Putnam
Premier
Income
Trust
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
7-31-02
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FROM THE TRUSTEES
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Dear Fellow Shareholder:
Thanks to some astute decisions by the management team and the strong
performance of U.S. government securities, Putnam Premier Income Trust
was able to post favorable results within its peer group for the fiscal
year that ended on July 31, 2002. The generally troubled non-U.S. and
high-yield securities in the portfolio detracted from performance. On
the following pages, the team provides a full discussion of the reasons
behind this performance and then presents its view of prospects for the
months ahead.
Management believes there are reasons for optimism as the U.S. economic
recovery continues to exhibit signs that it is still very much alive,
albeit not as robust as some investors might desire. Productivity
continues to improve, interest rates remain low, and inflation is still
virtually nonexistent, all positive signs for fixed-income securities.
As non-U.S. markets also begin to recover, the managers are confident
that the prospects for securities in these areas will similarly improve.
Meanwhile, as your fund begins a new fiscal year, the team continues to
monitor these market and economic trends closely and will adjust the
portfolio to seek maximum advantage as opportunities present themselves.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
September 18, 2002
REPORT FROM FUND MANAGEMENT
This fund is managed by the
Putnam Core Fixed-Income Team
During the past fiscal year, Putnam Premier Income Trust endured one of
the most volatile environments in recent memory for both stocks and
bonds. A series of unforeseeable events during the period resulted in a
flight to quality that benefited higher-quality bonds at the expense of
riskier asset classes, such as high yield. Since your fund holds
approximately 40%-50% of its assets in high-yield bonds, the fund
underperformed its benchmark index, the Lehman Government Bond Index,
which consists entirely of government securities. Despite modest
absolute returns at net asset value, the fund's relative performance
was strong, coming in ahead of its Lipper category average for the
12-month period (see page 7 for Lipper details). The fund's higher
return at market price reflected investors' growing preference for
fixed-income securities and pursuit of higher yields.
Total return for 12 months ended 7/31/02
NAV Market price
-----------------------------------------------------------------------
1.44% 4.44%
-----------------------------------------------------------------------
Past performance does not indicate future results. Performance based on
market prices for the shares will vary from performance based on the
portfolio's net asset value. Performance information for longer periods
begins on page 7.
* 2001 WAS HEAVILY INFLUENCED BY SEPTEMBER 11
Financial markets endured one of the most challenging periods in
decades, as the world struggled to overcome the damage caused by
terrorism, recession, geopolitical unrest, and accounting scandals
involving several large U.S. firms. These factors created an environment
of uncertainty, causing fixed-income investors to favor higher-quality
investments. As a result, bond sectors with greater risk, such as high
yield, struggled during the year. On the other hand, government bonds
benefited from the flight to quality and turned in strong returns.
[GRAPHIC OMITTED: horizontal bar chart SECTOR ALLOCATIONS]
SECTOR ALLOCATIONS*
High yield 45.4%
U.S. investment grade 32.0%
Foreign 22.6%
Footnote reads:
*Based on net assets as of 7/31/02. Holdings will vary over time.
Just as the U.S. economy was starting to gain some momentum in the late
summer of 2001, the September 11 tragedy sent global markets into a
tailspin. Economic activity dropped off sharply and a recession became
imminent. Central banks in many developed countries intervened by
cutting interest rates further in an effort to boost economic growth,
and the Federal Reserve Board lowered the federal funds rate to a
historical low of 1.75%, where it stood as this report was being
written. Yield curves steepened dramatically as short-term yields
plunged because of large-scale monetary and fiscal stimulus as well as a
flight to quality among investors. Government bonds emerged as the top
performers during this time.
"As the stock market continues to take an awful beating, investors have
rediscovered the simple virtues of bonds."
-- Barron's, July 29, 2002
While the high-yield market suffered from its lack of liquidity and
dependence on economic recovery immediately after September 11,
high-yield bonds staged an impressive rally in the final months of 2001.
Optimism set in again as the New Year approached and investors applauded
signs of a stronger-than-expected economic rebound. Amid widespread
references to the shortest and mildest U.S. recession in history,
investors developed a renewed appetite for risk that helped lift returns
in the high-yield market at the expense of the safer government sectors.
* 2002 BROUGHT MORE TURMOIL, BUT DECLINING RATES HELPED BONDS
Despite an earlier-than-expected turnaround in macroeconomic data,
investor confidence rapidly eroded following the intensification of
corporate accounting scandals. Poor first-quarter earnings, mounting
investigations by the Securities and Exchange Commission, and fears of
terrorism contributed to increasing investor risk aversion. As a result,
government bonds advanced at the expense of riskier asset classes.
Equity and credit markets came under pressure as investors became more
skeptical about corporate accounting practices. Within the fixed-income
universe, corporate bonds -- both investment grade and high-yield --
performed poorly compared to the higher-quality sectors.
Fund Profile
Putnam Premier Income Trust is designed for investors seeking a high
level of current income. The fund maintains flexibility across three
main sectors -- government and agencies, high-yield corporate, and
international -- to seek maximum current income without undue risk to
capital. The fund is designed for investors seeking a higher level of
income who can accept a moderately higher level of risk.
As with the high-yield sector, emerging-market bond returns fell victim
to the volatility. Initially, corporate scandals in the U.S. boosted
investor interest in these bonds, especially in light of the improving
macroeconomic environment. However, the second wave of corporate
scandals in the U.S. lowered growth expectations worldwide and hurt the
outlook for emerging-market bonds.
Your fund's performance was negatively affected by its high-yield
holdings, but the management team was able to mitigate the damage by
keeping the high-yield holdings well diversified and by having minimal
exposure to large-scale defaults. The fund's emerging-markets holdings
also hurt performance, but the fund benefited from our low exposure to
Argentina and from solid performance in Russian bonds. The fund's
international holdings within developed countries -- especially Germany
and the U.K. -- made positive contributions overall and were enhanced by
the decline in the U.S. dollar against its major counterparts.
* SLOW TO MODERATE GROWTH FOR THE REST OF 2002
We still believe that a modest economic recovery, combined with low
inflation, should continue through the second half of 2002. However,
given the recent trend of weaker-than-expected economic data, growth
appears likely to be somewhat sluggish. We believe personal consumption
should decelerate this year, moreover, due to a negative wealth effect
and the lack of further tax cuts. Furthermore, we believe growth in
business investment spending will outpace consumer spending by the end
of the year and continue its gradual improvement throughout 2003.
[GRAPHIC OMITTED: TOP SECTOR HOLDINGS]
TOP SECTOR HOLDINGS*
Top three high-yield holdings
HMH Properties, Inc.
company guaranty, Series B, 7.875%, 2008
Echostar Broadband Corp.
senior notes, 10.375%, 2007
Pioneer Natural Resources Co.
company guaranty, 9.675%, 2010
Top three U.S. government holdings
U.S. Treasury Bonds
7.5%, 11/15/16
Federal National Mortgage Association
pass-through certificates, TBA, 6.5%,
8/1/32
U.S. Treasury Bonds
6.25%, 5/15/30
Top three international holdings
Sweden (Government of) bonds,
Series 1044, 3.5%, 2006
Sweden (Government of) bonds,
Series 1037, 8%, 2007
United Kingdom Treasury bonds,
8.5%, 2005
Footnote reads:
*These holdings represent 12.4% of the fund's net assets as of 7/31/02.
Portfolio holdings will vary over time.
The high-yield market remains bifurcated, with controversy riddling four
industry sectors: cable, wireline telecommunications, wireless
telecommunications, and utilities. In our view, the rest of the
high-yield market is in good shape from a fundamental standpoint. Poor
returns in these four troubled sectors have weighed on the market
heavily, and we now view high-yield bonds somewhat more cautiously than
we had at the beginning of the year. While the technical environment
remains supportive -- with low absolute yields, a steep yield curve,
positive net cash inflows and a manageable level of supply -- secular
issues in the poor-performing sectors may continue to thwart returns.
We continue to find value in international developed markets, while we
remain neutral on emerging markets because of rising political concerns
in specific countries. As global investors await further evidence that
economic recovery remains on track, we will continue to maintain the
fund's diversity.
In general, the relative weakness in the global economies bodes well for
the higher-quality bond sectors, as this type of environment should keep
inflation and interest rates stable. We expect that the lower-quality,
higher-risk sectors will benefit more as economic growth improves. As
always, we will continue to take advantage of opportunities as they
arise while maintaining strict risk controls. The fund's diversity
remains its strength, as weak performance in some sectors can be offset
by stronger performance in others. As active managers, we will continue
to seek out securities with positive fundamentals and attractive
valuations, as well as market sectors that appear to offer potential for
outperformance, while seeking to pare back in those markets and sectors
that may be facing difficulties.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 7/31/02, there is no guarantee the fund will
continue to hold these securities in the future. 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. Government securities guarantee
principal and interest; mutual funds that invest in these securities are
not guaranteed. Mortgage-backed securities are subject to prepayment
risk.
The fund is managed by the Putnam Core Fixed-Income Team. The members of
the team are William Kohli (Portfolio Leader), David Waldman (Portfolio
Member), Carl Bell, Rob Bloemker, Andrea Burke, Kevin Cronin, Krisha
Memani, James Prusko, Michael Salm, and John Van Tassel.
PUTNAM'S POLICY ON CONFIDENTIALITY
In order to conduct business with our shareholders, we must obtain certain
personal information such as account holders' addresses, telephone numbers,
Social Security numbers, and the names of their financial advisors. We use
this information to assign an account number and to help us maintain
accurate records of transactions and account balances.
It is our policy to protect the confidentiality of your information,
whether or not you currently own shares of our funds, and in particular,
not to sell information about you or your accounts to outside marketing
firms. We have safeguards in place designed to prevent unauthorized
access to our computer systems and procedures to protect personal
information from unauthorized use.
Under certain circumstances, we share this information with outside
vendors who provide services to us, such as mailing and proxy
solicitation. In those cases, the service providers enter into
confidentiality agreements with us, and we provide only the information
necessary to process transactions and perform other services related to
your account. We may also share this information with our Putnam
affiliates to service your account or provide you with information about
other Putnam products or services. It is also our policy to share
account information with your financial advisor, if you've listed one on
your Putnam account.
If you would like clarification about our confidentiality policies or
have any questions or concerns, please don't hesitate to contact us at
1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or
Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy.
TOTAL RETURN FOR PERIODS ENDED 7/31/02
NAV Market price
--------------------------------------------------
1 year 1.44% 4.44%
--------------------------------------------------
5 years 11.41 12.02
Annual average 2.18 2.30
--------------------------------------------------
10 years 80.54 67.83
Annual average 6.09 5.31
--------------------------------------------------
Life of fund
(since 2/29/88)
Annual average 7.48 6.72
--------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/02
Lehman SSB Non-U.S.
Government World Govt. CSFB High Consumer
Bond Index Bond Index Yield Index price index
-------------------------------------------------------------------------------------------------------
1 year 8.60% 13.51% -2.36% 1.41%
-------------------------------------------------------------------------------------------------------
5 years 43.62 19.87 5.58 12.02
Annual average 7.51 3.69 1.09 2.30
-------------------------------------------------------------------------------------------------------
10 years 101.84 69.10 83.83 28.04
Annual average 7.28 5.39 6.28 2.50
-------------------------------------------------------------------------------------------------------
Life of fund
(since 2/29/88)
Annual average 8.17 6.43 7.88 3.09
-------------------------------------------------------------------------------------------------------
Past performance does not indicate 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. Performance does not reflect taxes on reinvested
distributions.
LIPPER INFORMATION:
The average annualized return for the 12 funds in the Lipper Flexible
Income Funds category over the 12 months ended 7/31/02 was -3.23%. Over the
5- and 10-year periods ended 7/31/02, annualized returns for the category
were 1.08% and 5.58%, respectively.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 7/31/02
--------------------------------------------------
Distributions
(number) 12
--------------------------------------------------
Income $0.5294
--------------------------------------------------
Capital gains --
--------------------------------------------------
Return of
capital 2 0.0106
--------------------------------------------------
Total $0.5400
--------------------------------------------------
Share value: NAV Market price
--------------------------------------------------
7/31/01 $6.68 $6.29
--------------------------------------------------
7/31/02 6.22 6.03
--------------------------------------------------
Current return (end of period)
--------------------------------------------------
Current
dividend
rate 1 8.68% 8.96%
--------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by
NAV or market price at end of period.
2 See page 55.
TOTAL RETURN FOR PERIODS ENDED 6/30/02 (most recent calendar quarter)
NAV Market price
--------------------------------------------------
1 year 4.17% 8.06%
--------------------------------------------------
5 years 15.57 19.93
Annual average 2.94 3.70
--------------------------------------------------
10 years 86.36 85.15
Annual average 6.42 6.35
--------------------------------------------------
Life of fund
(since 2/29/88)
Annual average 7.64 6.99
--------------------------------------------------
Past performance does not indicate future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns, net asset value, and market price will fluctuate so that an
investor's shares when sold may be worth more or less than their
original cost.
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 and the net assets allocated to remarketed preferred shares,
divided by the number of outstanding common shares.
Market price is the current trading price of one share of the fund.
Market prices are set by transactions between buyers and sellers on the
New York Stock Exchange.
COMPARATIVE BENCHMARKS
Lehman Government Bond Index* is an unmanaged index of U.S. Treasury and
agency securities.
Credit Suisse First Boston (CSFB) High Yield Index* is an unmanaged
index of high-yield debt securities.
Salomon Smith Barney (SSB) Non-U.S. World Government Bond Index* is an
unmanaged list of bonds issued by 10 countries.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
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.
*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.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, as well as the accompanying Notes,
preceded by the Report of independent accountants, constitute the fund's
financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or
loss the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal year.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios, and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate table
is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders
Putnam Premier Income Trust
We have audited the accompanying statement of assets and liabilities of
Putnam Premier Income Trust, including the fund's portfolio, as of July
31, 2002, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in
the two-year period then ended and financial highlights for each of the
years in the four-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform our audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of July 31, 2002 by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Putnam Premier Income Trust as of July 31, 2002,
the results of its operations for the year then ended, and changes in
its net assets for each of the years in the two-year period then ended
and financial highlights for each of the years in the four-year period
then ended in conformity with accounting principles generally accepted
in the United States of America.
KPMG LLP
Boston, Massachusetts
September 9, 2002
THE FUND'S PORTFOLIO
July 31, 2002
CORPORATE BONDS AND NOTES (48.0%) (a)
PRINCIPAL AMOUNT VALUE
Advertising and Marketing Services (0.1%)
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$1,188,235 Interact Operating Co. notes 14s, 2003 (PIK) $119
585,000 Lamar Media Corp. company guaranty 9 5/8s, 2006 605,475
420,000 Lamar Media Corp. sr. sub. notes 9 1/4s, 2007 428,400
-------------
1,033,994
Aerospace and Defense (1.1%)
-------------------------------------------------------------------------------------------------------------------
748,125 Alliant Techsystems, Inc. bank term loan FRN Ser. C,
4 1/8s, 2009 (acquired 5/7/02, cost $748,125) (RES) 753,736
120,000 Argo-Tech Corp. company guaranty Ser. D, 8 5/8s, 2007 105,600
1,735,000 Argo-Tech Corp. 144A company guaranty 8 5/8s, 2007 1,526,800
900,000 BE Aerospace, Inc. sr. sub. notes 9 1/2s, 2008 805,500
1,230,000 BE Aerospace, Inc. sr. sub. notes Ser. B, 8s, 2008 1,033,200
1,310,000 Decrane Aircraft Holdings Co. company guaranty
Ser. B, 12s, 2008 1,192,100
1,030,000 Hexcel Corp. sr. sub. notes 9 3/4s, 2009 741,600
1,310,000 L-3 Communications Corp. sr. sub. notes 8 1/2s, 2008 1,339,475
1,000,000 L-3 Communications Corp. Structured Notes 5.7s, 2009
(Issued by COUNTS Trust, Series 2001-5) 997,500
570,000 Moog, Inc. sr. sub. notes Ser. B, 10s, 2006 574,275
679,164 United Defense Industries, Inc. bank term loan FRN
4.59s, 2009 (acquired various dates 10/19/01 to 7/1/02,
cost $679,286) (RES) 680,183
-------------
9,749,969
Agriculture (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,620,000 Premium Standard Farms, Inc. sr. notes 9 1/4s, 2011 1,409,400
Airlines (0.7%)
-------------------------------------------------------------------------------------------------------------------
100,000 Air Canada Corp. sr. notes 10 1/4s, 2011 (Canada) 65,000
1,390,000 Airbus Industries sinking fund 144A notes Ser. D, 12.266s, 2020 1,086,450
1,360,000 Calair, LLC/Calair Capital Corp. company guaranty 8 1/8s, 2008 1,142,400
450,000 Continental Airlines, Inc. pass-through certificates Ser. D,
7.568s, 2006 342,000
550,000 Delta Air Lines, Inc. pass-through certificates Ser. 00-1,
Class C, 7.779s, 2005 563,541
390,000 Delta Air Lines, Inc. pass-through certificates Ser. C, 7.779s, 2012 391,832
330,000 Northwest Airlines, Inc. company guaranty 8 3/8s, 2004 257,400
770,000 Northwest Airlines, Inc. company guaranty 7 5/8s, 2005 569,800
840,000 Northwest Airlines, Inc. sr. notes 9 7/8s, 2007 646,800
368,769 NWA Trust sr. notes Ser. A, 9 1/4s, 2012 361,394
780,000 US Air, Inc. pass-through certificates Ser. 93A3, 10 3/8s, 2013 468,000
-------------
5,894,617
Automotive (1.2%)
-------------------------------------------------------------------------------------------------------------------
484,072 Collins & Aikman Products, Inc. bank term loan FRN
Ser. B, 7s, 2005 (acquired 12/20/01, cost $479,232) (RES) 485,628
1,120,000 Collins & Aikman Products, Inc. company guaranty
11 1/2s, 2006 1,002,400
1,100,000 Collins & Aikman Products, Inc. company guaranty
10 3/4s, 2011 1,094,500
875,000 Dana Corp. notes 9s, 2011 840,000
160,000 Dana Corp. notes 7s, 2029 112,000
490,000 Dana Corp. notes 6 1/4s, 2004 458,150
255,000 Dana Corp. 144A sr. notes 10 1/8s, 2010 255,000
360,000 Delco Remy International, Inc. company guaranty 11s, 2009 255,600
150,000 Delco Remy International, Inc. company guaranty 10 5/8s, 2006 97,500
100,000 Delco Remy International, Inc. sr. notes 8 5/8s, 2007 89,000
620,000 Dura Operating Corp. company guaranty Ser. B, 8 5/8s, 2012 623,100
1,300,000 Dura Operating Corp. company guaranty Ser. D, 9s, 2009 1,235,000
730,000 Exide Corp. sr. notes 10s, 2005 (In default) (NON) 120,450
200,000 Federal Mogul Corp. notes 7 7/8s, 2010 (In default) (NON) 39,000
910,000 Federal Mogul Corp. notes 7 3/4s, 2006 (In default) (NON) 177,450
260,000 Ford Motor Credit Corp. notes 7 3/8s, 2009 260,822
350,000 Hayes Lemmerz International, Inc. 144A company
guaranty 11 7/8s, 2006 (In default) (NON) 245,000
700,000 Lear Corp. company guaranty Ser. B, 8.11s, 2009 718,837
1,160,000 Lear Corp. company guaranty Ser. B, 7.96s, 2005 1,187,214
150,000 Lear Corp. sr. notes 8 1/8s, 2008 146,677
350,000 Lear Corp. Structured Notes 8.46s (Issued by STEERS
Credit Linked Trust Series 2001) (acquired 5/17/01,
cost $350,000) 2006 (RES) 350,000
368,000 Tenneco Automotive, Inc. company guaranty Ser. B,
11 5/8s, 2009 312,800
-------------
10,106,128
Banking (1.2%)
-------------------------------------------------------------------------------------------------------------------
700,000 Chevy Chase Savings Bank, Inc. sub. debs. 9 1/4s, 2005 701,750
850,000 Colonial Capital II 144A company guaranty 8.92s, 2027 782,698
110,000 Dime Capital Trust I bank guaranty Ser. A, 9.33s, 2027 120,550
1,500,000 GS Escrow Corp. sr. notes 7 1/8s, 2005 1,573,230
165,000 North Fork Capital Trust I company guaranty 8.7s, 2026 173,709
DKK 15,313,059 Nykredit mtge. 6s, 2032 (Denmark) 2,007,004
$160,000 Ocwen Financial Corp. notes 11 7/8s, 2003 159,200
115,000 Peoples Heritage Capital Trust company guaranty
Ser. B, 9.06s, 2027 118,533
715,000 Provident Capital Trust company guaranty 8.6s, 2026 644,701
2,980,000 Sovereign Bancorp, Inc. sr. notes 10 1/2s, 2006 3,278,000
750,000 Veridian Corp. bank term loan FRN Ser. B, 5.09s, 2006
(acquired various dates 5/9/02 to 5/14/02, cost $755,250) (RES) 747,000
505,000 Webster Capital Trust I 144A bonds 9.36s, 2027 505,308
-------------
10,811,683
Beverage (0.3%)
-------------------------------------------------------------------------------------------------------------------
210,000 Constellation Brands, Inc. company guaranty 8 1/2s, 2009 214,725
860,000 Constellation Brands, Inc. company guaranty Ser. B, 8s, 2008 885,800
1,190,000 Constellation Brands, Inc. sr. sub. notes Ser. B, 8 1/8s, 2012 1,225,700
-------------
2,326,225
Broadcasting (3.2%)
-------------------------------------------------------------------------------------------------------------------
1,440,000 Acme Television company guaranty 10 7/8s, 2004 1,418,400
920,000 Benedek Communications Corp. sr. disc. notes 13 1/4s,
2006 (In default) (NON) 947,600
310,000 British Sky Broadcasting PLC company guaranty 8.2s,
2009 (United Kingdom) 294,035
2,320,000 British Sky Broadcasting PLC company guaranty 6 7/8s,
2009 (United Kingdom) 2,056,866
2,200,000 Chancellor Media Corp. company guaranty 8s, 2008 2,112,000
240,000 Cumulus Media, Inc. bank term loan FRN Ser. B, 4 7/8s,
2007 (acquired 3/20/02, cost $240,000) (RES) 241,140
3,586,000 Diva Systems Corp. sr. disc. notes stepped-coupon Ser. B,
zero % (12 5/8s, 3/1/03), 2008 (In default) (NON) (STP) 448,250
4,490,000 Echostar Broadband Corp. sr. notes 10 3/8s, 2007 4,287,950
1,430,000 Echostar DBS Corp. sr. notes 9 3/8s, 2009 1,337,050
2,130,000 Echostar DBS Corp. 144A sr. notes 9 1/8s, 2009 1,959,600
600,000 Emmis Communications Corp. bank term loan FRN
4 3/8s, 2009 (acquired 6/20/02, cost $599,250) (RES) 601,313
200,000 Emmis Communications Corp. company guaranty
Ser. B, 8 1/8s, 2009 192,000
433,000 Emmis Communications Corp. sr. disc. notes stepped-coupon
zero % (12 1/2s, 3/15/06), 2011 (STP) 311,760
270,000 Fox/Liberty Networks, LLC sr. disc. notes stepped-coupon
zero % (9 3/4s, 8/15/02), 2007 (STP) 280,800
1,120,000 Fox/Liberty Networks, LLC sr. notes 8 7/8s, 2007 1,166,200
10,000 Granite Broadcasting Corp. sr. sub. notes 10 3/8s, 2005 9,000
790,000 Granite Broadcasting Corp. sr. sub. notes 9 3/8s, 2005 699,150
960,000 Granite Broadcasting Corp. sr. sub. notes 8 7/8s, 2008 830,400
85,000 Knology Holdings, Inc. sr. disc. notes stepped-coupon
zero % (11 7/8s, 10/15/02), 2007 (STP) 25,500
1,740,000 LIN Holdings Corp. sr. disc. notes stepped-coupon zero %
(10s, 3/1/03), 2008 (STP) 1,618,200
170,000 LIN Holdings Corp. sr. disc. notes stepped-coupon zero %
(10s, 3/1/03), 2008 (STP) 159,800
510,000 Pegasus Satellite sr. notes 12 3/8s, 2006 249,900
2,658,731 Quorum Broadcast Holdings, LLC notes stepped-coupon
zero % (15s, 5/15/06), 2009 (acquired 5/15/01,
cost $1,056,491) (RES) (STP) 1,409,925
300,000 Radio One, Inc. company guaranty Ser. B, 8 7/8s, 2011 294,750
502,000 RCN Corp. sr. disc. notes stepped-coupon Ser. B, zero %
(9.8s, 2/15/03), 2008 (STP) 80,320
450,000 Sinclair Broadcast Group, Inc. bank term loan FRN Ser. B,
4 1/8s, 2010 (acquired 7/12/02, cost $450,000) (RES) 448,875
1,370,000 Sinclair Broadcast Group, Inc. company guaranty 9s, 2007 1,376,850
440,000 Sinclair Broadcast Group, Inc. company guaranty 8 3/4s, 2011 440,000
100,000 Sinclair Broadcast Group, Inc. sr. sub. notes 8 3/4s, 2007 100,000
2,080,000 XM Satellite Radio Holdings, Inc. sec. notes 14s, 2010 686,400
2,250,000 Young Broadcasting, Inc. company guaranty 10s, 2011 1,980,000
166,000 Young Broadcasting, Inc. company guaranty Ser. B, 8 3/4s, 2007 143,175
-------------
28,207,209
Building Materials (0.3%)
-------------------------------------------------------------------------------------------------------------------
390,000 Atrium Companies, Inc. company guaranty Ser. B, 10 1/2s, 2009 387,563
450,000 Building Materials Corp. company guaranty 8s, 2008 360,000
1,230,000 Dayton Superior Corp. company guaranty 13s, 2009 1,223,850
1,750,000 Owens Corning bonds 7 1/2s, 2018 (In default) (NON) 586,250
380,000 Owens Corning notes 7 1/2s, 2005 (In default) (NON) 129,200
-------------
2,686,863
Cable Television (1.3%)
-------------------------------------------------------------------------------------------------------------------
110,000 Adelphia Communications Corp. notes Ser. B, 9 7/8s,
2005 (In default) (NON) 33,275
560,000 Adelphia Communications Corp. sr. notes 10 7/8s,
2010 (In default) (NON) 170,800
440,000 Adelphia Communications Corp. sr. notes 10 1/4s,
2011 (In default) (NON) 143,000
20,000 Adelphia Communications Corp. sr. notes 9 3/8s,
2009 (In default) (NON) 6,150
50,000 Adelphia Communications Corp. sr. notes 7 7/8s,
2009 (In default) (NON) 14,625
1,680,000 Adelphia Communications Corp. sr. notes Ser. B, 7 3/4s,
2009 (In default) (NON) 508,200
1,120,000 Century Cable Holdings bank term loan FRN 6 3/4s, 2009
(acquired various dates 5/22/02 to 6/11/02, cost $980,400) (RES) 756,933
450,000 Charter Communications Holdings, LLC bank term loan
FRN Ser. B, 4.61s, 2008 (acquired 10/22/01, cost $439,875) (RES) 388,125
1,130,000 Charter Communications Holdings, LLC sr. notes 11 1/8s, 2011 717,550
590,000 Charter Communications Holdings, LLC sr. notes 10 3/4s, 2009 374,650
520,000 Charter Communications Holdings, LLC/Capital Corp. sr. disc.
notes stepped-coupon zero % (12 1/8s, 1/15/07), 2012 (STP) 176,800
2,310,000 Charter Communications Holdings, LLC/Capital Corp. sr. disc.
notes stepped-coupon zero % (11 3/4s, 5/15/06), 2011 (STP) 796,950
580,000 Charter Communications Holdings, LLC/Capital Corp. sr. disc.
notes stepped-coupon zero % (11 3/4s, 1/15/05), 2010 (STP) 208,800
440,000 Charter Communications Holdings, LLC/Capital Corp. sr.
notes 10s, 2011 277,200
710,000 Charter Communications Holdings, LLC/Capital Corp. sr.
notes 10s, 2009 450,850
520,000 Charter Communications Holdings, LLC/Capital Corp. sr.
notes 9 5/8s, 2009 327,600
30,000 Charter Communications Holdings, LLC/Capital Corp. sr.
notes 8 5/8s, 2009 18,450
130,000 Charter Communications Holdings, LLC/Capital Corp. sr.
notes 8 1/4s, 2007 79,300
680,000 CSC Holdings, Inc. debs. 7 5/8s, 2018 479,121
410,000 CSC Holdings, Inc. sr. notes 7 7/8s, 2007 336,057
1,605,000 CSC Holdings, Inc. sr. notes Ser. B, 7 5/8s, 2011 1,251,033
3,225,000 Diamond Cable Communications PLC sr. disc. notes
10 3/4s, 2007 (United Kingdom) (In default) (NON) 419,250
330,000 Diamond Cable Communications PLC sr. disc. notes
13 1/4s, 2004 (United Kingdom) (In default) (NON) 66,000
1,340,000 Diamond Cable Communications PLC sr. disc. notes
11 3/4s, 2005 (United Kingdom) (In default) (NON) 174,200
330,000 Insight Communications Company, Inc. sr. disc. notes
stepped-coupon zero % (12 1/4s, 2/15/06), 2011 (STP) 105,600
210,000 Insight Midwest LP/Insight Capital, Inc. bank term loan
FRN 5.063s, 2009 (acquired 11/5/01, cost $209,606) (RES) 199,850
969,000 International Cabletel, Inc. sr. disc. notes 11 1/2s, 2006
(In default) (NON) 135,660
680,000 NTL Communications Corp. sr. notes stepped-coupon
Ser. B, zero % (12 3/8s, 10/1/03), 2008 (In default) (NON) (STP) 88,400
480,000 NTL, Inc. sr. notes Ser. A, 12 3/4s, 2005 (In default) (NON) 67,200
100,000 NTL, Inc. sr. notes Ser. B, 10s, 2007 (In default) (NON) 14,000
190,000 Olympus Cable bank term loan FRN Ser. B, 6 3/4s, 2010
(acquired 6/20/02, cost $165,585) (RES) 153,289
560,000 ONO Finance PLC sr. notes 14s, 2011 (United Kingdom) 102,200
250,000 ONO Finance PLC sr. notes 13s, 2009 (United Kingdom) 38,750
780,000 Rogers Cablesystems, Ltd. sr. notes Ser. B, 10s, 2005 (Canada) 822,900
910,000 Rogers Cablesystems, Ltd. sr. sub. notes 8.8s, 2007 (Canada) 541,450
1,840,000 TeleWest Communications PLC debs. 11s, 2007
(United Kingdom) 386,400
300,000 TeleWest Communications PLC debs. 9 5/8s, 2006
(United Kingdom) 63,000
360,000 TeleWest Communications PLC Structured Notes
10 7/8s, 2005 (issued by DLJ International Capital)
(United Kingdom) 100,800
1,880,000 United Pan-Europe NV sr. disc. notes 12 1/2s,
2009 (Netherlands) (In default) (NON) 103,400
3,170,000 United Pan-Europe NV sr. disc. notes stepped-coupon
zero % (13 3/4s, 2/1/05), 2010 (Netherlands) (STP) 174,350
-------------
11,272,168
Chemicals (2.8%)
-------------------------------------------------------------------------------------------------------------------
1,180,000 Acetex Corp. sr. notes 10 7/8s, 2009 (Canada) 1,221,300
260,000 Airgas, Inc. company guaranty 9 1/8s, 2011 273,000
880,000 Applied Extrusion Technologies, Inc. company guaranty
Ser. B, 10 3/4s, 2011 765,600
1,960,000 ARCO Chemical Co. debs. 9.8s, 2020 1,626,800
1,360,000 Avecia Group PLC company guaranty 11s, 2009
(United Kingdom) 1,292,000
740,000 Compass Minerals Group, Inc. company guaranty 10s, 2011 762,200
2,280,000 Equistar Chemicals LP/Equistar Funding Corp. company
guaranty 10 1/8s, 2008 2,086,200
370,000 Ferro Corp. sr. notes 9 1/8s, 2009 390,220
240,000 Georgia Gulf Corp. company guaranty 10 3/8s, 2007 254,400
2,010,000 Hercules, Inc. company guaranty 11 1/8s, 2007 2,231,100
190,000 Huntsman Corp. bank term loan FRN Ser. B, 5.11s, 2004
(acquired 7/17/02, cost $164,825) (RES) 163,163
330,000 Huntsman Corp. bank term loan FRN Ser. C, 5.381s, 2005
(acquired various dates 3/6/02 to 7/17/02, cost $270,625) (RES) 282,480
333,969 Huntsman Corp. bank term loan FRN Ser. L, 5.881s, 2002
(acquired various dates 3/1/02 to 3/28/02, cost $245,216) (RES) 285,877
2,155,000 Huntsman ICI Chemicals, Inc. company guaranty 10 1/8s, 2009 1,896,400
1,420,000 Huntsman ICI Holdings sr. disc. notes zero %, 2009 312,400
500,000 IMC Global, Inc. company guaranty Ser. B, 11 1/4s, 2011 527,820
650,000 IMC Global, Inc. company guaranty Ser. B, 10 7/8s, 2008 685,289
1,590,000 ISP Chemco, Inc. company guaranty Ser. B, 10 1/4s, 2011 1,534,350
260,000 Lyondell Chemical Co. bonds 11 1/8s, 2012 249,600
790,000 Lyondell Chemical Co. notes Ser. A, 9 5/8s, 2007 738,650
1,040,000 Lyondell Chemical Co. sr. sub. notes 10 7/8s, 2009 842,400
310,000 Messer Griesheim Holdings AG sr. notes 10 3/8s,
2011 (Germany) 316,049
500,000 Millenium America, Inc. company guaranty 9 1/4s, 2008 512,500
320,000 Millenium America, Inc. company guaranty 7s, 2006 305,715
530,000 Millenium America, Inc. 144A sr. notes 9 1/4s, 2008 540,600
630,000 Noveon, Inc. company guaranty Ser. B, 11s, 2011 670,950
1,390,000 OM Group, Inc. company guaranty 9 1/4s, 2011 1,334,400
609,379 PCI Chemicals Canada sec. sr. notes 10s, 2008 (Canada) 402,190
203,126 Pioneer Companies, Inc. sec. FRN 5.355s, 2006 132,032
330,000 Polymer Group, Inc. company guaranty Ser. B, 9s,
2007 (In default) (NON) 56,100
160,000 Polymer Group, Inc. company guaranty Ser. B, 8 3/4s,
2008 (In default) (NON) 27,200
1,210,000 Royster-Clark, Inc. 1st mtge. 10 1/4s, 2009 847,000
1,085,000 Sterling Chemicals Holdings sr. disc. notes 13 1/2s,
2008 (In default) (NON) 5,425
740,000 Sterling Chemicals, Inc. company guaranty Ser. B,
12 3/8s, 2006 (In default) (NON) 717,800
70,000 Texas Petrochemical Corp. sr. sub. notes 11 1/8s, 2006 55,300
280,000 Texas Petrochemical Corp. sr. sub. notes Ser. B, 11 1/8s, 2006 207,200
-------------
24,551,710
Commercial and Consumer Services (0.2%)
-------------------------------------------------------------------------------------------------------------------
315,200 Coinmach Corp. bank term loan FRN Ser. B, 4.951s, 2009
(acquired 1/31/02, cost $314,806) (RES) 316,776
1,920,000 Coinmach Corp. 144A sr. notes 9s, 2010 1,915,200
-------------
2,231,976
Communications Equipment (0.3%)
-------------------------------------------------------------------------------------------------------------------
100,000 Lucent Technologies, Inc. debs. 6 1/2s, 2028 46,000
3,360,000 Lucent Technologies, Inc. debs. 6.45s, 2029 1,545,600
1,460,000 Nortel Networks Corp. notes 6 1/8s, 2006 (Canada) 671,600
208,982 Telex Communications Group, Inc. sr. sub. notes zero %,
2006 (In default) (NON) 114,940
-------------
2,378,140
Computers (0.1%)
-------------------------------------------------------------------------------------------------------------------
300,000 Seagate Technology Holdings bank term loan FRN
Ser. B, 3.938s, 2007 (acquired 5/9/02, cost $300,000) (RES) 298,800
870,000 Seagate Technology Holdings 144A sr. notes 8s, 2009 837,375
-------------
1,136,175
Conglomerates (0.3%)
-------------------------------------------------------------------------------------------------------------------
3,210,000 Tyco International Group SA company guaranty
6 3/8s, 2006 (Luxembourg) 2,535,900
Construction (0.2%)
-------------------------------------------------------------------------------------------------------------------
850,000 Better Minerals & Aggregates Co. company guaranty 13s, 2009 773,500
590,000 Nortek, Inc. sr. notes Ser. B, 8 7/8s, 2008 584,100
120,000 Nortek, Inc. sr. sub. notes Ser. B, 9 7/8s, 2011 117,900
460,000 Nortek, Inc. 144A sr. notes Ser. B, 9 1/8s, 2007 471,500
-------------
1,947,000
Consumer (0.5%)
-------------------------------------------------------------------------------------------------------------------
753,830 Derby Cycle Corp. (The) sr. notes 10s, 2008 (In default) (NON) 15,077
2,042,070 Derby Cycle Corp. (The) sr. notes 9 3/8s, 2008 (In default) (NON) 20,471
740,000 Icon Health & Fitness 144A sr. sub. notes 11 1/4s, 2012 714,100
375,000 Jostens, Inc. bank term loan FRN Ser. C, 4.61s, 2009
(acquired 7/30/02, cost $375,000) (RES) 375,000
1,230,000 Jostens, Inc. sr. sub. notes 12 3/4s, 2010 1,349,925
2,330,000 Samsonite Corp. sr. sub. notes 10 3/4s, 2008 1,846,525
-------------
4,321,098
Consumer Finance (0.1%)
-------------------------------------------------------------------------------------------------------------------
400,000 Conseco Finance Trust III, Inc. bonds 8.796s, 2027 28,000
3,566,000 Finova Group, Inc. notes 7 1/2s, 2009 1,034,140
-------------
1,062,140
Consumer Goods (0.5%)
-------------------------------------------------------------------------------------------------------------------
580,000 Armkel, LLC/Armkel Finance sr. sub. notes 9 1/2s, 2009 598,850
770,000 Berry Plastics Corp. 144A sr. sub. notes 10 3/4s, 2012 770,000
290,000 French Fragrances, Inc. company guaranty Ser. D,
10 3/8s, 2007 269,700
220,000 French Fragrances, Inc. sr. notes Ser. B, 10 3/8s, 2007 202,400
40,000 Iron Age Holdings Corp. sr. disc. notes stepped-coupon
zero % (12 1/8s, 5/1/03), 2009 (STP) 2,750
300,000 Playtex Products, Inc. bank term loan FRN 4.109s, 2009
(acquired 6/3/02, cost $300,000) (RES) 300,000
760,000 Playtex Products, Inc. company guaranty 9 3/8s, 2011 801,800
370,000 Revlon Consumer Products sr. notes 9s, 2006 258,075
360,000 Revlon Consumer Products sr. notes 8 1/8s, 2006 234,000
540,000 Revlon Consumer Products sr. sub. notes 8 5/8s, 2008 259,200
670,000 Scotts Co. (The) company guaranty 8 5/8s, 2009 681,725
-------------
4,378,500
Consumer Services (0.1%)
-------------------------------------------------------------------------------------------------------------------
910,000 Outsourcing Solutions, Inc. sr. sub. notes Ser. B, 11s, 2006 773,500
400,000 United Rentals (North America), Inc. company guaranty
Ser. B, 10 3/4s, 2008 410,000
-------------
1,183,500
Containers (0.7%)
-------------------------------------------------------------------------------------------------------------------
968,000 AEP Industries, Inc. sr. sub. notes 9 7/8s, 2007 958,320
430,000 Fonda Group, Inc. sr. sub. notes Ser. B, 9 1/2s, 2007 356,900
1,320,000 Owens-Brockway Glass 144A sec. notes 8 7/8s, 2009 1,300,200
1,000,000 Owens-Illinois, Inc. debs. 7.8s, 2018 780,000
330,000 Owens-Illinois, Inc. sr. notes 8.1s, 2007 293,700
570,000 Pliant Corp. company guaranty 13s, 2010 581,400
300,000 Pliant Corp. sr. sub. notes 13s, 2010 306,000
1,490,000 Tekni-Plex, Inc. company guaranty Ser. B, 12 3/4s, 2010 1,490,000
-------------
6,066,520
Distribution (0.1%)
-------------------------------------------------------------------------------------------------------------------
600,000 Roundy's, Inc. bank term loan FRN 4.454s, 2009
(acquired 6/3/02, cost $600,000) (RES) 598,500
Electric Utilities (0.9%)
-------------------------------------------------------------------------------------------------------------------
1,190,000 CMS Energy Corp. sr. notes 8.9s, 2008 809,200
440,000 CMS Energy Corp. sr. notes 8 1/2s, 2011 286,000
340,000 Mission Energy Holding Co. sec. notes 13 1/2s, 2008 136,000
186 Northeast Utilities notes Ser. A, 8.58s, 2006 204
500,000 Pacific Gas & Electric Co. 144A sr. notes 7 3/8s,
2005 (In default) (NON) 492,500
1,000,000 Southern California Edison Co. bank term loan FRN
5.063s, 2005 (acquired 2/28/02, cost $998,500) (RES) 1,000,000
1,270,000 Southern California Edison Co. notes 8.95s, 2003 1,212,850
130,000 Southern California Edison Co. notes 6 3/8s, 2006 110,500
977,500 TNP Enterprises, Inc. bank term loan FRN 4.589s, 2005
(acquired 4/4/00, cost $976,523) (RES) 976,278
750,000 Western Resources, Inc. bank term loan FRN 4.844s, 2005
(acquired 6/4/02, cost $750,000) (RES) 740,156
1,105,000 Western Resources, Inc. 144A 1st mtge. 7 7/8s, 2007 1,060,800
815,000 Western Resources, Inc. 144A sr. notes 9 3/4s, 2007 741,650
-------------
7,566,138
Electrical Equipment (0.1%)
-------------------------------------------------------------------------------------------------------------------
280,000 Amkor Technologies, Inc. sr. notes 9 1/4s, 2006 231,000
540,000 Amkor Technologies, Inc. Structured Notes 12.58s, 2005
(issued by STEERS Credit Linked Trust 2000) 356,400
-------------
587,400
Electronics (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,760,000 Sequa Corp. sr. notes 9s, 2009 1,751,200
160,000 Sequa Corp. sr. notes Ser. B, 8 7/8s, 2008 158,400
900,000 Titan Corp. (The) bank term loan FRN Ser. B, 4.841s,
2009 (acquired various dates 5/14/02 to 6/3/02,
cost $901,125) (RES) 898,200
-------------
2,807,800
Energy (0.4%)
-------------------------------------------------------------------------------------------------------------------
890,000 BRL Universal Equipment sec. notes 8 7/8s, 2008 885,550
975,000 Dresser, Inc. company guaranty 9 3/8s, 2011 962,813
50,000 Hornbeck Offshore Services, Inc. sr. notes 10 5/8s, 2008 50,875
605,000 Parker Drilling Co. company guaranty Ser. AI, 10 1/8s, 2009 611,050
150,000 Parker Drilling Co. 144A company guaranty 10 1/8s, 2009 151,500
1,110,000 Pride Petroleum Services, Inc. sr. notes 9 3/8s, 2007 1,148,850
-------------
3,810,638
Entertainment (0.9%)
-------------------------------------------------------------------------------------------------------------------
860,000 AMC Entertainment, Inc. sr. sub. notes 9 1/2s, 2011 795,500
990,000 AMC Entertainment, Inc. sr. sub. notes 9 1/2s, 2009 925,650
715,034 AMF Bowling Worldwide bank term loan FRN Ser. B,
6.533s, 2008 (acquired 3/1/02, cost $713,247) (RES) 715,481
1,805,000 Cinemark USA, Inc. sr. sub. notes Ser. B, 8 1/2s, 2008 1,714,750
450,000 MGM Studios bank term loan FRN 4.85s, 2008
(acquired 6/10/02, cost $450,000) (RES) 449,438
390,000 Premier Parks, Inc. sr. notes 9 3/4s, 2007 391,950
990,000 Regal Cinemas, Inc. 144A sr. sub. notes 9 3/8s, 2012 1,019,700
1,120,000 Silver Cinemas, Inc. sr. sub. notes 10 1/2s, 2005 (In default) (NON) 112
375,000 Six Flags, Inc. bank term loan FRN Ser. B, 4.09s, 2009
(acquired 7/3/02, cost $375,000) (RES) 375,469
420,000 Six Flags, Inc. sr. notes 9 1/2s, 2009 420,000
1,310,000 Six Flags, Inc. sr. notes 8 7/8s, 2010 1,277,250
-------------
8,085,300
Environmental (0.1%)
-------------------------------------------------------------------------------------------------------------------
270,000 Laidlaw, Inc. debs. 8 3/4s, 2025 (Canada) (In default) (NON) 136,350
170,000 Laidlaw, Inc. debs. 8 1/4s, 2023 (Canada) (In default) (NON) 87,550
900,000 Laidlaw, Inc. notes 7.65s, 2006 (Canada) (In default) (NON) 459,000
-------------
682,900
Financial (0.7%)
-------------------------------------------------------------------------------------------------------------------
70,000 Acme Communications, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (12s, 9/30/02), 2005 (STP) 64,750
1,915,000 Advanta Corp. 144A company guaranty Ser. B, 8.99s, 2026 1,149,000
1,005,000 AMRESCO, Inc. sr. sub. notes Ser. 97-A, 10s, 2004 (In default) (NON) 206,025
150,000 Comdisco, Inc. notes 7 1/4s, 2001 (In default) (DEF) (NON) 124,125
110,000 Comdisco, Inc. notes 6 3/8s, 2001 (In default) (DEF) (NON) 89,100
340,000 Comdisco, Inc. notes 5.95s, 2002 (In default) (DEF) (NON) 276,250
530,000 Conseco, Inc. 144A company guaranty 10 3/4s, 2009 153,700
450,000 Hilb, Rogal & Hamilton Co. bank term loan FRN 4 5/8s,
2007 (acquired 6/20/02, cost $450,000) (RES) 450,000
420,000 Imperial Credit Industries, Inc. sec. notes 12s, 2005 46,200
550,000 Nationwide Credit, Inc. sr. notes Ser. A, 10 1/4s,
2008 (In default) (NON) 110,000
220,000 Ocwen Capital Trust I company guaranty 10 7/8s, 2027 178,200
545,000 Ocwen Federal Bank sub. debs. 12s, 2005 545,000
1,070,000 Resource America, Inc. 144A sr. notes 12s, 2004 1,091,400
880,000 Superior Financial Corp. 144A sr. notes 8.65s, 2003 896,903
760,000 Western Financial Bank sub. debs. 9 5/8s, 2012 737,200
-------------
6,117,853
Food (0.9%)
-------------------------------------------------------------------------------------------------------------------
496,875 American Seafood Group, LLC bank term loan FRN
Ser. B, 5.108s, 2009 (acquired 4/11/02, cost $496,378) (RES) 499,567
1,510,000 Archibald Candy Corp. company guaranty 10 1/4s,
2004 (In default) (NON) 800,300
420,000 Aurora Foods, Inc. sr. sub. notes Ser. B, 9 7/8s, 2007 262,500
905,000 Aurora Foods, Inc. 144A sr. sub. notes Ser. D, 9 7/8s, 2007 565,625
310,000 Del Monte Corp. company guaranty Ser. B, 9 1/4s, 2011 308,450
1,150,000 Doane Pet Care Co. sr. sub. debs. 9 3/4s, 2007 1,000,500
560,000 Eagle Family Foods company guaranty Ser. B, 8 3/4s, 2008 428,400
399,000 National Dairy bank term loan FRN Ser. B, 4.393s, 2009
(acquired 4/30/02, cost $399,000) (RES) 400,164
900,000 Premier International Foods PLC sr. notes 12s, 2009
(United Kingdom) 963,000
1,570,000 RAB Enterprises, Inc. company guaranty 10 1/2s, 2005 879,200
450,000 Smithfield Foods, Inc. sr. notes Ser. B, 8s, 2009 452,250
970,568 Suiza Foods Corp. bank term loan FRN Ser. B, 4.11s, 2008
(acquired 12/10/01, cost $977,038) (RES) 972,994
1,220,000 Vlasic Foods International, Inc. sr. sub. notes Ser. B, 10 1/4s,
2009 (In default) (NON) 219,600
-------------
7,752,550
Gaming & Lottery (3.9%)
-------------------------------------------------------------------------------------------------------------------
650,000 Aladdin Gaming Holdings, LLC sr. disc. notes stepped-coupon
Ser. B, zero % (13 1/2s, 3/1/03), 2010 (In default) (NON) (STP) 13,000
470,000 Ameristar Casinos, Inc. company guaranty 10 3/4s, 2009 502,900
900,000 Argosy Gaming Co. company guaranty 10 3/4s, 2009 969,750
230,000 Argosy Gaming Co. sr. sub. notes 9s, 2011 235,750
690,629 Autotote Corp. bank term loan FRN 6.166s, 2007
(acquired 10/13/00, cost $688,903) (RES) 692,141
661,000 Autotote Corp. company guaranty Ser. B, 12 1/2s, 2010 740,320
750,000 Borgata Resorts bank term loan FRN 5.86s, 2007
(acquired 6/5/02, cost $748,125) (RES) 740,625
300,000 Boyd Gaming Corp. bank term loan FRN 3.885s, 2008
(acquired 6/5/02, cost $300,000) (RES) 300,375
150,000 Boyd Gaming Corp. sr. sub. notes 9 1/2s, 2007 153,750
1,050,000 Boyd Gaming Corp. sr. sub. notes 8 3/4s, 2012 1,063,125
420,000 Chumash Casino & Resort Enterprise 144A sr. notes 9s, 2010 426,300
413,718 Fitzgeralds Gaming Corp. company guaranty Ser. B,
12 1/4s, 2004 (In default) (NON) 145,318
980,000 Harrah's Operating Company, Inc. company guaranty
7 1/2s, 2009 1,014,486
900,000 Herbst Gaming, Inc. sec. notes Ser. B, 10 3/4s, 2008 931,509
1,450,000 Hollywood Casino Corp. company guaranty 11 1/4s, 2007 1,558,750
120,000 Hollywood Park, Inc. company guaranty Ser. B, 9 1/4s, 2007 108,000
1,250,000 Horseshoe Gaming Holdings company guaranty 8 5/8s, 2009 1,271,875
1,010,000 International Game Technology sr. notes 8 3/8s, 2009 1,052,925
2,300,000 International Game Technology sr. notes 7 7/8s, 2004 2,346,000
399,000 Isle of Capri Casinos, Inc. bank term loan FRN Ser. B, 4.385s,
2008 (acquired 4/22/02, cost $399,000) (RES) 400,140
1,670,000 Majestic Investor Holdings/Majestic Investor Capital Corp.
144A company guaranty 11.653s, 2007 1,536,400
110,000 Mandalay Resort Group sr. notes 9 1/2s, 2008 117,150
90,000 Mandalay Resort Group sr. sub. notes 9 3/8s, 2010 93,150
1,690,000 Mandalay Resort Group sr. sub. notes Ser. B, 10 1/4s, 2007 1,782,950
2,730,000 MGM Mirage, Inc. company guaranty 8 1/2s, 2010 2,798,687
550,000 Mikohn Gaming Corp. company guaranty Ser. B, 11 7/8s, 2008 467,500
680,000 Mirage Resorts, Inc. notes 6 3/4s, 2008 648,938
230,000 Mohegan Tribal Gaming Authority sr. notes 8 1/8s, 2006 232,300
1,090,000 Mohegan Tribal Gaming Authority sr. sub. notes 8 3/4s, 2009 1,111,800
270,000 Mohegan Tribal Gaming Authority sr. sub. notes 8 3/8s, 2011 272,025
980,000 Mohegan Tribal Gaming Authority sr. sub. notes 8s, 2012 975,100
1,300,000 Park Place Entertainment Corp. sr. notes 7 1/2s, 2009 1,267,500
1,190,000 Park Place Entertainment Corp. sr. sub. notes 8 7/8s, 2008 1,204,875
200,000 Penn National Gaming, Inc. company guaranty Ser. B,
11 1/8s, 2008 214,000
1,320,000 Penn National Gaming, Inc. sr. sub. notes 8 7/8s, 2010 1,290,300
580,000 Resorts International Hotel and Casino, Inc. company
guaranty 11 1/2s, 2009 533,600
1,020,000 Station Casinos, Inc. sr. notes 8 3/8s, 2008 1,040,400
50,000 Station Casinos, Inc. sr. sub. notes 9 7/8s, 2010 52,250
280,000 Station Casinos, Inc. 144A sr. sub. notes 9 3/4s, 2007 288,400
570,000 Trump Atlantic City Associates company guaranty
11 1/4s, 2006 423,225
60,000 Trump Atlantic City Associates company guaranty
Ser. B, 11 1/4s, 2006 44,250
130,000 Trump Castle Funding, Inc. sr. sub. notes 11 3/4s, 2003 118,300
2,250,000 Venetian Casino Resort, LLC 144A 2nd mtge. 11s, 2010 2,250,000
300,000 Venetian Casino, Inc. bank term loan FRN 4.84s, 2008
(acquired 6/3/02, cost $300,000) (RES) 302,625
450,000 Wheeling Island Gaming, Inc. company guaranty 10 1/8s, 2009 459,000
-------------
34,191,764
Health Care (1.6%)
-------------------------------------------------------------------------------------------------------------------
600,000 Community Health Systems, Inc. bank term loan FRN
Ser. B, 4.35s, 2010 (acquired 7/11/02, cost $600,000) (RES) 601,650
644,677 Concentra Operating Corp. bank term loan FRN Ser. B,
5.915s, 2006 (acquired 1/15/02, cost $646,118) (RES) 645,617
322,338 Concentra Operating Corp. bank term loan FRN Ser. C,
6.165s, 2007 (acquired 1/15/02, cost $323,041) (RES) 322,661
52,800 Genesis Health Ventures, Inc. sec. notes FRN 6.86s, 2007 52,272
1,080,000 Hanger Orthopedic Group, Inc. company guaranty
10 3/8s, 2009 1,112,400
70,000 Hanger Orthopedic Group, Inc. sr. sub. notes 11 1/4s, 2009 70,000
1,060,000 HCA, Inc. debs. 7.19s, 2015 1,048,361
750,000 HCA, Inc. med. term notes 7.69s, 2025 717,705
520,000 HCA, Inc. notes 8 3/4s, 2010 571,487
350,000 HCA, Inc. notes 8.36s, 2024 362,614
1,530,000 HCA, Inc. notes 7s, 2007 1,551,099
970,000 Healthsouth Corp. sr. sub. notes 10 3/4s, 2008 989,400
255,000 Healthsouth Corp. 144A notes 7 5/8s, 2012 221,850
2,500,000 Mariner Post-Acute Network, Inc. sr. sub. notes
Ser. B, 9 1/2s, 2007 (In default) (NON) 31,250
510,000 Mariner Post-Acute Network, Inc. sr. sub. notes stepped-coupon
Ser. B, zero % (10 1/2s, 11/1/02), 2007 (In default) (NON) (STP) 3,825
2,690,000 Multicare Companies, Inc. sr. sub. notes 9s, 2007 (In default) (NON) 53,800
598,500 Rotech Healthcare, Inc. bank term loan Ser. B, 4.86s, 2008
(acquired various dates 4/3/02 to 4/23/02, cost $604,500) (RES) 597,502
1,060,000 Rotech Healthcare, Inc. 144A sr. sub. notes 9 1/2s, 2012 1,038,800
2,390,000 Triad Hospitals Holdings company guaranty Ser. B, 11s, 2009 2,581,200
660,000 Triad Hospitals, Inc. company guaranty Ser. B, 8 3/4s, 2009 679,800
780,000 Vanguard Health Systems, Inc. company guaranty 9 3/4s, 2011 795,600
-------------
14,048,893
Homebuilding (1.0%)
-------------------------------------------------------------------------------------------------------------------
610,000 Beazer Homes USA, Inc. company guaranty 8 5/8s, 2011 606,950
390,000 D.R. Horton, Inc. company guaranty 8 1/2s, 2012 390,000
120,000 D.R. Horton, Inc. company guaranty 8s, 2009 116,400
880,000 D.R. Horton, Inc. sr. notes 7 7/8s, 2011 849,200
780,000 Del Webb Corp. sr. sub. debs. 9 3/8s, 2009 830,700
630,000 K. Hovnanian Enterprises, Inc. company guaranty 10 1/2s, 2007 661,500
180,000 K. Hovnanian Enterprises, Inc. 144A sr. notes 8s, 2012 168,300
50,000 K. Hovnanian Enterprises, Inc. 144A sr. sub. notes 8 7/8s, 2012 46,500
1,270,000 KB Home sr. sub. notes 9 1/2s, 2011 1,270,000
330,000 Lennar Corp. company guaranty Ser. B, 9.95s, 2010 356,400
720,000 Lennar Corp. sr. notes 7 5/8s, 2009 720,000
120,000 M.D.C. Holdings, Inc. sr. notes 8 3/8s, 2008 121,200
920,000 Ryland Group, Inc. sr. notes 9 3/4s, 2010 984,400
180,000 Ryland Group, Inc. sr. sub. notes 8 1/4s, 2008 178,200
50,000 Schuler Homes, Inc. company guaranty 9s, 2008 48,000
330,000 Standard Pacific Corp. sr. notes 9 1/2s, 2010 336,600
140,000 Standard Pacific Corp. sr. notes 8 1/2s, 2009 137,200
550,000 Toll Corp. company guaranty 8 1/8s, 2009 544,500
170,000 Toll Corp. sr. sub. notes 8 1/4s, 2011 164,900
790,000 WCI Communities, Inc. company guaranty 9 1/8s, 2012 750,500
-------------
9,281,450
Household Furniture and Appliances (0.6%)
-------------------------------------------------------------------------------------------------------------------
2,050,000 American Standard Companies, Inc. company guaranty
7 5/8s, 2010 2,070,500
100,000 American Standard Companies, Inc. company guaranty
7 1/8s, 2003 100,750
661,534 Sealy Mattress Co. bank term loan FRN Ser. B, 3.938s, 2004
(acquired 12/17/01, cost $663,202) (RES) 658,640
334,891 Sealy Mattress Co. bank term loan FRN Ser. C, 4.188s, 2005
(acquired 12/17/01, cost $335,710) (RES) 333,426
498,343 Sealy Mattress Co. bank term loan FRN Ser. D, 4.438s, 2005
(acquired 12/17/01, cost $499,522) (RES) 496,162
1,000,000 Sealy Mattress Co. company guaranty stepped-coupon
Ser. B, zero % (10 7/8s, 12/15/02), 2007 (STP) 815,000
1,210,000 Sealy Mattress Co. sr. sub. notes Ser. B, 9 7/8s, 2007 1,028,500
-------------
5,502,978
Lodging/Tourism (1.4%)
-------------------------------------------------------------------------------------------------------------------
1,807,000 Felcor Lodging LP company guaranty 9 1/2s, 2008 (R) 1,816,035
639,000 Felcor Lodging LP company guaranty 8 1/2s, 2008 (R) 603,855
5,270,000 HMH Properties, Inc. company guaranty Ser. B, 7 7/8s, 2008 4,952,579
920,000 ITT Corp. notes 6 3/4s, 2005 877,514
1,490,000 John Q. Hammons Hotels 144A 1st mtge. 8 7/8s, 2012 1,419,225
500,000 Lodgian Financing Corp. company guaranty 12 1/4s, 2009
(In default) (NON) 272,500
430,000 Meristar Hospitality Corp. company guaranty 9 1/8s, 2011 406,350
260,000 Meristar Hospitality Corp. company guaranty 9s, 2008 245,700
410,000 MeriStar Hospitality Operating Partnership/MeriStar
Hospitality Finance Corp. company guaranty
10 1/2s, 2009 414,100
720,000 RFS Partnership LP company guaranty 9 3/4s, 2012 720,000
670,000 Starwood Hotels & Resorts Worldwide, Inc. 144A
notes 7 7/8s, 2012 636,500
-------------
12,364,358
Machinery (0.4%)
-------------------------------------------------------------------------------------------------------------------
810,000 Briggs & Stratton company guaranty 8 7/8s, 2011 862,772
650,000 Insilco Holding Co. sr. disc. notes stepped-coupon zero %
(14s, 8/15/03), 2008 (STP) 32,500
620,000 JLG Industries, Inc. 144A sr. sub. notes 8 3/8s, 2012 598,300
550,000 Michigan Electric Transmission Co./Michigan Electric
Transmission, Inc. bank term loan FRN Ser. B, 4.412s,
2007 (acquired various dates 4/22/02 to 5/3/02,
cost $552,250) (RES) 550,688
450,000 Terex Corp. bank term loan FRN Ser. B, 3.839s, 2009
(acquired 6/26/02, cost $450,000) (RES) 444,825
220,000 Terex Corp. company guaranty 8 7/8s, 2008 211,200
460,000 Terex Corp. company guaranty Ser. B, 10 3/8s, 2011 478,400
370,000 Terex Corp. company guaranty Ser. D, 8 7/8s, 2008 358,900
-------------
3,537,585
Manufacturing (0.8%)
-------------------------------------------------------------------------------------------------------------------
770,000 ABB Finance, Inc. company guaranty Ser. EMTN, 6 3/4s, 2004 752,675
310,000 Advanced Glass Fiber Yarns sr. sub. notes 9 7/8s, 2009
(In default) (NON) 114,700
1,470,000 Blount, Inc. company guaranty 13s, 2009 882,000
562,500 Flowserve Corp. bank term loan FRN Ser. C, 4.804s,
2009 (acquired 4/30/02, cost $562,500) (RES) 559,266
960,000 Flowserve Corp. company guaranty 12 1/4s, 2010 1,056,000
730,000 High Voltage Engineering Corp. sr. notes 10 3/4s, 2004 262,800
720,000 Jackson Products, Inc. company guaranty Ser. B, 9 1/2s, 2005 468,000
220,000 Jordan Industries, Inc. sr. notes Ser. D, 10 3/8s, 2007 137,500
1,470,000 Motors and Gears, Inc. sr. notes Ser. D, 10 3/4s, 2006 1,381,800
930,000 Roller Bearing Company of America company guaranty
Ser. B, 9 5/8s, 2007 897,450
140,625 SPX Corp. bank term loan FRN Ser. B, 4.11s, 2009
(acquired 7/23/02, cost $140,625) (RES) 140,449
234,375 SPX Corp. bank term loan FRN Ser. C, 4.36s, 2010
(acquired 7/23/02, cost $234,375) (RES) 234,287
-------------
6,886,927
Media (0.3%)
-------------------------------------------------------------------------------------------------------------------
287,303 Adams Outdoor Advertising bank term loan FRN
Ser. B, 5.36s, 2008 (acquired 8/1/01, cost $286,944) (RES) 288,021
2,155,000 Affinity Group Holdings sr. notes 11s, 2007 2,036,475
-------------
2,324,496
Medical Services (1.4%)
-------------------------------------------------------------------------------------------------------------------
478,800 Accredo Health, Inc. bank term loan FRN Ser. B, 4.6s,
2009 (acquired 3/20/02, cost $478,321) (RES) 480,596
2,167,600 Alderwoods Group, Inc. company guaranty 12 1/4s, 2009 2,135,086
19,800 Alderwoods Group, Inc. company guaranty 11s, 2007 19,800
780,000 AmerisourceBergen Corp. sr. notes 8 1/8s, 2008 787,800
597,229 DaVita, Inc. bank term loan FRN Ser. B, 5.28s, 2009
(acquired 4/26/02, cost $596,483) (RES) 597,827
690,000 Extendicare Health Services, Inc. 144A sr. notes 9 1/2s, 2010 691,725
1,260,000 Integrated Health Services, Inc. sr. sub. notes Ser. A,
9 1/2s, 2007 (In default) (NON) 126
620,000 Integrated Health Services, Inc. sr. sub. notes Ser. A,
9 1/4s, 2008 (In default) (NON) 62
1,880,000 Magellan Health Services, Inc. sr. sub. notes 9s, 2008 770,800
50,000 Magellan Health Services, Inc. 144A sr. notes 9 3/8s, 2007 40,000
1,070,000 Mediq, Inc. company guaranty 11s, 2008 (In default) (NON) 10,700
940,000 Mediq, Inc. deb. stepped-coupon zero % (13s, 6/1/03),
2009 (In default) (NON) (STP) 94
800,000 Omnicare, Inc. company guaranty Ser. B, 8 1/8s, 2011 826,000
1,780,000 PacifiCare Health Systems, Inc. 144A sr. notes 10 3/4s, 2009 1,699,900
390,000 Service Corp. International debs. 7 7/8s, 2013 317,850
120,000 Service Corp. International notes 7.7s, 2009 104,400
2,060,000 Service Corp. International notes 6s, 2005 1,761,300
1,010,000 Stewart Enterprises, Inc. notes 10 3/4s, 2008 1,121,100
960,000 Ventas Realty LP/Capital Corp. company guaranty 9s, 2012 976,800
-------------
12,341,966
Medical Technology (0.8%)
-------------------------------------------------------------------------------------------------------------------
450,000 Advanced Medical Optics bank term loan FRN 5.11s, 2008
(acquired 6/17/02, cost $449,438) (RES) 453,000
1,130,000 ALARIS Medical Systems, Inc. sec. notes Ser. B, 11 5/8s, 2006 1,237,350
490,000 ALARIS Medical Systems, Inc. 144A company guaranty
9 3/4s, 2006 487,550
350,000 ALARIS Medical, Inc. sr. disc. notes stepped-coupon
zero % (11 1/8s, 8/1/03), 2008 (STP) 287,000
630,000 Alliance Imaging, Inc. sr. sub. notes 10 3/8s, 2011 664,650
510,000 Bio-Rad Labs Corp. sr. sub. notes 11 5/8s, 2007 566,100
1,270,000 Conmed Corp. company guaranty 9s, 2008 1,270,000
640,000 Insight Health Services Corp. company guaranty
Ser. B, 9 7/8s, 2011 640,000
386,961 Kinetic Concepts, Inc. bank term loan FRN Ser. C, 4.86s,
2005 (acquired 11/5/01, cost $387,445) (RES) 385,349
1,015,000 Kinetic Concepts, Inc. company guaranty Ser. B, 9 5/8s, 2007 984,550
-------------
6,975,549
Metal Fabricators (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,110,000 Earle M. Jorgensen Co. 144A sec. notes 9 3/4s, 2012 1,087,800
300,000 Mueller Industries, Inc. bank term loan FRN 4.599s, 2008
(acquired 6/21/02, cost $300,000) (RES) 300,225
300,000 Trimas Corp. bank term loan FRN 4 5/8s, 2009
(acquired 6/5/02, cost $300,000) (RES) 301,500
520,000 Trimas Corp. 144A sr. sub. notes 9 7/8s, 2012 525,200
-------------
2,214,725
Metals (0.9%)
-------------------------------------------------------------------------------------------------------------------
1,370,000 AK Steel Corp. company guaranty 7 7/8s, 2009 1,370,000
650,000 AK Steel Corp. 144A company guaranty 7 3/4s, 2012 650,000
510,450 Anker Coal Group, Inc. company guaranty Ser. B,
14 1/4s, 2007 (In default) (NON) (PIK) 168,449
1,250,000 Doe Run Resources Corp. company guaranty Ser. B,
11 1/4s, 2005 (In default) (NON) 325,000
180,000 Doe Run Resources Corp. company guaranty Ser. B(a),
11 1/4s, 2005 (In default) (NON) 57,600
420,000 Doe Run Resources Corp. company guaranty FRN
Ser. B, 8.536s, 2003 (In default) (NON) 96,600
350,000 Haynes International, Inc. sr. notes 11 5/8s, 2004 262,500
80,000 Kaiser Aluminum & Chemical Corp. sr. notes Ser. B,
10 7/8s, 2006 (In default) (NON) 61,800
2,360,000 Kaiser Aluminum & Chemical Corp. sr. sub. notes
12 3/4s, 2003 (In default) (NON) 436,600
1,680,000 LTV Corp. company guaranty 11 3/4s, 2009 (In default) (NON) 8,400
406,000 Oregon Steel Mills, Inc. 1st mtge. 11s, 2003 406,000
770,000 Oregon Steel Mills, Inc. 144A 1st mtge. 10s, 2009 777,700
484,000 P&L Coal Holdings Corp. company guaranty Ser. B,
9 5/8s, 2008 498,520
1,020,000 Steel Dynamics, Inc. 144A sr. notes 9 1/2s, 2009 1,045,500
720,000 United States Steel, LLC 144A company guaranty
10 3/4s, 2008 745,200
710,000 WCI Steel, Inc. sr. notes Ser. B, 10s, 2004 353,225
55,000 Weirton Steel Corp. sr. notes FRN 10s, 2008 22,000
1,290,000 Wheeling-Pittsburgh Steel Corp. sr. notes 9 1/4s,
2007 (In default) (NON) 25,800
570,000 WHX Corp. sr. notes 10 1/2s, 2005 444,600
-------------
7,755,494
Natural Gas Utilities (--%)
-------------------------------------------------------------------------------------------------------------------
140,000 CMS Panhandle Holding Corp. sr. notes 6 1/2s, 2009 105,386
Oil & Gas (2.7%)
-------------------------------------------------------------------------------------------------------------------
990,000 Belco Oil & Gas Corp. sr. sub. notes Ser. B, 8 7/8s, 2007 1,017,225
950,000 Chesapeake Energy Corp. company guaranty 8 3/8s, 2008 945,250
1,090,000 Chesapeake Energy Corp. company guaranty 8 1/8s, 2011 1,081,825
670,000 Comstock Resources, Inc. company guaranty 11 1/4s, 2007 683,400
550,000 Comstock Resources, Inc. 144A sr. notes 11 1/4s, 2007 561,000
180,000 Denbury Resources, Inc. company guaranty Ser. B, 9s, 2008 172,800
590,000 El Paso Energy Partners L.P. company guaranty Ser. B,
8 1/2s, 2011 554,600
560,000 Encore Acquisition Co. 144A sr. sub. notes 8 3/8s, 2012 560,000
420,000 Forest Oil Corp. sr. notes 8s, 2011 424,200
520,000 Forest Oil Corp. sr. notes 8s, 2008 527,800
570,000 Forest Oil Corp. 144A sr. notes 7 3/4s, 2014 554,325
800,000 Leviathan Gas Corp. company guaranty Ser. B, 10 3/8s, 2009 756,000
320,000 Magnum Hunter Resources, Inc. 144A sr. notes 9.6s, 2012 322,400
670,000 Mission Resources Corp. company guaranty Ser. C,
10 7/8s, 2007 569,500
980,000 Newfield Exploration Co. sr. notes 7 5/8s, 2011 994,700
840,000 Ocean Energy, Inc. company guaranty Ser. B, 8 3/8s, 2008 879,178
1,735,000 Petronas Capital, Ltd. 144A company guaranty
7s, 2012 (Malaysia) 1,813,075
3,500,000 Pioneer Natural Resources Co. company guaranty
9 5/8s, 2010 3,924,375
800,000 Plans Exploration & Production Co. 144A sr. sub. notes
8 3/4s, 2012 788,000
920,000 Pogo Producing Co. sr. sub. notes Ser. B, 8 1/4s, 2011 924,600
420,000 Seven Seas Petroleum, Inc. sr. notes Ser. B, 12 1/2s, 2005 243,600
210,000 Stone Energy Corp. company guaranty 8 3/4s, 2007 214,725
1,000,000 Stone Energy Corp. sr. sub. notes 8 1/4s, 2011 1,007,500
460,000 Swift Energy Co. sr. sub. notes 10 1/4s, 2009 455,400
660,000 Swift Energy Co. sr. sub. notes 9 3/8s, 2012 627,000
900,000 Vintage Petroleum, Inc. sr. notes 8 1/4s, 2012 877,500
810,000 Vintage Petroleum, Inc. sr. sub. notes 9 3/4s, 2009 785,700
510,000 Westport Resources Corp. company guaranty
8 1/4s, 2011 522,750
360,000 XTO Energy, Inc. sr. notes 7 1/2s, 2012 369,900
440,000 XTO Energy, Inc. 144A sr. sub. notes Ser. B, 8 3/4s, 2009 458,700
-------------
23,617,028
Paper & Forest Products (1.7%)
-------------------------------------------------------------------------------------------------------------------
299,248 Appleton Papers, Inc. bank term loan FRN 5.115s, 2006
(acquired 6/4/02, cost $300,370) (RES) 300,557
1,460,000 Appleton Papers, Inc. company guaranty
Ser. B, 12 1/2s, 2008 1,463,650
1,125,000 Four M Corp. sr. notes Ser. B, 12s, 2006 1,161,563
990,000 Georgia-Pacific Corp. notes 8 7/8s, 2031 812,879
660,000 Georgia-Pacific Corp. notes 8 1/8s, 2011 574,471
210,000 Georgia-Pacific Corp. notes 7 1/2s, 2006 184,943
1,630,000 Pacifica Papers, Inc. sr. notes 10s, 2009 (Canada) 1,707,425
1,000,000 Potlatch Corp. company guaranty 10s, 2011 1,070,000
100,000 Potlatch Corp. debs. 6.95s, 2015 92,454
800,000 Riverwood International Corp. bank term loan FRN
Ser. C, 4.51s, 2007 (acquired 4/24/02, cost $802,222) (RES) 801,000
2,320,000 Riverwood International Corp. company guaranty
10 7/8s, 2008 2,378,000
375,000 Silgan Holdings, Inc. bank term loan FRN 3.87s, 2007
(acquired 6/25/02, cost $374,930) (RES) 374,531
1,090,000 Stone Container Corp. sr. notes 9 3/4s, 2011 1,149,950
490,000 Stone Container Corp. sr. notes 9 1/4s, 2008 509,600
460,000 Stone Container Corp. 144A company guaranty
11 1/2s, 2006 (Canada) 489,900
790,000 Stone Container Corp. 144A sr. notes 8 3/8s, 2012 793,950
1,450,000 Tembec Industries, Inc. company guaranty 8 5/8s,
2009 (Canada) 1,457,250
-------------
15,322,123
Pharmaceuticals (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,210,000 Biovail Corp. sr. sub. notes 7 7/8s, 2010 (Canada) 1,169,494
Photography/Imaging (0.1%)
-------------------------------------------------------------------------------------------------------------------
630,000 Polaroid Corp. sr. notes 11 1/2s, 2006 (In default) (NON) 22,050
260,000 Xerox Cap Europe PLC company guaranty 5 7/8s,
2004 (United Kingdom) 197,600
130,000 Xerox Corp. notes 5 1/2s, 2003 107,900
1,150,000 Xerox Corp. 144A sr. notes 9 3/4s, 2009 908,500
50,000 Xerox Credit Corp. sr. notes 6.1s, 2003 41,500
-------------
1,277,550
Power Producers (0.9%)
-------------------------------------------------------------------------------------------------------------------
780,000 AES Corp. (The) notes 8 3/4s, 2008 304,200
1,010,000 AES Corp. (The) sr. notes 9 3/8s, 2010 409,050
190,000 AES Corp. (The) sr. notes 8 7/8s, 2011 73,150
180,000 Calpine Canada Energy Finance company guaranty
8 1/2s, 2008 (Canada) 82,800
530,000 Calpine Corp. sr. notes 10 1/2s, 2006 265,000
2,110,000 Calpine Corp. sr. notes 8 5/8s, 2010 1,055,000
1,160,000 Calpine Corp. sr. notes 8 1/2s, 2011 591,600
1,050,000 Calpine Corp. sr. notes 7 7/8s, 2008 525,000
520,000 Edison Mission Energy sr. notes 10s, 2008 299,000
530,000 Edison Mission Energy sr. notes 9 7/8s, 2011 304,750
120,000 Midland Funding II Corp. debs. Ser. A, 11 3/4s, 2005 117,600
1,740,000 Midland Funding II Corp. debs. Ser. B, 13 1/4s, 2006 1,722,600
1,270,000 Tiverton/Rumford Power Associates, LP 144A pass-through
certificates 9s, 2018 927,100
1,651,000 York Power Funding 144A notes 12s, 2007 (Cayman Islands)
(In default) (NON) 1,485,900
-------------
8,162,750
Publishing (1.4%)
-------------------------------------------------------------------------------------------------------------------
420,000 Belo Corp. sr. notes 7 1/8s, 2007 416,346
760,000 Garden State Newspapers, Inc. sr. sub. notes 8 5/8s, 2011 744,800
290,000 Garden State Newspapers, Inc. sr. sub. notes Ser. B,
8 3/4s, 2009 276,950
502,000 Hollinger International Publishing, Inc. company guaranty
9 1/4s, 2007 514,550
2,404,419 Hollinger Participation Trust 144A sr. notes 12 1/8s,
2010 (Canada) (PIK) 2,115,889
740,000 Key3media Group, Inc. company guaranty 11 1/4s, 2011 207,200
680,000 Mail-Well I Corp. 144A company guaranty 9 5/8s, 2012 544,000
950,000 Perry-Judd company guaranty 10 5/8s, 2007 902,500
1,910,000 PRIMEDIA, Inc. company guaranty 8 7/8s, 2011 1,375,200
470,000 PRIMEDIA, Inc. company guaranty 7 5/8s, 2008 338,400
1,070,000 PRIMEDIA, Inc. company guaranty Ser. B, 8 1/2s, 2006 775,750
300,000 Quebecor Media, Inc. sr. disc. notes stepped-coupon
zero % (13 3/4s, 7/15/06), 2011 (Canada) (STP) 157,500
740,000 Quebecor Media, Inc. sr. notes 11 1/8s, 2011 (Canada) 658,600
600,000 Reader's Digest Association, Inc. (The) bank term loan FRN
Ser. B, 4.309s, 2008 (acquired 5/15/02, cost $600,000) (RES) 598,875
960,000 Vertis, Inc. 144A sr. notes 10 7/8s, 2009 936,000
800,000 Von Hoffman Press, Inc. 144A company guaranty 10 1/4s, 2009 792,000
411,360 Von Hoffman Press, Inc. 144A sr. sub. notes 13 1/2s, 2009 287,952
370,000 Von Hoffman Press, Inc. 144A sr. sub. notes 10 3/8s, 2007 342,250
-------------
11,984,762
Railroads (0.4%)
-------------------------------------------------------------------------------------------------------------------
1,020,000 Kansas City Southern Railway Co. company guaranty 9 1/2s, 2008 1,096,500
510,000 Kansas City Southern Railway Co. 144A sr. notes 7 1/2s, 2009 510,000
1,100,000 RailAmerica Transportation company guaranty 12 7/8s, 2010 1,133,000
200,000 Transportation Manufacturing Operations, Inc. company
guaranty 11 1/4s, 2009 136,000
260,000 Travel Centers of America, Inc. company guaranty 12 3/4s, 2009 267,800
-------------
3,143,300
Real Estate (0.3%)
-------------------------------------------------------------------------------------------------------------------
170,000 Crescent Real Estate Equities LP FRN 7 1/2s, 2007 169,575
1,410,000 Crescent Real Estate Equities LP 144A sr. notes 9 1/4s, 2009 1,453,076
980,000 iStar Financial, Inc. sr. notes 8 3/4s, 2008 1,009,400
-------------
2,632,051
Regional Bells (0.3%)
-------------------------------------------------------------------------------------------------------------------
170,000 Qwest Capital Funding, Inc. company guaranty 7.9s, 2010 66,300
800,000 Qwest Capital Funding, Inc. company guaranty 7 3/4s, 2006 312,000
1,200,000 Qwest Capital Funding, Inc. company guaranty 7s, 2009 444,000
270,000 Qwest Capital Funding, Inc. company guaranty 6 3/8s, 2008 105,300
620,000 Qwest Communications International, Inc. sr. notes Ser. B,
7 1/2s, 2008 229,400
680,000 Qwest Communications International, Inc. sr. notes Ser. B,
7 1/4s, 2008 251,600
260,000 Qwest Corp. notes 7 5/8s, 2003 218,400
200,000 Qwest Corp. 144A notes 8 7/8s, 2012 156,000
550,000 US West, Inc. notes 5 5/8s, 2008 393,443
210,000 US West Capital Funding, Inc. company guaranty 6 7/8s, 2028 69,300
-------------
2,245,743
Restaurants (0.4%)
-------------------------------------------------------------------------------------------------------------------
500,000 Domino's, Inc. company guaranty Ser. B, 10 3/8s, 2009 536,250
760,000 Sbarro, Inc. company guaranty 11s, 2009 729,600
50,000 Tricon Global Restaurants, Inc. sr. notes 8 7/8s, 2011 52,750
1,470,000 Tricon Global Restaurants, Inc. sr. notes 7.65s, 2008 1,484,700
830,000 Tricon Global Restaurants, Inc. sr. notes 7.45s, 2005 838,300
-------------
3,641,600
Retail (1.5%)
-------------------------------------------------------------------------------------------------------------------
670,000 Amazon.com, Inc. sr. sub. notes stepped-coupon zero %
(10s, 5/1/03), 2008 (STP) 603,000
800,000 Asbury Automotive Group, Inc. 144A sr. sub. notes 9s, 2012 740,000
1,240,000 Autonation, Inc. company guaranty 9s, 2008 1,271,000
750,000 Fleming Companies, Inc. bank term loan FRN 4 1/8s, 2008
(acquired 6/18/02, cost $752,334) (RES) 748,438
1,090,000 Fleming Companies, Inc. company guaranty 10 1/8s, 2008 1,079,100
20,000 Fleming Companies, Inc. company guaranty Ser. D, 10 5/8s, 2007 19,100
640,000 Fleming Companies, Inc. sr. notes 9 1/4s, 2010 627,200
70,000 Fleming Companies, Inc. 144A sr. sub. notes 9 7/8s, 2012 63,700
360,000 Great Atlantic & Pacific Tea Co. notes 7 3/4s, 2007 324,000
210,000 JC Penney Company, Inc. debs. 7.95s, 2017 186,900
620,000 JC Penney Company, Inc. debs. 7.4s, 2037 584,350
450,000 JC Penney Company, Inc. notes Ser. MTNA, 7.05s, 2005 436,500
1,300,000 JC Penney Company, Inc. 144A notes 9s, 2012 1,287,000
1,000,000 Kmart Corp. bank term loan FRN Ser. B, 5.09s, 2004
(acquired 3/7/02, cost $1,000,000) (RES) 1,003,750
700,000 Kmart Corp. pass-through certificates Ser. 95K4, 9.35s,
2020 (In default) (NON) 325,500
360,000 Kmart Corp. 144A notes 9 7/8s, 2008 (In default) (NON) 117,000
90,000 Mothers Work, Inc. sr. notes 12 5/8s, 2005 90,900
630,000 Rite Aid Corp. notes 7 1/8s, 2007 431,550
2,190,000 Saks, Inc. company guaranty 8 1/4s, 2008 2,036,700
571,765 Shoppers Drug Mart bank term loan FRN Ser. F, 3.917s,
2009 (acquired various dates 5/22/02 to 5/29/02,
cost $573,640) (RES) 572,301
80,000 Southland Corp. debs. Ser. A, 4 1/2s, 2004 76,800
190,000 Southland Corp. sr. sub. debs. 5s, 2003 186,200
580,000 United Auto Group, Inc. 144A sr. sub. notes 9 5/8s, 2012 568,400
-------------
13,379,389
Semiconductor (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,000,000 Micron Technology, Inc. notes 6 1/2s, 2005 870,000
Shipping (0.3%)
-------------------------------------------------------------------------------------------------------------------
300,000 Ingram Industries bank term loan FRN 4.53s, 2008
(acquired 6/17/02, cost $300,000) (RES) 297,000
54,000 International Shipholding Corp. sr. notes 9s, 2003 54,068
670,000 Navistar International Corp. company guaranty Ser. B,
9 3/8s, 2006 676,700
880,000 Navistar International Corp. sr. notes Ser. B, 8s, 2008 831,600
1,030,000 Trico Marine Services, Inc. 144A sr. notes 8 7/8s, 2012 932,150
-------------
2,791,518
Technology (0.2%)
-------------------------------------------------------------------------------------------------------------------
620,000 ON Semiconductor Corp. 144A company guaranty
12s, 2008 520,800
370,000 SCG Holding & Semiconductor Corp. company guaranty
12s, 2009 236,800
765,000 Telecommunications Techniques, Inc. company guaranty
9 3/4s, 2008 145,350
440,000 Unisys Corp. sr. notes 7 7/8s, 2008 429,000
250,000 Unisys Corp. sr. notes 7 1/4s, 2005 243,125
-------------
1,575,075
Technology Services (0.3%)
-------------------------------------------------------------------------------------------------------------------
387,000 CSG Systems International, Inc. bank term loan FRN Ser. B,
5.129s, 2008 (acquired various dates 2/27/02 to 3/4/02,
cost $387,866) (RES) 370,553
1,250,000 Intira Corp. bonds stepped-coupon zero % (13s, 2/1/05),
2010 (acquired 1/3/00, cost $666,138) (In default) (NON) (RES) (STP) 125
305,000 Iron Mountain, Inc. company guaranty 8 5/8s, 2013 289,750
370,000 Iron Mountain, Inc. company guaranty 8 1/8s, 2008 (Canada) 358,900
1,890,000 Iron Mountain, Inc. sr. sub. notes 8 1/4s, 2011 1,738,800
-------------
2,758,128
Telecommunications (2.1%)
-------------------------------------------------------------------------------------------------------------------
1,490,000 360Networks, Inc. sr. notes 13s, 2008 (Canada) (In default) (NON) 14,900
1,510,000 American Cellular Corp. company guaranty 9 1/2s, 2009 203,850
2,410,000 American Tower Corp. sr. notes 9 3/8s, 2009 1,253,200
550,000 Arch Communications, Inc. sr. notes 13 3/4s, 2008 (In default) (NON) 2,750
770,000 Asia Global Crossing, Ltd. sr. notes 13 3/8s, 2010 (Bermuda)
(In default) (NON) 138,600
168,280 Call-Net Enterprises, Inc. company guaranty 10 5/8s,
2008 (Canada) 37,022
456,760 Colo.com, Inc. 144A sr. notes 13 7/8s, 2010 (In default) (NON) 9,135
1,140,000 Crown Castle International Corp. sr. disc. notes stepped-coupon
zero % (10 3/8s, 5/15/04), 2011 (STP) 524,400
150,000 Crown Castle International Corp. sr. notes 10 3/4s, 2011 102,750
1,210,000 Crown Castle International Corp. sr. notes 9 3/8s, 2011 750,200
3,080,000 Cybernet Internet Services International, Inc. 144A sr. disc.
notes stepped-coupon zero % (13s, 8/15/04), 2009
(Denmark) (STP) 308
1,220,000 Dobson/Sygnet Communications, Inc. sr. notes 12 1/4s, 2008 646,600
2,270,000 Econophone, Inc. company guaranty 13 1/2s, 2007 (In default) (NON) 11,350
1,180,000 Equinix, Inc. sr. notes 13s, 2007 (In default) (NON) 177,000
580,000 Esprit Telecom Group PLC sr. notes 11 1/2s, 2007
(United Kingdom) (In default) (NON) 1,450
2,000,000 Firstworld Communication Corp. sr. disc. notes stepped-coupon
zero % (13s, 4/15/03), 2008 (In default) (NON) (STP) 195,000
830,000 Flag, Ltd. 144A sr. notes 8 1/4s, 2008 (Bermuda) (In default) (NON) 49,800
130,000 Global Crossing Holdings, Ltd. company guaranty 9 5/8s, 2008
(Bermuda) (In default) (NON) 1,300
230,000 Global Crossing Holdings, Ltd. company guaranty 9 1/2s, 2009
(Bermuda) (In default) (NON) 2,300
3,230,000 Global Crossing Holdings, Ltd. company guaranty 9 1/8s, 2006
(Bermuda) (In default) (NON) 32,300
2,100,000 Globix Corp. sr. notes 12 1/2s, 2010 (In default) (NON) 346,500
1,270,000 iPCS, Inc. sr. disc. notes stepped-coupon zero % (14s, 7/15/05),
2010 (STP) 203,200
1,060,000 IWO Holdings, Inc. company guaranty 14s, 2011 371,000
1,420,000 Leap Wireless International, Inc. company guaranty 12 1/2s, 2010 213,000
1,650,000 McCaw International, Ltd. sr. disc. notes 13s, 2002 (In default) (NON) 99,000
310,000 Metrocall, Inc. sr. sub. notes 11s, 2008 (In default) (NON) 3,100
250,000 Metrocall, Inc. sr. sub. notes 10 3/8s, 2007 (In default) (NON) 625
260,000 Metrocall, Inc. sr. sub. notes 9 3/4s, 2007 (In default) (NON) 5,200
1,260,000 Microcell Telecommunications sr. disc. notes Ser. B, 14s,
2006 (Canada) 50,400
320,000 Millicom International Cellular SA sr. disc. notes 13 1/2s,
2006 (Luxembourg) 115,200
1,030,000 Nextel Communications, Inc. sr. disc. notes stepped-coupon
zero % (9 3/4s, 10/31/02), 2007 (STP) 664,350
1,490,000 Nextel Communications, Inc. sr. notes 12s, 2008 1,057,900
1,990,000 Nextel Communications, Inc. sr. notes 9 1/2s, 2011 1,283,550
4,100,000 Nextel Communications, Inc. sr. notes 9 3/8s, 2009 2,624,000
270,000 Nextel Communications, Inc. 144A sr. disc. notes stepped-
coupon zero % (10.65s, 9/15/02), 2007 (STP) 185,625
270,000 Nextel Partners, Inc. sr. notes 12 1/2s, 2009 143,100
1,560,000 Nextel Partners, Inc. sr. notes 11s, 2010 780,000
350,000 NorthEast Optic Network, Inc. sr. notes 12 3/4s, 2008
(In default) (NON) 43,750
990,000 Orbital Imaging Corp. sr. notes Ser. B, 11 5/8s, 2005 (In default) (NON) 198,000
690,000 PanAmSat Corp. bank term loan FRN Ser. B, 5.339s, 2009
(acquired 2/21/02, cost $689,138) (RES) 688,275
1,060,000 PanAmSat Corp. 144A sr. notes 8 1/2s, 2012 981,302
1,480,000 Price Communications Wireless, Inc. 144A sr. notes 9 1/8s, 2006 1,546,600
230,000 PSINet, Inc. sr. notes 11 1/2s, 2008 (In default) (NON) 21,275
160,000 PSINet, Inc. sr. notes Ser. B, 10s, 2005 (In default) (NON) 14,800
178,142 Rhythms Netconnections, Inc. sr. notes Ser. B, 14s, 2010
(In default) (NON) 8,016
450,000 Rogers Wireless, Inc. sec. notes 9 5/8s, 2011 (Canada) 292,500
150,000 RSL Communications PLC 144A company guaranty
10 1/2s, 2008 (United Kingdom) (In default) (NON) 3,188
1,025,000 RSL Communications, Ltd. company guaranty 12 1/4s,
2006 (Bermuda) (In default) (NON) 21,781
420,000 Rural Cellular Corp. sr. sub. notes Ser. B, 9 5/8s, 2008 231,000
860,000 SBA Communications Corp. sr. notes 10 1/4s, 2009 451,500
1,340,000 Spectrasite Holdings, Inc. sr. disc. notes stepped-coupon
zero % (11 1/8s, 4/15/04), 2009 (STP) 314,900
1,380,000 Startec Global Communications Corp. sr. notes 12s, 2008
(In default) (NON) 27,600
630,000 Telehub Communications Corp. company guaranty 13 7/8s,
2005 (In default) (NON) 1
710,000 TSI Telecommunication Services, Inc. 144A sr. sub. notes
12 3/4s, 2009 667,400
1,250,000 US UnWired, Inc. company guaranty stepped-coupon Ser. B,
zero % (13 3/8s, 11/1/04), 2009 (STP) 318,750
1,280,000 WebLink Wireless, Inc. sr. disc. notes stepped-coupon zero %
(11 1/4s, 2/1/03), 2008 (STP) 3,200
750,000 Western Wireless Corp. bank term loan FRN 4.66s, 2008
(acquired 4/24/00, cost $749,063) (RES) 471,250
140,000 Williams Communications Group, Inc. sr. notes 11 7/8s, 2010
(In default) (NON) 15,400
180,000 Williams Communications Group, Inc. sr. notes 11.7s, 2008
(In default) (NON) 18,000
280,000 Williams Communications Group, Inc. sr. notes 10.7s, 2007
(In default) (NON) 30,800
1,250,000 World Access, Inc. sr. notes Ser. B, 13 1/4s, 2008 (In default) (NON) 43,750
-------------
18,713,003
Telephone (0.4%)
-------------------------------------------------------------------------------------------------------------------
1,065,000 Airgate PCS, Inc. sr. sub. notes stepped-coupon zero %
(13 1/2s, 10/1/04), 2009 (STP) 298,200
890,000 Alamosa Delaware, Inc. company guaranty 13 5/8s, 2011 320,400
400,000 Alamosa Delaware, Inc. company guaranty 12 1/2s, 2011 138,000
1,893,000 Alamosa PCS Holdings, Inc. company guaranty stepped-coupon
zero % (12 7/8s, 2/15/05), 2010 (STP) 340,740
780,000 Birch Telecommunications, Inc. sr. notes 14s, 2008 (In default) (NON) 7,800
220,000 Horizon PCS, Inc. company guaranty 13 3/4s, 2011 72,600
220,000 Hyperion Telecommunications Corp., Inc. sr. disc. notes Ser. B,
zero %, 2003 (In default) (NON) 768
1,700,000 Hyperion Telecommunications Corp., Inc. sr. sub. notes 12s,
2007 (In default) (NON) 5,933
90,000 Intermedia Communications, Inc. sr. notes Ser. B, 8.6s, 2008
(In default) (NON) 18,900
910,000 MCI WorldCom, Inc. notes 7 3/4s, 2007 (In default) (NON) 111,475
720,000 MCI WorldCom, Inc. sr. notes 6.4s, 2005 (In default) (NON) 88,200
450,000 Metromedia Fiber Network, Inc. sr. notes 10s, 2009
(In default) (NON) 3,938
1,070,000 Metromedia Fiber Network, Inc. sr. notes Ser. B, 10s,
2008 (In default) (NON) 9,363
390,000 Tele1 Europe BV sr. notes 13s, 2009 (Netherlands) 42,900
202,000 Telecorp PCS, Inc. company guaranty 10 5/8s, 2010 171,700
45,000 Telecorp PCS, Inc. company guaranty stepped-coupon zero %
(11 5/8s, 4/15/04), 2009 (STP) 31,950
820,000 Time Warner Telecom, Inc. sr. notes 9 3/4s, 2008 278,800
249,000 Tritel PCS, Inc. company guaranty 10 3/8s, 2011 209,160
130,000 Triton PCS, Inc. company guaranty 9 3/8s, 2011 84,500
1,080,000 Triton PCS, Inc. company guaranty 8 3/4s, 2011 669,600
90,000 Triton PCS, Inc. company guaranty zero %, 2008 55,350
2,310,000 UbiquiTel Operating Co. company guaranty stepped-coupon
zero % (14s, 4/15/05), 2010 (STP) 184,800
5,406,000 WinStar Communications, Inc. sr. disc. notes stepped-coupon
zero % (14 3/4s, 4/15/05), 2010 (In default) (NON) (STP) 541
1,280,000 WinStar Communications, Inc. sr. notes 12 3/4s, 2010
(In default) (NON) 128
70,000 WinStar Communications, Inc. sr. notes 12 1/2s, 2008
(In default) (NON) 7
350,000 WorldCom, Inc.-WorldCom Group notes 8 1/4s, 2010
(In default) (NON) 42,875
-------------
3,188,628
Textiles (0.4%)
-------------------------------------------------------------------------------------------------------------------
780,000 Galey & Lord, Inc. company guaranty 9 1/8s, 2008
(In default) (NON) 126,750
970,000 Levi Strauss & Co. sr. notes 11 5/8s, 2008 853,600
590,000 Russell Corp. 144A sr. notes 9 1/4s, 2010 604,750
830,000 William Carter Holdings Co. (The) company guaranty
Ser. B, 10 7/8s, 2011 892,250
310,000 Tommy Hilfiger USA, Inc. company guaranty 6 1/2s, 2003 306,900
1,200,000 Westpoint Stevens, Inc. sr. notes 7 7/8s, 2008 684,000
470,000 Westpoint Stevens, Inc. sr. notes 7 7/8s, 2005 279,650
-------------
3,747,900
Tobacco (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,560,000 North Atlantic Trading Co. company guaranty Ser. B,
11s, 2004 1,544,400
Waste Management (1.0%)
-------------------------------------------------------------------------------------------------------------------
65,700 Allied Waste Industries, Inc. bank term loan FRN Ser. C,
4.931s, 2007 (acquired 2/27/02, cost $64,879) (RES) 61,783
1,105,321 Allied Waste Industries, Inc. bank term loan FRN Ser. B,
4.664s, 2006 (acquired various dates 10/18/01 to
2/27/02, cost $1,084,442) (RES) 1,039,427
3,670,000 Allied Waste North America, Inc. company guaranty
Ser. B, 10s, 2009 3,303,000
360,000 Allied Waste North America, Inc. company guaranty
Ser. B, 8 7/8s, 2008 329,400
1,185,000 Allied Waste North America, Inc. company guaranty Ser. B,
8 1/2s, 2008 1,066,500
2,300,000 Browning-Ferris Industries, Inc. debs. 7.4s, 2035 1,748,000
880,000 Browning-Ferris Industries, Inc. sr. notes 6 3/8s, 2008 734,800
470,000 IESI Corp. 144A sr. sub. notes 10 1/4s, 2012 441,800
160,000 Waste Management, Inc. sr. notes 7 3/8s, 2010 158,165
-------------
8,882,875
-------------
Total Corporate Bonds and Notes (cost $519,283,285) $421,478,882
FOREIGN GOVERNMENT BONDS AND NOTES (17.3%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
USD 2,498,943 Argentina (Republic of) bonds Ser. 2018, 2.89s, 2018
(In default) (NON) $437,315
USD 2,795,000 Brazil (Federal Republic of) bonds 10 1/8s, 2027 1,159,925
USD 935,000 Brazil (Federal Republic of) notes 14 1/2s, 2009 510,978
USD 1,600,000 Brazil (Federal Republic of) notes 11s, 2012 720,000
USD 2,260,000 Brazil (Federal Republic of) unsub. notes 11s, 2040 997,790
USD 6,215,000 Bulgaria (Republic of) 144A bonds 8 1/4s, 2015 6,162,173
CAD 11,840,000 Canada (Government of) bonds 6s, 2011 7,878,384
CAD 2,725,000 Canada (Government of) bonds 5 1/2s, 2010 1,761,960
CAD 930,000 Canada (Government of) bonds Ser. WL43, 5 3/4s, 2029 588,589
USD 2,380,000 Colombia (Republic of) bonds 11 3/4s, 2020 1,961,120
EUR 480,000 Colombia (Republic of) notes Ser. EMTN, 11 1/2s, 2011 368,907
EUR 480,000 Colombia (Republic of) unsub. bonds Ser. 15A, 11 3/8s, 2008 368,201
USD 710,000 Ecuador (Republic of) bonds Ser. REGS, 12s, 2012 386,950
USD 3,000,000 Ecuador (Republic of) bonds stepped-coupon Ser. REGS, 5s
(6s, 8/15/02), 2030 (STP) 1,162,500
EUR 1,495,000 France (Government of) bonds 5 1/2s, 2010 1,540,291
EUR 1,080,000 France (Government of) debs. 4s, 2009 1,017,434
EUR 650,000 Germany (Federal Republic of) bonds 5s, 2012 649,302
EUR 6,380,000 Germany (Federal Republic of) bonds Ser. 02, 5s, 2012 6,370,019
EUR 2,000,000 Germany (Federal Republic of) bonds Ser. 94, 6 1/4s, 2024 2,213,517
EUR 7,040,000 Germany (Federal Republic of) bonds Ser. 97, 6s, 2007 7,391,305
EUR 5,380,000 Germany (Federal Republic of) bonds Ser. 99, 4s, 2009 5,107,883
EUR 530,000 Italy (Government of) treasury bonds 4 3/4s, 2006 531,145
EUR 5,325,000 Italy (Government of) treasury bonds 3 1/4s, 2004 5,200,261
USD 510,000 Malaysia (Government of) bonds 7 1/2s, 2011 561,255
NZD 8,399,000 New Zealand (Government of) bonds 8s, 2006 4,183,906
NZD 2,656,000 New Zealand (Government of) bonds Ser. 709, 7s, 2009 1,280,770
USD 1,757,250 Peru (Republic of) bonds Ser. PDI, 4s, 2017 1,144,497
USD 1,380,000 Russia (Federation of) bonds 12 3/4s, 2028 1,600,800
USD 4,820,000 Russia (Federation of) unsub. 10s, 2007 5,036,900
USD 3,040,000 Russia (Federation of) unsub. 8 1/4s, 2010 2,960,960
USD 8,840,000 Russia (Federation of) unsub. stepped-coupon 5s
(7 1/2s, 3/31/07), 2030 (STP) 5,922,800
USD 11,677,500 Russia (Federation of) 144A unsub. stepped-coupon 5s
(7 1/2s, 3/31/07), 2030 (STP) 7,823,925
USD 3,675,000 South Africa (Republic of) notes 7 3/8s, 2012 3,656,625
EUR 710,000 Spain (Government of) bonds 5 3/4s, 2032 745,082
EUR 2,360,000 Spain (Government of) bonds 4.8s, 2006 2,365,562
SEK 76,070,000 Sweden (Government of) bonds Ser. 1037, 8s, 2007 9,080,322
SEK 118,540,000 Sweden (Government of) bonds Ser. 1044, 3 1/2s, 2006 11,928,946
USD 1,490,000 Turkey (Republic of) bonds 11 3/4s, 2010 1,285,125
GBP 4,420,000 United Kingdom Treasury bonds 10s, 2003 7,356,255
GBP 1,100,000 United Kingdom Treasury bonds 5s, 2012 1,737,100
GBP 2,855,000 United Kingdom Treasury bonds Ser. 85, 9 3/4s, 2002 4,477,348
GBP 4,781,000 United Kingdom Treasury bonds 8 1/2s, 2005 8,379,008
USD 3,845,000 United Mexican States bonds 11 3/8s, 2016 4,619,768
USD 3,830,000 United Mexican States bonds Ser. MTN, 8.3s, 2031 3,542,750
USD 1,125,000 United Mexican States notes 8 1/8s, 2019 1,060,313
USD 5,535,000 United Mexican States notes Ser. A, 9 7/8s, 2010 6,116,175
USD 1,055,000 Venezuela (Republic of) bonds 9 1/4s, 2027 648,825
-------------
Total Foreign Government Bonds and Notes
(cost $147,261,155) $152,000,966
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (12.2%) (a)
PRINCIPAL AMOUNT VALUE
U.S. Government Agency Mortgage Obligations (3.2%)
-------------------------------------------------------------------------------------------------------------------
$88,723 Federal Home Loan Mortgage Corporation 7 1/2s,
March 1, 2026 $93,929
Federal National Mortgage Association Pass-Through Certificates
1,045,980 7 1/2s, with due dates from August 1, 2029 to
May 1, 2031 1,103,507
2,108,106 6 1/2s, with due dates from March 1, 2029 to
May 1, 2031 2,169,078
54,955 6 1/2s, January 1, 2015 57,530
23,497,000 TBA, 6 1/2s, August 1, 2032 24,143,168
239,976 6s, July 1, 2032 242,217
Government National Mortgage Association
Pass-Through Certificates
470,043 8s, December 15, 2022 508,174
-------------
28,317,603
U.S. Treasury Obligations (9.0%)
-------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
21,600,000 7 1/2s, November 15, 2016 (SEG) 26,700,408
13,600,000 6 1/4s, May 15, 2030 15,142,648
12,260,000 6 1/4s, August 15, 2023 13,480,728
U.S. Treasury Notes
11,375,000 4 7/8s, February 15, 2012 11,734,905
11,350,000 4 3/8s, May 15, 2007 11,805,703
-------------
78,864,392
-------------
Total U.S. Government and Agency Obligations
(cost $105,227,997) $107,181,995
COLLATERALIZED MORTGAGE OBLIGATIONS (10.4%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
Amortizing Residential Collateral Trust
$49,410,000 Ser. 02-BC1, Class AIO, Interest Only (IO) 6s, 2005 $3,391,157
3,170,000 Ser. 02-BC1, Class M2, FRN, 2.94s, 2032 3,131,634
80,000 Amresco Commercial Mortgage Funding I Ser. 97-C1,
Class F, 7.64s, 2029 86,944
330,000 Banc of America Commercial Mortgage, Inc. Ser. 02-PB2,
Class K, 6.29s, 2035 286,481
1,780,901 Blackstone Hotel Acquisition Co. jr. mtge. loan FRN
9.794s, 2003 (United Kingdom) 2,640,940
760,000 Chase Commercial Mortgage Securities Corp. Ser. 00-3,
Class G, 6.887s, 2019 661,319
Commercial Mortgage Acceptance Corp.
2,305,000 Ser. 97-ML1, Class D, 6.962s, 2010 2,348,219
6,419,420 Ser. 97-ML1, Class IO, 0.88s, 2017 228,441
335,000 Commercial Mortgage Acceptance Corp. 144A Ser. 98-C2,
Class F, 5.44s, 2013 257,217
43,104,313 Commercial Mortgage Asset Trust Ser. 99-C1, Class X, IO,
0.92s, 2020 2,507,122
2,948,000 Criimi Mae Commercial Mortgage Trust Ser. 98-C1,
Class A2, 7s, 2011 3,109,219
2,814,000 Criimi Mae Commercial Mortgage Trust 144A Ser. 98-C1,
Class B, 7s, 2011 2,790,362
590,000 CS First Boston Mortgage Securities Corp. 144A Ser. 02-CKN2,
Class H, 6.122s, 2037 477,716
68,259,310 Deutsche Mortgage & Asset Receiving Corp. Ser. 98-C1,
Class X, IO, 1.09s, 2023 2,675,765
Euro Loan Conduit 144A
700,000 FRN Ser. 7A, Class E, 7.48s, 2006 (United Kingdom) 1,045,181
700,000 FRN Ser. 7A, Class D, 5.73s, 2006 (United Kingdom) 1,086,840
Fannie Mae
7,426,078 Ser. 02-36, Class SJ, 15 1/2s, 2029 8,057,440
27,370,606 Ser. 00-T6, IO, 8.7s, 2030 598,732
5,800 Ser. 92-15, Class L, IO, 8s, 2022 133,115
515,736 Ser. 01-55, Class CZ, 6 1/2s, 2031 513,802
1,304,000 Ser. 01-58, Class HI, IO, 6 1/2s, 2026 229,830
1,276,438 Ser. 98-1, Class SA, IO, 6 1/2s, 2024 236,141
7,347,548 Ser. 93-251, Class Z, 6 1/2s, 2023 7,368,213
4,022,481 Ser. 02-29, Class SL, IO, 6.21s, 2029 342,539
5,686,800 Ser. 02-47, Class NS, IO, 6.16s, 2032 611,331
3,033,755 Ser. 02-39, Class SB, IO, 6.111s, 2032 251,233
12,671,508 Ser. 02-34, Class SB, IO, 6.09s, 2032 1,049,359
3,270,300 Ser. 01-72, Class NI, IO, 6s, 2021 358,993
4,660,100 Ser. 01-70, Class PI, IO, 6s, 2021 505,615
3,281,400 Ser. 01-74, Class QI, IO, 6s, 2018 292,448
827,666 Ser. 98-51, Class SG, 1.62s, 2022 356,931
2,396,528 Ser. 01-74, Class MI, IO, 6s, 2015 368,934
5,746,818 Ser. 318, Class 2, IO, 6s, 2032 1,489,683
16,089,820 Ser. 02-36, Class QH, IO, 6.21s, 2031 1,149,355
29,426 Ser. 01-30, Class DO, Principal Only (PO) zero %, 2031 26,630
836,619 Ser. 99-51, Class N, PO, zero %, 2029 719,492
820,513 Ser. 99-52, Class MO, PO, zero %, 2026 772,046
375,933 Ser. 97-92, PO, zero %, 2025 371,998
1,026,815 Ser. 96-5, Class PB, PO, zero %, 2024 884,344
196,183 Ser. 99-4, Class M, PO, zero %, 2023 185,087
969,786 Ser. 93-159, Class D, PO, zero %, 2023 889,173
512,555 Federal Home Loan Mortgage Corp. Ser. 57, Class A,
PO, zero %, 2023 508,150
24,618,291 FFCA Secured Lending Corp. Ser. 00-1, Class X, IO,
1.71s, 2020 2,104,864
Freddie Mac
631,014 Ser. 2154, Class SA, 24.83s, 2029 662,367
110,037 Ser. 2319, Class S, 21.932s, 2031 114,267
1,241,998 Ser. 2398, Class DT, 20.589s, 2032 1,243,939
Freddie Mac
1,737,937 Ser. 2413, Class SH, 20.199s, 2032 1,750,429
1,035,752 Ser. 2360, Class SC, 16.279s, 2031 1,077,830
664,000 Ser. 2028, Class SG, IO, 10.114s, 2023 162,680
1,379,786 Ser. 1717, Class L, 6 1/2s, 2024 1,466,450
1,300,208 Ser. 2044, Class SG, IO, 6 1/2s, 2023 58,509
6,536,727 Ser. 2448, Class SE, IO, 6 1/4s, 2029 551,536
3,799,300 Ser. 2448, Class SM, IO, 6.16s, 2032 730,178
10,903,690 Ser. 212, IO, 6s, 2031 2,427,775
2,292,016 Ser. 2389, Class EI, IO, 6s, 2021 257,852
695,670 Ser. 2351, Class EO, PO, zero %, 2031 716,540
285,857 Ser. 2337, PO, zero %, 2031 298,006
114,146 Ser. 2331, PO, zero %, 2031 103,302
2,961,936 Ser. 215, Class PO, PO, zero %, 2031 2,665,742
25,229 Ser. 2312, PO, zero %, 2031 22,832
40,976 Ser. 2317, PO, zero %, 2031 44,305
113,220 Ser. 2078, Class KC, PO, zero %, 2023 107,153
1,575,000 GE Capital Mortgage Services, Inc. Ser. 98-11,
Class 2A4, 6 3/4s, 2028 1,661,625
Government National Mortgage Association
8,840,467 Ser. 01-43, Class SJ, IO, 5.76s, 2029 654,747
1,019,513 Ser. 98-2, Class EA, PO, zero %, 2028 867,542
193,937 Ser. 99-42, PO, zero %, 2027 190,301
1,495,000 Granite Mortgages PLC FRN Ser. 01-1, Class 1C,
3.26s, 2041 (United Kingdom) 1,494,056
7,365,000 Holmes Financing PLC FRB Ser. 1, Class 2C, 3.01s, 2040 7,365,000
LB-UBS Commercial Mortgage Trust
740,000 Ser. 01-C3, Class A2, 6.37s, 2011 789,719
910,000 Ser. 01-C3, Class J, 6.16s, 2036 719,035
Merrill Lynch Mortgage Investors, Inc.
15,421,009 Ser. 96-C2, IO, 9.1s, 2028 1,033,208
1,615,000 Ser. 95-C3, Class D, 7.782s, 2025 1,759,656
1,495,000 Ser. 96-C2, Class E, 6.96s, 2028 1,513,746
9,494,469 Mortgage Capital Funding, Inc. Ser. 97-MC2, Class X, IO,
8.05s, 2012 482,319
58,365 Prudential Home Mortgage Securities Ser. 93-57, Class A4,
5.9s, 2023 59,222
868,660 Rural Housing Trust Ser. 87-1, Class D, 6.33s, 2026 904,475
-------------
Total Collateralized Mortgage Obligations (cost $91,821,148) $91,056,378
ASSET-BACKED SECURITIES (5.1%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$908,074 Arc Net Interest Margin Trust 144A Ser. 02-1A, Class A,
7 3/4s, 2032 $907,919
732,580 Asset Backed Funding Corp. NIM Trust Ser. 02-WF1,
9.32s, 2032 725,254
2,571,000 Bank One Issuance Trust Ser. 02-C1, Class C1, FRN,
2.799s, 2007 2,538,059
Bayview Financial Acquisition Trust
1,481,826 Ser. 01-DA, Class M3, FRN, 3.24s, 2031 1,481,826
1,390,000 Ser. 02-CA, Class AIO, IO, 14s, 2004 205,025
1,752,996 CDC Mortgage Capital Trust Ser. 02-HE1, Class M, FRN,
3.236s, 2033 1,735,466
Chase Funding Net Interest Margin
731,390 Ser. 02-1, Class Note, 8 1/2s, 2035 725,246
1,257,000 Ser. 02-2, 8 1/2s, 2032 1,257,000
598,871 Ser. 02-C1, Class Note, 8 1/2s, 2035 610,129
Conseco Finance Securitizations Corp.
4,265,000 Ser. 00-4, Class A6, 8.31s, 2032 4,608,315
1,535,000 Ser. 00-6, Class M2, 8.2s, 2032 1,463,934
1,436,000 Ser. 01-4, Class B1, 9.4s, 2010 1,372,695
5,263,133 Ser. 02-1, Class A, 6.681s, 2033 5,432,932
1,100,000 Consumer Credit Reference IDX Securities Ser. 02-1A,
Class A, FRB, 3.87s, 2007 1,102,406
1,713,383 First Plus 144A Ser. 98-A, Class A, 8 1/2s, 2023 1,130,833
385,000 Green Tree Financial Corp. Ser. 95-F, Class B2, 7.1s, 2021 343,733
3,539,249 Greenpoint Manufactured Housing Ser. 00-3, Class IA,
8.45s, 2031 3,826,813
1,755,000 LNR CDO, Ltd. Ser. 02-1A, Class FFL, 4.589s, 2037 1,649,700
1,457,253 Madison Avenue Manufactured Housing Contract
Ser. 02-A, Class B1, FRN, 5.09s, 2032 1,092,940
859,828 Mid-State Trust Ser. 10, Class B, 7.54s, 2026 868,426
Morgan Stanley Dean Witter Capital I
545,000 Ser. 01-NC3, Class B1, FRN, 4.287s, 2031 546,145
2,318,000 Ser. 01-NC4, Class B1, FRN, 4.337s, 2032 2,323,100
890,000 Ser. 02-AM2, Class B1, FRN, 4.09s, 2032 884,037
Morgan Stanley Dean Witter Capital I 144A
603,210 Ser. 01-AM1N, Class Note, 12 3/4s, 2032 603,210
1,277,602 Ser. 01-NC4N, Class Note, 8 1/2s, 2032 1,283,479
1,505,132 Option One Mortgage Securities Corp. Ser. 02-2A, Class
CFTS, 8.83s, 2032 1,505,132
1,291,918 Option One Mortgage Securities Corp. 144A Ser. 02-1,
Class CTFS, 6 3/4s, 2032 1,286,461
2,490,718 Pass-Through Amortizing Credit Card Trust Ser. 02-1A,
Class A4FL, 7.339s, 2012 2,490,718
544,000 TIAA Commercial Real Estate Securitization Ser. 02-1A,
Class IV, 6.84s, 2037 428,998
-------------
Total Asset-Backed Securities (cost $44,360,695) $44,429,931
PREFERRED STOCKS (1.5%) (a)
NUMBER OF SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
42,375 AmeriKing, Inc. $3.25 cum. pfd. (PIK) $424
43,276 Brand Scaffold Services, Inc. 144A $3.625 pfd. 2,163,800
62,400 California Federal Bancorp, Inc. Ser. A, $2.281 pfd. 1,622,400
33,332 Chevy Chase Capital Corp. Ser. A, $5.188 pfd. (PIK) 1,893,258
3,805 Chevy Chase Savings Bank, Inc. $3.25 pfd. 103,686
340,000 CSBI Capital Trust I 144A company guaranty Ser. A,
11.75% pfd. 385,050
28,919 CSC Holdings, Inc. Ser. M, $11.125 cum. pfd. (PIK) 1,388,112
1,185 Delta Financial Corp. Ser. A, $10.00 cum. pfd. 6,517
69,460 Diva Systems Corp. Ser. C, 6.00% cum. pfd. 695
20,000 Doane Pet Care Co. $7.125 pfd. 700,000
1,047 Dobson Communications Corp. 13.00% pfd. 523,500
619 Dobson Communications Corp. 12.25% pfd. (PIK) 309,290
540 First Republic Capital Corp. 144A 10.50% pfd. 540,000
710 Granite Broadcasting Corp. 12.75% cum. pfd. (PIK) 440,200
69 Leiner Health Products Ser. C, zero % cum. pfd. 1
2 Nextel Communications, Inc. Ser. D, 13.00% cum. pfd. (PIK) 1,000
1,095 Nextel Communications, Inc. Ser. E, 11.125% pfd. (PIK) 481,800
401 Paxson Communications Corp. 13.25% cum. pfd. (PIK) 2,406,000
1,612 Rural Cellular Corp. 12.25% pfd. (PIK) 274,074
-------------
Total Preferred Stocks (cost $19,317,214) $13,239,807
BRADY BONDS (1.1%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$4,051,339 Brazil (Federal Republic of) bonds 8s, 2014 $2,091,706
1,065,000 Brazil (Federal Republic of) government guaranty
Ser. 30YR, 3.063s, 2024 549,860
1,125,000 Brazil (Federal Republic of) govt. guaranty FRB
3 1/8s, 2012 461,250
1,000,000 Central Bank of Nigeria bonds Ser. WW, 6 1/4s, 2020 580,000
515,000 Peru (Republic of) coll. FLIRB 4s, 2017 298,700
1,650,000 United Mexican States bonds Ser. B, 6 1/4s, 2019 1,534,500
6,285,600 Venezuela (Republic of) debs. FRB Ser. DL, 2 7/8s, 2007 4,525,632
-------------
Total Brady Bonds (cost $12,278,012) $10,041,648
COMMON STOCKS (1.1%) (a)
NUMBER OF SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
3,074 Alderwoods Group, Inc. (NON) $21,641
525 AmeriKing, Inc. (NON) 5
45,677 Arch Wireless, Inc. (NON) 46
19,924 Aurora Foods, Inc. (NON) 28,890
8,087 Call-Net Enterprises, Inc. Class B (Canada) (NON) 2,264
277,865 Celcaribe SA (Colombia) (NON) 2,779
3,390,037 Contifinancial Corp. Liquidating Trust Units (NON) 161,027
21,241 Covad Communications Group, Inc. 144A (NON) 24,852
1,145 Delta Funding Residual Exchange Co., LLC (NON) 222,703
1,145 Delta Funding Residual Management, Inc. (NON) 11
28,440 Doskocil Manufacturing Company, Inc. (NON) 107,503
9,649 Genesis Health Ventures, Inc. (NON) 155,445
20,238 Intira Corp. 2
160,000 Loewen Group International, Inc. (NON) 16
1,250,000 Morrison Knudsen Corp. (NON) 87,500
1,330,000 Paracelsus Healthcare Corp. (NON) 133
39,407 Pioneer Cos., Inc. (NON) 108,369
1,186 Premium Holdings (L.P.) 144A 24,900
2,502 PSF Holdings LLC Class A 4,629,588
234 Quorum Broadcast Holdings, Inc. Class E (acquired 5/15/01,
cost $233,502) (RES) 179,463
236,020 Regal Entertainment Group 144A (acquired 5/9/02,
cost $1,872,959) (RES) (NON) 3,499,587
124 RSL Communications, Ltd. Class A (NON) 1
39,603 Safety Components International, Inc. (NON) 277,221
36,750 Specialty Foods Acquisition Corp. (NON) 368
1,195 Sun Healthcare Group, Inc. (NON) 12,607
2,169 Vast Solutions, Inc. Class B1 (NON) 6,507
2,169 Vast Solutions, Inc. Class B2 (NON) 6,507
2,169 Vast Solutions, Inc. Class B3 (NON) 6,507
1,807 Washington Group Intl., Inc. (NON) 32,526
-------------
Total Common Stocks (cost $19,280,249) $9,598,968
CONVERTIBLE BONDS AND NOTES (0.2%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$950,000 American Tower Corp. cv. notes 5s, 2010 $402,563
690,000 DaVita, Inc. cv. sub. notes 7s, 2009 680,513
1,610,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 (In default) (NON) 4,025
158,000 Hexcel Corp. cv. sub. notes 7s, 2003 128,770
990,000 Nextel Communications, Inc. cv. sr. notes 5 1/4s, 2010 529,650
150,000 Rogers Communications cv. debs. 2s, 2005 (Canada) 109,313
-------------
Total Convertible Bonds and Notes (cost $2,960,193) $1,854,834
CONVERTIBLE PREFERRED STOCKS (0.1%) (a)
NUMBER OF SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
218 Anker Coal Group, Inc. 14.25% cv. pfd. $1,090
77 Genesis Health Ventures, Inc. $6.00 cv. pfd. (PIK) 8,470
847 Hercules Trust II 6 1/2s cum. cv. pfd. 478,555
1,900 Interact Systems, Inc. 144A 14.00% cv. pfd. (In default) (NON) 19
6,800 LTV Corp. 144A $4.125 cv. pfd. (In default) (NON) 850
71 Paxson Communications Corp. 144A 9.75% cv. pfd. (PIK) 404,700
9,916 Telex Communications, Inc. zero % cv. pfd. (In default) (NON) 9,916
900 Weirton Steel Corp. Ser. C, zero % cv. pfd. 1,800
1,503 XCL, Ltd. 144A Ser. A, 9.50% cum. cv. pfd. (In default) (NON) (PIK) 752
-------------
Total Convertible Preferred Stocks (cost $1,734,278) $906,152
UNITS (0.1%) (a)
NUMBER OF UNITS VALUE
-------------------------------------------------------------------------------------------------------------------
500,000 SOI Funding Corp. 144A units 11 1/4s, 2009 $452,500
960,000 XCL, Ltd. 144A units 13 1/2s, 2004 (In default) (NON) 289,200
7,615 XCL, Ltd. 144A units cv. cum. pfd. $8.08 (In default) (NON) (PIK) 3,808
-------------
Total Units (cost $2,035,908) $745,508
WARRANTS (--%) (a) (NON) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
-------------------------------------------------------------------------------------------------------------------
16 Anker Coal Group, Inc. 144A 10/28/09 $1
780 Birch Telecommunications, Inc. 144A (PIK) 6/15/08 8
810 Club Regina, Inc. 144A 12/1/04 8
1,420 Dayton Superior Corp. 6/15/09 14,200
160 Decrane Aircraft Holdings Co. 9/30/08 1
2,919 Diva Systems Corp. 5/15/06 29
8,326 Diva Systems Corp. 144A 3/1/08 83
11,700 Genesis Health Ventures, Inc. 10/1/02 3,627
1,450 Horizon PCS, Inc. 10/1/10 15
25,863 Imperial Credit Industries, Inc. 8/1/08 26
1,900 Interact Systems, Inc. 8/1/03 2
1,900 Interact Systems, Inc. 144A 12/15/09 19
1,270 iPCS, Inc. 144A 7/15/10 318
820 IWO Holdings, Inc. 1/15/11 205
1,600 Jostens, Inc. 5/1/10 16,200
758 Leap Wireless International, Inc. 144A 4/15/10 8
4,144 Loral Space & Communications, Ltd. 12/27/06 41
3,590 McCaw International, Ltd. 4/15/07 36
550 Mikohn Gaming Corp. 144A 8/15/08 550
560 ONO Finance PLC 144A (United Kingdom) 2/15/11 1
990 Orbital Imaging Corp. 144A 3/1/05 1
1,310 Orion Network Systems 1/15/07 13
1,600 Paxson Communications Corp. 144A 6/30/03 1,600
570 Pliant Corp. 144A 6/1/10 1,140
680 Sterling Chemicals Holdings 8/15/08 408
2,987 Sun Healthcare Group, Inc. 2/28/05 1
630 Telehub Communications Corp. 144A 7/31/05 1
391 Telex Communications Group, Inc. 3/30/07 4
690 Travel Centers of America, Inc. 144A 5/1/09 7
2,310 Ubiquitel, Inc. 144A 4/15/10 1
5,820 UIH Australia/Pacific, Inc. 144A 5/15/06 58
22,321 United Artists Theatre 3/2/08 174,991
1,190 Veraldo Holdings, Inc. 144A 4/15/08 12
50 Versatel Telecom NV (Netherlands) 5/15/08 25
1,116 Washington Group International Ser. A 1/25/06 2,790
1,275 Washington Group International Ser. B 1/25/06 2,231
689 Washington Group International Ser. C 1/25/06 1,034
800 XM Satellite Radio Holdings, Inc. 144A 3/15/10 800
-------------
Total Warrants (cost $3,068,667) $220,495
SHORT-TERM INVESTMENTS (5.1%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$39,953,000 Interest in $500,000,000 joint tri-party repurchase agreement
dated July 31, 2002 with Deutsche Bank Alex Brown, Inc.
due August 1, 2002 with respect to various U.S. Government
obligations -- maturity value of $39,955,042 for an effective
yield of 1.84% $39,953,000
12,907 Short-term investments held as collateral for loaned securities
with yields ranging from 1.77% to 2.03% and due dates ranging
from August 1, 2002 to September 19, 2002 (d) 12,900
5,090,702 Short-term investments held in Putnam commingled cash account
with yields ranging from 1.70% to 1.84% and due dates ranging
from August 1, 2002 to September 25, 2002 (d) 5,090,702
-------------
Total Short-Term Investments (cost $45,056,602) $45,056,602
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,013,685,403) (b) $897,812,166
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $877,648,717.
(b) The aggregate identified cost on a tax basis is $1,017,184,455,
resulting in gross unrealized appreciation and depreciation of
$27,823,996 and $147,196,285, respectively, or net unrealized
depreciation of $119,372,289.
(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 at this rate.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at July 31, 2002 was
$39,148,852 or 4.5% of net assets.
(PIK) Income may be received in cash or additional securities at the
discretion of the issuer.
(DEF) Security is in default of principal and interest.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at July 31,
2002.
(d) See footnote 1 to the financial statements.
(R) Real Estate Investment Trust.
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).
FLIRB represents Front Loaded Interest Reduction Bond.
The rates shown on Floating Rate Bonds (FRB) and Floating Rate
Notes (FRN) are the current interest rates shown at July 31, 2002, which
are subject to change based on the terms of the security.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at July 31, 2002: (as percentage of Market Value)
Argentina 0.5%
Brazil 0.7
Bulgaria 0.7
Canada 2.6
Germany 2.5
Italy 0.6
Mexico 1.9
New Zealand 0.6
Russia 2.6
Sweden 2.3
United Kingdom 3.8
United States 78.1
Venezuela 0.6
Other 2.5
----
Total 100.0%
------------------------------------------------------------------------------
Forward Currency Contracts to Buy at July 31, 2002
(aggregate face value $78,934,074)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
------------------------------------------------------------------------------
Australian Dollars $23,981,879 $24,443,984 9/18/02 $(462,105)
British Pounds 5,519,858 5,482,309 9/18/02 37,549
Canadian Dollars 4,966,371 5,073,794 9/18/02 (107,423)
Euro 23,474,582 22,824,249 9/18/02 650,333
Japanese Yen 21,221,983 20,582,407 9/18/02 639,576
Swiss Franc 554,284 527,331 9/18/02 26,953
------------------------------------------------------------------------------
$784,883
------------------------------------------------------------------------------
Forward Currency Contracts to Sell at July 31, 2002
(aggregate face value $70,692,103)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
------------------------------------------------------------------------------
British Pounds $15,860,505 $15,194,750 9/18/02 $(665,755)
Canadian Dollars 7,967,191 8,021,840 9/18/02 54,649
Danish Krone 833,087 793,973 9/18/02 (39,114)
Euro 20,723,293 21,119,195 9/18/02 395,902
New Zealand
Dollars 5,452,715 5,715,952 9/18/02 263,237
Swedish Krona 20,417,640 19,846,393 9/18/02 (571,247)
------------------------------------------------------------------------------
$(562,328)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Futures Contracts Outstanding at July 31, 2002
Unrealized
Market Aggregate Face Expiration Appreciation/
Value Value Date (Depreciation)
------------------------------------------------------------------------------
CBT Interest Rate
Swap 10 Yr (Long) $2,449,500 $2,380,238 Sep-02 $69,262
Euro-BOBL 5 Yr
(Long) 19,708,312 19,159,349 Sep-02 548,963
Euro BUND 10 Yr
(Long) 22,488,472 21,963,056 Sep-02 525,416
Euro Dollar 90 day
(Short) 1,950,900 1,917,566 Jun-03 (33,334)
Euro Dollar 90 day
(Long) 1,941,500 1,909,134 Sep-03 32,366
Euro Dollar 90 day
(Long) 3,182,725 3,178,718 Mar-03 4,007
Euro Dollar 90 day
(Short) 3,128,125 3,120,595 Mar-04 (7,530)
Euro Yen 90 day
Simex (Long) 9,596,459 9,594,711 Sep-02 1,748
Euro Yen 90 day
Simex (Short) 9,590,216 9,581,880 Sep-03 (8,336)
Japanese
Government Bonds
10 Yr Tokyo Stock
Exchange(Long) 6,982,629 6,943,066 Sep-02 39,563
Japanese
Government Bonds
10 Yr Simex
(Long) 9,889,218 9,809,448 Sep-02 79,770
LIF Interest Rate
Swap 10 Yr (Long) 2,215,497 2,175,422 Sep-02 40,075
US Treasury Bond
(Long) 56,782,500 53,771,606 Sep-02 3,010,894
US Treasury Bond
(Short) 1,695,000 1,646,856 Sep-02 (48,144)
US Treasury Note
5 Yr (Short) 71,823,609 68,875,166 Sep-02 (2,948,443)
US Treasury Note
10 Yr (Short) 58,733,578 56,025,571 Sep-02 (2,708,007)
US Treasury Note
10 Yr (Long) 7,632,047 7,191,926 Sep-02 440,121
------------------------------------------------------------------------------
$(961,609)
------------------------------------------------------------------------------
Swap Contracts Outstanding at July 31, 2002
Notional Termination Unrealized
Amount Date Appreciation
------------------------------------------------------------------------------
Agreement with
Merrill Lynch
Capital Services
dated November
17, 2000 to pay
semi-annually the
notional amount
multiplied by the
return of
LIBOR-BBA and
receive the
notional amount
multiplied by
6.68% $9,000,000 11/21/05 $908,212
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2002
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value, including $11,341 of securities on loan
(identified cost $1,013,685,403) (Note 1) $897,812,166
-------------------------------------------------------------------------------------------
Cash 3,557,898
-------------------------------------------------------------------------------------------
Foreign currency (cost $2,094,521) 2,081,106
-------------------------------------------------------------------------------------------
Dividends, interest and other receivables 18,167,483
-------------------------------------------------------------------------------------------
Receivable for securities sold 15,745,680
-------------------------------------------------------------------------------------------
Receivable for open swap contracts (Note 1) 908,212
-------------------------------------------------------------------------------------------
Receivable for open forward currency contracts (Note 1) 2,013,049
-------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts (Note 1) 1,038,489
-------------------------------------------------------------------------------------------
Total assets 941,324,083
Liabilities
-------------------------------------------------------------------------------------------
Payable for variation margin (Note 1) 195,279
-------------------------------------------------------------------------------------------
Distributions payable to shareholders 6,334,793
-------------------------------------------------------------------------------------------
Payable for securities purchased 52,970,491
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,627,394
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 123,829
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 72,193
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,380
-------------------------------------------------------------------------------------------
Payable for open forward currency contracts (Note 1) 1,790,494
-------------------------------------------------------------------------------------------
Payable for closed forward currency contracts (Note 1) 425,580
-------------------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 12,900
-------------------------------------------------------------------------------------------
Other accrued expenses 120,033
-------------------------------------------------------------------------------------------
Total liabilities 63,675,366
-------------------------------------------------------------------------------------------
Net assets $877,648,717
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) 1,205,220,865
-------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (9,613,815)
-------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (202,314,837)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets and
liabilities in foreign currencies (115,643,496)
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares
outstanding $877,648,717
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value per share ($877,648,717 divided by 140,989,259
shares) $6.22
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
STATEMENT OF OPERATIONS
Year ended July 31, 2002
Investment income:
-------------------------------------------------------------------------------------------
Interest $83,253,133
-------------------------------------------------------------------------------------------
Dividends 2,058,542
-------------------------------------------------------------------------------------------
Securities lending 678
-------------------------------------------------------------------------------------------
Total investment income 85,312,353
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 6,502,446
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 843,786
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 26,298
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 14,354
-------------------------------------------------------------------------------------------
Other 565,873
-------------------------------------------------------------------------------------------
Total expenses 7,952,757
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (47,633)
-------------------------------------------------------------------------------------------
Net expenses 7,905,124
-------------------------------------------------------------------------------------------
Net investment income 77,407,229
-------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (50,238,572)
-------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (4,243,368)
-------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Notes 1 and 3) (939,660)
-------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 684
-------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in foreign
currencies during the year 3,146,945
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures contracts, swap
contracts and written options during the year (13,477,548)
-------------------------------------------------------------------------------------------
Net loss on investments (65,751,519)
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 11,655,710
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSETS
Year ended July 31
-----------------------------------
2002 2001
-------------------------------------------------------------------------------------------------------
Decrease in net assets
-------------------------------------------------------------------------------------------------------
Operations:
-------------------------------------------------------------------------------------------------------
Net investment income $77,407,229 $86,175,137
-------------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency
transactions (55,420,916) (48,500,275)
-------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets and
liabilities in foreign currencies (10,330,603) (21,624,968)
-------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 11,655,710 16,049,894
-------------------------------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
-------------------------------------------------------------------------------------------------------
From net investment income (74,641,521) (72,307,759)
-------------------------------------------------------------------------------------------------------
From return of capital (1,490,807) (15,103,543)
-------------------------------------------------------------------------------------------------------
Total decrease in net assets (64,476,618) (71,361,408)
Net assets
-------------------------------------------------------------------------------------------------------
Beginning of year 942,125,335 1,013,486,743
-------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of net investment
income of $9,613,815 and $14,128,356, respectively) $877,648,717 $942,125,335
-------------------------------------------------------------------------------------------------------
Number of fund shares
-------------------------------------------------------------------------------------------------------
Shares outstanding at beginning and end of year 140,989,259 140,989,259
-------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended July 31
-----------------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998
-----------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $6.68 $7.19 $7.62 $8.71 $8.88
-----------------------------------------------------------------------------------------------------
Investment operations:
-----------------------------------------------------------------------------------------------------
Net investment income (a) .55 .61 .63 .64 .74
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
loss on investments (.47) (.50) (.39) (.99) (.18)
-----------------------------------------------------------------------------------------------------
Total from
investment operations .08 .11 .24 (.35) .56
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.53) (.51) (.67) (.62) (.66)
-----------------------------------------------------------------------------------------------------
From net realized
gain on investments -- -- -- (.12) (.07)
-----------------------------------------------------------------------------------------------------
From return of capital (.01) (.11) -- -- --
-----------------------------------------------------------------------------------------------------
Total distributions (.54) (.62) (.67) (.74) (.73)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $6.22 $6.68 $7.19 $7.62 $8.71
-----------------------------------------------------------------------------------------------------
Total return at
market value (%)(b) 4.44 8.56 (1.51) (7.24) 8.06
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Market value,
end of period $6.03 $6.29 $6.38 $7.19 $8.50
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $877,649 $942,125 $1,013,487 $1,073,980 $1,221,188
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .86 .85 .83 .86 .89
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 8.39 8.87 8.48 8.05 8.34
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 175.78(d) 231.58 133.80 165.79 209.50
-----------------------------------------------------------------------------------------------------
(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
July 31, 2002
Note 1
Significant accounting policies
Putnam Premier Income Trust (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified,
closed-end management investment company. The fund's investment
objective is to seek high current income consistent with the
preservation of capital by allocating its investments among the U.S.
government sector, high yield sector and international sector of the
fixed-income securities market.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with 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 stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Market quotations are
not considered to be readily available for certain debt obligations;
such investments are stated at fair value on the basis of valuations
furnished by an independent pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size
trading units of such securities using methods based on market
transactions for comparable securities and variable relationships,
generally recognized by institutional traders, between securities. For
foreign investments, if trading or events occurring in other markets
after the close of the principal exchange in which the securities are
traded are expected to materially affect the value of the investments,
then those investments are valued, taking into consideration these
events, at their fair value following procedures approved by the
Trustees. Securities quoted in foreign currencies are translated into
U.S. dollars at the current exchange rate. Short-term investments having
remaining maturities of 60 days or less are stated at amortized cost,
which approximates market value. Other investments, including restricted
securities, are stated at fair value.
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 accounted for on the trade date (date the order to buy
or sell is executed). Gains or losses on securities sold are determined
on the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date. Non-cash dividends, if any, are recorded at the fair
market value of the securities received.
All premiums/discounts are amortized/accreted on a yield-to-maturity
basis. The premium in excess of the call price, if any, is amortized to
the call date; thereafter, the remaining excess premium is amortized to
maturity.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such gains and losses are included with the net
realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net realized
exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies and the difference between the amount
of investment income and foreign withholding taxes recorded on the
fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized appreciation and depreciation of assets and
liabilities in foreign currencies arise from changes in the value of
open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange
rate. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political
developments, and currency fluctuations, not present with domestic
investments.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date. 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.
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 agrees to receive from or
pay to the broker 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.
H) Interest rate swap contracts The fund may engage in interest rate
swap agreements, which are arrangements between two parties to exchange
cash flows based on a notional principal amount. The fund may enter into
interest rate swap agreements, to manage the fund's exposure to interest
rates. Interest rate swaps 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 included as part
of interest income. Payments received or made upon early termination 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.
I) TBA purchase commitments The fund may enter into "TBA" (to be
announced) purchase 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 fluctuate
more than 0.01% 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 in 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 current market 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 their 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.
J) Security lending The fund may lend securities, through its agent
Citibank N.A., 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 Citibank N.A., 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 July 31, 2002, the value of
securities loaned amounted to $11,341. The fund received cash collateral
of $12,900 which is pooled with collateral of other Putnam funds into 33
issuers of high-grade short-term investments.
K) 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, 2002, the fund had a capital loss carryover of approximately
$154,608,000 available to offset future capital gains, if any. The
amount of the carryover and the expiration dates are:
Loss Carryover Expiration
-------------- ------------------
$39,893,000 July 31, 2007
44,858,000 July 31, 2008
24,930,000 July 31, 2009
44,927,000 July 31, 2010
L) 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. These differences include temporary and permanent
differences of losses on wash sale transactions, foreign currency gains
and losses, post-October loss deferrals, dividends payable, defaulted
bond interest, realized and unrealized gains and losses on certain
futures contracts, paydown gains and losses on mortgage-backed
securities, market discount and interest on payment-in-kind securities.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. For the year ended July 31,
2002, the fund reclassified $1,748,833 to decrease distributions in
excess of net investment income and $73,840 to decrease paid-in-capital,
with an increase to accumulated net realized losses of $1,674,993. As of
July 31, 2002, the undistributed ordinary income on a tax basis was
zero.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.75% of the
first $500 million of average weekly net assets, 0.65% of the next $500
million, 0.60% of the next $500 million and 0.55% of any amount over
$1.5 billion.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam,
LLC. Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
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 year ended July 31, 2002, the
fund's expenses were reduced by $47,633 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $1,050 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 Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
Note 3
Purchases and sales of securities
During the year ended July 31, 2002, cost of purchases and proceeds from
sales of investment securities other than U.S. government obligations
and short-term investments aggregated $827,496,144 and $818,094,720,
respectively. Purchases and sales of U.S. government obligations
aggregated $1,171,503,408 and $1,192,922,632, respectively.
Written option transactions during the year are summarized as follows:
Contract Premiums
Amounts Received
---------------------------------------------------------------------------
Written options
outstanding at
beginning of year 1,664,000 $33,280
---------------------------------------------------------------------------
Options opened 6,126,048 27,813
Options expired (6,126,000) (11,167)
Options closed (1,664,048) (49,926)
---------------------------------------------------------------------------
Written options
outstanding at
end of year -- $--
---------------------------------------------------------------------------
Note 4
Share repurchase program
The Trustees authorized the fund to repurchase up to 7,000,000 of its
shares in the open market. Repurchases will only be made when the fund's
shares are trading at less than net asset value and at such times and
amounts as is believed to be in the best interest of the fund's
shareholders. Any repurchases of shares will have the effect of
increasing the net asset value per share of remaining shares
outstanding. For the year ended July 31, 2002, the fund did not
repurchase any shares. As of July 31, 2002, 511,000 shares have been
repurchased since the inception of the program.
Note 5
New accounting pronouncement
As required, the fund has adopted the provisions of the AICPA Audit and
Accounting Guide, Audits of Investment Companies. This Guide requires
that the fund amortize premium and accrete discount on all fixed-income
securities, and classify as interest income gains and losses realized on
paydowns on mortgage-backed securities. Prior to August 2001, the fund
did not amortize premium and accrete discounts for certain fixed income
securities and characterized as realized gains and losses paydowns on
mortgage-backed securities. Adopting these accounting principles did not
affect the fund's net asset value, but did change the classification of
certain amounts between interest income and realized and unrealized
gain/loss in the Statement of operations. The adoption of this principle
was not material to the financial statements.
FEDERAL TAX INFORMATION
(Unaudited)
For the year ended July 31, 2002, a portion of the fund's distribution
represents a return of capital and is therefore not taxable to
shareholders.
The fund has designated 1.14% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 2003 will show the tax status of
all distributions paid to your account in calendar 2002.
RESULTS OF JUNE 13, 2002 SHAREHOLDER MEETING
(Unaudited)
An annual meeting of shareholders of the fund was held on June 13, 2002.
At the meeting, each of the nominees for Trustees was elected, as
follows:
Votes
Votes for withheld
Jameson Adkins Baxter 129,768,706 2,801,733
Charles B. Curtis 129,666,439 2,904,000
John A. Hill 129,774,247 2,796,192
Ronald J. Jackson 129,780,091 2,790,348
Paul L. Joskow 129,680,070 2,890,369
Elizabeth T. Kennan 129,766,242 2,804,197
Lawrence J. Lasser 129,775,131 2,795,308
John H. Mullin, III 129,775,921 2,794,518
Robert E. Patterson 129,765,882 2,804,557
George Putnam, III 129,761,292 2,809,147
A.J.C. Smith 129,760,258 2,810,181
W. Thomas Stephens 129,772,971 2,797,468
W. Nicholas Thorndike 129,766,618 2,803,821
All tabulations are rounded to nearest whole number.
TRUSTEES
Name, Address, 1 Date of Birth,
Position(s) Held with Fund
and Length of Service Principal Occupation(s)
as a Putnam Fund Trustee 2 During Past 5 Years Other Directorships Held by Trustee
-------------------------------------------------------------------------------------------------------
Jameson A. Baxter (9/6/43), President, Baxter Director of ASHTA Chemicals, Inc.,
Trustee since 1994 Associates, Inc. Banta Corporation (a printing and
(a management digital imaging firm), Intermatic
consulting and private Corporation (manufacturer of energy
investments firm) control products), Ryerson Tull, Inc.
(a steel service corporation),
Advocate Health Care, and the
National Center for Nonprofit
Boards. Chairman Emeritus
of the Board of Trustees, Mount
Holyoke College. Also held various
positions in investment banking and
corporate finance, including Vice
President and principal of the
Regency Group and consultant to
First Boston Corp.
Charles B. Curtis (4/27/40), President and Chief Member of the Council on Foreign
Trustee since 2001 Operating Officer, Relations, the Electric Power
Nuclear Threat Research Institute Advisory Council,
Initiative (a private the Board of Directors of the Gas
foundation dedicated Technology Institute, the University
to reducing the threat of Chicago Board of Governors for
of weapons of mass Argonne National Laboratory, the
destruction), also serves Board of Directors of the
as Senior Advisor to the Environment and Natural Resources
United Nations Program Steering Committee,
Foundation John F. Kennedy School of
Government, Harvard University.
Prior to 2002, Mr. Curtis was a
member of the Board of Directors of
the Gas Technology Institute. Until
2001, Mr. Curtis was a Member of
the Department of Defense's Policy
Board and Director of EG&G
Technical Services, Inc. (fossil energy
research and development support)
and prior to May 1997, Mr. Curtis
was Deputy Secretary of Energy.
John A. Hill (1/31/42), Vice-Chairman and Director of Devon Energy
Trustee since 1985 and Managing Director, Corporation (formerly known as
Chairman since 2000 First Reserve Snyder Oil Corporation),
Corporation TransMontaigne Oil Company,
(a registered investment Continuum Health Partners of
advisor investing in New York, Sarah Lawrence College,
companies in the and various private companies owned
world-wide energy by First Reserve Corporation.
industry on behalf of Trustee of TH Lee, Putnam
institutional investors) Investment Trust (a closed-end
investment company). Prior to
acquiring First Reserve in 1983,
Mr. Hill held executive positions
with several advisory firms and
various positions with the federal
government, including Associate
Director of the Office of Manage
ment and Budget and Deputy
Director of the Federal Energy
Administration.
Ronald J. Jackson Private investor Former Chairman, President, and
(12/17/43), Chief Executive Officer of Fisher-
Trustee since 1996 Price, Inc. (a toy manufacturer).
Previously served as President and
Chief Executive Officer of Stride-
Rite, Inc. and Kenner Parker Toys.
Also held financial and marketing
positions with General Mills, Parker
Brothers, and Talbots. President of
the Kathleen and Ronald J. Jackson
Foundation (charitable trust).
Member of the Board of Overseers of
WGBH (public television and radio).
Member of the Board of Overseers of
the Peabody Essex Museum.
Paul L. Joskow (6/30/47), Elizabeth and James Director, National Grid Group
Trustee since 1997 Killian Professor of (a UK-based holding company
Economics and with interests in electric power,
Management and natural gas distribution, and
Director of the Center telecommunications networks), and
for Energy and the Whitehead Institute for
Environmental Policy Biomedical Research (a non-profit
Research, Massachusetts research institution). President of the
Institute of Technology Yale University Council. Prior to
February 2002, March 2000, and
September 1998, Dr. Joskow was a
Director of State Farm Indemnity
Company (an automobile insurance
company), Director of New England
Electric System (a public utility
holding company) and a consultant
to National Economic Research
Associates, respectively.
Elizabeth T. Kennan Chairman, Cambus- Director, Northeast Utilities, and
(2/25/38), Kenneth Bloodstock (a Talbots (a distributor of women's
Trustee since 1992 limited liability company apparel). Trustee of Centre College.
involved in thoroughbred Prior to 2001, Dr. Kennan was a
horse breeding and member of the Oversight Committee
farming), President of Folger Shakespeare Library.
Emeritus of Mount Prior to September 2000, June 2000,
Holyoke College and November 1999, Dr. Kennan
was a Director of Chastain Real
Estate, Bell Atlantic, and Kentucky
Home Life Insurance, respectively.
Prior to 1995, Dr. Kennan was a
Trustee of Notre Dame University.
For 12 years, she was on the faculty
of Catholic University.
John H. Mullin, III Chairman and CEO Director Alex. Brown Realty, Inc.,
(6/15/41), of Ridgeway Farm Sonoco Products, Inc. (a packaging
Trustee since 1997 (a limited liability company), The Liberty Corporation
company engaged in (a company engaged in the
timber and farming) broadcasting industry), and Progress
Energy, Inc. (a utility company,
formerly known as Carolina Power
& Light). Trustee Emeritus of
Washington & Lee University. Prior
to October 1997, January 1998, and
May 2001, Mr. Mullin was a Director
of Dillon, Read and Co. Inc.,
The Ryland Group, Inc., and
Graphic Packaging International
Corp., respectively.
Robert E. Patterson Senior Partner of Cabot Chairman of the Joslin Diabetes
(3/15/45), Properties, LLP and Center, Trustee of SEA Education
Trustee since 1984 Chairman of Cabot Association, and Director of
Properties, Inc. Brandywine Trust Company (a trust
company). Prior to February 1998,
Mr. Patterson was Executive Vice
President and Director of
Acquisitions of Cabot Partners
Limited Partnership. Prior to
December 2001, Mr. Patterson was
President and Trustee of Cabot
Industrial Trust (publicly traded real
estate investment trust). Prior to
1990, Mr. Patterson was Executive
Vice President of Cabot, Cabot &
Forbes Realty Advisors, the
predecessor of Cabot Partners, and
prior to that was Senior Vice
President of the Beal Companies.
W. Thomas Stephens Corporate Director Director of Qwest Communications
(9/2/42), (communications company), Xcel
Trustee since 1997 Energy Incorporated (public utility
company), TransCanada Pipelines,
Norske Canada, Inc. (paper
manufacturer) and Mail-Well
(printing and envelope company).
Prior to July 2001 and October 1999,
Mr. Stephens was Chairman of Mail-
Well and MacMillan-Bloedel (forest
products company). Prior to 1996,
Mr. Stephens was Chairman and
Chief Executive Officer of
Johns Manville.
W. Nicholas Thorndike Director of various Trustee of Northeastern University and
(3/28/33), corporations and Honorary Trustee of Massachusetts
Trustee since 1992 charitable General Hospital. Prior to
organizations, September 2000, April 2000, and
including Courier December 2001, Mr. Thorndike was
Corporation (a book a Director of Bradley Real Estate,
manufacturer) and Inc., a Trustee of Eastern Utilities
Providence Journal Co. Associates, and a Trustee of Cabot
(a newspaper publisher) Industrial Trust, respectively.
Previously served as Chairman of the
Board and managing partner of
Wellington Management/Thorndike
Doran Paine & Lewis, and Chairman
and Director of Ivest Fund.
Lawrence J. Lasser* President and Chief Director of Marsh & McLennan
(11/1/42), Executive Officer Companies, Inc. and the United Way
Trustee since 1992 of Putnam of Massachusetts Bay. Member of the
Vice President since 1981 Investments, LLC, Board of Governors of the Investment
and Putnam Investment Company Institute, Trustee of the
Management, LLC Museum of Fine Arts, Boston, a
Trustee and Member of the Finance
and Executive Committees of Beth
Israel Deaconess Medical Center,
Boston, and a Member of the
CareGroup Board of Managers
Investment Committee, the Council
on Foreign Relations, and the
Commercial Club of Boston.
George Putnam, III* President, New Director of The Boston Family
(8/10/51), Generation Research, Office, L.L.C. (registered investment
Trustee since 1984 and Inc. (a publisher of advisor), Trustee of the SEA
President since 2000 financial advisory and Education Association, Trustee of
other research services St. Mark's School, and Trustee of
relating to bankrupt and Shore Country Day School.
distressed companies) Previously, Mr. Putnam was an
and New Generation attorney with the firm of Dechert
Advisers, Inc. Price & Rhoads.
(a registered
investment adviser)
A.J.C. Smith (4/13/34),* Director of Marsh & Director of Trident Corp. (a limited
Trustee since 1986 McLennan partnership with over 30 institutional
Companies, Inc. investors). Trustee of the Carnegie
Hall Society, the Educational
Broadcasting Corporation and the
National Museums of Scotland.
Chairman of the Central Park
Conservancy. Member of the Board
of Overseers of the Joan and
Sanford I. Weill Graduate School
of Medical Sciences of Cornell
University. Fellow of the Faculty of
Actuaries in Edinburgh, the
Canadian Institute of Actuaries, and
the Conference of Actuaries.
Associate of the Society of Actuaries.
Member of the American Actuaries,
the International Actuarial
Association and the International
Association of Consulting Actuaries.
Prior to May 2000 and November
1999, Mr. Smith was Chairman and
CEO, respectively, of Marsh &
McLennan Companies, Inc.
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1 The address of each Trustee is One Post Office Square, Boston, MA 02109. As of July 31, 2002, there
were 113 Putnam Funds.
2 Each Trustee serves for an indefinite term, until his or her resignation, death, or removal.
* Trustees who are or may be deemed to be "interested persons" (as defined in the Investment Company Act
of 1940) of the fund, Putnam Management or Putnam Retail Management. Messrs. Putnam, III, Lasser, and
Smith are deemed "interested persons" by virtue of their positions as officers or shareholders of the
fund, or officers of Putnam Management, Putnam Retail Management, or Marsh & McLennan Companies, Inc.,
the parent company of Putnam Management and Putnam Retail Management. George Putnam, III, is the
President of your Fund and each of the other Putnam Funds. Lawrence J. Lasser has been the President,
Chief Executive Officer, and a Director of Putnam Investments, LLC, and Putnam Management since 1985,
having begun his career there in 1969. Mr. Lasser currently also serves as a Director of Marsh &
McLennan Companies, Inc., the parent company of Putnam Management. A.J.C. Smith is a Director of
Marsh & McLennan Companies, Inc.
OFFICERS
Name, Address, 1 Date of Birth, Inception of Service
Position(s) Held with Fund with the Putnam Funds Principal Occupation(s) During Past 5 Years
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Charles E. Porter (7/26/38), Since 1989 Managing Director, Putnam Investments,
Executive Vice President, LLC and Putnam Management
Treasurer & Principal
Financial Officer
Patricia C. Flaherty Since 1993 Senior Vice President, Putnam
(12/1/46), Investments, LLC and Putnam Management
Senior Vice President
Michael T. Healy (1/24/58), Since 2000 Managing Director, Putnam
Assistant Treasurer and Investments, LLC
Principal Accounting
Officer
Gordon H. Silver (7/3/47), Since 1990 Senior Managing Director, Putnam
Vice President Investments, LLC and Putnam Management
Brett C. Browchuk Since 1994 Managing Director, Putnam Investments,
(2/27/63), Vice President LLC and Putnam Management
Ian C. Ferguson (7/3/57), Since 1997 Senior Managing Director, Putnam
Vice President Investments, LLC and Putnam Management
Richard G. Leibovitch Since 1999 Managing Director of Putnam Investments,
(10/31/63), Vice President LLC and Putnam Management. Prior to
February 1999, Managing Director at
J.P. Morgan.
Richard A. Monaghan Since 1998 Managing Director, Putnam Investments,
(8/25/54), LLC, Putnam Management and Putnam
Vice President Retail Management
John R. Verani Since 1988 Senior Vice President, Putnam
(6/11/39), Investments, LLC and Putnam Management
Vice President
Kevin M. Cronin Since 2000 Managing Director of Putnam Management
(6/13/61),
Vice President
Stephen M. Oristaglio Since 1998 Senior Managing Director of Putnam
(8/21/55), Management. Prior to July 1998, Managing
Vice President Director, Swiss Bank Corp.
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1 The address of each Officer is One Post Office Square, Boston, MA 02109.
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 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
INDEPENDENT ACCOUNTANTS
KPMG LLP
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
President
Charles E. Porter
Executive Vice President and Treasurer
Patricia C. Flaherty
Senior Vice President
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen M. Oristaglio
Vice President
Kevin M. Cronin
Vice President
Richard G. Leibovitch
Vice President
Richard A. Monaghan
Vice President
John R. Verani
Vice President
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time, or
visit our Web site (www.putnaminvestments.com) anytime for up-to-date
information about the fund's NAV.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
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For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
83999 073 9/02