<PAGE>
--------------------------------------------------------------------------------
MORGAN STANLEY
DEAN WITTER
HIGH YIELD
FUND, INC.
--------------------------------------------------------------------------------
THIRD QUARTER REPORT
SEPTEMBER 30, 2000
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
MORGAN STANLEY DEAN WITTER
HIGH YIELD FUND, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
OF DIRECTORS
Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR
John D. Barrett II
DIRECTOR
Gerard E. Jones
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
Andrew McNally IV
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Samuel T. Reeves
DIRECTOR
Fergus Reid
DIRECTOR
Frederick O. Robertshaw
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Arthur J. Lev
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
TREASURER
Robin L. Conkey
ASSISTANT TREASURER
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
--------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
--------------------------------------------------------------------------------
CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
--------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(800) 278-4353
--------------------------------------------------------------------------------
LEGAL COUNSEL
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
--------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726 or visit our website at
www.msdw.com/im.
<PAGE>
LETTER TO SHAREHOLDERS
------------
For the nine months ended September 30, 2000, the Morgan Stanley Dean Witter
High Yield Fund, Inc. (the "Fund") had a total return, based on net asset value
per share, of -9.78% compared to -0.16% for the CS First Boston High Yield Index
(the "Index"). For the period from the Fund's commencement of operations on
November 30, 1993 through September 30, 2000, the Fund's total return, based on
net asset value per share, was 68.83% compared to 54.55% for the Index. On
September 30, 2000, the closing price of the Fund's shares on the New York Stock
Exchange was $11 3/8, representing a 5.7% premium to the Fund's net asset value
per share.
The high yield market underperformed higher-quality fixed income securities
for the nine months ending September 30, 2000. The NASDAQ was down almost 10%
this year, with a great deal of volatility, which helped lead to a sell-off
in the high yield telecommunication sector. The widening of telecommunication
spreads also was the result of concerns about future financing needs. The
cyclical sectors also performed very poorly as several companies,
particularly in the automotive and metal industries, announced that earnings
would be much lower than anticipated. Also, mutual fund flows have been
negative much of the year with total outflows being close to $8 billion. The
spread on the Index widened by 256 basis points this year to 829 over
treasuries (unlike treasury securities, high yield securities are neither
insured nor guaranteed by the U.S. government).
Our overweight exposure to international long distance, CLEC's (competitive
local exchange carriers), and the internet/data sectors all detracted from
returns as these sectors performed very poorly. Furthermore, our low exposure
to the energy sector hurt our results as this sector posted strong results
due to the continued high oil prices. In a down market, the leverage that the
Fund employed during this period also significantly detracted from our
returns.
On the positive side, our higher quality fixed income securities benefited
our returns as BB securities performed better than lower rated bonds. Also,
our continued overweight in both gaming and health care added to results as
these sectors showed strong performance.
We expect to maintain a BB- credit rating for the Fund, which is above the
Index. The Fund expects to continue to have overweight exposure to
telecommunications, cable, gaming and health care where we currently find very
good value.
We continue to believe that the current valuations in the high yield market are
compelling. With spreads of the Index over 800 basis points above treasuries and
with yields over 14%, the market has a good deal of cushion against any further
bad news. We feel we are correctly positioned to take advantage of the present
environment.
Sincerely,
/s/ Harold J. Schaaff, Jr
Harold J. Schaaff, Jr.
President and Director
October 2000
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED.
HIGH YIELD FIXED INCOME SECURITIES, ALSO KNOWN AS "JUNK BONDS" ARE CONSIDERED
SPECULATIVE, INVOLVE GREATER RISK OF DEFAULT AND TEND TO BE MORE VOLATILE THAN
INVESTMENT GRADE FIXED INCOME SECURITIES.
--------------------------------------------------------------------------------
DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT WWW.MSDW.COM/IM.
2
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
INVESTMENT SUMMARY AS OF SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION TOTAL RETURN (%)
------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX(3)
---------------------- ---------------------- ----------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
YEAR TO DATE 11.77% -- -9.78% -- -0.16% --
ONE YEAR 10.01 10.01% -3.09+ -3.09%+ 1.92 1.92%
FIVE YEAR 67.95 10.92 47.86+ 8.14+ 35.07 6.20
SINCE INCEPTION* 66.27 7.72 68.83+ 7.96+ 54.55 6.58
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
--------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1993* 1994 1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share...... $ 14.10 $ 11.96 $ 13.63 $ 14.45 $ 15.19 $ 13.62 $ 12.73 $ 10.77
Market Value Per Share ........ $ 14.75 $ 11.38 $ 12.88 $ 14.63 $ 16.06 $ 15.38 $ 11.06 $ 11.38
Premium/(Discount) ............ 4.6% -4.8% -5.5% 1.3% 5.7% 12.9% -13.1% 5.7%
Income Dividends .............. -- $ 1.37 $ 1.27 $ 1.42 $ 1.36 $ 1.42 $ 1.38 $ 0.96
Capital Gains Distributions ... -- -- -- -- $ 0.48 $ 0.83 -- --
Fund Total Return(2)........... 0.00% -5.53% 26.07% 17.52% 18.48% 4.12% 6.34%+ -9.78%
Index Total Return (1)(3) ..... 1.26% -0.98% 17.39% 12.40% 12.65% 0.58% 3.28% -0.16%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
(3) The CS First Boston High Yield Index is an unmanaged index of high yield
corporate bonds.
* The Fund commenced operations on November 30, 1993.
+ This return does not include the effect of the rights issued in connection
with the Rights Offering.
3
<PAGE>
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
PORTFOLIO SUMMARY AS OF SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFICATION OF TOTAL INVESTMENTS
<S> <C>
Debt Securities (95.1%)
Equity Securities (4.5%)
Short-Term Investments (0.4%)
</TABLE>
--------------------------------------------------------------------------------
INDUSTRIES
[PIE CHART]
<TABLE>
<S> <C>
Other (24.9%)
Chemicals (3.1%)
Services (3.2%)
Paper & Packaging (3.4%)
Retail (4.7%)
Media (5.0%)
Health Care (6.5%)
Communications: Fixed (18.8%)
Cable (13.0%)
Communications: Mobile (10.2%)
Gaming (7.2%)
</TABLE>
--------------------------------------------------------------------------------
TEN LARGEST HOLDINGS**
[PIE CHART]
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
-----------
<S> <C>
1. HCA-- The Healthcare Co., 6.91%, 6/15/05 2.7%
2. Nextel Communications, Inc., 0.00%, 9/15/07 2.1
3. Station Casinos, Inc., 10.125%, 3/15/06 1.9
4. Harrah's Operating Co., Inc., 7.875%, 12/15/05 1.5
5. Intermedia Communications, Inc. `B', 0.00%, 7/15/07 1.5
6. Winstar Communications, 0.00%, 4/15/10 1.4
7. Chancellor Media Corp. `B', 8.125%, 12/15/07 1.4
8. Murrin Murrin Holdings Property Ltd., 9.375%, 8/31/07 1.4
9. DR Securitized Lease Trust, 7.60%, 8/15/07 1.4
10. Hayes Lemmerz International, Inc., 8.25%, 12/15/08 1.3
----
16.6%
====
</TABLE>
* Other includes industries not shown separately.
** Excludes short-term investments.
4
<PAGE>
INVESTMENTS (UNAUDITED)
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
------------
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
-----------------------------------------------------------
CORPORATE BONDS AND NOTES (92.1%)
-----------------------------------------------------------
AUTOMOTIVE (1.5%)
<S> <C> <C>
Hayes Lemmerz International, Inc.
8.25%, 12/15/08 U.S.$ 2,850 U.S.$ 2,308
Tenneco Automotive, Inc.
11.625%, 10/15/09 420 269
-----------
2,577
-----------
-----------------------------------------------------------
CABLE (13.0%)
Adelphia Communications Corp. 'B'
7.75%, 1/15/09 1,300 1,084
8.375%, 2/1/08 2,050 1,773
9.375%, 11/15/09 1,250 1,133
9.875%, 3/1/07 200 188
British Sky Broadcasting Group plc
8.20%, 7/15/09 1,945 1,831
Cablevision SA
13.75%, 5/1/09 750 668
Callahan Nordrhein-Westfalen
14.00%, 7/15/10 2,100 2,089
Charter Communications
10.25%, 1/15/10 2,100 2,055
CSC Holdings, Inc.
9.875%, 5/15/06 570 583
Echostar DBS Corp.
9.375%, 2/1/09 1,900 1,862
Multicanal SA
10.50%, 2/1/07 1,705 1,356
NTL, Inc.
(a)0.00%, 4/1/08 2,325 1,418
NTL, Inc. 'B'
(a)0.00%, 4/1/08 GBP 750 666
RCN Corp. 'B'
(a)0.00%, 10/15/07 U.S. $ 3,200 1,696
Rogers Cablesystems
10.125%, 9/1/12 900 943
Telewest Communication plc
(a)0.00%, 4/15/09 GBP 2,100 1,662
United Pan-Europe
Communications NV
10.875%, 8/1/09 U.S. $ 1,355 1,152
-----------
22,159
-----------
-----------------------------------------------------------
CHEMICALS (3.1%)
Huntsman ICI Chemicals
10.125%, 7/1/09 EUR 750 650
10.125%, 7/1/09 U.S. $ 850 834
ISP Holdings, Inc. 'B'
9.00%, 10/15/03 2,450 2,156
Lyondell Chemical Co.
9.625%, 5/1/07 1,620 1,582
-----------
5,222
-----------
-----------------------------------------------------------
COMMUNICATIONS: FIXED (17.1%)
Bayan Telecommunications, Inc.
13.50%, 7/15/06 U.S. $ 1,875 U.S.$ 680
Espirit Telecommunications
Group plc 'DM'
11.50%, 12/15/07 EUR 665 264
Exodus Communications, Inc.
11.625%, 7/15/10 U.S. $ 1,415 1,419
Focal Communications Corp.
11.875%, 1/15/10 1,485 1,129
Global Crossing Holding Ltd.
9.625%, 5/15/08 1,975 1,975
Globix Corp.
12.50%, 2/1/10 1,260 895
GT Group Telecom, Inc.
(a)0.00%, 2/1/10 2,345 1,196
Hermes Europe Railtel BV
10.375%, 1/15/09 1,125 562
11.50%, 8/15/07 945 472
Hyperion Telecommunications, Inc.
(a)0.00%, 4/15/03 1,580 1,315
Intermedia Communications, Inc.
8.50%, 1/15/08 200 192
Intermedia Communications, Inc. 'B'
(a)0.00%, 7/15/07 3,110 2,581
Level 3 Communications, Inc.
(a)0.00%, 3/15/10 1,675 896
Maxcom Telecommunicaciones SA de CV
13.75%, 4/1/07 1,250 684
Netia Holdings II B.V.
13.50%, 6/15/09 EUR 925 756
NEXTLINK Communications, Inc.
(a)0.00%, 4/15/08 U.S. $ 3,050 1,784
(a)0.00%, 12/1/09 850 442
Primus Telecommunications
Group, Inc.
11.25%, 1/5/09 1,735 885
Primus Telecommunications
Group, Inc. 'B'
9.875%, 5/15/08 1,000 495
PSINet, Inc. 'B'
10.00%, 2/15/05 2,675 1,739
Rhythms NetConnections, Inc.
14.00%, 2/15/10 1,050 693
Rhythms NetConnections, Inc. 'B'
(a)0.00%, 5/15/08 3,475 1,320
RSL Communications plc
(a)0.00%, 3/1/08 1,500 225
(a)0.00%, 3/15/08 EUR 1,380 159
9.125%, 3/1/08 U.S. $ 1,900 380
9.875%, 11/15/09 275 63
12.00%, 11/1/08 900 221
12.25%, 11/15/06 300 72
-----------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
-----------------------------------------------------------
COMMUNICATIONS: FIXED (CONTINUED)
<S> <C> <C>
Tele1 Europe AB
13.00%, 5/15/09 U.S. $ 1,910 U.S.$ 1,853
Viatel, Inc.
(a)0.00%, 4/15/08 2,400 600
WAM! Net, Inc. 'B'
13.25%, 3/1/05 1,875 844
Winstar Communications
(a)0.00%, 4/15/10 7,695 2,462
-----------
29,253
-----------
-----------------------------------------------------------
COMMUNICATIONS: MOBILE (8.8%)
Cellco Finance NV
12.75%, 8/1/05 900 891
Centennial Cellular
10.75%, 12/15/08 1,755 1,716
CTI Holdings SA
(a)0.00%, 4/15/08 2,250 1,147
Dolphin Telecommunications plc
(a)0.00%, 5/15/09 2,000 400
(a)0.00%, 6/1/08 EUR 1,520 255
Globalstar LP
11.375%, 2/15/04 U.S. $ 1,050 315
Grupo Iusacell SA de CV
14.25%, 12/1/06 1,615 1,712
Motient Corp.
12.25%, 4/1/08 1,810 1,308
Nextel Communications, Inc.
(a)0.00%, 9/15/07 4,300 3,526
(a)0.00%, 2/15/08 500 382
Occidente y Caribe 'B'
14.00%, 3/15/04 3,125 2,266
PTC International Finance II SA
11.25%, 12/1/09 EUR 1,290 1,114
-----------
15,032
-----------
-----------------------------------------------------------
ENERGY (1.8%)
Husky Oil Ltd.
8.90%, 8/15/28 U.S. $ 1,175 1,143
Nuevo Energy Corp.
9.375%, 10/1/10 920 914
Vintage Petroleum, Inc.
8.625%, 2/1/09 185 184
9.75%, 6/30/09 875 910
-----------
3,151
-----------
-----------------------------------------------------------
FINANCIAL (1.4%)
Anthem Insurance Co.
9.125%, 4/1/10 1,430 1,338
Golden State Holdings
7.125%, 8/1/05
1,185 1,106
-----------
2,444
-----------
-----------------------------------------------------------
FOOD & BEVERAGES (1.1%)
Smithfield Foods, Inc.
7.625%, 2/15/08 U.S. $ 2,100 U.S.$ 1,885
-----------
-----------------------------------------------------------
GAMING (7.2%)
Harrah's Operating Co., Inc.
7.875%, 12/15/05 2,700 2,599
Horseshoe Gaming Holding
8.625%, 5/15/09 2,060 2,019
International Game Technology
8.375%, 5/15/09 2,200 2,151
Park Place Entertainment
7.875%, 12/15/05 1,380 1,330
8.50%, 11/15/06 400 405
Station Casinos, Inc.
8.875%, 12/1/08 600 578
10.125%, 3/15/06 3,200 3,200
-----------
12,282
-----------
-----------------------------------------------------------
GENERAL INDUSTRIAL (1.5%)
Actuant Corp.
13.00%, 5/1/09 980 997
Flowserve Corp.
12.25%, 8/15/10 1,560 1,595
-----------
2,592
-----------
-----------------------------------------------------------
HEALTH CARE (6.5%)
Fresenius Medical Capital Trust II
7.875%, 2/1/08 2,195 2,074
HCA- The Healthcare Co.
6.91%, 6/15/05 4,825 4,567
8.75%, 9/1/10 945 959
Tenet Healthcare Corp.
8.125%, 12/1/08 1,700 1,628
8.625%, 1/15/07 1,900 1,881
-----------
11,109
-----------
-----------------------------------------------------------
HOTELS & LODGING (1.8%)
Hilton Hotels
7.95%, 4/15/07 2,000 1,944
HMH Properties 'A'
7.875%, 8/1/05
1,200 1,131
-----------
3,075
-----------
-----------------------------------------------------------
MEDIA (4.0%)
Chancellor Media Corp.
9.00%, 10/1/08 925 1,018
Chancellor Media Corp. 'B'
8.125%, 12/15/07 2,420 2,444
Satelites Mexicanos 'B'
10.125%, 11/1/04 1,370 863
TV Azteca 'B'
10.50%, 2/15/07 1,940 1,799
-----------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
-----------------------------------------------------------
MEDIA (CONTINUED)
<S> <C> <C>
XM Satellite Radio Holdings, Inc.
14.00%, 3/15/10 U.S. $ 1,000 U.S.$ 700
---------
6,824
---------
-----------------------------------------------------------
METALS (2.5%)
Glencore Nickel Property Ltd.
9.00%, 12/1/14 515 430
Murrin Murrin Holdings Property Ltd.
9.375%, 8/31/07 2,600 2,340
National Steel Corp. 'D'
9.875%, 3/1/09 2,425 1,431
Republic Technologies International
13.75%, 7/15/09 720 129
---------
4,330
---------
-----------------------------------------------------------
PAPER & PACKAGING (3.4%)
Indah Kiat International Finance
10.00%, 7/1/07 1,950 936
Norampac, Inc.
9.50%, 2/1/08 2,080 2,096
Pacifica Papers, Inc.
10.00%, 3/15/09 1,875 1,889
Pindo Deli Finance (Mauritius)
10.75%, 10/1/07 1,955 958
--------
5,879
--------
-----------------------------------------------------------
REAL ESTATE (3.0%)
Centex Corp.
9.75%, 6/15/05 1,300 1,343
D.R. Horton, Inc.
8.00%, 2/1/09 1,105 1,014
Lennar Corp.
9.95%, 5/1/10 1,115 1,145
Nortek, Inc.
8.875%, 8/1/08 1,700 1,564
--------
5,066
--------
-----------------------------------------------------------
RETAIL (4.3%)
DR Securitized Lease Trust
6.66%, 8/15/10 1,170 886
7.60%, 8/15/07 2,721 2,317
9.35%, 8/15/19 500 373
HMV Media Group plc
10.25%, 5/15/08 490 323
10.875%, 5/15/08 GBP 1,035 972
Musicland Group, Inc.
9.00%, 6/15/03 U.S. $ 590 549
Musicland Group, Inc. 'B'
9.875%, 3/15/08 2,400 2,016
--------
7,436
--------
-----------------------------------------------------------
SERVICES (3.2%)
Norcal Waste Systems, Inc.
13.50%, 11/15/05 U.S. $ 1,655 U.S.$ 1,742
Waste Management, Inc.
6.875%, 5/15/09 180 163
7.00%, 10/15/06 2,225 2,085
7.125%, 10/1/07 960 901
7.125%, 12/15/17 350 301
7.65%, 3/15/11 375 352
-----------
5,544
-----------
-----------------------------------------------------------
SUPERMARKET/DRUG (1.3%)
CA FM Lease Trust
8.50%, 7/15/17 1,332 1,250
Stater Bros Holdings
10.75%, 8/15/06 1,110 938
-----------
2,188
-----------
-----------------------------------------------------------
TECHNOLOGY (0.7%)
Hyundai Semiconductor
8.25%, 5/15/04 790 719
8.625%, 5/15/07 500 430
-----------
1,149
-----------
-----------------------------------------------------------
TRANSPORTATION (2.6%)
Aircraft Lease Portfolio
Securitization Ltd. 1996-1 P1D
12.75%, 6/15/06 1,526 1,450
Jet Equipment Trust 'C1'
8.16%, 12/15/13 1,500 1,684
Jet Equipment Trust 'D-95'
11.44%, 11/1/14 1,100 1,214
-----------
4,348
-----------
-----------------------------------------------------------
UTILITIES (2.3%)
AES Corp.
8.50%, 11/1/07 1,800 1,719
Paiton Energy Funding BV
9.34%, 2/15/14 1,435 301
RAS Laffan Liquid Natural Gas
8.294%, 3/15/14 500 475
TNP Enterprises, Inc.
14.50%, 4/1/11 148 1,490
-----------
3,985
-----------
-----------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost U.S.$183,087) 157,530
-----------
-----------------------------------------------------------
ASSET BACKED SECURITIES (0.5%)
-----------------------------------------------------------
OHA Auto Grantor Trust 1997-1, 'B'
11.00%, 9/15/03
(Cost U.S.$1,005) 1,001 956
-----------
-----------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
-----------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS (0.8%)
-----------------------------------------------------------
<S> <C> <C>
DLJ Mortgage Acceptance Corp.
1997-CF2-S IO
0.31%, 10/15/17 U.S.$ 31,709 U.S. $ 630
Federal Home Mortgage
Acceptance Corp.,
7.929%, 11/1/18 1,312 367
GMAC Commercial Mortgage
Securities, Inc. 1996-C1 X2 IO
2.82%, 3/15/21 5,799 333
----------
-----------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost U.S.$2,369) 1,330
----------
-----------------------------------------------------------
SOVEREIGN & EMERGING MARKETS (1.7%)
-----------------------------------------------------------
Federative Republic of Brazil
11.00%, 8/17/40 2,240 1,785
Republic of Columbia Global Bond
9.75%, 4/23/09 930 754
Republic of Philippines
10.625%, 3/16/25 500 423
----------
-----------------------------------------------------------
TOTAL SOVEREIGN & EMERGING MARKETS
(Cost U.S.$3,102) 2,962
----------
-----------------------------------------------------------
SHARES
-----------------------------------------------------------
COMMON STOCK (0.2%)
-----------------------------------------------------------
COMMUNICATIONS: FIXED (0.2%)
Tele1 Europe Holding AB ADR
(Cost U.S.$54) 33,640 303
---------
-----------------------------------------------------------
PREFERRED STOCKS (4.1%)
-----------------------------------------------------------
COMMUNICATIONS: FIXED (1.5%)
Broadwing Communications
Corp., Series B 1,659 1,692
NEXTLINK Communications, Inc. 10,022 862
---------
2,554
---------
-----------------------------------------------------------
COMMUNICATIONS: MOBILE (1.3%)
Dobson Communications
Corp. PIK 13.00% 14,502 1,385
Nextel Communications, Inc., 'D'
PIK 13.00% 741 797
---------
2,182
---------
-----------------------------------------------------------
MEDIA (0.9%)
Paxson Communications
Corp., PIK 13.25% 16,219 U.S.$ 1,581
---------
-----------------------------------------------------------
RETAIL (0.4%)
Kmart Financing, 7.75% 21,250 662
---------
-----------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost U.S.$6,353) 6,979
---------
-----------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
-----------------------------------------------------------
WARRANTS (0.2%)
-----------------------------------------------------------
COMMUNICATIONS: FIXED (0.0%)
GT Group Telecom, Inc.,
expiring 02/01/10 2,345 15
Maxcom Telecommunicaciones SA
de CV, expiring 04/01/07 1,250 -- @
---------
15
---------
-----------------------------------------------------------
COMMUNICATIONS: MOBILE (0.1%)
Globalstar LP, expiring
2/15/04 1,850 23
Motient Corp., expiring 04/01/08 17,250 43
Occidente y Caribe, expiring
3/15/04 145,000 55
---------
121
---------
-----------------------------------------------------------
MEDIA (0.1%)
XM Satellite Radio Holdings,
Inc., expiring 03/15/10 1,000 150
---------
-----------------------------------------------------------
METALS (0.0%)
Republic Technologies
International, expiring
07/15/09 720 -- @
---------
-----------------------------------------------------------
TOTAL WARRANTS
(Cost U.S.$115) 286
---------
-----------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
-----------------------------------------------------------
SHORT-TERM INVESTMENTS (0.4%)
-----------------------------------------------------------
<S> <C> <C>
BILLS
U.S. Treasury Bill, 12/14/00 U.S. $ 100 U.S.$ 99
REPURCHASE AGREEMENT
(b)Chase Securities, Inc., 6.25% dated
9/29/00, due 10/02/00 616 616
---------
-----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost U.S.$715) 715
---------
-----------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(Cost U.S.$196,800) 171,061
---------
-----------------------------------------------------------
OTHER ASSETS AND LIABILITIES
Other Assets 7,829
Liabilities (54,161) (46,332)
---------
-----------------------------------------------------------
NET ASSETS
Applicable to 11,582,649 issued and
outstanding $0.01 par value shares
(100,000,000 shares authorized) U.S.$124,729
============
-----------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 10.77
===========
-----------------------------------------------------------
</TABLE>
(a)-- Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of September 30, 2000. Maturity date disclosed is the
ultimate maturity.
(b)-- The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
schedule of investments. The investment in the repurchase agreement is
through participation in a joint account with affiliated funds.
@ -- Value is less than U.S.$500.
ADR-- American Depositary Receipt
IO -- Interest Only
9
