UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-21323
---------
Eaton Vance Limited Duration Income Fund
----------------------------------------
(Exact Name of registrant as Specified in Charter)
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
-----------------------------------------------------------------------
(Address of Principal Executive Offices)
Alan R. Dynner
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
-----------------------------------------------------------------------
(Name and Address of Agent for Services)
(617) 482-8260
--------------
(registrant's Telephone Number)
April 30
--------
Date of Fiscal Year End
October 31, 2004
----------------
Date of Reporting Period
ITEM 1. REPORTS TO STOCKHOLDERS
[EV LOGO]
[GRAPHIC IMAGE]
SEMIANNUAL REPORT OCTOBER 31, 2004
[GRAPHIC IMAGE]
EATON VANCE LIMITED DURATION INCOME FUND
[GRAPHIC IMAGE]
PRIVACY NOTICE
The Eaton Vance organization is committed to ensuring your financial privacy.
Each of the financial institutions identified below has in effect the following
policy ("Privacy Policy") with respect to nonpublic personal information about
its customers:
- Only such information received from you, through application forms or
otherwise, and information about your Eaton Vance fund transactions will
be collected. This may include information such as name, address, social
security, tax status, account balances and transactions.
- None of such information about you (or former customers) will be disclosed
to anyone, except as permitted by law (which includes disclosure to
employees necessary to service your account). In the normal course of
servicing a customer's account, Eaton Vance may share information with
unaffiliated third parties that perform various required services such as
transfer agents, custodians and broker/dealers.
- Policies and procedures (including physical, electronic and procedural
safeguards) are in place that are designed to protect the confidentiality
of such information.
- We reserve the right to change our Privacy Policy at any time upon proper
notification to you. Customers may want to review our Policy periodically
for changes by accessing the link on our homepage: www.eatonvance.com.
Our pledge of privacy applies to the following entities within the Eaton Vance
organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton
Vance Investment Counsel, Boston Management and Research, and Eaton Vance
Distributors, Inc.
In addition, our Privacy Policy only applies only to those Eaton Vance customers
who are individuals and who have a direct relationship with us. If a customer's
account (i.e., fund shares) is held in the name of a third-party financial
adviser/broker-dealer, it is likely that only such adviser's privacy policies
apply to the customer. This notice supersedes all previously issued privacy
disclosures.
For more information about Eaton Vance's Privacy Policy,
please call 1-800-262-1122.
IMPORTANT NOTICE
REGARDING DELIVERY OF
SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission permits funds to deliver only one copy of
shareholder documents, including prospectuses, proxy statements and shareholder
reports, to fund investors with multiple accounts at the same residential or
post office box address. This practice is often called "householding" and it
helps eliminate duplicate mailings to shareholders.
EATON VANCE, OR YOUR FINANCIAL ADVISER, MAY HOUSEHOLD THE MAILING OF YOUR
DOCUMENTS INDEFINITELY UNLESS YOU INSTRUCT EATON VANCE, OR YOUR FINANCIAL
ADVISER, OTHERWISE.
If you would prefer that your Eaton Vance documents not be householded, please
contact Eaton Vance at 1-800-262-1122, or contact your financial adviser.
Your instructions that householding not apply to delivery of your Eaton Vance
documents will be effective within 30 days of receipt by Eaton Vance or your
financial adviser.
The Fund will file a schedule of its portfolio holdings on Form N-Q with the
Securities and Exchange Commission (the "SEC") for the first and third quarters
of each fiscal year. The Fund's Form N-Q will be available on the Eaton Vance
website www.eatonvance.com, by calling Eaton Vance at 1-800-262-1122 or in the
EDGAR database on the SEC's website at www.sec.gov. Form N-Q may also be
reviewed and copied at the SEC's public reference room in Washington, D.C. (call
1-800-732-0330 for information on the operation of the public reference room).
From time to time, funds are required to vote proxies related to the securities
held by the funds. The Eaton Vance Funds or their underlying Portfolios vote
proxies according to a set of policies and procedures approved by the Funds' and
Portfolios' Boards. You may obtain a description of these policies and
procedures without charge, upon request, by calling 1-800-262-1122. This
description is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
EATON VANCE LIMITED DURATION INCOME FUND as of October 31, 2004
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
THE FUND
Performance
- Based on the Fund's October 2004 monthly dividend of $0.1345 and a closing
share price of $19.25, the Fund had a market yield of 8.38%.(1)
- Based on share price (traded on the American Stock Exchange), the Fund had a
total return of 12.84% for the six months ended October 31, 2004. That return
was the result of an increase in share price from $17.81 on April 30, 2004 to
$19.25 on October 31, 2004 and the reinvestment of $0.807 in regular monthly
dividends.(1)
- Based on net asset value, the Fund had a total return of 4.12% for the six
months ended October 31, 2004. That return was the result of a decrease in
net asset value per share from $19.07 on April 30, 2004 to $19.02 on October
31, 2004, and the reinvestment of all distributions.
The Fund's Investments
- Among the corporate loan and bond portfolio portions of the Fund, the Fund's
managers continued to emphasize broad industry diversification. Investments
included companies in cyclical sectors that may benefit from a continued
recovery in overall economic activity. The Fund also had commitments in
defensive, non-economically sensitive companies whose revenues derive from
non-discretionary expenditures and are, therefore, less reliant on a
sustained recovery. At October 31, 2004, the Fund's investments represented
52 industries, with no single sector representing as much as 8% of the Fund's
net assets. The largest industry weightings were telecommunications, health
care, chemicals and plastics, radio and television and publishing.
- Due to improving fundamentals and strong technical factors in the loan
market, loan credit spreads for new issues narrowed and prices averaged
above-par in the secondary market. These trends have increased the importance
of diligent risk-management.
- Among its high-yield corporate bond investments, while management continued
its historical focus on the B-rated portion of the high-yield market, the
Fund was less involved in turnaround situations, focusing instead on B-rated
bonds that management believes may be positioned for an upgrade. The Fund's
chemical investments fared especially well, as producers of commodity
chemicals and specialty chemicals alike have seen increased demand in
response to a stronger economy. These companies have products used in
industrial processes and are thus leveraged to a turnaround in the broader
cyclical economy and could benefit from an upturn in manufacturing.
- The mortgage-backed securities (MBS) market improved somewhat during the
year. Seasoned MBS spreads were around 150 basis points (1.50%) at October
31, 2004, down from 175 basis points (1.75%) at April 30, 2004. Prepayment
rates for the Fund's seasoned MBS declined significantly over the course of
the year, falling to near 25% by October 31, 2004 from from their peak around
50% in 2003. Interestingly, while this trend marked a significant
improvement, the rate of decline was somewhat below expectations due, in
part, to a flattening of the yield curve. That is, while short-term rates
rose, longer-term rates moved slightly lower, keeping 30-year mortgage rates
near historical lows. We believe that seasoned MBS may fare better in a
stable-to slightly-higher long-term interest rate scenario. Signs of a
sustained economic recovery would likely pressure long-term rates higher.
THE VIEWS EXPRESSED IN THIS REPORT ARE THOSE OF THE PORTFOLIO MANAGERS AND
ARE CURRENT ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THESE VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET
OR OTHER CONDITIONS, AND EATON VANCE DISCLAIMS ANY RESPONSIBILITY TO UPDATE
SUCH VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND,
BECAUSE INVESTMENT DECISIONS FOR AN EATON VANCE FUND ARE BASED ON MANY
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON BEHALF
OF ANY EATON VANCE FUND.
FUND INFORMATION
AS OF OCTOBER 31, 2004
PERFORMANCE(2)
AVERAGE ANNUAL TOTAL RETURN (BY SHARE PRICE, AMEX)
----------------------------------------------------------------
One year 11.66%
Life of Fund (5/30/03) 8.91
AVERAGE ANNUAL TOTAL RETURN (AT NET ASSET VALUE)
----------------------------------------------------------------
One year 8.30%
Life of Fund (5/30/03) 8.00
(1) THE FUND'S MARKET YIELD IS CALCULATED BY DIVIDING THE MOST RECENT DIVIDEND
PER SHARE BY THE SHARE MARKET PRICE AT THE END OF THE PERIOD AND
ANNUALIZING THE RESULT. (2) RETURNS ARE HISTORICAL AND ARE CALCULATED BY
DETERMINING THE PERCENTAGE CHANGE IN NET ASSET VALUE OR SHARE PRICE (AS
APPLICABLE) WITH ALL DISTRIBUTIONS REINVESTED. PERFORMANCE RESULTS REFLECT
THE EFFECT OF LEVERAGE RESULTING FROM THE FUND'S ISSUANCE OF AUCTION
PREFERRED SHARES. IN THE EVENT OF A RISE IN LONG-TERM INTEREST RATES, THE
VALUE OF THE FUND'S INVESTMENT PORTFOLIO COULD DECLINE, WHICH WOULD REDUCE
THE ASSET COVERAGE FOR ITS AUCTION PREFERRED SHARES.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. RETURNS ARE
HISTORICAL AND ARE CALCULATED BY DETERMINING THE PERCENTAGE CHANGE IN
NET ASSET VALUE OR SHARE PRICE (AS APPLICABLE) WITH ALL DISTRIBUTIONS
REINVESTED. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO
THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. PERFORMANCE IS FOR THE STATED TIME PERIOD ONLY; DUE TO
MARKET VOLATILITY, THE FUND'S CURRENT PERFORMANCE MAY BE LOWER OR
HIGHER THAN THE QUOTED RETURN.
FUND SHARES ARE NOT INSURED BY THE FDIC AND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED. YIELDS WILL
VARY.
2
EATON VANCE LIMITED DURATION INCOME FUND as of October 31, 2004
PORTFOLIO OF INVESTMENTS (Unaudited)
SENIOR, FLOATING RATE INTERESTS -- 48.5%(1)
PRINCIPAL
AMOUNT BORROWER/TRANCHE DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.8%
ALLIANT TECHSYSTEMS, INC.
$ 3,450,000 Term Loan, 5.67%, Maturing March 31, 2011 $ 3,497,437
CACI INTERNATIONAL, INC.
1,368,125 Term Loan, 3.95%, Maturing May 3, 2011 1,381,806
STANDARD AERO HOLDINGS, INC.
790,193 Term Loan, 4.51%, Maturing August 24, 2012 801,552
TRANSDIGM, INC.
5,273,500 Term Loan, 5.44%, Maturing July 22, 2010 5,347,661
UNITED DEFENSE INDUSTRIES, INC.
5,199,536 Term Loan, 3.97%, Maturing June 30, 2009 5,250,881
---------------------------------------------------------------------------------------------------
$ 16,279,337
---------------------------------------------------------------------------------------------------
AIR TRANSPORT -- 0.0%
UNITED AIRLINES, INC.
$ 1,000,000 DIP Loan, 8.00%, Maturing June 30, 2005 $ 1,011,250
---------------------------------------------------------------------------------------------------
$ 1,011,250
---------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 2.9%
ACCURIDE CORP.
$ 4,875,500 Term Loan, 6.69%, Maturing June 13, 2007 $ 5,006,529
COLLINS & AIKMAN PRODUCTS, CO.
2,967,840 Revolving Loan, 5.81%, Maturing August 31, 2009 2,964,130
DAYCO PRODUCTS, LLC
2,992,500 Term Loan, 3.98%, Maturing June 23, 2011 3,041,128
EXIDE TECHNOLOGIES
1,275,000 Term Loan, 5.25%, Maturing May 5, 2010 1,278,187
1,275,000 Term Loan, 5.25%, Maturing May 5, 2010 1,278,187
FEDERAL-MOGUL CORP.
1,919,081 Term Loan, 5.71%, Maturing February 6, 2005 1,940,671
5,626,706 Term Loan, 5.71%, Maturing February 24, 2005 5,668,906
HLI OPERATING CO., INC.
5,711,667 Term Loan, 4.25%, Maturing June 3, 2009 5,789,311
KEY AUTOMOTIVE GROUP
1,189,872 Term Loan, 4.87%, Maturing June 29, 2010 1,204,374
MERIDIAN AUTOMOTIVE SYSTEMS
298,500 Term Loan, 4.44%, Maturing April 27, 2010 278,351
METALDYNE CORP.
2,639,686 Term Loan, 4.48%, Maturing December 31, 2009 2,633,636
PLASTECH ENGINEERED PRODUCTS
881,379 Term Loan, 5.09%, Maturing March 31, 2010 896,253
R.J. TOWER CORP.
$ 1,750,000 Term Loan, 8.94%, Maturing January 29, 2010 $ 1,755,469
TENNECO AUTOMOTIVE, INC.
2,094,288 Term Loan, 4.88%, Maturing December 12, 2009 2,133,556
949,552 Term Loan, 4.88%, Maturing December 12, 2010 967,752
THE GOODYEAR TIRE & RUBBER CO.
2,500,000 Term Loan, 5.16%, Maturing March 31, 2006 2,536,720
8,000,000 Term Loan, 6.43%, Maturing March 31, 2006 8,155,000
TI AUTOMOTIVE LIMITED
1,375,000 Term Loan, 5.23%, Maturing June 30, 2011 1,366,406
TRIMAS CORP.
4,730,927 Term Loan, 5.62%, Maturing December 31, 2009 4,778,236
TRW AUTOMOTIVE, INC.
2,010,420 Term Loan, 4.13%, Maturing February 27, 2009 2,037,058
3,055,427 Term Loan, 4.13%, Maturing February 27, 2011 3,106,669
UNITED COMPONENTS, INC.
1,713,333 Term Loan, 6.09%, Maturing June 30, 2010 1,737,962
---------------------------------------------------------------------------------------------------
$ 60,554,491
---------------------------------------------------------------------------------------------------
BEVERAGE AND TOBACCO -- 0.4%
CONSTELLATION BRANDS, INC.
$ 1,718,750 Term Loan, 3.50%, Maturing November 30, 2008 $ 1,729,032
CULLIGAN INTERNATIONAL CO.
700,000 Term Loan, 4.34%, Maturing September 30, 2011 710,797
DS WATERS, L.P.
1,509,423 Term Loan, 4.83%, Maturing November 7, 2009 1,470,178
SOUTHERN WINE & SPIRITS OF AMERICA
4,363,233 Term Loan, 4.32%, Maturing June 28, 2008 4,421,182
SUNNY DELIGHT BEVERAGES CO.
720,000 Term Loan, 5.98%, Maturing August 20, 2010 725,400
---------------------------------------------------------------------------------------------------
$ 9,056,589
---------------------------------------------------------------------------------------------------
BUILDING AND DEVELOPMENT -- 1.8%
BRE/HOMESTEAD, LLC
$ 4,000,000 Term Loan, 5.87%, Maturing January 11, 2006 $ 3,992,500
DMB/CHII, LLC
1,471,075 Term Loan, 4.38%, Maturing March 3, 2009 1,474,752
FORMICA CORP.
78,574 Term Loan, 6.96%, Maturing June 10, 2010 78,967
192,055 Term Loan, 6.96%, Maturing June 10, 2010 193,015
98,218 Term Loan, 6.96%, Maturing June 10, 2010 98,709
286,102 Term Loan, 6.96%, Maturing June 10, 2010 287,532
See notes to financial statements
3
PRINCIPAL
AMOUNT BORROWER/TRANCHE DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------
BUILDING AND DEVELOPMENT (CONTINUED)
LANDSOURCE COMMUNITIES, LLC
$ 1,002,000 Term Loan, 4.50%, Maturing March 31, 2010 $ 1,018,909
MAAX CORP.
927,675 Term Loan, 4.61%, Maturing June 4, 2011 938,691
MUELLER GROUP, INC.
2,362,385 Term Loan, 4.71%, Maturing April 23, 2011 2,381,580
NCI BUILDING SYSTEMS, INC.
875,000 Term Loan, 3.82%, Maturing June 18, 2010 886,211
NEWKIRK MASTER, L.P.
410,789 Term Loan, 3.62%, Maturing November 24, 2006 416,951
NEWKIRK TENDER HOLDINGS, LLC
1,798,216 Term Loan, 7.89%, Maturing May 25, 2006 1,816,198
4,333,333 Term Loan, 7.89%, Maturing May 25, 2006 4,376,667
NORTEK, INC.
2,050,000 Term Loan, 4.74%, Maturing August 27, 2011 2,082,458
PANOLAM INDUSTRIES, INC.
500,000 Term Loan, 9.94%, Maturing November 24, 2007 505,000
PLY GEM INDUSTRIES, INC.
800,000 Term Loan, 4.59%, Maturing February 12, 2011 807,750
2,156,663 Term Loan, 4.59%, Maturing February 12, 2011 2,177,556
380,588 Term Loan, 4.59%, Maturing February 12, 2011 384,275
ST. MARYS CEMENT, INC.
1,989,987 Term Loan, 3.98%, Maturing December 4, 2010 2,010,510
SUGARLOAF MILLS, LLC
2,000,000 Term Loan, 4.84%, Maturing April 7, 2008 1,995,000
TOWER FINANCING, LLC
2,750,000 Term Loan, 5.44%, Maturing July 9, 2008 2,753,437
WFP TOWER A CO. L.P.
4,500,000 Term Loan, 4.13%, Maturing June 12, 2006 4,504,221
WHITEHALL STREET REAL ESTATE L.P.
3,972,026 Term Loan, 4.21%, Maturing September 11, 2006(2) 3,987,398
---------------------------------------------------------------------------------------------------
$ 39,168,287
---------------------------------------------------------------------------------------------------
BUSINESS EQUIPMENT AND SERVICES -- 0.7%
ALLIED SECURITY HOLDINGS, LLC
$ 850,000 Term Loan, 6.23%, Maturing June 30, 2010 $ 860,625
BAKER & TAYLOR, INC.
1,350,000 Term Loan, 9.00%, Maturing May 6, 2011 1,350,000
GLOBAL IMAGING SYSTEMS, INC.
2,423,759 Term Loan, 3.74%, Maturing May 10, 2010 2,454,056
INFOUSA, INC.
872,813 Term Loan, 4.63%, Maturing June 4, 2010 883,723
IRON MOUNTAIN, INC.
1,680,308 Term Loan, 3.56%, Maturing April 2, 2011 1,692,490
LANGUAGE LINE, INC.
$ 3,157,895 Term Loan, 4.50%, Maturing June 11, 2011 $ 3,193,421
MITCHELL INTERNATIONAL, INC.
474,088 Term Loan, 4.98%, Maturing August 13, 2011 480,162
997,500 Term Loan, 8.25%, Maturing August 13, 2012 998,123
QUINTILES TRANSNATIONAL CORP.
2,475,000 Term Loan, 6.23%, Maturing September 25, 2009 2,507,484
WORLDSPAN, L.P.
391,254 Term Loan, 6.07%, Maturing June 30, 2007 393,333
---------------------------------------------------------------------------------------------------
$ 14,813,417
---------------------------------------------------------------------------------------------------
CABLE AND SATELLITE TELEVISION -- 3.4%
ADELPHIA COMMUNICATIONS CORP.
$ 1,986,191 DIP Loan, 4.25%, Maturing March 31, 2005 $ 1,995,708
ATLANTIC BROADBAND FINANCE, LLC
1,935,000 Term Loan, 5.23%, Maturing February 10, 2011 1,966,444
BRAGG COMMUNICATION, INC.
1,185,000 Term Loan, 3.81%, Maturing August 31, 2011 1,196,109
BRESNAN COMMUNICATIONS, LLC
6,500,000 Term Loan, 5.86%, Maturing September 30, 2010 6,591,409
CANADIEN CABLE ACQUISITION
500,000 Term Loan, 4.98%, Maturing July 27, 2011 505,312
CEBRIDGE CONNECTIONS, INC.
1,592,000 Term Loan, 8.40%, Maturing February 23, 2010 1,588,020
CHARTER COMMUNICATIONS OPERATING, LLC
13,241,813 Term Loan, 5.61%, Maturing April 27, 2011 13,155,873
DIRECTV HOLDINGS, LLC
14,866,531 Term Loan, 4.01%, Maturing March 6, 2010 15,087,670
INSIGHT MIDWEST HOLDINGS, LLC
1,488,750 Term Loan, 3.37%, Maturing December 31, 2009 1,512,426
9,925,000 Term Loan, 4.75%, Maturing December 31, 2009 10,080,078
MCC IOWA, LLC
3,960,000 Term Loan, 4.71%, Maturing March 31, 2010 3,943,914
MEDIACOM BROADBAND
4,488,750 Term Loan, 5.06%, Maturing September 30, 2010 4,536,443
MEDIACOM ILLINOIS, LLC
2,900,000 Term Loan, 5.06%, Maturing March 31, 2013 2,923,304
NTL, INC.
2,600,000 Term Loan, 5.20%, Maturing April 13, 2012 2,627,625
UGS CORP.
3,820,425 Term Loan, 4.21%, Maturing May 27, 2011 3,882,507
---------------------------------------------------------------------------------------------------
$ 71,592,842
---------------------------------------------------------------------------------------------------
See notes to financial statements
4
PRINCIPAL
AMOUNT BORROWER/TRANCHE DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------
CHEMICALS AND PLASTICS -- 2.3%
BRENNTAG AG
$ 2,475,000 Term Loan, 4.73%, Maturing December 9, 2011 $ 2,518,312
HERCULES, INC.
835,800 Term Loan, 3.95%, Maturing October 8, 2010 843,113
HUNTSMAN INTERNATIONAL, LLC
9,014,409 Term Loan, 5.19%, Maturing December 31, 2010 9,174,415
HUNTSMAN, LLC
2,250,000 Term Loan, 5.44%, Maturing March 31, 2010 2,284,922
INNOPHOS, INC.
445,000 Term Loan, 3.37%, Maturing August 13, 2010 452,787
INVISTA B.V.
4,581,176 Term Loan, 4.75%, Maturing April 29, 2011 4,669,937
2,018,825 Term Loan, 4.75%, Maturing April 29, 2011 2,052,892
ISP CHEMCO, INC.
1,492,500 Term Loan, 4.12%, Maturing March 27, 2011 1,509,291
KRATON POLYMER
3,469,660 Term Loan, 4.73%, Maturing December 5, 2008 3,501,467
NALCO CO.
5,058,307 Term Loan, 4.43%, Maturing November 4, 2010 5,152,756
ROCKWOOD SPECIALTIES GROUP, INC.
3,815,000 Term Loan, 4.63%, Maturing July 30, 2012 3,858,216
SOLO CUP CO.
3,448,833 Term Loan, 4.32%, Maturing February 27, 2011 3,490,147
SYNTHETIC INDUSTRIES, INC.
996,156 Term Loan, 6.73%, Maturing December 30, 2007 989,930
UNITED INDUSTRIES CORP.
5,032,624 Term Loan, 4.63%, Maturing April 29, 2011 5,117,550
997,500 Term Loan, 6.56%, Maturing October 31, 2011 1,015,580
WELLMAN, INC.
750,000 Term Loan, 3.48%, Maturing February 10, 2009 763,281
WESTLAKE CHEMICAL CORP.
2,262,500 Term Loan, 4.21%, Maturing July 31, 2010 2,292,195
---------------------------------------------------------------------------------------------------
$ 49,686,791
---------------------------------------------------------------------------------------------------
CLOTHING / TEXTILES -- 0.1%
ST. JOHN KNITS INTERNATIONAL
$ 2,220,490 Term Loan, 3.94%, Maturing July 31, 2007 $ 2,237,839
---------------------------------------------------------------------------------------------------
$ 2,237,839
---------------------------------------------------------------------------------------------------
CONGLOMERATES -- 1.0%
AMSTED INDUSTRIES, INC.
$ 6,792,868 Term Loan, 4.70%, Maturing October 15, 2010 $ 6,865,042
BLOUNT, INC.
997,500 Term Loan, 4.88%, Maturing August 9, 2010 1,017,450
JOHNSON DIVERSEY, INC.
$ 2,600,677 Term Loan, 7.25%, Maturing November 30, 2009 $ 2,646,839
POLYMER GROUP, INC.
2,452,083 Term Loan, 4.59%, Maturing April 27, 2010 2,473,029
2,500,000 Term Loan, 4.59%, Maturing April 27, 2011 2,512,500
PP ACQUISITION CORP.
3,366,563 Term Loan, 4.21%, Maturing November 12, 2011 3,410,749
REXNORD CORP.
2,299,464 Term Loan, 5.20%, Maturing November 30, 2009 2,322,459
---------------------------------------------------------------------------------------------------
$ 21,248,068
---------------------------------------------------------------------------------------------------
CONTAINERS AND GLASS PRODUCTS -- 2.7%
BERRY PLASTICS CORP.
$ 4,287,204 Term Loan, 3.71%, Maturing July 22, 2010 $ 4,348,833
BWAY CORP.
1,696,111 Term Loan, 4.19%, Maturing June 30, 2011 1,722,084
CELANESE AG
2,250,000 Term Loan, 5.48%, Maturing June 4, 2011 2,292,188
1,500,000 Term Loan, 5.48%, Maturing December 8, 2011 1,527,499
CONSOLIDATED CONTAINER HOLDING
1,246,875 Term Loan, 4.61%, Maturing December 15, 2008 1,260,902
DR. PEPPER/SEVEN UP BOTTLING
3,697,342 Term Loan, 4.71%, Maturing December 19, 2010 3,750,953
GRAHAM PACKAGING HOLDINGS CO.
4,148,045 Term Loan, 8.00%, Maturing October 7, 2011 4,211,564
2,000,000 Term Loan, 8.00%, Maturing October 7, 2012 2,049,584
GRAPHIC PACKAGING INTERNATIONAL, INC.
1,900,000 Term Loan, 4.51%, Maturing August 8, 2008 1,915,042
10,227,687 Term Loan, 4.51%, Maturing August 8, 2009 10,422,013
IPG (US), INC.
775,000 Term Loan, 4.14%, Maturing July 28, 2011 789,047
OWENS-ILLINOIS, INC.
4,171,137 Term Loan, 4.74%, Maturing April 1, 2007 4,238,050
PRINTPACK HOLDINGS, INC
2,984,962 Term Loan, 3.61%, Maturing April 30, 2009 3,014,812
SILGAN HOLDINGS, INC.
2,467,638 Term Loan, 5.75%, Maturing December 31, 2008 2,497,713
STONE CONTAINER CORP.
9,147,852 Term Loan, 6.25%, Maturing June 30, 2009 9,200,736
1,840,014 Term Loan, 6.25%, Maturing June 30, 2009 1,852,664
U.S. CAN CORP.
1,492,500 Term Loan, 5.89%, Maturing January 10, 2010 1,494,366
---------------------------------------------------------------------------------------------------
$ 56,588,050
---------------------------------------------------------------------------------------------------
See notes to financial statements
5
PRINCIPAL
AMOUNT BORROWER/TRANCHE DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------
COSMETICS / TOILETRIES -- 0.5%
AMERICAN SAFETY RAZOR CO.
$ 517,400 Term Loan, 4.92%, Maturing April 29, 2011 $ 525,161
333,333 Term Loan, 9.11%, Maturing October 29, 2011 338,333
CHURCH & DWIGHT CO., INC.
5,935,125 Revolving Loan, 3.71%, Maturing May 30, 2011 6,013,024
PRESTIGE BRANDS, INC.
1,766,125 Term Loan, 4.86%, Maturing April 7, 2011 1,784,154
2,000,000 Term Loan, 6.86%, Maturing April 7, 2011 2,039,166
REVLON CONSUMER PRODUCTS CORP.
670,000 Term Loan, 4.63%, Maturing July 9, 2010 680,783
---------------------------------------------------------------------------------------------------
$ 11,380,621
---------------------------------------------------------------------------------------------------
ECOLOGICAL SERVICES AND EQUIPMENT -- 1.1%
ALDERWOODS GROUP, INC.
$ 959,219 Term Loan, 4.61%, Maturing August 19, 2010 $ 976,905
ALLIED WASTE INDUSTRIES, INC.
8,485,011 Term Loan, 4.66%, Maturing January 15, 2009 8,584,447
666,304 Term Loan, 4.66%, Maturing January 15, 2010 673,991
983,951 Term Loan, 4.66%, Maturing January 15, 2010 994,559
ENVIRONMENTAL SYSTEMS, INC.
770,363 Term Loan, 12.01%, Maturing December 12, 2008 779,993
1,000,000 Term Loan, 12.01%, Maturing December 12, 2010 1,037,500
IONICS, INC.
2,242,400 Term Loan, 4.73%, Maturing February 13, 2011 2,271,132
IPSI CORP.
1,980,000 Term Loan, 5.08%, Maturing September 30, 2010 2,010,937
NATIONAL WATERWORKS, INC.
4,201,531 Term Loan, 4.73%, Maturing November 22, 2009 4,250,550
WASTE CONNECTIONS, INC.
990,000 Term Loan, 3.62%, Maturing October 22, 2010 1,002,066
---------------------------------------------------------------------------------------------------
$ 22,582,080
---------------------------------------------------------------------------------------------------
ELECTRONICS / ELECTRICAL -- 1.3%
AMI SEMICONDUCTOR
$ 497,487 Term Loan, 4.46%, Maturing September 30, 2008 $ 503,084
AMPHENOL CORP.
3,789,474 Term Loan, 3.76%, Maturing May 6, 2010 3,820,263
COMMUNICATIONS & POWER, INC.
1,990,000 Term Loan, 4.94%, Maturing July 23, 2010 2,021,508
ENERSYS CAPITAL, INC.
1,571,063 Term Loan, 4.84%, Maturing March 17, 2011 1,591,683
FAIRCHILD SEMICONDUCTOR CORP.
7,653,125 Term Loan, 3.23%, Maturing June 19, 2008 7,755,968
INVENSYS INTERNATIONAL HOLDING
$ 4,091,483 Term Loan, 6.08%, Maturing September 5, 2009 $ 4,150,298
MEMEC GROUP, LTD.
2,125,000 Term Loan, 10.00%, Maturing June 15, 2010 2,129,781
RAYOVAC CORP.
4,290,739 Term Loan, 4.38%, Maturing September 30, 2009 4,360,464
SECURITYCO, INC.
997,500 Term Loan, 5.94%, Maturing June 28, 2010 999,994
500,000 Term Loan, 9.56%, Maturing June 28, 2011 502,500
VIASYSTEMS, INC.
750,000 Term Loan, 6.49%, Maturing September 30, 2009 757,187
---------------------------------------------------------------------------------------------------
$ 28,592,730
---------------------------------------------------------------------------------------------------
EQUIPMENT LEASING -- 0.2%
UNITED RENTALS, INC.
$ 565,000 Term Loan, 4.63%, Maturing February 14, 2011 $ 570,885
2,810,875 Term Loan, 4.63%, Maturing February 14, 2011 2,846,362
---------------------------------------------------------------------------------------------------
$ 3,417,247
---------------------------------------------------------------------------------------------------
FARMING / AGRICULTURE -- 0.2%
IMC GLOBAL, INC.
$ 4,721,369 Term Loan, 5.08%, Maturing November 17, 2006 $ 4,739,665
THE SCOTTS CO.
393,750 Term Loan, 3.44%, Maturing September 30, 2010 397,288
---------------------------------------------------------------------------------------------------
$ 5,136,953
---------------------------------------------------------------------------------------------------
FINANCIAL INTERMEDIARIES -- 0.7%
AIMCO PROPERTIES, L.P.
$ 5,000,000 Term Loan, 4.94%, Maturing May 30, 2008 $ 5,084,375
COINSTAR, INC.
793,013 Term Loan, 4.29%, Maturing July 7, 2011 806,395
CORRECTIONS CORP. OF AMERICA
2,461,932 Term Loan, 3.50%, Maturing March 31, 2008 2,505,016
REFCO GROUP LTD, LLC
3,850,000 Term Loan, 4.46%, Maturing August 5, 2011 3,861,230
WACKENHUT CORRECTIONS CORP.
1,545,633 Term Loan, 4.09%, Maturing July 9, 2009 1,563,988
---------------------------------------------------------------------------------------------------
$ 13,821,004
---------------------------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.6%
ACOSTA SALES CO., INC.
$ 1,600,000 Term Loan, 4.73%, Maturing August 13, 2010 $ 1,616,000
See notes to financial statements
6
PRINCIPAL
AMOUNT BORROWER/TRANCHE DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------
FOOD PRODUCTS (CONTINUED)
AMERICAN SEAFOODS HOLDINGS, LLC
$ 2,360,290 Term Loan, 5.29%, Maturing March 31, 2009 $ 2,375,780
ATKINS NUTRITIONAL, INC.
1,895,000 Term Loan, 4.12%, Maturing November 26, 2009 1,565,270
DEL MONTE CORP.
2,413,082 Term Loan, 4.38%, Maturing December 20, 2010 2,458,703
INTERSTATE BRANDS CORP.
625,000 Term Loan, 5.47%, Maturing July 19, 2006 609,375
1,202,226 Term Loan, 5.47%, Maturing July 19, 2007 1,178,558
3,884,640 Term Loan, 5.47%, Maturing July 19, 2007 3,798,693
MERISANT CO.
6,153,645 Term Loan, 4.88%, Maturing January 31, 2010 6,187,490
MICHAEL FOODS, INC.
1,246,859 Term Loan, 4.48%, Maturing November 20, 2010 1,265,173
3,000,000 Term Loan, 4.48%, Maturing November 20, 2011 3,087,189
PINNACLE FOODS HOLDINGS CORP.
3,879,587 Term Loan, 4.98%, Maturing November 25, 2010 3,918,383
1,095,413 Term Loan, 4.98%, Maturing November 25, 2010 1,104,770
REDDY ICE GROUP, INC.
4,356,000 Term Loan, 4.46%, Maturing July 31, 2009 4,409,544
SEMINIS VEGETABLE SEEDS, INC.
873,078 Term Loan, 4.46%, Maturing September 30, 2009 885,810
---------------------------------------------------------------------------------------------------
$ 34,460,738
---------------------------------------------------------------------------------------------------
FOOD SERVICE -- 0.9%
AFC ENTERPRISES, INC.
$ 2,393,029 Term Loan, 4.95%, Maturing May 23, 2009 $ 2,404,396
BUFFETS, INC.
418,182 Term Loan, 5.48%, Maturing June 28, 2009 420,273
2,384,902 Term Loan, 5.48%, Maturing June 28, 2009 2,396,826
CKE RESTAURANTS, INC.
1,949,292 Term Loan, 4.88%, Maturing July 2, 2008 1,990,714
DENNY'S, INC.
535,000 Term Loan, 5.16%, Maturing September 21, 2009 546,871
DOMINO'S, INC.
7,569,042 Term Loan, 4.25%, Maturing June 25, 2010 7,722,792
GATE GOURMET BORROWER, LLC
1,000,000 Term Loan, 9.50%, Maturing December 31, 2008 1,020,000
JACK IN THE BOX, INC.
1,488,750 Term Loan, 4.30%, Maturing January 8, 2011 1,510,151
MAINE BEVERAGE CO., LLC
1,050,000 Term Loan, 5.34%, Maturing June 30, 2010 1,055,250
WEIGHT WATCHERS INTERNATIONAL
950,000 Term Loan, 6.76%, Maturing March 31, 2010 957,125
---------------------------------------------------------------------------------------------------
$ 20,024,398
---------------------------------------------------------------------------------------------------
FOOD / DRUG RETAILERS -- 0.8%
CUMBERLAND FARMS, INC.
$ 4,261,403 Term Loan, 4.49%, Maturing September 8, 2008 $ 4,296,027
2,068,178 Term Loan, 5.00%, Maturing September 8, 2008 2,068,178
GENERAL NUTRITION CENTERS, INC.
2,979,987 Term Loan, 6.42%, Maturing December 5, 2009 3,013,512
RITE AID CORP.
1,975,000 Term Loan, 3.64%, Maturing September 22, 2009 1,997,219
THE JEAN COUTU GROUP (PJC), INC.
3,000,000 Term Loan, 6.43%, Maturing July 30, 2011 3,049,944
THE PANTRY, INC.
2,147,956 Term Loan, 4.44%, Maturing March 12, 2011 2,181,518
---------------------------------------------------------------------------------------------------
$ 16,606,398
---------------------------------------------------------------------------------------------------
FOREST PRODUCTS -- 0.4%
APPLETON PAPERS, INC.
$ 2,478,788 Term Loan, 4.16%, Maturing June 11, 2010 $ 2,510,392
KOCH CELLULOSE, LLC
551,114 Term Loan, 4.22%, Maturing May 7, 2011 559,898
2,196,517 Term Loan, 4.22%, Maturing May 7, 2011 2,231,525
RLC INDUSTRIES CO.
2,807,016 Term Loan, 3.96%, Maturing February 24, 2010 2,824,559
---------------------------------------------------------------------------------------------------
$ 8,126,374
---------------------------------------------------------------------------------------------------
HEALTHCARE -- 3.3%
ACCREDO HEALTH, INC.
$ 2,224,425 Term Loan, 3.71%, Maturing April 30, 2011 $ 2,241,108
ALLIANCE IMAGING, INC.
2,500,000 Term Loan, 4.41%, Maturing June 10, 2008 2,493,360
AMERISOURCE BERGEN CORP.
1,094,118 Term Loan, 3.14%, Maturing March 31, 2005 1,096,853
ARDENT HEALTH SERVICES, INC.
1,200,000 Term Loan, 7.00%, Maturing July 12, 2011 1,201,126
COLGATE MEDICAL, LTD.
1,054,151 Term Loan, 4.72%, Maturing December 30, 2008 1,063,375
COMMUNITY HEALTH SYSTEMS, INC.
7,883,016 Term Loan, 3.54%, Maturing July 5, 2010 7,916,803
3,970,000 Term Loan, 3.54%, Maturing July 5, 2010 4,010,943
CONCENTRA OPERATING CORP.
4,937,625 Term Loan, 4.30%, Maturing June 30, 2009 4,995,232
CONMED CORP.
2,998,592 Term Loan, 5.83%, Maturing December 31, 2007 3,033,577
CROSS COUNTRY HEALTHCARE, INC.
1,144,036 Term Loan, 4.27%, Maturing June 5, 2009 1,154,761
See notes to financial statements
7
PRINCIPAL
AMOUNT BORROWER/TRANCHE DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
DADE BEHRING HOLDINGS, INC.
$ 582,679 Term Loan, 4.25%, Maturing October 3, 2008 $ 585,593
1,810,267 Term Loan, 4.52%, Maturing October 3, 2008 1,834,027
DAVITA, INC.
13,264,456 Term Loan, 3.98%, Maturing March 31, 2009 13,447,877
DJ ORTHOPEDICS, INC.
962,500 Term Loan, 4.01%, Maturing May 15, 2009 972,727
ENCORE MEDICAL IHC, INC.
1,650,000 Term Loan, 4.84%, Maturing October 4, 2010 1,675,781
ENVISION WORLDWIDE, INC.
1,300,000 Term Loan, 6.84%, Maturing September 30, 2010 1,303,250
FHC HEALTH SYSTEMS, INC.
1,300,000 Term Loan, 5.71%, Maturing December 18, 2009 1,316,250
1,857,143 Term Loan, 9.79%, Maturing December 18, 2009 1,880,357
HANGER ORTHOPEDIC GROUP, INC.
497,487 Term Loan, 5.48%, Maturing September 30, 2009 497,487
KINETIC CONCEPTS, INC.
3,216,500 Term Loan, 4.67%, Maturing October 3, 2009 3,257,375
KNOWLEDGE LEARNING CORP.
1,903,523 Term Loan, 5.23%, Maturing May 15, 2010 1,913,040
LEINER HEALTH PRODUCTS, INC.
1,122,188 Term Loan, 4.89%, Maturing May 27, 2011 1,139,020
MAGELLAN HEALTH SERVICES, INC.
277,778 Term Loan, 3.98%, Maturing August 15, 2008 279,861
493,056 Term Loan, 4.13%, Maturing August 15, 2008 496,753
MEDCATH HOLDINGS CORP.
498,750 Term Loan, 5.06%, Maturing July 2, 2011 506,076
SUNRISE MEDICAL HOLDINGS, INC.
1,064,650 Term Loan, 5.23%, Maturing May 13, 2010 1,073,966
TEAM HEALTH, INC.
2,238,750 Term Loan, 5.23%, Maturing March 23, 2011 2,259,738
TRIAD HOSPITALS HOLDINGS
4,794,348 Term Loan, 5.05%, Maturing March 31, 2008 4,867,462
VANGUARD HEALTH HOLDING CO., LLC
1,275,000 Term Loan, 5.58%, Maturing September 23, 2011 1,297,712
VWR INTERNATIONAL, INC.
1,189,933 Term Loan, 5.71%, Maturing April 7, 2011 1,210,757
---------------------------------------------------------------------------------------------------
$ 71,022,247
---------------------------------------------------------------------------------------------------
HOME FURNISHINGS -- 1.1%
GENERAL BINDING CORP.
$ 1,150,000 Term Loan, 6.42%, Maturing January 15, 2008 $ 1,155,031
INTERLINE BRANDS, INC.
4,218,750 Term Loan, 5.47%, Maturing November 30, 2009 4,268,848
JUNO LIGHTING, INC.
$ 852,364 Term Loan, 3.60%, Maturing November 21, 2010 $ 864,616
KNOLL, INC.
3,425,000 Term Loan, 4.84%, Maturing September 30, 2011 3,472,094
SEALY MATTRESS CO.
2,621,699 Term Loan, 4.17%, Maturing April 6, 2012 2,659,386
SIMMONS CO.
4,979,259 Term Loan, 3.96%, Maturing December 19, 2011 5,035,276
TERMPUR-PEDIC, INC.
4,937,500 Term Loan, 3.94%, Maturing June 30, 2009 4,969,905
---------------------------------------------------------------------------------------------------
$ 22,425,156
---------------------------------------------------------------------------------------------------
INDUSTRIAL EQUIPMENT -- 0.9%
BUCYRUS INTERNATIONAL, INC.
$ 483,875 Term Loan, 4.04%, Maturing July 28, 2010 $ 492,040
CHART INDUSTRIES, INC.
1,573,060 Term Loan, 5.61%, Maturing September 15, 2009 1,570,111
COLFAX CORP.
2,005,078 Term Loan, 4.88%, Maturing May 30, 2009 2,015,103
DOUGLAS DYNAMICS HOLDINGS, INC.
294,455 Term Loan, 4.25%, Maturing March 30, 2010 298,871
900,000 Term Loan, 7.98%, Maturing March 30, 2011 922,500
FLOWSERVE CORP.
2,917,740 Term Loan, 4.65%, Maturing June 30, 2009 2,966,067
GLEASON CORP.
550,000 Term Loan, 4.65%, Maturing July 27, 2011 556,875
750,000 Term Loan, 7.27%, Maturing January 31, 2012 757,500
ITRON, INC.
889,392 Term Loan, 4.25%, Maturing December 17, 2010 898,471
MTD PRODUCTS
997,500 Term Loan, 3.63%, Maturing June 1, 2010 1,007,475
SPX CORP.
871,795 Term Loan, 3.94%, Maturing September 30, 2008 876,972
5,880,822 Term Loan, 3.94%, Maturing September 30, 2009 5,950,657
---------------------------------------------------------------------------------------------------
$ 18,312,642
---------------------------------------------------------------------------------------------------
INSURANCE -- 0.8%
ALLIANT RESOURCES GROUP, INC.
$ 1,596,000 Term Loan, 5.67%, Maturing August 31, 2011 $ 1,597,995
CCC INFORMATION SERVICES GROUP
1,101,773 Term Loan, 4.96%, Maturing August 20, 2010 1,110,036
CONSECO, INC.
6,086,000 Term Loan, 5.41%, Maturing June 22, 2010 6,214,062
See notes to financial statements
8
PRINCIPAL
AMOUNT BORROWER/TRANCHE DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------
INSURANCE (CONTINUED)
HILB, ROGAL AND HAMILTON CO.
$ 1,974,747 Term Loan, 4.25%, Maturing June 30, 2007 $ 1,979,684
U.S.I. HOLDINGS CORP.
5,925,000 Term Loan, 4.63%, Maturing August 11, 2008 5,967,589
---------------------------------------------------------------------------------------------------
$ 16,869,366
---------------------------------------------------------------------------------------------------
LEISURE GOODS / ACTIVITIES / MOVIES -- 2.7%
AMF BOWLING WORLDWIDE, INC.
$ 2,401,196 Term Loan, 4.00%, Maturing August 27, 2009 $ 2,419,956
BOMBARDIER RECREATIONAL PRODUCTS, INC.
1,194,000 Term Loan, 4.25%, Maturing December 18, 2010 1,214,149
CINEMARK, INC.
1,990,000 Term Loan, 4.54%, Maturing March 31, 2011 2,012,387
HOLLYWOOD ENTERTAINMENT CORP.
2,462,121 Term Loan, 5.75%, Maturing March 31, 2008 2,472,893
LIONS GATE ENTERTAINMENT, INC.
1,666,667 Term Loan, 4.23%, Maturing December 31, 2008 1,681,250
LOEWS CINEPLEX ENTERTAINMENT
3,370,000 Term Loan, 5.23%, Maturing July 30, 2011 3,416,337
METRO-GOLDWYN-MAYER STUDIO, INC.
8,750,000 Term Loan, 4.48%, Maturing April 26, 2011 8,791,563
NEW ENGLAND SPORTS VENTURES
3,000,000 Term Loan, 5.70%, Maturing February 28, 2005 3,000,000
REGAL CINEMAS CORP.
8,634,718 Term Loan, 3.88%, Maturing November 10, 2010 8,751,286
SIX FLAGS THEME PARKS, INC.
8,317,254 Term Loan, 4.34%, Maturing June 30, 2009 8,382,236
UNIVERSAL CITY DEVELOPMENT
6,205,282 Term Loan, 4.17%, Maturing June 30, 2007 6,228,551
WMG ACQUISITION CORP.
6,616,750 Term Loan, 4.53%, Maturing February 28, 2011 6,718,952
YANKEES HOLDINGS & YANKEENETS
455,714 Term Loan, 3.73%, Maturing June 25, 2007 463,120
994,286 Term Loan, 3.73%, Maturing June 25, 2007 1,010,443
---------------------------------------------------------------------------------------------------
$ 56,563,123
---------------------------------------------------------------------------------------------------
LODGING AND CASINOS -- 1.8%
ALLIANCE GAMING CORP.
$ 6,939,796 Term Loan, 3.54%, Maturing September 5, 2009 $ 7,022,206
AMERISTAR CASINOS
2,988,316 Term Loan, 3.14%, Maturing December 31, 2006 3,025,670
ARGOSY GAMING CO.
2,400,000 Term Loan, 3.82%, Maturing June 30, 2011 2,421,000
BOYD GAMING CORP.
$ 4,972,538 Term Loan, 3.81%, Maturing June 30, 2011 $ 5,040,288
CNL RESORT HOTEL, L.P.
1,790,000 Term Loan, 4.34%, Maturing August 18, 2006 1,790,000
GLOBALCASH ACCESS, LLC
1,151,796 Term Loan, 3.74%, Maturing March 10, 2010 1,172,672
ISLE OF CAPRI CASIONS, INC.
2,005,063 Term Loan, 4.12%, Maturing April 25, 2008 2,030,127
MARINA DISTRICT FINANCE CO., INC.
2,850,000 Term Loan, 3.93%, Maturing October 14, 2011 2,871,968
PENN NATIONAL GAMING, INC.
2,143,145 Term Loan, 4.48%, Maturing July 31, 2006 2,179,756
PINNACLE ENTERTAINMENT, INC.
1,565,000 Term Loan, 4.98%, Maturing August 27, 2010 1,588,475
SEMINOLE TRIBE OF FLORIDA
650,000 Term Loan, 6.00%, Maturing September 30, 2011 656,500
VAIL RESORTS, INC.
3,940,000 Term Loan, 4.38%, Maturing December 10, 2008 3,978,580
VENETIAN CASINO RESORT, LLC
1,843,864 Term Loan, 5.06%, Maturing June 15, 2011 1,878,053
WYNDHAM INTERNATIONAL, INC.
2,199,362 Term Loan, 7.88%, Maturing December 31, 2004 2,207,334
---------------------------------------------------------------------------------------------------
$ 37,862,629
---------------------------------------------------------------------------------------------------
NONFERROUS METALS / MINERALS -- 0.4%
COMPASS MINERALS GROUP, INC.
$ 1,851,248 Term Loan, 4.30%, Maturing November 28, 2009 $ 1,879,789
CONSOL ENERGY, INC.
1,560,000 Term Loan, 4.34%, Maturing June 30, 2010 1,592,663
FOUNDATION COAL CORP.
2,000,000 Term Loan, 4.04%, Maturing July 30, 2011 2,025,000
MAGNEQUENCH, INC.
960,586 Term Loan, 12.84%, Maturing September 30, 2009 967,791
1,600,000 Term Loan, 12.84%, Maturing December 31, 2009 1,624,000
---------------------------------------------------------------------------------------------------
$ 8,089,243
---------------------------------------------------------------------------------------------------
OIL AND GAS -- 1.9%
BPL ACQUISITION, L.P.
$ 1,500,000 Term Loan, 3.81%, Maturing May 4, 2010 $ 1,519,688
COLUMBIA NATURAL RESOURCES, LLC
4,875,000 Revolving Loan, 5.81%, Maturing August 28, 2008 4,862,813
DRESSER, INC.
1,631,252 Term Loan, 4.46%, Maturing March 31, 2007 1,648,584
See notes to financial statements
9
PRINCIPAL
AMOUNT BORROWER/TRANCHE DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------
OIL AND GAS (CONTINUED)
DYNEGY HOLDINGS, INC.
$ 4,438,875 Term Loan, 5.84%, Maturing May 28, 2010 $ 4,537,365
GETTY PETROLEUM MARKETING, INC.
3,294,167 Term Loan, 5.23%, Maturing May 19, 2010 3,347,697
LA GRANGE ACQUISITION, L.P.
2,500,000 Term Loan, 4.96%, Maturing January 18, 2008 2,541,408
LYONDELL-CITGO REFINING, L.P.
1,985,025 Term Loan, 3.59%, Maturing May 21, 2007 1,999,913
MAGELLAN MIDSTREAM HOLDINGS
2,589,605 Term Loan, 4.13%, Maturing June 17, 2008 2,628,450
SEMGROUP, L.P.
790,000 Term Loan, 5.33%, Maturing August 27, 2010 801,850
SPRAGUE ENERGY CORP.
2,907,143 Revolving Loan, 4.32%, Maturing August 10, 2007 2,899,875
TRANSWESTERN PIPELINE CO.
1,635,900 Term Loan, 4.09%, Maturing April 30, 2009 1,646,465
WILLIAMS PRODUCTION RMT CO.
12,284,519 Term Loan, 5.71%, Maturing May 30, 2007 12,489,265
---------------------------------------------------------------------------------------------------
$ 40,923,373
---------------------------------------------------------------------------------------------------
PUBLISHING -- 3.0%
ADVANSTAR COMMUNICATIONS
$ 359,177 Term Loan, 5.07%, Maturing November 17, 2007 $ 361,272
AMERICAN MEDIA OPERATIONS, INC.
2,294,864 Term Loan, 4.81%, Maturing April 1, 2007 2,327,852
CBD MEDIA, LLC
1,696,854 Term Loan, 4.29%, Maturing December 31, 2009 1,719,125
DEX MEDIA EAST, LLC
791,845 Term Loan, 3.82%, Maturing November 8, 2008 801,166
4,937,860 Term Loan, 3.82%, Maturing May 8, 2009 5,009,869
FREEDOM COMMUNICATIONS
4,750,000 Term Loan, 4.04%, Maturing May 18, 2012 4,829,563
HERALD MEDIA, INC.
309,225 Term Loan, 4.45%, Maturing July 22, 2011 313,477
625,000 Term Loan, 7.45%, Maturing January 22, 2012 635,352
LIBERTY GROUP OPERATING
4,378,996 Term Loan, 4.89%, Maturing April 30, 2007 4,406,365
MERRILL COMMUNICATIONS, LLC
1,500,000 Term Loan, 4.48%, Maturing February 9, 2009 1,517,345
MORRIS PUBLISHING GROUP, LLC
$ 3,000,000 Term Loan, 3.63%, Maturing September 30, 2010 $ 3,025,314
4,500,000 Term Loan, 3.63%, Maturing March 31, 2011 4,554,846
NEBRASKA BOOK CO., INC.
955,200 Term Loan, 4.67%, Maturing March 4, 2011 968,334
NEWSPAPER HOLDINGS, INC.
2,300,000 Term Loan, 3.69%, Maturing August 24, 2011 2,299,282
R.H. DONNELLEY CORP.
5,670,787 Term Loan, 6.50%, Maturing June 30, 2011 5,759,983
SUN MEDIA CORP.
2,585,211 Term Loan, 4.13%, Maturing February 7, 2009 2,605,409
THE READER'S DIGEST ASSOCIATION, INC.
3,034,750 Term Loan, 3.84%, Maturing May 20, 2008 3,076,004
TRANSWESTERN PUBLISHING CO., LLC
857,937 Term Loan, 4.09%, Maturing February 25, 2011 868,930
1,592,001 Term Loan, 5.88%, Maturing February 25, 2011 1,614,638
395,600 Term Loan, 4.09%, Maturing August 24, 2012 399,989
WEEKLY READER CORP.
980,000 Term Loan, 6.76%, Maturing March 18, 2009 978,163
XEROX CORP.
4,500,000 Term Loan, 3.73%, Maturing September 30, 2008 4,534,686
---------------------------------------------------------------------------------------------------
$ 63,780,582
---------------------------------------------------------------------------------------------------
RADIO AND TELEVISION -- 1.8%
ADAMS OUTDOOR ADVERTISING, L.P.
$ 2,643,375 Term Loan, 4.33%, Maturing October 15, 2011 $ 2,680,271
350,000 Term Loan, 5.58%, Maturing April 15, 2012 356,344
BLOCK COMMUNICATIONS, INC.
746,019 Term Loan, 4.73%, Maturing November 30, 2009 751,614
CANWEST MEDIA, INC.
3,953,494 Term Loan, 4.07%, Maturing August 15, 2009 4,007,855
CUMULUS MEDIA, INC.
997,500 Term Loan, 4.49%, Maturing March 28, 2010 1,013,709
EMMIS OPERATING CO.
5,575,000 Term Loan, 3.59%, Maturing November 10, 2011 5,634,931
ENTRAVISION COMMUNICATIONS CO.
660,000 Term Loan, 3.85%, Maturing February 27, 2012 667,632
GRAY TELEVISION, INC.
6,284,250 Term Loan, 3.72%, Maturing December 31, 2010 6,370,658
NEP SUPERSHOOTERS, L.P.
1,500,000 Term Loan, 10.13%, Maturing August 3, 2011 1,507,500
NEXSTAR BROADCASTING, INC.
1,287,157 Term Loan, 3.73%, Maturing December 31, 2010 1,288,766
702,855 Term Loan, 3.73%, Maturing December 31, 2010 705,052
See notes to financial statements
10
PRINCIPAL
AMOUNT BORROWER/TRANCHE DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------
RADIO AND TELEVISION (CONTINUED)
RAINBOW NATIONAL SERVICES, LLC
$ 3,128,663 Term Loan, 4.50%, Maturing March 31, 2012 $ 3,183,415
RAYCOM NATIONAL, LLC
2,350,000 Term Loan, 4.50%, Maturing February 24, 2012 2,364,688
SINCLAIR TELEVISION GROUP, INC.
1,835,000 Term Loan, 3.96%, Maturing June 30, 2009 1,847,616
2,985,000 Term Loan, 3.96%, Maturing December 31, 2009 3,017,337
SUSQUEHANNA MEDIA CO.
2,000,000 Term Loan, 4.05%, Maturing March 31, 2012 2,029,376
---------------------------------------------------------------------------------------------------
$ 37,426,764
---------------------------------------------------------------------------------------------------
RAIL INDUSTRIES -- 0.2%
RAILAMERICA, INC.
$ 4,441,513 Term Loan, 3.94%, Maturing September 29, 2011 $ 4,517,387
525,035 Term Loan, 3.94%, Maturing September 29, 2011 534,004
---------------------------------------------------------------------------------------------------
$ 5,051,391
---------------------------------------------------------------------------------------------------
RETAILERS (EXCEPT FOOD AND DRUG) -- 1.4%
AMERICAN ACHIEVEMENT CORP.
$ 696,500 Term Loan, 4.66%, Maturing March 25, 2011 $ 707,383
AMSCAN HOLDINGS, INC.
987,525 Term Loan, 3.76%, Maturing April 30, 2012 999,869
CKS AUTO, INC.
3,980,000 Term Loan, 4.88%, Maturing June 20, 2009 4,027,263
COINMACH LAUNDRY CORP.
4,642,194 Term Loan, 4.64%, Maturing July 25, 2009 4,696,596
FTD, INC.
995,000 Term Loan, 4.63%, Maturing February 28, 2011 1,010,547
HARBOR FREIGHT TOOLS USA, INC.
2,350,000 Term Loan, 5.48%, Maturing July 15, 2010 2,374,236
HOME INTERIORS & GIFTS, INC.
885,938 Term Loan, 6.42%, Maturing March 31, 2011 855,594
JOSTEN'S CORP.
2,631,034 Term Loan, 6.25%, Maturing October 4, 2011 2,673,789
ORIENTAL TRADING CO., INC.
5,330,584 Term Loan, 8.00%, Maturing August 4, 2010 5,413,874
PETCO ANIMAL SUPPLIES, INC.
987,456 Term Loan, 4.34%, Maturing October 2, 2008 1,002,885
RENT-A-CENTER, INC.
2,584,216 Term Loan, 3.88%, Maturing June 30, 2010 2,610,327
SAVERS, INC.
897,750 Term Loan, 6.50%, Maturing August 4, 2009 905,044
1,000,000 Term Loan, 10.48%, Maturing August 4, 2010 1,012,500
TRAVELCENTERS OF AMERICA, INC.
$ 498,718 Term Loan, 5.05%, Maturing November 30, 2008 $ 504,536
---------------------------------------------------------------------------------------------------
$ 28,794,443
---------------------------------------------------------------------------------------------------
SURFACE TRANSPORT -- 0.6%
HORIZON LINES, LLC
$ 982,538 Term Loan, 4.73%, Maturing July 7, 2011 $ 1,000,550
LAIDLAW INTERNATIONAL, INC.
6,492,939 Term Loan, 5.59%, Maturing June 19, 2009 6,601,494
NFIL HOLDING CORP.
1,726,018 Term Loan, 4.31%, Maturing February 27, 2010 1,750,291
392,857 Term Loan, 4.71%, Maturing February 27, 2010 398,996
SIRVA WORLDWIDE, INC.
2,441,176 Term Loan, 4.34%, Maturing December 31, 2010 2,462,537
---------------------------------------------------------------------------------------------------
$ 12,213,868
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 3.4%
AMERICAN TOWER, L.P.
$ 6,359,063 Term Loan, 4.48%, Maturing August 31, 2011 $ 6,452,960
CENTENNIAL CELLULAR OPERATING
2,835,750 Term Loan, 4.50%, Maturing February 9, 2011 2,873,222
CINCINNATI BELL, INC.
9,550,502 Term Loan, 4.54%, Maturing June 30, 2008 9,651,976
CONSOLIDATED COMMUNICATIONS, INC.
1,264,481 Term Loan, 4.34%, Maturing October 14, 2010 1,267,642
2,117,917 Term Loan, 4.34%, Maturing October 14, 2011 2,139,096
DOBSON CELLULAR SYSTEMS, INC.
2,979,950 Term Loan, 5.38%, Maturing March 31, 2010 2,972,315
NEXTEL COMMUNICATIONS
12,397,584 Term Loan, 3.73%, Maturing December 15, 2010 12,447,695
NEXTEL PARTNERS OPERATION CORP.
4,800,000 Term Loan, 4.31%, Maturing May 31, 2011 4,881,499
NTELOS, INC.
994,922 Term Loan, 5.96%, Maturing July 25, 2008 993,057
PANAMSAT CORP.
5,758,275 Term Loan, 4.66%, Maturing August 20, 2011 5,797,207
QWEST CORP.
12,500,000 Term Loan, 6.50%, Maturing June 4, 2007 13,012,275
SBA SENIOR FINANCE, INC.
1,679,462 Term Loan, 5.21%, Maturing October 31, 2008 1,696,783
SPECTRASITE COMMUNICATIONS, INC.
3,227,995 Term Loan, 5.23%, Maturing December 31, 2007 3,236,468
See notes to financial statements
11
PRINCIPAL
AMOUNT BORROWER/TRANCHE DESCRIPTION VALUE
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
WESTERN WIRELESS CORP.
$ 5,386,500 Term Loan, 4.94%, Maturing May 28, 2011 $ 5,475,474
---------------------------------------------------------------------------------------------------
$ 72,897,669
---------------------------------------------------------------------------------------------------
UTILITIES -- 1.4%
ALLEGHENY ENERGY SUPPLY CO.
$ 3,963,695 Term Loan, 3.70%, Maturing March 8, 2011 $ 3,989,709
CENTERPOINT ENERGY, INC.
9,630,617 Term Loan, 4.88%, Maturing October 7, 2006 9,678,770
COGENTRIX DELAWARE HOLDINGS, INC.
1,741,250 Term Loan, 4.34%, Maturing February 26, 2009 1,773,172
COLETO CREEK WLE, L.P.
947,625 Term Loan, 4.23%, Maturing June 30, 2011 966,380
NRG ENERGY, INC.
1,692,839 Term Loan, 4.74%, Maturing June 23, 2010 1,749,126
2,988,039 Term Loan, 4.74%, Maturing June 23, 2010 3,085,897
NUI UTILITIES
562,500 Term Loan, 5.20%, Maturing November 24, 2004 565,313
399,590 Term Loan, 8.00%, Maturing November 24, 2004 401,089
2,037,910 Term Loan, 8.00%, Maturing November 24, 2004 2,045,552
PIKE ELECTRIC, INC.
1,541,251 Term Loan, 4.13%, Maturing July 1, 2012 1,569,829
PLAINS RESOURCES, INC.
1,474,286 Term Loan, 5.09%, Maturing July 23, 2010 1,495,019
TETON POWER FUNDING, LLC
2,121,955 Term Loan, 5.16%, Maturing March 12, 2011 2,156,437
---------------------------------------------------------------------------------------------------
$ 29,476,293
---------------------------------------------------------------------------------------------------
TOTAL SENIOR, FLOATING RATE INTERESTS
(IDENTIFIED COST $1,018,375,491) $ 1,028,094,293
---------------------------------------------------------------------------------------------------
MORTGAGE PASS-THROUGHS -- 49.1%
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.:
$ 1,554 6.00%, with maturity at 2026 $ 1,621,132
34,243 6.50%, with various maturities to 2025 36,202,051
29,719 7.00%, with various maturities to 2027 31,796,957
1,932 7.13%, with maturity at 2023 2,072,053
61,573 7.50%, with various maturities to 2028 66,721,510
2,492 7.65%, with maturity at 2022 2,728,708
637 7.70%, with maturity at 2022 699,676
43,194 8.00%, with various maturities to 2030 47,369,701
29,787 8.50%, with various maturities to 2030 33,021,332
$ 389 8.75%, with maturity at 2010 $ 417,819
11,269 9.00%, with various maturities to 2023 12,561,502
11,287 9.50%, with various maturities to 2025 12,794,431
5,334 10.00%, with various maturities to 2022 6,172,491
2,290 10.50%, with various maturities to 2021 2,670,150
206 11.00%, with maturity at 2015 235,122
395 11.50%, with various maturities to 2020 460,285
227 12.00%, with maturity at 2019 267,837
1,349 12.50%, with various maturities to 2015 1,611,366
586 13.00%, with maturity at 2015 712,770
60 13.50%, with maturity at 2014 71,205
204 14.00%, with maturity at 2014 255,138
---------------------------------------------------------------------------------------------------
$ 260,463,236
---------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSN.:
$ 1,405 6.00%, with maturity at 2023 $ 1,462,747
98,179 6.50%, with various maturities to 2029(3) 103,549,949
1,192 6.75%, with maturity at 2023 1,274,143
92,170 7.00%, with various maturities to 2028(3) 98,483,311
12,711 7.50%, with various maturities to 2026 13,750,085
32,002 8.00%, with various maturities to 2028 35,033,202
178 8.25%, with maturity at 2018 197,772
16,720 8.50%, with various maturities to 2027 18,565,042
2,589 8.616%, with maturity at 2029 2,895,650
4,144 8.634%, with maturity at 2028 4,588,814
3,919 8.799%, with maturity at 2027 4,352,392
28,855 9.00%, with various maturities to 2026 32,315,786
1,686 9.176%, with maturity at 2024 1,902,299
12,556 9.50%, with various maturities to 2030 14,238,420
5,316 10.00%, with various maturities to 2021 6,161,036
4,843 10.233%, with maturity at 2019 5,559,536
6,545 10.50%, with various maturities to 2025 7,646,989
2,192 11.00%, with various maturities to 2020 2,566,712
226 11.25%, with maturity at 2016 264,865
5,384 11.50%, with various maturities to 2021 6,344,164
15 11.75%, with maturity at 2014 18,139
787 12.00%, with various maturities to 2016 938,992
661 12.50%, with various maturities to 2015 790,489
738 13.00%, with various maturities to 2015 895,535
259 13.50%, with various maturities to 2017 320,334
96 14.50%, with maturity at 2014 119,252
---------------------------------------------------------------------------------------------------
$ 364,235,655
---------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSN.:
$ 9,978 6.00%, with maturity at 2024(3) $ 10,414,671
86,753 6.50%, with various maturities to 2024(3) 91,702,172
16,146 7.00%, with various maturities to 2024(3) 17,276,496
50,976 8.00%, with various maturities to 2025(3) 55,974,767
See notes to financial statements
12
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
$ 4,680 8.50%, with various maturities to 2022 $ 5,213,297
22,036 9.00%, with various maturities to 2026 24,756,325
30,781 9.50%, with various maturities to 2026(3) 35,025,768
2,116 10.00%, with maturity at 2019 2,472,948
---------------------------------------------------------------------------------------------------
$ 242,836,444
---------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS:
1,239 Federal Home Loan Mortgage Corp.,
Series 1289, Class PV, 7.50%, 6/15/22 $ 1,314,084
6,921 Federal Home Loan Mortgage Corp.,
Series 1497, Class K, 7.00%, 4/15/23 7,337,281
10,966 Federal Home Loan Mortgage Corp.,
Series 1529, Class Z, 7.00%, 6/15/23 11,656,183
6,343 Federal Home Loan Mortgage Corp.,
Series 1620, Class Z, 6.00%, 11/15/23 6,641,151
3,907 Federal Home Loan Mortgage Corp.,
Series 1650, Class K, 6.50%, 1/15/24 4,181,137
2,009 Federal Home Loan Mortgage Corp.,
Series 1720, Class PJ, 7.25%, 1/15/24 2,102,361
15,547 Federal Home Loan Mortgage Corp.,
Series 1730, Class Z, 7.00%, 5/15/24 16,537,378
2,942 Federal Home Loan Mortgage Corp.,
Series 2198, Class ZA, 8.50%, 11/15/29 3,595,680
4,300 Federal Home Loan Mortgage Corp.,
Series 24, Class J, 6.25%, 11/25/23 4,526,249
5,152 Federal Home Loan Mortgage Corp.,
Series 40, Class K, 6.50%, 8/17/24 5,497,138
1,322 Federal National Mortgage Assn.,
Series 1988-14, Class I, 9.20%, 6/25/18 1,466,324
1,182 Federal National Mortgage Assn.,
Series 1989-1, Class D, 10.30%, 1/25/19 1,335,254
2,464 Federal National Mortgage Assn.,
Series 1989-34, Class Y, 9.85%, 7/25/19 2,780,671
572 Federal National Mortgage Assn.,
Series 1990-29, Class J, 9.00%, 3/25/20 636,789
3,051 Federal National Mortgage Assn.,
Series 1990-43, Class Z, 9.50%, 4/25/20 3,454,023
1,019 Federal National Mortgage Assn.,
Series 1991-98, Class J, 8.00%, 8/25/21 1,107,592
550 Federal National Mortgage Assn.,
Series 1992-103, Class Z, 7.50%, 6/25/22 591,158
1,030 Federal National Mortgage Assn.,
Series 1992-113, Class Z, 7.50%, 7/25/22 1,108,416
2,057 Federal National Mortgage Assn.,
Series 1992-185, Class ZB, 7.00%, 10/25/22 2,188,653
8,053 Federal National Mortgage Assn.,
Series 1992-77, Class ZA, 8.00%, 5/25/22 8,808,286
4,274 Federal National Mortgage Assn.,
Series 1993-16, Class Z, 7.50%, 2/25/23 4,598,512
3,973 Federal National Mortgage Assn.,
Series 1993-22, Class PM, 7.40%, 2/25/23 4,264,855
$ 5,455 Federal National Mortgage Assn.,
Series 1993-25, Class J, 7.50%, 3/25/23 $ 5,869,295
12,471 Federal National Mortgage Assn.,
Series 1993-30, Class PZ, 7.50%, 3/25/23 13,419,522
8,862 Federal National Mortgage Assn.,
Series 1994-89, Class ZQ, 8.00%, 7/25/24 9,638,923
9,910 Federal National Mortgage Assn.,
Series 1996-57, Class Z, 7.00%, 12/25/26 10,544,422
5,545 Federal National Mortgage Assn.,
Series 1997-77, Class Z, 7.00%, 11/18/27 5,923,907
9,185 Federal National Mortgage Assn.,
Series 2001-37, Class GA, 8.00%, 7/25/16 10,001,467
1,814 Federal National Mortgage Assn.,
Series G92-44, Class Z, 8.00%, 7/25/22 1,970,041
6,606 Federal National Mortgage Assn.,
Series G93-29, Class Z, 7.00%, 8/25/23 7,025,386
9,000 Government National Mortgage Assn.,
Series 2002-45, Class PG, 6.00%, 3/17/32 9,406,044
3,622 Merrill Lynch Trust, Series 45, Class Z,
9.10%, 9/20/20 3,820,881
---------------------------------------------------------------------------------------------------
$ 173,349,063
---------------------------------------------------------------------------------------------------
TOTAL MORTGAGE PASS-THROUGHS
(IDENTIFIED COST $1,045,562,501) $ 1,040,884,398
---------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES -- 48.2%
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.6%
ARGO TECH CORP., SR. NOTES
$ 1,815 9.25%, 6/1/11(4) $ 1,987,425
ARMOR HOLDINGS, INC., SR. SUB. NOTES
1,895 8.25%, 8/15/13 2,093,975
SEQUA CORP.
5,350 8.875%, 4/1/08 5,871,625
STANDARD AERO HOLDINGS, INC., SR. SUB. NOTES
760 8.25%, 9/1/14(4) 807,500
VOUGHT AIRCRAFT INDUSTRIES, INC., SR. NOTES
1,000 8.00%, 7/15/11 980,000
---------------------------------------------------------------------------------------------------
$ 11,740,525
---------------------------------------------------------------------------------------------------
AIR TRANSPORT -- 0.4%
AMERICAN AIRLINES
$ 3,000 7.80%, 10/1/06 $ 2,510,923
525 8.608%, 4/1/11 446,003
See notes to financial statements
13
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
AIR TRANSPORT (CONTINUED)
AMR CORP.
$ 2,970 9.00%, 8/1/12 $ 1,826,550
CONTINENTAL AIRLINES
475 8.00%, 12/15/05 439,375
DELTA AIR LINES
2,625 7.779%, 11/18/05 1,970,686
DELTA AIR LINES, SERIES 02-1
643 7.779%, 1/2/12 302,712
---------------------------------------------------------------------------------------------------
$ 7,496,249
---------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 1.6%
DANA CORP.
$ 2,360 10.125%, 3/15/10 $ 2,672,700
KEYSTONE AUTOMOTIVE OPERATIONS, INC., SR. SUB. NOTES
1,020 9.75%, 11/1/13 1,109,250
METALDYNE CORP.
2,855 11.00%, 6/15/12(4) 2,412,475
METALDYNE, INC., SR. NOTES
2,640 10.00%, 11/1/13(4) 2,534,400
SONIC AUTOMOTIVE, INC., SR. SUB. NOTES
1,600 8.625%, 8/15/13 1,700,000
TENNECO AUTOMOTIVE, GLOBAL SHARES, SERIES B
10,855 10.25%, 7/15/13 12,700,350
TENNECO AUTOMOTIVE, INC., SERIES B
2,470 11.625%, 10/15/09 2,636,725
TRW AUTOMOTIVE, INC., SR. NOTES
2,230 9.375%, 2/15/13 2,575,650
TRW AUTOMOTIVE, INC., SR. SUB. NOTES
3,900 11.00%, 2/15/13 4,660,500
UNITED COMPONENTS, INC., SR. SUB. NOTES
990 9.375%, 6/15/13 1,079,100
---------------------------------------------------------------------------------------------------
$ 34,081,150
---------------------------------------------------------------------------------------------------
BEVERAGE AND TOBACCO -- 0.2%
ASG CONSOLIDATED, LLC/ASG FINANCE, INC., SR. DISC. NOTES
$ 4,240 11.50%, 11/1/11(4) $ 2,724,200
NORTH ATLANTIC TRADING CO., SR. NOTES
1,985 9.25%, 3/1/12 1,935,375
---------------------------------------------------------------------------------------------------
$ 4,659,575
---------------------------------------------------------------------------------------------------
BROADCASTING -- 0.0%
FISHER COMMUNICATIONS, INC., SR. NOTES
$ 995 8.625%, 9/15/14(4) $ 1,054,700
---------------------------------------------------------------------------------------------------
$ 1,054,700
---------------------------------------------------------------------------------------------------
BUILDING AND DEVELOPMENT -- 1.4%
COLEMAN CABLE, INC., SR. NOTES
$ 1,060 9.875%, 10/1/12(4) $ 1,097,100
DAYTON SUPERIOR CORP., SR. NOTES
7,000 10.75%, 9/15/08 7,490,000
KOPPERS, INC.
1,835 9.875%, 10/15/13 2,082,725
MAAX CORP., SR. SUB. NOTES
1,150 9.75%, 6/15/12(4) 1,242,000
MUELLER GROUP, INC., SR. SUB. NOTES
2,625 10.00%, 5/1/12(4) 2,848,125
PLY GEM INDUSTRIES, INC., SR. SUB. NOTES
1,740 9.00%, 2/15/12(4) 1,744,350
2,625 9.00%, 2/15/12(4) 2,631,562
RMCC ACQUISITION CO., SR. SUB. NOTES
1,550 9.50%, 11/1/12(4) 1,581,000
THL BUILDCO (NORTEK, INC.), SR. SUB. NOTES
2,190 8.50%, 9/1/14(4) 2,332,350
WCI COMMUNITIES, INC., SR. SUB. NOTES
6,000 7.875%, 10/1/13 6,420,000
---------------------------------------------------------------------------------------------------
$ 29,469,212
---------------------------------------------------------------------------------------------------
BUSINESS EQUIPMENT AND SERVICES -- 1.4%
AFFINITY GROUP, INC., SR. SUB. NOTES
$ 3,450 9.00%, 2/15/12 $ 3,708,750
ALLIED SECURITY ESCROW, SR. SUB. NOTES
675 11.375%, 7/15/11(4) 712,125
AMERCO, INC.
1,560 9.00%, 3/15/09 1,653,600
COINMACH CORP., SR. NOTES
660 9.00%, 2/1/10 686,400
MOBILE MINI, INC.
2,090 9.50%, 7/1/13 2,393,050
NORCROSS SAFETY PRODUCTS LLC/NORCROSS CAPITAL CORP., SR. SUB. NOTES, SERIES B
4,660 9.875%, 8/15/11 5,102,700
QUINTILES TRANSNATIONAL CORP., SR. SUB. NOTES
9,690 10.00%, 10/1/13 10,610,550
UGS CORP., SR. SUB. NOTES
2,265 10.00%, 6/1/12(4) 2,548,125
WILLIAMS SCOTSMAN, INC., SR. NOTES
1,515 10.00%, 8/15/08 1,658,925
---------------------------------------------------------------------------------------------------
$ 29,074,225
---------------------------------------------------------------------------------------------------
See notes to financial statements
14
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
CABLE AND SATELLITE TELEVISION -- 0.8%
CABLEVISION SYSTEMS CORP., SR. NOTES
$ 345 8.00%, 4/15/12(4) $ 372,600
CHARTER COMMUNICATIONS HOLDINGS, LLC, SR. NOTES
2,520 10.25%, 1/15/10 2,079,000
INSIGHT COMMUNICATIONS, SR. DISC. NOTES
15,730 12.25%, 2/15/11 15,454,725
---------------------------------------------------------------------------------------------------
$ 17,906,325
---------------------------------------------------------------------------------------------------
CHEMICALS AND PLASTICS -- 3.8%
ACETEX CORP., SR. NOTES
$ 3,000 10.875%, 8/1/09 $ 3,315,000
AVECIA INVESTMENTS LTD.
2,207 11.00%, 7/1/09 2,085,615
BCP CAYLUX HOLDINGS, SR. SUB. NOTES
4,880 9.625%, 6/15/14(4) 5,490,000
BORDEN U.S. FINANCE/NOVA SCOTIA FINANCE, SR. NOTES
1,765 9.00%, 7/15/14(4) 1,939,294
CRYSTAL US HOLDINGS/US HOLDINGS 3, LLC, SR. DISC. NOTES
5,165 10.50%, 10/1/14(4) 3,279,775
EQUISTAR CHEMICAL, SR. NOTES
7,000 10.625%, 5/1/11 8,120,000
HUNTSMAN ADVANCED MATERIALS, SR. NOTES
905 11.00%, 7/15/10(4) 1,049,800
HUNTSMAN INTERNATIONAL
6,000 9.875%, 3/1/09 6,690,000
HUNTSMAN LLC
6,825 11.625%, 10/15/10 8,079,094
INNOPHOS, INC., SR. SUB. NOTES
1,100 8.875%, 8/15/14(4) 1,190,750
LYONDELL CHEMICAL CO.
1,940 9.50%, 12/15/08 2,124,300
4,790 9.50%, 12/15/08 5,245,050
LYONDELL CHEMICAL CO., SERIES A
3,170 9.625%, 5/1/07 3,494,925
LYONDELL CHEMICAL CO., SR. NOTES
2,412 10.50%, 6/1/13 2,858,220
NALCO CO., SR. SUB. NOTES
2,960 8.875%, 11/15/13(4) 3,259,700
OM GROUP, INC.
11,180 9.25%, 12/15/11 11,752,975
POLYONE CORP., SR. NOTES
2,275 8.875%, 5/1/12 2,439,937
RHODIA SA, SR. NOTES
6,450 10.25%, 6/1/10 7,030,500
ROCKWOOD SPECIALTIES GROUP, SR. SUB. NOTES
$ 1,185 10.625%, 5/15/11 $ 1,321,275
---------------------------------------------------------------------------------------------------
$ 80,766,210
---------------------------------------------------------------------------------------------------
CLOTHING / TEXTILES -- 0.9%
GFSI, INC., SR. SUB. NOTES, SERIES B
$ 270 9.625%, 3/1/07 $ 265,950
J CREW OPERATING CORP., SR. SUB. NOTES
3,885 10.375%, 10/15/07 4,011,262
LEVI STRAUSS & CO.
250 7.00%, 11/1/06 245,937
LEVI STRAUSS & CO., SR. NOTES
3,250 11.625%, 1/15/08 3,331,250
MOTHERS WORK, INC.
1,100 11.25%, 8/1/10 1,061,500
PENNY (JC) CO., INC.
1,875 8.00%, 3/1/10 2,156,250
PERRY ELLIS INTERNATIONAL, INC., SR. SUB. NOTES
3,795 8.875%, 9/15/13 4,079,625
PHILLIPS VAN-HEUSEN, SR. NOTES
1,175 7.25%, 2/15/11(4) 1,236,687
2,500 8.125%, 5/1/13 2,725,000
---------------------------------------------------------------------------------------------------
$ 19,113,461
---------------------------------------------------------------------------------------------------
COMPUTERS - INTEGRATED SYSTEMS -- 0.0%
ACTIVANT SOLUTIONS, INC., SR. NOTES
$ 1,000 10.50%, 6/15/11 $ 1,047,500
---------------------------------------------------------------------------------------------------
$ 1,047,500
---------------------------------------------------------------------------------------------------
CONGLOMERATES -- 0.4%
AMSTED INDUSTRIES, INC., SR. NOTES
$ 7,150 10.25%, 10/15/11(4) $ 7,900,750
---------------------------------------------------------------------------------------------------
$ 7,900,750
---------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.3%
FEDDERS NORTH AMERICA, INC.
$ 2,585 9.875%, 3/1/14 $ 2,093,850
RIDDELL BELL HOLDINGS, SR. SUB. NOTES
425 8.375%, 10/1/12(4) 440,937
SAMSONITE CORP., SR. SUB. NOTES
3,680 8.875%, 6/1/11 3,937,600
---------------------------------------------------------------------------------------------------
$ 6,472,387
---------------------------------------------------------------------------------------------------
See notes to financial statements
15
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
CONTAINERS AND GLASS PRODUCTS -- 2.4%
ANCHOR GLASS CONTAINER CORP.
$ 5,000 11.00%, 2/15/13 $ 5,600,000
CROWN EURO HOLDINGS SA
20,495 10.875%, 3/1/13 24,440,287
GRAHAM PACKAGING CO., SR. NOTES
850 8.50%, 10/15/12(4) 896,750
GRAHAM PACKAGING CO., SR. SUB. NOTES
1,700 9.875%, 10/15/14(4) 1,810,500
GRAPHIC PACKAGING INTERNATIONAL CORP., SR. SUB. NOTES
3,265 9.50%, 8/15/13 3,779,237
INTERTAPE POLYMER US, INC., SR. SUB. NOTES
3,235 8.50%, 8/1/14(4) 3,230,956
PLASTIPAK HOLDINGS, INC.
3,915 10.75%, 9/1/11 4,404,375
PLIANT CORP.
2,775 11.125%, 6/15/09 2,483,625
STONE CONTAINER CORP., SR. NOTES
1,150 7.375%, 7/15/14(4) 1,233,375
TEKNI-PLEX, INC., SR. NOTES
1,755 8.75%, 11/15/13(4) 1,682,606
US CAN CORP., SR. NOTES
820 10.875%, 7/15/10 836,400
---------------------------------------------------------------------------------------------------
$ 50,398,111
---------------------------------------------------------------------------------------------------
ECOLOGICAL SERVICES AND EQUIPMENT -- 0.1%
ALDERWOODS GROUP, INC., SR. NOTES
$ 1,145 7.75%, 9/15/12(4) $ 1,242,325
NATIONAL WATERWORKS, INC., SERIES B
1,500 10.50%, 12/1/12 1,691,250
---------------------------------------------------------------------------------------------------
$ 2,933,575
---------------------------------------------------------------------------------------------------
ELECTRONICS / ELECTRICAL -- 1.0%
DANKA BUSINESS SYSTEMS, SR. NOTES
$ 2,350 11.00%, 6/15/10 $ 2,479,250
HEXCEL CORP.
1,520 9.875%, 10/1/08 1,710,000
HEXCEL CORP., SR. SUB. NOTES
525 9.75%, 1/15/09 555,187
RAYOVAC CORP., SR. SUB. NOTES
4,025 8.50%, 10/1/13 4,437,562
SANMINA-SCI CORP., SR. NOTES
5,000 10.375%, 1/15/10 5,887,500
WESCO DISTRIBUTION INC.
5,000 9.125%, 6/1/08 5,200,000
---------------------------------------------------------------------------------------------------
$ 20,269,499
---------------------------------------------------------------------------------------------------
ENGINEERING -- 0.1%
SHAW GROUP, INC., SR. NOTES
$ 1,210 10.75%, 3/15/10 $ 1,297,725
---------------------------------------------------------------------------------------------------
$ 1,297,725
---------------------------------------------------------------------------------------------------
EQUIPMENT LEASING -- 0.2%
UNITED RENTALS NORTH AMERICA, INC.
$ 2,120 6.50%, 2/15/12 $ 2,109,400
UNITED RENTALS NORTH AMERICA, INC., SR. SUB. NOTES
2,250 7.00%, 2/15/14 2,086,875
---------------------------------------------------------------------------------------------------
$ 4,196,275
---------------------------------------------------------------------------------------------------
FARMING / AGRICULTURE -- 0.4%
IMC GLOBAL, INC.
$ 6,775 11.25%, 6/1/11 $ 7,994,500
---------------------------------------------------------------------------------------------------
$ 7,994,500
---------------------------------------------------------------------------------------------------
FINANCIAL INTERMEDIARIES -- 0.2%
REFCO FINANCE HOLDINGS, LLC, SR. SUB. NOTES
$ 4,335 9.00%, 8/1/12(4) $ 4,703,475
---------------------------------------------------------------------------------------------------
$ 4,703,475
---------------------------------------------------------------------------------------------------
FINANCIAL INVESTMENTS -- 0.1%
CARLYLE HIGH YIELD PARTNERS, SERIES 2004-6A, CLASS C
$ 1,000 4.36%, 8/15/16(2)(4) $ 1,000,000
DRYDEN LEVERAGED LOAN, SERIES 2004-6A, CLASS C1
1,500 4.055%, 7/30/16(2)(4) 1,500,000
---------------------------------------------------------------------------------------------------
$ 2,500,000
---------------------------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.7%
MERISANT CO., SR. NOTES
$ 3,155 9.75%, 7/15/13(4) $ 2,949,925
MICHAEL FOODS, SR. SUB. NOTES
1,125 8.00%, 11/15/13 1,192,500
PINNACLE FOODS HOLDINGS CORP., SR. SUB. NOTES
250 8.25%, 12/1/13(4) 237,500
3,725 8.25%, 12/1/13(4) 3,538,750
UAP HOLDING CORP., SR. DISC. NOTES
5,535 10.75%, 7/15/12(4) 4,261,950
WH HOLDINGS LTD./WH CAPITAL CORP., SR. NOTES
1,865 9.50%, 4/1/11 2,051,500
---------------------------------------------------------------------------------------------------
$ 14,232,125
---------------------------------------------------------------------------------------------------
See notes to financial statements
16
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
FOOD / DRUG RETAILERS -- 0.3%
GENERAL NUTRITION CENTERS, SR. SUB. NOTES
$ 1,250 8.50%, 12/1/10(4) $ 1,265,625
JEAN COUTU GROUP, INC., SR. SUB. NOTES
2,685 8.50%, 8/1/14(4) 2,752,125
PIERRE FOODS, INC., SR. SUB. NOTES
3,225 9.875%, 7/15/12(4) 3,289,500
---------------------------------------------------------------------------------------------------
$ 7,307,250
---------------------------------------------------------------------------------------------------
FOREST PRODUCTS -- 2.5%
AINSWORTH LUMBER, SR. NOTES
$ 2,125 7.25%, 10/1/12(4) $ 2,162,187
BOISE CASCADE, LLC, SR. NOTES, VARIABLE RATE
1,520 5.005%, 10/15/12(4) 1,561,800
BOISE CASCADE, LLC, SR. SUB. NOTES
1,955 7.125%, 10/15/14(4) 2,050,420
CARAUSTAR INDUSTRIES, INC., SR. SUB. NOTES
4,950 9.875%, 4/1/11 5,395,500
GEORGIA-PACIFIC CORP.
15,225 9.50%, 12/1/11 19,031,250
MDP ACQUISITIONS/JSG FUNDING PLC, SR. NOTES
17,180 9.625%, 10/1/12 19,671,100
NEWARK GROUP, INC., SR. SUB. NOTES
3,885 9.75%, 3/15/14(4) 4,059,825
---------------------------------------------------------------------------------------------------
$ 53,932,082
---------------------------------------------------------------------------------------------------
HEALTHCARE -- 3.4%
ARDENT HEALTH SERVICES, INC., SR. SUB. NOTES
$ 6,995 10.00%, 8/15/13 $ 7,187,362
CONCENTRA OPERATING CORP., SR. NOTES
7,000 9.50%, 8/15/10 7,805,000
INVERNESS MEDICAL INNOVATIONS, INC., SR. SUB. NOTES
3,175 8.75%, 2/15/12(4) 3,286,125
MEDICAL DEVICE MANUFACTURING, INC., SR. SUB. NOTES
2,645 10.00%, 7/15/12(4) 2,843,375
MEDQUEST, INC.
6,000 11.875%, 8/15/12 6,990,000
NATIONAL MENTOR, INC., SR. SUB. NOTES
1,305 9.625%, 12/1/12(4) 1,344,150
NATIONAL NEPHROLOGY ASSOCIATION, SR. SUB. NOTES
2,000 9.00%, 11/1/11(4) 2,320,000
PACIFICARE HEALTH SYSTEM
7,017 10.75%, 6/1/09 8,122,177
ROTECH HEALTHCARE, INC.
3,675 9.50%, 4/1/12 4,024,125
TENET HEALTHCARE CORP.
$ 6,500 7.375%, 2/1/13 $ 6,175,000
TENET HEALTHCARE CORP., SR. NOTES
5,710 9.875%, 7/1/14(4) 6,009,775
US ONCOLOGY, INC., SR. NOTES
2,205 9.00%, 8/15/12(4) 2,392,425
US ONCOLOGY, INC., SR. SUB. NOTES
4,365 10.75%, 8/15/14(4) 4,779,675
VANGUARD HEALTH HOLDINGS II, SR. SUB. NOTES
4,730 9.00%, 10/1/14(4) 4,966,500
VWR INTERNATIONAL, INC., SR. SUB. NOTES
3,270 8.00%, 4/15/14(4) 3,523,425
---------------------------------------------------------------------------------------------------
$ 71,769,114
---------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.2%
NEW ASAT (FINANCE) LTD., SR. NOTES
$ 2,490 9.25%, 2/1/11(4) $ 2,191,200
STRATUS TECHNOLOGIES, INC., SR. NOTES
2,715 10.375%, 12/1/08 2,321,325
---------------------------------------------------------------------------------------------------
$ 4,512,525
---------------------------------------------------------------------------------------------------
INVESTMENT SERVICES -- 0.1%
E*TRADE FINANCIAL CORP., SR. NOTES
$ 2,420 8.00%, 6/15/11(4) $ 2,565,200
---------------------------------------------------------------------------------------------------
$ 2,565,200
---------------------------------------------------------------------------------------------------
LEISURE GOODS / ACTIVITIES / MOVIES -- 2.3%
CHUKCHANSI EDA, SR. NOTES
$ 800 14.50%, 6/15/09(4) $ 1,012,000
LCE ACQUISITION CORP., SR. SUB. NOTES
4,465 9.00%, 8/1/14(4) 4,699,412
MARQUEE HOLDINGS, INC., SR. DISC. NOTES
5,965 12.00%, 8/15/14(4) 3,698,300
MARQUEE, INC., SR. NOTES
3,310 8.625%, 8/15/12(4) 3,632,725
OED CORP./DIAMOND JO LLC
3,830 8.75%, 4/15/12(4) 3,619,350
PENN NATIONAL GAMING, INC., SR. SUB. NOTES
850 11.125%, 3/1/08 923,312
ROYAL CARIBBEAN CRUISES, SR. NOTES
11,010 8.75%, 2/2/11 13,156,950
SIX FLAGS THEME PARKS, INC., SR. NOTES
1,000 8.875%, 2/1/10 962,500
1,025 9.625%, 6/1/14 984,000
See notes to financial statements
17
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
LEISURE GOODS / ACTIVITIES / MOVIES (CONTINUED)
TRUE TEMPER SPORTS, INC., SR. SUB. NOTES
$ 700 8.375%, 9/15/11 $ 640,500
UNIVERSAL CITY DEVELOPMENT PARTNERS, SR. NOTES
12,925 11.75%, 4/1/10 15,122,250
---------------------------------------------------------------------------------------------------
$ 48,451,299
---------------------------------------------------------------------------------------------------
LODGING AND CASINOS -- 2.7%
HOST MARRIOTT L.P., SERIES I
$ 3,505 9.50%, 1/15/07 $ 3,908,075
INN OF THE MOUNTAIN GODS, SR. NOTES
5,230 12.00%, 11/15/10 6,092,950
JOHN Q HAMONS HOTELS/FINANCE, SERIES B
3,500 8.875%, 5/15/12 4,042,500
MAJESTIC STAR CASINO LLC
5,555 9.50%, 10/15/10 5,763,312
MGM GRAND, INC.
1,125 6.875%, 2/6/08 1,230,469
MTR GAMING GROUP, SERIES B
2,500 9.75%, 4/1/10 2,712,500
PREMIER ENTERTAINMENT BILOXI, LLC/PREMIER FINANCE BILOXI CORP.
475 10.75%, 2/1/12(4) 508,250
SUN INTERNATIONAL HOTELS, SR. SUB. NOTES
4,000 8.875%, 8/15/11 4,430,000
TRUMP ATLANTIC CITY ASSOCIATES, INC.
5,510 11.25%, 5/1/06(5) 4,862,575
TRUMP HOLDINGS AND FUNDING, SR. NOTES
6,545 11.625%, 3/15/10 7,003,150
VENETIAN CASINO RESORT, LLC/LAS VEGAS SANDS, INC.
5,995 11.00%, 6/15/10 6,916,731
WATERFORD GAMING LLC, SR. NOTES
9,086 8.625%, 9/15/12(4) 9,710,662
---------------------------------------------------------------------------------------------------
$ 57,181,174
---------------------------------------------------------------------------------------------------
MACHINERY -- 1.1%
CASE NEW HOLLAND, INC., SR. NOTES
$ 7,135 9.25%, 8/1/11(4) $ 8,169,575
MANITOWOC CO., INC. (THE)
1,500 10.50%, 8/1/12 1,741,875
TEREX CORP.
8,645 10.375%, 4/1/11 9,768,850
THERMADYNE HOLDINGS CORP., SR. SUB. NOTES
4,575 9.25%, 2/1/14 4,369,125
---------------------------------------------------------------------------------------------------
$ 24,049,425
---------------------------------------------------------------------------------------------------
MANUFACTURING -- 0.6%
AEARO CO. I, SR. SUB. NOTES
$ 1,665 8.25%, 4/15/12(4) $ 1,731,600
OXFORD INDUSTRIES, INC., SR. NOTES
9,690 8.875%, 6/1/11(4) 10,513,650
---------------------------------------------------------------------------------------------------
$ 12,245,250
---------------------------------------------------------------------------------------------------
MINING - COAL -- 0.1%
ALPHA NATURAL RESOURCES, SR. NOTES
$ 1,370 10.00%, 6/1/12(4) $ 1,527,550
---------------------------------------------------------------------------------------------------
$ 1,527,550
---------------------------------------------------------------------------------------------------
NONFERROUS METALS / MINERALS -- 0.4%
AK STEEL CORP.
$ 2,000 7.75%, 6/15/12 $ 2,035,000
GENERAL CABLE CORP., SR. NOTES
1,510 9.50%, 11/15/10 1,713,850
ISPAT INLAND ULC, SR. NOTES
3,235 9.75%, 4/1/14(4) 3,946,700
---------------------------------------------------------------------------------------------------
$ 7,695,550
---------------------------------------------------------------------------------------------------
OIL AND GAS -- 2.7%
BELDEN & BLAKE CORP., SR. NOTES
$ 675 8.75%, 7/15/12(4) $ 732,375
DENBURY RESOURCES, INC.
210 7.50%, 4/1/13 228,900
DRESSER, INC.
9,200 9.375%, 4/15/11 10,258,000
DRESSER-RAND GROUP, INC., SR. SUB. NOTES
4,655 7.375%, 11/1/14(4) 4,899,387
DYNEGY HOLDINGS, INC., SR. NOTES
9,790 10.125%, 7/15/13(4) 11,454,300
EL PASO CGP CO., SR. DEBS.
2,305 9.625%, 5/15/12 2,518,212
EL PASO CORP., SR. NOTES
650 7.00%, 5/15/11 656,500
EL PASO PRODUCTION HOLDING CO.
2,245 7.75%, 6/1/13 2,351,638
GIANT INDUSTRIES
850 8.00%, 5/15/14 890,375
HANOVER COMPRESSOR CO., SR. SUB. NOTES
4,945 0.00%, 3/31/07 4,227,975
MARKWEST ENERGY PARTNERS, L.P./MARKWEST ENERGY FINANCE CORP., SR. NOTES
1,085 6.875%, 11/1/14(4) 1,112,125
See notes to financial statements
18
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
OIL AND GAS (CONTINUED)
NGC CORP., SR. DEBS.
$ 885 7.125%, 5/15/18 $ 787,650
1,990 7.625%, 10/15/26 1,746,225
PARKER DRILLING CO., SR. NOTES
1,930 9.625%, 10/1/13 2,156,775
PREMCOR REFINING GROUP, SR. SUB. NOTES
1,265 7.75%, 2/1/12 1,407,313
SONAT, INC.
5,000 7.625%, 7/15/11 5,137,500
TRANSMONTAIGNE, INC., SR. SUB. NOTES
4,800 9.125%, 6/1/10 5,364,000
UNITED REFINING CO., SR. NOTES
2,320 10.50%, 8/15/12(4) 2,360,600
---------------------------------------------------------------------------------------------------
$ 58,289,850
---------------------------------------------------------------------------------------------------
PUBLISHING -- 2.1%
ADVANSTAR COMMUNICATIONS, INC.
$ 6,980 10.75%, 8/15/10 $ 7,817,600
ADVANSTAR COMMUNICATIONS, INC., VARIABLE RATE
4,455 9.79%, 8/15/08 4,688,888
ADVERTISING DIRECT SOLUTIONS, SR. NOTES
870 9.25%, 11/15/12(4) 912,413
AMERICAN MEDIA OPERATIONS, INC.
2,040 8.875%, 1/15/11 2,182,800
AMERICAN MEDIA OPERATIONS, INC., SERIES B
5,240 10.25%, 5/1/09 5,541,300
CBD MEDIA, INC., SR. SUB. NOTES
1,335 8.625%, 6/1/11 1,405,088
DEX MEDIA WEST LLC, SR. SUB. NOTES
5,475 9.875%, 8/15/13 6,501,563
HOLLINGER PARTICIPATION TRUST, SR. NOTES, (PIK)
1,739 12.125%, 11/15/10(4) 2,130,090
HOUGHTON MIFFLIN CO., SR. SUB. NOTES
1,490 9.875%, 2/1/13 1,624,100
LIBERTY GROUP OPERATING, INC.
1,380 9.375%, 2/1/08 1,397,250
PRIMEDIA, INC.
3,180 8.875%, 5/15/11 3,331,050
XEROX CORP.
3,000 9.75%, 1/15/09 3,532,500
XEROX CORP., SR. NOTES
1,855 7.125%, 6/15/10 2,017,313
1,485 7.625%, 6/15/13 1,640,925
---------------------------------------------------------------------------------------------------
$ 44,722,880
---------------------------------------------------------------------------------------------------
RADIO AND TELEVISION -- 3.3%
CANWEST MEDIA, INC., SR. SUB. NOTES
$ 11,000 10.625%, 5/15/11 $ 12,485,000
CCO HOLDINGS LLC / CCO CAPITAL CORP., SENIOR NOTES
2,000 8.75%, 11/15/13 2,005,000
CORUS ENTERTAINMENT, INC., SR. SUB. NOTES
880 8.75%, 3/1/12 985,600
CSC HOLDINGS, INC., SR. NOTES
2,970 7.875%, 12/15/07 3,215,025
5,000 8.125%, 7/15/09 5,525,000
CSC HOLDINGS, INC., SR. SUB. NOTES
6,605 10.50%, 5/15/16 7,579,238
ECHOSTAR DBS CORP., SR. NOTES
10,000 4.85%, 10/1/08 10,450,000
KABEL DEUTSCHLAND GMBH
4,965 10.625%, 7/1/14(4) 5,585,625
MUZAK HOLDINGS LLC
1,310 9.875%, 3/15/09 910,450
MUZAK LLC/MUZAK FINANCE, SR. NOTES
7,365 10.00%, 2/15/09 6,628,500
NEXSTAR FINANCE HOLDINGS LLC, INC.
330 12.00%, 4/1/08 361,350
NEXSTAR FINANCE HOLDINGS LLC, INC., SR. DISC. NOTES
3,450 11.375%, 4/1/13 2,673,750
PAXSON COMMUNICATIONS CORP.
3,000 4.35%, 1/15/10(4) 3,033,750
RAINBOW NATIONAL SERVICES, LLC, SR. NOTES
1,805 8.75%, 9/1/12(4) 1,940,375
RAINBOW NATIONAL SERVICES, LLC, SR. SUB. DEBS.
6,905 10.375%, 9/1/14(4) 7,560,975
---------------------------------------------------------------------------------------------------
$ 70,939,638
---------------------------------------------------------------------------------------------------
RECYCLING -- 0.1%
IMCO RECYCLING, SR. NOTES
$ 1,085 9.00%, 11/15/14(2)(4) $ 1,085,000
---------------------------------------------------------------------------------------------------
$ 1,085,000
---------------------------------------------------------------------------------------------------
REITS -- 0.3%
CB RICHARD ELLIS SERVICES, INC., SR. NOTES
$ 1,717 9.75%, 5/15/10 $ 1,965,965
CB RICHARD ELLIS SERVICES, INC., SR. SUB. NOTES
2,600 11.25%, 6/15/11 3,055,000
OMEGA HEALTHCARE INVESTORS, INC., SR. NOTES
1,165 7.00%, 4/1/14(4) 1,199,950
---------------------------------------------------------------------------------------------------
$ 6,220,915
---------------------------------------------------------------------------------------------------
See notes to financial statements
19
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
RETAILERS (EXCEPT FOOD AND DRUG) -- 0.6%
AMSCAN HOLDINGS, INC., SR. SUB. NOTES
$ 220 8.75%, 5/1/14(4) $ 222,200
HOME INTERIORS & GIFTS, INC.
2,255 10.025%, 6/1/08 1,950,575
JOSTENS HOLDING CORP., SR. DISC. NOTES
1,250 10.25%, 12/1/13 878,125
PCA LLC/PCA FINANCE CORP., SR. NOTES
8,455 11.875%, 8/1/09 8,074,525
PETRO STOPPING CENTERS LP/PETRO FINANCIAL CORP., SR. NOTES
1,795 9.00%, 2/15/12 1,929,625
---------------------------------------------------------------------------------------------------
$ 13,055,050
---------------------------------------------------------------------------------------------------
SEMICONDUCTORS -- 0.8%
ADVANCED MICRO DEVICES, INC., SR. NOTES
$ 8,040 7.75%, 11/1/12(4) $ 8,100,300
AMKOR TECHNOLOGIES, INC.
1,010 5.75%, 6/1/06 964,550
AMKOR TECHNOLOGIES, INC., SR. NOTES
2,340 7.125%, 3/15/11 2,029,950
7,585 7.75%, 5/15/13 6,579,988
---------------------------------------------------------------------------------------------------
$ 17,674,788
---------------------------------------------------------------------------------------------------
SERVICES -- 0.3%
KINDERCARE LEARNING CENTERS, INC., SR. SUB. NOTES
$ 5,375 9.50%, 2/15/09 $ 5,469,063
---------------------------------------------------------------------------------------------------
$ 5,469,063
---------------------------------------------------------------------------------------------------
SURFACE TRANSPORT -- 0.4%
HORIZON LINES, LLC
$ 4,380 9.00%, 11/1/12(4) $ 4,757,775
OMI CORP., SR. NOTES
3,510 7.625%, 12/1/13 3,724,988
QUALITY DISTRIBUTION LLC/QD CAPITAL CORP.
1,045 9.00%, 11/15/10(4) 978,381
---------------------------------------------------------------------------------------------------
$ 9,461,144
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 3.8%
AIRGATE PCS, INC., SR. NOTES, VARIABLE RATE
$ 1,080 5.85%, 10/15/11(4) $ 1,112,400
ALAMOSA DELAWARE, INC., SR. DISC. NOTES
1,305 12.00%, 7/31/09 1,396,350
ALAMOSA DELAWARE, INC., SR. NOTES
$ 2,295 11.00%, 7/31/10 $ 2,696,625
1,010 8.50%, 1/31/12 1,075,650
ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
5,000 9.875%, 8/15/11 4,975,000
AMERICAN TOWER, L.P., SR. NOTES
3,529 9.375%, 2/1/09 3,749,563
CENTENNIAL CELLULAR OPERATING CO., LLC, SR. SUB. NOTES
680 10.75%, 12/15/08 710,600
CENTENNIAL CELLULAR OPERATING CO./CENTENNIAL COMMUNICATIONS CORP., SR. NOTES
6,490 10.125%, 6/15/13 7,074,100
CROWN CASTLE OPERATING CO., SR. NOTES
5,000 10.75%, 8/1/11(2) 5,562,500
DOBSON CELLULAR SYSTEMS, INC., VARIABLE RATE
1,085 6.95%, 11/1/11(4) 1,120,263
INMARSAT FINANCE PLC
4,795 7.625%, 6/30/12 4,866,925
LCI INTERNATIONAL, INC., SR. NOTES
3,150 7.25%, 6/15/07 2,905,875
NEXTEL COMMUNICATIONS, INC., SR. NOTES
6,225 7.375%, 8/1/15 6,940,875
NEXTEL PARTNERS, INC., SR. NOTES
1,918 12.50%, 11/15/09 2,203,303
NORTEL NETWORKS LTD.
665 6.125%, 2/15/06 683,288
1,575 4.25%, 9/1/08 1,521,844
PANAMSAT CORP., SR. NOTES
4,335 9.00%, 8/15/14(4) 4,616,775
QWEST CAPITAL FUNDING, INC.
510 7.75%, 8/15/06 526,575
785 7.90%, 8/15/10 763,413
QWEST CORP.
3,740 14.00%, 12/15/10(4) 4,459,950
2,000 8.875%, 3/15/12(4) 2,265,000
RURAL CELLULAR CORP., VARIABLE RATE
2,000 5.61%, 3/15/10(4) 2,070,000
TELEMIG CELULAR SA/AMAZONIA CELULAR SA
1,755 8.75%, 1/20/09(4) 1,755,000
TRITON PCS, INC.
2,765 8.50%, 6/1/13 2,550,713
TSI TELECOMMUNICATION, SERIES B
2,000 12.75%, 2/1/09 2,250,000
UBIQUITEL OPERATING CO., SR. NOTES
1,435 9.875%, 3/1/11 1,560,563
See notes to financial statements
20
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
US UNWIRED, INC., SERIES B
$ 4,470 10.00%, 6/15/12 $ 4,861,125
WESTERN WIRELESS, SR. NOTES
3,290 9.25%, 7/15/13 3,520,300
---------------------------------------------------------------------------------------------------
$ 79,794,575
---------------------------------------------------------------------------------------------------
UTILITIES -- 2.9%
AES CORP., SR. NOTES
$ 4,500 8.75%, 6/15/08 $ 4,983,750
6,000 9.50%, 6/1/09 6,945,000
6,965 8.75%, 5/15/13(4) 8,079,400
945 9.00%, 5/15/15(4) 1,105,650
CALPINE CORP., SR. NOTES
1,810 8.25%, 8/15/05 1,778,325
4,455 7.625%, 4/15/06 4,165,425
680 10.50%, 5/15/06 647,700
4,405 8.50%, 7/15/10(4) 3,259,700
ILLINOIS POWER
2,430 7.50%, 6/15/09 2,789,001
MISSION ENERGY HOLDING CO.
2,115 13.50%, 7/15/08 2,691,338
NORTHWESTERN CORP., SR. NOTES
435 5.875%, 11/1/14(4) 450,769
NRG ENERGY, INC., SR. NOTES
5,805 8.00%, 12/15/13(4) 6,421,781
ORION POWER HOLDINGS, INC., SR. NOTES
12,415 12.00%, 5/1/10 15,704,975
RELIANT ENERGY, INC.
1,770 9.25%, 7/15/10 1,973,550
---------------------------------------------------------------------------------------------------
$ 60,996,364
---------------------------------------------------------------------------------------------------
WASTE MANAGEMENT -- 0.2%
WASTE SERVICES, INC., SR. SUB. NOTES
$ 4,515 9.50%, 4/15/14(4) $ 4,266,675
---------------------------------------------------------------------------------------------------
$ 4,266,675
---------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES
(IDENTIFIED COST $962,817,525) $ 1,022,519,915
---------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 0.5%
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------------------
GENERAL ELECTRIC CAPITAL CORP.
$ 8,144 1.83%, 11/1/04 $ 8,143,172
MORTGAGE & REALTY TRUST
$ 1,500 1.90%, 11/1/04 $ 1,499,842
---------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $9,643,014) $ 9,643,014
---------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.0%
PRINCIPAL MATURITY
AMOUNT DATE BORROWER RATE AMOUNT
---------------------------------------------------------------------------------------------------
$ 20,958,000 11/01/04 Investors Bank and Trust 1.88% $ 20,958,000
Company Time Deposit
---------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(AT AMORTIZED COST) $ 20,958,000
---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 147.3%
(IDENTIFIED COST $3,057,356,531) $ 3,122,099,620
---------------------------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES -- (9.6)% $ (202,445,876)
---------------------------------------------------------------------------------------------------
AUCTION PREFERRED SHARES PLUS
CUMULATIVE UNPAID
DIVIDENDS -- (37.8)% $ (800,150,340)
---------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO
COMMON SHARES -- 100.0% $ 2,119,503,404
---------------------------------------------------------------------------------------------------
Note: The Fund has made commitments to fund specified amounts under certain
existing credit arrangments. Pursuant to the terms of these arrangements, the
Fund had unfunded loan commitments of $7,878,070 as of October 31, 2004.
PIK - Payment In Kind.
(1) Senior floating-rate interests often require prepayments from excess cash
flows or permit the borrower to repay at its election. The degree to which
borrowers repay, whether as a contractual requirement or at their election,
cannot be predicted with accuracy. As a result, the actual remaining
maturity may be substantially less than the stated maturities shown.
However, it is anticipated that the senior floating-rate interests will
have an expected average life of approximately two to three years. The
stated interest rate represents the weighted average interest rate of all
contracts within the senior loan facility.
(2) Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
(3) All or a portion of these securities were on loan at October 31, 2004.
(4) Security exempt from registration under Rule 144A of the Securities Act of
1933. these securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
2004, the aggregate value of the securities is $287,887,932 or 13.6% of the
Fund's net assets.
(5) Defaulted bond.
See notes to financial statements
21
EATON VANCE LIMITED DURATION INCOME FUND as of October 31, 2004
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
AS OF OCTOBER 31, 2004
ASSETS
Investments, at value including $216,333,374 of securities on loan
(identified cost, $3,057,356,531) $ 3,122,099,620
Cash 4,575,544
Receivable for investments sold 11,812,193
Interest receivable 33,078,901
Prepaid expenses 79,452
-----------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 3,171,645,710
-----------------------------------------------------------------------------------------------------
LIABILITIES
Collateral for securities loaned $ 221,705,085
Payable for investments purchased 29,977,231
Payable to affiliate for Trustees' fees 2,006
Accrued expenses 307,644
-----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 251,991,966
-----------------------------------------------------------------------------------------------------
AUCTION PREFERRED SHARES (32,000 SHARES OUTSTANDING) AT LIQUIDATION
VALUE PLUS CUMULATIVE UNPAID DIVIDENDS 800,150,340
-----------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $ 2,119,503,404
-----------------------------------------------------------------------------------------------------
SOURCES OF NET ASSETS
Common Shares, $0.01 par value, unlimited number of shares authorized,
111,447,775 shares issued and outstanding $ 1,114,478
Additional paid-in capital 2,116,810,969
Accumulated net realized loss (computed on the basis of identified cost) (50,275,668)
Accumulated distributions in excess of net investment income (12,889,464)
Net unrealized appreciation (computed on the basis of identified cost) 64,743,089
-----------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES $ 2,119,503,404
-----------------------------------------------------------------------------------------------------
NET ASSET VALUE PER COMMON SHARE
($2,119,503,404 DIVIDED BY 111,447,775 COMMON SHARES ISSUED
AND OUTSTANDING) $ 19.02
-----------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS
ENDED OCTOBER 31, 2004
INVESTMENT INCOME
Interest $ 81,520,531
Securities lending income, net 2,377,587
Dividends 33,701
-----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 83,931,819
-----------------------------------------------------------------------------------------------------
EXPENSES
Investment adviser fee $ 11,896,668
Trustees' fees and expenses 11,455
Preferred shares remarketing agent fee 1,173,630
Custodian fee 306,081
Printing and postage 193,967
Legal and accounting services 48,749
Transfer and dividend disbursing agent fees 30,180
Miscellaneous 152,398
-----------------------------------------------------------------------------------------------------
TOTAL EXPENSES $ 13,813,128
-----------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee $ 357
Reduction of investment adviser fee 3,172,445
-----------------------------------------------------------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 3,172,802
-----------------------------------------------------------------------------------------------------
NET EXPENSES $ 10,640,326
-----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 73,291,493
-----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (3,279,043)
-----------------------------------------------------------------------------------------------------
NET REALIZED LOSS $ (3,279,043)
-----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 21,310,445
-----------------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ 21,310,445
-----------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 18,031,402
-----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS $ (7,289,221)
-----------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 84,033,674
-----------------------------------------------------------------------------------------------------
See notes to financial statements
22
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
INCREASE (DECREASE) OCTOBER 31, 2004 PERIOD ENDED
IN NET ASSETS (UNAUDITED) APRIL 30, 2004(1)
-------------------------------------------------------------------------------------------------------
From operations --
Net investment income $ 73,291,493 $ 116,656,709
Net realized gain (loss) from
investment transactions (3,279,043) 4,765,139
Net change in unrealized appreciation
(depreciation) from investments 21,310,445 43,432,644
Distributions to preferred shareholders (7,289,221) (8,280,107)
-------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 84,033,674 $ 156,574,385
-------------------------------------------------------------------------------------------------------
Distributions to common shareholders --
From net investment income $ (89,713,589) $ (149,316,513)
-------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS $ (89,713,589) $ (149,316,513)
-------------------------------------------------------------------------------------------------------
Capital share transactions --
Proceeds from sale of common shares $ -- $ 2,120,100,000(2)
Reinvestment of distributions to
common shareholders 6,274,258 2,116,452
Offering costs and preferred shares
underwriting discounts -- (10,665,263)
-------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS $ 6,274,258 $ 2,111,551,189
-------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 594,343 $ 2,118,809,061
-------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES
At beginning of period $ 2,118,909,061 $ 100,000
-------------------------------------------------------------------------------------------------------
AT END OF PERIOD $ 2,119,503,404 $ 2,118,909,061
-------------------------------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME
INCLUDED IN NET ASSETS APPLICABLE TO COMMON SHARES
AT END OF PERIOD $ (12,889,464) $ 10,821,853
-------------------------------------------------------------------------------------------------------
(1) For the period from the start of business, May 30, 2003, to April 30, 2004.
(2) Proceeds from sales of shares net of sales load paid of $99,900,000.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
INCREASE (DECREASE) IN CASH OCTOBER 31, 2004
-----------------------------------------------------------------------------------------------------
Cash Flows From (Used For) Operating Activities --
Purchase of investments $ (968,290,626)
Proceeds from sales of investments and principal repayments 998,281,014
Interest and dividends received, including net securities lending income 103,053,503
Prepaid expenses (44,732)
Facility fees received 236,517
Operating expenses paid (10,541,534)
Net decrease in short-term investments 16,609,986
Payment of collateral for securities loaned, net 97,749,542
---------------------------------------------------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES $ 237,053,670
---------------------------------------------------------------------------------------------------
Cash Flows Used For Financing Activities --
Auction preferred shares redeemed $ (150,000,000)
Cash distributions paid (excluding reinvestments of $6,274,258) (90,627,519)
---------------------------------------------------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES $ (240,627,519)
---------------------------------------------------------------------------------------------------
NET DECREASE IN CASH $ (3,573,849)
---------------------------------------------------------------------------------------------------
CASH AT BEGINNING OF PERIOD $ 8,149,393
---------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 4,575,544
---------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET CASH USED
FOR OPERATING ACTIVITIES
Net increase in net assets from operations $ 84,033,674
Distributions to preferred shareholders 7,289,221
Increase in receivable for investments sold (5,998,170)
Decrease in interest receivable 1,238,086
Increase in prepaid expenses (76,312)
Decrease in payable to affiliate (583)
Increase in accrued expenses 130,955
Increase in collateral for securities loaned 97,749,542
Increase in payable for investments purchased 29,977,231
Net decrease in investments 22,710,026
---------------------------------------------------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES $ 237,053,670
---------------------------------------------------------------------------------------------------
See notes to financial statements
23
FINANCIAL HIGHLIGHTS
Selected data for a common share outstanding during the periods stated
SIX MONTHS ENDED
OCTOBER 31, 2004 YEAR ENDED
(UNAUDITED)(1) APRIL 30, 2004(1)(2)
--------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning of period (Common shares) $ 19.070 $ 19.100(3)
--------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
Net investment income $ 0.659(11) $ 1.061(10)
Net realized and unrealized gain 0.164(11) 0.426(10)
Distribution to preferred shareholders from net investment income (0.066) (0.075)
--------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM OPERATIONS $ 0.757 $ 1.412
--------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income $ (0.807) $ (1.345)
--------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS $ (0.807) $ (1.345)
--------------------------------------------------------------------------------------------------------------------------
PREFERRED AND COMMON SHARES OFFERING COSTS CHARGED TO PAID-IN CAPITAL $ -- $ (0.011)
--------------------------------------------------------------------------------------------------------------------------
PREFERRED SHARES UNDERWRITING DISCOUNTS $ -- $ (0.086)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD (COMMON SHARES) $ 19.020 $ 19.070
--------------------------------------------------------------------------------------------------------------------------
MARKET VALUE -- END OF PERIOD (COMMON SHARES) $ 19.250 $ 17.810
--------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN ON NET ASSET VALUE 4.12%(4) 7.22%(5)
--------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN ON MARKET VALUE 12.84%(4) 0.13%(5)
--------------------------------------------------------------------------------------------------------------------------
See notes to financial statements
24
Selected data for a common share outstanding during the periods stated
SIX MONTHS ENDED
OCTOBER 31, 2004 YEAR ENDED
(UNAUDITED)(1) APRIL 30, 2004(1)(2)
--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA+ ++
Net assets applicable to common shares, end of period (000's omitted) $ 2,119,503 $ 2,118,889
Ratios (As a percentage of average net assets applicable to common shares):
Net expenses(6) 1.01%(7) 0.93%(7)
Net expenses after custodian fee reduction(6) 1.01%(7) 0.93%(7)
Net investment income(6) 6.95%(7) 6.02%(7)
Portfolio Turnover 33% 72%
--------------------------------------------------------------------------------------------------------------------------------
+ The operating expenses of the Fund reflect a reduction of the investment
adviser fee. Had such action not been taken, the ratios and net investment
income per share would have been as follows:
Ratios (As a percentage of average net assets applicable to common shares):
Expenses(6) 1.31%(7) 1.21%(7)
Expenses after custodian fee reduction(6) 1.31%(7) 1.21%(7)
Net investment income(6) 6.65%(7) 5.74%(7)
Net investment income per share $ 0.631 $ 1.012
--------------------------------------------------------------------------------------------------------------------------------
++ The ratios reported are based on net assets applicable solely to common
shares. The ratios based on net assets, including amounts related to
preferred shares, are as follows:
Ratios (As a percentage of average total net assets):
Net expenses 0.70%(7) 0.67%(7)
Net expenses after custodian fee reduction 0.70%(7) 0.67%(7)
Net investment income 4.81%(7) 4.37%(7)
--------------------------------------------------------------------------------------------------------------------------------
+ The operating expenses of the Fund reflect a reduction of the investment
adviser fee. Had such action not been taken, the ratios and net investment
income per share would have been as follows:
Ratios (As a percentage of average total net assets):
Expenses 0.91%(7) 0.88%(7)
Expenses after custodian fee reduction 0.91%(7) 0.88%(7)
Net investment income 4.60%(7) 4.16%(7)
--------------------------------------------------------------------------------------------------------------------------------
Senior Securities:
Total preferred shares outstanding 32,000 38,000
Asset coverage per preferred share(8) $ 91,239 $ 80,762
Involuntary liquidation preference per preferred share(9) $ 25,000 $ 25,000
Approximate market value per preferred share(9) $ 25,000 $ 25,000
--------------------------------------------------------------------------------------------------------------------------------
(1) Computed using average common shares outstanding.
(2) For the period from the start of business, May 30, 2003, to April 30, 2004.
(3) Net asset value at beginning of period reflects the deduction of the sales
load of $0.900 per share paid by the shareholder from the $20.000 offering
price.
(4) Returns are historical and are calculated by determining the percentage
change in net asset value or market value with all distributions
reinvested. total return is not computed on an annualized basis.
(5) Total investment return on net asset value is calculated assuming a
purchase at the offering of $20.000 less the sales load of $0.900 per share
paid by the shareholder on the first day and a sale at the net asset value
on the last day of the period reported. Total investment return on market
value is calculated assuming a purchase at the offering price of $20.000
less the sales load of $0.900 per share paid by on the first day and a sale
at the current market price on the last day of the period reported. Total
investment return on net asset value and total investment return on market
value are not computed on an annualized basis.
(6) Ratios do not reflect the effect of dividend payments to preferred
shareholders. Ratios to average net assets applicable to common shares
reflect the Fund's leveraged capital structure.
(7) Annualized.
(8) Calculated by subtracting the Fund's total liabilities (not including the
preferred shares) from the Fund's total assets, and dividing this by the
number of preferred shares outstanding.
(9) Plus accumulated and unpaid dividends.
(10) For Federal Income tax purposes, net investment income per share was $1.531
and net realized and unrealized loss per share was $0.044. Computed using
average common shares outstanding.
(11) For Federal Income tax purposes, net investment income per share was $0.842
and net realized and unrealized loss per share was $0.019. Computed using
average common shares outstanding.
See notes to financial statements
25
EATON VANCE LIMITED DURATION INCOME FUND as of October 31, 2004
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1 SIGNIFICANT ACCOUNTING POLICIES
Eaton Vance Limited Duration Income Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified closed-end
management investment company. The Fund, which was organized as a
Massachusetts business trust on March 12, 2003, seeks to provide a high level
of current income. The Fund may, as a secondary objective, also seek capital
appreciation to the extent consistent with its primary goal of high current
income. The Fund pursues its objectives by investing primarily in,
mortgage-backed securities (MBS) issued, backed or otherwise guaranteed by
the U.S. government or its agencies or instrumentalities; senior, secured
floating rate loans made to corporate and other business entities (Senior
Loans); and corporate bonds of below investment grade quality (Non-Investment
Grade Bonds). The following is a summary of significant accounting policies
of the Fund. The policies are in conformity with accounting principles
generally accepted in the United States of America.
A INVESTMENT VALUATION -- Seasoned mortgage backed, pass-through securities
are valued using an independent matrix pricing system applied by the adviser
which takes into account closing bond valuations, yield differentials,
anticipated prepayments and interest rates provided by dealers. Debt
securities (other than seasoned mortgage backed, pass-through securities) are
normally valued on the basis of valuations furnished by dealers or a pricing
service. Certain senior loans are deemed to be liquid because reliable market
quotations are readily available for them. Liquid senior loans are valued on
the basis of prices furnished by a pricing service. Other senior loans are
valued at fair value by the Fund's investment adviser, Eaton Vance Management
(EVM), under procedures established by the Trustees as permitted by Section
2(a)(41) of the Investment Company Act of 1940. Such procedures include the
consideration of relevant factors, data and information relating to fair
value, including (i) the characteristics of and fundamental analytical data
relating to the Senior Loan, including the cost, size, current interest rate,
period until next interest rate reset, maturity and base lending rate of the
Senior Loan, the terms and conditions of the Senior Loan and any related
agreements, and the position of the Senior Loan in the Borrower's debt
structure; (ii) the nature, adequacy and value of the collateral, including
the Fund's rights, remedies and interests with respect to the collateral;
(iii) the creditworthiness of the Borrower, based on an evaluation of its
financial condition, financial statements and information about the
Borrower's business, cash flows, capital structure and future prospects; (iv)
information relating to the market for the Senior Loan including price
quotations for and trading in the Senior Loan, and interests in similar
Senior Loans and the market environment and investor attitudes towards the
Senior Loan and interests in similar Senior Loans; (v) the experience, the
reputation, stability and financial condition of the agent and any
intermediate participant in the Senior Loan; and (vi) general economic and
market conditions affecting the fair value of the Senior Loan. Other
portfolio securities (other than short-term obligations, but including listed
issues) may be valued on the basis of prices furnished by one or more pricing
services which determine prices for normal, institutional-size trading units
of such securities which may use market information, transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. In certain circumstances,
portfolio securities will be valued at the last sales price on the exchange
that is the primary market for such securities, or the last quoted bid price
for those securities for which the over-the-counter market is the primary
market or for listed securities in which there were no sales during the day.
The value of interest rate swaps will be based on dealer quotations.
Short-term obligations which mature in 60 days or less, are valued at
amortized cost, if their original term to maturity when acquired by the Fund
was 60 days or less or are valued at amortized cost using their value on the
61st day prior to maturity, if their original term to maturity when acquired
by the Fund was more than 60 days, unless in each case this is determined not
to represent fair value. OTC options are valued at the mean between the bid
and asked price provided by dealers. Financial futures contracts listed on
commodity exchanges and exchange traded options are valued at closing
settlement prices. Securities for which there is no such quotation or
valuation are valued at fair value using methods determined in good faith by
or at the direction of the Trustees. Repurchase agreements are valued at cost
plus accrued interest. Other portfolio securities for which there are no
quotations or valuations are valued at fair value as determined in good faith
by or on behalf of the Trustees.
B INCOME -- Interest income from Senior Loans is recorded on the accrual
basis at the then-current interest rate, while all other interest income is
determined on the basis of interest accrued, adjusted for amortization of
premium or accretion of discount. Dividend income is recorded on the
ex-dividend date for dividends received in cash and/or securities.
26
C FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments. Accordingly, no provision for federal
income or excise tax is necessary. At April 30, 2004, the Fund, for federal
income tax purposes, had a capital loss carryover of $26,481,368 which will
reduce the Fund's taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code,
and thus will reduce the amount of the distributions to shareholders which
would otherwise be necessary to relieve the Fund of any liability for federal
income or excise tax. Such capital loss carryover will expire on April 30,
2012.
At April 30, 2004, net capital losses of $17,668,020 attributable to security
transactions incurred after October 31, 2003, are treated as arising on the
first day of the Fund's taxable year ending April 30, 2005.
D INVESTMENT TRANSACTIONS -- Investment transactions are recorded on a trade
date basis. Realized gains and losses from such transactions are determined
using the specific identification method. Securities purchased or sold on a
when-issued or delayed delivery basis may be settled a month or more after
the transaction date. The securities so purchased are subject to market
fluctuations during this period. To the extent that when-issued or delayed
delivery purchases are outstanding, the Fund instructs the custodian to
segregate assets in a separate account, with a current value at least equal
to the amount of its purchase commitments.
E OFFERING COSTS -- Costs incurred by the Fund in connection with the
offering of the common shares were recorded as a reduction of capital paid in
excess of par applicable to common shares.
F EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as
custodian of the Fund. Pursuant to the custodian agreement, IBT receives a
fee reduced by credits which are determined based on the average daily cash
balances the Fund maintains with IBT. All credit balances used to reduce the
Fund's custodian fees are reported as a reduction of expenses on the
Statement of Operations.
G WRITTEN OPTIONS -- Upon the writing of a call or a put option, an amount
equal to the premium received by the Fund is included in the Statement of
Assets and Liabilities as a liability. The amount of the liability is
subsequently marked-to-market to reflect the current value of the option
written in accordance with the Fund's policies on investment valuations
discussed above. Premiums received from writing options which expire are
treated as realized gains. Premiums received from writing options which are
exercised or are closed are added to or offset against the proceeds or amount
paid on the transaction to determine the realized gain or loss. If a put
option is exercised, the premium reduces the cost basis of the securities
purchased by the Fund. The Fund, as writer of an option, may have no control
over whether the underlying securities may be sold (call) or purchased (put)
and, as a result, bears the market risk of an unfavorable change in the price
of the securities underlying the written option.
H PURCHASED OPTIONS -- Upon the purchase of a call or put option, the premium
paid by the Fund is included in the Statement of Assets and Liabilities as an
investment. The amount of the investment is subsequently marked-to-market to
reflect the current market value of the option purchased, in accordance with
the Fund's policies on investment valuations discussed above. If an option
which the Fund has purchased expires on the stipulated expiration date, the
Fund will realize a loss in the amount of the cost of the option. If the Fund
enters into a closing sale transaction, the Fund will realize a gain or loss,
depending on whether the sales proceeds from the closing sale transaction are
greater or less than the cost of the option. If a Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying
security, and the proceeds from such sale will be decreased by the premium
originally paid. If the Fund exercises a call option, the cost of the
security which the Fund purchases upon exercise will be increased by the
premium originally paid.
I FINANCIAL FUTURES CONTRACTS -- Upon entering into a financial futures
contract, the Fund is required to deposit an amount (initial margin) either
in cash or securities equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Fund (margin maintenance) each day, dependent on the daily
fluctuations in the value of the underlying securities, and are recorded for
book purposes as unrealized gains or losses by the Fund.
If the Fund enters into a closing transaction, the Fund will realize, for
book purposes, a gain or loss equal to the difference between the value of
the financial futures contract to sell and the financial futures contract to
buy. The Fund's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest rates. Should interest
rates move unexpectedly, the Fund may not achieve the anticipated benefits of
the financial futures contracts and may realize a loss.
27
J REVERSE REPURCHASE AGREEMENTS -- The Fund may enter into reverse repurchase
agreements. Under such an agreement, the Fund temporarily transfers
possession, but not ownership, of a security to a counterparty, in return for
cash. At the same time, the Fund agrees to repurchase the security at an
agreed-upon price and time in the future. The Fund may enter into reverse
repurchase agreements for temporary purposes, such as to fund withdrawals, or
for use as hedging instruments where the underlying security is denominated
in a foreign currency. As a form of leverage, reverse repurchase agreements
may increase the risk of fluctuation in the market value of the Fund's assets
or in its yield. Liabilities to counterparties under reverse repurchase
agreements are recognized in the Statement of Assets and Liabilities at the
same time at which cash is received by the Fund. The securities underlying
such agreements continue to be treated as owned by the Fund and remain in the
Portfolio of Investments. Interest charged on amounts borrowed by the Fund
under reverse repurchase agreements is accrued daily.
K TOTAL RETURN SWAPS -- The Fund may enter into swap agreements to hedge
against fluctuations in securities prices, interest rates or market
conditions; to change the duration of the portfolio; to mitigate default
risk; or for other risk management purposes. Pursuant to these agreements,
the Fund makes monthly payments at a rate equal to a predetermined spread to
the one-month LIBOR. In exchange, the Fund receives payments based on the
rate of return of a benchmark industry index. During the term of the
outstanding swap agreement, changes in the underlying value of the swap are
recorded as unrealized gains and losses. Payments received or made at the end
of the measurement period are recorded as realized gains and losses. The
value of the swap is determined by changes in the relationship between the
rate of interest and the benchmark industry index. The Fund is exposed to
credit loss in the event of non-performance by the swap counterparty.
However, the Fund does not anticipate non-performance by the counterparty.
Risk may also arise from the unanticipated movements in value of interest
rates or the index.
L OTHER -- Investment transactions are accounted for on the date the
securities are purchased or sold. Realized gains and losses are computed
based on the specific identification of securities sold.
M USE OF ESTIMATES -- The preparation of the financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expense during the
reporting period. Actual results could differ from those estimates.
N INDEMNIFICATIONS -- Under the Fund's organizational documents, its officers
and Trustees may be indemnified against certain liabilities and expenses
arising out of the performance of their duties to the Fund, and shareholders
are indemnified against personal liability for obligations of the Fund.
Additionally, in the normal course of business, the Fund enters into
agreements with service providers that may contain indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred.
O INTERIM FINANCIAL STATEMENTS -- The interim financial statements relating
to October 31, 2004 and for the six months then ended have not been audited
by an independent registered public accounting firm, but in the opinion of
the Fund's management reflect all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
statements.
2 AUCTION PREFERRED SHARES (APS)
The Fund issued 7,600 shares of Auction Preferred Shares Series A, 7,600
shares of Auction Preferred Shares Series B, 7,600 shares of Auction
Preferred Shares Series C, 7,600 shares of Auction Preferred Shares Series D,
and 7,600 shares of Auction Preferred Shares Series E on July 25, 2003 in a
public offering. The underwriting discount and other offering costs were
recorded as a reduction of the capital of the common shares. As of October
31, 2004, 6,400 shares of Series A, 6,400 shares of Series B, 6,400 shares of
Series C, 6,400 shares of Series D and 6,400 shares of Series E were
outstanding. During the six months ended October 31, 2004, the Fund redeemed
6,000 preferred shares at a cost of $150,000,000. Dividends on the APS, which
accrue daily, are cumulative at a rate which was established at the offering
of the APS and have been reset every 7 days thereafter by an auction.
Dividend rates ranged from 1.12% to 1.92% for Series A Shares, from 1.09% to
1.94% for Series B Shares, from 1.15% to 1.90% for Series C Shares, from
1.18% to 1.94% for Series D Shares and from 1.10% to 1.90% for Series E
Shares, during the six months ended October 31, 2004.
The APS are redeemable at the option of the Fund, at a redemption price equal
to $25,000 per share, plus accumulated and unpaid dividends on any dividend
payment date. The APS are also subject to mandatory redemption at a
redemption price equal to $25,000 per share, plus accumulated and unpaid
dividends, if the Fund is in default for an extended period on its asset
28
maintenance requirements with respect to the APS. If the dividends on the APS
shall remain unpaid in an amount equal to two full years' dividends, the
holders of the APS as a class have the right to elect a majority of the Board
of Trustees. In general, the holders of the APS and the common shares have
equal voting rights of one vote per share, except that the holders of the
APS, as a separate class, have the right to elect at least two members of the
Board of Trustees. The APS have a liquidation preference of $25,000 per
share, plus accumulated and unpaid dividends. The Fund is required to
maintain certain asset coverage with respect to the APS as defined in the
Fund's By-Laws and the Investment Company Act of 1940. The Fund pays an
annual fee equivalent to 0.25% of the preferred shares' liquidation value for
the remarketing efforts associated with the preferred auctions.
3 DISTRIBUTION TO SHAREHOLDERS
The Fund intends to make monthly distributions of net investment income,
after payment of any dividends on any outstanding Auction Preferred Shares.
Distributions are recorded on the ex-dividend date. Distributions to
preferred shareholders are recorded daily and are payable at the end of each
dividend period. Each dividend payment period for the Auction Preferred
Shares is generally seven days. The applicable dividend rate for the Auction
Preferred Shares on October 31, 2004 was 1.85%, 1.87%, 1.86%, 1.90% and
1.80%, for Series A, Series B, Series C, Series D and Series E Shares,
respectively. For the six months ended October 31, 2004, the Fund paid
dividends to Auction Preferred shareholders amounting to $1,467,489,
$1,460,793, $1,447,039, $1,469,928, and $1,443,972 for Series A, Series B,
Series C, Series D and Series E Shares, respectively, representing an average
APS dividend rate for such period of 1.55%, 1.54%, 1.53%, 1.56% and 1.52%,
respectively.
The Fund distinguishes between distribution on a tax basis and a financial
reporting basis. Accounting principles generally accepted in the United
States of America require that only distributions in excess of tax basis
earnings and profits be reported in the financial statements as a return of
capital. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid in capital. These differences relate
primarily to the different treatment for paydown gain/losses on
mortgage-backed securities and the method for amortizing premiums.
4 INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee, computed at an annual rate of 0.75% of the Fund's
weekly gross assets, was earned by Eaton Vance Management (EVM), as
compensation for management and investment advisory services rendered to the
Fund. For the six months ended October 31, 2004, the fee was equivalent to
0.75% (annualized) of the Fund's average weekly gross assets for such period
and amounted to $11,896,668.
In addition, the Adviser has contractually agreed to reimburse the Fund for
fees and other expenses in the amount of 0.20% (annualized) of average weekly
gross assets of the Fund for the first five years of the Fund's operations
0.15% of average weekly gross assets of the Fund in year 6, 0.10% in year 7
and 0.05% in year 8. For the six months ended October 31, 2004, the
Investment Adviser waived $3,172,445 of its advisory fee.
EVM serves as the administrator of the Fund, but currently receives no
compensation for providing administrative services to the Fund.
Certain officers and Trustees of the Fund are officers of the above
organizations.
5 PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term obligations and
including paydowns, aggregated $998,267,857 and $1,004,279,184, respectively,
for the six months ended October 31, 2004.
6 SECURITIES LENDING AGREEMENT
The Fund has established a securities lending agreement with brokers in which
the Fund lends portfolio securities to a broker in exchange for collateral
consisting of either cash or U.S. government securities in an amount at least
equal to the market value of the securities on loan. Under the agreement, the
Fund continues to earn interest on the securities loaned. Collateral received
is generally cash, and the Fund invests the cash and receives any interest on
the amount invested but it must also pay the broker a loan rebate fee
computed as a varying percentage of the collateral received. The loan rebate
fee paid by the Fund offsets a portion of the interest income received and
amounted to $955,119 for the six months ended October 31, 2004. At October
31, 2004, the value of the securities loaned and the value of the collateral
amounted to $216,333,374 and $221,705,085, respectively. In the event of
counterparty default, the Fund is subject to potential loss if it is delayed
or prevented from exercising its right to dispose of the collateral. The Fund
bears risk in the event that invested collateral is not sufficient to meet
obligations due on the loans. The Fund has the right under the lending
agreement to recover the securities from the borrower on demand.
29
7 COMMON SHARES OF BENEFICIAL INTEREST
The Agreement and Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional $0.01 par value common shares of
beneficial interest. Transactions in common shares were as follows:
SIX MONTHS ENDED
OCTOBER 31, 2004 YEAR ENDED
(UNAUDITED) APRIL 30, 2004(1)
----------------------------------------------------------------------------
Sales -- 111,005,000
Issued to shareholders electing to
receive payments of distributions
in Fund shares 332,829 109,946
----------------------------------------------------------------------------
NET INCREASE 332,829 111,114,946
----------------------------------------------------------------------------
(1) For the period from the start of business, May 30, 2003, to October
31, 2004.
8 FEDERAL INCOME TAX BASIS OF UNREALIZED APPRECIATION (DEPRECIATION)
The cost and unrealized appreciation (depreciation) in value of the
investments owned at October 31, 2004, as computed on a federal income tax
basis, were as follows:
AGGREGATE COST $ 3,060,635,548
--------------------------------------------------------
Gross unrealized appreciation $ 78,460,895
Gross unrealized depreciation (16,996,823)
--------------------------------------------------------
NET UNREALIZED APPRECIATION $ 61,464,072
--------------------------------------------------------
9 FINANCIAL INSTRUMENTS
The Fund regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options and financial futures contracts, and may involve, to a varying
degree, elements of risk in excess of the amounts recognized for financial
statement purposes. The notional or contractual amounts of these instruments
represent the investment the Fund has in particular classes of financial
instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting transactions
are considered. At October 31, 2004 there were no outstanding obligations
under these financial instruments.
30
EATON VANCE LIMITED DURATION INCOME FUND
DIVIDEND REINVESTMENT PLAN
The Fund offers a dividend reinvestment plan (the Plan) pursuant to which
shareholders may elect to have dividends and capital gains distributions
reinvested in common shares (the Shares) of the Fund. You may elect to
participate in the Plan be completing the Dividend Reinvestment Plan Application
Form. If you do not participate, you will receive all distributions in cash paid
by check mailed directly to you by PFPC Inc. as dividend paying agent. On the
distribution payment date, if the net asset value per Share is equal to or less
than the market price per Share plus estimated brokerage commissions then new
Shares will be issued. The number of Shares shall be determined by the greater
of the net asset value per Share or 95% of the market price. Otherwise, Shares
generally will be purchased on the open market by the Plan Agent. Distributions
subject to income tax (if any) are taxable whether or not shares are reinvested.
If your shares are in the name of a brokerage firm, bank, or other nominee, you
can ask the firm or nominee to participate in the Plan on your behalf. If the
nominee does not offer the Plan, you will need to request that your shares be
re-registered in your name with the Fund's transfer agent, PFPC, Inc. or you
will not be able to participate.
The Plan Agent's service fee for handling distributions will be paid by the
Fund. Each participant will be charged their pro rata share of brokerage
commissions on all open-market purchases.
Plan participants may withdraw from the Plan at any time by writing to the Plan
Agent at the address noted on the following page. If you withdraw, you will
receive shares in your name for all Shares credited to your account under the
Plan. If a participant elects by written notice to the Plan Agent to have the
Plan Agent sell part or all of his or her Shares and remit the proceeds, the
Plan Agent is authorized to deduct a $5.00 fee plus brokerage commissions from
the proceeds.
If you wish to participate in the Plan and your shares are held in your own
name, you may complete the form on the following page and deliver it to the Plan
Agent.
Any inquires regarding the Plan can be directed to the Plan Agent, PFPC, Inc.,
at 1-800-331-1710.
31
EATON VANCE LIMITED DURATION INCOME FUND
APPLICATION FOR PARTICIPATION IN DIVIDEND REINVESTMENT PLAN
This form is for shareholders who hold their common shares in their own names.
If your common shares are held in the name of a brokerage firm, bank, or other
nominee, you should contact your nominee to see if it will participate in the
Plan on your behalf. If you wish to participate in the Plan, but your brokerage
firm, bank, or nominee is unable to participate on your behalf, you should
request that your common shares be re-registered in your own name which will
enable your participation in the Plan.
The following authorization and appointment is given with the understanding that
I may terminate it at any time by terminating my participation in the Plan as
provided in the terms and conditions of the Plan.
--------------------------------------------------------------
Please print exact name on account:
--------------------------------------------------------------
Shareholder signature Date
--------------------------------------------------------------
Shareholder signature Date
Please sign exactly as your common shares are registered. All
persons whose names appear on the share certificate must sign.
YOU SHOULD NOT RETURN THIS FORM IF YOU WISH TO RECEIVE YOUR DIVIDENDS AND
DISTRIBUTIONS IN CASH. THIS IS NOT A PROXY.
THIS AUTHORIZATION FORM, WHEN SIGNED, SHOULD BE MAILED TO THE FOLLOWING ADDRESS:
Eaton Vance Limited Duration Income Fund
c/o PFPC, Inc.
P.O. Box 43027
Providence, RI 02940-3027
800-331-1710
NUMBER OF EMPLOYEES
The Fund is organized as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company and has no employees.
NUMBER OF SHAREHOLDERS
As of October 31, 2004, our records indicate that there are 122 registered
shareholders and approximately 99,329 shareholders owning the Fund shares in
street name, such as through brokers, banks, and financial intermediaries.
If you are a street name shareholder and wish to receive our reports directly,
which contain important information about the Fund, please write or call:
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
AMERICAN STOCK EXCHANGE SYMBOL
The American Stock Exchange symbol is EVV.
32
EATON VANCE LIMITED DURATION INCOME FUND
INVESTMENT MANAGEMENT
EATON VANCE LIMITED DURATION INCOME FUND
OFFICERS
Thomas E. Faust Jr.
President and Chief Executive Officer
James B. Hawkes
Vice President and Trustee
Scott H. Page
Vice President
Susan Schiff
Vice President
Payson F. Swaffield
Vice President
Mark S. Venezia
Vice President
Michael W. Weilheimer
Vice President
James L. O'Connor
Treasurer and Principal Financial
Accounting Officer
Paul M. O'Neil
Chief Compliance Officer
Alan R. Dynner
Secretary
TRUSTEES
Samuel L. Hayes, III
William H. Park
Ronald A. Pearlman
Norton H. Reamer
Lynn A. Stout
33
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
INVESTMENT ADVISER OF EATON VANCE LIMITED DURATION INCOME FUND
EATON VANCE MANAGEMENT
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
ADMINISTRATOR OF EATON VANCE LIMITED DURATION INCOME FUND
EATON VANCE MANAGEMENT
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 CLARENDON STREET
BOSTON, MA 02116
TRANSFER AGENT
PFPC INC.
ATTN: EATON VANCE FUNDS
P.O. BOX 43027
PROVIDENCE, RI 02940-9653
(800) 331-1710
EATON VANCE LIMITED DURATION INCOME FUND
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
1856-12/04 CE-LDISRC
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics applicable to its Principal
Executive Officer, Principal Financial Officer and Principal Accounting Officer.
The registrant undertakes to provide a copy of such code of ethics to any person
upon request, without charge, by calling 1-800-262-1122.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The registrant's Board has designated William H. Park, Samuel L. Hayes, III and
Norton H. Reamer, each an independent trustee, as its audit committee financial
experts. Mr. Park is a certified public accountant who is the President and
Chief Executive Officer of Prizm Capital Management, LLC (investment management
firm). Previously, he served as Executive Vice President and Chief Financial
Officer of United Asset Management Corporation ("UAM") (a holding company owning
institutional investment management firms). Mr. Hayes is the Jacob H. Schiff
Professor of Investment Banking Emeritus of the Harvard University Graduate
School of Business Administration. Mr. Reamer is the President, Chief Executive
Officer and a Director of Asset Management Finance Corp. (a specialty finance
company serving the investment management industry) and is President of Unicorn
Corporation (an investment and financial advisory services company). Formerly,
Mr. Reamer was Chairman of Hellman, Jordan Management Co., Inc. (an investment
management company) and Advisory Director of Berkshire Capital Corporation (an
investment banking firm), Chairman of the Board of UAM and Chairman, President
and Director of the UAM Funds (mutual funds).
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not required in this filing
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not required in this filing.
ITEM 6. SCHEDULE OF INVESTMENTS
Please see schedule of investments contained in the Report to Stockholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
The Board of Trustees of the Trust has adopted a proxy voting policy and
procedure (the "Fund Policy"), pursuant to which the Trustees have delegated
proxy voting responsibility to the Fund's investment adviser and adopted the
investment adviser's proxy voting policies and procedures (the "Policies") which
are described below. The Trustees will review the Fund's proxy voting records
from time to time and will annually consider approving the Policies for the
upcoming year. In the event that a conflict of interest arises between the
Fund's shareholders and the investment adviser, the administrator, or any of
their affiliates or any affiliate of the Fund, the investment adviser will
generally refrain from voting the proxies related to the companies giving rise
to such conflict until it consults with the Board of the Fund except as
contemplated under the Fund Policy. The Board's Special Committee will instruct
the investment adviser on the appropriate course of action.
The Policies are designed to promote accountability of a company's management to
its shareholders and to align the interests of management with those
shareholders. The investment adviser will generally support company management
on proposals relating to environmental and social policy issues and on matters
regarding the state of organization of the company. On all other matters, the
investment adviser will take management's proposals under advisement but will
consider each matter in light of the guidelines set forth in the Policies.
Except in the instance of routine matters related to corporate administration
which are not expected to have a significant economic impact on the company or
its shareholders (on which the investment adviser will routinely vote with
management), the investment adviser will review each matter on a case-by-case
basis and reserves the right to deviate from the Policies guidelines when it
believes the situation warrants such a deviation. The Policy includes voting
guidelines for matters relating to, among other things, the election of
directors, approval of independent auditors, executive compensation, corporate
structure and anti-takeover defenses. The investment adviser may abstain from
voting from time to time where it determines that the costs associated with
voting a proxy outweighs the benefits derived from exercising the right to vote.
In addition, the investment adviser will monitor situations that may result in a
conflict of interest between the Fund's shareholders and the investment adviser,
the administrator, or any of their affiliates or any affiliate of the Fund by
maintaining a list of significant existing and prospective corporate clients.
The investment adviser's personnel responsible for reviewing and voting proxies
on behalf of the Fund will report any proxy received or expected to be received
from a company included on that list to the investment adviser's general counsel
or chief equity investment officer. The general counsel or chief equity
investment officer will determine if a conflict exists. If a conflict does
exist, the proxy will either be voted strictly in accordance with the Policy or
the investment adviser will seek instruction on how to vote from the Board.
Effective August 31, 2004, information on how the Fund voted proxies relating to
portfolio securities during the 12 month period ended June 30, 2004 [is/will be]
available (1) without charge, upon request, by calling 1-800-262-1122, and (2)
on the Securities and Exchange Commission's website at http://www.sec.gov.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not required in this filing.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Effective February 9, 2004, the Governance Committee of the Board of Trustees
formalized the procedures by which a Fund's shareholders may recommend nominees
to the registrant's Board of Trustees. The Governance Committee shall, when
identifying candidates for the position of Independent Trustee, consider any
such candidate recommended by a shareholder of a Fund if such recommendation
contains sufficient background information concerning the candidate, and is
received in a sufficiently timely manner (and in any event no later than the
date specified for receipt of shareholder proposals in any applicable proxy
statement with respect to a Fund). Shareholders shall be directed to address any
such recommendations to the attention of the Governance Committee, c/o the
Secretary of the Fund.
ITEM 10. CONTROLS AND PROCEDURES
(a) It is the conclusion of the registrant's principal executive officer and
principal financial officer that the effectiveness of the registrant's current
disclosure controls and procedures (such disclosure controls and procedures
having been evaluated within 90 days of the date of this filing) provide
reasonable assurance that the information required to be disclosed by the
registrant has been recorded, processed, summarized and reported within the time
period specified in the Commission's rules and forms and that the information
required to be disclosed by the registrant has been accumulated and communicated
to the registrant's principal executive officer and principal financial officer
in order to allow timely decisions regarding required disclosure.
(b) There have been no changes in the registrant's internal controls over
financial reporting during the period that has materially affected, or is
reasonably likely to materially affect the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS
(a)(1) Registrant's Code of Ethics - Not applicable (please see Item 2).
(a)(2)(i) Treasurer's Section 302 certification.
(a)(2)(ii) President's Section 302 certification.
(b) Combined Section 906 certification.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
EATON VANCE LIMITED DURATION INCOME FUND
By: /s/ Thomas E. Faust Jr.
-----------------------------------
Thomas E. Faust Jr.
President
Date: December 17, 2004
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ James L. O'Connor
-----------------------------------
James L. O'Connor
Treasurer
Date: December 17, 2004
- ---------------
By: /s/ Thomas E. Faust Jr.
-----------------------------------
Thomas E. Faust Jr.
President
Date: December 17, 2004
-----------------