<PAGE>
DLJ High Yield Bond Fund
TRUSTEES
G. MOFFETT COCHRAN ROBERT E. FISCHER
WILMOT H. KIDD, III MARTIN JAFFE
OFFICERS
G. MOFFETT COCHRAN, Chairman and President
MARTIN JAFFE, Vice President, Secretary and Treasurer
BRIAN A. KAMMERER, Vice President
CATHERINE M. NOLAN, Vice President
VANCE P. SHAW, Vice President
MICHAEL A. SNYDER, Vice President
INVESTMENT ADVISER
DLJ ASSET MANAGEMENT GROUP, INC
277 Park Avenue, New York, NY 10172
CUSTODIAN
CUSTODIAL TRUST COMPANY
101 Carnegie Center, Princeton, NJ 08540
TRANSFER AGENT
PFPC 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
SULLIVAN & CROMWELL
125 Broad Street, New York, NY 10004
DLJ High Yield
Bond Fund
Semi-Annual Report
April 30, 2000
a division of Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172
(888) 649-5711
<PAGE>
Dear Shareholders:
Based on the market price per share of the Fund for the four months ending
April 2000, the Fund's total return was +19.84%. The Fund's total return based
on NAV for that time period was, however, -4.03%, which is slightly below the
-3.46% return on the Lipper Closed End High Yield Bond Fund Average. The
substantial difference between market and NAV returns was the result of the
sharp boost in the market price of the Fund's shares between 1999's calendar
year end ($6.75 per share) and April, 2000 ($7.75 per share). The year-end
price had been depressed by a large amount of tax-loss selling. Total return
for the six month period ending April 30, 2000, was +2.55% on a market price
basis and -0.80% on an NAV basis, which is slightly worse than the -0.15% total
return for the Lipper Closed End High Yield Bond Fund Average. The Fund's
dividend has held steady at 8.25 cents per share per month.
We are generally pleased with the performance of the portfolio which is strongly
weighted in the fast-growing Telecom and Media sectors. We believe the Fund
under-performed the Lipper average due to over-weighted positions in two
sectors: cinema and aerospace. The cinema business has been wracked with
overcapacity and difficult fundamentals over the past several months, but we
expect that much stronger movie product offerings for the balance of calendar
year 2000 may boost the value of these bonds. As of April 30, 2000 we had 2% of
the Fund's total investments in this sector. The aerospace suppliers in which we
have invested have suffered both from lower aircraft demand and, specifically,
from the well-publicized production and organizational problems at Boeing. We
believe the sector has probably hit bottom at this point from a fundamental
perspective, and, we hope to see future improvement. As of April 30, 2000, we
had 2.3% of the Fund's total investments in the aerospace sector. On a more
positive note, our investments in the Information Technology sector performed
very well during the period due to strong operating performance in
semiconductors and related equipment businesses as well as the completion of
equity IPOs by a number of our bond issuers. As of April 30, 2000, we had 3.8%
of the Fund's portfolio in this sector, which is almost double the DLJ High
Yield Index weighting.
There were no defaults in the portfolio during the six months ending April,
2000, despite the fact that the default rate for the high-yield market as a
whole was roughly 4% according to DLJ High Yield Research. Fund leverage was
maintained near the maximum allowable 33% in order to maximize income and take
advantage of the high yield debt available in the market. We do not anticipate
any change to this policy in the near future. Our focus continues to be on
opportunities to enhance yield to take advantage of the oversold position of
the high-yield market and to cover the dividend. Unfortunately, these efforts
have been significantly hampered by rising interest rates which affect our cost
of borrowing. Spreads against U.S. Treasury Bonds are at or over all-time highs
on both an absolute and relative basis and we see no sign of recession in the
U.S. or in the world economy at this time to justify these levels. This would
seem to indicate that the high-yield bond market should have a limited downside
in the near future. Accordingly, until the Federal Reserve stops raising
interest rates and investors are convinced that we have achieved a "soft
landing," risk assets, like high yield bonds, will likely continue to trade at
the very high yields we see today.
Thank you for your investment in the DLJ High Yield Bond Fund. The Officers and
Trustees would like to wish you a most enjoyable summer.
Sincerely,
/s/ G. Moffett Cochran
-----------------------
G. Moffett Cochran
President June, 2000
<PAGE>
Fund Highlights (unaudited)
DLJ High Yield Bond Fund
Top Ten Holdings as of April 30, 2000
<TABLE>
<CAPTION>
% of % of
Security Description Net Assets Security Description Net Assets
-------------------- ---------- -------------------- ----------
<S> <C> <C> <C>
Kaiser Aluminum & Chemical Corp. PTC International Finance II SA
12.75%, 02/01/03 2.54% 11.25%, 12/01/09 1.80%
Esat Telecom Group plc Regional Independent Media
11.88%, 12/01/08 2.18% 10.50%, 07/01/08 1.77%
@Entertainment, Inc. Rent-A-Center, Inc.
14.50%, 02/01/09 1.86% 11.00%, 08/15/08 1.77%
Ono Finance plc LTV Corp.
13.00%, 05/01/09 1.82% 11.75%, 11/15/09 1.76%
ICN Pharmaceuticals, Inc. Bell Sports, Inc.
8.75%, 11/15/08 1.80% 11.00%, 08/15/08 1.76%
</TABLE>
Portfolio and Fund Information April 30, 2000
Current Yield(1): 12.77% Ticker Symbol: DHY
Distribution Rate(2): 12.77% Primary Exchange: NYSE
Average Rating: B
Average Years to Maturity*: 7.77 years
Average Duration*: 5.11 years
*weighted average
Investment Results
<TABLE>
<CAPTION>
DLJ High Yield Bond Fund(3) Average Annual Total Return
--------------------------- ---------------------------
1 Year Since Inception*
------ ---------------
<S> <C> <C>
Market Price .............................................. -5.28% -2.87%
NAV(4) .................................................... -8.82% -5.04%
Fund Index
----------
Lipper Closed-End High Yield Bond Fund Average(5) ......... -5.75% -5.01%
* July 31, 1998 through April 30, 2000
</TABLE>
------------
(1) Current yield is based on April's dividend per share of $.0825
(annualized) divided by the April 30, 2000 market price ($7.75).
(2) Distribution rate is based on dividends per share paid from net
investment income during the period November 1, 1998 through April 30,
2000 divided by the April 30, 2000 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, 2000 (unaudited)
--------------------------------------------------------------------------------
BONDS--140.55%
Principal
Amount Value
------ -----
AEROSPACE--3.76%
Compass Aerospace Corp.
10.13%, 04/15/05 ** .............. $5,150,000 $1,828,250
Fairchild Corp.
10.75%, 04/15/09 ** .............. 7,000,000 3,876,250
Hexcel Corp.
9.75%, 01/15/09 ** ............... 4,000,000 3,380,000
Transdigm, Inc.
10.38%, 12/01/08 ** .............. 4,500,000 3,577,500
----------
12,662,000
----------
CHEMICALS--3.81%
Avecia Group plc
11.00%, 07/01/09 ** .............. 3,250,000 3,315,000
Huntsman ICI Chemicals LLC
0.00%, 12/31/09 ** ............... 11,230,000 3,593,600
Lyondell Chemical Co.
10.88%, 05/01/09 ** .............. 5,000,000 4,962,500
Trans-Resources, Inc.
12.00%, 03/15/08 **, *** ......... 5,000,000 975,000
----------
12,846,100
----------
CONSUMER NON-DURABLES--3.15%
Albecca, Inc.
10.75%, 08/15/08 ** .............. 3,000,000 2,422,500
Consoltex Group
11.00%, 10/01/03 ** .............. 4,000,000 3,670,000
Polaroid Corp.
11.50%, 02/15/06 ** .............. 4,000,000 4,060,000
Styling Technology Corp.
10.88%, 07/01/08 ** .............. 1,500,000 457,500
----------
10,610,000
----------
ENERGY--5.32%
Grey Wolf, Inc.
8.88%, 07/01/07 ** ............... 1,000,000 925,000
8.88%, 07/01/07 ** ................. 2,300,000 2,133,250
Mariner Energy, Inc.
10.50%, 08/01/06 ** .............. 4,000,000 3,580,000
R&B Falcon Corp.
9.50%, 12/15/08 .................. 5,000,000 4,950,000
Swift Energy Co.
10.25%, 08/01/09 ** .............. 2,000,000 1,950,000
Tokheim Corp.
11.38%, 08/01/08 ** .............. 4,000,000 1,700,000
Trico Marine Services, Inc.
8.50%, 08/01/05 ** ............... 3,000,000 2,715,000
----------
17,953,250
----------
FINANCIAL SERVICES--3.61%
AmeriCredit Corp.
9.88%, 04/15/06 ** ............... 4,500,000 4,443,750
Metris Companies, Inc.
10.13%, 07/15/06 ** .............. 4,750,000 4,583,750
<PAGE>
Principal
Amount Value
------ -----
Ocwen Financial Corp.
11.88%, 10/01/03 ** .............. $3,445,000 $3,152,175
----------
12,179,675
----------
FOOD & TOBACCO--7.23%
Advantica Restaurant Group, Inc.
11.25%, 01/15/08 ** .............. 6,000,000 3,990,000
Fleming Companies, Inc.
10.63%, 07/31/07 ** .............. 6,420,000 5,392,800
Luigino's, Inc.
10.00%, 02/01/06 ** .............. 4,000,000 3,300,000
National Wine & Spirits Holding Corp.
10.13%, 01/15/09 ** .............. 4,000,000 3,840,000
Triarc Consumer Beverage
10.25%, 02/15/09 ** .............. 5,325,000 5,032,125
Volume Services America, Inc.
11.25%, 03/01/09 ** .............. 3,000,000 2,805,000
----------
24,359,925
----------
FOREST PRODUCTS/CONTAINERS--5.64%
American Tissue, Inc.
12.50%, 07/15/06 ** .............. 4,000,000 4,120,000
Packaging Corp. of America
9.63%, 04/01/09 ** ............... 5,550,000 5,619,375
Repap New Brunswick
10.63%, 04/15/05 ** .............. 4,700,000 4,453,250
Riverwood International Corp.
10.63%, 08/01/07 ** .............. 5,000,000 4,825,000
----------
19,017,625
----------
GAMING/LEISURE--6.50%
Argosy Gaming Co.
10.75%, 06/01/09 ** .............. 4,000,000 4,180,000
Bell Sports, Inc.
11.00%, 08/15/08 ** .............. 6,000,000 5,925,000
Extended Stay America, Inc.
9.15%, 03/15/08 ** ............... 5,000,000 4,237,500
Hollywood Casino Shreveport
13.00%, 08/01/06 *, ** ........... 2,000,000 2,120,000
Hollywood Casino Corp.
11.25%, 05/01/07 ** .............. 5,350,000 5,457,000
----------
21,919,500
----------
HEALTHCARE--6.23%
Alaris Medical, Inc.
11.13%, 08/01/08 **, *** ......... 10,000,000 2,750,000
ICN Pharmaceuticals, Inc.
8.75%, 11/15/08 * ................ 6,500,000 6,077,500
Kinetic Concepts, Inc.
9.63%, 11/01/07 ** ............... 4,500,000 3,307,500
King Pharmaceutical, Inc.
10.75%, 02/15/09 ** .............. 5,000,000 5,125,000
Total Renal Care Holdings, Inc.
7.00%, 05/15/09 *, ** ............ 6,500,000 3,737,500
----------
20,997,500
----------
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Investments April 30, 2000 (unaudited)
--------------------------------------------------------------------------------
Principal
Amount Value
------ -----
INFORMATION TECHNOLOGY--6.35%
Asat Finance LLC
12.50%, 11/01/06 *, ** ........... $5,000,000 $5,450,000
Details, Inc.
10.00%, 11/15/05 ** .............. 6,000,000 5,640,000
Integrated Circuit Systems
11.50%, 05/15/09 ** .............. 4,000,000 4,420,000
SCG Holding & Semiconductor Co.
12.00%, 08/01/09 ** .............. 5,500,000 5,912,500
----------
21,422,500
----------
MANUFACTURING--6.23%
BGF Industries, Inc.
10.25%, 01/15/09 ** .............. 4,000,000 3,605,000
Continental Global Group, Inc.
11.00%, 04/01/07 ** .............. 2,000,000 810,000
Filtronic plc
10.00%, 12/01/05 ** .............. 4,000,000 3,840,000
Gentek, Inc.
11.00%, 08/01/09 ** .............. 4,500,000 4,578,750
Grove Worldwide LLC
9.25%, 05/01/08 ** ............... 5,000,000 2,125,000
Jordan Industries, Inc.
10.38%, 08/01/07 ** .............. 4,500,000 4,207,500
Roller Bearing Company of America
9.63%, 06/15/07 ** ............... 2,000,000 1,850,000
----------
21,016,250
----------
MEDIA/ENTERTAINMENT--25.30%
@Entertainment, Inc.
14.50%, 02/01/09 **, *** ......... 10,200,000 6,273,000
AMC Entertainment, Inc.
9.50%, 03/15/09 ** ............... 6,000,000 3,300,000
American Media Operations
10.25%, 05/01/09 ** .............. 3,750,000 3,562,500
Cablevision SA
13.75%, 04/30/07 * ............... 5,000,000 4,862,500
Carmike Cinemas, Inc. Series (B)
9.38%, 02/01/09 ** ............... 4,500,000 3,037,500
Charter Communications Holdings LLC
8.63%, 04/01/09 ** ............... 3,000,000 2,636,250
9.92%, 04/01/11 **, *** ............ 6,500,000 3,591,250
Citadel Broadcasting Company
10.25%, 07/01/07 ** .............. 3,000,000 3,030,000
Echostar DBS Corp.
9.38%, 02/01/09 ** ............... 5,000,000 4,875,000
Globix Corp.
12.50%, 02/01/10 *, ** ........... 5,000,000 4,425,000
Globo Communicacoes e Participacoes
S.A.
10.63%, 12/05/08 *, ** ........... 6,000,000 4,965,000
Liberty Group Operating
9.38%, 02/01/08 ** ............... 3,500,000 3,027,500
11.63%, 02/01/09 **, *** ......... 3,000,000 1,665,000
<PAGE>
Principal
Amount Value
------ -----
Ono Finance plc
13.00%, 05/01/09 ** .............. $5,980,000 $6,129,500
Pegasus Communications Corp.
9.63%, 10/15/05 ** ............... 4,000,000 3,910,000
9.75%, 12/01/06 ** ............... 2,000,000 1,970,000
RCN Corp.
11.13%, 10/15/07 **, *** ......... 9,000,000 5,782,500
Regal Cinemas, Inc.
9.50%, 06/01/08 ** ............... 6,000,000 2,490,000
Regional Independent Media
10.50%, 07/01/08 ** .............. 6,000,000 5,970,000
United International Holdings, Inc.
10.75%, 02/15/08 **, *** ......... 8,000,000 5,240,000
XM Satellite Radio, Inc.
14.00%, 03/15/10 ** .............. 5,000,000 4,525,000
----------
85,267,500
----------
METALS & MINERALS--7.59%
Algoma Steel, Inc.
12.38%, 07/15/05 ................. 3,980,000 3,940,200
Great Lakes Carbon Corp.
10.25%, 05/15/08 ** .............. 5,000,000 4,450,000
Kaiser Aluminum & Chemical Corp.
12.75%, 02/01/03 ** .............. 9,000,000 8,550,000
LTV Corp.
11.75%, 11/15/09 *, ** ........... 6,000,000 5,940,000
Renco Steel Holdings
10.88%, 02/01/05 ** .............. 3,000,000 2,715,000
----------
25,595,200
----------
RETAIL--2.61%
Big 5 Corp.
10.88%, 11/15/07 ** .............. 4,000,000 3,700,000
J Crew Operating Corp.
10.38%, 10/15/07 ** .............. 3,500,000 3,027,500
MusicLand Group, Inc.
9.88%, 03/15/08 ** ............... 2,500,000 2,062,500
----------
8,790,000
----------
SERVICE--4.86%
Allied Waste North America, Inc.
10.00%, 08/01/09 ** .............. 5,750,000 3,924,375
Neff Corp.
10.25%, 06/01/08 ** .............. 3,000,000 2,475,000
Phoenix Color Corp.
10.38%, 02/01/09 ** .............. 4,500,000 4,027,500
Rent-A-Center, Inc.
11.00%, 08/15/08 ** .............. 6,000,000 5,970,000
----------
16,396,875
----------
TELECOMMUNICATIONS--33.87%
CapRock Communications Corp.
11.50%, 05/01/09 ** .............. 5,000,000 4,700,000
Covad Communications Group
12.00%, 02/15/10 *, ** ........... 4,500,000 4,252,500
Crown Castle International Corp.
10.38%, 05/15/11 **, *** ......... 7,750,000 4,688,750
9.50%, 08/01/11 ** ............... 1,500,000 1,440,000
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Investments April 30, 2000 (unaudited)
--------------------------------------------------------------------------------
Principal
Amount Value
------ -----
Dobson/Sygnet Communications Corp.
12.25%, 12/15/08 ** .............. $4,000,000 $ 4,180,000
Dolphin Telecommunications plc
11.50%, 06/01/08 **, *** ......... 2,250,000 731,250
14.00%, 05/15/09 **, *** ......... 6,000,000 2,010,000
Esat Telecom Group plc Series (B)
11.88%, 12/01/08 ** .............. 6,250,000 7,343,750
GT Group Telecom
13.25%, 02/01/10 *, ** ........... 6,750,000 3,611,250
ICG Holdings, Inc.
13.50%, 09/15/05 **, *** ......... 5,500,000 5,225,000
Impsat Corp.
12.38%, 06/15/08 ** .............. 5,000,000 4,187,500
Impsat Fiber Networks
12.38%, 02/15/05 * ............... 1,000,000 930,000
Intermedia Communications, Inc.
12.25%, 03/01/09 **, *** ......... 7,600,000 4,598,000
Leap Wireless Units
12.50%, 04/15/10 ** .............. 4,000,000 4,020,000
14.50%, 04/15/10 ** .............. 1,000,000 490,000
Netia Holdings II B.V.
13.13%, 06/15/09 *, ** ........... 4,000,000 3,885,000
Netia Holdings B.V.
10.25%, 11/01/07 ** .............. 2,000,000 1,690,000
NTL, Inc.
12.38%, 10/01/08 **, *** ......... 2,000,000 1,315,000
11.50%, 10/01/08 ** .............. 5,000,000 5,100,000
Primus Telecommunications Group, Inc.
11.25%, 01/15/09 ** .............. 5,000,000 4,537,500
12.75%, 10/15/09 ** .............. 1,000,000 970,000
PSINet, Inc.
10.00%, 02/15/05 ** .............. 2,000,000 1,780,000
11.50%, 11/01/08 ** .............. 4,000,000 3,580,000
PTC International Finance II SA
11.25%, 12/01/09 *, ** ........... 6,000,000 6,075,000
Spectrasite Holdings, Inc.
12.88%, 03/15/10 *, **, *** ...... 2,500,000 1,306,250
TeleCorp PCS, Inc.
11.63%, 04/15/09 **, *** ......... 6,500,000 4,290,000
Triton PCS, Inc.
11.00%, 05/01/08 **, *** ......... 5,500,000 3,973,750
Versatel Telecom International N.V.
13.25%, 05/15/08 ** .............. 3,000,000 3,060,000
11.88%, 07/15/09 ** .............. 3,500,000 3,447,500
Viatel, Inc.
11.50%, 03/15/09 ** .............. 6,000,000 5,190,000
WinStar Communications, Inc.
14.50%, 10/15/05 *, ** ........... 6,018,234 5,777,505
11.00%, 03/15/08 **, *** ......... 2,982,910 1,349,767
Worldwide Fiber, Inc.
12.00%, 08/01/09 ** .............. 4,800,000 4,464,000
-----------
114,199,272
-----------
<PAGE>
Principal
Amount Value
------ -----
TRANSPORTATION/AUTOMOTIVE--8.49%
American Axle & Manufacturing
Holdings, Inc.
9.75%, 03/01/09 ** ............... $5,000,000 $ 4,800,000
Amtran, Inc.
9.63%, 12/15/05 ** ............... 5,500,000 4,633,750
Great Lakes Dredge & Dock
11.25%, 08/15/08 ** .............. 4,500,000 4,612,500
JPS Automotive Products Corp.
11.13%, 06/15/01 ................. 3,000,000 3,075,000
JL French Automotive Casting
11.50%, 06/01/09 ** .............. 4,000,000 3,880,000
North American Van Lines
13.38%, 12/01/09 *, ** ........... 2,500,000 2,362,500
Venture Holdings Trust
11.00%, 06/01/07 ** .............. 2,000,000 1,690,000
Worldwide Flight Service
12.25%, 08/15/07 ** .............. 4,000,000 3,580,000
-----------
28,633,750
-----------
Total Bonds
(cost--$529,346,155)................. 473,866,922
-----------
COMMERCIAL PAPER--0.51%
UBS Finance
5.30%, 04/30/00 **** ............ 1,720,000 1,720,000
-----------
Total Commercial Paper
(cost--$1,720,000) .................. 1,720,000
-----------
REPURCHASE AGREEMENTS--21.70%
Bear Stearns & Co., 6.04%, dated
4/28/00, due 5/1/00, proceeds at
maturity $73,155,744 +++......... 73,143,467 73,143,467
-----------
Total Repurchase Agreements
(cost--$73,143,467) ................. 73,143,467
-----------
Shares
----------
PREFERRED STOCKS--2.70%
INFORMATION TECHNOLOGY--1.18%
Viasystems Group, Inc. .............. 220,816 3,974,691
-----------
MEDIA/ENTERTAINMENT--1.52%
Paxson Communications Corp. ......... 5,221 5,116,766
-----------
Total Preferred Stocks
(Cost--$8,259,466)................... 9,091,457
-----------
WARRANTS--0.70%
MEDIA/ENTERTAINMENT--0.27%
Ono Finance plc ++
(expires 05/31/09) ............... 5,980 899,990
-----------
TELECOMMUNICATIONS--0.43%
Versatel Telecom International N.V. *++
(expires 05/15/08) ............... 3,000 1,441,500
-----------
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Investments April 30, 2000 (unaudited)
--------------------------------------------------------------------------------
Shares Value
-------- ------------
TRANSPORTATION/AUTOMOTIVE--0.00%+
Worldwide Flight Service ++
(expires 05/15/08) ........... 4,000 $ 2,000
----------
Total Warrants
(cost--$165,000) ................ 2,343,490
----------
Value
-----------------
TOTAL INVESTMENTS
(cost--$612,634,088) .......... $ 560,165,336
--------------
Liabilities Net of Cash and
Other Assets--(66.16%) ......... (223,034,347)
--------------
NET ASSETS--100.00% .............. $ 337,130,989
==============
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,
2000, the value of these securities amounted to $67,219,005 or 19.94% of
net assets.
** Security has an effective maturity date less than the stated maturity date
due to a call feature.
*** Zero coupon until a specified date at which time the stated coupon rate
becomes effective until maturity.
**** Commerical paper is traded on a discount basis; the interest rate shown
reflects the discount rate paid at the time of purchase by the fund.
+ Percentage rounds to less than .01 percent.
++ Non income producing.
+++ Collateralized by Fannie Mae and Federal Home Loan Mortgage Corp. notes,
0.00% to 6.50%, due 2/25/22 to 8/25/29, market values total $73,773,798.
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Assets and Liabilities April 30, 2000
(unaudited)
--------------------------------------------------------------------------------
ASSETS:
Investments in securities at value (cost $612,634,088)........ $ 560,165,336
Cash ......................................................... 19,409
Dividends and interest receivable ............................ 14,422,804
Receivable for investments sold .............................. 2,869,885
Other assets ................................................. 93,035
-------------
Total assets .............................................. 577,570,469
-------------
LIABILITIES:
Loan payable ................................................. 160,500,000
Collateral on securities loaned .............................. 73,143,467
Payable for securities purchased ............................. 5,288,569
Interest payable ............................................. 858,234
Payable to advisor ........................................... 411,821
Accrued expenses ............................................. 237,389
-------------
Total liabilities ......................................... 240,439,480
-------------
NET ASSETS:
Applicable to 45,452,836 shares outstanding .................. $ 337,130,989
=============
NET ASSETS CONSIST OF:
Capital paid-in .............................................. $ 449,259,486
Accumulated distributions in excess of net investment income . (590,675)
Accumulated net realized loss on investments ................. (59,069,070)
Net unrealized depreciation on investments ................... (52,468,752)
-------------
$ 337,130,989
=============
Net asset value per share ..................................... $ 7.42
=============
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Operations For the Six Months Ended
April 30, 2000+
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ................................................ $ 28,786,437
Dividends ............................................... 1,133,485
-------------
Total investment income .............................. 29,919,922
-------------
EXPENSES:
Investment advisory fees (Note 2) ....................... 2,613,562
Interest and leveraging fees (Note 5) ................... 5,446,221
Fund accounting fees .................................... 32,540
Administration fees ..................................... 25,298
Custodian fees .......................................... 25,232
Legal fees .............................................. 23,883
Transfer agent fees ..................................... 23,088
Auditing fees ........................................... 17,979
Registration expenses ................................... 17,290
Trustees fees (Note 2) .................................. 14,924
Postage expense ......................................... 14,679
Printing fees ........................................... 5,389
Insurance expense ....................................... 2,555
Miscellaneous expenses .................................. 500
-------------
Total expenses ....................................... 8,263,140
-------------
NET INVESTMENT INCOME .................................... 21,656,782
-------------
REALIZED AND UNREALIZED GAIN / (LOSS) ON INVESTMENTS:
Net realized loss on investments ........................ (14,607,369)
Net unrealized depreciation on investments .............. (10,125,508)
-------------
Net realized and unrealized loss on investments ......... (24,732,877)
-------------
NET DECREASE IN NET ASSETS FROM OPERATIONS ............... $ (3,076,095)
=============
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
4/30/00+ 10/31/1999
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ....................................................... $ 21,656,782 $ 43,058,379
Net realized loss on investments ............................................ (14,607,369) (30,606,551)
Net unrealized appreciation (depreciation) on investments ................... (10,125,508) 12,681,862
------------- -------------
Net increase (decrease) in net assets ....................................... (3,076,095) 25,133,690
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income .................................................. (22,353,633) (42,990,100)
CAPITAL SHARE TRANSACTIONS:
Reinvestment of dividends ................................................... 3,881,385 16,685,722
Offering costs charged to capital paid-in ................................... 0 (106,056)
------------- -------------
Net increase in net assets from capital share transactions .................. 3,881,385 16,579,666
------------- -------------
Total decrease in net assets ................................................ (21,548,343) (1,276,744)
NET ASSETS:
Beginning of period ......................................................... 358,679,332 359,956,076
------------- -------------
End of period ............................................................... $ 337,130,989 $ 358,679,332
============= =============
Accumulated undistributed (distributions in excess of) net investment income $ (590,675) $ 106,176
============= =============
</TABLE>
+ Unaudited.
See notes to financial statements.
<PAGE>
DLJ High Yield Bond Fund--Statement of Cash Flows for the Six Months Ended
April 30, 2000+
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Interest and dividends received .................................................. $ 24,831,966
Operating expenses paid .......................................................... (3,168,374)
--------------
Net cash provided by operating activities ......................................... $ 21,663,592
Cash flows from investing activities:
Decrease in short-term securities, net ........................................... $ 2,421,962
Purchases of long-term securities ................................................ (129,280,662)
Proceeds from sales of long-term securities ...................................... 138,709,656
--------------
Net cash provided by investing activities ......................................... 11,850,956
Cash flows from financing activities:
Interest paid on notes payable ................................................... (5,436,810)
Cash dividends paid .............................................................. (19,062,923)
Proceeds from borrowings ......................................................... 15,800,000
Repayments of borrowings ......................................................... (24,800,000)
--------------
Net cash used for financing activities ............................................ (33,499,733)
-------------
Net increase in cash .............................................................. 14,815
Cash -- beginning of year ......................................................... 4,594
-------------
Cash -- end of year ............................................................... $ 19,409
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net decrease in net assets resulting from operations .............................. $ (3,076,095)
Adjustments to reconcile net increase in net assets from operations to net cash
provided by operating activities:
Interest expense and leveraging fees ............................................. $ 5,446,221
Increase in dividends and interest receivable .................................... (318,254)
Decrease in accrued expenses ..................................................... (32,730)
Decrease in other assets ......................................................... 8,892
Decrease in advisory fees payable ................................................ (60,577)
Net realized loss on investments ................................................. 14,607,369
Net unrealized depreciation on investments ....................................... 10,125,508
Net amortization of discount on investments ...................................... (5,036,742)
--------------
Total adjustments ............................................................. 24,739,687
-------------
Net cash provided by operating activities ......................................... $ 21,663,592
=============
</TABLE>
+ Unaudited
See notes to financial statements
<PAGE>
DLJ High Yield Bond Fund--Notes to Financial Statements April 30, 2000
(unaudited)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
DLJ High Yield Bond Fund is a business trust under the laws of the State
of Delaware organized on April 30, 1998. 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. The Fund's shares trade on the New York Stock Exchange
under the ticker symbol DHY. 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.
Effective January 1, 2000, DLJIM merged into DLJ Asset Management Group
(DLJAM). DLJAM assumed the investment advisory responsibilities formerly
undertaken by DLJIM. The Fund's primary 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.
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, 2000
(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 DLJAM. The Agreement provides that the Fund will
pay DLJAM 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 PFPC Inc., to provide all administrative services to the Fund other than
those related to investment decisions. For these administration services, the
Fund will pay PFPC Inc. a fee at the annual rate of $50,000 per year.
Effective May 16, 2000, the Fund pays each non-affiliated Trustee $1,500
per board meeting attended, a $500 fee for each special meeting attended, $250
per audit committee meeting attended, an annual retainer of $500 and reimburses
each such Trustee for travel and out-of-pocket expenses relating to their
attendance at such meetings. The Fund pays the actual out-of-pocket expenses of
the affiliated Trustees relating to their attendance at such meetings.
Effective April, 10, 2000, Custodial Trust Co. (CTC) serves as the Fund's
custodian. PFPC Inc. 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,
2000, was substantially the same as the cost of securities for financial
statement purposes. At April 30, 2000, the aggregate gross unrealized
appreciation amounted to $8,859,076, and the aggregate gross unrealized
depreciation amounted to $61,327,828, resulting in net unrealized depreciation
of $52,468,752.
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments, during the six months ended April 30, 2000,
amounted to $130,458,454 and $141,579,541, 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 Year Ended
April 30, 2000 October 31, 1999
------------------ -----------------
<S> <C> <C>
Shares issued through reinvestment of dividends ......... 499,729 1,907,819
------- ---------
Net Increase ............................................ 499,729 1,907,819
======= =========
</TABLE>
5. NOTES PAYABLE
The Fund currently has a $200 million ("commitment amount") line of credit
provided by Citibank North America, Inc., under an Amended and Restated
Revolving Credit and Security Agreement (the "Agreement") dated April 7, 2000,
primarily to leverage its investment portfolio. Under this Agreement the Fund
may borrow up to the lesser of $200 million or 331/3% 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 331/3%. The Fund's
investment portfolio serves as collateral for borrowing. The average daily
amount of borrowings during the year ended April 30, 2000 was $168,348,352,
with a related weighted average annualized interest rate of 6.49%.
<PAGE>
DLJ High Yield Bond Fund--Notes to Financial Statements April 30, 2000
(continued)
--------------------------------------------------------------------------------
6. CAPITAL LOSS CARRYFORWARD
At October 31, 1999, the Fund had available for Federal tax purposes an
unused captial loss carryforward of $44,461,701, of which $13,855,150 expires
in 2006 and $30,606,551 expires in 2007. 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.
8. LOANS OF PORTFOLIO SECURITIES
DLJ High Yield Bond Fund loaned securities during the year to certain
brokers, with the Funds' custodian acting as lending agent. Upon such loans,
the Fund receives collateral which is maintained by the custodian and earns
income, in the form of negotiated lender's fees, which is included in interest
income. On a daily basis, the Fund monitors the market value of securities
loaned and maintains collateral against the securities loaned in an amount not
less than the value of the securities loaned. The Fund may receive collateral
in the form of cash or other eligible securities. Risks may arise upon entering
into securities lending to the extent that the value of the collateral is less
than the value of the securities loaned due to changes in the value of
collateral or the loaned securities.
The value of loaned securities and related collateral outstanding at April
30, 2000, was as follows:
Value of Value of
Fund Securities Loaned Collateral
---------------------------------- ------------------- --------------
DLJ High Yield Bond Fund $68,443,312 $73,143,467
The collateral for the DLJ High Yield Bond Fund consisted of cash which
was invested in repurchase agreements with Bear Stearns due May 1, 2000,
collateralized by Fannie Mae and Federal Home Loan Mortgage Corp. notes.
<PAGE>
DLJ High Yield Bond Fund--Financial Highlights
--------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout the periods presented. This information has been derived
form the Fund's financial statements.
<TABLE>
<CAPTION>
Six Months Ended
04/30/2000 Year Ended Period Ended
(unaudited) 10/31/1999 10/31/1998*
----------- ------------ -------------
<S> <C> <C> <C>
Net asset value, beginning of period .............. $ 7.98 $ 8.36 $ 10.00
-------- -------- ---------
Income from Investment Operations:
Net investment income ............................ 0.50 0.98 0.24
Net realized and unrealized loss on
investments ..................................... (0.56) (0.38) (1.62)
-------- -------- ---------
Total from investment operations ................ (0.07) 0.60 (1.38)
-------- -------- ---------
Less Distributions:
From net investment income ....................... (0.50) (0.98) (0.24)
-------- -------- ---------
Offering costs charged to paid-in capital ......... 0.00+ 0.00+ (0.02)
-------- -------- ---------
Net asset value, end of period .................... $ 7.42 $ 7.98 $ 8.36
======== ======== =========
Market value, end of period ....................... $ 7.75 $ 8.06 $ 9.56
======== ======== =========
Total return (market value) *** ................... 2.55% (5.71)% (1.74)%
Ratios/Supplemental Data:
Net assets, end of period (000) .................. $337,131 $358,679 $ 359,956
Average debt per share ........................... $ 3.73 $ 3.18 $ 1.02
Ratio of operating expenses to average net assets 1.58%** 1.53% 1.16%**
Ratio of interest and leveraging expenses to
average net assets .............................. 3.06%** 2.09% 0.65%**
Ratio of net investment income to average net
assets .......................................... 11.97%** 11.24% 10.48%**
Portfolio turnover ............................... 25.55% 60.23% 15.26%
</TABLE>
* The DLJ High Yield Bond Fund commenced operations on July 28, 1998.
** Annualized
*** Total return (market value) is based on the change in market price of a
share during the period and assumes reinvestment of dividends and
distributions at actual prices pursuant to the Fund's Dividend
Reinvestment Plan. Total return for periods of less than one year are not
annualized. Total return based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns.
+ Amount rounds to less than $0.01.
See notes to financial statements.
DLJ High Yield Bond Fund--Additional Information April 30, 2000 (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
PFPC Inc. 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 PFPC
Inc. 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 PFPC Inc., as the
Dividend Disbursing Agent, at the
<PAGE>
DLJ High Yield Bond Fund--Additional Information April 30, 2000 (continued)
--------------------------------------------------------------------------------
address set forth below. Participation in the Plan is com-pletely 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 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
<PAGE>
-
DLJ High Yield Bond Fund--Additional Information April 30, 2000 (continued)
--------------------------------------------------------------------------------
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.
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.
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, DLJAM 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 DLJAM in
managing the Fund's portfolio in accordance with the Fund's investment
objectives and policies.
Supplemental Information
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.
