Putnam
Income
Fund
SEMIANNUAL REPORT
April 30, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* For the 5 years ended April 30, 1998, Putnam Income Fund's class A
shares ranked 11 out of 63 corporate debt A-rated funds tracked by Lipper
Analytical Services, placing the fund in the top 18% of its category.*
* "The fund's flexible, diversified strategy encompassing the full
range of fixed-income categories -- investment-grade and high yield bonds,
U.S. government securities, and foreign bonds -- enabled investors to take
advantage of stronger-performing sectors while reducing the effects of
market volatility."
-- James M. Prusko, manager
Putnam Income Fund
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
35 Financial statements
* Lipper rankings are based on total return performance, vary over time,
and do not reflect the effects of sales charges. The fund's class A shares
ranked 88 out of 140 and 8 out of 35 for 1- and 10-year performance,
respectively, through 4/30/98. Class B shares ranked 126 out of 140 and 63
out of 115 for 1- and 3-year performance, respectively. Class M shares
were ranked 101 out of 140 and 27 out of 115 for 1- and 3-year
performance, respectively. Class B and class M shares were not ranked over
longer periods. Past performance is not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
One of the strengths of Putnam's team-oriented approach to portfolio
management is the relatively easy transitions that it provides when team
members change. This point was demonstrated during the first half of Putnam
Income Fund's fiscal year, when three new members were appointed. James Prusko
and David Waldman have been named co-lead managers, and Jeffrey Kobylarz
joined the team, while D. William Kohli continues to focus on the fund's
foreign holdings.
Before joining Putnam in 1992, Jim was with Salomon Brothers. He has 7 years
of investment experience. David was with Lazard Freres Asset Management and
Goldman Sachs Asset Management before joining Putnam in 1997. He has 10 years
of investment experience. Jeffrey joined Putnam's High-Yield Bond Group in
1993, from Dean Witter InterCapital and W. R. Huff Asset Management. He has 11
years of investment experience. In the following report, the managers discuss
the fund's strategy during the six months ended April 30, 1998, and look at
prospects for the fiscal year's second half.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 17, 1998
Report from the Fund Managers
James M. Prusko
David L. Waldman
Jeffrey J. Kobylarz
D. William Kohli
Over Putnam Income Fund's long life, shareholders have harvested the
advantages of the fund's active management style, which attempts to capitalize
on the fixed-income market sectors and maturities that appear to offer the
best value at any given time. During the six months ended April 30, 1998,
world bond markets provided a host of challenges for investors. The fund's
flexible, diversified strategy encompassing the full range of fixed-income
categories -- investment-grade and high-yield bonds, U.S. government
securities, and foreign bonds -- enabled investors to take advantage of
stronger-performing sectors while reducing the effects of market volatility.
For the period, your fund's class A share total return at net asset value was
3.22%. At public offering price, class A shares returned - 1.74%. For more
performance information, including the results of other share classes, please
see pages 9 and 10.
* U.S. MARKET PROVIDES HAVEN FOR GLOBAL FIXED-INCOME INVESTORS
Over the semiannual period, the U.S. stock and bond markets continued to
benefit from an ideal environment of moderate economic growth paired with
benign inflation. The Federal Reserve Board remained reluctant to raise
interest rates in light of the fragile Asian equity currency markets.
Benefiting from investors' perceptions that the Asian crisis would have a
deflationary impact and would lead to lower yields, the U.S. bond market
recorded robust gains at the beginning of the period. Persistent
noninflationary economic reports and continued strides toward deficit
reduction resulted in a decline in rates and a flattening of the yield curve
in December. After an initial decline in January, interest rates rose steadily
throughout the remainder of the period in reaction to stronger-than-expected
U.S. economic reports.
* MORTGAGE-BACKED SECURITIES ENHANCED PERFORMANCE
Mortgage-backed securities generally offer higher yields than Treasuries in
order to compensate investors for the risk that their principal may be
returned in full at some point prior to the security's stated maturity date.
Such prepayment may cause an investor's actual rate of return to differ from
the expected rate of return. Early in the period, the low interest-rate
environment raised concerns that prepayments on mortgage-backed securities
were likely to increase. Consequently, we took steps to limit the fund's
exposure to prepayment risk during the period.
First, we concentrated primarily on commercial mortgage-backed security (CMBS)
issues. CMBS issues represent mortgages of office buildings, hotels,
multifamily housing, and industrial real estate. Unlike residential mortgages,
CMBS issues have the advantage of prepayment protection. For example, under
the terms of some loans, commercial mortgage owners are not allowed to prepay
for the first five years. In November, with the Asian crisis at its peak, CMBS
issues underperformed in line with corporate bonds because investors feared a
significant slowdown in Asia would heighten credit risk in the United States.
We took advantage of the depressed prices to increase the fund's position in
these securities, and they helped boost fund performance as prepayment risk
increased in other segments of the mortgage market.
[GRAPHIC OMITTED: horizontal bar chart BOND MARKET PERFORMANCE BY SECTOR]
BOND MARKET PERFORMANCE BY SECTOR*
Comparison of total return, 10/31/97-4/30/98
First Boston High Yield Index 5.47%
Lehman Brothers Mortgage-Backed Securities Index 3.48%
Lehman Brothers Corporate Bond Index 3.83%
Saloman Brothers World Government Bond Index 0.52%
J.P. Morgan Emerging Markets Bond Index 14.56%
Lehman Brothers Long-Term Treasury Bond Index 4.97%
Footnote reads:
*These indexes reflect the general performance of market sectors in which the
fund invests. The fund's performance will differ. Past performance is not
indicative of future results. The indexes may include bonds different from
those in the fund. It is not possible to invest in an index.
Our decision to overweight the mortgage-backed sector and underweight
Treasuries proved to be successful, for mortgage-backed securities
outperformed Treasuries. We believe the fixed-income market's supply and
demand dynamics remain favorable toward mortgage-backed securities and expect
to maintain a slight overweight exposure to mortgages. We plan to add
opportunistically to your fund's position in mortgage-backed securities when
the excess return potential of this sector becomes more significant.
* CORPORATE BONDS REBOUND SHARPLY
Continuing a trend that began with the worsening of the financial crisis in
Asia, credit-sensitive sectors -- including asset-backed securities and
corporate bonds -- experienced challenging times early in the period. As
interest rates fell in late 1997 and early January 1998, corporate treasurers
took advantage of the low-rate environment to issue debt in record levels in
the first few months of 1998. After lagging Treasuries in January, corporate
bond performance improved, as investors focused on strong fundamentals for the
sector, including continued economic growth, contained inflation, management
focus on cost rationalization, solid earnings growth, generally positive event
risk, and further gains in the equity market.
The low interest-rate environment was a positive factor for several of your
fund's corporate bond holdings in the financial sector. While there can be no
assurances, we anticipate that the U.S. insurance industry will begin to
benefit from the efficiencies and cost economies that other financial
industries have already experienced.
Your fund's performance was buoyed by its position in corporates, as the
sector rebounded sharply. Within the corporate market, the fund's emphasis on
the financial sector was also a plus. We believe that the fundamental
underpinnings for corporate bonds are sound and that with much of the
new-issue supply behind us, the technical posture of the corporate bond market
will continue to improve.
[GRAPHIC OMITTED: vertical bar chart CHANGES IN PORTFOLIO COMPOSITION]
CHANGES IN PORTFOLIO COMPOSITION*
4/30/98 10/31/97
U.S. government and agency obligations 47.3% 38.8%
Corporate bonds 40.0% 45.3%
Foreign government bonds and notes 10.2% 5.6%
Collateralized mortgage obligations 2.6% 5.1%
Short-term investments 5.6% 2.0%
Other 1.3% 4.5%
Footnote reads:
*Based on total net assets as of indicated dates. Holdings will vary over
time.
Throughout the period, we have maintained a neutral allocation to high-yield
bonds. We believe that valuations in the high-yield sector are in line with
historical averages, but with the prospect of some slowdown in economic
growth, we do not anticipate tremendous outperformance of high-yield relative
to investment-grade bonds.
* INTERNATIONAL HOLDINGS BEAR STRENGTH OF DOLLAR
International markets were shaken by the conditions in Asia at the beginning
of your fund's fiscal year but rebounded successfully in the last few months
of the period. International fixed-income markets rallied during the period
with markets posting gains in local-currency terms. However, the U.S. dollar
continued to strengthen against other major currencies, canceling out
local-currency gains for U.S.-dollar based investors. European bond markets
posted robust returns amid signs of continued sluggish economic growth in
Germany and firming prospects for broad first-round participation in the
European Economic and Monetary Union (EMU). Official reports released near
period-end reinforced expectations of a continued downward convergence of
interest rates, supporting a broad first round of EMU-boosted bonds. Japanese
bonds underperformed, buffeted by domestic financial sector weakness and
spillover effects of regional economic turmoil. Meanwhile, Japanese investors
were unnerved by a steady stream of government statements announcing plans to
stimulate growth.
In your fund's international component, an overweighting in U.K. bonds boosted
returns as inflation remained subdued and growth weakened. Underweighting
Japanese government bonds also aided performance.
* CAREFUL SELECTION AND MONITORING REQUIRED FOR MONTHS AHEAD
In Putnam's opinion, continued U.S. economic growth appears likely in the
months ahead as the pace of consumption rises to meet recent gains in personal
income. This growth should have little impact on inflation in the near term,
however, because we expect unit labor costs and energy prices to stay low and
the U.S. dollar's strength to keep import prices in check. Concern over the
impact of the Asian financial turmoil on the U.S. economy, though minimal so
far, has kept the Fed from raising interest rates. We will continue to monitor
the impact of the Asian slowdown on the U.S. economy but we remain confident
that careful security, country, and currency selection can help produce solid
performance for your fund in the second half of its fiscal year.
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 4/30/98, there is no guarantee the fund will continue to hold
these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Income Fund is designed for investors seeking high current income
consistent with prudent risk, mainly through fixed-income securities.
TOTAL RETURN FOR PERIODS ENDED 4/30/98
Class A Class B Class M
(inception date) (11/1/54) (3/1/93) (12/14/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 3.22% -1.74% 2.71% -2.27% 3.00% -0.36%
- ------------------------------------------------------------------------------
1 year 10.06 4.90 9.17 4.17 9.79 6.23
- ------------------------------------------------------------------------------
5 years 41.24 34.50 35.75 33.79 39.14 34.66
Annual average 7.15 6.11 6.30 5.99 6.83 6.13
- ------------------------------------------------------------------------------
10 years 141.18 129.66 121.65 121.65 133.05 125.62
Annual average 9.20 8.67 8.28 8.28 8.83 8.48
- ------------------------------------------------------------------------------
Annual average
(life of fund) 8.67 8.54 7.62 7.62 8.16 8.08
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/98
Lehman Bros.
Aggregate Consumer
Bond Index* Price Index
- ------------------------------------------------------------------------------
6 months 3.59% 0.56%
- ------------------------------------------------------------------------------
1 year 10.91 1.44
- ------------------------------------------------------------------------------
5 years 39.65 12.85
Annual average 6.91 2.45
- ------------------------------------------------------------------------------
10 years 138.00 38.77
Annual average 9.06 3.33
- ------------------------------------------------------------------------------
Annual average
(life of fund) -- 4.23
- ------------------------------------------------------------------------------
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 and represent past
performance; they do not guarantee future results. 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.
*The Lehman Brothers Aggregate Bond Index was introduced on 12/31/75.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 4/30/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------------
Income $0.222 $0.198 $0.216
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term -- -- --
- ------------------------------------------------------------------------------
Short-term $0.024 $0.024 $0.024
- ------------------------------------------------------------------------------
Total $0.246 $0.222 $0.240
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
10/31/97 $7.14 $7.50 $7.11 $7.11 $7.35
- ------------------------------------------------------------------------------
4/30/98 7.12 7.48 7.08 7.08 7.32
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate1 6.24% 5.94% 5.42% 6.10% 5.90%
- ------------------------------------------------------------------------------
Current 30-day SEC yield2 6.37 6.06 5.60 6.10 5.90
- ------------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by NAV
or POP at end of period.
2Based on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 3/31/98
(most recent calendar quarter)
Class A Class B Class M
(inception date) (11/1/54) (3/1/93) (12/14/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 3.07% -1.88% 2.71% -2.27% 3.00% -0.36%
- ------------------------------------------------------------------------------
1 year 10.89 5.65 10.16 5.16 10.78 7.16
- ------------------------------------------------------------------------------
5 years 41.45 34.70 36.41 34.43 39.58 35.09
Annual average 7.18 6.14 6.41 6.10 6.90 6.20
- ------------------------------------------------------------------------------
10 years 138.75 127.48 119.84 119.84 131.14 123.55
Annual average 9.09 8.57 8.20 8.20 8.74 8.38
- ------------------------------------------------------------------------------
Annual average
(life of fund) 8.67 8.54 7.62 7.62 8.17 8.09
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns and
principal value will fluctuate so that an investor's shares, when sold,
may be worth more of 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 maximum 4.75% sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Lehman Brothers Aggregate Bond Index* is a unmanaged list of
investment-grade bonds.
First Boston High Yield Index* is a market-weighted index, including
publicly traded bonds rated below BBB by Standard & Poor's and Moody's.
Lehman Brothers Corporate Bond Index* is a unmanaged list 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.
Lehman Brothers Long-Term Treasury Bond Index* is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of 10
years or greater.
Lehman Brothers Mortgage-Backed Securities Index* is a unmanaged list of
GNMA bonds.
Salomon Brothers World Government Bond Index* is a market-capitalization
weighted benchmark that tracks the performance of government-bond markets
in 14 countries.
J.P. Morgan Emerging Market Bond Index* is a total-return index that
tracks the traded market for U.S. dollar-denominated Brady and other
similar sovereign restructured bonds.
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.
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Portfolio of investments owned
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES (45.3%) (a)
PRINCIPAL AMOUNT VALUE
Advertising (0.2%)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 1,250,000 Adams Outdoor Advertising sr. notes 10 3/4s, 2006 $ 1,368,750
100,000 Lamar Advertising Co. company guaranty 8 5/8s, 2007 101,250
2,010,000 Lamar Advertising Co. sr. sub. notes 9 5/8s, 2006 2,130,600
470,000 Outdoor Communications Inc. sr. sub. notes 9 1/4s, 2007 494,675
1,175,000 Outdoor Systems, Inc. company guaranty 8 7/8s, 2007 1,213,172
60,000 Outdoor Systems, Inc. sr. sub. notes 9 3/8s, 2006 63,150
--------------
5,371,597
Aerospace and Defense (0.5%)
- -------------------------------------------------------------------------------------------------------------
130,000 Argo-Tech Corp. company guaranty 8 5/8s, 2007 131,625
410,000 Aviation Sales Co. 144A sr. sub. notes 8 1/8s, 2008 401,800
270,000 BE Aerospace, Inc. 144A sr. sub. notes 8s, 2008 266,625
155,000 K&F Industries, Inc. sr. sub. notes Ser. B, 9 1/4s, 2007 161,200
16,515,000 Raytheon Co notes 6.45s, 2002 16,651,909
125,000 Sequa Corp. bonds 8 3/4s, 2001 127,813
145,000 Sequa Corp. sr. notes 9 5/8s, 1999 149,350
140,000 Tracor, Inc. sr. sub. notes 8 1/2s, 2007 151,200
165,000 United Defense Industries Inc. company guaranty 8 3/4s, 2007 167,475
--------------
18,208,997
Agriculture (0.2%)
- -------------------------------------------------------------------------------------------------------------
275,000 AGCO Corp. sr. sub. notes 8 1/2s, 2006 283,250
5,850,000 Potash Corp. of Saskatchewan notes 7 1/8s, 2007 (Canada) 5,993,091
511,480 Premium Standard Farms, Inc. sr. secd. notes 11s, 2003 (PIK) 552,399
480,000 Purina Mills, Inc. 144A sr. sub. notes 9s, 2010 493,200
--------------
7,321,940
Apparel (--%)
- -------------------------------------------------------------------------------------------------------------
400,000 Sassco Fashions Ltd. sr. notes 12 3/4s, 2004 429,000
1,000,000 Tultex Corp. company guaranty 9 5/8s, 2007 985,000
--------------
1,414,000
Automotive (0.3%)
- -------------------------------------------------------------------------------------------------------------
232,000 Aftermarket Technology Corp. sr. sub. notes 12s, 2004 257,230
165,000 Aftermarket Technology Corp. sr. sub. notes Ser. D, 12s, 2004 182,944
40,000 Cambridge Industries Inc. company guaranty Ser. B,
10 1/4s, 2007 41,300
4,360,000 Chrysler Corp. deb. Ser. B, 7.45s, 2097 4,621,905
1,185,000 Hayes Wheels International, Inc. company guaranty Ser. B,
9 1/8s, 2007 1,244,250
1,100,000 Lear Corp. sub. notes 9 1/2s, 2006 1,215,500
130,000 Navistar International Corp. sr. notes Ser. B, 8s, 2008 129,513
1,930,000 Navistar International Corp. sr. notes Ser. B, 7s, 2003 1,925,175
890,000 Talon Automotive Group 144A sr. sub. notes 9 5/8s, 2008 885,550
1,050,000 Walbro Corp. sr. notes Ser. B, 9 7/8s, 2005 1,050,000
--------------
11,553,367
Banks (2.8%)
- -------------------------------------------------------------------------------------------------------------
4,205,000 Abbey National PLC sub. notes 7.35s, 2049 (United Kingdom) 4,403,224
900,000 Chevy Chase Savings Bank Inc. sub. deb. 9 1/4s, 2008 927,000
180,000 Chevy Chase Savings Bank Inc. sub. deb. 9 1/4s, 2005 183,600
8,325,000 Den Danske Bank sub. notes 6.55s, 2003 (Denmark) 8,444,963
50,000 Dime Capital Trust sub. notes 9.33s, 2027 56,925
895,000 First Nationwide Holdings 144A sr. sub. notes 10 5/8s, 2003 1,002,400
5,705,000 Greenpoint Bank sr. notes 6.7s, 2002 5,777,111
2,630,000 Greenpoint Capital Trust company guaranty 9.1s, 2027 2,916,907
1,520,000 Merita Bank Ltd. sub. notes 6 1/2s, 2006 (Finland) 1,507,901
90,000 Ocwen Capital Trust company guaranty 10 7/8s, 2027 99,000
5,000 Ocwen Federal Bank sub. deb. 12s, 2005 5,550
18,990,000 Peoples Bank sub. notes 7.2s, 2006 19,436,835
2,065,000 Peoples Heritage Capital Trust company guaranty
Ser. B, 9.06s, 2027 2,245,873
95,000 Provident Capital Trust company guaranty 8.6s, 2026 100,430
115,000 Riggs Capital Trust 144A bonds 8 5/8s, 2026 121,784
8,500,000 Riggs National Corp. sub. deb. 8 1/2s, 2006 8,908,170
6,500,000 Scotland International Finance B.C. 144A sub. notes 8.85s,
2006 (Netherlands) 7,458,295
5,000,000 Society Bank & Trust notes 12 1/2s, 1999 5,412,500
6,935,000 Sparbanken Sverige AB (Swedbank) 144A sub. notes 7 1/2s,
2006 (Sweden) 7,140,623
6,065,000 St. Paul Bancorp sr. notes 7 1/8s, 2004 6,216,807
3,745,000 State Street Institution 144A company guaranty 7.94s, 2026 3,980,673
6,095,000 Webster Capital Trust I 144A bonds 9.36s, 2027 6,696,089
8,445,000 Webster Financial Corp. sr. notes 8 3/4s, 2000 8,828,572
--------------
101,871,232
Basic Industrial Products (--%)
- -------------------------------------------------------------------------------------------------------------
290,000 Clark-Schwebel sr. notes 10 1/2s, 2006 319,000
770,000 Grove Worldwide 144A sr. sub. notes 9 1/4s, 2008 771,925
170,000 Koppers Industries, Inc. company guaranty 9 7/8s, 2007 175,525
75,000 Owens-Illinois, Inc. sr. notes 8.1s, 2007 79,526
30,000 Roller Bearing Co. company guaranty Ser. B, 9 5/8s, 2007 30,675
--------------
1,376,651
Broadcasting (1.1%)
- -------------------------------------------------------------------------------------------------------------
100,000 Adelphia Communications Corp. sr. notes Ser. B, 10 1/4s, 2000 103,500
855,000 Affinity Group Holdings sr. notes 11s, 2007 927,675
1,100,000 American Radio Systems Corp. company guaranty 9s, 2006 1,177,000
550,000 Benedek Broadcasting sr. notes 11 7/8s, 2005 621,500
925,000 Benedek Communications Corp. sr. disc. notes stepped-
coupon zero % (13 1/4s, 5/15/01), 2006 (STP) 730,750
260,000 Capstar Broadcasting sr. disc. notes stepped-coupon zero %
(12 3/4s, 2/1/02), 2009 (STP) 193,700
900,000 Capstar Broadcasting sr. sub. notes 9 1/4s, 2007 936,000
1,110,000 Central European Media Enterprises Ltd. sr. notes
9 3/8s, 2004 1,098,900
230,000 Chancellor Media Corp. sr. sub. notes 9 3/8s, 2004 241,500
90,000 Citadel Broadcasting Inc. sr. sub. notes 10 1/4s, 2007 98,775
840,000 Comcast Corp. sr. sub. notes 9 1/2s, 2008 893,416
1,490,000 Echostar Satellite Broadcast Corp. sr. disc. notes stepped-
coupon zero % (13 1/8s, 3/15/00), 2004 (STP) 1,355,900
1,350,000 Fox/Liberty Networks LLC sr. disc. notes stepped-coupon
zero % (9 3/4s, 8/15/02), 2007 (STP) 918,000
630,000 Fox/Liberty Networks LLC sr. notes 8 7/8s, 2007 642,600
875,000 Granite Broadcasting Corp. sr. sub. notes 10 3/8s, 2005 927,500
65,000 Gray Communications Systems, Inc. sr. sub. notes 10 5/8s, 2006 70,525
160,000 Heartland Wireless Communications, Inc. sr. notes Ser. B,
14s, 2004 (In default) (NON) 46,800
120,000 Heritage Media Services Corp. sr. sub. notes 8 3/4s, 2006 127,200
125,000 Jacor Communications, Inc. company guaranty 9 3/4s, 2006 135,625
1,350,000 Jacor Communications, Inc. company guaranty Ser. B,
8 3/4s, 2007 1,397,250
70,000 Pegasus Communications Corp. sr. notes Ser. B, 9 5/8s, 2005 73,150
250,000 Pegasus Media & Communications notes Ser. B, 12 1/2s, 2005 285,000
305,000 Radio One Inc. company guaranty stepped-coupon Ser. B, 7s,
(12s, 5/15/00), 2004 (STP) 311,100
330,000 SFX Entertainment Inc. 144A sr. sub. notes 9 1/8s, 2008 320,100
1,075,000 Sinclair Broadcasting Group, Inc. company guaranty 9s, 2007 1,107,250
275,000 Sinclair Broadcasting Group, Inc. sr. sub. notes 10s, 2005 294,250
1,000,000 Spanish Broadcasting Systems sr. notes 12 1/2s, 2002 1,150,000
155,000 Spanish Broadcasting Systems sr. notes Ser. B, 11s, 2004 169,725
1,160,000 Sullivan Broadcasting sr. sub. notes 10 1/4s, 2005 1,252,800
100,000 TV Azteca S.A. de C.V. sr. notes 10 1/2s, 2007 (Mexico) 105,500
22,491,000 Viacom, Inc. sr. notes 7 3/4s, 2005 23,709,787
--------------
41,422,778
Building and Construction (0.3%)
- -------------------------------------------------------------------------------------------------------------
175,000 American Architectural Products Corp. 144A sr. notes
11 3/4s, 2007 185,063
260,000 Atrium Companies Inc. 144A sub. notes 10 1/2s, 2006 273,650
320,000 Beazer Homes USA, Inc. 144A sr. notes 8 7/8s, 2008 316,000
300,000 Brand Scaffold Services 144A sr. notes 10 1/4s, 2008 306,000
80,000 Building Materials Corp. sr. notes Ser. B, 8 5/8s, 2006 82,400
115,000 D.R. Horton Inc. company guaranty 10s, 2006 123,625
830,000 GS Superhighway Holdings sr. notes 9 7/8s, 2004 713,800
4,740,000 Guangdong Enterprises 144A sr. notes 8 7/8s, 2007 (China) 4,213,007
220,000 Jackson Products, Inc. 144A company guaranty 9 1/2s, 2005 222,200
75,000 M.D.C. Holdings, Inc. notes Ser. B, 11 1/8s, 2003 82,125
2,000,000 NVR, Inc. sr. notes 8s, 2005 1,970,000
550,000 Southdown, Inc. sr. sub. notes Ser. B, 10s, 2006 596,750
--------------
9,084,620
Business Equipment and Services (0.1%)
- -------------------------------------------------------------------------------------------------------------
185,000 ATC Group Services Inc. 144A sr. sub. notes 12s, 2008 180,375
305,000 Corporate Express, Inc. sr. sub. notes Ser. B, 9 1/8s, 2004 312,625
250,000 Iron Mountain, Inc. company guaranty 8 3/4s, 2009 253,750
840,000 Iron Mountain, Inc. med. term notes company guaranty
10 1/8s, 2006 907,200
440,000 Morris Material Handling Inc. 144A sr. notes 9 1/2s, 2008 437,800
135,000 Outsourcing Solutions, Inc. sr. sub. notes Ser. B, 11s, 2006 142,931
679,000 Pierce Leahy Corp. sr. sub. notes 11 1/8s, 2006 760,480
160,000 United Stationer Supply, Inc. sr. sub. notes 12 3/4s, 2005 183,600
60,000 Williams Scotsman, Inc. 144A sr. notes 9 7/8s, 2007 62,400
1,200,000 Unicco Service Co. company guaranty Ser. B, 9 7/8s, 2007 1,219,500
480,000 United Stationer 144A sr. sub. notes 8 3/8s, 2008 482,400
--------------
4,943,061
Cable Television (0.5%)
- -------------------------------------------------------------------------------------------------------------
1,000,000 Acme Television sr. disc. notes stepped-coupon zero %
(10 7/8s, 9/30/00), 2004 (STP) 820,000
95,000 Century Communications Corp. sr. notes 9 1/2s, 2005 101,888
1,200,000 Century Communications Corp. sr. notes 8 7/8s, 2007 1,254,000
8,400,000 Continental Cablevision, Inc. sr. deb 9 1/2s, 2013 9,864,792
1,100,000 CSC Holdings, Inc. sr. sub. deb. 10 1/2s, 2016 1,276,000
5,000 CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2023 5,450
880,000 Diamond Cable Communication Co. sr. disc. notes stepped-
coupon zero % (11 1/4s, 12/15/00), 2005
(United Kingdom) (STP) 699,600
15,000 Diamond Cable Communication Co. sr. disc. notes stepped-
coupon zero % (13 1/2s, 9/30/99), 2004
(United Kingdom) (STP) 13,950
320,000 Globo Communicacoes 144A sr. notes 10 5/8s, 2008 323,200
1,350,000 Jones Intercable, Inc. sr. notes 7 5/8s, 2008 1,323,000
245,000 Jones Intercable, Inc. sr. sub. deb. 10 1/2s, 2008 267,050
750,000 Lenfest Communications, Inc. 144A sr. sub. notes 8 1/4s, 2008 757,500
1,105,000 Marcus Cable Co. L.P. notes stepped-coupon zero %
(13 1/2s, 8/1/99), 2004 (STP) 1,055,275
1,170,000 RCN Corp. 144A sr. disc. notes stepped-coupon zero %
(9.8s, 2/15/03), 2008 (STP) 731,250
5,000 Rogers Cablesystems Ltd. deb. 10 1/8s, 2012 (Canada) 5,425
75,000 Rogers Cablesystems Ltd. notes 11s, 2015 (Canada) 86,625
--------------
18,585,005
Chemicals (0.2%)
- -------------------------------------------------------------------------------------------------------------
275,000 Great Lakes Carbon Corp. sr. notes 10s, 2006 310,750
305,000 Huntsman Corp. 144A sr. sub. notes FRN 9.188s, 2007 305,763
3,335,000 Lyondell Petrochemical Co. notes 9 1/8s, 2002 3,636,584
250,000 NL Industries, Inc. sr. notes stepped-coupon zero %
(13s, 10/15/98), 2005 (STP) 253,750
2,000,000 PCI Chemicals & Pharmaceuticals company guaranty
9 1/4s, 2007 (India) 1,965,000
165,000 Pharmaceutical Fine Chemicals 144A sr. sub. notes
9 3/4s, 2007 (Switzerland) 169,950
45,000 Pioneer Americas Acquisition company guaranty
Ser. B, 9 1/4s, 2007 45,675
165,000 Polytama International notes 11 1/4s, 2007 (Netherlands) 103,950
175,000 Radnor Holdings Corp. company guaranty 10s, 2003 182,438
1,650,000 Sociedad Quimica Y Minera de Chile S.A. 144A bonds
7.7s, 2006 (Chile) 1,687,488
115,000 Sovereign Specialty Chemical 144A sr. sub. notes 9 1/2s, 2007 120,175
170,000 Sterling Chemicals Holdings sr. disc. notes stepped-coupon
zero % (13 1/2s, 8/15/01), 2008 (STP) 97,750
95,000 Trikem S.A. 144A bonds 10 5/8s, 2007 (Brazil) 89,300
100,000 Union Carbide Global Enterprises sr. sub. notes Ser. B,
12s, 2005 107,000
--------------
9,075,573
Computer Services and Software (0.6%)
- -------------------------------------------------------------------------------------------------------------
17,975,000 Dell Computer Corp. deb. 7.1s, 2028 17,930,063
1,080,000 IPC Information Systems sr. disc. notes stepped-coupon zero %
(10 7/8s, 11/1/01), 2008 (STP) 788,400
2,000,000 Unisys Corp. deb. 9 3/4s, 2016 2,060,000
--------------
20,778,463
Conglomerates (--%)
- -------------------------------------------------------------------------------------------------------------
100,000 Aramark Corp. sub. notes 8 1/2s, 2003 102,750
40,000 Cia Latino Americana 144A company guaranty 11 1/8s, 2004
(Argentina) 41,100
140,000 Congoleum Corp. sr. notes 9s, 2001 143,675
145,000 MacAndrews & Forbes Holdings, Inc. sub. deb. notes 13s, 1999 144,275
--------------
431,800
Consumer Durable Goods (0.1%)
- -------------------------------------------------------------------------------------------------------------
290,000 French Fragrances, Inc. 144A sr. notes 10 3/8s, 2007 308,850
45,000 French Fragrances, Inc. sr. notes Ser. B, 10 3/8s, 2007 47,475
20,000 Hedstrom Holdings, Inc. stepped-coupon zero %
(12s, 6/01/02), 2009 (STP) 12,500
920,000 Iron Age Corp. 144A sr. sub. notes 9 7/8s, 2008 929,200
210,000 Revlon Worldwide Corp. sr. disc. notes Ser. B, zero %, 2001 161,175
160,000 Sealy Mattress Co. 144A sr. sub. notes 9 7/8s, 2007 169,200
200,000 Selmer Co., Inc. sr. sub. notes 11s, 2005 216,000
--------------
1,844,400
Consumer Non Durables (1.0%)
- -------------------------------------------------------------------------------------------------------------
90,000 Amscan Holdings, Inc. sr. sub. notes 9 7/8s, 2007 94,500
330,000 Carson, Inc. company guaranty Ser. B, 10 3/8s, 2007 338,250
250,000 Chattem, Inc. 144A sr. sub. notes 8 7/8s, 2008 250,000
2,000,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 2,020,000
1,000,000 Packaged Ice, Inc. 144A sr. notes 9 3/4s, 2005 1,017,500
1,895,000 Philip Morris Cos., Inc. deb. 7 3/4s, 2027 1,997,178
2,255,000 Philip Morris Cos., Inc. notes 7 1/2s, 2004 2,356,768
11,028,000 Philip Morris Cos., Inc. notes 7 1/4s, 2003 11,362,920
4,530,000 Philip Morris Cos., Inc. notes 7 1/8s, 2004 4,650,090
6,220,000 Philip Morris Cos., Inc. notes 6.8s, 2003 6,295,386
9,055,000 Sampoerna International Finance Co. 144A company
guaranty 8 3/8s, 2006 (Indonesia) 6,247,950
--------------
36,630,542
Consumer Services (0.7%)
- -------------------------------------------------------------------------------------------------------------
738,500 Falcon Holdings Group, Inc. sr. sub. notes 11s, 2003 (PIK) 790,195
80,000 FRD Acquisition Co. sr. notes Ser. B, 12 1/2s, 2004 87,400
660,000 Host Marriott Travel Plaza sr. notes Ser. B, 9 1/2s, 2005 701,250
595,000 John Q Hammons Hotels, Inc. 1st mtge. 8 7/8s, 2004 597,975
1,500,000 Production Resource Group 144A sr. sub. notes 11 1/2s, 2008 1,477,500
18,775,000 TCI Communications, Inc. sr. notes 8.65s, 2004 20,653,627
--------------
24,307,947
Electronics and Electrical Equipment (0.3%)
- -------------------------------------------------------------------------------------------------------------
150,000 Celestica International Ltd. 144A sr. sub. notes 10 1/2s, 2006
(Canada) 165,375
151,266 Cirent Semiconductor sr. sub. notes 10.22s, 2002 157,316
175,029 Cirent Semiconductor 144A sr. sub. notes 10.14s, 2004 181,155
190,000 Details, Inc. sr. sub. notes Ser. B, 10s, 2005 196,175
1,190,000 DII Group, Inc. (The) sr. sub. notes 8 1/2s, 2007 1,195,950
210,000 Dobson Communications Corp. sr. notes 11 3/4s, 2007 228,900
1,010,000 Fairchild Semiconductor Corp. sr. sub. notes 10 1/8s, 2007 1,050,400
2,380,280 Fairchild Semiconductor Corp. 144A sr. sub. notes 11.74s, 2008 2,725,420
540,000 Flag Limited 144A sr. notes 8 1/4s, 2008 (Bermuda) 549,450
220,000 Flextronics International Ltd. sr. sub. notes Ser. B, 8 3/4s, 2007 222,750
60,000 HCC Industries, Inc. company guaranty 10 3/4s, 2007 62,850
475,000 Motors and Gears Inc. sr. notes Ser. D, 10 3/4s, 2006 515,375
260,000 Samsung Electronics 144A company guaranty 9 3/4s, 2003 261,300
780,000 Viasystems Inc. 144A sr. sub. notes 9 3/4s, 2007 815,100
110,000 Viasystems Inc. sr. sub notes 9 3/4s, 2007 115,225
30,000 Wavetek Corp. company guaranty 10 1/8s, 2007 30,900
660,000 Zilog Inc. 144A sr. notes 9 1/2s, 2005 567,600
--------------
9,041,241
Energy-Related (0.1%)
- -------------------------------------------------------------------------------------------------------------
115,000 Newpark Resources, Inc. company guaranty Ser. B, 9 5/8s, 2007 116,150
250,000 Panda Global Energy Co. company guaranty 12 1/2s, 2004 240,000
4,715,000 Quezon Power Ltd. sr. notes 8.86s, 2017 (Philippines) 4,237,606
260,000 RAM Energy Inc. sr. notes 11 1/2s, 2008 259,350
--------------
4,853,106
Entertainment (1.7%)
- -------------------------------------------------------------------------------------------------------------
55,000 Affinity Group Holdings sr. sub. notes 11 1/2s, 2003 58,231
490,000 AMC Entertainment, Inc. sr. sub. notes 9 1/2s, 2009 509,600
700,000 Aztar Corp. sr. sub. notes 11s, 2002 717,500
600,000 Boyd Gaming Corp. sr. sub. notes 9 1/2s, 2007 634,500
1,650,000 Cinemark USA, Inc. sr. sub. notes Ser. D, 9 5/8s, 2008 1,724,250
1,355,000 Coinmach Corp. sr. notes 11 3/4s, 2005 1,517,600
200,000 Coast Hotels & Casinos, Inc. company guaranty Ser. B,
10 7/8s, 2001 212,000
760,000 Fitzgeralds Gaming Corp. 144A company guaranty
12 1/4s, 2004 771,400
140,000 Isle of Capri Black Hawk LLC 1st mtge Ser. B, 13s, 2004 142,800
120,000 Penn National Gaming, Inc. 144A sr. notes 10 5/8s, 2004 126,300
180,000 Premier Parks, Inc. sr. notes Ser. A, 12s, 2003 199,800
850,000 Premier Parks, Inc. sr. notes 9 1/4s, 2006 862,750
470,000 Silver Cinemas Intl.144A sr. sub. notes 10 1/2s, 2005 478,225
1,205,000 Six Flags Corp. sr. sub. notes stepped-coupon zero %
(12 1/4s, 6/15/98), 2005 (STP) 1,354,119
3,450,000 Time Warner Entertainment Co. notes 8 7/8s, 2012 4,070,621
34,720,000 Time Warner Entertainment Co. sr. notes 8 3/8s, 2033 39,989,107
2,175,000 Time Warner, Inc. notes 7 3/4s, 2005 2,306,327
685,000 Trump A.C. 1st mtge. 11 1/4s, 2006 686,713
970,000 Trump Castle Funding 144A sub. notes 10 1/4s, 2003 979,700
400,000 United Artists Theatre 144A sr. sub. notes 9 3/4s, 2008 402,000
2,515,000 Viacom International, Inc. sub. deb. 8s, 2006 2,549,581
--------------
60,293,124
Environmental Control (0.4%)
- -------------------------------------------------------------------------------------------------------------
35,000 Allied Waste Industries, Inc. company guaranty 10 1/4s, 2006 38,500
200,000 Allied Waste Industries, Inc. sr. disc. notes stepped-coupon
zero % (11.3s, 6/1/02), 2007 (STP) 146,000
4,250,000 Waste Management, Inc. notes 6 5/8s, 2002 4,262,750
8,610,000 WMX Technologies, Inc. notes 7.7s, 2002 8,989,959
--------------
13,437,209
Food and Beverages (0.2%)
- -------------------------------------------------------------------------------------------------------------
65,000 Ameriserve Food Co. company guaranty 10 1/8s, 2007 69,550
295,000 Ameriserve Food Co. company guaranty 8 7/8s, 2006 300,163
70,000 Aurora Foods, Inc. sr. sub. notes Ser. B, 9 7/8s, 2007 75,425
600,000 Aurora Foods, Inc. 144A sr. sub. notes Ser. D, 9 7/8s, 2007 646,500
1,590,000 Canandaigua Wine Co. sr. sub. notes Ser. C, 8 3/4s, 2003 1,617,825
115,000 Eagle Family Foods 144A sr. sub. notes 8 3/4s, 2008 113,850
130,000 Fleming Companies, Inc. company guaranty Ser. B, 10 1/2s, 2004 135,200
300,000 Jitney-Jungle Stores company guaranty 12s, 2006 336,000
780,000 RAB Enterprises, Inc. 144A sr. notes 10 1/2s, 2005 783,900
130,000 Signature Brands Ltd. sr. sub. notes 13s, 2002 (Canada) 146,738
1,430,000 Smithfield Foods, Inc. 144A sr. sub. notes 7 5/8s, 2008 1,433,575
130,000 Southern Foods Group 144A sr. sub. notes 9 7/8s, 2007 136,825
1,000,000 Southland Corp. deb. Ser. A, 4 1/2s, 2004 830,000
930,000 Stater Brothers Holdings 144A sr. sub. notes 9s, 2004 967,200
--------------
7,592,751
Health Care (0.7%)
- -------------------------------------------------------------------------------------------------------------
600,000 Columbia/HCA Healthcare Corp. deb. 7.05s, 2027 523,500
1,250,000 Columbia/HCA Healthcare Corp. notes 7.15s, 2004 1,215,625
750,000 Extendicare Inc. 144A sr. sub. notes 9.35s, 2007 (Canada) 761,250
290,000 Genesis Health Ventures, Inc. sr. sub. notes 9 1/4s, 2006 298,700
430,000 Global Health Sciences 144A sr. notes 11s, 2008 421,400
480,000 Hudson Respiratory Care, Inc. 144A sr. sub. notes 9 1/8s, 2008 484,800
325,000 Integrated Health Services, Inc. sr. sub. notes Ser. A, 9 1/2s, 2007 339,625
450,000 Integrated Health Services, Inc. sr. sub. notes Ser. A, 9 1/4s, 2008 465,750
6,675,000 Manor Care, Inc. sr. notes 7 1/2s, 2006 6,504,988
2,000,000 MedPartners, Inc. sr. notes 7 3/8s, 2006 1,791,260
1,200,000 Multicare Cos., Inc. sr. sub. notes 9s, 2007 1,215,000
250,000 Paracelsus Healthcare sr. sub. notes 10s, 2006 258,750
250,000 Paragon Corp. Holdings 144A sr. notes 9 5/8s, 2008 243,125
2,195,000 Paragon Health Networks, Inc. sr. sub. notes Ser. B, 9 1/2s, 2007 2,227,925
625,000 Quorum Health Group, Inc. sr. sub. notes 8 3/4s, 2005 650,000
595,000 Sun Healthcare Group Inc. 144A sr. sub. notes 9 1/2s, 2007 609,875
925,000 Sun Healthcare Group Inc. 144A sr. sub. notes 9 3/8s, 2008 928,469
6,465,000 Tenet Healthcare Corp. sr. notes 8s, 2005 6,610,463
1,295,000 Tenet Healthcare Corp. sr. sub. notes 8 5/8s, 2007 1,340,325
--------------
26,890,830
Insurance and Finance (11.6%)
- -------------------------------------------------------------------------------------------------------------
125,000 Aames Financial Corp. sr. notes 9 1/8s, 2003 125,000
7,745,000 Advanta Corp. med. term notes Ser. B, 7s, 2001 7,218,650
20,115,000 AFC Capital Trust I company guaranty Ser. B, 8.207s, 2027 22,512,909
3,245,000 Allstate Financing II company guaranty 7.83s, 2045 3,393,037
3,500,000 AMBAC Indemnity Corp. deb. 9 3/8s, 2011 4,338,285
29,515,000 American General Institute 144A company guaranty
8 1/8s, 2046 33,014,594
23,725,000 Amvescap Corp. PLC 144A sr. notes 6.6s, 2005 23,688,938
500,000 Colonial Capital I 144A company guaranty 8.92s, 2027 535,781
20,000 Contifinancial Corp. sr. notes 8 3/8s, 2003 20,514
110,000 Delta Financial Corp. sr. notes 9 1/2s, 2004 110,000
150,000 Dine S.A. de C.V. 144A company guaranty 8 3/4s, 2007
(Mexico) 146,250
120,000 Dollar Financial Group Inc. sr. notes Ser. A, 10 7/8s, 2006 130,200
12,055,000 Executive Risk Capital Trust company guaranty Ser. B,
8.675s, 2027 12,882,455
12,397,000 First Citizens Bank Capital Trust I 144A company guaranty
8.05s, 2028 12,610,073
3,595,000 First Financial Caribbean Corp. sr. notes 7.84s, 2006 3,742,467
9,050,000 Firstar Bank Milwaukee sr. bank notes 6 1/4s, 2002 9,051,720
6,840,000 Firstar Capital Trust I company guaranty Ser. B, 8.32s, 2026 7,396,571
11,105,000 Fleet Credit Card LLC sr. bank notes 7.02s, 2001 11,382,625
21,480,000 Ford Motor Credit Corp. sr. notes 6s, 2003 21,282,599
5,050,000 Hartford Life, Inc. deb. 7.65s, 2027 5,458,242
585,000 Imperial Credit Capital Trust I 144A company guaranty
10 1/4s, 2032 585,000
245,000 Investors Capital Trust I company guaranty Ser. B, 9.77s, 2027 264,428
9,705,000 Lehman Bros Holdings, Inc. med. term notes 6.4s, 1999 9,754,398
27,015,000 Lehman Brothers Holdings, Inc. notes 6 1/4s, 2003 26,889,110
6,460,000 Markel Capital Trust I company guaranty 8.71s, 2046 6,945,598
330,000 Market Hub Partners 144A sr. notes 8 1/4s, 2008 336,600
12,770,000 Merrill Lynch & Co., Inc. med. term notes 6.13s, 2003 12,744,205
8,325,000 Money Store, Inc. notes 8.05s, 2002 8,803,604
170,000 Nationwide Credit Inc. 144A sr. notes 10 1/4s, 2008 173,400
4,588,000 North Fork Bancorporation, Inc. company guaranty 8s, 2027 4,663,243
175,000 North Fork Capital Trust I company guaranty 8.7s, 2026 190,425
2,950,000 Orange Cogen Funding 144A company guaranty 8.175s, 2022 3,210,485
5,000,000 Orion Capital Corp. sr. notes 9 1/8s, 2002 5,481,250
7,857,000 Orion Capital Corp. 144A company guaranty 7.701s, 2028 7,792,651
17,915,000 Paine Webber Group sr. med. term notes 6.52s, 2005 17,870,213
18,815,000 Paine Webber Group, Inc. sr. notes 6.55s, 2008 18,744,444
7,600,000 Phoenix Home Life Mutual Insurance Co. 144A notes
6.95s, 2006 7,755,724
390,000 Pindo Deli Finance Mauritius Ltd. company guaranty
10 3/4s, 2007 315,900
21,330,000 Provident Companies, Inc. bonds 7.405s, 2038 21,436,650
205,000 Reliance Group Holdings, Inc. sr. notes 9s, 2000 214,270
5,470,000 Riggs Capital Trust company guaranty Ser. A, 8 5/8s, 2026 5,647,775
9,140,000 Salomon, Inc. sr. notes 7.3s, 2002 9,482,750
10,910,000 Salomon, Inc. sr. notes 6 3/4s, 2003 11,128,418
6,255,000 Salton Sea Funding Corp. company guaranty Ser. E, 8.3s, 2011 6,813,384
6,655,000 Southern Investments Service Co. sr. notes 6.8s, 2006
(United Kingdom) 6,779,116
115,000 Sovereign Capital Trust company guaranty 9s, 2027 124,807
7,790,000 Sumitoma Bank Treasury Co. 144A bonds Ser. A, FRB,
9.4s, 2049 (Japan) 7,978,830
12,490,000 Tig Capital Trust I 144A bonds 8.597s, 2027 13,022,823
7,845,000 Trenwick Capital Trust I company guaranty 8.82s, 2037 8,293,263
14,330,000 Trenwick Group, Inc. 144A sr. notes 6.7s, 2003 14,283,571
4,645,000 USF&G Corp. 144A company guaranty 8.312s, 2046 5,347,556
--------------
422,114,801
Medical Supplies and Devices (0.5%)
- -------------------------------------------------------------------------------------------------------------
350,000 ALARIS Medical Systems, Inc. company guaranty 9 3/4s, 2006 372,750
15,000,000 Beckman Coulter Inc. 144A company guaranty 7.1s, 2003 15,018,300
290,000 Conmed Corp. 144A sr. sub. notes 9s, 2008 290,725
175,000 Dade International, Inc. sr. sub. notes Ser. B, 11 1/8s, 2006 196,000
580,000 Fresenius Medical Care AG 144A company guaranty 7 7/8s,
2008 (Germany) 574,200
210,000 Graphic Controls Corp. sr. sub. notes Ser. A, 12s, 2005 233,100
95,000 Imagyn Medical Technologies company guaranty 12 1/2s, 2004 53,200
905,000 Kinetic Concepts, Inc. company guaranty Ser. B, 9 5/8s, 2007 916,313
670,000 Wright Medical Technology, Inc. 144A notes Ser. C,
11 3/4s, 2000 663,300
--------------
18,317,888
Metals and Mining (0.3%)
- -------------------------------------------------------------------------------------------------------------
855,000 AK Steel Corp. sr. notes 9 1/8s, 2006 902,025
575,000 Ameristeel Corp. 144A sr. notes 8 3/4s, 2008 575,000
200,000 Anker Coal Group, Inc. sr. notes Ser. B, 9 3/4s, 2007 194,000
135,000 Armco, Inc. sr. notes 9s, 2007 139,725
155,000 Continental Global Group sr. notes Ser. B, 11s, 2007 164,688
2,585,000 Freeport-McMoRan Copper & Gold Co., Inc. sr. notes
7 1/2s, 2006 2,195,932
430,000 Hylsa S.A. de C.V. 144A bonds 9 1/4s, 2007 (Mexico) 425,700
6,100,000 PT Alatief Freeport sr. notes 9 3/4s, 2001 (Netherlands) 5,821,230
360,000 WHX Corp. 144A sr. notes 10 1/2s, 2005 365,400
--------------
10,783,700
Motion Picture Distribution (--%)
- -------------------------------------------------------------------------------------------------------------
190,000 Panavision Inc. 144A sr. disc. notes stepped-coupon zero %
(9 5/8s, 2/1/02), 2006 (STP) 135,850
Oil and Gas (3.9%)
- -------------------------------------------------------------------------------------------------------------
195,000 Abraxas Petroleum Corp. 144A sr. notes Ser. B, 11 1/2s, 2004 201,825
200,000 Benton Oil & Gas Co. sr. notes 11 5/8s, 2003 216,000
1,000,000 Benton Oil & Gas Co. sr. notes 9 3/8s, 2007 1,000,000
135,000 Chesapeake Energy Corp. sr. notes 9 1/8s, 2006 132,300
610,000 Chesapeake Energy Corp. 144A sr. notes 9 5/8s, 2005 613,050
120,000 CIA Naviera Perez Companc S.A. 144A bonds 9s, 2004
(Argentina) 121,800
190,000 Coho Energy, Inc. sr. sub. notes 8 7/8s, 2007 177,650
1,505,000 Costilla Energy, Inc. sr. notes 10 1/4s, 2006 1,535,100
330,000 Dailey International Inc. 144A sr. notes 9 1/2s, 2008 333,300
65,000 DI Industries Inc. sr. notes 8 7/8s, 2007 65,650
6,802,000 Express Pipeline Ltd. 144A sub. notes Ser. B, 7.39s, 2019
(Canada) 6,721,600
900,000 Flores & Rucks, Inc. sr. sub. notes 9 3/4s, 2006 983,250
150,000 Gulf Canada Resources Ltd. sr. sub. notes 9 5/8s, 2005
(Canada) 162,750
5,565,000 Gulf Canada Resources, Ltd. sr. notes 8.35s, 2006 (Canada) 6,016,934
19,995,000 K N Energy, Inc. sr. notes 6.45s, 2003 20,004,398
22,335,000 Louis Dreyfus Natural Gas notes 6 7/8s, 2007 22,175,751
1,630,000 Michael Ptroleum Corp. 144A sr. notes 11 1/2s, 2005 1,605,550
10,000,000 Northwest Pipeline Corp. deb. 6 5/8s, 2007 10,019,600
150,000 Ocean Energy, Inc. company guaranty Ser. B, 8 7/8s, 2007 157,500
6,600,000 ONEOK Inc. deb. 9.7s, 2019 7,183,044
400,000 Pacalta Resources Ltd. sr. notes Ser. B, 10 3/4s, 2004 (Canada) 412,000
900,000 Panaco, Inc. company guaranty Ser. B, 10 5/8s, 2004 913,500
4,055,000 Petro Geo-Services AS ADR notes 7 1/2s, 2007 (Norway) 4,289,136
12,500,000 Petro-Canada deb. 9 1/4s, 2021 (Canada) 15,479,750
20,710,000 Pioneer Natural Resources Co. bonds 7.2s, 2028 20,320,652
20,000 Pogo Producing Co. sr. sub. notes Ser. B, 8 3/4s, 2007 20,600
70,000 Pride Petroleum Services, Inc. sr. notes 9 3/8s, 2007 75,950
6,135,000 Saga Petroleum ASA deb. 7 1/4s, 2027 (Norway) 6,100,889
1,000,000 Seagull Energy sr. sub notes 8 5/8s, 2005 1,030,000
60,000 Snyder Oil Corp. sr. sub. notes 8 3/4s, 2007 61,500
7,773,000 Sonat, Inc. notes 6 5/8s, 2008 7,716,335
625,000 Southwest Royalties, Inc. company guaranty 10 1/2s, 2004 568,750
370,000 Tokai Corp. 144A bonds FRB 9.98s, 2049 365,375
5,425,000 Transamerican Energy sr. disc. notes stepped-coupon Ser. B,
zero % (13s, 6/15/99), 2002 (STP) 4,611,250
495,000 Transamerican Energy sr. notes Ser. B, 11 1/2s, 2002 491,288
541,000 TransTexas Gas Corp. sr. sub. notes Ser. D, 13 3/4s, 2001 605,920
175,000 Trico Marine Services, Inc. company guaranty Ser. B,
8 1/2s, 2005 178,500
110,000 Trico Marine Services, Inc. company guaranty Ser. D,
8 1/2s, 2005 110,550
45,000 Wiser Oil Co. company guaranty 9 1/2s, 2007 43,200
--------------
142,822,197
Packaging and Containers (0.1%)
- -------------------------------------------------------------------------------------------------------------
145,000 AEP Industries, Inc. 144A sr. sub. notes 9 7/8s, 2007 150,800
2,000,000 Gaylord Container Corp. sr. sub. notes 9 7/8s, 2008 1,975,000
200,000 Innova S De R.L. sr. notes 12 7/8s, 2007 (Mexico) 215,250
115,000 Radnor Holdings Inc. sr. notes 10s, 2003 120,463
2,600,000 Riverwood International Corp. company guaranty 10 5/8s, 2007 2,743,000
165,000 Vicap SA. 144A company guaranty 10 1/4s, 2002 169,950
--------------
5,374,463
Paper and Forest Products (0.1%)
- -------------------------------------------------------------------------------------------------------------
115,000 APP Finance II Mauritius Ltd. bonds stepped-coupon
zero % (16s, 2/15/07), 2049 (Indonesia) (STP) 98,900
340,000 Florida Coast Paper LLC 1st mtge. Ser. B, 12 3/4s, 2003 370,600
225,000 Huntsman Packaging Corp. company guaranty 9 1/8s, 2007 230,344
550,000 Indah Kiat Financial Mauritius Ltd. company guaranty 10s, 2007
(Indonesia) 448,250
145,000 Maxxam Group Holdings, Inc. sr. notes Ser. B, 12s, 2003 158,956
415,000 PT Pabrik Kertas Tjiwi Kimia company guaranty 10s, 2004 336,150
110,000 Repap New Brunswick sr. notes 10 5/8s, 2005 (Canada) 114,950
1,000,000 Repap New Brunswick sr. notes 9 7/8s, 2000 (Canada) 1,055,000
90,000 Repap New Brunswick sr. notes FRN 9 1/2s, 2000 (Canada) 90,000
40,000 Riverwood International Corp. company guaranty
10 7/8s, 2008 40,400
630,000 Riverwood International Corp. company guaranty
10 1/4s, 2006 652,050
--------------
3,595,600
Pharmaceuticals (--%)
- -------------------------------------------------------------------------------------------------------------
265,000 ICN Pharmaceuticals, Inc. 144A sr. notes 9 1/4s, 2005 285,869
380,000 PharMerica, Inc. 144A sr. sub. notes 8 3/8s, 2008 380,000
--------------
665,869
Publishing (1.1%)
- -------------------------------------------------------------------------------------------------------------
210,000 American Media Operation, Inc. sr. sub. notes 11 5/8s, 2004 228,113
990,000 Garden State Newspapers, Inc. sr. sub. notes Ser. B, 8 3/4s, 2009 1,014,750
25,595,000 News America Holdings, Inc. deb. 7 3/4s, 2045 26,739,097
11,600,000 News America Holdings, Inc. deb. 7.7s, 2025 12,136,268
180,000 Perry-Judd 144A sr. sub. notes 10 5/8s, 2007 189,450
50,000 Von Hoffman Press Inc. 144A sr. sub. notes 10 3/8s, 2007 53,500
--------------
40,361,178
REIT's (Real Estate Investment Trust) (3.2%)
- -------------------------------------------------------------------------------------------------------------
2,110,000 Avalon Properties, Inc. notes 7 3/8s, 2002 2,164,544
8,730,000 Avalon Properties, Inc. notes 6 7/8s, 2007 8,696,128
9,085,000 Avalon Properties, Inc. notes 6 5/8s, 2005 8,964,079
170,000 Bluegreen Corp. 144A sr. notes 10 1/2s, 2008 170,638
7,815,000 Chelsea GCA Realty, Inc. notes 7 1/4s, 2007 7,863,766
25,275,000 Equity Residential Properties notes 6.63s, 2015 25,193,362
17,365,000 First Industrial LP med. term notes 7s, 2006 17,505,830
7,920,000 First Industrial Realty Trust, Inc. notes 7.6s, 2007 8,255,570
3,290,000 Health Care Property Investors, Inc. sr. notes 6 1/2s, 2006 3,205,250
13,915,000 National Health Investors, Inc. bonds 7.3s, 2007 14,450,867
13,575,000 OMEGA Healthcare Investors, Inc. notes 6.95s, 2007 13,320,333
230,000 Prime Hospitality Corp. sub. notes 9 3/4s, 2007 247,825
5,705,000 Sun Communities, Inc. sr. notes 7 5/8s, 2003 5,912,034
400,000 Tanger Properties Ltd. company guaranty 8 3/4s, 2001 415,280
--------------
116,365,506
Recreation (0.2%)
- -------------------------------------------------------------------------------------------------------------
150,000 Argosy Gaming Co. 1st mtge. 13 1/4s, 2004 168,750
85,000 Casino America, Inc. sr. notes 12 1/2s, 2003 94,988
475,000 Coast Hotels & Casinos, Inc. company guaranty Ser. B,
13s, 2002 551,000
220,000 Empress River Casino sr. notes 10 3/4s, 2002 238,975
300,000 Harveys Casino sr. sub. notes 10 5/8s, 2006 331,500
350,000 Hollywood Casino Corp. sr. notes 12 3/4s, 2003 388,500
740,000 Lady Luck Gaming Corp. 1st mtge. 11 7/8s, 2001 765,900
795,000 Mohegan Tribal Gaming Auth. sr. secd. notes Ser. B,
13 1/2s, 2002 1,013,625
150,000 Players International Inc. sr. notes 10 7/8s, 2005 162,750
450,000 Showboat Marina Casino 1st mtge. Ser. B, 13 1/2s, 2003 528,750
1,050,000 Sun International Hotels Ltd. company guaranty 9s, 2007 1,099,875
--------------
5,344,613
Retail (0.7%)
- -------------------------------------------------------------------------------------------------------------
1,900,000 Big 5 Corp. sr. notes 144A 10 7/8s, 2007 1,938,000
1,000,000 Brylane (L.P.) sr. sub. notes 10s, 2003 1,055,000
370,000 Eye Care Centers of America 144A sr. sub. notes 9 1/8s, 2008 370,000
5,585,000 Federated Department Stores sr. notes 8 1/2s, 2003 6,084,858
250,000 Johns Manville International Group sr. notes 10 7/8s, 2004 277,500
2,000,000 K mart Corp. deb. 7.95s, 2023 2,000,000
5,000,000 May Department Stores Co. notes 9 1/2s, 2021 6,221,900
250,000 Mothers Work, Inc. sr. notes 12 5/8s, 2005 271,250
2,000,000 NBTY Inc. 144A sr. sub. notes 8 5/8s, 2007 2,025,000
5,500,000 Proffitt's, Inc. company guaranty Ser. B, 8 1/8s, 2004 5,808,440
65,000 Specialty Retailers, Inc. company guaranty Ser. B, 8 1/2s, 2005 66,950
410,000 William Carter Co. sr. sub. notes Ser. A, 10 3/8s, 2006 436,650
125,000 William Carter Co. 144A sr. sub. notes 12s, 2008 135,000
270,000 Zale Corp. sr. notes Ser. B, 8 1/2s, 2007 274,725
--------------
26,965,273
Satellite Services (0.1%)
- -------------------------------------------------------------------------------------------------------------
260,000 Esat Holdings Ltd. 144A sr. notes stepped-coupon zero %
(12 1/2s, 2/01/02), 2007 (Ireland) (STP) 195,000
1,390,000 ICG Services, Inc. 144A sr. discount notes stepped-coupon
zero % (9 7/8s, 5/1/03), 2008 (STP) 860,063
340,000 Satellites Mexicanos S.A. de C.V. 144A sr. notes 10 1/8s, 2004
(Mexico) 345,950
570,000 TCI Satellite Entertainment sr. sub. notes 10 7/8s, 2007 604,200
--------------
2,005,213
Shipping (--%)
- -------------------------------------------------------------------------------------------------------------
150,000 International Shipholding Corp. sr. notes 7 3/4s, 2007 148,500
Specialty Consumer Products (--%)
- -------------------------------------------------------------------------------------------------------------
270,000 Coty Inc. Gtd. sr. sub. notes 10 1/4s, 2005 286,200
530,000 Decora Industries, Inc. 144A sr. sec. notes 11s, 2005 516,088
65,000 GFSI, Inc. sr. sub. notes Ser. B, 9 5/8s, 2007 67,925
--------------
870,213
Telecommunications (3.7%)
- -------------------------------------------------------------------------------------------------------------
1,000,000 Adelphia Communications Corp. sr. notes Ser. B, 9 7/8s, 2007 1,075,000
6,650,000 AirTouch communications, Inc. notes 7s, 2003 6,824,629
18,020,000 AirTouch Communications, Inc. notes 6.65s, 2008 18,177,675
210,000 Allbritton Communications Co. sr. sub. notes Ser. B, 8 7/8s,
2008 209,475
410,000 Antenna TV S.A. sr. notes 9s, 2007 (Greece) 410,000
3,000,000 Barak I.T.C. sr. disc. notes stepped-coupon Ser. B, zero %
(12 1/2s, 11/15/02), 2007 (STP) 1,785,000
1,340,000 BTI Telecom Corp. sr. notes 10 1/2s, 2007 1,393,600
295,000 Call-Net Enterprises sr. disc. notes stepped-coupon zero %
(13 1/4s, 12/1/99), 2004 (STP) 275,825
100,000 Celcaribe S.A. sr. notes 13 1/2s, 2004 105,500
1,550,000 CellNet Data Systems, Inc. sr. disc. notes stepped-coupon
zero % (14s, 10/1/02), 2007 (STP) 887,375
305,000 Centennial Cellular Corp. sr. notes 8 7/8s, 2001 314,150
3,080,000 Cia de Telecomunicaciones de Chile S.A. notes 7 5/8s, 2006
(Chile) 3,191,896
270,000 Colt Telecom Group PLC sr. disc. notes stepped-coupon
zero % (12s, 12/15/01), 2006 (United Kingdom) (STP) 214,650
15,980,000 Colt Telecommunications Group PLC sr. notes 8 7/8s, 2007
(United Kingdom) 9,790,031
195,000 Comcast Cellular Holdings sr. notes Ser. B, 9 1/2s, 2007 202,800
50,000 Consorcio Ecuatoiano notes 14s, 2002 (Ecuador) 48,500
310,000 CTI Holdings S.A. 144A sr. notes stepped-coupon zero %
(11 1/2s, 4/15/03), 2008 (STP) 182,900
560,000 Dial Call Communications, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (10 1/4s, 12/15/98), 2005 (STP) 548,800
2,015,000 Diamond Cable Communication Co. sr. disc. notes stepped-
coupon zero % (10 3/4s, 2/15/02), 2007
(United Kingdom) (STP) 1,425,613
1,275,000 E. Spire Communications, Inc. sr. disc. notes stepped-coupon
zero % (12 3/4s, 4/1/01), 2006 (STP) 1,016,813
85,000 E. Spire Communications, Inc. sr. notes 13 3/4s, 2007 100,300
900,000 Echostar DBS Corp. company guaranty 12 1/2s, 2002 1,012,500
950,000 Econophone Inc. 144A sr. disc. notes stepped-coupon zero %
(11s, 2/15/03), 2008 (STP) 551,000
210,000 Espirit Teleom Group PLC sr. notes 11 1/2s, 2007
(United Kingdom) 229,950
130,000 Fonorola, Inc. sr. notes 12 1/2s, 2002 (Canada) 145,600
670,000 Fox Kids Worldwide Inc. 144A sr. discount notes stepped-
coupon zero % (10 1/4s, 11/1/02), 2007 (STP) 428,800
1,370,000 Fox Kids Worldwide Inc. 144A sr. notes 9 1/4s, 2007 1,351,163
150,000 FrontierVision Operating Partners L.P. sr. sub. notes 11s, 2006 166,500
2,250,000 GST Telecommunication 144A sr. disc. notes stepped-coupon
zero % (10 1/2s, 5/1/03), 2008 (STP) 1,361,250
1,100,000 GST Telecommunications, Inc. company guaranty stepped-
coupon zero % (13 7/8s, 12/15/00), 2005 (STP) 888,250
320,000 Hyperion Telecommunication Corp. sr. disc. notes stepped-
coupon Ser. B, zero % (13s, 4/15/01), 2003 (STP) 239,200
270,000 IDT Corp. 144A sr. notes 8 3/4s, 2006 268,650
410,000 Intercel, Inc. sr. disc. notes stepped-coupon zero %
(12s, 5/1/01), 2006 (STP) 312,625
1,950,000 Intermedia Communications, Inc. sr. disc. notes stepped-
coupon Ser. B, zero % (11 1/4s, 7/15/02), 2007 (STP) 1,433,250
1,000,000 Intermedia Communications, Inc. sr. notes Ser. B, 8 1/2s, 2008 1,015,000
825,000 International Cabletel, Inc. sr. notes stepped-coupon Ser. B,
zero % (11 1/2s, 2/01/01), 2006 (STP) 668,250
360,000 Iridium LLC/Capital Corp. company guaranty Ser. B, 14s, 2005 405,000
750,000 Iridium LLC/Capital Corp. company guaranty Ser. A, 13s, 2005 817,500
600,000 IXC Communications, Inc. 144A sr. sub. notes 9s, 2008 600,000
645,000 Knology Holdings Inc. sr. disc. notes stepped-coupon zero %,
(11 7/8s, 10/15/02), 2007 (STP) 374,100
75,000 L-3 Communications Corp. sr. sub. notes Ser. B, 10 3/8s, 2007 82,875
28,250,000 LCI International, Inc. sr. notes 7 1/4s, 2007 28,340,965
450,000 Level 3 Communication, Inc. 144A sr. notes 9 1/8s, 2008 445,500
315,000 McCaw International Ltd sr. discount notes stepped coupon
zero % (13s, 4/15/02), 2007 (STP) 217,350
400,000 McLeod USA, Inc. 144A sr. notes 8 3/8s, 2008 406,000
600,000 Metrocall, Inc. sr. sub. notes 9 3/4s, 2007 615,000
1,160,000 MetroNet Communications Corp. sr. disc. notes stepped-
coupon zero % (10 3/4s, 11/1/02), 2007 (Canada) (STP) 800,400
1,610,000 Millicom International Cellular S.A. sr. disc. notes stepped-
coupon zero % (13 1/2s, 6/1/01), 2006 (Luxembourg) (STP) 1,263,850
190,000 MJD Communications Inc. 144A sr. sub. notes 9 1/2s, 2008 190,000
210,000 MJD Communications Inc. 144A FRN, 6.232s, 2008 210,000
150,000 Mobile Telecommunications Tech. sr. notes 13 1/2s, 2002 175,875
120,000 Netia Holdings B.V. 144A company guaranty 10 1/4s, 2007
(Poland) 122,700
70,000 Netia Holdings B.V. 144A company guaranty stepped-
coupon zero % (11 1/4s, 11/1/02), 2007 (Poland) (STP) 49,350
1,120,000 NEXTEL Communications, Inc. sr. disc. notes stepped-coupon
zero % (10.65s, 9/15/02), 2007 (STP) 750,400
1,360,000 NEXTEL Communications, Inc. 144A sr. disc. notes stepped-
coupon zero % (9.95s, 2/15/03), 2008 (STP) 873,800
1,750,000 NEXTEL Communications sr. disc. notes stepped-coupon
zero % (9 3/4s, 10/31/02), 2007 (STP) 1,137,500
1,350,000 NEXTEL Communications, Inc. sr. disc. notes stepped-
coupon zero % (9 3/4s, 2/15/99), 2004 (STP) 1,299,375
1,480,000 NEXTLINK Communications, Inc. 144A sr. disc. notes
stepped-coupon zero % (9.45s, 4/15/03), 2008 (STP) 925,000
15,000 NTL Inc. sr. notes Ser. B, 10s, 2007 (United Kingdom) 16,050
4,030,000 NTL Inc. 144A sr. notes stepped-coupon zero %
(9 3/4s, 4/01/03), 2008 (STP) 2,579,200
460,000 Omnipoint Corp. sr. notes 11 5/8s, 2006 500,250
900,000 Omnipoint Corp. sr. notes Ser. A, 11 5/8s, 2006 978,750
330,000 Orbcomm Global Capital Corp. sr. notes Ser. B, 14s, 2004 386,100
350,000 Paging Network, Inc. sr. sub. notes 10s, 2008 364,000
2,090,000 Powertel, Inc. sr. notes 11 1/8s, 2007 2,257,200
680,000 Pricellular Wireless Corp. sr. notes 10 3/4s, 2004 783,700
580,000 Psinet, Inc. 144A sr. notes 10s, 2005 595,950
1,245,000 Qwest Communications International Inc. sr. disc. notes
stepped-coupon zero % (9.47s, 10/15/02), 2007 (STP) 893,288
690,000 RCN Corp. sr. disc. notes stepped-coupon zero %
(11 1/8s, 10/15/02), 2007 (STP) 457,125
410,000 RSL Communications, Ltd. 144A sr. disc. notes stepped-
coupon zero % (10 1/8s, 3/1/03), 2008 (STP) 256,250
275,000 RSL Communications, Ltd. 144A sr. notes 9 1/8s, 2008 275,000
120,000 Sprint Spectrum L.P. sr. notes 11s, 2006 137,100
155,000 Telesystem International Wireless Inc. sr. disc. notes stepped-
coupon Ser. C, zero % (10 1/2s, 11/1/02), 2007 (STP) 98,425
130,000 Transtel S.A. 144A pass through certificates 12 1/2s, 2007
(Colombia) 127,400
835,000 UIH Australia/Pacifi sr. disc. notes stepped-coupon Ser. D,
zero % (14s, 5/15/01), 2006 (Australia) (STP) 567,800
890,000 United International Holdings 144A sr. disc. notes stepped-
coupon zero % (10 3/4s, 2/15/03), 2008 (STP) 562,925
1,375,000 WinStar Communications. Inc. 144A sr. sub. notes 15s, 2007 1,787,500
600,000 WinStar Equipment Corp. company guaranty 12 1/2s, 2004 672,000
85,000 Wireless One, Inc. sr. notes 13s, 2003 20,188
19,840,000 WorldCom, Inc. notes 7 3/4s, 2007 21,398,432
--------------
134,069,693
Textiles (0.1%)
- -------------------------------------------------------------------------------------------------------------
590,000 Day International Group, Inc. 144A sr. sub. notes 9 1/2s, 2008 595,900
75,000 Glenoit Corp. company guaranty 11s, 2007 81,000
110,000 Polymer Group, Inc. company guaranty Ser. B, 9s, 2007 113,300
490,000 Polymer Group, Inc. 144A sr. sub.notes 8 3/4s, 2008 498,575
1,810,000 Polysindo International Eka company guaranty 13s, 2001 1,212,700
310,000 Polysindo International Finance company guaranty
11 3/8s, 2006 (Indonesia) 186,000
250,000 Tultex Corp. sr. notes 10 5/8s, 2005 256,875
--------------
2,944,350
Transportation (3.5%)
- -------------------------------------------------------------------------------------------------------------
100,000 Blue Bird Body Co. sr. sub. notes Ser. B, 10 3/4s, 2006 110,250
8,705,000 Burlington Northern Santa Fe notes 6 3/8s, 2005 8,674,881
18,220,000 Burlington Northern Santa Fe Corp. bonds 6 7/8s, 2027 17,824,626
360,000 Calair LLC 144A company guaranty 8 1/8s, 2008 357,300
630,000 Canadian Airlines Corp. sec. 10s, 2005 (Canada) 636,300
2,520,000 Cathay International Ltd. 144A sr. notes 13s, 2008 2,526,300
30,000 Chemical Leaman Corp. sr. notes 10 3/8s, 2005 31,800
60,000 Coach USA, Inc. 144A company guaranty 9 3/8s, 2007 62,400
165,000 Consorcio/MCII Holdings sec. notes stepped-coupon zero %
(12s, 11/15/98), 2002 (STP) 150,975
3,245,000 Continental Airlines, Inc. pass through certificates
Ser. 97CI, 7.42s, 2007 3,354,227
2,000,000 Continental Airlines, Inc. pass-through certificates
Ser. 974C, 6.8s, 2009 2,019,780
13,587,000 Continental Airlines, Inc. pass-through certificates
Ser. 981C, 6.541s, 2008 13,513,630
600,000 Continental Airlines, Inc. sr. notes 9 1/2s, 2001 636,000
30,265,000 CSX Corp. deb. 7.95s, 2027 34,157,684
600,000 Eletson Holdings, Inc. 1st pfd. mtge. notes 9 1/4s, 2003
(Greece) 615,000
270,000 Facilicom International 144A sr. notes 10 1/2s, 2008 278,100
180,000 Hermes Europe Railtel 144A sr. notes 11 1/2s, 2007
(Netherlands) 203,400
240,000 International Shipholding Corp. sr. notes 9s, 2003 246,300
215,000 Johnstown America Industries, Inc. company guaranty
Ser. C, 11 3/4s, 2005 239,725
680,000 Kitty Hawk, Inc. company guaranty 9.95s, 2004 714,000
240,000 MC Shipping, Inc. 144A sr. notes 11 1/4s, 2008 240,000
10,090,000 Norfolk Southern Corp. bonds 7.8s, 2027 11,339,243
12,655,000 Norfolk Southern Corp. bonds 7.05s, 2037 13,338,750
1,500,000 Pegasus Shipping 144A company guaranty 11 7/8s, 2004 1,485,000
5,465,000 Southwest Airlines Co. deb. 7 7/8s, 2007 6,015,763
35,000 TFM S.A. de C.V. company guaranty 10 1/4s, 2007 35,700
175,000 TFM S.A. de C.V. company guaranty stepped-coupon zero %
(11 3/4s, 6/15/02), 2009 (STP) 117,906
1,000,000 US Air Inc. pass thru certificates Ser. 93-A2, 9 5/8s, 2003 1,070,000
238,000 Viking Star Shipping sr. secd. notes 9 5/8s, 2003 240,380
5,540,000 Wisconsin Central Transportation Corp. notes 6 5/8s, 2008 5,478,672
--------------
125,714,092
Utilities (4.2%)
- -------------------------------------------------------------------------------------------------------------
200,000 AES China Generating Co. sr. notes 10 1/8s, 2006 (China) 188,000
600,000 AES Corp. sr. sub. notes 8 3/8s, 2007 610,500
7,275,000 Arizona Public Service Co. sr. notes 6 3/4s, 2006 7,401,149
18,535,000 CalEnergy, Inc. sr. notes 7.63s, 2007 18,436,023
6,565,000 California Energy Corp. disc. notes 10 1/4s, 2004 7,043,589
750,000 California Energy Corp. sr. notes 9 7/8s, 2003 808,260
325,000 Calpine Corp. sr. notes 10 1/2s, 2006 359,125
2,200,000 Calpine Corp. sr. notes 8 3/4s, 2007 2,271,500
10,305,000 CMS Energy Corp. pass through certificates 7s, 2005 9,882,804
3,115,000 CMS Energy Corp. sr. notes 8 1/8s, 2002 3,221,502
6,090,000 Connecticut Light & Power Co. 1st mtge. Ser. C, 7 3/4s, 2002 6,220,509
6,980,000 Connecticut Light & Power Co. 1st mtge. Ser. A, 7 7/8s, 2001 7,116,878
1,970,000 Edison Mission Energy 144A company guaranty 7.33s, 2008 2,062,098
7,630,000 EIP Funding-Public Service Co. of New Mexico deb.
10 1/4s, 2012 8,899,403
10,850,000 El Paso Electric Co. 1st mtge. Ser. B, 7 3/4s, 2001 11,055,282
140,000 El Paso Electric Co. 1st mtge. Ser. D, 8.9s, 2006 155,382
4,680,000 Enersis S.A. notes 6.6s, 2026 (Chile) 4,597,913
110,000 Espirito Santo Centrais 144A sr. notes 10s, 2007 (Brazil) 105,050
205,000 First PV Funding deb. 10.15s, 2016 214,102
180,000 Gothic Production 144A sr. notes 11 1/8s, 2005 180,900
7,965,000 Illinova Corp. sr. notes 7 1/8s, 2004 8,151,859
6,440,000 Israel Electric Corp., Ltd. 144A sr. notes 7 1/4s, 2006 (Israel) 6,591,533
65,000 Long Island Lighting Co. deb. 9s, 2022 73,952
3,142,404 Midland Cogeneration Ventures LP deb. 10.33s, 2002 3,389,743
550,000 Midland Funding Corp. deb. Ser. A, 11 3/4s, 2005 657,690
500,000 Niagara Mohawk Power Corp. med. term notes 9.95s, 2000 507,880
1,888,378 Northeast Utilities System notes Ser. A, 8.58s, 2006 1,922,482
5,623,856 Northeast Utilities System notes Ser. B, 8.38s, 2005 5,726,154
8,120,000 Texas New-Mexico Power Utilities 1st mtge. 9 1/4s, 2000 8,577,724
11,800,000 Texas Utilities Co. secd. lease fac. bonds 7.46s, 2015 11,972,634
8,625,000 Texas Utilities Electric Capital Trust V company guaranty
8.175s, 2037 8,849,940
7,205,000 US West Capital Funding, Inc. company guaranty 6.95s, 2037 7,483,113
--------------
$ 154,734,673
--------------
Total Corporate Bonds and Notes
(cost $1,637,686,281) $1,649,663,906
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (38.8%) (a)
PRINCIPAL AMOUNT VALUE
U.S. Government Agency Mortgage Obligations (21.8%)
- -------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
$ 6,504,801 7s, July 1, 2012 $ 6,638,280
39,320,963 5 1/2s, with due dates from December 1, 2010
to August 1, 2011 38,031,944
Federal National Mortgage Association
Adjustable Rate Mortgages
2,938,179 7.797s, May 1, 2025 3,059,379
6,217,004 7.145s, July 1, 2027 6,302,488
14,100,000 Federal National Mortgage Association 14,038,242
5.94s med. term notes December 12, 2005
2,422,856 Federal National Mortgage Association Graduated Payment
Mortgages 8s, December 1, 2008 2,558,003
Federal National Mortgage Association Pass-Through Certificates
319,263 11s, with due dates from August 1, 2013 to October 1, 2015 362,561
191,280 6 1/2s, April 1, 2024 189,306
29,954,734 5 1/2s, with due dates from May 1, 2011 to February 1, 2013 28,913,761
Government National Mortgage Association
39,290,000 8s, TBA, May 15, 2028 40,763,375
40,315,000 7s, TBA, May 15, 2028 40,793,539
60,920,000 6 1/2s, TBA, June 15, 2028 60,367,456
Government National Mortgage Association
Adjustable Rate Mortgages
26,080,261 7 3/8s, with due dates from June 20, 2022 to May 20, 2024 26,742,592
34,589,418 7s, with due dates from July 20, 2024 to September 20, 2024 35,474,049
19,305,000 5.5s. April 15, 2028 19,365,328
Government National Mortgage Association
339,176 11s, with due dates from December 15, 2009
to October 15, 2013 365,860
252,871 9s, with due dates from October 15, 2004
to May 15, 2009 272,072
70,170,680 8s, with due dates from December 15, 2024
to March 15, 2028 72,818,580
138,252,206 7 1/2s, with due dates from January 15, 2024
to January 15, 2028 142,010,057
170,748,034 7s, with due dates from June 15, 2025
to February 15, 2028 172,775,368
84,880,056 6 1/2s, with due dates from February 15, 2026
to April 15, 2028 84,110,193
--------------
795,952,433
U.S. Treasury Obligations (17.0%)
- -------------------------------------------------------------------------------------------------------------
14,192,000 U.S. Treasury Bonds
10 3/4s, August 15, 2005 (SEG) 18,349,830
U.S. Treasury Notes
40,650,000 6 1/4s, June 30, 2002 41,494,707
15,428,000 6s, July 31, 2002 15,611,130
159,370,000 5 3/4s, November 30, 2002 159,768,425
53,380,000 5 3/4s, November 15, 2000 53,546,546
158,300,000 5 5/8s, December 31, 2002 157,978,651
12,279,000 5 1/2s, March 31, 2003 12,198,450
90,090,000 5 1/2s, February 28, 2003 89,456,667
21,235,000 5 1/2s, January 31, 2003 21,085,718
48,075,000 5 1/2s, March 31, 2000 47,992,311
--------------
$ 617,482,435
--------------
Total U.S. Government and Agency Obligations
(cost $1,404,746,369) $1,413,434,868
FOREIGN GOVERNMENT BONDS AND NOTES (5.6%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
DEM 52,355,000 Germany (Federal Republic of) bonds Ser. 98,
5 5/8s, 2028 $ 29,523,496
DEM 16,020,000 Germany (Federal Republic of) Unity Fund bonds
8s, 2002 9,957,293
USD 10,215,000 Korea (Republic of) unsub. 8 7/8s, 2008 10,046,657
USD 8,600,000 Quebec (Province of) deb. 13s, 2013 9,237,002
USD 26,710,000 Russia (Government of) deb. principal loans
FRB 6.719s, 2020 (POR) 16,894,075
ZAR 148,872,000 South Africa (Republic of) bonds Ser. 153, 13s, 2010 29,420,995
GBP 53,600,000 United Kingdom Treasury bonds 8s, 2007 98,849,978
--------------
Total Foreign Government Bonds and Notes
(cost $203,037,176) $ 203,929,496
COLLATERALIZED MORTGAGE OBLIGATIONS (5.1%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$ 3,681,286 Chase Mortgage Finance Corp. Ser. 93-3, Class B13,
7.461s, 2024 $ 3,027,379
Commercial Mortgage Acceptance Corp.
4,945,000 Ser. 97-ML1, Class D, 7.11s, 2030 4,958,908
28,790,000 Ser. 97-ML1, Class A3, 6.57s, 2030 29,136,380
7,000,000 Ser. 97-ML1, Class A2, 6.53s, 2030 7,087,500
First Union-Lehman Brothers Commercial Mortgage
8,340,000 Ser. 97-C2, Class D, 7.11s, 2012 8,323,059
10,780,000 Ser. 97-C2, Class A3, 6.65s, 2008 10,943,384
131,889,811 Ser. 97-C2, Class IO, 1.902s, 2027 11,931,906
GMAC Commercial Mortgage Securities Inc.
12,972,000 Ser. 98-C1, Class E, 7.153s, 2011 13,030,779
9,034,117 Ser. 97-C2, Class A1, 6.45s, 2004 9,124,459
18,520,000 Ser. 98-C1, Class A1, 6.44s, 2007 18,693,625
Housing Securities Inc.
2,137,647 Ser. 91-B, Class B6, 9s, 2006 2,142,323
2,549,457 Ser. 93-F, Class F9M2, 7s, 2023 2,497,671
586,783 Ser. 93-J, Class J4, 6.66s, 2009 554,877
279,421 Ser. 93-J, Class J5, 6.66s, 2009 235,499
465,408 Ser. 94-1, Class AB1, 6 1/2s, 2009 436,029
11,136,000 Merrill Lynch Mortgage Investors, Inc. Ser. 98-C2, Class D,
14.045s, 2030 11,136,000
5,935,000 Morgan Stanley Capital I Ser. 96-WF1, Class A2, 7.218s, 2006 6,137,161
Prudential Home Mortgage Securities
2,192,446 Ser. 94-A, Class 4B, 7 1/2s, 2007 2,024,587
2,339,589 Ser. 94-D, Class B4, 6.312s, 2009 2,213,836
3,341,913 Ser. 93-31, Class B2, 6s, 2000 2,777,965
Prudential Home Mortgage Securities 144A
2,324,265 Ser. 92-25, Class B3, 8s, 2022 (in default) (NON) 2,269,064
7,563,985 Ser. 93-D, Class 2B, 7.108s, 2023 7,580,532
3,970,212 Ser. 93-E, Class 5B, 7.394s, 2023 3,275,425
632,391 Ser. 94-31, Class B3, 8s, 2009 628,834
405,072 Ser. 94-31, Class B4, 8s, 2009 364,312
7,488,903 Ser. 94-A, Class 4B, 6.803s, 2024 7,339,125
1,965,690 Ser. 94-D, Class 3B, 6.312s, 2009 1,909,483
6,752,310 Ser. 95-C, Class B1, 7.681s, 2001 6,733,319
8,601,806 Securitized Asset Sales, Inc. Ser. 93-J, Class 2B, 6.808s, 2023 8,486,220
983,144 Travelers Mortgage Securities Corp. coll. oblig. Ser. 1, Class Z2,
12s, 2014 1,128,158
--------------
Total Collateralized Mortgage Obligations
(cost $179,299,063) $ 186,127,799
BRADY BONDS (1.8%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$ 20 Argentina (Republic of) deb. FRB 6.625s, 2005 $ 18
23,843,000 Argentina (Republic of) Ser. L-GP, stepped-coupon 5 3/4s
(6s, 3/31/99), 2023, (STP) 18,120,680
19,880,000 Peru (Government of) 144A Ser. PDI, 4s, 2017 13,518,400
13,115,000 Philippines (Government of) Ser. B, 6 1/2s, 2017 11,573,988
26,530,000 United Mexican States sec. Ser. B, 6 1/4s, 2019 22,351,525
--------------
Total Brady Bonds (cost $65,780,280) $ 65,564,611
ASSET-BACKED SECURITIES (1.7%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$ 8,955,000 First Plus Ser. 98-A, Class A, 8 1/2s, 2023 $ 8,910,225
14,230,000 Green Tree Financial Corp. Ser. 98-2, Class A5, 6.24s, 2028 14,205,542
Green Tree Recreational Equipment & Cons.
19,563,436 Ser. 97-B, Class A1, 6.55s, 2028 19,667,318
13,980,000 Ser. 98-A, Class A1C, 6.18s, 2019 13,962,525
65,355,000 Lehman Manufactured Housing Ser. 98-1,
Class IO, 0.82s, 2028 3,267,750
--------------
Total Asset-Backed Securities (cost $60,154,025) $ 60,013,360
UNITS (0.2%) (a)
NUMBER OF UNITS VALUE
- -------------------------------------------------------------------------------------------------------------
850,000 Allegiance Telephone, Inc 144A units stepped-coupon zero %
(11 3/4s, 2/15/03), 2008 (STP) $ 476,000
40,000 Celcaribe S.A. units 13 1/2s, 2004 (Columbia) 846,000
1,285,000 Club Regina, Inc. 144A units 13s, 2004 1,378,163
1,245,000 Diva Systems Corp. 144A units stepped-coupon zero %
(13s, 5/15/01), 2006 (STP) 678,525
1,615,000 DTI Holdings Inc. units stepped-coupon zero %
(12 1/2s, 3/1/03), 2008 (STP) 928,625
840,000 KMC Telecommunications 144A units stepped-coupon zero %
(12 1/2s, 2/15/03), 2008 (STP) 499,800
1,010,000 Long Distance International Inc. 144A units 12 1/4s, 2008 1,030,200
720,000 Pathnet, Inc. 144A units 12 1/4s, 2008 740,700
1,030,000 Rhythms Netcon 144A units stepped-coupon zero %
(13.5s, 5/15/03), 2008 (STP) 535,600
95,000 Stone Container Corp. units sr. sub. 12 1/4s, 2002 97,850
480,000 Transam Refinance, Inc. 144A units 16s, 2003 512,400
--------------
Total Units (cost $7,054,009) $ 7,723,863
PREFERRED STOCKS (0.5%) (a)
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
7,033 AmeriKing, Inc. $3.25 pfd. (PIK) $ 189,902
55 Anvil Holdings Ser. B, $3.25 pfd. (PIK) 1,403
692 Capstar Broadcasting Inc. 144A $12.00 pfd. (PIK) 81,310
24,956 CGA Group Ltd. 144A Ser. A, $13.75 pfd. (PIK) 673,812
2,874 Chancellor Media Corp. $12.00 pfd. (PIK) 350,628
2,855 Chevy Chase Capital Corp. Ser. A, $5.19 pfd. 154,170
2,701 CSC Holdings Inc. Ser. M, $11.125 cum. pfd. (PIK) 311,290
155 Echostar Communications, Inc. $12.125 pfd. (PIK) 173,213
850 Fresenius Medical Care AG Ser. D, $9.00 pfd. (Germany) 884,000
8,481 Nextlink Communications, Inc. 144A $7.00 cum. pfd. 513,101
1,972 SFX Broadcasting, Inc. Ser. E, $12.625 pfd. (PIK) 230,724
1,314 Time Warner Inc. Ser. M, 10.25% pfd. 1,481,535
12,580 Webster Financial $7.375 pfd. 12,403,955
--------------
Total Preferred Stocks (cost $17,261,818) $ 17,449,043
MUNICIPAL BONDS AND NOTES (0.2%) (a)(cost $7,665,000)
PRINCIPAL AMOUNT RATINGS(RAT) VALUE
- -------------------------------------------------------------------------------------------------------------
$ 7,665,000 NJ Econ. Dev. Auth. Municipal Bond Investors
Assurance Corporation Rev. Bonds,
Ser. A, 7.425s, 2/15/29 Aaa $ 8,362,745
CONVERTIBLE BONDS AND NOTES (0.2%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$ 2,145,000 APP Global Finance (V) Ltd. 144A cv. sec. 2s, 2000
(United Kingdom) $ 2,241,525
1,000,000 Corporate Express, Inc. cv. notes 4 1/2s, 2000 903,750
2,750,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 1,773,750
105,000 Integrated Device Technology, Inc. cv. sub. notes 5 1/2s, 2002 91,350
1,500,000 Lam Research Corp. 144a cv. sub. notes 5s, 2002 1,284,375
75,000 National Semiconductor Corp. 144A cv. deb. 6 1/2s, 2002 72,188
--------------
Total Convertible Bonds and Notes (cost $6,190,780) $ 6,366,938
COMMON STOCKS (--%) (a)
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
150 AmeriKing, Inc. $ 7,500
1,213 Hedstrom Holdings, Inc. 144A 1,516
4,662 NEXTEL Communications, Inc. Class A (NON) 133,741
44,051 PSF Holdings LLC Class A 1,321,529
--------------
Total Common Stocks (cost $1,610,905) $ 1,464,286
WARRANTS (--%) (a) (NON) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- -------------------------------------------------------------------------------------------------------------
1,550 Cellnet Data Systems, Inc. 9/15/07 $ 85,250
24,000 CGA Group Ltd. 144A 1/1/04 240
270 Colt Telecommunications Group PLC 12/31/06 36,450
10 E. Spire Communications, Inc. 11/1/05 1,700
260 Esat Holdings, Inc. (Ireland) 2/1/07 9,100
3,544 Fitzgeralds Gaming Co. 12/19/98 35
250 Globalstar Telecom 144A 2/15/04 36,250
400 Intermedia Communications 6/1/00 54,000
645 Knology Holdings Inc. 144A 10/15/07 323
315 McCaw International Ltd. 4/15/07 95
835 UIH Australia/Pacific, Inc. 144A 5/15/06 12,525
95 Urohealth Systems Inc. 4/10/04 1
--------------
Total Warrants (cost $66,093) $ 235,969
CONVERTIBLE PREFERRED STOCKS (--%)(a) (cost $134,750)
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
2,695 Chesapeake Energy Corp. 144A $3.50 cv. cum. pfd. $ 133,739
SHORT-TERM INVESTMENTS (2.0%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$ 10,000,000 Federal Home Loan Mortgage Corporation,
effective yield of 5.44%, May 13, 1998 $ 9,966,756
TRL 1,681,380,000,000 Turkey Treasury bills zero %, June 4, 1998 6,188,487
TRL 1,806,250,000,000 Turkey Treasury bills zero %, June 17, 1998 6,527,282
$ 47,996,000 Interest in $500,000,000 joint repurchase
agreement dated April 30, 1998 with Lehman
Brothers due May 1, 1998 with respect to
various U.S. Treasury obligations -- maturity
value of $48,003,346 for an effective yield
of 5.51% 48,003,346
--------------
Total Short-Term Investments (cost $69,833,334) $ 70,685,871
- -------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,660,519,883) (b) $3,691,156,494
- -------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,641,606,423.
(RAT) The Moody's or Standard & Poor's ratings indicated are
believed to be the most recent ratings available at April 30, 1998 for the
securities listed. Ratings are generally ascribed to securities at the
time of issuance. While the agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings do not
necessarily represent what the agencies would ascribe to these
securities at April 30, 1998. Securities rated by Putnam are indicated
by "/P".
(b) The aggregate identified cost on a tax basis is $3,661,846,375,
resulting in gross unrealized appreciation and depreciation of
$56,377,879 and $27,067,760 respectively, or net unrealized appreciation
of $29,310,119.
(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.
(POR) A portion of the income will be received in additional
securities.
(PIK) Income may be received in cash or additional securities at the
discretion of the issuer.
(SEG) A portion of this security was pledged and segregated with the custodian
to cover margin requirements for futures contracts at April 30, 1998.
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.
ADR after the name of a foreign holding stands for American
Depository Receipts, representing ownership of foreign securities on
deposit with a domestic custodian bank.
TBA after the name of a security represents to be announced
securities (Note 1).
The rates shown on Floating Rate Bonds (FRB) and Floating Rate
Notes (FRN) are the current interest rates shown at April 30, 1998,
which are subject to change based on the terms of the security.
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy at April 30, 1998 (Unaudited)
(aggregate face value $149,096,833)
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars $ 577,080 $ 583,032 6/17/98 $ (5,952)
Deutschemarks 121,181,528 119,968,543 6/17/98 1,212,985
Mexican Peso 2,591,241 2,428,468 5/12/98 162,773
Mexican Peso 3,216,501 3,035,584 5/11/98 180,917
New Zealand Dollar 9,314,038 9,444,864 6/17/98 (130,826)
South African Rand 389,498 392,969 6/17/98 (3,471)
South Korean Won 14,575,605 13,243,373 3/11/99 1,332,232
- ------------------------------------------------------------------------------------------
$2,748,658
- ------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at April 30, 1998 (Unaudited)
(aggregate face value $306,995,107)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- ------------------------------------------------------------------------------------------
British Pounds $ 98,441,539 $ 96,586,901 6/17/98 $(1,854,638)
Deutschemarks 169,227,975 167,850,125 6/17/98 (1,377,850)
New Zealand Dollar 9,739,719 10,106,209 6/17/98 366,490
South African Rand 32,146,114 32,451,872 6/17/98 305,758
- ------------------------------------------------------------------------------------------
$(2,560,240)
- ------------------------------------------------------------------------------------------
Futures Contracts Outstanding at April 30, 1998 (Unaudited)
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date Depreciation
- ------------------------------------------------------------------------------------------
US Treasury Bonds
20 Yr (long) $90,885,375 $ 91,022,369 Jun-98 $(136,994)
US Treasury Notes
10 Yr (long) 139,716,750 139,535,819 Jun-98 180,931
US Treasury Notes
5 Yr (short) 268,306,500 268,245,212 Jun-98 (61,288)
- ------------------------------------------------------------------------------------------
$(17,351)
- ------------------------------------------------------------------------------------------
TBA Sales Commitments at April 30, 1998 (Unaudited)
(Proceeds receivable $141,819,275)
Settlement Market
Agency Principal Amount Date Value
- ------------------------------------------------------------------------------------------
GNMA 7 1/2s, June 15, 2028 $58,816,000 6/18/98 $ 60,414,619
GNMA 7 1/2s, May 15, 2028 79,380,000 5/20/98 81,537,548
- ------------------------------------------------------------------------------------------
$141,952,167
- ------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
April 30,1998 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $3,660,519,883) (Note 1) $3,691,156,494
- ---------------------------------------------------------------------------------------------------
Cash 833,804
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 21,333,841
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 10,923,257
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 309,570,603
- ---------------------------------------------------------------------------------------------------
Receivable for variation margin 820,875
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 3,561,155
- ---------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 564,280
- ---------------------------------------------------------------------------------------------------
Total assets 4,038,764,309
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 224,192,404
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 10,817,818
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,181,673
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 630,917
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 7,352
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,592
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,236,778
- ---------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 3,372,737
- ---------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 10,190,497
- ---------------------------------------------------------------------------------------------------
TBA sales commitments, at value (proceeds receivable $141,819,275) 141,952,167
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 572,951
- ---------------------------------------------------------------------------------------------------
Total liabilities 397,157,886
- ---------------------------------------------------------------------------------------------------
Net assets $3,641,606,423
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $3,596,589,015
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 9,903,777
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 3,879,124
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 31,234,507
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $3,641,606,423
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,395,265,333 divided by 196,026,101 shares) $7.12
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $7.12)* $7.48
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($444,862,389 divided by 62,838,856 shares)** $7.08
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,569,349,552 divided by 221,732,333 shares) $7.08
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $7.08)* $7.32
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($232,129,149 divided by 32,576,744 shares)
- ---------------------------------------------------------------------------------------------------
* 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 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 April 30, 1998 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Interest $119,843,951
- --------------------------------------------------------------------------------------------------
Dividends 268,977
- --------------------------------------------------------------------------------------------------
Total investment income 120,112,928
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 7,615,744
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 4,112,631
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 1,217
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 16,425
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,686,072
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,103,414
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 2,525,260
- --------------------------------------------------------------------------------------------------
Reports to shareholders 34,031
- --------------------------------------------------------------------------------------------------
Registration fees 395,737
- --------------------------------------------------------------------------------------------------
Auditing 35,087
- --------------------------------------------------------------------------------------------------
Legal 8,946
- --------------------------------------------------------------------------------------------------
Postage 50,016
- --------------------------------------------------------------------------------------------------
Other 66,904
- --------------------------------------------------------------------------------------------------
Total expenses 18,651,484
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (658,871)
- --------------------------------------------------------------------------------------------------
Net expenses 17,992,613
- --------------------------------------------------------------------------------------------------
Net investment income 102,120,315
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 14,269,869
- --------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 5,906,300
- --------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 180,005
- --------------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (17,847,524)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 2,917,140
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures
and TBA sale commitments, during the period (18,527,621)
- --------------------------------------------------------------------------------------------------
Net loss on investments (13,101,831)
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 89,018,484
- --------------------------------------------------------------------------------------------------
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
April 30 October 31
1998* 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 102,120,315 $ 106,884,049
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 2,508,650 8,584,505
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
and assets and liabilities in foreign currencies (15,610,481) 31,232,964
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 89,018,484 146,701,518
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
- ----------------------------------------------------------------------------------------------------------------------
Class A (42,300,297) (72,785,926)
- ----------------------------------------------------------------------------------------------------------------------
Class B (11,711,870) (20,709,360)
- ----------------------------------------------------------------------------------------------------------------------
Class M (31,748,984) (3,091,964)
- ----------------------------------------------------------------------------------------------------------------------
Class Y (6,490,417) (8,962,004)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
- ----------------------------------------------------------------------------------------------------------------------
Class A (4,385,106) (5,178,160)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,393,129) (1,738,693)
- ----------------------------------------------------------------------------------------------------------------------
Class M (2,566,601) (103,201)
- ----------------------------------------------------------------------------------------------------------------------
Class Y (580,311) (668,296)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 1,414,261,155 675,094,508
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 1,402,102,924 708,558,422
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 2,239,503,499 1,530,945,077
- ----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $9,903,777 and $35,030, respectively) $3,641,606,423 $2,239,503,499
- ----------------------------------------------------------------------------------------------------------------------
* 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 April 30
operating performance (Unaudited) Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $7.14 $7.02 $7.07 $6.53 $7.36 $6.97
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .25 (c) .45 .45 .47 .54 .56
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.03) .15 (.04) .55 (.84) .40
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .22 .60 .41 1.02 (.30) .96
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.22) (.44) (.46) (.48) (.41) (.56)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- -- -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.02) (.04) -- -- (.04) --
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.24) (.48) (.46) (.48) (.53) (.57)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $7.12 $7.14 $7.02 $7.07 $6.53 $7.36
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.22 * 8.88 6.08 16.23 (4.16) 14.36
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,395,265 $1,296,600 $1,037,718 $928,995 $781,784 $814,289
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .53 * 1.17 1.17 1.05 .83 .77
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.47 * 6.39 6.50 6.91 7.10 7.71
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 107.91 * 265.71 213.46 169.29 128.82 129.95
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charge.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 March 1, 1993+
operating performance (Unaudited) Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $7.11 $6.99 $7.04 $6.50 $7.34 $7.19
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .22 (c) .39 .40 .42 .48 .28 (c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.03) .16 (.04) .55 (.83) .22
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .19 .55 .36 .97 (.35) .50
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.20) (.39) (.41) (.43) (.38) (.35)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.02) (.04) -- -- (.04) --
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.07) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.22) (.43) (.41) (.43) (.49) (.35)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $7.08 $7.11 $6.99 $7.04 $6.50 $7.34
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.71 * 8.15 5.32 15.46 (4.98) 7.18 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $444,862 $403,704 $340,775 $260,769 $169,501 $92,832
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .91 * 1.92 1.92 1.80 1.59 1.03 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.11 * 5.64 5.76 6.14 6.40 4.37 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 107.91 * 265.71 213.46 169.29 128.82 129.95
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charge.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 Dec. 14, 1994+
operating performance (Unaudited) Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $7.11 $6.99 $7.04 $6.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .24 (c) .43 .44 .43
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.03) .16 (.04) .54
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .21 .59 .40 .97
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.22) (.43) (.45) (.43)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.02) (.04) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.24) (.47) (.45) (.43)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $7.08 $7.11 $6.99 $7.04
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.00 * 8.74 5.92 15.43 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,569,350 $368,297 $18,937 $7,673
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .66 * 1.42 1.42 1.19 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.31 * 5.76 6.28 5.17 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 107.91 * 265.71 213.46 169.29
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charge.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 June 16, 1994+
operating performance (Unaudited) Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $7.15 $7.02 $7.07 $6.52 $6.72
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .26 (c) .47 .47 .47 .19
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.03) .16 (.04) .57 (.21)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .23 .63 .43 1.04 (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.46) (.48) (.49) (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.02) (.04) -- -- (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.25) (.50) (.48) (.49) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $7.13 $7.15 $7.02 $7.07 $6.52
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.34 * 9.23 6.31 16.65 (0.35)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $232,129 $170,902 $133,516 $107,414 $7,517
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .41 * .92 .92 .86 .24 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.56 * 6.64 6.76 7.14 2.91 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 107.91 * 265.71 213.46 169.29 128.82
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charge.
(b) The ratio of expenses to average net assets for the year ended October 31, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
Notes to financial statements
April 30, 1998 (Unaudited)
Note 1
Significant accounting policies
Putnam Income Fund (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 consistent with what Putnam Investment
Management, Inc. ("Putnam Management"), the fund's manager, a wholly-owned
subsidiary of Putnam Investments, Inc. believes to be prudent risk. The fund
invests in a portfolio of debt securities, both government and corporate
obligations, preferred stocks and dividend-paying common stocks.
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 may be subject to a contingent deferred sales charge, if those
shares are redeemed within six years of purchase. Class M shares are sold with
a maximum front end sales charge of 3.25% and pay an ongoing distribution fee
that is higher than class A shares but lower than class B shares. Class Y
shares, which are sold at net asset value, are generally subject to the same
expenses as class A shares, 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 $250 million in a combination of Putnam Funds and other
accounts managed by affiliates of Putnam Management.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if
that fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of some
securities traded over-the-counter -- the last reported bid price. Securities
quoted in foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60 days
or less are stated at amortized cost, which approximates market value, and
other investments are stated at fair market value following procedures
approved by the Trustees. Market quotations are not considered to be readily
available for certain long-term corporate bonds and notes; such investments
are stated at fair value on the basis of valuations furnished by a pricing
service, approved by the Trustees, which determines valuations for normal,
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships
between securities which 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. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed).
Interest income is recorded on the accrual basis. Dividend income is recorded
on the ex-dividend date except that certain dividends from foreign securities
are recorded as soon as the fund is informed of 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 securities 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, 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.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell currencies
at a set price on a future date, to protect against a decline in value
relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of a
currency in which securities a fund intends to buy are denominated, when a
fund holds cash reserves and short-term investments). The U.S. dollar value of
forward currency contracts is determined using current forward currency
exchange rates supplied by a quotation service. The market value of the
contract will fluctuate with changes in currency exchange rates. The contract
is "marked to market" daily and the change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The fund could be exposed to risk if the value of the currency changes
unfavorably, if the counterparties to the contracts are unable to meet the
terms of their contracts or if the fund is unable to enter into a closing
position.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund owns
or expects to purchase. The fund may also write options on securities it owns
or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparty to the contract is unable to perform. When
the contract is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Realized gains and losses on purchased
options are included in realized gains and losses on investment securities.
Futures contracts are valued at the quoted daily settlement prices established
by the exchange on which they trade. Exchange traded options are valued at the
last sale price, or if no sales are reported, the last bid price for purchased
options and the last ask price for written options. Options traded
over-the-counter are valued using prices supplied by dealers.
H) 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 at least 300% and borrowings must not
exceed prospectus limitations. For the six months ended April 30, 1998, the
fund had no borrowings against the line of credit.
I) TBA purchase commitments The fund may enter into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed unit price at a future
date beyond customary settlement time. Although the unit price has been
established, the principal value has not been finalized. However, the amount
of the commitments will not fluctuate more than 1.0% from the principal
amount. The fund holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the fund may enter into offsetting contracts for the forward sale of
other securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in the value of the fund's other assets. Unsettled TBA
purchase commitments are valued at the current market value of the underlying
securities, according to the procedures described under "Security valuation"
above.
Although the fund will generally enter into TBA purchase commitments with the
intention of acquiring securities for their portfolio or for delivery pursuant
to options contracts it has entered into, the fund may dispose of a commitment
prior to settlement if Putnam Management deems it appropriate to do so.
J) TBA sale commitments The fund may enter into TBA sale commitments to hedge
its portfolio positions or to sell mortgage-backed securities it owns under
delayed delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time a TBA sale
commitment is outstanding, equivalent deliverable securities, or an offsetting
TBA purchase commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
"Security valuation" above. The contract is "marked-to-market" daily and the
change in market value is recorded by the fund as an unrealized gain or loss.
If the TBA sale commitment is closed through the acquisition of an offsetting
purchase commitment, the fund realizes a gain or loss. If the fund delivers
securities under the commitment, the fund realizes a gain or a loss from the
sale of the securities based upon the unit price established at the date the
commitment was entered into.
K) 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.
L) 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 fees, 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: 0.65% of the first $500 million of
average net assets, 0.55% of the next $500 million, 0.50% of the next $500
million, 0.45% of the next $5 billion, 0.425% of the next $5 billion, 0.405%
of the next $5 billion, 0.39% of the next $5 billion, and 0.38% 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 April 30, 1998 fund expenses were reduced by $658,871
under expense offset arrangements with PFTC. Investor servicing and custodian
fees reported in the Statement of operations exclude these credits. The fund
could have invested a portion of the assets utilized in connection with the
expense offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,680 has
been allocated to the fund, and an additional fee for each Trustee's meeting
attended. Trustees who are not interested persons of Putnam Management and who
serve on committees of the Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees currently limit 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 April 30, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $190,831 and $3,469,888 from the sale
of class A and class M shares, respectively and $357,373 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 April 30, 1998, Putnam Mutual Funds Corp., acting as
underwriter received $9,628 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended April 30, 1998, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $1,895,189,395 and $723,069,956, respectively. Purchases and sales
of U.S. government obligations aggregated $2,643,263,363 and $2,430,728,131,
respectively. In determining the net gain or loss on securities sold, the cost
of securities has been determined on the identified cost basis.
Written option transactions during the year are summarized as follows:
Contract Premiums
Amounts Received
- ------------------------------------------------------------
Written options
outstanding at
beginning of year $ -- $ --
- ------------------------------------------------------------
Options opened 56,700,000 180,005
- ------------------------------------------------------------
Options closed (56,700,000) (180,005)
- ------------------------------------------------------------
Written options
outstanding at
end of year $ -- $ --
- ------------------------------------------------------------
Note 4
Capital shares
At April 30, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six month ended
April 30, 1998
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 53,103,087 $378,476,178
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,148,733 36,659,257
- ------------------------------------------------------------
58,251,820 415,135,435
Shares
repurchased (43,705,570) (311,300,567)
- ------------------------------------------------------------
Net increase 14,546,250 $103,834,868
- ------------------------------------------------------------
Year ended
October 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 77,412,276 $543,976,678
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,301,268 58,159,711
- ------------------------------------------------------------
85,713,544 602,136,389
Shares
repurchased (52,076,132) (365,715,762)
- ------------------------------------------------------------
Net increase 33,637,412 $236,420,627
- ------------------------------------------------------------
Six month ended
April 30, 1998
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 13,111,077 $92,969,411
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,323,499 9,375,435
- ------------------------------------------------------------
14,434,576 102,344,846
Shares
repurchased (8,383,446) (59,412,508)
- ------------------------------------------------------------
Net increase 6,051,130 $42,932,338
- ------------------------------------------------------------
Year ended
October 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 20,253,849 $141,668,032
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,260,966 15,771,501
- ------------------------------------------------------------
22,514,815 157,439,533
Shares
repurchased (14,489,029) (101,264,493)
- ------------------------------------------------------------
Net increase 8,025,786 $ 56,175,040
- ------------------------------------------------------------
Six months ended
April 30, 1998
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 175,147,188 $1,242,442,730
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 143,191 1,014,128
- ------------------------------------------------------------
175,290,379 1,243,456,858
Shares
repurchased (5,359,113) (38,007,086)
- ------------------------------------------------------------
Net increase 169,931,266 $1,205,449,772
- ------------------------------------------------------------
Year ended
October 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 50,210,110 $355,774,387
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 192,477 1,342,428
- ------------------------------------------------------------
50,402,587 357,116,815
Shares
repurchased (1,311,388) (9,197,153)
- ------------------------------------------------------------
Net increase 49,091,199 $347,919,662
- ------------------------------------------------------------
Six months ended
April 30, 1998
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 13,943,190 $99,574,441
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 993,505 7,070,728
- ------------------------------------------------------------
14,936,695 106,645,169
Shares
repurchased (6,251,007) (44,600,992)
- ------------------------------------------------------------
Net increase 8,685,688 $62,044,177
- ------------------------------------------------------------
Year ended
October 31, 1997
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 13,478,379 $94,976,470
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,374,239 9,630,300
- ------------------------------------------------------------
14,852,618 104,606,770
Shares
repurchased (9,971,826) (70,027,591)
- ------------------------------------------------------------
Net increase 4,880,792 $34,579,179
- ------------------------------------------------------------
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Strategic Income Fund *
High Quality Bond Fund +
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Money Market Fund **
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
LIFESTAGE SM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
+ Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to maintain a
price of $1.00 per share, although there is no assurance that this price
will be maintained in the future.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
William J. Curtin
Vice President
James M. Prusko
Vice President and Fund Manager
David L. Waldman
Vice President and Fund Manager
Jeffrey J. Kobylarz
Vice President and Fund Manager
D. William Kohli
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Income Fund. It
may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details of sales charges, investment
objectives, and operating policies of the fund, and the most recent copy of
Putnam's Quarterly Performance Summary. For more information or to request a
prospectus, call toll free: 1-800-225-1581. You can also learn more at Putnam
Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution; are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency;
and involve risk, including the possible loss of the principal amount
invested.
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PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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SA035-42863 -- 004/312/510/514 6/98
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
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Putnam Income Fund
Supplement to Semiannual Report dated April 30, 1998
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 $250 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 semiannual report.
SEMIANNUAL RESULTS AT A GLANCE
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Total return: NAV
Six months ended 4/30/98 3.34%
One year ended 4/30/98 10.28
Annual average
(since class A inception, 11/1/54) 8.69
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Share value: NAV
10/31/97 $7.15
4/30/98 7.13
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Distributions: No. Income Capital gains Total
6 $0.231 $0.024 $0.255
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Current return (end of period) Total
Current dividend rate1 6.57%
Current 30-day SEC yield2 6.61
1Income portion of most recent distribution, annualized and divided by
NAV at end of period.
2Based only on investment income, calculated using SEC guidelines.
Class Y shares are offered without an initial sales charge or CDSC. The
class Y share returns shown for periods before their inception (6/16/94)
are derived from the historical performance of class A shares for such
periods, but have not been adjusted to reflect differences in expenses,
which are lower for class Y shares than for class A shares. All returns
assume reinvestment of distributions at NAV and represent past
performance; they do not guarantee future results. Investment return
will fluctuate and may involve the loss of principal. Performance of
other share classes will vary. 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.
