Putnam
Convertible
Opportunities
and Income Trust
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
8-31-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes will be
breathtaking in their scope. What will not change is the Trustees'
dedication to serving the best interests of our shareholders.
We welcome the challenges that lie ahead and are confident that Putnam
and your Board will continue to face those challenges successfully as
they have for more than 60 years. We look forward to helping you meet
your financial objectives for many years to come.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
October 18, 2000
REPORT FROM FUND MANAGEMENT
Charles G. Pohl
Rosemary H. Thomsen
A sharp correction in the technology sector of the convertibles market,
combined with weakness in the high-yield bond market, created negative
returns for the fund in absolute terms but also offered some exciting
buying opportunities. On the plus side, the fund's strong positions in
energy and financial-related convertibles and underweight position in
telecommunications-related convertibles aided the fund's relative
performance against its benchmark indexes.
Total return for 6 months ended 8/31/00
NAV Market price
-----------------------------------------------------------------------
-1.33% 9.56%
-----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods begins on page 6.
* TECHNOLOGY DOMINATES CONVERTIBLE MARKET
Compared with a total of more than 5,000 common stocks traded on the
various stock exchanges, the convertible market is relatively small,
comprising roughly 600 issues. It also is transitory by nature. The
companies that issue convertibles typically are in the fastest-growing
sectors of the economy and often tap the convertible market for
financing. Given the recent influx of new issues from high-growth
sectors, the composition of the convertible market has rapidly evolved
to heavier weightings in these sectors.
During 1999 and 2000, the principal issuers of convertible securities
have been companies in the technology and telecommunications industries.
In fact, by the end of 1999, the combined technology and
telecommunications sectors amounted to more than 60% of the convertible
universe, up from 29% in 1998. This mix differs greatly from the
market's composition in the early to mid-1990s, when most issuers were
from the cyclical and consumer services sectors. Concurrent with the
shift into technology has been a change in the life stage of the issuer,
with new issues reflecting younger, relatively untested companies that
were enthusiastically embraced by the market.
* STRATEGY FOCUSED ON QUALITY COMPANIES
In the convertible portion of the fund, we attempt to emphasize smaller
companies with attractive valuations. Nevertheless, convertibles in the
technology and telecommunications sectors have higher valuations, on
average, than the overall market. They are susceptible to
greater-than-average volatility. In recent years, these valuations have
been exaggerated by an exuberant market, which considered the Internet
and other emerging technologies the next gold rush and did little to
distinguish well-run companies from ill-conceived startups. Because we
recognize that fast-growing small and midsize companies are likely to
come in and out of favor, our research is focused on identifying the
highest-quality companies with the best long-term fundamentals for
inclusion in the portfolio.
[GRAPHIC OMITTED: TOP FIVE CONVERTIBLE SECURITY HOLDINGS]
TOP FIVE CONVERTIBLE SECURITY HOLDINGS*
Reliant Energy, Inc. into Time
Warner, Inc.
$1.165 convertible preferred
Electric utilities
Veritas Software Corp.
1.856%, 2006
Software
MediaOne Group, Inc.
$3.633 convertible preferred
Cable television
AES Trust II
$3.375 convertible preferred
Electric utilities
Hewlett-Packard Co.
0%, 2017
Computers
[GRAPHIC OMITTED: TOP FIVE CORPORATE BOND AND NOTES HOLDINGS]
TOP FIVE CORPORATE BOND AND NOTES HOLDINGS+
Midland Funding II Corp.
11.75%, 2005
Power producers
AMFM Operating, Inc.
12.625%, 2006
Broadcasting
Global Crossing Holdings Ltd.
9.625%, 2008
Telecommunications
Nextel Partners, Inc.
11%, 2010
Telecommunications
RBF Finance Co.
11.375%, 2009
Energy
Footnotes read:
*These combined holdings represent 4.8% of the fund's net assets as of
8/31/00. Portfolio holdings will vary over time.
+These holdings represent 3.0% of the fund's net assets as of 8/31/00.
Portfolio holdings will vary over time.
In March, technology issues experienced their first major setback in
several months. Rising interest rates, lofty valuations, and the
Microsoft antitrust trial were just some of the factors that combined to
drive the prices of technology convertibles lower. Although difficult
for many of the fund's holdings, the experience provided a unique
opportunity for us to buy convertible securities of quality companies in
rapidly growing industries at bargain prices. The fund's relative
performance was aided during the period by an underweight position in
the telecommunications sector, which was hit particularly hard and
therefore generated some of the best buying opportunities. Recent
purchases include Qwest, Level 3 Communications, Juniper Networks, and
Redback Networks. Although these holdings, along with others mentioned
in this report, were viewed favorably at the end of the period, all are
subject to review and adjustment in accordance with your fund's
investment strategy and may vary in the future.
[GRAPHIC OMITTED: pie chart PORTFOLIO COMPOSITION]
PORTFOLIO COMPOSITION*
Convertible securities -- 49.7%
Corporate bonds and notes -- 41.8%
Preferred stocks -- 1.6%
Common stocks,
including warrants -- 1.9%
Other -- 5.0%
Footnote reads:
*Based on total market value of investments as of 8/31/00. Composition will
vary over time.
* OTHER SECTORS PROVIDE DIVERSIFICATION, PERFORMANCE
Outside of the technology and telecommunications sectors, the fund's
holdings in energy and financial-related convertibles helped provide
valuable diversification and boosted performance during the period. The
fund's energy-related holdings benefited from rising commodity prices
and some strategic positioning prior to the start of the period. By
early 1999, the price of oil had dropped to $11 per barrel. OPEC was
having trouble restricting supply among its members, the Asian financial
crisis was threatening to leach demand from the global commodity market,
and an unseasonably warm winter in the United States also dampened
demand for the commodity. We took advantage of that opportunity and
loaded up on companies specializing in oil services, exploration, and
production. This year, oil futures skyrocketed to over $37 per barrel
(in September 2000) due to supply shortages and unseasonably cold
weather. The fund entered the period overweight in oil service,
exploration, and production company stocks, all of which have benefited
from the rise in oil prices. Holdings include Devon Energy, Diamond
Offshore Drilling, and Swift Energy.
In the financial sector, rising interest rates created volatility, but
the fund benefited from ongoing banking and insurance industry
consolidations and took advantage of opportunities to add to existing
holdings. In the past year, the Federal Reserve Board has raised
short-term interest rates six times in an effort to slow the U.S.
economy and hold off inflation. Merger and acquisition activity has
helped financial companies create efficiencies in a difficult business
environment. The fact that the Fed is nearer to the end of its
tightening cycle than the beginning puts interest-rate sensitive
companies in a strong position, and we took advantage of opportunities
during the period to buy quality companies selling at attractive
valuations. Recent purchases include American General common stock and
Sovereign Bankcorp, Inc. convertible bonds.
* HIGH-YIELD BONDS LOSE FAVOR IN 2000
The fund's high-yield corporate bonds reflected the unfavorable market
conditions in the high-yield sector. Reasons for the unfriendly
environment included the fact that the Fed's rate increases helped make
short-term fixed-income investments more attractive than they had been
in several years. Also, the U.S. Treasury's buyback program of
ultra-safe long-term Treasury securities captured the attention of
fixed-income investors. Finally, a rise in high-yield default rates over
the past two years cast a shadow over the market. Credit for many
issuers remains tight.
Although merger and acquisition activity helped in certain sectors, we
generally took a defensive tack with the portfolio. For example, we
reduced your fund's exposure to zero-coupon bonds -- bonds that don't
pay interest but are sold at a deep discount to their face value -- in
the face of generally increasing volatility in the bond market. In times
of increased market volatility, zero-coupon bonds tend to be more
volatile than comparable bonds with coupon payments.
* SPRING CORRECTION RESTORES BALANCE TO MARKETS
Debate over the future course of corporate earnings, interest rates, and
the November election is likely to generate uncertainty for the
foreseeable future. While this may translate into increased volatility
over the short term, we remain quite upbeat. In addition to the
attractive buying opportunities that uncertainty creates, the spring
correction produced a tangible shift in investor psychology and a
renewed appreciation for quality companies that can deliver growth. This
less speculative approach bodes well for the companies in your fund.
As we approach 2001, a number of factors could work in favor of the
high-yield market. First, it appears the Fed is nearing the end of its
rate-increase program, if it hasn't reached it already. This would be a
positive development for virtually all markets but particularly good for
high-yield bonds. Once investors feel more comfortable about re-entering
the high-yield market, they should find that these securities offer
attractive yields on both an historical and relative basis. The one wild
card remains the significant amount of pent-up issuance waiting for
conditions to improve before coming to market. Nevertheless, our outlook
remains positive.
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 8/31/00, there is no guarantee the fund will
continue to hold these securities in the future.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Convertible Opportunities and Income Trust is designed for investors
aggressively seeking capital appreciation and current income through a
diversified portfolio of lower-grade and nonrated convertible securities
and nonconvertible high-yielding securities.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 8/31/00
Merrill Merrill
Lynch Small Lynch All- First Boston Consumer
Market Cap Convertible High-Yield price
Since 6/29/95 NAV price Convertible Index Index Bond Index index
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 months -1.33% 9.56% -5.50% -3.00% 0.55% 1.53%
------------------------------------------------------------------------------------------------
1 year 9.54 1.23 -13.10 36.77 2.08 3.23
------------------------------------------------------------------------------------------------
5 years 57.65 42.26 --* 131.29 37.92 12.81
Annual average 9.53 7.30 --* 18.25 6.64 2.44
------------------------------------------------------------------------------------------------
Life of fund 61.89 39.44 --* 142.34 40.45 13.18
Annual average 9.77 6.64 --* 18.67 6.79 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 redeemed may be worth more or less than their
original cost.
*This index's inception was December 1996.
</TABLE>
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 8/31/00
-----------------------------------------------------------------------
Distributions from common shares
-----------------------------------------------------------------------
Number 6
-----------------------------------------------------------------------
Income $0.9300
-----------------------------------------------------------------------
Capital gains --
-----------------------------------------------------------------------
Total $0.9300
-----------------------------------------------------------------------
Share value: NAV Market price
-----------------------------------------------------------------------
2/29/00 $24.03 $18.750
-----------------------------------------------------------------------
8/31/00 22.58 19.563
-----------------------------------------------------------------------
Current return (end of period)
-----------------------------------------------------------------------
Current dividend rate1 8.24% 9.51%
-----------------------------------------------------------------------
1 Most recent distribution, annualized and divided by NAV or market price
at end of period.
TOTAL RETURN FOR PERIODS ENDED 9/30/00 (most recent calendar quarter)
Since 6/29/95 NAV Market price
-----------------------------------------------------
6 months -3.13% 7.01%
-----------------------------------------------------
1 year 8.10 12.29
-----------------------------------------------------
5 years 52.71 57.55
Annual average 8.84 9.52
-----------------------------------------------------
Life of fund 58.62 41.87
Annual average 9.17 6.88
-----------------------------------------------------
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
Merrill Lynch All-Convertible Index is an unmanaged list of convertible
securities commonly used as a measure of performance for the convertible
market.
Merrill Lynch Small Cap Convertible Index* is a sub-index of the Merrill
Lynch All-Convertible Index and is an unmanaged list of
small-capitalization convertible securities that measures performance
for small-capitalization convertible securities. The index's inception
was December 1996.
First Boston High-Yield Bond Index* is a market-weighted index including
publicly traded bonds having a rating below BBB by Standard & Poor's and
Baa by Moody's. The average quality of bonds included in the index may
be lower than the average quality of the bonds in which the fund
customarily invests.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take into account brokerage fees or taxes. Securities
in the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report 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
August 31, 2000 (Unaudited)
CORPORATE BONDS AND NOTES (41.4%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Advertising and Marketing Services (0.4%)
-------------------------------------------------------------------------------------------------------------------
$ 90,000 Adams Outdoor Advertising sr. notes 10 3/4s, 2006 $ 92,700
107,000 Interact Operating Co. notes 14s, 2003 32,100
40,000 Lamar Media Corp. company guaranty 9 5/8s, 2006 40,900
100,000 Lamar Media Corp. sr. sub. notes 9 1/4s, 2007 100,250
45,000 Lamar Media Corp. company guaranty 8 5/8s, 2007 44,213
-------------
310,163
Aerospace and Defense (0.8%)
-------------------------------------------------------------------------------------------------------------------
50,000 Argo-Tech Corp. company guaranty 8 5/8s, 2007 40,000
140,000 Argo-Tech Corp. company guaranty Ser. D, 8 5/8s, 2007 110,600
110,000 BE Aerospace, Inc. sr. sub. notes 9 1/2s, 2008 106,700
30,000 BE Aerospace, Inc. sr. sub. notes Ser. B, 8s, 2008 26,925
60,000 Decrane Aircraft Holdings company guaranty Ser. B, 12s, 2008 54,000
120,000 L-3 Communications Corp. sr. sub. notes Ser. B, 10 3/8s, 2007 122,400
50,000 L-3 Communications Corp. sr. sub. notes 8 1/2s, 2008 46,500
40,000 L-3 Communications Corp. company guaranty Ser. B, 8s, 2008 36,000
120,000 Moog, Inc. sr. sub. notes Ser. B, 10s, 2006 119,700
20,000 Sequa Corp. med. term notes 10s, 2001 20,146
10,000 Sequa Corp. sr. notes 9s, 2009 9,975
-------------
692,946
Agriculture (0.3%)
-------------------------------------------------------------------------------------------------------------------
284,643 Premium Standard Farms, Inc. sr. sec. notes 11s, 2003 (PIK) 259,025
Airlines (0.4%)
-------------------------------------------------------------------------------------------------------------------
100,000 Air 2 US 144A 12.266s, 2020 107,259
80,000 Calair LLC 144A company guaranty 8 1/8s, 2008 74,400
30,000 Continental Airlines, Inc. notes 8s, 2005 28,273
70,000 Northwest Airlines, Inc. company guaranty 8.52s, 2004 67,276
40,000 Northwest Airlines, Inc. company guaranty 7 5/8s, 2005 37,182
30,000 US Air, Inc. pass-through certificates Ser. 93A3, 10 3/8s, 2013 27,150
-------------
341,540
Automotive (1.1%)
-------------------------------------------------------------------------------------------------------------------
138,000 Aftermarket Technology Corp. sr. sub. notes 12s, 2004 135,930
80,000 Dura Operating Corp. company guaranty Ser. B, 9s, 2009 73,100
60,000 Exide Corp. sr. notes 10s, 2005 49,800
60,000 Federal Mogul Corp. notes 7 7/8s, 2010 43,800
180,000 Federal Mogul Corp. notes 7 3/4s, 2006 136,350
80,000 Federal Mogul Corp. notes 7 1/2s, 2009 58,400
80,000 Hayes Lemmerz International, Inc. company guaranty
Ser. B, 8 1/4s, 2008 70,000
55,000 Hayes Wheels International, Inc. company guaranty
Ser. B, 9 1/8s, 2007 50,325
30,000 Lear Corp. company guaranty Ser. B, 7.96s, 2005 28,844
160,000 Oxford Automotive, Inc. company guaranty Ser. D,
10 1/8s, 2007 144,000
170,000 Talon Automotive Group sr. sub. notes Ser. B, 9 5/8s, 2008 68,000
80,000 Tenneco, Inc. company guaranty Ser. B, 11 5/8s, 2009 69,600
-------------
928,149
Banking (1.2%)
-------------------------------------------------------------------------------------------------------------------
20,000 Bank United Corp. bonds 8 7/8s, 2007 19,838
50,000 CSBI Capital Trust I 144A company guaranty 11.75s, 2027 53,500
10,000 Chevy Chase Savings Bank, Inc. sub. deb. 9 1/4s, 2008 9,100
120,000 Chevy Chase Savings Bank, Inc. sub. deb. 9 1/4s, 2005 111,000
90,000 Colonial Capital II 144A company guaranty 8.92s, 2027 84,291
140,000 GS Escrow Corp. sr. notes 7 1/8s, 2005 128,387
125,000 Hanvit Bank 144A sub. notes 11 3/4s, 2010 (Korea) 125,313
90,000 Local Financial Corp. sr. notes 11s, 2004 90,000
70,000 Provident Capital Trust company guaranty 8.6s, 2026 65,270
40,000 Riggs Capital Trust 144A bonds 8 5/8s, 2026 32,472
70,000 Sovereign Bancorp, Inc. sr. notes 10 1/2s, 2006 71,225
60,000 Sovereign Capital Trust company guaranty 9s, 2027 45,007
90,000 Superior Financial 144A sr. notes 8.65s, 2003 86,632
50,000 Webster Capital Trust I 144A bonds 9.36s, 2027 43,207
-------------
965,242
Beverage (0.2%)
-------------------------------------------------------------------------------------------------------------------
198,000 Triarc Consumer Products, Inc. company guaranty
10 3/4s, 2009 192,555
Broadcasting (3.0%)
-------------------------------------------------------------------------------------------------------------------
165,000 Acme Television sr. disc. notes stepped-coupon zero %
(10 7/8s, 9/30/00), 2004 (STP) 156,750
160,000 Allbritton Communications Co. sr. sub. notes Ser. B,
8 7/8s, 2008 149,600
379,900 AMFM Operating, Inc. deb. 12 5/8s, 2006 (PIK) 434,986
2,044 Australis Media, Ltd. sr. disc. notes 15 3/4s, 2003
(In default) (Australia) (PIK) (NON) 1
240,000 Benedek Communications Corp. sr. disc. notes
stepped-coupon zero % (13 1/4s, 5/15/01), 2006 (STP) 199,200
75,800 Capstar Broadcasting sub. deb. 12s, 2009 (PIK) 87,170
75,000 Central European Media Enterprises, Ltd. sr. notes 9 3/8s,
2004 (Bermuda) 29,250
79,370 Citadel Broadcasting, Inc. sr. sub. notes 10 1/4s, 2007 81,751
193,000 Diva Systems Corp. sr. disc. notes stepped-coupon Ser. B,
zero % (12 5/8s, 3/1/03), 2008 (STP) 86,850
310,000 Echostar DBS Corp. sr. notes 9 3/8s, 2009 306,125
50,000 Fox Family Worldwide, Inc. sr. disc. notes stepped-coupon
zero % (10 1/4s, 11/1/02), 2007 (STP) 36,125
75,000 Fox Family Worldwide, Inc. sr. notes 9 1/4s, 2007 71,813
125,000 Golden Sky DBS, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (13 1/2s, 3/1/04), 2007 (STP) 89,375
75,000 Golden Sky Systems company guaranty Ser. B,
12 3/8s, 2006 83,250
80,000 Granite Broadcasting Corp. sr. sub. notes 8 7/8s, 2008 62,000
70,000 LIN Television Corp. company guaranty 8 3/8s, 2008 66,325
45,000 Onepoint Communications, Inc. company guaranty
Ser. B, 14 1/2s, 2008 41,400
30,000 Pegasus Communications Corp. sr. notes Ser. B, 9 3/4s, 2006 29,850
30,000 Pegasus Media & Communications notes Ser. B, 12 1/2s, 2005 31,200
247,000 PHI Holdings, Inc. sr. sub. notes zero %, 2001 229,290
50,000 Radio One, Inc. company guaranty Ser. B, 12s, 2004 52,500
90,000 Spanish Broadcasting System, Inc. sr. sub notes 9 5/8s, 2009 89,325
80,000 TV Azteca S.A. de C.V. sr. notes 10 1/2s, 2007 (Mexico) 75,800
-------------
2,489,936
Building Materials (0.3%)
-------------------------------------------------------------------------------------------------------------------
50,000 American Architectural Products Corp. company
guaranty 11 3/4s, 2007 (In default) (NON) 12,500
30,000 Atrium Companies, Inc. company guaranty Ser. B,
10 1/2s, 2009 27,300
80,000 Building Materials Corp. company guaranty 8s, 2008 58,800
130,000 Dayton Superior Corp. 144A sr. sub. notes 13s, 2009 127,400
60,000 NCI Building Systems, Inc. sr. sub. notes Ser. B,
9 1/4s, 2009 56,100
-------------
282,100
Cable Television (2.0%)
-------------------------------------------------------------------------------------------------------------------
90,000 Adelphia Communications Corp. sr. notes Ser. B,
9 7/8s, 2007 85,725
30,000 Adelphia Communications Corp. sr. notes 7 7/8s, 2009 25,425
100,000 Century Communications Corp. sr. notes 8 7/8s, 2007 92,250
400,000 Charter Communications Holdings LLC sr. notes
8 5/8s, 2009 366,000
80,000 Classic Cable, Inc. company guaranty 10 1/2s, 2010 66,400
250,000 Comcast UK Cable, Ltd. deb. stepped-coupon zero %
(11.2s, 11/15/00), 2007 (Bermuda) (STP) 234,375
30,000 CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2013 30,750
295,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (10 3/4s, 2/15/02), 2007
(United Kingdom) (STP) 227,519
125,000 Knology Holdings, Inc. sr. disc. notes stepped-coupon
zero % (11 7/8s, 10/15/02), 2007 (STP) 65,000
70,000 RCN Corp. sr. notes 10 1/8s, 2010 56,350
70,000 TeleWest Communications PLC 144A sr. disc. notes
stepped-coupon zero % (11 3/8s, 2/1/05), 2010
(United Kingdom) (STP) 37,100
90,000 TeleWest Communications PLC deb. stepped-coupon
zero % (11s, 10/1/00), 2007 (United Kingdom) (STP) 86,288
150,000 TeleWest Communications PLC 144A 9 7/8s, 2010
(United Kingdom) 142,500
50,000 United Pan-Europe N.V. sr. disc. notes stepped-coupon
zero % (13 3/4s, 8/01/05), 2010 (Netherlands) (STP) 22,563
60,000 United Pan-Europe N.V. sr. notes 10 7/8s, 2009
(Netherlands) 51,000
260,000 United Pan-Europe N.V. 144A notes stepped-coupon
zero % (12 1/2s, 8/01/04), 2009 (Netherlands) (STP) 119,600
-------------
1,708,845
Chemicals (1.8%)
-------------------------------------------------------------------------------------------------------------------
90,000 Arco Chemical Co. deb. 9.8s, 2020 87,300
60,000 Geo Specialty Chemicals, Inc. sr. sub. notes 10 1/8s, 2008 54,000
90,000 Huntsman Corp. 144A sr. sub. notes 9 1/2s, 2007 81,450
90,000 Huntsman Corp. 144A sr. sub. notes FRN 10.263s, 2007 78,300
280,000 Huntsman ICI Chemicals, Inc. company guaranty 10 1/8s, 2009 284,200
40,000 ISP Holdings, Inc. sr. notes Ser. B, 9 3/4s, 2002 38,800
20,000 ISP Holdings, Inc. sr. notes Ser. B, 9s, 2003 19,200
120,000 Lyondell Petrochemical Co. sr. sub. notes 10 7/8s, 2009 122,100
220,000 Lyondell Petrochemical Co. sec. notes Ser. B, 9 7/8s, 2007 223,025
200,000 PCI Chemicals & Pharmaceuticals company guaranty 9 1/4s,
2007 (India) 106,000
30,000 Pioneer Americas Acquisition 144A sr. notes 9 1/4s, 2007 18,000
60,000 Polymer Group, Inc. company guaranty Ser. B, 9s, 2007 48,300
40,000 Polymer Group, Inc. company guaranty Ser. B, 8 3/4s, 2008 31,500
140,268 Polytama International notes 11 1/4s, 2007 (In default)
(Netherlands) (NON) 7,013
80,000 Royster-Clark, Inc. 1st mtge. 10 1/4s, 2009 62,400
75,000 Sterling Chemicals Holdings sr. disc. notes stepped-coupon
zero % (13 1/2s, 8/15/01), 2008 (STP) 31,875
100,000 Sterling Chemicals Holdings company guaranty Ser. B,
12 3/8s, 2006 103,000
90,000 Trikem S.A. 144A bonds 10 5/8s, 2007 (Brazil) 72,225
-------------
1,468,688
Coal (--%)
-------------------------------------------------------------------------------------------------------------------
110,000 Lodestar Holdings, Inc. company guaranty 11 1/2s, 2005 16,500
Commercial and Consumer Services (0.4%)
-------------------------------------------------------------------------------------------------------------------
170,000 Coinmach Corp. sr. notes Ser. D, 11 3/4s, 2005 170,850
180,000 GS Superhighway Holdings sr. notes 9 7/8s, 2004 (China) 131,400
-------------
302,250
Computers (0.3%)
-------------------------------------------------------------------------------------------------------------------
235,000 Unisys Corp. sr. notes 11 3/4s, 2004 247,338
Conglomerates (0.1%)
-------------------------------------------------------------------------------------------------------------------
90,000 Insilco Holding Co. sr. disc. notes stepped-coupon zero %
(14s, 8/15/03), 2008 (STP) 49,500
Construction (0.2%)
-------------------------------------------------------------------------------------------------------------------
100,000 Morrison Knudsen Corp. 144A sr. notes 11s, 2010 101,500
30,000 Republic Group, Inc. sr. sub. notes 9 1/2s, 2008 30,000
-------------
131,500
Consumer (0.2%)
-------------------------------------------------------------------------------------------------------------------
140,000 Home Interiors & Gifts, Inc. company guaranty 10 1/8s, 2008 42,000
140,000 Samsonite Corp. sr. sub. notes 10 3/4s, 2008 114,450
-------------
156,450
Consumer Finance (0.1%)
-------------------------------------------------------------------------------------------------------------------
115,000 Contifinancial Corp. sr. notes 8 3/8s, 2003 (In default) (NON) 14,375
110,000 Contifinancial Corp. sr. notes 8 1/8s, 2008 (In default) (NON) 13,750
80,000 Contifinancial Corp. sr. notes 7 1/2s, 2002 (In default) (NON) 8,800
80,000 Outsourcing Solutions, Inc. sr. sub. notes Ser. B, 11s, 2006 68,000
-------------
104,925
Consumer Goods (0.5%)
-------------------------------------------------------------------------------------------------------------------
35,000 French Fragrances, Inc. sr. notes Ser. B, 10 3/8s, 2007 33,600
30,000 French Fragrances, Inc. company guaranty Ser. D, 10 3/8s, 2007 29,100
205,000 NBTY, Inc. 144A sr. sub. notes 8 5/8s, 2007 175,275
250,000 Revlon Consumer Products sr. notes 8 1/8s, 2006 177,500
-------------
415,475
Consumer Services (0.2%)
-------------------------------------------------------------------------------------------------------------------
110,000 Iron Mountain, Inc. company guaranty 8 3/4s, 2009 103,675
49,000 Pierce Leahy Corp. sr. sub. notes 11 1/8s, 2006 50,470
-------------
154,145
Containers (0.5%)
-------------------------------------------------------------------------------------------------------------------
180,000 AEP Industries, Inc. sr. sub. notes 9 7/8s, 2007 153,000
150,000 Consumers International 144A sr. notes 10 1/4s, 2005 60,000
40,000 Radnor Holdings, Inc. sr. notes 10s, 2003 35,600
170,000 Tekni-Plex, Inc. 144A sr. sub. notes 12 3/4s, 2010 171,700
-------------
420,300
Electric Utilities (0.7%)
-------------------------------------------------------------------------------------------------------------------
85,000 AES China Generating Co. sr. notes 10 1/8s, 2006 (China) 62,900
40,000 CMS Energy Corp. sr. notes 7 1/2s, 2009 36,100
220,000 CMS Energy Corp. sr. notes Ser. B, 6 3/4s, 2004 204,600
100,843 Northeast Utilities System notes Ser. A, 8.58s, 2006 102,123
56,000 Northeast Utilities System notes Ser. B, 8.38s, 2005 56,064
290,000 Panda Global Energy Co. company guaranty 12 1/2s,
2004 (China) 130,500
-------------
592,287
Energy (0.8%)
-------------------------------------------------------------------------------------------------------------------
80,000 Leviathan Gas Corp. company guaranty Ser. B, 10 3/8s, 2009 84,000
90,000 Parker Drilling Corp. company guaranty Ser. D, 9 3/4s, 2006 87,750
90,000 R&B Falcon Corp. sr. notes 12 1/4s, 2006 106,200
320,000 RBF Finance Co. company guaranty 11 3/8s, 2009 369,600
-------------
647,550
Entertainment (0.8%)
-------------------------------------------------------------------------------------------------------------------
300,000 AMC Entertainment, Inc. sr. sub. notes 9 1/2s, 2009 108,000
160,000 Autotote Corp. 144A company guaranty 12 1/2s, 2010 160,000
70,000 Cinemark USA, Inc. sr. sub. notes 8 1/2s, 2008 (Mexico) 22,400
180,000 Premier Parks, Inc. sr. notes 9 1/4s, 2006 168,300
140,000 SFX Entertainment, Inc. company guaranty 9 1/8s, 2008 146,475
75,000 SFX Entertainment, Inc. 144A company guaranty Ser. B,
9 1/8s, 2008 77,250
100,000 Silver Cinemas, Inc. sr. sub. notes 10 1/2s, 2005 (In default) (NON) 9,000
110,000 United Artists Theatre sr. sub. notes 9 3/4s, 2008 (In default) (NON) 2,200
-------------
693,625
Financial (0.8%)
-------------------------------------------------------------------------------------------------------------------
60,000 Aames Financial Corp. sr. notes 9 1/8s, 2003 26,700
250,000 Advanta Corp. med. term notes Ser. B, 7s, 2001 236,903
50,000 AMRESCO, Inc. sr. sub. notes Ser. 97-A, 10s, 2004 19,500
40,000 AMRESCO, Inc. sr. sub. notes Ser. 98-A, 9 7/8s, 2005 15,600
70,000 Delta Financial Corp. sr. notes 9 1/2s, 2004 31,500
75,000 Imperial Credit Capital Trust I 144A company guaranty
10 1/4s, 2002 59,250
45,000 Imperial Credit Industries, Inc. sr. notes 9 7/8s, 2007 31,950
60,000 Nationwide Credit, Inc. sr. notes Ser. A, 10 1/4s, 2008 42,000
25,000 Ocwen Capital Trust I company guaranty 10 7/8s, 2027 12,750
80,000 Ocwen Federal Bank FSB sub. deb. 12s, 2005 74,200
50,000 Ocwen Financial Corp. notes 11 7/8s, 2003 45,375
80,000 Resource America, Inc. 144A sr. notes 12s, 2004 71,600
-------------
667,328
Food (0.4%)
-------------------------------------------------------------------------------------------------------------------
110,000 Aurora Foods, Inc. 144A ser. sub. notes Ser. D, 9 7/8s, 2007 86,350
75,000 Eagle Family Foods company guaranty Ser. B, 8 3/4s, 2008 40,125
150,000 RAB Enterprises, Inc. company guaranty 10 1/2s, 2005 106,500
130,000 Vlassic Foods Intl., Inc. sr. sub notes Ser. B, 10 1/4s, 2009 65,000
-------------
297,975
Gaming & Lottery (1.8%)
-------------------------------------------------------------------------------------------------------------------
40,000 Ameristar Casinos, Inc. company guaranty Ser. B,
10 1/2s, 2004 40,200
40,000 Boyd Gaming Corp. sr. sub. notes 9 1/2s, 2007 38,400
160,000 Fitzgeralds Gaming Corp. company guaranty Ser. B, 12 1/4s,
2004 (In default) (NON) 88,000
50,000 Harrahs Entertainment, Inc. company guaranty 7 1/2s, 2009 47,246
190,000 Hollywood Casino Corp. company guaranty 11 1/4s, 2007 197,125
60,000 Hollywood Park, Inc. company guaranty Ser. B, 9 1/4s, 2007 61,500
60,000 Isle of Capri Black Hawk LLC 144A 1st mortgage Ser. B,
13s, 2004 65,400
120,000 Isle of Capri Black Hawk LLC company guaranty 8 3/4s,
2009 112,200
30,000 MGM Grand, Inc. company guaranty 9 3/4s, 2007 31,425
120,000 Mohegan Tribal Gaming, Auth. sr. sub. notes 8 3/4s, 2009 117,900
30,000 Mohegan Tribal Gaming, Auth. sr. notes 8 1/8s, 2006 29,250
50,000 Riviera Black Hawk, Inc. 1st mtge. 13s, 2005 50,000
280,000 Trump A.C. 1st mtge. 11 1/4s, 2006 189,000
320,000 Trump Castle Funding 144A sub. notes 10 1/4s, 2003 320,800
130,000 Venetian Casino, Inc. company guaranty 12 1/4s, 2004 132,275
-------------
1,520,721
Health Care (1.2%)
-------------------------------------------------------------------------------------------------------------------
125,000 ALARIS Medical Systems, Inc. company guaranty 9 3/4s, 2006 86,250
40,000 Bio-Rad Labs Corp. sr. sub. notes 11 5/8s, 2007 41,950
30,000 Columbia/HCA Healthcare Corp. deb. 8.36s, 2024 27,600
30,000 Columbia/HCA Healthcare Corp. med. term notes 7.69s, 2025 25,650
30,000 Columbia/HCA Healthcare Corp. notes 7 1/4s, 2008 27,338
90,000 Columbia/HCA Healthcare Corp. notes 6.91s, 2005 83,700
130,000 Columbia/HCA Healthcare Corp. med. term notes
6.63s, 2045 124,145
75,000 Conmed Corp. company guaranty 9s, 2008 63,000
110,000 HCA-The Healthcare Co. notes 8 3/4s, 2010 110,138
100,000 Hudson Respiratory Care, Inc. sr. sub. notes 9 1/8s, 2008 70,500
85,000 Mediq, Inc. deb. stepped-coupon zero % (13s, 6/1/03),
2009 (STP) 9
80,000 Mediq, Inc. company guaranty 11s, 2008 (In default) (NON) 2,400
90,000 Tenet Healthcare Corp. sr. notes 8 5/8s, 2003 90,000
70,000 Tenet Healthcare Corp. sr. notes 8s, 2005 68,600
50,000 Tenet Healthcare Corp. sr. notes Ser. B, 7 5/8s, 2008 47,063
160,000 Triad Hospitals Holdings company guaranty Ser. B, 11s, 2009 167,200
-------------
1,035,543
Homebuilding (0.3%)
-------------------------------------------------------------------------------------------------------------------
70,000 D.R. Horton, Inc. company guaranty 8s, 2009 64,400
20,000 Del Webb Corp. sr. sub. deb. 10 1/4s, 2010 18,700
40,000 Del Webb Corp. sr. sub. deb. 9 3/8s, 2009 34,000
60,000 Lennar Corp. 144A sr. notes 9.95s, 2010 61,500
80,000 Ryland Group, Inc. sr. notes 9 3/4s, 2010 80,800
30,000 Toll Corp. company guaranty 8 1/8s, 2009 28,313
-------------
287,713
Household Furniture & Appliances (0.1%)
-------------------------------------------------------------------------------------------------------------------
85,000 Albecca, Inc. company guaranty 10 3/4s, 2008 75,650
45,000 Sealy Mattress Co. sr. sub. notes Ser. B, 9 7/8s, 2007 43,650
-------------
119,300
Insurance (--%)
-------------------------------------------------------------------------------------------------------------------
110,000 Conseco Finance Trust III, Inc. bonds 8.796s, 2027 39,600
Lodging/Tourism (0.5%)
-------------------------------------------------------------------------------------------------------------------
70,000 Epic Resorts LLC company guaranty Ser. B, 13s, 2005 30,800
210,000 HMH Properties, Inc. company guaranty Ser. B, 7 7/8s, 2008 196,875
30,000 Host Marriott L.P. sr. notes Ser. E, 8 3/8s, 2006 28,650
180,000 ITT Corp. notes 6 3/4s, 2005 166,855
-------------
423,180
Manufacturing (0.9%)
-------------------------------------------------------------------------------------------------------------------
140,000 Blount, Inc. company guaranty 13s, 2009 144,200
35,000 Celestica International, Ltd. 144A sr. sub. notes 10 1/2s,
2006 (Canada) 36,400
80,000 Continental Global Group sr. notes Ser. B, 11s, 2007 27,200
235,000 Day International Group, Inc. company guaranty 9 1/2s, 2008 199,750
130,000 Flowserve Corp. 144A company guaranty 12 1/4s, 2010 131,560
310,000 Grove Holdings LLC deb. stepped-coupon zero %
(11 5/8s, 5/1/03), 2009 (STP) 15,500
170,000 Motors and Gears, Inc. sr. notes Ser. D, 10 3/4s, 2006 166,600
40,000 Roller Bearing Co. company guaranty Ser. B, 9 5/8s, 2007 36,800
-------------
758,010
Medical Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
185,000 Extendicare Health Services, Inc. company guaranty
9.35s, 2007 101,750
90,000 Integrated Health Services, Inc. sr. sub. notes Ser. A, 9 1/2s,
2007 (In default) (NON) 1,800
60,000 Integrated Health Services, Inc. sr. sub. notes Ser. A, 9 1/4s,
2008 (In default) (NON) 1,200
150,000 Mariner Post-Acute Network, Inc. sr. sub. notes stepped-
coupon Ser. B, zero % (10 1/2s, 11/1/02), 2007
(In default) (STP) (NON) 938
245,000 Multicare Cos., Inc. sr. sub. notes 9s, 2007 (In default) (NON) 13,169
145,000 Sun Healthcare Group, Inc. sr. sub. notes Ser. B, 9 1/2s,
2007 (In default) (NON) 2,900
60,000 Sun Healthcare Group, Inc. 144A sr. sub. notes 9 3/8s,
2008 (In default) (NON) 1,200
-------------
122,957
Medical Technology (0.1%)
-------------------------------------------------------------------------------------------------------------------
70,000 Hanger Orthopedic Group, Inc. sr. sub. notes 11 1/4s, 2009 61,250
Metals (1.0%)
-------------------------------------------------------------------------------------------------------------------
140,000 AK Steel Corp. company guaranty 7 7/8s, 2009 130,550
68,560 Anker Coal Group, Inc. company guaranty Ser. B,
14 1/4s, 2007 30,852
40,000 Armco, Inc. sr. notes 8 7/8s, 2008 38,400
140,000 Kaiser Aluminum & Chemical Corp. sr. sub. notes
12 3/4s, 2003 128,800
10,000 Kaiser Aluminum & Chemical Corp. sr. notes Ser. B,
10 7/8s, 2006 9,850
10,000 Kaiser Aluminum & Chemical Corp. sr. notes 9 7/8s, 2002 9,850
190,000 LTV Corp. company guaranty 11 3/4s, 2009 144,400
190,000 National Steel Corp. 1st mtge. Ser. D, 9 7/8s, 2009 166,725
40,000 Oregon Steel Mills 1st mortgage 11s, 2003 30,400
10,000 Weirton Steel Corp. 144A sr. notes 10 3/4s, 2005 9,300
100,000 Wheeling -Pittsburgh Steel Corp. sr. notes 9 1/4s, 2007 65,000
80,000 WHX Corp. sr. notes 10 1/2s, 2005 61,400
-------------
825,527
Oil & Gas (1.1%)
-------------------------------------------------------------------------------------------------------------------
180,000 Belco Oil & Gas Corp. company guaranty Ser. B,
10 1/2s, 2006 180,450
60,000 Belco Oil & Gas Corp. sr. sub. notes Ser. B, 8 7/8s, 2007 55,800
60,000 Giant Industries Corp. company guaranty 9s, 2007 55,800
20,000 Gulf Canada Resources, Ltd. sr. sub. notes 9 5/8s,
2005 (Canada) 20,500
30,000 HS Resources, Inc. company guaranty 9 1/4s, 2006 30,300
70,000 HS Resources, Inc. sr. sub. notes Ser. B, 9 1/4s, 2006 69,738
80,000 Nuevo Energy Co. sr. sub. notes Ser. B, 9 1/2s, 2008 80,400
10,000 Ocean Energy, Inc. company guaranty Ser. B, 8 7/8s, 2007 10,200
150,000 Ocean Energy, Inc. company guaranty Ser. B, 8 3/8s, 2008 149,625
40,000 Pioneer Natural Resources Co. company guaranty
9 5/8s, 2010 42,000
10,000 Port Arthur Finance Corp. company guaranty 12 1/2s, 2009 10,000
55,000 Seven Seas Petroleum sr. notes Ser. B, 12 1/2s, 2005 12,650
85,000 Snyder Oil Corp. sr. sub. notes 8 3/4s, 2007 85,425
30,000 Stone Energy Corp. company guaranty 8 3/4s, 2007 28,500
75,000 Vintage Petroleum sr. sub. notes 9 3/4s, 2009 76,875
-------------
908,263
Paper & Forest Products (1.9%)
-------------------------------------------------------------------------------------------------------------------
205,000 APP Finance II Mauritius, Ltd. bonds stepped-coupon 12s,
(16s, 2/15/04), 2049 (Indonesia) (STP) 92,250
40,000 Four M Corp. sr. notes Ser. B, 12s, 2006 38,200
170,000 Gaylord Container Corp. sr. sub. notes 9 7/8s, 2008 85,000
90,000 Indah Kiat Financial Mauritius, Ltd. company guaranty 10s,
2007 (Indonesia) 50,400
20,000 Owens-Illinois, Inc. deb. 7.8s, 2018 17,051
140,000 Owens-Illinois, Inc. sr. notes 7.35s, 2008 119,004
150,000 Pacifica Papers, Inc. sr. notes 10s, 2009 (Canada) 151,500
70,000 Packaging Corp. company guaranty 9 5/8s, 2009 71,750
240,000 Pindo Deli Finance Mauritius, Ltd. company guaranty 10 3/4s,
2007 (Indonesia) 134,400
285,000 Repap New Brunswick sr. notes 10 5/8s, 2005 (Canada) 293,550
350,000 Riverwood International Corp. company guaranty
10 7/8s, 2008 330,750
30,000 Stone Container Corp. sr. notes 12.58s, 2016 31,125
10,000 Stone Container Corp. 1st. Mtge. 10 3/4s, 2002 10,150
40,000 Stone Container Financial 144A company guaranty 11 1/2s,
2006 (Canada) 41,450
125,000 Tembec Industries, Inc. company guaranty 8 5/8s,
2009 (Canada) 123,750
-------------
1,590,330
Pharmaceuticals (0.2%)
-------------------------------------------------------------------------------------------------------------------
130,000 ICN Pharmaceuticals, Inc. 144A sr. notes 8 3/4s, 2008 128,700
Power Producers (1.5%)
-------------------------------------------------------------------------------------------------------------------
60,000 Calpine Corp. sr. notes 10 1/2s, 2006 61,800
20,000 Calpine Corp. sr. notes 9 1/4s, 2004 19,900
70,000 Calpine Corp. sr. notes 8 3/4s, 2007 71,657
40,000 Calpine Corp. sr. notes 7 7/8s, 2008 38,185
830,000 Midland Funding II Corp. deb. Ser. A, 11 3/4s, 2005 909,315
139,000 York Power Funding 144A notes 12s, 2007 (Cayman Islands) 140,390
-------------
1,241,247
Publishing (0.4%)
-------------------------------------------------------------------------------------------------------------------
235,000 Affinity Group Holdings sr. notes 11s, 2007 196,225
180,000 Garden State Newspapers, Inc. sr. sub. notes Ser. B,
8 3/4s, 2009 165,600
-------------
361,825
Railroads (0.1%)
-------------------------------------------------------------------------------------------------------------------
155,000 TFM S.A. de C.V. company guaranty stepped-coupon
zero % (11 3/4s, 6/15/02), 2009 (Mexico) (STP) 120,900
Restaurants (0.2%)
-------------------------------------------------------------------------------------------------------------------
100,000 FRD Acquisition Co. sr. notes Ser. B, 12 1/2s, 2004 47,000
80,000 Sbarro, Inc. company guaranty 11s, 2009 82,400
-------------
129,400
Retail (0.7%)
-------------------------------------------------------------------------------------------------------------------
190,000 Amazon.com, Inc. sr. disc. notes stepped-coupon zero %
(10s,05/01/03), 2008 (STP) 95,000
30,000 Iron Age Corp. company guaranty 9 7/8s, 2008 21,000
100,000 K mart Corp. deb. 7 3/4s, 2012 86,250
135,000 Mothers Work, Inc. sr. notes 12 5/8s, 2005 125,550
310,000 Saks, Inc. company guaranty 8 1/4s, 2008 238,461
20,000 Southland Corp. sr. sub. deb. 5s, 2003 17,961
-------------
584,222
Semiconductor (0.1%)
-------------------------------------------------------------------------------------------------------------------
50,000 Amkor Technologies, Inc. sr. notes 9 1/4s, 2006 49,813
40,000 Chippac Intl., Ltd. company guaranty Ser. B, 12 3/4s, 2009 42,800
-------------
92,613
Shipping (0.1%)
-------------------------------------------------------------------------------------------------------------------
40,000 International Shipholding Corp. sr. notes 7 3/4s, 2007 34,400
30,000 Transportacion Maritima Mexicana S.A. de C.V. notes
9 1/4s, 2003 (Mexico) 24,600
-------------
59,000
Software (--%)
-------------------------------------------------------------------------------------------------------------------
50,000 Telehub Communications Corp. company guaranty stepped-
coupon zero % (13 7/8s, 7/31/02), 2005 (STP) 9,000
Specialty Printing (0.1%)
-------------------------------------------------------------------------------------------------------------------
50,000 Perry-Judd company guaranty 10 5/8s, 2007 44,500
35,154 Von Hoffman Press, Inc. 144A sr. sub. notes 13 1/2s, 2009 31,639
40,000 Von Hoffman Press, Inc. 144A sr. sub. notes 10 3/8s, 2007 37,600
-------------
113,739
Technology (0.8%)
-------------------------------------------------------------------------------------------------------------------
135,000 Fairchild Semiconductor Corp. sr. sub. notes 10 1/8s, 2007 136,688
140,000 Flextronics International, Ltd. 144A sr. sub. notes 9 7/8s, 2010 145,250
100,000 Flextronics International, Ltd. sr. sub. notes Ser. B, 8 3/4s, 2007 98,250
60,000 Telecommunications Techniques, Inc. company guaranty
9 3/4s, 2008 56,400
225,000 Viasystems, Inc. sr. sub notes 9 3/4s, 2007 203,625
-------------
640,213
Technology Services (0.7%)
-------------------------------------------------------------------------------------------------------------------
90,000 Covad Communications Group, Inc. sr. notes 12 1/2s, 2009 71,100
70,000 Covad Communications Group, Inc. sr. notes Ser. B, 12s, 2010 53,900
150,000 Equinix, Inc. sr. notes 13s, 2007 120,000
200,000 Exodus Communications, Inc. 144A sr. notes 11 5/8s, 2010 203,000
60,000 Exodus Communications, Inc. sr. notes 10 3/4s, 2009 59,100
30,000 PSINet, Inc. sr. notes 11 1/2s, 2008 26,250
40,000 PSINet, Inc. sr. notes 11s, 2009 34,400
60,000 Rhythms Netconnections sr. notes Ser. B, 14s, 2010 39,000
-------------
606,750
Telecommunications (5.7%)
-------------------------------------------------------------------------------------------------------------------
150,000 360Networks, Inc. 144A sr. notes 13s, 2008 (Canada) 141,750
120,000 American Mobile Satellite Corp. company guaranty
12 1/4s, 2008 89,100
20,000 Arch Communications, Inc. sr. notes 13 3/4s, 2008 16,000
80,000 Bestel S.A. de C.V. sr. disc. notes stepped-coupon zero %
(12 3/4s, 5/15/03), 2005 (Mexico) (STP) 52,400
60,000 Call-Net Enterprises, Inc. sr. notes 8s, 2008 (Canada) 32,400
110,000 Carrier1 Intl. SA sr. notes Ser. B, 13 1/4s, 2009 (Luxembourg) 105,325
210,000 Celcaribe S.A. sr. notes stepped-coupon zero %
(13 1/2s, 3/15/04), 2004 (Colombia) (STP) 168,000
380,000 CellNet Data Systems, Inc. sr. disc. notes stepped-coupon
zero % (14s, 10/1/02), 2007 (In default) (NON) (STP) 26,600
70,000 Crown Castle Intl., Corp. sr. notes 10 3/4s, 2011 73,150
90,000 Dobson Communications Corp. sr. notes 10 7/8s, 2010 90,900
120,000 Dobson/Sygnet Communications, Inc. sr. notes 12 1/4s, 2008 123,000
60,000 Esprit Telecom Group PLC sr. notes 11 1/2s, 2007
(United Kingdom) 34,200
120,000 Flag, Ltd. 144A sr. notes 8 1/4s, 2008 (Bermuda) 106,800
400,000 Global Crossing Holdings, Ltd. company guaranty
9 5/8s, 2008 404,000
30,000 Global Crossing Holdings, Ltd. company guaranty
9 1/8s, 2006 29,775
70,000 Grupo Iusacell sr. notes 14 1/4s, 2006 75,775
100,000 Innova S De R.L. sr. notes 12 7/8s, 2007 (Mexico) 97,000
200,000 Level 3 Communications, Inc. sr. notes 11 1/4s, 2010 192,500
50,000 Level 3 Communications, Inc. sr. notes 11s, 2008 49,500
50,000 Loral Space & Communication, Ltd. sr. notes 9 1/2s, 2006 38,188
450,000 McCaw International, Ltd. sr. disc. notes stepped coupon
zero % (13s, 4/15/02), 2007 (STP) 346,500
30,000 Metrocall, Inc. sr. sub. notes 11s, 2008 22,500
30,000 Metrocall, Inc. sr. sub. notes 9 3/4s, 2007 22,200
20,000 Metromedia Fiber Network, Inc. sr. notes 10s, 2009 19,750
170,000 Metromedia Fiber Network, Inc. sr. notes Ser. B, 10s, 2008 167,450
157,000 Millicom International Cellular S.A. sr. disc. notes
stepped-coupon zero % (13 1/2s, 6/1/01), 2006
(Luxembourg) (STP) 138,945
180,000 Nextel Communications, Inc. sr. notes 12s, 2008 190,800
140,000 Nextel International, Inc. 144A sr. notes 12 3/4s, 2010 136,850
370,000 Nextel Partners, Inc. 144A sr. notes 11s, 2010 370,000
70,000 Nextlink Communications, Inc. sr. notes 10 1/2s, 2009 67,200
90,000 NorthEast Optic Network, Inc. sr. notes 12 3/4s, 2008 78,300
130,000 NorthPoint Communications Group, Inc. sr. notes
12 7/8s, 2010 126,100
90,000 Orbital Imaging Corp. sr. notes Ser. B, 11 5/8s, 2005 36,000
90,000 Pagemart Wireless, Inc. sr. disc. notes stepped-coupon
zero % (11 1/4s, 2/1/03), 2008 (STP) 35,550
55,000 Paging Network Do Brasil sr. notes 13 1/2s, 2005 (Brazil) 3,575
70,000 Pinnacle Holdings, Inc. sr. disc. notes stepped-coupon
zero % (10s, 3/15/03), 2008 (STP) 50,400
30,000 Price Communications Wireless, Inc. 144A sr. notes
9 1/8s, 2006 30,600
100,000 Primus Telecommunications Group, Inc. sr. notes
12 3/4s, 2009 64,000
130,000 RSL Communications PLC company guaranty
12 7/8s, 2010 35,100
55,000 RSL Communications PLC company guaranty 12 1/4s, 2006 19,800
70,000 RSL Communications PLC 144A notes 10 1/2s, 2008 21,175
80,000 RSL Communications PLC company guaranty 9 1/8s, 2008 20,800
60,000 Satelites Mexicanos S.A. de C.V. 144A sr. notes 10 1/8s,
2004 (Mexico) 39,600
50,000 Spectrasite Holdings, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (12 7/8s, 3/15/05), 2010 (STP) 28,250
50,000 Spectrasite Holdings, Inc. sr. disc. notes stepped-coupon
zero % (11 1/4s, 4/15/04), 2009 (STP) 29,750
80,000 Startec Global Communications Corp. sr. notes 12s, 2008 64,000
40,000 USA Mobile Communication, Inc. sr. notes 14s, 2004 32,400
30,000 USA Mobile Communication, Inc. sr. notes 9 1/2s, 2004 21,900
110,000 Viatel, Inc. sr. disc. notes stepped-coupon zero %
(12 1/2s, 4/15/03), 2008 (STP) 38,500
157,000 Viatel, Inc. sr. notes 11 1/2s, 2009 89,490
70,000 Viatel, Inc. sr. notes 11 1/4s, 2008 39,900
90,000 Williams Communications Group, Inc. sr. notes
10 7/8s, 2009 86,850
458,000 WinStar Communications, Inc. 144A sr. disc. notes
stepped-coupon zero % (14 3/4s, 4/15/05), 2010 (STP) 180,910
93,000 WinStar Communications, Inc. 144A sr. notes 12 3/4s, 2010 80,910
115,000 World Access, Inc. sr. notes Ser. B, 13 1/4s, 2008 96,600
-------------
4,779,018
Telephone (2.6%)
-------------------------------------------------------------------------------------------------------------------
200,000 Alamosa PCS Holdings, Inc. company guaranty stepped-
coupon zero % (12 7/8s, 2/15/05), 2010 (STP) 114,000
80,000 Alaska Communications Systems Corp. company guaranty
9 3/8s, 2009 73,600
10,000 Allegiance Telecom, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (11 3/4s, 2/15/03), 2008 (STP) 7,100
70,000 Birch Telecommunications, Inc. sr. notes 14s, 2008 42,000
170,000 BTI Telecom Corp. sr. notes 10 1/2s, 2007 110,500
59,200 Hyperion Telecommunications Corp., Inc. sr. notes Ser. B,
12 1/4s, 2004 57,128
480,000 ICG Services, Inc. sr. disc. notes stepped-coupon zero %
(9 7/8s, 5/1/03), 2008 (STP) 163,200
70,000 Intermedia Communications, Inc. sr. disc. notes stepped-
coupon Ser. B, zero % (121/4s, 3/1/04), 2009 (STP) 34,650
570,000 KMC Telecommunications Holdings, Inc. sr. disc. notes
stepped-coupon zero % (12 1/2s, 2/15/03), 2008 (STP) 228,000
50,000 Leap Wireless International, Inc. company guaranty
12 1/2s, 2010 42,500
200,000 Madison River Capital Corp. sr. notes 13 1/4s, 2010 166,000
90,000 MGC Communications, Inc. sr. notes 13s, 2010 74,700
135,000 Microcell Telecommunications sr. disc. notes stepped-coupon
Ser. B, zero % (14s, 12/1/01), 2006 (Canada) (STP) 129,600
40,000 Netia Holdings B.V. 144A company guaranty stepped-
coupon zero % (11 1/4s, 11/1/01), 2007 (Poland) (STP) 28,200
40,000 Netia Holdings B.V. 144A company guaranty 10 1/4s,
2007 (Poland) 33,700
280,000 Telecorp PCS, Inc. 144A sr. sub. notes 10 5/8s, 2010 291,200
5,000 Time Warner Telecom, Inc. sr. notes 9 3/4s, 2008 4,775
45,000 Transtel S.A. pass-through certificates 12 1/2s, 2007 18,450
200,000 Ubiquitel Operating Co. company guaranty stepped-
coupon zero % (14s, 4/15/05), 2010 (STP) 104,000
240,000 US Unwired, Inc. company guaranty, stepped-coupon
Ser. B, zero % (13 3/8s, 11/1/04), 2009 (STP) 135,600
85,000 Versatel Telecom N.V. sr. notes 13 1/4s, 2008 (Netherlands) 81,175
30,000 Versatel Telecom N.V. sr. notes 13 1/4s, 2008 (Netherlands) 28,650
210,000 Voicestream Wireless, Inc. sr. notes 10 3/8s, 2009 226,800
-------------
2,195,528
Textiles (0.4%)
-------------------------------------------------------------------------------------------------------------------
110,000 Galey & Lord, Inc. company guaranty 9 1/8s, 2008 60,500
110,000 Kasper A.S.L., Ltd. sr. notes 12 3/4s, 2004 62,700
50,000 Levi Strauss & Co. notes 6.8s, 2003 41,000
40,000 Westpoint Stevens, Inc. sr. notes 7 7/8s, 2008 34,600
130,000 Westpoint Stevens, Inc. sr. notes 7 7/8s, 2005 116,350
65,000 William Carter Holdings Co. sr. sub. notes Ser. A, 12s, 2008 59,800
-------------
374,950
Tobacco (0.2%)
-------------------------------------------------------------------------------------------------------------------
160,000 North Atlantic Trading Co. company guaranty Ser. B, 11s, 2004 137,600
Trucks & Parts (0.1%)
-------------------------------------------------------------------------------------------------------------------
120,000 Transportation Manufacturing Operations, Inc. company
guaranty 11 1/4s, 2009 96,000
Utilities (0.1%)
-------------------------------------------------------------------------------------------------------------------
160,000 Cathay International, Ltd. 144A sr. notes 13s, 2008 (China) 83,200
Waste Management (0.8%)
-------------------------------------------------------------------------------------------------------------------
315,000 Allied Waste Industries, Inc. company guaranty Ser. B,
10s, 2009 281,520
130,000 Allied Waste Industries, Inc. company guaranty Ser. B,
7 7/8s, 2009 117,325
250,000 Waste Management, Inc. company guaranty 6 7/8s, 2009 227,645
-------------
626,490
Water Utilities (0.1%)
-------------------------------------------------------------------------------------------------------------------
70,000 Azurix Corp. 144A notes 10 3/8s, 2007 54,250
-------------
Total Corporate Bonds and Notes (cost $40,782,807) $ 34,663,376
<CAPTION>
CONVERTIBLE BONDS AND NOTES (29.7%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Advertising and Marketing Services (0.6%)
-------------------------------------------------------------------------------------------------------------------
$ 45,000 DoubleClick, Inc. cv. sub. notes 4 3/4s, 2006 $ 51,131
20,000 DoubleClick, Inc. 144A cv. sub. notes 4 3/4s, 2006 22,725
115,000 Interpublic Group Cos., Inc. cv. sub. notes 1.8s, 2004 123,194
119,000 Omnicom Group, Inc. cv. sub. deb. 2 1/4s, 2013 205,721
95,000 Young & Rubicam, Inc. 144A cv. sr. notes 3s, 2005 99,869
-------------
502,640
Aerospace/Defense (0.1%)
-------------------------------------------------------------------------------------------------------------------
21,000 Diagnostic Retrieval Systems, Inc. cv. sr. sub. deb 9s, 2003 28,166
95,000 Kellstrom Industries, Inc. cv. sub. notes 5 1/2s, 2003 42,275
60,000 SPACEHAB, Inc. cv. sub. notes 8s, 2007 43,125
-------------
113,566
Airlines (0.2%)
-------------------------------------------------------------------------------------------------------------------
458,000 World Airways, Inc. cv. sr. sub. deb 8s, 2004 128,240
Automotive (0.9%)
-------------------------------------------------------------------------------------------------------------------
375,000 Magna International cv. sub. deb. 5s, 2002 377,813
86,000 Standard Motor Products, Inc. cv. sub. deb. 6 3/4s, 2009 48,483
380,000 Tower Automotive, Inc. cv. sub. notes 5s, 2004 304,950
-------------
731,246
Biotechnology (2.4%)
-------------------------------------------------------------------------------------------------------------------
35,000 Affymetrix, Inc. cv. sub. notes 4 3/4s, 2007 26,338
73,000 Alexion Pharmaceuticals, Inc. 144A cv. sub. notes 5 3/4s, 2007 83,494
70,000 Alkermes, Inc. cv. sub. notes 3 3/4s, 2007 59,063
169,000 Athena Neurosciences, Inc. cv. notes 4 3/4s, 2004 278,850
37,000 Aviron cv. sub. notes 5 3/4s, 2005 54,806
317,000 Centocor, Inc. cv. sub. deb. 4 3/4s, 2005 399,816
66,000 Chiron Corp. cv. sub. notes 1.9s, 2000 123,338
59,000 COR Therapeutics, Inc. 144A cv. notes 5s, 2007 104,946
45,000 Genzyme Corp. cv. sub. notes 5 1/4s, 2005 90,394
180,000 Human Genome Sciences, Inc. cv. sub. notes 3 3/4s, 2007 167,625
33,000 IDEC Pharmaceuticals Corp. cv. sub. notes zero %, 2019 62,205
42,000 Imclone Systems, Inc 144A cv. sub. notes 5 1/2s, 2005 44,258
86,000 Millennium Pharmaceuticals, Inc. cv. sub. notes 5 1/2s, 2007 160,498
69,000 Protein Design Labs, Inc. 144A cv. sub. notes 5 1/2s, 2007 82,800
100,000 Sepracor, Inc. cv. sub. deb. 7s, 2005 191,625
16,000 Sepracor, Inc. cv. sub. deb. 6 1/4s, 2005 75,380
50,000 ViroPharma, Inc. 144A cv. sub. notes 6s, 2007 22,063
-------------
2,027,499
Broadcasting (1.8%)
-------------------------------------------------------------------------------------------------------------------
27,000 CD Radio, Inc. cv. sub. notes 8 3/4s, 2009 52,920
320,000 Clear Channel Communications, Inc. cv. sr. notes 1 1/2s, 2002 315,200
244,000 Echostar Communications Corp. cv. sub. notes 4 7/8s, 2007 300,730
200,000 Jacor Communications, Inc. cv. sr. notes zero %, 2011 225,750
314,000 News America Holdings, Inc. cv. Liquid Yield Option
Note (LYON) zero %, 2013 319,693
210,000 Scandinavian Broadcasting System S.A. cv. sub. notes 7s,
2004 (Luxembourg) 321,563
-------------
1,535,856
Commercial and Consumer Services (0.4%)
-------------------------------------------------------------------------------------------------------------------
371,000 Cendant Corp. cv. sub. notes 3s, 2002 335,755
Communications Equipment (1.3%)
-------------------------------------------------------------------------------------------------------------------
34,000 American Tower Corp. cv. notes 6 1/4s, 2009 56,100
140,000 American Tower Corp. 144A cv. notes 5s, 2010 131,775
17,000 Antec Corp. cv. sub. notes 4 1/2s, 2003 26,520
21,000 Commscope, Inc. cv. sub. notes 4s, 2006 18,533
48,000 Comverse Technology, Inc. cv. sub. deb. 4 1/2s, 2005 205,680
119,000 Efficient Networks, Inc. 144A cv. sub. notes 5s, 2005 82,705
270,000 Juniper Networks, Inc. cv. sub. notes 4 3/4s, 2007 400,613
77,000 Redback Networks, Inc. 144A cv. sub. notes 5s, 2007 80,465
67,000 Terayon Communications Systems, Inc. 144A cv. sr. notes
5s, 2007 59,463
-------------
1,061,854
Computers (1.4%)
-------------------------------------------------------------------------------------------------------------------
52,000 Adaptec, Inc. cv. sub. notes 4 3/4s, 2004 44,850
354,000 Anixter International, Inc. 144A cv. notes zero %, 2020 110,625
61,000 Aspen Technology, Inc. cv. sub. deb. 5 1/4s, 2005 64,203
26,000 Critical Path, Inc. 144A cv. bonds 5 3/4s, 2005 25,448
130,000 Digital Island, Inc. cv. bonds 6s, 2005 83,038
604,000 Hewlett-Packard Co. cv. sub. notes zero %, 2017 551,905
220,000 Quantum Corp. cv. sub. 7s, 2004 173,114
573,000 System Software Associates, Inc. cv. sub. notes 7s, 2002
(In default) (NON) 31,515
52,000 Vantive Corp. (The) cv. sub. notes 4 3/4s, 2002 53,885
-------------
1,138,583
Conglomerates (0.1%)
-------------------------------------------------------------------------------------------------------------------
29,000 ADT Operations, Inc. cv. sub. notes zero %, 2010 89,900
Consumer Services (0.3%)
-------------------------------------------------------------------------------------------------------------------
140,000 Getty Images, Inc. 144A cv. sub. notes 5s, 2007 127,400
36,000 Getty Images, Inc. cv. sub. notes 4 3/4s, 2003 56,520
36,000 VerticalNet, Inc. cv. sub. deb. 5 1/4s, 2004 99,090
-------------
283,010
Electrical Equipment (0.2%)
-------------------------------------------------------------------------------------------------------------------
28,000 Oak Industries, Inc. cv. sub. notes 4 7/8s, 2008 197,085
Electronics (3.2%)
-------------------------------------------------------------------------------------------------------------------
44,000 Benchmark Electronics, Inc. 144A cv. sub. notes 6s, 2006 62,040
80,000 Burr-Brown Corp. 144A cv. sub. notes 4 1/4s, 2007 137,000
78,000 Cypress Semiconductor Corp. cv. sub. notes 4s, 2005 99,255
110,000 Cypress Semiconductor Corp. cv. sub. deb. 3 3/4s, 2005 113,438
28,000 Kent Electronics Corp. cv. sub. notes 4 1/2s, 2004 24,465
45,000 Kulicke & Soffa Industries, Inc. 144A cv. sub. notes
4 3/4s, 2006 45,281
44,000 Level One Communications, Inc. cv. sub. notes 4s, 2004 212,520
58,000 LSI Logic Corp. cv. sub. notes 4 1/4s, 2004 137,823
54,000 Motorola, Inc. cv. sub. deb. LYON zero %, 2013 66,150
88,000 Park Electrochemical Corp. cv. sub. notes 5 1/2s, 2006 91,080
250,000 S3, Inc. 144A cv. sub. notes 5 3/4s, 2003 236,875
82,000 Sanmina Corp. 144A cv. sub. notes 4 1/4s, 2004 223,450
300,000 SCI Systems, Inc. cv. sub. 3s, 2007 384,375
17,000 Semtech Corp. 144A cv. sub. notes 4 1/2s, 2007 26,095
430,000 Solectron Corp. cv. notes zero %, 2020 283,800
370,000 Solectron Corp. cv. notes zero %, 2019 268,250
71,000 TriQuint Semiconductor, Inc. cv. notes 4s, 2007 71,799
220,000 Vitesse Semiconductor Corp. 144A cv. sub. deb. 4s, 2005 226,600
-------------
2,710,296
Energy (0.8%)
-------------------------------------------------------------------------------------------------------------------
100,000 Baker Hughes, Inc. cv. notes zero %, 2008 79,625
274,000 Diamond Offshore Drilling, Inc. cv. sub. notes 3 3/4s, 2007 324,348
110,000 Diamond Offshore Drilling, Inc. 144A cv. deb. zero %, 2020 56,650
87,000 Offshore Logistics, Inc. cv. sub. notes 6s, 2003 83,955
20,000 Parker Drilling Corp. cv. sub. notes 5 1/2s, 2004 16,475
102,000 Pride International, Inc. cv. sub. deb. zero %, 2018 43,350
67,000 Seacor Holdings, Inc. cv. sub. notes 5.38s, 2006 73,784
-------------
678,187
Health Care Services (0.4%)
-------------------------------------------------------------------------------------------------------------------
82,000 HEALTHSOUTH Corp. cv. sub. deb. 3 1/4s, 2003 63,960
60,000 Invitrogen Corp. 144A cv. sub. notes 5 1/2s, 2007 55,875
138,000 Omnicare, Inc. cv. bonds 5s, 2007 99,705
350,000 Phoenix Shannon 144A cv. sr. sub. notes 9 1/2s, 2000
(In default) (Ireland) (NON) 3,500
240,000 Universal Health Services, Inc. 144A cv. notes 0.426s, 2020 113,700
-------------
336,740
Homebuilding (0.1%)
-------------------------------------------------------------------------------------------------------------------
177,000 Lennar Corp. cv. deb. zero %, 2018 81,420
Household Furniture and Appliances (--%)
-------------------------------------------------------------------------------------------------------------------
137,000 Sunbeam Corp. 144A cv. sr. notes zero %, 2018 15,070
Insurance (0.1%)
-------------------------------------------------------------------------------------------------------------------
251,000 Mutual Risk Management cv. sub. deb. zero %, 2015 125,814
Investment Banking/Brokerage (0.4%)
-------------------------------------------------------------------------------------------------------------------
81,000 Berkshire Hathaway, Inc. cv. sr. notes 1s, 2001 283,601
20,000 E(a)Trade Group, Inc. 144A cv. sub. notes 6s, 2007 19,150
-------------
302,751
Manufacturing (0.3%)
-------------------------------------------------------------------------------------------------------------------
29,000 Thermo Ecotek Corp. 144A cv. bonds 4 7/8s, 2004 26,100
147,000 Thermo Electron Corp. 144A cv. sub. deb. 4 1/4s, 2003 135,608
119,000 Thermo Electron Corp. cv. sr. notes 4s, 2005 101,745
-------------
263,453
Medical Technology (0.3%)
-------------------------------------------------------------------------------------------------------------------
291,000 Thermo Cardiosystems, Inc. 144A cv. company guaranty
4 3/4s, 2004 255,353
Metals (0.3%)
-------------------------------------------------------------------------------------------------------------------
100,000 Inco, Ltd. cv. deb. 7 3/4s, 2016 (Canada) 87,125
100,000 Inco, Ltd. cv. deb. 5 3/4s, 2004 (Canada) 89,500
103,000 Quanex Corp. cv. sub. deb. 6.88s, 2007 92,056
-------------
268,681
Oil & Gas (1.1%)
-------------------------------------------------------------------------------------------------------------------
350,000 Anadarko Petroleum Corp. cv. sub. notes zero %, 2020 283,063
445,000 Devon Energy Corp. cv. deb. 4.95s, 2008 427,756
71,000 Kerr-McGee Corp. cv. sub. deb. 5 1/4s, 2010 85,200
117,000 Swift Energy Co. cv. sub. notes 6 1/4s, 2006 118,024
-------------
914,043
Pharmaceuticals (1.6%)
-------------------------------------------------------------------------------------------------------------------
55,000 Alpharma, Inc. cv. sub. notes 5 3/4s, 2005 109,038
400,000 Alza Corp. cv. sub. LYON zero %, 2014 396,000
56,000 C.V. Therapeutics 144A cv. sub. notes 4 3/4s, 2007 72,660
429,000 Genetech, Inc. 144A cv. bonds zero %, 2015 416,130
47,000 Inhale Therapeutic Systems 144A cv. sub. notes 5s, 2007 67,386
90,000 IVAX Corp. 144A cv. sr. sub. notes 5 1/2s, 2007 104,400
249,000 Roche Holdings, Inc. 144A cv. unsub. LYON zero %,
2010 (Switzerland) 136,477
-------------
1,302,091
Photography/Imaging (0.1%)
-------------------------------------------------------------------------------------------------------------------
171,000 Xerox Corp. cv. sub. deb. 0.57s, 2018 86,141
Publishing (0.1%)
-------------------------------------------------------------------------------------------------------------------
172,000 Times Mirror Co. cv. sub. notes zero %, 2017 98,255
Retail (1.3%)
-------------------------------------------------------------------------------------------------------------------
174,000 Amazon.com, Inc. cv. sub. deb. 4 3/4s, 2009 121,583
70,000 Ann Taylor Stores Corp. cv. company guaranty 0.55s, 2019 37,888
50,000 Ann Taylor Stores Corp. 144A cv. company guaranty
0.55s, 2019 27,063
221,000 Costco Cos, Inc. cv. sub. notes zero %, 2017 183,154
380,000 Cybernet Internet Services Intl., Inc. 144A cv. sr. disc.
notes stepped-coupon zero % (13s, 8/15/04), 2009 (STP) 163,400
494,000 Office Depot, Inc. cv. LYON zero %, 2007 297,018
493,000 Rite Aid Corp. cv. sub. notes 5 1/4s, 2002 220,618
-------------
1,050,724
Semiconductor (0.9%)
-------------------------------------------------------------------------------------------------------------------
87,000 Advanced Energy Industries, Inc. cv. sub. notes 5 1/4s, 2006 114,949
79,000 Amkor Technologies, Inc. 144A cv. sub. notes 5s, 2007 69,619
18,000 ASM Lithography Holdings 144A cv. bonds 4 1/4s, 2004
(Netherlands) 21,825
76,000 Conexant Systems, Inc. cv. sub. notes 4 1/4s, 2006 131,290
200,000 Conexant Systems, Inc. 144A cv. sub. notes 4s, 2007 146,250
66,000 Credence Systems Corp. cv. sub. notes 5 1/4s, 2002 113,438
96,000 LAM Research Corp. cv. sub. notes 5s, 2002 115,920
60,000 Photronics, Inc. cv. sub. notes 6s, 2004 69,150
-------------
782,441
Software (3.4%)
-------------------------------------------------------------------------------------------------------------------
39,000 Akamai Technologies, Inc. 144A cv. sub. notes 5 1/2s, 2007 34,515
105,000 BEA Systems, Inc. cv. sub. notes 4s, 2006 217,481
10,000 BEA Systems, Inc. cv. sub. notes 4s, 2005 103,075
115,000 BEA Systems, Inc. 144A cv. sub. notes 4s, 2006 238,194
108,000 Citrix Systems, Inc. cv. sub. deb. zero %, 2019 42,390
53,000 I2 Technologies, Inc. cv. sub. notes 5 1/4s, 2006 124,550
110,000 Mercury Interactive Corp. 144A cv. bonds 4 3/4s, 2007 139,150
697,000 Network Associates, Inc. cv. sub deb. zero %, 2018 270,959
221,000 Rational Software Corp. 144A cv. sub. notes 5s, 2007 419,071
76,000 Siebel Systems, Inc. cv. sub. notes 5 1/2s, 2006 327,940
253,000 Veritas Software Corp. cv. disc. notes 1.856s, 2006 862,414
33,000 Wind River Systems, Inc. cv. sub. notes 5s, 2002 42,694
-------------
2,822,433
Technology Services (1.9%)
-------------------------------------------------------------------------------------------------------------------
37,000 America Online, Inc. cv. sub. notes 4s, 2002 332,121
190,000 America Online, Inc. cv. sub. notes zero %, 2019 99,038
110,000 Automatic Data Processing, Inc. cv. deb. zero %, 2012 169,813
71,000 CheckFree Holdings Corp. 144A cv. sub. notes 6 1/2s, 2006 70,468
21,000 CNET Networks , Inc. cv. sub. notes 5s, 2006 22,313
47,000 EarthWeb, Inc. cv. sub. notes 7s, 2005 24,205
235,000 Exodus Communications, Inc. cv. sub. notes 4 3/4s, 2008 478,519
174,000 Internet Capital Group, Inc. cv. sub. notes 5 1/2s, 2004 119,408
370,000 Intevac, Inc. 144A cv. sub. notes 6 1/2s, 2004 183,150
86,000 Safeguard Scientifics, Inc. 144A cv. sub. notes 5s, 2006 114,595
-------------
1,613,630
Telecommunications (3.1%)
-------------------------------------------------------------------------------------------------------------------
66,000 Aether Systems, Inc. cv. sub. notes 6s, 2005 56,843
220,000 Corecomm, Ltd. cv. sub. notes 6s, 2006 140,800
340,000 Cox Communications, Inc. cv. sub. deb. 0.426s, 2020 159,800
187,000 Level 3 Communication, Inc. cv. sub. deb. 6s, 2010 172,274
164,000 Level 3 Communication, Inc. cv. sub. notes 6s, 2009 244,565
280,000 Liberty Media Group 144A cv. deb. 4s, 2029 352,100
257,000 Liberty Media Group 144A cv. deb. 3 3/4s, 2030 240,938
465,000 MIDCOM Communications, Inc. 144A cv. sub. deb.
8 1/4s, 2003 (In default) (NON) 9,300
443,000 Nextel Communications, Inc. cv. sr. notes 5 1/4s, 2010 441,318
192,000 Nextel Communications, Inc. cv. sr. notes 4 3/4s, 2007 463,680
103,000 NTL, Inc. cv. sub. notes 7s, 2008 (United Kingdom) 130,166
46,000 NTL, Inc. 144A cv. sub. notes 7s, 2008 (United Kingdom) 58,133
100,000 Pinnacle Holdings, Inc. 144A cv. sub. notes 5 1/2s, 2007 76,625
60,000 Primus Telecommunications Group, Inc. 144A cv. sub.
deb. 5 3/4s, 2007 31,275
-------------
2,577,817
Tobacco (0.2%)
-------------------------------------------------------------------------------------------------------------------
270,000 Standard Commercial Corp. cv. sub. deb. 7 1/4s, 2007 160,313
Transaction Processing (0.2%)
-------------------------------------------------------------------------------------------------------------------
170,000 National Data Corp. cv. sub. notes 5s, 2003 145,563
Waste Management (0.2%)
-------------------------------------------------------------------------------------------------------------------
159,000 Waste Management, Inc. cv. sub. notes 4s, 2002 148,268
-------------
Total Convertible Bonds and Notes (cost $23,939,576) $ 24,884,718
<CAPTION>
CONVERTIBLE PREFERRED STOCKS (19.5%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Automotive (0.3%)
-------------------------------------------------------------------------------------------------------------------
2,840 Federal-Mogul Financial Trust 3.50 cum. cv. pfd. $ 56,800
5,820 Tower Automotive Capital Trust 144A 3.375 cv. pfd. 176,783
-------------
233,583
Banking (0.7%)
-------------------------------------------------------------------------------------------------------------------
4,836 CNB Capital Trust I 1.50 cum. cv. pfd. 168,051
2,035 National Australia Bank, Ltd. 1.969 cv. pfd. 54,691
3,000 Sovereign Bancorp, Inc. 7.50% cv. pfd. 154,125
5,880 Union Planters Corp. Ser. E, 2.00 cum. cv. pfd. 221,235
-------------
598,102
Biotechnology (0.3%)
-------------------------------------------------------------------------------------------------------------------
844 Alkermes, Inc. 3.25 cv. pfd. 131,875
1,468 Biovail Corp. 3.375 cv. pfd. (Canada) 89,732
418 Cephalon, Inc. 3.625 cv. pfd. 59,147
-------------
280,754
Broadcasting (1.5%)
-------------------------------------------------------------------------------------------------------------------
4,897 Cox Communications, Inc. 7.75 cv. pfd. 461,532
2,802 Cox Communications, Inc. 3.50 cv. pfd. 137,648
51 Echostar Communications Corp. Ser. C, 3.375 cum. cv. pfd. 40,966
2,496 Emmis Broadcasting Corp. Ser. A, 3.125 cv. pfd. 123,240
541 Pegasus Communications Corp. 144A 6.50% cv. pfd. 48,961
110 Radio One, Inc. 6.50% cum. cv. pfd. 117,700
4,830 Sinclair Broadcast Group, Inc. 3.00 cv. pfd. 163,616
3,273 United Global Communications, Inc. Ser. D, 3.50 cv. pfd. 129,693
803 XM Satellite Radio Holdings Ser. B, 4.125 cv. pfd. 46,976
-------------
1,270,332
Cable Television (1.3%)
-------------------------------------------------------------------------------------------------------------------
828 Adelphia Communications Corp. Ser. D, 5.50% cv. pfd. 94,703
8,664 MediaOne Group, Inc. 3.633 cv. pfd. 768,930
1,159 TCI Pacific Comm 5.00 cv. pfd. 231,800
-------------
1,095,433
Commercial and Consumer Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
3,600 Carriage Services, Inc. 144A 3.50 cv. pfd. 75,600
Consumer Goods (0.3%)
-------------------------------------------------------------------------------------------------------------------
2,898 Estee Lauder Aces TR II 5.406 cv. pfd. 221,697
Electric Utilities (3.0%)
-------------------------------------------------------------------------------------------------------------------
6,898 AES Trust II 3.375 cv. pfd. 669,106
5,500 Alliant Energy 144A 7.25 cv. pfd. 317,969
2,100 CMS Energy Corp. 8.75% cum. cv. pfd. 68,513
3,100 NiSource, Inc. 3.875 cv. pfd. 139,113
14,348 Reliant Energy, Inc. into Time Warner, Inc. 1.165 cv. pfd. 1,198,058
2,629 TXU Corporation 4.625 cum. cv. pfd. 109,761
600 TXU Corporation 1.658 cum. cv. pfd. 21,525
-------------
2,524,045
Electrical Equipment (0.3%)
-------------------------------------------------------------------------------------------------------------------
10,440 Sensormatic Electronics Corp. 144A 1.625 cv. pfd. 251,865
Electronics (0.2%)
-------------------------------------------------------------------------------------------------------------------
200 Interact Systems, Inc. 14.00% cv. pfd. 200
2,034 Pioneer Standard Electronics, Inc. 144A 3.375 cv. pfd. 101,700
1,500 Titan Corp. 144A 2.875 cv. pfd. 55,500
-------------
157,400
Energy (0.3%)
-------------------------------------------------------------------------------------------------------------------
3,679 Evi, Inc. 2.50 cum. cv. pfd. 180,271
931 Hanover Compressor, Inc. 3.625 cv. pfd. 88,911
115 XCL, Ltd. 144A Ser. A, 9.50% cum. cv. pfd. 58
-------------
269,240
Entertainment (--%)
-------------------------------------------------------------------------------------------------------------------
859 Six Flags, Inc. 4.05 cv. pfd. 27,488
Food (0.3%)
-------------------------------------------------------------------------------------------------------------------
5,300 Suiza Capital Trust II 2.75 cv. pfd. 204,050
Household Furniture and Appliances (0.4%)
-------------------------------------------------------------------------------------------------------------------
4,630 Metromedia International Group, Inc. 3.625 cum. cv. pfd. 109,384
6,700 Newell Financial Trust I 2.625 cum. cv. pfd. 256,275
-------------
365,659
Insurance (1.1%)
-------------------------------------------------------------------------------------------------------------------
1,063 Ace, Ltd. 4.125 cv. pfd. 78,795
3,863 Conseco Finance Trust IV 3.50 cum. cv. pfd. 42,493
8,897 Lincoln National Corp. 0.463 cum. cv. pfd. 214,640
5,597 Metlife Capital Trust I 4.00 cv. pfd. 428,171
2,345 Protective Life Corp. 3.25 cum. cv. pfd. 108,456
-------------
872,555
Machinery (--%)
-------------------------------------------------------------------------------------------------------------------
1,165 Ingersoll-Rand Co. 0.195 cv. pfd. 24,756
Media (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,324 Seagram Co., Ltd. 3.76 cv. pfd. (Canada) 71,827
Medical Technology (0.5%)
-------------------------------------------------------------------------------------------------------------------
9,940 Owens & Minor Trust I 144A Ser. A, 2.688 cum. cv. pfd. 417,480
Natural Gas Utilities (0.4%)
-------------------------------------------------------------------------------------------------------------------
1,886 El Paso Energy Capital Trust 2.375 cv. pfd. 136,264
3,200 KN Energy, Inc. 3.548 cv. pfd. 158,400
-------------
294,664
Oil & Gas (1.8%)
-------------------------------------------------------------------------------------------------------------------
4,611 Apache Corp. 2.015 cv. pfd. 247,841
3,495 Coastal Corp. 1.656 cv. pfd. 132,373
2,608 Kerr-McGee Corp. 1.825 cv. pfd. 136,594
2,000 Newfield Exploration Co. 3.25 cv. pfd. 130,000
1,486 Pogo Producing Co. Ser. A, 3.25 cv. pfd. 90,832
4,573 Tosco Financing Trust 2.875 cv. pfd. 229,793
12,390 Unocal Capital Trust 3.125 cum. cv. pfd. 551,355
-------------
1,518,788
Paper & Forest Products (1.2%)
-------------------------------------------------------------------------------------------------------------------
2,995 Georgia Pacific Corp. 3.75 cv. pfd. 94,343
7,142 International Paper Co. 2.625 cv. pfd. 290,144
7,540 Owens-Illinois, Inc. 2.375 cv. pfd. 158,340
10,083 Sealed Air Corp. Ser. A, 1.00 cv. pfd. 496,588
-------------
1,039,415
Pharmaceuticals (0.4%)
-------------------------------------------------------------------------------------------------------------------
6,028 Monsanto Co. 2.60 cv. pfd. 300,647
Power Producers (0.3%)
-------------------------------------------------------------------------------------------------------------------
2,743 Calpine Corp. 144A 2.75 cv. pfd. 279,100
Publishing (0.8%)
-------------------------------------------------------------------------------------------------------------------
3,604 Readers Digest 0.445 cv. pfd. 120,734
4,076 Tribune Co. 2.00 cv. pfd. 525,804
4,181 Tribune Co. 1.75 cv. pfd. 52,785
-------------
699,323
Railroads (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,079 Canadian National Railway Co. 2.625 cv. pfd. (Canada) 48,150
3,788 Union Pacific Capital Trust 3.125 cum. cv. pfd. 152,941
-------------
201,091
Real Estate (0.5%)
-------------------------------------------------------------------------------------------------------------------
11,994 Equity Residential Properties Trust Ser. E, 1.75 cv. pfd. 319,340
2,091 Vornado Realty Trust Ser. A, 3.25 cv. cum. pfd. 109,516
-------------
428,856
Restaurants (--%)
-------------------------------------------------------------------------------------------------------------------
465 Wendy's Financing Ser. A, 2.50 cv. pfd. 21,390
Retail (0.5%)
-------------------------------------------------------------------------------------------------------------------
2001 CVS Auto Exchange 6.00% cv. pfd. 132,316
8,736 K mart Financing I 3.875 cum. cv. pfd. 306,852
-------------
439,168
Shipping (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,939 CNF Trust I Ser. A, 2.50 cum. cv. pfd. 72,955
Software (0.1%)
-------------------------------------------------------------------------------------------------------------------
408 Amdocs, Ltd. 6.75% cv. pfd. 24,888
873 Lernout & Hauspie Speech Products N.V. 144A 2.375
cv. pfd 45,396
-------------
70,284
Technology Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
500 NBC Internet, Inc. 7.25% cv. pfd. 10,563
1,600 PSINet, Inc. 144A 3.50 cv. pfd. 42,400
-------------
52,963
Telecommunications (2.4%)
-------------------------------------------------------------------------------------------------------------------
4,600 Comcast Corp. 2.00% cv. pfd. 474,926
369 Crown Castle International Corp. 3.125 cum. cv. pfd. 20,157
3,029 DECS Trust IV 0.91 cv. pfd. 24,611
3,518 DECS Trust VI 6.25% cv. pfd. 246,260
1,983 Global Crossing, Ltd. 3.375 cum cv. pfd 483,852
1,307 Global Crossing, Ltd. 6.375 cum. cv. pfd. 110,115
2,447 Global Telesystems Group, Inc. 3.625 cv. pfd. 45,270
700 Mpower Communications Corp. 3.625 cum. cv. pfd. 20,563
1,181 Nextlink Communications, Inc. 3.25 cv. pfd. 192,355
221 Omnipoint Corp. 3.50 cv. pfd. 35,913
2,296 Qwest Trends Trust 144A 2.401 cv. pfd. 193,725
2,424 WinStar Communications, Inc. 3.50 cv. pfd. 114,231
13 World Access, Inc. 144A Ser. D, zero % cv. pfd. 12,090
-------------
1,974,068
-------------
Total Convertible Preferred Stocks (cost $17,313,685) $ 16,354,578
<CAPTION>
PREFERRED STOCKS (1.6%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
3,119 AmeriKing, Inc. 3.25 cum. pfd. (PIK) $ 18,714
2,970 Chevy Chase Preferred Corporation Ser. A, 5.19 pfd. 139,590
1,021 Citadel Broadcasting Co. Ser. B, 13.25 cum. pfd. (PIK) 110,319
2,023 CSC Holdings, Inc. Ser. M, 11.125 cum. pfd. (PIK) 214,437
7,510 Diva Systems Corp. Ser. C, 6.00% cum. pfd. 45,060
117 Dobson Communications 12.25% pfd. (PIK) 112,203
115 Fresenius Medical Capital Trust I Ser. D, 9.00% company
guaranty, pfd. (Germany) 113,850
85 Fresenius Medical Capital Trust II 7.875% company
guaranty, pfd. (Germany) 79,475
2 Intermedia Communications Ser. B, 13.50% pfd. (PIK) 1,346
89 Nextel Communications, Inc. 13.00% cum. pfd. (PIK) 94,340
132 NEXTLINK Communications, Inc. 14.00 cum. pfd. (PIK) 6,072
62 NEXTLINK Communications, Inc. Ser. B, 13.50% pfd. (PIK) 53,630
16 Paxson Communications Corp. 144A 13.25 cum. pfd. (PIK) 156,800
79 R&B Falcon Corp. 13.875% cum. pfd. (PIK) 97,565
123 Rural Cellular Corp. 12.25 pfd. (PIK) 107,010
1,834 Trikon Technologies, Inc. Ser. H, 8.125% pfd. (PIK) 16,506
-------------
Total Preferred Stocks (cost $1,441,329) $ 1,366,917
<CAPTION>
COMMON STOCKS (1.5%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
5,410 Allstate Corp. $ 157,228
7,214 American General Corp. 525,269
50 AmeriKing, Inc. (NON) 500
1,704 BB&T Corp. 46,115
24,313 Celcaribe S.A. (Colombia) (NON) 3,039
1,379 Fitzgeralds Gaming Corp. (NON) 14
1 Flextronics International, Ltd. (NON) 83
1,503 Gilead Sciences, Inc. (NON) 162,343
151 Leap Wireless (NON) 11,986
2,305 MGC Communications, Inc. (NON) 42,498
58 Mothers Work, Inc. (NON) 533
55 Paging Do Brazil Holdings Co., LLC 144A Class B, (Brazil) (NON) 1
132 Pegasus Communications Corp. (NON) 6,567
220 PSF Holdings LLC Class A (NON) 220,000
79 RCN Corp. (NON) 1
3,402 Sensormatic Electronics Corp. (NON) 56,558
2,100 Spanish Broadcasting System, Inc. (NON) 21,131
803 St. Paul Cos., Inc. 38,260
91 U.S. Interactive, Inc. (NON) 711
64 WinStar Communications, Inc. (NON) 1,720
47 XM Satellite Radio Holdings, Inc. Class A (NON) 2,008
-------------
Total Common Stocks (cost $1,566,699) $ 1,296,565
<CAPTION>
UNITS (0.6%) (a)
NUMBER OF UNITS VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
125 App China Group, Ltd. units 14s, 2010 $ 72,500
250 Australis Media, Ltd. units 15 3/4s, 2003 (In default)
(Australia) (NON) 24
200 CFW Communications Co. 144A units 13s, 2010 196,000
60 Huntsman Packaging Corp. units 13s, 2010 54,000
130 Ipcs Inc. units stepped-coupon zero % (14s 7/15/05),
2010 (STP) 74,100
110 Maxcom Telecomunicacione units 13 3/4s, 2007 67,650
200 XCL, Ltd. units 13 1/2s, 2004 (In default) (NON) 36,000
600 XCL, Ltd. 144A units cum. pfd. 9 1/2s, 2006 (PIK) 300
-------------
Total Units (cost $1,049,143) $ 500,574
<CAPTION>
WARRANTS (0.3%) (a) (NON) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
1 Anker Coal Group, Inc. 144A 10/28/09 $ 1
80 Bestel S.A. de C.V. (Mexico) 5/15/05 9,600
70 Birch Telecommunications, Inc. 144A (PIK) 6/15/08 7,000
57 Carrier1 Intl. S.A. 2/19/09 15,390
690 CellNet Data Systems, Inc. 10/1/07 1
130 Dayton Superior Corp. 6/15/09 2,600
200 Decrane Aircraft Holdings 9/30/08 2
185 Diva Systems Corp. 5/15/06 111,000
579 Diva Systems Corp. 3/1/08 8,105
400 Firstworld Communication Corp. 4/15/08 8,000
6,534 ICG Communications 10/15/05 6,534
90 Insilco Corp. 144A 8/15/07 1
200 Interact Systems, Inc. 8/1/03 2
200 Interact Systems, Inc. 144A 12/15/09 2
85 International Wireless Communications
Holdings 144A 8/15/01 1
175 Iridium World Com 144A 7/15/05 1
200 KMC Telecommunications Holdings, Inc. 4/15/08 600
235 Knology Holdings 10/22/07 1,410
500 Leap Wireless International 144A 4/15/10 1,250
650 McCaw International, Ltd. 4/15/07 2,600
85 Mediq, Inc. 144A 6/1/09 1
120 Motient Corp. 144A 4/1/08 4,200
45 Onepoint Communications, Inc. 6/1/08 4,050
90 Orbital Imaging Corp. 144A 3/1/05 450
10 Pathnet, Inc. 144A 4/15/08 100
80 Raintree Resort 144A 12/1/04 1
80 Startec Global Communications Corp. 5/15/08 80
75 Sterling Chemicals Holdings 8/15/08 675
50 Telehub Communications Corp. 7/31/05 25
200 Ubiquitel, Inc. 144A 4/15/10 14,000
435 UIH Australia/Pacific, Inc. 144A 5/15/06 13,050
-------------
Total Warrants (cost $155,491) $ 210,732
<CAPTION>
SHORT-TERM INVESTMENTS (4.3%) (a) (cost $3,620,000)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 3,620,000 Interest in $749,144,000 joint repurchase agreement
dated August 31, 2000 with S.G.C Warburg, Inc.
due September 1, 2000 with respect to various
U.S. Treasury obligations -- maturity value of $3,620,669
for an effective yield of 6.65% $ 3,620,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $89,868,730) (b) $ 82,897,460
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $83,823,875.
(b) The aggregate identified cost on a tax basis is $89,963,768,
resulting in gross unrealized appreciation and depreciation of
$6,789,002 and $13,855,310, respectively, or net unrealized depreciation
of $7,066,308.
(NON) Non-income-producing security.
(STP) The interest rate and date shown parenthetically represent the new
interest rate to be paid and the date the fund will begin receiving
interest at this rate.
(PIK) Income 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 rates shown on Floating Rate Notes (FRN) are the current
interest rates shown at August 31, 2000, which are subject to change
based on the terms of the security.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000 (Unaudited)
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $89,868,730) (Note 1) $82,897,460
-------------------------------------------------------------------------------------------
Cash 20,264
-------------------------------------------------------------------------------------------
Dividends and interest receivables 1,266,486
-------------------------------------------------------------------------------------------
Receivable for securities sold 936,408
-------------------------------------------------------------------------------------------
Total assets 85,120,618
Liabilities
-------------------------------------------------------------------------------------------
Distributions payable to shareholders 582,579
-------------------------------------------------------------------------------------------
Payable for securities purchased 354,596
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 289,786
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 26,936
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 15,195
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 685
-------------------------------------------------------------------------------------------
Other accrued expenses 26,966
-------------------------------------------------------------------------------------------
Total liabilities 1,296,743
-------------------------------------------------------------------------------------------
Net assets $83,823,875
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (unlimited shares authorized) (Note 1) $91,878,793
-------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (1,822,271)
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investment (Note 1) 738,623
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (6,971,270)
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $83,823,875
Computation of net asset value
-------------------------------------------------------------------------------------------
Net asset value per share ($83,823,875 divided by 3,712,567 shares) $22.58
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended August 31, 2000 (Unaudited)
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Interest income $ 2,554,882
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $202) 596,486
-------------------------------------------------------------------------------------------
Total investment income 3,151,368
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 589,176
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 94,600
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 5,796
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 2,075
-------------------------------------------------------------------------------------------
Other 33,494
-------------------------------------------------------------------------------------------
Total expenses 725,141
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (3,182)
-------------------------------------------------------------------------------------------
Net expenses 721,959
-------------------------------------------------------------------------------------------
Net investment income 2,429,409
-------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (503,480)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (3,863,547)
-------------------------------------------------------------------------------------------
Net loss on investments (4,367,027)
-------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(1,937,618)
-------------------------------------------------------------------------------------------
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
August 31 February 29
2000* 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 2,429,409 $ 5,115,930
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (503,480) 3,164,770
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (3,863,547) 3,562,128
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (1,937,618) 11,842,828
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income (3,452,454) (5,539,578)
--------------------------------------------------------------------------------------------------
In excess of net investment income -- (893,174)
--------------------------------------------------------------------------------------------------
From net realized gain on investments -- (1,329,775)
--------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (5,390,072) 4,080,301
Net assets
--------------------------------------------------------------------------------------------------
Beginning of period 89,213,947 85,133,646
--------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $1,822,271 and
$799,226, respectively) $83,823,875 $89,213,947
--------------------------------------------------------------------------------------------------
Number of fund shares
--------------------------------------------------------------------------------------------------
Shares outstanding at the beginning of period 3,712,567 3,712,567
--------------------------------------------------------------------------------------------------
Shares issued in connection with reinvestment of distributions -- --
--------------------------------------------------------------------------------------------------
Shares outstanding at the end of period 3,712,567 3,712,567
--------------------------------------------------------------------------------------------------
* 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 Year For the period
Per-share August 31 ended June 29, 1995+
operating performance (Unaudited) February 29 Year ended February 28 to February 29
------------------------------------------------------------------------------------------------------------------
2000 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $24.03 $22.93 $27.57 $26.40 $26.43 $24.85(c)
------------------------------------------------------------------------------------------------------------------
Investment operations
------------------------------------------------------------------------------------------------------------------
Net investment income .65 1.38 1.86 1.76 1.77 1.17
------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.17) 1.81 (3.69) 2.49 1.54 1.63
------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.52) 3.19 (1.83) 4.25 3.31 2.80
------------------------------------------------------------------------------------------------------------------
Less distributions:
------------------------------------------------------------------------------------------------------------------
From net
investment income (.93) (1.49) (1.91) (1.77) (1.83) (1.15)
------------------------------------------------------------------------------------------------------------------
In excess of
net investment income -- (.24) -- -- (.17) --
------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.36) (.90) (1.31) (1.34) (.07)
------------------------------------------------------------------------------------------------------------------
Total distributions (.93) (2.09) (2.81) (3.08) (3.34) (1.22)
------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.58 $24.03 $22.93 $27.57 $26.40 $26.43
------------------------------------------------------------------------------------------------------------------
Market value,
end of period $19.563 $18.750 $22.500 $27.312 $24.375 $22.625
------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
------------------------------------------------------------------------------------------------------------------
Total investment return
at market value (%)(a) 9.56* (7.49) (7.47) 26.03 23.54 (4.53)*
------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $83,824 $89,214 $85,134 $102,112 $97,791 $97,881
------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .86* 1.71 1.78 1.71 1.72 1.14*
------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.87* 5.89 7.31 6.45 6.66 4.56*
------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 38.13* 65.85 56.58 60.69 70.33 38.92*
------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Represents initial net asset value of $25.00 less offering
expenses of $0.15. Original offering costs were reduced by $0.03 to
reflect actual cost incurred.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
August 31, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam Convertible Opportunities and Income Trust (the "fund") is
registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management investment company. The fund seeks
current income and capital appreciation by investing primarily in a
diversified portfolio of convertible securities and non-convertible,
higher risk, high yield 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 sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Securities quoted in
foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market
value. Other investments, including restricted securities, are stated at
fair value following procedures approved by the Trustees. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size
trading units of such securities using methods based on market
transactions for comparable securities and variable relationships
between securities that are generally recognized by institutional
traders.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Gains or losses on securities sold are determined
on the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date. Discounts on zero coupon bonds, original issue
discount bonds, stepped-coupon bonds and payment in kind bonds are
accreted according to the yield-to-maturity basis. Any premium resulting
from the purchase of stepped-coupon bonds is amortized on a
yield-to-maturity basis. Non-cash dividends, if any, are recorded at the
fair market value of the securities received.
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.
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: 1.10% of
average net assets.
The fund compensates Putnam Management for administrative services based
on quarterly net assets of the fund. Such administrative fees are based
at an annual rate of 0.25% of the average net assets of the fund.
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 August 31, 2000, fund expenses were reduced by
$3,182 under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $680
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
Note 3
Purchases and sales of securities
During the six months ended August 31, 2000, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $31,268,706 and $36,176,249, respectively. There
were no purchases and sales of U.S. government obligations.
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FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Charles G. Pohl
Vice President and Fund Manager
Rosemary H. Thomsen
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time, or
visit our Web site (www.putnaminvestments.com) any time for up-to-date
information about the fund's NAV.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
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PUTNAM
INVESTMENTS
---------------------
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