Putnam
High Yield
Trust
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
2-28-99
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "U.S. corporate junk bonds have actually risen in value so far this
year, and their yields have dropped -- a sign, analysts say, that this
volatile but popular market sector may hold up much better in 1999 than it
did in '98."
-- The Los Angeles Times, January 26, 1999
* "Given the recent strength of the U.S. economy, it is quite unusual to
see the high-yield market struggling to keep pace with other asset
classes, and we believe this has been based mainly on unexplained negative
market sentiment rather than on any fundamental weakness. Evidently, the
high-yield market is going through an adjustment period, but as the period
drew to an end, we saw signs that investors are slowly but steadily
gravitating back to high-yield securities."
-- Rosemary H. Thomsen, manager
Putnam High Yield Trust
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
12 Portfolio holdings
36 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The first half of Putnam High Yield Trust's current fiscal year coincided
with the most difficult market environment in a decade for the lower-rated
high-yielding bonds in which the fund invests. There are signs that
investors' flight to safer havens has slowed, but your fund's managers are
prepared for continued volatility over the shorter term.
For the longer term, however, they believe the high-yield bond market's
fundamentals remain positive. In their opinion, these strengths will
eventually re-emerge and reward investors who have patience and a
long-term investment perspective.
I am pleased to announce the appointment of three new members to your
fund's management team. Rosemary H. Thomsen, who has 16 years of
investment experience, has been with Putnam since 1986. Robert M. Paine,
who joined Putnam the following year, has more than 10 years of experience
in the industry. Jeffrey A. Kaufman joined Putnam last year after serving
with MFS Investment Management and prior to that with Salomon Brothers. He
has 8 years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
April 21, 1999
Report from the Fund Managers
Rosemary H. Thomsen
Jennifer E. Leichter
Robert M. Paine
Jeffrey A. Kaufman
The six months ended February 28, 1999, proved to be a particularly
challenging period for the high-yield bond market. Problems overseas and
broad-based selling of high-yield debt by highly leveraged hedge funds
curbed Wall Street's appetite for high-yield securities, driving prices
down to lows we have not seen for almost 10 years. While Putnam High Yield
Trust took advantage of the buying opportunities that resulted, inevitably
its performance was affected by the market decline. As a result, your
fund's class A shares provided a total return of -0.93% at net asset value
and -5.62% at public offering price for the period. For more information,
including returns for other classes of shares, please see pages 9 and 10.
* WORLDWIDE RISK AVERSION DRIVES DOWN HIGH-YIELD MARKET
The 1998 crisis in the fixed-income markets started when the Russian ruble
was devalued in August. Although Russia makes up only a tiny portion of
the global economy, this move sparked a cascade of subsequent events that
caused investors worldwide to become risk averse in an extremely short
time. Several large hedge funds had significant investments in Russia and
other emerging markets. Losses from those investments forced these and
other, smaller hedge funds to liquidate their higher-risk holdings,
prompting a worldwide rush to the safer haven of U.S. Treasuries. The
yield differential between Treasuries and all other sectors of the
fixed-income market increased dramatically as a result. Concurrently --
since yield moves in the opposite direction of price -- the value of
non-Treasury investments fell precipitously and the high-yield market was
hit especially hard. The stock market, which historically has been a major
influence on high-yield bond prices, also declined dramatically.
Fortunately for the financial markets, the Federal Reserve Board stepped
in to provide liquidity to the system by cutting short-term interest rates
three times from late September through Thanksgiving. These moves were
successful in restoring liquidity and providing the stock market with a
much-needed shot in the arm. Equities quickly rebounded from their lows.
High-yield bonds strengthened somewhat but have yet to recover fully.
For example, in July 1998, yields in this market were approximately 3.80
percentage points higher than comparable Treasuries. That yield
differential widened out to 7.65 percentage points in early October, fell
back to 6.32 percentage points at the end of 1998, and at the end of the
period was back down to 5.81 percentage points. This semiannual period was
the worst for high-yield bonds since 1990, when default rates in the
high-yield market ranged as high as 10%, the economy was in recession, and
the United States was at war in the Persian Gulf.
Unlike other types of bonds, high-yield bonds react more to prospects for
economic growth and corporate earnings growth rates than they do to
interest-rate movements. It is typical for the high-yield market to lag at
times of predicted economic weakness. Given the recent strength of the
U.S. economy, it is quite unusual to see the high-yield market struggling
to keep pace with other asset classes, and we believe this struggle has
been based mainly on unexplained negative market sentiment rather than on
any fundamental weakness. Evidently, the high-yield market is going
through an adjustment period, but as the reporting period drew to an end,
we saw signs that investors are slowly but steadily gravitating back to
high-yield securities.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Telecommunications 15.7%
Broadcasting 6.4%
Cable television 5.2%
Gaming 4.7%
Health care 4.5%
Footnote reads:
Based on net assets as of 2/28/99. Holdings will vary over time.
* OPPORTUNITIES IN TELECOMMUNICATIONS REMAIN A FOCUS
Your fund has emphasized investments in the telecommunications industry
for some time and continued to do so during the period. In this sector,
fundamentals, or business prospects, remained extremely strong with demand
for telecommunications services expanding dramatically. Competitive,
fast-growing telecommunications companies that are rapidly gaining market
share typically issue high-yield debt to finance their expansion plans.
Bonds from this sector also offer particularly high yields -- an important
consideration in light of your fund's high-income objective.
Unfortunately, during the recent market turmoil, telecommunications bonds
suffered, as investors became concerned that these companies would lose
access to capital to finance their business plans. However, that fear has
proved ungrounded, and the sector continues to demonstrate exceptional
growth potential and operating performance.
Throughout the telecommunications business, consolidation remains an
ongoing trend. As deregulation continues to move forward in the United
States and elsewhere, large telecommunications and cable television firms
seek to become more competitive through acquisition, both domestically and
across borders. One portfolio holding that exemplifies this trend is NTL,
a provider of local telephone and cable TV services in the United Kingdom.
Through creative marketing and aggressive management, this company has
succeeded in reaching a steadily growing number of homes by using its
fiber-optic backbone and by acquiring other companies. Recently, the
company received about $500 million in funding from Microsoft. The fund's
investment in NTL reflects both the company's outstanding business
prospects and its potential strategic value at some point in the future.
While this and other securities discussed in this report were viewed
favorably at the end of the period, all holdings are subject to review in
accordance with the fund's investment strategy and may vary in the future.
[GRAPHIC OMITTED: worm chart HIGH-YIELD BONDS VERSUS
OTHER CORPORATE SECURITIES]
HIGH-YIELD BONDS VERSUS
OTHER CORPORATE SECURITIES
First Boston Lehman Brothers
Date High Yield Index Corporate Bond Index
2/29/92 37.30% 14.71%
2/28/93 57.42% 30.91%
2/28/94 82.13% 39.61%
2/28/95 83.19% 41.58%
2/29/96 112.76% 61.86%
2/28/97 139.61% 71.12%
2/28/98 169.52% 89.75%
2/28/99 166.42% 100.82%
Footnote reads:
Past performance is not indicative of future results. This chart demonstrates
that high-yield bonds, as represented by the First Boston High Yield Index,
generally outperformed investment-grade corporate bonds, as represented by
the Lehman Brothers Corporate Bond Index. The chart shows cumulative returns.
The lower credit rating of high-yield bonds reflects a greater possibility
that adverse changes in an issuer's business or financial condition or in
general economic conditions may impair the issuer's ability to pay principal
and interest on the securities. This chart does not reflect the performance
of Putnam High Yield Trust.
We should also add that, given our concerns about liquidity in the market,
we have added a layer of higher-quality, more-liquid securities to the
portfolio. Because of the higher quality, their yields are somewhat lower
than the fund's typical high-yield holding. However, in light of the
recent market volatility, we consider it important to provide the
portfolio with a greater element of stability.
* OUTLOOK FOR HIGH-YIELD MARKET REMAINS POSITIVE
At the end of the period, the environment for the high-yield market was
characterized by low default rates and a strong economy. In addition,
valuations were unusually compelling and demand for high-yield issues had
stabilized. Over this period, we have been able to buy bonds at
historically low prices and to position the fund in sectors and industries
we consider likely to show strong growth prospects in the future.
Putnam's economic forecast currently calls for continued strong economic
growth and low inflation. Although the recovery in the equity market has
not yet spread to the high-yield market, we believe it will gradually
start to do so. Meanwhile, merger and acquisition activity has continued
to strengthen a number of high-yield issuers during the period. Over the
remainder of fiscal 1999, we anticipate that the positions we established
during this buying opportunity will enable the fund to benefit as the
high-yield market strengthens once again.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 2/28/99, there is no guarantee the fund will
continue to hold these securities in the future. The lower credit ratings
of high-yield bonds reflect a greater possibility that adverse changes in
the economy or poor performance by the issuers of these bonds may affect
the issuer's ability to pay principal and interest.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
High Yield Trust is designed for investors seeking high current income
through a diversified portfolio of high-yielding lower-rated corporate
bonds, with a secondary objective of capital growth when consistent with
high current income.
TOTAL RETURN FOR PERIODS ENDED 2/28/99
Class A Class B Class M
(inception date) (2/14/78) (3/1/93) (7/3/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months -0.93% -5.62% -1.31% -6.00% -1.06% -4.31%
- ------------------------------------------------------------------------------
1 year -9.32 -13.65 -9.96 -14.05 -9.56 -12.48
- ------------------------------------------------------------------------------
5 years 31.93 25.65 27.12 25.52 30.36 26.15
Annual average 5.70 4.67 4.92 4.65 5.45 4.76
- ------------------------------------------------------------------------------
10 years 138.15 126.83 120.40 120.40 131.76 124.30
Annual average 9.06 8.54 8.22 8.22 8.77 8.41
- ------------------------------------------------------------------------------
Annual average
(life of fund) 10.36 10.11 9.38 9.38 9.93 9.76
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/28/99
First Boston
High Yield Consumer
Bond Index* price index
- ------------------------------------------------------------------------------
6 months 3.48% 0.80%
- ------------------------------------------------------------------------------
1 year -1.15 1.73
- ------------------------------------------------------------------------------
5 years 46.28 12.27
Annual average 7.90 2.34
- ------------------------------------------------------------------------------
10 years 172.70 35.44
Annual average 10.55 3.08
- ------------------------------------------------------------------------------
Annual average
(life of fund) --* 4.69
- ------------------------------------------------------------------------------
*Comparative return information for the First Boston High Yield Index is
not available.
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 4.75% and
3.25% respectively. Class B share returns for the 1-, 5-, and 10-year
(where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class B and class M shares for periods prior to their inception
are derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares,
the higher operating expenses applicable to such shares. All returns
assume reinvestment of distributions at NAV. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 2/28/99
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------------
Income $0.613 $0.571 $0.599
- ------------------------------------------------------------------------------
Capital gains -- -- --
- ------------------------------------------------------------------------------
Total $0.613 $0.571 $0.599
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
8/31/98 $11.47 $12.04 $11.43 $11.47 $11.86
- ------------------------------------------------------------------------------
2/28/99 10.74 11.28 10.70 10.74 11.10
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate1 10.95% 10.43% 10.21% 10.73% 10.38%
- ------------------------------------------------------------------------------
Current 30-day SEC yield2 10.77 10.25 9.99 10.51 10.17
- ------------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by NAV
or POP at end of period.
2Based on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 3/31/99
(most recent calendar quarter)
Class A Class B Class M
(inception date) (2/14/78) (3/1/93) (7/3/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 2.49% -2.40% 2.12% -2.73% 2.37% -1.00%
- ------------------------------------------------------------------------------
1 year -9.21 -13.52 -9.86 -13.95 -9.39 -12.36
- ------------------------------------------------------------------------------
5 years 38.99 32.41 33.95 32.27 37.40 32.96
Annual average 6.81 5.78 6.02 5.75 6.56 5.86
- ------------------------------------------------------------------------------
10 years 142.43 130.94 124.43 124.43 136.00 128.31
Annual average 9.26 8.73 8.42 8.42 8.97 8.61
- ------------------------------------------------------------------------------
Annual average 10.41 10.16 9.43 9.43 9.98 9.81
(life of fund)
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost. See first
page of performance summary for method of performance calculation.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 4.75% sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
The First Boston High Yield Index* is an unmanaged list of lower-rated,
higher-yielding U.S. corporate bonds. The average quality of bonds
included in this index will differ from the average quality of bonds in
which the fund customarily invests.
The Lehman Brothers Corporate Bond Index* is an index of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt
securities frequently used as a general measure of the performance of the
corporate bond market.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Portfolio of investments owned
February 28, 1999 (Unaudited)
CORPORATE BONDS AND NOTES (86.0%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C> <C>
Advertising (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
$ 5,145,000 Adams Outdoor Advertising sr. notes 10 3/4s, 2006 $ 5,595,188
8,210,000 Lamar Advertising Co. sr. sub. notes 9 5/8s, 2006 8,948,900
4,805,000 Lamar Advertising Co. company guaranty 8 5/8s, 2007 5,093,300
2,645,000 Outdoor Communications Inc. sr. sub. notes
9 1/4s, 2007 2,849,988
2,000,000 Outdoor Systems, Inc. sr. sub. notes 9 3/8s, 2006 2,150,000
--------------
24,637,376
Aerospace and Defense (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
4,470,000 Argo-Tech Corp. company guaranty 8 5/8s, 2007 4,201,800
4,410,000 Argo-Tech Corp. 144A sr. sub. notes 8 5/8s, 2007 4,145,400
5,575,000 BE Aerospace, Inc. sr. sub. notes Ser. B, 9 7/8s, 2006 5,825,875
2,970,000 BE Aerospace, Inc. sr. sub. notes 9 1/2s, 2008 3,125,925
5,440,000 BE Aerospace, Inc. sr. sub. notes Ser. B, 8s, 2008 5,276,800
6,610,000 Burke Industries, Inc. company guaranty 10s, 2007 6,015,100
4,810,000 K&F Industries, Inc. sr. sub. notes Ser. B, 9 1/4s, 2007 4,906,200
--------------
33,497,100
Agriculture (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
14,743,125 Premium Standard Farms, Inc. sr. sec. notes 11s, 2003
(acquired various dates from 9/11/92 to 6/25/97,
cost $13,969,693) (RES) (PIK) 14,153,400
9,330,000 Purina Mills, Inc. 144A sr. sub. notes 9s, 2010 8,676,900
--------------
22,830,300
Airlines (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
6,580,000 Calair LLC company guaranty 8 1/8s, 2008 6,251,000
6,690,000 Canadian Airlines Corp. sr. notes
12 1/4s, 2006 (Canada) 3,478,800
11,240,000 Canadian Airlines Corp. sr. sec. notes
10s, 2005 (Canada) 8,992,000
4,500,000 Continental Airlines, Inc. sr. notes 9 1/2s, 2001 4,635,000
10,405,000 Trans World Airlines, Inc. sr. notes 11 1/2s, 2004 8,115,900
7,340,000 Trans World Airlines, Inc. sr. notes 11 3/8s, 2006 4,183,800
--------------
35,656,500
Apparel (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
3,310,000 GFSI, Inc. sr. disc. notes stepped-coupon Ser. B,
zero % (11 3/8s, 9/15/04), 2009 (STP) 2,598,350
11,650,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 11,533,500
922,000 Sassco Fashions Ltd. sr. notes 12 3/4s, 2004 908,170
5,850,000 William Carter Holdings Co. sr. sub. notes
Ser. A, 12s, 2008 6,157,125
--------------
21,197,145
Automotive (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
15,605,000 Federal Mogul Corp. 144A notes 7 1/2s, 2009 15,126,083
7,950,000 Lear Corp. sub. notes 9 1/2s, 2006 8,705,250
1,700,000 Walbro Corp. company guaranty Ser. B,
10 1/8s, 2007 1,700,000
--------------
25,531,333
Automotive Parts (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
4,699,000 Aftermarket Technology Corp. sr. sub. notes
12s, 2004 4,816,475
5,775,000 Aftermarket Technology Corp. sr. sub. notes
Ser. D, 12s, 2004 5,919,375
12,870,000 Hayes Lemmerz International, Inc. 144A
company guaranty 8 1/4s, 2008 13,063,050
7,910,000 Safety Components International, Inc. sr. sub. notes
Ser. B, 10 1/8s, 2007 7,830,900
--------------
31,629,800
Banks (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
4,550,000 Chevy Chase Savings Bank Inc. sub. deb. 9 1/4s, 2005 4,572,750
11,000,000 Delta Financial Corp. sr. notes 9 1/2s, 2004 8,800,000
6,400,000 Dime Capital Trust I bank guaranty Ser. A, 9.33s, 2027 6,539,264
9,120,000 Greenpoint Capital Trust I company guaranty
9.1s, 2027 9,102,490
990,000 GS Escrow Corp. sr. notes 7s, 2003 985,050
4,400,000 North Fork Capital Trust I company guaranty
8.7s, 2026 4,587,660
6,365,000 Peoples Heritage Capital Trust company guaranty
Ser. B, 9.06s, 2027 6,239,800
6,475,000 Provident Capital Trust company guaranty 8.6s, 2026 6,537,743
1,450,000 Riggs Capital Trust 144A company guaranty
8 7/8s, 2027 1,437,661
3,690,000 Riggs Capital Trust 144A bonds 8 5/8s, 2026 3,536,164
6,980,000 Sovereign Capital Trust company guaranty 9s, 2027 6,983,350
1,225,000 Webster Capital Trust I 144A bonds 9.36s, 2027 1,255,613
--------------
60,577,545
Basic Industrial Products (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,180,000 American Standard Companies, Inc. sr. notes
7 3/8s, 2008 2,196,350
10,801,960 Grove Investors LLC 144A 14 1/2s, 2010 (PIK) 7,021,274
920,000 Koppers Industries, Inc. 144A company guaranty
9 7/8s, 2007 915,400
4,710,000 Paragon Corp. Holdings, Inc. company guaranty Ser. B,
9 5/8s, 2008 3,768,000
4,450,000 Roller Bearing Co. company guaranty Ser. B,
9 5/8s, 2007 4,249,750
--------------
18,150,774
Broadcasting (4.9%)
- --------------------------------------------------------------------------------------------------------------------------
4,000,000 Allbritton Communications sr. sub. deb. Ser. B,
9 3/4s, 2007 4,280,000
2,160,000 Allbritton Communications Co. sr. sub. notes
Ser. B, 8 7/8s, 2008 2,208,600
338,956 Australis Media, Ltd. sr. disc. notes stepped-coupon
1 3/4s, (15 3/4s 5/15/00), 2003 (In default)
(Australia) (NON) (STP) (PIK) 2,542
2,555,792 Australis Media, Ltd. sr. sec. disc. notes zero %, 2000
(In default) (Australia) (NON) 1,990,451
7,500,000 Benedek Broadcasting sr. notes 11 7/8s, 2005 8,137,500
15,150,000 Benedek Communications Corp. sr. disc. notes stepped-
coupon zero % (13 1/4s, 5/15/01), 2006 (STP) 11,211,000
17,685,000 Capstar Broadcasting sr. disc. notes stepped-coupon
zero % (12 3/4s, 2/1/02), 2009 (STP) 15,120,675
7,560,000 Capstar Broadcasting sr. sub. notes 9 1/4s, 2007 8,127,000
3,800,000 Central European Media Enterprises Ltd. sr. notes
9 3/8s, 2004 (Bermuda) 3,116,000
22,730,000 Chancellor Media Corp. 144A sr. notes 8s, 2008 23,752,850
6,914,690 Citadel Broadcasting Co. sr. sub. notes 10 1/4s, 2007 7,588,872
24,480,000 Echostar DBS Corp. 144A sr. notes 9 3/8s, 2009 24,602,400
5,490,000 Fox Family Worldwide, Inc. sr. notes 9 1/4s, 2007 5,270,400
7,770,000 Fox/Liberty Networks LLC sr. notes 8 7/8s, 2007 8,022,525
3,175,000 Granite Broadcasting Corp. sr. sub. notes 9 3/8s, 2005 3,111,500
6,460,000 Granite Broadcasting Corp. sr. sub. notes 8 7/8s, 2008 6,395,400
5,125,000 Heritage Media Services Corp. sr. sub. notes
8 3/4s, 2006 5,483,750
2,150,000 Pegasus Communications Corp. 144A sr. notes
9 3/4s, 2006 2,230,625
8,330,000 Pegasus Media & Communications notes Ser. B,
12 1/2s, 2005 9,163,000
7,214,000 PHI Holdings, Inc. sr. sub. notes 16s, 2001 5,628,363
9,700,000 Radio One Inc. company guaranty stepped-coupon
Ser. B, 7s, (12s, 5/15/00), 2004 (STP) 10,063,750
450,000 Rogers Cablesystems Ltd. company guaranty
10s, 2007 (Canada) 508,500
2,117,000 Rogers Cablesystems Ltd. notes
9 5/8s, 2002 (Canada) 2,270,483
2,000,000 TV Azteca Holdings S.A. de C.V. sr. notes
11s, 2002 (Mexico) 1,690,000
3,550,000 TV Azteca Holdings S.A. de C.V. sr. notes
10 1/2s, 2007 (Mexico) 2,875,500
--------------
172,851,686
Building and Construction (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
4,370,000 American Architectural Products Corp.
company guaranty 11 3/4s, 2007 3,714,500
13,040,000 D.R. Horton, Inc. company guaranty 8s, 2009 12,746,600
14,275,000 GS Superhighway Holdings sr. notes 10 1/4s, 2007 6,852,000
1,700,000 GS Superhighway Holdings sr. notes 9 7/8s, 2004 867,000
3,470,000 Jackson Products, Inc. company guaranty
Ser. B, 9 1/2s, 2005 3,478,675
6,180,000 Presley Cos. sr. notes 12 1/2s, 2001 5,005,800
980,063 Terex Corp. term loan 8.18s, 2005 970,262
6,130,000 Toll Corp. company guaranty 8 1/8s, 2009 6,191,300
--------------
39,826,137
Building Products (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
686,000 American Standard, Inc. company guaranty
7 5/8s, 2010 686,000
9,726,000 American Standard, Inc. company guaranty
7 3/8s, 2005 9,580,110
7,220,000 Building Materials Corp. 144A sr. notes 8s, 2008 7,138,775
--------------
17,404,885
Buses (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
23,500,000 MCII Holdings sec. notes 12s (15s,11/15/99) 2002 (STP) 19,975,000
Business Equipment and Services (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
4,950,000 Cex Holdings, Inc. company guaranty Ser. B, 9
5/8s, 2008 4,628,250
4,285,000 Outsourcing Solutions, Inc. sr. sub. notes Ser. B,
11s, 2006 4,177,875
4,994,426 Outsourcing Solutions Inc. 144A 8.621s, 2004 4,894,537
4,840,000 Pierce Leahy Corp. sr. sub. notes 11 1/8s, 2006 5,275,600
13,710,000 U.S. Office Products Co. company guaranty
9 3/4s, 2008 9,734,100
4,997,531 U.S. Office Products bank term loan 7.53s, 6/9/06 3,998,025
7,321,000 United Stationer Supply, Inc. sr. sub. notes
12 3/4s, 2005 8,162,915
--------------
40,871,302
Cable Television (5.1%)
- --------------------------------------------------------------------------------------------------------------------------
8,380,000 Acme Television sr. disc. notes stepped-coupon zero %
(10 7/8s, 9/30/00), 2004 (STP) 7,081,100
13,605,000 Adelphia Communications Corp. sr. notes Ser. B,
9 7/8s, 2007 15,135,563
12,190,000 Adelphia Communications Corp. 144A sr. notes
8 3/8s, 2008 12,586,175
6,945,000 Century Communications Corp. sr. notes
8 7/8s, 2007 7,708,950
4,060,000 Century Communications Corp. sr. notes
8 3/4s, 2007 4,506,600
3,150,000 Century Communications Corp. sr. notes
8 3/8s, 2007 3,425,625
2,350,000 Century Communications Corp. sr. disc. notes Ser. B,
zero %, 2008 1,222,000
16,120,000 Charter Communications International, Inc. disc.
notes stepped-coupon Ser. B, zero %
(14s, 3/15/01), 2007 (STP) 14,911,000
1,050,000 Comcast Corp. sr. sub. notes 9 3/8s, 2005 1,117,505
2,320,000 CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2023 2,598,400
9,020,000 CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2013 9,967,100
2,475,000 CSC Holdings, Inc. deb. 7 7/8s, 2018 2,535,811
2,770,000 CSC Holdings, Inc. sr. notes 7 7/8s, 2007 2,893,182
2,700,000 CSC Holdings, Inc. deb. 7 5/8s, 2018 2,699,055
8,500,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (11 3/4s, 12/15/00), 2005
(United Kingdom) (STP) 7,395,000
20,190,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (10 3/4s, 2/15/02), 2007
(United Kingdom) (STP) 15,798,675
4,750,000 Jones Intercable, Inc. sr. notes 8 7/8s, 2007 5,141,875
8,082,000 Lenfest Communications, Inc. sr. notes 8 3/8s, 2005 8,728,560
15,978,000 Marcus Cable Co. (L.P.) sr. disc. notes stepped-coupon
zero % (14 1/4s, 6/15/00), 2005 (STP) 15,838,193
7,360,000 NTL Inc. 144A sr. notes 11 1/2s, 2008 8,316,800
5,170,000 NTL Inc. sr. notes, stepped-coupon Ser. B, zero %
(9 3/4s, 4/1/03), 2008 (STP) 3,515,600
2,370,000 RCN Corp. sr. disc. notes stepped-coupon zero %,
(11 1/8s, 10/15/02), 2007 (STP) 1,380,525
1,030,000 Rogers Cablesystems Ltd. notes 11s, 2015 (Canada) 1,225,700
6,115,000 Rogers Cablesystems Ltd. sr. notes Ser. B, 10s, 2005 6,848,800
7,850,000 Supercanal Holdings S.A. 144A sr. notes
11 1/2s, 2005 (Argentina) 3,611,000
2,440,000 TeleWest Communications PLC 144A sr. notes
11 1/4s, 2008 (United Kingdom) 2,867,000
23,175,000 21st Century Telecom Group, Inc. sr. disc. notes
stepped-coupon zero % (12 1/4s, 2/15/03), 2008 (STP) 8,111,250
5,210,000 United International Holdings sr. disc. notes stepped-
coupon Ser. B, zero % (10 3/4s, 2/15/03), 2008 (STP) 3,438,600
--------------
180,605,644
Cellular Communications (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
6,950,000 Celcaribe S.A. sr. notes zero % (13 1/2s, 3/15/04), 2004
(Colombia) (STP) 5,351,500
32,271,000 CellNet Data Systems, Inc. sr. disc. notes stepped-coupon
zero % (14s, 10/1/02), 2007 (STP) 10,649,430
17,750,000 Cencall Communications Corp. sr. disc. notes
10 1/8s, 2004 18,016,250
8,965,000 Conecel Holdings 144A notes Ser. A, 14s, 2000 2,868,800
1,000,000 Dial Call Communications, Inc. sr. disc. notes
stepped-coupon Ser. B, 10 1/4s, 2005 1,015,000
9,150,000 Dobson Communications Corp. sr. notes
11 3/4s, 2007 9,790,500
30,125,000 McCaw International Ltd sr. disc. notes stepped-coupon
zero % (13s, 4/15/02), 2007 (STP) 15,665,000
41,190,000 Millicom International Cellular S.A. sr. disc. notes
stepped-coupon zero % (13 1/2s, 6/1/01), 2006
(Luxembourg) (STP) 30,480,600
360,000 NEXTEL Communications, Inc. sr. disc. notes stepped-
coupon zero % (12 1/8s, 4/15/03), 2008 (STP) 152,100
14,380,000 NEXTEL Communications, Inc. 144A sr. notes
12s, 2008 16,213,450
6,140,000 NEXTEL Communications, Inc. sr. disc. notes stepped-
coupon zero % (10.65s, 9/15/02), 2007 (STP) 4,190,550
3,480,000 NEXTEL Communications, Inc. sr. disc. notes
stepped-coupon zero % (9.95s, 2/15/03), 2008 (STP) 2,227,200
495,000 NEXTEL Communications, Inc. sr. disc. notes stepped-
coupon zero % (9 3/4s, 10/31/02), 2007 (STP) 322,988
3,085,000 Price Communications Wireless, Inc. 144A sr. notes
9 1/8s, 2006 3,239,250
--------------
120,182,618
Chemicals (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
6,770,000 Acetex Corp. sr. notes 9 3/4s, 2003 (Canada) 6,566,900
6,380,000 Geo Specialty Chemicals, Inc. 144A sr. sub. notes
10 1/8s, 2008 6,316,200
4,590,000 Huntsman Corp. 144A sr. sub. notes 9 1/2s, 2007 4,635,900
5,307,692 Lyondell Petrochemical bank term loan 7 1/4s, 2003 5,168,365
11,384,614 Lyondell Petrochemical bank term loan 7 1/4s, 1999 11,085,768
9,425,000 PCI Chemicals & Pharmaceuticals company guaranty
9 1/4s, 2007 (India) 6,691,750
6,355,000 Pioneer Americas Acquisition 144A sr. notes
9 1/4s, 2007 4,766,250
2,469,880 Pioneer Americas Acquisition bank term loan
8.815s, 12/5/06 1,605,422
1,452,626 Pioneer Americas Acquisition 144A bank loan notes
FRN 8.47s, 2006 944,207
10,845,954 Polytama International notes 11 1/4s, 2007 (Indonesia) 1,409,974
8,265,000 Scotts Co. 144A sr. sub. notes 8 5/8s, 2009 8,512,950
7,390,000 Sterling Chemicals Holdings sr. disc. notes stepped-
coupon zero % (13 1/2s, 8/15/01), 2008 (STP) 2,734,300
6,965,000 Trikem S.A. 144A bonds 10 5/8s, 2007 (Brazil) 2,577,050
--------------
63,015,036
Computer Services and Software (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,975,000 Concentric Network Corp. sr. notes 12 3/4s, 2007 3,213,000
17,300,000 IPC Information Systems sr. disc. notes stepped-coupon
zero % (10 7/8s, 11/1/01), 2008 (STP) 11,072,000
8,920,000 PSINet, Inc. 144A sr. notes 11 1/2s, 2008 9,968,100
840,000 PSINet, Inc. sr. notes Ser. B, 10s, 2005 869,400
5,140,000 Unisys Corp. sr. notes Ser. B, 12s, 2003 5,718,250
13,185,000 Unisys Corp. sr. notes 11 3/4s, 2004 15,162,750
2,000,000 Unisys Corp. sr. notes 7 7/8s, 2008 2,105,000
4,270,000 Verio Inc. 144A sr. notes 11 1/4s, 2008 4,611,600
--------------
52,720,100
Conglomerates (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
14,360,000 Cathay International Ltd. 144A sr. notes
13s, 2008 (China) 2,872,000
1,215,000 Dine S.A. de C.V. company guaranty
8 3/4s, 2007 (Mexico) 984,150
--------------
3,856,150
Consumer Durable Goods (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
6,750,000 Albecca Inc. 144A sr. sub. notes 10 3/4s, 2008 5,940,000
5,000,000 Doskocil Manufacturing Co 144A sr. sub. notes
10 1/8s, 2007 4,100,000
2,240,000 Iron Age Corp. company guaranty 9 7/8s, 2008 1,680,000
13,575,000 Samsonite Corp. sr. sub. notes 10 3/4s, 2008 10,317,000
6,586,958 Sealy Mattress Co. 144A sr. notes 12s, 2008 5,928,263
1,500,000 Signature Brands Ltd. sr. sub. notes
13s, 2002 (Canada) 1,657,500
--------------
29,622,763
Consumer Services (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
19,444,000 Coinmach Corp. sr. notes 11 3/4s, 2005 21,388,400
2,470,000 Protection One, Inc. sr. disc. notes stepped-coupon
zero %, (13 5/8s, 6/30/00), 2005 (STP) 2,815,800
--------------
24,204,200
Cosmetics (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
3,090,000 Chattem, Inc. company guaranty Ser. B, 8 7/8s, 2008 3,151,800
2,380,000 French Fragrances, Inc. company guaranty Ser. D,
10 3/8s, 2007 2,380,000
3,275,000 French Fragrances, Inc. sr. notes Ser. B, 10 3/8s, 2007 3,242,250
4,390,000 Revlon Consumer Products sr. notes 9s, 2006 4,247,325
3,665,000 Revlon Consumer Products sr. sub. notes
8 5/8s, 2008 3,188,550
--------------
16,209,925
Electric Utilities (2.9%)
- --------------------------------------------------------------------------------------------------------------------------
4,000,000 Calpine Corp. sr. notes 10 1/2s, 2006 4,360,000
2,185,000 Calpine Corp. sr. notes 7 7/8s, 2008 2,217,775
15,100,000 Midland Funding Corp. deb. Ser. B, 13 1/4s, 2006 18,621,320
45,025,000 Midland Funding Corp. deb. Ser. A, 11 3/4s, 2005 52,541,924
1,500,000 Niagara Mohawk Power Corp. med. term notes
9.95s, 2000 (Philippines) 1,557,810
2,717,000 North Atlantic Energy Corp. 1st mtge. Ser. A,
9.05s, 2002 2,790,060
3,718,781 Northeast Utilities System notes Ser. A, 8.58s, 2006 3,865,599
8,036,256 Northeast Utilities System notes Ser. B, 8.38s, 2005 8,264,566
8,750,000 York Power Funding 144A notes 12s, 2007
(Cayman Islands) 8,837,500
--------------
103,056,554
Electrical Equipment (--%)
- --------------------------------------------------------------------------------------------------------------------------
190,000 Samsung Electronics 144A company guaranty
9 3/4s, 2003 189,050
Electronic Components (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
5,000,000 Details, Inc. sr. discount notes stepped-coupon Ser. B,
zero %, (12 1/2s, 11/15/02), 2007 (STP) 2,725,000
2,900,000 Details, Inc. sr. sub. notes Ser. B, 10s, 2005 2,668,000
6,485,000 DII Group, Inc. (The) sr. sub. notes 8 1/2s, 2007 6,485,000
7,030,000 Flextronics International Ltd. sr. sub. notes Ser. B,
8 3/4s, 2007 7,293,625
4,250,000 HCC Industries, Inc. company guaranty 10 3/4s, 2007 4,080,000
10,450,000 Metromedia Fiber Network, Inc. 144A sr. notes
10s, 2008 10,920,250
10,820,000 Motors and Gears, Inc. sr. notes Ser. D, 10 3/4s, 2006 11,171,650
--------------
45,343,525
Electronics (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,685,000 Celestica International Ltd. 144A sr. sub. notes
10 1/2s, 2006 (Canada) 1,861,925
4,371,981 Cirent Semiconductor sr. sub. notes 10.22s, 2002 4,371,981
4,842,170 Cirent Semiconductor 144A sr. sub. notes
10.14s, 2004 4,842,170
5,450,000 Moog, Inc. sr. sub. notes Ser. B, 10s, 2006 5,668,000
7,865,000 Viasystems Inc. sr. sub notes 9 3/4s, 2007 7,412,763
2,700,000 Viasystems, Inc. 144A sr. notes 9 3/4s, 2007 2,504,250
--------------
26,661,089
Energy-Related (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
4,000,000 CalEnergy, Inc. sr. notes 7.63s, 2007 4,231,800
4,600,000 CE Casecnan Water & Energy sr. notes Ser. A,
11.45s, 2005 (Philippines) 3,818,000
6,360,000 Gothic Production Corp. company guaranty Ser. B,
11 1/8s, 2005 4,134,000
18,680,000 Panda Global Energy Co. company guaranty
12 1/2s, 2004 (China) 7,845,600
5,495,000 RAM Energy Inc. sr. notes 11 1/2s, 2008 3,626,700
2,606,898 Subic Power Corp. 144A sec. 9 1/2s, 2008 1,824,829
--------------
25,480,929
Entertainment (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
14,305,000 ITT Corp. notes 6 3/4s, 2005 12,944,881
6,880,000 SFX Entertainment, Inc. 144A company guaranty
Ser. B, 9 1/8s, 2008 7,052,000
5,990,000 SFX Entertainment, Inc. 144A sr. sub. notes
9 1/8s, 2008 6,019,950
9,375,000 United Artists Theatre sr. sub. notes Ser. B,
9 3/4s, 2008 8,367,188
--------------
34,384,019
Environmental Control (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
4,370,000 Allied Waste Industries, Inc. 144A sr. notes
7 7/8s, 2009 4,479,250
13,500,000 Allied Waste Industries, Inc. 144A sr. notes
7 5/8s, 2006 13,770,000
--------------
18,249,250
Financial Services (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
13,640,000 Aames Financial Corp. sr. notes 9 1/8s, 2003 9,548,000
8,950,000 Advanta Corp. company guaranty Ser. B, 8.99s, 2026 5,191,000
14,200,000 Advanta Corp. med. term notes Ser. B, 7s, 2001 12,716,526
5,240,000 Capital One Financial Corp. notes 7 1/8s, 2008 4,848,834
2,360,000 Cellco Finance Corp. NV 144A sr. sub. notes
15s, 2005 (Netherlands) 2,253,800
6,610,000 Colonial Capital II 144A company guaranty
8.92s, 2027 6,414,622
12,745,000 Contifinancial Corp. sr. notes 8 3/8s, 2003 8,156,800
7,678,000 Green Tree Acceptance Corp. sr. sub. notes
10 1/4s, 2002 8,044,087
6,620,000 Imperial Credit Capital Trust I 144A company
guaranty 10 1/4s, 2002 4,965,000
6,700,000 Local Financial Corp. 144A sr. notes 11s, 2004 6,901,000
3,755,000 Ocwen Capital Trust I company guaranty
10 7/8s, 2027 3,041,550
6,900,000 Ocwen Federal Bank FSB sub. deb. 12s, 2005 6,727,500
4,140,000 Ocwen Financial Corp. notes 11 7/8s, 2003 3,726,000
11,600,000 Resource America Inc. 144A sr. notes 12s, 2004 10,324,000
3,000,000 SRI Receivables Purchase 144A notes 12 1/2s, 2000 3,030,000
--------------
95,888,719
Food and Beverages (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
6,320,000 Ameriserve Food Co. company guaranty
10 1/8s, 2007 4,803,200
6,040,000 Ameriserve Food Co. company guaranty 8 7/8s, 2006 5,073,600
16,650,000 Aurora Foods, Inc. sr. sub. notes Ser. B, 9 7/8s, 2007 18,148,500
965,000 Canandaigua Wine Co. sr. sub. notes Ser. C,
8 3/4s, 2003 981,888
1,875,000 Eagle Family Foods company guaranty Ser. B,
8 3/4s, 2008 1,706,250
1,915,000 Fleming Companies, Inc. company guaranty Ser. B,
10 1/2s, 2004 1,800,100
6,300,000 Nebco Evans Holding Co. sr. disc. notes stepped-coupon
zero % (12 3/8s, 7/15/02), 2007 (STP) 2,520,000
6,600,000 RAB Enterprises, Inc. 144A sr. notes 10 1/2s, 2005 4,884,000
8,910,000 RAB Food Holdings, Inc. 144A sr. notes 13s, 2008 6,237,000
6,810,000 Trairc Consumer Products, Inc. 144A sr. sub. notes
10 1/4s, 2009 6,690,825
--------------
52,845,363
Gaming (4.7%)
- --------------------------------------------------------------------------------------------------------------------------
13,740,000 Argosy Gaming Co. company guaranty 13 1/4s, 2004 15,491,850
7,860,000 Boyd Gaming Corp. sr. sub. notes 9 1/2s, 2007 8,056,500
4,835,000 Casino America, Inc. sr. notes 12 1/2s, 2003 5,427,288
1,030,000 Circus Circus Enterprises, Inc. sr. sub. notes
9 1/4s, 2005 1,050,600
3,780,000 Circus Circus Enterprises, Inc. sr. notes 6.45s, 2006 3,364,427
16,030,000 Coast Hotels & Casinos, Inc. 1st mtge. company
guaranty Ser. B, 13s, 2002 18,133,938
5,290,000 Colorado Gaming & Entertainment Co. sr. notes
12s, 2003 5,633,850
15,195,000 Fitzgeralds Gaming Corp. company guaranty Ser. B,
12 1/4s, 2004 6,913,725
1,210,000 Harrahs Entertainment, Inc. company guaranty
7 7/8s, 2005 1,210,000
10,620,000 Harrahs Entertainment, Inc. company guaranty
7 1/2s, 2009 10,556,811
18,050,000 Hollywood Casino Corp. sr. notes 12 3/4s, 2003 19,494,000
5,740,000 Hollywood Park Inc. 144A sr. sub. notes 9 1/4s, 2007 5,740,000
5,570,000 Isle of Capri Black Hawk LLC 144A 1st mortgage
Ser. B, 13s, 2004 6,043,450
7,540,000 Mohegan Tribal Gaming, Auth. 144A sr. sub. notes
8 3/4s, 2009 7,653,100
5,770,000 Park Place Entertainment sr. sub. notes 7 7/8s, 2005 5,654,600
13,350,000 PRT Funding Corp. sr. notes 11 5/8s, 2004
(In default) (NON) 6,007,500
5,280,000 Showboat Marina Casino 1st mtge. Ser. B,
13 1/2s, 2003 6,019,200
4,750,000 Trump A.C. company guaranty Ser. B, 11 1/4s, 2006 3,942,500
11,435,000 Trump A.C. 1st mtge. 11 1/4s, 2006 9,719,750
15,985,000 Trump Castle Funding 144A sub. notes 10 1/4s, 2003 16,144,850
2,500,000 Trump Castle Hotel 144A sr. sub. notes 10 1/4s, 2003 2,525,000
--------------
164,782,939
Health Care (3.8%)
- --------------------------------------------------------------------------------------------------------------------------
2,370,000 Columbia/HCA Healthcare Corp. deb. 8.36s, 2024 2,237,517
735,000 Columbia/HCA Healthcare Corp. notes 7.69s, 2025 621,884
6,215,000 Columbia/HCA Healthcare Corp. notes 7 1/4s, 2008 5,621,095
2,050,000 Columbia/HCA Healthcare Corp. notes 7s, 2007 1,837,128
4,165,500 Columbia/HCA Healthcare Corp. notes 6.91s, 2005 3,792,646
3,680,000 Columbia/HCA Healthcare Corp. med term notes
6.63s, 2045 3,460,120
5,045,000 Conmed Corp. company guaranty 9s, 2008 5,045,000
13,340,000 Extendicare Health Services, Inc. company guaranty
9.35s, 2007 11,605,800
9,855,000 Global Health Sciences company guaranty 11s, 2008 6,011,550
2,120,000 HEALTHSOUTH Corp. sr. notes 7s, 2008 2,014,000
7,850,000 Integrated Health Services, Inc. sr. sub. notes Ser. A,
9 1/2s, 2007 5,887,500
11,890,000 Integrated Health Services, Inc. sr. sub. notes Ser. A,
9 1/4s, 2008 8,798,600
4,235,000 Magellan Health Services, Inc. sr. sub. notes 9s, 2008 3,620,925
4,000,000 Mariner Post-Acute Network, Inc. sr. sub. notes stepped-
coupon Ser. B, zero % (10 1/2s, 11/1/02), 2007 (STP) 1,160,000
17,240,000 Mariner Post-Acute Network, Inc. sr. sub. notes Ser. B,
9 1/2s, 2007 8,620,000
9,850,000 MedPartners, Inc. sr. notes 7 3/8s, 2006 8,520,250
4,891,000 MedPartners, Inc. sr. sub. notes 6 7/8s, 2000 4,585,313
3,100,000 Multicare Cos., Inc. sr. sub. notes 9s, 2007 2,387,000
15,300,000 Paracelsus Healthcare sr. sub. notes 10s, 2006 13,005,000
5,400,000 Quorum Health Group, Inc. sr. sub. notes 8 3/4s, 2005 5,130,000
11,605,000 Sun Healthcare Group, Inc. sr. sub. notes Ser. B,
9 1/2s, 2007 3,481,500
2,439,000 Tenet Healthcare Corp. sr. sub. notes 8 5/8s, 2007 2,439,000
13,201,000 Tenet Healthcare Corp. 144A sr. sub. notes
8 1/8s, 2008 12,870,975
7,560,000 Tenet Healthcare Corp. sr. notes 8s, 2005 7,522,200
2,450,000 Tenet Healthcare Corp.144A sr. notes 7 5/8s, 2008 2,364,250
--------------
132,639,253
Insurance and Finance (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
4,105,000 CSBI Capital Trust I 144A company guaranty 4,433,400
5,860,000 Superior Financial 144A sr. notes 8.65s, 2003 5,515,725
--------------
9,949,125
Lodging (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
6,110,000 Epic Resorts LLC company guaranty Ser. B, 13s, 2005 5,804,500
4,445,000 HMH Properties, Inc. sr. notes Ser. C, 8.45s, 2008 4,378,325
5,480,000 HMH Properties, Inc. company guaranty Ser. B,
7 7/8s, 2008 5,233,400
8,000,000 Starwood Hotels Resorts bank term loan
7.861s, 2/23/03 7,990,000
--------------
23,406,225
Manufacturing (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
7,540,000 Insilco Holding Co. sr. disc. notes stepped-coupon
zero % (14s, 8/15/03), 2008 (STP) 3,393,000
Media (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
6,050,000 Ackerly Group, Inc. 144A sr. sub. notes 9s, 2009 6,276,875
8,250,000 RBS Participacoes S.A. 144A company guaranty
11s, 2007 (Brazil) 3,052,500
--------------
9,329,375
Medical Supplies and Devices (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
11,215,000 ALARIS Medical Systems, Inc. company guaranty
9 3/4s, 2006 11,327,150
3,155,000 Dade International, Inc. sr. sub. notes Ser. B,
11 1/8s, 2006 3,521,769
7,440,000 Mediq, Inc. deb. stepped-coupon zero %
(13s, 6/1/03), 2009 (STP) 2,976,000
6,780,000 Mediq, Inc. company guaranty 11s, 2008 6,102,000
--------------
23,926,919
Metals and Mining (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
10,840,000 AK Steel Corp. sr. notes 9 1/8s, 2006 11,463,300
6,760,000 AK Steel Corp. 144A sr. notes 7 7/8s, 2009 6,675,500
2,825,000 Armco, Inc. sr. notes 9s, 2007 2,952,125
3,140,000 Armco, Inc. 144A sr. notes 8 7/8s, 2008 3,257,750
4,150,000 Kaiser Aluminum & Chemical Corp. sr. sub. notes
12 3/4s, 2003 4,015,125
2,050,000 Kaiser Aluminum & Chemical Corp. sr. notes Ser. B,
10 7/8s, 2006 2,060,250
6,380,000 Lodestar Holdings, Inc. company guaranty
11 1/2s, 2005 5,295,400
8,500,000 WCI Steel, Inc. sr. notes Ser. B, 10s, 2004 8,733,750
6,740,000 WHX Corp. sr. notes 10 1/2s, 2005 6,588,350
--------------
51,041,550
Motion Picture Distribution (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
200,000 Cinemark USA, Inc. sr. sub. notes 9 5/8s, 2008
(Mexico) 205,000
7,225,000 Cinemark USA, Inc. sr. sub. notes Ser. D, 9 5/8s, 2008
(Mexico) 7,423,688
25,608,000 Diva Systems Corp. 144A sr. disc. notes stepped-coupon
zero % (12 5/8s, 3/1/03), 2008 (STP) 7,938,480
--------------
15,567,168
Oil and Gas (3.9%)
- --------------------------------------------------------------------------------------------------------------------------
8,180,000 Abraxas Petroleum Corp. 144A company guaranty
11 1/2s, 2004 4,090,000
2,530,000 Belco Oil & Gas Corp. company guaranty Ser. B,
10 1/2s, 2006 2,504,700
4,000,000 Belco Oil & Gas Corp. sr. sub. notes Ser. B,
8 7/8s, 2007 3,780,000
7,675,000 Benton Oil & Gas Co. sr. notes 11 5/8s, 2003 4,067,750
8,500,000 Chesapeake Energy Corp. sr. notes 9 1/8s, 2006 5,950,000
5,550,000 Dailey Petroleum Services Corp. company guaranty
9 1/2s, 2008 2,775,000
2,900,000 Flores & Rucks, Inc. sr. sub. notes 9 3/4s, 2006 2,965,250
1,300,000 Gothic Energy Corp. sr. disc. notes, stepped-coupon
Ser. B, zero % (14 1/8s, 5/1/03), 2006 (STP) 390,000
6,000,000 Gulf Canada Resources, Ltd. sr. notes
8 3/8s, 2005 (Canada) 5,940,000
2,350,000 Gulf Canada Resources, Ltd. sr. notes
8.35s, 2006 (Canada) 2,245,848
2,000,000 Gulf Canada Resources, Ltd. sr. notes
8 1/4s, 2017 (Canada) 1,860,000
5,750,000 HS Resources, Inc. sr. sub. notes Ser. B, 9 1/4s, 2006 5,462,500
5,950,000 Michael Petroleum Corp. sr. notes Ser. B,
11 1/2s, 2005 4,224,500
6,840,000 Northern Offshore 144A company guaranty
10s, 2005 3,146,400
7,690,000 Ocean Energy, Inc. company guaranty Ser. B,
8 7/8s, 2007 7,151,700
14,383,000 Ocean Energy, Inc. company guaranty Ser. B,
8 3/8s, 2008 13,304,275
9,045,000 Petroleos Mexicanos 144A company guaranty
9 3/8s, 2008 8,909,325
2,320,000 Petro Geo-Services AS ADR notes
7 1/2s, 2007 (Norway) 2,349,418
2,120,000 Seagull Energy sr. sub notes 8 5/8s, 2005 2,056,400
4,755,000 Seven Seas Petroleum sr. notes Ser. B, 12 1/2s, 2005 2,995,650
3,050,000 Snyder Oil Corp. sr. sub. notes 8 3/4s, 2007 3,034,750
41,991,000 Transamerican Energy sr. disc. notes stepped-coupon
Ser. B, zero % (13s, 6/15/99), 2002 (STP) 12,597,300
31,870,000 Transamerican Energy sr. notes Ser. B, 11 1/2s, 2002 9,561,000
12,530,000 Transamerican Refining Corp. 144A
sr. sub. notes 16s, 2003 1,253,000
17,087,000 TransTexas Gas Corp. sr. sub. notes Ser. D,
13 3/4s, 2001 7,689,150
2,950,000 Triton Energy Ltd. sr. notes 9 1/4s, 2005 2,673,526
12,280,000 Vintage Petroleum 144A sr. sub. notes 9 3/4s, 2009 11,973,000
1,070,000 Vintage Petroleum sr. sub. notes 9s, 2005 997,775
--------------
135,948,217
Packaging and Containers (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
11,010,000 AEP Industries, Inc. sr. sub. notes 9 7/8s, 2007 11,065,050
2,000,000 Ball Corp. company guaranty 7 3/4s, 2006 2,040,000
1,880,000 Owens-Illinois, Inc. deb. 7.8s, 2018 1,815,742
13,020,000 Owens-Illinois, Inc. sr. notes 7.15s, 2005 12,789,546
7,285,000 Riverwood International Corp. company guaranty
10 7/8s, 2008 6,629,350
6,510,000 Riverwood International Corp. company guaranty
10 5/8s, 2007 6,640,200
2,900,000 Riverwood International Corp. company guaranty
10 1/4s, 2006 2,929,000
13,517,971 Riverwood International Corp. bank term loan
8.015s, 2003 13,467,279
--------------
57,376,167
Paper and Forest Products (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
8,831,547 Alabama River Newsprint bank loan notes FRN
7.562s, 2002 6,623,660
14,230,000 APP Finance II Mauritius Ltd. bonds stepped-coupon
12s, (16s, 2/15/04), 2049 (Indonesia) (STP) 5,976,600
3,000,000 Boise Cascade Co. notes 7.35s, 2004 2,897,010
8,675,000 Consumers International 144A sr. notes 10 1/4s, 2005 9,152,125
7,515,000 Huntsman Packaging Corp. company guaranty
9 1/8s, 2007 7,533,788
12,000,000 Jefferson Smurfit bank term loan 8.65s, 2006 12,000,000
14,960,000 Pindo Deli Finance Mauritius Ltd. company guaranty
10 3/4s, 2007 (Indonesia) 7,629,600
2,580,000 PT Pabrik Kertas Tjiwi Kimia company guaranty
10s, 2004 (Indonesia) 1,354,500
215,000 Republic Group Inc. sr. sub. notes 9 1/2s, 2008 217,688
5,000,000 Stone Container Corp. sr. notes 12.58s, 2016 5,350,000
--------------
58,734,971
Pharmaceuticals (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
3,070,000 Biovail Corp. International 144A sr. notes
10 7/8s, 2005 3,116,050
9,705,000 ICN Pharmaceuticals, Inc. 144A sr. notes 9 1/4s, 2005 10,008,281
--------------
13,124,331
Photography (--%)
- --------------------------------------------------------------------------------------------------------------------------
2,760,000 PX Escrow Corp. sr. disc. notes stepped-coupon zero %
(9 5/8s, 2/1/02), 2006 (STP) 1,545,600
Publishing (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
12,880,000 Affinity Group Holdings sr. notes 11s, 2007 12,880,000
7,700,000 American Media Operation, Inc. sr. sub. notes
11 5/8s, 2004 7,931,000
2,000,000 Garden State Newspapers, Inc. sr. sub. notes
Ser. B, 8 3/4s, 2009 2,020,000
2,450,000 Perry-Judd company guaranty 10 5/8s, 2007 2,560,250
4,345,065 Von Hoffman Press, Inc. 144A sr. sub. notes
13 1/2s, 2009 4,518,868
3,540,000 Von Hoffman Press Inc. 144A sr. sub. notes
10 3/8s, 2007 3,663,900
--------------
33,574,018
Railroads (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
13,545,000 TFM S.A. de C.V. company guaranty stepped-coupon
zero %, (11 3/4s, 6/15/02), 2009 (Mexico) (STP) 7,314,300
1,960,000 TFM S.A. de C.V. company guaranty
10 1/4s, 2007 (Mexico) 1,646,400
--------------
8,960,700
Restaurants (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
8,000,000 FRD Acquisition Co. sr. notes Ser. B, 12 1/2s, 2004 8,080,000
Retail (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
5,080,000 Home Interiors & Gifts, Inc. company guaranty
10 1/8s, 2008 5,105,400
2,250,000 K mart Corp. deb. 13 1/2s, 2009 2,336,400
2,000,000 K mart Corp. med. term notes 9s, 2020 1,951,420
2,000,000 K mart Corp. med. term notes 8.96s, 2019 1,944,800
1,900,000 K mart Corp. deb. 7 3/4s, 2012 1,957,000
8,635,000 Mothers Work, Inc. sr. notes 12 5/8s, 2005 8,980,400
5,265,000 NBTY Inc. 144A sr. sub. notes 8 5/8s, 2007 5,054,400
3,900,000 North Atlantic Trading Co. company guaranty
Ser. B, 11s, 2004 3,939,000
2,030,000 Specialty Retailers, Inc. company guaranty Ser. B,
8 1/2s, 2005 1,806,700
--------------
33,075,520
Satellite Services (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,645,765 Direct Sat I 144A notes 8 1/4s, 2001 1,643,708
1,754,259 Echostar I 144A sr. notes 8 1/4s, 2001 1,752,066
9,210,000 Golden Sky Systems 144A sr. sub. notes
12 3/8s, 2006 10,038,900
5,015,000 Satelites Mexicanos S.A. de C.V. 144A sr. notes
10 1/8s, 2004 (Mexico) 3,961,850
10,966,000 Satelites Mexicanos S.A. de C.V. 144A company
guaranty FRB 9.06s, 2004 (Mexico) 10,088,720
--------------
27,485,244
Semiconductors (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
22,993,891 Fairchild Semiconductor Corp. 144A sr. sub. notes
11.74s, 2008 20,694,502
9,105,000 Fairchild Semiconductor Corp. sr. sub. notes
10 1/8s, 2007 9,287,100
16,340,000 Zilog, Inc. company guaranty Ser. B, 9 1/2s, 2005 14,379,200
--------------
44,360,802
Shipping (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
7,730,000 Johnstown America Industries, Inc. company guaranty
Ser. C, 11 3/4s, 2005 8,309,750
3,700,000 Pegasus Shipping 144A 11 7/8s, 2004 3,200,500
--------------
11,510,250
Specialty Consumer Products (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
8,650,000 Decora Industries, Inc. sr. sec. notes Ser. B, 11s, 2005 8,433,750
Steel (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
10,032,000 UCAR Global Enterprises sr. sub. notes
Ser. B, 12s, 2005 10,583,760
Telecommunications (13.9%)
- --------------------------------------------------------------------------------------------------------------------------
12,000,000 Barak I.T.C. sr. disc. notes stepped-coupon Ser. B,
zero % (12 1/2s, 11/15/02), 2007 (Israel) (STP) 6,480,000
6,820,000 Bestel S.A.de C.V. sr. disc. notes stepped-coupon
zero % (12 3/4s, 5/15/03), 2005 (Mexico) (STP) 3,887,400
6,050,000 CapRock Communications Corp. sr. notes
Ser. B, 12s, 2008 6,110,500
16,435,000 Covad Communications Group sr. disc. notes stepped-
coupon Ser. B, zero % (13 1/2s, 03/15/03), 2008 (STP) 8,710,550
10,630,000 Covad Communications Group Inc. 144A sr. notes
12 1/2s, 2009 10,257,950
5,000,000 Cox Communications, Inc. term loan B, FRN
8.255s, 2007 4,950,000
43,350,000 DTI Holdings Inc. sr. disc. notes, stepped-coupon
Ser. B, zero % (12 1/2s, 03/01/03), 2008 (STP) 9,970,500
3,465,000 Econophone, Inc. company guaranty 13 1/2s, 2007 3,534,300
20,120,000 Econophone, Inc. 144A notes stepped-coupon
zero % (11s, 2/15/03), 2008 (STP) 10,060,000
7,640,000 Esprit Telecom Group PLC sr. notes 11 1/2s, 2007
(United Kingdom) 8,078,536
18,680,000 Firstworld Communication Corp. sr. disc. notes
stepped-coupon zero % (13, 4/15/03), 2008 (STP) 6,724,800
16,130,000 Focal Communications Corp. sr. disc. notes, stepped-
coupon Ser. B, zero % (12 1/8s, 02/15/03), 2008 (STP) 8,065,000
20,750,000 Global Crossing Holdings, Ltd. company guaranty
9 5/8s, 2008 21,787,500
32,245,000 GST Telecommunications, Inc. company guaranty
stepped-coupon zero % (13 7/8s, 12/15/00), 2005 (STP) 22,813,338
5,815,000 Hyperion Telecommunications Corp., Inc. sr. disc. notes
stepped-coupon Ser. B, zero % (13s, 4/15/01), 2003 (STP) 4,477,550
9,040,000 Hyperion Telecommunications Corp., Inc. sr. notes
Ser. B, 12 1/4s, 2004 9,559,800
4,350,000 Hyperion Telecommunications Inc. 144A sr. sub. notes
12s, 2007 4,360,875
650,000 ICG Communications, Inc. sr. disc. notes stepped-coupon
zero % (10s, 02/15/03), 2008 (STP) 385,125
6,075,000 ICG Holdings, Inc. sr. disc. notes stepped-coupon zero %
(13 1/2s, 9/15/00), 2005 (Canada) (STP) 5,270,063
33,770,000 ICG Services, Inc. sr. disc. notes stepped-coupon zero %
(9 7/8s, 5/1/03), 2008 (STP) 19,417,750
27,785,000 Intelcom Group (USA), Inc. company guaranty stepped-
coupon zero % (12 1/2s, 5/1/01), 2006 (STP) 22,089,075
14,200,000 Interact Systems, Inc. 144A units stepped-coupon zero %
(14s, 8/1/99), 2003 (STP) 497,000
14,660,000 Intermedia Communications, Inc. sr. disc. notes stepped-
coupon Ser. B, zero % (11 1/4s, 7/15/02), 2007 (STP) 10,188,700
10,700,000 Intermedia Communications, Inc. sr. notes Ser. B,
8.6s, 2008 10,084,750
10,470,000 Intermedia Communications, Inc. sr. notes Ser. B,
8 1/2s, 2008 9,789,450
39,605,000 International Cabletel, Inc. sr. notes stepped-coupon
Ser. B, zero % (11 1/2s, 2/01/01), 2006 (STP) 34,852,400
8,155,000 IXC Communications, Inc. sr. sub. notes 9s, 2008 8,521,975
27,260,000 KMC Telecom Holdings, Inc. sr. disc. notes stepped-coupon
zero % (12 1/2s, 2/15/03), 2008 (STP) 14,038,900
19,320,000 Knology Holdings, Inc. sr. disc. notes stepped-coupon
zero %, (11 7/8s, 10/15/02), 2007 (STP) 10,143,000
5,150,000 L-3 Communications Corp. sr. sub. notes Ser. B,
10 3/8s, 2007 5,652,125
2,100,000 L-3 Communications Corp. sr. sub. notes
8 1/2s, 2008 2,173,500
4,380,000 L-3 Communications Corp. company guaranty
Ser. B, 8s, 2008 4,423,800
7,390,000 Logix Communications Enterprises sr. notes
12 1/4s, 2008 6,651,000
3,670,000 Metrocall, Inc. 144A sr. sub. notes 11s, 2008 3,449,800
3,900,000 MetroNet Communications Corp. sr. notes 12s, 2007 4,465,500
4,920,000 MetroNet Communications Corp. sr. disc. notes stepped-
coupon zero % (10 3/4s, 11/1/02), 2007
(Canada) (STP) 3,591,600
10,220,000 MetroNet Communications Corp. 144A sr. notes
10 5/8s, 2008 (Canada) 11,497,500
12,630,000 MetroNet Communications Corp. sr. disc. stepped-coupon
notes zero % (9.95s, 6/15/03), 2008 (Canada) (STP) 8,651,550
9,185,000 Microcell Telecommunications sr. disc. notes
stepped-coupon Ser. B, zero % (14s, 12/1/01), 2006
(Canada) (STP) 7,302,075
2,040,000 Netia Holdings B.V. 144A company guaranty
stepped-coupon zero % (11 1/4s, 11/1/01), 2007
(Poland) (STP) 1,244,400
4,450,000 Netia Holdings B.V. 144A company guaranty
10 1/4s, 2007 (Poland) 4,005,000
10,910,000 NorthEast Optic Network, Inc. sr. notes 12 3/4s, 2008 10,910,000
16,940,000 Pathnet, Inc. sr. notes 12 1/4s, 2008 9,486,400
17,660,000 Qwest Communications International, Inc. sr. disc. notes
stepped-coupon zero % (9.47s, 10/15/02), 2007 (STP) 13,951,400
5,300,000 Qwest Communications International, Inc. 144A
sr. notes 7 1/2s, 2008 5,472,250
9,272,000 Qwest Communications International, Inc. 144A
sr. notes 7 1/4s, 2008 9,480,620
18,500,000 Rhythms Netconnections, Inc. sr. disc. notes stepped-
coupon Ser. B, zero % (13 1/2s, 5/15/03), 2008 (STP) 9,250,000
2,850,000 Rogers Cantel, Inc. sr. sub. notes 8.8s, 2007 (Canada) 2,921,250
7,140,000 Startec Global Communications Corp. sr. notes
12s, 2008 6,461,700
4,100,000 Telecommunications Techniques, Inc. company
guaranty 9 3/4s, 2008 4,120,500
4,960,000 Telehub Communications Corp. company guaranty
stepped-coupon zero % (13 7/8s, 7/31/02),
2005 (STP) 2,926,400
12,670,000 Time Warner Telecom Inc. sr. notes 9 3/4s, 2008 13,556,900
9,962,000 USN Communications, Inc. sr. disc. notes stepped-
coupon Ser. B, zero % (14 5/8s, 8/15/00), 2004 (STP) 996,200
12,610,000 WinStar Communications, Inc. sr. sub. notes stepped-
coupon zero % (15s, 3/1/02), 2007 (STP) 10,466,300
12,299,000 WinStar Communications, Inc. 144A sr. disc. notes
stepped-coupon zero % (14s, 10/15/00), 2005 (STP) 20,908,300
14,580,000 WinStar Communications, Inc. sr. sub. notes 11s, 2008 9,185,400
--------------
488,308,257
Telephone Services (4.1%)
- --------------------------------------------------------------------------------------------------------------------------
17,630,000 Allegiance Telecom, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (11 3/4s, 2/15/03), 2008 (STP) 10,225,400
21,510,000 BTI Telecom Corp. sr. notes 10 1/2s, 2007 17,208,000
11,250,000 Call-Net Enterprises, Inc. sr. disc. notes stepped-coupon
zero % (9.27s, 8/15/02), 2007 (Canada) (STP) 7,565,625
1,860,000 Call-Net Enterprises, Inc. sr. disc. notes stepped-coupon
zero % (8.94s, 8/15/03), 2008 (Canada) (STP) 1,125,300
8,520,000 Colt Telecommunications Group PLC sr. disc. notes
stepped-coupon zero %, (12s, 12/15/01), 2006
(United Kingdom) (STP) 7,242,000
4,500,000 E. Spire Communications, Inc. sr. disc. notes stepped-
coupon zero % (13s, 11/1/00), 2005 (STP) 2,700,000
905,000 E. Spire Communications, Inc. sr. disc. notes stepped-coupon
zero % (12 3/4s, 4/1/01), 2006 (STP) 543,000
5,810,000 Facilicom International sr. notes Ser. B, 10 1/2s, 2008 4,299,400
12,020,000 Flag Ltd. 144A sr. notes 8 1/4s, 2008 (Bermuda) 11,419,000
2,390,000 Globo Communicacoes 144A sr. notes
10 5/8s, 2008 (Brazil) 1,302,550
2,400,000 Globo Communicacoes company guaranty
10 1/2s, 2006 (Brazil) 1,320,000
1,875,000 Globo Communicacoes 144A company guaranty
10 1/2s, 2006 (Brazil) 1,031,250
3,187,000 ITC Deltacom, Inc. sr. notes 11s, 2007 3,505,700
1,900,000 Long Distance International, Inc. 144A sr. notes
12 1/4s, 2008 1,330,000
4,580,000 McLeodUSA, Inc. sr. disc. notes stepped-coupon
zero %, (10 1/2s, 3/1/02), 2007 (STP) 3,618,200
2,200,000 McLeodUSA, Inc. 144A sr. notes 8 1/8s, 2009 2,167,000
3,920,000 OnePoint Communications, Corp. 144A sr. notes
14 1/2s, 2008 2,058,000
6,520,000 Primus Telecommunications Group, Inc. sr. notes
Ser. B, 9 7/8s, 2008 6,161,400
10,520,000 RSL Communications, Ltd. company guaranty
12 1/4s, 2006 11,282,700
2,470,000 RSL Communications, Ltd. company guaranty,
stepped-coupon zero % (10 1/8s, 3/1/03), 2008 (STP) 1,407,900
5,470,000 RSL Communications, Ltd. company guaranty
9 1/8s, 2008 5,155,475
4,680,000 RSL Communications PLC. 144A sr. notes
10 1/2s, 2008 (United Kingdom) 4,773,600
5,640,000 Transtel S.A. 144A pass-through certificates
12 1/2s, 2007 (Colombia) 2,143,200
4,980,000 US Xchange LLC sr. notes 15s, 2008 5,229,000
7,130,000 Versatel Telecom sr. notes 13 1/4s, 2008 7,272,600
2,590,000 Versatel Telecom sr. notes 13 1/4s, 2008 2,641,800
28,320,000 Viatel, Inc. sr. disc. notes stepped-coupon zero %
(12 1/2s, 4/15/03), 2008 (STP) 16,992,000
1,905,000 Viatel, Inc. sr. notes 11 1/4s, 2008 1,962,150
--------------
143,682,250
Textiles (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
3,575,000 Glenoit Corp. company guaranty 11s, 2007 3,289,000
440,000 Westpoint Stevens, Inc. sr. notes 7 7/8s, 2008 453,200
2,000,000 Westpoint Stevens, Inc. sr. notes 7 7/8s, 2005 2,065,000
--------------
5,807,200
Transportation (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
3,650,000 Kitty Hawk, Inc. company guaranty 9.95s, 2004 3,650,000
Utilities (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
7,450,000 CMS Energy Corp. pass-through certificates 7s, 2005 7,161,813
7,860,000 CMS Energy Corp. sr. notes 6 3/4s, 2004 7,683,150
10,680,000 Public Service Co. of New Mexico sr. notes
Ser. A, 7.1s, 2005 10,705,525
--------------
25,550,488
Wireless Communications (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
10,040,000 American Mobile Satellite Corp. company guaranty
12 1/4s, 2008 4,869,400
320,000 Clearnet Communications, Inc. sr. disc. notes stepped-
coupon zero % (14 3/4s, 12/15/00), 2005 (STP) 288,000
7,380,000 Paging Network Do Brasil sr. notes
13 1/2s, 2005 (Brazil) 3,173,400
4,785,000 Telesystem International Wireless Inc. sr. disc. notes
stepped-coupon Ser. C, zero %, (10 1/2s, 11/1/02), 2007
(Canada) (STP) 1,866,150
--------------
10,196,950
--------------
Total Corporate Bonds and Notes
(cost $3,387,232,884) $3,021,175,846
PREFERRED STOCKS (6.9%) (a)
NUMBER OF SHARES VALUE
Banks (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
296,110 Chevy Chase Capital Corp. Ser. A, $5.188 pfd. $ 15,989,940
19,825 Chevy Chase Savings Bank $3.25 pfd. 589,794
--------------
16,579,734
Broadcasting (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
63,341 Capstar Broadcasting Inc. 144A $12.00 pfd. (PIK) 7,569,250
279 Capstar Communications, Inc. Ser. E, $12.625
cum. pfd. (PIK) 33,341
123,134 Citadel Broadcasting Inc. 144A $13.25 cum. pfd. (PIK) 14,406,678
5,476 Granite Broadcasting 144A 12.75% pfd. (PIK) 5,804,560
1,545 Paxson Communications Corp. $13.25 cum. pfd. (PIK) 12,669,000
10,977 Spanish Broadcasting Systems 14.25% (PIK) 11,525,850
--------------
52,008,679
Building and Construction (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
129,800 Brand Scaffold Services, Inc. 144A $3.625 cum. pfd. 3,894,000
259,960 CSC Holdings, Inc. Ser. M, $11.125 cum. pfd. (PIK) 31,065,220
--------------
34,959,220
Cable Television (--%)
- --------------------------------------------------------------------------------------------------------------------------
3,600 Adelphia Communications Corp. Ser. B, $13.00
cum. pfd. 412,200
6,102 21st Century Telecom Group 144A 13.75% (PIK) 3,051,000
--------------
3,463,200
Cellular Communications (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
8,906 Dobson Communications Corp. 144A $12.25 pfd. (PIK) 8,015,400
2,885 NEXTEL Communications, Inc. Ser. E, $11.125 pfd. (PIK) 2,740,750
--------------
10,756,150
Computer Services and Software (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
4,977 Concentric Network Corp. Ser. B, $13.50 pfd. (PIK) 4,777,920
Cosmetics (--%)
- --------------------------------------------------------------------------------------------------------------------------
5,636 Renaissance Cosmetics Inc. 14.00% pfd. (PIK) 1
Electric Utilities (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
74,923 Public Service Co. of New Hampshire $2.651
1st mtge. pfd. 1,947,998
Food and Beverages (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
240,000 Doane Products Co. $14.25 pfd. 10,560,000
74,762 Nebco Evans Holding Co. 144A 11.25% pfd. (PIK) 3,140,004
--------------
13,700,004
Health Care (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
13,395,000 Fresenius Medical Capital Trust I company guaranty,
Ser. D, $9.00 pfd. (Germany) 13,914,056
10,730,000 Fresenius Medical Capital Trust II company guaranty,
7.875% pfd. (Germany) 10,837,300
--------------
24,751,356
Insurance and Finance (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
130,000 CGA Group Ltd. 144A Ser. A, $13.75 pfd. (PIK) 3,640,000
Motion Picture Distribution (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
392,000 Diva Systems Corp. Ser. C, $6.00 pfd. 2,352,000
876,252 Diva Systems Corp. Ser. D, $6.00 pfd. 5,257,512
--------------
7,609,512
Oil and Gas (--%)
- --------------------------------------------------------------------------------------------------------------------------
83,725 TCR Holding Corp. Class D, zero % pfd. 4,437
1,494,577 TCR Holding Corp. Class E, zero % pfd. 94,158
--------------
98,595
Restaurants (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
154,863 AmeriKing, Inc. $3.25 pfd. (PIK) 4,103,870
Telecommunications (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
14,190 Centaur Funding Corp 144A $9.08 pfd.
(Cayman Islands) 15,451,065
8,908 ICG Holdings, Inc., 144A $14.00 pfd. (Canada) (PIK) 8,952,540
16,463 Intermedia Communication Ser. B, 13.50% (PIK) 16,380,685
4,125 IXC Communications, Inc. $12.50 pfd. (PIK) 4,475,625
75,589 Nextlink Communications, Inc. 144A $7.00 pfd. (PIK) 3,892,834
2,828 Pegasus Communications Corp. Ser. A, $12.75 cum. pfd. 3,082,520
13,340 WinStar Communications, Inc. 144A $14.25 pfd. (PIK) 10,672,000
--------------
62,907,269
Telephone Services (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
420 E. Spire Communications, Inc. 12.75% (PIK) 142,800
18,569 Viatel, Inc. Ser. A, $10.00 cv. pfd. (PIK) 2,321,125
--------------
2,463,925
--------------
Total Preferred Stocks (cost $254,789,470) $ 243,767,433
CONVERTIBLE BONDS AND NOTES (1.5%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 2,610,000 APP Global Finance Ltd. 144A cv. company guaranty
3 1/2s, 2003 (United Kingdom) $ 1,246,275
5,300,000 Argosy Gaming cv. sub. notes 12s, 2001 5,419,250
5,500,000 Corporate Express, Inc. cv. notes 4 1/2s, 2000 4,840,000
25,690,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 14,643,300
3,900,000 GST Telecommunications, Inc. cv. sr. disc. notes stepped-
coupon zero %, (13 7/8s, 12/15/00), 2005 (STP) 3,588,000
11,350,000 Integrated Device Technology, Inc. cv. sub. notes
5 1/2s, 2002 8,285,500
5,000,000 Lam Research Corp. cv. sub. notes 5s, 2002 4,175,000
4,000,000 Lam Research Corp. 144A cv. sub. notes 5s, 2002 3,340,000
8,000,000 NovaCare, Inc. cv. sub. deb. 5 1/2s, 2000 5,640,000
--------------
Total Convertible Bonds and Notes
(cost $61,653,724) $ 51,177,325
UNITS (1.2%) (a)
NUMBER OF UNITS VALUE
- --------------------------------------------------------------------------------------------------------------------------
21,510 Australis Media, Ltd. units stepped-coupon zero %,
(15 3/4s, 5/15/03), 2003 (In default)
(Australia) (STP) (NON) $ 161,325
6,120 Birch Telecom, Inc. 144A units 14s, 2008 5,599,800
8,710 Carrier1 144A units pfd. 13 1/4s, 2009 8,884,200
30 Decrane Aircraft Holdings 144A units 12s, 2008 30,000
12,760 Network Plus Corp. units pfd. 13 1/2s, 2009 13,015,200
2,000 Signature Brands USA, Inc. units 13s, 2002 2,210,000
13,345 XCL Ltd. units sr. sec. notes 13 1/2s, 2004 10,942,900
60,536 XCL Ltd. 144A units cv. cum. pfd. 9 1/2s, 2006 (PIK) 2,663,584
--------------
Total Units (cost $66,435,851) $ 43,507,009
WARRANTS (1.1%) (a)(NON) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
30,610 Allegiance Telecom, Inc. 2/3/08 $ 857,080
10,040 American Mobile Satellite Corp. 4/1/08 33,032
265,000 Becker Gaming Corp. 144A 11/15/00 27
6,820 Bestel SA (Mexico) 5/15/05 6,820
45,271 CellNet Data Systems, Inc. 10/1/07 905,420
130,000 CGA Group Ltd. 144A 2/11/07 2,600
11,495 Club Regina, Inc. 144A 4/15/06 11,495
8,595 Colt Telecommunications Group PLC 12/31/06 4,942,125
2,975 Concentric Network Corp. 12/15/07 496,825
121,027 Consorcio Ecuatoriano 144A (Ecuador) 10/1/00 60,514
26,510 Covad Communications Group 144A,
(acquired 5/27/98, cost $1,073,478) (RES) 3/15/08 15,216,740
4,650 Diva Systems Corp. 5/15/06 1,125,300
76,824 Diva Systems Corp. 3/1/08 998,712
210,395 DTI Holdings Inc. 3/1/08 2,104
130 E. Spire Communications, Inc. 11/1/05 780
8,400 Econophone, Inc. 144A 7/1/07 420,000
6,110 Epic Resorts 6/15/05 61
8,200 Esat Holdings, Inc. (Ireland) 2/1/07 582,200
18,330 Firstworld Communication 4/15/08 183,300
6,135 Globalstar Telecom 144A 2/15/04 337,425
19,455 Hyperion Telecommunications 144A 4/15/01 1,193,370
251,394 ICG Communications 10/15/05 5,027,880
7,540 Insilco Holding Co. 8/15/08 1
14,200 Interact Systems, Inc. 8/1/03 142
15,924 Intermedia Communications 6/1/00 844,768
5,125 International Wireless
Communications Holdings 144A 8/15/01 51
16,520 Iridium World Com 144A 7/15/05 1,156,400
25,970 KMC Telecom Holdings, Inc. 4/15/08 64,925
25,920 Knology Holdings, Inc. 144A 10/15/07 38,880
1,900 Long Distance International, Inc. 144A 4/13/08 4,750
41,270 McCaw International Ltd. 4/15/07 165,080
7,440 Mediq, Inc. 144A 6/1/09 74
3,900 Metronet Communications 144A 8/15/07 136,500
3,310 MGC Communications, Inc. 144A 10/1/04 90,032
3,920 Onepoint Communications, Inc. 6/1/08 3,920
12,550 Orion Network Systems 1/15/07 144,325
72,220 Pagemart, Inc. 144A 12/31/03 577,760
16,940 Pathnet, Inc. 144A 4/15/08 169,400
12,480 Paxson Communications Corp. 144A 6/30/03 125
76,800 Powertel, Inc. 2/1/06 307,200
44,150 President Riverboat Casinos, Inc. 9/30/99 2,208
74,000 Rhythms Netcon 144A 5/15/08 1,480,000
9,115 Spanish Broadcasting Systems 144A 6/30/99 1,868,575
7,140 Startec Global Communications Corp. 5/15/08 7,140
6,375 Sterling Chemicals Holdings 8/15/08 95,625
4,960 Telehub Communications Corp. exp. 7/31/05 7/31/05 4,960
12,530 Transamerican Refining Corp. 6/30/03 13
2,340 21st Century Telecom Group 144A 2/15/10 46,800
38,235 UIH Australia/Pacific, Inc. 144A 5/15/06 38,235
99,620 USN Communications Inc. 8/15/04 996
9,720 Versatel Teleco 144A 5/15/08 388,800
4,190 WAM!NET, Inc. 3/1/05 33,520
23,250 Wireless One, Inc. 10/19/00 233
--------------
Total Warrants (cost $19,228,981) $ 40,075,248
COMMON STOCKS (0.9%) (a)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
3,000 AmeriKing, Inc. (NON) $ 120,000
6,570 Axia Holding Inc. 144A (PIK) 91,980
100,000 BE Aerospace, Inc. (NON) 1,475,000
1,663,637 Capstar Broadcasting Partners (NON) 2,994,547
258,760 CellNet Data Systems, Inc. (NON) 1,633,423
100,000 Clearnet Communications, Inc. Class A, (Canada) (NON) 1,100,000
96,272 Fitzgerald Gaming Corp. (NON) 48,136
110,000 French Fragrances Inc. (NON) 721,875
105,841 Hedstrom Holdings, Inc. 144A (NON) 105,841
195,000 Intermedia Communications, Inc. (NON) 3,534,375
400,000 Isle of Capri Casinos, Inc. (NON) 1,850,000
41,666 Lady Luck Gaming Corp. (NON) 239,580
2,604 Mothers Work, Inc. (NON) 27,993
4,555 Paging Do Brazil Holdings Co., LLC 144A
Class B, (Brazil) 46
293 Pegasus Communications Corp. (NON) 7,142
8,407 Premium Holdings (L.P.) 144A (NON) 33,628
1,185,708 PSF Holdings LLC Class A (acquired various dates
from 3/15/95 to 8/13/98, cost $39,028,423)(NON) (RES) (AFF) 15,117,777
61,213 RSL Communications, Ltd. Class A (NON) 1,748,396
236,025 Specialty Foods Acquisition Corp. (NON) 11,801
16,316 Wang Laboratories, Inc. (NON) 389,545
--------------
Total Common Stocks (cost $60,192,418) $ 31,251,085
CONVERTIBLE PREFERRED STOCKS (0.4%) (a)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
121,000 Cendant Corp. $3.75 cv.pfd. $ 3,887,125
50,000 Chancellor Media Corp. $3.00 cv. cum. pfd. 4,450,000
24,040 Chesapeake Energy Corp. 144A $3.50 cv. cum. pfd. 228,380
412 Paxson Communications Corp. 144A $9.75 cv. pfd. (PIK) 4,037,600
8,689 XCL Ltd $8.075 cv. pfd. 382,316
--------------
Total Convertible Preferred Stocks
(cost $16,553,902) $ 12,985,421
BRADY BONDS (0.1%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
FRF 31,700,000 Ivory Coast -- 144A FLIRB collateralized
FRB 2s, 2018 $ 1,251,070
FRF 31,303,750 Ivory Coast -- 144A PDI bonds FRB
1.9s, 2018 1,524,547
--------------
Total Foreign Government Bonds and Notes
(cost $4,304,236) $ 2,775,617
SHORT-TERM INVESTMENTS (0.2%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 3,300,000 Advanta Corp. med. term notes Ser. D, 6.584s, 2000 $ 3,237,003
4,000,000 Colombia Holdings sr. notes 10s, 1999 4,040,000
--------------
Total Short-Term Investments (cost $7,295,792) $ 7,277,003
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,877,687,258) (b) $3,453,991,987
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,514,679,379.
(b) The aggregate identified cost on a tax basis is $3,877,925,729, resulting in gross unrealized appreciation and
depreciation of $144,223,842 and $568,157,584, respectively, or net unrealized depreciation of $423,933,742.
(NON) Non-income-producing security.
(STP) The interest or dividend rate and date shown parenthetically represent the new interest or dividend rate to
be paid and the date the fund will begin receiving interest or dividend income at this rate.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities
held at February 28, 1999 was $44,487,917 or 1.3% of net assets.
(PIK) Income may be received in cash or additional securities at the discretion of the issuer.
(AFF) Affiliated Companies (Note 5).
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
FLIRB represents Front Loaded Interest Reduction Bond.
The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes (FRN) are the current interest rates
shown at February 28, 1999, which are subject to change based on the terms of the security.
- -------------------------------------------------------------------------------
Forward Currency Contracts to Sell at February 28, 1999 (Unaudited)
Market Aggregate Face Delivery Unrealized
Value Value Date Appreciation
- -------------------------------------------------------------------------------
Euro Dollars $4,381,939 $4,491,643 3/17/99 $109,704
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 28, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $3,877,687,258) (Note 1) $3,453,991,987
- -----------------------------------------------------------------------------------------------
Cash 1,942,817
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 74,000,932
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,225,408
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 23,272,927
- -----------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 109,704
- -----------------------------------------------------------------------------------------------
Total assets 3,554,543,775
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 20,873,456
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 10,632,283
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,893,058
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 494,057
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 111,626
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,160
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,778,759
- -----------------------------------------------------------------------------------------------
Other accrued expenses 1,075,997
- -----------------------------------------------------------------------------------------------
Total liabilities 39,864,396
- -----------------------------------------------------------------------------------------------
Net assets $3,514,679,379
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $4,599,197,665
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (8,609,129)
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Notes 1) (652,419,849)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets and
liabilities in foreign currencies (423,489,308)
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $3,514,679,379
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($2,596,895,279 divided by 241,722,485 shares) $10.74
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $10.74)* $11.28
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($878,138,461 divided by 82,069,497 shares)** $10.70
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($17,933,062 divided by 1,669,464 shares) $10.74
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $10.74)* $11.10
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class Y share
($21,712,577 divided by 2,021,199 shares) $10.74
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended February 28, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Interest (net foreign tax of $46,320) $194,455,613
- -----------------------------------------------------------------------------------------------
Dividends 17,530,289
- -----------------------------------------------------------------------------------------------
Total investment income 211,985,902
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 9,874,933
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,668,245
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 169,907
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 15,572
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 3,317,193
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 4,623,551
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 45,470
- -----------------------------------------------------------------------------------------------
Reports to shareholders 57,897
- -----------------------------------------------------------------------------------------------
Auditing 79,296
- -----------------------------------------------------------------------------------------------
Legal 26,201
- -----------------------------------------------------------------------------------------------
Postage 86,376
- -----------------------------------------------------------------------------------------------
Other 153,257
- -----------------------------------------------------------------------------------------------
Total expenses 20,117,898
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (337,391)
- -----------------------------------------------------------------------------------------------
Net expenses 19,780,507
- -----------------------------------------------------------------------------------------------
Net investment income 192,205,395
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (218,040,841)
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (26,978)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 204,578
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (15,276,200)
- -----------------------------------------------------------------------------------------------
Net loss on investments (233,139,441)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(40,934,046)
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
February 28 August 31
1999* 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 192,205,395 $ 415,020,991
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions (218,067,819) 10,596,629
- ---------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of
investments and assets and liabilities in
foreign currencies (15,071,622) (467,505,371)
- ---------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (40,934,046) (41,887,751)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (149,781,833) (320,732,329)
- ---------------------------------------------------------------------------------------------------------------
Class B (48,931,692) (111,084,627)
- ---------------------------------------------------------------------------------------------------------------
Class M (1,006,085) (2,202,905)
- ---------------------------------------------------------------------------------------------------------------
Class Y (422,622) --
- ---------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class A -- (2,874,118)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (995,442)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (19,740)
- ---------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (92,041,855) (183,107,719)
- ---------------------------------------------------------------------------------------------------------------
Total decrease in net assets (333,118,133) (662,904,631)
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 3,847,797,512 4,510,702,143
- ---------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $8,609,129 and
$672,292, respectively) $3,514,679,379 $3,847,797,512
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share February 28
operating performance (Unaudited) Year ended August 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.47 $12.89 $12.11 $12.01 $12.06 $13.01
- ------------------------------------------------------------------------------------------------------------------------------------
Investment activities
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .59(c) 1.22(c) 1.20 1.16(c) 1.22 1.27
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.71) (1.35) .72 .11 (.01) (.93)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.12) (.13) 1.92 1.27 1.21 .34
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.61) (1.28) (1.14) (1.15) (1.22) (1.29)
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- -- (.04) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.01) -- (.02) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.61) (1.29) (1.14) (1.17) (1.26) (1.29)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.74 $11.47 $12.89 $12.11 $12.01 $12.06
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (0.93)* (1.75) 16.60 11.08 10.76 2.46
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,596,895 $2,821,513 $3,259,440 $3,115,546 $2,997,467 $2,885,748
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .46* .95 .96 .96 .95 .94
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.39* 9.39 9.54 9.57 10.27 9.82
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 30.24* 69.23 130.77 184.86 81.70 55.00
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996 and thereafter
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts. (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share February 28
operating performance (Unaudited) Year ended August 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.43 $12.84 $12.07 $11.97 $12.03 $12.99
- ------------------------------------------------------------------------------------------------------------------------------------
Investment activities
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .55(c) 1.12(c) 1.10 1.07(c) 1.09 1.18
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.71) (1.34) .72 .11 .02 (.94)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.16) (.22) 1.82 1.18 1.11 .24
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.57) (1.18) (1.05) (1.06) (1.13) (1.20)
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- -- (.04) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.01) -- (.02) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.57) (1.19) (1.05) (1.08) (1.17) (1.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.70 $11.43 $12.84 $12.07 $11.97 $12.03
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (1.31)* (2.42) 15.71 10.28 9.88 1.66
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $878,138 $1,007,028 $1,226,880 $1,100,757 $762,947 $535,002
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .83* 1.70 1.71 1.71 1.70 1.69
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.01* 8.64 8.79 8.84 9.52 9.06
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 30.24* 69.23 130.77 184.86 81.70 55.00
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996 and thereafter
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts. (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 28 July 3, 1995+
operating performance (Unaudited) Year ended August 31 to August 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.47 $12.88 $12.10 $12.00 $11.92
- ------------------------------------------------------------------------------------------------------------------------------------
Investment activities
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .57(c) 1.19(c) 1.16 1.14(c) .21(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.70) (1.34) .73 .11 .07
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.13) (.15) 1.89 1.25 .28
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.60) (1.25) (1.11) (1.13) (.19)
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.01) -- (.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.60) (1.26) (1.11) (1.15) (.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.74 $11.47 $12.88 $12.10 $12.00
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (1.06)* (1.94) 16.33 10.88 2.38*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $17,933 $19,256 $24,382 $16,616 $964
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .58* 1.20 1.21 1.19 .20*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.27* 9.10 9.29 9.45 1.65*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 30.24* 69.23 130.77 184.86 81.70
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996 and thereafter
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts. (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Dec. 31, 1998+
Per-share to February 28
operating performance (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $10.83
- ------------------------------------------------------------------------------------------------------------------------------------
Investment activities
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .21
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.09)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .12
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21)
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.21)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.74
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 1.06*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $21,713
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .11*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.89*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 30.24*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended August 31, 1996 and thereafter
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts. (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
</TABLE>
Notes to financial statements
February 28, 1999 (Unaudited)
Note 1
Significant accounting policies
Putnam High Yield Trust ("the fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The fund seeks high current income by investing
primarily in high-yielding, lower-rated fixed-income securities
constituting a portfolio that Putnam Investment Management, Inc. ("Putnam
Management"), the fund's Manager, a wholly-owned subsidiary of Putnam
Investments, Inc. believes does not involve undue risk to income or
principal.
The fund offers class A, class B, class M and class Y shares. Class A
shares are sold with a maximum front-end sales charge of 4.75%. Class B
shares, which convert to class A shares after approximately eight years,
do not pay a front-end sales charge but pay a higher ongoing distribution
fee than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class M
shares are sold with a maximum front end sales charge of 3.25% and pay an
ongoing distribution fee that is higher than class A shares but lower than
class B shares. Class Y shares, which are sold at net asset value, are
generally subject to the same expenses as class A, class B, and class M
shares, but do not bear a distribution fee. Class Y shares are sold to
defined contribution plans that invest at least $150 million in a
combination of Putnam funds and other accounts managed by affiliates of
Putnam Management.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
A) Security valuation Investments for which quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of
some securities traded over-the-counter -- the last reported bid price.
Securities quoted in foreign currencies are translated into U.S. dollars
at the current exchange rate. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value, and other investments, including restricted
securities, are stated at fair value following procedures approved by the
Trustees. Market quotations are not considered to be readily available for
certain debt obligations; such investments are stated at fair value on the
basis of valuations furnished by a pricing service, approved by the
Trustees, or dealers which determine valuations for normal
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships
between securities that are generally recognized by institutional traders.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed).
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. Discounts on zero coupon bonds, original
issue discount bonds, stepped-coupon bonds and payment in kind bonds are
accreted according to the yield-to-maturity basis. Any premium resulting
from the purchase of stepped-coupon bonds is amortized on a
yield-to-maturity basis.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term investments).
The U.S. dollar value of forward currency contracts is determined using
current forward currency exchange rates supplied by a quotation service.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is "marked to market" daily and the change in
market value is recorded as an unrealized gain or loss. When the contract
is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. The fund could be exposed to risk if
the value of the currency changes unfavorably, if the counterparties to
the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended February 28, 1999, the fund had no borrowings against the line of
credit.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
At August 31, 1998, the fund had a capital loss carryover of approximately
$402,432,000 available to offset future capital gains, if any. The amount
of the carryover and the expiration dates are:
Loss Carryover Expiration
-------------- ---------------
$239,466,000 August 31, 1999
110,228,000 August 31, 2000
52,738,000 August 31, 2003
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.70% of the first $500
million of average net assets, 0.60% of the next $500 million, 0.55% of
the next $500 million, and 0.50% of the next $5 billion, 0.475% of the
next $5 billion, 0.455% of the next $5 billion, 0.44% of the next $5
billion and 0.43% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended February 28, 1999, fund expenses were reduced by
$337,391 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized in
connection with the expense offset arrangements in an income producing
asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $2,460
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution in
accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing
shares of the fund. The Plans provide for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the
average net assets attributable to class A, class B and class M shares,
respectively. The Trustees have approved payment by the fund to an annual
rate of 0.25%, 1.00% and 0.50% of the average net assets attributable to
class A, class B and class M shares, respectively.
For the six months ended February 28, 1999, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $150,791 and $542 from
the sale of class A and class M shares, respectively and $868,648 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the six months ended February 28, 1999, Putnam Mutual
Funds Corp., acting as underwriter received $67 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended February 28, 1999, purchases and sales of
investment securities other than short-term investments aggregated
$1,059,767,898 and $1,169,224,054, respectively. There were no purchases
and sales of U.S. government obligations. In determining the net gain or
loss on securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At February 28, 1999, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
February 28, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 20,094,803 $217,885,057
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 7,059,634 76,320,952
- -----------------------------------------------------------------------------
27,154,437 294,206,009
Shares
repurchased (31,359,439) (341,793,070)
- -----------------------------------------------------------------------------
Net decrease (4,205,002) $(47,587,061)
- -----------------------------------------------------------------------------
Year ended
August 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 25,577,181 $333,528,744
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 12,674,739 164,535,205
- -----------------------------------------------------------------------------
38,251,920 498,063,949
Shares
repurchased (45,120,605) (585,257,649)
- -----------------------------------------------------------------------------
Net decrease (6,868,685) $(87,193,700)
- -----------------------------------------------------------------------------
Six months ended
February 28, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 6,560,639 $ 70,849,288
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,070,736 22,306,489
- -----------------------------------------------------------------------------
8,631,375 93,155,777
Shares
repurchased (14,694,218) (159,531,271)
- -----------------------------------------------------------------------------
Net decrease (6,062,843) $(66,375,494)
- -----------------------------------------------------------------------------
Year ended
August 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 10,055,130 $130,832,944
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,995,549 51,694,415
- -----------------------------------------------------------------------------
14,050,679 182,527,359
Shares
repurchased (21,435,734) (275,673,256)
- -----------------------------------------------------------------------------
Net decrease (7,385,055) $(93,145,897)
- -----------------------------------------------------------------------------
Six months ended
February 28, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 157,480 $1,716,721
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 61,499 664,718
- -----------------------------------------------------------------------------
218,979 2,381,439
Shares
repurchased (228,358) (2,468,705)
- -----------------------------------------------------------------------------
Net decrease (9,379) $ (87,266)
- -----------------------------------------------------------------------------
Year ended
August 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 241,153 $ 3,146,665
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 108,525 1,408,515
- -----------------------------------------------------------------------------
349,678 4,555,180
Shares
repurchased (563,137) (7,323,302)
- -----------------------------------------------------------------------------
Net decrease (213,459) $(2,768,122)
- -----------------------------------------------------------------------------
For the period
December 31, 1998
(commencement of
operations) to
February 28, 1999
- -----------------------------------------------------------------------------
Class Y
- -----------------------------------------------------------------------------
Shares sold 2,199,692 $23,933,275
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 37,653 422,622
- -----------------------------------------------------------------------------
2,237,345 24,355,897
Shares
repurchased (216,146) (2,347,931)
- -----------------------------------------------------------------------------
Net increase 2,021,199 $22,007,966
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 5
Transactions with Affiliated Issuers
Transactions during the year with companies in which the fund owned at
least 5% of the voting securities were as follows:
Purchase Sales Dividend Market
Affiliates cost cost Income Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PSF Holdings LLC Class A -- -- -- $15,117,777
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Quality Bond Fund +
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
LIFESTAGE SM FUNDS
Putnam Asset Allocation Funds-three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
+ Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
**An investment in a money market fund is neither insured nor guaranteed by
the U.S. government. These funds are managed to maintain a price of $1.00
per share, although there is no assurance that this price will be
maintained in the future.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a
prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you invest
or send money.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Edward H. D'Alelio
Vice President
Rosemary H. Thomsen
Vice President and Fund Manager
Jennifer E. Leichter
Vice President and Fund Manager
Robert M. Paine
Vice President and Fund Manager
Jeffrey A. Kaufman
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam High Yield
Trust. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' website:
http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
www.putnaminv.com
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
SA034-51081 014/324/2AC 4/99
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam High Yield Trust
Supplement to Annual Report dated 2/28/99
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $150 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
B, and M shares, which are discussed more extensively in the annual report.
ANNUAL RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return
for periods ended 2/28/99 NAV
6 months -0.89%
1 year -9.28
5 years 31.98
Annual average 5.71
10 years 138.23
Annual average 9.07
Life of fund (since class A inception, 02/14/78) 696.54
Annual average 10.37
- ----------------------------------------------------------------------------
Share value: NAV
8/31/98 $11.47
2/28/99 $10.74
- ----------------------------------------------------------------------------
Distributions:
No. Income Capital gains Total
6 $0.617000 $0.000000 $0.000000
- ----------------------------------------------------------------------------
Please note that past performance does not indicate future results. Returns
shown for class Y shares for periods prior to their inception are derived
from the historical performance of class A shares, adjusted to reflect the
initial sales charge currently applicable to class A shares. These returns
have not been adjusted to reflect differences in operating expenses which,
for class Y shares, are lower than the operating expenses applicable to
class A shares. All returns assume reinvestment of distributions at net
asset value. Performance data reflects an expense limitation previously in
effect. Without the expense limitation, total returns would have been lower.
Investment return and principal value will fluctuate so your shares, when
redeemed, may be worth more or less than their original cost. See full
report for information on comparative benchmarks. If you have questions,
please consult your fund prospectus or call Putnam toll free at
1-800-752-9894.
