Putnam
Premier
Income
Trust
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
7-31-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes will be
breathtaking in their scope. What will not change is the Trustees'
dedication to serving the best interests of our shareholders.
We welcome the challenges that lie ahead and are confident that Putnam
and your Board will continue to face those challenges successfully as
they have for more than 60 years. We look forward to helping you meet
your financial objectives for many years to come.
Respectfully yours,
/S/ JOHN A. HILL /S/GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
September 20, 2000
REPORT FROM FUND MANAGEMENT
David L. Waldman and the Fixed-Income Team
During the fiscal year that ended on July 31, 2000, for Putnam Premier
Income Trust, global capital markets were highly volatile as investors
contended with threatening inflation, higher short-term interest rates,
and increasing uncertainty in the U.S. equity markets. The fund's
strategy of maintaining diversity across a range of fixed-income sectors
served shareholders well, producing a positive net asset value return
during this challenging period.
Total return for 12 months ended 7/31/00
NAV Market price
----------------------------------------------
4.77% -1.51%
----------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods begins on page 5.
* BOND MARKETS FLUCTUATE DESPITE ECONOMIC STABILITY
Throughout the fund's fiscal year, the global economy was generally
characterized by strong growth, moderate inflation, and central bank
tightening. In the United States, the Federal Reserve Board raised
short-term interest rates six times for a total increase of 1.75
percentage points between June 30, 1999, and May 31, 2000. Ironically,
the yield on the 10-year Treasury bond, a widely used benchmark for the
fixed-income markets, finished the fiscal year near the 6% level at
which it began. U.S. Treasury bonds benefited greatly from a federal
buyback program in which Treasury securities, particularly those with
longer maturities, were repurchased as part of the government's
objective of using the budget surplus to reduce the federal debt. This
program began in January 2000 and has continued throughout the year.
The conflicting impact of strong economic growth, low inflation, and the
Treasury buyback program resulted in a volatile market for Treasury
securities. Since the Treasury market has historically served as a
benchmark for fixed-income, this volatility impacted other sectors,
including government agency bonds, mortgage-backed securities (MBSs),
and corporate bonds. During the fiscal period, these so-called spread
sectors underperformed Treasuries.
[GRAPHIC OMITTED: horizontal bar chart SECTOR ALLOCATION]
SECTOR ALLOCATION*
7/31/99 7/31/00
U.S. investment
grade 34.0% 30.0%
High yield 45.0% 46.3%
Foreign+ 10.0% 11.1%
Emerging
markets 11.0% 10.7%
Footnotes read:
*Based on net assets as of 7/31/00. Holdings will vary over time.
+Exclusive of emerging markets.
* MARKET SECTORS EXPERIENCED DRAMATIC MOVES, HIGH-YIELD WOES APPEAR NEAR AN END
Several fixed-income relationships experienced dramatic swings, some of
which occurred in relatively short time periods. Most U.S. spread
sectors, which include agency, MBSs, and corporates, widened
dramatically in February and March of this year. Specifically,
high-yield bond spreads widened by approximately 1.30 percentage points.
Furthermore, the Treasury curve, which historically has maintained a
positive shape, inverted in January 2000 at the hands of the Fed's
tightening and the government's buyback program. In addition, the euro
declined significantly relative to the dollar as a result of global
investors' continued attraction toward U.S. assets.
High-yield corporates had a difficult time throughout the period. This
sector suffered from difficult market conditions brought on by the Fed's
rate increases, low demand from institutional investors, and an
increase in high-yield defaults. Although a strong economy is usually
favorable for corporate fundamentals, the surge in high-yield issuance
in 1997 has caused default rates to increase. Going forward over the
longer term, high-yield bonds appear poised to perform well, given their
attractive valuations and the expected leveling of default rates.
* EMERGING MARKETS PERFORMED WELL
Emerging markets bonds represented a significant exception to the bond
market's meager performance, exhibiting positive returns throughout the
period. This sector outperformed most others for several reasons. First,
the prices of these issues have been extremely attractive, which has
strengthened investor interest. Second, several countries, particularly
Mexico, appear to be on firmer footing economically, and others, like
Russia, are experiencing some stability after several years of turmoil.
Third, higher commodity prices, especially those driven by higher oil
prices, have helped the fundamentals of several emerging markets
countries that rely on oil exports. Finally, the overall global economic
environment of strong growth with low to moderate inflation has helped
the economies of many developing countries.
[GRAPHIC OMITTED: TOP SECTOR HOLDINGS]
TOP SECTOR HOLDINGS*
Top three high-yield holdings
Stone Containers Corp. bank term loan
FRN 9.938%, 2006
Midland Funding II Corp. deb. series B,
13.25%, 2006
Midland Funding II Corp., deb. series A,
11.75%, 2005
Top three U.S. government holdings
U.S. Treasury Notes, 6.5%, 2/15/10
U.S. Treasury Bonds, 6.125%, 11/15/27
GNMA pass-through certificates, 7%,
due dates from 12/15/22 to 12/15/28
Top three international holdings
Denmark (Kingdom of) bonds 6%, 2009
Australia (Government of) bonds,
series 909, 7.5%, 2009
Hellenic Greece (Republic of) bonds,
6.5%, 2014
Footnote reads:
*These holdings represented 16.4% of the fund's net assets as of 7/31/00.
Holdings will vary over time.
* AN OPTIMISTIC OUTLOOK FOR THE REMAINDER OF 2000
During this volatile period we were careful to employ strategies in a
risk-controlled manner. These strategies included taking positions in
longer-maturity Treasuries, the euro, and certain emerging markets
countries, such as Mexico. In addition, we added value in areas of the
mortgage-backed market that tend to perform well in a stable to rising
interest-rate environment.
Finally, we kept the portfolio underweighted in Japanese government
bonds, because we believed that revitalized economic growth and
potential oversupply could threaten their performance. Overall, however,
we adhered to the fund's stated objective of remaining well diversified
to mitigate downside risk.
By the end of the fund's fiscal period, investors' inflation fears were
allayed somewhat as it became apparent that the Fed's campaign to slow
the economy to keep inflation under control was beginning to take hold.
For fixed-income markets in the United States, we believe the potential
for a soft landing has increased and that, as a result, there should be
less pressure on the Fed to raise rates. Going forward, we expect
fixed-income securities to provide stability within capital markets.
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 7/31/00, there is no guarantee the fund will
continue to hold these securities in the future. The lower credit rating
of high-yield bonds reflect a greater possibility that adverse changes
in the economy or poor performance by the issuers of these bonds may
affect the issuer's ability to pay principal and interest. International
investing involves certain risks, such as currency fluctuations,
economic instability, and political developments. While U.S. government
backing of individual securities does not insure principal, which will
fluctuate, it does guarantee that the fund's government-backed holdings
will make timely payments of interest and principal. This fund includes
investments in mortgage-backed securities, which are subject to
prepayment risk.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Premier Income Trust is designed for investors seeking a high level of
current income consistent with preservation of capital.
TOTAL RETURN FOR PERIODS ENDED 7/31/00
NAV Market price
-------------------------------------------------------------
1 year 4.77% -1.51%
-------------------------------------------------------------
5 years 33.49 34.63
Annual average 5.95 6.13
-------------------------------------------------------------
10 years 128.25 132.91
Annual average 8.60 8.82
-------------------------------------------------------------
Life of fund (since 2/29/88) 172.98 125.10
Annual average 8.42 6.75
-------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/00
Salomon Bros.
Lehman Bros. Non-U.S. First Boston Consumer
Government World Govt. High Yieid price
Bond Index Bond Index Index index
------------------------------------------------------------------------
1 year 6.16% -3.72% 0.80% 3.60%
------------------------------------------------------------------------
5 years 36.91 5.32 37.80 13.10
Annual average 6.48 1.04 6.62 2.49
------------------------------------------------------------------------
10 years 110.61 107.99 169.50 32.44
Annual average 7.73 7.60 10.42 2.85
------------------------------------------------------------------------
Life of fund
(since 2/29/88) 155.41 121.82 207.27 48.88
Annual average 7.84 6.63 9.46 3.26
------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns, net asset value and market price will fluctuate so that an
investor's shares when sold may be worth more or less than their
original cost. Securities indexes assume reinvestment of all
distributions and interest payments and do not take into 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 in an index.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 7/31/00
------------------------------------------------------------------------
Distributions from common shares (number) 12
------------------------------------------------------------------------
Income $0.6710
------------------------------------------------------------------------
Capital gains --
------------------------------------------------------------------------
Total $0.6710
------------------------------------------------------------------------
Share value: NAV Market price
------------------------------------------------------------------------
7/31/99 $7.62 $7.188
------------------------------------------------------------------------
7/31/00 7.19 6.375
------------------------------------------------------------------------
Current return (end of period)
------------------------------------------------------------------------
Current dividend rate1 8.85% 9.98%
------------------------------------------------------------------------
1 Most recent distribution, annualized and divided by NAV or market price
at end of period.
TOTAL RETURN FOR PERIODS ENDED 6/30/00 (most recent calendar quarter)
NAV Market price
----------------------------------------------------------
1 year 4.41% -9.56%
----------------------------------------------------------
5 years 35.12 32.08
Annual average 6.20 5.72
----------------------------------------------------------
10 years 135.06 135.37
Annual average 8.92 8.94
----------------------------------------------------------
Life of fund
since 2/29/88) 173.02 121.08
Annual average 8.49 6.65
----------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost.
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.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares.
Market price is the current trading price of one share of the fund.
Market prices are set by transactions between buyers and sellers on the
New York Stock Exchange.
COMPARATIVE BENCHMARKS
First Boston High Yield Index* is an unmanaged list of lower-rated
higher-yield U.S. corporate bonds.
Lehman Brothers Government Bond Index* is an unmanaged list of U.S.
government and mortgage-backed securities.
Salomon Brothers Non-U.S. World Government Bond Index* is an unmanaged
list of bonds issued by 10 countries.
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 into account brokerage fees or taxes. Securities
in the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Putnam Premier Income Trust
We have audited the accompanying statement of assets and liabilities of
Putnam Premier Income Trust, including the fund's portfolio, as of July
31, 2000, the related statement of operations for the year then ended,
and the statements of changes in net assets and financial highlights for
each of the years or periods in the two-year period then ended. These
financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
The financial highlights for each of the years in the three-year period
ended July 31, 1998 were audited by other auditors whose report dated
September 17, 1998 expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform our audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of July 31, 2000, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Putnam Premier Income Trust as of July 31, 2000,
the results of its operations for the year then ended, changes in its
net assets and financial highlights for each of the years or periods in
the two-year period then ended, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
Boston, Massachusetts
September 5, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
July 31, 2000
CORPORATE BONDS AND NOTES (44.2%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C>
Advertising and Marketing Services (0.4%)
-------------------------------------------------------------------------------------------------------------------
$ 800,000 Adams Outdoor Advertising sr. notes 10 3/4s, 2006 $ 822,000
906,500 Interact Operating Co. notes 14s, 2003 271,950
9,000 Lamar Media Corp. company guaranty 9 5/8s, 2006 9,045
1,930,000 Lamar Media Corp. sr. sub. notes 9 1/4s, 2007 1,901,050
950,000 Lamar Media Corp. company guaranty 8 5/8s, 2007 916,750
----------------
3,920,795
Aerospace and Defense (0.6%)
-------------------------------------------------------------------------------------------------------------------
1,735,000 Argo-Tech Corp. company guaranty 8 5/8s, 2007 1,301,250
260,000 Argo-Tech Corp. company guaranty Ser. D, 8 5/8s, 2007 197,600
1,130,000 BE Aerospace, Inc. sr. sub. notes 9 1/2s, 2008 1,070,675
100,000 BE Aerospace, Inc. sr. sub. notes Ser. B, 8s, 2008 87,250
630,000 Decrane Aircraft Holdings company guaranty Ser. B,
12s, 2008 559,125
1,310,000 L-3 Communications Corp. sr. sub. notes 8 1/2s, 2008 1,218,300
860,000 L-3 Communications Corp. sr. sub. notes Ser. B,
10 3/8s, 2007 877,200
460,000 Moog, Inc. sr. sub. notes Ser. B, 10s, 2006 458,850
60,000 Sequa Corp. med. term notes 10s, 2001 60,446
130,000 Sequa Corp. sr. notes 9s, 2009 126,750
----------------
5,957,446
Agriculture (0.3%)
-------------------------------------------------------------------------------------------------------------------
3,234,062 Premium Standard Farms, Inc. sr. sec. notes 11s, 2003 (PIK) 2,942,996
Airlines (0.4%)
-------------------------------------------------------------------------------------------------------------------
1,390,000 Airbus Industries 144A equip. trust 12.266s, 2020 1,478,156
780,000 Calair LLC 144A company guaranty 8 1/8s, 2008 719,550
260,000 Continental Airlines, Inc. notes 8s, 2005 242,791
110,000 Northwest Airlines, Inc. company guaranty 8.52s, 2004 105,072
330,000 Northwest Airlines, Inc. company guaranty 8 3/8s, 2004 312,589
670,000 Northwest Airlines, Inc. company guaranty 7 5/8s, 2005 618,008
260,000 US Air, Inc. pass-through certificates Ser. 93A3, 10 3/8s, 2013 230,100
----------------
3,706,266
Automotive (1.3%)
-------------------------------------------------------------------------------------------------------------------
460,000 Aftermarket Technology Corp. sr. sub. notes 12s, 2004 458,850
949,000 Aftermarket Technology Corp. sr. sub. notes Ser. D,
12s, 2004 946,628
1,260,000 Dura Operating Corp. company guaranty Ser. B, 9s, 2009 1,134,000
350,000 Exide Corp. sr. notes 10s, 2005 322,000
2,700,000 Federal Mogul Corp. notes 7 3/4s, 2006 2,187,000
120,000 Federal Mogul Corp. notes 7 1/2s, 2009 91,800
630,000 Federal Mogul Corp. notes 7 3/8s, 2006 510,300
1,520,000 Hayes Lemmerz International, Inc. company guaranty
Ser. B, 8 1/4s, 2008 1,288,200
1,355,000 Lear Corp. sub. notes 9 1/2s, 2006 1,358,388
2,140,000 Navistar International Corp. sr. notes Ser. B, 8s, 2008 2,011,600
1,480,000 Oxford Automotive, Inc. company guaranty Ser. D,
10 1/8s, 2007 1,346,800
740,000 Safety Components International, Inc. sr. sub. notes Ser. B,
10 1/8s, 2007 (In default) (NON) 111,000
1,000,000 Tenneco, Inc. company guaranty Ser. B, 11 5/8s, 2009 892,500
----------------
12,659,066
Banking (1.1%)
-------------------------------------------------------------------------------------------------------------------
495,000 Bangko Sentral NG Pilipinas bonds 8.6s, 2027 (Philippines) 334,125
250,000 Bank United Corp. sub. notes 8 7/8s, 2007 233,053
400,000 Chevy Chase Savings Bank, Inc. sub. deb. 9 1/4s, 2008 360,000
860,000 Chevy Chase Savings Bank, Inc. sub. deb. 9 1/4s, 2005 808,400
850,000 Colonial Capital II 144A company guaranty 8.92s, 2027 785,672
110,000 Dime Capital Trust I bank guaranty Ser. A, 9.33s, 2027 101,556
1,410,000 GS Escrow Corp. sr. notes 7 1/8s, 2005 1,281,295
2,240,000 Hanvit Bank 144A sub. notes 11 3/4s, 2010 (Korea) 2,195,200
930,000 Local Financial Corp. sr. notes 11s, 2004 927,675
165,000 North Fork Capital Trust I company guaranty 8.7s, 2026 158,436
115,000 Peoples Heritage Capital Trust company guaranty Ser. B,
9.06s, 2027 113,227
715,000 Provident Capital Trust company guaranty 8.6s, 2026 658,351
410,000 Riggs Capital Trust 144A bonds 8 5/8s, 2026 329,070
1,090,000 Sovereign Bancorp, Inc. sr. notes 10 1/2s, 2006 1,090,000
585,000 Sovereign Capital Trust company guaranty 9s, 2027 413,782
880,000 Superior Financial 144A sr. notes 8.65s, 2003 842,806
555,000 Webster Capital Trust I 144A bonds 9.36s, 2027 474,342
----------------
11,106,990
Beverage (0.2%)
-------------------------------------------------------------------------------------------------------------------
2,010,000 Triarc Consumer Products, Inc. company guaranty
10 1/4s, 2009 1,949,700
Broadcasting (3.1%)
-------------------------------------------------------------------------------------------------------------------
1,880,000 Acme Television sr. disc. notes stepped-coupon zero %
(10 7/8s, 9/30/00), 2004 (STP) 1,788,350
1,650,000 Allbritton Communications Co. sr. sub. notes Ser. B,
8 7/8s, 2008 1,522,125
910,000 AMFM Operating, Inc. deb. 12 5/8s, 2006 (PIK) 1,046,500
1,890,000 Benedek Communications Corp. sr. disc. notes
stepped-coupon zero % (13 1/4s, 5/15/01), 2006 (STP) 1,455,300
420,000 Capstar Broadcasting sr. disc. notes stepped-coupon
zero % (12 3/4s, 2/1/02), 2009 (STP) 383,250
1,331,200 Capstar Broadcasting sub. deb. 12s, 2009 (PIK) 1,530,880
800,000 Capstar Broadcasting sr. sub. notes 9 1/4s, 2007 820,000
420,000 Central European Media Enterprises, Ltd. sr. notes 9 3/8s,
2004 (Bermuda) 163,800
2,290,000 Chancellor Media Corp. company guaranty 8s, 2008 2,312,900
559,390 Citadel Broadcasting, Inc. sr. sub. notes 10 1/4s, 2007 564,984
140,000 Citadel Broadcasting, Inc. company guaranty 9 1/4s, 2008 137,900
2,346,000 Diva Systems Corp. sr. disc. notes, stepped-coupon Ser. B,
zero % (12 5/8s, 3/1/03), 2008 (STP) 1,196,460
2,630,000 Echostar DBS Corp. sr. notes 9 3/8s, 2009 2,557,675
510,000 Fox Family Worldwide, Inc. sr. disc. notes stepped-coupon
zero % (10 1/4s, 11/1/02), 2007 (STP) 359,550
700,000 Fox Family Worldwide, Inc. sr. notes 9 1/4s, 2007 665,000
1,300,000 Golden Sky DBS, Inc. sr. disc. notes, stepped-coupon Ser. B,
zero % (13 1/2s, 3/1/04), 2007 (STP) 897,000
920,000 Golden Sky Systems company guaranty Ser. B, 12 3/8s, 2006 1,007,400
900,000 Granite Broadcasting Corp. sr. sub. notes 8 7/8s, 2008 765,000
1,315,000 Knology Holdings, Inc. sr. disc. notes stepped-coupon zero %
(11 7/8s, 10/15/02), 2007 (STP) 657,500
2,200,000 Lin Holdings Corp. sr. disc. notes stepped-coupon zero %
(10s, 3/1/03), 2008 (STP) 1,474,000
980,000 Onepoint Communications, Inc. company guaranty Ser. B,
14 1/2s, 2008 568,400
450,000 Paxson Communications Corp. 144A sr. sub. notes 11 5/8s,
2002 460,125
30,000 Pegasus Communications 144A sr. notes Ser. B, 9 5/8s, 2005 29,175
360,000 Pegasus Media & Communications notes Ser. B, 12 1/2s, 2005 374,400
4,096,000 PHI Holdings, Inc. sr. sub. notes zero %, 2001 3,750,707
1,010,000 Radio One, Inc. company guaranty stepped-coupon Ser. B,
zero % (12s, 5/15/00), 2004 (STP) 1,090,800
680,000 RCN Corp. sr. notes 10 1/8s, 2010 544,000
960,000 Spanish Broadcasting System, Inc. sr. sub notes 9 5/8s, 2009 946,800
2,070,000 TV Azteca S.A. de C.V. sr. notes 10 1/2s, 2007 (Mexico) 1,904,400
----------------
30,974,381
Building Materials (0.2%)
-------------------------------------------------------------------------------------------------------------------
490,000 American Architectural Products Corp. company guaranty
11 3/4s, 2007 83,300
500,000 American Standard, Inc. company guaranty 7 5/8s, 2010 457,500
390,000 Atrium Companies, Inc. company guaranty Ser. B,
10 1/2s, 2009 352,950
940,000 Building Materials Corp. company guaranty 8s, 2008 737,900
690,000 NCI Building Systems, Inc. sr. sub. notes Ser. B,
9 1/4s, 2009 641,700
----------------
2,273,350
Cable Television (2.2%)
-------------------------------------------------------------------------------------------------------------------
380,000 Adelphia Communications Corp. sr. notes Ser. B,
9 7/8s, 2007 361,000
560,000 Adelphia Communications Corp. sr. notes Ser. B,
8 3/8s, 2008 481,600
510,000 Adelphia Communications Corp. sr. notes 7 7/8s, 2009 423,300
110,000 Adelphia Communications Corp. sr. notes 7 3/4s, 2009 91,850
1,500,000 Century Communications Corp. bank term loan FRN 9.73s,
2009 1,503,750
860,000 Century Communications Corp. sr. notes 8 7/8s, 2007 778,300
800,000 Charter Communications Holdings bank term loan FRN
9.73s, 2008 796,000
4,030,000 Charter Communications Holdings LLC sr. notes 8 5/8s, 2009 3,566,550
840,000 Classic Cable, Inc. company guaranty 10 1/2s, 2010 730,800
230,000 Classic Cable, Inc. company guaranty Ser. B, 9 3/8s, 2009 190,900
2,105,000 Comcast UK Cable, Ltd. deb. stepped-coupon zero %
(11.2s, 11/15/00), 2007 (Bermuda) (STP) 1,973,438
25,000 CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2023 25,563
2,015,000 CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2013 2,055,300
2,565,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (10 3/4s, 2/15/02), 2007
(United Kingdom) (STP) 2,003,906
1,020,000 NTL Communications Corp. sr. notes Ser. B, 11 1/2s, 2008 1,045,500
930,000 Supercanal Holdings S.A. 144A sr. notes 11 1/2s, 2005
(In default) (Argentina) (NON) 390,600
590,000 TeleWest Communications PLC 144A sr. disc. notes
stepped-coupon zero % (11 3/8s, 2/1/05), 2010
(United Kingdom) (STP) 325,975
700,000 TeleWest Communications PLC deb. stepped-coupon
zero % (11s, 10/1/00), 2007 (United Kingdom) (STP) 672,000
540,000 TeleWest Communications PLC, structured note
(issued by DLJ International Capital) 10 7/8s, 2005
(United Kingdom) 563,922
1,910,000 TeleWest Communications PLC 144A sr. notes 9 7/8s,
2010 (United Kingdom) 1,833,600
680,000 TeleWest Communications PLC sr. disc. notes zero %
(9 1/4s, 4/15/04) 2009 (United Kingdom) (STP) 386,750
1,520,000 United Pan-Europe N.V. sr. disc. notes stepped-coupon
Ser. B, zero % (13 3/4s, 2/01/05), 2010 (Netherlands) (STP) 684,000
780,000 United Pan-Europe N.V. sr. disc. notes stepped
coupon zero % (12 1/2s, 8/1/04), 2009 (Netherlands) (STP) 360,750
1,180,000 United Pan-Europe N.V. sr. notes Ser. B, 10 7/8s,
2009 (Netherlands) 1,005,950
----------------
22,251,304
Chemicals (1.8%)
-------------------------------------------------------------------------------------------------------------------
2,490,000 Arco Chemical Co. deb. 9.8s, 2020 2,340,600
740,000 Geo Specialty Chemicals, Inc. sr. sub. notes 10 1/8s, 2008 643,800
400,000 Georgia Gulf Corp. company guaranty 10 3/8s, 2007 412,000
1,860,000 Huntsman Corp. 144A sr. sub. notes 9 1/2s, 2007 1,705,325
3,140,000 Huntsman ICI Chemicals, Inc. company guaranty
10 1/8s, 2009 3,202,800
390,000 ISP Holdings, Inc. sr. notes Ser. B, 9 3/4s, 2002 377,325
180,000 ISP Holdings, Inc. sr. notes Ser. B, 9s, 2003 172,800
2,665,000 Lyondell Petrochemical Co. sec. notes Ser. B, 9 7/8s, 2007 2,665,000
460,000 Lyondell Petrochemical Co. notes Ser. A, 9 5/8s, 2007 460,000
2,035,000 Pioneer Americas Acquisition 144A sr. notes 9 1/4s, 2007 1,276,963
260,000 Polymer Group, Inc. company guaranty Ser. B, 9s, 2007 217,100
470,000 Polymer Group, Inc. company guaranty Ser. B, 8 3/4s, 2008 387,750
1,364,000 Polytama International notes 11 1/4s, 2007 (Indonesia) 54,560
1,210,000 Royster-Clark, Inc. 1st mtge. 10 1/4s, 2009 989,175
1,085,000 Sterling Chemicals Holdings sr. disc. notes stepped-coupon
zero % (13 1/2s, 8/15/01), 2008 (STP) 466,550
950,000 Sterling Chemicals, Inc. company guaranty Ser. B,
12 3/8s, 2006 985,625
1,010,000 Sterling Chemicals, Inc. sr. sub. notes 11 3/4s, 2006 808,000
330,000 Sterling Chemicals, Inc. sr. sub. notes Ser. A, 11 1/4s, 2007 260,700
140,000 Texas Petrochemical Corp. sr. sub. notes 11 1/8s, 2006 124,600
280,000 Texas Petrochemical Corp. sr. sub. notes Ser. B,
11 1/8s, 2006 249,200
1,160,000 Trikem S.A. 144A bonds 10 5/8s, 2007 (Brazil) 904,800
----------------
18,704,673
Coal (--%)
-------------------------------------------------------------------------------------------------------------------
1,760,000 Lodestar Holdings, Inc. company guaranty 11 1/2s, 2005 264,000
Commercial and Consumer Services (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,740,000 Coinmach Corp. sr. notes Ser. D, 11 3/4s, 2005 1,687,800
1,165,000 GS Superhighway Holdings sr. notes 10 1/4s, 2007 (China) 802,276
665,000 GS Superhighway Holdings sr. notes 9 7/8s, 2004 (China) 482,125
----------------
2,972,201
Communications Equipment (--%)
-------------------------------------------------------------------------------------------------------------------
50,000 USA Mobile Communication, Inc. sr. notes 9 1/2s, 2004 38,250
Computers (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,000,000 Unisys Corp. sr. notes 11 3/4s, 2004 1,060,000
1,710,000 Unisys Corp. sr. notes 7 7/8s, 2008 1,573,200
----------------
2,633,200
Construction (0.4%)
-------------------------------------------------------------------------------------------------------------------
1,950,000 Better Minerals & Aggregates Co. company guaranty 13s,
2009 1,901,250
1,200,000 Morrison Knudsen Corp. 144A sr. notes 11s, 2010 1,203,000
1,490,000 Republic Group, Inc. sr. sub. notes 9 1/2s, 2008 1,266,500
----------------
4,370,750
Consumer (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,520,000 Home Interiors & Gifts, Inc. company guaranty 10 1/8s, 2008 951,900
1,390,000 Samsonite Corp. sr. sub. notes 10 3/4s, 2008 1,143,275
----------------
2,095,175
Consumer Finance (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,030,000 Contifinancial Corp. sr. notes 8 3/8s, 2003 (In default) (NON) 131,325
1,510,000 Contifinancial Corp. sr. notes 8 1/8s, 2008 (In default) (NON) 192,525
1,150,000 Contifinancial Corp. sr. notes 7 1/2s, 2002 (In default) (NON) 126,500
200,000 Finova Capital Corp. sr. notes 7 5/8s, 2009 166,000
790,000 Outsourcing Solutions, Inc. sr. sub. notes Ser. B, 11s, 2006 687,300
----------------
1,303,650
Consumer Goods (0.2%)
-------------------------------------------------------------------------------------------------------------------
320,000 French Fragrances, Inc. company guaranty Ser. D,
10 3/8s, 2007 308,000
345,000 French Fragrances, Inc. sr. notes Ser. B, 10 3/8s, 2007 331,200
840,000 Leiner Health Products sr. sub. notes 9 5/8s, 2007 588,000
810,000 Revlon Consumer Products sr. notes 9s, 2006 591,300
60,000 Revlon Consumer Products sr. sub. notes 8 5/8s, 2008 30,300
520,000 Revlon Consumer Products sr. notes 8 1/8s, 2006 374,400
----------------
2,223,200
Consumer Services (0.3%)
-------------------------------------------------------------------------------------------------------------------
795,000 Iron Mountain, Inc. company guaranty 8 3/4s, 2009 715,500
2,400,000 Iron Mountain, Inc. sr. sub. notes 8 1/4s, 2011 2,100,000
----------------
2,815,500
Consumer Staples (--%)
-------------------------------------------------------------------------------------------------------------------
790,000 Doskcil Manufacturing Co 144A sr. sub. notes 10 1/8s, 2007 276,500
Containers (1.1%)
-------------------------------------------------------------------------------------------------------------------
1,530,000 AEP Industries, Inc. sr. sub. notes 9 7/8s, 2007 1,407,600
3,040,000 Huntsman Packaging Corp. bank term loan FRN 9.688s, 2008 3,040,000
1,230,000 Impac Group, Inc. company guaranty Ser. B, 10 1/8s, 2008 1,371,450
880,000 Owens-Illinois, Inc. sr. notes 8.1s, 2007 781,528
1,940,000 Owens-Illinois, Inc. sr. notes 7.15s, 2005 1,706,754
650,000 Radnor Holdings, Inc. sr. notes 10s, 2003 578,500
1,710,000 Tekni-Plex, Inc. 144A sr. sub. notes 12 3/4s, 2010 1,744,200
----------------
10,630,032
Distribution (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,570,000 RAB Enterprises, Inc. company guaranty 10 1/2s, 2005 1,099,000
Electric Utilities (0.7%)
-------------------------------------------------------------------------------------------------------------------
1,245,000 AES China Generating Co. sr. notes 10 1/8s, 2006 (China) 852,825
310,000 CMS Energy Corp. sr. notes 7 1/2s, 2009 280,550
2,640,000 CMS Energy Corp. sr. notes Ser. B, 6 3/4s, 2004 2,455,200
909,339 Northeast Utilities System notes Ser. A, 8.58s, 2006 915,432
265,067 Northeast Utilities System notes Ser. B, 8.38s, 2005 264,627
2,100,000 Panda Global Energy Co. company guaranty 12 1/2s,
2004 (China) 945,000
997,500 TNP Enterprises bank term loan FRN 9.38s, 2005 998,747
----------------
6,712,381
Energy (0.5%)
-------------------------------------------------------------------------------------------------------------------
760,000 Leviathan Gas Corp. company guaranty Ser. B, 10 3/8s, 2009 780,900
820,000 Parker Drilling Corp. company guaranty Ser. D, 9 3/4s, 2006 791,300
530,000 RBF Finance Co. company guaranty 11 3/8s, 2009 573,725
2,550,000 RBF Finance Co. company guaranty 11s, 2006 2,754,000
----------------
4,899,925
Entertainment (0.7%)
-------------------------------------------------------------------------------------------------------------------
1,130,000 AMC Entertainment, Inc. sr. sub. notes 9 1/2s, 2011 615,850
400,000 AMC Entertainment, Inc. sr. sub. notes 9 1/2s, 2009 220,000
1,805,000 Cinemark USA, Inc. sr. sub. notes 8 1/2s, 2008 (Mexico) 776,150
2,300,000 Premier Parks, Inc. sr. notes 9 1/4s, 2006 2,150,500
960,000 Regal Cinemas, Inc. sr. sub. notes 9 1/2s, 2008 187,200
730,000 Regal Cinemas, Inc. sr. sub. notes 8 7/8s, 2010 142,350
1,380,000 SFX Entertainment, Inc. company guaranty 9 1/8s, 2008 1,414,500
1,240,000 SFX Entertainment, Inc. 144A company guaranty
Ser. B, 9 1/8s, 2008 1,264,800
1,120,000 Silver Cinemas, Inc. sr. sub. notes 10 1/2s, 2005 (In default) (NON) 112,000
2,459,000 United Artists Theatre sr. sub. notes 9 3/4s,
2008 (In default) (NON) 49,180
859,000 United Artists Theatre 144A sr. sub. notes 10.415s,
2007 (In default) (NON) 17,180
----------------
6,949,710
Financial (1.1%)
-------------------------------------------------------------------------------------------------------------------
1,385,000 Aames Financial Corp. sr. notes 9 1/8s, 2003 623,250
125,000 Advanta Corp. company guaranty Ser. B, 8.99s, 2026 78,750
2,000,000 Advanta Corp. med. term notes Ser. B, 7s, 2001 1,880,200
600,000 Advanta Corp. med. term notes Ser. D, 6.92s, 2002 529,104
1,005,000 AMRESCO, Inc. sr. sub. notes Ser. 97-A, 10s, 2004 414,563
510,000 AMRESCO, Inc. sr. sub. notes Ser. 98-A, 9 7/8s, 2005 209,738
390,000 Conseco Finance Trust III, Inc. bonds 8.796s, 2027 183,300
980,000 Conseco Financial Corp. sr. sub. notes 10 1/4s, 2002 715,400
1,885,000 Delta Financial Corp. sr. notes 9 1/2s, 2004 735,150
1,573,000 Fannie Mae notes, 6 5/8s, 2009 1,518,684
1,175,000 Imperial Credit Capital Trust I 144A company guaranty
10 1/4s, 2002 998,750
470,000 Imperial Credit Industries, Inc. sr. notes 9 7/8s, 2007 336,050
550,000 Nationwide Credit, Inc. sr. notes Ser. A, 10 1/4s, 2008 385,000
510,000 Ocwen Capital Trust I company guaranty 10 7/8s, 2027 257,550
815,000 Ocwen Federal Bank FSB sub. deb. 12s, 2005 755,913
680,000 Ocwen Financial Corp. notes 11 7/8s, 2003 625,600
1,110,000 Resource America, Inc. 144A sr. notes 12s, 2004 976,800
----------------
11,223,802
Food (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,070,000 Aurora Foods, Inc. sr. sub. notes Ser. B, 9 7/8s, 2007 684,800
805,000 Aurora Foods, Inc. 144A sr. sub. notes Ser. D, 9 7/8s, 2007 515,200
1,150,000 Doane Pet Care Corp. sr. sub. notes 9 3/4s, 2007 983,250
600,000 Eagle Family Foods company guaranty Ser. B, 8 3/4s, 2008 357,000
1,410,000 Vlasic Foods Intl., Inc. sr. sub notes Ser. B, 10 1/4s, 2009 705,000
----------------
3,245,250
Gaming and Lottery (2.0%)
-------------------------------------------------------------------------------------------------------------------
360,000 Ameristar Casinos, Inc. company guaranty Ser. B,
10 1/2s, 2004 363,600
1,480,000 Autotote Corp. company guaranty Ser. B, 10 7/8s, 2004 1,550,300
1,660,000 Boyd Gaming Corp. sr. sub. notes 9 1/2s, 2007 1,593,600
1,780,000 Fitzgeralds Gaming Corp. company guaranty Ser. B, 12 1/4s,
2004 (In default) (NON) 987,900
480,000 Harrahs Entertainment, Inc. company guaranty 7 1/2s, 2009 448,930
2,770,000 Hollywood Casino Corp. company guaranty 11 1/4s, 2007 2,839,250
970,000 Hollywood Park, Inc. company guaranty Ser. B, 9 1/4s, 2007 974,850
2,300,000 International Game Technology sr. notes 7 7/8s, 2004 2,219,500
540,000 Isle of Capri Black Hawk LLC 144A 1st mortgage Ser. B,
13s, 2004 588,600
650,000 Isle of Capri Black Hawk LLC company guaranty
8 3/4s, 2009 591,500
1,170,000 Mohegan Tribal Gaming, Auth. sr. sub. notes 8 3/4s, 2009 1,126,125
380,000 Mohegan Tribal Gaming, Auth. sr. notes 8 1/8s, 2006 363,850
130,000 Park Place Entertainment, Inc. sr. sub. notes 9 3/8s, 2007 130,650
90,000 Park Place Entertainment sr. sub. notes 7 7/8s, 2005 85,500
2,640,000 Trump A.C. 1st mtge. 11 1/4s, 2006 1,768,800
3,200,000 Trump Castle Funding 144A sub. notes 10 1/4s, 2003 3,248,000
875,000 Trump Holdings & Funding Corp. sr. notes 15 1/2s, 2005 503,125
1,180,000 Venetian Casino, Inc. company guaranty 12 1/4s, 2004 1,197,700
----------------
20,581,780
Health Care (1.6%)
-------------------------------------------------------------------------------------------------------------------
1,640,000 ALARIS Medical Systems, Inc. company guaranty
9 3/4s, 2006 1,086,500
450,000 Bio-Rad Labs Corp. sr. sub. notes 11 5/8s, 2007 470,250
350,000 Columbia/HCA Healthcare Corp. deb. 8.36s, 2024 315,000
750,000 Columbia/HCA Healthcare Corp. med. term notes
7.69s, 2025 622,500
90,000 Columbia/HCA Healthcare Corp. notes 7 1/4s, 2008 81,450
960,000 Columbia/HCA Healthcare Corp. notes 6.91s, 2005 880,800
1,590,000 Columbia/HCA Healthcare Corp. med. term notes
6.63s, 2045 1,518,768
1,270,000 Conmed Corp. company guaranty 9s, 2008 1,104,900
815,000 Dade International, Inc. sr. sub. notes Ser. B, 11 1/8s, 2006 317,850
1,040,000 Hudson Respiratory Care, Inc. sr. sub. notes 9 1/8s, 2008 738,400
825,000 Kinetic Concepts, Inc. company guaranty Ser. B, 9 5/8s, 2007 618,750
1,780,000 Lifepoint Hospital Holdings company guaranty Ser. B,
10 3/4s, 2009 1,851,200
860,193 Magellan Health bank term loan FRN 9.375s, 2005 696,756
1,300,000 Magellan Health sr. sub. notes 9s, 2008 682,500
940,000 Mediq, Inc. deb. stepped-coupon zero %
(13s, 6/1/03), 2009 (STP) 94
1,070,000 Mediq, Inc. company guaranty 11s, 2008 53,500
1,330,000 Paracelsus Healthcare sr. sub. notes 10s, 2006 (In default) (NON) 345,800
650,000 Tenet Healthcare Corp. sr. sub. notes 8 5/8s, 2007 637,000
410,000 Tenet Healthcare Corp. sr. notes 8 5/8s, 2003 408,975
1,813,000 Tenet Healthcare Corp. sr. notes Ser. B, 8 1/8s, 2008 1,708,753
650,000 Tenet Healthcare Corp. sr. notes Ser. B, 7 5/8s, 2008 600,438
1,550,000 Triad Hospitals Holdings company guaranty Ser. B, 11s, 2009 1,619,750
----------------
16,359,934
Homebuilding (0.3%)
-------------------------------------------------------------------------------------------------------------------
670,000 D.R. Horton, Inc. company guaranty 8s, 2009 603,000
400,000 Del Webb Corp. sr. sub. deb. 10 1/4s, 2010 356,000
440,000 Del Webb Corp. sr. sub. deb. 9 3/8s, 2009 358,600
510,000 Lennar Corp. 144A sr. notes 9.95s, 2010 515,100
480,000 Lennar Corp. sr. notes 7 5/8s, 2009 428,400
280,000 M.D.C. Holdings, Inc. sr. notes 8 3/8s, 2008 247,800
910,000 Toll Corp. company guaranty 8 1/8s, 2009 832,650
----------------
3,341,550
Household Furniture and Appliances (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,160,000 Albecca, Inc. company guaranty 10 3/4s, 2008 1,032,400
1,000,000 Sealy Mattress Co. company guaranty stepped-coupon
Ser. B, zero % (10 7/8s, 12/15/02), 2007 (STP) 722,500
450,000 Sealy Mattress Co. sr. sub. notes Ser. B, 9 7/8s, 2007 433,125
----------------
2,188,025
Lodging and Tourism (0.7%)
-------------------------------------------------------------------------------------------------------------------
1,030,000 Epic Resorts LLC company guaranty Ser. B, 13s, 2005 463,500
2,820,000 HMH Properties, Inc. company guaranty Ser. B, 7 7/8s, 2008 2,559,150
70,000 HMH Properties, Inc. sr. notes Ser. C, 8.45s, 2008 65,800
1,720,000 ITT Corp. notes 6 3/4s, 2005 1,556,067
2,500,000 Starwood Hotels & Resorts bank term loan FRN 9.38s, 2003 2,506,250
260,000 Starwood Hotels & Resorts notes 6 3/4s, 2003 244,660
----------------
7,395,427
Manufacturing (1.0%)
-------------------------------------------------------------------------------------------------------------------
1,500,000 Axia, Inc. company guaranty 10 3/4s, 2008 1,500,000
1,740,000 Blount, Inc. company guaranty 13s, 2009 1,746,525
1,266,122 Blount, Inc. bank term loan FRN 10.66s, 2006 1,270,870
670,000 Celestica International, Ltd. 144A sr. sub. notes 10 1/2s,
2006 (Canada) 690,100
775,000 Continental Global Group sr. notes Ser. B, 11s, 2007 248,000
770,000 Flextronics International Ltd. 144A sr. sub. notes
9 7/8s, 2010 788,288
1,720,000 Flextronics International, Ltd. sr. sub. notes Ser. B,
8 3/4s, 2007 1,659,800
1,740,000 Motors and Gears, Inc. sr. notes Ser. D, 10 3/4s, 2006 1,687,800
575,000 Roller Bearing Co. company guaranty Ser. B, 9 5/8s, 2007 526,125
----------------
10,117,508
Medical Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,485,000 Extendicare Health Services, Inc. company guaranty
9.35s, 2007 742,500
1,260,000 Integrated Health Services, Inc. sr. sub. notes Ser. A,
9 1/2s, 2007 (In default) (NON) 23,625
620,000 Integrated Health Services, Inc. sr. sub. notes Ser. A,
9 1/4s, 2008 (In default) (NON) 11,625
510,000 Mariner Post-Acute Network, Inc. sr. sub. notes
stepped-coupon Ser. B, zero % (10 1/2s, 11/1/02),
2007 (In default) (NON) (STP) 2,550
2,500,000 Mariner Post-Acute Network, Inc. sr. sub. notes Ser. B,
9 1/2s, 2007 (In default) (NON) 12,500
2,690,000 Multicare Cos., Inc. sr. sub. notes 9s, 2007 141,225
1,345,000 Sun Healthcare Group, Inc. sr. sub. notes Ser. B, 9 1/2s,
2007 (In default) (NON) 36,988
1,080,000 Sun Healthcare Group, Inc. 144A sr. sub. notes 9 3/8s,
2008 (In default) (NON) 29,700
----------------
1,000,713
Medical Technology (--%)
-------------------------------------------------------------------------------------------------------------------
570,000 Hanger Orthopedic Group, Inc. sr. sub. notes 11 1/4s, 2009 490,200
Metals (1.1%)
-------------------------------------------------------------------------------------------------------------------
1,380,000 AK Steel Corp. company guaranty 7 7/8s, 2009 1,273,050
728,450 Anker Coal Group, Inc. company guaranty Ser. B,
14 1/4s, 2007 (PIK) 327,803
1,300,000 Kaiser Aluminum & Chemical Corp. sr. sub. notes 12 3/4s,
2003 1,173,250
150,000 Kaiser Aluminum & Chemical Corp. sr. notes 9 7/8s, 2002 144,188
1,960,000 LTV Corp. company guaranty 11 3/4s, 2009 1,646,400
1,830,000 National Steel Corp. 1st mtge. Ser. D, 9 7/8s, 2009 1,614,975
406,000 Oregon Steel Mills 1st mtge. 11s, 2003 290,290
1,993,333 Union Carbide Global bank term loan FRN 9.578s, 2008 2,000,808
730,000 WCI Steel, Inc. sr. notes Ser. B, 10s, 2004 693,500
100,000 Weirton Steel Corp. 144A sr. notes 10 3/4s, 2005 94,000
1,290,000 Wheeling-Pittsburgh Steel Corp. sr. notes 9 1/4s, 2007 928,800
690,000 WHX Corp. sr. notes 10 1/2s, 2005 531,300
----------------
10,718,364
Office Equipment and Supplies (--%)
-------------------------------------------------------------------------------------------------------------------
735,000 U.S. Office Products Co. company guaranty 9 3/4s, 2008 147,000
Oil and Gas (1.1%)
-------------------------------------------------------------------------------------------------------------------
1,800,000 Belco Oil & Gas Corp. company guaranty Ser. B,
10 1/2s, 2006 1,804,500
570,000 Belco Oil & Gas Corp. sr. sub. notes Ser. B, 8 7/8s, 2007 528,675
140,000 Benton Oil & Gas Co. sr. notes 9 3/8s, 2007 82,600
590,000 Giant Industries Corp. company guaranty 9s, 2007 545,750
320,000 Gulf Canada Resources, Ltd. sr. sub. notes 9 5/8s,
2005 (Canada) 326,400
1,120,000 HS Resources, Inc. company guaranty 9 1/4s, 2006 1,108,800
800,000 Nuevo Energy Co. sr. sub. notes Ser. B, 9 1/2s, 2008 794,000
1,370,000 Ocean Energy, Inc. company guaranty Ser. B, 8 7/8s, 2007 1,363,150
930,000 Ocean Energy, Inc. company guaranty Ser. B, 8 3/8s, 2008 906,750
460,000 Pioneer Natural Resources Co. company guaranty
9 5/8s, 2010 478,400
120,000 Port Arthur Finance Corp. company guaranty 12 1/2s, 2009 120,000
370,000 RAM Energy, Inc. sr. notes 11 1/2s, 2008 203,500
610,000 Seven Seas Petroleum sr. notes Ser. B, 12 1/2s, 2005 152,500
560,000 Snyder Oil Corp. sr. sub. notes 8 3/4s, 2007 560,000
310,000 Stone Energy Corp. company guaranty 8 3/4s, 2007 292,950
1,290,000 Vintage Petroleum sr. sub. notes 9 3/4s, 2009 1,315,800
430,000 Vintage Petroleum sr. sub. notes 9s, 2005 430,000
----------------
11,013,775
Paper and Forest Products (2.3%)
-------------------------------------------------------------------------------------------------------------------
1,505,000 APP Finance II Mauritius, Ltd. bonds stepped-coupon
zero % (16s, 2/15/04), 2049 (Indonesia) (STP) 722,400
1,505,000 Doman Industries, Ltd. 144A sr. notes 8 3/4s, 2004 1,245,388
420,000 Four M Corp. sr. notes Ser. B, 12s, 2006 399,000
1,315,000 Gaylord Container Corp. sr. sub. notes 9 7/8s, 2008 828,450
250,000 Gaylord Container Corp. sr. notes Ser. B, 9 3/8s, 2007 200,000
4,250,000 Indah Kiat Financial Mauritius, Ltd. company guaranty 10s,
2007 (Indonesia) 2,401,250
1,450,000 Pacifica Papers, Inc. sr. notes 10s, 2009 (Canada) 1,468,125
2,810,000 Pindo Deli Finance Mauritius, Ltd. company guaranty
10 3/4s, 2007 (Indonesia) 1,587,650
2,694,000 Repap New Brunswick sr. notes 10 5/8s, 2005 (Canada) 2,465,010
2,320,000 Riverwood International Corp. company guaranty 10 7/8s,
2008 2,111,200
1,185,000 Riverwood International Corp. company guaranty 10 1/4s,
2006 1,167,225
170,000 Stone Container Corp. sr. notes 12.58s, 2016 176,800
460,000 Stone Container 144A company guaranty 11 1/2s,
2006 (Canada) 476,675
1,611,000 Stone Containers Corp. bank term loan FRN 10.188s, 2006 1,611,000
4,973,913 Stone Containers Corp. bank term loan FRN 9.938s, 2006 4,961,478
1,080,000 Tembec Industries, Inc. company guaranty 8 5/8s,
2009 (Canada) 1,063,800
----------------
22,885,451
Pharmaceuticals (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,240,000 ICN Pharmaceuticals, Inc. 144A sr. notes 9 1/4s, 2005 1,224,500
1,230,000 ICN Pharmaceuticals, Inc. 144A sr. notes 8 3/4s, 2008 1,211,550
110,000 ICN Pharmaceuticals, Inc. 144A sr. notes 8 3/4s, 2008 108,350
700,000 MedPartners, Inc. sr. sub. notes 6 7/8s, 2000 694,750
----------------
3,239,150
Power Producers (1.2%)
-------------------------------------------------------------------------------------------------------------------
1,250,000 Calpine Corp. sr. notes 8 3/4s, 2007 1,231,638
170,000 Calpine Corp. sr. notes 7 7/8s, 2008 161,045
3,750,000 Midland Funding II Corp. deb. Ser. B, 13 1/4s, 2006 4,416,000
3,630,000 Midland Funding II Corp. deb. Ser. A, 11 3/4s, 2005 4,029,808
508,176 Midland Funding I Corp. deb. Ser. C-94, 10.33s, 2002 519,737
1,655,000 York Power Funding 144A company guaranty 12s, 2007
(Cayman Islands) 1,671,550
----------------
12,029,778
Publishing (0.5%)
-------------------------------------------------------------------------------------------------------------------
2,315,000 Affinity Group Holdings sr. notes 11s, 2007 1,944,600
754,111 Big Flower Holdings bank term loan FRN 9.625s, 2010 752,226
1,250,000 Garden State Newspapers, Inc. sr. sub. notes Ser. B,
8 3/4s, 2009 1,137,500
1,260,000 Garden State Newspapers, Inc. sr. sub. notes 8 5/8s, 2011 1,134,000
----------------
4,968,326
Railroads (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,415,000 TFM S.A. de C.V. company guaranty stepped-coupon
zero % (11 3/4s, 6/15/02), 2009 (Mexico) (STP) 1,089,550
Restaurants (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,080,000 FRD Acquisition Co. sr. notes Ser. B, 12 1/2s, 2004 507,600
1,800,000 Sbarro, Inc. company guaranty 11s, 2009 1,863,000
610,000 Tricon Global Restaurants, Inc. sr. notes 7.65s, 2008 544,462
----------------
2,915,062
Retail (0.9%)
-------------------------------------------------------------------------------------------------------------------
2,700,000 Amazon.com, Inc. sr. disc. notes stepped-coupon zero %
(10s, 5/1/03), 2008 (STP) 1,323,000
1,220,000 Groupo Elektra S.A. de C.V. 144A sr. notes 12s, 2008 1,177,300
560,000 Iron Age Corp. company guaranty 9 7/8s, 2008 392,000
40,000 Iron Age Holdings Corp. sr. disc. notes stepped-coupon
zero % (12 1/8s, 5/1/03), 2009 (STP) 6,000
2,310,000 Kmart Corp. notes 8 3/8s, 2004 2,207,436
1,000,000 Kmart Corp. pass-through certificates Ser. 95K4,
9.35s, 2020 911,720
1,330,000 Mothers Work, Inc. sr. notes 12 5/8s, 2005 1,243,550
2,140,000 Saks, Inc. company guaranty 8 1/4s, 2008 1,721,523
190,000 Southland Corp. sr. sub. deb. 5s, 2003 169,132
----------------
9,151,661
Semiconductor (0.1%)
-------------------------------------------------------------------------------------------------------------------
540,000 Amkor Technologies, Inc., structured note (issued by Steers,
Credit Linked Trust 2000) 12.58s, 2005 542,700
500,000 Amkor Technologies, Inc. sr. notes 9 1/4s, 2006 496,250
360,000 Chippac Intl., Ltd. company guaranty Ser. B, 12 3/4s, 2009 390,600
----------------
1,429,550
Shipping (0.2%)
-------------------------------------------------------------------------------------------------------------------
500,000 Eletson Holdings, Inc. 1st mtge. notes 9 1/4s, 2003 (Greece) 465,000
245,000 International Shipholding Corp. sr. notes 9s, 2003 244,388
360,000 International Shipholding Corp. sr. notes 7 3/4s, 2007 306,000
1,050,000 Kitty Hawk, Inc. company guaranty 9.95s, 2004 (In default) (NON) 441,000
940,000 Transportacion Maritima Mexicana S.A. de C.V.
notes 9 1/4s, 2003 761,400
----------------
2,217,788
Software (--%)
-------------------------------------------------------------------------------------------------------------------
630,000 Telehub Communications Corp. company guaranty
stepped-coupon zero % (13 7/8s, 7/31/02), 2005 (STP) 107,100
Specialty Printing (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,000,000 Perry-Judd company guaranty 10 5/8s, 2007 860,000
316,775 Von Hoffman Press, Inc. 144A sr. sub. notes 13 1/2s, 2009 285,098
370,000 Von Hoffman Press, Inc. 144A sr. sub. notes 10 3/8s, 2007 346,875
----------------
1,491,973
Technology (0.6%)
-------------------------------------------------------------------------------------------------------------------
1,860,000 Fairchild Semiconductor Corp. sr. sub. notes 10 1/8s, 2007 1,883,250
1,765,000 Telecommunications Techniques, Inc. company guaranty
9 3/4s, 2008 1,623,800
540,000 Viasystems, Inc. sr. sub notes 9 3/4s, 2007 480,600
1,750,000 Viasystems, Inc. sr. notes Ser. B, 9 3/4s, 2007 1,557,500
----------------
5,545,150
Technology Services (0.8%)
-------------------------------------------------------------------------------------------------------------------
1,560,000 Covad Communications Group, Inc. sr. notes 12 1/2s, 2009 1,201,200
1,050,000 Covad Communications Group, Inc. sr. notes Ser. B, 12s, 2010 798,000
950,000 Equinix, Inc. sr. notes 13s, 2007 807,500
2,120,000 Exodus Communications, Inc. 144A sr. notes 11 5/8s, 2010 2,135,900
500,000 Exodus Communications, Inc. sr. notes 10 3/4s, 2009 485,000
270,000 Globix Corp. sr. notes 12 1/2s, 2010 216,000
230,000 PSINet, Inc. sr. notes 11 1/2s, 2008 190,900
430,000 PSINet, Inc. sr. notes 11s, 2009 344,000
630,000 Rhythms Netconnections sr. notes Ser. B, 14s, 2010 428,400
850,000 Verio, Inc. sr. notes 11 1/4s, 2008 983,875
----------------
7,590,775
Telecommunications (6.2%)
-------------------------------------------------------------------------------------------------------------------
1,830,000 360Networks, Inc. 144A sr. notes 13s, 2008 (Canada) 1,793,400
650,000 Alaska Communications Systems Corp. company
guaranty 9 3/8s, 2009 598,000
100,000 Allegiance Telecom, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (11 3/4s, 2/15/03), 2008 (STP) 73,500
160,000 American Mobile Satellite Corp. company guaranty
12 1/4s, 2008 119,200
590,000 Arch Communications Group sr. disc. notes stepped-coupon
zero % (10 7/8s, 3/15/01), 2008 (STP) 365,800
1,100,000 Barak I.T.C. sr. disc. notes stepped-coupon Ser. B, zero %
(12 1/2s, 11/15/02), 2007 (Israel) (STP) 517,000
810,000 Bestel S.A. de C.V. sr. disc. notes stepped-coupon zero %
(12 3/4s, 5/15/03), 2005 (Mexico) (STP) 530,550
290,000 Call-Net Enterprises, Inc. sr. notes 9 3/8s, 2009 147,900
750,000 Call-Net Enterprises, Inc. sr. disc. notes stepped-coupon
zero % (8.94s, 8/15/03), 2008 (Canada) (STP) 225,000
710,000 Call-Net Enterprises, Inc. sr. notes 8s, 2008 (Canada) 340,800
1,300,000 Carrier1 Intl. SA sr. notes Ser. B, 13 1/4s, 2009 (Luxembourg) 1,267,500
2,400,000 Celcaribe S.A. sr. notes stepped-coupon zero %
(13 1/2s, 3/15/04), 2004 (Colombia) (STP) 1,932,000
6,042,000 CellNet Data Systems, Inc. sr. disc. notes stepped-coupon
zero % (14s, 10/1/02), 2007 (STP) 422,940
120,000 Clearnet Communications, Inc. sr. disc. notes stepped-coupon
zero % (14 3/4s, 12/15/00), 2005 (STP) 123,000
1,020,000 Crown Castle Intl., Corp. sr. notes 10 3/4s, 2011 1,045,500
790,000 Dobson Communications, Inc. 144A sr. notes 10 7/8s, 2010 776,175
880,000 Dobson/Sygnet Communications, Inc. sr. notes 12 1/4s, 2008 904,200
2,270,000 Econophone, Inc. company guaranty 13 1/2s, 2007 1,974,900
580,000 Esprit Teleom Group PLC sr. notes 11 1/2s, 2007
(United Kingdom) 423,400
1,560,000 Flag Ltd. 144A sr. notes 8 1/4s, 2008 (Bermuda) 1,357,200
1,940,000 Global Crossing Holdings, Ltd. company guaranty 9 1/2s,
2009 (Bermuda) 1,881,800
850,000 Global Crossing Holdings, Ltd. company guaranty 9 1/8s,
2006 (Bermuda) 820,250
815,000 Grupo Iusacell sr. notes 14 1/4s, 2006 876,125
1,420,000 ICG Services, Inc. sr. disc. notes stepped-coupon zero %
(10s, 2/15/03), 2008 (STP) 653,200
3,790,000 ICG Services, Inc. sr. disc. notes stepped-coupon zero %
(9 7/8s, 5/1/03), 2008 (STP) 1,705,500
1,355,000 Innova S De R.L. sr. notes 12 7/8s, 2007 (Mexico) 1,277,088
1,250,000 Intira Corp. bonds stepped-coupon zero %
(13s, 8/1/05) 2010 (STP) 715,625
2,640,000 IPC Information Systems, Inc. sr. disc. notes zero %
(10 7/8s, 5/1/03), 2008 (STP) 2,428,800
470,000 Leap Wireless Corp. 144A sr. notes 12 1/2s, 2010 399,500
670,000 Level 3 Communications, Inc. sr. notes 11 1/4s, 2010 639,850
970,000 Level 3 Communications, Inc. sr. notes 11s, 2008 931,200
730,000 Level 3 Communications, Inc. sr. notes 9 1/8s, 2008 633,275
2,950,000 Logix Communications Enterprises sr. notes 12 1/4s, 2008 737,500
590,000 Loral Space & Communication, Ltd. sr. notes 9 1/2s, 2006 442,500
310,000 Metrocall, Inc. sr. sub. notes 11s, 2008 235,600
260,000 Metrocall, Inc. sr. sub. notes 9 3/4s, 2007 172,900
640,000 Metromedia Fiber Network, Inc. sr. notes 10s, 2009 619,200
2,010,000 Metromedia Fiber Network, Inc. sr. notes Ser. B, 10s, 2008 1,939,650
4,512,000 Millicom International Cellular S.A. sr. disc. notes
stepped-coupon zero % (13 1/2s, 6/1/01), 2006
(Luxembourg) (STP) 3,948,000
350,000 Nextel Communications, Inc. sr. disc. notes stepped-coupon
zero % (12 1/8s, 4/15/03), 2008 (STP) 220,500
2,010,000 Nextel Communications, Inc. sr. notes 12s, 2008 2,160,750
3,520,000 Nextel Communications, Inc. sr. notes 9 3/8s, 2009 3,361,600
1,570,000 Nextel International, Inc. 144A sr. notes 12 3/4s, 2010 1,546,450
3,110,000 Nextel Partners, Inc. 144A sr. notes 11s, 2010 3,078,900
970,000 Nextel Partners, Inc. 144A sr. notes 11s, 2010 953,025
840,000 NorthEast Optic Network, Inc. sr. notes 12 3/4s, 2008 781,200
2,220,000 NorthPoint Communications Group, Inc. sr. notes
12 7/8s, 2010 1,531,800
990,000 Orbital Imaging Corp. sr. notes Ser. B, 11 5/8s, 2005 435,600
1,280,000 Pagemart Wireless, Inc. sr. disc. notes stepped-coupon zero %
(11 1/4s, 2/1/03), 2008 (STP) 512,000
140,000 Paging Network sr. sub. notes 8 7/8s, 2006 59,850
250,000 Paging Network Do Brasil sr. notes 13 1/2s, 2005 (Brazil) 12,500
380,000 Paging Network, Inc. sr. sub. notes 10s, 2008 153,900
2,020,000 Pathnet, Inc. sr. notes 12 1/4s, 2008 1,191,800
670,000 Pinnacle Holdings, Inc. sr. disc. notes stepped-coupon
zero % (10s, 3/15/03), 2008 (STP) 485,750
1,110,000 Price Communications Wireless, Inc. 144A sr. notes
9 1/8s, 2006 1,104,450
1,350,000 Primus Telecommunications Group, Inc. sr. notes Ser. B,
9 7/8s, 2008 756,000
810,000 RSL Communications PLC 144A company guaranty
12 7/8s, 2010 299,700
1,025,000 RSL Communications, Ltd. company guaranty 12 1/4s, 2006 369,000
660,000 RSL Communications PLC 144A company guaranty
10 1/2s, 2008 212,025
635,000 RSL Communications PLC company guaranty 9 1/8s, 2008 194,469
640,000 Satelites Mexicanos S.A. de C.V. 144A sr. notes 10 1/8s,
2004 (Mexico) 454,400
400,000 Spectrasite Holdings, Inc. sr. disc. notes stepped-coupon
zero % (11 1/4s, 4/15/04), 2009 (STP) 238,000
570,000 Spectrasite Holdings, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (12 7/8, 3/15/05) 2010 (STP) 322,050
1,640,000 Startec Global Communications Corp. sr. notes 12s, 2008 1,312,000
180,000 Verio, Inc. sr. notes 10 5/8s, 2009 213,291
1,490,000 Viatel, Inc. sr. disc. notes stepped-coupon zero %
(12 1/2s, 4/15/03), 2008 (STP) 521,500
2,400,000 Viatel, Inc. sr. notes 11 1/4s, 2008 1,440,000
2,000,000 Western Wireless bank term loan FRN 9.38s, 2008 2,000,000
100,000 Williams Communications Group, Inc. sr. notes 10 7/8s, 2009 95,000
1,430,000 World Access, Inc. sr. notes Ser. B, 13 1/4s, 2008 1,251,250
----------------
63,264,288
Telephone (2.6%)
-------------------------------------------------------------------------------------------------------------------
1,060,000 Airgate PCS, Inc. sr. sub. notes stepped-coupon zero %
(13 1/2s, 10/1/04), 2009 (STP) 612,150
2,590,000 Alamosa PCS Holdings, Inc. company guaranty
stepped-coupon zero % (12 7/8s, 2/15/05), 2010 (STP) 1,333,850
780,000 Birch Telecommunications, Inc. sr. notes 14s, 2008 624,000
1,710,000 BTI Telecom Corp. sr. notes 10 1/2s, 2007 1,197,000
2,780,000 Firstworld Communication Corp. sr. disc. notes
stepped-coupon zero % (13, 4/15/03), 2008 (STP) 861,800
1,755,000 Focal Communications Corp. sr. disc. notes, stepped-coupon
Ser. B, zero % (12 1/8s, 2/15/03), 2008 (STP) 1,149,525
180,000 Focal Communications Corp. sr. notes 11 7/8s, 2010 177,300
550,000 Hyperion Telecommunications Corp., Inc. sr. notes Ser. B,
12 1/4s, 2004 539,000
770,000 Intermedia Communications, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (12 1/4s, 3/1/04), 2009 (STP) 385,000
4,175,000 KMC Telecommunications Holdings, Inc. sr. disc. notes
stepped-coupon zero % (12 1/2s, 2/15/03), 2008 (STP) 1,878,750
2,000,000 Madison River Capital 144A sr. notes 13 1/4s, 2010 1,800,000
450,000 McLeodUSA, Inc. sr. notes 9 1/2s, 2008 433,125
1,530,000 MGC Communications, Inc. 144A sr. notes 13s, 2010 1,453,500
1,660,000 Microcell Telecommunications sr. disc. notes stepped-coupon
Ser. B, zero % (14s, 12/1/01), 2006 (Canada) (STP) 1,543,800
760,000 Netia Holdings B.V. 144A company guaranty stepped-coupon
zero % (11 1/4s, 11/1/01), 2007 (Poland) (STP) 543,400
380,000 Netia Holdings B.V. 144A company guaranty 10 1/4s,
2007 (Poland) 322,050
680,000 NEXTLINK Communications, Inc. sr. notes 10 1/2s, 2009 666,400
2,250,000 Telecorp PCS, Inc. 144A sr. sub. notes 10 5/8s, 2010 2,283,750
650,000 Time Warner Telecom, Inc. sr. notes 9 3/4s, 2008 622,375
440,000 Transtel S.A. pass-through certificates 12 1/2s, 2007 162,800
2,360,000 US Unwired, Inc. company guaranty stepped-coupon
Ser. B, zero % (13 3/8s, 11/1/04), 2009 (STP) 1,233,100
320,000 Versatel Telecom N.V. 144A sr. notes 13 1/4s, 2008
(Netherlands) 328,000
850,000 Versatel Telecom N.V. sr. notes 13 1/4s, 2008 (Netherlands) 871,250
2,190,000 Voicestream Wire, Inc. sr. notes 10 3/8s, 2009 2,348,775
4,346,000 WinStar Communications, Inc. 144A sr. disc. notes zero %
(14 3/4s, 4/15/05), 2010 (STP) 1,868,780
1,137,000 WinStar Communications, Inc. 144A sr. notes 12 3/4s, 2010 1,023,300
----------------
26,262,780
Textiles (0.7%)
-------------------------------------------------------------------------------------------------------------------
590,000 Galey & Lord, Inc. company guaranty 9 1/8s, 2008 300,900
1,995,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 1,985,025
1,160,000 Kasper A.S.L., Ltd. sr. notes 12 3/4s, 2004 661,200
1,370,000 Levi Strauss & Co. notes 6.8s, 2003 1,150,800
2,130,000 Westpoint Stevens, Inc. sr. notes 7 7/8s, 2008 1,778,550
635,000 William Carter Holdings Co. sr. sub. notes Ser. A, 12s, 2008 603,250
645,000 William Carter Holdings Co. sr. sub. notes Ser. A,
10 3/8s, 2006 609,525
----------------
7,089,250
Tobacco (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,690,000 North Atlantic Trading Co. company guaranty Ser. B,
11s, 2004 1,470,300
Trucks and Parts (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,270,000 Transportation Manufacturing Operations, Inc. company
guaranty 11 1/4s, 2009 1,098,550
Utilities (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,980,000 Cathay International, Ltd. 144A sr. notes 13s, 2008 (China) 990,000
Waste Management (0.8%)
-------------------------------------------------------------------------------------------------------------------
3,735,000 Allied Waste Industries, Inc. company guaranty Ser. B,
10s, 2009 3,249,450
830,000 Allied Waste Industries, Inc. bank term loan FRN
9.75s, 2007 787,778
680,000 Allied Waste Industries, Inc. bank term loan FRN
9.563s, 2006 644,103
2,430,000 Browning-Ferris Industries, Inc. deb. 7.4s, 2035 1,676,700
1,670,000 Waste Management, Inc. notes 6 5/8s, 2002 1,605,004
430,000 Waste Management, Inc. company guaranty 6 1/2s, 2004 397,064
150,000 WMX Technologies, Inc. notes 7.7s, 2002 146,526
----------------
8,506,625
Water Utilities (0.1%)
-------------------------------------------------------------------------------------------------------------------
780,000 Azurix Corp. 144A notes 10 3/8s, 2007 717,600
----------------
Total Corporate Bonds and Notes (cost $515,334,610) $ 447,614,476
FOREIGN GOVERNMENT BONDS AND NOTES (15.7%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
USD 2,190,000 Argentina (Republic of) bonds 12 1/8s, 2005 $ 2,175,765
USD 2,419,000 Argentina (Republic of) bonds 11 3/4s, 2015 2,234,672
USD 5,736,000 Argentina (Republic of) unsub. 11 3/4s, 2009 5,420,520
AUD 21,025,000 Australia (Government of) bonds Ser. 909,
7 1/2s, 2009 13,178,570
USD 3,630,000 Brazil (Federal Republic of) notes 14 1/2s, 2009 3,938,550
USD 4,605,000 Brazil (Federal Republic of) bonds 12 3/4s, 2020 4,489,875
CAD 1,405,000 Canada (Government of) bonds Ser. WB60,
7 1/4s, 2007 1,010,787
CAD 10,735,000 Canada (Government of) bonds Ser. WL43,
5 3/4s, 2029 7,446,932
USD 955,000 Colombia (Republic of) bonds 11 3/4s, 2020 826,075
DKK 35,295,000 Denmark (Kingdom of) bonds 7s, 2024 5,062,759
DKK 125,420,000 Denmark (Kingdom of) bonds 6s, 2009 15,914,226
EUR 4,920,000 Germany (Federal Republic of) bonds Ser. 98,
5 5/8s, 2028 4,658,162
EUR 10,610,000 Germany (Federal Republic of) bonds Ser. 132,
4 1/8s, 2004 9,460,513
GRD 4,401,000 Hellenic Greece (Republic of) bonds 6 1/2s, 2014 12,471,637
EUR 4,950,000 Italy (Government of) sr. unsub. 4.356s, 2002 4,581,094
USD 1,285,000 Korea (Republic of) unsub. 8 7/8s, 2008 1,329,975
USD 1,258,000 Morocco (Kingdom of) gov't guaranty Ser. A,
7 3/4s, 2009 1,144,780
NZD 16,190,000 New Zealand (Government of) bonds Ser. 709,
7s, 2009 7,442,533
USD 2,995,000 Philippines (Republic of) notes 10 5/8s, 2025 2,493,338
USD 1,675,000 Philippines (Republic of) bonds 9 7/8s, 2019 1,340,000
USD 3,665,000 Russia (Federation of) 144A bonds 12 3/4s, 2028 3,238,944
USD 3,115,000 Russia (Federation of) unsub. 10s, 2007 2,441,537
USD 25,380,000 Russia (Federation of) deb. FRB 6.719s, 2020
(In default) (NON) 8,375,400
GBP 4,420,000 United Kingdom Treasury bonds 10s, 2003 7,363,090
GBP 2,355,000 United Kingdom Treasury bonds Ser. 85,
9 3/4s, 2002 3,773,223
GBP 8,165,000 United Kingdom Treasury bonds 8s, 2000 12,305,742
USD 2,410,000 United Mexican States bonds 11 3/8s, 2016 2,795,600
USD 9,835,000 United Mexican States bonds Ser. XW,
10 3/8s, 2009 10,560,823
USD 1,985,000 Venezuela (Republic of) bonds 9 1/4s, 2027 1,334,913
----------------
Total Foreign Government Bonds and Notes
(cost $159,430,727) $ 158,810,035
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (15.4%) (a)
PRINCIPAL AMOUNT VALUE
U.S. Government Agency Mortgage Obligations (4.5%)
-------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Association
$ 162,194 7 1/2s, March 1, 2026 $ 159,956
6,524,231 6s, with due dates from March 1, 2029 to April 1, 2029 5,992,963
1,072,000 Federal National Mortgage Association 8s, TBA,
August 25, 2030 1,075,012
Federal National Mortgage Association Pass-Through
Certificates
265,151 8s, November 1, 2029 266,002
3,377,892 7 1/2s, with due dates from January 1, 2030 to July 1, 2030 3,329,183
2,297,539 7s, June 1, 2030 2,218,871
20,561 6 1/2s, with due dates from August 1, 2010 to
September 1, 2010 19,845
2,746,529 6s, with due dates from May 15, 2008 to August 1, 2029 2,530,926
Government National Mortgage Association Pass-Through
Certificates
9,327,706 8s, with due dates from December 15, 2022
to December 15, 2027 9,409,361
7,178,338 7 1/2s, with due dates from January 15, 2023
to February 15, 2027 7,135,940
13,356,732 7s, with due dates from December 15, 2022
to December 15, 2028 13,007,459
----------------
45,145,518
U.S. Treasury Obligations (10.9%)
-------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
5,055,000 6 1/2s, November 15, 2026 5,359,109
231,000 6 1/4s, May 15, 2030 246,087
41,545,000 6 1/8s, November 15, 2027 (SEG) 42,077,191
U.S. Treasury Notes
54,475,000 6 1/2s, February 15, 2010 56,271,041
3,870,000 6 3/8s, January 31, 2002 3,867,562
2,835,000 5 7/8s, November 15, 2004 2,798,684
----------------
110,619,674
----------------
Total U.S. Government and Agency Obligations
(cost $154,276,699) $ 155,765,192
COLLATERALIZED MORTGAGE OBLIGATIONS (9.3%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$ 80,000 Amresco Commercial Mortgage Funding I Ser. 97-C1,
Class F, 7.64s, 2029 $ 75,200
1,780,901 Blackstone Hotel Acquisition Co. sr. mtge. loan 10.26s, 2003 2,533,385
Commercial Mortgage Acceptance Corp.
2,305,000 Ser. 97-ML1, Class D, 6.977s, 2030 2,128,884
12,555,128 Ser. 97-ML1, Interest Only (IO), .956s, 2017 563,019
76,689,770 Commercial Mortgage Asset Trust Ser. 99-C1, Class X,
IO, .9125s, 2020 4,739,188
2,685,000 Countrywide Home Loan Ser. 98-3, Class A5, 6 3/4s, 2028 2,482,366
4,100,000 Countrywide Mortgage Backed Securities, Inc. Ser. 93-C,
Class A8, 6 1/2s, 2024 3,711,074
Criimi Mae Commercial Mortgage Trust
13,223,000 Ser. 98-C1, Class A2, 7s, 2011 11,698,223
3,474,000 Ser. 98-C1, Class B, 7s, 2011 2,796,570
70,780,978 Deutsche Mortgage & Asset Receiving Corp. Ser. 98-C1,
Class X, IO, 1.11s, 2031 3,561,168
Fannie Mae
5,636,429 Ser. 281, Class 2, IO, 9s, 2026 1,595,814
2,900,298 Ser. 251, Class 2, IO, 8s, 2023 869,636
2,748,766 Ser. 203, Class 2, IO, 8s, 2023 824,200
876,127 Ser. 176, Class 2, IO, 8s, 2022 248,738
2,427,348 Ser. 217, Class 2, IO, 8s, 2023 689,139
5,457,496 Ser. 266, Class 2, IO, 7 1/2s, 2024 1,611,667
6,079,312 Ser. 254, Class 2, IO, 7 1/2s, 2024 1,863,689
6,452,221 Ser. 252, Class 2, IO, 7 1/2s, 2023 1,975,993
6,762,024 Ser. 221, Class 2, IO, 7 1/2s, 2023 2,028,607
15,175,623 Ser. 218, Class 2, IO, 7 1/2s, 2023 4,581,141
6,454,113 Ser. 93-251, Class Z, 6 1/2s, 2023 5,701,805
6,328,034 Ser. 97-91, Class SL, IO, 2.76s, 2023 570,512
8,681,387 Ser. 98-66, Class SB, IO, 1.53s, 2028 412,366
Freddie Mac
703,374 Ser. 2209, Class S, 10.62s, 2024 656,885
969,373 Ser. 147, IO, 8s, 2023 287,480
2,757,500 Ser. 2219, Class SA, 7.7s, 2030 2,209,585
1,539,212 Ser. 1717, Class L, 6 1/2s, 2024 1,473,615
1,914,000 Ser. 44, Class SG, IO, 2.8s, 2023 304,147
3,027,381 Ser. 2090, Class SA, IO, 2.174s, 2028 161,776
3,045,229 Ser. 2090, Class SB, IO, 2.174s, 2028 162,729
3,056,056 Ser. 2090, Class SC, IO, 2.174s, 2028 163,308
2,761,181 Ser. 2090, Class SD, IO, 2.174s, 2028 147,551
1,575,000 GE Capital Mortgage Services, Inc. Ser. 98-11, Class 2A4,
6 3/4s, 2028 1,466,073
2,770,000 General Growth Properties Ala Moa Ser. 99-C1, Class E,
FRB 8.88s, 2004 2,772,489
General Growth Properties-Homart
570,000 Ser. 99-C1, Class G, 9.13s, 2003 571,180
650,000 Ser. 99-C1, Class F, 8.88s, 2003 651,346
General Growth Properties-Ivanhoe
695,000 Ser. 99-C1, Class G, FRB, 9.88s, 2004 695,842
1,198,000 Ser. 99-C1, Class F, FRB, 9.13s, 2004 1,199,498
Government National Mortgage Association
1,919,698 Ser. 99-30, Class SG, 9.619s, 2025 1,776,921
3,862,067 Ser. 00-17, Class SB, 9.119s, 2026 3,746,205
1,203,438 Ser. 99-44, Class SZ, 9.1s, 2029 1,117,881
2,110,632 Ser. 99-38, Class SL 8.869s, 2026 1,906,494
986,222 Ser. 00-16, Class SA, 8.619s, 2026 857,396
1,970,478 Ser. 98-2, Class EA, Principal Only (PO) zero %, 2028 1,335,615
Merrill Lynch Mortgage Investors, Inc.
1,495,000 Ser. 96-C2, Class E, 6.96s, 2028 1,281,495
23,921,191 Ser. 96-C2, IO, 1.935s, 2028 1,532,451
1,615,000 Ser. 95-C3, Class D, 7.788s, 2025 1,579,167
2,450,738 Ser. 98-C2, IO, 6.574s, 2030 168,488
Mortgage Capital Funding, Inc.
10,243,865 Ser. 97-MC2, Class X, IO, 1.579s, 2012 671,453
6,292,745 Ser. 98-MC1, Class X, IO, .854s, 2009 223,442
391,077 Prudential Home Mortgage Securities Ser. 93-57,
Class A4, 5.9s, 2023 383,678
1,700,000 Residential Mortgage Securities Ser. 8, Class M, FRB,
7.436s, 2038 2,524,706
1,471,263 Rural Housing Trust Ser. 87-1, Class D, 6.33s, 2026 1,422,152
3,495,000 Starwood Asset Receivables Trust Ser. 00-1, Class E,
9.37s, 2005 3,507,560
----------------
Total Collateralized Mortgage Obligations
(cost $96,729,092) $ 94,220,992
BRADY BONDS (2.9%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$ 2,910,000 Argentina (Republic of) gov't guaranty 6s, 2023 $ 1,982,583
912,000 Argentina (Republic of) deb. FRB 6.688s, 2005 841,320
13,195,790 Brazil (Federal Republic of) bonds 8s, 2014 9,815,028
4,170,000 Bulgaria (Government of) Ser. A, FLIRB, 2 1/4s, 2012 3,153,563
510,000 Bulgaria (Government of) deb. Ser. PDI, FRB, 6.688s, 2011 410,550
1,730,000 Bulgaria (Government of) FRB Ser. A, 6 1/2s, 2024 1,388,325
9,170,000 United Mexican States sec. Ser. W-B, 6 1/4s, 2019 7,852,271
2,110,000 Venezuela (Republic of) Ser. W-A, 6 3/4s, 2020 1,506,118
2,678,550 Venezuela (Republic of) deb. Ser. DL, FRB, 6.762s, 2007 2,233,375
----------------
Total Brady Bonds (cost $26,998,906) $ 29,183,133
PREFERRED STOCKS (3.3%) (a)
NUMBER OF SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
32,813 AmeriKing, Inc. $3.25 cum. pfd. (PIK) $ 262,504
538 Benedek Communications Corp. 11.50% pfd. (PIK) 384,670
80,020 Brand Scaffold $3.63 cum. pfd. 2,200,550
3,000 CGA Group, Ltd. 144A Ser. A, 13.75% pfd. (PIK) 81,000
39,725 Chevy Chase Pfd. Capital Corp. Ser. A, $5.19 pfd. 1,867,075
5,275 Chevy Chase Savings Bank $3.25 pfd. 134,513
9,940 Citadel Broadcasting, Inc. 144A Ser. B, $13.25 cum. pfd. (PIK) 1,063,580
430,000 CSBI Capital Trust I 144A company guaranty $11.75, 2027 460,100
27,376 CSC Holdings, Inc. Ser. M, $11.13 cum. pfd. (PIK) 2,888,168
69,460 Diva Systems Corp. Ser. C, $6.00 pfd. 416,760
20,000 Doane Pet Care Enterprise $7.12 pfd. 800,000
2,770 Dobson Communications 13.00% pfd. (PIK) 2,728,450
540 First Republic 144A 10.50% pfd. 467,100
170 Fresenius Medical Capital Trust I Ser. D, 9.00% company
guaranty, pfd. (Germany) 166,600
1,960 Fresenius Medical Capital Trust II 7.875% company guaranty,
pfd. (Germany) 1,754,200
16,260 Global Crossing Holdings, Ltd. $10.50 cum. pfd. (PIK) 1,593,480
74,000 Golden State Bancorp Ser. A, $2.28 pfd. 1,720,500
1,381 Granite Broadcasting 144A 12.75% cum. pfd. (PIK) 1,160,040
1,833 ICG Holdings, Inc. 14.25% pfd. (PIK) 1,356,420
787 ICG Holdings, Inc. 14.00% cum. pfd. (PIK) 566,352
2,515 Intermedia Communications Ser. B, 13.50% pfd. (PIK) 1,835,950
1,172 Nextel Communications, Inc. Ser. D, 13.00% cum. pfd. (PIK) 1,242,320
469 Nextel Communications, Inc. Ser. E, $11.125 pfd. (PIK) 469,000
39,670 NEXTLINK Communications, Inc. 14.00% pfd. (PIK) 2,072,758
766 NEXTLINK Communications, Inc. Ser. B, 13.50% pfd. (PIK) 735,360
253 Paxson Communications Corp. 13.25% cum. pfd. (PIK) 2,454,100
782 R & B Falcon Corp. 13.875% cum. pfd. (PIK) 891,480
1,268 Rural Cellular Corp. 12.25% pfd. (PIK) 1,179,240
----------------
Total Preferred Stocks (cost $35,160,019) $ 32,952,270
UNITS (1.1%) (a)
NUMBER OF UNITS VALUE
-------------------------------------------------------------------------------------------------------------------
1,420,000 AP Pegasus Shipping units 14 1/2s, 2008 $ 63,900
1,600,000 App China Group, Ltd. units 14s, 2010 (Singapore) 912,000
1,950,000 CFW Communications Co. 144A units 13s, 2010 1,925,625
530,000 Colo.com units 13 7/8s, 2010 572,400
1,300,000 Dayton Superior Corp. units 13s, 2009 1,290,250
1,070,000 Huntsman Packaging Corp. units 13s, 2010 1,086,050
1,780,000 Investcorp units 12 3/4s, 2010 1,762,200
1,270,000 IPCS, Inc. units stepped-coupon zero % (14s 7/15/05),
2010 (STP) 701,675
1,450,000 Maxcom Telecomunicacione units 13 3/4s, 2007 (Mexico) 1,015,000
2,310,000 Ubiquitel Operating Co. units company guaranty
stepped-coupon zero % (14s, 4/15/05), 2010 (STP) 1,270,500
960,000 XCL, Ltd. units 13 1/2s, 2004 172,800
820,000 XM Satellite Radio, Inc. units 14s, 2010 766,700
----------------
Total Units (cost $13,923,875) $ 11,539,100
CONVERTIBLE BONDS AND NOTES (0.4%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$ 3,080,000 Cybernet Internet Services Intl., Inc. 144A cv. sr. disc.
notes stepped-coupon zero % (13s, 8/15/04), 2009 (STP) $ 1,324,400
1,940,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 979,700
800,000 HEALTHSOUTH Corp. cv. sub. deb. 3 1/4s, 2003 618,000
1,000,000 Micron Technology, Inc cv. 6 1/2s, 2005 840,000
680,000 Parker Drilling Corp. cv. sub. notes 5 1/2s, 2004 538,900
----------------
Total Convertible Bonds and Notes (cost $4,838,213) $ 4,301,000
CONVERTIBLE PREFERRED STOCKS (0.4%) (a)
NUMBER OF SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
3,200 Global Crossing Ltd. 6.75% cum cv. pfd. $ 677,400
2,500 Global Crossing, Ltd. 7.00% cum cv. pfd. 424,531
41,120 Global Telesystems Group, Inc. 144A $3.625 cv. pfd. 745,300
1,900 Interact Systems, Inc. 14.00% cv. pfd. 1,900
6,800 LTV Corp. (The) 144A $4.13 cv. pfd. 261,375
57 Paxson Communications Corp. 144A 9.75% cv. pfd. (PIK) 547,200
31,400 PSINet, Inc. 144A $3.50 cv. pfd. 816,400
186 World Access 144A Series D, zero % cv. pfd. 180,420
7,615 XCL, Ltd. 144A 9.50% cv. pfd. (PIK) 3,808
1,503 XCL, Ltd. 144A Ser. A, 9.50% cv. pfd. (PIK) 752
----------------
Total Convertible Preferred Stocks (cost $6,306,209) $ 3,659,086
COMMON STOCKS (0.3%) (a) (NON)
NUMBER OF SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
44,790 360Networks, Inc. 144A (Canada) $ 559,875
525 AmeriKing, Inc. 5,250
277,865 Celcaribe S.A. 34,733
10,934 IFINT Diversified Holdings 144A 21,868
1,887 MGC Communications, Inc. 84,915
466 Mothers Work, Inc. 4,660
250 Paging Do Brazil Holdings Co., LLC 144A Class B, (Brazil) 3
1,186 Premium Holdings 144A 11,857
2,502 PSF Holdings LLC Class A 2,502,480
21,150 Spanish Broadcasting System, Inc. 235,294
36,750 Specialty Foods Acquisition Corp. 368
5,535 Viatel, Inc. 77,144
----------------
Total Common Stocks (cost $10,108,637) $ 3,538,447
WARRAANTS (0.3%) (a) (NON) EXPIRATION
NUMBER OF WARRAANTS DATE VALUE
-------------------------------------------------------------------------------------------------------------------
16 Anker Coal Group, Inc. 144A 10/28/09 $ 1
810 Bestel S.A. de C.V. (Mexico) 5/15/05 97,200
780 Birch Telecommunications, Inc. 144A (PIK) 6/15/08 42,900
1,247 Carrier1 Intl. SA 2/19/09 374,100
6,652 CellNet Data Systems, Inc. 10/1/07 1
60 Decrane Aircraft Holdings 9/30/08 1
2,520 Destia Communications 144A 7/15/07 176,400
1,715 Diva Systems Corp. 5/15/06 1,029,000
6,398 Diva Systems Corp. 3/1/08 89,572
1,090 Epic Resorts 6/15/05 11
950 Equinix, Inc. 12/1/07 66,500
1,190 Firstworld Communication Corp. 4/15/08 23,800
1,015 Globalstar Telecommunications 2/15/04 1,015
20,856 ICG Communications 10/15/05 333,695
1,900 Interact Systems, Inc. 8/1/03 19
1,900 Interact Systems, Inc. 144A 12/15/09 19
1,140 International Wireless Communications
Holdings 144A 8/15/01 1
20,653 Intra Corp. Class A 2/1/10 2
7,097 Intra Corp. Class B 2/1/10 1
2,175 KMC Telecommunications Holdings, Inc. 4/15/08 6,525
2,185 Knology Holdings 10/22/07 13,110
470 Leap Wireless International 144A 4/15/10 1,175
3,590 McCaw International, Ltd. 4/15/07 14,360
940 Mediq, Inc. 144A 6/1/09 9
160 Motient Corp. 144A 4/1/08 6,400
470 Onepoint Communications, Inc. 6/1/08 9,400
990 Orbital Imaging Corp. 144A 3/1/05 19,800
1,310 Orion Network Systems 1/15/07 14,410
12,880 Pagemart, Inc. 144A 12/31/03 141,680
1,570 Pathnet, Inc. 144A 4/15/08 15,700
1,600 Paxson Communications Corp. 144A 6/30/03 3,600
960 R & B Falcon Corp. 144A 5/1/09 384,000
810 Raintree Resort 144A 12/1/04 8
1,640 Startec Global Communications Corp. 5/15/08 5,740
680 Sterling Chemicals Holdings 8/15/08 6,120
630 Telehub Communications Corp. 7/31/05 315
5,820 UIH Australia/Pacific, Inc. 144A 5/15/06 174,600
50 Versatel Telecom N.V. 5/15/08 20,750
454,880 Wright Medical Technology, Inc. 144A 6/30/03 5
----------------
Total Warrants (cost $1,681,541) $ 3,071,945
ASSET-BACKED SECURITIES (0.3%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$ 948,191 Contimortgage Home Equity Loan Trust Ser. 97-1,
Class M2, 7.67s, 2028 $ 468,466
3,289,582 First Plus Ser. 98-A, Class A, 8 1/2s, 2023 2,445,588
----------------
Total Asset-Backed Securities (cost $4,223,683) $ 2,914,054
PURCHASED OPTIONS OUTSTANDING (--%) (a) EXPIRATION DATE/
CONTRACT AMOUNT STRIKE PRICE VALUE
-------------------------------------------------------------------------------------------------------------------
$ 9,954,792 USD/JPY Call Oct-00/110 $ 96,114
10,072,333 USD/JPY Call Oct-00/110 95,687
----------------
Total Purchased Options Outstanding
(cost $186,820) $ 191,801
SHORT-TERM INVESTMENTS (4.6%) (cost $46,785,000) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$ 46,785,000 Interest in $625,000,000 joint repurchase agreement
dated July 31, 2000 with Morgan (J.P.) & Co., Inc.
due August 1, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $46,793,551 for an
effective yield of 6.58% $ 46,785,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,075,984,031) (b) $ 994,546,531
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,013,486,743.
(b) The aggregate identified cost on a tax basis is $1,080,252,081,
resulting in gross unrealized appreciation and depreciation of
$20,229,026 and $105,934,576, respectively, or net unrealized
depreciation of $85,705,550.
(NON) Non-income-producing security.
(STP) The interest or dividend rate and date shown parenthetically
represent the new interest or dividend rate to be paid and the date the
fund will begin receiving interest or dividend income at this rate.
(PIK) Income may be received in cash or additional securities at the
discretion of the issuer.
(SEG) A portion of this security was pledged and segregated with the custodian
to cover margin requirements for futures contracts at July 31, 2000.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
FLIRB represents Front Loaded Interest Reduction Bond.
The rates shown on Floating Rate Bonds (FRB) and Floating Rate
Notes (FRN) are the current interest rates shown at July 31, 2000, which
are subject to change based on the terms of the security.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at July 31, 2000:
(as percentage of Market Value)
Argentina 1.0%
Australia 1.3
Canada 2.0
Denmark 2.1
Germany 1.6
Greece 1.3
Mexico 2.0
Russia 1.4
United Kingdom 2.8
United States 78.6
Other 5.9
----
Total 100.0%
---------------------------------------------------------------------------
Forward Currency Contracts to Buy at July 31, 2000
(aggregate face value $219,831,350)
Aggregate Face Delivery Unrealized
Market Value Value Date Depreciation
---------------------------------------------------------------------------
Australian
Dollar $ 32,704,378 $33,465,363 9/20/00 $ (760,985)
Canadian Dollar 3,248,746 3,267,932 9/20/00 (19,186)
Euro Dollar 104,433,338 107,478,023 9/20/00 (3,044,685)
Japanese Yen 47,930,166 49,736,934 9/20/00 (1,806,768)
Japanese Yen 10,250,179 10,355,795 10/16/00 (105,616)
Swedish Krone 12,686,900 13,049,384 9/20/00 (362,484)
Swiss Franc 2,466,296 2,477,919 9/20/00 (11,623)
---------------------------------------------------------------------------
$(6,111,347)
---------------------------------------------------------------------------
Forward Currency Contracts to Sell at July 31, 2000
(aggregate face value $172,382,768)
Aggregate Face Delivery Unrealized
Market Value Value Date Appreciation
---------------------------------------------------------------------------
British Pounds $28,514,450 $28,967,476 9/20/00 $ 453,026
Canadian Dollar 23,290,991 23,485,917 9/20/00 194,926
Danish Krone 20,423,439 20,812,728 9/20/00 389,289
Euro Dollar 31,488,286 32,276,476 9/20/00 788,190
Japanese Yen 56,826,266 58,961,296 9/20/00 2,135,030
New Zealand
Dollar 7,543,108 7,878,875 9/20/00 335,767
---------------------------------------------------------------------------
$4,296,228
---------------------------------------------------------------------------
Futures Contracts Outstanding at July 31, 2000
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
---------------------------------------------------------------------------
Euro-Bobl 5 Yr
(Short) $1,335,740 $1,328,678 Dec-00 $ (7,062)
Euro-Bobl 5 Yr
(Long) 1,527,597 1,520,102 Sep-00 7,495
Euro-Bund
(Short) 16,013,385 15,758,360 Sep-00 (255,025)
EuroYen 3 Mo
(Long) 9,094,477 9,087,266 Mar-01 7,211
EuroYen 3 Mo
(Short) 9,077,590 9,064,225 Sep-01 (13,365)
Gilt (Short) 3,225,730 3,167,554 Sep-00 (58,176)
US Treasury
Note 10 Yr
(Long) 20,074,797 19,396,063 Sep-00 678,734
US Treasury
Note 5 Yr (Long) 4,067,328 4,057,268 Sep-00 10,060
US Treasury
Note 5 Yr
(Short) 64,085,219 62,597,677 Sep-00 (1,487,542)
US Treasury
Note 5 Yr
(Short) 4,069,250 4,056,303 Dec-00 (12,947)
US Treasury
Bond (Long) 14,591,875 13,920,616 Sep-00 671,259
---------------------------------------------------------------------------
$ (459,358)
---------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,075,984,031) (Note 1) $ 994,546,531
-------------------------------------------------------------------------------------------
Cash 885,667
-------------------------------------------------------------------------------------------
Foreign currency (cost $620,168) 673,284
-------------------------------------------------------------------------------------------
Dividends, interest and other receivables 20,493,958
-------------------------------------------------------------------------------------------
Receivable for securities sold 23,089,829
-------------------------------------------------------------------------------------------
Receivable for variation margin 14,615
-------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 4,296,228
-------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 501,196
-------------------------------------------------------------------------------------------
Total assets 1,044,501,308
Liabilities
-------------------------------------------------------------------------------------------
Distributions payable to shareholders 7,462,770
-------------------------------------------------------------------------------------------
Payable for securities purchased 15,125,079
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,797,873
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 120,700
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 48,745
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,364
-------------------------------------------------------------------------------------------
Payable for open forward currency contracts 6,111,347
-------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 235,299
-------------------------------------------------------------------------------------------
Other accrued expenses 111,388
-------------------------------------------------------------------------------------------
Total liabilities 31,014,565
-------------------------------------------------------------------------------------------
Net assets $1,013,486,743
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,220,796,521
-------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (18,262,657)
-------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (105,359,196)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets and
liabilities in foreign currencies (83,687,925)
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,013,486,743
Computation of net asset value
-------------------------------------------------------------------------------------------
Net asset value per share ($1,013,486,743 divided by
140,989,259 shares) $7.19
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended July 31, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Interest income $ 92,587,114
-------------------------------------------------------------------------------------------
Dividends 4,180,175
-------------------------------------------------------------------------------------------
Total investment income 96,767,289
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 7,245,642
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 953,350
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 37,853
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 16,849
-------------------------------------------------------------------------------------------
Other 406,451
-------------------------------------------------------------------------------------------
Total expenses 8,660,145
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (115,272)
-------------------------------------------------------------------------------------------
Net expenses 8,544,873
-------------------------------------------------------------------------------------------
Net investment income 88,222,416
-------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (28,456,473)
-------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 905,526
-------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (3,996,965)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (3,005,988)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures
contracts and TBA sale commitments during the year (19,560,542)
-------------------------------------------------------------------------------------------
Net loss on investments (54,114,442)
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 34,107,974
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended July 31
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 88,222,416 $ 90,268,650
--------------------------------------------------------------------------------------------------
Net realized loss on investments and
foreign currency transactions (31,547,912) (73,019,543)
--------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and
assets and liabilities in foreign currencies (22,566,530) (66,575,654)
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 34,107,974 (49,326,547)
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income (91,636,916) (86,389,968)
--------------------------------------------------------------------------------------------------
In excess of net investment income (2,963,818) --
--------------------------------------------------------------------------------------------------
From net realized gain on investments -- (17,357,444)
--------------------------------------------------------------------------------------------------
Increase from capital share transactions
from reinvestment of dividends -- 5,865,852
--------------------------------------------------------------------------------------------------
Total decrease in net assets (60,492,760) (147,208,107)
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 1,073,979,503 1,221,187,610
--------------------------------------------------------------------------------------------------
End of year (including distributions in excess
of net investment income of $18,262,657
and $6,283,550, respectively) $1,013,486,743 $1,073,979,503
--------------------------------------------------------------------------------------------------
Number of fund shares
--------------------------------------------------------------------------------------------------
Shares outstanding at beginning of year 140,989,259 140,248,960
--------------------------------------------------------------------------------------------------
Shares issued in connection with reinvestment
of distributions -- 740,299
--------------------------------------------------------------------------------------------------
Shares outstanding at end of year 140,989,259 140,989,259
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended July 31
------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $7.62 $8.71 $8.88 $8.53 $8.46
------------------------------------------------------------------------------------------------
Investment operations
------------------------------------------------------------------------------------------------
Net investment income .63 .64 .74 .65 .64
------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.39) (.99) (.18) .38 .09
------------------------------------------------------------------------------------------------
Total from
investment operations .24 (.35) .56 1.03 .73
------------------------------------------------------------------------------------------------
Less distributions:
------------------------------------------------------------------------------------------------
From net
investment income (.65) (.62) (.66) (.65) (.65)
------------------------------------------------------------------------------------------------
In excess of net
investment income (.02) -- -- (.03) (.01)
------------------------------------------------------------------------------------------------
From net realized gain -- (.12) (.07) -- --
------------------------------------------------------------------------------------------------
Total distributions (.67) (.74) (.73) (.68) (.66)
------------------------------------------------------------------------------------------------
Net asset value,
end of period $7.19 $7.62 $8.71 $8.88 $8.53
------------------------------------------------------------------------------------------------
Ratios and supplemental data
------------------------------------------------------------------------------------------------
Total return at
market value (%)(a) (1.51) (7.24) 8.06 26.24 7.94
------------------------------------------------------------------------------------------------
Market value,
end of period $6.38 $7.19 $8.50 $8.56 $7.38
------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,013,487 $1,073,980 $1,221,188 $1,245,444 $1,199,854
------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .83 .86 .89 .83 .85
------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 8.48 8.05 8.34 7.42 7.43
------------------------------------------------------------------------------------------------
Portfolio turnover (%) 133.80 165.79 209.50 262.01 332.00
------------------------------------------------------------------------------------------------
(a) Total return assumes dividend reinvestment.
(b) Includes amounts paid through expense offset arrangements (Note 2).
</TABLE>
NOTES TO FINANCIAL STATEMENTS
July 31, 2000
Note 1
Significant accounting policies
Putnam Premier Income Trust (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified,
closed-end management investment company. The fund's investment
objective is to seek high current income consistent with the
preservation of capital by allocating its investments among the U.S.
government sector, high yield sector and international sector of the
fixed income securities market.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Securities quoted in
foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market
value. Other investments, including restricted securities, are stated at
fair value following procedures approved by the Trustees. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size
trading units of such securities using methods based on market
transactions for comparable securities and variable relationships
between securities that are generally recognized by institutional
traders.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Gains or losses on securities sold are determined
on the identified cost basis. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date except that
certain dividends from foreign securities are recorded as soon as the
fund is informed of the ex-dividend date. Non cash dividends, if any,
are recorded at the fair market value of the securities received.
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.
Securities purchased or sold on a forward commitment basis may be
settled a month or more after the trade date; interest income is accrued
based on the terms of the security. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty
does not perform under the contract.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such gains and losses are included with the net
realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net realized
exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies and the difference between the amount
of investment income and foreign withholding taxes recorded on the
fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized appreciation and depreciation of assets and
liabilities in foreign currencies arise from changes in the value of
open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange
rate. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political
developments, and currency fluctuations, not present with domestic
investments.
F) 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) 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.
I) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
At July 31, 2000, the fund had a capital loss carryover of approximately
$84,751,000 available to offset future capital gains, if any. The amount
of the carryover and the expiration dates are:
Loss Carryover Expiration
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$39,893,000 July 31, 2007
44,858,000 July 31, 2008
J) 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. These differences include temporary and permanent
differences of losses on wash sale transactions, foreign currency gains
and losses, post-October loss deferrals, dividends payable, defaulted
bond interest, unrealized gains and losses on certain futures contracts,
paydown gains and losses on mortgage-backed securities, market discount,
interest on payment-in-kind securities, foreign market discount reclass
and book accretion adjustment. 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. For
the year ended July 31, 2000, the fund reclassified $5,600,789 to
increase distributions in excess of net investment income and $329,025
to decrease paid-in-capital, with a decrease to accumulated net realized
losses of $5,929,814. The calculation of net investment income per share
in the financial highlights table excludes these adjustments.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average weekly net
assets of the fund. Such fee is based on the following annual rates:
0.75% of the first $500 million of average weekly net assets, 0.65% of
the next $500 million, 0.60% of the next $500 million and 0.55% of any
amount over $1.5 billion.
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 year ended July 31, 2000, fund expenses were reduced by $115,272
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,589
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a 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.
Note 3
Purchases and sales of securities
During the year ended July 31, 2000, cost of purchases and proceeds from
sales of investment securities other than U.S. government obligations
and short-term investments aggregated $904,293,569 and $693,725,384,
respectively. Purchases and sales of U.S. government obligations
aggregated $439,784,125 and $721,321,825, respectively.
Note 4
Share Repurchase Program
The Trustees authorized the fund to repurchase up to 7,000,000 of its
shares in the open market. Repurchases will only be made when the fund's
shares are trading at less than net asset value and at such times and
amounts as is believed to be in the best interest of the fund's
shareholders. Any repurchases of shares will have the effect of
increasing the net asset value per share of remaining shares
outstanding. For the year ended July 31, 2000, the fund did not
repurchase any shares. As of July 31, 2000, 511,000 shares have been
repurchased since the inception of the program.
FEDERAL TAX INFORMATION
(Unaudited)
The fund has designated .70% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
RESULTS OF JUNE 1, 2000 SHAREHOLDER MEETING
(Unaudited)
An annual meeting of shareholders of the fund was held on June 1, 2000.
At the meeting, each of the nominees for Trustees was elected, as
follows:
Votes
Votes for withheld
Jameson Adkins Baxter 127,353,988 3,679,138
Hans H. Estin 127,145,757 3,887,368
John A. Hill 127,379,358 3,653,767
Ronald J. Jackson 127,371,696 3,661,430
Paul L. Joskow 127,376,340 3,656,785
Elizabeth T. Kennan 127,277,900 3,755,225
Lawrence J. Lasser 127,363,658 3,669,467
John H. Mullin III 127,358,699 3,674,426
Robert E. Patterson 127,404,749 3,628,376
George Putnam, III 127,342,171 3,690,954
A.J.C. Smith 127,288,314 3,744,811
W. Thomas Stephens 127,374,776 3,658,349
W. Nicholas Thorndike 127,254,496 3,778,630
A proposal to ratify the selection of KPMG LLP as the independent
auditors of your fund was approved as follows:
128,544,633 votes for, and 1,012,536 votes against, with 1,475,956 abstentions.
All tabulations are rounded to nearest whole number.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
KPMG LLP
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
David L. Waldman
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time, or
visit our Web site (www.putnaminvestments.com) any time for up-to-date
information about the fund's NAV.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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PUTNAM
INVESTMENTS
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For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
63670 073 9/00
