Putnam
Premier
Income
Trust
Item 1. Report to Stockholders:
-------------------------------
The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
1-31-04
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
As we consider how the financial markets may perform in 2004, we think
it is important to take note of the increasingly positive trends that
have become apparent in the U.S. economy and financial markets. The
stimulus provided by fiscal and monetary policies has drawn the economy
out of the slump of early 2003 and rising profits prompted a broad rally
for stocks. In the bond market, a favorable trend of declining interest
rates over the past six months has given way to the possibility of
Federal Reserve tightening some time this year. We see indications that
these trends will take shape in the remainder of the year and know that
Putnam management teams will seek to position the funds to benefit from
them.
Putnam Premier Income Trust's strong six-month performance reflects
favorable economic and market conditions for the global fixed-income
markets that helped bring interest rates down over the course of the
period. Despite surging stock market returns in both the United States
and Europe, the period was also a positive one for bonds, as low
inflation and improved economic conditions helped bolster prices --
especially for bonds with lower credit quality. In the following pages,
your fund's management team discusses fund performance, market trends,
investment strategies, and sector performance that contributed to
returns. The management team also discusses its expectations for the
months ahead.
We deeply appreciate your continued confidence in Putnam and we are
committed to helping you pursue your long-term investment goals. We
firmly believe that your patience will be rewarded.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
March 17, 2004
Report from Fund Management
Fund highlights
* During the semiannual period ended January 31, 2004, Putnam Premier
Income Trust had a total return at net asset value (NAV) of 10.89%. The
fund's return at market price was 10.25%.
* Due to its emphasis on high-yield bonds and investments in
emerging-market securities, as well as a beneficial currency strategy,
the fund significantly outperformed the 3.88% return of its primary
benchmark, the Lehman Government Bond Index.
* Also as a result of its investments in high-yield bonds, and, to a
lesser extent, emerging-market securities, the fund slightly
outperformed (at NAV) the 10.80% average return of funds in the Lipper
Flexible Income Funds (Closed-End) category.
* The fund's return at market price was consistent, although slightly
lower, than its return at NAV, reflecting investors' positive
perceptions of the fund's investment strategy and the global bond
markets generally.
* See the Performance Summary beginning on page 7 for complete fund
performance, comparative performance, and Lipper data.
Performance commentary
During the first half of its fiscal year, Putnam Premier Income Trust
benefited from an unusually positive confluence of factors that drove
solid returns in the global bond markets and strong returns in the
equity markets. The U.S. economy steamed forward, with robust growth of
8.2% in the third 2003 calendar quarter, and solid, albeit somewhat
slower, growth in the fourth calendar quarter. However, with high
productivity, an accommodative Federal Reserve Board monetary policy,
and no apparent threat of inflation in either the United States or
Europe, bond yields -- fluctuating within a broad range -- generally
declined over the six-month period. This helped bolster returns (since
bond prices move in the opposite direction of yields). In this
environment, bonds with lower credit quality generally outperformed
higher-quality bonds. As a result, your fund slightly outperformed its
benchmark index and Lipper category average, primarily due to its focus
on high-yield bonds and, to a lesser extent, emerging-market bonds.
FUND PROFILE
Putnam Premier Income Trust is designed for investors seeking a high
level of current income. The fund maintains flexibility across three
sectors -- U.S. government and agencies, high-yield corporate, and
international -- to seek maximum current income without undue risk to
capital. The fund may be appropriate for investors seeking a higher
level of income who can accept a moderately higher level of risk.
Market overview
Overall, global bond markets performed well for the six-month period,
despite a dramatic upturn in interest rates during June and July 2003.
This rise in yields was caused by a change in perceptions about the
state of the U.S. economic recovery and the level of risk investors were
willing to accept. As investors grew more optimistic about the economy,
they became more comfortable with higher levels of risk and therefore
less enamored with high-quality bonds such as U.S. Treasuries.
From August 2003 through January 2004, the global bond markets continued
to be volatile, with yields rising and falling within a fairly broad
range with each bit of news that either challenged or supported the
notion of a sustained economic recovery. However, low inflation and an
accommodative Fed monetary policy helped bond yields in the United
States to trend generally downward. In Europe, low inflation reduced the
likelihood of a rate increase by the European Central Bank, and European
government agency bonds turned in a solid performance. In emerging
markets, the strengthening global economy helped boost commodities
exports, helping performance in both the stock and bond markets of these
countries. The U.S. dollar continued to weaken, as the country's trade
deficit ballooned, causing concerns about the ability of foreign
investors to continue supporting the trade gap (foreign direct
investment in the United States essentially finances the trade deficit).
U.S. high-yield corporate bonds remained strong, continuing this
sector's most impressive year of returns since the early 1990s. Default
rates continued to decline, and credit quality improved as companies
retired or refinanced debt. Responding to the strong performance,
investor demand for high-yield bonds was heavy, and there was ample new
issuance.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 1/31/04
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Bonds
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Lehman Government Bond Index (U.S. Treasury and agency
securities) 3.88%
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Citigroup Non-U.S. World Government Bond Index
(international government bonds) 12.70%
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JP Morgan Chase Global High Yield Index (global high-yield
corporate bonds) 11.92%
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JP Morgan Chase (EMBI) Global Diversified
(global emerging-market securities) 10.57%
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Equities
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S&P 500 Index (broad stock market) 15.23%
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MSCI EAFE Index (international stocks) 25.35%
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Russell 2000 Index (stocks of small and midsize companies) 22.67%
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These indexes provide an overview of performance in different market
sectors for the six months ended 1/31/04.
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Strategy overview
One of our main strategies during the past six months was to emphasize
investments in four dollar-bloc countries (countries whose currencies
are tied to the U.S. dollar) -- Canada, the United Kingdom, Australia,
and New Zealand. As the global economy began to show signs of growth
during the summer of 2003 and these four economies began to strengthen,
the central banks of these countries either hinted at raising interest
rates or, in the case of Canada and the United Kingdom, actually raised
them (twice in Canada and once in the U.K.). We felt the concerns about
rapid growth were overblown, and increased the fund's weightings in
government agency bonds in all four countries. Over the course of the
semiannual period, interest rates in these countries either leveled off
or declined, providing a boost to the performance of the fund's
holdings. In New Zealand, there has been talk of a rate cut, and
Canada's central bank cut interest rates three times in a row. Although
the U.K. raised rates early in the period, the yield curve appears to
have factored in many more rate hikes than we think are likely. Toward
the end of the period, we reduced the weightings in Canada, Australia,
and New Zealand after the fund's holdings from these countries had shown
strong performance.
We continued to overweight U.S. high-yield corporate bonds during the
period, which made a positive contribution to the fund's returns. This
sector remains the fund's largest single weighting, and high-yield bonds
performed well due to the strong economy, improving credit quality,
declining default rates, and a favorable supply/demand environment.
Within the U.S. investment-grade sector, we maintained the fund's
weighting in mortgage-backed securities, which had solid, albeit
unspectacular performance, after being hurt by heavy home mortgage
refinancing activity during the spring and summer of 2003.
[GRAPHIC OMITTED: horizontal bar chart SECTOR WEIGHTINGS COMPARED]
SECTOR WEIGHTINGS COMPARED
as of 7/31/03 as of 1/31/04
High yield 50.1% 47.3%
U.S. investment
grade 27.1% 33.2%
International* 22.8% 19.5%
Footnote reads:
This chart shows how the fund's sector weightings have changed over the
last six months. Weightings are shown as a percentage of market value.
Holdings will vary over time.
* Includes emerging markets.
How fund holdings affected performance
The primary trend characterizing the past six months was that securities
-- of all types, both debt and equity -- with greater credit risk
significantly outperformed those with higher quality and lower risk,
reflecting a new attitude among investors that had not been seen for
most of the three and a half years preceding this semiannual period. In
the bond markets, securities with lower credit quality outperformed
Treasuries in each of the six months from August 2003 through January
2004. As a result, the fund's holdings of U.S. high-yield corporate
bonds, its largest weighting, made a significant contribution to
performance. Within this sector, we sought, on a selective basis,
opportunities in lower-quality bonds that offered both higher yields and
the potential for an improvement in credit quality. Our primary
rationale was that, in an environment of economic recovery and declining
corporate default rates, we believed these securities offered the
greatest total return potential within the high-yield universe. As the
economy and stock market improved during the period, many high-yield
bonds -- especially those with lower ratings and higher yields -- had
impressive price gains in addition to their attractive yields. To take
advantage of this trend, we generally underweighted BB-rated bonds and
overweighted those with CCC ratings. We also sought bonds issued by
companies with adequate liquidity and a strong ability to meet their
obligations. Bonds with CCC ratings were among the best-performing bonds
in the high-yield market during the period.
[GRAPHIC OMITTED: TOP HOLDINGS]
TOP HOLDINGS
U.S. Investment-Grade Sector
1 Federal National Mortgage Association
Pass-through certificates 5.0%, TBA,
February 1, 2019
2 U.S. Treasury Bonds
7.5%, November 15, 2016
3 U.S. Treasury Bonds
6.25%, May 15, 2030
High-Yield Sector
1 HMH Properties, Inc.
company guaranty Ser. B, 7.875%, 2008
2 Pioneer Natural Resources Co.
company guaranty 9.625%, 2010
3 Qwest Corp.
144A notes 8.875%, 2012
International Sector
1 United Kingdom
Treasury bonds 7.5%, 2006
2 Germany (Federal Republic of)
bonds Ser. 97, 6.0%, 2007
3 Austria (Republic of)
notes Ser. E MTN, 3.8%, 2013
Footnote reads:
These holdings represent 14.7% of the fund's net assets as of 1/31/04.
The fund's holdings will change over time.
Although the fund's emerging markets weighting was neutral, relative to
many competitors, this sector contributed strongly to returns. As
mentioned, these securities have surged as a result of strong growth in
many emerging-market countries, including Brazil, Mexico, India, China,
and South Korea. This growth has been due in large part to gains in
manufacturing and exports to other rapidly growing countries. As a
result of what we believed were excessive valuations near the end of the
period, we sharply reduced the fund's exposure to emerging-market
securities by the period's end.
European government agency bonds continued to produce solid returns,
helped by the rising euro in relation to the continuing decline in the
U.S. dollar. Stable or declining interest rates and economic growth in
most Continental countries contributed to this sector's performance.
Mortgage-backed securities performed well, although their performance
lagged many sectors of lower credit quality because of investors'
preference for the latter. Nevertheless, after a difficult summer of
volatility caused by high prepayment levels, these securities earned
their coupon rates and had relatively stable principal values. We
deployed the fund's assets in this sector as an anchor against some of
the more volatile sectors with higher credit risk.
Finally, the fund's currency strategy continued to favor a weakening
dollar and a rising euro, and made a solid contribution to returns.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary
in the future.
The fund's management team
The fund is managed by the Putnam Core Fixed-Income Team. The members of
the team are D. William Kohli (Portfolio Leader), David Waldman
(Portfolio Member), Carl Bell, Rob Bloemker, Andrea Burke, Kevin Cronin,
Steve Horner, Michael Salm, and John Van Tassel.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
The global economy is currently in a state of transition, making it
difficult to assess what could happen in the coming months. There has
been tremendous stimulus in the United States in the form of tax cuts, a
weaker dollar, increased government spending -- some related to the Iraq
war -- and interest rates that have been at historical lows for some
time. Meanwhile, there have been few clear signs from central banks that
significant tightening will occur in 2004. The increased willingness
among investors to accept risk has helped boost the capital markets,
which has also provided economic stimulus. Overseas, interest rates are
somewhat higher, but are stable and, in some cases, have been reduced.
Surging growth in Asia and the U.S. economic recovery have provided the
fabled "rising tide that lifts all boats," helping many smaller
countries around the world to grow their economies.
Countering these forces are several trends that may hold back growth
from a pace that we would normally see in a cyclical recovery from
recession. These trends include the ongoing efforts among corporations
to reduce debt, which diverts resources from capital spending, as well
as continued high productivity, which enables companies to produce more
with the same resources. Finally, low wages in developing regions, such
as Asia, are holding down global wages overall. As a result, many
developed economies, especially the United States, have experienced a
"jobless recovery."
While we suspect the Federal Reserve Board may raise rates sometime this
year, it is by no means a certainty. Should the Fed begin to tighten, it
will likely do so in a careful, deliberate, and open manner, with
significant warning to investors beforehand. As a result, we have
positioned the fund to be slightly less sensitive to interest-rate
changes, which we believe is a prudent strategy at this time.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. International
investing involves certain risks, such as currency fluctuations,
economic instability, and political developments. Lower-rated bonds may
offer higher yields in return for more risk. Mutual funds that invest in
government securities are not guaranteed. Mortgage-backed securities are
subject to prepayment risk.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended January 31, 2004. In accordance with regulatory
requirements, we also include performance for the most current calendar
quarter-end. Performance should always be considered in light of a
fund's investment strategy. Data represent past performance. Past
performance does not guarantee future results. More recent returns may
be less or more than those shown. Investment return, net asset value,
and market price will fluctuate and you may have a gain or a loss when
you sell your shares.
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TOTAL RETURN FOR PERIODS ENDED 1/31/04
-----------------------------------------------------------
NAV Market price
-----------------------------------------------------------
6 months 10.89% 10.25%
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1 year 20.50 10.45
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5 years 40.87 26.48
Annual average 7.09 4.81
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10 years 92.02 100.31
Annual average 6.74 7.19
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Annual average
Life of fund (since
2/29/88) 8.55 7.56
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Performance does not reflect taxes on reinvested distributions.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 1/31/04
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Lipper
Citigroup Non- JP Morgan Flexible
Lehman U.S. World Chase Global Income Funds
Government Government High Yield (Closed-End)
Bond Index Bond Index Index* category average+
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6 months 3.88% 12.70% 11.92% 10.80%
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1 year 3.46 16.49 26.55 21.13
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5 years 35.82 31.12 34.58 35.53
Annual average 6.31 5.57 6.12 5.95
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10 years 90.65 91.12 101.33 84.55
Annual average 6.67 6.69 7.25 6.24
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Annual average
Life of fund
(since 2/29/88) 7.93 7.50 -- 8.35
----------------------------------------------------------------------------------------------------------------------------------
Index and Lipper results should be compared to fund performance at net
asset value.
* The inception date of the JP Morgan Chase Global High Yield Index was
12/31/93.
+ Over the 6-month and 1-, 5-, and 10-year periods ended 1/31/04, there
were 12, 12, 12, and 10 funds, respectively, in this Lipper category.
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PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 1/31/04
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Putnam Premier Income Trust
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Distributions (number) 6
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Income $0.234
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Capital gains --
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Total $0.234
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Share value: NAV Market price
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7/31/03 $6.75 $6.31
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1/31/04 7.22 6.71
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Current return (end of period)
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Current dividend rate 1 6.48% 6.97%
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1 Most recent distribution, excluding capital gains, annualized and
divided by NAV or market price at end of period.
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TOTAL RETURN FOR PERIODS ENDED 12/31/03 (MOST RECENT CALENDER QUARTER)
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NAV Market price
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6 months 7.18% 3.10%
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1 year 20.62 16.06
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5 years 39.43 25.41
Annual average 6.87 4.63
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10 years 91.83 94.01
Annual average 6.73 6.85
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Annual average
Life of fund (since
2/29/88) 8.48 7.44
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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
stock exchanges such as the American Stock Exchange and the New York
Stock Exchange.
Comparative indexes
Citigroup (formerly Salomon Smith Barney) Non-U.S. World Government Bond
Index is an unmanaged index of government bonds issued by 10 countries.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and
agency securities.
JP Morgan Chase Emerging Markets Bond Index (EMBI) Global Diversified is
an unmanaged index used to mirror the investable universe of emerging
markets debt securities.
JP Morgan Chase Global High Yield Index is an unmanaged index used to
mirror the investable universe of the U.S. dollar global high-yield
corporate debt market of both developed and emerging markets.
Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged
index of international stocks from Europe, Australasia, and the Far
East.
Russell 2000 Index is an unmanaged index of common stocks that generally
measure performance of small to midsize companies within the Russell
3000 Index.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper Inc. is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. Our proxy voting guidelines and policies are
available on the Putnam Individual Investor Web site,
www.putnaminvestments.com, by calling Putnam's Shareholder Services at
1-800-225-1581, or on the SEC's Web site, www.sec.gov.
The fund's portfolio
January 31, 2004 (Unaudited)
Corporate bonds and notes (49.4%) (a)
Principal amount Value
Advertising and Marketing Services (0.1%)
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$326,477 Adams Outdoor Advertising bank term
loan FRN 4.37s, 2008 (acquired
4/20/03, cost $325,662) (RES) $327,702
300,000 Lamar Media Corp. bank term loan FRN
Ser. B, 3.4375s, 2010 (acquired
2/27/03, cost $300,000) (RES) 302,438
780,000 Lamar Media Corp. company guaranty
7 1/4s, 2013 846,300
--------------
1,476,440
Automotive (1.2%)
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395,000 ArvinMeritor, Inc. notes 8 3/4s,
2012 444,375
1,425,000 Collins & Aikman Products company
guaranty 10 3/4s, 2011 1,410,750
220,000 Dana Corp. notes 10 1/8s, 2010 250,800
880,000 Dana Corp. notes 9s, 2011 1,029,600
EUR 60,000 Dana Corp. notes 9s, 2011 89,431
$135,000 Dana Corp. notes 7s, 2029 130,275
405,000 Dana Corp. notes 6 1/2s, 2009 423,225
295,000 Delco Remy International, Inc.
company guaranty 11s, 2009 312,700
695,000 Delco Remy International, Inc.
company guaranty 10 5/8s, 2006 707,163
850,000 Dura Operating Corp. company
guaranty Ser. D, 9s, 2009 864,875
265,000 Dura Operating Corp. 144A sr. notes
8 5/8s, 2012 282,225
246,881 Hayes Lemmerz International, Inc.
bank term loan FRN 4.9522s,
2009 (acquired 6/3/03, cost
$244,412) (RES) 250,122
1,090,000 Lear Corp. company guaranty Ser. B,
8.11s, 2009 1,269,850
160,000 Lear Corp. company guaranty Ser. B,
7.96s, 2005 170,600
EUR 285,000 Lear Corp. sr. notes 8 1/8s, 2008 401,788
$560,000 Meritor Automotive, Inc. notes 6.8s,
2009 586,600
875,000 Metaldyne Corp. 144A sr. notes 10s,
2013 888,125
138,870 SPX Corp. bank term loan FRN Ser. B,
3.4375s, 2009 (acquired various
dates from 7/23/02 to 8/26/03, cost
$138,870) (RES) 139,694
EUR 450,000 Teksid Aluminum 144A company
guaranty 11 3/8s, 2011 (Luxembourg) 564,534
$683,000 Tenneco Automotive, Inc. company
guaranty Ser. B, 11 5/8s, 2009 734,225
1,040,000 Tenneco Automotive, Inc. sec. notes
Ser. B, 10 1/4s, 2013 1,206,400
155,000 TRW Automotive bank term loan FRN
3.6875s, 2011 (acquired 1/7/04,
cost $155,000) (RES) 157,325
--------------
12,314,682
Basic Materials (4.8%)
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750,000 Acetex Corp. sr. notes 10 7/8s, 2009
(Canada) 832,500
1,085,000 AK Steel Corp. company guaranty
7 7/8s, 2009 971,075
575,000 AK Steel Corp. company guaranty
7 3/4s, 2012 503,125
230,628 Appleton Papers, Inc. bank term loan
FRN 3.64s, 2006 (acquired 6/4/02,
cost $231,493) (RES) 231,781
915,000 Appleton Papers, Inc. company
guaranty Ser. B, 12 1/2s, 2008s 1,038,525
560,000 Avecia Group PLC company guaranty
11s, 2009 (United Kingdom) 526,400
810,000 Better Minerals & Aggregates Co.
company guaranty 13s, 2009 599,400
740,000 Compass Minerals Group, Inc. company
guaranty 10s, 2011 851,000
1,070,000 Compass Minerals International, Inc.
sr. notes stepped-coupon zero %
(12 3/4s, 12/15/07), 2012 (STP) 845,300
1,516,300 Doe Run Resources Corp. company
guaranty Ser. A1, 11 3/4s,
2008 (acquired various dates from
7/27/01 to 5/27/03, cost $938,450)
(RES) (PIK) 803,639
1,065,000 Dow Chemical Co. (The) notes 5 3/4s,
2009 1,150,475
255,000 Equistar Chemicals LP notes 8 3/4s,
2009 262,013
2,345,000 Equistar Chemicals LP/Equistar
Funding Corp. company guaranty
10 1/8s, 2008 2,556,050
550,000 Equistar Chemicals LP/Equistar
Funding Corp. 144A sr. notes
10 5/8s, 2011 596,750
510,000 Four M Corp. sr. notes Ser. B, 12s,
2006 515,100
600,000 Georgia-Pacific Corp. bonds 7 3/4s,
2029 591,000
1,230,000 Georgia-Pacific Corp. debs. 7.7s,
2015 1,288,425
4,000 Georgia-Pacific Corp. sr. notes
7 3/8s, 2008 4,255
950,000 Gerdau Ameristeel Corp. sr. notes
10 3/8s, 2011 (Canada) 1,054,500
223,875 Graphics Packaging bank term loan
FRN 3.9209s, 2010 (acquired 8/6/03,
cost $223,875) (RES) 226,841
297,000 Hercules, Inc. bank term loan FRN
Ser. B, 3.6245s, 2007 (acquired
12/17/02, cost $296,258) (RES) 298,238
1,925,000 Hercules, Inc. company guaranty
11 1/8s, 2007 2,329,250
775,000 Huntsman Advanced Materials, LLC
144A sec. notes 11s, 2010 879,625
411,513 Huntsman Corp. bank term loan FRN
Ser. A, 5.9581s, 2007 (acquired
various dates from 7/17/02 to
9/24/03, cost $462,944) (RES) 498,985
277,028 Huntsman Corp. bank term loan FRN
Ser. B, 9 1/2s, 2007
(acquired various dates from 3/22/02
to 9/24/03, cost $314,199) (RES) 341,927
1,150,000 Huntsman ICI Chemicals, Inc. company
guaranty 10 1/8s, 2009 1,178,750
1,920,000 Huntsman ICI Holdings sr. disc.
notes zero %, 2009 902,400
EUR 590,000 Huntsman International, LLC sr. sub.
notes Ser. EXCH, 10 1/8s, 2009 714,518
$555,000 Huntsman LLC 144A sec. notes
11 5/8s, 2010 579,975
1,910,000 ISP Chemco, Inc. company guaranty
Ser. B, 10 1/4s, 2011 2,120,100
130,000 ISP Holdings, Inc. sec. sr. notes
Ser. B, 10 5/8s, 2009 144,300
80,000 Kaiser Aluminum & Chemical Corp. sr.
notes Ser. B, 10 7/8s, 2006 (In
default) (NON) 72,000
1,255,000 Kaiser Aluminum & Chemical Corp. sr.
sub. notes 12 3/4s, 2003 (In
default) (NON) (DEF) 232,175
555,000 Louisiana-Pacific Corp. sr. notes
8 7/8s, 2010 663,225
2,000 Louisiana-Pacific Corp. sr. sub.
notes 10 7/8s, 2008 2,370
100,000 Lyondell Chemical Co. bonds 11 1/8s,
2012 109,000
980,000 Lyondell Chemical Co. company
guaranty 9 1/2s, 2008 1,009,400
185,000 Lyondell Chemical Co. company
guaranty 9 1/2s, 2008 190,550
1,340,000 Lyondell Chemical Co. notes Ser. A,
9 5/8s, 2007 1,390,250
EUR 1,110,000 MDP Acquisitions PLC sr. notes
10 1/8s, 2012 (Ireland) 1,575,200
$125,000 MDP Acquisitions PLC sr. notes
9 5/8s, 2012 (Ireland) 141,875
477,496 MDP Acquisitions PLC sub. notes
15 1/2s, 2013 (Ireland) (PIK) 549,120
1,085,000 Millennium America, Inc. company
guaranty 9 1/4s, 2008 1,182,650
340,000 Millennium America, Inc. company
guaranty 7 5/8s, 2026 326,400
260,000 Millennium America, Inc. 144A sr.
notes 9 1/4s, 2008 283,400
206,250 Nalco Co. bank term loan FRN 3.62s,
2010 (acquired 11/6/03, cost
$206,250) (RES) 208,441
375,000 Nalco Co. 144A sr. notes 7 3/4s,
2011 395,625
EUR 100,000 Nalco Co. 144A sr. notes 7 3/4s,
2011 127,005
EUR 100,000 Nalco Co. 144A sr. sub. notes 9s,
2013 127,315
$1,545,000 Nalco Co. 144A sr. sub. notes
8 7/8s, 2013 1,641,563
740,175 Noveon International bonds 13s, 2011 791,987
200,000 Noveon International company
guaranty Ser. B, 11s, 2011 228,000
505,000 OM Group, Inc. company guaranty
9 1/4s, 2011 525,200
470,000 Pacifica Papers, Inc. sr. notes 10s,
2009 (Canada) 495,850
609,379 PCI Chemicals Canada sec. sr. notes
10s, 2008 (Canada) 597,191
192,965 Pioneer Cos., Inc. sec. FRN 4.663s,
2006 189,106
1,095,000 Potlatch Corp. company guaranty 10s,
2011 1,242,825
505,000 Resolution Performance Products, LLC
sr. notes 9 1/2s, 2010 517,625
250,000 Resolution Performance Products, LLC
144A sec. notes 8s, 2009 257,500
EUR 290,000 Rhodia SA unsub. Ser. EMTN, 6 1/4s,
2005 (France) 341,298
$400,000 Salt Holdings Corp. 144A sr. disc.
notes stepped-coupon zero % (12s,
6/1/06), 2013 (STP) 300,000
EUR 620,000 SGL Carbon SA 144A sr. notes 8 1/2s,
2012 (Luxembourg) 779,728
$310,000 Smurfit-Stone Container Corp.
company guaranty 8 1/4s, 2012 336,350
1,235,000 Steel Dynamics, Inc. company
guaranty 9 1/2s, 2009 1,377,025
207,976 Sterling Chemicals, Inc. sec. notes
10s, 2007 (PIK) 201,737
1,090,000 Stone Container Corp. sr. notes
9 3/4s, 2011 1,201,725
345,000 Stone Container Corp. sr. notes
8 3/8s, 2012 374,325
70,000 Texas Petrochemical Corp. sr. sub.
notes 11 1/8s, 2006 (In default)
(NON) 28,700
280,000 Texas Petrochemical Corp. sr. sub.
notes Ser. B, 11 1/8s, 2006 (In
default) (NON) 114,800
1,160,000 Ucar Finance, Inc. company guaranty
10 1/4s, 2012 1,334,000
550,000 United Agri Products 144A sr. notes
8 1/4s, 2011 577,500
840,000 United States Steel Corp. sr. notes
9 3/4s, 2010 953,400
710,000 WCI Steel, Inc. sr. notes Ser. B,
10s, 2004 (In default) (NON) 284,000
55,000 Weirton Steel Corp. sr. notes 10s,
2008 (In default) (NON) 20,900
73,913 Wheeling-Pittsburgh Steel Corp. sr.
notes 6s, 2010 48,783
147,827 Wheeling-Pittsburgh Steel Corp. sr.
notes 5s, 2011 99,044
570,000 WHX Corp. sr. notes 10 1/2s, 2005 518,700
--------------
49,401,085
Building Materials (0.4%)
-------------------------------------------------------------------------------
450,000 Building Materials Corp. company
guaranty 8s, 2008 445,500
830,000 Dayton Superior Corp. 144A sec.
notes 10 3/4s, 2008 875,650
315,000 Interface, Inc. 144A sr. sub. notes
9 1/2s, 2014 311,850
173,750 NCI Building Systems, Inc. bank term
loan FRN Ser. B, 4.4085s,
2008 (acquired 9/4/02, cost
$173,750) (RES) 174,908
760,000 Nortek Holdings, Inc. 144A sr. notes
stepped-coupon zero % (10s,
11/15/07), 2011 (STP) 585,200
555,000 Nortek, Inc. sr. sub. notes Ser. B,
9 7/8s, 2011 613,275
460,000 Nortek, Inc. 144A sr. notes Ser. B,
9 1/8s, 2007 474,950
415,000 Owens Corning bonds 7 1/2s, 2018 (In
default) (NON) 198,163
1,185,000 Owens Corning notes 7 1/2s, 2005 (In
default) (NON) 565,838
--------------
4,245,334
Capital Goods (4.8%)
-------------------------------------------------------------------------------
350,000 Advanced Glassfiber Yarns bank term
loan FRN Ser. A, 6 1/2s,
2004 (acquired 9/12/02, cost
$245,237) (RES) 245,000
310,000 Advanced Glassfiber Yarns sr. sub.
notes 9 7/8s, 2009 (In default)
(NON) 14,725
1,148,000 AEP Industries, Inc. sr. sub. notes
9 7/8s, 2007 1,185,310
1,340,093 Air2 US 144A sinking fund Ser. D,
12.266s, 2020 (In default) (NON) 40,203
312,038 Alliant Techsystems, Inc. bank term
loan FRN Ser. C, 3.4729s,
2009 (acquired 5/7/02, cost
$312,038) (RES) 315,047
209,491 Allied Waste Industries, Inc. bank
term loan FRN 3.9218s,
2010 (acquired 4/25/03, cost
$209,491) (RES) 212,546
35,357 Allied Waste Industries, Inc. bank
term loan FRN Ser. C, 1.12s,
2010 (acquired 4/25/03, cost
$35,357) (RES) 35,821
1,975,000 Allied Waste North America, Inc.
company guaranty Ser. B, 9 1/4s,
2012 2,226,813
1,670,000 Allied Waste North America, Inc.
company guaranty Ser. B, 8 1/2s,
2008 1,866,225
765,000 Allied Waste North America, Inc.
144A sec. notes 6 1/2s, 2010 780,300
298,500 Amsted Industries bank term loan FRN
5.1369s, 2010 (acquired 8/12/03,
cost $297,008) (RES) 299,713
1,750,000 Argo-Tech Corp. company guaranty
8 5/8s, 2007 1,758,750
120,000 Argo-Tech Corp. company guaranty
Ser. D, 8 5/8s, 2007 120,600
305,000 BE Aerospace, Inc. sr. notes 8 1/2s,
2010 329,400
840,000 BE Aerospace, Inc. sr. sub. notes
9 1/2s, 2008 827,400
285,000 BE Aerospace, Inc. sr. sub. notes
Ser. B, 8 7/8s, 2011 275,025
660,000 BE Aerospace, Inc. sr. sub. notes
Ser. B, 8s, 2008 620,400
405,000 Berry Plastics Corp. company
guaranty 10 3/4s, 2012 473,850
1,195,000 Blount, Inc. company guaranty 13s,
2009 1,278,650
940,000 Blount, Inc. company guaranty 7s,
2005 954,100
2,730,000 Browning-Ferris Industries, Inc.
debs. 7.4s, 2035 2,661,750
880,000 Browning-Ferris Industries, Inc. sr.
notes 6 3/8s, 2008 897,600
EUR 470,000 BSN Glasspack 144A sec. notes
9 1/4s, 2009 (France) 633,409
$285,000 Crown Cork & Seal Company, Inc. bank
term loan FRN Ser. B, 4.17s, 2008
(acquired 2/21/03, cost $282,150)
(RES) 288,420
745,000 Crown Holdings SA notes 10 7/8s,
2013 (France) 875,375
2,190,000 Crown Holdings SA notes 9 1/2s, 2011
(France) 2,463,750
1,310,000 Decrane Aircraft Holdings Co.
company guaranty Ser. B, 12s, 2008 736,875
223,875 EaglePicher bank term loan FRN
4.6713s, 2009 (acquired 8/6/03,
cost $225,188) (RES) 226,020
985,000 Earle M. Jorgensen Co. sec. notes
9 3/4s, 2012 1,103,200
935,000 FIMEP SA sr. notes 10 1/2s, 2013
(France) 1,103,300
500,000 Flender Holdings 144A sr. notes 11s,
2010 (Denmark) 717,313
103,900 Flowserve Corp. bank term loan FRN
Ser. C, 3.9153s, 2009 (acquired
4/30/02, cost $103,900) (RES) 104,568
770,000 Flowserve Corp. company guaranty
12 1/4s, 2010 887,425
EUR 135,000 Flowserve Finance BV company
guaranty 12 1/4s, 2010 (Netherlands) 191,159
$135,000 Fonda Group, Inc. sr. sub. notes
Ser. B, 9 1/2s, 2007 134,325
298,947 Graham Packaging bank term loan FRN
5.1875s, 2010 (acquired 2/18/03,
cost $297,453) (RES) 301,713
915,000 Hexcel Corp. sr. sub. notes 9 3/4s,
2009 958,463
DEM 745,000 Impress Metal Packaging Holding NV
sr. sub. notes 9 7/8s,
2007 (Netherlands) 444,743
$650,000 Insilco Holding Co. sr. disc. notes
zero %, 2008 (In default) (NON) 2,600
400,000 International Wire Group Inc.
company guaranty Ser. B,
11 3/4s, 2005 (In default) (NON) 296,000
EUR 380,000 Invensys, PLC sr. unsub. notes
5 1/2s, 2005 (United Kingdom) 458,546
$580,000 Jordan Industries, Inc. sr. notes
Ser. D, 10 3/8s, 2007 301,600
710,000 K&F Industries, Inc. sr. sub. notes
Ser. B, 9 5/8s, 2010 795,200
329,000 K&F Industries, Inc. sr. sub. notes
Ser. B, 9 1/4s, 2007 338,870
240,075 Laidlaw International, Inc. bank
term loan FRN 5 1/2s, 2009
(acquired 6/18/03, cost $235,274)
(RES) 242,476
1,445,000 Laidlaw International, Inc. 144A sr.
notes 10 3/4s, 2011 1,678,006
495,000 Legrand SA debs. 8 1/2s, 2025
(France) 542,025
120,000 Manitowoc Co., Inc. (The) company
guaranty 10 1/2s, 2012 136,800
EUR 255,000 Manitowoc Co., Inc. (The) company
guaranty 10 3/8s, 2011 350,785
$305,000 Manitowoc Co., Inc. (The) sr. notes
7 1/8s, 2013 320,250
440,000 Motors and Gears, Inc. sr. notes
Ser. D, 10 3/4s, 2006 382,800
775,000 Owens-Brockway Glass company
guaranty 8 1/4s, 2013 829,250
725,000 Owens-Brockway Glass company
guaranty 7 3/4s, 2011 772,125
955,000 Owens-Brockway Glass sr. sec. notes
8 3/4s, 2012 1,050,500
715,000 Pliant Corp. sec. notes 11 1/8s,
2009 750,750
255,000 Portola Packaging Inc. 144A sr.
notes 8 1/4s, 2012 263,925
825,000 Roller Bearing Company of America
company guaranty Ser. B, 9 5/8s,
2007 812,625
200,000 Roper bank term loan FRN 3.1128s,
2008 (acquired 12/22/03, cost
$200,000) (RES) 202,250
785,000 Sensus Metering Systems Inc. 144A
sr. sub. notes 8 5/8s, 2013 824,250
1,650,000 Sequa Corp. sr. notes 9s, 2009 1,843,875
270,000 Sequa Corp. sr. notes Ser. B,
8 7/8s, 2008 299,700
580,000 Siebe PLC 144A sr. unsub. 6 1/2s,
2010 (United Kingdom) 527,800
705,000 TD Funding Corp. company guaranty
8 3/8s, 2011 761,400
1,730,000 Tekni-Plex, Inc. company guaranty
Ser. B, 12 3/4s, 2010 1,920,300
640,000 Tekni-Plex, Inc. 144A sr. sec. notes
8 3/4s, 2013 678,400
265,000 Terex Corp. company guaranty 9 1/4s,
2011 294,813
995,000 Terex Corp. company guaranty Ser. B,
10 3/8s, 2011 1,126,838
442,139 Titan Corp. (The) bank term loan FRN
Ser. B, 4.4127s, 2009 (acquired
various dates from 5/14/02 to
6/3/02, cost $443,836) (RES) 442,231
74,813 Transdigm, Inc. bank term loan FRN
4.1338s, 2010 (acquired 7/21/03,
cost $74,813) (RES) 75,607
830,000 Trimas Corp. company guaranty
9 7/8s, 2012 888,100
510,000 Vought Aircraft Industries Inc. 144A
sr. notes 8s, 2011 531,675
--------------
49,331,658
Commercial and Consumer Services (0.3%)
-------------------------------------------------------------------------------
189,225 Coinmach Corp. bank term loan FRN
Ser. B, 4.1073s, 2009 (acquired
1/31/02, cost $188,988) (RES) 190,738
1,655,000 Coinmach Corp. sr. notes 9s, 2010 1,795,675
73,858 Corrections Corporation of America
bank term loan FRN 3.9219s,
2008 (acquired 8/5/03, cost $73,858)
(RES) 74,597
661,675 Derby Cycle Corp. (The) sr. notes
10s, 2008 (In default) (NON) 29,114
DEM 1,700,694 Derby Cycle Corp. (The) sr. notes
9 3/8s, 2008 (In default) (NON) 47,523
$149,625 IESI Corp. bank term loan FRN
4.2874s, 2010 (acquired various
dates from 10/20/03 to 10/21/03,
cost $150,469) (RES) 151,215
895,000 IESI Corp. company guaranty 10 1/4s,
2012 993,450
--------------
3,282,312
Communication Services (4.6%)
-------------------------------------------------------------------------------
838,000 Alamosa Delaware, Inc. company
guaranty 11s, 2010 909,230
2,000 Alamosa Delaware, Inc. company
guaranty stepped-coupon zero %
(12s, 7/31/06), 2009 (STP) 1,830
1,005,000 Alamosa Delaware, Inc. 144A sr.
notes 8 1/2s, 2012 979,875
270,000 American Cellular Corp. company
guaranty 9 1/2s, 2009 (In default)
(NON) 275,400
1,795,000 American Cellular Corp. sr. notes
Ser. B, 10s, 2011 1,983,475
405,000 American Tower Corp. sr. notes
9 3/8s, 2009 430,313
515,000 American Tower Corp. 144A sr. notes
7 1/2s, 2012 498,263
1,040,000 American Towers, Inc. 144A sr. sub.
notes 7 1/4s, 2011 1,068,600
770,000 Asia Global Crossing, Ltd. sr. notes
13 3/8s, 2010 (Bermuda) (In default)
(NON) 84,700
2,340,000 Centennial Cellular Operating Co.
company guaranty 10 1/8s, 2013 2,527,200
205,000 Cincinnati Bell Telephone Co.
company guaranty 6.3s, 2028 195,775
1,045,000 Cincinnati Bell, Inc. company
guaranty 7 1/4s, 2013 1,107,700
565,000 Cincinnati Bell, Inc. notes 7 1/4s,
2023 593,250
605,000 Cincinnati Bell, Inc. sr. sub. notes
8 3/8s, 2014 642,813
441,450 Colo.com, Inc. 144A sr. notes
13 7/8s, 2010 (In default) (NON) 1,655
GBP 305,000 Colt Telecommunications Group PLC
sr. notes 10 1/8s, 2007 (United
Kingdom) 566,819
EUR 150,000 Colt Telecommunications Group PLC
sr. notes 7 5/8s, 2009 (United
Kingdom) 187,899
$149,625 Crown Castle International Corp.
bank term loan FRN 4.66s,
2010 (acquired 10/03/03, cost
$149,625) (RES) 152,537
1,060,000 Crown Castle International Corp. sr.
notes 9 3/8s, 2011 1,176,600
149,625 Dobson Communications Corp. bank
term loan FRN 4.4028s, 2010
(acquired 10/20/03, cost $149,625)
(RES) 151,495
1,520,000 Dobson Communications Corp. sr.
notes 8 7/8s, 2013 1,573,200
365,000 Eircom Funding notes 8 1/4s, 2013
(Ireland) 406,975
540,000 Fairpoint Communications, Inc. sr.
sub. notes 12 1/2s, 2010 588,600
338,710 Firstworld Communication Corp. sr.
disc. notes zero %, 2008 (In
default) (NON) 34
459,310 Globix Corp. company guaranty 11s,
2008 (PIK) 399,600
1,200,000 Inmarsat Finance PLC 144A company
guaranty 7 5/8s, 2012 (United
Kingdom) 1,248,000
1,375,000 iPCS, Inc. sr. disc. notes
stepped-coupon zero % (14s,
7/15/05), 2010 (In default) (NON)
(STP) 316,250
705,000 IWO Holdings, Inc. company guaranty
14s, 2011 (In default) (NON) 141,000
110,000 Level 3 Communications, Inc. sr.
notes 9 1/8s, 2008 104,500
2,155,000 Level 3 Financing Inc. 144A sr.
notes 10 3/4s, 2011 2,327,400
1,005,000 Madison River Capital Corp. sr.
notes 13 1/4s, 2010 1,105,500
240,000 MCI Communications Corp. debs.
Ser. D, 8 1/4s, 2023 (In default)
(NON) 194,400
95,000 MCI Communications Corp. sr. notes
6.95s, 2006 (In default) (NON) 76,950
640,000 MCI Communications Corp. sr. notes
Ser. D, 7 1/2s, 2004 (In default)
(NON) 518,400
320,000 MCI Communications Corp. sr. notes
Ser. D, 6 1/2s, 2010 (In default)
(NON) 259,200
350,000 Nextel bank term loan FRN 3.41s,
2010 (acquired 12/19/02, cost
$323,663) (RES) 354,102
1,255,000 Nextel Communications, Inc. sr.
notes 9 1/2s, 2011 1,415,013
1,090,000 Nextel Communications, Inc. sr.
notes 9 3/8s, 2009 1,178,563
2,080,000 Nextel Communications, Inc. sr.
notes 7 3/8s, 2015 2,233,400
58,000 Nextel Partners, Inc. sr. notes
12 1/2s, 2009 67,280
760,000 Nextel Partners, Inc. sr. notes 11s,
2010 832,200
1,790,000 Nextel Partners, Inc. sr. notes
8 1/8s, 2011 1,888,450
241,500 PanAmSat Corp. bank term loan FRN
3.6s, 2010 (acquired 10/29/03, cost
$241,500) (RES) 244,720
1,160,000 PanAmSat Corp. company guaranty
8 1/2s, 2012 1,258,600
268,125 Qwest Communications International,
Inc. bank term loan FRN 6 1/2s, 2007
(acquired 6/5/03, cost $265,444)
(RES) 280,861
1,765,000 Qwest Communications International,
Inc. 144A sr. notes 7 1/2s, 2014 1,734,559
240,000 Qwest Communications International,
Inc. 144A sr. notes FRN 4.63s, 2009 240,000
3,360,000 Qwest Corp. 144A notes 8 7/8s, 2012 3,922,800
505,000 Qwest Services Corp. 144A notes 14s,
2014 636,300
70,000 Rogers Cantel, Ltd. debs. 9 3/8s,
2008 (Canada) 72,975
380,000 Rogers Wireless, Inc. sec. notes
9 5/8s, 2011 (Canada) 457,900
420,000 Rural Cellular Corp. sr. sub. notes
Ser. B, 9 5/8s, 2008 413,700
225,000 SBA Communications Corp. sr. notes
10 1/4s, 2009 227,250
445,000 SBA Telecommunications Inc. 144A sr.
dis. notes stepped-coupon zero %
(9 3/4s, 12/15/07), 2011 (STP) 318,175
1,805,000 Telus Corp. notes 8s, 2011 (Canada) 2,129,165
297,000 Time Warner Telecom, Inc. bank term
loan FRN Ser. B, 5.17s,
2009 (acquired 1/15/03, cost
$259,611) (RES) 298,485
935,000 TSI Telecommunication Services, Inc.
company guaranty Ser. B, 12 3/4s,
2009 1,047,200
550,000 U S West, Inc. notes 5 5/8s, 2008 544,500
577,000 UbiquiTel Operating Co. bonds
stepped-coupon zero % (14s,
4/15/05), 2010 (STP) 530,840
545,000 US UnWired, Inc. company guaranty
stepped-coupon Ser. B, zero %
(13 3/8s, 11/1/04), 2009 (STP) 493,225
1,500,000 Western Wireless Corp. sr. notes
9 1/4s, 2013 1,608,750
--------------
47,224,451
Conglomerates (0.4%)
-------------------------------------------------------------------------------
450,000 Tyco International Group SA company
guaranty 7s, 2028 (Luxembourg) 475,002
585,000 Tyco International Group SA company
guaranty 6 7/8s, 2029 (Luxembourg) 608,182
230,000 Tyco International Group SA company
guaranty 6 3/4s, 2011 (Luxembourg) 252,248
2,270,000 Tyco International Group SA notes
6 3/8s, 2011 (Luxembourg) 2,439,735
355,000 Tyco International Group SA 144A sr.
notes 6s, 2013 (Luxembourg) 369,068
--------------
4,144,235
Consumer (0.6%)
-------------------------------------------------------------------------------
1,470,000 Icon Health & Fitness company
guaranty 11 1/4s, 2012 1,646,400
1,310,000 Jostens Holding Corp. 144A sr. disc.
notes stepped-coupon zero %
(10 1/4s, 12/1/08), 2013 (STP) 884,250
284,333 Jostens, Inc. bank term loan FRN
Ser. B, 3.72s, 2010
(acquired 7/28/03, cost $284,333)
(RES) 286,892
730,000 Jostens, Inc. sr. sub. notes
12 3/4s, 2010 839,500
2,330,000 Samsonite Corp. sr. sub. notes
10 3/4s, 2008 2,434,850
--------------
6,091,892
Consumer Staples (8.0%)
-------------------------------------------------------------------------------
110,000 Adelphia Communications Corp. notes
Ser. B, 9 7/8s, 2005 (In default)
(NON) 109,450
560,000 Adelphia Communications Corp. sr.
notes 10 7/8s, 2010 (In default)
(NON) 558,600
25,000 Adelphia Communications Corp. sr.
notes 10 1/4s, 2011 (In default)
(NON) 25,625
75,000 Adelphia Communications Corp. sr.
notes 9 3/8s, 2009 (In default)
(NON) 76,125
1,505,000 Adelphia Communications Corp. sr.
notes Ser. B, 7 3/4s, 2009 (In
default) (NON) 1,493,713
EUR 370,000 Ahold Finance USA eurobonds 6 3/8s,
2005 468,998
$915,000 AMC Entertainment, Inc. sr. sub.
notes 9 7/8s, 2012 1,027,088
890,000 AMC Entertainment, Inc. sr. sub.
notes 9 1/2s, 2011 930,050
725,000 AMC Entertainment, Inc. sr. sub.
notes 9 1/2s, 2009 744,031
442,815 American Seafood Group, LLC bank
term loan FRN Ser. B, 4.42s,
2009 (acquired 4/11/02, cost
$442,372) (RES) 444,014
266,986 AMF Bowling Worldwide bank term loan
FRN Ser. B, 5 1/2s, 2008 (acquired
3/1/02, cost $266,319) (RES) 267,320
474,093 Archibald Candy Corp. company
guaranty 10s, 2007 (In default)
(NON) (PIK) 165,933
890,000 Armkel, LLC/Armkel Finance sr. sub.
notes 9 1/2s, 2009 976,775
605,000 Atlantic Broadband Finance LLC 144A
sr. sub. notes 9 3/8s, 2014 612,563
790,000 Brand Services, Inc. company
guaranty 12s, 2012 924,300
1,320,000 British Sky Broadcasting PLC company
guaranty 6 7/8s, 2009 (United
Kingdom) 1,486,694
910,000 Capital Records, Inc. 144A company
guaranty 8 3/8s, 2009 955,500
240,098 Carmike Cinemas, Inc. bank term loan
FRN Ser. B, 7 3/4s, 2005 (acquired
10/4/02, cost $234,306) (RES) 240,898
1,120,000 Century Cable Holdings bank term
loan FRN 6s, 2009 (acquired various
dates from 5/22/02 to 6/11/02, cost
$980,796) (RES) 1,105,200
247,481 Charter Communications Holdings, LLC
bank term loan FRN Ser. B,
3.87s, 2008 (acquired 1/9/03, cost
$214,999) (RES) 243,597
360,000 Charter Communications Holdings,
LLC/Capital Corp. sr. disc. notes
stepped-coupon zero % (12 1/8s,
1/15/07), 2012 (STP) 241,200
735,000 Charter Communications Holdings,
LLC/Capital Corp. sr. disc. notes
stepped-coupon zero % (11 3/4s,
5/15/06), 2011 (STP) 503,475
595,000 Charter Communications Holdings,
LLC/Capital Corp. sr. disc. notes
stepped-coupon zero % (11 3/4s,
1/15/05), 2010 (STP) 508,725
980,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes
11 1/8s, 2011 921,200
1,195,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes
10 3/4s, 2009 1,117,325
585,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes
10 1/4s, 2010 535,275
2,310,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes 10s,
2011 2,067,450
1,300,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes 9 5/8s,
2009 1,176,500
265,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes 8 5/8s,
2009 232,538
910,000 Cinemark USA, Inc. sr. sub. notes
9s, 2013 1,028,300
1,805,000 Cinemark USA, Inc. sr. sub. notes
Ser. B, 8 1/2s, 2008 1,841,100
154,685 Constellation Brands, Inc. bank term
loan FRN 3.1625s, 2008 (acquired
11/03/03, cost $154,685) (RES) 156,329
210,000 Constellation Brands, Inc. company
guaranty 8 1/2s, 2009 218,925
420,000 Constellation Brands, Inc. company
guaranty Ser. B, 8s, 2008 468,300
595,000 Constellation Brands, Inc. sr. sub.
notes Ser. B, 8 1/8s, 2012 651,525
2,575,000 CSC Holdings, Inc. sr. notes 7 7/8s,
2007 2,761,688
240,000 Dean Foods Co. sr. notes 6 5/8s,
2009 254,400
310,000 Del Monte Corp. company guaranty
Ser. B, 9 1/4s, 2011 345,650
780,000 Del Monte Corp. sr. sub. notes
8 5/8s, 2012 858,000
345,664 Del Monte Foods Co. bank term loan
FRN Ser. B, 4.8796s, 2010 (acquired
12/16/02, cost $343,935) (RES) 349,293
245,000 DirecTV bank term loan FRN Ser. B,
3.9006s, 2010 (acquired
various dates from 3/4/03 to 8/5/03,
cost $245,000) (RES) 247,527
1,315,000 DirecTV Holdings, LLC sr. notes
8 3/8s, 2013 1,489,238
3,586,000 Diva Systems Corp. sr. disc. notes
Ser. B, 12 5/8s, 2008 (In default)
(NON) 215,160
1,150,000 Doane Pet Care Co. sr. sub. debs.
9 3/4s, 2007 1,092,500
34,862 Dole Food Co. bank term loan FRN
3.8668s, 2009 (acquired 3/28/03,
cost $34,862) (RES) 35,342
365,000 Dole Food Co. sr. notes 8 7/8s, 2011 397,850
275,000 Dole Food Co. sr. notes 8 5/8s, 2009 299,750
930,000 Domino's, Inc. sr. sub. notes
8 1/4s, 2011 995,100
560,000 Eagle Family Foods company guaranty
Ser. B, 8 3/4s, 2008 436,800
2,048,000 Echostar DBS Corp. sr. notes 9 1/8s,
2009 2,314,240
2,300,000 Echostar DBS Corp. 144A sr. notes
6 3/8s, 2011 2,415,000
187,500 Echostar DBS Corp. 144A sr. notes
FRN 4.405s, 2008 194,531
350,000 Elizabeth Arden, Inc. 144A company
guaranty 7 3/4s, 2014 358,750
296,258 Emmis Communications Corp. bank term
loan FRN Ser. C, 3 3/8s,
2009 (acquired 6/20/02, cost
$295,887) (RES) 299,344
335,000 Emmis Communications Corp. company
guaranty Ser. B, 8 1/8s, 2009 349,656
865,000 Fleming Cos., Inc. company guaranty
10 1/8s, 2008 (In default) (NON) 160,025
720,000 Fleming Cos., Inc. sr. notes 9 1/4s,
2010 (In default) (NON) 129,600
282,000 French Fragrances, Inc. sr. notes
Ser. B, 10 3/8s, 2007 291,752
2,035,000 Granite Broadcasting Corp. 144A sec.
notes 9 3/4s, 2010 2,019,738
585,000 Gray Television, Inc. company
guaranty 9 1/4s, 2011 649,350
105,000 Insight Midwest LP/Insight Capital,
Inc. bank term loan FRN
3.9375s, 2009 (acquired 11/5/01,
cost $104,803) (RES) 105,459
56,047 Knology, Inc. 144A sr. notes 12s,
2009 (PIK) 56,888
815,000 Land O'Lakes, Inc. sr. notes 8 3/4s,
2011 725,350
1,270,000 News America Holdings, Inc. company
guaranty 9 1/4s, 2013 1,643,060
1,560,000 North Atlantic Trading Co. company
guaranty Ser. B, 11s, 2004 1,544,400
465,000 Olympus Cable bank term loan FRN
Ser. B, 6s, 2010 (acquired
various dates from 6/20/02 to
11/6/02, cost $374,206) (RES) 458,994
EUR 95,000 ONO Finance PLC company guaranty
13s, 2009 (United Kingdom) 127,734
$330,000 ONO Finance PLC sr. notes 14s, 2011
(United Kingdom) 366,300
45,000 ONO Finance PLC sr. notes 13s, 2009
(United Kingdom) 48,150
EUR 210,000 ONO Finance PLC sr. notes Ser. REGS,
14s, 2011 (United Kingdom) 289,534
$510,000 Pegasus Satellite sr. notes 12 3/8s,
2006 525,300
545,000 Pinnacle Foods Holding Corp. 144A
sr. sub. notes 8 1/4s, 2013 579,063
295,500 Playtex Products, Inc. bank term
loan FRN Ser. C, 4.7159s,
2009 (acquired 6/3/02, cost
$295,500) (RES) 295,808
2,195,000 Playtex Products, Inc. company
guaranty 9 3/8s, 2011 2,304,750
630,000 Polaroid Corp. sr. notes 11 1/2s,
2006 (In default) (NON) 168,525
900,000 Premier International Foods PLC sr.
notes 12s, 2009 (United Kingdom) 981,000
45,000 Quebecor Media, Inc. sr. disc. notes
stepped-coupon zero % (13 3/4s,
7/15/06), 2011 (Canada) (STP) 40,050
1,585,000 Quebecor Media, Inc. sr. notes
11 1/8s, 2011 (Canada) 1,838,600
144,309 Rayovac Corp. bank term loan FRN
Ser. B, 4.8866s, 2009 (acquired
9/26/02, cost $144,165) (RES) 145,091
502,000 RCN Corp. sr. disc. notes Ser. B,
zero %, 2008 288,650
560,000 Regal Cinemas, Inc. company guaranty
Ser. B, 9 3/8s, 2012 627,200
980,000 Remington Arms Co., Inc. company
guaranty 10 1/2s, 2011 1,033,900
640,000 Revlon Consumer Products sr. notes
9s, 2006 467,200
500,000 Revlon Consumer Products sr. notes
8 1/8s, 2006 365,000
165,000 Rite Aid Corp. bank term loan FRN
4.1s, 2008 (acquired 5/16/03, cost
$164,794) (RES) 168,053
780,000 Rite Aid Corp. company guaranty
9 1/2s, 2011 873,600
50,000 Rite Aid Corp. debs. 6 7/8s, 2013 48,500
105,000 Rite Aid Corp. notes 7 1/8s, 2007 106,838
525,000 Rite Aid Corp. sec. notes 8 1/8s,
2010 567,000
710,000 Rite Aid Corp. sr. notes 9 1/4s,
2013 770,350
55,000 Rite Aid Corp. 144A notes 6s, 2005 55,000
294,759 Roundy's, Inc. bank term loan FRN
3.6998s, 2009 (acquired 6/3/02,
cost $294,759) (RES) 296,694
1,135,000 Sbarro, Inc. company guaranty 11s,
2009 930,700
150,000 Scotts Co. (The) bank term loan FRN
3.1781s, 2010 (acquired 10/16/03,
cost $150,000) (RES) 151,795
355,000 Scotts Co. (The) 144A sr. sub. notes
6 5/8s, 2013 369,200
440,000 Sinclair Broadcast Group, Inc.
company guaranty 8 3/4s, 2011 490,050
525,000 Sinclair Broadcast Group, Inc.
company guaranty 8s, 2012 567,000
140,625 Six Flags, Inc. bank term loan FRN
Ser. B, 3.62s, 2009 (acquired
1/15/03, cost $140,449) (RES) 140,947
3,350,000 Six Flags, Inc. sr. notes 8 7/8s,
2010 3,484,000
1,215,000 Six Flags, Inc. 144A sr. notes
9 5/8s, 2014 1,293,975
250,745 Sum Media bank term loan FRN Ser. B,
3.41s, 2009 (acquired 2/4/03, cost
$250,745) (RES) 251,607
1,840,000 TeleWest Communications PLC debs.
11s, 2007 (United Kingdom) (In
default) (NON) 1,375,400
300,000 TeleWest Communications PLC debs.
9 5/8s, 2006 (United Kingdom) (In
default) (NON) 217,500
255,000 TeleWest Communications PLC sr.
notes Ser. S, 9 7/8s, 2010 (United
Kingdom) (In default) (NON) 179,775
105,000 TeleWest Communications PLC 144A sr.
notes 11 1/4s, 2008 (United Kingdom)
(In default) (NON) 76,650
70,000 TM Group Holdings sr. notes 11s,
2008 (United Kingdom) 73,850
400,000 United Rentals (North America), Inc.
company guaranty Ser. B, 10 3/4s,
2008 460,000
405,000 Videotron Ltee 144A notes 6 7/8s,
2014 (Canada) 421,200
165,000 Vivendi Universal SA bank term loan
FRN Ser. B, 3.85s, 2008 (acquired
6/23/03, cost $165,000) (France)
(RES) 166,134
630,000 Vivendi Universal SA sr. notes
9 1/4s, 2010 (France) 737,100
1,070,000 Vivendi Universal SA sr. notes
6 1/4s, 2008 (France) 1,126,175
1,010,000 Williams Scotsman, Inc. company
guaranty 9 7/8s, 2007 1,015,050
1,978,000 Young Broadcasting, Inc. company
guaranty 10s, 2011 2,156,020
510,000 Young Broadcasting, Inc. 144A sr.
sub. notes 8 3/4s, 2014 540,600
50,000 Yum! Brands, Inc. sr. notes 8 7/8s,
2011 60,875
560,000 Yum! Brands, Inc. sr. notes 7.7s,
2012 644,000
910,000 Yum! Brands, Inc. sr. notes 7.65s,
2008 1,028,300
--------------
79,354,869
Energy (4.3%)
-------------------------------------------------------------------------------
1,105,000 Arch Western Finance, LLC 144A sr.
notes 6 3/4s, 2013 1,149,200
960,000 Belden & Blake Corp. company
guaranty Ser. B, 9 7/8s, 2007 945,600
890,000 BRL Universal Equipment sec. notes
8 7/8s, 2008 963,425
475,000 Chesapeake Energy Corp. company
guaranty 9s, 2012 546,250
165,000 Chesapeake Energy Corp. company
guaranty 8 3/8s, 2008 183,150
371,000 Chesapeake Energy Corp. company
guaranty 7 3/4s, 2015 402,535
1,515,000 Chesapeake Energy Corp. sr. notes
7 1/2s, 2013 1,651,350
170,000 Comstock Resources, Inc. company
guaranty 11 1/4s, 2007 182,325
975,000 Dresser, Inc. company guaranty
9 3/8s, 2011 1,062,750
208,000 El Paso Energy Partners LP company
guaranty Ser. B, 8 1/2s, 2011 236,080
755,000 Encore Acquisition Co. company
guaranty 8 3/8s, 2012 826,725
755,000 Exco Resources, Inc. 144A company
guaranty 7 1/4s, 2011 766,325
850,000 Forest Oil Corp. company guaranty
7 3/4s, 2014 915,875
420,000 Forest Oil Corp. sr. notes 8s, 2011 466,200
275,000 Forest Oil Corp. sr. notes 8s, 2008 302,500
400,000 Gazprom OAO notes Ser. REGS, 9 5/8s,
2013 (Russia) 444,000
1,550,000 Gazprom OAO 144A notes 9 5/8s, 2013
(Russia) 1,720,500
495,000 Hanover Compressor Co. sr. notes
8 5/8s, 2010 527,175
745,000 Hanover Compressor Co. sub. notes
zero %, 2007 571,788
495,000 Hanover Equipment Trust sec. notes
Ser. A, 8 1/2s, 2008 534,600
670,000 Hornbeck Offshore Services, Inc. sr.
notes 10 5/8s, 2008 740,350
410,000 Key Energy Services, Inc. sr. notes
6 3/8s, 2013 424,350
105,000 Leviathan Gas Corp. company guaranty
Ser. B, 10 3/8s, 2009 109,200
123,621 Magellan Midstream Holdings bank
term loan FRN 4.6697s, 2008
(acquired 6/13/03, cost $122,385)
(RES) 124,857
765,000 Massey Energy Co. 144A sr. notes
6 5/8s, 2010 780,300
980,000 Newfield Exploration Co. sr. notes
7 5/8s, 2011 1,097,600
655,000 Offshore Logistics, Inc. company
guaranty 6 1/8s, 2013 645,175
842,931 Oslo Seismic Services, Inc. 1st
mtge. 8.28s, 2011 885,077
150,000 Parker Drilling Co. bank term loan
FRN 5.39s, 2007 (acquired 10/22/03,
cost $150,000) (RES) 150,844
755,000 Parker Drilling Co. company guaranty
Ser. B, 10 1/8s, 2009 830,500
122,822 Peabody Energy Corp. bank term loan
FRN Ser. B, 3.6662s, 2010 (acquired
3/20/03, cost $122,822) (RES) 124,152
550,000 Pemex Project Funding Master Trust
company guaranty 7 3/8s, 2014 589,215
1,626,000 Petroleos Mexicanos company guaranty
9 1/2s, 2027 (Mexico) 1,943,070
795,000 Petro Geo-Services notes 10s, 2010
(Norway) 866,550
1,410,000 Petronas Capital, Ltd. company
guaranty 7 7/8s, 2022 (Malaysia) 1,660,275
315,000 Petronas Capital, Ltd. company
guaranty 7s, 2012 (Malaysia) 358,313
350,000 Petronas Capital, Ltd. 144A company
guaranty 7 7/8s, 2022 (Malaysia) 412,125
3,500,000 Pioneer Natural Resources Co.
company guaranty 9 5/8s, 2010 4,428,060
160,000 Pioneer Natural Resources Co.
company guaranty 7.2s, 2028 177,355
525,000 Plains All American Pipeline
LP/Plains All American Finance
Corp. company guaranty 7 3/4s, 2012 614,250
800,000 Plains Exploration & Production Co.
company guaranty Ser. B, 8 3/4s,
2012 888,000
675,000 Plains Exploration & Production Co.
sr. sub. notes 8 3/4s, 2012 749,250
920,000 Pogo Producing Co. sr. sub. notes
Ser. B, 8 1/4s, 2011 1,012,000
591,000 Pride Petroleum Services, Inc. sr.
notes 9 3/8s, 2007 608,730
830,000 Seabulk International, Inc. company
guaranty 9 1/2s, 2013 879,800
420,000 Seven Seas Petroleum, Inc. sr. notes
Ser. B, 12 1/2s, 2005 (In default)
(NON) 4
1,035,000 Star Gas Partners LP/Star Gas
Finance Co. sr. notes 10 1/4s, 2013 1,148,850
250,000 Star Gas Partners LP/Star Gas
Finance Co. 144A sr. notes 10 1/4s,
2013 277,500
507,692 Star Gas Propane 1st Mtge. 8.04s,
2009 520,385
460,000 Swift Energy Co. sr. sub. notes
10 1/4s, 2009 496,800
660,000 Swift Energy Co. sr. sub. notes
9 3/8s, 2012 732,600
1,295,000 Trico Marine Services, Inc. company
guaranty 8 7/8s, 2012 964,775
205,000 Universal Compression, Inc. sr.
notes 7 1/4s, 2010 218,325
900,000 Vintage Petroleum, Inc. sr. notes
8 1/4s, 2012 999,000
205,000 Vintage Petroleum, Inc. sr. sub.
notes 7 7/8s, 2011 219,863
945,000 Westport Resources Corp. company
guaranty 8 1/4s, 2011 1,039,500
720,000 Westport Resources Corp. 144A
company guaranty 8 1/4s, 2011 792,000
530,000 XTO Energy, Inc. sr. notes 7 1/2s,
2012 621,425
425,000 XTO Energy, Inc. sr. notes 6 1/4s,
2013 457,938
--------------
43,986,716
Financial (1.3%)
-------------------------------------------------------------------------------
435,000 Crescent Real Estate Equities LP
notes 7 1/2s, 2007 (R) 458,381
1,075,000 Crescent Real Estate Equities LP sr.
notes 9 1/4s, 2009 (R) 1,186,531
3,046,000 Finova Group, Inc. notes 7 1/2s,
2009 1,987,515
328,584 Hilb, Rogal & Hamilton Co. bank term
loan FRN Ser. B, 3.9375s,
2007 (acquired 6/20/02, cost
$328,584) (RES) 331,870
238,868 Infinity Inc. bank term loan FRN
3.67s, 2010 (acquired 7/2/03, cost
$238,868) (RES) 240,461
1,155,000 iStar Financial, Inc. sr. notes
8 3/4s, 2008 (R) 1,319,588
180,000 iStar Financial, Inc. sr. notes 7s,
2008 (R) 194,400
595,000 iStar Financial, Inc. sr. notes 6s,
2010 (R) 614,338
DKK 34,867,264 Realkredit Danmark A/S mtge. Ser.
23D, 5s, 2035 (Denmark) 5,634,896
$760,000 Western Financial Bank sub. debs.
9 5/8s, 2012 870,200
--------------
12,838,180
Gaming & Lottery (2.8%)
-------------------------------------------------------------------------------
690,000 Ameristar Casinos, Inc. company
guaranty 10 3/4s, 2009 791,775
70,000 Argosy Gaming Co. company guaranty
10 3/4s, 2009 75,075
230,000 Argosy Gaming Co. sr. sub. notes 9s,
2011 256,450
249,375 Borgata Resorts bank term loan FRN
Ser. B, 5.2013s, 2007 (acquired
6/5/02, cost $248,752) (RES) 252,076
1,050,000 Boyd Gaming Corp. sr. sub. notes
8 3/4s, 2012 1,160,250
500,000 Chumash Casino & Resort Enterprise
144A sr. notes 9s, 2010 557,500
1,245,000 Herbst Gaming, Inc. sec. notes
Ser. B, 10 3/4s, 2008 1,409,963
855,000 Hollywood Park, Inc. company
guaranty Ser. B, 9 1/4s, 2007 882,788
1,250,000 Horseshoe Gaming Holdings company
guaranty 8 5/8s, 2009 1,315,625
655,000 Inn of the Mountain Gods 144A sr.
notes 12s, 2010 717,225
600,000 Mandalay Resort Group sr. notes
6 1/2s, 2009 630,000
2,465,000 MGM Mirage, Inc. company guaranty
8 1/2s, 2010 2,859,400
680,000 Mirage Resorts, Inc. notes 6 3/4s,
2008 724,200
75,000 Mohegan Tribal Gaming Authority sr.
notes 8 1/8s, 2006 80,250
270,000 Mohegan Tribal Gaming Authority sr.
sub. notes 8 3/8s, 2011 297,000
165,000 Mohegan Tribal Gaming Authority sr.
sub. notes 8s, 2012 181,088
1,605,000 Mohegan Tribal Gaming Authority sr.
sub. notes 6 3/8s, 2009 1,673,213
1,410,000 Park Place Entertainment Corp. sr.
notes 7 1/2s, 2009 1,568,625
680,000 Park Place Entertainment Corp. sr.
notes 7s, 2013 734,400
545,000 Park Place Entertainment Corp. sr.
sub. notes 8 7/8s, 2008 621,300
5,000 Park Place Entertainment Corp. sr.
sub. notes 8 1/8s, 2011 5,650
200,106 Penn National Gaming, Inc. bank term
loan FRN 3.6341s, 2010 (acquired
2/19/03, cost $199,856) (RES) 201,857
640,000 Penn National Gaming, Inc. company
guaranty Ser. B, 11 1/8s, 2008 723,200
1,320,000 Penn National Gaming, Inc. sr. sub.
notes 8 7/8s, 2010 1,438,800
165,000 Pinnacle Entertainment, Inc. bank
term loan FRN 4.6s, 2009 (acquired
12/15/03, cost $165,000) (RES) 166,581
510,000 Pinnacle Entertainment, Inc. sr.
sub. notes 8 3/4s, 2013 530,400
995,000 Resorts International Hotel and
Casino, Inc. company guaranty
11 1/2s, 2009 1,099,475
785,000 Riviera Holdings Corp. company
guaranty 11s, 2010 824,250
372,188 Scientific Games Holdings bank term
loan FRB 3.85s, 2008 (acquired
12/11/02, cost $370,327) (RES) 377,150
1,060,000 Station Casinos, Inc. sr. notes
8 3/8s, 2008 1,139,500
1,700,000 Trump Atlantic City Associates
company guaranty 11 1/4s, 2006 1,381,250
2,135,000 Trump Casino Holdings, LLC company
guaranty 11 5/8s, 2010 2,135,000
1,300,000 Venetian Casino Resort, LLC company
guaranty 11s, 2010 1,482,000
--------------
28,293,316
Health Care (3.2%)
-------------------------------------------------------------------------------
58,516 ALARIS Medical Systems, Inc. bank
term loan FRN 3.655s, 2009
(acquired 6/30/03, cost $58,516)
(RES) 59,116
132,224 Alderwoods Group, Inc. bank term
loan FRN 3.9566s, 2008 (acquired
9/9/03, cost $132,224) (RES) 133,712
1,917,600 Alderwoods Group, Inc. company
guaranty 12 1/4s, 2009 2,147,712
786,000 Alliance Imaging, Inc. sr. sub.
notes 10 3/8s, 2011 825,300
805,000 AmerisourceBergen Corp. company
guaranty 7 1/4s, 2012 861,350
780,000 AmerisourceBergen Corp. sr. notes
8 1/8s, 2008 873,600
1,375,000 Ardent Health Services 144A sr. sub.
notes 10s, 2013 1,526,250
187,031 Beverly Enterprises, Inc. bank term
loan FRN 4.407s, 2008 (acquired
10/20/03, cost $186,564) (RES) 188,668
640,000 Biovail Corp. sr. sub. notes 7 7/8s,
2010 (Canada) 662,400
444,375 Community Health Systems, Inc. bank
term loan FRN Ser. B, 3.67s, 2010
(acquired 7/11/02, cost $444,375)
(RES) 450,374
298,500 Concentra bank term loan FRN
4.9368s, 2009 (acquired 8/12/03,
cost $298,500) (RES) 301,672
234,970 Dade Behring, Inc. company guaranty
11.91s, 2010 271,390
200,000 DaVita, Inc. bank term loan FRN
Ser. B, 3.402s, 2009 (acquired
1/30/04, cost $202,750) (RES) 201,906
298,384 DaVita, Inc. bank term loan FRN
Ser. C, 3.4199s, 2009 (acquired
7/17/03, cost $298,384) (RES) 301,228
690,000 Extendicare Health Services, Inc.
company guaranty 9 1/2s, 2010 765,900
202,881 Fisher Scientific International,
Inc. bank term loan FRN 3.17s,
2010 (acquired 2/13/03, cost
$202,881) (RES) 204,022
149,625 Hanger Orthopedic Group, Inc. bank
term loan FRN 3.9125s,
2009 (acquired 9/29/03, cost
$149,625) (RES) 150,841
835,000 Hanger Orthopedic Group, Inc.
company guaranty 10 3/8s, 2009 951,900
920,000 HCA, Inc. debs. 7.19s, 2015 1,022,948
350,000 HCA, Inc. notes 8.36s, 2024 408,172
750,000 HCA, Inc. notes 7.69s, 2025 822,746
1,385,000 HCA, Inc. notes 7s, 2007 1,526,298
1,525,000 Healthsouth Corp. notes 7 5/8s, 2012 1,479,250
705,000 Healthsouth Corp. sr. notes 8 1/2s,
2008 712,050
340,000 Healthsouth Corp. sr. notes 8 3/8s,
2011 345,100
290,000 Healthsouth Corp. sr. notes 7s, 2008 277,675
560,000 IASIS Healthcare Corp. company
guaranty 13s, 2009 628,600
105,000 IASIS Healthcare Corp. company
guaranty 8 1/2s, 2009 110,250
223,875 Kinetic Concepts, Inc. bank term
loan FRN 3.92s, 2011 (acquired
8/5/03, cost $224,391) (RES) 226,744
340,845 Magellan Health Services, Inc. sr.
notes Ser. A, 9 3/8s, 2008 369,817
205,219 Medex, Inc. bank term loan FRN
4.1575s, 2009 (acquired various
dates from 5/16/03 to 6/16/03, cost
$205,118) (RES) 206,416
940,000 Mediq, Inc. debs. 13s, 2009 (In
default) (NON) 94
1,285,000 MedQuest, Inc. company guaranty
Ser. B, 11 7/8s, 2012 1,432,775
2,690,000 Multicare Companies, Inc. sr. sub.
notes 9s, 2007 (In default) (NON) 3
505,000 NeighborCare, Inc. 144A sr. sub.
notes 6 7/8s, 2013 521,413
1,045,000 Omnicare, Inc. sr. sub. notes
6 1/8s, 2013 1,047,613
1,022,000 PacifiCare Health Systems, Inc.
company guaranty 10 3/4s, 2009 1,205,960
930,000 Province Healthcare Co. sr. sub.
notes 7 1/2s, 2013 957,900
390,000 Service Corp. International debs.
7 7/8s, 2013 390,000
105,000 Service Corp. International notes
7.2s, 2006 109,200
35,000 Service Corp. International notes
6 7/8s, 2007 36,225
155,000 Service Corp. International notes
6 1/2s, 2008 158,100
1,435,000 Service Corp. International notes
6s, 2005 1,474,463
370,000 Service Corp. International notes
Ser. (a), 7.7s, 2009 394,050
1,010,000 Stewart Enterprises, Inc. notes
10 3/4s, 2008 1,133,755
285,000 Tenet Healthcare Corp. notes 7 3/8s,
2013 272,175
25,000 Tenet Healthcare Corp. sr. notes
6 1/2s, 2012 22,750
970,000 Tenet Healthcare Corp. sr. notes
6 3/8s, 2011 887,550
425,000 Tenet Healthcare Corp. sr. notes
5 3/8s, 2006 405,875
1,530,000 Triad Hospitals, Inc. 144A sr. sub.
notes 7s, 2013 1,583,550
740,000 Universal Hospital Services, Inc.
144A sr. notes 10 1/8s, 2011 795,500
425,000 Ventas Realty LP/Capital Corp.
company guaranty 9s, 2012 480,250
--------------
32,322,608
Homebuilding (0.9%)
-------------------------------------------------------------------------------
610,000 Beazer Homes USA, Inc. company
guaranty 8 5/8s, 2011 678,625
210,000 Beazer Homes USA, Inc. company
guaranty 8 3/8s, 2012 234,150
170,000 Beazer Homes USA, Inc. 144A sr.
notes 6 1/2s, 2013 172,550
880,000 D.R. Horton, Inc. sr. notes 7 7/8s,
2011 1,001,000
220,000 D.R. Horton, Inc. sr. notes 6 7/8s,
2013 235,950
870,000 D.R. Horton, Inc. sr. notes 5 7/8s,
2013 870,000
630,000 K. Hovnanian Enterprises, Inc.
company guaranty 10 1/2s, 2007 737,100
795,000 K. Hovnanian Enterprises, Inc.
company guaranty 8 7/8s, 2012 870,525
285,000 K. Hovnanian Enterprises, Inc.
company guaranty 8s, 2012 309,225
405,000 K. Hovnanian Enterprises, Inc. sr.
notes 6 1/2s, 2014 407,025
100,000 Landsource bank term loan FRN
3.652s, 2010 (acquired 1/12/04,
cost $100,000) (RES) 101,250
410,000 Meritage Corp. company guaranty
9 3/4s, 2011 461,250
530,000 Schuler Homes, Inc. company guaranty
10 1/2s, 2011 622,750
365,000 Technical Olympic USA, Inc. company
guaranty 10 3/8s, 2012 419,750
415,000 Technical Olympic USA, Inc. company
guaranty 9s, 2010 453,388
1,135,000 WCI Communities, Inc. company
guaranty 9 1/8s, 2012 1,262,688
--------------
8,837,226
Household Furniture and Appliances (0.2%)
-------------------------------------------------------------------------------
1,000,000 Sealy Mattress Co. company guaranty
Ser. B, zero %, 2007 1,040,000
1,220,000 Sealy Mattress Co. sr. sub. notes
Ser. B, 9 7/8s, 2007 1,268,800
--------------
2,308,800
Lodging/Tourism (1.5%)
-------------------------------------------------------------------------------
627,000 FelCor Lodging LP company guaranty
9 1/2s, 2008 (R) 674,025
965,000 Gaylord Entertainment Co. 144A sr.
notes 8s, 2013 1,020,488
1,175,000 Hilton Hotels Corp. notes 7 5/8s,
2012 1,316,000
4,420,000 HMH Properties, Inc. company
guaranty Ser. B, 7 7/8s, 2008 4,563,650
389,000 Host Marriott LP sr. notes Ser. E,
8 3/8s, 2006 (R) 414,285
645,000 Host Marriott LP 144A sr. notes
7 1/8s, 2013 (R) 659,513
355,000 ITT Corp. debs. 7 3/8s, 2015 376,300
815,000 ITT Corp. notes 6 3/4s, 2005 851,675
2,245,000 John Q. Hammons Hotels LP/John Q.
Hammons Hotels Finance Corp. III
1st mtge. Ser. B, 8 7/8s, 2012 2,486,338
725,000 Meristar Hospitality Corp. company
guaranty 9 1/8s, 2011 (R) 775,750
790,000 Meristar Hospitality Corp. company
guaranty 9s, 2008 (R) 831,475
945,000 RFS Partnership LP company guaranty
9 3/4s, 2012 1,020,600
135,000 Starwood Hotels & Resorts Worldwide,
Inc. company guaranty 7 7/8s, 2012 150,525
535,000 Starwood Hotels & Resorts Worldwide,
Inc. company guaranty 7 3/8s, 2007 573,788
--------------
15,714,412
Publishing (1.9%)
-------------------------------------------------------------------------------
58,487 Affinity Group Holdings bank term
loan FRN Ser. B1, 5.1403s,
2009 (acquired 5/27/03, cost $58,340)
(RES) 58,578
146,217 Affinity Group Holdings bank term
loan FRN Ser. B2, 5.1696s,
2009 (acquired 5/27/03, cost
$145,851) (RES) 146,445
1,657,000 Affinity Group Holdings sr. notes
11s, 2007 1,717,762
283,056 Dex Media West, LLC bank term loan
FRN 3.9152s, 2010 (acquired 9/9/03,
cost $283,056) (RES) 286,948
1,545,000 Dex Media West, LLC 144A sr. notes
8 1/2s, 2010 1,699,500
705,000 Dex Media, Inc. 144A disc. notes
stepped-coupon zero % (9s,
11/15/08), 2013 (STP) 486,450
805,000 Dex Media, Inc. 144A notes 8s, 2013 829,150
2,105,140 Hollinger Participation Trust 144A
sr. notes 12 1/8s, 2010 (Canada)
(PIK) 2,568,271
164,175 Moore Wallace bank term loan FRN
Ser. B, 3.1438s, 2010 (acquired
3/13/03, cost $164,175) (RES) 164,585
281,275 PRIMEDIA, Inc. bank term loan FRN
Ser. B, 3.8872s, 2009 (acquired
2/10/03, cost $269,321) (RES) 277,056
1,515,000 PRIMEDIA, Inc. company guaranty
8 7/8s, 2011 1,583,175
470,000 PRIMEDIA, Inc. company guaranty
7 5/8s, 2008 468,825
1,110,000 PRIMEDIA, Inc. 144A sr. notes 8s,
2013 1,126,650
371,279 RH Donnelley Finance Corp. I bank
term loan FRN Ser. B, 3.4192s,
2010 (acquired 12/4/02, cost
$371,251) (RES) 375,097
175,000 RH Donnelley Finance Corp. I company
guaranty 8 7/8s, 2010 196,438
1,290,000 RH Donnelley Finance Corp. I 144A
sr. notes 8 7/8s, 2010 1,448,025
650,000 RH Donnelley Finance Corp. I 144A
sr. sub. notes 10 7/8s, 2012 775,125
1,215,000 Vertis, Inc. company guaranty
Ser. B, 10 7/8s, 2009 1,330,425
630,000 Vertis, Inc. sec. notes 9 3/4s, 2009 685,125
1,015,000 Vertis, Inc. sub. notes 13 1/2s,
2009 1,042,913
370,000 Von Hoffman Press, Inc. company
guaranty 10 3/8s, 2007 374,625
800,000 Von Hoffman Press, Inc. company
guaranty 10 1/4s, 2009 860,000
500,408 Von Hoffman Press, Inc. debs. 13s,
2009 (PIK) 457,873
260,000 Von Hoffman Press, Inc. 144A company
guaranty 10 1/4s, 2009 278,200
145,000 WRC Media Corp. sr. sub. notes
12 3/4s, 2009 145,000
87,000 Yell Finance BV sr. notes 10 3/4s,
2011 (Netherlands) 102,660
--------------
19,484,901
Retail (0.8%)
-------------------------------------------------------------------------------
110,492 Advance Stores bank term loan FRN
Ser. C, 3.9259s, 2007 (acquired
3/4/03, cost $110,492) (RES) 111,286
640,000 Asbury Automotive Group, Inc.
company guaranty 9s, 2012 675,200
1,230,000 Autonation, Inc. company guaranty
9s, 2008 1,414,500
460,000 Gap, Inc. (The) notes 6.9s, 2007 503,700
830,000 Hollywood Entertainment Corp. sr.
sub. notes 9 5/8s, 2011 888,100
1,370,000 JC Penney Co., Inc. debs. 7.95s,
2017 1,561,800
245,000 JC Penney Co., Inc. debs. 7.65s,
2016 269,500
615,000 JC Penney Co., Inc. debs. 7 1/8s,
2023 659,588
40,000 JC Penney Co., Inc. notes 8s, 2010 45,900
1,538,000 Saks, Inc. 144A company guaranty 7s,
2013 1,599,520
715,000 United Auto Group, Inc. company
guaranty 9 5/8s, 2012 793,650
--------------
8,522,744
Technology (1.6%)
-------------------------------------------------------------------------------
625,000 AMI Semiconductor, Inc. company
guaranty 10 3/4s, 2013 742,188
204,703 Amkor Technologies, Inc. bank term
loan FRN 7s, 2006 (acquired
4/17/03, cost $204,974) (RES) 207,091
270,000 Avaya, Inc. sec. sr. notes 11 1/8s,
2009 317,250
705,000 DigitalNet Holdings Inc. sr. notes
9s, 2010 754,350
EUR 1,195,000 Getronics NV sub. notes 13s, 2008
(Netherlands) 718,035
$305,000 Iron Mountain, Inc. company guaranty
8 5/8s, 2013 329,400
1,890,000 Iron Mountain, Inc. sr. sub. notes
8 1/4s, 2011 1,946,700
100,000 Lucent Technologies, Inc. debs.
6 1/2s, 2028 83,750
1,435,000 Lucent Technologies, Inc. debs.
6.45s, 2029 1,205,400
75,000 Lucent Technologies, Inc. notes
5 1/2s, 2008 72,000
1,095,000 ON Semiconductor Corp. company
guaranty 13s, 2008 1,275,675
785,000 SCG Holding & Semiconductor Corp.
company guaranty 12s, 2009 851,725
465,000 SCG Holding Corp. 144A notes zero %,
2011 632,400
855,000 Seagate Technology Hdd Holdings
company guaranty 8s, 2009 (Cayman
Islands) 931,950
765,000 Viasystems, Inc. 144A sr. sub. notes
10 1/2s, 2011 826,200
1,075,000 Xerox Capital Trust I company
guaranty 8s, 2027 1,096,500
255,000 Xerox Corp. company guaranty 9 3/4s,
2009 297,713
555,000 Xerox Corp. notes Ser. MTN, 7.2s,
2016 577,200
EUR 270,000 Xerox Corp. sr. notes 9 3/4s, 2009 396,068
$1,565,000 Xerox Corp. sr. notes 7 5/8s, 2013 1,674,550
1,015,000 Xerox Corp. sr. notes 7 1/8s, 2010 1,088,588
--------------
16,024,733
Textiles (0.3%)
-------------------------------------------------------------------------------
1,310,000 Levi Strauss & Co. sr. notes
12 1/4s, 2012 858,050
635,000 Oxford Industries, Inc. 144A sr.
notes 8 7/8s, 2011 701,675
920,000 Russell Corp. company guaranty
9 1/4s, 2010 979,800
552,000 William Carter Holdings Co. (The)
company guaranty Ser. B, 10 7/8s,
2011 643,080
--------------
3,182,605
Tire & Rubber (0.1%)
-------------------------------------------------------------------------------
1,085,000 Goodyear Tire & Rubber Co. (The)
notes 7.857s, 2011 1,014,475
135,000 Goodyear Tire & Rubber Co. (The)
notes 6 3/8s, 2008 128,250
--------------
1,142,725
Transportation (1.0%)
-------------------------------------------------------------------------------
620,000 Allied Holdings, Inc. company
guaranty Ser. B, 8 5/8s, 2007 607,600
760,000 American Airlines, Inc. pass-through
certificates Ser. 01-1, 6.817s,
2011 729,600
115,000 American Airlines, Inc. pass-through
certificates Ser. 99-1, 7.024s,
2009 118,450
1,365,000 Calair, LLC/Calair Capital Corp.
company guaranty 8 1/8s, 2008 1,235,325
235,000 Continental Airlines, Inc.
pass-through certificates Ser. D,
7.568s, 2006 209,150
1,300,000 CSX Corp. notes 6 1/4s, 2008 1,432,809
550,000 Delta Air Lines, Inc. pass-through
certificates Ser. 00-1, 7.779s,
2005 517,318
325,588 Delta Air Lines, Inc. pass-through
certificates Ser. 02-1, 7.779s, 2012 302,797
EUR 500,000 Fixed-Link Finance BV sec. notes
Ser. B2-X, 7.85s, 2009 (Netherlands) 481,314
$1,270,000 Kansas City Southern Railway Co.
company guaranty 9 1/2s, 2008 1,423,988
260,000 Kansas City Southern Railway Co.
company guaranty 7 1/2s, 2009 268,775
985,000 Navistar International Corp. company
guaranty Ser. B, 9 3/8s, 2006 1,078,575
300,000 Navistar International Corp. sr.
notes Ser. B, 8s, 2008 305,250
770,000 Northwest Airlines, Inc. company
guaranty 7 5/8s, 2005 752,675
342,738 NWA Trust sr. notes Ser. A, 9 1/4s,
2012 363,731
236,662 Pacer International, Inc. bank term
loan FRN 3.9486s, 2010 (acquired
6/10/03, cost $237,599) (RES) 238,437
260,000 Travel Centers of America, Inc.
company guaranty 12 3/4s, 2009 305,500
737,147 US Air, Inc. pass-through
certificates Ser. 93-A3,
10 3/8s, 2013 (In default) (NON) 221,144
--------------
10,592,438
Utilities & Power (4.3%)
-------------------------------------------------------------------------------
77,000 AES Corp. (The) sr. notes 8 7/8s,
2011 83,160
43,000 AES Corp. (The) sr. notes 8 3/4s,
2008 45,849
1,085,000 AES Corp. (The) 144A sec. notes 9s,
2015 1,205,706
1,530,000 AES Corp. (The) 144A sec. notes
8 3/4s, 2013 1,684,913
1,300,000 Allegheny Energy Supply 144A bonds
8 1/4s, 2012 1,319,500
475,000 Allegheny Energy Supply 144A sec.
notes 10 1/4s, 2007 508,250
505,000 Calpine Canada Energy Finance
company guaranty 8 1/2s, 2008
(Canada) 411,575
105,000 Calpine Corp. sr. notes 8 5/8s, 2010 86,100
1,750,000 Calpine Corp. sr. notes 7 7/8s, 2008 1,400,000
2,775,000 Calpine Corp. 144A sec. notes
8 1/2s, 2010 2,691,750
390,000 CenterPoint Energy Resources Corp.
debs. 6 1/2s, 2008 416,740
335,000 CenterPoint Energy Resources Corp.
sr. notes Ser. B, 7 7/8s, 2013 377,718
210,000 CMS Energy Corp. pass-through
certificates 7s, 2005 213,675
1,190,000 CMS Energy Corp. sr. notes 8.9s,
2008 1,297,100
315,000 CMS Energy Corp. sr. notes 8 1/2s,
2011 341,775
250,000 CMS Energy Corp. 144A sr. notes
7 3/4s, 2010 262,500
425,000 Dynegy Holdings, Inc. sr. notes
6 7/8s, 2011 392,063
1,990,000 Dynegy Holdings, Inc. 144A sec.
notes 10 1/8s, 2013 2,228,800
525,000 Dynegy-Roseton Danskamme company
guaranty Ser. A, 7.27s, 2010 527,625
800,000 Dynegy-Roseton Danskamme company
guaranty Ser. B, 7.67s, 2016 780,000
370,000 Edison Mission Energy sr. notes 10s,
2008 392,200
505,000 Edison Mission Energy sr. notes
9 7/8s, 2011 539,719
440,000 Edison Mission Energy sr. notes
7.73s, 2009 434,500
935,000 El Paso Corp. sr. notes 7 3/8s, 2012 856,694
900,000 El Paso Corp. sr. notes Ser. MTN,
7 3/4s, 2032 761,625
265,000 El Paso Natural Gas Co. debs.
8 5/8s, 2022 279,244
240,000 El Paso Natural Gas Co. sr. notes
Ser. A, 7 5/8s, 2010 253,200
1,285,000 El Paso Production Holding Co.
company guaranty 7 3/4s, 2013 1,285,000
300,000 Kansas Gas & Electric debs. 8.29s,
2016 310,500
535,000 Midwest Generation LLC pass-through
certificates Ser. A, 8.3s, 2009 577,800
535,000 Mirant Americas Generation, Inc. sr.
notes 8.3s, 2011 (In default) (NON) 458,763
615,000 Mirant Americas Generation, Inc. sr.
notes 7 5/8s, 2006 (In default)
(NON) 522,750
390,000 Mirant Americas Generation, Inc. sr.
notes 7.2s, 2008 (In default) (NON) 330,525
390,000 Mission Energy Holding Co. sec.
notes 13 1/2s, 2008 413,400
930,000 Nevada Power Co. 144A 2nd mtge. 9s,
2013 1,032,300
1,400,000 Northwest Pipeline Corp. company
guaranty 8 1/8s, 2010 1,568,000
465,000 Northwestern Corp. notes 7 7/8s,
2007 (In default) (NON) 427,800
318,131 NRG bank term loan FRN 5 1/2s, 2010
(acquired 12/19/03, cost $316,540)
(RES) 328,205
178,125 NRG bank term loan FRN 1.07s, 2010
(acquired 12/19/03, cost $177,234)
(RES) 183,766
2,510,000 NRG Energy, Inc. 144A sr. sec. notes
8s, 2013 2,610,400
805,000 Orion Power Holdings, Inc. sr. notes
12s, 2010 994,175
500,000 Pacific Gas & Electric Co. 144A sr.
notes 10 3/8s, 2005 (In default)
(NON) 500,000
1,185,000 PG&E Corp. 144A sec. notes 6 7/8s,
2008 1,291,650
220,000 PG&E Gas Transmission Northwest sr.
notes 7.1s, 2005 222,750
850,000 PSEG Energy Holdings, Inc. notes
7 3/4s, 2007 896,750
670,000 SEMCO Energy, Inc. sr. notes 7 3/4s,
2013 713,550
130,000 Southern California Edison Co. notes
6 3/8s, 2006 139,588
440,000 Teco Energy, Inc. notes 10 1/2s,
2007 512,600
250,000 Teco Energy, Inc. notes 7.2s, 2011 261,250
675,000 Teco Energy, Inc. notes 7s, 2012 696,938
520,000 Teco Energy, Inc. sr. notes 7 1/2s,
2010 555,100
105,000 Tennessee Gas Pipeline Co. debs. 7s,
2028 98,963
135,000 Transcontinental Gas Pipeline Corp.
debs. 7 1/4s, 2026 141,581
1,460,000 Utilicorp Canada Finance Corp.
company guaranty 7 3/4s, 2011
(Canada) 1,445,400
265,000 Utilicorp United, Inc. sr. notes
9.95s, 2011 286,200
815,000 Western Resources, Inc. sr. notes
9 3/4s, 2007 947,438
200,000 Williams Cos., Inc. (The) notes
8 3/4s, 2032 216,500
210,000 Williams Cos., Inc. (The) notes
8 1/8s, 2012 226,800
755,000 Williams Cos., Inc. (The) notes
7 5/8s, 2019 766,325
10,000 Williams Cos., Inc. (The) notes
Ser. A, 6 3/4s, 2006 10,300
975,000 Williams Cos., Inc. (The) sr. notes
8 5/8s, 2010 1,077,375
520,000 Williams Holdings Of Delaware notes
6 1/2s, 2008 530,400
164,175 Williams Products bank term loan FRN
4.86s, 2007 (acquired 6/4/03, cost
$164,175) (RES) 166,022
1,370,925 York Power Funding 144A notes 12s,
2007 (Cayman Islands) (In default)
(NON) 959,647
--------------
43,498,492
--------------
Total Corporate bonds and notes
(cost $478,458,386) $503,616,854
U.S. government and agency obligations (19.7%) (a)
Principal amount Value
U.S. Government and Agency Mortgage Obligations (7.8%)
-------------------------------------------------------------------------------
$33,776 Federal Home Loan Mortgage Corporation
7 1/2s, March 1, 2026 $36,381
Federal National Mortgage
Association Pass-Through
Certificates
206,572 7 1/2s, with due dates from October
1, 2022 to January 1, 2030 221,203
21,978,864 6 1/2s, with due dates from April 1,
2024 to November 1, 2033 23,071,460
4,891,000 6 1/2s, TBA, February 1, 2034 5,130,962
49,796,000 5s, TBA, February 1, 2019 50,885,288
--------------
79,345,294
U.S. Government and Agency Obligations (2.0%)
-------------------------------------------------------------------------------
16,947,000 Fannie Mae 7 1/4s, January 15, 2010 20,047,860
U.S. Treasury Obligations (9.9%)
-------------------------------------------------------------------------------
U.S. Treasury Bonds
21,600,000 7 1/2s, November 15, 2016 27,773,712
20,246,000 6 1/4s, May 15, 2030 23,750,299
12,260,000 6 1/4s, August 15, 2023 14,171,309
22,594,000 4 1/4s, August 15, 2013 22,844,658
6,273,000 U.S. Treasury Notes 1 1/8s, June 30,
2005 6,243,843
20,460,000 U.S. Treasury Strip zero %, November
15, 2024 6,731,913
--------------
101,515,734
--------------
Total U.S. government and agency
obligations (cost $196,858,536) $200,908,888
Foreign government bonds and notes (12.9%) (a)
Principal amount Value
-------------------------------------------------------------------------------
USD 4,421,000 Australia (Government of) bonds
6 1/2s, 2013 $3,520,362
EUR 6,000,000 Austria (Republic of) notes Ser. E
MTN, 3.8s, 2013 7,176,854
USD 940,000 Brazil (Federal Republic of) bonds
10 1/8s, 2027 971,020
USD 1,505,000 Brazil (Federal Republic of) bonds
2.063s, 2012 1,328,163
USD 1,290,000 Bulgaria (Republic of) bonds 2s,
2024 1,273,875
USD 1,565,000 Bulgaria (Republic of) 144A bonds
8 1/4s, 2015 1,852,960
CAD 2,725,000 Canada (Government of) bonds 5 1/2s,
2010 2,205,114
CAD 930,000 Canada (Government of) bonds
Ser. WL43, 5 3/4s, 2029 754,319
USD 1,300,000 Chile (Republic of) bonds 5 1/2s,
2013 1,358,500
USD 220,000 Colombia (Republic of) bonds
10 3/8s, 2033 235,950
USD 3,835,000 Colombia (Republic of) notes
10 3/4s, 2013 4,352,725
USD 635,000 Colombia (Republic of) unsub.
9 3/4s, 2009 701,675
EUR 400,000 Colombia (Republic of) unsub. bonds
Ser. 15A, 11 3/8s, 2008 562,174
USD 465,000 Dominican (Republic of) 144A unsub.
Notes 9 1/2s, 2006 374,325
USD 875,000 Ecuador (Republic of) bonds
stepped-coupon Ser. REGS, 7s (8s,
8/15/04), 2030 (STP) 749,438
USD 750,000 El Salvador (Republic of) 144A bonds
8 1/4s, 2032 771,750
USD 2,490,000 El Salvador (Republic of) 144A bonds
7 3/4s, 2023 2,701,650
EUR 1,845,000 France (Government of) bonds 5 3/4s,
2032 2,573,550
EUR 4,830,000 France (Government of) bonds 5 1/2s,
2010 6,575,280
EUR 1,080,000 France (Government of) deb. 4s, 2009 1,365,614
EUR 6,340,000 Germany (Federal Republic of) bonds
Ser. 97, 6s, 2007 8,544,282
USD 1,875,000 Hellenic Greece (Republic of) bonds
3 1/2s, 2008 2,337,787
USD 260,000 Indonesia (Republic of) FRN 2.005s,
2006 243,100
USD 645,000 Indonesia (Republic of) FRN 2.005s,
2005 615,975
EUR 530,000 Italy (Government of) treasury bonds
4 3/4s, 2006 686,423
NZD 7,610,000 New Zealand (Government of) bonds
8s, 2006 5,385,834
NZD 8,036,000 New Zealand (Government of) bonds
Ser. 709, 7s, 2009 5,644,242
USD 325,000 Panama (Government of) bonds 9 3/8s,
2023 347,750
USD 1,425,000 Peru (Republic of) bonds 8 3/4s,
2033 1,378,688
USD 1,915,000 Philippines (Republic of) notes
8 1/4s, 2014 1,852,763
USD 6,212,500 Russia (Federation of) 144A unsub.
stepped-coupon 5s (7 1/2s,
3/31/07), 2030 (STP) 6,057,188
USD 1,335,000 Russia (Ministry of Finance) deb.
Ser. V, 3s, 2008 1,208,175
EUR 430,000 South Africa (Republic of) bonds
5 1/4s, 2013 518,347
USD 3,985,000 South Africa (Republic of) notes
7 3/8s, 2012 4,503,050
USD 43,075,000 Sweden (Government of) bonds 6 3/4s,
2014 6,767,077
SEK 37,600,000 Sweden (Government of) bonds Ser.
3101, 4s, 2008 6,224,124
USD 548,806 Ukraine (Government of) sr. notes
Ser. REGS, 11s, 2007 602,314
USD 1,025,000 Ukraine (Government of) 144A bonds
7.65s, 2013 1,048,575
GBP 1,055,000 United Kingdom treasury bonds
8 3/4s, 2017 2,647,149
GBP 1,100,000 United Kingdom treasury bonds 5s,
2012 2,018,238
GBP 2,800,000 United Kingdom treasury bonds 5s,
2004 5,114,398
GBP 9,625,000 United Kingdom treasury bonds
7 1/2s, 2006 18,868,421
USD 1,855,000 United Mexican States bonds
Ser. MTN, 8.3s, 2031 2,094,295
USD 2,370,000 United Mexican States notes 8 1/8s,
2019 2,665,065
USD 570,000 Venezuela (Republic of) bonds
9 3/8s, 2034 505,305
USD 585,000 Venezuela (Republic of) bonds
9 1/4s, 2027 515,970
USD 1,020,000 Venezuela (Republic of) unsub. bonds
5 3/8s, 2010 818,550
USD 650,000 Venezuela (Republic of) 144A notes
10 3/4s, 2013 672,750
--------------
Total Foreign government bonds and
notes (cost $115,249,796) $131,291,133
Asset-backed securities (6.9%) (a)
Principal amount Value
-------------------------------------------------------------------------------
$338,000 Aames Mortgage Trust FRN Ser. 03-1,
Class M6, 4.1s, 2033 $321,655
ABSC NIMS Trust 144A
569,305 Ser. 03-HE5, Class A, 7s, 2033 556,496
362,982 Ser. 03-HE7, Class A, 7s, 2033 356,630
Ameriquest Mortgage Securities, Inc.
145,000 FRB Ser. 03-10, Class MV6, 4.85s,
2033 120,350
231,000 FRB Ser. 03-AR3, Class M5, 4.85s,
2033 242,153
585,000 FRN Ser. 03-1, Class M4, 4.18s, 2033 517,852
Amortizing Residential Collateral
Trust
26,950,909 Ser. 02-BC1, Class A, Interest Only
(IO), 6s, 2005 509,990
541,000 FRN Ser. 02-BC5, Class B, 3.35s,
2032 528,320
438,000 FRN Ser. 02-BC7, Class B3, 3.1s,
2032 395,774
357,647 AQ Finance NIM Trust Ser. 03-N1,
Class Note, 9.37s, 2033 357,871
AQ Finance NIM Trust 144A
838,371 Ser. 03-N2, Class NOTE, 9.3s, 2033 844,659
227,642 Ser. 03-N9A, Class NOTE, 7.385s,
2033 227,642
37,605 Arc Net Interest Margin Trust Ser.
02-5A, Class A, 7 3/4s, 2032 37,363
Arc Net Interest Margin Trust 144A
109,551 Ser. 02-1A, Class A, 7 3/4s, 2032 109,532
211,429 Ser. 02-8A, Class A1, 7 3/4s, 2032 209,687
535,000 Arcap REIT, Inc. 144A Ser. 03-1A,
Class E, 6.33s, 2038 555,313
464,896 Argent NIM Trust 144A Ser. 03-N6,
Class A, 6.4s, 2034 462,571
Asset Backed Funding Certificates
607,000 FRB Ser. 03-WF1, Class M3, 4.15s,
2032 620,396
185,000 FRB Ser. 03-WF1, Class M4, 4.35s,
2032 172,505
6,824 Asset Backed Funding Corp. NIM Trust
Ser. 02-WF1, Class Note, 9.32s,
2032 6,824
146,852 Asset Backed Funding Corp. NIM Trust
144A Ser. 03-WF1, Class N1, 8.35s,
2032 146,852
Asset Backed Securities Corp. Home
Equity Loan Trust
350,000 FRB Ser. 02-HE3, Class M4, 4.1s,
2032 319,998
1,125,000 FRN Ser. 03-HE2, Class M4, 4.94s,
2033 1,190,790
546,000 FRN Ser. 03-HE3, Class M5, 5.1s,
2033 549,303
Asset Backed Securities Corp. Home
Equity Loan Trust
460,470 Aviation Capital Group Trust 144A
FRB Ser. 03-2A, Class G1, 1.8s,
2033 460,470
2,571,000 Bank One Issuance Trust FRN Ser.
02-C1, Class C1, 2.05s, 2009 2,555,634
Bayview Financial Acquisition Trust
1,042,495 Ser. 02-CA, Class A, IO, 5.7s, 2004 30,786
38,530,613 Ser. 03-X, Class A, IO, 1.36s, 2006 629,516
871,355 FRN Ser. 01-DA, Class M3, 2 1/2s,
2031 874,078
449,996 CDC Mortgage Capital Trust FRB Ser.
03-HE2, Class B3, 4.85s, 2033 408,371
Chase Funding Net Interest Margin
144A
101,257 Ser. 03-1A, 8 3/4s, 2004 101,257
320,525 Ser. 03-2A, Class NOTE, 8 3/4s, 2035 321,326
706,933 Ser. 03-4A, Class NOTE, 6 3/4s, 2036 710,468
277,000 Citigroup Mortgage Loan Trust, Inc.
FRB Ser. 03-HE3, Class M4, 4.1s,
2034 259,604
Conseco Finance Securitizations Corp.
346,000 Ser. 00-2, Class A4, 8.48s, 2021 357,660
6,061,000 Ser. 00-4, Class A6, 8.31s, 2032 4,936,504
1,535,000 Ser. 00-6, Class M2, 8.2s, 2032 230,250
32,000 Ser. 01-04, Class A4, 7.36s, 2019 29,817
18,000 Ser. 01-3, Class A3, 5.79s, 2024 18,009
692,000 Ser. 01-3, Class A4, 6.91s, 2033 627,452
400,000 Ser. 01-3, Class M2, 7.44s, 2033 80,000
1,436,000 Ser. 01-4, Class B1, 9.4s, 2010 143,600
3,821,138 Ser. 02-1, Class A, 6.681s, 2032 3,888,137
1,100,000 Consumer Credit Reference IDX
Securities FRB Ser. 02-1A, Class
A, 3.17s, 2007 1,118,414
940,000 Countrywide Asset Backed
Certificates FRB Ser. 03-5, Class
BV, 4.1s, 2033 889,034
603,000 Crest, Ltd. 144A Ser. 03-2A, Class
E2, 8s, 2038 556,456
237,000 First Franklin Mortgage Loan Asset
Backed Certificates Ser.
03-FF3, 4.1s, 2033 222,015
571,093 First Franklin NIM Trust 144A Ser.
03-FF3A, Class A, 6 3/4s, 2033 568,875
187,918 First Plus 144A Ser. 98-A, Class A,
8 1/2s, 2023 242,777
172,713 Fremont NIM Trust 144A Ser. 03-B,
Class NOTE, 5.65s, 2033 172,281
Green Tree Financial Corp.
310,258 Ser. 95-F, Class B2, 7.1s, 2021 275,936
205,586 Ser. 99-3, Class A5, 6.16s, 2031 208,413
1,739,000 Ser. 99-5, Class A5, 7.86s, 2030 1,496,604
Greenpoint Manufactured Housing
2,801,268 Ser. 00-3, Class IA, 8.45s, 2031 2,411,932
50,000 Ser. 99-5, Class A4, 7.59s, 2028 50,908
GSAMP Trust
63,740 Ser. 02-HE2N, Class Note, 8 1/4s,
2032 63,957
299,000 FRB Ser. 03-FM1, Class B3, 5.6s,
2033 274,741
316,812 GSAMP Trust 144A Ser. 03-HE1N, Class
NOTE, 7 1/4s, 2033 316,875
Home Equity Asset Trust
51,373 Ser. 02-1N, Class A, 8s, 2032 51,116
216,000 FRB Ser. 03-8, Class B3, 5.65s, 2034 222,294
Home Equity Asset Trust 144A
672,930 Ser. 02-5N, Class A, 8s, 2033 664,519
321,804 Ser. 03-4N, Class A, 8s, 2033 318,586
1,755,000 LNR CDO, Ltd. FRB Ser. 02-1A, Class
FFL, 3.85s, 2037 (Cayman Islands) 1,666,197
1,070,000 LNR CDO, Ltd. 144A FRB Ser. 03-1A,
Class EFL, 4.1s, 2036 (Cayman
Islands) 1,071,605
574,757 Long Beach Asset Holdings Corp. 144A
Ser. 2003-2, Class N1, 7.627s, 2033 578,349
305,711 Long Beach Asset Holdings Corp. NIM
Trust 144A Ser. 03-4, Class
N1, 6.535s, 2033 305,616
588,000 Long Beach Mortgage Loan Trust FRB
Ser. 03-3, Class M4, 4.641s, 2033 485,100
1,457,253 Madison Avenue Manufactured Housing
Contract FRB Ser. 02-A, Class B1,
4.35s, 2032 947,214
Master Asset Backed Securities Trust
191,000 FRB Ser. 03-NC1, Class M6, 5.1s,
2033 191,000
736,000 FRN Ser. 03-OPT2, Class M5, 4.85s,
2033 730,480
287,000 Master Asset Backed Securities Trust
FRB Ser. 03-OPT1, Class MV5, 4.6s,
2032 282,336
Merrill Lynch Mortgage Investors, Inc.
348,902 Ser. 03-WM3N, Class N1, 8s, 2005 345,624
957,000 FRB Ser. 03-WMC1, Class B2, 4.1s,
2033 916,926
272,679 Mid-State Trust Ser. 11, Class B,
8.221s, 2038 259,301
509,000 MNIMS 144A 4.458s, 2034 509,000
Morgan Stanley ABS Capital I
495,000 FRB Ser. 02-NC6, Class B2, 4.85s,
2032 457,875
560,000 FRN Ser. 03-NC6, Class B3, 4.85s,
2033 512,960
217,854 Morgan Stanley ABS Capital I 144A
Ser. 03-NC9N, Class NOTE, 7.6s,
2033 218,194
Morgan Stanley Dean Witter Capital I
545,000 FRN Ser. 01-NC3, Class B1, 3.55s,
2031 524,925
499,000 FRN Ser. 01-NC4, Class B1, 3.6s,
2032 479,008
890,000 FRN Ser. 02-AM2, Class B1, 3.35s,
2032 830,255
494,000 FRN Ser. 02-HE1, Class B1, 2.9s,
2032 488,867
560,000 New Century Home Equity Loan Trust
FRN Ser. 03-2, Class M4, 4.7s, 2033 490,000
320,924 New Century Mortgage Corp. NIM Trust
144A Ser. 03-B, Class NOTE, 6 1/2s,
2033 321,727
28,438 NovaStar Caps Trust Ser. 02-C1,
Class A, 7.15s, 2031 28,438
524,000 Option One Mortgage Loan Trust FRB
Ser. 03-6, Class M6, 4.6s, 2033 471,600
Option One Mortgage Securities Corp.
144A
16,895 Ser. 02-1, Class CTFS, 6 3/4s, 2032 16,823
202,482 Ser. 03-5, Class Note, 6.9s, 2033 202,482
214,312 Option One Mortgage Securities Corp.
NIM Trust 144A Ser. 2003-2B, Class
N1, 7.63s, 2033 (Cayman Islands) 215,652
1,022,147 Pass-Through Amortizing Credit Card
Trust Ser. 02-1A, Class A4FL, 6.6s,
2012 1,025,978
1,848,000 PGMT Ser. 02, Class B, zero %, 2006 1,530,606
5,079,918 Residential Asset Mortgage Products,
Inc. Ser. 03-RZ1, Class A,
IO, 5 3/4s, 2005 288,127
516,876 Rural Housing Trust Ser. 87-1, Class
D, 6.33s, 2026 541,266
169,218 SAIL Net Interest Margin Notes Ser.
03-4, Class A, 7 1/2s, 2033 (Cayman
Islands) 169,032
SAIL Net Interest Margin Notes 144A
932,794 Ser. 03-10A, Class A, 7 1/2s, 2033 932,743
367,378 Ser. 03-12A, Class A, 7.35s, 2033 367,267
246,177 Ser. 03-6A, Class A, 7s, 2033 244,347
493,346 Ser. 03-7A, Class A, 7s, 2033 489,686
146,386 Ser. 03-8A, Class A, 7s, 2033 145,649
748,040 Ser. 03-BC2A, Class A, 7 3/4s, 2033 745,866
124,247 Sasco Arc Net Interest Margin Notes
Ser. 02-BC10, Class A, 7 3/4s, 2033 123,118
Sasco Arc Net Interest Margin Notes
144A
448,013 Ser. 03-3, Class A, 7 3/4s, 2033 445,764
864,673 Ser. 03-5, Class A, 7.35s, 2033
(Cayman Islands) 864,420
731,607 Ser. 03-AM1, Class A, 7 3/4s, 2033 728,041
384,662 Sasco Arc Net Interest Margin Trust
144A Ser. 03-BC1, Class B, zero %,
2033 275,454
369,000 Saxon Asset Securities Trust FRB
Ser. 03-3, Class M6, 5.1s, 2033 319,646
398,736 Saxon Net Interest Margin Trust 144A
Ser. 03-A, Class A, 6.656s, 2033 400,730
600,330 SHARP Ser. 03-NC1N, Class N, 7 1/4s,
2033 600,888
SHARP 144A
291,464 Ser. 03-HS1N, Class N, 7.48s, 2033 292,739
164,156 Ser. 03-TC1N, 7 3/4s, 2033 164,156
200,000 South Coast Funding FRB Ser. 3A,
Class A2, 2.37s, 2038 200,000
340,000 Specialty Underwriting & Residential
Finance FRB Ser. 03-BC4, Class B3,
4.1s, 2034 329,216
Structured Asset Investment Loan
Trust
1,332,000 Ser. 03-BC1, Class M3, 4.1s, 2033 1,374,458
787,869 Ser. 03-BC1A, Class A, 7 3/4s, 2033 784,040
12,744,025 Ser. 03-BC2, Class A, IO, 6s, 2005 575,063
193,000 Ser. 03-BC2, Class B, 7s, 2033 183,840
4,033,000 Ser. 03-BC8, Class A, IO, 6s, 2005 233,857
20,615,000 Ser. 04-1, Class A, IO, 6s, 2005 1,427,300
741,000 FRB Ser. 03-BC10, Class B, 4.1s,
2033 736,137
570,000 FRB Ser. 03-BC13, Class M6, 4.141s,
2033 564,834
226,000 FRN Ser. 03-BC8, Class B, 4.1s, 2033 226,000
514,000 FRN Ser. 2003-BC3, Class B, 4.6s,
2033 520,023
552,000 Structured Asset Securities Corp.
FRN Ser. 02-HF2, Class M3, 3.1s,
2032 510,600
544,000 TIAA Commercial Real Estate
Securitization Ser. 02-1A, Class
IV, 6.84s, 2037 428,571
650,000 TIAA Commercial Real Estate
Securitization 144A Ser. 03-1A,
Class E, 8s, 2038 593,328
4,075,000 Washington Mutual Ser. 03-S1, Class
A11, IO, 5 1/2s, 2033 337,461
1,263,000 Whole Auto Loan Trust 144A Ser.
03-1, Class D, 6s, 2010 1,258,264
--------------
Total Asset-backed securities (cost $74,274,551) $70,675,267
Collateralized mortgage obligations (5.7%) (a)
Principal amount Value
-------------------------------------------------------------------------------
$6,256,858 Commercial Mortgage Acceptance Corp.
Ser. 97-ML1, IO, 0.94s, 2017 $167,175
1,858,000 Criimi Mae Commercial Mortgage Trust
Ser. 98-C1, Class A2, 7s, 2011 2,093,153
2,814,000 Criimi Mae Commercial Mortgage Trust
144A Ser. 98-C1, Class B, 7s, 2033 2,913,960
60,177,230 Deutsche Mortgage & Asset Receiving
Corp. Ser. 98-C1, Class X,
IO, 1.17s, 2023 1,910,095
324,373 Entertainment Properties Trust 144A
Ser. 03-EPR, Class A1, 4.239s, 2018 324,780
Fannie Mae
255,837 Ser. 98-51, Class SG, IO, 25.92s,
2022 102,099
1,326,890 Ser. 02-36, Class SJ, 17 3/8s, 2029 1,475,375
1,706 Ser. 92-15, Class L, IO, 10.37s,
2022 22,027
878,072 Ser. 03-W3, Class 1A3, 7 1/2s, 2042 960,974
14,206 Ser. 03-W2, Class 1A3, 7 1/2s, 2042 15,547
1,957 Ser. 02-W1, Class 2A, 7 1/2s, 2042 2,142
6,036 Ser. 02-14, Class A2, 7 1/2s, 2042 6,606
1,051,569 Ser. 01-T10, Class A2, 7 1/2s, 2041 1,150,851
3,202 Ser. 02-T4, Class A3, 7 1/2s, 2041 3,504
11,671 Ser. 01-T8, Class A1, 7 1/2s, 2041 12,773
4,071,945 Ser. 01-T7, Class A1, 7 1/2s, 2041 4,456,389
595,763 Ser. 01-T3, Class A1, 7 1/2s, 2040 652,011
1,811,457 Ser. 01-T1, Class A1, 7 1/2s, 2040 1,982,483
726,552 Ser. 99-T2, Class A1, 7 1/2s, 2039 795,148
388,676 Ser. 00-T6, Class A1, 7 1/2s, 2030 425,372
1,787,029 Ser. 01-T4, Class A1, 7 1/2s, 2028 1,955,748
3,864 Ser. 02-W3, Class A5, 7 1/2s, 2028 4,229
2,874,925 Ser. 02-36, Class QH, IO, 6.95s,
2029 183,650
449,514 Ser. 02-29, Class SL, IO, 6.95s,
2029 6,041
1,608,344 Ser. 03-7, Class SM, IO, 6.65s, 2023 44,481
5,597,281 Ser. 03-49, Class TS, IO, 6.6s, 2018 736,392
2,374,158 Ser. 03-14, Class KS, IO, 6 1/2s,
2017 200,691
1,256,885 Ser. 03-23, Class SC, IO, 6.45s,
2033 91,124
4,695,200 Ser. 03-41, Class SP, IO, 6.1s, 2015 378,551
1,983,792 Ser. 03-58, Class ID, IO, 6s, 2033 375,681
2,462,219 Ser. 03-26, Class IG, IO, 6s, 2033 392,801
1,570,100 Ser. 322, Class 2, IO, 6s, 2032 278,693
15,652,990 Ser. 03-34, IO, 6s, 2032 1,457,685
2,033,030 Ser. 318, Class 2, IO, 6s, 2032 362,134
784,590 Ser. 01-74, Class MI, IO, 6s, 2015 41,681
13,370,496 Ser. 03-34, Class ES, IO, 5.9s, 2033 1,220,058
5,348,115 Ser. 03-34, Class SG, IO, 5.9s, 2033 497,208
2,350,168 Ser. 343, Class 14, IO, 5 1/2s, 2033 495,004
2,450,713 Ser. 343, Class 15, IO, 5 1/2s, 2033 518,479
1,122,774 Ser. 343, Class 17, IO, 5 1/2s, 2033 242,449
3,614,609 Ser. 338, Class 2, 5 1/2s, 2033 860,164
3,703,980 Ser. 329, Class 2, IO, 5 1/2s, 2033 822,980
3,386,247 Ser. 03-45, Class PI, IO, 5 1/2s,
2029 423,281
4,555,724 Ser. 03-37, Class IC, IO, 5 1/2s,
2027 497,576
4,384,748 Ser. 343, Class 5, IO, 5s, 2033 984,513
4,900,376 Ser. 343, Class 9, IO, 5s, 2033 1,149,291
7,468,889 Ser. 03-23, Class AI, IO, 5s, 2017 823,912
2,663,700 Ser. 03-24, Class IC, IO, 5s, 2015 481,938
Fannie Mae
15,012,278 Ser. 03-W10, Class 1A, IO, 2.14s,
2043 527,775
17,795,671 Ser. 03-W10, Class 3A, IO, 2.14s,
2043 639,532
16,336,955 Ser. 00-T6, IO, 0.74s, 2030 354,818
164,646 Ser. 02-97, Principal Only (PO),
zero %, 2033 155,590
320,737 Ser. 99-51, Class N, PO, zero %,
2029 279,543
219,984 Ser. 99-52, Class MO, PO, zero %,
2026 215,404
23,375 Ser. 96-5, Class PB, PO, zero %,
2024 22,944
18,475 Federal Home Loan Mortgage Corp.
Structured Pass-Through
Securities Ser. T-58, Class 4A,
7 1/2s, 2043 20,219
20,991,447 FFCA Secured Lending Corp. Ser.
00-1, Class X, IO, 1.63s, 2020 1,445,416
Freddie Mac
1,844,800 Ser. 2412, Class GS, FRN, 18.08s,
2032 2,135,933
588,252 Ser. 2478, Class SY, IO, 7.05s, 2021 29,596
407,663 Ser. 2448, Class SE, IO, 7s, 2029 4,331
3,799,300 Ser. 2448, Class SM, IO, 6.9s, 2032 383,492
3,901,989 Ser. 2579, Class GS, IO, 6.55s, 2017 338,869
6,624,313 Ser. 216, IO, 6s, 2032 1,163,395
2,008,400 Ser. 2515, Class IG, IO, 5 1/2s,
2032 630,249
1,033,400 Ser. 2590, Class IH, IO, 5 1/2s,
2028 268,361
2,619,000 Ser. 2596, Class IQ, IO, 5 1/2s,
2026 300,328
770,123 Ser. 215, Class PO, PO, zero %, 2031 703,941
672,848 Ser. 2235, PO, zero %, 2030 585,169
5 Ser. 2078, C5
Government National Mortgage
Association
176,417 Ser. 02-36, Class SD, IO, 7.05s,
2029 2,095
978,347 Ser. 02-51, Class SA, IO, 7s, 2032 33,659
863,215 Ser. 02-29, Class SX, IO, 6.95s,
2029 10,652
2,009,407 Ser. 01-43, Class SJ, IO, 6 1/2s,
2029 76,920
65,136 Ser. 02-40, Class IB, IO, 6 1/2s,
2028 723
3,843,713 Ser. 01-19, Class S, IO, 6.4s, 2031 360,348
6,776,669 Ser. 03-83, Class SI, IO, 5.4s, 2032 554,840
3,482,043 Ser. 02-47, Class SM, IO, 4.87s,
2032 191,164
2,474,823 Ser. 02-63, Class ST, IO, 4.53s,
2024 43,309
333,065 Ser. 98-2, Class EA, PO, zero %,
2028 292,213
Granite Mortgages PLC
1,505,000 Ser. 03-2, Class 3C, 5.578s, 2043 2,775,835
2,005,000 FRB Ser. 03-2, Class 2C1, 5.2s, 2043 2,523,533
300,000 GS Mortgage Securities Corp. II 144A
FRB Ser. 03-FL6A, Class L, 4.34s,
2015 300,094
1,870,697 Hermione (European Loan Conduit No.
14) 144A FRB Class A, 4.324s, 2011
(Ireland) 3,399,935
10,820,333 Merrill Lynch Mortgage Investors,
Inc. Ser. 96-C2, IO, 2.51s, 2028 773,185
8,987,060 Mortgage Capital Funding, Inc. Ser.
97-MC2, Class X, IO, 1.54s, 2012 310,225
Starwood Asset Receivables Trust
144A
270,000 FRB Ser. 03-1A, Class F, 2.2s, 2022 270,675
340,000 FRB Ser. 03-1A, Class E, 2.15s, 2022 340,850
271,000 Trizechahn Office Properties Trust
144A Ser. 01-TZHA, Class D3, 6.943s,
2013 290,955
--------------
Total Collateralized mortgage
obligations (cost $61,312,362) $57,755,019
Preferred stocks (1.1%) (a)
Number of shares Value
-------------------------------------------------------------------------------
35,609 Avecia Group PLC $4.00 pfd.
(acquired 12/3/03, cost $467,368)
(United Kingdom) (RES) (PIK) $605,353
28,919 CSC Holdings, Inc. Ser. M, $11.125
cum. pfd. 3,050,955
15,119 Doane Pet Care Co. $7.125 pfd. 755,950
1,577 Dobson Communications Corp. 13.00%
pfd. (PIK) 1,679,505
540 First Republic Capital Corp. 144A
10.50% pfd. 556,200
17,777 iStar Financial, Inc. $1.95 cum.
pfd. 466,092
25,668 Lodgian, Inc. Ser. A, $7.06 cum.
pfd. (PIK) 571,113
79 Metrocall Holdings, Inc. Ser. A,
15.00% cum. pfd. 905
5,003 Microcell Telecommunications, Inc.
zero % pfd. (Canada) 86,875
1,861 North Atlantic Trading Co. 12.00%
pfd. (PIK) 33,498
124 Paxson Communications Corp. 13.25%
cum. pfd. (PIK) 1,221,400
19 PTV, Inc. Ser. A, $5.00 cum. pfd. 67
277 Rural Cellular Corp. Ser. B, 11.375%
cum. pfd. 265,920
1,791 Rural Cellular Corp. 12.25% pfd.
(PIK) 1,486,530
--------------
Total Preferred stocks (cost $10,552,067) $10,780,363
Common stocks (0.9%) (a)
Number of shares Value
-------------------------------------------------------------------------------
2,767 AboveNet, Inc. (NON) $141,809
3,074 Alderwoods Group, Inc. (NON) 30,740
1,005,000 AMRESCO Creditor Trust (acquired
6/17/99, cost $174,438) (RES) (NON) (R) 10,050
14 Arch Wireless, Inc. Class A (NON) 311
2,452 Archibald Candy Corp. (NON) 123
19,924 Aurora Foods, Inc. (NON) 141
1,522 Birch Telecom, Inc. (NON) 15
643 Comdisco Holding Co., Inc. (NON) 32,150
3,390,037 Contifinancial Corp. Liquidating
Trust Units 33,900
21,241 Covad Communications Group, Inc.
(NON) 74,556
871 Crown Castle International Corp.
(NON) 10,800
1,529 Genesis HealthCare Corp. (NON) 33,026
64,253 Globix Corp. (NON) 253,799
282 Knology, Inc. (NON) 3,017
147 Leucadia National Corp. 7,231
27,093 Lodgian, Inc. (NON) 194,799
160,000 Loewen Group International, Inc.
(NON) 16
33,775 Magellan Health Services, Inc. (NON) 927,799
2,359 Mariner Health Care, Inc. (NON) 50,129
1,971 Mediq, Inc. (NON) 7,923
41 Microcell Telecommunications, Inc.
Class A (Canada) (NON) 737
4,973 Microcell Telecommunications, Inc.
Class B (Canada) (NON) 91,961
49,941 Millennium Chemicals, Inc. (NON) 632,752
1,250,000 Morrison Knudsen Corp. (NON) 187,500
3,058 NeighborCare, Inc. (NON) 69,447
39,407 Pioneer Cos., Inc. (NON) 283,730
2,502 PSF Group Holdings, Inc. 144A Class
A (NON) 3,753,720
74,020 Regal Entertainment Group (NON) 1,492,983
368 Sterling Chemicals, Inc. (NON) 9,752
1,195 Sun Healthcare Group, Inc. (NON) 17,041
1,292,251 VFB LLC (acquired various dates from
6/22/99 to 10/27/00, cost $955,585)
(RES) (NON) 174,454
3,675 Washington Group International, Inc.
(NON) 136,637
7,299 Wheeling-Pittsburgh Steel Corp.
(NON) 151,162
--------------
Total Common stocks (cost $25,566,801) $8,814,210
Brady bonds (0.4%) (a)
Principal amount Value
-------------------------------------------------------------------------------
$2,590,000 Argentina (Government of) FRB
Ser. L-GL, 2.063s, 2023 $1,269,100
2,045,000 Argentina (Republic of) govt.
guaranty Ser. L-GP, 6s, 2023 (In
default) (NON) 984,259
1,610,000 Brazil (Federal Republic of) govt.
guaranty FRB Ser. RG, 2.063s, 2012 1,420,825
719,100 Peru (Republic of) bonds Ser. PDI,
5s, 2017 652,583
--------------
Total Brady bonds (cost $3,654,753) $4,326,767
Convertible preferred stocks (0.3%) (a)
Number of shares Value
-------------------------------------------------------------------------------
12,672 Crown Castle International Corp.
$3.125 cv. pfd. $600,336
7,495 Omnicare, Inc. zero % cv. pfd. 496,544
85 Paxson Communications Corp. 144A
9.75% cv. pfd. (PIK) 688,500
8,622 Pegasus Communications Corp. Ser. C,
6.50% cum. cv. pfd. 603,540
9,530 Williams Cos., Inc. (The) 144A $2.75
cv. pfd. 639,701
--------------
Total Convertible preferred stocks
(cost $2,690,447) $3,028,621
Convertible bonds and notes (0.3%) (a)
Principal amount Value
-------------------------------------------------------------------------------
$155,000 AES Corp. (The) cv. sub. notes
4 1/2s, 2005 $151,125
725,000 Amkor Technologies, Inc. cv. notes
5 3/4s, 2006 727,719
325,000 CenterPoint Energy, Inc. 144A cv.
sr. notes 3 3/4s, 2023 357,094
3,080,000 Cybernet Internet Services
International, Inc. 144A cv. sr.
disc. notes stepped-coupon zero %
(13s, 8/15/04) 2009 (Denmark) (In
default) (NON) (STP) 31
1,075,000 Nextel Communications, Inc. cv. sr.
notes 6s, 2011 1,268,500
55,000 Tower Automotive, Inc. cv. sub.
notes 5s, 2004 55,069
--------------
Total Convertible bonds and notes
(cost $4,856,582) $2,559,538
Units (0.2%) (a)
Number of units Value
-------------------------------------------------------------------------------
1,654 HMP Equity Holdings Corp. units zero %,
2008 $1,281,808
305 Tom Brown Inc. unit 7 1/4s, 2013 324,063
951 XCL Equity Units zero % (NON) 422,079
--------------
Total Units (cost $3,285,450) $2,027,950
Warrants (--%) (a) (NON) Expiration
Number of warrants date Value
-------------------------------------------------------------------------------
1,178 AboveNet, Inc. 9/8/10 $38,224
1,001 AboveNet, Inc. 9/8/08 35,636
1,420 Dayton Superior Corp. 144A 6/15/09 1
4 D 12/31/12 1
694 MDP Acquisitions PLC 144A (Ireland) 10/1/13 34,700
3,079 Microcell Telecommunications
(Canada) 5/1/08 14,929
1,847 Microcell Telecommunications
(Canada) 5/1/05 8,192
550 Mikohn Gaming Corp. 144A 8/15/08 413
560 ONO Finance PLC 144A (United
Kingdom) 2/15/11 1
570 Pliant Corp. 144A 6/1/10 6
682 Solutia, Inc. 144A 7/15/09 7
690 Travel Centers of America, Inc. 144A 5/1/09 3,450
2,310 Ubiquitel, Inc. 144A 4/15/10 1
2,269 Washington Group International, Inc.
Ser. A 1/25/06 24,278
2,593 Washington Group International, Inc.
Ser. B 1/25/06 22,948
1,401 Washington Group International, Inc.
Ser. C 1/25/06 10,508
800 XM Satellite Radio Holdings, Inc.
144A 3/15/10 44,000
--------------
Total Warrants (cost $914,865) $237,295
Short-term investments (6.9%) (a)
Principal amount Value
-------------------------------------------------------------------------------
$32,649,000 Interest in $404,000,000 joint
tri-party repurchase agreement
dated January 30, 2004 with Bank of
America Securities, LLC due February
2, 2004 with respect to various U.S.
Government obligations -- maturity
value of $32,651,830 for an
effective yield of 1.04% $32,649,000
33,000,000 Interest in $403,000,000 joint
tri-party repurchase agreement
dated January 30, 2004 with Goldman
Sachs & Co. due February 2,
2004 with respect to various U.S.
Government obligations -- maturity
value of $33,002,860 for an
effective yield of 1.04%. 33,000,000
1,998,980 Short-term investments held as
collateral for loaned
securities with yields ranging from
1.00% to 1.05% and due February 2,
2004 (d) 1,998,864
3,092,000 U.S. Treasury Bill zero %, February
5, 2004 (SEG) 3,091,680
--------------
Total Short-term investments (cost $70,739,544) $70,739,544
-------------------------------------------------------------------------------
Total Investments (cost $1,048,414,140) $1,066,761,449
-------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,019,165,926.
(DEF) Security is in default of principal and interest.
(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 accruing
interest income at this rate.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at January 31, 2004 was
$21,931,633 or 2.2% of net assets.
(PIK) Income may be received in cash or additional securities at the
discretion of the issuer.
(SEG) This security was pledged and segregated with the custodian to
cover margin requirements for futures contracts at January 31, 2004.
(R) Real Estate Investment Trust.
(d) See Note 1 to the financial statements.
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.
TBA after the name of a security represents to be announced securities
(Note 1).
The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes
(FRN) are the current interest rates shown at January 31, 2004.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at January 31, 2004: (as
a percentage of Market Value)
Austria 0.7%
Bermuda 0.7
Canada 1.5
Cayman Islands 0.5
Colombia 0.5
Denmark 0.6
France 1.7
Germany 0.8
Ireland 0.6
Luxembourg 0.5
Mexico 0.6
New Zealand 1.0
Russia 0.9
Sweden 1.7
United Kingdom 3.6
United States 75.0
Other 9.1
--------
Total 100.0%
Forward currency contracts to buy at January 31, 2004 (Unaudited)
(aggregate face value $76,500,873)
Unrealized
Aggregate Delivery appreciation/
Value face value date (depreciation)
------------------------------------------------------------------------------------------------------
Australian Dollar $25,427,148 $24,054,120 3/17/04 $1,373,028
British Pound 4,155,334 3,863,768 3/17/04 291,566
Canadian Dollar 2,414,121 2,439,939 3/17/04 (25,818)
Euro 3,055,402 3,078,509 3/17/04 (23,107)
Japanese Yen 39,566,607 38,570,342 3/17/04 996,265
Swiss Franc 651,485 636,645 3/17/04 14,840
Taiwan Dollar 3,857,550 3,857,550 6/16/04 --
------------------------------------------------------------------------------------------------------
$2,626,774
------------------------------------------------------------------------------------------------------
Forward currency contracts to sell at January 31, 2004 (Unaudited)
(aggregate face value $86,519,809)
Unrealized
Aggregate Delivery appreciation/
Value face value date (depreciation)
------------------------------------------------------------------------------------------------------
British Pound $11,801,750 $11,133,660 3/17/04 $(668,090)
Canadian Dollar 3,732,061 3,763,919 3/17/04 31,858
Danish Krone 4,039,123 3,925,857 3/17/04 (113,266)
Euro 45,100,596 43,824,630 3/17/04 (1,275,966)
Japanese Yen 1,912,512 1,889,265 3/17/04 (23,247)
New Zealand Dollar 10,555,532 10,165,376 3/17/04 (390,156)
Swedish Krona 12,052,846 11,817,102 3/17/04 (235,744)
------------------------------------------------------------------------------------------------------
$(2,674,611)
------------------------------------------------------------------------------------------------------
Futures contracts outstanding at January 31, 2004 (Unaudited)
Unrealized
Aggregate Expiration appreciation/
Value face value date (depreciation)
------------------------------------------------------------------------------------------------------
Euro Bobl 5 yr (Long) $21,545,024 $21,164,150 Mar-04 $380,874
Euro Bund 10 yr (Long) 65,050,032 64,020,547 Mar-04 1,029,485
Interest Rate Swap
10 yr (Long) 2,555,875 2,510,332 Mar-04 45,543
Japanese Government Bond
10 yr-TSE (Long) 7,884,143 7,790,613 Mar-04 93,530
Japanese Government
Bond-Mini 10 yr (Long) 10,379,295 10,297,893 Mar-04 81,402
Long Gilt 10 yr (Long) 24,145,962 23,708,752 Mar-04 437,210
U.S. Long Treasury Bond
20 yr (Long) 50,438,719 49,547,079 Mar-04 891,640
U.S. Treasury Note
10 yr (Short) 25,977,188 25,613,122 Mar-04 (364,066)
U.S. Treasury Note
5 yr (Short) 176,130,500 176,233,426 Mar-04 102,926
------------------------------------------------------------------------------------------------------
$2,698,544
------------------------------------------------------------------------------------------------------
Interest rate swap contracts outstanding at January 31, 2004 (Unaudited)
Unrealized
Notional Termination appreciation/
amount date (depreciation)
------------------------------------------------------------------------------------------------------
Agreement with Bank of America, N.A.
dated December 1, 2003 to pay semi-annually
the notional amount multiplied by 2.444% and
receive quarterly the notional amount
multiplied by the three month USD-LIBOR. $8,912,000 12/5/05 $(80,527)
------------------------------------------------------------------------------------------------------
Agreement with Bank of America, N.A. dated
January 22, 2004 to pay semi-annually the
notional amount multiplied by 1.97375% and
receive quarterly the notional amount multiplied
by the three month USD-LIBOR-BBA. 17,400,000 1/26/06 57,812
------------------------------------------------------------------------------------------------------
Agreement with Bank of America, N.A. dated
January 22, 2004 to pay semi-annually the
notional amount multiplied by 4.35% and
receive quarterly the notional amount multiplied
by the three month USD-LIBOR-BBA. 5,500,000 1/27/14 78,114
------------------------------------------------------------------------------------------------------
Agreement with Lehman Brothers Special
Financing, Inc. dated December 9, 2003 to
receive semi-annually the notional amount
multiplied by 4.641% and pay quarterly the
notional amount multiplied by three month
USD-LIBOR-BBA. 12,964,000 12/15/13 197,777
------------------------------------------------------------------------------------------------------
Agreement with Lehman Brothers Special
Financing, Inc. dated January 22, 2004 to pay
semi-annually the notional amount multiplied
by 1.955% and receive quarterly the notional
amount multiplied by the three month
USD-LIBOR-BBA. 17,400,000 1/26/06 66,383
------------------------------------------------------------------------------------------------------
Agreement with Lehman Brothers Special
Financing, Inc. dated January 22, 2004 to pay
semi-annually the notional amount multiplied
by 4.3375% and receive quarterly the notional
amount multiplied by the three month
USD-LIBOR-BBA. 5,500,000 1/26/14 82,413
------------------------------------------------------------------------------------------------------
Agreement with Merrill Lynch Capital Services,
Inc. dated November 17, 2000 to pay semi-
annually the notional amount multiplied by the
three month USD-LIBOR-BBA and receive
the notional amount multiplied by 6.68%. 9,000,000 11/21/05 740,250
------------------------------------------------------------------------------------------------------
Agreement with Merrill Lynch Capital
Services, Inc. dated September 27, 2002 to
receive semi-annually the notional amount
multiplied by the six month JPY-LIBOR-BBA
and pay monthly the notional amount
multiplied by 0.399%. JPY 3,417,000,000 10/1/07 $(36,966)
------------------------------------------------------------------------------------------------------
Agreement with UBS, AG dated
November 18, 2003 to receive annually the
notional amount multiplied by 3.36% and pay
semi-annually the notional amount multiplied
by the six month EUR-EURIBOR-Telerate. EUR 41,945,000 8/20/06 247,475
------------------------------------------------------------------------------------------------------
$1,352,731
------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities
January 31, 2004 (Unaudited)
Assets
-------------------------------------------------------------------------------
Investments in securities, at value including $1,959,195 of
securities on loan (identified cost $1,048,414,140) (Note 1) $1,066,761,449
-------------------------------------------------------------------------------
Cash 2,319,537
-------------------------------------------------------------------------------
Foreign currency (cost $5,036,271) (Note 1) 5,066,892
-------------------------------------------------------------------------------
Dividends, interest and other receivables 15,963,008
-------------------------------------------------------------------------------
Receivable for securities sold 5,277,313
-------------------------------------------------------------------------------
Receivable for open swap contracts (Note 1) 1,470,224
-------------------------------------------------------------------------------
Receivable for open forward currency contracts (Note 1) 2,733,478
-------------------------------------------------------------------------------
Receivable for closed forward currency contracts (Note 1) 446,550
-------------------------------------------------------------------------------
Total assets 1,100,038,451
Liabilities
-------------------------------------------------------------------------------
Payable for variation margin (Note 1) 806,978
-------------------------------------------------------------------------------
Distributions payable to shareholders 5,588,311
-------------------------------------------------------------------------------
Payable for securities purchased 67,461,796
-------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,696,030
-------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 150,847
-------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 91,452
-------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,522
-------------------------------------------------------------------------------
Payable for open forward currency contracts (Note 1) 2,781,315
-------------------------------------------------------------------------------
Payable for closed forward currency contracts (Note 1) 84,633
-------------------------------------------------------------------------------
Payable for open swap contracts (Note 1) 117,493
-------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 1,998,864
-------------------------------------------------------------------------------
Other accrued expenses 93,284
-------------------------------------------------------------------------------
Total liabilities 80,872,525
-------------------------------------------------------------------------------
Net assets $1,019,165,926
Represented by
-------------------------------------------------------------------------------
Paid-in capital (Note 1) $1,206,682,449
-------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 10,738,434
-------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (220,623,561)
-------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 22,368,604
-------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $1,019,165,926
Computation of net asset value and offering price
-------------------------------------------------------------------------------
Net asset value per share ($1,019,165,926 divided by
141,198,870 shares) $7.22
-------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of operations
Six months ended January 31, 2004 (Unaudited)
Investment income:
-------------------------------------------------------------------------------
Interest $35,927,534
-------------------------------------------------------------------------------
Dividends 784,228
-------------------------------------------------------------------------------
Securities lending 531
-------------------------------------------------------------------------------
Total investment income 36,712,293
Expenses:
-------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,447,204
-------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 442,239
-------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 15,644
-------------------------------------------------------------------------------
Administrative services (Note 2) 6,653
-------------------------------------------------------------------------------
Other 197,880
-------------------------------------------------------------------------------
Total expenses 4,109,620
-------------------------------------------------------------------------------
Expense reduction (Note 2) (18,841)
-------------------------------------------------------------------------------
Net expenses 4,090,779
-------------------------------------------------------------------------------
Net investment income 32,621,514
-------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 16,686,689
-------------------------------------------------------------------------------
Net realized gain on swap contracts (Note 1) 1,182,170
-------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (5,892,845)
-------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 2,185,374
-------------------------------------------------------------------------------
Net realized gain on credit default contracts (Note 1) 74,035
-------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (921,542)
-------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures
contracts, swap contracts, TBA sale commitments and credit
default contracts during the period 53,540,644
-------------------------------------------------------------------------------
Net gain on investments 66,854,525
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations $99,476,039
-------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
Six months ended Year ended
January 31 July 31
Increase in net assets 2004* 2003
-------------------------------------------------------------------------------
Operations:
-------------------------------------------------------------------------------
Net investment income $32,621,514 $72,453,759
-------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 14,235,423 (11,293,897)
-------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign
currencies 52,619,102 85,392,998
-------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 99,476,039 146,552,860
-------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
-------------------------------------------------------------------------------
From net investment income (33,039,645) (72,810,386)
-------------------------------------------------------------------------------
Increase from issuance of common shares in
connection with reinvestment of
distributions -- 1,338,341
-------------------------------------------------------------------------------
Total increase in net assets 66,436,394 75,080,815
Net assets
-------------------------------------------------------------------------------
Beginning of period 952,729,532 877,648,717
-------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $10,738,434 and
$11,156,565, respectively) $1,019,165,926 $952,729,532
-------------------------------------------------------------------------------
Number of fund shares
-------------------------------------------------------------------------------
Shares outstanding at beginning of period 141,198,870 140,989,259
-------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions -- 209,611
-------------------------------------------------------------------------------
Shares outstanding at end of period 141,198,870 141,198,870
-------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
Six months
ended
January 31
Per-share (Unaudited) Year ended July 31
operating performance 2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $6.75 $6.22 $6.68 $7.19 $7.62 $8.71
---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .23 .51 .55 .61 .63 .64
---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .47 .54 (.47) (.50) (.39) (.99)
---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .70 1.05 .08 .11 .24 (.35)
---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.52) (.53) (.51) (.67) (.62)
---------------------------------------------------------------------------------------------------------------------------------
From net realized
gain on investments -- -- -- -- -- (.12)
---------------------------------------------------------------------------------------------------------------------------------
From return of
capital -- -- (.01) (.11) -- --
---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.52) (.54) (.62) (.67) (.74)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $7.22 $6.75 $6.22 $6.68 $7.19 $7.62
---------------------------------------------------------------------------------------------------------------------------------
Market price,
end of period $6.71 $6.31 $6.03 $6.29 $6.38 $7.19
---------------------------------------------------------------------------------------------------------------------------------
Total return at
market price (%)(b) 10.25* 13.41 4.44 8.56 (1.51) (7.24)
---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,019,166 $952,730 $877,649 $942,125 $1,013,487 $1,073,980
---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .42* .85 .86 .85 .83 .86
---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.31* 7.91 8.39 8.87 8.48 8.05
---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 43.13* 96.21 (d) 175.78 (d) 231.58 133.80 165.79
---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
The accompanying notes are an integral part of these financial
statements.
Notes to financial statements
January 31, 2004 (Unaudited)
Note 1
Significant accounting policies
Putnam Premier Income Trust (the "fund"), is registered under the
Investment Company Act of 1940, as amended, as a non-diversified,
closed-end management investment company. The fund's investment
objective is to seek high current income which it intends to achieve by
allocating its investments among the U.S. government sector, the high
yield sector and the international sector of the fixed-income securities
market. The fund invests in higher yielding, lower rated bonds that have
a higher rate of default due to the nature of the investments.
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 accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in 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 valued at the last reported sales price on their
principal exchange, or official closing price for certain markets. If no
sales are reported -- as in the case of some securities traded
over-the-counter -- a security is valued at its last reported bid price.
Market quotations are not considered to be readily available for certain
debt obligations; such investments are valued at fair value on the basis
of valuations furnished by an independent pricing service or dealers,
approved by the Trustees. Such services or dealers determine valuations
for normal institutional-size trading units of such securities using
methods based on market transactions for comparable securities and
various relationships, generally recognized by institutional traders,
between securities. Many securities markets and exchanges outside the
U.S. close prior to the close of the New York Stock Exchange and
therefore, the closing prices for securities in such markets or on such
exchanges may not fully reflect events that occur after such close but
before the close of the New York Stock Exchange. Accordingly, on certain
days, the fund will fair value foreign securities taking into account
multiple factors, including movements in the U.S. Securities market. The
number of days on which fair value prices will be used will depend on
market activity and it is possible that fair value prices will be used
by the fund to a significant extent. 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 valued at amortized cost, which approximates fair value. Other
investments, including restricted securities, are valued at fair value
following procedures approved by the Trustees. Such valuations and
procedures are reviewed periodically by the Trustees.
B) Joint trading account The fund may transfer uninvested cash balances,
including cash collateral received under security lending arrangements,
into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam
Investment Management, LLC ("Putnam Management"), the fund's manager, an
indirect wholly-owned subsidiary of Putnam, LLC. These balances may be
invested in issuers of high-grade short-term investments having
maturities of up to 397 days for collateral received under security
lending arrangements and up to 90 days for other cash investments.
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 recorded 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
recognized on the ex-dividend date except that certain dividends from
foreign securities are recognized as soon as the fund is informed of the
ex-dividend date. Non-cash dividends, if any, are recorded at the fair
market value of the securities received.
All premiums/discounts are amortized/accreted on a yield-to-maturity
basis.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such gains and losses are included with the net
realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net realized
exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies, currency gains and losses realized
between the trade and settlement dates on securities transactions and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized
appreciation and depreciation of assets and liabilities in foreign
currencies arise from changes in the value of open forward currency
contracts and assets and liabilities other than investments at the
period end, resulting from changes in the exchange rate. Investments in
foreign securities involve certain risks, including those related to
economic instability, unfavorable political developments, and currency
fluctuations, not present with domestic investments.
F) Forward currency contracts The fund may buy and sell forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date. These contracts are used to
protect against a decline in value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or quoted
(or an increase in the value of a currency in which securities a fund
intends to buy are denominated, when a fund holds cash reserves and
short term investments). The U.S. dollar value of forward currency
contracts is determined using current forward currency exchange rates
supplied by a quotation service. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is
marked to market daily and the change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed. The fund could be exposed to risk if the value of the currency
changes unfavorably, if the counterparties to the contracts are unable
to meet the terms of their contracts or if the fund is unable to enter
into a closing position. Forward currency contracts outstanding at
period end, if any, are listed after the fund's portfolio.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed. Realized gains and losses on purchased options are included in
realized gains and losses on investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. The fund and the broker
agree to exchange an amount of cash equal to the daily fluctuation in
the value of the futures contract. Such receipts or payments are known
as "variation margin." Exchange traded options are valued at the last
sale price, or if no sales are reported, the last bid price for
purchased options and the last ask price for written options. Options
traded over-the-counter are valued using prices supplied by dealers.
Futures and written option contracts outstanding at period end, if any,
are listed after the fund's portfolio.
H) Interest rate swap contracts The fund may enter into interest rate
swap contracts, which are arrangements between two parties to exchange
cash flows based on a notional principal amount, to manage the fund's
exposure to interest rates. Interest rate swap contracts are marked to
market daily based upon quotations from market makers and the change, if
any, is recorded as unrealized gain or loss. Payments made or received
are recorded as realized gain or loss. The fund could be exposed to
credit or market risk due to unfavorable changes in the fluctuation of
interest rates or if the counterparty defaults on its obligation to
perform. Interest rate swap contracts outstanding at period end, if any,
are listed after the fund's portfolio.
I) Credit default contracts The fund may enter into credit default
contracts where one party, the protection buyer, makes an upfront
payment to a counter party, the protection seller, in exchange for the
right to receive a contingent payment. The maximum amount of the payment
may equal the notional amount, at par, of the underlying index or
security as a result of a related credit event. An upfront payment
received by the fund, as the protection seller, is recorded as a
liability on the fund's books. An upfront payment made by the fund, as
the protection buyer, is recorded as an asset on the fund's books. The
credit default contracts are marked to market daily based upon
quotations from market makers and the change, if any, is recorded as
unrealized gain or loss. Payments received or made as a result of a
credit event or termination of the contract are recognized, net of a
proportional amount of the upfront payment, as realized gains or losses.
In addition to bearing the risk that the credit event will occur, the
fund could be exposed to market risk due to unfavorable changes in
interest rates or in the price of the underlying security or index, the
possibility that the fund may be unable to close out its position at the
same time or at the same price as if it had purchased comparable
publicly traded securities or that the counterparty may default on its
obligation to perform. The risk of loss may exceed the fair value of
these contracts recognized on the statement of assets and liabilities.
Credit default contracts outstanding at period end, if any, are listed
after the fund's portfolio.
J) TBA purchase commitments The fund may enter into "TBA" (to be
announced) commitments to purchase securities for a fixed unit price at
a future date beyond customary settlement time. Although the unit price
has been established, the principal value has not been finalized.
However, the amount of the commitments will not significantly differ
from the principal amount. The fund holds, and maintains until
settlement date, cash or high-grade debt obligations in an amount
sufficient to meet the purchase price, or the fund may enter into
offsetting contracts for the forward sale of other securities it owns.
Income on the securities will not be earned until settlement date. TBA
purchase commitments may be considered securities themselves, and
involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the
risk of decline in the value of the fund's other assets. Unsettled TBA
purchase commitments are valued at the fair value of the underlying
securities, according to the procedures described under "Security
valuation" above.
Although the fund will generally enter into TBA purchase commitments
with the intention of acquiring securities for its portfolio or for
delivery pursuant to options contracts it has entered into, the fund may
dispose of a commitment prior to settlement if Putnam Management deems
it appropriate to do so.
K) TBA sale commitments The fund may enter into TBA sale commitments to
hedge its portfolio positions or to sell mortgage-backed securities it
owns under delayed delivery arrangements. Proceeds of TBA sale
commitments are not received until the contractual settlement date.
During the time a TBA sale commitment is outstanding, equivalent
deliverable securities, or an offsetting TBA purchase commitment
deliverable on or before the sale commitment date, are held as "cover"
for the transaction.
Unsettled TBA sale commitments are valued at the fair value of the
underlying securities, generally according to the procedures described
under "Se cur ity valuation" above. The contract is "marked-to-market"
daily and the change in market value is recorded by the fund as an
unrealized gain or loss. If the TBA sale commitment is closed through
the acquisition of an offsetting purchase commitment, the fund realizes
a gain or loss. If the fund delivers securities under the commitment,
the fund realizes a gain or a loss from the sale of the securities based
upon the unit price established at the date the commitment was entered
into. TBA sale commitments outstanding at period end, if any, are listed
after the fund's portfolio.
L) Security lending The fund may lend securities, through its agents, to
qualified borrowers in order to earn additional income. The loans are
collateralized by cash and/or securities in an amount at least equal to
the market value of the securities loaned. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the fund on the next business day.
The risk of borrower default will be borne by the fund's agents; the
fund will bear the risk of loss with respect to the investment of the
cash collateral. Income from securities lending is included in
investment income on the Statement of operations. At January 31, 2004,
the value of securities loaned amounted to $1,959,195. The fund received
cash collateral of $1,998,864 which is pooled with collateral of other
Putnam funds into 9 issuers of high grade short-term investments.
M) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
At July 31, 2003, the fund had a capital loss carryover of $234,718,499
available to the extent allowed by tax law to offset future net capital
gain, if any. The amount of the carryover and the expiration dates are:
Loss Carryover Expiration
--------------------------------
$39,893,260 July 31, 2007
44,857,570 July 31, 2008
24,930,247 July 31, 2009
44,917,486 July 31, 2010
80,119,936 July 31, 2011
Pursuant to federal income tax regulations applicable to regulated
investment companies, the fund has elected to defer to its fiscal year
ending July 31, 2004 $2,541,873 of losses recognized during the period
November 1, 2002 to July 31, 2003.
The aggregate identified cost on a tax basis is $1,052,218,052,
resulting in gross unrealized appreciation and depreciation of
$71,335,144 and $56,791,747 respectively, or net unrealized appreciation
of $14,543,397.
N) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Distributions from capital gains, 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
Putnam Management is paid for management and investment advisory
services quarterly based on the average net assets of the fund. Such fee
is based on the following annual rates: 0.75% of the first $500 million
of average weekly net assets, 0.65% of the next $500 million, 0.60% of
the next $500 million and 0.55% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam, LLC. Putnam
Investor Services, a division of PFTC, provides investor servicing agent
functions to the fund. During the six months ended January 31, 2004, the
fund paid PFTC $442,239 for these services.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. For the six months ended January 31,
2004, the fund's expenses were reduced by $18,841 under these
arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $1,248 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 Trustee compensation and expenses in the
Statement of operations. Accrued pension liability is included in
Payable for Trustee compensation and expenses in the Statement of assets
and liabilities.
Note 3
Purchases and sales of securities
During the six months ended January 31, 2004, cost of purchases and
proceeds from sales of investment securities other than U.S. government
securities and short-term investments aggregated $348,872,165 and
$416,542,471, respectively. Purchases and sales of U.S. government
securities aggregated $51,320,792 and $14,861,379, respectively.
Note 4
Regulatory matters and litigation
On November 13, 2003, Putnam Management agreed to entry of an order by
the Securities and Exchange Commission in partial resolution of
administrative and cease-and-desist proceedings initiated by the SEC on
October 28, 2003 in connection with alleged excessive short-term trading
by at least six Putnam Management investment professionals. The SEC's
findings reflect that four of those employees engaged in such trading in
funds over which they had investment decision-making responsibility and
had access to non-public information regarding, among other things,
current portfolio holdings and valuations. The six individuals are no
longer employed by Putnam Management. Under the order, Putnam Management
will make restitution for losses attributable to excessive short-term
trading by Putnam employees, institute new employee trading restrictions
and enhanced employee trading compliance, retain an independent
compliance consultant, and take other remedial actions. Putnam
Management neither admitted nor denied the order's findings, which
included findings that Putnam Management willfully violated provisions
of the federal securities laws. A civil monetary penalty and other
monetary relief, if any, will be determined at a later date. If a
hearing is necessary to determine the amounts of such penalty or other
relief, Putnam Management will be precluded from arguing that it did not
violate the federal securities laws in the manner described in the SEC
order, the findings set forth in the SEC order will be accepted as true
by the hearing officer and additional evidence may be presented. Putnam
Management, and not the investors in any Putnam fund, will bear all
costs, including restitution, civil penalties and associated legal fees.
Administrative proceedings instituted by the Commonwealth of
Massachusetts on October 28, 2003 against Putnam Management in
connection with alleged market timing activities by Putnam employees and
by participants in some Putnam-administered 401(k) plans are pending.
Putnam Management has committed to make complete restitution for any
losses suffered by Putnam shareholders as a result of any improper
market-timing activities by Putnam employees or within
Putnam-administered 401(k) plans.
The SEC's and Commonwealth's allegations and related matters also serve
as the general basis for numerous lawsuits, including purported class
action lawsuits filed against Putnam Management and certain related
parties, including certain Putnam funds. Putnam Management has agreed to
bear any costs incurred by Putnam funds in connection with these
lawsuits. Based on currently available information, Putnam Management
believes that the likelihood that the pending private lawsuits and
purported class action lawsuits will have a material adverse financial
impact on the fund is remote, and the pending actions are not likely to
materially affect its ability to provide investment management services
to its clients, including the Putnam funds.
Review of these matters by counsel for Putnam Management and by separate
independent counsel for the Putnam funds and their independent Trustees
is continuing. In addition, Marsh & McLennan Companies, Inc., Putnam
Management's parent company, has engaged counsel to conduct a separate
review of Putnam Management's policies and controls related to
short-term trading.
Fund information
About Putnam Investments
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
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,
Treasurer and Principal Financial Officer
Patricia C. Flaherty
Senior Vice President
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Beth S. Mazor
Vice President
Gordon H. Silver
Vice President
Mark C. Trenchard
Vice President and
BSA Compliance Officer
William H. Woolverton
Vice President and
Chief Legal Officer
Judith Cohen
Clerk and Assistant Treasurer
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
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
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Shareholders can sign up for email delivery of shareholder reports on
www.putnaminvestments.com.
211466 073 3/04
Item 2. Code of Ethics:
-----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
-----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
-----------------------------------------------
Not applicable
Items 5-6. [Reserved]
---------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
-------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. [Reserved]
------------------
Item 9. Submission of Matters to a Vote of Security Holders:
------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
---------------------------------
(a) The registrant's principal executive officer and principal financial
officer have concluded, based on their evaluation of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as of a date within 90 days of
the filing date of this report on Form N-CSR, that the design and
operation of such procedures are generally effective to provide
reasonable assurance that information required to be disclosed by
the investment company in the reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Commission's rules and forms.
Although such officers reached the conclusion expressed in the
preceding paragraph, they are aware of matters that raise concerns
with respect to controls, each of which arose in connection with the
administration of 401(k) plans by Putnam Fiduciary Trust Company.
The first matter, which occurred in early 2001, involved the willful
circumvention of controls by certain Putnam employees in connection
with the correction of operational errors with respect to a 401(k)
client's investment in certain Putnam Funds, which led to losses in
five Putnam Funds (not including the registrant). Such officers
became aware of this matter in February 2004. The second matter,
which occurred in 2002, involved the willful circumvention by
certain Putnam employees of policies and procedures in connection
with the payment of Putnam corporate expenses. Such officers did
not learn that this matter involved a Putnam Fund until January
2004. Putnam has made restitution to the affected Funds,
implemented a number of personnel changes, including senior
personnel, begun to implement changes in procedures to address these
items and informed the SEC, the Funds' Trustees and independent
auditors. An internal investigation and review of procedures and
controls are currently ongoing.
In reaching the conclusion expressed herein, the registrant's
principal executive officer and principal financial officer
considered a number of factors, including the nature of the matters
described above, when the matters occurred, the individuals
involved, personnel changes that have occurred since these matters
occurred, the results to date of the current ongoing investigation
and the overall quality of controls at Putnam at this time.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
------------------
(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002
are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: April 1, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: April 1, 2004
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: April 1, 2004