Putnam
High Yield
Trust
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
2-29-00
[SCALE LOGO OMITTED]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The markets continued to provide their share of challenges and
opportunities as your fund closed its books on the first half of fiscal
2000. In the following report, the fund's managers discuss performance for
the period and prospects for the months ahead.
This is the last letter to you and the other shareholders of Putnam High
Yield Trust that I will be signing. After more than 30 years as Chairman
of the Trustees and President of the Putnam Funds, the time has come for
me to step aside. In June, John Hill will become Chairman. John is
currently an independent Trustee and has served on the board for the past
14 years. In addition, my son, George Putnam, III, will take on the role
of President. I am confident that the leadership of the funds will be in
exceptionally strong hands.
I will become Chairman Emeritus, remain a Putnam shareholder, and stay in
close touch with the funds. It has been my privilege to serve you.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
April 19, 2000
Report from the Fund Managers
Rosemary H. Thomsen
Jeffrey A. Kaufman
Amid a relatively stagnant six-month period in the high-yield market,
strong security selection -- especially in the telecommunications sector
- -- helped Putnam High Yield Trust post a performance that more than
doubled that of the market as a whole. During the six months ended
February 29, 2000, your fund's return was well ahead of the 1.52% return
of the high-yield market as measured by the First Boston High Yield Bond
Index. Rising interest rates and an uptick in defaults were the main
culprits that held back the overall performance of high-yield bonds.
However, our selection of strong performers, especially in the
telecommunications sector, not only enabled the fund to outperform but
also underscored the value of professional management in this challenging
sector.
Total return for 6 months ended 2/29/00
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- --------------------------------------------------------------------------
3.43% -1.47% 3.04% -1.86% 3.40% 0.05%
- --------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
* HIGH-YIELD MARKET EXPERIENCES UPS AND DOWNS
The high-yield market got off to a slow start during the period,
responding to a program of protracted interest-rate increases implemented
by the Federal Reserve Board, a weak equity market in the summer, and
concerns related to Y2K. As we entered the fourth quarter of 1999, though,
both the high-yield and equity markets rallied strongly, led by the Nasdaq
in general and securities of telecommunications stocks specifically.
That positive situation reversed as we entered 2000. Typically, the
high-yield market experiences a bounce at the beginning of the year known
as the January effect. The market tends to be anticipatory, however, and
it appears that this performance boost hit the market a bit early, when
fears about Y2K problems started to subside in December 1999.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Telecommunications 13.0%
Wireless
communications 6.2%
Cable television 6.1%
Broadcasting 5.9%
Telephone
services 4.3%
Footnote reads:
*Based on net assets as of 2/29/00. Holdings will vary over time.
Even though your fund has posted strong relative performance year to date
in 2000, the high-yield market environment has proved to be anemic during
that time. With the Fed pushing short-term interest rates higher four
times since the middle of 1999, investors have become more attracted to
the interest rates offered by shorter-term bonds and money market
instruments.
"Managers are finding value in corporate and municipal junk bonds. For
individuals, the safest way to play this market is probably via bond mutual
funds, since dissecting the risks and returns of specific issues is a fine
art."
-- Business Week, March 20, 2000
Yields on the short end of the market have risen to the point at which
they are as attractive as those offered by longer-term securities, but
with less risk. This move has pulled assets away from our higher-yielding
- -- but more risky -- market.
In addition, defaults increased in a meaningful way in 1999 and this
year's data indicate that this trend has not reversed. While your fund was
not immune to this trend, we were able to avoid most of the higher-profile
defaults and still deliver competitive returns.
* TELECOMMUNICATIONS LEADS MARKET AND HELPS YOUR FUND
A backdrop characterized by little difference between short- and long-term
yields can be stagnant for the fixed-income market in general and
high-yield in particular. Nevertheless, your fund's results have been
favorable during the past six months. The main reason? Our sharp focus on
securities offered by telecommunications companies and their continuing
strength. This sector now accounts for more than 20% of the high-yield
market and is by far its most influential sector.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Nextel Communications, Inc.
sr. notes 9 3/8s, 2009
Wireless communications
Midland Funding II Corp.
deb. Ser. A, 11 3/4s, 2005
Electric utilities
Millicom International Cellular S.A.
sr. disc. notes stepped-coupon zero %
(13 1/2s, 6/1/01), 2006 (Luxembourg)
Wireless communications
United Pan-Europe N.V.
144A sr. disc. notes stepped-coupon zero %
(13 3/4s, 2/1/05), 2010
(Netherlands)
Cable television
Allied Waste Industries, Inc.
company guaranty Ser. B, 10s, 2009
Environmental control
Chancellor Media Corp.
company guaranty 8s, 2008
Broadcasting
McCaw International Ltd.
sr. disc. notes stepped coupon zero %
(13s, 4/15/02), 2007
Wireless communications
CSC Holdings, Inc.
Ser. M, $11.125 cum. pfd.
Cable television
Lyondell Petrochemical Co.
sec. notes Ser. B, 9 7/8s, 2007
Chemicals
Viatel, Inc.
sr. disc. notes stepped-coupon zero %
(12 1/2s, 4/15/03), 2008
Telephone services
Footnote reads:
These holdings represent 7.8% of the fund's net assets as of 2/29/00.
Portfolio holdings will vary over time.
Telecom has done well largely because the explosion of the Internet has
sparked demand for all sorts of communications products and services,
including broadband, fiber optics, and networking. While fiber-optic loops
now circle major cities around the globe, the competitive local exchange
carriers (CLECs), which connect these networks over the last mile into
buildings, businesses, and homes, have assumed significant strategic
importance.
Intense merger and acquisition activity also helped propel securities
prices in the telecom sector. Among the fund's holdings that benefited
from investor enthusiasm about this development were Global Crossing,
which provides state-of-the-art Internet and long-distance
telecommunications services using undersea and overland digital
fiber-optic cable systems.
Nextel, a wireless communications provider and another of the fund's best
performers, had a breakout year in 1999, ending the year with more than 4
million subscribers. While these holdings and others 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.
Other investments that helped boost performance included PSINet, an
Internet supercarrier with fiber networks around the globe, and Viatel, a
European company that is setting up networks across Europe. There, we've
seen a significant amount of merger and acquisition activity, largely
because the Continent's telecommunications industry was deregulated after
the United States telecommunications industry and the Continent is trying
to play catch-up. Now that the European community has been united even
further through a common currency, Internet-driven demand for
communications services and infrastructure has exploded.
The entry of some new competition into Revlon's market, combined with
mismanagement of inventory control, affected the performance of the
company's bonds. These developments created the perception that the
company might encounter some liquidity problems and along with
disappointing earnings, hurt the valuations of the firm's securities
However, the fund still owns Revlon bonds because we feel these are
short-term difficulties from which the company should recover.
* EXCELLENT LONG-TERM OUTLOOK FOR HIGH-YIELD BONDS
With short-term yields competing for investor interest against those
offered by longer-term securities, the investment environment for
high-yield securities could remain stagnant over the near future,
especially since all indications are that the Fed will continue to raise
short-term interest rates. Nevertheless, the fundamentals of the
high-yield market, most notably within the all-important
telecommunications sector, remain quite favorable.
Overall yields in the market remain at a particularly attractive level of
about 12%. Therefore, the long-term outlook is excellent with valuations
at very appealing levels. While it may be tough sailing for a while into
the headwind caused by Fed rate hikes, we remain confident that high-yield
debt securities can provide significant opportunities for the investor
seeking high income and capital appreciation.
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 2/29/00, 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 2/29/00
Class A Class B Class M
(inception dates) (2/14/78) (3/1/93) (7/3/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 3.43% -1.47% 3.04% -1.86% 3.40% 0.05%
- ------------------------------------------------------------------------
1 year 6.24 1.15 5.45 0.67 5.99 2.55
- ------------------------------------------------------------------------
5 years 45.62 38.71 40.30 38.54 43.96 39.29
Annual average 7.81 6.76 7.01 6.74 7.56 6.85
- ------------------------------------------------------------------------
10 years 183.03 169.54 162.50 162.50 176.11 167.16
Annual average 10.96 10.42 10.13 10.13 10.69 10.33
- ------------------------------------------------------------------------
Annual average
(life of fund) 10.17 9.93 9.20 9.20 9.75 9.59
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/29/00
First Boston
High Yield Consumer
Bond Index price index
- -----------------------------------------------------------------------
6 months 1.52% 1.67%
- -----------------------------------------------------------------------
1 year 2.76 3.16
- -----------------------------------------------------------------------
5 years 49.45 12.58
Annual average 8.36 2.40
- -----------------------------------------------------------------------
10 years 202.07 32.81
Annual average 11.69 2.88
- -----------------------------------------------------------------------
Life of fund n/a 170.27
Annual average n/a 4.62
- -----------------------------------------------------------------------
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 2/29/00
Class A Class B Class M
- -----------------------------------------------------------------------------
Distributions (number) 6 6 6
- -----------------------------------------------------------------------------
Income $0.546 $0.506 $0.533
- -----------------------------------------------------------------------------
Total $0.546 $0.506 $0.533
- -----------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------------
8/31/99 $10.46 $10.98 $10.42 $10.45 $10.80
- -----------------------------------------------------------------------------
2/29/00 10.26 10.77 10.22 10.26 10.60
- -----------------------------------------------------------------------------
Current return (end of period)
- -----------------------------------------------------------------------------
Current dividend rate1 10.64% 10.14% 9.86% 10.41% 10.08%
- -----------------------------------------------------------------------------
Current 30-day SEC yield2 10.94 10.41 10.17 10.69 10.34
- -----------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2 Based on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (most recent calendar quarter)
Class A Class B Class M
(inception dates) (2/14/78) (3/1/93) (7/3/95)
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------------
6 months 3.40% -1.48% 2.92% -1.97% 3.27% -0.13%
- -----------------------------------------------------------------------------
1 year 3.48 -1.44 2.69 -1.96 3.23 -0.09
- -----------------------------------------------------------------------------
5 years 43.03 36.25 37.81 36.08 41.38 36.80
Annual average 7.42 6.38 6.62 6.36 7.17 6.47
- -----------------------------------------------------------------------------
10 years 177.16 163.90 157.08 157.08 170.56 161.76
Annual average 10.73 10.19 9.90 9.90 10.47 10.10
- -----------------------------------------------------------------------------
Annual average
(life of fund) 10.09 9.85 9.11 9.11 9.67 9.51
- -----------------------------------------------------------------------------
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 section for performance calculation method.
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 4.75% maximum 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 class B CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
Comparative benchmarks
First Boston High Yield Bond Index is a market-weighted index including
publicly traded bonds having a rating below BBB by Standard & Poor's and
Baa by Moody's.*
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
fixed-income securities.*
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.
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
<TABLE>
<CAPTION>
The fund's portfolio
February 29, 2000 (Unaudited)
CORPORATE BONDS AND NOTES (82.8%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Advertising (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
$ 10,950,000 Aoa Holdings LLC 144A sr. notes 10 3/8s, 2006 $ 10,731,000
7,100,000 Interact Operating Co. notes 14s, 2003 2,130,000
210,000 Lamar Media Corp. company guaranty 9 5/8s, 2006 210,525
2,645,000 Lamar Media Corp. sr. sub. notes 9 1/4s, 2007 2,618,550
1,305,000 Lamar Media Corp. company guaranty 8 5/8s, 2007 1,252,800
--------------
16,942,875
Aerospace and Defense (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
4,270,000 Argo-Tech Corp. company guaranty 8 5/8s, 2007 3,501,400
4,010,000 Argo-Tech Corp. company guaranty Ser. D, 8 5/8s, 2007 3,428,550
2,745,000 BE Aerospace, Inc. sr. sub. notes 9 1/2s, 2008 2,525,400
5,080,000 BE Aerospace, Inc. sr. sub. notes Ser. B, 8s, 2008 4,318,000
4,410,000 Burke Industries, Inc. company guaranty 10s, 2007 2,050,650
2,300,000 Decrane Aircraft Holdings company guaranty Ser. B, 12s, 2008 2,093,000
5,150,000 L-3 Communications Corp. sr. sub. notes Ser. B, 10 3/8s, 2007 5,175,750
5,750,000 L-3 Communications Corp. sr. notes 9 1/8s, 2008 5,189,375
2,050,000 L-3 Communications Corp. sr. sub. notes 8 1/2s, 2008 1,855,250
4,380,000 L-3 Communications Corp. company guaranty Ser. B, 8s, 2008 3,843,450
--------------
33,980,825
Agriculture (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
16,409,465 Premium Standard Farms, Inc. sr. sec. notes 11s, 2003 (PIK) 14,932,613
Airlines (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
7,600,000 Air 2 US Industries 144A sr. sub. notes 12.266s, 2020 7,766,440
6,580,000 Calair LLC 144A company guaranty 8 1/8s, 2008 5,667,025
8,235,000 Canadian Airlines Corp. secd. notes 10s, 2005 (Canada)
(In default) (NON) 6,670,350
4,030,000 Continental Airlines, Inc. sr. notes 9 1/2s, 2001 4,030,000
4,935,000 Trans World Airlines, Inc. sr. notes 11 1/2s, 2004 3,133,725
4,340,000 Trans World Airlines, Inc. sr. notes 11 3/8s, 2006 1,725,150
--------------
28,992,690
Apparel (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
3,310,000 GFSI, Inc. sr. disc. notes stepped-coupon Ser. B, zero %
(11 3/8s, 9/15/04), 2009 (STP) 662,000
11,400,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 11,514,000
5,850,000 William Carter Holdings Co. sr. sub. notes Ser. A, 12s, 2008 5,440,500
--------------
17,616,500
Automotive (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
6,070,000 Dura Operating Corp. company guaranty Ser. B, 9s, 2009 5,705,800
1,295,000 Oxford Automotive, Inc. company guaranty Ser. D,
10 1/8s, 2007 1,217,300
4,350,000 Transportation Manufacturing Operations Inc.
company guaranty 11 1/4s, 2009 4,360,875
--------------
11,283,975
Automotive Parts (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
4,599,000 Aftermarket Technology Corp. sr. sub. notes 12s, 2004 4,621,995
4,485,000 Aftermarket Technology Corp. sr. sub. notes Ser. D, 12s, 2004 4,507,425
12,920,000 Federal Mogul Corp. notes 7 1/2s, 2009 11,205,774
4,985,714 Federal Mogul Corp. bank tern loan, FRN 6.29s, 2010 4,991,946
870,000 Hayes Lemmerz International, Inc. company guaranty Ser. B,
8 1/4s, 2008 767,775
7,950,000 Lear Corp. sub. notes 9 1/2s, 2006 7,910,250
10,820,000 Motors and Gears, Inc. sr. notes Ser. D, 10 3/4s, 2006 10,657,700
7,910,000 Safety Components International, Inc. sr. sub. notes Ser. B,
10 1/8s, 2007 (In default) (NON) 1,740,200
1,140,000 San Luis Corp. S.A. de CV sr. notes 8 7/8s, 2008 (Mexico) 1,037,400
--------------
47,440,465
Banks (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
4,450,000 Chevy Chase Savings Bank Inc. sub. deb. 9 1/4s, 2005 7,291,448
10,480,000 Delta Financial Corp. sr. notes 9 1/2s, 2004 6,812,000
595,000 Dime Capital Trust I bank guaranty Ser. A, 9.33s, 2027 585,694
8,800,000 Hanvit Bank 144A sub. notes 11 3/4s, 2010 (Korea) 8,866,000
830,000 North Fork Capital Trust I company guaranty 8.7s, 2026 761,185
3,400,000 Peoples Heritage Capital Trust company guaranty Ser. B,
9.06s, 2027 3,243,056
2,375,000 Provident Capital Trust company guaranty 8.6s, 2026 2,227,394
1,450,000 Riggs Capital Trust 144A company guaranty 8 7/8s, 2027 1,330,897
3,690,000 Riggs Capital Trust 144A bonds 8 5/8s, 2026 3,284,211
4,110,000 Sovereign Bancorp Inc. sr. notes 10 1/2s, 2006 4,110,000
5,300,000 Sovereign Capital Trust company guaranty 9s, 2027 3,917,601
1,225,000 Webster Capital Trust I 144A bonds 9.36s, 2027 1,163,640
--------------
43,593,126
Basic Industrial Products (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
12,019,157 Grove Investors LLC notes 14 1/2s, 2010 (PIK) 721,149
920,000 Koppers Industries, Inc. 144A company guaranty 9 7/8s, 2007 851,000
4,710,000 Paragon Corp. Holdings, Inc. company guaranty Ser. B,
9 5/8s, 2008 1,648,500
4,300,000 Roller Bearing Co. company guaranty Ser. B, 9 5/8s, 2007 3,934,500
--------------
7,155,149
Broadcasting (4.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,270,000 Ackerly Group, Inc. sr. sub. notes Ser. B, 9s, 2009 3,073,800
9,880,000 Acme Television sr. disc. notes stepped-coupon zero %
(10 7/8s, 9/30/00), 2004 (STP) 9,089,600
4,000,000 Allbritton Communications Co. sr. sub. deb. Ser. B, 9 3/4s, 2007 3,880,000
2,110,000 Allbritton Communications Co. sr. sub. notes Ser. B, 8 7/8s, 2008 1,972,850
29,600 AMFM Operating, Inc. deb. 12 5/8s, 2006 (PIK) 33,596
338,956 Australis Media, Ltd. sr. disc. notes stepped-coupon zero %
(15 3/4s 5/15/00), 2003 (In default) (Australia) (STP) (PIK) (NON) 34
2,555,791 Australis Media, Ltd. sr. sec. disc. notes zero %,
2000 (In default) (Australia) (NON) 383,369
3,085,000 Benedek Communications Corp. sr. disc. notes stepped-coupon
zero % (13 1/4s, 5/15/01), 2006 (STP) 2,842,056
6,000,000 Benedek Broadcasting bank term loan Ser. B, FRN 9.41s, 2007 6,007,500
17,685,000 Capstar Broadcasting sr. disc. notes stepped-coupon zero %
(12 3/4s, 2/1/02), 2009 (STP) 15,562,800
6,714,100 Capstar Broadcasting sub. deb. 12s, 2009 (PIK) 7,586,933
11,090,000 CD Radio, Inc. sec. notes 14 1/2s, 2009 10,646,400
3,800,000 Central European Media Enterprises Ltd. sr. notes 9 3/8s,
2004 (Bermuda) 1,558,000
22,210,000 Chancellor Media Corp. company guaranty 8s, 2008 22,043,425
6,914,690 Citadel Broadcasting, Inc. sr. sub. notes 10 1/4s, 2007 7,035,697
1,690,000 Fox Family Worldwide, Inc. sr. disc. notes stepped-coupon
zero % (10 1/4s, 11/1/02), 2007 (STP) 1,073,150
5,040,000 Fox Family Worldwide, Inc. sr. notes 9 1/4s, 2007 4,561,200
860,000 Granite Broadcasting Corp. sr. sub. notes 9 3/8s, 2005 812,700
8,485,000 Granite Broadcasting Corp. sr. sub. notes 8 7/8s, 2008 7,636,500
5,125,000 Heritage Media Services Corp. sr. sub. notes 8 3/4s, 2006 5,163,438
7,214,000 PHI Holdings, Inc. sr. sub. notes zero %, 2001 6,095,830
3,315,000 Radio One Inc. company guaranty stepped-coupon Ser. B,
7s, (12s, 5/15/00), 2004 (STP) 3,547,050
6,660,000 Spanish Broadcasting Systems sr. sub. notes 9 5/8s, 2009 6,560,100
2,000,000 TV Azteca S.A. de C.V. sr. notes 11s, 2002 (Mexico) 1,910,000
3,550,000 TV Azteca S.A. de C.V. sr. notes 10 1/2s, 2007 (Mexico) 3,266,000
2,580,000 TV Azteca S.A. de C.V. sr. notes Ser. A, 10 1/8s, 2004 (Mexico) 2,418,750
--------------
134,760,778
Building and Construction (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
4,370,000 American Architectural Products Corp. company guaranty
11 3/4s, 2007 1,092,500
2,540,000 Atrium Companies Inc. company guaranty Ser. B, 10 1/2s, 2009 2,432,050
6,790,000 D.R. Horton, Inc. company guaranty 8s, 2009 5,992,175
11,460,000 GS Superhighway Holdings sr. notes 10 1/4s, 2007 (China) 7,907,400
1,380,000 GS Superhighway Holdings sr. notes 9 7/8s, 2004 (China) 979,800
3,320,000 Jackson Products, Inc. company guaranty Ser. B, 9 1/2s, 2005 3,071,000
2,230,000 Lennar Corp. sr. notes 7 5/8s, 2009 1,895,924
4,410,000 NCI Building Systems Inc. sr. sub. notes Ser. B, 9 1/4s, 2009 4,189,500
967,719 Terex Corp. bank term loan, FRN 8.18s, 2005 962,881
3,155,000 Toll Corp. company guaranty 8 1/8s, 2009 2,878,938
--------------
31,402,168
Building Products (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
686,000 American Standard, Inc. company guaranty 7 5/8s, 2010 620,830
6,226,000 American Standard, Inc. company guaranty 7 3/8s, 2005 5,821,310
7,220,000 Building Materials Corp. company guaranty 8s, 2008 6,281,400
--------------
12,723,540
Business Equipment and Services (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
4,285,000 Outsourcing Solutions, Inc. sr. sub. notes Ser. B, 11s, 2006 3,813,650
4,740,000 Pierce Leahy Corp. sr. sub. notes 11 1/8s, 2006 4,882,200
9,425,000 U.S. Office Products Co. company guaranty 9 3/4s, 2008 3,675,750
4,405,149 U.S. Office Products Co. bank term loan Ser. B, FRN 8.09s, 2006 3,524,119
7,321,000 United Stationer Supply, Inc. sr. sub. notes 12 3/4s, 2005 7,842,621
--------------
23,738,340
Cable Television (5.4%)
- --------------------------------------------------------------------------------------------------------------------------
6,751,000 21st Century Telecom Group sub. deb. 13 3/4s, 2010 (PIK) 6,075,900
23,175,000 21st Century Telecom Group, Inc. sr. disc. notes
stepped-coupon zero % (12 1/4s, 2/15/03), 2008 (STP) 16,048,688
3,380,000 Alaska Communications Systems Corp. company guaranty
9 3/8s, 2009 3,151,850
3,965,000 Adelphia Communications Corp. sr. notes Ser. B, 9 7/8s, 2007 3,925,350
6,140,000 Adelphia Communications Corp. sr. notes Ser. B, 8 3/8s, 2008 5,541,350
1,890,000 Bresnan Communications, Inc. sr. notes Ser. B, 8s, 2009 1,899,450
2,363,000 Century Communications Corp. sr. notes 8 7/8s, 2007 2,203,498
5,000,000 Charter Communications Holdings LLC 144A sr. disc. notes
stepped-coupon zero % (11 3/4s, 1/15/05), 2010 (STP) 2,850,000
14,575,000 Charter Communications Holdings LLC sr. disc. notes
stepped-coupon zero % (9.92s, 4/1/04), 2011 (STP) 8,380,625
2,250,000 Charter Communications Holdings LLC sr. notes 8 5/8s, 2009 2,047,500
3,730,000 Charter Communications Holdings LLC sr. notes 8 1/4s, 2007 3,422,275
4,270,000 Classic Cable, Inc. 144A sr. sub. notes 10 1/2s, 2010 4,275,338
2,320,000 CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2023 2,401,200
9,020,000 CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2013 9,313,150
4,475,000 CSC Holdings, Inc. sr. notes 7 1/4s, 2008 4,165,464
6,425,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (10 3/4s, 2/15/02),
2007 (United Kingdom) (STP) 5,091,813
1,875,000 Globo Communicacoes 144A company guaranty 10 1/2s,
2006 (Brazil) 1,631,250
14,785,000 Knology Holdings, Inc. sr. disc. notes stepped-coupon 11 7/8s,
(11 7/8s, 10/15/02), 2007 (STP) 9,610,250
770,000 Lenfest Communications, Inc. sr. sub. notes 8 1/4s, 2008 778,058
7,360,000 NTL Communications Corp. sr. notes Ser. B, 11 1/2s, 2008 7,746,400
2,370,000 RCN Corp. sr. disc. notes stepped-coupon 11 1/8s,
(11 1/8s, 10/15/02), 2007 (STP) 1,576,050
1,030,000 Rogers Cablesystems Ltd. notes 11s, 2015 (Canada) 1,169,050
450,000 Rogers Cablesystems Ltd. company guaranty 10s,
2007 (Canada) 472,500
115,000 Rogers Cablesystems Ltd. sr. notes Ser. B, 10s, 2005 (Canada) 120,750
7,850,000 Supercanal Holdings S.A. 144A sr. notes 11 1/2s,
2005 (In default) (Argentina) (NON) 4,631,500
8,630,000 TeleWest Communications Plc 144A sr. disc. notes
stepped-coupon 11 3/8s, (11 3/8s, 2/1/05),
2010 (United Kingdom) (STP) 5,091,700
2,410,000 TeleWest Communications Plc structured notes (issued by
DLJ International Capital) 10 7/8s, 2005 (Cayman Islands) 2,391,443
2,790,000 TeleWest Communications Plc 144A sr. notes 9 7/8s, 2010 2,790,000
5,740,000 TeleWest Communications Plc 144A sr. disc. notes
stepped-coupon zero %, (9 1/4, 4/15/04),
2009 (United Kingdom) (STP) 3,386,600
42,380,000 United Pan-Europe N.V. 144A sr. disc. notes stepped-coupon
zero % (13 3/4s, 2/1/05), 2010 (Netherlands) (STP) 22,461,400
9,180,000 United Pan-Europe N.V. sr. disc. notes stepped-coupon zero %
(12.5s, 8/1/04), 2009 (Netherlands) (STP) 5,117,850
5,690,000 United Pan-Europe N.V. 144A 10 7/8s, 2009 (Netherlands) 5,547,750
--------------
155,316,002
Chemicals (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
6,380,000 Geo Specialty Chemicals, Inc. sr. sub. notes 10 1/8s, 2008 5,423,000
5,810,000 Huntsman Corp. 144A sr. sub. notes 9 1/2s, 2007 5,490,450
14,120,000 Huntsman ICI Chemicals Inc. 144A sr. sub. notes 10 1/8s, 2009 14,049,400
20,115,000 Lyondell Petrochemical Co. sec. notes Ser. B, 9 7/8s, 2007 19,310,400
2,416,000 Lyondell Petrochemical Co. notes Ser. A, 9 5/8s, 2007 2,319,360
7,065,000 Lyondell Petrochemical Co. sr. sub. notes 10 7/8s, 2009 6,676,425
10,250,000 PCI Chemicals & Pharmaceuticals company guaranty 9 1/4s,
2007 (India) 8,405,000
5,905,000 Pioneer Americas Acquisition 144A sr. notes 9 1/4s, 2007 5,078,300
2,432,229 Pioneer Americas Acquisition bank term loan FRN 8.87s, 2006 2,018,750
1,437,879 Pioneer Americas Acquisition bank term loan FRN 7.86s, 2006 1,179,061
11,513,144 Polytama International notes 11 1/4s, 2007 (Indonesia) 1,381,577
5,850,000 Royster-Clark Inc. 144A 1st mtge 10 1/4s, 2009 5,206,500
7,140,000 Sterling Chemicals Holdings sr. disc. notes stepped-coupon
zero % (13 1/2s, 8/15/01), 2008 (STP) 2,356,200
2,610,000 Sterling Chemicals, Inc. company guaranty Ser. B, 12 3/8s, 2006 2,701,350
1,170,000 Sterling Chemicals, Inc. sr. sub. notes Ser. A, 11 1/4s, 2007 965,250
7,355,000 Trikem S.A. 144A bonds 10 5/8s, 2007 (Brazil) 5,810,450
--------------
88,371,473
Computer Services and Software (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
2,975,000 Concentric Network Corp. sr. notes 12 3/4s, 2007 3,205,563
5,480,000 Cybernet Internet Services Intl., Inc. 144A sr. notes 14s, 2009 4,548,400
6,690,000 Exodus Communications, Inc. 144A sr. notes 10 3/4s, 2009 6,790,350
5,000,000 Globix Corp. 144A sr. notes 12 1/2s, 2010 4,962,500
460,000 PSINet, Inc. sr. notes 11 1/2s, 2008 464,600
6,760,000 PSINet, Inc. sr. notes 11s, 2009 6,895,200
740,000 PSINet, Inc. 144A sr. notes 10 1/2s, 2006 728,900
4,250,000 Rhythms Netconnections Inc. 144A sr. notes 14s, 2010 4,186,250
11,185,000 Unisys Corp. sr. notes 11 3/4s, 2004 12,079,800
2,000,000 Unisys Corp. sr. notes 7 7/8s, 2008 1,870,000
4,070,000 Verio Inc. sr. notes 11 1/4s, 2008 4,131,050
--------------
49,862,613
Conglomerates (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
14,360,000 Cathay International Ltd. 144A sr. notes 13 1/2s, 2008 (China) 7,180,000
Consumer Durable Goods (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
7,980,000 Albecca Inc. company guaranty 10 3/4s, 2008 6,364,050
5,000,000 Doskcil Manufacturing Co 144A sr. sub. notes 10 1/8s, 2007 1,900,000
4,460,000 Iron Age Corp. company guaranty 9 7/8s, 2008 3,211,200
13,600,000 Samsonite Corp. sr. sub. notes 10 3/4s, 2008 11,424,000
7,418,478 Sealy Mattress Co. 144A sr. notes 12s, 2008 7,195,924
--------------
30,095,174
Consumer Services (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
8,000,000 Coinmach Corp. sr. notes Ser. D, 11 3/4s, 2005 8,120,000
Cosmetics (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
1,135,000 French Fragrances, Inc. company guaranty Ser. D, 10 3/8s, 2007 1,089,600
3,275,000 French Fragrances, Inc. sr. notes Ser. B, 10 3/8s, 2007 3,111,250
3,180,000 Revlon Consumer Products sr. notes 9s, 2006 2,273,700
10,940,000 Revlon Consumer Products sr. sub. notes 8 5/8s, 2008 4,376,000
--------------
10,850,550
Electric Utilities (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
5,880,000 AES China Generating Co. sr. notes 10 1/8s, 2006 (China) 4,116,000
3,060,000 Applied Power Inc. sr. sub. notes 8 3/4s, 2009 3,136,500
3,440,000 Azurix Corp. 144A notes 10 3/8s, 2007 3,465,800
4,000,000 Calpine Corp. sr. notes 10 1/2s, 2006 4,220,000
2,185,000 Calpine Corp. sr. notes 7 7/8s, 2008 2,095,643
2,025,000 Calpine Corp. sr. notes 7 3/4s, 2009 1,913,625
2,390,000 Cleveland Electric Illuminating Co. 1st mtge 6.86s, 2008 2,193,375
7,350,000 CMS Energy Corp. pass-through certificates 7s, 2005 6,814,185
4,410,000 CMS Energy Corp. sr. notes Ser. B, 6 3/4s, 2004 4,112,325
15,100,000 Midland Funding II Corp. deb. Ser. B, 13 1/4s, 2006 17,549,522
22,325,000 Midland Funding II Corp. deb. Ser. A, 11 3/4s, 2005 23,897,127
2,025,000 North Atlantic Energy Corp. 1st mtge. Ser. A, 9.05s, 2002 2,042,962
3,365,903 Northeast Utilities System notes Ser. A, 8.58s, 2006 3,356,377
6,929,984 Northeast Utilities System notes Ser. B, 8.38s, 2005 6,896,790
18,680,000 Panda Global Energy Co. company guaranty 12 1/2s,
2004 (China) 9,340,000
11,130,000 York Power Funding 144A notes 12s, 2007 (Cayman Islands) 11,463,900
--------------
106,614,131
Electronics (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,585,000 Celestica International Ltd. 144A sr. sub. notes 10 1/2s,
2006 (Canada) 1,616,700
6,485,000 DII Group, Inc. (The) sr. sub. notes 8 1/2s, 2007 6,355,300
3,770,000 Flextronics International Ltd. sr. sub. notes Ser. B, 8 3/4s, 2007 3,600,350
900,000 Hadco Corp. company guaranty 9 1/2s, 2008 868,500
1,405,000 HCC Industries, Inc. company guaranty 10 3/4s, 2007 800,850
5,450,000 Moog, Inc. sr. sub. notes Ser. B, 10s, 2006 5,531,750
3,950,000 Telecommunications Techniques, Inc. company guaranty
9 3/4s, 2008 3,604,375
4,820,000 Viasystems, Inc. sr. notes Ser. B, 9 3/4s, 2007 3,759,600
4,205,000 Viasystems, Inc. sr. sub. notes 9 3/4s, 2007 3,279,900
--------------
29,417,325
Entertainment (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
8,190,000 Premier Parks, Inc. sr. notes 9 3/4s, 2007 7,780,500
4,500,000 Premier Parks bank term loan FRN 8.66s, 2005 4,533,750
5,000,000 SFX Entertainment, Inc. bank term loan Ser. B, FRN 9.56s, 2006 5,000,000
5,990,000 SFX Entertainment, Inc. company guaranty 9 1/8s, 2008 6,139,750
6,880,000 SFX Entertainment, Inc. 144A company guaranty Ser. B,
9 1/8s, 2008 6,467,200
--------------
29,921,200
Environmental Control (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
27,510,000 Allied Waste Industries, Inc. company guaranty Ser. B, 10s, 2009 22,420,650
4,500,000 Allied Waste Industries, Inc. bank term loan Ser. C, FRN
8.438s, 2007 4,421,925
3,750,000 Allied Waste Industries, Inc. bank term loan Ser. B, FRN
8.188s, 2006 3,661,913
5,900,000 Allied Waste Industries, Inc. company guaranty Ser. B,
7 5/8s, 2006 5,074,000
2,530,000 Waste Management, Inc. sr. notes 7 1/8s, 2007 2,251,776
320,000 Waste Management, Inc. company guaranty 6 7/8s, 2009 271,488
--------------
38,101,752
Financial Services (3.2%)
- --------------------------------------------------------------------------------------------------------------------------
11,570,000 Aames Financial Corp. sr. notes 9 1/8s, 2003 6,942,000
8,950,000 Advanta Corp. company guaranty Ser. B, 8.99s, 2026 6,399,250
14,125,000 Advanta Corp. med. term notes Ser. B, 7s, 2001 13,224,249
4,515,000 AMRESCO, Inc. sr. sub. notes Ser. 98-A, 9 7/8s, 2005 3,160,500
6,610,000 Colonial Capital II 144A company guaranty 8.92s, 2027 6,003,380
7,678,000 Conseco Financial Corp. sr. sub. notes 10 1/4s, 2002 7,899,050
12,490,000 Contifinancial Corp. sr. notes 8 3/8s, 2003 1,124,100
4,225,000 Contifinancial Corp. sr. notes 8 1/8s, 2008 380,250
3,920,000 Contifinancial Corp. sr. notes 7 1/2s, 2002 343,000
6,450,000 GS Escrow Corp. sr. notes 7 1/8s, 2005 5,767,719
6,620,000 Imperial Credit Capital Trust I 144A company guaranty
10 1/4s, 2002 5,130,500
530,000 Imperial Credit Industries, Inc. sr. notes 9 7/8s, 2007 402,800
6,700,000 Local Financial Corp. sr. notes 11s, 2004 6,700,000
3,755,000 Ocwen Capital Trust I company guaranty 10 7/8s, 2027 2,440,750
6,900,000 Ocwen Federal Bank FSB sub. deb. 12s, 2005 6,486,000
4,140,000 Ocwen Financial Corp. notes 11 7/8s, 2003 3,808,800
11,600,000 Resource America Inc. 144A sr. notes 12s, 2004 9,164,000
5,860,000 Superior Financial 144A sr. notes 8.65s, 2003 5,569,420
--------------
90,945,768
Food and Beverages (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
8,235,000 Aurora Foods, Inc. sr. sub. notes Ser. B, 9 7/8s, 2007 4,529,250
5,785,000 Eagle Family Foods company guaranty Ser. B, 8 3/4s, 2008 4,599,075
6,600,000 RAB Enterprises, Inc. company guaranty 10 1/2s, 2005 4,554,000
8,910,000 RAB Holdings, Inc. sr. notes 13s, 2008 4,455,000
8,939,000 Triarc Consumer Products, Inc. 144A sr. sub. notes 10 3/4s, 2009 8,559,093
5,945,000 Vlasic Foods Intl. Inc. sr. sub. notes Ser. B, 10 1/4s, 2009 3,388,650
--------------
30,085,068
Gaming (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
3,648,292 Ameristar Casinos Inc. company guaranty Ser. B, 8s, 2004 3,283,463
3,260,000 Argosy Gaming Co. company guaranty 10 3/4s, 2009 3,357,800
2,860,000 Boyd Gaming Corp. sr. sub. notes 9 1/2s, 2007 2,688,400
15,195,000 Fitzgeralds Gaming Corp. company guaranty Ser. B,
12 1/4s, 2004 (In default) (NON) 7,749,450
1,110,000 Hard Rock Hotel, Inc. sr. sub. notes Ser. B, 9 1/4s, 2005 899,100
11,350,000 Hollywood Casino Corp. company guaranty 11 1/4s, 2007 11,718,875
1,000,000 Hollywood Park Inc. sr. sub. notes Ser. B, 9 1/2s, 2007 967,500
6,570,000 Hollywood Park, Inc. company guaranty Ser. B, 9 1/4s, 2007 6,323,625
4,900,000 Horseshoe Gaming Holdings company guaranty 8 5/8s, 2009 4,508,000
5,570,000 Isle of Capri Black Hawk LLC 144A 1st mortgage Ser. B,
13s, 2004 6,071,300
1,990,000 Isle Of Capri Black Hack bank term loan, FRN 9.35s, 3/1/06 1,997,463
7,540,000 Mohegan Tribal Gaming, Auth. sr. sub. notes 8 3/4s, 2009 7,219,550
1,480,000 Park Place Entertainment 144A sr. sub. notes 9 3/8s, 2007 1,459,650
560,000 Park Place Entertainment sr. notes 8 1/2s, 2006 539,655
7,520,000 Peninsula Gaming Llc 144A units 12 1/4s, 2006 7,820,800
3,870,000 Riviera Black Hawk Inc. 1st mtge. 13s, 2005 4,140,900
11,335,000 Trump A.C. 1st mtge. 11 1/4s, 2006 7,764,475
4,750,000 Trump A.C. company guaranty Ser. B, 11 1/4s, 2006 3,230,000
12,665,000 Trump Castle Funding 144A sub. notes 10 1/4s, 2003 12,791,650
2,500,000 Trump Castle Hotel 144A sr. sub. notes 10 1/4s, 2003 2,525,000
1,770,000 Venetian Casino company guaranty 12 1/4s, 2004 1,610,700
--------------
98,667,356
Health Care (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,540,000 Bio-Rad Labs Corp. 144A sr. sub. notes 11 5/8s, 2007 1,557,325
2,370,000 Columbia/HCA Healthcare Corp. deb. 8.36s, 2024 2,115,225
735,000 Columbia/HCA Healthcare Corp. med term notes notes
7.69s, 2025 595,350
2,965,000 Columbia/HCA Healthcare Corp. notes 7 1/4s, 2008 2,601,788
3,680,000 Columbia/HCA Healthcare Corp. med term notes 6.63s, 2045 3,467,038
45,000 Conmed Corp. company guaranty 9s, 2008 41,400
8,650,000 Extendicare Health Services, Inc. company guaranty 9.35s, 2007 5,449,500
2,500,000 Genesis Health Ventures, Inc. sr. sub. notes 9 3/4s, 2005 375,000
5,770,000 Integrated Health Services, Inc. sr. sub. notes Ser. A, 9 1/2s, 2007
(In default) (NON) 115,400
4,370,000 Integrated Health Services, Inc. sr. sub. notes Ser. A, 9 1/4s, 2008
(In default) (NON) 87,400
2,830,000 Lifepoint Hospital Holdings company guaranty Ser. B,
10 3/4s, 2009 2,907,825
4,000,000 Mariner Post-Acute Network, Inc. sr. sub. notes
stepped-coupon Ser. B, zero % (10 1/2s, 11/1/02), 2007
(In default) (NON) (STP) 20,000
17,240,000 Mariner Post-Acute Network, Inc. sr. sub. notes Ser. B,
9 1/2s, 2007 (In default) (NON) 86,200
3,100,000 Multicare Cos., Inc. sr. sub. notes 9s, 2007 465,000
7,832,000 Paracelsus Healthcare sr. sub. notes 10s, 2006 3,211,120
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
(In default) (NON) 232,100
1,750,000 Sun Healthcare Group, Inc. 144A sr. sub. notes 9 3/8s, 2008
(In default) (NON) 35,000
1,389,000 Tenet Healthcare Corp. sr. sub. notes 8 5/8s, 2007 1,326,495
9,201,000 Tenet Healthcare Corp. sr. notes Ser. B, 8 1/8s, 2008 8,464,920
7,610,000 Tenet Healthcare Corp. sr. notes 8s, 2005 7,229,500
2,450,000 Tenet Healthcare Corp. sr. notes Ser. B, 7 5/8s, 2008 2,241,750
4,210,000 Triad Hospitals Holdings company guaranty Ser. B, 11s, 2009 4,304,725
5,000,000 Vanguard Health Systems, Inc. bank term loan, FRN 6.52s, 2001 5,025,000
--------------
57,085,061
Lodging (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
5,730,000 Epic Resorts LLC company guaranty Ser. B, 13s, 2005 4,182,900
10,285,000 HMH Properties, Inc. sr. notes Ser. C, 8.45s, 2008 9,230,788
7,980,000 HMH Properties, Inc. company guaranty Ser. B, 7 7/8s, 2008 6,922,650
1,960,000 Host Marriott Travel Plaza sr. notes Ser. B, 9 1/2s, 2005 2,043,300
6,595,000 ITT Corp. notes 6 3/4s, 2005 5,804,787
8,000,000 Starwood Hotels, Inc. bank term loan 8.763s, 2003 8,040,000
4,488,750 Strategic Hotel bank term loan FRN 8.95s, 2004 4,499,972
--------------
40,724,397
Manufacturing (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
12,780,000 Blount Inc. company guaranty 13s, 2009 13,482,900
6,287,500 Blount Inc. bank term loan FRN 9.375s, 9/1/06 6,334,656
7,540,000 Insilco Holding Co. sr. disc. notes stepped-coupon zero %
(14s, 8/15/03), 2008 (STP) 3,619,200
--------------
23,436,756
Media (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
3,695,000 RBS Participacoes S.A. 144A company guaranty 11s,
2007 (Brazil) 3,177,700
Medical Supplies and Devices (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
10,965,000 ALARIS Medical Systems, Inc. company guaranty 9 3/4s, 2006 9,100,950
1,492,500 Dade Behring bank term loan Ser. C, FRN 9.19s, 2006 1,492,500
1,492,500 Dade Behring bank term loan Ser. B, FRN 8.94s, 2006 1,492,500
3,155,000 Dade International, Inc. sr. sub. notes Ser. B, 11 1/8s, 2006 3,020,913
7,120,000 Leiner Health Products sr. sub. notes 9 5/8s, 2007 5,322,200
7,440,000 Mediq, Inc. deb. stepped-coupon zero % (13s, 6/1/03), 2009 (STP) 372,000
7,090,000 Mediq, Inc. company guaranty 11s, 2008 709,000
--------------
21,510,063
Metals and Mining (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
12,090,000 Better Minerals & Aggregates Co. 144A sr. sub. notes 13s, 2009 12,090,000
2,790,000 Kaiser Aluminum & Chemical Corp. sr. notes 9 7/8s, 2002 2,685,375
9,315,000 Lodestar Holdings, Inc. company guaranty 11 1/2s, 2005 2,794,500
1,030,000 Weirton Steel Co. sr. notes 11 3/8s, 2004 1,053,175
3,530,000 WHX Corp. sr. notes 10 1/2s, 2005 3,327,025
--------------
21,950,075
Motion Picture Distribution (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
8,135,000 AMC Entertainment, Inc. sr. sub. notes 9 1/2s, 2011 6,182,600
3,730,000 Cinemark USA, Inc. sr. sub. notes Ser. D, 9 5/8s, 2008 (Mexico) 3,170,500
25,608,000 Diva Systems Corp. sr. disc. notes, stepped-coupon Ser. B,
zero % (12 5/8s, 3/1/03), 2008 (STP) 13,572,240
4,490,000 Regal Cinemas, Inc. sr. sub. notes 9 1/2s, 2008 2,918,500
13,349,000 United Artists Theatre sr. sub. notes 9 3/4s, 2008 1,067,920
116,000 United Artists Theatre 144A sr. sub. notes 10.415s, 2007 11,600
--------------
26,923,360
Oil and Gas (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,270,000 Belco Oil & Gas Corp. company guaranty Ser. B, 10 1/2s, 2006 3,351,750
3,900,000 Belco Oil & Gas Corp. sr. sub. notes Ser. B, 8 7/8s, 2007 3,666,000
2,215,000 Benton Oil & Gas Co. sr. notes 11 5/8s, 2003 1,439,750
3,050,000 Gulf Canada Resources, Ltd. sr. notes 8 3/8s, 2005 (Canada) 2,973,750
3,850,000 Gulf Canada Resources, Ltd. sr. notes 8.35s, 2006 (Canada) 3,744,125
2,000,000 Gulf Canada Resources, Ltd. sr. notes 8 1/4s, 2017 (Canada) 1,807,760
3,450,000 HS Resources, Inc. sr. sub. notes Ser. B, 9 1/4s, 2006 3,312,000
2,990,000 Leviathan Gas Corp. company guaranty Ser. B, 10 3/8s, 2009 3,049,800
3,220,000 Ocean Energy, Inc. company guaranty Ser. B, 8 7/8s, 2007 3,139,500
12,223,000 Ocean Energy, Inc. company guaranty Ser. B, 8 3/8s, 2008 11,642,408
1,000,000 Parker Drilling Corp. company guaranty Ser. D, 9 3/4s, 2006 962,500
5,495,000 RAM Energy Inc. sr. notes 11 1/2s, 2008 2,637,600
7,520,000 RBF Finance Co. company guaranty 11 3/8s, 2009 7,971,200
5,120,000 RBF Finance Co. company guaranty 11s, 2006 5,324,800
3,180,000 Seagull Energy sr. sub. notes 8 5/8s, 2005 3,108,450
4,755,000 Seven Seas Petroleum sr. notes Ser. B, 12 1/2s, 2005 1,426,500
3,820,000 Snyder Oil Corp. sr. sub. notes 8 3/4s, 2007 3,781,800
12,280,000 Vintage Petroleum sr. sub. notes 9 3/4s, 2009 12,402,800
1,070,000 Vintage Petroleum sr. sub. notes 9s, 2005 1,048,600
--------------
76,791,093
Packaging and Containers (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
8,220,000 AEP Industries, Inc. sr. sub. notes 9 7/8s, 2007 7,233,600
8,575,000 Consumers International 144A sr. notes 10 1/4s, 2005 6,088,250
330,000 Gaylord Container Corp. sr. notes Ser. B, 9 3/4s, 2007 307,725
2,740,000 Gaylord Container Corp. sr. notes Ser. B, 9 3/8s, 2007 2,500,250
3,350,000 Gaylord Container Corp. sr. sub. notes 9 7/8s, 2008 2,747,000
7,515,000 Huntsman Packaging Corp. company guaranty 9 1/8s, 2007 7,139,250
1,533,335 Jefferson Smurft bank term loan Ser. B, FRN 9.38s, 2006 1,533,335
2,930,000 Kappa Beheer BV company guaranty 10 5/8s,
2009 (Netherlands) 2,959,300
1,880,000 Owens-Illinois, Inc. deb. 7.8s, 2018 1,643,816
8,020,000 Owens-Illinois, Inc. sr. notes 7.15s, 2005 7,381,287
2,160,000 Packaging Corp. company guaranty 9 5/8s, 2009 2,165,400
2,640,000 Riverwood International Corp. company guaranty 10 7/8s, 2008 2,527,800
6,510,000 Riverwood International Corp. company guaranty 10 5/8s, 2007 6,607,650
13,518,000 Riverwood International Corp. bank term loan, FRN 8.61s, 2003 13,545,577
--------------
64,380,240
Paper and Forest Products (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
8,113,609 Alabama River Newsprint bank term loan FRN 7.56s, 2002 6,190,887
11,375,000 APP Finance II Mauritius Ltd. bonds stepped-coupon 12s,
(16s, 2/15/04), 2049 (Indonesia) (STP) 7,166,250
5,900,000 APP Global Finance III sec. notes FRN 10.345s,
2002 (Cayman Islands) 4,307,000
3,000,000 Boise Cascade Co. notes 7.35s, 2004 2,853,720
5,610,000 Doman Industries Ltd. company guaranty 12s, 2004 (Canada) 5,890,500
9,500,000 Indah Kiat Financial Mauritius Ltd. company guaranty 10s,
2007 (Indonesia) 6,460,000
7,680,000 Pacifica Papers, Inc. sr. notes 10s, 2009 (Canada) 7,641,600
11,680,000 Pindo Deli Finance Mauritius Ltd. company guaranty 10 3/4s,
2007 (Indonesia) 7,942,400
5,340,000 Repap New Brunswick 11 1/2s, 2004 (Canada) 5,446,800
7,350,000 Repap New Brunswick sr. notes 10 5/8s, 2005 (Canada) 6,798,750
5,000,000 Stone Container Corp. sr. notes 12.58s, 2016 5,287,500
4,270,000 Tembec Industries, Inc. company guaranty 8 5/8s,
2009 (Canada) 4,109,875
--------------
70,095,282
Pharmaceuticals (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
9,705,000 ICN Pharmaceuticals, Inc. 144A sr. notes 9 1/4s, 2005 9,244,013
3,000,000 ICN Pharmaceuticals, Inc. 144A sr. notes 8 3/4s, 2008 2,775,000
--------------
12,019,013
Publishing (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
12,780,000 Affinity Group Holdings sr. notes 11s, 2007 11,757,600
2,450,000 Perry-Judd company guaranty 10 5/8s, 2007 2,051,875
4,949,706 Von Hoffman Press, Inc. 144A sr. sub. notes 13 1/2s, 2009 4,504,232
--------------
18,313,707
Railroads (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
1,765,000 MRS Logistica, S.A. bonds Ser. B, 10 5/8s, 2005 (Brazil) 1,517,900
1,165,000 TFM S.A. de C.V. company guaranty 10 1/4s, 2007 (Mexico) 1,118,400
11,045,000 TFM S.A. de C.V. company guaranty stepped-coupon zero %,
(11 3/4s, 6/15/02), 2009 (Mexico) (STP) 7,814,338
--------------
10,450,638
Restaurants (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
5,490,000 FRD Acquisition Co. sr. notes Ser. B, 12 1/2s, 2004 3,294,000
Retail (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
1,500,000 Amazon.com Inc. sr. disc. notes stepped-coupon zero %
(10s, 05/01/03), 2008 (STP) 900,000
7,115,000 Home Interiors & Gifts, Inc. company guaranty 10 1/8s, 2008 5,905,450
1,600,000 K mart Corp. med. term notes 9s, 2020 1,464,016
2,000,000 K mart Corp. med. term notes 8.96s, 2019 1,826,780
842,000 Kasper A.S.L. Ltd. sr. notes 12 3/4s, 2004 547,300
6,925,000 Mothers Work, Inc. sr. notes 12 5/8s, 2005 6,717,250
5,265,000 NBTY Inc. 144A sr. sub. notes 8 5/8s, 2007 4,738,500
3,900,000 North Atlantic Trading Co. company guaranty Ser. B, 11s, 2004 3,724,500
--------------
25,823,796
Satellite Services (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,089,230 Direct Sat 1 144A notes 8 1/4s, 2001 1,089,230
933,080 Echostar I 144A sr. notes 8 1/4s, 2001 933,080
4,625,000 Golden Sky Systems company guaranty Ser. B, 12 3/8s, 2006 5,110,625
6,620,000 Innova S De R.L. sr. notes 12 7/8s, 2007 (Mexico) 6,123,500
5,910,000 Orbital Imaging Corp. sr. notes Ser. D, 11 5/8s, 2005 4,137,000
2,150,000 Pegasus Communications Corp. sr. notes Ser. B, 9 3/4s, 2006 2,085,500
1,330,000 Pegasus Media & Communications notes Ser. B, 12 1/2s, 2005 1,429,750
5,015,000 Satelites Mexicanos S.A. de C.V. 144A sr. notes 10 1/8s,
2004 (Mexico) 3,911,700
5,083,000 Satelites Mexicanos S.A. de C.V. 144A company guaranty FRB
9 3/8s, 2004 (Mexico) 4,828,850
--------------
29,649,235
Semiconductors (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,530,000 Chippac Intl. Ltd. 144A company guaranty 12 3/4s, 2009 1,606,500
2,330,000 Fairchild Semiconductor Corp. company guaranty 10 3/8s, 2007 2,283,400
4,055,000 Fairchild Semiconductor Corp. sr. sub. notes 10 1/8s, 2007 3,994,175
--------------
7,884,075
Shipping (--%)
- --------------------------------------------------------------------------------------------------------------------------
3,700,000 Pegasus Shipping 144A company guaranty 11 7/8s, 2004
(In default) (NON) 1,406,000
Specialty Consumer Products (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
8,650,000 Decora Industries, Inc. sr. sec. notes Ser. B, 11s, 2005 4,584,500
Steel (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
8,140,000 AK Steel Corp. sr. notes 9 1/8s, 2006 7,987,375
3,140,000 Armco, Inc. sr. notes 8 7/8s, 2008 3,045,800
8,960,000 LTV Corp. sr. notes 11 3/4s, 2009 9,139,200
5,750,000 National Steel Corp. 1st mtge. Ser. D, 9 7/8s, 2009 5,692,500
3,352,000 UCAR Global Enterprises sr. sub. notes Ser. B, 12s, 2005 3,469,320
8,500,000 WCI Steel, Inc. sr. notes Ser. B, 10s, 2004 8,415,000
1,655,000 Wheeling-Pittsburgh Steel Corp. sr. notes 9 1/4s, 2007 1,551,563
--------------
39,300,758
Telecommunications (10.5%)
- --------------------------------------------------------------------------------------------------------------------------
14,170,000 Barak I.T.C. sr. disc. notes stepped-coupon Ser. B, zero %
(12 1/2s, 11/15/02), 2007 (Israel) (STP) 8,076,900
6,820,000 Bestel S.A.de C.V. sr. disc. notes stepped-coupon zero %
(12 3/4s, 5/15/03), 2005 (Mexico) (STP) 5,251,400
6,510,000 Birch Telecommunications, Inc. sr. notes 14s, 2008 6,510,000
1,385,000 Caprock Communications Corp. sr. notes 11 1/2s, 2009 1,412,700
8,710,000 Carrier1 Intl. S.A. sr. notes Ser. B, 13 1/4s, 2009 (Luxembourg) 9,145,500
8,965,000 Conecel Holdings 144A notes Ser. A, 14s, 2000 (In default) (NON) 2,241,250
14,485,000 Covad Communications Group, Inc. sr. disc. notes
stepped-coupon Ser. B, zero % (13 1/2s, 03/15/03), 2008 (STP) 9,270,400
1,055,000 Covad Communications Group Inc. sr. notes 12 1/2s, 2009 1,086,650
7,920,000 Covad Communications Group 144A sr. notes 12s, 2010 7,860,600
3,465,000 Econophone, Inc. company guaranty 13 1/2s, 2007 3,638,250
5,335,000 Esprit Teleom Group PLC sr. notes 11 1/2s,
2007 (United Kingdom) 5,121,600
18,680,000 Firstworld Communication Corp. sr. disc. notes
stepped-coupon zero % (13, 4/15/03), 2008 (STP) 9,526,800
17,500,000 Focal Communications Corp. sr. disc. notes, stepped-coupon
Ser. B, zero % (12 1/8s, 02/15/03), 2008 (STP) 11,725,000
5,530,000 Focal Communications Corp. 144A sr. notes 11 7/8s, 2010 5,723,550
1,500,000 Global Crossing Holdings, Ltd. company guaranty 9 5/8s, 2008 1,462,500
10,245,000 Global Crossing Holdings Ltd. 144A sr. notes 9 1/2s, 2009 9,886,425
8,325,000 Global Crossing Holdings Ltd. 144A sr. notes 9 1/8s, 2006 8,033,625
2,030,000 Globe Telecom, Inc. 144A sr. notes 13s, 2009 (Philippines) 2,248,225
7,590,000 GST Telecommunications, Inc. sr. disc. notes stepped-coupon
zero % (10 1/2s, 5/1/03), 2008 (STP) 3,757,050
650,000 ICG Communications, Inc. sr. disc. notes stepped-coupon
zero % (10s, 02/15/03), 2008 (STP) 378,625
23,720,000 ICG Services, Inc. sr. disc. notes stepped-coupon zero %
(9 7/8s, 5/1/03), 2008 (STP) 13,579,700
17,610,000 Intelcom Group (USA), Inc. company guaranty
stepped-coupon zero % (12 1/2s, 5/1/01), 2006 (STP) 14,660,325
740,000 Intercel, Inc. sr. disc. notes stepped-coupon zero %
(12s, 2/1/01), 2006 (STP) 691,900
4,500,000 Intermedia Communications, Inc. sr. disc. notes
stepped-coupon Ser. B, zero %, (121/4s, 3/1/04), 2009 (STP) 2,700,000
890,000 Intermedia Communications, Inc. sr. notes Ser. B, 8.6s, 2008 812,125
8,440,000 Intira Corp. bonds 13s, 2010 4,497,760
17,030,000 IPC Information Systems Inc. sr. disc. notes zero %
(10 7/8s,), 2008 (STP) 14,816,100
60,000 KMC Telecommunications Inc. sr. notes 13 1/2s, 2009 61,200
27,060,000 KMC Telecom Holdings, Inc. sr. disc. notes stepped-coupon
zero % (12 1/2s, 2/15/03), 2008 (STP) 15,694,800
4,190,000 Level 3 Communication, Inc. 144A sr. notes 11 1/4s, 2010 4,169,050
6,580,000 Level 3 Communication, Inc. 144A sr. notes 11s, 2008 6,596,450
9,785,000 Logix Communications Enterprises sr. notes 12 1/4s, 2008 7,094,125
8,850,000 Madison River Capital 144A sr. notes 13 1/4s, 2010 8,717,250
9,030,000 Microcell Telecommunications sr. disc. notes stepped-coupon
Ser. B, zero % (14s, 12/1/01), 2006 (Canada) (STP) 8,127,000
2,040,000 Netia Holdings B.V. 144A company guaranty stepped-coupon
zero % (11 1/4s, 11/1/01), 2007 (Poland) (STP) 1,433,100
3,815,000 Netia Holdings B.V. 144A company guaranty 10 1/4s,
2007 (Poland) 3,366,738
7,450,000 NorthEast Optic Network, Inc. sr. notes 12 3/4s, 2008 47,822,500
6,890,000 NorthPoint Communications Group, Inc. 144A notes
12 7/8s, 2010 6,855,550
3,920,000 Onepoint Communications, Inc. company guaranty Ser. B,
14 1/2s, 2008 2,548,000
11,480,000 Pathnet, Inc. sr. notes 12 1/4s, 2008 7,576,800
7,140,000 Startec Global Communications Corp. sr. notes 12s, 2008 5,961,900
5,180,000 Tele1 Europe BV 144A 13s, 2009 5,439,000
4,960,000 Telehub Communications Corp. company guaranty
stepped-coupon zero % (13 7/8s, 7/31/02), 2005 (STP) 248,000
4,640,000 Time Warner Telecom Inc. sr. notes 9 3/4s, 2008 4,663,200
7,130,000 Versatel Telecom B.V. sr. notes 13 1/4s, 2008 (Netherlands) 7,771,700
12,510,000 WinStar Communications, Inc. sr. sub. notes stepped-coupon
zero % (15s, 3/1/02), 2007 (STP) 18,514,800
5,230,000 WinStar Communications. Inc. sr. sub. notes 11s, 2008 5,413,050
7,940,000 World Access, Inc. sr. notes Ser. B, 13 1/4s, 2008 7,215,475
--------------
299,404,648
Telephone Services (4.3%)
- --------------------------------------------------------------------------------------------------------------------------
14,510,000 BTI Telecom Corp. sr. notes 10 1/2s, 2007 12,768,800
2,340,000 Call-Net Enterprises, Inc. sr. disc. notes stepped-coupon zero %
(8.94s, 8/15/03), 2008 (Canada) (STP) 1,131,975
4,935,000 Call-Net Enterprises Inc. sr. disc. notes stepped-coupon zero %
(10.8s, 5/15/04), 2009 (Canada) (STP) 2,270,100
10,905,000 Call-Net Enterprises, Inc. sr. disc. notes stepped-coupon zero %
(9.27s, 8/15/02), 2007 (Canada) (STP) 6,433,950
4,610,000 Call-Net Enterprises Inc. sr. notes 8s, 2008 (Canada) 3,549,700
6,965,000 Flag Ltd. 144A sr. notes 8 1/4s, 2008 (Bermuda) 6,268,500
1,130,000 Long Distance International, Inc. sr. notes 12 1/4s, 2008
(In default) (NON) 791,000
5,430,000 Metromedia Fiber Network, Inc. sr. notes 10s, 2009 5,348,550
8,150,000 Metromedia Fiber Network, Inc. sr. notes Ser. B, 10s, 2008 8,027,750
560,000 Nextlink Communications Inc. sr. disc. notes stepped-coupon
zero % (12 1/4s, 6/1/04), 2009 (STP) 331,800
910,000 Nextlink Communications 144A sr. disc. notes stepped-coupon
zero % (12 1/8s, 12/1/04), 2009 (STP) 507,325
10,900,000 Nextlink Communications Inc. 144A sr. notes 10 1/2s, 2009 10,763,750
6,520,000 Primus Telecommunications Group, Inc. sr. notes Ser. B,
9 7/8s, 2008 5,884,300
6,010,000 RSL Communications, Ltd. company guaranty 12 1/4s, 2006 6,085,125
2,055,000 RSL Communications, Ltd. company guaranty 12s, 2008 1,952,250
2,625,000 RSL Communications, Ltd. 144A 10 1/2s, 2008 2,296,875
7,290,000 RSL Communications, Ltd. company guaranty 9 1/8s, 2008 5,832,000
6,620,000 Transtel S.A. pass-through certificates 12 1/2s, 2007 3,839,600
3,710,000 US Xchange LLC sr. notes 15s, 2008 2,226,000
2,590,000 Versatel Telecom B.V. sr. notes 13 1/4s, 2008 (Netherlands) 2,823,100
31,975,000 Viatel, Inc. sr. disc. notes stepped-coupon zero %
(12 1/2s, 4/15/03), 2008 (STP) 18,705,375
12,794,000 Viatel, Inc. sr. notes 11 1/2s, 2009 12,026,360
1,805,000 Viatel, Inc. sr. notes 11 1/4s, 2008 1,687,675
--------------
121,551,860
Transportation (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
8,585,000 Johnstown America Industries, Inc. company guaranty Ser. C,
11 3/4s, 2005 9,250,338
3,650,000 Kitty Hawk, Inc. company guaranty 9.95s, 2004 3,476,625
240,000 Transportacion Maritima Mexicana S.A. de C.V. sr. notes 10s,
2006 (Mexico) 204,000
1,940,000 Transportacion Maritima Mexicana S.A. de C.V. notes
9 1/4s, 2003 1,697,500
--------------
14,628,463
Wireless Communications (6.2%)
- --------------------------------------------------------------------------------------------------------------------------
3,710,000 Airgate PCS, Inc. sr. sub. notes stepped-coupon zero %
(13 1/2s, 10/1/04), 2009 (STP) 2,179,625
11,110,000 Alamosa PCS Holdings, Inc. company guaranty stepped-coupon
zero % (12 7/8s, 2/15/05), 2010 (STP) 5,888,300
12,040,000 Celcaribe S.A. sr. notes stepped-coupon zero %
(13 1/2s, 3/15/04), 2004 (Colombia) (STP) 10,535,000
2,991,000 Cellco Finance Corp. NV sr. sub. notes 15s, 2005 (Netherlands) 3,282,623
6,255,000 Cellco Finance Corp. NV 144A sr. notes 12 3/4s,
2005 (Netherlands) 6,630,300
31,246,000 CellNet Data Systems, Inc. sr. disc. notes stepped-coupon
zero % (14s, 10/1/02), 2007 (STP) 3,749,520
30,125,000 McCaw International Ltd sr. disc. notes stepped coupon zero %
(13s, 4/15/02), 2007 (STP) 21,765,313
26,180,000 Millicom International Cellular S.A. sr. disc. notes
stepped-coupon zero % (13 1/2s, 6/1/01),
2006 (Luxembourg) (STP) 22,580,250
6,130,000 Neuvo Grupo Iusacell S.A. 144A sr. notes 14 1/4s,
2006 (Mexico) 6,735,338
360,000 NEXTEL Communications, Inc. sr. disc. notes stepped-coupon
zero % (12 1/8s, 4/15/03), 2008 (STP) 226,800
10,170,000 NEXTEL Communications, Inc. sr. notes 12s, 2008 11,110,725
30,840,000 NEXTEL Communications, Inc. sr. notes 9 3/8s, 2009 29,837,700
8,420,000 Nextel Partners, Inc. 144A sr. notes 11s, 2010 8,420,000
2,840,000 Omnipoint Corp. 144A sr. notes 11 1/2s, 2009 3,067,200
120,000 Price Communications Wireless, Inc. 144A sr. notes
9 1/8s, 2006 120,000
7,380,000 Paging Network Do Brasil sr. notes 13 1/2s, 2005 (Brazil) 811,800
4,000,000 Paging Network, Inc. sr. sub. notes 10s, 2008 2,660,000
2,850,000 Rogers Cantel, Inc. sr. sub. notes 8.8s, 2007 (Canada) 2,828,625
1,640,000 Spectrasite Holdings, Inc. sr. disc. notes stepped-coupon
11 1/4s, (11 1/4s, 4/15/04), 2009 (STP) 951,200
7,500,000 Telecorp PCS Inc. company guaranty stepped-coupon zero %
(11 5/8s, 4/15/04), 2009 (STP) 4,875,000
2,770,000 Tritel PCS, Inc. company guaranty stepped-coupon zero %
(12 3/4s, 5/15/04), 2009 (STP) 1,800,500
12,750,000 US Unwired Inc. sr. disc. notes stepped-coupon zero %,
(13 3/8s, 11/1/04), 2009 (STP) 7,363,125
6,070,000 VoiceStream Wire Corp. sr. disc. notes stepped-coupon
zero % (11 7/8s, 11/15/04), 2009 (STP) 3,793,750
15,010,000 VoiceStream Wire Corp. 144A sr. notes 10 3/8s, 2009 15,535,350
--------------
176,748,044
--------------
Total Corporate Bonds and Notes
(cost $2,727,355,018) $2,369,244,220
PREFERRED STOCKS (7.6%) (a)
NUMBER OF SHARES VALUE
Banks (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
296,110 Chevy Chase Capital Corp. Ser. A, $5.188 pfd. (PIK) $ 15,693,830
19,825 Chevy Chase Savings Bank $3.25 pfd. 535,275
3,520 First Republic 144A 10.50% pfd. 3,308,800
--------------
19,537,905
Broadcasting (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,970 Benedek Communications $11.50 pfd. (PIK) 1,648,890
90,994 Citadel Broadcasting Inc. 144A $13.25 cum. pfd. (PIK) 10,168,580
6,196 Granite Broadcasting 144A $12.75 pfd. (PIK) 6,350,900
1,645 Paxson Communications Corp. 13.25% cum. pfd. (PIK) 16,861,250
--------------
35,029,620
Building and Construction (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
129,800 Brand Scaffold Services, Inc. 144A $3.625 pfd. 3,569,500
Cable Television (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,600 Adelphia Communications Corp. Ser. B, $13.00 cum. pfd. 392,400
180,308 CSC Holdings, Inc. Ser. M, $11.125 cum. pfd. (PIK) 19,518,341
--------------
19,910,741
Cellular Communications (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
5,430 Rural Cellular Corp. 12.25% pfd. (PIK) 5,443,575
Chemicals (--%)
- --------------------------------------------------------------------------------------------------------------------------
50,000 Avecia Group PLC 16.00% pfd. (PIK) 1,275,000
Computer Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
5,681 Concentric Network Corp. Ser. B, 13.50% pfd. (PIK) 5,783,968
Electric Utilities (--%)
- --------------------------------------------------------------------------------------------------------------------------
49,949 Public Service Co. of New Hampshire $2.651 1st mtge. pfd. 1,248,725
Financial Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
4,105,000 CSBI Capital Trust I 144A company guaranty 4,392,350
Food and Beverages (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
240,000 Doane Products Co. $14.25 pfd. 10,800,000
Health Care (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
13,395 Fresenius Medical Capital Trust I Ser. D, $9.00 company
guaranty, pfd. (Germany) 12,959,663
6,540 Fresenius Medical Capital Trust II $7.875 company guaranty,
pfd. (Germany) 5,902,350
--------------
18,862,013
Insurance and Finance (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
130,000 CGA Group Ltd. 144A Ser. A, $13.75 pfd. (PIK) 3,510,000
Motion Picture Distribution (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
876,252 Diva Systems Corp. Ser. D, $6.00 pfd. 4,381,260
392,000 Diva Systems Corp. Ser. C, $6.00 pfd. 1,960,000
--------------
6,341,260
Oil and Gas (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
5,026 R&B Falcon Corp. 13.875% pfd. 5,176,780
Packaging and Containers (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
35,932 Packaging Corp. of America $12.375 pfd. (PIK) 4,195,061
Restaurants (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
141,797 AmeriKing, Inc. $3.25 pfd. (PIK) 1,559,767
Telecommunications (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
1,065 Adelphia Business Solutions, Inc. Ser. B, 12.875% pfd. 1,059,675
6,916 Dobson Communications Corp. 13.00% pfd. 7,503,860
10,063 Dobson Communications Corp. 144A $12.25% pfd.(PIK) 10,063,000
12,122 ICG Holdings, Inc., 144A $14.00 pfd. (Canada) (PIK) 10,788,580
16,338 Intermedia Communication Ser. B, 13.50% pfd. (PIK) 16,256,310
3,131 NEXTEL Communications, Inc. Ser. E, 11.125% pfd. (PIK) 3,005,760
84,443 Nextlink Communications, Inc. 144A $7.00 cum. pfd. (PIK) 4,391,036
3,402 Pegasus Communications Corp. Ser. A, $12.75 cum. pfd. 3,589,110
13,340 WinStar Communications, Inc. 144A 14.25% cum. pfd. (PIK) 15,341,000
--------------
71,998,331
--------------
Total Preferred Stocks (cost $217,945,917) $ 218,634,596
UNITS (0.5%) (a)
NUMBER OF UNITS VALUE
- --------------------------------------------------------------------------------------------------------------------------
21,510,000 Australis Media, Ltd. units stepped-coupon zero %,
(15 3/4s, 5/15/00), 2003 (In default) (Australia) (STP) (NON) $ 2,151
6,510,000 Earthwatch 144A unit zero %, 2007 (STP) 4,654,650
10,030,000 Equinix, Inc. 144A units 13s, 2007 1,086,887
3,830,000 GT Group Telecom 144A units stepped-coupon zero %
(13 1/4s, 2/1/05), 2010 (Canada) (STP) 2,240,550
4,780,000 Leap Wireless 144A units 12 1/2s, 2010 4,851,700
2,845,000 XCL Ltd. units sr. sec. notes 13 1/2s, 2004 (In default) (NON) 284,500
10,500,000 XCL Ltd. units sr. sec. notes 13 1/2s, 2001 (In default) (NON) 105,000
60,536 XCL Ltd. 144A units cv. cum. pfd. 9 1/2s, 2006 (PIK) 60,536
--------------
Total Units (cost $51,225,530) $ 13,285,974
WARRANTS (1.7%) (a) (NON) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
2,340 21st Century Telecom Group 144A 2/15/10 $ 64,350
690 American Mobile Satellite Corp. 4/1/08 62,100
6,820 Bestel S.A. (Mexico) 5/15/05 818,400
6,120 Birch Telecommunications, Inc. 144A (PIK) 6/15/08 336,600
33,270 CD Radio, Inc. 144A 5/15/09 4,325,100
45,271 Cellnet Data Systems, Inc. 10/1/07 226,355
130,000 CGA Group Ltd. 144A 2/11/07 1,300
11,495 Club Regina, Inc. 144A 12/1/04 115
121,027 Consorcio Ecuatoriano 144A (Ecuador) 10/1/00 12,103
5,480 Cybernet Internet 144A 7/1/09 931,600
8,400 Destia Communications 144A 7/15/07 1,176,000
4,650 Diva Systems Corp. 5/15/06 1,860,000
76,824 Diva Systems Corp. 3/1/08 614,592
130 E. Spire Communications, Inc. 11/1/05 2,080
6,110 Epic Resorts 6/15/05 61
8,200 Esat Holdings, Inc. (Ireland) 2/1/07 1,845,000
11,930 Firstworld Communication 4/15/08 2,386,000
6,135 Globalstar Telecommunications 2/15/04 582,825
251,394 ICG Communications 10/15/05 4,399,395
7,540 Insilco Holding Co. 8/15/08 26,390
14,200 Interact Systems, Inc. 8/1/03 142
14,200 Interact Systems, Inc. 144A 12/15/09 142
5,125 International Wireless Communications
Holdings 144A 8/15/01 5
139,421 Intra Corp. Class A 2/1/10 1,394
47,911 Intra Corp. Class B 2/1/10 479
15,030 Iridium World Com 144A 7/15/05 2
25,970 KMC Telecom Holdings, Inc. 4/15/08 90,895
25,920 Knology Holdings 10/22/07 58,320
1,130 Long Distance International, Inc. 144A 4/13/08 1,413
41,270 McCaw International Ltd. 4/15/07 185,715
7,440 Mediq Inc. 144A 6/1/09 74
3,900 Metronet Communications 144A 8/15/07 585,000
98,890 Network Plus Corp. 12/31/00 9,889,000
8,710 Network Plus Corp. 2/19/09 5,661,500
3,920 Onepoint Communications, Inc. 6/1/08 39,200
12,550 Orion Network Systems 1/15/07 138,050
72,220 Pagemart, Inc. 144A 12/31/03 541,650
9,690 Pathnet, Inc. 144A 4/15/08 96,900
12,480 Paxson Communications Corp. 144A 6/30/03 37,440
76,800 Powertel, Inc. 2/1/06 345,600
4,680 R&B Falcon Corp. 144A 5/1/09 1,287,000
2,000 Signature Brands Ltd. 8/15/02 40,000
6,640 Startec Global Communications Corp. 5/15/08 119,520
6,375 Sterling Chemicals Holdings 8/15/08 114,750
5,180 Tele1 Europe BV 144A (PIK) 5/15/09 1,554,000
4,960 Telehub Communications Corp. 7/31/05 2,480
38,235 UIH Australia/Pacific, Inc. 144A 5/15/06 1,147,050
99,620 USN Communications Inc. 8/15/04 996
9,720 Versatel Telecom B.V. 144A (Netherlands) 5/15/08 7,581,600
4,190 WAM!NET, Inc. 3/1/05 46,090
23,250 Wireless One, Inc. 10/19/00 23
402,760 Wright Medical Technology, Inc. 144A 6/30/03 4
50,000 ZSC Specialty Chemicals Plc 144A 6/30/11 81,250
50,000 ZSC Specialty Chemicals Plc 144A pfd. 6/30/11 31,250
--------------
Total Warrants (cost $17,270,861) $ 49,349,300
CONVERTIBLE BONDS AND NOTES (1.4%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 16,245,000 Cybernet Internet Service 144A cv. sr. disc. notes
stepped-coupon zero %, (13s, 8/15/04), 2009 (STP) $ 8,447,400
14,380,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 7,837,100
3,900,000 GST Telecommunications, Inc. 144A cv. sr. disc. notes
stepped-coupon zero %, (13 7/8s, 12/15/00), 2005 (STP) 3,315,000
12,000,000 Micron Technology, Inc cv. 6 1/2s, 2005 10,020,000
1,830,000 NTL, Inc. 144A cv. sub. notes 5 3/4s, 2009 1,862,025
2,135,000 Parker Drilling Co. cv. sub. notes 5 1/2s, 2004 1,561,219
5,050,000 Total Renal Care Holdings, Inc. 144A cv. 7s, 2009 3,004,750
3,950,000 Waste Management, Inc. cv. sub. notes 4s, 2002 3,500,688
--------------
Total Convertible Bonds and Notes (cost $43,685,641) $ 39,548,182
COMMON STOCKS (1.1%) (a)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
1,611 Airgate PCS, Inc. (NON) $ 157,878
3,000 AmeriKing, Inc. (NON) 30,000
6,570 Axia Holding Inc. 144A (NON) 85,410
1,663,637 Capstar Broadcasting Partners (NON) 6,654,548
96,272 Fitzgerald Gaming Corp. (NON) 24,068
41,666 Lady Luck Gaming Corp. (NON) 486,971
17,851 MGC Communications, Inc. 1,231,719
2,604 Mothers Work, Inc. (NON) 29,621
8,055 Paging Do Brazil Holdings Co., LLC 144A Class B, (Brazil) (NON) 81
293 Pegasus Communications Corp. (NON) 36,332
8,407 Premium Holdings (L.P.) 144A (NON) 84,071
1,185,708 PSF Holdings LLC Class A (AFF) (NON) 11,857,080
195,050 Spanish Broadcasting Systems (NON) 2,984,265
236,025 Specialty Foods Acquisition Corp. (NON) 2,360
38,168 Viatel, Inc. (NON) 2,149,336
58,960 WinStar Communications. Inc. (NON) 4,562,030
--------------
Total Common Stocks (cost $45,355,742) $ 30,375,770
COLLATERALIZED MORTGAGE OBLIGATIONS (1.0%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 1,385,000 Amresco Commercial Mortgage Funding I 7s, 2029 $ 1,085,494
38,953,310 Commercial Mortgage Asset Trust Ser. 99-C1, Class X,
Interest Only (IO), 0.99s, 2020 2,425,452
8,000,000 Criimi Mae Commercial Mortgage Trust 7s, 2012 5,517,500
2,500,000 CS First Boston Mortgage Securities Corp. Ser. 99-C1,
Class F, 8.18s,, 2009 2,323,438
Fannie Mae
2,673 Ser. 92-184, Class J, IO 11.46s, 2022 108,572
1,541 Ser. 92-181, Class PJ, IO 10.07s, 2022 54,465
1,530,125 Ser. G93-9, Class IO 8s, 2023 455,671
393,000 Ser. 00-4, Class SX 6.998s, 2023 355,419
831,439 Ser. 97-23, Class SJ, IO 5.94s, 2023 171,484
4,266,450 Federal National Mortgage Association 3.195s, 2023 1,358,598
Freddie Mac
2,043,461 Ser. 2033, Class SK, 9.24s, 2021 593,881
4,844,000 Ser. 1849, Class DA, 8.1785s, 2022 1,498,613
957,000 Ser. 2032, Class SK, 7.475s, 2024 402,538
238,000 Ser. 2183, class SG, 5.43s, 2014 2014 177,608
Fannie Mae Strip
985,623 Ser. 215, Class 2, IO, 7s, 2003 300,769
5,350,481 Ser. 218, Class 2, IO, 7 1/2s, 2023 1,667,009
7,594,879 Ser. 221, Class 2, IO, 7 1/2s, 2023 2,371,026
222,638 Ser. 241, Class 2, IO, 8 1/2s, 2023 65,226
4,700,000 General Growth Properties Ala Moana Ser. 99-C1, Class F,
8.72s, 2004 4,711,750
11,450,272 Government National Mortgage Association Ser 1999-34,
Class SC, IO,1.006s, 2019 629,765
3,200,000 GS Mortgage Securities Corp. 7.855s, November 13, 2013 3,023,500
6,746,086 Merill Lynch Mortgage Investors, Inc. Ser. 96-C2, Class IO,
1.601s, 2028 449,036
--------------
Total Collateralized Mortgage Obligations
(cost $29,788,841) $ 29,746,814
CONVERTIBLE PREFERRED STOCKS (0.8%) (a)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
24,040 Chesapeake Energy Corp. $3.50 cum. cv. pfd. $ 889,480
127,905 Global Telesystems, Inc. 144A $3.625 cv. pfd. 5,611,832
14,200 Interact Electronic $14.00 cv. pfd 14,200
46,500 LTV Corp. (The) 144A $4.13 cv. pfd. 2,394,750
449 Paxson Communications Corp. 144A 9.75% cv. pfd. (PIK) 4,445,100
34,380 PSINet, Inc. Ser. C, $3.38 cv. pfd. 2,752,549
70,100 PSINet, Inc. 144A $3.50 cv. pfd. 3,610,150
40,600 RSL Communications Ltd. 144A 7.50% cv. pfd. (Bermuda) 1,969,100
12,430 Verio Inc. 144A $3.375 c.v. pfd. 1,045,674
11,976 XCL Ltd 144A Ser. A, $9.50 cv. cum. pfd. 11,976
--------------
Total Convertible Preferred Stocks (cost $22,414,243) $ 22,744,811
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (--%)
PRINCIPAL AMOUNT VALUE
U.S. Treasury Obligations (--%) (cost $1,285,362)
- --------------------------------------------------------------------------------------------------------------------------
$ 1,360,000 U.S. Treasury Bonds 6 1/8s, August 15, 2029 $ 1,337,478
SHORT-TERM INVESTMENTS (1.1%) (a) (cost $32,066,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 32,066,000 Interest in $1,000,000,000 joint tri-party repurchase agreement
dated February 29, 2000 with Goldman Sachs & Co. due
March 1, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $32,071,139 for an
effective yield of 5.77% $ 32,066,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,188,393,155) (b) $2,806,333,145
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $2,860,024,966.
(b) The aggregate identified cost on a tax basis is $3,189,001,947 resulting in gross unrealized appreciation and
depreciation of $103,795,853 and $486,464,655, respectively, or net unrealized depreciation of $382,668,802.
(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.
(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.
The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes (FRN) are the current interest rates shown at
February 29, 2000, which are subject to change based on the terms of the security.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 29, 2000 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $3,188,393,155) (Note 1) $2,806,333,145
- -----------------------------------------------------------------------------------------------
Cash 2,582,801
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 61,431,690
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 959,620
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 25,782,739
- -----------------------------------------------------------------------------------------------
Total assets 2,897,089,995
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 24,461,313
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 6,624,288
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,105,640
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 188,226
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 128,619
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,852
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,381,526
- -----------------------------------------------------------------------------------------------
Other accrued expenses 170,565
- -----------------------------------------------------------------------------------------------
Total liabilities 37,065,029
- -----------------------------------------------------------------------------------------------
Net assets $2,860,024,966
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $3,829,699,966
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (4,648,531)
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (583,091,733)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and
assets and liabilities in foreign currencies (381,934,736)
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $2,860,024,966
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($2,336,984,465 divided by 227,796,695 shares) $10.26
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $10.26)* $10.77
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($492,327,516 divided by 48,161,627 shares)** $10.22
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($12,494,616 divided by 1,218,241 shares) $10.26
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $10.26)* $10.60
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($18,218,369 divided by 1,775,145 shares) $10.26
- -----------------------------------------------------------------------------------------------
* 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 29, 2000 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Interest $159,540,842
- -----------------------------------------------------------------------------------------------
Dividends 12,399,918
- -----------------------------------------------------------------------------------------------
Total investment income 171,940,760
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 8,362,691
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,307,376
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 32,314
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 14,951
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 2,988,206
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,886,533
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 31,790
- -----------------------------------------------------------------------------------------------
Reports to shareholders 68,668
- -----------------------------------------------------------------------------------------------
Auditing 36,854
- -----------------------------------------------------------------------------------------------
Legal 61,694
- -----------------------------------------------------------------------------------------------
Postage 166,720
- -----------------------------------------------------------------------------------------------
Other 190,224
- -----------------------------------------------------------------------------------------------
Total expenses 16,148,021
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (266,548)
- -----------------------------------------------------------------------------------------------
Net expenses 15,881,473
- -----------------------------------------------------------------------------------------------
Net investment income 156,059,287
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (81,445,325)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and
liabilities in foreign currencies during the period 8,273
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 23,374,573
- -----------------------------------------------------------------------------------------------
Net loss on investments (58,062,479)
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 97,996,808
- -----------------------------------------------------------------------------------------------
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 29 August 31
2000* 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 156,059,287 $ 354,832,644
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments (81,445,325) (305,126,069)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 23,382,846 3,100,104
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 97,996,808 52,806,679
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (126,944,645) (268,432,849)
- ---------------------------------------------------------------------------------------------------------------
Class B (28,782,422) (83,105,443)
- ---------------------------------------------------------------------------------------------------------------
Class M (719,017) (1,769,553)
- ---------------------------------------------------------------------------------------------------------------
Class Y (1,090,238) (1,524,798)
- ---------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class A -- (4,573,658)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (1,415,981)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (30,150)
- ---------------------------------------------------------------------------------------------------------------
Class Y -- (25,980)
- ---------------------------------------------------------------------------------------------------------------
From return of capital
Class A -- (14,016,686)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (4,339,494)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (92,400)
- ---------------------------------------------------------------------------------------------------------------
Class Y -- (79,620)
- ---------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (275,061,759) (326,571,340)
- ---------------------------------------------------------------------------------------------------------------
Total decrease in net assets (334,601,273) (653,171,273)
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 3,194,626,239 3,847,797,512
- ---------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $4,648,531 and
$3,171,496, respectively) $2,860,024,966 $3,194,626,239
- ---------------------------------------------------------------------------------------------------------------
* 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 29
operating performance (Unaudited) Year ended August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.46 $11.47 $12.89 $12.11 $12.01 $12.06
- ----------------------------------------------------------------------------------------------------------------------------------
Investment activities
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income .54(c) 1.11(c) 1.22(c) 1.20 1.16(c) 1.22
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.19) (.93) (1.35) .72 .11 (.01)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .35 .18 (.13) 1.92 1.27 1.21
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.55) (1.11) (1.28) (1.14) (1.15) (1.22)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.02) (.01) -- (.02) --
- ----------------------------------------------------------------------------------------------------------------------------------
From return of capital -- (.06) -- -- -- (.04)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.55) (1.19) (1.29) (1.14) (1.17) (1.26)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.26 $10.46 $11.47 $12.89 $12.11 $12.01
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.43* 1.76 (1.75) 16.60 11.08 10.76
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,336,984 $2,488,892 $2,821,513 $3,259,440 $3,115,546 $2,997,467
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .46* .93 .95 .96 .96 .95
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.25* 10.23 9.39 9.54 9.57 10.27
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 29.16* 50.65 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. (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 29
operating performance (Unaudited) Year ended August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.42 $11.43 $12.84 $12.07 $11.97 $12.03
- ----------------------------------------------------------------------------------------------------------------------------------
Investment activities
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income .50(c) 1.04(c) 1.12(c) 1.10 1.07(c) 1.09
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.19) (.95) (1.34) .72 .11 .02
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .31 .09 (.22) 1.82 1.18 1.11
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.51) (1.03) (1.18) (1.05) (1.06) (1.13)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.02) (.01) -- (.02) --
- ----------------------------------------------------------------------------------------------------------------------------------
From return of capital -- (.05) -- -- -- (.04)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.51) (1.10) (1.19) (1.05) (1.08) (1.17)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.22 $10.42 $11.43 $12.84 $12.07 $11.97
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.04* .99 (2.42) 15.71 10.28 9.88
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $492,328 $669,009 $1,007,028 $1,226,880 $1,100,757 $762,947
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .84* 1.68 1.70 1.71 1.71 1.70
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.88* 9.53 8.64 8.79 8.84 9.52
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 29.16* 50.65 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. (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 29 July 3, 1995+
operating performance (Unaudited) Year ended August 31 to August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.45 $11.47 $12.88 $12.10 $12.00 $11.92
- ----------------------------------------------------------------------------------------------------------------------------------
Investment activities
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income .53(c) 1.09(c) 1.19(c) 1.16 1.14(c) .21(c)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.19) (.95) (1.34) .73 .11 .07
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .34 .14 (.15) 1.89 1.25 .28
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.53) (1.08) (1.25) (1.11) (1.13) (.19)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.02) (.01) -- (.02) --
- ----------------------------------------------------------------------------------------------------------------------------------
From return of capital -- (.06) -- -- -- (.01)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.53) (1.16) (1.26) (1.11) (1.15) (.20)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.26 $10.45 $11.47 $12.88 $12.10 $12.00
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.40* 1.42 (1.94) 16.33 10.88 2.38*
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $12,495 $15,264 $19,256 $24,382 $16,616 $964
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .59* 1.18 1.20 1.21 1.19 .20*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.13* 10.00 9.10 9.29 9.45 1.65*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 29.16* 50.65 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. (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
- ----------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share February 29 Dec. 31, 1998+
operating performance (Unaudited) to August 31
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $10.46 $10.83
- ----------------------------------------------------------------------------------------------------------------------------------
Investment activities
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .56 .77
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.20) (.35)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .36 .42
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.56) (.74)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.01)
- ----------------------------------------------------------------------------------------------------------------------------------
From return of capital -- (.04)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.56) (.79)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.26 $10.46
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.55* 3.92*
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $18,218 $21,461
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .34* .46*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.38* 6.81*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 29.16* 50.65
- ----------------------------------------------------------------------------------------------------------------------------------
+ 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. (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 29, 2000 (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.
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 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 Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sales price on its principal exchange, 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. 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 or dealers, approved by the Trustees, which determine valuations
for normal institutional-size trading units of such securities using
methods based on market transactions for comparable securities and
variable 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). Gains or losses on securities sold are determined on
the identified cost basis.
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 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. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political developments,
and currency fluctuations, not present with domestic investments.
F) 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 29, 2000, the fund had no borrowings against the line of
credit.
G) 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, 1999, the fund had a capital loss carryover of approximately
$274,060,000 available to offset future capital gains, if any. The amount
of the carryover and the expiration dates are:
Loss Carryover Expiration
- -------------- ----------------
$110,229,000 August 31, 2000
52,738,000 August 31, 2003
111,093,000 August 31, 2007
H) 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 29, 2000, fund expenses were reduced by
$266,548 under expense offset arrangements with PFTC and brokerage service
arrangements. 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 $2,888
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
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 at the date of the
financial statements and the reported amounts of increases and decreases
in net assets from operations during the reporting period.
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 29, 2000, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $48,713 and $221 from
the sale of class A and class M shares, respectively and $726,008 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 29, 2000, Putnam Mutual
Funds Corp., acting as underwriter received $16 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended February 29, 2000 cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $850,469,305 and $1,173,251,097, respectively.
There were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At February 29, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 17,540,769 $ 180,228,824
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,173,336 63,264,746
- -----------------------------------------------------------------------------
23,714,105 243,493,570
Shares
repurchased (33,880,608) (348,754,791)
- -----------------------------------------------------------------------------
Net decrease (10,166,503) $(105,261,221)
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 44,981,104 $485,885,851
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 13,480,631 145,351,569
- -----------------------------------------------------------------------------
58,461,735 631,237,420
Shares
repurchased (66,426,024) (719,775,716)
- -----------------------------------------------------------------------------
Net decrease (7,964,289) $ (88,538,296)
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,106,676 $ 21,518,060
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,292,525 13,208,976
- -----------------------------------------------------------------------------
3,399,201 34,727,036
Shares
repurchased (19,445,690) (199,191,165)
- -----------------------------------------------------------------------------
Net decrease (16,046,489) $(164,464,129)
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 10,378,015 $ 111,878,930
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,756,970 40,381,620
- -----------------------------------------------------------------------------
14,134,985 152,260,550
Shares
repurchased (38,059,209) (410,271,534)
- -----------------------------------------------------------------------------
Net decrease (23,924,224) $(258,010,984)
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 52,900 $ 545,981
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 49,029 502,858
- -----------------------------------------------------------------------------
101,929 1,048,839
Shares
repurchased (343,727) (3,541,757)
- -----------------------------------------------------------------------------
Net decrease (241,798) $(2,492,918)
- -----------------------------------------------------------------------------
Year ended August 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 357,667 $ 3,880,064
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 115,307 1,243,383
- -----------------------------------------------------------------------------
472,974 5,123,447
Shares
repurchased (691,778) (7,478,474)
- -----------------------------------------------------------------------------
Net decrease (218,804) $(2,355,027)
- -----------------------------------------------------------------------------
Six months ended February 29, 2000
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 122,168 $ 1,221,394
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 102,199 1,090,238
- -----------------------------------------------------------------------------
224,867 2,311,632
Shares
repurchased (501,638) (5,155,123)
- -----------------------------------------------------------------------------
Net decrease (276,771) $(2,843,491)
- -----------------------------------------------------------------------------
For the period December 31, 1998
(commencement of operations)
to August 31, 1999
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,485,552 $26,987,184
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 146,161 1,630,398
- -----------------------------------------------------------------------------
2,631,713 28,617,582
Shares
repurchased (579,797) (6,284,615)
- -----------------------------------------------------------------------------
Net increase 2,051,916 $22,332,967
- -----------------------------------------------------------------------------
Note 5
Transactions with Affiliated Issuers
Transactions during the year with companies in which the fund owns at
least 5% of the voting securities were as follows:
Purchase Sales Dividend Market
Affiliates cost cost Income Value
- ---------------------------------------------------------------------
PSF Holdings LLC -- -- -- $11,857,080
- ---------------------------------------------------------------------
THE PUTNAM FAMILY OF FUNDS
The following is a complete list of Putnam's open-end mutual funds. 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.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund [DBL. DAGGER]
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
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
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
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
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
ASSET ALLOCATION 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
[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 not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
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
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
Jeffrey A. Kaufman
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
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' Web site: 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
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA034-59730 014/324/2AC 4/00
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- -------------------------------------------------------------------------
Putnam High Yield Trust
Supplement to Semiannual Report dated 2/29/00
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.
SEMIANNUAL RESULTS AT A GLANCE
- -------------------------------------------------------------------------
Total return
for periods ended 2/29/00 NAV
6 months 3.55%
I year 6.48
5 years 46.01
Annual average 7.86
10 years 183.79
Annual average 10.99
Life of fund (since 2/14/78) 748.14
Annual average 10.19
Share value: NAV
8/31/99 $10.46
2/29/00 $10.26
- -------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
6 $0.558 $0 $0.558
- -------------------------------------------------------------------------
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.
