Putnam
High Yield
Trust
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
2-29-04
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
In the first months of 2004, we have continued to see the same positive
conditions in financial markets that arose during the recovery of 2003.
The U.S. economy and corporate profits are growing impressively based on
a solid foundation of rising productivity, low inflation, and low
interest rates. With both consumer spending and business capital
investment contributing to the expansion, the economy also shows greater
equilibrium than has been the case in recent years. These favorable
economic conditions have contributed to strong returns in both the stock
and bond markets over the reporting period.
Experience teaches us that a run of good news like this does not give
reason to be complacent. Rather, in such an environment, active research
plays an even more important role in evaluating potential risks.
Uncertainties include the possibilities of a rise in interest rates and
the adverse effects of a weaker U.S. dollar. Putnam's investment
management teams are focused on analyzing these and similar issues. They
are also working to identify new opportunities, which may be less
abundant than they were in last year's broad rally.
We are pleased to report that for the six-month period ended February
29, 2004, the performance of Putnam High Yield Trust was strong, both on
an absolute basis and relative to its competitors. A focus on
lower-quality bonds helped the fund outperform its Lipper peer group,
although it finished slightly behind its benchmark index. This
assessment is based on results at net asset value. Details appear on the
facing page.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
April 21, 2004
Report from Fund Management
Fund highlights
* Putnam High Yield Trust posted strong returns during the six months
ended February 29, 2004, with class A shares returning 10.48% at net
asset value (NAV) and 5.18% at public offering price (POP).
* The fund's returns at NAV were slightly behind those of its benchmark,
the JP Morgan Chase Global High Yield Index, which returned 10.92%
during the same period.
* The fund's focus on lower-quality bonds enabled it to outperform the
9.59% average for its Lipper category, High Current Yield Funds, based
on results at NAV.
* The fund's dividend was adjusted on October 17, 2003. The new dividend
for class A shares is $0.049. Please refer to page 5 for further
details.
* See the Performance Summary beginning on page 7 for complete fund
performance, comparative performance, and Lipper data.
Performance commentary
During the six months ended February 29, 2004, your fund benefited from
its significant exposure to lower-rated high-yield bonds. These types of
securities delivered the strongest performance as the high-yield market
continued its rally. This structure kept the fund's returns at NAV ahead
of the average for its competitive universe, as many of its peers held a
smaller concentration in lower-rated bonds. Despite our overweighting of
the lower-rated sector, the fund's returns were marginally behind those
of its benchmark index. We attribute this to the fact that an index, by
its nature, is always 100% invested in securities while a mutual fund
generally maintains a percentage of its portfolio in cash or cash
equivalents to meet normal cash flow demands. Typically, your fund holds
4% to 5% of its assets in cash or cash equivalents. We estimate that
this cash position held back the fund's performance, enough to account
for most of the difference in return relative to the index. This issue
was not a factor in your fund's performance relative to its Lipper
category, since other funds in the category also maintain cash balances.
FUND PROFILE
Putnam High Yield Trust seeks high current income through a portfolio of
higher-yielding, lower-rated corporate bonds diversified across
different industry sectors. It has a secondary objective of capital
growth when consistent with high current income. This fund may be
suitable for investors who can accept a higher level of risk in exchange
for a potentially higher level of income than that available from
higher-quality bonds.
Market overview
With the exception of a small pause in the second half of January and
early February, the high-yield market trended steadily upward during
your fund's semiannual period. A strengthening economy, falling default
rates, an improving equity market, and declining interest rates were the
factors that helped provide a positive backdrop.
Within this almost perfect environment for high-yield bonds, the
high-yield market attracted net inflows of cash from investors. The
lower-rated sector of the market -- such as CCC-rated securities -- saw
the greatest benefit from this positive market backdrop.
In January and February, the high-yield market came under some pressure
due to concerns that the Federal Reserve Board might raise short-term
interest rates sooner than had been widely expected. However, in our
view, the impact of these concerns was relatively mild and it has not
disrupted our longer-term positive outlook for high-yield bonds.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 2/29/04
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Bonds
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JP Morgan Chase Global High Yield Index (global high-yield
corporate bonds) 10.92%
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Lehman Aggregate Bond Index (broad bond market) 4.92%
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Lehman Government Credit Index (U.S. government and
corporate bonds) 5.35%
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Lehman Municipal Bond Index (tax-exempt bonds) 6.53%
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Equities
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S&P 500 Index (broad stock market) 14.59%
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Russell 2000 Value Index (small-company value stocks) 21.31%
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Russell 2500 Growth Index (growth stocks of small and
midsize companies) 15.23%
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These indexes provide an overview of performance in different market
sectors for the six months ended 2/29/04.
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Strategy overview
There were no significant changes in our strategy during the period.
Based on our view of where we were in the high-yield market cycle, we
had anticipated the strong performance of lower-rated debt securities
and positioned the portfolio to benefit from it. We also continued to
maintain broad diversification by both company and industry. We
continued to pursue detailed credit analysis, making sure that any
investments we chose for the fund fit with our portfolio profile in
terms of weightings, sector allocations, and credit ratings. In
conducting our research, our analysts seek companies characterized by a
sustainable competitive advantage, a manageable debt structure, and the
ability to generate adequate levels of cash flow. These companies should
also have downside protection in the event of a negative development.
At this point, we have begun to consider reducing the fund's overweight
to lower-rated securities. The high-yield market appears to now be
transitioning from a period of extremely strong returns to one of more
stable, moderate returns. In this market phase, a smaller overweight to
the lower-rated sectors may be warranted.
[GRAPHIC OMITTED: horizontal bar chart TOP SECTOR WEIGHTINGS COMPARED]
TOP SECTOR WEIGHTINGS COMPARED
as of 8/31/03 as of 2/29/04
Consumer cyclicals 17.3% 22.3%
Consumer staples 17.0% 12.6%
Communications services 10.7% 10.0%
Basic materials 9.6% 9.9%
Capital goods 7.6% 9.9%
Footnote reads:
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.
How fund holdings affected performance
During such a strong period, nearly all of your fund's holdings offered
positive returns. Among the fund's larger positions, cable television
company Charter Communications was one of the top performers. While the
firm faced competitive and financial pressures, the company met
expectations and management's moves to refinance debt eased some of its
financial difficulties.
In addition, finance company Finova provided solid returns. The company
had encountered significant difficulties a few years ago, particularly
in its airplane finance business. The firm worked to liquidate assets
and manage its sizeable portfolio of loans. Given an improving economy,
the company's portfolio of investments has performed better than
originally expected.
[GRAPHIC OMITTED: TOP HOLDINGS]
TOP HOLDINGS
1 CSC Holdings, Inc.
Ser. M, $11.125 cum. pfd.
Communications services
2 Qwest Corp. 144A
Notes 8 7/8s, 2012
Communications services
3 Freddie Mac
Notes 1.4s, 2004
U.S. government and agency obligations
4 PSF Group Holdings, Inc. 144A
Class A
Consumer staples
5 NRG Energy, Inc. 144A
Sr. sec. notes 8s, 2013
Utilities and power
6 Hercules, Inc.
Company guaranty 11 1/8s, 2007
Basic materials
7 Centennial Cellular Operating Co.
Company guaranty 10 1/8s, 2013
Communications services
8 Echostar DBS Corp. 144A
Sr. notes 6 3/8s, 2011
Consumer staples
9 Samsonite Corp.
Sr. sub. notes 10 3/4s, 2008
Consumer cyclicals
10 Crown Holdings SA
Notes 9 1/2s, 2011 (France)
Capital goods
Footnote reads:
These holdings represent 5.9% of the fund's net assets as of 2/29/04.
The fund's holdings will change over time.
The fund's sizeable stake in the chemicals sector, which represented an
overweighting relative to the benchmark, also boosted returns. Key
holdings in this sector included diversified chemicals manufacturer
Huntsman International and commodity chemical producer Millennium
Chemicals.* Although energy prices were high, leading to skepticism
about the sector's prospects, this cyclical sector benefited from the
improving economy.
Not all of the fund's chemicals investments prospered, however. Among the
fund's few detractors during the period was Solutia, a diversified
specialty chemical company. The firm made news when it settled a
high-profile PCB contamination lawsuit in Alabama, and appeared to be on
its way to working out balance sheet problems. However, the company
surprised the market by filing for bankruptcy in late 2003 and we have
since eliminated the bonds from the portfolio.
* After the close of the reporting period, Lyondell Chemical Co.,
another fund holding, agreed to acquire Millennium Chemicals Inc. This
transaction would also involve a third fund holding, Equistar Chemicals
LP, which is currently 70% owned by Lyondell and 30% owned by
Millennium. Announcement of this merger had a substantial impact on
Millennium's stock price; however, thus far it has had little impact on
the prices of these bonds or their credit profiles.
Bonds issued by Levi-Strauss also declined in price, as the company faced
an increasingly competitive environment for blue jeans and posted results
that were below expectations. We have maintained the investment, as the
company's bonds are trading at a significant discount at a time when we
believe management seems to be stabilizing operations.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary in
the future.
OF SPECIAL INTEREST
Falling interest rates throughout much of the fiscal year made it
necessary to decrease the fund's dividend. Class A shares were reduced
from $0.055 to $0.049 in October 2003. Other share classes experienced
similar reductions.
The fund's management team
The fund is managed by the Putnam Core Fixed-Income High-Yield Team. The
members of the team are Stephen Peacher (Portfolio Leader), Norm Boucher
(Portfolio Member), Paul Scanlon (Portfolio Member), Rosemary Thomsen
(Portfolio Member), Jeffrey Kaufman, Geoffrey Kelley, Neal Reiner, and
Joseph Towell.
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.
The economic backdrop continues to be favorable for high-yield bonds,
which are enjoying a steady influx of cash from investors. The Federal
Reserve Board appears to be on hold with monetary policy. As such, we
expect that short-term interest rates should remain at historically low
levels for a reasonable period of time. The economy, bond yields, and
interest rates will influence the high-yield market in the next six
months. However, we feel that returns will be influenced more by where
we are in the high-yield market cycle, which is subject to the interplay
among new issuance, default rates, total returns, and valuations.
To illustrate, the high-yield market can become frothy with speculation,
leading to the issuance of bonds by companies with shaky
creditworthiness, as seen in the late '90s and into 2000. This
oversupply then typically leads to a rise in the default rate, lower
total returns, and an overall contraction in the high-yield market.
Issuance subsides and leveraged companies then turn their attention to
shoring up their balance sheets. In turn, this improved fiscal sanity
attracts investors once again, and high-yield bonds start to offer
strong returns as they rebound from depressed valuations amid a
declining default rate.
We believe that we have just emerged from the sharp rebound typical of
this recovery phase of the market cycle. From this point, we envision
less dramatic returns than seen over approximately the past 17 months,
but still a positive backdrop for high-yield bonds. Consistent with this
expected market environment, it is likely that at some point in 2004 we
will moderate our emphasis on lower-rated securities. We will continue
to look at such factors as new issuance, valuations, and defaults to
divine where we are in the market cycle and fine-tune the portfolio
accordingly.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. Lower-rated bonds
may offer higher yields in return for more risk.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended February 29, 2004. In accordance with
regulatory requirements, we also include performance for the most
current calendar quarter-end. Performance should always be considered in
light of a fund's investment strategy. Data represent 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.putnaminvestments.com.
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TOTAL RETURN FOR PERIODS ENDED 2/29/04
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Class A Class B Class C Class M Class R
(inception dates) (2/14/78) (3/1/93) (3/19/02) (7/3/95) (1/21/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 10.48% 5.18% 9.96% 4.96% 9.98% 8.98% 10.32% 6.79% 10.34%
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1 year 24.60 18.67 23.64 18.64 23.45 22.45 24.28 20.17 24.36
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5 years 27.20 21.11 22.60 21.11 22.11 22.11 25.56 21.49 25.69
Annual average 4.93 3.90 4.16 3.90 4.08 4.08 4.66 3.97 4.68
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10 years 67.81 59.84 55.85 55.85 55.09 55.09 63.68 58.41 63.81
Annual average 5.31 4.80 4.54 4.54 4.49 4.49 5.05 4.71 5.06
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Annual average
(life of fund) 9.30 9.09 8.36 8.36 8.46 8.46 8.90 8.76 9.03
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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 4.75% and 3.25%, respectively (which
for class A shares does not reflect a reduction in sales charges that
went into effect on January 28, 2004; if this reduction had been in
place for all periods indicated, returns would have been higher). 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 share returns have no
initial sales charge or CDSC. Performance for class B, C, M, and R
shares before their inception is derived from the historical performance
of class A shares, adjusted for the applicable sales charge (or CDSC)
and higher operating expenses for such shares.
A 2% short-term trading fee will be imposed on shares exchanged or sold
within 5 days of purchase. In addition, there is a 1% short-term trading
fee for this fund on shares sold or exchanged between 6 and 90 days.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/29/04
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Lipper High
JP Morgan Chase Current Yield
Global High Funds category
Yield Index* average+
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6 months 10.92% 9.59%
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1 year 24.82 21.90
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5 years 35.37 20.16
Annual average 6.24 3.54
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10 years 102.18 62.98
Annual average 7.29 4.87
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Annual average
(life of fund) -- 9.02
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Index and Lipper results should be compared to fund performance
at net asset value.
* This index began operations on 12/31/93.
+ Over the 6-month and 1-, 5-, and 10-year periods ended 2/29/04,
there were 421, 411, 264, and 75 funds, respectively, in this
Lipper category.
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PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 2/29/04
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Class A Class B Class C Class M Class R
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Distributions (number) 6 6 6 6 6
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Income $0.300 $0.270 $0.271 $0.289 $0.290
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Capital gains -- -- -- -- --
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Total $0.300 $0.270 $0.271 $0.289 $0.290
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Share value: NAV POP NAV NAV NAV POP NAV
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8/31/03 $7.55 $7.93 $7.52 $7.52 $7.55 $7.80 $7.55
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2/29/04 8.03 8.41* 7.99 7.99 8.03 8.30 8.03
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Current return
(end of period)
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Current dividend rate 1 7.32% 6.99% 6.61% 6.46% 7.02% 6.80% 7.02%
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Current 30-day
SEC yield 2 6.13 5.85 5.37 5.36 5.87 5.68 5.88
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* Reflects a reduction in sales charges that took effect on January 28, 2004.
1 Most recent distribution, excluding capital gains, annualized and divided by NAV or POP at end
of period.
2 Based only on investment income, calculated using SEC guidelines.
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TOTAL RETURN FOR PERIODS ENDED 3/31/04 (MOST RECENT CALENDAR QUARTER)
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Class A Class B Class C Class M Class R
(inception dates) (2/14/78) (3/1/93) (3/19/02) (7/3/95) (1/21/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 8.49% 3.37% 8.12% 3.12% 7.99% 6.99% 8.48% 4.93% 8.22%
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1 year 22.46 16.72 21.50 16.50 21.49 20.49 22.14 18.15 22.06
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5 years 25.76 19.79 21.21 19.73 20.68 20.68 24.14 20.15 24.10
Annual average 4.69 3.68 3.92 3.67 3.83 3.83 4.42 3.74 4.41
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10 years 74.80 66.51 62.36 62.36 61.54 61.54 70.56 65.06 70.36
Annual average 5.74 5.23 4.97 4.97 4.91 4.91 5.48 5.14 5.47
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Annual average
(life of fund) 9.29 9.09 8.35 8.35 8.45 8.45 8.89 8.76 9.02
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Risk comparison
As part of new initiatives to enhance disclosure, we are including a
risk comparison 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.
[GRAPHIC OMITTED: MORNINGSTAR RISK]
MORNINGSTAR [REGISTRATION MARK] RISK
Fund's Overall
Morningstar Risk 0.60
Taxable bond
fund average 0.32
Percentile rank [plot as risk bar]: 31%
0% INCREASING RISK 100%
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 3/31/04. 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 the 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 2004
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.
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
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. The
NAV is calculated by dividing the net value of all the fund's assets by
the number of outstanding shares.
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 4.75% maximum sales charge for class A
shares (since reduced to 4.50%) and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B or C shares and assumes redemption at the
end of the period. Your 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.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without an initial sales charge).
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption (except on certain
redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and
are available only to certain defined contribution plans.
Comparative indexes
JP Morgan Chase Global High Yield Index is an unmanaged index used to
mirror the investable universe of the U.S. dollar global high-yield
corporate debt market of both developed and emerging markets.
Lehman Aggregate Bond Index is an unmanaged index used as a general
measure of U.S. fixed-income securities.
Lehman Government Credit Index is an unmanaged index of U.S fixed-income
securities.
Lehman Municipal Bond Index is an unmanaged index of long-term
fixed-rate investment-grade tax-exempt bonds.
Russell 2000 Value Index is an unmanaged index of those companies in the
Russell 2000 Index chosen for their value orientation.
Russell 2500 Growth Index is an unmanaged index of the smallest 2,500
companies in the Russell 3000 Index chosen for their growth orientation.
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 Inc. is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. Our proxy voting guidelines and policies are
available on the Putnam Individual Investor Web site,
www.putnaminvestments.com, by calling Putnam's Shareholder Services at
1-800-225-1581, or on the SEC's Web site, www.sec.gov.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or loss
the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment
income ratios, and portfolio turnover in one summary table, reflecting
the five most recent reporting periods. In a semiannual report, the
highlight table also includes the current reporting period. For open-end
funds, a separate table is provided for each share class.
The fund's portfolio
February 29, 2004 (Unaudited)
Corporate bonds and notes (88.3%) (a)
Principal amount Value
Advertising and Marketing Services (0.2%)
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$840,926 Adams Outdoor Advertising bank term
loan FRN 4.37s, 2008 (acquired
4/2/03, cost $838,824) (RES) $844,780
3,950,000 Lamar Media Corp. company guaranty
7 1/4s, 2013 4,266,000
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5,110,780
Automotive (2.5%)
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2,615,000 ArvinMeritor, Inc. notes 8 3/4s,
2012 2,928,800
7,959,000 Collins & Aikman Products company
guaranty 10 3/4s, 2011 7,760,025
1,475,000 Dana Corp. notes 10 1/8s, 2010 1,718,375
8,472,000 Dana Corp. notes 9s, 2011 10,187,580
1,199,000 Dana Corp. notes 7s, 2029 1,181,015
1,598,000 Delco Remy International, Inc.
company guaranty 11s, 2009 1,685,890
3,096,000 Delco Remy International, Inc.
company guaranty 10 5/8s, 2006 3,111,480
9,000 Dura Operating Corp. company
guaranty Ser. B, 8 5/8s, 2012 9,675
4,990,000 Dura Operating Corp. company
guaranty Ser. D, 9s, 2009 5,089,800
1,780,000 Dura Operating Corp. 144A sr. notes
8 5/8s, 2012 1,913,500
2,735,000 Federal Mogul Corp. bank term loan
FRN Libor plus a specified
amount, 2005 (acquired 10/29/03,
cost $2,249,538) (RES) 2,466,059
6,365,000 Federal Mogul Corp. bank term loan
FRN 3.60s, 2005 (acquired
various dates from 10/28/03 to
10/29/03, cost $5,465,358) (RES) 5,744,413
611,646 Hayes Lemmerz International, Inc.
bank term loan FRN 4.9622s,
2009 (acquired 6/3/03, cost
$605,529) (RES) 621,203
6,522,000 Lear Corp. company guaranty Ser. B,
8.11s, 2009 7,663,350
3,785,000 Meritor Automotive, Inc. notes 6.8s,
2009 3,926,938
5,925,000 Metaldyne Corp. 144A sr. notes 10s,
2013 6,132,375
220,000 Plastech bank term loan FRN 5 3/4s,
2010 (acquired 2/9/04, cost
$220,000) (RES) 223,300
110,000 Plastech 2nd. Lien bank term loan
FRN 5.62s, 2011 (acquired
2/9/04, cost $110,000) (RES) 111,788
1,485,000 SPX Corp. bank term loan FRN Ser. B,
3.1144s, 2009 (acquired
various dates from 7/23/02 to
8/26/03, cost $1,485,000) (RES) 1,493,818
310,345 Tenneco Automotive, Inc. bank term
loan FRN 4.44s, 2010 (acquired
12/10/03, cost $310,345) (RES) 315,517
139,655 Tenneco Automotive, Inc. bank term
loan FRN 4.37s, 2010 (acquired
12/10/03, cost $139,655) (RES) 142,099
2,010,000 Tenneco Automotive, Inc. company
guaranty Ser. B, 11 5/8s, 2009 2,170,800
12,200,000 Tenneco Automotive, Inc. sec. notes
Ser. B, 10 1/4s, 2013 14,213,000
520,000 TRW Automotive bank term loan FRN
3.4375s, 2011 (acquired 1/7/04, cost
$520,000) (RES) 528,450
--------------
81,339,250
Basic Materials (9.7%)
- -------------------------------------------------------------------------------
3,000 Abitibi-Consolidated Finance LP
company guaranty 7 7/8s, 2009 3,234
4,874,000 Acetex Corp. sr. notes 10 7/8s, 2009
(Canada) 5,361,400
877,000 AK Steel Corp. company guaranty
7 7/8s, 2009 776,145
5,699,000 AK Steel Corp. company guaranty
7 3/4s, 2012 4,901,140
5,447,586 Alabama River Newsprint bank term
loan FRN 5.188s, 2004 (acquired
various dates from 4/14/98 to
5/15/02, cost $4,959,742) (RES) 5,338,634
5,218,000 Appleton Papers, Inc. company
guaranty Ser. B, 12 1/2s, 2008 5,935,475
4,210,000 Armco, Inc. sr. notes 8 7/8s, 2008 3,704,800
2,965,000 Avecia Group PLC company guaranty
11s, 2009 (United Kingdom) 2,535,075
5,099,000 Better Minerals & Aggregates Co.
company guaranty 13s, 2009 3,671,280
897,750 Buckeye Technologies, Inc. bank term
loan FRN 3.7021s, 2010 (acquired
various dates from 11/20/03 to
11/21/03, cost $902,250) (RES) 902,239
5,629,000 Compass Minerals Group, Inc. company
guaranty 10s, 2011 6,417,060
7,145,000 Compass Minerals International Inc.
stepped-coupon zero % (12 3/4s,
12/15/07), 2012 (STP) 5,787,450
11,258,454 Doe Run Resources Corp. company
guaranty Ser. A1, 11 3/4s,
2008 (acquired various dates from
7/18/01 to 11/26/03, cost
$6,829,562) (RES) (PIK) 5,966,981
3,665,000 Equistar Chemicals LP notes 8 3/4s,
2009 3,747,463
14,008,000 Equistar Chemicals LP/Equistar
Funding Corp. company guaranty
10 1/8s, 2008 15,198,680
3,595,000 Equistar Chemicals LP/Equistar
Funding Corp. sr. notes 10 5/8s,
2011 3,900,575
3,390,000 Four M Corp. sr. notes Ser. B, 12s,
2006 3,390,000
1,760,000 Georgia-Pacific Corp. bonds 7 3/4s,
2029 1,724,800
2,985,000 Georgia-Pacific Corp. company
guaranty 8 7/8s, 2010 3,402,900
3,589,000 Georgia-Pacific Corp. debs. 7.7s,
2015 3,786,395
1,000 Georgia-Pacific Corp. sr. notes
7 3/8s, 2008 1,080
7,150,000 Gerdau Ameristeel Corp. sr. notes
10 3/8s, 2011 (Canada) 8,043,750
746,250 Graphics Packaging bank term loan
FRN 3.921s, 2010 (acquired
8/6/03, cost $746,250) (RES) 756,356
14,103,000 Hercules, Inc. company guaranty
11 1/8s, 2007 16,782,570
11,005,000 HMP Equity Holdings Corp. 144A sr.
disc. notes zero %, 2008 5,832,650
3,045,000 Huntsman Advanced Materials, LLC
144A sec. notes 11s, 2010 3,425,625
3,945,714 Huntsman Corp. bank term loan FRN
Ser. A, 5.9375s, 2007 (acquired
various dates from 6/10/02 to
9/24/03, cost $3,623,568) (RES) 3,822,410
2,721,415 Huntsman Corp. bank term loan FRN
Ser. B, 9 1/2s, 2007 (acquired
various dates from 3/6/02 to
9/24/03, cost $2,462,000) (RES) 2,636,371
8,308,000 Huntsman ICI Chemicals, Inc. company
guaranty 10 1/8s, 2009 8,453,390
12,978,000 Huntsman ICI Holdings sr. disc.
notes zero %, 2009 6,099,660
EUR 7,176,000 Huntsman International, LLC sr. sub.
notes Ser. EXCH, 10 1/8s, 2009 8,558,155
$3,710,000 Huntsman LLC 144A sec. notes
11 5/8s, 2010 3,876,950
9,839,000 ISP Chemco, Inc. company guaranty
Ser. B, 10 1/4s, 2011 11,068,875
25,000 ISP Holdings, Inc. sec. sr. notes
Ser. B, 10 5/8s, 2009 27,625
260,000 Kaiser Aluminum & Chemical Corp. sr.
notes Ser. B, 10 7/8s, 2006 (In
default) (NON) 232,700
3,547,000 Kaiser Aluminum & Chemical Corp. sr.
sub. notes 12 3/4s, 2003 (In
default) (DEF) (NON) 523,183
EUR 360,000 Kappa Beheer BV company guaranty
stepped-coupon Ser. EUR, zero %
(12s, 7/15/04), 2009 (Netherlands)
(STP) 459,527
$3,475,000 Kappa Beheer BV company guaranty
10 5/8s, 2009 (Netherlands) 3,700,875
660,000 Lyondell Chemical Co. bonds 11 1/8s,
2012 719,400
7,294,000 Lyondell Chemical Co. company
guaranty 9 1/2s, 2008 7,531,055
735,000 Lyondell Chemical Co. company
guaranty 9 1/2s, 2008 764,400
9,719,000 Lyondell Chemical Co. notes Ser. A,
9 5/8s, 2007 10,204,950
EUR 322,000 MDP Acquisitions PLC sr. notes
10 1/8s, 2012 (Ireland) 447,823
$8,555,000 MDP Acquisitions PLC sr. notes
9 5/8s, 2012 (Ireland) 9,624,375
2,961,697 MDP Acquisitions PLC sub. notes
15 1/2s, 2013 (Ireland) (PIK) 3,405,952
8,371,000 Millennium America, Inc. company
guaranty 9 1/4s, 2008 9,082,535
1,570,000 Millennium America, Inc. company
guaranty 7 5/8s, 2026 1,491,500
1,750,000 Millennium America, Inc. 144A sr.
notes 9 1/4s, 2008 1,898,750
687,500 Nalco Co. bank term loan FRN 3.62s,
2010 (acquired 11/6/03, cost
$687,500) (RES) 693,945
2,690,000 Nalco Co. 144A sr. notes 7 3/4s,
2011 2,797,600
EUR 685,000 Nalco Co. 144A sr. notes 7 3/4s,
2011 859,485
EUR 685,000 Nalco Co. 144A sr. sub. notes 9s,
2013 859,485
$10,375,000 Nalco Co. 144A sr. sub. notes
8 7/8s, 2013 10,893,750
4,654,050 Noveon International bonds 13s, 2011 4,933,293
1,170,000 Noveon International company
guaranty Ser. B, 11s, 2011 1,339,650
1,449,000 Pacifica Papers, Inc. sr. notes 10s,
2009 (Canada) 1,523,261
2,553,936 PCI Chemicals Canada sec. sr. notes
10s, 2008 (Canada) 2,490,088
3,078,797 Pioneer Cos., Inc. sec. FRN 4.663s,
2006 3,001,827
5,450,000 Potlatch Corp. company guaranty 10s,
2011 6,131,250
2,070,000 Resolution Performance Products, LLC
sr. notes 9 1/2s, 2010 2,070,000
1,660,000 Resolution Performance Products, LLC
144A sec. notes 8s, 2009 1,676,600
2,000,000 Rhodia SA notes 9s, 2009 (acquired
various dates from 11/21/03 to
12/2/03, cost $2,051,047) (France)
(RES) 2,450,000
EUR 1,910,000 Rhodia SA unsub. Ser. EMTN, 6 1/4s,
2005 (France) 2,325,337
$2,540,000 Salt Holdings Corp. 144A sr. disc.
notes stepped-coupon zero % (12s,
6/1/06), 2013 (STP) 1,930,400
EUR 4,040,000 SGL Carbon SA 144A sr. notes 8 1/2s,
2012 (Luxembourg) 5,156,912
$660,000 SGL Carbon, LLC bank guaranty FRN
4.22s, 2009 (acquired 2/26/04, cost
$663,300) (RES) 661,650
400,000 Smurfit Capital Funding PLC notes
6 3/4s, 2005 (Ireland) 416,000
76,000 Smurfit-Stone Container Corp.
company guaranty 8 1/4s, 2012 82,460
600,000 St. Mary's Cement Corp. bank term
loan FRN 3.69s, 2009 (acquired
11/26/03, cost $600,000) (RES) 604,500
4,379,000 Steel Dynamics, Inc. company
guaranty 9 1/2s, 2009 4,860,690
1,334,122 Sterling Chemicals, Inc. sec. notes
10s, 2007 (PIK) 1,287,428
7,480,000 Stone Container Corp. sr. notes
9 3/4s, 2011 8,340,200
3,555,000 Stone Container Corp. sr. notes
8 3/8s, 2012 3,861,619
1,390,000 Tembec Industries, Inc. company
guaranty 7 3/4s, 2012 (Canada) 1,327,450
570,000 Texas Petrochemical Corp. sr. sub.
notes 11 1/8s, 2006 (In default)
(NON) 245,100
1,915,000 Texas Petrochemical Corp. sr. sub.
notes Ser. B, 11 1/8s, 2006 (In
default) (NON) 823,450
8,145,000 Ucar Finance, Inc. company guaranty
10 1/4s, 2012 9,285,300
3,660,000 United Agri Products 144A sr. notes
8 1/4s, 2011 3,788,100
1,660,000 United States Steel Corp. sr. notes
9 3/4s, 2010 1,871,650
2,475,000 United States Steel, LLC sr. notes
10 3/4s, 2008 2,864,813
4,491,000 WCI Steel, Inc. sr. notes Ser. B,
10s, 2004 (In default) (NON) 2,200,590
380,600 Weirton Steel Corp. sr. notes 10s,
2008 (In default) (NON) 137,016
1,355,000 Wellman 1st. Lien bank term loan FRN
6s, 2009 (acquired 2/4/04, cost
$1,355,000) (RES) 1,381,535
2,425,000 Wellman 2nd. Lien bank term loan FRN
8 3/4s, 2010 (acquired 2/4/04, cost
$2,376,500) (RES) 2,376,500
365,270 Wheeling-Pittsburgh Steel Corp. sr.
notes 6s, 2010 237,426
730,540 Wheeling-Pittsburgh Steel Corp. sr.
notes 5s, 2011 482,156
3,636,000 WHX Corp. sr. notes 10 1/2s, 2005 3,308,760
--------------
317,501,494
Beverage (0.2%)
- -------------------------------------------------------------------------------
398,440 Constellation Brands, Inc. bank term
loan FRN 3.2125s, 2008 (acquired
11/3/03, cost $398,440) (RES) 403,385
1,463,000 Constellation Brands, Inc. company
guaranty 8 1/2s, 2009 1,525,178
3,088,000 Constellation Brands, Inc. company
guaranty Ser. B, 8s, 2008 3,427,680
338,000 Constellation Brands, Inc. sr. sub.
notes Ser. B, 8 1/8s, 2012 366,730
--------------
5,722,973
Broadcasting (1.7%)
- -------------------------------------------------------------------------------
635,000 DirecTV bank term loan FRN Ser. B,
3.8908s, 2010 (acquired
various dates from 3/4/03 to 8/5/03,
cost $635,000) (RES) 641,033
23,030,000 Diva Systems Corp. sr. disc. notes
Ser. B, 12 5/8s, 2008 (In default)
(NON) 1,439,375
3,007,000 Echostar DBS Corp. sr. notes
10 3/8s, 2007 3,285,148
3,423,000 Echostar DBS Corp. sr. notes 9 1/8s,
2009 3,867,990
15,140,000 Echostar DBS Corp. 144A sr. notes
6 3/8s, 2011 16,048,400
625,000 Echostar DBS Corp. 144A sr. notes
FRN 4.405s, 2008 650,000
558,243 Emmis Communications Corp. bank term
loan FRN Ser. C, 3 3/8s,
2009 (acquired 6/20/02, cost
$557,545) (RES) 564,368
13,580,000 Granite Broadcasting Corp. 144A sec.
notes 9 3/4s, 2010 13,342,350
1,783,000 Gray Television, Inc. company
guaranty 9 1/4s, 2011 1,983,588
382,042 Knology, Inc. 144A sr. notes 12s,
2009 (PIK) 387,773
420,000 Pegasus Communications Corp. sr.
notes 12 1/2s, 2007 386,400
3,440,000 Pegasus Satellite sr. notes 12 3/8s,
2006 3,199,200
2,866,000 RCN Corp. sr. disc. notes Ser. B,
zero %, 2008 1,619,290
6,183,000 Young Broadcasting, Inc. company
guaranty 10s, 2011 6,615,810
3,385,000 Young Broadcasting, Inc. 144A sr.
sub. notes 8 3/4s, 2014 3,503,475
--------------
57,534,200
Building Materials (0.7%)
- -------------------------------------------------------------------------------
1,057,000 American Standard Cos., Inc. company
guaranty 7 5/8s, 2010 1,199,695
2,869,000 Building Materials Corp. company
guaranty 8s, 2008 2,869,000
5,474,000 Dayton Superior Corp. 144A sec.
notes 10 3/4s, 2008 5,747,700
2,075,000 Interface, Inc. 144A sr. sub. notes
9 1/2s, 2014 2,054,250
451,750 NCI Building Systems, Inc. bank term
loan FRN Ser. B, 4.4125s,
2008 (acquired 9/4/02, cost
$451,750) (RES) 454,950
5,245,000 Nortek Holdings, Inc. 144A sr. notes
stepped-coupon zero % (10s,
11/15/07), 2011 (STP) 3,868,188
4,175,000 Nortek, Inc. sr. sub. notes Ser. B,
9 7/8s, 2011 4,655,125
969,000 Nortek, Inc. 144A sr. notes Ser. B,
9 1/8s, 2007 998,477
4,000 Owens Corning bonds 7 1/2s, 2018 (In
default) (NON) 1,760
5,755,000 Owens Corning notes 7 1/2s, 2005 (In
default) (NON) 2,532,200
--------------
24,381,345
Cable Television (3.6%)
- -------------------------------------------------------------------------------
230,000 Adelphia Communications Corp. notes
Ser. B, 9 7/8s, 2005 (In default)
(NON) 221,950
3,211,000 Adelphia Communications Corp. sr.
notes 10 7/8s, 2010 (In default)
(NON) 3,130,725
2,918,000 Adelphia Communications Corp. sr.
notes 7 7/8s, 2009 (In default)
(NON) 2,772,100
2,431,000 Adelphia Communications Corp. sr.
notes Ser. B, 9 7/8s, 2007 (In
default) (NON) 2,345,915
1,340,000 Adelphia Communications Corp. sr.
notes Ser. B, 7 3/4s, 2009 (In
default) (NON) 1,293,100
3,950,000 Atlantic Broadband Finance LLC 144A
sr. sub. notes 9 3/8s, 2014 3,959,875
5,320,000 Century Cable Holdings bank term
loan FRN 6s, 2009 (acquired
various dates from 5/20/02 to
6/11/02, cost $4,639,400) (RES) 5,082,818
2,453,788 Charter Communications Holdings, LLC
bank term loan FRN Ser. B, 3.87s,
2008 (acquired 10/22/01, cost
$2,398,577) (RES) 2,383,582
2,258,000 Charter Communications Holdings,
LLC/Capital Corp. sr. disc. notes
stepped-coupon zero % (12 1/8s,
1/15/07), 2012 (STP) 1,383,025
4,938,000 Charter Communications Holdings,
LLC/Capital Corp. sr. disc. notes
stepped-coupon zero % (11 3/4s,
5/15/06), 2011 (STP) 3,234,390
5,946,000 Charter Communications Holdings,
LLC/Capital Corp. sr. disc. notes
stepped-coupon zero % (11 3/4s,
1/15/05), 2010 (STP) 4,845,990
10,835,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes
11 1/8s, 2011 9,616,063
10,927,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes
10 3/4s, 2009 9,615,760
13,360,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes 10s,
2011 11,155,600
8,070,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes 9 5/8s,
2009 6,879,675
211,000 CSC Holdings, Inc. debs. 7 5/8s,
2018 232,100
6,818,000 CSC Holdings, Inc. sr. notes 7 7/8s,
2007 7,346,395
440,000 Frontier Vision bank term loan FRN
Ser. B, 5.525s, 2006 (acquired
5/20/02, cost $407,000) (RES) 435,967
5,000,000 Insight Midwest LP/Insight Capital,
Inc. bank term loan FRN
3.9375s, 2009 (acquired various
dates from 1/9/01 to 11/5/01, cost
$4,992,125) (RES) 5,019,445
3,570,000 Mediacom LLC/Mediacom Capital Corp.
sr. notes 9 1/2s, 2013 3,623,550
5,053,836 Olympus Cable bank term loan FRN
Ser. B, 6s, 2010 (acquired
various dates from 5/20/02 to
11/21/02, cost $4,272,863) (RES) 4,788,510
2,205,000 ONO Finance PLC sr. notes 14s, 2011
(United Kingdom) 2,458,575
930,000 ONO Finance PLC sr. notes 13s, 2009
(United Kingdom) 985,800
EUR 1,420,000 ONO Finance PLC sr. notes Ser. REGS,
14s, 2011 (United Kingdom) 1,940,473
$1,993,000 Quebecor Media, Inc. sr. disc. notes
stepped-coupon zero % (13 3/4s,
7/15/06), 2011 (Canada) (STP) 1,763,805
7,354,000 Quebecor Media, Inc. sr. notes
11 1/8s, 2011 (Canada) 8,383,560
12,876,000 TeleWest Communications PLC debs.
11s, 2007 (United Kingdom) (In
default) (NON) 8,562,540
280,000 TeleWest Communications PLC debs.
9 5/8s, 2006 (United Kingdom) (In
default) (NON) 182,000
1,935,000 TeleWest Communications PLC sr.
notes Ser. S, 9 7/8s, 2010 (United
Kingdom) (In default) (NON) 1,219,050
775,000 TeleWest Communications PLC 144A sr.
notes 11 1/4s, 2008 (United Kingdom)
(In default) (NON) 511,500
2,670,000 Videotron Ltee company guaranty
6 7/8s, 2014 (Canada) 2,796,825
--------------
118,170,663
Capital Goods (9.6%)
- -------------------------------------------------------------------------------
2,500,000 Advanced Glass Fiber Yarns bank term
loan FRN Ser. B, 8 1/4s,
2005 (acquired 7/18/02, cost
$2,106,250) (RES) 2,000,000
7,970,000 AEP Industries, Inc. sr. sub. notes
9 7/8s, 2007 8,189,175
900,000 AGCO Corp. bank term loan FRN 3.35s,
2008 (acquired 12/3/03, cost
$900,000) (RES) 909,000
11,355,121 Air2 US 144A sinking fund Ser. D,
12.266s, 2020 (In default) (NON) 114
539,598 Allied Waste Industries, Inc. bank
term loan FRN 3.907s, 2010 (acquired
4/25/03, cost $539,598) (RES) 547,782
91,071 Allied Waste Industries, Inc. bank
term loan FRN Ser. C, 1.12s,
2010 (acquired 4/25/03, cost
$91,071) (RES) 92,405
12,694,000 Allied Waste North America, Inc.
company guaranty Ser. B, 9 1/4s,
2012 14,312,485
9,367,000 Allied Waste North America, Inc.
company guaranty Ser. B, 8 1/2s,
2008 10,444,205
5,065,000 Allied Waste North America, Inc.
144A sec. notes 6 1/2s, 2010 5,140,975
9,451,000 Argo-Tech Corp. company guaranty
8 5/8s, 2007 9,427,373
5,398,000 Argo-Tech Corp. company guaranty
Ser. D, 8 5/8s, 2007 5,384,505
2,015,000 BE Aerospace, Inc. sr. notes 8 1/2s,
2010 2,186,275
6,038,000 BE Aerospace, Inc. sr. sub. notes
Ser. B, 8 7/8s, 2011 5,902,145
5,492,000 BE Aerospace, Inc. sr. sub. notes
Ser. B, 8s, 2008 5,217,400
2,468,000 Berry Plastics Corp. company
guaranty 10 3/4s, 2012 2,862,880
5,540,000 Blount, Inc. company guaranty 13s,
2009 5,983,200
12,105,000 Blount, Inc. company guaranty 7s,
2005 12,347,100
10,273,000 Browning-Ferris Industries, Inc.
debs. 7.4s, 2035 9,913,445
2,300,000 Browning-Ferris Industries, Inc. sr.
notes 6 3/8s, 2008 2,369,000
5,785,000 Crown Holdings SA notes 10 7/8s,
2013 (France) 6,739,525
13,650,000 Crown Holdings SA notes 9 1/2s, 2011
(France) 15,356,250
3,300,000 Decrane Aircraft Holdings Co. bank
term loan FRN 12s, 2008 (acquired
various dates from 11/25/03 to
1/29/04, cost $3,312,500) (RES) 3,300,000
11,600,000 Decrane Aircraft Holdings Co.
company guaranty Ser. B, 12s, 2008 7,656,000
744,375 EaglePicher bank term loan FRN
4.671s, 2009 (acquired 8/6/03, cost
$748,750) (RES) 751,199
7,141,000 Earle M. Jorgensen Co. sec. notes
9 3/4s, 2012 7,926,510
3,075,000 FIMEP SA sr. notes 10 1/2s, 2013
(France) 3,666,938
EUR 405,000 Flender Holdings 144A sr. notes 11s,
2010 (Denmark) 581,117
$884,961 Flowserve Corp. bank term loan FRN
Ser. C, 3.8952s, 2009 (acquired
various dates from 4/30/02 to
2/26/04, cost $888,811) (RES) 892,389
3,802,000 Flowserve Corp. company guaranty
12 1/4s, 2010 4,372,300
849,000 Fonda Group, Inc. sr. sub. notes
Ser. B, 9 1/2s, 2007 865,980
382,500 Goodman Manufacturing bank term loan
FRN 3 1/4s, 2009 (acquired
11/20/03, cost $382,500) (RES) 386,803
3,755,000 Hexcel Corp. sr. sub. notes 9 3/4s,
2009 3,933,363
DEM 6,155,000 Impress Metal Packaging Holding NV
sr. sub. notes 9 7/8s,
2007 (Netherlands) 3,635,854
$2,620,000 International Wire Group Inc.
company guaranty Ser. B, 11 3/4s,
2005 (In default) (NON) 1,971,550
6,395,000 Invensys, PLC notes 9 7/8s, 2011
(United Kingdom) 6,276,501
EUR 2,530,000 Invensys, PLC sr. unsub. notes
5 1/2s, 2005 (United Kingdom) 3,202,736
$2,784,600 JII Holdings LLC 144A secd. notes
13s, 2007 2,366,910
5,340,000 K&F Industries, Inc. sr. sub. notes
Ser. B, 9 5/8s, 2010 5,967,450
1,116,000 K&F Industries, Inc. sr. sub. notes
Ser. B, 9 1/4s, 2007 1,152,270
8,790,000 L-3 Communications Corp. company
guaranty 6 1/8s, 2013 9,031,725
618,375 Laidlaw International, Inc. bank
term loan FRN 5 1/2s, 2009
(acquired 6/18/03, cost $606,008)
(RES) 627,908
10,430,000 Laidlaw International, Inc. 144A sr.
notes 10 3/4s, 2011 11,968,425
9,150,000 Legrand SA debs. 8 1/2s, 2025
(France) 9,882,000
3,834,000 Manitowoc Co., Inc. (The) company
guaranty 10 1/2s, 2012 4,361,175
EUR 1,640,000 Manitowoc Co., Inc. (The) company
guaranty 10 3/8s, 2011 2,271,670
$2,030,000 Manitowoc Co., Inc. (The) sr. notes
7 1/8s, 2013 2,131,500
2,834,000 Motors and Gears, Inc. sr. notes
Ser. D, 10 3/4s, 2006 2,479,750
4,000 Owens-Brockway Glass company
guaranty 8 7/8s, 2009 4,360
6,540,000 Owens-Brockway Glass company
guaranty 8 1/4s, 2013 6,883,350
4,810,000 Owens-Brockway Glass company
guaranty 7 3/4s, 2011 5,098,600
8,313,000 Owens-Brockway Glass sr. sec. notes
8 3/4s, 2012 9,123,518
1,500,000 Owens-Illinois, Inc. bank term loan
FRN 3.88s, 2008 (acquired
7/17/03, cost $1,505,625) (RES) 1,510,001
4,795,000 Pliant Corp. sec. notes 11 1/8s,
2009 4,998,788
6,496,000 Roller Bearing Company of America
company guaranty Ser. B, 9 5/8s,
2007 6,398,560
500,000 Roper bank term loan FRN 3.113s,
2008 (acquired 12/22/03, cost
$500,000) (RES) 505,625
6,671,000 Sensus Metering Systems Inc. 144A
sr. sub. notes 8 5/8s, 2013 6,779,404
3,561,000 Sequa Corp. sr. notes 9s, 2009 3,952,710
3,255,000 Sequa Corp. sr. notes Ser. B,
8 7/8s, 2008 3,580,500
950,000 Siebe PLC 144A sr. unsub. 6 1/2s,
2010 (United Kingdom) 847,875
550,000 Solo Cup Co. bank guaranty FRN
3.652s, 2011 (acquired 2/19/04, cost
$553,300) (RES) 557,838
3,850,000 Solo Cup Co. 144A sr. sub. notes
8 1/2s, 2014 4,013,625
11,783,000 Tekni-Plex, Inc. company guaranty
Ser. B, 12 3/4s, 2010 12,725,640
4,115,000 Tekni-Plex, Inc. 144A sr. sec. notes
8 3/4s, 2013 4,289,888
1,540,000 Terex Corp. company guaranty 9 1/4s,
2011 1,724,800
6,295,000 Terex Corp. company guaranty Ser. B,
10 3/8s, 2011 7,129,088
5,530,000 Titan Corp. (The) 144A sr. sub.
notes 8s, 2011 6,304,200
249,375 Transdigm, Inc. bank term loan FRN
4s, 2010 (acquired 7/21/03, cost
$249,375) (RES) 251,973
4,032,000 Trimas Corp. company guaranty
9 7/8s, 2012 4,354,560
--------------
318,020,165
Commercial and Consumer Services (0.6%)
- -------------------------------------------------------------------------------
EUR 2,500,000 CB Bus AB sr. sub. notes 11s, 2010
(Sweden) 2,903,876
$8,593,000 Coinmach Corp. sr. notes 9s, 2010 9,151,545
246,193 Corrections Corporation of America
bank term loan FRN 3.8756s,
2008 (acquired 8/5/03, cost
$246,193) (RES) 248,963
7,564,711 Derby Cycle Corp. (The) sr. notes
10s, 2008 (In default) (NON) 332,847
DEM 7,134,747 Derby Cycle Corp. (The) sr. notes
9 3/8s, 2008 (In default) (NON) 199,401
$498,750 IESI Corp. bank term loan FRN
4.287s, 2010 (acquired various
dates from 10/20/03 to 10/21/03,
cost $501,563) (RES) 504,361
5,997,000 IESI Corp. company guaranty 10 1/4s,
2012 6,536,730
569,874 Pike Electric bank term loan FRN
4.402s, 2010 (acquired 2/27/04, cost
$578,422) (RES) 573,257
--------------
20,450,980
Communication Services (8.0%)
- -------------------------------------------------------------------------------
5,448,000 Alamosa Delaware, Inc. company
guaranty 11s, 2010 5,842,980
6,580,000 Alamosa Delaware, Inc. 144A sr.
notes 8 1/2s, 2012 6,283,900
1,795,000 American Cellular Corp. company
guaranty 9 1/2s, 2009 1,669,350
7,435,000 American Cellular Corp. sr. notes
Ser. B, 10s, 2011 7,472,175
2,396,000 American Tower Corp. sr. notes
9 3/8s, 2009 2,539,760
3,360,000 American Tower Corp. 144A sr. notes
7 1/2s, 2012 3,225,600
6,940,000 American Towers, Inc. 144A sr. sub.
notes 7 1/4s, 2011 7,096,150
5,905,000 Asia Global Crossing, Ltd. sr. notes
13 3/8s, 2010 (Bermuda) (In default)
(NON) 664,313
1,564,000 Cellular Operating Co., LLC sr. sub.
notes 10 3/4s, 2008 1,642,200
15,290,000 Centennial Cellular Operating Co.
company guaranty 10 1/8s, 2013 16,054,500
1,335,000 Cincinnati Bell Telephone Co.
company guaranty 6.3s, 2028 1,261,575
7,330,000 Cincinnati Bell, Inc. company
guaranty 7 1/4s, 2013 7,549,900
3,752,000 Cincinnati Bell, Inc. notes 7 1/4s,
2023 3,752,000
4,090,000 Cincinnati Bell, Inc. sr. sub. notes
8 3/8s, 2014 4,304,725
6,323,562 Colo.com, Inc. 144A sr. notes
13 7/8s, 2010 (In default) (NON) 15,809
498,750 Crown Castle International Corp.
bank term loan FRN 4.66s,
2010 (acquired 10/3/03, cost
$498,750) (RES) 507,339
8,951,000 Crown Castle International Corp. sr.
notes 9 3/8s, 2011 9,846,100
498,750 Dobson Communications Corp. bank
term loan FRN 4.3754s, 2010
(acquired 10/20/03, cost $498,750)
(RES) 502,135
17,225,000 Dobson Communications Corp. sr.
notes 8 7/8s, 2013 14,856,563
3,610,000 Fairpoint Communications, Inc. sr.
sub. notes 12 1/2s, 2010 3,898,800
11,474,257 Firstworld Communication Corp. sr.
disc. notes zero %, 2008 (In
default) (NON) 1,147
2,810,000 Inmarsat Finance PLC 144A company
guaranty 7 5/8s, 2012 (United
Kingdom) 2,950,500
10,395,000 iPCS, Inc. sr. disc. notes
stepped-coupon zero % (14s,
7/15/05), 2010 (In default) (NON)
(STP) 2,832,638
4,532,000 IWO Holdings, Inc. company guaranty
14s, 2011 (In default) (NON) 1,223,640
725,000 Level 3 Communications, Inc. sr.
notes 9 1/8s, 2008 603,563
8,985,000 Level 3 Financing Inc. 144A sr.
notes 10 3/4s, 2011 9,029,925
6,660,000 Madison River Capital Corp. sr.
notes 13 1/4s, 2010 7,326,000
1,550,000 MCI Communications Corp. debs.
Ser. D, 8 1/4s, 2023 (In default)
(NON) 1,224,500
615,000 MCI Communications Corp. sr. notes
6.95s, 2006 (In default) (NON) 485,850
4,195,000 MCI Communications Corp. sr. notes
Ser. D, 7 1/2s, 2004 (In default)
(NON) 3,314,050
2,105,000 MCI Communications Corp. sr. notes
Ser. D, 6 1/2s, 2010 (In default)
(NON) 1,662,950
2,333,333 Nextel bank term loan FRN 3.41s,
2010 (acquired 10/31/03, cost
$2,138,306) (RES) 2,354,042
6,721,000 Nextel Communications, Inc. sr.
notes 9 1/2s, 2011 7,544,323
13,295,000 Nextel Communications, Inc. sr.
notes 7 3/8s, 2015 14,325,363
3,029,000 Nextel Partners, Inc. sr. notes
12 1/2s, 2009 3,513,640
5,025,000 Nextel Partners, Inc. sr. notes 11s,
2010 5,565,188
13,580,000 Nextel Partners, Inc. sr. notes
8 1/8s, 2011 14,326,900
3,409,000 PanAmSat Corp. company guaranty
8 1/2s, 2012 3,545,360
699,000 PanAmSat Corp. notes 6 3/8s, 2008 705,990
690,625 Qwest Communications International,
Inc. bank term loan FRN 6 1/2s, 2007
(acquired 6/5/03, cost $683,719)
(RES) 718,394
11,475,000 Qwest Communications International,
Inc. 144A sr. notes 7 1/2s, 2014 10,843,875
600,000 Qwest Communications International,
Inc. 144A sr. notes FRN 4.63s, 2009 567,000
24,908,000 Qwest Corp. 144A notes 8 7/8s, 2012 28,395,120
3,310,000 Qwest Services Corp. 144A notes 14s,
2014 4,005,100
455,000 Rogers Cantel, Ltd. debs. 9 3/8s,
2008 (Canada) 477,750
1,312,000 Rogers Wireless, Inc. sec. notes
9 5/8s, 2011 (Canada) 1,600,640
365,000 Rural Cellular Corp. sr. notes
9 7/8s, 2010 372,300
1,525,000 Rural Cellular Corp. sr. sub. notes
Ser. B, 9 5/8s, 2008 1,464,000
250,000 SBA bank term loan FRN 4.6s, 2008
(acquired 2/3/04, cost $250,000)
(RES) 251,875
1,515,000 SBA Communications Corp. sr. notes
10 1/4s, 2009 1,518,788
2,975,000 SBA Telecommunications Inc. 144A sr.
dis. notes stepped-coupon zero %
(9 3/4s, 12/15/07), 2011 (STP) 2,052,750
825,000 Time Warner Telecom, Inc. 144A sec.
notes FRN 5.12s, 2011 818,813
3,215,000 Time Warner Telecom, Inc. 144A sr.
notes 9 1/4s, 2014 3,190,888
5,824,000 TSI Telecommunication Services, Inc.
company guaranty Ser. B, 12 3/4s,
2009 6,435,520
78,000 U S West, Inc. notes 5 5/8s, 2008 77,610
3,832,000 UbiquiTel Operating Co. bonds
stepped-coupon zero % (14s,
4/15/05), 2010 (STP) 3,602,080
3,210,000 UbiquiTel Operating Co. 144A sr.
notes 9 7/8s, 2011 3,121,725
3,576,000 US UnWired, Inc. company guaranty
stepped-coupon Ser. B, zero %
(13 3/8s, 11/1/04), 2009 (STP) 3,307,800
10,340,000 Western Wireless Corp. sr. notes
9 1/4s, 2013 10,857,000
--------------
265,200,471
Conglomerates (0.7%)
- -------------------------------------------------------------------------------
2,526,000 Tyco International Group SA company
guaranty 7s, 2028 (Luxembourg) 2,682,061
5,075,000 Tyco International Group SA company
guaranty 6 7/8s, 2029 (Luxembourg) 5,314,012
3,000 Tyco International Group SA company
guaranty 6 3/8s, 2005 (Luxembourg) 3,150
12,253,000 Tyco International Group SA notes
6 3/8s, 2011 (Luxembourg) 13,237,798
3,180,000 Tyco International Group SA 144A sr.
notes 6s, 2013 (Luxembourg) 3,327,174
--------------
24,564,195
Consumer (1.1%)
- -------------------------------------------------------------------------------
10,514,000 Icon Health & Fitness company
guaranty 11 1/4s, 2012 12,038,530
8,890,000 Jostens Holding Corp. 144A sr. disc.
notes stepped-coupon zero %
(10 1/4s, 12/1/08), 2013 (STP) 5,911,850
947,776 Jostens, Inc. bank term loan FRN
Ser. B, 3.72s, 2010 (acquired
7/28/03, cost $947,776) (RES) 956,780
3,016,000 Jostens, Inc. sr. sub. notes
12 3/4s, 2010 3,438,240
14,878,000 Samsonite Corp. sr. sub. notes
10 3/4s, 2008 15,510,315
--------------
37,855,715
Consumer Goods (1.2%)
- -------------------------------------------------------------------------------
6,282,000 Armkel, LLC/Armkel Finance sr. sub.
notes 9 1/2s, 2009 6,957,315
2,305,000 Elizabeth Arden, Inc. 144A company
guaranty 7 3/4s, 2014 2,379,913
11,592,000 Playtex Products, Inc. company
guaranty 9 3/8s, 2011 10,751,580
6,910,000 Playtex Products, Inc. 144A secd.
notes 8s, 2011 7,186,400
432,927 Rayovac Corp. bank term loan FRN
Ser. B, 4.8671s, 2009 (acquired
9/26/02, cost $432,495) (RES) 435,273
7,821,000 Remington Arms Co., Inc. company
guaranty 10 1/2s, 2011 8,172,945
817,000 Revlon Consumer Products sr. notes
9s, 2006 861,935
565,000 Revlon Consumer Products sr. notes
8 1/8s, 2006 598,900
500,000 Scotts Co. (The) bank term loan FRN
3.125s, 2010 (acquired
10/16/03, cost $500,000) (RES) 506,250
2,335,000 Scotts Co. (The) 144A sr. sub. notes
6 5/8s, 2013 2,416,725
--------------
40,267,236
Consumer Services (0.5%)
- -------------------------------------------------------------------------------
6,145,000 Brand Services, Inc. company
guaranty 12s, 2012 7,189,650
600,000 Itron, Inc. bank term loan FRN Libor
plus a specified amount,
2010 (acquired 11/20/03, cost
$600,000) (RES) 605,250
10,135,000 Williams Scotsman, Inc. company
guaranty 9 7/8s, 2007 9,957,638
--------------
17,752,538
Distribution (0.1%)
- -------------------------------------------------------------------------------
5,816,000 Fleming Cos., Inc. company guaranty
10 1/8s, 2008 (In default) (NON) 959,640
2,642,000 Fleming Cos., Inc. sr. notes 9 1/4s,
2010 (In default) (NON) 435,930
--------------
1,395,570
Energy (7.7%)
- -------------------------------------------------------------------------------
7,450,000 Arch Western Finance, LLC 144A sr.
notes 6 3/4s, 2013 7,859,750
8,105,000 Belden & Blake Corp. company
guaranty Ser. B, 9 7/8s, 2007 8,023,950
6,150,000 BRL Universal Equipment sec. notes
8 7/8s, 2008 6,565,125
3,334,000 Chesapeake Energy Corp. company
guaranty 9s, 2012 3,846,603
3,742,000 Chesapeake Energy Corp. company
guaranty 7 3/4s, 2015 4,088,135
7,445,000 Chesapeake Energy Corp. sr. notes
7 1/2s, 2013 8,133,663
4,485,000 Comstock Resources, Inc. sr. notes
6 7/8s, 2012 4,535,456
660,000 Dresser, Inc. bank term loan FRB
4.652s, 2010 (acquired 2/27/04, cost
$664,950) (RES) 669,282
5,599,000 Dresser, Inc. company guaranty
9 3/8s, 2011 6,074,915
763,000 El Paso Energy Partners LP company
guaranty Ser. B, 8 1/2s, 2011 854,560
4,873,000 Encore Acquisition Co. company
guaranty 8 3/8s, 2012 5,214,110
4,930,000 Exco Resources, Inc. 144A company
guaranty 7 1/4s, 2011 5,065,575
5,624,000 Forest Oil Corp. company guaranty
7 3/4s, 2014 5,905,200
1,819,000 Forest Oil Corp. sr. notes 8s, 2011 1,964,520
2,507,000 Forest Oil Corp. sr. notes 8s, 2008 2,707,560
3,080,000 Gazprom OAO 144A notes 9 5/8s, 2013
(Russia) 3,449,600
30,000 Grant Prideco Escrow Corp. company
guaranty 9s, 2009 33,450
3,320,000 Hanover Compressor Co. sr. notes
8 5/8s, 2010 3,486,000
4,990,000 Hanover Compressor Co. sub. notes
zero %, 2007 3,779,925
3,330,000 Hanover Equipment Trust sec. notes
Ser. A, 8 1/2s, 2008 3,529,800
3,749,000 Hornbeck Offshore Services, Inc. sr.
notes 10 5/8s, 2008 4,152,018
2,755,000 Key Energy Services, Inc. sr. notes
6 3/8s, 2013 2,865,200
1,574,000 Leviathan Gas Corp. company guaranty
Ser. B, 10 3/8s, 2009 1,656,635
305,672 Magellan Midstream Holdings bank
term loan FRN 4.67s, 2008 (acquired
6/13/03, cost $302,616) (RES) 309,493
5,065,000 Massey Energy Co. 144A sr. notes
6 5/8s, 2010 5,216,950
6,220,000 Newfield Exploration Co. sr. notes
7 5/8s, 2011 6,997,500
6,060,000 Offshore Logistics, Inc. company
guaranty 6 1/8s, 2013 5,878,200
5,449,415 Oslo Seismic Services, Inc. 1st
mtge. 8.28s, 2011 5,531,156
6,740,000 Parker & Parsley Co. sr. notes
8 1/4s, 2007 7,704,500
500,000 Parker Drilling Co. bank term loan
FRN 5.36s, 2007 (acquired 10/22/03,
cost $500,000) (RES) 505,313
4,880,000 Parker Drilling Co. company guaranty
Ser. B, 10 1/8s, 2009 5,368,000
316,359 Peabody Energy Corp. bank term loan
FRN Ser. B, 3.6627s, 2010 (acquired
3/20/03, cost $316,359) (RES) 318,798
1,540,000 Pemex Project Funding Master Trust
company guaranty 8 5/8s, 2022 1,709,400
13,970,000 Pemex Project Funding Master Trust
company guaranty 7 3/8s, 2014 15,157,450
5,200,000 Petro Geo-Svcs. notes 10s, 2010
(Norway) 5,642,000
7,564,000 Pioneer Natural Resources Co.
company guaranty 9 5/8s, 2010 9,635,507
1,601,000 Pioneer Natural Resources Co.
company guaranty 7.2s, 2028 1,765,826
3,296,000 Plains All American Pipeline
LP/Plains All American Finance
Corp. company guaranty 7 3/4s, 2012 3,864,560
5,200,000 Plains Exploration & Production Co.
company guaranty Ser. B, 8 3/4s,
2012 5,811,000
4,500,000 Plains Exploration & Production Co.
sr. sub. notes 8 3/4s, 2012 5,028,750
6,059,000 Pogo Producing Co. sr. sub. notes
Ser. B, 8 1/4s, 2011 6,755,785
531,000 Pride International, Inc. sr. notes
10s, 2009 566,179
3,438,000 Pride Petroleum Services, Inc. sr.
notes 9 3/8s, 2007 3,528,248
5,165,000 Seabulk International, Inc. company
guaranty 9 1/2s, 2013 5,423,250
2,848,000 Seven Seas Petroleum, Inc. sr. notes
Ser. B, 12 1/2s, 2005 (In default)
(NON) 28
6,705,000 Star Gas Partners LP/Star Gas
Finance Co. sr. notes 10 1/4s, 2013 7,442,550
1,645,000 Star Gas Partners LP/Star Gas
Finance Co. 144A sr. notes 10 1/4s,
2013 1,825,950
3,514,615 Star Gas Propane 1st Mtge. 8.04s,
2009 (acquired 5/7/03, cost
$3,444,323) (RES) 3,611,267
3,710,000 Swift Energy Co. sr. sub. notes
9 3/8s, 2012 4,136,650
2,235,000 Trico Marine bank guaranty FRN
7.152s, 2009 (acquired 2/3/04, cost
$2,190,300) (RES) 2,235,000
9,683,000 Trico Marine Services, Inc. company
guaranty 8 7/8s, 2012 6,874,930
1,375,000 Universal Compression, Inc. sr.
notes 7 1/4s, 2010 1,471,250
3,408,000 Vintage Petroleum, Inc. sr. notes
8 1/4s, 2012 3,731,760
3,343,000 Vintage Petroleum, Inc. sr. sub.
notes 7 7/8s, 2011 3,543,580
6,325,000 Westport Resources Corp. company
guaranty 8 1/4s, 2011 6,989,125
4,575,000 Westport Resources Corp. 144A
company guaranty 8 1/4s, 2011 5,055,375
6,046,000 XTO Energy, Inc. sr. notes 7 1/2s,
2012 7,058,705
2,785,000 XTO Energy, Inc. sr. notes 6 1/4s,
2013 3,039,131
--------------
254,194,198
Entertainment (1.3%)
- -------------------------------------------------------------------------------
4,760,000 AMC Entertainment, Inc. sr. sub.
notes 9 7/8s, 2012 5,247,900
6,685,000 AMC Entertainment, Inc. sr. sub.
notes 9 1/2s, 2011 7,002,538
4,810,000 AMC Entertainment, Inc. 144A sr.
sub. notes 8s, 2014 4,797,975
660,000 AMF Bowling Worldwide bank term loan
FRN 4.152s, 2009 (acquired 2/25/04,
cost $660,000) (RES) 664,950
7,930,000 Cinemark USA, Inc. sr. sub. notes
9s, 2013 8,861,775
235,000 Cinemark USA, Inc. sr. sub. notes
Ser. B, 8 1/2s, 2008 244,400
149,000 Regal Cinemas, Inc. company guaranty
Ser. B, 9 3/8s, 2012 167,625
225,000 Six Flags, Inc. bank term loan FRN
Ser. B, 3.6053s, 2009 (acquired
1/15/03, cost $224,719) (RES) 227,531
5,861,000 Six Flags, Inc. sr. notes 8 7/8s,
2010 6,029,504
8,190,000 Six Flags, Inc. 144A sr. notes
9 5/8s, 2014 8,640,450
--------------
41,884,648
Financial (1.4%)
- -------------------------------------------------------------------------------
2,640,000 Crescent Real Estate Equities LP
notes 7 1/2s, 2007 (R) 2,785,200
5,000,000 Crescent Real Estate Equities LP sr.
notes 9 1/4s, 2009 (R) 5,506,250
19,775,000 Finova Group, Inc. notes 7 1/2s,
2009 12,408,813
4,430,000 iStar Financial, Inc. sr. notes
8 3/4s, 2008 (R) 5,016,975
3,015,000 iStar Financial, Inc. sr. notes 7s,
2008 (R) 3,241,125
3,985,000 iStar Financial, Inc. sr. notes 6s,
2010 (R) 4,124,475
2,720,000 Peoples Bank-Bridgeport sub. notes
9 7/8s, 2010 (acquired various dates
from 1/12/01 to 3/12/02, cost
$2,830,941) (RES) 3,512,951
4,570,000 UBS AG/Jersey Branch sr. notes
Ser. EMTN, 9.14s, 2008 (Jersey) 4,707,100
5,204,000 Western Financial Bank sub. debs.
9 5/8s, 2012 5,958,580
--------------
47,261,469
Food (1.3%)
- -------------------------------------------------------------------------------
469,507 Agrilink Foods bank term loan FRN
Ser. B, 3.8747s, 2008 (acquired
8/9/02, cost $469,507) (RES) 473,763
3,391,963 Archibald Candy Corp. company
guaranty 10s, 2007 (In default)
(NON) (PIK) 1,322,866
90,000 Aurora Foods, Inc. sr. sub. notes
Ser. B, 8 3/4s, 2008 (In default)
(NON) 78,075
1,530,000 Dean Foods Co. sr. notes 6 5/8s,
2009 1,621,800
1,850,000 Del Monte Corp. company guaranty
Ser. B, 9 1/4s, 2011 2,048,875
5,010,000 Del Monte Corp. sr. sub. notes
8 5/8s, 2012 5,536,050
1,086,951 Del Monte Foods Co. bank term loan
FRN Ser. B, 3.3802s, 2010 (acquired
12/16/02, cost $1,081,516) (RES) 1,102,576
4,291,000 Doane Pet Care Co. sr. sub. debs.
9 3/4s, 2007 3,904,810
235,035 Dole Food Co. bank term loan FRN
3.867s, 2009 (acquired various
dates from 3/28/03 to 11/20/03, cost
$235,035) (RES) 238,952
2,190,000 Dole Food Co. sr. notes 8 7/8s, 2011 2,348,775
1,840,000 Dole Food Co. sr. notes 8 5/8s, 2009 1,978,000
6,530,000 Eagle Family Foods company guaranty
Ser. B, 8 3/4s, 2008 5,224,000
7,753,000 Land O'Lakes, Inc. sr. notes 8 3/4s,
2011 6,745,110
818,807 Pinnacle Foods Holding Corp. bank
term loan FRN Libor plus a
specified amount, 2010 (acquired
11/26/03, cost $818,807) (RES) 825,972
231,193 Pinnacle Foods Holding Corp. bank
term loan FRN 3.84s, 2010 (acquired
11/26/03, cost $231,193) (RES) 233,216
3,670,000 Pinnacle Foods Holding Corp. 144A
sr. sub. notes 8 1/4s, 2013 3,844,325
5,451,000 Premier International Foods PLC sr.
notes 12s, 2009 (United Kingdom) 5,914,335
--------------
43,441,500
Gaming & Lottery (5.3%)
- -------------------------------------------------------------------------------
5,460,000 Ameristar Casinos, Inc. company
guaranty 10 3/4s, 2009 6,279,000
360,000 Argosy Gaming Co. sr. sub. notes 9s,
2011 401,400
3,815,000 Argosy Gaming Co. 144A sr. sub.
notes 7s, 2014 3,905,606
2,829,000 Boyd Gaming Corp. sr. sub. notes
8 3/4s, 2012 3,126,045
3,175,000 Chumash Casino & Resort Enterprise
144A sr. notes 9s, 2010 3,472,656
8,590,000 Herbst Gaming, Inc. sec. notes
Ser. B, 10 3/4s, 2008 9,642,275
6,681,000 Hollywood Park, Inc. company
guaranty Ser. B, 9 1/4s, 2007 6,898,133
8,370,000 Horseshoe Gaming Holdings company
guaranty 8 5/8s, 2009 8,819,888
4,420,000 Inn of the Mountain Gods 144A sr.
notes 12s, 2010 4,806,750
4,140,000 Mandalay Resort Group sr. notes
6 1/2s, 2009 4,367,700
809,000 MGM Mirage, Inc. coll. sr. notes
6 7/8s, 2008 875,743
5,549,000 MGM Mirage, Inc. company guaranty
8 1/2s, 2010 6,478,458
2,000 MGM Mirage, Inc. company guaranty
8 3/8s, 2011 2,305
2,900,000 Mirage Resorts, Inc. notes 6 3/4s,
2008 3,124,750
2,325,000 Mohegan Tribal Gaming Authority sr.
sub. notes 8 3/8s, 2011 2,563,313
3,149,000 Mohegan Tribal Gaming Authority sr.
sub. notes 8s, 2012 3,456,028
7,246,000 Mohegan Tribal Gaming Authority sr.
sub. notes 6 3/8s, 2009 7,572,070
1,465,000 Park Place Entertainment Corp. sr.
notes 8 1/2s, 2006 1,622,488
4,189,000 Park Place Entertainment Corp. sr.
notes 7 1/2s, 2009 4,660,263
4,475,000 Park Place Entertainment Corp. sr.
notes 7s, 2013 4,866,563
2,834,000 Park Place Entertainment Corp. sr.
sub. notes 8 7/8s, 2008 3,209,505
1,805,000 Park Place Entertainment Corp. sr.
sub. notes 8 1/8s, 2011 2,039,650
4,820,000 Penn National Gaming, Inc. company
guaranty Ser. B, 11 1/8s, 2008 5,410,450
8,402,000 Penn National Gaming, Inc. sr. sub.
notes 8 7/8s, 2010 9,032,150
425,000 Pinnacle Entertainment, Inc. bank
term loan FRN 4.59s, 2009 (acquired
12/15/03, cost $425,000) (RES) 429,250
4,305,000 Pinnacle Entertainment, Inc. sr.
sub. notes 8 3/4s, 2013 4,444,913
3,855,000 Pinnacle Entertainment, Inc. 144A
sr. sub. notes 8 1/4s, 2012 3,827,321
6,243,000 Resorts International Hotel and
Casino, Inc. company guaranty
11 1/2s, 2009 6,898,515
6,345,000 Riviera Holdings Corp. company
guaranty 11s, 2010 6,662,250
1,513,563 Scientific Games Holdings bank term
loan FRB 3.85s, 2008 (acquired
12/11/02, cost $1,505,995) (RES) 1,533,743
6,975,000 Station Casinos, Inc. sr. notes
8 3/8s, 2008 7,498,125
4,485,000 Station Casinos, Inc. 144A sr. sub.
notes 6 7/8s, 2016 4,529,850
11,174,000 Trump Atlantic City Associates
company guaranty 11 1/4s, 2006 9,162,680
14,491,000 Trump Casino Holdings, LLC company
guaranty 11 5/8s, 2010 14,382,318
8,731,000 Venetian Casino Resort, LLC company
guaranty 11s, 2010 10,040,650
--------------
176,042,804
Health Care (6.1%)
- -------------------------------------------------------------------------------
150,723 ALARIS Medical Systems, Inc. bank
term loan FRN 3.655s, 2009
(acquired 6/30/03, cost $150,723)
(RES) 152,306
440,748 Alderwoods Group, Inc. bank term
loan FRN 3.957s, 2008 (acquired
9/9/03, cost $440,748) (RES) 445,982
8,773,000 Alderwoods Group, Inc. company
guaranty 12 1/4s, 2009 9,748,996
5,305,000 Alliance Imaging, Inc. sr. sub.
notes 10 3/8s, 2011 5,344,788
5,289,000 AmerisourceBergen Corp. company
guaranty 7 1/4s, 2012 5,685,675
4,730,000 AmerisourceBergen Corp. sr. notes
8 1/8s, 2008 5,262,125
9,095,000 Ardent Health Services 144A sr. sub.
notes 10s, 2013 10,095,450
623,438 Beverly Enterprises, Inc. bank term
loan FRN 4.407s, 2008 (acquired
10/20/03, cost $621,879) (RES) 629,672
4,334,000 Biovail Corp. sr. sub. notes 7 7/8s,
2010 (Canada) 4,334,000
592,500 Community Health Systems, Inc. bank
term loan FRN Ser. B, 3.67s,
2010 (acquired 7/11/02, cost
$592,500) (RES) 601,980
1,617,468 Dade Behring, Inc. company guaranty
11.91s, 2010 1,866,154
1,085,993 DaVita, Inc. bank term loan FRN
Ser. B, 3.4162s, 2009 (acquired
various dates from 7/17/03 to
1/30/04, cost $1,092,868) (RES) 1,098,598
4,310,000 Extendicare Health Services, Inc.
company guaranty 9 1/2s, 2010 4,784,100
498,750 Hanger Orthopedic Group, Inc. bank
term loan FRN 3.8688s,
2009 (acquired 9/29/03, cost
$498,750) (RES) 502,491
4,234,000 Hanger Orthopedic Group, Inc.
company guaranty 10 3/8s, 2009 4,779,128
5,993,000 HCA, Inc. debs. 7.19s, 2015 6,687,385
3,080,000 HCA, Inc. med. term notes 8.85s,
2007 3,502,588
3,150,000 HCA, Inc. notes 8.36s, 2024 3,684,001
735,000 HCA, Inc. notes 7.69s, 2025 808,785
716,000 HCA, Inc. notes 7s, 2007 791,618
116,000 HCA, Inc. sr. notes 7 7/8s, 2011 134,021
8,659,000 Healthsouth Corp. notes 7 5/8s, 2012 8,290,993
3,722,000 Healthsouth Corp. sr. notes 8 1/2s,
2008 3,675,475
2,125,000 Healthsouth Corp. sr. notes 8 3/8s,
2011 2,109,063
2,041,000 Healthsouth Corp. sr. notes 7s, 2008 1,938,950
5,760,000 IASIS Healthcare Corp. company
guaranty 13s, 2009 6,451,200
3,215,000 Insight Health Svcs. Corp. 144A
company guaranty 9 7/8s, 2011 3,263,225
746,250 Kinetic Concepts, Inc. bank term
loan FRN 3.92s, 2011 (acquired
8/5/03, cost $747,969) (RES) 755,812
2,145,923 Magellan Health Services, Inc. sr.
notes Ser. A, 9 3/8s, 2008 2,285,408
528,594 Medex, Inc. bank term loan FRN
4.1525s, 2009 (acquired 5/16/03 to
6/16/03, cost $528,335) (RES) 531,677
10,442,000 Mediq, Inc. debs. 13s, 2009 (In
default) (NON) 1,044
6,546,000 MedQuest, Inc. company guaranty
Ser. B, 11 7/8s, 2012 7,396,980
10,600,000 Multicare Companies, Inc. sr. sub.
notes 9s, 2007 (In default) (NON) 11
3,420,000 NeighborCare, Inc. 144A sr. sub.
notes 6 7/8s, 2013 3,556,800
6,090,000 Omnicare, Inc. sr. sub. notes
6 1/8s, 2013 6,242,250
7,409,000 PacifiCare Health Systems, Inc.
company guaranty 10 3/4s, 2009 8,687,053
7,205,000 Province Healthcare Co. sr. sub.
notes 7 1/2s, 2013 7,439,163
3,757,000 Service Corp. International debs.
7 7/8s, 2013 3,841,533
670,000 Service Corp. International notes
7.2s, 2006 701,825
228,000 Service Corp. International notes
6 7/8s, 2007 238,260
1,006,000 Service Corp. International notes
6 1/2s, 2008 1,031,150
7,786,000 Service Corp. International notes
6s, 2005 7,980,650
2,281,000 Service Corp. International notes
Ser. (a), 7.7s, 2009 2,440,670
6,300,000 Stewart Enterprises, Inc. notes
10 3/4s, 2008 7,024,500
1,775,000 Tenet Healthcare Corp. notes 7 3/8s,
2013 1,641,875
410,000 Tenet Healthcare Corp. sr. notes
6 1/2s, 2012 361,825
7,140,000 Tenet Healthcare Corp. sr. notes
6 3/8s, 2011 6,336,750
8,920,000 Tenet Healthcare Corp. sr. notes
5 3/8s, 2006 8,474,000
1,496,414 Triad Hospitals, Inc. bank term loan
FRN Ser. B, 4.1s, 2008 (acquired
various dates from 4/23/01 to
4/24/01, cost $1,505,857) (RES) 1,514,963
10,080,000 Triad Hospitals, Inc. 144A sr. sub.
notes 7s, 2013 10,432,800
7,780,000 Universal Hospital Services, Inc.
144A sr. notes 10 1/8s, 2011 8,305,150
6,360,000 Ventas Realty LP/Capital Corp.
company guaranty 9s, 2012 7,234,500
--------------
201,125,398
Homebuilding (1.7%)
- -------------------------------------------------------------------------------
3,759,000 Beazer Homes USA, Inc. company
guaranty 8 5/8s, 2011 4,172,490
1,405,000 Beazer Homes USA, Inc. company
guaranty 8 3/8s, 2012 1,559,550
1,105,000 Beazer Homes USA, Inc. 144A sr.
notes 6 1/2s, 2013 1,124,338
5,539,000 D.R. Horton, Inc. sr. notes 7 7/8s,
2011 6,342,155
2,625,000 D.R. Horton, Inc. sr. notes 6 7/8s,
2013 2,802,188
2,628,000 D.R. Horton, Inc. sr. notes 5 7/8s,
2013 2,654,280
3,750,000 K. Hovnanian Enterprises, Inc.
company guaranty 10 1/2s, 2007 4,406,250
4,180,000 K. Hovnanian Enterprises, Inc.
company guaranty 8 7/8s, 2012 4,587,550
2,917,000 K. Hovnanian Enterprises, Inc. sr.
notes 6 1/2s, 2014 2,953,463
3,370,000 K. Hovnanian Enterprises, Inc. 144A
sr. notes 6 3/8s, 2014 3,344,725
250,000 Landsource bank term loan FRN
3.625s, 2010 (acquired 1/12/04, cost
$250,000) (RES) 253,125
2,690,000 Meritage Corp. company guaranty
9 3/4s, 2011 3,012,800
220,000 Ryland Group, Inc. sr. sub. notes
9 1/8s, 2011 249,700
3,450,000 Schuler Homes, Inc. company guaranty
10 1/2s, 2011 4,023,563
3,405,000 Technical Olympic USA, Inc. company
guaranty 10 3/8s, 2012 3,864,675
2,572,000 Technical Olympic USA, Inc. company
guaranty 9s, 2010 2,784,190
2,309,000 WCI Communities, Inc. company
guaranty 10 5/8s, 2011 2,591,853
6,427,000 WCI Communities, Inc. company
guaranty 9 1/8s, 2012 7,037,565
--------------
57,764,460
Household Furniture and Appliances (0.5%)
- -------------------------------------------------------------------------------
4,200,000 Sealy Mattress Co. sr. sub. notes
Ser. B, 9 7/8s, 2007 4,347,000
11,997,265 Sealy Mattress Co. 144A sr. notes
zero %, 2008 11,157,457
--------------
15,504,457
Lodging/Tourism (2.4%)
- -------------------------------------------------------------------------------
4,196,000 FelCor Lodging LP company guaranty
9 1/2s, 2008 (R) 4,458,250
6,500,000 Gaylord Entertainment Co. 144A sr.
notes 8s, 2013 6,881,875
9,669,000 Hilton Hotels Corp. notes 7 5/8s,
2012 10,925,970
5,414,000 HMH Properties, Inc. company
guaranty Ser. B, 7 7/8s, 2008 5,603,490
1,695,000 Host Marriott LP company guaranty
Ser. G, 9 1/4s, 2007 (R) 1,877,213
2,555,000 Host Marriott LP sr. notes 7 1/8s,
2013 2,638,038
1,200,000 Host Marriott LP sr. notes Ser. E,
8 3/8s, 2006 (R) 1,278,000
4,225,000 ITT Corp. debs. 7 3/8s, 2015 4,499,625
5,715,000 ITT Corp. notes 6 3/4s, 2005 5,986,463
12,630,000 John Q. Hammons Hotels LP/John Q.
Hammons Hotels Finance Corp. III
1st mtge. Ser. B, 8 7/8s, 2012 13,735,125
4,845,000 Meristar Hospitality Corp. company
guaranty 9 1/8s, 2011 (R) 5,014,575
5,255,000 Meristar Hospitality Corp. company
guaranty 9s, 2008 (R) 5,425,788
715,000 MeriStar Hospitality Operating
Partnership/MeriStar
Hospitality Finance Corp. company
guaranty 10 1/2s, 2009 754,325
5,635,000 RFS Partnership LP company guaranty
9 3/4s, 2012 6,057,625
561,000 Starwood Hotels & Resorts Worldwide,
Inc. company guaranty 7 7/8s, 2012 625,515
3,374,000 Starwood Hotels & Resorts Worldwide,
Inc. company guaranty 7 3/8s, 2007 3,652,355
--------------
79,414,232
Media (0.4%)
- -------------------------------------------------------------------------------
123,543 Affinity Group Holdings bank term
loan FRN Ser. B1, 5.1215s,
2009 (acquired 5/27/03, cost
$123,234) (RES) 124,263
308,857 Affinity Group Holdings bank term
loan FRN Ser. B2, 5.1607s,
2009 (acquired 5/27/03, cost
$308,084) (RES) 310,658
4,835,000 Affinity Group Inc. 144A sr. sub.
notes 9s, 2012 5,016,313
5,225,000 Capital Records, Inc. 144A company
guaranty 8 3/8s, 2009 5,531,812
450,000 Lions Gate Entertainment bank term
loan FRN 4.43s, 2008 (acquired
12/15/03, cost $450,000) (RES) 450,563
425,000 Vivendi Universal SA bank term loan
FRN Ser. B, 3.85s, 2008 (acquired
6/23/03, cost $425,000) (France)
(RES) 427,391
240,000 Vivendi Universal SA sr. notes
9 1/4s, 2010 (France) 282,600
--------------
12,143,600
Publishing (3.6%)
- -------------------------------------------------------------------------------
943,519 Dex Media West, LLC bank term loan
FRN 3.8931s, 2010 (acquired 9/9/03,
cost $943,519) (RES) 956,296
12,045,000 Dex Media West, LLC 144A sr. notes
8 1/2s, 2010 13,460,288
4,720,000 Dex Media, Inc. 144A disc. notes
stepped-coupon zero % (9s,
11/15/08), 2013 (STP) 3,150,600
9,295,000 Dex Media, Inc. 144A notes 8s, 2013 9,295,000
12,706,100 Hollinger Participation Trust 144A
sr. notes 12 1/8s, 2010 (Canada)
(PIK) 14,643,780
422,875 Moore Wallace bank term loan FRN
Ser. B, 3.1313s, 2010 (acquired
3/13/03, cost $422,875) (RES) 423,555
9,212,000 PRIMEDIA, Inc. company guaranty
8 7/8s, 2011 9,511,390
4,517,000 PRIMEDIA, Inc. company guaranty
7 5/8s, 2008 4,517,000
5,095,000 PRIMEDIA, Inc. 144A sr. notes 8s,
2013 5,107,738
3,200,000 Reader's Digest Association, Inc.
(The) 144A sr. notes 6 1/2s, 2011 3,200,000
1,200,000 RH Donnelley Finance Corp. I company
guaranty 8 7/8s, 2010 1,356,000
8,470,000 RH Donnelley Finance Corp. I 144A
sr. notes 8 7/8s, 2010 9,571,100
4,242,000 RH Donnelley Finance Corp. I 144A
sr. sub. notes 10 7/8s, 2012 5,047,980
2,125,000 TDL Infomedia Holdings PLC sr. disc.
notes stepped-coupon zero %
(15 1/2s, 10/15/04), 2010 (United
Kingdom) (STP) 2,082,500
8,978,000 Vertis, Inc. company guaranty
Ser. B, 10 7/8s, 2009 9,157,560
4,160,000 Vertis, Inc. sec. notes 9 3/4s, 2009 4,430,400
6,870,000 Vertis, Inc. sub. notes 13 1/2s,
2009 6,784,125
890,000 Von Hoffman Press, Inc. company
guaranty 10 3/8s, 2007 876,650
1,790,000 Von Hoffman Press, Inc. company
guaranty 10 1/4s, 2009 1,861,600
12,883,117 Von Hoffman Press, Inc. debs. 13s,
2009 (PIK) 11,530,390
2,300,000 WRC Media Corp. sr. sub. notes
12 3/4s, 2009 2,320,125
--------------
119,284,077
Restaurants (0.6%)
- -------------------------------------------------------------------------------
7,558,000 Sbarro, Inc. company guaranty 11s,
2009 6,235,350
6,559,000 Yum! Brands, Inc. sr. notes 8 7/8s,
2011 8,100,365
3,480,000 Yum! Brands, Inc. sr. notes 7.7s,
2012 4,071,600
1,510,000 Yum! Brands, Inc. sr. notes 7.65s,
2008 1,728,950
--------------
20,136,265
Retail (2.2%)
- -------------------------------------------------------------------------------
284,600 Advance Stores bank term loan FRN
Ser. C, 3.926s, 2007 (acquired
3/4/03, cost $284,600) (RES) 287,357
3,430,000 Asbury Automotive Group, Inc. 144A
sr. sub. notes 8s, 2014 3,438,575
7,838,000 Autonation, Inc. company guaranty
9s, 2008 9,052,890
300,000 Couche-Tard bank term loan FRN
3 3/8s, 2010 (acquired
12/16/03, cost $300,000) (RES) 302,125
3,024,000 Gap, Inc. (The) notes 6.9s, 2007 3,341,520
5,350,000 Hollywood Entertainment Corp. sr.
sub. notes 9 5/8s, 2011 5,510,500
8,860,000 JC Penney Co., Inc. debs. 7.95s,
2017 10,011,800
1,621,000 JC Penney Co., Inc. debs. 7.65s,
2016 1,815,520
6,590,000 JC Penney Co., Inc. debs. 7 1/8s,
2023 7,133,675
680,000 JC Penney Co., Inc. notes 9s, 2012 829,600
240,000 JC Penney Co., Inc. notes 8s, 2010 277,200
509,318 PETCO Animal Supplies, Inc. bank
term loan FRN 3.67s, 2009 (acquired
8/6/03, cost $509,318) (RES) 514,411
425,000 Rite Aid Corp. bank term loan FRN
4.1s, 2008 (acquired 5/16/03, cost
$424,469) (RES) 432,969
5,030,000 Rite Aid Corp. company guaranty
9 1/2s, 2011 5,608,450
335,000 Rite Aid Corp. debs. 6 7/8s, 2013 318,250
1,195,000 Rite Aid Corp. notes 7 1/8s, 2007 1,200,975
860,000 Rite Aid Corp. sec. notes 8 1/8s,
2010 924,500
5,189,000 Rite Aid Corp. sr. notes 9 1/4s,
2013 5,617,093
370,000 Rite Aid Corp. 144A notes 6s, 2005 369,075
1,000,000 Saks, Inc. company guaranty 7 1/2s,
2010 1,092,500
9,155,000 Saks, Inc. 144A company guaranty 7s,
2013 9,544,088
750,000 TM Group Holdings sr. notes 11s,
2008 (United Kingdom) 780,000
3,759,000 United Auto Group, Inc. company
guaranty 9 5/8s, 2012 4,153,695
--------------
72,556,768
Technology (2.4%)
- -------------------------------------------------------------------------------
6,058,000 AMI Semiconductor, Inc. company
guaranty 10 3/4s, 2013 7,118,150
527,266 Amkor Technologies, Inc. bank term
loan FRN 5.1s, 2006 (acquired
4/27/03, cost $527,962) (RES) 533,197
3,368,000 DigitalNet Holdings Inc. sr. notes
9s, 2010 3,629,020
8,626,000 Iron Mountain, Inc. company guaranty
8 5/8s, 2013 9,402,340
1,545,000 Iron Mountain, Inc. company guaranty
6 5/8s, 2016 1,498,650
350,000 Lucent Technologies, Inc. debs.
6 1/2s, 2028 285,250
4,029,000 Lucent Technologies, Inc. debs.
6.45s, 2029 3,293,708
445,000 Lucent Technologies, Inc. notes
5 1/2s, 2008 428,313
4,827,000 ON Semiconductor Corp. company
guaranty 13s, 2008 5,768,265
7,356,000 SCG Holding & Semiconductor Corp.
company guaranty 12s, 2009 7,990,455
3,040,000 SCG Holding Corp. 144A notes zero %,
2011 4,286,400
4,684,000 Seagate Technology Hdd Holdings
company guaranty 8s, 2009 (Cayman
Islands) 5,070,430
3,225,000 Viasystems, Inc. 144A sr. sub. notes
10 1/2s, 2011 3,515,250
4,340,000 Xerox Capital Trust I company
guaranty 8s, 2027 4,253,200
504,000 Xerox Corp. company guaranty 9 3/4s,
2009 587,160
3,715,000 Xerox Corp. notes Ser. MTN, 7.2s,
2016 3,826,450
10,424,000 Xerox Corp. sr. notes 7 5/8s, 2013 11,101,560
5,845,000 Xerox Corp. sr. notes 7 1/8s, 2010 6,239,538
--------------
78,827,336
Textiles (0.7%)
- -------------------------------------------------------------------------------
188,000 Levi Strauss & Co. notes 7s, 2006 129,720
9,703,000 Levi Strauss & Co. sr. notes
12 1/4s, 2012 6,695,070
4,250,000 Oxford Industries, Inc. 144A sr.
notes 8 7/8s, 2011 4,526,250
1,935,000 Phillips-Van Heusen Corp. 144A sr.
notes 7 1/4s, 2011 1,944,675
6,073,000 Russell Corp. company guaranty
9 1/4s, 2010 6,407,015
3,401,000 William Carter Holdings Co. (The)
company guaranty Ser. B, 10 7/8s,
2011 3,945,160
--------------
23,647,890
Tire & Rubber (0.4%)
- -------------------------------------------------------------------------------
440,000 Goodyear Tire & Rubber Co. (The)
bank term loan FRN 5.34s,
2006 (acquired 2/19/04, cost
$440,000) (RES) 436,700
12,475,000 Goodyear Tire & Rubber Co. (The)
notes 7.857s, 2011 10,603,750
1,840,000 Goodyear Tire & Rubber Co. (The)
notes 6 3/8s, 2008 1,582,400
--------------
12,622,850
Tobacco (0.1%)
- -------------------------------------------------------------------------------
3,230,000 North Atlantic Trading Co. 144A sr.
notes 9 1/4s, 2012 3,310,750
Transportation (1.4%)
- -------------------------------------------------------------------------------
6,032,000 Allied Holdings, Inc. company
guaranty Ser. B, 8 5/8s, 2007 5,851,040
5,475,000 American Airlines, Inc. pass-through
certificates Ser. 01-1, 6.817s,
2011 5,256,000
70,832 Aran Shipping & Trading SA notes
8.3s, 2005 (Greece) (In default)
(NON) 1
7,906,000 Calair, LLC/Calair Capital Corp.
company guaranty 8 1/8s, 2008 7,036,340
3,555,000 Delta Air Lines, Inc. pass-through
certificates Ser. 00-1, 7.779s, 2005 3,312,011
2,173,090 Delta Air Lines, Inc. pass-through
certificates Ser. 02-1, 7.779s, 2012 1,868,858
8,753,000 Kansas City Southern Railway Co.
company guaranty 9 1/2s, 2008 9,759,595
1,685,000 Kansas City Southern Railway Co.
company guaranty 7 1/2s, 2009 1,735,550
1,950,000 Northwest Airlines, Inc. company
guaranty 8 7/8s, 2006 1,813,500
40,000 Northwest Airlines, Inc. company
guaranty 8.7s, 2007 35,700
378,000 Northwest Airlines, Inc. company
guaranty 8.52s, 2004 377,528
4,915,000 Northwest Airlines, Inc. company
guaranty 7 5/8s, 2005 4,828,988
615,417 Pacer International, Inc. bank term
loan FRN 3.9037s, 2010 (acquired
6/10/03, cost $618,568) (RES) 620,802
1,747,000 Travel Centers of America, Inc.
company guaranty 12 3/4s, 2009 2,052,725
4,459,738 US Air, Inc. pass-through
certificates Ser. 93-A3, 10 3/8s,
2013 (In default) (NON) 1,427,116
--------------
45,975,754
Utilities & Power (8.4%)
- -------------------------------------------------------------------------------
795,000 AES Corp. (The) sr. notes 8 7/8s,
2011 848,663
171,000 AES Corp. (The) sr. notes 8 3/4s,
2008 179,550
7,235,000 AES Corp. (The) 144A sec. notes 9s,
2015 7,994,675
7,390,000 AES Corp. (The) 144A sec. notes
8 3/4s, 2013 8,138,238
8,380,000 Allegheny Energy Supply 144A bonds
8 1/4s, 2012 8,296,200
3,040,000 Allegheny Energy Supply 144A sec.
notes 10 1/4s, 2007 3,268,000
600,000 BV Holdings bank term loan FRN 7s,
2006 (acquired 12/10/03, cost
$597,000) (RES) 604,500
4,283,000 Calpine Canada Energy Finance
company guaranty 8 1/2s, 2008
(Canada) 3,308,618
1,317,000 Calpine Corp. sr. notes 8 3/4s, 2007 1,070,063
700,000 Calpine Corp. sr. notes 8 5/8s, 2010 533,750
6,218,000 Calpine Corp. sr. notes 7 7/8s, 2008 4,725,680
16,637,000 Calpine Corp. 144A sec. notes
8 1/2s, 2010 15,306,040
2,490,000 CenterPoint Energy Resources Corp.
debs. 6 1/2s, 2008 2,685,251
2,100,000 CenterPoint Energy Resources Corp.
sr. notes Ser. B, 7 7/8s, 2013 2,413,001
10,000 Cleveland Electric Illuminating Co.
(The) 144A sr. notes Ser. D, 7.88s,
2017 12,225
9,434,000 CMS Energy Corp. pass-through
certificates 7s, 2005 9,599,095
175,000 CMS Energy Corp. sr. notes 9 7/8s,
2007 193,156
2,199,000 CMS Energy Corp. sr. notes 8.9s,
2008 2,383,184
1,254,000 CMS Energy Corp. sr. notes 8 1/2s,
2011 1,344,915
1,730,000 CMS Energy Corp. 144A sr. notes
7 3/4s, 2010 1,790,550
1,996,000 Dynegy Holdings, Inc. sr. notes
6 7/8s, 2011 1,741,510
12,605,000 Dynegy Holdings, Inc. 144A sec.
notes 10 1/8s, 2013 14,054,575
3,500,000 Dynegy-Roseton Danskamme company
guaranty Ser. A, 7.27s, 2010 3,500,000
5,330,000 Dynegy-Roseton Danskamme company
guaranty Ser. B, 7.67s, 2016 5,063,500
2,399,000 Edison Mission Energy sr. notes 10s,
2008 2,518,950
3,735,000 Edison Mission Energy sr. notes
9 7/8s, 2011 3,921,750
3,045,000 Edison Mission Energy sr. notes
7.73s, 2009 2,923,200
3,630,000 El Paso Corp. sr. notes 7 3/8s, 2012 3,158,100
8,470,000 El Paso Corp. sr. notes Ser. MTN,
7 3/4s, 2032 6,797,175
1,745,000 El Paso Natural Gas Co. debs.
8 5/8s, 2022 1,836,613
1,730,000 El Paso Natural Gas Co. sr. notes
Ser. A, 7 5/8s, 2010 1,768,925
10,025,000 El Paso Production Holding Co.
company guaranty 7 3/4s, 2013 9,423,500
1,973,000 Kansas Gas & Electric debs. 8.29s,
2016 2,042,055
458,221 Midland Funding II Corp. debs.
Ser. A, 11 3/4s, 2005 490,296
5,890,000 Midwest Generation LLC pass-through
certificates Ser. A, 8.3s, 2009 6,243,400
5,105,000 Mirant Americas Generation, Inc. sr.
notes 7 5/8s, 2006 (In default)
(NON) 4,109,525
2,530,000 Mirant Americas Generation, Inc. sr.
notes 7.2s, 2008 (In default) (NON) 2,036,650
2,683,000 Mission Energy Holding Co. sec.
notes 13 1/2s, 2008 2,783,613
6,200,000 Nevada Power Co. 144A 2nd mtge. 9s,
2013 6,882,000
7,465,000 Northwest Pipeline Corp. company
guaranty 8 1/8s, 2010 8,136,850
3,110,000 Northwestern Corp. notes 7 7/8s,
2007 (In default) (NON) 2,830,100
1,606,470 NRG bank term loan FRN 5 1/2s, 2010
(acquired 12/19/03, cost $1,598,437)
(RES) 1,649,142
899,479 NRG bank term loan FRN 1.07s, 2010
(acquired 12/19/03, cost $894,982)
(RES) 923,372
16,485,000 NRG Energy, Inc. 144A sr. sec. notes
8s, 2013 17,020,763
6,000,000 Orion Power Holdings, Inc. sr. notes
12s, 2010 7,320,000
3,150,000 Pacific Gas & Electric Co. 144A sr.
notes 10 3/8s, 2005 (In default)
(NON) 3,150,000
7,905,000 PG&E Corp. 144A sec. notes 6 7/8s,
2008 8,497,875
1,430,000 PG&E Gas Transmission Northwest sr.
notes 7.1s, 2005 1,458,600
5,540,000 PSEG Energy Holdings, Inc. notes
7 3/4s, 2007 5,810,075
4,505,000 SEMCO Energy, Inc. sr. notes 7 3/4s,
2013 4,775,300
340,000 Southern California Edison Co. notes
6 3/8s, 2006 365,075
2,840,000 Teco Energy, Inc. notes 10 1/2s,
2007 3,290,850
1,645,000 Teco Energy, Inc. notes 7.2s, 2011 1,735,475
4,435,000 Teco Energy, Inc. notes 7s, 2012 4,606,856
3,475,000 Teco Energy, Inc. sr. notes 7 1/2s,
2010 3,739,969
695,000 Tennessee Gas Pipeline Co. debs. 7s,
2028 649,825
550,000 Teton Power Funding bank term loan
FRN 4.402s, 2011 (acquired 2/4/04,
cost $550,000) (RES) 555,500
900,000 Transcontinental Gas Pipeline Corp.
debs. 7 1/4s, 2026 918,000
9,510,000 Utilicorp Canada Finance Corp.
company guaranty 7 3/4s, 2011
(Canada) 9,129,600
1,730,000 Utilicorp United, Inc. sr. notes
9.95s, 2011 1,833,800
5,274,000 Western Resources, Inc. sr. notes
9 3/4s, 2007 6,065,100
1,330,000 Williams Cos., Inc. (The) notes
8 3/4s, 2032 1,429,750
5,210,000 Williams Cos., Inc. (The) notes
7 5/8s, 2019 5,288,150
3,000 Williams Cos., Inc. (The) notes
Ser. A, 6 3/4s, 2006 3,101
6,500,000 Williams Cos., Inc. (The) sr. notes
8 5/8s, 2010 7,085,000
3,365,000 Williams Holdings Of Delaware notes
6 1/2s, 2008 3,449,125
422,875 Williams Products bank term loan FRN
4.6s, 2007 (acquired 6/4/03, cost
$422,875) (RES) 425,518
14,136,881 York Power Funding 144A notes 12s,
2007 (Cayman Islands) (In default)
(NON) 10,319,923
--------------
278,453,385
--------------
Total Corporate bonds and notes
(cost $2,860,646,692) $2,918,859,416
Preferred stocks (2.5%) (a)
Number of shares Value
- -------------------------------------------------------------------------------
297,368 Avecia Group PLC $4.00 pfd.
(acquired various dates from
6/24/99 to 2/11/04, cost $6,417,528)
(United Kingdom) (RES) (PIK) $5,055,256
269,495 CSC Holdings, Inc. Ser. M, $11.125
cum. pfd. 28,431,723
34,967 Decrane Aircraft Holdings, Inc.
$16.00 pfd. (PIK) 276,236
101,546 Doane Pet Care Co. $7.125 pfd. 4,975,754
4,830 Dobson Communications Corp. 13.00%
pfd. (PIK) 4,491,900
6,670 First Republic Capital Corp. 144A
10.50% pfd. 6,936,800
88,879 iStar Financial, Inc. $1.95 cum.
pfd. 2,319,742
167,775 Lodgian, Inc. Ser. A, $7.06 cum.
pfd. (PIK) 4,194,375
663 Metrocall Holdings, Inc. Ser. A,
15.00% cum. pfd. 7,598
32,161 Microcell Telecommunications, Inc.
zero % pfd. (Canada) 567,857
171,242 North Atlantic Trading Co. 12.00%
pfd. (PIK) 3,810,135
797 Paxson Communications Corp. 13.25%
cum. pfd. (PIK) 7,551,575
4 Pegasus Satellite Ser. B, 12.75%
cum. pfd. (PIK) 3,360
36,436 PRIMEDIA, Inc. Ser. F, $9.20 cum.
pfd. 3,497,856
1,809 Rural Cellular Corp. Ser. B, 11.375%
cum. pfd. 1,682,370
12,310 Rural Cellular Corp. 12.25% pfd.
(PIK) 9,663,350
--------------
Total Preferred stocks
(cost $87,942,837) $83,465,887
Common stocks (1.6%) (a)
Number of shares Value
- -------------------------------------------------------------------------------
17,730 AboveNet, Inc. (NON) $833,310
18,922 Alderwoods Group, Inc. (NON) 175,596
8,780,000 AMRESCO Creditor Trust (acquired
various dates from 5/5/99 to
3/18/02, cost $1,860,945) (NON)
(RES) (R) 87,800
1,241 Arch Wireless, Inc. Class A (NON) 27,637
16,714 Archibald Candy Corp. (NON) (AFF) 836
234,223 Aurora Foods, Inc. (NON) 1,171
10,363 Birch Telecom, Inc. (acquired
9/30/02, cost $0) (NON) (RES) 104
1,690,908 Capstar Broadcasting 144A (NON) 2,840,725
4,233 Comdisco Holding Co., Inc. (NON) 177,786
31,440,192 Contifinancial Corp. Liquidating
Trust Units 314,402
148,962 Covad Communications Group, Inc.
(NON) 493,064
11,305 Crown Castle International Corp.
(NON) 136,225
645,566 DigitalGlobe, Inc. 144A (NON) (AFF) 968,349
6,026 Genesis HealthCare Corp. (NON) 164,209
286,810 Globix Corp. (NON) 866,166
1,894 Knology, Inc. (NON) 15,796
654 Leucadia National Corp. 34,008
177,090 Lodgian, Inc. (NON) 1,409,636
985,000 Loewen Group International, Inc.
(NON) 99
31,549 Magellan Health Services, Inc. (NON) 851,823
178,784 Mariner Health Care, Inc. (NON) 3,888,552
21,000 Mediq, Inc. (NON) (AFF) 84,420
268 Microcell Telecommunications, Inc.
Class A (Canada) (NON) 4,996
31,969 Microcell Telecommunications, Inc.
Class B (Canada) (NON) 595,681
7,647,000 Morrison Knudsen Corp. 1,223,520
289,692 Pioneer Cos., Inc. (NON) 1,932,246
11,906 PSF Group Holdings, Inc. 144A Class
A (acquired various dates from
9/15/93 to 8/13/98, cost
$39,131,323) (NON) (RES) (AFF) 17,859,053
2,118 RCN Corp. (NON) 593
484,229 Regal Entertainment Group (acquired
various dates from 5/9/02 to
5/15/02, cost $3,781,686) (NON)
(RES) 9,854,060
4,358 Sterling Chemicals, Inc. (NON) 113,308
9,048 Sun Healthcare Group, Inc. (NON) 108,124
12,695,838 VFB LLC (acquired various dates from
5/15/02 to 12/8/03, cost $9,558,415)
(NON) (RES) (AFF) 1,713,938
327,451 VS Holdings, Inc. (NON) 32,745
22,485 Washington Group International, Inc.
(NON) 865,672
33,000 Wayland Investment Fund II (acquired
2/2/01, cost $3,300,000) (NON) (RES) 4,455,000
6 WorldCom, Inc. -- WorldCom Group (NON) 1
--------------
Total Common stocks
(cost $180,006,611) $52,130,651
Asset-backed securities (0.7%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$4,315,000 CDO Repackaging Trust Series 144A
FRB Ser. 03-3, Class A, 9.49s, 2008 $4,390,513
1,845,000 Denali Capital CLO III Ltd. FRN
Ser. B-2L, 9.116s, 2015 (Cayman
Islands) 1,806,370
2,020,000 Dryden Leveraged Loan CDO 144A FRN
Ser. 03-4A, Class D, 9.93s, 2015 2,050,300
4,295,000 Goldentree Loan Opportunities II,
Ltd. 144A FRN Ser. 2A, Class
5A, 9.96s, 2015 (Cayman Islands) 4,295,000
1,685,000 Octagon Investment Parties VI, Ltd.
FRN Ser. 03-6A, Class B2L, 9.46s,
2016 1,674,995
6,320,000 PGMT Ser. 02, Class B, zero %, 2006 5,360,308
3,010,000 Verdi Synthetic CLO 144A Ser. 1A,
Class E2, 11.15s, 2010 3,041,041
--------------
Total Asset-backed securities
(cost $22,281,085) $22,618,527
Foreign government bonds and notes (0.6%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$5,129,000 Bulgaria (Republic of) 144A bonds
8 1/4s, 2015 $6,154,800
2,115,000 Colombia (Republic of) bonds
10 3/8s, 2033 2,300,063
1,700,000 Colombia (Republic of) notes
10 3/4s, 2013 1,953,300
1,550,000 Colombia (Republic of) unsub.
9 3/4s, 2009 1,755,375
6,040,000 Ecuador (Republic of) bonds
stepped-coupon Ser. REGS, 6s (7s,
8/15/04), 2030 (STP) 5,013,200
2,365,000 Peru (Republic of) bonds 8 3/4s,
2033 2,270,400
1,440,000 United Mexican States bonds
Ser. MTN, 8.3s, 2031 1,672,560
--------------
Total Foreign government bonds and
notes (cost $17,069,519) $21,119,698
Convertible preferred stocks (0.6%) (a)
Number of shares Value
- -------------------------------------------------------------------------------
83,650 Crown Castle International Corp.
$3.125 cv. pfd. $3,816,531
61,779 Microcell Telecom, Inc. $1.35 cv.
pfd. (Canada) 1,099,562
49,600 Omnicare, Inc. zero % cv. pfd. 3,286,000
816 Paxson Communications Corp. 144A
9.75% cv. pfd. (PIK) 6,609,600
56,356 Pegasus Communications Corp. Ser. C,
6.50% cum. cv. pfd. 2,007,683
63,090 Williams Cos., Inc. (The) 144A $2.75
cv. pfd. 4,021,988
--------------
Total Convertible preferred stocks
(cost $20,985,096) $20,841,364
Convertible bonds and notes (0.4%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$1,080,000 AES Corp. (The) cv. sub. notes
4 1/2s, 2005 $1,066,500
2,190,000 CenterPoint Energy, Inc. 144A cv.
sr. notes 3 3/4s, 2023 2,389,838
19,813,000 Cybernet Internet Services
International, Inc. 144A cv. sr.
disc. notes stepped-coupon zero %
(13s, 8/15/04) 2009 (Denmark) (In
default) (NON) (STP) 198
7,280,000 Nextel Communications, Inc. cv. sr.
notes 6s, 2011 8,554,000
355,000 Tower Automotive, Inc. cv. sub.
notes 5s, 2004 355,000
--------------
Total Convertible bonds and notes
(cost $27,496,126) $12,365,536
U.S. government and agency obligations (1.0%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$7,500,000 Fannie Mae 1.62s, December 8, 2004 $7,505,708
25,000,000 Freddie Mac notes 1.4s, 2004 25,005,475
--------------
Total U.S. government and agency
obligations (cost $32,500,000) $32,511,183
Brady bonds (0.1%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$1,410,000 Peru (Republic of) coll. FLIRB
4 1/2s, 2017 (acquired various
dates from 5/14/02 to 8/23/02, cost
$940,313) (RES) $1,202,025
2,920,000 Peru (Republic of) coll. FLIRB Ser.
20YR, 4 1/2s, 2017 2,489,300
--------------
Total Brady bonds (cost $3,046,781) $3,691,325
Warrants (0.1%) (a) (NON) Expiration
Number of warrants date Value
- -------------------------------------------------------------------------------
7,570 AboveNet, Inc. 9/8/10 $212,717
6,435 AboveNet, Inc. 9/8/08 189,833
8,414 Dayton Superior Corp. 144A 6/15/09 84
1 Decrane Aircraft Holdings Co. Class B 6/30/10 1
1 Decrane Aircraft Holdings Co. Class B 6/30/10 1
31 Doe Run Resources Corp. 144A 12/31/12 1
11,005 HMP Equity Holdings Corp. 144A 5/15/11 1,540,700
4,453 MDP Acquisitions PLC 144A (Ireland) 10/1/13 220,424
19,791 Microcell Telecommunications
(Canada) 5/1/08 98,092
11,875 Microcell Telecommunications
(Canada) 5/1/05 49,564
3,334 Mikohn Gaming Corp. 144A 8/15/08 2,501
186 ONO Finance PLC 144A (United
Kingdom) 2/15/11 2
3,668 Pliant Corp. 144A 6/1/10 37
4,262 Solutia, Inc. 144A 7/15/09 43
5,247 Travel Centers of America, Inc. 144A 5/1/09 26,235
15,004 Ubiquitel, Inc. 144A 4/15/10 1
13,879 Washington Group International, Inc.
Ser. A 1/25/06 159,609
15,861 Washington Group International, Inc.
Ser. B 1/25/06 145,921
8,574 Washington Group International, Inc.
Ser. C 1/25/06 69,021
9,684 XM Satellite Radio Holdings, Inc.
144A 3/15/10 484,200
175,000 ZSC Specialty Chemicals PLC 144A
(United Kingdom) 6/30/11 285,250
175,000 ZSC Specialty Chemicals PLC
(Preferred) 144A (United Kingdom) 6/30/11 87,500
--------------
Total Warrants (cost $8,484,307) $3,571,737
Units(--%) (a) (cost $12,603,530)
Number of units Value
- -------------------------------------------------------------------------------
3,124 XCL Equity Units (AFF) $1,386,703
Short-term investments (2.9%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$17,500,000 Federal National Mortgage 1.34%,
September 17, 2004 $17,369,730
67,687,646 Short-term investments held in
Putnam commingled cash account with
yields ranging from 1.01% to 1.07%
and due dates ranging from March 1,
2004 to April 23, 2004 (d) 67,687,646
9,285,192 Short-term investments held as
collateral for loaned
securities with yields ranging from
1.03% to 1.08% and due March 1, 2004
(d) 9,284,918
45,000 U.S. Treasury Note zero %, May 6,
2004 (SEG) 44,897
--------------
Total Short-term investments
(cost $94,387,191) $94,387,191
- -------------------------------------------------------------------------------
Total Investments
(cost $3,367,449,775) $3,266,949,218
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,304,113,011.
(DEF) Security is in default of principal and interest.
(NON) Non-income-producing security.
(STP) The interest or dividend rate and date shown parenthetically
represent the new interest or dividend rate to be paid and the date the
fund will begin accruing interest or dividend income at this rate.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at
February 29, 2004 was $175,209,832 or 5.3% of net assets.
(PIK) Income may be received in cash or additional securities at the
discretion of the issuer.
(AFF) Affiliated Companies (Note 5).
(SEG) This security was pledged and segregated with the custodian to
cover margin requirements for futures contracts at February 29, 2004.
(R) Real Estate Investment Trust.
(d) See Note 1 to the financial statements.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
FLIRB represents Front Loaded Interest Reduction Bond.
The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes
(FRN) are the current interest rates shown at February 29, 2004.
Forward currency contracts to buy at February 29, 2004 (Unaudited)
(aggregate face value $1,825,745)
Market Aggregate Delivery Unrealized
value face value date depreciation
- --------------------------------------------------------------------
British Pounds $882,833 $883,185 6/16/04 $(352)
Euro 939,748 942,560 6/16/04 (2,812)
- --------------------------------------------------------------------
$(3,164)
- --------------------------------------------------------------------
Forward currency contracts to sell at February 29, 2004 (Unaudited)
(aggregate face value $34,719,815)
Market Aggregate Delivery Unrealized
value face value date depreciation
- --------------------------------------------------------------------
Euro $33,786,662 $33,887,821 6/16/04 $101,159
Canadian Dollars 826,785 831,994 6/16/04 5,209
- --------------------------------------------------------------------
$106,368
- --------------------------------------------------------------------
Futures contracts outstanding at February 29, 2004 (Unaudited)
Market Aggregate Expiration Unrealized
value face value date depreciation
- --------------------------------------------------------------------
U.S. Treasury Note
5 yr (Long) $4,945,875 $4,931,978 Jun-04 $13,897
- --------------------------------------------------------------------
Interest rate swap contracts outstanding at February 29, 2004
(Unaudited)
Notional Termination Unrealized
amount date appreciation
- -------------------------------------------------------------------------------------------------------
Agreement with Merrill Lynch Capital
Services, Inc. dated October 27, 2000 to
receive semi-annually the notional amount
multiplied by 6.74% and pay quarterly the
notional amount multiplied by the three
month USD-LIBOR adjusted by a
specified spread. $59,500,000 10/31/05 $6,122,580
- ------------------------------------------------------------------------------------------------------
Total return swap contracts outstanding at February 29, 2004 (Unaudited)
Notional Termination Unrealized
amount date appreciation
- -------------------------------------------------------------------------------------------------------
Agreement with Lehman Brothers Special
Financing, Inc. dated October 9, 2003 to
receive (pay) semi-annually the notional
amount multiplied by the total rate of return
of the Lehman Brothers U.S. High Yield Index
and pay semi-annually the notional amount
multiplied by the six month USD-Libor
adjusted by a specified spread. $7,500,243 5/1/06 $455,252
Agreement with Lehman Brothers Special
Financing, Inc. dated June 16, 2003 to receive
(pay) quarterly the notional amount multiplied
by the return of the Lehman Brothers U.S. High
Yield Index and pay quarterly the notional
amount multiplied by the three month
USD-LIBOR adjusted by a specified spread. 16,001,110 6/1/05 562,702
Agreement with Lehman Brothers Special
Financing, Inc. dated September 30, 2003
to receive(pay) semi-annually the notional
amount multiplied by the total rate of return
of the Lehman Brothers U.S. High Yield Index
and pay semi-annually the notional amount
multiplied by the six month USD-Libor adjusted
by a specified spread. 17,500,022 10/1/04 1,214,881
Agreement with Lehman Brothers Special
Financing, Inc. dated June 27, 2003 to receive
(pay) quarterly the notional amount multiplied
by the total rate of the Lehman Brothers U.S.
High Yield Index and pay quarterly the notional
amount multiplied by the three month
USD-Libor adjusted by a specified spread. 8,717,876 7/1/04 105,678
Agreement with Merrill Lynch Capital
Services, Inc. dated June 13, 2003 to pay
quarterly the notional amount multiplied
by the three month USD-LIBOR adjusted
by a specified spread and receive/(pay)
quarterly the notional amount multiplied
by the return of the Merrill Lynch US High
Yield Cash Pay Index. 10,843,748 1/1/05 130,426
- ------------------------------------------------------------------------------------------------------
$2,468,939
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities
February 29, 2004 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investments in securities, at value, including $9,132,642 of
securities on loan (identified cost $3,367,449,775) (Note 1) $3,266,949,218
- -------------------------------------------------------------------------------
Cash 8,584,922
- -------------------------------------------------------------------------------
Dividends, interest and other receivables 60,820,928
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,888,437
- -------------------------------------------------------------------------------
Receivable for securities sold 22,859,818
- -------------------------------------------------------------------------------
Receivable for open swap contracts (Note 1) 8,591,519
- -------------------------------------------------------------------------------
Receivable for variation margin (Note 1) 13,750
- -------------------------------------------------------------------------------
Receivable for open forward currency contracts (Note 1) 106,368
- -------------------------------------------------------------------------------
Receivable for closed forward currency contracts (Note 1) 171,488
- -------------------------------------------------------------------------------
Total assets 3,369,986,448
Liabilities
- -------------------------------------------------------------------------------
Payable for securities purchased 39,064,923
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 8,106,220
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,711,529
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 585,230
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 276,166
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,459
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,641,381
- -------------------------------------------------------------------------------
Payable for open forward currency contracts (Note 1) 3,164
- -------------------------------------------------------------------------------
Payable for closed forward currency contracts (Note 1) 1,854,493
- -------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 9,284,918
- -------------------------------------------------------------------------------
Other accrued expenses 339,954
- -------------------------------------------------------------------------------
Total liabilities 65,873,437
- -------------------------------------------------------------------------------
Net assets $3,304,113,011
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $5,101,333,433
- -------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (18,886,188)
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (1,686,544,258)
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets and
liabilities in foreign currencies (91,789,976)
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $3,304,113,011
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($2,118,782,449 divided by 263,882,482 shares) $8.03
- -------------------------------------------------------------------------------
Offering price per class A share (100/95.50 of $8.03)* $8.41
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($800,192,710 divided by 100,141,590 shares)** $7.99
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($101,135,109 divided by 12,650,486 shares)** $7.99
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($42,750,783 divided by 5,326,158 shares) $8.03
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $8.03)* $8.30
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($62,623 divided by 7,802 shares) $8.03
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class Y share ($241,189,337 divided by 30,128,879 shares) $8.01
- -------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial
statements.
Statement of operations
Six months ended February 29, 2004 (Unaudited)
Investment income:
- -------------------------------------------------------------------------------
Interest $143,107,509
- -------------------------------------------------------------------------------
Dividends 5,993,137
- -------------------------------------------------------------------------------
Securities lending 26,309
- -------------------------------------------------------------------------------
Total investment income 149,126,955
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 9,613,102
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,468,876
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 39,443
- -------------------------------------------------------------------------------
Administrative services (Note 2) 16,926
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 2,809,805
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 4,314,809
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 549,974
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 115,645
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 130
- -------------------------------------------------------------------------------
Other 496,263
- -------------------------------------------------------------------------------
Non-recurring costs (Note 6) 50,002
- -------------------------------------------------------------------------------
Costs assumed by Manager (Note 6) (50,002)
- -------------------------------------------------------------------------------
Total expenses 20,424,973
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (58,124)
- -------------------------------------------------------------------------------
Net expenses 20,366,849
- -------------------------------------------------------------------------------
Net investment income 128,760,106
- -------------------------------------------------------------------------------
Net realized loss on investments (including net realized
loss of $1,332,700 on sales of investments in affiliated
issuers) (Notes 1, 3 and 5) (31,498,886)
- -------------------------------------------------------------------------------
Net realized gain on swap contracts (Note 1) 6,195,909
- -------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 210,078
- -------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (5,443,259)
- -------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 559,144
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures
contracts and swap contracts during the period 249,361,542
- -------------------------------------------------------------------------------
Net gain on investments 219,384,528
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $348,144,634
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
Six months ended Year ended
February 29 August 31
Increase (decrease) in net assets 2004* 2003
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $128,760,106 $288,750,055
- -------------------------------------------------------------------------------
Net realized loss on investments and foreign
currency transactions (30,536,158) (169,865,396)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign
currencies 249,920,686 484,949,927
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 348,144,634 603,834,586
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
Class A (85,545,566) (192,148,223)
- -------------------------------------------------------------------------------
Class B (29,842,045) (74,674,852)
- -------------------------------------------------------------------------------
Class C (3,828,731) (6,641,986)
- -------------------------------------------------------------------------------
Class M (1,701,024) (3,772,717)
- -------------------------------------------------------------------------------
Class R (1,906) (1,005)
- -------------------------------------------------------------------------------
Class Y (9,349,271) (16,802,807)
- -------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) (418,039,159) 369,906,038
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets (200,163,068) 679,699,034
Net assets
- -------------------------------------------------------------------------------
Beginning of period 3,504,276,079 2,824,577,045
- -------------------------------------------------------------------------------
End of period (including distributions in
excess of net investment income of
$18,886,188 and $17,377,751, respectively) $3,304,113,011 $3,504,276,079
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
February 29
Per-share (Unaudited) Year ended August 31
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.55 $6.86 $8.10 $9.47 $10.46 $11.47
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .30 .67 .77 .97 1.05 1.11
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .48 .71 (1.15) (1.31) (.95) (.93)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .78 1.38 (.38) (.34) .10 .18
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.30) (.69) (.81) (1.00) (1.09) (1.13)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.05) (.03) -- (.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.30) (.69) (.86) (1.03) (1.09) (1.19)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.03 $7.55 $6.86 $8.10 $9.47 $10.46
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.48* 21.27 (5.10) (3.49) .93 1.76
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,118,782 $2,271,756 $1,814,979 $1,584,421 $2,022,516 $2,488,892
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .48* .98 1.01 .99 .96 .93
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.76* 9.41 10.37 11.40 10.45 10.23
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 34.05* 75.18 74.29 (d) 77.43 60.55 50.65
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam High Yield Trust II.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
February 29
Per-share (Unaudited) Year ended August 31
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.52 $6.84 $8.07 $9.44 $10.42 $11.43
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .27 .62 .71 .91 .98 1.04
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .47 .70 (1.14) (1.31) (.94) (.95)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .74 1.32 (.43) (.40) .04 .09
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.27) (.64) (.76) (.94) (1.02) (1.05)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.04) (.03) -- (.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.27) (.64) (.80) (.97) (1.02) (1.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $7.99 $7.52 $6.84 $8.07 $9.44 $10.42
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 9.96* 20.31 (5.69) (4.23) .27 .99
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $800,193 $879,566 $793,713 $274,501 $381,093 $669,009
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .86* 1.73 1.76 1.74 1.71 1.68
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.38* 8.67 9.40 10.67 9.72 9.53
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 34.05* 75.18 74.29 (d) 77.43 60.55 50.65
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam High Yield Trust II.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS C
- --------------------------------------------------------------------------------------------
For the
Six months period
ended Year March 19,
February 29 ended 2002+ to
Per-share (Unaudited) August 31 August 31
operating performance 2004 2003 2002
- --------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.52 $6.85 $7.60
- --------------------------------------------------------------------------------------------
Investment operations:
- --------------------------------------------------------------------------------------------
Net investment income (a) .27 .62 .29
- --------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .47 .68 (.74)
- --------------------------------------------------------------------------------------------
Total from
investment operations .74 1.30 (.45)
- --------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------
From net
investment income (.27) (.63) (.28)
- --------------------------------------------------------------------------------------------
From return of capital -- -- (.02)
- --------------------------------------------------------------------------------------------
Total distributions (.27) (.63) (.30)
- --------------------------------------------------------------------------------------------
Net asset value,
end of period $7.99 $7.52 $6.85
- --------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 9.98* 20.08 (6.03)*
- --------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $101,135 $87,008 $48,587
- --------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .86* 1.73 .80*
- --------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.39* 8.49 4.17*
- --------------------------------------------------------------------------------------------
Portfolio turnover (%) 34.05* 75.18 74.29 (d)
- --------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted
average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect
of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Portfolio turnover excludes the impact of assets received from the acquisition
of Putnam High Yield Trust II.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
February 29
Per-share (Unaudited) Year ended August 31
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.55 $6.87 $8.10 $9.47 $10.45 $11.47
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .29 .65 .75 .95 1.03 1.09
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .48 .70 (1.15) (1.31) (.94) (.95)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .77 1.35 (.40) (.36) .09 .14
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.29) (.67) (.79) (.98) (1.07) (1.10)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.04) (.03) -- (.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.29) (.67) (.83) (1.01) (1.07) (1.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.03 $7.55 $6.87 $8.10 $9.47 $10.45
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.32* 20.80 (5.23) (3.76) .78 1.42
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $42,751 $45,017 $34,917 $8,601 $11,005 $15,264
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .61* 1.23 1.26 1.24 1.21 1.18
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.63* 9.12 9.79 11.15 10.21 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 34.05* 75.18 74.29 (d) 77.43 60.55 50.65
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam High Yield Trust II.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS R
- --------------------------------------------------------------------------
For the
Six months period
ended Jan. 21,
Feb. 29 2003+ to
Per-share (Unaudited) Aug. 31
operating performance 2004 2003
- --------------------------------------------------------------------------
Net asset value,
beginning of period $7.55 $6.99
- --------------------------------------------------------------------------
Investment operations:
- --------------------------------------------------------------------------
Net investment income (a) .29 .40
- --------------------------------------------------------------------------
Net realized and unrealized
gain on investments .48 .54
- --------------------------------------------------------------------------
Total from
investment operations .77 .94
- --------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------
From net
investment income (.29) (.38)
- --------------------------------------------------------------------------
From return of capital -- --
- --------------------------------------------------------------------------
Total distributions (.29) (.38)
- --------------------------------------------------------------------------
Net asset value,
end of period $8.03 $7.55
- --------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.34* 13.76*
- --------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------
Net assets, end of period
(in thousands) $63 $46
- --------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .61* .75*
- --------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.63* 5.59*
- --------------------------------------------------------------------------
Portfolio turnover (%) 34.05* 75.18
- --------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment.
(c) Includes amounts paid through expense offset arrangements (Note 2).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS Y
- ---------------------------------------------------------------------------------------------------------------------------------
For the
Six months period
ended Dec. 31,
February 29 1998+ to
Per-share (Unaudited) Year ended August 31 August 31
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.53 $6.85 $8.09 $9.47 $10.46 $10.83
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .31 .68 .77 .99 1.08 .77
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .48 .71 (1.13) (1.31) (.95) (.35)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .79 1.39 (.36) (.32) .13 .42
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.31) (.71) (.83) (1.03) (1.12) (.75)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.05) (.03) -- (.04)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.31) (.71) (.88) (1.06) (1.12) (.79)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.01 $7.53 $6.85 $8.09 $9.47 $10.46
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.67* 21.45 (4.84) (3.34) 1.17 3.92*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $241,189 $220,883 $132,382 $14,580 $16,668 $21,461
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .36* .73 .76 .74 .71 .46*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.88* 9.57 10.05 11.61 10.72 6.81*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 34.05* 75.18 74.29 (d) 77.43 60.55 50.65
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam High Yield Trust II.
The accompanying notes are an integral part of these financial statements.
Notes to financial statements
February 29, 2004 (Unaudited)
Note 1
Significant accounting policies
Putnam High Yield Trust ("the fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The fund seeks high current income by investing
primarily in high-yielding, lower-rated fixed-income securities. These
securities may have a higher rate of default due to the nature of the
investments.
The fund offers class A, class B, class C, class M, class R and class Y
shares. Class A shares are sold with a maximum front-end sales charge of
4.50%. Prior to January 28, 2004, the maximum front-end sales charge for
class A was 4.75%. Class B shares, which convert to class A shares after
approximately eight years, do not pay a front-end sales charge but pay a
higher ongoing distribution fee than class A, class M and class R
shares, and are subject to a contingent deferred sales charge, if those
shares are redeemed within six years of purchase. Class C shares are
subject to the same fees and expenses as class B shares, except that
class C shares have a one-year 1.00% contingent deferred sales charge
and do not convert to class A shares. Class M shares are sold with a
maximum front end sales charge of 3.25% and pay an ongoing distribution
fee that is higher than class A and class R shares but lower than class
B and class C shares. Class R shares are sold without a front end sales
charge and pay an ongoing distribution fee that is higher than class A
shares, but lower than class B and class C shares. Class R shares are
offered to qualified employee-benefit plans. 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, trust companies and certain college savings
plans.
Effective December 1, 2003 a redemption fee of 1.00% which is retained
by the fund, may apply to shares of any class redeemed (either by
selling or by exchanging to another fund) within 90 days of purchase.
Effective April 19, 2004 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. A 1.00% redemption fee would apply to any
shares that are redeemed (either by selling or exchanging into another
fund) within 6-90 days of purchase.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with 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 at fair value on the basis
of valuations furnished by an independent pricing service or dealers,
approved by the Trustees. 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 fund will fair value foreign 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 fund to a significant extent. Securities quoted in foreign
currencies are translated into U.S. dollars at the current exchange
rate. Short-term investments having remaining maturities of 60 days or
less are valued at amortized cost, which approximates fair value. Other
investments, including restricted securities, are valued at fair value
following procedures approved by the Trustees. Such valuations and
procedures are reviewed periodically by the Trustees.
B) Joint trading account The 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
Investment Management, LLC ("Putnam Management"), the fund's manager, an
indirect wholly-owned subsidiary of Putnam, LLC. These balances may be
invested in issuers 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) Security transactions and related investment income Security
transactions are recorded on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income, net
of applicable withholding taxes, is recognized on the ex-dividend date.
Non-cash dividends, if any, are recorded at the fair market value of the
securities received. All premiums/discounts are amortized/accreted on a
yield-to-maturity basis.
D) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred. The
fund does 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 fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized
appreciation and depreciation of assets and liabilities in foreign
currencies arise from changes in the value of open forward currency
contracts and assets and liabilities other than investments at the
period end, resulting from changes in the exchange rate. Investments in
foreign securities involve certain risks, including those related to
economic instability, unfavorable political developments, and currency
fluctuations, not present with domestic investments.
E) Forward currency contracts The 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). 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. Forward currency contracts outstanding at
period end, if any, are listed after the fund's portfolio.
F) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the 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.
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 fund's portfolio.
G) Total return swap contracts The 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 or index 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, respectively. 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. 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. Risks
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 fund's portfolio.
H) Interest rate swap contracts The 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 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. 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. Risks 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
fund's portfolio.
I) Security lending The fund may lend securities, through its agents, to
qualified borrowers in order to earn additional income. The loans are
collateralized by cash and/or securities in an amount at least equal to
the market value of the securities loaned. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the 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 February 29, 2004, the value
of securities loaned amounted to $9,132,642. The fund received cash
collateral of $9,284,918 which is pooled with collateral of other Putnam
funds into 10 issuers of high grade short-term investments.
J) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986 (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 August 31, 2003, the fund had a capital loss carryover of
$1,600,861,913 available to the extent allowed by the Code to offset
future net capital gain, if any. This amount includes $381,214,708 of
capital losses acquired in connection with the acquisition of High Yield
Trust II which are subject to limitations imposed by the Code. The
amount of the carryover and the expiration dates are:
Loss Carryover Expiration
- --------------------------------
$3,690,829 August 31, 2004
4,909,410 August 31, 2005
14,566,882 August 31, 2006
135,892,331 August 31, 2007
339,129,540 August 31. 2008
305,968,663 August 31, 2009
298,606,980 August 31, 2010
498,097,278 August 31, 2011
Pursuant to federal income tax regulations applicable to regulated
investment companies, the fund has elected to defer to its fiscal year
ending August 31, 2004 $49,320,027 of losses recognized during the
period November 1, 2002 to August 31, 2003.
The aggregate identified cost on a tax basis is $3,385,592,391,
resulting in gross unrealized appreciation and depreciation of
$215,472,833 and $334,116,006, respectively, or net unrealized
depreciation of $118,643,173.
K) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the 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. Reclassifications are made to the fund's capital
accounts to reflect income and gains available for distribution (or
available capital loss carryovers) under income tax regulations.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.70% 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.
Effective January 28, 2004, Putnam Management has agreed to limit its
compensation (and, to the extent necessary bear other expenses) through
December 31, 2004 to the extent that the fund's net expenses as a
percentage of average net assets exceed the average expense ratio for
the fund's Lipper peer group of front-end load funds.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam, LLC. Putnam
Investor Services, a division of PFTC, provides investor servicing
functions to the fund. During the six months ended February 29, 2004 the
fund paid $1,891,104 for these services.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. For the six months ended February 29,
2004, the fund's expenses were reduced by $58,124 under these
arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $3,661 as a quarterly retainer, has been allocated to the fund,
and an additional fee for each Trustees meeting attended. Trustees
receive additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Trustee compensation and expenses in the
Statement of operations. Accrued pension liability is included in
Payable for Trustee compensation and expenses in the Statement of assets
and liabilities.
The 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
fund. The Plans provide for payments by the 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 the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.50% 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 six months ended February 29, 2004, Putnam Retail Management,
acting as underwriter, received net commissions of $156,903 and $1,600
from the sale of class A and class M shares, respectively, and received
$1,453,477 and $29,453 in contingent deferred sales charges from
redemptions of class B and class C shares, respectively. A deferred
sales charge of up to 1.00% and 0.40% is assessed on certain redemptions
of class A and class M shares, respectively. For the six months ended
February 29, 2004, Putnam Retail Management, acting as underwriter,
received $92,859 and no monies on class A and class M redemptions,
respectively.
Note 3
Purchases and sales of securities
During the six months ended February 29, 2004, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $1,110,609,976 and $1,359,777,566, respectively.
There were no purchases or sales of U.S. government securities.
Note 4
Capital shares
At February 29, 2004, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended February 29, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 33,452,968 $261,247,828
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 7,287,914 57,308,842
- ----------------------------------------------------------------
40,740,882 318,556,670
Shares repurchased (77,695,445) (611,783,851)
- ----------------------------------------------------------------
Net decrease (36,954,563) $(293,227,181)
- ----------------------------------------------------------------
Year ended August 31, 2003
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 145,785,467 $1,042,058,741
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 16,597,854 117,784,000
- ----------------------------------------------------------------
162,383,321 1,159,842,741
Shares repurchased (125,950,786) (902,791,022)
- ----------------------------------------------------------------
Net increase 36,432,535 $257,051,719
- ----------------------------------------------------------------
Six months ended February 29, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 11,324,637 $90,037,375
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 2,299,263 16,002,291
- ----------------------------------------------------------------
13,623,900 106,039,666
Shares repurchased (30,513,108) (239,338,175)
- ----------------------------------------------------------------
Net decrease (16,889,208) $(133,298,509)
- ----------------------------------------------------------------
Year ended August 31, 2003
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 44,160,108 $314,502,228
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 5,669,255 40,058,308
- ----------------------------------------------------------------
49,829,363 354,560,536
Shares repurchased (48,893,664) (349,166,755)
- ----------------------------------------------------------------
Net increase 935,699 $5,393,781
- ----------------------------------------------------------------
Six months ended February 29, 2004
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 6,207,504 $48,070,901
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 357,264 2,769,193
- ----------------------------------------------------------------
6,564,768 50,840,094
Shares repurchased (5,478,782) (43,416,926)
- ----------------------------------------------------------------
Net increase 1,085,986 $7,423,168
- ----------------------------------------------------------------
Year ended August 31, 2003
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 18,718,402 $133,618,312
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 587,322 4,197,741
- ----------------------------------------------------------------
19,305,724 137,816,053
Shares repurchased (14,837,161) (107,524,031)
- ----------------------------------------------------------------
Net increase 4,468,563 $30,292,022
- ----------------------------------------------------------------
Six months ended February 29, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 1,191,464 $9,303,160
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 165,242 1,299,275
- ----------------------------------------------------------------
1,356,706 10,602,435
Shares repurchased (1,993,946) (15,751,021)
- ----------------------------------------------------------------
Net decrease (637,240) $(5,148,586)
- ----------------------------------------------------------------
Year ended August 31, 2003
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 3,402,242 $24,330,666
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 356,289 2,534,391
- ----------------------------------------------------------------
3,758,531 26,865,057
Shares repurchased (2,880,242) (20,781,685)
- ----------------------------------------------------------------
Net increase 878,289 $6,083,372
- ----------------------------------------------------------------
Six months ended February 29, 2004
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 1,698 $13,594
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 196 1,542
- ----------------------------------------------------------------
1,894 15,136
Shares repurchased (154) (1,219)
- ----------------------------------------------------------------
Net increase 1,740 $13,917
- ----------------------------------------------------------------
For the period January 21, 2003
(commencement of operations)
to August 31, 2003
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 15 $1,500
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 5 500
- ----------------------------------------------------------------
20 2,000
Shares repurchased (3) (300)
- ----------------------------------------------------------------
Net increase 17 $1,700
- ----------------------------------------------------------------
Six months ended February 29, 2004
- ----------------------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------------------
Shares sold 4,914,303 $38,663,343
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1,187,990 9,349,271
- ----------------------------------------------------------------
6,102,293 48,012,614
Shares repurchased (5,297,038) (41,814,582)
- ----------------------------------------------------------------
Net increase 805,255 $6,198,032
- ----------------------------------------------------------------
Year ended August 31, 2003
- ----------------------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------------------
Shares sold 14,737,927 $102,795,238
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 2,179,863 16,802,807
- ----------------------------------------------------------------
16,917,790 119,598,045
Shares repurchased (6,915,851) (48,557,716)
- ----------------------------------------------------------------
Net increase 10,001,939 $71,040,329
- ----------------------------------------------------------------
Note 5
Transactions with affiliated issuers
Transactions during the period with companies in which the fund owned at
least 5% of the voting securities were as follows:
Purchase Sales Dividend Market
Affiliates cost cost Income Value
- ------------------------------------------------------------------------------
Archibald Candy Corp. $-- $-- $-- $836
DigitalGlobe, Inc. 144A* -- -- -- 968,349
Jasper Energy 144A* -- -- -- --
Mediq, Inc. -- -- -- 84,420
Pioneer Cos., Inc. -- 707,311 -- --
PSF Group Holdings Inc., 144A
Class A -- -- -- 17,859,053
Safety Components
International, Inc. -- 11,094,122 -- --
VFB LLC (United Kingdom)* -- -- -- 1,713,938
XCL Equity Units* 12,182,999 -- -- 1,386,703
York Research Corp. 144A* -- -- -- --
- ------------------------------------------------------------------------------
Totals $12,182,999 $11,801,433 $-- $22,013,299
- ------------------------------------------------------------------------------
* Securities received/written off as the result of a corporate action.
Market values are shown for those securities affiliated at period end.
Note 6
Regulatory matters and litigation
On April 8, 2004, Putnam Management entered into agreements with the
Securities and Exchange Commission and the Massachusetts Securities
Division representing a final settlement of all charges brought
against Putnam Management by those agencies on October 28, 2003 in
connection 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. The settlement with the SEC requires Putnam Management
to pay $5 million in disgorgement plus a civil monetary penalty of
$50 million, and the settlement with the Massachusetts Securities
Division requires Putnam Management to pay $5 million in restitution
and an administrative fine of $50 million. The settlements also
leave intact the process established under an earlier partial
settlement with the SEC under which Putnam Management agreed to pay
the amount of restitution determined by an independent consultant,
which may exceed the disgorgement and restitution amounts specified
above, pursuant to a plan to be developed by the independent
consultant.
Putnam Management, and not the investors in any Putnam fund, will
bear all costs, including restitution, civil penalties and
associated legal fees stemming from both of these proceedings. The
SEC'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 has agreed to bear any costs
incurred by Putnam funds in connection with these lawsuits. Based on
currently available information, 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
fund 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.
For the period ended February 29, 2004, Putnam Management has assumed
$50,002 of legal, shareholder servicing and communication, audit, and
Trustee fees incurred by the Fund in connection with these matters.
Review of these matters by counsel for Putnam Management and by
separate independent counsel for the Putnam funds and their
independent Trustees is continuing. The fund may experience increased
redemptions as a result of these matters, which could result in
increased transaction costs and operating expenses.
Putnam puts your interests first
In January, Putnam announced a number of voluntary initiatives designed
to reduce fund expenses, provide investors with more useful information,
and help safeguard the interests of all Putnam investors. For details,
visit www.putnaminvestments.com.
Cost-cutting initiatives
Reduced sales charges
Effective immediately, the maximum sales charge for class A shares has been
reduced to 5.25% for equity funds (formerly 5.75%) and 4.50% for most
income funds* (formerly 4.75%).
Lower class B purchase limit
To help ensure that investors are in the most cost-effective share class,
the maximum amount that can be invested in class B shares has been reduced
to $100,000. (Larger trades or accumulated amounts will be directed to
class A shares.)
Ongoing expenses will be limited
During calendar 2004, total ongoing expenses, including management fees for
all funds, will be maintained at or below the average of each fund's
industry peers in its Lipper load-fund universe. For more information,
please see the Statement of Additional information.
Additional measures are being taken to reduce expenses for shareholders
in the six global and international funds that had short-term trading
issues.
Improved disclosure
Putnam fund prospectuses and shareholder reports are being revised to
disclose additional information that will help shareholders compare
funds and weigh their costs and risks along with their potential
benefits. Shareholders will find easy-to-understand information about
fund expense ratios, portfolio manager compensation, risk comparisons,
brokerage commissions, and employee and trustee ownership of Putnam
funds. Disclosure of breakpoint discounts is also being enhanced to
alert investors to potential cost savings.
Protecting investors' interests
New short-term trading fee introduced
To discourage short-term trading, which can interfere with a fund's
long-term strategy, a 2% short-term trading fee will be imposed on any
Putnam fund shares redeemed or exchanged within five calendar days of
purchase.
* The maximum sales charge for class A shares of Putnam U.S.
Intermediate Government Income Fund remains 3.25%.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. 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 presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President,
Treasurer and Principal
Executive Officer
Patricia C. Flaherty
Senior Vice President
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Beth S. Mazor
Vice President
Mark C. Trenchard
Vice President and
BSA Compliance Officer
William H. Woolverton
Vice President and
Chief Legal Officer
Judith Cohen
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam High Yield
Trust. 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.putnaminvestments.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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Call 1-800-225-1581 or visit our Web site www.putnaminvestments.com.
SA034-212135 014/324/2AC 4/04
Not FDIC Insured May Lose Value No Bank Guarantee
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam High Yield Trust
Supplement to Semiannual Report dated 2/29/04
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to clients that meet the eligibility requirements
specified in the fund's prospectus for such shares. Performance of class Y
shares, which do not incur a front-end load, a distribution fee, or a
contingent deferred sales charge, will differ from the performance of class
A, B, C, M, and R shares, which are discussed more extensively in the
annual report.
RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return for periods ended 2/29/04
NAV
6 months 10.67%
1 year 24.85
5 years 28.63
Annual average 5.16
10 years 69.76
Annual average 5.43
Life of fund (since class A inception, 2/14/78)
Annual average 9.35
Share value: NAV
8/31/03 $7.53
2/29/04 $8.01
- ----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
6 $0.312 -- $0.312
- ----------------------------------------------------------------------------
Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. Returns shown for
class Y shares for periods prior to their inception are derived from the
historical performance of class A shares, and are not adjusted to reflect
the initial sales charge currently applicable to class A shares. These
returns have not been adjusted to reflect differences in operating expenses
which, for class Y shares, typically are lower than the operating expenses
applicable to class A shares. All returns assume reinvestment of
distributions at net asset value. Investment return and principal value
will fluctuate so your shares, when redeemed, may be worth more or less
than their original cost. See full report for information on comparative
benchmarks. If you have questions, please consult your fund prospectus or
call Putnam toll free at 1-800-752-9894.
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Items 5-6. [Reserved]
- ---------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. [Reserved]
- ------------------
Item 9. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
Not applicable
Item 10. 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 on Form N-CSR, that the design and
operation of such procedures are generally effective to provide
reasonable assurance that information required to be disclosed by
the investment company in the reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Commission's rules and forms.
Although such officers reached the conclusion expressed in the
preceding paragraph, they are aware of matters that raise concerns
with respect to controls, each of which arose in connection with the
administration of 401(k) plans by Putnam Fiduciary Trust Company.
The first matter, which occurred in early 2001, involved the willful
circumvention of controls by certain Putnam employees in connection
with the correction of operational errors with respect to a 401(k)
client's investment in certain Putnam Funds, which led to losses in
five Putnam Funds (not including the registrant). Such officers
became aware of this matter in February 2004. The second matter,
which occurred in 2002, involved the willful circumvention by
certain Putnam employees of policies and procedures in connection
with the payment of Putnam corporate expenses. Such officers did
not learn that this matter involved a Putnam Fund until January
2004. Putnam has made restitution to the affected Funds,
implemented a number of personnel changes, including senior
personnel, begun to implement changes in procedures to address these
items and informed the SEC, the Funds' Trustees and independent
auditors. An internal investigation and review of procedures and
controls are currently ongoing.
In reaching the conclusion expressed herein, the registrant's
principal executive officer and principal financial officer
considered a number of factors, including the nature of the matters
described above, when the matters occurred, the individuals
involved, personnel changes that have occurred since these matters
occurred, the results to date of the current ongoing investigation
and the overall quality of controls at Putnam at this time.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
- ------------------
(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002
are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an 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.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: May 4, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934
an 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: May 4, 2004
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: May 4, 2004