Putnam
Asset
Allocation
Funds
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-98
[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.
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 securites 5
* Balanced Portfolio is designed to seek total return for investors in
their peak accumulation years.
Targeted portfolio structure*
- --------------------------
Large-cap growth stocks 20%
Small-cap growth stocks 10
Value stocks 20
International equities 15
Domestic fixed-income securities 10
International fixed-income securities 10
High-yield securities 10
Cash and money market securites 5
* Conservative Portfolio is designed to seek income while protecting the
original value of the investment for investors concerned about maintaining
their purchasing power.
Targeted portfolio structure*
- --------------------------
Large-cap growth stocks 10%
Small-cap growth stocks 5
Value stocks 10
International equities 10
Domestic fixed-income securities 35
International fixed-income securities 15
High-yield securities 10
Cash and money market securites 5
* The targeted portfolio represents the ideal allocation of assets among
the various investment categories assuming that all security 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:
Reviewing the performance of the three Putnam Asset Allocation Funds
provides a textbook example of the way growth, balanced, and conservative
portfolios are supposed to act. The comparison also points up the contrast
in risk/reward relationships of the three portfolios.
Investors with long-term growth objectives are likely to focus on the
long-term positive results of the Growth Portfolio rather than the
negative results for the current period. Investors with shorter time
horizons or more cautious risk tolerances are likely to find comfort in
the Conservative Portfolio's short-term results. Investors with
perspectives more or less evenly split between risk and reward should find
that the Balanced Portfolio's results fall within their expectations.
The point is, each of these portfolios is doing the job expected of it,
and together they provide a means for investors to undertake
well-diversified, all-weather investment programs.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
November 18, 1998
Report from the Fund Managers
Ian C. Ferguson
William J. Landes
Throughout Putnam Asset Allocation Funds' fiscal year, the 12 months ended
September 30, 1998, the world's major financial markets continued to
wrestle with the effects of Asia's currency and debt crisis. Many of the
hardest-hit Asian markets remained weak, a situation that was exacerbated
as investors set their sights on countries with stronger economies and
less direct involvement in this troubled region. U.S. equities advanced
strongly during the first half of the funds' fiscal year, although the
recession in Asia resulted in increased volatility on Wall Street during
the last half of the period. See the performance summary that begins on
page 9 for a detailed overview of each portfolio's performance.
* U.S. COMPANIES EXPERIENCE TURNABOUT
U.S. equities performed well for most of the period, but sentiment toward
developed equity markets abruptly turned negative in August. On the
fixed-income side, low inflation, a global slowdown, and a flight to
quality have pushed the yields on U.S. Treasury bonds down to levels not
seen since the late 1960s -- with a corresponding rise in prices.
Stocks: Companies whose operations were primarily United States based
fared well during the period, but the Asian downturn continued to hamper
manufacturers and exporters with links to that region. The staggering pace
of advance in U.S. stocks cooled at period's end. Japan's recession,
worries of slower economic growth around the world, and a short-term
squeeze on corporate profits combined to deal a setback to major equity
averages, especially in contrast to their record highs in early summer.
Putnam's extensive research tells us that valuations in the U.S. stock
market are now very attractive. However, we believe that investor fear and
not the compelling prices will govern investor behavior for the next
several months. Consequently, short-term fluctuations in the level of the
U.S. stock market, such as the ones we have experienced recently, may
persist and could be difficult to predict for some time. Over the longer
term, we believe the current market turmoil will create opportunities. In
particular, we anticipate improvements among segments of the market that
have already been devastated, such as small-capitalization stocks and
value stocks.
Bonds: U.S. fixed-income markets continued to rally throughout most of the
period as nervous investors worldwide flocked to the high credit quality
and attractive yields offered by U.S. bonds. Treasury securities benefited
particularly from the international flight to quality; yields on 30-year
Treasuries fell to historic lows during the latter half of the period. In
addition, the issuance of new Treasury bonds remained quite low, as the
balanced federal budget reduced the government's borrowing needs.
The strong performance of Treasuries did not reflect the performance of
the overall U.S. bond market, however. Just as investors shunned equity
markets during the second half of the period, so too have they turned sour
on credit risk. Corporate bonds, mortgages, and asset-backed securities
underperformed Treasuries by a wide margin over the past several months.
In our opinion, this process is creating an opportunity for us to take
advantage of attractively priced sectors within the U.S. bond market.
[GRAPHIC OMITTED: worm chart of WORLD FIXED-INCOME MARKETS]
WORLD FIXED-INCOME MARKETS
Growth of $10,000 Investment
U.S. high- U.S. government
yield and investment- International
Date bonds1 grade securities2 bonds3
- -------- -------- -------- --------
9/30/97 10,000 10,000 10,000
10/97 9,999 10,145 10,224
11/97 10,070 10,192 9,962
12/97 10,162 10,295 9,862
1/98 10,334 10,426 9,929
2/98 10,415 10,418 10,069
3/98 10,467 10,453 9,903
4/98 10,546 10,508 10,120
5/98 10,577 10,608 10,104
6/98 10,599 10,698 10,068
7/98 10,674 10,720 10,080
8/98 9,949 10,895 10,356
9/30/98 $9,948 $11,150 $11,035
Footnote reads:
1 First Boston High Yield Bond Index. 2 Lehman Brothers Aggregate Bond
Index. 3 Salomon Brothers Non-U.S. World Government Bond Index. See page
12 for descriptions of the indexes. Past performance is not indicative of
future results. This is not intended to represent the returns of any fund.
* INTERNATIONAL MARKETS MIXED AMID VOLATILITY
International equity markets have borne the brunt of the global
correction. In contrast, foreign government bond markets have benefited
from global turmoil and the resulting flight to quality.
Stocks: Crises in Asia, Russia, and Latin America provided investors in
international securities with many challenges during the period. Not
surprisingly, stock markets in the Pacific Rim did not fare particularly
well. The financial downturn that began in October 1997 continued to
dampen performance throughout much of the region. In fact, the weakness of
the yen versus the dollar caused renewed turbulence in Asian markets
during the period. The weak yen and the struggling Japanese economy
continued to destabilize other Asian markets that must sell exports to
Japan in order to achieve their own economic recovery.
There were some bright spots, however. In South Korea, debt rescheduling
and the new president's willingness to accept International Monetary Fund
reforms led investors to view the country more favorably. In the latter
half of the period, the fundamentally strong economies of Hong Kong and
Singapore had begun to offer equity opportunities, although Japan's
ongoing difficulties clouded the future for many other markets.
Bonds: Benign inflation and relatively low interest rates continued to
provide a positive backdrop for many global fixed-income markets during
most of the period. As international investors remained nervous in the
wake of Asia's currency crisis, they sought safe haven among European
fixed-income markets. European bond markets registered strong gains during
the period, slightly behind those provided by U.S. fixed-income
securities. The United Kingdom's fixed-income market turned in a strong
performance, although an unexpected interest-rate increase by the Bank of
England dampened returns among shorter-maturity U.K. government bonds.
Emerging markets were hit hard once again as Asia's economic and currency
woes entered another phase. Russian debt also came under pressure while
the country negotiated with the International Monetary Fund for financial
aid. With many emerging markets continuing to experience significant
economic problems, investors' confidence in this sector remains shaky.
[GRAPHIC OMITTED: worm chart of WORLD EQUITY MARKETS]
WORLD EQUITY MARKETS
Growth of $10,000 Investment
Large-cap Small-cap
growth growth International
Date stocks1 stocks2 stocks3
- -------- -------- -------- --------
9/30/97 10,000 10,000 10,000
10/97 9,666 9,561 9,231
11/97 10,114 9,499 9,137
12/97 10,287 9,665 9,216
1/98 10,402 9,512 9,638
2/98 11,152 10,215 10,256
3/98 11,723 10,636 10,572
4/98 11,841 10,695 10,656
5/98 11,637 10,118 10,603
6/98 12,110 10,140 10,684
7/98 11,981 9,318 10,792
8/98 10,249 7,509 9,455
9/30/98 $10,905 $8,098 $9,166
Footnote reads:
1 Standard & Poor's(R) 500 Index. 2 Russell 2000 Index. 3 Morgan
Stanley Capital International (MSCI) EAFE Index. See page 12 for
descriptions of the indexes. Past performance is not indicative of future
results. This is not intended to represent the returns of any fund.
* STRATEGY AND OUTLOOK
The shift in investor sentiment is troublesome, and Putnam Management
expects markets to remain volatile for several months. Nevertheless, we
believe that the extent of the price declines in major stock markets is
already overdone and that there have been some important opportunities
created by the panic selling worldwide. For long-term investors, such
volatility is inevitable from time to time. In such an uncertain
environment, it is essential for all investors to stay focused on their
long-term objectives.
We believe that valuations are now quite attractive in the U.S. stock
market. Nevertheless, investor psychology takes some time to repair, and
we expect the market to struggle in the short term. The global inflation
environment remains quite supportive, and we continue to favor the U.S.
bond market over both the European bond markets and the Japanese bond
market. In international equity markets, we expect that Asian markets will
continue to suffer from weak economies and investors' risk aversion. We
believe valuation opportunities in Europe are significant, and markets
like Australia, which typically offer a useful opportunity for
diversification, are attractive in this environment.
As Putnam Asset Allocation Funds enter the next fiscal year, global equity
and fixed-income markets continue to face numerous challenges, many
stemming from Asia's ongoing difficulties. However, uncertain times often
produce attractive investment opportunities. With their experienced
management, diverse asset structure, and all-weather investment
strategies, the funds are well positioned to take advantage of these
opportunities.
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 9/30/98, 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.
Performance summary
* GROWTH PORTFOLIO
<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIOD ENDED 9/30/98
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 -7.01% -12.34% -7.72% -12.02% -7.70% -8.55% -7.52% -10.76%
- ------------------------------------------------------------------------------------------------
Life of fund 66.54 56.93 61.14 59.14 60.21 60.21 62.48 56.79
Annual average 11.62 10.20 10.83 10.53 10.69 10.69 11.03 10.18
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/98
Class A Class B Class C Class M
Share value NAV POP NAV NAV NAV POP
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9/30/97 $13.64 $14.47 $13.47 $13.38 $13.49 $13.98
- ----------------------------------------------------------------------------------------
9/30/98 11.76 12.48 11.59 11.50 11.60 12.02
- ----------------------------------------------------------------------------------------
</TABLE>
Capital gains
Investment Long Short
Distributions Number income term term Total
- -----------------------------------------------------------------------
Class A 1 0.1352 0.4280 0.4028 0.966
- -----------------------------------------------------------------------
Class B 1 0.0522 0.4280 0.4028 0.883
- -----------------------------------------------------------------------
Class C 1 0.0632 0.4280 0.4028 0.894
- -----------------------------------------------------------------------
Class M 1 0.0882 0.4280 0.4028 0.919
- -----------------------------------------------------------------------
Performance data represent past results, is not indicative of future
performance, and the life-of-fund data reflect an expense limitation,
which was in effect until 12/31/94. Without the limitation, the funds'
total return would have been lower. 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-, 5-, and 10-year (where
available) 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, 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. 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.
This performance information does not reflect any market volatility that
may have occurred since the date of the information. As a result, more
recent returns may be more or less than those shown.
* BALANCED PORTFOLIO
<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIOD ENDED 9/30/98
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 -4.97% -10.44% -5.70 -10.04 -5.70 -6.56 -5.46% -8.80%
- --------------------------------------------------------------------------------------------------
Life of fund 61.62 52.30 56.19 54.19 55.34 55.34 58.40 52.85
Annual average 10.90 9.49 10.09 9.78 9.96 9.96 10.42 9.58
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/98
Class A Class B Class C Class M
Share value NAV POP NAV NAV NAV POP
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9/30/97 $12.28 $13.03 $12.23 $12.18 $12.27 $12.72
- --------------------------------------------------------------------------------------
9/30/98 10.66 11.31 10.61 10.56 10.65 11.04
- --------------------------------------------------------------------------------------
</TABLE>
Capital gains
Investment Long Short
Distributions Number income term term Total
- ---------------------------------------------------------------------
Class A 4 0.1810 0.4669 0.3952 1.043
- ---------------------------------------------------------------------
Class B 4 0.0980 0.4669 0.3952 0.960
- ---------------------------------------------------------------------
Class C 4 0.1030 0.4669 0.3952 0.965
- ---------------------------------------------------------------------
Class M 4 0.1300 0.4669 0.3952 0.992
- ---------------------------------------------------------------------
Performance data represent past results, is not indicative of future
performance, and the life-of-fund data reflect an expense limitation,
which was in effect until 12/31/94. Without the limitation, the funds'
total return would have been lower. 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-, 5-, and 10-year (where
available) 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, 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. 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.
This performance information does not reflect any market volatility that
may have occurred since the date of the information. As a result, more
recent returns may be more or less than those shown.
* CONSERVATIVE PORTFOLIO
<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIOD ENDED 9/30/98
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 -0.69% -6.42% -1.32% -5.95% -1.51% -2.43% -1.27% -4.68%
- ---------------------------------------------------------------------------------------------------
Life of fund 46.28 37.85 41.46 39.46 40.85 40.85 43.01 38.00
Annual average 8.54 7.16 7.76 7.43 7.66 7.66 8.02 7.19
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/98
Class A Class B Class C Class M
Share value NAV POP NAV NAV NAV POP
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9/30/97 $10.61 $11.26 $10.57 $10.56 $10.59 $10.97
- ------------------------------------------------------------------------------------
9/30/98 9.81 10.41 9.78 9.75 9.78 10.13
- ------------------------------------------------------------------------------------
</TABLE>
Capital gains
Investment Long Short
Distributions Number income term term Total
- -----------------------------------------------------------------------
Class A 4 0.1957 0.2666 0.2676 0.7299
- -----------------------------------------------------------------------
Class B 4 0.1227 0.2666 0.2676 0.6569
- -----------------------------------------------------------------------
Class C 4 0.1247 0.2666 0.2676 0.6589
- -----------------------------------------------------------------------
Class M 4 0.1517 0.2666 0.2676 0.6859
- -----------------------------------------------------------------------
Performance data represent past results, is not indicative of future
performance, and the life-of-fund data reflect an expense limitation,
which was in effect until 12/31/94. Without the limitation, the funds'
total return would have been lower. 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-, 5-, and 10-year (where
available) 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, 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. 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.
This performance information does not reflect any market volatility that
may have occurred since the date of the information. As a result, more
recent returns may be more or less than those shown.
<TABLE>
<CAPTION>
COMPARATIVE INDEX RETURNS FOR PERIOD ENDED 9/30/98
(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 11.51% 9.05% -19.02% -0.52% 1.36%
- ----------------------------------------------------------------------------------
Life of fund 39.69 134.34 46.04 41.56 11.76
Annual average 7.43 20.04 8.46 7.74 2.41
- ----------------------------------------------------------------------------------
The performance of each index will differ from that of the funds, assumes
reinvestment of all distributions, and does not take into account
brokerage commissions or other costs. The funds' portfolios contain
securities that do not match those in the indexes. Past performance is not
indicative of future results.
</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 Bond 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.
[GRAPHIC OMITTED: worm chart of GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment
Global Growth Consumer
Growth Index Price S&P 500
Date Portfolio* Mix Index Index
- -------- -------- -------- -------- -----------
2/8/94 9,425 10,000 10,000 10,000
9/30/94 9,346 9,862 10,219 9,800
9/30/95 11,257 12,006 10,479 12,716
9/30/96 13,367 13,813 10,793 15,301
9/30/97 16,876 17,970 11,026 21,450
9/30/98 $15,693 $18,432 $11,176 $23,434
*(class A shares at POP since 2/8/94)
Footnote reads:
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 Bond 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 9/30/98.
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 $16,114 on
9/30/98 ($15,914 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 $16,021 on 9/30/98.
A $10,000 investment in the Growth Portfolio's class M shares would have been
valued at $15,679 on 9/30/98 at public offering price ($16,248 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.
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 OMITTED: worm chart of GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment
Global Balanced Consumer
Balanced Index Price S&P 500
Date Portfolio* Mix Index Index
- -------- -------- -------- -------- -----------
2/8/94 9,425 10,000 10,000 10,000
9/30/94 9,285 9,885 10,219 9,800
9/30/95 11,024 11,854 10,479 12,716
9/30/96 12,943 13,434 10,793 15,301
9/30/97 16,027 16,894 11,026 21,490
9/30/98 $15,230 $17,468 $11,176 $23,434
*(class A shares at POP since 2/8/94)
Footnote reads:
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
Bond 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 9/30/98.
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
$15,619 on 9/30/98 ($15,419 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 $15,534 on 9/30/98.
A $10,000 investment in the Balanced Portfolio's class M shares would have
been valued at $15,285 on 9/30/98 at public offering price ($15,840 at
net asset value).
[GRAPHIC OMITTED: worm chart of GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment
Global
Conservative Consumer Lehman Bros.
Conservative Index Price Corporate
Date Portfolio* Mix Index Bond Index
- -------- -------- -------- -------- -----------
2/8/94 9,425 10,000 10,000 10,000
9/30/94 9,191 9,849 10,219 9,384
9/30/95 10,594 11,520 10,479 10,979
9/30/96 11,837 12,618 10,793 11,501
9/30/97 13,881 14,816 11,026 12,747
9/30/98 $13,785 $15,653 $11,176 $14,160
*(class A shares at POP since 2/8/94)
Footnote reads:
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 Bond 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 9/30/98.
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 $14,146
on 9/30/98 ($13,946 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 $14,085 on 9/30/98.
A $10,000 investment in the Conservative Portfolio's class M shares would
have been valued $13,800 on 9/30/98 at public offering price ($14,301 at
net asset value).
Report of independent accountants
For the fiscal year ended September 30, 1998
To the Trustees and Shareholders of
Putnam Asset Allocation Funds
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio 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, 1998, and the results of their operations, the changes in
their net assets and the 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, 1998 by correspondence with the custodian, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 13, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
September 30, 1998
GROWTH BALANCED CONSERVATIVE
77.7% 62.5% 28.2%
COMMON STOCKS* Shares Value Shares Value Shares Value
<S> <C> <C> <C> <C> <C> <C>
Advertising 0.1% 0.1% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Lamar Advertising Co. (NON) 67,050 $ 1,877,400 56,500 $ 1,582,000 8,750 $ 245,000
Aerospace and Defense 0.2% 0.2% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Lockheed Martin Corp. 11,070 1,115,994 11,210 1,130,108 1,680 169,365
Raytheon Co. Class B 11,700 631,069 11,300 609,494 1,900 102,481
Smiths Industries PLC (United Kingdom) 127,976 1,449,925 159,199 1,803,671 31,720 359,377
------------ ------------ ------------
3,196,988 3,543,273 631,223
Agriculture --% --% --%
- -----------------------------------------------------------------------------------------------------------------------------------
PPB Oil Palms Berhad (Malaysia) (NON) 343,000 175,939 374,000 191,840 69,000 35,393
PSF Holdings LLC Class A (RES) (NON) 3,305 57,904 12,885 225,745 4,186 73,339
------------ ------------ ------------
233,843 417,585 108,732
Automotive 1.8% 1.6% 0.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Bayerische Motoren Werke (BMW) AG
(Germany) 2,308 1,486,947 3,076 1,981,246 600 386,459
Bayerische Motoren Werke (BMW)
(Germany) 841 529,089 1,068 671,899 223 140,294
Bridgestone Corp. (Japan) 42,000 844,916 53,000 1,066,203 11,000 221,287
Chrysler Corp. 13,800 660,675 13,700 655,888 2,100 100,538
CSK Auto Corp. (NON) 62,200 1,415,050 52,300 1,189,825 8,100 184,275
Dana Corp. 18,975 708,005 18,480 689,535 2,895 108,020
Ford Motor Co. 96,540 4,531,346 96,865 4,546,601 15,085 708,052
Fuji Heavy Industries (Japan) 89,000 463,555 110,000 572,933 23,000 119,795
General Motors Corp. 36,760 2,010,313 36,425 1,991,992 5,715 312,539
Goodyear Tire & Rubber Co. (The) 55,905 2,872,119 55,965 2,875,202 8,765 450,302
Honda Motor Co., Ltd. (Japan) 55,000 1,669,715 70,000 2,125,091 14,000 425,018
Lear Corp. (NON) 21,500 940,625 21,065 921,594 3,255 142,406
Michelin Corp. Class B (France) 58,435 2,297,055 72,929 2,866,808 15,233 598,803
Renault S.A. (France) (NON) 9,134 365,582 11,470 459,079 2,361 94,497
Volkswagon AG (Germany) 28,160 2,033,122 35,490 2,562,340 7,270 524,886
Volvo AB (Sweden) 43,726 1,067,912 55,226 1,348,775 11,268 275,196
------------ ------------ ------------
23,896,026 26,525,011 4,792,367
Basic Industrial Products 0.8% 0.6% 0.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Cooper Industries, Inc. 22,900 933,175 23,700 965,775 3,600 146,700
Deere (John) & Co. 53,630 1,622,308 53,255 1,610,964 8,370 253,193
Ingersoll-Rand Co. 84,665 3,211,978 86,805 3,293,165 13,565 514,622
International Container Terminal Services,
Inc. (Philippines) 684,800 23,614 844,400 29,117 154,850 5,340
Minnesota Mining & Manufacturing Co. 31,145 2,294,997 31,090 2,290,944 4,820 355,174
Owens-Illinois, Inc. (NON) 63,316 1,582,900 62,596 1,564,900 9,860 246,500
Sandvik AB Class A, (Sweden) 2,270 47,210 3,050 63,433 775 16,118
Sandvik AB Class B, (Sweden) 33,500 698,849 43,540 908,295 10,260 214,035
------------ ------------ ------------
10,415,031 10,726,593 1,751,682
Biotechnology 0.3% 0.2% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Kendle International, Inc. (NON) 36,800 1,205,200 31,000 1,015,250 4,800 157,200
Quintiles Transnational Corp. (NON) 39,900 1,745,625 42,800 1,872,500 6,600 288,750
Serologicals Corp. 42,050 1,056,506 35,450 890,681 5,250 131,906
Sonus Pharmaceuticals, Inc. (NON) 24,900 180,525 21,000 152,250 3,200 23,200
------------ ------------ ------------
4,187,856 3,930,681 601,056
Broadcasting 1.1% 0.8% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Citadel Communications Corp. (NON) 84,900 1,735,144 71,600 1,463,325 11,100 226,856
Comcast Corp. Class A 15,800 741,613 16,600 779,163 2,500 117,344
Heftel Broadcasting Corp. Class A (NON) 76,800 2,899,200 64,400 2,431,100 10,000 377,500
MediaOne Group Inc. (NON) 164,390 7,305,081 163,560 7,268,198 25,267 1,181,135
SAGA Communications Inc. Class A (NON) 68,250 1,074,938 57,516 905,877 8,853 139,435
Scandinavian Broadcasting System S.A.
(Luxembourg) (NON) 40,200 854,250 33,800 718,250 5,200 110,500
Sinclair Broadcast Group, Inc. Class A (NON) 25,000 406,250 20,600 334,750 3,400 55,250
------------ ------------ ------------
15,016,476 13,900,663 2,208,020
Building and Construction 0.8% 0.7% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Barnett, Inc. (NON) 39,400 334,900 33,000 280,500 4,900 41,650
Cemex S.A. de C.V. (Mexico) 56,400 124,624 71,300 157,548 14,500 32,040
Cimpor-Cimentos de Portugal, SGPS, SA
(Portugal) 24,430 681,718 30,828 860,253 6,378 177,978
CRH PLC (Ireland) 252,908 3,191,718 326,162 4,116,189 64,225 810,524
Dycom Industries, Inc. (NON) 62,100 1,932,863 52,300 1,627,838 8,100 252,113
IJM Copr. Berhad (Malaysia) 157,000 54,304 167,000 57,762 31,000 10,722
Lafarge Coppee (France) 17,173 1,521,961 21,657 1,919,357 4,466 395,800
Masco Corp. 85,400 2,102,975 86,700 2,134,988 13,600 334,900
VA Technologies AG (Australia) 10,980 996,016 13,861 1,257,357 2,825 256,261
------------ ------------ ------------
10,941,079 12,411,792 2,311,988
Business Equipment and Services 5.2% 4.1% 1.7%
- -----------------------------------------------------------------------------------------------------------------------------------
ACSYS, Inc. (NON) 57,100 442,525 48,100 372,775 7,400 57,350
American Bank Note Holographics, Inc. (NON) 175,700 1,383,638 148,000 1,165,500 22,900 180,338
Analytical Surveys, Inc. (NON) 37,400 869,550 31,400 730,050 4,900 113,925
Avery Dennison Corp. 10,400 454,350 10,600 463,088 1,600 69,900
BMC Software, Inc. (NON) 120,900 7,261,556 137,000 8,228,563 18,700 1,181,982
Charles River Associates Inc. (NON) 26,100 619,875 22,000 522,500 3,400 80,750
Cisco Systems, Inc. (NON) 95,500 5,903,094 95,900 5,927,819 15,000 927,188
Computer Sciences Corp. (NON) 50,800 2,768,600 51,000 2,779,500 8,000 436,000
Condor Technology Solutions, Inc. (NON) 61,000 625,250 51,600 528,900 7,600 77,900
CORT Business Services Corp. (NON) 46,900 1,234,056 39,300 1,034,081 6,200 163,138
Cunningham Graphics International, Inc. (NON) 50,800 622,300 42,800 524,300 6,700 82,075
Dai Nippon Printing Co., Ltd. (Japan) 72,000 922,780 90,000 1,153,475 19,000 243,511
Data Processing Resources Corp. (NON) 47,900 1,401,075 40,400 1,181,700 6,200 181,350
EMC Corp. (NON) 114,000 6,519,375 114,900 6,570,844 17,400 995,063
F.Y.I., Inc. (NON) 29,300 717,850 24,700 605,150 3,800 93,100
HBO & Co. 199,000 5,746,125 202,700 5,852,963 25,000 721,875
Lason Holdings, Inc. (NON) 61,500 3,151,875 51,800 2,654,750 7,990 409,488
Mannesmann AG (Germany) 39,549 3,625,522 49,810 4,566,165 10,138 929,367
Metamor Worldwide, Inc. (NON) 36,500 1,003,750 30,725 844,938 4,800 132,000
NCO Group, Inc. (NON) 91,000 2,530,938 76,700 2,133,219 11,900 330,969
NOVA Corp./Georgia (NON) 44,830 1,375,721 37,752 1,158,515 5,827 178,824
Outsource International, Inc. (NON) 51,900 253,013 43,500 212,063 6,700 32,663
PeopleSoft, Inc. (NON) 47,200 1,539,900 47,400 1,546,425 7,500 244,688
Pitney Bowes, Inc. 105,495 5,545,081 105,390 5,539,562 16,270 855,192
ProBusiness Services, Inc. (NON) 67,650 2,300,100 56,850 1,932,900 8,800 299,200
Provant, Inc. (NON) 49,786 740,567 42,149 626,966 6,576 97,818
RCM Technologies, Inc. (NON) 43,300 638,675 36,500 538,375 5,600 82,600
Renaissance Worldwide, Inc. 6,460 84,788 5,340 70,088 820 10,763
Rental Service Corp. (NON) 58,100 1,045,800 48,650 875,700 7,600 136,800
Ricoh Co., Ltd. (Japan) 155,000 1,428,676 196,000 1,806,584 40,000 368,691
Romac International, Inc. (NON) 41,400 745,200 34,900 628,200 5,400 97,200
Vedior NV (Netherlands) 33,530 828,627 41,987 1,037,625 8,515 210,431
Xerox Corp. 60,865 5,158,309 60,705 5,144,749 9,290 787,328
------------ ------------ ------------
69,488,541 68,958,032 10,809,467
Cable Television 0.2% 0.1% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Grupo Televisa S.A.GDR (Mexico) 6,182 119,390 7,820 151,024 1,589 30,688
Jones Intercable, Inc. (NON) 111,800 2,781,025 94,200 2,343,225 14,600 363,175
------------ ------------ ------------
2,900,415 2,494,249 393,863
Chemicals 0.9% 0.8% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Akzo-Nobel N.V. (Netherlands) 69,545 2,476,358 85,220 3,034,513 17,540 624,564
Bayer AG ADR (Germany) 54,251 2,051,071 68,321 2,583,017 13,330 503,968
Dow Chemical Co. 2,400 205,050 2,400 205,050 400 34,175
du Pont (E.I.) de Nemours & Co., Ltd. 81,995 4,601,969 82,175 4,612,072 12,740 715,033
Eastman Chemical Co. 36,620 1,847,021 37,065 1,869,406 5,765 290,772
Hoechst AG (Germany) 10,420 430,785 13,140 543,235 2,720 112,451
Witco Chemical Corp. 28,675 602,175 28,120 590,520 4,340 91,140
------------ ------------ ------------
12,214,429 13,437,813 2,372,103
Computer Equipment 0.4% 0.3% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Artesyn Technologies, Inc. (NON) 96,800 1,669,800 81,500 1,405,875 12,600 217,350
Seagate Technology, Inc. (NON) 58,256 1,460,041 60,197 1,508,687 9,116 228,470
Sun Microsystems, Inc. (NON) 41,530 2,068,713 40,785 2,031,603 6,305 314,068
------------ ------------ ------------
5,198,554 4,946,165 759,888
Computer Services and Software 6.3% 4.6% 2.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Acer Inc. GDR (Taiwan) (NON) 5,875 27,906 7,250 34,438 1,200 5,700
Activision, Inc. 75,000 843,750 63,200 711,000 9,800 110,250
Analysts International Corp. 54,300 1,629,000 45,750 1,372,500 7,100 213,000
Aspect Development, Inc. (NON) 20,100 791,438 16,900 665,438 2,600 102,375
Best Software, Inc. (NON) 61,500 1,476,000 51,800 1,243,200 8,000 192,000
BrightStar Information Technology
Group, Inc. (NON) 44,900 275,013 38,100 233,363 5,700 34,913
Compaq Computer Corp. 164,830 5,212,749 165,970 5,248,801 25,530 807,386
Complete Business Solutions, Inc. (NON) 69,800 2,006,750 58,500 1,681,875 9,200 264,500
Computer Associates Intl., Inc. 24,224 896,288 25,108 928,996 3,788 140,156
Computer Horizons Corp. (NON) 35,393 882,613 29,820 743,636 4,610 114,962
Computer Task Group, Inc. 47,700 1,398,206 40,200 1,178,363 6,200 181,738
Compuware Corp. (NON) 61,500 3,620,813 67,200 3,956,400 7,500 441,563
Data Dimensions, Inc. (NON) 45,300 464,325 38,100 390,525 5,900 60,475
Dell Computer Corp. (NON) 70,200 4,615,650 70,400 4,628,800 10,800 710,100
Fujitsu Ltd. (Japan) 276,000 2,382,444 344,000 2,969,422 69,000 595,611
Fundtech Ltd. (NON) 52,500 564,375 44,200 475,150 6,800 73,100
Fvc.com Inc. (NON) 46,700 437,813 39,300 368,438 6,100 57,188
GeoTel Communications Corp. (NON) 94,010 2,526,519 69,508 1,868,028 12,260 329,488
Harbinger Corp. (NON) 97,100 703,975 81,650 591,963 12,650 91,713
IBM Corp. 117,875 15,088,000 118,252 15,136,256 18,415 2,357,120
IMS Health Inc. (NON) 51,500 3,189,781 51,600 3,195,975 7,900 489,306
Information Management Resources, Inc. (NON) 45,150 1,117,463 38,050 941,738 5,850 144,788
Inso Corp. (NON) 71,800 1,373,175 60,200 1,151,325 9,500 181,688
Intelligroup, Inc. (NON) 52,772 897,124 44,472 756,024 6,920 117,640
Keane, Inc. (NON) 21,980 772,048 18,208 639,556 2,760 96,945
Legato Systems, Inc. (NON) 52,800 2,712,600 44,400 2,281,050 6,900 354,488
Metro Information Services, Inc. (NON) 44,800 1,428,000 37,700 1,201,688 5,800 184,875
Microsoft Corp. (NON) 130,000 14,308,125 130,100 14,319,131 20,000 2,201,250
NCR Corp. (NON) 23,419 673,296 23,802 684,308 3,702 106,433
New Era of Networks, Inc. (NON) 20,000 815,000 16,300 664,225 2,500 101,875
Pegasus Systems, Inc. (NON) 38,400 492,000 32,100 411,281 4,800 61,500
Peregrine Systems, Inc. (NON) 75,700 3,046,925 63,795 2,567,749 9,900 398,475
Pinnacle Systems, Inc. (NON) 21,100 548,600 17,700 460,200 2,700 70,200
SPR Inc. (NON) 37,800 869,400 32,950 757,850 5,050 116,150
Software AG Systems, Inc. (NON) 62,200 1,057,400 52,400 890,800 8,100 137,700
Spyglass, Inc. (NON) 63,900 814,725 53,800 685,950 8,300 105,825
Summit Design, Inc. (NON) 89,300 636,263 75,200 535,800 11,600 82,650
3Com Corp. (NON) 41,465 1,246,542 42,270 1,270,742 6,590 198,112
Visual Networks, Inc. (NON) 44,800 1,220,800 37,700 1,027,325 5,800 158,050
------------ ------------ ------------
83,062,894 78,869,309 12,191,288
Conglomerates 0.6% 0.6% 0.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Axia Holding Inc. 144A 225 3,375
BTR PLC (United Kingdom) 566,300 1,022,037 672,500 1,213,703 144,164 260,181
Granada Group PLC (United Kingdom) 165,400 2,079,018 206,000 2,589,346 41,900 526,668
Ogden Corp. 8,193 232,988 8,386 238,477 1,322 37,594
Securicor Group PLC (United Kingdom) 211,856 1,371,961 281,600 1,823,617 54,583 353,475
Temple Inland, Inc. 8,900 426,088 9,300 445,238 1,400 67,025
Tomkins PLC (United Kingdom) 518,434 2,430,489 661,836 3,102,777 133,296 624,910
United Technologies Corp. 3,435 262,563 3,600 275,175 555 42,423
------------ ------------ ------------
7,828,519 9,688,333 1,912,276
Consumer Durable Goods 0.3% 0.2% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Bebe Stores, Inc. (NON) 39,700 637,681 33,400 536,488 5,200 83,525
Hasbro, Inc. 30,900 911,550 30,335 894,883 4,880 143,960
Home Choice Holdings Inc. (NON) 93,700 1,223,956 78,900 1,030,631 12,200 159,363
Rubbermaid, Inc. 38,325 917,405 37,415 895,622 6,025 144,223
------------ ------------ ------------
3,690,592 3,357,624 531,071
Consumer Non Durables 1.6% 1.4% 0.6%
- -----------------------------------------------------------------------------------------------------------------------------------
B A T Industries PLC (United Kingdom) 128,952 959,933 162,055 1,206,356 34,065 253,584
Clorox Co. 44,150 3,642,375 44,395 3,662,588 6,945 572,963
Colgate-Palmolive Co. 100,595 6,890,758 100,765 6,902,403 15,605 1,068,943
Estee Lauder Cos. Class A 49,700 2,547,125 50,000 2,562,500 7,800 399,750
Hedstrom Holdings, Inc. 144A 910 1,138 2,729 3,411 910 1,138
KAO Corp. (Japan) 120,000 1,913,680 151,000 2,408,047 31,000 494,367
Kimberly-Clark Corp. 26,400 1,069,200 26,800 1,085,400 4,000 162,000
Onward Kashiyama Co. Ltd. (Japan) 43,000 527,513 56,000 686,993 12,000 147,213
RJR Nabisco Holdings Corp. 63,280 1,593,865 64,600 1,627,113 9,800 246,838
Svenska Cellulosa AB Class B, (Sweden) 80,061 1,578,510 101,701 2,005,171 21,660 427,056
U.S.A. Floral Products, Inc. (NON) 14,800 90,650 12,600 77,175 2,000 12,250
Wesley Jessen VisionCare, Inc. (NON) 39,400 837,250 33,200 705,500 5,100 108,375
------------ ------------ ------------
21,651,997 22,932,657 3,894,477
Consumer Products 1.1% 0.8% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
French Fragrances Inc. (NON) 82,500 598,125 69,500 503,875 10,800 78,300
Home Products International, Inc. (NON) 22,900 194,650 19,600 166,600 3,200 27,200
Media Arts Group, Inc. (NON) 49,300 449,863 41,200 375,950 6,400 58,400
Philip Morris Cos., Inc. 271,880 12,523,473 273,025 12,576,214 42,505 1,957,887
Weider Nutrition International, Inc. 46,400 269,700 39,100 227,269 5,900 34,294
------------ ------------ ------------
14,035,811 13,849,908 2,156,081
Consumer Services 1.8% 1.3% 0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Ambassadors International, Inc. (NON) 66,100 1,189,800 55,700 1,002,600 8,600 154,800
AmeriKing, Inc. (NON) 50 2,000 100 4,000 -- --
America Online, Inc. (NON) 21,800 2,425,250 21,900 2,436,375 3,400 378,250
Bright Horizons Family Solutions, Inc. (NON) 36,371 772,884 30,621 650,691 4,770 101,363
Carey International, Inc. (NON) 57,400 861,000 48,300 724,500 7,500 112,500
Gannett Co., Inc. 41,000 2,196,063 41,100 2,201,419 6,400 342,800
Global Vacation Group, Inc. (NON) 68,700 493,781 57,900 416,156 9,000 64,688
Interpublic Group Cos. Inc. 83,100 4,482,206 83,700 4,514,569 13,000 701,188
Market Facts, Inc. (NON) 64,400 1,787,100 54,200 1,504,050 8,400 233,100
MemberWorks Inc. (NON) 45,400 703,700 38,200 592,100 5,950 92,225
Morton's Restaurant Group, Inc. (NON) 19,800 425,700 16,700 359,050 2,600 55,900
On Assignment, Inc. (NON) 79,900 2,956,300 67,300 2,490,100 10,400 384,800
PJ America Inc. (NON) 25,400 390,525 21,400 329,025 3,300 50,738
Rent-Way, Inc. 106,000 2,610,250 89,300 2,199,013 13,800 339,825
Steiner Leisure Ltd. (NON) 26,300 410,938 22,200 346,875 3,450 53,906
Strayer Education, Inc. 49,750 1,299,719 41,700 1,089,413 6,550 171,119
Travel Services International, Inc. (NON) 49,900 676,769 41,900 568,269 6,500 88,156
------------ ------------ ------------
23,683,985 21,428,205 3,325,358
Education Services 0.2% 0.1% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Career Education Corp. (NON) 52,300 1,144,063 44,000 962,500 6,800 148,750
Education Management Corp. (NON) 51,400 1,824,700 43,800 1,554,900 7,100 252,050
------------ ------------ ------------
2,968,763 2,517,400 400,800
Electronics and Electrical Equipment 3.8% 3.1% 1.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Advanced Lighting Technologies, Inc. (NON) 21,000 178,500 17,800 151,300 2,800 23,800
Applied Micro Circuits Corp. (NON) 45,100 670,863 37,800 562,275 6,000 89,250
ATMI, Inc. 43,600 604,950 36,700 509,213 5,700 79,088
Cookson Group PLC (United Kingdom) 174,633 323,328 220,856 408,909 44,716 82,791
Delaware Global Technologies Corp. (NON) 74,898 552,373 63,808 470,584 9,076 66,936
Emerson Electric Co. 54,090 3,367,103 54,305 3,380,486 8,380 521,655
General Electric Co. 198,600 15,801,113 203,400 16,183,013 31,430 2,500,649
Harmonic Lightwaves, Inc. (NON) 86,400 1,058,400 73,700 902,825 11,300 138,425
Hon Hai Precision Industry (Taiwan) (NON) 7,200 32,211 8,800 39,368 -- --
Iberdola S.A. (Spain) (NON) 68,273 1,139,168 87,000 1,451,637 16,620 277,313
Intel Corp. 104,935 8,998,176 105,195 9,020,471 16,360 1,402,870
Micrel, Inc. (NON) 19,700 522,050 16,550 438,575 2,650 70,225
Molins PLC (United Kingdom) -- -- 38,100 77,660 7,461 15,208
Motorola, Inc. 49,280 2,103,640 49,280 2,103,640 7,675 327,627
Omron Corp. (Japan) 106,000 1,050,695 118,000 1,169,642 23,000 227,981
Philips Electronics N.V. (Netherlands) 43,918 2,369,089 54,781 2,955,076 11,743 633,458
Photronics, Inc. (NON) 19,000 242,250 15,900 202,725 2,500 31,875
Premier Farnell PLC (United Kingdom) 14,700 37,454 18,700 47,646 3,992 10,171
QLogic Corp. 23,000 1,500,750 19,400 1,265,850 3,000 195,750
Rohm Co. Ltd. (Japan) 6,000 570,593 7,000 665,691 2,000 190,198
STMicroelectronics N.V. ADR (France) (NON) 37,074 1,666,013 47,003 2,112,197 9,648 433,557
Samsung Electronics Co. (South Korea) 969 26,519 972 26,601 206 5,638
Siebe PLC (United Kingdom) 351,676 1,134,978 443,628 1,431,738 90,340 291,558
Sipex Corp. (NON) 19,400 492,275 16,200 411,075 2,500 63,438
Sony Corp. (Japan) 24,500 1,700,842 30,800 2,138,200 6,400 444,301
Texas Instruments, Inc. 88,990 4,694,223 88,160 4,650,440 13,910 733,753
------------ ------------ ------------
50,837,556 52,776,837 8,857,515
Energy-Related 0.1% 0.1% --%
- -----------------------------------------------------------------------------------------------------------------------------------
KTI, Inc. (NON) 55,700 1,016,525 46,900 855,925 7,300 133,225
Entertainment 1.6% 1.2% 0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Carnival Corp. Class A 133,900 4,259,694 134,600 4,281,963 21,000 668,063
Cinar Films, Inc. Class B, (Canada) (NON) 52,500 941,719 44,200 792,838 6,800 121,975
Family Golf Centers, Inc. (NON) 62,900 1,116,475 53,000 940,750 8,200 145,550
Time Warner, Inc. 92,525 8,101,720 93,015 8,144,606 14,454 1,265,628
Viacom, Inc. Class B (NON) 109,700 6,362,600 109,910 6,374,780 16,940 982,520
Vistana, Inc. (NON) 64,600 831,725 54,800 705,550 8,100 104,288
------------ ------------ ------------
21,613,933 21,240,487 3,288,024
Environmental Control 1.1% 0.9% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Casella Waste Systems, Inc. (NON) 33,400 1,135,600 28,100 955,400 4,400 149,600
Superior Services, Inc. (NON) 74,100 2,088,694 62,400 1,758,900 9,700 273,419
Vivendi (France) 20,803 4,148,259 25,903 5,165,234 5,317 1,060,246
Waste Management, Inc. (NON) 142,020 6,825,836 141,880 6,819,168 21,875 1,051,367
------------ ------------ ------------
14,198,389 14,698,702 2,534,632
Food and Beverages 2.4% 2.0% 0.9%
- -----------------------------------------------------------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 71,560 3,864,240 71,835 3,879,090 11,080 598,320
AquaPenn Spring Water Company, Inc. (NON) 32,400 172,125 28,100 149,281 4,200 22,313
Bass PLC (United Kingdom) 189,402 2,268,114 238,966 2,861,649 49,452 592,194
Celestial Seasonings, Inc. (NON) 43,500 657,938 37,100 561,138 5,500 83,188
Coca-Cola Femsa S.A. ADR (Mexico) 14,300 174,281 18,100 220,594 3,700 45,094
ConAgra, Inc. 24,900 670,744 26,100 703,069 3,900 105,056
General Mills, Inc. 25,635 1,794,450 25,815 1,807,050 3,920 274,400
Greencore Group PLC (Ireland) 223,053 816,168 266,236 974,177 55,955 204,744
Hain Food Group, Inc. (The) (NON) 65,600 984,000 55,200 828,000 8,500 127,500
Heinz (H.J.) Co. 68,700 3,512,288 69,000 3,527,625 10,700 547,038
McDonald's Corp. 42,460 2,534,331 42,600 2,542,688 6,680 398,713
NBTY, Inc. 35,800 281,925 30,200 237,825 4,700 37,013
Nabisco Holdings Corp. Class A 11,562 415,509 11,364 408,394 1,703 61,202
Nestle S.A. (Switzerland) 2,957 5,901,143 3,717 7,417,839 757 1,510,709
PepsiCo, Inc. 1,400 41,213 1,500 44,156 200 5,888
Sara Lee Corp. 60,300 3,256,200 60,700 3,277,800 9,300 502,200
The Quaker Oats Co. 42,389 2,500,951 42,078 2,482,602 6,590 388,810
Whitman Corp. 69,085 1,101,042 67,755 1,079,845 10,850 172,922
Wild Oats Markets, Inc. (NON) 14,200 385,175 11,600 314,650 1,800 48,825
------------ ------------ ------------
31,331,837 33,317,472 5,726,129
Funeral/Cemetery Services 0.2% 0.1% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Corporation International (NON) 89,750 2,019,375 75,650 1,702,125 11,700 263,250
Health Care 1.2% 0.9% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Alternative Living Services, Inc. (NON) 6,500 173,875 5,500 147,125 800 21,400
American Oncology Resources, Inc. (NON) 94,600 957,825 79,700 806,963 12,300 124,538
Cardinal Health, Inc. 44,000 4,543,000 44,300 4,573,975 6,850 707,263
CareMatrix Corp. (NON) 42,400 964,600 35,700 812,175 5,500 125,125
Columbia/HCA Healthcare Corp. 26,200 525,638 26,000 521,625 3,900 78,244
HEALTHSOUTH Corp. (NON) 125,800 1,328,763 124,100 1,310,806 19,800 209,138
NCS HealthCare, Inc. Class A (NON) 26,100 460,013 22,000 387,750 3,400 59,925
Pediatrix Medical Group, Inc. (NON) 7,700 345,538 6,200 278,225 1,100 49,363
Province Healthcare Co. (NON) 39,000 1,328,438 32,800 1,117,250 5,100 173,719
Renal Care Group, Inc. (NON) 49,725 1,274,203 41,900 1,073,688 6,525 167,203
SteriGenics International, Inc. (NON) 52,300 1,144,063 44,000 962,500 6,800 148,750
Sunrise Assisted Living, Inc. (NON) 30,600 1,049,963 26,000 892,125 4,000 137,250
Tenet Healthcare Corp. (NON) 48,100 1,382,875 49,300 1,417,375 7,400 212,750
United Healthcare Corp. 9,600 336,000 10,100 353,500 1,500 52,500
Wellpoint Health Networks, Inc. (NON) 11,360 636,870 11,586 649,540 1,748 97,997
------------ ------------ ------------
16,451,664 15,304,622 2,365,165
Hospital Management and
Medical Services 0.4% 0.2% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
AmSurg Corp. (NON) 56,600 389,125 47,700 327,938 7,400 50,875
Centennial HealthCare Corp. (NON) 47,900 381,703 40,400 321,938 6,200 49,406
First Consulting Group, Inc. (NON) 37,300 638,763 31,400 537,725 4,900 83,913
Medical Manager Corp. (NON) 23,000 526,125 19,300 441,488 3,000 68,625
Medquist, Inc. (NON) 89,200 2,820,950 74,700 2,362,388 11,800 373,175
------------ ------------ ------------
4,756,666 3,991,477 625,994
Insurance and Finance 12.8% 10.8% 5.0%
- -----------------------------------------------------------------------------------------------------------------------------------
ABN AMRO Holding N.V. (Netherlands) 98,470 1,679,893 125,779 2,145,783 25,850 435,541
Aetna Inc. 7,300 507,350 7,700 535,150 1,100 76,450
Ahmanson (H.F.) & Co. 2,300 127,650 2,400 133,200 400 22,200
AGF (Assurances Generales de France)
(France) 21,745 1,200,587 25,231 1,393,056 5,107 281,968
Allianz Versicherungs AG (Germany) (NON) 4,032 1,251,394 4,551 1,412,473 918 284,916
Allied Irish Banks PLC (Ireland) 267,664 3,917,611 334,827 4,900,628 66,718 976,505
Allied Zurich AG (United Kingdom) (NON) 155,052 1,585,495 195,955 2,003,752 40,465 413,778
Allstate Corp. 55,992 2,334,167 55,828 2,327,330 8,728 363,849
American Express Co. 60,590 4,703,299 63,250 4,909,781 9,430 732,004
American General Corp. 58,270 3,721,996 58,515 3,737,646 9,055 578,388
American International Group, Inc. 68,725 5,291,825 74,300 5,721,100 11,550 889,350
AON Corp. 45,010 2,903,145 44,935 2,898,308 6,955 448,598
Associates First Capital Corp. 27,300 1,781,325 27,500 1,794,375 4,300 280,575
Axa S.A. (Mexico) (NON) 9,095 833,673 11,477 1,052,014 2,341 214,583
Banc One Corp. 9,000 383,625 8,900 379,363 1,400 59,675
Banca Popolare di Bergamo (Italy) 20,900 424,252 26,300 533,868 5,400 109,616
Banca Popolare di Brescia (Italy) 20,100 378,738 25,200 474,837 5,100 96,098
Banca Popolare di Milano (Italy) 58,200 420,292 73,200 528,616 14,900 107,601
Banco Frances del Rio de la Plata ADR
(Argentina) 793 15,364 -- -- -- --
Banco Frances del Rio de la Plata
S.A. ADR (Argentina) 58,009 371,335 74,731 478,378 16,414 105,071
Bank Sinopac (Taiwan) (NON) 28,490 12,246 34,650 14,893 -- --
Bank of Ireland (Ireland) (NON) 187,661 3,335,236 237,291 4,217,298 48,204 856,708
Bank of Nova Scotia (Canada) 129,350 2,114,253 170,906 2,793,502 33,402 545,963
BankAmerica Corp. 130,565 7,850,221 130,650 7,855,331 10,725 1,228,054
BankBoston Corp. 75,815 2,501,895 76,005 2,508,165 11,840 390,720
Bankers Trust New York Corp. (CUS) 38,840 2,291,560 38,865 2,293,035 6,030 355,770
Banque Nationale de Paris (France) 49,879 2,673,713 63,808 3,420,362 12,692 680,342
Bayerische Vereinsbank AG (Germany) 13,910 1,025,123 17,540 1,292,642 3,580 263,835
CIGNA Corp. 54,710 3,617,699 54,810 3,624,311 8,455 559,087
Chase Manhattan Corp. 46,190 1,997,718 46,565 2,013,936 7,267 314,298
Cie Finance Richemont 850 1,090,217 1,073 1,376,239 219 280,891
Citicorp 36,590 3,400,583 36,805 3,420,565 5,705 530,208
Comerica, Inc. 57,000 3,124,313 57,300 3,140,756 8,900 487,831
Commonwealth Bank of Australia
(Australia) 95,139 1,128,499 112,812 1,338,129 24,082 285,651
Conseco Inc. 117,700 3,597,206 118,900 3,633,881 18,400 562,350
Credit Commercial de France (France) 8,500 546,761 10,830 696,637 2,200 141,514
Deutsche Bank AG (Germany) 35,166 1,818,350 44,426 2,297,162 9,221 476,796
Equitable Companies, Inc. (The) 48,040 1,987,655 48,080 1,989,310 7,356 304,355
Fannie Mae 61,765 3,968,401 62,075 3,988,319 9,620 618,085
Federal Home Loan Mortgage Corp. 141,700 7,005,294 142,300 7,034,956 22,300 1,102,456
Fifth Third Bancorp 49,550 2,849,125 51,300 2,949,750 7,900 454,250
First Chicago NBD Corp. 57,195 3,917,858 57,290 3,924,365 8,955 613,418
First Tennessee National Corp. 4,625 126,320 4,850 132,466 750 20,484
First Union Corp. 25,600 1,310,400 26,040 1,332,923 3,920 200,655
Firstar Corp. 51,600 2,612,250 51,800 2,622,375 8,000 405,000
Fleet Financial Group, Inc. 28,010 2,056,984 28,135 2,066,164 4,380 321,656
ForeningsSparbanken AB (Sweden) 22,918 524,740 27,300 625,072 5,279 120,870
Fubon Insurance Co. GDR (Taiwan) (NON) -- -- -- -- 800 7,940
Gilman & Ciocia, Inc. (NON) 61,500 384,375 51,800 323,750 8,000 50,000
Haci Omer Sabanci Holdings (Turkey) 25,200 91,980 24,920 90,970 5,110 18,652
Haci Omer Sabanci Holdings 144A AS
(Turkey) 28,800 104,400 28,480 103,240 5,840 21,170
Hartford Financial Services Group 14,800 702,075 15,000 711,563 2,400 113,850
HealthCare Financial Partners, Inc. (NON) 16,700 701,400 14,100 592,200 2,200 92,400
Huntington Bancshares, Inc. 5,000 125,625 5,245 131,781 810 20,351
Inspire Insurance Solutions, Inc. (NON) 95,900 2,265,638 80,900 1,911,263 12,350 291,769
Internationale Nederlanden Groep
(Netherlands) 65,394 2,950,654 81,323 3,669,389 17,277 779,559
Istituto Nazionale delle Assicurazioni
(Italy) 384,000 978,728 483,100 1,231,314 98,400 250,800
Julius Baer Holdings AG (Switzerland) 685 1,613,225 794 1,869,928 176 414,493
KeyCorp 35,756 1,032,455 36,933 1,066,440 5,634 162,682
Lehman Brothers Holding, Inc. 38,845 1,097,371 38,480 1,087,060 6,200 175,152
MBNA Corp. 136,100 3,895,863 136,962 3,920,537 21,300 609,713
Mercantile Bancorpation, Inc. 34,830 1,684,901 34,675 1,677,403 5,440 263,160
Merrill Lynch & Co., Inc. 20,680 979,715 20,405 966,687 3,185 150,889
Morgan (J.P.) & Co., Inc. 29,970 2,536,211 30,120 2,548,905 4,660 394,353
Morgan Stanley, Dean Witter, Discover
and Co. 9,940 428,041 10,435 449,357 1,585 68,254
Munich Re (Germany) (NON) 2,534 1,118,968 3,147 1,389,658 622 274,664
National City Corp. 24,700 1,628,656 24,400 1,608,875 3,900 257,156
National Westminster Bancorp Inc.
(United Kingdom) 101,403 1,360,721 127,300 1,708,231 25,700 344,867
NationsBank Corp. 24,825 1,328,138 25,200 1,348,200 3,840 205,440
Nikko Securities Co. Ltd. (Japan) 592,000 1,268,881 763,000 1,635,399 153,000 327,937
Nordbanken Holding AG (Sweden) 116,741 668,237 134,450 769,605 26,826 153,555
Norwest Corp. 71,220 2,550,566 73,600 2,635,800 11,350 406,472
PNC Bank Corp. 48,690 2,191,050 49,025 2,206,125 7,607 342,315
Promise Co., Ltd. (Japan) 26,300 1,183,212 33,100 1,489,137 6,800 305,925
Reinsurance Group America, Inc. 44,950 2,649,241 37,915 2,234,615 5,820 343,016
Royal & Sun Alliance Insurance Group
PLC (United Kingdom) 200,911 1,740,464 242,269 2,098,741 48,064 416,372
Royal Bank of Canada (Canada) 12,074 488,644 14,734 596,296 3,054 123,598
Societe Generale (France) 15,544 1,721,988 19,810 2,194,582 4,149 459,633
Southtrust Corp. 29,950 1,046,378 31,000 1,083,063 5,250 183,422
Star Banc Corp. 23,500 1,553,938 23,700 1,567,163 3,700 244,663
Summit Bancorp 15,390 577,125 15,470 580,125 2,395 89,813
SunAmerica, Inc. 76,000 4,636,000 76,200 4,648,200 11,700 713,700
Svenska Handelsbanken (Sweden) 35,650 1,333,219 41,442 1,549,825 8,456 316,233
TeleBanc Financial Corp. (NON) 38,000 612,750 32,000 516,000 5,000 80,625
Travelers Group, Inc. 176,045 6,601,688 176,870 6,632,625 27,620 1,035,750
United Bank of Switzerland AG
(Switzerland) 14,513 2,839,500 18,209 3,562,630 3,650 714,130
Unidanmark AS (Denmark) 10,400 753,979 11,704 848,517 2,388 173,125
Washington Mutual, Inc. 60,930 2,056,388 61,235 2,066,681 9,526 321,503
Wells Fargo & Co. 10,116 3,591,180 10,063 3,572,365 1,555 552,025
Yapi ve Kredi Bankasi A.S. GDR (Turkey) (NON) 13,588 146,071 16,669 179,192 2,765 29,724
Zurich Allied AG (Switzerland) 1,856 923,965 2,389 1,189,307 472 234,974
------------ ------------ ------------
170,461,240 182,224,946 31,133,837
Medical Supplies and Devices 2.2% 1.7% 0.7%
- -----------------------------------------------------------------------------------------------------------------------------------
Baxter International, Inc. 103,270 6,144,565 103,540 6,160,630 16,115 958,843
CN Biosciences, Inc. (NON) 26,100 639,450 22,000 539,000 3,400 83,300
Horizon Medical Products, Inc. (NON) 46,500 273,188 39,100 229,713 6,100 35,838
Igen, Inc. (NON) 25,900 731,675 21,800 615,850 3,400 96,050
McKesson Corp. 20,500 1,878,313 20,800 1,905,800 3,300 302,363
Minimed, Inc. (NON) 29,200 1,927,200 24,600 1,623,600 3,800 250,800
ResMed Inc. (NON) 2,600 135,200 2,200 114,400 300 15,600
Sabratek Corp. (NON) 57,800 1,307,725 48,700 1,101,838 7,500 169,688
Theargenics Corp. (NON) 70,700 1,003,056 59,500 844,156 9,200 130,525
Tyco International Ltd. (NON) 230,000 12,694,000 230,600 12,740,650 35,500 1,961,375
Xomed Surgical Products Inc. (NON) 64,600 2,656,675 54,400 2,237,200 8,400 345,450
------------ ------------ ------------
29,391,047 28,112,837 4,349,832
Metals and Mining 0.2% 0.2% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Aluminum Co. of America 8,800 624,800 8,700 617,700 1,300 92,300
Freeport-McMoRan Copper & Gold Co.,
Inc. Class A 21,600 252,450 22,700 265,306 3,400 39,738
Freeport-McMoRan Copper & Gold Co.,
Inc. Class B 14,400 171,000 15,100 179,313 2,300 27,313
Rio Tinto PLC (Australia) 117,948 1,405,431 148,018 1,763,735 31,191 371,662
------------ ------------ ------------
2,453,681 2,826,054 531,013
Oil and Gas 4.0% 3.4% 1.6%
- -----------------------------------------------------------------------------------------------------------------------------------
Amoco Corp. 47,975 2,584,653 48,853 2,631,955 7,464 402,123
Atlantic Richfield Co. 50,975 3,616,039 51,235 3,634,483 7,945 563,598
British Petroleum Co. PLC
(United Kingdom) 186,329 2,848,486 236,310 3,612,565 45,656 697,962
British Petroleum PLC ADR
(United Kingdom) 16,910 1,475,398 16,543 1,443,377 2,595 226,414
Burlington Resources Inc. 6,604 246,825 6,899 257,850 1,007 37,637
Burmah Castrol PLC (United Kingdom) 152,356 2,163,500 199,206 2,828,784 38,942 552,988
Chevron, Inc. 28,685 2,411,333 28,495 2,395,361 4,410 370,716
Coastal Corp. 33,100 1,117,125 32,500 1,096,875 5,200 175,500
Elf Aquitaine S.A. (France) (NON) 25,568 3,156,825 31,243 3,857,505 6,453 796,738
Enron Corp. 14,500 765,781 14,400 760,500 2,200 116,188
Ente Nazionale Idrocarburi SPA (Italy) 354,226 2,175,416 472,143 2,899,589 88,139 541,291
Exxon Corp. 209,120 14,677,610 209,730 14,720,424 32,275 2,265,302
Halliburton Co. 45,846 1,309,476 45,419 1,297,280 7,185 205,222
Kerr-McGee Corp. 25,895 1,178,223 25,370 1,154,335 4,030 183,365
Mobil Corp. 49,900 3,789,281 50,300 3,819,656 7,800 592,313
Occidental Petroleum Corp. 27,200 584,800 27,600 593,400 4,300 92,450
Schlumberger Ltd. 21,845 1,099,077 22,020 1,107,881 3,365 169,302
Sonat, Inc. 62,560 1,868,980 63,060 1,883,918 9,900 295,763
Texaco, Inc. 17,400 1,090,763 17,500 1,097,031 2,700 169,256
Tosco Corp. 58,700 1,262,050 59,060 1,269,790 9,080 195,220
Total Corp. Class B, (France) 28,786 3,631,297 37,534 4,734,840 7,770 980,120
------------ ------------ ------------
53,052,938 57,097,399 9,629,468
Paper and Forest Products 0.2% 0.2% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Boise Cascade Corp. 33,740 854,044 33,080 837,338 5,140 130,106
Fort James Corp. 11,200 367,500 11,000 360,938 1,700 55,781
Weyerhaeuser Co. 37,160 1,567,688 37,980 1,602,281 5,805 244,898
------------ ------------ ------------
2,789,232 2,800,557 430,785
Pharmaceuticals 6.8% 5.5% 2.4%
- -----------------------------------------------------------------------------------------------------------------------------------
American Home Products Corp. 102,715 5,379,698 103,150 5,402,481 15,940 834,858
Bristol-Myers Squibb Co. 126,195 13,108,506 126,570 13,147,470 19,895 2,066,593
Coulter Pharmaceutical, Inc. (NON) 74,200 1,845,725 62,400 1,552,200 9,700 241,288
Glaxo Wellcome PLC (United Kingdom) 43,001 1,268,731 54,245 1,600,481 11,262 332,282
Johnson & Johnson 18,290 1,431,193 17,920 1,402,240 2,850 223,013
Lilly (Eli) & Co. 81,900 6,413,794 82,300 6,445,119 12,900 1,010,231
Medicis Pharmaceutical Corp. Class A (NON) 52,650 2,086,256 44,350 1,757,369 6,750 267,469
Merck & Co., Inc. 50,450 6,536,428 50,550 6,549,384 7,780 1,007,996
Natural Alternatives International, Inc. (NON) 43,600 534,100 36,300 444,675 5,600 68,600
Novartis AG ADR (Switzerland) 2,092 3,363,875 2,640 4,245,043 546 877,952
Pfizer, Inc. 108,200 11,462,438 108,700 11,515,406 17,100 1,811,531
Pharmacia & Upjohn, Inc. 178,325 8,949,686 178,800 8,973,525 27,753 1,392,854
Pharmacia & Upjohn, Inc. Depository
Shares (Sweden) 85,629 4,291,525 107,918 5,408,598 21,997 1,102,438
Sankyo Co., Ltd. (Japan) 58,000 1,281,346 74,000 1,634,821 16,000 353,475
Schering-Plough Corp. 104,900 10,863,706 105,300 10,905,131 16,500 1,708,781
Trimeris, Inc. (NON) 15,300 76,500 12,900 64,500 2,000 10,000
Warner-Lambert Co. 156,800 11,838,400 158,100 11,936,550 23,300 1,759,150
------------ ------------ ------------
90,731,907 92,984,993 15,068,511
Photography 0.5% 0.4% 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Canon, Inc. (Japan) 75,000 1,519,751 95,000 1,925,018 19,000 385,004
Eastman Kodak Co. 42,960 3,321,345 42,975 3,322,505 6,650 514,128
Fuji Photo Film Co. (Japan) 48,000 1,650,329 61,000 2,097,293 12,000 412,582
------------ ------------ ------------
6,491,425 7,344,816 1,311,714
Publishing 0.4% 0.3% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Consolidated Graphics, Inc. (NON) 22,800 866,400 19,100 725,800 3,000 114,000
McGraw-Hill, Inc. 21,120 1,673,760 21,320 1,689,610 3,300 261,525
Times Mirror Co. Class A 43,717 2,322,466 44,060 2,340,688 6,875 365,234
------------ ------------ ------------
4,862,626 4,756,098 740,759
Real Estate 0.1% 0.1% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Residential Properties Trust (R) 15,792 666,225 16,080 678,375 2,498 105,384
Starwood Lodging Trust 27,752 846,436 27,908 851,194 4,275 130,357
------------ ------------ ------------
1,512,661 1,529,569 235,741
Retail 6.3% 4.9% 2.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Aoyamma Trading Co. Ltd. (Japan) 3,100 65,991 3,800 80,892 700 14,901
CVS Corp. 229,500 10,054,969 231,364 10,136,635 35,894 1,572,606
Coldwater Creek Inc. (NON) 45,500 864,500 37,800 718,200 5,600 106,400
Cost Plus, Inc. (NON) 35,300 939,863 29,800 793,425 4,600 122,475
Costco Companies, Inc. (NON) 127,500 6,040,313 127,900 6,059,263 19,700 933,288
Dayton Hudson Corp. 198,700 7,103,525 199,855 7,144,816 30,645 1,095,559
Dixons Group PLC (United Kingdom) 157,130 1,609,413 186,000 1,905,116 35,700 365,659
Federated Department Stores, Inc. (NON) 4,000 145,500 4,000 145,500 600 21,825
Hibbett Sporting Goods, Inc. (NON) 44,000 1,102,750 37,100 929,819 5,700 142,856
Home Depot, Inc. (The) 141,600 5,593,200 142,000 5,609,000 21,800 861,100
Hot Topic, Inc. (NON) 15,000 217,500 13,900 201,550 2,000 29,000
Jones Apparel Group, Inc. (NON) 105,100 2,410,731 105,300 2,415,319 16,200 371,588
K mart Corp. 172,055 2,053,907 172,065 2,054,026 26,635 317,955
Koninklijke Ahold N.V. (Netherlands) 64,660 1,934,714 81,123 2,427,309 17,136 512,732
Linens 'N Things, Inc. (NON) 97,500 2,681,250 82,000 2,255,000 13,000 357,500
Marks & Spencer PLC (United Kingdom) 40,800 313,249 51,100 392,329 10,800 82,919
May Department Stores Co. 21,700 1,117,550 21,800 1,122,700 3,300 169,950
99 Cents Only Stores (NON) 34,875 1,379,742 29,400 1,163,138 4,550 180,009
Office Depot, Inc. (NON) 95,500 2,142,781 95,600 2,145,025 14,700 329,831
Penney (J.C.) Co., Inc. 27,600 1,240,275 27,075 1,216,683 4,305 193,456
Piercing Pagoda, Inc. (NON) 41,150 473,225 34,650 398,475 5,400 62,100
President Chain Store Corp. (Taiwan) 688 2,022 756 2,222 -- --
Rexall Sundown, Inc. (NON) 81,500 1,258,156 68,200 1,052,838 10,800 166,725
Safeway, Inc. (NON) 137,900 6,395,113 138,600 6,427,575 21,700 1,006,338
Sears, Roebuck & Co. 52,815 2,333,763 52,430 2,316,751 8,220 363,221
TJX Cos., Inc. (The) 223,500 3,981,094 225,000 4,007,813 35,000 623,438
The Men's Wearhouse, Inc. (NON) 65,200 1,124,700 54,975 948,319 8,500 146,625
The North Face, Inc. (NON) 51,800 673,400 43,600 566,800 6,800 88,400
Toys "R" Us (NON) 90,720 1,468,530 90,625 1,466,992 14,025 227,030
Vendex International N.V. (Netherlands) 33,630 1,251,116 43,849 1,631,287 8,629 321,019
Wal-Mart Stores, Inc. 183,200 10,007,300 184,500 10,078,313 28,700 1,567,738
Walgreen Co. 133,300 5,873,531 133,500 5,882,344 20,600 907,688
------------ ------------ ------------
83,853,673 83,695,474 13,261,931
Specialty Consumer Products 0.3% 0.2% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Action Performance Cos., Inc. (NON) 49,100 1,325,700 41,400 1,117,800 6,400 172,800
Central Garden and Pet Co. (NON) 58,800 1,087,800 49,500 915,750 7,700 142,450
Gucci Group N.V. (Netherlands) 900 32,513 1,100 39,738 300 10,838
Guitar Center, Inc. (NON) 71,000 1,331,250 61,200 1,147,500 9,100 170,625
Lumen Technologies, Inc. (NON) 43,600 218,000 36,600 183,000 5,400 27,000
------------ ------------ ------------
3,995,263 3,403,788 523,713
Telecommunications 5.4% 4.5% 2.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Advanced Communication Systems, Inc. (NON) 38,000 358,625 32,000 302,000 5,000 47,188
Airtouch Communications, Inc. (NON) 76,300 4,349,100 76,500 4,360,500 11,800 672,600
Alcatel Alsthom CGE S.A. (France) 5,600 498,303 7,100 631,776 1,450 129,025
American Telephone & Telegraph Co. 96,375 5,631,914 96,440 5,635,713 15,000 876,563
Ascend Communications, Inc. (NON) 49,700 2,261,350 50,000 2,275,000 7,800 354,900
Black Box Corp. (NON) 40,700 986,975 34,250 830,563 5,300 128,525
Cable & Wireless Communications
(United Kingdom) (NON) 100 679 -- -- -- --
Cable & Wireless PLC (United Kingdom) 218,700 2,084,024 275,500 2,625,280 56,000 533,632
CellNet Data Systems, Inc. (NON) 1,000 6,000 3,200 19,200 800 4,800
Deutsche Telekom AG (Germany) 59,863 1,861,528 77,279 2,403,104 15,761 490,111
E. Spire Communications, Inc. (NON) 81,208 708,300 66,300 596,700 10,628 95,655
Excel Switching Corp. (NON) 18,800 444,150 15,900 375,638 2,400 56,700
Exodus Communications, Inc. (NON) 18,200 443,625 15,400 375,375 2,300 56,063
Hellenic Telecommunication Organization
S.A. (Greece) 56,444 1,356,260 71,367 1,714,836 14,476 347,835
Hellenic Telecommunication Organization
S.A. GDR (Greece) 3,011 35,078 3,689 42,976 611 7,119
IDT Corp. (NON) 69,000 1,587,000 58,100 1,336,300 9,000 207,000
Intermedia Communications, Inc. (NON) 49,200 1,208,475 42,000 1,031,625 6,400 157,200
Lucent Technologies, Inc. 66,500 4,592,656 72,000 4,972,500 11,200 773,500
MCI WorldCom, Inc. (NON) 129,200 6,314,650 129,400 6,324,425 19,900 972,613
NEXTEL Communications, Inc. Class A (NON) 1,177 23,761 3,819 77,096 1,819 36,721
Northern Telecom Ltd. (Canada) (NON) 48,118 1,544,691 61,780 1,983,271 13,080 419,880
Oy Nokia AB Class A, (Finland) 38,043 3,026,063 47,732 3,796,757 10,046 799,091
Portugal Telecom S.A. (Portugal) 15,500 564,484 19,500 710,157 4,000 145,673
Premisys Communications, Inc. (NON) 14,900 104,300 13,100 91,700 2,200 15,400
Royal PTT (United Kingdom) 26,596 822,644 33,247 1,028,367 6,764 209,218
SK Telecom Co., Ltd. ADR (South Korea) 960 6,780 1,170 8,263 192 1,356
Sprint Corp. 128,010 9,216,720 128,295 9,237,240 20,070 1,445,040
Tele-Communications, Inc. Class A (NON) 139,800 5,469,675 140,700 5,504,888 21,700 849,013
Tele-Communications TCI ventures
Group Class A (NON) 193,100 3,463,731 195,300 3,503,194 30,300 543,506
Telecom Italia SPA (Italy) 497,800 3,436,273 629,200 4,343,326 127,900 882,885
Telefonaktiebolaget LM Ericsson Class B,
(Sweden) 36,628 689,556 45,380 854,320 9,816 184,795
Telesp Celular S.A. (Brazil) (NON) -- -- -- -- 900 38,341
Telfonica de Espana (Spain) 88,718 3,242,269 112,961 4,128,249 22,829 834,304
U S West, Inc. 72,508 3,802,138 72,660 3,810,115 11,335 594,420
Vodafone Group PLC (United Kingdom) 82,049 951,886 103,495 1,200,691 21,469 249,071
WinStar Communications. Inc. 46,000 1,092,500 38,700 919,125 6,000 142,500
------------ ------------ ------------
72,186,163 77,050,270 13,302,243
Transportation 1.1% 0.9% 0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Bombardier, Inc. (Canada) 138,900 1,525,675 179,472 1,971,317 38,886 427,123
British Airways PLC (United Kingdom) 236,243 1,444,616 304,516 1,862,106 60,939 372,643
Burlington Northern Santa Fe Corp. (NON) 91,690 2,934,080 91,925 2,941,600 14,415 461,280
Delta Air Lines, Inc. 5,500 534,875 5,800 564,050 900 87,525
Deutsche Lufthansa AG (Germany) 69,893 1,382,365 88,470 1,749,787 17,245 341,077
Expeditors International of Washington, Inc. 40,020 1,110,555 33,720 935,730 5,240 145,410
Mesaba Holdings, Inc. 56,100 813,450 47,100 682,950 7,300 105,850
Norfolk Southern Corp. 19,900 578,344 20,200 587,063 3,100 90,094
Peninsular and Oriental Steam Navigation
Co. (United Kingdom) 102,437 974,397 129,279 1,229,724 25,045 238,231
Southwest Airlines Co. 51,645 1,032,900 50,565 1,011,300 8,060 161,200
TNT Post Group N.V. (Netherlands) (NON) 69,564 1,774,592 87,567 2,233,852 17,852 455,408
------------ ------------ ------------
14,105,849 15,769,479 2,885,841
Utilities 2.9% 2.4% 1.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Ameritech Corp. 73,670 3,490,116 73,615 3,487,511 11,335 536,996
Bell Atlantic Corp. 36,070 1,747,141 36,965 1,790,492 5,715 276,820
BellSouth Corp. 10,705 805,551 11,225 844,681 1,725 129,806
Consolidated Edison, Inc. 39,715 2,070,144 38,875 2,026,359 6,200 323,197
Duke Energy Corp. 54,520 3,608,543 54,785 3,626,082 8,415 556,968
Electricidade de Portugal S.A. (Portugal) 72,619 1,671,943 88,145 2,029,404 17,547 403,993
Entergy Corp. 73,190 2,250,593 73,150 2,249,363 11,530 354,548
GTE Corp. 61,328 3,373,040 60,821 3,345,155 9,453 519,915
Independent Energy Holdings PLC
(United Kingdom) (NON) 80,800 414,100 68,100 349,013 10,500 53,813
Public Service Enterprise Group, Inc. 1,500 58,969 1,500 58,969 200 6,263
SBC Communications, Inc. 133,300 5,923,519 134,000 5,954,625 20,900 928,743
Scottish Power PLC (United Kingdom) 390,549 3,781,303 492,467 4,768,075 101,260 980,401
Sempra Energy (NON) 23,800 620,288 24,200 630,713 3,700 96,431
Southern Co. 33,500 986,156 34,200 1,006,763 5,200 153,075
Telebras Co. ADR (Brazil) 18,751 1,293,819 23,175 1,599,075 4,721 325,749
Telefonos de Mexico S.A. ADR Class L,
(Mexico) 15,088 667,644 19,085 844,511 3,879 171,646
Texas Utilities Co. 65,769 3,062,369 65,240 3,037,738 10,125 471,445
Veba (Vereinigte Elektrizitaets Bergwerks)
AG (Germany) 42,400 2,210,186 54,373 2,834,727 10,502 547,438
------------ ------------ ------------
38,035,424 40,483,256 6,837,247
------------ ------------ ------------
Total Common Stocks
(cost $982,548,025, $1,009,755,606
and $165,011,574) $1,032,638,273 $1,059,484,476 $175,433,309
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
5.9% 11.1% 18.6%
CORPORATE BONDS Principal Principal Principal
AND NOTES* Amount Value Amount Value Amount Value
Advertising 0.1% 0.2% 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Adams Outdoor Advertising sr. notes
10 3/4s, 2006 $ 300,000 $ 315,000 $ 530,000 $ 556,500 $ 300,000 $ 315,000
Lamar Advertising Co. sr. sub. notes
9 5/8s, 2006 340,000 360,400 800,000 848,000 255,000 270,300
Lamar Advertising Co. company guaranty
8 5/8s, 2007 35,000 35,963 70,000 71,925 20,000 20,550
Outdoor Communications Inc. sr. sub.
notes 9 1/4s, 2007 340,000 346,800 775,000 790,500 260,000 265,200
Outdoor Systems, Inc. sr. sub. notes
9 3/8s, 2006 10,000 10,425 35,000 36,488 10,000 10,425
Outdoor Systems, Inc. company guaranty
8 7/8s, 2007 125,000 127,500 200,000 204,000 225,000 229,500
------------ ------------ ------------
1,196,088 2,507,413 1,110,975
Aerospace and Defense 0.1% 0.1% 0.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Argo-Tech Corp. company guaranty
8 5/8s, 2007 30,000 28,350 80,000 75,600 20,000 18,900
Aviation Sales Co. company guaranty
8 1/8s, 2008 160,000 148,800 400,000 372,000 130,000 120,900
BE Aerospace sr. sub. notes Ser. B,
9 7/8s, 2006 275,000 291,500 650,000 689,000 400,000 424,000
BE Aerospace sr. sub. notes Ser. B,
8s, 2008 200,000 196,000 550,000 539,000 100,000 98,000
Derlan Industries Ltd. sr. notes 10s,
2007 (Canada) 150,000 135,000 425,000 382,500 125,000 112,500
K&F Industries, Inc. sr. sub. notes Ser. B,
9 1/4s, 2007 35,000 34,300 85,000 83,300 30,000 29,400
Lockheed Martin Corp. company guaranty
7 1/4s, 2006 -- -- -- -- 1,190,000 1,309,012
Raytheon Co notes 6.45s, 2002 530,000 551,295 -- --
Sequa Corp. sr. sub. notes 9 3/8s, 2003 -- -- 10,000 10,000 -- --
United Defense Industries Inc. company
guaranty 8 3/4s, 2007 35,000 35,088 85,000 85,213 -- --
------------ ------------ ------------
1,420,333 2,236,613 2,112,712
Agriculture --% --% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Premium Standard Farms, Inc. sr. secd. notes
11s, 2003 (RES) (PIK) 3,799 4,008 15,182 16,017 8,590 9,063
Purina Mills, Inc. sr. sub. notes 9s, 2010 130,000 127,400 340,000 333,200 110,000 107,800
------------ ------------ ------------
131,408 349,217 116,863
Apparel --% --% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Sassco Fashions Ltd. sr. notes 12 3/4s, 2004 60,000 63,600 315,000 333,900 50,000 53,000
Automotive 0.2% 0.3% 0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Aftermarket Technology Corp. sr. sub. notes
12s, 2004 60,000 63,750 152,000 161,500 48,000 51,000
Aftermarket Technology Corp. sr. sub.
notes Ser. D, 12s, 2004 11,000 11,688 18,000 19,125 12,000 12,750
Chrysler Corp. deb. Ser. B, 7.45s, 2097 80,000 88,171 190,000 209,407 280,000 308,599
Hawk Corp. sr. notes 10 1/4s, 2003 136,000 140,080 344,000 354,320 117,000 120,510
Hayes Wheels International, Inc. company
guaranty Ser. B, 9 1/8s, 2007 150,000 145,500 355,000 344,350 250,000 242,500
Hertz Corp. sr. notes 7s, 2028 550,000 555,566 1,385,000 1,399,016 1,600,000 1,616,192
Lear Corp. sub. notes 9 1/2s, 2006 325,000 351,000 730,000 788,400 210,000 226,800
Navistar International Corp. sr. notes
Ser. B, 8s, 2008 -- -- 450,000 447,750 -- --
Navistar International Corp. sr. notes
Ser. B, 7s, 2003 400,000 398,000 640,000 636,800 250,000 248,750
Safety Components International, Inc.
sr. sub. notes Ser. B, 10 1/8s, 2007 40,000 40,000 120,000 120,000 35,000 35,000
Talon Automotive Group 144A sr. sub.
notes 9 5/8s, 2008 220,000 209,000 560,000 532,000 190,000 180,500
------------ ------------ ------------
2,002,755 5,012,668 3,042,601
Basic Industrial Products --% --% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Newcor, Inc. company guaranty Ser. B,
9 7/8s, 2008 250,000 220,000 450,000 396,000 200,000 176,000
W. R. Carpenter North America, Inc.
company guaranty 10 5/8s, 2007 50,000 49,250 150,000 147,750 125,000 123,125
------------ ------------ ------------
269,250 543,750 299,125
Broadcasting 0.3% 0.6% 0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Allbritton Communications sr. sub. deb.
Ser. B, 9 3/4s, 2007 -- -- -- -- 200,000 205,000
American Radio Systems Corp. company
guaranty 9s, 2006 5,000 5,350 10,000 10,700 10,000 10,700
Benedek Communications Corp. sr. disc.
notes stepped-coupon zero %
(13 1/4s, 5/15/01), 2006 (STP) 100,000 74,000 200,000 148,000 75,000 55,500
Capstar Broadcasting sr. disc. notes
stepped-coupon zero %
(12 3/4s, 2/1/02), 2009 (STP) 175,000 132,125 465,000 351,075 155,000 117,025
Capstar Broadcasting sr. sub. notes
9 1/4s, 2007 230,000 234,600 850,000 867,000 195,000 198,900
Central European Media Enterprises Ltd.
sr. notes 9 3/8s, 2004 20,000 18,000 60,000 54,000 20,000 18,000
Chancellor Media Corp. sr. sub. notes
9 3/8s, 2004 -- -- 5,000 5,100 5,000 5,100
Chancellor Media Corp. sr.sub notes
Ser. B, 8 1/8s, 2007 185,000 178,525 450,000 434,250 150,000 144,750
Citadel Broadcasting Inc. sr. sub. notes
10 1/4s, 2007 400,000 428,000 124,370 133,076 40,000 42,800
Comcast Corp. sr. sub. 9 1/8s, 2006 170,000 180,200 -- -- -- --
Comcast Corp. sr. sub. notes 9 1/2s, 2008 225,000 252,056 800,000 896,200 275,000 308,069
Comcast UK Cable, Ltd. deb.
stepped-coupon zero %
(11.2s, 11/15/00), 2007 (Bermuda) (STP) 150,000 121,500 400,000 324,000 130,000 105,300
Diamond Cable Communication Co.
sr. disc. notes stepped-coupon
zero % (11 3/4s, 12/15/00), 2005
(United Kingdom) (STP) 225,000 180,563 900,000 722,250 180,000 144,450
Diamond Cable Communication Co.
sr. disc. notes stepped-coupon
zero % (10 3/4s, 2/15/02), 2007
(United Kingdom) (STP) 475,000 332,500 550,000 385,000 400,000 280,000
Echostar Satellite Broadcast Corp.
sr. disc. notes stepped-coupon
zero % (13 1/8s, 3/15/00), 2004 (STP) 50,000 44,000 300,000 264,000 40,000 35,200
Fox Family Worldwide, Inc. sr. notes
9 1/4s, 2007 350,000 330,750 800,000 756,000 280,000 264,600
Fox Family Worldwide, Inc. sr. disc.
notes stepped-coupon zero %
(10 1/4s, 11/1/02), 2007 (STP) 150,000 93,000 375,000 232,500 110,000 68,200
Fox/Liberty Networks LLC sr. notes
8 7/8s, 2007 140,000 137,200 460,000 450,800 120,000 117,600
Fox/Liberty Networks LLC sr. disc.
notes stepped-coupon zero %
(9 3/4s, 8/15/02), 2007 (STP) 100,000 66,500 300,000 199,500 100,000 66,500
Granite Broadcasting Corp. sr. sub.
notes 10 3/8s, 2005 200,000 208,000 -- -- -- --
Granite Broadcasting Corp. sr. sub.
notes 9 3/8s, 2005 200,000 198,000 225,000 222,750 150,000 148,500
Granite Broadcasting Corp. sr. sub.
notes 8 7/8s, 2008 -- -- 350,000 339,500 -- --
Gray Communications Systems, Inc.
sr. sub. notes 10 5/8s, 2006 10,000 10,450 35,000 36,575 10,000 10,450
Marcus Cable Co. (L.P.) sr. disc. notes
stepped-coupon zero %
(14 1/4s, 6/15/00), 2005 (STP) 100,000 93,000 275,000 255,750 75,000 69,750
Marcus Cable Co. (L.P.) sr. sub. disc.
notes stepped-coupon zero %
(13 1/2s, 8/1/99), 2004 (STP) 170,000 166,600 430,000 421,400 140,000 137,200
PHI Holdings, Inc. sr. notes zero %, 2001 159,000 120,538 447,000 338,871 178,000 134,942
Pegasus Media & Communications
notes Ser. B, 12 1/2s, 2005 -- -- 200,000 218,000 100,000 109,000
Radio One Inc. company guaranty
stepped-coupon Ser. B, 7s,
(12s, 5/15/00), 2004 (STP) 5,000 4,700 10,000 9,400 10,000 9,400
SFX Broadcasting, Inc. sr. sub. notes
Ser. B, 10 3/4s, 2006 247,000 269,230 658,000 717,220 197,000 214,730
Sinclair Broadcast Group, Inc. sr. sub.
notes 8 3/4s, 2007 100,000 99,000 500,000 495,000 100,000 99,000
Spanish Broadcasting sr. notes Ser. B,
11s, 2004 65,000 65,000 170,000 170,000 60,000 60,000
TV Azteca Holdings S.A. de C.V. sr.
notes 11s, 2002 (Mexico) 40,000 28,000 100,000 70,000 25,000 17,500
Young Broadcasting, Inc. company
guaranty Ser. B, 9s, 2006 75,000 75,375 165,000 165,825 60,000 60,300
Young Broadcasting Inc. company
guaranty Ser. B, 8 3/4s, 2007 75,000 74,625 250,000 248,750 75,000 74,625
------------ ------------ ------------
4,221,387 9,942,492 3,333,091
Building and Construction 0.1% 0.1% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Albecca Inc. 144A sr. sub. notes
10 3/4s, 2008 130,000 123,500 330,000 313,500 110,000 104,500
American Architectural Products
Corp. company guaranty 11 3/4s, 2007 35,000 32,200 90,000 82,800 25,000 23,000
Atrium Companies Inc. 144A sub.
notes 10 1/2s, 2006 230,000 227,700 490,000 485,100 180,000 178,200
Beazer Homes USA company
guaranty 8 7/8s, 2008 50,000 46,500 150,000 139,500 40,000 37,200
D.R. Horton Inc. company guaranty
10s, 2006 120,000 124,800 290,000 301,600 100,000 104,000
GS Superhighway Holdings sr. notes
9 7/8s, 2004 220,000 92,400 540,000 226,800 170,000 71,400
Jackson Products, Inc. 144A company
guaranty 9 1/2s, 2005 60,000 57,300 150,000 143,250 50,000 47,750
M.D.C. Holdings, Inc. notes Ser. B,
11 1/8s, 2003 75,000 77,625 200,000 207,000 75,000 77,625
Morris Material Handling, Inc. company
guaranty 9 1/2s, 2008 120,000 86,400 300,000 216,000 100,000 72,000
Presley Cos. sr. notes 12 1/2s, 2001 40,000 35,600 110,000 97,900 -- --
Republic Group Inc. 144A sr. sub. notes
9 1/2s, 2008 50,000 47,500 140,000 133,000 40,000 38,000
Waxman Industries Inc. sr. notes
stepped-coupon Ser. B, zero %
(12 3/4s, 6/1/99), 2004 (STP) 10,000 9,300 10,000 9,300 10,000 9,300
------------ ------------ ------------
960,825 2,355,750 762,975
Business Equipment and Services 0.1% 0.1% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Cex Holdings, Inc. 144A sr. sub. notes
9 5/8s, 2008 110,000 101,200 280,000 257,600 90,000 82,800
Iron Mountain, Inc. med. term notes
company guaranty 10 1/8s, 2006 50,000 52,500 200,000 210,000 200,000 210,000
Iron Mountain, Inc. company guaranty
8 3/4s, 2009 150,000 145,500 170,000 164,900 50,000 48,500
Outsourcing Solutions, Inc. sr. sub. notes
Ser. B, 11s, 2006 25,000 23,938 75,000 71,813 25,000 23,938
U.S. Office Products Co. 144A sr .sub
notes 9 3/4s, 2008 220,000 183,700 570,000 475,950 120,000 100,200
United Stationer Supply, Inc. sr. sub.
notes 12 3/4s, 2005 207,000 230,805 503,000 560,845 182,000 202,930
------------ ------------ ------------
737,643 1,741,108 668,368
Cable Television 0.1% 0.2% 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Acme Television sr. disc. notes
stepped-coupon zero %
(10 7/8s, 9/30/00), 2004 (STP) 55,000 42,900 140,000 109,200 40,000 31,200
CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2023 10,000 10,700 10,000 10,700 10,000 10,700
CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2013 375,000 405,000 1,150,000 1,242,000 300,000 324,000
CSC Holdings, Inc. sr. sub. notes 9 1/4s, 2005 10,000 10,500 10,000 10,500 10,000 10,500
Globo Communicacoes 144A sr. notes
10 5/8s, 2008 (Brazil) 90,000 45,900 230,000 117,300 80,000 40,800
Grupo Televisa S.A. 144A sr. notes
11 7/8s, 2006 (Mexico) 250,000 227,500 600,000 546,000 200,000 182,000
Grupo Televisa S.A. sr. disc. notes
stepped-coupon zero %
(13 1/4s, 5/15/01), 2008 (Mexico) (STP) 250,000 185,000 600,000 444,000 200,000 148,000
Jones Intercable, Inc. sr. sub. deb.
10 1/2s, 2008 160,000 176,000 415,000 456,500 140,000 154,000
Jones Intercable, Inc. sr. notes
7 5/8s, 2008 50,000 51,000 100,000 102,000 -- --
Lenfest Communications, Inc.
sr. sub. notes 10 1/2s, 2006 100,000 112,000 300,000 336,000 100,000 112,000
Lenfest Communications, Inc. 144A
sr. sub. notes 8 1/4s, 2008 150,000 151,500 350,000 353,500 100,000 101,000
Supercanal Holdings S.A. 144A sr. notes
11 1/2s, 2005 (Argentina) 120,000 50,400 300,000 126,000 100,000 42,000
------------ ------------ ------------
1,468,400 3,853,700 1,156,200
Chemicals 0.1% 0.2% 0.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Geo Specialty Chemicals 144A sr. sub.
notes 10 1/8s, 2008 100,000 96,000 240,000 230,400 70,000 67,200
Huntsman Corp. 144A sr. sub. notes
FRN 9.031s, 2007 120,000 114,000 300,000 285,000 100,000 95,000
Solutia Inc. bonds 6.72s, 2037 560,000 578,043 1,355,000 1,398,658 1,575,000 1,625,747
Sterling Chemicals Holdings sr. disc.
notes stepped-coupon zero %
(13 1/2s, 8/15/01), 2008 (STP) 100,000 40,000 270,000 108,000 100,000 40,000
Trikem S.A. 144A bonds 10 5/8s,
2007 (Brazil) 120,000 66,000 305,000 167,750 100,000 55,000
Union Carbide Global Enterprises
sr. sub. notes Ser. B, 12s, 2005 80,000 80,000 210,000 210,000 90,000 90,000
------------ ------------ ------------
974,043 2,399,808 1,972,947
Computer Services and Software 0.1% 0.1% 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Concentric Network Corp. sr. notes
12 3/4s, 2007 30,000 27,750 75,000 69,375 30,000 27,750
Dell Computer Corp. sr. secd. notes
7.1s, 2028 290,000 302,163 620,000 646,003 975,000 1,015,892
IPC Information Systems sr. disc.
notes stepped-coupon zero %
(10 7/8s, 11/1/01), 2008 (STP) 270,000 180,900 680,000 455,600 230,000 154,100
PSINet, Inc. sr. notes Ser. B, 10s, 2005 150,000 150,000 380,000 380,000 130,000 130,000
Unisys Corp. sr. notes 7 7/8s, 2008 100,000 99,750 225,000 224,438 75,000 74,813
------------ ------------ ------------
760,563 1,775,416 1,402,555
Conglomerates --% --% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Axia, Inc. 144A sr. sub. notes 10 3/4s, 2008 160,000 154,400 400,000 386,000 130,000 125,450
Cia Latino Americana 144A company
guaranty 11 1/8s, 2004 (Argentina) 25,000 18,000 75,000 54,000 25,000 18,000
------------ ------------ ------------
172,400 440,000 143,450
Consumer Durable Goods --% 0.1% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Hedstrom Holdings, Inc. sr. disc. notes
stepped-coupon zero % (12s, 6/1/02),
2009 (STP) 15,000 9,000 45,000 27,000 15,000 9,000
Icon Fitness Corp. 144A sr. disc. notes
stepped-coupon Ser. B, zero %
(14s, 11/15/01), 2006 (STP) 90,000 4,500 215,000 10,750 95,000 4,750
Iron Age Corp. 144A sr. sub. notes 9 7/8s,
2008 230,000 198,950 585,000 506,025 190,000 164,350
Sealy Mattress Co. sr. sub. notes Ser. B,
9 7/8s, 2007 35,000 34,300 80,000 78,400 25,000 24,500
Selmer Co., Inc. sr. sub. notes 11s, 2005 160,000 166,400 250,000 260,000 25,000 26,000
------------ ------------ ------------
413,150 882,175 228,600
Consumer Non Durables --% 0.1% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Amscan Holdings, Inc. sr. sub. notes
9 7/8s, 2007 20,000 17,600 60,000 52,800 20,000 17,600
Chattem, Inc. company guaranty Ser. B,
8 7/8s, 2008 70,000 66,500 170,000 161,500 60,000 57,000
Guess Jeans, Inc. sr. sub. notes 9 1/2s,
2003 410,000 385,400 1,110,000 1,043,400 705,000 662,700
Packaged Ice, Inc. company guaranty
Ser. B, 9 3/4s, 2005 65,000 61,100 190,000 178,600 60,000 56,400
------------ ------------ ------------
530,600 1,436,300 793,700
Consumer Products 0.1% 0.2% 0.6%
- -----------------------------------------------------------------------------------------------------------------------------------
French Fragrances, Inc. sr. notes Ser. B,
10 3/8s, 2007 30,000 30,900 85,000 87,550 30,000 30,900
French Fragrances, Inc. company guaranty
Ser. D, 10 3/8s, 2007 50,000 50,000 130,000 130,000 40,000 40,000
Philip Morris Companies, Inc. notes
7 1/2s, 2004 570,000 620,855 1,130,000 1,230,819 1,845,000 2,009,611
Philip Morris Companies, Inc. notes
7 1/2s, 2002 260,000 275,184 685,000 725,004 915,000 968,436
Revlon Consumer Products sr. sub.
notes 8 5/8s, 2008 600,000 589,500 1,500,000 1,473,750 500,000 491,250
------------ ------------ ------------
1,566,439 3,647,123 3,540,197
Consumer Services 0.1% 0.3% 0.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Century Communications Corp.
sr. notes 9 1/2s, 2005 125,000 135,938 165,000 179,438 50,000 54,375
Coinmach Corp. sr. notes 11 3/4s, 2005 225,000 236,250 565,000 593,250 200,000 210,000
Consumers International 144A 10 1/4s,
2005 10,000 10,300 5,000 5,150 5,000 5,150
FRD Acquisition Co. sr. notes Ser. B,
12 1/2s, 2004 75,000 79,500 200,000 212,000 75,000 79,500
Fitzgeralds Gaming Corp. company
guaranty Ser. B, 12 1/4s, 2004 190,000 129,200 460,000 312,800 160,000 108,800
HMH Properties, Inc. company
guaranty Ser. B, 7 7/8s, 2008 300,000 296,250 770,000 760,375 250,000 246,875
Hollinger International Publishing, Inc.
company guaranty 9 1/4s, 2007 50,000 51,375 100,000 102,750 -- --
Host Marriott Travel Plaza sr. notes
Ser. B, 9 1/2s, 2005 390,000 403,650 990,000 1,024,650 325,000 336,375
John Q Hammons Hotels, Inc. 1st mtge.
8 7/8s, 2004 75,000 70,500 150,000 141,000 200,000 188,000
Sun International Hotels Ltd. sr. sub.
notes 8 5/8s, 2007 150,000 150,000 400,000 400,000 125,000 125,000
Viasystems, Inc. sr. sub notes 9 3/4s, 2007 60,000 55,200
Viasystems, Inc. 144A sr. notes 9 3/4s, 2007 50,000 42,500 650,000 552,500 225,000 191,250
------------ ------------ ------------
1,660,663 4,283,913 1,545,325
Electronics and Electrical Equipment 0.1% 0.2% 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Celestica International Ltd. 144A sr. sub.
notes 10 1/2s, 2006 (Canada) 20,000 21,200 55,000 58,300 20,000 21,200
Cirent Semiconductor 144A sr. sub. notes
10.14s, 2004 32,304 31,981 92,821 91,893 -- --
Cirent Semiconductor sr. sub. notes
10.22s, 2002 30,639 30,333 87,481 86,606 29,823 29,525
DII Group, Inc. (The) sr. sub. notes
8 1/2s, 2007 290,000 263,900 110,000 100,100 40,000 36,400
Details, Inc. sr. sub. notes Ser. B, 10s, 2005 35,000 33,600 100,000 96,000 30,000 28,800
Dobson Communications Corp. 11 3/4s,
2007 300,000 300,000 755,000 755,000 275,000 275,000
Fairchild Semiconductor Corp. 144A
sr. sub. notes 11.74s, 2008 202,065 178,828 344,700 305,060 166,407 147,270
Fairchild Semiconductor Corp. sr. sub.
notes 10 1/8s, 2007 200,000 180,000 775,000 697,500 175,000 157,500
Flextronics International Ltd. sr. sub.
notes Ser. B, 8 3/4s, 2007 50,000 47,500 120,000 114,000 35,000 33,250
HCC Industries, Inc. company guaranty
10 3/4s, 2007 40,000 40,000 110,000 110,000 40,000 40,000
Moog, Inc. sr. sub. notes Ser. B, 10s, 2006 20,000 20,800 60,000 62,400 20,000 20,800
Motors and Gears, Inc. sr. notes Ser. D,
10 3/4s, 2006 100,000 97,000 255,000 247,350 80,000 77,600
Samsung Electronics 144A company
guaranty 9 3/4s, 2003 30,000 22,050 70,000 51,450 30,000 22,050
Wavetek Corp. company guaranty
10 1/8s, 2007 25,000 23,000 60,000 55,200 20,000 18,400
Zilog, Inc. company guaranty Ser. B,
9 1/2s, 2005 200,000 124,000 510,000 316,200 170,000 105,400
------------ ------------ ------------
1,414,192 3,147,059 1,013,195
Energy-Related 0.1% 0.1% 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
CalEnergy, Inc. sr. notes 9 1/2s, 2006 200,000 222,522 400,000 450,440 150,000 167,097
Enron Corp. notes 6.95s, 2028 225,000 223,043 485,000 480,781 740,000 733,562
Gothic Production Corp. company
guaranty Ser. B, 11 1/8s, 2005 100,000 73,000 240,000 175,200 80,000 58,400
Panda Global Energy Co. company
guaranty 12 1/2s, 2004 10,000 6,000 10,000 6,000 5,000 3,000
RAM Energy Inc. sr. notes 11 1/2s, 2008 70,000 64,400 190,000 174,800 60,000 55,200
York Power Funding 144A notes 12s, 2007 140,000 135,800 360,000 349,200 120,000 116,400
------------ ------------ ------------
724,765 1,636,421 1,133,659
Entertainment 0.3% 0.5% 0.8%
- -----------------------------------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc. sr. sub. notes
9 1/2s, 2009 135,000 126,225 340,000 317,900 110,000 102,850
Argosy Gaming Co. company guaranty
13 1/4s, 2004 180,000 191,250 440,000 467,500 150,000 159,375
Casino America, Inc. sr. notes 12 1/2s, 2003 55,000 59,400 160,000 172,800 50,000 54,000
Cinemark USA, Inc. sr. sub. notes 9 5/8s,
2008 205,000 209,100 490,000 499,800 160,000 163,200
Coast Hotels & Casinos, Inc. 1st mtge.
company guaranty Ser. B, 13s, 2002 160,000 179,200 405,000 453,600 135,000 151,200
Colorado Gaming & Entertainment Co.
sr. notes 12s, 2003 50,000 53,250 275,000 292,875 50,000 53,250
Isle of Capri Black Hawk LLC 1st
mortgage Ser. B, 13s, 2004 30,000 30,000 80,000 80,000 30,000 30,000
Mohegan Tribal Gaming Auth. sr. notes
Ser. B, 13 1/2s, 2002 215,000 266,600 535,000 663,400 175,000 217,000
News America Holdings, Inc. deb.
7 3/4s, 2045 100,000 105,653 205,000 216,589 325,000 343,372
Premier Parks, Inc. sr. notes Ser. A,
12s, 2003 105,000 113,400 270,000 291,600 90,000 97,200
Premier Parks, Inc. sr. notes 9 1/4s, 2006 225,000 220,500 575,000 563,500 185,000 181,300
SFX Entertainment, Inc. 144A company
guaranty Ser. B, 9 1/8s, 2008 95,000 88,350 245,000 227,850 80,000 74,400
Silver Cinemas Intl.144A sr. sub. notes
10 1/2s, 2005 130,000 123,825 320,000 304,800 110,000 104,775
Six Flags Corp. sr. sub. notes 12 1/4s, 2005 445,000 485,050 1,050,000 1,144,500 405,000 441,450
Time Warner Entertainment Co. notes
8 7/8s, 2012 225,000 280,463 400,000 498,600 580,000 722,970
Time Warner, Inc. notes 7 3/4s, 2005 -- -- 165,000 183,955 995,000 1,109,306
Trump A.C. 1st mtge. 11 1/4s, 2006 155,000 129,425 375,000 313,125 105,000 87,675
Trump Castle Funding 144A sub.
notes 10 1/4s, 2003 260,000 262,600 660,000 666,600 220,000 222,200
Viacom International, Inc. sub. deb. 8s,
2006 500,000 503,750 1,000,000 1,007,500 400,000 403,000
------------ ------------ ------------
3,428,041 8,366,494 4,718,523
Environmental Control --% 0.1% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Allied Waste Industries, Inc. company
guaranty 10 1/4s, 2006 75,000 81,750 195,000 212,550 -- --
Allied Waste Industries, Inc. sr. disc.
notes stepped-coupon zero %
(11.3s, 6/1/02), 2007 (STP) 145,000 107,300 380,000 281,200 130,000 96,200
ATC Group Services Inc. company
guaranty 12s, 2008 40,000 23,200 110,000 63,800 35,000 20,300
U.S. Filter Corp. 144A bonds 6 1/2s, 2003 -- -- -- -- 1,180,000 1,187,375
WMX Technologies Inc. notes 7.1s, 2026 300,000 322,185 685,000 735,656 1,010,000 1,084,690
------------ ------------ ------------
534,435 1,293,206 2,388,565
Food and Beverages 0.1% 0.2% 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Ameriserve Food Co. company
guaranty 10 1/8s, 2007 35,000 30,800 90,000 79,200 30,000 26,400
Ameriserve Food Co. company
guaranty 8 7/8s, 2006 70,000 61,600 160,000 140,800 50,000 44,000
Aurora Foods, Inc. sr. sub. notes Ser. B,
9 7/8s, 2007 20,000 21,400 60,000 64,200 20,000 21,400
Aurora Foods, Inc. 144A ser. sub. notes
Ser. D, 9 7/8s, 2007 155,000 165,850 385,000 411,950 120,000 128,400
Canandaigua Wine Co. sr. sub. notes
Ser. C, 8 3/4s, 2003 205,000 209,100 605,000 617,100 155,000 158,100
Canandaigua Wine Co. sr. sub. notes
8 3/4s, 2003 -- -- -- -- 100,000 100,750
Fleming Companies, Inc. company
guaranty Ser. B, 10 1/2s, 2004 60,000 58,200 170,000 164,900 50,000 48,500
RAB Enterprises, Inc. 144A sr. notes
10 1/2s, 2005 200,000 186,000 500,000 465,000 160,000 148,800
Stater Brothers Holdings 144A sr. sub.
notes 9s, 2004 100,000 93,500 420,000 392,700 255,000 238,425
Windy Hill Pet Food Co. sr. sub. notes
9 3/4s, 2007 -- -- 45,000 45,450 15,000 15,150
------------ ------------ ------------
826,450 2,381,300 929,925
Health Care 0.3% 0.6% 0.6%
- -----------------------------------------------------------------------------------------------------------------------------------
Conmed Corp. company guaranty 9s, 2008 80,000 75,400 210,000 197,925 65,000 61,263
Extendicare Health Services, Inc. company
guaranty 9.35s, 2007 300,000 285,000 640,000 608,000 250,000 237,500
Fresenius Medical Capital Trust I company
guaranty 9s, 2006 (Germany) 500,000 497,500 760,000 756,200 500,000 497,500
Fresenius Medical Capital Trust II company
guaranty 7 7/8s, 2008 (Germany) 205,000 189,625 500,000 462,500 140,000 129,500
Genesis Health Ventures, Inc. sr. sub. notes
9 1/4s, 2006 50,000 48,250 375,000 361,875 50,000 48,250
Global Health Sciences company guaranty
11s, 2008 160,000 139,200 410,000 356,700 130,000 113,100
Hudson Respiratory Care, Inc. sr. sub.
notes 9 1/8s, 2008 130,000 100,750 320,000 248,000 110,000 85,250
Integrated Health Services, Inc. sr. sub.
notes Ser. A, 9 1/2s, 2007 160,000 155,200 400,000 388,000 140,000 135,800
Integrated Health Services, Inc. sr. sub.
notes Ser. A, 9 1/4s, 2008 150,000 144,000 380,000 364,800 120,000 115,200
Magellan Health Services, Inc. 144A
sr. sub. notes 9s, 2008 200,000 170,000 510,000 433,500 170,000 144,500
Manor Care, Inc. sr. notes 7 1/2s, 2006 190,000 196,530 520,000 537,872 660,000 682,684
Mariner Post-Acute Network, Inc.
sr. sub. notes Ser. B, 9 1/2s, 2007 350,000 322,000 900,000 828,000 170,000 156,400
Mariner Post-Acute Network, Inc.
sr. sub. notes stepped-coupon Ser. B,
zero % (10 1/2s, 11/1/02), 2007 70,000 38,150 160,000 87,200 100,000 54,500
MedPartners, Inc. sr. notes 7 3/8s, 2006 255,000 210,666 640,000 528,730 210,000 173,489
MedPartners, Inc. sr. sub. notes 6 7/8s, 2000 10,000 8,457 20,000 16,914 -- --
Multicare Cos., Inc. sr. sub. notes 9s, 2007 400,000 376,000 1,020,000 958,800 330,000 310,200
Paracelsus Healthcare sr. sub. notes 10s,
2006 150,000 138,000 355,000 326,600 115,000 105,800
Paragon Corp. Holdings, Inc. company
guaranty Ser. B, 9 5/8s, 2008 80,000 60,000 190,000 142,500 60,000 45,000
Patriot American Hospital term loan
Ser. B, 8 1/8s, 2003 -- -- 499,583 489,592 -- --
PharMerica, Inc. company guaranty
8 3/8s, 2008 100,000 90,000 260,000 234,000 90,000 81,000
Quorum Health Group, Inc. sr. sub.
notes 8 3/4s, 2005 -- -- -- -- 100,000 102,500
Sun Healthcare Group, Inc. sr. sub.
notes Ser. B, 9 1/2s, 2007 75,000 67,500 175,000 157,500 -- --
Tenet Healthcare Corp. sr. notes 8s, 2005 150,000 152,250 -- -- 125,000 126,875
Tenet Healthcare Corp. sr. sub. notes
8 5/8s, 2007 250,000 259,375 975,000 1,011,563 375,000 389,063
------------ ------------ ------------
3,723,853 9,496,771 3,795,374
Insurance and Finance 0.9% 1.8% 5.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Aames Financial Corp. sr. notes 9 1/8s,
2003 230,000 207,000 580,000 522,000 190,000 171,000
AFC Capital Trust company guaranty
Ser. B, 8.207s, 2027 285,000 322,703 675,000 764,296 970,000 1,098,321
Allstate Financing II company guaranty
7.83s, 2045 -- -- 200,000 212,026 -- --
American General Institute 144A
company guaranty 8 1/8s, 2046 480,000 541,800 1,190,000 1,343,213 1,390,000 1,568,963
Amvescap Corp. PLC sr. notes 6.6s,
2005 (United Kingdom) 330,000 333,713 -- -- 1,150,000 1,162,938
Banponce Financial Corp. med. term
note 7 1/8s, 2002 205,000 216,211 530,000 558,986 740,000 780,471
Chevy Chase Savings Bank Inc. sub.
deb. 9 1/4s, 2005 120,000 116,400 300,000 291,000 100,000 97,000
Chevy Chase Savings Bank Inc. sub.
deb. 9 1/4s, 2008 175,000 169,750 450,000 436,500 125,000 121,250
Colonial Capital I 144A company
guaranty 8.92s, 2027 35,000 36,127 90,000 92,897 30,000 30,966
Contifinancial Corp. sr. notes 8 3/8s, 2003 120,000 120,110 305,000 305,281 105,000 105,097
DTI Holdings Inc. sr. disc. notes,
stepped-coupon Ser. B, zero %
(12 1/2s, 03/01/03), 2008 (STP) 605,000 229,900 1,445,000 549,100 480,000 182,400
Delta Financial Corp. sr. notes 9 1/2s, 2004 110,000 66,000 300,000 180,000 90,000 54,000
Dime Capital Trust I bank guaranty Ser. A,
9.33s, 2027 35,000 39,684 90,000 102,046 30,000 34,015
Dine S.A. de C.V. 144A company
guaranty 8 3/4s, (Mexico) 35,000 22,750 85,000 55,250 25,000 16,250
Dollar Financial Group Inc. sr. notes
Ser. A, 10 7/8s, 2006 25,000 24,250 70,000 67,900 25,000 24,250
Fannie Mae sr. unsub. 6 3/8s, 2007 715,000 448,787 1,755,000 1,101,568 815,000 511,554
Fannie Mae notes 6s, 2008 1,155,000 1,245,229 2,680,000 2,889,362 3,870,000 4,172,324
First Financial Caribbean Corp. sr. notes
7.84s, 2006 90,000 96,489 235,000 251,944 340,000 364,514
First Nationwide Holdings sr. notes
12 1/2s, 2003 -- -- 100,000 114,750 -- --
First Nationwide Holdings sr. sub.
notes 10 5/8s, 2003 100,000 116,000 255,000 295,800 90,000 104,400
First Nationwide Holdings sr. sub.
notes 9 1/8s, 2003 -- -- -- -- 150,000 168,000
Firstar Bank Milwaukee sr. bank notes
6 1/4s, 2002 250,000 260,900 600,000 626,160 710,000 740,956
Fleet Financial Group, Inc. sub. deb.
6 7/8s, 2028 325,000 332,306 715,000 731,073 1,130,000 1,155,402
Fuji JGB Inv. LLC 144A FLIRB bonds
9.87s, 2049 350,000 155,236 790,000 350,389 965,000 428,006
GS Escrow Corp. 144A sr. notes
7 1/8s, 2005 325,000 320,856 800,000 789,800 275,000 271,494
Greenpoint Bank sr. notes 6.7s, 2002 375,000 383,220 820,000 837,974 1,255,000 1,282,510
Greenpoint Capital Trust I company
guaranty 9.1s, 2027 35,000 37,763 90,000 97,106 30,000 32,369
Imperial Credit Capital Trust I 144A
company guaranty 10 1/4s, 2002 100,000 80,000 275,000 220,000 200,000 160,000
Imperial Credit Industries, Inc. sr. notes
9 7/8s, 2007 40,000 30,800 100,000 77,000 30,000 23,100
Investors Capital Trust I company guaranty
Ser. B, 9.77s, 2027 -- -- 15,000 16,913 -- --
Korea Development Bank bonds 7 3/8s,
2004 (Korea) 50,000 38,979 125,000 97,448 50,000 38,979
Korea Development Bank Bonds 7 1/8s,
2001 (Korea) 100,000 87,301 250,000 218,253 75,000 65,476
Kreditanstalt Fuer Wiederauf bonds 5s,
2009 (Germany) 1,950,000 1,238,466 6,010,000 3,817,016 3,550,000 2,254,644
Merita Bank Ltd. sub. notes 6 1/2s,
2006 (Finland) 295,000 298,953 730,000 739,782 1,060,000 1,074,204
Money Store, Inc. notes 8.05s, 2002 165,000 179,753 360,000 392,188 525,000 571,940
NationsBank Corp. sub. notes 6 7/8s, 2005 610,000 651,639 1,515,000 1,618,414 -- --
Nationwide Credit Inc. 144A sr. notes
10 1/4s, 2008 160,000 152,000 500,000 475,000 180,000 171,000
Netia Holdings B.V. 144A company
guaranty stepped-coupon zero %
(11 1/4s, 11/1/01), 2007 (Poland) (STP) 20,000 8,200 40,000 16,400 10,000 4,100
Netia Holdings B.V. 144A notes 10 1/4s,
(Poland) 30,000 22,800 60,000 45,600 20,000 15,200
North Fork Capital Trust I company
guaranty 8.7s, 2026 10,000 11,251 15,000 16,876 5,000 5,625
Ocwen Capital Trust I company
guaranty 10 7/8s, 2027 20,000 18,000 50,000 45,000 15,000 13,500
Ocwen Federal Bank FSB sub. deb. 12s, 2005 5,000 5,100 10,000 10,200 5,000 5,100
Ocwen Financial Corp. notes 11 7/8s, 2003 10,000 10,000 10,000 10,000 10,000 10,000
Orange Cogen Funding 144A company
guaranty 8.175s, 2022 75,000 82,680 195,000 214,968 275,000 303,160
PRT Funding Corp. sr. notes 11 5/8s, 2004 (NON) 95,000 61,750 225,000 146,250 75,000 48,750
Paine Webber Group, Inc. sr. notes 6.55s,
2008 505,000 508,111 1,095,000 1,101,745 1,705,000 1,715,503
Peoples Bank- Bridgeport sub. notes 7.2s,
2006 240,000 238,282 565,000 560,955 865,000 858,807
Peoples Heritage Capital Trust company
guaranty Ser. B, 9.06s, 2027 -- -- 165,000 196,857 -- --
Phoenix Home Life Mutual Insurance
Co. 144A notes 6.95s, 2006 210,000 226,086 555,000 597,513 780,000 839,748
Pindo Deli Finance Mauritius Ltd.
company guaranty 10 3/4s, 2007
(Indonesia) 90,000 36,000 215,000 86,000 65,000 26,000
Pioneer Americas Acquisition 144A
sr. notes 9 1/4s, 2007 35,000 28,350 90,000 72,900 30,000 24,300
Polytama International notes 11 1/4s, 2007 60,000 9,000 150,000 22,500 50,000 7,500
Popular, Inc. med. term notes 6.4s, 2000 375,000 378,983 920,000 929,770 1,095,000 1,106,629
Provident Capital Trust company guaranty
8.6s, 2026 70,000 77,705 190,000 210,913 -- --
Provident Companies, Inc. bonds 7.405s,
2038 415,000 419,669 910,000 920,238 1,370,000 1,385,413
Reliance Group Holdings, Inc. sr. notes 9s,
2000 -- -- 145,000 149,467 -- --
Riggs Capital Trust 144A bonds 8 5/8s,
2026 35,000 36,948 90,000 95,009 40,000 42,226
Sampoerna International Finance Co.
144A company guaranty 8 3/8s, 2006
(Indonesia) 170,000 69,700 480,000 196,800 545,000 223,450
Southern Investments Service Co.
sr. notes 6.8s, 2006 (United Kingdom) 585,000 616,093 1,310,000 1,379,627 1,980,000 2,085,237
Sovereign Capital Trust company guaranty
9s, 2027 50,000 53,334 130,000 138,668 45,000 48,001
Sparbanken Sverige AB (Swedbank)
144A sub. 7 1/2s, 2006 (Sweden) 175,000 176,341 470,000 473,600 660,000 665,056
St. Paul Bancorp sr. notes 7 1/8s, 2004 380,000 409,401 875,000 942,699 1,275,000 1,373,647
TIG Holdings, Inc. notes 8 1/8s, 2005 275,000 302,902 615,000 677,398 925,000 1,018,851
Webster Capital Trust I 144A bonds
9.36s, 2027 5,000 5,300 20,000 21,200 10,000 10,600
------------ ------------ ------------
12,413,061 30,517,588 30,874,196
Lodging --% --% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Epic Resorts LLP 144A sr. notes 13s, 2005 100,000 95,000 250,000 237,500 80,000 76,000
Raintree Resorts International, Inc.
sr. notes Ser. B, 13s, 2004 55,000 41,250 140,000 105,000 40,000 30,000
------------ ------------ ------------
136,250 342,500 106,000
Medical Supplies and Devices 0.1% 0.2% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
ALARIS Medical Systems, Inc. company
guaranty 9 3/4s, 2006 100,000 93,000 265,000 246,450 115,000 106,950
Graphic Controls Corp. sr. sub. notes
Ser. A, 12s, 2005 100,000 113,000 270,000 305,100 90,000 101,700
Imagyn Medical Technologies, Inc.
company guaranty 12 1/2s, 2004 85,000 23,375 230,000 63,250 75,000 20,625
Kinetic Concepts, Inc. company guaranty
Ser. B, 9 5/8s, 2007 110,000 108,900 355,000 351,450 100,000 99,000
Mediq, Inc. 144A sr. sub. notes 11s, 2008 170,000 159,800 410,000 385,400 140,000 131,600
Tyco International Ltd. company guaranty
6 3/8s, 2005 250,000 263,515 555,000 585,003 850,000 895,951
Tyco International Ltd. company guaranty
6 1/4s, 2003 260,000 269,217 570,000 590,207 875,000 906,019
Wright Medical Technology, Inc. 144A
notes Ser. C, 11 3/4s, 2000 200,000 179,000 400,000 358,000 100,000 89,500
------------ ------------ ------------
1,209,807 2,884,860 2,351,345
Metals and Mining 0.1% 0.1% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Acindar Industria Argentina de Aceros
S.A. bonds 11 1/4s, 2004 (Argentina) 30,000 20,400 80,000 54,400 25,000 17,000
AK Steel Corp. sr. notes 9 1/8s, 2006 70,000 70,000 180,000 180,000 75,000 75,000
Ameristeel Corp. company guaranty
Ser. B, 8 3/4s, 2008 155,000 142,600 385,000 354,200 130,000 119,600
Anker Coal Group, Inc. sr. notes Ser. B,
9 3/4s, 2007 600,000 372,000 1,125,000 697,500 400,000 248,000
Continental Global Group sr. notes Ser. B,
11s, 2007 65,000 56,550 170,000 147,900 60,000 52,200
Freeport-McMoRan Copper & Gold Co.,
Inc. sr. notes 7 1/2s, 2006 100,000 62,049 240,000 148,918 365,000 226,479
Lodestar Holding, Inc. 144A sr. notes
11 1/2s, 2005 100,000 82,000 210,000 172,200 80,000 65,600
WHX Corp. sr. notes 10 1/2s, 2005 100,000 92,000 240,000 220,800 80,000 73,600
Weirton Steel Co. sr. notes 11 3/8s, 2004 110,000 99,000 50,000 45,000 -- --
------------ ------------ ------------
996,599 2,020,918 877,479
Oil and Gas 0.3% 0.6% 1.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Abraxas Petroleum Corp. company
guaranty Ser D, 11 1/2s, 2004 130,000 101,400 340,000 265,200 115,000 89,700
American Eco Corp. company guaranty
Ser. B, 9 5/8s, 2008 220,000 165,000 560,000 420,000 180,000 135,000
Benton Oil & Gas Co. sr. notes 11 5/8s,
2003 100,000 85,000 125,000 106,250 -- --
Benton Oil & Gas Co. sr. notes 9 3/8s, 2007 15,000 11,775 45,000 35,325 20,000 15,700
CIA Naviera Perez Companc S.A.
144A bonds 9s, 2004 (Argentina) 35,000 34,300 90,000 88,200 30,000 29,400
Cliffs Drilling Co. company guaranty
Ser. D, 10 1/4s, 2003 200,000 210,000 150,000 157,500 500,000 525,000
Coastal Corp. bonds 6.95s, 2028 340,000 328,811 750,000 725,318 1,165,000 1,126,660
Coastal Corp. deb. 6 1/2s, 2008 -- -- -- -- 1,200,000 1,229,244
Coho Energy, Inc. sr. sub. notes 8 7/8s,
2007 40,000 36,400 110,000 100,100 30,000 27,300
Columbia Gas System, Inc. notes Ser. B,
6.61s, 2002 210,000 217,592 530,000 549,160 -- --
Columbia Gas System, Inc. notes Ser. E,
7.32s, 2010 150,000 163,317 400,000 435,512 500,000 544,390
Costilla Energy, Inc. sr. notes 10 1/4s, 2006 15,000 13,050 280,000 243,600 90,000 78,300
Dailey International, Inc. company
guaranty Ser. B, 9 1/2s, 2008 100,000 60,000 240,000 144,000 80,000 48,000
Eagle Geophysical, Inc. 144A sr. notes
10 3/4s, 2008 95,000 83,600 240,000 211,200 80,000 70,400
Enron Corp. notes 6.4s, 2006 115,000 117,706 245,000 250,765 375,000 383,824
Flores & Rucks, Inc. sr. sub. notes 9 3/4s,
2006 35,000 36,488 90,000 93,825 -- --
Global Marine Inc. notes 7s, 2028 510,000 484,403 1,120,000 1,063,787 1,760,000 1,671,666
Gothic Energy Corp. sr. disc. notes,
stepped-coupon Ser. B, zero %
(14 1/8s, 5/1/03), 2006 (STP) 20,000 8,000 50,000 20,000 20,000 8,000
K N Energy, Inc. deb. 7 1/4s, 2028 100,000 98,938 215,000 212,717 330,000 326,495
K N Energy, Inc. sr. notes 6.45s, 2003 220,000 226,125 475,000 488,224 705,000 724,627
Michael Petroleum Corp. sr. notes Ser. B,
11 1/2s, 2005 90,000 80,100 220,000 195,800 70,000 62,300
Northern Offshore 144A company
guaranty 10s, 2005 100,000 74,000 270,000 199,800 90,000 66,600
Pacalta Resources Ltd. sr. notes Ser. B,
10 3/4s, 2004 (Canada) 135,000 121,500 345,000 310,500 105,000 94,500
Panaco, Inc. company guaranty Ser. B,
10 5/8s, 2004 250,000 200,000 400,000 320,000 250,000 200,000
Petro Geo-Services AS ADR notes
7 1/2s, 2007 (Norway) 95,000 101,338 255,000 272,014 365,000 389,353
Pogo Producing Co. sr. sub. notes Ser. B,
8 3/4s, 2007 120,000 114,000 315,000 299,250 105,000 99,750
Saga Petroleum ASA deb. 7 1/4s, 2027
(Norway) 200,000 180,744 500,000 451,860 575,000 519,639
Seven Seas Petroleum sr. notes Ser. B,
12 1/2s, 2005 80,000 65,200 200,000 163,000 60,000 48,900
Snyder Oil Corp. sr. sub. notes 8 3/4s,
2007 35,000 35,175 90,000 90,450 30,000 30,150
Southwest Royalties, Inc. company
guaranty 10 1/2s, 2004 140,000 74,200 275,000 145,750 75,000 39,750
TransTexas Gas Corp. sr. sub. notes
Ser. D, 13 3/4s, 2001 163,000 154,850 419,000 398,050 180,000 171,000
Transamerican Energy sr. disc. notes
stepped-coupon Ser. B, zero %
(13s, 6/15/99), 2002 (STP) 1,500,000 720,000 3,825,000 1,836,000 1,275,000 612,000
Transamerican Energy sr. notes Ser. B,
11 1/2s, 2002 345,000 189,750 885,000 486,750 290,000 159,500
------------ ------------ ------------
4,592,762 10,779,907 9,527,148
Packaging and Containers --% --% --%
- -----------------------------------------------------------------------------------------------------------------------------------
AEP Industries, Inc. 144A notes 9 7/8s,
2007 170,000 163,200 425,000 408,000 20,000 19,200
Huntsman Packaging Corp. company
guaranty 9 1/8s, 2007 50,000 47,500 125,000 118,750 35,000 33,250
------------ ------------ ------------
210,700 526,750 52,450
Paper and Forest Products 0.1% 0.1% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
APP Finance II Mauritius Ltd. bonds
sr. disc. notes stepped-coupon 12s,
(16s, 2/15/04), 2049 (Indonesia) (STP) 110,000 55,000 280,000 140,000 100,000 50,000
APP International Finance Co. notes
11 3/4s, 2005 (Netherlands) 10,000 5,900 30,000 17,700 10,000 5,900
Buckeye Cellulose Corp. sr. sub. notes
9 1/4s, 2008 25,000 25,875 50,000 51,750 25,000 25,875
Florida Coast Paper LLC 1st mtge.
Ser. B, 12 3/4s, 2003 25,000 23,625 50,000 47,250 20,000 18,900
Indah Kiat Financial Mauritius Ltd.
company guaranty 10s, 2007
(Indonesia) 550,000 239,250 1,500,000 652,500 525,000 228,375
PT Pabrik Kertas Tjiwi Kimia company
guaranty 10s, 2004 (Indonesia) 205,000 87,125 260,000 110,500 70,000 29,750
Repap New Brunswick sr. notes
10 5/8s, 2005 (Canada) 215,000 135,450 530,000 333,900 175,000 110,250
Repap New Brunswick sr. notes 9s,
2004 (Canada) 50,000 45,625 170,000 155,125 55,000 50,188
Riverwood International Corp. company
guaranty 10 7/8s, 2008 270,000 224,100 645,000 535,350 215,000 178,450
Riverwood International Corp. company
guaranty 10 1/4s, 2006 140,000 127,400 380,000 345,800 125,000 113,750
------------ ------------ ------------
969,350 2,389,875 811,438
Pharmaceuticals --% --% --%
- -----------------------------------------------------------------------------------------------------------------------------------
ICN Pharmaceuticals, Inc. 144A sr. notes
9 1/4s, 2005 60,000 59,400 150,000 148,500 250,000 247,500
Photography --% --% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Panavision Inc. 144A sr. disc. notes
stepped-coupon zero %
(9 5/8s, 2/1/02), 2006 (STP) 35,000 19,950 100,000 57,000 35,000 19,950
Publishing 0.1% 0.2% 0.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Affinity Group Holdings sr. sub. notes
11 1/2s, 2003 170,000 171,275 420,000 423,150 50,000 50,375
Affinity Group Holdings sr. notes 11s, 2007 115,000 111,550 610,000 591,700 180,000 174,600
American Media Operation, Inc. sr. sub.
notes 11 5/8s, 2004 115,000 119,025 285,000 294,975 100,000 103,500
Garden State Newspapers, Inc. sr. sub.
notes Ser. B, 8 3/4s, 2009 325,000 315,250 850,000 824,500 275,000 266,750
Hollinger International Publishing, Inc.
sr. sub. notes 9 1/4s, 2006 250,000 256,875 -- -- -- --
News America Holdings, Inc. deb. 7.7s,
2025 220,000 235,268 505,000 540,047 720,000 769,968
Perry-Judd company guaranty 10 5/8s,
2007 225,000 216,000 390,000 374,400 130,000 124,800
Tri State Media, Inc. 144A sr. sub.
notes 11s, 2008 190,000 184,775 485,000 471,663 155,000 150,738
Von Hoffman Press Inc. 144A sr. sub.
notes 10 3/8s, 2007 35,000 35,525 90,000 91,350 30,000 30,450
------------ ------------ ------------
1,645,543 3,611,785 1,671,181
Real Estate --% --% 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Bluegreen Corp. company guaranty
Ser. B, 10 1/2s, 2008 20,000 18,200 60,000 54,600 20,000 18,200
First Industrial Realty Trust, Inc. notes
6 1/2s, 2001 -- -- -- -- 860,000 885,430
Prime Hospitality Corp. sub. notes 9 3/4s,
2007 95,000 87,400 300,000 276,000 125,000 115,000
------------ ------------ ------------
105,600 330,600 1,018,630
Recreation 0.1% --% --%
- -----------------------------------------------------------------------------------------------------------------------------------
Boyd Gaming Corp. sr. sub. notes 9 1/2s,
2007 -- -- -- -- 25,000 24,750
Empress River Casino sr. notes 10 3/4s,
2002 100,000 108,000 -- -- 125,000 135,000
Grand Casinos, Inc. 1st mtge. 10 1/8s,
2003 75,000 79,500 200,000 212,000 -- --
Hollywood Casino Corp. sr. notes
12 3/4s, 2003 150,000 155,250 250,000 258,750 -- --
Players International Inc. sr. notes
10 7/8s, 2005 250,000 263,750 280,000 295,400 50,000 52,750
Showboat Marina Casino 1st mtge.
Ser. B, 13 1/2s, 2003 100,000 109,500 -- -- 75,000 82,125
------------ ------------ ------------
716,000 766,150 294,625
Retail 0.1% 0.2% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Amazon.com Inc. sr. disc. notes
stepped-coupon zero %
(10s, 05/01/03), 2008 (STP) 260,000 143,000 660,000 363,000 220,000 121,000
Eye Care Centers of America
144A sr. sub. notes 9 1/8s, 2008 100,000 84,000 250,000 210,000 80,000 67,200
Federated Department Stores,
Inc. sr. notes 8 1/2s, 2003 360,000 404,453 930,000 1,044,836 1,270,000 1,426,820
Fred Meyer, Inc. company guaranty
7.45s, 2008 150,000 157,124 400,000 418,996 125,000 130,936
Home Interiors & Gifts, Inc. 144A
sr. sub. notes 10 1/8s, 2008 50,000 47,250 140,000 132,300 50,000 47,250
Jitney-Jungle Stores company guaranty
12s, 2006 60,000 66,000 180,000 198,000 60,000 66,000
K mart Corp. med. term notes 8s, 2001 10,000 10,094 10,000 10,094
K mart Corp. deb. 7 3/4s, 2012 10,000 9,800 5,000 4,900 10,000 9,800
Service Merchandise Co., Inc. sr. sub.
deb. 9s, 2004 20,000 12,000 60,000 36,000 20,000 12,000
Southland Corp. 1st priority sr. sub.
deb. 5s, 2003 135,000 114,750 350,000 297,500 115,000 97,750
Specialty Retailers, Inc. company guaranty
Ser. B, 8 1/2s, 2005 10,000 9,100 15,000 13,650 10,000 9,100
William Carter Co. sr. sub. notes Ser. A,
10 3/8s, 2006 -- -- -- -- 150,000 156,000
William Carter Holdings Co. sr. sub.
Notes Ser. A, 12s, 2008 50,000 51,500 140,000 144,200 50,000 51,500
Zale Corp. sr. notes Ser. B, 8 1/2s, 2007 60,000 58,200 150,000 145,500 50,000 48,500
------------ ------------ ------------
1,167,271 3,018,976 2,243,856
Satellite Services --% 0.1% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Esat Holdings Ltd. 144A sr. notes
stepped-coupon zero %
(12 1/2s, 2/01/02), 2007 (Ireland) (STP) 75,000 48,000 205,000 131,200 65,000 41,600
Golden Sky Systems 144A sr. sub.
notes 12 3/8s, 2006 150,000 150,000 380,000 380,000 130,000 130,000
Satelites Mexicanos S.A. de C.V. 144A
sr. notes 10 1/8s, 2004 (Mexico) 80,000 54,400 210,000 142,800 70,000 47,600
TCI Satellite Entertainment Inc. sr. sub.
notes 10 7/8s, 2007 110,000 101,750 335,000 309,875 90,000 83,250
TCI Satellite Entertainment, Inc. sr. disc.
notes stepped-coupon zero %
(12 1/4s, 2/102), 2007 (STP) 155,000 91,450 280,000 165,200 125,000 73,750
------------ ------------ ------------
445,600 1,129,075 376,200
Specialty Consumer Products --% 0.1% 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Decora Industries, Inc. 144A sr. sec. notes
11s, 2005 130,000 114,400 340,000 299,200 110,000 96,800
EOP Operating LP 144A notes 6.763s,
2007 350,000 349,804 750,000 749,580 1,160,000 1,159,350
GFSI, Inc. sr. sub. notes Ser. B, 9 5/8s, 2007 25,000 23,500 75,000 70,500 -- --
------------ ------------ ------------
487,704 1,119,280 1,256,150
Telecommunications 1.1% 2.2% 2.5%
- -----------------------------------------------------------------------------------------------------------------------------------
AT&T Capital Corp. med. term notes
6 1/4s, 2001 340,000 345,379 755,000 766,944 1,085,000 1,102,165
Adelphia Communications Corp. sr.
notes Ser. B, 10 1/4s, 2000 10,000 10,100 20,000 20,200 10,000 10,100
Adelphia Communications Corp. sr.
notes Ser. B, 9 7/8s, 2007 280,000 301,000 705,000 757,875 235,000 252,625
Adelphia Communications Corp. sr.
notes 9 1/2s, 2004 (PIK) 125,000 129,375 250,000 258,750 -- --
AirTouch Communications, Inc.
notes 6.65s, 2008 340,000 367,152 -- -- 1,150,000 1,241,839
Allbritton Communications Co.
sr. sub. notes Ser. B, 8 7/8s, 2008 90,000 89,100 400,000 396,000 -- --
Allegiance Telecom, Inc. sr. notes
12 7/8s, 2008 30,000 27,600 80,000 73,600 30,000 27,600
Allegiance Telecom, Inc. sr. disc.
notes stepped-coupon Ser. B,
zero % (11 3/4s, 2/15/03), 2008 (STP) 380,000 163,400 950,000 408,500 310,000 133,300
Barak I.T.C. sr. disc. notes
stepped-coupon Ser. B, zero %
(12 1/2s, 11/15/02), 2007 (Israel) (STP) 80,000 40,800 190,000 96,900 60,000 30,600
BTI Telecom Corp. sr. notes 10 1/2s, 2007 360,000 298,800 875,000 726,250 290,000 240,700
Call-Net Enterprises sr. disc. notes
stepped-coupon zero %
(13 1/4s, 12/1/99), 2004 (STP) 100,000 95,000 365,000 346,750 100,000 95,000
Call-Net Enterprises, Inc. sr. disc.
notes stepped-coupon zero %
(8.94s, 8/15/03), 2008 (Canada) (STP) 50,000 29,000 130,000 75,400 40,000 23,200
Caprock Communications Corp.
144A sr. notes 12s, 2008 100,000 90,000 250,000 225,000 80,000 72,000
Celcaribe S.A. sr. notes 13 1/2s, 2004
(Columbia) 200,000 202,000 250,000 252,500 150,000 151,500
CellNet Data Systems, Inc. sr. disc.
notes stepped-coupon zero %
(14s, 10/1/02), 2007 (STP) 400,000 192,000 1,000,000 480,000 350,000 168,000
Centennial Cellular Corp. sr. notes
10 1/8s, 2005 145,000 179,075 350,000 432,250 60,000 74,100
Centennial Cellular Corp. sr. notes
8 7/8s, 2001 50,000 53,250 135,000 143,775 50,000 53,250
Charter Communications International,
Inc. disc. notes stepped-coupon
Ser. B, zero % (14s, 3/15/01), 2007 (STP) 70,000 60,200 180,000 154,800 60,000 51,600
Colt Telecommunications Group
PLC sr. disc. notes stepped-coupon
zero % (12s, 12/15/01), 2006
(United Kingdom) (STP) 300,000 234,000 725,000 565,500 250,000 195,000
Comcast Cellular Holdings sr. notes
Ser. B, 9 1/2s, 2007 140,000 143,500 365,000 374,125 125,000 128,125
Conecel Holdings 144A notes 14s, 2000 55,000 29,150 145,000 76,850 50,000 26,500
Consorcio Ecuatoiano notes 14s, 2002
(Ecuador) 35,000 18,550 95,000 50,350 30,000 15,900
Covad Communications Group sr. disc.
notes Ser. B, zero % (13 1/2s, 03/15/03),
2008 (STP) 135,000 54,000 330,000 132,000 115,000 46,000
CTI Holdings S.A. 144A sr. notes
stepped-coupon zero %
(11 1/2s, 4/15/03), 2008 (STP) 80,000 30,400 210,000 79,800 70,000 26,600
Dobson Wireline Co. 144A sr. notes
12 1/4s, 2008 140,000 134,400 340,000 326,400 110,000 105,600
E. Spire Communications, Inc. sr. notes
13 3/4s, 2007 40,000 43,200 115,000 124,200 35,000 37,800
E. Spire Communications, Inc. sr. disc.
notes stepped-coupon zero %
(13s, 11/1/00), 2005 (STP) -- -- 100,000 78,000 -- --
E. Spire Communications, Inc. sr.
disc. notes stepped-coupon zero %
(12 3/4s, 4/1/01), 2006 (STP) 390,000 287,625 1,010,000 744,875 350,000 258,125
Econophone, Inc. 144A notes
stepped-coupon zero %
(11s, 2/15/03), 2008 (STP) 310,000 168,950 790,000 430,550 260,000 141,700
Espirit Telecom Group PLC sr. notes
11 1/2s, 2007 (United Kingdom) 40,000 37,200 100,000 93,000 30,000 27,900
Facilicom International sr. notes
Ser. B., 10 1/2s, 2008 60,000 52,200 160,000 139,200 50,000 43,500
Flag Ltd. 144A sr. notes 8 1/4s, 2008
(Bermuda) 120,000 114,300 390,000 371,475 100,000 95,250
Focal Communications Corp. sr. disc.
notes stepped-coupon Ser. B, zero %
(12 1/8s, 02/15/03), 2008 (STP) 250,000 125,000 670,000 335,000 210,000 105,000
GST Telecommunications, Inc. 144A
sr. disc. notes stepped-coupon zero %
(10 1/2s, 5/1/03), 2008 (STP) 540,000 261,900 1,470,000 712,950 540,000 261,900
GST Telecommunications, Inc. company
guaranty stepped-coupon zero %
(13 7/8s, 12/15/00), 2005 (STP) 298,000 214,560 652,000 469,440 186,000 133,920
Global Crossing Holdings 144A
sr. notes 9 5/8s, 2008 600,000 585,000 1,530,000 1,491,750 510,000 497,250
Hyperion Telecommunication Corp.
sr. disc. notes stepped-coupon Ser. B,
zero % (13s, 4/15/01), 2003 (STP) 85,000 58,650 210,000 144,900 70,000 48,300
Hyperion Telecommunications, Inc.
sr. notes Ser. B, 12 1/4s, 2004 100,000 98,500 290,000 285,650 90,000 88,650
ICG Holdings, Inc. sr. disc. notes
stepped-coupon zero %
(13 1/2s, 9/15/00), 2005 (STP) 130,000 101,400 260,000 202,800 100,000 78,000
ICG Services, Inc. sr. disc. notes
stepped-coupon zero %
(10s, 02/15/03), 2008 (STP) 1,000,000 475,000 1,190,000 565,250 800,000 380,000
ICG Services, Inc. sr. disc. notes
stepped-coupon zero %
(9 7/8s, 5/1/03), 2008 350,000 161,000 880,000 404,800 295,000 135,700
IDT Corp. sr. notes 8 3/4s, 2006 70,000 61,600 180,000 158,400 65,000 57,200
Intelcom Group (USA), Inc. company
guaranty stepped-coupon zero %
(12 1/2s, 5/1/01), 2006 (STP) 140,000 99,750 355,000 252,938 125,000 89,063
Intercel, Inc. sr. disc. notes
stepped-coupon zero %
(12s, 2/1/01), 2006 (STP) -- -- 60,000 39,300 -- --
Intermedia Communications, Inc.
sr. notes Ser. B, 8.6s, 2008 330,000 326,700 790,000 782,100 360,000 356,400
Intermedia Communications, Inc.
sr. notes Ser. B, 8 1/2s, 2008 440,000 433,400 1,000,000 985,000 250,000 246,250
International Cabletel, Inc. sr. notes
stepped-coupon Ser. B, zero %
(11 1/2s, 2/01/01), 2006 (STP) 460,000 374,900 1,400,000 1,141,000 480,000 391,200
Ionica Group PLC sr. disc. notes
stepped-coupon zero % (15s, 5/1/02),
2007 (United Kingdom) (STP) 300,000 18,000 480,000 28,800 200,000 12,000
Iridium LLC/Capital Corp. company
guaranty Ser. B, 14s, 2005 135,000 120,150 345,000 307,050 110,000 97,900
Iridium LLC company guaranty Ser. A,
13s, 2005 5,000 4,400 80,000 70,400 5,000 4,400
ITC Deltacom, Inc. sr. notes 11s, 2007 58,000 62,060 156,000 166,920 52,000 55,640
IXC Communications, Inc. sr. sub. notes
9s, 2008 160,000 158,400 400,000 396,000 130,000 128,700
KMC Telecom Holdings, Inc. sr. disc.
notes stepped-coupon zero %
(12 1/2s, 2/15/03), 2008 (STP) 200,000 92,000 580,000 266,800 175,000 80,500
Knology Holdings, Inc. sr. disc. notes
stepped-coupon zero %
(11 7/8s, 10/15/02), 2007 (STP) 285,000 145,350 720,000 367,200 210,000 107,100
L-3 Communications Corp. sr. sub.
notes Ser. B, 10 3/8s, 2007 50,000 54,625 135,000 147,488 50,000 54,625
L-3 Communications Corp. sr. sub.
notes 8 1/2s, 2008 90,000 91,238 230,000 233,163 70,000 70,963
MCI Communications Corp.
notes 6 1/8s, 2002 130,000 133,259 215,000 220,390 680,000 697,048
MCI WorldCom, Inc. sr. notes 6 1/8s, 2001 -- -- 830,000 849,148 -- --
MJD Communications Inc. 144A
FRN 10s, 2008 50,000 50,000 130,000 130,000 40,000 40,000
MJD Communications, Inc. 144A
sr. sub. notes 9 1/2s, 2008 50,000 50,000 120,000 120,000 40,000 40,000
McCaw International Ltd sr. discount
notes stepped coupon zero %
(13s, 4/15/02), 2007 (STP) 10,000 5,000 20,000 10,000 10,000 5,000
MetroNet Communications Corp.
sr. disc. notes stepped-coupon zero %
(10 3/4s, 11/1/02), 2007 (Canada) (STP) 35,000 21,175 85,000 51,425 25,000 15,125
MetroNet Communications Corp.
sr. disc. notes zero %
(9.95s, 6/15/03), 2008 (Canada) (STP) 350,000 193,375 890,000 491,725 200,000 110,500
Microcell Telecommunications sr. disc.
notes stepped-coupon Ser. B, zero %
(14s, 12/1/01), 2006 (Canada) (STP) 90,000 63,900 220,000 156,200 70,000 49,700
Millicom International Cellular S.A.
sr. disc. notes stepped-coupon
zero % (13 1/2s, 6/1/01),
2006 (Luxembourg) (STP) 435,000 276,225 1,105,000 701,675 365,000 231,775
Mobile Telecommunications Tech.
sr. notes 13 1/2s, 2002 -- -- 145,000 162,400 50,000 56,000
NEXTEL Communications, Inc. sr. disc.
notes stepped-coupon zero %
(12 1/8s, 4/15/03), 2008 (STP) 820,000 369,000 2,090,000 940,500 690,000 310,500
NEXTEL Communications, Inc.
sr. disc. notes stepped-coupon
zero % (10.65s, 9/15/02), 2007 (STP) 860,000 541,800 2,015,000 1,269,450 825,000 519,750
NEXTEL Communications, Inc. sr. disc.
notes stepped-coupon zero %
(9.95s, 2/15/03), 2008 (STP) 390,000 230,100 1,000,000 590,000 340,000 200,600
NEXTEL Communications, Inc. sr. disc.
notes stepped-coupon zero %
(9 3/4s, 2/15/99), 2004 (STP) 600,000 576,000 1,555,000 1,492,800 510,000 489,600
NTL Inc. 144A sr. notes stepped-coupon
zero % (9 3/4s, 4/01/03), 2008 (STP) 150,000 90,750 500,000 302,500 200,000 121,000
NTL Inc. sr. notes Ser. B, 10s, 2007
(United Kingdom) 270,000 273,375 615,000 622,688 100,000 101,250
NorthEast Optic Network, Inc. sr. notes
12 3/4s, 2008 170,000 156,400 480,000 441,600 140,000 128,800
Orbital Imaging Corp. sr. notes Ser. B,
11 5/8s, 2005 115,000 108,100 300,000 282,000 100,000 94,000
Pagemart Nationwide, Inc. sr. disc. notes
stepped-coupon zero %
(15s, 2/1/00), 2005 (STP) 50,000 44,250 130,000 115,050 40,000 35,400
Paging Network Do Brasil sr. notes
13 1/2s, 2005 (Brazil) 5,000 1,850 10,000 3,700 10,000 3,700
Pathnet, Inc. 144A sr. notes 12 1/4s, 2008 190,000 144,400 490,000 372,400 160,000 121,600
Price Communications Wireless Inc.
144A sr. notes 9 1/8s, 2006 140,000 137,200 330,000 323,400 110,000 107,800
Primus Telecommunications Group, Inc.
sr. notes Ser. B, 9 7/8s, 2008 100,000 87,000 210,000 182,700 80,000 69,600
Qwest Communications International, Inc.
sr. disc. notes stepped-coupon zero %
(9.47s, 10/15/02), 2007 (STP) 295,000 227,150 625,000 481,250 210,000 161,700
Qwest Communications International, Inc.
sr. disc. notes stepped-coupon zero %
(8.29s, 2/1/03), 2008 (STP) 40,000 29,600 110,000 81,400 50,000 37,000
RCN Corp. sr. disc. notes stepped-coupon
zero % (11 1/8s, 10/15/02), 2007 (STP) 160,000 88,800 390,000 216,450 115,000 63,825
RCN Corp. sr. discount notes,
stepped-coupon Ser. B, zero %
(9.8s, 2/15/03), 2008 (STP) 390,000 206,700 1,080,000 572,400 350,000 185,500
RSL Communications Ltd. company
guaranty 9 1/8s, 2008 80,000 68,800 200,000 172,000 70,000 60,200
RSL Communications Ltd. company
guaranty, stepped-coupon zero %
(10 1/8s, 3/1/03), 2008 (STP) 120,000 61,200 295,000 150,450 100,000 51,000
RSL Communications, Ltd. company
guaranty 12 1/4s, 2006 140,000 144,900 350,000 362,250 123,000 127,305
Sprint Spectrum L.P. sr. notes 11s, 2006 60,000 67,500 145,000 163,125 45,000 50,625
Sprint Spectrum L.P. sr. disc. notes
stepped-coupon zero %
(12 1/2s, 8/15/01), 2006 (STP) 80,000 69,616 200,000 170,040 70,000 58,800
Sygnet Wireless, Inc. sr. notes 11 1/2s, 2006 175,000 194,250 425,000 471,750 35,000 38,850
TCI Communications, Inc. sr. notes 8.65s,
2004 355,000 409,553 775,000 894,094 1,210,000 1,395,941
Telecom Tech, Inc. 144A sr. sub. notes
9 3/4s, 2008 80,000 72,800 620,000 564,200 60,000 54,600
Telesystem International Wireless Inc.
sr. disc. notes stepped-coupon Ser. C,
zero % (10 1/2s, 11/1/02), 2007 (STP) 35,000 16,275 80,000 37,200 25,000 11,625
Teligent, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (11 1/2s, 3/1/03), 2008 (STP) 400,000 156,000 1,030,000 401,700 360,000 140,400
Teligent, Inc. sr. notes 11 1/2s, 2007 140,000 107,800 320,000 246,400 85,000 65,450
Time Warner Telecom Inc. sr. notes
9 3/4s, 2008 280,000 281,400 710,000 713,550 230,000 231,150
Transtel S.A. 144A pass through
certificates 12 1/2s, 2007 (Colombia) 30,000 12,000 70,000 28,000 20,000 8,000
United International Holdings sr. disc.
notes stepped-coupon Ser. B, zero %
(10 3/4s, 2/15/03), 2008 (STP) 170,000 79,900 420,000 197,400 140,000 65,800
US Xchange LLC 144A sr. notes 15s, 2008 80,000 79,600 200,000 199,000 70,000 69,650
Versatel Telecom BV 144A sr. notes
13 1/4s, 2008 110,000 104,500 280,000 266,000 90,000 85,500
Viatel, Inc. 144A sr. notes 11 1/4s, 2008 340,000 323,000 870,000 826,500 280,000 266,000
WinStar Communications. Inc. 144A
sr. sub. notes 15s, 2007 85,000 83,300 415,000 406,700 65,000 63,700
WinStar Equipment Corp. company
guaranty 12 1/2s, 2004 65,000 59,150 175,000 159,250 60,000 54,600
WorldCom, Inc. notes 7 3/4s, 2007 -- -- 1,045,000 1,193,954 -- --
------------ ------------ ------------
14,641,242 37,963,732 15,252,209
Textiles 0.1% 0.1% 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Day International Group, Inc. company
guaranty 9 1/2s, 2008 170,000 154,700 430,000 391,300 140,000 127,400
Galey & Lord Inc. company guaranty
9 1/8s, 2008 220,000 189,200 550,000 473,000 180,000 154,800
Glenoit Corp. company guaranty 11s, 2007 30,000 29,100 85,000 82,450 30,000 29,100
Polymer Group, Inc. company guaranty
Ser. B, 9s, 2007 45,000 43,088 130,000 124,475 40,000 38,300
Polymer Group, Inc. company guaranty
Ser. B, 8 3/4s, 2008 110,000 104,225 280,000 265,300 90,000 85,275
Tultex Corp. sr. notes 10 5/8s, 2005 175,000 150,500 450,000 387,000 150,000 129,000
------------ ------------ ------------
670,813 1,723,525 563,875
Transportation 0.3% 0.4% 1.1%
- -----------------------------------------------------------------------------------------------------------------------------------
CSX Corp. deb. 7.95s, 2027 445,000 504,901 305,000 346,056 1,315,000 1,492,012
Calair LLC 144A company guaranty
8 1/8s, 2008 100,000 91,500 240,000 219,600 80,000 73,200
Canadian Airlines Corp. sr. notes
12 1/4s, 2006 (Canada) 110,000 94,600 280,000 240,800 90,000 77,400
Canadian Airlines Corp. secd. notes
10s, 2005 (Canada) 170,000 153,000 420,000 378,000 140,000 126,000
Cathay International Ltd. 144A sr. notes
13s, 2008 210,000 113,400 530,000 286,200 180,000 97,200
Continental Airlines, Inc. pass-through
certificates Ser. 97CI, 7.42s, 2007 1,847 1,948 3,232 3,409 4,524 4,772
Continental Airlines, Inc. pass-through
certificates Ser. 981C, 6.541s, 2009 575,000 612,841 1,220,000 1,300,288 1,785,000 1,902,471
Continental Airlines, Inc. sr. notes
9 1/2s, 2001 310,000 322,400 650,000 676,000 250,000 260,000
Hermes Europe Railtel 144A sr. notes
11 1/2s, 2007 (Netherlands) 40,000 42,000 210,000 220,500 30,000 31,500
International Shipholding Corp. sr. notes
7 3/4s, 2007 40,000 36,400 90,000 81,900 30,000 27,300
Johnstown America Industries, Inc.
company guaranty Ser. C, 11 3/4s, 2005 50,000 51,500 125,000 128,750 125,000 128,750
Kitty Hawk, Inc. company guaranty
9.95s, 2004 90,000 90,000 220,000 220,000 70,000 70,000
MC Shipping, Inc. sr. notes Ser. B,
11 1/4s, 2008 65,000 52,650 170,000 137,700 60,000 48,600
MCII Holdings sec. notes stepped-coupon
zero % (12s, 11/15/98), 2002 (STP) 65,000 48,750 170,000 127,500 55,000 41,250
Newport News Shipbuilding sr. notes
8 5/8s, 2006 40,000 41,000 100,000 102,500 -- --
Norfolk Southern Corp. bonds 7.05s, 2037 390,000 429,944 960,000 1,058,323 1,090,000 1,201,638
Norfolk Southern Corp. notes 6.95s, 2002 45,000 47,407 225,000 237,035 180,000 189,628
TFM S.A. de C.V. company guaranty
10 1/4s, 2007 (Mexico) 25,000 23,250 70,000 65,100 20,000 18,600
TFM S.A. de C.V. company guaranty
stepped-coupon zero %
(11 3/4s, 6/15/02), 2009 (Mexico) (STP) 135,000 71,550 355,000 188,150 115,000 60,950
Trans World Airlines, Inc. sr. notes
11 1/2s, 2004 145,000 136,663 360,000 339,300 105,000 98,963
Trans World Airlines, Inc. sr. notes
11 3/8s, 2006 100,000 88,000 245,000 215,600 80,000 70,400
US Air Inc. pass-through certificates
Ser. 93-A2, 9 5/8s, 2003 500,000 523,750 700,000 733,250 400,000 419,000
------------ ------------ ------------
3,577,454 7,305,961 6,439,634
Utilities 0.3% 0.7% 0.8%
- -----------------------------------------------------------------------------------------------------------------------------------
AES China Generating Co. sr. notes
10 1/8s, 2006 (China) 10,000 7,500 10,000 7,500 5,000 3,750
Arizona Public Service Co. sr. notes
6 3/4s, 2006 220,000 233,152 585,000 619,971 785,000 831,927
CMS Energy Corp. pass through
certificates 7s, 2005 480,000 482,866 400,000 402,388 460,000 462,746
California Energy Corp. sr. notes
9 7/8s, 2003 -- -- 250,000 276,055 -- --
Calpine Corp. sr. notes 10 1/2s, 2006 400,000 428,000 1,000,000 1,070,000 -- --
Chesapeake Energy Corp. sr. notes
9 1/8s, 2006 250,000 212,500 700,000 595,000 225,000 191,250
Cleveland Electric Illuminating Co.
1st mtge. Ser. B, 9 1/2s, 2005 60,000 70,827 140,000 165,263 50,000 59,023
Cleveland Electric Illuminating Co.
bonds 6.86s, 2008 220,000 222,200 540,000 545,400 180,000 181,800
Connecticut Light & Power Co.
1st mtge. Ser. A, 7 7/8s, 2001 170,000 176,662 445,000 462,440 605,000 628,710
El Paso Electric Co. 1st mtge. Ser. D,
8.9s, 2006 10,000 11,432 20,000 22,864 5,000 5,716
Jersey Central Power & Light Co.
1st mtge. med. term notes 6.85s, 2006 95,000 103,105 220,000 238,770 335,000 363,582
Long Island Lighting Co. deb. 9s, 2022 800,000 924,496 2,000,000 2,311,240 700,000 808,934
Long Island Lighting Co. deb. 8.9s, 2019 50,000 53,067 290,000 307,786 50,000 53,067
Midland Funding Corp. deb. Ser. A,
11 3/4s, 2005 500,000 620,235 1,000,000 1,240,470 525,000 651,247
Midland Funding Corp. deb. Ser. B,
13 1/4s, 2006 53,000 68,637 395,000 511,541 80,000 103,603
Niagara Mohawk Power Corp. mtge.
9 1/2s, 2000 50,000 52,781 150,000 158,342 50,000 52,781
Niagara Mohawk Power Corp. sr. notes
Ser. G, 7 3/4s, 2008 305,000 325,310 720,000 767,945 240,000 255,982
Niagara Mohawk Power Corp. sr. notes
Ser. F, 7 5/8s, 2005 80,000 83,309 190,000 197,858 70,000 72,895
Niagara Mohawk Power Corp. 1st mtge.
6 7/8s, 2003 150,000 156,359 400,000 416,956 150,000 156,359
Northeast Utilities System notes Ser. A,
8.58s, 2006 19,036 20,657 47,590 51,642 12,800 13,889
Northeast Utilities System notes Ser. B,
8.38s, 2005 117,333 122,414 341,333 356,113 106,666 111,285
Public Service Co. of New Mexico sr.
notes Ser. A, 7.1s, 2005 175,000 178,155 500,000 512,631 150,000 152,705
------------ ------------ ------------
4,553,664 11,238,175 5,161,251
------------ ------------ ------------
Total Corporate Bonds and Notes
(cost $81,888,206, $199,981,455
and $118,391,757) $77,820,053 $187,937,754 $115,407,042
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
3.3% 5.5% 22.8%
U.S. GOVERNMENT AND Principal Principal Principal
AGENCY OBLIGATIONS Amount Value Amount Value Amount Value
Agency Obligations 0.1% 0.1% 0.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Financing Corp.
8 1/2s, bonds, October 25, 2019 $ 465,000 $ 507,595 $1,190,000 $ 1,299,006 $ 1,575,000 $ 1,719,272
7s, bonds, August 18, 2027 194,138 217,437 490,738 549,632 -- --
6 1/4s, bonds, December 25, 2013 262,134 264,858 685,228 692,348 910,571 920,032
------------ ------------ ------------
989,890 2,540,986 2,639,304
U.S. Government Agency
Mortgage Obligations 2.2% 4.1% 15.9%
- -----------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association
6 1/2s, August 1, 2028 -- -- 988,888 1,005,571 -- --
6 1/2s, Dwarf, with due dates from
August 1, 2010 to September 1, 2013 -- -- 11,778,115 12,024,636 17,645,467 18,014,789
6s, Dwarf, TBA, October 15, 2013 1,440,000 1,454,846 3,345,000 3,379,487 4,890,000 4,940,416
5 3/4s, April 15, 2003 495,000 516,344 1,145,000 1,194,372 1,655,000 1,726,364
Federal National Mortgage Association
Adjustable Rate Mortgages 7.346s,
July 1, 2025 46,622 47,205 112,384 113,789 132,874 134,534
Federal National Mortgage Association
Pass-through Certificates
7 1/2s, January 1, 2027 96,506 99,552 671,788 692,990 874,760 902,368
7.4s, May 1, 2026 206,056 225,181 564,202 616,567 686,854 750,603
7s, Dwarf, July 1, 2011 -- -- 1,421,281 1,459,031 -- --
7s, Dwarf, with due dates from
October 1, 2011 to April 1, 2012 1,554,300 1,595,583 1,583,370 1,625,424 4,657,951 4,781,666
6 1/2s, Dwarf, with due dates from
August 1, 2010 to September 1, 2013 5,449,949 5,564,020 1,156,242 1,180,442 3,500,946 3,574,222
6 1/2s, with due dates from July 1, 2028
to August 1, 2028 6,347,719 6,454,808 12,130,794 12,335,441 18,747,475 19,063,741
5 1/2s, Dwarf, with due dates from
February 1, 2011 to June 1, 2011 2,019,225 2,011,012 2,748,538 2,737,351 4,844,804 4,825,087
Government National Mortgage
Association Adjustable Rate Mortgages
7s, September 20, 2024 1,188,865 1,210,043 2,761,539 2,810,729 3,964,447 4,035,063
5 1/2s, April 15, 2028 -- -- 463,609 464,623 -- --
Government National Mortgage
Association Pass-through Certificates
10s, June 15, 2013 238,726 261,553 629,477 689,667 900,864 987,005
U.S. Government Agency
8s, with due dates from August 15,
2024 to October 15, 2027 2,457,183 2,560,112 7,662,859 7,984,106 10,157,238 10,585,149
7 1/2s, with due dates from
April 15, 2022 to May 16, 2028 1,307,464 1,396,245 3,196,451 3,413,111 5,292,204 5,605,378
7s, with due dates from
December 15, 2023 to
January 15, 2028 3,832,462 3,956,477 10,343,878 10,678,682 12,961,978 13,381,345
6 1/2s, with due dates from
March 15, 2028 to April 15, 2028 2,347,266 2,399,331 4,312,482 4,408,133 5,177,728 5,292,569
------------ ------------ ------------
29,752,312 68,814,152 98,600,299
U.S. Treasury Obligations 1.0% 1.3% 6.5%
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
6 3/8s, August 15, 2027 (SEG) -- -- 550,000 649,517 985,000 1,163,226
6 1/8s, November 15, 2027 (SEG) 1,695,000 1,954,013 4,965,000 5,723,702 6,565,000 7,568,198
5 1/2s, August 15, 2028 2,005,000 2,167,285 4,425,000 4,783,160 8,255,000 8,923,160
5 1/2s, May 31, 2003 (SEG) 1,890,000 1,982,723 5,145,000 5,397,414 -- --
5 1/2s, May 31, 2000 310,000 315,230 -- -- -- --
5 3/8s, June 30, 2000 (SEG) 5,055,000 5,135,577 3,945,000 4,007,883 19,725,000 20,039,417
5 1/4s, August 15, 2003 225,000 235,055 490,000 511,898 765,000 799,188
U.S. Treasury Notes
5 5/8s, May 15, 2008 740,000 809,375 1,225,000 1,339,844 2,030,000 2,220,312
------------ ------------ ------------
12,599,258 22,413,418 40,713,501
------------ ------------ ------------
Total U.S. Government and Agency
Obligations (cost $42,228,695,
$91,306,290 and $138,669,965) $43,341,460 $93,768,556 $141,953,104
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH BALANCED CONSERVATIVE
<S> <C> <C> <C> <C> <C> <C> <C>
2.8% 7.0% 12.1%
FOREIGN GOVERNMENT Principal Principal Principal
BONDS AND NOTES Amount Value Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
AUD Australia (Government of) bonds
Ser. 101, 8 3/4s, 2001 2,345,000 $1,517,597 7,370,000 $4,769,591 4,695,000 $3,038,430
AUD Australia (Government of) bonds
Ser. 909, 7 1/2s, 2009 620,000 441,384 1,955,000 1,391,782 1,245,000 886,327
CAD Canada (Government of)
bonds 5 1/4s, 2003 2,335,000 1,558,550 7,340,000 4,899,252 4,685,000 3,127,111
DKK Denmark (Government of)
bonds 6s, 2009 9,605,000 1,678,037 29,510,000 5,155,530 18,545,000 3,239,895
FRF France (Government of)
bonds 5 1/4s, 2008 2,000,000 391,309 3,200,000 626,094 720,000 140,871
FRF France (Government of)
bonds 5 1/2s, 2007 4,966,000 986,261 35,292,000 7,009,087 20,164,000 4,004,625
FRF France Treasury bill bonds
4 s, 2000 6,830,000 1,227,706 21,290,000 3,826,920 12,615,000 2,267,571
FRF France (Government of) bonds
Ser. OC25, zero %, 2025 20,100,000 896,071 60,780,000 2,709,611 38,490,000 1,715,909
FRF France (Government of)
bonds 5 1/2s, 2007 6,770,000 1,342,726 20,700,000 4,105,528 13,430,000 2,663,635
DEM Germany (Federal Republic of)
Unity Fund bonds 8s, 2002 2,885,000 1,965,395 8,420,000 5,736,093 5,420,000 3,692,355
DEM Germany (Federal Republic of)
bonds Ser. 97, 6s, 2007 1,285,000 885,025 1,215,000 836,814 1,990,000 1,370,584
DEM Germany (Federal Republic of)
bonds Ser. 97, 6s, 2007 3,890,000 2,658,205 16,170,000 11,049,661 10,035,000 6,857,350
DEM Germany (Federal Republic of)
bonds Ser. 98, 5 5/8s, 2028 4,230,000 2,849,991 12,120,000 8,165,932 8,275,000 5,575,337
ITL Italy (Government of)
bonds 5 3/4s, 2002 3,650,000,000 2,360,750 11,250,000,000 7,276,283 6,645,000,000 4,297,868
USD Korea (Republic of) unsub.
8 7/8s, 2008 90,000 75,600 230,000 193,200 80,000 67,200
NLG Netherlands (Government of)
bonds Ser. 1, 5 3/4s, 2007 2,415,000 1,440,067 7,285,000 4,344,053 4,655,000 2,775,781
NLG Netherlands (Government of)
bonds 7s, 2003 4,270,000 2,559,821 13,020,000 7,805,357 8,515,000 5,104,656
NLG Netherlands (Government of)
bonds Ser. 1 & 2, 9s, 2000 6,385,000 3,677,415 20,290,000 11,685,944 13,360,000 7,694,639
NZD New Zealand (Government of)
bonds 8s, 2004 2,215,000 1,228,646 7,045,000 3,907,815 4,345,000 2,410,143
ESP Spain (Government of) bonds
5 1/4s, 2003 144,250,000 1,076,735 444,140,000 3,315,226 262,500,000 1,959,397
SEK Sweden (Government of)
bonds, Ser. 1039, 5 1/2s, 2002 13,000,000 1,710,844 39,600,000 5,211,494 24,200,000 3,184,802
GBP United Kingdom Treasury bonds
8s, 2015 960,000 2,230,737 2,930,000 6,808,396 1,915,000 4,449,856
GBP United Kingdom Treasury bonds
Ser. 85, 9 3/4s, 2002 1,180,000 2,313,018 3,600,000 7,056,664 2,355,000 4,616,203
RUB U.S. Dollar GKO Pass Through
Structured Note (Issued by
Deutsche Bank. The principal
at redemption is linked to the
bid price for the Russian
Treasury Bill at maturity, and
the change in the spot rate of
the Russian Ruble from issue
date to maturity date) zero %,
1998 (in default) 2,810,000 26,358 8,635,000 80,996 -- --
------------ ------------ ------------
Total Foreign Government Bonds
and Notes (cost $35,672,486,
$111,404,936 and $70,350,750) $37,098,248 $117,967,323 $75,140,545
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH BALANCED CONSERVATIVE
0.4% 0.9% 3.5%
COLLATERALIZED Principal Principal Principal
MORTGAGE OBLIGATIONS* Amount Value Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
Chase Mortgage Finance Corp.
Ser. 94-1, Class B2, 6.601s, 2025 $ -- $ -- $ 180,542 $ 191,703 $ 180,542 $ 191,703
Commercial Mortgage Acceptance
Corp.
Ser. 97-ML1, Class A3, 6.57s, 2007 35,000 37,056 615,000 651,131 1,220,000 1,291,675
Ser. 97-ML1, Class A2, 6.53s, 2007 15,000 15,823 220,000 232,066 440,000 464,131
Ser. 97-ML1, Class Interest Only (IO),
0.96s, 2017 2,227,489 127,635 4,846,899 277,727 7,515,918 430,662
Ser. 98-C2, Class A1, 5.8s, 2006 380,000 386,175 880,000 894,300 1,295,000 1,316,044
Collateralized Mortgage Obligation
Trust Ser. 64, Class Z, 9s, 2020 488,080 515,459 1,515,083 1,600,070 1,626,935 1,718,196
Criimi Mae Commercial Mortgage
Trust Ser. 98-C1, Class A2, 7s, 2011 335,000 342,747 735,000 751,997 1,155,000 1,181,709
Deutsche Mortgage & Asset Receiving
Corp. Ser. 98-C1, Class X, 1.254s,
2031 2,616,082 171,680 5,654,916 371,104 8,564,437 562,041
First Union-Lehman Brothers
Bank of America Ser. 98-C2,
Class A1, 6.28s, 2007 457,679 472,983 1,067,918 1,103,627 1,530,519 1,581,696
Commercial Mortgage Ser. 97-C2,
Class A3, 6.65s, 2007 300,000 317,168 730,000 771,775 870,000 919,787
Commercial Mortgage Ser. 97-C2,
Class IO, 1.092s, 2027 778,570 67,486 1,760,463 152,596 2,722,519 235,987
Freddie Mac
Ser. 1439, Class I, 7.5s, 2022 490,000 545,087 1,195,000 1,329,344 1,420,000 1,579,639
Ser. 2080, Class PC, 6s, 2015 135,000 136,013 360,000 362,700 450,000 453,375
GE Capital Mortgage Services
Inc. Ser. 94-8A2, Class A2, 6s, 2024 21,623 21,609 80,485 80,434 90,095 90,039
GMAC Commercial Mortgage
Securities Inc.
Ser. 98-C2, Class A2, 6.42s, 2008 315,000 329,803 735,000 769,539 1,055,000 1,104,577
Ser. 98-C2, Class A1, 6.15s, 2031 204,175 209,926 468,110 481,294 692,205 711,700
GS Mortgage Securities Corp. II
Ser. 98-GLII, Class A2, 6.562s, 2031 270,000 283,331 595,000 624,378 935,000 981,166
Independent National Mortgage
Corp. Ser. 94-V, Class A1, 8.169s, 2024 168,148 170,040 347,268 351,175 -- --
Merrill Lynch Mortgage Investors, Inc.
Ser. 97-C2, Class A2, 6.54s, 2029 655,000 693,788 1,505,000 1,594,124 2,340,000 2,478,572
Ser. 98-C2, Class A1, 6.22s, 2030 534,421 551,289 1,132,001 1,167,730 1,710,148 1,764,124
Mortgage Capital Funding, Inc.
Ser. 98-MC1, Class A2, 6.663s, 2008 255,000 269,423 555,000 586,392 870,000 919,209
Morgan Stanley Capital I Ser. 96-WF1,
Class A2, 7.218s, 2006 260,000 279,256 915,000 982,767 1,370,000 1,471,466
------------ ------------ ------------
Total Collateralized Mortgage
Obligations (cost $5,797,101,
$14,892,851 and $20,830,331) $ 5,943,777 $ 15,327,973 $ 21,447,498
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.4% 0.7% 2.9%
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 $ 413,606 $1,045,000 $ 1,067,206 $1,395,000 $ 1,424,644
Advanta Mortgage Loan Trust
Ser. 97-4, Class A7, 6.63s, 2029 440,000 455,778 1,075,000 1,113,549 1,275,000 1,320,721
Amresco Commercial Mortgage
Funding I Ser. 97-C1, Class A1,
6.73s, 2029 778,783 809,235 1,675,565 1,741,082 2,666,744 2,771,018
Amresco Residential Securities
Mortgage Loan Ser. 97-3, Class A3,
6.6s, 2018 270,000 271,856 675,000 679,641 780,000 785,363
Associates Manufactured Housing
Ser. 96-1, Class A3, 7s, 2027 -- -- -- -- 385,000 394,023
Capita Equipment Receivables Trust
Ser. 96-1, Class A4, 6.28s, 2000 80,000 80,774 250,000 252,420 260,000 262,517
First Plus Ser. 98, Class A, 8 1/2s, 2023 208,603 211,114 450,395 455,814 692,186 700,514
Green Tree Financial Corp. Ser. 97-2,
Class A6, 7.24s, 2028 380,000 398,286 1,005,000 1,053,361 1,425,000 1,493,571
Green Tree Financial Corp. Ser. 97-3,
Class A-4, 6.93s, 2028 545,000 560,156 1,665,000 1,711,304 1,930,000 1,983,673
Green Tree Financial Corp. Ser. 98-2,
Class A5, 6.24s, 2016 650,000 665,082 1,420,000 1,452,948 2,135,000 2,184,539
Green Tree Recreational Equipment &
Cons Ser. 97-B, Class A1, 6.55s, 2028 462,777 475,829 1,137,109 1,169,179 1,351,970 1,390,100
Green Tree Recreational Equipment &
Cons. Ser. 98-A, Class A1C, 6.18s,
2019 569,672 581,979 1,234,291 1,260,954 2,891,520 2,953,982
Provident Bank Home Equity Loan
Trust Ser. 97-4, Class A3, 6.91s, 2029 135,000 141,718 325,000 341,174 400,000 419,906
------------ ------------ ------------
Total Asset Backed Securities
(cost $4,938,780, $11,992,025
and $17,633,945) $ 5,065,413 $ 12,298,632 $ 18,084,571
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.3% 0.6% 0.4%
Number of Number of Number of
PREFERRED STOCKS* Shares Value Shares Value Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
AmeriKing, Inc. $3.25 pfd. (PIK) 2,497 $ 62,425 4,997 $ 124,925 $ --
Anvil Holdings Ser. B, $3.25 pfd. (PIK) 26 546 -- -- 19 399
CSC Holdings, Inc. Ser. M, $11.125 cum. (PIK) 1,531 168,410 3,803 418,330 707 77,770
California Federal Bancorp Inc. Ser. A,
$2.281 pfd. 8,100 206,550 13,300 339,150 10,000 255,000
Capstar Broadcasting Inc. 144A
$12.00 pfd. (PIK) 563 64,182 1,523 173,622 507 57,798
Citadel Broadcasting Inc. 144A $13.25
cum. pfd. (PIK) 1,816 205,208 4,373 494,149 1,419 160,347
Concentric Network Corp. Ser. B, $13.50
pfd. (PIK) 72 63,000 185 161,875 61 53,375
Dobson Communications 144A $12.25
pfd. (PIK) 94 94,000 238 238,000 -- --
E. Spire Communications, Inc. $12.75 pfd. (PIK) -- -- 52 43,160 -- --
Echostar Communications, Inc.
$12.125 pfd. (PIK) 44 42,460 114 110,010 30 28,950
El Paso Electric Co. $11.40 pfd (PIK) 35 3,763 88 9,460 -- --
Hyperion Telecommunications Ser. B,
$12.875 pfd. (PIK) 53 43,460 109 89,380 -- --
ICG Holdings, Inc., 144A $14.00 pfd. (PIK) 927 954,810 2,327 2,396,810 283 291,490
IXC Communications, Inc. $12.50 pfd. (PIK) 96 102,240 257 273,705 78 83,399
Intermedia Communication Ser. B,
$13.50 pfd. 243 272,160 736 824,320 243 272,160
NEXTEL Communications, Inc. Ser. D,
$13.00 cum. pfd. (PIK) 54 57,240 174 184,440 54 57,240
NEXTEL Communications, Inc. Ser. E,
$11.125 pfd. (PIK) 718 703,640 1,787 1,751,260 602 589,960
Nebco Evans Holding $11.25 pfd. (PIK) 1,054 68,510 2,638 171,470 844 54,860
Nextlink Communications, Inc. 144A
$7.00 cum. pfd. 7,348 382,096 20,149 1,047,748 2,807 145,964
Paxson Communications Corp. $13.25
cum. pfd. (PIK) 23 218,500 58 551,000 19 180,500
Public Service Co. of New Hampshire
$2.65 1st mtge. pfd. 1,740 44,370 9,471 241,511 1,740 44,370
SFX Broadcasting, Inc. Ser. E, $12.625 pfd. (PIK) 226 26,894 564 67,116 197 23,442
Spanish Broadcasting Systems $14.25
cum. pfd. (PIK) 238 233,240 554 542,920 181 177,380
Spanish Broadcasting Systems 144A
$14.25 pfd. (PIK) -- -- -- -- 5 4,900
Viatel, Inc. Ser. A, $10.00 cv. pfd. (PIK) 168 10,080 431 25,860 138 8,280
Von Hoffman Corp. 144A $13.50 pfd. 855 26,505 2,215 68,665 730 22,630
WinStar Communications, Inc. 144A
$14.25 cum. pfd. (PIK) 140 126,000 340 306,000 120 108,000
------------ ------------ ------------
Total Preferred Stocks
(cost $4,456,947, $11,453,156
and $2,817,430) $ 4,180,289 $ 10,654,886 $ 2,698,214
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.1% 0.1% 0.1%
CONVERTIBLE PREFERRED Number of Number of Number of
STOCKS* Shares Value Shares Value Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Chancellor Media Corp. $3.00 cv. cum. pfd. 800 $ 57,700 2,000 $ 144,250 700 $ 50,488
Chesapeake Energy Corp. 144A
$3.50 cv. cum. pfd. 720 10,800 1,810 27,150 600 9,000
K mart Financing I $3.875 cum. cv. pfd. 8,200 410,000 8,500 425,000 1,300 65,000
MediaOne Group Inc. 6.25% cv. pfd. 21,900 1,223,663 21,400 1,195,725 3,300 184,387
Paxson Communications Corp. 144A
9.75% cv. pfd. (PIK) 10 100,000 20 200,000 10 100,000
------------ ------------ ------------
Total Convertible Preferred Stocks
(cost $2,036,549, $2,308,511
and $481,807) $ 1,802,163 $ 1,992,125 $ 408,875
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.1% 0.3% 0.2%
Number of Number of Number of
UNITS Units Value Units Value Units Value
- -----------------------------------------------------------------------------------------------------------------------------------
Bestel S.A.de CV units, stepped-coupon
zero % (12 3/4s,5/15/03), 2005 (STP) 100 $ 56,000 220 $ 123,200 90 $ 50,400
Birch Telecom, Inc. 144A units 14s, 2008 100 88,000 240 211,200 80 70,400
Celcaribe S.A. 144A units 13 1/2s, 2004
(Columbia) 3 60,000 22 440,000 2 40,000
Diva Systems Corp. 144A units
stepped-coupon zero %
(13s, 5/15/01), 2008 (STP) 488 165,920 1,231 418,540 403 137,020
Firstworld Communication 144A units
stepped-coupon zero %
(13s, 4/15/03), 2008 (STP) 430 129,000 1,080 324,000 360 108,000
ICO Global Communications (Holdings)
Ltd. units 15s, 2015 170 132,600 440 343,200 150 117,000
Interact Systems, Inc. 144A units
stepped-coupon zero % (14s, 8/1/99),
2003 (STP) 100,000 12,000 300,000 36,000 90,000 10,800
Long Distance International, Inc. 144A
units 12 1/4s, 2008 270 259,200 680 652,800 230 220,800
Mediq 144A units, stepped-coupon
zero % (13s, 6/1/09), 2009 (STP) 120 60,000 290 145,000 100 50,000
Onepoint Communications, Inc. units
14 1/2s, 2008 60 43,800 130 94,900 50 36,500
Rhythms Netcon 144A units
stepped-coupon zero %
(13 1/2s, 5/15/03), 2008 (STP) 280 112,000 720 288,000 240 96,000
Startec Global Communications Corp.
units 12s, 2008 110 95,150 280 242,200 90 77,850
Telehub Communications Corp. units
stepped-coupon zero %
(13 7/8s,7/31/02), 2005 (STP) 80 42,400 200 106,000 70 37,100
Transam Refinance, Inc. 144A units
16s, 2003 120 80,400 290 194,300 100 67,000
United Artists Theatre 144A units
9 3/4s, 2008 110,000 101,750 275,000 254,375 95,000 87,875
United Stationer Supply, Inc. 144A
units 8 3/8s, 2008 30,000 29,925 80,000 79,800 20,000 19,950
Winstar Communications, Inc. 144A
sr. disc. units notes stepped-coupon
zero % (14s, 10/15/00), 2005 (STP) 400,000 264,000 1,125,000 742,500 -- --
------------ ------------ ------------
Total Units (cost $2,162,253,
$5,938,815 and $1,609,730) $ 1,732,145 $ 4,696,015 $ 1,226,695
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.1% 0.1% 0.1%
CONVERTIBLE BONDS Principal Principal Principal
AND NOTES* Amount Value Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
APP Global Finance Ltd. 144A cv.
company guaranty 3 1/2s, 2003
(United Kingdom) $460,000 $ 174,800 $1,130,000 $ 429,400 $380,000 $ 144,400
APP Global Finance (V) Ltd. 144A
cv. sec. 2s, 2000 (United Kingdom) 65,000 38,350 190,000 112,100 60,000 35,400
Apple Computer, Inc. cv. sub. notes
6s, 2001 340,000 473,450 360,000 501,300 55,000 76,588
GST Telecommunications, Inc. cv. sr.
disc. notes stepped-coupon zero %
(13 7/8s, 12/15/00), 2005 (STP) 21,000 27,300 59,000 76,700 17,000 22,100
Integrated Device Technology, Inc.
cv. sub. notes 5 1/2s, 2002 40,000 27,000 115,000 77,625 35,000 23,625
Jacor Communications, Inc. cv. sr.
notes zero %, 2011 150,000 103,500 390,000 269,100 130,000 89,700
WinStar Communications. Inc. 144A
cv. sr. disc. notes stepped-coupon
zero % (14s, 10/15/00), 2005 (STP) $ -- $ -- $ -- $ -- $ 70,000 $ 91,000
------------ ------------ ------------
Total Convertible Bonds and Notes
(cost $1,183,884, $2,301,972
and $726,934) $ 844,400 $ 1,466,225 $ 482,813
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH BALANCED CONSERVATIVE
<S> <C> <C> <C> <C> <C> <C> <C>
PURCHASED OPTIONS
OUTSTANDING Expiration --% 0.1% 0.2%
(cost $434,480, Date/ Contract Contract Contract
$1,270,468 and $835,860) Strike Price Amount Value Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
Japanese Government Bond Nov. 98/
Future Contracts (Call) 127.0 JPY 700,000 $ 607,315 2,100,000 $1,821,946 1,400,000 $1,214,631
------------ ---------- ------------
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
--% --% --%
Expiration Number of Number of Number of
WARRANTS* (NON) Date Warrants Value Warrants Value Warrants Value
- -----------------------------------------------------------------------------------------------------------------------------------
Allegiance Telecom, Inc. 2/3/08 220 $ 3,520 570 $ 9,120 190 $ 3,040
Cellnet Data Systems, Inc. 9/15/07 285 11,400 645 25,800 210 8,400
Club Regina, Inc. 144A 12/1/04 55 330 140 840 40 240
Colt Telecommunications
Group PLC 12/31/06 300 90,000 725 217,500 250 75,000
Concentric Network Corp. 12/15/07 30 2,700 75 6,750 30 2,700
Consorcio Ecuatoriano 144A
(Ecuador) 10/01/00 742 278 1,957 734 675 253
County Seat Holdings, Inc. 10/15/98 65 1 200 4 110 2
Covad Communications Group
144A 3/15/08 135 1,350 330 3,300 115 1,150
DTI Holdings Inc. 3/1/08 3,025 3,025 7,225 7,225 2,400 2,400
Diva Systems Corp. 5/15/06 75 21,000 220 61,600 75 21,000
Epic Resorts 6/15/05 100 1 250 3 80 1
Equity Office 144A 12/15/98 350 1,890 750 4,050 1,160 6,264
Esat Holdings, Inc. (Ireland) 2/1/07 75 2,625 205 7,175 65 2,275
Fitzgeralds Gaming Co. 12/19/98 433 4 1,338 13 630 6
Globalstar Telecom 144A 2/15/04 100 2,500 300 7,500 90 2,250
Hyperion Telecommunications
144A 4/15/01 400 16,896 850 35,904 200 8,448
Intelcom Group 144A 10/15/05 429 11,583 858 23,166 330 8,910
Interact Systems, Inc. 8/1/03 100 1 300 3 90 1
Intermedia Communications 6/1/00 100 10,379 350 36,327 -- --
International Wireless
Communications Holdings
144A 8/15/01 40 4 115 12 40 4
KMC Telecom Holdings, Inc. 4/15/08 200 3,200 500 8,000 175 2,800
Knology Holdings, Inc. 144A 10/15/07 285 428 720 1,080 210 315
McCaw International Ltd. 4/15/07 10 40 20 80 10 40
MGC Communications, Inc. 144A 10/1/04 20 990 55 2,721 15 742
Orbital Imaging Corp. 144A 3/1/05 115 4,600 300 12,000 100 4,000
Pathnet, Inc. 144A 4/15/08 190 2,850 490 7,350 160 2,400
Paxson Communications Corp.
144A 6/30/03 320 3 640 6 320 3
Powertel, Inc. 2/1/06 -- -- 1,600 11,200 -- --
Spanish Broadcasting Systems
144A 6/30/99 80 16,400 220 45,100 75 15,375
Sterling Chemicals Holdings 8/15/08 35 735 110 2,310 30 630
UIH Australia/Pacific, Inc.
144A 5/15/06 210 1,050 610 3,050 200 1,000
Versatel 144A 5/15/08 110 1,100 280 2,800 90 900
Wireless One, Inc. 10/19/00 450 5 1,050 11 375 4
---------- ---------- ----------
Total Warrants + (cost $99,674,
$273,884 and $89,434) $ 210,888 $ 542,734 $ 170,553
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH BALANCED CONSERVATIVE
<S> <C> <C> <C> <C> <C> <C> <C>
7.8% 9.6% 9.7%
Principal Principal Principal
SHORT-TERM INVESTMENTS* Amount Value Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
Interest in $471,473,000 joint
repurchase agreement dated
September 30, 1998 with
Credit Suisse First Boston due
October 1, 1998 with respect to
various U.S. Treasury obligations --
maturity value of $88,552,404,
$134,485,357 and 57,012,630
for an effective yield of 5.45% $ 88,539,000 $ 88,552,404 $ 134,465,000 $134,485,357 $ 57,004,000 $ 57,012,630
U.S. Treasury bills, zero %,
December 17, 1998 14,151,052 13,920,909 22,615,000 22,377,022 -- --
ITL Italy (Government of) deb.
8 1/2s, August 1, 1999 2,820,000,000 1,764,710 8,580,000,000 5,369,224 5,245,000,000 3,282,243
-------------- -------------- ------------
Total Short-Term Investments
(cost $104,130,500,
$161,872,903, and $60,094,880) $ 104,238,023 $ 162,231,603 $ 60,294,873
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments
(cost $1,267,577,580,
$1,624,752,872 and $597,544,397) $1,315,522,447 $1,670,190,248 $613,962,723
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets as follows:
<CAPTION>
- ------------------------------------------
<S> <C>
Growth portfolio $1,329,290.563
Balanced portfolio 1,694,766,505
Conservative portfolio 621,474,288
- ------------------------------------------
(b) The aggregate identified cost on a tax basis is as follows:
<CAPTION>
Aggregate Gross Unrealized Gross Unrealized Unrealized
Identified Cost Appreciation Depreciation Appreciation
(Depreciation)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth
portfolio $1,272,153,580 $119,312,699 $75,943,832 $ 43,368,867
Balanced
portfolio 1,628,713,738 184,597,688 143,121,178 41,476,510
Conservative
portfolio 598,062,104 40,483,203 24,582,584 15,900,619
- ----------------------------------------------------------------------------------------
(NON) Non-income-producing security.
(STP) 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.
(POR) A portion of the income will be received in additional securities.
(RES) Restricted, excluding 144A securities, as to public resale. PSF Holding LLC, Class A was acquired on dates
from 3/16/96 to 9/30/96 with a cost of $114,837, $451,081, and $145,237 for Growth, Balanced and Conservative
portfolios, respectively. Premium Standard Farms, Inc. was acquired on dates from 9/17/96 to 4/8/97 with a cost of
$3,839, $15,310, and $8,506 for Growth, Balanced and Conservative portfolios, respectively. The total market value
of restricted securities held by the fund did not exceed 0.1% of each fund's net assets.
(PIK) Income may be received in cash or additional securities at the discretion of the issuer.
(SEG) 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, 1998.
(CUS) This entity provides subcustodian services to the fund.
(R) Real Estate Investment Trust.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
ADR or GDR after the name of a foreign holding stands for American Depository Receipts, or Global Depository Receipts,
respectively representing ownership of foreign securities on deposit with a domestic custodian bank.
TBA after the name of a security represents to be announced securities (Note 1).
The rates shown on Floating Rate Notes (FRN) and Floating Rate Bonds (FRB) are the interest rates shown at
September 30, 1998, 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, 1998: (as percentage of Market Value)
<CAPTION>
Growth portfolio
-----------------------------
<C> <C>
Canada 1.0%
France 2.1
Germany 2.4
Ireland 1.0
Italy 1.0
Japan 1.6
Netherlands 1.8
Sweden 1.0
Switzerland 1.1
United Kingdom 3.4
United States 81.8
Other 1.8
-----------------------------
Total 100.0%
Distribution of investments by country of issue at September 30, 1998: (as percentage of Market Value)
Balanced portfolio
-----------------------------
Australia 1.0%
Canada 1.1
France 2.9
Germany 3.4
Ireland 1.0
Italy 1.4
Japan 1.6
Netherlands 2.6
Sweden 1.2
Switzerland 1.1
United Kingdom 3.9
United States 76.9
Other 1.9
-----------------------------
Total 100.0%
Distribution of investments by country of issue at September 30, 1998: (as percentage of Market Value)
Conservative portfolio
-----------------------------
Australia 1.0%
Canada 1.0
Denmark 1.0
France 2.7
Germany 4.2
Italy 1.6
Japan 1.1
Netherlands 3.2
Sweden 1.1
Switzerland 1.0
United Kingdom 3.7
United States 77.0
Other 1.4
-----------------------------
Total 100.0%
<CAPTION>
Forward Currency Contracts to Buy
at September 30, 1998 GROWTH
(aggregate face value $62,075,628)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brazilian Real $ 307,619 $ 302,279 10/5/98 $ 5,340
Canadian Dollar 110,675 109,353 12/16/98 1,322
Deutschemarks 29,485,665 28,457,112 12/16/98 1,028,553
Finnish Marka 360,039 343,531 12/16/98 16,508
French Franc 37,737 37,340 12/16/98 397
Japanese Yen 31,427,944 32,055,325 12/16/98 (627,381)
Spanish Peseta 806,338 770,688 12/16/98 35,650
- --------------------------------------------------------------------------------
$ 460,389
- --------------------------------------------------------------------------------
Forward Currency Contracts to Sell
at September 30, 1998 GROWTH
(aggregate face value $75,133,371)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------
Australian
Dollars $ 1,238,665 $ 1,214,507 12/16/98 $ (24,158)
British Pounds 8,079,686 8,018,400 3/22/99 (61,286)
British Pounds 642,794 636,924 12/16/98 (5,870)
Danish Krone 596,036 567,812 12/16/98 (28,224)
Deutschemarks 24,733,295 23,876,824 12/16/98 (856,471)
Dutch Guilder 7,899,980 7,724,666 12/16/98 (175,314)
Italian Lira 57,676 55,536 12/16/98 (2,140)
Japanese Yen 10,475,054 10,695,718 3/15/99 220,664
Japanese Yen 20,434,138 20,797,923 12/16/98 363,785
New Zealand Dollar 762,161 767,385 12/16/98 5,224
Swedish Krona 783,011 777,676 12/16/98 (5,335)
- --------------------------------------------------------------------------------
$(569,125)
- --------------------------------------------------------------------------------
Futures Contracts Outstanding
at September 30, 1998 GROWTH
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- --------------------------------------------------------------------------------
ASX Index (long) $68,697,169 $68,240,544 Dec-98 $ 456,625
CAC 40 Index
(long) 47,404,942 49,690,648 Oct-98 (2,285,706)
DAX Index (long) 24,762,852 25,883,983 Dec-98 (1,121,131)
FT-SE 100 (long) 37,229,405 38,211,763 Dec-98 (982,358)
German Eux 10yr
(short) 4,463,152 4,370,854 Dec-98 (92,298)
Gilt (short) 3,545,760 3,402,631 Dec-98 (143,129)
MIB 30 Index
(long) 12,384,965 14,164,666 Dec-98 (1,779,701)
Nasdaq 100
(long) 19,068,000 19,095,060 Dec-98 (27,060)
Nikkei 225
(short) 12,964,065 14,290,611 Dec-98 1,326,546
S & P Index
(short) 55,404,000 55,757,804 Dec-98 353,804
US Treasury
(short) 70,730,188 67,455,003 Dec-98 (3,275,185)
- --------------------------------------------------------------------------------
$(7,569,593)
- --------------------------------------------------------------------------------
<CAPTION>
TBA Sale Commitments
at September 30, 1998 GROWTH
(Proceeds receivable $1,443,071)
Settlement Market
Agency Principal Amount Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FNMA, 6.5s,
October 2028 $1,435,000 10/14/98 $1,459,208
- --------------------------------------------------------------------------------
<CAPTION>
Forward Currency Contracts to Buy
at September 30, 1998 BALANCED
(aggregate face value $140,571,572)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brazilian Real $ 938,800 $ 922,503 10/5/98 $ 16,297
Canadian Dollar 247,303 244,348 12/16/98 2,955
Deutschemarks 67,212,574 64,930,577 12/16/98 2,281,997
Finnish Marka 1,057,918 1,009,412 12/16/98 48,506
Italian Lira 39,875 38,396 12/16/98 1,479
Japanese Yen 69,562,705 70,961,611 12/16/98 (1,398,906)
Spanish Peseta 2,578,735 2,464,725 12/16/98 114,010
- --------------------------------------------------------------------------------
$1,066,338
- --------------------------------------------------------------------------------
Forward Currency Contracts to Sell
at September 30, 1998 BALANCED
(aggregate face value $150,139,920)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------
Australian Dollars $3,604,146 $ 3,533,851 12/16/98 $ (70,295)
British Pounds 1,845,493 1,831,721 12/16/98 (13,772)
British Pounds 10,178,722 10,101,514 3/22/99 (77,208)
Danish Krone 1,820,952 1,734,724 12/16/98 (86,228)
Deutschemarks 53,403,393 51,553,957 12/16/98 (1,849,436)
Dutch Guilder 24,531,149 23,992,802 12/16/98 (538,347)
French Franc 2,972,783 2,842,344 12/16/98 (130,439)
Japanese Yen 35,975,479 36,597,645 12/16/98 622,166
Japanese Yen 13,260,416 13,539,755 3/15/99 279,339
New Zealand Dollar 2,580,578 2,598,263 12/16/98 17,685
Swedish Krona 1,825,782 1,813,344 12/16/98 (12,438)
- --------------------------------------------------------------------------------
$(1,858,973)
- --------------------------------------------------------------------------------
Futures Contracts Outstanding
at September 30, 1998 BALANCED
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- --------------------------------------------------------------------------------
ASX Index (long) $ 75,751,952 $ 75,236,601 Dec-98 $ 515,351
CAC 40 Index
(long) 56,524,585 59,253,956 Oct-98 (2,729,371)
DAX Index (long) 16,242,301 17,028,785 Dec-98 (786,484)
US Treasury Bonds
20yr (long) 57,057,438 55,539,106 Dec-98 1,518,332
FT-SE 100 Index
(long) 39,326,837 40,367,400 Dec-98 (1,040,563)
German 10yr
(short) 20,942,481 20,504,094 Dec-98 (438,387)
Gilt (long) 2,363,840 2,267,529 Dec-98 96,311
MIB 30 Index
(long) 10,858,051 12,531,046 Dec-98 (1,672,995)
Nasdaq 100
(short) 1,498,200 1,459,347 Dec-98 (38,853)
Nikkei 225
(short) 16,290,694 17,926,402 Dec-98 1,635,708
S & P Index
(short) 104,139,000 104,720,866 Dec-98 581,866
- --------------------------------------------------------------------------------
$(2,359,085)
- --------------------------------------------------------------------------------
<CAPTION>
TBA Sale Commitments
at September 30, 1998 BALANCED
(Proceeds receivable $3,348,731)
Settlement Market
Agency Principal Amount Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FNMA, 6.5s,
October 2028 $3,330,000 10/14/98 $3,386,177
- --------------------------------------------------------------------------------
<CAPTION>
Forward Currency Contracts to Buy
at September 30, 1998 CONSERVATIVE
(aggregate face value $79,357,117)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brazilian Real $ 562,605 $ 552,839 10/5/98 $ 9,766
Canadian Dollar 187,618 185,377 12/16/98 2,241
Deutschemarks 32,323,230 31,216,354 12/16/98 1,106,876
Finnish Marka 594,853 567,578 12/16/98 27,275
Japanese Yen 44,471,988 45,361,904 12/16/98 (889,916)
Spanish Peseta 1,541,204 1,473,065 12/16/98 68,139
- --------------------------------------------------------------------------------
$ 324,381
- --------------------------------------------------------------------------------
Forward Currency Contracts to Sell
at September 30, 1998 CONSERVATIVE
(aggregate face value $75,459,342)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------
Australian Dollars $2,039,639 $ 1,999,858 12/16/98 $ (39,781)
British Pounds 1,749,834 1,731,359 12/16/98 (18,475)
British Pounds 2,119,234 2,103,160 3/22/99 (16,074)
Danish Krone 1,252,031 1,192,743 12/16/98 (59,288)
Deutschemarks 23,500,632 22,686,637 12/16/98 (813,995)
Dutch Guilder 16,031,888 15,681,363 12/16/98 (350,525)
French Franc 1,687,840 1,613,782 12/16/98 (74,058)
Italian Lira 69,835 67,244 12/16/98 (2,591)
Japanese Yen 22,366,474 22,747,947 12/16/98 381,473
Japanese Yen 2,658,073 2,714,067 3/15/99 55,994
New Zealand Dollar 1,518,917 1,529,327 12/16/98 10,410
Swedish Krona 1,401,402 1,391,855 12/16/98 (9,547)
- --------------------------------------------------------------------------------
$(936,457)
- --------------------------------------------------------------------------------
Futures Contracts Outstanding
at September 30, 1998 CONSERVATIVE
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- --------------------------------------------------------------------------------
ASX Index (long) $26,946,865 $26,763,980 Dec-98 $ 182,885
CAC 40 Index
(long) 20,017,332 20,983,754 Oct-98 (966,422)
DAX Index (long) 1,597,603 1,717,975 Dec-98 (120,372)
US Treasury Notes
10yr (short) 5,707,563 5,504,570 Dec-98 (202,993)
FT-SE 100 Index
(long) 32,073,220 32,924,638 Dec-98 (851,418)
German Eux 10yr
(short) 15,792,690 15,462,103 Dec-98 (330,587)
Gilt (short) 5,909,599 5,668,312 Dec-98 (241,287)
MIB 30 Index
(long) 3,562,806 4,111,758 Dec-98 (548,952)
Nasdaq 100
(short) 1,362,000 1,326,680 Dec-98 (35,320)
Nikkei 225
(short) 5,332,389 5,867,349 Dec-98 534,960
S & P Index
(short) 8,208,000 8,264,592 Dec-98 56,592
US Treasury
(short) 8,151,063 7,660,472 Dec-98 (490,591)
- --------------------------------------------------------------------------------
$(3,013,505)
- --------------------------------------------------------------------------------
<CAPTION>
TBA Sale Commitments
at September 30, 1998 CONSERVATIVE
(Proceeds receivable $4,897,394)
Settlement Market
Agency Principal Amount Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FNMA, 6.5s,
October 2028 $4,870,000 10/14/98 $4,952,157
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1998
Putnam Asset Allocation: Growth Portfolio
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,179,025,176) (Note 1) $1,226,970,043
- -----------------------------------------------------------------------------------------------
Repurchase agreement
(identified cost $88,552,404) (Note 1) 88,552,404
- -----------------------------------------------------------------------------------------------
Cash 86,811
- -----------------------------------------------------------------------------------------------
Foreign currency (cost $8,346,580) 7,853,849
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 4,549,125
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,426,683
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 19,584,197
- -----------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 1,677,441
- -----------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 208,550
- -----------------------------------------------------------------------------------------------
Total assets 1,351,909,103
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for variation margin 494,886
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 12,481,677
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 2,377,727
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,261,917
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 381,807
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 16,320
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,667
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 904,872
- -----------------------------------------------------------------------------------------------
Payable for open forward currency contracts 1,786,177
- -----------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 156,745
- -----------------------------------------------------------------------------------------------
TBA sales commitments, at value (proceeds receivable $1,443,071) 1,459,208
- -----------------------------------------------------------------------------------------------
Other accrued expenses 292,537
- -----------------------------------------------------------------------------------------------
Total liabilities 22,618,540
- -----------------------------------------------------------------------------------------------
Net assets $1,329,290,563
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,258,060,784
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 2,873,593
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments
and foreign currency transactions (Note 1) 29,101,843
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 39,254,343
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,329,290,563
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($602,273,239 divided by 51,214,352 shares) $11.76
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $11.76)* $12.48
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($385,644,644 divided by 33,267,814 shares)** $11.59
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($88,075,705 divided by 7,659,033 shares)** $11.50
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($49,702,119 divided by 4,283,448 shares) $11.60
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $11.60)* $12.02
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($203,594,856 divided by 17,192,019 shares) $11.84
- -----------------------------------------------------------------------------------------------
* 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.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1998
Putnam Asset Allocation: Growth Portfolio
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Interest $ 18,222,324
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $431,134) 14,729,678
- -----------------------------------------------------------------------------------------------
Total investment income 32,952,002
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 8,493,068
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 5,358,952
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 25,768
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 20,645
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,507,797
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 3,989,208
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 861,726
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 342,439
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 3,604
- -----------------------------------------------------------------------------------------------
Reports to shareholders 99,294
- -----------------------------------------------------------------------------------------------
Registration fees 94,444
- -----------------------------------------------------------------------------------------------
Auditing 83,501
- -----------------------------------------------------------------------------------------------
Legal 13,531
- -----------------------------------------------------------------------------------------------
Postage 218,906
- -----------------------------------------------------------------------------------------------
Other 76,717
- -----------------------------------------------------------------------------------------------
Total expenses 21,189,600
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (578,099)
- -----------------------------------------------------------------------------------------------
Net expenses 20,611,501
- -----------------------------------------------------------------------------------------------
Net investment income 12,340,501
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 44,289,367
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (3,586,378)
- -----------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 199,875
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (2,502,331)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (305,574)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures
contracts, written options, and TBA sale commitments during the year (159,444,370)
- -----------------------------------------------------------------------------------------------
Net loss on investments (121,349,411)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(109,008,910)
- -----------------------------------------------------------------------------------------------
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
-------------------------------
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 12,340,501 $ 10,137,942
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments of foreign
currency transactions 38,400,533 64,007,920
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities in foreign currencies (159,749,944) 135,037,077
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (109,008,910) 209,182,939
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (5,451,260) (3,419,375)
- ---------------------------------------------------------------------------------------------------------------
Class B (1,452,810) (1,858,459)
- ---------------------------------------------------------------------------------------------------------------
Class C (354,049) (354,573)
- ---------------------------------------------------------------------------------------------------------------
Class M (255,177) (181,831)
- ---------------------------------------------------------------------------------------------------------------
Class Y (2,655,086) (2,813,692)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (33,520,017) (9,736,876)
- ---------------------------------------------------------------------------------------------------------------
Class B (23,158,050) (8,947,425)
- ---------------------------------------------------------------------------------------------------------------
Class C (4,660,281) (1,403,269)
- ---------------------------------------------------------------------------------------------------------------
Class M (2,405,966) (610,900)
- ---------------------------------------------------------------------------------------------------------------
Class Y (13,951,480) (7,064,486)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 346,133,424 498,609,902
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 149,260,338 671,401,955
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 1,180,030,225 508,628,270
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed
net investment income of $2,873,593
and $4,753,670, respectively) $1,329,290,563 $1,180,030,225
- ---------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.64 $11.41 $10.06 $8.43 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .15 .17 .18 .18(d) .10(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.06) 2.69 1.63 1.53 (.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.91) 2.86 1.81 1.71 (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.14) (.16) (.19) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.83) (.47) (.27) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.97) (.63) (.46) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.76 $13.64 $11.41 $10.06 $8.43
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (7.01) 26.25 18.75 20.45 (.82)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $602,273 $486,107 $210,531 $122,228 $43,669
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.31 1.39 1.45 1.49(d) .78(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.13 1.42 1.72 1.98(d) 1.31(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 146.58 99.96 100.93 88.36 39.90*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) 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.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.47 $11.29 $9.97 $8.39 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .05 .08 .10 .11(d) .06(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.05) 2.67 1.64 1.52 (.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (1.00) 2.75 1.74 1.63 (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.05) (.10) (.15) (.05) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.83) (.47) (.27) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.88) (.57) (.42) (.05) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.59 $13.47 $11.29 $9.97 $8.39
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (7.72) 25.23 18.04 19.57 (1.29)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $385,645 $357,501 $199,871 $116,263 $50,664
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.06 2.14 2.21 2.23(d) 1.21(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .40 .68 .95 1.22(d) .80(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 146.58 99.96 100.93 88.36 39.90*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) 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.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.38 $11.24 $9.93 $8.39 $8.46
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .05 .08 .10 .11 (d) .01(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.04) 2.65 1.63 1.51 (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.99) 2.73 1.73 1.62 (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.06) (.12) (.15) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.83) (.47) (.27) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.89) (.59) (.42) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.50 $13.38 $11.24 $9.93 $8.39
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (7.70) 25.31 18.01 19.46 (.83)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $88,076 $68,749 $27,556 $7,985 $385
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.06 2.14 2.23 2.23(d) .15(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .41 .67 .94 1.24(d) .14(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 146.58 99.96 100.93 88.36 39.90 *
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) 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.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $13.49 $11.32 $10.01 $8.39
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .08 .11 .12 .08(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.05) 2.67 1.64 1.54
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.97) 2.78 1.76 1.62
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.09) (.14) (.18) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.83) (.47) (.27) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.92) (.61) (.45) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.60 $13.49 $11.32 $10.01
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (7.52) 25.63 18.21 19.31*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $49,702 $34,381 $12,369 $3,160
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.81 1.89 1.95 1.45(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .65 .92 1.16 .79(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 146.58 99.96 100.93 88.36
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) 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.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.72 $11.47 $10.09 $8.43 $8.22
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .18 .21 .21 .17(d) .03(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.07) 2.70 1.65 1.57 .18
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.89) 2.91 1.86 1.74 .21
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.16) (.19) (.21) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.83) (.47) (.27) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.99) (.66) (.48) (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.84 $13.72 $11.47 $10.09 $8.43
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (6.79) 26.54 19.20 20.94 2.55*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $203,595 $233,292 $58,301 $45,150 $775
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.06 1.14 1.21 1.28(d) .20(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.40 1.71 1.97 2.05(d) .50(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 146.58 99.96 100.93 88.36 39.90*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1998
Putnam Asset Allocation: Balanced Portfolio
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,490,267,515) (Note 1) $1,535,704,891
- -----------------------------------------------------------------------------------------------
Repurchase Agreement
(identified cost $134,485,357) (Note 1) 134,485,357
- -----------------------------------------------------------------------------------------------
Cash 108,151
- -----------------------------------------------------------------------------------------------
Foreign currency (cost $11,480,795) 10,806,575
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 10,614,029
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,490,252
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 22,525,894
- -----------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 3,384,434
- -----------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 398,801
- -----------------------------------------------------------------------------------------------
Receivable for variation margin 3,267,498
- -----------------------------------------------------------------------------------------------
Total assets 1,725,785,882
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 16,424,263
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,958,639
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,737,586
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 447,022
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 17,139
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,727
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,160,570
- -----------------------------------------------------------------------------------------------
Payable for open forward currency contracts 4,177,069
- -----------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 503,885
- -----------------------------------------------------------------------------------------------
TBA Sales commitments, at value (proceeds receivable $3,348,731) 3,386,177
- -----------------------------------------------------------------------------------------------
Other accrued expenses 202,300
- -----------------------------------------------------------------------------------------------
Total liabilities 31,019,377
- -----------------------------------------------------------------------------------------------
Net assets $1,694,766,505
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,631,259,716
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 269,507
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions (Note 1) 21,876,272
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets
and liabilities in foreign currencies 41,361,010
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,694,766,505
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($846,574,024 divided by 79,406,445 shares) $10.66
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $10.66)* $11.31
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($482,028,865 divided by 45,430,057 shares)** $10.61
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($94,553,153 divided by 8,955,550 shares)** $10.56
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($55,510,805 divided by 5,211,742 shares) $10.65
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $10.65)* $11.04
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($216,099,658 divided by 20,259,101shares) $10.67
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales
the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1998
Putnam Asset Allocation: Balanced Portfolio
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Interest (net of foreign tax of $17,964) $ 40,667,254
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $552,792) 16,643,914
- -----------------------------------------------------------------------------------------------
Total investment income 57,311,168
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 10,260,857
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 5,584,968
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 29,152
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 18,869
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 2,102,998
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 4,876,164
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 869,536
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 403,440
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 3,593
- -----------------------------------------------------------------------------------------------
Reports to shareholders 82,779
- -----------------------------------------------------------------------------------------------
Registration fees 109,044
- -----------------------------------------------------------------------------------------------
Auditing 85,314
- -----------------------------------------------------------------------------------------------
Legal 15,571
- -----------------------------------------------------------------------------------------------
Postage 227,408
- -----------------------------------------------------------------------------------------------
Other 77,263
- -----------------------------------------------------------------------------------------------
Total expenses 24,746,956
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (503,302)
- -----------------------------------------------------------------------------------------------
Net expenses 24,243,654
- -----------------------------------------------------------------------------------------------
Net investment income 33,067,514
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 48,996,830
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (1,406,877)
- -----------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 272,132
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (7,233,025)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (617,294)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures contracts,
written options, and TBA sale commitments during the year (170,862,107)
- -----------------------------------------------------------------------------------------------
Net loss on investments (130,850,341)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (97,782,827)
- -----------------------------------------------------------------------------------------------
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
-------------------------------
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $33,067,514 $24,292,767
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 40,629,060 82,193,569
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities in foreign currencies (171,479,401) 136,953,355
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (97,782,827) 243,439,691
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (13,459,243) (12,697,299)
- ---------------------------------------------------------------------------------------------------------------
Class B (4,125,880) (6,684,235)
- ---------------------------------------------------------------------------------------------------------------
Class C (785,030) (929,452)
- ---------------------------------------------------------------------------------------------------------------
Class M (583,502) (584,395)
- ---------------------------------------------------------------------------------------------------------------
Class Y (4,212,140) (5,162,787)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (51,741,621) (17,400,957)
- ---------------------------------------------------------------------------------------------------------------
Class B (32,302,821) (14,022,870)
- ---------------------------------------------------------------------------------------------------------------
Class C (5,432,068) (1,750,679)
- ---------------------------------------------------------------------------------------------------------------
Class M (3,496,761) (891,021)
- ---------------------------------------------------------------------------------------------------------------
Class Y (16,085,456) (6,323,825)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 454,601,683 529,850,375
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 224,594,334 706,842,546
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 1,470,172,171 763,329,625
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income and distributions in excess of
net investment income of $269,507 and
$1,691,530, respectively) $1,694,766,505 $1,470,172,171
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balanced Portfolio
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 7, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.28 $10.71 $9.67 $8.33 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .26 .28 .29 .27(d) .16 (d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.84) 2.13 1.32 1.27 (.28)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.58) 2.41 1.61 1.54 (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.18) (.31) (.28) (.20) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.86) (.53) (.29) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.04) (.84) (.57) (.20) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.66 $12.28 $10.71 $9.67 $8.33
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (4.97) 23.82 17.41 18.73 (1.47)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $846,574 $680,720 $327,326 $152,317 $54,483
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.22 1.27 1.33 1.32(d) .83(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.17 2.44 2.83 2.95(d) 2.13(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 158.14 136.75 122.12 106.03 52.62*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) 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.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balanced Portfolio
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 11, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.23 $10.67 $9.64 $8.31 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .17 .19 .21 .20(d) .11(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.83) 2.13 1.32 1.26 (.27)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.66) 2.32 1.53 1.46 (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.10) (.23) (.21) (.13) (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.86) (.53) (.29) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.96) (.76) (.50) (.13) (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.61 $12.23 $10.67 $9.64 $8.31
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (5.70) 22.95 16.54 17.83 (1.89)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $482,029 $442,463 $264,830 $159,230 $81,093
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.97 2.02 2.08 2.07(d) 1.23(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.42 1.70 2.08 2.26(d) 1.41(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 158.14 136.75 122.12 106.03 52.62*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) 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.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balanced Portfolio
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Sept. 1, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.18 $10.64 $9.62 $8.31 $8.41
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .16 .19 .22 .20(d) .01(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.82) 2.11 1.30 1.27 (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.66) 2.30 1.52 1.47 (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.10) (.23) (.21) (.16) (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.86) (.53) (.29) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.96) (.76) (.50) (.16) (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.56 $12.18 $10.64 $9.62 $8.31
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (5.70) 22.86 16.47 17.89 (.84)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $94,553 $70,847 $29,724 $11,921 $441
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.97 2.02 2.09 2.09(d) .16(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.41 1.70 2.18 2.22 d) .11(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 158.14 136.75 122.12 106.03 52.62*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) 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.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balanced Portfolio
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 6, 1995+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $12.27 $10.71 $9.66 $8.34
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .20 .22 .24 .14(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.83) 2.13 1.34 1.31
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.63) 2.35 1.58 1.45
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.13) (.26) (.24) (.13)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.86) (.53) (.29) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.99) (.79) (.53) (.13)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.65 $12.27 $10.71 $9.66
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (5.46) 23.19 17.05 17.46*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $55,511 $44,121 $14,967 $3,509
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.72 1.77 1.84 1.38(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.67 1.93 2.42 1.56(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 158.14 136.75 122.12 106.03
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) 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.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balanced Portfolio
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 5, 1994+
operating performance Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.29 $10.71 $9.66 $8.33 $8.11
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .29 .31 .31 .29(d) .05(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.84) 2.14 1.34 1.26 .22
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.55) 2.45 1.65 1.55 .27
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) (.34) (.31) (.22) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.86) (.53) (.29) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.07) (.87) (.60) (.22) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.67 $12.29 $10.71 $9.66 $8.33
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (4.74) 24.21 17.81 18.89 3.34*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $216,100 $232,021 $126,482 $71,661 $66,081
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .97 1.02 1.08 1.07(d) .23(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.43 2.70 3.03 3.35(d) .62(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 158.14 136.75 122.12 106.03 52.62 *
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1998
Putnam Asset Allocation: Conservative Portfolio
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $540,531,767) (Note 1) $556,950,093
- -----------------------------------------------------------------------------------------------
Repurchase Agreement
(identified cost $57,012,630) (Note 1) 57,012,630
- -----------------------------------------------------------------------------------------------
Cash 58,390
- -----------------------------------------------------------------------------------------------
Foreign currency (cost $5,391,324) 5,754,786
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 6,673,512
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,949,942
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 10,477,231
- -----------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 1,662,174
- -----------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 155,528
- -----------------------------------------------------------------------------------------------
Receivable for variation margin 461,436
- -----------------------------------------------------------------------------------------------
Total assets 641,155,722
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 9,525,713
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 657,187
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,080,056
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 220,742
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 12,071
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,516
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 442,474
- -----------------------------------------------------------------------------------------------
Payable for open forward currency contracts 2,274,250
- -----------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 343,271
- -----------------------------------------------------------------------------------------------
TBA sales commitments, at value (proceeds receivable $4,897,394) 4,952,157
- -----------------------------------------------------------------------------------------------
Other accrued expenses 170,997
- -----------------------------------------------------------------------------------------------
Total liabilities 19,681,434
- -----------------------------------------------------------------------------------------------
Net assets $621,474,288
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $604,003,948
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 358,007
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 4,131,116
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 12,981,217
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $621,474,288
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($367,806,291 divided by 37,497,116 shares) $ 9.81
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $9.81)* $10.41
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($162,807,353 divided by 16,645,596 shares)** $ 9.78
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($45,739,602 divided by 4,689,331 shares)** $ 9.75
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($18,867,770 divided by 1,928,780 shares) $ 9.78
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $9.78)* $10.13
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($26,253,272 divided by 2,674,703 shares) $ 9.82
- -----------------------------------------------------------------------------------------------
* 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, 1998
Putnam Asset Allocation: Conservative Portfolio
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Interest (net of foreign tax of $403,686) $ 26,358,607
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $128,165) 3,099,859
- -----------------------------------------------------------------------------------------------
Total investment income 29,458,466
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 4,003,145
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,344,891
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 17,909
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,237
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 888,969
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,534,996
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 355,775
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 121,968
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 3,604
- -----------------------------------------------------------------------------------------------
Reports to shareholders 27,601
- -----------------------------------------------------------------------------------------------
Registration fees 35,526
- -----------------------------------------------------------------------------------------------
Auditing 81,248
- -----------------------------------------------------------------------------------------------
Legal 4,502
- -----------------------------------------------------------------------------------------------
Postage 70,453
- -----------------------------------------------------------------------------------------------
Other 73,092
- -----------------------------------------------------------------------------------------------
Total expenses 9,570,916
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (194,022)
- -----------------------------------------------------------------------------------------------
Net expenses 9,376,894
- -----------------------------------------------------------------------------------------------
Net investment income 20,081,572
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 15,853,533
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (4,777,197)
- -----------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 128,404
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (5,042,773)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (17,491)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures contracts,
written options and TBA sale commitments during the year (33,740,418)
- -----------------------------------------------------------------------------------------------
Net loss on investments (27,595,942)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (7,514,370)
- -----------------------------------------------------------------------------------------------
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
-------------------------------
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 20,081,572 $ 14,135,990
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 6,161,967 16,587,637
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities
in foreign currencies (33,757,909) 34,561,076
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (7,514,370) 65,284,703
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (6,966,826) (8,805,780)
- ---------------------------------------------------------------------------------------------------------------
Class B (1,866,547) (3,124,303)
- ---------------------------------------------------------------------------------------------------------------
Class C (456,355) (624,813)
- ---------------------------------------------------------------------------------------------------------------
Class M (252,645) (241,373)
- ---------------------------------------------------------------------------------------------------------------
Class Y (533,235) (509,001)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (12,929,412) (7,375,222)
- ---------------------------------------------------------------------------------------------------------------
Class B (5,974,120) (3,325,457)
- ---------------------------------------------------------------------------------------------------------------
Class C (1,238,650) (631,861)
- ---------------------------------------------------------------------------------------------------------------
Class M (541,685) (177,085)
- ---------------------------------------------------------------------------------------------------------------
Class Y (823,320) (342,603)
- ---------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments
Class A (3,009,400) --
- ---------------------------------------------------------------------------------------------------------------
Class B (1,390,513) --
- ---------------------------------------------------------------------------------------------------------------
Class C (288,303) --
- ---------------------------------------------------------------------------------------------------------------
Class M (126,081) --
- ---------------------------------------------------------------------------------------------------------------
Class Y (191,633) --
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 171,400,189 --
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 127,297,094 --
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 494,177,194 228,860,587
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed
net investment income and distributions
in excess of net investment income of
$358,007 and $253,640, respectively) $621,474,288 $494,177,194
- ---------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.61 $9.69 $9.19 $8.23 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .38(c) .38(c) .36 .33(d) .18(c)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.45) 1.22 .68 .90 (.39)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.07) 1.60 1.04 1.23 (.21)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.20) (.35) (.36) (.27) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.43) (.33) (.18) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments (.10) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.73) (.68) (.54) (.27) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.81 $10.61 $9.69 $9.19 $8.23
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (0.69) 17.26 11.73 15.27 (2.47)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $367,806 $295,239 $106,933 $57,341 $25,782
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.39 1.38 1.47 1.22(d) .75(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.67 3.74 4.08 4.48(d) 2.41(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 203.19 219.44 183.67 159.80 59.27*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) Reflects an expense limitation. As a result of such limitation, expenses for the period ended September 30, 1994 reflect a
reduction of $0.05, $0.04, none and $0.01 per share for class A, class B, class C and class Y shares, respectively. Expenses
for the year ended September 30, 1995 reflect a reduction of $0.03, $0.03, $0.03, $0.02 and $0.03 per share for class A,
class B, class C, class M and class Y, respectively.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.57 $9.66 $9.16 $8.22 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .30(c) .30(c) .29 .30(d) .15(c)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.43) 1.22 .68 .85 (.39)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.13) 1.52 .97 1.15 (.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.13) (.28) (.29) (.21) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.43) (.33) (.18) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments (.10) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.66) (.61) (.47) (.21) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.78 $10.57 $9.66 $9.16 $8.22
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (1.32) 16.36 10.96 14.22 (2.79)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $162,807 $138,457 $94,954 $65,783 $38,711
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.14 2.13 2.22 1.98(d) 1.21(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.92 2.97 3.33 3.81(d) 1.92(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 203.19 219.44 183.67 159.80 59.27 *
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) Reflects an expense limitation. As a result of such limitation, expenses for the period ended September 30, 1994 reflect a
reduction of $0.05, $0.04, none and $0.01 per share for class A, class B, class C and class Y shares, respectively. Expenses
for the year ended September 30, 1995 reflect a reduction of $0.03, $0.03, $0.03, $0.02 and $0.03 per share for class A,
class B, class C, class M and class Y, respectively.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.56 $9.64 $9.15 $8.22 $8.33
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .30(c) .29(c) .30 .29(d) .03(c)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.45) 1.24 .66 .87 (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.15) 1.53 .96 1.16 (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.13) (.28) (.29) (.23) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.43) (.33) (.18) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments (.10) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.66) (.61) (.47) (.23) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.75 $10.56 $9.64 $9.15 $8.22
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (1.51) 16.52 10.86 14.41 (.80)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $45,740 $29,032 $16,326 $7,198 $273
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 2.14 2.13 2.22 1.89(d) .16(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.93 2.96 3.30 3.92(d) .48(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 203.19 219.44 183.67 159.80 59.27 *
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) Reflects an expense limitation. As a result of such limitation, expenses for the period ended September 30, 1994 reflect a
reduction of $0.05, $0.04, none and $0.01 per share for class A, class B, class C and class Y shares, respectively. Expenses
for the year ended September 30, 1995 reflect a reduction of $0.03, $0.03, $0.03, $0.02 and $0.03 per share for class A,
class B, class C, class M and class Y, respectively.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.59 $9.67 $9.18 $8.21
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .33(c) .32(c) .33 .21(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.46) 1.24 .66 .92
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.13) 1.56 .99 1.13
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.15) (.31) (.32) (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.43) (.33) (.18) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments (.10) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.68) (.64) (.50) (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.78 $10.59 $9.67 $9.18
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (1.27) 16.80 11.17 13.92*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $18,868 $12,689 $4,622 $1,366
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.89 1.88 1.96 1.10(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.17 3.19 3.60 2.73(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 203.19 219.44 183.67 159.80
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) Reflects an expense limitation. As a result of such limitation, expenses for the period ended September 30, 1994 reflect a
reduction of $0.05, $0.04, none and $0.01 per share for class A, class B, class C and class Y shares, respectively. Expenses
for the year ended September 30, 1995 reflect a reduction of $0.03, $0.03, $0.03, $0.02 and $0.03 per share for class A,
class B, class C, class M and class Y, respectively.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.62 $9.69 $9.19 $8.23 $8.23
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .41(c) .40(c) .38 .36(d) .07(c)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.45) 1.23 .68 .89 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.04) 1.63 1.06 1.25 .07
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.37) (.38) (.29) (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.43) (.33) (.18) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments (.10) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.76) (.70) (.56) (.29) (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.82 $10.62 $9.69 $9.19 $8.23
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (0.44) 17.62 11.99 15.54 1.01*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $26,253 $18,760 $6,025 $1,818 $163
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.14 1.13 1.22 .92(d) .21(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.93 3.96 4.45 4.93(d) 1.04(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 203.19 219.44 183.67 159.80 59.27*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(d) Reflects an expense limitation. As a result of such limitation, expenses for the period ended September 30, 1994 reflect a
reduction of $0.05, $0.04, none and $0.01 per share for class A, class B, class C and class Y shares, respectively. Expenses
for the year ended September 30, 1995 reflect a reduction of $0.03, $0.03, $0.03, $0.02 and $0.03 per share for class A,
class B, class C, class M and class Y, respectively.
</TABLE>
Notes to financial statements
September 30, 1998
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 are 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 invest at least $250
million in a combination of Putnam Funds and other accounts managed by
affiliates of Putnam Management.
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 consistently
followed by the fund 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 forward
currency contracts, futures and options 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 Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The funds, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are 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, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
funds do not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on investments
from fluctuations arising from changes in the market prices of the
securities. Such gains and losses are included with the net realized and
unrealized gain or loss on investments. Net realized gains and losses on
foreign currency transactions represent net realized exchange gains or
losses on closed forward currency contracts, disposition of foreign
currencies and the difference between the amount of investment income and
foreign withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate.
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. 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. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices supplied
by dealers.
H) TBA purchase commitments The funds may enter into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed unit
price at a future date beyond customary settlement time. Although the unit
price has been established, the principal value has not been finalized.
However, the amount of the commitments will not fluctuate more than 1.0%
from the principal amount. The funds hold, and maintain until settlement
date, cash or high-grade debt obligations in an amount sufficient to meet
the purchase price, or the funds may enter into offsetting contracts for
the forward sale of other securities they own. Income on the securities
will not be earned until settlement date. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the
value of the security to be purchased declines prior to the settlement
date, which risk is in addition to the risk of decline in the value of
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 it has 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 fund 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 fund delivers 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 year ended
September 30, 1998, the funds had no borrowings against the line of
credit.
K) Federal taxes It is the policy of each fund to distribute all of their
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 the funds 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 temporary and permanent differences of losses on wash
sale transactions, foreign currency gains and losses, post-October loss
deferrals, organization costs, nontaxable dividends, defaulted bond
interest, unrealized gains and losses on certain futures contracts, market
discount, interest on payment-in-kind securities, realized gains and
losses on passive foreign investment companies, and unrealized gains and
losses 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, 1998 were
as follows:
Undistributed Net Investment Income
- ------------------------------------------------------------
Growth Portfolio (4,052,196)
Balanced Portfolio (7,940,682)
Conservative Portfolio (9,394,317)
- ------------------------------------------------------------
Accumulated Net Realized Gain (Loss)
- ------------------------------------------------------------
Growth Portfolio 4,118,718
Balanced Portfolio 7,824,088
Conservative Portfolio 9,085,505
- ------------------------------------------------------------
Additional Paid-in Capital
- ------------------------------------------------------------
Growth Portfolio (66,522)
Balanced Portfolio 116,594
Conservative Portfolio 308,812
- ------------------------------------------------------------
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 have been fully amortized over a five year period as of
September 30, 1998.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.700% 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% thereafter.
The trust reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the 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 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, 1998, fund expenses were reduced by
$578,099, $503,302, and $194,022 (for Growth Portfolio, Balanced
Portfolio, and Conservative Portfolio, respectively) under expense offset
arrangements with PFTC and brokerage service arrangements. Investor
servicing and custodian fees reported in the Statement of operations
exclude these credits. The funds could have invested a portion of the
assets utilized in connection with the expense offset arrangements in an
income producing asset if they had not entered into such arrangements.
Each Trustee of the trust receives an annual Trustee fee, of which $1,210,
$1,310, and $680 (for Growth Portfolio, Balanced Portfolio, and
Conservative Portfolio, respectively) has been allocated to the funds, and
an additional fee for each Trustee's meeting attended. Trustees who are
not interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
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
fund 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, 1998, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $879,118 and $78,294 from the
sale of class A and class M shares, respectively and received $1,486,222
and $61,038 in contingent deferred sales charges from redemptions of class
B and C shares. A deferred sales charge of up to 1% is assessed on certain
redemptions of class A shares. For the year ended September 30, 1998,
Putnam Mutual Funds Corp., acting as underwriter received $17,943 on class
A redemptions.
Note 3
Purchases and sales of securities
During the year ended September 30, 1998, purchases and sales of
investment securities other short-term investments were as follows:
U.S. Government Obligations
- -----------------------------------------------------------------------------
Purchases Sales
- -----------------------------------------------------------------------------
Growth
Portfolio $177,983,327 $169,879,420
- -----------------------------------------------------------------------------
Balanced
Portfolio 335,528,887 342,190,196
- -----------------------------------------------------------------------------
Conservative
Portfolio 475,673,256 421,421,460
- -----------------------------------------------------------------------------
Other Securities
- -----------------------------------------------------------------------------
Purchases Sales
- -----------------------------------------------------------------------------
Growth
Portfolio $1,889,575,407 $1,636,148,252
- -----------------------------------------------------------------------------
Balanced
Portfolio 2,379,398,474 2,046,676,539
- -----------------------------------------------------------------------------
Conservative
Portfolio 593,916,046 656,761,635
- -----------------------------------------------------------------------------
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 $ 2,860,000 $ 35,607
- -----------------------------------------------------------------------------
Option written 8,485,636,000 246,821
- -----------------------------------------------------------------------------
Options expired (8,488,496,000) (282,428)
- -----------------------------------------------------------------------------
Written options
outstanding at
the end of
the year $-- $--
- -----------------------------------------------------------------------------
Balanced Portfolio
- -----------------------------------------------------------------------------
Contract Premiums
Amount Received
- -----------------------------------------------------------------------------
Contracts
outstanding at
the beginning
of the year $ 7,145,000 $88,955
- -----------------------------------------------------------------------------
Options written 72,636,000 385,828
- -----------------------------------------------------------------------------
Options expired (69,488,000) (416,571)
- -----------------------------------------------------------------------------
Options closed (10,293,000) (58,212)
- -----------------------------------------------------------------------------
Written options
outstanding at
the end of
the year $-- $--
- -----------------------------------------------------------------------------
Conservative Portfolio
- -----------------------------------------------------------------------------
Contract Premiums
Amount Received
- -----------------------------------------------------------------------------
Contracts
outstanding at
the beginning
of the year $ 3,245,000 $ 40,400
- -----------------------------------------------------------------------------
Options written 33,974,000 181,759
- -----------------------------------------------------------------------------
Options expired (27,707,000) (166,258)
- -----------------------------------------------------------------------------
Options closed (9,512,000) (55,901)
- -----------------------------------------------------------------------------
Written options
outstanding at
the end of
the year $- $-
- -----------------------------------------------------------------------------
Note 4
Capital shares
At September 30, 1998, there was an unlimited number of shares of beneficial
interest authorized.
Transactions in capital shares were as follows:
Year ended September 30
- -----------------------------------------------------------------------------
Class A 1998
- -----------------------------------------------------------------------------
Growth Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 24,621,616 $324,604,400
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,138,681 38,573,774
- -----------------------------------------------------------------------------
Shares
repurchased (12,185,516) (159,028,024)
- -----------------------------------------------------------------------------
Net increase 15,574,781 $204,150,150
- -----------------------------------------------------------------------------
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 B 1998
- -----------------------------------------------------------------------------
Growth Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 9,551,527 $123,782,632
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,908,500 23,246,065
- -----------------------------------------------------------------------------
Shares
repurchased (4,740,088) (61,044,722)
- -----------------------------------------------------------------------------
Net increase 6,719,939 $85,983,975
- -----------------------------------------------------------------------------
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 C 1998
- -----------------------------------------------------------------------------
Growth Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,243,937 $41,705,965
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 372,280 4,500,861
- -----------------------------------------------------------------------------
Shares
repurchased (1,096,464) (13,897,436)
- -----------------------------------------------------------------------------
Net increase 2,519,753 $32,309,390
- -----------------------------------------------------------------------------
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 M 1998
- -----------------------------------------------------------------------------
Growth Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,169,821 $27,889,545
- -----------------------------------------------------------------------------
Shares issued in
connections with
reinvestment of
distributions 209,497 2,551,663
- -----------------------------------------------------------------------------
Shares
repurchased (644,734) (8,293,971)
- -----------------------------------------------------------------------------
Net increase 1,734,584 $22,147,237
- -----------------------------------------------------------------------------
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 Y 1998
- -----------------------------------------------------------------------------
Growth Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,578,714 $47,181,760
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,344,667 16,606,566
- -----------------------------------------------------------------------------
Shares
repurchased (4,736,367) (62,245,654)
- -----------------------------------------------------------------------------
Net increase 187,014 $1,542,672
- -----------------------------------------------------------------------------
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 A 1998
- -----------------------------------------------------------------------------
Balanced Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 38,114,271 $445,949,649
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,783,912 64,542,247
- -----------------------------------------------------------------------------
Shares
repurchased (19,920,933) (233,259,051)
- -----------------------------------------------------------------------------
Net increase 23,977,250 $277,232,845
- -----------------------------------------------------------------------------
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 B 1998
- -----------------------------------------------------------------------------
Balanced Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 13,283,531 $155,148,314
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,069,468 34,027,927
- -----------------------------------------------------------------------------
Shares
repurchased (7,114,827) (82,698,219)
- -----------------------------------------------------------------------------
Net increase 9,238,172 $106,478,022
- -----------------------------------------------------------------------------
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 C 1998
- -----------------------------------------------------------------------------
Balanced Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,021,414 $46,821,621
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 506,490 5,589,640
- -----------------------------------------------------------------------------
Shares
repurchased (1,390,736) (16,089,944)
- -----------------------------------------------------------------------------
Net increase 3,137,168 $36,321,317
- -----------------------------------------------------------------------------
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 M 1998
- -----------------------------------------------------------------------------
Balanced Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,623,574 $30,830,284
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 330,776 3,686,141
- -----------------------------------------------------------------------------
Shares
repurchased (1,337,772) (15,551,147)
- -----------------------------------------------------------------------------
Net increase 1,616,578 $18,965,278
- -----------------------------------------------------------------------------
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 Y 1998
- -----------------------------------------------------------------------------
Balanced
Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 5,040,688 $59,227,754
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,817,279 20,297,598
- -----------------------------------------------------------------------------
Shares
repurchased (5,485,023) (63,921,131)
- -----------------------------------------------------------------------------
Net increase 1,372,944 $15,604,221
- -----------------------------------------------------------------------------
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 7,078,340 $73,908,852
- -----------------------------------------------------------------------------
Year ended September 30
- -----------------------------------------------------------------------------
Class A 1998
- -----------------------------------------------------------------------------
Conservative
Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 20,094,070 $206,991,701
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,251,230 22,562,077
- -----------------------------------------------------------------------------
Shares
repurchased (12,671,876) (130,983,828)
- -----------------------------------------------------------------------------
Net increase 9,673,424 $98,569,950
- -----------------------------------------------------------------------------
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 B 1998
- -----------------------------------------------------------------------------
Conservative
Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 6,012,610 $61,736,994
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 818,845 8,164,752
- -----------------------------------------------------------------------------
Shares
repurchased (3,281,345) (33,719,671)
- -----------------------------------------------------------------------------
Net increase 3,550,110 $36,182,075
- -----------------------------------------------------------------------------
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 C 1998
- -----------------------------------------------------------------------------
Conservative
Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,677,788 $27,211,811
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 184,292 1,834,269
- -----------------------------------------------------------------------------
Shares
repurchased (923,229) (9,460,711)
- -----------------------------------------------------------------------------
Net increase 1,938,851 $19,585,369
- -----------------------------------------------------------------------------
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 M 1998
- -----------------------------------------------------------------------------
Conservative
Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,170,382 12,071,907
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 89,518 894,846
- -----------------------------------------------------------------------------
Shares
repurchased (529,912) (5,449,767)
- -----------------------------------------------------------------------------
Net increase 729,988 $7,516,986
- -----------------------------------------------------------------------------
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 Y 1998
- -----------------------------------------------------------------------------
Conservative
Portfolio Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,139,073 $22,281,129
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 154,113 1,548,188
- -----------------------------------------------------------------------------
Shares
repurchased (1,385,178) (14,283,508)
- -----------------------------------------------------------------------------
Net increase 908,008 $9,545,809
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
As of September 30, 1998, Putnam Companies, Inc. owned the following shares,
% Market
Fund Shares Ownership Value
- -----------------------------------------------------------------------------
Growth
Class Y 5,846,598 34.01% $ 69,223,720
- -----------------------------------------------------------------------------
Balanced
Class Y 18,868,547 93.14% $201,138,711
- -----------------------------------------------------------------------------
Conservative
Class A 9,076,477 24.21% $ 89,040,239
Class M 288,445 14.95% 2,820,992
Class Y 2,527,961 94.51% 24,824,577
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Funds hereby designate $35,891,257, $42,698,758 and $12,854,429 for
Growth, Balanced and Conservative, respectively, as capital gains for
their taxable year ended 1998.
The funds have designated 53.36%, 22.31%, and 11.00% 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 1999 will show the tax status of all
distributions paid to your account in calendar 1998.
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
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
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
Steven M. Oristaglio
Vice President
Ian C. Ferguson
Vice President and Fund Manager
William J. Landes
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
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
www.putnaminv.com
- -------------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- -------------------------
AN060 47010 250/259/264 11/98
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam Asset Allocation Funds
Supplement to Annual Report dated September 30, 1998
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $250 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
B, C and M shares, which are discussed more extensively in the annual
report.
SEMIANNUAL RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return
Periods ended 9/30/98
6 months 1 year Life-of-fund* Life-of-fund*
cummulative annual average
Growth Portfolio -13.89% -6.79% 69.23% 13.76%
Balanced Portfolio -11.20 -4.83 64.81 13.03
Conservative Portfolio -5.10 -0.44 50.55 10.55
*Inception of Y shares (9/1/94)
- ----------------------------------------------------------------------------
Share value at NAV 9/30/97 9/30/98
Growth Portfolio $13.72 $11.84
Balanced Portfolio 12.28 10.66
Conservative Portfolio 10.61 9.81
- ----------------------------------------------------------------------------
Distributions No. Income Capital gains Total
Long-term Short term
Growth Portfolio 1 $0.1520 $0.4280 $0.4090 $0.989
Balanced Portfolio 4 0.2940 0.3960 0.3810 1.071
Conservative Portfolio 4 0.4206 0.0870 0.2464 0.754
- ----------------------------------------------------------------------------
Please note that past performance does not indicate future results.
Investment return and principal value will fluctuate so your shares, when
redeemed, may be worth more or less than their original cost. See full
Annual Report for information on comparative benchmarks. If you have
questions, please consult your fund prospectus or call Putnam toll free at
1-800-752-9894.
