SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


            X    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
         -------
                 THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2001
                                                -------------

                     TRANSITION REPORT PURSUANT TO SECTION 13 OR
         ---------
                 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from to

                         Commission file number 1-14762

                            THE SERVICEMASTER COMPANY
             (Exact name of registrant as specified in its charter)

         Delaware                                         36-3858106
(State or other jurisdiction of               (IRS Employer Identification No.)
incorporation or organization)

One ServiceMaster Way, Downers Grove, Illinois                 60515-1700
(Address of principal executive offices)                       (Zip Code)

                                  630-271-1300
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X  No     .
                                      ---   ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock: 299,797,000 shares of common stock on August 10, 2001.








<PAGE>








                                  TABLE OF CONTENTS

                                                                            Page
                                                                             No.

THE SERVICEMASTER COMPANY (Registrant) -


Part I.  Financial Information
-------  ---------------------
Consolidated Statements of Income for the three and six
 months ended June 30, 2001 and June 30, 2000                                  2

Consolidated Statements of Financial Position
 as of June 30, 2001 and December 31, 2000                                     3

Consolidated Statements of Cash Flows for the six months
 ended June 30, 2001 and June 30, 2000                                         4

Notes to Consolidated Financial Statements                                     5

Management Discussion and Analysis of Financial Position
 and Results of Operations                                                     9


Part II.  Other Information
--------  -----------------
Item 1:  Legal Proceedings                                                    15

Item 2:  Changes in Securities and Use of Proceeds                            15

Item 4:  Submission of Matters to a Vote of Security Holders                  16

Item 6:  Exhibits and Reports on Form 8-K                                     17

Signature







                                       1
<PAGE>











                                             PART I. FINANCIAL INFORMATION

                                               THE SERVICEMASTER COMPANY
                                           Consolidated Statements of Income
                                         (In thousands, except per share data)

<TABLE>

                                                                       Three Months Ended                Six Months Ended
                                                                           June 30,                           June 30,
                                                                       2001           2000            2001          2000
                                                                   ------------   -----------    -----------    -----------
<S>                                                                <C>            <C>            <C>            <C>
Operating Revenue ..............................................   $ 1,648,941    $ 1,614,695    $ 2,978,603    $ 2,955,579

Operating Costs and Expenses:
Cost of services rendered and products sold.....................     1,265,964      1,225,043      2,337,584      2,309,859
Selling and administrative expenses.............................       264,508        249,435        453,409        418,631
                                                                   -----------    -----------    -----------    -----------
Total operating costs and expenses .............................     2,790,993      1,530,472      1,474,478      2,728,490
                                                                   -----------    -----------    -----------    -----------

Operating Income ...............................................       118,469        140,217        187,610        227,089

Non-operating  Expense (Income):
Interest expense ...............................................        31,825         35,680         66,399         67,545
Interest and investment income..................................        (3,745)        (6,756)        (7,263)       (10,649)
Minority interest and other expense (income), net...............         2,838         (3,422)         1,064         (6,362)
                                                                    -----------    -----------    -----------    -----------

Income before Income Taxes and Extraordinary Item ..............        87,551        114,715        127,410        176,555
Provision for income taxes......................................        36,838         48,400         53,473         74,186
                                                                    -----------    -----------    -----------    -----------
Income before Extraordinary Item................................        50,713         66,315         73,937        102,369

Extraordinary Item - gain on repurchase of bonds, net of
   $4.2 million in income taxes (1).............................           -              -           (6,003)           -
                                                                    -----------    -----------    -----------    -----------

Net Income .....................................................   $    50,713    $    66,315    $    79,940    $   102,369
                                                                   ============   ============   ============   ============

Per Share:(2)
Basic earnings per share, before extraordinary item.............          $.17           $.22           $.25           $.34
Extraordinary gain on repurchase of bonds(1)....................            -              -             .02             -
                                                                   ------------   ------------   ------------   ------------
Basic earnings per share........................................          $.17           $.22           $.27           $.34
                                                                   ============   ============   ============   ============


Diluted earnings per share, before extraordinary item...........          $.17           $.21           $.25           $.33
Extraordinary gain on repurchase of bonds(1)....................            -              -             .02             -
                                                                   ------------   ------------   ------------   ------------
Diluted earnings per share......................................          $.17           $.21           $.27           $.33
                                                                   ============   ============   ============   ============

Dividends per share.............................................          $.10           $.09           $.20           $.18
                                                                   ============   ============   ============   ============
</TABLE>

(1) In the first quarter of 2001, the Company paid approximately $35 million to
purchase $45 million, a portion, of its public debt securities. As a result, the
Company recognized an extraordinary gain on the early extinguishment of debt.

(2) Basic earnings per share are calculated based on 298,547 shares and 304,391
shares for the three months ended June 30, 2001 and 2000, respectively, and
298,170 shares and 305,030 shares for the six months ended June 30, 2001 and
2000, respectively. Diluted earnings per share are calculated based on 310,764
shares and 308,475 shares for the three months ended June 30, 2001 and 2000,
respectively, and 310,300 shares and 309,307 shares for the six months ended
June 30, 2001 and 2000, respectively.


                                 See Notes to Consolidated Financial Statements



                                       2
<PAGE>





                                       THE SERVICEMASTER COMPANY
                             Consolidated Statements of Financial Position
                                            (In thousands)
<TABLE>

                                                                                                   As of
Assets                                                                                 June 30,           December 31,
                                                                                         2001                 2000
                                                                                    ------------         -------------
<S>                                                                                 <C>                  <C>
Current Assets:
Cash and cash equivalents .......................................................   $    32,529          $    44,386
Marketable securities ...........................................................        60,537               56,531
Receivables less allowance of $39,054 and $37,970, respectively .................       533,558              556,941
Inventories .....................................................................       101,035               88,152
Prepaid expenses and other assets ...............................................       251,042              168,403
Deferred taxes and tax receivables ..............................................        49,562               70,346
                                                                                    -----------          -----------
       Total current assets .....................................................     1,028,263              984,759
                                                                                    -----------          -----------

Property and Equipment:
   At cost ......................................................................       684,352              681,569
   Less: accumulated depreciation ...............................................       393,688              375,585
                                                                                    -----------          -----------
     Net property and equipment .................................................       290,664              305,984
                                                                                    -----------          -----------

Intangible assets, primarily trade names and goodwill,
  net of accumulated amortization of $464,699 and $422,899, respectively ........     2,615,827            2,521,633
Notes receivable, long-term securities, and other assets ........................       157,413              155,292
                                                                                    -----------          -----------

       Total assets .............................................................   $ 4,092,167          $ 3,967,668
                                                                                    ===========          ===========

Liabilities and Shareholders' Equity

Current Liabilities:
Accounts payable ................................................................   $   150,124          $   147,788
Income taxes payable ............................................................        51,184                1,235
Accrued liabilities .............................................................       294,976              291,852
Deferred revenues ...............................................................       394,004              325,246
Current portion of long-term obligations ........................................       326,146               61,360
                                                                                    -----------          -----------
       Total current liabilities ................................................     1,216,434              827,481
                                                                                    -----------          -----------

Long-Term Debt ..................................................................     1,376,947            1,756,757
Deferred Tax Liability ..........................................................       114,073              115,150
Other Long-Term Obligations .....................................................       101,651              100,759
Minority Interest ...............................................................       108,172                5,933

Commitments and Contingencies

Shareholders' Equity:
Common stock $0.01 par value, authorized 1 billion shares; issued
     and outstanding 299,656 and 298,474 shares, respectively ...................         2,997                2,985
Additional paid-in capital ......................................................     1,023,742            1,030,399
Retained earnings ...............................................................       321,355              301,207
Accumulated other comprehensive income ..........................................       (14,139)              (2,832)
Restricted stock ................................................................        (1,543)              (1,829)
Treasury stock ..................................................................      (157,522)            (168,342)
                                                                                    -----------          -----------
       Total shareholders' equity ...............................................     1,174,890            1,161,588
                                                                                    -----------          -----------
       Total liabilities and shareholders' equity ...............................   $ 4,092,167          $ 3,967,668
                                                                                    ===========          ===========


</TABLE>



                        See Notes to Consolidated Financial Statements



                                       3
<PAGE>





                                       THE SERVICEMASTER COMPANY
                                 Consolidated Statements of Cash Flows
                                             (In thousands)
<TABLE>

                                                                                              Six Months Ended
                                                                                                   June 30,
                                                                                           2001               2000
                                                                                    ---------------     ---------------
<S>                                                                                    <C>                <C>
Cash and Cash Equivalents at January 1 .............................................   $  44,386          $  59,834

Cash Flows from Operations:
Net Income .........................................................................      79,940            102,369
      Adjustments to reconcile net income to net cash flows from operations:
        Depreciation ...............................................................      38,112             39,286
        Amortization ...............................................................      41,800             36,714
     Tax refund from prior years payments ..........................................      21,000             22,000
     Deferred income taxes .........................................................      48,752             64,410
         Change in working capital, net of acquisitions:
            Receivables ............................................................     (70,988)           (84,678)

            Sale of receivables ....................................................     100,000               --
            Inventories and other current assets ...................................     (92,950)           (76,408)
            Accounts payable .......................................................       2,164              1,551
            Deferred revenues ......................................................      69,250             43,355
            Accrued liabilities ....................................................       8,997            (24,569)
         Other, net ................................................................         704             (1,256)
                                                                                       ---------          ---------
Net Cash Provided from Operations ..................................................     246,781            122,774
                                                                                       ---------          ---------


 Memo:  Net Cash Provided from Operations (Excluding Sale of Receivables) ..........     146,781            122,774

Cash Flows from Investing Activities:
      Property additions ...........................................................     (31,986)           (39,068)
      Sale of equipment and other assets ...........................................       8,070              2,937
      Business acquisitions, net of cash acquired ..................................     (21,065)          (113,510)
      Proceeds from business sales and minority interests ..........................      12,542             17,331
      Notes receivable, financial investments and securities .......................     (23,003)           (16,841)
                                                                                       ---------          ---------
Net Cash Used for Investing Activities .............................................     (55,442)          (149,151)
                                                                                       ---------          ---------

Cash Flows from Financing Activities:
      Net borrowings (payments) ....................................................    (147,313)           119,212
      Purchase of ServiceMaster stock ..............................................      (1,308)           (55,704)
      Shareholders' dividends ......................................................     (59,792)           (55,217)

      Other ........................................................................       5,217              5,729
                                                                                       ---------          ---------
Net Cash Provided from (Used for) Financing Activities .............................    (203,196)            14,020
                                                                                       ---------          ---------

Cash Decrease during the Period ....................................................     (11,857)           (12,357)
                                                                                       ---------          ---------

Cash and Cash Equivalents at June 30 ...............................................   $  32,529          $  47,477
                                                                                       =========          =========
</TABLE>

                          See Notes to Consolidated Financial Statements



                                       4
<PAGE>





                              THE SERVICEMASTER COMPANY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1:  The  consolidated   financial   statements  include  the  accounts  of
ServiceMaster and its significant subsidiaries, collectively referred to as "the
Company".  Intercompany  transactions  and  balances  have  been  eliminated  in
consolidation.

NOTE 2: The consolidated financial statements included herein have been prepared
by the  Company  pursuant to the rules and  regulations  of the  Securities  and
Exchange  Commission.  Certain  information  and footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations.  However, the Company believes that the disclosures are adequate to
make the  information  presented  not  misleading.  It is  suggested  that these
consolidated  financial  statements be read in conjunction with the consolidated
financial  statements  and the notes thereto  included in the  Company's  latest
Annual  Report to  Shareholders  and the  Annual  Report to the  Securities  and
Exchange  Commission  on Form 10-K for the year ended  December 31, 2000. In the
opinion  of the  Company,  all  adjustments  necessary  to  present  fairly  the
financial position of The ServiceMaster Company as of June 30, 2001 and December
31,  2000,  and the results of  operations  for the three and six month  periods
ended June 30, 2001 and 2000,  and the cash flows for the six months  ended June
30,  2001  and  2000  have  been  included.  The  preparation  of the  financial
statements  requires  management  to  make  certain  estimates  and  assumptions
required under generally  accepted  accounting  principles which may differ from
the actual  results.  The results of operations  for any interim  period are not
necessarily indicative of the results which might be obtained for a full year.

NOTE 3: In December 1999,  the Staff of the  Securities and Exchange  Commission
issued Staff Accounting  Bulletin (SAB) No. 101,  "Revenue  Recognition,"  which
provides   additional   guidance  in  applying  generally  accepted   accounting
principles  for revenue  recognition  in  financial  statements.  The  Company's
interpretation  of the  requirements  of SAB No. 101  resulted in changes to the
Company's  accounting  policies for revenue  recognition on sales of its termite
baiting  contracts.  These  changes were adopted in the fourth  quarter of 2000,
however,  as required by SAB No. 101, the impact of adoption  was  retroactively
recorded as of January 1, 2000 which  required the second  quarter and six month
2000 financial information to be restated to incorporate this accounting change.

NOTE 4: In June 2001, the Financial  Accounting Standards Board issued Statement
of Financial  Accounting  Standards No. 141, "Business  Combinations" (SFAS 141)
and No.  142,  "Goodwill  and Other  Intangible  Assets"  (SFAS  142).  SFAS 141
requires  all  business  combinations  initiated  after  June  30,  2001,  to be
accounted for using the purchase method. SFAS 142 requires that for fiscal years
beginning after December 31, 2001 existing goodwill will no longer be subject to
amortization.  Rather goodwill will be subject to at least an annual  assessment
for  impairment  by applying a  fair-value-based  test.  The Company has not yet
determined  the  effect  of  applying  the  impairment  provisions  of SFAS 142.
Goodwill  amortization expense which would be eliminated under SFAS 142 was $.04
per diluted  share for both the three month periods ended June 30, 2001 and 2000
and $.08 per diluted  share for both the six month  periods  ended June 30, 2001
and 2000.

NOTE 5: Basic earnings per share  includes no dilution from options,  debentures
or other financial  instruments and is computed by dividing income  available to
common  stockholders  by the  weighted  average  number of  shares  outstanding.
Diluted  earnings  per share  reflects  the  potential  dilution of  convertible
securities and options to purchase common stock.  The following chart reconciles
both  the  numerator  and  the  denominator  of the  basic  earnings  per  share
computation to the numerator and  denominator of the diluted  earnings per share
computation.


                                       5
<PAGE>
<TABLE>


(In thousands, except per share data)                       Three Months                      Three Months
                                                        Ended June 30, 2001                Ended June 30, 2000
                                                   ------------------------------   ------------------------------


                                                    Income      Shares      EPS        Income      Shares     EPS
                                                    ------      ------      ---        ------      ------     ---
<S>                                                <C>         <C>         <C>       <C>           <C>       <C>
Basic earnings per share ......................    $50,713     298,547     $0.17     $  66,315     304,391   $0.22
                                                                           =====                             =====
Effect of dilutive securities, net of tax:
         Options ..............................        -         4,060                     -         4,084
         Convertible securities ...............      1,191       8,157                     -           -
                                                  --------     -------               ---------     --------

Diluted earnings per share ....................    $51,904     310,764     $0.17     $  66,315     308,475   $0.21
                                                   =======     =======     =====     =========     =======   =====

</TABLE>


<TABLE>

                                                               Six Months                       Six Months
                                                          Ended June 30, 2001              Ended June 30, 2000
                                                    ------------------------------  ------------------------------

                                                    Income      Shares      EPS        Income      Shares     EPS
                                                    ------      ------      ---        ------      ------     ---
<S>                                                <C>         <C>         <C>       <C>           <C>       <C>
Basic earnings per share ......................    $79,940     298,170     $0.27     $ 102,369     305,030   $0.34
                                                                           =====                             =====
Effect of dilutive securities, net of tax:
         Options ..............................        -         3,973                     -         4,277
         Convertible securities ...............      2,383       8,157                     -           -
                                                  --------     -------               ---------     --------

Diluted earnings per share ....................    $82,323     310,300     $0.27     $ 102,369     309,307   $0.34
                                                   =======     =======     =====     =========     =======   =====

</TABLE>



NOTE 6: In the Consolidated  Statements of Cash Flows, the caption Cash and Cash
Equivalents includes investments in short-term,  highly-liquid securities having
a maturity of three  months or less.  Supplemental  information  relating to the
Consolidated Statements of Cash Flows for the six months ended June 30, 2001 and
2000 is presented in the following  table. The increase in interest paid in 2001
is primarily due to the timing of payments  resulting from refinancing a portion
of floating rate borrowings in the public bond market in the second quarter last
year.  Tax  payments in 2001  include a $21  million  tax refund  related to tax
over-payments  in 2000.  This is comparable to 2000 when the Company  received a
similar tax refund in the first quarter.



                                                        (in thousands)
                                                      2001         2000
                                                 ------------  ------------
Cash paid or (received for):
Interest expense...............................  $   64,845    $   61,154
Interest and dividend income...................  $   (4,366)   $   (5,177)
Income taxes...................................  $   (12,277)  $  (10,200)


NOTE 7: Total  comprehensive  income was $49.3 million and $69.0 million for the
three months ended June 30, 2001 and 2000,  respectively,  and $68.6 million and
$112.7  million for the six months  ended June 30, 2001 and 2000,  respectively.
Total comprehensive income includes primarily net income,  changes in unrealized
gains and losses on marketable securities and translation balances.

NOTE 8: At the end of the first  quarter of 2001,  the Company  entered  into an
agreement to sell, on a revolving basis, certain of its accounts receivable to a
wholly-owned,  bankruptcy-remote  subsidiary,  ServiceMaster Funding Company LLC
which entered into an agreement to transfer,  on a revolving basis, an undivided
percentage  ownership  interest in a pool of accounts  receivable  to  unrelated
third party purchasers.  ServiceMaster  Funding Company LLC retains an undivided
percentage  interest in the pool of accounts  receivable and bad debt losses for
the entire pool are allocated first to this retained  interest.  Amounts sold to
the purchasers under this agreement  include certain of the accounts  receivable
from the Company's  Management  Services,  TruGreen and Terminix business units.
The agreement is a 364-day facility renewable at the option of the purchasers.

Through June 30, 2001, $768 million of net accounts  receivable had been sold to
ServiceMaster  Funding  Company LLC. The amount of the retained  interest in the
receivables  was $68 million as of June 30, 2001 and is  classified  as accounts
receivable in the Consolidated  Statements of



                                       6
<PAGE>


Financial Position.  ServiceMaster Funding Company LLC in turn sold $700 million
of receivables to Falcon Asset Securitization  Corporation under this agreement.
Approximately  $600 million of these  receivables have been collected.  The $100
million of cash proceeds  relating to  outstanding  receivables  sold under this
agreement was used to pay down bank revolving credit debt.

The retained interest in the accounts receivable sold are valued at the carrying
amount of the retained  accounts  receivable  net of applicable  loss  reserves,
which approximates fair value. Management monitors the change in the outstanding
retained  interest and makes  adjustments to its carrying amount based on actual
and projected  losses.  Any changes in interest  rates would only have a minimal
impact on the value of the residual interest due to the short-term nature of the
receivables.

The Company, as agent for the purchaser,  retains servicing responsibilities for
the sold receivables. The fees received by the Company for these services during
the  quarter and six months  ended June 30,  2001,  were at fair  market  value,
therefore,  no related assets or liabilities have been recorded. The discount on
the Company's sale of  receivables  totaled $1.8 million for the quarter and the
six months ended June 30, 2001 and is included in  "Minority  interest and other
expense (income), net" in the Consolidated Statements of Income.

NOTE 9: The Company has a bank  revolving  credit  facility which expires April,
2002. Because the facility is scheduled to mature within the next twelve months,
outstanding  amounts under the facility as of June 30, 2001 have been classified
as current  debt  maturities.  The Company  expects to enter into a  replacement
facility  in an  amount  that is  expected  to meet  its bank  revolving  credit
facility needs prior to the maturity of the existing facility.

NOTE 10:  The  business  of the  Company is  primarily  conducted  through  four
operating segments:  TruGreen,  Terminix, Home Maintenance and Improvement,  and
Management  Services.  In  accordance  with  Statement of  Financial  Accounting
Standards No. 131 (SFAS 131),  the Company's  reportable  segments are strategic
business  units  that offer  different  services.  The  TruGreen  unit  provides
residential  and  commercial  lawn care and  landscaping  services  through  the
TruGreen  ChemLawn and TruGreen LandCare  companies.  The Terminix unit provides
domestic  termite  and pest  control  services  to  residential  and  commercial
customers.   The  Home  Maintenance  and  Improvement  unit  includes   American
Residential Services, American Home Shield, ServiceMaster Clean and Merry Maids.
This unit provides  heating,  ventilation and air  conditioning,  plumbing,  and
cleaning  services  to  residential  and  commercial  customers  as well as home
warranties  to  consumers.  The  Management  Services unit provides a variety of
supportive   management  services  to  health  care,  education  and  commercial
accounts.

The Other Operations unit includes entities that are managed separately from the
four major  units and  aggregated  together in  accordance  with SFAS 131 due to
their  size  or   developmental   nature.   This  unit  includes  the  Company's
international  operations which include Terminix Europe;  ServiceMaster Employer
Services,  a  professional  employer  organization  that  provides  clients with
administrative  processing of payroll,  workers' compensation insurance,  health
insurance,   unemployment   insurance   and  other   employee   benefit   plans;
ServiceMaster Home Service Center (formerly  WeServeHomes.com),  a joint venture
initiative  that is developing a full service,  cross-selling  marketing arm for
the enterprise;  the Company's  headquarters  operations;  and certain  non-core
businesses that have been sold or  discontinued.  Segment  information as of and
for the three months and six months ended June 30, 2001 and 2000 is presented on
the following page.





                                       7
<PAGE>




<TABLE>



(In thousands)                                        THREE MONTHS          THREE MONTHS           SIX MONTHS           SIX MONTHS
                                                     ENDED JUNE 30,        ENDED JUNE 30,         ENDED JUNE 30,      ENDED JUNE 30,
                                                          2001                  2000                   2001                2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                   <C>                    <C>                  <C>
OPERATING REVENUE:
TruGreen .................................           $   475,059           $   468,707            $   733,379          $   731,763
Terminix .................................               227,321               200,063                421,991              364,996
Home Maintenance
    and Improvement ......................               353,220               317,069                644,233              573,949
Management Services ......................               480,932               471,802                954,162              941,081
Other Operations .........................               112,409               157,054                224,838              343,790
                                                     -----------           -----------            -----------          -----------

TOTAL OPERATING REVENUE ..................           $ 1,648,941           $ 1,614,695            $ 2,978,603          $ 2,955,579
                                                     -----------           -----------            -----------          -----------

OPERATING INCOME:
TruGreen .................................           $    48,162           $    58,716            $    65,119          $    90,955
Terminix .................................                34,623                30,555                 60,029               51,082
Home Maintenance
    and Improvement ......................                32,920                30,527                 52,937               49,574
Management Services ......................                13,759                14,734                 28,450               31,210
Other Operations .........................                 5,685               (18,925)               (10,995)               4,268
                                                     -----------           -----------            -----------          -----------

TOTAL OPERATING INCOME ...................           $   118,469           $   140,217            $   187,610          $   227,089
                                                     -----------           -----------            -----------          -----------

CAPITAL EMPLOYED:
TruGreen .................................            $1,458,529            $1,563,610
Terminix .................................               593,783               521,708
Home Maintenance
    and Improvement ......................               677,263               627,158
Management Services ......................                74,050               138,096
Other Operations .........................               182,530               315,063
                                                      ----------            ----------
TOTAL CAPITAL EMPLOYED ...................            $2,986,155            $3,165,635
                                                      ----------            ----------

IDENTIFIABLE ASSETS:
TruGreen .................................            $1,595,735            $1,711,622
Terminix .................................               797,145               705,658
Home Maintenance
    and Improvement ......................             1,042,942               967,010
Management Services ......................               148,233               237,478
Other Operations .........................               508,112               555,351
                                                      ----------            ----------
TOTAL IDENTIFIABLE ASSETS ................            $4,092,167            $4,177,119
                                                      ----------            ----------

</TABLE>




                                       8
<PAGE>







                         MANAGEMENT DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

SECOND QUARTER 2001 COMPARED TO SECOND QUARTER 2000

Revenue for the second  quarter  totaled  $1.65  billion,  two percent above the
prior year.  After adjusting for the impact of sold or discontinued  businesses,
revenue growth was four percent. Operating income decreased 16 percent to $118.5
million, with margins decreasing to 7.2 percent from 8.7 percent. The decline in
operating income reflects growth in operating  earnings in the Terminix and Home
Maintenance  and  Improvement  segments  which were  offset  primarily  by lower
earnings in the TruGreen and Other  Operations  segments.  Diluted  earnings per
share for the  quarter  declined to $.17 from $.21 and net income  decreased  to
$50.7 million from $66.3 million.

As a result of the  challenges in the TruGreen  segment,  combined with concerns
about the near-term U.S. economic outlook,  the Company has reduced its earnings
outlook  for 2001 to be in the range of $.51 to $.55 per share.  The Company has
implemented  cost reduction  measures at the corporate center and in each of its
businesses to address these challenges.

The TruGreen segment includes lawn care operations  performed under the TruGreen
ChemLawn  brand  name and  landscaping  services  provided  under  the  TruGreen
LandCare brand name. This segment reported revenue of $475 million,  an increase
of one percent from $469 million in the prior year.  Operating  income decreased
to $48 million  from $59 million last year.  Revenues in the lawn care  business
increased over the prior year, reflecting the impact of price increases,  growth
in ancillary services, and the delay of first quarter production into the second
quarter.  These factors were partially  offset by a decrease in customer counts.
Projected sales which management believed were delayed due to adverse weather in
March and April were below  expectations in the second  quarter.  Margins in the
lawn care operations declined, partially impacted by costs incurred to support a
higher  expected  demand  for  services.  The  Company  has  put in  place a new
marketing  team that will examine the  effectiveness  of its  telemarketing  and
customer acquisition capabilities. Revenue in the landscaping business was lower
than the prior year,  reflecting  management's  focus to reposition the business
portfolio to increase its concentration on more predictable maintenance services
and less on construction  services.  In addition,  management has been enforcing
stricter   profitability   standards  on  contract   sales  and  renewals.   The
implementation of a branch level  construction  project management system in the
landscape operations was completed in the second quarter.  This process included
a thorough assessment of all construction contracts on the books and resulted in
the  recording  of an expense to reflect the amount of  anticipated  losses from
unprofitable  construction  accounts. The impact of that expense, along with the
comparison to a more  profitable  construction  business last year,  resulted in
significantly  lower  margins  in the  consolidated  landscape  operations.  The
Company has closed four low-performing and non-profitable  construction branches
and  continues  to evaluate  potential  additional  branches.  Capital  employed
decreased seven percent primarily reflecting improved working capital management
as well as the sale of a portion of this segment's accounts receivable.



                                       9
<PAGE>


The Terminix  segment,  which  includes  the  domestic  termite and pest control
services,  reported a 14 percent  increase in revenue to $227  million from $200
million in 2000 and  operating  income  growth of 13 percent to $35 million from
$31 million last year.  This strong growth  reflects the continued  migration of
the customer base to termite baiting systems,  improved customer retention,  and
the impact of price increases.  In January 2001, the Company acquired the Allied
Bruce  Terminix  companies,  the Company's  largest  Terminix  franchise and the
fourth largest pest control company in the United States. Approximately one-half
of the revenue and operating income growth for the quarter  reflected the impact
of  the  Allied  Bruce  acquisition  which  continues  to  exceed   management's
expectations.  Margins for the quarter were down slightly,  reflecting  improved
branch-level  margins offset by a higher level of incentive program expense than
the same quarter last year.  Capital employed increased 14 percent primarily due
to acquisitions, offset in part by higher prepaid contracts and improved working
capital management.

The Home Maintenance and Improvement segment includes heating,  ventilation, air
conditioning   (HVAC),   and  plumbing  services  provided  under  the  American
Residential  Services (ARS),  Rescue Rooter,  and AMS (for commercial  accounts)
brand names;  home systems and  appliance  warranty  contracts  offered  through
American Home Shield;  and the franchised  operations,  ServiceMaster  Clean and
Merry Maids.  The segment achieved  revenues of $353 million,  an increase of 11
percent  from $317  million  last year,  reflecting  double-digit  growth in all
businesses in this segment.  The combined ARS operations  achieved  double-digit
revenue growth, reflecting continuing strength in the commercial operations, the
impact of acquisitions, and price increases. These factors were partially offset
by reduced  residential  service call volume for both plumbing and HVAC services
reflecting  the  adverse  effect of a cool May and June which  dampened  demand.
American Home Shield reported  double-digit  increases in all major distribution
channels which will continue to support  revenue growth in the future as revenue
on these contracts is recognized. The franchise operations achieved double-digit
revenue growth supported by strong disaster  restoration growth at ServiceMaster
Clean and growth in branch operations at Merry Maids.  Operating income for this
segment  increased  eight percent to $33 million  compared to $31 million in the
prior year. Operating income grew at a lesser rate than revenue primarily due to
a higher level of direct and indirect support costs that were in place at ARS in
anticipation  of stronger  sales.  These factors were partially  offset by lower
service costs from reduced claim  activity at American Home Shield and operating
efficiencies in the franchise operations.  Management of ARS has taken action to
reduce branch  operating  costs and bring margins in line,  primarily  targeting
direct  and  indirect  labor.  Capital  employed  in this unit  increased  eight
percent, primarily reflecting acquisitions at ARS.

The Management Services segment serves institutional  healthcare,  education and
commercial facilities. The segment reported revenue of $481 million, an increase
of two percent compared to $472 million last year, reflecting growth in both the
healthcare and business and industry  markets.  Operating income decreased seven
percent to $14 million from $15 million in the prior year. Several large account
terminations  last year as well as an unprofitable  account in SiteServices that
was  terminated  in the second  quarter  this year  contributed  to the  reduced
profits.   Capital  employed  decreased  46  percent  primarily  reflecting  the
securitization of a significant portion of this segment's receivables as well as
a strong reduction in working capital.

Other  Operations  consists  of the  Company's  international  operations  which
include  Terminix  Europe;  ServiceMaster  Employer  Services (the  professional
employer   organization);    ServiceMaster   Home   Service   Center   (formerly
WeServeHomes.com);  the Company's headquarters operations;  and certain non-core
businesses   that  have  been  sold  or   discontinued.   During  the   quarter,
WeServeHomes.com   was  renamed  the  ServiceMaster   Home  Service  Center  and
repositioned  to focus  more  heavily  on  membership  programs  and  additional
distribution  channels.  Revenues and capital  employed in the Other  Operations
segment declined,  reflecting the impact of sold or discontinued operations. The
decrease  in  operating  income  primarily


                                       10
<PAGE>



reflects the impact of one-time or transitional  items that improved the results
last year  including  the  resolution  of a foreign  license  agreement  and the
benefit of a marketing arrangement that is no longer in place. In addition,  the
current year includes  increased  expenses related to ServiceMaster Home Service
Center,  ServiceMaster  Employer Services,  and various enterprise  initiatives.
Throughout 2000 and until May 2001, the operating losses of  ServiceMaster  Home
Service  Center  had  been  allocated  to  the  Company's  minority  partner  in
ServiceMaster  Home Service  Center,  Kleiner  Perkins,  and were offset through
minority  interest  income below the  operating  income line.  In May 2001,  the
cumulative operating losses of ServiceMaster Home Service Center began exceeding
the funding provided by Kleiner Perkins. As a result, the operating losses since
May have been  absorbed  in the  accompanying  financial  statements  without an
offset at the minority interest income line.

Cost of services  rendered and products  sold  increased  three  percent for the
quarter and  increased as a  percentage  of revenue to 76.8 percent in 2001 from
75.9 percent in 2000. Selling and administrative  expenses increased six percent
and  increased as a  percentage  of revenue to 16.0 percent from 15.4 percent in
2000.

Interest  expense  decreased from the prior year,  primarily due to reduced debt
levels  from  improved  cash  flows  and the sale of  certain  of the  Company's
accounts receivable. Interest income decreased primarily due to a lower level of
investment  gains  realized on the American  Home Shield  investment  portfolio.
Minority  interest  and other  expense/income  reflected $6 million more expense
than  last  year  due  to:  lower  minority   interest  income  related  to  the
ServiceMaster Home Service Center venture,  minority interest expense related to
the equity  security  issued in the Allied Bruce  acquisition,  and the discount
from the Company's sale of receivables.

As discussed  last quarter,  the Company is  undertaking  an in-depth  strategic
review  of its  portfolio  of  businesses  with the focus on  shareholder  value
creation and strategic alignment. Management intends to take steps over the next
few quarters to implement the vision as it emerges.  Last  quarter,  the Company
also announced that it will be implementing  operational imperatives to focus on
ways to improve customer retention, the quality of service and employee loyalty.
The Company  expects to implement  Six Sigma later this year,  with a broadening
rollout of the  program  expected  to occur over a twelve to  twenty-four  month
period. Six Sigma is a continuous  improvement  methodology that will be used by
the Company to discover ways to better serve customers and improve productivity.
The Company is also in the final stages of a decision about a common methodology
to  use  across  the  entire   enterprise  to  measure   customer  and  employee
satisfaction.  The Company's goal is to have a baseline  established by year end
and roll it out to all the branches and facilities during 2002.

SIX MONTHS ENDED JUNE 30, 2001 AS COMPARED TO JUNE 30, 2000
-----------------------------------------------------------

Revenues  for the six months  increased  one  percent to $3.0  billion.  Revenue
growth was four percent,  after adjusting for the impact of sold or discontinued
businesses.  Operating  income  decreased  17  percent to $187.6  million,  with
margins  decreasing  to 6.3  percent  from 7.7  percent.  As was the case in the
second  quarter,  the decline in operating  income for the six months  reflected
strong  growth in the Terminix and Home  Maintenance  and  Improvement  segments
offset  primarily  by  lower  operating  earnings  in  the  TruGreen  and  Other
Operations segments. Diluted earnings per share for the six months declined from
$.33 to $.27 and net income decreased from $102.4 million to $79.9 million.  The
2001 results  include a $.02 per share, or $6 million  after-tax,  extraordinary
gain  recorded in the first  quarter  resulting  from the  repurchase of certain
ServiceMaster corporate bonds. Excluding this extraordinary item, net income and
diluted earnings per share were $73.9 million and $.25, respectively.

The TruGreen  segment  reported  revenues of $733 million,  consistent with last
year.  Operating  income  decreased  to $65 million  from $91 million last year.
Revenues  in the lawn care  business


                                       11
<PAGE>


increased  modestly over the prior year,  reflecting  the  realization  of price
increases and growth in ancillary  services,  partially  offset by a decrease in
customer counts.  The lawn care operations'  first quarter results were impacted
by winter weather conditions that persisted much later in 2001 than in the prior
year,  resulting in reduced production levels and lower margins from sub-optimal
labor  utilization  and  fixed  cost  leverage.  In  addition,   management  was
optimistic  that the  selling  season,  which had been  delayed  due to  adverse
weather  in March and  April,  was going to  rebound  in May and June.  However,
second  quarter  sales  were  below  expectations  and  margins in the lawn care
operations  were  unfavorably  impacted by a cost structure that was in place to
support a higher  anticipated  level of demand.  Landscaping  services  revenues
decreased modestly compared to last year,  reflecting  management's  decision to
enforce  stricter  profitability  standards on contract  sales and renewals.  As
discussed  in  the  three  month   comparison,   management   is  also  actively
repositioning  its  business   portfolio  to  concentrate  on  more  predictable
maintenance services and less on construction services. Operating margins in the
landscaping operations were lower due to expenses recorded in the second quarter
this year to accrue for estimated losses on many construction contracts, as well
as the impact of integration  challenges that had not yet begun to emerge in the
prior year period.  Management has taken measures such as establishing  stronger
pricing  guidelines,  instituting branch level operating controls and conducting
increased  training  for region  and branch  managers,  which it  believes  will
enhance future operating performance.

The Terminix  segment reported a 16 percent increase in revenues to $422 million
from $365  million  in 2000 and  operating  income  growth of 18  percent to $60
million from $51 million last year.  The growth at Terminix  reflected  both the
acquisition of Allied Bruce,  which accounted for approximately  one-half of the
revenue and operating  growth for the six months,  and strong growth in both new
termite  contracts and termite  renewals.  The margin  improvement  reflects the
continued  increased mix of higher margin termite renewals,  the impact of price
increases,   as  well  as  ongoing   productivity   improvements   and  overhead
efficiencies.

The Home Maintenance and Improvement  segment achieved revenues of $644 million,
an  increase  of 12  percent  from $574  million  last  year.  Operating  income
increased  seven  percent to $53 million  compared with $50 million in the prior
year.  The  combined  ARS  operations  achieved   double-digit  revenue  growth,
reflecting continuing strength in the commercial  operations,  acquisitions,  as
well as price  increases.  For the six  months,  residential  plumbing  and HVAC
services showed solid growth  reflecting  strong increases in the first quarter,
partially offset by lower than expected demand in the second quarter,  which the
Company  believes is due to cooler  weather  conditions  and softening  economic
environment.   American  Home  Shield  reported   double-digit   revenue  growth
continuing  its  strong  growth  across  all major  distribution  channels.  The
franchise operations, ServiceMaster Clean and Merry Maids, achieved double-digit
growth,  reflecting  the  benefit of  successful  marketing  programs,  national
account relationships, and employee retention initiatives.

The Management  Services  segment reported revenue growth of one percent to $954
million and operating income of $28 million, a nine percent decrease compared to
last year. The decrease in profits  reflects the impact of account  terminations
last  year  in  the  healthcare  and  education   markets  and  an  unprofitable
SiteService account, which was terminated in the second quarter this year.

Revenues in the Other Operations segment declined  reflecting the impact of sold
or  discontinued  operations.  Operating  income declined as a result of certain
favorable  non-recurring  items last year including a benefit resulting from the
resolution of a foreign license  agreement,  a marketing  arrangement that is no
longer in  place,  higher  expenses  this year in  certain  business  operations
including  the  ServiceMaster  Home Service  Center  venture,  and the impact of
discontinued  operations.  As noted in the three month comparison,  beginning in
May 2001,  the operating  losses of  ServiceMaster  Home Service  Center were no
longer   allocated  to  the  Company's   minority


                                       12
<PAGE>

partner,  Kleiner Perkins.  Consequently,  the consolidated  results for the six
months  ended June 30,  2001  include  operating  losses of  ServiceMaster  Home
Services  Center  since May without an offset at the  minority  interest  income
line.

Cost of services  rendered and products  sold  increased one percent for the six
months and  increased  as a  percentage  of revenue to 78.5 percent in 2001 from
78.2  percent in 2000.  Selling  and  administrative  expenses  increased  eight
percent and  increased  as a  percentage  of revenue to 15.2  percent  from 14.2
percent in 2000.

Interest  expense  decreased  from the prior year,  primarily  due to lower debt
levels reflecting strong cash flows and the use of funds received on the sale of
receivables to pay down revolving bank credit debt.  Interest  income  decreased
primarily  reflecting  a  reduced  level of  investment  gains  realized  on the
American  Home  Shield  investment   portfolio.   Minority  interest  and  other
expense/income  was $7 million  below the  comparable  period  last year due to:
minority  interest  expense  related to the equity security issued in the Allied
Bruce  acquisition,  the discount from the Company's  sale of  receivables,  and
reduced  minority  interest  income  related to the  ServiceMaster  Home Service
Center venture.

FINANCIAL POSITION

Net cash provided from  operations of $247 million was $125 million  higher than
the first six months of 2000. The significant increase reflects the sale of $100
million of accounts receivable through the Company's  securitization program and
lower working  capital usage which provided $57 million in cash flow.  Cash from
operations  excluding  the benefit  from the sale of  receivables  increased  20
percent to the highest level in the Company's  history for the first half of the
year.  This  result was due to strong  working  capital  management,  reflecting
improved  receivable  collections  and days sales  outstanding  in the landscape
operations and growth in customer  prepayments in the lawn care operations,  and
the Terminix and American Home Shield companies.  Management believes that funds
generated  from  operations  and other  existing  resources  will continue to be
adequate to satisfy ongoing working capital needs of the Company.

Debt levels  decreased  primarily  reflecting  the  proceeds  from the  accounts
receivable  securitization  financing program and strong cash flows. As a result
of the ongoing cash flow strength of the Company,  debt levels have been reduced
over the last four  consecutive  quarters to the lowest level in two years.  The
Company is party to a number of long-term  debt  agreements  which require it to
maintain compliance with certain financial covenants,  including  limitations on
indebtedness,  restricted payments, fixed charge coverage ratios, and net worth.
The  Company  is  in  compliance  with  the  covenants  related  to  these  debt
agreements.

The Company has a bank  revolving  credit  facility which is scheduled to mature
within the next twelve months.  The outstanding  amounts under the facility have
been  classified as current debt  maturities  even though the Company expects to
enter into a replacement facility that is expected to meet its credit needs.

Accounts  receivable  decreased  from year-end  levels,  reflecting  the sale of
receivables   through  the   securitization   financing   program  and  improved
collections  and  days  sales  outstanding  at  several  companies.  Inventories
increased over year-end levels as a result of normal  seasonal  build-ups in the
lawn care operations.

Prepaids  and  other  assets  have  increased   from  year-end   reflecting  the
seasonality in the lawn care  operations  and the increased  volume of contracts
written at Terminix and American  Home Shield.  The lawn care  operations  defer
marketing  and other  costs  that are  incurred  earlier  in the  year,  but are
directly associated with revenues realized in subsequent quarters of the current
year.  These costs are then  amortized over the balance of the current lawn care
production  season,  as the related  revenues are recognized.  In addition,  the
Company capitalizes sales commission and


                                       13
<PAGE>

other direct  contract  acquisition  costs relating to termite  baiting and pest
contracts as well as home warranty agreements.

Deferred   revenues  grew   significantly   reflecting   increases  in  customer
prepayments  for lawn care  services and termite  renewals and strong  growth in
warranty contracts written at American Home Shield.

Capital  expenditures  which include  recurring  capital  needs and  information
technology  projects are below prior year levels  reflecting  fewer  large-scale
technology  projects.  The Company has no material  capital  commitments at this
time.

The  increase  in  the  minority  interest  liability   primarily  reflects  the
acquisition of the Allied Bruce Terminix  Companies,  in which the consideration
included an equity  interest in the Terminix  subsidiary  which is  exchangeable
into eight million ServiceMaster common shares.

In  February  2001,   Kleiner  Perkins,   the  Company's   minority  partner  in
ServiceMaster  Home  Service  Center  (formerly  WeServeHomes.com),  exercised a
warrant to purchase  additional  capital  stock for $5 million,  and the Company
purchased additional capital stock for $10 million. The Company currently has an
81 percent ownership  interest in ServiceMaster  Home Service Center and Kleiner
Perkins  has an 18  percent  interest.  Kleiner  Perkins  also has a warrant  to
purchase additional capital stock for $6.5 million.

Total shareholders' equity was $1.2 billion at June 30, 2001,  approximately the
same  level as year end,  reflecting  earnings  offset by cash  dividends.  Cash
dividends paid directly to shareholders  totaled $60 million, or $.20 per share,
for the six months ended June 30, 2001. In July 2000, the Company announced that
its Board of Directors  authorized $350 million for a share repurchase  program.
The  Company  purchased  approximately  $136  million  of  its  shares  in  2000
subsequent to the authorization.  The Company has not undertaken  material share
repurchases in 2001.  Decisions  relating to any future share  repurchases  will
take various  factors into  consideration  such as the  Company's  commitment to
maintain  investment  grade  ratings,  general  business  conditions,  and other
strategic investment opportunities.

In June 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 141,  "Business  Combinations" and No. 142,
"Goodwill and Other Intangible Assets". See Note 4 to the Consolidated Financial
Statements for additional discussion of these statements.

THE COMPANY NOTES THAT STATEMENTS THAT LOOK FORWARD IN TIME, WHICH INCLUDE
EVERYTHING OTHER THAN HISTORICAL INFORMATION, INVOLVE RISKS AND UNCERTAINTIES
THAT AFFECT THE COMPANY'S RESULTS OF OPERATIONS. FACTORS WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN A
FORWARD-LOOKING STATEMENT INCLUDE THE FOLLOWING (AMONG OTHERS): WEATHER
CONDITIONS ADVERSE TO CERTAIN OF THE COMPANY'S CONSUMER AND COMMERCIAL SERVICES
BUSINESSES; THE ENTRY OF ADDITIONAL COMPETITORS IN ANY OF THE MARKETS SERVED BY
THE COMPANY; LABOR SHORTAGES; CONSOLIDATION OF HOSPITALS IN THE HEALTHCARE
MARKET; THE COST AND LENGTH OF TIME TO INTEGRATE ACQUIRED BUSINESSES; UNEXPECTED
CHANGES IN OPERATING COSTS; THE CONDITION OF THE U.S. ECONOMY; AND OTHER FACTORS
DISCUSSED ABOVE LISTED FROM TIME TO TIME IN THE COMPANY'S FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION.



                                       14
<PAGE>



                           PART II. OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS

In the ordinary course of conducting its business activities, ServiceMaster
becomes involved in judicial, administrative and regulatory proceedings which
involve both private parties and governmental authorities. As of August 1, 2001,
these proceedings included general and commercial liability actions and a small
number of environmental proceedings.

     RAY D.  MARTIN V.  SERVICEMASTER.  In June 1996,  Ray D.  Martin,  a former
salesman employed by ServiceMaster  Management Services,  filed a lawsuit in the
State Court of Fulton County,  Georgia (Civ. Action File No.  96VS114677J).  The
complaint,  as originally filed,  contended that  ServiceMaster had not paid Mr.
Martin  the  full  amount  of  commission  due to him on a sale in  which he was
involved. In the course of the pre-trial proceedings,  the trial court entered a
default  judgment  against  ServiceMaster,  thereby leaving only the question of
damages  to be  considered  at the trial.  At trial in  September  1999,  a jury
awarded the plaintiff  compensatory damages and fees of approximately $1 million
and punitive  damages of $135 million.  In October 1999,  ServiceMaster  filed a
motion for judgment  notwithstanding  the verdict or, in the alternative,  for a
new trial.  On June 1, 2000 the trial court entered a new judgment in the amount
of $461,440 in compensatory damages and $45 million in punitive damages, as well
as amounts for  attorneys'  fees and  interest.  ServiceMaster  appealed and Mr.
Martin  cross-appealed.  The  appeals  have been  fully  briefed.  ServiceMaster
believes  that the award of $45 million in punitive  damages is not supported by
the facts of the case or by  applicable  state law and that the judgment will be
reversed by the court of appeals.  The court of appeals  must issue its decision
by the end of the 2001.  Under Georgia law, a judgment  accrues  interest at the
rate of 12% per  annum.  ServiceMaster  continues  to be  unable  to  reasonably
estimate the ultimate outcome of this case, and accordingly, minimal expense has
been  recorded.  If the  existing  judgment  is  sustained,  or if the  original
judgment is reinstated  (which is not  anticipated  by  ServiceMaster),  then it
would be likely that ServiceMaster's results of operations for a particular year
may be materially adversely affected. However,  ServiceMaster believes, based on
advice from legal counsel,  that the ultimate  outcome of this litigation is not
expected  to  have  a  material  adverse  effect  on  ServiceMaster's  financial
condition or results of operations.


ITEM 2:  CHANGES IN SECURITIES AND USE OF PROCEEDS

(c) On May 10, 2001, ServiceMaster sold to Jonathan P. Ward, President and Chief
Executive  Officer of ServiceMaster,  a 5.50% convertible  debenture due May 10,
2011 with a face amount equal to $1,083,000.  The debenture becomes  convertible
into 20,000  shares of common stock of  ServiceMaster  on December 31 of each of
the years 2001 through  2005.  The  debenture was sold pursuant to the exemption
from  registration  provided  by  section  4(2) of the  Securities  Act of 1933.
ServiceMaster  financed 50% of the purchase  price of the debenture  with a full
recourse loan of $541,500 to Mr. Ward.



                                       15
<PAGE>










ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


(a)      The 2001 Annual Meeting of Shareholders was held on April 27, 2001.

(b)      The following persons are elected as Class of 2004 directors:


Name                              Votes For    Votes Withheld   Broker Non-Votes
                                 -----------   --------------   ----------------
Brian Griffiths                  249,427,709      4,545,584          N/A
Sidney E. Harris                 249,883,276      4,090,017          N/A
James D. McLennan                250,077,132      3,896,161          N/A
C. William Pollard               244,464,129      9,509,164          N/A
Donald G. Soderquist             249,463,277      4,510,016          N/A

No votes  were  cast for any  other  nominee  for  directors.  The Class of 2002
directors continuing in office are Paul W. Berezny,  Carlos H. Cantu, Vincent C.
Nelson,  Charles W. Stair, and Jonathan P. Ward. The Class of 2003 continuing in
office are:  Glenda A.  Hatchett,  Herbert P. Hess,  Michele M. Hunt,  Dallen W.
Peterson, and David K. Wessner.

A vote was taken to approve the 2001 Directors Stock Plan as follows:

For                Against            Abstain        Broker Non-votes
-----------       -----------       -----------      ----------------
169,737,530        26,984,461         2,235,884        55,015,418

A vote was taken to ratify the selection of Arthur Andersen LLP to serve as the
Company's independent auditor for 2001 as follows:

For                Against            Abstain      Broker Non-votes
-----------      -----------         ---------    ------------------
244,881,556        8,288,928          802,809      N/A

No other matters were submitted to shareholders.





                                       16
<PAGE>




ITEM 6(A):    EXHIBITS


Exhibit No.     Description of Exhibit
-----------     -----------------------
10.1            Letter Agreement with Carlos Cantu dated as of June 1, 2001

10.2            Letter Agreement with Charles Stair dated as of July 1, 2001



ITEM 6(B):    REPORTS ON FORM 8-K

The Company did not file any current reports on Form 8-K during the quarter
ended June 30, 2001.



                                       17
<PAGE>