<PAGE>
PRESIDENT'S LETTER
The total return based on market price for the DLJ High Yield Bond Fund (DHY)
for the first six month period ended April 30, 1999, was 2.10%. The Fund's
return based on NAV during this time was 16.15%, which compares favorably with
the 11.07% return of the Lipper Closed End High Yield Bond Fund Average. The
Fund ranked second among the thirty-five funds in this Lipper peer group for
the period noted. For the period from its inception in July of 1998 to April
30, 1999, it ranked eighth. In April of 1999, the Fund's monthly dividend was
raised from 8 cents per share to 8.25 cents.
The Fund's quality performance resulted from advantageous sector weightings and
securities selection, as well as a measured approach to raising the Fund's
leverage. The Fund was overweighted in the media and telecom sectors, which
continue to benefit from the convergence of the telecom/cable/internet
businesses and supportive capital market activities. During the first six
months of the fiscal year, the Fund's leverage was gradually raised from
approximately 10% to 30%, which supported the increase in the dividend. At the
same time, the quality of the portfolio assets was raised slightly as we
rotated into larger market capitalization bonds.
The Fund continued to avoid investing in the hard-hit shipping sector and
stayed underweighted in the energy and cyclical sectors. Although cyclical
bonds have rallied considerably over the last several months on concern that
the economy is overheating, we believe that prices for industrial commodities
will stay below their cyclical midpoints for the foreseeable future. Sharp
competition, abundant supply and moderate demand increases worldwide should
prevent inflation from being more buoyant.
We expect that Fund leverage will stay around 30% and are focused on bond swaps
that would raise the yield on assets. We also plan to harvest some gains that
should open up the total return prospects of the portfolio. The high yield
market is currently being buffeted by the uncertainty surrounding Federal
Reserve Bank interest policy, the direction of the stock market and abundant
new-issue supply. We believe once interest rates are raised, both the stock
market and the high yield market will settle down and the tone will firm up as
supply and demand come into balance. We do not expect any likely interest rate
scenario will negatively affect high yield bond values or the health of the
economy in a meaningful way. For now, we view the rising default rate within
the high yield universe, from 1% in 1998 to 3% for the first calendar quarter
in 1999, as being more driven by microeconomic factors pertaining to individual
companies and sectors, rather than by a fundamental negative shift in the
viability of the high yield bond asset class or the strength of the domestic
U.S. economy.
We appreciate your continued support and wish you a most enjoyable summer.
Sincerely,
[GRAPHIC OMITTED]
G. Moffett Cochran
President June, 1999
<PAGE>
Fund Highlights (unaudited)
- --------------------------------------------------------------------------------
DLJ High Yield Bond Fund
Top Ten Holdings as of April 30, 1999
-------------------------------------
% of Total % of Total
Security Description Net Assets Security Description Net Assets
Kaiser Aluminum & Chemical Corp. Renters Choice, Inc.
12.75%, 02/01/03 2.23% 11.00%, 08/15/08 1.56%
Unisys Corp. PSINet, Inc.
12.00%, 04/15/03 2.18% 10.00%, 02/15/05 1.56%
Young Broadcasting Corp. RCN Corp.
11.75%, 11/15/04 1.75% 10.56%, 10/15/07 1.55%
Fairchild Corp. Regional Independent Media
10.75%, 04/15/09 1.74% 10.50%, 07/01/08 1.54%
Time Warner Telecom, Inc. SFX Entertainment, Inc.
9.75%, 07/15/08 1.61% 9.13%, 02/01/08 1.54%
Portfolio and Fund Information April 30, 1999
---------------------------------------------
Current Yield(1): 10.70% Ticker Symbol: DHY
Distribution Rate(2): 10.34% Primary Exchange: NYSE
Average Rating: B
Average Years to Maturity*: 8.17 years
Average Duration*: 5.88 years
*weighted average
Investment Results July 31, 1998* through April 30, 1999
--------------------------------------------------------
DLJ High Yield Bond Fund Total Return(3)
------------------------ ----------------
Market Price ............................................... 0.32%
NAV(4) ..................................................... 0.18%
Fund Index
----------
Lipper Closed-End High Yield Bond Fund Average(5) .......... -3.09%
* Date of closing of the Fund's Initial Public Offering
------------
(1) Current yield is based on April's dividend per share of $.0825
(annualized) divided by the April 30 market price ($9.25).
(2) Distribution rate is based on dividends per share paid from net
investment income during the period from the Fund's inception through
April 30 (annualized) divided by the April 30 market price.
(3) The performance data quoted represents past performance, which is no
indication of future performance. Investment return and principal value
will fluctuate so that an investor's shares, when sold, may be worth more
or less than their original cost. No adjustment has been made for any
income taxes payable by shareholders on dividends.
(4) The total return referenced reflects the change in the Fund's net asset
value over the period and assumes that dividends were reinvested. The
percentage is not an indication of the performance of a shareholder's
investment in the Fund which is based on market price.
(5) The Lipper Closed-End High Yield Bond Fund Average is an equally
weighted performance average of 35 funds in the Lipper Analytical grouping
of closed-end high yield bond funds, adjusted for capital gains and income
dividends.
<PAGE>
DLJ High Yield Bond Fund--Statement of Investments April 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
BONDS--131.98%
Principal
Amount Value
--------------- ----------------
AEROSPACE--6.17%
BE Aerospace
9.50%, 11/01/08 ** ............... $4,000,000 $4,280,000
Compass Aerospace Corp.
10.13%, 04/15/05 *, ** ........... 5,150,000 5,014,813
Fairchild Corp.
10.75%, 04/15/09 ** .............. 7,000,000 7,035,000
Hexcel Corp.
9.75%, 01/15/09 *, ** ............ 4,000,000 4,080,000
Transdigm, Inc.
10.38%, 12/01/08 *, ** ........... 4,500,000 4,556,250
----------
24,966,063
----------
CHEMICALS--3.48%
Pioneer Americas Acquisition Corp.
9.25%, 06/15/07 ** ............... 5,000,000 4,337,500
Sterling Chemicals, Inc.
11.75%, 08/15/06 ** .............. 2,000,000 1,930,000
11.25%, 04/01/07 ** .............. 2,425,000 2,291,625
Trans-Resources, Inc.
11.75%, 03/15/08 **, *** ......... 10,000,000 5,550,000
----------
14,109,125
----------
CONSUMER NON-DURABLES--4.62%
Consoltex Group
11.00%, 10/01/03 ** .............. 4,000,000 4,100,000
Galey & Lord, Inc.
9.13%, 03/01/08 ** ............... 6,000,000 4,920,000
Globe Manufacturing Corp.
10.00%, 08/01/08 ** .............. 3,000,000 2,520,000
Polaroid Corp.
11.50%, 02/15/06 ** .............. 4,000,000 4,210,000
Styling Technology Corp.
10.88%, 07/01/08 ** .............. 3,000,000 2,932,500
----------
18,682,500
----------
ENERGY--2.46%
Belden & Blake Corp.
9.88%, 06/15/07 ** ............... 5,000,000 3,750,000
Mariner Energy, Inc.
10.50%, 08/01/06 ** .............. 4,000,000 3,560,000
Trico Marine Services, Inc.
8.50%, 08/01/05 ** ............... 3,000,000 2,647,500
----------
9,957,500
----------
FINANCIAL SERVICES--1.76%
Americredit Corp.
9.88%, 04/15/06 ** ............... 4,500,000 4,567,500
Ocwen Financial Corp.
11.88%, 10/01/03 ** .............. 2,625,000 2,546,250
----------
7,113,750
----------
<PAGE>
Principal
Amount Value
--------------- ----------------
FOOD & TOBACCO--5.27%
Advantica Restaurant Group, Inc.
11.25%, 01/15/08 ** .............. $6,000,000 $6,195,000
Luigino's Inc.
10.00%, 02/01/06 *, ** ........... 4,000,000 4,055,000
National Wine & Spirits Holding Corp.
10.13%, 01/15/09 *, ** ........... 4,000,000 4,160,000
New World Pasta Co.
9.25%, 02/15/09 *, ** ............ 3,750,000 3,829,687
Volume Services America, Inc.
11.25%, 03/01/09 *, ** ........... 3,000,000 3,105,000
----------
21,344,687
----------
FOREST PRODUCTS/CONTAINERS--3.17%
Packaging Corp. of America
9.63%, 04/01/09 *, ** ............ 2,750,000 2,866,875
Repap New Brunswick
10.63%, 04/15/05 ** .............. 5,700,000 4,731,000
Riverwood International Corp.
10.63%, 08/01/07 ** .............. 5,000,000 5,250,000
----------
12,847,875
----------
GAMING/LEISURE--6.31%
Bell Sports, Inc.
11.00%, 08/15/08 ** .............. 6,000,000 6,165,000
Extended Stay America, Inc.
9.15%, 03/15/08 ** ............... 5,000,000 4,875,000
Hilton Hotels Corp.
7.50%, 12/15/17 .................. 3,500,000 3,368,750
Stations Casinos, Inc.
10.13%, 03/15/06 ** .............. 5,000,000 5,337,500
8.88%, 12/01/08 *, ** ............ 1,500,000 1,556,250
Venetian Casino/LV Sands
12.25%, 11/15/04 ** .............. 4,000,000 4,240,000
----------
25,542,500
----------
HEALTHCARE--8.60%
Alaris Medical, Inc.
10.94%, 08/01/08 **, *** ......... 10,000,000 6,100,000
Genesis Health Ventures, Inc.
9.88%, 01/15/09 *, ** ............ 3,500,000 3,193,750
ICN Pharmaceuticals, Inc.
8.75%, 11/15/08 * ................ 6,000,000 6,090,000
Integrated Health Services, Inc.
9.25%, 01/15/08 ** ............... 6,000,000 4,410,000
Kinetic Concepts, Inc.
9.63%, 11/01/07 ** ............... 4,500,000 4,410,000
King Pharmaceutical, Inc.
10.75%, 02/15/09 *, ** ........... 5,000,000 5,300,000
Total Renal Care Holdings, Inc.
7.00%, 05/15/09 *, ** ............ 6,500,000 5,313,750
----------
34,817,500
----------
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Investments April 30, 1999 (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
--------------- -------------
HOUSING--2.84%
Nortek, Inc.
9.88%, 03/01/04 ** .................. $ 3,000,000 $ 3,142,500
9.25%, 03/15/07 ** .................. 3,000,000 3,150,000
Webb (Del E.) Corp.
10.25%, 02/15/10 ** ................. 5,000,000 5,187,500
-----------
11,480,000
-----------
INFORMATION TECHNOLOGY--5.29%
Details, Inc.
10.00%, 11/15/05 ** ................. 6,000,000 5,872,500
Fairchild Semiconductor Corp.
11.74%, 03/14/08 .................... 5,000,000 4,375,000
Unisys Corp.
12.00%, 04/15/03 ** ................. 7,984,000 8,842,280
Viasystems Group, Inc.
9.75%, 06/01/07 ** .................. 2,500,000 2,343,750
-----------
21,433,530
-----------
MANUFACTURING--9.53%
Albecca, Inc.
10.75%, 08/15/08 *, ** .............. 6,000,000 5,250,000
BGF Industries, Inc.
10.25%, 01/15/09 *, ** .............. 4,000,000 4,090,000
Continential Global Group, Inc.
11.00%, 04/01/07 ** ................. 4,000,000 3,610,000
Filtronic plc
10.00%, 12/01/05 *, ** .............. 4,000,000 4,200,000
Grove Worldwide LLC
9.25%, 05/01/08 ** .................. 5,000,000 4,300,000
Jordan Industries, Inc.
10.38%, 08/01/07 *, ** .............. 4,500,000 4,590,000
Liberty Group Publishing, Inc.
12.58%, 02/01/09 **, *** ............ 3,000,000 1,616,250
Roller Bearing Company of America
9.63%, 06/15/07 ** .................. 5,000,000 4,787,500
Tokheim Corp.
11.38%, 08/01/08 *, ** .............. 6,000,000 6,120,000
-----------
38,563,750
-----------
MEDIA/ENTERTAINMENT--30.24%
@Entertainment, Inc.
16.95%, 02/01/09 *, **, *** ......... 10,200,000 5,010,750
Adelphia Communications Corp.
8.38%, 02/01/08 * ................... 4,500,000 4,635,000
AMC Entertainment, Inc.
9.50%, 03/15/09 ** .................. 6,000,000 5,925,000
American Media Operations
10.25%, 05/01/09 *, ** .............. 750,000 750,000
Avalon Cable Holdings LLC
11.70%, 12/01/08 *, **, *** ......... 5,500,000 3,685,000
Avalon Cable of Michigan
9.38%, 12/01/08 *, ** ............... 1,000,000 1,062,500
<PAGE>
Principal
Amount Value
--------------- -------------
Carmike Cinemas, Inc.
9.38%, 02/01/09 *, ** ............... $ 4,500,000 $ 4,533,750
Chancellor Media Corp.
9.00%, 10/01/08 ** .................. 4,000,000 4,290,000
Charter Comm Holdings LLC
8.63%, 04/01/09 *, ** ............... 3,000,000 3,082,500
9.73%, 04/01/11 *, **, *** .......... 6,500,000 4,290,000
Citadel Broadcasting Company
10.25%, 07/01/07 ** ................. 3,000,000 3,315,000
Cumulus Media, Inc.
10.38%, 07/01/08 ** ................. 5,000,000 5,412,500
Echostar DBS Corp.
9.38%, 02/01/09 *, ** ............... 5,000,000 5,225,000
Globo Communicacoes e
Participacoes S.A.
10.63%, 12/05/08 *, ** .............. 6,000,000 4,845,000
ICG Holdings, Inc.
12.72%, 09/15/05 **, *** ............ 5,500,000 5,018,750
Liberty Group, Inc.
9.38%, 02/01/08 ** .................. 3,500,000 3,543,750
Paxson Commmunications Corp.
11.63%, 10/01/02 ** ................. 4,000,000 4,190,000
Premier Parks, Inc.
9.25%, 04/01/06 ** .................. 4,000,000 4,200,000
PSINet, Inc.
10.00%, 02/15/05 ** ................. 6,000,000 6,300,000
Regal Cinemas, Inc.
9.50%, 06/01/08 ** .................. 6,000,000 5,985,000
Regional Independent Media
10.50%, 07/01/08 ** ................. 6,000,000 6,225,000
Rogers Cablesystems, Ltd.
10.00%, 12/01/07 ** ................. 5,105,000 5,768,650
SFX Entertainment, Inc.
9.13%, 02/01/08 ** .................. 6,000,000 6,225,000
Six Flags Entertainment Corp.
8.88%, 04/01/06 ** .................. 2,000,000 2,065,000
TV Azteca S.A. de CV
10.50%, 02/15/07 ** ................. 5,000,000 4,337,500
United International Holdings, Inc.
10.22%, 02/15/08 **, *** ............ 8,000,000 5,380,000
Young Broadcasting Corp.
11.75%, 11/15/04 ** ................. 6,589,000 7,074,939
-----------
122,375,589
-----------
METALS & MINERALS--5.15%
Great Lakes Carbon Corp.
10.25%, 05/15/08 ** ................. 5,000,000 5,181,250
Kaiser Aluminum & Chemical Corp.
12.75%, 02/01/03 ** ................. 9,000,000 9,045,000
Lodestar Holdings, Inc.
11.50%, 05/15/05 ** ................. 5,000,000 3,906,250
Renco Steel Holdings
10.88%, 02/01/05 ** ................. 3,000,000 2,730,000
-----------
20,862,500
-----------
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Investments April 30, 1999 (continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
--------------- --------------
RETAIL--5.73%
Big 5 Corp.
10.88%, 11/15/07 ** ................. $4,000,000 $ 4,170,000
Hollywood Entertainment Corp.
10.63%, 08/15/04 ** ................. 3,500,000 3,517,500
Jitney-Jungle Stores of America, Inc.
12.00%, 03/01/06 ** ................. 3,000,000 3,225,000
10.38%, 09/15/07 ** ................. 500,000 475,000
Musicland Group, Inc.
9.88%, 03/15/08 ** .................. 5,500,000 5,586,250
Pathmark Stores, Inc.
12.63%, 06/15/02 ** ................. 6,000,000 6,195,000
-----------
23,178,750
-----------
SERVICE--3.47%
Neff Corp.
10.25%, 06/01/08 ** ................. 3,000,000 3,120,000
Phoenix Color Corp.
10.38%, 02/01/09 *, ** .............. 4,500,000 4,590,000
Renters Choice, Inc.
11.00%, 08/15/08 ** ................. 6,000,000 6,315,000
-----------
14,025,000
-----------
TELECOMMUNICATIONS--21.89%
Dobson/Sygnet Communications Corp.
12.25%, 12/15/08 *, ** .............. 4,000,000 4,440,000
Dolphin Telecommunications plc
13.85%, 06/01/08 **, *** ............ 2,250,000 1,310,625
Esat Telecom Group plc
11.88%, 12/01/08 *, ** .............. 3,000,000 3,240,000
Hermes Europe Railtel BV
11.50%, 08/15/07 ** ................. 5,000,000 5,500,000
Impsat Corp.
12.38%, 06/15/08 ** ................. 5,000,000 4,487,500
Intermedia Commmunications, Inc.
11.96%, 03/01/09 *, **, *** ......... 3,600,000 2,295,000
9.50%, 03/01/09 *, ** ............... 2,000,000 2,080,000
McCaw International, Ltd.
11.93%, 04/15/07 **, *** ............ 5,000,000 3,100,000
Millicom International Cellular S.A.
11.13%, 06/01/06 **, *** ............ 7,500,000 5,793,750
Nextel Communications, Inc.
9.75%, 08/15/04 **, *** ............. 4,000,000 4,180,000
NEXTLINK Communications, Inc.
10.75%, 11/15/08, *, ** ............. 4,000,000 4,310,000
<PAGE>
Principal
Amount Value
--------------- -------------
NTL Incorporated
12.19%, 10/01/08 *, **, *** ......... $2,000,000 $ 1,405,000
11.50%, 10/01/08 *, ** .............. 5,000,000 5,662,500
Primus Telecommunications Group, Inc.
11.24%, 01/15/09 *, ** .............. 5,000,000 5,237,500
RCN Corp.
10.56%, 10/15/07 **, *** ............ 9,000,000 6,277,500
Telecorp PCS, Inc.
11.46%, 04/15/09 *, **, *** ......... 4,500,000 2,542,500
Telesystem International Wireless, Inc.
11.76%, 06/30/07 **, *** ............ 4,000,000 2,480,000
TeleWest Communications plc
10.62%, 10/01/07 **, *** ............ 4,000,000 3,560,000
11.25%, 11/01/08 *, ** .............. 2,000,000 2,330,000
Time Warner Telecom, Inc.
9.75%, 07/15/08 ** .................. 6,000,000 6,510,000
VersaTel Telecom Belgium N.V.
13.25%, 05/15/08 ** ................. 3,000,000 3,240,000
Viatel, Inc.
11.50%, 03/15/09 *, ** .............. 4,000,000 4,250,000
Winstar Communications, Inc.
12.89%, 10/15/05 ** ................. 2,000,000 2,720,000
11.36%, 03/15/08 ** ................. 2,000,000 1,640,000
-----------
88,591,875
-----------
TRANSPORTATION/AUTOMOTIVE--4.99%
American Axle & Manufacturing
Holdings, Inc.
9.75%, 03/01/09 *, ** ............... 5,000,000 5,212,500
Amtran, Inc.
9.63%, 12/15/05 ** .................. 4,000,000 4,040,000
Atlas Air, Inc.
9.38%, 11/15/06 *, ** ............... 3,000,000 3,030,000
Great Lakes Dredge & Dock
11.25%, 08/15/08 *, ** .............. 4,500,000 4,713,750
JPS Automotive Products Corp.
11.13%, 06/15/01 .................... 3,000,000 3,187,500
-----------
20,183,750
-----------
UTILITIES--1.01%
Espirito Santo-Escelsa
10.00%, 07/15/07 .................... 3,000,000 4,075,000
-----------
Total Bonds
(cost--$535,316,516) ................... 534,151,244
-----------
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Investments April 30, 1999 (continued)
- --------------------------------------------------------------------------------
Shares Value
--------- -------------
PREFERRED STOCK--1.91%
INFORMATION TECHNOLOGY--0.69%
Viasystems Group, Inc. ............... 200,000 $2,800,000
----------
MEDIA/ENTERTAINMENT--0.48%
Paxson Communications Corp. .......... 2,125 1,917,812
----------
RETAIL--0.74%
Jitney-Jungle Stores of America, Inc. 24,000 3,000,000
----------
Total Preferred Stock
(cost--$8,247,215) ................... 7,717,812
----------
Principal
Amount Value
------------- -----------------
COMMERCIAL PAPER--0.84%
(cost--$3,399,069)
Merrill Lynch & Company, Inc.
4.93%, 05/03/99 ................ $3,400,000 $ 3,399,069
--------------
TOTAL INVESTMENTS
(cost--$546,962,800) ............ 545,268,125
--------------
Liabilities Net of Cash and
Other Assets --(34.73%) ......... (140,565,199)
--------------
NET ASSETS--100.00% $ 404,702,926
==============
NOTES:
* Security 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. At April 30,
1999, the value of these securities amounted to $169,829,625 or 41.96% of
net assets.
** Security has an effective maturity date less than the stated maturity date
due to a call feature.
*** Security is a map-bond. Rate shown represents the yield to maturity at the
time of purchase.
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Assets and Liabilities April 30, 1999
(unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities at value (cost $546,962,800) ..... $ 545,268,125
Cash ....................................................... 1,764
Dividends and interest receivable .......................... 13,118,531
Receivable for securities sold ............................. 8,609,503
Deferred organization costs (Note 1) ....................... 24,106
Other assets ............................................... 115,429
-------------
Total assets ............................................ 567,137,458
-------------
LIABILITIES:
Loan payable ............................................... 160,000,000
Payable to advisor ......................................... 859,465
Payable for securities purchased ........................... 750,000
Interest payable ........................................... 647,884
Accrued expenses ........................................... 177,183
-------------
Total liabilities ....................................... 162,434,532
-------------
NET ASSETS:
Applicable to 44,006,543 shares outstanding ................ $ 404,702,926
=============
NET ASSETS CONSIST OF:
Capital paid-in ............................................ $ 437,338,122
Accumulated undistributed net investment income ............ 843,780
Accumulated net realized loss on investments ............... (31,784,301)
Net unrealized depreciation on investments ................. (1,694,675)
-------------
$ 404,702,926
=============
Net asset value per share ................................... $ 9.20
=============
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Operations For the Six Months Ended
April 30, 1999+
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ............................................... $ 297,500
Interest ................................................ 27,636,015
-------------
Total investment income .............................. 27,933,515
-------------
EXPENSES:
Investment advisory fees (Note 2) ....................... 2,479,971
Leveraging expenses (Note 5) ............................ 3,351,291
Administration fees ..................................... 25,494
Transfer agent fees ..................................... 22,504
Legal fees .............................................. 42,741
Fund accounting fees .................................... 34,587
Registration expenses ................................... 27,120
Custodian fees .......................................... 23,354
Printing fees ........................................... 36,947
Auditing fees ........................................... 23,354
Trustees fees ........................................... 14,598
Postage expense ......................................... 32,061
Amortization of organization costs (Note 1) ............. 23,711
Miscellaneous expenses .................................. 11,798
-------------
Total expenses ....................................... 6,149,531
-------------
NET INVESTMENT INCOME .................................... 21,783,984
-------------
REALIZED AND UNREALIZED GAIN / (LOSS) ON INVESTMENTS:
Net realized loss on investments ........................ (17,929,151)
Net unrealized appreciation on investments .............. 53,330,431
-------------
Net realized and unrealized gain on investments ......... 35,401,280
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............... $ 57,185,264
=============
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Period Ended
4/30/99+ 10/31/1998 *
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 21,783,984 $ 10,057,563
Net realized loss on investments ................................... (17,929,151) (13,855,150)
Net unrealized appreciation (depreciation) on investments .......... 53,330,431 (55,025,106)
------------ ------------
Net increase (decrease) in net assets .............................. 57,185,264 (58,822,693)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ......................................... (20,978,101) (10,019,666)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................................... 0 424,100,800**
Reinvestment of dividends .......................................... 8,539,687 4,597,635
------------ ------------
Net increase in net assets from capital share transactions ......... 8,539,687 428,698,435
------------ ------------
Total increase in net assets ....................................... 44,746,850 359,856,076
NET ASSETS:
Beginning of period ................................................ 359,956,076 100,000
------------ ------------
End of period ...................................................... $404,702,926 $359,956,076
============ ============
Accumulated undistributed net investment income .................... $ 843,780 $ 37,897
============ ============
</TABLE>
*The DLJ High Yield Bond Fund commenced operations on July 28, 1998.
**Net of offering costs of $899,200.
+ Unaudited.
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Cash Flows for the Six Months Ended
April 30, 1999+
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Cash flows from operating activities:
Interest and dividends received ............................................. $ 160,000
Operating expenses paid ..................................................... (3,143,366)
--------------
Net cash used for operating activities ....................................... $ (2,983,366)
Cash flows from investing activities:
Increase in short-term securities, net ...................................... 2,890,397
Purchases of long-term securities ........................................... (313,974,842)
Proceeds from sales of long-term securities ................................. 221,783,000
--------------
Net cash used for investing activities ....................................... (89,301,445)
Cash flows from financing activities:
Interest paid on notes payable .............................................. (2,980,561)
Cash dividends paid ......................................................... (12,438,414)
Proceeds from borrowings .................................................... 117,700,000
Repayments of borrowings .................................................... (10,000,000)
--------------
Net cash provided by financing activities .................................... 92,281,025
-------------
Net decrease in cash ......................................................... (3,786)
Cash -- beginning of period .................................................. 5,550
-------------
Cash -- end of period ........................................................ $ 1,764
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES:
Adjustments to reconcile net increase in net assets resulting from operations
to net cash used for operating activities ................................... $ 57,185,264
Leveraging expenses ......................................................... $ 3,351,291
Increase in dividends and interest receivable ............................... (3,156,430)
Increase in accrued expenses ................................................ 75,068
Increase in advisory fees payable ........................................... 92,412
Decrease in other assets .................................................... 13,463
Net realized loss on investments ............................................ 17,929,151
Net unrealized appreciation on investments .................................. (53,330,431)
Amortization of organization costs .......................................... 23,711
Amortization of discount .................................................... (25,166,865)
--------------
Total adjustments ........................................................ (60,168,630)
-------------
Net cash used for operating activities ....................................... $ (2,983,366)
=============
</TABLE>
+ Unaudited.
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Notes to Financial Statements April 30, 1999
(unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
DLJ High Yield Bond Fund ("the Fund") is a business trust organized under
the laws of the State of Delaware. The Fund is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended
(the "1940 Act"), as a non-diversified, closed-end management investment
company. Prior to the commencement of operations on July 28, 1998, the Fund had
no operations other than those relating to organizational matters and the sale
of 10,000 shares of beneficial interest on July 2, 1998 to DLJ Investment
Management Corp. ("DLJIM") for $100,000. The Fund's primary investment
objective is to seek high current income. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Portfolio valuation: Fixed-income securities (other than short-term
obligations, but including listed issues) are valued based on prices obtained
by one or more independent pricing services approved by the Board of Trustees.
Securities (other than fixed-income securities) for which the principal
market is one or more securities exchanges are valued at the last reported sale
price (or if there has been no current sale, at the closing bid price) on the
primary exchange on which such securities are traded. If a securities exchange
is not the principal market for a security, such security will, if market
quotations are readily available, be valued at the closing bid price in the
over-the-counter market (or the last sale price in the case of securities
reported on the NASDAQ national market system for which any sales occurred
during the day). Portfolio securities for which there are no such valuations
are valued at fair value as determined in good faith by or at the direction of
the Board of Trustees. Short-term obligations with maturities of less than 60
days are valued at amortized cost which approximates market value.
Securities transactions and investment income: Securities transactions are
recorded as of the trade date. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recorded on the ex-dividend date. Interest income, including, where applicable,
accretion of discount on investments is recorded on the accrual basis.
Dividends and distributions to shareholders: The Fund distributes monthly
to shareholders substantially all of its net investment income. Capital gains,
if any, net of capital losses, are distributed annually. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
Federal income taxes: It is the Fund's policy to comply with the
requirements of the Internal Revenue Service applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no provisions for federal income or excise taxes
have been made in the accompanying financial statements.
Offering and organization costs: Direct expenses of $899,200 relating to
the public offering of the Fund's shares were charged to capital at the time of
issuance. Organization costs of $60,000 are being amortized from the
commencement of operations through October 31, 1999.
Cash flow information: Cash, as used in the Statement of Cash Flows, is
the amount reported in the Statement of Assets and Liabilities. The Fund
invests in securities and distributes dividends from net investment income and
net realized gains (which are either paid in cash or reinvested at the
discretion of shareholders). These activities are reported in the Statement of
Changes in Net Assets. Information on cash payments is presented in the
Statement of Cash Flows. Accounting practices that do not affect reporting
activities on a cash basis include unrealized gain or loss on investment
securities and accretion income recognized on investment securities.
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses during
the reported period. Actual results could differ from those estimates.
<PAGE>
DLJ High Yield Bond Fund--Notes to Financial Statements April 30, 1999
(continued)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED PARTY
TRANSACTIONS
The Fund has entered into an investment management agreement (the
"Management Agreement") with DLJIM. The Agreement provides that the Fund will
pay DLJIM a fee, computed and payable monthly, at the annual rate of 1% of the
average weekly value of the Fund's total assets minus the sum of accrued
liabilities (other than the aggregate indebtedness constituting leverage) (the
"Managed Assets").
The Fund has also entered into an Administration and Support Agreement
with First Data Investor Services Group, Inc. ("Investor Services Group"), a
wholly-owned subsidiary of First Data Corporation, to provide all
administrative services to the Fund other than those related to the investment
decisions. For these administration services, the Fund will pay Investor
Services Group a fee at the annual rate of $50,000 per year.
The Fund pays each Trustee not affiliated with DLJIM $2,000 per board
meeting attended, $1,000 per audit committee meeting attended and reimburses
each such Trustee for travel and out-of-pocket expenses relating to their
attendance at such meetings.
Citibank, N.A. serves as the Fund's custodian. Investor Services Group
serves as the Fund's shareholder servicing agent (transfer agent).
3. INVESTMENTS
For federal income tax purposes, the cost of securities owned at April 30,
1999, was substantially the same as the cost of securities for financial
statement purposes. At April 30, 1999, the aggregate gross unrealized
appreciation on investments amounted to $16,974,482, and the aggregate gross
unrealized depreciation on investments amounted to $18,669,157, resulting in
net unrealized depreciation of $1,694,675.
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments, during the six months ended April 30, 1999,
amounted to $272,229,480 and $176,896,983, respectively.
4. FUND SHARES
The Fund has one class of shares of beneficial interest, par value $0.001
per share. 200,000,000 shares are authorized. Transactions in shares of
beneficial interest were as follows:
<TABLE>
<CAPTION>
Six Months Ended Period Ended
April 30, 1999 October 31, 1998*
------------------ ------------------
<S> <C> <C>
Shares sold ............................................. - 42,500,000
Shares issued through reinvestment of dividends ......... 961,255 535,288
------- ----------
Net Increase ............................................ 961,255 43,035,288
======= ==========
</TABLE>
*The DLJ High Yield Bond Fund commenced operations on July 28, 1998.
5. NOTES PAYABLE
The Fund currently has a $200 million ("commitment amount") line of credit
provided by Citibank North America, Inc., under a Revolving Credit and Security
Agreement (the "Agreement") dated July 31, 1998, primarily to leverage its
investment portfolio. Under this Agreement the Fund may borrow up to the lesser
of $200 million or 33 1/3% of its gross assets. Interest is payable at the
Bank's Base Rate plus a commission of 0.05%. The Fund is charged a structuring
fee of $19,000 per quarter, a program fee of 0.20% of the average daily amount
leveraged, an administration fee of 0.02% of the average daily amount leveraged
and a liquidity fee of 0.13% of the maximum borrowing limit (currently $200
million). The Agreement requires, among other provisions, that the percentage
obtained by dividing total indebtedness for money borrowed by total assets of
the Fund shall not exceed 33 1/3%. The average daily amount of borrowings during
the six months ended April 30, 1999 was $118,259,669, with a related weighted
average annualized interest rate of 5.71%.
<PAGE>
DLJ High Yield Bond Fund--Notes to Financial Statements April 30, 1999
(continued)
- --------------------------------------------------------------------------------
6. CAPITAL LOSS CARRYFORWARD
At October 31, 1998, the Fund had available for Federal tax purposes
unused capital loss carryforward of $13,855,150, expiring in 2006. Capital loss
carryforwards are available to offset future realized capital gains. To the
extent that these carryforwards are used to offset future capital gains, it is
probable that the amount which is offset will not be distributed to
shareholders.
7. CONCENTRATION OF RISK
The Fund invests in securities offering high current income which
generally will be in the lower rating categories of recognized ratings agencies
(so-called "junk bonds"). These securities generally involve more credit risk
than securities in the higher rating categories. In addition, the trading
market for high yield securities may be relatively less liquid than the market
for higher-rated securities. The Fund's use of leverage also increases exposure
to capital risk.
Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout each period presented. This information has been derived
from the Fund's financial statements.
<TABLE>
<CAPTION>
Six Months Ended
4/30/99 Period Ended
(unaudited) 10/31/1998 *
------------------ ---------------
<S> <C> <C>
Net asset value, beginning of period .............. $ 8.36 $ 10.00
-------- ----------
Income from Investment Operations:
Net investment income ............................ 0.50 0.24
Net realized and unrealized gain (loss) on
investments .................................... 0.82 (1.62)
-------- ----------
Total from investment operations ............... 1.32 (1.38)
-------- ----------
Less Distributions:
From net investment income ....................... (0.48) (0.24)
-------- ----------
Offering costs charged to paid-in capital ......... 0.00 (0.02)
-------- ----------
Net asset value, end of period .................... $ 9.20 $ 8.36
======== ==========
Market value, end of period ....................... $ 9.25 $ 9.56
======== ==========
Total return (market value) ....................... 2.10% (1.74)%
Ratios/Supplemental Data:
Net assets, end of period (000) .................. $404,703 $359,956
Average debt per share ........................... $ 2.70 $ 1.02
Ratio of operating expenses to average net
assets ......................................... 1.47%** 1.16%**
Ratio of leveraging expenses to average net
assets ......................................... 1.76%** 0.65%**
Ratio of total expenses to average net assets. 3.23%** 1.81%**
Ratio of net investment income to average
net assets ..................................... 11.44%** 10.48%**
Portfolio turnover ............................... 36.24% 15.26%
</TABLE>
* The DLJ High Yield Bond Fund commenced operations on July 28, 1998.
** Annualized
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Additional Information April 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan
Referenced below are policies related to the Fund's Automatic Dividend
Reinvestment Plan ("The Plan"). These policies referenced apply to shareholders
whose shares are registered directly with the Fund in their own name.
Shareholders whose shares are purchased through a broker-dealer or nominee
should contact such broker-dealer or nominee regarding questions related to the
reinvestment of the Fund's dividends.
Pursuant to the Fund's Plan, unless a shareholder otherwise elects, all
dividends and capital gain distributions will be automatically reinvested by
First Data as agent for Shareholders in administering the Plan (the "Plan
Agent"), in additional shares of the Fund. Shareholders who elect not to
participate in the Plan will receive all dividends and other distributions in
cash paid by check mailed directly to the shareholder of record (or, if the
shares are held in street or other nominee name, then to such nominee) by
Investor Services Group as the Dividend Disbursing Agent. Such participants may
elect not to participate in the Plan and to receive all dividends and capital
gain distributions in cash by sending written instructions to Investor Services
Group, as the Dividend Disbursing Agent, at the address set forth below.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by written notice if received by the Plan
Agent not less than ten days prior to any dividend record date; otherwise such
termination will be effective with respect to any subsequently declared
dividend or other distribution.
Whenever the Fund declares an income dividend or a capital gain
distribution (collectively referred to as "dividends") payable either in shares
or in cash, non-participants in the Plan will receive cash and participants in
the Plan will receive the equivalent in shares. The shares will be acquired by
the Plan Agent for the participants' accounts, depending upon the circumstances
described below, either (i) through receipt of additional unissued but
authorized shares from the Fund ("newly issued shares") or (ii) by purchase of
outstanding shares on the open market ("open-market purchases") on the NYSE or
elsewhere. If on the record date for the dividend, the net asset value per
share is equal to or less than the market price per share plus estimated
brokerage commissions (such condition being referred to herein as "market
premium"), the Plan Agent will invest the dividend amount in newly issued
shares on behalf of the participants. The number of newly issued shares to be
credited to each participant's account will be determined by dividing the
dollar amount of the dividend by the net asset value per share on the date the
shares are issued. If on the dividend record date the net asset value per share
is greater than the market value (such condition being referred to herein as
"market-discount"), the Plan Agent will invest the dividend amount in shares
acquired on behalf of the participants in open-market purchases.
In the event of a market discount on the dividend record date, the Plan
Agent will have until the last business day before the next date on which the
shares trade on an "ex-dividend" basis or in no event more than 30 days after
the dividend record date (the "last purchase date") to invest the dividend
amount in shares acquired in open-market purchases. It is contemplated that the
Fund will pay monthly income dividends. Therefore, the period during which
open-market purchases can be made will exist only from the record date of the
dividend through the date before the next "ex-dividend" date. If, before the
Plan Agent has completed its open-market purchases, the market price of a share
exceeds the net asset value per share, the average per share purchase price
paid by the Plan Agent may exceed the net asset value of the shares, resulting
in the acquisition of fewer shares than if the dividend had been paid in newly
issued shares on the dividend record date. Because of the foregoing difficulty
with respect to open market purchases, the Plan provides that if the Plan Agent
is unable to invest the full dividend amount in open market purchases during
the purchase period or if the market discount shifts to a market premium during
the purchase period, the Plan Agent may cease making open-market purchases and
may invest the uninvested portion of the dividend amount in newly issued shares
at the net asset value per share at the close of business on the last purchase
date.
The Plan Agent maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Shares in the account of
each Plan participant will be held by the Plan Agent on behalf of the Plan
participant, and each shareholder proxy will include those shares purchased or
received pursuant to the Plan. The
<PAGE>
DLJ High Yield Bond Fund--Additional Information April 30, 1999 (continued)
- --------------------------------------------------------------------------------
Plan Agent will forward all proxy solicitation materials to participants and
vote proxies for shares held pursuant to the Plan in accordance with the
instructions of the participants.
In the case of shareholders such as banks, brokers or nominees that hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by
the record shareholder and held for the account of beneficial owners who
participate in the Plan.
There will be no brokerage charges with respect to shares issued directly
by the Fund as a result of dividends or capital gains distributions payable
either in shares or in cash. However, each participant will pay a pro rata
share of brokerage commissions incurred with respect to the Plan Agent's
open-market purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends will not relieve participants of
any Federal, state or local income tax that may be payable (or required to be
withheld) on such dividends.
Shareholders participating in the Plan may receive benefits not available
to shareholders not participating in the Plan. If the market price (plus
commissions) of the shares is above their net asset value, participants in the
Plan will receive shares of the Fund at less than they could otherwise purchase
them and will have shares with a cash value greater than the value of any cash
distribution they would have received on their shares. If the market price plus
commissions is below the net asset value, participants will receive
distributions in shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions in shares
at prices below the net asset value. Also, since the Fund does not redeem
shares, the price on resale may be more or less than the net asset value.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan. There
is no direct service charge to participants in the Plan; however, the Fund
reserves the right to amend the Plan to include a service charge payable by the
participants.
All correspondence concerning the Plan should be directed to the Plan
Agent at P.O. Box 8030, Boston, MA 02266-8030, 1-800-331-1710.
Year 2000 Risks
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by DLJIM and the Fund's other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." DLJIM is
taking steps to address the Year 2000 Problem with respect to the computer
systems that it uses and to obtain assurances that comparable steps are being
taken by the Fund's other major service providers. To date, all of DLJIM's
business-critical internal systems and applications and links with major
suppliers and vendors have been remediated and tested for Y2K compliance; and
the balance, non business-critical items will be tested by the end of the 2nd
Quarter of 1999. Full integration testing of these systems and testing of
interfaces with third-party suppliers will continue through 1999. At this time,
management of DLJIM believes that the costs associated with resolving this
issue will not have a material adverse effect on its operations or on its
ability to provide the level of services it currently provides to the Fund.
The Fund and DLJIM have been advised by the Fund's Transfer Agent and
Custodian that they are also in the process of reviewing their systems with the
same goals. As of the date of this report the Fund and DLJIM have no reason to
believe that the Transfer Agent and Custodian will be unable to achieve these
goals.
Managed Dividend Policy
The Fund's dividend policy is to distribute substantially all of its net
investment income to its shareholders on a monthly basis. However, in order to
provide shareholders with a more consistent yield to the current trading price
of shares of Common Stock of the Fund, the Fund may at times pay out less than
the entire amount of net investment income earned in any particular month and
may at times in any month pay out such accumulated but undistributed income in
addition to net investment income earned in that month. As a result, the
dividends paid by the Fund for any particular month may be more or less than
the amount of net investment income earned by the Fund during such month. The
Fund's current accumulated but undistributed net investment income, if any, is
disclosed in the Statement of Assets and Liabilities, which comprises part of
the Financial Information included in this report.
<PAGE>
DLJ High Yield Bond Fund--Additional Information April 30, 1999 (continued)
- --------------------------------------------------------------------------------
Leverage--Benefits and Risks
The use of leverage by the Fund creates an opportunity for increased net
income and capital appreciation for the Fund, but, at the same time, creates
special risks, and there can be no assurance that a leveraging strategy will be
successful during any period in which it is employed. The Fund intends to
utilize leverage to provide the Shareholders with a potentially higher return.
Leverage creates risks for Shareholders including the likelihood of greater
volatility of net asset value and market price of the Fund's shares and the
risk that fluctuations in interest rates on borrowings and short-term debt may
affect the return to Shareholders. To the extent the income or capital
appreciation derived from securities purchased with funds received from
leverage exceeds the cost of leverage, the Fund's return will be greater than
if leverage had not been used. Conversely, if the income or capital
appreciation from the securities purchased with such funds is not sufficient to
cover the cost of leverage, the return to the Fund will be less than if
leverage had not been used, and therefore the amount available for distribution
to Shareholders as dividends and other distributions will be reduced. In the
latter case, DLJIM in its best judgment nevertheless may determine to maintain
the Fund's leveraged position if it deems such action to be appropriate under
the circumstances. During periods in which the Fund is utilizing leverage, the
Management Fee will be higher than if the Fund did not utilize a leveraged
capital structure because the fee is calculated as a percentage of the Managed
Assets including those purchased with leverage. Certain types of borrowings by
the Fund may result in the Fund's being subject to covenants in credit
agreements, including those relating to asset coverage and portfolio
composition requirements. The Fund's lenders may establish guidelines for
borrowing which may impose asset coverage or portfolio composition requirements
that are more stringent than those imposed by the Investment Company Act. It is
not anticipated that these covenants or guidelines will impede DLJIM in
managing the Fund's portfolio in accordance with the Fund's investment
objectives and policies.
Supplemental Information
Since the initial filing of the Fund's registration statement with the
Securities and Exchange Commission, Michael A. Snyder, a Vice President of the
Fund, has been assigned as the person primarily responsible for the day-to-day
management of the Fund's portfolio. In addition, since the filing there have
been (i) no material changes in the Fund's investment objectives or policies,
(ii) no changes in the Fund's charter or by-laws that would delay or prevent a
change of control of the Fund, and (iii) no material changes in the principal
risk factors associated with investment in the Fund.
<PAGE>
DLJ High Yield Bond Fund
TRUSTEES
G. MOFFETT COCHRAN ROBERT E. FISCHER
WILMOT H. KIDD, III MARTIN JAFFE
JOHN W. WALLER, III
OFFICERS
G. MOFFETT COCHRAN, Chairman and President
MARTIN JAFFE, Vice President, Secretary and Treasurer
BRIAN A. KAMMERER, Vice President
JOHN L. LINDARS, Vice President
CATHERINE M. NOLAN, Vice President
VANCE P. SHAW, Vice President
MICHAEL A. SNYDER, Vice President
INVESTMENT ADVISER
DLJ INVESTMENT MANAGEMENT CORP.
277 Park Avenue, New York, NY 10172
CUSTODIAN
CITIBANK, N.A.
111 Wall Street, New York, NY 10043
TRANSFER AGENT
FIRST DATA INVESTOR SERVICES GROUP, INC.
P.O. Box 61787 (211 South Gulph Road)
King of Prussia, PA 19406
DISTRIBUTOR
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue, New York, NY 10172
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue, New York, NY 10019
LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 Third Avenue, New York, NY 10022
DLJ Investment Management Corp.
member of DLJ Asset Management Group,
a division of Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172
(888) 649-5711
<PAGE>
Semi-Annual Report
April 30, 1999
