Putnam Asset Allocation Funds – ‘N-30D’ for 9/30/01

On:  Thursday, 11/29/01   ·   For:  9/30/01   ·   Accession #:  928816-1-500661   ·   File #:  811-07121

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Annual or Semi-Annual Report Mailed to Shareholders   —   Rule 30d-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Putnam Asset Allocation Funds                        181±  1.01M 


Putnam                                                                          
Asset                                                                           
Allocation                                                                      
Funds                                                                           

ANNUAL REPORT ON PERFORMANCE AND OUTLOOK                                        

9-30-01                                                                         

[SCALE LOGO OMITTED]                                                            

Performance highlights                                                          

Putnam Asset Allocation Funds consist of three portfolios that target           
investors' various life stages and financial goals.                             

* Growth Portfolio is designed to pursue maximum growth of an investment        
over time.                                                                  

Targeted portfolio structure*                                                   
--------------------------------------------------                              
Large-cap growth stocks                       12.5%                             
Small-cap growth stocks                        5.0                              
Large-cap value stocks                        12.5                              
International stocks                          35.0                              
U.S. fixed-income securities                  10.0                              
International fixed-income securities         10.0                              
High-yield securities                         10.0                              
Small-cap value stocks                         5.0                              

* Balanced Portfolio is designed to pursue total return for investors in        
their peak accumulation years.                                              

Targeted portfolio structure*                                                   
--------------------------------------------------                              
Large-cap growth stocks                      21.25%                             
Small-cap growth stocks                       3.75                              
Large-cap value stocks                       21.25                              
International stocks                         10.00                              
U.S. fixed-income securities                 30.00                              
U.S. convertible bonds                        5.00                              
High-yield securities                         5.00                              
Small-cap value stocks                        3.75                              

* Conservative Portfolio is designed to pursue total return while               
protecting the original value of the investment for investors concerned     
about maintaining their purchasing power.                                   

Targeted portfolio structure*                                                   
--------------------------------------------------                              
Large-cap growth stocks                        5.0%                             
Large-cap value stocks                         5.0                              
International stocks                           5.0                              
U.S. fixed-income securities                  37.5                              
International fixed-income securities         12.5                              
High-yield securities                        25.0                               
U.S. convertible bonds                        10.0                              

* 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.                                                  

+ The majority of high-yield securities in this portfolio are rated BBB or      
above.                                                                      

Allocations in each portfolio will vary over time.                              

FROM THE TRUSTEES                                                               

[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]                  

Dear Shareholder:                                                               

There has hardly been a time in recent memory when investments across such      
a broad arc of the asset-class spectrum have been under as much duress. A       
widespread downturn in the global economy and the resulting edginess of         
investors has brought declines in virtually all but the safest                  
investments. The tragic events of September 11 only exacerbated an already      
distressful trend.                                                              

It is instructive at this juncture to note how history has responded to         
other such momentous events. Almost without exception, but generally with       
a brief lag while investors digested the news, the stock market and the         
economy eventually recovered. There is no reason to believe that the            
pattern will be different this time.                                            

Over the next few months, your fund's managers will be making appropriate       
portfolio adjustments in response to the opportunities that may present         
themselves in the emerging environment. In the following report, they           
review the fund's performance during the fiscal year just ended and look        
at prospects for the year ahead.                                                

Respectfully yours,                                                             

/S/ JOHN A. HILL              /S/ GEORGE PUTNAM, III                            

John A. Hill                  George Putnam, III                                
Chairman of the Trustees      President of the Funds                            
November 14, 2001                                                               

REPORT FROM THE FUND MANAGERS                                                   

Global Asset Allocation                                                         
Committee                                                                       

In early 2001, the Global Asset Allocation Committee undertook a strategic      
restructuring of the Putnam Asset Allocation portfolios. The reason for         
this action was that after five consecutive years of above-average stock        
market performance, we took the view that capital preservation should           
become the funds' primary focus. The restructuring proved timely, as the        
12 months ended September 30, 2001, have been some of the most difficult        
in the modern history of equity markets. The Standard & Poor's 500 Index        
has not had such a severe one-year drop since 1974 and before that, not         
since the 1930s.                                                                

The funds' fiscal year ended with significant downturns in both the equity      
and fixed-income markets in the wake of the September 11 terrorist              
attacks. Concerned investors sought refuge from higher-risk holdings in         
the relative safety of Treasuries and investment-grade bonds. Although the      
Federal Reserve Board had adopted one of its most aggressive monetary           
easing policies on record to fend off a recession, it appears that one now      
looms on the horizon.                                                           

Worldwide, markets experienced continued volatility, consumer confidence        
faltered, and corporate earnings steadily declined. The S&P 500 Index           
dropped 27% over the reporting period; the Nasdaq Composite lost 59%.           
Foreign markets were just as hard hit. The Japanese Nikkei index lost 29%       
and the German Dax lost 37%. Although the portfolios in the Putnam Asset        
Allocation Funds experienced losses as well, our commitment to                  
diversification and our move to a more conservative positioning helped          
soften the blow.                                                                

* U.S. MARKETS SUFFERED CONTINUED VOLATILITY                                    

In the United States, the rapid slowdown of the economy in the fourth           
quarter of 2000 continued throughout the first three quarters of 2001. Led      
by the ongoing woes of the technology and telecommunications sectors,           
equity markets found the occasional rally ultimately unsustainable. The         
Fed's aggressive moves to bolster the economy were undermined, at least         
temporarily, by the terrorist attacks. Investors who had been steadily          
moving assets into the fixed-income markets, turned their attention             
primarily to investment-grade bonds.                                            

[GRAPHIC OMITTED: worm chart WORLD FIXED-INCOME MARKETS]                        

WORLD FIXED-INCOME MARKETS                                                      

Growth of a $10,000 investment                                                  
                       Salomon
       Lehman           Smith Barney
CSFB High      Aggregate         Non-U.S. World         
Date       Yield Index     Bond Index       Gov't Bond Index                    

9/30/00      10,000          10,000              10,000                         
10/00       9,689          10,066               9,789                       
11/00       9,307          10,231               9,981                       
12/00       9,494          10,421              10,400                       
1/01      10,063          10,591              10,354                      
2/01      10,165          10,683              10,304                      
3/01       9,963          10,737               9,890                      
4/01       9,860          10,692               9,887                      
5/01      10,057          10,757               9,835                      
6/01       9,900          10,798               9,695                      
7/01      10,006          11,039               9,941                      
8/01      10,146          11,165              10,401                      
9/30/01      $9,506         $11,296             $10,447                         

Footnote reads:                                                                 
See page 13 for descriptions of the indexes. Past performance is not            
indicative of future results. This is not intended to represent the             
returns of any fund. It is not possible to invest directly in an index.         

Stocks. Value stocks continued to outperform growth stocks as major growth      
indexes continued to lose ground during the reporting period. The               
restructuring of the funds' portfolios, which began in March 2000, was          
designed to tilt holdings toward increasingly conservative positions. This      
change allowed us to take advantage of some of the opportunities within         
the value universe. The funds' growth stocks, however, were hurt by a           
continued lack of interest among investors, since value and fixed-income        
remained the more favored sectors in the market. For much of the period,        
capital spending declined, corporate earnings lagged, and economic growth       
generally stagnated. After the terrorist attacks in September, both value       
and growth stocks declined, hurting performance in the Balanced and Growth      
Portfolios and, to a lesser extent, in the Conservative Portfolio.              
Defensive sectors within the portfolios, such as financials and utilities,      
in which we increased weightings, held up relatively well.                      

Bonds. At the fiscal year's midpoint, we believed bonds were overvalued by      
most historical measures; continued demand because of their relative            
security had pushed their prices significantly higher. Since January, the       
yield curve has steepened considerably as the Fed lowered short-term            
interest rates eight times during the period and again shortly after its        
close. Meanwhile, interest rates on long-term bonds crept steadily upward,      
in part because of increasing investor uncertainty about the economy and        
concerns over the possibility of renewed inflation. The result was              
relatively solid performances from fixed-income securities, especially in       
the investment-grade sector. High-tech companies have flooded the market        
with high-yield bonds, a sector that performed unsteadily before September      
11 and poorly during the remainder of the month. The credit spread (the         
difference in yield between Treasuries and bonds with greater risk)             
rapidly widened to historic levels as high-yield bond prices fell to            
distressed levels. We had positioned the fixed-income allocations to take       
advantage of an anticipated economic recovery, but because the aftermath        
of the terrorist attacks is likely to delay any rebound until well into         
2002, the funds' fixed-income positions underperformed.                         

"The stock market is more                                                       
undervalued today than it was                                                   
overvalued in March 2000."                                                      

-- Jeffrey L. Knight,                                                           
Putnam Global Asset Allocation Committee                                        

* UNCERTAINTY AND RECESSION FEARS WEAKENED INTERNATIONAL MARKETS                

Markets worldwide generally declined as the technology and                      
telecommunications sectors continued to struggle. Europe was especially         
hard hit as the euro and other foreign currencies experienced some              
weakness. After the terrorist attacks on the United States, many European       
central banks initiated a coordinated round of short-term interest-rate         
cuts in an attempt to limit negative effects on economic activity.              

Stocks. Europe, in particular, was hurt by the uncertainty caused by            
recent events in the United States. Stocks in the United Kingdom                
underperformed considerably in September and, ultimately, over the entire       
fiscal year. The portfolios had been overweight in U.K. equities because        
of our belief in the long-term strength of the British economy. This            
position hurt performance during the period, primarily because of the           
unprecedented events of September 11.                                           

[GRAPHIC OMITTED: worm chart WORLD EQUITY MARKETS]                              

WORLD EQUITY MARKETS                                                            

Growth of a $10,000 investment                                                  

Standard &                                      
Poor's       Russell       Morgan Stanley 
[Registration Mark]   2000    Capital International     
Date            500 Index         Index      (MSCI) EAFE Index                  

9/30/00          10,000          10,000          10,000                         
10/00           9,958           9,554           9,764                       
11/00           9,173           8,573           9,398                       
12/00           9,218           9,309           9,732                       
1/01           9,545           9,794           9,727                      
2/01           8,674           9,151           8,997                      
3/01           8,125           8,704           8,398                      
4/01           8,756           9,384           8,981                      
5/01           8,815           9,615           8,664                      
6/01           8,600           9,947           8,310                      
7/01           8,516           9,409           8,159                      
8/01           7,983           9,105           7,952                      
9/30/01          $7,338          $7,879          $7,147                         

Footnote reads:                                                                 
See page 13 for descriptions of the indexes. Past performance is not            
indicative of future results. This is not intended to represent the             
returns of any fund. It is not possible to invest directly in an index.         

In Asia, the economic environment has been extremely volatile, since it         
tends to be sensitive to fluctuations in worldwide demand for technology,       
which has declined dramatically over the past 12 months. In addition,           
exports from Asian markets have declined as the global economic slowdown        
eroded consumer confidence and stunted consumer spending. The fund's            
holdings in Japan benefited as the economy there improved from its record       
lows over the past several months, though they still underperformed. The        
one bright spot in the international equities markets was Australia, where      
stocks were up 3% to 4% over the reporting period and where we had been         
overweight.                                                                     

Bonds. Most of the non-U.S. fixed-income holdings were in high-quality          
government bonds. Solid performance from these issues helped returns,           
since we had hedged away most of the currency exposure in these markets.        
As was the case in the United States, demand for lower-risk investments         
has increased significantly in many other world markets. In our opinion,        
valuations have been driven to unreasonable heights, particularly in            
Japan.                                                                          

* MARKET OUTLOOK POSITIVE UPON ECONOMIC RECOVERY                                

Because of the unprecedented nature of the events of September 11, it is        
important for investors to keep in mind that the short-term effect these        
attacks had on the markets is not an indication of long-term economic           
fundamentals. We do not believe the fiscal 2001 returns of the three            
portfolios are reflective of their long-term potential. As uncertainty          
lessens over time and the U.S. and other world economies begin to recover,      
we believe your funds should be well positioned to take advantage of the        
opportunities this recovery presents.                                           

For the past 18 months, capital preservation has been the goal of most          
investors. Looking forward, we believe that wealth accumulation will            
return as a top priority. Meanwhile, we are beginning to shift more of the      
funds' holdings into equities. Within the fixed-income sector, we are           
moving toward more high-yield securities because we believe these markets       
will rebound over the next several months.                                      

We believe the Fed will continue its easing policy and even make further        
interest-rate cuts in an effort to avoid a recession or at least moderate       
its effects. In our opinion, investors will likely move away from               
higher-quality securities as economic recovery begins, and the shift            
should benefit more aggressive holdings. The combination of top-down            
strategy and bottom-up security selection that has helped your funds            
outperform the S&P 500 over the past three years should continue to             
benefit the funds' Conservative, Balanced and Growth Portfolios as the          
world's markets recover.                                                        

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 9/30/01, 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.                                                         

NEWS FROM THE TRUSTEES                                                          

In July 2001, we welcomed Charles B. Curtis to the Putnam Funds' Board of       
Trustees. He brings an impressive list of credentials that include several      
key positions in Washington and directorships in education and                  
energy-related industries. We look forward to the contributions Charles         
will make to the continued success of the Putnam funds.                         

PUTNAM'S POLICY ON CONFIDENTIALITY                                              

In order to conduct business with our shareholders, we must obtain certain      
personal information such as account holders' addresses, telephone              
numbers, Social Security numbers, and the names of their financial              
advisors. We use this information to assign an account number and to help       
us maintain accurate records of transactions and account balances.              

It is our policy to protect the confidentiality of your information,            
whether or not you currently own shares of our funds, and in particular,        
not to sell information about you or your accounts to outside marketing         
firms. We have safeguards in place designed to prevent unauthorized access      
to our computer systems and procedures to protect personal information          
from unauthorized use.                                                          

Under certain circumstances, we share this information with outside             
vendors who provide services to us, such as mailing and proxy                   
solicitation. In those cases, the service providers enter into                  
confidentiality agreements with us, and we provide only the information         
necessary to process transactions and perform other services related to         
your account. We may also share this information with our Putnam                
affiliates to service your account or provide you with information about        
other Putnam products or services. It is also our policy to share account       
information with your financial advisor, if you've listed one on your           
Putnam account.                                                                 

If you would like clarification about our confidentiality policies or have      
any questions or concerns, please don't hesitate to contact us at               
1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or               
Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.                             

PERFORMANCE SUMMARY                                                             

* GROWTH PORTFOLIO                                                              

                                                        [Enlarge/Download Table]


TOTAL RETURN FOR PERIODS ENDED 9/30/01                                                           
Change in value during period plus reinvested distributions                                      

                                Class A           Class B           Class C           Class M    
(inception dates)               (2/8/94)         (2/16/94)          (9/1/94)          (2/3/95)   
                           NAV       POP      NAV      CDSC     NAV      CDSC     NAV      POP   
-------------------------------------------------------------------------------------------------
                                                                                                 
1 year                     -22.41%  -26.86%  -23.04%  -26.12%  -23.08%  -23.69%  -22.84%  -25.56%
-------------------------------------------------------------------------------------------------
5 years                     28.96    21.51    24.12    22.56    24.04    24.04    25.84    21.44 
Annual average               5.22     3.97     4.42     4.15     4.40     4.40     4.70     3.96 
-------------------------------------------------------------------------------------------------
Life of fund                82.93    72.38    72.92    72.92    71.81    71.81    75.98    69.82 
Annual average               8.23     7.39     7.43     7.43     7.34     7.34     7.68     7.18 
-------------------------------------------------------------------------------------------------


PRICE AND DISTRIBUTION INFORMATION                                              
12 MONTHS ENDED 9/30/01                                                         

         Class A         Class B      Class C      Class M
Share value      NAV       POP        NAV          NAV      NAV      POP        
------------------------------------------------------------------------        
9/30/00        $14.47    $15.35     $14.21       $14.08   $14.25  $14.77        
------------------------------------------------------------------------        
9/30/01          8.94      9.49       8.76         8.64     8.78    9.10        
------------------------------------------------------------------------        

                         Capital gains
           Investment    Long    Short
Distributions            Number   income      term     term     Total           
------------------------------------------------------------------------        
Class A                    1      $0.190     $1.411   $1.215   $2.816           
------------------------------------------------------------------------        
Class B                    1      $0.070     $1.411   $1.215   $2.696           
------------------------------------------------------------------------        
Class C                    1      $0.089     $1.411   $1.215   $2.715           
------------------------------------------------------------------------        
Class M                    1      $0.114     $1.411   $1.215   $2.740           
------------------------------------------------------------------------        

Performance data represent past results, are 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. More recent returns may be more or          
less than those shown. 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, 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.        
Performance data reflect an expense limitation currently or previously in       
effect. Without the limitation, total return would have been lower.             

PERFORMANCE SUMMARY                                                             

* BALANCED PORTFOLIO                                                            

                                                        [Enlarge/Download Table]


TOTAL RETURNS FOR PERIOD ENDED 9/30/01                                                     
Change in value during period plus reinvested distributions                                

                         Class A            Class B          Class C          Class M      
(inception dates)        (2/7/94)          (2/11/94)         (9/1/94)         (2/6/95)     
                        NAV     POP      NAV      CDSC     NAV     CDSC      NAV      POP  
-------------------------------------------------------------------------------------------
                                                                                           
1 year               -17.11%  -21.86%  -17.78%  -21.32%  -17.65%  -18.36%  -17.57%  -20.46%
-------------------------------------------------------------------------------------------
5 years               34.61    26.91    29.61    27.90    29.59    29.59    31.15    26.55 
Annual average         6.12     4.88     5.32     5.04     5.32     5.32     5.57     4.82 
-------------------------------------------------------------------------------------------
Life of fund          84.89    74.23    74.61    74.61    73.74    73.74    78.37    72.12 
Annual average         8.38     7.54     7.57     7.57     7.50     7.50     7.87     7.37 
-------------------------------------------------------------------------------------------


PRICE AND DISTRIBUTION INFORMATION                                              
12 MONTHS ENDED 9/30/01                                                         

   Class A       Class B     Class C         Class M
Share value    NAV      POP      NAV         NAV        NAV      POP            
----------------------------------------------------------------------          
9/30/00      $12.99   $13.78   $12.92      $12.83      $12.97   $13.44          
----------------------------------------------------------------------          
9/30/01        9.20     9.76     9.14        9.08        9.18     9.51          
----------------------------------------------------------------------          

                           Capital gains
                Investment  Long     Short
Distributions              Number    income    term     term     Total          
----------------------------------------------------------------------          
Class A                      4       $0.376   $0.880   $0.560   $1.816          
----------------------------------------------------------------------          
Class B                      4       $0.293   $0.880   $0.560   $1.733          
----------------------------------------------------------------------          
Class C                      4       $0.294   $0.880   $0.560   $1.734          
----------------------------------------------------------------------          
Class M                      4       $0.320   $0.880   $0.560   $1.760          
----------------------------------------------------------------------          

Performance data represent past results, are 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. More recent returns may be more or          
less than those shown. 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, 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.        
Performance data reflect an expense limitation currently or previously in       
effect. Without the limitation, total return would have been lower.             

PERFORMANCE SUMMARY                                                             

* CONSERVATIVE PORTFOLIO                                                        

                                                        [Enlarge/Download Table]


TOTAL RETURNS FOR PERIOD ENDED 9/30/01                                                  
Change in value during period plus reinvested distributions                             

                       Class A           Class B          Class C          Class M      
(inception dates)     (2/7/94)          (2/18/94)         (9/1/94)         (2/7/95)     
                     NAV     POP      NAV      CDSC     NAV     CDSC      NAV      POP  
----------------------------------------------------------------------------------------
                                                                                        
1 year             -4.84%  -10.34%   -5.60%   -9.77%   -5.51%   -6.34%   -5.34%   -8.67%
----------------------------------------------------------------------------------------
5 years            33.12    25.48    28.38    26.59    28.51    28.51    29.94    25.40 
Annual average      5.89     4.64     5.12     4.83     5.14     5.14     5.38     4.63 
----------------------------------------------------------------------------------------
Life of fund       67.21    57.57    58.18    58.18    57.71    57.71    61.13    55.49 
Annual average      6.96     6.13     6.19     6.19     6.14     6.14     6.44     5.95 
----------------------------------------------------------------------------------------


PRICE AND DISTRIBUTION INFORMATION                                              
12 MONTHS ENDED 9/30/01                                                         

           Class A      Class B    Class C       Class M
Share value         NAV      POP      NAV        NAV      NAV      POP          
------------------------------------------------------------------------        
9/30/00           $10.45   $11.09   $10.42     $10.39   $10.42   $10.80         
------------------------------------------------------------------------        
9/30/01             8.71     9.24     8.68       8.66     8.68     8.99         
------------------------------------------------------------------------        

             Capital gains
Investment  Long     Short
Distributions       Number   income    term     term     Total                  
------------------------------------------------------------------------        
Class A               12     $0.620   $0.289   $0.366   $1.275                  
------------------------------------------------------------------------        
Class B               12     $0.547   $0.289   $0.366   $1.202                  
------------------------------------------------------------------------        
Class C               12     $0.548   $0.289   $0.366   $1.203                  
------------------------------------------------------------------------        
Class M               12     $0.572   $0.289   $0.366   $1.227                  
------------------------------------------------------------------------        

Performance data represent past results, are 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. More recent returns may be more or          
less than those shown. 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, 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.        
Performance data reflect an expense limitation currently or previously in       
effect. Without the limitation, total return would have been lower.             

                                                        [Enlarge/Download Table]


COMPARATIVE INDEX RETURNS FOR PERIOD ENDED 9/30/01                                              
(Cumulative total returns)                                                                      
                                                                          Salomon               
                                                                           Smith                
                                                                           Barney               
                                                   Credit Suisse           Non-U.S.             
                     Lehman    Standard   Russell  First Boston    MSCI     World      Consumer 
                    Aggregate   & Poor's   2000     High Yield     EAFE   Govt. Bond     price  
                   Bond Index  500 Index   Index      Index        Index    Index        index  
----------------------------------------------------------------------------------------------- 
                                                                                                
1 year               12.96%    -26.62%    -21.21%    -4.94%       -28.53%    4.47%         2.65%
----------------------------------------------------------------------------------------------- 
5 years              47.31      62.71      24.86     15.93         -0.71     6.92         12.93 
Annual average        8.06      10.23       4.54      3.00         -0.14     1.35          2.46 
----------------------------------------------------------------------------------------------- 
Life of fund         69.87     153.85      72.24     42.56         14.55    37.48         21.89 
Annual average        7.18      12.96       7.37      4.74          1.79     4.24          2.62 
----------------------------------------------------------------------------------------------- 

The performance of each index will differ from that of the funds, assume                        
reinvestment of all distributions, and does not take into account                               
brokerage commissions or other costs. The funds' portfolios contain                             
securities that do not match those in the indexes. Past performance is not                      
indicative of future results. It is not possible to invest directly in an                       
index.                                                                                          


COMPARATIVE BENCHMARKS                                                          

Lehman Aggregate Bond Index* is an unmanaged index of U.S. fixed-income         
securities. Total return comprises price appreciation/depreciation and          
income as a percentage of the original investment. Indexes are rebalanced       
monthly by market capitalization.                                               

Standard & Poor's 500 Index* is an unmanaged list of common stocks that is      
frequently used as a general measure of 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.                                                              

Credit Suisse First Boston (CSFB) High Yield Index* is an unmanaged list        
of lower-rated, higher-yielding U.S. corporate bonds.                           

Morgan Stanley Capital International (MSCI) EAFE Index* is an unmanaged         
list of equity securities from Europe, Australasia, and the Far East, with      
values expressed in U.S. dollars.                                               

[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]                    

GROWTH OF A $10,000 INVESTMENT                                                  

Cumulative total return of a $10,000 investment since 2/8/94                    

Growth                                          
Portfolio    Global                               
class A     Growth       S&P       Consumer     
shares      Index        500         Price      
Date            at POP       Mix        Index        Index                      

2/8/94         9,425       10,000      10,000      10,000                     
9/30/94         9,346        9,869       9,800      10,219                      
9/30/95        11,257       12,005      12,716      10,479                      
9/30/96        13,367       13,772      15,301      10,793                      
9/30/97        16,876       17,648      21,490      11,033                      
9/30/98        15,693       17,943      23,434      11,190                      
9/30/99        19,703       21,847      29,949      11,477                      
9/30/00        22,219       24,306      33,928      11,874                      
9/30/01       $17,238      $19,822     $25,385     $12,189                      

Footnote reads:                                                                 
The Global Growth Index Mix is a combination of the following indexes: 25%      
represented by the Russell 1000 Index, 25% by Solomon Smith Barney Primary      
Market Index World ex US 50% Hedged, 10% by Russell 2000 Index, 10% by          
Lehman Government Bond Index, 10% by Chase High Yield Developed Index, 10%      
by Solomon Smith Barney World Government Bond Index ex US 50% Hedged, 5%        
by Solomon Smith Barney Extended Market Index World ex US 50% Hedged, and       
5% by Morgan Stanley Capital International Emerging Markets Free Index,         
which reflects generally the allocations of the different asset categories      
of Putnam Asset Allocation: Growth Portfolio as of 9/30/01.                     

Past performance is no assurance of future results. At the end of the same      
time period, a $10,000 investment in the fund's class B and class C shares      
would have been valued at $17,292 and $17,181, respectively, and no             
contingent deferred sales charge would apply; a $10,000 investment in the       
fund's class M shares would have been valued at $17,598 ($16,982 at public      
offering price.)                                                                

Salomon Smith Barney Non-U.S. World Government Bond Index* is an unmanaged      
list of bonds issued by 10 countries.                                           

Consumer price index (CPI) is a commonly used measure of inflation; it          
does not represent an investment return.                                        

*Securities indexes assume reinvestment of all distributions and interest       
payments and do not take into account brokerage fees or taxes. Securities     
in the funds do not match those in the indexes and performance of the         
funds will differ. It is not possible to invest directly in an index.         

TERMS AND DEFINITIONS                                                           

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

Class A shares are generally subject to an initial sales charge.                

Class B shares may be subject to a sales charge upon redemption.                

[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]                    

GROWTH OF A $10,000 INVESTMENT                                                  

Cumulative total return of a $10,000 investment since 2/7/94                    

Balanced                                        
portfolio      Global                           
class A shares  Balanced      S&P 500       Consumer
Date             at POP       Index Mix      Index       price index            

2/7/94           9,425        10,000        10,000        10,000              
9/30/94           9,285         9,893         9,800        10,219               
9/30/95          11,024        11,855        12,716        10,479               
9/30/96          12,943        13,395        15,301        10,793               
9/30/97          16,027        16,548        21,490        11,033               
9/30/98          15,230        17,044        23,434        11,190               
9/30/99          18,138        20,135        29,949        11,477               
9/30/00          21,019        22,812        33,928        11,874               
9/30/01         $17,423       $19,494       $25,385       $12,189               

Footnote reads:                                                                 
The Global Balanced Index Mix is a combination of the following indexes:        
42.5% represented by the Russell 1000 Index, 15% by Lehman Government Bond      
Index, 10% by Solomon Smith Barney Primary Market Index World ex US             
Hedged, 7.5% by Russell 2000 Index, 7.5% by Lehman Corporate Bond Index,        
7.5% by Lehman-Mortgage Index, 5% by Merrill Lynch High Yield BB Rated          
Index, and 5% by Merrill Lynch All Convertible All Quality Index, which         
reflects generally the allocations of the different asset categories of         
Putnam Asset Allocation: Balanced Portfolio as of 9/30/01.                      

Past performance is no assurance of future results. At the end of the same      
time period, a $10,000 investment in the fund's class B and class C shares      
would have been valued at $17,461 and $17,374, respectively, and no             
contingent deferred sales charge would apply; a $10,000 investment in the       
fund's class M shares would have been valued at $17,837 ($17,212 at public      
offering price.)                                                                

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

Class M shares have a lower initial sales charge and a higher 12b-1 fee         
than class A shares and no sales charge on redemption.                          

Net asset value (NAV) is the value of all your fund's assets, minus any         
liabilities, divided by the number of outstanding shares, not including         
any initial or contingent deferred sales charge.                                

Public offering price (POP) is the price of a mutual fund share plus the        
maximum sales charge levied at the time of purchase. POP performance            
figures shown here assume the 5.75% maximum 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.                                                                 

[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]                    

GROWTH OF A $10,000 INVESTMENT                                                  

Cumulative total return of a $10,000 investment since 2/7/94                    

Conservative                     Lehman           
portfolio        Global        Aggregate        
   class A shares  Conservative       Bond        Consumer
Date             at POP        Index Mix         Index      price index         

2/7/94           9,425         10,000          10,000        10,000           
9/30/94           9,191          9,853           9,384        10,219            
9/30/95          10,594         11,523          10,979        10,479            
9/30/96          11,837         12,587          11,501        10,793            
9/30/97          13,881         14,555          12,747        11,033            
9/30/98          13,785         15,438          14,160        11,190            
9/30/99          15,308         17,056          13,963        11,477            
9/30/00          16,559         18,699          14,783        11,874            
9/30/01         $15,757        $18,501         $16,987       $12,189            

Footnote reads:                                                                 
The Global Conservative Index Mix is a combination of the following             
indexes: 12.5% represented by the Solomon Smith Barney World Government         
Bond Index ex US Hedged, 12.5% by Lehman Corporate Bond Index, 12.5% by         
Lehman-Mortgage Index, 12.5% by Chase High Yield Developed Index, 12.5% by      
Merrill Lynch High Yield BB Rated Index, 12.5% by Lehman Government Bond        
Index, 10% by Russell 1000 Index, 10% by Merrill Lynch All Convertible All      
Quality Index, and 5% by Solomon Smith Barney Primary Market Index World        
ex US Hedged, which reflects generally the allocations of the different         
asset categories of Putnam Asset Allocation: Conservative Portfolio as of       
9/30/01.                                                                        

Past performance is no assurance of future results. At the end of the same      
time period, a $10,000 investment in the fund's class B and class C shares      
would have been valued at $15,818 and $15,771, respectively, and no             
contingent deferred sales charge would apply; a $10,000 investment in the       
fund's class M shares would have been valued at $16,113 ($15,549 at public      
offering price.)                                                                

A GUIDE TO THE FINANCIAL STATEMENTS                                             

These sections of the report, as well as the accompanying Notes, preceded       
by the Report of independent accountants, constitute the fund's financial       
statements.                                                                     

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

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

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

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

Financial highlights provide an overview of the fund's investment results,      
per-share distributions, expense ratios, net investment income ratios and       
portfolio turnover in one summary table, reflecting the five most recent        
reporting periods. In a semiannual report, the highlight table also             
includes the current reporting period. For open-end funds, a separate           
table is provided for each share class.                                         

REPORT OF INDEPENDENT ACCOUNTANTS                                               

For the fiscal year ended September 30, 2001                                    

To the Trustees and Shareholders of                                             
Putnam Asset Allocation Funds                                                   

In our opinion, the accompanying statements of assets and liabilities,          
including the funds' portfolios, and the related statements of operations       
and of changes in net assets and the financial highlights present fairly,       
in all material respects, the financial position of each of the funds           
(Growth Portfolio, Balanced Portfolio and Conservative Portfolio)               
constituting the Putnam Asset Allocation Funds (the "funds") at September       
30, 2001, and the results of each of their operations, the changes in each      
of their net assets and the financial highlights for the periods                
indicated, in conformity with accounting principles generally accepted in       
the United States of America. These financial statements and financial          
highlights (hereafter referred to as "financial statements") are the            
responsibility of the funds' 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 auditing            
standards generally accepted in the United States of America, 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, 2001 by correspondence with the custodian, provide a              
reasonable basis for our opinion.                                               

PricewaterhouseCoopers LLP                                                      
Boston, Massachusetts                                                           
November 9, 2001                                                                

                                                        [Enlarge/Download Table]


The fund's portfolio                                                                                                                
September 30, 2001                                                                                                                  

                                                       GROWTH                         BALANCED                       CONSERVATIVE   

                                                              67.1%                           57.2%                           12.5% 
COMMON STOCKS (a)                            Shares           Value          Shares           Value          Shares           Value 

Advertising and Marketing Services                             0.6%                            0.3%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                    
Aegis Group PLC (United Kingdom)            403,300  $      474,119              --  $           --              --  $           -- 
Carlton Communications PLC                                                                                                          
(United Kingdom)                             61,300         119,356              --              --              --              -- 
Cheil Communications, Inc. (South Korea)     13,720         965,326              --              --              --              -- 
Cordiant Communications Group                                                                                                       
(United Kingdom)                            605,156         533,566              --              --              --              -- 
Havas Advertising SA (France)               255,929       1,561,256         197,209       1,203,044          25,321         154,467 
Informa Group PLC (United Kingdom)           91,730         223,652              --              --              --              -- 
Interpublic Group of Companies, Inc.          4,000          81,600           8,800         179,520              --              -- 
Omnicom Group, Inc.                           1,700         110,330           3,700         240,130              --              -- 
Publicis SA (France)                         88,281       1,487,027          41,558         700,013           5,284          89,005 
Valassis Communications, Inc. (NON)           8,400         268,044          15,800         504,178           1,900          60,629 
WPP Group PLC (United Kingdom)              414,103       3,012,196         444,333       3,232,089          56,858         413,587 
                                                     --------------                  --------------                  -------------- 
                                                          8,836,472                       6,058,974                         717,688 

Aerospace and Defense                                          0.7%                            0.7%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
AAR Corp.                                    33,100         265,131          61,500         492,615              --              -- 
BAE Systems PLC (United Kingdom)            416,205       2,024,440         255,288       1,241,732          29,100         141,544 
Boeing Co.                                   22,600         757,100          43,650       1,462,275           4,100         137,350 
Diagnostic Retrieval Systems, Inc. (NON)     26,243         911,944          48,482       1,684,750              --              -- 
Empresa Bras de Aeronautiica (Brazil)         6,100          77,775              --              --              --              -- 
Engineered Support Systems, Inc.             12,600         593,460          23,200       1,092,720              --              -- 
General Dynamics Corp.                        5,800         512,256          11,400       1,006,848             900          79,488 
Goodrich Corp.                                1,000          19,480           2,200          42,856              --              -- 
Heico Corp.                                  10,293         154,395          19,017         285,255              --              -- 
Innovative Solutions & Support, Inc.                                                                                                
(NON)                                        20,800         151,216          38,700         281,349              --              -- 
L-3 Communications Holdings, Inc. (NON)         200          17,490             400          34,980              --              -- 
Lockheed Martin Corp.                        57,900       2,533,125         110,700       4,843,125          11,600         507,500 
Northrop Grumman Corp.                       16,100       1,626,100          29,850       3,014,850           3,600         363,600 
Precision Castparts Corp.                        --              --          16,600         368,520          12,800         284,160 
Raytheon Co.                                  8,800         305,800          19,400         674,150              --              -- 
Rockwell Collins                              2,900          41,180           6,200          88,040              --              -- 
United Technologies Corp.                    17,601         818,447          33,700       1,567,050           3,350         155,775 
                                                     --------------                  --------------                  -------------- 
                                                         10,809,339                      18,181,115                       1,669,417 

Agriculture                                                     --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
PSF Holdings LLC Class A (NON)                  162         259,040              --              --              41          65,600 

Airlines                                                       0.1%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
AMR Corp. (NON)                               4,239          81,134           9,353         179,016              --              -- 
British Airways PLC (United Kingdom)          9,000          23,806              --              --              --              -- 
Cathay Pacific Airways (Hong Kong)          258,000         221,632              --              --              --              -- 
Continental Airlines, Inc. Class B (NON)        600           9,000           1,300          19,500              --              -- 
Delta Air Lines, Inc.                           600          15,810           1,300          34,255              --              -- 
Deutsche Lufthansa AG (Germany)              24,335         232,649              --              --              --              -- 
FedEx Corp. (NON)                             2,400          88,200           5,300         194,775              --              -- 
Singapore Airlines, Ltd. (Singapore)         61,000         276,331              --              --              --              -- 
UAL Corp.                                       300           5,478             700          12,782              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            954,040                         440,328                              -- 

Automotive                                                     1.2%                            0.8%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Autoliv, Inc.                                 1,200          18,888           2,600          40,924              --              -- 
Autoliv, Inc. Swedish Depositary Receipt                                                                                            
(SDR) (Sweden)                               79,750       1,219,156              --              --              --              -- 
Bayerische Motoren Werke (BMW)                                                                                                      
AG (Germany)                                129,960       3,307,284         134,897       3,432,923          17,071         434,431 
BorgWarner Automotive, Inc.                   9,000         362,700          16,800         677,040              --              -- 
CLARCOR, Inc.                                10,900         260,510          19,900         475,610              --              -- 
DaimlerChrysler AG (Germany)                  8,200         243,395              --              --              --              -- 
Dana Corp.                                    2,100          32,760           4,600          71,760              --              -- 
Delphi Automotive Systems Corp.              20,508         240,969          39,900         468,825           3,500          41,125 
Denway Motors, Ltd. (Hong Kong)             875,600         232,950              --              --              --              -- 
Exide Corp.                                  15,800          59,408          29,000         109,040              --              -- 
Ford Motor Co.                               47,535         824,732          94,047       1,631,715           7,400         128,390 
General Motors Corp.                          8,400         360,360          18,800         806,520              --              -- 
Genuine Parts Co.                             1,300          41,418           2,900          92,394              --              -- 
Group 1 Automotive, Inc. (NON)               12,100         321,255          22,300         592,065              --              -- 
Honda Motor Co., Ltd. (Japan)                83,500       2,713,680         107,000       3,477,410          13,700         445,239 
Hyundai Motor Co., Ltd. (South Korea)        25,000         320,856              --              --              --              -- 
Lear Corp. (NON)                              1,000          27,020           2,000          54,040              --              -- 
Magna International Class A (Canada)         12,100         638,275              --              --              --              -- 
Nissan Motor Co., Ltd. (Japan)              208,000         868,122          89,000         371,456          11,000          45,910 
Perusahaan Otomobil                                                                                                                 
Nasional (Malaysia)                          59,000          94,711              --              --              --              -- 
Pilkington PLC (United Kingdom)             747,697       1,197,627              --              --              --              -- 
Safety Components                                                                                                                   
International, Inc. (NON) (STP)               8,563          68,504              --              --           1,873          14,984 
Sonic Automotive, Inc. (NON)                 84,100       1,143,760         154,700       2,103,920              --              -- 
Toyota Motor Corp. (Japan)                  144,100       3,702,939         171,100       4,396,758          21,600         555,055 
Valeo SA (France)                            13,650         430,641              --              --              --              -- 
Volkswagon AG (Germany)                       7,000         244,105              --              --              --              -- 
Volvo AB Class B (Sweden)                     3,300          42,556              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         19,018,581                      18,802,400                       1,665,134 

Banking                                                        7.3%                            6.2%                            1.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Abbey National PLC (United Kingdom)          32,900         482,499          48,800         715,682           6,200          90,927 
ABN AMRO Holdings NV                                                                                                                
(Netherlands)                               171,288       2,824,394         152,567       2,515,701          19,489         321,357 
ABSA Group, Ltd. (South Africa)              66,313         274,386              --              --              --              -- 
Allied Irish Banks PLC (Ireland)             93,940         844,204         162,086       1,456,608          49,041         440,714 
AMCORE Financial, Inc.                       16,500         374,880          30,200         686,144              --              -- 
AmSouth Bancorporation                        2,100          37,947           4,600          83,122              --              -- 
Astoria Financial Corp.                      10,200         604,452          18,700       1,108,162              --              -- 
Banca Popolare di Milano Scrl                                                                                                       
(BPM) (Italy)                               265,521       1,051,642              --              --              --              -- 
Banca Popolare di Verona (Italy)              9,100          79,210              --              --              --              -- 
Banco Bradesco S.A. (Brazil)                      1               3              --              --              --              -- 
Banco de Biblao Vizcava (BBV) (Spain)        22,000         226,350              --              --          10,100         103,915 
Banco Itau S.A. (Brazil)                     10,040         639,251              --              --              --              -- 
Banco Popular Espanol (Spain)                69,890       2,418,124          44,582       1,542,493           5,588         193,339 
Banco Santander Central Hispano                                                                                                     
SA (Spain)                                   20,000         153,328              --              --              --              -- 
Banco Santander Chile ADR (Chile)            17,595         313,191              --              --              --              -- 
Bangkok Bank Public Co., Ltd.                                                                                                       
(Thailand) (NON)                            324,000         295,142              --              --              --              -- 
Bank of America Corp.                        73,000       4,263,200         140,000       8,176,000          13,600         794,240 
Bank of East Asia, Ltd. (Hong Kong)         197,000         392,767              --              --              --              -- 
Bank of New York Company, Inc. (The)         21,000         735,000          40,600       1,421,000           3,500         122,500 
Bank of Nova Scotia (Canada)                  2,757          80,956              --              --              --              -- 
Bank One Corp.                               10,400         327,288          22,900         720,663              --              -- 
Bank Polska Kasa Opieki Grupa Pekao                                                                                                 
SA (Poland) (NON)                            18,222         283,080              --              --              --              -- 
Bank Sinopac (Taiwan) (NON)                 692,950         261,415              --              --              --              -- 
BankAtlantic Bancorp, Inc. Class A           51,200         517,120          95,200         961,520              --              -- 
Banknorth Group, Inc.                        42,700         953,064          78,000       1,740,960              --              -- 
Barclays PLC (United Kingdom)                82,747       2,275,075              --              --              --              -- 
Bayerische Vereinsbank AG (Germany)          20,544         587,347              --              --              --              -- 
BB&T Corp.                                   32,900       1,199,205          62,800       2,289,060           7,000         255,150 
BNP Paribas SA (France)                      39,773       3,251,956          40,836       3,338,870           5,291         432,608 
Centennial Bancorp                           42,384         319,578          77,374         583,400              --              -- 
Charter One Financial, Inc.                  81,495       2,299,789         151,156       4,265,608          18,950         534,769 
Chinatrust Commercial Bank (Taiwan)         917,480         468,591              --              --              --              -- 
Citigroup, Inc.                             244,248       9,892,044         482,993      19,561,217          60,060       2,432,430 
Citizens Banking Corp.                       27,500         882,200          50,300       1,613,624              --              -- 
City National Corp.                          16,600         716,290          30,400       1,311,760              --              -- 
Colonial Bancgroup Inc.                      57,200         732,160         104,600       1,338,880              --              -- 
Comerica, Inc.                               47,800       2,648,120          87,250       4,833,650           9,900         548,460 
Commerce Bancorp, Inc.                        4,300         292,400           7,800         530,400              --              -- 
Commonwealth Bank of                                                                                                                
Australia (Australia)                        56,361         725,655              --              --              --              -- 
Community First Bankshares                   22,000         528,440          40,900         982,418              --              -- 
Credit Suisse Group (Switzerland)            14,000         489,510              --              --              --              -- 
Danske Bank A/S (Denmark)                    96,289       1,509,842         171,537       2,689,755          21,889         343,226 
DBS Group Holdings, Ltd. (Singapore)        112,069         612,382         156,181         853,424          19,749         107,915 
Deutsche Bank AG (Germany)                    7,950         433,223              --              --              --              -- 
DnB Holdings ASA (Norway)                    15,100          56,217              --              --              --              -- 
DnB Holdings ASA 144A (Norway)               11,000          40,953              --              --              --              -- 
Doral Financial Corp.                        27,600       1,070,880          51,100       1,982,680              --              -- 
Downey Financial Corp.                       12,800         564,864          23,300       1,028,229              --              -- 
Dresdner Bank AG (Germany)                    3,300         117,181              --              --              --              -- 
East West Bancorp, Inc.                      19,900         465,461          36,500         853,735              --              -- 
Fifth Third Bancorp                          36,800       2,262,464          69,100       4,248,268           7,876         484,216 
First Midwest Bancorp, Inc.                  18,800         635,064          34,400       1,162,032              --              -- 
First Tennessee National Corp.                1,500          55,500           3,300         122,100              --              -- 
FirstFed Finacial Corp. (NON)                23,700         616,200          44,000       1,144,000              --              -- 
Flagstar Bancorp, Inc.                       10,650         246,015          19,650         453,915              --              -- 
FleetBoston Financial Corp.                  64,916       2,385,663         123,638       4,543,697          13,400         492,450 
Foreningssparbanken AB (Sweden)               7,600          79,831              --              --              --              -- 
Gjensidige NOR Sparebank (Norway)            42,571       1,128,656              --              --              --              -- 
Golden State Bancorp, Inc.                    1,000          30,400           2,400          72,960              --              -- 
Golden West Financial Corp.                     500          29,050           1,200          69,720              --              -- 
Greater Bay Bancorp                           9,000         209,430          16,800         390,936              --              -- 
Greenpoint Finanacial Corp.                   1,100          38,610           2,400          84,240              --              -- 
Grupo Financiero Bancomer                                                                                                           
SA de CV (Mexico) (NON)                   1,949,487       1,345,039         865,000         596,803              --              -- 
Hang Seng Bank, Ltd. (Hong Kong)             65,300         676,074         111,600       1,155,435          14,200         147,018 
HBOS PLC (United Kingdom)                    28,150         303,630          62,746         676,787           7,879          84,984 
HDFC Bank, Ltd. ADR (India) (NON)            32,200         444,360              --              --              --              -- 
Housing & Commercial Bank                                                                                                           
(South Korea)                                15,550         332,620              --              --              --              -- 
Housing Development Finance                                                                                                         
Corporation, Ltd. (India)                    48,564         634,990              --              --              --              -- 
HSBC Holdings PLC (United Kingdom)          378,226       3,985,108         277,505       2,923,880          35,127         370,109 
HSBC Holdings PLC (United                                                                                                           
Kingdom) - Hong Kong Exchange                62,024         650,109              --              --              --              -- 
Hudson United Bancorp                        41,200       1,142,888          75,300       2,088,822              --              -- 
Huntington Bancshares, Inc.                     670          11,598           1,430          24,753              --              -- 
ICICI Bank, Ltd. ADR (India)                 64,700         184,395              --              --              --              -- 
Independent Bank Corp. -                                                                                                            
Massachusetts                                14,400         234,720          26,400         430,320              --              -- 
Independent Bank Corp. -                                                                                                            
Michigan                                      5,300         138,330           9,800         255,780              --              -- 
IntesaBCI SpA (Italy)                       596,807       1,475,311         439,659       1,086,840          55,317         136,744 
Investors Financial Services Corp.            5,400         311,256           9,900         570,636              --              -- 
Irwin Financial Corp.                        42,600         890,340          78,700       1,644,830              --              -- 
KeyCorp                                       1,200          28,968           2,600          62,764              --              -- 
Kookmin Bank (South Korea)                   36,900         453,850              --              --              --              -- 
Lloyds TSB Group PLC (United Kingdom)        28,300         270,315              --              --              --              -- 
M & T Bank Corp.                             16,100       1,191,400          30,550       2,260,700           3,600         266,400 
MAF Bancorp, Inc.                             6,400         183,424          11,600         332,456              --              -- 
Malayan Banking Berhad (Malaysia)           101,000         273,763              --              --              --              -- 
Marshall & Ilsley Corp.                       2,700         153,063           5,900         334,471              --              -- 
Mellon Financial Corp.                       26,300         850,279          50,200       1,622,966           5,000         161,650 
Mercantile Bankshares Corp.                  14,700         583,590          26,550       1,054,035           4,000         158,800 
National Australia Bank, Ltd.                                                                                                       
(Australia)                                  18,600         235,440              --              --              --              -- 
National Bank of Canada (Canada)             43,100         764,039              --              --              --              -- 
National City Corp.                           9,000         269,550          19,800         593,010              --              -- 
National Commerce Financial Corp.             1,300          33,930           2,900          75,690              --              -- 
New York Community Bancorp, Inc.             24,900         577,929          45,450       1,054,895              --              -- 
North Fork Bancorporation, Inc.              21,800         648,332          40,500       1,204,470           2,000          59,480 
Northern Trust Corp.                            400          20,992             900          47,232              --              -- 
OTP Bank GDR (Greece)                         4,760         227,290              --              --              --              -- 
Overseas-Chinese Banking                                                                                                            
Corp. (Singapore)                           205,480       1,099,539         193,650       1,036,236          24,000         128,426 
PNC Financial Services Group                  3,300         188,925           7,300         417,925              --              -- 
Provident Bankshares Corp.                   32,055         663,539          58,257       1,205,920              --              -- 
Public Bank Berhad (Malaysia)               571,100         335,146              --              --              --              -- 
Regions Financial Corp.                         800          23,088           1,800          51,948              --              -- 
Republic Bancorp, Inc.                       54,820         784,474         100,290       1,435,150              --              -- 
Royal Bank of Canada (Canada)                33,900       1,033,419          75,600       2,304,615              --              -- 
Royal Bank of Scotland Group PLC                                                                                                    
(United Kingdom)                             65,700       1,446,261              --              --              --              -- 
San Paolo-IMI SpA (Italy)                   210,388       2,206,751         225,307       2,363,236          28,903         303,162 
Silicon Valley Bancshares (NON)              11,000         222,200          20,300         410,060              --              -- 
Sky Financial Group, Inc.                    22,900         455,710          42,200         839,780              --              -- 
Societe Generale (France)                    67,174       3,351,674          67,998       3,392,787           8,573         427,753 
Sovereign Bancorp, Inc.                       4,100          38,950           8,600          81,700              --              -- 
Standard Bank Investment                                                                                                            
(South Africa)                              268,000         919,878              --              --              --              -- 
State Street Corp.                           33,435       1,521,293          63,700       2,898,350           6,840         311,220 
Sterling Bancshares, Inc.                    53,250         703,965          97,350       1,286,967              --              -- 
Sumitomo Mitsui Banking Corp. (Japan)        18,000         129,090              --              --              --              -- 
Sumitomo Trust & Co., Ltd. (Japan)           24,000         118,912              --              --              --              -- 
SunTrust Banks, Inc.                          1,500          99,900           3,200         213,120              --              -- 
Svenska Handelsbanken AB                                                                                                            
Class A (Sweden)                             94,760       1,230,880         163,748       2,126,996          46,418         602,944 
Synovus Financial Corp.                      28,600         789,360          52,750       1,455,900           6,700         184,920 
TCF Financial Corp.                             500          23,030           1,100          50,666              --              -- 
Toronto-Dominion Bank (Canada)               94,093       2,313,157         107,706       2,647,815              --              -- 
Trustmark Corp.                              33,000         738,540          60,300       1,349,514              --              -- 
U.S. Bancorp                                171,886       3,812,431         324,585       7,199,295          35,068         777,808 
UBS AG (Switzerland)                         51,861       2,426,321           5,740         268,546             728          34,060 
UCBH Holdings, Inc.                          12,100         353,078          22,200         647,796              --              -- 
Unibanco-Uniao de Bancos Brasileiros                                                                                                
S.A. GDR (Brazil)                            26,300         381,350          35,400         513,300              --              -- 
UnionBanCal Corp.                             1,500          50,760           3,400         115,056              --              -- 
United Overseas Bank, Ltd. (Singapore)       52,000         282,673              --              --              --              -- 
Wachovia Corp.                               40,700       1,261,700          79,000       2,449,000           6,800         210,800 
Washington Federal, Inc.                     36,820         922,341          67,360       1,687,368              --              -- 
Washington Mutual, Inc.                      65,250       2,510,820         125,000       4,810,000          13,900         534,872 
Webster Financial Corp.                      29,900         985,504          55,400       1,825,984              --              -- 
Wells Fargo & Co.                            56,500       2,511,425         109,476       4,866,208          10,000         444,500 
Westamerica Bancorporation                    8,700         313,635          15,900         573,195              --              -- 
Westpac Banking Corp. (Australia)           224,569       1,472,265              --              --              --              -- 
Wilmington Trust Corp.                          300          16,560             700          38,640              --              -- 
Wing Hang Bank, Ltd. (Hong Kong)              9,000          28,156              --              --              --              -- 
Zions Bancorporation                          2,100         112,686           4,600         246,836              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                        115,735,447                     152,384,117                      13,043,866 

Beverage                                                       1.4%                            1.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Al Ahram Beverage Co. GDR                                                                                                           
(Egypt) (NON)                                48,800         346,480              --              --              --              -- 
Anheuser-Busch Companies, Inc.               31,696       1,327,428          60,800       2,546,304           6,150         257,562 
Brown-Forman Corp. Class B                    8,700         549,666          16,200       1,023,516           2,000         126,360 
Coca-Cola Co. (The)                          25,300       1,185,305          53,400       2,501,790           2,000          93,700 
Coca-Cola Enterprises, Inc.                 111,000       1,702,740         208,900       3,204,526          23,600         362,024 
Coca-Cola Femsa SA ADR (Mexico)              41,800         825,550              --              --              --              -- 
Companhia de Bebidas das Americas                                                                                                   
(AmBev) ADR (Brazil)                         63,941       1,023,695          49,844         798,002              --              -- 
Diageo PLC (United Kingdom)                 125,850       1,321,372              --              --              --              -- 
Fomento Economico Mexicano                                                                                                          
SA de CV (Mexico)                           117,500         333,666              --              --              --              -- 
Fomento Economico Mexicano                                                                                                          
SA de CV ADR (Mexico)                        11,800         335,946              --              --              --              -- 
Fortune Brands, Inc.                         51,700       1,731,950          96,400       3,229,400          11,400         381,900 
Grupo Modelo SA de CV (Mexico)              199,000         433,246              --              --              --              -- 
Heineken NV (Netherlands)                    10,762         407,826              --              --              --              -- 
Kirin Brewery Co., Ltd. (Japan)              12,000          91,703              --              --              --              -- 
Pepsi Bottling Group, Inc. (The)            108,100       4,980,167         201,050       9,262,374          16,400         755,548 
PepsiCo, Inc.                                65,380       3,170,930         125,190       6,071,715          12,400         601,400 
Six Continents PLC (United Kingdom)          28,200         256,927              --              --              --              -- 
South African Breweries PLC                                                                                                         
(United Kingdom)                            206,200       1,287,796              --              --              --              -- 
Triac Cos., Inc. (NON)                        5,900         136,290          10,800         249,480              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         21,448,683                      28,887,107                       2,578,494 

Biotechnology                                                  0.6%                            0.8%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Albany Molecular Research, Inc. (NON)        16,000         397,280          29,600         734,968              --              -- 
Amgen, Inc. (NON)                            70,700       4,155,039         134,300       7,892,811          14,050         825,719 
Applera Corp. - Applied                                                                                                             
Biosystems Group                             16,800         409,920          30,700         749,080           3,700          90,280 
Applera Corp. - Celera                                                                                                              
Genomics Group (NON)                            300           7,230             600          14,460              --              -- 
Biogen, Inc. (NON)                              900          50,022           2,000         111,160              --              -- 
Celgene Corp. (NON)                           9,500         251,085          17,700         467,811              --              -- 
Chiron Corp. (NON)                            3,500         155,295           7,700         341,649              --              -- 
Genentech, Inc. (NON)                         3,300         145,200           7,500         330,000              --              -- 
Genmab A/S (Denmark) (NON)                   18,938         243,595              --              --              --              -- 
Genmab A/S 144A (Denmark) (NON)              13,659         175,692              --              --              --              -- 
Genta, Inc. (NON)                            23,300         241,155          43,100         446,085              --              -- 
Genzyme Corp. (NON)                           1,400          63,588          15,725         714,230              --              -- 
Genzyme Corp. (Genzyme                                                                                                              
Biosurgery Division) (NON)                       --              --             685           2,672              --              -- 
Human Genome Sciences, Inc. (NON)               500          15,455           1,100          34,001              --              -- 
IDEC Pharmaceuticals Corp. (NON)                300          14,871             700          34,699              --              -- 
Invitrogen Corp. (NON)                        9,500         624,720          17,600       1,157,376           2,300         151,248 
Ligand Pharmaceuticals, Inc. Class B                                                                                                
(NON)                                        27,800         255,204          51,400         471,852              --              -- 
Martek Biosciences Corp. (NON)               12,200         222,040          22,600         411,320              --              -- 
MedImmune, Inc. (NON)                        34,000       1,211,420          63,200       2,251,816           7,800         277,914 
Pharmacopeia, Inc. (NON)                     12,300         159,408          22,700         294,192              --              -- 
Protein Design Labs, Inc. (NON)                 200           9,446             400          18,892              --              -- 
Serono SA Class B (Switzerland)                  30          22,650              --              --              --              -- 
SICOR, Inc. (NON)                            28,200         532,698          51,900         980,391              --              -- 
Waters Corp. (NON)                            1,100          39,347           2,400          85,848              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          9,402,360                      17,545,313                       1,345,161 

Broadcasting                                                   0.6%                            0.6%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Capital Radio PLC (United Kingdom)           87,040         669,682              --              --              --              -- 
Clear Channel Communications, Inc.                                                                                                  
(NON)                                        66,489       2,642,938         125,200       4,976,700          14,100         560,475 
Echostar Communications Corp.                                                                                                       
Class A (NON)                                79,800       1,856,946         147,300       3,427,671          19,000         442,130 
Fuji Television Network, Inc. (Japan)           106         528,754             187         932,801              25         124,706 
Grupo Televisa SA ADR (Mexico) (NON)         40,200       1,153,740          51,318       1,472,827              --              -- 
Hispanic Broadcasting Corp. (NON)               400           6,440             900          14,490              --              -- 
Hit Entertainment PLC                                                                                                               
(United Kingdom)                            115,700         420,802              --              --              --              -- 
Mediaset SpA (Italy)                         16,500          92,543              --              --              --              -- 
Nippon Television Network Corp. (Japan)       3,270         750,771           4,980       1,143,376             670         153,828 
ProSiebenSat.1 Media AG (Germany)            19,686          89,621          31,741         144,501           4,511          20,536 
Quorum Broadcast Holdings, Inc.                                                                                                     
Class E (STP)                                   114         114,270              --              --              56          56,228 
RCN Corp. (NON)                              42,100         134,720          78,300         250,560              --              -- 
Societe Television Francaise I (France)      57,059       1,090,997          91,667       1,752,719          11,700         223,710 
Spanish Broadcasting System, Inc.                                                                                                   
Class A (NON)                                33,800         239,642          62,500         443,125              --              -- 
UnitedGlobalCom, Inc. Class A (NON)             800           1,856           1,800           4,176              --              -- 
Univision Communications, Inc.                                                                                                      
Class A (NON)                                 2,000          45,900           4,400         100,980              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          9,839,622                      14,663,926                       1,581,613 

Building Materials                                             0.4%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
American Standard Companies, Inc. (NON)         400          22,000             700          38,500              --              -- 
American Woodmark Corp.                      30,751         902,542          56,812       1,667,432              --              -- 
Apogee Enterprises, Inc.                    105,800       1,364,820         196,300       2,532,270              --              -- 
Assa Abloy AB Class B (Sweden)                4,500          50,645              --              --              --              -- 
BPB PLC (United Kingdom)                    282,606       1,017,459              --              --              --              -- 
Cemex SA de CV ADR (Mexico)                  51,786       1,063,684              --              --              --              -- 
CSR, Ltd. (Australia)                       267,400         824,428              --              --              --              -- 
Hanson PLC (United Kingdom)                  10,870          75,994              --              --              --              -- 
Inax Corp. (Japan)                           10,000          59,960              --              --              --              -- 
Lennox International, Inc.                   24,100         224,130          44,800         416,640              --              -- 
Matsushita Electric Works, Ltd. (Japan)     125,600       1,011,508         126,000       1,014,730          18,000         144,961 
Sherwin Williams Co.                          1,100          24,442           2,400          53,328              --              -- 
USG Corp.                                     4,800          17,904          10,600          39,538              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          6,659,516                       5,762,438                         144,961 

Cable Television                                               0.1%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Adelphia Communications Corp.                                                                                                       
Class A (NON)                                 7,400         164,280          14,600         324,120           1,100          24,420 
Liberty Media Corp. Class A (NON)            64,900         824,230         129,200       1,640,840           9,500         120,650 
USA Networks, Inc. (NON)                     49,900         897,202          97,300       1,749,454           8,500         152,830 
                                                     --------------                  --------------                  -------------- 
                                                          1,885,712                       3,714,414                         297,900 

Capital Goods                                                   --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Eaton Corp.                                   3,600         213,156           6,900         408,549             600          35,526 

Chemicals                                                      1.1%                            1.0%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Air Products & Chemicals, Inc.                1,700          65,586           3,700         142,746              --              -- 
Airgas, Inc. (NON)                           57,600         764,352         105,400       1,398,658              --              -- 
Akzo-Nobel NV (Netherlands)                  43,784       1,785,568          73,860       3,012,106           9,389         382,896 
BASF AG (Germany)                            47,100       1,655,344          60,200       2,115,747           7,700         270,619 
BOC Group PLC (United Kingdom)              159,150       2,192,540         236,350       3,256,091          29,980         413,021 
Ciba Specialty Chemicals                                                                                                            
AG (Switzerland)                             22,570       1,340,875          27,200       1,615,942           3,450         204,963 
Clariant AG (Switzerland)                     5,500          82,369              --              --              --              -- 
Crompton Corp.                               69,800         483,714         127,600         884,268              --              -- 
Dow Chemical Co. (The)                       23,727         777,297          46,327       1,517,673           3,800         124,488 
E.I. du Pont de Nemours & Co.                29,600       1,110,592          57,600       2,161,152           5,400         202,608 
Eastman Chemical Co.                            700          25,410           1,500          54,450              --              -- 
Edinburgh International Fund                                                                                                        
(United Kingdom) (NON)                            2              98              --              --              --              -- 
Engelhard Corp.                              42,900         990,990          80,200       1,852,620           9,600         221,760 
Formosa Plastics Corp. (Taiwan)             380,000         314,277              --              --              --              -- 
Formosa Chemicals &                                                                                                                 
Fiber Co. (Taiwan)                          325,200         199,121              --              --              --              -- 
Givaudan SA (Switzerland)                       252          75,948              --              --              --              -- 
H.B. Fuller Co.                              10,400         476,320          19,000         870,200              --              -- 
Hercules, Inc.                                1,000           8,250           2,200          18,150              --              -- 
Hitachi Chemical Co., Ltd. (Japan)           66,900         514,054              --              --              --              -- 
Imperial Chemicals Industries PLC                                                                                                   
(United Kingdom)                              8,000          33,622              --              --              --              -- 
Minnesota Mining & Manufacturing Co.          3,000         295,200           6,600         649,440              --              -- 
Nan Ya Plastic Corp. (Taiwan)                43,344          24,401              --              --              --              -- 
Omnova Solutions, Inc. (NON)                 75,900         474,375         138,800         867,500              --              -- 
PolyOne Corp.                                34,200         266,760          62,500         487,500              --              -- 
PPG Industries, Inc.                          7,500         343,125          14,700         672,525           1,300          59,475 
Praxair, Inc.                                 1,400          58,800           3,100         130,200              --              -- 
Reliance Industries (Poland)                113,274         629,998              --              --              --              -- 
Rhodia SA (France)                           83,492         532,136              --              --              --              -- 
Rohm & Haas Co.                               5,800         190,008          10,700         350,532           1,300          42,588 
Shin-Etsu Chemical Co. (Japan)               14,000         393,853              --              --              --              -- 
Solutia, Inc.                                 4,200          52,080           7,800          96,720           1,000          12,400 
Syngenta AG (Switzerland) (NON)               2,000         101,120              --              --              --              -- 
Teijin, Ltd. (Japan)                         17,000          73,379              --              --              --              -- 
USEC, Inc.                                   68,000         437,240         124,000         797,320              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         16,768,802                      22,951,540                       1,934,818 

Coal                                                            --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Arch Coal, Inc.                              11,000         171,600          20,000         312,000              --              -- 
Beijing Datang Power                                                                                                                
Gen. Co., Ltd. (China)                      840,000         298,869              --              --              --              -- 
Peabody Energy Corp.                          7,500         180,750          13,800         332,580           1,800          43,380 
                                                     --------------                  --------------                  -------------- 
                                                            651,219                         644,580                          43,380 

Commercial and Consumer Services                               0.7%                            0.4%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Administaff, Inc. (NON)                      17,100         444,600          31,600         821,600              --              -- 
Asatsu-DK, Inc. (Japan)                      12,500         293,920          24,200         569,029           3,300          77,595 
Autopistas Concesionaria Espanola                                                                                                   
SA (Spain)                                   24,865         215,302              --              --              --              -- 
Autostrade SpA (Italy)                       57,200         364,564              --              --              --              -- 
Banta Corp.                                  21,200         590,844          38,700       1,078,569              --              -- 
Benesse Corp.                                 2,300          70,499              --              --              --              -- 
Bowne & Co.                                  31,300         317,695          58,200         590,730              --              -- 
Capita Group PLC (United Kingdom)             2,475          13,421              --              --              --              -- 
Cendant Corp. (NON)                           7,800          99,840          17,300         221,440              --              -- 
Coinstar, Inc. (NON)                         28,100         554,132          52,000       1,025,440              --              -- 
Deluxe Corp.                                  1,900          65,626           4,200         145,068              --              -- 
DST Systems, Inc. (NON)                         500          21,625           1,100          47,575              --              -- 
eBay, Inc. (NON)                             19,000         869,250          35,500       1,624,125           4,250         194,438 
Electro Rent Corp. (NON)                      9,800         123,578          18,000         226,980              --              -- 
Galileo International, Inc.                   2,600          53,976           5,700         118,332              --              -- 
Group 4 Falck A/S (Denmark)                     700          77,177              --              --              --              -- 
H&R Block, Inc.                               1,200          46,272           2,600         100,256              --              -- 
Hagemeyer NV (Netherlands)                   80,572       1,073,269              --              --              --              -- 
Harland (John H.) Co.                        14,300         313,170          26,600         582,540              --              -- 
Hays PLC (United Kingdom)                   278,050         625,150          66,200         148,840           8,300           18,661
Integrated Electrical Services, Inc.                                                                                                
(NON)                                        19,200         105,600          36,300         199,650              --              -- 
Li & Fung, Ltd. (Hong Kong)                 546,000         518,040              --              --              --              -- 
Macrovision Corp. (NON)                      10,900         309,669          20,000         568,200           2,500          71,025 
Manpower, Inc.                                  600          15,798           1,300          34,229              --              -- 
Meitec Corp. (Japan)                         20,400         531,072              --              --              --              -- 
NCH Corp.                                     3,200         125,408           6,000         235,140              --              -- 
R. R. Donnelley & Sons Co.                      700          18,935           1,500          40,575              --              -- 
Robert Half International, Inc. (NON)         1,000          20,010           2,200          44,022              --              -- 
Sabre Holdings Corp. (NON)                      289           7,728             605          16,178              --              -- 
Securicor Group PLC (United Kingdom)         80,500         138,405              --              --              --              -- 
Securitas AB Class B (Sweden)                37,022         597,213          20,820         335,854           2,660          42,909 
ServiceMaster Co. (The)                       4,300          47,687           9,500         105,355              --              -- 
Sodexho Alliance SA (France)                 13,803         584,395              --              --              --              -- 
Spherion Corp. (NON)                         36,100         259,920          67,200         483,840              --              -- 
Toppan Printing Co., Ltd. (Japan)           171,000       1,615,511              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         11,129,301                       9,363,567                         404,628 

Communications Equipment                                       0.7%                            0.6%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Agere Systems, Inc. Class A (NON)            47,000         194,110          87,000         359,310          11,200          46,256 
Alcatel SA (France)                          13,000         149,495              --              --              --              -- 
American Tower Corp. Class A (NON)              900          12,501           2,000          27,780              --              -- 
Avaya, Inc. (NON)                             2,041          20,206           4,516          44,708              --              -- 
Cisco Systems, Inc. (NON)                   280,221       3,413,092         538,100       6,554,058          51,500         627,270 
Clarent Corp. (NON)                          41,800         112,233          77,400         207,819              --              -- 
Comverse Technology, Inc. (NON)               1,200          24,576           2,600          53,248              --              -- 
Copper Mountain Networks, Inc. (NON)         73,600          58,880         136,800         109,440              --              -- 
Corning, Inc.                                 5,000          44,100          11,000          97,020              --              -- 
Digital Lightwave, Inc. (NON)                 8,200          80,442          15,000         147,150              --              -- 
Enterasys Networks, Inc. (NON)                2,400          15,480           5,300          34,185              --              -- 
Inter-Tel, Inc.                              45,800         524,868          84,700         970,662              --              -- 
LGP Telecom Holding AB (Sweden)              56,086         302,457              --              --              --              -- 
Marconi PLC (United Kingdom) (NON)           28,000           7,509              --              --              --              -- 
Matsushita Communication                                                                                                            
Industrial Co., Ltd. (Japan)                  1,000          27,545              --              --              --              -- 
Nokia OYJ (Finland)                         116,509       1,904,162              --              --              --              -- 
Nortel Networks Corp. (Canada)               26,300         147,360              --              --              --              -- 
ONI Systems Corp. (NON)                          --              --          24,100          97,123          18,500          74,555 
Performance Technologies, Inc. (NON)         24,800         203,856          46,500         382,230              --              -- 
QUALCOMM, Inc. (NON)                         46,200       2,196,348          87,100       4,140,734           9,900         470,646 
Riverstone Networks, Inc. (NON)               1,231           6,463           2,719          14,275              --              -- 
Scientific-Atlanta, Inc.                      1,000          17,550           2,000          35,100              --              -- 
Telefonaktiebolaget LM Ericsson AB                                                                                                  
Class B (Sweden)                            570,946       2,066,918         667,805       2,417,564          85,718         310,313 
Telefonaktiebolaget LM Ericsson AB                                                                                                  
ADR (Sweden)                                  8,000          27,920              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         11,558,071                      15,692,406                       1,529,040 

Computers                                                      1.3%                            1.3%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Apple Computer, Inc. (NON)                    1,700          26,367           3,800          58,938              --              -- 
Asustek Computer, Inc. GDR (Taiwan)         156,500         470,045              --              --              --              -- 
BARRA, Inc. (NON)                             8,800         369,776          16,200         680,724              --              -- 
Brocade Communications Systems, Inc.                                                                                                
(NON)                                           700           9,821           1,500          21,045              --              -- 
Bsquare Corp. (NON)                          41,300         109,445          76,400         202,460              --              -- 
Cap Gemini SA (France)                        1,800          95,794              --              --              --              -- 
Compal Electronics, Inc.                    316,000         236,587              --              --              --              -- 
Compaq Computer Corp.                       121,400       1,008,834         228,400       1,898,004          25,200         209,412 
Dassault Systemes SA (France)                 2,800          85,277              --              --              --              -- 
Dell Computer Corp. (NON)                   109,000       2,019,770         206,300       3,822,739          22,800         422,484 
EMC Corp. (NON)                              76,700         901,225         148,900       1,749,575          13,900         163,325 
EMCOR Group, Inc. (NON)                      23,000         733,700          42,500       1,355,750              --              -- 
Emulex Corp. (NON)                           37,300         354,723          68,900         655,239           8,800          83,688 
Fujitsu, Ltd. (Japan)                        94,000         788,596              --              --              --              -- 
Gateway, Inc. (NON)                           1,600           8,720           3,500          19,075              --              -- 
Gerber Scientific, Inc.                      39,800         417,900          74,000         777,000              --              -- 
Hewlett-Packard Co.                         104,500       1,682,450         197,500       3,179,750          22,600         363,860 
Hitachi, Ltd. (Japan)                        54,000         359,607              --              --              --              -- 
IBM Corp.                                    30,900       2,852,070          62,050       5,727,215           4,300         396,890 
Iomega Corp. (NON)                          208,000         253,760         384,900         469,578              --              -- 
Manhattan Associates, Inc. (NON)             11,000         186,560          20,400         345,984              --              -- 
McAfee.com Corp. (NON)                       42,500         490,875          78,600         907,830              --              -- 
McDATA Corp. Class A (NON)                   71,901         603,249         132,000       1,107,480          17,100         143,469 
Mentor Graphics Corp. (NON)                  38,300         527,774          70,850         976,313              --              -- 
NCR Corp. (NON)                               5,900         174,935          11,300         335,045           1,200          35,580 
NCSoft Corp. (South Korea)                    2,090         150,084              --              --              --              -- 
NEC Corp. (Japan)                            37,000         302,326              --              --              --              -- 
Netsolve, Inc. (NON)                         22,500         257,625          41,500         475,175              --              -- 
Quanta Computer, Inc. (Taiwan)              159,250         298,074              --              --              --              -- 
Quantum Corp. (NON)                           7,000          57,120          15,400         125,664              --              -- 
Renaissance Learning, Inc. (NON)              6,000         197,460          11,100         365,301              --              -- 
Satyam Computer Services, Ltd.                                                                                                      
ADR (India)                                  10,800          63,180              --              --              --              -- 
Satyam Computer Services, Ltd. (India)       51,512         137,994              --              --              --              -- 
Sharp Corp. (Japan)                          90,000         808,700              --              --              --              -- 
Sun Microsystems, Inc. (NON)                103,900         859,253         199,100       1,646,557          20,400         168,708 
TietoEnator OYJ (Finland)                    13,405         253,259          29,272         553,032           4,000          75,572 
TietoEnator OYJ 144A (Finland)               14,450         273,002          20,804         393,047           2,200          41,564 
Toshiba Corp. (Japan) (NON)                  41,000         157,004              --              --              --              -- 
Unisys Corp. (NON)                           36,800         318,688          68,000         588,880           8,600          74,476 
VeriSign, Inc. (NON)                         29,350       1,229,765          55,900       2,342,210           5,800         243,020 
                                                     --------------                  --------------                  -------------- 
                                                         20,131,394                      30,779,610                       2,422,048 

Conglomerates                                                  1.7%                            1.6%                            0.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
Autonation, Inc. (NON)                        3,800          33,402           8,400          73,836              --              -- 
Axia Holding, Inc. 144A  (PIK)                  225           2,700              --              --              --              -- 
Berkshire Hathaway, Inc. Class B (NON)          620       1,444,600           1,140       2,656,200             140         326,200 
Canadian Pacific, Ltd. (Canada)              11,300         362,573              --              --              --              -- 
China Merchants Holdings                                                                                                            
International Co., Ltd. (Hong Kong)         453,000         267,174              --              --              --              -- 
Citic Pacific, Ltd. (Hong Kong)             189,000         356,220              --              --              --              -- 
Cookson Group PLC (United Kingdom)        1,024,781         738,349              --              --              --              -- 
Cooper Industries, Inc.                      31,000       1,285,570          59,150       2,452,951           6,700         277,849 
GenCorp., Inc.                               46,200         523,908          85,800         972,972              --              -- 
General Electric Co.                        248,970       9,261,684         492,000      18,302,400          39,320       1,462,704 
Grupo Carso SA de CV (Mexico) (NON)         100,500         226,516              --              --              --              -- 
Honeywell International, Inc.                27,200         718,080          51,700       1,364,880           5,700         150,480 
Hutchison Whampoa, Ltd. (Hong Kong)          39,100         290,766              --              --              --              -- 
Investor AB Class B (Sweden)                217,333       2,058,676         454,248       4,302,842          57,094         540,820 
IOI Corporation Berhad (Malaysia)           195,000         175,500              --              --              --              -- 
Mitsui Fudoscan Co., Ltd. (Japan)            50,000         283,843              --              --              --              -- 
Norsk Hydro ASA (Norway)                     10,828         397,630              --              --              --              -- 
Peninsular and Oriental Steam                                                                                                       
Navigation Co. (United Kingdom)              21,500          58,133              --              --              --              -- 
Remgro, Ltd. (South Africa)                  91,400         604,088              --              --              --              -- 
Samsung Corp. (South Korea)                  50,700         224,645              --              --              --              -- 
Sime Darby Berhad (Malaysia)                302,000         365,579              --              --              --              -- 
Singapore Exchange, Ltd.                                                                                                            
144A (Singapore) (NON)                      167,000          95,510              --              --              --              -- 
Singapore Technologies                                                                                                              
Engineering, Ltd. (Singapore)               616,000         760,408              --              --              --              -- 
Smiths Group PLC (United Kingdom)           116,534       1,126,803          95,588         924,270          12,195          117,917
Textron, Inc.                                 6,100         205,021          13,400         450,374              --             --  
Tyco International, Ltd. (Bermuda)           73,548       3,346,434         136,645       6,217,348          16,900         768,950 
Vedior NV (Netherlands)                       6,500          61,550              --              --              --              -- 
Vivendi Universal SA (France)                26,755       1,238,728          31,270       1,447,767           3,970         183,807 
Vivendi Universal SA ADR (France)             2,000          92,700              --              --              --              -- 
Walter Industries, Inc.                      31,400         281,030          58,300         521,785              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         26,887,820                      39,687,625                       3,828,727 

Construction                                                   0.3%                            0.3%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
CRH PLC (Ireland)                           182,243       2,704,696         301,487       4,474,414          38,769         575,377 
Lafarge Coppee (France)                      27,650       2,251,933          35,663       2,904,545           4,495         366,092 
                                                     --------------                  --------------                  -------------- 
                                                          4,956,629                       7,378,959                         941,469 

Consumer                                                        --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Consorcio ARA SA (Mexico) (NON)             338,400         423,534              --              --              --              -- 

Consumer Cyclicals                                             0.2%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Matsushita Electric Industrial Co.                                                                                                  
(Japan)                                     115,800       1,419,785              --              --              --              -- 
Sony Corp. (Japan)                           49,900       1,839,612          58,600       2,160,346           7,000         258,062 
                                                     --------------                  --------------                  -------------- 
                                                          3,259,397                       2,160,346                         258,062 

Consumer Finance                                               0.5%                            0.4%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Acom Co., Ltd. (Japan)                       18,200       1,606,332             600          52,956             100           8,826 
Acom Co., Ltd. 144A (Japan)                   4,700         414,822          10,600         935,556           1,300         114,738 
Aiful Corp. (Japan)                          21,250       1,784,515          10,400         873,362           1,350         113,369 
AmeriCredit Corp. (NON)                      25,700         812,634          47,300       1,495,626              --              -- 
Capital One Financial Corp.                   1,800          82,854           4,000         184,120              --              -- 
CompuCredit Corp. (NON)                      45,800         333,882          84,200         613,818              --              -- 
Countrywide Credit Industries, Inc.           3,800         166,934           8,400         369,012              --              -- 
Dun & Bradstreet Corp. (NON)                    400          11,200             850          23,800              --              -- 
Household International, Inc.                18,100       1,020,478          35,500       2,001,490           3,100         174,778 
MBNA Corp.                                    8,000         242,320          17,700         536,133              --              -- 
Metris Companies, Inc.                       13,700         339,075          25,300         626,175              --              -- 
Promise Co., Ltd. (Japan)                     3,600         241,854              --              --              --              -- 
Providian Financial Corp.                    47,439         955,896          89,600       1,805,440          10,200         205,530 
Takefuji Corp. (Japan)                        1,000          78,939              --              --              --              -- 
Theta Group, Ltd. (Kenya)                   222,900         192,879              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          8,284,614                       9,517,488                         617,241 

Consumer Goods                                                 0.9%                            0.7%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Avon Products, Inc.                           1,800          83,250           4,000         185,000              --              -- 
Beiersdorf AG (Germany)                       1,100         120,386              --              --              --              -- 
Clorox Co.                                    1,200          44,400           2,600          96,200              --              -- 
Colgate-Palmolive Co.                        17,100         996,075          33,100       1,928,075           3,000         174,750 
Dial Corp. (The)                            134,223       2,221,391         248,096       4,105,989              --              -- 
Estee Lauder Companies, Inc. (The)                                                                                                  
Class A                                      17,200         570,180          31,500       1,044,225           4,000         132,600 
Gillette Co. (The)                            7,000         208,600          14,800         441,040              --              -- 
Hindustan Lever, Ltd. (India)               158,059         687,788              --              --              --              -- 
International Flavors & Fragrances, Inc.      2,000          55,380           4,700         130,143              --              -- 
KAO Corp. (Japan)                            47,000       1,158,423              --              --              --              -- 
Kimberly-Clark Corp.                         30,300       1,878,600          58,100       3,602,200           5,900         365,800 
L'Oreal SA (Germany)                         23,695       1,633,174              --              --              --              -- 
LG Household & Health Care, Ltd.                                                                                                    
(South Korea) (NON)                          12,900         275,936              --              --              --              -- 
NBTY, Inc. (NON)                            107,700       1,417,332         199,300       2,622,788              --              -- 
Procter & Gamble Co.                          9,400         684,226          20,700       1,506,753              --              -- 
Shiseido Co., Ltd. (Japan)                   61,000         525,579          50,000         430,803           7,000          60,312 
Swatch Group AG (The) (Switzerland)          29,260         434,581          31,770         471,861           3,920          58,221 
Swatch Group AG (The) Class B                                                                                                       
(Switzerland)                                21,240       1,537,892          14,140       1,023,813           1,740         125,986 
Tupperware Corp.                              8,800         175,472          16,000         319,040              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         14,708,665                      17,907,930                         917,669 

Consumer Services                                              0.2%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
CDW Computer Centers, Inc. (NON)                600          21,708           1,300          47,034              --              -- 
Deutsche Post AG (Germany)                   29,116         421,511          67,525         977,556           9,336         135,157 
Deutsche Post AG 144A (Germany)              14,600         211,363          24,600         356,133           2,500          36,192 
Freemarkets, Inc. (NON)                      20,300         214,774          37,600         397,808              --              -- 
Heidrick & Struggles International, Inc.                                                                                            
(NON)                                         7,700         109,879          14,200         202,634              --              -- 
Hotel Reservations Network, Inc.                                                                                                    
Class A (NON)                                 5,100         115,974           9,600         218,304              --              -- 
HotJobs.com, Ltd. (NON)                      48,700         290,739          89,500         534,315              --              -- 
PHS Group PLC 144A                                                                                                                  
(United Kingdom) (NON)                      367,700         432,268              --              --              --              -- 
Register.com (NON)                           60,400         599,168         111,900       1,110,048              --              -- 
TMP Worldwide, Inc. (NON)                    29,800         846,022          55,100       1,564,289           6,900         195,891 
Travelocity.com (NON)                        15,900         211,470          29,400         391,020              --              -- 
Watson Wyatt & Co. Holdings (NON)             7,500         119,250          13,900         221,010              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          3,594,126                       6,020,151                         367,240 

Consumer Staples                                               0.1%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Fuji Photo Film Co., Ltd. (Japan)            64,000       2,203,561          37,000       1,273,933           5,000         172,153 
Orkla ASA (Norway)                            4,500          71,583              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          2,275,144                       1,273,933                         172,153 

Distribution                                                   0.1%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Performance Food Group Co. (NON)             25,200         718,956          46,600       1,329,498              --              -- 
SYSCO Corp.                                   8,200         209,428          18,000         459,720              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            928,384                       1,789,218                              -- 

Electric Utilities                                             2.1%                            1.4%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
American Electric Power Company, Inc.           640          27,667           1,420          61,387              --              -- 
BSES, Ltd. GDR (India)                       61,600         242,018              --              --              --              -- 
Black Hills Corp.                            21,300         650,076          39,500       1,205,540              --              -- 
Centrais Eletricas Brasileiras S.A.                                                                                                 
(Brazil)                                     34,800         383,191              --              --              --              -- 
Chubu Electric Power, Inc. (Japan)           61,600       1,355,324              --              --              --              -- 
Cinergy Corp.                                31,300         966,231          58,170       1,795,708           6,900         213,003 
CLP Holdings, Ltd. (Hong Kong)              169,600         652,358              --              --              --              -- 
CMS Energy Corp.                             10,000         200,000          21,200         424,000             900          18,000 
Companhia Energetica de Minas Gerais                                                                                                
ADR (Brazil) (NON)                           27,100         258,805              --              --              --              -- 
Companhia Paranaense de                                                                                                             
Energia-Copel ADR (Brazil)                   50,900         297,765              --              --              --              -- 
Conectiv, Inc.                               25,200         592,200          46,000       1,081,000              --              -- 
Consolidated Edison, Inc.                     2,600         105,872           5,700         232,104              --              -- 
Constellation Energy Group, Inc.             25,500         617,100          47,100       1,139,820           6,000         145,200 
Dominion Resources, Inc.                      9,900         587,565          19,400       1,151,390           1,700         100,895 
DPL, Inc.                                    51,882       1,261,770          96,043       2,335,766          11,874         288,776 
DTE Energy Co.                                4,200         180,810           7,900         340,095             700          30,135 
Duke Energy Corp.                            25,900         980,315          51,050       1,932,243           4,400         166,540 
E.On AG (Germany)                            31,750       1,630,432              --              --              --              -- 
Edison International                         18,300         240,828          35,800         471,128           2,600          34,216 
Electrabel SA (Belgium)                       8,281       1,741,705              --              --              --              -- 
Electricidade de Portugal SA (Portugal)      43,400         112,225              --              --              --              -- 
Empresa Nacional de Electricidad                                                                                                    
ADR (Chile)                                  24,300         210,438              --              --              --              -- 
Endesa S.A. (Spain)                          11,800         183,184              --              --              --              -- 
Enersis S.A. ADR (Chile)                     15,600         190,944              --              --              --              -- 
Entergy Corp.                                32,100       1,141,476          61,000       2,169,160           6,400         227,584 
Exelon Corp.                                  2,762         123,185           6,087         271,480              --              -- 
FirstEnergy Corp.                            19,700         708,215          36,500       1,312,175           4,500         161,775 
FPL Group, Inc.                               6,600         353,430          12,900         690,795           1,200          64,260 
Hong Kong Electric Holdings, Ltd.                                                                                                   
(Hong Kong)                                 271,500       1,044,311         433,500       1,667,436          54,500         209,632 
Iberdrola SA (Spain)                        116,536       1,586,285              --              --              --              -- 
Kansai Electric Power, Inc. (Japan)           3,000          50,386              --              --              --              -- 
Korea Electric Power Corp.                                                                                                          
(South Korea)                               162,320       2,604,064         101,690       1,631,390              --              -- 
Northeast Utilities                          30,000         561,900          56,050       1,049,817           7,100         132,983 
NRG Energy, Inc. (NON)                       12,900         209,109          23,900         387,419              --              -- 
NSTAR                                           800          33,520           1,800          75,420              --              -- 
PG&E Corp.                                    5,500          83,600          12,300         186,960              --              -- 
Potomac Electric Power Co.                      400           8,784             900          19,764              --              -- 
PPL Corp.                                     7,200         234,720          13,800         449,880           1,500          48,900 
Progress Energy, Inc.                        38,300       1,646,517          71,800       3,086,682           8,200         352,518 
Public Service Co. of New Mexico             40,500       1,021,005          75,200       1,895,792              --              -- 
Public Service Enterprise Group, Inc.         2,200          93,610           4,800         204,240              --              -- 
Puget Energy, Inc.                              600          12,894           1,300          27,937              --              -- 
Reliant Energy, Inc.                         24,500         644,840          47,050       1,238,356           4,500         118,440 
RWE AG (Germany)                              2,330          93,344              --              --              --              -- 
Scottish and Southern Energy PLC                                                                                                    
(United Kingdom)                             78,376         746,324              --              --              --              -- 
Scottish Power PLC (United Kingdom)         629,349       3,782,548         451,733       2,715,031          86,143         517,741 
Sierra Pacific Resources                     50,400         761,040          92,800       1,401,280              --              -- 
Southern Co. (The)                            6,900         165,462          15,000         359,700              --              -- 
Teco Energy, Inc.                               300           8,130             700          18,970              --              -- 
Tokyo Electric Power Co. (Japan)             38,000         947,766              --              --              --              -- 
TXU Corp.                                    10,600         490,992          21,200         981,984           1,800          83,376 
Unified Energy Systems ADR (Russia)          39,200         436,100              --              --              --              -- 
UniSource Energy Corp.                       32,100         449,400          59,600         834,400              --              -- 
Utilicorp United, Inc.                        3,000          84,030           6,700         187,667              --              -- 
Wisconsin Energy Corp.                          700          15,750           1,600          36,000              --              -- 
XCEL Energy, Inc.                             1,705          47,996           3,765         105,985              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         33,859,556                      35,175,901                       2,913,974 

Electrical Equipment                                           0.2%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
ABB, Ltd. (Switzerland)                      15,480         111,126              --              --              --              -- 
BEI Technologies, Inc.                        8,716         139,892          16,102         258,437              --              -- 
C&D Technologies, Inc.                        7,650         140,760          14,100         259,440              --              -- 
Chubb PLC (United Kingdom)                   11,300          26,319              --              --              --              -- 
Electro Scientific Industries, Inc.                                                                                                 
(NON)                                        18,700         410,465          34,500         757,275              --              -- 
Emerson Electric Co.                          2,000          94,120           4,500         211,770              --              -- 
Furukawa Electrical Co., Ltd. (Japan)         6,000          32,650              --              --              --              -- 
Invensys PLC (United Kingdom)                71,500          36,774              --              --              --              -- 
Kidde PLC (United Kingdom)                  541,703         427,868              --              --              --              -- 
Lincoln Electric Holdings, Inc.              25,500         561,510          46,200       1,017,324              --              -- 
Rockwell International Corp.                  1,900          27,892           4,200          61,656              --              -- 
Schneider Electric SA (France)               14,753         537,304              --              --              --              -- 
Siemens AG (Germany)                         26,893       1,013,724              --              --              --              -- 
Sumitomo Electric Industries, Ltd.                                                                                                  
(Japan)                                      34,000         304,652              --              --              --              -- 
Vestas Wind Systems A/S (Denmark)             2,000          59,536              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          3,924,592                       2,565,902                              -- 

Electronics                                                    3.0%                            2.1%                            0.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
Act Manufacturing, Inc. (NON)                    --              --          80,000         355,200          60,500         268,620 
Advanced Micro Devices, Inc. (NON)            4,100          33,415           9,100          74,165              --              -- 
Advantest Corp. (Japan)                       2,000          84,817              --              --              --              -- 
Alpha Industries, Inc. (NON)                 24,800         480,376          45,932         889,703           5,700         110,409 
ALPS Electric Co. Ltd. (Japan)               30,000         177,612              --              --              --              -- 
American Power Conversion Corp. (NON)         1,300          15,184           2,900          33,872              --              -- 
Analog Devices, Inc. (NON)                    2,600          85,020           5,700         186,390              --              -- 
Applied Micro Circuits Corp. (NON)            2,700          18,873           6,000          41,940              --              -- 
Arrow Electronics, Inc. (NON)                 2,000          41,720           4,400          91,784              --              -- 
ASE Test, Ltd. (Taiwan) (NON)               158,713       1,222,090              --              --              --              -- 
Atmel Corp. (NON)                             6,000          40,080          13,200          88,176              --              -- 
Avanex Corp. (NON)                            1,300           3,848           2,700           7,992              --              -- 
Avant! Corp. (NON)                          193,200         571,872         355,200       1,051,392              --              -- 
Avnet, Inc.                                  10,000         181,900          19,700         358,343           1,500          27,285 
Axcelis Technologies, Inc. (NON)                707           6,681           1,532          14,477              --              -- 
Broadcom Corp. Class A (NON)                 16,500         334,950          31,100         631,330           3,400          69,020 
Celestica, Inc. (Canada) (NON)               41,450       1,131,585          81,300       2,219,490          14,000         382,200 
Celestica, Inc. - Toronto                                                                                                           
Exchange (Canada) (NON)                       9,070         245,197              --              --              --              -- 
Chartered Semiconductor                                                                                                             
Manufacturing, Ltd. (Singapore) (NON)       605,200       1,062,356              --              --              --              -- 
Cypress Semiconductor Corp. (NON)             1,000          14,860           2,000          29,720              --              -- 
DSP Group, Inc. (NON)                        27,300         544,635              --              --              --              -- 
FDK Corporation (Japan)                         400           1,132              --              --              --              -- 
FEI Co. (NON)                                35,000         761,250          64,800       1,409,400              --              -- 
Finisar Corp. (NON)                             800           3,168           1,700           6,732              --              -- 
Fuji Soft ABC, Inc. (Japan)                  14,100         602,696              --              --              --              -- 
General Cable Corp.                          83,600         823,460         154,800       1,524,780              --              -- 
GlobeSpan, Inc. (NON)                        43,900         396,856          80,900         731,336          10,500          94,920 
HI/FN, Inc. (NON)                            47,600         468,860          87,600         862,860              --              -- 
Hon Hai Precision Industry (Taiwan)         161,720         511,535              --              --              --              -- 
Humax Co., Ltd. (South Korea)                13,240         192,177              --              --              --              -- 
Intel Corp.                                 201,200       4,112,528         391,000       7,992,040          35,800         731,752 
International Rectifier Corp. (NON)          11,900         324,037          22,000         599,060              --              -- 
Intersil Corp. Class A (NON)                  4,500         125,640           8,300         231,736              --              -- 
Kulicke & Soffa Industries, Inc. (NON)       32,900         358,610          60,900         663,810              --              -- 
Kyocera Corp. (Japan)                         1,800         117,602              --              --              --              -- 
Linear Technology Corp.                      47,500       1,558,000          89,300       2,929,040          10,400         341,120 
LSI Logic Corp. (NON)                         4,500          52,875          10,300         121,025              --              -- 
Marvell Technology                                                                                                                  
Group, Ltd. (Bermuda) (NON)                  50,800         728,980          93,700       1,344,595          12,200         175,070 
Maxim Integrated Products, Inc. (NON)        36,200       1,264,828          68,200       2,382,908           7,500         262,050 
Measurement Specialties, Inc. (NON)             300           2,967             700           6,923              --              -- 
MEMC Electronic Materials, Inc. (NON)        51,500          54,075          94,600          99,330              --              -- 
Merix Corp. (NON)                            25,700         361,085          47,300         664,565              --              -- 
Methode Electronics, Inc. Class A           108,500         819,175         200,400       1,513,020              --              -- 
Microchip Technology, Inc. (NON)              1,500          40,200           3,400          91,120              --              -- 
Micron Technology, Inc. (NON)                48,737         917,718          91,600       1,724,828          10,400         195,832 
Microsemi Corp. (NON)                         6,600         171,930          12,200         317,810              --              -- 
MIPS Technologies, Inc. (NON)                27,900         182,745          51,200         335,360              --              -- 
Mitsumi Electric Company, Ltd. (Japan)       30,000         327,511              --              --              --              -- 
Molex, Inc.                                     500          14,055           1,075          30,218              --              -- 
Motorola, Inc.                               78,400       1,223,040         154,000       2,402,400          13,600         212,160 
Murata Manufacturing Co., Ltd. (Japan)        3,600         206,483              --              --              --              -- 
National Semiconductor Corp. (NON)            2,300          50,715           5,100         112,455              --              -- 
Nidec Corp. (Japan)                           6,900         238,151              --              --              --              -- 
NMS Communications Corp. (NON)              106,100         165,516         195,200         304,512              --              -- 
Oak Technology, Inc. (NON)                   16,460         128,388          30,400         237,120              --              -- 
OMRON Corp. (Japan)                         188,100       2,446,816              --              --              --              -- 
Pace Micro Technology PLC                                                                                                           
(United Kingdom)                            167,550         571,218              --              --              --              -- 
PerkinElmer, Inc.                            10,700         280,768          19,900         522,176              --              -- 
PictureTel Corp. (NON)                       61,400         367,172         114,000         681,720              --              -- 
Pioneer-Standard Electronics, Inc.           26,100         235,422          48,500         437,470              --              -- 
PMC-Sierra, Inc. (NON)                        3,900          40,053           8,600          88,322              --              -- 
Premier Farnell PLC (United Kingdom)        175,600         445,126              --              --              --              -- 
Read-Rite Corp. (NON)                       108,300         319,485         199,100         587,345              --              -- 
Recoton Corp. (NON)                          26,700         329,745          48,800         602,680              --              -- 
RF Micro Devices, Inc. (NON)                  2,000          33,200           2,000          33,200              --              -- 
Rohm Co., Ltd. (Japan)                        9,300         905,946          15,100       1,470,944           1,500         146,120 
Samsung Electronics Co., Ltd.                                                                                                       
(South Korea)                                52,989       5,667,273          49,187       5,260,642              --              -- 
Samsung Electronics Co., Ltd. 144A                                                                                                  
GDR (South Korea)                             1,800         106,200           4,800         283,200              --              -- 
Samsung SDI Co., Ltd. (South Korea)           4,400         142,857              --              --              --              -- 
Sanmina Corp. (NON)                           2,000          27,160           4,400          59,752              --              -- 
SCI Systems, Inc. (NON)                         900          16,200           2,000          36,000              --              -- 
Silicon Laboratories, Inc. (NON)                400           5,516             900          12,411              --              -- 
Siliconware Precision                                                                                                               
Industries Co. (Taiwan) (NON)             1,570,000         779,077              --              --              --              -- 
Solectron Corp. (NON)                        37,100         432,215          68,300         795,695           8,500          99,025 
STMicroelectronics NV (Switzerland)           9,400         201,814              --              --              --              -- 
Storage Technology Corp. (NON)               55,700         699,035         103,500       1,298,925              --              -- 
Taiwan Semiconductor                                                                                                                
Manufacturing Co. (Taiwan) (NON)          1,460,096       1,978,714              --              --              --              -- 
Tandberg ASA (Norway) (NON)                  20,900         312,422              --              --              --              -- 
Texas Instruments, Inc.                      10,200         254,796          23,200         579,536              --              -- 
Thermo Electron Corp. (NON)                   1,000          18,050           2,200          39,710              --              -- 
Thomson Multimedia SA (France) (NON)         22,784         446,014              --              --              --              -- 
Tokyo Electron, Ltd. (Japan)                  2,500          87,756              --              --              --              -- 
Trimble Navigation, Ltd. (NON)               11,200         170,800          20,700         315,675              --              -- 
TriQuint Semiconductor, Inc. (NON)            8,400         134,316          15,500         247,845              --              -- 
United Microelectronics                                                                                                             
Corp. (Taiwan) (NON)                      2,174,958       1,697,805       1,035,000         807,937              --              -- 
Varian, Inc. (NON)                            9,300         236,964          17,200         438,256              --              -- 
Venture Manufacturing, Ltd.                                                                                                         
(Singapore)                                 191,000         946,348          22,000         109,003           3,000          14,864 
Vishay Intertechnology, Inc. (NON)            1,300          23,920           2,800          51,520              --              -- 
Vitesse Semiconductor Corp. (NON)               700           5,425           1,500          11,625              --              -- 
W.W. Grainger, Inc.                          33,360       1,296,036          61,875       2,403,844           7,945         308,663 
X-Rite, Inc.                                 44,700         353,130          83,100         656,490              --              -- 
Zarlink Semiconductor, Inc.                                                                                                         
(Canada) (NON)                              128,751       1,031,149              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         46,651,002                      52,544,880                       3,439,110 

Energy                                                         0.2%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Baker Hughes, Inc.                            4,500         130,275           9,900         286,605              --              -- 
Bharat Petroleum Corp. Ltd. (India)          57,800         193,775              --              --              --              -- 
Chiles Offshore, Inc. (NON)                   4,300          86,860           8,000         161,600              --              -- 
ENSCO International, Inc.                     1,100          16,082           2,400          35,088              --              -- 
Global Marine, Inc. (NON)                        --              --          22,700         317,800          17,300         242,200 
Grey Wolf, Inc. (NON)                        54,600          98,280         101,000         181,800              --              -- 
GulfMark Offshore, Inc. (NON)                10,700         256,800          19,600         470,400              --              -- 
Halliburton Co.                               3,600          81,180           7,900         178,145              --              -- 
Helmerich & Payne, Inc.                       7,400         193,140          13,800         360,180              --              -- 
Hydril Co. (NON)                              6,200          86,366          11,300         157,409              --              -- 
Input/Ouput, Inc. (NON)                      21,600         176,688          40,100         328,018              --              -- 
Nabors Industries, Inc. (NON)                   600          12,582           1,300          27,261              --              -- 
Patterson-UTI Energy, Inc. (NON)             27,300         337,428          50,500         624,180              --              -- 
Schlumberger, Ltd.                            4,500         205,650           8,300         379,310           1,100          50,270 
Seacor Holdings, Inc. (NON)                      --              --               1              36              --              -- 
Smedvig ASA Class A (Norway)                  5,000          41,179              --              --              --              -- 
Smith International, Inc. (NON)                 500          18,200           1,100          40,040              --              -- 
Spinnaker Exploration Company (NON)           7,100         251,198          13,100         463,478              --              -- 
Tidewater, Inc.                               7,800         208,182          14,300         381,667              --              -- 
Transocean Sedco Forex, Inc.                  8,000         211,200          15,400         406,560           1,500          39,600 
                                                     --------------                  --------------                  -------------- 
                                                          2,605,065                       4,799,577                         332,070 

Engineering & Construction                                     0.4%                            0.2%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Abengoa SA (Spain)                           75,482         463,216              --              --              --              -- 
ACS, Actividades Cons y Servicios                                                                                                   
SA (Spain)                                   15,460         371,474              --              --              --              -- 
Ameron International Corp.                   12,800         824,832          22,800       1,469,232              --              -- 
Balfour Beatty PLC (United Kingdom)         225,219         595,727              --              --              --              -- 
Bouygues SA (France)                         86,294       2,228,664         114,249       2,948,032          14,506         374,307 
Daelim Industrial Co. (South Korea)          20,000         156,608              --              --              --              -- 
Fluor Corp.                                     800          30,800           1,800          69,300              --              -- 
IJM Corp. Berhad (Malaysia)                 391,000         452,737              --              --              --              -- 
LG Engineering & Construction, Ltd.                                                                                                 
(South Korea)                                61,500         570,837              --              --              --              -- 
Texas Industries, Inc.                           --              --          11,000         339,900           8,600         265,740 
URS Corp. (NON)                              17,500         402,500          32,600         749,800              --              -- 
VA Technolgies AG (Australia)                 3,250          69,303              --              --              --              -- 
Vinci SA (France)                             7,860         461,596              --              --              --              -- 
YTL Corp. Berhad (Malaysia)                 144,000         164,463              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          6,792,757                       5,576,264                         640,047 

Entertainment                                                  0.2%                            0.2%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
AMC Entertainment, Inc. (NON)                34,800         365,400          64,000         672,000              --              -- 
Bec World Public Co., Ltd. (Thailand)        75,200         382,258              --              --              --              -- 
International Speedway Corp. Class A            500          17,415           1,200          41,796              --              -- 
Pixar, Inc. (NON)                               600          24,240           1,500          60,600              --              -- 
Six Flags, Inc. (NON)                           600           7,338           1,300          15,899              --              -- 
Viacom, Inc. Class B (NON)                   75,640       2,609,580         145,761       5,028,755          13,847         477,722 
                                                     --------------                  --------------                  -------------- 
                                                          3,406,231                       5,819,050                         477,722 

Environmental                                                  0.1%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Tetra Technologies, Inc. (NON)               67,000       1,167,140         123,600       2,153,112              --              -- 

Financial                                                      1.1%                            0.9%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
American Express Co.                         14,700         427,182          29,100         845,646           2,700          78,462 
Annaly Mortgage Mgmt., Inc.                  57,100         825,095         106,100       1,533,145              --              -- 
Anthracite Capital, Inc.                     30,500         317,200          56,700         589,680              --              -- 
Bradespar S.A. (Brazil)                          --              --               1              --              --              -- 
Conseco, Inc. (NON)                           2,500          18,150           5,500          39,930              --              -- 
Deutsche Boerse AG (Germany)                 37,670       1,303,344              --              --              --              -- 
Deutsche Boerse 144A (Germany)                  500          17,300              --              --              --              -- 
Dexia - Paris Exchange (Belgium)            206,500       3,098,541         166,620       2,500,140          21,110         316,756 
Dexia - Brussels Exchange (Belgium)           6,890         104,765              --              --              --              -- 
Fannie Mae                                   75,030       6,006,902         142,098      11,376,366          15,783       1,263,587 
Fortis (B) (Belgium)                          3,100          75,757              --              --              --              -- 
Freddie Mac                                  37,000       2,405,000          70,550       4,585,750           7,300         474,500 
Gabelli Asset Management, Inc. (NON)          6,600         243,144          12,100         445,764              --              -- 
ICICI, Ltd. ADR (India)                      59,700         295,515              --              --              --              -- 
Imperial Credit Industries, Inc. (NON)        3,339           1,469              --              --           1,752             771 
MGIC Investment Corp.                         1,500          98,010           3,300         215,622              --              -- 
Mitsubishi Tokyo Finance                                                                                                            
Group, Inc. (Japan)                              71         554,501              --              --              --              -- 
Moody's Corp.                                   900          33,300           2,000          74,000              --              -- 
Sampo OYJ Class A (Finland)                  70,900         541,612              --              --              --             --  
Shinhan Financial Group Co., Ltd.                                                                                                   
(South Korea) (NON)                          44,580         336,479              --              --              --              -- 
USA Education, Inc.                           1,000          82,910           2,200         182,402              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         16,786,176                      22,388,445                       2,134,076 

Food                                                           1.5%                            1.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
7-Eleven, Inc. (NON)                         30,300         292,395          55,700         537,505              --              -- 
Ajinomoto Co. Inc.                           40,000         460,867              --              --              --              -- 
Archer Daniels Midland Co.                    7,308          92,008          16,102         202,721              --              -- 
Aurora Foods, Inc. (NON)                      8,234          32,854              --              --             354           1,412 
Campbell Soup Co.                               800          22,400           1,300          36,400              --              -- 
Compass Group PLC (United Kingdom)          233,626       1,629,022         387,535       2,702,195          49,191         342,998 
ConAgra, Inc.                                 1,400          31,430           3,100          69,595              --              -- 
CSM NV (Netherlands)                          1,170          23,703              --              --              --              -- 
Danisco A/S (Denmark)                         8,100         285,774              --              --              --              -- 
Dole Food Co.                                27,000         577,800          50,000       1,070,000              --              -- 
Groupe Danone (France)                       27,828       3,623,247          24,675       3,212,722           3,197         416,254 
H.J. Heinz Co.                               37,700       1,589,055          70,000       2,950,500           8,500         358,275 
IBP, Inc.                                     2,439          57,682           6,075         143,674              --              -- 
International Multifoods Corp.               38,300         731,530          71,100       1,358,010              --              -- 
Interstate Bakeries Corp.                    31,200         795,600          58,000       1,479,000              --              -- 
Kellogg Co.                                   1,000          30,000           2,200          66,000              --              -- 
Kraft Foods, Inc. Class A                    54,700       1,880,039         102,593       3,526,121          12,300         422,751 
McCormick & Company, Inc.                     1,400          64,120           3,100         141,980              --              -- 
Nestle SA (Switzerland)                      24,651       5,263,070          26,962       5,756,476           3,493         745,767 
Parmalat Finanziaria SpA (Italy)            610,901       1,607,491              --              --              --              -- 
Ralston-Ralston Purina Group                  3,900         127,920           8,600         282,080              --              -- 
Sara Lee Corp.                               45,500         969,150          88,600       1,887,180           8,400         178,920 
Smithfield Foods, Inc. (NON)                 25,000         526,250          46,400         976,720              --              -- 
Tesco PLC (United Kingdom)                  619,181       2,329,309         778,665       2,929,275         140,733         529,426 
Tyson Foods, Inc. Class A                     1,000          10,020           2,000          20,040              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         23,052,736                      29,348,194                       2,995,803 

Gaming & Lottery                                               0.2%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Anchor Gaming (NON)                          14,500         601,750          26,900       1,116,350              --              -- 
Argosy Gaming Co. (NON)                      72,700       1,904,740         134,800       3,531,760              --              -- 
Dover Downs Entertainment, Inc.              18,300         226,554          33,800         418,444              --              -- 
Fitzgeralds Gaming Corp. (NON)                1,338              13              --              --             630               6 
Harrah's Entertainment, Inc. (NON)              400          10,804           1,100          29,711              --              -- 
International Game Technology (NON)             700          29,750           1,500          63,750              --              -- 
MGM Mirage (NON)                              1,000          22,480           2,200          49,456              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          2,796,091                       5,209,471                               6 

Health Care Services                                           1.3%                            1.6%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
AdvancePCS (NON)                              3,050         218,929           5,600         401,968              --              -- 
Apria Healthcare Group, Inc. (NON)           39,900       1,033,410          74,000       1,916,600              --              -- 
Beverly Enterprises, Inc. (NON)              50,200         512,040         118,300       1,206,660              --              -- 
Cardinal Health, Inc.                         3,900         288,405           8,850         654,458              --              -- 
Caremark Rx, Inc. (NON)                      66,300       1,105,884         122,700       2,046,636              --              -- 
Cerner Corp. (NON)                           11,500         569,250          21,300       1,054,350              --              -- 
CIGNA Corp.                                  20,000       1,659,000          38,100       3,160,395           4,100         340,095 
Cobalt Corp.                                 48,000         244,800          87,800         447,780              --              -- 
DaVita, Inc. (NON)                           91,800       1,868,130         169,700       3,453,395              --              -- 
Eclipsys Corp. (NON)                         10,600         140,980          19,600         260,680              --              -- 
Fresenius Medical Care AG (Germany)           2,200         168,260              --              --              --              -- 
Generale De Sante 144 A (France) (NON)       18,900         318,356              --              --              --              -- 
Generale De Sante (France) (NON)              4,800          80,852              --              --              --              -- 
HCA, Inc.                                    60,087       2,662,455         113,500       5,029,185          12,500         553,875 
Health Management Assoc., Inc. (NON)          2,000          41,520           4,400          91,344              --              -- 
Health Net, Inc. (NON)                        1,500          28,830           3,400          65,348              --              -- 
Healthsouth Corp. (NON)                       2,400          39,024           5,300          86,178              --              -- 
Henry Schein, Inc. (NON)                      7,900         304,940          14,500         559,700              --              -- 
Humana Inc. (NON)                            55,800         672,948         102,100       1,231,326              --              -- 
IMS Health, Inc.                              2,800          70,140           6,200         155,310              --              -- 
Invacare Corp.                                8,700         352,350          15,900         643,950              --              -- 
Laboratory Corp. of America                                                                                                         
Holdings (NON)                                2,800         226,380           5,250         424,463              --              -- 
LifePoint Hospitals, Inc. (NON)               3,650         160,600           6,800         299,200              --              -- 
Mckesson Corp.                               19,400         733,126          36,300       1,371,777           4,200         158,718 
Mid Atlantic Medical Services, Inc.                                                                                                 
(NON)                                        32,600         684,600          60,000       1,260,000              --              -- 
Owens & Minor, Inc.                          10,300         209,090          19,100         387,730              --              -- 
Oxford Health Plans, Inc. (NON)              38,300       1,087,720          70,700       2,007,880              --              -- 
Per-Se Technologies, Inc. (NON)              23,300         185,002          42,500         337,450              --              -- 
Pharmaceutical Product                                                                                                              
Development, Inc. (NON)                      44,500       1,303,405          82,400       2,413,496              --              -- 
Quintiles Transnational Corp. (NON)           1,100          16,060           2,400          35,040              --              -- 
Rightchoice Managed Care, Inc. (NON)         12,600         630,630          23,100       1,156,155              --              -- 
Sierra Health Services, Inc. (NON)           24,800         205,840          46,000         381,800              --              -- 
Syncor International Corp. (NON)              5,800         184,614          10,600         337,398              --              -- 
Tenet Healthcare Corp. (NON)                  3,800         226,670           8,400         501,060              --              -- 
Trigon Healthcare, Inc. (NON)                15,122         990,491          28,000       1,834,000           2,500         163,750 
UnitedHealth Group, Inc.                      5,600         372,400          12,300         817,950              --              -- 
US Oncology, Inc. (NON)                      56,600         421,670         104,800         780,760              --              -- 
WebMD Corp. (NON)                            83,700         356,562         155,500         662,430              --              -- 
Wellpoint Health Networks, Inc. (NON)         6,900         753,135          13,000       1,418,950           1,550         169,183 
                                                     --------------                  --------------                  -------------- 
                                                         21,128,498                      38,892,802                       1,385,621 

Homebuilding                                                   0.2%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Champion Enterprises, Inc. (NON)             29,300         203,635          54,300         377,385              --              -- 
Crossman Communities, Inc.                    5,900         154,993          11,000         288,970              --              -- 
Daiwa House Industry Co. Ltd. (Japan)       134,000         979,006              --              --              --              -- 
Fleetwood Enterprises, Inc.                  24,800         277,264          46,100         515,398              --              -- 
M.D.C. Holdings, Inc.                         5,200         144,144           9,400         260,568              --              -- 
NVR, Inc. (NON)                               8,350       1,173,259          15,400       2,163,854              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          2,932,301                       3,606,175                              -- 

Household Furniture and Appliances                             0.1%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Applica, Inc. (NON)                          29,400         248,430          54,600         461,370              --              -- 
Black & Decker Manufacturing Co.                600          18,720           1,400          43,680              --              -- 
Electrolux AB (Sweden)                        6,900          71,831              --              --              --              -- 
Hunter Douglas NV (Netherlands)              20,978         458,411              --              --              --              -- 
Leggett & Platt, Inc.                         1,600          31,200           3,500          68,250              --              -- 
Maytag Corp.                                    600          14,784           1,300          32,032              --              -- 
Newell Rubbermaid, Inc.                       1,700          38,607           3,700          84,027              --              -- 
Whirlpool Corp.                               1,832         101,401           4,038         223,503              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            983,384                         912,862                              -- 

Insurance                                                      3.8%                            3.2%                            0.8% 
----------------------------------------------------------------------------------------------------------------------------------- 
ACE, Ltd.                                    81,200       2,344,244         132,500       3,825,275          14,200         409,954 
AFLAC, Inc.                                   4,600         124,200          10,100         272,700              --              -- 
AGF (Assurances Generales                                                                                                           
de France) (France)                          10,650         487,750              --              --              --              -- 
Aegon NV (Netherlands)                       66,262       1,732,722              --              --              --              -- 
Alleanza Assicurazioni SpA (Italy)           10,000          97,879              --              --              --              -- 
Allianz AG (Germany)                         36,760       8,334,025          36,787       8,340,146           4,678       1,060,570 
Allmerica Financial Corp.                     3,100         139,035           5,700         255,645             700          31,395 
AMBAC Financial Group, Inc.                  14,200         776,882          26,800       1,466,228           3,200         175,072 
American International Group, Inc. AIG       66,221       5,165,238         129,953      10,136,334          10,600         826,800 
American National Insurance Co.               2,500         202,500           5,100         413,100              --              -- 
AmerUs Group Co.                             22,300         784,960          39,200       1,379,840              --              -- 
AMP, Ltd. (Australia)                        33,100         296,194              --              --              --              -- 
AON Corp.                                     1,300          54,600           2,900         121,800              --              -- 
Axa SA (France)                              32,800         647,162              --              --              --              -- 
Brown & Brown, Inc.                          10,300         536,630          19,100         995,110              --              -- 
Canada Life Financial Corp. (Canada)          1,075          30,525              --              --              --              -- 
Cathay Life Insurance Co., Ltd.                                                                                                     
(Taiwan)                                    255,000         263,436              --              --              --              -- 
CGNU PLC (Hong Kong)                         24,100         297,309              --              --              --              -- 
Chubb Corp. (The)                            10,100         721,241          19,300       1,378,213           1,900         135,679 
Cincinnati Financial Corp.                      500          20,810           1,100          45,782              --              -- 
Clark/Bardes, Inc. (NON)                      6,800         146,608          12,700         273,812              --              -- 
CNA Financial Corp. (NON)                     8,700         235,248          19,200         519,168              --              -- 
CNP Assurances (France)                      29,911         930,040              --              --              --              -- 
Commerce Group, Inc.                         32,500       1,235,000          59,700       2,268,600              --              -- 
Erie Indemnity Co. Class A                    1,400          55,370           3,300         130,515              --              -- 
Fairfax Financial Holdings, Ltd.                                                                                                    
(Canada) (NON)                               12,478       1,598,243              --              --              --              -- 
FBL Financial Group, Inc. Class A            14,053         234,966          25,803         431,426              --              -- 
Fidelity National Financial, Inc.            45,760       1,230,486          84,260       2,265,751              --              -- 
First American Corp.                         17,700         358,425          32,900         666,225              --              -- 
Fremont General Corp.                        62,600         341,796         116,200         634,452              --              -- 
Fubon Insurance Co. (Taiwan)                499,000         385,183              --              --              --              -- 
Gallagher, Arthur J. & Co.                   18,000         609,300          33,300       1,127,205              --              -- 
Hannover Rueckversicherungs                                                                                                         
AG (Germany)                                  1,900         100,337              --              --              --              -- 
Hartford Financial Services                                                                                                         
Group, Inc. (The)                            19,300       1,133,682          37,150       2,182,191           3,800         223,212 
ING Groep NV (Netherlands)                  330,918       8,867,284         472,783      12,668,700          59,846       1,603,634 
Jefferson-Pilot Corp.                         1,950          86,736           4,300         191,264              --              -- 
Liberty Group, Ltd. (South Africa)           99,800         578,679              --              --              --              -- 
Lincoln National Corp.                        1,200          55,956           2,700         125,901              --              -- 
Loews Corp.                                   1,900          87,932           4,200         194,376              --              -- 
Manulife Financial Corp. (Canada)            15,210         398,185              --              --              --              -- 
MBIA, Inc.                                    6,600         330,000          12,550         627,500           1,400          70,000 
Metlife, Inc.                                 1,400          41,580           2,800          83,160              --              -- 
Muenchener Rueckversicherungs-                                                                                                      
Gesellschaft AG (Germany)                    18,955       4,918,680          25,565       6,633,926           3,346         868,262 
Muenchener Rueckversicherungs-                                                                                                      
Gesellschaft AG 144A (Germany)                  400         103,797             900         233,543             100          25,949 
Old Mutual PLC (United Kingdom)             230,780         397,631              --              --              --              -- 
PMI Group, Inc. (The)                         9,800         611,422          18,300       1,141,737           2,300         143,497 
Presidential Life Corp.                      31,000         563,580          57,600       1,047,168              --              -- 
Prudential Corp. PLC (United Kingdom)        11,300         116,237              --              --          29,819         306,733 
QBE Insurance Group, Ltd. (Australia)        31,000          87,931              --              --              --              -- 
Radian Group, Inc.                           51,632       1,987,832          95,822       3,689,147           8,100         311,850 
Royal & Sun Alliance Insurance Group                                                                                                
PLC (United Kingdom)                         15,000          75,055              --              --              --              -- 
Samsung Fire & Marine Insurance                                                                                                     
(South Korea)                                10,000         274,255              --              --              --              -- 
Sanlam, Ltd. (South Africa)               1,156,400       1,206,176              --              --              --              -- 
Scor SA (France)                              3,300         106,665              --              --              --              -- 
St. Paul Companies, Inc. (The)               18,000         741,960          34,700       1,430,334           3,200         131,904 
Stancorp Financial Group                     11,300         546,920          20,900       1,011,560              --              -- 
State Auto Financial Corp.                   27,000         359,910          49,300         657,169              --              -- 
Sun Life Financial Services of                                                                                                      
Canada, Inc. (Canada)                        49,612         995,381         109,223       2,191,375              --              -- 
Swiss Reinsurance Co. (Switzerland)          10,658       1,048,717              --              --              --              -- 
Torchmark Corp.                                 700          27,300           1,500          58,500              --              -- 
UnumProvident Corp.                          23,600         595,900          44,450       1,122,363           4,900         123,725 
XL Capital, Ltd. Class A (Bermuda)           38,800       3,065,200          67,600       5,340,400          19,400       1,532,600 
Zurich Financial Services AG (Switzerland)    1,145         234,187              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         60,163,114                      77,577,641                       7,980,836 

Investment Banking/Brokerage                                   1.4%                            1.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
3i Group PLC (United Kingdom)                12,600         129,610              --              --              --              -- 
Amvescap PLC (United Kingdom)                90,784         971,204              --              --              --              -- 
Banca Fideuram SpA (Italy)                   47,800         282,022              --              --              --              -- 
Bear Stearns Companies, Inc. (The)           10,800         540,108          20,500       1,025,205           2,100         105,021 
BlackRock, Inc. (NON)                        18,200         804,804          33,700       1,490,214              --              -- 
Charles Schwab Corp. (The)                    7,050          81,075          15,800         181,700              --              -- 
Federated Investors, Inc.                    39,200       1,160,320          72,900       2,157,840              --              -- 
Fortis (NL) NV (Netherlands)                 37,692         920,424              --              --              --              -- 
Franklin Resources, Inc.                        700          24,269           1,400          48,538              --              -- 
Goldman Sachs Group, Inc. (The)              24,814       1,770,479          46,900       3,346,315           5,350         381,723 
JPMorgan Chase & Co.                         64,500       2,202,675         126,010       4,303,242          11,000         375,650 
Julius Baer Holdings, Ltd. AG                                                                                                       
Class B (Switzerland)                         3,230         962,464           6,310       1,880,231             800         238,381 
Legg Mason, Inc.                                500          19,880           1,100          43,736              --              -- 
Lehman Brothers Holdings, Inc.               24,500       1,392,825          46,600       2,649,210           4,900         278,565 
Mediolanum SpA (Italy)                       88,680         580,543              --              --              --              -- 
Merrill Lynch & Co., Inc.                    34,100       1,384,460          65,150       2,645,090           6,450         261,870 
Mizuho Holdings, Inc. (Japan)                    82         316,762              --              --              --              -- 
MLP AG (Germany)                             10,702         638,243              --              --              --              -- 
Morgan Stanley Dean Witter & Co.             41,800       1,937,430          80,400       3,726,540           7,700         356,895 
Nikko Securities Co., Ltd. (Japan)          385,000       2,046,565         622,000       3,306,399          79,000         419,945 
Nomura Securites Co., Ltd. (Japan)           17,000         222,279              --              --              --              -- 
Orix Corp. (Japan)                           13,400       1,119,667           9,600         802,150           1,200         100,269 
Samsung Securities Co., Ltd.                                                                                                        
(South Korea) (NON)                          16,200         352,093              --              --              --              -- 
Stilwell Financial, Inc.                      2,000          39,000           4,200          81,900              --              -- 
Student Loan Corp.                            4,400         310,200           8,000         564,000              --              -- 
T Rowe Price Group, Inc.                        600          17,580           1,300          38,090              --              -- 
Van der Moolen Holding                                                                                                              
NV (Netherlands)                             59,273       1,119,837              --              --              --              -- 
Yuanta Core Pacific                                                                                                                 
Securities Co. (Taiwan) (NON)               478,000         207,374              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         21,554,192                      28,290,400                       2,518,319 

Leisure                                                        0.2%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Brunswick Corp.                                 700          11,529           1,600          26,352              --              -- 
Gtech Holdings Corp. (NON)                   26,700         922,218          49,300       1,702,822              --              -- 
Harley-Davidson, Inc.                        41,538       1,682,289          78,100       3,163,050           9,200         372,600 
Shimano, Inc. (Japan)                        17,800         224,368              --              --              --              -- 
Winnebago Industries, Inc.                   10,600         227,370          19,700         422,565              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          3,067,774                       5,314,789                         372,600 

Lodging/Tourism                                                0.5%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Accor SA (France)                            49,164       1,396,631          40,660       1,155,053           5,200         147,720 
Airtours PLC (United Kingdom)               256,480         605,863              --              --              --              -- 
Airtours PLC 144A (United Kingdom)           28,400          67,087              --              --              --              -- 
Four Seasons Hotels, Inc. (Canada)           22,700         850,569              --              --              --              -- 
Genting Berhad (Malaysia)                    37,000          89,910              --              --              --              -- 
Hilton Hotels Corp.                           2,200          17,270           4,800          37,680              --              -- 
Host Marriott Corp.                           3,600          25,380           7,900          55,695              --              -- 
Marriott International, Inc. Class A         28,100         938,540          52,850       1,765,190           6,100         203,740 
Orient-Express Hotels, Ltd.                                                                                                         
Class A (Bermuda) (NON)                      85,819       1,202,324              --              --              --              -- 
P&O Princess Cruises PLC                                                                                                            
(United Kingdom)                            410,911       1,354,097              --              --              --              -- 
Resorts World Berhad (Malaysia)             101,000         155,487              --              --              --              -- 
Royal Caribbean Cruises, Ltd.                 1,000          10,730           2,000          21,460              --              -- 
Starwood Hotels & Resorts                                                                                                           
Worldwide, Inc.                               2,000          44,000           4,400          96,800              --              -- 
Tanjong PLC (Malaysia)                      203,000         464,763              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          7,222,651                       3,131,878                         351,460 

Machinery                                                      0.4%                            0.3%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Alstom (France)                              26,999         412,496          47,330         723,117           6,091          93,059 
Applied Industrial Technologies, Inc.        10,100         170,589          18,800         317,532              --              -- 
Atlas Copco AB Class B (Sweden)              31,541         517,672              --              --              --              -- 
Caterpillar, Inc.                             1,500          67,200           3,300         147,840              --              -- 
FLIR Systems, Inc. (NON)                      5,203         213,479           9,612         394,380              --              -- 
FSI International, Inc. (NON)                25,000         249,000          46,000         458,160              --              -- 
Fuji Machine Manufacturing                                                                                                          
Co., Ltd. (Japan)                            39,500         540,687              --              --              --              -- 
Gardner Denver, Inc. (NON)                   16,000         355,200          29,200         648,240              --              -- 
Hyundai Mobis (South Korea)                  19,000         160,390              --              --              --              -- 
Ingersoll-Rand Co.                            1,600          54,080           3,600         121,680              --              -- 
Kurita Water Industries, Ltd. (Japan)        17,000         207,004              --              --              --              -- 
Milacron, Inc.                               10,800         129,168          19,700         235,612              --              -- 
NACCO Industries, Inc. Class A                5,100         284,325           9,400         524,050              --              -- 
NEG Micon A/S (Denmark) (NON)                 1,100          29,646              --              --              --              -- 
Parker-Hannifin Corp.                        20,000         686,000          37,200       1,275,960           4,500         154,350 
Samsung Heavy Industries                                                                                                            
(South Korea) (NON)                          92,800         263,725              --              --              --              -- 
Sandvik AB (Sweden)                          50,394         912,173         103,680       1,876,693          15,554         281,540 
Tecumseh Products Co. Class A                 7,000         318,710          12,900         587,337              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          5,571,544                       7,310,601                         528,949 

Manufacturing                                                  0.3%                            0.2%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
BBA Group PLC (United Kingdom)               55,214         181,747              --              --              --              -- 
Danaher Corp.                                   200           9,436             400          18,872              --              -- 
Diebold, Inc.                                   600          22,860           1,300          49,530              --              -- 
Hyundai Heavy Industries (South Korea)       34,160         592,385              --              --              --              -- 
Illinois Tool Works, Inc.                     8,700         470,757          16,600         898,226           1,850         100,104 
IMI PLC (United Kingdom)                    324,215       1,095,798              --              --              --              -- 
Kaman Corp.                                  21,700         287,308          40,400         534,896              --              -- 
Mettler-Toledo International, Inc.                                                                                                  
(NON)                                         7,000         294,980          13,000         547,820              --              -- 
Pentair, Inc.                                15,800         486,166          53,100       1,633,887          17,700         544,629 
Roper Industries, Inc.                        7,000         251,930          13,000         467,870              --              -- 
SKF AB Class B (Sweden)                       3,300          45,032              --              --              --              -- 
Stewart & Stevenson Services, Inc.           14,800         356,384          27,600         664,608              --              -- 
Teleflex, Inc.                                8,700         325,293          16,200         605,718              --              -- 
Tennant Co.                                   7,100         248,500          12,600         441,000              --              -- 
Tomkins PLC (United Kingdom)                 68,200         151,332              --              --              --              -- 
Zodiac SA (France)                            1,716         260,924              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          5,080,832                       5,862,427                         644,733 

Media                                                          0.7%                            0.9%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
AOL Time Warner, Inc. (NON)                 198,885       6,583,094         379,600      12,564,760          39,100       1,294,210 
EMI Group PLC (United Kingdom)               26,200          91,247              --              --              --              -- 
Fox Entertainment Group, Inc.                                                                                                       
Class A (NON)                                30,377         580,201          56,700       1,082,970           6,600         126,060 
Martha Stewart Living Omnimedia                                                                                                     
Class A (NON)                                28,600         426,140          52,900         788,210              --              -- 
News Corp., Ltd. (The) (Australia)            8,500          51,994              --              --              --             --  
News Corp., Ltd. (The) ADR (Australia)       61,420       1,480,222         121,791       2,935,163          22,649         545,841 
Walt Disney Co. (The)                       125,977       2,345,692         238,469       4,440,293          26,422         491,978 
                                                     --------------                  --------------                  -------------- 
                                                         11,558,590                      21,811,396                       2,458,089 

Medical Services                                                --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Magellan Health Services, Inc. (NON)         39,800         456,506          73,300         840,751              --              -- 

Medical Technology                                             1.1%                            1.2%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Apogent Technologies, Inc. (NON)              1,200          28,680           2,600          62,140              --              -- 
Arrow International, Inc.                     6,050         225,665          11,000         410,300              --              -- 
Bausch & Lomb, Inc.                             600          16,980           1,300          36,790              --              -- 
Baxter International, Inc.                    6,000         330,300          13,200         726,660              --              -- 
Beckman Coulter, Inc.                         7,700         340,725          14,400         637,200              --              -- 
Becton, Dickinson and Co.                     2,400          88,800           5,300         196,100              --              -- 
Biomet, Inc.                                  2,550          74,588           5,625         164,531              --              -- 
Biosite Diagnostics, Inc. (NON)              11,100         268,731          20,600         498,726              --              -- 
Boston Scientific Corp. (NON)                 1,000          20,500           2,200          45,100              --              -- 
C.R. Bard, Inc.                                 600          30,846           1,300          66,833              --              -- 
Closure Medical Corp. (NON)                  12,100         232,925          22,400         431,200              --              -- 
Coloplast A/S (Denmark)                         500          33,994              --              --              --              -- 
Cytyc Corp. (NON)                            17,000         455,770          31,800         852,558              --              -- 
DENTSPLY International, Inc.                    600          27,564           1,300          59,722              --              -- 
Diagnostic Products Corp.                    32,200       1,359,484          59,400       2,507,868              --              -- 
Edwards Lifesciences Corp. (NON)             20,400         456,960          37,900         848,960              --              -- 
Haemonetics Corp. (NON)                      15,400         532,994          28,200         976,002              --              -- 
Intermagnetics General Corp. (NON)           26,904         625,787          49,760       1,157,418              --              -- 
Inverness Medical Technology, Inc.                                                                                                  
(NON)                                         8,400         310,380          15,600         576,420              --              -- 
Lumenis, Ltd. (Israel) (NON)                 33,200         666,656              --              --              --              -- 
Medtronic, Inc.                              81,101       3,527,894         154,200       6,707,700          16,300         709,050 
Mentor Corp.                                 47,700       1,206,810          87,700       2,218,810              --              -- 
Millipore Corp.                                 500          26,470           1,100          58,234              --              -- 
Ocular Sciences, Inc. (NON)                  33,300         674,325          61,600       1,247,400              --              -- 
ORATEC Interventions, Inc. (NON)             23,000         159,160          42,600         294,792              --              -- 
Pall Corp.                                   27,100         527,095          48,800         949,160           6,000         116,700 
PolyMedica Corp. (NON)                       10,400         158,808          19,200         293,184              --              -- 
Possis Medical, Inc. (NON)                   37,900         443,449          69,800         816,695              --              -- 
Respironics, Inc. (NON)                       6,300         224,028          11,700         416,052              --              -- 
Smith & Nephew PLC (United Kingdom)           2,000          10,140              --              --              --              -- 
SRI/Surgical Express, Inc. (NON)             20,300         603,925          37,300       1,109,675              --              -- 
SSL International PLC (United Kingdom)       57,200         418,176              --              --              --              -- 
St. Jude Medical, Inc. (NON)                    700          47,915           1,500         102,675              --              -- 
Stryker Corp.                                 2,700         142,830           5,900         312,110              --              -- 
Sybron Dental Specialties, Inc. (NON)           400           7,440             866          16,108              --              -- 
Synthes-Stratec, Inc. (Switzerland)             100          65,598              --              --              --              -- 
Techne Corp. (NON)                            8,800         258,984          16,400         482,652              --              -- 
Varian Medical Systems, Inc. (NON)           10,200         654,330          18,850       1,209,228              --              -- 
Ventana Medical Systems, Inc. (NON)          17,900         365,876          33,100         676,564              --              -- 
Vidamed, Inc. (NON)                          24,900          95,118          46,000         175,720              --              -- 
Vital Signs, Inc.                             5,500         168,300          10,000         306,000              --              -- 
Zimmer Holdings, Inc. (NON)                  34,540         958,485          64,430       1,787,933           8,040         223,110 
                                                     --------------                  --------------                  -------------- 
                                                         16,873,485                      29,435,220                       1,048,860 

Metals                                                         0.9%                            0.5%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Alcan Aluminum, Ltd. (Canada)                11,141         334,477          24,491         735,273              --              -- 
Alcoa, Inc.                                   6,836         211,984          15,060         467,011              --              -- 
Allegheny Technologies, Inc.                  1,100          14,663           2,400          31,992              --              -- 
Anglo American Platinum Corp.                                                                                                       
(South Africa)                               11,400         379,894              --              --              --              -- 
Anglo American PLC (United Kingdom)         136,712       1,643,353              --              --              --              -- 
BHP Billiton, Ltd. (Australia)              304,233       1,287,670         381,133       1,613,151          70,499         298,388 
BHP Billiton PLC (United Kingdom)           151,600         623,216         294,300       1,209,846          37,400         153,749 
Carpenter Technology Corp.                   15,000         333,750          27,500         611,875              --              -- 
China Steel Corp. (Taiwan)                  253,550          89,397              --              --              --              -- 
Companhia Vale do Rio Doce (CVRD)                                                                                                   
ADR (Brazil)                                 31,100         618,890              --              --              --              -- 
Dofasco, Inc. (Canada)                       28,700         387,936              --              --              --              -- 
Falconbridge, Ltd. (Canada)                  39,400         374,169              --              --              --              -- 
Freeport-McMoRan Copper &                                                                                                           
Gold, Inc. Class B (NON)                     40,400         443,996          77,500         851,725              --              -- 
Gerdau S.A. (Brazil)                         29,900         152,300              --              --              --              -- 
Impala Platinum Holdings, Ltd.                                                                                                      
(South Africa)                                6,992         246,982              --              --              --              -- 
M.I.M. Holdings, Ltd. (Australia)         1,493,016         618,664              --              --              --              -- 
Massey Energy Co.                               600           8,790           1,300          19,045              --              -- 
Material Sciences Corp. (NON)                 8,400          69,720          17,100         141,930              --              -- 
NS Group, Inc. (NON)                         19,200         130,560          35,700         242,760              --              -- 
Nucor Corp.                                     700          27,790           1,500          59,550              --              -- 
OneSteel Ltd. (Australia)                     5,000           2,245              --              --              --              -- 
Pechiney SA Class A (France)                 15,738         594,672              --              --              --              -- 
Pohang Iron & Steel Company, Ltd.                                                                                                   
(South Korea)                                 5,320         327,979             680          41,922              --              -- 
Pohang Iron & Steel Company, Ltd.                                                                                                   
ADR (South Korea)                            38,540         605,078          49,758         781,201              --              -- 
Quanex Corp.                                 30,200         697,620          56,200       1,298,220              --              -- 
Reliance Steel & Aluminum Co.                10,600         251,856          19,800         470,448              --              -- 
Rio Tinto, Ltd. (Australia)                 106,457       1,641,101          66,121       1,019,297           8,755         134,964 
Rio Tinto PLC (United Kingdom)               59,660         938,073          75,058       1,180,186          10,085         158,573 
Ryerson Tull, Inc.                           19,100         239,705          35,600         446,780              --              -- 
Stillwater Mining Co. (NON)                  21,400         430,568          39,600         796,752              --              -- 
Usinor SA (France)                           20,000         160,248              --              --              --              -- 
Worthington Industries , Inc.                39,200         441,000          72,800         819,000              --              -- 
Yanzhou Coal Mining Co., Ltd.                                                                                                       
(Hong Kong)                                 714,000         215,132              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         14,543,478                      12,837,964                         745,674 

Natural Gas Utilities                                          0.3%                            0.3%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
AGL Resources, Inc.                          11,800         235,646          22,500         449,325              --              -- 
Atmos Energy Corp.                            8,600         185,760          15,800         341,280              --              -- 
CENTRICA PLC (United Kingdom)                 4,125          12,911              --              --              --              -- 
Dynegy, Inc.                                  3,000         103,950           6,600         228,690              --              -- 
El Paso Corp.                                 8,937         371,332          18,166         754,797             900          37,395 
Enron Corp.                                  47,900       1,304,317          91,700       2,496,789           9,400         255,962 
Hong Kong and China Gas Co., Ltd.                                                                                                   
(Hong Kong)                                 441,280         551,642         529,600         662,051          60,600          75,756 
KeySpan Corp.                                 1,000          33,240           2,200          73,128              --              -- 
National Fuel Gas Co.                        11,600         267,148          21,500         495,145           2,800          64,484 
NiSource, Inc.                                1,300          30,303           2,800          65,268              --              -- 
Sempra Energy                                 2,000          49,500           4,400         108,900              --              -- 
Southwestern Energy Co. (NON)                34,500         408,825          64,100         759,585              --              -- 
Tokyo Gas Co., Ltd. (Japan)                 108,000         355,526         210,000         691,300          27,000          88,881 
Williams Companies, Inc. (The)               14,429         393,912          27,461         749,685           3,200          87,360 
                                                     --------------                  --------------                  -------------- 
                                                          4,304,012                       7,875,943                         609,838 

Office Equipment & Supplies                                    0.3%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Canon,Inc. (Japan)                           89,000       2,443,987          62,000       1,702,553           8,000         219,684 
Global Imaging Systems, Inc. (NON)           39,000         673,140          71,800       1,239,268              --              -- 
HON Industries, Inc.                          7,900         173,484          14,700         322,812              --              -- 
Reynolds and Reynolds Co. (The)                                                                                                     
Class A                                         800          18,640           1,800          41,940              --              -- 
Standard Register Co. (The)                  47,400         687,300          88,000       1,276,000              --              -- 
Steelcase, Inc.                               1,500          18,855           3,300          41,481              --              -- 
Wallace Computer Services, Inc.              40,300         640,770          71,600       1,138,440              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          4,656,176                       5,762,494                         219,684 

Oil & Gas                                                      4.3%                            3.5%                            0.9% 
----------------------------------------------------------------------------------------------------------------------------------- 
Amerada Hess Corp.                            1,100          69,850           2,400         152,400              --              -- 
Anadarko Petroleum Corp.                      3,800         182,704           8,685         417,575              --              -- 
BG PLC (United Kingdom)                     129,000         497,136              --              --              --              -- 
BP PLC (United Kingdom)                     851,904       7,035,526         239,800       1,980,410          66,694         550,798 
Brown (Tom), Inc. (NON)                       5,600         117,040          10,300         215,270              --              -- 
Burlington Resources, Inc.                    2,300          78,683           5,100         174,471              --              -- 
Cabot Oil & Gas Corp. Class A                 8,100         161,595          14,900         297,255              --              -- 
Chevron, Inc.                                24,000       2,034,000          46,600       3,949,350           4,400         372,900 
CNOOC, Ltd. (Hong Kong)                     293,500         293,523              --              --              --              -- 
Conoco, Inc. Class A                         40,300       1,024,829          80,400       2,044,572           5,600         142,408 
Conoco, Inc. Class B                         31,700         803,278          61,446       1,557,042           5,500         139,370 
Devon Energy Corp.                            9,500         326,800          17,500         602,000           2,300          79,120 
ENI SpA (Italy)                             300,313       3,726,906              --              --          17,257         214,161 
Exco Resources, Inc. (NON)                    8,000         120,000          14,600         219,000              --              -- 
Exxon Mobil Corp.                           209,800       8,266,120         407,952      16,073,309          36,230       1,427,462 
Frontier Oil Corp.                           29,600         507,640          54,800         939,820              --              -- 
Houston Exploration Co. (NON)                12,000         297,600          22,200         550,560              --              -- 
KEY Production Company, Inc. (NON)            7,700          88,935          14,300         165,165              --              -- 
Louis Dreyfus Natural Gas Corp. (NON)        16,000         622,400          29,600       1,151,440              --              -- 
Lukoil ADR (Russia)                           9,900         435,600              --              --              --              -- 
Mitchell Energy & Development Corp.                                                                                                 
Class A                                       7,700         385,924          14,000         701,680              --              -- 
Newfield Exploration Co. (NON)                8,800         256,960          16,100         470,120              --              -- 
Occidental Petroleum Corp.                    4,600         111,964          10,100         245,834              --              -- 
Patina Oul & Gas Corp.                        6,900         158,700          12,800         294,400              --              -- 
PetroChina Co., Ltd. (Hong Kong)          1,582,000         302,226              --              --              --              -- 
Petroleo Brasileiro S.A. - Sao Paulo                                                                                                
Exchange (Brazil)                            14,608         280,671              --              --              --              -- 
Petroleo Brasileiro S.A. ADR (Brazil.)       64,450       1,237,440              --              --              --              -- 
Petroleo Brasileiro S.A. ADR (Brazil)        62,131       1,227,087          73,682       1,455,220              --              -- 
Phillips Petroleum Co.                       26,460       1,427,252          49,740       2,682,976           5,680         306,379 
Pogo Producing Co.                            8,000         188,000          14,900         350,150              --              -- 
PTT Exploration & Production                                                                                                        
Public Co., Ltd. (Thailand)                  86,800         214,755              --              --              --              -- 
Range Resources Corp. (NON)                  49,200         233,700          89,900         427,025              --              -- 
Repsol S.A. (Spain)                          11,500         165,438              --              --              --              -- 
Royal Dutch Petroleum Co.                                                                                                           
(Netherlands)                                55,993       2,815,205              --              --              --              -- 
Royal Dutch Petroleum Co.                                                                                                           
ADR (Netherlands)                            50,800       2,552,700          92,200       4,633,050          11,900         597,975 
Shell Transport & Trading Co. PLC                                                                                                   
(United Kingdom)                          1,096,362       8,216,630       1,911,506      14,325,686         245,203       1,837,662 
St. Mary Land & Exploration Co.               6,800         108,324          12,600         200,718              --              -- 
Suncor Energy, Inc. (Canada)                 70,043       1,951,182          78,888       2,197,576              --              -- 
Surgutneftegaz ADR (Russia)                  81,700         898,700              --              --              --              -- 
Texaco, Inc.                                  3,300         214,500           7,300         474,500              --              -- 
TotalFinaElf SA Class B (France)             94,158      12,645,302         129,290      17,363,485          16,361       2,197,262 
TotalFinaElf SA ADR (France)                 31,000       2,094,050          44,400       2,999,220           5,700         385,035 
Ultramar Diamond Shamrock Corp.               1,000          47,940           2,200         105,468              --              -- 
Universal Compression Holdings, Inc.                                                                                                
(NON)                                         9,700         218,250          18,000         405,000              --              -- 
Unocal Corp.                                 39,700       1,290,250          75,500       2,453,750           8,000         260,000 
USX-Marathon Group                           30,900         826,575          59,800       1,599,650           5,500         147,125 
Vintage Petroleum, Inc.                      14,200         225,070          25,900         410,515              --              -- 
XTO Energy, Inc.                             53,325         743,884          98,650       1,376,168              --              -- 
YUKOS Oil Co. (Russia) (NON)                199,700         643,034              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         68,371,878                      85,661,830                       8,657,657 

Paper & Forest Products                                        0.8%                            0.6%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Abitibi-Consolidated, Inc. - Toronto                                                                                                
Exhange (Canada)                            208,812       1,320,691              --              --              --              -- 
Abitibi-Consolidated, Inc. (Canada)         168,100       1,072,478         314,600       2,007,148          39,900         254,562 
Albany International Corp. (NON)             21,500         321,640          39,300         587,928              --              -- 
Aracruz Celulose S.A. ADR (Brazil)           10,610         157,559              --              --              --              -- 
Aracruz Celulose S.A. ADR - Sao                                                                                                     
Paulo Exchange (Brazil)                      62,400          93,016              --              --              --              -- 
Bemis Company, Inc.                             300          11,955             700          27,895              --              -- 
Boise Cascade Corp.                          18,200         536,900          33,850         998,575           4,300         126,850 
Bowater, Inc.                                   400          17,608             900          39,618              --              -- 
Compania de Petroleos de Chile                                                                                                      
SA (COPEC) (Chile)                          136,500         388,766              --              --              --              -- 
Georgia-Pacific Group                         2,484          71,514           5,495         158,201              --              -- 
International Paper Co.                      22,665         788,742          44,010       1,531,548           4,500         156,600 
Jefferson Smurfit Group PLC (Ireland)       168,000         293,597              --              --              --              -- 
Kadent, Inc. (NON)                               61             787             134           1,729              --              -- 
Mead Corp.                                    1,200          33,216           2,600          71,968              --              -- 
Norske Skogindustrier ASA                                                                                                           
144A (Norway)                                41,400         616,530              --              --              --              -- 
Norske Skogindustrier ASA (Norway)           15,300         227,848              --              --              --              -- 
Owens-Illinois, Inc. (NON)                   47,000         189,410          88,300         355,849           2,000           8,060 
P.H. Glatfelter Co.                          17,000         260,270          31,100         476,141              --              -- 
Sappi, Ltd. (South Africa)                  104,444         900,289              --              --              --              -- 
Sealed Air Corp. (NON)                          900          32,841           2,000          72,980              --              -- 
Smurfit-Stone Container Corp. (NON)          65,000         859,950         126,300       1,670,949          11,500         152,145 
Sonoco Products Co.                          40,700         956,450          75,500       1,774,250           9,700         227,950 
Stora Enso OYJ Class R (Finland)            103,295       1,152,114         202,089       2,254,025          25,990         289,883 
Svenska Cellulosa AB SCA                                                                                                            
Class B (Sweden)                              6,800         147,958              --              --              --              -- 
Temple Inland, Inc.                             400          18,996             900          42,741              --              -- 
Uni-Charm Corp. (Japan)                       1,700          48,682              --              --              --              -- 
UPM-Kymmene OYJ (Finland)                    37,910       1,080,384              --              --              --              -- 
Weyerhaeuser Co.                             13,500         657,585          26,800       1,305,428           2,300         112,033 
Willamette Industries, Inc.                     800          35,992           1,800          80,982              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         12,293,768                      13,457,955                       1,328,083 

Pharmaceuticals                                                6.6%                            6.2%                            1.7% 
----------------------------------------------------------------------------------------------------------------------------------- 
Abbott Laboratories                          32,800       1,700,680          66,200       3,432,470           4,400         228,140 
Allergan, Inc.                               13,100         868,530          24,700       1,637,610           2,800         185,640 
American Home Products Corp.                 74,000       4,310,500         140,500       8,184,125          15,300         891,225 
Andrx Group (NON)                            15,400         999,768          28,400       1,843,728           3,750         243,450 
AstraZeneca PLC (United Kingdom)            242,561      11,281,433         313,802      14,594,829          40,161       1,867,875 
AstraZeneca PLC - Stockholm                                                                                                         
Exchange (United Kingdom)                     9,400         431,100              --              --              --              -- 
AstraZeneca PLC ADR (United Kingdom)          1,500          70,050           3,500         163,450              --              -- 
Aventis SA (France)                          56,285       4,268,916          52,245       3,962,504           6,637         503,381 
Barr Laboratories, Inc. (NON)                 8,300         656,198          15,400       1,217,524              --              -- 
Bayer AG (Germany)                            8,300         235,027              --              --              --              -- 
Bristol-Myers Squibb Co.                     39,400       2,189,064          78,600       4,367,016           5,400         300,024 
Cambrex Corp.                                 8,100         271,593          14,900         499,597              --              -- 
Chugai Pharmaceutical Co., Ltd. (Japan)      51,000         793,609              --              --              --              -- 
Cima Labs, Inc. (NON)                         3,400         206,550           6,300         382,725              --              -- 
Daiichi Pharmaceutical Co., Ltd.                                                                                                    
(Japan)                                       5,000         104,971              --              --              --              -- 
Dr. Reddy's Laboratories ADR (India)                                                                                                
(NON)                                         7,198         160,156              --              --              --              -- 
Egis Rt (Hungary)                            13,300         552,769              --              --              --              -- 
Eisai Co., Ltd. (Japan)                      12,000         291,233              --              --              --              -- 
Elan Corp. PLC (Ireland) (NON)               33,832       1,678,820          75,504       3,746,678           9,557         474,240 
Elan Corp. PLC ADR (Ireland) (NON)            6,600         319,770          22,445       1,087,460          17,125         829,706 
Enzon, Inc. (NON)                            32,000       1,632,000          59,000       3,009,000           4,500         229,500 
Forest Laboratories, Inc. (NON)               1,200          86,568           2,600         187,564              --              -- 
Fujisawa Pharmaceutical Co. (Japan)          11,000         250,798              --              --              --              -- 
Gedeon Richter Rt (Hungary)                   8,651         482,318              --              --              --              -- 
GlaxoSmithKline PLC (United Kingdom)        348,541       9,833,875         398,292      11,237,570          50,376       1,421,329 
H. Lundbeck A/S (Denmark)                     2,300          53,534              --              --              --              -- 
IVAX Corp. (NON)                             19,500         432,315          36,212         802,820              --              -- 
Johnson & Johnson                           136,672       7,571,629         261,688      14,497,515          26,510       1,468,654 
K-V Pharamceuticals Co. (NON)                 4,700         138,180           8,700         255,780              --              -- 
King Pharmaceuticals, Inc. (NON)             29,233       1,226,324          54,633       2,291,854           6,599         276,828 
Kos Pharmaceuticals, Inc. (NON)              16,200         451,170          29,900         832,715              --              -- 
Lilly (Eli) & Co.                            52,100       4,204,470          98,724       7,967,027          10,600         855,420 
Merck & Co., Inc.                            82,700       5,507,820         161,950      10,785,870          14,600         972,360 
Merck KGaA (Germany)                          7,775         279,626              --              --              --              -- 
Mylan Laboratories, Inc.                        800          26,096           1,800          58,716              --              -- 
Novartis AG (Switzerland)                    74,450       2,916,446          73,600       2,883,149           9,400         368,228 
Novo-Nordisk A/S (Denmark)                    5,400         224,253              --              --              --              -- 
Perrigo Co. (NON)                           214,100       3,243,615         395,500       5,991,825              --              -- 
Pfizer, Inc.                                259,375      10,400,938         497,325      19,942,733          50,060       2,007,406 
Pharmacia Corp.                              33,800       1,370,928          67,034       2,718,899           5,500         223,080 
Pharmacia Corp. - Stockholm Echange           4,288         171,520              --              --              --              -- 
Ranbaxy Laboratories, Ltd. (India)           18,918         257,431              --              --              --              -- 
Roche Holdings AG (Switzerland)               3,500         251,253              --              --              --              -- 
Sankyo Co., Ltd. (Japan)                    140,000       2,474,807         115,000       2,032,877          16,000         282,835 
Sanofi-Synthelabo SA (France)               129,100       8,404,507         160,378      10,440,728          20,158       1,312,301 
Schering Corp. (Germany)                      2,709         134,427              --              --              --              -- 
Schering-Plough Corp.                       151,100       5,605,810         283,700      10,525,270          32,900       1,220,590 
Sepracor, Inc. (NON)                            500          17,950           1,100          39,490              --              -- 
Shionogi & Co., Ltd. (Japan)                 41,000         771,246          65,000       1,222,707           9,000         169,298 
Takeda Chemical Industries (Japan)           30,000       1,385,623              --              --              --              -- 
Taro Pharmaceuticals Industries                                                                                                     
(Israel) (NON)                                7,200         253,152              --              --              --              -- 
Teva Pharmaceutical Industries, Ltd.                                                                                                
ADR (Israel)                                 13,400         810,030              --              --              --              -- 
Welfide Corp. (Japan)                        80,000         953,981              --              --              --              -- 
Yamanouchi Pharmaceutical                                                                                                           
Co., Ltd. (Japan)                            14,000         376,218              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                        103,591,595                     152,843,825                      16,331,510 

Photography/Imaging                                            0.2%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
BMC Industries, Inc.                         41,600          84,864          77,400         157,896              --              -- 
Eastman Kodak Co.                             3,100         100,843           6,700         217,951              --              -- 
Ikon Office Solutions, Inc.                  80,100         618,372         148,800       1,148,736              --              -- 
Imation Corp. (NON)                          30,200         631,180          56,000       1,170,400              --              -- 
Olympus Optical Co., Ltd. (Japan)            79,000       1,111,228              --              --              --              -- 
Ricoh Co., Ltd. (Japan)                      59,000         888,865              --              --              --              -- 
Xerox Corp.                                   5,000          38,750          11,300          87,575              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          3,474,102                       2,782,558                              -- 

Power Producers                                                 --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
AES Corp. (NON)                               1,700          21,794           3,700          47,434              --              -- 
Aquila, Inc. (NON)                              800          17,440           1,900          41,420              --              -- 
Centrais Geradoras do Sul do Brasil                                                                                                 
S.A. (Brazil)                                 5,371           5,935              --              --              --              -- 
Mirant Corp. (NON)                            3,653          80,001           7,324         160,396              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            125,170                         249,250                              -- 

Publishing                                                     0.5%                            0.3%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Dai Nippon Printing Co., Ltd. (Japan)        36,000         361,874              --              --              --              -- 
EMAP PLC (United Kingdom)                     1,600          12,696              --              --              --              -- 
Eniro AB (Sweden) (NON)                     131,958         952,944              --              --              --              -- 
Eniro AB 144A (Sweden) (NON)                  5,000          36,108              --              --              --              -- 
Kadokawa Shoten Publishing                                                                                                          
Co., Ltd. (Japan)                             3,300          52,848              --              --              --              -- 
Knight-Ridder, Inc.                             800          44,680           1,900         106,115              --              -- 
McGraw-Hill Companies, Inc. (The)             1,500          87,300           3,300         192,060              --              -- 
New York Times Co. (The) Class A              1,000          39,030           2,100          81,963              --              -- 
Pearson PLC (United Kingdom)                 13,800         147,835              --              --              --              -- 
Quebecor World, Inc. (Canada)                67,280       1,686,792              --              --              --              -- 
Reader's Digest Association, Inc.                                                                                                   
(The) Class A                                   400           7,356             700          12,873              --              -- 
Scholastic Corp. (NON)                       21,200         922,200          39,250       1,707,375              --              -- 
Singapore Press Holdings,                                                                                                           
Ltd. (Singapore)                             54,300         485,810         108,000         966,251          13,000         116,308 
Tribune Co.                                  17,400         546,360          32,450       1,018,930           3,900         122,460 
Trinity Mirror PLC (United Kingdom)         219,427       1,119,456              --              --              --              -- 
United Business Media PLC                                                                                                           
(United Kingdom)                             61,167         339,765         127,407         707,709          16,241          90,214 
VNU NV (Netherlands)                         16,705         470,746          37,153       1,046,971           4,727         133,207 
Wolters Kluwer NV (Netherlands)              24,884         551,469          48,025       1,064,309           6,821         151,164 
                                                     --------------                  --------------                  -------------- 
                                                          7,865,269                       6,904,556                         613,353 

Railroads                                                      0.2%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Burlington Northern Santa Fe Corp.            4,900         131,075          10,800         288,900              --              -- 
CSX Corp.                                     4,100         129,150           9,000         283,500              --              -- 
East Japan Railway Co. (Japan)                   49         295,860              --              --              --              -- 
GATX Corp.                                      600          20,184           1,300          43,732              --              -- 
Kansas City Southern Industries, Inc.                                                                                               
(NON)                                           450           5,400             950          11,400              --              -- 
Union Pacific Corp.                          41,100       1,927,590          76,100       3,569,090           9,300         436,170 
                                                     --------------                  --------------                  -------------- 
                                                          2,509,259                       4,196,622                         436,170 

Real Estate                                                    0.6%                            0.7%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Alexandria Real Estate Equities               4,800         189,360           8,800         347,160              --              -- 
Apartment Investment &                                                                                                              
Management Co. Class A (R)                      500          22,630           1,100          49,786              --              -- 
Avalonbay Communities, Inc. (R)                 500          23,875           1,100          52,525              --              -- 
Boston Properties, Inc. (R)                  22,100         842,673          40,900       1,559,517           5,200         198,276 
Cheung Kong Holdings, Ltd.                                                                                                          
(Hong Kong)                                 264,476       2,060,020         520,000       4,050,312          67,000         521,867 
China Resources Beijing Land                                                                                                        
(Hong Kong)                               1,105,000         262,104              --              --              --              -- 
Duke Realty Investments, Inc.(R)                800          18,952           1,800          42,642              --              -- 
Equity Office Properties Trust (R)           51,797       1,657,504          97,244       3,111,808          11,100         355,200 
Equity Residential Properties Trust(R)       50,492       2,948,733          93,880       5,482,592          11,398         665,643 
Henderson Land Development                                                                                                          
Co., Ltd. (Hong Kong) (R)                    53,000         173,622              --              --              --              -- 
Keppel Land, Ltd. (Singapore)                33,000          25,227              --              --              --              -- 
LNR Property Corp.                           22,200         664,890          40,500       1,212,975              --              -- 
Meritage Corp. (NON)                         15,500         573,500          28,600       1,058,200              --              -- 
Mills Corp.                                   5,900         126,142          10,800         230,904              --              -- 
Security Capital Group, Inc. Class B                                                                                                
(NON)                                         2,000          37,420           3,700          69,227              --              -- 
Sun Hung Kai Properties, Ltd.                                                                                                       
(Hong Kong)                                  36,000         229,402              --              --              --              -- 
Vornado Realty Trust (R)                      1,500          59,550           3,500         138,950              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          9,915,604                      17,406,598                       1,740,986 

Regional Bells                                                 0.9%                            1.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
BellSouth Corp.                              77,600       3,224,280         150,500       6,253,275          15,000         623,250 
SBC Communications, Inc.                    120,100       5,659,112         234,850      11,066,132          21,500       1,013,080 
Verizon Communications, Inc.                111,836       6,051,446         217,024      11,743,169          21,300       1,152,543 
                                                     --------------                  --------------                  -------------- 
                                                         14,934,838                      29,062,576                       2,788,873 

Restaurants                                                    0.4%                            0.4%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
AmeriKing, Inc. (NON)                           150               2              --              --              --              -- 
CBRL Group, Inc.                             51,100       1,122,667          93,400       2,051,998              --              -- 
Darden Restaurants, Inc.                     39,000       1,023,750          73,100       1,918,875           8,300         217,875 
Granada PLC (United Kingdom)                440,792         602,402              --              --              --              -- 
McDonald's Corp.                             62,800       1,704,392         119,500       3,243,230          12,900         350,106 
Outback Steakhouse, Inc. (NON)                  600          15,366           1,400          35,854              --              -- 
Panera Bread Co. (NON)                        3,400         118,966           6,400         223,936              --              -- 
Starbucks Corp. (NON)                        52,000         776,880          95,400       1,425,276          12,400         185,256 
Tricon Global Restaurants, Inc. (NON)         7,100         278,462          13,750         539,275           1,200          47,064 
Wendy's International, Inc.                   1,200          31,980           2,600          69,290              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          5,674,867                       9,507,734                         800,301 

Retail                                                         3.0%                            3.1%                            0.6% 
----------------------------------------------------------------------------------------------------------------------------------- 
1-800-FLOWERS. COM, Inc. (NON)               32,600         393,156          60,000         723,600              --              -- 
99 Cents Only Stores (NON)                   23,362         755,761          42,900       1,387,815           5,600         181,160 
Aaron Rents, Inc.                            14,100         218,550          26,200         406,100              --              -- 
Albertsons, Inc.                             24,500         781,060          49,300       1,571,684           3,800         121,144 
American Eagle Outfitters, Inc. (NON)        11,700         232,830          21,700         431,830              --              -- 
AutoZone, Inc. (NON)                         16,600         860,876          30,800       1,597,288           3,700         191,882 
Bed Bath & Beyond, Inc. (NON)                43,300       1,103,392          79,900       2,034,254          10,200         259,692 
Best Buy Co., Inc. (NON)                        800          36,360           1,700          77,265              --              -- 
BJ's Wholesale Club, Inc. (NON)               1,900          90,459           4,200         199,962              --              -- 
Blockbuster, Inc. Class A                   122,200       2,676,180         226,400       4,958,160              --              -- 
Bulgari SpA (Italy)                           2,100          15,602              --              --              --              -- 
Burlington Coat Factory                                                                                                             
Warehouse Corp.                              53,400         752,940          97,700       1,377,570              --              -- 
Carrefour Supermarche SA (France)             8,720         420,003              --              --              --              -- 
Castorama Dubois Investissement                                                                                                     
SA (France)                                  13,128         609,605              --              --              --              -- 
Chico's FAS, Inc. (NON)                      18,250         429,788          33,500         788,925              --              -- 
Circuit City Stores-Circuit City Group          500           6,000           1,100          13,200              --              -- 
Columbia Sportswear Co. (NON)                11,550         256,410          21,350         473,970              --              -- 
Companhia Brasileira de Distribuicao                                                                                                
Grupo Pao de Acucar ADR (Brazil)             10,100         126,250              --              --              --              -- 
Companhia Brasileira de Distribuicao                                                                                                
Grupo Pao de Acucar (Brazil)                  3,200          39,850              --              --              --              -- 
CVS Corp.                                     8,000         265,600          15,400         511,280           1,500          49,800 
Dillards, Inc. Class A                       15,300         201,501          28,100         370,077              --              -- 
Dixons Group PLC (United Kingdom)            53,600         145,125              --              --              --              -- 
Dollar Tree Stores, Inc. (NON)                  700          13,223           1,500          28,335              --              -- 
Esprit Holdings, Ltd. (Hong Kong)           428,000         406,083              --              --              --              -- 
Expedia, Inc. Class A (NON)                  16,600         403,214          30,700         745,703              --              -- 
Family Dollar Stores, Inc.                    1,000          27,520           2,200          60,544              --              -- 
Fast Retailing Co., Ltd. (Japan)              8,500         955,786           4,900         550,983             600          67,467 
Fastenal Co.                                    500          28,490           1,100          62,678              --              -- 
Federated Department Stores, Inc.                                                                                                   
(NON)                                        28,700         809,340          54,300       1,531,260           5,800         163,560 
Fleming Companies, Inc.                      25,500         752,250          47,400       1,398,300              --              -- 
Fred's, Inc. Class A                          7,500         196,500          13,900         364,180              --              -- 
Great Atlantic & Pacific Tea Co.             17,700         253,287          32,900         470,799              --              -- 
Gucci Group NV (Netherlands)                 14,475       1,183,766          32,210       2,634,134           4,101         335,380 
GUS PLC (United Kingdom)                    161,260       1,279,646              --              --              --              -- 
Home Depot, Inc. (The)                       13,200         506,484          29,100       1,116,567              --              -- 
HomeStore.com, Inc. (NON)                    26,900         205,785          49,500         378,675           6,500          49,725 
Intimate Brands, Inc.                        13,500         121,500          30,800         277,200              --             --  
J. Jill Group, Inc. (NON)                     5,400          67,500          10,000         125,000              --              -- 
Jones Apparel Group, Inc. (NON)               1,500          38,235           3,300          84,117              --              -- 
K mart Corp. (NON)                            2,000          13,980           4,400          30,756              --              -- 
Kingfisher Leisure PLC (United Kingdom)       7,454          33,956              --              --              --              -- 
Kohls Corp. (NON)                            36,318       1,743,264          67,100       3,220,800           8,800         422,400 
Kojima Co., Ltd. (Japan)                      5,500          65,586              --              --              --              -- 
Koninklijke Ahold NV (Netherlands)           10,090         280,202              --              --              --              -- 
Kroger Co. (NON)                             51,800       1,276,352         100,000       2,464,000           9,700         239,008 
La Rinascente SpA (Italy)                     3,300          11,808              --              --              --              -- 
Lands' End, Inc. (NON)                       10,000         289,000          18,600         537,540              --              -- 
Limited, Inc. (The)                          62,900         597,550         117,600       1,117,200          13,900         132,050 
Longs Drug Stores, Inc.                      31,000         843,200          57,500       1,564,000              --              -- 
Lowe's Companies, Inc.                       48,209       1,525,815          94,000       2,975,100           8,460         267,759 
Marks & Spencer PLC (United Kingdom)         20,900          78,317              --              --              --              -- 
May Department Stores Co.                    18,100         525,262          33,950         985,229           4,000         116,080 
Metro AG (Germany)                           26,561         870,616          49,618       1,626,379           6,300         206,501 
Next PLC (United Kingdom)                     8,200         107,847              --              --              --              -- 
Office Depot, Inc. (NON)                     58,200         791,520         110,300       1,500,080          11,900         161,840 
OfficeMax, Inc. (NON)                        36,900         112,545          69,200         211,060              --              -- 
Pathmark Stores, Inc. (NON)                  16,200         385,560          30,100         716,380              --              -- 
Penney (J.C.) Co., Inc.                       5,300         116,070          11,700         256,230              --              -- 
Pep Boys (The)-Manny, Moe, & Mack            37,500         414,375          69,600         769,080              --              -- 
PETsMART, Inc. (NON)                        255,400       1,798,016         473,100       3,330,624              --              -- 
President Chain Store Corp. (Taiwan)        127,769         242,858              --              --              --              -- 
Priceline.com, Inc. (NON)                    42,500         161,075          78,600         297,894              --              -- 
Regis Corp.                                   9,200         192,832          16,900         354,224              --              -- 
Rent-A-Center, Inc. (NON)                    23,900         555,675          44,000       1,023,000              --              -- 
Rite Aid Corp. (NON)                        109,035         841,750         324,522       2,505,310         121,082         934,753 
Rite Aid Corp. (Private) (NON)               34,100         263,252          88,300         681,676          27,100         209,212 
Ross Stores, Inc.                             1,300          38,025           2,900          84,825              --              -- 
Ruddick Corp.                                17,100         261,630          31,200         477,360              --              -- 
Safeway, Inc. (NON)                           4,000         158,880           8,800         349,536              --              -- 
Saks, Inc. (NON)                              4,100          20,500           8,900          44,500              --              -- 
Sears, Roebuck & Co.                          9,400         325,616          20,700         717,048              --              -- 
Seven-Eleven Japan Co., Ltd. (Japan)          2,000          80,954              --              --              --              -- 
Shinsegae Department Store                                                                                                          
(South Korea)                                 4,000         281,131              --              --              --              -- 
ShopKo Stores, Inc. (NON)                    27,500         227,975          51,100         423,619              --              -- 
Signet Group PLC (United Kingdom)           771,856         703,230              --              --              --              -- 
Spiegel, Inc. Class A                        26,500         186,825          49,300         347,565              --              -- 
Staples, Inc. (NON)                          11,900         158,865          26,200         349,770              --              -- 
SUPERVALU, Inc.                               3,600          72,828           7,900         159,817              --              -- 
Talbots, Inc. (The)                          45,694       1,025,830          84,400       1,894,780          10,800         242,460 
Target Corp.                                  3,700         117,475           8,200         260,350              --              -- 
Ticketmaster Class B (NON)                   25,100         259,785          46,100         477,135              --              -- 
Tiffany & Co.                                   900          19,485           2,000          43,300              --              -- 
TJX Companies, Inc. (The)                    39,100       1,286,390          74,750       2,459,275           7,600         250,040 
Venator Group, Inc. (NON)                    49,812         759,633          91,600       1,396,900          12,200         186,050 
Vendex International NV (Netherlands)        62,494         458,051              --              --              --              -- 
Wal-Mart Stores, Inc.                       108,700       5,380,650         206,900      10,241,550          21,750       1,076,625 
Walgreen Co.                                  4,400         151,492           9,700         333,971              --              -- 
Walmart de Mexico/Mexico City                                                                                                       
(Mexico)                                    286,900         600,173              --              --              --              -- 
Walmart de Mexico/Mexico City                                                                                                       
Class C (Mexico)                            180,500         341,712              --              --              --              -- 
Weiss Markets, Inc.                           4,700         130,660           8,800         244,640              --              -- 
Weston, Ltd. (George) (Canada)                  375          24,632              --              --              --              -- 
Wet Seal, Inc. (The) (NON)                   70,200       1,292,382         129,900       2,391,459              --              -- 
Whole Foods Market, Inc. (NON)                1,000          31,410           2,200          69,102              --              -- 
Wild Oats Markets, Inc. (NON)                61,100         485,134         113,100         898,014              --              -- 
Woolworths, Ltd. (United Kingdom)             8,200           3,826              --              --              --              -- 
Woolworths, Ltd. (Australia)                 15,634          91,390              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         46,780,759                      76,582,533                       5,864,588 

Schools                                                        0.1%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Career Education Corp. (NON)                  6,700         368,500          12,400         682,000              --              -- 
Education Management Corp. (NON)              7,500         227,700          13,900         422,004              --              -- 
MemberWorks, Inc. (NON)                      16,200         333,234          30,000         617,100              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            929,434                       1,721,104                              -- 

Semiconductor                                                  0.3%                            0.3%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Applied Materials, Inc. (NON)                 6,600         187,704          14,600         415,224              --              -- 
ASML Holding NV (Netherlands) (NON)          13,000         144,642              --              --              --              -- 
Cognex Corp. (NON)                              300           5,886             700          13,734              --              -- 
Cohu, Inc.                                   11,000         164,560          20,400         305,184              --              -- 
Credence Systems Corp. (NON)                  9,170         110,499          16,980         204,609              --              -- 
Disco Corp. (Japan)                             200           5,828              --              --              --              -- 
GSI Lumonics, Inc. (Canada) (NON)            51,300         348,840              --              --              --              -- 
Integrated Device Technology, Inc.                                                                                                  
(NON)                                        30,600         615,672          56,200       1,130,744           7,100         142,852 
KLA-Tencor Corp. (NON)                       39,900       1,260,042          74,700       2,359,026           8,900         281,062 
LAM Research Corp. (NON)                     10,900         184,755          20,800         352,560              --              -- 
Mykolis Corp. (NON)                             700           6,279           1,900          17,043              --              -- 
Novellus Systems, Inc. (NON)                 30,800         879,648          57,491       1,641,943           7,100         202,776 
ON Semiconductor Corp. (NON)                 45,400          83,990          84,100         155,585              --              -- 
Photronics, Inc. (NON)                        6,433         118,689          11,884         219,260              --              -- 
Semitool, Inc. (NON)                         26,800         256,208          49,600         474,176              --              -- 
Teradyne, Inc. (NON)                          1,100          21,450           2,300          44,850              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          4,394,692                       7,333,938                         626,690 

Shipping                                                       0.1%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Airbourne, Inc.                              59,800         571,090         111,100       1,061,005              --              -- 
China Shipping Development                                                                                                          
Co. (China)                                 634,000          81,288              --              --              --              -- 
Expeditors International of                                                                                                         
Washington, Inc.                              6,500         307,775          12,200         577,670              --              -- 
Newport News Shipbuilding, Inc.              17,200       1,155,840          31,700       2,130,240           4,150         278,880 
Nippon Express Co., Ltd. (Japan)             59,000         223,950              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          2,339,943                       3,768,915                         278,880 

Software                                                       1.5%                            1.6%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Activision, Inc. (NON)                       40,300       1,096,966          74,400       2,025,168           8,300         225,926 
Adobe Systems, Inc.                           5,000         119,900          10,100         242,198              --              -- 
Advent Software, Inc. (NON)                   7,400         278,610          13,700         515,805              --              -- 
Aether Systems, Inc. (NON)                   48,700         305,349          90,300         566,181              --              -- 
Akamai Technologies, Inc. (NON)              71,700         208,647         133,200         387,612              --              -- 
Amdocs, Ltd. (Guernsey) (NON)                22,420         597,493           7,700         205,205              --              -- 
Ansoft Corp. (NON)                           32,459         296,026          59,968         546,908              --              -- 
Ascental Software Corp. (NON)                93,300         307,890         172,700         569,910              --              -- 
Autodesk, Inc.                                1,000          32,060           2,200          70,532              --              -- 
Avid Technology, Inc. (NON)                  26,900         196,101          49,900         363,771              --              -- 
BEA Systems, Inc. (NON)                      44,500         426,755          84,800         813,232           8,800          84,392 
BMC Software, Inc. (NON)                     37,800         480,060          71,900         913,130           7,800          99,060 
Cadence Design Systems, Inc. (NON)            1,600          26,640           3,500          58,275              --              -- 
CGI Group, Inc. (Canada) (NON)                4,100          23,492              --              --              --              -- 
Check Point Software                                                                                                                
Technologies, Ltd. (Israel) (NON)            62,098       1,367,398          70,500       1,552,410           9,170         201,923 
Citrix Systems, Inc. (NON)                    1,700          33,660           3,700          73,260              --              -- 
Cognos, Inc. (Canada) (NON)                  15,600         224,016              --              --              --              -- 
Computer Associates International, Inc.       4,081         105,045           9,007         231,840              --              -- 
Compuware Corp. (NON)                         2,400          19,992           5,300          44,149              --              -- 
Electronic Arts, Inc. (NON)                   3,600         164,412           7,900         360,793              --              -- 
FileNET Corp. (NON)                          20,500         206,435          37,900         381,653              --              -- 
HNC Software (NON)                           24,100         450,670          44,600         834,020              --              -- 
Hyperion Solutions Corp. (NON)               20,500         273,880          37,900         506,344              --              -- 
I2 Technologies, Inc. (NON)                   1,400           4,816           3,100          10,664              --              -- 
Infosys Technologies, Ltd. (India)           11,088         551,698              --              --              --              -- 
Infosys Technologies, Ltd. - Bombay                                                                                                 
Exchange (India)                              4,700         233,855              --              --              --              -- 
Iona Tecnologies PLC ADR (Ireland) (NON)      7,800          60,684              --              --              --              -- 
J.D. Edwards & Co. (NON)                     34,800         247,776          64,400         458,528              --              -- 
JDA Software Group, Inc. (NON)               12,400         162,936          22,700         298,278              --              -- 
Kronos, Inc. (NON)                           17,100         701,955          31,600       1,297,180              --              -- 
Mercury Interactive Corp. (NON)                 500           9,520           1,100          20,944              --              -- 
Micromuse, Inc. (NON)                           700           3,976           1,700           9,656              --              -- 
Microsoft Corp. (NON)                       175,500       8,980,335         336,200      17,203,354          33,700       1,724,429 
MicroStrategy, Inc. (NON)                    58,400          65,992         108,000         122,040              --              -- 
Misys PLC (United Kingdom)                  427,544       1,278,541         287,591         860,021          32,539          97,306 
Netegrity, Inc. (NON)                         7,500          64,275          13,800         118,266              --              -- 
Network Associates, Inc. (NON)               13,500         174,015          95,900       1,236,151          54,600         703,794 
NTT Data Corp. (Japan)                            7          31,214              --              --              --              -- 
Openwave Systems, Inc. (NON)                    844          10,761           1,888          24,072              --              -- 
Oracle Corp. (NON)                           18,100         227,698          40,500         509,490              --              -- 
Parametric Technology Corp. (NON)            15,500          80,445          34,200         177,498              --              -- 
PeopleSoft, Inc. (NON)                        2,200          39,688           5,000          90,200              --              -- 
Peregrine Systems, Inc. (NON)                 8,430         106,471          15,591         196,914              --              -- 
Portal Software, Inc. (NON)                  75,000         111,750         137,900         205,471              --              -- 
Rational Software Corp. (NON)                 3,300          28,578           7,200          62,352              --              -- 
S1 Corp. (NON)                               43,200         365,472          79,900         675,954              --              -- 
SAP AG (Germany)                              6,300         667,114              --              --              --              -- 
Secure Computing Corp. (NON)                 30,400         296,096          56,200         547,388              --              -- 
Siebel Systems, Inc. (NON)                   36,500         474,865          67,000         871,670           8,750         113,838 
Sybase, Inc. (NON)                            9,966          92,684          18,458         171,659              --              -- 
Symantec Corp. (NON)                            800          27,736           1,800          62,406              --              -- 
Synopsys, Inc. (NON)                            700          28,077           1,500          60,165              --              -- 
THQ, Inc. (NON)                               3,300         142,395           6,000         258,900              --              -- 
Ulticom, Inc. (NON)                           9,300          75,795          17,000         138,550              --              -- 
VERITAS Software Corp. (NON)                 35,003         645,455          67,491       1,244,534           6,575         121,243 
Vitria Technology, Inc. (NON)                45,700          93,685          84,600         173,430              --              -- 
Wipro, Ltd. ADR (India)                       5,600         118,720              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         23,446,570                      38,368,131                       3,371,911 

Staffing                                                        --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Kforce, Inc. (NON)                           84,700         426,041         157,000         789,710              --              -- 

Technology                                                      --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Koninklijke (Royal) Philips                                                                                                         
Electronics NV (Netherlands)                 24,330         471,848           8,350         161,937          49,482         959,637 
Lucent Technologies, Inc.                    17,600         100,848          38,800         222,324              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            572,696                         384,261                         959,637 

Technology Services                                            0.4%                            0.4%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Accenture, Ltd. Class A (Bermuda) (NON)       8,200         104,550          17,843         227,498              --              -- 
Acxiom Corp. (NON)                              700           6,580          23,400         219,960          16,800         157,920 
Affiliated Computer Services, Inc.                                                                                                  
Class A (NON)                                   600          48,846           1,300         105,833              --              -- 
Altran Technologies SA (France)               1,624          67,057              --              --              --              -- 
Automatic Data Processing, Inc.               5,800         272,832          12,800         602,112              --              -- 
BISYS Group, Inc. (The) (NON)                   600          31,812           1,300          68,926              --              -- 
Checkfree Corp. (NON)                         5,600          95,032          12,300         208,731              --              -- 
Ciber, Inc. (NON)                            24,800         156,240          46,100         290,430              --              -- 
Computer Horizons Corp. (NON)                48,600         145,314          89,700         268,203              --              -- 
Computer Sciences Corp. (NON)                10,500         348,285          19,300         640,181           2,500          82,925 
Computer Task Group, Inc. (NON)              25,500          51,000          46,700          93,400              --              -- 
Convergys Corp. (NON)                         4,300         119,325           9,400         260,850              --              -- 
CSG Systems International, Inc. (NON)           900          36,900           2,000          82,000              --              -- 
Davox Corp. (NON)                            25,900         205,905          47,900         380,805              --              -- 
Electronic Data Systems Corp.                 5,200         299,416          11,400         656,412              --              -- 
Euronet Services, Inc. (NON)                 47,500         524,875              --              --              --              -- 
Fiserv, Inc. (NON)                            4,350         148,770           9,600         328,320              --              -- 
Forrester Research, Inc. (NON)               15,800         262,438          29,200         485,012              --              -- 
GoTo.com, Inc. (NON)                         28,500         357,675          52,700         661,385              --              -- 
KPMG Consulting, Inc. (NON)                 102,800       1,111,268         194,400       2,101,464          22,100         238,901 
Logitech International                                                                                                              
(Switzerland) (NON)                          26,790         618,397              --              --              --              -- 
Morse PLC (United Kingdom)                  161,617         271,204              --              --              --              -- 
MTS Systems Corp.                            44,900         516,350          82,200         945,300              --              -- 
Pacific Century CyberWorks, Ltd.                                                                                                    
(Hong Kong) (NON)                            21,000           5,170              --              --              --              -- 
Safeguard Scientifics, Inc. (NON)           130,000         230,100         242,000         428,340              --              -- 
SEI Investments Co.                           1,200          38,400           2,600          83,200              --              -- 
SunGard Data Systems, Inc. (NON)              2,200          51,414           4,800         112,176              --              -- 
Symbol Technologies, Inc.                     9,200          96,508          54,850         575,377          31,200         327,288 
Unova, Inc. (NON)                            31,700         141,065          59,000         262,550              --              -- 
Yahoo!, Inc. (NON)                            2,600          22,906           5,700          50,217              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          6,385,634                      10,138,682                         807,034 

Telecommunications                                             3.7%                            2.3%                            0.6% 
----------------------------------------------------------------------------------------------------------------------------------- 
Advanced Info Service Public                                                                                                        
Co., Ltd. (Thailand)                         38,400         411,120              --              --              --              -- 
ALLTEL Corp.                                 14,000         811,300          26,800       1,553,060           2,800         162,260 
America Movil SA de CV ADR                                                                                                          
Class L (Mexico)                             72,937       1,081,656           7,879         116,846              --              -- 
AT&T Corp.                                   68,100       1,314,330         135,900       2,622,870           9,500         183,350 
AT&T Wireless Services, Inc. (NON)           27,171         405,935          53,677         801,934           3,700          55,278 
Boston Communications Group (NON)            10,200         114,240          18,700         209,440              --              -- 
Brasil Telecom Paricipacoes S.A.                                                                                                    
ADR (Brazil)                                  9,300         252,960              --              --              --              -- 
British Telecommunications PLC                                                                                                      
(United Kingdom)                            155,700         777,924          31,800         158,882           4,100          20,485 
Broadwing, Inc. (NON)                        21,700         348,936          42,700         686,616           3,600          57,888 
Cable & Wireless PLC (United Kingdom)        18,700          77,012              --              --              --              -- 
CenturyTel, Inc.                                500          16,750           1,100          36,850              --              -- 
China Mobile, Ltd. (Hong Kong) (NON)        916,898       2,915,490         371,400       1,180,952          48,700         154,853 
Citizens Communications Co. (NON)            29,800         280,120          55,550         522,170           7,000          65,800 
Commonwealth Telephone                                                                                                              
Enterprises, Inc. (NON)                       5,100         187,425           9,400         345,450              --              -- 
Deutsche Telekom AG (Germany)                61,000         949,187              --              --              --              -- 
Deutsche Telekom AG ADR (Germany)             5,000          77,500              --              --              --              -- 
Energis PLC (United Kingdom) (NON)            5,500           2,788              --              --              --              -- 
Entel S.A. (Chile)                           38,000         235,040              --              --              --              -- 
France Telecom SA (France)                   12,150         382,986              --              --              --              -- 
General Communication, Inc. Class A (NON)    52,900         640,090          97,700       1,182,170              --              -- 
Illuminet Holdings, Inc. (NON)                4,300         164,776           7,900         302,728              --              -- 
Johnnies Industrial Corp. (South Africa)     94,042         476,347              --              --              --              -- 
Koninlijke (Royal) KPN                                                                                                              
NV (Netherlands) (NON)                        9,765          26,673              --              --              --              -- 
Level 3 Communications, Inc. (NON)              600           2,268           1,300           4,914              --              -- 
Magyar Tavkozlesi I Rt                                                                                                              
(Matav) (Hungary)                           143,400         370,331              --              --              --              -- 
McLeodUSA, Inc. (NON)                         5,700           4,389          10,600           8,162              --              -- 
Metro One Telecommunications (NON)           31,000         719,200          57,300       1,329,360              --              -- 
Nextel Communications, Inc. Class A (NON)     2,300          19,872           5,100          44,064              --              -- 
Nippon Telegraph and Telephone Corp.                                                                                                
(NTT) (Japan)                                   836       3,903,393             432       2,017,064              57         266,140 
NTT DoCoMo, Inc. (Japan)                        446       6,030,064             606       8,193,315             113       1,527,796 
NTT DoCoMo, Inc. 144A (Japan)                    66         892,341             140       1,892,845              16         216,325 
Olivetti SpA (Italy)                         22,700          22,363              --              --              --              -- 
Orange SA (France) (NON)                    190,620       1,388,476         116,390         847,785          15,098         109,974 
Portugal Telecom SGPS SA (Portugal) (NON)   254,176       1,846,789          27,100         196,903          41,929         304,647 
Qwest Communications International, Inc.     75,963       1,268,582         146,034       2,438,768          14,300         238,810 
Rural Cellular Corp. Class A (NON)            8,500         206,550          15,700         381,510              --              -- 
SK Telecom Co., Ltd. (South Korea)           11,300       1,795,569           1,190         189,091              --              -- 
SK Telecom Co., Ltd. ADR (South Korea)       29,900         551,356          41,600         767,104              --              -- 
Sprint Corp. (FON Group)                     53,500       1,284,535         105,000       2,521,050           8,800         211,288 
Sprint Corp. (PCS Group) (NON)               96,541       2,538,063         179,500       4,719,055          21,600         567,864 
Sunrise Telecom, Inc. (NON)                  23,100         115,269          42,700         213,073              --              -- 
Swisscom AG ADR (Switzerland)                 7,246       2,044,790              --              --              --              -- 
Taiwan Cellular Corp. (Taiwan) (NON)        242,920         260,120              --              --              --              -- 
TDC A/S (Denmark)                             2,500          87,589              --              --              --              -- 
Tele Celular Sul Participacoes                                                                                                      
S.A. (Brazil)                                11,613         120,775              --              --              --              -- 
Tele Norte Leste Participacoes S.A.                                                                                                 
ADR (Brazil)                                 69,100         625,355              --              --              --              -- 
Telecom Italia SpA (Italy)                  373,150       2,816,553              --              --              --              -- 
Telecom Italia Mobile SpA (Italy)           245,180       1,189,850         366,555       1,778,879          47,494         230,487 
Telefonos de Mexico SA de CV                                                                                                        
(Telmex) ADR Ser. L (Mexico)                136,818       4,417,853          61,500       1,985,835              --              -- 
Telekom Austria AG (Austria) (NON)            6,000          36,875              --              --              --              -- 
Telekomunikacja Polska SA (Poland)           70,921         196,504              --              --              --              -- 
Telephone and Data Systems, Inc.                400          37,720             900          84,870              --              -- 
Telesp Celular Participacoes S.A.                                                                                                   
(Brazil)                                     49,500         105,860              --              --              --              -- 
United States Cellular Corp. (NON)              300          14,850             700          34,650              --              -- 
Videsh Sanchar Nigam, Ltd. ADR (India)       20,075         190,311              --              --              --              -- 
Vodafone Group PLC (United Kingdom)       4,090,008       9,015,400       5,701,854      12,568,312         721,735       1,590,884 
Western Wireless Corp. Class A (NON)          2,390          80,734           5,222         176,399              --              -- 
Williams Communications Group, Inc.                                                                                                 
(NON)                                           681             804           1,530           1,805              --              -- 
WJ Communications, Inc. (NON)                41,100         156,180          76,100         289,180              --              -- 
Worldcom, Inc. - MCI Group                      663          10,097           1,465          22,312              --              -- 
Worldcom, Inc. - WorldCom Group (NON)       129,092       1,941,544         247,128       3,716,805          26,800         403,072 
                                                     --------------                  --------------                  -------------- 
                                                         58,259,759                      56,143,078                       6,367,201 

Telephone                                                      0.4%                            0.2%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Korea Telecom Corp. ADR                                                                                                             
(South Korea)                               101,980       1,865,214         100,300       1,834,487              --              -- 
MPower Holdings Corp. 144A (NON)                604             121              --              --             120              24 
Philippine Long Distance                                                                                                            
Telephone Co. ADR (Philippines)              15,900         150,255              --              --              --              -- 
Telecom Corp. of New Zealand, Ltd.                                                                                                  
(New Zealand)                               847,013       1,518,037              --              --              --              -- 
Telecom Corp. of New Zealand, Ltd.                                                                                                  
144A (New Zealand)                          105,502         189,083              --              --              --              -- 
TelecomAsia Corporation Public                                                                                                      
Co., Ltd. (Thailand) (NON)                  593,800         122,874              --              --              --              -- 
TeleCorp PCS, Inc. (NON)                        700           7,735           1,500          16,575              --              -- 
Telefonica SA (Spain) (NON)                 213,472       2,359,606         186,751       2,064,247          49,879         551,336 
Telekom Malaysia Berhad (Malaysia)          172,000         416,421              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          6,629,346                       3,915,309                         551,360 

Textiles                                                       0.2%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Brown Shoe Co., Inc.                         26,000         295,100          47,000         533,450              --              -- 
Buhrmann NV (Netherlands)                    55,400         327,367              --              --              --              -- 
Far Eastern Textile, Ltd. (Taiwan)          606,182         184,704              --              --              --              -- 
Hugo Boss AG-Pfd. (Germany)                  19,921         345,530              --              --              --              -- 
Industria de Diseno Textil (Inditex) SA                                                                                             
144A (Spain) (NON)                            1,800          30,320              --              --              --              -- 
Industria de Diseno Textil SA                                                                                                       
(Inditex) (Spain) (NON)                       1,450          24,424              --              --              --              -- 
Interface, Inc.                              29,300         125,990          54,400         233,920              --              -- 
Liz Claiborne, Inc.                             300          11,310             800          30,160              --              -- 
Onward Kashiyama Co., Ltd. (Japan)           68,000         737,219              --              --              --              -- 
Polo Ralph Lauren Corp. (NON)                25,400         476,250          46,400         870,000              --              -- 
Reebok International, Ltd. (NON)             12,200         252,540          22,600         467,820              --              -- 
Tokyo Style Co., Ltd. (Japan)                12,000         114,780              --              --              --              -- 
V. F. Corp.                                     600          17,562           1,300          38,051              --              -- 
Wolverine World Wide, Inc.                   32,700         439,488          59,700         802,368              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          3,382,584                       2,975,769                              -- 

Tire & Rubber                                                   --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Goodyear Tire & Rubber Co. (The)                600          11,058           1,300          23,959              --              -- 
Michelin Corp. Class B (France)               5,200         137,067              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            148,125                          23,959                              -- 

Tobacco                                                        0.9%                            0.7%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Altadis SA (Spain)                          134,787       2,147,662          33,894         540,059           5,001          79,685 
BAT Industries PLC (United Kingdom)          72,000         635,882              --              --              --              -- 
Cie Finance Richemont                                                                                                               
AG (Switzerland)                              1,148       2,167,552           1,311       2,475,315             168         317,203 
ITC, Ltd. (India)                            24,900         300,780              --              --              --              -- 
Philip Morris Companies, Inc.               147,799       7,137,214         284,200      13,724,018          29,500       1,424,555 
R.J. Reynolds Tobacco Holdings, Inc.          2,100         119,994           4,600         262,844              --              -- 
Shanghai Industrial Holdings, Ltd.                                                                                                  
(Hong Kong)                                  56,000          76,467              --              --              --              -- 
Swedish Match AB (Sweden)                   322,889       1,650,406              --              --              --              -- 
UST, Inc.                                     1,000          33,200           2,200          73,040              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                         14,269,157                      17,075,276                       1,821,443 

Toys                                                           0.2%                            0.2%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Action Performance Companies, Inc.                                                                                                  
(NON)                                        92,282       1,680,455         170,826       3,110,741              --              -- 
Mattel, Inc.                                 10,000         156,600          22,000         344,520              --              -- 
Nintendo Co., Ltd. (Japan)                   13,100       1,882,272          12,100       1,738,588           2,300         330,475 
Toys R Us (NON)                                 800          13,784           1,500          25,845              --              -- 
Zapf Creaton AG (Germany)                     8,807         154,762              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          3,887,873                       5,219,694                         330,475 

Transaction Processing                                         0.1%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Concord EFS, Inc. (NON)                       1,700          83,215           3,700         181,115              --              -- 
National Data Corp.                          20,700         745,200          37,900       1,364,400              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            828,415                       1,545,515                              -- 

Transportation Services                                        0.1%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Arriva PLC (United Kingdom)                 112,041         543,326              --              --              --              -- 
Grupo Aeroportuario del Sureste SA                                                                                                  
de CV ADR (Mexico) (NON)                     71,200         669,280              --              --              --              -- 
TNT Post Group NV (Netherlands)               5,000          95,557              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          1,308,163                              --                              -- 

Trucks & Parts                                                  --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Johnson Controls, Inc.                        2,400         156,576           5,300         345,772              --              -- 
PACCAR, Inc.                                    400          19,628             800          39,256              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            176,204                         385,028                              -- 

Utilities                                                       --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Celcaribe SA (Colombia) (NON)                28,943           3,618              --              --           2,316             290 
EVN AG (Australia)                            1,200          45,977              --              --              --              -- 
Tenneco, Inc. (Malaysia)                    171,000         443,250              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            492,845                              --                             290 

Waste Management                                               0.2%                            0.2%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Allied Waste Industries, Inc. (NON)           2,500          31,875           5,500          70,125              --              -- 
Republic Services, Inc. (NON)                89,200       1,445,040         164,600       2,666,520          21,100         341,820 
Waste Management, Inc.                       52,300       1,398,502         101,283       2,708,307           9,500         254,030 
                                                     --------------                  --------------                  -------------- 
                                                          2,875,417                       5,444,952                         595,850 

Water Utilities                                                0.1%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Anglian Water AWG PLC                                                                                                               
(United Kingdom)                             17,500         150,440              --              --              --              -- 
Severn Trent Water PLC                                                                                                              
(United Kingdom)                            113,240       1,215,597              --              --              --              -- 
Suez Lyonnaise des Eaux SA (France)          29,342         975,130              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          2,341,167                              --                              -- 
                                                     --------------                  --------------                  -------------- 
Total Common Stocks                                                                                                                 
(cost  1,258,799,247, $1,590,861,060                                                                                                
and $142,494,649)                                    $1,060,388,125                  $1,400,949,531                    $122,651,598 
----------------------------------------------------------------------------------------------------------------------------------- 

                                                       GROWTH                       BALANCED                     CON SERVATIVE      

                                                              13.4%                           16.8%                           38.1% 
CORPORATE BONDS                           Principal                       Principal                       Principal                 
AND NOTES (a)                                Amount           Value          Amount           Value          Amount           Value 

Advertising and Marketing Services                             0.1%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Interact Operating Co. notes 14s,                                                                                                   
2003 (PIK)                           $      262,158  $           26  $           --  $           --  $       58,984  $            6 
Lamar Media Corp. company guaranty                                                                                                  
9 5/8s, 2006                                850,000         862,750              --              --         475,000         482,125 
Lamar Media Corp. sr. sub. notes                                                                                                    
9 1/4s, 2007                                105,000         105,525              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                            968,301                              --                         482,131 

Aerospace and Defense                                          0.3%                            0.2%                            0.8% 
----------------------------------------------------------------------------------------------------------------------------------- 
Alliant Techsystems, Inc. 144A                                                                                                      
sr. sub. notes 8 1/2s, 2011                 450,000         450,000              --              --         220,000         220,000 
Argo-Tech Corp. company guaranty                                                                                                    
Ser. D, 8 5/8s, 2007                        100,000          70,000              --              --         230,000         161,000 
Argo-Tech Corp. 144A company                                                                                                        
guaranty 8 5/8s, 2007                     1,085,000         759,500              --              --         360,000         252,000 
BE Aerospace, Inc. sr. sub. notes                                                                                                   
9 1/2s, 2008                              1,145,000         801,500              --              --         640,000         448,000 
BE Aerospace, Inc. sr. sub. notes                                                                                                   
Ser. B, 8s, 2008                            520,000         338,000              --              --         180,000         117,000 
Decrane Aircraft Holdings Co.                                                                                                       
company guaranty Ser. B, 12s, 2008               --              --              --              --         150,000         136,500 
L-3 Communications Corp.                                                                                                            
company guaranty Ser. B, 8s, 2008           300,000         300,000              --              --          80,000          80,000 
L-3 Communications Corp.                                                                                                            
sr. sub. notes 8 1/2s, 2008                 840,000         840,000              --              --         440,000         440,000 
L-3 Communications Corp. sr. sub.                                                                                                   
notes Ser. B, 10 3/8s, 2007                      --              --              --              --          40,000          42,200 
Lockheed Martin Corp. bonds                                                                                                         
8 1/2s, 2029                                     --              --       3,265,000       3,807,121       1,830,000       2,133,853 
Lockheed Martin Corp.                                                                                                               
company guaranty 7 1/4s, 2006                    --              --              --              --       2,475,000       2,699,087 
Moog, Inc. sr. sub. notes Ser. B,                                                                                                   
10s, 2006                                   360,000         370,800              --              --         180,000         185,400 
Sequa Corp. sr. notes 9s, 2009              840,000         722,400       1,070,000         920,200       1,470,000       1,264,200 
Sequa Corp. sr. notes Ser. B,                                                                                                       
8 7/8s, 2008                                280,000         238,000              --              --          10,000           8,500 
                                                     --------------                  --------------                  -------------- 
                                                          4,890,200                       4,727,321                       8,187,740 

Agriculture                                                    0.1%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Premium Standard Farms, Inc. sr. notes                                                                                              
9 1/4s, 2011                                800,000         792,000              --              --         400,000         396,000 

Airlines                                                       0.1%                            0.4%                            0.7% 
----------------------------------------------------------------------------------------------------------------------------------- 
Air Canada Corp. sr. notes 10 1/4s,                                                                                                 
2011 (Canada)                                60,000          25,200              --              --          30,000          12,600 
Airbus Industries 144A notes Ser. D,                                                                                                
12.266s, 2020                               200,000         211,731         550,000         582,262         450,000         476,396 
Calair, LLC 144A company guaranty                                                                                                   
8 1/8s, 2008                                750,000         721,875       2,490,000       2,396,625       1,610,000       1,549,625 
Northwest Airlines, Inc.                                                                                                            
company guaranty 8.7s, 2007                      --              --       1,330,000         904,400         170,000         115,600 
Northwest Airlines, Inc.                                                                                                            
company guaranty 8.52s, 2004                     --              --       3,160,000       2,338,400       2,890,000       2,138,600 
Northwest Airlines, Inc.                                                                                                            
company guaranty 8 3/8s, 2004               410,000         303,400              --              --          40,000          29,600 
Northwest Airlines, Inc.                                                                                                            
company guaranty 7 5/8s, 2005                80,000          57,600              --              --         170,000         122,400 
United AirLines, Inc. deb. 9 3/4s, 2021          --              --       3,300,000       2,409,000       2,560,000       1,868,800 
United AirLines, Inc. deb. 9 1/8s, 2012     580,000         446,600              --              --              --              -- 
US Air, Inc. pass-through certificates                                                                                              
Ser. 93A2, 9 5/8s, 2003                     100,000          76,000              --              --              --              -- 
US Air, Inc. pass-through certificates                                                                                              
Ser. 93A3, 10 3/8s, 2013                    460,000         266,800       2,400,000       1,392,000       1,830,000       1,061,400 
                                                     --------------                  --------------                  -------------- 
                                                          2,109,206                      10,022,687                       7,375,021 

Automotive                                                     0.5%                            0.5%                            1.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Aftermarket Technology Corp.                                                                                                        
sr. sub. notes 12s, 2004                    793,000         769,210              --              --         388,000         376,360 
Collins & Aikman Products, Inc. company                                                                                             
guaranty 11 1/2s, 2006                      530,000         477,000              --              --         270,000         243,000 
DaimlerChrysler Corp.                                                                                                               
company guaranty 8 1/2s, 2031                    --              --       3,905,000       4,139,886       2,505,000       2,655,676 
Dana Corp. notes 7s, 2029                    70,000          46,900              --              --          40,000          26,800 
Dana Corp. notes 6 1/4s, 2004               180,000         160,200              --              --          90,000          80,100 
Dana Corp. 144A sr. notes 9s, 2011        1,360,000       1,196,800       2,030,000       1,786,400       2,060,000       1,812,800 
Delco Remy International, Inc.                                                                                                      
company guaranty 11s, 2009                  250,000         247,500              --              --         120,000         118,800 
Delco Remy International, Inc.                                                                                                      
company guaranty 10 5/8s, 2006               20,000          19,800              --              --          20,000          19,800 
Delphi Automotive Systems Corp.                                                                                                     
notes 6 1/8s, 2004                               --              --       3,660,000       3,688,658       1,895,000       1,909,838 
Dura Operating Corp.                                                                                                                
company guaranty Ser. D, 9s, 2009         1,090,000         921,050              --              --         540,000         456,300 
Exide Corp. sr. notes 10s, 2005             290,000         203,000              --              --         170,000         119,000 
Federal Mogul Corp. notes 7 3/4s,                                                                                                   
2006 (In default) (NON)                     430,000          40,850              --              --         250,000          23,750 
Federal Mogul Corp. notes 7 3/8s,                                                                                                   
2006 (In default) (NON)                      90,000           8,550              --              --              --              -- 
Ford Motor Co. bonds 6 5/8s, 2028                --              --       3,440,000       2,945,156       1,810,000       1,549,632 
Ford Motor Co. notes 7.45s, 2031                 --              --              --              --       1,270,000       1,199,794 
Hayes Lemmerz International, Inc.                                                                                                   
company guaranty Ser. B, 8 1/4s,                                                                                                    
2008                                        630,000         126,000              --              --          80,000          16,000 
Hayes Lemmerz International, Inc.                                                                                                   
144A company guaranty 11 7/8s, 2006         250,000         142,500              --              --          80,000          45,600 
Hayes Wheels International, Inc.                                                                                                    
company guaranty Ser. B, 9 1/8s,                                                                                                    
2007                                        400,000          80,000              --              --          70,000          14,000 
Hayes Wheels International, Inc.                                                                                                    
144A sr. sub. notes 9 1/8s, 2007            220,000          48,400              --              --         540,000         118,800 
Lear Corp. company guaranty Ser. B,                                                                                                 
8.11s, 2009                                 740,000         733,029              --              --         340,000         336,797 
Lear Corp. company guaranty Ser. B,                                                                                                 
7.96s, 2005                               1,530,000       1,512,390              --              --         800,000         790,792 
Oxford Automotive, Inc. company                                                                                                     
guaranty Ser. D, 10 1/8s, 2007              850,000         467,500              --              --         420,000         231,000 
Talon Automotive Group sr. sub. notes                                                                                               
Ser. B, 9 5/8s, 2008 (In default)                                                                                                   
(NON)                                       780,000          15,600              --              --         190,000           3,800 
Visteon Corp. sr. notes 8 1/4s, 2010             --              --              --              --         730,000         746,819 
                                                     --------------                  --------------                  -------------- 
                                                          7,216,279                      12,560,100                      12,895,258 

Banking                                                        0.3%                            2.3%                            3.9% 
----------------------------------------------------------------------------------------------------------------------------------- 
Bank of America Corp. sub. notes                                                                                                    
7.4s, 2011                                       --              --       6,500,000       7,100,990       5,275,000       5,762,727 
Bank One Corp. notes 6s, 2008                    --              --       3,435,000       3,457,259       2,190,000       2,204,191 
Chevy Chase Savings Bank, Inc.                                                                                                      
sub. deb. 9 1/4s, 2008                      330,000         315,150              --              --              --              -- 
Chevy Chase Savings Bank, Inc.                                                                                                      
sub. deb. 9 1/4s, 2005                    1,080,000       1,058,400              --              --         710,000         695,800 
Citigroup, Inc. deb. 6 5/8s, 2028                --              --       1,770,000       1,718,298         970,000         941,666 
Citigroup, Inc. notes 6 1/2s, 2011               --              --       1,700,000       1,774,443       1,015,000       1,059,447 
Colonial Bank sub. notes 8s, 2009                --              --       1,390,000       1,374,126         610,000         603,034 
Colonial Capital II 144A company                                                                                                    
guaranty 8.92s, 2027                        395,000         366,465         540,000         500,990         980,000         909,204 
Dime Capital Trust I bank guaranty                                                                                                  
Ser. A, 9.33s, 2027                              --              --       3,370,000       3,714,246       2,320,000       2,556,988 
First Union Corp. notes 6.95s, 2004              --              --       1,960,000       2,101,610       1,090,000       1,168,753 
FleetBoston Financial Corp. notes                                                                                                   
7 1/4s, 2005                                     --              --       4,690,000       5,082,881       2,210,000       2,395,132 
GS Escrow Corp. sr. notes 7 1/8s, 2005    1,615,000       1,646,056       3,850,000       3,924,036       3,955,000       4,031,055 
Merita Bank, Ltd. sub. notes 6 1/2s,                                                                                                
2006 (Finland)                                   --              --       1,230,000       1,302,127         645,000         682,823 
National City Bank sub. notes                                                                                                       
Ser. BKNT, 6 1/4s, 2011                          --              --       3,515,000       3,519,816       2,250,000       2,253,083 
Peoples Heritage Capital Trust company                                                                                              
guaranty Ser. B, 9.06s, 2027                     --              --         210,000         193,937         175,000         161,614 
Provident Capital Trust                                                                                                             
company guaranty 8.6s, 2026                      --              --         190,000         167,116              --              -- 
Riggs Capital Trust 144A bonds                                                                                                      
8 5/8s, 2026                                 35,000          25,136         120,000          86,180          70,000          50,272 
Sovereign Bancorp, Inc. sr. notes                                                                                                   
10 1/2s, 2006                             1,470,000       1,609,650       5,220,000       5,715,900       4,280,000       4,686,600 
Sovereign Capital Trust                                                                                                             
company guaranty 9s, 2027                    50,000          34,500              --              --          45,000          31,050 
Washington Mutual Bank FA                                                                                                           
notes 6 7/8s, 2011                               --              --       4,745,000       4,982,392       3,040,000       3,192,091 
Webster Capital Trust I 144A bonds                                                                                                  
9.36s, 2027                                   5,000           4,336          20,000          17,344         320,000         277,504 
Wells Fargo & Co. notes 5.9s, 2006               --              --       3,955,000       4,125,065       2,525,000       2,633,575 
Wells Fargo & Co. sr. notes 7 1/4s,                                                                                                 
2005                                             --              --       4,710,000       5,125,139       2,225,000       2,421,112 
                                                     --------------                  --------------                  -------------- 
                                                          5,059,693                      55,983,895                      38,717,721 

Beverage                                                        --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Anheuser-Busch Companies, Inc.                                                                                                      
deb. 7.55s, 2030                                 --              --       1,805,000       2,036,924         930,000       1,049,496 
Constellation Brands, Inc.                                                                                                          
company guaranty 8 1/2s, 2009               100,000          96,750              --              --          60,000          58,050 
Constellation Brands, Inc.                                                                                                          
company guaranty Ser. B, 8s, 2008           480,000         482,400              --              --         240,000         241,200 
                                                     --------------                  --------------                  -------------- 
                                                            579,150                       2,036,924                       1,348,746 

Broadcasting                                                   0.9%                            0.4%                            1.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Acme Television company guaranty                                                                                                    
10 7/8s, 2004                               850,000         748,000              --              --         420,000         369,600 
Allbritton Communications Co. sr.                                                                                                   
sub. notes Ser. B, 8 7/8s, 2008             200,000         196,000              --              --         100,000          98,000 
AMFM Operating, Inc. deb.                                                                                                           
12 5/8s, 2006  (PIK)                         85,500          92,340          63,600          68,688          22,200          23,976 
Benedek Communications Corp.                                                                                                        
sr. disc. notes 13 1/4s, 2006               560,000         302,400              --              --         275,000         148,500 
British Sky Broadcasting PLC company                                                                                                
guaranty 8.2s, 2009 (United Kingdom)        465,000         470,850              --              --         230,000         232,893 
British Sky Broadcasting PLC company                                                                                                
guaranty 6 7/8s, 2009 (United Kingdom)      780,000         732,631       4,219,000       3,962,780       3,290,000       3,090,198 
Chancellor Media Corp.                                                                                                              
company guaranty 8s, 2008                 1,320,000       1,359,600              --              --         710,000         731,300 
Diva Systems Corp. sr. disc. notes                                                                                                  
stepped-coupon Ser. B, zero % (12 5/8s,                                                                                             
3/1/03), 2008 (STP)                       1,829,000         205,763              --              --       1,123,000         126,338 
Echostar Broadband Corp. sr. notes                                                                                                  
10 3/8s, 2007                             3,075,000       3,105,750              --              --       1,590,000       1,605,900 
Echostar DBS Corp. sr. notes                                                                                                        
9 3/8s, 2009                                130,000         126,750              --              --              --              -- 
Emmis Communications Corp. sr. disc.                                                                                                
notes stepped-coupon zero % (12 1/2s,                                                                                               
3/15/06), 2011 (STP)                        270,000         148,500              --              --         130,000          71,500 
Fox Family Worldwide, Inc. sr. disc.                                                                                                
notes stepped-coupon zero % (10 1/4s,                                                                                               
11/1/02), 2007 (STP)                        390,000         366,600              --              --         130,000         122,200 
Fox Family Worldwide, Inc. sr. notes                                                                                                
9 1/4s, 2007                              1,220,000       1,268,800              --              --         660,000         686,400 
Fox/Liberty Networks, LLC sr. notes                                                                                                 
8 7/8s, 2007                                260,000         266,500              --              --         140,000         143,500 
Granite Broadcasting Corp.                                                                                                          
sr. sub. notes 9 3/8s, 2005                 575,000         385,250              --              --         140,000          93,800 
Granite Broadcasting Corp.                                                                                                          
sr. sub. notes 8 7/8s, 2008                      --              --              --              --         150,000         102,000 
Knology Holdings, Inc. sr. disc. notes                                                                                              
stepped-coupon 11 7/8s (11 7/8s,                                                                                                    
10/15/02), 2007 (STP)                        45,000          14,850              --              --          20,000           6,600 
LIN Holdings Corp. sr. disc. notes                                                                                                  
stepped-coupon zero % (10s, 3/1/03), 2008                                                                                           
(STP)                                       140,000         101,500              --              --         240,000         174,000 
LIN Holdings Corp. 144A sr. disc. notes                                                                                             
stepped-coupon zero % (10s, 3/1/03), 2008                                                                                           
(STP)                                        80,000          44,000              --              --          40,000          22,000 
LIN Television Corp. company guaranty                                                                                               
8 3/8s, 2008                                770,000         704,550              --              --         240,000         219,600 
News America, Inc. sr. notes                                                                                                        
6 5/8s, 2008                                120,000         121,440              --              --          60,000          60,720 
News America Holdings, Inc. deb.                                                                                                    
7.7s, 2025                                       --              --       7,085,000       6,746,408       3,590,000       3,418,434 
Pegasus Satellite sr. notes 12 3/8s, 2006   660,000         541,200              --              --         330,000         270,600 
Quorum Broadcast Holdings, LLC notes                                                                                                
stepped-coupon zero % (15s, 5/15/06),                                                                                               
2009 (RES)(STP)                           1,298,450         516,004              --              --         638,920         253,907 
Radio One, Inc. 144A sr. sub. notes                                                                                                 
8 7/8s, 2011                                310,000         308,450              --              --         150,000         149,250 
RCN Corp. sr. notes 10 1/8s, 2010                --              --              --              --         170,000          57,800 
Sinclair Broadcast Group, Inc.                                                                                                      
company guaranty 9s, 2007                   340,000         309,400              --              --          90,000          81,900 
Sinclair Broadcast Group, Inc.                                                                                                      
sr. sub. notes 10s, 2005                     40,000          38,000              --              --              --              -- 
Sinclair Broadcast Group, Inc.                                                                                                      
sr. sub. notes 8 3/4s, 2007                 390,000         351,000              --              --         310,000         279,000 
XM Satellite Radio Holdings, Inc.                                                                                                   
sec. notes 14s, 2010                        470,000         220,900              --              --         230,000         108,100 
Young Broadcasting, Inc. 144A                                                                                                       
sr. sub. notes 10s, 2011                    890,000         712,000              --              --         440,000         352,000 
                                                     --------------                  --------------                  -------------- 
                                                         13,759,028                      10,777,876                      13,100,016 

Building Materials                                             0.2%                             --%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
American Standard Companies, Inc. company                                                                                           
guaranty 7 5/8s, 2010                       515,000         505,988              --              --         390,000         383,175 
American Standard Companies, Inc.                                                                                                   
company guaranty 7 3/8s, 2005                90,000          89,100              --              --              --              -- 
American Standard Companies, Inc. company                                                                                           
guaranty 7 1/8s, 2003                       240,000         236,400              --              --         110,000         108,350 
Atrium Companies, Inc.                                                                                                              
company guaranty Ser. B,                                                                                                            
10 1/2s, 2009                               180,000         149,400              --              --          50,000          41,500 
Building Materials Corp. company guaranty                                                                                           
8s, 2008                                    210,000         132,300       1,240,000         781,200         740,000         466,200 
Dayton Superior Corp.                                                                                                               
company guaranty 13s, 2009                  860,000         832,050              --              --         460,000         445,050 
NCI Building Systems, Inc. sr. sub. notes                                                                                           
Ser. B, 9 1/4s, 2009                        280,000         252,350              --              --         100,000          90,125 
Nortek, Inc. sr. notes Ser. B,                                                                                                      
8 7/8s, 2008                                280,000         249,200              --              --         140,000         124,600 
Nortek, Inc. sr. sub. notes Ser. B,                                                                                                 
9 7/8s, 2011                                 40,000          34,800              --              --          20,000          17,400 
Nortek, Inc. 144A sr. notes Ser. B,                                                                                                 
9 1/8s, 2007                                140,000         134,400              --              --          70,000          67,200 
                                                     --------------                  --------------                  -------------- 
                                                          2,615,988                         781,200                       1,743,600 

Cable Television                                               1.0%                            0.5%                            1.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
Adelphia Communications Corp. sr. notes                                                                                             
10 7/8s, 2010                               720,000         633,600              --              --         380,000         334,400 
Adelphia Communications Corp.                                                                                                       
sr. notes 10 1/4s, 2011                     750,000         656,250              --              --         310,000         271,250 
Adelphia Communications Corp.                                                                                                       
sr. notes 7 7/8s, 2009                           --              --         835,000         676,350         280,000         226,800 
Adelphia Communications Corp. sr. notes                                                                                             
Ser. B, 9 7/8s, 2007                      2,065,000       1,796,550              --              --       1,165,000       1,013,550 
Adelphia Communications Corp.                                                                                                       
sr. notes Ser. B, 8 3/8s, 2008               60,000          50,400              --              --              --              -- 
Adelphia Communications Corp.                                                                                                       
sr. notes Ser. B, 7 3/4s, 2009               70,000          56,700              --              --          30,000          24,300 
Century Communications Corp.                                                                                                        
sr. notes 8 7/8s, 2007                      190,000         165,300          30,000          26,100          50,000          43,500 
Charter Communications Holdings, LLC sr.                                                                                            
disc. notes stepped-coupon zero %                                                                                                   
(11 3/4s, 5/15/06), 2011 (STP)              870,000         469,800              --              --         440,000         237,600 
Charter Communications Holdings, LLC sr.                                                                                            
notes 11 1/8s, 2011                       3,260,000       3,260,000              --              --       1,560,000       1,560,000 
Charter Communications Holdings,                                                                                                    
LLC sr. notes 10 3/4s, 2009                 120,000         120,600              --              --          60,000          60,300 
Charter Communications Holdings,                                                                                                    
LLC sr. notes 8 1/4s, 2007                  190,000         171,000              --              --         100,000          90,000 
Comcast UK Cable, Ltd. deb. 11.2s,                                                                                                  
2007 (Bermuda)                              550,000         356,125              --              --       1,090,000         705,775 
CSC Holdings, Inc. deb. 7 5/8s, 2018             --              --       1,630,000       1,482,436       1,380,000       1,255,069 
CSC Holdings, Inc. sr. notes 7 7/8s, 2007        --              --       1,285,000       1,337,043         630,000         655,515 
CSC Holdings, Inc. sr. notes 7 1/4s, 2008        --              --         310,000         305,136         110,000         108,274 
CSC Holdings, Inc. sr. notes Ser. B,                                                                                                
8 1/8s, 2009                                     --              --       3,560,000       3,662,065       1,440,000       1,481,285 
CSC Holdings, Inc. sr. sub. deb.                                                                                                    
10 1/2s, 2016                             1,410,000       1,480,500              --              --         980,000       1,029,000 
CSC Holdings, Inc. sr. sub. deb. 9 7/8s,                                                                                            
2013                                      1,155,000       1,183,875       1,310,000       1,342,750       2,080,000       2,132,000 
Diamond Cable Communication PLC sr. disc.                                                                                           
notes stepped-coupon zero % (10 3/4s,                                                                                               
2/15/02), 2007 (United Kingdom) (STP)     1,025,000         407,438       1,070,000         425,325       1,330,000         528,675 
Insight Communications Company, Inc. sr.                                                                                            
disc. notes stepped-coupon zero %                                                                                                   
(12 1/4s, 2/15/06), 2011 (STP)              110,000          60,500              --              --          30,000          16,500 
Insight Midwest LP/Insight Capital, Inc.                                                                                            
sr. notes 10 1/2s, 2010                   1,130,000       1,169,550              --              --         580,000         600,300 
International Cabletel, Inc.                                                                                                        
sr. disc. notes 11 1/2s, 2006               180,000          92,700              --              --         360,000         185,400 
Jones Intercable, Inc. sr. notes                                                                                                    
8 7/8s, 2007                                     --              --       1,230,000       1,340,122         340,000         370,440 
Mediacom LLC/Mediacom Capital                                                                                                       
Corp. sr. notes 9 1/2s, 2013                140,000         137,900              --              --          70,000          68,950 
NTL Communications Corp. sr. notes                                                                                                  
Ser. B, 11 7/8s, 2010                     1,070,000         551,050              --              --         360,000         185,400 
NTL Communications Corp. sr. notes                                                                                                  
Ser. B, 11 1/2s, 2008                     1,850,000         962,000              --              --              --              -- 
ONO Finance PLC sr. notes 14s, 2011                                                                                                 
(United Kingdom)                            290,000         168,200              --              --              --              -- 
ONO Finance PLC sr. notes 13s, 2009                                                                                                 
(United Kingdom)                             30,000          17,700              --              --         180,000         106,200 
Rogers Cablesystems, Ltd. deb. 10 1/8s,                                                                                             
2012 (Canada)                               110,000         114,400              --              --          50,000          52,000 
Rogers Cablesystems, Ltd. notes 11s,                                                                                                
2015 (Canada)                                90,000          95,400              --              --          50,000          53,000 
Rogers Cablesystems, Ltd. sr. notes                                                                                                 
Ser. B, 10s, 2005 (Canada)                   70,000          72,800              --              --          40,000          41,600 
Rogers Cablesystems, Ltd. sr. sub. notes                                                                                            
8.8s, 2007 (Canada)                         410,000         369,000         950,000         855,000         585,000         526,500 
Supercanal Holdings S.A. 144A sr. notes                                                                                             
11 1/2s, 2005 (Argentina)                                                                                                           
(In default) (NON)                          420,000          42,000              --              --         100,000          10,000 
TeleWest Communications PLC                                                                                                         
deb. 11s, 2007 (United Kingdom)             450,000         279,000              --              --              --              -- 
United Pan-Europe NV sr. disc. notes                                                                                                
stepped-coupon zero % (12 1/2s, 8/1/04),                                                                                            
2009 (Netherlands) (STP)                    870,000          78,300              --              --         850,000          76,500 
United Pan-Europe NV sr. disc. notes                                                                                                
stepped-coupon zero % (13 3/4s, 2/1/05),                                                                                            
2010 (Netherlands) (STP)                  2,890,000         245,650              --              --         890,000          75,650 
United Pan-Europe NV sr. notes Ser. B,                                                                                              
10 7/8s, 2007 (Netherlands)                 530,000          74,200              --              --         220,000          30,800 
United Pan-Europe NV 144A bonds                                                                                                     
10 7/8s, 2009 (Netherlands)                      --              --              --              --          80,000          12,000 
                                                     --------------                  --------------                  -------------- 
                                                         15,338,488                      11,452,327                      14,168,533 

Chemicals                                                      0.7%                            0.5%                            1.5% 
----------------------------------------------------------------------------------------------------------------------------------- 
Acetex Corp. 144A sr. notes 10 7/8s,                                                                                                
2009 (Canada)                               260,000         250,900              --              --         130,000         125,450 
Airgas, Inc. 144A sr. sub. notes                                                                                                    
9 1/8s, 2011                                200,000         204,000       1,190,000       1,213,800         910,000         928,200 
ARCO Chemical Co. deb. 9.8s, 2020                --              --              --              --         240,000         216,000 
Avecia Group PLC company guaranty                                                                                                   
11s, 2009 (United Kingdom)                  180,000         171,000              --              --          90,000          85,500 
Equistar Chemicals LP/Equistar Funding                                                                                              
Corp. 144A sr. notes 10 1/8s, 2008        1,180,000       1,093,353       1,960,000       1,816,077       1,930,000       1,788,280 
Geo Specialty Chemicals, Inc.                                                                                                       
sr. sub. notes 10 1/8s, 2008                290,000         258,100              --              --         150,000         133,500 
Georgia Gulf Corp. company guaranty                                                                                                 
10 3/8s, 2007                               130,000         128,700              --              --          60,000          59,400 
Hercules, Inc. 144A company guaranty                                                                                                
11 1/8s, 2007                             1,110,000       1,065,600              --              --         550,000         528,000 
Huntsman Corp. 144A sr. sub. notes                                                                                                  
9 1/2s, 2007                                     --              --              --              --         300,000          96,000 
Huntsman Corp. 144A sr. sub. notes                                                                                                  
FRN 7.08s, 2007                             760,000         212,800              --              --         100,000          28,000 
Huntsman ICI Chemicals, Inc.                                                                                                        
company guaranty 10 1/8s, 2009            1,140,000         980,400              --              --         710,000         610,600 
IMC Global, Inc. 144A sr. notes                                                                                                     
11 1/4s, 2011                               430,000         424,217              --              --         210,000         207,176 
IMC Global, Inc. 144A sr. notes 10 7/8s,                                                                                            
2008                                        500,000         492,850       2,400,000       2,365,680       1,900,000       1,872,830 
ISP Chemco, Inc. 144A sr. sub. notes                                                                                                
10 1/4s, 2011                               960,000         943,200              --              --         480,000         471,600 
ISP Holdings, Inc. sr. notes Ser. B,                                                                                                
9s, 2003                                    150,000         149,250              --              --          70,000          69,650 
Lyondell Petrochemical Co. notes Ser. A,                                                                                            
9 5/8s, 2007                                890,000         809,900       4,390,000       3,994,900       2,530,000       2,302,300 
Lyondell Petrochemical Co. sec. notes                                                                                               
Ser. B, 9 7/8s, 2007                      1,520,000       1,375,600       1,750,000       1,583,750       2,665,000       2,411,825 
Millenium America, Inc. company guaranty                                                                                            
9 1/4s, 2008                                580,000         544,411       1,960,000       1,839,734       1,640,000       1,539,370 
Noveon, Inc. company guaranty Ser. B,                                                                                               
11s, 2011                                   250,000         245,000              --              --         120,000         117,600 
PCI Chemicals & Pharmaceuticals company                                                                                             
guaranty 9 1/4s, 2007 (Canada) (In                                                                                                  
default) (NON)                              100,000          36,000              --              --              --             --  
Pioneer Americas Acquisition company                                                                                                
guaranty 9 1/4s, 2007 (In default) (NON)    185,000          59,200              --              --          90,000          28,800 
Polymer Group, Inc. company guaranty                                                                                                
Ser. B, 9s, 2007                            230,000          86,250              --              --         230,000          86,250 
Polymer Group, Inc. company guaranty                                                                                                
Ser. B, 8 3/4s, 2008                        560,000         210,000              --              --         160,000          60,000 
Royster-Clark, Inc. 1st mtge.                                                                                                       
10 1/4s, 2009                               495,000         346,500              --              --         450,000         315,000 
Sterling Chemicals, Inc. company guaranty                                                                                           
Ser. B, 12 3/8s, 2006 (In default) (NON)    500,000         400,000              --              --         260,000         208,000 
Sterling Chemicals Holdings sr. disc.                                                                                               
notes 13 1/2s, 2008 (In default) (NON)      370,000          11,100              --              --         100,000           3,000 
Texas Petrochemical Corp. sr. sub. notes                                                                                            
Ser. B, 11 1/8s, 2006                       140,000         110,600              --              --          70,000          55,300 
                                                     --------------                  --------------                  -------------- 
                                                         10,608,931                      12,813,941                      14,347,631 

Commercial and Consumer Services                               0.1%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Coinmach Corp. sr. notes Ser. D,                                                                                                    
11 3/4s, 2005                             1,110,000       1,132,200              --              --         690,000         703,800 

Components                                                      --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Seagate Technology, Inc. 144A company                                                                                               
guaranty 12 1/2s, 2007 (Cayman Islands)     100,000          99,000       1,680,000       1,663,200       1,370,000       1,356,300 

Computers                                                       --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Unisys Corp. sr. notes 8 1/8s, 2006         390,000         374,400              --              --         190,000         182,400 

Conglomerates                                                   --%                            0.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Tyco International, Ltd. company guaranty                                                                                           
6 3/4s, 2011 (Luxembourg)                        --              --       4,985,000       5,166,354       2,665,000       2,761,953 

Construction                                                   0.1%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Better Minerals & Aggregates Co.                                                                                                    
company guaranty 13s, 2009                1,220,000         927,200              --              --         610,000         463,600 
Morrison Knudsen Corp. 144A                                                                                                         
sr. notes 11s, 2010 (In default) (NON)      570,000          57,000              --              --         275,000          27,500 
                                                     --------------                  --------------                  -------------- 
                                                            984,200                              --                         491,100 

Consumer                                                       0.1%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Jostens, Inc. sr. sub. notes 12 3/4s,                                                                                               
2010  880,000                               888,800              --              --         435,000         439,350                 
Samsonite Corp. sr. sub. notes                                                                                                      
10 3/4s, 2008                             1,130,000         802,300              --              --         560,000         397,600 
Sealy Mattress Co. sr. sub. notes                                                                                                   
Ser. B, 9 7/8s, 2007                        676,000         625,300              --              --         337,000         311,725 
                                                     --------------                  --------------                  -------------- 
                                                          2,316,400                              --                       1,148,675 

Consumer Finance                                               0.1%                            1.0%                            1.6% 
----------------------------------------------------------------------------------------------------------------------------------- 
Capital One Financial Corp. notes                                                                                                   
7 1/4s, 2006                                     --              --       1,120,000       1,114,974         880,000         876,051 
Delta Financial Corp. company guaranty                                                                                              
9 1/2s, 2004 (In default) (NON)             767,000         222,430              --              --         192,000          55,680 
Finova Group, Inc. notes 7 1/2s, 2009     3,390,000       1,356,000              --              --       1,680,000         672,000 
Ford Motor Credit Corp. notes 7 3/8s,                                                                                               
2009                                             --             --       5,910,000       6,059,050       3,385,000       3,470,370  
Ford Motor Credit Corp. sr. notes                                                                                                   
5.8s, 2009                                       --              --       1,750,000       1,638,263         960,000         898,704 
General Motors Acceptance Corp.                                                                                                     
notes 5 3/4s, 2003                               --              --       3,970,000       4,090,648       2,835,000       2,921,156 
General Motors Acceptance Corp.                                                                                                     
notes 6 7/8s, 2011                               --              --       2,575,000       2,541,886       1,555,000       1,535,003 
General Motors Acceptance Corp.                                                                                                     
notes 6 5/8s, 2002                               --              --       1,600,000       1,641,936         900,000         923,589 
Household Finance Corp. notes                                                                                                       
8s, 2005                                         --              --       7,400,000       8,099,374       4,225,000       4,624,305 
Nationwide Credit, Inc. sr. notes                                                                                                   
Ser. A, 10 1/4s, 2008                       660,000         198,000              --              --         160,000          48,000 
Outsourcing Solutions, Inc. sr. sub.                                                                                                
notes Ser. B, 11s, 2006                     420,000         350,700              --              --         215,000         179,525 
                                                     --------------                  --------------                  -------------- 
                                                          2,127,130                      25,186,131                      16,204,383 

Consumer Goods                                                 0.2%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Albecca, Inc. company guaranty                                                                                                      
10 3/4s, 2008                               460,000         462,300              --              --         220,000         221,100 
Armkel, LLC/Armkel Finance 144A                                                                                                     
sr. sub. notes 9 1/2s, 2009                 270,000         272,700              --              --         130,000         131,300 
Elizabeth Arden, Inc. sec. notes Ser. B,                                                                                            
11 3/4s, 2011                               190,000         175,750              --              --         140,000         129,500 
French Fragrances, Inc. company                                                                                                     
guaranty Ser. D, 10 3/8s, 2007              150,000         136,500              --              --          20,000          18,200 
Home Interiors & Gifts, Inc. company                                                                                                
guaranty 10 1/8s, 2008                      380,000         247,000              --              --         180,000         117,000 
Iron Age Holdings Corp. sr. disc. notes                                                                                             
stepped-coupon zero % (12 1/8s, 5/1/03),                                                                                            
2009 (STP)                                       --              --         320,000          28,800              --              -- 
NBTY, Inc. sr. sub. notes Ser. B,                                                                                                   
8 5/8s, 2007                                250,000         237,500              --              --         130,000         123,500 
Playtex Products, Inc. company guaranty                                                                                             
9 3/8s, 2011                                370,000         371,850              --              --         190,000         190,950 
Revlon Consumer Products sr. notes                                                                                                  
9s, 2006                                    540,000         394,200              --              --         270,000         197,100 
Scotts Co. (The) company guaranty                                                                                                   
8 5/8s, 2009                                290,000         284,200              --              --         150,000         147,000 
                                                     --------------                  --------------                  -------------- 
                                                          2,582,000                          28,800                       1,275,650 

Consumer Services                                               --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
United Rentals (North America), Inc. 144A                                                                                           
company guaranty 10 3/4s, 2008              210,000         206,325              --              --         100,000          98,250 

Containers                                                     0.3%                            0.1%                            0.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
AEP Industries, Inc. sr. sub. notes                                                                                                 
9 7/8s, 2007                                575,000         511,750              --              --         290,000         258,100 
Applied Extrusion Technologies, Inc. 144A                                                                                           
sr. notes 10 3/4s, 2011                     360,000         360,000              --              --         180,000         180,000 
Ball Corp. company guaranty                                                                                                         
8 1/4s, 2008                                290,000         290,000       2,275,000       2,275,000         455,000         455,000 
Ball Corp. company guaranty                                                                                                         
7 3/4s, 2006                                     --              --         945,000         945,000       1,772,000       1,772,000 
Huntsman Packaging Corp. company guaranty                                                                                           
13s, 2010                                        --              --              --              --         160,000         134,400 
Owens-Illinois, Inc. deb. 7 1/2s, 2010      220,000         165,000              --              --          10,000           7,500 
Owens-Illinois, Inc. sr. notes 8.1s, 2007   270,000         210,600              --              --         170,000         132,600 
Owens-Illinois, Inc. sr. notes 7.35s, 2008  710,000         532,500              --              --         270,000         202,500 
Owens-Illinois, Inc. sr. notes 7.15s, 2005  410,000         323,900              --              --         260,000         205,400 
Radnor Holdings, Inc. sr. notes 10s, 2003   185,000         140,600         365,000         277,400         170,000         129,200 
Tekni-Plex, Inc. company guaranty                                                                                                   
Ser. B, 12 3/4s, 2010                       940,000         817,800              --              --         460,000         400,200 
U.S. Can Corp. company guaranty                                                                                                     
Ser. B, 12 3/8s, 2010                       770,000         685,300              --              --         370,000         329,300 
                                                     --------------                  --------------                  -------------- 
                                                          4,037,450                       3,497,400                       4,206,200 

Electric Utilities                                             0.3%                            1.4%                            2.6% 
----------------------------------------------------------------------------------------------------------------------------------- 
AES Corp. sr. notes 9 3/8s, 2010            960,000         816,000       4,870,000       4,139,500       3,810,000       3,238,500 
AES Corp. (The) notes 8 3/4s, 2008          220,000         187,000              --              --         100,000          85,000 
AES Corp. (The) sr. notes 8 7/8s, 2011      670,000         569,500              --              --         360,000         306,000 
Arizona Public Service Co. sr. notes                                                                                                
6 3/4s, 2006                                     --              --              --              --       1,135,000       1,199,809 
Cleveland Electric Illuminating Co.                                                                                                 
(The) 144A sr. notes Ser. D, 7.88s,                                                                                                 
2017                                      1,370,000       1,436,733              --              --         680,000         713,123 
CMS Energy Corp. pass-through                                                                                                       
certificates 7s, 2005                       480,000         480,149         900,000         900,279         460,000         460,143 
CMS Energy Corp. sr. notes 8.9s, 2008            --              --              --              --          60,000          59,657 
CMS Energy Corp. sr. notes Ser. B,                                                                                                  
6 3/4s, 2004                                655,000         635,350       2,700,000       2,619,000       2,490,000       2,415,300 
CMS Panhandle Holding Corp. sr. notes                                                                                               
6 1/8s, 2004                                     --              --       2,325,000       2,357,225       1,320,000       1,338,295 
Dominion Resources, Inc. sr. notes                                                                                                  
Ser. B,  7 5/8s, 2005                            --              --       4,690,000       5,088,744       2,210,000       2,397,894 
Mission Energy Holding 144A sec. notes                                                                                              
13 1/2s, 2008                               550,000         565,125       2,730,000       2,805,075       2,150,000       2,209,125 
Northeast Utilities notes Ser. A,                                                                                                   
8.58s, 2006                                  13,253          14,109          33,132          35,272         160,168         170,512 
Northeast Utilities notes Ser. B,                                                                                                   
8.38s, 2005                                 152,533         161,226         187,733         198,432         123,200         130,221 
NRG Northeast Generating Corp. company                                                                                              
guaranty Ser. A-1, 8.065s, 2004                  --              --       1,715,625       1,765,498         921,094         947,870 
Pacific Gas & Electric Co. 144A                                                                                                     
sr. notes 7 3/8s, 2005                      370,000         344,100              --              --         180,000         167,400 
Progress Energy, Inc. sr. notes 7.1s,                                                                                               
2011                                             --              --       3,965,000       4,216,262       2,295,000       2,440,434 
PSEG Energy Holdings, Inc. 144A sr.                                                                                                 
notes 8 5/8s, 2008                               --              --       4,720,000       5,053,226       3,280,000       3,511,564 
The Cleveland Electric Illuminating Co.                                                                                             
1st mtge. Ser. B, 9 1/2s, 2005               60,000          61,755              --              --         150,000         154,388 
Toledo Edison Co. med. term notes                                                                                                   
9.22s, 2021                                      --              --              --              --         500,000         543,280 
TXU Corp. sr. notes Ser. J, 6 3/8s, 2006         --              --       4,585,000       4,731,307       3,000,000       3,095,730 
                                                     --------------                  --------------                  -------------- 
                                                          5,271,047                      33,909,820                      25,584,245 

Electrical Equipment                                            --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Avista Corp. 144A sr. notes 9 3/4s, 2008         --              --       3,250,000       3,402,653       2,230,000       2,334,743 

Energy                                                         0.2%                            0.4%                            0.7% 
----------------------------------------------------------------------------------------------------------------------------------- 
BRL Universal Equipment sec. notes 8 7/8s,                                                                                          
2008                                        370,000         364,450       2,960,000       2,915,600       2,220,000       2,186,700 
Grant Prideco, Inc. company guaranty                                                                                                
Ser. B, 9 5/8s, 2007                        250,000         237,500              --              --         130,000         123,500 
Hanover Equipment Trust 144A                                                                                                        
sec. notes 8 1/2s, 2008                     240,000         238,200              --              --         120,000         119,100 
Key Energy Services, Inc. company                                                                                                   
guaranty Ser. B, 8 3/8s, 2008               250,000         248,733              --              --         120,000         119,392 
Lone Star Technologies, Inc. 144A                                                                                                   
sr. sub. notes 9s, 2011                     210,000         176,400              --              --         100,000          84,000 
Parker Drilling Corp. company guaranty                                                                                              
Ser. D, 9 3/4s, 2006                        505,000         499,950              --              --         250,000         247,500 
Pride Petroleum Services, Inc. sr. notes                                                                                            
9 3/8s, 2007                              1,000,000       1,030,000       2,130,000       2,193,900       1,870,000       1,926,100 
R&B Falcon Corp. sr. notes Ser. B,                                                                                                  
6 3/4s, 2005                                900,000         933,003              --              --         290,000         300,634 
Transocean Sedco Forex, Inc. notes                                                                                                  
6 5/8s, 2011                                     --              --       3,830,000       3,762,384       2,210,000       2,170,984 
                                                     --------------                  --------------                  -------------- 
                                                          3,728,236                       8,871,884                       7,277,910 

Entertainment                                                  0.2%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
AMC Entertainment, Inc. sr. sub. notes                                                                                              
9 1/2s, 2009                                520,000         452,400              --              --         113,000          98,310 
Cinemark USA, Inc. sr. sub. notes Ser. B,                                                                                           
8 1/2s, 2008                                675,000         526,500              --              --         290,000         226,200 
Premier Parks, Inc. sr. notes 9 3/4s, 2007  690,000         652,050              --              --         230,000         217,350 
Premier Parks, Inc. sr. notes 9 1/4s, 2006   13,000          12,285              --              --          80,000          75,600 
Silver Cinemas, Inc. sr. sub. notes                                                                                                 
10 1/2s, 2005 (In default) (NON)            450,000              45              --              --         110,000              11 
Six Flags Corp. sr. notes 8 7/8s, 2006      500,000         490,000              --              --         400,000         392,000 
Six Flags, Inc. sr. notes 9 1/2s, 2009      230,000         216,200              --              --              --              -- 
United Artists Theatre sr. sub. notes                                                                                               
Ser. B, 9 3/4s, 2008 (In default) (NON)   1,650,000          66,000              --              --         435,000          17,400 
                                                     --------------                  --------------                  -------------- 
                                                          2,415,480                              --                       1,026,871 

Financial                                                      0.1%                            1.0%                            1.7% 
----------------------------------------------------------------------------------------------------------------------------------- 
Advanta Corp. 144A company guaranty                                                                                                 
Ser. B, 8.99s, 2026                              --              --         100,000          64,000          85,000          54,400 
AMRESCO, Inc. sr. sub. notes Ser. 97-A,                                                                                             
10s, 2004 (In default) (NON)                101,000          38,380              --              --          30,000          11,400 
AMRESCO, Inc. sr. sub. notes Ser. 98-A,                                                                                             
9 7/8s, 2005 (In default) (NON)             400,000         152,000              --              --         210,000          79,800 
Associates Corp. sr. notes 6 1/4s, 2008          --              --       4,195,000       4,290,856       2,820,000       2,884,437 
Conseco Financing Trust II company                                                                                                  
guaranty 8.7s, 2026                         310,000         148,800       3,540,000       1,699,200       2,860,000       1,372,800 
Conseco, Inc. sr. notes 10 3/4s, 2008       490,000         382,200              --              --         400,000         312,000 
Conseco Financial Corp. sr. sub. notes                                                                                              
10 1/4s, 2002                                    --              --       1,806,000       1,715,700         980,000         931,000 
Conseco Finance Trust III, Inc. bonds                                                                                               
8.796s, 2027                              1,360,000         652,800              --              --         600,000         288,000 
Imperial Credit Industries, Inc.                                                                                                    
sec. notes 12s, 2005                        244,000         122,000              --              --         128,000          64,000 
Markel Capital Trust I company guaranty                                                                                             
Ser. B, 8.71s, 2046                              --              --       2,250,000       1,724,558       1,750,000       1,341,323 
Nisource Finance Corp. company guaranty                                                                                             
Ser. B, 7 5/8s, 2005                             --              --       4,690,000       5,098,827       2,210,000       2,402,646 
Ocwen Capital Trust I company                                                                                                       
guaranty 10 7/8s, 2027                       70,000          53,900              --              --          15,000          11,550 
Ocwen Federal Bank sub. deb.                                                                                                        
12s, 2005                                   102,000          94,860              --              --          55,000          51,150 
Ocwen Financial Corp. notes 11 7/8s,                                                                                                
2003                                        140,000         133,000              --              --          80,000          76,000 
Superior Financial 144A sr. notes                                                                                                   
8.65s, 2003                                      --              --              --              --         240,000         246,245 
TIG Capital Trust I 144A bonds                                                                                                      
8.597s, 2027                                     --              --       8,995,000       6,210,238       5,955,000       4,111,392 
TIG Holdings, Inc. notes 8 1/8s, 2005            --              --       3,938,000       3,757,679       2,370,000       2,261,478 
Willis Corroon Corp. 144A                                                                                                           
company guaranty 9s, 2009                   230,000         232,300              --              --         110,000         111,100 
                                                     --------------                  --------------                  -------------- 
                                                          2,010,240                      24,561,058                      16,610,721 

Food                                                           0.2%                            0.2%                            0.6% 
----------------------------------------------------------------------------------------------------------------------------------- 
Aurora Foods, Inc. 144A sr. sub. notes                                                                                              
Ser. D, 9 7/8s, 2007                        990,000         801,900              --              --         510,000         413,100 
Del Monte Corp. 144A sr. sub. notes                                                                                                 
9 1/4s, 2011                                210,000         212,100              --              --         100,000         101,000 
Doane Pet Care Co. sr. sub. deb.                                                                                                    
9 3/4s, 2007                                940,000         737,900              --              --         470,000         368,950 
Eagle Family Foods company guaranty                                                                                                 
Ser. B, 8 3/4s, 2008                         80,000          48,000              --              --          40,000          24,000 
Premier International Foods PLC sr. notes                                                                                           
12s, 2009 (United Kingdom)                  430,000         436,450              --              --         210,000         213,150 
RAB Enterprises, Inc. company guaranty                                                                                              
10 1/2s, 2005                               700,000         371,000              --              --         160,000          84,800 
Unilever Capital Corp. company                                                                                                      
guaranty 7 1/8s, 2010                            --              --       4,545,000       4,988,637       3,840,000       4,214,822 
Vlasic Foods International, Inc. sr. sub.                                                                                           
notes Ser. B, 10 1/4s, 2009 (In default)                                                                                            
(NON)                                            --              --              --              --         240,000          57,600 
                                                     --------------                  --------------                  -------------- 
                                                          2,607,350                       4,988,637                       5,477,422 

Gaming & Lottery                                               0.9%                            0.8%                            2.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Ameristar Casinos, Inc. company                                                                                                     
guaranty 10 3/4s, 2009                      350,000         353,500              --              --         170,000         171,700 
Argosy Gaming Co. company                                                                                                           
guaranty 10 3/4s, 2009                      700,000         742,000              --              --         340,000         360,400 
Argosy Gaming Co. sr. sub. notes                                                                                                    
9s, 2011                                     20,000          20,000              --              --              --              -- 
Boyd Gaming Corp. sr. sub. notes                                                                                                    
9 1/2s, 2007                                     --              --       2,070,000       1,925,100       1,430,000       1,329,900 
Fitzgeralds Gaming Corp. company guaranty                                                                                           
Ser. B, 12 1/4s, 2004 (In default) (NON)    578,671         347,203              --              --         160,247          96,148 
Harrah's Entertainment, Inc. company                                                                                                
guaranty 7 7/8s, 2005                            --              --              --              --         100,000          99,000 
Harrah's Entertainment, Inc. company                                                                                                
guaranty 7 1/2s, 2009                     1,030,000         997,401       1,250,000       1,210,438         725,000         702,054 
Harrah's Operating Co., Inc. company                                                                                                
guaranty 8s, 2011                           120,000         115,570              --              --         190,000         182,987 
Hollywood Casino Corp. company                                                                                                      
guaranty 11 1/4s, 2007                      960,000         960,000              --              --         480,000         480,000 
Hollywood Park, Inc. company                                                                                                        
guaranty Ser. B, 9 1/4s, 2007               280,000         232,400              --              --         140,000         116,200 
Horseshoe Gaming Holdings company                                                                                                   
guaranty 8 5/8s, 2009                     1,310,000       1,283,800              --              --         660,000         646,800 
International Game Technology sr.                                                                                                   
notes 8 3/8s, 2009                        1,030,000       1,030,000       2,390,000       2,390,000       2,150,000       2,150,000 
Isle of Capri Black Hawk LLC 1st mtge.                                                                                              
Ser. B, 13s, 2004                           110,000         119,900              --              --         400,000         436,000 
Isle of Capri Black Hawk LLC company                                                                                                
guaranty 8 3/4s, 2009                       284,000         252,760              --             --         140,000         124,600  
Mandalay Resort Group sr. sub. notes                                                                                                
Ser. B, 10 1/4s, 2007                       475,000         439,375       2,810,000       2,599,250       2,410,000       2,229,250 
MGM Mirage company guaranty 8 3/8s, 2011  1,150,000       1,035,000       3,080,000       2,772,000       2,705,000       2,434,500 
Mohegan Tribal Gaming sr. notes                                                                                                     
8 1/8s, 2006                                190,000         191,900         460,000         464,600         270,000         272,700 
Mohegan Tribal Gaming sr. sub. notes                                                                                                
8 3/4s, 2009                                920,000         924,600       1,460,000       1,467,300       1,745,000       1,753,725 
Park Place Entertainment Corp. sr. sub.                                                                                             
notes 9 3/8s, 2007                          240,000         232,800       3,660,000       3,550,200       2,640,000       2,560,800 
Park Place Entertainment Corp.                                                                                                      
sr. sub. notes 8 7/8s, 2008                 940,000         895,350              --              --         520,000         495,300 
Park Place Entertainment Corp.                                                                                                      
sr. sub. notes 7 7/8s, 2005                      --              --              --              --          70,000          66,150 
Penn National Gaming, Inc. company                                                                                                  
guaranty Ser. B, 11 1/8s, 2008              410,000         410,000              --              --         200,000         200,000 
Riviera Black Hawk, Inc. 1st mtge.                                                                                                  
13s, 2005                                        --              --              --              --         130,000         130,000 
Station Casinos, Inc. sr. notes 8 3/8s,                                                                                             
2008                                        380,000         353,400       3,460,000       3,217,800       2,510,000       2,334,300 
Station Casinos, Inc. sr. sub. notes                                                                                                
9 7/8s, 2010                                490,000         445,900              --              --         310,000         282,100 
Trump A.C. 1st mtge. 11 1/4s, 2006          910,000         564,200              --              --         455,000         282,100 
Trump Castle Funding, Inc. sr. sub. notes                                                                                           
11 3/4s, 2003                               240,000         189,600              --              --         125,000          98,750 
Trump Castle Funding, Inc. sub. notes                                                                                               
10 1/4s, 2003                             1,120,000       1,134,000              --              --         700,000         708,750 
Venetian Casino, Inc. company guaranty                                                                                              
12 1/4s, 2004                               465,000         423,150              --              --         230,000         209,300 
                                                     --------------                  --------------                  -------------- 
                                                         13,693,809                      19,596,688                      20,953,514 

Health Care                                                    0.4%                            0.6%                            1.5% 
----------------------------------------------------------------------------------------------------------------------------------- 
Beverly Enterprises, Inc. sr. notes                                                                                                 
9 5/8s, 2009                                670,000         703,500              --              --         330,000         346,500 
DaVita, Inc. company guaranty Ser. B,                                                                                               
9 1/4s, 2011                                490,000         507,150              --              --              --              -- 
HCA, Inc. deb. 7.19s, 2015                  550,000         508,750       2,425,000       2,243,125       1,480,000       1,369,000 
HCA, Inc. med. term notes 7.69s, 2025        80,000          74,800         200,000         187,000          70,000          65,450 
HCA, Inc. notes 8 3/4s, 2010                550,000         594,000              --              --         930,000       1,004,400 
HCA, Inc. notes 8.36s, 2024                  50,000          49,500              --              --         125,000         123,750 
HCA, Inc. notes 7 1/4s, 2008                     --              --          35,000          35,525              --              -- 
HCA, Inc. notes 7s, 2007                    230,000         230,000              --              --         100,000         100,000 
HCA, Inc. sr. notes 7 7/8s, 2011            930,000         957,900       2,370,000       2,441,100       1,890,000       1,946,700 
HCA-The Healthcare Co.                                                                                                              
med. term notes 6.63s, 2045                 270,000         272,049         640,000         644,858         530,000         534,023 
Healthsouth Corp. sr. sub. notes 10 3/4s,                                                                                           
2008                                        680,000         734,400       3,750,000       4,050,000       3,030,000       3,272,400 
Integrated Health Services, Inc. sr. sub.                                                                                           
notes Ser. A, 9 1/2s, 2007 (In default)                                                                                             
(NON)                                       810,000           3,637              --              --         220,000             988 
Integrated Health Services, Inc. sr. sub.                                                                                           
notes Ser. A, 9 1/4s, 2008 (In default)                                                                                             
(NON)                                       250,000           1,123              --              --          60,000             269 
Lifepoint Hospital Holdings company                                                                                                 
guaranty Ser. B, 10 3/4s, 2009              120,000         132,900              --              --          70,000          77,525 
Mariner Post-Acute Network, Inc. sr. sub.                                                                                           
notes Ser. B, 9 1/2s,                                                                                                               
2007 (In default) (NON)                   1,160,000           8,097              --              --         170,000           1,187 
Mariner Post-Acute Network, Inc. sr. sub.                                                                                           
notes stepped-coupon Ser. B, zero % (10                                                                                             
1/2s, 11/1/02), 2007 (In default) (NON)                                                                                             
(STP)                                       230,000           1,605              --              --         100,000             698 
Multicare Companies, Inc. sr. sub. notes                                                                                            
9s, 2007 (In default) (NON)               1,410,000          56,400              --              --         330,000          13,200 
Paracelsus Healthcare sr. sub. notes                                                                                                
10s, 2006 (In default) (NON)                505,000         159,706              --              --         115,000          36,369 
Tenet Healthcare Corp. sr. notes                                                                                                    
8s, 2005                                         --              --              --              --         370,000         397,750 
Tenet Healthcare Corp. sr. notes Ser. B,                                                                                            
8 1/8s, 2008                                     --              --       3,190,000       3,381,400       2,310,000       2,448,600 
Tenet Healthcare Corp. sr. sub. notes                                                                                               
8 5/8s, 2007                                     --              --       2,650,000       2,769,250       2,010,000       2,100,450 
Triad Hospitals, Inc. company guaranty                                                                                              
Ser. B, 8 3/4s, 2009                        390,000         397,800              --              --          60,000          61,200 
Triad Hospitals Holdings company                                                                                                    
guaranty Ser. B, 11s, 2009                1,095,000       1,182,600              --              --         680,000         734,400 
Vanguard Health Systems, Inc. 144A sr.                                                                                              
sub. notes 9 3/4s, 2011                     430,000         440,750              --              --         210,000         215,250 
                                                     --------------                  --------------                  -------------- 
                                                          7,016,667                      15,752,258                      14,850,109 

Homebuilding                                                   0.3%                            0.2%                            0.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
Beazer Homes USA, Inc. company                                                                                                      
guaranty 8 5/8s, 2011                       430,000         412,800              --              --         210,000         201,600 
D.R. Horton, Inc. company guaranty                                                                                                  
10s, 2006                                   120,000         117,000              --              --         290,000         282,750 
D.R. Horton, Inc. company guaranty                                                                                                  
8 3/8s, 2004                                     --              --       1,400,000       1,337,000         920,000         878,600 
D.R. Horton, Inc. company guaranty                                                                                                  
8s, 2009                                    540,000         486,000         810,000         729,000         580,000         522,000 
Del Webb Corp. sr. sub. deb.                                                                                                        
9 3/8s, 2009                                150,000         151,500              --              --         140,000         141,400 
Del Webb Corp. sr. sub. debs                                                                                                        
9 3/4s, 2008                                160,000         163,200              --              --          90,000          91,800 
Del Webb Corp. sr. sub. debs 9s, 2006       290,000         292,175              --              --          20,000          20,150 
K. Hovnanian Enterprises, Inc.                                                                                                      
company guaranty 10 1/2s, 2007              480,000         475,200              --              --         250,000         247,500 
K. Hovnanian Enterprises, Inc.                                                                                                      
company guaranty 9 1/8s, 2009               220,000         204,600              --              --         100,000          93,000 
KB Home sr. sub. notes 9 1/2s, 2011         720,000         673,200              --              --         350,000         327,250 
Lennar Corp. company guaranty Ser. B,                                                                                               
9.95s, 2010                                 110,000         116,050         530,000         559,150         560,000         590,800 
Lennar Corp. sr. notes 7 5/8s, 2009         480,000         451,200              --              --         150,000         141,000 
M.D.C. Holdings, Inc. sr. notes                                                                                                     
8 3/8s, 2008                                 60,000          57,975              --              --          30,000          28,988 
Ryland Group, Inc. sr. notes                                                                                                        
9 3/4s, 2010                                560,000         575,400              --              --         270,000         277,425 
Standard Pacific Corp. sr. notes                                                                                                    
9 1/2s, 2010                                500,000         465,000              --              --         240,000         223,200 
Toll Corp. company guaranty                                                                                                         
8 1/8s, 2009                                220,000         198,000         390,000         351,000         230,000         207,000 
Toll Corp. sr. sub. notes                                                                                                           
8 1/4s, 2011                                     --              --       1,750,000       1,583,750              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          4,839,300                       4,559,900                       4,274,463 

Investment Banking/Brokerage                                    --%                            0.2%                            0.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
Goldman Sachs Group, Inc. (The) bonds                                                                                               
6 7/8s, 2011                                     --              --       2,210,000       2,285,759       1,260,000       1,303,193 
Morgan Stanley Dean Witter & Co. sr.                                                                                                
notes 6 3/4s, 2011                               --              --       3,650,000       3,759,281       2,350,000       2,420,359 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       6,045,040                       3,723,552 

Lodging/Tourism                                                0.3%                            0.5%                            1.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Felcor Lodging company guaranty 9 1/2s,                                                                                             
2008                                        350,000         301,000       1,770,000       1,522,200       1,590,000       1,367,400 
Felcor Lodging 144A sr. notes                                                                                                       
8 1/2s, 2011                                300,000         270,000              --              --         170,000         153,000 
HMH Properties, Inc. company guaranty                                                                                               
Ser. B, 7 7/8s, 2008                      2,730,000       2,197,650       8,490,000       6,834,450       7,475,000       6,017,375 
HMH Properties, Inc. sr. notes Ser. C,                                                                                              
8.45s, 2008                                      --              --              --              --          10,000           8,400 
Host Marriott L.P. sr. notes Ser. E,                                                                                                
8 3/8s, 2006                                100,000          89,000         320,000         284,800              --              -- 
ITT Corp. notes 6 3/4s, 2005                450,000         439,763       1,665,000       1,627,121         975,000         952,819 
John Q. Hammons Hotels, Inc.                                                                                                        
1st mtge. 8 7/8s, 2004                      660,000         607,200              --              --         290,000         266,800 
Meristar Hospitality Corp. 144A                                                                                                     
sr. notes 9 1/8s, 2011                      630,000         478,800              --              --         310,000         235,600 
Meristar Hospitality Corp. 144A                                                                                                     
sr. notes 9s, 2008                               --              --       2,960,000       2,397,600       2,040,000       1,652,400 
                                                     --------------                  --------------                  -------------- 
                                                          4,383,413                      12,666,171                      10,653,794 

Machinery                                                      0.2%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Briggs & Stratton company guaranty                                                                                                  
8 7/8s, 2011                              1,010,000         994,052              --              --         490,000         482,263 
Case Corp. notes 7 1/4s, 2016               680,000         489,600       1,950,000       1,404,000       1,680,000       1,209,600 
Case Corp. notes 7 1/4s, 2005               170,000         149,600              --              --          80,000          70,400 
Terex Corp. company guaranty                                                                                                        
8 7/8s, 2008                                130,000         119,763              --              --          60,000          55,275 
Terex Corp. company guaranty Ser. B,                                                                                                
10 3/8s, 2011                               120,000         114,000              --              --          60,000          57,000 
Terex Corp. company guaranty Ser. D,                                                                                                
8 7/8s, 2008                                620,000         564,200              --              --         320,000         291,200 
                                                     --------------                  --------------                  -------------- 
                                                          2,431,215                       1,404,000                       2,165,738 

Manufacturing                                                  0.2%                             --%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Agco Corp. 144A sr. notes 9 1/2s, 2008      520,000         514,800              --              --         260,000         257,400 
Blount, Inc. company guaranty 13s, 2009   1,895,000         814,850              --              --         940,000         404,200 
Day International Group, Inc.                                                                                                       
company guaranty 9 1/2s, 2008               550,000         412,500              --              --         200,000         150,000 
Flowserve Corp. company guaranty                                                                                                    
12 1/4s, 2010                               805,000         841,225              --              --         400,000         418,000 
Insilco Holding Co. sr. disc. notes                                                                                                 
stepped-coupon zero % (14s, 8/15/03),                                                                                               
2008 (STP)                                  320,000          48,000              --              --         150,000          22,500 
Motors and Gears, Inc. sr. notes Ser. D,                                                                                            
10 3/4s, 2006                             1,125,000       1,057,500              --              --         560,000         526,400 
Roller Bearing Co. company guaranty                                                                                                 
Ser. B, 9 5/8s, 2007                        250,000         212,500              --              --         230,000         195,500 
                                                     --------------                  --------------                  -------------- 
                                                          3,901,375                              --                       1,974,000 

Media                                                           --%                            0.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
AOL Time Warner, Inc. bonds 7 5/8s, 2031         --              --       4,800,000       4,884,912       2,200,000       2,238,918 
Quebecor Media, Inc. 144A sr. disc. notes                                                                                           
stepped-coupon zero % (13 3/4s, 7/15/06),                                                                                           
2011 (Canada) (STP)                         370,000         188,700              --              --         180,000          91,800 
Quebecor Media, Inc. 144A sr. notes                                                                                                 
11 1/8s, 2011 (Canada)                      370,000         366,300              --              --         180,000         178,200 
                                                     --------------                  --------------                  -------------- 
                                                            555,000                       4,884,912                       2,508,918 

Medical Services                                               0.2%                             --%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
AmerisourceBergen Corp. 144A                                                                                                        
sr. notes 8 1/8s, 2008                      370,000         379,250              --              --         180,000         184,500 
Magellan Health Services, Inc. sr. sub.                                                                                             
notes 9s, 2008                              700,000         672,000              --              --         330,000         316,800 
Magellan Health Services, Inc. 144A                                                                                                 
sr. notes 9 3/8s, 2007                      410,000         415,125              --              --         220,000         222,750 
Mediq, Inc. company guaranty 11s,                                                                                                   
2008 (In default) (NON)                     510,000           5,100              --              --         130,000           1,300 
Mediq, Inc. deb. stepped-coupon zero %                                                                                              
(13s, 6/1/03), 2009 (In default) (NON)                                                                                              
(STP)                                       410,000              41              --              --         100,000              10 
Omnicare, Inc. 144A sr. sub. notes                                                                                                  
8 1/8s, 2011                                380,000         387,600              --              --         160,000         163,200 
Service Corp. International notes                                                                                                   
6s, 2005                                    930,000         781,200              --              --         500,000         420,000 
Stewart Enterprises, Inc. notes                                                                                                     
10 3/4s, 2008                               470,000         495,850              --              --         230,000         242,650 
Sun Healthcare Group, Inc. sr. sub. notes                                                                                           
Ser. B, 9 1/2s, 2007 (In default) (NON)     250,000              25              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
                                                          3,136,191                              --                       1,551,210 

Medical Technology                                             0.1%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
ALARIS Medical, Inc. sr. disc. notes                                                                                                
stepped-coupon zero % (11 1/8s, 8/1/03),                                                                                            
2008 (STP)                                  410,000         180,400              --              --         480,000         211,200 
ALARIS Medical Systems, Inc. 144A                                                                                                   
company guaranty 9 3/4s, 2006               295,000         236,000              --              --              --              -- 
Bio-Rad Labs Corp. sr. sub. notes                                                                                                   
11 5/8s, 2007                               250,000         270,000              --              --         120,000         129,600 
Hanger Orthopedic Group, Inc.                                                                                                       
sr. sub. notes 11 1/4s, 2009                330,000         234,300              --              --         160,000         113,600 
Kinetic Concepts, Inc. company guaranty                                                                                             
Ser. B, 9 5/8s, 2007                        465,000         451,050              --              --         240,000         232,800 
Quest Diagnostics, Inc. company                                                                                                     
guaranty 7 1/2s, 2011                       630,000         659,793              --              --         310,000         324,660 
                                                     --------------                  --------------                  -------------- 
                                                          2,031,543                              --                       1,011,860 

Metals                                                         0.3%                            0.3%                            0.8% 
----------------------------------------------------------------------------------------------------------------------------------- 
AK Steel Corp. company guaranty 7 7/8s,                                                                                             
2009                                      1,725,000       1,604,250       3,520,000       3,273,600       3,260,000       3,031,800 
AK Steel Corp. sr. notes 9 1/8s, 2006        60,000          58,500         510,000         497,250         715,000         697,125 
Alcoa, Inc. notes 6 3/4s, 2028                   --              --       3,575,000       3,482,372       2,310,000       2,250,148 
Anker Coal Group, Inc. company guaranty                                                                                             
Ser. B, 14 1/4s, 2007  (PIK)                426,325         183,320              --              --         205,800          88,494 
Kaiser Aluminum & Chemical Corp. sr. sub.                                                                                           
notes 12 3/4s, 2003                       1,695,000       1,220,400              --              --         845,000         608,400 
LTV Corp. company guaranty 11 3/4s, 2009                                                                                            
(In default) (NON) (STP)                    910,000          18,200       1,490,000          29,800       1,790,000          35,800 
National Steel Corp. 1st mtge. Ser. D,                                                                                              
9 7/8s, 2009                                300,000         114,000              --              --         150,000          57,000 
Oregon Steel Mills 1st mtge. 11s, 2003      280,000         261,800              --              --         150,000         140,250 
P&L Coal Holdings Corp. company                                                                                                     
guaranty Ser. B, 9 5/8s, 2008               260,000         269,100              --              --         123,000         127,305 
United States Steel, LLC 144A                                                                                                       
company guaranty 10 3/4s, 2008              800,000         728,000              --              --         390,000         354,900 
WCI Steel, Inc. sr. notes Ser. B, 10s,                                                                                              
2004                                        700,000         504,000              --              --         350,000         252,000 
Wheeling-Pittsburgh Steel Corp.                                                                                                     
sr. notes 9 1/4s, 2007 (In default)                                                                                                 
(NON)                                            --              --              --              --         250,000           6,563 
WHX Corp. sr. notes 10 1/2s, 2005           320,000         131,200              --              --         130,000          53,300 
                                                     --------------                  --------------                  -------------- 
                                                          5,092,770                       7,283,022                       7,703,085 

Natural Gas Utilities                                           --%                            0.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Enron Corp. notes Ser. A, 8 3/8s, 2005           --              --       3,990,000       4,303,175       2,545,000       2,744,757 

Oil & Gas                                                      0.6%                            1.1%                            2.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
Amerada Hess Corp. notes 5.9s, 2006              --              --       3,920,000       3,987,346       2,560,000       2,611,200 
Belco Oil & Gas Corp. sr. sub. notes                                                                                                
Ser. B, 8 7/8s, 2007                        900,000         891,000              --              --         220,000         217,800 
Chesapeake Energy Corp. company                                                                                                     
guaranty 8 1/8s, 2011                     1,680,000       1,579,200              --              --         840,000         789,600 
El Paso Energy Partners L.P. 144A company                                                                                           
guaranty 8 1/2s, 2011                       375,000         375,000              --              --         230,000         230,000 
Forest Oil Corp. company guaranty                                                                                                   
10 1/2s, 2006                               200,000         202,000              --              --         100,000         101,000 
Forest Oil Corp. 144A sr. notes 8s, 2008    410,000         397,700              --              --         200,000         194,000 
Giant Industries Corp. company                                                                                                      
guaranty 9s, 2007                            40,000          36,800              --              --          20,000          18,400 
HS Resources, Inc. company guaranty                                                                                                 
9 1/4s, 2006                                 70,000          73,150              --              --          90,000          94,050 
HS Resources, Inc. sr. sub. notes Ser. B,                                                                                           
9 1/4s, 2006                                260,000         271,050              --              --         270,000         281,475 
K N Energy, Inc. sr. notes 6.45s, 2003           --              --       3,770,000       3,883,703       2,110,000       2,173,638 
Leviathan Gas Corp. company guaranty                                                                                                
Ser. B, 10 3/8s, 2009                       430,000         457,950       2,385,000       2,540,025       1,825,000       1,943,625 
Newfield Exploration Co. sr. notes                                                                                                  
7 5/8s, 2011                                560,000         559,300              --              --         280,000         279,650 
Nuevo Energy Co. sr. sub. notes Ser. B,                                                                                             
9 1/2s, 2008                                     --              --       1,410,000       1,332,450         970,000         916,650 
Nuevo Energy Co. sr. sub. notes Ser. B,                                                                                             
9 3/8s, 2010                                490,000         456,925              --              --         240,000         223,800 
Ocean Energy, Inc. company guaranty                                                                                                 
Ser. B, 8 7/8s, 2007                        830,000         876,870              --              --         140,000         147,906 
Ocean Energy, Inc. company guaranty                                                                                                 
Ser. B, 8 3/8s, 2008                        140,000         146,388         350,000         365,971         480,000         501,902 
Parker & Parsley Co. sr. notes                                                                                                      
8 7/8s, 2005                                     --              --         330,000         331,650         170,000         170,850 
Pioneer Natural Resources Co. company                                                                                               
guaranty 9 5/8s, 2010                     1,170,000       1,246,050         900,000         958,500       3,500,000       3,727,500 
Pogo Producing Co. sr. sub. notes Ser. B,                                                                                           
8 1/4s, 2011                                200,000         199,000              --              --         100,000          99,500 
Port Arthur Finance Corp. company guaranty                                                                                          
12 1/2s, 2009                                    --              --       1,350,000       1,363,500       1,190,000       1,201,900 
Seven Seas Petroleum sr. notes Ser. B,                                                                                              
12 1/2s, 2005                                    --              --              --              --          60,000          27,000 
Snyder Oil Corp. sr. sub. notes                                                                                                     
8 3/4s, 2007                                     --              --          90,000          95,197          30,000          31,732 
Stone Energy Corp. company guaranty                                                                                                 
8 3/4s, 2007                                320,000         310,400              --              --         150,000         145,500 
Transcontinental Gas Pipe Corp. 144A notes                                                                                          
7s, 2011                                         --              --       3,645,000       3,702,700       2,355,000       2,392,280 
Triton Energy, Ltd. sr. notes 8 7/8s,                                                                                               
2007 (Cayman Islands)                       340,000         374,000              --              --         170,000         187,000 
Union Pacific Resources Group, Inc.                                                                                                 
notes 7.3s, 2009                                 --              --       5,285,000       5,572,081       3,145,000       3,315,836 
Vintage Petroleum, Inc. sr. sub. notes                                                                                              
9 3/4s, 2009                                710,000         750,825       1,770,000       1,871,775       1,775,000       1,877,063 
Vintage Petroleum, Inc. sr. sub. notes                                                                                              
7 7/8s, 2011                                250,000         246,875              --              --         130,000         128,375 
XTO Energy, Inc. 144A sr. sub. notes                                                                                                
Ser. B, 8 3/4s, 2009                        100,000         102,000              --              --          60,000          61,200 
                                                     --------------                  --------------                  -------------- 
                                                          9,552,483                      26,004,898                      24,090,432 

Paper & Forest Products                                        0.5%                            0.5%                            1.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Doman Industries, Ltd. sr. notes 8 3/4s,                                                                                            
2004 (Canada)                               570,000         216,600              --              --         285,000         108,300 
Fibermark, Inc. 144A sr. notes                                                                                                      
10 3/4s, 2011                               300,000         267,000              --              --         150,000         133,500 
Four M Corp. sr. notes Ser. B, 12s, 2006    685,000         602,800              --              --         340,000         299,200 
Gaylord Container Corp. sr. notes                                                                                                   
Ser. B, 9 3/4s, 2007                        260,000         187,200              --              --         150,000         108,000 
Gaylord Container Corp. sr. notes                                                                                                   
Ser. B, 9 3/8s, 2007                        340,000         244,800              --              --         130,000          93,600 
Georgia-Pacific Group notes                                                                                                         
8 7/8s, 2031                                     --              --       3,930,000       3,855,783       2,690,000       2,639,200 
Georgia-Pacific Group notes                                                                                                         
7 1/2s, 2006                                     --              --       1,935,000       1,961,761       1,240,000       1,257,149 
International Paper Co. notes                                                                                                       
8 1/8s, 2005                                     --              --       3,335,000       3,607,975       1,705,000       1,844,557 
Norampac, Inc. sr. notes 9 1/2s,                                                                                                    
2008 (Canada)                                    --              --         690,000         700,350         540,000         548,100 
Pacifica Papers, Inc. sr. notes 10s,                                                                                                
2009 (Canada)                               610,000         619,150              --              --         340,000         345,100 
Potlatch Corp. 144A sr. sub. notes                                                                                                  
10s, 2011                                   730,000         740,424              --              --         340,000         344,855 
Riverwood International Corp. company                                                                                               
guaranty 10 7/8s, 2008                    1,485,000       1,381,050              --              --         535,000         497,550 
Riverwood International Corp.                                                                                                       
company guaranty 10 5/8s, 2007                   --              --              --              --         190,000         191,900 
Stone Container Corp. sr. notes                                                                                                     
12.58s, 2016                                350,000         349,125              --              --          40,000          39,900 
Stone Container Corp. sr. notes                                                                                                     
9 3/4s, 2011                              1,860,000       1,887,900              --              --       1,060,000       1,075,900 
Tembec Industries, Inc. company guaranty                                                                                            
8 5/8s, 2009 (Canada)                     1,560,000       1,552,200       1,080,000       1,074,600       1,700,000       1,691,500 
                                                     --------------                  --------------                  -------------- 
                                                          8,048,249                      11,200,469                      11,218,311 

Power Producers                                                0.3%                            0.4%                            0.9% 
----------------------------------------------------------------------------------------------------------------------------------- 
Calpine Corp. sr. notes 10 1/2s, 2006       150,000         153,000       1,000,000       1,020,000         250,000         255,000 
Calpine Corp. sr. notes 8 3/4s, 2007             --              --              --              --          80,000          79,887 
Calpine Corp. sr. notes 8 5/8s, 2010        350,000         342,937              --              --              --              -- 
Calpine Corp. sr. notes 8 1/2s, 2011      1,030,000         999,790              --              --         520,000         504,748 
Calpine Corp. sr. notes 7 7/8s, 2008        450,000         434,557         380,000         366,959         730,000         704,948 
Calpine Corp. sr. notes 7 3/4s, 2009        280,000         262,195       2,350,000       2,200,564       2,085,000       1,952,415 
Midland Funding II Corp. deb. Ser. A,                                                                                               
11 3/4s, 2005                             1,390,000       1,545,652       3,170,000       3,524,977       2,709,000       3,012,354 
Midland Funding II Corp. deb. Ser. B,                                                                                               
13 1/4s, 2006                                    --              --         395,000         467,972          80,000          94,779 
Tiverton/Rumford Power Associates, Ltd.                                                                                             
144A pass-through certificates 9s, 2018     560,000         548,890       2,370,000       2,322,979       1,920,000       1,881,907 
York Power Funding 144A notes 12s,                                                                                                  
2007 (Cayman Islands)                            --              --         660,000         666,600         242,000         244,420 
                                                     --------------                  --------------                  -------------- 
                                                          4,287,021                      10,570,051                       8,730,458 

Publishing                                                     0.2%                             --%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Affinity Group Holdings sr. notes                                                                                                   
11s, 2007                                 1,165,000         897,050              --              --         579,000         445,830 
CanWest Media, Inc. 144A sr. sub.                                                                                                   
notes 10 5/8s, 2011 (Canada)                380,000         374,300              --              --         190,000         187,150 
Garden State Newspapers, Inc. sr. sub.                                                                                              
notes 8 5/8s, 2011                           50,000          45,000              --              --          90,000          81,000 
Garden State Newspapers, Inc. sr. sub.                                                                                              
notes Ser. B, 8 3/4s, 2009                  395,000         339,700              --              --         145,000         124,700 
Hollinger International Publishing, Inc.                                                                                            
company guaranty 9 1/4s, 2007               250,000         230,000              --              --         120,000         110,400 
Hollinger Participation Trust 144A sr.                                                                                              
notes 12 1/8s, 2010 (Canada)                250,000         185,000              --              --         120,000          88,800 
Key3media Group, Inc. company guaranty                                                                                              
11 1/4s, 2011                               240,000         172,800              --              --         120,000          86,400 
Perry-Judd company guaranty                                                                                                         
10 5/8s, 2007                               615,000         510,450              --              --         130,000         107,900 
PRIMEDIA, Inc. company guaranty                                                                                                     
7 5/8s, 2008                                510,000         331,500              --              --         260,000         169,000 
PRIMEDIA, Inc. company guaranty                                                                                                     
Ser. B, 8 1/2s, 2006                        390,000         356,850              --              --         170,000         155,550 
PRIMEDIA, Inc. 144A sr. notes                                                                                                       
8 7/8s, 2011                                370,000         277,500              --              --         200,000         150,000 
                                                     --------------                  --------------                  -------------- 
                                                          3,720,150                              --                       1,706,730 

Railroads                                                      0.1%                            0.3%                            0.7% 
----------------------------------------------------------------------------------------------------------------------------------- 
Burlington Northern Santa Fe Corp.                                                                                                  
debs. 7.95s, 2030                                --              --       2,105,000       2,264,475       1,220,000       1,312,427 
Canadian National Railway Co. bonds                                                                                                 
7 3/8s, 2031 (Canada)                            --              --       1,570,000       1,611,291       1,010,000       1,036,563 
Kansas City Southern Railway Co. company                                                                                            
guaranty 9 1/2s, 2008                       785,000         800,700       1,000,000       1,020,000       1,400,000       1,428,000 
Railamerica Transportation Corp. company                                                                                            
guaranty 12 7/8s, 2010                      720,000         734,400              --              --         360,000         367,200 
Transportation Manufacturing Operations,                                                                                            
Inc. company guaranty 11 1/4s, 2009              --              --              --              --          60,000          24,600 
Union Pacific Corp. notes 7 3/8s, 2009           --              --       3,306,000       3,561,818       2,255,000       2,429,492 
                                                     --------------                  --------------                  -------------- 
                                                          1,535,100                       8,457,584                       6,598,282 

Real Estate                                                     --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
EOP Operating LP sr. notes 7s, 2011              --              --       2,790,000       2,853,016       1,780,000       1,820,204 
iStar Financial, Inc. sr. notes 8 3/4s,                                                                                             
2008                                        260,000         249,600              --              --         130,000         124,800 
                                                     --------------                  --------------                  -------------- 
                                                            249,600                       2,853,016                       1,945,004 

Regional Bells                                                  --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Madison River Capital Corp. sr. notes                                                                                               
13 1/4s, 2010                               480,000         292,800              --              --         240,000         146,400 

Restaurants                                                     0.1 %                           0.1 %                           0.2%
----------------------------------------------------------------------------------------------------------------------------------- 
Domino's, Inc. company guaranty Ser. B,                                                                                             
10 3/8s, 2009                               230,000         234,600              --              --         140,000         142,800 
Sbarro, Inc. company guaranty                                                                                                       
11s, 2009                                   555,000         510,600              --              --         275,000         253,000 
Tricon Global Restaurants, Inc.                                                                                                     
sr. notes 8 7/8s, 2011                      140,000         141,400              --              --          50,000          50,500 
Tricon Global Restaurants, Inc. sr. notes                                                                                           
7.65s, 2008                                 560,000         540,400       2,120,000       2,045,800       1,750,000       1,688,750 
Tricon Global Restaurants, Inc.                                                                                                     
sr. notes 7.45s, 2005                       460,000         453,100              --              --         230,000         226,550 
                                                     --------------                  --------------                  -------------- 
                                                          1,880,100                       2,045,800                       2,361,600 

Retail                                                         0.3%                            0.5%                            1.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Amazon.com, Inc. sr. sub. notes                                                                                                     
stepped-coupon zero % (10s, 5/1/03), 2008                                                                                           
(STP)                                       640,000         425,600              --              --         320,000         212,800 
Autonation, Inc. 144A sr. notes 9s, 2008    490,000         460,600              --              --         240,000         225,600 
Fleming Companies, Inc. company                                                                                                     
guaranty 10 1/8s, 2008                      750,000         757,500              --              --         370,000         373,700 
Fleming Companies, Inc. company guaranty                                                                                            
Ser. B, 10 1/2s, 2004                       230,000         227,700              --              --         110,000         108,900 
Great Atlantic & Pacific Tea Co.                                                                                                    
notes 7 3/4s, 2007                          180,000         158,400              --              --          90,000          79,200 
Great Atlantic & Pacific Tea Co.                                                                                                    
sr. notes 7.7s, 2004                        170,000         158,100              --              --          80,000          74,400 
J. Crew Operating Corp. 144A                                                                                                        
sr. sub. notes 10 3/8s, 2007                280,000         218,400              --              --         135,000         105,300 
K mart Corp. deb. 7 3/4s, 2012               10,000           8,700           5,000           4,350          10,000           8,700 
K mart Corp. med. term notes                                                                                                        
8.85s, 2011                                 140,000         131,011         350,000         327,527         120,000         112,295 
K mart Corp. notes 9 3/8s, 2006              20,000          18,800       1,140,000       1,071,600         180,000         169,200 
K mart Corp. notes 8 3/8s, 2004             250,000         238,750       2,990,000       2,855,450       2,980,000       2,845,900 
K mart Corp. 144A notes                                                                                                             
9 7/8s, 2008                                360,000         334,800       4,830,000       4,491,900       3,490,000       3,245,700 
Mothers Work, Inc. sr. notes                                                                                                        
12 5/8s, 2005                                40,000          37,600              --              --          20,000          18,800 
Penney (J.C.) Co., Inc. notes 7.6s, 2007    690,000         639,975       2,350,000       2,179,625       1,950,000       1,808,625 
Saks, Inc. company guaranty                                                                                                         
8 1/4s, 2008                                360,000         270,000       1,700,000       1,275,000       1,300,000         975,000 
Saks, Inc. company guaranty                                                                                                         
7 1/2s, 2010                                960,000         624,000              --              --         780,000         507,000 
Southland Corp. deb. Ser. A,                                                                                                        
4 1/2s, 2004                                     --              --              --              --          20,000          17,300 
Southland Corp. sr. sub. deb. 5s, 2003      135,000         131,175         350,000         340,085         165,000         160,326 
                                                     --------------                  --------------                  -------------- 
                                                          4,841,111                      12,545,537                      11,048,746 

Semiconductor                                                   --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Fairchild Semiconductor Corp.                                                                                                       
company guaranty 10 3/8s, 2007                   --              --              --              --          50,000          47,500 
Fairchild Semiconductor Corp.                                                                                                       
sr. sub. notes 10 1/8s, 2007                405,000         375,638              --              --          80,000          74,200 
                                                     --------------                  --------------                  -------------- 
                                                            375,638                              --                         121,700 

Shipping                                                       0.1%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Eletson Holdings 1st pfd. mtge. notes                                                                                               
9 1/4s, 2003 (Greece)                            --              --         585,000         585,000         480,000         480,000 
Kitty Hawk, Inc. company guaranty                                                                                                   
9.95s, 2004 (In default) (NON)                   --              --              --              --          70,000          10,150 
Navistar International Corp. company                                                                                                
guaranty Ser. B, 9 3/8s, 2006               650,000         630,500              --              --         330,000         320,100 
Navistar International Corp. sr. notes                                                                                              
Ser. B, 8s, 2008                            680,000         598,400         210,000         184,800         590,000         519,200 
Newport News Shipbuilding, Inc.                                                                                                     
sr. notes 8 5/8s, 2006                       90,000          91,800              --              --          40,000          40,800 
Travel Centers of America                                                                                                           
notes 12 3/4s, 2009                         130,000         130,000              --              --          60,000          60,000 
                                                     --------------                  --------------                  -------------- 
                                                          1,450,700                         769,800                       1,430,250 

Software                                                        --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Telehub Communications Corp. company                                                                                                
guaranty stepped-coupon zero % (13 7/8s,                                                                                            
7/31/02), 2005  (In default) (NON) (STP)    290,000              29              --              --          80,000               8 

Specialty Printing                                              --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Von Hoffman Press, Inc. 144A                                                                                                        
sr. sub. notes 13 1/2s, 2009                129,462         103,570              --              --          30,783          24,626 
Von Hoffman Press, Inc. 144A                                                                                                        
sr. sub. notes 10 3/8s, 2007                125,000         111,250              --              --          30,000          26,700 
                                                     --------------                  --------------                  -------------- 
                                                            214,820                              --                          51,326 

Technology                                                     0.1%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Amkor Technologies, Inc. sr. notes 9 1/4s,                                                                                          
2006                                         10,000           8,300       1,590,000       1,319,700       1,260,000       1,045,800 
Amkor Technologies, Inc. Structured Notes                                                                                           
12.58s (issued by STEERS Credit Linked                                                                                              
Trust 2000), 2005                           270,000         248,400              --              --         140,000         128,800 
Amkor Technology, Inc. sr. notes                                                                                                    
9 1/4s, 2008                                320,000         256,000              --              --          60,000          48,000 
Flextronics International, Ltd. sr. sub.                                                                                            
notes 9 7/8s, 2010 (Singapore)                   --              --         340,000         333,200         160,000         156,800 
Lucent Technologies, Inc. debs.                                                                                                     
6.45s, 2029                                 890,000         569,600              --              --         440,000         281,600 
SCG Holding & Semiconductor Corp.                                                                                                   
company guaranty 12s, 2009                  310,000         155,000              --              --         150,000          75,000 
Telecommunications Techniques, Inc.                                                                                                 
company guaranty 9 3/4s, 2008               360,000         252,000              --              --         180,000         126,000 
Viasystems, Inc. sr. notes Ser. B,                                                                                                  
9 3/4s, 2007                                700,000         140,000              --              --         225,000          45,000 
Viasystems, Inc. sr. sub. notes                                                                                                     
9 3/4s, 2007                                     --              --              --              --          10,000           2,000 
                                                     --------------                  --------------                  -------------- 
                                                          1,629,300                       1,652,900                       1,909,000 

Technology Services                                            0.1%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Equinix, Inc. sr. notes 13s, 2007           570,000         199,500              --              --         540,000         189,000 
Exodus Communications, Inc. sr. notes                                                                                               
11 5/8s, 2010                                80,000           9,200              --              --              --              -- 
Exodus Communications, Inc. sr. notes                                                                                               
10 3/4s, 2009                               430,000          47,300              --              --         280,000          30,800 
Exodus Communications, Inc. 144A sr. notes                                                                                          
11 1/4s, 2008 (In default) (NON)            320,000          36,800              --              --         130,000          14,950 
Firstworld Communication Corp. sr. disc.                                                                                            
notes stepped-coupon zero % (13s,                                                                                                   
4/15/03), 2008 (STP)                        520,000          20,800              --              --         360,000          14,400 
Globix Corp. sr. notes 12 1/2s, 2010        405,000          93,150              --              --         210,000          48,300 
Iron Mountain, Inc. company guaranty                                                                                                
8 3/4s, 2009                                665,000         671,650              --              --         505,000         510,050 
Iron Mountain, Inc. company guaranty                                                                                                
8 1/8s, 2008 (Canada)                       180,000         175,500              --              --          90,000          87,750 
Iron Mountain, Inc. sr. sub. notes                                                                                                  
8 1/4s, 2011                                490,000         491,225              --              --          40,000          40,100 
PSINet, Inc. sr. notes 11s, 2009                                                                                                    
(In default) (NON)                          530,000          31,800              --              --         290,000          17,400 
Xerox Credit Corp. sr. notes 6.1s, 2003     630,000         541,800              --              --         310,000         266,600 
                                                     --------------                  --------------                  -------------- 
                                                          2,318,725                              --                       1,219,350 

Telecommunications                                             0.8%                            0.5%                            1.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
360Networks, Inc. sr. notes 13s, 2008                                                                                               
(Canada) (In default) (NON)                 870,000           8,700              --              --         430,000           4,300 
American Cellular Corp. company                                                                                                     
guaranty 9 1/2s, 2009                       560,000         520,800              --              --         270,000         251,100 
American Tower Corp. sr. notes                                                                                                      
9 3/8s, 2009                                720,000         612,000              --              --         360,000         306,000 
Arch Communications, Inc. sr. notes                                                                                                 
13 3/4s, 2008 (In default) (NON)             80,000             800              --              --          40,000             400 
Asia Global Crossing, Ltd. sr. notes                                                                                                
13 3/8s, 2010 (Bermuda)                     190,000          96,900              --              --         100,000          51,000 
Call-Net Enterprises, Inc. sr. notes 8s,                                                                                            
2008 (Canada)                               410,000          90,200              --              --         110,000          24,200 
Crown Castle International Corp. sr. disc.                                                                                          
notes stepped-coupon zero % (11 1/4s,                                                                                               
8/1/04), 2011 (STP)                         200,000         112,000              --              --         100,000          56,000 
Crown Castle International Corp.                                                                                                    
sr. notes 10 3/4s, 2011                     330,000         306,900              --              --         160,000         148,800 
Crown Castle International Corp.                                                                                                    
sr. notes 9 3/8s, 2011                      490,000         421,400              --              --         250,000         215,000 
Dobson Communications Corp.                                                                                                         
sr. notes 10 7/8s, 2010                     920,000         938,400              --              --          80,000          81,600 
Dobson/Sygnet Communications, Inc.                                                                                                  
sr. notes 12 1/4s, 2008                     300,000         312,000              --              --         540,000         561,600 
Esprit Telecom Group PLC sr. notes                                                                                                  
11 1/2s, 2007 (United Kingdom)                                                                                                      
(In default) (NON)                          430,000           6,450              --              --         160,000           2,400 
Flag, Ltd. 144A sr. notes 8 1/4s,                                                                                                   
2008 (Bermuda)                              470,000         286,700         105,000          64,050         320,000         195,200 
Global Crossing Holdings, Ltd. company                                                                                              
guaranty 9 5/8s, 2008 (Bermuda)              60,000          26,100              --              --          20,000           8,700 
Global Crossing Holdings, Ltd. company                                                                                              
guaranty 9 1/2s, 2009 (Bermuda)             580,000         240,700              --              --         310,000         128,650 
Global Crossing Holdings, Ltd. company                                                                                              
guaranty 8.7s, 2007 (Bermuda)             1,180,000         489,700       4,230,000       1,755,450       3,470,000       1,440,050 
Level 3 Communications, Inc.                                                                                                        
sr. notes 11 1/4s, 2010                     200,000          85,000              --              --         100,000          42,500 
Level 3 Communications, Inc.                                                                                                        
sr. notes 11s, 2008                       1,610,000         700,350              --              --         900,000         391,500 
Level 3 Communications, Inc.                                                                                                        
sr. notes 9 1/8s, 2008                      670,000         288,100              --              --         220,000          94,600 
McCaw International, Ltd. sr. disc. notes                                                                                           
stepped-coupon zero % (13s, 4/15/02), 2007                                                                                          
(STP)                                       460,000         105,800              --              --         150,000          34,500 
McLeodUSA, Inc. sr. notes 8 1/8s, 2009      640,000         204,800              --              --         310,000          99,200 
Metrocall, Inc. sr. sub. notes 11s, 2008                                                                                            
(In default) (NON)                          150,000           1,500              --              --          80,000             800 
Metrocall, Inc. sr. sub. notes 10 3/8s,                                                                                             
2007 (In default) (NON)                     210,000           2,100              --              --         120,000           1,200 
Metrocall, Inc. sr. sub. notes 9 3/4s,                                                                                              
2007 (In default) (NON)                      70,000             700              --              --          30,000             300 
Millicom International Cellular SA sr.                                                                                              
disc. notes 13 1/2s, 2006 (Luxembourg)      813,000         569,100              --              --         404,000         282,800 
Nextel Communications, Inc. sr. notes                                                                                               
12s, 2008                                   950,000         750,500              --              --         650,000         513,500 
Nextel Communications, Inc. sr. notes                                                                                               
9 1/2s, 2011                              1,915,000       1,177,725              --              --         660,000         405,900 
Nextel International, Inc. sr. notes                                                                                                
12 3/4s, 2010                               700,000         154,000              --              --         420,000          92,400 
Nextel Partners, Inc. sr. notes 11s, 2010   450,000         283,500              --              --          40,000          25,200 
Nextel Partners, Inc. sr. notes 11s, 2010    85,000          53,550              --              --         230,000         144,900 
Nextlink Communications, Inc. sr. disc.                                                                                             
notes stepped-coupon zero % (12 1/8s,                                                                                               
12/1/04), 2009 (STP)                         70,000           5,250              --              --          40,000           3,000 
Nextlink Communications, Inc. sr. disc.                                                                                             
notes stepped-coupon zero % (12 1/4s,                                                                                               
6/1/04), 2009 (STP)                       1,360,000         115,600              --              --         590,000          50,150 
Nextlink Communications, Inc.                                                                                                       
sr. notes 9 5/8s, 2007                       90,000          23,400              --              --          90,000          23,400 
NorthEast Optic Network, Inc.                                                                                                       
sr. notes 12 3/4s, 2008                     450,000         126,000              --              --         240,000          67,200 
Orbital Imaging Corp. sr. notes Ser. B,                                                                                             
11 5/8s, 2005 (In default) (NON)            415,000          68,475              --              --         100,000          16,500 
Price Communications Wireless, Inc. 144A                                                                                            
sr. notes 9 1/8s, 2006                      875,000         875,000              --              --         440,000         440,000 
Qwest Capital Funding, Inc.                                                                                                         
company guaranty 7.9s, 2010                      --              --       2,155,000       2,301,648              --              -- 
Rhythms Netconnections, Inc. sr. notes                                                                                              
Ser. B, 14s, 2010 (In default) (NON)             --              --              --              --         160,000           8,000 
Rogers Wireless, Inc. sec. notes 9 5/8s,                                                                                            
2011 (Canada)                               370,000         351,500              --              --         180,000         171,000 
RSL Communications PLC company guaranty                                                                                             
12 7/8s, 2010 (United Kingdom)                                                                                                      
(In default) (NON)                           60,000           1,800              --              --         420,000          12,600 
RSL Communications PLC company guaranty                                                                                             
9 1/8s, 2008 (United Kingdom) (In default)                                                                                          
(NON)                                       300,000           8,250              --              --              --              -- 
RSL Communications PLC 144A company                                                                                                 
guaranty 10 1/2s, 2008 (United Kingdom)                                                                                             
(In default) (NON)                          160,000           4,400              --              --              --              -- 
RSL Communications, Ltd. company guaranty                                                                                           
12 1/4s, 2006 (United Kingdom)                                                                                                      
(In default) (NON)                          490,000          13,475              --              --         123,000           3,383 
Rural Cellular Corp. sr. sub. notes                                                                                                 
Ser. B, 9 5/8s, 2008                        740,000         723,350              --              --         370,000         361,675 
SBA Communications Corp. sr. notes                                                                                                  
10 1/4s, 2009                               400,000         324,000              --              --         200,000         162,000 
Spectrasite Holdings, Inc. sr. disc. notes                                                                                          
stepped-coupon zero % (11 1/8s, 4/15/04),                                                                                           
2009 (STP)                                  370,000         116,550              --              --         220,000          69,300 
Spectrasite Holdings, Inc. sr. disc.                                                                                                
notes stepped-coupon Ser. B, zero %                                                                                                 
(12 7/8s, 3/15/05), 2010 (STP)            1,000,000         260,000              --              --         500,000         130,000 
Sprint Capital Corp. company guaranty                                                                                               
7 5/8s, 2011                                     --              --       1,235,000       1,301,727         720,000         758,902 
Sprint Capital Corp. company guaranty                                                                                               
6 1/8s, 2008                                     --              --       1,095,000       1,068,643         590,000         575,799 
Startec Global Communications Corp.                                                                                                 
sr. notes 12s, 2008                         390,000          13,650              --              --          90,000           3,150 
Verizon Global Funding Corp. notes                                                                                                  
7 3/4s, 2030                                     --              --       2,645,000       2,832,848       1,535,000       1,644,016 
Viatel, Inc. sr. disc. notes stepped-                                                                                               
coupon zero % (12 1/2s, 4/15/03), 2008                                                                                              
(STP)                                       920,000           9,642              --              --       1,110,000          11,633 
Viatel, Inc. sr. notes 11 1/2s, 2009                                                                                                
(In default) (NON)                          753,000          16,001              --              --         178,000           3,783 
Viatel, Inc. sr. notes 11 1/4s, 2008                                                                                                
(In default) (NON)                           70,000           1,488              --              --              --              -- 
Williams Communications Group, Inc.                                                                                                 
sr. notes 11 7/8s, 2010                     370,000         155,400              --              --         260,000         109,200 
Williams Communications Group, Inc.                                                                                                 
sr. notes 11.7s, 2008                       210,000          87,150              --              --              --              -- 
Williams Communications Group, Inc.                                                                                                 
sr. notes 10 7/8s, 2009                     970,000         407,400              --              --         500,000         210,000 
Williams Communications Group, Inc.                                                                                                 
sr. notes 10.7s, 2007                       130,000          54,600              --              --          80,000          33,600 
World Access, Inc. sr. notes Ser. B,                                                                                                
13 1/4s, 2008 (In default) (NON)            560,000           5,600              --              --         320,000           3,200 
Worldcom, Inc.-WorldCom Group                                                                                                       
notes 7 1/2s, 2011                               --              --       2,820,000       2,842,673       1,815,000       1,829,593 
XO Communications, Inc. sr. disc. notes                                                                                             
stepped-coupon zero % (9.45s, 4/15/03),                                                                                             
2008 (STP)                                  400,000          52,000              --              --         190,000          24,700 
XO Communications, Inc. 144A                                                                                                        
sr. notes 12 1/2s, 2006                     230,000          48,300              --              --         110,000          23,100 
                                                     --------------                  --------------                  -------------- 
                                                         12,714,756                      12,167,039                      12,353,184 

Telephone                                                      0.5%                             --%                            0.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
Airgate PCS, Inc. sr. sub. notes                                                                                                    
stepped-coupon zero % (13 1/2s, 10/1/04),                                                                                           
2009 (STP)                                  140,000          88,200              --              --              --              -- 
Alamosa Delaware, Inc.                                                                                                              
company guaranty 12 1/2s, 2011               80,000          72,800              --              --          40,000          36,400 
Alamosa Delaware, Inc. 144A                                                                                                         
sr. notes 13 5/8s, 2011                     440,000         415,800              --              --         220,000         207,900 
Alamosa PCS Holdings, Inc. company                                                                                                  
guaranty stepped-coupon zero % (12 7/8s,                                                                                            
2/15/05), 2010 (STP)                        230,000         110,400              --              --         120,000          57,600 
Allegiance Telecom, Inc. sr. notes                                                                                                  
12 7/8s, 2008                               220,000         132,000              --              --         110,000          66,000 
Birch Telecommunications, Inc.                                                                                                      
sr. notes 14s, 2008                         340,000         136,000              --              --         300,000         120,000 
Covad Communications Group, Inc. sr. disc.                                                                                          
notes stepped-coupon Ser. B, zero %                                                                                                 
(13 1/2s, 3/15/03), 2008 (STP)                   --              --              --              --         330,000          31,350 
Covad Communications Group, Inc. sr. notes                                                                                          
12 1/2s, 2009 (In default) (NON)            490,000          78,400              --              --          60,000           9,600 
Focal Communications Corp. sr. sub. notes                                                                                           
stepped-coupon Ser. B, zero % (12 1/8s,                                                                                             
2/15/03), 2008 (STP)                        500,000          95,000              --              --         230,000          43,700 
Horizon PCS, Inc. company guaranty                                                                                                  
stepped-coupon 14s (14s, 10/1/05), 2010                                                                                             
(STP)                                       700,000         287,000              --              --         340,000         139,400 
Hyperion Telecommunications Corp., Inc.                                                                                             
sr. disc. notes Ser. B, zero %, 2003         90,000          36,000              --              --              --              -- 
Hyperion Telecommunications Corp., Inc.                                                                                             
sr. sub. notes 12s, 2007                    520,000         176,800              --              --         550,000         187,000 
ICG Holdings, Inc. company guaranty                                                                                                 
12 1/2s, 2006 (In default) (NON)            205,000          18,450              --              --          85,000           7,650 
ICG Services, Inc. sr. disc. notes                                                                                                  
stepped-coupon zero % (9 7/8s, 5/1/03),                                                                                             
2008 (STP)                                  130,000          11,700              --              --         245,000          22,050 
ICG Services, Inc. sr. disc. notes                                                                                                  
stepped-coupon zero % (10s, 2/15/03),                                                                                               
2008 (In default) (NON) (STP)             2,190,000         197,100              --              --         940,000          84,600 
Intermedia Communications, Inc. sr.                                                                                                 
notes Ser. B, 8 1/2s, 2008                  500,000         513,750              --              --         250,000         256,875 
Ipcs Inc. sr. disc. notes stepped-coupon                                                                                            
zero % (14s, 7/15/05), 2010 (STP)           500,000         250,000              --              --         260,000         130,000 
IWO Holdings, Inc. company guaranty                                                                                                 
14s, 2011                                   390,000         327,600              --              --         190,000         159,600 
KMC Telecommunications Holdings, Inc. sr.                                                                                           
disc. notes stepped-coupon zero %                                                                                                   
(12 1/2s, 2/15/03), 2008 (STP)              440,000          30,800              --              --         575,000          40,250 
Metromedia Fiber Network, Inc.                                                                                                      
sr. notes 10s, 2009                          90,000          11,250              --              --          20,000           2,500 
Metromedia Fiber Network, Inc.                                                                                                      
sr. notes Ser. B, 10s, 2008                 820,000         102,500              --              --         440,000          55,000 
Microcell Telecommunications sr. disc.                                                                                              
notes stepped-coupon Ser. B, zero % (14s,                                                                                           
12/1/01), 2006 (Canada) (STP)               700,000         315,000              --              --         350,000         157,500 
Tele1 Europe B.V. sr. notes 13s,                                                                                                    
2009 (Netherlands)                          250,000          52,500              --              --         120,000          25,200 
Telecorp PCS, Inc. company guaranty                                                                                                 
10 5/8s, 2010                               890,000         783,200              --              --         440,000         387,200 
Time Warner Telecom, Inc. sr. notes                                                                                                 
9 3/4s, 2008                                270,000         186,300              --              --         140,000          96,600 
Tritel PCS, Inc. company guaranty                                                                                                   
10 3/8s, 2011                               780,000         670,800              --              --         390,000         335,400 
Triton PCS, Inc. company guaranty                                                                                                   
9 3/8s, 2011                                550,000         544,500              --              --         280,000         277,200 
UbiquiTel Operating Co. company guaranty                                                                                            
stepped-coupon zero % (14s, 4/15/05),                                                                                               
2010 (STP)                                1,110,000         455,100              --              --         550,000         225,500 
US UnWired, Inc. company guaranty                                                                                                   
stepped-coupon Ser. B, zero % (13 3/8s,                                                                                             
11/1/04), 2009 (STP)                        700,000         385,000              --              --         350,000         192,500 
Versatel Telecom NV sr. notes 13 1/4s,                                                                                              
2008 (Netherlands)                          180,000          44,100              --              --          40,000           9,800 
Versatel Telecom NV sr. notes 13 1/4s,                                                                                              
2008 (Netherlands)                          250,000          61,250              --              --         170,000          41,650 
Voicestream Wireless Corp. sr. notes                                                                                                
10 3/8s, 2009                               960,000       1,097,856              --              --         470,000         537,492 
WinStar Communications, Inc. sr. disc.                                                                                              
notes stepped-coupon zero % (14 3/4s,                                                                                               
4/15/05), 2010 (In default) (NON) (STP)   2,569,000          16,056              --              --       1,307,000           8,169 
WinStar Communications, Inc. sr. notes                                                                                              
12 3/4s, 2010 (In default) (NON)            570,000           5,700              --              --         300,000           3,000 
                                                     --------------                  --------------                  -------------- 
                                                          7,708,912                              --                       3,954,686 

Textiles                                                       0.1%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Galey & Lord, Inc. company guaranty                                                                                                 
9 1/8s, 2008                                370,000         138,750              --              --         180,000          67,500 
Kasper A.S.L., Ltd. sr. notes 12 3/4s,                                                                                              
2004 (In default) (NON)                     285,000          79,800              --              --          30,000           8,400 
Levi Strauss & Co. sr. notes                                                                                                        
11 5/8s, 2008                               810,000         575,100              --              --         400,000         284,000 
Tommy Hilfiger USA, Inc.                                                                                                            
company guaranty 6 1/2s, 2003               150,000         140,250              --              --          70,000          65,450 
Westpoint Stevens, Inc. sr. notes                                                                                                   
7 7/8s, 2008                                 50,000          15,500              --              --              --              -- 
Westpoint Stevens, Inc. sr. notes                                                                                                   
7 7/8s, 2005                                820,000         270,600              --              --         430,000         141,900 
                                                     --------------                  --------------                  -------------- 
                                                          1,220,000                              --                         567,250 

Toys                                                           0.1%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Hasbro, Inc. notes 7.95s, 2003              820,000         779,000              --              --         420,000         399,000 
Hasbro, Inc. notes 5.6s, 2005               550,000         462,000              --              --         270,000         226,800 
                                                     --------------                  --------------                  -------------- 
                                                          1,241,000                              --                         625,800 

Waste Management                                               0.4%                            0.4%                            0.7% 
----------------------------------------------------------------------------------------------------------------------------------- 
Allied Waste Industries, Inc. company                                                                                               
guaranty Ser. B, 10s, 2009                2,720,000       2,720,000              --              --       1,465,000       1,465,000 
Allied Waste Industries, Inc. company                                                                                               
guaranty Ser. B, 7 7/8s, 2009               205,000         197,313       2,725,000       2,622,813          50,000          48,125 
Allied Waste Industries, Inc. company                                                                                               
guaranty Ser. B, 7 5/8s, 2006               430,000         420,325         420,000         410,550         120,000         117,300 
Browning-Ferris deb. 7.4s, 2035             320,000         254,400       3,746,000       2,978,070       3,090,000       2,456,550 
Waste Management, Inc. sr. notes 7 3/8s,                                                                                            
2010                                      2,090,000       2,211,617       2,193,000       2,320,611       2,510,000       2,656,057 
                                                     --------------                  --------------                  -------------- 
                                                          5,803,655                       8,332,044                       6,743,032 

Water Utilities                                                0.1%                            0.3%                            0.5% 
----------------------------------------------------------------------------------------------------------------------------------- 
Azurix Corp. sr. notes Ser. B,                                                                                                      
10 3/4s, 2010                               650,000         663,000         140,000         142,800          30,000          30,600 
Azurix Corp. sr. notes Ser. B, 10 3/8s,                                                                                             
2007                                        431,000         431,000       6,360,000       6,360,000       4,750,000       4,750,000 
                                                     --------------                  --------------                  -------------- 
                                                          1,094,000                       6,502,800                       4,780,600 
----------------------------------------------------------------------------------------------------------------------------------- 
Total Corporate Bonds and Notes                                                                                                     
(cost $255,955,405, $413,805,699                                                                                                    
and $400,607,046)                                    $  211,088,154                  $  412,029,312                  $  375,220,169 
----------------------------------------------------------------------------------------------------------------------------------- 

                                                      GROWTH                        BALANCED                      C ONSERVATIVE     
                                                               9.5%                            3.9%                            6.0% 
ASSET-BACKED                              Principal                       Principal                       Principal                 
SECURITIES (a)                               Amount           Value          Amount           Value          Amount           Value 
----------------------------------------------------------------------------------------------------------------------------------- 
Asset Backed Securities Corp. Home Equity                                                                                           
Loan Trust, Ser. 01-HE3, Class AIO,                                                                                                 
Interest Only (IO), 6 1/2s, 2031     $    2,225,357  $      253,802  $    8,366,386  $      954,186  $    5,391,586  $      614,910 
Capital One Master Trust                                                                                                            
Ser. 96-2, Class A, 3.588s, 2005          8,435,000       8,435,000       2,870,000       2,870,000       1,695,000       1,695,000 
Ser. 99-2, Class A, 3.613s, 2005         12,679,000      12,682,930       4,212,000       4,213,306         609,000         609,189 
Chase Credit Card Master Trust Ser.                                                                                                 
00-2, Class A, 3.588s, 2005              10,012,000      10,015,104       3,326,000       3,327,031       2,162,000       2,162,670 
Chevy Chase Master Credit Card Trust                                                                                                
Ser. 95-C, Class A, 3.748s, 2006          6,488,000       6,500,133       2,208,000       2,212,129       1,304,000       1,306,438 
Conseco Finance Securitizations Corp.                                                                                               
Ser. 00-4, Class A6, 8.31s, 2032            960,000       1,057,500       3,960,000       4,362,188       2,080,000       2,291,250 
Ser. 00-5, Class A6, 7.96s, 2032            505,000         550,766       2,105,000       2,295,766       1,090,000       1,188,781 
Ser. 01-3, Class AIO, 2 1/2s, 2007        2,685,000         250,460      10,435,000         973,390       6,495,000         605,862 
Discover Card Master Trust I Ser. 00-3,                                                                                             
Class A, 3.608s, 2005                    15,000,000      15,013,950       5,000,000       5,004,650       5,000,000       5,004,650 
Federal Home Loan Mortgage Acceptance                                                                                               
Corp. Ser. T-25, Class A1, 3.72s, 2030   15,073,559      15,073,559       1,287,980       1,287,980              --              -- 
First Plus 144A Ser. 98-A, Class A,                                                                                                 
8 1/2s, 2023                                130,605          86,200         281,989         186,113         422,858         279,086 
First USA Credit Card Master Trust                                                                                                  
Ser. 95-2, Class A, 3.928s, 2004          4,575,000       4,579,255       1,304,000       1,305,213              --              -- 
Ser. 98-1, Class A, 3.576s, 2006          6,057,000       6,058,878       3,155,000       3,155,978       2,050,000       2,050,636 
Fleet Credit Card Master Trust II Ser.                                                                                              
00-B, Class A, 3 3/4s, 2005              15,000,000      15,013,950       5,000,000       5,004,650       5,000,000       5,004,650 
Hyundai Auto Receivables Trust Ser.                                                                                                 
01-A, Class D, 6 1/4s, 2008                 235,000         238,911         865,000         879,394         565,000         574,402 
MBNA Master Credit Card Trust                                                                                                       
Ser. 00-B, Class A, 3.603s, 2005         19,000,000      19,017,670      10,000,000      10,009,300              --              -- 
Ser. 95-E, Class A, 3.86s, 2005           6,010,000       6,019,376         787,000         788,228              --              -- 
Ser. 96-E, Class A, 3.658s, 2005         13,874,000      13,899,944      12,000,000      12,022,440       8,000,000       8,014,960 
Ser. 96-J, Class A, 3.638s, 2006                 --              --      20,000,000      20,037,400      20,000,000      20,037,400 
Ser. 96-K, Class A, 3.618s, 2006                 --              --       3,112,000       3,115,890       2,023,000       2,025,529 
Ser. 98-A, Class A, 3.598s, 2005         13,695,000      13,707,736       4,743,000       4,747,411       2,407,000       2,409,239 
Morgan Stanley Dean Witter Capital I                                                                                                
FRN Ser. 01-NC2, Class B1, 4.611s,                                                                                                  
2009                                        220,000         218,453         840,000         834,094         535,000         531,238 
Residential Asset Securities Corp. Ser.                                                                                             
01-KS3, Class AIO, IO, 5s, 2004           2,655,000         197,466       9,965,000         741,147       6,425,000         477,859 
Vanderbilt Mortgage Finance Ser. 01-B,                                                                                              
Class A4, 6.62s, 2027                       565,000         578,596       2,130,000       2,181,254       1,370,000       1,402,966 
Xerox Equipment Lease Owner Trust 144A                                                                                              
FRB Ser. 01-1, Class A, 5.801s, 2008        474,119         474,119       1,789,127       1,789,127       1,140,568       1,140,568 
                                                     --------------                  --------------                  -------------- 
Total Asset-Backed Securities                                                                                                       
(cost $149,802,252, $93,767,813                                                                                                     
and $59,223,245)                                     $  149,923,758                  $   94,298,265                  $   59,427,283 
----------------------------------------------------------------------------------------------------------------------------------- 

                                                       GROWTH                        BALANCED                     C ONSERVATIVE     
                                                               3.3%                            7.0%                           11.5% 
U.S. GOVERNMENT AND                       Principal                       Principal                       Principal                 
AGENCY OBLIGATIONS (a)                       Amount           Value          Amount           Value          Amount           Value 

U.S. Government Agency                                                                                                              
Mortgage Obligations                                           3.3%                            7.0%                           11.5% 
----------------------------------------------------------------------------------------------------------------------------------- 
Federal Home Loan Mortgage                                                                                                          
Corporation                                                                                                                         
8 1/2s, July 1, 2028                 $           --  $           --  $      927,240  $      994,604  $    1,092,491  $    1,171,860 
7 1/2s, October 1, 2029                   2,439,542       2,546,468       9,179,518       9,581,856       5,904,876       6,163,687 
6 1/2s, April 1, 2029                            --              --         324,436         331,444              --              -- 
Federal National Mortgage Association                                                                                               
6s, TBA, October 1, 2031                  3,200,000       3,189,984              --              --              --              -- 
6s, TBA, October 1, 2016                  5,300,000       5,387,768      19,800,000      20,127,888      12,800,000      13,011,968 
Federal National Mortgage Association                                                                                               
Pass-Through Certificates                                                                                                           
8 1/2s, with due dates from                                                                                                         
March 1, 2030 to April 1, 2030                   --              --         343,996         364,325              --              -- 
8s, with due dates from April 1, 2025                                                                                               
to February 1, 2028                              --              --         896,306         948,816         504,116         530,814 
7 1/2s, December 1, 2029                         --              --              --              --          55,904          58,170 
6 1/2s, with due dates from March 1,                                                                                                
2031 to September 1, 2031                20,225,788      20,586,818      58,883,204      59,934,272      47,709,486      48,561,102 
6 1/2s, with due dates from                                                                                                         
August 1, 2010 to October 1, 2011                --              --              --              --         466,765         483,644 
6s, with due dates from February 1, 2031                                                                                            
to September 1, 2031                      9,646,860       9,623,803      34,562,057      34,479,454      21,104,812      21,056,374 
6s, with due dates from December 1, 2015                                                                                            
to December 1, 2030                       2,339,201       2,380,628      10,434,968      10,619,773       9,491,103       9,656,480 
Government National Mortgage                                                                                                        
Association Pass-Through Certificates                                                                                               
8s, with due dates from June 15, 2017 to                                                                                            
April 15, 2028                            3,150,076       3,351,754      13,430,062      14,269,849       7,265,762       7,728,013 
7 1/2s, with due dates from April 15,                                                                                               
2022 to October 20, 2030                  1,311,016       1,365,370       8,689,799       9,092,218       1,582,316       1,664,203 
7s, with due dates from August 15, 2025                                                                                             
to September 15, 2029                     3,416,812       3,557,243      10,058,939      10,476,366       2,750,565       2,863,659 
6 1/2s, March 15, 2028                           --              --         272,683         279,680              --              -- 
                                                     --------------                  --------------                  -------------- 
Total U.S. Government and                                                                                                           
Agency Obligations (cost $51,048,875,                                                                                               
$167,805,599 and $110,959,915)                       $   51,989,836                  $  171,500,545                  $  112,949,974 
----------------------------------------------------------------------------------------------------------------------------------- 

                                                      GROWTH                         BALANCED                       CONSERVATIVE    
                                                               1.0%                            1.5%                            2.3% 
COLLATERALIZED                            Principal                       Principal                       Principal                 
MORTGAGE OBLIGATIONS (a)                     Amount           Value          Amount           Value          Amount           Value 
----------------------------------------------------------------------------------------------------------------------------------- 
Arc Net Interest Margin Trust FRN Ser.                                                                                              
01-5A, Class A, 3.366s, 2008         $      240,987  $      240,987  $      481,975  $      481,975  $      308,464  $      308,464 
Commercial Mortgage Acceptance Corp.                                                                                                
Ser. 97-ML1, Class D, 7.052s, 2010               --              --         110,000         108,530              --              -- 
Ser. 97-ML1, IO, 0.953s, 2017             3,906,060         132,440      14,747,760         500,041       9,579,375         324,801 
Countrywide Mortgage Backed                                                                                                         
Securities, Inc. Ser. 93-C, Class A8,                                                                                               
6 1/2s, 2024                                     --              --         180,000         183,051              --              -- 
Criimi Mae Commercial Mortgage Trust                                                                                                
Ser. 98-C1, Class A2, 7s, 2011                   --              --         760,000         775,675         470,000         479,694 
Deutsche Mortgage & Asset Receiving                                                                                                 
Corp. Ser. 98-C1, Class X, IO, 1.234s,                                                                                              
2023                                      3,092,146         141,321       7,173,778         327,864       5,936,920         271,336 
Fannie Mae                                                                                                                          
Ser. 98-1, Class SA, IO, 11.483s, 2024           --              --       3,765,200       1,325,756       1,885,300         663,829 
Ser. 01-T8, Class A1, 7 1/2s, 2031        2,468,683       2,619,890       8,797,790       9,336,655       5,600,100       5,943,106 
Ser. 01-T4, Class A1, 7 1/2s, 2028               --              --         490,979         521,051         317,967         337,443 
Ser. 00-4, Class SX, 6 1/2s, 2023                --              --         986,050         995,910         898,010         906,990 
Ser. 94-53, Class EA, Principal Only                                                                                                
(PO), zero %, 2023                          196,832         194,864         740,732         733,325         476,678         471,911 
FFCA Secured Lending Corp.                                                                                                          
Ser. 00-1, Class A2, 7.77s, 2027 [DBL                                                                                               
DAGGER]                                   1,025,000       1,129,873       3,885,000       4,282,494       2,475,000       2,728,230 
Ser. 00-1, Class X, IO, 1.72s, 2020       1,323,992         120,194       5,643,565         512,330       2,823,735         256,342 
Freddie Mac                                                                                                                         
Ser. 2028, Class SG, IO, 11.606s, 2023           --              --       1,324,000         490,281       1,035,000         383,263 
Ser. 2032, Class SK, IO, 11.483s, 2024    1,593,000         432,101              --              --              --              -- 
Ser. 184, IO, 7s, 2026                           --              --       2,915,166         488,290       1,860,205         311,584 
Ser. 1717, 6 1/2s, 2024                          --              --          67,818          70,841              --              -- 
Ser. 2191, Class MS, IO, 4.913s, 2027            --              --         217,707          13,879              --              -- 
Ser. 180, PO, zero %, 2026                       --              --           8,840           7,866          82,891          73,760 
Ser. 188, PO, zero %, 2027                  697,595         620,533       2,645,642       2,353,381       1,688,223       1,501,728 
Ser. 1208, Class F, PO, zero %, 2022         69,108          60,948              --              --              --              -- 
GE Capital Mortgage Services, Inc.                                                                                                  
Ser. 98-11, Class 2A4, 6 3/4s, 2028              --              --          75,000          76,934              --              -- 
GMAC Commercial Mortgage Securities Inc.                                                                                            
144A FRN Ser. 01-C1, Class X1, IO, 0.59s,                                                                                           
2011                                      3,500,837         131,828      13,155,565         495,389       8,452,875         318,304 
Government National Mortgage Association                                                                                            
Ser. 00-14, Class SD, 24.463s, 2030         154,659         159,298         582,965         600,454         375,530         386,796 
Ser. 97-13, Class PI, IO, 8s, 2027        1,101,029         179,605              --              --              --              -- 
Ser. 99-46, Class SQ, IO, 4.963s, 2027    2,073,356         139,305       8,921,005         599,384       4,993,655         335,514 
Ser. 99-31, Class MP, PO, zero %, 2029      424,535         382,214       2,005,677       1,805,736       1,002,839         902,868 
Ser. 98-2, Class EA, PO, zero %, 2028       289,753         257,980          55,281          49,219              --              -- 
Granite Mortgages PLC FRN Ser. 01-2,                                                                                                
Class 1C, 3.958s, 2041 (United Kingdom)     160,000         160,000         615,000         615,000         395,000         395,000 
Holmes Financing PLC FRN 4.97s, 2040                                                                                                
(United Kingdom)                          1,030,000       1,030,773       4,390,000       4,393,293       2,200,000       2,201,650 
Merrill Lynch Mortgage Investors, Inc.                                                                                              
Ser. 98-C2, IO, 7.86s, 2030               2,196,440         147,230       8,211,165         550,405       4,202,893         281,725 
Ser. 1995-C3, Class D, 7.782s, 2025              --              --          75,000          80,139              --              -- 
Ser. 96-C2, Class E, 6.96s, 2028                 --              --          65,000          64,771              --              -- 
Ser. 96-C2, IO, 2.03s, 2028               1,181,204          79,547       2,012,257         135,513         728,966          49,091 
Mortgage Capital Funding, Inc. Ser.                                                                                                 
97-MC2, Class X, IO, 1.542s, 2012         1,806,642         104,729         500,529          29,015              --              -- 
PNC Mortgage Acceptance Corp. Ser.                                                                                                  
01-C1, Class X1, IO, 0.703s, 2021         3,034,034         132,265      11,396,249         496,805       7,324,387         319,297 
PNC Mortgage Securities Corp.                                                                                                       
Ser. 97-6, Class A2, 6.6s, 2027                  --              --          62,568          62,608              --              -- 
Prudential Home Mortgage Securities                                                                                                 
Ser. 93-57, Class A4, 5.9s, 2023                 --              --           3,034           3,087              --              -- 
Structured Asset Security Corp. Ser.                                                                                                
00-1, Class A1, 3.87s, 2024               7,370,503       7,368,654       2,456,834       2,457,218       2,682,599       2,683,018 
                                                     --------------                  --------------                  -------------- 
Total Collateralized Mortgage                                                                                                       
Obligations                                                                                                                         
(cost $15,879,825, $35,138,083                                                                                                      
and $22,181,601)                                     $   15,966,579                  $   36,024,165                  $   22,835,744 
----------------------------------------------------------------------------------------------------------------------------------- 

                                                      GROWTH                        BALANCED                     CONSERVATIVE       
                                                               0.2%                            3.1%                            6.0% 
CONVERTIBLE                               Principal                       Principal                       Principal                 
BONDS AND NOTES (a)                          Amount           Value          Amount           Value          Amount           Value 

Advertising and                                                                                                                     
Marketing Services                                              --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
DoubleClick, Inc. cv. sub.                                                                                                          
notes 4 3/4s, 2006                   $           --  $           --  $      126,000  $       85,838  $       82,000  $       55,863 
Lamar Advertising Co. cv. notes                                                                                                     
5 1/4s, 2006                                     --              --         130,000         122,525         100,000          94,250 
Young & Rubicam, Inc. 144A                                                                                                          
cv. sr. notes 3s, 2005                           --              --         250,000         228,125         260,000         237,250 
                                                     --------------                  --------------                  -------------- 
                                                                 --                         436,488                         387,363 

Aerospace and Defense                                           --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Hexcel Corp. cv. sub. notes 7s, 2003         77,000          62,755              --              --          49,000          39,935 

Automotive                                                      --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Exide Corp. 144A cv. sr. sub. notes                                                                                                 
2.9s, 2005                                1,170,000         444,600              --              --         530,000         201,400 
Standard Motor Products, Inc. cv.                                                                                                   
sub. notes 6 3/4s, 2009                          --              --         239,000         160,728         146,000          98,185 
Tower Automotive, Inc. cv.                                                                                                          
sub. notes 5s, 2004                              --              --         889,000         697,865         685,000         537,725 
                                                     --------------                  --------------                  -------------- 
                                                            444,600                         858,593                         837,310 

Banking                                                         --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
JMH Finance, Ltd. 144A cv. sr. notes                                                                                                
4 3/4s, 2007 (United Kingdom)                    --              --       1,313,000       1,248,991       1,008,000         958,860 

Biotechnology                                                   --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Affymetrix, Inc. cv. sub. notes                                                                                                     
4 3/4s, 2007                                     --              --         784,000         478,240         603,000         367,830 
COR Therapeutics, Inc. 144A cv. notes                                                                                               
5s, 2007                                         --              --         139,000         123,884          89,000          79,321 
COR Therapeutics, Inc. 144A cv. notes                                                                                               
4 1/2s, 2006                                     --              --         680,000         603,160         530,000         470,110 
Genzyme Corp. 144A cv. sub. deb.                                                                                                    
3s, 2021                                         --              --         970,000         919,075         750,000         710,625 
Gilead Sciences, Inc. 144A cv. notes                                                                                                
5s, 2007                                         --              --         239,000         322,351         171,000         230,636 
Invitrogen Corp. 144A cv. sub. notes                                                                                                
5 1/2s, 2007                                     --              --         140,000         151,725          90,000          97,538 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       2,598,435                       1,956,060 

Broadcasting                                                    --%                            0.1%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Clear Channel Communications, Inc.                                                                                                  
cv. sr. notes 2 5/8s, 2003                       --              --         360,000         359,550         285,000         284,644 
Clear Channel Communications, Inc.                                                                                                  
cv. sr. notes 1 1/2s, 2002                       --              --         956,000         915,370         736,000         704,720 
Jacor Communications, Inc. cv. LYON                                                                                                 
zero %, 2018                                     --              --       2,150,000         980,938       1,656,000         755,550 
News America, Inc. 144A cv. notes                                                                                                   
zero %, 2021                                     --              --       2,078,000         955,880       1,600,000         736,000 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       3,211,738                       2,480,914 

Cable Television                                                --%                            0.2%                            0.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
Adelphia Communications Corp. cv. sub.                                                                                              
notes 3 1/4s, 2021                               --              --         450,000         371,813         350,000         289,188 
AT&T Corp. - Liberty Media Group cv. deb.                                                                                           
Class B, 3 1/4s, 2031                            --              --       1,430,000       1,136,850       1,130,000         902,588 
AT&T Corp. - Liberty Media Group cv.                                                                                                
mortgage-backed 4s, 2029                         --              --       1,297,000         992,205         966,000         738,990 
AT&T Corp. - Liberty Media Group 144A cv.                                                                                           
sr. notes 3 1/2s, 2031                           --              --         500,000         381,250         380,000         289,750 
Comcast Corp. cv. deb. zero %, 2020              --              --       1,200,000         937,500       1,000,000         781,250 
Rogers Communications cv. deb. 2s,                                                                                                  
2005 (Canada)                                30,000          22,800              --              --          10,000           7,600 
Telewest Finance 144A cv. company guaranty                                                                                          
6s, 2005 (United Kingdom)                   110,000          61,325              --              --         350,000         195,125 
Telewest Finance Corp. cv. sub. notes 6s,                                                                                           
2005 (United Kingdom)                       670,000         373,525              --              --         270,000         150,525 
                                                     --------------                  --------------                  -------------- 
                                                            457,650                       3,819,618                       3,355,016 

Communications Equipment                                        --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
CIENA Corp. cv. sr. notes 3 3/4s, 2008           --              --         780,000         462,228         590,000         349,634 
CommScope, Inc. cv. sub. notes 4s, 2006          --              --         122,000          95,313          73,000          57,031 
Comverse Technology, Inc. 144A cv. sr.                                                                                              
notes 1 1/2s, 2005                               --              --       1,500,000       1,083,750       1,150,000         830,875 
ONI Systems Corp. cv. notes 5s, 2005             --              --         785,000         487,681         599,000         372,129 
Redback Networks, Inc. cv. sub. notes                                                                                               
5s, 2007                                         --              --         638,000         231,275         491,000         177,988 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       2,360,247                       1,787,657 

Computers                                                       --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Adaptec, Inc. cv. sub. notes 4 3/4s, 2004        --              --         151,000         134,201          95,000          84,431 
Anixter International, Inc.                                                                                                         
cv. sr. notes zero %, 2020                       --              --       2,100,000         548,625       1,800,000         470,250 
Anixter International, Inc. 144A                                                                                                    
cv. sr. notes zero %, 2020                       --              --         979,000         255,764         599,000         156,489 
Checkpoint Systems, Inc. 144A                                                                                                       
cv. sub. deb. 5 1/4s, 2005                       --              --         770,000         625,625         590,000         479,375 
Hewlett-Packard Co. cv. sub. notes                                                                                                  
zero %, 2017                                     --              --       2,250,000       1,004,063       1,728,000         771,120 
Quantum Corp. cv. sub. notes 7s, 2004            --              --         162,000         140,940         100,000          87,000 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       2,709,218                       2,048,665 

Consumer Finance                                                --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Providian Financial Corp. cv. sr. notes                                                                                             
3 1/4s, 2005                                     --              --       1,732,000       1,136,625       1,335,000         876,094 

Consumer Services                                               --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Getty Images, Inc. 144A cv. sub. notes                                                                                              
5s, 2007                                         --              --         350,000         256,813         230,000         168,763 

Electronics                                                     --%                            0.5%                            1.0% 
----------------------------------------------------------------------------------------------------------------------------------- 
Act Manufacturing, Inc.                                                                                                             
cv. sub. notes 7s, 2007                          --              --       1,200,000         424,500       1,000,000         353,750 
Analog Devices, Inc. 144A                                                                                                           
cv. notes 4 3/4s, 2005                           --              --       1,135,000       1,042,781         874,000         802,988 
Analog Devices, Inc. 144A                                                                                                           
cv. sub. notes 4 3/4s, 2005                      --              --         332,000         305,025         199,000         182,831 
Arrow Electronics, Inc. cv. deb.                                                                                                    
zero %, 2021                                     --              --         857,000         342,800         690,000         276,000 
Atmel Corp. cv. sub. deb. zero %, 2018           --              --         340,000         158,100         300,000         139,500 
Atmel Corp. 144A cv. sub. notes                                                                                                     
zero %, 2021                                     --              --       1,850,000         531,875       1,420,000         408,250 
Benchmark Electronics, Inc. 144A                                                                                                    
cv. sub. notes 6s, 2006                          --              --         466,000         355,908         359,000         274,186 
Brooks Automation, Inc. 144A                                                                                                        
cv. notes 4 3/4s, 2008                           --              --         680,000         493,850         520,000         377,650 
Celestica, Inc. cv. notes zero %,                                                                                                   
2020 (Canada)                                    --              --       4,098,000       1,495,770       3,172,000       1,157,780 
DDi Corp. cv. sub. notes 5 1/4s, 2008            --              --         380,000         238,925         260,000         163,475 
Jabil Circuit, Inc. cv. sub. notes                                                                                                  
1 3/4s, 2021                                     --              --       1,760,000       1,493,800       1,330,000       1,128,838 
Kulicke & Soffa Industries, Inc. 144A cv.                                                                                           
sub. notes 4 3/4s, 2006                          --              --         145,000         107,663         115,000          85,388 
Lattice Semiconductor Corp.                                                                                                         
cv. sub. notes 4 3/4s, 2006                      --              --         223,000         226,066         132,000         133,815 
S3, Inc. 144A cv. sub. notes 5 3/4s, 2003        --              --         700,000         426,125         700,000         426,125 
Sanmina Corp. cv. sub. deb.                                                                                                         
zero %, 2020                                     --              --       1,500,000         525,000       1,100,000         385,000 
Sanmina Corp. cv. sub. notes                                                                                                        
4 1/4s, 2004                                     --              --         613,000         574,688         472,000         442,500 
Solectron Corp. cv. notes zero %, 2020      610,000         305,763       1,428,000         715,785       1,387,000         695,234 
Thermo Electron Corp.                                                                                                               
cv. sr. notes 4s, 2005                           --              --         550,000         492,250         383,000         342,785 
Thermo Electron Corp. 144A                                                                                                          
cv. sub. deb. 4 1/4s, 2003                       --              --         300,000         293,250         400,000         391,000 
TranSwitch Corp. cv. notes 4 1/2s, 2005          --              --       1,420,000         978,025       1,111,000         765,201 
TranSwitch Corp. 144A cv. notes                                                                                                     
4 1/2s, 2005                                     --              --         362,000         249,328         210,000         144,638 
TriQuint Semiconductor, Inc.                                                                                                        
cv. notes 4s, 2007                               --              --       1,160,000         880,150         900,000         682,875 
                                                     --------------                  --------------                  -------------- 
                                                            305,763                      12,351,664                       9,759,809 

Energy                                                          --%                            0.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Diamond Offshore Drilling, Inc.                                                                                                     
cv. deb. zero %, 2020                            --              --              --              --         100,000          48,750 
Diamond Offshore Drilling, Inc. 144A                                                                                                
cv. deb. zero %, 2020                            --              --         310,000         151,125         190,000          92,588 
Global Marine, Inc. cv. deb. zero %, 2020        --              --       1,400,000         670,250       1,000,000         478,750 
Global Marine, Inc. 144A cv. deb.                                                                                                   
zero %, 2020                                     --              --       1,008,000         482,580         630,000         301,613 
Hanover Compressor Co. cv. sr. notes                                                                                                
4 3/4s, 2008                                     --              --         672,000         578,760         515,000         443,544 
Nabors Industries, Inc. cv. deb.                                                                                                    
zero %, 2020                                     --              --         925,000         559,625         713,000         431,365 
Offshore Logistics, Inc. cv. sub. notes                                                                                             
6s, 2003                                         --              --         103,000         104,803          81,000          82,418 
Pride International, Inc. cv. deb.                                                                                                  
zero %, 2021                                     --              --       1,656,000         964,620       1,300,000         757,250 
Pride International, Inc. cv. sub. deb.                                                                                             
zero %, 2018                                     --              --         281,000         119,425         272,000         115,600 
Seacor Holdings, Inc. cv. sub. notes                                                                                                
5 3/8s, 2006                                     --              --          70,000          66,763          39,000          37,196 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       3,697,951                       2,789,074 

Engineering & Construction                                      --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Foster Wheeler, Ltd. 144A                                                                                                           
cv. sub. notes 6 1/2s, 2007                      --              --         980,000         632,100         750,000         483,750 

Financial                                                       --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Financial Federal Corp. cv. sub. notes                                                                                              
4 1/2s, 2005                                     --              --         600,000         582,000         400,000         388,000 

Health Care                                                     --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
DaVita, Inc. cv. sub. notes 7s, 2009        240,000         231,456              --              --              --              -- 
Healthsouth Corp. cv. sub. deb.                                                                                                     
3 1/4s, 2003                                110,000         103,950         901,000         851,445         586,000         553,770 
Total Renal Care Holdings, Inc.                                                                                                     
144A cv. notes 7s, 2009                     120,000         113,700              --              --         490,000         464,275 
                                                     --------------                  --------------                  -------------- 
                                                            449,106                         851,445                       1,018,045 

Health Care Services                                            --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Medical Care International, Inc. 144A                                                                                               
cv. notes 6 3/4s, 2006                           --              --         523,000         517,770         404,000         399,960 

Homebuilding                                                    --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
D.R. Horton, Inc. cv. sr. notes                                                                                                     
zero %, 2021                                     --              --         770,000         397,513         590,000         304,588 

Investment Banking/Brokerage                                    --%                            0.2%                            0.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
Berkshire Hathaway, Inc. cv. sr. notes                                                                                              
1s, 2001                                         --              --         149,000         360,021          99,000         239,209 
E*Trade Group, Inc. cv. sub. notes                                                                                                  
6s, 2007                                         --              --       1,985,000       1,213,331       1,545,000         944,381 
E*Trade Group, Inc. 144A cv. sub.                                                                                                   
notes 6s, 2007                                   --              --          51,000          31,174          32,000          19,560 
Legg Mason, Inc. 144A cv. LYON                                                                                                      
zero %, 2031                                     --              --       2,560,000       1,140,224       1,960,000         872,984 
Merrill Lynch & Co., Inc. cv. sr. notes                                                                                             
zero %, 2031                                     --              --       2,630,000       1,295,275       2,080,000       1,024,400 
Stilwell Financial, Inc. 144A cv. LYON                                                                                              
zero %, 2031                                     --              --         880,000         636,900         680,000         492,150 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       4,676,925                       3,592,684 

Lodging/Tourism                                                 --%                            0.1%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Royal Caribbean Cruises cv. sr. notes                                                                                               
zero %, 2021                                     --              --       2,100,000         560,910       1,600,000         427,360 

Medical Services                                               0.1%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Service Corp. International cv. sub. notes                                                                                          
6 3/4s, 2008                                840,000         942,228       2,300,000       2,579,910         770,000         863,709 

Medical Technology                                              --%                             0.1 %                          0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
ResMed, Inc. 144A cv. sub. notes                                                                                                    
4s, 2006                                         --              --         740,000         751,766         570,000         579,063 
Thermo Cardiosystems, Inc. 144A cv.                                                                                                 
company guaranty 4 3/4s, 2004                    --              --         600,000         541,500         400,000         361,000 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       1,293,266                         940,063 

Metals                                                          --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Freeport-McMoRan Copper & Gold, Inc. 144A                                                                                           
cv. sr. notes 8 1/4s, 2006                  180,000         189,036       1,610,000       1,690,822       1,050,000       1,102,710 
Inco, Ltd. cv. deb. 7 3/4s, 2016 (Canada)        --              --         144,000         139,320          90,000          87,075 
Inco, Ltd. cv. deb. 5 3/4s, 2004 (Canada)        --              --         300,000         291,750         300,000         291,750 
Quanex Corp. cv. sub. deb. 6.88s, 2007           --              --         576,000         545,040         376,000         355,790 
                                                     --------------                  --------------                  -------------- 
                                                            189,036                       2,666,932                       1,837,325 

Oil & Gas                                                       --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Devon Energy Corp. cv. deb. 4.95s, 2008          --              --         700,000         694,750         500,000         496,250 

Paper & Forest Products                                         --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Mail-Well, Inc. cv. sub. notes 5s, 2002          --              --         497,000         445,436         383,000         343,264 

Pharmaceuticals                                                 --%                            0.3%                            0.5% 
----------------------------------------------------------------------------------------------------------------------------------- 
Alkermes, Inc. cv. sub. notes                                                                                                       
3 3/4s, 2007                                     --              --         599,000         354,159         460,000         271,975 
Allergan, Inc. 144A cv. bonds                                                                                                       
zero %, 2020                                     --              --         845,000         513,338         510,000         309,825 
Alpharma, Inc. cv. sr. notes 5 3/4s, 2005        --              --         460,000         510,025         351,000         389,171 
Alza Corp. cv. sub. LYON zero %, 2014            --              --         552,000         788,670         427,000         610,076 
Aviron cv. sub. notes 5 1/4s, 2008               --              --         120,000          83,400         100,000          69,500 
ICN Pharmaceuticals, Inc. 144A cv. sub.                                                                                             
notes 6 1/2s, 2008                               --              --       1,510,000       1,513,775       1,230,000       1,233,075 
Inhale Therapeutic Systems, Inc.                                                                                                    
cv. sub. notes 3 1/2s, 2007                      --              --         200,000         107,250         150,000          80,438 
Inhale Therapeutic Systems, Inc. 144A                                                                                               
cv. sub. notes 5s, 2007                          --              --         116,000          72,935          77,000          48,414 
Inhale Therapeutic Systems, Inc. 144A cv.                                                                                           
sub. notes 3 1/2s, 2007                          --              --         340,000         182,325         210,000         112,613 
IVAX Corp. 144A cv. sr. sub. notes                                                                                                  
4 1/2s, 2008                                     --              --         995,000         850,725         790,000         675,450 
Sepracor, Inc. cv. sub. deb. 7s, 2005            --              --         761,000         630,679         513,000         425,149 
Sepracor, Inc. cv. sub. deb. 5s, 2007            --              --       1,394,000         947,920       1,031,000         701,080 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       6,555,201                       4,926,766 

Photography/Imaging                                             --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Xerox Corp. cv. sub. deb. 0.57s, 2018            --              --       5,324,000       2,582,140       4,090,000       1,983,650 

Publishing                                                      --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Times Mirror Co. cv. sub. notes                                                                                                     
zero %, 2017                                     --              --         688,000         356,040         530,000         274,275 

Real Estate                                                     --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
EOP Operating LP cv. sr. notes FRN                                                                                                  
7 1/4s, 2008                                     --              --         100,000         107,375         200,000         214,750 
EOP Operating LP 144A cv. sr. notes                                                                                                 
7 1/4s, 2008                                     --              --         980,000       1,052,275         586,000         629,218 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       1,159,650                         843,968 

Restaurants                                                     --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
CKE Restaurants, Inc. cv. sub notes                                                                                                 
4 1/4s, 2004                                     --              --         500,000         355,000         400,000         284,000 

Retail                                                          --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
TJX Companies, Inc. (The) 144A cv. sub.                                                                                             
notes zero %, 2021                               --              --       1,964,000       1,367,435       1,492,000       1,038,805 

Semiconductor                                                   --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Advanced Energy Industries, Inc. cv. sub.                                                                                           
notes 5 1/4s, 2006                               --              --         200,000         152,000         300,000         228,000 
ASM Lithography Holdings NV 144A                                                                                                    
cv. bonds 4 1/4s, 2004 (Netherlands)             --              --           3,000           2,265              --              -- 
LAM Research Corp. cv. sub. notes                                                                                                   
5s, 2002                                         --              --         584,000         592,030         437,000         441,364 
LAM Research Corp. 144A cv. notes                                                                                                   
4s, 2006                                         --              --         390,000         308,588         290,000         229,463 
Photronics, Inc. cv. sub. notes 6s, 2004         --              --         300,000         282,000         300,000         282,000 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       1,336,883                       1,180,827 

Software                                                        --%                            0.2%                            0.4% 
----------------------------------------------------------------------------------------------------------------------------------- 
Aether Systems, Inc. cv. sub. notes                                                                                                 
6s, 2005                                         --              --       1,100,000         649,000         850,000         501,500 
Akamai Technologies, Inc. cv. sub. notes                                                                                            
5 1/2s, 2007                                     --              --       2,000,000         832,500       1,600,000         666,000 
Aspen Technology, Inc. cv. sub. deb.                                                                                                
5 1/4s, 2005                                     --              --         400,000         284,000         411,000         291,810 
Manugistics Group, Inc. cv. sub. notes                                                                                              
5s, 2007                                         --              --       2,160,000       1,217,700       1,660,000         935,825 
Network Associates, Inc. 144A                                                                                                       
cv. sub. notes 5 1/4s, 2006                      --              --       1,120,000       1,128,400         870,000         876,525 
Rational Software Corp. cv. sub. notes                                                                                              
5s, 2007                                         --              --       1,400,000       1,022,000       1,100,000         803,000 
Rational Software Corp. 144A                                                                                                        
cv. sub. notes 5s, 2007                          --              --         313,000         228,490         244,000         178,120 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       5,362,090                       4,252,780 

Technology                                                      --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Amkor Technology, Inc. cv. sub. notes                                                                                               
5s, 2007                                         --              --         185,000         113,313         199,000         121,888 
Amkor Technology, Inc. 144A                                                                                                         
cv. sub. notes 5s, 2007                          --              --          81,000          49,613          50,000          30,625 
                                                     --------------                  --------------                  -------------- 
                                                                 --                         162,926                         152,513 

Technology Services                                             --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Acxion Corp. cv. sub. notes                                                                                                         
5 1/4s, 2003                                     --              --         400,000         339,000         300,000         254,250 
Affiliated Computer Services, Inc.                                                                                                  
cv. sub. notes 4s, 2005                          --              --         550,000       1,072,500         410,000         799,500 
Automatic Data Processing, Inc.                                                                                                     
cv. LYON zero %, 2012                            --              --         300,000         365,625         300,000         365,625 
CheckFree Holdings Corp.                                                                                                            
cv. company guaranty 6 1/2s, 2006                --              --         864,000         629,640         638,000         464,943 
CheckFree Holdings Corp. 144A                                                                                                       
cv. sub. notes 6 1/2s, 2006                      --              --          59,000          42,996          35,000          25,506 
Safeguard Scientifics, Inc.                                                                                                         
cv. sub. notes 5s, 2006                          --              --         488,000         250,100         387,000         198,338 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       2,699,861                       2,108,162 

Telecommunications                                             0.1%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
American Tower Corp. cv. notes                                                                                                      
5s, 2010                                     70,000          52,171              --              --          40,000          29,812 
Brightpoint, Inc. cv. LYON zero %, 2018          --              --       2,300,000         882,625       1,800,000         690,750 
Nextel Communications, Inc.                                                                                                         
cv. sr. notes 5 1/4s, 2010                  830,000         421,225              --              --         500,000         253,750 
Spectrasite Holdings, Inc.                                                                                                          
cv. sr. notes 6 3/4s, 2010                  110,000          54,077              --              --          30,000          14,748 
                                                     --------------                  --------------                  -------------- 
                                                            527,473                         882,625                         989,060 

Textiles                                                        --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Reebok International, Ltd. 144A cv.                                                                                                 
bonds 4 1/4s, 2021                               --              --         126,000         116,078          99,000          91,204 

Tobacco                                                         --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Standard Commercial Corp.                                                                                                           
cv. sub. deb. 7 1/4s, 2007                       --              --         300,000         270,000         352,000         316,800 
Vector Group, Ltd. 144A cv. sub. notes                                                                                              
6 1/4s, 2008 (Germany)                           --              --         970,000       1,287,675         790,000       1,048,725 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       1,557,675                       1,365,525 

Transaction Processing                                          --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
National Data Corp. cv. sub. notes                                                                                                  
5s, 2003                                         --              --         700,000         783,125         519,000         580,631 
                                                     --------------                  --------------                  -------------- 
Total Convertible Bonds and Notes                                                                                                   
(cost $3,724,577, $84,344,023                                                                                                       
and $65,437,979)                                     $    3,378,611                  $   75,862,067                  $   58,612,684 
----------------------------------------------------------------------------------------------------------------------------------- 

                                                      GROWTH                       BALANCED                     CONSERVATIVE        

                                                               0.2%                            0.2%                            0.6% 
PREFERRED STOCKS (a)                         Shares           Value          Shares           Value          Shares           Value 
----------------------------------------------------------------------------------------------------------------------------------- 
AmeriKing, Inc. $3.25 cum. pfd. (PIK)        10,536  $          105              --  $           --              --  $           -- 
California Federal Bancorp, Inc. Ser. A,                                                                                            
$2.281 pfd.                                   8,100         202,500          22,060         551,500          15,240         381,000 
Chevy Chase Capital Corp. Ser. A,                                                                                                   
$5.188 pfd.  (PIK)                            4,057         229,221              --              --           2,028         114,582 
CSBI Capital Trust I 144A company                                                                                                   
guaranty Ser. A, 11.75% pfd.                     --              --              --              --          90,000          99,000 
CSC Holdings, Inc. Ser. M,                                                                                                          
$11.125 cum. pfd.  (PIK)                      7,045         739,725              --              --             925          97,125 
Dobson Communications Corp.                                                                                                         
13.00% pfd.                                      34          30,940              --              --               1             910 
Dobson Communications Corp. 144A                                                                                                    
12.25% pfd.  (PIK)                               14          12,740              --              --              --              -- 
First Union Capital II Ser. A, 7.95% pfd.        --              --           2,490       2,556,483           3,155       3,239,239 
Fresenius Medical Capital Trust II company                                                                                          
guaranty 7.875% pfd. (Germany)                   --              --           1,330       1,290,100             990         960,300 
Intermedia Communications, Inc.                                                                                                     
Ser. B, 13.50% pfd.  (PIK)                       --              --               1           1,060              --              -- 
Nextel Communications, Inc.                                                                                                         
Ser. D, 13.00% cum. pfd.  (PIK)                   6           3,120              --              --               2           1,040 
Nextel Communications, Inc. 144A                                                                                                    
Ser. E, 11.125% pfd.  (PIK)                     237          97,170              --              --             118          48,380 
Paxson Communications Corp.                                                                                                         
13.25% cum. pfd.  (PIK)                         137       1,219,300              --              --              76         676,400 
Paxson Communications Corp.                                                                                                         
12.50% pfd.  (PIK)                                1             920              --              --              --              -- 
                                                     --------------                  --------------                  -------------- 
Total Preferred Stocks                                                                                                              
(cost $2,917,632, $4,176,095                                                                                                        
and $5,323,369)                                      $    2,535,741                  $    4,399,143                  $    5,617,976 
----------------------------------------------------------------------------------------------------------------------------------- 

                                                      GROWTH                         BALANCED                       CONSERVATIVE    
                                                               0.1%                            0.1%                            0.1% 
UNITS (a)                                     Units           Value           Units           Value           Units           Value 
----------------------------------------------------------------------------------------------------------------------------------- 
Cipla, Ltd. Ser. B equity participation                                                                                             
notes zero %, (Issued by Credit Suisse                                                                                              
First Boston) 2003 (India) (NON)              9,252  $      218,370              --  $           --              --  $           -- 
Contifinacial Corp. Liquidating Trust                                                                                               
units 8 1/8s, 2031                        1,784,768         160,629              --              --         475,649          42,808 
Infosys Technologies, Ltd. 144A                                                                                                     
Structured Call Warrants (Issued by                                                                                                 
UBS AG) 2002 (India)                             --              --           9,900         492,587              --              -- 
Lehman Brothers Holdings, Inc. 144A                                                                                                 
Structured Warrants (Issued by Lehman                                                                                               
Brothers Finance S.A.)                        2,300         130,755           4,400         250,140              --              -- 
Nippon Television Network Corp. 144A                                                                                                
Structured Call Warrants (Issued by Lehman                                                                                          
Brothers Finance S.A.), Exp. 8/6/02                                                                                                 
(Japan)                                          --              --             440         101,557              --              -- 
Satyam Computer Services, Ltd. Low                                                                                                  
Exercise Call Warrants (Issued by UBS AG),                                                                                          
Exp. 8/16/02 (India)                        147,650         395,540              --              --              --              -- 
Tokyo Broadcasting System, Inc. Structured                                                                                          
Notes 3.35s (Issued by UBS AG) 2001                                                                                                 
(Japan)                                      22,100         419,091          39,000         739,573           5,000          94,817 
Washington Mutual Capital Trust I 144A                                                                                              
units cum. cv. pfd. $2.688                       --              --          16,300         906,688          12,600         700,875 
                                                     --------------                  --------------                  -------------- 
Total Units                                                                                                                         
(cost $2,314,385, $3,602,104                                                                                                        
and $1,252,881)                                      $    1,324,385                  $    2,490,545                  $      838,500 
----------------------------------------------------------------------------------------------------------------------------------- 

                                                      GROWTH                          BALANCED                    CONSERVATIVE      
                                                                --%                            1.4%                            2.7% 
CONVERTIBLE                                                                                                                         
PREFERRED STOCKS (a)                         Shares           Value          Shares           Value          Shares           Value 

Aerospace and Defense                                           --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Coltech Capitial Trust $2.625 cv. pfd.           --  $           --           4,592  $      143,500           3,241  $      101,281 

Automotive                                                      --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Tower Automotive Capital Trust                                                                                                      
$3.375 cv. pfd.                                  --              --           9,900         230,175           7,800         181,350 

Banking                                                         --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Sovereign Bancorp, Inc. $3.75 cv.                                                                                                   
pfd.                                             --              --          11,760         687,960           9,100         532,350 
Union Planters Corp. Ser. E,                                                                                                        
$2.00 cum. cv. pfd.                              --              --           9,800         525,525           7,500         402,188 
Washington Mutual, Inc. $4.00 cv.                                                                                                   
pfd.                                             --              --           8,500         727,175           6,500         556,075 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       1,940,660                       1,490,613 

Broadcasting                                                    --%                            0.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Emmis Communications Corp. Ser. A,                                                                                                  
$3.125 cv. pfd.                                  --              --          28,925         925,600          22,633         724,256 
Paxson Communications Corp. 144A                                                                                                    
9.75% cv. pfd.  (PIK)                            37         321,900              --              --              12         104,400 
Pegasus Communications Corp. Ser. C,                                                                                                
6.50% cum. cv. pfd.                              --              --          28,355         744,319          21,681         569,126 
Radio One, Inc. 6.50% cum. cv. pfd.              --              --             810         688,652             600         510,113 
Radio One, Inc. 6.50% cum. cv. pfd.              --              --             233         198,094             171         145,382 
Sinclair Broadcast Group, Inc. Ser. D,                                                                                              
$3.00 cv. pfd.                                   --              --          45,236       1,243,990          34,759         955,873 
                                                     --------------                  --------------                  -------------- 
                                                            321,900                       3,800,655                       3,009,150 

Cable Television                                                --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
MediaOne Group, Inc. 7.00% cv. pfd.              --              --          40,500       1,012,500          31,700         792,500 

Commercial and Consumer Services                                --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Carriage Services Capital Trust                                                                                                     
$3.50 cv. pfd.                                   --              --              --              --           1,500          41,813 

Electric Utilities                                              --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
CMS Energy Corp. 8.75% cum. cv. pfd.             --              --          17,754         534,839          13,677         412,020 
Reliant Energy, Inc. zero % cv. pfd.             --              --          11,600         614,336           9,000         476,640 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       1,149,175                         888,660 

Electronics                                                     --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Interact Systems, Inc. 144A                                                                                                         
14.00% cv. pfd. (In default) (NON)              400               4              --              --              90               1 
Pioneer Standard Electronics, Inc.                                                                                                  
$3.375 cv. pfd.                                  --              --           3,700         134,588           2,600          94,575 
Titan Capital Trust $2.875 cum. cv. pfd.         --              --             400          14,150             600          21,225 
Titan Capital Trust 144A $2.875 cv. pfd.         --              --           3,000         106,125           2,000          70,750 
World Access, Inc. 144A Ser. D,                                                                                                     
zero % cv. pfd.                                 114             171              --              --              29              43 
                                                     --------------                  --------------                  -------------- 
                                                                175                         254,863                         186,594 

Energy                                                          --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Evi, Inc. $2.50 cum. cv. pfd.                    --              --          15,298         592,798          11,785         456,669 
Hanover Compressor Capital Trust                                                                                                    
$3.625 cv. pfd.                                  --              --             300          20,213             400          26,950 
Hanover Compressor Capital Trust                                                                                                    
144A $3.625 cv. pfd.                             --              --           1,900         128,013           1,300          87,588 
                                                     --------------                  --------------                  -------------- 
                                                                 --                         741,024                         571,207 

Engineering & Construction                                      --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
TXI Capital Trust I $2.75 cv. pfd.               --              --          45,400       1,492,525          34,700       1,140,763 

Food                                                            --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Suiza Capital Trust II $2.75 cv. pfd.            --              --          23,433       1,077,918          18,017         828,782 

Health Care Services                                            --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Caremark Rx Capital Trust I $3.50 cum. cv.                                                                                          
pfd.                                             --              --           9,219       1,075,166           7,069         824,422 

Insurance                                                       --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
ACE, Ltd. $4.125 cum. cv. pfd.                   --              --          38,735       2,430,621          30,158       1,892,415 

Metals                                                          --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Anker Coal Group, Inc. 14.25% cv. pfd.          182             910              --              --              87             435 
Freeport-McMoRan Copper & Gold, Inc.                                                                                                
$1.75 cum. cv. pfd.                              --              --          78,400       1,146,600          59,900         876,038 
USX Capital Trust I $3.375 cum. cv. pfd.         --              --           8,200         385,400           6,500         305,500 
                                                     --------------                  --------------                  -------------- 
                                                                910                       1,532,000                       1,181,973 

Oil & Gas                                                       --%                            0.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Newfield Exploration Co. $3.25 cv. pfd.          --              --          17,300         856,350          13,300         658,350 
Unocal Capital Trust $3.125 cum. cv. pfd.        --              --          14,216         677,037          10,863         517,350 
Vec Trust I $1.937 cum. cv. pfd.                 --              --          39,800       1,180,070          30,700         910,255 
Western Gas Rersources zero % cum. cv.                                                                                              
pfd.                                             --              --          41,100       1,633,725          31,700       1,260,075 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       4,347,182                       3,346,030 

Paper & Forest Products                                         --%                            0.1%                            0.2% 
----------------------------------------------------------------------------------------------------------------------------------- 
Georgia-Pacific Group $3.75 cv. pfd.             --              --           9,883         326,139          10,170         335,610 
International Paper Capital Trust                                                                                                   
$2.625 cum. cv. pfd.                             --              --          31,991       1,399,606          24,522       1,072,838 
Sealed Air Corp. Ser. A,                                                                                                            
$1.00 cum. cv. pfd.                              --              --          18,230         717,806          14,156         557,393 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       2,443,551                       1,965,841 

Pharmaceuticals                                                 --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Biovail Corp. $3.375 cv. pfd. (Canada)           --              --           5,743         478,823           4,196         349,842 
Pharmacia Corp. 6.50% cv. pfd.                   --              --          26,420       1,007,263          20,353         775,958 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       1,486,086                       1,125,800 

Power Producers                                                 --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Mirant Trust I Ser. A, $3.125 cum. cv. pfd       --              --          10,266         549,231           7,870         421,045 

Publishing                                                      --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Tribune Co. 2.00% cv. pfd.                       --              --           9,800         883,225           7,700         693,963 

Railroads                                                       --%                             --%                             --% 
----------------------------------------------------------------------------------------------------------------------------------- 
Canadian National Railway Co.                                                                                                       
$2.625 cv. pfd. (Canada)                         --              --           2,400         132,300           5,300         292,163 

Real Estate                                                     --%                            0.1%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Equity Residential Properties Trust                                                                                                 
Ser. E, 7.00% cum. cv. pfd. (R)                  --              --          14,341         466,083          11,047         359,028 
Equity Residential Properties Trust                                                                                                 
Ser. G, $1.813 cum. cv. pfd. (R)                 --              --          27,800         706,954          21,400         544,202 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       1,173,037                         903,230 

Software                                                        --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Amdocs Automatic 6.75% cv. pfd.                  --              --          24,374         594,116          18,541         451,937 

Technology Services                                             --%                             --%                            0.1% 
----------------------------------------------------------------------------------------------------------------------------------- 
Electronic Data Systems Corp.                                                                                                       
zero % cv. pfd.                                  --              --          14,000         714,000          10,900         555,900 

Telecommunications                                              --%                            0.2%                            0.3% 
----------------------------------------------------------------------------------------------------------------------------------- 
Broadwing, Inc. Ser. B,                                                                                                             
$3.275 cum. cv. pfd.                             --              --          20,310         774,319          15,613         595,246 
Citizens Communications Co.                                                                                                         
cv. pfd. $1.688                                  --              --          29,700         631,125          22,800         484,500 
Cox Communications, Inc.                                                                                                            
$7.75 cv. pfd.                                   --              --          24,875       1,557,797          19,500       1,221,188 
Global Crossing, Ltd. 6.75% cum. cv.                                                                                                
pfd. (Bermuda)                                   --              --           9,652         402,971           7,465         311,664 
Global Telesystems Group, Inc.                                                                                                      
$3.625 cv. pfd.                                  --              --           5,300           7,288              --              -- 
McLeodUSA, Inc. Ser. A,                                                                                                             
6.75% cum. cv. pfd.                              --              --           7,400         373,700           5,600         282,800 
Qwest Trends Trust 144A                                                                                                             
5.75% cv. pfd.                                   --              --          15,541         538,107          11,651         403,416 
                                                     --------------                  --------------                  -------------- 
                                                                 --                       4,285,307                       3,298,814 
                                                     --------------                  --------------                  -------------- 
Total Convertible Preferred Stocks                                                                                                  
(cost $589,607, $39,636,382                                                                                                         
and $30,769,299)                                     $      322,985                  $   33,488,817                  $   26,186,246 
----------------------------------------------------------------------------------------------------------------------------------- 


                                                     GROWTH                     BALANCED                   CONSERVATIVE             
PURCHASED                                                     --%                          --%                           --%        
OPTIONS                  Expiration Date/      Contract                Contract                      Contract                       
OUTSTANDING(a)              Strike Price         Amount     Value        Amount          Value         Amount          Value        
----------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                    
USD/JPY Fx                                                                                                                          
OTC Option                                                                                                                          
(UBS AG) (Call)        Nov-01/123.05 USD JPY 46,061,000  $161,214            --  $          --             --  $          --        
EUR/USD Fx OTC                                                                                                                      
Option                                                                                                                              
(Lehman Brothers)                                                                                                                   
(Call)                   Oct 01/.905 EUR    $10,784,000   103,098    12,256,000        117,170      4,480,000         42,830        
                                                         --------                     --------                      --------        
Total Purchased Options                                                                                                             
Outstanding                                                                                                                         
(cost $489,709, $111,593                                                                                                            
and $40,791)                                             $264,312                $     117,170                 $      42,830        
----------------------------------------------------------------------------------------------------------------------------------- 


                                                           GROWTH                      BALANCED                   CONSERVATIVE      
                                                                     --%                          --%                           --% 
                                Expiration                                                                                          
WARRANTS* (NON)                       Date       Warrants          Value       Warrants         Value       Warrants          Value 
----------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                    
Anker Coal Group, Inc. 144A       10/28/09             32  $           1             --  $         --              7  $           1 
Birch Telecommunications, Inc.                                                                                                      
144A  (PIK)                        6/15/08            340             34             --            --             80              8 
CellNet Data Systems, Inc.         10/1/07            995              1             --            --            210              1 
Dayton Superior Corp.              6/15/09            630         12,600             --            --            330          6,600 
Delta Financial Corp.             12/21/10          8,130              1             --            --          2,035              1 
Diva Systems Corp.                 5/15/06            502        125,500             --            --            128         32,000 
Diva Systems Corp. 144A             3/1/08          5,157         15,471             --            --          3,189          9,567 
Globalstar Telecommunications      2/15/04            400              4             --            --             90              1 
Horizon PCS, Inc.                  10/1/01            700         14,000             --            --            340          6,800 
ICG Communications, Inc.          10/15/05          1,287             13             --            --            330              3 
Imperial Credit Industries, Inc.    8/1/08         11,686          1,169             --            --          6,131            613 
Interact Systems, Inc.              8/1/03            400              1             --            --             90              1 
Interact Systems, Inc. 144A       12/15/09            400              4             --            --             90              1 
Ipcs Inc. 144A                     7/15/10            500         30,000             --            --            260         15,600 
IWO Holdings, Inc.                 1/15/11            390         27,300             --            --            190         13,300 
Jostens, Inc.                       5/1/10            830         16,704             --            --            480          9,660 
KMC Telecommunications                                                                                                              
Holdings, Inc. 144A                4/15/08            700              7             --            --            175              2 
Knology Holdings, Inc.            10/22/07          1,005             50             --            --            210             11 
McCaw International, Ltd.          4/15/07             30            360             --            --             10            120 
Mediq, Inc. 144A                    6/1/09            410              4             --            --            100              1 
ONO Finance PLC 144A                                                                                                                
(United Kingdom)                   2/15/11            290         11,600             --            --             --             -- 
Orbital Imaging Corp. 144A          3/1/05            415              1             --            --            100              1 
Paxson Communications Corp.                                                                                                         
144A                               6/30/03            960          3,840             --            --            320          1,280 
Pliant Corp. 144A                   6/1/10             --             --             --            --            160            320 
Raintree Resort 144A               12/1/04            195              2             --            --             40              1 
Startec Global                                                                                                                      
Communications Corp.               5/15/08            390             12             --            --             90              3 
Sterling Chemicals Holdings        8/15/08            145             87             --            --             30             18 
Telehub Communications Corp.                                                                                                        
144A                               7/31/05            290              1             --            --             80              1 
Travel Centers of America           5/1/09            210              2             --            --            180              2 
Ubiquitel, Inc. 144A               4/15/10             --             --             --            --            590         35,400 
UIH Australia/Pacific, Inc.                                                                                                         
144A                               5/15/06            820              8             --            --            200              2 
Veraldo Holdings, Inc.                                                                                                              
144A                               4/15/08          1,510            755             --            --            360            180 
Versatel Telecom NV                                                                                                                 
(Netherlands)                      5/15/08             20             20             --            --             10             10 
                                                            ------------                 ------------                  ------------ 

Total Warrants                                                                                                                      
(cost $801,547, $0 and $242,799)                           $     259,552                 $         --                  $    131,509 
----------------------------------------------------------------------------------------------------------------------------------- 



                                                           GROWTH                      BALANCED                    CONSERVATIVE     
                                                                    --%                          0.3%                          0.5% 
FOREIGN GOVERNMENT                             Principal                     Principal                     Principal                
BONDS AND NOTES (a)                               Amount          Value         Amount          Value         Amount          Value 
----------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                    
Ontario (Province of) sr. unsub. 5 1/2s,                                                                                            
2008 (Canada)                              $          --  $          --  $   5,675,000  $   5,847,123  $   3,490,000  $   3,595,852 
Quebec (Province of) sr. unsub.                                                                                                     
5 3/4s, 2009 (Canada)                                 --             --      1,985,000      2,032,680      1,175,000      1,203,224 
                                                         --------------                --------------                -------------- 
Total Foreign Government                                                                                                            
Bonds and Notes                                                                                                                     
(cost $--, $6,966,218 and $4,308,499)                     $          --                 $   7,879,803                 $   4,799,076 
----------------------------------------------------------------------------------------------------------------------------------- 

                                                           GROWTH                      BALANCED                    CONSERVATIVE     
                                                                   6.5%                         10.1%                         20.0% 
SHORT-TERM                                     Principal                     Principal                     Principal                
INVESTMENTS (a)                                   Amount          Value         Amount          Value         Amount          Value 
----------------------------------------------------------------------------------------------------------------------------------- 
Corporate Receivables Corp. effective yield                                                                                         
of 2.67%, October 4, 2001                   $         --  $          --  $          --  $          --  $  25,000,000  $  24,994,438 
CXC, Inc. for an effective yield of                                                                                                 
3.45%, November 5, 2001                               --             --     45,000,000     44,849,063             --             -- 
CXC, Inc. for an effective yield of                                                                                                 
3.33%, November 27, 2001                              --             --             --             --     25,000,000     24,868,188 
Eureka Securitization, Inc. effective yield                                                                                         
of 3.33%, November 21, 2001                           --             --     25,000,000     24,882,063             --             -- 
Falcon Asset Securitization Corp. effective                                                                                         
yield of 3.50%, October 15, 2001                      --             --     32,200,000     32,156,172             --             -- 
Falcon Asset Securitization Corp. effective                                                                                         
yield of 3.50%, October 11, 2001                      --             --             --             --     22,600,000     22,578,028 
Juniper Securities Corp. effective yield of                                                                                         
2.50%, October 22, 2001                       25,000,000     24,963,542             --             --             --             -- 
Park Avenue Recievables effective yield of                                                                                          
3.57%, October 10, 2001                               --             --             --             --     24,000,000     23,978,580 
Preferred Receivables Fund effective yield                                                                                          
of 2.47%, October 22, 2001                    15,000,000     14,978,388             --             --     10,000,000      9,985,592 
Quincy Capital Corp. effective yield of                                                                                             
2.55%, October 11, 2001                               --             --             --             --     25,000,000     24,982,292 
U.S. Treasury Bill zero %, December 13, 2001  16,000,000     15,912,400     37,300,000     37,103,417      9,900,000      9,847,438 
Short-term investments held as collateral                                                                                           
for loaned securities with yields ranging                                                                                           
from 2.55% to 3.63% and due dates ranging                                                                                           
from November 2, 2001 to November 26, 2001.                                                                                         
(d)                                           25,567,294     25,529,764     43,326,430     43,262,832      3,999,485      3,993,614 
Interest in $724,000,000 joint tri-party                                                                                            
repurchase agreement dated September 28,                                                                                            
2001 with S.B.C. Warburg, Inc. due October                                                                                          
1, 2001 with respect to various U.S.                                                                                                
Government obligations -- maturity value of                                                                                         
$21,897,157, $41,474,661 and $--,                                                                                                   
respectively, for an effective yield of                                                                                             
3.375%                                        21,891,000     21,891,000     41,463,000     41,463,000             --             -- 
Interest in $500,000,000 joint tri-party                                                                                            
repurchase agreement dated September 28,                                                                                            
2001 with Credit Suisse First Boston due                                                                                            
October 1, 2001 with respect to various                                                                                             
U.S. Government obligations -- maturity                                                                                             
value of $--, $1,713,482 and $26,669,499,                                                                                           
respectively, for an effective yield of                                                                                             
3.375%                                                --            --       1,713,000      1,713,000     26,662,000     26,662,000 
Interest in $624,000,000 joint repurchase                                                                                           
agreement dated September 28, 2001 with                                                                                             
Morgan Stanley, Dean Witter & Co. due                                                                                               
October 1, 2001 with respect to various                                                                                             
U.S. Government obligations -- maturity                                                                                             
value of $--, $22,321,276 and $24,731,954,                                                                                          
respectively, for an effective yield of                                                                                             
3.375%                                                --            --      22,315,000     22,315,000     24,725,000     24,725,000 
                                                         --------------                --------------                -------------- 
Total Short-Term Investments                                                                                                        
(cost $103,275,094, $247,744,547                                                                                                    
and $196,615,170)                                        $  103,275,094                $  247,744,547                  $196,615,170 
----------------------------------------------------------------------------------------------------------------------------------- 
Total Investments (cost $1,845,598,155,                                                                                             
$2,687,959,216 and $1,039,457,243)(b)                    $1,600,717,132                $2,486,783,910                  $985,928,759 
----------------------------------------------------------------------------------------------------------------------------------- 


(a) Percentages indicated are based on net assets as follows:                   
------------------------------------------------------------                    
Growth Portfolio                            $1,579,433,880                      
Balanced Portfolio                           2,449,264,584                      
Conservative Portfolio                         984,157,774                      
------------------------------------------------------------                    

(b) The aggregate identified cost on a tax basis is as follows:                 

                                                        [Enlarge/Download Table]

                             Aggregate  Gross Unrealized  Gross Unrealized  Net Unrealized 
                       Identified Cost      Appreciation      Depreciation    Depreciation 
------------------------------------------------------------------------------------------ 
                                                                                           
Growth Portfolio        $1,895,498,942       $18,849,197      $313,631,007   ($294,781,810)
Balanced Portfolio       2,735,610,000        83,636,588       332,462,678    (248,826,090)
Conservative Portfolio   1,045,598,462        16,821,359        76,491,062     (59,669,703)
------------------------------------------------------------------------------------------ 


(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 accruing interest or dividend income at this    
rate.                                                               

(RES) Restricted, excluding 144A securities, as to public resale.               
FFCA Secured Lending Corp. was acquired various dates from 11/17/00 
to 6/28/01 with a cost of $1,024,770, $3,884,130, and $2,488,001 for
Growth, Balanced and Conservative portfolios, respectively. Safety  
Components International, Inc. was acquired various dates from      
7/21/97 to 4/20/01 with a cost of $66,400 and $35,000 for Growth and
Conservative portfolios, respectively. Quorum Broadcast Holdings,   
LLC Class E was acquired 5/15/2001 with a cost of $515,960 and      
$253,885 for Growth and Conservative portfolios, respectively.      
Quorum Broadcast Holdings, LLC notes was acquired 5/15/2001 with a  
cost of $113,758 and $55,881 for Growth and Conservative portfolios,
respectively. LTV Corp. was acquired various dates from 11/2/99 to  
5/22/00 with a cost of $906,955, $1,492,437 and $1,795,515 for      
Growth, Balanced and Conservative portfolios, respectively. The     
total market value of restricted securities held by the fund did not
exceed 1.0% of each fund's net assets.                              

(PIK) Income may be received in cash or additional securities at the            
discretion of the issuer.                                           

(SEG) A portion of this security was pledged and segregated with the            
custodian to cover margin requirements for futures contracts at     
September 30, 2001.                                                 

(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              
Depositary Receipts and Global Depositary Receipts, respectively,               
representing ownership of foreign securities on deposit with a custodian        
bank.                                                                           

TBA after the name of a security represents to be announced securities          
(Note 1).                                                                       

The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes            
(FRN) are the current interest rates shown at September 30, 2001, which         
are subject to change based on the terms of the security.                       

(d) See footnote 1 to financial statements on page 135.                         

DIVERSIFICATION BY COUNTRY                                                      

Distribution of investments by country of issue at September 30, 2001:          
(as percentage of Market Value)                                                 

Growth Portfolio                                                                
--------------------------------------------------------                        
Australia                                            1.0                        
Bermuda                                              1.0                        
Brazil                                               1.0                        
Canada                                               1.5                        
France                                               3.8                        
Germany                                              2.0                        
Hong Kong                                            1.0                        
Italy                                                1.0                        
Japan                                                4.3                        
Mexico                                               1.0                        
Netherlands                                          1.8                        
South Korea                                          1.2                        
Spain                                                1.0                        
Sweden                                               1.0                        
Switzerland                                          1.4                        
Taiwan                                               1.0                        
United Kingdom                                       6.7                        
United States                                       67.3                        
Other                                                1.0                        
--------------------------------------------------------                        
Total                                              100.0%                       

Balanced Portfolio                                                              
--------------------------------------------------------                        
Bermuda                                              1.0                        
Canada                                               1.2                        
France                                               2.3                        
Germany                                              1.1                        
Japan                                                1.7                        
Netherlands                                          1.0                        
Switzerland                                          1.0                        
United Kingdom                                       3.7                        
United States                                       84.8                        
Other                                                2.2                        
--------------------------------------------------------                        
Total                                              100.0%                       

Conservative Portfolio                                                          
--------------------------------------------------------                        
Bermuda                                              1.0                        
Canada                                               1.3                        
France                                               1.0                        
Germany                                              1.0                        
Japan                                                1.0                        
Netherlands                                          1.0                        
United Kingdom                                       2.0                        
United States                                       91.0                        
Other                                                0.7                        
--------------------------------------------------------                        
Total                                              100.0%                       

                                                        [Enlarge/Download Table]


----------------------------------------------------------------------------------------------------  
Forward Currency Contracts to Buy                                                                     
at September 30, 2001                                                                GROWTH           
(aggregate face value $211,202,011)                                                                   
                                                                                           Unrealized 
                                                  Market Aggregate Face       Delivery   Appreciation/
                                                   Value          Value           Date  (Depreciation)
----------------------------------------------------------------------------------------------------- 
                                                                                                      
Australian Dollars                           $38,394,333    $40,320,305       12/19/01   $(1,925,972) 
British Pounds                                70,117,845     69,611,424       12/19/01       506,421  
Canadian Dollars                              24,488,618     25,122,325       12/19/01      (633,707) 
Euro                                          53,677,279     53,179,468       12/19/01       497,811  
Korean Won                                     9,361,182      9,456,083       12/19/01       (94,901) 
Norwegian Krone                               13,332,398     13,512,406       12/19/01      (180,008) 
----------------------------------------------------------------------------------------------------  
                                                                                         $(1,830,356) 
----------------------------------------------------------------------------------------------------  
Forward Currency Contracts to Sell                                                                    
at September 30, 2001                                                                GROWTH           
(aggregate face value $274,091,910)                                                                   
                                                                                          Unrealized  
                                                  Market Aggregate Face       Delivery  Appreciation/ 
                                                   Value          Value           Date (Depreciation) 
----------------------------------------------------------------------------------------------------  
Australian Dollars                          $  1,660,227   $  1,756,768       12/19/01  $     96,541  
British Pounds                                51,138,144     50,446,169       12/19/01      (691,975) 
Canadian Dollars                              17,656,340     17,983,632       12/19/01       327,292  
Danish Krone                                   3,173,521      3,096,487       12/19/01       (77,034) 
Euro                                         131,313,124    130,048,236       12/19/01    (1,264,888) 
Hong Kong Dollars                              6,537,519      6,535,909       12/19/01        (1,610) 
Japanese Yen                                  42,782,211     42,619,911       12/19/01      (162,300) 
Mexican Peso                                   3,854,431      3,747,611       12/19/01      (106,820) 
Singapore Dollars                              4,879,891      4,924,855       12/19/01        44,964  
Swedish Krona                                  7,539,898      7,562,000       12/19/01        22,102  
Swiss Francs                                   5,626,366      5,370,332       12/19/01      (256,034) 
----------------------------------------------------------------------------------------------------  
                                                                                         $(2,069,762) 
----------------------------------------------------------------------------------------------------  



Written Options Outstanding                                                                           
at September 30, 2001                                   GROWTH                                        
(premium received $87,408)                                                                            
                                                   Expiration Date/         Market                    
Contract Amount                                       Strike Price           Value                    
----------------------------------------------------------------------------------------------------  
                                                                                                      
AUD 16,758,000             OTC option to                                                              
                           exchange Australian                                                        
                           dollars for U.S.                                                           
                           dollars (Morgan                                                            
                           Stanley, Dean Witter                                                       
                           & Co.) (Put)           Oct 01/0.485 AUD         $64,480                    
----------------------------------------------------------------------------------------------------  



Futures Contracts Outstanding                                                                         
at September 30, 2001                                                                GROWTH           
                                                                                          Unrealized  
                                                         Aggregate Face     Expiration  Appreciation/ 
                                             Total Value          Value           Date (Depreciation) 
----------------------------------------------------------------------------------------------------  
                                                                                                      
CAC40 10 Euro (Long)                         $ 8,819,273    $ 8,578,542         Oct-01   $   240,731  
DAX Index (Long)                               4,023,760      3,983,065         Dec-01        40,695  
Euro Dollar 90 day                                                                                    
(Short)                                       29,505,850     29,037,411         Dec-01      (468,439) 
FT-SE 100 Index (Long)                        20,153,070     19,854,876         Dec-01       298,194  
Japanese Government                                                                                   
Bond 10yr (Short)                             69,453,905     69,416,604         Dec-01       (37,301) 
Russell 2000 Index (Short)                    11,775,450     11,721,088         Dec-01       (54,362) 
S&P 500 Index (Long)                          54,272,400     51,738,189         Dec-01     2,534,211  
SPI 200 Index (Long)                          25,093,517     24,545,189         Dec-01       548,328  
U.S. Treasury Note 10yr                                                                               
(Short)                                       48,951,562     47,621,863         Dec-01    (1,329,699) 
U.S. Treasury Note 2yr                                                                                
(Short)                                       34,273,297     33,752,578         Dec-01      (520,719) 
----------------------------------------------------------------------------------------------------  
                                                                                         $ 1,251,639  
----------------------------------------------------------------------------------------------------  



TBA Sale Commitments                                                                                  
at September 30, 2001                                                                GROWTH           
(proceeds receivable $11,200,372)                                                                     
                                                              Principal     Settlement        Market  
Agency                                                           Amount           Date         Value  
----------------------------------------------------------------------------------------------------  
                                                                                                      
FHLMC, 7 1/2s, October 1, 2031                               $2,465,000       10/15/01   $ 2,564,340  
FNMA, 6 1/2s, October 1, 2031                                 5,300,000       10/15/01     5,389,411  
GNMA, 8s, October 1, 2031                                       901,000       10/15/01       948,014  
GNMA, 8s, October 1, 2031                                     2,249,000       10/15/01     2,366,353  
----------------------------------------------------------------------------------------------------  
                                                                                         $11,268,118  
----------------------------------------------------------------------------------------------------  
Swap Contracts Outstanding                                                                            
at September 30, 2001                                                                GROWTH           

                                                                                          Unrealized  
                                                               Notional    Termination  Appreciation/ 
                                                                 Amount           Date (Depreciation) 
----------------------------------------------------------------------------------------------------  
Agreement with Merrill Lynch Capital                                                                  
Services, Inc. dated February 28, 2001 to                                                             
pay semi-annually the notional amount                                                                 
multiplied by 5.815% and receive quarterly                                                            
the notional amount multiplied by three                                                               
month USD-LIBOR-BBA.                                       $  7,200,000         Mar-11    $ (332,177) 

Agreement with Merrill Lynch Capital                                                                  
Services, Inc. dated February 28, 2001 to                                                             
pay semi-annually the notional amount                                                                 
multiplied by 5.485% and receive quarterly                                                            
the notional amount multiplied by three                                                               
month USD-LIBOR-BBA.                                          2,500,000         Mar-06      (107,708) 

Agreement with Salomon Brothers                                                                       
International Limited dated January 28,                                                               
2000 to receive monthly the notional amount                                                           
multiplied by the return of the World                                                                 
Government Bond Index Unhedged-NON USD and                                                            
pay monthly the notional amount multiplied                                                            
by one month USD LIBOR adjusted by a                                                                  
specified spread.                                            96,122,585         Jan-03            --  

Agreement with Salomon Brothers                                                                       
International Limited dated January 28,                                                               
2000 to receive monthly the notional amount                                                           
multiplied by the return of the World                                                                 
Government Bond Index Hedged-NON USD and                                                              
pay monthly the notional amount multiplied                                                            
by one month USD LIBOR adjusted by a                                                                  
specified spread.                                            92,969,279         Jan-03            --  

Agreement with JP Morgan Securities, Inc.                                                             
dated May 15, 2000 to receive monthly the                                                             
notional amount multiplied by the return of                                                           
the Lehman Brothers US Government Bond                                                                
Index and pay monthly the notional amount                                                             
multiplied by one month USD LIBOR adjusted                                                            
by a specified spread.                                       55,521,262         Jun-03       774,337  

Agreement with Lehman Brothers Special                                                                
Financing, Inc. dated February 29, 2000 to                                                            
pay monthly the notional amount multiplied                                                            
by the return of the Lehman Government                                                                
Index and receive monthly the notional                                                                
amount multiplied by one month USD LIBOR                                                              
adjusted by a specified spread.                              75,705,717         Mar-03     1,052,661  

Agreement with Lehman Brothers Special                                                                
Financing dated June 29, 2001 to pay                                                                  
monthly the notional amount multiplied by                                                             
the return of the Lehman Brothers MBS Fixed                                                           
Rate Index, adjusted by a specific spread,                                                            
and receive monthly the notional amount                                                               
multiplied by USD-LIBOR-BBA, adjusted by a                                                            
specified spread.                                            36,618,090         Oct-01      (464,684) 
----------------------------------------------------------------------------------------------------  
                                                                                          $  922,429  
----------------------------------------------------------------------------------------------------  



Forward Currency Contracts to Buy                                                                     
at September 30, 2001                                                       BALANCED                  
(aggregate face value $256,394,515)                                                                   
                                                                                          Unrealized  
                                                  Market Aggregate Face       Delivery  Appreciation/ 
                                                   Value          Value           Date (Depreciation) 
----------------------------------------------------------------------------------------------------  
                                                                                                      
Australian Dollars                           $42,565,088    $44,700,873       12/19/01   $(2,135,785) 
British Pounds                                88,226,217     87,555,527       12/19/01       670,690  
Canadian Dollars                              26,301,055     26,981,664       12/19/01      (680,609) 
Euro                                          66,046,267     65,625,587       12/19/01       420,680  
Japanese Yen                                   5,573,581      5,601,546       12/19/01       (27,965) 
Korean Won                                    10,637,940     10,745,785       12/19/01      (107,845) 
Norwegian Krone                               14,981,262     15,183,533       12/19/01      (202,271) 
----------------------------------------------------------------------------------------------------  
                                                                                         $(2,063,105) 
----------------------------------------------------------------------------------------------------  

Forward Currency Contracts to Sell                                                                    
at September 30, 2001                                                       BALANCED                  
(aggregate face value $397,002,641)                                                                   
                                                                                          Unrealized  
                                                  Market Aggregate Face       Delivery  Appreciation/ 
                                                   Value          Value           Date (Depreciation) 
----------------------------------------------------------------------------------------------------  
Australian Dollars                          $  8,528,713   $  9,024,652       12/19/01   $   495,939  
British Pounds                                93,290,268     92,027,912       12/19/01    (1,262,356) 
Canadian Dollars                              28,392,270     28,982,272       12/19/01       590,002  
Euro                                         188,972,051    186,898,153       12/19/01    (2,073,898) 
Hong Kong Dollars                              7,926,929      7,924,977       12/19/01        (1,952) 
Japanese Yen                                  46,781,388     46,272,475       12/19/01      (508,913) 
Singapore Dollars                              3,026,199      3,054,083       12/19/01        27,884  
Swedish Krona                                  8,369,063      8,393,596       12/19/01        24,533  
Swiss Francs                                  15,155,748     14,424,521       12/19/01      (731,227) 
----------------------------------------------------------------------------------------------------  
                                                                                         $(3,439,988) 
----------------------------------------------------------------------------------------------------  



Written Options Outstanding                                                                           
at September 30, 2001                                                       BALANCED                  
(premium received $98,842)                                                                            
                                                              Expiration Date/                Market  
Contract Amount                                                  Strike Price                  Value  
----------------------------------------------------------------------------------------------------  
                                                                                                      
AUD 18,950,000             OTC option to                                                              
                           exchange Australian                                                        
                           dollars for U.S.                                                           
                           dollars (Morgan                                                            
                           Stanley, Dean                                                              
                           Witter & Co.)                                                              
                           (Put)                             Oct 01/0.485 AUD                $72,915  
----------------------------------------------------------------------------------------------------  



Futures Contracts Outstanding                                                                         
at September 30, 2001                                                       BALANCED                  

                                                                                          Unrealized  
                                                         Aggregate Face     Expiration  Appreciation/ 
                                             Total Value          Value           Date (Depreciation) 
----------------------------------------------------------------------------------------------------  
                                                                                                      
CAC40 10 Euro (Long)                        $ 14,252,243   $ 13,863,214         Oct-01   $   389,029  
DAX Index (Long)                               6,575,413      6,508,911         Dec-01        66,502  
DJ Euro Stoxx 50                                                                                      
(Short)                                       47,458,886     45,994,538         Dec-01    (1,464,348) 
Euro Dollar 90 day                                                                                    
(Short)                                       29,505,850     29,257,685         Dec-01      (248,165) 
FT-SE 100 Index (Short)                       35,899,914     35,481,326         Dec-01      (418,588) 
FT-SE 100 Index (Long)                        29,182,224     28,750,430         Dec-01       431,794  
Hang Seng Index (Short)                        2,238,153      2,098,612         Oct-01      (139,541) 
Russell 2000 Index                                                                                    
(Short)                                      123,439,200    125,403,835         Dec-01     1,964,635  
S&P 500 Index (Long)                         375,597,233    369,099,382         Dec-01     6,497,851  
S&P/TSE 60 Index (Short)                       5,967,610      5,839,883         Dec-01      (127,727) 
SPI 200 Index (Long)                          41,254,802     40,357,592         Dec-01       897,210  
SPI 200 Index (Short)                          4,428,268      4,289,345         Oct-01      (138,923) 
Topix Index (Short)                           25,826,755     26,716,188         Oct-01       889,433  
U.S. Agency 10yr (Short)                       7,723,750      7,564,238         Oct-01      (159,512) 
U.S. Treasury Bond (Short)                     9,389,500      9,249,388         Oct-01      (140,112) 
U.S. Treasury Note 10yr                                                                               
(Long)                                         2,610,750      2,567,727         Dec-01        43,023  
U.S. Treasury Note 10yr                                                                               
(Short)                                      183,622,751    180,811,225         Dec-01    (2,811,526) 
U.S. Treasury Note 5yr                                                                                
(Short)                                       27,479,625     27,041,016         Dec-01      (438,609) 
U.S. Treasury Note 2yr                                                                                
(Short)                                      107,656,000    105,973,631         Dec-01    (1,682,369) 
----------------------------------------------------------------------------------------------------  
                                                                                         $ 3,410,057  
----------------------------------------------------------------------------------------------------  



TBA Sale Commitments                                                                                  
at September 30, 2001                                                       BALANCED                  
(proceeds receivable $24,108,844)                                                                     
                                                              Principal     Settlement        Market  
Agency                                                           Amount           Date         Value  
----------------------------------------------------------------------------------------------------  
                                                                                                      
FHLMC, 7 1/2s, October 1, 2031                              $ 4,000,000       10/15/01   $ 4,161,200  
FNMA, 6 1/2s, October 1, 2031                                19,800,000       10/15/01    20,134,026  
----------------------------------------------------------------------------------------------------  
                                                                                         $24,295,226  
----------------------------------------------------------------------------------------------------  

Swap Contracts Outstanding                                                                            
at September 30, 2001                                                       BALANCED                  

                                                               Notional    Termination    Unrealized  
                                                                 Amount           Date  Appreciation  
----------------------------------------------------------------------------------------------------  
Agreement with JP Morgan Securities, Inc.                                                             
dated May 15, 2000 to receive monthly the                                                             
notional amount multiplied by the return of                                                           
the Lehman Brothers US Government Bond                                                                
Index and pay monthly the notional amount                                                             
multiplied by one month USD LIBOR adjusted                                                            
by a specified spread.                                     $167,709,733         Jun-03    $2,338,934  

Agreement with Lehman Brothers Special                                                                
Financing, Inc. dated February 29, 2000 to                                                            
pay monthly the notional amount multiplied                                                            
by the return of the Lehman Government                                                                
Index and receive monthly the notional                                                                
amount multiplied by one month USD LIBOR                                                              
adjusted by a specified spread.                             160,875,221         Mar-03     2,236,914  
----------------------------------------------------------------------------------------------------  
                                                                                          $4,575,848  
----------------------------------------------------------------------------------------------------  



Forward Currency Contracts to Buy                                                                     
at September 30, 2001                                                     CONSERVATIVE                
(aggregate face value $94,820,941)                                                                    
                                                                                          Unrealized  
                                                  Market Aggregate Face       Delivery  Appreciation/ 
                                                   Value          Value           Date (Depreciation) 
----------------------------------------------------------------------------------------------------  
                                                                                                      
Australian Dollars                           $16,580,555    $17,416,633       12/19/01     $(836,078) 
British Pounds                                33,572,951     33,300,240       12/19/01       272,711  
Canadian Dollars                               9,861,112     10,116,294       12/19/01      (255,182) 
Danish Krone                                       1,222          1,192       12/19/01            30  
Euro                                          23,896,392     23,631,737       12/19/01       264,655  
Japanese Yen                                     601,363        604,113       12/19/01        (2,750) 
Korean Won                                     3,889,206      3,928,634       12/19/01       (39,428) 
Norwegian Krone                                5,744,738      5,822,098       12/19/01       (77,360) 
----------------------------------------------------------------------------------------------------  
                                                                                           $(673,402) 
----------------------------------------------------------------------------------------------------  
Forward Currency Contracts to Sell                                                                    
at September 30, 2001                                                     CONSERVATIVE                
(aggregate face value $66,081,796)                                                                    
                                                                                          Unrealized  
                                                  Market Aggregate Face       Delivery  Appreciation/ 
                                                   Value          Value           Date (Depreciation) 
----------------------------------------------------------------------------------------------------  
Australian Dollars                           $   261,978    $   277,212       12/19/01     $  15,234  
British Pounds                                13,763,150     13,576,914       12/19/01      (186,236) 
Canadian Dollars                               5,046,791      5,122,045       12/19/01        75,254  
Euro                                          36,251,286     35,983,538       12/19/01      (267,748) 
Hong Kong Dollars                              1,006,723      1,006,475       12/19/01          (248) 
Japanese Yen                                   6,319,540      6,250,793       12/19/01       (68,747) 
Singapore Dollars                                387,887        391,461       12/19/01         3,574  
Swedish Krona                                  1,643,195      1,648,012       12/19/01         4,817  
Swiss Francs                                   1,917,879      1,825,346       12/19/01       (92,533) 
----------------------------------------------------------------------------------------------------  
                                                                                           $(516,633) 
----------------------------------------------------------------------------------------------------  



Written Options Outstanding                                                                           
at September 30, 2001                                                     CONSERVATIVE                
(premium received $38,441)                                                                            
                                            Expiration Date/                   Market                 
Contract Amount                                Strike Price                     Value                 
----------------------------------------------------------------------------------------------------  
                                                                                                      
AUD 7,370,000            OTC option to                                                                
                         exchange Australian                                                          
                         dollars for U.S.                                                             
                         dollars (Morgan                                                              
                         Stanley, Dean                                                                
                         Witter & Co.)                                                                
                         (Put)             Oct 01/0.485 AUD                   $28,358                 
----------------------------------------------------------------------------------------------------  



Futures Contracts Outstanding                                                                         
at September 30, 2001                                                     CONSERVATIVE                

                                                                                          Unrealized  
                                                         Aggregate Face     Expiration  Appreciation/ 
                                             Total Value          Value           Date (Depreciation) 
----------------------------------------------------------------------------------------------------  
                                                                                                      
CAC40 10 Euro (Long)                         $ 3,944,485    $ 3,836,816         Oct-01    $  107,669  
Canadian Government                                                                                   
Bond 10yr (Short)                                 66,034         65,751         Dec-01          (283) 
DAX Index (Long)                               1,472,107      1,457,219         Dec-01        14,888  
Euro Dollar 90 day                                                                                    
(Short)                                       13,655,600     13,537,083         Dec-01      (118,517) 
FT-SE 100 Index (Long)                         8,812,454      8,682,061         Dec-01       130,393  
Gilt (Long)                                   23,270,253     23,346,578         Dec-01       (76,325) 
Japanese Government                                                                                   
Bond 10yr (Short)                             46,614,931     46,589,930         Dec-01       (25,001) 
S&P 500 Index (Long)                          83,496,000     81,394,232         Dec-01     2,101,768  
SPI 200 Index (Long)                          13,171,258     12,883,313         Dec-01       287,945  
U.S. Agency 10yr (Short)                       5,114,375      5,008,742         Dec-01      (105,633) 
U.S. Treasury Bond (Short)                     5,169,500      5,091,393         Dec-01       (78,107) 
U.S. Treasury Note 10yr                                                                               
(Long)                                        17,187,438     16,755,546         Dec-01       431,892  
U.S. Treasury Note 10yr                                                                               
(Short)                                       55,369,656     54,878,189         Dec-01      (491,467) 
U.S. Treasury Note 5yr                                                                                
(Short)                                       22,611,188     22,231,195         Dec-01      (379,993) 
U.S. Treasury Note 2yr                                                                                
(Short)                                       38,268,344     37,669,084         Dec-01      (599,260) 
----------------------------------------------------------------------------------------------------  
                                                                                          $1,199,969  
----------------------------------------------------------------------------------------------------  



TBA Sale Commitments                                                                                  
at September 30, 2001                                                     CONSERVATIVE                
(proceeds receivable $14,980,250)                                                                     
                                                              Principal     Settlement        Market  
Agency                                                           Amount           Date         Value  
----------------------------------------------------------------------------------------------------  
                                                                                                      
FHLMC, 7 1/2s, October 1, 2031                              $ 2,000,000       10/15/01   $ 2,080,600  
FNMA, 6 1/2s, October 1, 2031                                12,800,000       10/15/01    13,015,936  
----------------------------------------------------------------------------------------------------  
                                                                                         $15,096,536  
----------------------------------------------------------------------------------------------------  
Swap Contracts Outstanding                                                                            
at September 30, 2001                                                     CONSERVATIVE                

                                                               Notional    Termination    Unrealized  
                                                                 Amount           Date  Appreciation  
----------------------------------------------------------------------------------------------------  
Agreement with Salomon Brothers                                                                       
International Limited dated January 28,                                                               
2000 to receive monthly the notional amount                                                           
multiplied by the return of the World                                                                 
Government Bond Index Hedged -- NON USD and                                                           
pay monthly the notional amount multiplied                                                            
by one month USD LIBOR adjusted by a                                                                  
specific spread.                                           $129,089,766         Jan-03    $       --  

Agreement with JP Morgan Securities, Inc.                                                             
dated May 15, 2000 to receive monthly the                                                             
notional amount multiplied by the return of                                                           
the Lehman Brothers US Government Bond                                                                
Index and pay monthly the notional amount                                                             
multiplied by one month USD LIBOR adjusted                                                            
by a specified spread.                                       57,536,391         Jun-03       802,421  

Agreement with Lehman Brothers Special                                                                
Financing, Inc. dated February 29, 2000 to                                                            
pay monthly the notional amount multiplied                                                            
by the return of the Lehman Government                                                                
Index and receive monthly the notional                                                                
amount multiplied by one month USD LIBOR                                                              
adjusted by a specified spread.                              41,401,636         Mar-03       575,675  
----------------------------------------------------------------------------------------------------  
                                                                                          $1,378,096  
----------------------------------------------------------------------------------------------------  

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


                                                        [Enlarge/Download Table]


STATEMENT OF ASSETS AND LIABILITIES                                                             

September 30, 2001                                                                              
Putnam Asset Allocation: Growth Portfolio                                                       

                                                                                                
Assets                                                                                          
----------------------------------------------------------------------------------------------- 
Investments in securities, at value, including $23,961,560 of                                   
securities on loan (identified cost $1,845,598,155) (Note 1)                     $1,600,717,132 
----------------------------------------------------------------------------------------------- 
Cash                                                                                  2,490,372 
----------------------------------------------------------------------------------------------- 
Foreign currency (cost $5,077,386)                                                    5,080,197 
----------------------------------------------------------------------------------------------- 
Dividends, interest and other receivables                                            10,634,428 
----------------------------------------------------------------------------------------------- 
Receivable for shares of the fund sold                                                2,413,731 
----------------------------------------------------------------------------------------------- 
Receivable for securities sold                                                       30,236,304 
----------------------------------------------------------------------------------------------- 
Receivable for closed forward currency contracts (Note 1)                               634,228 
----------------------------------------------------------------------------------------------- 
Receivable for open forward currency contracts (Note 1)                               1,495,131 
----------------------------------------------------------------------------------------------- 
Receivable for variation margin (Note 1)                                              4,588,419 
----------------------------------------------------------------------------------------------- 
Receivable for open swap contracts (Note 1)                                           1,826,998 
----------------------------------------------------------------------------------------------- 
Total assets                                                                      1,660,116,940 

Liabilities                                                                                     
----------------------------------------------------------------------------------------------- 
Payable for securities purchased                                                     28,054,352 
----------------------------------------------------------------------------------------------- 
Payable for shares of the fund repurchased                                            3,284,802 
----------------------------------------------------------------------------------------------- 
Payable for compensation of Manager (Note 2)                                          2,657,270 
----------------------------------------------------------------------------------------------- 
Payable for investor servicing and custodian fees (Note 2)                            1,472,618 
----------------------------------------------------------------------------------------------- 
Payable for compensation of Trustees (Note 2)                                            63,776 
----------------------------------------------------------------------------------------------- 
Payable for administrative services (Note 2)                                              6,287 
----------------------------------------------------------------------------------------------- 
Payable for distribution fees (Note 2)                                                  831,571 
----------------------------------------------------------------------------------------------- 
Payable for written options outstanding                                                         
(premiums received $87,408) (Note 3)                                                     64,480 
----------------------------------------------------------------------------------------------- 
Payable for closed forward currency contracts (Note 1)                                  889,728 
----------------------------------------------------------------------------------------------- 
Payable for open forward currency contracts (Note 1)                                  5,395,249 
----------------------------------------------------------------------------------------------- 
Payable for open swap contracts (Note 1)                                                904,569 
----------------------------------------------------------------------------------------------- 
Collateral on securities loaned, at value (Note 1)                                   25,529,764 
----------------------------------------------------------------------------------------------- 
TBA sale commitments, at value                                                                  
(proceeds receivable $11,200,372) (Note 1)                                           11,268,118 
----------------------------------------------------------------------------------------------- 
Other accrued expenses                                                                  260,476 
----------------------------------------------------------------------------------------------- 
Total liabilities                                                                    80,683,060 
----------------------------------------------------------------------------------------------- 
Net assets                                                                       $1,579,433,880 

Represented by                                                                                  
----------------------------------------------------------------------------------------------- 
Paid-in capital (Notes 1 and 4)                                                  $2,047,966,174 
----------------------------------------------------------------------------------------------- 
Undistributed net investment income (Note 1)                                         39,304,843 
----------------------------------------------------------------------------------------------- 
Accumulated net realized loss on investments and                                                
foreign currency transactions (Note 1)                                             (261,119,989)
----------------------------------------------------------------------------------------------- 
Net unrealized depreciation of investments and                                                  
assets and liabilities in foreign currencies                                       (246,717,148)
----------------------------------------------------------------------------------------------- 
Total -- Representing net assets applicable to                                                  
capital shares outstanding                                                       $1,579,433,880 

Computation of net asset value and offering price                                               
----------------------------------------------------------------------------------------------- 
Net asset value and redemption price per class A share                                          
($671,127,298 divided by 75,087,726 shares)                                               $8.94 
----------------------------------------------------------------------------------------------- 
Offering price per class A share (100/94.25 of $8.94)*                                    $9.49 
----------------------------------------------------------------------------------------------- 
Net asset value and offering price per class B share                                            
($297,886,805 divided by 34,019,498 shares)**                                             $8.76 
----------------------------------------------------------------------------------------------- 
Net asset value and offering price per class C share                                            
($95,847,806 divided by 11,089,953 shares)**                                              $8.64 
----------------------------------------------------------------------------------------------- 
Net asset value and redemption price per class M share                                          
($48,910,777 divided by 5,570,491 shares)                                                 $8.78 
----------------------------------------------------------------------------------------------- 
Offering price per class M share (100/96.50 of $8.78)*                                    $9.10 
----------------------------------------------------------------------------------------------- 
Net asset value, offering price and redemption price per class Y share                          
($465,661,194 divided by 51,661,704 shares)                                               $9.01 
----------------------------------------------------------------------------------------------- 
 * 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.                      


                                                        [Enlarge/Download Table]


STATEMENT OF OPERATIONS                                                                         

Year ended September 30, 2001                                                                   
Putnam Asset Allocation: Growth Portfolio                                                       

                                                                                                
Investment income:                                                                              
----------------------------------------------------------------------------------------------- 
Interest                                                                          $  47,407,383 
----------------------------------------------------------------------------------------------- 
Dividends (net of foreign tax of $1,391,659)                                         18,607,504 
----------------------------------------------------------------------------------------------- 
Securities lending                                                                       39,646 
----------------------------------------------------------------------------------------------- 
Total investment income                                                              66,054,533 

Expenses:                                                                                       
----------------------------------------------------------------------------------------------- 
Compensation of Manager (Note 2)                                                     11,060,016 
----------------------------------------------------------------------------------------------- 
Investor servicing and custodian fees (Note 2)                                        6,459,970 
----------------------------------------------------------------------------------------------- 
Compensation of Trustees (Note 2)                                                        33,658 
----------------------------------------------------------------------------------------------- 
Administrative services (Note 2)                                                         23,443 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class A (Note 2)                                                 1,935,688 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class B (Note 2)                                                 3,855,505 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class C (Note 2)                                                 1,202,125 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class M (Note 2)                                                   436,992 
----------------------------------------------------------------------------------------------- 
Other                                                                                   970,918 
----------------------------------------------------------------------------------------------- 
Total expenses                                                                       25,978,315 
----------------------------------------------------------------------------------------------- 
Expense reduction (Note 2)                                                             (990,209)
----------------------------------------------------------------------------------------------- 
Net expenses                                                                         24,988,106 
----------------------------------------------------------------------------------------------- 
Net investment income                                                                41,066,427 
----------------------------------------------------------------------------------------------- 
Net realized loss on investments (Notes 1 and 3)                                   (211,478,814)
----------------------------------------------------------------------------------------------- 
Net realized loss on futures contracts (Note 1)                                     (25,896,642)
----------------------------------------------------------------------------------------------- 
Net realized gain on written options (Notes 1 and 3)                                    479,010 
----------------------------------------------------------------------------------------------- 
Net realized gain on foreign currency transactions (Note 1)                           1,080,069 
----------------------------------------------------------------------------------------------- 
Net realized gain on swap contracts (Note 1)                                         10,004,739 
----------------------------------------------------------------------------------------------- 
Net unrealized depreciation of  assets and liabilities in                                       
foreign currencies during the year                                                   (4,238,591)
----------------------------------------------------------------------------------------------- 
Net unrealized depreciation of investments, futures contracts,                                  
swap contracts, written options and TBA sale commitments during the year           (278,019,783)
----------------------------------------------------------------------------------------------- 
Net loss on investments                                                            (508,070,012)
----------------------------------------------------------------------------------------------- 
Net decrease in net assets resulting from operations                              $(467,003,585)
----------------------------------------------------------------------------------------------- 

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


                                                        [Enlarge/Download Table]


STATEMENT OF CHANGES IN NET ASSETS                                                                              

Putnam Asset Allocation: Growth Portfolio                                                                       
                                                                                      Year ended September 30   
                                                                                ------------------------------- 
                                                                                           2001            2000 
--------------------------------------------------------------------------------------------------------------- 
                                                                                                                
Increase (decrease) in net assets                                                                               
--------------------------------------------------------------------------------------------------------------- 
Operations:                                                                                                     
--------------------------------------------------------------------------------------------------------------- 
Net investment income                                                            $   41,066,427  $   32,342,208 
--------------------------------------------------------------------------------------------------------------- 
Net realized gain (loss) on investments and                                                                     
foreign currency transactions                                                      (225,811,638)    340,982,834 
--------------------------------------------------------------------------------------------------------------- 
Net unrealized depreciation of investments and                                                                  
assets and liabilities in foreign currencies                                       (282,258,374)   (164,266,891)
--------------------------------------------------------------------------------------------------------------- 
Net increase (decrease) in net assets resulting                                                                 
from operations                                                                    (467,003,585)    209,058,151 
--------------------------------------------------------------------------------------------------------------- 
Distributions to shareholders (Note 1):                                                                         
--------------------------------------------------------------------------------------------------------------- 
From net investment income                                                                                      
Class A                                                                             (10,852,084)     (7,363,351)
--------------------------------------------------------------------------------------------------------------- 
Class B                                                                              (2,248,299)     (1,873,390)
--------------------------------------------------------------------------------------------------------------- 
Class C                                                                                (850,876)       (413,031)
--------------------------------------------------------------------------------------------------------------- 
Class M                                                                                (518,264)       (357,845)
--------------------------------------------------------------------------------------------------------------- 
Class Y                                                                              (7,661,644)     (5,236,059)
--------------------------------------------------------------------------------------------------------------- 
From net realized gain on investments                                                                           
Class A                                                                            (149,987,221)    (72,475,751)
--------------------------------------------------------------------------------------------------------------- 
Class B                                                                             (84,343,316)    (52,354,553)
--------------------------------------------------------------------------------------------------------------- 
Class C                                                                             (25,105,619)    (11,542,732)
--------------------------------------------------------------------------------------------------------------- 
Class M                                                                             (11,938,255)     (6,511,946)
--------------------------------------------------------------------------------------------------------------- 
Class Y                                                                             (89,419,898)    (41,178,056)
--------------------------------------------------------------------------------------------------------------- 
Increase from capital share transactions (Note 4)                                   450,791,469     284,931,390 
--------------------------------------------------------------------------------------------------------------- 
Total increase (decrease) in net assets                                            (399,137,592)    294,682,827 

Net assets                                                                                                      
--------------------------------------------------------------------------------------------------------------- 
Beginning of year                                                                 1,978,571,472   1,683,888,645 
--------------------------------------------------------------------------------------------------------------- 
End of year (including undistributed net investment                                                             
income of $39,304,843 and $8,277,388, respectively)                              $1,579,433,880  $1,978,571,472 
--------------------------------------------------------------------------------------------------------------- 

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Growth Portfolio                                                                                      

CLASS A                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                Year ended September 30                                   
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $14.47               $14.35               $11.76               $13.64               $11.41 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .26                  .28                  .14                  .15                  .17 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments           (2.97)                1.56                 2.82                (1.06)                2.69 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                (2.71)                1.84                 2.96                 (.91)                2.86 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.19)                (.16)                (.10)                (.14)                (.16)
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                       (2.63)               (1.56)                (.27)                (.83)                (.47)
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (2.82)               (1.72)                (.37)                (.97)                (.63)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $8.94               $14.47               $14.35               $11.76               $13.64 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)              (22.41)               12.77                25.55                (7.01)               26.25 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                    $671,127             $817,887             $664,640             $602,273             $486,107 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             1.25                 1.18                 1.21                 1.31                 1.39 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             2.35                 1.87                 1.00                 1.13                 1.42 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)               98.60               155.18               105.11               146.58                99.96 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Growth Portfolio                                                                                      

CLASS B                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                  Year ended September 30                                                 
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $14.21               $14.12               $11.59               $13.47               $11.29 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .17                  .16                  .03                  .05                  .08 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments           (2.92)                1.55                 2.78                (1.05)                2.67 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                (2.75)                1.71                 2.81                (1.00)                2.75 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.07)                (.06)                (.01)                (.05)                (.10)
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                       (2.63)               (1.56)                (.27)                (.83)                (.47)
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (2.70)               (1.62)                (.28)                (.88)                (.57)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $8.76               $14.21               $14.12               $11.59               $13.47 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)              (23.04)               11.98                24.52                (7.72)               25.23 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                    $297,887             $469,645             $470,073             $385,645             $357,501 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             2.00                 1.93                 1.96                 2.06                 2.14 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             1.60                 1.07                  .25                  .40                  .68 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)               98.60               155.18               105.11               146.58                99.96 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Growth Portfolio                                                                                      

CLASS C                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                 Year ended September 30                                  
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $14.08               $14.00               $11.50               $13.38               $11.24 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .17                  .17                  .03                  .05                  .08 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments           (2.89)                1.53                 2.75                (1.04)                2.65 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                (2.72)                1.70                 2.78                 (.99)                2.73 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.09)                (.06)                (.01)                (.06)                (.12)
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                       (2.63)               (1.56)                (.27)                (.83)                (.47)
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (2.72)               (1.62)                (.28)                (.89)                (.59)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $8.64               $14.08               $14.00               $11.50               $13.38 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)              (23.08)               12.01                24.47                (7.70)               25.31 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                     $95,848             $135,439             $103,209              $88,076              $68,749 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             2.00                 1.93                 1.96                 2.06                 2.14 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             1.60                 1.13                  .25                  .41                  .67 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)               98.60               155.18               105.11               146.58                99.96 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Growth Portfolio                                                                                      

CLASS M                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                  Year ended September 30                                 
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $14.25               $14.15               $11.60               $13.49               $11.32 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .20                  .20                  .07                  .08                  .11 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments           (2.93)                1.55                 2.80                (1.05)                2.67 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                (2.73)                1.75                 2.87                 (.97)                2.78 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.11)                (.09)                (.05)                (.09)                (.14)
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                       (2.63)               (1.56)                (.27)                (.83)                (.47)
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (2.74)               (1.65)                (.32)                (.92)                (.61)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $8.78               $14.25               $14.15               $11.60               $13.49 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)              (22.84)               12.25                25.05                (7.52)               25.63 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                     $48,911              $67,225              $59,604              $49,702              $34,381 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             1.75                 1.68                 1.71                 1.81                 1.89 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             1.85                 1.35                  .50                  .65                  .92 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)               98.60               155.18               105.11               146.58                99.96 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


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FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Growth Portfolio                                                                                      

CLASS Y                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                   Year ended September 30                                
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $14.58               $14.44               $11.84               $13.72               $11.47 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .29                  .32                  .17                  .18                  .21 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments           (3.01)                1.58                 2.83                (1.07)                2.70 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                (2.72)                1.90                 3.00                 (.89)                2.91 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.22)                (.20)                (.13)                (.16)                (.19)
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                       (2.63)               (1.56)                (.27)                (.83)                (.47)
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (2.85)               (1.76)                (.40)                (.99)                (.66)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $9.01               $14.58               $14.44               $11.84               $13.72 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)              (22.30)               13.14                25.76                (6.79)               26.54 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                    $465,661             $488,376             $386,363             $203,595             $233,292 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             1.00                  .93                  .96                 1.06                 1.14 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             2.61                 2.13                 1.24                 1.40                 1.71 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)               98.60               155.18               105.11               146.58                99.96 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


STATEMENT OF ASSETS AND LIABILITIES                                                             

September 30, 2001                                                                              
Putnam Asset Allocation: Balanced Portfolio                                                     

                                                                                                
Assets                                                                                          
----------------------------------------------------------------------------------------------- 
Investments in securities, at value, including $40,677,429 of                                   
securities on loan (identified cost $2,687,959,216) (Note 1)                     $2,486,783,910 
----------------------------------------------------------------------------------------------- 
Cash                                                                                    988,601 
----------------------------------------------------------------------------------------------- 
Foreign currency (cost $25,478,520)                                                  25,396,549 
----------------------------------------------------------------------------------------------- 
Dividends, interest and other receivables                                            13,665,799 
----------------------------------------------------------------------------------------------- 
Receivable for shares of the fund sold                                                4,700,577 
----------------------------------------------------------------------------------------------- 
Receivable for securities sold                                                       40,241,986 
----------------------------------------------------------------------------------------------- 
Receivable for closed forward currency contracts (Note 1)                               700,267 
----------------------------------------------------------------------------------------------- 
Receivable for open forward currency contracts (Note 1)                               2,229,728 
----------------------------------------------------------------------------------------------- 
Receivable for variation margin (Note 1)                                              3,212,952 
----------------------------------------------------------------------------------------------- 
Receivable for open swap contracts (Note 1)                                           4,575,848 
----------------------------------------------------------------------------------------------- 
Total assets                                                                      2,582,496,217 

Liabilities                                                                                     
----------------------------------------------------------------------------------------------- 
Payable for securities purchased                                                     43,113,815 
----------------------------------------------------------------------------------------------- 
Payable for shares of the fund repurchased                                            6,924,943 
----------------------------------------------------------------------------------------------- 
Payable for compensation of Manager (Note 2)                                          3,812,091 
----------------------------------------------------------------------------------------------- 
Payable for investor servicing and custodian fees (Note 2)                            1,496,457 
----------------------------------------------------------------------------------------------- 
Payable for compensation of Trustees (Note 2)                                            74,475 
----------------------------------------------------------------------------------------------- 
Payable for administrative services (Note 2)                                             10,026 
----------------------------------------------------------------------------------------------- 
Payable for distribution fees (Note 2)                                                1,302,509 
----------------------------------------------------------------------------------------------- 
Payable for written options outstanding                                                         
(premiums received $98,842) (Note 3)                                                     72,915 
----------------------------------------------------------------------------------------------- 
Payable for closed forward currency contracts (Note 1)                                  810,178 
----------------------------------------------------------------------------------------------- 
Payable for open forward currency contracts (Note 1)                                  7,732,821 
----------------------------------------------------------------------------------------------- 
TBA sale commitments, at value                                                                  
(proceeds receivable $24,108,844) (Note 1)                                           24,295,226 
----------------------------------------------------------------------------------------------- 
Collateral on securities loaned, at value (Note 1)                                   43,262,832 
----------------------------------------------------------------------------------------------- 
Other accrued expenses                                                                  323,345 
----------------------------------------------------------------------------------------------- 
Total liabilities                                                                   133,231,633 
----------------------------------------------------------------------------------------------- 
Net assets                                                                       $2,449,264,584 

Represented by                                                                                  
----------------------------------------------------------------------------------------------- 
Paid-in capital (Notes 1 and 4)                                                  $2,892,363,855 
----------------------------------------------------------------------------------------------- 
Undistributed net investment income (Note 1)                                         17,857,247 
----------------------------------------------------------------------------------------------- 
Accumulated net realized loss on investments and                                                
foreign currency transactions (Note 1)                                             (262,688,238)
----------------------------------------------------------------------------------------------- 
Net unrealized depreciation of investments and                                                  
assets and liabilities in foreign currencies                                       (198,268,280)
----------------------------------------------------------------------------------------------- 
Total -- Representing net assets applicable to                                                  
capital shares outstanding                                                       $2,449,264,584 

Computation of net asset value and offering price                                               
----------------------------------------------------------------------------------------------- 
Net asset value and redemption price per class A share                                          
($1,237,229,317 divided by 134,464,651 shares)                                            $9.20 
----------------------------------------------------------------------------------------------- 
Offering price per class A share (100/94.25 of $9.20)*                                    $9.76 
----------------------------------------------------------------------------------------------- 
Net asset value and offering price per class B share                                            
($381,633,463 divided by 41,736,062 shares)**                                             $9.14 
----------------------------------------------------------------------------------------------- 
Net asset value and offering price per class C share                                            
($119,926,068 divided by 13,213,428 shares)**                                             $9.08 
----------------------------------------------------------------------------------------------- 
Net asset value and redemption price per class M share                                          
($55,312,789 divided by 6,023,262 shares)                                                 $9.18 
----------------------------------------------------------------------------------------------- 
Offering price per class M share (100/96.50 of $9.18)*                                    $9.51 
----------------------------------------------------------------------------------------------- 
Net asset value, offering price and redemption price per class Y share                          
($655,162,947 divided by 71,139,488 shares)                                               $9.21 
----------------------------------------------------------------------------------------------- 
 * 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.                      


                                                        [Enlarge/Download Table]


STATEMENT OF OPERATIONS                                                                         

Year ended September 30, 2001                                                                   
Putnam Asset Allocation: Balanced Portfolio                                                     

                                                                                                
Investment income:                                                                              
----------------------------------------------------------------------------------------------- 
Interest                                                                          $  71,918,284 
----------------------------------------------------------------------------------------------- 
Dividends (net of foreign tax of $884,874)                                           22,263,679 
----------------------------------------------------------------------------------------------- 
Securities lending                                                                       63,841 
----------------------------------------------------------------------------------------------- 
Total investment income                                                              94,245,804 

Expenses:                                                                                       
----------------------------------------------------------------------------------------------- 
Compensation of Manager (Note 2)                                                     15,356,647 
----------------------------------------------------------------------------------------------- 
Investor servicing and custodian fees (Note 2)                                        6,872,786 
----------------------------------------------------------------------------------------------- 
Compensation of Trustees (Note 2)                                                        59,020 
----------------------------------------------------------------------------------------------- 
Administrative services (Note 2)                                                         37,338 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class A (Note 2)                                                 3,427,007 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class B (Note 2)                                                 4,649,454 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class C (Note 2)                                                 1,366,664 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class M (Note 2)                                                   481,895 
----------------------------------------------------------------------------------------------- 
Other                                                                                 1,075,288 
----------------------------------------------------------------------------------------------- 
Total expenses                                                                       33,326,099 
----------------------------------------------------------------------------------------------- 
Expense reduction (Note 2)                                                           (1,052,666)
----------------------------------------------------------------------------------------------- 
Net expenses                                                                         32,273,433 
----------------------------------------------------------------------------------------------- 
Net investment income                                                                61,972,371 
----------------------------------------------------------------------------------------------- 
Net realized loss on investments (Notes 1 and 3)                                   (167,194,071)
----------------------------------------------------------------------------------------------- 
Net realized loss on futures contracts (Note 1)                                     (59,445,362)
----------------------------------------------------------------------------------------------- 
Net realized gain on written options (Notes 1 and 3)                                    724,453 
----------------------------------------------------------------------------------------------- 
Net realized gain on foreign currency transactions (Note 1)                              51,094 
----------------------------------------------------------------------------------------------- 
Net realized gain on swap contracts (Note 1)                                         19,210,823 
----------------------------------------------------------------------------------------------- 
Net unrealized depreciation of assets and                                                       
liabilities in foreign currencies during the year                                    (3,484,253)
----------------------------------------------------------------------------------------------- 
Net unrealized depreciation of investments, futures contracts, swap                             
contracts, written options and TBA sale commitments during the year                (358,561,811)
----------------------------------------------------------------------------------------------- 
Net loss on investments                                                            (568,699,127)
----------------------------------------------------------------------------------------------- 
Net decrease in net assets resulting from operations                              $(506,726,756)
----------------------------------------------------------------------------------------------- 

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


                                                        [Enlarge/Download Table]


STATEMENT OF CHANGES IN NET ASSETS                                                                              

Putnam Asset Allocation: Balanced Portfolio                                                                     
                                                                                      Year ended September 30   
                                                                                ------------------------------- 
                                                                                           2001            2000 
--------------------------------------------------------------------------------------------------------------- 
                                                                                                                
Increase (decrease) in net assets                                                                               
--------------------------------------------------------------------------------------------------------------- 
Operations:                                                                                                     
--------------------------------------------------------------------------------------------------------------- 
Net investment income                                                            $   61,972,371  $   52,648,388 
--------------------------------------------------------------------------------------------------------------- 
Net realized gain (loss) on investments and                                                                     
foreign currency transactions                                                      (206,653,063)    297,785,786 
--------------------------------------------------------------------------------------------------------------- 
Net unrealized depreciation of investments and                                                                  
assets and liabilities in foreign currencies                                       (362,046,064)    (22,504,619)
--------------------------------------------------------------------------------------------------------------- 
Net increase (decrease) in net assets resulting                                                                 
from operations                                                                    (506,726,756)    327,929,555 
--------------------------------------------------------------------------------------------------------------- 
Distributions to shareholders (Note 1):                                                                         
--------------------------------------------------------------------------------------------------------------- 
From net investment income                                                                                      
Class A                                                                             (45,016,921)    (22,163,223)
--------------------------------------------------------------------------------------------------------------- 
Class B                                                                             (12,254,633)     (7,115,666)
--------------------------------------------------------------------------------------------------------------- 
Class C                                                                              (3,467,612)     (1,713,203)
--------------------------------------------------------------------------------------------------------------- 
Class M                                                                              (1,812,358)     (1,065,211)
--------------------------------------------------------------------------------------------------------------- 
Class Y                                                                             (23,054,048)    (11,498,180)
--------------------------------------------------------------------------------------------------------------- 
From net realized gain on investments                                                                           
Class A                                                                            (148,315,876)    (66,297,566)
--------------------------------------------------------------------------------------------------------------- 
Class B                                                                             (55,463,172)    (41,791,913)
--------------------------------------------------------------------------------------------------------------- 
Class C                                                                             (14,878,917)     (9,236,973)
--------------------------------------------------------------------------------------------------------------- 
Class M                                                                              (7,312,576)     (4,918,496)
--------------------------------------------------------------------------------------------------------------- 
Class Y                                                                             (63,728,086)    (34,117,109)
--------------------------------------------------------------------------------------------------------------- 
In excess of net realized gain on investments                                                                   
Class A                                                                              (8,976,600)             -- 
--------------------------------------------------------------------------------------------------------------- 
Class B                                                                              (3,356,827)             -- 
--------------------------------------------------------------------------------------------------------------- 
Class C                                                                                (900,524)             -- 
--------------------------------------------------------------------------------------------------------------- 
Class M                                                                                (442,583)             -- 
--------------------------------------------------------------------------------------------------------------- 
Class Y                                                                              (3,857,048)             -- 
--------------------------------------------------------------------------------------------------------------- 
Increase from capital share transactions (Note 4)                                   638,655,867     557,354,934 
--------------------------------------------------------------------------------------------------------------- 
Total increase (decrease) in net assets                                            (260,908,670)    685,366,949 

Net assets                                                                                                      
--------------------------------------------------------------------------------------------------------------- 
Beginning of year                                                                 2,710,173,254   2,024,806,305 
--------------------------------------------------------------------------------------------------------------- 
End of year (including undistributed net investment                                                             
income of $17,857,247 and $9,477,809, respectively)                              $2,449,264,584  $2,710,173,254 
--------------------------------------------------------------------------------------------------------------- 

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Balanced Portfolio                                                                                    

CLASS A                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                              Year ended September 30                                     
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $12.99               $12.28               $10.66               $12.28               $10.71 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .26                  .31                  .23                  .26                  .28 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments           (2.23)                1.59                 1.78                 (.84)                2.13 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                (1.97)                1.90                 2.01                 (.58)                2.41 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.38)                (.26)                (.21)                (.18)                (.31)
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                       (1.36)                (.93)                (.18)                (.86)                (.53)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net realized gain                                                                                                 
on investments                        (.08)                  --                   --                   --                   -- 
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (1.82)               (1.19)                (.39)               (1.04)                (.84)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $9.20               $12.99               $12.28               $10.66               $12.28 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)              (17.11)               15.88                19.09                (4.97)               23.82 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                  $1,237,229           $1,377,302             $873,219             $846,574             $680,720 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             1.11                 1.09                 1.14                 1.22                 1.27 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             2.39                 2.37                 1.89                 2.17                 2.44 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)              131.05               182.86               119.70               158.14               136.75 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


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FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Balanced Portfolio                                                                                    

CLASS B                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                  Year ended September 30                                 
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $12.92               $12.22               $10.61               $12.23               $10.67 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .18                  .20                  .14                  .17                  .19 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments           (2.23)                1.59                 1.78                 (.83)                2.13 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                (2.05)                1.79                 1.92                 (.66)                2.32 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.29)                (.16)                (.13)                (.10)                (.23)
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                       (1.36)                (.93)                (.18)                (.86)                (.53)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net realized gain                                                                                                 
on investments                        (.08)                  --                   --                   --                   -- 
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (1.73)               (1.09)                (.31)                (.96)                (.76)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $9.14               $12.92               $12.22               $10.61               $12.23 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)              (17.78)               15.01                18.22                (5.70)               22.95 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                    $381,633             $535,663             $553,738             $482,029             $442,463 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             1.86                 1.84                 1.89                 1.97                 2.02 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             1.64                 1.56                 1.13                 1.42                 1.70 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)              131.05               182.86               119.70               158.14               136.75 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Balanced Portfolio                                                                                    

CLASS C                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                 Year ended September 30                                  
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $12.83               $12.15               $10.56               $12.18               $10.64 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .17                  .20                  .13                  .16                  .19 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments           (2.19)                1.57                 1.77                 (.82)                2.11 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                (2.02)                1.77                 1.90                 (.66)                2.30 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.29)                (.16)                (.13)                (.10)                (.23)
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                       (1.36)                (.93)                (.18)                (.86)                (.53)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net realized gain                                                                                                 
on investments                        (.08)                  --                   --                   --                   -- 
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (1.73)               (1.09)                (.31)                (.96)                (.76)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $9.08               $12.83               $12.15               $10.56               $12.18 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)              (17.65)               14.97                18.14                (5.70)               22.86 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                    $119,926             $142,761             $120,660              $94,553              $70,847 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             1.86                 1.84                 1.89                 1.97                 2.02 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             1.64                 1.58                 1.12                 1.41                 1.70 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)              131.05               182.86               119.70               158.14               136.75 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Balanced Portfolio                                                                                    

CLASS M                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                 Year ended September 30                                  
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $12.97               $12.26               $10.65               $12.27               $10.71 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .20                  .24                  .17                  .20                  .22 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments           (2.23)                1.59                 1.78                 (.83)                2.13 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                (2.03)                1.83                 1.95                 (.63)                2.35 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.32)                (.19)                (.16)                (.13)                (.26)
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                       (1.36)                (.93)                (.18)                (.86)                (.53)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net realized gain                                                                                                 
on investments                        (.08)                  --                   --                   --                   -- 
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (1.76)               (1.12)                (.34)                (.99)                (.79)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $9.18               $12.97               $12.26               $10.65               $12.27 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)              (17.57)               15.33                18.45                (5.46)               23.19 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                     $55,313              $70,757              $66,854              $55,511              $44,121 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             1.61                 1.59                 1.64                 1.72                 1.77 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             1.89                 1.84                 1.38                 1.67                 1.93 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)              131.05               182.86               119.70               158.14               136.75 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Balanced Portfolio                                                                                    

CLASS Y                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                 Year ended September 30                                  
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $13.00               $12.29               $10.67               $12.29               $10.71 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .29                  .33                  .26                  .29                  .31 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments           (2.24)                1.60                 1.78                 (.84)                2.14 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                (1.95)                1.93                 2.04                 (.55)                2.45 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.40)                (.29)                (.24)                (.21)                (.34)
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                       (1.36)                (.93)                (.18)                (.86)                (.53)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net realized gain                                                                                                 
on investments                        (.08)                  --                   --                   --                   -- 
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (1.84)               (1.22)                (.42)               (1.07)                (.87)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $9.21               $13.00               $12.29               $10.67               $12.29 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)              (16.89)               16.15                19.37                (4.74)               24.21 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                    $655,163             $583,691             $410,335             $216,100             $232,021 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)              .86                  .84                  .89                  .97                 1.02 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             2.64                 2.58                 2.10                 2.43                 2.70 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)              131.05               182.86               119.70               158.14               136.75 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


STATEMENT OF ASSETS AND LIABILITIES                                                             

September 30, 2001                                                                              
Putnam Asset Allocation: Conservative Portfolio                                                 

                                                                                                
Assets                                                                                          
----------------------------------------------------------------------------------------------- 
Investments in securities, at value, including $3,841,666 of                                    
securities on loan  (identified cost $1,039,457,243) (Note 1)                     $ 985,928,759 
----------------------------------------------------------------------------------------------- 
Cash                                                                                  1,628,402 
----------------------------------------------------------------------------------------------- 
Foreign currency (cost $3,727,728)                                                    3,706,450 
----------------------------------------------------------------------------------------------- 
Dividends, interest and other receivables                                            11,660,275 
----------------------------------------------------------------------------------------------- 
Receivable for shares of the fund sold                                                2,210,667 
----------------------------------------------------------------------------------------------- 
Receivable for securities sold                                                       21,813,194 
----------------------------------------------------------------------------------------------- 
Receivable for variation margin (Note 1)                                              2,587,880 
----------------------------------------------------------------------------------------------- 
Receivable for open swap contracts (Note 1)                                           1,378,096 
----------------------------------------------------------------------------------------------- 
Receivable for open forward currency contracts (Note 1)                                 636,275 
----------------------------------------------------------------------------------------------- 
Receivable for closed forward currency contracts (Note 1)                               146,160 
----------------------------------------------------------------------------------------------- 
Total assets                                                                      1,031,696,158 

Liabilities                                                                                     
----------------------------------------------------------------------------------------------- 
Payable for securities purchased                                                     22,311,202 
----------------------------------------------------------------------------------------------- 
Payable for shares of the fund repurchased                                              863,305 
----------------------------------------------------------------------------------------------- 
Payable for compensation of Manager (Note 2)                                          1,654,149 
----------------------------------------------------------------------------------------------- 
Payable for investor servicing and custodian fees (Note 2)                              841,179 
----------------------------------------------------------------------------------------------- 
Payable for compensation of Trustees (Note 2)                                            25,021 
----------------------------------------------------------------------------------------------- 
Payable for administrative services (Note 2)                                              5,890 
----------------------------------------------------------------------------------------------- 
Payable for distribution fees (Note 2)                                                  529,524 
----------------------------------------------------------------------------------------------- 
Written options outstanding, at value                                                           
(premiums receivable $38,441) (Note 3)                                                   28,358 
----------------------------------------------------------------------------------------------- 
Collateral on securities loaned, at value (Note 1)                                    3,993,614 
----------------------------------------------------------------------------------------------- 
Payable for open forward currency contracts (Note 1)                                  1,826,310 
----------------------------------------------------------------------------------------------- 
Payable for closed forward currency contracts (Note 1)                                  246,342 
----------------------------------------------------------------------------------------------- 
TBA sale commitments, at value                                                                  
(proceeds receivable $14,980,250) (Note 1)                                           15,096,536 
----------------------------------------------------------------------------------------------- 
Other accrued expenses                                                                  116,954 
----------------------------------------------------------------------------------------------- 
Total liabilities                                                                    47,538,384 
----------------------------------------------------------------------------------------------- 
Net assets                                                                         $984,157,774 

Represented by                                                                                  
----------------------------------------------------------------------------------------------- 
Paid-in capital (Notes 1 and 4)                                                  $1,077,751,998 
----------------------------------------------------------------------------------------------- 
Undistributed net investment income (Note 1)                                         20,355,778 
----------------------------------------------------------------------------------------------- 
Accumulated net realized loss on investments and                                                
foreign currency transactions (Note 1)                                              (61,530,427)
----------------------------------------------------------------------------------------------- 
Net unrealized depreciation of investments and                                                  
assets and liabilities in foreign currencies                                        (52,419,575)
----------------------------------------------------------------------------------------------- 
Total -- Representing net assets applicable to                                                  
capital shares outstanding                                                        $ 984,157,774 

Computation of net asset value and offering price                                               
----------------------------------------------------------------------------------------------- 
Net asset value and redemption price per class A share                                          
($578,415,517 divided by 66,419,400 shares)                                               $8.71 
----------------------------------------------------------------------------------------------- 
Offering price per class A share (100/94.25 of $8.71)*                                    $9.24 
----------------------------------------------------------------------------------------------- 
Net asset value and offering price per class B share                                            
($129,598,256 divided by 14,933,666 shares)**                                             $8.68 
----------------------------------------------------------------------------------------------- 
Net asset value and offering price per class C share                                            
($41,853,660 divided by 4,831,812 shares)**                                               $8.66 
----------------------------------------------------------------------------------------------- 
Net asset value and redemption price per class M share                                          
($21,264,721 divided by 2,450,615 shares)                                                 $8.68 
----------------------------------------------------------------------------------------------- 
Offering price per class M share (100/96.50 of $8.68)*                                    $8.99 
----------------------------------------------------------------------------------------------- 
Net asset value, offering price and redemption price per class Y share                          
($213,025,620 divided by 24,407,175 shares)                                               $8.73 
----------------------------------------------------------------------------------------------- 
 * 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.                      


                                                        [Enlarge/Download Table]


STATEMENT OF OPERATIONS                                                                         

Year ended September 30, 2001                                                                   
Putnam Asset Allocation: Conservative Portfolio                                                 

                                                                                                
Investment income:                                                                              
----------------------------------------------------------------------------------------------- 
Interest                                                                            $57,659,585 
----------------------------------------------------------------------------------------------- 
Dividends (net of foreign tax of $108,798)                                            3,767,976 
----------------------------------------------------------------------------------------------- 
Securities lending                                                                        1,215 
----------------------------------------------------------------------------------------------- 
Total investment income                                                              61,428,776 

Expenses:                                                                                       
----------------------------------------------------------------------------------------------- 
Compensation of Manager (Note 2)                                                      6,264,395 
----------------------------------------------------------------------------------------------- 
Investor servicing and custodian fees (Note 2)                                        3,328,683 
----------------------------------------------------------------------------------------------- 
Compensation of Trustees (Note 2)                                                        23,731 
----------------------------------------------------------------------------------------------- 
Administrative services (Note 2)                                                         20,169 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class A (Note 2)                                                 1,347,143 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class B (Note 2)                                                 1,417,855 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class C (Note 2)                                                   420,194 
----------------------------------------------------------------------------------------------- 
Distribution fees -- Class M (Note 2)                                                   175,043 
----------------------------------------------------------------------------------------------- 
Other                                                                                   391,354 
----------------------------------------------------------------------------------------------- 
Total expenses                                                                       13,388,567 
----------------------------------------------------------------------------------------------- 
Expense reduction (Note 2)                                                             (406,484)
----------------------------------------------------------------------------------------------- 
Net expenses                                                                         12,982,083 
----------------------------------------------------------------------------------------------- 
Net investment income                                                                48,446,693 
----------------------------------------------------------------------------------------------- 
Net realized loss on investments (Notes 1 and 3)                                    (39,300,483)
----------------------------------------------------------------------------------------------- 
Net realized loss on futures contracts (Note 1)                                     (16,494,324)
----------------------------------------------------------------------------------------------- 
Net realized gain on written options (Note 3)                                           269,195 
----------------------------------------------------------------------------------------------- 
Net realized gain on swap contracts (Note 1)                                          9,501,637 
----------------------------------------------------------------------------------------------- 
Net realized loss on foreign currency transactions (Note 1)                          (4,318,691)
----------------------------------------------------------------------------------------------- 
Net unrealized depreciation of assets and                                                       
liabilities in foreign currencies during the year                                      (299,103)
----------------------------------------------------------------------------------------------- 
Net unrealized depreciation of investments, futures contracts,                                  
swap contracts, written options and TBA sale commitments during the year            (46,606,216)
----------------------------------------------------------------------------------------------- 
Net loss on investments                                                             (97,247,985)
----------------------------------------------------------------------------------------------- 
Net decrease in net assets resulting from operations                               $(48,801,292)
----------------------------------------------------------------------------------------------- 

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


                                                        [Enlarge/Download Table]


STATEMENT OF CHANGES IN NET ASSETS                                                                              

Putnam Asset Allocation: Conservative Portfolio                                                                 
                                                                                      Year ended September 30   
                                                                                ------------------------------- 
                                                                                           2001            2000 
                                                                                                                
--------------------------------------------------------------------------------------------------------------- 
Increase in net assets                                                                                          
--------------------------------------------------------------------------------------------------------------- 
Operations:                                                                                                     
--------------------------------------------------------------------------------------------------------------- 
Net investment income                                                             $  48,446,693   $  32,909,727 
--------------------------------------------------------------------------------------------------------------- 
Net realized gain (loss) on investments and                                                                     
foreign currency transactions                                                       (50,342,666)     57,092,900 
--------------------------------------------------------------------------------------------------------------- 
Net unrealized depreciation of investments                                                                      
and assets and liabilities in foreign currencies                                    (46,905,319)    (29,712,225)
--------------------------------------------------------------------------------------------------------------- 
Net increase (decrease) in net assets resulting                                                                 
from operations                                                                     (48,801,292)     60,290,402 
--------------------------------------------------------------------------------------------------------------- 
Distributions to shareholders (Note 1):                                                                         
--------------------------------------------------------------------------------------------------------------- 
From net investment income                                                                                      
Class A                                                                             (29,165,045)    (14,757,033)
--------------------------------------------------------------------------------------------------------------- 
Class B                                                                              (7,949,283)     (5,637,499)
--------------------------------------------------------------------------------------------------------------- 
Class C                                                                              (2,329,256)     (1,576,843)
--------------------------------------------------------------------------------------------------------------- 
Class M                                                                              (1,361,627)       (866,030)
--------------------------------------------------------------------------------------------------------------- 
Class Y                                                                             (13,546,661)     (5,258,551)
--------------------------------------------------------------------------------------------------------------- 
From net realized gain on investments                                                                           
Class A                                                                             (25,211,547)    (13,824,003)
--------------------------------------------------------------------------------------------------------------- 
Class B                                                                              (9,276,639)     (6,780,121)
--------------------------------------------------------------------------------------------------------------- 
Class C                                                                              (2,687,672)     (2,046,426)
--------------------------------------------------------------------------------------------------------------- 
Class M                                                                              (1,512,172)       (970,249)
--------------------------------------------------------------------------------------------------------------- 
Class Y                                                                             (12,750,298)     (3,934,173)
--------------------------------------------------------------------------------------------------------------- 
Increase from capital share transactions (Note 4)                                   309,315,046      65,333,749 
--------------------------------------------------------------------------------------------------------------- 
Total increase in net assets                                                        154,723,554      69,973,223 

Net assets                                                                                                      
--------------------------------------------------------------------------------------------------------------- 
Beginning of year                                                                   829,434,220     759,460,997 
--------------------------------------------------------------------------------------------------------------- 
End of year (including undistributed net                                                                        
investment income of $20,355,778 and                                                                            
$18,146,569, respectively)                                                         $984,157,774    $829,434,220 
--------------------------------------------------------------------------------------------------------------- 

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Conservative Portfolio                                                                                

CLASS A                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                  Year ended September 30                                 
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $10.45               $10.40                $9.81               $10.61                $9.69 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .49                  .46                  .34                  .38                  .38 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments            (.95)                 .37                  .73                 (.45)                1.22 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                 (.46)                 .83                 1.07                 (.07)                1.60 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.62)                (.40)                (.34)                (.20)                (.35)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net investment income      --                   --                 (.06)                  --                   -- 
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                        (.66)                (.38)                (.08)                (.43)                (.33)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net realized                                                                                                      
gain on investments                     --                   --                   --                 (.10)                  -- 
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (1.28)                (.78)                (.48)                (.73)                (.68)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $8.71               $10.45               $10.40                $9.81               $10.61 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)               (4.84)                8.18                11.05                 (.69)               17.26 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                    $578,416             $406,224             $373,313             $367,806             $295,239 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             1.29                 1.25                 1.31                 1.39                 1.38 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             5.13                 4.37                 3.25                 3.67                 3.74 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)              180.29               276.48               165.48               203.19               219.44 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Conservative Portfolio                                                                                

CLASS B                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 

Per-share                                                                                                                      
operating performance                                                 Year ended September 30                                  
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $10.42               $10.37                $9.78               $10.57                $9.66 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .41                  .37                  .26                  .30                  .30 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments            (.94)                 .38                  .73                 (.43)                1.22 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                 (.53)                 .75                  .99                 (.13)                1.52 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.55)                (.32)                (.26)                (.13)                (.28)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net investment income      --                   --                 (.06)                  --                   -- 
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                        (.66)                (.38)                (.08)                (.43)                (.33)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net realized                                                                                                      
gain on investments                     --                   --                   --                 (.10)                  -- 
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (1.21)                (.70)                (.40)                (.66)                (.61)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $8.68               $10.42               $10.37                $9.78               $10.57 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)               (5.60)                7.40                10.29                (1.32)               16.36 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                    $129,598             $153,985             $187,112             $162,807             $138,457 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             2.04                 2.00                 2.06                 2.14                 2.13 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             4.41                 3.57                 2.50                 2.92                 2.97 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)              180.29               276.48               165.48               203.19               219.44 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Conservative Portfolio                                                                                

CLASS C                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                  Year ended September 30                                 
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $10.39               $10.34                $9.75               $10.56                $9.64 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .41                  .36                  .26                  .30                  .29 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments            (.93)                 .39                  .74                 (.45)                1.24 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                 (.52)                 .75                 1.00                 (.15)                1.53 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.55)                (.32)                (.26)                (.13)                (.28)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net investment income      --                   --                 (.07)                  --                   -- 
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                        (.66)                (.38)                (.08)                (.43)                (.33)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net realized                                                                                                      
gain on investments                     --                   --                   --                 (.10)                  -- 
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (1.21)                (.70)                (.41)                (.66)                (.61)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $8.66               $10.39               $10.34                $9.75               $10.56 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)               (5.51)                7.39                10.34                (1.51)               16.52 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                     $41,854              $41,846              $58,831              $45,740              $29,032 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             2.04                 2.00                 2.06                 2.14                 2.13 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             4.41                 3.51                 2.50                 2.93                 2.96 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)              180.29               276.48               165.48               203.19               219.44 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Conservative Portfolio                                                                                

CLASS M                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                  Year ended September 30                                 
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $10.42               $10.37                $9.78               $10.59                $9.67 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .44                  .40                  .29                  .33                  .32 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments            (.95)                 .38                  .73                 (.46)                1.24 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                 (.51)                 .78                 1.02                 (.13)                1.56 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.57)                (.35)                (.29)                (.15)                (.31)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net investment income      --                   --                 (.06)                  --                   -- 
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                        (.66)                (.38)                (.08)                (.43)                (.33)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net realized                                                                                                      
gain on investments                     --                   --                   --                 (.10)                  -- 
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (1.23)                (.73)                (.43)                (.68)                (.64)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $8.68               $10.42               $10.37                $9.78               $10.59 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)               (5.34)                7.66                10.56                (1.27)               16.80 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                     $21,265              $24,869              $29,373              $18,868              $12,689 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             1.79                 1.75                 1.81                 1.89                 1.88 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             4.66                 3.82                 2.77                 3.17                 3.19 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)              180.29               276.48               165.48               203.19               219.44 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


                                                        [Enlarge/Download Table]


FINANCIAL HIGHLIGHTS                                                                                                           
(For a common share outstanding throughout the period)                                                                         

Putnam Asset Allocation: Conservative Portfolio                                                                                

CLASS Y                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------ 
Per-share                                                                                                                      
operating performance                                                 Year ended September 30                                  
------------------------------------------------------------------------------------------------------------------------------ 
                                      2001                 2000                 1999                 1998                 1997 
------------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                               
Net asset value,                                                                                                               
beginning of period                 $10.47               $10.42                $9.82               $10.62                $9.69 
------------------------------------------------------------------------------------------------------------------------------ 
Investment operations                                                                                                          
------------------------------------------------------------------------------------------------------------------------------ 
Net investment income (a)              .51                  .51                  .36                  .41                  .40 
------------------------------------------------------------------------------------------------------------------------------ 
Net realized and unrealized                                                                                                    
gain (loss) on investments            (.95)                 .35                  .75                 (.45)                1.23 
------------------------------------------------------------------------------------------------------------------------------ 
Total from                                                                                                                     
investment operations                 (.44)                 .86                 1.11                 (.04)                1.63 
------------------------------------------------------------------------------------------------------------------------------ 
Less distributions:                                                                                                            
------------------------------------------------------------------------------------------------------------------------------ 
From net                                                                                                                       
investment income                     (.64)                (.43)                (.36)                (.23)                (.37)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net investment income      --                   --                 (.07)                  --                   -- 
------------------------------------------------------------------------------------------------------------------------------ 
From net realized gain                                                                                                         
on investments                        (.66)                (.38)                (.08)                (.43)                (.33)
------------------------------------------------------------------------------------------------------------------------------ 
In excess of net realized                                                                                                      
gain on investments                     --                   --                   --                 (.10)                  -- 
------------------------------------------------------------------------------------------------------------------------------ 
Total distributions                  (1.30)                (.81)                (.51)                (.76)                (.70)
------------------------------------------------------------------------------------------------------------------------------ 
Net asset value,                                                                                                               
end of period                        $8.73               $10.47               $10.42                $9.82               $10.62 
------------------------------------------------------------------------------------------------------------------------------ 
Total return at                                                                                                                
net asset value (%)(b)               (4.59)                8.43                11.42                 (.44)               17.62 
------------------------------------------------------------------------------------------------------------------------------ 

Ratios and                                                                                                                     
supplemental data                                                                                                              
------------------------------------------------------------------------------------------------------------------------------ 
Net assets, end of period                                                                                                      
(in thousands)                    $213,026             $202,510             $110,831              $26,253              $18,760 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of expenses to                                                                                                           
average net assets (%)(c)             1.04                 1.00                 1.06                 1.14                 1.13 
------------------------------------------------------------------------------------------------------------------------------ 
Ratio of                                                                                                                       
net investment income                                                                                                          
to average net assets (%)             5.41                 4.84                 3.50                 3.93                 3.96 
------------------------------------------------------------------------------------------------------------------------------ 
Portfolio turnover (%)              180.29               276.48               165.48               203.19               219.44 
------------------------------------------------------------------------------------------------------------------------------ 

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

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

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


NOTES TO FINANCIAL STATEMENTS                                                   
September 30, 2001                                                              

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 funds each offer 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 and class C 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      
$150 million in a combination of Putnam funds and other accounts managed        
by affiliates of Putnam Investment Management, LLC ("Putnam Management"),       
the fund's manager, a wholly-owned subsidiary of Putnam Investments, LLC.       

Expenses of the funds 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 funds, 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 funds in the preparation of its financial statements. The       
preparation of financial statements is in conformity with accounting            
principles generally accepted in the United States of America and requires      
management to make estimates and assumptions that affect the reported           
amounts of assets and liabilities in the financial statements and the           
reported amounts of increases and decreases in net assets from operations       
during the reporting period. Actual results could differ from those             
estimates.                                                                      

A) Security valuation Investments for which market quotations are readily       
available are stated at market value, which is determined using the last        
reported sales price on its principal exchange, 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. Market               
quotations are not considered to be readily available for certain debt          
obligations; such investments are stated at fair value on the basis of          
valuations furnished by an independent pricing service or dealers,              
approved by the Trustees, which determine valuations for normal                 
institutional-size trading units of such securities using methods based on      
market transactions for comparable securities and variable relationships        
between securities that are generally recognized by institutional traders.      
Short-term investments having remaining maturities of 60 days or less are       
stated at amortized cost, which approximates market value. Other                
investments, including restricted securities, are stated at fair value          
following procedures approved by the Trustees.                                  

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 including cash        
collateral received under security lending arrangements of other                
registered investment companies and certain other accounts managed by           
Putnam Management. These balances may be invested in one or more                
repurchase agreements and/or short-term money market instruments.               

C) Repurchase agreements The funds, or any joint trading account, through       
their custodian, receive 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 funds 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). Gains or losses on securities sold are determined on         
the identified cost basis.                                                      

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.                                                               

Non-cash dividends, if any, are recorded at the fair market value of the        
securities received. 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 bonds is amortized on a                     
yield-to-maturity basis.                                                        

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 funds after translation to U.S. dollars based on       
the exchange rates on that day. The cost of each security is determined         
using historical exchange rates. Income and withholding taxes are               
translated at prevailing exchange rates when 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 funds' books and the U.S. dollar      
equivalent amounts actually received or paid. Net unrealized appreciation       
and depreciation of assets and liabilities in foreign currencies arise          
from changes in the value of open forward currency contracts and assets         
and liabilities other than investments at the period end, resulting from        
changes in the exchange rate. Investments in foreign securities involve         
certain risks, including those related to economic instability,                 
unfavorable political developments, and currency fluctuations, not present      
with domestic investments.                                                      

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. These contracts are used to         
protect against a decline in value relative to the U.S. dollar of the           
currencies in which its portfolio securities are denominated or quoted (or      
an increase in the value of a currency in which securities a fund intends       
to buy are denominated, when a fund holds cash reserves and short-term          
investments). 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        
owns or expects 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) Equity swap contracts The funds may engage in swap agreements, which         
are arrangements to exchange the return generated by one instrument for         
the return generated by another instrument. To manage their exposure to         
equity markets the funds may enter into equity swap agreements, which           
involve a commitment by one party to pay interest in exchange for a             
market-linked return based on a notional principal amount. To the extent        
that the total return of the security or index underlying the transaction       
exceeds or falls short of the offsetting interest rate obligation, the          
funds will receive a payment from or make a payment to the counterparty,        
respectively. Equity swaps are marked to market daily based upon                
quotations from market makers and the change, if any, is recorded as            
unrealized gain or loss. Payments received or made at the end of the            
measurement period are recorded as realized gains or losses. The funds          
could be exposed to credit or market risk due to unfavorable changes in         
the fluctuation of interest rates or in the price of the underlying             
security or index, the possibility that there is no liquid market for           
these agreements or that the counterparty may default on its obligation to      
perform.                                                                        

I) Interest rate swap contracts The funds may engage in interest rate swap      
agreements, which are arrangements between two parties to exchange cash         
flows based on a notional principal amount. The funds may enter into            
interest rate swap agreements, to manage the funds' exposure to interest        
rates. Interest rate swaps are marked to market daily based upon                
quotations from market makers and the change, if any, is recorded as            
unrealized gain or loss. Payments made or received are included as part of      
interest income. Payments received or made upon early termination are           
recorded as realized gain or loss. The funds could be exposed to credit or      
market risk due to unfavorable changes in the fluctuation of interest           
rates or that the counterparty may default on its obligation to perform.        

J) 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 .01%        
from the principal amount. The funds hold, and maintain until settlement        
date, cash or high-grade debt obligations in an amount sufficient to meet       
the purchase price, or the funds may enter into offsetting contracts for        
the forward sale of other securities they own. Income on the securities         
will not be earned until settlement date. TBA purchase commitments may be       
considered securities in themselves, and involve a risk of loss if the          
value of the security to be purchased declines prior to the settlement          
date, which risk is in addition to the risk of decline in the value of the      
funds' other assets. Unsettled TBA purchase commitments are valued at the       
current market value of the underlying securities, according to the             
procedures described under "Security valuation" above.                          

Although the funds will generally enter into TBA purchase commitments with      
the intention of acquiring securities for their portfolio or for delivery       
pursuant to options contracts they have entered into, the funds may             
dispose of a commitment prior to settlement if Putnam Management deems it       
appropriate to do so.                                                           

K) TBA sale commitments The funds may enter into TBA sale commitments to        
hedge their portfolio positions or to sell mortgage-backed securities they      
own under delayed delivery arrangements. Proceeds of TBA sale commitments       
are not received until the contractual settlement date. During the time a       
TBA sale commitment is outstanding, equivalent deliverable securities, or       
an offsetting TBA purchase commitment deliverable on or before the sale         
commitment date, are held as "cover" for the transaction.                       

Unsettled TBA sale commitments are valued at the current market value of        
the underlying securities, generally according to the procedures described      
under "Security valuation" above. The contract is "marked-to-market" daily      
and the change in market value is recorded by the funds as an unrealized        
gain or loss. If the TBA sale commitment is closed through the acquisition      
of an offsetting purchase commitment, the funds realize a gain or loss. If      
the funds deliver securities under the commitment, the funds realize a          
gain or a loss from the sale of the securities based upon the unit price        
established at the date the commitment was entered into.                        

L) Security lending The funds may lend securities, through their agent          
Citibank N.A., to qualified borrowers in order to earn additional income.       
The loans are collateralized by cash and/or securities in an amount at          
least equal to the market value of the securities loaned. The market value      
of securities loaned is determined daily and any additional required            
collateral is allocated to the funds on the next business day. The risk of      
borrower default will be borne by Citibank N.A., the funds will bear the        
risk of loss with respect to the investment of the cash collateral. Income      
from securities lending is included in investment income on the Statement       
of operations. At September 30, 2001, the value of securities loaned            
amounted to $23,961,560, $40,677,429 and $3,841,666 for Growth Portfolio,       
Balanced Portfolio and Conservative Portfolio, respectively. The funds          
received cash collateral of $25,529,764, $43,262,832 and $3,993,614 for         
Growth Portfolio, Balanced Portfolio and Conservative Portfolio,                
respectively, which is pooled with collateral from other Putnam funds into      
(36) issuers of high-grade short-term investments.                              

M) 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, 2001, the funds had no borrowings against the line of             
credit.                                                                         

N) Federal taxes It is the policy of the funds 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. At September 30, 2001, the funds had a capital loss carryover of         
approximately $15,215,000 and $3,097,000 for the Growth Portfolio and           
Conservative Portfolio, respectively, available to offset future capital        
gains, if any, both of which will expire on September 30, 2009.                 

O) Distributions to shareholders Distributions to shareholders from net         
investment income are recorded by the funds on the ex-dividend date.            

Distributions from capital gains, if any, are recorded on the ex-dividend       
date and paid at least annually. The amount and character of income and         
gains to be distributed are determined in accordance with income tax            
regulations which may differ from generally accepted accounting                 
principles. These differences include temporary and permanent differences       
of losses on wash sale transactions, foreign currency gains and losses,         
post-October loss deferrals, nontaxable dividends, defaulted bond               
interest, realized and unrealized gains and losses on certain futures           
contracts, paydown gains and losses on mortgage-backed securities, market       
discount, interest on payment-in-kind securities, realized and unrealized       
gains and losses on passive foreign investment companies and income on          
swap contracts. Reclassifications are made to the funds' capital accounts       
to reflect income and gains available for distribution (or available            
capital loss carryovers) under income tax regulations. For the year ended       
September 30, 2001, reclassifications were as follows:                          

Undistributed Net Investment Income                                             
---------------------------------------------------------------------           
Growth                                                                          
Portfolio                                                 $12,092,194           
---------------------------------------------------------------------           
Balanced                                                                        
Portfolio                                                  32,012,639           
---------------------------------------------------------------------           
Conservative                                                                    
Portfolio                                                   8,114,388           
---------------------------------------------------------------------           

Accumulated Net Realized Gain (Loss)                                            
---------------------------------------------------------------------           
Growth                                                                          
Portfolio                                                $(10,520,945)          
---------------------------------------------------------------------           
Balanced                                                                        
Portfolio                                                 (32,012,336)          
---------------------------------------------------------------------           
Conservative                                                                    
Portfolio                                                  (8,190,227)          
---------------------------------------------------------------------           

Additional Paid-in Capital                                                      
---------------------------------------------------------------------           
Growth                                                                          
Portfolio                                                 $(1,571,249)          
---------------------------------------------------------------------           
Balanced                                                                        
Portfolio                                                        (303)          
---------------------------------------------------------------------           
Conservative                                                                    
Portfolio                                                      75,839           
---------------------------------------------------------------------           

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

Note 2                                                                          
Management fee, administrative services and other transactions                  

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

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

Custodial functions for the funds' assets are provided by Putnam Fiduciary      
Trust Company (PFTC), a subsidiary of Putnam Investments, LLC. Investor         
servicing agent functions are provided by Putnam Investor Services, a           
division of PFTC.                                                               

The funds have entered into an arrangement with PFTC whereby credits            
realized as a result of uninvested cash balances are used to reduce a           
portion of the funds' expenses. The funds also reduced expenses through         
brokerage service arrangements. For the year ended September 30, 2001,          
expenses were reduced by $990,209, $1,052,666 and $406,484 (for Growth          
Portfolio, Balanced Portfolio, and Conservative Portfolio, respectively)        
under these arrangements.                                                       

Each independent Trustee of the funds receives an annual Trustee fee, of        
which $1,743, $2,647, and $1,517 (for Growth Portfolio, Balanced                
Portfolio, and Conservative Portfolio, respectively) has been allocated to      
the funds, and an additional fee for each Trustees meeting attended.            
Trustees receive additional fees for attendance at certain committee            
meetings.                                                                       

The funds have adopted a Trustee Fee Deferral Plan (the "Deferral Plan")        
which allows the Trustees to defer the receipt of all or a portion of           
Trustees Fees payable on or after July 1, 1995. The deferred fees remain        
invested in certain Putnam funds until distribution in accordance with the      
Deferral Plan.                                                                  

The funds have adopted an unfunded noncontributory defined benefit pension      
plan (the "Pension Plan") covering all Trustees of the funds who have           
served as a Trustee for at least five years. 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 the          
funds 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.            

The funds have adopted distribution plans (the "Plans") with respect to         
their 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 Retail Management, a wholly-owned subsidiary of Putnam        
Investments, LLC, and Putnam Retail Management GP, Inc. for services            
provided and expenses incurred by it in distributing shares of the funds.       
The Plans provide for payments by the funds to Putnam Retail Management 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 the funds 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, 2001 Putnam Retail Management, acting as       
underwriter received the following:                                             

                            Class A              Class M
                    Net Commissions      Net Commissions
--------------------------------------------------------------------            
Growth                                                                          
Portfolio                              $142,568  $             8,358            
--------------------------------------------------------------------            
Balanced                                                                        
Portfolio                               236,525               10,687            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                68,925                2,559            
--------------------------------------------------------------------            

                            Class B              Class C
                Contingent deferred  Contingent deferred
                       sales charge         sales charge
--------------------------------------------------------------------            
Growth                                                                          
Portfolio                              $604,770              $13,128            
--------------------------------------------------------------------            
Balanced                                                                        
Portfolio                               737,147               18,511            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                               266,318               10,459            
--------------------------------------------------------------------            

A deferred sales charge of up to 1% and 0.65% is assessed on certain            
redemptions of class A and class M shares, respectively.                        

                             Class A             Class M
                            Deferred            Deferred
                        sales charge        sales charge
--------------------------------------------------------------------            
Growth                                                                          
Portfolio                                $10,061                 $--            
--------------------------------------------------------------------            
Balanced                                                                        
Portfolio                                  5,524                  --            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  2,021                  --            
--------------------------------------------------------------------            

Note 3                                                                          
Purchases and sales of securities                                               

During the year ended September 30, 2001, cost of purchases and proceeds        
from sales of investment securities other than short-term investments were      
as follows:                                                                     

                           U.S. Government Obligations
--------------------------------------------------------------------            
                            Purchases              Sales
--------------------------------------------------------------------            
Growth                                                                          
Portfolio                            $ 97,609,760       $ 94,587,377            
--------------------------------------------------------------------            
Balanced                                                                        
Portfolio                             179,234,232        172,706,856            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                              80,134,093         75,583,150            
--------------------------------------------------------------------            

                              Other Securities
--------------------------------------------------------------------            
                            Purchases              Sales
--------------------------------------------------------------------            
Growth                                                                          
Portfolio                          $1,830,980,503     $1,682,292,559            
--------------------------------------------------------------------            
Balanced                                                                        
Portfolio                           3,473,973,845      3,012,405,549            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                           2,248,372,208      2,030,104,936            
--------------------------------------------------------------------            

Written option transactions during the year are summarized as follows:          

Growth Portfolio                                                                
--------------------------------------------------------------------            
                             Contract           Premiums
                              Amounts           Received
--------------------------------------------------------------------            
Written options                                                                 
outstanding at                                                                  
beginning of year                              --            $   --             
--------------------------------------------------------------------            
Options opened                         16,788,250             87,424            
--------------------------------------------------------------------            
Options expired                                --                 --            
--------------------------------------------------------------------            
Options closed                            (30,250)               (16)           
--------------------------------------------------------------------            
Written options                                                                 
outstanding at                                                                  
end of year                            16,758,000            $87,408            
--------------------------------------------------------------------            

Balanced Portfolio                                                              
--------------------------------------------------------------------            
                             Contract           Premiums
                              Amounts           Received
--------------------------------------------------------------------            
Written options                                                                 
outstanding at                                                                  
beginning of year                              --            $   --             
--------------------------------------------------------------------            
Options opened                         18,995,750             98,858            
--------------------------------------------------------------------            
Options expired                                --                 --            
--------------------------------------------------------------------            
Options closed                            (45,750)               (16)           
--------------------------------------------------------------------            
Written options                                                                 
outstanding at                                                                  
end of year                            18,950,000            $98,842            
--------------------------------------------------------------------            

Conservative Portfolio                                                          
--------------------------------------------------------------------            
                             Contract           Premiums
                              Amounts           Received
--------------------------------------------------------------------            
Written options                                                                 
outstanding at                                                                  
beginning of year                              --            $    --            
--------------------------------------------------------------------            
Options opened                          7,387,000            307,637            
--------------------------------------------------------------------            
Options expired                                --                 --            
--------------------------------------------------------------------            
Options closed                            (17,000)          (269,196)           
--------------------------------------------------------------------            
Written options                                                                 
outstanding at                                                                  
end of year                             7,370,000            $38,441            
--------------------------------------------------------------------            

Note 4                                                                          
Capital shares                                                                  

At September 30, 2001, there was an unlimited number of shares of               
beneficial interest authorized. Transactions in capital shares were as          
follows:                                                                        

                                 Year ended September 30
--------------------------------------------------------------------            
Class A                                                         2001            
--------------------------------------------------------------------            
Growth Portfolio                           Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            25,985,550     $  285,418,153            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                          14,433,363        158,911,324            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (21,836,056)      (236,294,232)           
--------------------------------------------------------------------            
Net increase                           18,582,857     $  208,035,245            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class A                                                         2000            
--------------------------------------------------------------------            
Growth Portfolio                           Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            23,511,972     $  348,642,136            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           5,418,462         78,946,976            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (18,746,126)      (278,308,268)           
--------------------------------------------------------------------            
Net increase                           10,184,308     $  149,280,844            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class B                                                         2001            
--------------------------------------------------------------------            
Growth Portfolio                           Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             6,407,507     $   69,460,935            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           7,558,887         82,013,924            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (13,001,465)      (138,633,493)           
--------------------------------------------------------------------            
Net increase                              964,929     $   12,841,366            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class B                                                         2000            
--------------------------------------------------------------------            
Growth Portfolio                           Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             9,185,249     $  134,563,252            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           3,565,212         51,303,344            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (12,991,443)      (189,359,843)           
--------------------------------------------------------------------            
Net decrease                             (240,982)    $   (3,493,247)           
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class C                                                         2001            
--------------------------------------------------------------------            
Growth Portfolio                           Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            2,634,409      $   28,829,316            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                          2,268,836         24,299,238             
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (3,430,401)       (36,055,611)            
--------------------------------------------------------------------            
Net increase                           1,472,844      $   17,072,943            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class C                                                         2000            
--------------------------------------------------------------------            
Growth Portfolio                           Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             3,539,220     $   51,144,368            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                             764,712         10,904,790            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (2,056,451)       (29,960,983)           
--------------------------------------------------------------------            
Net increase                            2,247,481     $   32,088,175            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class M                                                         2001            
--------------------------------------------------------------------            
Growth Portfolio                           Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            1,052,702      $   11,971,266            
--------------------------------------------------------------------            
Shares issued in                                                                
connections with                                                                
reinvestment of                                                                 
distributions                          1,128,272          12,253,032            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (1,327,134)       (14,545,140)            
--------------------------------------------------------------------            
Net increase                             853,840      $    9,679,158            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class M                                                         2000            
--------------------------------------------------------------------            
Growth Portfolio                           Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             1,586,242     $   23,158,133            
--------------------------------------------------------------------            
Shares issued in                                                                
connections with                                                                
reinvestment of                                                                 
distributions                             471,258          6,786,113            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (1,552,473)       (23,441,390)           
--------------------------------------------------------------------            
Net increase                              505,027     $    6,502,856            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class Y                                                         2001            
--------------------------------------------------------------------            
Growth Portfolio                           Shares             Amount            
--------------------------------------------------------------------            
Shares sold                           23,736,424      $ 260,491,464             
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                          8,761,761         97,081,542             
--------------------------------------------------------------------            
Shares                                                                          
repurchased                          (14,332,328)      (154,410,249)            
--------------------------------------------------------------------            
Net increase                          18,165,857      $  203,162,757            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class Y                                                         2000            
--------------------------------------------------------------------            
Growth Portfolio                           Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            13,302,387     $  199,863,338            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           3,170,148         46,414,115            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (9,725,995)      (145,724,691)           
--------------------------------------------------------------------            
Net increase                            6,746,540     $  100,552,762            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class A                                                         2001            
--------------------------------------------------------------------            
Balanced Portfolio                         Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            47,433,838     $  512,194,213            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                          18,489,722        199,666,650            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (37,470,442)      (397,097,318)           
--------------------------------------------------------------------            
Net increase                           28,453,118     $  314,763,545            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class A                                                         2000            
--------------------------------------------------------------------            
Balanced Portfolio                         Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            57,452,184     $  739,305,555            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           6,926,557         87,295,477            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (29,463,927)      (378,626,634)           
--------------------------------------------------------------------            
Net increase                           34,914,814     $  447,974,398            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class B                                                         2001            
--------------------------------------------------------------------            
Balanced Portfolio                         Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             8,466,111     $   90,395,759            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           6,170,588         66,504,172            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (14,351,668)      (151,167,089)           
--------------------------------------------------------------------            
Net increase                              285,031     $    5,732,842            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class B                                                         2000            
--------------------------------------------------------------------            
Balanced Portfolio                         Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             9,951,479     $  127,026,445            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           3,669,339         45,855,574            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (17,484,194)      (222,981,859)           
--------------------------------------------------------------------            
Net decrease                           (3,863,376)    $  (50,099,840)           
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class C                                                         2001            
--------------------------------------------------------------------            
Balanced Portfolio                         Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             4,258,987      $  45,287,467            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           1,627,624         17,398,645            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (3,797,015)       (40,004,660)           
--------------------------------------------------------------------            
Net increase                            2,089,596      $  22,681,452            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class C                                                         2000            
--------------------------------------------------------------------            
Balanced Portfolio                         Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             3,703,078      $  46,890,743            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                             799,922          9,936,053            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (3,307,882)       (41,913,489)           
--------------------------------------------------------------------            
Net increase                            1,195,118      $  14,913,307            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class M                                                         2001            
--------------------------------------------------------------------            
Balanced Portfolio                         Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             1,287,968      $  13,859,181            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                             866,503          9,362,133            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (1,588,761)       (16,920,690)           
--------------------------------------------------------------------            
Net increase                              565,710      $   6,300,624            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class M                                                         2000            
--------------------------------------------------------------------            
Balanced Portfolio                         Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             2,210,703      $  28,538,940            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                             466,033          5,851,602            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (2,669,974)       (34,278,023)           
--------------------------------------------------------------------            
Net increase                                6,762      $     112,519            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class Y                                                         2001            
--------------------------------------------------------------------            
Balanced Portfolio                         Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            34,921,346      $ 379,903,128            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           8,540,800         90,639,182            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (17,227,693)      (181,364,906)           
--------------------------------------------------------------------            
Net increase                           26,234,453      $ 289,177,404            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class Y                                                         2000            
--------------------------------------------------------------------            
Balanced Portfolio                         Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            20,458,616      $ 260,542,598            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           3,619,327         45,615,289            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (12,560,109)      (161,703,337)           
--------------------------------------------------------------------            
Net increase                           11,517,834      $ 144,454,550            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class A                                                         2001            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            40,887,107      $ 379,238,873            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           5,792,549         53,376,934            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (19,130,204)      (179,307,864)           
--------------------------------------------------------------------            
Net increase                           27,549,452      $ 253,307,943            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class A                                                         2000            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            25,168,746      $ 262,460,869            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           2,701,861         28,125,681            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                           (24,892,439)      (258,018,559)           
--------------------------------------------------------------------            
Net increase                            2,978,168      $  32,567,991            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class B                                                         2001            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             3,474,393      $  32,302,913            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           1,686,183         15,499,150            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (5,007,606)       (46,966,715)           
--------------------------------------------------------------------            
Net increase                              152,970      $     835,348            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class B                                                         2000            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             3,119,134      $  32,439,091            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           1,068,376         11,090,655            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (7,455,256)       (77,580,404)           
--------------------------------------------------------------------            
Net decrease                           (3,267,746)     $ (34,050,658)           
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class C                                                         2001            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  Shares             Amount            
--------------------------------------------------------------------            
Shares sold                             1,522,557      $  14,165,202            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                             501,916          4,598,417            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (1,218,541)       (11,330,465)           
--------------------------------------------------------------------            
Net increase                              805,932      $   7,433,154            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class C                                                         2000            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  Shares             Amount            
--------------------------------------------------------------------            
Shares sold                               986,097      $  10,245,806            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                             317,930          3,290,989            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (2,966,838)       (30,834,984)           
--------------------------------------------------------------------            
Net decrease                           (1,662,811)     $ (17,298,189)           
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class M                                                         2001            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  Shares             Amount            
--------------------------------------------------------------------            
Shares sold                               528,989      $   4,905,760            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                             309,387          2,842,083            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                              (775,124)        (7,211,566)           
--------------------------------------------------------------------            
Net increase                               63,252      $     536,277            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class M                                                         2000            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  Shares             Amount            
--------------------------------------------------------------------            
Shares sold                               610,265      $   6,363,506            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                             174,583          1,810,827            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (1,231,179)       (12,969,309)           
--------------------------------------------------------------------            
Net decrease                             (446,331)     $  (4,794,976)           
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class Y                                                         2001            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            11,496,237      $ 107,582,565            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                           2,845,706         26,296,959            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (9,271,542)       (86,677,200)           
--------------------------------------------------------------------            
Net increase                            5,070,401      $  47,202,324            
--------------------------------------------------------------------            

                                 Year ended September 30
--------------------------------------------------------------------            
Class Y                                                         2000            
--------------------------------------------------------------------            
Conservative                                                                    
Portfolio                                  Shares             Amount            
--------------------------------------------------------------------            
Shares sold                            14,340,881      $ 147,912,331            
--------------------------------------------------------------------            
Shares issued in                                                                
connection with                                                                 
reinvestment of                                                                 
distributions                             878,911          9,192,724            
--------------------------------------------------------------------            
Shares                                                                          
repurchased                            (6,523,605)       (68,195,474)           
--------------------------------------------------------------------            
Net increase                            8,696,187      $  88,909,581            
--------------------------------------------------------------------            

Note 5                                                                          
New accounting pronouncement                                                    

In November 2000, the AICPA issued a revised Audit and Accounting Guide,        
Audits of Investment Companies, which is effective for fiscal years             
beginning after December 15, 2000. The revised Guide will require the fund      
to amortize premium and accrete discount on all fixed-income securities,        
and classify as interest income gains and losses realized on paydowns on        
mortgage-backed securities which are presently included in realized             
gain/loss. Adopting these accounting principles will not affect the funds'      
net asset values, but will change the classification of certain amounts         
between interest income and realized and unrealized gain/loss in the            
Statement of operations. The adoption of this principle will not be             
material to the financial statements.                                           

FEDERAL TAX INFORMATION                                                         

(Unaudited)                                                                     

Pursuant to Section 852 of the Internal Revenue Code, as amended, the           
Balanced Portfolio hereby designates $15,399,239 as long-term capital           
gain, for its taxable year ended September 30, 2001.                            

The funds have designated 16.43%, 18.83% and 4.37% of the distributions         
from net investment income for the Growth Portfolio, Balanced Portfolio         
and Conservative Portfolio, respectively, as qualifying for the dividends       
received deduction for corporations.                                            

The Form 1099 you receive in January 2002 will show the tax status of all       
distributions paid to your account in calendar 2001.                            

THE PUTNAM FAMILY OF FUNDS                                                      

The following is a complete list of Putnam's open-end mutual funds.             
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain        
a prospectus for any Putnam fund. It contains more complete information,        
including charges and expenses. Please read it carefully before you             
invest or send money.                                                           

GROWTH FUNDS                                                                    

Asia Pacific Growth Fund                                                        
Capital Appreciation Fund                                                       
Capital Opportunities Fund                                                      
Europe Growth Fund                                                              
Global Equity Fund                                                              
Global Growth Fund                                                              
Global Natural Resources Fund                                                   
Growth Opportunities Fund                                                       
Health Sciences Trust                                                           
International Growth Fund                                                       
International New Opportunities Fund                                            
Investors Fund                                                                  
New Century Growth Fund                                                         
New Opportunities Fund                                                          
OTC & Emerging Growth Fund                                                      
Research Fund                                                                   
Tax Smart Equity Fund                                                           
Technology Fund                                                                 
Vista Fund                                                                      
Voyager Fund                                                                    
Voyager Fund II                                                                 

GROWTH AND INCOME FUNDS                                                         

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

INCOME FUNDS                                                                    

American Government Income Fund                                                 
Diversified Income Trust                                                        
Global Governmental Income Trust                                                
High Yield Advantage Fund [DBL. DAGGER]                                         
High Yield Trust [DBL. DAGGER]                                                  
High Yield Trust II                                                             
Income Fund                                                                     
Intermediate U.S. Government                                                    
Income Fund                                                                     
Money Market Fund **                                                            
Preferred Income Fund                                                           
Strategic Income Fund                                                           
U.S. Government Income Trust                                                    

TAX-FREE INCOME FUNDS                                                           

Municipal Income Fund                                                           
Tax Exempt Income Fund                                                          
Tax Exempt Money Market Fund **                                                 
Tax-Free High Yield Fund                                                        
Tax-Free Insured Fund                                                           

State tax-free income funds [SECTION MARK]                                      

Arizona, California, Florida,                                                   
Massachusetts, Michigan, Minnesota,                                             
New Jersey, New York, Ohio and                                                  
Pennsylvania                                                                    

State tax-free money market funds [SECTION MARK] **                             

California, New York                                                            

ASSET ALLOCATION FUNDS                                                          

Putnam Asset Allocation Funds--three investment portfolios that spread          
your money across a variety of stocks, bonds, and money market                  
investments.                                                                    

The three portfolios:                                                           

Asset Allocation: Balanced Portfolio Asset Allocation: Conservative             
Portfolio Asset Allocation: Growth Portfolio                                    

* Formerly Putnam Growth and Income Fund II           

[DBL. DAGGER] Closed to new investors. Some exceptions may apply.             
Contact Putnam for details.                       

[SECTION MARK] Not available in all states.                                     

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

Check your account balances and current performance at                          
www.putnaminvestments.com.                                                      

OUR COMMITMENT TO QUALITY SERVICE                                               

* CHOOSE AWARD-WINNING SERVICE                                                  
Putnam has won the DALBAR Service Award 10 times in the past 11 years.          
In 1997, 1998 and 2000, Putnam won all 3 DALBAR awards -- for service           
to investors, to financial advisors, and to variable annuity contract           
holders.*                                                                       

* HELP YOUR INVESTMENTS GROW                                                    
Set up a systematic program for investing with as little as $25 a month         
from a Putnam money market fund or from your checking or savings                
account.+                                                                       

* SWITCH FUNDS EASILY                                                           
Within the same class of shares, you can move money from one account to         
another without a service charge. (This privilege is subject to change          
or termination.)                                                                

* ACCESS YOUR MONEY QUICKLY                                                     
You can get checks sent regularly or redeem shares any business day at          
the then-current net asset value, which may be more or less than the            
original cost of the shares.                                                    

For details about any of these or other services, contact your financial        
advisor or call the toll-free number shown below and speak with a               
helpful Putnam representative. To learn more about Putnam, visit our Web        
site.                                                                           

www.putnaminvestments.com                                                       

To make an additional investment in this or any other Putnam fund,              
contact your financial advisor or call our toll-free number.                    

1-800-225-1581                                                                  

* DALBAR, Inc., an independent research firm, presents the awards to            
financial services firms that provide consistently excellent service.       

+ Regular investing, of course, does not guarantee a profit or protect          
against a loss in a declining market.                                       

WELCOME TO WWW.PUTNAMINVESTMENTS.COM                                            

Get up-to-date information about your funds, learn more about investing         
and retirement planning, and access news and economic outlooks from             
Putnam's Web site. The site features:                                           

* Secure access (with your Social Security number and password) to your         
account with all of your information, including a record of your            
balances and transactions, updated daily.                                   

* On-line transactions, such as exchanges, additional investments, and          
address changes.                                                            

* Complete fund information, daily pricing, and long-term                       
performance.                                                                

* Instant access to your quarterly statements, and annual and semiannual        
fund reports.                                                               

You can also read economic commentary from Putnam senior economic           
advisor Dr. Robert Goodman, use our glossary to decode investment terms,    
get our update on the markets, and much more.                               

New enhancements are added to the site regularly.                           
Bookmark us at                                                              

www.putnaminvestments.com                                                   

FUND INFORMATION                                                                

WEB SITE                                                                        

www.putnaminvestments.com                                                       

INVESTMENT MANAGER                                                              

Putnam Investment Management LLC                                                
One Post Office Square                                                          
Boston, MA 02109                                                                

MARKETING SERVICES                                                              

Putnam Retail Management                                                        
One Post Office Square                                                          
Boston, MA 02109                                                                

CUSTODIAN                                                                       

Putnam Fiduciary Trust Company                                                  

LEGAL COUNSEL                                                                   

Ropes & Gray                                                                    

INDEPENDENT ACCOUNTANTS                                                         

PricewaterhouseCoopers LLP                                                      

TRUSTEES                                                                        

John A. Hill, Chairman                                                          
Jameson Adkins Baxter                                                           
Charles B. Curtis                                                               
Hans H. Estin                                                                   
Ronald J. Jackson                                                               
Paul L. Joskow                                                                  
Elizabeth T. Kennan                                                             
Lawrence J. Lasser                                                              
John H. Mullin III                                                              
Robert E. Patterson                                                             
George Putnam, III                                                              
A.J.C. Smith                                                                    
W. Thomas Stephens                                                              
W. Nicholas Thorndike                                                           

OFFICERS                                                                        

George Putnam, III                                                              
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                                                                  

Ian C. Ferguson                                                                 
Vice President                                                                  

Brett C. Browchuk                                                               
Vice President                                                                  

Stephen Oristaglio                                                              
Vice President                                                                  

Richard G. Leibovitch                                                           
Vice President                                                                  

Richard A. Monaghan                                                             
Vice President                                                                  

John R. Verani                                                                  
Vice President                                                                  

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 and              
Putnam's Quarterly Ranking Summary. For more information or to request a        
prospectus, call toll free: 1-800-225-1581.                                     

You can also learn more at Putnam Investments' Web site:                        
www.putnaminvestments.com.                                                      

NOT FDIC INSURED, MAY LOSE VALUE, NO BANK GUARANTEE                             

[LOGO OMITTED]                                                                  

PUTNAM INVESTMENTS                                                              

The Putnam Funds                                                                
One Post Ofce Square                                                            
Boston, Massachusetts 02109                                                     

---------------------                                                           
PRSRT STD                                                                       
U.S. POSTAGE PAID                                                               
PUTNAM                                                                          
INVESTMENTS                                                                     
---------------------                                                           

For account balances, economic forecasts, and the latest on Putnam funds, visit 
www.putnaminvestments.com                                                       

AN060-76217 250/259/264  11/01                                                  

PUTNAM INVESTMENTS                                      [SCALE LOGO OMITTED]    
----------------------------------------------------------------------------    
Putnam Asset Allocation Fund - Growth Portfolio                                 
Supplement to annual Report dated 9/30/01                                       

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 $150 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.                                                                         

ANNUAL RESULTS AT A GLANCE                                                      
----------------------------------------------------------------------------    
Total return for periods ended 9/30/01                                          

                                   NAV
1 year                                                -22.30%                   
5 years                                                30.38                    
Annual average                                          5.45                    
Life of fund (since class A inception, 2/8/94)         86.42                    
Annual average                                          8.49                    

Share value:                                            NAV                     
9/30/00                                               $14.58                    
9/30/01                                                $9.01                    
----------------------------------------------------------------------------    
               Capital gains
Distributions:      No.      Income     Short     Long        Total             
         1       $0.225    $1.215    $1.411       $2.851
----------------------------------------------------------------------------    
Please note that past performance is not indicative of future results.          
More recent returns may be more or less than those shown. Returns shown         
for class Y shares for periods prior to their inception are derived from        
the historical performance of class A shares, and are not adjusted to           
reflect the initial sales charge currently applicable to class A shares.        
These returns have not been adjusted to reflect differences in operating        
expenses which, for class Y shares, typically are lower than the operating      
expenses applicable to class A shares. All returns assume reinvestment of       
distributions at net asset value. Investment return and principal value         
will fluctuate so your shares, when redeemed, may be worth more or less         
than their original cost. See full 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.                                        

PUTNAM INVESTMENTS                                      [SCALE LOGO OMITTED]    
----------------------------------------------------------------------------    
Putnam Asset Allocation Fund - Balanced Portfolio                               
Supplement to annual Report dated 9/30/01                                       

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 $150 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.                                                                         

ANNUAL RESULTS AT A GLANCE                                                      
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Total return for periods ended 9/30/01                                          

                                     NAV
1 year                                                 -16.89%                  
5 years                                                 36.36                   
Annual average                                           6.40                   
Life of fund (since class A inception, 2/7/94)          88.32                   
Annual average                                           8.64                   

Share value:                                             NAV                    
9/30/00                                                $13.00                   
9/30/01                                                 $9.21                   
----------------------------------------------------------------------------    
 Capital gains
Distributions:   No.   Income    Short      Long   Return of Capital  Total     
              4   $0.4030   $0.5593   $0.8785      $0.0022       $1.8430
----------------------------------------------------------------------------    

Please note that past performance is not indicative of future results.          
More recent returns may be more or less than those shown. Returns shown         
for class Y shares for periods prior to their inception are derived from        
the historical performance of class A shares, and are not adjusted to           
reflect the initial sales charge currently applicable to class A shares.        
These returns have not been adjusted to reflect differences in operating        
expenses which, for class Y shares, typically are lower than the operating      
expenses applicable to class A shares. All returns assume reinvestment of       
distributions at net asset value. Investment return and principal value         
will fluctuate so your shares, when redeemed, may be worth more or less         
than their original cost. See full 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.                                        

PUTNAM INVESTMENTS                                      [SCALE LOGO OMITTED]    
----------------------------------------------------------------------------    
Putnam Asset Allocation Fund - Conservative Portfolio                           
Supplement to annual Report dated 9/30/01                                       

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 $150 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.                                                                         

ANNUAL RESULTS AT A GLANCE                                                      
----------------------------------------------------------------------------    
Total return for periods ended 9/30/01                                          

                                       NAV
1 year                                                  -4.59%                  
5 years                                                 34.98                   
Annual average                                           6.18                   
Life of fund (since class A inception, 2/7/94)          70.47                   
Annual average                                           7.23                   

Share value:                                             NAV                    
9/30/00                                                $10.47                   
9/30/01                                                 $8.73                   
----------------------------------------------------------------------------    
                 Capital gains
Distributions:      No.      Income      Short      Long        Total           
         12       $0.644     $0.366     $0.289      $1.299
----------------------------------------------------------------------------    

Please note that past performance is not indicative of future results.          
More recent returns may be more or less than those shown. Returns shown         
for class Y shares for periods prior to their inception are derived from        
the historical performance of class A shares, and are not adjusted to           
reflect the initial sales charge currently applicable to class A shares.        
These returns have not been adjusted to reflect differences in operating        
expenses which, for class Y shares, typically are lower than the operating      
expenses applicable to class A shares. All returns assume reinvestment of       
distributions at net asset value. Investment return and principal value         
will fluctuate so your shares, when redeemed, may be worth more or less         
than their original cost. See full 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.                                        

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘N-30D’ Filing		Date		Other Filings
		10/1/31
		3/1/31
		2/1/31
		4/1/30
		3/1/30
		12/1/29
		4/1/29
		7/1/28
		3/15/28
		2/1/28
		8/15/25
		4/1/25
		4/15/22
		6/15/17
		12/1/15
		10/1/11
		8/1/10
		9/30/09		24F-2NT,  497,  N-CSR,  NSAR-B
Filed on:		11/29/01		NSAR-B
		11/27/01
		11/26/01
		11/21/01
		11/14/01
		11/9/01
		11/5/01
		11/2/01
		10/15/01
		10/11/01
		10/10/01
		10/4/01
		10/1/01
For Period End:		9/30/01		24F-2NT,  NSAR-B
		9/28/01
		6/29/01
		2/28/01
		12/15/00
		5/15/00
		2/29/00
		1/28/00		485BPOS
		7/1/95
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