Putnam
Managed
High Yield
Trust
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
1999 has proven to be one of the most challenging years of the decade for
fixed income investments, with every sector feeling the impact. After
beginning calendar 1999 on a very strong note, high-yield bonds
encountered some difficulties before bouncing back toward the end of the
first half of Putnam Managed High Yield Trust's fiscal 2000. A glut of new
issuance, an uptick in defaults, rising interest rates, and concerns about
liquidity at the turn of the year 2000 were the main villains that tripped
up the high-yield market from May through September. However, from that
point the supply of new issues dried up and default activity began to
level off. In addition, investors turned back to high-yield alternatives,
heartened by sustained economic growth and a perception that the Federal
Reserve had halted, at least temporarily, implementing hikes in short-term
interest rates. Worries about Y2K subsided more and more the closer we got
to New Year's Day.
Within this changing climate, Rosemary H. Thomsen and Jennifer E.
Leichter, your fund managers, navigated the fund successfully through the
six months ended November 30, 1999. With a strong economy and increasing
stability in the high-yield market, they are confident that significant
opportunity and values still exist for the taking.
Total return for 6 months ended 11/30/99
Net asset value Market price
- -----------------------------------------------------------------------
0.41% -11.70%
- -----------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 7.
* HIGH-YIELD SECTOR STUMBLES THROUGHOUT SUMMER
The high-yield market's strength in the beginning of 1999 proved to be one
of the main reasons for its struggles this summer. With interest rates in
the high-yield market significantly lower than the highs they had reached
in the midst of 1998's flight to quality, issuers seized the opportunity
to bring new bonds to market -- a supply increase that the market could
not readily absorb. In addition, investors had become somewhat spoiled by
the low level of defaults that has prevailed over the past few years and
were spooked by an increase in defaults over the summer. On top of that,
short-term interest rates were on the rise as the Federal Reserve sought
to snuff any hint of inflation before it emerged. As a result of these
tightenings, most fixed-income sectors, including high-yield issues,
suffered price declines. Finally, Wall Street bond dealers reduced their
inventories of high-yield securities in the summer, because they were
uncertain about how liquid the market would be at year-end.
"Within the context of the high-yield market, Putnam Managed High Yield
Trust had a very good year. Looking ahead, we are optimistic because the
economy continues to demonstrate considerable strength, a positive backdrop
for high-yield securities."
- -- Rosemary Thomsen, manager, Putnam Managed High Yield Trust
Summer also brought with it an interesting paradox. Generally, when the
economy is strong, the default level is especially low. However, this
summer the economy was surging ahead while defaults were on the upswing.
There is no easy explanation for this juxtaposition, but it appears that
banks were less willing to lend after the credit crunch of late 1998. In
addition, defaults historically increase significantly after periods of
heavy issuance. From 1996 to 1998, a substantial amount of new high-yield
bonds hit the market. Perhaps it was not altogether unexpected that there
was an increase in defaults in 1999.
Fortunately, our scrupulous research helped your fund avoid many of the
high-profile defaults that hit the market this summer, including problems
in the paging sector and the default of Iridium, a large satellite project
backed by Motorola. At the same time, your fund did not emerge unscathed,
as it encountered some troubles with its health care holdings in the
nursing home area. This industry was hard hit by sharp reductions in the
Federal government's Medicare spending.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Telecommunications 14.9%
Broadcasting 9.1%
Cable television 6.8%
Wireless
communications 6.4%
Electric utilities 4.0%
Footnote reads:
*Based on net assets as of 11/30/99. Holdings will vary over time.
* TELECOMMUNICATIONS STILL PROVE FERTILE GROUND
As summer turned to fall, high-yield investments were boosted by a sharp
reduction in new issuance and a leveling off of default activity. Your
fund participated in this rebound. In addition, its performance was
particularly bolstered by our emphasis on holdings in the
telecommunications field, an area that performed well throughout the year.
Better-than-expected subscriber growth and substantial consolidation
activity in the wireless industry particularly attracted investors.
Among the stellar performers in this area was Nextel, one of your fund's
core investments. Calendar 1999 proved to be a real breakthrough year for
this company, which formally entered the Standard & Poor's 500 Index in
March. While a potential acquisition by WorldComm in the spring -- which
would have bumped the company's credit rating up to investment grade --
never came to fruition, it highlighted the strategic value of the company.
Nextel's stock price skyrocketed at the same time that the company was
following through with spectacular operating performance. Through all of
these events, the market's perception of Nextel changed from a start-up
company to an entrenched member of the large-cap elite.
* OUTLOOK CONSTRUCTIVE FOR REST OF YEAR
Within the context of the high-yield market, Putnam Managed High Yield
Trust had a very good year. Looking ahead, we are optimistic because the
economy continues to demonstrate considerable strength, a positive
backdrop for high-yield securities. In addition, the strong equity market
has helped a lot of high-yield companies, because they've been able to go
public or pursue other options to help eliminate some debt from their
balance sheets. If default activity stabilizes soon -- and we think it
will -- investors should be able to pick and choose among bonds that offer
particular value.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Midland Funding II Corp.
deb. Ser. A, 11 3/4s, 2005
Electric utilities
NEXTEL Communications, Inc.
144A sr. notes 9 3/8s, 2009
Wireless communications
CSC Holdings, Inc.
Ser. M, $11.125 cumulative preferred
Cable television
Intermedia Communication
Ser. B, 13.50% preferred
Telecommunications
Global Crossing Holdings, Ltd.
company guaranty 9 5/8s, 2008
Telecommunications
Premium Standard Farms, Inc.
sr. sec. notes 11s, 2003
Agriculture
Benedek Communications Corp.
sr. disc. notes stepped-coupon zero %
(13 1/4s, 5/15/01), 2006
Broadcasting
Echostar DBS Corp.
sr. notes 9 3/8s, 2009
Broadcasting
KMC Telecom Holdings, Inc.
sr. disc. notes stepped-coupon zero %
(12 1/2s, 2/15/03), 2008
Telecommunications
Diamond Cable Communication Co.
sr. disc. notes stepped-coupon zero %
(10 3/4s, 2/15/02), 2007
Packaging and containers
Footnote reads:
These holdings represent 9.6% of the fund's net assets as of 11/30/99.
Portfolio holdings will vary over time.
* UPCOMING TRANSITION ANNOUNCED
This is the last letter to you and the other shareholders of Putnam
Managed High Yield Trust that I will be signing. After more than 30 years
as Chairman of the Trustees and President of the Putnam Funds, the time
has come for me to step aside.
In June, John Hill will become Chairman. John is currently an independent
Trustee and has served on the board for the past 14 years. In addition, my
son, George Putnam, III, will become President of the funds. I am
confident that the leadership of the funds will be in exceptionally strong
hands.
I will become Chairman Emeritus, remain a shareholder, and stay in close
touch with each fund. It has been my privilege to serve your fund.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 19, 2000
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 11/30/99, there is no guarantee the fund will
continue to hold these securities in the future. The lower credit ratings
of high-yield corporate bonds reflect a greater possibility that adverse
changes in the economy or their issuers may affect their ability to pay
principal and interest on the bonds.
Performance summary
This section provides information about your fund's performance, which should
always be considered in light of its investment strategy. Putnam Managed High
Yield Trust is designed for investors seeking high current income with a
secondary objective of capital growth.
TOTAL RETURN FOR PERIODS ENDED 11/30/99
First Boston
Market High Yield Consumer
NAV price Bond Index price index
- ----------------------------------------------------------------------------
6 months 0.41% -11.70% -0.70% 1.32%
- ----------------------------------------------------------------------------
1 year 3.37 -14.92 1.81 2.68
- ----------------------------------------------------------------------------
5 years 56.36 61.21 54.17 12.49
Annual average 9.35 10.02 9.04 2.38
- ----------------------------------------------------------------------------
Life of fund (since 6/25/93) 60.11 42.88 61.64 16.62
Annual average 7.60 5.71 7.77 2.42
- ----------------------------------------------------------------------------
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.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 11/30/99
- ------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------
Number 6
- ------------------------------------------------------------------------
Income $0.666
- ------------------------------------------------------------------------
Capital gains --
- ------------------------------------------------------------------------
Total $0.666
- ------------------------------------------------------------------------
Share value NAV Market price
- ------------------------------------------------------------------------
5/31/99 $12.30 $13.500
- ------------------------------------------------------------------------
11/30/99 11.68 11.313
- ------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------
Current dividend rate1 11.40% 11.77%
- ------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by
NAV or market price at end of period.
TOTAL RETURN FOR PERIODS ENDED 12/31/99
Market
NAV price
- -------------------------------------------------------------------------
6 months 1.49% -22.95%
- -------------------------------------------------------------------------
1 year 6.01 -24.29
- -------------------------------------------------------------------------
5 years 57.85 40.30
Annual average 9.56 7.01
- -------------------------------------------------------------------------
Life of fund (since 6/25/93) 62.77 26.86
Annual average 7.76 3.72
- -------------------------------------------------------------------------
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 common 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 Bond Index is an unmanaged list of lower-rated,
high-yielding U.S. corporate bonds. The index assumes reinvestment of all
distributions, does not take into account brokerage commissions or other
costs, and may pose different risks than the fund. Securities in the
fund's portfolio will differ from those in the index. It is not possible
to invest directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
<TABLE>
<CAPTION>
The fund's portfolio
November 30, 1999 (Unaudited)
CORPORATE BONDS AND NOTES (84.7%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C>
Advertising (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
$ 190,000 Adams Outdoor Advertising sr. notes 10 3/4s, 2006 $ 198,550
447,000 Lamar Media Corp. sr. sub. notes 9 1/4s, 2007 440,854
240,000 Lamar Media Corp. company guaranty 8 5/8s, 2007 234,900
--------------
874,304
Aerospace and Defense (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
110,000 Argo-Tech Corp. company guaranty 8 5/8s, 2007 93,500
120,000 Argo-Tech Corp. 144A company guaranty Ser. D, 8 5/8s, 2007 102,000
80,000 BE Aerospace, Inc. sr. sub. notes 9 1/2s, 2008 71,600
465,000 BE Aerospace, Inc. sr. sub. notes Ser. B, 8s, 2008 383,625
50,000 K&F Industries, Inc. sr. sub. notes Ser. B, 9 1/4s, 2007 47,750
130,000 L-3 Communications Corp. sr. sub. notes Ser. B, 10 3/8s, 2007 133,900
100,000 L-3 Communications Corp. sr. sub. notes 8 1/2s, 2008 94,250
80,000 L-3 Communications Corp. company guaranty Ser. B, 8s, 2008 72,800
200,000 Sequa Corp. med. term notes 10s, 2001 204,514
--------------
1,203,939
Agriculture (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
744,115 Premium Standard Farms, Inc. sr. sec. notes 11s, 2003 (PIK) 684,586
Airlines (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
230,000 Airbus Industries 144A 12.266s, 2020 234,322
160,000 Calair LLC 144A company guaranty 8 1/8s, 2008 147,800
280,000 Canadian Airlines Corp. secd. notes 10s, 2005 (Canada) 204,400
250,000 Continental Airlines, Inc. sr. notes 9 1/2s, 2001 252,500
300,000 Trans World Airlines, Inc. sr. notes 11 1/2s, 2004 198,000
170,000 Trans World Airlines, Inc. sr. notes 11 3/8s, 2006 71,400
--------------
1,108,422
Apparel (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
190,000 Fruit of the Loom 144A company guaranty 8 7/8s, 2006 22,800
90,000 GFSI, Inc. sr. disc. notes stepped-coupon Ser. B, zero %
(11 3/8s, 9/15/04), 2009 (STP) 36,000
250,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 253,125
60,000 Iron Age Corp. company guaranty 9 7/8s, 2008 45,000
235,000 Kasper A.S.L. Ltd. sr. notes 12 3/4s, 2004 196,225
135,000 William Carter Holdings Co. sr. sub. notes Ser. A, 12s, 2008 132,300
95,000 William Carter Holdings Co. sr. sub. notes Ser. A, 10 3/8s, 2006 81,700
--------------
767,150
Automotive (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
375,000 Aftermarket Technology Corp. sr. sub. notes Ser. D, 12s, 2004 375,000
170,000 Dura Operating Corp. company guaranty Ser. B, 9s, 2009 159,800
350,000 Federal Mogul Corp. notes 7 1/2s, 2009 312,760
260,000 Hayes Lemmerz International, Inc. company guaranty Ser. B,
8 1/4s, 2008 238,550
140,000 Motors and Gears, Inc. sr. notes Ser. D, 10 3/4s, 2006 130,200
30,000 San Luis Corp. S.A 8 7/8s, 2008 26,400
500,000 Talon Automotive Group sr. sub. notes Ser. B, 9 5/8s, 2008 310,000
110,000 Transportation Manufacturing Operations Inc.
company guaranty 11 1/4s, 2009 112,200
--------------
1,664,910
Banks (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
15,000 Dime Capital Trust I bank guaranty Ser. A, 9.33s, 2027 14,606
75,000 Ocwen Capital Trust I company guaranty 10 7/8s, 2027 46,500
165,000 Ocwen Federal Bank FSB sub. deb. 12s, 2005 155,100
100,000 Ocwen Financial Corp. notes 11 7/8s, 2003 92,250
150,000 Provident Capital Trust company guaranty 8.6s, 2026 139,017
85,000 Riggs Capital Trust 144A bonds 8 5/8s, 2026 77,087
150,000 Sovereign Bancorp Inc. sr. notes 10 1/2s, 2006 151,313
125,000 Sovereign Capital Trust company guaranty 9s, 2027 91,920
110,000 Webster Capital Trust I 144A bonds 9.36s, 2027 103,352
--------------
871,145
Broadcasting (7.1%)
- --------------------------------------------------------------------------------------------------------------------------
170,000 Ackerly Group, Inc. sr. sub. notes Ser. B, 9s, 2009 164,475
270,000 Acme Television sr. disc. notes stepped-coupon zero %
(10 7/8s, 9/30/00), 2004 (STP) 240,300
440,000 Allbritton Communications Co. sr. sub. notes Ser. B, 8 7/8s, 2008 422,400
206,700 AMFM Operating, Inc. deb. 12 5/8s, 2006 (PIK) 234,605
9,407 Australis Media, Ltd. sr. disc. notes stepped-coupon zero %
(15 3/4s 5/15/00), 2003 (Australia) (In default) (STP) (PIK) (NON) 1
750,000 Benedek Communications Corp. sr. disc. notes stepped-coupon
zero % (13 1/4s, 5/15/01), 2006 (STP) 671,250
435,000 Capstar Broadcasting sr. disc. notes stepped-coupon zero %
(12 3/4s, 2/1/02), 2009 (STP) 382,800
330,000 Capstar Broadcasting sr. sub. notes 9 1/4s, 2007 336,600
220,000 CD Radio, Inc. sec. notes 14 1/2s, 2009 192,500
30,000 Citadel Broadcasting, Inc. company guaranty 9 1/4s, 2008 30,000
160,000 Citadel Broadcasting, Inc. sr. sub. notes 10 1/4s, 2007 168,000
620,000 Diva Systems Corp. sr. disc. notes, stepped-coupon Ser. B,
zero % (12 5/8s, 3/1/03), 2008 (STP) 161,200
660,000 Echostar DBS Corp. sr. notes 9 3/8s, 2009 663,300
245,000 Fox Family Worldwide, Inc. sr. notes 9 1/4s, 2007 225,400
210,000 Globo Communicacoes 144A company guaranty 10 1/2s,
2006 (Brazil) 174,300
160,000 Granite Broadcasting Corp. sr. sub. notes 8 7/8s, 2008 153,600
60,000 Pegasus Communications Corp. sr. notes Ser. B, 9 3/4s, 2006 59,100
100,000 Pegasus Media & Communications notes Ser. B, 12 1/2s, 2005 108,500
654,000 PHI Holdings, Inc. sr. sub. notes 16%, 2001 555,965
500,000 RBS Participacoes S.A. 144A company guaranty 11s,
2007 (Brazil) 400,000
225,000 Radio One Inc. company guaranty stepped-coupon Ser. B, 7s,
(12s, 5/15/00), 2004 (STP) 236,813
160,000 SFX Entertainment Inc. company guaranty 9 1/8s, 2008 150,400
270,000 Spanish Broadcasting Systems sr. sub notes 9 5/8s, 2009 270,675
100,000 TV Azteca Holdings S.A. de C.V. sr. notes 11s, 2002 (Mexico) 86,250
50,000 TV Azteca S.A. de C.V. sr. notes 10 1/2s, 2007 (Mexico) 40,750
80,000 TV Azteca S.A. de C.V. sr. notes Ser. A, 10 1/8s, 2004 (Mexico) 69,200
--------------
6,198,384
Building and Construction (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
110,000 American Architectural Products Corp. company guaranty
11 3/4s, 2007 34,100
250,000 American Standard Companies, Inc. sr. notes 7 3/8s, 2008 230,000
70,000 Atrium Companies Inc. company guaranty Ser. B, 10 1/2s, 2009 67,725
170,000 Building Materials Corp. company guaranty 8s, 2008 155,550
320,000 D.R. Horton, Inc. company guaranty 8s, 2009 294,400
390,000 GS Superhighway Holdings sr. notes 9 7/8s, 2004 (China) 206,700
120,000 NCI Building Systems Inc. sr. sub. notes Ser. B, 9 1/4s, 2009 110,400
80,000 Republic Group, Inc. sr. sub. notes 9 1/2s, 2008 75,200
160,000 Toll Corp. company guaranty 8 1/8s, 2009 147,200
--------------
1,321,275
Business Equipment and Services (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
50,000 Iron Mountain, Inc. company guaranty 8 3/4s, 2009 47,250
100,000 Outsourcing Solutions, Inc. sr. sub. notes Ser. B, 11s, 2006 99,000
240,000 U.S. Office Products Co. company guaranty 9 3/4s, 2008 129,600
--------------
275,850
Cable Television (5.7%)
- --------------------------------------------------------------------------------------------------------------------------
385,000 21st Century Telecom Group, Inc. sr. disc. notes
stepped-coupon zero % (12 1/4s, 2/15/03), 2008 (STP) 177,100
95,831 Adelphia Communications Corp. sr. notes 9 1/2s, 2004 (PIK) 96,071
220,000 Adelphia Communications Corp.144A sr. notes Ser. B,
8 3/8s, 2008 207,350
210,000 Adelphia Communications Corp. sr. notes 7 7/8s, 2009 191,100
300,000 Century Communications Corp. sr. notes 8 7/8s, 2007 290,250
470,000 Charter Communications Holdings LLC sr. disc. notes
stepped-coupon zero % (9.92s, 4/1/04), 2011 (STP) 284,350
380,000 Charter Communications Holdings LLC 144A sr. notes
8 5/8s, 2009 359,100
50,000 CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2013 52,125
70,000 CSC Holdings, Inc. deb. 7 7/8s, 2018 66,287
160,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (11 3/4s, 12/15/00),
2005 (United Kingdom) (STP) 148,800
795,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (10 3/4s, 2/15/02),
2007 (United Kingdom) (STP) 636,000
520,000 Knology Holdings, Inc. sr. disc. notes stepped-coupon zero %,
(11 7/8s, 10/15/02), 2007 (STP) 322,400
500,000 Lenfest Communications, Inc. sr. sub. notes 10 1/2s, 2006 565,000
190,000 NTL Communications Corp. sr. notes Ser. B, 11 1/2s,
2008 (United Kingdom) 206,150
430,000 NTL Inc. sr. notes Ser. B, 10s, 2007 (United Kingdom) 439,675
100,000 Onepoint Communications, Inc 144A company guaranty
Ser. B, 14 1/2s, 2008 65,000
60,000 RCN Corp. sr. disc. notes stepped-coupon zero %,
(11 1/8s, 10/15/02), 2007 (STP) 42,600
190,000 Supercanal Holdings S.A. 144A sr. notes 11 1/2s,
2005 (Argentina) (In default) (NON) 97,850
40,000 TeleWest Communications PLC 144A 11 1/4s, 2008 43,600
220,000 TeleWest Communications PLC 144A sr. disc. notes
stepped-coupon zero %, 2009 (9 1/4, 4/15/04)
(United Kingdom) (STP) 136,950
550,000 United Pan-Europe N.V. 144A stepped-coupon zero %
(12 1/2s, 2004), 2009 (Netherlands) (STP) 316,250
210,000 United Pan-Europe N.V. 144A 10 7/8s, 2009 (Netherlands) 215,250
--------------
4,959,258
Chemicals (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
150,000 Geo Specialty Chemicals, Inc. sr. sub. notes 10 1/8s, 2008 139,500
120,000 Huntsman Corp. 144A sr. sub. notes 9 1/2s, 2007 111,300
470,000 Huntsman ICI Chemicals Inc. 144A sr. sub. notes 10 1/8s, 2009 486,450
210,000 Lyondell Petrochemical Co. sr. sub. notes 10 7/8s, 2009 217,875
590,000 Lyondell Petrochemical Co. sec. notes Ser. B, 9 7/8s, 2007 606,225
200,000 PCI Chemicals & Pharmaceuticals company guaranty
9 1/4s, 2007 (India) 156,000
250,000 Pioneer Americas Acquisition 144A sr. notes 9 1/4s, 2007 195,000
160,000 Royster-Clark Inc. 144A 1st mtge 10 1/4s, 2009 140,800
210,000 Scotts Co 144A sr. sub. notes 8 5/8s, 2009 203,700
110,000 Sterling Chemicals Inc. company guaranty Ser. B, 12 3/8s, 2006 111,650
--------------
2,368,500
Computer Services and Software (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
70,000 Concentric Network Corp. sr. notes 12 3/4s, 2007 72,800
150,000 Cybernet Internet Services Intl., Inc. 144A sr. notes 14s, 2009 130,500
50,000 Exodus Communications, Inc. 144A sr. notes 11 1/4s, 2008 51,000
200,000 PSINet, Inc. sr. notes 11 1/2s, 2008 208,000
250,000 PSINet, Inc. sr. notes 11s, 2009 255,625
120,000 PSINet, Inc. 144A sr. notes 10 1/2s, 2006 121,050
300,000 Telecommunications Techniques, Inc. company guaranty
9 3/4s, 2008 270,000
90,000 Telehub Communications Corp. company guaranty
stepped-coupon zero % (13 7/8s, 7/31/02), 2005 (STP) 11,700
140,000 Unisys Corp. sr. notes Ser. B, 12s, 2003 149,450
285,000 Unisys Corp. sr. notes 11 3/4s, 2004 314,213
110,000 Verio Inc. sr. notes 11 1/4s, 2008 114,950
80,000 Verio Inc. sr. notes 10 3/8s, 2005 81,000
--------------
1,780,288
Conglomerates (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
250,000 Axia, Inc. company guaranty 10 3/4s, 2008 227,500
350,000 Cathay International Ltd. 144A sr. notes 13s, 2008 (China) 175,000
--------------
402,500
Consumer Durable Goods (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
190,000 Albecca Inc. company guaranty 10 3/4s, 2008 144,875
220,000 Decora Industries, Inc. sr. sec. notes Ser. B, 11s, 2005 187,000
550,000 Samsonite Corp. sr. sub. notes 10 3/4s, 2008 467,500
170,000 Sealy Mattress Co. company guaranty stepped-coupon Ser. B,
zero % (10 7/8s, 12/15/02), 2007 (STP) 119,850
--------------
919,225
Consumer Services (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
500,000 Coinmach Corp. sr. notes Ser. D, 11 3/4s, 2005 517,500
50,000 Protection One, Inc. company guaranty 7 3/8s, 2005 37,500
--------------
555,000
Cosmetics (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
150,000 French Fragrances, Inc. company guaranty Ser. D, 10 3/8s, 2007 138,750
120,000 Revlon Consumer Products sr. notes 9s, 2006 94,800
250,000 Revlon Consumer Products sr. notes 8 1/8s, 2006 195,625
--------------
429,175
Electric Utilities (4.0%)
- --------------------------------------------------------------------------------------------------------------------------
300,000 Calpine Corp. sr. notes 9 1/4s, 2004 303,000
360,000 CMS Energy Corp. sr. notes Ser. B, 6 3/4s, 2004 341,647
1,600,000 Midland Funding II Corp. deb. Ser. A, 11 3/4s, 2005 1,748,944
470,422 Northeast Utilities System notes Ser. A, 8.58s, 2006 472,294
545,000 Panda Global Energy Co. company guaranty 12 1/2s,
2004 (China) 327,000
310,000 York Power Funding 144A notes 12s, 2007 (Cayman Islands) 319,300
--------------
3,512,185
Electronics (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
160,000 DII Group, Inc. (The) sr. sub. notes 8 1/2s, 2007 155,200
355,000 Viasystems, Inc. sr. sub notes 9 3/4s, 2007 205,900
55,000 Wavetek Corp. company guaranty 10 1/8s, 2007 45,100
--------------
406,200
Entertainment (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
40,000 Premier Parks, Inc.144A sr. disc. notes stepped-coupon zero %,
(10s, 4/1/03), 2008 (STP) 27,200
120,000 Premier Parks, Inc. sr. notes 9 3/4s, 2007 118,950
165,000 SFX Entertainment, Inc. 144A company guaranty Ser. B,
9 1/8s, 2008 155,513
250,000 Six Flags Corp. sr. notes 8 7/8s, 2006 245,000
--------------
546,663
Environmental Control (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
605,000 Allied Waste Industries, Inc. 144A sr. sub. notes 10s, 2009 552,819
510,000 Allied Waste Industries, Inc. company guaranty Ser. B,
7 7/8s, 2009 452,625
--------------
1,005,444
Financial Services (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
345,000 Aames Financial Corp. sr. notes 9 1/8s, 2003 219,938
100,000 Advanta Corp. med. term notes Ser. B, 7s, 2001 93,666
340,000 Advanta Corp. med-term notes Ser. D, 6.92s, 2002 309,784
100,000 AMRESCO, Inc. sr. sub. notes Ser. 98-A, 9 7/8s, 2005 55,500
140,000 Capital One Financial Corp. notes 7 1/8s, 2008 129,746
250,000 Colonial Capital II 144A company guaranty 8.92s, 2027 226,079
260,000 Contifinancial Corp. sr. notes 8 3/8s, 2003 33,800
220,000 Contifinancial Corp. sr. notes 8 1/8s, 2008 28,600
180,000 Contifinancial Corp. sr. notes 7 1/2s, 2002 18,000
320,000 Delta Financial Corp. sr. notes 9 1/2s, 2004 230,400
155,000 Imperial Credit Capital Trust I 144A company guaranty
10 1/4s, 2002 120,900
175,000 Investors Capital Trust I company guaranty Ser. B, 9.77s, 2027 170,844
90,000 Nationwide Credit Inc. sr. notes Ser. A, 10 1/4s, 2008 51,300
350,000 Resource America Inc. 144A sr. notes 12s, 2004 290,500
--------------
1,979,057
Food and Beverages (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
100,000 Ameriserve Food Co. company guaranty 10 1/8s, 2007 32,000
210,000 Ameriserve Food Distribution Inc. 144A sec. notes 12s, 2006 168,000
50,000 Aurora Foods, Inc. sr. sub. notes Ser. B, 9 7/8s, 2007 50,875
250,000 Aurora Foods, Inc. 144A ser. sub. notes Ser. D, 9 7/8s, 2007 254,375
300,000 Eagle Family Foods company guaranty Ser. B, 8 3/4s, 2008 240,000
340,000 NBTY Inc. 144A sr. sub. notes 8 5/8s, 2007 307,700
320,000 RAB Enterprises, Inc. company guaranty 10 1/2s, 2005 224,000
105,000 Doane Pet Care Co. sr. sub. notes 9 3/4s, 2007 100,800
180,000 Triarc Consumer Products, Inc. 144A sr. sub. notes 10 1/4s, 2009 174,150
--------------
1,551,900
Gaming (3.0%)
- --------------------------------------------------------------------------------------------------------------------------
210,000 Argosy Gaming Co. company guaranty 10 3/4s, 2009 221,025
210,000 Boyd Gaming Corp. sr. sub. notes 9 1/2s, 2007 206,850
50,000 Circus Circus Enterprises, Inc. deb. 7s, 2036 43,733
100,000 Circus Circus Enterprises, Inc. sr. notes 6.45s, 2006 88,282
380,000 Fitzgeralds Gaming Corp. company guaranty Ser. B,
12 1/4s, 2004 205,200
340,000 Hollywood Casino Corp. company guaranty 11 1/4s, 2007 350,200
130,000 Hollywood Park, Inc. company guaranty Ser. B, 9 1/4s, 2007 127,725
150,000 Horseshoe Gaming Holdings company guaranty 8 5/8s, 2009 143,250
120,000 Isle of Capri Black Hawk LLC 144A 1st mortgage Ser. B,
13s, 2004 130,200
200,000 Mohegan Tribal Gaming, Auth. sr. sub. notes 8 3/4s, 2009 197,000
180,000 Park Place Entertainment sr. notes 8 1/2s, 2006 177,550
110,000 Riviera Black Hawk 144A 1st mtge. 13s, 2005 115,500
190,000 Trump A.C. 1st mtge. 11 1/4s, 2006 154,850
430,000 Trump Castle Funding 144A sub. notes 10 1/4s, 2003 435,409
--------------
2,596,774
Health Care (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
60,000 Columbia/HCA Healthcare Corp. deb. 8.36s, 2024 55,500
70,000 Columbia/HCA Healthcare Corp. med. term notes
notes 7.69s, 2025 56,263
40,000 Columbia/HCA Healthcare Corp. notes 7 1/4s, 2008 34,500
290,000 Columbia/HCA Healthcare Corp. med. term notes 6.63s, 2045 275,033
300,000 Conmed Corp. company guaranty 9s, 2008 273,000
220,000 Hudson Respiratory Care, Inc. sr. sub. notes 9 1/8s, 2008 172,150
180,000 Integrated Health Services, Inc. sr. sub. notes Ser. A, 9 1/2s, 2007 16,200
110,000 Integrated Health Services, Inc. sr. sub. notes Ser. A, 9 1/4s, 2008 9,900
80,000 Lifepoint Hospital Holdings 144A sr. sub. notes 10 3/4s, 2009 82,800
480,000 Mariner Post-Acute Network, Inc. sr. sub. notes Ser. B,
9 1/2s, 2007 14,400
100,000 Mariner Post-Acute Network, Inc. sr. sub. notes stepped-coupon
Ser. B, zero % (10 1/2s, 11/1/02), 2007 (STP) 2,000
130,000 MedPartners, Inc. sr. sub. notes 6 7/8s, 2000 125,450
310,000 Paracelsus Healthcare sr. sub. notes 10s, 2006 163,525
120,000 Paragon Corp. Holdings, Inc. company guaranty Ser. B,
9 5/8s, 2008 42,000
305,000 Sun Healthcare Group, Inc. sr. sub. notes Ser. B, 9 1/2s,
2007 (In default) (NON) 38,125
60,000 Sun Healthcare Group, Inc. 144A sr. sub. notes 9 3/8s,
2008 (In default) (NON) 7,500
200,000 Tenet Healthcare Corp. sr. notes 8 5/8s, 2003 198,000
150,000 Tenet Healthcare Corp. sr. notes 8s, 2005 143,625
140,000 Triad Hospitals Holdings 144A sr. sub. notes 11s, 2009 144,900
--------------
1,854,871
Lodging (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
150,000 Epic Resorts LLC company guaranty Ser. B, 13s, 2005 115,500
460,000 HMH Properties, Inc. company guaranty Ser. B, 7 7/8s, 2008 418,600
50,000 Host Marriott L.P. sr. notes Ser. E, 8 3/8s, 2006 47,500
370,000 ITT Corp. notes 6 3/4s, 2005 331,176
--------------
912,776
Manufacturing (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
90,000 Applied Power Inc. sr. sub. notes 8 3/4s, 2009 87,300
500,000 Blount Inc. 144A sr. sub. notes 13s, 2009 523,750
180,000 Insilco Holding Co. sr. disc. notes stepped-coupon zero %
(14s, 8/15/03), 2008 (STP) 86,400
--------------
697,450
Medical Supplies and Devices (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
250,000 ALARIS Medical Systems, Inc. company guaranty 9 3/4s, 2006 205,000
190,000 Dade International, Inc. sr. sub. notes Ser. B, 11 1/8s, 2006 192,850
170,000 Mediq, Inc. company guaranty 11s, 2008 56,100
180,000 Mediq, Inc. deb. stepped-coupon zero % (13s, 6/1/03), 2009 (STP) 18,000
--------------
471,950
Metals and Mining (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
300,000 Ameristeel Corp. company guaranty Ser. B, 8 3/4s, 2008 294,000
370,000 Better Minerals & Aggregates Co. 144A sr. sub. notes 13s, 2009 365,375
170,000 Continental Global Group sr. notes Ser. B, 11s, 2007 81,600
310,000 Lodestar Holdings, Inc. company guaranty 11 1/2s, 2005 170,500
250,000 UCAR Global Enterprises sr. sub. notes Ser. B, 12s, 2005 260,000
110,000 Weirton Steel Co. sr. notes 11 3/8s, 2004 98,725
120,000 WHX Corp. sr. notes 10 1/2s, 2005 112,800
--------------
1,383,000
Motion Picture Distribution (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
230,000 AMC Entertainment, Inc. sr. sub. notes 9 1/2s, 2009 213,325
150,000 Cinemark USA, Inc. sr. sub. notes 8 1/2s, 2008 (Mexico) 130,500
330,000 United Artists Theatre sr. sub. notes 9 3/4s, 2008 66,413
--------------
410,238
Oil and Gas (2.4%)
- --------------------------------------------------------------------------------------------------------------------------
170,000 Belco Oil & Gas Corp. company guaranty Ser. B, 10 1/2s, 2006 174,250
30,000 Benton Oil & Gas Co. sr. notes 9 3/8s, 2007 19,500
80,000 Flores & Rucks, Inc. sr. sub. notes 9 3/4s, 2006 87,200
140,000 Gulf Canada Resources, Ltd. sr. notes 8 3/8s, 2005 (Canada) 136,217
160,000 HS Resources, Inc. sr. sub. notes Ser. B, 9 1/4s, 2006 156,800
315,000 Leviathan Gas Corp. company guaranty Ser. B, 10 3/8s, 2009 327,600
200,000 Ocean Energy, Inc. company guaranty Ser. B, 8 3/8s, 2008 196,000
160,000 Ocean Energy, Inc. company guaranty Ser. B, 8 7/8s, 2007 161,600
190,000 R&B Falcon Corp. sr. notes 12 1/4s, 2006 207,100
300,000 R&B Falcon Corp. sr. notes Ser. B, 7 3/8s, 2018 240,000
130,000 RAM Energy Inc. sr. notes 11 1/2s, 2008 57,200
30,000 RBF Finance Co. company guaranty 11s, 2006 32,100
330,000 Vintage Petroleum sr. sub. notes 9 3/4s, 2009 339,900
--------------
2,135,467
Packaging and Containers (2.9%)
- --------------------------------------------------------------------------------------------------------------------------
240,000 AEP Industries, Inc. sr. sub. notes 9 7/8s, 2007 231,600
320,000 Consumers International 144A sr. notes 10 1/4s, 2005 249,600
185,000 Huntsman Packaging Corp. company guaranty 9 1/8s, 2007 175,750
250,000 Impac Group Inc. company guaranty Ser. B, 10 1/8s, 2008 227,500
80,000 Kappa Beheer BV. 144A company guaranty 10 5/8s,
2009 (New Zealand) 83,200
250,000 Owens-Illinois, Inc. sr. notes 8.1s, 2007 239,483
50,000 Owens-Illinois, Inc. deb. 7.8s, 2018 43,615
30,000 Owens-Illinois, Inc. sr. notes 7.35s, 2008 26,977
200,000 Packaging Corp. company guaranty 9 5/8s, 2009 206,500
605,000 Radnor Holdings Inc. sr. notes 10s, 2003 605,000
190,000 Riverwood International Corp. company guaranty
10 5/8s, 2007 195,700
245,000 Riverwood International Corp. company guaranty
10 1/4s, 2006 249,900
--------------
2,534,825
Paper and Forest Products (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
300,000 APP Finance II Mauritius Ltd. bonds stepped-coupon 12s,
(16s, 2/15/04), 2049 (Indonesia) (STP) 186,000
20,000 Boise Cascade Co. med. term notes Ser. A, 7.43s, 2005 19,213
150,000 Doman Industries Ltd. company guaranty 12s, 2004 (Canada) 156,375
105,000 Indah Kiat Financial Mauritius Ltd. company guaranty 10s,
2007 (Indonesia) 74,681
230,000 Pacifica Papers, Inc. sr. notes 10s, 2009 (Canada) 236,900
315,000 Pindo Deli Finance Mauritius Ltd. company guaranty 10 3/4s,
2007 (Indonesia) 225,225
412,000 Repap New Brunswick sr. notes 10 5/8s, 2005 (Canada) 379,040
120,000 Tembec Industries, Inc. company guaranty 8 5/8s, 2009 (Canada) 121,200
--------------
1,398,634
Pharmaceuticals (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
320,000 ICN Pharmaceuticals, Inc. 144A sr. notes 9 1/4s, 2005 307,200
40,000 ICN Pharmaceuticals, Inc. 144A sr. notes 8 3/4s, 2008 37,300
--------------
344,500
Photography (--%)
- --------------------------------------------------------------------------------------------------------------------------
70,000 PX Escrow Corp. sr. disc. notes stepped-coupon zero %
(9 5/8s, 2/1/02), 2006 (STP) 33,600
Publishing (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
300,000 Affinity Group Holdings sr. notes 11s, 2007 279,000
120,000 American Media Operation, Inc. sr. sub. notes 10 1/4s, 2009 118,800
110,000 Perry-Judd company guaranty 10 5/8s, 2007 99,000
70,025 Von Hoffman Press, Inc. 144A sr. sub. notes 13 1/2s, 2009 63,723
--------------
560,523
Railroads (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
35,000 MRS Logistica, S.A. bonds Ser. B, 10 5/8s, 2005 (Brazil) 27,650
320,000 TFM S.A. de C.V. company guaranty stepped-coupon
zero %, (11 3/4s, 6/15/02), 2009 (Mexico) (STP) 201,600
--------------
229,250
REITs (Real Estate Investment Trust) (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
370,000 Tanger Properties Ltd. partnership gtd. notes 8 3/4s, 2001 366,907
Restaurants (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
250,000 FRD Acquisition Co. sr. notes Ser. B, 12 1/2s, 2004 170,000
Retail (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
240,000 Home Interiors & Gifts, Inc. company guaranty 10 1/8s, 2008 201,600
600,000 Mothers Work, Inc. sr. notes 12 5/8s, 2005 600,000
500,000 Southland Corp. deb. Ser. A, 4 1/2s, 2004 411,250
--------------
1,212,850
Satellite Services (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
140,000 Golden Sky Systems company guaranty Ser. B, 12 3/8s, 2006 144,200
265,000 Innova S De R.L. sr. notes 12 7/8s, 2007 (Mexico) 228,566
--------------
372,766
Semiconductors (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
250,000 Amkor Technologies, Inc. 144A sr. notes 9 1/4s, 2006 241,250
190,000 Fairchild Semiconductor Corp. company guaranty 10 3/8s, 2007 186,200
170,000 Zilog, Inc. company guaranty Ser. B, 9 1/2s, 2005 156,825
--------------
584,275
Steel (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
490,000 AK Steel Corp. company guaranty 7 7/8s, 2009 459,375
80,000 Armco, Inc. sr. notes 8 7/8s, 2008 80,600
250,000 LTV Corp. sr. notes 11 3/4s, 2009 257,500
150,000 National Steel Corp. 1st mtge. Ser. D, 9 7/8s, 2009 152,625
--------------
950,100
Telecommunications (12.7%)
- --------------------------------------------------------------------------------------------------------------------------
500,000 Barak I.T.C. sr. disc. notes stepped-coupon Ser. B, zero %
(12 1/2s, 11/15/02), 2007 (Israel) (STP) 270,000
170,000 Bestel S.A.de C.V. sr. disc. notes stepped-coupon zero %
(12 3/4s, 5/15/03), 2005 (Mexico) (STP) 107,100
100,000 Birch Telecommunications, Inc. sr. notes 14s, 2008 101,000
100,000 CapRock Communications Corp. sr. notes 11 1/2s, 2009 101,000
70,000 CapRock Communications Corp. sr. notes Ser. B, 12s, 2008 71,750
240,000 Carrier1 Intl. S.A. sr. notes Ser. B, 13 1/4s, 2009 (Luxembourg) 255,600
200,000 Colt Telecommunications Group PLC sr. disc. notes
stepped-coupon zero %, (12s, 12/15/01), 2006
(United Kingdom) (STP) 172,000
110,000 Covad Communications Group Inc. sr. notes 12 1/2s, 2009 113,300
640,000 Covad Communications Group, Inc. sr. disc. notes
stepped-coupon Ser. B, zero % (13 1/2s, 3/15/03), 2008 (STP) 396,800
130,000 DTI Holdings Inc. sr. disc. notes, stepped-coupon Ser. B, zero %
(12 1/2s, 3/01/03), 2008 (STP) 48,750
500,000 Econophone, Inc. 144A notes stepped-coupon zero %
(11s, 2/15/03), 2008 (STP) 340,000
170,000 Esprit Teleom Group PLC sr. notes 11 1/2s,
2007 (United Kingdom) 170,850
690,000 Firstworld Communication Corp. sr. disc. notes stepped-coupon
zero % (13, 4/15/03), 2008 (STP) 372,600
800,000 Focal Communications Corp. sr. disc. notes, stepped-coupon
Ser. B, zero % (12 1/8s, 02/15/03), 2008 (STP) 480,000
690,000 Global Crossing Holdings, Ltd. company guaranty 9 5/8s, 2008 690,000
90,000 Globe Telecom Corp. sr. notes 144A 13s, 2009 96,300
670,000 GST Telecommunications, Inc. company guaranty
stepped-coupon zero % (13 7/8s, 12/15/00), 2005 (STP) 495,800
140,000 Hyperion Telecommunications Corp., Inc. sr. disc. notes
stepped-coupon Ser. B, zero % (13s, 4/15/01), 2003 (STP) 123,200
220,000 Hyperion Telecommunications Corp., Inc. sr. notes Ser. B,
12 1/4s, 2004 234,850
160,000 Hyperion Telecommunications Inc. sr. sub. notes 12s, 2007 167,200
300,000 ICG Holdings, Inc. sr. disc. notes stepped-coupon zero %
(13 1/2s, 9/15/00), 2005 (Canada) (STP) 260,250
1,180,000 ICG Services, Inc. sr. disc. notes stepped-coupon zero %
(9 7/8s, 5/1/03), 2008 (STP) 590,000
150,000 Intermedia Communications, Inc. sr. notes Ser. B, 8.6s, 2008 136,500
180,000 Intermedia Communications, Inc. sr. notes Ser. B, 8 1/2s, 2008 162,900
440,000 IPC Information Systems Inc. sr. disc. notes zero %
(10 7/8s,), 2008 (STP) 321,200
1,260,000 KMC Telecom Holdings, Inc. sr. disc. notes stepped-coupon
zero % (12 1/2s, 2/15/03), 2008 (STP) 661,500
200,000 Logix Communications Enterprises sr. notes 12 1/4s, 2008 150,000
50,000 Metromedia Fiber Network, Inc. sr. notes 10s, 2009 50,500
360,000 Metromedia Fiber Network, Inc. sr. notes Ser. B, 10s, 2008 363,600
50,000 Netia Holdings B.V. 144A company guaranty stepped-coupon
zero % (11 1/4s, 11/1/01), 2007 (Poland) (STP) 31,500
300,000 Netia Holdings B.V. 144A company guaranty 10 1/4s,
2007 (Poland) 255,000
60,000 Nextlink Communications Inc. 144A sr. notes 10 1/2s, 2009 60,750
290,000 NorthEast Optic Network, Inc. sr. notes 12 3/4s, 2008 307,400
320,000 Pathnet, Inc. sr. notes 12 1/4s, 2008 204,800
500,000 Primus Telecommunications Group, Inc. 144A sr. notes
12 3/4s, 2009 503,750
400,000 Qwest Communications International, Inc. sr. disc. notes
stepped-coupon zero % (9.47s, 10/15/02), 2007 (STP) 317,724
345,000 Rhythms Netconnections, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (13 1/2s, 5/15/03), 2008 (STP) 179,400
130,000 Tele1 Europe BV 144A 13s, 2009 131,950
140,000 Teligent, Inc. sr. disc. notes stepped-coupon Ser. B, zero %
(11 1/2s, 3/1/03), 2008 (STP) 80,150
280,000 Teligent, Inc. sr. notes 11 1/2s, 2007 268,800
430,000 Time Warner Telecom Inc. sr. notes 9 3/4s, 2008 442,900
250,000 Versatel Telecom B.V. sr. notes 13 1/4s, 2008 (Netherlands) 263,750
320,000 WinStar Communications, Inc. sr. sub. notes stepped-coupon
zero % (15s, 3/1/02), 2007 (STP) 393,600
150,000 WinStar Communications. Inc. sr. sub. notes 11s, 2008 138,000
--------------
11,084,024
Telephone Services (3.3%)
- --------------------------------------------------------------------------------------------------------------------------
360,000 Allegiance Telecom, Inc. sr. disc. notes stepped-coupon Ser. B,
zero % (11 3/4s, 2/15/03), 2008 (STP) 255,600
500,000 BTI Telecom Corp. sr. notes 10 1/2s, 2007 453,750
360,000 Call-Net Enterprises Inc. sr. disc. notes stepped-coupon zero %
(10.8s, 5/15/04), 2009 (Canada) (STP) 169,200
120,000 Call-Net Enterprises, Inc. sr. disc. notes stepped-coupon zero %
(9.27s, 8/15/02), 2007 (Canada) (STP) 69,600
350,000 Call-Net Enterprises, Inc. sr. disc. notes stepped-coupon zero %
(8.94s, 8/15/03), 2008 (Canada) (STP) 171,500
180,000 Call-Net Enterprises, Inc. sr. notes 8s, 2008 (Canada) 138,600
140,000 Facilicom International sr. notes Ser. B, 10 1/2s, 2008 123,200
280,000 Flag Ltd. 144A sr. notes 8 1/4s, 2008 (Bermuda) 252,000
143,000 ITC Deltacom, Inc. sr. notes 11s, 2007 148,720
50,000 Long Distance International, Inc. sr. notes 12 1/4s, 2008 25,000
250,000 McLeodUSA, Inc. sr. notes 9 1/2s, 2008 251,875
140,000 RSL Communications, Ltd. 144A 10 1/2s, 2008 132,300
130,000 RSL Communications, Ltd. company guaranty 9 1/8s, 2008 114,400
100,000 Transtel S.A. pass through certificates 12 1/2s, 2007 52,000
915,000 Viatel, Inc. sr. disc. notes stepped-coupon zero %
(12 1/2s, 4/15/03), 2008 (STP) 558,150
--------------
2,915,895
Textiles (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
240,000 Galey & Lord, Inc. company guaranty 9 1/8s, 2008 52,800
140,000 Polymer Group, Inc. company guaranty Ser. B, 9s, 2007 135,450
90,000 Polymer Group, Inc. company guaranty Ser. B, 8 3/4s, 2008 86,175
--------------
274,425
Transportation (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
220,000 Johnstown America Industries, Inc. company guaranty Ser. C,
11 3/4s, 2005 223,300
120,000 Kitty Hawk, Inc. company guaranty 9.95s, 2004 118,200
--------------
341,500
Wireless Communications (5.6%)
- --------------------------------------------------------------------------------------------------------------------------
440,000 Celcaribe S.A. sr. notes 13 1/2s, 2004 (Colombia) 330,000
750,000 CellNet Data Systems, Inc. sr. disc. notes stepped-coupon
zero % (14s, 10/1/02), 2007 (STP) 97,500
320,000 Clearnet Communications, Inc. sr. disc. notes stepped-coupon
zero % (14 3/4s, 12/15/00), 2005 (STP) 311,200
215,000 Conecel Holdings 144A notes Ser. A, 14s, 2000 (In default) (NON) 19,350
615,000 McCaw International Ltd sr. disc. notes stepped-coupon zero %
(13s, 4/15/02), 2007 (STP) 408,975
280,000 Microcell Telecommunications sr. disc. notes stepped-coupon
Ser. B, zero % (14s, 12/1/01), 2006 (Canada) (STP) 238,000
635,000 Millicom International Cellular S.A. sr. disc. notes
stepped-coupon zero % (13 1/2s, 6/1/01),
2006 (Luxembourg) (STP) 488,950
310,000 NEXTEL Communications, Inc. sr. disc. notes stepped-coupon
zero % (12 1/8s, 4/15/03), 2008 (STP) 170,500
380,000 NEXTEL Communications, Inc. sr. notes 12s, 2008 423,225
1,150,000 NEXTEL Communications, Inc. 144A sr. notes 9 3/8s, 2009 1,141,375
110,000 NEXTEL Partners Inc. sr. disc. notes stepped-coupon zero %
(14s, 2/1/04), 2009 (STP) 71,225
80,000 Omnipoint Corp. 144A sr. notes 11 1/2s, 2009 86,400
200,000 Orbital Imaging Corp. sr. notes Ser. B, 11 5/8s, 2005 140,500
110,000 Paging Network Do Brasil sr. notes 13 1/2s, 2005 (Brazil) 16,500
80,000 Price Communications Wireless, Inc. 144A sr. notes 9 1/8s, 2006 81,200
220,000 Telecorp PCS Inc. company guaranty stepped-coupon zero %
(11 5/8s, 4/15/04), 2009 (STP) 141,900
220,000 US UnWired Inc. sr. disc. notes stepped-coupon 13 3/8s,
(13 3/8s, 11/1/04), 2009 (STP) 124,850
205,000 Voicestream Wire Corp. sr. disc. notes stepped-coupon zero %
(11 7/8s, 11/15/04), 2009 (STP) 124,538
450,000 Voicestream Wire Corp. 144A sr. notes 10 3/8s, 2009 469,125
--------------
4,885,313
--------------
Total Corporate Bonds and Notes (cost $82,874,206) $ 74,107,273
PREFERRED STOCKS (8.2%) (a)
NUMBER OF SHARES VALUE
Banks (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
6,240 Chevy Chase Capital Corp. Ser. A, $5.188 pfd. (PIK) $ 336,960
80 First Republic 144A $10.50 cum. pfd. 79,200
--------------
416,160
Broadcasting (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,582 Capstar Broadcasting, Inc. 144A $12.00 pfd. (PIK) 185,095
1,762 Citadel Broadcasting Inc. 144A $13.25 cum. pfd. (PIK) 202,630
66,000 Diva Systems Corp. Ser. D, $6.00 pfd. 264,000
336 Granite Broadcasting 144A $12.75 pfd. (PIK) 342,720
40 Paxson Communications Corp. $13.25 cum. pfd. (PIK) 404,000
341 Spanish Broadcasting Systems $14.25 cum. pfd. (PIK) 366,575
--------------
1,765,020
Cable Television (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
276 21st Century Telecom Group 144A $13.75 cum. pfd. (PIK) 138,000
7,145 CSC Holdings, Inc. Ser. M, $11.125 cum. pfd. (PIK) 775,233
15 NTL Inc. 144A Ser. B, $13.00 pfd. (PIK) 15,600
--------------
928,833
Computer Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
139 Concentric Network Corp. Ser. B, 13.50% pfd. (PIK) 139,695
Insurance (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
14,500 CGA Group Ltd. 144A Ser. A, $13.75 pfd. (PIK) 391,500
Medical Supplies and Devices (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
260 Fresenius Medical Capital Trust I Ser. D, 9.00%
company guaranty, pfd. (Germany) 246,350
290 Fresenius Medical Capital Trust II 7.875% company guaranty,
pfd. (Germany) 262,450
--------------
508,800
Oil and Gas (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
171 R& B Falcon Corp. $13.875 cv. pfd. 177,840
Packaging and Containers (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
952 Packaging Corp. of America $12.375 pfd. (PIK) 103,768
Restaurants (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
5,673 AmeriKing, Inc. $3.25 pfd. (PIK) 103,532
Telecommunications (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
778 Intermedia Communication Ser. B, 13.50% pfd. (PIK) 739,100
463 IXC Communications, Inc. $12.50 pfd. (PIK) 508,143
7,850 Nextlink Communications, Inc. 144A $7.00 cum. pfd. (PIK) 404,275
330 WinStar Communications, Inc. 144A $14.25 cum. pfd. (PIK) 277,200
--------------
1,928,718
Wireless Communications (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
202 Dobson Communications 144A $13.00 pfd. 217,150
255 Dobson Communications Corp. 144A $12.25 pfd. (PIK) 255,000
187 NEXTEL Communications, Inc. Ser. D, 13.00% pfd. (PIK) 200,090
--------------
672,240
--------------
Total Preferred Stocks (cost $7,406,518) $ 7,136,106
COMMON STOCKS (1.6%) (a)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
100 AmeriKing, Inc. (NON) $ 1,000
1,800 Axia Holding Inc. 144A (PIK) (NON) 23,400
24,697 Celcaribe S.A. (Colombia) (NON) 9,261
71,544 Celcaribe S.A. 144A (Colombia) (NON) 89,430
10,124 Chesapeake Energy Corp. 30,372
8,769 Fitzgerald Gaming Corp. (NON) 2,192
1,971 Intermedia Communications, Inc.(NON) 54,942
175 Mothers Work, Inc. (NON) 1,794
1,180 NEXTEL Communications, Inc. Class A (NON) 116,968
150 Paging Do Brazil Holdings Co., LLC 144A Class B, (Brazil) (NON) 2
244 Premium Holdings (L.P.) 144A (NON) 978
57,579 PSF Holdings LLC Class A (NON) 705,343
4,600 Spanish Broadcasting System, Inc. Class B (NON) 109,250
12,750 Specialty Foods Acquisition Corp.(NON) 255
2,962 Viatel, Inc. (NON) 124,404
2,590 WinStar Communications. Inc. (NON) 131,443
--------------
Total Common Stocks (cost $2,258,395) $ 1,401,034
CONVERTIBLE BONDS AND NOTES (1.3%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 275,000 Corporate Express, Inc. cv. notes 4 1/2s, 2000 $ 277,750
490,000 Cybernet Internet Service 144A cv. sr. disc. notes
stepped-coupon zero % (13s, 8/15/04), 2009 (STP) 269,500
500,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 258,750
140,000 GST Telecommunications, Inc. cv. sr. disc. notes stepped-coupon
zero %, (13 7/8s, 12/15/00), 2005 (STP) 133,000
200,000 Integrated Device Technology, Inc. cv. sub. notes 5 1/2s, 2002 203,250
--------------
Total Convertible Bonds and Notes (cost $1,102,802) $ 1,142,250
UNITS (0.5%) (a)
NUMBER OF UNITS VALUE
- --------------------------------------------------------------------------------------------------------------------------
550 Australis Media, Ltd. units stepped-coupon zero %,
(15 3/4s, 5/15/00), 2003 (Australia) (In default) (STP) (NON) $ 55
310 Equinix, Inc. units 144A 13s, 2007 316,200
450 XCL Ltd. units sr. sec. notes 13 1/2s, 2004 (In default) (NON) 157,500
3,090 XCL Ltd. 144A units cum. pfd. zero % 2006 (PIK) 4,635
--------------
Total Units (cost $1,545,133) $ 478,390
WARRANTS (0.9%) (a) (NON) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
220 21st Century Telecom Group 144A 2/15/10 $ 2,200
10 American Mobile Satellite Corp. 4/1/08 450
170 Bestel S.A. (Mexico) 5/15/05 5,100
150 Birch Telecommunications, Inc. 144A (PIK) 6/15/08 8,250
240 Carrier1 Intl. 144A 2/19/09 4,800
660 CD Radio, Inc. 144A 5/15/09 34,650
1,490 Cellnet Data Systems, Inc. 10/1/07 14,900
14,500 CGA Group Ltd. 144A 2/11/07 145
300 Club Regina, Inc. 144A 12/1/04 300
250 Comunicacion Cellular 144A (Colombia) 11/15/03 13,500
2,902 Consorcio Ecuatoriano 144A (Ecuador) 10/1/00 290
150 Cybernet Internet Svs 144a 7/1/09 12,000
1,860 Diva Systems Corp. 3/1/08 14,880
650 DTI Holdings Inc. 3/1/08 7
150 Epic Resorts 6/15/05 2
190 Esat Holdings, Inc. (Ireland) 2/1/07 13,300
690 Firstworld Communication 4/15/08 48,300
270 Hyperion Telecommunications 144A 4/15/01 47,250
6,691 ICG Communications 10/15/05 120,438
180 Insilco Holding Co. 8/15/08 2
440 Iridium World Com 144A 7/15/05 4
800 KMC Telecom Holdings, Inc. 4/15/08 2,400
700 Knology Holdings, Inc. 144A 10/15/07 1,750
50 Long Distance International, Inc. 144A 4/13/08 100
815 McCaw International Ltd. 4/15/07 3,464
180 Mediq Inc. 144A 6/1/09 2
2,867 Network Plus Corp. 12/31/00 212,760
100 Onepoint Communications, Inc. 6/1/08 1,000
200 Orbital Imaging Corp. 144A 3/1/05 4,000
6,900 Pagemart, Inc. 144A 12/31/03 53,475
320 Pathnet, Inc. 144A 4/15/08 3,200
160 R&B Falcon Corp. 144A 5/1/09 40,000
500 Signature Brands Corp. 8/15/02 10,000
155 Sterling Chemicals Holdings 8/15/08 2,480
130 Tele1 Europe BV 144A 5/15/09 11,050
90 Telehub Communications Corp. 7/31/05 450
1,045 UIH Australia/Pacific, Inc. 144A 5/15/06 31,350
1,500 USN Communications Inc. 8/15/04 15
250 Versatel Telecom B.V. 144A (Netherlands) 5/15/08 72,500
100,640 Wright Medical Technology, Inc. 144A 6/30/03 1
--------------
Total Warrants (cost $477,226) $ 790,765
CONVERTIBLE PREFERRED STOCKS (0.4%) (a)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
1,195 Chesapeake Energy Corp. $3.50 cum. cv. pfd. $ 33,609
5,060 Global Telesystems, Inc. 144A $3.625 cv. pfd. 266,915
1,200 LTV Corp. (The) 144A $4.13 cv. pfd. 65,700
607 XCL Ltd 144A Ser. A, $9.50 cv. cum. pfd. 911
--------------
Total Convertible Preferred Stocks (cost $425,210) $ 367,135
SHORT-TERM INVESTMENTS (2.3%) (a) (cost $$2,040,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 2,040,000 Interest in $539,313,000 joint repurchase agreement dated
November 30, 1999 with S.B.C.Warburg Inc. due
December 1, 1999 with respect to various U.S. Treasury
obligations -- maturity value of $2,040,321 for an effective
yield of 5.67% $ 2,040,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $98,129,490) (b) $ 87,462,953
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $87,696,305.
(b) The aggregate identified cost on a tax basis is $98,132,453, resulting in gross unrealized appreciation and
depreciation of $4,376,927 and $15,046,427, respectively, or net unrealized depreciation of $10,669,500.
(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.
(SEG) Interest may be received in cash or additional securities at the discretion of the issuer.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional
buyers.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $98,129,490) (Note 1) $ 87,462,953
- -----------------------------------------------------------------------------------------------
Cash 806
- -----------------------------------------------------------------------------------------------
Dividends, interest and other receivables 1,795,605
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 783,534
- -----------------------------------------------------------------------------------------------
Total assets 90,042,898
Liabilities
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 833,200
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 1,275,634
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 163,457
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 19,749
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 13,262
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 770
- -----------------------------------------------------------------------------------------------
Other accrued expenses 40,521
- -----------------------------------------------------------------------------------------------
Total liabilities 2,346,593
- -----------------------------------------------------------------------------------------------
Net assets $ 87,696,305
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Note 1) $106,772,932
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (1,378,611)
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (7,031,479)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (10,666,537)
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $ 87,696,305
Computation of net asset value
- -----------------------------------------------------------------------------------------------
Net asset value per share ($87,696,305 divided by 7,507,107 shares) $11.68
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended November 30, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends $ 370,242
- -----------------------------------------------------------------------------------------------
Interest income 4,588,605
- -----------------------------------------------------------------------------------------------
Total investment income 4,958,847
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 338,660
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 77,568
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 5,536
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 2,283
- -----------------------------------------------------------------------------------------------
Reports to shareholders 10,977
- -----------------------------------------------------------------------------------------------
Auditing 22,391
- -----------------------------------------------------------------------------------------------
Legal 7,032
- -----------------------------------------------------------------------------------------------
Postage 8,515
- -----------------------------------------------------------------------------------------------
Exchange listing fees 8,085
- -----------------------------------------------------------------------------------------------
Other 2,186
- -----------------------------------------------------------------------------------------------
Total expenses 483,233
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,353)
- -----------------------------------------------------------------------------------------------
Net expenses 481,880
- -----------------------------------------------------------------------------------------------
Net investment income 4,476,967
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (200,237)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (3,948,962)
- -----------------------------------------------------------------------------------------------
Net loss on investments (4,149,199)
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 327,768
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
November 30 May 31
1999* 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 4,476,967 $ 9,278,784
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments (200,237) (6,541,670)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (3,948,962) (10,127,946)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 327,768 (7,390,832)
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income (4,999,286) (10,343,967)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (1,230,315)
- ---------------------------------------------------------------------------------------------------------------
Total decrease in net assets (4,671,518) (18,965,114)
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 92,367,823 111,332,937
- ---------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $1,378,611 and
$856,292, respectively) $87,696,305 $ 92,367,823
- ---------------------------------------------------------------------------------------------------------------
Number of fund shares
- ---------------------------------------------------------------------------------------------------------------
Shares outstanding at beginning and end of period 7,507,107 7,507,107
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ----------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share Nov. 30
operating performance (Unaudited) Year ended May 31
- ----------------------------------------------------------------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.30 $14.83 $14.08 $13.78 $13.04 $13.40
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income .60 1.24 1.44 1.34 1.27 1.32
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.55) (2.23) .69 .29 .79 (.36)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .05 (.99) 2.13 1.63 2.06 .96
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.67) (1.38) (1.38) (1.33) (1.30) (1.32)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- -- (.02) --
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized
gain on investments -- (.16) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.67) (1.54) (1.38) (1.33) (1.32) (1.32)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.68 $12.30 $14.83 $14.08 $13.78 $13.04
- ----------------------------------------------------------------------------------------------------------------------------------
Market value,
end of period $11.313 $13.500 $15.375 $14.375 $13.750 $13.125
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
market value (%)(a) (11.70)* (2.06) 16.96 14.88 15.30 9.20
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $87,696 $92,368 $111,333 $105,690 $103,466 $97,901
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .54* 1.11 1.05 1.06 1.04 1.00
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.00* 9.50 9.75 9.70 9.49 10.32
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 19.85* 47.56 85.45 62.57 74.70 103.91
- ----------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended May 31, 1996, and thereafter, includes amounts paid through
expense offset arrangements. Prior period ratios exclude these amounts (Note 2).
</TABLE>
Notes to financial statements
November 30, 1999 (Unaudited)
Note 1
Significant accounting policies
Putnam Managed High Yield 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. The fund intends to achieve its objective
by investing in high yielding income securities.
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 sale 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. 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, approved by the
Trustees, which determines valuations for normal, institutional-size
trading units of such securities using methods based on market
transactions for comparable securities and various relationships between
securities which are generally recognized by institutional traders.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned susidiary 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. 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.
E) 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 May 31, 1999, the fund had a capital loss carryover of approximately
$2,584,000 available to offset future capital gains, if any, which will
expire on May 31, 2007.
F) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.75% of the first $500
million of average net assets, 0.65% of the next $500 million, 0.60% of
the next $500 million, and 0.55% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended November 30, 1999, fund expenses were reduced by
$1,353 under expense offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized in
connection with the expense offset arrangements in an income producing
asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $480 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
Note 3
Purchase and sales of securities
During the six months ended November 30, 1999, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $17,115,077 and $19,374,608, respectively. There
were no purchases and sales of U.S. government obligations.
Results of October 7, 1999 shareholder meeting
(Unaudited)
A meeting of shareholders of the fund was held on October 7, 1999. At the
meeting, each of the nominees for Trustees was elected, as follows:
Common Shares
Votes
Votes for withheld
Jameson Adkins Baxter 6,807,663 122,679
Hans H. Estin 6,801,391 128,951
John A. Hill 6,805,999 124,343
Ronald J. Jackson 6,806,299 124,043
Paul L. Joskow 6,805,234 125,108
Elizabeth T. Kennan 6,805,888 124,454
Lawrence J. Lasser 6,803,799 126,543
John H. Mullin III 6,801,084 129,258
Robert E. Patterson 6,807,999 122,343
William F. Pounds 6,800,910 129,432
George Putnam 6,799,010 131,332
George Putnam, III 6,807,198 123,144
A.J.C. Smith 6,799,056 131,286
W. Thomas Stephens 6,802,334 128,008
W. Nicholas Thorndike 6,802,320 128,022
A proposal to ratify the selection of PricewaterhouseCoopers LLP as
independent accountants for the fund was approved as follows: 6,861,601
votes for, and 38,458 votes against, with 30,283 abstentions and
non-broker votes.
Welcome to www.putnaminv.com
Now you can use your PC to get up-to-date information about your funds, learn
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VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR:
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Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Edward H. D'Alelio
Vice President
Rosemary H. Thomsen
Vice President and Fund Manager
Jennifer E. Leichter
Vice President and Fund Manager
Richard A. Monaghan
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.putnaminv.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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U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
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