UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: (811- 07121 )

Exact name of registrant as specified in charter: Putnam Asset Allocation Funds

Address of principal executive offices: One Post Office Square, Boston, Massachusetts 02109

Name and address of agent for service:	Beth S. Mazor, Vice President
	One Post Office Square
	Boston, Massachusetts 02109
Copy to:	John W. Gerstmayr, Esq.
	Ropes & Gray LLP
	One International Place
	Boston, Massachusetts 02110

Registrant’s telephone number, including area code: (617) 292-1000

Date of fiscal year end: September 30, 2006

Date of reporting period: October 1, 2005—September 30, 2006

Item 1. Report to Stockholders:
The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:

What makes
Putnam different?

A time-honored tradition in
money management

Since 1937, our values have been rooted in a profound sense of responsibility for the money entrusted to us.

A prudent approach to investing

We use a research-driven team approach to seek consistent, dependable, superior investment results over time, although there is no guarantee a fund will meet its objectives.

Funds for every investment goal

We offer a broad range of mutual funds and other financial products so investors and their financial representatives can build diversified portfolios.

A commitment to doing what’s right
for investors

We have below-average expenses and stringent investor protections, and provide a wealth of information about the Putnam funds.

Industry-leading service

We help investors, along with their financial representatives, make informed investment decisions with confidence.

In 1830, Massachusetts Supreme Judicial Court Justice Samuel Putnam established The Prudent Man Rule, a legal foundation for responsible money management.

THE PRUDENT MAN RULE

All that can be required of a trustee to invest is that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how men of prudence, discretion, and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested.

Putnam
Asset Allocation
Funds

9| 30| 06

Annual Report

Message from the Trustees	1
About the funds	2
Report from the fund managers	5
Performance	10
Expenses	15
Portfolio turnover	17
Risk	18
Your fund’s management	19
Terms and definitions	21
Trustee approval of management contract	22
Other information for shareholders	26
Financial statements	27
Federal tax information and
brokerage commissions	153
About the Trustees	154
Officers	158

Message from the Trustees

Putnam Asset Allocation Funds:
diversification made easy

Putnam Asset Allocation Funds provide balanced diversification through three portfolios — Growth, Balanced, and Conservative — designed for investors with different goals and attitudes toward risk. Each portfolio has a distinct objective and a target mix of stocks and bonds. The mix of holdings is rebalanced regularly as the funds’ managers take profits on investments that have outperformed and invest the proceeds in areas they believe offer greater future potential. Spreading fund holdings across a variety of asset classes has been shown time and again to be a prudent strategy for long-term investors because it helps smooth the ups and downs of the market.

Combining insights gained from proprietary research with expertise in the tools and concepts of diversification, Putnam’s asset allocation specialists create investment strategies for each of the Putnam Asset Allocation Funds. These strategies integrate the global perspective of an experienced portfolio management team, flexible weightings of asset classes in accordance with their perceived attractiveness, and analysis to add value within each asset class.

The funds’ management team also draws on the resources of Putnam’s global research group, which covers more than 1,000 securities worldwide; recommendations of Putnam’s investment-style teams based on their in-depth analysis of specific market segments; and input from the firm’s economists, market strategists, and currency specialists.

This comprehensive approach, incorporating the insights of many specialists, helps the funds adhere to consistent investment objectives as they seek to exploit ever-changing market conditions.

The portfolios invest in a wide range of securities across
10 distinct asset classes and are actively rebalanced to manage risk.

Putnam Asset Allocation Funds can invest in international investments, which involve risks such as currency fluctuations, economic instability, and political developments. The portfolios can invest some or all of their assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. The use of derivatives involves special risk and may result in losses.

The portfolios can also have a significant portion of their holdings in bonds. Mutual funds that invest in bonds are subject to certain risks, including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds have more exposure to interest-rate risk than short-term bonds. Lower-rated bonds may offer higher yields in return for more risk. Unlike bonds, bond funds have ongoing fees and expenses. These risks apply to any fund with a significant portion of its assets invested in bonds.

Diversification does not ensure a profit or protect against loss. It is possible to lose money in a diversified portfolio.

Putnam Asset Allocation Funds balance diversified global investments in stocks, bonds, and money market instruments in varying proportions. The Growth, Balanced, and Conservative Portfolios seek capital appreciation, total return, and total return consistent with preservation of capital, respectively.

Highlights

• For the 12 months ended September 30, 2006, Putnam Asset Allocation Funds: Growth Portfolio’s class A shares returned 12.19% without sales charges. The portfolio’s benchmark, the Russell 3000 Index, returned 10.22%, and the Putnam Growth Blended Benchmark returned 11.02% for the period. The average return for the portfolio’s Lipper category, Mixed-Asset Target Allocation Growth Funds, was 7.96% .

• For the 12 months ended September 30, 2006, Putnam Asset Allocation Funds: Balanced Portfolio’s class A shares returned 9.64% without sales charges. The portfolio’s benchmark, the Russell 3000 Index, returned 10.22%, and the Putnam Balanced Blended Benchmark returned 8.69% for the period. The average return for the portfolio’s Lipper category, Mixed-Asset Target Allocation Growth Funds, was 7.96% .

• For the 12 months ended September 30, 2006, Putnam Asset Allocation Funds: Conservative Portfolio’s class A shares returned 6.46% without sales charges. The portfolio’s benchmark, the Lehman Aggregate Bond Index, returned 3.67%, and the Putnam Conservative Blended Benchmark returned 6.28% for the period. The average return for the portfolio’s Lipper category, Mixed-Asset Target Allocation Conservative Funds, was 4.96% .

• The class A share dividends for the Conservative Portfolio (monthly) and the Balanced Portfolio (quarterly) were increased during the period. See page 8 for details.

• Additional fund performance, comparative performance, and Lipper data can be found in the performance section beginning on page 10.

Performance

Total return for class A shares for periods ended 9/30/06

	Growth Portfolio		Balanced Portfolio		Conservative Portfolio
(inception dates)	(2/8/94)		(2/7/94)		(2/7/94)
	NAV	POP	NAV	POP	NAV	POP
Annual average
(life of fund)	9.11%	8.64%	8.09%	7.63%	6.71%	6.25%
10 years	112.19	101.08	94.60	84.44	80.88	71.34
Annual average	7.81	7.24	6.88	6.31	6.11	5.53
5 years	64.53	55.82	44.57	36.97	35.89	28.78
Annual average	10.47	9.28	7.65	6.49	6.33	5.19
3 years	50.28	42.41	35.62	28.54	21.91	15.50
Annual average	14.54	12.51	10.69	8.73	6.83	4.92
1 year	12.19	6.32	9.64	3.90	6.46	0.84

Data is historical. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes. Performance at POP reflects a sales charge of 5.25% . For the most recent month-end performance, visit www.putnam.com. For a portion of the period, the funds limited expenses, without which returns would have been lower. A 1% short-term trading fee may apply.

4

Report from the fund managers

The year in review

For the 12 months ended September 30, 2006, all three Putnam Asset Allocation Funds posted solid returns and, based on results at net asset value (NAV, or without sales charges), surpassed their blended benchmarks and the average return for their Lipper peer groups. The blended benchmarks are targeted combinations of stock and bond indexes designed to approximate each portfolio’s asset class diversification. We believe that these results continue to demonstrate the benefit of using a broadly diversified strategy in pursuit of specific financial goals. In addition, the Conservative and Growth Portfolios outperformed their external benchmark indexes. The Balanced Portfolio slightly lagged its all-stock benchmark index, the Russell 3000 Index, which is not surprising, given that the fund balances stock and bond investments and stocks generally outperformed bonds during the period.

Market overview

The global economy grew at a rate of approximately 5% during the funds’ fiscal year, its fastest pace of the past decade. Reflecting this strength, international stock markets, both developed and emerging, generally posted double-digit gains while U.S. markets showed more modest returns.

We attribute those returns to significant challenges that affected U.S. stocks, including rising interest rates and soaring energy prices. There were also growing concerns about slowing economic growth, though these were mitigated somewhat by encouraging inflation data. Also beneficial was an apparent end to the Fed’s tightening policy, breaking a string of 17 consecutive increases spanning more than two years. Optimism for a soft economic landing was boosted by an upward revision to second-quarter GDP (gross domestic product) growth, which nonetheless reflected a slowdown from the previous quarter, and the highest level of consumer spending since January.

International stocks continued to advance even as several overseas central banks (in Europe, Japan, and China) tightened their monetary policy. While these moves are unlikely to end these regions’ respective economic

Market sector performance

These indexes provide an overview of performance in different
market sectors for the 12 months ended 9/30/06.

Equities
S&P 500 Index
(broad stock market)	10.79%
MSCI EAFE Index
(international stocks)	19.16%
Russell 1000 Index
(large-company stocks)	10.25%
Russell 2000 Index
(small-company stocks)	9.92%
Bonds
Lehman Aggregate Bond Index
(broad bond market)	3.67%
Lehman Credit Index
(corporate bonds)	3.39%
JPMorgan Developed High Yield Index
(high-yield corporate bonds)	7.73%

expansions, they demonstrated the banks’ efforts to restrain growth. Japanese stocks led among non-U.S. equities early in the fiscal year as Japan’s economy continued to recover, but European markets delivered stronger results in the latter half as brisk merger-and-acquisitions (M&A) activity lifted equities.

For the first half of the fiscal year, global fixed-income markets provided mixed returns. During the second half of the year, bonds generally retreated, with U.S. government bonds outperforming their counterparts from Japan and Europe. The U.S. dollar, which had initially appreciated against the Japanese yen and British pound, ultimately lost ground against both. The euro steadily strengthened, which undercut profits of heavy exporters to the United States.

Strategy overview: Growth Portfolio

The Growth Portfolio substantially outperformed its blended benchmark during the period, largely due to strong selection within its equity component. The portfolio strives to outperform the stock market over a full market cycle with less volatility, following a flexible investment approach. The team invests approximately 80% of the fund’s assets in stocks of large, midsize, and small companies, and about 20% in bonds.

The portfolio’s positioning did not change significantly during the period. Given our continued belief that the international equity market was attractive and relatively undervalued, we maintained a large number of non-U.S. stock positions. Throughout the fiscal year, the portfolio benefited most from its significant allocation to international and emerging-market equities, as well as its lower-than-target exposure to the lagging U.S. fixed-income component. We believe that the current, relatively benign macroeconomic backdrop will permit continued gradual equity-market appreciation, as investors acknowledge record levels of corporate profitability around the world. But we also find that valuations, having risen, no longer appear as supportive of ongoing market advances.

Our tactical asset allocation strategy (short-term movements made to take advantage of perceived market inefficiencies) was beneficial: we added exposure to European equities throughout the year and to Hong Kong equities toward the end of the fiscal year.

The most significant detractor from performance for the period was our active currency strategy. The portfolio’s positive positioning in the strong Australian dollar was not sufficient to overcome less favorable positions in the British pound, Swiss franc, and Norwegian krone.

Growth Portfolio:
Comparison of equity and fixed-income weightings

This chart shows how the fund’s top weightings have changed
over the last six months. Weightings are shown as a percentage of
net assets. Holdings will vary over time.

6

Strategy overview: Balanced Portfolio

The main driver of the Balanced Portfolio’s relative outperformance was strong stock selection within the U.S. all-cap growth and international equity components. Favorable security selection within the U.S. fixed-income component also added value. The portfolio strives to achieve results that are competitive with the stock market, but with less volatility, following a flexible investment approach by investing approximately 60% of its assets in stocks and 40% in bonds.

The portfolio’s U.S. all-cap growth component outperformed its custom benchmark (75% Russell 1000 Index/25% Russell 2000 Index) due to adept selection within the energy, consumer cyclicals, and basic materials areas. Favorable sector allocation also added value, led by the portfolio’s overweight position in basic materials and its underweight positions in consumer cyclicals, conglomerates, and health care, all relative to the custom benchmark.

In the portfolio’s international equity component, favorable stock selection in the basic materials, capital goods, and consumer staples was beneficial. Country selection was also positive; our emphasis on the United Kingdom, France, and Japan proved rewarding.

In the fixed-income portion of the portfolio, we maintained a defensive, shorter-duration position, which was beneficial to returns as interest rates generally rose during the period. Duration is a measure of a fund’s sensitivity to changes in interest rates. The shorter its duration, the less sensitive a fund will be to interest-rate changes.

The most significant detractor from results during the fiscal year was the team’s currency strategy. Our emphasis on the British pound, Swiss franc, and Norwegian krone hindered performance, though our positioning in the Australian dollar offset some of these losses.

Strategy overview: Conservative Portfolio

The Conservative Portfolio strives to avoid losses while participating in rising markets worldwide. It follows a flexible investment approach, investing approximately 70% of its assets in bonds to generate income. There is also a stock component, which protects against inflation while providing a return potentially greater than a pure fixed-income investment. While the portfolio was positioned for a low-return environment, it benefited from its U.S. all-cap and international equity components. A lower-than-target weighting to U.S. fixed-income securities and a greater-than-target weighting to international bonds also contributed favorably to results.

In the equity portion of the portfolio, the U.S. all-cap growth component boosted returns, driven by adept selection within the energy, consumer cyclicals, and basic

Balanced Portfolio:
Comparison of equity and fixed-income weightings

This chart shows how the fund’s top weightings have changed
over the last six months. Weightings are shown as a percentage of
net assets. Holdings will vary over time.

7

materials sectors. Favorable sector allocations added value, led by our emphasis on basic materials and moderate exposure to consumer cyclicals, conglomerates, and health care. The portfolio’s international equity component also benefited from allocation decisions, both in terms of sectors (basic materials, capital goods, and consumer staples) and countries (the United Kingdom, France, and Japan).

In the portfolio’s fixed-income component, the team maintained a defensive, shorter-duration position. Duration is a measure of a fund’s sensitivity to changes in interest rates. A shorter-duration portfolio may help protect principal when interest rates rise, but it can reduce the fund’s potential for appreciation when rates fall. Since rates generally rose during the period, the team’s defensive approach helped performance.

The most significant detractor from results during the fiscal year was the portfolio’s currency positioning. A beneficial weighting in the Australian dollar was not sufficient to offset our less successful positioning in the British pound, Swiss franc, and Norwegian krone.

Of special interest

Dividend increases

As interest rates have risen steadily over the past year, newer holdings in the Balanced and Conservative Portfolios have generated more income. Consequently, dividends for these two funds were each increased once during the period. For the Balanced Portfolio, the quarterly dividend on class A shares rose from $0.0320 to $0.0430 per share, effective with the December 2005 payment; the Conservative Portfolio’s monthly dividend on class A shares rose from $0.0170 to $0.0200 per share, effective November 2005. Similar dividend increases were made in other share classes at the time of these increases for class A shares.

Conservative Portfolio:
Comparison of equity and fixed-income weightings

This chart shows how the fund’s top weightings have changed
over the last six months. Weightings are shown as a percentage of
net assets. Holdings will vary over time.

8

The outlook for your fund

The following commentary reflects anticipated developments that could affect your fund over the next six months, as well as your management team’s plans for responding to them.

We believe that the current benign global macroeconomic backdrop will allow gradual equity-market appreciation, as investors acknowledge record levels of corporate profitability. But we also believe that valuations are no longer as supportive of continued market advances as they have been over the past 12 months.

U.S. stocks have become more competitive with overseas markets, as investors increasingly embrace the robust U.S. corporate sector. Yet several risks confront equity markets, including stubbornly strong inflation data, soft housing markets, and the potential resumption of Fed rate tightening. Accordingly, we are positioning the portfolios conservatively, keeping duration relatively short to preserve principal, should rates rise. Among sectors, we look less favorably on corporate bonds, both investment grade and high yield. Fundamentals for corporate bonds are reasonably sound, but they continue to be richly priced. And surging new issuance, particularly for investment-grade bonds, raises concerns about oversupply.

The portfolios’ non-U.S. components are also positioned defensively against rising rates, but to a lesser degree. Overseas markets already reflect expectations of higher rates, because the major central banks have sent clear signals of potential tightening in the coming months. Emerging markets have softened, leading us to remain cautious in case they experience further setbacks in an environment of globally rising rates.

Within currencies, indicators remain negative for the yen. But we will opportunistically add yen exposure if the gap between U.S. and Japanese interest rates narrows. Within the U.S. dollar block, we are moderately bullish on the British pound and the Australian dollar. Interest-rate factors favor both currencies, while equity flows strengthen sterling and historically high commodity prices bolster the Australian dollar. We currently have a neutral outlook on the U.S. dollar.

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

Putnam Asset Allocation Funds can invest in international investments, which involve risks such as currency fluctuations, economic instability, and political developments. The portfolios can invest some or all of their assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. The use of derivatives involves special risks and may result in losses.

The portfolios can also have a significant portion of their holdings in bonds. Mutual funds that invest in bonds are subject to certain risks, including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds have more exposure to interest-rate risk than short-term bonds. Lower-rated bonds may offer higher yields in return for more risk. Unlike bonds, bond funds have ongoing fees and expenses. These risks apply to any fund with a significant portion of its assets invested in bonds.

Putnam Asset Allocation: Growth Portfolio, Balanced Portfolio, and Conservative Portfolio are series of Putnam Asset Allocation Funds, a registered investment company.

9

Your fund’s performance

This section shows your fund’s performance for periods ended September 30, 2006, the end of its fiscal year. Performance should always be considered in light of a fund’s investment strategy. Data represents past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. For the most recent month-end performance, please visit www.putnam.com or call Putnam at 1-800-225-1581. Class Y shares are generally only available to corporate and institutional clients. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.

Growth Portfolio

Fund performance Total return for periods ended 9/30/06

	Class A		Class B		Class C		Class M		Class R	Class Y
(inception dates)	(2/8/94)		(2/16/94)		(9/1/94)		(2/3/95)		(1/21/03)	(7/14/94)
	NAV	POP	NAV	CDSC	NAV	CDSC	NAV	POP	NAV	NAV
Annual average
(life of fund)	9.11%	8.64%	8.30%	8.30%	8.25%	8.25%	8.56%	8.28%	8.84%	9.38%
10 years	112.19	101.08	96.73	96.73	96.72	96.72	102.05	95.49	106.99	117.33
Annual average	7.81	7.24	7.00	7.00	7.00	7.00	7.29	6.93	7.55	8.07
5 years	64.53	55.82	58.51	56.51	58.60	58.60	60.57	55.43	62.50	66.69
Annual average	10.47	9.28	9.65	9.37	9.66	9.66	9.93	9.22	10.20	10.76
3 years	50.28	42.41	46.93	43.93	46.96	46.96	48.11	43.37	49.08	51.36
Annual average	14.54	12.51	13.69	12.91	13.69	13.69	13.99	12.76	14.24	14.82
1 year	12.19	6.32	11.37	6.37	11.38	10.38	11.60	7.93	11.85	12.40

Performance assumes reinvestment of distributions and does not account for taxes. Returns at public offering price (POP) for class A and M shares reflect a sales charge of 5.25% and 3.25%, respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares.

For a portion of the period, this fund limited expenses, without which returns would have been lower.

A 1% short-term trading fee may be applied to shares exchanged or sold within 7 days of purchase.

Fund price and distribution information For the 12-month period ended 9/30/06

Distributions	Class A		Class B	Class C	Class M		Class R	Class Y
Number	1		1	1	1		1	1
Income	$0.099		$0.013	$0.024	$0.041		$0.088	$0.125
Capital gains	—		—	—	—		—	—
Total	$0.099		$0.013	$0.024	$0.041		$0.088	$0.125
Share value:	NAV	POP	NAV	NAV	NAV	POP	NAV	NAV
9/30/05	$11.97	$12.63	$11.73	$11.57	$11.77	$12.17	$11.87	$12.08
9/30/06	13.32	14.06	13.05	12.86	13.09	13.53	13.18	13.44

10

Change in the value of a $10,000 investment ($9,475 after sales charge)

Cumulative total return from 9/30/96 to 9/30/06

Past performance does not indicate future results. At the end of the same time period for the Growth Portfolio, a $10,000 investment in the fund’s class B and class C shares would have been valued at $19,673 and $19,672, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,675 after sales charge) would have been valued at $19,549 at public offering price. A $10,000 investment in the fund’s class R and class Y shares would have been valued at $20,699 and $21,733, respectively. See first page of performance section for performance calculation method.

Balanced Portfolio

Fund performance Total return for periods ended 9/30/06
	Class A		Class B		Class C		Class M		Class R	Class Y
(inception dates)	(2/7/94)		(2/11/94)		(9/1/94)		(2/6/95)		(1/21/03)	(7/5/94)
	NAV	POP	NAV	CDSC	NAV	CDSC	NAV	POP	NAV	NAV
Annual average
(life of fund)	8.09%	7.63%	7.28%	7.28%	7.22%	7.22%	7.57%	7.29%	7.79%	8.35%
10 years	94.60	84.44	80.55	80.55	80.13	80.13	84.99	78.97	89.18	99.70
Annual average	6.88	6.31	6.09	6.09	6.06	6.06	6.34	5.99	6.58	7.16
5 years	44.57	36.97	39.30	37.30	39.01	39.01	41.05	36.44	42.35	46.46
Annual average	7.65	6.49	6.85	6.55	6.81	6.81	7.12	6.41	7.32	7.93
3 years	35.62	28.54	32.63	29.63	32.41	32.41	33.65	29.31	34.33	36.71
Annual average	10.69	8.73	9.87	9.04	9.81	9.81	10.15	8.95	10.34	10.99
1 year	9.64	3.90	8.88	3.88	8.72	7.72	9.11	5.57	9.25	9.89

Performance assumes reinvestment of distributions and does not account for taxes. Returns at public offering price (POP) for class A and M shares reflect a sales charge of 5.25% and 3.25%, respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares.

For a portion of the period, this fund limited expenses, without which returns would have been lower.

A 1% short-term trading fee may be applied to shares exchanged or sold within 7 days of purchase.

11

Fund price and distribution information For the 12-month period ended 9/30/06

Distributions	Class A		Class B	Class C	Class M		Class R	Class Y
Number	4		4	4	4		4	4
Income	$0.231		$0.145	$0.149	$0.174		$0.205	$0.259
Capital gains	—		—	—	—		—	—
Total	$0.231		$0.145	$0.149	$0.174		$0.205	$0.259
Share value:	NAV	POP	NAV	NAV	NAV	POP	NAV	NAV
9/30/05	$11.04	$11.65	$10.96	$10.87	$11.02	$11.39	$10.99	$11.06
9/30/06	11.86	12.52	11.78	11.66	11.84	12.24	11.79	11.88

Change in the value of a $10,000 investment ($9,475 after sales charge)

Cumulative total return from 9/30/96 to 9/30/06

Past performance does not indicate future results. At the end of the same time period for the Balanced Portfolio, a $10,000 investment in the fund’s class B and class C shares would have been valued at $18,055 and $18,013, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,675 after sales charge) would have been valued at $17,897 at public offering price. A $10,000 investment in the fund’s class R and class Y shares would have been valued at $18,918 and $19,970, respectively. See first page of performance section for performance calculation method.

12

Conservative Portfolio

Fund performance Total return for periods ended 9/30/06

	Class A		Class B		Class C		Class M		Class R	Class Y
(inception dates)	(2/7/94)		(2/18/94)		(9/1/94)		(2/7/95)		(1/21/03)	(7/14/94)
	NAV	POP	NAV	CDSC	NAV	CDSC	NAV	POP	NAV	NAV
Annual average
(life of fund)	6.71%	6.25%	5.89%	5.89%	5.87%	5.87%	6.14%	5.86%	6.51%	6.95%
10 years	80.88	71.34	67.28	67.28	67.68	67.68	71.33	65.84	77.98	85.16
Annual average	6.11	5.53	5.28	5.28	5.30	5.30	5.53	5.19	5.93	6.35
5 years	35.89	28.78	30.30	28.30	30.48	30.48	31.86	27.60	35.36	37.17
Annual average	6.33	5.19	5.44	5.11	5.47	5.47	5.69	5.00	6.24	6.53
3 years	21.91	15.50	18.84	15.84	19.05	19.05	19.87	15.96	22.01	22.79
Annual average	6.83	4.92	5.92	5.02	5.98	5.98	6.23	5.06	6.86	7.08
1 year	6.46	0.84	5.61	0.61	5.64	4.64	5.86	2.42	6.49	6.75

Performance assumes reinvestment of distributions and does not account for taxes. Returns at public offering price (POP) for class A and M shares reflect a sales charge of 5.25% and 3.25%, respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares.

For a portion of the period, this fund limited expenses, without which returns would have been lower.

A 1% short-term trading fee may be applied to shares exchanged or sold within 7 days of purchase.

Fund price and distribution information For the 12-month period ended 9/30/06
Distributions	Class A		Class B	Class C	Class M		Class R	Class Y
Number	12		12	12	12		12	12
Income	$0.328		$0.258	$0.260	$0.280		$0.305	$0.352
Capital gains	—		—	—	—		—	—
Total	$0.328		$0.258	$0.260	$0.280		$0.305	$0.352
Share value:	NAV	POP	NAV	NAV	NAV	POP	NAV	NAV
9/30/05	$9.33	$9.85	$9.25	$9.24	$9.25	$9.56	$9.38	$9.31
9/30/06	9.59	10.12	9.50	9.49	9.50	9.82	9.67	9.57

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Change in the value of a $10,000 investment ($9,475 after sales charge)

Cumulative total return from 9/30/96 to 9/30/06

Past performance does not indicate future results. At the end of the same time period for the Conservative Portfolio, a $10,000 investment in the fund’s class B and class C shares would have been valued at $16,728 and $16,768, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,675 after sales charge) would have been valued at $16,584 at public offering price. A $10,000 investment in the fund’s class R and class Y shares would have been valued at $17,798 and $18,516, respectively. See first page of performance section for performance calculation method.

Comparative index returns For periods ended 9/30/06

			Lipper Mixed-	Lipper Mixed-
			Asset Target	Asset Target
			Allocation	Allocation
		Lehman	Conservative	Growth Funds
	Russell	Aggregate	Funds category	category
	3000 Index	Bond Index	average*	average†
Annual average
(life of fund)	10.50%	6.23%	7.56%	7.94%
10 years	130.31	86.31	85.08	100.35
Annual average	8.70	6.42	6.25	7.05
5 years	47.48	26.48	31.40	37.60
Annual average	8.08	4.81	5.55	6.50
3 years	44.28	10.49	16.93	32.24
Annual average	13.00	3.38	5.30	9.69
1 year	10.22	3.67	4.96	7.96

Index and Lipper results should be compared to fund performance at net asset value. During the fiscal year Lipper reassigned the portfolios to the categories shown in this table; results of the portfolios’ prior Lipper group would have differed.

* Over the 1-, 3-, 5-, and 10-year periods ended 9/30/06, there were 317, 175, 92, and 30 funds, respectively, in this Lipper category.

† Over the 1-, 3-, 5-, and 10-year periods ended 9/30/06, there were 581, 449, 351, and 181 funds, respectively, in this Lipper category.

14

Your fund’s expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund limited these expenses; had it not done so, expenses would have been higher. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial advisor.

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in each of the three Putnam Asset Allocation Funds from April 1, 2006, to September 30, 2006. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

	Class A	Class B	Class C	Class M	Class R	Class Y
Growth Portfolio
Expenses paid per $1,000*	$ 6.06	$ 9.87	$ 9.87	$ 8.60	$ 7.33	$ 4.79
Ending value (after expenses)	$1,032.60	$1,029.20	$1,028.80	$1,029.90	$1,031.30	$1,033.90
Balanced Portfolio
Expenses paid per $1,000*	$ 5.46	$ 9.27	$ 9.26	$ 8.00	$ 6.73	$ 4.19
Ending value (after expenses)	$1,034.60	$1,030.80	$1,030.40	$1,031.90	$1,032.80	$1,036.70
Conservative Portfolio
Expenses paid per $1,000*	$ 5.95	$ 9.75	$ 9.75	$ 8.49	$ 7.23	$ 4.69
Ending value (after expenses)	$1,030.30	$1,026.60	$1,026.70	$1,027.90	$1,031.00	$1,031.70

* Expenses for each share class are calculated using each fund's annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 9/30/06. The expense ratio may differ for each share class (see the expense ratio comparison table in the next section). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the reporting period; and then dividing that result by the number of days in the year. Does not reflect the effect of a non-recurring reimbursement by Putnam. If this amount had been reflected in the table above, expenses for each share class would have been lower.

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended September 30, 2006, use the calculation method below. To find the value of your investment on April 1, 2006, go to www.putnam.com and log on to your account. Click on the “Transaction History” tab in your Daily Statement and enter 04/01/2006 in both the “from” and “to” fields. Alternatively, call Putnam at 1-800-225-1581.

15

Compare expenses using the SEC’s method

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

	Class A	Class B	Class C	Class M	Class R	Class Y
Growth Portfolio
Expenses paid per $1,000*	$ 6.02	$ 9.80	$ 9.80	$ 8.54	$ 7.28	$ 4.76
Ending value (after expenses)	$1,019.10	$1,015.34	$1,015.34	$1,016.60	$1,017.85	$1,020.36
Balanced Portfolio
Expenses paid per $1,000*	$ 5.42	$ 9.20	$ 9.20	$ 7.94	$ 6.68	$ 4.15
Ending value (after expenses)	$1,019.70	$1,015.94	$1,015.94	$1,017.20	$1,018.45	$1,020.96
Conservative Portfolio
Expenses paid per $1,000*	$ 5.92	$ 9.70	$ 9.70	$ 8.44	$ 7.18	$ 4.66
Ending value (after expenses)	$1,019.20	$1,015.44	$1,015.44	$1,016.70	$1,017.95	$1,020.46

* Expenses for each share class are calculated using each fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 9/30/06. The expense ratio may differ for each share class (see the next table). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the reporting period; and then dividing that result by the number of days in the year. Does not reflect the effect of a non-recurring reimbursement by Putnam. If this amount had been reflected in the table above, expenses for each share class would have been lower.

Compare expenses using industry averages

You can also compare your fund’s expenses with the average of its peer group, as defined by Lipper, an independent fund-rating agency that ranks funds relative to others that Lipper considers to have similar investment styles or objectives. The expense ratio for each share class shown below indicates how much of your fund’s net assets have been used to pay ongoing expenses during the period.

	Class A	Class B	Class C	Class M	Class R	Class Y
Growth Portfolio annualized expense ratio*	1.19%	1.94%	1.94%	1.69%	1.44%	0.94%
Average annualized expense ratio for Lipper peer group†	1.30%	2.05%	2.05%	1.80%	1.55%	1.05%
Balanced Portfolio annualized expense ratio*	1.07%	1.82%	1.82%	1.57%	1.32%	0.82%
Average annualized expense ratio for Lipper peer group†	1.30%	2.05%	2.05%	1.80%	1.55%	1.05%
Conservative Portfolio annualized expense ratio*	1.17%	1.92%	1.92%	1.67%	1.42%	0.92%
Average annualized expense ratio for Lipper peer group†	1.53%	2.28%	2.28%	2.03%	1.78%	1.28%

* For the funds' most recent fiscal half year; may differ from expense ratios based on one-year data in the financial highlights. Does not reflect the effect of a non-recurring reimbursement by Putnam. If this amount had been reflected in the table above, the expense ratio for each share class would have been lower.

† Simple average of the expenses of all front-end load funds in the funds' Lipper peer group, calculated in accordance with Lipper's standard method for comparing fund expenses (excluding 12b-1 fees and without giving effect to any expense offset and brokerage service arrangements that may reduce fund expenses). This average reflects each fund's expenses for its most recent fiscal year available to Lipper as of 9/30/06. To facilitate comparison, Putnam has adjusted this average to reflect the 12b-1 fees carried by each class of shares other than class Y shares, which do not incur 12b-1 fees. The peer group may include funds that are significantly smaller or larger than the funds, which may limit the comparability of the funds' expenses to the simple average, which typically is higher than the asset-weighted average.

16

Your fund’s portfolio turnover

Putnam funds are actively managed by teams of experts who buy and sell securities based on intensive analysis of companies, industries, economies, and markets. Portfolio turnover is a measure of how often a fund’s managers buy and sell securities for your fund. A portfolio turnover of 100%, for example, means that the managers sold and replaced securities valued at 100% of a fund’s assets within a one-year period. Funds with high turnover may be more likely to generate capital gains and dividends that must be distributed to shareholders as taxable income. High turnover may also cause a fund to pay more brokerage commissions and other transaction costs, which may detract from performance.

Funds that invest in bonds or other fixed-income instruments may have higher turnover than funds that invest only in stocks. Short-term bond funds tend to have higher turnover than longer-term bond funds, because shorter-term bonds will mature or be sold more frequently than longer-term bonds. You can use the table below to compare your fund’s turnover with the average turnover for funds in its Lipper category.

Turnover comparisons

Percentage of holdings that change every year

	2006	2005	2004	2003	2002
Growth Portfolio*	85%	112%	120%	126%	82%
Lipper Mixed-Asset Target Allocation Growth Funds category average	72%	72%	74%	84%	76%
Balanced Portfolio*	90%	144%	159%	145%	108%
Lipper Mixed-Asset Target Allocation Growth Funds category average	72%	72%	74%	84%	76%
Conservative Portfolio*	133%	209%	259%	200%	144%
Lipper Mixed-Asset Target Allocation Conservative Funds category average	49%	50%	48%	52%	52%

Turnover data for the fund is calculated based on the fund's fiscal-year period, which ends on September 30. Turnover data for the fund's Lipper category is calculated based on the average of the turnover of each fund in the category for its fiscal year ended during the indicated year. Fiscal years vary across funds in the Lipper category, which may limit the comparability of the fund's portfolio turnover rate to the Lipper average. Comparative data for 2006 is based on information available as of 9/30/06.

* Portfolio turnover excludes dollar roll transactions.

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Your fund’s risk

Your fund’s Overall Morningstar^® Risk

This risk comparison is designed to help you understand how your fund compares with other funds. The comparison utilizes a risk measure developed by Morningstar, an independent fund-rating agency. This risk measure is referred to as the fund’s Overall Morningstar Risk.

Your fund’s Overall Morningstar Risk is shown alongside that of the average fund in its broad asset class, as determined by Morningstar. The risk bar broadens the comparison by translating the fund’s Overall Morningstar Risk into a percentile, which is based on the fund’s ranking among all funds rated by Morningstar as of September 30, 2006. A higher Overall Morningstar Risk generally indicates that a fund’s monthly returns have varied more widely.

Morningstar determines a fund’s Overall Morningstar Risk by assessing variations in the fund’s monthly returns — with an emphasis on downside variations — over 3-, 5-, and 10-year periods, if available. Those measures are weighted and averaged to produce the fund’s Overall Morningstar Risk. The information shown is provided for each fund’s class A shares only; information for other classes may vary. Overall Morningstar Risk is based on historical data and does not indicate future results. Morningstar does not purport to measure the risk associated with a current investment in a fund, either on an absolute basis or on a relative basis. Low Overall Morningstar Risk does not mean that you cannot lose money on an investment in a fund. Copyright 2006 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

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Your fund’s management

Your fund is managed by the members of the Putnam Global Asset Allocation Team. Jeffrey Knight is the Portfolio Leader. Robert Kea and Robert Schoen are Portfolio Members of the funds. The Portfolio Leader and Portfolio Members coordinate the team’s management of the fund.

For a complete listing of the members of the Putnam Global Asset Allocation Team, including those who are not Portfolio Leaders or Portfolio Members of your fund, visit Putnam’s Individual Investor Web site at www.putnam.com.

Investment team fund ownership

The table below shows how much the funds’ current Portfolio Leader and Portfolio Members have invested in the funds and in all Putnam mutual funds (in dollar ranges). Information shown is as of September 30, 2006, and September 30, 2005.

GP	Assets in the Growth Portfolio	• Total assets in all Putnam funds
BP	Assets in the Balanced Portfolio
CP	Assets in the Conservative Portfolio

			$1 –	$10,001 –	$50,001 –	$100,001 –		$500,001 –	$1,000,001
	Year	$0	$10,000	$50,000	$100,000	$500,000		$1,000,000	and over
Jeffrey Knight	2006					BP	CP	GP	•
Portfolio Leader	2005					BP	CP	GP	•
Robert Kea	2006	BP CP				GP	•
Portfolio Member	2005	BP CP				GP	•
Robert Schoen	2006	BP CP				GP	•
Portfolio Member	2005	BP CP			GP		•

Trustee and Putnam employee fund ownership

As of September 30, 2006, all of the 11 Trustees then on the Board of the Putnam funds owned fund shares. The table below shows the approximate value of investments in each of the funds and all Putnam funds as of that date by the Trustees and Putnam employees. These amounts include investments by the Trustees’ and employees’ immediate family members and investments through retirement and deferred compensation plans.

		Putnam
	Trustees	employees
Growth Portfolio	$ 406,000	$ 19,973,000
Balanced Portfolio	$ 5,308,000	$ 8,021,000
Conservative Portfolio	$ 6,413,000	$ 8,066,000
All Putnam funds	$90,000,000	$418,000,000

Fund manager compensation

The total 2005 fund manager compensation that is attributable to the Growth, Balanced, and Conservative Portfolios is approximately $790,000, $840,000, and $400,000, respectively. These amounts include a portion of 2005 compensation paid by Putnam Management to the fund managers listed in this section for their portfolio management responsibilities, calculated based on the fund assets they manage taken as a percentage of the total assets they manage. The compensation amounts also include a portion of the 2005 compensation paid to the Chief Investment Officer of the team for his oversight responsibilities, calculated based on the fund assets he oversees taken as a percentage of the total assets he oversees. This amount does not include compensation of other personnel involved in research, trading, administration, systems, compliance, or fund operations; nor does it include non-compensation costs. These percentages are determined as of the funds’ fiscal period-end. For personnel who joined Putnam Management during or after 2005, the calculation reflects annualized 2005 compensation or an estimate of 2006 compensation, as applicable.

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Other Putnam funds managed by the Portfolio Leader and Portfolio Members

Jeffrey Knight is also a Portfolio Leader of Putnam Income Strategies Fund and the ten Putnam RetirementReady® Funds, and a Portfolio Member of The George Putnam Fund of Boston.

Robert Kea and Robert Schoen are also Portfolio Members of Putnam Income Strategies Fund and the ten Putnam RetirementReady Funds.

Jeffrey Knight, Robert Kea, and Robert Schoen may also manage other accounts and variable trust funds advised by Putnam Management or an affiliate.

Changes in your fund’s Portfolio Leader and Portfolio Members

Your fund’s Portfolio Leader and Portfolio Members did not change during the year ended September 30, 2006.

Putnam fund ownership by Putnam’s Executive Board

The table below shows how much the members of Putnam’s Executive Board have invested in all Putnam mutual funds (in dollar ranges). Information shown is as of September 30, 2006, and September 30, 2005.

			$1 –	$10,001 –	$50,001 –	$100,001 –	$500,001 –	$1,000,001
	Year	$0	$10,000	$50,000	$100,000	$500,000	$1,000,000	and over
Philippe Bibi	2006							•
Chief Technology Officer	2005							•
Joshua Brooks	2006							•
Deputy Head of Investments	2005							•
William Connolly	2006							•
Head of Retail Management	2005							•
Kevin Cronin	2006							•
Head of Investments	2005							•
Charles Haldeman, Jr.	2006							•
President and CEO	2005							•
Amrit Kanwal	2006						•
Chief Financial Officer	2005						•
Steven Krichmar	2006						•
Chief of Operations	2005							•
Francis McNamara, III	2006							•
General Counsel	2005							•
Jeffrey Peters	2006							•
Head of International Business	N/A
Richard Robie, III	2006						•
Chief Administrative Officer	2005						•
Edward Shadek	2006							•
Deputy Head of Investments	2005							•
Sandra Whiston	2006						•
Head of Institutional Management	2005						•

N/A indicates the individual was not a member of Putnam’s Executive Board as of 9/30/05.

20

Terms and definitions

Important terms

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

Net asset value (NAV) is the price, or value, of one share of a mutual fund, without a sales charge. NAVs fluctuate with market conditions. NAV is calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.

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 5.25% maximum sales charge for class A shares and 3.25% for class M shares.

Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.

Share classes

Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class B shares are not subject to an initial sales charge. They may be subject to a CDSC.

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

Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class R shares are not subject to an initial sales charge nor CDSC and are available only to certain defined contribution plans.

Class Y shares are not subject to an initial sales charge nor CDSC, and carry no 12b-1 fee. They are only available to eligible purchasers, including eligible defined contribution plans or corporate IRAs.

Comparative indexes

JP Morgan Developed High Yield Index is an unmanaged index of high-yield fixed-income securities issued in developed countries.

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

Lehman Credit Index is an unmanaged index of investment-grade corporate bonds.

Morgan Stanley Capital International (MSCI) Emerging Markets Free Index is an unmanaged index of equity securities from emerging markets available to non-U.S. investors.

Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged index of equity securities from developed countries in Western Europe, the Far East, and Australasia.

Putnam Balanced Blended Benchmark is a benchmark administered by Putnam Management that is 50% the Russell 3000 Index, 35% the Lehman Aggregate Bond Index, 10% the Morgan Stanley Capital International (MSCI) EAFE Index, and 5% the JP Morgan Developed High Yield Index.

Putnam Conservative Blended Benchmark is a benchmark administered by Putnam Management that is 65% the Lehman Aggregate Bond Index, 25% the Russell 3000 Index, 5% the JP Morgan Developed High Yield Index, and 5% the Morgan Stanley Capital International (MSCI) EAFE Index.

Putnam Growth Blended Benchmark is a benchmark administered by Putnam management that is 60% the Russell 3000 Index, 15% the Morgan Stanley Capital International (MSCI) EAFE Index, 15% the Lehman Aggregate Bond Index, 5% the JP Morgan Developed High Yield Index, and 5% the Morgan Stanley Capital International (MSCI) EMF Index.

Russell 1000 Index is an unmanaged index of the 1,000 largest companies in the Russell 3000 Index.

Russell 2000 Index is an unmanaged index of the 2,000 smallest companies in the Russell 3000 Index.

Russell 3000 Index is an unmanaged index of the 3,000 largest U.S. companies in the Russell universe.

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

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

Lipper is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.

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Trustee approval
of management contract

General conclusions

The Board of Trustees of the Putnam funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Management. In this regard, the Board of Trustees, with the assistance of its Contract Committee consisting solely of Trustees who are not “interested persons” (as such term is defined in the Investment Company Act of 1940, as amended) of the Putnam funds (the “Independent Trustees”), requests and evaluates all information it deems reasonably necessary under the circumstances. Over the course of several months ending in June 2006, the Contract Committee met four times to consider the information provided by Putnam Management and other information developed with the assistance of the Board’s independent counsel and independent staff. The Contract Committee reviewed and discussed key aspects of this information with all of the Independent Trustees. Upon completion of this review, the Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management contract, effective July 1, 2006.

This approval was based on the following conclusions:

• That the fee schedule in effect for your fund represents reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds and the costs incurred by Putnam Management in providing such services, and

• That such fee schedule represents an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels.

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the fee arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that certain aspects of such arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements in prior years.

Management fee schedules and categories; total expenses

The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints, and the assignment of funds to particular fee categories. In reviewing fees and expenses, the Trustees generally focused their attention on material changes in circumstances — for example, changes in a fund’s size or investment style, changes in Putnam Management’s operating costs, or changes in competitive practices in the mutual fund industry —that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not warrant changes to the management fee structure of your fund, which had been carefully developed over the years, re-examined on many occasions and adjusted where appropriate. The Trustees focused on two areas of particular interest, as discussed further below:

• Competitiveness. The Trustees reviewed comparative fee and expense information for competitive funds, which indicated that, in a custom peer group of competitive funds selected by Lipper Inc., your fund ranked in the following percentiles in management fees and in the following percentiles in total expenses (less any applicable 12b-1 fees) as of December 31, 2005 (the first percentile being the least expensive funds and the 100th percentile being the most expensive funds):

	Actual
	Management	Total Expenses
	Fee (percentile)	(percentile)
Putnam Asset Allocation Fund:
Conservative Portfolio	1st	20th
Putnam Asset Allocation Fund:
Balanced Portfolio	1st	1st
Putnam Asset Allocation Fund:
Growth Portfolio	10th	30th

(Because each fund’s custom peer group is smaller than each fund’s broad Lipper peer group, this expense information may differ from the Lipper peer expense information found elsewhere in this report.) The Trustees noted that expense ratios for a number of Putnam funds, which show the percentage of fund assets used to pay for management and administrative services, distribution (12b-1) fees and other expenses, had been increasing recently as a result of declining net assets and the natural operation of fee breakpoints.

The Trustees noted that the expense ratio increases described above were currently being controlled by expense limitations

22

implemented in January 2004 and which Putnam Management, in consultation with the Contract Committee, has committed to maintain at least through 2007. These expense limitations give effect to a commitment by Putnam Management that the expense ratio of each open-end fund would be no higher than the average expense ratio of the competitive funds included in the fund’s relevant Lipper universe (exclusive of any applicable 12b-1 charges in each case). The Trustees observed that this commitment to limit fund expenses has served shareholders well since its inception. In order to ensure that the expenses of the Putnam funds continue to meet evolving competitive standards, the Trustees requested, and Putnam Management agreed, to implement an additional expense limitation for certain funds for the twelve months beginning January 1, 2007 equal to the average expense ratio (exclusive of 12b-1 charges) of a custom peer group of competitive funds selected by Lipper based on the size of the fund. This additional expense limitation will be applied to those open-end funds that had above-average expense ratios (exclusive of 12b-1 charges) based on the Lipper custom peer group data for the period ended December 31, 2005. This additional expense limitation will not be applied to your fund.

• Economies of scale.Your fund currently has the benefit of breakpoints in its management fee that provide shareholders with significant economies of scale, which means that the effective management fee rate of a fund (as a percentage of fund assets) declines as a fund grows in size and crosses specified asset thresholds. Conversely, as a fund shrinks in size — as has been the case for many Putnam funds in recent years — these breakpoints result in increasing fee levels. In recent years, the Trustees have examined the operation of the existing breakpoint structure during periods of both growth and decline in asset levels. The Trustees concluded that the fee schedules in effect for the funds represented an appropriate sharing of economies of scale at current asset levels. In reaching this conclusion, the Trustees considered the Contract Committee’s stated intent to continue to work with Putnam Management to plan for an eventual resumption in the growth of assets, including a study of potential economies that might be produced under various growth assumptions.

In connection with their review of the management fees and total expenses of the Putnam funds, the Trustees also reviewed the costs of the services to be provided and profits to be realized by Putnam Management and its affiliates from the relationship with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of Putnam Management’s revenues, expenses and profitability with respect to the funds’ management contracts, allocated on a fund-by-fund basis. Because many of the costs incurred by Putnam Management in managing the funds are not readily identifiable to particular funds, the Trustees observed that the methodology for allocating costs is an important factor in evaluating Putnam Management’s costs and profitability, both as to the Putnam funds in the aggregate and as to individual funds. The Trustees reviewed Putnam Management’s cost allocation methodology with the assistance of independent consultants and concluded that this methodology was reasonable and well-considered.

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of the Putnam funds’ investment process and performance by the work of the Investment Process Committee of the Trustees and the Investment Oversight Committee of the Trustees, which meet on a regular monthly basis with the funds’ portfolio teams throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process-as measured by the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to such personnel, and in general the ability of Putnam Management to attract and retain high-quality personnel — but also recognize that this does not guarantee favorable investment results for every fund in every time period. The Trustees considered the investment performance of each fund over multiple time periods and considered information comparing each fund’s performance with various benchmarks and with the performance of competitive funds.

The Trustees noted the satisfactory investment performance of many Putnam funds. They also noted the disappointing investment performance of certain funds in recent years and discussed with senior management of Putnam Management the factors contributing to such underperformance and actions being taken to improve performance. The Trustees recognized that, in recent years, Putnam Management has made significant changes in its investment personnel and processes and in the fund product line to address areas of underperformance. In particular, they noted the important contributions of Putnam Management’s leadership in attracting, retaining and supporting high-quality investment professionals and in systematically implementing an investment process that seeks to merge the best features of fundamental and

23

quantitative analysis. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these changes and to evaluate whether additional changes to address areas of underperformance are warranted.

In the case of your fund, the Trustees considered the Lipper peer group percentile rankings of each fund’s class A share cumulative total return performance results. This information is shown in the following table. These rankings were determined on a cumulative-return basis and are for the one-, three- and five-year periods ended March 31, 2006. (Because of the passage of time, these performance results may differ from the performance results for more recent periods shown elsewhere in this report.) Where applicable, the table also shows the number of funds in the peer groups for the period; this number is indicated in parentheses following the percentile. Note that the first percentile denotes the best-performing funds and the 100th percentile denotes the worst-performing funds. See the next page for more recent Lipper performance ranking information for the funds. Past performance is no guarantee of future results.

	One-year	Three-year	Five-year
	period	period	period
Putnam Asset Allocation Fund:	92nd	91st	87th
Conservative Portfolio
Lipper Global Flexible Portfolio Funds*
Putnam Asset Allocation Fund:	60th	77th	83rd
Balanced Portfolio
Lipper Global Flexible Portfolio Funds*
Putnam Asset Allocation Fund:	29th	33rd	61st
Growth Portfolio
Lipper Global Flexible Portfolio Funds*

The Trustees noted the disappointing performance for Putnam Asset Allocation Fund: Conservative Portfolio and Putnam Asset Allocation Fund: Balanced Portfolio for the one-, three- and five-year periods ended March 31, 2006 and for the three- and five-year periods ended March 31, 2006, respectively. In this regard, the Trustees considered Putnam Management’s view that one factor in each fund’s underperformance during these periods was that the Lipper Global Flexible Portfolio Funds category to which the fund was assigned based on its investment objective included numerous funds that pursue different investment strategies than the fund. The Trustees also considered each fund’s assignment to new holdings-based Lipper peer groups (Lipper Mixed-Asset Target Allocation Conservative Funds for Putnam Asset Allocation Fund: Conservative Portfolio and Lipper Mixed-Asset Target Allocation Growth Funds for Putnam Asset Allocation Fund: Balanced Portfolio), which Putnam Management believes will be more reflective of the investment strategies of each fund.

As a general matter, the Trustees concluded that cooperative efforts between the Trustees and Putnam Management represent the most effective way to address investment performance problems. The Trustees noted that investors in the Putnam funds have, in effect, placed their trust in the Putnam organization, under the oversight of the funds’ Trustees, to make appropriate decisions regarding the management of the funds. Based on the responsiveness of Putnam Management in the recent past to Trustee concerns about investment performance, the Trustees concluded that it is preferable to seek change within Putnam Management to address performance shortcomings. In the Trustees’ view, the alternative of terminating a management contract and engaging a new investment adviser for an underperforming fund would entail significant disruptions and would not provide any greater assurance of improved investment performance.

Brokerage and soft-dollar allocations; other benefits

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage and soft-dollar allocations, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that may be useful to Putnam Management in managing the assets of the fund and of other clients. The Trustees indicated their continued intent to monitor the potential benefits associated with the allocation of fund brokerage to ensure that the principle of seeking “best price and execution” remains paramount in the portfolio trading process.

The Trustees’ annual review of your fund’s management contract also included the review of its distributor’s contract and distribution plan with Putnam Retail Management Limited Partnership and the custodian agreement and investor servicing agreement with Putnam Fiduciary Trust Company, all of which provide benefits to affiliates of Putnam Management.

* Unrelated to the Trustees’ approval the continuance of each fund’s management contract, in the second quarter of 2006, Lipper re-assigned each fund to a new peer group as follows: Putnam Asset Allocation Fund: Conservative Portfolio (Lipper Mixed-Asset Target Allocation Conservative Funds); Putnam Asset Allocation Fund: Balanced Portfolio (Lipper Mixed-Asset Target Allocation Growth Funds); and Putnam Asset Allocation Fund: Growth Portfolio (Lipper Mixed-Asset Target Allocation Growth Funds).

24

Comparison of retail and institutional fee schedules

The information examined by the Trustees as part of their annual contract review has included for many years information regarding fees charged by Putnam Management and its affiliates to institutional clients such as defined benefit pension plans, college endowments, etc. This information included comparison of such fees with fees charged to the funds, as well as a detailed assessment of the differences in the services provided to these two types of clients. The Trustees observed, in this regard, that the differences in fee rates between institutional clients and the mutual funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients reflect to a substantial degree historical competitive forces operating in separate market places. The Trustees considered the fact that fee rates across all asset sectors are higher on average for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to institutional clients of the firm, but did not rely on such comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

More recent peer group rankings

More recent Lipper percentile rankings are shown for each fund in the following table. Note that this information was not available to the Trustees when they approved the continuance of your fund’s management contract. The table shows the Lipper peer group percentile rankings of each fund’s class A share total return performance results. These rankings were determined on an annualized basis and are for the one-, five- and ten-year periods ended on the most recent calendar quarter (September 30, 2006). Where applicable, the table also shows the fund’s rank among the total number of funds in its peer group for the one-, five- and ten-year periods; this information is indicated in parentheses following the percentile. Note that the first percentile denotes the best-performing funds and the 100th percentile denotes the worst-performing funds.

Over the one, five-, and ten-year periods ended September 30, 2006, the Conservative Portfolio ranked 47th out of 317, 23rd out of 92, and 13th out of 30 funds, respectively; the Balanced Portfolio: 126th out of 581, 90th out of 351, and 94th out of 181 funds; the Growth Portfolio: 47th out of 581, 23rd out of 351, and 57th out of 181 funds.

	One-year	Five-year	Ten-year
	period	period	period
Putnam Asset Allocation Fund:	15%	25%	42%
Conservative Portfolio
Lipper Mixed-Asset Target
Allocation Conservative Funds*
Putnam Asset Allocation Fund:	22%	26%	52%
Balanced Portfolio
Lipper Mixed-Asset Target
Allocation Growth Funds*
Putnam Asset Allocation Fund:	9%	7%	32%
Growth Portfolio
Lipper Mixed-Asset Target
Allocation Growth Funds*

* Unrelated to the Trustees’ approval the continuance of each fund’s management contract, in the second quarter of 2006, Lipper re-assigned each fund to a new peer group as follows: Putnam Asset Allocation Fund: Conservative Portfolio (Lipper Mixed-Asset Target Allocation Conservative Funds); Putnam Asset Allocation Fund: Balanced Portfolio (Lipper Mixed-Asset Target Allocation Growth Funds); and Putnam Asset Allocation Fund: Growth Portfolio (Lipper Mixed-Asset Target Allocation Growth Funds).

25

Other information for shareholders

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.

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006, are available on the Putnam Individual Investor Web site, www.putnam.com/individual, and on the SEC’s Web site, www.sec.gov. If you have questions about finding forms on the SEC’s Web site, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Forms N-Q on the SEC’s Web site at www.sec.gov. In addition, the fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s Web site or the operation of the Public Reference Room.

26

Financial statements

These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, constitute the fund’s financial statements.

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

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

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

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

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.

27

Report of Independent Registered Public Accounting Firm

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 “trust”) at September 30, 2006, and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of 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 trust’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2006, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
November 13, 2006

28

The funds’ portfolios 9/30/06

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Banking			7.9%			5.9%			3.2%
Allied Irish Banks PLC (Ireland)	69,646	$	1,852,486	63,073	$	1,677,654	15,906	$	423,077
Australia & New Zealand Banking Group,
Ltd. (Australia)	92,117		1,840,685	83,423		1,666,961	21,157		422,760
Banca Popolare di Verona e Novara Scrl
(Italy)	6,488		179,064	—		—	—		—
Banco Bilbao Vizcaya Argentaria SA
(Spain)	9,883		228,450	—		—	—		—
Banco Bradesco SA (Preference) (Brazil)	37,653		1,249,143	—		—	—		—
Banco Nossa Caixa SA (Brazil)	15,900		317,487	—		—	—		—
Bank of America Corp. #	168,127		9,006,563	167,893		8,994,028	52,914		2,834,603
Bank of Fukuoka, Ltd. (The) (Japan)	216,000		1,592,992	195,000		1,438,118	48,000		353,998
Bank of Hawaii Corp.	18,200		876,512	18,200		876,512	5,700		274,512
Bank of Ireland (Ireland)	26,018		508,486	25,450		497,386	6,050		118,239
Bankunited Financial Corp. Class A	23,400		610,038	22,500		586,575	—		—
Barclays PLC (United Kingdom)	502,388		6,324,210	451,869		5,688,262	115,305		1,451,494
Bayerische Hypo-Und Vereinsbank AG
(Germany)	19,500		856,304	18,600		816,782	5,100		223,956
BNP Paribas SA (France)	71,818		7,718,353	58,526		6,289,848	14,822		1,592,935
Center Financial Corp.	22,100		525,538	21,400		508,892	—		—
Chiba Bank, Ltd. (The) (Japan)	174,000		1,557,399	158,000		1,414,190	40,000		358,023
China Merchants Bank Co., Ltd. Class H
(China) †	269,500		379,763	—		—	—		—
China Merchants Bank Co., Ltd. 144A
Class H (China) †	134,000		188,824	—		—	—		—
Citizens Banking Corp. (SG)	42,200		1,108,172	42,100		1,105,546	13,300		349,258
City Holding Co.	27,000		1,076,490	26,000		1,036,620	—		—
Commercial International Bank (Egypt)	164,453		1,321,733	—		—	—		—
Commerzbank AG (Germany)	52,685		1,783,048	48,034		1,625,641	12,010		406,461
Corus Bankshares, Inc. (SG) (SB) (SC)	134,500		3,007,420	133,100		2,976,116	34,400		769,184
Daegu Bank (South Korea)	142,550		2,381,323	—		—	—		—
DBS Group Holdings, Ltd. (Singapore)	145,000		1,754,945	131,000		1,585,502	33,000		399,401
Depfa Bank PLC (Ireland)	79,543		1,468,923	70,827		1,307,964	18,270		337,393
DnB Holdings ASA (Norway)	40,835		500,701	—		—	—		—
Downey Financial Corp.	18,900		1,257,606	18,500		1,230,990	3,400		226,236
Financial Institutions, Inc.	19,600		457,856	18,900		441,504	—		—
First Regional Bancorp †	15,700		534,899	15,300		521,271	—		—
FirstFed Financial Corp. † (SG) (SB) (SC)	36,120		2,048,726	35,500		2,013,560	6,400		363,008
Frontier Financial Corp. (SG) (SC)	29,100		754,854	28,950		750,963	9,150		237,351
HBOS PLC (United Kingdom)	268,890		5,308,316	243,506		4,807,195	61,177		1,207,731
Intervest Bancshares Corp. †	34,800		1,515,888	33,900		1,476,684	5,900		257,004
ITLA Capital Corp.	8,900		478,464	8,700		467,712	—		—
Kasikornbank PCL (Thailand)	268,600		491,221	—		—	—		—
KBC Groupe SA (Belgium)	40,579		4,268,551	36,891		3,880,606	9,344		982,906
KeyCorp	49,280		1,845,043	49,200		1,842,048	15,500		580,320
Kookmin Bank (South Korea)	33,095		2,591,436	—		—	—		—
Krung Thai Bank PCL (Thailand)	5,968,278		1,819,675	—		—	—		—
Krung Thai Bank PCL NVDR (Non Voting
Depository Receipt) (Thailand)	1,087,000		328,615	—		—	—		—
Mizuho Financial Group, Inc. (Japan)	585		4,530,775	364		2,819,149	93		720,277
Nara Bancorp, Inc.	49,800		910,842	48,200		881,578	—		—
Nordea AB (Sweden)	665,526		8,720,466	602,500		7,894,629	152,550		1,998,881
PFF Bancorp, Inc.	20,700		766,728	19,700		729,688	—		—
PNC Financial Services Group	32,300		2,339,812	32,300		2,339,812	10,200		738,888
Public Bank Berhad (Malaysia)	972,100		1,806,063	—		—	—		—
Public Bank Berhad (Malaysia)	320,300		581,837	—		—	—		—
Republic Bancorp, Inc.	49,830		664,234	47,370		631,442	—		—
Sberbank RF (Russia)	652		1,421,360	—		—	—		—

29

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Banking continued
Societe Generale (France)	68,946	$	10,959,539	53,795	$	8,551,162	13,631	$	2,166,761
Southwest Bancorp, Inc.	22,400		578,368	21,500		555,130	—		—
Sterling Financial Corp.	26,100		846,423	26,100		846,423	8,200		265,926
Sumitomo Mitsui Financial Group, Inc.
(Japan)	149		1,562,814	137		1,436,950	35		367,104
Swedbank AB (Sweden)	10,900		323,586	—		—	—		—
Trustmark Corp.	30,700		964,901	30,700		964,901	9,700		304,871
U.S. Bancorp	142,887		4,746,706	142,654		4,738,966	44,900		1,491,578
Unibanco - Uniao de Bancos Brasileiros
SA ADR (Brazil)	32,520		2,406,480	—		—	—		—
UniCredito Italiano SpA (Italy)	75,619		626,874	—		—	—		—
UnionBanCal Corp.	74,500		4,537,050	74,385		4,530,047	23,400		1,425,060
Vineyard National Bancorp	21,600		560,736	20,700		537,372	—		—
W Holding Co., Inc. (Puerto Rico)	108,100		638,871	108,000		638,280	34,000		200,940
Wachovia Corp.	107,513		5,999,225	107,415		5,993,757	33,796		1,885,817
Washington Mutual, Inc.	84,400		3,668,868	84,300		3,664,521	26,500		1,151,955
Wells Fargo & Co.	236,960		8,573,213	236,652		8,562,069	74,500		2,695,410
West Coast Bancorp	12,100		369,534	12,000		366,480	—		—
Westpac Banking Corp. (Australia)	238,595		4,035,263	216,910		3,668,513	54,937		929,128
			———————————————			———————————————			———————————————
			147,056,770			117,875,999			30,512,446
Basic Materials			5.2%			3.2%			1.7%
AK Steel Holding Corp. †	76,100		923,854	76,000		922,640	23,900		290,146
Albany International Corp.	26,440		841,321	26,400		840,048	8,300		264,106
Algoma Steel, Inc. (Canada) †	9,500		266,671	—		—	—		—
Aveng, Ltd. (South Africa)	649,191		2,299,694	—		—	—		—
Balfour Beatty PLC (United Kingdom)	94,676		728,083	92,609		712,187	24,077		185,158
BASF AG (Germany)	25,878		2,075,444	23,435		1,879,513	5,865		470,380
BlueScope Steel, Ltd. (Australia)	90,031		434,658	88,066		425,171	22,896		110,539
Builders FirstSource, Inc. †	26,100		397,503	26,100		397,503	8,200		124,886
Carpenter Technology Corp.	24,100		2,590,991	23,400		2,515,734	4,000		430,040
Chaparral Steel Co. †	29,900		1,018,394	29,800		1,014,988	9,400		320,164
China Bluechemical, Ltd. 144A Class H
(China) †	621,000		180,116	—		—	—		—
China Oriental Group Co., Ltd.
(Hong Kong)	52,000		10,416	—		—	—		—
China Steel Corp. (Taiwan)	1,855,110		1,600,231	—		—	—		—
Clariant AG (Switzerland) †	96,656		1,303,036	86,691		1,168,696	22,200		299,282
Cleveland-Cliffs, Inc. (SB)	17,000		647,870	16,800		640,248	—		—
Coeur d’Alene Mines Corp. †	57,900		272,709	57,200		269,412	—		—
Companhia Vale do Rio Doce (CVRD) ADR
(Brazil)	85,972		1,853,556	—		—	—		—
Companhia Vale do Rio Doce (CVRD)
(Preference A) ADR (Brazil)	79,500		1,471,545	—		—	—		—
CRH PLC (Ireland)	33,123		1,117,224	—		—	—		—
Dow Chemical Co. (The)	64,900		2,529,802	64,800		2,525,904	20,400		795,192
Duratex SA (Preference) (Brazil)	84,300		961,486	—		—	—		—
Eagle Materials, Inc.	29,400		990,192	28,700		966,616	—		—
Fletcher Building, Ltd. (New Zealand)	776,816		4,355,214	703,481		3,944,062	178,253		999,374
Gold Fields, Ltd. (South Africa)	15,402		272,780	—		—	—		—
Gold Fields, Ltd. ADR (South Africa)	75,497		1,346,866	—		—	—		—
Grief, Inc. Class A	18,599		1,489,966	17,900		1,433,969	2,300		184,253
H.B. Fuller Co.	119,400		2,798,736	118,200		2,770,608	28,600		670,384
Impala Platinum Holdings, Ltd.
(South Africa)	9,510		1,574,159	—		—	—		—
Imperial Chemical Industries PLC
(United Kingdom)	58,656		435,195	57,376		425,698	14,163		105,082
Italcementi SpA (Italy)	25,813		652,914	25,250		638,674	6,564		166,030

30

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Basic Materials continued
Italian-Thai Development PLC NVDR
(Thailand)	6,734,800	$	1,008,321	—	$	—	—	$	—
James Hardie Industries NV (Netherlands)	64,099		357,221	62,700		349,424	14,911		83,098
JFE Holdings, Inc. (Japan)	19,700		774,893	18,700		735,559	4,900		192,740
KCC Corp. (South Korea)	4,120		1,182,487	—		—	—		—
Kingspan Group PLC (Ireland)	8,666		178,366	—		—	—		—
Kobe Steel, Ltd. (Japan)	915,000		2,887,635	831,000		2,622,541	211,000		665,892
Koninklijke DSM NV (Netherlands)	25,292		1,108,085	23,545		1,031,546	6,315		276,671
Koppers Holdings, Inc.	40,300		764,491	38,800		736,036	—		—
Korea Zinc Co., Ltd. (South Korea)	10,220		927,746	—		—	—		—
LG Engineering & Construction, Ltd.
(South Korea)	24,720		1,735,941	—		—	—		—
Linde AG (Germany)	7,871		741,525	7,700		725,415	2,000		188,419
Lupatech SA (Brazil) †	107,763		1,134,739	—		—	—		—
Mittal Steel Co. NV (Netherlands)	152,708		5,326,786	138,291		4,823,889	35,025		1,221,748
Monsanto Co.	25,100		1,179,951	25,100		1,179,951	7,900		371,379
NS Group, Inc. †	9,300		600,315	9,300		600,315	2,900		187,195
Nucor Corp.	67,400		3,335,626	67,300		3,330,677	21,200		1,049,188
Orascom Construction Industries
(OCI) (Egypt)	68,347		2,984,603	—		—	—		—
Oregon Steel Mills, Inc. †	13,300		649,971	13,200		645,084	4,200		205,254
Phelps Dodge Corp.	38,600		3,269,420	38,600		3,269,420	12,200		1,033,340
Pioneer Cos., Inc. †	16,800		411,768	16,000		392,160	—		—
POSCO (South Korea)	11,019		2,860,290	—		—	—		—
POSCO ADR (South Korea)	10,100		655,793	—		—	—		—
PPG Industries, Inc.	41,940		2,813,335	41,850		2,807,298	13,200		885,456
PW Eagle, Inc. (SG) (SB) (SC)	52,200		1,566,522	51,600		1,548,516	4,200		126,042
Quanex Corp.	21,850		663,148	21,850		663,148	6,900		209,415
Rautaruukki OYJ (Finland)	45,650		1,309,630	41,250		1,183,400	10,350		296,926
Rayonier, Inc. (SG) (SB) (SC)	77,025		2,911,545	76,850		2,904,930	24,200		914,760
Rinker Group, Ltd. (Australia)	123,912		1,285,736	110,090		1,142,316	28,300		293,647
Shin-Etsu Chemical Co. (Japan)	27,000		1,722,528	17,600		1,122,833	4,500		287,088
Sika AG (Switzerland) †	398		500,040	—		—	—		—
Silgan Holdings, Inc.	24,900		935,244	24,400		916,464	—		—
Silver Wheaton Corp.
(Canada) † (SG) (SB)	75,200		709,888	73,900		697,616	—		—
Skanska AB Class B (Sweden)	96,200		1,628,172	87,200		1,475,848	22,000		372,347
Southern Copper Corp. (SG) (SB) (SC)	15,243		1,409,978	15,200		1,406,000	4,800		444,000
Steel Dynamics, Inc.	6,600		332,970	6,500		327,925	—		—
Steel Technologies, Inc.	20,000		392,600	20,000		392,600	6,300		123,669
Sterling Chemicals, Inc. †	125		1,594	—		—	34		434
Technicas Reunidas SA 144A (Spain) †	8,614		263,379	—		—	—		—
Teck Cominco, Ltd. Class B (Canada)	4,600		288,686	—		—	—		—
Toray Industries, Inc. (Japan)	33,000		249,601	—		—	—		—
Tostem Inax Holding Corp. (Japan)	240		5,038	—		—	—		—
Universal Forest Products, Inc.	16,800		824,040	16,600		814,230	3,300		161,865
Usinas Siderurgicas de Minas Gerais
(Usiminas) (Preference) (Brazil)	54,578		1,634,825	—		—	—		—
Vallourec (France)	741		172,599	—		—	—		—
Voest-Alpine AG (Austria)	78,402		3,234,330	71,009		2,929,346	17,843		736,080
WHX Corp. †	14,371		129,339	—		—	5,946		53,514
Zinifex, Ltd. (Australia)	34,022		296,741	—		—	—		—
			——————————			——————————			——————————
			96,798,107			64,266,158			15,795,183
Capital Goods			5.8%			5.0%			2.6%
ABB, Ltd. (Switzerland)	27,681		363,236	27,076		355,297	7,040		92,380
Actividades de Construccion y Servicios
SA (Spain)	61,918		2,933,108	56,075		2,656,320	14,142		669,918

31

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Capital Goods continued
AEP Industries, Inc. †	15,000	$	629,250	15,000	$	629,250	4,700	$	197,165
AGCO Corp. †	27,200		689,520	25,900		656,565	—		—
American Science &
Engineering, Inc. † (SG) (SB)	13,000		630,760	12,800		621,056	—		—
Andritz AG (Austria)	20,546		3,130,635	18,607		2,835,185	4,714		718,282
Applied Industrial Technologies, Inc.	68,590		1,673,596	67,825		1,654,930	10,000		244,000
Autoliv, Inc. (Sweden)	28,800		1,587,168	28,700		1,581,657	9,100		501,501
BAE Systems PLC (United Kingdom)	149,777		1,105,666	138,485		1,022,308	36,796		271,631
Bharat Heavy Electricals, Ltd. (India)	14,726		767,527	—		—	—		—
Boeing Co. (The)	80,550		6,351,368	80,400		6,339,540	25,300		1,994,905
Bouygues SA (France)	26,224		1,401,022	23,911		1,277,450	6,192		330,809
CAE, Inc. (Canada)	40,000		341,761	—		—	—		—
Canon, Inc. (Japan)	77,600		4,065,185	65,900		3,452,264	16,600		869,614
Cascade Corp.	14,300		652,795	13,600		620,840	—		—
Clean Harbors, Inc. †	18,000		783,900	17,800		775,190	—		—
Cookson Group PLC (United Kingdom)	92,677		982,302	87,761		930,196	23,448		248,530
Cummins, Inc.	42,230		5,035,083	42,190		5,030,314	13,300		1,585,759
Daito Trust Construction Co., Ltd.
(Japan)	39,000		2,123,615	11,400		620,749	3,000		163,355
Eaton Corp.	8,600		592,110	8,500		585,225	2,700		185,895
Emerson Electric Co.	40,890		3,429,035	40,900		3,429,874	12,900		1,081,794
EnPro Industries, Inc. †	14,790		444,587	14,800		444,888	4,700		141,282
European Aeronautic Defense and
Space Co. (Netherlands)	24,004		689,551	22,761		653,844	5,918		170,003
Flow International Corp. †	77,400		1,003,878	77,300		1,002,581	24,400		316,468
Franklin Electric Co., Inc.	10,400		552,656	10,300		547,342	—		—
Freightcar America, Inc.	31,000		1,643,000	30,400		1,611,200	4,700		249,100
Fujikura, Ltd. (Japan)	42,000		461,912	41,000		450,915	10,000		109,979
Global Imaging Systems, Inc. †	21,000		463,470	20,700		456,849	—		—
Heico Corp. (SG) (SB)	16,500		565,950	15,900		545,370	—		—
Herman Miller, Inc.	76,000		2,599,960	75,900		2,596,539	23,900		817,619
Hyundai Mobis (South Korea)	20,020		2,055,921	—		—	—		—
Illinois Tool Works, Inc.	47,500		2,132,750	47,500		2,132,750	14,900		669,010
Imation Corp.	15,000		602,250	14,500		582,175	—		—
IMI PLC (United Kingdom)	91,696		867,863	86,832		821,828	23,485		222,275
Insteel Industries, Inc.	20,200		401,374	20,100		399,387	6,300		125,181
JLG Industries, Inc.	81,700		1,618,477	81,600		1,616,496	25,700		509,117
John H. Harland Co.	38,940		1,419,363	38,600		1,406,970	9,600		349,920
Lancaster Colony Corp.	12,100		541,596	12,000		537,120	3,800		170,088
Leighton Holdings, Ltd. (Australia)	75,314		1,087,963	69,677		1,006,532	18,845		272,229
Lockheed Martin Corp.	66,300		5,705,778	66,200		5,697,172	20,900		1,798,654
Makita Corp. (Japan)	15,800		463,511	—		—	—		—
MAN AG (Germany)	16,610		1,401,777	14,759		1,245,565	3,904		329,472
Manitowoc Co., Inc. (The)	13,200		591,228	13,200		591,228	4,200		188,118
Modine Manufacturing Co.	43,200		1,051,056	43,200		1,051,056	13,600		330,888
Moog, Inc. †	48,100		1,667,146	46,950		1,627,287	—		—
Mueller Industries, Inc.	14,500		509,965	14,100		495,897	—		—
NACCO Industries, Inc. Class A	3,600		489,276	3,600		489,276	1,100		149,501
Nordson Corp. (SB)	27,000		1,076,220	27,000		1,076,220	8,500		338,810
Orbital Sciences Corp. †	33,500		628,795	33,100		621,287	—		—
Parker-Hannifin Corp.	41,500		3,225,795	41,500		3,225,795	13,100		1,018,263
Pinguely-Haulotte (France)	5,940		153,557	—		—	—		—
Raytheon Co.	16,800		806,568	16,800		806,568	5,300		254,453
Rieter Holding AG (Switzerland)	18,745		8,052,156	16,977		7,292,689	4,302		1,847,979
Rockwell Automation, Inc.	12,208		709,285	12,195		708,530	3,817		221,768
Rofin-Sinar Technologies, Inc. †	20,600		1,251,862	20,500		1,245,785	2,800		170,156
Schneider Electric SA (France)	5,336		594,417	—		—	—		—

32

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Capital Goods continued
Shanghai Prime Machinery Co., Ltd.
Class H (China) †	2,202,000	$	710,264	—	$	—	—	$	—
Shanghai Prime Machinery Co., Ltd.
Class H1 (China) †	624,000		201,274	—		—	—		—
Siemens AG (Germany)	15		1,307	—		—	24		2,092
SMC Corp. (Japan)	2,100		277,163	—		—	—		—
Smith (A.O.) Corp.	12,500		492,875	12,500		492,875	3,900		153,777
Teledyne Technologies, Inc. †	22,600		894,960	22,300		883,080	—		—
Terex Corp. †	70,280		3,178,062	70,234		3,175,981	22,100		999,362
Thomas & Betts Corp. †	53,700		2,562,027	53,700		2,562,027	16,900		806,299
ThyssenKrupp AG (Germany)	1		34	—		—	—		—
Timken Co.	21,500		640,270	21,500		640,270	6,800		202,504
United Industrial Corp. (SB)	40,360		2,159,260	39,400		2,107,900	2,700		144,450
United Stationers, Inc. †	18,600		865,086	18,600		865,086	5,900		274,409
United Technologies Corp.	19,100		1,209,985	19,100		1,209,985	6,000		380,100
URS Corp. †	8,900		346,121	8,700		338,343	—		—
USEC, Inc.	94,500		910,980	94,400		910,016	29,700		286,308
Valmont Industries, Inc.	17,200		898,700	17,200		898,700	5,400		282,150
Vinci SA (France)	24,624		2,738,373	22,307		2,480,705	5,669		630,435
Volvo AB Class A (Sweden)	25,600		1,586,351	22,800		1,412,844	6,000		371,801
Wabtec Corp.	20,200		548,026	20,000		542,600	—		—
Wartsila OYJ Class B (Finland)	27,100		1,098,396	24,600		997,068	6,700		271,559
WESCO International, Inc. † (SG) (SB)	16,500		957,495	16,300		945,889	—		—
			————————			————————			————————
			109,076,564			98,524,720			24,731,117
Communication Services			3.9%			2.5%			1.4%
America Movil SA de CV ADR Ser. L
(Mexico)	27,474		1,081,651	—		—	—		—
AT&T, Inc. (SG) (SB) #	159,621		5,197,260	159,432		5,191,106	50,237		1,635,717
Axtel SA de CV (Mexico) †	1,081,955		2,243,720	—		—	—		—
Axtel SA de CV 144A (Mexico) †	196,500		407,495	—		—	—		—
Belgacom SA (Belgium)	17,083		665,131	16,733		651,504	4,571		177,973
BellSouth Corp.	83,110		3,552,953	83,064		3,550,986	26,200		1,120,050
Brightpoint, Inc. †	41,410		588,850	39,780		565,672	—		—
BT Group PLC (United Kingdom)	53,883		269,708	—		—	—		—
China Mobile, Ltd. (Hong Kong)	244,000		1,723,317	—		—	—		—
China Netcom Group Corp., Ltd.
(Hong Kong)	1,393,000		2,496,099	—		—	—		—
China Unicom, Ltd. (Hong Kong)	1,658,000		1,631,176	—		—	—		—
Commonwealth Telephone
Enterprises, Inc. (SB)	18,200		750,386	18,100		746,263	5,700		235,011
Comstar United Telesystems GDR (Russia)	16,579		111,908	—		—	—		—
Comstar United Telesystems 144A GDR
(Russia) (SG)	164,314		1,109,120	—		—	—		—
CT Communications, Inc. (SG) (SB)	68,700		1,492,164	68,600		1,489,992	21,600		469,152
Deutsche Telekom AG (Germany)	32,202		511,062	31,499		499,905	8,189		129,964
Deutsche Telekom AG ADR (Germany)	53,266		845,331	50,432		800,356	13,464		213,674
DirecTV Group, Inc. (The) † (SG)	89,300		1,757,424	89,100		1,753,488	28,100		553,008
Earthlink, Inc. † (SC)	130,580		949,317	128,938		937,379	24,204		175,963
ECI Telecom, Ltd. (Israel) †	87,800		724,350	—		—	—		—
Embarq Corp.	15,919		770,002	15,846		766,471	4,975		240,641
Far EasTone Telecommunications Co.,
Ltd. (Taiwan)	726,000		786,663	—		—	—		—
France Telecom SA (France)	42,179		966,973	39,074		895,789	10,342		237,095
Globe Telecom, Inc. (Philippines)	48,570		1,040,901	—		—	—		—
Golden Telecom, Inc. (Russia)	16,500		499,125	16,500		499,125	5,200		157,300
InterDigital Communications Corp. †	83,800		2,857,580	83,400		2,843,940	19,400		661,540

33

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Communication Services continued
j2 Global Communications,
Inc. † (SG) (SB)	43,900	$	1,192,763	43,500	$	1,181,895	6,900	$	187,473
Koninklijke (Royal) KPN NV (Netherlands)	185,582		2,364,685	137,276		1,749,170	34,365		437,879
KT Freetel Co., Ltd. (South Korea)	32,510		999,013	—		—	—		—
Liberty Global, Inc. Class A †	56,400		1,451,736	56,300		1,449,162	17,700		455,598
Maroc Telecom (Morocco)	19,125		289,231	—		—	—		—
Mobile Telesystems ADR (Russia)	72,750		2,747,768	—		—	—		—
Nice Systems, Ltd. ADR (Israel) †	18,800		520,196	18,600		514,662	—		—
NII Holdings, Inc. †	26,961		1,675,896	—		—	—		—
Nippon Telegraph & Telephone
(NTT) Corp. (Japan)	608		2,987,379	552		2,712,226	139		682,970
NTT DoCoMo, Inc. (Japan)	594		915,943	564		869,683	158		243,635
Premiere Global Services, Inc. †	164,710		1,429,683	163,700		1,420,916	28,200		244,776
Rogers Communications Class B (Canada)	3,300		181,065	—		—	—		—
SAVVIS, Inc. † (SG) (SB)	21,600		615,600	21,300		607,050	—		—
Sprint Nextel Corp.	258,980		4,441,507	258,620		4,435,333	81,500		1,397,725
Syniverse Holdings, Inc. †	58,992		884,880	58,150		872,250	—		—
Telecom Italia SpA (Italy)	166		471	—		—	—		—
Telefonica SA (Spain)	72,339		1,252,508	64,710		1,120,416	17,355		300,492
Telekom Austria AG (Austria)	15,127		381,281	14,797		372,963	3,519		88,698
Telkom SA, Ltd. (South Africa)	69,852		1,210,225	—		—	—		—
USA Mobility, Inc.	45,100		1,030,084	45,000		1,027,800	14,200		324,328
Verizon Communications, Inc.	206,376		7,662,741	206,053		7,650,748	64,900		2,409,737
Vodafone Group PLC (United Kingdom)	982,682		2,243,722	889,911		2,031,901	225,493		514,860
Windstream Corp.	60,100		792,719	60,000		791,400	18,900		249,291
			——————————			——————————			——————————
			72,300,762			49,999,551			13,544,550
Communications Equipment			1.0%			0.9%			0.6%
Arris Group, Inc. †	82,400		944,304	82,300		943,158	25,900		296,814
Cisco Systems, Inc. † #	371,290		8,539,670	370,776		8,527,848	116,800		2,686,400
Coinstar, Inc. †	17,900		515,162	17,900		515,162	5,600		161,168
CommScope, Inc. † (SG)	22,300		732,778	21,400		703,204	—		—
F5 Networks, Inc. †	8,200		440,504	8,100		435,132	—		—
Nokia OYJ (Finland)	267,760		5,311,008	241,664		4,793,395	61,212		1,214,137
Qualcomm, Inc.	54,470		1,979,985	54,400		1,977,440	17,100		621,585
Telefonaktiebolaget LM Ericsson AB
Class B (Sweden)	267,492		927,359	255,027		884,145	65,939		228,602
			——————————			——————————			——————————
			19,390,770			18,779,484			5,208,706
Computers			2.3%			1.9%			0.9%
Anixter International, Inc. (SB)	11,900		671,993	11,800		666,346	—		—
ANSYS, Inc. †	21,600		954,288	21,100		932,198	—		—
Avocent Corp. †	25,900		780,108	24,400		734,928	—		—
Blackbaud, Inc.	42,100		925,779	41,600		914,784	—		—
Brocade Communications
Systems, Inc. † (SB)	310,900		2,194,954	308,500		2,178,010	73,900		521,734
D-Link Corp. (Taiwan)	784,000		831,490	—		—	—		—
Dell, Inc. †	48,100		1,098,604	48,000		1,096,320	15,100		344,884
Emulex Corp. †	28,500		517,845	27,500		499,675	—		—
Fujitsu, Ltd. (Japan)	105,000		869,228	99,000		819,558	28,000		231,794
Hewlett-Packard Co.	261,600		9,598,104	261,200		9,583,428	82,300		3,019,587
IBM Corp.	108,840		8,918,350	108,700		8,906,878	34,200		2,802,348
Lexmark International, Inc. Class A †	11,300		651,558	11,300		651,558	3,600		207,576
Lite-On Technology Corp. (Taiwan)	629,921		779,661	—		—	—		—
Mitsubishi Electric Corp. (Japan)	129,000		1,085,008	119,000		1,000,899	32,000		269,149
MTS Systems Corp.	49,000		1,584,660	48,150		1,557,171	5,000		161,700
NET One Systems Co., Ltd. (Japan)	316		441,037	310		432,662	85		118,633
Open Solutions, Inc. †	18,100		521,461	17,900		515,699	—		—

34

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Computers continued
Palm, Inc. † (SG)	53,900	$	784,784	52,400	$	762,944	—	$	—
RadiSys Corp. †	26,120		555,050	26,100		554,625	8,200		174,250
RealNetworks, Inc. †	154,500		1,639,245	154,300		1,637,123	48,600		515,646
Satyam Computer Services, Ltd. (India)	47,102		839,410	—		—	—		—
Smith Micro Software, Inc. †
(SG) (SB) (SC)	40,700		585,266	40,700		585,266	12,800		184,064
SPSS, Inc. †	32,100		800,253	32,000		797,760	10,100		251,793
Transaction Systems Architects, Inc. †	18,200		624,624	18,100		621,192	5,700		195,624
Trident Microsystems, Inc. †	15,100		351,226	14,900		346,574	—		—
Vasco Data Security Intl. †	74,100		767,676	73,200		758,352	—		—
Western Digital Corp. †	29,323		530,746	28,970		524,357	—		—
Wincor Nixdorf AG (Germany)	1,894		274,367	—		—	—		—
Wistron Corp. (Taiwan)	1,705,446		1,931,408	—		—	—		—
Xyratex, Ltd. (Bermuda) †	22,800		434,568	22,500		428,850	—		—
			——————————			——————————			——————————
			42,542,751			37,507,157			8,998,782
Conglomerates			1.0%			0.9%			0.5%
3M Co.	49,920		3,715,046	49,910		3,714,302	15,700		1,168,394
AMETEK, Inc.	8,700		378,885	8,600		374,530	—		—
Ansell, Ltd. (Australia)	114,864		906,769	108,919		859,838	28,319		223,558
General Electric Co. #	130,980		4,623,594	130,778		4,616,463	41,200		1,454,360
Honeywell International, Inc.	20,200		826,180	20,100		822,090	6,300		257,670
Itochu Corp. (Japan)	330,000		2,567,278	300,000		2,333,889	76,000		591,252
Swire Pacific, Ltd. (Hong Kong)	297,500		3,102,627	270,500		2,821,044	68,500		714,386
Vivendi SA (France)	83,160		2,994,545	75,602		2,722,386	19,148		689,509
			——————————			——————————			——————————
			19,114,924			18,264,542			5,099,129
Consumer Cyclicals			8.9%			7.5%			3.5%
Adidas-Salomon AG (Germany)	11,448		537,371	11,200		525,730	2,800		131,433
Advance America Cash Advance
Centers, Inc.	31,100		448,462	30,700		442,694	—		—
Aegis Group PLC (United Kingdom)	363,898		909,035	345,060		861,977	92,192		230,300
Aisin Seiki Co., Ltd. (Japan)	42,500		1,245,627	37,800		1,107,875	9,700		284,296
American Eagle Outfitters, Inc.
(SG) (SB)	64,760		2,838,431	64,640		2,833,171	20,400		894,132
American Woodmark Corp. (SG) (SB) (SC)	28,000		943,320	27,900		939,951	8,800		296,472
AnnTaylor Stores Corp. †	18,500		774,410	18,400		770,224	5,800		242,788
Aristocrat Leisure, Ltd. (Australia)	27,124		285,101	—		—	—		—
Assa Abloy AB Class B (Sweden)	600		11,158	—		—	200		3,719
Autobacs Seven Co., Ltd. (Japan)	12,800		480,712	12,500		469,445	3,300		123,933
Barloworld, Ltd. (South Africa)	58,463		975,249	—		—	—		—
Barratt Developments PLC
(United Kingdom)	15,056		299,760	—		—	—		—
Bayerische Motoren Werke (BMW) AG
(Germany)	4,550		243,603	—		—	—		—
Berkeley Group Holdings PLC
(United Kingdom) †	127,453		3,201,691	105,762		2,656,801	26,656		669,614
BJ’s Wholesale Club, Inc. †	20,000		583,600	19,000		554,420	—		—
British Sky Broadcasting PLC
(United Kingdom)	128,664		1,312,069	117,316		1,196,347	30,868		314,781
Brown Shoe Co., Inc.	15,800		566,272	15,800		566,272	5,000		179,200
Buckle, Inc. (The)	24,450		927,633	23,900		906,766	—		—
Burberry Group PLC (United Kingdom)	65,479		631,043	64,050		617,271	16,652		160,481
Casey’s General Stores, Inc.	73,860		1,644,862	72,600		1,616,802	15,800		351,866
Catalina Marketing Corp.	19,200		528,000	18,500		508,750	—		—
Cato Corp. (The) Class A	27,350		599,239	26,300		576,233	—		—
Charlotte Russe Holding, Inc. †	51,100		1,407,294	50,800		1,399,032	10,000		275,400
Choice Hotels International, Inc.	15,300		625,770	14,700		601,230	—		—

35

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Consumer Cyclicals continued
Citadel Broadcasting Corp.	52,600	$	494,440	52,600	$	494,440	16,600	$	156,040
Claire’s Stores, Inc.	20,500		597,780	19,500		568,620	—		—
Consolidated Graphics, Inc. †	22,100		1,329,757	21,400		1,287,638	2,600		156,442
Continental AG (Germany)	20,232		2,347,584	18,323		2,126,077	4,652		539,787
Cumulus Media, Inc. Class A †	44,700		427,332	44,600		426,376	14,100		134,796
Daily Mail and General Trust Class A
(United Kingdom)	76,261		863,854	72,313		819,133	19,667		222,780
Davis Service Group PLC (United Kingdom)	90,155		809,078	85,373		766,163	22,197		199,203
Deckers Outdoor Corp. † (SG) (SB)	40,900		1,935,388	40,000		1,892,800	3,500		165,620
Dillards, Inc. Class A (SB)	14,400		471,312	14,100		461,493	—		—
Dollar Tree Stores, Inc. †	59,500		1,842,120	59,400		1,839,024	18,700		578,952
Dress Barn, Inc. †	83,400		1,819,788	83,000		1,811,060	16,100		351,302
DSW, Inc. Class A † (SG) (SB)	24,400		768,600	23,600		743,400	—		—
EMAP PLC (United Kingdom)	50,696		712,031	46,902		658,743	12,195		171,280
EMAP PLC Class B (United Kingdom) (F) †	60,836		124,986	56,283		115,632	14,634		30,065
Fiat SpA (Italy) † (SG) (SB) (SC)	171,039		2,723,140	154,893		2,466,077	38,881		619,031
First Choice Holidays PLC
(United Kingdom)	188,935		703,983	179,154		667,539	48,946		182,376
Foschini, Ltd. (South Africa)	22,413		132,808	—		—	—		—
General Motors Corp. (SG) (SB) (SC)	75,900		2,524,434	75,800		2,521,108	23,900		794,914
Genesco, Inc. †	21,500		741,105	21,200		730,764	—		—
Genlyte Group, Inc. (The) †	30,600		2,178,720	30,500		2,171,600	6,100		434,320
Gildan Activewear, Inc. (Canada) †	5,100		248,462	—		—	—		—
Greek Organization of Football
Prognostics (OPAP) SA (Greece)	2		67	—		—	—		—
Group 1 Automotive, Inc.	9,600		479,040	9,500		474,050	—		—
GS Holdings Corp. (South Korea)	29,700		1,041,366	—		—	—		—
GUS PLC (United Kingdom)	79,369		1,431,974	71,878		1,296,822	18,126		327,029
Gymboree Corp. (The) †	39,600		1,670,328	39,300		1,657,674	5,400		227,772
Hasbro, Inc.	38,400		873,600	38,300		871,325	12,100		275,275
Home Depot, Inc. (The)	15,700		569,439	15,700		569,439	4,900		177,723
Honda Motor Co., Ltd. (Japan)	25,600		864,154	24,200		816,895	6,400		216,038
Hyunjin Materials Co., Ltd.
(South Korea) †	27,556		480,674	—		—	—		—
ICT Group, Inc. †	19,900		626,253	19,900		626,253	—		—
Industria de Diseno Textil (Inditex) SA
(Spain)	44,328		2,063,921	40,145		1,869,160	10,125		471,422
inVentiv Health, Inc. †	27,000		864,810	26,700		855,201	—		—
Jakks Pacific, Inc. †	73,300		1,306,939	72,100		1,285,543	11,600		206,828
K-Swiss, Inc. Class A	44,100		1,325,646	43,800		1,316,628	8,000		240,480
Kellwood Co.	24,700		712,101	24,700		712,101	7,800		224,874
Knology, Inc. †	149		1,478	—		—	66		655
Kuoni Reisen Holding AG (Switzerland) †	3,714		1,904,995	3,365		1,725,985	852		437,010
Laidlaw International, Inc.	72,500		1,981,425	71,800		1,962,294	15,900		434,547
Lamson & Sessions Co. (The) † (SG) (SB)	22,400		533,568	22,000		524,040	—		—
Landauer, Inc.	11,600		588,700	11,200		568,400	—		—
Live Nation, Inc. † (SB)	27,600		563,592	27,500		561,550	8,700		177,654
Lodgenet Entertainment Corp. †	17,500		330,400	17,300		326,624	—		—
Lotte Shopping Co., Ltd. (South Korea)	4,080		1,446,254	—		—	—		—
Lowe’s Cos., Inc.	75,300		2,112,918	75,100		2,107,306	23,700		665,022
LSI Industries, Inc.	15,900		258,375	15,500		251,875	—		—
Macrovision Corp. †	54,700		1,295,843	54,200		1,283,998	8,400		198,996
Maidenform Brands, Inc. †	54,700		1,055,710	54,000		1,042,200	—		—
Manpower, Inc.	10,900		667,843	10,800		661,716	3,400		208,318
Marks & Spencer Group PLC
(United Kingdom)	243,598		2,923,169	190,323		2,283,871	48,226		578,711
Marvel Entertainment, Inc. † (SG) (SB)	28,000		675,920	27,700		668,678	—		—

36

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Consumer Cyclicals continued
Matsushita Electric Industrial Co.,
Ltd. (Japan)	177,000	$	3,762,198	124,000	$	2,635,664	32,000	$	680,171
Mattel, Inc.	65,200		1,284,440	65,200		1,284,440	20,500		403,850
McGraw-Hill Cos., Inc. (The)	91,300		5,298,139	91,200		5,292,336	28,700		1,665,461
Mediaset SpA (Italy)	59,635		640,148	58,359		626,451	15,900		170,678
Men’s Wearhouse, Inc. (The)	22,350		831,644	21,450		798,155	—		—
Modern Times Group AB Class B (Sweden)	6,650		344,005	—		—	—		—
Monarch Casino & Resort, Inc. †	29,100		564,249	28,700		556,493	—		—
Morningstar, Inc. † (SG) (SB)	13,300		490,770	13,100		483,390	—		—
Multimedia Games, Inc. † (SG) (SB) (SC)	86,500		785,420	86,100		781,788	20,600		187,048
Next PLC (United Kingdom)	64,723		2,291,944	50,205		1,777,839	12,662		448,382
NIKE, Inc. Class B	8,900		779,818	8,900		779,818	2,800		245,336
Nobia AB (Sweden)	12,000		401,283	—		—	—		—
Nordstrom, Inc.	147,500		6,239,250	147,280		6,229,944	46,400		1,962,720
Office Depot, Inc. †	43,500		1,726,950	43,400		1,722,980	13,700		543,890
Omnicom Group, Inc.	8,300		776,880	8,200		767,520	2,600		243,360
Pantry, Inc. (The) †	48,840		2,753,111	48,600		2,739,582	9,600		541,152
Payless ShoeSource, Inc. †	81,600		2,031,840	79,700		1,984,530	13,800		343,620
Perry Ellis International, Inc. †	16,200		500,256	15,700		484,816	—		—
Phillips-Van Heusen Corp.	67,600		2,823,652	66,000		2,756,820	5,400		225,558
Piaggio & C SpA (Italy) †	99,332		368,635	—		—	—		—
Playboy Enterprises, Inc. Class B †	61,500		578,715	61,400		577,774	19,300		181,613
Playtech, Ltd. (Virgin Islands)	59,744		277,844	—		—	—		—
Plexus Corp. †	64,000		1,228,800	62,900		1,207,680	13,900		266,880
Polo Ralph Lauren Corp.	12,900		834,501	12,900		834,501	4,100		265,229
Polycom, Inc. †	52,200		1,280,466	51,900		1,273,107	8,900		218,317
Praktiker Bau - und Heimwerkermaerkte
AG (Germany)	9,751		321,240	—		—	—		—
Puma AG Rudolf Dassier Sport (Germany)	1,490		507,194	1,458		496,301	379		129,011
Punch Taverns PLC (United Kingdom)	15,158		274,471	—		—	—		—
Rent-A-Center, Inc. †	32,500		951,925	32,500		951,925	10,200		298,758
S.A. D’Ieteren NV (Belgium)	2,147		715,744	2,034		678,073	528		176,019
Sankyo Co., Ltd. (Japan)	4,700		250,739	—		—	—		—
Schibsted ASA (Norway)	6,700		201,525	—		—	—		—
Scholastic Corp. †	17,800		554,470	16,900		526,435	—		—
Select Comfort Corp. † (SG) (SB) (SC)	30,300		662,964	30,250		661,870	9,550		208,954
SGS SA (Switzerland)	248		249,068	—		—	—		—
Sherwin-Williams Co. (The)	50,100		2,794,578	50,000		2,789,000	15,800		881,324
Skechers U.S.A., Inc. Class A †	43,640		1,025,976	43,600		1,025,036	13,700		322,087
Snap-On, Inc.	11,300		503,415	11,300		503,415	3,600		160,380
Societe Television Francaise I (France)	21,926		699,563	20,764		662,489	5,398		172,227
Sodexho Alliance SA (France)	10,306		570,441	—		—	—		—
Sony Corp. (Japan)	48,300		1,953,714	43,800		1,771,691	11,100		448,990
Sotheby’s Holdings, Inc. Class A	16,200		522,288	16,000		515,840	—		—
Standard Parking Corp. †	25,800		809,604	25,500		800,190	—		—
Steven Madden, Ltd.	54,100		2,122,884	53,050		2,081,682	7,300		286,452
Suzuki Motor Corp. (Japan)	64,000		1,630,452	—		—	—		—
Tech Data Corp. †	23,400		854,802	23,300		851,149	7,300		266,669
Tempur-Pedic International,
Inc. † (SG) (SB)	57,100		980,407	56,400		968,388	—		—
Tenneco Automotive, Inc. †	33,600		785,904	33,500		783,565	10,600		247,934
TJX Cos., Inc. (The)	27,400		768,022	27,400		768,022	8,600		241,058
Tomkins PLC (United Kingdom)	156,045		689,997	147,767		653,393	38,892		171,972
Toro Co. (The)	33,900		1,429,563	33,000		1,391,610	—		—
Toyota Motor Corp. (Japan)	23,965		1,305,719	9,900		539,396	2,600		141,659
Tween Brands, Inc. †	36,900		1,387,440	36,500		1,372,400	7,800		293,280
United Business Media PLC
(United Kingdom)	39,972		494,594	39,100		483,804	9,298		115,049

37

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Consumer Cyclicals continued
Vail Resorts, Inc. †	14,000	$	560,280	13,900	$	556,278	4,400	$	176,088
VS Holdings, Inc. (F) †	63,050		1	—		—	15,358		1
Volkswagon AG (Germany)	37,420		3,195,924	33,889		2,894,352	8,587		733,389
Volt Information Sciences, Inc. †	28,600		1,016,730	28,600		1,016,730	9,000		319,950
Wal-Mart Stores, Inc.	90,150		4,446,197	90,032		4,440,378	28,400		1,400,687
Walt Disney Co. (The) (SG) (SB) (SC)	96,527		2,983,650	96,389		2,979,384	30,300		936,573
Warner Music Group Corp.	94,400		2,449,680	94,300		2,447,085	29,700		770,715
Watson Wyatt Worldwide, Inc. Class A	21,100		863,412	20,100		822,492	—		—
Westwood One, Inc.	111,700		790,836	111,600		790,128	35,100		248,508
Wiley (John) & Sons, Inc. Class A	22,100		795,821	22,100		795,821	7,000		252,070
William Hill PLC (United Kingdom)	349,639		4,202,189	316,632		3,805,489	80,230		964,256
Wolverine World Wide, Inc.	20,600		583,186	19,850		561,954	—		—
Yamada Denki Co., Ltd. (Japan)	2,250		226,686	—		—	—		—
Yamaha Motor Co., Ltd. (Japan)	100,800		2,682,067	91,200		2,426,632	23,100		614,640
			——————————			——————————			——————————
			166,177,236			148,446,331			33,535,642
Consumer Finance			0.6%			0.5%			0.2%
Accredited Home Lenders
Holding Co. † (SB)	30,980		1,113,421	30,900		1,110,546	9,750		350,415
Asta Funding, Inc. (SG) (SB) (SC)	55,400		2,076,946	54,300		2,035,707	5,700		213,693
Capital Trust, Inc. Class A (R)	7,000		285,110	6,700		272,891	—		—
CompuCredit Corp. † (SG) (SB)	15,700		474,297	14,900		450,129	—		—
Countrywide Financial Corp.	79,200		2,775,168	79,120		2,772,365	24,900		872,496
Diamond Lease Co., Ltd. (Japan)	10,000		481,120	—		—	—		—
Portfolio Recovery Associates,
Inc. † (SG) (SB)	13,800		605,406	13,600		596,632	—		—
Provident Financial PLC (United Kingdom)	71,641		836,943	67,841		792,550	17,639		206,067
World Acceptance Corp. †	40,399		1,776,748	39,200		1,724,016	—		—
			———————————————			———————————————			———————————————
			10,425,159			9,754,836			1,642,671
Consumer Staples			7.3%			6.3%			3.7%
Aderans Co., Ltd. (Japan)	39,100		1,012,560	35,700		924,511	9,600		248,608
Administaff, Inc. (SB)	17,200		579,640	17,200		579,640	5,400		181,980
Altria Group, Inc.	117,830		9,019,887	117,734		9,012,538	37,100		2,840,005
Anheuser-Busch Cos., Inc.	24,000		1,140,240	24,000		1,140,240	7,500		356,325
Autogrill SpA (Italy)	97,811		1,554,787	88,578		1,408,021	22,348		355,240
Avon Products, Inc.	46,900		1,437,954	46,800		1,434,888	14,700		450,702
BAT Industries PLC (United Kingdom)	143,862		3,879,899	130,786		3,527,245	33,124		893,341
Blyth Industries, Inc.	20,900		508,497	20,900		508,497	6,600		160,578
Brinker International, Inc.	26,400		1,058,376	26,300		1,054,367	8,300		332,747
C&C GROUP PLC (Ireland)	21,170		287,177	—		—	—		—
Carrefour Supermarche SA (France)	14,353		905,885	—		—	—		—
CBRL Group, Inc.	20,900		844,987	20,800		840,944	6,600		266,838
Chattem, Inc. †	17,900		628,648	17,700		621,624	—		—
CKE Restaurants, Inc.	46,500		777,480	45,900		767,448	—		—
Coca-Cola Co. (The)	21,500		960,620	21,400		956,152	6,700		299,356
Colgate-Palmolive Co.	23,400		1,453,140	23,400		1,453,140	7,400		459,540
Colruyt SA (Belgium)	3,510		598,400	3,540		603,515	967		164,858
Comcast Corp. Class A †	44,900		1,654,565	44,800		1,650,880	14,100		519,585
Costco Wholesale Corp.	21,850		1,085,508	21,777		1,081,881	6,900		342,792
Darden Restaurants, Inc.	60,970		2,589,396	60,910		2,586,848	19,200		815,424
Domino’s Pizza, Inc.	58,300		1,495,395	56,500		1,449,225	—		—
Estee Lauder Cos., Inc. (The) Class A	64,300		2,593,219	64,200		2,589,186	20,200		814,666
Flowers Foods, Inc.	43,800		1,177,344	43,000		1,155,840	8,700		233,856
General Mills, Inc.	48,200		2,728,120	48,100		2,722,460	15,200		860,320
Heidrick & Struggles
International, Inc. †	13,700		493,200	13,700		493,200	4,300		154,800
Heineken NV (Netherlands)	208,052		9,505,118	188,412		8,607,840	47,741		2,181,108

38

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Consumer Staples continued
Henkel KGaA (Preference) (Germany)	4,467	$	622,878	—	$	—	—	$	—
Ihop Corp.	10,700		495,945	10,600		491,310	—		—
Imperial Tobacco Group PLC
(United Kingdom)	26,183		870,455	24,795		824,311	6,706		222,941
InBev NV (Belgium)	16,873		927,944	—		—	—		—
Inchcape PLC (United Kingdom)	420,456		4,112,934	382,240		3,739,102	96,814		947,042
Jack in the Box, Inc. †	36,779		1,919,128	36,100		1,883,698	6,700		349,606
Japan Tobacco, Inc. (Japan)	1,202		4,681,536	1,088		4,237,530	278		1,082,751
Kellogg Co.	37,370		1,850,562	37,300		1,847,096	11,800		584,336
Kimberly-Clark Corp.	21,430		1,400,665	21,370		1,396,743	6,700		437,912
Koninklijke Ahold NV (Netherlands) †	68,531		727,395	43,815		465,057	10,420		110,599
Korn/Ferry International †	39,400		825,036	39,300		822,942	12,400		259,656
Kroger Co.	134,100		3,103,074	133,900		3,098,446	42,200		976,508
Labor Ready, Inc. †	66,200		1,054,566	66,100		1,052,973	20,800		331,344
Loews Corp. - Carolina Group	10,900		603,751	10,800		598,212	3,400		188,326
Longs Drug Stores, Inc. (SB)	21,000		966,210	21,000		966,210	6,600		303,666
Luby’s, Inc. †	42,600		420,462	40,500		399,735	—		—
Marubeni Corp. (Japan)	180,000		900,463	166,000		830,427	43,000		215,111
McDonald’s Corp.	99,800		3,904,176	99,600		3,896,352	31,400		1,228,368
Meiji Dairies Corp. (Japan)	429,000		2,900,729	389,000		2,630,264	98,000		662,637
MGP Ingredients, Inc.	18,200		387,114	18,200		387,114	5,700		121,239
Move, Inc. †	156,400		767,924	156,200		766,942	49,200		241,572
Nash Finch Co. (SG) (SB) (SC)	55,730		1,311,327	55,000		1,294,150	9,600		225,888
Nestle SA (Switzerland)	2,373		825,325	—		—	—		—
Papa John’s International, Inc. †	23,000		830,530	23,000		830,530	7,200		259,992
Parmalat SpA (Italy) †	46,614		167,087	—		—	—		—
Pepsi Bottling Group, Inc. (The)	83,100		2,950,050	83,000		2,946,500	26,100		926,550
PepsiCo, Inc.	38,000		2,479,880	38,000		2,479,880	12,000		783,120
Procter & Gamble Co. (The)	37,280		2,310,614	37,190		2,305,036	11,700		725,166
Ralcorp Holdings, Inc. †	13,200		636,636	13,200		636,636	4,100		197,743
Reckitt Benckiser PLC (United Kingdom)	27,220		1,125,571	—		—	—		—
Reynolds American, Inc. (SG)	101,700		6,302,349	101,600		6,296,152	32,000		1,983,040
Robert Half International, Inc.	37,200		1,263,684	37,100		1,260,287	11,700		397,449
Ruby Tuesday, Inc.	34,600		975,374	34,500		972,555	10,900		307,271
Safeway, Inc.	92,300		2,801,305	92,100		2,795,235	29,000		880,150
Seaboard Corp.	375		451,875	355		427,775	—		—
Spartan Stores, Inc.	27,400		463,060	26,600		449,540	—		—
Starbucks Corp. †	70,100		2,386,905	70,000		2,383,500	22,000		749,100
Swedish Match AB (Sweden)	112,100		1,824,599	102,400		1,666,717	25,700		418,307
Tesco PLC (United Kingdom)	90,586		609,075	—		—	—		—
Thai Beverage PCL (Thailand)	259,000		48,167	—		—	—		—
Thai Beverage PCL 144A (Thailand)	5,881,000		1,093,704	—		—	—		—
Time Warner, Inc.	462,920		8,439,032	462,223		8,426,325	145,600		2,654,288
Toyo Suisan Kaisha, Ltd. (Japan)	144,000		2,075,415	130,000		1,873,638	33,000		475,616
Unilever NV (Netherlands)	26,076		640,741	25,509		626,808	6,630		162,913
Universal Robina Corp. (Philippines)	3,018,490		1,081,088	—		—	—		—
Universal Robina Corp. 144A
(Philippines)	332,000		118,908	—		—	—		—
Universal Technical Institute, Inc. †	47,200		844,408	47,200		844,408	14,900		266,561
USANA Health
Sciences, Inc. † (SG) (SB) (SC)	32,300		1,440,257	32,300		1,440,257	10,200		454,818
UST, Inc.	35,310		1,936,047	35,200		1,930,016	11,100		608,613
Vector Group, Ltd. (SG) (SB) (SC)	27,900		452,538	27,900		452,538	8,800		142,736
VFB, LLC (F) ‡ †	—		—	—		—	254,213		5,402
Viacom, Inc. Class B †	11,900		442,442	11,900		442,442	3,700		137,566
Woolworths, Ltd. (Australia)	277,482		4,186,659	238,597		3,599,961	60,429		911,755
Yum! Brands, Inc.	24,360		1,267,938	24,360		1,267,938	7,700		400,785
			——————————			——————————			——————————
			137,195,579			125,153,418			35,271,112

39

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Electronics			3.4%			2.1%			1.1%
ALPS Electric Co., Ltd. (Japan)	107,700	$	1,124,634	102,000	$	1,065,113	26,100	$	272,544
Ansoft Corp. †	66,800		1,663,988	66,200		1,649,042	8,900		221,699
Atmel Corp. †	650,230		3,927,389	649,300		3,921,772	204,515		1,235,271
AU Optronics Corp. (Taiwan)	811,180		1,154,400	—		—	—		—
AVX Corp.	103,000		1,822,070	102,800		1,818,532	32,400		573,156
Compal Communications, Inc. (Taiwan)	125,000		554,247	—		—	—		—
Diodes, Inc. †	15,800		682,086	15,650		675,611	—		—
Eagle Test Systems, Inc. † (SG) (SB)	45,900		758,268	45,300		748,356	—		—
FEI Co. † (SG) (SB) (SC)	48,700		1,028,057	48,600		1,025,946	15,300		322,983
General Cable Corp. †	46,300		1,769,123	44,800		1,711,808	—		—
Hon Hai Precision Industry Co., Ltd.
(Taiwan)	315,520		1,920,125	—		—	—		—
Hynix Semiconductor, Inc.
(South Korea) †	44,770		1,771,897	—		—	—		—
Infineon Technologies AG (Germany) †	56,436		668,355	55,204		653,765	14,352		169,967
Intel Corp. #	268,830		5,529,833	268,426		5,521,523	84,600		1,740,222
Komag, Inc. † (SG) (SB) (SC)	42,400		1,355,104	42,200		1,348,712	8,900		284,444
Littelfuse, Inc. †	40,700		1,412,290	40,400		1,401,880	4,500		156,150
LSI Logic Corp. †	97,100		798,162	97,000		797,340	30,500		250,710
Motorola, Inc.	149,340		3,733,500	149,116		3,727,900	47,000		1,175,000
National Semiconductor Corp.	30,700		722,371	30,600		720,018	9,600		225,888
NEC Corp. (Japan)	47,000		259,464	46,000		253,943	11,000		60,726
Omnivision Technologies, Inc. †
(SG) (SB) (SC)	59,100		843,357	57,900		826,233	12,600		179,802
Omron Corp. (Japan)	51,800		1,269,897	37,600		921,778	9,700		237,799
Orbotech, Ltd. (Israel) †	33,100		784,470	—		—	—		—
Park Electrochemical Corp.	11,600		367,488	11,500		364,320	—		—
Powerchip Semiconductor Corp. (Taiwan)	1,254,512		800,701	—		—	—		—
Reunert, Ltd. (South Africa)	303,770		2,666,317	—		—	—		—
RF Micro Devices, Inc. †	141,000		1,068,780	138,300		1,048,314	—		—
Samsung Electronics Co., Ltd.
(South Korea)	8,693		6,123,344	—		—	—		—
Samsung Electronics Co., Ltd.
(Preference) (South Korea)	1,838		962,671	—		—	—		—
Shinko Electric Industries (Japan)	7,300		204,364	—		—	—		—
Silicon Image, Inc. †	90,900		1,156,248	89,200		1,134,624	—		—
Texas Instruments, Inc. (SG) (SB)	132,000		4,389,000	131,800		4,382,350	41,500		1,379,875
Toshiba Corp. (Japan)	401,000		2,612,745	362,000		2,358,638	91,000		592,917
TTM Technologies, Inc. †	117,800		1,378,260	115,800		1,354,860	11,000		128,700
Uniden (Japan)	39,000		412,909	38,000		402,322	10,000		105,874
United Microelectronics Corp. (Taiwan)	4,536,054		2,535,782	—		—	—		—
Varian, Inc. †	29,400		1,348,578	29,400		1,348,578	9,300		426,591
Yageo Corp. (Taiwan) †	2,874,000		1,006,388	—		—	—		—
Zoran Corp. †	53,800		865,104	53,800		865,104	16,900		271,752
			——————————			——————————			——————————
			63,451,766			42,048,382			10,012,070
Energy			6.7%			4.4%			2.4%
Alon USA Energy, Inc.	45,500		1,341,795	44,700		1,318,203	5,000		147,450
BP PLC (United Kingdom)	431,201		4,687,161	291,760		3,171,435	73,930		803,620
Chevron Corp. #	132,702		8,607,052	132,484		8,592,912	41,700		2,704,662
China Petroleum & Chemical Corp. (China)	5,098,000		3,158,424	—		—	—		—
China Shenhua Energy Co., Ltd. (China)	622,000		1,000,705	—		—	—		—
ConocoPhillips #	71,329		4,246,215	71,231		4,240,381	22,399		1,333,412
Core Laboratories NV (Netherlands) †	17,600		1,122,880	17,400		1,110,120	—		—
ENI SpA (Italy)	200,884		5,941,166	168,912		4,995,591	42,863		1,267,678
Exploration Company of Delaware, Inc.
(The) †	44,800		428,736	44,700		427,779	14,100		134,937
Exxon Mobil Corp. #	362,130		24,298,923	361,557		24,260,475	113,900		7,642,690

40

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Energy continued
Frontier Oil Corp. (SG) (SB)	115,320	$	3,065,206	113,200	$	3,008,856	9,300	$	247,194
Gazprom (Russia)	699,079		7,480,145	—		—	—		—
Giant Industries, Inc. †	6,950		564,340	6,900		560,280	2,200		178,640
Harvest Natural Resources, Inc. †	61,100		632,385	61,000		631,350	19,200		198,720
Helix Energy Solutions Group, Inc. †	17,800		594,520	17,600		587,840	—		—
Helmerich & Payne, Inc.	26,300		605,689	25,000		575,750	—		—
Holly Corp.	47,800		2,071,174	47,600		2,062,508	9,500		411,635
Houston Exploration Co. † (SG)	10,100		557,015	10,000		551,500	—		—
Lone Star Technologies, Inc. †	23,800		1,151,444	22,500		1,088,550	—		—
Lufkin Industries, Inc.	9,400		497,448	9,400		497,448	3,000		158,760
Lukoil (Russia)	7,558		575,920	—		—	—		—
Lukoil ADR (Russia)	36,664		2,777,298	—		—	—		—
Marathon Oil Corp.	58,210		4,476,349	58,160		4,472,504	18,300		1,407,270
Matrix Service Co. † (SG) (SB)	54,900		718,641	54,100		708,169	—		—
MOL Magyar Olaj - es Gazipari Rt.
(Hungary)	16,111		1,467,235	—		—	—		—
Norsk Hydro ASA (Norway)	131,845		2,948,975	84,295		1,885,425	21,275		475,858
Occidental Petroleum Corp.	39,500		1,900,345	39,500		1,900,345	12,400		596,564
Oil States International, Inc. †	12,800		352,000	12,600		346,500	—		—
Patterson-UTI Energy, Inc.	30,000		712,800	29,900		710,424	9,400		223,344
PetroChina Co., Ltd. (China)	877,000		943,804	—		—	—		—
Petroleo Brasileiro SA ADR (Brazil)	32,043		2,686,165	—		—	—		—
Petroleo Brasileiro SA ADR
(Preference) (Brazil)	49,110		3,675,392	—		—	—		—
Petroleum Development Corp. †	11,200		446,768	11,100		442,779	—		—
Questar Corp.	29,100		2,379,507	29,000		2,371,330	9,100		744,107
Renewable Energy Corp. AS (Norway) †	7,427		115,115	—		—	—		—
Renewable Energy Corp. AS 144A
(Norway) †	7,784		120,649	—		—	—		—
Repsol YPF SA (Spain)	35,827		1,065,033	33,785		1,004,330	9,027		268,347
Royal Dutch Shell PLC Class A
(Netherlands)	34,285		1,127,757	—		—	—		—
Royal Dutch Shell PLC Class B
(Netherlands)	213,216		7,219,792	178,042		6,028,752	45,113		1,527,589
Saipem SpA (Italy)	28,051		608,974	—		—	—		—
Sasol, Ltd. (South Africa)	86,254		2,844,357	—		—	—		—
Statoil ASA (Norway)	167,965		3,975,968	148,800		3,522,306	37,700		892,412
Sunoco, Inc.	74,940		4,660,519	74,800		4,651,812	23,600		1,467,684
Surgutneftegaz (Russia)	751,079		968,892	—		—	—		—
Tatneft ADR (Russia)	10,429		873,429	—		—	—		—
Technicas Reunidas SA (Spain) †	3,508		107,260	—		—	—		—
Tesoro Corp. (SG) (SB)	8,300		481,234	8,100		469,638	—		—
Total SA (France)	17,532		1,149,162	—		—	—		—
Trico Marine Services, Inc. †	27,000		911,250	26,900		907,875	8,500		286,875
Vaalco Energy, Inc. †	82,300		590,914	81,000		581,580	—		—
Western Refining, Inc.	33,301		773,915	32,115		746,353	—		—
			——————————			——————————			——————————
			125,707,842			88,431,100			23,119,448
Financial			4.3%			3.6%			2.1%
Acta Holding ASA (Norway)	127,800		517,766	—		—	—		—
Advanta Corp. Class B	16,700		616,230	16,700		616,230	5,200		191,880
Ameriprise Financial, Inc.	57,200		2,682,680	57,100		2,677,990	18,000		844,200
Assurant, Inc.	18,200		972,062	18,200		972,062	5,700		304,437
CapitalSource, Inc. (R)	121,115		3,127,189	120,910		3,121,896	38,085		983,355
Citigroup, Inc. #	278,253		13,820,827	277,837		13,800,164	87,500		4,346,125
Contifinancial Corp. Liquidating Trust
Units (F)	1,878,703		188	—		—	500,683		50
Credit Acceptance Corp. †	19,600		581,728	19,400		575,792	—		—

41

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Financial continued
Deutsche Boerse AG (Germany)	2,714	$	407,350	2,655	$	398,495	631	$	94,708
Equity One, Inc. (R)	21,900		524,943	21,900		524,943	6,900		165,393
Fidelity National Financial, Inc.	20,000		833,000	20,000		833,000	6,300		262,395
First American Corp.	40,210		1,702,491	40,100		1,697,834	12,600		533,484
Grupo Financiero Banorte SA de CV
(Mexico)	358,000		1,120,449	—		—	—		—
Hitachi Capital Corp. (Japan)	325,400		6,224,826	294,700		5,637,542	74,600		1,427,080
Independent Bank Corp.	23,305		565,845	24,675		599,109	7,770		188,656
International Securities Exchange, Inc.	17,800		834,642	17,600		825,264	—		—
JPMorgan Chase & Co.	106,302		4,991,942	106,181		4,986,260	33,500		1,573,160
Lehman Brothers Holdings, Inc.	74,900		5,532,114	74,800		5,524,728	23,600		1,743,096
Loews Corp.	10,100		382,790	10,100		382,790	3,200		121,280
London Stock Exchange Group PLC
(United Kingdom)	104,734		2,417,761	94,847		2,189,521	23,918		552,142
Man Group PLC (United Kingdom)	753,832		6,307,535	669,135		5,598,851	169,471		1,418,014
MGIC Investment Corp.	33,000		1,979,010	32,900		1,973,013	10,400		623,688
Mitsubishi UFJ Financial Group, Inc.
(Japan)	364		4,671,567	244		3,131,490	62		795,707
Nasdaq Stock Market, Inc. (The) †	26,500		801,360	26,000		786,240	—		—
Nationwide Financial Services, Inc.
Class A	20,500		986,050	20,400		981,240	6,400		307,840
New Century Financial
Corp. (R) (SG) (SB) (SC)	33,600		1,320,816	32,900		1,293,299	6,900		271,239
Nuveen Investments, Inc. Class A	9,000		461,070	8,900		455,947	—		—
Orix Corp. (Japan)	17,170		4,770,342	14,460		4,017,423	3,660		1,016,858
PMI Group, Inc. (The)	21,800		955,058	21,700		950,677	6,800		297,908
Radian Group, Inc.	37,000		2,220,000	36,900		2,214,000	11,600		696,000
Royal Bank of Scotland Group PLC
(United Kingdom)	121,199		4,162,822	99,327		3,411,585	25,157		864,068
Sampo OYJ Class A (Finland)	34,900		726,719	34,100		710,061	9,000		187,406
Shinhan Financial Group Co., Ltd.
(South Korea)	46,110		2,073,696	—		—	—		—
Sinopac Holdings Co. (Taiwan)	2,793,000		1,334,019	—		—	—		—
Tower, Ltd. (New Zealand) †	245,479		518,181	240,120		506,869	57,104		120,541
Wiener Staed Ver 144A (Austria)	1,660		104,077	—		—	—		—
			——————————			——————————			——————————
			81,249,145			71,394,315			19,930,710
Health Care			8.8%			7.6%			4.0%
Abbott Laboratories	25,120		1,219,827	25,075		1,217,642	7,900		383,624
Aetna, Inc.	95,800		3,788,890	95,700		3,784,935	30,100		1,190,455
Albany Molecular Research, Inc. †	31,141		291,480	30,787		288,166	—		—
Alfresa Holdings Corp. (Japan)	9,500		603,590	9,300		590,883	2,500		158,839
Alkermes, Inc. †	25,500		404,175	25,200		399,420	—		—
Alpharma, Inc. Class A	37,100		867,769	37,000		865,430	11,700		273,663
AMERIGROUP Corp. †	47,900		1,415,445	46,600		1,377,030	—		—
Amgen, Inc. † #	70,300		5,028,559	70,200		5,021,406	22,100		1,580,813
AMN Healthcare Services, Inc. †	38,600		916,750	38,100		904,875	—		—
Applera Corp. - Applied Biosystems Group	135,000		4,469,850	134,800		4,463,228	42,500		1,407,175
AstraZeneca PLC (United Kingdom)	125,168		7,803,452	105,560		6,581,014	26,769		1,668,882
Bayer AG (Germany)	6,065		308,045	—		—	—		—
Becton, Dickinson and Co.	96,400		6,812,588	96,200		6,798,454	30,300		2,141,301
Bio-Rad Laboratories, Inc. Class A †	13,900		983,147	13,900		983,147	4,400		311,212
Biovitrum 144A (Sweden) †	4,450		69,849	—		—	—		—
Bristol-Myers Squibb Co.	37,160		926,027	37,125		925,155	11,700		291,564
Candela Corp. †	53,900		588,049	53,800		586,958	16,900		184,379
Caremark Rx, Inc.	—		—	1		57	—		—
Celesio AG (Germany)	10,648		554,575	10,416		542,492	2,708		141,040
Cephalon, Inc. † (SG) (SB)	9,900		611,325	9,800		605,150	—		—

42

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Health Care continued
Cerner Corp. †	9,500	$	431,300	9,400	$	426,760	—	$	—
CIGNA Corp.	11,130		1,294,642	11,128		1,294,409	3,500		407,120
Coventry Health Care, Inc. †	63,680		3,280,794	63,595		3,276,414	20,000		1,030,400
Dade Behring Holdings, Inc.	39,390		1,581,902	38,400		1,542,144	—		—
Daiichi Sankyo Co., Ltd. (Japan)	40,900		1,162,069	—		—	—		—
Digene Corp. †	17,700		763,755	17,500		755,125	—		—
DJ Orthopedics, Inc. †	12,000		498,360	11,600		481,748	—		—
Eli Lilly Co.	43,600		2,485,200	43,500		2,479,500	13,700		780,900
Enzon, Inc. †	24,900		205,425	24,600		202,950	—		—
Forest Laboratories, Inc. †	31,400		1,589,154	31,400		1,589,154	9,900		501,039
Fresenius Medical Care AG (Germany)	2,554		331,739	—		—	—		—
Genesis HealthCare Corp. †	24,700		1,176,461	23,900		1,138,357	—		—
Gilead Sciences, Inc. †	39,300		2,699,910	39,200		2,693,040	12,400		851,880
GlaxoSmithKline PLC (United Kingdom)	213,333		5,665,846	144,236		3,830,720	36,532		970,242
Haemonetics Corp. †	29,700		1,389,960	29,600		1,385,280	6,342		296,806
Healthspring, Inc. †	46,600		897,050	44,300		852,775	—		—
Hologic, Inc. †	10,600		461,312	10,500		456,960	—		—
Humana, Inc. †	59,920		3,960,113	59,800		3,952,182	18,850		1,245,797
IDEXX Laboratories, Inc. †	11,800		1,075,452	11,700		1,066,338	—		—
Illumina, Inc. †	13,200		436,128	12,900		426,216	—		—
Imclone Systems, Inc. †	31,600		894,912	31,300		886,416	7,500		212,400
Intuitive Surgical, Inc. †	4,000		421,800	4,000		421,800	—		—
Johnson & Johnson #	134,612		8,741,703	134,404		8,728,196	42,300		2,746,962
Kaken Pharmaceutical Co., Ltd. (Japan)	127,000		866,412	117,000		798,191	31,000		211,486
Kinetic Concepts, Inc. †	12,100		380,666	11,700		368,082	—		—
King Pharmaceuticals, Inc. †	149,000		2,537,470	148,800		2,534,064	46,900		798,707
LifeCell Corp. † (SG) (SB) (SC)	46,900		1,511,118	46,600		1,501,452	6,300		202,986
Ligand Pharmaceuticals, Inc. Class B †	31,200		313,248	30,800		309,232	—		—
Magellan Health Services, Inc. †	53,600		2,283,360	52,500		2,236,500	5,000		213,000
Mayne Pharma, Ltd. (Australia)	254,006		814,359	248,461		796,581	61,334		196,641
McKesson Corp.	127,600		6,727,072	127,400		6,716,528	40,100		2,114,072
Mediceo Paltac Holdings Co., Ltd.
(Japan)	53,000		1,088,249	36,400		747,401	9,600		197,117
Mentor Corp. (SG) (SB)	12,900		650,031	12,700		639,953	—		—
Merck & Co., Inc.	166,160		6,962,104	165,913		6,951,755	52,250		2,189,275
Millennium Pharmaceuticals, Inc. †	118,300		1,177,085	118,100		1,175,095	37,200		370,140
Mindray Medical International, Ltd. ADR
Class A (China) †	1,112		18,559	—		—	—		—
Molina Healthcare, Inc. †	27,000		954,720	26,600		940,576	4,100		144,976
Neurocrine Biosciences, Inc. † (SG) (SC)	78,200		840,650	78,100		839,575	24,600		264,450
New River Pharmaceuticals,
Inc. † (SG) (SB)	19,100		491,443	18,900		486,297	—		—
Nobel Biocare Holding AG (Switzerland)	2,250		552,359	—		—	—		—
Novartis AG (Switzerland)	16,723		973,819	—		—	—		—
Noven Pharmaceuticals, Inc. †	20,000		482,400	20,000		482,400	6,300		151,956
Odyssey Healthcare, Inc. †	30,300		429,654	29,900		423,982	—		—
OraSure Technologies, Inc. † (SB)	60,900		489,636	60,200		484,008	—		—
Orthofix International NV
(Netherland Antilles) †	13,000		591,110	12,300		559,281	—		—
Pain Therapeutics, Inc. † (SG) (SB)	60,600		522,372	59,900		516,338	—		—
Palomar Medical
Technologies, Inc. † (SG) (SB) (SC)	12,900		544,380	12,900		544,380	4,100		173,020
Parexel International Corp. †	47,100		1,558,539	47,000		1,555,230	14,800		489,732
Pediatrix Medical Group, Inc. †	6,200		282,720	6,000		273,600	—		—
PerkinElmer, Inc.	32,800		620,904	32,800		620,904	10,300		194,979
Pfizer, Inc.	156,449		4,436,894	156,197		4,429,747	49,200		1,395,312
Quidel Corp. †	36,500		515,380	36,400		513,968	11,500		162,380
Regeneron Pharmaceuticals, Inc. †	56,100		880,209	55,800		875,502	9,300		145,917

43

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Health Care continued
Roche Holding AG (Switzerland)	34,004	$	5,864,442	26,731	$	4,610,117	6,771	$	1,167,749
Salix Pharmaceuticals, Ltd. †	54,306		736,389	53,651		727,508	—		—
Sanofi-Synthelabo SA (France)	6,087		541,228	—		—	—		—
Savient Pharmaceuticals, Inc. †	106,000		690,060	102,000		664,020	—		—
Schering AG (Germany) (SG)	9,965		1,159,931	8,855		1,030,727	2,363		275,054
Schering-Plough Corp.	257,100		5,679,339	256,700		5,670,503	80,900		1,787,081
Sciele Pharma, Inc. † (SG) (SB)	62,100		1,169,964	61,900		1,166,196	13,800		259,992
Sierra Health Services, Inc. †	146,360		5,538,262	144,876		5,482,108	31,900		1,207,096
Sun Healthcare Group, Inc. †	122		1,310	—		—	—		—
Symbion Health, Ltd. (Australia)	229,199		583,734	224,499		571,764	61,334		156,208
Taisho Pharmaceutical Co., Ltd. (Japan)	107,000		2,051,266	76,000		1,456,974	20,000		383,414
Techne Corp. †	13,900		706,954	13,700		696,782	—		—
Teva Pharmaceutical Industries, Ltd.
ADR (Israel)	102,097		3,480,487	—		—	—		—
United Therapeutics Corp. †	11,300		593,702	11,200		588,448	—		—
UnitedHealth Group, Inc.	91,338		4,493,830	91,212		4,487,630	28,760		1,414,992
Vertex Pharmaceuticals, Inc. †	12,168		409,453	11,990		403,464	—		—
Viropharma, Inc. †	29,000		352,930	28,700		349,279	—		—
Vital Images, Inc. †	16,200		511,596	16,200		511,596	5,100		161,058
Vital Signs, Inc.	8,400		475,524	8,100		458,541	—		—
Waters Corp. †	37,400		1,693,472	37,300		1,688,944	11,800		534,304
WellCare Health Plans, Inc. †	33,000		1,868,790	32,700		1,851,801	5,200		294,476
West Pharmaceutical Services, Inc.	13,900		545,853	13,900		545,853	4,400		172,788
Wyeth	101,700		5,170,428	101,600		5,165,344	32,000		1,626,880
Zoll Medical Corp. †	40,000		1,435,600	39,800		1,428,422	7,100		254,819
			———————————			———————————			———————————
			165,359,845			151,698,569			38,088,550
Insurance			3.3%			2.9%			1.5%
Admiral Group PLC (United Kingdom)	39,266		607,965	—		—	—		—
Aegon NV (Netherlands)	64,830		1,214,461	59,064		1,106,447	15,841		296,750
Allianz AG (Germany)	19,550		3,379,522	16,298		2,817,363	4,146		716,701
American Financial Group, Inc.	52,850		2,480,251	52,740		2,475,088	16,600		779,038
American International Group, Inc.	55,400		3,670,804	55,300		3,664,178	17,400		1,152,924
American Physicians Capital, Inc. †	10,500		507,990	10,200		493,476	—		—
Arch Capital Group, Ltd. (Bermuda) †	8,000		507,920	7,800		495,222	—		—
Argonaut Group, Inc. †	17,400		539,922	17,300		536,819	5,500		170,665
Chubb Corp. (The)	60,100		3,122,796	60,000		3,117,600	18,900		982,044
Commerce Group, Inc.	59,920		1,800,596	59,200		1,778,960	12,578		377,969
Corporacion Mapfre SA (Spain)	117,911		2,461,223	107,195		2,237,542	27,162		566,968
EMC Insurance Group, Inc.	11,200		323,008	10,600		305,704	—		—
FBL Financial Group, Inc. Class A	6,800		227,596	6,500		217,555	—		—
Fidelity National Title Group, Inc.
Class A (SG) (SB) (SC)	41,000		859,360	40,900		857,264	12,900		270,384
FPIC Insurance Group, Inc. †	18,600		736,746	17,900		709,019	—		—
Fremont General Corp. (SB)	119,200		1,667,608	119,000		1,664,810	37,488		524,457
HCC Insurance Holdings, Inc.	15,057		495,074	14,430		474,458	—		—
ING Groep NV (Netherlands)	108,406		4,763,181	85,189		3,743,064	21,587		948,497
Landamerica Financial Group, Inc.	33,240		2,186,860	32,600		2,144,754	6,300		414,477
Metropolitan Holdings, Ltd.
(South Africa)	484,443		764,440	—		—	—		—
Muenchener Rueckversicherungs-
Gesellschaft AG (Germany)	4,809		759,862	4,400		695,237	1,200		189,610
Navigators Group, Inc. †	16,140		774,881	15,350		736,954	—		—
Ohio Casualty Corp.	47,100		1,218,477	47,200		1,221,064	12,100		313,027
Philadelphia Consolidated
Holding Corp. †	60,400		2,402,712	59,600		2,370,888	13,500		537,030
QBE Insurance Group, Ltd. (Australia)	99,943		1,823,357	90,509		1,651,244	22,933		418,389

44

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Insurance continued
Safeco Corp.	85,500	$	5,038,515	85,400	$	5,032,622	26,900	$	1,585,217
Safety Insurance Group, Inc.	25,500		1,240,830	25,100		1,221,366	4,300		209,238
SeaBright Insurance Holdings, Inc. †	44,000		614,680	41,600		581,152	—		—
Selective Insurance Group	18,300		962,763	18,000		946,980	—		—
Triad Guaranty, Inc. †	16,300		834,071	16,300		834,071	5,100		260,967
W.R. Berkley Corp.	167,045		5,911,723	166,852		5,904,892	52,575		1,860,629
Zenith National Insurance Corp.	88,647		3,536,129	87,658		3,496,678	15,857		632,536
Zurich Financial Services AG
(Switzerland)	20,382		4,995,509	18,457		4,523,702	4,678		1,146,550
			————————————			————————————			————————————
			62,430,832			58,056,173			14,354,067
Investment Banking/Brokerage			1.7%			1.5%			0.9%
Affiliated Managers Group † (SG) (SB)	10,100		1,011,111	9,900		991,089	—		—
Calamos Asset Management, Inc. Class A	66,800		1,958,576	66,000		1,935,120	14,700		431,004
Challenger Financial Services Group,
Ltd. (Australia)	161,562		417,578	158,035		408,462	39,012		100,832
Deutsche Bank AG (Germany)	9,989		1,207,387	8,957		1,082,647	2,363		285,620
Goldman Sachs Group, Inc. (The)	43,900		7,426,563	43,800		7,409,646	13,800		2,334,546
Greenhill & Co., Inc. (SG) (SB) (SC)	9,600		643,392	9,600		643,392	3,000		201,060
Harris & Harris
Group, Inc. † (SG) (SB) (SC)	54,800		672,944	54,700		671,716	17,200		211,216
IndyMac Bancorp, Inc. (SB) (SC)	62,980		2,592,257	62,900		2,588,964	19,800		814,968
Investment Technology Group, Inc. †	33,000		1,476,750	32,700		1,463,325	3,200		143,200
Knight Capital Group, Inc. Class A †	38,400		698,880	38,300		697,060	12,100		220,220
Macquarie Bank, Ltd. (Australia)	12,686		653,550	12,410		639,331	3,226		166,195
MCG Capital Corp.	41,200		672,796	39,100		638,503	—		—
Merrill Lynch & Co., Inc.	31,000		2,424,820	31,000		2,424,820	9,800		766,556
Morgan Stanley	80,600		5,876,546	80,500		5,869,255	25,300		1,844,623
Raymond James Financial, Inc.	95,703		2,798,356	95,600		2,795,344	30,101		880,153
Schroders PLC (United Kingdom)	29,056		504,691	28,421		493,662	7,390		128,361
SembCorp Industries, Ltd. (Singapore)	178,000		375,708	—		—	—		—
			————————————			————————————			————————————
			31,411,905			30,752,336			8,528,554
Other			0.7%			1.0%			0.6%
iShares MSCI EAFE Index Fund †	17,840		1,208,660	12,892		873,433	3,293		223,101
iShares MSCI Emerging Markets
Index Fund †	34,022		3,292,309	—		—	—		—
iShares MSCI Hong Kong Index Fund	—		—	14,800		208,976	7,000		98,840
iShares MSCI Malaysia Index Fund	—		—	5,400		41,364	2,600		19,916
iShares MSCI Singapore Index Fund	—		—	7,400		69,042	3,500		32,655
iShares MSCI South Korea Index Fund	—		—	4,100		189,625	1,900		87,875
iShares MSCI Taiwan Index Fund	—		—	11,700		149,760	5,600		71,680
iShares Russell 1000 Growth Index Fund	139,800		7,276,590	195,800		10,191,390	93,100		4,845,855
iShares Russell 2000 Value Index Fund	15,077		1,111,929	12,446		917,893	—		—
S&P 500 Index Depository Receipts (SPDR
Trust Series 1)	—		—	51,689		6,904,617	—		—
			————————————			————————————			————————————
			12,889,488			19,546,100			5,379,922
Real Estate			2.0%			1.6%			0.8%
American Home Mortgage
Investment Corp. (R)	64,100		2,235,167	63,500		2,214,245	14,500		505,615
Anthracite Capital, Inc. (R)	88,100		1,132,966	85,700		1,102,102	11,800		151,748
AvalonBay Communities, Inc. (R)	7,300		878,920	7,300		878,920	2,300		276,920
Ayala Land, Inc. (Philippines)	3,819,500		1,083,816	—		—	—		—
Boston Properties, Inc. (R)	5,300		547,702	5,300		547,702	1,700		175,678
CB Richard Ellis Group, Inc. Class A †	256,100		6,300,060	255,800		6,292,680	80,600		1,982,760
CBL & Associates Properties (R)	12,900		540,639	12,600		528,066	—		—

45

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Real Estate continued
DiamondRock Hospitality Co. (R)	31,000	$	514,910	31,000	$	514,910	9,800	$	162,778
Digital Realty Trust, Inc. (R)	27,700		867,564	27,600		864,432	8,700		272,484
Entertainment Properties Trust (R)	26,897		1,326,560	26,690		1,316,351	6,900		340,308
Home Properties of NY, Inc. (R)	24,100		1,377,556	24,100		1,377,556	7,600		434,416
Innkeepers USA Trust (R)	27,300		444,717	26,000		423,540	—		—
Jones Lang LaSalle, Inc.	51,900		4,436,412	51,800		4,427,864	15,000		1,282,200
Lexington Corporate Properties
Trust (R) (SG) (SB)	25,800		546,444	24,800		525,264	—		—
LPN Development PCL NVDR (Thailand)	9,826,500		1,276,313	—		—	—		—
LTC Properties, Inc. (R)	40,100		972,425	38,200		926,350	—		—
Medical Properties Trust, Inc. (R)	60,900		815,451	60,800		814,112	19,100		255,749
Metrovacesa SA (Spain)	14,486		1,745,809	13,119		1,581,062	3,377		406,986
Mitsui Fudoscan Co., Ltd. (Japan)	13,000		296,833	—		—	—		—
National Health Investors, Inc. (R)	22,700		643,091	21,600		611,928	—		—
Newkirk Realty Trust, Inc. (R) (SG) (SB)	34,800		573,504	33,500		552,080	—		—
NorthStar Realty Finance Corp. (R)	112,900		1,433,830	111,000		1,409,700	19,900		252,730
Omega Healthcare Investors, Inc. (R)	18,900		283,689	18,000		270,180	—		—
Post Properties, Inc. (R)	14,800		703,296	14,800		703,296	4,700		223,344
PS Business Parks, Inc. (R)	9,456		570,197	8,994		542,338	—		—
RAIT Investment Trust (R)	41,139		1,186,860	40,900		1,179,965	9,508		274,306
Redwood Trust, Inc. (R) (SG) (SB)	11,200		564,144	11,100		559,107	3,500		176,295
Robinsons Land Co. 144A (Philippines) †	2,100,000		523,534	—		—	—		—
SP Setia Berhad (Malaysia)	1,479,600		1,517,295	—		—	—		—
Trammell Crow Co. †	15,600		569,556	15,600		569,556	4,900		178,899
Winthrop Realty Trust (R) (SG) (SB)	119,800		772,710	113,200		730,140	—		—
			————————————			————————————			————————————
			36,681,970			31,463,446			7,353,216
Semiconductor			0.5%			0.2%			0.1%
Advanced Energy Industries, Inc. †	32,900		560,616	32,500		553,800	—		—
Advantest Corp. (Japan)	19,400		958,581	18,400		909,170	4,800		237,175
Asyst Technologies, Inc. †	116,700		788,892	115,100		778,076	20,600		139,256
Greatek Electronics, Inc. (Taiwan)	1,018,875		1,110,825	—		—	—		—
Himax Technologies, Inc. ADR (Taiwan) †	161,516		922,256	—		—	—		—
Micrel, Inc. †	55,700		534,163	55,060		528,025	—		—
NEC Electronics Corp.
(Japan) † (SG) (SB)	11,700		403,893	11,400		393,537	2,800		96,658
Siliconware Precision Industries Co.
(Taiwan)	685,388		817,010	—		—	—		—
Taiwan Semiconductor Manufacturing Co.,
Ltd. (Taiwan)	545,570		982,480	—		—	—		—
Varian Semiconductor Equipment †	12,600		462,420	12,400		455,080	—		—
Veeco Instruments, Inc. †	60,700		1,223,105	60,600		1,221,090	19,100		384,865
			————————————			————————————			————————————
			8,764,241			4,838,778			857,954
Software			2.0%			1.8%			1.0%
Altiris, Inc. †	23,500		495,615	23,200		489,288	—		—
Aspen Technology, Inc. †	59,800		653,016	59,100		645,372	—		—
BEA Systems, Inc. † (SC)	176,570		2,683,864	176,400		2,681,280	55,600		845,120
Blackboard, Inc. †	23,198		614,747	22,900		606,850	—		—
BMC Software, Inc. †	42,900		1,167,738	42,800		1,165,016	13,500		367,470
Business Objects SA (France) †	11,706		395,728	—		—	—		—
Citrix Systems, Inc. †	50,100		1,814,121	50,000		1,810,500	15,800		572,118
Hyperion Solutions Corp. †	21,820		752,354	21,785		751,147	6,900		237,912
Intuit, Inc. †	77,300		2,480,557	77,200		2,477,348	24,300		779,787
Manhattan Associates, Inc. †	20,900		504,526	20,800		502,112	6,600		159,324
Microsoft Corp.	361,600		9,882,528	361,131		9,869,710	113,800		3,110,154
MicroStrategy, Inc. †	14,200		1,445,986	14,084		1,434,174	2,300		234,209
NTT Data Corp. (Japan)	571		2,642,848	518		2,397,540	131		606,328

46

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Software continued
Oracle Corp. †	442,960	$	7,858,110	442,293	$	7,846,278	139,300	$	2,471,182
Packeteer, Inc. †	44,400		382,284	44,400		382,284	14,000		120,540
Red Hat, Inc. †	38,800		817,904	38,500		811,580	12,100		255,068
Sybase, Inc. †	36,900		894,456	35,000		848,400	—		—
WebEx Communications, Inc. †	19,814		773,142	19,600		764,792	—		—
Websense, Inc. †	24,520		529,877	24,400		527,284	7,700		166,397
			————————————			————————————			————————————
			36,789,401			36,010,955			9,925,609
Technology			0.4%			0.4%			0.2%
Advanced Micro Devices,
Inc. † (SG) (SB) (SC)	170,900		4,246,865	170,700		4,241,895	53,800		1,336,930
Dun & Bradstreet Corp. (The) †	15,900		1,192,341	15,800		1,184,842	5,000		374,950
Freescale Semiconductor, Inc. Class B †	46,338		1,761,307	46,281		1,759,141	14,613		555,440
ON Semiconductor Corp. †	111,500		655,620	110,200		647,976	—		—
			————————————			————————————			————————————
			7,856,133			7,833,854			2,267,320
Technology Services			1.1%			0.9%			0.4%
Acxiom Corp.	21,300		525,258	20,800		512,928	—		—
Automatic Data Processing, Inc.	60,300		2,854,602	60,200		2,849,868	19,000		899,460
Blue Coat Systems, Inc. †	27,000		486,270	25,700		462,857	—		—
Convergys Corp. †	27,900		576,135	27,800		574,070	8,800		181,720
Covansys Corp. †	17,523		300,344	16,667		285,672	—		—
CSG Systems International, Inc. †	42,200		1,115,346	41,500		1,096,845	7,000		185,010
eCollege.com, Inc. † (SG) (SB)	37,400		598,026	36,900		590,031	—		—
Factset Research Systems, Inc.	26,800		1,301,676	26,500		1,287,105	—		—
Google, Inc. Class A †	1,600		643,040	1,600		643,040	500		200,950
Infospace, Inc. †	32,500		599,300	32,400		597,456	10,200		188,088
Inventec Co., Ltd. (Taiwan)	1,498,000		978,630	—		—	—		—
Oce NV (Netherlands)	47,487		761,461	44,969		721,085	11,836		189,792
SonicWall, Inc. †	207,300		2,263,716	204,300		2,230,956	41,900		457,548
Sykes Enterprises, Inc. †	81,700		1,662,595	78,900		1,605,615	8,600		175,010
TheStreet.com, Inc.	71,900		765,016	71,800		763,952	22,600		240,464
Trizetto Group † (SG)	122,700		1,857,678	122,200		1,850,108	30,800		466,312
Tyler Technologies, Inc. †	43,300		559,869	42,800		553,404	—		—
United Internet AG (Germany)	20,295		277,878	—		—	—		—
United Online, Inc.	145,600		1,773,408	145,400		1,770,972	45,800		557,844
			————————————			————————————			————————————
			19,900,248			18,395,964			3,742,198
Transportation			2.2%			1.7%			1.0%
Alaska Air Group, Inc. †	15,960		607,118	15,900		604,836	5,000		190,200
Arkansas Best Corp.	12,800		550,784	12,800		550,784	4,000		172,120
Arriva PLC (United Kingdom)	74,085		913,232	70,155		864,788	18,240		224,841
Bergesen Worldwide Gas ASA (Norway)	28,500		378,321	—		—	—		—
British Airways PLC (United Kingdom) †	503,303		4,013,881	409,468		3,265,540	103,755		827,454
Burlington Northern Santa Fe Corp.	16,200		1,189,728	16,100		1,182,384	5,100		374,544
Canadian National Railway Co. (Canada)	6,338		265,646	—		—	—		—
Central Japan Railway Co. (Japan)	447		4,755,886	407		4,330,303	103		1,095,875
Deutsche Lufthansa AG (Germany)	206,418		4,366,199	186,931		3,954,006	47,366		1,001,896
East Japan Railway Co. (Japan)	37		259,431	—		—	—		—
EGL, Inc. †	26,200		954,728	26,100		951,084	8,200		298,808
ExpressJet Holdings, Inc. †	70,950		468,980	70,841		468,259	22,277		147,251
FedEx Corp.	15,180		1,649,762	15,200		1,651,936	4,800		521,664
HUB Group, Inc. Class A †	41,600		947,648	41,100		936,258	—		—
Hyundai Mipo Dockyard (South Korea)	9,330		1,161,876	—		—	—		—
Korean Air Co., Ltd. (South Korea)	27,810		1,023,625	—		—	—		—
Kuehne & Nagel International AG
(Switzerland)	2,526		174,297	—		—	—		—

47

COMMON STOCKS*	Growth 83.8%			Balanced 66.6%			Conservative 35.7%
	Shares		Value	Shares		Value	Shares		Value
Transportation continued
National Express Group PLC
(United Kingdom)	50,268	$	881,585	47,602	$	834,830	12,529	$	219,730
Neptune Orient Lines, Ltd. (Singapore)	484,000		616,770	485,000		618,045	133,000		169,484
Norfolk Southern Corp.	65,760		2,896,728	65,700		2,894,085	20,700		911,835
Oesterreichische Post AG (Austria) †	9,982		379,928	—		—	—		—
Oesterreichische Post AG 144A (Austria) †	4,563		173,674	—		—	—		—
Orient Overseas International, Ltd.
(Hong Kong)	281,000		1,141,118	154,000		625,382	40,000		162,437
Overseas Shipholding Group	25,100		1,550,427	24,400		1,507,188	4,000		247,080
Qantas Airways, Ltd. (Australia)	123,066		359,470	—		—	—		—
Saia, Inc. †	30,900		1,007,340	30,800		1,004,080	9,700		316,220
Singapore Airlines, Ltd. (Singapore)	93,000		856,006	88,000		809,985	24,000		220,905
Southwest Airlines Co.	409,800		6,827,268	409,300		6,818,938	128,900		2,147,474
Thai Airways International (Thailand)	663,500		830,091	—		—	—		—
WAN HAI Lines, Ltd. (Taiwan)	115,163		63,466	—		—	—		—
			————————————			————————————			————————————
			41,265,013			33,872,711			9,249,818
Utilities & Power			2.8%			2.3%			1.3%
AES Corp. (The) †	136,100		2,775,079	136,000		2,773,040	42,800		872,692
Allete, Inc.	20,600		895,070	20,600		895,070	6,500		282,425
American Electric Power Co., Inc.	65,000		2,364,050	64,900		2,360,413	20,400		741,948
Avista Corp.	17,700		419,136	17,100		404,928	—		—
Centrais Eletricas Brasileiras SA (Brazil)	62,052		1,286,793	—		—	—		—
China Resources Power Holdings Co.
(Hong Kong)	1,022,000		1,080,614	—		—	—		—
Cleco Corp.	23,000		580,520	22,400		565,376	—		—
E.On AG (Germany)	24,585		2,918,070	22,265		2,642,702	5,642		669,666
Edison International	65,370		2,722,007	65,315		2,719,717	20,600		857,784
Electric Power Development Co. (Japan)	73,700		2,633,057	66,800		2,386,543	16,900		603,781
Energen Corp. #	100,180		4,194,537	99,300		4,157,691	25,506		1,067,936
Energias de Portugal (EDP) SA (Portugal)	219,183		949,451	207,556		899,085	55,454		240,214
First Philippine Holdings Corp. (Philippines)	1,292,610		1,287,954	—		—	—		—
FirstEnergy Corp.	24,000		1,340,640	24,000		1,340,640	7,600		424,536
Inversiones Aguas Metropolitanas SA
(Chile)	731,810		803,452	—		—	—		—
MDU Resources Group, Inc.	49,200		1,099,128	49,050		1,095,777	15,450		345,153
National Fuel Gas Co.	46,300		1,683,005	46,300		1,683,005	14,600		530,710
National Grid PLC (United Kingdom)	65,991		822,703	62,491		779,069	16,447		205,043
NICOR, Inc. (SG) (SB) (SC)	15,600		667,056	15,500		662,780	4,900		209,524
NSTAR	14,600		487,056	13,700		457,032	—		—
Ormat Technologies, Inc. (SG) (SB)	11,300		369,736	11,200		366,464	—		—
Osaka Gas Co., Ltd. (Japan)	665,000		2,324,181	602,000		2,103,996	152,000		531,241
PG&E Corp.	136,600		5,689,390	136,400		5,681,060	43,000		1,790,950
Portland General Electric Co.	19,600		478,436	19,600		478,436	6,200		151,342
RWE AG (Germany)	11,550		1,065,739	10,676		985,094	2,952		272,386
Scottish and Southern Energy PLC
(United Kingdom)	20,464		503,748	—		—	—		—
Scottish Power PLC (United Kingdom)	24,069		292,873	—		—	—		—
TXU Corp.	107,300		6,708,396	107,200		6,702,144	33,800		2,113,176
Vector, Ltd. (New Zealand)	251,632		389,071	246,139		380,578	60,761		93,948
Veolia Environnement (France)	47,932		2,890,435	34,342		2,070,920	8,661		522,283
Westar Energy, Inc.	27,200		639,472	25,900		608,909	—		—
			————————————			————————————			————————————
			52,360,855			45,200,469			12,526,738
Total common stocks (cost $1,376,044,998,
$1,151,945,145 and $279,344,965)			$1,566,197,306			$1,328,115,348		$	339,675,512

48

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Basic Materials				0.4%				0.5%				0.5%
Abitibi-Consolidated, Inc. bonds 8.55s,
2010 (Canada)	$	130,000	$	129,025	$	175,000	$	173,688	$	—	$	—
Abitibi-Consolidated, Inc. debs. 8.85s,
2030 (Canada)		45,000		37,800		55,000		46,200		30,000		25,200
Abitibi-Consolidated, Inc.
notes 7 3/4s, 2011 (Canada)		115,000		105,225		135,000		123,525		70,000		64,050
Abitibi-Consolidated, Inc. notes 6s,
2013 (Canada)		90,000		73,125		115,000		93,438		60,000		48,750
AK Steel Corp. company guaranty 7 3/4s,
2012		300,000		292,125		365,000		355,419		190,000		185,013
ARCO Chemical Co. debs. 10 1/4s, 2010		185,000		200,725		130,000		141,050		85,000		92,225
BCP Crystal US Holdings Corp.
sr. sub. notes 9 5/8s, 2014		305,000		330,925		365,000		396,025		180,000		195,300
Boise Cascade, LLC company
guaranty 7 1/8s, 2014		125,000		116,563		150,000		139,875		70,000		65,275
Builders FirstSource, Inc. company
guaranty FRB 9.655s, 2012		130,000		127,400		145,000		142,100		70,000		68,600
Chaparral Steel Co. company
guaranty 10s, 2013		315,000		351,225		365,000		406,975		180,000		200,700
Clondalkin Industries BV 144A
sr. notes 8s, 2014 (Netherlands)	EUR	60,000		80,252		65,000		86,939		35,000		46,814
Cognis Holding GmbH & Co. 144A
sr. notes 12.282s, 2015 (Germany) ‡‡	EUR	244,806		301,157		275,561		338,991		137,927		169,676
Compass Minerals International, Inc.
sr. notes stepped-coupon zero %
(12 3/4s, 12/15/07), 2012 ††	$	160,000		154,600	$	165,000		159,431	$	50,000		48,313
Covalence Specialty Materials Corp.
144A sr. sub. notes 10 1/4s, 2016		320,000		310,400		365,000		354,050		185,000		179,450
Crystal US Holdings, LLC sr. disc.
notes stepped-coupon Ser. A, zero %
(10s, 10/1/09), 2014 ††		220,000		176,550		205,000		164,513		110,000		88,275
Dow Chemical Co. (The) Pass Through
Trust 144A company guaranty 4.027s,
2009		—		—		270,000		259,332		320,000		307,357
Equistar Chemicals, LP/Equistar
Funding Corp. company
guaranty 10 1/8s, 2008		195,000		207,188		297,000		315,563		132,000		140,250
Georgia-Pacific Corp. debs. 9 1/2s, 2011		225,000		242,438		250,000		269,375		125,000		134,688
Georgia-Pacific Corp. notes 8 1/8s, 2011		—		—		140,000		143,500		140,000		143,500
Huntsman, LLC company guaranty 11 5/8s,
2010		156,000		172,380		211,000		233,155		—		—
ICI Wilmington, Inc. company
guaranty 5 5/8s, 2013		—		—		255,000		251,318		245,000		241,462
Jefferson Smurfit Corp. company
guaranty 8 1/4s, 2012		125,000		119,688		60,000		57,450		65,000		62,238
JSG Holding PLC 144A sr. notes 11 1/2s,
2015 (Ireland) ‡‡	EUR	50,000		64,914		55,000		71,405		—		—
Lafarge SA notes 6 1/2s, 2016 (France)	$	—		—	$	75,000		76,688	$	85,000		86,913
Lubrizol Corp. (The) sr. notes 5 1/2s,
2014		—		—		100,000		97,542		95,000		92,665
Lyondell Chemical Co. company
guaranty 8 1/4s, 2016		95,000		96,425		105,000		106,575		50,000		50,750
Lyondell Chemical Co. company
guaranty 8s, 2014		150,000		151,875		165,000		167,063		80,000		81,000
MDP Acquisitions PLC sr. notes 9 5/8s,
2012 (Ireland)		465,000		490,575		520,000		548,600		260,000		274,300

49

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Basic Materials continued
Metals USA, Inc. sec. notes 11 1/8s,
2015	$	145,000	$	158,775	$	175,000	$	191,625	$	90,000	$	98,550
Nalco Co. sr. sub. notes 8 7/8s, 2013		165,000		172,013		210,000		218,925		100,000		104,250
Nell AF S.a.r.l. 144A sr. notes 8 3/8s,
2015 (Luxembourg)	EUR	125,000		162,125		170,000		220,490		115,000		149,155
Nell AF S.a.r.l. 144A sr. notes 8 3/8s,
2015 (Luxembourg)	$	105,000		104,213	$	80,000		79,400	$	—		—
Newmont Mining Corp. notes 5 7/8s, 2035		—		—		145,000		136,068		135,000		126,684
NewPage Corp. sec. notes 10s, 2012		95,000		98,088		125,000		129,063		65,000		67,113
Norske Skog Canada, Ltd. company
guaranty Ser. D, 8 5/8s, 2011 (Canada)		195,000		191,588		226,000		222,045		110,000		108,075
Norske Skog Canada, Ltd.
sr. notes 7 3/8s, 2014 (Canada)		35,000		32,200		30,000		27,600		20,000		18,400
Novelis, Inc. 144A sr. notes 7 1/4s,
2015		385,000		365,750		485,000		460,750		255,000		242,250
Potash Corp. of Saskatchewan
notes 7 3/4s, 2011 (Canada)		—		—		105,000		114,806		105,000		114,806
PQ Corp. company guaranty 7 1/2s, 2013		180,000		171,000		225,000		213,750		115,000		109,250
Rockwood Specialties Group, Inc.
company guaranty 7 5/8s, 2014	EUR	210,000		276,625		220,000		289,798		135,000		177,831
Steel Dynamics, Inc. company
guaranty 9 1/2s, 2009	$	210,000		217,088	$	300,000		310,125	$	120,000		124,050
Stone Container Corp. sr. notes 9 3/4s,
2011		427,000		440,344		551,000		568,219		244,000		251,625
Ucar Finance, Inc. company
guaranty 10 1/4s, 2012		40,000		42,000		40,000		42,000		20,000		21,000
United States Steel Corp.
sr. notes 9 3/4s, 2010		80,000		85,400		105,000		112,088		76,000		81,130
Weyerhaeuser Co. debs. 7.95s, 2025		—		—		205,000		222,651		185,000		200,929
Weyerhaeuser Co. notes 6 3/4s, 2012		—		—		55,000		57,482		45,000		47,031
Wheeling-Pittsburgh Steel Corp.
sr. notes Ser. A, 5s, 2011 ‡‡		—		—		—		—		676		527
Wheeling-Pittsburgh Steel Corp.
sr. notes Ser. B, 6s, 2010 ‡‡		—		—		—		—		424		331
				————————————				————————————				————————————
				6,849,789				9,336,670				5,135,751
Capital Goods				0.3%				0.3%				0.4%
Alliant Techsystems, Inc.
sr. sub. notes 6 3/4s, 2016		320,000		315,200		360,000		354,600		180,000		177,300
Allied Waste North America, Inc.
company guaranty Ser. B, 8 1/2s, 2008		400,000		419,000		40,000		41,900		20,000		20,950
Allied Waste North America, Inc. sec.
notes Ser. B, 5 3/4s, 2011		10,000		9,588		120,000		115,050		55,000		52,731
Amsted Industries, Inc. 144A
sr. notes 10 1/4s, 2011		60,000		64,200		75,000		80,250		40,000		42,800
Blount, Inc. sr. sub. notes 8 7/8s, 2012		145,000		144,638		190,000		189,525		105,000		104,738
Bombardier, Inc. 144A notes 6 3/4s,
2012 (Canada)		100,000		95,250		100,000		95,250		—		—
Case New Holland, Inc. company
guaranty 9 1/4s, 2011		175,000		185,500		225,000		238,500		110,000		116,600
Crown Americas, LLC/Crown Americas
Capital Corp. sr. notes 7 5/8s, 2013		275,000		278,438		350,000		354,375		170,000		172,125
Crown Cork & Seal Co., Inc. debs. 8s,
2023		60,000		57,300		75,000		71,625		40,000		38,200
Crown Euro Holdings SA company
guaranty 6 1/4s, 2011 (France)	EUR	175,000		231,851		195,000		258,348		100,000		132,486
Decrane Aircraft Holdings Co. company
guaranty zero %, 2008 ‡	$	—		—	$	—		—	$	227,000		162,305

50

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Capital Goods continued
Earle M. Jorgensen Co. sec.
notes 9 3/4s, 2012	$	185,000	$	197,719	$	205,000	$	219,094	$	105,000	$	112,219
Graham Packaging Co., Inc.
sub. notes 9 7/8s, 2014		235,000		230,888		265,000		260,363		130,000		127,725
Greenbrier Cos., Inc. company
guaranty 8 3/8s, 2015		190,000		192,850		220,000		223,300		115,000		116,725
Impress Holdings BV 144A sec. FRN
8.512s, 2013 (Netherlands)		120,000		120,900		130,000		130,975		75,000		75,563
K&F Acquisitions, Inc. company
guaranty 7 3/4s, 2014		240,000		240,600		265,000		265,663		135,000		135,338
L-3 Communications Corp. company
guaranty 7 5/8s, 2012		290,000		298,700		388,000		399,640		181,000		186,430
L-3 Communications Corp. company
guaranty 6 1/8s, 2013		85,000		82,663		—		—		20,000		19,450
L-3 Communications Corp.
sr. sub. notes 5 7/8s, 2015		—		—		95,000		90,250		110,000		104,500
L-3 Communications Corp.
sr. sub. notes Class B, 6 3/8s, 2015		170,000		165,325		355,000		345,238		230,000		223,675
Legrand SA debs. 8 1/2s, 2025 (France)		120,000		135,900		355,000		402,038		280,000		317,100
Lockheed Martin Corp. 144A notes 6.15s,
2036		—		—		235,000		246,256		260,000		272,453
Manitowoc Co., Inc. (The) company
guaranty 10 1/2s, 2012		225,000		242,438		278,000		299,545		143,000		154,083
Milacron Escrow Corp. sec.
notes 11 1/2s, 2011		135,000		128,250		160,000		152,000		75,000		71,250
Owens-Brockway Glass Container, Inc.
sr. sec. notes 8 3/4s, 2012		320,000		337,600		420,000		443,100		210,000		221,550
Owens-Brockway Glass Container, Inc.
company guaranty 6 3/4s, 2014	EUR	220,000		270,850		235,000		289,317		100,000		123,114
Pliant Corp. sr. sub. notes 13s, 2010 (F)	$	—		—	$	—		—	$	3,000		3,000
Ray Acquisition SCA sr. notes 9 3/8s,
2015 (France)	EUR	55,000		78,301		65,000		92,538		—		—
Raytheon Co. debs. 6 3/4s, 2018	$	—		—	$	165,000		180,603	$	125,000		136,820
RBS Global, Inc. and Rexnord Corp. 144A
company guaranty 9 1/2s, 2014		280,000		284,200		320,000		324,800		160,000		162,400
RBS Global, Inc. and Rexnord Corp. 144A
sr. sub. notes 11 3/4s, 2016		35,000		36,050		40,000		41,200		20,000		20,600
Sensata Technologies BV 144A
sr. notes 8s, 2014 (Netherlands)		50,000		48,625		60,000		58,350		30,000		29,175
Solo Cup Co. sr. sub. notes 8 1/2s, 2014		310,000		267,763		350,000		302,313		175,000		151,156
TD Funding Corp. 144A
sr. sub. notes 7 3/4s, 2014		45,000		45,338		50,000		50,375		25,000		25,188
Tekni-Plex, Inc. 144A sec.
notes 10 7/8s, 2012		90,000		100,800		115,000		128,800		60,000		67,200
WCA Waste Corp. 144A sr. notes 9 1/4s,
2014		85,000		88,294		100,000		103,875		50,000		51,938
				————————————				————————————				————————————
				5,395,019				6,849,056				3,928,887
Communication Services				0.2%				0.5%				0.7%
American Cellular Corp.
sr. notes Ser. B, 10s, 2011		260,000		272,350		335,000		350,913		160,000		167,600
American Towers, Inc. company
guaranty 7 1/4s, 2011		75,000		77,250		85,000		87,550		40,000		41,200
Ameritech Capital Funding company
guaranty 6 1/4s, 2009		—		—		450,000		458,325		295,000		300,458
AT&T Corp. sr. notes 8s, 2031		—		—		145,000		177,227		140,000		171,116
AT&T Wireless Services, Inc.
sr. notes 8 3/4s, 2031		—		—		495,000		632,808		515,000		658,376

51

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Communication Services continued
BCM Ireland Finance, Ltd. 144A FRN
8.215s, 2016 (Cayman Islands)	EUR	90,000	$	117,984		105,000	$	137,648		50,000	$	65,547
Centennial Cellular Operating Co., LLC
company guaranty 10 1/8s, 2013	$	100,000		106,250	$	155,000		164,688	$	—		—
Centennial Cellular Operating Co., LLC
sr. sub. notes 10 3/4s, 2008		74,000		74,925		100,000		101,250		104,000		105,300
Cincinnati Bell, Inc. company
guaranty 7 1/4s, 2013		300,000		306,750		425,000		434,563		180,000		184,050
Citizens Communications Co.
notes 9 1/4s, 2011		340,000		374,850		480,000		529,200		225,000		248,063
Digicel, Ltd. 144A sr. notes 9 1/4s,
2012 (Jamaica)		—		—		100,000		103,750		—		—
Dobson Communications Corp.
sr. notes 8 7/8s, 2013		270,000		267,975		345,000		342,413		170,000		168,725
France Telecom notes 8 1/2s, 2031
(France)		—		—		20,000		26,095		—		—
France Telecom notes 7 3/4s, 2011
(France)		—		—		115,000		125,991		185,000		202,682
Horizon PCS, Inc. company
guaranty 11 3/8s, 2012		30,000		33,675		40,000		44,900		20,000		22,450
Inmarsat Finance PLC company
guaranty 7 5/8s, 2012 (United Kingdom)		109,000		112,270		152,000		156,560		71,000		73,130
Inmarsat Finance PLC company
guaranty stepped-coupon zero %
(10 3/8s, 11/15/08), 2012
(United Kingdom) ††		54,000		47,790		76,000		67,260		36,000		31,860
Intelsat Bermuda, Ltd. 144A
sr. notes 11 1/4s, 2016 (Bermuda)		340,000		361,250		395,000		419,688		200,000		212,500
Intelsat Subsidiary Holding Co., Ltd.
company guaranty 8 5/8s, 2015
(Bermuda)		10,000		10,225		15,000		15,338		5,000		5,113
iPCS, Inc. sr. notes 11 1/2s, 2012		140,000		156,800		200,000		224,000		95,000		106,400
Level 3 Communications, Inc.
sr. notes 11 1/2s, 2010		160,000		164,400		180,000		184,950		90,000		92,475
Nextel Communications, Inc.
sr. notes Ser. E, 6 7/8s, 2013		—		—		135,000		137,422		140,000		142,512
Nordic Telephone Co. Holdings ApS 144A
sr. notes 8 7/8s, 2016 (Denmark)		75,000		78,844		75,000		78,844		75,000		78,844
PanAmSat Corp. company guaranty 9s, 2014		180,000		185,850		225,000		232,313		110,000		113,575
Qwest Corp. debs. 7 1/4s, 2025		85,000		82,344		115,000		111,406		55,000		53,281
Qwest Corp. notes 8 7/8s, 2012		530,000		578,363		720,000		785,700		330,000		360,113
Qwest Corp. sr. notes 7 5/8s, 2015		115,000		119,313		155,000		160,813		75,000		77,813
Rogers Wireless, Inc. sec.
notes 9 5/8s, 2011 (Canada)		220,000		248,600		315,000		355,950		145,000		163,850
Rogers Wireless, Inc. sec.
notes 6 3/8s, 2014 (Canada)		—		—		160,000		159,400		175,000		174,344
Rural Cellular Corp.
sr. sub. notes 9 3/4s, 2010		235,000		236,469		315,000		316,969		155,000		155,969
Southwestern Bell Telephone debs. 7s,
2027		—		—		—		—		110,000		112,764
Sprint Capital Corp. company
guaranty 6.9s, 2019		—		—		175,000		182,115		115,000		119,676
Sprint Capital Corp. company
guaranty 6 7/8s, 2028		—		—		435,000		440,856		475,000		481,394
Syniverse Technologies, Inc.
sr. sub. notes Ser. B, 7 3/4s, 2013		65,000		62,563		85,000		81,813		40,000		38,500
Telecom Italia Capital SA company
guaranty 5 1/4s, 2013 (Luxembourg)		—		—		140,000		132,563		110,000		104,157

52

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Communication Services continued
Telecom Italia Capital SA company
guaranty 4s, 2010 (Luxembourg)	$	—	$	—	$	5,000	$	4,742	$	50,000	$	47,417
Telecom Italia Capital SA notes 5 1/4s,
2015 (Luxembourg)		—		—		215,000		199,220		240,000		222,385
Telefonica Emisones SAU company
guaranty 7.045s, 2036 (Spain)		—		—		275,000		290,881		300,000		317,325
Telefonica Emisones SAU company
guaranty 6.421s, 2016 (Spain)		—		—		75,000		77,193		75,000		77,193
Telefonica Europe BV company
guaranty 8 1/4s, 2030 (Netherlands)		—		—		125,000		148,857		120,000		142,903
Verizon New England, Inc.
sr. notes 6 1/2s, 2011		—		—		245,000		251,334		365,000		374,436
Verizon New Jersey, Inc. debs. 8s, 2022		—		—		160,000		177,220		165,000		182,758
Verizon Pennsylvania, Inc. debs. 8.35s,
2030		—		—		210,000		239,673		225,000		256,793
Verizon Virginia, Inc. debs. Ser. A,
4 5/8s, 2013		—		—		—		—		95,000		88,688
Windstream Corp. 144A sr. notes 8 5/8s,
2016		270,000		288,900		305,000		326,350		155,000		165,850
Windstream Corp. 144A sr. notes 8 1/8s,
2013		140,000		148,575		160,000		169,800		80,000		84,900
				—————————————				—————————————				—————————————
				4,514,565				9,846,551				6,994,485
Conglomerates				—%				—%				—%
Siemens Financieringsmaatschappij 144A
notes 5 3/4s, 2016 (Netherlands)		—		—		155,000		157,321		160,000		162,396
Consumer Cyclicals				0.7%				1.0%				1.3%
American Media, Inc. company
guaranty Ser. B, 10 1/4s, 2009		200,000		186,500		250,000		233,125		130,000		121,225
ArvinMeritor, Inc. sr. unsec.
notes 8 1/8s, 2015		110,000		99,825		120,000		108,900		60,000		54,450
Associated Materials, Inc. company
guaranty 9 3/4s, 2012		275,000		274,313		330,000		329,175		170,000		169,575
Autonation, Inc. 144A company
guaranty 7s, 2014		30,000		29,925		35,000		34,913		20,000		19,950
Autonation, Inc. 144A company
guaranty FRN 7.507s, 2013		50,000		50,625		55,000		55,688		30,000		30,375
Bon-Ton Stores, Inc. (The) company
guaranty 10 1/4s, 2014		220,000		213,950		270,000		262,575		140,000		136,150
Boyd Gaming Corp.
sr. sub. notes 7 3/4s, 2012		230,000		236,038		350,000		359,188		160,000		164,200
Boyd Gaming Corp.
sr. sub. notes 7 1/8s, 2016		145,000		140,288		180,000		174,150		95,000		91,913
CanWest Media, Inc. company
guaranty 8s, 2012 (Canada)		156,391		154,436		176,071		173,870		89,145		88,031
Cenveo Corp., sr. sub. notes 7 7/8s,
2013		70,000		66,325		82,000		77,695		43,000		40,743
Corrections Corporation of America
sr. notes 7 1/2s, 2011		125,000		127,813		160,000		163,600		85,000		86,913
D.R. Horton, Inc. sr. notes 7 7/8s, 2011		—		—		115,000		122,752		130,000		138,763
D.R. Horton, Inc. sr. notes 5 7/8s, 2013		—		—		140,000		135,516		365,000		353,310
DaimlerChrysler NA Holding Corp.
company guaranty 8s, 2010		—		—		590,000		634,268		440,000		473,013
DaimlerChrysler NA Holding Corp.
company guaranty 7.2s, 2009		—		—		—		—		35,000		36,468
DaimlerChrysler NA Holding Corp.
company guaranty 6 1/2s, 2013		—		—		35,000		35,841		50,000		51,202

53

CORPORATE BONDS AND NOTES*	Growth 3.2%				Balanced 5.9%				Conservative 8.6%
	Principal				Principal				Principal
	amount		Value		amount		Value		amount		Value
Consumer Cyclicals continued
DaimlerChrysler NA Holding Corp.
notes Ser. MTN, 5 3/4s, 2011	$ —	$	—	$	245,000	$	243,848	$	445,000	$	442,908
Dex Media, Inc. notes 8s, 2013	165,000		163,763		200,000		198,500		105,000		104,213
Ford Motor Co. notes 7.45s, 2031	415,000		320,588		475,000		366,938		240,000		185,400
Ford Motor Credit Corp. bonds 7 3/8s,
2011	70,000		67,188		90,000		86,385		45,000		43,192
Ford Motor Credit Corp. notes 7 7/8s,
2010	640,000		623,282		650,000		633,021		280,000		272,686
Ford Motor Credit Corp. notes 7 3/8s,
2009	155,000		150,630		190,000		184,643		95,000		92,321
Ford Motor Credit Corp. notes 6 1/2s,
2007	—		—		—		—		135,000		134,908
Ford Motor Credit Corp. notes 6 3/8s,
2008	—		—		215,000		206,607		235,000		225,826
Ford Motor Credit Corp.
sr. notes 9 7/8s, 2011	470,000		486,348		540,000		558,783		275,000		284,565
Ford Motor Credit Corp. 144A sr. unsec.
notes 9 3/4s, 2010	145,000		149,709		179,000		184,813		—		—
General Motors Acceptance Corp.
bonds 8s, 2031	—		—		235,000		245,712		320,000		334,586
General Motors Acceptance Corp. FRN
6.457s, 2007	—		—		400,000		397,752		405,000		402,724
General Motors Acceptance Corp. FRN
Ser. MTN, 6.243s, 2007	—		—		395,000		393,666		360,000		358,785
General Motors Acceptance Corp.
notes 7 3/4s, 2010	140,000		143,450		180,000		184,436		95,000		97,341
General Motors Acceptance Corp.
notes 7s, 2012	—		—		230,000		229,073		315,000		313,731
General Motors Acceptance Corp.
notes 6 7/8s, 2012	370,000		366,227		470,000		465,207		240,000		237,552
General Motors Acceptance Corp.
notes 6 7/8s, 2011	475,000		472,483		605,000		601,795		295,000		293,437
General Motors Acceptance Corp.
notes 6 3/4s, 2014	430,000		419,790		495,000		483,246		265,000		258,708
General Motors Acceptance Corp.
notes 5 1/8s, 2008	115,000		112,692		145,000		142,090		70,000		68,595
General Motors Acceptance Corp.
sr. unsub. notes 5.85s, 2009	195,000		191,189		240,000		235,310		130,000		127,459
General Motors Corp. notes 7.2s, 2011	350,000		322,438		395,000		363,894		190,000		175,038
Goodman Global Holding Co., Inc.
sr. notes FRN Ser. B, 8.329s, 2012	212,000		214,915		246,000		249,383		119,000		120,636
Goodyear Tire & Rubber Co. (The)
company guaranty 11s, 2011	170,000		187,425		190,000		209,475		95,000		104,738
Goodyear Tire & Rubber Co. (The)
notes 7.857s, 2011	—		—		4,000		3,890		—		—
Goodyear Tire & Rubber Co. (The)
sr. notes 9s, 2015	330,000		334,950		384,000		389,760		195,000		197,925
GTECH Holdings Corp. notes 4 3/4s, 2010	—		—		150,000		150,653		145,000		145,631
Harrah’s Operating Co., Inc. company
guaranty 5 3/4s, 2017	—		—		160,000		146,329		130,000		118,892
Host Marriott, LP sr. notes Ser. M, 7s,
2012 (R)	320,000		323,600		450,000		455,063		210,000		212,363
Houghton Mifflin Co.
sr. sub. notes 9 7/8s, 2013	280,000		296,100		395,000		417,713		185,000		195,638
iPayment, Inc. 144A
sr. sub. notes 9 3/4s, 2014	65,000		66,300		75,000		76,500		35,000		35,700
JC Penney Co., Inc. debs. 7.65s, 2016	—		—		25,000		28,075		25,000		28,075
JC Penney Co., Inc. notes 6 7/8s, 2015	—		—		195,000		206,062		210,000		221,913

54

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Consumer Cyclicals continued
Jostens IH Corp. company
guaranty 7 5/8s, 2012	$	190,000	$	190,950	$	265,000	$	266,325	$	125,000	$	125,625
K. Hovnanian Enterprises, Inc. company
guaranty 8 7/8s, 2012		70,000		68,600		80,000		78,400		40,000		39,200
K. Hovnanian Enterprises, Inc. company
guaranty 7 3/4s, 2013		135,000		123,525		150,000		137,250		75,000		68,625
Lamar Media Corp. company
guaranty 7 1/4s, 2013		185,000		186,156		260,000		261,625		120,000		120,750
Lamar Media Corp. 144A
sr. sub. notes 6 5/8s, 2015		70,000		67,113		80,000		76,700		40,000		38,350
Lear Corp. company guaranty Ser. B,
8.11s, 2009		290,000		279,850		315,000		303,975		150,000		144,750
Lear Corp. sr. notes 8 1/8s, 2008	EUR	155,000		195,538		165,000		208,153		90,000		113,538
Levi Strauss & Co. sr. notes 9 3/4s,
2015	$	50,000		51,875	$	75,000		77,813	$	40,000		41,500
Levi Strauss & Co. sr. notes 8 7/8s,
2016		115,000		114,425		145,000		144,275		75,000		74,625
Meritage Homes Corp. company
guaranty 6 1/4s, 2015		200,000		170,000		285,000		242,250		130,000		110,500
MGM Mirage, Inc. sr. notes 6 3/4s, 2012		315,000		310,669		436,000		430,005		216,000		213,030
Mohegan Tribal Gaming Authority
sr. sub. notes 6 3/8s, 2009		90,000		89,325		130,000		129,025		59,000		58,558
Movie Gallery, Inc. sr. unsec.
notes 11s, 2012		50,000		32,000		75,000		48,000		35,000		22,400
Neiman-Marcus Group, Inc. company
guaranty 9s, 2015		260,000		276,250		335,000		355,938		165,000		175,313
NTK Holdings, Inc. sr. disc.
notes zero %, 2014		175,000		120,750		215,000		148,350		105,000		72,450
Office Depot, Inc. notes 6 1/4s, 2013		—		—		119,000		121,674		128,000		130,876
Omnicom Group, Inc. sr. notes 5.9s, 2016		—		—		140,000		142,033		150,000		152,178
Owens Corning bonds 7 1/2s,
2018 (In default) †		185,000		94,813		180,000		92,250		100,000		51,250
Owens Corning notes 7 1/2s,
2005 (In default) † ***		145,000		74,675		200,000		103,000		95,000		48,925
Park Place Entertainment Corp.
sr. notes 7s, 2013		—		—		45,000		46,262		80,000		82,243
Park Place Entertainment Corp.
sr. sub. notes 9 3/8s, 2007		—		—		420,000		424,200		215,000		217,150
Park Place Entertainment Corp.
sr. sub. notes 7 7/8s, 2010		285,000		296,400		—		—		—		—
Pinnacle Entertainment, Inc.
sr. sub. notes 8 1/4s, 2012		170,000		172,125		240,000		243,000		115,000		116,438
Ply Gem Industries, Inc.
sr. sub. notes 9s, 2012		35,000		27,913		40,000		31,900		20,000		15,950
PRIMEDIA, Inc. company guaranty 8 7/8s,
2011		—		—		275,000		268,813		—		—
PRIMEDIA, Inc. sr. notes 8s, 2013		265,000		240,488		70,000		63,525		165,000		149,738
R.H. Donnelley Corp. sr. disc.
notes Ser. A-1, 6 7/8s, 2013		55,000		50,188		65,000		59,313		35,000		31,938
R.H. Donnelley Corp. sr. disc.
notes Ser. A-2, 6 7/8s, 2013		95,000		86,688		115,000		104,938		60,000		54,750
R.H. Donnelley Corp.
sr. notes Ser. A-3, 8 7/8s, 2016		145,000		145,363		180,000		180,450		95,000		95,238
Samsonite Corp. sr. sub. notes 8 7/8s,
2011		150,000		157,125		215,000		225,213		100,000		104,750
Scientific Games Corp. company
guaranty 6 1/4s, 2012		165,000		158,813		235,000		226,188		110,000		105,875

55

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Consumer Cyclicals continued
Sealy Mattress Co.
sr. sub. notes 8 1/4s, 2014	$	190,000	$	193,800	$	270,000	$	275,400	$	125,000	$	127,500
Standard Pacific Corp. sr. notes 7s,
2015		90,000		81,000		115,000		103,500		55,000		49,500
Station Casinos, Inc. sr. notes 6s, 2012		455,000		439,075		600,000		579,000		285,000		275,025
Tenneco Automotive, Inc. company
guaranty 8 5/8s, 2014		15,000		14,813		—		—		5,000		4,938
Tenneco Automotive, Inc. sec.
notes Ser. B, 10 1/4s, 2013		265,000		287,525		375,000		406,875		175,000		189,875
Texas Industries, Inc. sr. unsec.
notes 7 1/4s, 2013		105,000		105,000		140,000		140,000		65,000		65,000
THL Buildco, Inc. (Nortek
Holdings, Inc.) sr. sub. notes 8 1/2s,
2014		335,000		316,575		410,000		387,450		200,000		189,000
Trump Entertainment Resorts, Inc. sec.
notes 8 1/2s, 2015		320,000		306,000		430,000		411,188		200,000		191,250
TRW Automotive, Inc. sr. notes 9 3/8s,
2013		317,000		337,605		389,000		414,285		123,000		130,995
TRW Automotive, Inc.
sr. sub. notes 11s, 2013		40,000		43,600		45,000		49,050		100,000		109,000
United Auto Group, Inc. company
guaranty 9 5/8s, 2012		175,000		185,500		245,000		259,700		115,000		121,900
Vertis, Inc. company guaranty Ser. B,
10 7/8s, 2009		240,000		240,000		340,000		340,000		160,000		160,000
Visteon Corp. sr. notes 7s, 2014		25,000		22,375		20,000		17,900		5,000		4,475
Wynn Las Vegas, LLC/Wynn Las Vegas
Capital Corp. 1st mtge. 6 5/8s, 2014		270,000		261,900		380,000		368,600		175,000		169,750
				—————————				—————————				—————————
				13,609,490				20,633,669				12,456,488
Consumer Staples				0.5%				0.8%				1.1%
Adelphia Communications Corp.
sr. notes 10 7/8s, 2010 (In default) †		200,000		123,500		270,000		166,725		125,000		77,188
Affinion Group, Inc. company
guaranty 11 1/2s, 2015		110,000		112,750		135,000		138,375		70,000		71,750
Affinion Group, Inc. company
guaranty 10 1/8s, 2013		160,000		168,000		205,000		215,250		105,000		110,250
Affinity Group, Inc. sr. sub. notes 9s,
2012		175,000		175,000		250,000		250,000		115,000		115,000
AMC Entertainment, Inc. company
guaranty 11s, 2016		65,000		70,850		80,000		87,200		45,000		49,050
AMC Entertainment, Inc.
sr. sub. notes 8s, 2014		255,000		239,700		360,000		338,400		143,000		134,420
Avis Budget Care Rental, LLC 144A
sr. notes 7 3/4s, 2016		120,000		116,100		145,000		140,288		75,000		72,563
Avis Budget Care Rental, LLC 144A
sr. notes 7 5/8s, 2014		95,000		92,150		105,000		101,850		55,000		53,350
Brand Services, Inc. company
guaranty 12s, 2012		190,000		212,800		235,000		263,200		125,000		140,000
Burlington Coat Factory Warehouse Corp.
144A sr. notes 11 1/8s, 2014		160,000		154,400		190,000		183,350		100,000		96,500
CCH, LLC/Capital Corp.
sr. notes 10 1/4s, 2010		275,000		280,500		265,000		270,300		210,000		214,200
CCH I, LLC/Capital Corp. sec.
notes 11s, 2015		440,000		400,400		615,000		559,650		174,000		158,340
CCH II, LLC/Capital Corp.
sr. notes Ser. B, 10 1/4s, 2010		120,000		121,800		150,000		152,250		115,000		116,725
Chiquita Brands International, Inc.
sr. notes 8 7/8s, 2015		25,000		23,063		30,000		27,675		15,000		13,838

56

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Consumer Staples continued
Chiquita Brands International, Inc.
sr. notes 7 1/2s, 2014	$	150,000	$	129,750	$	170,000	$	147,050	$	85,000	$	73,525
Church & Dwight Co., Inc. company
guaranty 6s, 2012		130,000		124,475		180,000		172,350		85,000		81,388
Cinemark, Inc. sr. disc.
notes stepped-coupon zero % (9 3/4s,
3/15/09), 2014 ††		405,000		322,988		545,000		434,638		255,000		203,363
Comcast Corp. company guaranty 5.9s,
2016		—		—		—		—		95,000		95,044
Comcast Corp. company guaranty 4.95s,
2016		—		—		255,000		237,764		—		—
Constellation Brands, Inc. company
guaranty Ser. B, 8s, 2008		225,000		230,625		—		—		135,000		138,375
Constellation Brands, Inc.
sr. sub. notes Ser. B, 8 1/8s, 2012		—		—		270,000		280,800		—		—
Cox Communications, Inc. notes 6 3/4s,
2011		—		—		220,000		229,128		325,000		338,484
Cox Enterprises, Inc. 144A
notes 7 7/8s, 2010		—		—		225,000		241,490		110,000		118,062
CSC Holdings, Inc. debs. Ser. B,
8 1/8s, 2009		405,000		419,681		570,000		590,663		265,000		274,606
CVS Corp. sr. unsec. notes 6 1/8s, 2016		—		—		20,000		20,466		35,000		35,816
CVS Corp. 144A pass-through
certificates 6.117s, 2013		—		—		246,990		249,969		238,473		241,349
Dean Foods Co. company guaranty 7s, 2016		205,000		205,000		390,000		390,000		275,000		275,000
Dean Foods Co. sr. notes 8.15s, 2007		175,000		177,406		270,000		273,713		141,000		142,939
Del Monte Corp. company
guaranty 6 3/4s, 2015		230,000		221,950		320,000		308,800		150,000		144,750
Del Monte Corp. sr. sub. notes 8 5/8s,
2012		35,000		36,706		45,000		47,194		20,000		20,975
Delhaize America, Inc. company
guaranty 8 1/8s, 2011		220,000		236,123		605,000		649,339		465,000		499,079
Diageo PLC company guaranty 8s, 2022		—		—		165,000		201,544		135,000		164,900
DirecTV Holdings, LLC company
guaranty 6 3/8s, 2015		290,000		272,600		395,000		371,300		90,000		84,600
DirecTV Holdings, LLC sr. notes 8 3/8s,
2013		—		—		—		—		85,000		88,081
Dole Food Co. sr. notes 8 5/8s, 2009		98,000		95,795		197,000		192,568		88,000		86,020
Echostar DBS Corp. sr. notes 6 3/8s,
2011		440,000		428,450		620,000		603,725		290,000		282,388
Echostar DBS Corp. 144A sr. notes 7s,
2013		150,000		147,375		165,000		162,113		85,000		83,513
Elizabeth Arden, Inc. company
guaranty 7 3/4s, 2014		210,000		205,800		275,000		269,500		130,000		127,400
Fortune Brands, Inc. notes 5 3/8s, 2016		—		—		240,000		228,927		265,000		252,774
Hertz Corp. 144A sr. notes 8 7/8s, 2014		140,000		146,650		175,000		183,313		90,000		94,275
Insight Midwest, LP/Insight
Capital, Inc. sr. notes 10 1/2s, 2010		160,000		165,600		250,000		258,750		—		—
Insight Midwest, LP/Insight
Capital, Inc. sr. notes 9 3/4s, 2009		—		—		—		—		100,000		101,750
Interpublic Group of Companies, Inc.
notes 6 1/4s, 2014		155,000		134,075		190,000		164,350		100,000		86,500
Ion Media Networks, Inc. 144A sec. FRN
11.757s, 2013		70,000		70,525		90,000		90,675		45,000		45,338
Ion Media Networks, Inc. 144A sec. FRN
8.757s, 2012		90,000		90,675		110,000		110,825		60,000		60,450
Jean Coutu Group, Inc.
sr. notes 7 5/8s, 2012 (Canada)		80,000		84,100		110,000		115,638		50,000		52,563

57

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Consumer Staples continued
Kroger Co. company guaranty 6 3/4s, 2012	$	—	$	—	$	—	$	—	$	150,000	$	157,674
Liberty Media Corp. debs. 8 1/4s, 2030		195,000		194,643		245,000		244,551		120,000		119,780
LIN Television Corp. company
guaranty Ser. B, 6 1/2s, 2013		150,000		139,875		165,000		153,863		80,000		74,600
LIN Television Corp.
sr. sub. notes 6 1/2s, 2013		20,000		18,650		25,000		23,313		15,000		13,988
News America, Inc. company
guaranty 6.4s, 2035		—		—		325,000		318,738		350,000		343,256
News America, Inc. debs. 7 1/4s, 2018		—		—		225,000		247,810		205,000		225,782
News America Holdings, Inc.
debs. 7 3/4s, 2045		—		—		75,000		83,629		80,000		89,204
NTL Cable PLC sr. notes 9 1/8s, 2016
(United Kingdom)		—		—		100,000		103,250		—		—
Nutro Products, Inc. 144A sr. notes FRN
9.23s, 2013		60,000		61,725		80,000		82,300		40,000		41,150
Pinnacle Foods Holding Corp.
sr. sub. notes 8 1/4s, 2013		210,000		210,263		300,000		300,375		140,000		140,175
Playtex Products, Inc. company
guaranty 9 3/8s, 2011		150,000		156,750		215,000		224,675		100,000		104,500
Playtex Products, Inc. sec. notes 8s,
2011		70,000		72,625		80,000		83,000		40,000		41,500
Prestige Brands, Inc.
sr. sub. notes 9 1/4s, 2012		150,000		150,750		210,000		211,050		100,000		100,500
Rainbow National Services, LLC 144A
sr. notes 8 3/4s, 2012		225,000		240,750		320,000		342,400		150,000		160,500
Remington Arms Co., Inc. company
guaranty 10 1/2s, 2011		110,000		101,200		160,000		147,200		70,000		64,400
Sbarro, Inc. company guaranty 11s, 2009		170,000		172,975		235,000		239,113		110,000		111,925
Sinclair Broadcast Group, Inc. company
guaranty 8 3/4s, 2011		260,000		271,700		390,000		407,550		140,000		146,300
Sirius Satellite Radio, Inc. sr. unsec.
notes 9 5/8s, 2013		140,000		136,850		180,000		175,950		90,000		87,975
Six Flags, Inc. sr. notes 8 7/8s, 2010		100,000		96,000		140,000		134,400		70,000		67,200
Spectrum Brands, Inc. company
guaranty 7 3/8s, 2015		335,000		268,000		415,000		332,000		215,000		172,000
Swift & Co. company guaranty 10 1/8s, 2009		50,000		50,875		60,000		61,050		30,000		30,525
TCI Communications, Inc. debs. 9.8s, 2012		—		—		65,000		76,776		50,000		59,059
TCI Communications, Inc. debs. 8 3/4s, 2015		—		—		175,000		207,226		100,000		118,415
TCI Communications, Inc. debs. 7 7/8s, 2013		—		—		530,000		592,234		660,000		737,499
Time Warner Entertainment Co., LP
debs. 8 3/8s, 2023		—		—		—		—		25,000		28,872
Time Warner, Inc. debs. 9.15s, 2023		—		—		25,000		31,060		105,000		130,453
Time Warner, Inc. debs. 9 1/8s, 2013		—		—		705,000		821,454		555,000		646,677
United Rentals NA, Inc. company
guaranty 6 1/2s, 2012		95,000		91,675		120,000		115,800		60,000		57,900
United Rentals NA, Inc.
sr. sub. notes 7 3/4s, 2013		45,000		44,325		48,000		47,280		21,000		20,685
United Rentals NA, Inc.
sr. sub. notes 7s, 2014		250,000		235,000		305,000		286,700		155,000		145,700
Universal City Florida Holding Co.
sr. notes 8 3/8s, 2010		185,000		185,694		260,000		260,975		120,000		120,450
Viacom, Inc. 144A sr. notes 5 3/4s, 2011		—		—		130,000		129,741		140,000		139,721
Young Broadcasting, Inc. company
guaranty 10s, 2011		185,000		172,744		260,000		242,775		124,000		115,785
				—————————				—————————				—————————
				9,310,431				16,849,343				10,330,631

58

CORPORATE BONDS AND NOTES*	Growth 3.2%				Balanced 5.9%				Conservative 8.6%
	Principal				Principal				Principal
	amount		Value		amount		Value		amount		Value
Energy			0.3%				0.4%				0.6%
Anadarko Petroleum Corp.
sr. notes 6.45s, 2036	$ —	$	—	$	245,000	$	249,647	$	210,000	$	213,983
Anadarko Petroleum Corp.
sr. notes 5.95s, 2016	—		—		170,000		171,681		185,000		186,829
Arch Western Finance, LLC
sr. notes 6 3/4s, 2013	455,000		436,800		515,000		494,400		255,000		244,800
Bluewater Finance, Ltd. company
guaranty 10 1/4s, 2012
(Cayman Islands)	115,000		116,438		160,000		162,000		75,000		75,938
Chesapeake Energy Corp. company
guaranty 7 3/4s, 2015	383,000		390,660		—		—		—		—
Chesapeake Energy Corp.
sr. notes 7 1/2s, 2013	—		—		515,000		522,725		250,000		253,750
Chesapeake Energy Corp. sr. unsec.
notes 7 5/8s, 2013	—		—		225,000		229,781		230,000		234,888
Compton Petroleum Corp. company
guaranty 7 5/8s, 2013 (Canada)	160,000		154,400		200,000		193,000		95,000		91,675
Comstock Resources, Inc.
sr. notes 6 7/8s, 2012	125,000		119,219		175,000		166,906		80,000		76,300
Dresser, Inc. company guaranty 10 1/8s,
2011	140,000		146,650		190,000		199,025		80,000		83,800
Encore Acquisition Co.
sr. sub. notes 6s, 2015	290,000		265,350		402,000		367,830		184,000		168,360
Enterprise Products Operating, LP
company guaranty Ser. B, 6 3/8s, 2013	—		—		130,000		133,481		135,000		138,614
Forest Oil Corp. sr. notes 8s, 2011	110,000		113,850		270,000		279,450		120,000		124,200
Hanover Compressor Co. sr. notes 9s,
2014	205,000		217,300		290,000		307,400		135,000		143,100
Harvest Operations Corp.
sr. notes 7 7/8s, 2011 (Canada)	165,000		153,038		205,000		190,138		110,000		102,025
Hess Corp. bonds 7 7/8s, 2029	—		—		240,000		283,615		270,000		319,067
Hilcorp Energy I, LP/Hilcorp
Finance Co. 144A sr. notes 9s, 2016	70,000		72,275		80,000		82,600		40,000		41,300
Inergy, LP/Inergy Finance Corp.
sr. notes 6 7/8s, 2014	285,000		272,888		380,000		363,850		190,000		181,925
Kerr-McGee Corp. sec. notes 6.95s, 2024	180,000		192,848		230,000		246,417		110,000		117,852
Massey Energy Co. sr. notes 6 5/8s, 2010	190,000		185,250		265,000		258,375		125,000		121,875
Motiva Enterprises, LLC 144A
sr. notes 5.2s, 2012	—		—		115,000		114,258		120,000		119,226
Newfield Exploration Co.
sr. notes 7 5/8s, 2011	200,000		206,000		280,000		288,400		130,000		133,900
Newfield Exploration Co.
sr. sub. notes 6 5/8s, 2016	—		—		145,000		141,013		155,000		150,738
Offshore Logistics, Inc. company
guaranty 6 1/8s, 2013	180,000		168,750		245,000		229,688		115,000		107,813
Oslo Seismic Services, Inc. 1st mtge.
8.28s, 2011	54,549		55,916		79,343		81,332		57,028		58,457
Peabody Energy Corp. sr. notes 5 7/8s,
2016	290,000		265,350		410,000		375,150		195,000		178,425
PetroHawk Energy Corp. 144A
sr. notes 9 1/8s, 2013	395,000		396,975		455,000		457,275		230,000		231,150
Plains Exploration & Production Co.
sr. sub. notes 8 3/4s, 2012	295,000		311,963		415,000		438,863		200,000		211,500
Pogo Producing Co.
sr. sub. notes 6 7/8s, 2017	145,000		138,294		190,000		181,213		90,000		85,838
Pogo Producing Co. 144A
sr. sub. notes 7 7/8s, 2013	85,000		86,594		95,000		96,781		50,000		50,938

59

CORPORATE BONDS AND NOTES*	Growth 3.2%				Balanced 5.9%				Conservative 8.6%
	Principal				Principal				Principal
	amount		Value		amount		Value		amount		Value
Energy continued
Premcor Refining Group, Inc.
sr. notes 7 1/2s, 2015	$ —	$	—	$	50,000	$	52,244	$	60,000	$	62,693
Pride International, Inc.
sr. notes 7 3/8s, 2014	195,000		200,850		275,000		283,250		130,000		133,900
Quicksilver Resources, Inc. company
guaranty 7 1/8s, 2016	105,000		99,488		130,000		123,175		70,000		66,325
Sunoco, Inc. notes 4 7/8s, 2014	—		—		130,000		123,645		110,000		104,623
Targa Resources, Inc. 144A company
guaranty 8 1/2s, 2013	60,000		59,850		75,000		74,813		40,000		39,900
Valero Energy Corp. sr. unsec.
notes 7 1/2s, 2032	—		—		160,000		185,345		160,000		185,345
Weatherford International, Ltd. company
guaranty 6 1/2s, 2036	—		—		205,000		209,073		205,000		209,073
Weatherford International, Ltd.
sr. notes 5 1/2s, 2016	—		—		95,000		93,561		105,000		103,410
Whiting Petroleum Corp. company
guaranty 7s, 2014	120,000		117,000		150,000		146,250		75,000		73,125
			—————————				—————————				—————————
			4,943,996				8,597,650				5,226,660
Financial			—%				0.9%				1.8%
American Express Co. FRN 6.8s, 2066	—		—		195,000		206,103		200,000		211,387
Ameriprise Financial, Inc. jr. sub. FRN
7.518s, 2066	—		—		405,000		434,390		450,000		482,656
Bank One Corp. sub. notes 5 1/4s, 2013	—		—		30,000		29,854		115,000		114,441
Barclays Bank PLC FRB 6.278s, 2049
(United Kingdom)	—		—		250,000		237,505		240,000		228,005
Block Financial Corp. notes 5 1/8s, 2014	—		—		155,000		147,708		155,000		147,708
Bosphorus Financial Services, Ltd. 144A
sec. FRN 7.205s, 2012 (Cayman Islands)	200,000		198,566		529,000		525,208		602,000		597,684
Brandywine Operating Partnership, LP
notes 5 3/4s, 2012 (R)	—		—		110,000		110,668		120,000		120,728
Capital One Capital III company
guaranty 7.686s, 2036	—		—		375,000		399,560		375,000		399,560
CIT Group, Inc. sr. notes 5s, 2015	—		—		105,000		100,856		125,000		120,066
CIT Group, Inc. sr. notes 5s, 2014	—		—		805,000		778,196		820,000		792,696
Citigroup, Inc. sub. notes 5s, 2014	—		—		271,000		264,029		463,000		451,090
CNA Financial Corp. unsec.
notes 6 1/2s, 2016	—		—		165,000		169,554		175,000		179,829
CNA Financial Corp. unsec. notes 6s, 2011	—		—		165,000		167,311		170,000		172,381
Colonial Properties Trust notes 6 1/4s, 2014 (R)	—		—		170,000		173,644		185,000		188,966
Countrywide Capital III company
guaranty Ser. B, 8.05s, 2027	—		—		230,000		263,102		180,000		205,906
Deutsche Bank Capital Funding Trust VII
144A FRB 5.628s, 2049	—		—		235,000		229,123		260,000		253,498
Developers Diversified Realty Corp.
unsec. notes 5 3/8s, 2012 (R)	—		—		85,000		84,130		85,000		84,130
E*Trade Finance Corp. sr. notes 8s, 2011	180,000		186,300		255,000		263,925		120,000		124,200
Equity One, Inc. company
guaranty 3 7/8s, 2009 (R)	—		—		190,000		183,202		190,000		183,202
ERP Operating, LP notes 6.584s, 2015	—		—		125,000		133,045		120,000		127,723
Executive Risk Capital Trust company
guaranty Ser. B, 8.675s, 2027	—		—		430,000		451,071		300,000		314,701
Finova Group, Inc. notes 7 1/2s, 2009	204,000		57,120		288,150		80,682		135,150		37,842
Fleet Capital Trust V bank guaranty FRN
6.39s, 2028	—		—		225,000		224,473		220,000		219,484

60

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Financial continued
Fund American Cos., Inc. notes 5 7/8s,
2013	$	—	$	—	$	300,000	$	297,352	$	275,000	$	272,573
GATX Financial Corp. notes 5.8s, 2016		—		—		120,000		118,562		130,000		128,442
Greenpoint Capital Trust I company
guaranty 9.1s, 2027		—		—		130,000		138,233		115,000		122,283
Health Care REIT, Inc. sr. notes 6s,
2013 (R)		—		—		85,000		85,152		90,000		90,161
Heritage Property Investment Trust
company guaranty 5 1/8s, 2014 (R)		—		—		170,000		165,648		160,000		155,904
Hospitality Properties Trust
notes 6 3/4s, 2013 (R)		—		—		175,000		183,969		175,000		183,969
HRPT Properties Trust bonds 5 3/4s,
2014 (R)		—		—		115,000		115,009		105,000		105,008
HRPT Properties Trust notes 6 1/4s,
2016 (R)		—		—		105,000		108,113		95,000		97,816
HSBC Finance Capital Trust IX FRN
5.911s, 2035		—		—		700,000		699,838		800,000		799,814
ILFC E-Capital Trust I 144A FRB 5.9s,
2065		—		—		100,000		100,734		110,000		110,807
ILFC E-Capital Trust II 144A FRB
6 1/4s, 2065		—		—		385,000		384,874		475,000		474,845
International Lease Finance Corp.
notes 4 3/4s, 2012		—		—		75,000		72,871		45,000		43,723
iStar Financial, Inc. sr. unsec.
notes 5 7/8s, 2016 (R)		—		—		345,000		343,382		380,000		378,218
JPMorgan Chase Capital XVIII
bonds Ser. R, 6.95s, 2036		—		—		595,000		631,997		520,000		552,334
JPMorgan Chase Capital XX jr.
sub. Ser. T, 6.55s, 2036		—		—		355,000		358,220		360,000		363,265
JPMorgan Chase & Co. sub. notes 5 1/8s,
2014		—		—		—		—		100,000		98,059
Lehman Brothers E-Capital Trust I FRN
6.173s, 2065		—		—		485,000		487,626		520,000		522,816
Lehman Brothers Holdings, Inc.
notes Ser. MTN, 5 1/2s, 2016		—		—		45,000		44,834		35,000		34,871
Liberty Mutual Insurance 144A
notes 7.697s, 2097		—		—		490,000		501,499		510,000		521,969
Lincoln National Corp. FRB 7s, 2066		—		—		285,000		298,511		315,000		329,933
Loews Corp. notes 5 1/4s, 2016		—		—		95,000		92,109		100,000		96,957
MetLife, Inc. notes 5.7s, 2035		—		—		165,000		160,332		160,000		155,473
MetLife, Inc. notes 5s, 2015		—		—		235,000		227,509		280,000		271,075
Mizuho Financial Group Cayman, Ltd.
bank guaranty 8 3/8s, 2009
(Cayman Islands)		—		—		175,000		185,325		190,000		201,210
Nationwide Financial Services, Inc.
notes 5 5/8s, 2015		—		—		125,000		124,589		425,000		423,602
Nationwide Health Properties, Inc.
notes 6 1/2s, 2011 (R)		—		—		145,000		148,271		150,000		153,384
Nationwide Mutual Insurance Co. 144A
notes 8 1/4s, 2031		—		—		210,000		255,199		—		—
Nuveen Investments, Inc.
sr. notes 5 1/2s, 2015		—		—		110,000		107,493		110,000		107,493
Nuveen Investments, Inc. sr. notes 5s,
2010		—		—		110,000		107,919		110,000		107,919
OneAmerica Financial Partners, Inc.
144A bonds 7s, 2033		—		—		295,000		305,975		330,000		342,277
PNC Bank NA notes 4 7/8s, 2017		—		—		220,000		208,782		225,000		213,527

61

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Financial continued
ProLogis Trust sr. notes 5 3/4s,
2016 (R)	$	—	$	—	$	200,000	$	200,502	$	215,000	$	215,539
Prudential Holdings, LLC 144A
bonds 8.695s, 2023		—		—		320,000		394,461		350,000		431,442
Rouse Co., LP/TRC Co-Issuer, Inc.
sr. notes 6 3/4s, 2013		—		—		165,000		164,893		175,000		174,887
Rouse Co. (The) notes 7.2s, 2012 (R)		—		—		150,000		153,629		170,000		174,113
Royal Bank of Scotland Group PLC
bonds Ser. 1, 9.118s, 2049
(United Kingdom)		—		—		500,000		558,076		480,000		535,753
Safeco Capital Trust I company
guaranty 8.072s, 2037		—		—		285,000		299,886		315,000		331,453
Simon Property Group, LP unsub. 5 3/4s,
2015 (R)		—		—		165,000		166,323		165,000		166,323
Sovereign Bancorp, Inc. 144A
sr. notes 4.8s, 2010		—		—		155,000		151,760		155,000		151,760
St. Paul Travelers Cos., Inc. (The)
sr. unsec. notes 5 1/2s, 2015		—		—		20,000		19,741		20,000		19,741
Swiss Re Capital I, LP 144A company
guaranty FRN 6.854s, 2049		—		—		185,000		190,539		195,000		200,838
Transamerica Capital III company
guaranty 7 5/8s, 2037		—		—		240,000		270,012		240,000		270,012
UBS AG/Jersey Branch FRN 8.39s, 2008
(Jersey)		—		—		685,000		702,981		530,000		543,913
UBS Preferred Funding Trust I company
guaranty 8.622s, 2049		—		—		285,000		317,157		260,000		289,336
Washington Mutual Bank/Henderson NV
sub. notes Ser. BKNT, 5.95s, 2013		—		—		250,000		255,197		250,000		255,197
Westfield Group sr. notes 5.7s, 2016
(Australia)		—		—		205,000		204,508		230,000		229,448
Westpac Capital Trust III 144A
sub. notes FRN 5.819s, 2049
(Australia)		—		—		295,000		293,313		230,000		228,684
				—————————				—————————				—————————
				441,986				17,060,244				17,436,049
Health Care				0.2%				0.3%				0.4%
Bayer Corp. 144A FRB 6.2s, 2008		—		—		220,000		220,948		160,000		160,690
Community Health Systems, Inc.
sr. sub. notes 6 1/2s, 2012		205,000		196,031		280,000		267,750		130,000		124,313
DaVita, Inc. company guaranty 6 5/8s,
2013		195,000		190,369		240,000		234,300		125,000		122,031
Elan Finance PLC/Elan Finance Corp.
company guaranty 7 3/4s, 2011
(Ireland)		135,000		131,794		190,000		185,488		90,000		87,863
HCA, Inc. sr. notes 7 7/8s, 2011		416,000		397,800		590,000		564,188		275,000		262,969
Health Management Associates, Inc.
sr. notes 6 1/8s, 2016		—		—		100,000		95,741		110,000		105,316
Hospira, Inc. notes 5.9s, 2014		—		—		90,000		89,583		85,000		84,607
IASIS Healthcare/IASIS Capital Corp.
sr. sub. notes 8 3/4s, 2014		85,000		82,238		100,000		96,750		50,000		48,375
MedQuest, Inc. company guaranty Ser. B,
11 7/8s, 2012		45,000		39,150		50,000		43,500		25,000		21,750
Omnicare, Inc. sr. sub. notes 6 7/8s,
2015		70,000		67,988		90,000		87,413		45,000		43,706
Omnicare, Inc. sr. sub. notes 6 1/8s,
2013		230,000		217,350		325,000		307,125		150,000		141,750
Psychiatric Solutions, Inc. company
guaranty 7 3/4s, 2015		140,000		136,500		190,000		185,250		90,000		87,750

62

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Health Care continued
Select Medical Corp. company
guaranty 7 5/8s, 2015	$	10,000	$	8,425	$	15,000	$	12,638	$	10,000	$	8,425
Service Corporation International
sr. notes 6 3/4s, 2016		255,000		244,481		360,000		345,150		170,000		162,988
Stewart Enterprises, Inc.
sr. notes 6 1/4s, 2013		205,000		189,625		270,000		249,750		125,000		115,625
Tenet Healthcare Corp. notes 7 3/8s,
2013		300,000		270,375		385,000		346,981		175,000		157,719
Tenet Healthcare Corp. sr. notes
9 1/4s, 2015		165,000		158,813		235,000		226,188		110,000		105,875
Triad Hospitals, Inc.
sr. sub. notes 7s, 2013		320,000		310,800		450,000		437,063		210,000		203,963
US Oncology, Inc. company guaranty 9s,
2012		125,000		129,375		170,000		175,950		80,000		82,800
Vanguard Health Holding Co. II, LLC
sr. sub. notes 9s, 2014		120,000		116,400		170,000		164,900		80,000		77,600
Ventas Realty, LP/Capital Corp. company
guaranty 9s, 2012 (R)		165,000		183,975		235,000		262,025		110,000		122,650
Ventas Realty, LP/Capital Corp. company
guaranty 6 3/4s, 2010 (R)		—		—		65,000		66,138		65,000		66,138
Ventas Realty, LP/Capital Corp.
sr. notes 6 3/4s, 2017 (R)		—		—		145,000		145,906		165,000		166,031
WellPoint, Inc. notes 5s, 2014		—		—		110,000		106,331		105,000		101,497
WellPoint, Inc. unsec. notes 5 1/4s,
2016		—		—		120,000		117,576		145,000		142,071
Wyeth notes 5 1/2s, 2014		—		—		545,000		546,032		550,000		551,042
				—————————				—————————				—————————
				3,071,489				5,580,664				3,355,544
Other				0.2%				0.1%				0.2%
Dow Jones CDX HY 4-T1 pass-through
certificates Ser. 4-T1, 8 1/4s, 2010		—		—		—		—		576,000		586,568
Dow Jones CDX NA HY pass-through
certificates Ser. 5-T1, 8 3/4s, 2010		3,395,000		3,496,769		2,425,000		2,497,636		970,000		999,063
				—————————				—————————				—————————
				3,496,769				2,497,636				1,585,631
Technology				0.2%				0.3%				0.3%
Advanced Micro Devices, Inc.
sr. notes 7 3/4s, 2012		208,000		211,120		280,000		284,200		130,000		131,950
Amkor Technologies, Inc.
sr. notes 7 3/4s, 2013		190,000		174,325		253,000		232,128		116,000		106,430
Amkor Technologies, Inc. sr. unsec.
notes 9 1/4s, 2016		80,000		75,000		95,000		89,063		50,000		46,875
Arrow Electronics, Inc. debs. 7 1/2s,
2027		—		—		160,000		174,812		175,000		191,200
Avnet, Inc. notes 6s, 2015		—		—		160,000		156,117		160,000		156,117
Celestica, Inc. sr. sub. notes 7 7/8s,
2011 (Canada)		60,000		60,300		85,000		85,425		40,000		40,200
Celestica, Inc. sr. sub. notes 7 5/8s,
2013 (Canada)		140,000		138,950		—		—		—		—
Computer Associates International, Inc.
144A sr. notes 6 1/8s, 2014		140,000		130,819		365,000		341,063		275,000		256,965
Electronic Data Systems Corp. sec.
sr. notes Ser. B, 6 1/2s, 2013		280,000		284,039		355,000		360,121		175,000		177,525
Freescale Semiconductor, Inc.
sr. notes Ser. B, 7 1/8s, 2014		240,000		257,400		340,000		364,650		160,000		171,600
Iron Mountain, Inc. company
guaranty 8 3/4s, 2018		60,000		62,250		70,000		72,625		35,000		36,313

63

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Technology continued
Iron Mountain, Inc. company
guaranty 8 5/8s, 2013	$	15,000	$	15,338	$	—	$	—	$	120,000	$	122,700
Iron Mountain, Inc.
sr. sub. notes 8 1/4s, 2011		215,000		216,075		360,000		361,800		40,000		40,200
Lucent Technologies, Inc. debs. 6.45s,
2029		180,000		160,200		255,000		226,950		120,000		106,800
Nortel Networks, Ltd. 144A company
guaranty 10 3/4s, 2016 (Canada)		50,000		53,500		60,000		64,200		30,000		32,100
Nortel Networks, Ltd. 144A company
guaranty FRN 9.73s, 2011 (Canada)		160,000		165,200		185,000		191,013		95,000		98,088
Seagate Technology Hdd Holdings company
guaranty 6.8s, 2016 (Cayman Islands)		95,000		94,198		105,000		104,113		50,000		49,578
Serena Software, Inc. company
guaranty 10 3/8s, 2016		30,000		31,425		35,000		36,663		20,000		20,950
Solectron Global Finance Corp. company
guaranty 8s, 2016		90,000		89,100		110,000		108,900		55,000		54,450
SunGard Data Systems, Inc. company
guaranty 10 1/4s, 2015		140,000		144,200		160,000		164,800		86,000		88,580
SunGard Data Systems, Inc. company
guaranty 9 1/8s, 2013		340,000		351,900		416,000		430,560		206,000		213,210
UGS Capital Corp. II 144A
sr. notes 10.38s, 2011		70,000		71,050		80,000		81,200		40,000		40,600
UGS Corp. company guaranty 10s, 2012		140,000		151,200		160,000		172,800		80,000		86,400
Unisys Corp. sr. notes 8s, 2012		110,000		102,850		135,000		126,225		70,000		65,450
Xerox Corp. sr. notes 6 7/8s, 2011		360,000		370,800		505,000		520,150		235,000		242,050
Xerox Corp. sr. notes 6.4s, 2016		—		—		225,000		223,875		245,000		243,775
Xerox Corp. unsec. sr. notes 6 3/4s,
2017		110,000		111,650		125,000		126,875		60,000		60,900
				——————————				——————————				——————————
				3,522,889				5,100,328				2,881,006
Transportation				—%				0.1%				0.2%
American Airlines, Inc. pass-through
certificates Ser. 01-2, 7.858s, 2011		—		—		115,000		123,625		120,000		129,000
BNSF Funding Trust I company
guaranty FRB 6.613s, 2055		—		—		485,000		487,468		525,000		527,672
Continental Airlines, Inc. pass-through
certificates Ser. 97-4A, 6.9s, 2018		—		—		64,316		65,602		53,597		54,669
Continental Airlines, Inc. pass-through
certificates Ser. 98-1A, 6.648s, 2017		—		—		369,361		374,902		260,497		264,404
Continental Airlines, Inc. pass-through
certificates Ser. 98-3, 6.32s, 2008		—		—		5,000		5,036		75,000		75,540
Kansas City Southern Railway Co.
company guaranty 9 1/2s, 2008		190,000		198,550		255,000		266,475		120,000		125,400
Ryder System, Inc. notes Ser. MTN,
5.95s, 2011		—		—		95,000		96,628		105,000		106,799
Union Pacific Corp. 144A pass-through
certificates 5.214s, 2014		—		—		115,000		113,188		100,000		98,424
				——————————				——————————				——————————
				198,550				1,532,924				1,381,908
Utilities & Power				0.2%				0.7%				1.1%
AEP Texas North Co. sr. notes Ser. B,
5 1/2s, 2013		—		—		165,000		164,086		190,000		188,948
AES Corp. (The) 144A sec. notes 8 3/4s,
2013		380,000		406,600		530,000		567,100		245,000		262,150
Appalachian Power Co. sr. notes 5.8s,
2035		—		—		145,000		136,940		120,000		113,330

64

CORPORATE BONDS AND NOTES*	Growth 3.2%				Balanced 5.9%				Conservative 8.6%
	Principal				Principal				Principal
	amount		Value		amount		Value		amount		Value
Utilities & Power continued
Arizona Public Services Co.
notes 6 1/2s, 2012	$ —	$	—	$	240,000	$	247,699	$	265,000	$	273,501
Atmos Energy Corp. notes 4.95s, 2014	—		—		250,000		236,460		260,000		245,918
Beaver Valley II Funding debs. 9s, 2017	—		—		320,000		361,741		355,000		401,306
CenterPoint Energy Houston
Electric, LLC general ref. mtge.
Ser. M2, 5 3/4s, 2014	—		—		10,000		10,068		90,000		90,613
CenterPoint Energy Resources Corp.
notes 7 3/4s, 2011	—		—		240,000		260,298		185,000		200,646
Cleveland Electric Illuminating Co. (The)
144A sr. notes Ser. D, 7.88s, 2017	—		—		115,000		134,205		110,000		128,370
CMS Energy Corp. sr. notes 7 1/2s, 2009	185,000		190,550		230,000		236,900		120,000		123,600
Colorado Interstate Gas Co.
debs. 6.85s, 2037	30,000		30,163		50,000		50,272		25,000		25,136
Colorado Interstate Gas Co.
sr. notes 5.95s, 2015	10,000		9,563		15,000		14,345		10,000		9,563
Commonwealth Edison Co. 1st mtge. 5.9s,
2036	—		—		205,000		201,174		220,000		215,894
Consolidated Natural Gas Co.
sr. notes 5s, 2014	—		—		180,000		170,922		315,000		299,113
Consumers Energy Co. 1st mtge. 5s, 2012	—		—		255,000		249,141		260,000		254,026
Consumers Energy Co. 1st mtge. Ser. B,
5 3/8s, 2013	—		—		155,000		153,503		140,000		138,647
Dayton Power & Light Co. (The) 1st
mtge. 5 1/8s, 2013	—		—		170,000		166,987		160,000		157,164
Dominion Resources, Inc. jr.
sub. notes FRN 6.3s, 2066	—		—		525,000		523,845		405,000		404,109
Duke Energy Field Services, LLC 144A
notes 5 3/8s, 2015	—		—		55,000		53,588		55,000		53,588
Dynegy-Roseton Danskamme company
guaranty Ser. B, 7.67s, 2016	145,000		148,263		195,000		199,388		90,000		92,025
Edison Mission Energy 144A
sr. notes 7 3/4s, 2016	65,000		65,813		75,000		75,938		40,000		40,500
Edison Mission Energy 144A
sr. notes 7 1/2s, 2013	75,000		75,750		90,000		90,900		45,000		45,450
El Paso Corp. sr. notes Ser. MTN, 7.8s,
2031	490,000		502,250		655,000		671,375		305,000		312,625
Enbridge Energy Partners, LP
sr. notes 5.35s, 2014	—		—		120,000		115,499		115,000		110,686
Entergy Gulf States, Inc. 1st mtge.
5 1/4s, 2015	—		—		215,000		201,458		225,000		210,829
Ferrellgas, LP/Finance
sr. notes 6 3/4s, 2014	215,000		210,163		300,000		293,250		140,000		136,850
Indianapolis Power & Light 144A 1st
mtge. 6.3s, 2013	—		—		115,000		118,656		110,000		113,497
Ipalco Enterprises, Inc. sec.
notes 8 3/8s, 2008	—		—		90,000		92,475		95,000		97,613
Kansas Gas & Electric bonds 5.647s, 2021	—		—		85,000		82,316		80,000		77,474
Kinder Morgan, Inc. sr. notes 6 1/2s,
2012	—		—		150,000		150,106		155,000		155,110
MidAmerican Energy Holdings Co. 144A
bonds 6 1/8s, 2036	—		—		540,000		545,834		565,000		571,104
Midwest Generation, LLC sec.
sr. notes 8 3/4s, 2034	420,000		448,350		565,000		603,138		270,000		288,225
Mirant North America, LLC company
guaranty 7 3/8s, 2013	170,000		170,213		215,000		215,269		115,000		115,144
Monongahela Power Co. 1st mtge. 5s, 2006	—		—		410,000		410,000		365,000		365,000

65

CORPORATE BONDS AND NOTES*		Growth 3.2%				Balanced 5.9%				Conservative 8.6%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Utilities & Power continued
Monongahela Power Co. 144A 1st mtge.
5.7s, 2017	$	—	$	—	$	240,000	$	241,172	$	205,000	$	206,001
National Fuel Gas Co. notes 5 1/4s, 2013		—		—		145,000		142,250		100,000		98,103
Nevada Power Co. 2nd mtge. 9s, 2013		94,000		102,564		244,000		266,230		150,000		163,666
Nevada Power Co. general ref. mtge.
Ser. L, 5 7/8s, 2015		—		—		110,000		109,505		145,000		144,347
NRG Energy, Inc. sr. notes 7 3/8s, 2016		370,000		367,688		455,000		452,156		240,000		238,500
Oncor Electric Delivery Co. debs. 7s,
2022		—		—		145,000		157,137		130,000		140,882
Oncor Electric Delivery Co. sec.
notes 7 1/4s, 2033		—		—		195,000		221,195		220,000		249,553
PacifiCorp Sinking Fund 1st mtge.
5.45s, 2013		—		—		225,000		225,857		180,000		180,685
Potomac Edison Co. 1st mtge. 5.35s, 2014		—		—		—		—		65,000		63,894
Power Receivable Finance, LLC 144A
sr. notes 6.29s, 2012		—		—		230,692		232,738		199,412		201,181
PPL Energy Supply, LLC bonds Ser. A,
5.7s, 2015		—		—		135,000		133,007		145,000		142,859
Progress Energy, Inc. sr. unsec.
notes 5 5/8s, 2016		—		—		205,000		204,863		220,000		219,853
PSEG Energy Holdings, Inc.
sr. notes 8 1/2s, 2011		175,000		186,375		225,000		239,625		110,000		117,150
Public Service Co. of Colorado
sr. notes Ser. A, 6 7/8s, 2009		—		—		215,000		223,248		205,000		212,864
Public Service Co. of New Mexico
sr. notes 4.4s, 2008		—		—		125,000		122,593		100,000		98,074
Sierra Pacific Resources
sr. notes 8 5/8s, 2014		90,000		97,175		125,000		134,965		60,000		64,783
Southern California Edison Co. 1st
mtge. 5s, 2014		—		—		45,000		43,917		55,000		53,676
Southern California Edison Co.
notes 6.65s, 2029		—		—		255,000		275,777		275,000		297,407
Teco Energy, Inc. notes 7.2s, 2011		265,000		276,263		610,000		635,925		430,000		448,275
Teco Energy, Inc. sr. notes 6 3/4s, 2015		10,000		10,250		10,000		10,250		5,000		5,125
Tennessee Gas Pipeline Co. unsec.
notes 7 1/2s, 2017		25,000		26,330		30,000		31,596		15,000		15,798
TransAlta Corp. notes 5 3/4s, 2013
(Canada)		—		—		140,000		139,717		150,000		149,697
TXU Corp. sr. notes Ser. P, 5.55s, 2014		265,000		250,366		330,000		311,777		175,000		165,336
Utilicorp Canada Finance Corp. company
guaranty 7 3/4s, 2011 (Canada)		310,000		325,500		440,000		462,000		205,000		215,250
Westar Energy, Inc. 1st mtge. 5.15s,
2017		—		—		15,000		14,295		45,000		42,884
Westar Energy, Inc. 1st mtge. 5.1s, 2020		—		—		175,000		162,168		165,000		152,902
Williams Cos., Inc. (The) notes 7 5/8s,
2019		390,000		405,600		525,000		546,000		245,000		254,800
Williams Cos., Inc. (The) 144A
notes 6 3/8s, 2010		50,000		49,750		60,000		59,700		30,000		29,850
York Power Funding 144A notes 12s, 2007
(Cayman Islands) (In default) (F) †		—		—		120,485		10,048		44,178		3,684
				——————————				——————————				——————————
				4,355,539				13,614,587				10,694,833
Total corporate bonds and notes
(cost $60,235,944, $118,506,769
and $81,909,477)			$	59,710,512			$	117,656,643			$	81,570,269

66

COLLATERALIZED MORTGAGE OBLIGATIONS*	Growth 2.8%				Balanced 7.8%				Conservative 17.0%
	Principal				Principal				Principal
	amount		Value		amount		Value		amount		Value
AMP CMBS 144A FRB Ser. 06-1A, Class A,
6.14s, 2047 (Cayman Islands)	$ —	$	—	$	—	$	—	$	440,000	$	440,000
Amresco Commercial Mortgage Funding I 144A
Ser. 97-C1, Class G, 7s, 2029	—		—		187,000		187,378		205,000		205,415
Ser. 97-C1, Class H, 7s, 2029	38,000		38,251		173,000		174,144		168,000		169,110
Asset Securitization Corp.
Ser. 96-MD6, Class A7, 8.294s, 2029	—		—		400,000		418,941		401,000		419,989
Ser. 96-D3, Class A1C, 7.4s, 2026	109,182		110,743		668,244		677,802		477,505		484,335
FRB Ser. 97-D5, Class A5, 7.159s, 2043	150,000		162,516		234,000		253,525		247,000		267,610
Banc of America Commercial
Mortgage, Inc.
Ser. 01-1, Class G, 7.324s, 2036	—		—		200,000		212,325		200,000		212,325
Ser. 06-4, Class A4, 5.634s, 2046	480,000		489,547		920,000		938,298		1,140,000		1,162,674
Ser. 04-3, Class A5, 5.481s, 2039	230,000		232,659		920,000		930,635		930,000		940,751
Ser. 06-5, Class A4, 5.414s, 2016	718,000		720,513		1,343,000		1,347,689		1,576,000		1,581,502
Ser. 06-1, Class XC, Interest Only
(IO), 0.046s, 2045	1,777,232		12,936		11,705,186		85,199		12,852,753		93,552
Banc of America Commercial
Mortgage, Inc. 144A
Ser. 01-PB1, Class K, 6.15s, 2035	—		—		133,000		133,620		133,000		133,620
Ser. 02-PB2, Class XC, IO, 0.261s, 2035	2,945,043		55,220		4,383,922		82,199		2,606,027		48,863
Ser. 05-1, Class XW, IO, 0.16s, 2042	21,683,690		98,004		—		—		27,213,452		122,997
Ser. 06-5, Class XC, IO, 0.054s, 2016	1,263,000		19,577		—		—		—		—
Ser. 05-4, Class XC, IO, 0.051s, 2045	6,324,398		45,887		17,999,980		130,601		18,068,713		131,099
Banc of America Large Loan FRB
Ser. 04-BBA4, Class H, 6.28s, 2018	25,000		25,147		70,000		70,413		73,000		73,430
Ser. 04-BBA4, Class G, 6.03s, 2018	—		—		94,000		94,278		98,000		98,290
Banc of America Large Loan 144A
FRB Ser. 02-FL2A, Class L1, 8.33s, 2014	—		—		133,000		133,000		205,000		205,000
FRB Ser. 05-MIB1, Class K, 7.33s, 2022	190,000		188,039		186,000		184,080		187,000		185,070
FRB Ser. 05-ESHA, Class K, 7.13s, 2020	—		—		450,000		450,224		452,000		452,225
FRB Ser. 06-LAQ, Class M, 6.98s, 2021	—		—		245,000		245,740		265,000		265,800
FRB Ser. 06-LAQ, Class L, 6.88s, 2021	—		—		204,000		204,927		221,000		222,004
FRB Ser. 05-MIB1, Class J, 6.38s, 2022	100,000		100,458		409,000		410,874		343,000		344,572
FRB Ser. 06-LAQ, Class K, 6.33s, 2021	122,000		122,372		—		—		—		—
FRB Ser. 05-ESHA, Class G, 6.21s, 2020	100,000		100,170		180,000		180,305		181,000		181,307
FRB Ser. 06-LAQ, Class A3, 5.52s, 2021	443,000		443,136		—		—		—		—
Ser. 06-LAQ, Class X1, IO, 0.697s, 2021	6,661,000		41,272		13,384,000		82,928		19,290,000		119,522
Ser. 03-BBA2, Class X1A, IO, 0.175s,
2015	333,413		5		953,906		15		872,308		13
Banc of America Structured Security
Trust 144A Ser. 02-X1, Class A3,
5.436s, 2033	—		—		366,269		368,018		375,757		377,552
Bayview Commercial Asset Trust 144A
FRB Ser. 05-1A, Class A1, 5.63s, 2035	49,000		49,000		375,668		375,668		277,667		277,667
Ser. 04-3, IO, 1.6s, 2035	502,190		37,429		1,279,563		95,367		1,259,194		93,849
Ser. 06-2A, IO, 0.879s, 2036	164,373		14,525		788,220		69,654		749,771		66,256
Ser. 05-1A, IO, 0.775s, 2035	573,997		43,879		1,597,583		122,128		1,526,369		116,684
Ser. 05-3A, IO, 0.775s, 2035	1,578,144		129,950		5,084,405		418,669		4,592,577		378,170
Bear Stearns Commercial Mortgage
Securities, Inc. Ser. 05-PWR9,
Class X1, IO, 0.045s, 2042	—		—		8,976,075		90,462		13,520,232		136,259
Bear Stearns Commercial Mortgage
Securities, Inc. 144A
FRB Ser. 05-LXR1, Class J, 6.98s, 2018	—		—		453,000		453,000		453,000		453,000
FRB Ser. 05-LXR1, Class H, 6.53s, 2018	—		—		226,000		226,000		227,000		227,000
FRB Ser. 05-LXR1, Class G, 6.28s, 2018	—		—		226,000		226,000		227,000		227,000

67

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%				Balanced 7.8%				Conservative 17.0%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Bear Stearns Commercial Mortgage
Securities, Inc. 144A
Ser. 06-BBA7, Class X1A, IO, 1.765s,
2019	$	—	$	—	$	8,722,000	$	159,675	$	6,374,000	$	116,689
Ser. 05-LXR1, Class X1, IO, 0.818s, 2018		7,727,000		32,227		21,900,000		91,338		21,958,000		91,580
Ser. 05-PW10, Class X1, IO, 0.032s, 2040		11,576,483		52,908		—		—		—		—
Bear Stearns Commercial Mortgage
Securitization Corp.
Ser. 00-WF2, Class F, 8.453s, 2032		—		—		189,000		211,702		124,000		138,895
Ser. 04-PR3I, Class X1, IO, 4.209s, 2041		506,346		11,114		3,392,249		74,460		5,511,839		120,985
Chase Commercial Mortgage
Securities Corp. Ser. 00-3, Class A2,
7.319s, 2032		10,000		10,661		118,000		125,804		116,000		123,672
Chase Commercial Mortgage
Securities Corp. 144A
Ser. 98-1, Class F, 6.56s, 2030		—		—		962,000		990,449		896,000		922,497
Ser. 98-1, Class G, 6.56s, 2030		—		—		249,000		263,148		231,000		244,125
Ser. 98-1, Class H, 6.34s, 2030		91,000		77,499		371,000		315,958		362,000		308,293
Chase Manhattan Bank-First Union
National Ser. 99-1, Class A1,
7.134s, 2031		34,341		34,449		—		—		—		—
Citigroup Commercial Mortgage Trust
144A Ser. 05-C3, Class XC, IO,
0.077s, 2043		13,672,121		144,198		25,418,953		268,091		24,453,338		257,906
Citigroup/Deutsche Bank Commercial
Mortgage Trust 144A Ser. 06-CD2,
Class X, IO, 0.129s, 2046		2,498,016		14,636		16,499,293		96,669		18,105,375		106,079
Commercial Mortgage Acceptance Corp.
Ser. 97-ML1, Class A3, 6.57s, 2030		—		—		397,000		398,248		251,000		251,789
Ser. 97-ML1, Class A2, 6.53s, 2030		110,031		110,031		137,883		137,883		82,730		82,730
Ser. 97-ML1, IO, 0.916s, 2017		2,770,463		29,761		10,460,188		112,365		6,794,392		72,987
Commercial Mortgage Acceptance Corp.
144A Ser. 98-C1, Class F, 6.23s, 2031		—		—		415,000		429,628		404,000		418,240
Commercial Mortgage Pass-Through
Certificates
Ser. 06-C7, Class A4, 5.962s, 2046		80,000		82,816		—		—		—		—
Ser. 04-LB2A, Class A4, 4.715s, 2039		1,231,000		1,182,138		5,553,000		5,332,587		6,161,000		5,916,454
Commercial Mortgage Pass-Through
Certificates 144A
FRB Ser. 01-J2A, Class A2F, 5.83s, 2034		118,000		119,230		326,000		329,397		314,000		317,272
Ser. 06-CN2A, Class H, 5.756s, 2019		66,000		65,685		197,000		196,061		218,000		216,961
Ser. 06-CN2A, Class J, 5.756s, 2019		53,000		52,553		158,000		156,667		174,000		172,532
Ser. 03-LB1A, Class X1, IO, 0.325s, 2038		958,876		40,078		2,038,570		85,206		2,203,496		92,100
Ser. 05-LP5, Class XC, IO, 0.061s, 2043		5,971,082		63,443		13,300,443		141,317		12,939,114		137,478
Ser. 05-C6, Class XC, IO, 0.035s, 2044		8,814,919		59,915		25,840,953		175,641		12,978,764		88,217
Countrywide Alternative Loan Trust
Ser. 04-15, Class 1A1, 4.921s, 2034		27,994		27,850		135,490		134,795		136,236		135,538
Ser. 06-OA10, Class XBI, IO, 1.401s,
2046		379,937		18,047		1,735,308		82,427		1,692,984		80,417
Ser. 05-24, Class 1AX, IO, 1.221s, 2035		3,040,667		58,162		4,420,266		84,551		4,235,552		81,018
Ser. 05-24, Class IIAX, IO, 1.201s, 2035		1,279,128		36,327		3,553,438		100,918		3,398,496		96,517
IFB Ser. 06-6CB, Class 1A3, IO, zero %,
2036		1,844,361		4,899		5,146,188		13,670		5,308,781		14,101
IFB Ser. 06-14CB, Class A9, IO, zero %,
2036		143,656		864		475,861		2,863		455,909		2,743
IFB Ser. 06-19CB, Class A2, IO, zero %,
2036		104,432		306		291,413		854		302,353		886
IFB Ser. 06-20CB, Class A14, IO,
zero %, 2036		59,336		111		258,065		484		247,704		464

68

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%				Balanced 7.8%				Conservative 17.0%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Credit Suisse Mortgage Capital
Certificates Ser. 06-C4, Class A3,
5.467s, 2039	$	1,129,000	$	1,136,492	$	2,093,000	$	2,106,889	$	2,503,000	$	2,519,610
Credit Suisse Mortgage Capital
Certificates 144A
FRB Ser. 06-TFLA, Class K, 6.53s, 2021		50,000		50,037		—		—		484,000		484,359
Ser. 06-C3, Class AX, IO, 0.036s, 2038		15,515,339		17,067		68,689,658		75,559		74,310,520		81,742
CRESI Finance Limited Partnership 144A
FRB Ser. 06-A, Class C, 5.93s, 2017		—		—		155,000		154,999		161,000		160,999
Criimi Mae Commercial Mortgage Trust
144A Ser. 98-C1, Class B, 7s, 2033		1,602,000		1,612,733		—		—		—		—
Crown Castle Towers, LLC 144A
Ser. 05-1A, Class D, 5.612s, 2035		228,000		225,943		620,000		614,407		597,000		591,615
CS First Boston Mortgage
Securities Corp.
Ser. 97-C2, Class F, 7.46s, 2035		52,000		57,455		303,000		334,786		294,000		324,842
Ser. 04-C2, Class A2, 5.416s, 2036		260,000		261,196		1,050,000		1,054,830		1,050,000		1,054,830
Ser. 05-C4, Class A5, 5.104s, 2038		627,000		616,148		1,918,000		1,884,803		3,705,000		3,640,874
CS First Boston Mortgage
Securities Corp. 144A
FRB Ser. 04-TF2A, Class J, 6.28s, 2016		153,000		152,880		310,000		309,756		349,000		348,725
FRB Ser. 05-TFLA, Class J, 6.28s, 2020		—		—		134,000		133,999		131,000		130,999
FRB Ser. 05-TF2A, Class J, 6.23s, 2020		133,000		133,000		449,000		449,000		451,000		451,000
FRB Ser. 05-TFLA, Class H, 6.08s, 2020		—		—		67,000		67,000		64,000		64,000
FRB Ser. 04-TF2A, Class H, 6.03s, 2019		100,000		99,995		132,000		131,993		128,000		127,993
Ser. 01-CK1, Class AY, IO, 0.903s, 2035		5,014,000		132,989		13,888,000		368,358		13,364,000		354,459
Ser. 02-CP3, Class AX, IO, 0.46s, 2035		1,323,049		54,079		9,019,679		368,677		6,514,631		266,284
Ser. 03-C3, Class AX, IO, 0.46s, 2038		6,951,085		289,694		12,228,547		509,639		15,162,173		631,901
Ser. 05-C2, Class AX, IO, 0.091s, 2037		5,805,420		90,030		13,373,093		207,390		16,858,923		261,448
Deutsche Mortgage & Asset
Receiving Corp.
Ser. 98-C1, Class C, 6.861s, 2031		50,000		50,764		—		—		—		—
Ser. 98-C1, Class X, IO, 0.982s, 2031		2,893,370		46,084		11,212,645		178,589		8,396,192		133,730
DLJ Commercial Mortgage Corp.
Ser. 00-CF1, Class A1B, 7.62s, 2033		39,000		41,674		472,000		504,361		463,000		494,744
Ser. 99-CG2, Class B3, 6.1s, 2032		—		—		378,000		379,456		332,000		333,279
Ser. 99-CG2, Class B4, 6.1s, 2032		—		—		571,000		572,196		551,000		552,154
Ser. 98-CF2, Class B3, 6.04s, 2031		—		—		100,000		101,821		100,000		101,821
DLJ Mortgage Acceptance Corp. 144A
Ser. 97-CF1, Class A3, 7.76s, 2030		—		—		250,000		250,579		200,000		200,463
Fannie Mae
IFB Ser. 06-70, Class BS, 14.56s, 2036		—		—		140,677		167,978		131,945		157,552
Ser. 03-W6, Class PT1, 9.721s, 2042		44,788		47,844		178,431		190,611		104,246		111,362
Ser. 04-T3, Class PT1, 9.6s, 2044		40,714		46,212		270,492		307,016		128,694		146,072
Ser. 02-T1, Class A4, 9 1/2s, 2031		5,048		5,341		—		—		—		—
Ser. 02-T4, Class A4, 9 1/2s, 2041		43,282		45,728		350,607		370,416		44,984		47,525
Ser. 02-T6, Class A3, 9 1/2s, 2041		42,357		44,425		107,937		113,205		106,451		111,646
Ser. 02-T12, Class A4, 9 1/2s, 2042		20,919		22,114		53,485		56,540		52,623		55,628
IFB Ser. 06-62, Class PS, 7.92s, 2036		219,437		243,392		418,394		464,067		340,372		377,527
IFB Ser. 05-37, Class SU, 7.88s, 2035		164,944		179,487		659,777		717,946		659,777		717,946
IFB Ser. 06-48, Class TQ, 7.62s, 2036		—		—		667,289		720,894		704,854		761,478
IFB Ser. 06-70, Class SJ, 7.62s, 2036		224,610		251,393		—		—		98,083		109,779
IFB Ser. 06-76, Class QB, 7.62s, 2036		370,477		408,986		584,290		645,024		525,171		579,760
Ser. 99-T2, Class A1, 7 1/2s, 2039		125,674		132,021		34,115		35,838		26,969		28,331
Ser. 00-T6, Class A1, 7 1/2s, 2030		—		—		—		—		1,336		1,395
Ser. 01-T1, Class A1, 7 1/2s, 2040		15,998		16,677		83,484		87,025		53,327		55,589
Ser. 01-T3, Class A1, 7 1/2s, 2040		15,847		16,495		40,147		41,787		41,732		43,437
Ser. 01-T4, Class A1, 7 1/2s, 2028		23,508		24,772		155,149		163,494		126,940		133,768
Ser. 01-T5, Class A3, 7 1/2s, 2030		—		—		250,174		260,685		—		—

69

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%				Balanced 7.8%				Conservative 17.0%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Fannie Mae
Ser. 01-T7, Class A1, 7 1/2s, 2041	$	324,997	$	337,553	$	696,697	$	723,613	$	582,190	$	604,683
Ser. 01-T8, Class A1, 7 1/2s, 2041		284,923		296,412		1,538,218		1,600,244		2,003,503		2,084,289
Ser. 01-T10, Class A2, 7 1/2s, 2041		—		—		—		—		3,280		3,420
Ser. 01-T12, Class A2, 7 1/2s, 2041		62,511		65,162		173,974		181,352		166,930		174,010
Ser. 02-14, Class A2, 7 1/2s, 2042		81,809		85,478		526,290		549,894		623,717		651,690
Ser. 02-26, Class A2, 7 1/2s, 2048		102,513		107,246		589,389		616,605		515,981		539,807
Ser. 02-T1, Class A3, 7 1/2s, 2031		38,363		40,073		794,518		829,943		120,137		125,493
Ser. 02-T4, Class A3, 7 1/2s, 2041		63,606		66,335		473,948		494,284		575,315		599,999
Ser. 02-T6, Class A2, 7 1/2s, 2041		182,653		190,121		1,677,494		1,746,085		2,119,015		2,205,659
Ser. 02-T12, Class A3, 7 1/2s, 2042		23,350		24,369		133,844		139,686		78,388		81,810
Ser. 02-T16, Class A3, 7 1/2s, 2042		331,258		346,960		1,062,700		1,113,076		840,595		880,442
Ser. 02-T18, Class A4, 7 1/2s, 2042		157,979		165,541		259,875		272,314		544,460		570,520
Ser. 02-T19, Class A3, 7 1/2s, 2042		29,521		30,930		—		—		—		—
Ser. 02-W1, Class 2A, 7 1/2s, 2042		92,710		96,539		701,471		730,445		772,682		804,597
Ser. 02-W3, Class A5, 7 1/2s, 2028		52,183		54,523		583,023		609,171		931,718		973,503
Ser. 02-W4, Class A5, 7 1/2s, 2042		218,893		228,898		709,104		741,515		573,659		599,880
Ser. 02-W6, Class 2A, 7 1/2s, 2042		179,716		187,956		463,952		485,225		458,939		479,982
Ser. 02-W7, Class A5, 7 1/2s, 2029		177,650		185,918		121,513		127,168		116,302		121,715
Ser. 03-W1, Class 2A, 7 1/2s, 2042		8,210		8,574		141,304		147,576		142,051		148,355
Ser. 03-W2, Class 1A3, 7 1/2s, 2042		562,333		589,307		153,432		160,791		567,616		594,843
Ser. 03-W3, Class 1A3, 7 1/2s, 2042		112,741		118,111		325,215		340,707		193,992		203,233
Ser. 03-W4, Class 4A, 7 1/2s, 2042		163,641		170,961		69,666		72,782		66,702		69,685
Ser. 03-W10, Class 1A1, 7 1/2s, 2032		36,469		38,099		237,373		247,982		232,841		243,248
Ser. 04-T2, Class 1A4, 7 1/2s, 2043		81,380		85,543		222,625		234,015		213,271		224,182
Ser. 04-T3, Class 1A4, 7 1/2s, 2044		4,117		4,328		18,300		19,236		11,895		12,503
Ser. 04-W2, Class 5A, 7 1/2s, 2044		224,143		235,741		975,781		1,026,272		981,679		1,032,476
Ser. 04-W8, Class 3A, 7 1/2s, 2044		273,878		288,182		734,309		772,662		668,321		703,227
Ser. 04-W9, Class 2A3, 7 1/2s, 2044		75,943		79,772		—		—		—		—
Ser. 04-W11, Class 1A4, 7 1/2s, 2044		193,847		203,880		785,668		826,330		755,808		794,925
Ser. 04-W12, Class 1A4, 7 1/2s, 2044		81,845		86,071		152,740		160,625		148,129		155,776
Ser. 04-W14, Class 2A, 7 1/2s, 2044		27,654		29,071		71,386		75,044		71,386		75,044
Ser. 05-W1, Class 1A4, 7 1/2s, 2044		224,693		236,228		624,422		656,480		599,594		630,378
Ser. 05-W3, Class 1A, 7 1/2s, 2045		359,984		379,729		1,310,263		1,382,132		188,379		198,711
IFB Ser. 06-30, Class KN, 7.38s, 2036		96,552		98,453		412,276		420,395		1,476,276		1,505,348
IFB Ser. 06-63, Class SP, 7.32s, 2036		402,091		441,677		635,342		697,892		570,930		627,138
IFB Ser. 06-60, Class TK, 7.28s, 2036		99,984		105,129		258,960		272,285		243,962		256,515
Ser. 01-W3, Class A, 7s, 2041		92,867		96,084		112,652		116,554		113,258		117,181
Ser. 02-14, Class A1, 7s, 2042		226,610		233,800		461,502		476,146		434,105		447,880
Ser. 02-26, Class A1, 7s, 2048		54,129		55,911		307,345		317,465		308,666		318,829
Ser. 02-T4, Class A2, 7s, 2041		26,621		27,451		121,165		124,941		91,216		94,059
Ser. 02-T16, Class A2, 7s, 2042		55,063		56,983		312,442		323,338		313,705		324,645
Ser. 03-W3, Class 1A2, 7s, 2042		89,632		92,765		145,081		150,154		146,094		151,202
Ser. 03-W8, Class 2A, 7s, 2042		46,800		48,485		—		—		—		—
Ser. 04-T2, Class 1A3, 7s, 2043		60,779		63,104		—		—		—		—
Ser. 04-T3, Class 1A3, 7s, 2044		99,771		103,578		365,965		379,928		—		—
Ser. 04-W1, Class 2A2, 7s, 2033		551,318		572,112		1,431,207		1,485,188		1,376,511		1,428,429
Ser. 04-W12, Class 1A3, 7s, 2044		220,440		229,018		—		—		—		—
Ser. 05-W4, Class 1A3, 7s, 2035		198,966		207,077		803,000		835,734		688,059		716,107
IFB Ser. 06-42, Class JS, 6.96s, 2036		136,000		137,649		—		—		—		—
IFB Ser. 05-74, Class SK, 5.473s, 2035		203,470		205,631		693,206		700,568		667,662		674,753
IFB Ser. 05-74, Class CS, 5.363s, 2035		176,164		177,285		425,437		428,143		428,079		430,803
IFB Ser. 06-30, Class HK, 5.28s, 2036		199,532		199,753		—		—		—		—
IFB Ser. 05-74, Class CP, 5.207s, 2035		176,164		179,507		373,468		380,555		375,230		382,350
IFB Ser. 05-76, Class SA, 5.207s, 2034		183,239		183,693		529,357		530,668		532,013		533,330
IFB Ser. 06-70, Class US, 5.17s, 2032		195,920		196,248		587,759		588,744		567,188		568,138
IFB Ser. 05-57, Class CD, 5.138s, 2035		182,992		184,522		329,385		332,140		320,235		322,914
IFB Ser. 06-8, Class PK, 5.08s, 2036		212,318		211,233		630,197		626,977		692,927		689,387
IFB Ser. 05-99, Class SA, 5.023s, 2035		92,809		92,786		446,413		446,302		448,269		448,158

70

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%				Balanced 7.8%				Conservative 17.0%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Fannie Mae
IFB Ser. 05-106, Class US, 5.023s, 2035	$	286,552	$	291,364	$	913,893	$	929,240	$	917,509	$	932,917
IFB Ser. 06-8, Class HP, 5.023s, 2036		194,280		195,846		551,411		555,858		609,505		614,420
IFB Ser. 06-8, Class WK, 5.023s, 2036		195,010		194,626		855,121		853,434		940,925		939,070
IFB Ser. 06-27, Class SP, 5.023s, 2036		200,000		202,980		452,000		458,734		498,000		505,420
Ser. 06-104, Class CI, 5s, 2036		132,000		8,055		436,000		26,607		603,000		36,798
Ser. 06-104, Class CS, 5s, 2036		155,000		157,630		644,000		654,929		797,000		810,526
IFB Ser. 05-114, Class SP, 4.923s, 2036		—		—		263,180		254,627		265,066		256,452
IFB Ser. 05-45, Class DA, 4.877s, 2035		207,922		208,861		622,899		625,712		726,860		730,142
IFB Ser. 05-74, Class DM, 4.84s, 2035		250,921		250,854		857,390		857,159		825,470		825,249
IFB Ser. 05-45, Class DC, 4.767s, 2035		173,268		173,312		606,439		606,592		433,170		433,280
IFB Ser. 06-46, Class SK, 4.657s, 2036		263,807		260,407		—		—		—		—
IFB Ser. 06-60, Class CS, 4.547s, 2036		126,778		121,560		277,142		265,736		249,624		239,351
IFB Ser. 05-57, Class DC, 4.453s, 2034		187,086		186,747		587,985		586,920		570,167		569,135
IFB Ser. 05-45, Class PC, 4.26s, 2034		92,210		91,461		278,321		276,060		279,167		276,899
IFB Ser. 05-95, Class CP, 4.059s, 2035		—		—		87,032		85,932		87,032		85,932
IFB Ser. 05-95, Class OP, 3.892s, 2035		—		—		227,000		211,095		228,000		212,025
IFB Ser. 05-106, Class JC, 3.597s, 2035		—		—		179,175		163,228		170,458		155,287
IFB Ser. 05-83, Class QP, 3.536s, 2034		—		—		144,350		134,434		144,350		134,434
IFB Ser. 02-89, Class S, IO, 2.87s, 2033		212,495		19,789		739,833		68,897		709,336		66,057
IFB Ser. 02-36, Class QH, IO, 2.72s,
2029		4,542		43		17,010		163		12,682		121
IFB Ser. 06-90, Class SE, IO, 2.47s,
2036		229,392		20,735		833,885		75,375		1,213,909		109,726
IFB Ser. 03-66, Class SA, IO, 2.32s,
2033		247,572		19,032		804,941		61,880		807,879		62,106
Ser. 03-W12, Class 2, IO, 2.235s, 2043		1,393,237		79,066		2,776,100		157,544		2,283,464		129,587
IFB Ser. 03-48, Class S, IO, 2.22s, 2033		114,710		8,872		365,244		28,249		365,713		28,286
Ser. 03-W10, Class 1, IO, 1.954s, 2043		1,232,315		54,287		5,890,662		259,498		8,572,675		377,648
Ser. 03-W10, Class 3, IO, 1.927s, 2043		429,912		19,839		1,765,128		81,454		1,377,141		63,550
IFB Ser. 05-113, Class AI, IO, 1.9s,
2036		—		—		277,616		19,088		403,962		27,775
IFB Ser. 05-113, Class DI, IO, 1.9s,
2036		1,620,034		95,763		5,525,731		326,637		5,062,318		299,243
IFB Ser. 04-24, Class CS, IO, 1.82s,
2034		306,361		21,445		1,057,415		74,019		1,021,202		71,484
IFB Ser. 04-89, Class EI, IO, 1.82s,
2034		817,141		56,682		—		—		—		—
IFB Ser. 03-122, Class SA, IO, 1.77s,
2028		394,691		19,237		1,402,501		68,357		1,349,595		65,778
IFB Ser. 03-122, Class SJ, IO, 1.77s,
2028		419,462		20,837		1,490,480		74,039		1,431,385		71,104
IFB Ser. 06-60, Class DI, IO, 1.74s,
2035		229,575		12,125		833,375		44,015		1,213,200		64,076
IFB Ser. 04-60, Class SW, IO, 1.72s,
2034		560,038		38,885		1,949,653		135,370		1,869,173		129,782
IFB Ser. 05-65, Class KI, IO, 1.67s,
2035		1,044,391		54,253		1,541,566		80,079		1,925,657		100,031
Ser. 03-W8, Class 12, IO, 1.639s, 2042		1,854,346		81,218		6,579,896		288,190		5,066,292		221,897
IFB Ser. 05-42, Class SA, IO, 1.47s,
2035		465,821		26,140		1,621,028		90,964		1,554,482		87,230
IFB Ser. 05-17, Class ES, IO, 1.42s,
2035		233,044		14,882		828,078		52,882		795,245		50,785
IFB Ser. 05-17, Class SY, IO, 1.42s,
2035		174,956		11,010		384,735		24,211		369,480		23,251
IFB Ser. 05-73, Class SI, IO, 1.42s,
2035		83,037		4,635		420,999		23,501		405,222		22,620
IFB Ser. 05-82, Class SY, IO, 1.4s, 2035		570,377		28,611		1,943,939		97,511		1,871,358		93,870

71

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%				Balanced 7.8%				Conservative 17.0%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Fannie Mae
IFB Ser. 05-45, Class SR, IO, 1.39s,
2035	$	745,760	$	38,093	$	2,596,201	$	132,611	$	2,489,032	$	127,137
IFB Ser. 04-92, Class S, IO, 1.37s, 2034		238,270		13,738		1,324,720		76,378		1,328,467		76,594
IFB Ser. 05-17, Class SA, IO, 1.37s,
2035		995,897		59,357		1,120,386		66,776		1,075,965		64,129
IFB Ser. 05-17, Class SE, IO, 1.37s,
2035		335,558		19,713		1,192,343		70,046		1,145,069		67,268
IFB Ser. 05-23, Class SG, IO, 1.37s,
2035		348,935		21,355		1,240,575		75,923		1,191,576		72,924
IFB Ser. 05-29, Class SX, IO, 1.37s,
2035		414,898		23,150		1,474,264		82,259		1,415,813		78,997
IFB Ser. 05-29, Class SY, IO, 1.37s,
2035		1,045,448		64,254		—		—		—		—
IFB Ser. 05-54, Class SA, IO, 1.37s,
2035		531,630		25,751		1,837,269		88,993		1,773,745		85,916
IFB Ser. 05-57, Class CI, IO, 1.37s,
2035		315,713		16,503		1,108,846		57,961		1,062,644		55,546
IFB Ser. 05-57, Class DI, IO, 1.37s,
2035		766,757		38,904		2,671,010		135,522		2,561,474		129,965
IFB Ser. 05-69, Class AS, IO, 1.37s,
2035		154,108		8,260		431,045		23,104		431,808		23,145
IFB Ser. 05-84, Class SG, IO, 1.37s,
2035		516,040		30,380		1,649,991		97,137		1,655,001		97,432
IFB Ser. 05-95, Class CI, IO, 1.37s,
2035		286,572		17,531		926,581		56,684		930,923		56,950
IFB Ser. 05-104, Class SI, IO, 1.37s,
2033		—		—		2,188,270		129,414		2,197,813		129,979
IFB Ser. 06-16, Class SM, IO, 1.37s,
2036		407,951		26,310		—		—		—		—
IFB Ser. 05-83, Class QI, IO, 1.36s,
2035		—		—		238,402		16,298		240,265		16,426
IFB Ser. 05-73, Class SD, IO, 1.35s,
2035		313,913		20,433		1,068,495		69,550		1,028,512		66,947
IFB Ser. 05-92, Class SC, IO, 1.35s,
2035		675,620		39,477		2,182,515		127,527		2,192,612		128,117
IFB Ser. 05-83, Class SL, IO, 1.34s,
2035		1,281,627		63,226		4,167,047		205,572		4,182,686		206,343
IFB Ser. 06-20, Class IG, IO, 1.32s,
2036		1,769,759		76,779		5,233,019		227,029		5,767,716		250,226
Ser. 03-W6, Class 11, IO, 1.286s, 2035		56,033		46		44,449		36		106,924		87
IFB Ser. 06-8, Class PS, IO, 1.27s, 2036		266,862		17,075		—		—		—		—
IFB Ser. 06-44, Class IS, IO, 1.27s,
2036		460,686		23,817		1,251,258		64,690		1,425,338		73,690
IFB Ser. 06-45, Class SM, IO, 1.27s,
2036		256,123		11,397		1,339,578		59,611		1,448,292		64,449
IFB Ser. 06-45, Class XS, IO, 1.27s,
2034		489,889		26,248		—		—		—		—
IFB Ser. 05-95, Class OI, IO, 1.26s,
2035		—		—		134,178		9,228		135,123		9,293
IFB Ser. 06-20, Class IB, IO, 1.26s,
2036		758,218		31,725		2,243,098		93,855		2,471,878		103,427
IFB Ser. 06-42, Class IB, IO, 1.26s,
2036		—		—		1,104,645		47,799		1,194,933		51,705
IFB Ser. 06-92, Class JI, IO, 1 1/4s,
2036		305,000		17,712		769,000		44,656		999,000		58,012
IFB Ser. 06-85, Class TS, IO, 1.23s,
2036		380,167		16,186		1,441,054		61,353		1,692,840		72,073

72

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%				Balanced 7.8%				Conservative 17.0%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Fannie Mae
IFB Ser. 06-61, Class SE, IO, 1.22s,
2036	$	576,953	$	25,242	$	1,816,298	$	79,463	$	2,027,603	$	88,708
IFB Ser. 03-112, Class SA, IO, 1.17s,
2028		254,523		7,712		809,616		24,531		810,453		24,556
IFB Ser. 03-124, Class ST, IO, 1.17s,
2034		161,893		6,982		—		—		—		—
Ser. 03-W17, Class 12, IO, 1.159s, 2033		—		—		2,119,319		82,514		2,034,659		79,218
Ser. 03-T2, Class 2, IO, 0.827s, 2042		915,396		18,744		8,810,690		180,415		6,264,744		128,282
IFB Ser. 05-67, Class BS, IO, 0.82s,
2035		329,561		9,623		1,072,544		31,318		1,076,222		31,426
IFB Ser. 05-74, Class SE, IO, 0.77s,
2035		2,434,073		68,891		3,304,786		93,534		3,021,002		85,502
IFB Ser. 05-82, Class SI, IO, 0.77s,
2035		1,026,180		31,106		3,495,794		105,966		3,366,047		102,033
IFB Ser. 05-74, Class NI, IO, 0 3/4s,
2035		501,806		21,847		—		—		—		—
IFB Ser. 05-87, Class SE, IO, 0.72s,
2035		2,471,140		68,848		8,035,535		223,878		8,065,460		224,712
Ser. 03-W6, Class 51, IO, 0.678s, 2042		614,732		10,208		2,749,743		45,661		2,177,750		36,163
IFB Ser. 04-54, Class SW, IO, 0.67s,
2033		158,911		4,603		506,467		14,670		506,955		14,684
IFB Ser. 05-58, Class IK, IO, 0.67s,
2035		266,814		11,815		923,305		40,886		891,214		39,465
Ser. 01-T12, Class IO, 0.569s, 2041		3,336,901		43,370		1,673,741		21,754		1,113,770		14,476
Ser. 03-W2, Class 1, IO, 0.47s, 2042		445,366		5,010		15,637,293		175,907		12,519,731		140,837
Ser. 01-50, Class B1, IO, 0.46s, 2041		4,014,008		37,013		2,838,282		26,172		1,900,232		17,522
Ser. 02-T4, IO, 0.451s, 2041		8,998,237		89,402		9,457,768		93,968		5,980,558		59,420
Ser. 02-T1, Class IO, IO, 0.429s, 2031		1,466,371		13,992		1,820,855		17,374		1,156,196		11,032
Ser. 02-W8, Class 1, IO, 0.368s, 2042		1,655,959		12,045		—		—		—		—
Ser. 03-W6, Class 3, IO, 0.365s, 2042		814,068		7,403		3,640,939		33,111		2,883,756		26,225
Ser. 03-W6, Class 23, IO, 0.352s, 2042		894,763		7,868		4,001,105		35,184		3,168,811		27,865
Ser. 01-79, Class BI, IO, 0.33s, 2045		1,482,118		13,049		10,101,205		88,937		7,182,573		63,240
IFB Ser. 04-89, Class EX, IO, 0.05s, 2034		679,692		1,083		—		—		—		—
Ser. 03-W8, Class 11, IO, 0.03s, 2042		334,011		26		1,180,786		91		910,512		70
Ser. 03-W6, Class 21, IO, 0.004s, 2042		135,518		1		107,545		1		258,579		2
Ser. 342, Class 1, Principal Only (PO),
zero %, 2033		142,458		111,362		371,472		290,386		367,572		287,337
Ser. 361, Class 1, PO, zero %, 2035		481,703		385,829		1,936,252		1,550,878		2,076,584		1,663,280
Ser. 363, Class 1, PO, zero %, 2035		1,667,391		1,231,941		3,269,251		2,415,466		3,372,743		2,491,930
Ser. 367, Class 1, PO, zero %, 2036		95,158		70,298		318,779		235,497		350,181		258,696
Ser. 371, Class 1, PO, zero %, 2036		—		—		433,705		365,955		487,569		411,405
Ser. 02-82, Class TO, PO, zero %, 2032		101,208		81,251		318,110		255,383		285,180		228,946
Ser. 03-34, Class P1, PO, zero %, 2043		47,471		32,751		—		—		—		—
Ser. 04-38, Class AO, PO, zero %, 2034		381,280		276,130		1,060,227		767,836		984,138		712,731
Ser. 04-61, Class CO, PO, zero %, 2031		233,000		186,946		705,000		565,652		632,000		507,081
FRB Ser. 05-36, Class QA, zero %, 2035		—		—		122,438		118,369		118,180		114,252
FRB Ser. 05-57, Class UL, zero %, 2035		187,799		187,357		648,576		647,052		626,443		624,971
FRB Ser. 05-65, Class CU, zero %, 2034		—		—		178,245		223,274		171,468		214,784
FRB Ser. 05-65, Class ER, zero %, 2035		187,385		185,289		636,220		629,104		612,519		605,668
FRB Ser. 05-79, Class FE, zero %, 2035		68,881		71,419		—		—		—		—
FRB Ser. 05-81, Class DF, zero %, 2033		—		—		86,470		90,101		83,767		87,286
Ser. 05-113, Class DO, PO, zero %, 2036		248,941		200,315		849,464		683,537		778,229		626,216
FRB Ser. 05-117, Class GF, zero %, 2036		—		—		191,952		180,705		211,872		199,457
FRB Ser. 06-1, Class HF, zero %, 2032		—		—		87,900		86,352		133,794		131,438
Federal Home Loan Mortgage Corp.
Structured Pass-Through Securities
Ser. T-42, Class A6, 9 1/2s, 2042		22,079		23,341		56,238		59,452		55,405		58,572
Ser. T-41, Class 3A, 7 1/2s, 2032		101,989		106,391		684,172		713,698		683,094		712,573

73

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%				Balanced 7.8%				Conservative 17.0%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount	Value
Federal Home Loan Mortgage Corp.
Structured Pass-Through Securities
Ser. T-42, Class A5, 7 1/2s, 2042	$	138,871	$	144,949	$	325,830	$	340,089	$	546,367	570,276
Ser. T-51, Class 2A, 7 1/2s, 2042		146,299		152,619		322,460		336,389		374,545	390,724
Ser. T-57, Class 1A3, 7 1/2s, 2043		225,085		235,820		738,309		773,521		737,576	772,753
Ser. T-58, Class 4A, 7 1/2s, 2043		670,955		702,591		218,069		228,351		120,018	125,677
Ser. T-59, Class 1A3, 7 1/2s, 2043		230,768		243,216		315,371		332,381		505,626	532,898
Ser. T-60, Class 1A3, 7 1/2s, 2044		345,716		363,518		1,112,714		1,170,010		1,098,265	1,154,818
Ser. T-41, Class 2A, 7s, 2032		18,377		18,941		52,189		53,791		52,557	54,170
Ser. T-60, Class 1A2, 7s, 2044		172,132		178,629		1,052,751		1,092,489		1,058,962	1,098,934
Ser. T-56, Class A, IO, 0.605s, 2043		815,745		10,905		2,865,419		38,306		2,285,418	30,553
Ser. T-56, Class 3, IO, 0.358s, 2043		769,902		8,851		2,556,877		29,393		2,088,845	24,013
Ser. T-56, Class 1, IO, 0.28s, 2043		963,382		7,582		3,199,969		25,185		2,613,885	20,572
Ser. T-56, Class 2, IO, 0.045s, 2043		873,414		2,562		2,900,331		8,508		2,369,348	6,950
FFCA Secured Lending Corp.
Ser. 99-1A, Class C1, 7.59s, 2025		100,000		74,622		—		—		—	—
FFCA Secured Lending Corp. 144A
Ser. 00-1, Class A2, 7.77s, 2027		139,556		149,926		474,918		510,209		250,987	269,638
Ser. 00-1, Class X, IO, 1.381s, 2020		476,685		26,402		1,842,969		102,074		1,177,842	65,236
First Union National Bank-Bank
of America Commercial Mortgage 144A
Ser. 01-C1, Class 3, IO, 1.952s, 2033		—		—		6,761,977		404,100		6,022,779	359,925
First Union-Lehman Brothers Commercial
Mortgage Trust II
Ser. 97-C2, Class F, 7 1/2s, 2029		—		—		580,000		637,715		538,000	591,536
Ser. 97-C2, Class G, 7 1/2s, 2029		71,000		79,113		185,000		206,139		288,000	320,909
Ser. 97-C1, Class A3, 7.38s, 2029		63,019		63,014		—		—		—	—
First Union-Lehman Brothers-Bank
of America 144A Ser. 98-C2, Class G,
7s, 2035		—		—		717,000		771,901		703,000	756,829
Freddie Mac
IFB Ser. 3153, Class SQ, 7.56s, 2036		502,868		550,764		—		—		—	—
IFB Ser. 3153, Class UK, 7.44s, 2036		438,099		498,196		97,355		110,710		575,370	654,298
IFB Ser. 3182, Class PS, 7.28s, 2032		97,813		106,807		571,226		623,751		569,270	621,615
IFB Ser. 3202, Class PS, 7.26s, 2036		—		—		339,861		361,321		574,692	610,981
IFB Ser. 3153, Class SX, 6.6s, 2036		316,647		337,210		273,336		291,087		—	—
IFB Ser. 3202, Class HM, 6.6s, 2036		—		—		210,953		225,073		315,934	337,081
IFB Ser. 3081, Class DC, 5.175s, 2035		192,916		191,367		368,471		365,511		368,471	365,511
IFB Ser. 2996, Class SA, 5.143s, 2035		—		—		317,297		300,036		317,297	300,036
IFB Ser. 3114, Class GK, 5.08s, 2036		—		—		218,291		217,745		239,354	238,756
IFB Ser. 2976, Class KL, 4.84s, 2035		194,073		191,144		619,724		610,368		594,410	585,436
IFB Ser. 2979, Class AS, 4.73s, 2034		—		—		159,339		157,846		160,245	158,742
IFB Ser. 2990, Class DP, 4.73s, 2034		92,275		90,951		546,271		538,427		526,893	519,327
IFB Ser. 3153, Class UT, 4.473s, 2036		192,134		185,434		157,549		152,056		—	—
IFB Ser. 3065, Class DC, 3.87s, 2035		191,446		177,158		545,388		504,684		547,255	506,412
IFB Ser. 3050, Class SA, 3.55s, 2034		—		—		397,883		361,995		400,752	364,605
IFB Ser. 3031, Class BS, 3.4s, 2035		228,885		211,610		—		—		—	—
IFB Ser. 2990, Class LB, 3.323s, 2034		192,404		176,674		652,864		599,491		624,844	573,762
IFB Ser. 2990, Class WP, 3.277s, 2035		90,419		85,721		426,778		404,603		412,310	390,888
IFB Ser. 2927, Class SI, IO, 3.17s, 2035		267,485		28,554		951,412		101,562		913,772	97,544
IFB Ser. 3012, Class ST, 2.772s, 2035		92,179		83,003		—		—		—	—
IFB Ser. 2828, Class GI, IO, 2.17s, 2034		293,260		26,225		961,407		85,976		960,314	85,878
IFB Ser. 2869, Class SH, IO, 1.97s, 2034		157,208		9,147		542,061		31,540		520,569	30,289
IFB Ser. 2869, Class JS, IO, 1.92s, 2034		717,897		41,064		2,353,509		134,621		2,350,834	134,468
IFB Ser. 2594, Class SE, IO, 1.72s, 2030		333,666		16,416		—		—		—	—
IFB Ser. 2815, Class PT, IO, 1.72s, 2032		292,587		19,978		1,039,654		70,988		998,434	68,174
IFB Ser. 2828, Class TI, IO, 1.72s, 2030		172,953		10,377		526,685		31,601		528,250	31,695
IFB Ser. 3033, Class SF, IO, 1.47s, 2035		234,939		9,398		761,798		30,472		764,428	30,577
IFB Ser. 2922, Class SE, IO, 1.42s, 2035		415,219		20,501		1,445,335		71,363		1,385,705	68,419

74

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%				Balanced 7.8%				Conservative 17.0%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Freddie Mac
IFB Ser. 3028, Class ES, IO, 1.42s, 2035	$	824,718	$	57,976	$	2,633,591	$	185,137	$	2,644,031	$	185,871
IFB Ser. 3045, Class DI, IO, 1.4s, 2035		461,197		20,459		3,392,153		150,476		5,063,750		224,628
IFB Ser. 2927, Class ES, IO, 1.37s, 2035		215,914		10,348		765,437		36,686		735,404		35,246
IFB Ser. 2950, Class SM, IO, 1.37s, 2016		299,527		16,145		1,064,314		57,367		1,022,116		55,092
IFB Ser. 3054, Class CS, IO, 1.37s, 2035		205,164		10,226		614,578		30,633		619,157		30,861
IFB Ser. 3066, Class SI, IO, 1.37s, 2035		700,538		47,304		1,784,749		120,516		1,791,430		120,967
IFB Ser. 3107, Class DC, IO, 1.37s, 2035		418,637		28,908		2,484,626		171,572		2,739,110		189,145
IFB Ser. 3118, Class SD, IO, 1.37s, 2036		693,470		28,710		2,414,287		99,951		2,314,523		95,821
IFB Ser. 3129, Class SP, IO, 1.37s, 2035		161,130		7,906		1,078,105		52,895		1,165,018		57,159
IFB Ser. 3136, Class NS, IO, 1.37s, 2036		1,267,675		75,014		1,711,851		101,298		1,910,355		113,044
IFB Ser. 3031, Class BI, IO, 1.36s, 2035		176,588		12,590		496,210		35,377		497,976		35,503
IFB Ser. 2962, Class BS, IO, 1.32s, 2035		914,972		43,978		3,206,101		154,099		3,054,200		146,798
IFB Ser. 2986, Class WS, IO, 1.32s, 2035		182,223		5,369		620,625		18,287		597,752		17,613
IFB Ser. 3067, Class SI, IO, 1.32s, 2035		926,295		63,997		2,080,050		143,709		2,090,697		144,445
IFB Ser. 3114, Class BI, IO, 1.32s, 2030		442,519		18,788		1,435,540		60,948		1,445,328		61,363
IFB Ser. 3114, Class TS, IO, 1.32s, 2030		1,133,762		51,005		3,671,282		165,163		3,699,825		166,447
IFB Ser. 2990, Class LI, IO, 1.3s, 2034		268,974		17,114		950,953		60,506		910,173		57,911
IFB Ser. 3128, Class JI, IO, 1.3s, 2036		692,362		42,814		1,895,594		117,218		2,148,148		132,836
IFB Ser. 3065, Class DI, IO, 1.29s, 2035		92,848		6,064		392,747		25,651		394,604		25,772
IFB Ser. 3114, Class GI, IO, 1.27s, 2036		185,118		12,435		523,885		35,192		576,644		38,736
IFB Ser. 3145, Class GI, IO, 1.27s, 2036		557,301		36,317		1,525,851		99,433		1,729,554		112,707
IFB Ser. 3174, Class BS, IO, 1.19s, 2036		1,172,465		46,644		1,265,104		50,329		1,415,766		56,323
IFB Ser. 3081, Class DI, IO, 1.15s, 2035		92,911		5,124		462,695		25,517		510,080		28,130
IFB Ser. 3152, Class SY, IO, 1.15s, 2036		509,754		32,725		1,422,253		91,306		1,561,365		100,237
IFB Ser. 3199, Class S, IO, 1.12s, 2036		356,772		17,351		943,111		45,866		1,379,387		67,083
IFB Ser. 3012, Class UI, IO, 1.09s, 2035		118,836		6,344		—		—		—		—
IFB Ser. 3016, Class SP, IO, 0.78s, 2035		183,199		5,441		519,212		15,421		520,106		15,447
IFB Ser. 3016, Class SQ, IO, 0.78s, 2035		363,175		11,513		1,099,340		34,849		1,215,342		38,526
IFB Ser. 2937, Class SY, IO, 0.77s, 2035		143,842		3,769		468,450		12,273		470,654		12,331
IFB Ser. 3012, Class WI, IO, 0.77s, 2035		179,240		9,066		—		—		—		—
IFB Ser. 3012, Class IG, IO, 0 3/4s, 2035		438,336		19,457		—		—		—		—
IFB Ser. 2815, Class S, IO, 0.67s, 2032		383,307		10,759		1,203,597		33,783		1,211,175		33,995
IFB Ser. 2957, Class SW, IO, 0.67s, 2035		771,807		22,460		2,629,718		76,525		2,531,640		73,671
IFB Ser. 2835, Class BI, IO, 0.03s, 2030		284,802		242		—		—		—		—
Ser. 228, PO, zero %, 2035		1,324,355		1,036,381		3,825,324		2,993,527		3,646,198		2,853,351
Ser. 231, PO, zero %, 2035		4,761,535		3,551,151		16,911,992		12,612,954		17,228,518		12,849,019
Ser. 236, PO, zero %, 2036		536,812		421,319		1,631,411		1,280,421		1,667,644		1,308,858
Ser. 1208, Class F, PO, zero %, 2022		10,277		8,619		—		—		—		—
Ser. 3045, Class DO, PO, zero %, 2035		—		—		259,377		208,753		387,196		311,625
Ser. 3130, Class KO, PO, zero %, 2034		—		—		177,691		139,750		197,391		155,243
Ser. 3174, PO, zero %, 2036		—		—		106,537		86,651		103,604		84,266
FRB Ser. 2958, Class FB, zero %, 2035		321,405		303,407		—		—		—		—
FRB Ser. 2958, Class FL, zero %, 2035		46,784		43,151		238,598		220,072		229,709		211,873
FRB Ser. 2986, Class XT, zero %, 2035		—		—		68,972		70,632		68,972		70,632
FRB Ser. 3003, Class XF, zero %, 2035		160,084		161,210		569,902		573,909		549,891		553,758
FRB Ser. 3022, Class TC, zero %, 2035		—		—		92,141		98,634		92,699		99,232
FRB Ser. 3024, Class CF, zero %, 2034		226,195		223,263		—		—		—		—
FRB Ser. 3046, Class UF, zero %, 2033		85,425		84,207		—		—		—		—
FRB Ser. 3046, Class WF, zero %, 2035		—		—		128,476		125,479		129,125		126,112
FRB Ser. 3048, Class XG, zero %, 2035		—		—		—		—		96,544		91,928
FRB Ser. 3054, Class XF, zero %, 2034		—		—		65,103		64,584		65,103		64,584
FRB Ser. 3213, Class FX, zero %, 2036		—		—		—		—		155,000		150,302
GE Capital Commercial Mortgage Corp.
Ser. 04-C2, Class A4, 4.893s, 2040		442,000		428,214		1,313,000		1,272,046		1,454,000		1,408,648
GE Capital Commercial Mortgage Corp.
144A
Ser. 05-C2, Class XC, IO, 0.067s, 2043		12,130,109		102,772		21,500,127		182,158		20,674,382		175,162
Ser. 05-C3, Class XC, IO, 0.048s, 2045		25,212,713		131,963		48,977,817		256,350		49,356,147		258,330

75

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%			Balanced 7.8%				Conservative 17.0%
		Principal			Principal				Principal
		amount		Value	amount		Value		amount		Value
GMAC Commercial Mortgage
Securities, Inc.
Ser. 99-C3, Class F, 8.057s, 2036	$	56,000	$	60,065	$ 75,000	$	80,444	$	112,000	$	120,130
Ser. 03-C2, Class A2, 5.461s, 2040		198,000		200,465	1,181,000		1,195,703		1,179,000		1,193,679
Ser. 04-C2, Class A4, 5.301s, 2038		525,000		523,667	2,105,000		2,099,653		2,101,000		2,095,663
Ser. 97-C1, Class X, IO, 1.543s, 2029		1,472,914		43,588	—		—		—		—
Ser. 05-C1, Class X1, IO, 0.155s, 2043		4,723,479		85,429	19,868,239		359,337		21,579,270		390,283
GMAC Commercial Mortgage
Securities, Inc. 144A
Ser. 99-C3, Class G, 6.974s, 2036		—		—	350,039		352,791		306,364		308,773
Ser. 06-C1, Class XC, IO, 0.044s, 2045		19,915,983		135,369	—		—		36,178,855		245,908
Government National Mortgage Association
IFB Ser. 06-34, Class SA, 7.56s, 2036		—		—	125,090		130,915		117,148		122,602
IFB Ser. 05-7, Class JM, 4.994s, 2034		198,736		196,861	685,003		678,543		661,324		655,088
IFB Ser. 05-84, Class SB, 3.675s, 2035		95,128		88,135	—		—		—		—
IFB Ser. 05-68, Class DP, 3.59s, 2035		133,611		126,102	—		—		—		—
IFB Ser. 05-66, Class SP, 3.067s, 2035		—		—	336,674		307,639		338,581		309,382
IFB Ser. 05-84, Class SL, 3.067s, 2035		220,667		201,417	—		—		—		—
IFB Ser. 04-86, Class SW, IO, 1.42s,
2034		157,141		8,422	1,272,094		68,179		1,182,299		63,367
IFB Ser. 06-26, Class S, IO, 1.17s, 2036		1,842,061		91,056	5,019,936		248,143		5,718,001		282,649
IFB Ser. 05-65, Class SI, IO, 1.02s,
2035		203,410		8,175	1,310,030		52,652		1,316,727		52,921
IFB Ser. 05-68, Class KI, IO, 0.97s,
2035		1,551,000		87,608	—		—		—		—
IFB Ser. 05-68, Class SI, IO, 0.97s,
2035		1,338,903		60,089	4,353,514		195,382		4,369,244		196,088
IFB Ser. 06-14, Class S, IO, 0.92s, 2036		400,363		14,773	1,184,010		43,690		1,305,447		48,171
IFB Ser. 05-28, Class SA, IO, 0.87s,
2035		857,178		28,821	3,045,822		102,411		2,925,060		98,351
IFB Ser. 05-51, Class SJ, IO, 0.87s,
2035		397,039		16,781	1,290,155		54,530		1,294,617		54,719
IFB Ser. 05-68, Class S, IO, 0.87s, 2035		778,022		31,967	2,530,131		103,958		2,539,043		104,324
IFB Ser. 05-60, Class SJ, IO, 0.45s,
2034		652,481		18,138	—		—		—		—
Ser. 98-2, Class EA, PO, zero %, 2028		21,663		17,699	4,133		3,377		—		—
Ser. 99-31, Class MP, PO, zero %, 2029		19,008		16,061	89,800		75,880		44,900		37,940
Greenwich Capital Commercial
Funding Corp. Ser. 05-GG5, Class XC,
IO, 0.04s, 2037		12,902,860		57,962	41,099,072		184,625		41,211,765		185,131
Greenwich Capital Commercial
Funding Corp. 144A Ser. 05-GG3,
Class XC, IO, 0.108s, 2042		10,549,514		171,430	24,696,422		401,317		21,205,999		344,597
GS Mortgage Securities Corp. II
Ser. 04-GG2, Class A6, 5.396s, 2038		298,000		299,010	865,000		867,932		953,000		956,231
Ser. 05-GG4, Class A4B, 4.732s, 2039		230,000		219,580	701,000		669,240		1,349,000		1,287,882
GS Mortgage Securities Corp. II 144A
FRB Ser. 03-FL6A, Class L, 8.58s, 2015		87,000		87,489	124,000		124,698		114,000		114,641
Ser. 98-C1, Class F, 6s, 2030		—		—	280,000		280,949		282,000		282,956
Ser. 03-C1, Class X1, IO, 0.287s, 2040		7,899,975		143,559	6,496,524		118,055		9,362,467		170,135
Ser. 04-C1, Class X1, IO, 0.116s, 2028		5,783,853		46,768	7,879,909		63,716		7,879,909		63,716
Ser. 05-GG4, Class XC, IO, 0.109s, 2039		8,557,632		167,476	23,234,687		454,710		22,374,143		437,869
Ser. 06-GG6, Class XC, IO, 0.039s, 2038		3,486,228		11,984	34,884,254		119,915		25,204,728		86,641
HVB Mortgage Capital Corp.
Ser. 03-FL1A, Class K, 8.18s, 2022		118,000		117,880	—		—		—		—
JPMorgan Chase Commercial Mortgage
Securities Corp.
Ser. 97-C5, Class F, 7.561s, 2029		64,000		70,338	204,000		224,202		204,000		224,202
Ser. 06-CB14, Class AM, 5.63s, 2044		315,000		318,163	1,213,000		1,225,179		1,126,000		1,137,305

76

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%				Balanced 7.8%				Conservative 17.0%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
JPMorgan Chase Commercial Mortgage
Securities Corp.
Ser. 06-CB16, Class A4, 5.552s, 2045	$	735,000	$	744,305	$	1,361,000	$	1,378,230	$	1,650,000	$	1,670,889
Ser. 06-CB14, Class A4, 5.481s, 2044		454,000		459,394		1,740,000		1,760,671		1,950,000		1,973,166
Ser. 05-CB11, Class A4, 5.335s, 2037		454,000		457,121		1,348,000		1,357,268		1,490,000		1,500,244
Ser. 05-LDP2, Class AM, 4.78s, 2042		100,000		95,774		420,000		402,251		400,000		383,096
Ser. 06-LDP7, Class X, IO, 0.02s, 2045		13,438,569		12,599		49,957,505		46,835		49,957,505		46,835
JPMorgan Chase Commercial Mortgage
Securities Corp. 144A
Ser. 00-C9, Class G, 6 1/4s, 2032		38,000		38,856		240,000		245,404		260,000		265,854
Ser. 04-FL1A, Class X1A, IO, 2.045s,
2019		461,204		1,153		—		—		—		—
Ser. 03-ML1A, Class X1, IO, 0.513s, 2039		820,126		30,146		—		—		—		—
Ser. 05-LDP2, Class X1, IO, 0.09s, 2042		17,124,096		294,320		41,905,913		720,258		35,005,024		601,649
Ser. 05-CB12, Class X1, IO, 0.084s, 2037		4,276,984		46,780		12,242,284		133,900		11,768,383		128,717
Ser. 05-LDP1, Class X1, IO, 0.06s, 2046		3,244,324		31,429		7,989,533		77,399		7,645,003		74,061
Ser. 05-LDP3, Class X1, IO, 0.05s, 2042		16,413,045		125,662		17,439,480		133,521		29,290,696		224,257
Ser. 05-LDP4, Class X1, IO, 0.046s, 2042		11,495,726		109,569		24,186,085		230,524		29,142,666		277,766
Ser. 06-LDP6, Class X1, IO, 0.04s, 2043		—		—		22,899,554		125,232		16,508,888		90,283
Ser. 05-LDP5, Class X1, IO, 0.037s, 2044		22,952,519		107,590		69,406,087		325,341		76,406,336		358,155
Ser. 06-CB14, Class X1, IO, 0.037s, 2044		12,393,603		58,095		27,725,260		129,962		30,146,954		141,314
LB Commercial Conduit Mortgage Trust
144A
Ser. 99-C1, Class F, 6.41s, 2031		—		—		149,428		153,041		136,004		139,293
Ser. 99-C1, Class G, 6.41s, 2031		—		—		159,961		150,465		145,590		136,948
Ser. 98-C4, Class G, 5.6s, 2035		—		—		132,000		130,362		127,000		125,424
Ser. 98-C4, Class H, 5.6s, 2035		—		—		223,000		215,814		215,000		208,071
LB-UBS Commercial Mortgage Trust
Ser. 05-C7, Class AM, 5.263s, 2040		287,000		284,121		877,000		868,201		1,694,000		1,677,004
Ser. 04-C7, Class A6, 4.786s, 2029		121,000		116,632		362,000		348,932		400,000		385,560
LB-UBS Commercial Mortgage Trust 144A
Ser. 05-C3, Class XCL, IO, 0.139s, 2040		3,239,751		70,254		14,515,918		314,776		11,967,263		259,508
Ser. 05-C2, Class XCL, IO, 1/8s, 2040		16,194,180		172,027		32,351,650		343,665		42,905,350		455,775
Ser. 05-C5, Class XCL, IO, 0.112s, 2020		5,026,030		72,745		14,004,780		202,700		15,092,027		218,436
Ser. 05-C7, Class XCL, IO, 0.081s, 2040		12,548,131		117,152		32,587,775		304,246		32,675,232		305,062
Ser. 06-C1, Class XCL, IO, 0.071s, 2041		10,600,933		117,250		—		—		30,867,189		341,401
Lehman Brothers Floating Rate
Commercial Mortgage Trust 144A FRB
Ser. 03-LLFA, Class L, 9.08s, 2014		—		—		356,000		356,356		345,000		345,345
Ser. 04-LLFA, Class H, 6.28s, 2017		175,000		175,711		184,000		184,748		214,000		214,869
Ser. 05-LLFA, 6.13s, 2018		23,000		23,000		93,000		93,000		89,000		89,000
Lehman Mortgage Trust IFB
Ser. 06-5, Class 2A2, IO, 1.82s, 2036		751,000		27,348		2,077,000		75,635		2,337,000		85,103
Ser. 06-5, Class 1A3, IO, 0.07s, 2036		206,000		1,022		572,000		2,837		636,000		3,154
Merrill Lynch Mortgage Investors, Inc.
Ser. 98-C3, Class E, 7.12s, 2030		—		—		137,000		146,787		127,000		136,072
Ser. 96-C2, Class JS, IO, 2.174s, 2028		221,790		13,559		405,714		24,802		154,798		9,463
Merrill Lynch Mortgage Trust
Ser. 05-MCP1, Class XC, IO, 0.073s,
2043		4,560,432		61,815		15,435,994		209,230		14,847,455		201,253
Merrill Lynch Mortgage Trust 144A
Ser. 05-LC1, Class X, IO, 0.237s, 2044		2,515,239		24,268		7,583,629		73,170		8,345,883		80,525
Merrill Lynch/Countrywide Commercial
Mortgage Trust 144A Ser. 06-1,
Class X, IO, 0.139s, 2039		4,571,000		26,069		20,236,000		115,408		21,892,000		124,853
Mezz Cap Commercial Mortgage Trust 144A
Ser. 04-C2, Class X, IO, 6.403s, 2040		208,766		69,219		531,404		176,194		520,417		172,551
Ser. 05-C3, Class X, IO, 5.558s, 2044		413,692		131,961		654,513		208,779		655,512		209,098

77

COLLATERALIZED MORTGAGE OBLIGATIONS*		Growth 2.8%				Balanced 7.8%				Conservative 17.0%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Morgan Stanley Capital 144A
Ser. 05-RR6, Class X, IO, 1.715s, 2043	$	997,015	$	63,099	$	2,892,342	$	183,050	$	4,654,068	$	294,546
Ser. 05-HQ6, Class X1, IO, 0.086s, 2042		8,277,949		84,396		18,261,728		186,184		18,140,592		184,949
Morgan Stanley Capital I
Ser. 98-CF1, Class D, 7.35s, 2032		67,000		70,951		—		—		—		—
Ser. 05-HQ6, Class A4A, 4.989s, 2042		278,000		270,891		827,000		805,851		915,000		891,601
Ser. 04-HQ4, Class A7, 4.97s, 2040		144,000		140,662		427,000		417,102		473,000		462,036
Morgan Stanley Capital I 144A
Ser. 98-HF1, Class F, 7.18s, 2030		14,000		14,276		124,000		126,442		115,000		117,265
Ser. 04-RR, Class F5, 6s, 2039		—		—		395,000		345,684		340,000		297,551
Ser. 04-RR, Class F6, 6s, 2039		—		—		395,000		328,795		350,000		291,337
Ser. 05-HQ5, Class X1, IO, 0.085s, 2042		7,860,088		62,328		11,064,913		87,741		10,553,052		83,682
Mortgage Capital Funding, Inc.
FRB Ser. 98-MC2, Class E, 7 1/4s, 2030		53,000		54,457		215,000		220,911		206,000		211,663
Ser. 97-MC2, Class X, IO, 1.457s, 2012		601,070		3,451		166,526		956		—		—
Permanent Financing PLC FRB Ser. 8,
Class 2C, 5.79s, 2042 (United Kingdom)		165,000		165,000		—		—		—		—
PNC Mortgage Acceptance Corp. 144A
Ser. 99-CM1, Class B3, 7.1s, 2032		—		—		813,000		846,398		757,000		788,098
Ser. 00-C1, Class J, 6 5/8s, 2010		—		—		118,000		111,806		189,000		179,079
Ser. 00-C2, Class J, 6.22s, 2033		—		—		208,000		211,578		193,000		196,320
Pure Mortgages 144A
FRB Ser. 04-1A, Class F, 8.9s, 2034
(Ireland)		116,000		116,870		558,000		562,185		544,000		548,080
Ser. 04-1A, Class E, 6.65s, 2034
(Ireland)		100,000		100,750		220,000		221,650		429,000		432,218
Salomon Brothers Mortgage Securities
VII 144A Ser. 03-CDCA, Class X3CD, IO,
1.43s, 2015		287,512		125		802,493		349		748,527		326
SBA CMBS Trust 144A Ser. 05-1A,
Class D, 6.219s, 2035		—		—		200,000		199,915		200,000		199,915
STRIPS 144A
Ser. 03-1A, Class L, 5s, 2018
(Cayman Islands)		—		—		172,000		151,400		165,000		145,239
Ser. 03-1A, Class M, 5s, 2018
(Cayman Islands)		—		—		116,000		97,934		112,000		94,557
Ser. 04-1A, Class K, 5s, 2018
(Cayman Islands)		100,000		93,676		—		—		—		—
Ser. 04-1A, Class L, 5s, 2018
(Cayman Islands)		—		—		76,000		66,595		74,000		64,843
Wachovia Bank Commercial Mortgage Trust
Ser. 06-C23, Class A4, 5.418s, 2045		449,000		451,384		3,151,000		3,167,732		2,818,000		2,832,964
Ser. 05-C17, Class A4, 5.083s, 2042		236,000		231,953		1,493,000		1,467,395		1,424,000		1,399,578
Ser. 04-C15, Class A4, 4.803s, 2041		215,000		206,804		637,000		612,717		705,000		678,125
Wachovia Bank Commercial Mortgage Trust
144A
FRB Ser. 05-WL5A, Class L, 8.63s, 2018		—		—		164,000		162,627		156,000		154,694
Ser. 03-C3, Class IOI, IO, 0.361s, 2035		522,349		15,944		3,924,652		119,798		3,928,403		119,912
Ser. 05-C18, Class XC, IO, 0.072s, 2042		12,973,492		133,497		22,137,530		227,795		25,561,949		263,032
Ser. 06-C23, Class XC, IO, 0.051s, 2045		4,902,468		30,591		32,313,171		201,634		35,470,033		221,333
Ser. 06-C26, Class XC, IO, 0.045s, 2045		17,908,567		66,620		14,264,893		53,065		8,834,360		32,864
Washington Mutual Asset
Securities Corp. 144A
Ser. 05-C1A, Class G, 5.72s, 2036		—		—		46,000		44,446		44,000		42,514
Ser. 05-C1A, Class F, 5.3s, 2036		107,000		102,955		—		—		—		—
Total collateralized mortgage
obligations (cost $52,704,357,
$157,668,672 and $163,821,470)			$	52,093,778			$	155,318,935			$	161,869,031

78

U.S. GOVERNMENT AND AGENCY
MORTGAGE OBLIGATIONS*		Growth 1.5%				Balanced 7.3%				Conservative 26.8%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
U.S. Government Guaranteed Mortgage Obligations				—%				—%				—%
Government National Mortgage Association
Pass-Through Certificates
7s, with due dates from August 15, 2029
to September 15, 2029	$	—	$	—	$	—	$	—	$	2,275	$	2,360
				——————————				——————————				——————————
				—				—				2,360
U.S. Government Agency Mortgage Obligations				1.5%				7.3%				26.8%
Federal Home Loan Mortgage Corporation
Pass-Through Certificates
5 1/2s, June 1, 2035		81,695		80,802		408,476		404,009		408,476		404,009
5 1/2s, with due dates from
August 1, 2012 to April 1, 2020		691,897		692,211		436,419		437,188		566,143		567,156
Federal National Mortgage Association
Pass-Through Certificates
7s, with due dates from October 1, 2029
to January 1, 2036		1,410,737		1,451,476		2,670,542		2,748,004		5,101,692		5,240,194
7s, with due dates from
December 1, 2015 to March 1, 2018		26,146		27,089		—		—		590,258		617,386
6 1/2s, with due dates from
October 1, 2033 to November 1, 2034		37,674		38,439		503,865		514,553		924,251		943,026
6s, with due dates from August 1, 2032
to July 1, 2036		30,860		31,118		1,052,314		1,058,590		1,021,319		1,026,231
6s, TBA, October 1, 2021		8,100,000		8,221,500		55,600,000		56,434,000		106,300,000		107,894,500
5 1/2s, with due dates from
June 1, 2035 to August 1, 2036		578,235		570,440		1,929,197		1,900,559		3,321,678		3,272,743
5 1/2s, with due dates from
September 1, 2013 to February 1, 2021		438,187		438,633		1,538,350		1,540,118		1,512,200		1,514,176
5 1/2s, TBA, November 1, 2036		7,950,000		7,829,508		45,600,000		44,908,877		77,600,000		76,423,879
5 1/2s, TBA, October 1, 2036		1,600,000		1,576,125		11,000,000		10,835,859		42,300,000		41,668,810
5s, with due dates from May 1, 2021
to May 1, 2036		2,483,591		2,389,426		12,171,908		11,714,521		7,905,025		7,595,897
5s, December 1, 2020		9,462		9,313		—		—		—		—
4 1/2s, with due dates from
November 1, 2020 to November 1, 2035		2,082,636		1,980,825		1,036,305		970,666		1,033,248		968,705
4 1/2s, with due dates from
April 1, 2020 to September 1, 2020		341,266		329,708		—		—		—		—
4 1/2s, TBA, October 1, 2021		1,000,000		964,531		6,000,000		5,787,187		3,600,000		3,472,312
4 1/2s, TBA, November 1, 2020		1,000,000		964,531		6,000,000		5,787,188		3,600,000		3,472,313
				——————————				——————————				——————————
				27,595,675				145,041,319				255,081,337
Total U.S. government and agency
mortgage obligations (cost $27,574,626,
$144,815,342 and $254,568,385)		$		27,595,675		$		145,041,319		$		255,083,697
U.S. TREASURY OBLIGATIONS*		Growth 0.1%				Balanced 0.2%				Conservative 0.3%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
U.S. Treasury Notes
4 1/4s, August 15, 2014	$	200,000	$	195,188	$	3,400,000	$	3,318,188	$	2,500,000	$	2,439,844
4 1/4s, November 15, 2013		20,000		19,569		100,000		97,844		—		—
3 1/2s, November 15, 2009		1,700,000		1,645,945		—		—		—		—
Total U.S. treasury obligations
(cost $1,897,236, $3,519,110
and $2,513,701)			$	1,860,702			$	3,416,032			$	2,439,844

79

ASSET-BACKED SECURITIES*		Growth 1.6%				Balanced 3.4%				Conservative 7.4%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Aames Mortgage Investment Trust FRB
Ser. 04-1, Class 2A1, 5.67s, 2034	$	50,555	$	50,590	$	130,657	$	130,748	$	127,583	$	127,671
ABSC NIMS Trust 144A Ser. 05-HE2,
Class A1, 4 1/2s, 2035
(Cayman Islands)		35,391		34,694		98,370		96,432		94,468		92,607
Ace Securities Corp. FRB
Ser. 04-HE2, Class A2A, 5.71s, 2034		15,504		15,507		—		—		—		—
Ser. 04-HE3, Class A2A, 5.7s, 2034		7,689		7,696		—		—		—		—
Advanta Business Card Master Trust FRB
Ser. 04-C1, Class C, 6.38s, 2013		159,000		160,879		—		—		212,000		214,506
Aegis Asset Backed Securities Trust FRB
Ser. 04-5, Class 1A2, 5.67s, 2031		52,907		53,023		—		—		—		—
Aegis Asset Backed Securities Trust 144A
Ser. 04-5N, Class Note, 5s, 2034		13,463		13,290		20,850		20,583		20,254		19,995
Ser. 04-6N, Class Note, 4 3/4s, 2035		22,864		22,535		32,314		31,850		32,009		31,549
AFC Home Equity Loan Trust Ser. 99-2,
Class 1A, 5.74s, 2029		430,325		431,982		800,833		803,915		569,698		571,891
American Express Credit Account Master
Trust 144A Ser. 04-C, Class C, 5.83s,
2012		143,011		143,033		872,860		872,997		700,261		700,370
American Home Mortgage Investment Trust
FRB
Ser. 04-3, Class 3A, 3.71s, 2034		164,028		163,183		301,159		299,608		356,716		354,879
Ser. 04-3, Class 2A, 3.59s, 2034		98,471		97,751		270,461		268,483		225,904		224,252
Americredit Automobile Receivables
Trust 144A Ser. 05-1, Class E, 5.82s,
2012		—		—		131,276		131,204		83,539		83,493
Ameriquest Mortgage Securities, Inc.
FRB Ser. 06-R1, Class M10, 7.83s, 2036		—		—		142,000		121,365		261,000		223,072
FRB Ser. 04-R10, Class A5, 5.72s, 2034		7,889		7,894		—		—		—		—
FRB Ser. 04-R11, Class A2, 5.7s, 2034		24,519		24,573		—		—		—		—
Amortizing Residential Collateral Trust
FRB Ser. 04-1, Class A4, 5.65s, 2034		39,763		39,791		—		—		—		—
Arcap REIT, Inc. 144A
Ser. 03-1A, Class E, 7.11s, 2038		—		—		286,000		297,486		223,000		231,956
Ser. 04-1A, Class E, 6.42s, 2039		—		—		240,272		238,175		227,202		225,219
Argent Securities, Inc. Ser. 04-W11,
Class A3, 5.69s, 2034		61,437		61,494		—		—		—		—
Asset Backed Funding Corp. NIM Trust
144A FRB Ser. 05-OPT1, Class B1,
7.83s, 2035		50,000		39,714		—		—		117,000		92,932
Asset Backed Securities Corp. Home
Equity Loan Trust
FRB Ser. 04-HE7, Class A2, 5.71s, 2034		72,513		72,711		—		—		—		—
FRB Ser. 04-HE8, Class A2, 5.71s, 2034		67,825		67,899		—		—		—		—
FRB Ser. 04-HE9, Class A2, 5.7s, 2034		36,634		36,677		70,084		70,165		68,491		68,570
FRB Ser. 04-HE6, Class A2, 5.69s, 2034		190,377		191,357		674,198		677,671		646,794		650,125
FRB Ser. 05-HE1, Class A3, 5.62s, 2035		13,816		13,828		102,307		102,394		101,320		101,406
Asset Backed Securities Corp. Home
Equity Loan Trust 144A FRB
Ser. 06-HE2, Class M11, 7.83s, 2036		—		—		53,000		43,036		58,000		47,096
Banc of America Mortgage Securities
Ser. 04-D, Class 2A, IO, 0.464s, 2034		916,983		4,241		3,124,586		14,450		3,007,867		13,910
Ser. 05-E, Class 2, IO, 0.306s, 2035		2,264,000		14,469		7,566,000		48,352		7,285,000		46,557
Bank One Issuance Trust FRB Ser. 03-C4,
Class C4, 6.36s, 2011		110,000		111,498		280,000		283,814		250,000		253,405
Bay View Auto Trust
Ser. 05-LJ2, Class D, 5.27s, 2014		62,000		61,255		139,000		137,329		134,000		132,389
Ser. 05-LJ2, Class C, 4.92s, 2014		100,000		98,778		46,000		45,438		45,000		44,450

80

ASSET-BACKED SECURITIES*		Growth 1.6%				Balanced 3.4%				Conservative 7.4%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Bayview Financial Acquisition Trust
FRB Ser. 03-G, Class A1, 5.924s, 2039	$	550,000	$	550,396	$	1,012,000	$	1,012,729	$	944,000	$	944,680
Ser. 04-B, Class A1, 5.828s, 2039		—		—		861,452		861,449		1,131,240		1,131,235
FRB Ser. 03-F, Class A, 5.824s, 2043		213,046		213,579		347,126		347,994		318,062		318,857
FRB Ser. 04-D, Class A, 5.714s, 2044		147,464		147,562		482,008		482,330		470,563		470,877
Ser. 04-D, Class A, IO, 3.938s, 2007		717,400		15,186		2,176,045		46,064		2,123,315		44,948
Ser. 05-B, Class A, IO, 3.595s, 2039		2,078,148		62,678		1,995,512		60,186		5,199,693		156,826
Bayview Financial Asset Trust 144A FRB
Ser. 03-SSRA, Class M, 6.68s, 2038		67,398		68,133		200,627		202,814		156,740		158,449
Ser. 03-SSRA, Class A, 6.03s, 2038		67,398		67,796		200,627		201,811		156,740		157,665
Ser. 04-SSRA, Class A1, 5.93s, 2039		159,549		160,043		231,897		232,616		224,710		225,407
Bear Stearns Adjustable Rate Mortgage
Trust Ser. 04-1, Class 11A1, 3.598s,
2034		74,645		74,644		780,974		780,966		728,722		728,715
Bear Stearns Alternate Trust
Ser. 04-9, Class 1A1, 4.888s, 2034		51,721		51,503		136,667		136,092		124,679		124,154
Ser. 05-5, Class 21A1, 4.688s, 2035		408,374		405,116		835,598		828,930		800,694		794,305
Bear Stearns Asset Backed Securities
NIM Trust 144A
Ser. 04-HE10, Class A2, 5s, 2034
(Cayman Islands)		—		—		70,000		69,650		60,000		59,700
Ser. 04-HE10, Class A1, 4 1/4s, 2034
(Cayman Islands)		942		940		1,182		1,179		1,164		1,161
Bear Stearns Asset Backed
Securities, Inc.
FRB Ser. 06-EC1, Class M9, 7.33s, 2035		—		—		146,000		120,724		161,000		133,127
FRB Ser. 06-PC1, Class M9, 7.08s, 2035		—		—		—		—		100,000		82,063
FRB Ser. 03-3, Class A2, 5.92s, 2043		125,204		125,497		434,763		435,782		343,078		343,882
FRB Ser. 03-1, Class A1, 5.83s, 2042		128,208		128,207		365,779		365,777		260,232		260,231
FRB Ser. 05-3, Class A1, 5.78s, 2035		237,012		237,013		—		—		—		—
FRB Ser. 03-ABF1, Class A, 5.7s, 2034		28,062		28,097		—		—		—		—
FRB Ser. 04-HE9, Class 1A2, 5.7s, 2032		59,896		59,970		—		—		—		—
FRB Ser. 06-2, Class A1, 5.46s, 2036		497,808		497,808		—		—		—		—
Bear Stearns Asset Backed
Securities, Inc. 144A FRB Ser. 06-HE2,
Class M10, 7.58s, 2036		—		—		108,000		97,335		—		—
Bombardier Capital Mortgage
Securitization Corp. Ser. 01-A,
Class A, 6.805s, 2030		157,559		159,837		241,434		244,924		230,852		234,189
Broadhollow Funding, LLC 144A FRB
Ser. 04-A, Class Sub, 6.57s, 2009		—		—		500,000		505,800		500,000		505,800
Capital One Multi-Asset Execution Trust
FRB Ser. 02-C1, Class C1, 8.08s, 2010		—		—		65,000		66,480		53,000		54,207
CARMAX Auto Owner Trust Ser. 04-2,
Class D, 3.67s, 2011		13,541		13,331		53,388		52,563		49,519		48,754
CARSSX Finance, Ltd. 144A FRB
Ser. 04-AA, Class B4, 10.83s, 2011
(Cayman Islands)		—		—		116,116		120,764		148,658		154,608
Ser. 04-AA, Class B3, 8.68s, 2011
(Cayman Islands)		—		—		15,183		15,484		15,183		15,484
CDO Repackaging Trust Series 144A FRB
Ser. 03-2, Class A, 9.51s, 2008		—		—		690,000		733,125		535,000		568,438
Chase Credit Card Master Trust FRB
Ser. 03-3, Class C, 6.41s, 2010		170,000		172,623		470,000		477,252		420,000		426,480
Chase Funding Loan Acquisition Trust
FRB Ser. 04-AQ1, Class A2, 5.73s, 2034		159,739		160,148		—		—		—		—
Chase Funding Net Interest Margin 144A
Ser. 04-OPT1, Class Note, 4.458s, 2034		16,374		16,156		31,324		30,908		39,256		38,735

81

ASSET-BACKED SECURITIES*		Growth 1.6%				Balanced 3.4%				Conservative 7.4%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
CHEC NIM, Ltd. 144A Ser. 04-2,
Class N3, 8s, 2034 (Cayman Islands)	$	—	$	—	$	27,934	$	26,729	$	27,136	$	25,965
Citibank Credit Card Issuance Trust FRB
Ser. 01-C1, Class C1, 6.587s, 2010		110,000		111,208		240,000		242,636		210,000		212,306
Citigroup Mortgage Loan Trust, Inc.
FRB Ser. 06-WMC1, Class M10, 8.83s, 2035		—		—		—		—		46,000		41,903
FRB Ser. 05-HE4, Class M11, 7.83s, 2035		41,000		34,631		—		—		—		—
FRB Ser. 05-HE4, Class M12, 7.38s, 2035		49,000		39,918		—		—		—		—
FRB Ser. 04-RES1, Class A2, 5.73s, 2034		11,135		11,141		—		—		—		—
Ser. 03-HE3, Class A, 5.71s, 2033		965,213		965,967		—		—		—		—
Citigroup Mortgage Loan Trust, Inc.
144A FRB Ser. 03-HE4, Class A, 5.74s,
2033		389,573		390,167		—		—		—		—
CNL Funding Ser. 99-1, Class A2,
7.645s, 2014		122,000		134,994		455,000		503,462		286,000		316,462
Conseco Finance Securitizations Corp.
Ser. 02-2, Class A, IO, 8 1/2s, 2033		141,716		30,841		534,388		116,298		336,576		73,248
Ser. 00-4, Class A6, 8.31s, 2032		—		—		2,319,000		1,998,368		2,443,000		2,105,224
Ser. 00-5, Class A6, 7.96s, 2032		—		—		746,000		645,507		999,000		864,426
Ser. 01-4, Class A4, 7.36s, 2033		507,000		524,737		1,270,000		1,314,431		1,243,000		1,286,486
Ser. 01-1, Class A5, 6.99s, 2032		691,000		677,398		3,511,000		3,441,888		3,063,000		3,002,707
Ser. 01-3, Class A4, 6.91s, 2033		—		—		393,000		378,004		387,000		372,232
Ser. 02-1, Class A, 6.681s, 2033		262,061		265,843		802,681		814,263		666,939		676,563
Ser. 01-1, Class A4, 6.21s, 2032		69,643		69,690		214,551		214,695		258,459		258,633
Ser. 01-3, Class A3, 5.79s, 2033		—		—		226,298		226,115		196,969		196,810
Ser. 01-1, Class A, IO, 2 1/2s, 2032		794,475		4,860		2,934,475		17,950		1,859,125		11,372
Ser. 01-3, Class A, IO, 2 1/2s, 2033		1,912,918		31,563		6,008,821		99,146		3,740,037		61,711
Ser. 01-4, Class A, IO, 2 1/2s, 2033		838,872		17,365		1,879,716		38,910		1,248,179		25,837
Countryplace Manufactured Housing
Contract Ser. 05-1, Class A1, 4.23s,
2035		126,787		125,663		—		—		—		—
Countrywide Alternative Loan Trust IFB
Ser. 06-26CB, Class A2, IO, 0.47s,
2036		340,664		910		949,731		2,538		1,052,963		2,813
Countrywide Asset Backed Certificates
FRB
Ser. 04-8, Class 2A2, 5.68s, 2032		168,534		168,589		—		—		—		—
Ser. 04-5, Class 4A3, 5.65s, 2034		108,269		108,549		381,365		382,351		367,144		368,094
Ser. 04-13, Class AV2, 5.59s, 2034		38,140		38,159		134,416		134,484		128,861		128,926
Countrywide Asset Backed Certificates
144A
Ser. 04-6N, Class N1, 6 1/4s, 2035		8,435		8,410		24,689		24,616		22,894		22,826
Ser. 04-BC1N, Class Note, 5 1/2s, 2035		—		—		24,190		23,893		22,966		22,684
Ser. 04-14N, 5s, 2036		4,869		4,831		19,183		19,033		18,988		18,840
Countrywide Home Loans
FRB Ser. 05-22, Class 2A1, 5.304s, 2035		395,696		394,320		1,148,959		1,144,964		1,249,789		1,245,444
Ser. 06-0A5, Class X, IO, 1.543s, 2046		942,510		42,855		2,790,097		126,862		3,075,153		139,823
Ser. 05-2, Class 2X, IO, 1.16s, 2035		1,425,232		34,740		3,963,700		96,615		3,785,891		92,281
Ser. 05-9, Class 1X, IO, 1.093s, 2035		950,792		22,249		3,370,727		78,875		3,223,871		75,439
Countrywide Home Loans 144A IFB
Ser. 05-R2, Class 2A3, 8s, 2035		153,401		161,482		—		—		287,030		302,151
Ser. 05-R1, Class 1AS, IO, 0.806s, 2035
(SN)		352,691		11,628		2,521,703		83,138		2,514,747		82,909
Ser. 06-R1, Class AS, IO, 0.743s, 2036
(SN)		690,501		21,727		4,466,903		140,555		4,116,313		129,524
Ser. 05-R3, Class AS, IO, 0.707s, 2035
(SN)		1,851,394		51,171		1,802,023		49,806		1,861,746		51,457
Ser. 05-R2, Class 1AS, IO, 0.415s, 2035
(SN)		326,920		10,704		2,116,417		69,293		1,950,351		63,856

82

ASSET-BACKED SECURITIES*		Growth 1.6%				Balanced 3.4%				Conservative 7.4%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Credit-Based Asset Servicing and
Securitization FRB Ser. 02-CB2,
Class A2, 5.88s, 2032	$	52,905	$	53,170	$	—	$	—	$	—	$	—
Crest, Ltd. 144A Ser. 03-2A, Class D2,
6.723s, 2038 (Cayman Islands)		—		—		339,000		338,974		313,000		312,976
CS First Boston Mortgage
Securities Corp. 144A Ser. 04-FR1N,
Class A, 5s, 2034		64,097		63,455		89,531		88,636		97,671		96,694
DB Master Finance, LLC 144A Ser. 06-1,
Class M1, 8.285s, 2031		—		—		204,000		209,519		214,000		219,789
Fieldstone Mortgage Investment Corp.
FRB Ser. 05-1, Class M3, 5.87s, 2035		—		—		143,000		143,258		138,000		138,249
FRB Ser. 04-4, Class 2A, 5.65s, 2035		10,661		10,685		—		—		—		—
Finance America NIM Trust 144A
Ser. 04-1, Class A, 5 1/4s, 2034		—		—		16,152		1,534		14,683		1,395
First Franklin Mortgage Loan Asset
Backed Certificates FRB Ser. 04-FF10,
Class A2, 5.73s, 2032		235,740		236,308		—		—		—		—
First Horizon Mortgage Pass-Through
Trust Ser. 05-AR2, Class 1A1, 4.818s,
2035		324,052		322,091		581,683		578,163		556,859		553,489
Ford Credit Auto Owner Trust Ser. 04-A,
Class C, 4.19s, 2009		140,000		136,802		240,000		234,517		130,000		127,030
Fremont Home Loan Trust FRB Ser. 04-3,
Class A3, 5.73s, 2034		63,285		63,300		—		—		—		—
Fremont NIM Trust 144A
Ser. 04-3, Class B, 7 1/2s, 2034		—		—		42,779		39,682		41,483		38,479
Ser. 04-3, Class A, 4 1/2s, 2034		3,574		3,562		11,823		11,784		9,163		9,132
G-Force CDO, Ltd. 144A Ser. 03-1A,
Class E, 6.58s, 2038 (Cayman Islands)		142,000		140,979		197,000		195,584		184,000		182,678
GE Capital Credit Card Master Note
Trust FRB Ser. 04-2, Class C, 5.81s,
2010		100,000		100,084		403,620		403,958		374,560		374,874
GE Corporate Aircraft Financing, LLC
144A
FRB Ser. 05-1A, Class C, 6.63s, 2019		—		—		269,000		269,005		271,000		271,005
Ser. 04-1A, Class B, 6.18s, 2018		36,587		36,881		39,880		40,200		38,782		39,094
Gears Auto Owner Trust 144A Ser. 05-AA,
Class E1, 8.22s, 2012		—		—		443,000		440,434		442,000		439,440
GEBL 144A
Ser. 04-2, Class D, 8.08s, 2032		—		—		151,163		151,163		185,913		185,913
Ser. 04-2, Class C, 6.18s, 2032		—		—		112,938		112,937		185,913		185,912
GMAC Mortgage Corp. Loan Trust
Ser. 04-HE5, Class A, IO, 6s, 2007		1,657,700		43,515		1,026,300		26,940		1,251,800		32,860
Granite Mortgages PLC
FRB Ser. 03-2, Class 1C, 7.05s, 2043
(United Kingdom)		275,000		280,236		—		—		—		—
FRB Ser. 03-3, Class 1C, 6.95s, 2044
(United Kingdom)		60,000		60,887		230,000		233,402		—		—
FRB Ser. 02-1, Class 1C, 6.8s, 2042
(United Kingdom)		—		—		255,627		256,515		246,497		247,354
FRB Ser. 02-2, Class 1C, 6 3/4s, 2043
(United Kingdom)		90,000		90,644		230,000		231,645		220,000		221,574
Green Tree Financial Corp.
Ser. 99-5, Class A5, 7.86s, 2030		398,000		352,111		1,647,000		1,457,101		1,130,000		999,711
Ser. 97-2, Class A7, 7.62s, 2028		239,298		249,025		—		—		—		—
Ser. 97-6, Class A9, 7.55s, 2029		81,992		84,952		—		—		153,119		158,645
Ser. 97-4, Class A7, 7.36s, 2029		16,413		16,516		64,160		64,561		138,267		139,131
Ser. 96-10, Class M1, 7.24s, 2028		—		—		449,000		454,613		625,000		632,813

83

ASSET-BACKED SECURITIES*		Growth 1.6%				Balanced 3.4%				Conservative 7.4%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Green Tree Financial Corp.
Ser. 97-6, Class M1, 7.21s, 2029	$	—	$	—	$	202,000	$	177,063	$	506,000	$	443,533
Ser. 96-2, Class A4, 7.2s, 2027		356,495		363,400		—		—		—		—
Ser. 97-6, Class A8, 7.07s, 2029		62,291		63,476		—		—		70,120		71,453
Ser. 99-4, Class A5, 6.97s, 2031		86,628		87,081		—		—		—		—
Ser. 97-7, Class A8, 6.86s, 2029		11,870		11,915		46,402		46,576		99,998		100,373
Ser. 99-3, Class A6, 6 1/2s, 2031		—		—		235,000		233,379		228,000		226,427
Ser. 99-2, Class A7, 6.44s, 2030		—		—		639,858		628,880		891,759		876,459
Greenpoint Manufactured Housing
Ser. 00-3, Class IA, 8.45s, 2031		163,483		151,551		775,883		719,252		740,015		686,002
Ser. 99-5, Class A4, 7.59s, 2028		255,659		260,089		559,685		569,383		383,488		390,133
Greenpoint Mortgage Funding Trust
Ser. 05-AR1, Class X1, IO, 1.479s,
2045		830,412		23,874		2,306,903		66,323		2,206,442		63,435
GS Auto Loan Trust 144A Ser. 04-1,
Class D, 5s, 2011		—		—		257,594		255,685		252,014		250,147
GSAMP Trust FRB Ser. 05-HE3, Class A1B,
5.59s, 2035		202,287		202,417		—		—		—		—
GSAMP Trust 144A
Ser. 05-NC1, Class N, 5s, 2035		10,789		10,766		28,436		28,373		27,312		27,252
Ser. 04-NIM2, Class N, 4 7/8s, 2034		13,781		13,721		35,067		34,916		34,630		34,481
Ser. 04-NIM1, Class N2, zero %, 2034		—		—		33,298		24,524		30,884		22,746
GSMPS Mortgage Loan Trust
Ser. 05-RP3, Class 1A4, 8 1/2s, 2035		49,376		52,653		—		—		97,380		103,843
Ser. 05-RP3, Class 1A3, 8s, 2035		156,061		164,915		—		—		306,234		323,606
Ser. 05-RP3, Class 1A2, 7 1/2s, 2035		129,597		135,305		—		—		254,009		265,198
GSMPS Mortgage Loan Trust 144A
Ser. 05-RP2, Class 1A3, 8s, 2035		100,011		105,695		273,002		288,520		261,514		276,379
Ser. 05-RP1, Class 1A2, 7 1/2s, 2035		127,546		133,228		—		—		—		—
Ser. 05-RP2, Class 1A2, 7 1/2s, 2035		115,184		120,239		317,380		331,310		302,982		316,280
IFB Ser. 05-RP1, Class 1AS, IO, 0.857s,
2035 (SN)		756,663		23,813		1,696,081		53,378		1,753,275		55,178
IFB Ser. 04-4, Class 1AS, IO, 0.72s,
2034 (SN)		3,728,695		120,601		2,304,898		74,550		11,212,117		362,645
IFB Ser. 06-RP1, Class 1AS, IO, 0.468s,
2036 (SN)		1,000,590		24,704		4,050,528		100,005		4,992,955		123,273
GSR Mortgage Loan Trust
Ser. 05-AR2, Class 2A1, 4.863s, 2035		216,760		214,107		516,058		509,741		542,285		535,648
Ser. 04-12, Class 2A2, 3.554s, 2034		103,934		102,579		258,948		255,571		270,052		266,530
Guggenheim Structured Real Estate
Funding, Ltd. 144A FRB
Ser. 05-2A, Class D, 6.88s, 2030
(Cayman Islands)		—		—		250,000		250,850		250,000		250,850
Ser. 05-1A, Class D, 6.86s, 2030
(Cayman Islands)		—		—		465,000		465,000		446,000		446,000
HASCO NIM Trust 144A Ser. 05-OP1A,
Class A, 6 1/4s, 2035 (Cayman Islands)		—		—		170,083		166,979		186,770		183,362
High Income Trust Securities 144A FRB
Ser. 03-1A, Class A, 5.946s, 2036
(Cayman Islands)		—		—		607,177		588,810		552,543		535,829
Holmes Financing PLC FRB Ser. 8,
Class 2C, 6.227s, 2040
(United Kingdom)		58,000		58,093		164,000		164,262		164,000		164,262
Home Equity Asset Trust FRB
Ser. 04-7, Class A3, 5.72s, 2035		226,506		226,811		—		—		—		—
Ser. 04-8, Class A4, 5.69s, 2035		23,324		23,339		—		—		—		—
Home Equity Asset Trust 144A
Ser. 04-4N, Class A, 5s, 2034		6,225		6,147		—		—		11,888		11,739

84

ASSET-BACKED SECURITIES*		Growth 1.6%				Balanced 3.4%				Conservative 7.4%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Hyundai Auto Receivables Trust
Ser. 04-A, Class D, 4.1s, 2011	$	94,000	$	92,656	$	90,000	$	88,713	$	84,000	$	82,799
Impac CMB Trust FRB Ser. 04-8,
Class 1A, 5.69s, 2034		30,732		30,732		—		—		—		—
Lehman Mortgage Trust IFB
Ser. 06-6, Class 1A2, IO, 1.17s, 2036		—		—		1,254,000		42,619		1,387,000		47,140
Ser. 06-6, Class 1A3, IO, 1.17s, 2036		—		—		1,602,000		86,572		1,767,000		95,488
Ser. 06-6, Class 4A2, IO, 0.02s, 2036		—		—		1,251,000		3,670		1,382,000		4,054
LNR CDO, Ltd. 144A FRB Ser. 03-1A,
Class EFL, 8.33s, 2036
(Cayman Islands)		105,000		111,563		595,000		632,188		460,000		488,750
Long Beach Mortgage Loan Trust
Ser. 04-3, Class S1, IO, 4 1/2s, 2006		738,459		5,192		1,024,611		7,204		—		—
Ser. 04-3, Class S2, IO, 4 1/2s, 2006		369,234		2,596		512,313		3,602		—		—
Long Beach Mortgage Loan Trust 144A FRB
Ser. 06-WL3, Class B1, 7.83s, 2036		92,000		76,688		—		—		275,000		229,231
Marriott Vacation Club Owner Trust 144A
Ser. 05-2, Class D, 6.205s, 2027		—		—		36,812		36,612		39,539		39,324
FRB Ser. 02-1A, Class A1, 6.03s, 2024		32,111		32,355		136,075		137,107		133,849		134,864
Ser. 04-2A, Class D, 5.389s, 2026		—		—		25,774		24,956		25,279		24,476
Ser. 04-1A, Class C, 5.265s, 2026		—		—		65,958		65,084		61,247		60,435
Master Asset Backed Securities Trust FRB
Ser. 04-HE1, Class A1, 5.73s, 2034		13,098		13,119		—		—		—		—
Ser. 04-OPT2, Class A2, 5.68s, 2034		71,587		71,666		—		—		—		—
MASTR Adjustable Rate Mortgages Trust
Ser. 04-7, Class 2A1, 4.666s, 2034		72,108		72,467		177,566		178,450		178,017		178,903
Ser. 04-13, Class 3A6, 3.786s, 2034		266,000		255,436		771,000		740,380		838,000		804,719
Ser. 06-OA1, Class X, IO, 1.781s, 2046		1,774,601		81,243		1,516,425		69,424		4,098,186		187,620
Ser. 04-03, Class 4AX, IO, 1.417s, 2034		177,963		3,969		606,377		13,522		583,748		13,018
Ser. 05-2, Class 7AX, IO, 0.168s, 2035		476,203		1,333		1,622,286		4,542		1,562,201		4,374
MASTR Asset Backed Securities NIM Trust
144A
Ser. 04-CI5, Class N2, 9s, 2034
(Cayman Islands)		—		—		66,900		20,070		—		—
Ser. 04-HE1A, Class Note, 5.191s, 2034
(Cayman Islands)		1,208		1,200		4,250		4,225		4,130		4,105
MASTR Reperforming Loan Trust 144A
Ser. 05-1, Class 1A4, 7 1/2s, 2034		129,229		134,627		359,996		375,032		343,512		357,860
Ser. 05-2, Class 1A3, 7 1/2s, 2035		170,909		178,022		—		—		648,614		675,608
MBNA Credit Card Master Note Trust FRB
Ser. 03-C5, Class C5, 6.51s, 2010		170,000		172,790		470,000		477,715		420,000		426,894
Merit Securities Corp. 144A FRB
Ser. 11PA, Class 3A1, 5.944s, 2027		343,143		325,986		492,900		468,255		405,640		385,358
Merrill Lynch Mortgage Investors, Inc.
Ser. 03-WM3N, Class N1, 8s, 2034		—		—		1,512		1,491		1,188		1,172
FRB Ser. 02-HE1, Class A2, 5.83s, 2032		7,887		7,888		—		—		—		—
FRB Ser. 04-HE2, Class A1A, 5.73s, 2035		22,142		22,164		—		—		—		—
FRB Ser. 04-WMC5, Class A2A, 5.7s, 2035		7,205		7,214		—		—		—		—
FRB Ser. 05-A9, Class 3A1, 5.293s, 2035		515,463		513,288		1,497,036		1,490,720		1,627,730		1,620,863
Ser. 04-WMC3, Class B3, 5s, 2035		31,000		30,361		92,000		90,105		85,000		83,249
Ser. 05-1, Class 1A, 4.762s, 2035		—		—		—		—		87,084		86,501
Merrill Lynch Mortgage Investors, Inc.
144A
Ser. 04-FM1N, Class N1, 5s, 2035
(Cayman Islands)		2,712		2,671		4,254		4,191		3,927		3,868
Ser. 04-HE2N, Class N1, 5s, 2035
(Cayman Islands)		6,005		5,892		9,847		9,663		8,567		8,406
Ser. 05-WM1N, Class N1, 5s, 2035		2,782		2,744		7,728		7,622		7,385		7,283
Ser. 04-WM1N, Class N1, 4 1/2s, 2034		1,604		1,586		3,041		3,007		3,759		3,718

85

ASSET-BACKED SECURITIES*		Growth 1.6%				Balanced 3.4%				Conservative 7.4%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Merrill Lynch Mortgage Investors, Inc.
144A
Ser. 04-WM2N, Class N1, 4 1/2s, 2034	$	5,504	$	5,445	$	5,890	$	5,827	$	5,771	$	5,710
Ser. 04-WM3N, Class N1, 4 1/2s, 2035		—		—		12,500		12,225		11,170		10,925
Metris Master Trust FRB Ser. 04-2,
Class C, 6.68s, 2010		153,000		153,077		219,000		219,110		213,000		213,107
Mid-State Trust Ser. 11, Class B,
8.221s, 2038		57,140		56,588		220,122		217,991		170,124		168,477
MMCA Automobile Trust Ser. 02-1,
Class B, 5.37s, 2010		—		—		56,180		55,967		53,827		53,622
Morgan Stanley ABS Capital I FRB
Ser. 04-HE8, Class A4, 5.71s, 2034		72,474		72,587		—		—		—		—
Ser. 04-WMC3, Class A2PT, 5.62s, 2035		64,362		64,395		164,405		164,488		162,373		162,455
Morgan Stanley Auto Loan Trust 144A
Ser. 04-HB1, Class D, 5 1/2s, 2011		—		—		77,586		77,267		55,466		55,238
Ser. 04-HB2, Class E, 5s, 2012		—		—		78,722		77,598		73,572		72,521
Morgan Stanley Mortgage Loan Trust
Ser. 05-5AR, Class 2A1, 5.398s, 2035		460,191		459,803		811,561		810,878		1,363,528		1,362,380
Navigator CDO, Ltd. 144A FRB
Ser. 03-1A, Class A1, 5.895s, 2015
(Cayman Islands)		141,000		141,578		245,000		246,005		232,000		232,951
Navistar Financial Corp. Owner Trust
Ser. 05-A, Class C, 4.84s, 2014		64,786		63,521		152,247		149,274		146,578		143,716
Ser. 04-B, Class C, 3.93s, 2012		14,389		14,042		55,594		54,254		61,480		59,999
New Century Home Equity Loan Trust
FRB Ser. 04-3, Class A3, 5.72s, 2034		9,318		9,332		—		—		—		—
Ser. 03-5, Class AI7, 5.15s, 2033		98,000		94,870		333,000		322,364		292,000		282,673
Newcastle CDO, Ltd. 144A FRB Ser. 3A,
Class 4FL, 8.53s, 2038
(Cayman Islands)		—		—		139,000		139,608		109,000		109,477
Nomura Asset Acceptance Corp.
Ser. 04-R3, Class PT, 8.437s, 2035		89,863		93,092		118,916		123,190		116,213		120,390
Nomura Asset Acceptance Corp. 144A
Ser. 04-R2, Class PT, 9.087s, 2034		—		—		113,572		119,251		104,441		109,663
Novastar Home Equity Loan FRB
Ser. 04-4, Class A1B, 5.73s, 2035		24,683		24,683		—		—		—		—
Ser. 04-3, Class A3D, 5.69s, 2034		21,987		22,001		—		—		—		—
Oakwood Mortgage Investors, Inc.
Ser. 00-A, Class A3, 7.945s, 2022		88,556		70,227		344,510		273,205		337,083		267,315
Ser. 95-B, Class B1, 7.55s, 2021		—		—		185,000		122,100		267,000		176,220
Ser. 99-A, Class A3, 6.09s, 2029		293,938		273,196		—		—		—		—
Ser. 01-E, Class A, IO, 6s, 2009		191,944		25,456		655,446		86,927		439,509		58,289
Ser. 02-C, Class A1, 5.41s, 2032		346,779		298,835		1,024,434		882,802		947,999		816,934
Ser. 01-D, Class A2, 5.26s, 2019		59,661		39,682		—		—		364,704		242,572
Ser. 02-A, Class A2, 5.01s, 2020		260,629		200,210		—		—		130,314		100,105
Oakwood Mortgage Investors, Inc. 144A
Ser. 01-B, Class A4, 7.21s, 2030		—		—		105,613		93,805		139,781		124,153
Ocean Star PLC 144A FRB
Ser. 04, Class D, 7.702s, 2018 (Ireland)		23,000		23,334		133,000		134,933		123,000		124,787
Ser. 05-A, Class D, 6.902s, 2012
(Ireland)		27,000		26,997		149,000		148,985		150,000		149,985
Option One Mortgage Loan Trust FRB
Ser. 05-4, Class M11, 7.83s, 2035		—		—		46,000		41,587		51,000		46,107
Ser. 04-3, Class A3, 5.63s, 2034		10,723		10,737		—		—		—		—
Origen Manufactured Housing
Ser. 04-B, Class A3, 4 3/4s, 2021		56,000		53,933		—		—		—		—
Ser. 04-B, Class A2, 3.79s, 2017		144,000		141,069		92,000		90,128		85,000		83,270

86

ASSET-BACKED SECURITIES*		Growth 1.6%				Balanced 3.4%				Conservative 7.4%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Park Place Securities, Inc. FRB
Ser. 04-MCW1, Class A2, 5.71s, 2034	$	171,615	$	171,722	$	—	$	—	$	—	$	—
Ser. 04-WCW1, Class A2, 5.71s, 2034		135,722		135,791		480,667		480,914		461,183		461,419
Ser. 04-WHQ2, Class A3A, 5.68s, 2035		22,109		22,128		178,547		178,701		173,188		173,336
Park Place Securities, Inc. 144A FRB
Ser. 05-WCW2, Class M11, 7.83s, 2035		80,000		56,800		88,000		62,480		236,000		167,560
Ser. 04-MHQ1, Class M10, 7.83s, 2034		—		—		88,000		81,577		97,000		89,920
People’s Choice Net Interest Margin
Note 144A Ser. 04-2, Class B, 5s, 2034		—		—		11,721		11,677		11,721		11,677
Permanent Financing PLC FRB
Ser. 3, Class 3C, 6.45s, 2042
(United Kingdom)		110,000		111,173		280,000		282,987		270,000		272,880
Ser. 4, Class 3C, 6.19s, 2042
(United Kingdom)		177,000		178,820		500,000		505,140		503,000		508,171
Ser. 5, Class 2C, 6.04s, 2042
(United Kingdom)		169,000		169,524		445,000		446,380		405,000		406,256
Pillar Funding PLC 144A FRB
Ser. 04-1A, Class C1, 6.39s, 2011
(United Kingdom)		134,000		133,162		474,000		471,036		422,000		419,361
Ser. 04-2A, Class C, 6.27s, 2011
(United Kingdom)		—		—		183,000		181,175		169,000		167,315
Popular ABS Mortgage Pass-Through Trust
FRB Ser. 04-4, Class AV1, 5.67s, 2034		11,287		11,287		—		—		—		—
Provident Funding Mortgage Loan Trust
FRB Ser. 05-2, Class 1A1A, 4.391s, 2035		563,943		561,607		753,911		750,789		759,874		756,728
Providian Gateway Master Trust 144A
FRB Ser. 04-AA, Class D, 7.18s, 2011		100,000		100,722		266,000		267,921		265,000		266,913
FRB Ser. 04-EA, Class D, 6.26s, 2011		217,000		218,731		125,000		125,997		116,000		116,925
Ser. 04-DA, Class D, 4.4s, 2011		—		—		201,000		197,129		186,000		182,418
Renaissance Home Equity Loan Trust FRB
Ser. 04-3, Class AV1, 5 3/4s, 2034		335,286		336,326		—		—		—		—
Residential Accredit Loans, Inc.
Ser. 04-QA5, Class A2, 4.925s, 2034		53,263		51,981		100,058		97,651		94,352		92,081
Residential Asset Mortgage
Products, Inc.
Ser. 02-SL1, Class AI3, 7s, 2032		123,296		122,739		401,970		400,155		252,882		251,741
FRB Ser. 06-RZ2, Class A2, 5 1/2s, 2036		289,000		289,000		—		—		—		—
Residential Asset Securities Corp. FRB
Ser. 04-KS10, Class A, 5.65s, 2029		47,170		47,251		—		—		—		—
Ser. 06-EMX3, Class A2, 5.51s, 2036		1,216,000		1,216,000		—		—		—		—
Residential Asset Securities Corp. 144A
FRB Ser. 05-KS10, Class B, 8.08s, 2035		43,000		38,282		229,000		203,874		251,000		223,460
Ser. 04-N10B, Class A1, 5s, 2034		3,253		3,238		6,520		6,492		6,312		6,285
Ser. 04-NT, Class Note, 5s, 2034		24,462		23,484		35,552		34,130		38,324		36,791
Ser. 04-NT12, Class Note, 4.7s, 2035		—		—		5,940		5,928		6,275		6,262
Residential Asset Securitization Trust
IFB Ser. 06-A7CB, Class 1A6, IO,
0.22s, 2036		103,189		1,241		289,722		3,486		300,637		3,617
Residential Funding Mortgage Securities I
Ser. 04-S5, Class 2A1, 4 1/2s, 2019		370,207		349,179		1,308,866		1,234,522		1,453,795		1,371,219
FRB Ser. 05-SA2, Class 1A, 4.689s, 2035		286,228		284,249		381,871		379,231		385,388		382,723
Saco I Trust FRB Ser. 05-10, Class 1A1,
5.59s, 2033		184,061		184,118		439,084		439,221		483,435		483,586
SAIL Net Interest Margin Notes 144A
Ser. 03-3, Class A, 7 3/4s, 2033
(Cayman Islands)		2,566		513		3,381		676		7,825		1,565
Ser. 03-BC2A, Class A, 7 3/4s, 2033
(Cayman Islands)		18,358		1,836		4,166		417		—		—

87

ASSET-BACKED SECURITIES*		Growth 1.6%				Balanced 3.4%				Conservative 7.4%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
SAIL Net Interest Margin Notes 144A
Ser. 04-4A, Class B, 7 1/2s, 2034
(Cayman Islands)	$	—	$	—	$	50,071	$	4,204	$	—	$	—
Ser. 03-5, Class A, 7.35s, 2033
(Cayman Islands)		11,330		1,133		1,867		187		1,070		107
Ser. 03-6A, Class A, 7s, 2033
(Cayman Islands)		—		—		3,582		358		2,792		279
Ser. 03-8A, Class A, 7s, 2033
(Cayman Islands)		—		—		13,439		1,075		10,582		847
Ser. 03-9A, Class A, 7s, 2033
(Cayman Islands)		—		—		17,378		869		11,202		560
Ser. 04-10A, Class A, 5s, 2034
(Cayman Islands)		2,591		2,586		12,702		12,675		16,204		16,169
Ser. 04-BN2A, Class A, 5s, 2034
(Cayman Islands)		1,600		1,595		4,095		4,082		4,031		4,019
Ser. 04-11A, Class A2, 4 3/4s, 2035
(Cayman Islands)		18,301		18,194		47,249		46,973		46,762		46,488
Ser. 05-2A, Class A, 4 3/4s, 2035
(Cayman Islands)		16,918		16,800		57,291		56,890		46,333		46,008
Ser. 05-1A, Class A, 4 1/4s, 2035
(Cayman Islands)		22,359		22,181		62,138		61,645		59,716		59,242
Sasco Net Interest Margin Trust 144A
Ser. 05-NC1A, Class A, 4 3/4s, 2035
(Cayman Islands)		29,906		29,747		82,879		82,437		79,170		78,748
Ser. 05-WF1A, Class A, 4 3/4s, 2035		18,340		18,255		93,815		93,385		48,223		48,002
Saxon Asset Securities Trust FRB
Ser. 04-3, Class A, 5.67s, 2034		130,555		130,800		—		—		—		—
Sequoia Mortgage Funding Co. 144A
Ser. 04-A, Class AX1, IO, 0.8s, 2008		3,957,569		17,320		—		—		—		—
Sharps SP I, LLC Net Interest Margin
Trust 144A
Ser. 04-HS1N, Class Note, 5.92s, 2034
(Cayman Islands)		7,048		493		13,365		936		12,843		899
Ser. 04-HE2N, Class NA, 5.43s, 2034
(Cayman Islands)		2,046		2,031		3,765		3,737		3,479		3,453
Ser. 04-HE1N, Class Note, 4.94s, 2034
(Cayman Islands)		30,811		7,703		31,792		7,948		31,792		7,948
Ser. 04-RM2N, Class NA, 4s, 2035
(Cayman Islands)		776		776		2,153		2,150		2,065		2,062
Soundview Home Equity Loan Trust 144A
FRB Ser. 05-CTX1, Class B1, 7.83s,
2035		58,000		50,388		—		—		134,000		116,413
Structured Adjustable Rate Mortgage
Loan Trust
Ser. 05-18, Class 6A1, 5.303s, 2035		257,167		256,326		632,647		630,578		668,798		666,611
Ser. 04-12, Class 1A2, 4.963s, 2034		132,981		133,680		309,079		310,704		310,441		312,072
Ser. 04-10, Class 1A1, 4.909s, 2034		94,649		95,182		258,133		259,587		231,866		233,173
Ser. 04-8, Class 1A3, 4.676s, 2034		41,787		41,957		20,659		20,743		38,031		38,185
Ser. 04-6, Class 1A, 4.371s, 2034		319,550		320,875		1,126,833		1,131,508		1,009,104		1,013,291
Ser. 05-9, Class AX, IO, 0.948s, 2035		2,926,935		42,148		7,961,485		114,645		7,612,871		109,625
Ser. 04-19, Class 2A1X, IO, 0.619s, 2035		1,014,020		10,140		—		—		—		—
Structured Adjustable Rate Mortgage
Loan Trust 144A Ser. 04-NP2, Class A,
5.68s, 2034		76,174		76,182		294,642		294,671		304,697		304,727
Structured Asset Investment Loan Trust
FRB Ser. 04-9, Class A4, 5.63s, 2034		159,483		159,550		—		—		—		—

88

ASSET-BACKED SECURITIES*		Growth 1.6%				Balanced 3.4%				Conservative 7.4%
		Principal				Principal				Principal
		amount		Value		amount		Value		amount		Value
Structured Asset Investment Loan Trust
144A FRB
Ser. 06-BNC2, Class B1, 7.83s, 2036	$	—	$	—	$	117,000	$	104,747	$	24,000	$	21,487
Ser. 06-BNC1, Class B1, 7.83s, 2036		—		—		233,000		212,382		255,000		232,435
Ser. 05-HE3, Class M11, 7.83s, 2035		—		—		—		—		225,000		184,965
Structured Asset Receivables Trust 144A
FRB Ser. 05-1, 6.02s, 2015		—		—		1,161,625		1,161,263		1,119,079		1,118,729
Structured Asset Securities Corp.
IFB Ser. 05-10, Class 3A3, 5.143s, 2034		189,579		175,157		659,769		609,579		632,209		584,115
Ser. 03-40A, Class 1A, 5.112s, 2034		37,224		37,735		119,117		120,752		89,338		90,564
Ser. 04-8, Class 1A1, 4.676s, 2034		89,208		89,571		215,977		216,855		187,806		188,570
IFB Ser. 05-6, Class 5A8, 3.24s, 2035		162,860		135,879		891,662		743,940		891,662		743,940
Structured Asset Securities Corp. 144A
IFB
Ser. 05-RF6, Class AIO, IO, 0.786s,
2043 (SN)		—		—		1,686,937		51,328		1,760,134		53,555
Ser. 05-RF4, Class AIO, IO, 0.734s,
2035 (SN)		—		—		1,946,687		57,810		2,061,529		61,220
Terwin Mortgage Trust FRB Ser. 04-5HE,
Class A1B, 5 3/4s, 2035		26,692		26,706		111,269		111,329		105,803		105,859
Terwin Mortgage Trust 144A FRB
Ser. 06-9HGA, Class A1, 5.424s, 2037		269,000		269,000		—		—		—		—
Thornburg Mortgage Securities Trust FRB
Ser. 06-4, Class A2B, 5.444s, 2011		360,310		360,309		—		—		—		—
TIAA Real Estate CDO, Ltd. Ser. 03-1A,
Class E, 8s, 2038 (Cayman Islands)		—		—		349,000		357,682		299,000		306,438
TIAA Real Estate CDO, Ltd. 144A
FRB Ser. 02-1A, Class III, 7.6s, 2037
(Cayman Islands)		100,000		107,596		384,000		413,170		278,000		299,118
Ser. 02-1A, Class IIFX, 6.77s, 2037
(Cayman Islands)		200,000		209,212		—		—		—		—
Wells Fargo Mortgage Backed Securities
Trust
Ser. 06-AR10, Class 3A1, 5.099s, 2036		374,013		371,881		864,905		859,975		868,645		863,694
Ser. 05-AR16, Class 2A1, 4.945s, 2035		—		—		—		—		116,132		115,247
Ser. 05-AR2, Class 2A1, 4.546s, 2035		142,372		140,066		358,278		352,474		375,488		369,405
Ser. 04-R, Class 2A1, 4.354s, 2034		145,625		142,903		366,413		359,561		384,532		377,342
Ser. 05-AR9, Class 1A2, 4.353s, 2035		468,497		459,320		—		—		170,821		167,475
Ser. 05-AR12, Class 2A5, 4.319s, 2035		1,425,000		1,394,985		4,555,000		4,459,058		4,382,000		4,289,702
Ser. 05-AR10, Class 2A18, IO, 0.61s,
2035		—		—		9,846,000		123,524		9,480,000		118,932
WFS Financial Owner Trust
Ser. 05-1, Class D, 4 1/4s, 2012		54,582		53,897		—		—		44,950		44,386
Ser. 04-3, Class D, 4.07s, 2012		22,857		22,605		92,259		91,242		83,947		83,022
Ser. 04-4, Class D, 3.58s, 2012		50,278		49,471		40,222		39,577		38,851		38,228
Ser. 04-1, Class D, 3.17s, 2011		14,264		14,131		37,199		36,852		36,081		35,744
Whinstone Capital Management, Ltd. 144A
FRB Ser. 1A, Class B3, 6.385s, 2044
(United Kingdom)		—		—		374,000		374,007		375,000		375,008
Whole Auto Loan Trust 144A Ser. 04-1,
Class D, 5.6s, 2011		25,236		25,097		72,142		71,745		116,580		115,937
Total asset-backed securities
(cost $30,212,519, $69,024,220
and $70,901,799)			$	30,077,242			$	68,417,138			$	70,402,904

89

PURCHASED OPTIONS OUTSTANDING*					Growth —%					Balanced —%				Conservative 0.1%
	Expiration date/				Contract					Contract				Contract
	strike price				amount			Value		amount		Value		amount		Value
Option on an interest rate swap
with JPMorgan Chase Bank,
N.A. for the right to receive a
fixed rate of 5.28% versus the
three month USD-LIBOR-BBA
maturing on March 8, 2017	Mar 07/5.28			$	5,150,000		$	97,585	$	18,126,000	$	343,461	$	17,583,000	$	333,171
Option on an interest rate swap
with JPMorgan Chase Bank,
N.A. for the right to pay a fixed
rate of 5.28% versus the three
month USD-LIBOR-BBA
maturing on March 8, 2017	Mar 07/5.28				5,150,000			52,126		18,126,000		183,462		17,583,000		177,966
Total purchased options
outstanding (cost $252,608,
$889,080 and $862,446)							$	149,711			$	526,923			$	511,137
WARRANTS* †						Growth —%				Balanced —%				Conservative —%
	Expiration		Strike
	date		price			Warrants		Value		Warrants		Value		Warrants		Value
Dayton Superior Corp. 144A	6/15/09	$	0.01			630		$6		—		$—		330		$3
Ubiquitel, Inc. 144A	4/15/10		22.74			—		—		—		—		590		6
Total warrants
(cost $11,879, $— and $34,033)								$6				$—				$9
EQUITY VALUE CERTIFICATES* (cost $40,008, $— and $—)						Growth —%				Balanced —%				Conservative —%
			Maturity
			date			Certificates		Value		Certificates		Value		Certificates		Value
ONO Finance PLC 144A
(United Kingdom)			3/16/11			290		$3		—		$—		—		$—
PREFERRED STOCKS* (cost $—, $— and $19,818)						Growth —%				Balanced —%				Conservative —%
						Shares		Value		Shares		Value		Shares		Value
Pliant Corp. 13.00% cum. pfd. (F)						—		$—		—		$—		24		$8,419
MUNICIPAL BONDS AND NOTES*						Growth —%				Balanced —%				Conservative —%
						Principal				Principal				Principal
			Rating **			amount		Value		amount		Value		amount		Value
MI Tobacco Settlement Fin. Auth.
Rev. Bonds, Ser. A,
7.309s, 6/1/34			Baa3		$	—	$	—	$	220,000	$	227,861	$	230,000	$	238,218
NJ State Tpk. Auth. Rev. Bonds,
Ser. B, AMBAC, 4.252s, 1/1/16			Aaa			—		—		125,000		117,890		65,000		61,303
Total municipal bonds and notes
(cost $—, $346,131 and $294,975)							$	—			$	345,751			$	299,521

90

SHORT-TERM INVESTMENTS*		Growth 10.9%				Balanced 17.7%				Conservative 29.1%
		Principal amount/				Principal amount/				Principal amount/
		shares		Value		shares		Value		shares		Value
CHARTA, LLC for an effective yield
of 5.31%, November 1, 2006	$	900,000	$	895,830	$	—	$	—	$	—	$	—
Calyon for an effective yield of 5.15%,
February 26, 2007 (France)		2,050,000		2,049,335		2,550,000		2,549,063		1,300,000		1,299,524
HBOS Treasury Services PLC for an
effective yield of 5.26%,
April 5, 2007 (United Kingdom)		4,000,000		4,000,103		—		—		3,500,000		3,500,086
Interest in $400,000,000 joint
tri-party repurchase agreement dated
September 29, 2006 with Bank
of America Securities, LLC due
October 2, 2006 with respect
to various U.S. Government obligations
— maturity value of $34,304,316
for an effective yield of 5.36%
(collateralized by Fannie Mae
securities with a coupon rate of 6.50%
and a due date of July 1, 2035 valued
at $408,000,000)		—		—		—		—		34,289,000		34,289,000
Interest in $258,000,000 joint
tri-party repurchase agreement dated
September 29, 2006 with UBS
Securities, LLC due October 2, 2006
with respect to various asset-backed
securities — maturity value
of $24,062,723 for an
effective yield of 5.35%
(collateralized by various
asset-backed securities with coupon
rates ranging from zero % to 15.00%
and due dates ranging from
August 25, 2011 to July 12, 2046
valued at $263,162,125)		—		—		—		—		24,052,000		24,052,000
Short-term investments held as
collateral for loaned securities
with yields ranging from 5.00%
to 5.53% and due dates ranging from
October 2, 2006 to November 20, 2006 (d)		68,750,330		68,589,929		71,781,165		71,611,038		10,176,148		10,152,439
Putnam Prime Money Market Fund (e)		128,278,402		128,278,402		278,895,150		278,895,150		203,417,070		203,417,070
Total short-term investments
(cost $203,813,599, $353,055,251
and $276,710,119)			$	203,813,599			$	353,055,251			$	276,710,119
TOTAL INVESTMENTS
Total investments (cost $1,752,787,774,
$1,999,769,720 and $1,130,981,188)			$	1,941,498,534			$	2,171,893,340			$	1,188,570,462

91

* Percentages indicated are based on net assets as follows:

Growth Portfolio	$1,868,429,860
Balanced Portfolio	1,993,210,905
Conservative Portfolio	951,344,885

** The Moody’s or Standard & Poor’s ratings indicated are believed to be the most recent ratings available at September 30, 2006 for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to these securities at September 30, 2006. Ratings are not covered by the Report of Independent Registered Public Accounting Firm. Security ratings are defined in the Statement of Additional Information.

*** Security is in default of principal and interest.

† Non-income-producing security.

†† The interest rate and date shown parenthetically represent the new interest rate to be paid and the date the funds will begin accruing interest at this rate.

‡ Restricted, excluding 144A securities, as to public resale. Decrane Aircraft Holdings Co. was acquired on 7/23/04 with a cost of $74,520 for Conservative Portfolio. VFB, LLC was acquired on various dates from 6/22/99 to 1/21/00 with a cost of $230,697 for Conservative Portfolio. For Conservative portfolio, the total market value of restricted securities held was less than 0.1% of net assets.

‡‡ Income may be received in cash or additional securities at the discretion of the issuer.

# These securities, in part or in entirety, were pledged and segregated with the custodian to cover margin requirements for futures contracts for one or more of the funds at September 30, 2006.

(d) See Note 1 to the financial statements.

(e) See Note 5 to the financial statements regarding investments in Putnam Prime Money Market Fund.

(F) Security is valued at fair value following procedures approved by the Trustees. On September 30, 2006, fair value pricing was also used for certain foreign securities in the portfolios (Note 1).

(R) Real Estate Investment Trust.

(SG)Securities on loan, in part or in entirety, at September 30, 2006 (for Growth Portfolio).

(SB) Securities on loan, in part or in entirety, at September 30, 2006 (for Balanced Portfolio).

(SC)Securities on loan, in part or in entirety, at September 30, 2006 (for Conservative Portfolio).

(SN)The securities noted above were purchased during the period for an aggregate cost of $315,423, $799,768 and $1,130,583 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively). During the period, questions arose regarding a potential misidentification of the characteristics of these securities. As a result of initial inquiries into the matter, the values of these securities was adjusted. As of September 30, 2006 the aggregate values of these securities totaled $264,348, $679,863 and $983,617 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively). An investigation of the facts surrounding the acquisition and valuation of these securities is currently underway to determine whether the funds may have claims against other parties in this regard.

At September 30, 2006, liquid assets totaling $497,758,555, $549,187,497 and $263,662,122 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) have been designated as collateral for open forward commitments, swap contracts, forward contracts, written options and futures contracts.

144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

ADR or GDR after the name of a foreign holding stands for American Depository Receipts or Global Depository Receipts, respectively, representing ownership of foreign securities on deposit with a custodian bank.

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

AMBAC represents AMBAC Indemnity Corporation.

The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes (FRN) are the current interest rates at September 30, 2006.

The dates shown on debt obligations are the original maturity dates.

Inverse Floating Rate Bonds (IFB) are securities that pay interest rates that vary inversely to changes in the market interest rates. As interest rates rise, inverse floaters produce less current income. The interest rates shown are the current interest rates at September 30, 2006.

92

DIVERSIFICATION BY COUNTRY

Distribution of investments by country of issue at September 30, 2006 (as a percentage of Portfolio Value):

Growth Portfolio
Australia	1.0%
Brazil	1.0
Finland	0.5
France	2.0
Germany	1.8
Hong Kong	0.6
Italy	0.7
Japan	5.3
Netherlands	2.0
Norway	0.5
Russia	1.0
South Africa	0.8
South Korea	1.7
Spain	0.6
Sweden	0.9
Switzerland	1.4
Taiwan	1.1
United Kingdom	5.2
United States	67.7
Other	4.2
Total	100.0%
Balanced Portfolio
Australia	0.8%
France	1.4
Germany	1.4
Italy	0.5
Japan	3.7
Netherlands	1.5
Spain	0.5
Sweden	0.7
Switzerland	0.9
United Kingdom	3.8
United States	82.1
Other	2.7
Total	100.0%
Conservative Portfolio
Cayman Islands	0.5%
France	0.7
Germany	0.6
Japan	1.7
Netherlands	0.7
United Kingdom	2.2
United States	90.6
Other	3.0
Total	100.0%

93

Growth Portfolio

FORWARD CURRENCY CONTRACTS TO BUY at 9/30/06 (aggregate face value $226,063,739)
				Unrealized
		Aggregate	Delivery	appreciation/
	Value	face value	date	(depreciation)
Australian Dollar	$63,307,946	$64,297,287	10/18/06	$ (989,341)
British Pound	85,304,432	86,007,113	12/20/06	(702,681)
Canadian Dollar	21,497,988	21,465,096	10/18/06	32,892
Danish Krone	811,066	819,316	12/20/06	(8,250)
Euro	20,398,112	20,493,063	12/20/06	(94,951)
Hong Kong Dollar	2,736,734	2,746,453	11/15/06	(9,719)
Japanese Yen	7,908,453	8,176,456	11/15/06	(268,003)
New Zealand Dollar	4,506,797	4,508,145	10/18/06	(1,348)
South Korean Won	7,929,397	7,793,760	11/15/06	135,637
Swedish Krona	4,668,149	4,691,315	12/20/06	(23,166)
Swiss Franc	5,043,407	5,065,735	12/20/06	(22,328)
Total				$(1,951,258)
FORWARD CURRENCY CONTRACTS TO SELL at 9/30/06 (aggregate face value $414,703,435)
				Unrealized
		Aggregate	Delivery	appreciation/
	Value	face value	date	(depreciation)
Australian Dollar	$ 14,254,893	$ 14,378,003	10/18/06	$ 123,110
British Pound	30,645,604	30,874,081	12/20/06	228,477
Canadian Dollar	21,132,123	21,083,314	10/18/06	(48,809)
Chilean Peso	678,245	673,628	8/1/07	(4,617)
Euro	131,921,354	133,126,700	12/20/06	1,205,346
Japanese Yen	100,728,171	103,582,991	11/15/06	2,854,820
New Zealand Dollar	9,144,425	8,788,662	10/18/06	(355,763)
Norwegian Krone	35,431,618	35,696,103	12/20/06	264,485
Singapore Dollar	7,394,115	7,471,455	11/15/06	77,340
South African Rand	6,589,568	7,421,844	8/1/07	832,276
Swedish Krona	30,715,556	30,851,397	12/20/06	135,841
Swiss Franc	20,562,846	20,755,257	12/20/06	192,411
Total				$5,504,917
FUTURES CONTRACTS OUTSTANDING at 9/30/06
				Unrealized
	Number of		Expiration	appreciation/
	contracts	Value	date	(depreciation)
Canadian Government Bond 10 yr (Long)	11	$ 1,135,503	Dec-06	$ 17,510
Dow Jones Euro Stoxx 50 Index (Long)	751	37,221,117	Dec-06	740,809
Dow Jones Euro Stoxx 50 Index (Short)	135	6,690,880	Dec-06	(178,260)
Euro-Bobl 5 yr (Long)	25	3,481,568	Dec-06	12,271
Euro-Bund 10 yr (Long)	142	21,241,142	Dec-06	202,796
Euro-Bund 10 yr (Short)	113	16,903,162	Dec-06	(162,095)
Euro-Dollar 90 day (Long)	18	4,259,925	Dec-06	2,426
Euro-Dollar 90 day (Short)	132	31,239,451	Dec-06	(21,685)
Euro-Dollar 90 day (Long)	87	20,624,438	Mar-07	(7,974)
Euro-Dollar 90 day (Short)	4	948,250	Mar-07	(1,511)
Euro-Dollar 90 day (Long)	17	4,036,863	Jun-07	5,467
Euro-Dollar 90 day (Short)	5	1,187,313	Jun-07	(1,639)
Euro-Dollar 90 day (Long)	17	4,042,813	Sep-07	6,542
Euro-Dollar 90 day (Short)	4	951,250	Sep-07	(1,561)
Euro-Dollar 90 day (Short)	92	21,898,300	Dec-07	10,750
FTSE 100 Index (Short)	583	65,185,136	Dec-06	(546,328)

94

FUTURES CONTRACTS OUTSTANDING at 9/30/06 continued
				Unrealized
	Number of		Expiration	appreciation/
	contracts	Value	date	(depreciation)
Japanese Government Bond 10 yr (Long)	12	$ 13,702,668	Dec-06	$ 78,226
Japanese Government Bond 10 yr (Short)	10	11,418,890	Dec-06	(61,876)
Nasdaq 100 Index E-Mini (Long)	4	133,700	Dec-06	477
Russell 2000 Index Mini (Long)	566	41,436,860	Dec-06	(30,575)
Russell 2000 Index Mini (Short)	995	72,843,950	Dec-06	(66,565)
S&P 500 Index (Long)	27	9,081,450	Dec-06	87,325
S&P 500 Index E-Mini (Long)	3,002	201,959,550	Dec-06	2,940,601
S&P 500 Index E-Mini (Short)	2,672	179,758,800	Dec-06	(2,368,384)
S&P ASX 200 Index (Long)	360	34,778,509	Dec-06	338,413
S&P ASX 200 Index (Short)	15	1,449,105	Dec-06	(32,222)
S&P MidCap 400 Index E-Mini (Long)	474	36,052,440	Dec-06	385,885
Tokyo Price Index (Long)	258	35,296,061	Dec-06	(536,673)
Tokyo Price Index (Short)	33	4,514,612	Dec-06	78,147
U.K. Gilt 10 yr (Long)	44	9,042,954	Dec-06	16,702
U.S. Treasury Bond 20 yr (Long)	115	12,926,719	Dec-06	109,448
U.S. Treasury Bond 20 yr (Short)	47	5,283,094	Dec-06	(91,571)
U.S. Treasury Note 2 yr (Long)	231	47,239,500	Dec-06	101,454
U.S. Treasury Note 2 yr (Short)	95	19,427,500	Dec-06	12,658
U.S. Treasury Note 5 yr (Long)	422	44,527,594	Dec-06	276,144
U.S. Treasury Note 5 yr (Short)	753	79,453,265	Dec-06	(480,173)
U.S. Treasury Note 10 yr (Long)	1,403	151,611,689	Dec-06	1,381,743
Total				$ 2,216,702
WRITTEN OPTIONS OUTSTANDING at 9/30/06 (premiums received $477,767)
		Contract	Expiration date/
		amount	strike price	Value
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to
receive a fixed rate of 4.55% versus the three month USD-LIBOR-BBA maturing on
July 5, 2017		$3,430,000	Jul 07 / 4.55	$174,615
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to pay a
fixed rate of 4.55% versus the three month USD-LIBOR-BBA maturing on July 5, 2017.		3,430,000	Jul 07 / 4.55	16,143
Option on an interest rate swap with Lehman Brothers International for the obligation to
receive a fixed rate of 5.225% semi-annually versus the three month USD-LIBOR-BBA
maturing March 5, 2018.		2,032,000	Mar 08 / 5.225	54,159
Option on an interest rate swap with Lehman Brothers International for the obligation to pay
a fixed rate of 5.225% semi-annually versus the three month USD-LIBOR-BBA maturing
March 5, 2018.		2,032,000	Mar 08 / 5.225	58,503
Option on an interest rate swap with Citibank, N.A. for the obligation to receive a fixed rate
of 5.7% versus the three month USD-LIBOR-BBA maturing on May 14, 2018.		1,078,000	May 08 / 5.70	17,032
Option on an interest rate swap with Citibank, N.A. for the obligation to pay a fixed rate of
5.7% versus the three month USD-LIBOR-BBA maturing on May 14, 2018.		1,078,000	May 08 / 5.70	54,655
Total				$375,107
TBA SALE COMMITMENTS OUTSTANDING at 9/30/06 (proceeds receivable $13,978,049)
		Principal	Settlement
		amount	date	Value
FNMA, 5 1/2s, November 1, 2036		$3,700,000	11/13/06	$ 3,643,922
FNMA, 5 1/2s, October 1, 2036		9,150,000	10/12/06	9,013,465
FNMA, 4 1/2s, October 1, 2021		1,000,000	10/17/06	964,531
FNMA, 4 1/2s, September 1, 2021		400,000	10/16/06	385,719
Total				$14,007,637

95

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/06
		Payments	Payments	Unrealized
Swap counterparty /	Termination	made by	received by	appreciation/
Notional amount	date	fund per annum	fund per annum	(depreciation)
Bank of America, N.A.
$ 5,500,000	9/1/15	3 month USD-LIBOR-BBA	4.53%	$ (246,813)
786,000	10/2/16	5.15631%	3 month USD-LIBOR-BBA	752
80,000	5/31/16	5.58909%	3 month USD-LIBOR-BBA	(3,689)
4,800,000	10/21/15	4.943%	3 month USD-LIBOR-BBA	20,357
130,000	6/24/15	4.39%	3 month USD-LIBOR-BBA	5,488
110,000	6/23/15	4.45%	3 month USD-LIBOR-BBA	4,124
260,000	6/23/15	4.466%	3 month USD-LIBOR-BBA	9,446
740,000	6/17/15	4.555%	3 month USD-LIBOR-BBA	22,452
2,500,000	4/6/10	4.6375%	3 month USD-LIBOR-BBA	9,561
1,000,000	3/30/09	3.075%	3 month USD-LIBOR-BBA	46,257
Citibank, N.A.
4,920,000	7/27/09	5.504%	3 month USD-LIBOR-BBA	(54,957)
230,000	4/7/14	5.377%	3 month USD-LIBOR-BBA	(6,588)
Credit Suisse First Boston International
13,580,000	10/7/14	3 month USD-LIBOR-BBA	4.624%	(326,771)
687,400	7/9/14	4.945%	3 month USD-LIBOR-BBA	9,191
Credit Suisse International
1,111,000	9/28/16	5.10886%	3 month USD-LIBOR-BBA	5,190
269,000	3/21/16	3 month USD-LIBOR-BBA	5.20497%	782
Deutsche Bank AG
283,084	8/2/22	3 month USD-LIBOR-BBA	5.7756%	15,625
317,679	8/2/32	5.86%	3 month USD-LIBOR-BBA	(25,120)
Goldman Sachs Capital Markets, L.P.
285,000	5/3/16	5.565%	3 month USD-LIBOR-BBA	(12,546)
690,000	4/7/14	5.33842%	3 month USD-LIBOR-BBA	(17,919)
283,084	8/12/22	3 month USD-LIBOR-BBA	5.601%	10,290
317,679	8/12/32	5.689%	3 month USD-LIBOR-BBA	(17,442)
570,000	8/1/22	3 month USD-LIBOR-BBA	5.845%	35,735
639,659	8/1/32	5.919%	3 month USD-LIBOR-BBA	(55,909)
2,448,129	8/15/10	3 month USD-LIBOR-BBA	5.405%	(29,083)
Goldman Sachs International
414,000	9/29/16	3 month USD-LIBOR-BBA	5.1275%	(1,323)
1,243,000	9/29/08	5.085%	3 month USD-LIBOR-BBA	566
JPMorgan Chase Bank, N.A.
4,400,000	10/21/15	4.916%	3 month USD-LIBOR-BBA	27,681
13,000,000	9/2/15	3 month USD-LIBOR-BBA	4.4505%	(655,967)
17,000,000	8/25/10	4.4725%	3 month USD-LIBOR-BBA	366,988
1,200,000	8/4/16	3 month USD-LIBOR-BBA	5.5195%	32,056
2,700,000	8/4/08	3 month USD-LIBOR-BBA	5.40%	11,297
466,000	8/2/15	3 month USD-LIBOR-BBA	4.6570%	(16,318)
2,210,000	6/29/15	3 month USD-LIBOR-BBA	4.296%	(107,471)
160,000	6/24/15	4.387%	3 month USD-LIBOR-BBA	6,979
640,000	6/16/15	4.538%	3 month USD-LIBOR-BBA	19,962
486,000	9/28/16	3 month USD-LIBOR-BBA	5.1223%	(1,891)
1,457,000	9/28/08	5.096%	3 month USD-LIBOR-BBA	441
739,000	9/18/16	5.291%	3 month USD-LIBOR-BBA	(6,854)
7,000,000	1/17/16	4.946%	3 month USD-LIBOR-BBA	119,832
4,353,000	8/15/11	5.412%	3 month USD-LIBOR-BBA	(61,676)
Lehman Brothers International (Europe)
13,949,000	8/3/16	5.5675%	3 month USD-LIBOR-BBA	(424,736)
16,076,000	8/3/11	5.445%	3 month USD-LIBOR-BBA	(248,565)

96

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/06 continued
		Payments	Payments	Unrealized
Swap counterparty /	Termination	made by	received by	appreciation/
Notional amount	date	fund per annum	fund per annum	(depreciation)
Lehman Brothers Special Financing, Inc.
$ 1,530,000	9/29/13	5.0555%	3 month USD-LIBOR-BBA	$ 5,214
7,140,000	9/8/16	5.3275%	3 month USD-LIBOR-BBA	(86,252)
141,000	8/3/36	3 month USD-LIBOR-BBA	5.67%	7,870
7,039,000	8/3/08	3 month USD-LIBOR-BBA	5.425%	32,869
Merrill Lynch Capital Services, Inc.
275,120	8/13/12	4.94%	3 month USD-LIBOR-BBA	2,358
283,084	8/12/22	3 month USD-LIBOR-BBA	5.601%	10,290
570,000	8/1/22	3 month USD-LIBOR-BBA	5.845%	35,735
553,964	8/1/12	5.204%	3 month USD-LIBOR-BBA	(2,611)
7,200,000	3/2/11	5.815%	3 month USD-LIBOR-BBA	(214,319)
Total				$(1,749,432)
TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/06
		Fixed payments	Total return	Unrealized
Swap counterparty /	Termination	received (paid) by	received by	appreciation/
Notional amount	date	fund per annum	or paid by fund	(depreciation)
Bank of America, N.A.
$ 1,287,417	1/19/07	—	S&P 500 Index	$ (425,622)
			6 month forward
			variance
Citibank, N.A.
950,000	11/1/06	7.5 bp plus	The spread return of	221
		beginning	Lehman Brothers
		of period nominal	AAA 8.5+ CMBS
		spread of Lehman	Index adjusted
		Brothers AAA	by modified
		8.5+ Commercial	duration factor
		Mortgage Backed
		Securities Index
42,395,302	1/17/07	3 month USD-	Russell 2000	(352,311)
		LIBOR-BBA minus	Total Return
		85 bp	Index
Deutsche Bank AG London
1,227,516	12/15/06	—	S&P 500 Index	(523,926)
			6 month forward
			variance
1,275,910	12/15/06	—	S&P 500 Index	(599,070)
			6 month forward
			variance
950,000	11/1/06	5 bp plus	The spread return of	136
		nominal spread	Lehman Brothers
		of Lehman	AAA 8.5+ CMBS
		Brothers AAA	Index adjusted
		8.5+ Commercial	by modified
		Mortgage Backed	duration factor
		Securities Index
Goldman Sachs Capital Markets, L.P.
890,000	11/1/06	5 bp plus	The spread return of	138
		change in spread	Lehman Brothers
		of Lehman	AAA 8.5+ CMBS
		Brothers AAA	Index adjusted
		8.5+ Commercial	by modified
		Mortgage Backed	duration factor
		Securities Index
		multiplied by
		the modified
		duration factor

97

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/06 continued
		Fixed payments	Total return	Unrealized
Swap counterparty /	Termination	received (paid) by	received by	appreciation/
Notional amount	date	fund per annum	or paid by fund	(depreciation)
Goldman Sachs International
$ 4,550,000	12/1/06	5 bp plus	The spread return of	$ 10,211
		change in spread	Lehman Brothers
		of Lehman	Aaa 8.5+ CMBS
		Brothers Aaa	Index adjusted
		8.5+ Commercial	by modified
		Mortgage Backed	duration factor
		Securities Index
		multiplied by
		the modified
		duration factor
JPMorgan Chase Bank, N.A.
1,224,046 (E)	3/16/07	—	S&P 500 Index	(114,518)
			6 month forward
			variance
58,590,959	4/4/07	3 month USD-	Russell 2000	391,170
		LIBOR-BBA minus	Index
		90 bp
81,363,356	9/21/07	3 month USD-	Russell 2000	810,759
		LIBOR-BBA minus	Total Return
		90 bp	Index
11,118,202	10/4/06	(1 month USD-	Standard & Poors	439,238
		LIBOR-BBA plus	500 Technology
		25 bp)	Hardware &
			Equipment Index
4,509,839	10/4/06	(1 month USD-	Standard & Poors	(20,110)
		LIBOR-BBA plus	500 Utilities
		25 bp)	Index
5,034,713	10/4/06	(1 month USD-	Standard & Poors	249,701
		LIBOR-BBA plus	500
		25 bp)	Transportation
			Index
18,214,092	10/4/06	(1 month USD-	Standard & Poors	511,167
		LIBOR-BBA plus	500
		25 bp)	Pharmaceuticals,
			Biotechnology &
			Life Sciences
			Index
4,854,562	10/4/06	(1 month USD-	Standard & Poors	352,754
		LIBOR-BBA plus	500 Retailing
		25 bp)	Index
16,770,365	10/4/06	(1 month USD-	Standard & Poors	(137,061)
		LIBOR-BBA plus	500 Health Care
		25 bp)	Equipment &
			Services Index
4,862,348	10/4/06	(1 month USD-	Standard & Poors	170,056
		LIBOR-BBA plus	500 Insurance
		25 bp)	Index
10,466,191	10/4/06	(1 month USD-	Standard & Poors	(194,779)
		LIBOR-BBA plus	500 Food
		25 bp)	Beverage &
			Tobacco Index
12,060,278	10/4/06	(1 month USD-	Standard & Poors	123,353
		LIBOR-BBA plus	500 Food &
		25 bp)	Staples
			Retailing GICS
			Industry Group
			Index
10,940,391	10/4/06	1 month USD-	Standard & Poors	(157,761)
		LIBOR-BBA minus	500 Household &
		30 bp	Personal
			Products Index
8,479,074	10/4/06	(1 month USD-	Standard & Poors	380,456
		LIBOR-BBA plus	500 Diversified
		25 bp)	Financials Index

98

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/06 continued
		Fixed payments	Total return	Unrealized
Swap counterparty /	Termination	received (paid) by	received by	appreciation/
Notional amount	date	fund per annum	or paid by fund	(depreciation)
JPMorgan Chase Bank, N.A. continued
$19,649,229	10/4/06	1 month USD-	Standard & Poors	$ (958,305)
		LIBOR-BBA minus	500 Software &
		30 bp	Services Index
14,050,633	10/4/06	1 month USD-	Standard & Poors	(363,933)
		LIBOR-BBA minus	500 Real Estate
		30 bp	Index
9,186,203	10/4/06	1 month USD-	Standard & Poors	(402,780)
		LIBOR-BBA minus	500 Commercial
		30 bp	Services &
			Supplies Index
17,138,142	10/4/06	(1 month USD-	Standard & Poors	(513,019)
		LIBOR-BBA plus	500 Energy Index
		25 bp)
10,059,435	10/4/06	1 month USD-	Standard & Poors	89,957
		LIBOR-BBA minus	500 Materials
		30 bp	Index
13,155,757	10/4/06	1 month USD-	Standard & Poors	(377,690)
		LIBOR-BBA minus	500
		30 bp	Telecommunication
			Services Index
9,184,084	10/4/06	1 month USD-	Standard & Poors	(598,065)
		LIBOR-BBA minus	500 Consumer
		30 bp	Services Index
12,788,506	10/4/06	1 month USD-	Standard & Poors	(875,291)
		LIBOR-BBA minus	500 Consumer
		30 bp	Durables &
			Apparel Index
12,267,757	10/4/06	1 month USD-	Standard & Poors	(291,506)
		LIBOR-BBA minus	500 Banks Index
		30 bp
2,715,847	10/4/06	1 month USD-	Standard & Poors	(67,989)
		LIBOR-BBA minus	500 Automobiles
		30 bp	& Components
			Index
Lehman Brothers Special Financing, Inc.
3,999,728	10/1/06	(4.40688%)	Lehman Brothers	150,941
			U.S. High Yield
			Index
3,999,934	4/1/07	(1 year USD-	Lehman Brothers	69,582
		LIBOR-BBA minus	U.S. High Yield
		35 bp)	Index
3,230,604	3/1/07	(1 year USD-	Lehman Brothers	74,690
		LIBOR-BBA	U.S. High Yield
		minus 25 bp)	Index
Merrill Lynch International
2,108,910	9/21/07	(3 month USD-	MSCI Daily Total	58,820
		LIBOR-BBA minus	Return Net
		4.25%)	Emerging Markets
			India USD Index
15,469,255	8/24/07	3 month USD-	Russell 2000	(394,677)
		LIBOR-BBA minus	Total Return
		0.70%	Index
Morgan Stanley & Co. International Limited
2,125,189	2/1/07	(3 month USD-	MSCI India Net	363,844
		LIBOR-BBA minus	Dividends
		4.00%)	Reinvested Index
Total				$(3,121,219)

(E) See Note 1 to the financial statements regarding extended effective dates.

99

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/06
	Upfront			Fixed payments	Unrealized
Swap counterparty /	premium	Notional	Termination	received (paid) by	appreciation/
Referenced debt*	received (paid)**	amount	date	fund per annum	(depreciation)
Citibank, N.A.
Ford Motor Co., 7.45%,
7/16/31	$—	$ 65,000	6/20/07	620 bp	$ 1,450
Visteon Corp., 7%,
3/10/14	—	85,000	6/20/09	605 bp	5,079
Credit Suisse First Boston International
Ford Motor Co., 7.45%,
7/16/31	—	160,000	9/20/07	(487.5 bp)	(2,848)
Ford Motor Co., 7.45%,
7/16/31	—	195,000	9/20/08	725 bp	9,225
Ford Motor Co., 7.45%,
7/16/31	—	35,000	9/20/07	(485 bp)	(614)
Deutsche Bank AG
Ford Motor Co., 7.45%,
7/16/31	—	91,000	6/20/07	595 bp	1,640
Visteon Corp., 7%,
3/10/14	—	35,000	6/20/09	535 bp	1,468
Goldman Sachs Capital Markets, L.P.
Ford Motor Co., 7.45%,
7/16/31	—	65,000	6/20/07	630 bp	1,660
Goldman Sachs International
General Motors Corp.,
7 1/8%, 7/15/13	—	160,000	9/20/08	620 bp	7,556
General Motors Corp.,
7 1/8%, 7/15/13	—	160,000	9/20/07	(427.5 bp)	(3,340)
General Motors Corp.,
7 1/8%, 7/15/13	—	35,000	9/20/07	(425 bp)	(705)
General Motors Corp.,
7 1/8%, 7/15/13	—	35,000	9/20/08	620 bp	1,634
L-3 Communications
Corp. 7 5/8%, 6/15/12	—	35,000	9/20/11	(108 bp)	(61)
United States Steel
Corp., 9 3/4%, 5/15/10	—	80,000	9/20/09	(65 bp)	66
JPMorgan Chase Bank, N.A.
Ford Motor Co., 7.45%,
7/16/31	—	65,000	6/20/07	635 bp	1,394
Ford Motor Co., 7.45%,
7/16/31	—	85,000	6/20/07	665 bp	2,008
Ford Motor Co., 7.45%,
7/16/31	—	25,000	9/20/07	(345 bp)	(6)
Ford Motor Co., 7.45%,
7/16/31	—	25,000	9/20/08	550 bp	204
General Motors Corp.,
7 1/8%, 7/15/13	—	25,000	9/20/07	(350 bp)	(333)
General Motors Corp.,
7 1/8%, 7/15/13	—	25,000	9/20/08	500 bp	615
Lehman Brothers Special Financing, Inc.
General Motors Corp.,
7 1/8%, 7/15/13	—	170,000	12/20/06	750 bp	2,532
Merrill Lynch Capital Services, Inc.
Ford Motor Co., 7.45%,
7/16/31	—	80,000	9/20/07	(345 bp)	(128)
Ford Motor Co., 7.45%,
7/16/31	—	80,000	9/20/08	570 bp	1,545
General Motors Corp.,
7 1/8%, 7/15/13	—	110,000	9/20/07	(335 bp)	(256)
General Motors Corp.,
7 1/8%, 7/15/13	—	110,000	9/20/08	500 bp	2,776

100

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/06 continued
	Upfront			Fixed payments	Unrealized
Swap counterparty /	premium	Notional	Termination	received (paid) by	appreciation/
Referenced debt*	received (paid)**	amount	date	fund per annum	(depreciation)
Morgan Stanley Capital Services, Inc.
Bombardier, Inc,
6 3/4%, 5/1/12	$—	$ 85,000	3/20/11	355 bp	$ 3,346
Ford Motor Co., 7.45%,
7/16/31	—	30,000	9/20/07	(345 bp)	(120)
Ford Motor Co., 7.45%,
7/16/31	—	30,000	9/20/08	560 bp	525
General Motors Corp.,
7 1/8%, 7/15/13	—	30,000	9/20/07	(335 bp)	(356)
General Motors Corp.,
7 1/8%, 7/15/13	—	30,000	9/20/08	500 bp	757
Visteon Corp., 7%,
3/10/14	—	56,314	6/20/09	535 bp	2,363
Total					$39,076

* Payments related to the reference debt are made upon a credit default event.

** Upfront premium is based on the difference between the original spread on issue and the market spread on day of execution.

101

Balanced Portfolio
FORWARD CURRENCY CONTRACTS TO BUY at 9/30/06 (aggregate face value $251,431,310)
				Unrealized
		Aggregate	Delivery	appreciation/
	Value	face value	date	(depreciation)
Australian Dollar	$66,971,945	$68,023,531	10/18/06	$(1,051,586)
British Pound	92,713,641	93,514,383	12/20/06	(800,742)
Canadian Dollar	23,801,254	23,755,571	10/18/06	45,683
Euro	24,407,316	24,515,233	12/20/06	(107,917)
Hong Kong Dollar	1,618,176	1,623,923	11/15/06	(5,747)
Japanese Yen	15,799,924	16,192,955	11/15/06	(393,031)
New Zealand Dollar	4,867,331	4,868,787	10/18/06	(1,456)
South Korean Won	9,459,072	9,297,281	11/15/06	161,791
Swedish Krona	5,001,646	5,026,467	12/20/06	(24,821)
Swiss Franc	4,592,846	4,613,179	12/20/06	(20,333)
Total				$(2,198,159)
FORWARD CURRENCY CONTRACTS TO SELL at 9/30/06 (aggregate face value $437,176,681)
				Unrealized
		Aggregate	Delivery	appreciation/
	Value	face value	date	(depreciation)
Australian Dollar	$ 16,442,895	$ 16,574,090	10/18/06	$ 131,195
British Pound	39,537,439	39,838,299	12/20/06	300,860
Canadian Dollar	23,257,435	23,194,628	10/18/06	(62,807)
Danish Krone	954,015	963,719	12/20/06	9,704
Euro	141,815,276	143,085,369	12/20/06	1,270,093
Japanese Yen	111,895,537	115,091,643	11/15/06	3,196,106
New Zealand Dollar	9,534,764	9,173,138	10/18/06	(361,626)
Norwegian Krone	32,661,548	32,911,294	12/20/06	249,746
Singapore Dollar	8,225,837	8,311,878	11/15/06	86,041
Swedish Krona	28,857,601	28,996,823	12/20/06	139,222
Swiss Franc	18,878,467	19,035,800	12/20/06	157,333
Total				$5,115,867
FUTURES CONTRACTS OUTSTANDING at 9/30/06
				Unrealized
	Number of		Expiration	appreciation/
	contracts	Value	date	(depreciation)
Canadian Government Bond 10 yr (Long)	12	$ 1,238,731	Dec-06	$ 19,102
Dow Jones Euro Stoxx 50 Index (Long)	810	40,145,279	Dec-06	799,009
Dow Jones Euro Stoxx 50 Index (Short)	201	9,961,976	Dec-06	(265,409)
Euro-Bobl 5 yr (Long)	28	3,899,356	Dec-06	13,744
Euro-Bund 10 yr (Long)	157	23,484,924	Dec-06	224,217
Euro-Bund 10 yr (Short)	135	20,194,043	Dec-06	(193,653)
Euro-Dollar 90 day (Long)	34	8,046,525	Dec-06	4,583
Euro-Dollar 90 day (Long)	388	91,980,250	Mar-07	(36,168)
Euro-Dollar 90 day (Long)	34	8,073,725	Jun-07	10,933
Euro-Dollar 90 day (Long)	34	8,085,625	Sep-07	13,083
Euro-Dollar 90 day (Short)	417	99,256,425	Dec-07	49,216
FTSE 100 Index (Short)	586	65,520,565	Dec-06	(549,138)
Japanese Government Bond 10 yr (Long)	12	13,702,668	Dec-06	78,226
Japanese Government Bond 10 yr (Short)	10	11,418,890	Dec-06	(61,876)
Nasdaq 100 Index E-Mini (Long)	1	33,425	Dec-06	(27)
Russell 2000 Index Mini (Long)	583	42,681,430	Dec-06	(47,295)
Russell 2000 Index Mini (Short)	1,002	73,356,420	Dec-06	(67,324)

102

FUTURES CONTRACTS OUTSTANDING at 9/30/06 continued
				Unrealized
	Number of		Expiration	appreciation/
	contracts	Value	date	(depreciation)
S&P 500 Index (Long)	13	$ 4,372,550	Dec-06	$ 53,857
S&P 500 Index E-Mini (Long)	2,682	180,431,550	Dec-06	2,627,146
S&P 500 Index E-Mini (Short)	3,428	230,618,700	Dec-06	(3,145,441)
S&P ASX 200 Index (Long)	406	39,222,430	Dec-06	489,164
S&P ASX 200 Index (Short)	17	1,642,318	Dec-06	(36,517)
S&P MidCap 400 Index E-Mini (Long)	520	39,551,200	Dec-06	425,643
Tokyo Price Index (Long)	286	39,126,641	Dec-06	(594,916)
Tokyo Price Index (Short)	53	7,250,742	Dec-06	125,507
U.K. Gilt 10 yr (Long)	49	10,070,562	Dec-06	18,574
U.S. Treasury Bond 20 yr (Long)	265	29,787,656	Dec-06	(112,319)
U.S. Treasury Note 2 yr (Short)	707	144,581,500	Dec-06	4,197
U.S. Treasury Note 5 yr (Long)	582	61,410,094	Dec-06	380,844
U.S. Treasury Note 5 yr (Short)	199	20,997,609	Dec-06	(118,632)
U.S. Treasury Note 10 yr (Long)	1,910	206,399,375	Dec-06	1,834,674
Total				$ 1,943,004
WRITTEN OPTIONS OUTSTANDING at 9/30/06 (premiums received $2,028,120)
		Contract	Expiration date/
		amount	strike price	Value
S&P 500 Index Depository Receipts (SPDR Trust Series I) (Call)		$ 51,689	Oct 06 / $139.20	$ 320
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to
receive a fixed rate of 4.55% versus the three month USD-LIBOR-BBA maturing on
July 5, 2017.		19,820,000	Jul 07 / 4.55	1,009,001
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to pay
a fixed rate of 4.55% versus the three month USD-LIBOR-BBA maturing on July 5, 2017.		19,820,000	Jul 07 / 4.55	93,279
Option on an interest rate swap with Lehman Brothers International for the obligation to
receive a fixed rate of 5.225% semi-annually versus the three month USD-LIBOR-BBA
maturing March 5, 2018.		7,124,000	Mar 08 / 5.225	189,876
Option on an interest rate swap with Lehman Brothers International for the obligation to pay
a fixed rate of 5.225% semi-annually versus the three month USD-LIBOR-BBA maturing
March 5, 2018.		7,124,000	Mar 08 / 5.225	205,107
Total				$1,497,583
TBA SALE COMMITMENTS OUTSTANDING at 9/30/06 (proceeds receivable $83,689,949)
		Principal	Settlement
		amount	date	Value
FNMA, 5 1/2s, November 1, 2036		$25,400,000	11/13/06	$25,015,033
FNMA, 5 1/2s, October 1, 2036		53,800,000	10/12/06	52,997,201
FNMA, 4 1/2s, October 1, 2021		6,000,000	10/17/06	5,787,187
Total				$83,799,421

103

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/06
		Payments	Payments	Unrealized
Swap counterparty /	Termination	made by	received by	appreciation/
Notional amount	date	fund per annum	fund per annum	(depreciation)
Bank of America, N.A.
$ 1,500,000	9/1/15	3 month USD-LIBOR-BBA	4.53%	$ (67,313)
1,470,000	10/2/16	5.15631%	3 month USD-LIBOR-BBA	1,406
8,600,000	10/21/15	4.943%	3 month USD-LIBOR-BBA	36,474
800,000	6/24/15	4.39%	3 month USD-LIBOR-BBA	33,771
660,000	6/23/15	4.45%	3 month USD-LIBOR-BBA	24,747
1,590,000	6/23/15	4.466%	3 month USD-LIBOR-BBA	57,766
4,410,000	6/17/15	4.555%	3 month USD-LIBOR-BBA	133,802
53,000,000	5/21/07	3.95%	3 month USD-LIBOR-BBA	50,757
18,600,000	4/6/10	4.6375%	3 month USD-LIBOR-BBA	71,136
27,200,000	1/14/10	3 month USD-LIBOR-BBA	4.106%	(867,078)
17,346,000	12/22/09	3.965%	3 month USD-LIBOR-BBA	392,071
7,100,000	3/30/09	3.075%	3 month USD-LIBOR-BBA	328,427
20,743,000	1/28/24	3 month USD-LIBOR-BBA	5.2125%	(163,843)
Citibank, N.A.
13,500,000	7/27/09	5.504%	3 month USD-LIBOR-BBA	(150,799)
900,000	4/7/14	5.377%	3 month USD-LIBOR-BBA	(25,777)
Credit Suisse First Boston International
9,662,000	3/9/09	3 month USD-LIBOR-BBA	3.195%	(423,576)
Credit Suisse International
2,060,000	9/28/16	5.10886%	3 month USD-LIBOR-BBA	9,623
802,000	3/21/16	3 month USD-LIBOR-BBA	5.20497%	2,333
Deutsche Bank AG
1,251,434	8/2/22	3 month USD-LIBOR-BBA	5.7756%	69,075
1,404,369	8/2/32	5.86%	3 month USD-LIBOR-BBA	(111,050)
Goldman Sachs Capital Markets, L.P.
1,095,000	5/3/16	5.565%	3 month USD-LIBOR-BBA	(48,199)
2,770,000	4/7/14	5.33842%	3 month USD-LIBOR-BBA	(71,938)
1,251,434	8/12/22	3 month USD-LIBOR-BBA	5.601%	45,490
1,404,369	8/12/32	5.689%	3 month USD-LIBOR-BBA	(77,107)
2,515,000	8/1/22	3 month USD-LIBOR-BBA	5.845%	157,669
2,822,353	8/1/32	5.919%	3 month USD-LIBOR-BBA	(246,687)
9,013,565	8/15/10	3 month USD-LIBOR-BBA	5.405%	(107,080)
Goldman Sachs International
2,762,000	9/29/16	3 month USD-LIBOR-BBA	5.1275%	(8,820)
8,657,000	9/29/08	5.085%	3 month USD-LIBOR-BBA	3,945
JPMorgan Chase Bank, N.A.
7,800,000	10/21/15	4.916%	3 month USD-LIBOR-BBA	49,071
4,000,000	9/2/15	3 month USD-LIBOR-BBA	4.4505%	(201,836)
12,700,000	8/4/16	3 month USD-LIBOR-BBA	5.5195%	339,260
24,400,000	8/4/08	3 month USD-LIBOR-BBA	5.40%	102,094
2,690,000	8/2/15	3 month USD-LIBOR-BBA	4.6570%	(94,196)
13,300,000	6/29/15	3 month USD-LIBOR-BBA	4.296%	(646,772)
960,000	6/24/15	4.387%	3 month USD-LIBOR-BBA	41,876
3,840,000	6/16/15	4.538%	3 month USD-LIBOR-BBA	119,772
20,700,000	3/7/15	3 month USD-LIBOR-BBA	4.798%	(491,308)
3,238,000	9/28/16	3 month USD-LIBOR-BBA	5.1223%	(12,597)
10,143,000	9/28/08	5.096%	3 month USD-LIBOR-BBA	3,066
1,368,000	9/18/16	5.291%	3 month USD-LIBOR-BBA	(12,687)
35,000,000	1/17/16	4.946%	3 month USD-LIBOR-BBA	599,160
Lehman Brothers International (Europe)
51,091,000	8/3/16	5.5675%	3 month USD-LIBOR-BBA	(1,555,682)
40,316,000	8/3/11	5.445%	3 month USD-LIBOR-BBA	(623,361)

104

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/06 continued
		Payments	Payments	Unrealized
Swap counterparty /	Termination	made by	received by	appreciation/
Notional amount	date	fund per annum	fund per annum	(depreciation)
Lehman Brothers Special Financing, Inc.
$15,850,000	9/29/13	5.0555%	3 month USD-LIBOR-BBA	$ 54,006
18,750,000	9/8/16	5.3275%	3 month USD-LIBOR-BBA	(226,501)
622,000	8/3/36	3 month USD-LIBOR-BBA	5.67%	34,716
46,963,000	8/3/08	3 month USD-LIBOR-BBA	5.425%	219,301
Merrill Lynch Capital Services, Inc.
1,216,226	8/13/12	4.94%	3 month USD-LIBOR-BBA	10,427
1,251,434	8/12/22	3 month USD-LIBOR-BBA	5.601%	45,490
2,515,000	8/1/22	3 month USD-LIBOR-BBA	5.845%	157,669
2,444,243	8/1/12	5.204%	3 month USD-LIBOR-BBA	(11,519)
Total				$(3,051,326)
TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/06
		Fixed payments	Total return	Unrealized
Swap counterparty /	Termination	received (paid) by	received by	appreciation/
Notional amount	date	fund per annum	or paid by fund	(depreciation)
Bank of America, N.A.
$ 1,526,759	1/19/07	—	S&P 500 Index	$ (504,749)
			6 month forward
			variance
Citibank, N.A.
3,470,000	11/1/06	7.5 bp plus	The spread return of	806
		beginning	Lehman Brothers
		of period nominal	AAA 8.5+ CMBS
		spread of Lehman	Index adjusted
		Brothers AAA	by modified
		8.5+ Commercial	duration factor
		Mortgage Backed
		Securities Index
46,434,379	1/17/07	3 month USD-	Russell 2000	(385,876)
		LIBOR-BBA minus	Total Return
		85 bp	Index
Deutsche Bank AG London
1,481,891	12/15/06	—	S&P 500 Index	(632,498)
			6 month forward
			variance
1,540,528	12/15/06	—	S&P 500 Index	(723,315)
			6 month forward
			variance
3,470,000	11/1/06	5 bp plus	The spread return of	497
		nominal spread	Lehman Brothers
		of Lehman	AAA 8.5+ CMBS
		Brothers AAA	Index adjusted
		8.5+ Commercial	by modified
		Mortgage Backed	duration factor
		Securities Index
24,073,088	6/19/07	(3 month USD-	iShares MSCI	158,400
		LIBOR-BBA minus	Emerging Markets
		300 bp)	Index
Goldman Sachs Capital Markets, L.P.
3,250,000	11/1/06	5 bp plus	The spread return of	504
		change in spread	Lehman Brothers
		of Lehman	AAA 8.5+ CMBS
		Brothers AAA	Index adjusted
		8.5+ Commercial	by modified
		Mortgage Backed	duration factor
		Securities Index
		multiplied by
		the modified
		duration factor

105

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/06 continued
		Fixed payments	Total return	Unrealized
Swap counterparty /	Termination	received (paid) by	received by	appreciation/
Notional amount	date	fund per annum	or paid by fund	(depreciation)
Goldman Sachs International
$ 768,000	9/15/11	678 bp (1 month	Ford Credit Auto	$ 423
		USD-LIBOR-BBA)	Owner Trust
			Series 2005-B
			Class D
16,580,000	12/1/06	5 bp plus	The spread return of	37,206
		change in spread	Lehman Brothers
		of Lehman	Aaa 8.5+ CMBS
		Brothers Aaa	Index adjusted
		8.5+ Commercial	by modified
		Mortgage Backed	duration factor
		Securities Index
		multiplied by
		the modified
		duration factor
JPMorgan Chase Bank, N.A.
1,404,035 (E)	3/16/07	—	S&P 500 Index	(131,358)
			6 month forward
			variance
140,719,342	4/4/07	3 month USD-	Russell 2000	939,483
		LIBOR-BBA minus	Index
		90 bp
22,122,175	9/21/07	3 month USD-	Russell 2000	220,440
		LIBOR-BBA minus	Total Return
		90 bp	Index
11,868,491	10/4/06	(1 month USD-	Standard & Poors	468,879
		LIBOR-BBA plus	500 Technology
		25 bp)	Hardware &
			Equipment Index
4,893,180	10/4/06	(1 month USD-	Standard & Poors	(21,819)
		LIBOR-BBA plus	500 Utilities
		25 bp)	Index
5,267,507	10/4/06	(1 month USD-	Standard & Poors	261,247
		LIBOR-BBA plus	500
		25 bp)	Transportation
			Index
19,762,218	10/4/06	(1 month USD-	Standard & Poors	554,615
		LIBOR-BBA plus	500
		25 bp)	Pharmaceuticals,
			Biotechnology &
			Life Sciences
			Index
5,071,977	10/4/06	(1 month USD-	Standard & Poors	368,552
		LIBOR-BBA plus	500 Retailing
		25 bp)	Index
17,999,823	10/4/06	(1 month USD-	Standard & Poors	(147,110)
		LIBOR-BBA plus	500 Health Care
		25 bp)	Equipment &
			Services Index
5,275,621	10/4/06	(1 month USD-	Standard & Poors	184,510
		LIBOR-BBA plus	500 Insurance
		25 bp)	Index
11,159,791	10/4/06	(1 month USD-	Standard & Poors	(207,687)
		LIBOR-BBA plus	500 Food
		25 bp)	Beverage &
			Tobacco Index
13,085,207	10/4/06	(1 month USD-	Standard & Poors	133,836
		LIBOR-BBA plus	500 Food &
		25 bp)	Staples
			Retailing GICS
			Industry Group
			Index
10,837,330	10/4/06	1 month USD-	Standard & Poors	(156,275)
		LIBOR-BBA minus	500 Household &
		30 bp	Personal
			Products Index

106

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/06 continued
		Fixed payments	Total return	Unrealized
Swap counterparty /	Termination	received (paid) by	received by	appreciation/
Notional amount	date	fund per annum	or paid by fund	(depreciation)
JPMorgan Chase Bank, N.A. continued
$ 9,004,389	10/4/06	(1 month USD-	Standard & Poors	$ 404,026
		LIBOR-BBA plus	500 Diversified
		25 bp)	Financials Index
21,514,439	10/4/06	1 month USD-	Standard & Poors	(1,049,273)
		LIBOR-BBA minus	500 Software &
		30 bp	Services Index
15,440,082	10/4/06	1 month USD-	Standard & Poors	(399,923)
		LIBOR-BBA minus	500 Real Estate
		30 bp	Index
9,380,562	10/4/06	1 month USD-	Standard & Poors	(411,302)
		LIBOR-BBA minus	500 Commercial
		30 bp	Services &
			Supplies Index
18,326,382	10/4/06	(1 month USD-	Standard & Poors	(548,589)
		LIBOR-BBA plus	500 Energy Index
		25 bp)
11,109,188	10/4/06	1 month USD-	Standard & Poors	99,345
		LIBOR-BBA minus	500 Materials
		30 bp	Index
14,469,337	10/4/06	1 month USD-	Standard & Poors	(415,401)
		LIBOR-BBA minus	500
		30 bp	Telecommunication
			Services Index
10,159,907	10/4/06	1 month USD-	Standard & Poors	(661,611)
		LIBOR-BBA minus	500 Consumer
		30 bp	Services Index
13,289,077	10/4/06	1 month USD-	Standard & Poors	(909,551)
		LIBOR-BBA minus	500 Consumer
		30 bp	Durables &
			Apparel Index
13,506,009	10/4/06	1 month USD-	Standard & Poors	(320,930)
		LIBOR-BBA minus	500 Banks Index
		30 bp
2,750,238	10/4/06	1 month USD-	Standard & Poors	(68,850)
		LIBOR-BBA minus	500 Automobiles
		30 bp	& Components
			Index
Lehman Brothers Special Financing, Inc.
4,999,856	10/1/06	(4.40688%)	Lehman Brothers	188,684
			U.S. High Yield
			Index
3,969,926	3/1/07	(1 year USD-	Lehman Brothers	91,783
		LIBOR-BBA	U.S. High Yield
		minus 25 bp)	Index
Total				$(3,582,881)

(E) See Note 1 to the financial statements regarding extended effective dates.

107

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/06
	Upfront			Fixed payments	Unrealized
Swap counterparty /	premium	Notional	Termination	received (paid) by	appreciation/
Referenced debt*	received (paid)**	amount	date	fund per annum	(depreciation)
Bank of America, N.A.
L-3 Communications
Corp., 7 5/8%, 6/15/12	$—	$ 160,000	9/20/11	(111 bp)	$ (489)
L-3 Communications
Corp., 7 5/8%, 6/15/12	—	65,000	6/20/11	(101 bp)	(47)
Waste Management,
7.375%, 8/1/10	—	240,000	9/20/12	64 bp	3,023
Citibank, N.A.
DJ CDX NA HY Series 6
Index	107	85,750	6/20/11	(345 bp)	(927)
DJ CDX NA HY Series 6
Index	694	42,750	6/20/11	(345 bp)	178
DJ CDX NA HY Series 6
Index 25-35% tranche	—	343,000	6/20/11	80 bp	434
DJ CDX NA HY Series 6
Index 25-35% tranche	—	171,000	6/20/11	74 bp	32
Ford Motor Co., 7.45%,
7/16/31	—	75,000	6/20/07	620 bp	1,673
Visteon Corp., 7%,
3/10/14	—	100,000	6/20/09	605 bp	5,975
Credit Suisse First Boston International
Ford Motor Co., 7.45%,
7/16/31	—	180,000	9/20/07	(487.5 bp)	(3,204)
Ford Motor Co., 7.45%,
7/16/31	—	220,000	9/20/08	725 bp	10,407
Ford Motor Co., 7.45%,
7/16/31	—	40,000	9/20/07	(485 bp)	(702)
Deutsche Bank AG
DJ CDX NA IG Series 7	—	850,000	12/20/13	(50 bp)	(360)
DJ CDX NA IG Series 7
Index 7-10% tranche	—	850,000	12/20/13	55 bp	546
Ford Motor Co., 7.45%,
7/16/31	—	105,000	6/20/07	595 bp	1,891
France Telecom, 7.25%,
1/28/13	—	410,000	6/20/16	70 bp	1,626
Visteon Corp., 7%,
3/10/14	—	35,000	6/20/09	535 bp	1,468
Goldman Sachs Capital Markets, L.P.
DJ CDX NA IG Series 5
Index	(15,168)	6,025,000	12/20/10	(45 bp)	(41,180)
Ford Motor Co., 7.45%,
7/16/31	—	75,000	6/20/07	630 bp	1,915
Noble Energy, Inc., 8%,
4/1/27	—	250,000	6/20/13	60 bp	(141)
Goldman Sachs International
Any one of the
underlying securities
in the basket of BB
CMBS securities	—	1,804,000	(a)	2.461%	122,870
DJ CDX NA HY Series 6
Index	263	105,250	6/20/11	(345 bp)	(1,007)
DJ CDX NA HY Series 6
Index 25-35% tranche	—	421,000	6/20/11	85 bp	1,427
DJ CDX NA IG Series 6
Index	—	1,352,000	6/20/13	55 bp	8,988
DJ CDX NA IG Series 6
Index	580	1,352,000	6/20/13	(50 bp)	(141)
DJ CDX NA IG Series 7
Index	(1)	1,420,000	12/20/13	(50 bp)	807
DJ CDX NA IG Series 7
Index 7-10% tranche	—	1,420,000	12/20/13	56 bp	1,716

108

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/06 continued
	Upfront			Fixed payments	Unrealized
Swap counterparty /	premium	Notional	Termination	received (paid) by	appreciation/
Referenced debt*	received (paid)**	amount	date	fund per annum	(depreciation)
Goldman Sachs International continued
General Motors Corp.,
7 1/8%, 7/15/13	$—	$ 180,000	9/20/08	620 bp	$ 8,500
General Motors Corp.,
7 1/8%, 7/15/13	—	180,000	9/20/07	(427.5 bp)	(3,758)
General Motors Corp.,
7 1/8%, 7/15/13	—	40,000	9/20/07	(425 bp)	(806)
General Motors Corp.,
7 1/8%, 7/15/13	—	40,000	9/20/08	620 bp	1,889
L-3 Communications
Corp., 7 5/8%, 6/15/12	—	45,000	9/20/11	(108 bp)	(79)
United States Steel
Corp., 9 3/4%, 5/15/10	—	105,000	9/20/09	(65 bp)	86
HSBC
DJ CDX NA IG Series 5
Index	(13,146)	8,180,000	12/20/10	(45 bp)	(48,463)
JPMorgan Chase Bank, N.A.
DJ CDX NA IG Series 5	1,715	555,000	12/20/10	(45 bp)	(682)
Ford Motor Co., 7.45%,
7/16/31	—	75,000	6/20/07	635 bp	1,609
Ford Motor Co., 7.45%,
7/16/31	—	100,000	6/20/07	665 bp	2,362
Ford Motor Co., 7.45%,
7/16/31	—	30,000	9/20/07	(345 bp)	(8)
Ford Motor Co., 7.45%,
7/16/31	—	30,000	9/20/08	550 bp	244
General Motors Corp.,
7 1/8%, 7/15/13	—	30,000	9/20/07	(350 bp)	(399)
General Motors Corp.,
7 1/8%, 7/15/13	—	30,000	9/20/08	500 bp	738
Lehman Brothers Special Financing, Inc.
DJ CDX NA HY Series 6
Index	634	84,500	6/20/11	(345 bp)	(385)
DJ CDX NA HY Series 6
Index	1,035	103,500	6/20/11	(345 bp)	(214)
DJ CDX NA HY Series 6
Index 25-35% tranche	—	338,000	6/20/11	74 bp	355
DJ CDX NA HY Series 6
Index 25-35% tranche	—	414,000	6/20/11	72 bp	82
DJ CDX NA IG Series 5
Index	(853)	2,640,000	12/20/10	(45 bp)	(12,250)
DJ CDX NA IG Series 4
Index	(1,982)	1,480,000	12/20/10	(45 bp)	(8,371)
DJ CDX NA IG Series 5
Index	(5,750)	3,155,000	12/20/10	(45 bp)	(19,372)
DJ CDX NA IG Series 6
Index	513	445,000	6/20/11	(40 bp)	(195)
General Motors Corp.,
7 1/8%, 7/15/13	—	200,000	12/20/06	750 bp	2,978
Hilton Hotels, 7 5/8%,
12/1/12	—	320,000	6/20/13	94 bp	(4,567)
Merrill Lynch Capital Services, Inc.
Ford Motor Co., 7.45%,
7/16/31	—	90,000	9/20/07	(345 bp)	(144)
Ford Motor Co., 7.45%,
7/16/31	—	90,000	9/20/08	570 bp	1,739
General Motors Corp.,
7 1/8%, 7/15/13	—	125,000	9/20/07	(335 bp)	(290)
General Motors Corp.,
7 1/8%, 7/15/13	—	125,000	9/20/08	500 bp	3,155

109

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/06 continued
		Upfront				Fixed payments	Unrealized
Swap counterparty /		premium		Notional	Termination	received (paid) by	appreciation/
Referenced debt*		received (paid)**		amount	date	fund per annum	(depreciation)
Morgan Stanley Capital Services, Inc.
Bombardier, Inc.,
6 3/4%, 5/1/12	$	—	$	105,000	3/20/11	355 bp	$ 4,133
DJ CDX NA HY Series 6
Index		1,068		106,750	6/20/11	(345 bp)	(220)
DJ CDX NA HY Series 6
Index 25-35% tranche		—		427,000	6/20/11	73 bp	(772)
DJ CDX NA HY Series 6
Index 25-35% tranche		1,737		63,875	6/20/11	(345 bp)	966
DJ CDX NA HY Series 6
Index 25-35% tranche		—		255,500	6/20/11	74 bp	(328)
DJ CDX NA IG Series 7
Index		879		1,480,000	12/20/13	(50 bp)	710
DJ CDX NA IG Series 7
Index, 7-10% tranche		—		1,480,000	12/20/13	53 bp	(195)
Ford Motor Co., 7.45%,
7/16/31		—		30,000	9/20/07	(345 bp)	(120)
Ford Motor Co., 7.45%,
7/16/31		—		30,000	9/20/08	560 bp	525
General Motors Corp.,
7 1/8%, 7/15/13		—		30,000	9/20/07	(335 bp)	(356)
General Motors Corp.,
7 1/8%, 7/15/13		—		30,000	9/20/08	500 bp	757
Visteon Corp., 7%,
3/10/14		—		66,553	6/20/09	535 bp	2,792
Total							$ 48,424

* Payments related to the reference debt are made upon a credit default event.

** Upfront premium is based on the difference between the original spread on issue and the market spread on day of execution.

(a) Terminating on the date on which the notional amount is reduced to zero or the date on which the assets securing the reference entity are liquidated.

110

Conservative Portfolio

FORWARD CURRENCY CONTRACTS TO BUY at 9/30/06 (aggregate face value $61,007,760)
				Unrealized
		Aggregate	Delivery	appreciation/
	Value	face value	date	(depreciation)
Australian Dollar	$15,929,611	$16,176,318	10/18/06	$(246,707)
British Pound	22,092,361	22,280,305	12/20/06	(187,944)
Canadian Dollar	5,764,668	5,760,967	10/18/06	3,701
Danish Krone	801,154	809,304	12/20/06	(8,150)
Euro	5,873,369	5,899,369	12/20/06	(26,000)
Hong Kong Dollar	383,420	384,782	11/15/06	(1,362)
Japanese Yen	2,403,740	2,450,801	11/15/06	(47,061)
New Zealand Dollar	1,849,103	1,804,661	10/18/06	44,442
Norwegian Krone	178,823	180,792	12/20/06	(1,969)
Singapore Dollar	413,301	417,625	11/15/06	(4,324)
South Korean Won	2,386,530	2,345,713	11/15/06	40,817
Swedish Krona	1,196,506	1,202,445	12/20/06	(5,939)
Swiss Franc	1,288,971	1,294,678	12/20/06	(5,707)
Total				$(446,203)
FORWARD CURRENCY CONTRACTS TO SELL at 9/30/06 (aggregate face value $109,826,839)
				Unrealized
		Aggregate	Delivery	appreciation/
	Value	face value	date	(depreciation)
Australian Dollar	$ 3,297,139	3,315,191	10/18/06	$ 18,052
British Pound	13,041,943	13,140,167	12/20/06	98,224
Canadian Dollar	5,303,366	5,292,014	10/18/06	(11,352)
Euro	37,191,829	37,545,387	12/20/06	353,558
Japanese Yen	26,773,883	27,536,748	11/15/06	762,865
New Zealand Dollar	1,172,777	1,160,127	10/18/06	(12,650)
Norwegian Krone	6,911,347	6,961,018	12/20/06	49,671
Singapore Dollar	1,137,653	1,149,553	11/15/06	11,900
Swedish Krona	8,546,071	8,583,367	12/20/06	37,296
Swiss Franc	5,096,711	5,143,267	12/20/06	46,556
Total				$1,354,120
FUTURES CONTRACTS OUTSTANDING at 9/30/06
				Unrealized
	Number of		Expiration	appreciation/
	contracts	Value	date	(depreciation)
Canadian Government Bond 10 yr (Long)	11	1,135,503	Dec-06	$ 17,510
Dow Jones Euro Stoxx 50 Index (Long)	293	14,521,687	Dec-06	289,024
Dow Jones Euro Stoxx 50 Index (Short)	120	5,947,449	Dec-06	(158,454)
Euro-Bobl 5 yr (Long)	27	3,760,093	Dec-06	13,253
Euro-Bund 10 yr (Long)	151	22,587,412	Dec-06	215,649
Euro-Bund 10 yr (Short)	137	20,493,214	Dec-06	(196,522)
Euro-Dollar 90 day (Long)	38	8,993,175	Dec-06	5,122
Euro-Dollar 90 day (Long)	428	101,462,750	Mar-07	(39,889)
Euro-Dollar 90 day (Long)	37	8,786,113	Jun-07	11,887
Euro-Dollar 90 day (Long)	37	8,799,063	Sep-07	14,237
Euro-Dollar 90 day (Short)	460	109,491,500	Dec-07	54,274
FTSE 100 Index (Short)	166	18,560,433	Dec-06	(155,558)
Japanese Government Bond 10 yr (Long)	12	13,702,668	Dec-06	78,226
Japanese Government Bond 10 yr (Short)	10	11,418,890	Dec-06	(61,876)
Russell 2000 Index Mini (Long)	203	14,861,630	Dec-06	(10,366)

111

FUTURES CONTRACTS OUTSTANDING at 9/30/06 continued
				Unrealized
	Number of		Expiration	appreciation/
	contracts	Value	date	(depreciation)
Russell 2000 Index Mini (Short)	18	$ 1,317,780	Dec-06	$ (1,116)
S&P 500 Index (Long)	2	672,700	Dec-06	15,767
S&P 500 Index E-Mini (Long)	117	7,871,175	Dec-06	114,606
S&P 500 Index E-Mini (Short)	1,556	104,679,900	Dec-06	(1,372,344)
S&P ASX 200 Index (Long)	194	18,741,752	Dec-06	205,128
S&P ASX 200 Index (Short)	11	1,062,677	Dec-06	(23,629)
S&P MidCap 400 Index E-Mini (Long)	187	14,223,220	Dec-06	154,145
Tokyo Price Index (Long)	102	13,954,257	Dec-06	(212,173)
Tokyo Price Index (Short)	31	4,241,000	Dec-06	73,410
U.K. Gilt 10 yr (Long)	46	9,453,996	Dec-06	21,326
U.S. Treasury Bond 20 yr (Long)	272	30,574,500	Dec-06	(113,686)
U.S. Treasury Note 2 yr (Short)	556	113,702,000	Dec-06	75,567
U.S. Treasury Note 5 yr (Long)	405	42,733,828	Dec-06	233,629
U.S. Treasury Note 10 yr (Long)	926	100,065,875	Dec-06	767,550
Total				$ 14,697
WRITTEN OPTIONS OUTSTANDING at 9/30/06 (premiums received $1,764,729)
		Contract	Expiration date/
		amount	strike price	Value
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to
receive a fixed rate of 4.55% versus the three month USD-LIBOR-BBA maturing on
July 5, 2017.		$15,880,000	Jul 07 / 4.55	$ 808,423
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to pay
a fixed rate of 4.55% versus the three month USD-LIBOR-BBA maturing on July 5, 2017.		15,880,000	Jul 07 / 4.55	74,736
Option on an interest rate swap with Lehman Brothers International for the obligation to
receive a fixed rate of 5.225% semi-annually versus the three month USD-LIBOR-BBA
maturing March 5, 2018.		7,746,000	Mar 08 / 5.225	206,454
Option on an interest rate swap with Lehman Brothers International for the obligation to pay
a fixed rate of 5.225% semi-annually versus the three month USD-LIBOR-BBA maturing
March 5, 2018.		7,746,000	Mar 08 / 5.225	223,015
Total				$1,312,628
TBA SALE COMMITMENTS OUTSTANDING at 9/30/06 (proceeds receivable $94,598,739)
		Principal	Settlement
		amount	date	Value
FNMA, 5 1/2s, November 1, 2036		$55,900,000	11/13/06	$55,052,769
FNMA, 5 1/2s, October 1, 2036		36,400,000	10/12/06	35,856,850
FNMA, 4 1/2s, October 1, 2021		3,600,000	10/17/06	3,472,312
Total				$94,381,931

112

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/06
		Payments	Payments	Unrealized
Swap counterparty /	Termination	made by	received by	appreciation/
Notional amount	date	fund per annum	fund per annum	(depreciation)
Bank of America, N.A.
$ 5,000,000	9/1/15	3 month USD-LIBOR-BBA	4.53%	$ (224,375)
1,725,000	10/2/16	5.15631%	3 month USD-LIBOR-BBA	1,650
6,300,000	10/21/15	4.943%	3 month USD-LIBOR-BBA	26,719
770,000	6/24/15	4.39%	3 month USD-LIBOR-BBA	32,504
640,000	6/23/15	4.45%	3 month USD-LIBOR-BBA	23,996
1,540,000	6/23/15	4.466%	3 month USD-LIBOR-BBA	55,950
4,260,000	6/17/15	4.555%	3 month USD-LIBOR-BBA	129,251
51,000,000	5/21/07	3.95%	3 month USD-LIBOR-BBA	48,842
15,300,000	4/6/10	4.6375%	3 month USD-LIBOR-BBA	58,515
12,300,000	1/14/10	3 month USD-LIBOR-BBA	4.106%	(392,098)
13,689,000	12/22/09	3.965%	3 month USD-LIBOR-BBA	309,412
7,000,000	3/30/09	3.075%	3 month USD-LIBOR-BBA	323,801
18,177,000	1/28/24	3 month USD-LIBOR-BBA	5.2125%	(143,574)
Citibank, N.A.
18,650,000	7/27/09	5.504%	3 month USD-LIBOR-BBA	(208,325)
910,000	4/7/14	5.377%	3 month USD-LIBOR-BBA	(26,064)
Credit Suisse First Boston International
19,400,000	11/17/09	3.947%	3 month USD-LIBOR-BBA	460,967
Credit Suisse International
2,464,000	9/28/16	5.10886%	3 month USD-LIBOR-BBA	11,510
887,000	3/21/16	3 month USD-LIBOR-BBA	5.20497%	2,580
Deutsche Bank AG
824,399	8/2/22	3 month USD-LIBOR-BBA	5.7756%	45,504
925,147	8/2/32	5.86%	3 month USD-LIBOR-BBA	(73,156)
Goldman Sachs Capital Markets, L.P.
1,017,000	5/3/16	5.565%	3 month USD-LIBOR-BBA	(44,766)
2,770,000	4/7/14	5.33842%	3 month USD-LIBOR-BBA	(71,938)
824,399	8/12/22	3 month USD-LIBOR-BBA	5.601%	29,967
925,147	8/12/32	5.689%	3 month USD-LIBOR-BBA	(50,795)
1,650,000	8/1/22	3 month USD-LIBOR-BBA	5.845%	103,440
1,851,643	8/1/32	5.919%	3 month USD-LIBOR-BBA	(161,842)
5,675,208	8/15/10	3 month USD-LIBOR-BBA	5.405%	(67,421)
Goldman Sachs International
6,031,000	9/29/16	3 month USD-LIBOR-BBA	5.1275%	(19,259)
19,018,000	9/29/08	5.085%	3 month USD-LIBOR-BBA	8,666
JPMorgan Chase Bank, N.A.
5,700,000	10/21/15	4.916%	3 month USD-LIBOR-BBA	35,859
12,600,000	9/2/15	3 month USD-LIBOR-BBA	4.4505%	(635,783)
14,800,000	8/4/16	3 month USD-LIBOR-BBA	5.5195%	395,358
25,700,000	8/4/08	3 month USD-LIBOR-BBA	5.40%	107,538
2,156,000	8/2/15	3 month USD-LIBOR-BBA	4.6570%	(75,497)
12,900,000	6/29/15	3 month USD-LIBOR-BBA	4.296%	(627,320)
920,000	6/24/15	4.387%	3 month USD-LIBOR-BBA	40,132
3,710,000	6/16/15	4.538%	3 month USD-LIBOR-BBA	115,717
22,000,000	3/7/15	3 month USD-LIBOR-BBA	4.798%	(522,163)
7,069,000	9/28/16	3 month USD-LIBOR-BBA	5.1223%	(27,500)
22,282,000	9/28/08	5.096%	3 month USD-LIBOR-BBA	6,736
1,659,000	9/18/16	5.291%	3 month USD-LIBOR-BBA	(15,386)
31,000,000	1/17/16	4.946%	3 month USD-LIBOR-BBA	530,685
5,163,000	8/15/11	5.412%	3 month USD-LIBOR-BBA	(73,154)
Lehman Brothers International (Europe)
26,397,000	8/3/16	5.5675%	3 month USD-LIBOR-BBA	(803,773)
24,138,000	8/3/11	5.445%	3 month USD-LIBOR-BBA	(373,219)

113

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/06 continued
		Payments	Payments	Unrealized
Swap counterparty /	Termination	made by	received by	appreciation/
Notional amount	date	fund per annum	fund per annum	(depreciation)
Lehman Brothers Special Financing, Inc.
$20,650,000	9/29/13	5.0555%	3 month USD-LIBOR-BBA	$ 70,361
41,960,000	9/8/16	5.3275%	3 month USD-LIBOR-BBA	(506,880)
410,000	8/3/36	3 month USD-LIBOR-BBA	5.67%	22,883
6,002,000	8/3/08	5.425%	3 month USD-LIBOR-BBA	(28,027)
Merrill Lynch Capital Services, Inc.
801,206	8/13/12	4.94%	3 month USD-LIBOR-BBA	6,868
824,399	8/12/22	3 month USD-LIBOR-BBA	5.601%	29,967
1,650,000	8/1/22	3 month USD-LIBOR-BBA	5.845%	103,440
1,603,579	8/1/12	5.204%	3 month USD-LIBOR-BBA	(7,557)
Total				$(2,041,054)

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/06
		Fixed payments	Total return	Unrealized
Swap counterparty /	Termination	received (paid) by	received by	appreciation/
Notional amount	date	fund per annum	or paid by fund	(depreciation)
Bank of America, N.A.
$ 773,239	1/19/07	—	S&P 500 Index	$ (255,634)
			6 month forward
			variance
Citibank, N.A.
3,740,000	11/1/06	7.5 bp plus	The spread return of	869
		beginning	Lehman Brothers
		of period nominal	AAA 8.5+ CMBS
		spread of Lehman	Index adjusted
		Brothers AAA	by modified
		8.5+ Commercial	duration factor
		Mortgage Backed
		Securities Index
Deutsche Bank AG London
756,194	12/15/06	—	S&P 500 Index	(322,757)
			6 month forward
			variance
786,116	12/15/06	—	S&P 500 Index	(369,100)
			6 month forward
			variance
3,740,000	11/1/06	5 bp plus	The spread return of	536
		nominal spread	Lehman Brothers
		of Lehman	AAA 8.5+ CMBS
		Brothers AAA	Index adjusted
		8.5+ Commercial	by modified
		Mortgage Backed	duration factor
		Securities Index
11,174,625	6/19/07	(3 month USD-	iShares MSCI	73,528
		LIBOR-BBA minus	Emerging Markets
		300 bp)	Index
Goldman Sachs Capital Markets, L.P.
3,500,000	11/1/06	5 bp plus	The spread return of	543
		change in spread	Lehman Brothers
		of Lehman	AAA 8.5+ CMBS
		Brothers AAA	Index adjusted
		8.5+ Commercial	by modified
		Mortgage Backed	duration factor
		Securities Index
		multiplied by
		the modified
		duration factor

114

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/06 continued
		Fixed payments	Total return	Unrealized
Swap counterparty /	Termination	received (paid) by	received by	appreciation/
Notional amount	date	fund per annum	or paid by fund	(depreciation)
Goldman Sachs International
$15,940,000	12/1/06	5 bp plus	The spread return of	$ 35,769
		change in spread	Lehman Brothers
		of Lehman	Aaa 8.5+ CMBS
		Brothers Aaa	Index adjusted
		8.5+ Commercial	by modified
		Mortgage Backed	duration factor
		Securities Index
		multiplied by
		the modified
		duration factor
846,000	9/15/11	678 bp (1 month	Ford Credit Auto	466
		USD-LIBOR-BBA)	Owner Trust
			Series 2005-B
			Class D
JPMorgan Chase Bank, N.A.
684,081 (E)	3/16/07	—	S&P 500 Index	(64,001)
			6 month forward
			variance
15,688,572	4/4/07	3 month USD-	Russell 2000	104,741
		LIBOR-BBA minus	Index
		90 bp
24,369,850	9/21/07	3 month USD-	Russell 2000	242,838
		LIBOR-BBA minus	Total Return
		90 bp	Index
4,387,046	10/4/06	(1 month USD-	Standard & Poors	173,316
		LIBOR-BBA plus	500 Technology
		25 bp)	Hardware &
			Equipment Index
2,347,426	10/4/06	(1 month USD-	Standard & Poors	(10,467)
		LIBOR-BBA plus	500 Utilities
		25 bp)	Index
2,339,845	10/4/06	(1 month USD-	Standard & Poors	116,046
		LIBOR-BBA plus	500
		25 bp)	Transportation
			Index
9,293,035	10/4/06	(1 month USD-	Standard & Poors	260,803
		LIBOR-BBA plus	500
		25 bp)	Pharmaceuticals,
			Biotechnology &
			Life Sciences
			Index
2,339,833	10/4/06	(1 month USD-	Standard & Poors	170,022
		LIBOR-BBA plus	500 Retailing
		25 bp)	Index
8,259,757	10/4/06	(1 month USD-	Standard & Poors	(67,505)
		LIBOR-BBA plus	500 Health Care
		25 bp)	Equipment &
			Services Index
2,343,655	10/4/06	(1 month USD-	Standard & Poors	81,968
		LIBOR-BBA plus	500 Insurance
		25 bp)	Index
4,978,178	10/4/06	(1 month USD-	Standard & Poors	(92,645)
		LIBOR-BBA plus	500 Food
		25 bp)	Beverage &
			Tobacco Index
5,434,299	10/4/06	(1 month USD-	Standard & Poors	55,582
		LIBOR-BBA plus	500 Food &
		25 bp)	Staples
			Retailing GICS
			Industry Group
			Index
3,106,706	10/4/06	1 month USD-	Standard & Poors	(44,799)
		LIBOR-BBA minus	500 Household &
		30 bp	Personal
			Products Index

115

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/06 continued
		Fixed payments	Total return	Unrealized
Swap counterparty /	Termination	received (paid) by	received by	appreciation/
Notional amount	date	fund per annum	or paid by fund	(depreciation)
JPMorgan Chase Bank, N.A. continued
$ 3,286,567	10/4/06	(1 month USD-	Standard & Poors	$ 147,468
		LIBOR-BBA plus	500 Diversified
		25 bp)	Financials Index
11,447,618	10/4/06	1 month USD-	Standard & Poors	(558,307)
		LIBOR-BBA minus	500 Software &
		30 bp	Services Index
6,844,666	10/4/06	1 month USD-	Standard & Poors	(177,288)
		LIBOR-BBA minus	500 Real Estate
		30 bp	Index
2,812,710	10/4/06	1 month USD-	Standard & Poors	(123,326)
		LIBOR-BBA minus	500 Commercial
		30 bp	Services &
			Supplies Index
9,008,635	10/4/06	(1 month USD-	Standard & Poors	(269,668)
		LIBOR-BBA plus	500 Energy Index
		25 bp)
6,264,587	10/4/06	1 month USD-	Standard & Poors	56,021
		LIBOR-BBA minus	500 Materials
		30 bp	Index
7,504,434	10/4/06	1 month USD-	Standard & Poors	(215,445)
		LIBOR-BBA minus	500
		30 bp	Telecommunication
			Services Index
4,686,640	10/4/06	1 month USD-	Standard & Poors	(305,194)
		LIBOR-BBA minus	500 Consumer
		30 bp	Services Index
3,077,498	10/4/06	1 month USD-	Standard & Poors	(210,635)
		LIBOR-BBA minus	500 Consumer
		30 bp	Durables &
			Apparel Index
7,042,992	10/4/06	1 month USD-	Standard & Poors	(167,356)
		LIBOR-BBA minus	500 Banks Index
		30 bp
659,691	10/4/06	1 month USD-	Standard & Poors	(16,515)
		LIBOR-BBA minus	500 Automobiles
		30 bp	& Components
			Index
Lehman Brothers Special Financing, Inc.
2,000,256	10/1/06	(4.40688%)	Lehman Brothers	75,486
			U.S. High Yield
			Index
3,499,841	4/1/07	(1 year USD-	Lehman Brothers	60,882
		LIBOR-BBA minus	U.S. High Yield
		35 bp)	Index
2,097,836	3/1/07	(1 year USD-	Lehman Brothers	48,502
		LIBOR-BBA	U.S. High Yield
		minus 25 bp)	Index
Total				$(1,565,256)

(E) See Note 1 to the financial statements regarding extended effective dates.

116

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/06
	Upfront			Fixed payments	Unrealized
Swap counterparty /	premium	Notional	Termination	received (paid) by	appreciation/
Referenced debt*	received (paid)**	amount	date	fund per annum	(depreciation)
Bank of America, N.A.
L-3 Communications
Corp. 7 5/8%, 6/15/12	$ —	$ 170,000	9/20/11	(111 bp)	$ (520)
L-3 Communications
Corp. 7 5/8%, 6/15/12	—	65,000	6/20/11	(101 bp)	(47)
Waste Management,
7.375%, 8/1/10	—	235,000	9/20/12	64 bp	2,960
Citibank, N.A.
Celestica, Inc. 7 7/8%,
7/1/11	—	90,000	9/20/11	285 bp	328
DJ CDX NA HY Series 6
Index	(119)	89,750	6/20/11	(345 bp)	(1,202)
DJ CDX NA HY Series 6
Index	770	44,750	6/20/11	(345 bp)	230
DJ CDX NA HY Series 6
Index 25-35% tranche	—	359,000	6/20/11	80 bp	454
DJ CDX NA HY Series 6
Index 25-35% tranche	—	179,000	6/20/11	74 bp	33
Ford Motor Co., 7.45%,
7/16/31	—	40,000	6/20/07	620 bp	892
Visteon Corp., 7%,
3/10/14	—	55,000	6/20/09	605 bp	3,287
Credit Suisse First Boston International
Ford Motor Co., 7.45%,
7/16/31	—	90,000	9/20/07	(487.5 bp)	(1,602)
Ford Motor Co., 7.45%,
7/16/31	—	110,000	9/20/08	725 bp	5,204
Ford Motor Co., 7.45%,
7/16/31	—	20,000	9/20/07	(485 bp)	(351)
Deutsche Bank AG
DJ CDX NA IG Series 7	—	937,000	12/20/13	(50 bp)	(397)
DJ CDX NA IG Series 7
Index 7-10% tranche	—	937,000	12/20/13	55 bp	602
Ford Motor Co., 7.45%,
7/16/31	—	56,000	6/20/07	595 bp	1,009
France Telecom, 7.25%,
1/28/13	—	390,000	6/20/16	70 bp	1,545
Visteon Corp., 7%,
3/10/14	—	20,000	6/20/09	535 bp	839
Goldman Sachs Capital Markets, L.P.
DJ CDX NA HY Series 6
Index	105	10,000	6/20/11	(345 bp)	(16)
DJ CDX NA HY Series 6
Index 25-35% tranche	—	40,000	6/20/11	74 bp	(51)
DJ CDX NA IG Series 5
Index	(5,792)	2,030,000	12/20/10	(45 bp)	(14,556)
Ford Motor Co., 7.45%,
7/16/31	—	40,000	6/20/07	630 bp	1,022
Noble Energy, Inc., 8%,
4/1/27	—	275,000	6/20/13	60 bp	(156)
Goldman Sachs International
Any one of the
underlying securities
in the basket of BB
CMBS securities	—	1,678,000	(a)	2.461%	114,288
DJ CDX NA HY Series 6
Index	294	109,750	6/20/11	(345 bp)	(1,030)
DJ CDX NA HY Series 6
Index 25-35% tranche	—	439,000	6/20/11	85 bp	1,488
DJ CDX NA IG Series 6
Index	—	1,404,000	6/20/13	55 bp	9,334

117

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/06 continued
	Upfront			Fixed payments	Unrealized
Swap counterparty /	premium	Notional	Termination	received (paid) by	appreciation/
Referenced debt*	received (paid)**	amount	date	fund per annum	(depreciation)
Goldman Sachs International continued
DJ CDX NA IG Series 6
Index	$ 643	$1,404,000	6/20/13	(50 bp)	$ (105)
DJ CDX NA IG Series 7
Index	(1)	1,564,000	12/20/13	(50 bp)	890
DJ CDX NA IG Series 7
Index 7-10% tranche	—	1,564,000	12/20/13	56 bp	1,889
General Motors Corp.,
7 1/8%, 7/15/13	—	90,000	9/20/08	620 bp	4,251
General Motors Corp.,
7 1/8%, 7/15/13	—	90,000	9/20/07	(427.5 bp)	(1,879)
General Motors Corp.,
7 1/8%, 7/15/13	—	20,000	9/20/07	(425 bp)	(403)
General Motors Corp.,
7 1/8%, 7/15/13	—	20,000	9/20/08	620 bp	944
L-3 Communications
Corp. 7 5/8%, 6/15/12	—	20,000	9/20/11	(108 bp)	(35)
United States Steel
Corp., 9 3/4%, 5/15/10	—	76,000	9/20/09	(65 bp)	63
HSBC
DJ CDX NA IG Series 5
Index	(3,728)	2,320,000	12/20/10	(45 bp)	(13,746)
JPMorgan Chase Bank, N.A.
DJ CDX NA IG Series 5	2,193	630,000	12/20/10	(45 bp)	(527)
DJ CDX NA IG Series 5
Index	9,613	4,035,000	12/20/10	(45 bp)	(7,808)
Ford Motor Co., 7.45%,
7/16/31	—	40,000	6/20/07	635 bp	858
Ford Motor Co., 7.45%,
7/16/31	—	50,000	6/20/07	665 bp	1,181
Ford Motor Co., 7.45%,
7/16/31	—	15,000	9/20/07	(345 bp)	(4)
Ford Motor Co., 7.45%,
7/16/31	—	15,000	9/20/08	550 bp	122
General Motors Corp.,
7 1/8%, 7/15/13	—	15,000	9/20/07	(350 bp)	(200)
General Motors Corp.,
7 1/8%, 7/15/13	—	15,000	9/20/08	500 bp	369
Lehman Brothers Special Financing, Inc.
DJ CDX NA HY Series 6
Index	707	88,500	6/20/11	(345 bp)	(360)
DJ CDX NA HY Series 6
Index	1,146	108,000	6/20/11	(345 bp)	(157)
DJ CDX NA HY Series 6
Index 25-35% tranche	—	354,000	6/20/11	74 bp	372
DJ CDX NA HY Series 6
Index 25-35% tranche	—	432,000	6/20/11	72 bp	86
DJ CDX NA IG Series 5
Index	(576)	2,655,000	12/20/10	(45 bp)	(12,039)
DJ CDX NA IG Series 4
Index	(1,982)	1,480,000	12/20/10	(45 bp)	(8,371)
DJ CDX NA IG Series 5
Index	1,543	625,000	12/20/10	(45 bp)	(1,154)
DJ CDX NA IG Series 5
Index	(5,695)	3,125,000	12/20/10	(45 bp)	(19,187)
DJ CDX NA IG Series 6
Index	659	505,000	6/20/11	(40 bp)	(145)
General Motors Corp.,
7 1/8%, 7/15/13	—	105,000	12/20/06	750 bp	1,564
Hilton Hotels, 7 5/8%,
12/1/12	—	335,000	6/20/13	94 bp	(4,782)

118

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/06 continued
	Upfront			Fixed payments	Unrealized
Swap counterparty /	premium	Notional	Termination	received (paid) by	appreciation/
Referenced debt*	received (paid)**	amount	date	fund per annum	(depreciation)
Merrill Lynch Capital Services, Inc.
Ford Motor Co., 7.45%,
7/16/31	$ —	$ 45,000	9/20/07	(345 bp)	$ (72)
Ford Motor Co., 7.45%,
7/16/31	—	45,000	9/20/08	570 bp	869
General Motors Corp.,
7 1/8%, 7/15/13	—	65,000	9/20/07	(335 bp)	(151)
General Motors Corp.,
7 1/8%, 7/15/13	—	65,000	9/20/08	500 bp	1,640
Morgan Stanley Capital Services, Inc.
Bombardier, Inc,
6 3/4%, 5/1/12	—	50,000	3/20/11	355 bp	1,968
DJ CDX NA HY Series 6
Index	1,188	112,000	6/20/11	(345 bp)	(163)
DJ CDX NA HY Series 6
Index 25-35% tranche	—	448,000	6/20/11	73 bp	(809)
DJ CDX NA HY Series 6
Index 25-35% tranche	1,020	59,125	6/20/11	(345 bp)	306
DJ CDX NA HY Series 6
Index 25-35% tranche	—	236,500	6/20/11	74 bp	(304)
DJ CDX NA IG Series 7
Index	1,056	1,628,000	12/20/13	(50 bp)	871
DJ CDX NA IG Series 7
Index, 7-10% tranche	—	1,628,000	12/20/13	53 bp	(215)
Ford Motor Co., 7.45%,
7/16/31	—	15,000	9/20/07	(345 bp)	(60)
Ford Motor Co., 7.45%,
7/16/31	—	15,000	9/20/08	560 bp	263
General Motors Corp.,
7 1/8%, 7/15/13	—	15,000	9/20/07	(335 bp)	(177)
General Motors Corp.,
7 1/8%, 7/15/13	—	15,000	9/20/08	500 bp	379
Visteon Corp., 7%,
3/10/14	—	30,717	6/20/09	535 bp	1,289
Total					$70,908

* Payments related to the reference debt are made upon a credit default event.

** Upfront premium is based on the difference between the original spread on issue and the market spread on day of execution.

(a) Terminating on the date on which the notional amount is reduced to zero or the date on which the assets securing the reference entity are liquidated.

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

119

Statement of assets and liabilities 9/30/06

Putnam Asset Allocation: Growth Portfolio
ASSETS
Investment in securities, at value, including $66,035,440 of securities on loan (Note 1):
Unaffiliated issuers (identified cost $1,624,509,372)	$1,813,220,132
Affiliated issuers (identified cost $128,278,402) (Note 5)	128,278,402
Foreign currency (cost $18,258,346) (Note 1)	18,100,160
Dividends, interest and other receivables	5,512,987
Receivable for shares of the fund sold	7,072,401
Receivable for securities sold	10,428,073
Receivable for sales of delayed delivery securities (Note 1)	23,008,712
Unrealized appreciation on swap contracts (Note 1)	5,170,425
Receivable for closed swap contracts (Note 1)	1,453
Receivable for open forward currency contracts (Note 1)	6,200,083
Receivable for closed forward currency contracts (Note 1)	1,830,343
Receivable for variation margin (Note 1)	1,033,362
Total assets	2,019,856,533
LIABILITIES
Payable to subcustodian (Note 2)	403,004
Payable for securities purchased	19,344,470
Payable for purchases of delayed delivery securities (Note 1)	28,548,718
Payable for shares of the fund repurchased	1,994,914
Payable for compensation of Manager (Notes 2 and 5)	2,606,785
Payable for investor servicing and custodian fees (Note 2)	448,455
Payable for Trustee compensation and expenses (Note 2)	166,287
Payable for administrative services (Note 2)	4,565
Payable for distribution fees (Note 2)	1,118,058
Payable for open forward currency contracts (Note 1)	2,646,424
Payable for closed forward currency contracts (Note 1)	795,776
Payable for closed swap contracts (Note 1)	123,614
Unrealized depreciation on swap contracts (Note 1)	10,002,000
Written options outstanding, at value (premiums received $477,767) (Note 1)	375,107
TBA sale commitments, at value (proceeds receivable $13,978,049) (Note 1)	14,007,637
Collateral on securities loaned, at value (Note 1)	68,589,929
Other accrued expenses	250,930
Total liabilities	151,426,673
Net assets	$1,868,429,860
REPRESENTED BY
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$1,767,612,566
Undistributed net investment income (Note 1)	3,458,686
Accumulated net realized loss on investments and foreign currency transactions (Note 1)	(92,212,792)
Net unrealized appreciation of investments and assets and liabilities in foreign currencies	189,571,400
Total — Representing net assets applicable to capital shares outstanding	$1,868,429,860

(Continued on next page)

120

Statement of assets and liabilities (Continued)

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price per class A share ($1,152,980,288 divided by 86,538,170 shares)	$13.32
Offering price per class A share (100/94.75 of $13.32)*	$14.06
Net asset value and offering price per class B share ($363,651,042 divided by 27,873,946 shares)**	$13.05
Net asset value and offering price per class C share ($150,254,588 divided by 11,686,306 shares)**	$12.86
Net asset value and redemption price per class M share ($40,409,220 divided by 3,087,330 shares)	$13.09
Offering price per class M share (100/96.75 of $13.09)*	$13.53
Net asset value, offering price and redemption price per class R share ($6,258,147 divided by 474,756 shares)	$13.18
Net asset value, offering price and redemption price per class Y share ($154,876,575 divided by 11,519,513 shares)	$13.44

* On single retail sales of less than $50,000. On sales of $50,000 or more 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.

121

Statement of operations Year ended 9/30/06

Putnam Asset Allocation: Growth Portfolio
INVESTMENT INCOME
Dividends (net of foreign tax of $1,270,222)	$ 26,221,577
Interest (including interest income of $4,636,451 from investments in affiliated issuers) (Note 5)	15,154,522
Securities lending	423,522
Total investment income	41,799,621
EXPENSES
Compensation of Manager (Note 2)	9,806,381
Investor servicing fees (Note 2)	3,385,542
Custodian fees (Note 2)	1,560,157
Trustee compensation and expenses (Note 2)	77,347
Administrative services (Note 2)	37,909
Distribution fees — Class A (Note 2)	2,326,890
Distribution fees — Class B (Note 2)	3,378,860
Distribution fees — Class C (Note 2)	1,207,338
Distribution fees — Class M (Note 2)	279,100
Distribution fees — Class R (Note 2)	17,588
Other	688,574
Non-recurring costs (Notes 2 and 6)	19,682
Costs assumed by Manager (Notes 2 and 6)	(19,682)
Fees waived and reimbursed by Manager or affiliate (Notes 2, 5 and 6)	(1,228,366)
Total expenses	21,537,320
Expense reduction (Note 2)	(780,740)
Net expenses	20,756,580
Net investment income	21,043,041
Net realized gain on investments (net of foreign taxes of $226,269) (Notes 1 and 3)	114,252,347
Net realized loss on swap contracts (Note 1)	(7,888,036)
Net realized gain on futures contracts (Note 1)	4,503,195
Net realized loss on foreign currency transactions (Note 1)	(6,396,355)
Net realized gain on written options (Notes 1 and 3)	24,592
Net unrealized appreciation of assets and liabilities in foreign currencies during the year	2,398,236
Net unrealized appreciation of investments, futures contracts, swap contracts, written options and TBA sale commitments during the year	53,792,256
Net gain on investments	160,686,235
Net increase in net assets resulting from operations	$181,729,276

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

122

Statement of changes in net assets

Putnam Asset Allocation: Growth Portfolio
INCREASE IN NET ASSETS
	Year ended	Year ended
	9/30/06	9/30/05
Operations:
Net investment income	$ 21,043,041	$ 16,511,933
Net realized gain on investments and foreign currency transactions	104,495,743	159,517,355
Net unrealized appreciation of investments and assets and liabilities in foreign currencies	56,190,492	58,424,538
Net increase in net assets resulting from operations	181,729,276	234,453,826
Distributions to shareholders: (Note 1)
From net investment income
Class A	(6,684,450)	(6,876,361)
Class B	(351,132)	(1,497,241)
Class C	(209,543)	(384,276)
Class M	(120,535)	(226,410)
Class R	(10,862)	(1,829)
Class Y	(1,487,947)	(6,246,177)
Redemption fees (Note 1)	8,738	9,328
Increase (decrease) from capital share transactions (Note 4)	170,844,886	(38,942,174)
Total increase in net assets	343,718,431	180,288,686
NET ASSETS
Beginning of year	1,524,711,429	1,344,422,743
End of year (including undistributed net investment income of $3,458,686 and $8,714,782, respectively)	$1,868,429,860	$1,524,711,429

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

123

Financial highlights (For a common share outstanding throughout the period)

Putnam Asset Allocation: Growth Portfolio
INVESTMENT OPERATIONS:					LESS DISTRIBUTIONS					RATIOS AND SUPPLEMENTAL DATA:
			Net						Total			Ratio of net
	Net asset		realized and	Total	From			Net asset	return	Net	Ratio of	investment
	value,	Net	unrealized	from	net			value,	at net	assets,	expenses to	income (loss)	Portfolio
	beginning	investment	gain (loss) on	investment	investment	Total	Redemption	end	asset	end of period	average net	to average	turnover
Period ended	of period	income (loss)(a)	investments	operations	income	distributions	fees	of period	value (%)(b)	(in thousands)	assets (%)(c)	net assets (%)	(%)(h)
CLASS A
September 30, 2006	$11.97	.19(d,g)	1.26	1.45	(.10)	(.10)	—(e)	$13.32	12.19(g)	$1,152,980	1.14(d,g)	1.51(d,g)	85.02
September 30, 2005	10.26	.15(d,f)	1.69	1.84	(.13)	(.13)	—(e)	11.97	18.02	775,947	1.25(d)	1.34(d,f)	111.90
September 30, 2004	9.22	.11(d)	1.13	1.24	(.20)	(.20)	—(e)	10.26	13.51	547,168	1.32(d)	1.12(d)	120.17
September 30, 2003	7.69	.13	1.64	1.77	(.24)	(.24)	—	9.22	23.41	629,578	1.35	1.54	126.07
September 30, 2002	8.94	.17	(1.12)	(.95)	(.30)	(.30)	—	7.69	(11.29)	573,390	1.30	1.80	82.18
CLASS B
September 30, 2006	$11.73	.09(d,g)	1.24	1.33	(.01)	(.01)	—(e)	$13.05	11.37(g)	$363,651	1.89(d,g)	.75(d,g)	85.02
September 30, 2005	10.06	.06(d,f)	1.67	1.73	(.06)	(.06)	—(e)	11.73	17.22	315,199	2.00(d)	.59(d,f)	111.90
September 30, 2004	9.06	.04(d)	1.09	1.13	(.13)	(.13)	—(e)	10.06	12.55	261,591	2.07(d)	.37(d)	120.17
September 30, 2003	7.54	.06	1.62	1.68	(.16)	(.16)	—	9.06	22.57	236,650	2.10	.78	126.07
September 30, 2002	8.76	.10	(1.11)	(1.01)	(.21)	(.21)	—	7.54	(11.99)	205,744	2.05	1.05	82.18
CLASS C
September 30, 2006	$11.57	.09(d,g)	1.22	1.31	(.02)	(.02)	—(e)	$12.86	11.38(g)	$150,255	1.89(d,g)	.76(d,g)	85.02
September 30, 2005	9.92	.06(d,,f)	1.64	1.70	(.05)	(.05)	—(e)	11.57	17.21	96,350	2.00(d)	.59(d,,f)	111.90
September 30, 2004	8.93	.04(d)	1.08	1.12	(.13)	(.13)	—(e)	9.92	12.57	73,936	2.07(d)	.37(d)	120.17
September 30, 2003	7.44	.06	1.59	1.65	(.16)	(.16)	—	8.93	22.47	76,075	2.10	.78	126.07
September 30, 2002	8.64	.09	(1.07)	(.98)	(.22)	(.22)	—	7.44	(11.88)	67,431	2.05	1.05	82.18
CLASS M
September 30, 2006	$11.77	.12(d,g)	1.24	1.36	(.04)	(.04)	—(e)	$13.09	11.60(g)	$40,409	1.64(d,g)	1.00(d,g)	85.02
September 30, 2005	10.09	.09(d,f)	1.67	1.76	(.08)	(.08)	—(e)	11.77	17.48	34,029	1.75(d)	.84(d,,f)	111.90
September 30, 2004	9.07	.06(d)	1.11	1.17	(.15)	(.15)	—(e)	10.09	12.97	29,373	1.82(d)	.62(d)	120.17
September 30, 2003	7.56	.08	1.61	1.69	(.18)	(.18)	—	9.07	22.70	32,490	1.85	1.02	126.07
September 30, 2002	8.78	.12	(1.10)	(.98)	(.24)	(.24)	—	7.56	(11.65)	34,056	1.80	1.30	82.18
CLASS R
September 30, 2006	$11.87	.17(d,g)	1.23	1.40	(.09)	(.09)	—(e)	$13.18	11.85(g)	$6,258	1.39(d,g)	1.31(d,g)	85.02
September 30, 2005	10.21	.12(d,f)	1.68	1.80	(.14)	(.14)	—(e)	11.87	17.80	1,285	1.50(d)	1.10(d,,f)	111.90
September 30, 2004	9.21	.09(d)	1.11	1.20	(.20)	(.20)	—(e)	10.21	13.15	32	1.57(d)	.87(d)	120.17
September 30, 2003†	8.08	.07	1.06	1.13	—	—	—	9.21	13.99*	1	1.11*	.89*	126.07
CLASS Y
September 30, 2006	$12.08	.22(d,g)	1.27	1.49	(.13)	(.13)	—(e)	$13.44	12.40(g)	$154,877	.89(d,g)	1.73(d,g)	85.02
September 30, 2005	10.35	.18(d,,f)	1.70	1.88	(.15)	(.15)	—(e)	12.08	18.35	301,901	1.00(d)	1.58(d,f)	111.90
September 30, 2004	9.30	.14(d)	1.13	1.27	(.22)	(.22)	—(e)	10.35	13.79	432,322	1.07(d)	1.37(d)	120.17
September 30, 2003	7.76	.15	1.65	1.80	(.26)	(.26)	—	9.30	23.70	420,617	1.10	1.79	126.07
September 30, 2002	9.01	.19	(1.12)	(.93)	(.32)	(.32)	—	7.76	(10.97)	416,532	1.05	2.05	82.18
See notes to financial highlights at the end of this section.

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

124  125 

Financial highlights (Continued)

† For the period January 21, 2003 (commencement of operations) to September 30, 2003.

* Not annualized.

(a) Per share net investment income (loss) 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).

(d) Reflects an involuntary contractual expense limitation and waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such limitation and waivers, the expenses of each class, as a percentage of its net assets, reflect a reduction of the following amounts (Notes 2 and 5):

	9/30/06	9/30/05	9/30/04
Class A	0.01%	0.02%	<0.01%
Class B	0.01	0.02	<0.01
Class C	0.01	0.02	<0.01
Class M	0.01	0.02	<0.01
Class R	0.01	0.02	<0.01
Class Y	0.01	0.02	<0.01

(e) Amount represents less than $0.01 per share.

(f) Reflects a non-recurring accrual related to Putnam Management’s settlement with the SEC regarding brokerage allocation practices, which amounted to the following amounts (Note 6):

		Percentage of
	Per share	net assets
Class A	<$0.01	0.01%
Class B	<0.01	0.01
Class C	<0.01	0.01
Class M	<0.01	0.01
Class R	<0.01	0.01
Class Y	<0.01	0.01

(g) Reflects a non-recurring reimbursement from Putnam Investments relating to the calculation of certain amounts paid by the fund to Putnam in previous years for transfer agent services, which amounted to $0.01 per share and 0.07% of average net assets for the period ended September 30, 2006 (Note 6).

(h) Portfolio turnover excludes dollar roll transactions.

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

126

Statement of assets and liabilities 9/30/06

Putnam Asset Allocation: Balanced Portfolio
ASSETS
Investment in securities, at value, including $69,034,752 of securities on loan (Note 1):
Unaffiliated issuers (identified cost $1,720,874,570)	$1,892,998,190
Affiliated issuers (identified cost $278,895,150) (Note 5)	278,895,150
Foreign currency (cost $18,917,844) (Note 1)	18,806,696
Dividends, interest and other receivables	7,165,806
Receivable for shares of the fund sold	7,144,222
Receivable for securities sold	3,324,113
Receivable for sales of delayed delivery securities (Note 1)	136,806,191
Unrealized appreciation on swap contracts (Note 1)	7,506,232
Receivable for closed swap contracts (Note 1)	8,287
Premium paid on swap contracts (Note 1)	36,900
Receivable for open forward currency contracts (Note 1)	5,843,778
Receivable for closed forward currency contracts (Note 1)	1,173,986
Receivable for variation margin (Note 1)	1,182,741
Total assets	2,360,892,292
LIABILITIES
Payable to subcustodian (Note 2)	203,934
Payable for securities purchased	5,383,711
Payable for purchases of delayed delivery securities (Note 1)	176,667,712
Payable for shares of the fund repurchased	5,887,659
Payable for compensation of Manager (Notes 2 and 5)	2,776,887
Payable for investor servicing and custodian fees (Note 2)	310,201
Payable for Trustee compensation and expenses (Note 2)	192,884
Payable for administrative services (Note 2)	4,850
Payable for distribution fees (Note 2)	1,201,353
Payable for open forward currency contracts (Note 1)	2,926,070
Payable for closed forward currency contracts (Note 1)	757,500
Payable for closed swap contracts (Note 1)	154,043
Unrealized depreciation on swap contracts (Note 1)	14,092,015
Premium received on swap contracts (Note 1)	9,225
Written options outstanding, at value (premiums received $2,028,120) (Note 1)	1,497,583
TBA sale commitments, at value (proceeds receivable $83,689,949) (Note 1)	83,799,421
Collateral on securities loaned, at value (Note 1)	71,611,038
Other accrued expenses	205,301
Total liabilities	367,681,387
Net assets	$1,993,210,905
REPRESENTED BY
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$1,963,939,036
Distributions in excess of net investment income (Note 1)	(6,491,015)
Accumulated net realized loss on investments and foreign currency transactions (Note 1)	(134,944,242)
Net unrealized appreciation of investments and assets and liabilities in foreign currencies	170,707,126
Total — Representing net assets applicable to capital shares outstanding	$1,993,210,905

(Continued on next page)

127

Statement of assets and liabilities (Continued)

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price per class A share ($1,329,409,477 divided by 112,125,975 shares)	$11.86
Offering price per class A share (100/94.75 of $11.86)*	$12.52
Net asset value and offering price per class B share ($324,824,684 divided by 27,585,120 shares)**	$11.78
Net asset value and offering price per class C share ($128,541,134 divided by 11,022,121 shares)**	$11.66
Net asset value and redemption price per class M share ($34,729,663 divided by 2,934,213 shares)	$11.84
Offering price per class M share (100/96.75 of $11.84)*	$12.24
Net asset value, offering price and redemption price per class R share ($9,384,668 divided by 795,778 shares)	$11.79
Net asset value, offering price and redemption price per class Y share ($166,321,279 divided by 14,005,038 shares)	$11.88

* On single retail sales of less than $50,000. On sales of $50,000 or more 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.

128

Statement of operations Year ended 9/30/06

Putnam Asset Allocation: Balanced Portfolio
INVESTMENT INCOME
Interest (including interest income of $9,883,923 from investments in affiliated issuers) (Note 5)	$ 32,401,643
Dividends (net of foreign tax of $772,972)	23,219,852
Securities lending	637,568
Total investment income	56,259,063
EXPENSES
Compensation of Manager (Note 2)	11,097,429
Investor servicing fees (Note 2)	3,197,418
Custodian fees (Note 2)	722,008
Trustee compensation and expenses (Note 2)	87,168
Administrative services (Note 2)	41,070
Distribution fees — Class A (Note 2)	2,952,276
Distribution fees — Class B (Note 2)	3,321,281
Distribution fees — Class C (Note 2)	1,135,972
Distribution fees — Class M (Note 2)	254,967
Distribution fees — Class R (Note 2)	26,335
Other	585,255
Non-recurring costs (Notes 2 and 6)	22,242
Costs assumed by Manager (Notes 2 and 6)	(22,242)
Fees waived and reimbursed by Manager or affiliate (Notes 5 and 6)	(1,773,943)
Total expenses	21,647,236
Expense reduction (Note 2)	(417,349)
Net expenses	21,229,887
Net investment income	35,029,176
Net realized gain on investments (Notes 1 and 3)	82,367,605
Net realized loss on swap contracts (Note 1)	(7,068,339)
Net realized loss on futures contracts (Note 1)	(1,297,622)
Net realized loss on foreign currency transactions (Note 1)	(7,642,656)
Net realized gain on written options (Notes 1 and 3)	43,162
Net unrealized appreciation of assets and liabilities in foreign currencies during the year	1,701,200
Net unrealized appreciation of investments, futures contracts, swap contracts, written options and TBA sale commitments during the year	66,513,514
Net gain on investments	134,616,864
Net increase in net assets resulting from operations	$169,646,040

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

129

Statement of changes in net assets

Putnam Asset Allocation: Balanced Portfolio
INCREASE IN NET ASSETS
	Year ended	Year ended
	9/30/06	9/30/05
Operations:
Net investment income	$ 35,029,176	$ 29,938,995
Net realized gain on investments and foreign currency transactions	66,402,150	131,244,503
Net unrealized appreciation of investments and assets and liabilities in foreign currencies	68,214,714	55,833,154
Net increase in net assets resulting from operations	169,646,040	217,016,652
Distributions to shareholders: (Note 1)
From net investment income
Class A	(23,836,313)	(12,126,628)
Class B	(4,317,206)	(1,553,424)
Class C	(1,479,301)	(461,547)
Class M	(519,992)	(224,895)
Class R	(72,778)	(7,093)
Class Y	(3,796,620)	(5,889,099)
Redemption fees (Note 1)	3,997	10,714
Decrease from capital share transactions (Note 4)	(50,641,573)	(81,392,266)
Total increase in net assets	84,986,254	115,372,414
NET ASSETS
Beginning of year	1,908,224,651	1,792,852,237
End of year (including distributions in excess of net investment income and
undistributed net investment income of $6,491,015 and $11,005,976, respectively)	$1,993,210,905	$1,908,224,651

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

130

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131

Financial highlights (For a common share outstanding throughout the period)

Putnam Asset Allocation: Balanced Portfolio
INVESTMENT OPERATIONS:					LESS DISTRIBUTIONS:					RATIOS AND SUPPLEMENTAL DATA:
			Net						Total			Ratio of net
	Net asset		realized and	Total	From			Net asset	return	Net	Ratio of	investment
	value,	Net	unrealized	from	net			value,	at net	assets,	expenses to	income (loss)	Portfolio
	beginning	investment	gain (loss) on	investment	investment	Total	Redemption	end	asset	end of period	average net	to average	turnover
Period ended	of period	income (loss)(a)	investments	operations	income	distributions	fees	of period	value (%)(b)	(in thousands)	assets (%)(c)	net assets (%)	(%)(h)
CLASS A
September 30, 2006	$11.04	.23(d,g)	.82	1.05	(.23)	(.23)	—(e)	$11.86	9.64(g)	$1,329,409	1.00(d,g)	2.04(d,g)	90.03
September 30, 2005	9.94	.18(d,f)	1.05	1.23	(.13)	(.13)	—(e)	11.04	12.40	1,077,903	1.12(d)	1.72(d,,f)	144.41
September 30, 2004	9.26	.13(d)	.79	.92	(.24)	(.24)	—(e)	9.94	10.05	911,128	1.21(d)	1.36(d)	159.30
September 30, 2003	8.10	.14	1.25	1.39	(.23)	(.23)	—	9.26	17.40	1,156,736	1.20	1.62	145.04
September 30, 2002	9.20	.18	(.98)	(.80)	(.30)	(.30)	—	8.10	(9.20)	1,073,716	1.15	1.96	108.47
CLASS B
September 30, 2006	$10.96	.14(d,g)	.83	.97	(.15)	(.15)	—(e)	$11.78	8.88(g)	$324,825	1.75(d,g)	1.28(d,g)	90.03
September 30, 2005	9.87	.10(d,,f)	1.04	1.14	(.05)	(.05)	—(e)	10.96	11.54	340,442	1.87(d)	.97(d,f)	144.41
September 30, 2004	9.20	.06(d)	.78	.84	(.17)	(.17)	—(e)	9.87	9.20	327,229	1.96(d)	.61(d)	159.30
September 30, 2003	8.05	.08	1.23	1.31	(.16)	(.16)	—	9.20	16.52	310,616	1.95	.87	145.04
September 30, 2002	9.14	.11	(.98)	(.87)	(.22)	(.22)	—	8.05	(9.86)	268,219	1.90	1.21	108.47
CLASS C
September 30, 2006	$10.87	.14(d,g)	.80	.94	(.15)	(.15)	—(e)	$11.66	8.72(g)	$128,541	1.75(d,g)	1.29(d,g)	90.03
September 30, 2005	9.79	.10(d,f)	1.03	1.13	(.05)	(.05)	—(e)	10.87	11.58	101,610	1.87(d)	.97(d,f)	144.41
September 30, 2004	9.13	.06(d)	.77	.83	(.17)	(.17)	—(e)	9.79	9.15	83,403	1.96(d)	.61(d)	159.30
September 30, 2003	7.99	.07	1.23	1.30	(.16)	(.16)	—	9.13	16.52	87,992	1.95	.87	145.04
September 30, 2002	9.08	.11	(.97)	(.86)	(.23)	(.23)	—	7.99	(9.90)	87,252	1.90	1.21	108.47
CLASS M
September 30, 2006	$11.02	.17(d,g)	.82	.99	(.17)	(.17)	—(e)	$11.84	9.11(g)	$34,730	1.50(d,g)	1.54(d,g)	90.03
September 30, 2005	9.92	.13(d,f)	1.05	1.18	(.08)	(.08)	—(e)	11.02	11.87	32,605	1.62(d)	1.22(d,f)	144.41
September 30, 2004	9.24	.08(d)	.79	.87	(.19)	(.19)	—(e)	9.92	9.49	31,184	1.71(d)	.86(d)	159.30
September 30, 2003	8.08	.09	1.25	1.34	(.18)	(.18)	—	9.24	16.85	39,902	1.70	1.11	145.04
September 30, 2002	9.18	.14	(.99)	(.85)	(.25)	(.25)	—	8.08	(9.68)	42,753	1.65	1.46	108.47
CLASS R
September 30, 2006	$10.99	.22(d,g)	.79	1.01	(.21)	(.21)	—(e)	$11.79	9.25(g)	$9,385	1.25(d,g)	1.87(d,g)	90.03
September 30, 2005	9.91	.16(d,f)	1.03	1.19	(.11)	(.11)	—(e)	10.99	12.06	1,210	1.37(d)	1.49(d,f)	144.41
September 30, 2004	9.25	.12(d)	.77	.89	(.23)	(.23)	—(e)	9.91	9.73	44	1.46(d)	1.11(d)	159.30
September 30, 2003†	8.50	.08	.76	.84	(.09)	(.09)	—	9.25	10.00*	1	1.00*	.95*	145.04
CLASS Y
September 30, 2006	$11.06	.26(d,g)	.82	1.08	(.26)	(.26)	—(e)	$11.88	9.89(g)	$166,321	.75(d,g)	2.28(d,g)	90.03
September 30, 2005	9.95	.21(d,f)	1.06	1.27	(.16)	(.16)	—(e)	11.06	12.77	354,455	.87(d)	1.97(d,f)	144.41
September 30, 2004	9.27	.16(d)	.79	.95	(.27)	(.27)	—(e)	9.95	10.32	439,865	.96(d)	1.61(d)	159.30
September 30, 2003	8.11	.16	1.25	1.41	(.25)	(.25)	—	9.27	17.67	564,799	.95	1.87	145.04
September 30, 2002	9.21	.21	(.99)	(.78)	(.32)	(.32)	—	8.11	(8.96)	641,329	.90	2.21	108.47

See notes to financial highlights at the end of this section.

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

132  133 

Financial highlights (Continued)

† For the period January 21, 2003 (commencement of operations) to September 30, 2003.

* Not annualized.

(a) Per share net investment income (loss) 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).

(d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of each class, as a percentage of its net assets, reflect a reduction of the following amounts (Note 5):

	9/30/06	9/30/05	9/30/04
Class A	0.01%	0.02%	<0.01%
Class B	0.01	0.02	<0.01
Class C	0.01	0.02	<0.01
Class M	0.01	0.02	<0.01
Class R	0.01	0.02	<0.01
Class Y	0.01	0.02	<0.01

(e) Amount represents less than $0.01 per share.

(f) Reflects a non-recurring accrual related to Putnam Management’s settlement with the SEC regarding brokerage allocation practices, which amounted to the following amounts (Note 6):

		Percentage of
	Per share	net assets
Class A	<$0.01	0.01%
Class B	<0.01	0.01
Class C	<0.01	0.01
Class M	<0.01	0.01
Class R	<0.01	0.01
Class Y	<0.01	0.01

(g) Reflects a non-recurring reimbursement from Putnam Investments relating to the calculation of certain amounts paid by the fund to Putnam in previous years for transfer agent services, which amounted to $0.01 per share and 0.08% of average net assets for the period ended September 30, 2006 (Note 6).

(h) Portfolio turnover excludes dollar roll transactions.

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

134

Statement of assets and liabilities 9/30/06

Putnam Asset Allocation: Conservative Portfolio
ASSETS
Investment in securities, at value, including $9,735,294 of securities on loan (Note 1):
Unaffiliated issuers (identified cost $927,564,118)	$ 985,153,392
Affiliated issuers (identified cost $203,417,070) (Note 5)	203,417,070
Cash	1,126,605
Foreign currency (cost $8,364,634) (Note 1)	8,290,989
Dividends, interest and other receivables	4,658,177
Receivable for shares of the fund sold	992,204
Receivable for securities sold	3,660,403
Receivable for sales of delayed delivery securities (Note 1)	229,412,451
Unrealized appreciation on swap contracts (Note 1)	5,007,893
Receivable for closed swap contracts (Note 1)	9,774
Premium paid on swap contracts (Note 1)	17,893
Receivable for open forward currency contracts (Note 1)	1,497,836
Receivable for closed forward currency contracts (Note 1)	295,050
Receivable for variation margin (Note 1)	393,174
Total assets	1,443,932,911
LIABILITIES
Payable for securities purchased	6,325,609
Payable for purchases of delayed delivery securities (Note 1)	367,750,878
Payable for shares of the fund repurchased	1,010,429
Payable for compensation of Manager (Notes 2 and 5)	1,457,222
Payable for investor servicing and custodian fees (Note 2)	191,912
Payable for Trustee compensation and expenses (Note 2)	95,968
Payable for administrative services (Note 2)	3,314
Payable for distribution fees (Note 2)	373,163
Payable for open forward currency contracts (Note 1)	589,919
Payable for closed forward currency contracts (Note 1)	210,864
Payable for closed swap contracts (Note 1)	103,932
Unrealized depreciation on swap contracts (Note 1)	8,543,295
Premium received on swap contracts (Note 1)	20,937
Written options outstanding, at value (premiums received $1,764,729) (Note 1)	1,312,628
TBA sale commitments, at value (proceeds receivable $94,598,739) (Note 1)	94,381,931
Collateral on securities loaned, at value (Note 1)	10,152,439
Other accrued expenses	63,586
Total liabilities	492,588,026
Net assets	$ 951,344,885
REPRESENTED BY
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$ 954,562,935
Undistributed net investment income (Note 1)	3,048,174
Accumulated net realized loss on investments and foreign currency transactions (Note 1)	(61,843,440)
Net unrealized appreciation of investments and assets and liabilities in foreign currencies	55,577,216
Total — Representing net assets applicable to capital shares outstanding	$ 951,344,885

(Continued on next page)

135

Statement of assets and liabilities (Continued)

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price per class A share ($414,951,560 divided by 43,285,254 shares)	$9.59
Offering price per class A share (100/94.75 of $9.59)*	$10.12
Net asset value and offering price per class B share ($89,286,558 divided by 9,401,213 shares)**	$9.50
Net asset value and offering price per class C share ($46,990,363 divided by 4,951,892 shares)**	$9.49
Net asset value and redemption price per class M share ($11,794,344 divided by 1,241,576 shares)	$9.50
Offering price per class M share (100/96.75 of $9.50)*	$9.82
Net asset value, offering price and redemption price per class R share ($926,928 divided by 95,869 shares)	$9.67
Net asset value, offering price and redemption price per class Y share ($387,395,132 divided by 40,487,236 shares)	$9.57

* On single retail sales of less than $50,000. On sales of $50,000 or more 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.

136

Statement of operations Year ended 9/30/06

Putnam Asset Allocation: Conservative Portfolio
INVESTMENT INCOME
Interest (including interest income of $9,267,338 from investments in affiliated issuers) (Note 5)	$30,065,110
Dividends (net of foreign tax of $194,467)	6,364,025
Securities lending	160,851
Total investment income	36,589,986
EXPENSES
Compensation of Manager (Note 2)	6,001,529
Investor servicing fees (Note 2)	1,751,830
Custodian fees (Note 2)	450,008
Trustee compensation and expenses (Note 2)	56,581
Administrative services (Note 2)	28,801
Distribution fees — Class A (Note 2)	982,450
Distribution fees — Class B (Note 2)	994,410
Distribution fees — Class C (Note 2)	429,235
Distribution fees — Class M (Note 2)	89,467
Distribution fees — Class R (Note 2)	3,195
Other	318,994
Non-recurring costs (Notes 2 and 6)	10,775
Costs assumed by Manager (Notes 2 and 6)	(10,775)
Fees waived and reimbursed by Manager or affiliate (Notes 5 and 6)	(1,157,608)
Total expenses	9,948,892
Expense reduction (Note 2)	(192,200)
Net expenses	9,756,692
Net investment income	26,833,294
Net realized gain on investments (Notes 1 and 3)	13,541,744
Net realized gain on swap contracts (Note 1)	1,297,350
Net realized loss on futures contracts (Note 1)	(2,864,346)
Net realized loss on foreign currency transactions (Note 1)	(1,729,557)
Net unrealized appreciation of assets and liabilities in foreign currencies during the year	468,643
Net unrealized appreciation of investments, futures contracts, swap contracts, written options, and TBA sale commitments during the year	19,866,876
Net gain on investments	30,580,710
Net increase in net assets resulting from operations	$57,414,004

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

137

Statement of changes in net assets

Putnam Asset Allocation: Conservative Portfolio
INCREASE IN NET ASSETS
	Year ended	Year ended
	9/30/06	9/30/05
Operations:
Net investment income	$ 26,833,294	$ 19,925,248
Net realized gain on investments and foreign currency transactions	10,245,191	31,674,188
Net unrealized appreciation of investments and assets and liabilities in foreign currencies	20,335,519	14,324,376
Net increase in net assets resulting from operations	57,414,004	65,923,812
Distributions to shareholders: (Note 1)
From net investment income
Class A	(13,671,190)	(10,513,251)
Class B	(2,827,861)	(1,742,362)
Class C	(1,179,477)	(552,460)
Class M	(356,858)	(221,275)
Class R	(18,619)	(4,600)
Class Y	(13,695,158)	(6,226,155)
Redemption fees (Note 1)	3,426	7,675
Increase from capital share transactions (Note 4)	7,629,939	22,162,499
Total increase in net assets	33,298,206	68,833,883
NET ASSETS
Beginning of year	918,046,679	849,212,796
End of year (including undistributed net investment income of $3,048,174 and $10,776,800, respectively)	$951,344,885	$918,046,679

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

138

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139

Financial highlights (For a common share outstanding throughout the period)

Putnam Asset Allocation: Conservative Portfolio
INVESTMENT OPERATIONS:					LESS DISTRIBUTIONS:					RATIOS AND SUPPLEMENTAL DATA:
			Net						Total			Ratio of net
	Net asset		realized and	Total	From			Net asset	return	Net	Ratio of	investment
	value,	Net	unrealized	from	net			value,	at net	assets,	expenses to	income (loss)	Portfolio
	beginning	investment	gain (loss) on	investment	investment	Total	Redemption	end	asset	end of period	average net	to average	turnover
Period ended	of period	income (loss)(a)	investments	operations	income	distributions	fees	of period	value (%)(b)	(in thousands)	assets (%)(c)	net assets (%)	(%)(h)
CLASS A
September 30, 2006	$9.33	.28(d,g)	.31	.59	(.33)	(.33)	—(e)	$9.59	6.46(g)	$414,952	1.06(d,g)	2.95(d,g)	133.41
September 30, 2005	8.84	.21(d,f)	.48	.69	(.20)	(.20)	—(e)	9.33	7.92	378,616	1.20(d)	2.28(d,f)	209.05
September 30, 2004	8.65	.15(d)	.37	.52	(.33)	(.33)	—(e)	8.84	6.11	590,441	1.39(d)	1.66(d)	258.72
September 30, 2003	7.94	.21	.93	1.14	(.43)	(.43)	—	8.65	14.88	680,678	1.39	2.55	200.28
September 30, 2002	8.71	.34	(.57)	(.23)	(.54)	(.54)	—	7.94	(2.97)	558,847	1.33	3.99	144.07
CLASS B
September 30, 2006	$9.25	.20(d,g)	.31	.51	(.26)	(.26)	—(e)	$9.50	5.61(g)	$89,287	1.81(d,g)	2.21(d,g)	133.41
September 30, 2005	8.78	.14(d,f)	.47	.61	(.14)	(.14)	—(e)	9.25	6.94	109,941	1.95(d)	1.56(d,f)	209.05
September 30, 2004	8.60	.08(d)	.37	.45	(.27)	(.27)	—(e)	8.78	5.23	120,168	2.14(d)	.92(d)	258.72
September 30, 2003	7.89	.15	.93	1.08	(.37)	(.37)	—	8.60	14.14	127,586	2.14	1.80	200.28
September 30, 2002	8.68	.28	(.59)	(.31)	(.48)	(.48)	—	7.89	(3.94)	109,186	2.08	3.26	144.07
CLASS C
September 30, 2006	$9.24	.20(d,g)	.31	.51	(.26)	(.26)	—(e)	$9.49	5.64(g)	$46,990	1.81(d,g)	2.20(d,g)	133.41
September 30, 2005	8.76	.14(d,f)	.48	.62	(.14)	(.14)	—(e)	9.24	7.08	38,901	1.95(d)	1.56(d,f)	209.05
September 30, 2004	8.58	.08(d)	.37	.45	(.27)	(.27)	—(e)	8.76	5.24	35,850	2.14(d)	.92(d)	258.72
September 30, 2003	7.88	.15	.92	1.07	(.37)	(.37)	—	8.58	13.99	38,868	2.14	1.81	200.28
September 30, 2002	8.66	.28	(.58)	(.30)	(.48)	(.48)	—	7.88	(3.84)	36,330	2.08	3.26	144.07
CLASS M
September 30, 2006	$9.25	.23(d,g)	.30	.53	(.28)	(.28)	—(e)	$9.50	5.86(g)	$11,794	1.56(d,g)	2.45(d,g)	133.41
September 30, 2005	8.77	.16(d,f)	.48	.64	(.16)	(.16)	—(e)	9.25	7.32	12,913	1.70(d)	1.81(d,f)	209.05
September 30, 2004	8.59	.10(d)	.37	.47	(.29)	(.29)	—(e)	8.77	5.51	12,728	1.89(d)	1.17(d)	258.72
September 30, 2003	7.90	.16	.92	1.08	(.39)	(.39)	—	8.59	14.10	16,114	1.89	2.09	200.28
September 30, 2002	8.68	.30	(.58)	(.28)	(.50)	(.50)	—	7.90	(3.59)	19,109	1.83	3.50	144.07
CLASS R
September 30, 2006	$9.38	.26(d,g)	.34	.60	(.31)	(.31)	—(e)	$9.67	6.49(g)	$927	1.31(d,g)	2.70(d,g)	133.41
September 30, 2005	8.86	.19(d,f)	.51	.70	(.18)	(.18)	—(e)	9.38	7.98	428	1.45(d)	2.10(d,f)	209.05
September 30, 2004	8.65	.13(d)	.39	.52	(.31)	(.31)	—(e)	8.86	6.10	102	1.64(d)	1.41(d)	258.72
September 30, 2003†	8.01	.13	.66	.79	(.15)	(.15)	—	8.65	9.91*	1	1.13*	1.60*	200.28
CLASS Y
September 30, 2006	$9.31	.30(d,g)	.31	.61	(.35)	(.35)	—(e)	$9.57	6.75(g)	$387,395	.81(d,g)	3.20(d,g)	133.41
September 30, 2005	8.83	.24(d,f)	.47	.71	(.23)	(.23)	—(e)	9.31	8.11	377,247	.95(d)	2.62(d,f)	209.05
September 30, 2004	8.64	.17(d)	.38	.55	(.36)	(.36)	—(e)	8.83	6.40	89,925	1.14(d)	1.87(d)	258.72
September 30, 2003	7.94	.23	.92	1.15	(.45)	(.45)	—	8.64	15.08	169,684	1.14	2.83	200.28
September 30, 2002	8.73	.37	(.59)	(.22)	(.57)	(.57)	—	7.94	(2.93)	189,105	1.08	4.25	144.07

See notes to financial highlights at the end of this section.

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

140  141 

Financial highlights (Continued)

† For the period January 21, 2003 (commencement of operations) to September 30, 2003.

* Not annualized.

(a) Per share net investment income (loss) 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).

(d) Reflects an involuntary contractual expense limitation and waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such limitation and waivers, the expenses of each class, as a percentage of its net assets, reflect a reduction of the following amounts (Notes 2 and 5):

	9/30/06	9/30/05	9/30/04
Class A	0.03%	0.08%	0.01%
Class B	0.03	0.08	0.01
Class C	0.03	0.08	0.01
Class M	0.03	0.08	0.01
Class R	0.03	0.08	0.01
Class Y	0.03	0.08	0.01

(e) Amount represents less than $0.01 per share.

(f) Reflects a non-recurring accrual related to Putnam Management’s settlement with the SEC regarding brokerage allocation practices, which amounted to the following amounts (Note 6):

		Percentage of
	Per share	net assets
Class A	<$0.01	<0.01%
Class B	<0.01	<0.01
Class C	<0.01	<0.01
Class M	<0.01	<0.01
Class R	<0.01	<0.01
Class Y	<0.01	<0.01

(g) Reflects a non-recurring reimbursement from Putnam Investments relating to the calculation of certain amounts paid by the fund to Putnam in previous years for transfer agent services, which amounted to $0.01 per share and 0.10% of average net assets for the period ended September 30, 2006 (Note 6).

(h) Portfolio turnover excludes dollar roll transactions.

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

142

Notes to financial statements 9/30/06

Note 1: Significant accounting policies

Putnam Asset Allocation Funds (the “trust”), a Massachusetts business 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, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.25% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are offered to qualified employee-benefit plans, are sold without a front-end sales charge or a contingent deferred sales charge. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are sold to certain eligible purchasers including certain defined contribution plans (including corporate IRAs), bank trust departments and trust companies.

A 2.00% redemption fee may apply to any shares that are redeemed (either by selling or exchanging into another fund) within 5 days of purchase. The redemption fee is accounted for as an addition to paid-in-capital.

The redemption fees discussed above will be replaced, effective October 2, 2006, by a 1.00% redemption fee on any shares purchased on or after such date that are redeemed (either by selling or exchanging into another fund) within 7 days of purchase.

Investment income, realized and unrealized gains and losses and expenses of each fund are borne pro-rata based on the relative net assets of each class to the total net assets of each fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund, if that fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares.

 In the normal course of business, the funds enter into contracts that may include agreements to indemnify another party under given circumstances. The funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the funds. However, the funds expect the risk of material loss to be remote.

The following is a summary of significant accounting policies consistently followed by the funds in the preparation of their 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 valued at the last reported sales price on their principal exchange, or official closing price for certain markets. If no sales are reported — as in the case of some securities traded over-the-counter — a security is valued at its last reported bid price. Market quotations are not considered to be readily available for certain debt obligations; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Investment Management, LLC (“Putnam Management”), the funds’ manager, an indirect wholly-owned subsidiary of Putnam, LLC. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on certain days, the funds will fair value foreign equity securities taking into account multiple factors, including movements in the U.S. securities markets. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the funds to a significant extent. At September 30, 2006, fair value pricing was used for certain foreign securities in the portfolios. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate. Certain investments, including certain restricted securities, are also valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the funds could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security at a given point in time and does not reflect an actual market price, which may be different by a material amount.

B) Joint trading account Pursuant to an exemptive order from the Securities and Exchange Commission, each fund may transfer uninvested cash balances, including cash collateral received under security lending arrangements, into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Management. These balances may be invested in issues of high-grade, short-term investments having maturities of up to 397 days for collateral received under security lending arrangements and up to 90 days for other cash investments.

C) Repurchase agreements Each fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty’s custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that

143

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 recorded on the trade date (the 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, net of applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the funds are informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain.

All premiums/discounts are amortized/accreted on a yield-to-maturity basis.

Securities purchased or sold on a forward commitment or delayed delivery basis may be settled a month or more after the trade date; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.

E) Stripped securities Each fund may invest in stripped securities which represent a participation in securities that may be structured in classes with rights to receive different portions of the interest and principal. Interest-only securities receive all of the interest and principal-only securities receive all of the principal. If the interest-only securities experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal-only securities increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The market value of these securities is highly sensitive to changes in interest rates.

F) 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 earned 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, currency gains and losses realized between the trade and settlement dates on securities transactions 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.

Each fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned.

G) Forward currency contracts Each fund may buy and sell 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), or for other investment purposes. 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 fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the statement of assets and liabilities. Forward currency contracts outstanding at period end, if any, are listed after the funds’ portfolios.

H) Futures and options contracts Each fund may use futures and options contracts to hedge against changes in the values of securities the fund owns or expects to purchase, or for other investment purposes. Each fund may also write options on swaps or securities it owns or in which it may invest to increase its current returns.

The potential risk to each fund 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. Risks may exceed amounts recognized on the statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.

Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.” 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. Futures and written option contracts outstanding at period end, if any, are listed after the funds’ portfolios.

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I) Total return swap contracts Each fund may enter into total return swap contracts, which are arrangements to exchange a market-linked return for a periodic payment, both based on a notional principal amount. To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. Total return swap contracts 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 are recorded as realized gains or loss. Certain total return swap contracts may include extended effective dates. Income related to these swap contracts is accrued based on the terms of the contract. The fund 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. Risk of loss may exceed amounts recognized on the statement of assets and liabilities. Total return swap contracts outstanding at period end, if any, are listed after the funds’ portfolios.

J) Interest rate swap contracts Each fund may enter into interest rate swap contracts, which are arrangements between two parties to exchange cash flows based on a notional principal amount, to manage the fund’s exposure to interest rates. Interest rate swap contracts are marked-to-market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made are recorded as realized gains or loss. Certain interest rate swap contracts may include extended effective dates. Income related to these swap contracts is accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or if the counterparty defaults on its obligation to perform. Risk of loss may exceed amounts recognized on the statement of assets and liabilities. Interest rate swap contracts outstanding at period end, if any, are listed after the funds’ portfolios.

K) Credit default contracts Each fund may enter into credit default contracts where one party, the protection buyer, makes an upfront or periodic payment to a counterparty, the protection seller, in exchange for the right to receive a contingent payment. The maximum amount of the payment may equal the notional amount, at par, of the underlying index or security as a result of a related credit event. Payments are made upon a credit default event of the disclosed primary referenced obligation or all other equally ranked obligations of the reference entity. An upfront payment received by the fund, as the protection seller, is recorded as a liability on the fund’s books. An upfront payment made by the fund, as the protection buyer, is recorded as an asset on the fund’s books. Periodic payments received or paid by the fund are recorded as realized gains or losses. The credit default contracts are marked-to-market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses. In addition to bearing the risk that the credit event will occur, the fund could be exposed to market risk due to unfavorable changes in interest rates or in the price of the underlying security or index, the possibility that the fund may be unable to close out its position at the same time or at the same price as if it had purchased comparable publicly traded securities or that the counterparty may default on its obligation to perform. Risks of loss may exceed amounts recognized on the statement of assets and liabilities. Credit default contracts outstanding at period end, if any, are listed after the funds’ portfolios.

L) TBA purchase commitments Each fund may enter into “TBA” (to be announced) 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 significantly differ from the principal amount. The fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund’s other assets. Unsettled TBA purchase commitments are valued at fair value of the underlying securities, according to the procedures described under “Security valuation” above. The contract is marked-to-market daily and the change in market value is recorded by the fund as an unrealized gain or loss.

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

M) TBA sale commitments Each fund may enter into TBA sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns 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 fair value of the underlying securities, generally according to the procedures described under “Security valuation” above. The contract is marked-to-market daily and the change in market value is recorded by the fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes 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. TBA sale commitments outstanding at period end, if any, are listed after the funds’ portfolios.

N) Dollar rolls To enhance returns, each fund may enter into dollar rolls (principally using TBAs) in which the fund sells securities for delivery in the current month and simultaneously contracts to purchase similar securities on a specified future date. During the period between the sale and subsequent purchase, the fund will not be entitled to receive income and principal payments on the securities sold. The fund will, however, retain the difference between the initial sales price and the forward price for the future purchase. The fund will also be able to earn interest on the cash proceeds that are received from the initial sale. The fund may be exposed to market or credit risk if the price of the security changes unfavorably or the counterparty fails to perform under the terms of the agreement.

O) Security lending Each fund may lend securities, through its agents, to qualified borrowers in order to earn additional income. The loans are

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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 fund on the next business day. The risk of borrower default will be borne by the fund’s agents; the fund 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, 2006, the value of securities loaned amounted to $66,035,440, $69,034,752 and $9,735,294 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively). The funds received cash collateral of $68,589,929, $71,611,038 and $10,152,439 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively), which is pooled with collateral of other Putnam funds into 40 issues of high-grade, short-term investments.

P) Federal taxes It is the policy of each fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code of 1986 (the “Code”) applicable to regulated investment companies. It is also the intention of each fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code, 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, 2006, the funds had capital loss carryovers of $85,946,308, $129,873,136 and $61,053,845 (Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively), available to the extent allowed by the Code to offset future net capital gain, if any. These capital loss carryovers will expire on September 30, 2011.

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund (Balanced Portfolio) has elected to defer to its fiscal year ending September 30, 2007 $3,660,534 of losses recognized during the period November 1, 2005 to September 30, 2006.

Q) Distributions to shareholders Distributions to shareholders from net investment income are recorded by each fund 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 (for Balanced Portfolio), both realized and unrealized gains and losses on certain futures contracts, income on swap contracts and interest only securities (for Balanced Portfolio and Conservative Portfolio). 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, 2006, reclassifications were as follows:

Undistributed Net Investment Income
Growth Portfolio	$ (17,434,668)
Balanced Portfolio	(18,503,957)
Conservative Portfolio	(2,812,757)
Accumulated Net Realized Gains and Losses
Growth Portfolio	$ 17,416,556
Balanced Portfolio	18,506,225
Conservative Portfolio	2,795,391

Paid-in Capital
Growth Portfolio	$ 18,112
Balanced Portfolio	(2,268)
Conservative Portfolio	17,366
The tax basis components of distributable earnings and the federal tax
cost as of September 30, 2006 were as follows:
Growth Portfolio
Unrealized appreciation	$ 242,192,914
Unrealized depreciation	(57,551,675)
	———————————
Net unrealized appreciation	184,641,239
Undistributed ordinary income	7,921,632
Capital loss carryforward	(85,946,308)
Cost for federal income tax purposes	$1,756,857,295
Balanced Portfolio
Unrealized appreciation	$ 227,542,696
Unrealized depreciation	(58,717,970)
	———————————
Net unrealized appreciation	168,824,726
Capital loss carryforward	(129,873,136)
Post-October loss	(3,660,534)
Cost for federal income tax purposes	$2,003,068,614
Conservative Portfolio
Unrealized appreciation	$ 71,176,499
Unrealized depreciation	(14,487,832)
	———————————
Net unrealized appreciation	56,688,667
Undistributed ordinary income	3,426,801
Capital loss carryforward	(61,053,845)
Cost for federal income tax purposes	$1,131,881,795

R) 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

Putnam Management is paid for management and investment advisory services quarterly based on the average net assets of each fund. Such fee is based on the following annual rates: 0.70% of the first $500 million of average net assets, 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.

Putnam Management has agreed to waive fees and reimburse expenses of each fund through September 30, 2007, to the extent necessary to ensure that each fund’s expenses do not exceed the simple average of the expenses of all front-end load funds viewed by Lipper, Inc. as having the same investment classification or objective as the fund. The expense reimbursement is based on a comparison of each fund’s expenses with the average annualized operating expenses of the funds in its Lipper peer group for each calendar quarter during the fund’s last fiscal year, excluding 12b-1 fees and without giving effect to any expense offset and brokerage service arrangements that may reduce fund expenses. For the year ended September 30, 2006, Putnam Management waived $46,524 of its management fee from the Growth Portfolio. Putnam Management did

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not waive any of its management fee from the Balanced Portfolio or the Conservative Portfolio.

For the year ended September 30, 2006, Putnam Management has assumed $19,682, $22,242 and $10,775 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) of legal, shareholder servicing and communication, audit and Trustee fees incurred by the funds in connection with certain legal and regulatory matters (including those described in Note 6).

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, LLC. PFTC receives fees for custody services based on each fund’s asset level, the number of its security holdings and transaction volumes. Putnam Investor Services, a division of PFTC, provides investor servicing agent functions to the funds. Putnam Investor Services receives fees for investor servicing based on the number of shareholder accounts in each fund and the level of defined contribution plan assets in each fund. During the year ended September 30, 2006, the funds incurred $4,945,699, $3,919,426 and $2,201,838 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) for these services.

Under the subcustodian contract between the subcustodian bank and PFTC, the subcustodian bank has a lien on the securities of the fund to the extent permitted by the fund’s investment restrictions to cover any advances made by the subcustodian bank for the settlement of securities purchased by the fund. At September 30, 2006, the payable to the subcus-todian bank (for Growth Portfolio and Balanced Portfolio) represents the amount due for cash advanced for the settlement of securities purchased.

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, 2006, the funds’ expenses were reduced by $780,740, $417,349 and $192,200 (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 $567, $609 and $420 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively), as a quarterly retainer, 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, industry seminars and for certain compliance-related matters. Trustees also are reimbursed for expenses they incur relating to their services as Trustees. George Putnam, III, who is not an independent Trustee, also receives the foregoing fees for his services as Trustee.

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 and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. Pension expense for the funds is included in Trustee compensation and expenses in each fund’s statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.

Each fund has adopted distribution plans (the “Plans”) with respect to its class A, class B, class C, class M and class R 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, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred in distributing shares of the funds. The Plans provide for payments by each fund to Putnam Retail Management at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by each fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.

For the year ended September 30, 2006, Putnam Retail Management, acting as underwriter, received the following:

	Class A	Class M
	Net	Net
	commissions	commissions
Growth Portfolio	$390,536	$6,992
Balanced Portfolio	374,539	5,467
Conservative Portfolio	88,951	2,200
	Class B	Class C
	Contingent	Contingent
	deferred	deferred
	sales charges	sales charges
Growth Portfolio	$ 339,238	$14,194
Balanced Portfolio	413,057	13,251
Conservative Portfolio	143,652	14,374
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain
redemptions of class A and class M shares, respectively. For the year
ended September 30, 2006, Putnam Retail Management, acting as
underwriter, received the following:
	Class A	Class M
	Deferred	Deferred
	sales charges	sales charges
Growth Portfolio	$ 390	$—
Balanced Portfolio	8,755	—
Conservative Portfolio	296	—

Note 3: Purchases and sales of securities

During the year ended September 30, 2006, cost of purchases and proceeds from sales of investment securities other than short-term investments were as follows:

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U.S. Government Securities
	Purchases	Sales
Growth Portfolio	$387,279	$387,241
Balanced Portfolio	—	—
Conservative Portfolio	—	—
Other Securities
	Purchases	Sales
Growth Portfolio	$1,398,663,298	$1,265,818,972
Balanced Portfolio	1,467,108,554	1,610,365,822
Conservative Portfolio	896,438,583	1,015,057,350
Written option transactions during the year ended September 30, 2006,
are summarized as follows:
	Contract	Premiums
Growth Portfolio	Amounts	Received
Written options
outstanding at
beginning of year	$6,860,000	$265,311
Options opened	6,271,311	246,950
Options exercised	(8,232)	(9,902)
Options expired	(43,079)	(24,592)
Options closed	—	—
Written options
outstanding at
end of year	$13,080,000	$477,767
	Contract	Premiums
Balanced Portfolio	Amounts	Received
Written options
outstanding at
beginning of year	$39,690,760	$1,533,707
Options opened	14,920,588	548,413
Options exercised	(9,010)	(10,837)
Options expired	(662,649)	(43,163)
Options closed	—	—
Written options
outstanding at
end of year	$53,939,689	$2,028,120
	Contract	Premiums
Conservative Portfolio	Amounts	Received
Written options
outstanding at
beginning of year	$31,760,000	$1,228,318
Options opened	15,492,000	536,411
Options exercised	—	—
Options expired	—	—
Options closed	—	—
Written options
outstanding at
end of year	$47,252,000	$1,764,729

Note 4: Capital shares
At September 30, 2006, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as follows:
Growth Portfolio
CLASS A	Shares	Amount
Year ended 9/30/06:
Shares sold	38,664,985	$ 489,972,563
Shares issued in connection with
reinvestment of distributions	536,598	6,514,294
Shares repurchased	(17,463,960)	(219,675,426)
Net increase	21,737,623	$ 276,811,431
Year ended 9/30/05:
Shares sold	29,378,259	$ 329,523,089
Shares issued in connection with
reinvestment of distributions	624,622	6,733,429
Shares repurchased	(18,537,434)	(207,525,565)
Net increase	11,465,447	$ 128,730,953
CLASS B	Shares	Amount
Year ended 9/30/06:
Shares sold	10,155,844	$ 126,273,710
Shares issued in connection with
reinvestment of distributions	28,064	335,771
Shares repurchased	(9,179,020)	(113,756,664)
Net increase	1,004,888	$ 12,852,817
Year ended 9/30/05:
Shares sold	9,174,709	$100,780,084
Shares issued in connection with
reinvestment of distributions	135,593	1,439,997
Shares repurchased	(8,437,635)	(93,216,094)
Net increase	872,667	$ 9,003,987
CLASS C	Shares	Amount
Year ended 9/30/06:
Shares sold	4,716,321	$ 57,930,595
Shares issued in connection with
reinvestment of distributions	15,551	183,348
Shares repurchased	(1,371,637)	(16,789,631)
Net increase	3,360,235	$ 41,324,312
Year ended 9/30/05:
Shares sold	2,386,654	$ 25,982,785
Shares issued in connection with
reinvestment of distributions	33,418	350,218
Shares repurchased	(1,544,697)	(16,663,990)
Net increase	875,375	$ 9,669,013

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CLASS M	Shares	Amount
Year ended 9/30/06:
Shares sold	824,301	$10,237,347
Shares issued in connection with
reinvestment of distributions	9,918	118,820
Shares repurchased	(638,666)	(7,965,198)
Net increase	195,553	$ 2,390,969
Year ended 9/30/05:
Shares sold	736,368	$ 8,062,121
Shares issued in connection with
reinvestment of distributions	20,890	222,266
Shares repurchased	(777,590)	(8,567,787)
Net decrease	(20,332)	$(283,400)
CLASS R	Shares	Amount
Year ended 9/30/06:
Shares sold	408,571	$5,173,547
Shares issued in connection with
reinvestment of distributions	902	10,862
Shares repurchased	(43,024)	(533,138)
Net increase	366,449	$4,651,271
Year ended 9/30/05:
Shares sold	144,883	$1,610,018
Shares issued in connection with
reinvestment of distributions	171	1,829
Shares repurchased	(39,921)	(461,613)
Net increase	105,133	$1,150,234
CLASS Y	Shares	Amount
Year ended 9/30/06:
Shares sold	4,124,585	$52,313,145
Shares issued in connection with
reinvestment of distributions	121,664	1,487,947
Shares repurchased	(17,722,193)	(220,987,006)
Net decrease	(13,475,944)	$(167,185,914)
Year ended 9/30/05:
Shares sold	6,677,105	$75,087,442
Shares issued in connection with
reinvestment of distributions	575,684	6,246,177
Shares repurchased	(24,040,983)	(268,546,580)
Net decrease	(16,788,194)	$(187,212,961)

Balanced Portfolio
CLASS A	Shares	Amount
Year ended 9/30/06:
Shares sold	39,574,113	$ 451,846,355
Shares issued in connection with
reinvestment of distributions	2,016,629	22,770,815
Shares repurchased	(27,082,282)	(308,419,046)
Net increase	14,508,460	$ 166,198,124
Year ended 9/30/05:
Shares sold	35,264,759	$ 374,197,272
Shares issued in connection with
reinvestment of distributions	1,074,127	11,539,776
Shares repurchased	(30,362,276)	(322,386,443)
Net increase	5,976,610	$ 63,350,605
CLASS B	Shares	Amount
Year ended 9/30/06:
Shares sold	7,546,153	$ 85,221,717
Shares issued in connection with
reinvestment of distributions	361,588	4,039,363
Shares repurchased	(11,373,608)	(128,492,821)
Net decrease	(3,465,867)	$ (39,231,741)
Year ended 9/30/05:
Shares sold	8,915,288	$ 93,886,665
Shares issued in connection with
reinvestment of distributions	136,927	1,358,202
Shares repurchased	(11,148,043)	(117,659,926)
Net decrease	(2,095,828)	$ (22,415,059)
CLASS C	Shares	Amount
Year ended 9/30/06:
Shares sold	3,570,987	$ 40,060,820
Shares issued in connection with
reinvestment of distributions	115,335	1,278,551
Shares repurchased	(2,011,544)	(22,539,113)
Net increase	1,674,778	$ 18,800,258
Year ended 9/30/05:
Shares sold	2,839,609	$ 29,723,482
Shares issued in connection with
reinvestment of distributions	38,485	406,789
Shares repurchased	(2,046,948)	(21,357,920)
Net increase	831,146	$ 8,772,351

149

CLASS M	Shares	Amount
Year ended 9/30/06:
Shares sold	646,138	$ 7,337,360
Shares issued in connection with
reinvestment of distributions	44,108	496,232
Shares repurchased	(714,178)	(8,133,498)
Net decrease	(23,932)	$ (299,906)
Year ended 9/30/05:
Shares sold	691,023	$ 7,299,010
Shares issued in connection with
reinvestment of distributions	20,438	219,084
Shares repurchased	(895,308)	(9,481,236)
Net decrease	(183,847)	$(1,963,142)
CLASS R	Shares	Amount
Year ended 9/30/06:
Shares sold	1,155,979	$13,290,431
Shares issued in connection with
reinvestment of distributions	6,432	72,778
Shares repurchased	(476,786)	(5,484,373)
Net increase	685,625	$ 7,878,836
Year ended 9/30/05:
Shares sold	128,611	$ 1,352,226
Shares issued in connection with
reinvestment of distributions	655	7,093
Shares repurchased	(23,537)	(249,554)
Net increase	105,729	$ 1,109,765
CLASS Y	Shares	Amount
Year ended 9/30/06:
Shares sold	5,404,275	$ 61,516,446
Shares issued in connection with
reinvestment of distributions	335,817	3,796,620
Shares repurchased	(23,790,217)	(269,300,210)
Net decrease	(18,050,125)	$(203,987,144)
Year ended 9/30/05:
Shares sold	8,109,589	$ 86,387,008
Shares issued in connection with
reinvestment of distributions	548,888	5,889,099
Shares repurchased	(20,800,093)	(222,522,893)
Net decrease	(12,141,616)	$(130,246,786)

Conservative Portfolio
CLASS A	Shares	Amount
Year ended 9/30/06:
Shares sold	14,651,816	$ 137,424,816
Shares issued in connection with
reinvestment of distributions	1,409,720	13,138,419
Shares repurchased	(13,359,361)	(125,477,862)
Net increase	2,702,175	$ 25,085,373
Year ended 9/30/05:
Shares sold	16,125,066	$ 147,395,094
Shares issued in connection with
reinvestment of distributions	1,120,174	10,225,525
Shares repurchased	(43,423,690)	(398,601,132)
Net decrease	(26,178,450)	$(240,980,513)
CLASS B	Shares	Amount
Year ended 9/30/06:
Shares sold	1,981,831	$ 18,389,260
Shares issued in connection with
reinvestment of distributions	274,841	2,536,698
Shares repurchased	(4,737,745)	(44,007,165)
Net decrease	(2,481,073)	$(23,081,207)
Year ended 9/30/05:
Shares sold	2,636,078	$ 23,937,866
Shares issued in connection with
reinvestment of distributions	173,812	1,578,627
Shares repurchased	(4,613,620)	(41,910,836)
Net decrease	(1,803,730)	$(16,394,343)
CLASS C	Shares	Amount
Year ended 9/30/06:
Shares sold	1,667,936	$ 15,493,382
Shares issued in connection with
reinvestment of distributions	112,352	1,036,254
Shares repurchased	(1,040,521)	(9,660,728)
Net increase	739,767	$ 6,868,908
Year ended 9/30/05:
Shares sold	1,217,067	$ 11,075,530
Shares issued in connection with
reinvestment of distributions	54,153	491,186
Shares repurchased	(1,151,602)	(10,433,398)
Net increase	119,618	$ 1,133,318

150

CLASS M	Shares	Amount
Year ended 9/30/06:
Shares sold	261,504	$ 2,427,608
Shares issued in connection with
reinvestment of distributions	37,596	347,175
Shares repurchased	(453,892)	(4,197,349)
Net decrease	(154,792)	$(1,422,566)
Year ended 9/30/05:
Shares sold	375,572	$ 3,406,749
Shares issued in connection with
reinvestment of distributions	23,545	213,773
Shares repurchased	(453,295)	(4,108,354)
Net decrease	(54,178)	$ (487,832)
CLASS R	Shares	Amount
Year ended 9/30/06:
Shares sold	78,336	$ 740,927
Shares issued in connection with
reinvestment of distributions	1,981	18,619
Shares repurchased	(30,048)	(283,376)
Net increase	50,269	$ 476,170
Year ended 9/30/05:
Shares sold	38,318	$ 353,481
Shares issued in connection with
reinvestment of distributions	497	4,600
Shares repurchased	(4,676)	(43,398)
Net increase	34,139	$ 314,683
CLASS Y	Shares	Amount
Year ended 9/30/06:
Shares sold	6,608,799	$ 61,825,623
Shares issued in connection with
reinvestment of distributions	1,472,481	13,695,158
Shares repurchased	(8,104,166)	(75,817,520)
Net decrease	(22,886)	$ (296,739)
Year ended 9/30/05:
Shares sold	35,606,421	$326,832,349
Shares issued in connection with
reinvestment of distributions	677,684	6,226,155
Shares repurchased	(5,956,644)	(54,481,318)
Net increase	30,327,461	$278,577,186

Note 5: Investment in Putnam Prime Money Market Fund

Each fund invests in Putnam Prime Money Market Fund, an open-end management investment company managed by Putnam Management. Investments in Putnam Prime Money Market Fund are valued at its closing net asset value each business day. Management fees paid by each fund are reduced by an amount equal to the management and administrative services fees paid by Putnam Prime Money Market Fund with respect to assets invested by each fund in Putnam Prime Money Market Fund. For the year ended September 30, 2006, management fees paid were reduced by $120,562, $255,713 and $241,606 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) relating to the funds’ investments in Putnam Prime Money Market Fund. Income distributions earned by the funds are recorded as income in the statement of operations and totaled $4,636,451, $9,883,923 and $9,267,338 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) for the year ended September 30, 2006. During the year ended September 30, 2006, cost of purchases and proceeds of sales of investments in Putnam Prime Money Market Fund aggregated as follows:

	Cost of	Proceeds of
	Purchases	Sales
Growth Portfolio	$825,052,532	$799,813,216
Balanced Portfolio	805,673,004	730,264,806
Conservative Portfolio	497,672,236	501,041,281

Note 6: Regulatory matters and litigation

Putnam Management has entered into agreements with the Securities and Exchange Commission and the Massachusetts Securities Division settling charges connected with excessive short-term trading by Putnam employees and, in the case of the charges brought by the Massachusetts Securities Division, by participants in some Putnam-administered 401(k) plans. Pursuant to these settlement agreements, Putnam Management will pay a total of $193.5 million in penalties and restitution, with $153.5 million being paid to certain open-end funds and their shareholders. The amount will be allocated to shareholders and funds pursuant to a plan developed by an independent consultant, and will be paid following approval of the plan by the SEC and the Massachusetts Securities Division.

The Securities and Exchange Commission’s and Massachusetts Securities Division’s allegations and related matters also serve as the general basis for numerous lawsuits, including purported class action lawsuits filed against Putnam Management and certain related parties, including certain Putnam funds. Putnam Management will bear any costs incurred by Putnam funds in connection with these lawsuits. Putnam Management believes that the likelihood that the pending private lawsuits and purported class action lawsuits will have a material adverse financial impact on the funds is remote, and the pending actions are not likely to materially affect its ability to provide investment management services to its clients, including the Putnam funds.

Pursuant to a settlement with the Securities and Exchange Commission relating to Putnam Management’s brokerage allocation practices, on October 13, 2005 the funds received $134,884, $178,452 and $37,359 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) in proceeds paid by Putnam Management. The funds had accrued a receivable for this amount in the prior fiscal year.

In connection with a settlement between Putnam and the funds’ Trustees, the funds received $1,061,280, $1,518,230 and $916,002 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) during the period from Putnam to address issues relating to the calculation of certain amounts paid by the Putnam mutual funds to Putnam for transfer agent services. This amount is included in Fees waived and reimbursed by Manager or affiliate on the Statement of operations.

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Putnam Management and Putnam Retail Management are named as defendants in a civil suit in which the plaintiffs allege that the management and distribution fees paid by certain Putnam funds were excessive and seek recovery under the Investment Company Act of 1940. Putnam Management and Putnam Retail Management have contested the plaintiffs’ claims and the matter is currently pending in the U.S. District Court for the District of Massachusetts. Based on currently available information, Putnam Management believes that this action is without merit and that it is unlikely to have a material effect on Putnam Management’s and Putnam Retail Management’s ability to provide services to their clients, including the funds.

Note 7: New accounting pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (the “Interpretation”). The Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken by a filer in the filer’s tax return. The Interpretation will become effective for fiscal years beginning after December 15, 2006, but will also apply to tax positions reflected in the funds’ financial statements as of that date. No determination has been made whether the adoption of the Interpretation will require the funds to make any adjustments to their net assets or have any other effect on the funds’ financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (the “Standard”). The Standard defines fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. The Standard applies to fair value measurements already required or permitted by existing standards. The Standard is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Putnam Management is currently evaluating what impact the adoption of the Standard will have on the fund’s financial statements.

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Federal tax information and brokerage
commissions (Unaudited)

Federal tax information

The funds have designated 100.00%, 50.35% and 15.71% of ordinary income distributions (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) as qualifying for the dividends received deduction for corporations.

For their tax year ended September 30, 2006, the funds hereby designate 100.00%, 81.62% and 24.20%, or, in each case, the maximum amount allowable (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively), of their taxable ordinary income distributions as qualified dividends taxed at the individual net capital gain rates.

The Form 1099 you receive in January 2007 will show the tax status of all distributions paid to your account in calendar 2006.

Brokerage commissions

Brokerage commissions are paid to firms that execute trades on behalf of your fund. When choosing these firms, Putnam is required by law to seek the best execution of the trades, taking all relevant factors into consideration, including expected quality of execution and commission rate. Listed below are the largest relationships based upon brokerage commissions for your fund and the other funds in Putnam’s Global Asset Allocation group for the year ended September 30, 2006. The other Putnam mutual funds in this group are Putnam Income Strategies Fund, the ten Putnam RetirementReady Funds, and Putnam VT Global Asset Allocation Fund.

The top five firms that received brokerage commissions for trades executed for the Global Asset Allocation group are (in descending order) Citigroup Global Markets, Morgan Stanley Dean Witter, Goldman Sachs, Merrill Lynch, and Deutsche Bank Securities. Commissions paid to these firms together represented approximately 55% of the total brokerage commissions paid for the year ended September 30, 2006.

Commissions paid to the next 10 firms together represented approximately 27% of the total brokerage commissions paid during the period. These firms are (in alphabetical order) Bank of America, Bear Stearns & Company, Credit Suisse First Boston, First Albany Corporation, Investment Technology, JPMorgan Clearing, Lehman Brothers, UBS Warburg, Wachovia Securities, and Weeden & Company.

Commission amounts do not include “mark-ups” paid on bond or derivative trades made directly with a dealer. Additional information about brokerage commissions is available on the Securities and Exchange Commission (SEC) Web site at www.sec.gov. Putnam funds disclose commissions by firm to the SEC in semiannual filings on Form N-SAR.

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About the Trustees

Jameson A. Baxter (Born 1943), Trustee since 1994, Vice Chairman since 2005

Ms. Baxter is the President of Baxter Associates, Inc., a private investment firm that she founded in 1986.

Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Banta Corporation (a printing and digital imaging firm), Ryerson Tull, Inc. (a steel service corporation), the Mutual Fund Directors Forum, Advocate Health Care and BoardSource, formerly the National Center for Nonprofit Boards. She is Chairman Emeritus of the Board of Trustees, Mount Holyoke College, having served as Chairman for five years and as a board member for thirteen years. Until 2002, Ms. Baxter was a Director of Intermatic Corporation (a manufacturer of energy control products).

Ms. Baxter has held various positions in investment banking and corporate finance, including Vice President and Principal of the Regency Group, and Vice President of and Consultant to First Boston Corporation. She is a graduate of Mount Holyoke College.

Charles B. Curtis (Born 1940), Trustee since 2001

Mr. Curtis is President and Chief Operating Officer of the Nuclear Threat Initiative (a private foundation dealing with national security issues) and serves as Senior Advisor to the United Nations Foundation.

Mr. Curtis is a member of the Council on Foreign Relations and the Trustee Advisory Council of the Applied Physics Laboratory, Johns Hopkins University. Until 2003, Mr. Curtis was a member of the Electric Power Research Institute Advisory Council and the University of Chicago Board of Governors for Argonne National Laboratory. Prior to 2002, Mr. Curtis was a Member of the Board of Directors of the Gas Technology Institute and the Board of Directors of the Environment and Natural Resources Program Steering Committee, John F. Kennedy School of Government, Harvard University. Until 2001, Mr. Curtis was a member of the Department of Defense Policy Board and Director of EG&G Technical Services, Inc. (a fossil energy research and development support company).

From August 1997 to December 1999, Mr. Curtis was a Partner at Hogan & Hartson L.L.P., a Washington, D.C. law firm. Prior to May 1997, Mr. Curtis was Deputy Secretary of Energy and Under Secretary of the U.S. Department of Energy. He served as Chairman of the Federal Energy Regulatory Commission from 1977 to 1981 and has held positions on the staff of the U.S. House of Representatives, the U.S. Treasury Department, and the SEC.

Myra R. Drucker (Born 1948), Trustee since 2004

Ms. Drucker is Chair of the Board of Trustees of Commonfund (a not-for-profit firm specializing in asset management for educational endowments and foundations), Vice Chair of the Board of Trustees of Sarah Lawrence College, and a member of the Investment Committee of the Kresge Foundation (a charitable trust). She is also a director of New York Stock Exchange LLC, a wholly-owned subsidiary of the publicly-traded NYSE Group, Inc. She is an advisor to Hamilton Lane LLC and RCM Capital Management (investment management firms).

Ms. Drucker is an ex-officio member of the New York Stock Exchange (NYSE) Pension Managers Advisory Committee, having served as Chair for seven years and a member of the Executive Committee of the Committee on Investment of Employee Benefit Assets.

Until August 31, 2004, Ms. Drucker was Managing Director and a member of the Board of Directors of General Motors Asset Management and Chief Investment Officer of General Motors Trust Bank. Ms. Drucker also served as a member of the NYSE Corporate Accountability and Listing Standards Committee and the NYSE/NASD IPO Advisory Committee.

Prior to joining General Motors Asset Management in 2001, Ms. Drucker held various executive positions in the investment management industry. Ms. Drucker served as Chief Investment Officer of Xerox Corporation (a technology and service company in the document industry), where she was responsible for the investment of the company’s pension assets. Ms. Drucker was also Staff Vice President and Director of Trust Investments for International Paper (a paper, paper distribution, packaging and forest products company) and previously served as Manager of Trust Investments for Xerox Corporation. Ms. Drucker received a B.A. degree in Literature and Psychology from Sarah Lawrence College and pursued graduate studies in economics, statistics and portfolio theory at Temple University.

John A. Hill (Born 1942), Trustee since 1985 and Chairman since 2000

Mr. Hill is Vice Chairman of First Reserve Corporation, a private equity buyout firm that specializes in energy investments in the diversified worldwide energy industry.

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Mr. Hill is a Director of Devon Energy Corporation, TransMontaigne Oil Company and various private companies controlled by First Reserve Corporation, as well as Chairman of TH Lee, Putnam Investment Trust (a closed-end investment company advised by an affiliate of Putnam Management). He is also a Trustee of Sarah Lawrence College. Until 2005, he was a Director of Continuum Health Partners of New York.

Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held executive positions in investment banking and investment management with several firms and with the federal government, including Deputy Associate Director of the Office of Management and Budget and Deputy Director of the Federal Energy Administration. He is active in various business associations, including the Economic Club of New York, and lectures on energy issues in the United States and Europe. Mr. Hill holds a B.A. degree in Economics from Southern Methodist University and pursued graduate studies there as a Woodrow Wilson Fellow.

Paul L. Joskow (Born 1947), Trustee since 1997

Dr. Joskow is the Elizabeth and James Killian Professor of Economics and Management, and Director of the Center for Energy and Environmental Policy Research at the Massachusetts Institute of Technology.

Dr. Joskow serves as a Director of National Grid plc (a UK-based holding company with interests in electric and gas transmission and distribution and telecommunications infrastructure) and TransCanada Corporation (an energy company focused on natural gas transmission and power services). He also serves on the Board of Overseers of the Boston Symphony Orchestra. Prior to February 2005, he served on the board of the Whitehead Institute for Biomedical Research (a non-profit research institution) and has been President of the Yale University Council since 1993. Prior to February 2002, he was a Director of State Farm Indemnity Company (an automobile insurance company), and, prior to March 2000, he was a Director of New England Electric System (a public utility holding company).

Dr. Joskow has published five books and numerous articles on topics in industrial organization, government regulation of industry, and competition policy. He is active in industry restructuring, environmental, energy, competition and privatization policies — serving as an advisor to governments and corporations worldwide. Dr. Joskow holds a Ph.D. and M. Phil from Yale University and a B.A. from Cornell University.

Elizabeth T. Kennan (Born 1938), Trustee since 1992

Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse and cattle breeding). She is President Emeritus of Mount Holyoke College.

Dr. Kennan served as Chairman and is now Lead Director of Northeast Utilities. Until 2005, she was a Director of Talbots, Inc. She has served as Director on a number of other boards, including Bell Atlantic, Chastain Real Estate, Shawmut Bank, Berkshire Life Insurance and Kentucky Home Life Insurance. She is a Trustee of the National Trust for Historic Preservation, of Centre College and of Midway College in Midway, Kentucky. Until 2006, she was a member of The Trustees of Reservations. Dr. Kennan has served on the oversight committee of the Folger Shakespeare Library, as President of Five Colleges Incorporated, as a Trustee of Notre Dame University and is active in various educational and civic associations.

As a member of the faculty of Catholic University for twelve years, until 1978, Dr. Kennan directed the post-doctoral program in Patristic and Medieval Studies, taught history and published numerous articles. Dr. Kennan holds a Ph.D. from the University of Washington in Seattle, an M.S. from St. Hilda’s College at Oxford University and an A.B. from Mount Holyoke College. She holds several honorary doctorates.

Kenneth R. Leibler (Born 1949), Trustee since 2006

Mr. Leibler is founding Chairman of the Boston Options Exchange, the nation’s newest electronic marketplace for the trading of derivative securities.

Mr. Leibler currently serves as a Trustee of Beth Israel Deaconess Hospital in Boston. He is also lead director of Ruder Finn Group, a global communications and advertising firm. Since 2003, he has served as a director of the Optimum Funds group. Prior to October 2006, he served as a director of ISO New England, the organization responsible for the operation of the electric generation system in the New England states. Prior to 2000, he was a director of the Investment Company Institute in Washington, D.C.

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Prior to January 2005, Mr. Leibler served as Chairman and Chief Executive Officer of the Boston Stock Exchange. Prior to January 2000, he served as President and Chief Executive Officer of Liberty Financial Companies, a publicly traded diversified asset management organization. Prior to June 1990, he served as President and Chief Operating Officer of the American Stock Exchange, the youngest person in Exchange history to hold the title of President. Prior to serving as Amex President, he held the position of Chief Financial Officer, and headed its management and marketing operations. Mr. Leibler graduated magna cum laude in economics from Syracuse University, where he was elected Phi Beta Kappa.

Robert E. Patterson (Born 1945), Trustee since 1984

Mr. Patterson is Senior Partner of Cabot Properties, L.P. and Chairman of Cabot Properties, Inc. (a private equity firm investing in commercial real estate).

Mr. Patterson serves as Chairman Emeritus and Trustee of the Joslin Diabetes Center and as a Director of Brandywine Trust Group, LLC. Prior to June 2003, he was a Trustee of Sea Education Association. Prior to December 2001, he was President and Trustee of Cabot Industrial Trust (a publicly traded real estate investment trust). Prior to February 1998, he was Executive Vice President and Director of Acquisitions of Cabot Partners Limited Partnership (a registered investment adviser involved in institutional real estate investments). Prior to 1990, he served as Executive Vice President of Cabot, Cabot & Forbes Realty Advisors, Inc. (the predecessor company of Cabot Partners).

Mr. Patterson practiced law and held various positions in state government and was the founding Executive Director of the Massachusetts Industrial Finance Agency. Mr. Patterson is a graduate of Harvard College and Harvard Law School.

W. Thomas Stephens (Born 1942), Trustee since 1997

Mr. Stephens is Chairman and Chief Executive Officer of Boise Cascade, L.L.C. (a paper, forest products and timberland assets company).

Until 2005, Mr. Stephens was a director of TransCanadaPipelines, Ltd. Until 2004, Mr. Stephens was a Director of Xcel Energy Incorporated (a public utility company), Qwest Communications, and Norske Canada, Inc. (a paper manufacturer). Until 2003, Mr. Stephens was a Director of Mail-Well, Inc. (a diversified printing company). He served as Chairman of Mail-Well until 2001 and as CEO of MacMillan-Bloedel, Ltd. (a forest products company) until 1999.

Prior to 1996, Mr. Stephens was Chairman and Chief Executive Officer of Johns Manville Corporation. He holds B.S. and M.S. degrees from the University of Arkansas.

Richard B. Worley (Born 1945), Trustee since 2004

Mr. Worley is Managing Partner of Permit Capital LLC, an investment management firm.

Mr. Worley serves on the Executive Committee of the University of Pennsylvania Medical Center, is a Trustee of The Robert Wood Johnson Foundation (a philanthropic organization devoted to health care issues) and is a Director of The Colonial Williamsburg Foundation (a historical preservation organization). Mr. Worley also serves on the investment committees of Mount Holyoke College and World Wildlife Fund (a wildlife conservation organization).

Prior to joining Permit Capital LLC in 2002, Mr. Worley served as Chief Strategic Officer of Morgan Stanley Investment Management. He previously served as President, Chief Executive Officer and Chief Investment Officer of Morgan Stanley Dean Witter Investment Management and as a Managing Director of Morgan Stanley, a financial services firm. Mr. Worley also was the Chairman of Miller Anderson & Sherrerd, an investment management firm.

Mr. Worley holds a B.S. degree from University of Tennessee and pursued graduate studies in economics at the University of Texas.

Charles E. Haldeman, Jr.* (Born 1948), Trustee since 2004

Mr. Haldeman is President and Chief Executive Officer of Putnam, LLC (“Putnam Investments”). He is a member of Putnam Investments’ Executive Board of Directors and Advisory Council. Prior to November 2003, Mr. Haldeman served as Co-Head of Putnam Investments’ Investment Division.

Prior to joining Putnam Investments in 2002, Mr. Haldeman held executive positions in the investment management industry. He previously served as Chief Executive Officer of Delaware Investments and President & Chief Operating Officer of United Asset Management. Mr. Haldeman was also a partner and director of Cooke & Bieler, Inc. (an investment management firm).

Mr. Haldeman currently serves on the Board of Governors of the Investment Company Institute and as a Trustee of Dartmouth College, and he is a member of the Partners HealthCare Systems Investment Committee. He is a graduate of Dartmouth College, Harvard Law School and Harvard Business School. Mr. Haldeman is also a Chartered Financial Analyst (CFA) charterholder.

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George Putnam, III* (Born 1951), Trustee since 1984 and President since 2000

Mr. Putnam is President of New Generation Research, Inc. (a publisher of financial advisory and other research services), and of New Generation Advisers, Inc. (a registered investment advisor to private funds). Mr. Putnam founded the New Generation companies in 1986.

Mr. Putnam is a Director of The Boston Family Office, LLC (a registered investment adviser). He is a Trustee of St. Mark’s School and Shore Country Day School, and until 2002 was a Trustee of the Sea Education Association.

Mr. Putnam previously worked as an attorney with the law firm of Dechert LLP (formerly known as Dechert Price & Rhoads) in Philadelphia. He is a graduate of Harvard College, Harvard Business School and Harvard Law School.

The address of each Trustee is One Post Office Square, Boston, MA 02109.

As of September 30, 2006, there were 108 Putnam Funds. All Trustees serve as Trustees of all Putnam funds.

Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 72, death, or removal.

* Trustees who are or may be deemed to be “interested persons” (as defined in the Investment Company Act of 1940) of the fund, Putnam Management, Putnam Retail Management, or Marsh & McLennan Companies, Inc., the parent company of Putnam, LLC and its affiliated companies. Messrs. Haldeman and Putnam, III are deemed “interested persons” by virtue of their positions as officers of the fund, Putnam Management or Putnam Retail Management and as shareholders of Marsh & McLennan Companies, Inc. Mr. Putnam, III is the President of your fund and each of the other Putnam funds. Mr. Haldeman is President and Chief Executive Officer of Putnam Investments.

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Officers

In addition to George Putnam, III, the other officers of the fund are shown below:

Charles E. Porter (Born 1938)	Richard S. Robie, III (Born 1960)
Executive Vice President, Principal Executive Officer, Associate	Vice President
Treasurer, and Compliance Liaison	Since 2004
Since 1989
	Senior Managing Director, Putnam Investments, Putnam Management
Jonathan S. Horwitz (Born 1955)	and Putnam Retail Management. Prior to 2003, Senior Vice President,
Senior Vice President and Treasurer	United Asset Management Corporation
Since 2004
	Francis J. McNamara, III (Born 1955)
Prior to 2004, Managing Director,	Vice President and Chief Legal Officer
Putnam Investments	Since 2004
Steven D. Krichmar (Born 1958)	Senior Managing Director, Putnam Investments, Putnam Management
Vice President and Principal Financial Officer	and Putnam Retail Management. Prior to 2004, General Counsel,
Since 2002	State Street Research & Management Company
Senior Managing Director, Putnam Investments.	Charles A. Ruys de Perez (Born 1957)
Prior to July 2001, Partner, PricewaterhouseCoopers LLP	Vice President and Chief Compliance Officer
	Since 2004
Michael T. Healy (Born 1958)
Assistant Treasurer and Principal Accounting Officer	Managing Director, Putnam Investments
Since 2000
	Mark C. Trenchard (Born 1962)
Managing Director, Putnam Investments	Vice President and BSA Compliance Officer
	Since 2002
Beth S. Mazor (Born 1958)
Vice President	Managing Director, Putnam Investments
Since 2002
	Judith Cohen (Born 1945)
Managing Director, Putnam Investments	Vice President, Clerk and Assistant Treasurer
	Since 1993
James P. Pappas (Born 1953)
Vice President	Wanda M. McManus (Born 1947)
Since 2004	Vice President, Senior Associate Treasurer and Assistant Clerk
	Since 2005
Managing Director, Putnam Investments and Putnam Management.
During 2002, Chief Operating Officer, Atalanta/Sosnoff Management	Nancy E. Florek (Born 1957)
Corporation; prior to 2001, President and Chief Executive Officer,	Vice President, Assistant Clerk, Assistant Treasurer
UAM Investment Services, Inc.	and Proxy Manager
	Since 2005

The address of each Officer is One Post Office Square, Boston, MA 02109.

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The Putnam Family of Funds

The following is a list of Putnam’s open-end mutual funds offered to the public. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus containing this and other information for any Putnam fund or product, call your financial advisor at 1-800-225-1581 and ask for a prospectus. Please read the prospectus carefully before investing.

Growth funds	Tax-free income funds
Discovery Growth Fund	AMT-Free Insured Municipal Fund
Growth Opportunities Fund	Tax Exempt Income Fund
Health Sciences Trust	Tax Exempt Money Market Fund§
International New Opportunities Fund*	Tax-Free High Yield Fund
New Opportunities Fund
OTC & Emerging Growth Fund	State tax-free income funds:
Small Cap Growth Fund*	Arizona, California, Florida, Massachusetts, Michigan, Minnesota,
Vista Fund	New Jersey, New York, Ohio, and Pennsylvania
Voyager Fund
	Asset allocation funds
Blend funds	Income Strategies Fund
Capital Appreciation Fund	Putnam Asset Allocation Funds — three investment portfolios that
Capital Opportunities Fund*	spread your money across a variety of stocks, bonds, and money
Europe Equity Fund*	market investments.
Global Equity Fund*
Global Natural Resources Fund*	The three portfolios:
International Capital Opportunities Fund*	Asset Allocation: Balanced Portfolio
International Equity Fund*	Asset Allocation: Conservative Portfolio
Investors Fund	Asset Allocation: Growth Portfolio
Research Fund
Tax Smart Equity Fund®	Putnam RetirementReady® Funds
Utilities Growth and Income Fund	Putnam RetirementReady Funds — ten investment portfolios that
	offer diversification among stocks, bonds, and money market instru-
Value funds	ments and adjust to become more conservative over time based on a
Classic Equity Fund	target date for withdrawing assets.
Convertible Income-Growth Trust
Equity Income Fund	The ten funds:
The George Putnam Fund of Boston	Putnam RetirementReady 2050 Fund
The Putnam Fund for Growth and Income	Putnam RetirementReady 2045 Fund
International Growth and Income Fund*	Putnam RetirementReady 2040 Fund
Mid Cap Value Fund	Putnam RetirementReady 2035 Fund
New Value Fund	Putnam RetirementReady 2030 Fund
Small Cap Value Fund*†	Putnam RetirementReady 2025 Fund
	Putnam RetirementReady 2020 Fund
Income funds	Putnam RetirementReady 2015 Fund
American Government Income Fund	Putnam RetirementReady 2010 Fund
Diversified Income Trust	Putnam RetirementReady Maturity Fund
Floating Rate Income Fund
Global Income Trust*
High Yield Advantage Fund*†	* A 1% redemption fee on total assets redeemed or exchanged within 90 days
High Yield Trust*	of purchase may be imposed for all share classes of these funds.
Income Fund
Limited Duration Government Income Fund	† Closed to new investors.
Money Market Fund‡
U.S. Government Income Trust	‡ 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 fund
	seeks to preserve your investment at $1.00 per share, it is possible to lose money by
	investing in the fund.
	With the exception of money market funds, a 1% redemption fee may be applied
	to shares exchanged or sold within 7 days of purchase (90 days, for certain funds).
	Check your account balances and the most recent month-end performance at
	www.putnam.com.

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Services for shareholders

Investor services

Help your investment grow Set up a program for systematic investing from a Putnam fund or from your own savings or checking account. (Regular investing does not guarantee a profit or protect against loss in a declining market.)

 Switch funds easily You can move money from one Putnam fund to another within the same class of shares without a service charge.

This privilege is subject to change or termination. An exchange of funds may result in a taxable event. In addition, a 1% redemption fee will be applied to shares exchanged or sold within 7 days of purchase, and, for certain funds, this fee applies on total assets redeemed or exchanged within 90 days of purchase.

Access your money easily You can have 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. Class B and class C shares carry a sales charge that is applied to certain withdrawals.

How to buy additional shares You may buy shares through your financial advisor or directly from Putnam. To open an account by mail, send a check made payable to the name of the fund along with a completed fund application. To add to an existing account, complete the investment slip found at the top of your Confirmation of Activity statement and return it with a check payable to your fund.

For more information

Visit www.putnam.com A secure section of our Web site contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.

Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.

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Fund information

Founded over 65 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 mutual funds in growth, value, blend, fixed income, and international.

Investment Manager	Robert E. Patterson	Francis J. McNamara, III
Putnam Investment	George Putnam, III	Vice President and Chief Legal Officer
Management, LLC	W. Thomas Stephens
One Post Office Square	Richard B. Worley	Charles A. Ruys de Perez
Boston, MA 02109		Vice President and Chief Compliance Officer
	Officers
Marketing Services	George Putnam, III	Mark C. Trenchard
Putnam Retail Management	President	Vice President and BSA Compliance Officer
One Post Office Square
Boston, MA 02109	Charles E. Porter	Judith Cohen
	Executive Vice President, Principal Executive	Vice President, Clerk and Assistant Treasurer
Custodian	Officer, Associate Treasurer, and
Putnam Fiduciary Trust Company	Compliance Liaison	Wanda M. McManus
		Vice President, Senior Associate Treasurer
Legal Counsel	Jonathan S. Horwitz	and Assistant Clerk
Ropes & Gray LLP	Senior Vice President and Treasurer
		Nancy E. Florek
Independent Registered Public	Steven D. Krichmar	Vice President, Assistant Clerk,
Accounting Firm	Vice President and Principal Financial Officer	Assistant Treasurer and Proxy Manager
PricewaterhouseCoopers LLP
	Michael T. Healy
Trustees	Assistant Treasurer and
John A. Hill, Chairman	Principal Accounting Officer
Jameson Adkins Baxter, Vice Chairman
Charles B. Curtis	Beth S. Mazor
Myra R. Drucker	Vice President
Charles E. Haldeman, Jr.
Paul L. Joskow	James P. Pappas
Elizabeth T. Kennan	Vice President
Kenneth R. Leibler
	Richard S. Robie, III
	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, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit www.putnam.com. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.

Item 2. Code of Ethics:

(a) The fund’s principal executive, financial and accounting officers are employees of Putnam Investment Management, LLC, the Fund's investment manager. As such they are subject to a comprehensive Code of Ethics adopted and administered by Putnam Investments which is designed to protect the interests of the firm and its clients. The Fund has adopted a Code of Ethics which incorporates the Code of Ethics of Putnam Investments with respect to all of its officers and Trustees who are employees of Putnam Investment Management, LLC. For this reason, the Fund has not adopted a separate code of ethics governing its principal executive, financial and accounting officers.

(c) None

Item 3. Audit Committee Financial Expert:

The Funds' Audit and Compliance Committee is comprised solely of Trustees who are "independent" (as such term has been defined by the Securities and Exchange Commission ("SEC") in regulations implementing Section 407 of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe that each of the members of the Audit and Compliance Committee also possess a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualify them for service on the Committee. In addition, the Trustees have determined that each of Mr. Patterson, Mr. Stephens, Mr. Leibler and Mr. Hill meets the financial literacy requirements of the New York Stock Exchange's rules and qualifies as an "audit committee financial expert" (as such term has been defined by the Regulations) based on their review of his pertinent experience and education. Certain other Trustees, although not on the Audit and Compliance Committee, would also qualify as "audit committee financial experts." The SEC has stated that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit and Compliance Committee and the Board of Trustees in the absence of such designation or identification.

Item 4. Principal Accountant Fees and Services:

The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund’s independent auditor:

Fiscal		Audit-
year	Audit	Related	Tax	All Other
ended	Fees	Fees	Fees	Fees
September 30, 2006	$572,246*	$1,197	$63,546	$12,987
September 30, 2005	$279,662*	$--	$49,186	$ 2,964

* Includes fees of $3,808 and $2,435 billed by the fund’s independent auditor to the fund for audit procedures necessitated by regulatory and litigation matters for the fiscal years ended September 30, 2006 and September 30, 2005, respectively. These fees were reimbursed to the fund by Putnam Investment Management, LLC (“Putnam Management”).

For the fiscal years ended September 30, 2006 and September 30, 2005, the fund’s independent auditor billed aggregate non-audit fees in the amounts of $359,410 and $239,897 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.

Audit Fees represent fees billed for the fund’s last two fiscal years.

Audit-Related Fees represent fees billed in the fund’s last two fiscal years for services traditionally performed by the fund’s auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation.

Tax Fees represent fees billed in the fund’s last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities.

All Other Fees represent fees billed for services relating to valuation of derivative securities, an analysis of the funds proposed market timing distribution plan and an analysis of recordkeeping fees.

Pre-Approval Policies of the Audit and Compliance Committee. The Audit and Compliance Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds’ independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures.

The Audit and Compliance Committee also has adopted a policy to pre-approve the engagement by Putnam Management and certain of its affiliates of the funds’ independent auditors, even in circumstances where pre-approval is not required by applicable law. Any such requests by Putnam Management or certain of its affiliates are typically submitted in writing to the Committee and explain, among other things, the nature of the proposed engagement, the estimated fees, and why this work should be performed by that particular audit firm as opposed to another one. In reviewing such requests, the Committee considers, among other things, whether the provision of such services by the audit firm are compatible with the independence of the audit firm.

The following table presents fees billed by the fund’s independent auditor for services required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.

Fiscal	Audit-		All	Total
year	Related	Tax	Other	Non-Audit
ended	Fees	Fees	Fees	Fees
September 30,
2006	$ -	$ 153,160	$ -	$ -
September
30, 2005	$ -	$ -	$ -	$ -

Item 5. Audit Committee of Listed Registrants

Not applicable

Item 6. Schedule of Investments:

The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.

Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:

Not applicable

Item 8. Portfolio Managers of Closed-End Investment Companies

Not Applicable

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:

Not applicable

Item 10. Submission of Matters to a Vote of Security Holders:

Not applicable

Item 11. Controls and Procedures:

(a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.

(b) Changes in internal control over financial reporting: Not applicable

Item 12. Exhibits:

(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith.

(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.

(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Putnam Asset Allocation Funds

By (Signature and Title):

/s/Michael T. Healy
Michael T. Healy
Principal Accounting Officer

Date: December 5, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title):

/s/Charles E. Porter
Charles E. Porter
Principal Executive Officer

Date: December 5, 2006

By (Signature and Title):

/s/Steven D. Krichmar
Steven D. Krichmar
Principal Financial Officer

Date: December 5, 2006