Putnam
Asset
Allocation
Funds
ANNUAL REPORT
September 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Performance highlights
Putnam Asset Allocation Funds consist of three portfolios that
target investors' various life stages and financial goals.
* Growth Portfolio is designed to seek maximum growth of an
investment over time.
[GRAPHIC OMITTED: HORIZONTAL BAR CHART: TARGETED PORTFOLIO STRUCTURE]
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.
[GRAPHIC OMITTED: HORIZONTAL BAR CHART: TARGETED PORTFOLIO STRUCTURE]
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 5%
* Conservative Portfolio is designed to seek income, while protecting
the original value of the investment, for investors concerned about
maintaining their purchasing power.
[GRAPHIC OMITTED: HORIZONTAL BAR CHART: TARGETED PORTFOLIO STRUCTURE]
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%
Footnote reads:
* The targeted portfolio represents the ideal allocation of assets
among the various investment categories assuming that all securities
markets are displaying historical tendencies and that no
extraordinary opportunities exist within any category.
Allocations in each portfolio will vary over time.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
All three portfolios of Putnam Asset Allocation Funds closed the books
on fiscal 1997 solidly in the black, thanks in no small measure to
careful security selection and constant fine-tuning within each of the
market sectors in which the globally diverse funds invest. Besides
their gratifyingly positive results, the funds afforded investors the
opportunity to diversify assets across a broad band of the world's
asset classes and risk/return spectrums.
As you might expect, the skills and experience of a wide variety of
professionals are required to undertake such a challenge. Few
investment management organizations are able to match the depth and
breadth of expertise and technology that Putnam brings to the task.
In the report that follows, your funds' management team reviews the
performance and strategies employed during fiscal 1997 and looks at
prospects for the fiscal year just begun.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
November 19, 1997
Report from the Fund Managers
Ian C. Ferguson
Gary N. Coburn
William J. Landes
During the first half of their 1997 fiscal year, all three Putnam
Asset Allocation Funds benefited from a continuing trend of steady
growth, falling interest rates, ample liquidity, and low inflation for
the world's major economies. Toward the end of the fiscal year, global
stock markets experienced a volatile period with strong results in
July, substantial price declines in August, and a robust recovery in
September. The solid results delivered by all three portfolios for the
12 months ended September 30, 1997, reflect the advantages offered by
actively managed portfolios strategically diversified across a wide
array of domestic and foreign stocks and of domestic and foreign
fixed-income securities.
* U.S. STOCK AND BOND MARKETS CONTINUE TO BENEFIT FROM IDEAL
ENVIRONMENT
The funds' Growth, Balanced, and Conservative portfolios were each
well positioned to take advantage of the remarkable strength of the
U.S. stock market and a favorable environment for bonds. An underlying
current of nervousness prevailed throughout the period, however, as
both the Federal Reserve Board and investors kept a close watch on
inflation, fearing that the still robust U.S. economy might reignite
it at any moment. The Fed's quarter-point increase in short-term
interest rates in March, billed as a "preemptive strike," seemed to do
the trick without extinguishing the economy's long-standing growth
cycle.
Stocks. During the period, the bull market in U.S. equities roared on.
Although the large-company stocks that have done so well in the recent
past are still near their record high prices, the market's results in
the latter half of the summer suggest that they may be slowing down
while other sectors move ahead. Lately stocks of smaller companies
have shown signs of renewed strength and the performance of value
stocks has eclipsed that of growth stocks.
At period's end, U.S. equities were ahead of the pace set in both 1995
and 1996, and as a result, we believe the U.S. stock market has become
overvalued. Nevertheless Putnam's outlook for U.S. stocks is not
necessarily gloomy. Corporations have been delivering encouragingly
strong earnings to investors and in our view at this time should
continue to do so. We continue to expect positive total returns from
U.S. stocks over the next 6 to 12 months, but we will maintain a sharp
lookout for any hint of rising inflation. We also believe that your
fund will benefit from more attractive opportunities offered by equity
markets overseas.
Bonds. Economic activity in the first half of your fund's fiscal year
was vigorous and widespread. Consumer spending rose, unemployment
fell, sales of new homes set records, and manufacturing capacity
became increasingly strained. When the Fed raised rates in March,
anticipating a potential spike in inflation, the market reacted
immediately. Bonds most sensitive to changing interest rates suffered
the greatest price declines, and returns among fixed-income
investments in general were lackluster over the first half of the
fiscal year.
The second half brought a calmer mood to the market. Economic activity
tapered off in a manner that convinced the Fed to leave interest rates
unchanged. Despite a continued strong employment picture, retail sales
declined and manufacturers slowed production. This new landscape
proved a welcome change for fixed-income investors; bond prices rose
throughout the spring and summer and bond yields fell. With the
significant rally based on subdued prospects for inflation, we are
cautiously optimistic that interest rates will remain low for the near
term. In fact, we believe U.S. bond yields look increasingly
attractive to investors on a global basis. We are, therefore, more
optimistic about the U.S. bond market's prospects than we have been
for some time.
[GRAPHIC WORM CHART OMITTED: WORLD FIXED-INCOME MARKETS]
WORLD FIXED-INCOME MARKETS
Growth of a $10,000 Investment
U.S. government
U.S. high yield and investment International
Date bonds1 grade securities2 bonds3
9/30/96 10,000 10,000 10,000
10/31/96 10,084 10,222 10,169
11/30/96 10,241 10,397 10,285
12/31/96 10,441 10,300 10,212
1/31/97 10,517 10,331 9,797
2/28/97 10,715 10,357 9,683
3/31/97 10,595 10,242 9,622
4/30/97 10,689 10,396 9,426
5/31/97 10,904 10,494 9,773
6/30/97 11,052 10,619 9,894
7/31/97 11,287 10,905 9,635
8/31/97 11,348 10,812 9,679
9/30/97 11,572 10,971 9,914
Footnote reads:
1First Boston High Yield Bond Index. 2Lehman Brothers Aggregate Bond
Index. 3Salomon Brothers Non-U.S. World Government Bond Index. See
page 11 for descriptions of the indexes. Past performance is not
indicative of future results. This is not intended to represent the
returns of any fund.
* NON-U.S. STOCKS AND BONDS OFFER ATTRACTIVE DIVERSIFICATION POTENTIAL
During the period, world equity markets enjoyed a favorable
environment of reasonable economic growth, continued low inflation,
and stability in government policies. In light of our increasingly
cautious outlook for U.S. stocks, bond markets abroad offer
diversification benefits as well and could be a valuable component
of the funds' portfolios during fiscal 1998. The most important
advantage that both these markets have to offer is their low
correlation with the U.S. equity market.
Stocks. Except for Japan's, equity markets around the world performed
well during the period. The United Kingdom and Continental Europe
remain attractive on the basis of favorable valuations and expectation
of further economic growth. With valuations still attractive and with
a global economic acceleration still under way, we favor international
equities over U.S. equities and are weighting the portfolios
accordingly.
In the United Kingdom, equities remain attractive and valuations
are better than in any of the other major markets Putnam follows.
Furthermore U.K. interest rates have been falling sharply and
fundamental underpinnings there remain favorable.
In Germany, low interest rates, a recovering domestic economy, and a
weakening currency have combined to create an especially favorable
cyclical environment for German stocks. In addition, corporate
restructuring and a renewed emphasis on shareholder value have added
further structural support to the already bullish environment.
In Japan, a spike in inflation and a pronounced deterioration in our
outlook for that country's economic growth have caused us to become
negative on equities there. Despite Japan's currently low interest
rates and reasonably strong corporate earnings, we believe the risks
are quite high and we have slightly decreased your fund's exposure in
that market.
Bonds. World bond markets performed well, as inflationary expectations
diminished. International bond markets are now slightly overvalued,
but we believe these markets offer important diversification benefits
in the event of further U.S. equity market weakness.
The U.K. government bond market had turned out to be the best
performing so far in this calendar year. The Bank of England's
independence and tighter monetary policy as well as the possibility
that the United Kingdom may enter the European Economic and Monetary
Union (EMU) after all provided the catalyst that U.K. bonds needed to
rally.
[GRAPHIC WORM CHART OMITTED: WORLD EQUITY MARKETS]
WORLD EQUITY MARKETS
Growth of a $10,000 Investment
Large cap Small cap International
Date growth stocks1 growth stocks2 stocks3
9/30/96 10,000 10,000 10,000
10/31/96 10,276 9,846 9,898
11/30/96 11,052 10,252 10,291
12/31/96 10,833 10,520 10,159
1/31/97 11,509 10,730 9,804
2/28/97 11,600 10,470 9,964
3/31/97 11,124 9,976 10,000
4/30/97 11,787 10,004 10,053
5/31/97 12,504 11,117 10,707
6/30/97 13,064 11,593 11,298
7/31/97 14,104 12,133 11,480
8/31/97 13,314 12,411 10,623
9/30/97 14,403 13,319 11,218
1Standard & Poor's 500 Index. 2Russell 2000 Index. 3Morgan Stanley
Capital International (MSCI) EAFE Index. See page 11 for descriptions
of the indexes. Past performance is not indicative of future results.
This is not intended to represent the returns of any fund.
During the period's second half, we reversed our negative view on
Japanese bonds and entered that market after a long period of
avoidance. Signs of continued economic weakness in Japan and
difficulties in Southeast Asia prompted our decision. By period's
end, currency hedges allowed the funds to fully realize the positive
results Japanese bonds recently posted in local terms.
* STRATEGY AND OUTLOOK
While it has become more difficult to discern relative value among
major stock markets, we remain committed to a broad-based equity
overweighting versus global fixed income for the near term. Moving
forward, your fund will remain fully invested across world equity
markets, with the exception of Asian securities of both the emerging
markets and the developed market in Japan. An appropriate allocation
of international and U.S. bonds will also position your fund well for
upcoming opportunities in the global fixed-income markets.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. While these holdings and
others discussed in the report were viewed favorably as of 9/30/97,
all are subject to review and adjustment in accordance with the funds'
investment strategies and may well vary 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. While U.S. government backing of individual securities does
not insure your principal, which will fluctuate with market
conditions, it does guarantee that the fund's government-backed
holdings will make timely payments of interest and principal.
<TABLE>
<CAPTION>
Performance summary
* GROWTH PORTFOLIO
TOTAL RETURNS FOR PERIODS ENDED 9/30/97
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
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 26.25% 18.95% 25.33% 20.33% 25.31% 24.31% 25.63% 21.24%
- --------------------------------------------------------------------------------------------------------
Life of fund 79.08 68.76 74.61 71.61 73.57 73.57 75.70 69.54
Annual average 17.36 15.46 16.55 15.99 16.36 16.36 16.75 15.61
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/97
Class A Class B Class C Class M
Share value NAV POP NAV NAV NAV POP
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9/30/96 $11.41 $12.11 $11.29 $11.24 $11.32 $11.73
- ---------------------------------------------------------------------------------------------------------
9/30/97 13.64 14.47 13.47 13.38 13.49 13.98
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Capital gains
Investment Long Short
Distributions Number income term term Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 1 $0.164 $0.261 $0.206 $0.631
- ---------------------------------------------------------------------------------------------------------
Class B 1 0.097 0.261 0.206 0.564
- ---------------------------------------------------------------------------------------------------------
Class C 1 0.118 0.261 0.206 0.585
- ---------------------------------------------------------------------------------------------------------
Class M 1 0.139 0.261 0.206 0.606
- ---------------------------------------------------------------------------------------------------------
Performance data represent past results and the life-of-fund data reflect an expense limitation in effect
until 12/31/94. Without the limitation, the funds' total return would have been lower. For additional
performance details, see page 12. Returns for class A and class M shares reflect the current maximum
initial sales charges of 5.75% and 3.50%, respectively. Class B share returns for the 1-year and
life-of-fund periods reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the
first year, declines to 1% in the sixth year, and is eliminated thereafter. Returns shown for class B and
class M shares for periods prior to their inception are derived from the historical performance of class A
shares, adjusted to reflect both the initial sales charge or CDSC, if any, currently applicable to each
class and, in the case of class B and class M shares, the higher operating expenses applicable to such
shares. For class C shares of Putnam Asset Allocation Funds: Growth Portfolio returns for periods prior to
their inception are derived from the historical performance of class A shares, adjusted to reflect both the
CDSC currently applicable to class C shares, which is 1% for the first year and is eliminated thereafter,
and the higher operating expenses applicable to class C shares. All returns assume reinvestment of
distributions at NAV and represent past performance; they do not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares when redeemed may be worth more or
less than their original cost.
</TABLE>
<TABLE>
<CAPTION>
Performance summary
* BALANCED PORTFOLIO
TOTAL RETURNS FOR PERIODS ENDED 9/30/97
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
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 23.82% 16.74% 22.95% 17.95% 22.86% 21.86% 23.19% 18.86%
- --------------------------------------------------------------------------------------------------------
Life of fund 70.07 60.27 65.62 62.62 64.72 64.72 67.54 61.67
Annual average 15.71 13.84 14.87 14.29 14.70 14.70 15.23 14.11
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/97
Class A Class B Class C Class M
Share value NAV POP NAV NAV NAV POP
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9/30/96 $10.71 $11.36 $10.67 $10.64 $10.71 $11.10
- ---------------------------------------------------------------------------------------------------------
9/30/97 12.28 13.03 12.23 12.18 12.27 12.72
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Capital gains
Investment Long Short
Distributions Number income term term Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 4 $0.309 $0.313 $0.218 $0.840
- -------------------------------------------------------------------------------------------------------
Class B 4 0.229 0.313 0.218 0.760
- -------------------------------------------------------------------------------------------------------
Class C 4 0.233 0.313 0.218 0.764
- -------------------------------------------------------------------------------------------------------
Class M 4 0.260 0.313 0.218 0.791
- -------------------------------------------------------------------------------------------------------
Performance data represent past results and the life-of-fund data reflect an expense limitation in effect
until 12/31/94. Without the limitation, the funds' total return would have been lower. For additional
performance details, see page 12. Returns for class A and class M shares reflect the current maximum
initial sales charges of 5.75% and 3.50%, respectively. Class B share returns for the 1-year and
life-of-fund periods reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the
first year, declines to 1% in the sixth year, and is eliminated thereafter. Returns shown for class B
and class M shares for periods prior to their inception are derived from the historical performance of
class A shares, adjusted to reflect both the initial sales charge or CDSC, if any, currently applicable
to each class and, in the case of class B and class M shares, the higher operating expenses applicable
to such shares. For class C shares of Putnam Asset Allocation Funds: Balanced Portfolio returns for
periods prior to their inception are derived from the historical performance of class A shares, adjusted
to reflect both the CDSC currently applicable to class C shares, which is 1% for the first year and is
eliminated thereafter, and the higher operating expenses applicable to class C shares. All returns assume
reinvestment of distributions at NAV and represent past performance; they do not guarantee future results.
Investment return and principal value will fluctuate so that an investor's shares when redeemed may be
worth more or less than their original cost.
</TABLE>
<TABLE>
<CAPTION>
* CONSERVATIVE PORTFOLIO
TOTAL RETURNS FOR PERIODS ENDED 9/30/97
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
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 17.26% 10.53% 16.36% 11.36% 16.52% 15.52% 16.80% 12.72%
- --------------------------------------------------------------------------------------------------------
Life of fund 47.29 38.81 43.36 40.36 43.01 43.01 44.84 39.77
Annual average 11.22 9.43 10.40 9.76 10.33 10.33 10.71 9.63
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/97
Class A Class B Class C Class M
Share value NAV POP NAV NAV NAV POP
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9/30/96 $ 9.69 $10.28 $ 9.66 $ 9.64 $ 9.67 $10.02
- ---------------------------------------------------------------------------------------------------------
9/30/97 10.61 11.26 10.57 10.56 10.59 10.97
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Capital gains
Investment Long Short
Distributions Number income term term Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 4 $0.351 $0.133 $0.194 $0.678
- ----------------------------------------------------------------------------------------------------------
Class B 4 0.278 0.133 0.194 0.605
- ----------------------------------------------------------------------------------------------------------
Class C 4 0.280 0.133 0.194 0.607
- ----------------------------------------------------------------------------------------------------------
Class M 4 0.308 0.133 0.194 0.635
- ----------------------------------------------------------------------------------------------------------
Performance data represent past results and the life-of-fund data reflect an expense limitation in effect
until 12/31/94. Without the limitation, the funds' total return would have been lower. For additional
performance details, see page 12. Returns for class A and class M shares reflect the current maximum
initial sales charges of 5.75% and 3.50%, respectively. Class B share returns for the 1-year and
life-of-fund periods reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the
first year, declines to 1% in the sixth year, and is eliminated thereafter. Returns shown for class B and
class M shares for periods prior to their inception are derived from the historical performance of class A
shares, adjusted to reflect both the initial sales charge or CDSC, if any, currently applicable to each
class and, in the case of class B and class M shares, the higher operating expenses applicable to such
shares. For class C shares of Putnam Asset Allocation Funds: Conservative Portfolio returns for periods
prior to their inception are derived from the historical performance of class A shares, adjusted to reflect
both the CDSC currently applicable to class C shares, which is 1% for the first year and is eliminated
thereafter, and the higher operating expenses applicable to class C shares. All returns assume reinvestment
of distributions at NAV and represent past performance; they do not guarantee future results. Investment
return and principal value will fluctuate so that an investor's shares when redeemed may be worth more or
less than their original cost.
</TABLE>
<TABLE>
<CAPTION>
COMPARATIVE INDEX RETURNS FOR PERIOD ENDED 9/30/97
(Cumulative total returns)
Lehman Bros. Standard Russell First Boston Consumer
Aggregate & Poor's 2000 High Yield Price
Bond Index 500 Index Index Bond Index Index
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year 9.71% 40.43% 33.19% 15.72% 2.15%
- -----------------------------------------------------------------------------------------
Life of Fund 25.27 114.78 80.34 42.30 10.26
Annual average 6.34 23.20 17.46 10.11 2.70
- -----------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE BENCHMARKS
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.
Consumer Price Index (CPI) is a commonly used measure of
inflation; it does not represent an investment return.
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.
Merrill Lynch 91-day Treasury Bill Index is an unmanaged
list of Treasury bills with maturities that most closely
match the stated maturity of the index at the beginning of
a selected month. The total return of the index is computed
using the prices of the underlying bills at the beginning
and end of the month.
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. It is not possible to invest directly
in an index. Past performance is not indicative of future
results.
[GRAPHIC WORM CHART OMITTED: GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of
a $10,000 investment
Growth Portfolio
(class A shares at Global Growth Consumer
Date POP since 2/8/94) Index Mix Price Index
2/8/94 9,425 10,000 10,000
9/30/94 9,346 9,868 10,219
9/30/95 11,257 12,004 10,479
9/30/96 13,367 13,769 10,793
9/30/97 16,876 17,642 11,026
The Global Growth Index Mix is a combination of the following indexes:
50% represented by the S&P 500, 15% by Russell 2000, 15% by Morgan
Stanley Capital International EAFE Index (Europe, Australia, and the
Far East), 5% by Lehman Brothers Aggregate Bond Index, 5% by Solomon
Brothers Non-U.S. Government Bond Index, 5% by First Boston High Yield
Index, and 5% by Merrill Lynch 91-day Treasury Bill Index, which
reflects generally the allocations of the different asset categories of
Putnam Asset Allocation: Growth Portfolio as of 9/30/97.
Past performance is no assurance of future results. A $10,000 investment
in the Growth Portfolio's class B shares would have been valued at
$17,461 on 9/30/97 ($17,161 with a redemption at the end of the period).
A $10,000 investment in the Growth Portfolio's class C shares would have
been valued at $17,357 on 9/30/97.
A $10,000 investment in the Growth Portfolio's class M shares would have
been valued at $16,954 on 9/30/97 at public offering price. ($17,570 at
net asset value).
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 funds' 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.
[GRAPHIC WORM CHART OMITTED: GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of
a $10,000 investment
(Plot points)
Balanced Portfolio
(class A shares at Global Balanced Consumer
Date POP since 2/7/94) Index Mix Price Index
2/8/94 9,425 10,000 10,000
9/30/94 9,285 9,892 10,219
9/30/95 11,024 11,854 10,479
9/30/96 12,943 13,394 10,793
9/30/97 16,027 16,545 11,026
The Global Balanced Index Mix is a combination of the following indexes:
40% represented by the S&P 500, 10% by Russell 2000, 15% by Morgan
Stanley Capital International EAFE Index (Europe, Australia, and the Far
East), 10% by Lehman Brothers Aggregate Bond Index, 10% by Solomon
Brothers Non-U.S. Government Bond Index, 10% by First Boston High Yield
Index, and 5% by Merrill Lynch 91-day Treasury Bill Index, which
reflects generally the allocations of the different asset categories of
Putnam Asset Allocation: Balanced Portfolio as of 9/30/97.
Past performance is no assurance of future results. A $10,000 investment
in the Balanced Portfolio's class B shares would have been valued at
$16,562 on 9/30/97 ($16,262 with a redemption at the end of the period).
A $10,000 investment in the Balanced Portfolio's class C shares would
have been valued at $16,472 on 9/30/97.
A $10,000 investment in the Balanced Portfolio's class M shares would
have been valued at $16,167 on 9/30/97 at public offering price.
($16,754 at net asset value).
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 funds' 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.
[GRAPHIC WORM CHART OMITTED: GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of
a $10,000 investment
Conservative Portfolio mix
(class A shares at POP Global Conservative Consumer Price
Date since 2/7/94) Index Mix Index
2/8/94 9,425 10,000 10,000
9/30/94 9,191 9,853 10,219
9/30/95 10,594 11,523 10,479
9/30/96 11,837 12,589 10,793
9/30/97 13,881 14,558 11,026
The Global Conservative Index Mix is a combination of the following
indexes: 20% represented by the S&P 500, 5% by Russell 2000, 10% by
Morgan Stanley Capital International EAFE Index (Europe, Australia, and
the Far East), 35% by Lehman Brothers Aggregate Bond Index, 15% by
Solomon Brothers Non-U.S. Government Bond Index, 10% by First Boston
High Yield Index, and 5% by Merrill Lynch 91-day Treasury Bill Index,
which reflects generally the allocations of the different asset
categories of Putnam Asset Allocation: Conservative Portfolio as of
9/30/97.
Past performance is no assurance of future results. A $10,000 investment
in the Conservative Portfolio's class B shares would have been valued at
$14,336 on 9/30/97 ($14,036 with a redemption at the end of the period).
A $10,000 investment in the Conservative Portfolio's class C shares would
have been valued at $14,301 on 9/30/97.
A $10,000 investment in the Conservative Portfolio's class M shares would
have been valued $13,977 on 9/30/97 at public offering price. ($14,484 at
net asset value).
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, 1997, 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, 1997 by
correspondence with the custodian and the application of alternative
auditing procedures where investments purchased were not yet received
by the custodian, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
November 17, 1997
<TABLE>
<CAPTION>
Portfolio of investments owned
September 30, 1997
<S> <C> <C> <C> <C> <C> <C>
GROWTH BALANCED CONSERVATIVE
77.3% 63.8% 37.8%
COMMON STOCKS* Shares Value Shares Value Shares Value
Advertising 0.2% 0.2% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Lamar Advertising Co. + 34,900 $1,068,813 29,400 $900,375 5,000 $153,125
Outdoor Systems, Inc. + 27,687 726,784 23,350 612,938 4,162 109,253
Universal Outdoor Holdings, Inc. + 26,200 982,500 22,000 825,000 3,800 142,500
------------- ------------ ------------
2,778,097 2,338,313 404,878
Aerospace and Defense 2.0% 1.7% 0.9%
- -------------------------------------------------------------------------------------------------------------------------
Boeing Co. 103,900 5,656,056 105,900 5,764,931 19,500 1,061,531
General Motors Corp. Class H 104,100 6,883,613 106,100 7,015,863 15,600 1,031,550
Northrop Grumman Corp. 26,400 3,204,300 27,100 3,289,263 4,000 485,500
REMEC, Inc. + 53,750 1,961,875 45,225 1,650,713 7,875 287,438
Rolls-Royce PLC (United Kingdom) 205,100 848,648 260,700 1,078,706 65,100 269,366
Smiths Industries PLC (United Kingdom) 93,801 1,386,479 118,398 1,750,048 22,791 336,875
Textron, Inc. 66,200 4,303,000 63,400 4,121,000 15,000 975,000
------------- ------------ ------------
24,243,971 24,670,524 4,447,260
Agriculture --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
PSF Holdings LLC Class A + 3,305 99,150 12,885 386,550 4,186 125,580
Automotive 1.4% 1.3% 0.7%
- -------------------------------------------------------------------------------------------------------------------------
Avis Rent A Car, Inc. + 45,800 1,093,475 38,100 909,638 6,650 158,769
Bayerische Motoren Werke (BMW)
AG (Germany) 3,100 2,648,467 4,610 3,938,526 941 803,938
Bridgestone Corp. (Japan) 31,000 746,678 40,000 963,455 10,000 240,864
Budget Group, Inc. (Japan) + 72,500 2,392,500 61,100 2,016,300 10,500 346,500
Edaran Otomobil Nasional Berhad
(Malaysia) 22,000 88,190 36,000 144,311 9,000 36,078
Lear Corp. + 133,500 6,574,875 136,000 6,698,000 25,600 1,260,800
Magna International, Inc. Class A,
(Canada) 17,800 1,230,425 21,700 1,500,013 5,100 352,538
Michelin Corp. Class B, (France) 29,713 1,692,862 39,572 2,254,567 8,827 502,908
------------- ------------ ------------
16,467,472 18,424,810 3,702,395
Basic Industrial Products 0.7% 0.6% 0.6%
- -------------------------------------------------------------------------------------------------------------------------
Ade Corp. + 47,000 1,885,875 39,600 1,588,950 6,900 276,863
Alfa S.A. de C.V. Class A, (Mexico) 223,500 2,101,159 279,600 2,628,564 68,100 640,219
Asyst Technologies, Inc. + 27,350 1,214,511 23,000 1,021,344 4,050 179,845
Minnesota Mining & Manufacturing Co. -- -- -- -- 11,000 1,017,500
Mitsui Fudoscan Co. Ltd. (Japan) 10,000 78,821 12,000 94,585 3,000 23,646
Rieter Holding AG (Switzerland) 2,316 1,076,392 2,700 1,254,861 616 286,294
Sandvik AB Class A (Sweden) 6,070 208,371 8,080 277,370 2,120 72,775
Sandvik AB Class B (Sweden) 43,270 1,505,366 57,510 2,000,777 13,960 485,669
------------- ------------ ------------
8,070,495 8,866,451 2,982,811
Biotechnology 0.2% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Bioreliance Corp. + 7,900 207,375 6,700 175,875 1,200 31,500
Kendle International, Inc. + 21,800 408,750 18,300 343,125 3,300 61,875
Quintiles Transnational Corp. + 17,200 1,449,100 17,500 1,474,375 3,500 294,875
------------- ------------ ------------
2,065,225 1,993,375 388,250
Broadcasting 0.7% 0.4% 0.2%
- -------------------------------------------------------------------------------------------------------------------------
Chancellor Media Corp. + 41,950 2,207,619 35,350 1,860,294 6,100 321,013
Heftel Broadcasting Corp. Class A + 30,800 2,333,100 25,900 1,961,925 4,500 340,875
SAGA Communications Inc. Class A + 42,800 1,037,900 36,013 873,315 6,263 151,878
Sinclair Broadcast Group, Inc. Class A + 11,600 468,350 9,800 395,675 1,700 68,638
SFX Broadcasting, Inc. Class A + 11,180 827,320 9,410 696,340 1,635 120,990
Young Broadcasting Inc. Class A + 24,600 842,550 20,725 709,831 3,575 122,444
------------- ------------ ------------
7,716,839 6,497,380 1,125,838
Building and Construction 0.8% 0.8% 0.5%
- -------------------------------------------------------------------------------------------------------------------------
Barnett, Inc. + 34,700 737,375 29,200 620,500 4,200 89,250
Cemex, S.A. de C.V. (Mexico) 229,200 1,188,062 309,000 1,601,706 64,700 335,373
CRH PLC (Ireland) 189,964 2,167,912 242,859 2,771,562 52,187 595,570
Lafarge Coppee (France) 22,971 1,688,553 27,330 2,008,975 7,249 532,860
Masco Corp. 48,300 2,212,744 48,800 2,235,650 9,300 426,056
Sungei Way Holdings Berhad (Malaysia) 177,150 162,784 212,250 195,037 57,900 53,204
Terex Corp. Rights 144A + 1,100 22,000 600 12,000 1,000 20,000
VA Technolgies AG (Austria) 7,680 1,651,067 10,361 2,227,435 2,990 642,798
------------- ------------ ------------
9,830,497 11,672,865 2,695,111
Business Equipment and Services 3.6% 2.8% 1.7%
- -------------------------------------------------------------------------------------------------------------------------
BMC Software, Inc. + 60,000 3,885,000 62,700 4,059,825 13,300 861,175
Caribiner Intl., Inc. + 12,700 517,525 10,700 436,025 1,800 73,350
Corestaff, Inc. + 16,500 534,188 15,325 496,147 2,900 93,888
CORT Business Services Corp. + 48,600 1,940,963 40,900 1,633,444 7,100 283,556
Dai Nippon Printing Co., Ltd. (Japan) 85,000 1,821,429 103,000 2,207,143 25,000 535,714
Data Processing Resources Corp. + 31,200 780,000 26,300 657,500 3,900 97,500
EMC Corp. + 62,200 3,630,925 59,500 3,473,313 12,900 753,038
Encad, Inc. + 42,200 1,297,650 35,500 1,091,625 6,300 193,725
F.Y.I., Inc. + 24,000 624,000 20,200 525,200 3,500 91,000
HBO & Co. 87,800 3,314,450 85,400 3,223,850 16,600 626,650
Hewlett-Packard Co. 142,300 9,898,744 142,700 9,926,569 28,700 1,996,444
Lason Holdings, Inc. + 44,200 1,221,025 37,200 1,027,650 6,590 182,049
Mannesmann AG (Germany) 3,900 1,864,736 4,800 2,295,060 1,200 573,765
Metzler Group, Inc. + 12,700 509,588 10,700 429,338 2,100 84,263
NCO Group, Inc. + 51,400 1,901,800 43,300 1,602,100 7,800 288,600
PeopleSoft, Inc. + 67,600 4,039,100 64,800 3,871,800 12,800 764,800
Pharmaceutical Product
Development, Inc. + 18,700 381,013 15,700 319,888 2,700 55,013
Pierce Leahy Corp. + 20,700 561,488 17,400 471,975 3,100 84,088
Rental Service Corp. + 29,200 655,175 24,650 553,084 4,300 96,481
Ricoh Co., Ltd. (Japan) 36,000 541,196 47,000 706,562 13,000 195,432
Staff Leasing, Inc. + 52,300 1,287,888 44,000 1,083,500 7,700 189,613
The Registry, Inc. + 36,180 1,668,803 30,520 1,407,735 5,460 251,843
------------- ------------ ------------
42,876,686 41,499,333 8,371,987
Chemicals 1.2% 1.1% 0.7%
- -------------------------------------------------------------------------------------------------------------------------
Akzo-Nobel N.V. (Netherlands) 12,530 2,148,343 15,770 2,703,860 3,646 625,128
Bayer AG ADR (Germany) 56,247 2,247,005 75,637 3,021,614 16,007 639,462
Ciba Specialty Chemicals AG
(Switzerland) + 18,312 1,774,125 22,411 2,171,249 5,304 513,868
Hercules, Inc. 119,000 5,920,250 121,300 6,034,675 20,700 1,029,825
Shin-Etsu Chemical Co. (Japan) 55,000 1,516,612 66,000 1,819,934 17,000 468,771
------------- ------------ ------------
13,606,335 15,751,332 3,277,054
Communications and Technology 0.1% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Newbridge Networks Corp. (Canada) + 24,600 1,473,150 29,700 1,778,559 7,400 443,143
Computer Equipment 0.2% 0.2% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Box Hill Systems Corp. 7,700 134,750 6,500 113,750 1,100 19,250
PMC - Sierra, Inc. + 63,100 1,609,050 53,100 1,354,050 8,900 226,950
PRI Automation, Inc. + 16,700 976,950 14,100 824,850 2,400 140,400
------------- ------------ ------------
2,720,750 2,292,650 386,600
Computer Services and Software 6.6% 5.1% 2.9%
- -------------------------------------------------------------------------------------------------------------------------
Advantage Learning Systems, Inc. + 2,500 63,125 2,200 55,550 400 10,100
Analysts International Corp. 31,000 1,201,250 26,100 1,011,375 4,400 170,500
Aspect Development, Inc. + 12,100 496,856 10,200 418,838 1,800 73,913
Best Product Co., Inc. + 16,200 236,925 13,700 200,363 2,400 35,100
Compaq Computer Corp. 72,050 5,385,738 70,600 5,277,350 14,150 1,057,713
Complete Business Solutions, Inc. + 50,300 1,433,550 42,400 1,208,400 7,500 213,750
Computer Associates Intl., Inc. 170,450 12,240,441 174,050 12,498,966 32,750 2,351,859
Computer Horizons Corp. + 56,393 2,044,246 47,420 1,718,975 8,310 301,238
Computer Learning Centers, Inc. + 53,025 2,067,975 49,350 1,924,650 9,450 368,550
Computer Task Group, Inc. 42,900 1,799,119 36,100 1,513,944 6,200 260,013
Compuware Corp. + 34,200 2,069,100 28,800 1,742,400 5,400 326,700
Dell Computer Corp. + 34,400 3,332,500 33,600 3,255,000 6,700 649,063
Discreet Logic, Inc. + 79,100 2,101,094 66,600 1,769,063 11,300 300,156
GENICOM Corp. + 39,800 437,800 34,300 377,300 6,200 68,200
Harbinger Corp. + 31,000 1,127,625 26,100 949,388 4,500 163,688
IBM Corp. 64,400 6,822,375 65,700 6,960,094 14,200 1,504,313
Information Management Associates, Inc. + 18,500 226,625 15,500 189,875 2,700 33,075
Information Management Resources, Inc. + 36,000 1,026,000 30,300 863,550 5,700 162,450
Keane, Inc. + 82,780 2,628,265 69,708 2,213,229 12,260 389,255
Legato Systems, Inc. + 26,600 944,300 22,400 795,200 3,900 138,450
Microsoft Corp. + 63,600 8,415,075 64,700 8,560,619 12,000 1,587,750
NCR Corp. + 215,700 7,536,019 219,900 7,682,756 36,900 1,289,194
Parametric Technology Corp. + 49,900 2,201,838 47,800 2,109,175 9,400 414,775
Pegasus Systems, Inc. + 36,900 668,813 31,100 563,688 5,400 97,875
Peregrine Systems, Inc. + 45,100 800,525 37,900 672,725 6,700 118,925
Peritus Software Services, Inc. + 17,400 445,875 14,600 374,125 2,600 66,625
Pinnacle Systems, Inc. + 16,500 482,625 13,900 406,575 2,500 73,125
Sapiens International Corp., N.V. 32,400 295,650 2,710 247,288 5,000 45,625
(Israel) +
SGS-Thomson Microelectronics N.V. ADR
(France) + 26,700 2,506,463 33,341 3,129,886 8,157 765,738
Simione Central Holdings, Inc. + 51,400 623,225 43,300 525,013 7,500 90,938
Splash Technology Holdings, Inc. + 24,200 946,825 20,400 798,150 3,550 138,894
SPSS, Inc. + 33,800 967,525 28,500 815,813 4,900 140,263
Summit Design, Inc. + 39,300 697,575 33,100 587,525 5,600 99,400
TSI International Software, Ltd. + 10,800 143,100 9,100 120,575 1,600 21,200
Technology Solutions Co. + 80,575 2,598,544 67,875 2,188,969 11,925 384,581
Xionics Document Technologies, Inc. + 40,700 707,163 34,200 594,225 6,000 104,250
------------- ------------ ------------
77,721,749 74,320,617 14,017,244
Conglomerates 1.2% 1.0% 0.6%
- -------------------------------------------------------------------------------------------------------------------------
Axia Inc. 144A + 225 11,250 -- -- -- --
BTR PLC (United Kingdom) 433,300 1,764,864 336,600 1,370,997 85,200 347,026
Hutchison Whampoa, Ltd. (Hong Kong) 178,000 1,754,120 237,000 2,335,541 50,000 492,730
Ogden Corp. 288,100 6,806,363 293,600 6,936,300 50,400 1,190,700
Securicor Group PLC (United Kingdom) 150,245 653,242 204,509 889,174 41,503 180,449
Tomkins PLC (United Kingdom) 311,158 1,735,090 416,803 2,324,191 93,819 523,157
United Technologies Corp. 14,600 1,182,600 13,900 1,125,900 3,500 283,500
------------- ------------ ------------
13,907,529 14,982,103 3,017,562
Consumer Durable Goods 0.1% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Blyth Industries, Inc. + 10,325 289,100 8,750 245,000 1,650 46,200
Electrolux AB (Sweden) 5,544 434,063 6,918 541,639 1,689 132,239
Racing Champions Corp. + 47,000 558,125 39,600 470,250 7,000 83,125
------------- ------------ ------------
1,281,288 1,256,889 261,564
Consumer Non Durables 3.4% 3.0% 1.6%
- -------------------------------------------------------------------------------------------------------------------------
B A T Industries PLC (United Kingdom) 268,609 2,357,449 373,711 3,279,878 84,539 741,957
Clorox Co. 47,100 3,491,288 47,000 3,483,875 9,200 681,950
Colgate-Palmolive Co. 45,100 3,142,906 45,100 3,142,906 8,800 613,250
Dimon Inc. 277,500 6,937,500 276,400 6,910,000 49,800 1,245,000
Estee Lauder Cos. Class A 29,900 1,382,875 59,800 2,765,750 5,800 268,250
French Fragrances Inc. + 58,500 683,719 49,200 575,025 8,500 99,344
KAO Corp. (Japan) 137,000 1,991,280 183,000 2,659,884 42,000 610,465
Liz Claiborne, Inc. 58,300 3,202,856 58,500 3,213,844 9,500 521,906
Onward Kashiyama Co., Ltd. (Japan) 42,000 606,977 47,000 679,236 14,000 202,326
Procter & Gamble Co. 91,800 6,339,938 91,800 6,339,938 18,000 1,243,125
RJR Nabisco Holdings Corp. 191,900 6,596,563 195,600 6,723,750 29,400 1,010,625
St. John Knits, Inc. 45,310 2,036,118 39,290 1,765,594 7,140 320,854
Svenska Cellulosa AB Class B (Sweden) 63,350 1,601,733 83,100 2,101,089 19,068 482,113
------------- ------------ ------------
40,371,202 43,640,769 8,041,165
Consumer Products 0.1% 0.1% --%
- -------------------------------------------------------------------------------------------------------------------------
Home Products International, Inc. + 61,100 893,588 51,400 751,725 8,100 118,463
Weider Nutrition Internatiional, Inc. 13,800 160,425 11,700 136,013 2,000 23,250
------------- ------------ ------------
1,054,013 887,738 141,713
Consumer Related 0.7% 0.6% 0.3%
- -------------------------------------------------------------------------------------------------------------------------
Lowe's Cos., Inc. 174,989 6,802,697 178,317 6,932,073 32,281 1,254,924
Unilever Group (United Kingdom) 52,200 1,527,956 70,600 2,066,546 15,800 462,485
------------- ------------ ------------
8,330,653 8,998,619 1,717,409
Consumer Services 1.3% 1.0% 0.5%
- -------------------------------------------------------------------------------------------------------------------------
AmeriKing, Inc. + 50 2,500 100 5,000 -- --
Applied Graphics Technologies, Inc. + 9,500 534,375 8,000 450,000 1,500 84,375
Extended Stay America, Inc. + 39,910 598,650 33,611 504,165 3,528 52,920
Fine Host Corp. + 33,900 1,313,625 30,200 1,170,250 5,900 228,625
Interpublic Group Cos. Inc. 50,800 2,606,675 51,700 2,652,856 9,400 482,338
Marriott International, Inc. 52,900 3,759,206 50,600 3,595,763 9,000 639,563
Morton's Restaurant Group, Inc. + 24,400 597,800 20,500 502,250 3,600 88,200
On Assignment, Inc. + 31,200 1,419,600 26,300 1,196,650 4,600 209,300
PJ America Inc. + 19,800 341,550 16,700 288,075 2,700 46,575
Payment Svcs., Inc. + 51,900 804,450 44,700 692,850 8,150 126,325
Rent-Way, Inc. + 46,100 973,863 39,000 823,875 7,000 147,875
Stewart Enterprises, Inc. Class A 46,340 2,027,375 38,965 1,704,719 6,605 288,969
Travel Services International Inc. + 29,000 601,750 24,400 506,300 4,300 89,225
------------- ------------ ------------
15,581,419 14,092,753 2,484,290
Correctional Facilities 0.1% --% --%
- -------------------------------------------------------------------------------------------------------------------------
Wackenhut Corrections Corp. + 27,400 849,400 22,700 703,700 4,000 124,000
Education Services 0.3% 0.2% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Education Management Corp. + 22,000 583,000 18,500 490,250 3,200 84,800
Learning Tree International, Inc. + 9,300 266,213 7,750 221,844 1,250 35,781
Strayer Education, Inc. 40,900 1,860,950 34,400 1,565,200 6,100 277,550
Youth Services International, Inc. + 50,500 830,094 42,600 700,238 7,500 123,281
------------- ------------ ------------
3,540,257 2,977,532 521,412
Electronics and
Electrical Equipment 7.1% 5.7% 3.7%
- -------------------------------------------------------------------------------------------------------------------------
ABB AG (Switzerland) + 310 457,882 460 679,437 105 155,089
Act Manufacturing, Inc. + 48,600 1,615,950 40,900 1,359,925 7,200 239,400
Adflex Solutions, Inc. + 50,100 1,221,188 42,200 1,028,625 7,500 182,813
Advanced Lighting Technologies, Inc. + 70,500 1,903,500 59,400 1,603,800 10,300 278,100
Aehr Test Systems + 34,900 617,294 29,400 520,013 5,100 90,206
American Telephone &
Telegraph Co. + -- -- -- -- 32,000 1,418,000
ANADIGICS, Inc. + 13,600 670,650 11,500 567,094 1,950 96,159
Anicom, Inc. + 19,100 319,925 16,000 268,000 2,800 46,900
Applied Materials, Inc. + 24,000 2,286,000 24,500 2,333,625 5,700 542,925
Benchmarq Microelectronics, Inc. + 12,400 275,900 10,700 238,075 1,600 35,600
Brooks Automation, Inc. + 22,600 867,275 19,000 729,125 3,300 126,638
Computer Products, Inc. + 82,900 2,466,275 69,800 2,076,550 12,300 365,925
Cookson Group PLC (United Kingdom) 126,700 515,731 161,100 655,756 40,700 165,669
C.P. Clare Corp. + 44,250 873,938 37,025 731,244 5,750 113,563
Credence Systems Corp. + 55,575 2,709,281 47,884 2,334,345 8,628 420,615
Delaware Global Technologies Corp. + 44,898 479,847 41,808 446,823 7,976 85,244
Elexsys International, Inc. + 78,200 2,199,375 65,900 1,853,438 11,200 315,000
Flextronics International Ltd. + 55,600 2,647,950 46,650 2,221,706 8,300 395,288
General Electric Co. 135,400 9,215,663 135,200 9,202,050 26,500 1,803,656
General Electric Co. PLC
(United Kingdom) 281,600 1,775,085 335,700 2,116,108 85,014 535,892
Hadco Corp. + 30,300 1,640,934 25,500 1,380,984 4,300 232,872
Helix Technology Corp. 21,300 1,318,603 17,900 1,108,122 3,200 198,100
Hirose Electric Co. Ltd. (Japan) 12,600 930,349 13,800 1,018,954 3,500 258,430
Honeywell, Inc. 38,100 2,559,844 38,000 2,553,125 7,400 497,188
Integrated Process Equipment Corp. + 26,400 973,500 22,200 818,625 3,900 143,813
Intel Corp. 41,300 3,812,506 41,300 3,812,506 8,000 738,500
JPM Co. + 19,200 463,200 16,500 398,063 3,000 72,375
Level One Communications, Inc. + 24,750 996,188 20,850 839,213 3,600 144,900
Matsushita Electric (Japan) 156,000 1,632,559 204,000 2,134,884 51,000 533,721
Micrel, Inc. + 35,200 1,489,400 29,600 1,252,450 5,400 228,488
Molins PLC (United Kingdom) -- -- 51,400 365,542 14,000 99,564
Motorola, Inc. 80,500 5,785,938 80,500 5,785,938 15,700 1,128,438
Murata Manufacturing Co. (Japan) 27,000 1,170,598 34,000 1,474,087 9,000 390,199
Omron Corp. (Japan) 83,000 1,744,103 95,000 1,996,263 25,000 525,332
Philips Electronics N.V. (Netherlands) 30,200 2,563,864 38,460 3,265,106 9,770 829,435
Photronics, Inc. + 11,600 702,525 9,800 593,513 1,700 102,956
Plexus Corp. + 17,400 611,175 14,600 512,825 2,500 87,813
Power One Inc. + 2,500 35,000 1,900 26,600 300 3,920
Rohm Co., Ltd. (Japan) 17,000 2,004,984 20,000 2,358,805 6,000 707,641
Sanmina Corp. + 25,160 2,177,913 21,180 1,833,394 3,730 322,878
SDL, Inc. + 38,000 769,500 32,000 648,000 5,600 113,400
Sipex Corp. + 27,400 869,950 22,400 711,200 3,900 123,825
Sony Corp. (Japan) 24,000 2,272,426 31,000 2,935,217 7,000 662,791
Tokyo Electron Ltd. (Japan) 18,000 1,101,828 23,000 1,407,891 6,000 367,276
TriQuint Semiconductor, Inc. + 24,000 874,500 20,200 736,038 3,500 127,531
Ultratech Stepper, Inc. + 36,300 1,234,200 30,550 1,038,700 5,300 180,200
Uniphase Corp. + 7,900 628,050 6,700 532,650 1,100 87,450
Veeco Instruments, Inc. + 22,900 1,446,994 19,200 1,213,200 3,400 214,838
Vishay Intertechnology, Inc. 230,900 6,104,419 238,245 6,298,602 44,625 1,179,773
Westinghouse Electric Corp. 137,100 3,710,269 134,200 3,631,788 26,800 725,275
------------- ------------ ------------
84,744,028 83,648,024 18,441,604
Entertainment 0.6% 0.4% 0.2%
- -------------------------------------------------------------------------------------------------------------------------
Carnival Corp. Class A 60,400 2,793,500 61,000 2,821,250 9,400 434,750
Penske Motorsports, Inc. + 28,100 943,106 23,700 795,431 4,100 137,606
Resorts World Berhad (Malaysia) 85,000 186,093 106,000 232,069 26,000 56,923
Signature Resorts, Inc. + 51,900 2,465,250 43,700 2,075,750 7,700 365,750
Vistana, Inc. + 8,700 187,050 7,100 152,650 1,300 27,950
------------- ------------ ------------
6,574,999 6,077,150 1,022,979
Environmental Control 0.3% 0.2% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Compagnie Generale des Eaux (France) 14,744 1,739,867 17,791 2,099,428 3,350 395,317
Superior Services, Inc. + 42,200 1,202,700 35,500 1,011,750 6,200 176,700
Waterlink, Inc. + 28,100 526,875 23,700 444,375 4,100 76,875
------------- ------------ ------------
3,469,442 3,555,553 648,892
Food and Beverages 3.0% 2.7% 1.6%
- -------------------------------------------------------------------------------------------------------------------------
Archer Daniels Midland Co. -- -- -- -- 58,564 1,401,870
Bass PLC (United Kingdom) 83,400 1,126,923 103,000 1,391,764 25,800 348,617
Campbell Soup Co. 39,500 1,935,500 40,400 1,979,600 9,400 460,600
Coca-Cola Enterprises, Inc. 123,300 3,321,394 125,300 3,375,269 21,000 565,688
ConAgra, Inc. 50,000 3,300,000 50,500 3,333,000 7,200 475,200
Dole Food Co. 139,600 6,308,175 142,300 6,430,181 25,730 1,162,674
Fomento Economico Mexicano,
S.A. de C.V. Class B, (Mexico) + 111,400 962,645 151,300 1,307,435 31,200 269,610
Goodman Fielder Ltd. ADR (Australia) 665,100 1,075,894 867,000 1,402,496 216,500 350,219
Grand Union Co. [DBL. DAGGER]+ 4,153 7,268 9,986 17,476 3,270 5,723
Greencore Group PLC (Ireland) 248,744 1,178,269 340,262 1,611,779 87,825 416,016
Nestle S.A. (Switzerland) 1,840 2,570,570 2,420 3,380,858 563 786,538
Sara Lee Corp. 34,900 1,797,350 34,900 1,797,350 6,800 350,200
The Quaker Oats Co. 126,800 6,387,550 130,000 6,548,750 -- --
Whitman Corp. 236,700 6,450,075 241,200 6,572,700 41,000 1,117,250
------------- ------------ ------------
36,421,613 39,148,658 7,710,205
Funeral/Cemetery Services 0.1% 0.1% --%
- -------------------------------------------------------------------------------------------------------------------------
Equity Corporation International + 56,750 1,322,984 47,750 1,113,172 8,300 193,494
Health Care 1.8% 1.3% 0.8%
- -------------------------------------------------------------------------------------------------------------------------
American HomePatient, Inc. + 42,025 966,575 35,375 813,625 5,987 137,701
Cardinal Health, Inc. 34,700 2,463,700 33,300 2,364,300 6,750 479,250
CareMatrix Corp. + 30,300 768,863 25,500 647,063 4,500 114,188
Compdent Corp. + 24,050 601,250 20,300 507,500 3,450 86,250
Concentra Managed Care, Inc. + 27,103 957,059 25,182 889,239 4,786 169,023
HEALTHSOUTH Corp. + 133,600 3,565,450 130,600 3,485,388 26,200 699,213
IMPATH, Inc. + 25,700 751,725 21,600 631,800 3,700 108,225
NCS HealthCare, Inc. Class A + 20,400 520,200 17,200 438,600 3,000 76,500
Oxford Health Plans Inc. + 31,500 2,358,563 30,900 2,313,638 6,200 464,225
Pediatrix Medical Group, Inc. + 7,300 322,113 6,200 273,575 1,100 48,538
Renal Care Group, Inc. + 25,450 916,200 21,500 774,000 3,750 135,000
Wellpoint Health Networks, Inc. + 115,000 6,662,813 115,000 6,662,813 21,000 1,216,688
------------- ------------ ------------
20,854,511 19,801,541 3,734,801
Hospital Management and
Medical Services 0.3% 0.2% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Centennial HealthCare Corp. + 37,300 857,900 31,400 722,200 5,600 128,800
Monarch Dental Corp. + 17,100 367,650 14,400 309,600 2,500 53,750
National Surgery Centers, Inc. + 44,625 970,594 37,625 818,344 6,675 145,181
OrthAlliance, Inc. Class A + 14,900 219,775 12,600 185,850 2,200 32,450
Phymatrix, Inc. + 50,500 757,500 42,600 639,000 7,500 112,500
ProMedCo Management Co. + 47,700 500,850 40,200 422,100 6,900 72,450
------------- ------------ ------------
3,674,269 3,097,094 545,131
Insurance and Finance 12.2% 10.3% 6.4%
- -------------------------------------------------------------------------------------------------------------------------
ABN AMRO Holding N.V. (Netherlands) 35,408 719,370 57,180 1,161,703 11,296 229,496
Acom Co. Ltd. 7,300 381,371 9,100 475,407 2,300 120,158
Ahmanson (H.F.) & Co. 126,300 7,175,419 127,000 7,215,188 23,500 1,335,094
Allied Irish Banks PLC (Ireland) 210,271 1,860,273 251,169 2,222,098 63,342 560,388
American Express Co. 78,200 6,402,625 74,800 6,124,250 14,800 1,211,750
American International Group, Inc. 43,250 4,462,859 41,400 4,271,963 8,100 835,819
Banc One Corp. 55,900 3,119,919 53,600 2,991,550 10,700 597,194
Banco Frances del Rio de la Plata
(Argentina) 793 25,921 -- -- -- --
Banco Frances del Rio de la Plata
S.A. ADR (Argentina) 34,723 376,125 42,522 460,605 9,983 108,138
Bank of Ireland (Ireland) + 151,145 1,890,123 181,670 2,271,844 43,298 541,462
Bank of Nova Scotia (Canada) 26,381 1,265,562 33,808 1,621,854 5,928 284,381
BankAmerica Corp. 86,900 6,370,856 89,100 6,532,144 17,800 1,304,963
Bankers Trust New York Corp. [UPSIDE DOWN DELTA] 64,500 7,901,250 67,100 8,219,750 12,700 1,555,750
Barnett Banks, Inc. 56,300 3,983,225 56,100 3,969,075 10,900 771,175
Cetelem Group (France) 7,400 845,714 10,500 1,200,000 2,900 331,429
Citicorp 30,600 4,098,488 31,000 4,152,063 6,100 817,019
Comerica, Inc. 36,700 2,897,006 37,100 2,928,581 9,600 757,800
Commonwealth Bank of Australia
(Installment Shares)(Australia) 60,480 747,582 73,262 905,578 29,408 363,507
Commonwealth Bank of Australia
(Australia) 29,616 269,617 35,852 326,388 7,000 63,726
Concord EFS, Inc. + 8,205 221,535 6,909 186,543 1,137 30,699
Conseco Inc. 77,600 3,787,850 76,600 3,739,038 15,000 732,188
Credit Locale de France S.A. (France) 13,000 1,235,165 17,883 1,699,112 3,580 340,145
Dao Heng Bank Group Ltd. (Hong Kong) 123,500 557,047 176,000 793,848 39,000 175,910
Deutsche Bank AG (Germany) 26,400 1,864,940 32,100 2,267,598 8,000 565,133
Fifth Third Bancorp 12,700 830,263 12,500 817,188 2,500 163,438
First Union Corp. 141,800 7,098,863 141,000 7,058,813 -- --
Fleet Financial Group, Inc. -- -- -- -- 18,700 1,226,019
Franklin Resources, Inc. 33,000 3,073,125 30,050 2,798,406 7,050 656,531
Guoco Group Ltd. (Hong Kong) 99,800 398,555 173,600 693,278 35,400 141,371
Healthcare Recoveries, Inc. + 73,800 1,660,500 62,200 1,399,500 10,600 238,500
HSBC Holdings PLC (United Kingdom) 83,387 2,791,242 97,255 3,255,450 25,125 841,018
Internationale Nederlanden Groep
(Netherlands) 44,305 2,041,479 57,749 2,660,949 14,321 659,881
Julius Baer Holdings AG (Switzerland) 485 747,466 750 1,155,875 180 277,410
MBNA Corp. 112,100 4,540,050 107,375 4,348,688 21,275 861,638
Metris Companies Inc. 20,100 870,581 16,800 727,650 3,000 129,938
MGIC Investment Corp. 30,400 1,742,300 29,100 1,667,794 5,600 320,950
Morgan Stanley, Dean Witter,
Discover and Co. 55,800 3,016,688 55,700 3,011,281 10,900 589,281
Norwich Union PLC (United Kingdom) + 21,100 114,589 38,900 211,257 11,500 62,454
Norwich Union PLC 144A
(United Kingdom) + 117,400 639,470 153,400 835,559 38,400 209,162
Promise Co. Ltd. (Japan) 15,070 788,547 17,380 909,419 5,170 270,523
Reinsurance Group America, Inc. 41,750 1,706,531 35,115 1,435,326 6,420 262,418
Societe Generale (France)+ 9,500 1,379,628 11,900 1,728,166 2,900 421,150
Summit Bancorp 175,950 7,818,778 179,250 7,965,422 31,050 1,379,784
Swiss Reinsurance Co. (Switzerland) 565 849,721 707 1,063,279 173 260,180
Travelers Group Inc. 90,933 6,206,177 90,533 6,178,877 18,033 1,230,752
Uniao de Bancos Brasileiros S.A. GDR
(Brazil) + 9,600 350,400 12,500 456,250 3,100 113,150
Union Planters Corp. 118,000 6,593,250 120,200 6,716,175 20,300 1,134,263
United Bank of Switzerland (Switzerland) 2,036 2,385,301 2,654 3,109,327 662 775,574
United Overseas Bank Ltd. (Singapore) 179,000 1,323,324 243,000 1,796,467 55,000 406,608
USF&G Corp. 251,600 5,771,075 271,500 6,227,531 54,000 1,238,625
Washington Mutual, Inc. 196,300 13,691,925 194,000 13,531,500 37,000 2,580,750
Westpac Banking Corp. (Australia) 309,100 1,950,724 377,500 2,382,395 96,500 609,010
Zurich Versicherungs-Gesellschaft
(Switzerland) 1,424 621,564 2,054 896,554 461 201,223
------------- ------------ ------------
143,461,958 150,774,556 30,894,925
Medical Supplies and Devices 1.0% 0.7% 0.4%
- -------------------------------------------------------------------------------------------------------------------------
CN Biosciences, Inc. + 20,400 479,400 17,200 404,200 3,000 70,500
Cytyc Corp. + 49,900 1,253,738 42,000 1,055,250 7,100 178,388
Guidant Corp. 31,000 1,736,000 31,400 1,758,400 6,200 347,200
Igen, Inc. + 33,000 445,500 27,800 375,300 4,800 64,800
Minimed, Inc. + 25,300 993,025 21,300 836,025 3,700 145,225
Sabratek Corp. + 36,300 1,320,413 30,500 1,109,438 5,200 189,150
Tyco International Ltd. 68,000 5,580,250 66,600 5,465,363 13,300 1,091,431
------------- ------------ ------------
11,808,326 11,003,976 2,086,694
Metals and Mining 0.8% 0.7% 0.3%
- -------------------------------------------------------------------------------------------------------------------------
Freeport-McMoRan Copper &
Gold Co., Inc. Class B 218,765 6,303,167 223,029 6,426,023 30,241 871,319
Kawasaki Steel Corp. (Japan) 269,000 516,105 306,000 587,093 77,000 147,733
Rio Tinto PLC (United Kingdom) 130,028 2,068,016 167,410 2,662,554 39,213 623,659
------------- ------------ ------------
8,887,288 9,675,670 1,642,711
Oil and Gas 4.1% 3.7% 2.3%
- -------------------------------------------------------------------------------------------------------------------------
Amoco Corp. 67,600 6,514,950 68,900 6,640,238 12,400 1,195,050
British Petroleum Co. PLC
(United Kingdom) 145,922 2,206,412 184,162 2,784,619 44,109 666,950
Burmah Castrol PLC (United Kingdom) 116,129 2,075,954 148,040 2,646,404 37,344 667,572
Ente Nazionale Idrocarburi SPA (Italy) 544,472 3,439,366 701,310 4,430,093 161,370 1,019,355
Exxon Corp. 76,000 4,868,750 74,500 4,772,656 14,900 954,531
Halliburton Co. 110,200 5,730,400 112,000 5,824,000 19,200 998,400
Hong Kong and China Gas Co. Ltd.
(Hong Kong) 277,200 571,417 297,600 613,469 79,200 163,262
Mobil Corp. 35,700 2,641,800 34,200 2,530,800 7,800 577,200
Occidental Petroleum Corp. 243,700 6,320,969 248,400 6,442,875 41,000 1,063,438
Petroleo Brasileiro S/A-Petrobras ADR
(Brazil) 3,100 87,153 49,100 1,380,388 -- --
Petroleo Brasileiro S/A-Petrobras 144A
ADR (Brazil) 33,600 945,000 42,800 1,203,750 10,800 303,750
Schlumberger Ltd. 64,600 5,438,513 61,900 5,211,206 14,600 1,229,138
Shell Transportation & Trading
(United Kingdom) 263,300 1,929,968 343,100 2,514,896 78,480 575,252
Societe Nationale Elf Aquitaine SA
(France) 18,942 2,536,275 24,689 3,305,780 5,972 799,632
Total Corp. Class B, (France) 27,173 3,119,268 35,350 4,057,929 8,001 918,458
------------- ------------ ------------
48,426,195 54,359,103 11,131,988
Paper and Forest Products 1.7% 1.4% 0.7%
- -------------------------------------------------------------------------------------------------------------------------
Boise Cascade Corp. 160,200 6,738,413 163,300 6,868,806 29,600 1,245,050
International Paper Co. 102,100 5,621,881 105,000 5,781,563 19,500 1,073,719
Mayr-Melnhof Karton AG (Austria) 5,528 330,762 8,100 484,654 2,000 119,668
Unisource Worldwide, Inc. 366,000 6,954,000 373,000 7,087,000 64,700 1,229,300
------------- ------------ ------------
19,645,056 20,222,023 3,667,737
Pharmaceuticals 4.0% 3.2% 1.8%
- -------------------------------------------------------------------------------------------------------------------------
Astra AB (Sweden) 46,943 867,708 58,657 1,084,233 14,360 265,434
Bristol-Myers Squibb Co. 69,800 5,775,950 66,700 5,519,425 9,800 810,950
Dura Pharmaceuticals, Inc. + 38,700 1,688,288 33,300 1,452,713 6,000 261,750
Glaxo Wellcome PLC (United Kingdom) 40,400 910,588 50,400 1,135,981 12,300 277,233
Lilly (Eli) & Co. 42,900 5,166,769 42,800 5,154,725 8,400 1,011,675
Medicis Pharmaceutical Corp. Class A + 56,750 2,603,406 47,750 2,190,531 8,250 378,469
Merck & Co., Inc. 63,800 6,376,013 64,800 6,475,950 10,300 1,029,356
Novartis AG ADR (Switzerland) 992 1,525,417 1,347 2,071,307 294 452,089
Pfizer, Inc. 96,500 5,796,031 92,400 5,549,775 17,600 1,057,100
Pharmacia & Upjohn, Inc. 167,300 6,106,450 170,500 6,223,250 28,600 1,043,900
Pharmacia & Upjohn, Inc.
Depository Shares (Sweden) 25,500 925,865 37,300 1,354,304 7,514 272,821
Sankyo Co., Ltd. (Japan) 52,000 1,805,316 66,000 2,291,363 17,000 590,199
Santen Pharmaceutical Co. Ltd (Japan) 24,000 452,492 30,000 565,615 7,000 131,977
Warner-Lambert Co. 44,200 5,964,238 44,100 5,950,744 8,600 1,160,463
Yamanouchi Pharmaceutical Co., Ltd.
(Japan) 38,000 940,532 41,000 1,014,784 11,000 272,259
------------- ------------ ------------
46,905,063 48,034,700 9,015,675
Photography 0.8% 0.8% 0.5%
- -------------------------------------------------------------------------------------------------------------------------
Canon, Inc. (Japan) 102,000 2,990,532 124,000 3,635,549 30,000 879,568
Fuji Photo Film Co. (Japan) 34,000 1,406,313 42,000 1,737,210 10,000 413,621
Polaroid Corp. 108,500 5,553,844 110,600 5,661,338 21,800 1,115,888
------------- ------------ ------------
9,950,689 11,034,097 2,409,077
Publishing 1.1% 0.9% 0.5%
- -------------------------------------------------------------------------------------------------------------------------
Consolidated Graphics, Inc. + 22,200 1,104,450 18,700 930,325 3,300 164,175
Gannett Co., Inc. 59,800 6,454,663 58,100 6,271,169 11,300 1,219,694
Times Mirror Co. Class A 114,800 6,306,825 119,500 6,565,031 22,000 1,208,625
------------- ------------ ------------
13,865,938 13,766,525 2,592,494
Real Estate 1.6% 1.4% 0.7%
- -------------------------------------------------------------------------------------------------------------------------
Amoy Properties Ltd. (Hong Kong) (R) 723,500 790,123 829,000 905,338 204,000 222,785
Beacon Properties Corp. (R) 180,595 8,273,508 183,992 8,429,134 30,162 1,381,797
Castle & Cooke, Inc. + 26,633 522,673 26,766 525,283 -- --
Cheung Kong Holdings Ltd.
(Hong Kong) (R) 174,000 1,956,446 208,000 2,338,740 52,000 584,685
Equity Office Properties Trust (R) -- -- -- -- 2,400 81,450
Equity Residential Properties Trust (R) 124,800 6,809,400 140,200 7,649,663 26,300 1,434,994
------------- ------------ ------------
18,352,150 19,848,158 3,705,711
Recreation 0.1% --% --%
- -------------------------------------------------------------------------------------------------------------------------
Penn National Gaming Inc. + 34,300 638,838 28,900 538,263 4,200 78,225
Retail 5.2% 4.1% 2.4%
- -------------------------------------------------------------------------------------------------------------------------
99 Cents Only Stores + 12,300 403,594 10,400 341,250 1,800 59,063
Braun's Fashions Corp. + 37,400 532,950 31,500 448,875 5,500 78,375
CVS Corp. 105,724 6,013,053 101,932 5,797,383 17,847 1,015,048
Consolidated Stores Corp. + 60,275 2,524,016 57,700 2,416,188 15,375 643,828
Cost Plus, Inc. + 26,600 771,400 22,400 649,600 4,000 116,000
Costco Companies, Inc. + 98,600 3,709,825 94,600 3,559,325 20,100 756,263
Cycle & Carriage Ltd. (Singapore) 39,000 236,016 48,000 290,481 12,000 72,620
Dayton Hudson Corp. 57,200 3,428,425 59,000 3,536,313 11,000 659,313
Dixons Group PLC (United Kingdom) 48,000 494,976 62,700 646,562 15,700 161,898
Hot Topic, Inc. + 22,900 458,000 19,200 384,000 3,500 70,000
Il Fornaio (America) Corp. + 4,000 61,000 3,300 50,325 600 9,150
Ito-Yokado Co., Ltd. (Japan) 30,000 1,629,569 37,000 2,009,801 9,000 488,871
Kmart Corp. 576,500 8,071,000 588,100 8,233,400 109,800 1,537,200
Linens 'N Things, Inc. + 37,600 1,259,600 31,600 1,058,600 5,600 187,600
Mazel Stores Inc. + 18,000 445,500 15,200 376,200 2,600 64,350
Officemax, Inc. + 433,300 6,580,744 491,000 7,457,063 93,100 1,413,956
Petco Animal Supplies, Inc. + 14,100 442,388 11,800 370,225 2,000 62,750
Piercing Pagoda, Inc. + 36,000 1,143,000 30,300 962,025 5,100 161,925
Rexall Sundown, Inc. + 57,100 2,605,188 48,100 2,194,563 8,800 401,500
Safeway, Inc. 57,400 3,121,125 58,800 3,197,250 11,800 641,625
The Men's Wearhouse, Inc. + 39,600 1,475,100 33,450 1,246,013 5,800 216,050
The North Face, Inc. + 68,400 1,838,250 57,500 1,545,313 10,000 268,750
TJX Cos., Inc. (The) 89,400 2,732,288 85,600 2,616,150 18,800 574,575
Vendex International N.V. (Netherlands) 26,300 1,564,529 34,300 2,040,432 7,580 450,918
Walgreen Co. 100,300 2,570,188 99,300 2,544,563 18,800 481,750
Wal-Mart Stores, Inc. 150,700 5,519,388 156,700 5,739,138 29,500 1,080,438
Wolverine World Wide, Inc. 53,520 1,351,380 45,887 1,158,647 8,302 209,626
------------- ------------ ------------
60,982,492 60,869,685 11,883,442
Specialty Consumer Products 0.2% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Action Performance Cos., Inc. + 40,400 1,176,650 34,000 990,250 6,000 174,750
Guitar Center, Inc. + 40,200 994,950 33,900 839,025 6,000 148,500
------------- ------------ ------------
2,171,600 1,829,275 323,250
Telecommunications 2.4% 2.1% 1.4%
- -------------------------------------------------------------------------------------------------------------------------
Black Box Corp. + 44,600 1,951,250 37,550 1,642,813 6,600 288,750
Brightpoint, Inc. + 36,500 1,692,688 30,775 1,427,191 5,225 242,309
CellNet Data Systems, Inc. + 1,000 12,563 3,200 40,200 800 10,050
Deutsche Telekom AG (Germany) 120,939 2,348,730 139,419 2,707,626 34,100 662,249
Deutsche Telekom AG ADR (Germany) 16,400 312,625 19,900 379,344 5,800 110,563
Globecomm Systems, Inc. + 28,600 500,500 24,100 421,750 4,200 73,500
Intermedia Communications, Inc. + 25,600 1,201,600 22,100 1,037,319 4,200 197,138
Lucent Technologies, Inc. 40,400 3,287,550 40,300 3,279,413 7,900 642,863
Natural Microsystems Corp. + 8,200 311,600 7,400 281,200 1,300 49,400
NEXTEL Communications, Inc. 144A [DBL. DAGGER] 1,177 32,287 3,819 104,760 1,819 49,897
Northern Telecom Ltd. (Canada) + 19,500 2,036,839 24,100 2,517,324 5,700 595,384
Omtool, Ltd. + 54,500 728,938 45,900 613,913 8,200 109,675
Oy Nokia AB Class A (Finland) 17,450 1,665,847 22,655 2,162,738 5,400 515,506
PT Telekomunikasi (Indonesia) 173,500 192,927 219,500 244,077 54,500 60,602
Portugal Telecom S.A. (Portugal) 54,279 2,361,471 73,611 3,202,532 16,970 738,300
Powerwave Technologies, Inc. + 21,800 844,750 18,300 709,125 3,200 124,000
Premisys Communications, Inc. + 41,800 1,063,288 35,200 895,400 6,100 155,169
RF Micro Devices, Inc. + 15,700 292,413 13,500 251,438 2,100 39,113
Telefonaktiebolaget LM Ericsson Class B
(Sweden) 33,680 1,620,856 44,630 2,147,826 9,650 464,408
Tellabs, Inc. + 54,700 2,817,050 54,600 2,811,900 10,700 551,050
Vodafone Group PLC (United Kingdom) 520,334 2,792,173 667,646 3,582,666 161,249 865,281
Winstar Communications Inc. 25,900 496,956 21,600 414,450 3,900 74,831
------------- ------------ ------------
28,564,901 30,875,005 6,620,038
Transportation 2.0% 1.7% 1.0%
- -------------------------------------------------------------------------------------------------------------------------
Bombardier, Inc. (Canada) 2,100 42,578 2,500 50,688 700 14,193
Burlington Northern Santa Fe Corp. + 66,000 6,377,250 69,000 6,667,125 13,000 1,256,125
Delta Air Lines, Inc. 72,500 6,828,594 73,900 6,960,456 12,700 1,196,181
Expeditors International of
Washington, Inc. 66,720 2,793,900 56,120 2,350,025 9,740 407,863
K.L.M.-Royal Dutch Airlines (Netherlands) 26,600 931,992 33,000 1,156,231 8,100 283,802
Norfolk Southern Corp. 56,300 5,812,975 58,000 5,988,500 11,000 1,135,750
Swire Pacific Ltd. Class A, (Hong Kong) 71,500 547,512 102,300 783,363 21,800 166,934
Yamato Transport Co. Ltd. (Japan) 65,000 799,004 77,000 946,512 20,000 245,847
------------- ------------ ------------
24,133,805 24,902,900 4,706,695
Utilities 2.0% 1.7% 1.0%
- -------------------------------------------------------------------------------------------------------------------------
Electricidade de Portugal S.A. (Portugal) 10,600 182,575 13,900 239,415 3,500 60,284
Hong Kong Electric Holdings Ltd.
(Hong Kong) 89,500 333,131 94,000 349,880 23,000 85,609
Kurita Water Industries Ltd. (Japan) 42,000 840,698 53,000 1,060,881 11,000 220,183
Philippine Long Distance Telephone Co.
ADR (Philippines) 3,200 86,800 4,000 108,500 1,000 27,125
Scottish Power PLC (United Kingdom) 273,774 2,119,579 361,340 2,797,522 73,749 570,970
Sprint Corp. 220,700 11,035,000 226,900 11,345,000 39,900 1,995,000
US West, Communications Inc. 162,000 6,237,000 165,100 6,356,350 29,700 1,143,450
Veba (Vereinigte Elektrizitaets
Bergwerks) AG (Germany) 37,400 2,192,817 48,514 2,844,447 12,649 741,629
------------- ------------ ------------
23,027,600 25,101,995 4,844,250
Total Common Stocks
(cost $716,738,837, $733,533,882
and $144,499,523) $912,469,922 $937,309,985 $186,577,284
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH BALANCED CONSERVATIVE
4.5% 9.1% 12.0%
FOREIGN GOVERNMENT Principal Principal Principal
BONDS AND NOTES * Amount Value Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------------
AUD Australia (Government of)
bonds Ser. 206, 10s, 2006 1,865,000 $1,696,500 4,855,000 $4,416,359 1,400,000 $1,273,512
AUD Australia (Government of)
bonds Ser. 705, 7 1/2s, 2005 -- -- -- -- 2,410,000 1,907,301
AUD Australia (Government of)
bonds Ser. 1106, 6 3/4s, 2006 -- -- -- -- 1,625,000 1,232,409
USD Bank of Foreign Economic Affairs
of Russia (Vnesheconombank)
principal loan FRN Libor plus
13/16s, 2020 +##+++ 1,623,000 1,209,135 4,176,000 3,111,120 2,329,000 1,735,105
CAD Canada (Government of) bonds
Ser. WB60, 7 1/4s, 2007 -- -- -- -- 2,235,000 1,793,988
CAD Canada (Government of) bonds
Ser. WE00, 5 1/2s, 2002 5,265,000 3,858,967 13,545,000 9,927,769 5,545,000 4,064,192
DKK Denmark (Government of)
bonds 8s, 2006 -- -- -- -- 4,970,000 846,982
DKK Denmark (Government of)
bonds 7s, 2026 8,665,000 1,286,508 22,508,000 3,341,802 12,449,000 1,848,325
FRF France Treasury Bill notes
5 1/2s 2001 -- -- -- -- 21,600,000 3,764,937
FRF France Treasury Bill notes
4 3/4s, 2002 44,305,000 7,497,701 111,660,000 18,896,308 29,535,000 4,998,231
DEM Germany (Federal Republic of)
bonds Ser. 92, 8s, 2002 13,725,000 8,822,658 33,565,000 21,576,150 -- --
DEM Germany (Federal Republic of)
Unity Fund bonds 8s, 2002 5,830,000 3,717,825 15,030,000 9,584,719 14,610,000 9,316,882
DEM Germany (Federal Republic of )
bonds Ser. 97, 6 1/2s 2027 2,805,000 1,665,319 7,275,000 4,319,144 3,490,000 2,072,002
DEM Germany (Federal Republic of)
bonds Ser. 97, 6s, 2007 8,015,000 4,710,690 20,745,000 12,192,547 -- --
ITL Italy (Government of) bonds
6 1/4s, 2002 2,005,000,000 1,195,460 5,360,000,000 3,195,843 6,715,000,000 4,003,747
PEN Peru (Government of) 144A
Ser. US, 4s 2017 825,000 551,719 2,104,000 1,407,050 930,000 621,938
CAD Quebec (Province of) deb.
Ser. NN, 7 1/8s, 2024 445,000 437,591 1,470,000 1,445,525 1,960,000 1,927,366
ZAR South Africa (Republic of) bonds
Ser. 153, 13s, 2010 4,482,000 904,106 11,444,000 2,308,476 5,305,000 1,070,121
ESP Spain (Government of) bonds
9.4s, 1999 -- -- -- -- 395,950,000 2,841,032
ESP Spain (Government of) bonds
7.9s, 2002 -- -- -- -- 194,100,000 1,440,220
GBP United Kingdom Treasury bonds
7 1/2s 2006 4,085,000 7,068,926 10,475,000 18,126,561 5,235,000 9,058,954
GBP United Kingdom Treasury bonds
7s 2002 4,870,000 8,038,648 12,400,000 20,468,015 2,220,000 3,664,435
------------- ------------ ------------
Total Foreign Government Bonds
and Notes (cost $51,030,371,
$130,202,024 and $58,936,977) $52,661,753 $134,317,388 $59,481,679
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
GROWTH BALANCED CONSERVATIVE
3.6% 7.3% 14.3%
CORPORATE BONDS Principal Principal Principal
AND NOTES * Amount Value Amount Value Amount Value
Advertising 0.1% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Adams Outdoor Advertising
sr. notes 10 3/4s, 2006 $225,000 $246,375 $530,000 $580,350 $25,000 $27,375
Lamar Advertising Co. 144A
sr. sub. notes 8 5/8s, 2007 100,000 99,750 240,000 239,400 75,000 74,813
Lamar Advertising Co. sr. sub. notes
9 5/8s, 2006 275,000 289,438 720,000 757,800 225,000 236,813
Outdoor Communications Inc.
sr. sub. notes 9 1/4s, 2007 15,000 14,906 40,000 39,750 10,000 9,938
Outdoor Systems, Inc. company
guaranty 8 7/8s, 2007 125,000 127,500 200,000 204,000 225,000 229,500
Outdoor Systems, Inc. sr. sub. notes
9 3/8s, 2006 10,000 10,500 35,000 36,750 10,000 10,500
Universal Outdoor, Inc. sr. sub. notes
9 3/4s, 2006 118,000 126,260 292,000 312,440 95,000 101,650
------------- ------------ ------------
914,729 2,170,490 690,589
Aerospace and Defense 0.1% 0.1% 0.3%
- -------------------------------------------------------------------------------------------------------------------------
Alliant Techsystems, Inc. sr. sub. notes
11 3/4s, 2003 60,000 66,450 145,000 160,588 50,000 55,375
BE Aerospace sr. notes 9 3/4s, 2003 140,000 147,000 340,000 357,000 100,000 105,000
Howmet Corp. sr. sub. notes
10s, 2003 115,000 125,350 280,000 305,200 100,000 109,000
L-3 Communications Corp. 144A
sr. sub. notes 10 3/8s, 2007 50,000 53,750 135,000 145,125 50,000 53,750
Lockheed Martin Corp. company
guaranty 7 1/4s, 2006 -- -- -- -- 1,190,000 1,231,948
Raytheon Co notes 6.45s, 2002 530,000 529,475 1,355,000 1,353,659 -- --
Sequa Corp. bonds 8 3/4s, 2001 30,000 30,525 -- -- -- --
Sequa Corp. sr. notes 9 5/8s, 1999 10,000 10,350 20,000 20,700 10,000 10,350
Sequa Corp. sr. sub. notes 9 3/8s, 2003 -- -- 10,000 10,375 -- --
Tracor, Inc. sr. 144A sub. notes
8 1/2s, 2007 10,000 10,250 20,000 20,500 10,000 10,250
------------- ------------ ------------
973,150 2,373,147 1,575,673
Agriculture --% --% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
AGCO Corp. sr. sub. notes 8 1/2s, 2006 100,000 104,000 290,000 301,600 100,000 104,000
Potash Corp. of Saskatchewan notes
7 1/8s, 2007 (Cananda) 155,000 158,038 395,000 402,742 525,000 535,290
Premium Standard Farms, Inc.
sr. secd. notes 11s, 2003 [2 DBL. DAGGERS] 3,799 4,179 15,181 16,700 8,590 9,449
------------- ------------ ------------
266,217 721,042 648,739
Apparel --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
Sassco Fashions Ltd. sr. notes
12 3/4s, 2004 60,000 63,600 315,000 333,900 50,000 53,000
Automotive --% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Aftermarket Technology Corp.
sr. sub. notes 12s, 2004 -- -- 12,000 13,380 8,000 8,920
Aftermarket Technology Corp.
sr. sub. notes Ser. D, 12s, 2004 11,000 12,265 18,000 20,070 12,000 13,380
Exide Corp. sr. notes 10s, 2005 10,000 10,600 10,000 10,600 -- --
Harvard Industries Inc. sr. notes
11 1/8s, 2005 (In default) + 5,000 1,900 10,000 3,800 10,000 3,800
Hawk Corp. sr. notes 10 1/4s, 2003 5,000 5,313 10,000 10,625 -- --
Hayes Wheels International, Inc.
144A sr. sub. notes 9 1/8s, 2007 150,000 154,500 355,000 365,650 250,000 257,500
Lear Corp. sub. notes 9 1/2s, 2006 210,000 229,950 275,000 301,125 85,000 93,075
Safety Component International, Inc.
144A sr. sub. notes 10 1/8s, 2007 40,000 41,400 120,000 124,200 35,000 36,225
------------- ------------ ------------
455,928 849,450 412,900
Basic Industrial Products --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
Astor Corp. 144A sr. sub. notes
10 1/2s, 2006 25,000 26,500 70,000 74,200 20,000 21,200
Clark-Schwebel sr. notes 10 1/2s, 2006 110,000 119,900 290,000 316,100 100,000 109,000
------------- ------------ ------------
146,400 390,300 130,200
Biotechnology --% --% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Millipore Corp. notes 7.2s, 2002 160,000 163,878 425,000 435,302 595,000 609,423
Broadcasting 0.3% 0.6% 0.5%
- -------------------------------------------------------------------------------------------------------------------------
Acme Television/Finance 144A
sr. disc. notes stepped-coupon zero %
(10 7/8s, 9/30/00), 2004 ++ 55,000 40,288 140,000 102,550 40,000 29,300
American Radio Systems Corp.
company guaranty 9s, 2006 5,000 5,300 10,000 10,600 10,000 10,600
American Telecasting, Inc. sr. disc.
notes stepped-coupon zero %
(14 1/2s, 6/15/99), 2004 ++ 325,000 120,250 1,000,000 370,000 265,000 98,050
Argyle Television Corp. sr. sub. notes
9 3/4s, 2005 230,000 249,550 580,000 629,300 190,000 206,150
Azteca Holdings 144A sr. notes 11s,
2002 (Mexico) 40,000 42,100 100,000 105,250 25,000 26,313
Benedek Communications Corp.
sr. disc. notes stepped-coupon zero %
(13 1/4s, 5/15/01), 2006 ++ 100,000 70,500 200,000 141,000 75,000 52,875
Capstar Broadcasting sr. disc. notes
stepped-coupon zero %
(12 3/4s, 2/1/02), 2009 ++ 175,000 119,875 465,000 318,525 155,000 106,175
Capstar Broadcasting 144A sr. sub. notes
9 1/4s, 2007 -- -- 115,000 117,875 -- --
Central European Media Enterprises Ltd.
sr. notes 9 3/8s, 2004 20,000 20,050 60,000 60,150 20,000 20,050
Chancellor Radio Broadcasting Corp.
sr. sub. notes 9 3/8s, 2004 -- -- 5,000 5,200 5,000 5,200
Citadel Broadcasting Co. sr. notes
10 1/4s, 2007 -- -- 4,370 4,698 -- --
Citadel Broadcasting Co. 144A
sr. sub. notes 10 1/4s, 2007 45,000 48,375 120,000 129,000 40,000 43,000
Comcast Corp. sr. sub. 9 1/8s, 2006 170,000 181,900 -- -- -- --
Comcast Corp. sr. sub. notes 9 1/2s, 2008 -- -- -- -- 50,000 53,750
Comcast UK Cable, Ltd. deb.
stepped-coupon zero % (11.2s,
11/15/00), 2007 (Bermuda) ++ 150,000 117,750 400,000 314,000 130,000 102,050
Commodore Media, Inc. sr. sub. notes
stepped-coupon 7 1/2s,
(13 1/4s, 5/1/98), 2003 ++ 220,000 242,000 555,000 610,500 180,000 198,000
Diamond Cable Communication Co.
sr. disc. notes stepped-coupon zero %
(10 3/4s, 2/15/02), 2007
(United Kingdom) ++ 195,000 126,994 510,000 332,138 -- --
Diamond Cable Communication Co.
sr. disc. notes stepped-coupon zero %
(11 3/4s, 12/15/00), 2005
(United Kingdom) ++ 150,000 112,313 440,000 329,450 145,000 108,569
Diamond Cable Communication Co.
sr. disc. notes stepped-coupon zero %
(13 1/4s, 9/30/99), 2004
(United Kingdom) ++ -- -- 200,000 175,000 -- --
Fox/Liberty Networks LLC 144A
sr. notes 8 7/8s, 2007 140,000 140,875 360,000 362,250 120,000 120,750
Gray Communications Systems, Inc.
sr. sub. notes 10 5/8s, 2006 10,000 10,750 35,000 37,625 10,000 10,750
Jacor Communications, Inc.
company guaranty 9 3/4s, 2006 5,000 5,350 10,000 10,700 5,000 5,350
Jacor Communications, Inc. sr. sub. notes
10 1/8s, 2006 110,000 119,350 285,000 309,225 100,000 108,500
Marcus Cable Co. (L.P.) sr. sub. disc. notes
stepped-coupon zero %
(13 1/2s, 8/1/99), 2004 ++ 170,000 153,213 430,000 387,538 140,000 126,175
Paxson Communications Corp. 144A
sr. sub. notes 11 5/8s, 2002 10,000 10,950 10,000 10,950 5,000 5,475
Pegasus Media & Communications notes
Ser. B, 12 1/2s, 2005 -- -- 200,000 223,500 100,000 111,750
Petracom Holdings, Inc. notes
stepped-coupon zero %
(17 1/2s, 8/1/98), 2003 ++ 150,000 144,000 414,000 397,440 165,000 158,400
Radio One Inc. 144A sr. sub. notes
stepped-coupon 7s, (12s, 5/1/00),
2004 ++ 5,000 4,800 10,000 9,600 10,000 9,600
Rogers Cablesystems Ltd. deb. 10 1/8s,
2012 (Canada) -- -- 400,000 435,000 -- --
Rogers Cablesystems Ltd. notes 11s, 2015
(Canada) 150,000 171,750 -- -- 50,000 57,250
SFX Broadcasting, Inc. sr. sub. notes
Ser. B, 10 3/4s, 2006 295,000 321,550 515,000 561,350 160,000 174,400
Sinclair Broadcasting Group sr. sub.
notes 10s, 2005 220,000 231,000 550,000 577,500 190,000 199,500
Spanish Broadcasting sr. notes Ser. B,
11s, 2004 65,000 71,013 170,000 185,725 60,000 65,550
Sullivan Broadcasting sr. sub. notes
10 1/4s, 2005 225,000 236,250 590,000 619,500 200,000 210,000
TCI Communications Inc deb. 8 3/4s, 2015 -- -- 500,000 549,505 -- --
TCI Satellite Entertainment 144A
sr. sub. notes 10 7/8s, 2007 45,000 47,250 145,000 152,250 35,000 36,750
Young Broadcasting, Inc. company guaranty
Ser. B, 9s, 2006 5,000 5,013 5,000 5,013 10,000 10,025
------------- ------------ ------------
3,170,359 8,589,907 2,470,307
Building and Construction 0.1% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Atrium Companies Inc. 144A
sr. sub. notes 10 1/2s, 2006 10,000 10,400 15,000 15,600 -- --
Cemex S.A. 144A bonds 12 3/4s,
2006 (Mexico) 5,000 6,038 10,000 12,075 10,000 12,075
Cia Latino Americana 144A company
guaranty 11 5/8s, 2004 (Argentina) 25,000 26,438 75,000 79,313 25,000 26,438
Continental Homes Holding Corp.
sr. notes 10s, 2006 120,000 126,600 290,000 305,950 100,000 105,500
Consumers International 144A
sr. notes 10 1/4s, 2005 10,000 10,900 5,000 5,450 5,000 5,450
GS Superhighway Holdings 144A
sr. notes 10 1/4s, 2007 100,000 100,250 200,000 200,500 -- --
M.D.C. Holdings, Inc. notes Ser. B,
11 1/8s, 2003 75,000 82,125 200,000 219,000 75,000 82,125
Presley Cos. sr. notes 12 1/2s, 2001 40,000 38,000 110,000 104,500 -- --
Terex Corp. sr. notes Ser. B, 13 1/4s, 2002 70,000 80,500 184,000 211,600 60,000 69,000
Triangle Pacific Corp. sr. notes
10 1/2s, 2003 100,000 106,500 350,000 372,750 125,000 133,125
Waxman Industries Inc. sr. notes
stepped-coupon Ser. B, zero %
(12 3/4s, 6/1/99), 2004 ++ 10,000 8,700 10,000 8,700 10,000 8,700
------------- ------------ ------------
596,451 1,535,438 442,413
Business Equipment and Services --% 0.1% --%
- -------------------------------------------------------------------------------------------------------------------------
Axiohm Transactions Solutions 144A
sr. sub. notes 9 3/4s, 2007 40,000 40,500 120,000 121,500 15,000 15,188
Coleman Escrow Corp. 144A
sr. disc. notes zero %, 2001 35,000 21,088 90,000 54,225 30,000 18,075
Iron Mountain, Inc. med. term notes
company guaranty 10 1/8s, 2006 50,000 54,000 50,000 54,000 15,000 16,200
Pierce Leahy Corp. sr. sub. notes
144A 11 1/8s, 2006 207,000 232,875 410,000 461,250 106,000 119,250
United Stationer Supply, Inc. sr. sub.
notes
12 3/4s, 2005 10,000 11,350 5,000 5,675 10,000 11,350
Williams Scotsman Inc. 144A sr.notes
9 7/8s, 2007 40,000 40,300 115,000 115,863 40,000 40,300
------------- ------------ ------------
400,113 812,513 220,363
Cable Television 0.1% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Adelphia Communications Corp. sr. notes
9 1/2s, 2004 [2 DBL. DAGGERS] 160,475 158,068 375,000 369,375 -- --
Adelphia Communications Corp. sr. notes
Ser. B, 10 1/4s, 2000 10,000 10,500 20,000 21,000 10,000 10,500
Antenna TV S.A. 144A sr. notes 9s,
2007 (Greece) 35,000 35,175 90,000 90,450 30,000 30,150
Cablevision Systems Corp. sr. sub. deb.
9 7/8s, 2023 10,000 10,800 10,000 10,800 10,000 10,800
Cablevision Systems Corp. sr. sub. notes
9 7/8s, 2013 -- -- 100,000 108,000 -- --
Cablevision Systems Corp. sr. sub. notes
9 1/4s, 2005 10,000 10,450 10,000 10,450 10,000 10,450
Charter Communications International, Inc.
disc. notes stepped-coupon Ser. B, zero %
(14s, 3/15/01), 2007 ++ 10,000 7,550 20,000 15,100 10,000 7,550
Falcon Holdings Group, Inc. sr. sub. notes
11s, 2003 [2 DBL. DAGGERS] 135,270 140,681 330,561 343,783 114,854 119,448
FrontierVision Holdings LP 144A
sr. disc. notes stepped coupon zero %
(11 7/8s, 9/15/01), 2007 ++ 170,000 115,600 400,000 272,000 100,000 68,000
Jones Intercable, Inc. sr. sub. deb.
10 1/2s, 2008 160,000 175,200 415,000 454,425 140,000 153,300
UIH Australia/Pacific, Inc. sr. disc. notes
stepped-coupon Ser. B, zero %
(14s, 5/15/01), 2006 (Australia) ++ 210,000 150,675 610,000 437,675 200,000 143,500
------------- ------------ ------------
814,699 2,133,058 553,698
Cellular Communications 0.1% 0.2% 0.2%
- -------------------------------------------------------------------------------------------------------------------------
AirTouch Communications, Inc. notes
7 1/8s, 2001 190,000 194,155 465,000 475,170 625,000 638,669
Cellular, Inc. sr. sub. disc. notes
stepped-coupon zero %
(11 3/4s, 9/1/98), 2003 ++ 50,000 49,500 150,000 148,500 50,000 49,500
Centennial Cellular Corp. sr. notes
10 1/8s, 2005 145,000 155,513 350,000 375,375 60,000 64,350
Centennial Cellular Corp. sr. notes
8 7/8s, 2001 50,000 50,750 135,000 137,025 50,000 50,750
Comcast Cellular 144A sr. notes
9 1/2s, 2007 140,000 146,300 365,000 381,425 125,000 130,625
Interact Systems, Inc. 144A
stepped-coupon zero % (14s, 8/1/99),
2003 ++ 100,000 40,000 300,000 120,000 90,000 36,000
Millicom International Cellular S.A. sr.
disc. notes stepped-coupon zero % (13 1/2s,
6/1/01), 2006 (Luxembourg) ++ 245,000 189,875 620,000 480,500 205,000 158,875
Pratama Datakom Asia BV 144A company
guaranty 12 3/4s, 2005 (Indonesia) 45,000 43,088 110,000 105,325 35,000 33,513
------------- ------------ ------------
869,181 2,223,320 1,162,282
Chemicals 0.1% 0.1% 0.2%
- -------------------------------------------------------------------------------------------------------------------------
Great Lakes Carbon Corp. sr. notes
10s, 2006 -- -- 225,000 240,750 150,000 160,500
Harris Chemical Corp. sr. sub. notes
10 3/4s, 2003 115,000 118,738 300,000 309,750 100,000 103,250
Huntsman Corp. 144A sr. sub. notes FRN
9.187s, 2007 120,000 124,500 300,000 311,250 100,000 103,750
NL Industries, Inc. sr. notes stepped-
coupon zero % (13s, 10/15/98), 2005 ++ 100,000 97,250 250,000 243,125 75,000 72,938
Sociedad Quimica Y Minera de Chile S.A.
144A bonds 7.7s, 2006 (Chile) 55,000 57,819 160,000 168,200 170,000 178,713
Sovereign Specialty Chemical 144A
sr. sub. notes 9 1/2s, 2007 50,000 51,000 130,000 132,600 40,000 40,800
Sterling Chemicals Holdings sr. disc.
notes stepped-coupon zero %
(13 1/2s, 8/15/01), 2008 ++ 100,000 70,500 270,000 190,350 100,000 70,500
Sterling Chemicals Inc. sr. sub. notes
Ser. A, 11 1/4s, 2007 -- -- -- -- 80,000 87,400
Trikem S.A. 144A bonds 10 5/8s,
2007 (Brazil) 40,000 40,250 125,000 125,781 40,000 40,250
Union Carbide Global Enterprises
sr. sub. notes Ser. B, 12s, 2005 80,000 91,100 210,000 239,137 90,000 102,488
------------- ------------ ------------
651,157 1,960,943 960,589
Computer Services and Software --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
DecisionOne Corp. sr. sub. notes
9 3/4s, 2007 20,000 20,900 65,000 67,925 20,000 20,900
Conglomerates --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
Axia, Inc. sr. sub. notes Ser. B, 11s,
2001 40,000 41,600 -- -- -- --
MacAndrews & Forbes Holdings, Inc.
sub. deb. notes 13s, 1999 104,000 104,390 172,000 172,645 5,000 5,019
------------- ------------ ------------
145,990 172,645 5,019
Consumer Durable Goods --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
Icon Fitness Corp. sr. disc. notes
stepped-coupon Ser. B, zero %
(14s, 11/15/01), 2006 ++ 90,000 53,100 215,000 126,850 95,000 56,050
Remington Products Co. LLC sr. sub.
notes Ser. B, 11s, 2006 65,000 54,600 155,000 130,200 45,000 37,800
Selmer Co., Inc. sr. sub. notes 11s, 2005 160,000 174,400 250,000 272,500 25,000 27,250
------------- ------------ ------------
282,100 529,550 121,100
Consumer Non Durables --% --% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Foamex L.P. 144A sr. sub. notes
9 7/8s, 2007 35,000 36,225 95,000 98,325 30,000 31,050
Guess Jeans, Inc. sr. sub. notes 9 1/2s,
2003 10,000 10,325 10,000 10,325 5,000 5,163
RJR Nabisco, Inc. notes 8 3/4s, 2005 75,000 79,285 185,000 195,569 270,000 285,425
Twin Laboratories, Inc. company guaranty
10 1/4s, 2006 200,000 217,000 250,000 271,250 -- --
------------- ------------ ------------
342,835 575,469 321,638
Consumer Products 0.1% 0.1% 0.3%
- -------------------------------------------------------------------------------------------------------------------------
French Fragrances, Inc. sr. notes Ser.
B.,10 3/8s, 2007 30,000 31,200 85,000 88,400 30,000 31,200
Hedstrom Corp. 144A sr. sub. notes
10s, 2007 35,000 35,700 90,000 91,800 30,000 30,600
Philip Morris Cos., Inc. deb. 7 3/4s, 2027 195,000 199,881 325,000 333,135 370,000 379,261
Philip Morris Cos., Inc. notes 7 1/2s, 2002 260,000 268,174 685,000 706,536 915,000 943,768
Revlon Worldwide Corp. sr. disc. notes
Ser. B, zero %, 2001 50,000 36,375 145,000 105,488 -- --
------------- ------------ ------------
571,330 1,325,359 1,384,829
Consumer Services --% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Act III Theatres, Inc. sr. sub. notes
11 7/8s, 2003 -- -- -- -- 135,000 144,450
Century Communications Corp. sr. notes
9 1/2s, 2005 -- -- 290,000 303,413 50,000 52,313
Coinmach Corp. sr. notes Ser. B,
11 3/4s, 2005 10,000 11,075 10,000 11,075 4,000 4,430
FRD Acquisition Co. sr. notes Ser. B,
12 1/2s, 2004 75,000 80,250 200,000 214,000 75,000 80,250
Host Marriott Travel Plaza sr. notes Ser.
B, 9 1/2s, 2005 115,000 121,613 295,000 311,963 100,000 105,750
Metrocall, Inc. sr. sub. notes 10 3/8s,
2007 70,000 70,175 -- -- 60,000 60,150
Viasystems Inc. 144A sr. sub. notes
9 3/4s, 2007 10,000 10,400 10,000 10,400 5,000 5,200
------------- ------------ ------------
293,513 850,851 452,543
Electronics and Electrical Equipment 0.1% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Argo-Tech Corp. 144A sr. sub. notes
8 5/8s, 2007 30,000 30,075 80,000 80,200 20,000 20,050
Celestica International Ltd. 144A
sr. sub. notes 10 1/2s, 2006 (Canada) 30,000 32,438 85,000 91,906 30,000 32,438
Cirent Semiconductor 144A sr. sub. notes
10.14s, 2004 35,388 36,185 101,042 103,316 -- --
Cirent Semiconductor sr. sub. notes
10.22s, 2002 33,345 34,054 95,209 97,232 32,458 33,148
DII Group, Inc. 144A sr. sub. notes
8 1/2s, 2007 40,000 40,050 110,000 110,138 40,000 40,050
Dobson Communications Corp. 144A
11 3/4s, 2007 90,000 89,438 255,000 253,406 -- --
Fairchild Semiconductor Corp. 144A
sr. sub. notes 11.74s, 2008 70,000 70,700 190,000 191,900 65,000 65,650
Fairchild Semiconductor Corp. sr. sub.
notes 10 1/8s, 2007 65,000 69,713 200,000 214,500 50,000 53,625
HCC Industries, Inc. 144A sr. sub. notes
10 3/4s, 2007 40,000 42,400 110,000 116,600 40,000 42,400
International Semi-Tech. Corp. sr. secd.
disc. notes stepped-coupon zero %
(11 1/2s,8/15/00), 2003 (Canada) ++ 120,000 75,000 316,000 197,500 160,000 100,000
Moog, Inc. sr. sub. notes Ser. B, 10s, 2006 20,000 21,200 60,000 63,600 20,000 21,200
Motors and Gears, Inc. sr. notes Ser. B,
10 3/4s, 2006 50,000 53,500 145,000 155,150 50,000 53,500
Wavetek Corp. 144A sr. sub. notes
10 1/8s, 2007 25,000 26,000 60,000 62,400 20,000 20,800
------------- ------------ ------------
620,753 1,737,848 482,861
Energy-Related --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
AES Corp. sr. sub. notes 8 3/8s, 2007 60,000 60,150 160,000 160,400 50,000 50,125
Panda Global Energy Co. 144A sr. notes
12 1/2s, 2004 10,000 9,750 10,000 9,750 5,000 4,875
------------- ------------ ------------
69,900 170,150 55,000
Entertainment 0.1% 0.3% 0.6%
- -------------------------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc. sr. sub. notes
9 1/2s, 2009 305,000 308,050 285,000 287,850 100,000 101,000
Cinemark USA, Inc. notes 9 5/8s, 2008 170,000 174,888 440,000 452,650 145,000 149,169
Isle of Capri Black Hawk LLC 144A
1st mortgage 13s, 2004 30,000 30,300 80,000 80,800 30,000 30,300
Premier Parks, Inc. sr. notes Ser. A,
12s, 2003 105,000 116,813 270,000 300,375 90,000 100,125
Six Flags Corp. sr. sub. notes
stepped-coupon zero %
(12 1/4s, 6/15/98), 2005 ++ 120,000 125,100 290,000 302,325 230,000 239,775
Time Warner Entertainment sr. notes
8 3/8s, 2033 195,000 209,237 495,000 531,140 -- --
Time Warner Entertainment Inc. notes
8 7/8s, 2012 225,000 256,856 400,000 456,632 580,000 662,116
Time Warner Entertainment Inc. deb.
7 1/4s, 2008 65,000 66,056 435,000 442,064 1,340,000 1,361,762
Trump A.C. 1st mtge. 11 1/4s, 2006 155,000 150,350 375,000 363,750 75,000 72,750
Viacom International, Inc. sub. deb.
8s, 2006 295,000 294,263 735,000 733,163 100,000 99,750
------------- ------------ ------------
1,731,913 3,950,749 2,816,747
Environmental Control --% 0.1% 0.2%
- -------------------------------------------------------------------------------------------------------------------------
Allied Waste Industries, Inc. 144A
sr. disc. notes stepped-coupon
zero % (11.3s, 6/1/02), 2007 ++ 145,000 98,238 380,000 257,450 130,000 88,075
Allied Waste Industries, Inc.
company guaranty 10 1/4s, 2006 75,000 82,125 195,000 213,525 -- --
WMX Technologies Inc. notes 7.1s, 2026 300,000 312,618 685,000 713,811 1,010,000 1,052,481
------------- ------------ ------------
492,981 1,184,786 1,140,556
Food and Beverages --% 0.1% --%
- -------------------------------------------------------------------------------------------------------------------------
Ameriserve Food Co. 144A sr. sub. notes
10 1/8s, 2007 35,000 36,400 90,000 93,600 30,000 31,200
Canandaigua Wine Co. sr. sub. notes Ser.
C,8 3/4s, 2003 5,000 5,075 5,000 5,075 5,000 5,075
Chiquita Brands cv. sr. notes 9 5/8s, 2004 140,000 145,950 350,000 364,875 35,000 36,488
Del Monte Corp. sr. sub. notes Ser. B,
12 1/4s, 2007 25,000 27,250 65,000 70,850 25,000 27,250
Fleming Companies, Inc. 144A sr. sub.
notes 10 1/2s, 2004 60,000 62,100 170,000 175,950 50,000 51,750
MBW Foods, Inc. 144A sr. sub. notes
9 7/8s, 2007 20,000 20,700 60,000 62,100 20,000 20,700
Mafco, Inc. sr. sub. notes 11 7/8s, 2002 10,000 10,650 -- -- 10,000 10,650
Southern Foods Group 144A sr. sub. notes
9 7/8s, 2007 30,000 31,050 70,000 72,450 20,000 20,700
Stater Brothers Holdings 144A
sr. sub. notes 9s, 2004 100,000 102,500 420,000 430,500 255,000 261,375
Stater Brothers sr. notes 11s, 2001 5,000 5,500 10,000 11,000 10,000 11,000
------------- ------------ ------------
447,175 1,286,400 476,188
Health Care 0.1% 0.2% 0.3%
- -------------------------------------------------------------------------------------------------------------------------
Genesis Eldercare 144A sr. sub. notes
9s, 2007 60,000 59,700 160,000 159,200 50,000 49,750
Genesis Health Ventures, Inc. sr. sub.
notes 9 1/4s, 2006 20,000 20,450 65,000 66,463 20,000 20,450
IMED Corp. sr. sub. notes 9 3/4s, 2006 100,000 103,000 265,000 272,950 115,000 118,450
Integrated Health Services, Inc. 144A
sr. sub. notes 9 1/2s, 2007 100,000 102,500 215,000 220,375 70,000 71,750
Integrated Health Services, Inc. 144A
sr. sub. notes 9 1/4s, 2008 110,000 111,650 275,000 279,125 85,000 86,275
Manor Care, Inc. sr. notes 7 1/2s, 2006 190,000 194,651 520,000 532,730 660,000 676,157
Merit Behavioral Care sr. sub. notes
11 1/2s, 2005 110,000 122,100 275,000 305,250 -- --
Paracelsus Healthcare sr. sub. notes
10s, 2006 150,000 154,875 355,000 366,538 125,000 129,063
Quorum Health Group, Inc. sr. sub. notes
8 3/4s, 2005 -- -- -- -- 100,000 104,250
Tenet Healthcare Corp. sr. notes 8s, 2005 150,000 153,000 -- -- 125,000 127,500
Tenet Healthcare Corp. sr. sub. notes
8 5/8s, 2007 -- -- 350,000 362,250 -- --
------------- ------------ ------------
1,021,926 2,564,881 1,383,645
Insurance and Finance 0.7% 1.4% 4.4%
- -------------------------------------------------------------------------------------------------------------------------
Aames Financial Corp. sr. notes
9 1/8s, 2003 120,000 122,400 150,000 153,000 100,000 102,000
Abbey National First Capital PLC sub.
notes 7.35s, 2049 (United Kingdom) 90,000 92,060 260,000 265,951 270,000 276,180
Aegon NV sub. notes 8s,
2006 (Netherlands) 230,000 248,996 665,000 719,922 810,000 876,898
AFC Capital Trust company guaranty
Ser. B, 8.207s, 2027 140,000 149,752 355,000 379,729 475,000 508,089
Allstate Financing II company guaranty
7.83s, 2045 75,000 74,937 200,000 199,832 280,000 279,765
Banponce Financial Corp. med. term note
7 1/8s, 2002 205,000 210,195 530,000 543,430 740,000 758,752
Chevy Chase Savings Bank Inc. sub. deb.
9 1/4s, 2005 120,000 121,200 300,000 303,000 100,000 101,000
Colonial Capital I 144A company guaranty
8.92s, 2027 35,000 36,017 90,000 92,616 30,000 30,872
Conseco Inc. sr. notes 10 1/2s, 2004 275,000 328,226 740,000 883,227 1,050,000 1,253,228
Contifinancial Corp. sr. notes 8 3/8s, 2003 120,000 124,800 305,000 317,200 105,000 109,200
Delta Financial Corp. sr. notes 9 1/2s, 2004 35,000 35,438 105,000 106,313 30,000 30,375
Dime Capital Trust I bank guaranty Ser.
A, 9.33s, 2027 35,000 37,818 90,000 97,246 30,000 32,415
Dollar Financial Group Inc. sr. notes
Ser. A, 10 7/8s, 2006 25,000 27,000 70,000 75,600 25,000 27,000
Federal National Mortgage Ser. E,
6 3/8s 2007 1,135,000 833,703 2,840,000 2,086,094 -- --
First Financial Caribbean Corp. sr. notes
7.84s, 2006 90,000 93,089 235,000 243,065 340,000 351,669
First Nationwide Holdings sr. notes
12 1/2s, 2003 -- -- 100,000 112,500 -- --
First Nationwide Holdings sr. sub. notes
10 5/8s, 2003 100,000 110,000 255,000 280,500 90,000 99,000
First Nationwide Holdings sr. sub. notes
9 1/8s, 2003 -- -- -- -- 150,000 156,000
Ford Motor Credit Corp. sr. notes 7s, 2001 -- -- -- -- 185,000 189,052
GMAC med. term notes 6.4s, 1999 420,000 422,503 1,075,000 1,081,407 1,455,000 1,463,672
Greenpoint Bank sr. notes 6.7s, 2002 250,000 249,793 395,000 394,672 530,000 529,560
Greenpoint Capital Trust I 144A
company guaranty 9.1s, 2027 35,000 36,925 90,000 94,950 30,000 31,650
Imperial Credit Capital Trust I 144A
company guaranty 10 1/4s, 2002 65,000 66,300 165,000 168,300 55,000 56,100
Imperial Credit Industries, Inc. sr.
notes 9 7/8s, 2007 40,000 40,400 100,000 101,000 30,000 30,300
Intertek Finance PLC 144A sr. sub. notes
10 1/4s, 2006 (United Kingdom) 40,000 42,100 115,000 121,038 40,000 42,100
Investors Capital Trust I company
guaranty Ser. B, 9.77s, 2027 -- -- 15,000 15,966 -- --
Korea Developmental Bank notes
7.9s, 2002 50,000 51,562 100,000 103,124 100,000 103,124
Lehman Bros Holdings, Inc.
med. term notes 6.4s, 1999 260,000 260,915 610,000 612,147 1,000,000 1,003,520
Merita Bank Ltd. sub. notes 6 1/2s,
2006 (Finland) 295,000 287,333 730,000 711,027 1,060,000 1,032,451
Money Store, Inc. (The) notes 8.05s, 2002 100,000 103,552 260,000 269,235 370,000 383,142
NationsBank Corp. sub. notes
6 1/2s, 2006 295,000 291,501 700,000 691,698 1,070,000 1,057,310
North Fork Capital Trust I
company guaranty 8.7s, 2026 10,000 10,462 15,000 15,692 5,000 5,231
Ocwen Capital Trust I
company guaranty 10 7/8s, 2027 20,000 21,225 50,000 53,063 15,000 15,919
Ocwen Federal Bank FSB sub. deb.
12s, 2005 5,000 5,550 10,000 11,100 5,000 5,550
Ocwen Financial Corp. notes
11 7/8s, 2003 10,000 11,300 10,000 11,300 10,000 11,300
Orange Cogen Funding 144A
company guaranty 8.175s, 2022 75,000 79,763 195,000 207,382 275,000 292,463
Outsourcing Solutions, Inc. sr. sub.
notes Ser. B, 11s, 2006 25,000 27,750 75,000 83,250 25,000 27,750
Peoples Bank- Bridgeport sub. notes
7.2s, 2006 240,000 242,638 565,000 571,209 865,000 874,506
Peoples Heritage Capital Trust
company guaranty Ser. B, 9.06s, 2027 -- -- 165,000 174,864 -- --
Phoenix Home Life Mutual Insurance Co.
144A notes 6.95s, 2006 210,000 210,210 555,000 555,555 780,000 780,780
Pioneer Americas Acquisition 144A
sr. notes 9 1/4s, 2007 35,000 34,825 90,000 89,550 30,000 29,850
Polytama International notes 11 1/4s, 2007 60,000 58,350 150,000 145,875 50,000 48,625
Provident Capital Trust
company guaranty 8.6s, 2026 70,000 71,143 190,000 193,103 -- --
PRT Funding Corp. sr. notes 11 5/8s, 2004 95,000 77,900 225,000 184,500 75,000 61,500
Railcar Leasing LLC 144A sr. notes
6 3/4s, 2006 375,956 381,126 972,787 986,163 1,362,841 1,381,581
Reliance Group Holdings, Inc. sr. notes
9s, 2000 -- -- 145,000 151,664 -- --
Riggs Capital Trust 144A bonds 8 5/8s 35,000 35,936 90,000 92,407 40,000 41,070
Salomon, Inc. sr. notes 7.3s, 2002 230,000 236,362 605,000 621,734 830,000 852,958
Salomon, Inc. sr. notes 7s, 1999 220,000 222,631 575,000 581,877 795,000 804,508
Sampoerna International Finance Co.
144A company guaranty 8 3/8s,
2006 (Indonesia) 170,000 170,111 480,000 480,312 545,000 545,354
Societe Generale 144A notes 7.85s,
2049 (France) 405,000 422,942 1,015,000 1,059,965 1,185,000 1,237,496
Southern Investments Service Co.
sr. notes 6.8s, 2006 (United Kingdom) 585,000 582,836 1,310,000 1,305,153 1,980,000 1,972,674
Sovereign Capital Trust 144A
company guaranty 9s, 2027 50,000 52,342 130,000 136,089 45,000 47,108
Sparbanken Sverige AB (Swedbank) 144A
sub. 7 1/2s, 2006 (Sweden) 175,000 180,199 470,000 483,964 660,000 679,609
St. Paul Bancorp sr. notes 7 1/8s, 2004 85,000 85,728 230,000 231,969 315,000 317,696
State Development Bank of China notes
7 3/8s, 2007 (China) 95,000 96,017 260,000 262,785 355,000 358,802
Travelers Capital Trust II bonds
7 3/4s, 2036 95,000 95,155 250,000 250,408 355,000 355,579
Webster Capital Trust I 144A bonds
9.36s, 2027 5,000 5,427 20,000 21,706 10,000 10,853
------------- ------------ ------------
7,916,443 20,186,428 21,673,186
Medical Supplies and Devices --% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Graphic Controls Corp. sr. sub. notes
Ser. A, 12s, 2005 100,000 112,000 270,000 302,400 90,000 100,800
Urohealth Systems, Inc. 144A sr. sub.
notes 12 1/2s, 2004 95,000 94,288 240,000 238,200 75,000 74,438
Wright Medical Technology, Inc. Ser. C,
11 3/4s, 2000 200,000 205,000 400,000 410,000 100,000 102,500
------------- ------------ ------------
411,288 950,600 277,738
Metals and Mining 0.1% 0.2% 0.4%
- -------------------------------------------------------------------------------------------------------------------------
Acindar Industria Argentina de Aceros
S.A. bonds 11 1/4s, 2004 (Argentina) 30,000 32,588 80,000 86,900 25,000 27,156
AK Steel Corp. sr. notes 9 1/8s, 2006 70,000 73,675 180,000 189,450 75,000 78,938
Altos Hornos De Mexico 144A bonds
11 7/8s, 2004 (Mexico) 35,000 38,938 100,000 111,250 35,000 38,938
Anker Coal Group, Inc. 144A sr. notes
9 3/4s, 2007 45,000 45,675 115,000 116,725 35,000 35,525
Armco, Inc. 144A sr. notes 9s, 2007 30,000 30,375 80,000 81,000 20,000 20,250
Continental Global Group sr. notes Ser.
B, 11s, 2007 65,000 69,550 170,000 181,900 60,000 64,200
Freeport-McMoRan Copper &
Gold Co., Inc. sr. notes 7 1/2s, 2006 100,000 101,881 240,000 244,514 365,000 371,866
Hylsa S.A. de C.V. 144A bonds
9 1/4s, (Mexico) 100,000 102,250 250,000 255,625 80,000 81,800
Murrin Holdings 144A sr. notes 9 3/8s,
2007 (Australia) 40,000 40,400 100,000 101,000 30,000 30,300
Noranda Inc. notes 7s, 2005 (Canada) 290,000 291,418 785,000 788,839 1,050,000 1,055,135
Royal Oak Mines, Inc. company guaranty
Ser. B, 11s, 2006 (Canada) 10,000 9,650 25,000 24,125 5,000 4,825
WCI Steel, Inc. sr. notes Ser. B, 10s, 100,000 105,750 265,000 280,238 -- --
2004
Weirton Steel Co. sr. notes 11 3/8s, 2004 110,000 119,350 50,000 54,250 -- --
------------- ------------ ------------
1,061,500 2,515,816 1,808,933
Oil and Gas 0.3% 0.5% 1.0%
- -------------------------------------------------------------------------------------------------------------------------
Abraxas Petroleum Corp. 144A sr. notes
Ser. B, 11 1/2s, 2004 40,000 43,600 110,000 119,900 35,000 38,150
Benton Oil & Gas Co. sr. notes
11 5/8s, 2003 100,000 110,000 125,000 137,500 -- --
Coho Energy, Inc. sr. sub. notes 8 7/s, 2007 40,000 39,900 110,000 109,725 30,000 29,925
CIA Naviera Perez Companc S.A.
144A bonds 9s, 2004 (Argentina) 35,000 36,488 90,000 93,825 30,000 31,275
Chesapeake Energy Corp. sr. notes
10 1/2s, 2002 100,000 106,000 -- -- -- --
Chesapeake Energy Corp. sr. notes
9 1/8s, 2006 150,000 153,000 125,000 127,500 -- --
Cliffs Drilling Co. company guaranty Ser.
B, 10 1/4s, 2003 20,000 21,750 60,000 65,250 20,000 21,750
Columbia Gas System, Inc. notes Ser. E,
7.32s, 2010 150,000 153,402 400,000 409,072 500,000 511,340
Columbia Gas System, Inc. notes Ser. B,
6.61s, 2002 210,000 211,027 530,000 532,592 -- --
Costilla Energy, Inc. sr. notes 10 1/4s, 2006 15,000 15,413 40,000 41,100 10,000 10,275
Dailey Petroleum Services Corp.
144A company guaranty 9 3/4s, 2007 15,000 15,600 40,000 41,600 15,000 15,600
El Paso Natural Gas Co. deb. 7 1/2s, 2026 105,000 108,594 240,000 248,215 375,000 387,836
Flores & Rucks, Inc. sr. sub. notes
9 3/4s, 2006 115,000 122,763 270,000 288,225 -- --
Maxus Energy Corp. global notes
9 7/8s, 2002 50,000 52,488 175,000 183,708 175,000 183,708
Maxus Energy Corp. med. term notes
10.83s, 2004 110,000 125,709 -- -- 90,000 102,853
Maxus Energy Corp. notes 9 1/2s, 2003 -- -- 250,000 261,875 -- --
Pacalta Resources Ltd. sr. notes Ser. B,
10 3/4s, 2004 (Canada) 35,000 36,138 95,000 98,088 30,000 30,975
Parker Drilling Corp. sr. notes Ser. B,
9 3/4s, 2006 40,000 42,600 115,000 122,475 40,000 42,600
Petro Geo-Services ASA notes 7 1/2s,
2007 (Norway) 95,000 98,165 255,000 263,497 365,000 377,162
Pogo Producing Co. 144A notes
8 3/4s, 2007 15,000 15,300 45,000 45,900 15,000 15,300
Pride Petroleum Services, Inc.
9 3/8s, 2007 50,000 53,500 135,000 144,450 45,000 48,150
Saga Petroleum ASA deb. 7 1/4s,
2027 (Norway) 200,000 198,542 500,000 496,355 575,000 570,808
Snyder Oil Corp. sr. sub. notes 8 3/4s, 2007 35,000 35,175 90,000 90,450 30,000 30,150
Texas Petrochemical Corp. sr. sub. notes
11 1/8s, 2006 15,000 16,350 50,000 54,500 15,000 16,350
TransTexas Gas Corp. sr. sub. notes
13 3/4s, 2001 163,000 186,635 419,000 479,755 180,000 206,100
Transamerican Energy 144A sr. disc. notes
stepped-coupon zero % (13s 6/01/99),
2002 ++ 455,000 361,725 1,175,000 934,125 390,000 310,050
Transamerican Energy 144A sr. notes
11 1/2s, 2002 285,000 282,863 730,000 724,525 160,000 158,800
Wiser Oil Co. 144A sr. sub. notes
9 1/2s, 2007 35,000 33,775 90,000 86,850 30,000 28,950
YPF Sociedad Anonima notes 7 3/4s,
2007 (Argentina) 565,000 565,661 1,415,000 1,416,656 1,620,000 1,621,895
------------- ------------ ------------
3,242,163 7,617,713 4,790,002
Packaging and Containers --% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Huntsman Packaging Corp. 144A sr. sub.
notes 9 1/8s, 2007 50,000 51,125 125,000 127,813 35,000 35,788
Innova S De R.L. sr. notes 12 7/8s,
2007 (Mexico) 80,000 85,800 220,000 235,950 75,000 80,438
Ivex Packaging Corp. sr. sub. notes
12 1/2s, 2002 110,000 118,250 275,000 295,625 95,000 102,125
Printpack, Inc. sr. notes Ser. B, 9 7/8s, 2004 -- -- 50,000 52,500 -- --
Radnor Holdings Inc. sr. notes 10s, 2003 5,000 5,175 10,000 10,350 -- --
Vicap SA. 144A company guaranty 10 1/4s,
2002 (Mexico) 60,000 63,750 160,000 170,000 50,000 53,125
------------- ------------ ------------
324,100 892,238 271,476
Paper and Forest Products 0.1% 0.1% 0.2%
- -------------------------------------------------------------------------------------------------------------------------
APP International Finance Co. notes
11 3/4s, 2005 (Netherlands) 110,000 118,388 280,000 301,350 100,000 107,625
Boise Cascade Corp. deb. 7.35s, 2016 -- -- -- -- 260,000 256,688
Buckeye Cellulose Corp. sr. sub. notes
9 1/4s, 2008 25,000 26,313 50,000 52,625 25,000 26,313
Domtar, Inc. deb. 9 1/2s, 2016 (Canada) 50,000 53,684 175,000 187,892 70,000 75,157
Domtar, Inc. notes 8 3/4s, 2006 (Canada) 20,000 21,110 70,000 73,885 -- --
Florida Coast Paper LLC 1st mtge. Ser. B,
12 3/4s, 2003 95,000 103,313 240,000 261,000 80,000 87,000
Indah Kiat Financial Mauritius 144A
company guaranty 10s, 2007 (Indonesia) -- -- -- -- 125,000 122,188
PT Pabrik Kertas Tjiwi Kimia 144A
company guaranty 10s, 2004 (Indonesia) 95,000 93,100 260,000 254,800 70,000 68,600
Pindo Deli Finance Mauritius Ltd. 144A
company guaranty 10 3/4s, 2007 (India) 90,000 91,800 215,000 219,300 65,000 66,300
Repap New Brunswick sr. notes 10 5/8s,
2005 (Canada) 50,000 49,250 100,000 98,500 35,000 34,475
Riverwood International Corp. company
guaranty 10 7/8s, 2008 10,000 9,975 15,000 14,963 5,000 4,988
Riverwood International Corp. company
guaranty 10 1/4s, 2006 -- -- -- -- 125,000 128,125
Stone Container Corp. sr. notes
11 1/2s, 2004 70,000 75,425 170,000 183,175 65,000 70,038
Stone Container Corp. 1st mtge.
10 3/4s, 2002 -- -- -- -- 10,000 10,600
------------- ------------ ------------
642,358 1,647,490 1,058,097
Pharmaceuticals --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
ICN Pharmaceuticals, Inc. 144a sr. notes
9 1/4s, 2005 60,000 63,000 150,000 157,500 50,000 52,500
Publishing 0.1% 0.2% 0.5%
- -------------------------------------------------------------------------------------------------------------------------
Affinity Group Holdings sr. sub. notes
11 1/2s, 2003 170,000 182,325 420,000 450,450 50,000 53,625
Affinity Group Holdings sr. notes 11s, 2007 115,000 123,338 310,000 332,475 180,000 193,050
American Media Operation, Inc.
sr. sub. notes 11 5/8s, 2004 115,000 125,925 285,000 312,075 100,000 109,500
Garden State Newspapers 144A
sr. sub. notes 8 3/4s, 2009 60,000 60,450 140,000 141,050 40,000 40,300
Hollinger International Publishing, Inc.
company guaranty 9 1/4s, 2007 40,000 41,700 110,000 114,675 40,000 41,700
Hollinger International Publishing, Inc.
sr. sub. notes 9 1/4s, 2006 150,000 156,000 -- -- -- --
Hollinger International Publishing, Inc.
company guaranty 8 5/8s, 2005 40,000 41,200 110,000 113,300 40,000 41,200
News America Holdings, Inc. deb.
7 3/4s, 2045 355,000 345,514 935,000 910,017 1,005,000 978,146
News America Holdings, Inc. deb.
7.7s, 2025 265,000 260,005 605,000 593,596 875,000 858,506
Von Hoffman Press Inc. 144A sr. sub.
notes 10 3/8s, 2007 35,000 37,100 90,000 95,400 30,000 31,800
------------- ------------ ------------
1,373,557 3,063,038 2,347,827
Real Estate --% 0.1% 0.3%
- -------------------------------------------------------------------------------------------------------------------------
HMH Properties, Inc. 144A sr. notes
8 7/8s, 2007 (Canada) (R) 90,000 92,475 240,000 246,600 75,000 77,063
National Health Investors, Inc. bonds
7.3s, 2007 (R) 330,000 337,838 865,000 885,544 1,155,000 1,182,431
Prime Hospitality Corp. sub. notes
9 3/4s, 2007 95,000 100,463 255,000 269,663 90,000 95,175
------------- ------------ ------------
530,776 1,401,807 1,354,669
Recreation 0.1% 0.2% 0.2%
- -------------------------------------------------------------------------------------------------------------------------
Argosy Gaming Co. 1st mtge. 13 1/4s, 2004 25,000 25,000 150,000 150,000 -- --
Boyd Gaming Corp. 144A sr. sub. notes
9 1/2s, 2007 -- -- -- -- 25,000 25,500
Casino America, Inc. sr. notes 12 1/2s, 2003 55,000 58,850 160,000 171,200 50,000 53,500
Coast Hotels & Casinos, Inc.
company guaranty Ser. B, 13s, 2002 160,000 180,400 405,000 456,638 135,000 152,213
Colorado Gaming & Entertainment Co.
sr. notes 12s, 2003 50,000 54,500 275,000 299,750 50,000 54,500
Empress River Casino sr. notes
10 3/4s, 2002 100,000 107,500 -- -- 125,000 134,375
Grand Casinos, Inc. 1st mtge. 10 1/8s, 2003 75,000 79,500 200,000 212,000 -- --
Harveys Casino Resorts sr. sub. notes
10 5/8s, 2006 25,000 27,375 70,000 76,650 20,000 21,900
Hollywood Casino Corp. sr. notes
12 3/4s, 2003 150,000 164,250 250,000 273,750 125,000 136,875
Lady Luck Gaming Corp. 1st mtge.
11 7/8s, 2001 120,000 119,700 310,000 309,225 105,000 104,738
Mohegan Tribal Gaming 144A
sr. secd. notes 13 1/2s, 2002 90,000 117,450 235,000 306,675 80,000 104,400
Players International Inc. sr. notes
10 7/8s, 2005 250,000 268,750 280,000 301,000 50,000 53,750
Showboat Marina Casino 1st mtge.
Ser. B, 13 1/2s, 2003 100,000 115,000 -- -- 75,000 86,250
------------- ------------ ------------
1,318,275 2,556,888 928,001
Retail 0.1% 0.2% 0.5%
- -------------------------------------------------------------------------------------------------------------------------
Brylane (L.P.) sr. sub. notes 10s, 2003 70,000 74,550 170,000 181,050 60,000 63,900
Federated Department Stores
sr. notes 8 1/2s, 2003 360,000 390,683 930,000 1,009,264 1,270,000 1,378,242
Jitney-Jungle Stores company guaranty
12s, 2006 150,000 169,125 250,000 281,875 100,000 112,750
K mart Corp. deb. 7 3/4s, 2012 10,000 9,500 5,000 4,750 10,000 9,500
K mart Corp. med. term notes 8s, 2001 10,000 9,977 10,000 9,977 -- --
Ralphs Grocery Co. company guaranty
10.45s, 2004 10,000 11,000 10,000 11,000 10,000 11,000
Rite Aid Corp. notes 6.7s, 2001 95,000 95,603 220,000 221,397 340,000 342,159
Sears Roebuck Acceptance Corp.
med. term notes 6.15s, 2005 65,000 64,834 185,000 184,528 245,000 244,375
Southland Corp. 1st priority
sr. sub. deb. 5s, 2003 135,000 114,413 350,000 296,625 115,000 97,463
Specialty Retailers, Inc. company
guaranty Ser. B, 8 1/2s, 2005 10,000 10,238 15,000 15,356 10,000 10,238
William Carter Co. 144A sr. sub. notes
12s, 2008 50,000 53,250 140,000 149,100 50,000 53,250
Windy Hill Pet Food Co. 144A
sr. sub. notes 9 3/4s, 2007 15,000 15,525 45,000 46,575 15,000 15,525
Zale Corp. 144A sr. notes 8 1/2s, 2007 60,000 60,000 150,000 150,000 50,000 50,000
------------- ------------ ------------
1,078,698 2,561,497 2,388,402
Satellite Services --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
Echostar Communications Corp.
stepped-coupon zero %
(12 7/8s, 6/01/99), 2004 ++ 50,000 45,250 300,000 271,500 40,000 36,200
Esat Holdings Ltd. 144A sr. notes
stepped-coupon zero %
(12 1/2s, 2/01/02), 2007 (Ireland) ++ 75,000 49,125 205,000 134,275 65,000 42,575
Globalstar L.P. Capital 11 3/8s, 2004 100,000 104,000 300,000 312,000 90,000 93,600
------------- ------------ ------------
198,375 717,775 172,375
Specialty Consumer Products --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
Genesco, Inc. sr. notes 10 3/8s, 2003 35,000 36,400 100,000 104,000 30,000 31,200
GFSI, Inc. sr. sub. notes Ser. B, 9 5/8s, 2007 25,000 25,625 75,000 76,875 -- --
Herff Jones, Inc. sr. sub. notes 11s, 2005 110,000 119,900 285,000 310,650 100,000 109,000
------------- ------------ ------------
181,925 491,525 140,200
Technology --% --% --%
- -------------------------------------------------------------------------------------------------------------------------
Computervision Corp. sr. sub. notes
11 3/8s, 1999 100,000 80,000 350,000 280,000 -- --
Telecommunications 0.5% 1.0% 1.4%
- -------------------------------------------------------------------------------------------------------------------------
Advanced Radio Telecom Corp.
sr. notes 14s, 2007 50,000 43,438 125,000 108,594 50,000 43,438
America Communication Services, Inc.
144A sr. notes 13 3/4s, 2007 40,000 46,400 115,000 133,400 35,000 40,600
American Communications Services, Inc.
sr. disc. notes stepped-coupon zero %
(12 3/4s, 4/1/01), 2006 ++ 220,000 154,000 555,000 388,500 185,000 129,500
Brooks Fiber Properties, Inc. 144A
sr. notes 10s, 2007 55,000 62,288 150,000 169,875 50,000 56,625
Brooks Fiber Properties, Inc.
sr. disc. notes stepped-coupon zero %
(10 7/8s, 3/1/01), 2006 ++ 90,000 72,000 220,000 176,000 80,000 64,000
Brooks Fiber Properties, Inc.
sr. disc. notes stepped-coupon zero %
(11 7/8s, 11/01/01), 2006 ++ -- -- 15,000 11,550 10,000 7,700
BTI Telecom Corp. 144A sr. notes
10 1/2s, 2007 80,000 82,800 190,000 196,650 60,000 62,100
Call-Net Enterprises sr. disc. notes
stepped-coupon zero %
(13 1/4s, 12/1/99), 2004 ++ 100,000 89,625 365,000 327,131 100,000 89,625
Celcaribe S.A. sr. notes stepped-coupon
zero % (13 1/2s, 3/15/98), 2004 ++ -- -- -- -- 50,000 50,500
CellNet Data Systems, Inc. sr. disc.
notes stepped-coupon Ser. B, zero %
(13s, 6/15/00), 2005 ++ 125,000 88,750 400,000 284,000 100,000 71,000
Cia de Telecomunicaciones de Chile S.A.
notes 7 5/8s, 2006 (Chile) 465,000 489,259 1,205,000 1,267,865 1,720,000 1,809,732
Consorcio Ecuatoriano 144A notes 14s,
2002 (Ecuador) 35,000 37,800 95,000 102,600 30,000 32,400
Frontiervision Operating Partners L.P.
sr. sub. notes 11s, 2006 30,000 32,700 85,000 92,650 25,000 27,250
Grupo Iusacell S.A. 144A sr. notes 10s,
2004 (Mexico) 20,000 20,700 60,000 62,100 20,000 20,700
GST Telecommunications, Inc. company
guaranty stepped-coupon zero %
(13 7/8s, 12/15/00), 2005 ++ 98,000 73,990 252,000 190,260 86,000 64,930
Hyperion Telecommunication, Inc.
sr. disc. notes stepped-coupon Ser. B,
zero % (13s, 4/15/01), 2003 ++ 140,000 98,175 345,000 241,931 110,000 77,138
Hyperion Telecommunications, Inc. 144A
sr. notes 12 1/4s, 2004 100,000 109,500 290,000 317,550 90,000 98,550
ICG Holdings, Inc. sr. disc. notes
stepped-coupon zero %
(13 1/2s, 9/15/00), 2005 ++ 130,000 104,000 260,000 208,000 100,000 80,000
ITC Deltacom, Inc. 144A sr. notes 11s, 2007 90,000 98,775 240,000 263,400 80,000 87,800
Intelcom Group (USA), Inc. company
guaranty stepped-coupon zero %
(12 1/2s, 5/1/01), 2006 ++ 140,000 104,300 355,000 264,475 125,000 93,125
Intercel, Inc. sr. disc. notes stepped-
coupon zero % (12s, 2/1/01), 2006 ++ -- -- 470,000 324,300 -- --
Intercel, Inc. sr. disc. notes stepped-
coupon zero % (12s, 5/1/01), 2006 ++ 10,000 6,825 5,000 3,413 5,000 3,413
Intermedia Communications, Inc.
sr. disc. notes stepped-coupon zero %
(12 1/2s, 5/15/01), 2006 ++ 200,000 157,000 300,000 235,500 -- --
International Cabletel, Inc. sr. notes
stepped-coupon Ser. B, zero %
(11 1/2s, 2/01/01), 2006 ++ 168,000 125,580 425,000 317,688 145,000 108,388
International Wireless Communications,
Inc. sr. disc. notes zero %, 2001 40,000 22,800 115,000 65,550 40,000 22,800
Iridium LLC/Capital Corp. 144A sr. notes
14s, 2005 190,000 205,200 500,000 540,000 155,000 167,400
McCaw International Ltd sr. discount
notes stepped coupon zero %
(13s, 4/15/02), 2007 ++ 10,000 6,025 20,000 12,050 10,000 6,025
McLeodUSA, Inc. sr. disc. notes
stepped-coupon zero %
(10 1/2s, 3/1/02), 2007 ++ 150,000 109,500 385,000 281,050 -- --
Mobile Telecommunications Tech.
sr. notes 13 1/2s, 2002 -- -- 145,000 164,575 50,000 56,750
NEXTEL Communications, Inc. 144A
sr. disc. notes stepped-coupon zero %
(10.65s, 9/15/02), 2007 ++ 270,000 166,388 650,000 400,563 200,000 123,250
NEXTEL Communications, Inc. sr. disc.
notes stepped-coupon zero %
(11 1/2s, 9/1/98), 2003 ++ 160,000 154,800 385,000 372,488 5,000 4,838
NEXTEL Communications, Inc. sr. disc.
notes stepped-coupon zero %
(9 3/4s, 2/15/99), 2004 ++ 600,000 519,000 1,555,000 1,345,075 510,000 441,150
NTL Inc. sr. notes Ser. B, 10s, 2007
(United Kingdom) 220,000 229,900 515,000 538,175 100,000 104,500
Nextlink Communications sr. notes
9 5/8s, 2007 85,000 87,975 210,000 217,350 65,000 67,275
Nextlink Communications, Inc. sr. notes
12 1/2s, 2006 50,000 57,500 150,000 172,500 50,000 57,500
Omnipoint Corp. sr. notes 11 5/8s, 2006 35,000 36,050 15,000 15,450 85,000 87,550
Omnipoint Corp. sr. notes Ser. A,
11 5/8s, 2006 70,000 72,100 160,000 164,800 -- --
Orbcomm Global Capital Corp. sr. notes
Ser. B, 14s, 2004 60,000 62,400 225,000 234,000 55,000 57,200
Pagemart Nationwide, Inc. sr. disc. notes
stepped-coupon zero %
(15s, 2/1/00), 2005 ++ 70,000 56,700 170,000 137,700 60,000 48,600
Powertel, Inc. sr. notes 11 1/8s, 2007 120,000 124,800 300,000 312,000 90,000 93,600
Pricellular Wireless Corp. sr. disc.
notes stepped-coupon zero %
(12 1/4s, 10/1/98), 2003 ++ -- -- 150,000 148,500 100,000 99,000
Pricellular Wireless Corp. sr. notes
10 3/4s, 2004 115,000 124,200 290,000 313,200 25,000 27,000
SK Telecom Co. Ltd. notes 7 3/4s, 2004
(South Korea) 165,000 167,630 435,000 441,934 580,000 589,245
Sprint Spectrum L.P. sr. notes 11s, 2006 60,000 67,200 140,000 156,800 50,000 56,000
Sygnet Wireless, Inc. sr. notes 11 1/2s, 2006 25,000 26,625 75,000 79,875 20,000 21,300
Teleport Communications Group Inc.
sr. disc. notes stepped-coupon zero %
(11 1/8s, 7/1/01), 2007 ++ 70,000 54,600 160,000 124,800 60,000 46,800
Winstar Equipment Corp.
company guaranty 12 1/2s, 2004 65,000 68,900 175,000 185,500 60,000 63,600
Wireless One, Inc. sr. notes 13s, 2003 80,000 38,400 190,000 91,200 65,000 31,200
WorldCom Inc sr. notes 9 3/8s, 2004 156,888 166,861 453,232 482,044 161,000 171,235
WorldCom Inc sr. notes 8 7/8s, 2006 166,029 178,063 424,298 455,051 140,203 150,365
WorldCom, Inc. notes 7 3/4s, 2007 415,000 435,061 1,035,000 1,085,032 1,180,000 1,237,041
------------- ------------ ------------
5,336,583 14,224,694 6,949,738
Textiles --% 0.1% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Glenoit Corp. 144A sr. sub. notes 11s, 2007 30,000 32,100 85,000 90,950 30,000 32,100
Polymer Group, Inc. 144A sr. Sub notes
9s, 2007 55,000 55,550 150,000 151,500 50,000 50,500
Polysindo International Finance company
guaranty 11 3/8s, 2006 (Indonesia) 60,000 65,175 185,000 200,956 65,000 70,606
Tultex Corp. sr. notes 10 5/8s, 2005 175,000 193,375 450,000 497,250 150,000 165,750
------------- ------------ ------------
346,200 940,656 318,956
Transportation 0.1% 0.2% 0.6%
- -------------------------------------------------------------------------------------------------------------------------
Atlantic Express, Inc. 144A company
guaranty 10 3/4s, 2004 10,000 10,600 5,000 5,300 5,000 5,300
Blue Bird Body Co. sr. sub. notes Ser. B,
10 3/4s, 2006 -- -- -- -- 30,000 32,175
Chemical Leaman Corp. 144A sr. notes
10 3/8s, 2005 25,000 26,188 65,000 68,088 20,000 20,950
Consorcio/MCII Holdings sec. notes
stepped-coupon zero %
(12s, 11/15/98), 2002 ++ 65,000 59,313 170,000 155,125 55,000 50,188
Continental Airlines pass thru cert.
Ser. 97CI, 7.42s, 2007 100,000 102,583 175,000 179,520 245,000 251,328
CSX Corp. 144A deb. 7.95s, 2027 180,000 194,168 480,000 517,781 670,000 722,736
Eletson Holdings, Inc. 1st pfd. mtge.
notes 9 1/4s, 2003 (Greece) -- -- -- -- 50,000 51,250
Hermes Europe Railtel 144a sr. notes
11 1/2s, 2007 (Netherlands) 40,000 43,300 100,000 108,250 30,000 32,475
Johnstown America Industries, Inc.
144A sr. sub. notes 11 3/4s, 2005 50,000 53,750 125,000 134,375 40,000 43,000
Newport News Shipbuilding sr. notes
8 5/8s, 2006 40,000 41,600 100,000 104,000 -- --
Newport News Shipbuilding
sr. sub. notes 9 1/4s, 2006 35,000 36,750 90,000 94,500 -- --
Norfolk Southern Corp. bonds 7.05s, 2037 305,000 316,364 760,000 788,318 930,000 964,652
Norfolk Southern Corp. bonds 7.8s, 2027 125,000 133,871 300,000 321,291 300,000 321,291
Norfolk Southern Corp. notes 6.95s, 2002 125,000 127,574 400,000 408,236 450,000 459,266
TFM S.A. de C.V. 144A company guaranty
10 1/4s, 2007 (Mexico) 25,000 26,375 70,000 73,850 20,000 21,100
TFM S.A. de C.V. 144A company
guaranty stepped-coupon zero %
(11 3/4s,6/15/02), 2009 (Mexico) ++ 135,000 89,100 355,000 234,300 115,000 75,900
------------- ------------ ------------
1,261,536 3,192,934 3,051,611
Utilities 0.2% 0.4% 1.0%
- -------------------------------------------------------------------------------------------------------------------------
AES China Generating Co. sr. notes
10 1/8s, 2006 (China) 10,000 10,525 10,000 10,525 5,000 5,263
Arizona Public Service Co. sr. notes
6 3/4s, 2006 220,000 220,524 585,000 586,392 785,000 786,868
Cleveland Electric Illuminating Co.
1st mtge. Ser. B, 9 1/2s, 2005 60,000 65,964 140,000 153,916 50,000 54,970
Connecticut Light & Power Co.
1st mtge. Ser. A, 7 7/8s, 2001 170,000 172,902 445,000 452,596 605,000 615,327
El Paso Electric Co. 1st mtge. Ser. D,
8.9s, 2006 10,000 10,844 20,000 21,688 5,000 5,422
Enersis S.A. ADR notes 7.4s, 2016 (Chile) 370,000 371,721 915,000 919,255 1,120,000 1,125,208
Espirto Santo Centrais 144A sr. notes
10s, 2007 (Brazil) 50,000 50,000 150,000 150,000 45,000 45,000
First PV Funding deb. 10.15s, 2016 4,000 4,257 7,000 7,450 2,000 2,129
Illinova Corp. sr. notes 7 1/8s, 2004 65,000 65,718 180,000 181,987 240,000 242,650
Jersey Central Power & Light Co.
1st mtge. med. term note 6.85s, 2006 95,000 94,953 220,000 219,892 335,000 334,836
Long Island Lighting Co. deb. 9s, 2022 110,000 122,518 -- -- 90,000 100,242
Long Island Lighting Co. deb. 8.9s, 2019 50,000 53,336 290,000 309,349 50,000 53,336
Midland Funding Corp. deb. Ser. B,
13 1/4s, 2006 53,000 66,991 245,000 309,675 80,000 101,118
Midland Funding Corp. deb. Ser. A,
11 3/4s, 2005 150,000 178,035 250,000 296,725 25,000 29,673
Niagara Mohawk Power Corp. 1st mtge.
6 7/8s, 2003 150,000 147,747 400,000 393,992 150,000 147,747
Niagara Mohawk Power Corp. mtge.
9 1/2s, 2000 50,000 52,907 150,000 158,720 50,000 52,907
Northeast Utilities notes Ser. A,
8.58s, 2006 19,036 18,872 47,590 47,181 14,277 14,154
Northeast Utilities notes Ser. B,
8.38s, 2005 134,933 136,721 392,533 397,734 122,666 124,291
US West Capital Funding, Inc.
company guaranty 6.95s, 2037 175,000 178,498 760,000 775,192 930,000 948,591
------------- ------------ ------------
2,023,033 5,392,269 4,789,732
------------- ------------ ------------
Total Corporate Bonds and Notes
(cost $41,085,389, $104,342,101
and $68,685,871) $42,916,988 $107,736,291 $70,964,645
- -------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
3.1% 6.2% 17.5%
U.S. GOVERNMENT AND Principal Principal Principal
AGENCY OBLIGATIONS * Amount Value Amount Value Amount Value
Agency Obligations --% --% 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Financing Corp. 9.8s, bonds,
November 30, 2017 $30,000 $40,111 $345,000 $461,275 $210,000 $280,776
U.S. Government Agency
Mortgage Obligations 1.6% 3.4% 13.7%
- -------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
7 1/2s, with due dates from
January 1, 2027 to June 1, 2027 -- -- -- -- 6,960,678 7,084,655
Federal National Mortgage Association
6 1/2s, TBA, October 16, 2027 -- -- 2,295,000 2,234,756 -- --
Federal National Mortgage Association
Pass-through Certificates
9 1/2s, Dwarf, May 1, 2007 123,914 129,623 467,601 489,144 561,122 586,973
7 1/2s, with due dates from
January 1, 2027 to May 1, 2027 143,005 145,373 975,422 991,577 2,135,256 2,170,615
7.4s, May 1, 2026 207,842 209,141 569,091 572,648 692,806 697,137
7s, with due dates from
September 1, 2026 to
September 1, 2027 1,901,764 1,894,026 5,042,017 5,021,501 7,091,569 7,062,710
6 1/2s, with due dates from
August 1, 2025 to August 1, 2027 1,498,724 1,459,385 6,590,752 6,417,754 9,532,513 9,282,294
5 1/2s, Dwarf, with due dates from
February 1, 2011 to June 1, 2011 2,270,885 2,170,811 4,021,280 3,844,065 5,660,506 5,411,050
Government National Mortgage
Association Pass-through Certificates
10s, June 15, 2013 321,605 355,490 848,014 937,361 1,213,620 1,341,488
8 1/2s, with due dates from
July 15, 2026 to August 15, 2027 1,582,893 1,656,106 4,583,382 4,795,371 6,312,497 6,604,455
8s, with due dates from
November 15, 2022 to
August 15, 2027 2,953,257 3,052,930 7,789,504 8,052,677 9,778,260 10,112,956
7 1/2s, with due dates from
August 15, 2025 to August 15, 2027 2,343,761 2,384,033 4,924,262 5,008,867 6,346,204 6,455,241
7s, May 15, 2023 978,474 981,831 488,842 490,519 -- --
7s, Midget, with due dates from
December 15, 2007 to June 15, 2009 113,719 115,283 629,213 637,865 604,697 613,013
Government National Mortgage
Association Adjustable Rate Mortgages
7 3/8s, with due dates from
April 20, 2023 to June 20, 2026 492,003 505,180 1,166,214 1,196,971 -- --
7 1/8s, with due dates from
September 20, 2023 to
August 20, 2025 362,162 370,513 909,036 930,002 950,632 972,021
6 7/8s, with due dates from
November 20, 2021 to
October 20, 2025 850,128 871,042 2,154,186 2,207,188 -- --
6s, with due dates from
May 20, 2024 to June 20, 2024 376,162 386,856 841,504 865,445 -- --
5 1/2s, TBA, October 16, 2027 1,760,000 1,758,346 4,610,000 4,605,667 9,615,000 9,605,962
------------- ------------ ------------
18,445,969 49,299,378 68,000,570
U.S. Treasury Obligations 1.5% 2.8% 3.7%
- -------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
6 5/8s, February 15, 2027 # 735,000 752,574 730,000 747,454 2,525,000 2,585,372
6 3/8s, August 15, 2027 440,000 438,073 1,130,000 1,125,051 -- --
U.S. Treasury Notes
6 3/8s, April 30, 1999 # 680,000 686,059 -- -- -- --
6 1/4s, June 30, 2002 # 7,020,000 7,084,724 17,470,000 17,631,074 4,315,000 4,354,784
6 1/4s, October 31, 2001 # 500,000 504,530 1,255,000 1,266,370 -- --
6 1/8s, August 15, 2007 70,000 70,033 320,000 320,150 540,000 540,254
6s, June 30, 1999 1,565,000 1,570,133 10,205,000 10,238,472 4,120,000 4,133,514
5 7/8s, July 31, 1999 # 6,675,000 6,680,207 9,125,000 9,132,118 6,325,000 6,329,934
5 1/4s, July 31, 1998 185,000 184,480 411,000 409,845 493,000 491,615
------------- ------------ ------------
17,970,813 40,870,534 18,435,473
------------- ------------ ------------
Total U.S. Government and
Agency Obligations (cost $36,163,803,
$89,992,230 and $85,713,883) $36,456,893 $90,631,187 $86,716,819
- -------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.2% 0.5% 2.0%
ASSET BACKED Principal Principal Principal
SECURITIES * Amount Value Amount Value Amount Value
- -------------------------------------------------------------------------------------------------------------------------
Advanta Mortgage Loan Trust Ser. 97-2,
Class A2, 7.05s, 2021 $405,000 $410,316 $1,045,000 $1,058,716 $1,395,000 $1,413,309
Amresco Residential Securities Mortgage
Loan Ser. 97-3, Class A3, 6.6s, 2018 270,000 270,759 675,000 676,898 780,000 782,194
Associates Manufactured Housing
Ser. 96-1, Class A3, 7s, 2027 -- -- -- -- 385,000 392,941
Capita Equipment Receivables Trust
Ser. 96-1, Class A4, 6.28s, 2000 80,000 80,388 250,000 251,211 260,000 261,259
Carco Auto Loan Master Trust Ser. 97-1,
Class A, 6.689s, 2004 325,000 325,508 830,000 831,297 1,100,000 1,101,719
Green Tree Financial Corp. Ser. 97-2,
Class A6, 7.24s, 2028 380,000 394,725 1,005,000 1,043,944 1,425,000 1,480,219
Green Tree Financial Corp. Ser. 97-3,
Class A-4, 6.93s, 2028 545,000 554,197 1,665,000 1,693,097 1,930,000 1,962,569
Green Tree Recreational Equipment &
Cons Ser. 97-B, Class A1, 6.55s, 2028 734,461 737,331 1,939,270 1,946,846 2,601,022 2,611,183
------------- ------------ ------------
Total Asset-Backed Securities
(cost $2,740,964, $7,417,459
and $9,880,587) $2,773,224 $7,502,009 $10,005,393
- -------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.2% 0.4% 0.7%
Principal Principal Principal
BRADY BONDS * Amount Value Amount Value Amount Value
- -------------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) deb.
FRB 6.688s, 2005 $567,360 $540,410 $1,422,720 $1,355,141 $633,600 $603,505
Bulgaria (Government of) deb.
Ser. PDI, FRB 6.688s, 2011 1,060,000 853,300 2,750,000 2,213,750 1,520,000 1,223,600
Philippines (Government of) Ser. B,
FRB 6 1/4s, 2017 303,000 266,640 767,000 674,960 348,000 306,240
United Mexican States Ser. C,
FRB 6.820s, 2019 920,000 879,750 2,370,000 2,266,313 1,320,000 1,262,250
------------- ------------ ------------
Total Brady Bonds
(cost $2,403,695, $6,156,951
and $3,201,652) $2,540,100 $6,510,164 $3,395,595
- -------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.2% 0.4% 1.4%
COLLATERALIZED Principal Principal Principal
MORTGAGE OBLIGATIONS * Amount Value Amount Value Amount Value
- -------------------------------------------------------------------------------------------------------------------------
Chase Mortgage Finance Corp.
Ser. 94-1, Class B2, 6.601s, 2025 $-- $-- $184,889 $175,413 $184,889 $175,413
Collateralized Mortgage Obligation Trust
Ser. 64, Class Z, 9s, 2020 442,901 482,623 1,385,147 1,509,377 1,476,334 1,608,742
Federal National Mortgage Association
Ser. 89-71 Class J, 8 1/2s, 2019 465,000 505,687 1,190,000 1,294,125 1,575,000 1,712,812
Ser. 97-61 Class C ZBond, 7s, 2027 -- -- 455,000 429,611 -- --
Ser. G97-3 Class GA, 7s, 2024 350,000 345,188 595,000 586,819 830,000 818,588
Ser. 97-61 Class ZC, 7s, 2023 180,000 169,956 -- -- -- --
Ser. 97-25 Class VA, 7s, 2002 160,042 162,518 429,827 436,476 612,732 622,211
Ser. 97-17 Class W, 6.75s 2025 155,000 151,416 400,000 390,750 560,000 547,050
Ser. 93-240, Class B, 6 1/4s 2013 279,124 273,978 729,640 716,187 969,588 951,712
GE Capital Mortgage Services Inc.
Ser. 94-8 Class A2, 6s, 2024 75,417 75,535 280,719 281,157 359,242 359,803
------------- ------------ ------------
Total Collateralized Mortgage Obligations
(cost $2,142,533, $5,726,893
and $6,686,183) $2,166,901 $5,819,915 $6,796,331
- -------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.2% 0.4% 0.3%
Number of Number of Number of
PREFERRED STOCKS * Shares Value Shares Value Shares Value
- -------------------------------------------------------------------------------------------------------------------------
AmeriKing, Inc. $3.25 pfd. [2 DBL. DAGGERS] 2,000 $56,500 4,000 $113,000 -- $--
Anvil Holdings Inc. Ser. B, $3.25 pfd.
[2 DBL. DAGGERS] -- -- 65 1,625 -- --
Cablevision Systems Corp. Ser. M,
$11.125 dep. shs. pfd. [2 DBL. DAGGERS] 1,373 150,687 3,410 374,248 548 60,143
California Federal Bancorp Inc. Ser. A,
$2.281 pfd. 500 13,063 2,600 67,925 -- --
California Federal Bank Ser. B, $10.625
exch. pfd. 955 106,005 1,750 194,250 950 105,450
California Federated Bankcorp Inc. Ser.
B, $11.50 pfd. -- -- 3,500 399,000 -- --
Capstar Broadcasting $12.00 pfd. [2 DBL. DAGGERS] 500 55,500 1,350 149,850 450 49,950
Chancellor Radio Broadcasting 144A
$12.00 pfd. [2 DBL. DAGGERS] 1,037 119,774 2,382 275,121 849 98,060
Citadel Broadcasting Inc. 144A
$13.25 pfd. [2 DBL. DAGGERS] 1,600 182,800 3,850 439,863 1,250 142,813
Echostar Communications Corp. $12.125
pfd. [2 DBL. DAGGERS] 40 41,600 105 109,200 30 31,200
El Paso Electric Co. $11.40 pfd [2 DBL. DAGGERS] 1,175 130,425 2,866 318,126 917 101,787
Fresenius Medical Care AG Ser. D, $9.00
(Germany) 100 103,750 260 269,750 -- --
IXC Communications, Inc. 144A $12.50 pfd.
[2 DBL. DAGGERS] 90 104,400 230 266,800 70 81,200
Intermedia Communications Ser. B,
13.50 pfd. [2 DBL. DAGGERS] 208 248,560 625 746,875 208 248,560
NEXTEL Communications Inc. 144A
$13.00 pfd. ++++ 50 57,500 155 178,250 50 57,500
Nextlink Communications, Inc. 144A
$7.00 pfd. 1,007 64,448 2,935 187,840 1,982 126,848
NTL Inc. 144A Ser. B, $13.00 pfd.
[2 DBL. DAGGERS] 116 132,240 234 266,760 74 84,360
Pantry Pride Inc. Ser. B, $14.875 pfd.
[2 DBL. DAGGERS] 152 15,352 800 80,800 500 50,500
Public Service Co. of New Hampshire
$2.65 1st mtge. pfd. [2 DBL. DAGGERS] 2,320 59,160 12,628 322,014 2,320 59,160
Spanish Broadcasting Systems 144A
$14.25 cum. pfd. [2 DBL. DAGGERS] 85 89,038 234 245,115 75 78,563
Time Warner Inc. Ser. M, $10.25 pfd.
[2 DBL. DAGGERS] 183 208,620 557 634,980 -- --
Von Hoffman Corp. 144A $13.50 pfd. 855 24,453 2,215 63,349 730 20,878
------------- ------------ ------------
Total Preferred Stocks
(cost $1,788,270, $5,231,169
and $1,241,737) $1,963,875 $5,704,741 $1,396,972
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH BALANCED CONSERVATIVE
0.1% 0.1% 0.3%
PURCHASED Expiration/
OPTIONS Date Number of Number of Number of
OUTSTANDING Strike Price Contracts Value Contracts Value Contracts Value
- ---------------------------------------------------------------------------------------------------------------------------
Japanese Government Nov. 97/
Bond Future Contracts (Call) 118.0 JPY 1,000,000 $882,060 2,400,000 $2,116,944 1,400,000 $1,234,884
U.S. Dollars in exchange Nov. 97/
for Deutschemarks (Call) 1.78 DEM 2,860,000 25,168 7,145,000 62,876 3,245,000 28,556
------------- ------------ ------------
Total Purchased Options
Outstanding (cost $775,248,
$1,863,906 and $1,076,406) $907,228 $2,179,820 $1,263,440
- ---------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
MUNICIPAL BONDS
AND NOTES * --% 0.1% 0.3%
(COST $435,000, $1,125,000 Principal Principal Principal
AND $1,500,000) Rating Amount Value Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
NJ Econ. Dev. Auth. MBIA
Rev. Bonds, Ser. A, 7.425s,
2/15/29 Aaa $435,000 $458,877 $1,125,000 $1,186,751 $1,500,000 $1,582,335
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
GROWTH BALANCED CONSERVATIVE
--% 0.1% 0.1%
Number of Number of Number of
UNITS * Units Value Units Value Units Value
- -------------------------------------------------------------------------------------------------------------------------
Celcaribe S.A. 144A units
stepped-coupon zero %
(13 1/2s, 3/15/98), 2004 ++ 3 $60,000 22 $440,000 2 $40,000
CellNet Data Systems, Inc. 144A units
stepped-coupon zero %
(14s, 10/01/02), 2007 ++ 110 55,877 85 43,177 70 35,558
Conecel Holdings 144A units 14s, 2000 55 56,375 145 148,625 50 51,250
Diva Systems Corp. 144A units
stepped-coupon zero %
(13s, 5/15/01), 2006 ++ 75 65,719 220 192,775 75 65,719
Fitzgerald Gaming Co. units 13s, 2002 55 52,525 170 162,350 80 76,400
Hedstrom Holdings, Inc. units
stepped-coupon zero %
(12s, 6/01/02), 2009 ++ 15 9,450 45 28,350 15 9,450
MGC communications, Inc. 144A units
13s, 2004 20 20,650 55 56,788 15 15,488
Paging Network Do Brazil units 13 1/2s,
2005 (Brazil) 5 4,913 10 9,825 10 9,825
Real Time Data 144A units stepped-coupon
zero % (13 1/2s, 8/15/01), 2006 ++ 35 20,475 95 55,575 30 17,550
Wireless One, Inc. units stepped-coupon
zero % (13 1/2s, 8/1/01), 2006 ++ 100 21,000 200 42,000 75 15,750
------------- ------------ ------------
Total Units (cost $376,328, $1,033,320
and $345,426) $366,984 $1,179,465 $336,990
- -------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
--% 0.1% 0.1%
CONVERTIBLE BONDS Principal Principal Principal
AND NOTES * Amount Value Amount Value Amount Value
- -------------------------------------------------------------------------------------------------------------------------
APP Global Finance (V) Ltd. 144A
cv. sec. 2s, 2000 (United Kingdom) $65,000 $70,363 $190,000 $205,675 $60,000 $64,950
GST Telecommunications, Inc. cv. sr.
disc. notes stepped-coupon zero %
(13 7/8s, 12/15/00), 2005 ++ 21,000 21,420 59,000 60,180 17,000 17,340
Integrated Device Technology, Inc. cv.
sub. notes 5 1/2s, 2002 40,000 34,350 115,000 98,756 35,000 30,056
National Semiconductor Corp. cv. deb.
6 1/2s, 2002 25,000 28,688 75,000 86,063 25,000 28,688
Pricellular Wireless Corp. 144A cv. sub.
notes stepped-coupon zero %
(10 3/4s, 8/15/00) ++ 94,000 80,605 206,000 176,645 77,000 66,028
VLSI Technology, Inc. cv. sub. notes
8 1/4s, 2005 40,000 41,950 115,000 120,606 35,000 36,706
Winstar Communications. Inc. 144A cv. sr.
disc. notes stepped-coupon zero %
(14s, 10/15/00), 2005 ++ -- -- -- -- 70,000 53,025
----------- ---------- ----------
Total Convertible Bonds and Notes
(cost $224,319, $612,402 and $244,696) $277,376 $747,925 $296,793
- -------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
--% --% --%
CONVERTIBLE PREFERRED
STOCKS * Number of Number of Number of
(COST $120,250, $252,525 AND $102,213) Shares Value Shares Value Shares Value
- -------------------------------------------------------------------------------------------------------------------------
Granite Broadcasting $1.938 cv. pfd. 2,000 $116,000 4,200 $243,600 1,700 $98,600
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH BALANCED CONSERVATIVE
--% --% --%
Expiration Number of Number of Number of
WARRANTS * + Date Warrants Value Warrants Value Warrants Value
- ----------------------------------------------------------------------------------------------------------------------------
County Seat Holdings, Inc. 10/15/98 65 $1 200 $4 110 $2
Esat Holdings, Inc. 1/1/04 75 2,063 205 5,638 65 1,788
Generale Des Eaux (France) 5/2/01 2,060 1,114 2,730 1,477 710 384
Globalstar Telecom 144A 2/15/04 100 12,000 300 36,000 90 10,800
Hyperion Telecommunications
144A 4/15/01 400 16,000 850 34,000 200 8,000
Intelcom Group 144A 9/15/05 429 6,221 858 12,441 330 4,785
Interact Systems Inc. 8/1/03 100 25 300 75 90 23
Intermedia Communications
144A 6/1/00 100 6,875 350 24,063 -- --
International Wireless
Communications Holdings 8/15/01 40 3,400 115 9,775 40 3,400
McCaw International Ltd. 144A 4/15/07 10 3 20 6 10 3
Nextlink Communications, Inc.
144A 2/1/09 940 9 2,740 27 1,850 19
Petracom Holdings, Inc. 144A 8/1/05 -- -- 1,001 7,132 399 2,843
Powertel, Inc. 2/1/06 -- -- 1,600 11,520 -- --
Spanish Broadcasting Systems
144A 6/30/99 80 15,200 220 41,800 75 14,250
Sterling Chemicals Holdings 8/15/08 35 1,330 110 4,180 30 1,140
UCC Warrants 144A 10/3/99 10 125 30 375 20 250
UROHEALTH systems Inc. 144A 4/10/04 95 475 240 1,200 75 375
Wireless One, Inc. 10/19/00 450 45 1,050 105 375 38
----------- ---------- ----------
Total Warrants (cost $54,968,
$162,012 and $117,361) $64,886 $189,818 $48,100
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
GROWTH BALANCED CONSERVATIVE
9.3% 10.8% 14.5%
Principal Principal Principal
SHORT-TERM INVESTMENTS * Amount Value Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------------
Interest in $226,927,000 joint
repurchase agreement dated
September 30, 1997 with S.B.C.
Warburg Inc. due October 1, 1997
with respect to various U.S. Treasury
obligations -- maturity value of
$0, $159,350,775 and $0 for an
effective yield of 6.05%. $-- $-- $159,324,000 $159,350,775 $-- $--
Interest in $565,867,000 joint
repurchase agreement dated
September 30, 1997 with U.B.S.
Securities due October 1, 1997
with respect to various U.S. Treasury
obligations -- maturity value of
$109,793,448, $0 and $34,306,764
for an effective yield of 6.05%. 109,775,000 109,793,448 -- -- 34,301,000 34,306,764
Interest in $750,000,000 joint
repurchase agreement dated
September 30, 1997 with Goldman
Sachs due October 1, 1997 with
respect to various U.S. Treasury
obligations -- maturity value of
$0, $0 and $37,506,406 for an
effective yield of 6.15%. -- -- -- -- 37,500,000 37,506,406
------------ ------------ -----------
Total Short-Term Investments
(cost $109,793,448, $159,350,775
and $71,813,170) $109,793,448 $159,350,775 $71,813,170
- -----------------------------------------------------------------------------------------------------------------------------
Total Investments
(cost $965,873,423, $1,247,002,649
and $454,045,685)*** $1,165,934,455 $1,460,609,834 $500,774,146
- -----------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets as follows:
- --------------------------------------------
Growth portfolio $1,180,030,225
Balanced portfolio 1,470,172,171
Conservative portfolio 494,177,194
- --------------------------------------------
*** The aggregate identified cost on a tax basis is as follows:
Aggregate Gross Unrealized Gross Unrealized Net Unrealized
Identified Cost Appreciation Depreciation Appreciation
- --------------------------------------------------------------------------------------------
Growth portfolio $966,730,668 $206,158,649 $6,954,862 $199,203,787
Balanced portfolio 1,247,940,386 222,955,456 10,286,008 212,669,448
Conservative portfolio 454,666,595 48,327,056 2,220,546 46,106,510
- --------------------------------------------------------------------------------------------
+ Non-income-producing security.
++ The interest or dividend rate and date shown parenthetically represent the new interest or
dividend rate to be paid and the date the fund will begin receiving interest or dividend
income at this rate.
[DBL.DAGGER] Restricted, excluding 144A securities, as to public resale were the following securities:
Growth Balanced Conservative
- --------------------------------------------------------------------------------------------
Grand Union (acquired 3/7/94-12/8/94) 115,725 252,731 112,188
NEXTEL Communication, Inc. (acquired 9/12/97) 18,993 61,625 29,352
- --------------------------------------------------------------------------------------------
The total market value of restricted securities held by the fund did not exceed 0.1% of each fund's
net assets.
[2 DBL. DAGGERS] Income may be received in cash or additional securities at the discretion of the issuer.
+++ A portion of the income will be received in additional securities.
# These securities or a portion of, and cash were pledged and segregated with the custodian to
cover margin requirements for futures contracts at September 30, 1997
## When-issued securities (Note 1).
[UPSIDE DOWN DELTA] This entity provides subcustodian services to the funds.
(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 after the name of a foreign holding stands for American Depository Receipts, 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).
MBIA represents Municipal Bond Investors Assurance Corporation.
The rates shown on Floating Rate Notes (FRN) and floating rate bonds (FRB) are the interest rates
shown at September 30, 1997, which are subject to change based on the terms of the security.
Diversification by Country
Distribution of investments by country of issue at September 30, 1997: (as percentage of Market Value)
Growth portfolio
Growth portfolio
- ----------------------------------------
Australia 1.2%
Canada 1.0%
France 2.1
Germany 2.9
Japan 2.8
Switzerland 1.0
United Kingdom 4.2
United States 80.5
Other 4.3
- ----------------------------------------
Total 100.0%
Distribution of investments by country of issue at
September 30, 1997: (as percentage of Market Value)
Balanced portfolio
- ----------------------------------------
Canada 1.5%
France 2.8
Germany 4.5
Japan 2.8
Netherlands 1.0
Switzerland 1.0
United Kingdom 5.7
United States 74.6
Other 6.1
- ----------------------------------------
Total 100.0%
Distribution of investments by country of issue at
September 30, 1997: (as percentage of Market Value)
Conservative portfolio
- ----------------------------------------
Canada 2.3%
France 3.0
Germany 3.1
Italy 1.0
Japan 2.2
United Kingdom 5.0
United States 73.9
Other 9.5
- ----------------------------------------
Total 100.0%
<CAPTION>
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy
at September 30, 1997 GROWTH
(aggregate face value $58,493,195)
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
British Pounds $ 1,201,482 $ 1,187,229 12/17/97 $ 14,253
Deutschemarks 15,393,912 15,027,765 12/17/97 366,147
Indonesian Rupiah 324,012 356,732 2/23/98 (32,720)
Italian Lira 10,295,095 10,067,176 12/17/97 227,919
Japanese Yen 25,803,938 25,806,158 12/17/97 (2,220)
Philippines Peso 59,978 62,700 3/25/98 (2,722)
Polish Zloty 648,968 677,389 6/5/98 (28,421)
Spanish Peseta 1,908,194 1,868,407 12/17/97 39,787
Swedish Krona 2,422,073 2,384,403 12/17/97 37,670
Swiss Franc 932,862 908,814 12/17/97 24,048
Venezuelan Bolivar 147,118 146,422 6/5/98 696
- --------------------------------------------------------------------------------------------
$644,437
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell
at September 30, 1997 GROWTH
(aggregate face value $42,105,993)
Market Aggregate Face Delivery Unrealized
Value Value Date Depreciation
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deutschemarks $16,386,788 $16,110,248 12/17/97 $(276,540)
French Franc 10,877,602 10,357,003 2/11/98 (520,599)
French Franc 7,734,721 7,585,649 12/30/98 (149,072)
Japanese Yen 5,654,257 5,639,376 12/17/97 (14,881)
New Zealand Dollar 1,155,782 1,134,261 12/17/97 (21,521)
South African Rand 445,825 432,824 12/17/97 (13,001)
Swedish Krona 25,560 24,860 12/17/97 (700)
Swiss Franc 826,041 821,772 12/17/97 (4,269)
- --------------------------------------------------------------------------------------------
$(1,000,583)
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Futures Contracts Outstanding
at September 30, 1997 GROWTH
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DAX Index (long) $35,159,455 $35,589,450 Dec-97 $(429,995)
FT-SE 100 Index (long) 1,936,893 1,865,932 Dec-97 70,961
German 10yr (short) 11,547,189 11,386,119 Dec-97 (161,070)
Gilt (short) 3,665,011 3,527,919 Dec-97 (137,092)
Japanese Government
Bonds 10yr Fut (short) 11,218,608 11,023,764 Dec-97 (194,844)
Nikkei 225 SMX (short) 28,007,918 30,209,754 Dec-97 2,201,836
Nikkei Ose (long) 27,863,379 29,332,546 Dec-97 (1,469,167)
S&P Index (long) 52,974,750 53,098,637 Dec-97 (123,887)
US Treasury Bonds 10 YR
(short) 2,202,500 2,186,250 Dec-97 (16,250)
US Treasury Bonds 5yr
(short) 2,255,531 2,245,360 Dec-97 (10,171)
- --------------------------------------------------------------------------------------------
$(269,679)
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Written Options Outstanding
at September 30, 1997 GROWTH
(premium received $35,607)
Expiration Date/ Market
Contract Amount Strike Price Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
$2,860,000 U.S. Dollars in Exchange
for Deutschemarks Nov. 97 /DEM 1.73 $23,452
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy
at September 30, 1997 BALANCED
(aggregate face value $134,126,518)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
British Pounds $ 2,934,502 $ 2,899,692 12/17/97 $34,810
Deutschemarks 31,811,938 31,093,199 12/17/97 718,739
Indonesian Rupiah 832,366 916,415 2/23/98 (84,049)
Italian Lira 25,275,644 24,716,195 12/17/97 559,449
Japanese Yen 58,565,664 58,505,319 12/17/97 60,345
Philippines Peso 154,010 161,000 3/25/98 (6,990)
Polish Zloty 1,678,562 1,752,074 6/5/98 (73,512)
Spanish Peseta 4,898,921 4,796,777 12/17/97 102,144
Swedish Krona 6,235,070 6,137,255 12/17/97 97,815
Swiss Franc 2,846,013 2,772,644 12/17/97 73,369
Venezuelan Bolivar 377,720 375,948 6/5/98 1,772
- --------------------------------------------------------------------------------------------
$1,483,892
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell
at September 30,1997 BALANCED
(aggregate face value $83,446,704)
Market Aggregate Face Delivery Unrealized
Value Value Date Depreciation
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deutschemarks $34,586,317 $34,052,394 12/17/97 $(533,923)
French Franc 13,729,225 13,052,464 2/11/98 (676,761)
French Franc 19,493,508 19,117,855 12/30/97 (375,653)
Japanese Yen 11,169,484 11,124,485 12/17/97 (44,999)
New Zealand Dollar 2,884,608 2,830,893 12/17/97 (53,715)
South African Rand 1,132,600 1,099,575 12/17/97 (33,025)
Swedish Krona 121,749 118,416 12/17/97 (3,333)
Swiss Franc 2,061,275 2,050,622 12/17/97 (10,653)
- --------------------------------------------------------------------------------------------
$(1,732,062)
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Futures Contracts Outstanding
at September 30, 1997 BALANCED
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DAX Index (long) $43,711,755 $44,386,020 Dec-97 $(674,265)
FT-SE 100 Index (long) 8,177,993 7,876,329 Dec-97 301,664
German 10yr (short) 14,616,695 14,412,808 Dec-97 (203,887)
Gilt (short) 7,233,574 6,962,998 Dec-97 (270,576)
Japanese Government
Bonds 10yr (short) 13,889,705 13,648,469 Dec-97 (241,236)
Nikkei 225 SMX (short) 35,619,569 38,451,802 Dec-97 2,832,233
Nikkei Ose (long) 35,529,494 37,402,712 Dec-97 (1,873,218)
S&P Index (long) 28,157,750 28,340,750 Dec-97 (183,000)
US Treasury Bonds
10 Yr (long) 26,319,875 26,051,000 Dec-97 268,875
US Treasury Bonds
5Yr (long) 46,506,906 46,209,244 Dec-97 297,662
- --------------------------------------------------------------------------------------------
$254,252
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
TBA Sale Commitments
at September 30, 1997 BALANCED
(Proceeds receivable $2,250,774)
Settlement Market
Agency Principal Amount Date Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FNMA, 6.5s, October 2027 $2,300,000 10/14/97 $2,239,625
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Written Options Outstanding
at September 30, 1997 BALANCED
(premium received $88,955)
Expiration Date/ Market
Contract Amount Strike Price Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
$7,145,000 U.S. Dollars in Exchange for Deutschemarks Nov. 97 / DEM 1.73 $58,589
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy
at September 30, 1997 CONSERVATIVE
(aggregate face value $66,853,823)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
British Pounds $ 1,348,424 $ 1,332,428 12/17/97 $ 15,996
Deutschemarks 21,394,156 20,861,939 12/17/97 532,217
Indonesian Rupiah 464,296 511,180 2/3/98 (46,884)
Italian Lira 12,462,585 12,186,897 12/17/97 275,688
Japanese Yen 27,466,710 27,473,794 12/17/97 (7,084)
Philippines Peso 85,901 89,800 3/25/98 (3,899)
Polish Zloty 930,850 971,616 6/5/98 (40,766)
Swedish Krona 3,308,060 3,216,418 12/17/97 91,642
Venezuelan Bolivar 210,744 209,751 6/5/98 993
- --------------------------------------------------------------------------------------------
$817,903
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell
at September 30, 1997 CONSERVATIVE
(aggregate face value $25,429,723)
Market Aggregate Face Delivery Unrealized
Value Value Date Depreciation
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deutschemarks $9,473,011 $9,279,165 12/17/97 $(193,846)
French Franc 5,156,182 5,056,877 12/30/97 (99,305)
French Franc 3,239,342 3,069,324 2/11/98 (170,018)
Japanese Yen 2,936,302 2,928,662 12/17/97 (7,640)
New Zealand Dollar 1,307,114 1,282,775 12/17/97 (24,339)
South African Rand 233,474 226,668 12/17/97 (6,806)
Spanish Peseta 1,812,220 1,774,435 12/17/97 (37,785)
Swedish Krona 214,137 212,829 12/17/97 (1,308)
Swiss Franc 1,608,239 1,598,988 12/17/97 (9,251)
- --------------------------------------------------------------------------------------------
$(550,298)
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Futures Contracts Outstanding
at September 30, 1997 CONSERVATIVE
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DAX Index (long) $14,966,525 $15,015,051 Dec-97 $(48,526)
FT-SE 100 (long) 8,393,203 8,063,292 Dec-97 329,911
German 10yr (short) 7,600,681 7,530,685 Dec-97 (69,996)
Gilt (short) 7,522,917 7,241,927 Dec-97 (280,990)
Japanese Government
Bonds 10yr (short) 6,944,852 6,824,234 Dec-97 (120,618)
Nikkei 225 SMX (short) 2,882,081 3,129,461 Dec-97 247,380
S&P Index (long) 8,113,250 8,169,625 Dec-97 (56,375)
US Treasury Bonds 10 Yr
(long) 24,007,250 23,659,812 Dec-97 347,438
- --------------------------------------------------------------------------------------------
$348,224
- --------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------
Written Options Outstanding
at September 30, 1997 CONSERVATIVE
(premium received $40,400)
Expiration Date/ Market
Contract Amount Strike Price Value
- --------------------------------------------------------------------------------------------
$3,245,000 U.S. Dollars in Exchange for Deutschemarks Nov. 97 / DEM 1.73 $26,609
- --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1997
Putnam Asset Allocation: Growth Portfolio
<S> <C>
Assets
- --------------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $856,079,975) (Note 1) $1,056,141,007
- --------------------------------------------------------------------------------------------------------
Repurchase Agreement
(identified cost $109,793,448) (Note 1) 109,793,448
- --------------------------------------------------------------------------------------------------------
Cash 11,981,239
- --------------------------------------------------------------------------------------------------------
Foreign currency 7,268,765
- --------------------------------------------------------------------------------------------------------
Receivable for foreign currency contracts (Note 1) 23,121,131
- --------------------------------------------------------------------------------------------------------
Margin deposit for futures contracts (Note 1) 5,385,000
- --------------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 4,054,816
- --------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,125,951
- --------------------------------------------------------------------------------------------------------
Receivable for securities sold 4,876,906
- --------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 767,627
- --------------------------------------------------------------------------------------------------------
Unamortized organization expense (Note 1) 3,604
- --------------------------------------------------------------------------------------------------------
Total assets 1,227,519,494
Liabilities
- --------------------------------------------------------------------------------------------------------
Payable for variation margin 23,220
- --------------------------------------------------------------------------------------------------------
Payable for securities purchased 9,340,315
- --------------------------------------------------------------------------------------------------------
Payable for foreign currency contracts (Note 1) 32,569,722
- --------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,123,146
- --------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,787,279
- --------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 407,799
- --------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 11,202
- --------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,894
- --------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 675,500
- --------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 1,123,773
- --------------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 111,146
- --------------------------------------------------------------------------------------------------------
Written options outstanding, at value (premiums received $35,607) (Note 3) 23,452
- --------------------------------------------------------------------------------------------------------
Other accrued expenses 289,821
- --------------------------------------------------------------------------------------------------------
Total liabilities 47,489,269
- --------------------------------------------------------------------------------------------------------
Net assets $1,180,030,225
Represented by
- --------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $ 911,993,882
- --------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 4,753,670
- --------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 64,278,386
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 199,004,287
- --------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,180,030,225
Computation of net asset value and offering price
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($486,106,912 divided by 35,639,571 shares) $13.64
- --------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.64)* $14.47
- --------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($357,501,327 divided by 26,547,875 shares)** $13.47
- --------------------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($68,748,563 divided by 5,139,280 shares)** $13.38
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($34,381,050 divided by 2,548,864 shares) $13.49
- --------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.49)* $13.98
- --------------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($233,292,373 divided by 17,005,005 shares) $13.72
- --------------------------------------------------------------------------------------------------------
* 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
charges.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1997
Putnam Asset Allocation: Growth Portfolio
Investment income:
- --------------------------------------------------------------------------------------------------------
<S> <C>
Interest (net of foreign tax of $4,507) $ 13,258,104
- --------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $221,680) 10,329,486
- --------------------------------------------------------------------------------------------------------
Total investment income 23,587,590
- --------------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 5,592,040
- --------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,600,260
- --------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 26,761
- --------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 12,590
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 806,669
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,698,162
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 462,107
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 171,491
- --------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,653
- --------------------------------------------------------------------------------------------------------
Reports to shareholders 56,021
- --------------------------------------------------------------------------------------------------------
Registration fees 144,867
- --------------------------------------------------------------------------------------------------------
Auditing 53,573
- --------------------------------------------------------------------------------------------------------
Legal 13,593
- --------------------------------------------------------------------------------------------------------
Postage 143,211
- --------------------------------------------------------------------------------------------------------
Other 71,044
- --------------------------------------------------------------------------------------------------------
Total expenses 13,855,042
- --------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (405,394)
- --------------------------------------------------------------------------------------------------------
Net expenses 13,449,648
- --------------------------------------------------------------------------------------------------------
Net investment income 10,137,942
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 48,448,974
- --------------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1) 12,724,211
- --------------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 75,725
- --------------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 2,759,010
- --------------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (957,411)
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures and
written options during the year 135,994,488
- --------------------------------------------------------------------------------------------------------
Net gain on investments 199,044,997
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $209,182,939
- --------------------------------------------------------------------------------------------------------
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
----------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- --------------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------------
Net investment income $ 10,137,942 $ 5,435,648
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 64,007,920 31,633,588
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
asset and liabilities in foreign currencies 135,037,077 29,767,246
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 209,182,939 66,836,482
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders
- --------------------------------------------------------------------------------------------------------
From net investment income
Class A (3,419,375) (2,471,036)
- --------------------------------------------------------------------------------------------------------
Class B (1,858,459) (1,771,400)
- --------------------------------------------------------------------------------------------------------
Class C (354,573) (137,682)
- --------------------------------------------------------------------------------------------------------
Class M (181,831) (60,532)
- --------------------------------------------------------------------------------------------------------
Class Y (2,813,692) (894,776)
- --------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (9,736,876) (3,563,495)
- --------------------------------------------------------------------------------------------------------
Class B (8,947,425) (3,394,151)
- --------------------------------------------------------------------------------------------------------
Class C (1,403,269) (263,811)
- --------------------------------------------------------------------------------------------------------
Class M (610,900) (96,428)
- --------------------------------------------------------------------------------------------------------
Class Y (7,064,486) (1,178,695)
- --------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 498,609,902 160,838,514
- --------------------------------------------------------------------------------------------------------
Total increase in net assets 671,401,955 213,842,990
Net assets
- --------------------------------------------------------------------------------------------------------
Beginning of year 508,628,270 294,785,280
- --------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income
of $4,753,670 and $4,566,163, respectively) $1,180,030,225 $508,628,270
- --------------------------------------------------------------------------------------------------------
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
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 8, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $11.41 $10.06 $8.43 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .17 .18 .18 (a) .10(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.69 1.63 1.53 (.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.86 1.81 1.71 (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.16) (.19) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.47) (.27) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.63) (.46) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.64 $11.41 $10.06 $8.43
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 26.25 18.75 20.45 (.82)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $486,107 $210,531 $122,228 $43,669
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.39 1.45 1.49 (a) .78(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.42 1.72 1.98 (a) 1.31(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 99.96 100.93 88.36 39.90*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0417 $.0486
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Growth Portfolio
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 16, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $11.29 $9.97 $8.39 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .08 .10 .11 (a) .06(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.67 1.64 1.52 (.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.75 1.74 1.63 (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.10) (.15) (.05) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.47) (.27) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.57) (.42) (.05) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.47 $11.29 $9.97 $8.39
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(c) 25.23 18.04 19.57 (1.29)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $357,501 $199,871 $116,263 $50,664
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.14 2.21 2.23 (a) 1.21(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .68 .95 1.22 (a) .80(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 99.96 100.93 88.36 39.90*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0417 $.0486
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Growth Portfolio
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Sept. 1, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $11.24 $9.93 $8.39 $8.46
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .08 .10 .11 (a) .01(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.65 1.63 1.51 (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.73 1.73 1.62 (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.12) (.15) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.47) (.27) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.59) (.42) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.38 $11.24 $9.93 $8.39
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(c) 25.31 18.01 19.46 (.83)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $68,749 $27,556 $7,985 $385
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.14 2.23 2.23 (a) .15(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .67 .94 1.24 (a) .14(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 99.96 100.93 88.36 39.90*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0417 $.0486
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Growth Portfolio
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 3, 1995+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $11.32 $10.01 $8.39
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .11 .12 .08(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.67 1.64 1.54
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.78 1.76 1.62
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.14) (.18) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.47) (.27) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.61) (.45) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.49 $11.32 $10.01
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 25.63 18.21 19.31*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $34,381 $12,369 $3,160
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.89 1.95 1.45(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .92 1.16 .79(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 99.96 100.93 88.36
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0417 $.0486
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Growth Portfolio
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 14, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $11.47 $10.09 $8.43 $8.22
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .21 .21 .17 (a) .03(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.70 1.65 1.57 .18
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.91 1.86 1.74 .21
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.19) (.21) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.47) (.27) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.66) (.48) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.72 $11.47 $10.09 $8.43
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 26.54 19.20 20.94 2.55 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $233,292 $58,301 $45,150 $775
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.14 1.21 1.28 (a) .20(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.71 1.97 2.05 (a) .50(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 99.96 100.93 88.36 39.90*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0417 $.0486
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1997
Putnam Asset Allocation: Balanced Portfolio
<S> <C>
Assets
- --------------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,087,651,874) (Note 1) $1,301,259,059
- --------------------------------------------------------------------------------------------------------
Repurchase Agreement
(identified cost $159,350,775) (Note 1) 159,350,775
- --------------------------------------------------------------------------------------------------------
Cash 27,421,985
- --------------------------------------------------------------------------------------------------------
Foreign currency 11,795,662
- --------------------------------------------------------------------------------------------------------
Receivable for foreign currency contracts (Note 1) 63,562,973
- --------------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 7,613,689
- --------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,635,309
- --------------------------------------------------------------------------------------------------------
Receivable for securities sold 7,779,759
- --------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 1,730,069
- --------------------------------------------------------------------------------------------------------
Receivable for variation margin 2,976,432
- --------------------------------------------------------------------------------------------------------
Unamortized organization expense (Note 1) 3,593
- --------------------------------------------------------------------------------------------------------
Total assets 1,588,129,305
Liabilities
- --------------------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 2,621,182
- --------------------------------------------------------------------------------------------------------
Payable for securities purchased 18,279,175
- --------------------------------------------------------------------------------------------------------
Payable for foreign currency contracts (Note 1) 87,517,717
- --------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,117,902
- --------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,200,063
- --------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 395,874
- --------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 11,744
- --------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,959
- --------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 884,678
- --------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 1,978,239
- --------------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 481,287
- --------------------------------------------------------------------------------------------------------
Written options outstanding, at value (premiums received $88,955) (Note 3) 58,589
- --------------------------------------------------------------------------------------------------------
TBA sales commitments, at value (proceeds receivable $2,250,774) 2,239,625
- --------------------------------------------------------------------------------------------------------
Other accrued expenses 166,100
- --------------------------------------------------------------------------------------------------------
Total liabilities 117,957,134
- --------------------------------------------------------------------------------------------------------
Net assets $1,470,172,171
Represented by
- --------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,176,541,439
- --------------------------------------------------------------------------------------------------------
Distribution in excess of net investment income (Note 1) (1,691,530)
- --------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 82,481,851
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 212,840,411
- --------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,470,172,171
Computation of net asset value and offering price
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($680,720,360 divided by 55,429,195 shares) $12.28
- --------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $12.28)* $13.03
- --------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($442,462,622 divided by 36,191,885 shares)** $12.23
- --------------------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($70,847,057 divided by 5,818,382 shares)** $12.18
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($44,120,877 divided by 3,595,164 shares) $12.27
- --------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $12.27)* $12.72
- --------------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($232,021,255 divided by 18,886,157 shares) $12.29
- --------------------------------------------------------------------------------------------------------
* 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
charges.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1997
Putnam Asset Allocation: Balanced Portfolio
Investment income:
- --------------------------------------------------------------------------------------------------------
<S> <C>
Interest (net of foreign tax of $25,283) $ 28,586,248
- --------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $281,981) 11,868,329
- --------------------------------------------------------------------------------------------------------
Total investment income 40,454,577
- --------------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 7,033,919
- --------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,701,475
- --------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 29,612
- --------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 17,999
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,223,892
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 3,441,956
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 483,446
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 209,501
- --------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,653
- --------------------------------------------------------------------------------------------------------
Reports to shareholders 60,268
- --------------------------------------------------------------------------------------------------------
Registration fees 132,229
- --------------------------------------------------------------------------------------------------------
Auditing 61,824
- --------------------------------------------------------------------------------------------------------
Legal 16,378
- --------------------------------------------------------------------------------------------------------
Postage 77,968
- --------------------------------------------------------------------------------------------------------
Other 69,365
- --------------------------------------------------------------------------------------------------------
Total expenses 16,562,485
- --------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (400,675)
- --------------------------------------------------------------------------------------------------------
Net expenses 16,161,810
- --------------------------------------------------------------------------------------------------------
Net investment income 24,292,767
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 60,533,513
- --------------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 19,755,973
- --------------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 195,898
- --------------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 1,708,185
- --------------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (1,252,211)
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures,
written options, and TBA sale commitments during the year 138,205,566
- --------------------------------------------------------------------------------------------------------
Net gain on investments 219,146,924
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $243,439,691
- --------------------------------------------------------------------------------------------------------
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
----------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- --------------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------------
Net investment income $ 24,292,767 $ 14,211,074
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 82,193,569 41,972,934
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 136,953,355 32,957,829
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 243,439,691 89,141,837
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- --------------------------------------------------------------------------------------------------------
From net investment income
Class A (12,697,299) (6,120,832)
- --------------------------------------------------------------------------------------------------------
Class B (6,684,235) (4,209,053)
- --------------------------------------------------------------------------------------------------------
Class C (929,452) (365,863)
- --------------------------------------------------------------------------------------------------------
Class M (584,395) (164,641)
- --------------------------------------------------------------------------------------------------------
Class Y (5,162,787) (2,550,204)
- --------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (17,400,957) (5,171,891)
- --------------------------------------------------------------------------------------------------------
Class B (14,022,870) (5,203,895)
- --------------------------------------------------------------------------------------------------------
Class C (1,750,679) (396,189)
- --------------------------------------------------------------------------------------------------------
Class M (891,021) (121,806)
- --------------------------------------------------------------------------------------------------------
Class Y (6,323,825) (2,134,847)
- --------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 529,850,375 301,988,514
- --------------------------------------------------------------------------------------------------------
Total increase in net assets 706,842,546 364,691,130
Net assets
- --------------------------------------------------------------------------------------------------------
Beginning of year 763,329,625 398,638,495
- --------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of net
investment income and undistributed net investment
income of $1,691,530 and $5,962,239, respectively) $1,470,172,171 $763,329,625
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: Balananced Portfolio
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 7, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.71 $9.67 $8.33 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .28 .29 .27 (a) .16(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.13 1.32 1.27 (.28)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.41 1.61 1.54 (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.31) (.28) (.20) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.53) (.29) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.84) (.57) (.20) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.28 $10.71 $9.67 $8.33
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 23.82 17.41 18.73 (1.47)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $680,720 $327,326 $152,317 $54,483
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.27 1.33 1.32 (a) .83(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.44 2.83 2.95 (a) 2.13(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 136.75 122.12 106.03 52.62*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0407 $.0470
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balananced Portfolio
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 11, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.67 $9.64 $8.31 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .19 .21 .20 (a) .11(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.13 1.32 1.26 (.27)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.32 1.53 1.46 (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.21) (.13) (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.53) (.29) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.76) (.50) (.13) (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.23 $10.67 $9.64 $8.31
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 22.95 16.54 17.83 (1.89)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $442,463 $264,830 $159,230 $81,093
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.02 2.08 2.07 (a) 1.23(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.70 2.08 2.26 (a) 1.41(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 136.75 122.12 106.03 52.62*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0407 $.0470
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balananced Portfolio
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Sept. 1, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.64 $9.62 $8.31 $8.41
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .19 .22 .20 (a) .01(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.11 1.30 1.27 (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.30 1.52 1.47 (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.21) (.16) (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.53) (.29) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.76) (.50) (.16) (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.18 $10.64 $9.62 $8.31
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 22.86 16.47 17.89 (.84)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $70,847 $29,724 $11,921 $441
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.02 2.09 2.09 (a) .16(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.70 2.18 2.22 (a) .11(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 136.75 122.12 106.03 52.62*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0407 $.0470
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balananced Portfolio
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 6, 1995+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $10.71 $9.66 $8.34
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .22 .24 .14(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.13 1.34 1.31
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.35 1.58 1.45
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.26) (.24) (.13)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.53) (.29) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.79) (.53) (.13)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.27 $10.71 $9.66
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 23.19 17.05 17.46*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $44,121 $14,967 $3,509
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.77 1.84 1.38(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.93 2.42 1.56(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 136.75 122.12 106.03
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0407 $.0470
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balananced Portfolio
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 5, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.71 $9.66 $8.33 $8.11
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .31 .31 .29 (a) .05(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.14 1.34 1.26 .22
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.45 1.65 1.55 .27
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.34) (.31) (.22) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.53) (.29) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.87) (.60) (.22) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.29 $10.71 $9.66 $8.33
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 24.21 17.81 18.89 3.34*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $232,021 $126,482 $71,661 $66,081
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.02 1.08 1.07 (a) .23(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.70 3.03 3.35 (a) .62(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 136.75 122.12 106.03 52.62*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0407 $.0470
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1997
Putnam Asset Allocation: Conservative Portfolio
<S> <C>
Assets
- --------------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $382,232,515) (Note 1) $428,960,976
- --------------------------------------------------------------------------------------------------------
Repurchase Agreement
(identified cost $71,813,170) (Note 1) 71,813,170
- --------------------------------------------------------------------------------------------------------
Cash 16,155,859
- --------------------------------------------------------------------------------------------------------
Foreign currency 1,370,344
- --------------------------------------------------------------------------------------------------------
Receivable for foreign currency contracts (Note 1) 26,177,009
- --------------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 4,062,266
- --------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,007,310
- --------------------------------------------------------------------------------------------------------
Receivable for securities sold 6,644,892
- --------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 977,196
- --------------------------------------------------------------------------------------------------------
Receivable for variation margin 421,214
- --------------------------------------------------------------------------------------------------------
Unamortized organization expense (Note 1) 3,604
- --------------------------------------------------------------------------------------------------------
Total assets 557,593,840
Liabilities
- --------------------------------------------------------------------------------------------------------
Payable for securities purchased 18,133,817
- --------------------------------------------------------------------------------------------------------
Payable for foreign currency contracts (Note 1) 42,280,734
- --------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 685,167
- --------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 847,185
- --------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 194,631
- --------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 6,559
- --------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3,822
- --------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 338,395
- --------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 709,591
- --------------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 57,673
- --------------------------------------------------------------------------------------------------------
Written options outstanding, at value (premiums received $40,400) (Note 3) 26,609
- --------------------------------------------------------------------------------------------------------
Other accrued expenses 132,463
- --------------------------------------------------------------------------------------------------------
Total liabilities 63,416,646
- --------------------------------------------------------------------------------------------------------
Net assets $494,177,194
Represented by
- --------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $432,294,947
- --------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (253,640)
- --------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 15,396,761
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 46,739,126
- --------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $494,177,194
Computation of net asset value and offering price
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($295,238,903 divided by 27,823,692 shares) $10.61
- --------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $10.61)* $11.26
- --------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($138,457,056 divided by 13,095,486 shares)** $10.57
- --------------------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($29,031,568 divided by 2,750,480 shares)** $10.56
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($12,689,460 divided by 1,198,792 shares) $10.59
- --------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $10.59)* $10.97
- --------------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($18,760,207 divided by 1,766,695 shares) $10.62
- --------------------------------------------------------------------------------------------------------
* 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
charges.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1997
Putnam Asset Allocation: Conservative Portfolio
Investment income:
- --------------------------------------------------------------------------------------------------------
<S> <C>
Interest (net of foreign tax of $12,019) $18,112,692
- --------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $70,507) 2,567,752
- --------------------------------------------------------------------------------------------------------
Total investment income 20,680,444
- --------------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,847,969
- --------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,521,253
- --------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 16,817
- --------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 9,347
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 617,818
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,144,691
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 227,417
- --------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 62,112
- --------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,653
- --------------------------------------------------------------------------------------------------------
Reports to shareholders 17,740
- --------------------------------------------------------------------------------------------------------
Registration fees 68,264
- --------------------------------------------------------------------------------------------------------
Auditing 51,879
- --------------------------------------------------------------------------------------------------------
Legal 12,911
- --------------------------------------------------------------------------------------------------------
Postage 19,449
- --------------------------------------------------------------------------------------------------------
Other 28,968
- --------------------------------------------------------------------------------------------------------
Total expenses 6,649,288
- --------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (104,834)
- --------------------------------------------------------------------------------------------------------
Net expenses 6,544,454
- --------------------------------------------------------------------------------------------------------
Net investment income 14,135,990
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 8,546,866
- --------------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 7,755,628
- --------------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 59,157
- --------------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 225,986
- --------------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (323,015)
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures
and written options during the year 34,884,091
- --------------------------------------------------------------------------------------------------------
Net gain on investments 51,148,713
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $65,284,703
- --------------------------------------------------------------------------------------------------------
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
----------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- --------------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------------
Net investment income $ 14,135,990 $ 6,776,655
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 16,587,637 8,940,554
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 34,561,076 3,784,426
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 65,284,703 19,501,635
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- --------------------------------------------------------------------------------------------------------
From net investment income
Class A (8,805,780) (3,204,010)
- --------------------------------------------------------------------------------------------------------
Class B (3,124,303) (2,376,868)
- --------------------------------------------------------------------------------------------------------
Class C (624,813) (350,861)
- --------------------------------------------------------------------------------------------------------
Class M (241,373) (77,650)
- --------------------------------------------------------------------------------------------------------
Class Y (509,001) (120,711)
- --------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (7,375,222) (1,368,540)
- --------------------------------------------------------------------------------------------------------
Class B (3,325,457) (1,343,244)
- --------------------------------------------------------------------------------------------------------
Class C (631,861) (177,029)
- --------------------------------------------------------------------------------------------------------
Class M (177,085) (29,335)
- --------------------------------------------------------------------------------------------------------
Class Y (342,603) (41,182)
- --------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 225,189,402 84,941,848
- --------------------------------------------------------------------------------------------------------
Total increase in net assets 265,316,607 95,354,053
Net assets
- --------------------------------------------------------------------------------------------------------
Beginning of year 228,860,587 133,506,534
- --------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of
and undistributed net investment income of
$253,640 and $2,258,348, respectively) $494,177,194 $228,860,587
- --------------------------------------------------------------------------------------------------------
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: Conservative Portfolio
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 7, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.69 $9.19 $8.23 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .38 (d) .36 .33 (a) .18(a)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.22 .68 .90 (.39)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.60 1.04 1.23 (.21)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.35) (.36) (.27) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.33) (.18) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.68) (.54) (.27) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.61 $9.69 $9.19 $8.23
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 17.26 11.73 15.27 (2.47)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $295,239 $106,933 $57,341 $25,782
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.38 1.47 1.22 (a) .75(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.74 4.08 4.48 (a) 2.41(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 219.44 183.67 159.80 59.27*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0398 $.0495
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 $0.01per 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Conservative Portfolio
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 18, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.66 $9.16 $8.22 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .30 (d) .29 .30 (a) .15(a)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.22 .68 .85 (.39)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.52 .97 1.15 (.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.28) (.29) (.21) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.33) (.18) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.61) (.47) (.21) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.57 $9.66 $9.16 $8.22
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 16.36 10.96 14.22 (2.79)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $138,457 $94,954 $65,783 $38,711
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.13 2.22 1.98 (a) 1.21(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.97 3.33 3.81 (a) 1.92(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 219.44 183.67 159.80 59.27*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0398 $.0495
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 $0.01per 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Conservative Portfolio
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Sept. 1, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.64 $9.15 $8.22 $8.33
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .29 (d) .30 .29 (a) .03(a)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.24 .66 .87 (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.53 .96 1.16 (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.28) (.29) (.23) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.33) (.18) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.61) (.47) (.23) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.56 $9.64 $9.15 $8.22
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 16.52 10.86 14.41 (.80)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $29,032 $16,326 $7,198 $273
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.13 2.22 1.89 (a) .16(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.96 3.30 3.92 (a) .48(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 219.44 183.67 159.80 59.27*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0398 $.0495
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 $0.01per 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Conservative Portfolio
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 7, 1995+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $9.67 $9.18 $8.21
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .32 (d) .33 .21(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.24 .66 .92
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.56 .99 1.13
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.31) (.32) (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.33) (.18) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.64) (.50) (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.59 $9.67 $9.18
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 16.80 11.17 13.92*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $12,689 $4,622 $1,366
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.88 1.96 1.10(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.19 3.60 2.73(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 219.44 183.67 159.80
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0398 $.0495
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 $0.01per 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Conservative Portfolio
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 14, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.69 $9.19 $8.23 $8.23
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .40 (d) .38 .36 (a) .07(a)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.23 .68 .89 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.63 1.06 1.25 .07
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.37) (.38) (.29) (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.33) (.18) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.70) (.56) (.29) (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.62 $9.69 $9.19 $8.23
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 17.62 11.99 15.54 1.01*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $18,760 $6,025 $1,818 $163
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.13 1.22 .92 (a) .21(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.96 4.45 4.93 (a) 1.04(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 219.44 183.67 159.8 59.27*
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (e) $.0398 $.0495
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 $0.01per 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 on security trades is required for fiscal periods beginning
on or after September 1, 1995.
</TABLE>
Notes to financial statements
September 30, 1997
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 and other accounts managed by
affiliates of Putnam Investment Management, Inc. ("Putnam
Management"), the fund's manager, a wholly-owned subsidiary of Putnam
Investments, Inc..
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, H and I of Note 1 with respect to
valuation of futures and options contracts, forward currency
contracts, TBA purchase commitments and TBA sale commitments.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the funds 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 Management. 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 discount bonds, stepped-coupon bonds and payment
in kind bonds are accreted according to the yield-to-maturity basis.
Any premium resulting from the purchase of stepped-coupon securities
in excess of maturity value is amortized on a yield-to-maturity basis.
Securities purchased or sold on a when-issued or delayed delivery
basis may be settled a month or more after the trade date; interest
income is accrued based on the terms of the security. Losses may arise
due to changes in the market value of the underlying securities or if
the counterparty does not perform under the contract.
E) 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 each 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 funds do not isolate that portion of realized
or unrealized gains or losses resulting from changes in the foreign
exchange rate on investments from fluctuations arising from changes in
the market prices of the securities. Such gains and losses are
included with the net realized and unrealized gain or loss on
investments. Net realized gains and losses on foreign currency
transactions represent net 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 funds' books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized
appreciation and depreciation of assets and liabilities in foreign
currencies arise from changes in the value of open forward currency
contracts and assets and liabilities other than investments at the
period end, resulting from changes in the exchange rate.
Receivable and payable for foreign currency contracts represent
amounts to be received and delivered under foreign currency contracts.
These amounts were settled on or by 11/3/97.
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 their 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 current forward currency exchange rates supplied by a
quotation service. The market value of the contract will fluctuate
with changes in currency exchange rates. The contract is "marked to
market" daily and the change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the funds record
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed. The funds could be exposed to risk if the value of the
currency changes unfavorably, if the counterparties to the contracts
are unable to meet the terms of their contracts or if the funds are
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 they own or in which they may invest to increase their
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.
At September 30, 1997, the Growth Portfolio deposited $5,385,000 to
cover margin requirements for open futures margin.
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 each 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 they have entered into, the
funds may dispose of a commitment prior to settlement if Putnam
Management deems it appropriate to do so.
I) TBA sale commitments The funds may enter into TBA sale commitments
to hedge their portfolio positions or to sell mortgage-backed
securities they own under delayed delivery arrangements. Proceeds of
TBA sale commitments are not received until the contractual settlement
date. During the time a TBA sale commitment is outstanding, equivalent
deliverable securities, or an offsetting TBA purchase commitment
deliverable on or before the sale commitment date, are held as "cover"
for the transaction.
Unsettled TBA sale commitments are valued at the current market value
of the underlying securities, generally according to the procedures
described under "Security valuation" above. The contract is "marked-
to-market" daily and the change in market value is recorded by the
funds as an unrealized gain or loss. If the TBA sale commitment is
closed through the acquisition of an offsetting purchase commitment,
the funds realize a gain or loss. If the funds deliver securities
under the commitment, the funds realize a gain or a loss from the sale
of the securities based upon the unit price established at the date
the commitment was entered into.
J) Line of Credit The funds have entered into a committed line of
credit with certain banks. This line of credit agreement includes
restrictions that the funds maintain an asset coverage ratio of at
least 300% and borrowings must not exceed prospectus limitations. For
the period ended September 30, 1997, the funds had no borrowings
against the line of credit.
K) Federal taxes It is the policy of each fund to distribute all of
its taxable income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code 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, as
amended. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation on securities held
nor for excise tax on income and capital gains.
L) 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 at least annually. The amount and character of
income and gains to be distributed are determined in accordance with
income tax regulations which may differ from generally accepted
accounting principles. These differences include treatment of losses
on wash sales transactions, realized and unrealized gains and losses
on forward foreign currency contracts, currency gains and losses on
foreign bonds, post-October currency loss deferrals, non-taxable
dividends, organization costs, paydown gains, losses on mortgage-
backed securities, market discount, interest on payment-in-kind
securities and realized gains on passive foreign investment companies.
Reclassifications are made to each 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, 1997 were as follows:
Undistributed Net Investment Income
- ------------------------------------------
Growth Portfolio ($1,322,505)
Balanced Portfolio (5,888,368)
Conservative Portfolio (3,342,708)
- ------------------------------------------
Accumulated Net Realized Gain (Loss)
- ------------------------------------------
Growth Portfolio $1,178,775
Balanced Portfolio 5,715,702
Conservative Portfolio 3,338,182
- ------------------------------------------
Additional Paid-in Capital
- ------------------------------------------
Growth Portfolio $143,730
Balanced Portfolio 172,666
Conservative Portfolio 4,526
- ------------------------------------------
The calculation of net investment income per share in the financial
highlights table excludes these adjustments.
M) 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.
N) Unamortized organization expenses Expenses incurred by the funds 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.
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
each fund. Such fee is based on the following annual rates: 0.700% of
the first $500 million of average net assets of each fund, 0.600% of
the next $500 million, 0.550% of the next $500 million, 0.500% of the
next $5 billion, 0.475% of the next $5 billion, 0.455% of the next $5
billion, 0.440% of the next $5 billion and 0.430% of the excess
thereafter. Prior to January 20, 1997, any amount over $1.5 billion
was based on a rate of 0.500%.
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.
Custodial functions for each fund's 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, 1997, fund expenses were reduced by
$405,394, $400,675 and $104,834 (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.
Trustees of the trust receive an annual Trustee's fee as follows:
- ------------------------------------------
Growth Portfolio $1,094
Balanced Portfolio 1,203
Conservative Portfolio 683
- ------------------------------------------
Trustees receive an additional fee for each Trustees 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.
Each fund has adopted a Trustee Fee Deferral Plan (the "Deferral
Plan") which allows the Trustees to defer the receipt of all or a
portion of Trustees Fees payable on or after July 1, 1995. The
deferred fees remain in each fund and are invested in certain Putnam
funds until distribution in accordance with the Deferral Plan.
Each fund has adopted an unfunded noncontributory defined benefit
pension plan (the "Pension Plan") covering all Trustees of the funds
who have served as Trustee for at least five years. Benefits under the
Pension Plan are equal to 50% of the Trustee's average total retainer
and meeting fees for the three years preceding retirement. Pension
expense for each fund is included in Compensation of trustees in the
Statement of operations. Accrued pension liability is included in
Payable for compensation of Trustees in the Statement of assets and
liabilities.
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, 1997, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $842,103 and $87,554
from the sale of class A and class M shares, respectively and received
$1,014,463 and $61,804 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, 1997, Putnam Mutual Funds
Corp., acting as underwriter received $1,873 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended September 30, 1997, aggregate purchases and
sales of investment securities other than short- term investments were
as follows:
U.S. Government Obligations
- ----------------------------------------------------
Purchases Sales
- ----------------------------------------------------
Growth
Portfolio $133,972,999 112,368,699
- ----------------------------------------------------
Balanced
Portfolio 369,773,274 326,674,160
- ----------------------------------------------------
Conservative
Portfolio 478,562,587 439,964,270
- ----------------------------------------------------
Other Securities
- ----------------------------------------------------
Purchases Sales
- ----------------------------------------------------
Growth
Portfolio $1,025,584,865 640,418,666
- ----------------------------------------------------
Balanced
Portfolio 1,342,149,396 987,765,240
- ----------------------------------------------------
Conservative
Portfolio 473,533,365 337,884,445
- ----------------------------------------------------
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 Premiums
Amount Received
- ----------------------------------------------------
Contracts
outstanding at
the beginning
of the year $-- $--
- ----------------------------------------------------
Option written 11,328,900 133,529
- ----------------------------------------------------
Options expired (4,320,000) (34,236)
- ----------------------------------------------------
Option closed (4,148,900) (63,686)
- ----------------------------------------------------
Written options
outstanding at
the end of
the year $2,860,000 $35,607
- ----------------------------------------------------
Balanced Portfolio
- ----------------------------------------------------
Contract Premiums
Amount Received
- ----------------------------------------------------
Contracts
outstanding at
the beginning
of the year $-- $--
- ----------------------------------------------------
Options written 29,054,600 342,256
- ----------------------------------------------------
Options expired (11,180,000) (88,602)
- ----------------------------------------------------
Options closed (10,729,600) (164,699)
- ----------------------------------------------------
Written options
outstanding at
the end of
the year $7,145,000 $88,955
- ----------------------------------------------------
Conservative Portfolio
- ----------------------------------------------------
Contract Premiums
Amount Received
- ----------------------------------------------------
Contracts
outstanding at
the beginning
of the year $-- $--
- ----------------------------------------------------
Options opened 9,160,700 131,206
- ----------------------------------------------------
Options expired (5,915,700) (90,806)
- ----------------------------------------------------
Written options
outstanding at
the end of
the year $3,245,000 $40,400
- ----------------------------------------------------
Note 4
Capital shares
At September 30, 1997 there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended September 30
- ----------------------------------------------------
Class A 1997
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 23,602,836 $287,822,715
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,148,584 12,921,415
- ----------------------------------------------------
Shares
repurchased (7,562,808) (92,745,311)
- ----------------------------------------------------
Net increase 17,188,612 $207,998,819
- ----------------------------------------------------
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 B 1997
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 10,376,531 $123,138,833
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 914,912 10,219,589
- ----------------------------------------------------
Shares
repurchased (2,447,143) (29,173,188)
- ----------------------------------------------------
Net increase 8,844,300 $104,185,234
- ----------------------------------------------------
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 C 1997
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 3,040,994 $36,134,789
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 138,796 1,540,641
- ----------------------------------------------------
Shares
repurchased (492,759) (5,933,974)
- ----------------------------------------------------
Net increase 2,687,031 $31,741,456
- ----------------------------------------------------
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 M 1997
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 1,797,515 $21,278,969
- ----------------------------------------------------
Shares issued in
connections with
reinvestment of
distributions 68,451 764,599
- ----------------------------------------------------
Shares
repurchased (409,741) (4,975,611)
- ----------------------------------------------------
Net increase 1,456,225 $17,067,957
- ----------------------------------------------------
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
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class Y 1997
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 15,043,228 $176,010,272
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 874,948 9,878,178
- ----------------------------------------------------
Shares
repurchased (3,997,439) (48,272,014)
- ----------------------------------------------------
Net increase 11,920,737 $137,616,436
- ----------------------------------------------------
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 A 1997
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 37,950,346 $419,369,956
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,765,300 29,607,244
- ----------------------------------------------------
Shares
repurchased (15,849,240) (175,118,204)
- ----------------------------------------------------
Net increase 24,866,406 $273,858,996
- ----------------------------------------------------
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 B 1997
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 13,440,364 $148,380,642
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,818,059 19,215,924
- ----------------------------------------------------
Shares
repurchased (3,887,593) (43,051,542)
- ----------------------------------------------------
Net increase 11,370,830 $124,545,024
- ----------------------------------------------------
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 C 1997
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 3,334,653 $36,738,709
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 230,087 2,431,192
- ----------------------------------------------------
Shares
repurchased (541,054) (5,978,475)
- ----------------------------------------------------
Net increase 3,023,686 $33,191,426
- ----------------------------------------------------
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 M 1997
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 2,475,833 $27,588,867
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 127,955 1,366,839
- ----------------------------------------------------
Shares
repurchased (405,927) (4,609,629)
- ----------------------------------------------------
Net increase 2,197,861 $24,346,077
- ----------------------------------------------------
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
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class Y 1997
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 10,734,301 $115,032,777
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,070,690 11,486,612
- ----------------------------------------------------
Shares
repurchased (4,726,651) (52,610,537)
- ----------------------------------------------------
Net increase
(decrease) 7,078,340 $73,908,852
- ----------------------------------------------------
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 4,390,414 $45,201,632
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class A 1997
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 26,085,641 $257,229,151
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,633,735 15,899,013
- ----------------------------------------------------
Shares
repurchased (10,933,886) (108,713,204)
- ----------------------------------------------------
Net increase 16,785,490 $164,414,960
- ----------------------------------------------------
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 B 1997
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 4,642,547 $45,939,391
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 582,974 5,644,011
- ----------------------------------------------------
Shares
repurchased (1,963,926) (19,497,340)
- ----------------------------------------------------
Net increase 3,261,595 $32,086,062
- ----------------------------------------------------
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 C 1997
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 1,406,045 $13,867,322
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 116,814 1,129,756
- ----------------------------------------------------
Shares
repurchased (465,847) (4,609,292)
- ----------------------------------------------------
Net increase 1,057,012 $10,387,786
- ----------------------------------------------------
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 M 1997
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 888,082 $8,731,408
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 41,229 402,409
- ----------------------------------------------------
Shares
repurchased (208,529) (2,075,942)
- ----------------------------------------------------
Net increase 720,782 $7,057,875
- ----------------------------------------------------
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
repurchased (89,556) (836,049)
- ----------------------------------------------------
Net increase 329,090 $3,086,783
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class Y 1997
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 2,100,427 $20,853,092
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 87,037 851,604
- ----------------------------------------------------
Shares
repurchased (1,042,532) (10,461,977)
- ----------------------------------------------------
Net increase 1,144,932 $11,242,719
- ----------------------------------------------------
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
- ----------------------------------------------------
As of September 30, 1997, Putnam Management owned the following
shares,
% Market
Fund Shares Ownership Value
- ----------------------------------------------------
Growth 9,092,862 10.47% $124,504,899
Balanced 18,051,402 15.05% 221,849,186
Conservative 12,289,244 26.35% 130,403,604
- ----------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Funds hereby
designate $50,985,241, $64,334,301 and $6,995,898 for Growth, Balanced
and Conservative, respectively, as capital gains for their taxable
year ended September 30, 1997.
The funds have designated 19.37%, 12.6% and 6.09% for Growth, Balanced
and Conservative, respectively, of the distributions from net
investment income as qualifying for the dividends received deduction
for corporations.
The Form 1099 you receive in January 1998 will show the tax status of
all distributions paid to your account in calendar 1997.
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
A.J.C. Smith
W. Thomas Stephens
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
Brett C. Browchuk
Vice President
Ian C. Ferguson
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 the principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- ---------------------
AN060-36855-250/259/264 11/97
