Putnam
High Yield
Trust
ANNUAL REPORT
August 31, 1994
(LOGO)
B O S T O N * L O N D O N * T O K Y O
<PAGE>
Performance highlights
The fund's class A shares have earned Morningstar's ranking of four out of
five stars based on risk-adjusted 3-, 5-, and 10-year performance through
August 31, 1994.*
The fund's class A shares at net asset value outperformed the average high
yield bond fund in one-, five-, and 10-year total return for periods ending
August 31, 1994, according to Lipper.(+)
Performance should always be considered in light of a fund's investment
strategy. Putnam High Yield Trust is designed for investors seeking high
current income through a diversified portfolio of high-yielding, lower-rated
corporate bonds, with a secondary objective of capital growth when consistent
with high current income.
FISCAL 1994 RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Class A Class B
<S> <C> <C> <C> <C>
Total return: NAV POP NAV CDSC
12 months ended 8/31/94
(change in value during period
plus reinvested distributions) 2.46% -2.42% 1.66% -2.97%
Share value: NAV POP NAV
8/31/93 $13.01 $ 13.66 $ 12.99
8/31/94 12.06 12.66 12.03
Distributions: No. Income Total
Class A 12 $ 1.290 $ 1.290
Class B 12 1.199 1.199
Current return: NAV POP NAV
(end of period)
Current dividend rate(1) 10.45% 9.95% 9.78%
Current 30-day SEC yield(2) 9.81 9.33 9.04
</TABLE>
Performance data represent past results and will differ for each share class.
For performance over longer periods, see pages 8 and 9. POP assumes 4.75%
maximum sales charge. CDSC assumes 5% maximum contingent deferred sales
charge. (1)Income portion of most recent distribution, annualized and divided
by NAV or POP at end of period. (2)Based only on investment income,
calculated using SEC guidelines.
*Morningstar is an independent research firm that rates funds relative to
funds with similar objectives, based on risk-adjusted performance, as
applicable, and adjusted for sales charges. A four-star rating put the fund
in the top 32.5% of rated funds. Ratings are updated monthly. Past
performance is not indicative of future results.
+Rankings by Lipper Analytical Services, an industry research firm, vary over
time and do not include the effects of sales charges. Past performance is not
indicative of future results.
<PAGE>
From the Chairman
(Chairman's Photo)
(c) Karsh, Ottawa
Dear Shareholder:
Recent times have provided an instability in the bond market rarely
experienced within such a brief time span.
Your fund began its current fiscal year during the waning days of a
three-year bond market rally. However, between the fiscal year's start and
its end on August 31, 1994, a fretful market dissipated most of the prior
year's gains.
Hints of the impending reversal first began to emerge last fall, prompting
your fund's managers to begin positioning the portfolio more defensively.
Then, in early February of this year, the first in a series of increases in
short-term interest rates brought the market's sustained advance to an
unmistakable halt. While the resulting turbulence dampened your fund's
performance, the outcome might have been far worse had fund managers Edward
D'Alelio and Jin Ho not anticipated the rally's end.
In all likelihood, the bond market will continue to experience ongoing
volatility over the next few months. In the report that follows, Ed and Jin
explain in greater detail how your fund's management team responded to the
challenges of fiscal 1994 and what it sees in store for fiscal 1995.
Respectfully yours,
(signature of George Putnam)
George Putnam
Chairman of the Trustees
October 19, 1994
<PAGE>
Report from the fund managers
Edward D'Alelio
Jin W. Ho
In comparison with results for previous periods, Putnam High Yield Trust's
total return for the fiscal year ended August 31, 1994, may appear somewhat
lackluster. Once you compare the fund's performance with those of other
fixed-income investments, however, you can see that it rose successfully to
the challenge of this spring's bond market decline.
There is no denying that the one-year 2.46% total return at net asset value
for the fund's class A shares and the 1.66% return of class B shares were
disappointing when judged against the First Boston High Yield Index's 3.65%
return. Compare the fund's positive returns, however, with the -2.30%
one-year return for government guaranteed U.S. Treasury bonds, as measured by
the Lehman Brothers Treasury Bond Index, and it begins to look considerably
more palatable.
STRONG MARKET DYNAMICS
Despite the current unrest, we believe there is ample evidence to suggest a
positive future for the high-yield bond market and, in turn, for your fund.
The anticipated rise in corporate profits created by a strengthening economy
should help invigorate the market in the months ahead. We have shifted the
portfolio away from securities we believe are overvalued. Using Putnam's
extensive credit research capabilities, we have sought out securities for
your fund in industry sectors we believe offer the best growth potential over
the long term.
Historically, high-yield bonds have been less sensitive to interest rate
changes than most higher-quality bonds. That was certainly the case this
spring. However, high-yield bonds showed they were not entirely exempt from
the negative effects of the Federal Reserve Board's increases in short-term
interest rates, as the high-yield market viewed the Fed's action as a signal
that higher corporate borrowing costs were on the way.
<PAGE>
It is important for investors in high-yield bonds to keep in mind that these
securities' prices depend more on the credit quality of the issuing companies
than on interest rate levels. Thus, even though the Fed's recent actions hurt
the market and your fund, we believe the strength of the U.S. economy may
well have positive long-term effects on both. We anticipate that corporate
profits will continue to rise in the foreseeable future. If this occurs,
companies' ability to make timely interest payments on their debt will
increase--thus increasing credit quality over time.
STRENGTH IN SECTORS
As with most investments, performance of a portfolio of high- yield
securities is best evaluated over the long term and should not be judged on
the basis of short-term market changes. Several of your fund's largest
holdings have endured tough times recently. However, in our opinion, they
still offer evidence of strong appreciation potential in the future.
The casino and gaming industry, for example, has had a choppy ride at the
hands of changing government regulation and a reversal in investor sentiment.
We believe that ultimately, however, the obvious popularity among players and
revenue-hungry state and local governments should eventually make casino and
gaming securities attractive again.
(Horizontal Bar Graph--plot points)
TOP INDUSTRY SECTORS*
Cable television 8.6%
Recreation (caino/gaming) 6.7%
Forest products 5.4%
Finance 4.4%
*Based on net assets on 8/31/94
<PAGE>
The cable television industry, another substantial portfolio sector, has felt
the brunt of stricter FCC regulation and imposition of price controls. The
willingness of telephone companies to consider combining operations with
cable TV systems leads us to conclude that cable companies will find new
sources of revenue in the future.
Many of the smaller companies in these industries need to issue high-yield
debt, as opposed to other forms of debt or stock, because their potential may
not yet be recognized by the market. Additionally, many of these companies
may also use high-yield bonds to refinance their overall debt liability or to
fund business activities such as mergers and acquisitions.
CREDIT RESEARCH HIGHLIGHTS OPPORTUNITIES
Investing in the high-yield bond market demands intensive research to analyze
industries as well as the creditworthiness of specific companies that may
offer attractive potential for income and appreciation. Putnam brings
considerable experience and talent to the task.
The evaluation of high-yield bonds is similar to that of equities. Business
characteristics such as industry projections, credit quality changes, and
corporate financial health are emphasized. With strong research capabilities,
Putnam has a better chance of capitalizing on inefficiencies in the
high-yield market.
As the economy changes, we constantly reevaluate the securities in the fund's
portfolio. For example, we believe several cyclical industries, those whose
demand depends on the season or the business cycle, still offer potential in
today's economic environment. These sectors include the paper, steel, and
chemical industries. Among the specific companies we have targeted recently
for acquisition or further investment include Gaylord Container, a paperboard
producer, and UCC Investors, a chemical company.
IMPROVED PROFITS OUTLOOK BODES WELL FOR BONDS
As we monitor your fund's existing holdings, we also seek to identify the
growth industries of the future. For example, we believe next year's dynamic
industries will include cellular communications. As time goes on, an
increasing number of companies will begin to compete for the latest
technology and will need to issue debt to finance these ventures.
<PAGE>
(Mountain Chart--plot points)
TREASURY BONDS* HIGH YIELD
1989 0.42 -2.27
3.08 -4.71
4.07 -4.53
4.24 -4.96
2.68 -8.31
2.87 -10
2.84 -7.41
1.96 -7.02
4.77 -5.09
6.42 -2.1
7.77 1.06
6.22 -6.3
1990 7.42 -10.95
9.01 -13.19
11.42 -11.44
13.16 -11.02
14.37 -8.58
14.98 -0.69
15.55 5.47
16.82 9.85
17.25 10.39
17.08 13.29
18.45 17.12
21.20 19.25
1991 23.75 21.95
24.86 25.99
26.1 27
30.45 27.93
28.37 33.13
28.87 36.36
28.09 38.40
28.9 38.52
31.27 40.41
33.18 41.79
36.57 43.98
37.86 45.97
1992 39.88 46.91
37.83 45.38
37.50 47.57
39.88 49.24
42.88 53.29
45.75 56.29
46.24 59.59
47.38 60.54
47.20 62.88
50.5 65.69
51.38 67.43
54.75 68.84
1993 55.36 69.80
55.93 72.91
54.22 75.09
54.82 77.30
56.95 80.48
53.59 80.75
50.15 75.43
48.98 73.08
48.79 74.07
48.47 72.90
51.16 73.72
1994 51.20 75.02
*Sources: Lehman Brothers Treasury Bond Index and First Boston High Yield
Index. Chart shows cumulative returns. High yield bonds are subject to
significant credit risk in contrast to U.S. government-backed Treasuries.
We believe corporate profits and credit quality will continue to improve
through 1995. If so, there is likely to be a positive impact on the fund's
holdings. We also expect the U.S. economy to continue along its recent path
of slow but steady growth.
While high-yield bond investors have had to endure a rather volatile market
this year, we believe your fund has shown its strength in a market that has,
over time, outperformed other fixed-income investments.
The views expressed about the companies mentioned in this report are
exclusively those of Putnam Management, and not meant as investment advice.
Although the described holdings were viewed favorably as of August 31, 1994,
there is no guarantee the fund will continue to hold these securities in the
future.
<PAGE>
Performance summary
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares changed
over time, assuming you held the shares through the entire period and
reinvested all distributions back into the fund. We show total return in two
ways: on a cumulative long- term basis and on average how the fund might have
grown each year over varying periods. For comparative purposes, we show how
the fund performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 8/31/94
<TABLE>
<CAPTION>
Lehman First
Brothers Boston
Class A Class B Corporate High Yield
NAV POP NAV CDSC Bond Index Index
<S> <C> <C> <C> <C> <C> <C>
1 year 2.46% -2.42% 1.66% -2.97% -2.54% 3.65%
5 years 66.63 58.72 -- -- 55.90 74.98
Annual average 10.75 9.68 -- -- 9.29 11.84
10 years 203.44 189.02 -- -- 210.12 --
Annual average 11.74 11.20 -- -- 11.98 --
Life of Class B -- -- 8.58 4.83 4.33 11.94
Annual average -- -- 5.64 3.19 2.87 7.80
</TABLE>
TOTAL RETURN FOR PERIODS ENDED 9/30/94
(most recent calendar quarter)
<TABLE>
<CAPTION>
Class A Class B
NAV POP NAV CDSC
<S> <C> <C> <C> <C>
1 year 2.19% -2.70% 1.37% -3.25%
5 years 69.22 61.21 -- --
Annual average 11.09 10.02 -- --
10 years 194.16 180.25 -- --
Annual average 11.39 10.85 -- --
Life of class B -- -- 8.55 4.83
Annual average -- -- 5.33 3.03
</TABLE>
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions or, for class A shares, distribution fees
prior to implementation of the class A distribution plan in 1990. Effective
3/1/93 the fund began offering class B shares. Performance of share classes
will differ. Performance data represent past results. Investment returns and
principal value will fluctuate so an investor's shares, when sold, may be
worth more or less than their original cost. The Lehman Brothers Corporate
Bond Index is an unmanaged list of publicly issued, fixed-rate
non-convertible investment-grade domestic corporate debt securities
frequently used as a general measure of the performance of fixed-income
securities. The First Boston High Yield Index is a market-weighted index
including publicly traded bonds having a rating below BBB by Standard &
Poor's and Moody's.
<PAGE>
(Line chart)
GROWTH OF A $10,000 INVESTMENT
(key:
Cumulative total return of a $10,000
investment since 8/31/84
<TABLE>
<CAPTION>
Fund's class Lehman Brothers Consumer Price
A shares at POP Corporate Bond Index Index
<S> <C> <C> <C>
8/84 $ 9,525 10,000 10,000
8/85 11,460 12,167 10,335
8/86 13,267 14,229 10,498
8/87 14,771 15,656 10,947
8/88 15,990 16,337 11,338
8/89 17,345 17,629 11,923
8/90 16,029 16,194 12,593
8/91 19,631 19,059 13,072
8/92 24,637 23,562 13,483
8/93 28,209 27,293 13,856
8/94 28,902 27,947 14,528
</TABLE>
Past performance is no assurance of future results. A $10,000 investment in
the fund's class B shares at inception 3/1/93 would have grown to $10,858 by
8/31/94 ($10,483 with a redemption at the end of the period). The average
quality of bonds in the index will differ from those in which the fund
customarily invests. Index performance reflects changes in market prices and
reinvestment of all interest payments. The Consumer Price Index is a commonly
used measure of inflation; it does not represent an investment return.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon
redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including any
initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance figures
shown here assume the maximum 4.75% sales charge.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of shares and assumes redemption at the end of the period.
Your fund's CDSC declines from a 5% maximum during the first year to 1%
during the sixth year. After the sixth year, the CDSC no longer applies.
<PAGE>
The Putnam Fund Selector(TM)
The Putnam Fund Selector shows the many opportunities for investors within
every investment strategy. All investors should first accumulate a base of
conservative, cash-equivalent investments. Then, with the help of your
investment advisor, diversify your portfolio by investing in the Putnam
Family of Funds.
(Pyramid Graphic)
Risk/Reward
Putnam Growth Funds
Putnam Growth and Income Funds
Putnam Income or Tax-Free Income Funds
Most Conservative Investments
<PAGE>
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Health Sciences Trust
Investors Fund
Natural Resources Fund*
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund
PUTNAM GROWTH AND INCOME FUNDS
Convertible Income-Growth Trust
Dividend Growth Fund
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Managed Income Trust
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund
American Government Income Fund
Balanced Government Fund
Corporate Asset Trust
Diversified Income Trust
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Intermediate Tax Exempt Fund
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds+
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio, and Pennsylvania
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS++
Putnam money market funds:
Money Market Funds(S)
California Tax Exempt Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts**
* Formerly Energy-Resources Trust.
+ Not available in all states.
++ Relative to above.
(S) Formerly Putnam Daily Dividend Trust.
** Not offered by Putnam Investments. Certificates of deposit offer a fixed
rate of return and may be insured, up to certain limits, by federal/state
agencies. Savings accounts may also be insured up to certain limits.
Please call your financial advisor or Putnam at 1-800- 225-1581 to obtain a
prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Read it carefully before you invest or send
money.
<PAGE>
Report of Independent Accountants
For the Year Ended August 31, 1994
To the Trustees and Shareholders of
Putnam High Yield Trust
We have audited the accompanying statement of assets and liabilities of
Putnam High Yield Trust, including the portfolio of investments owned, as of
August 31, 1994, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended, and the "Financial Highlights" for each of the ten
years in the period then ended, for class A shares and for the year ended
August 31, 1994 and the period from March 1, 1993 (commencement of
operations) to August 31, 1993 for class B shares. These financial statements
and "Financial Highlights" are the responsibility of the Trust's management.
Our responsibility is to express an opinion on these financial statements and
"Financial Highlights" based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
"Financial Highlights" are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1994, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and "Financial Highlights" referred
to above present fairly, in all material respects, the financial position of
Putnam High Yield Trust as of August 31, 1994, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the "Financial Highlights" for each of
the ten years in the period then ended, for class A shares and for the year
ended August 31, 1994 and the period from March 1, 1993 (commencement of
operations) to August 31, 1993 for class B shares in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 18, 1994
<PAGE>
Portfolio of investments owned
August 31, 1994
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES (84.8%)(a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Cable Television (8.6%)
$89,320,000 Adelphia Communications Corp. sr. notes
12-1/2s, 2002 $ 89,320,000
6,665,000 Adelphia Communications Corp. sr. deb.
11-7/8s, 2004 6,498,375
12,500,000 Adelphia Communications Corp. notes Ser.
B, 9-7/8s, 2005 10,875,000
11,250,000 Cablevision Systems Corp. sr. sub. reset
deb. 10-3/4s, 2004 11,475,000
7,500,000 Cablevision Systems Corp. sr. sub. deb.
9-7/8, 2023 6,937,500
8,500,000 Century Communications Corp. sr. sub. deb.
11-7/8s, 2003 8,967,500
16,250,000 Continental Cablevision, Inc. sr. sub.
deb. 12-7/8s, 2004 17,550,000
29,500,000 Continental Cablevision, Inc. sr. deb.
9-1/2s, 2013 26,771,250
20,844,410 Falcon Holdings Group Inc. sr. sub. notes
11s, 2003(c) 19,176,857
11,300,000 Insight Communications Co. sr. sub. notes
stepped coupon notes 8-1/4s (11-1/4s,
3/1/96), 2000(d) 10,735,000
24,183,000 Jones Intercable, Inc. sub. deb. 11-1/2s,
2004 25,452,608
18,100,000 Marcus Cable Co. (L.P.) sr. deb. 11-7/8s,
2005 16,923,500
45,145,000 Marcus Cable Co. (L.P.) sr. sub. disc.
notes stepped- coupon zero% (13-1/2s,
8/1/99), 2004(d) 23,983,281
17,500,000 Summit Communications Group, Inc. sr. sub.
deb. 10-1/2s, 2005 18,025,000
292,690,871
Recreation (6.7%)
21,000,000 AMC Entertainment, Inc. sr. sub. deb.
12-5/8s, 2002 23,310,000
7,500,000 AMC Entertainment, Inc. sr. note 11-7/8s,
2000 8,137,500
9,470,000 Arizona Charlies Corp. sub. deb. Ser. B
12s, 2000 8,611,781
4,240,000 Capitol Queen Corp. sr. sub. deb. Ser. B
12s, 2000(b) 2,999,800
12,910,000 Casino America Inc. 1st mtge. deb.
11-1/2s, 2001 11,231,700
8,880,000 Casino Magic Finance Corp. 1st mtge. deb.
11-1/2s, 2001 7,370,400
35,500,000 Golden Nugget Finance Corp. 1st mtge. deb.
Ser. B, 10-5/8s, 2003 20,590,000
11,440,000 Grand Casino Resorts Inc. notes 12-1/2s,
2000 11,268,400
12,500,000 Lady Luck Gaming gtd. 1st mtge. 10-1/2s,
2001 6,625,000
3,704,000 Louisiana Casino Cruises Corp. sr. sub.
deb. 11-1/2s, 1998 3,296,560
19,150,000 Pioneer Finance Corp. gtd. 1st mtge.
13-1/2s, 1998 18,192,500
5,000,000 President Riverboat Casinos, Inc. sr. sub.
notes 13s, 2001 4,553,125
22,600,000 Showboat, Inc. 1st mtge. deb. 9-1/4s, 2008 19,040,500
14,931,000 Trump Castle Funding Corp. sr. sub. notes
11-1/2s, 2000(b) 14,931,000
26,350,000 Trump Plaza Funding, Inc. 1st mtge. notes
10-7/8s, 2001 19,301,374
65,841,998 Trump Taj Mahal deb. Ser. A, 11.35s,
1999(c) 46,089,398
225,549,038
Forest Products (5.4%)
11,750,000 Container Corp. of America sr. notes Ser.
A, 11-1/4s, 2004 12,337,500
16,500,000 Container Corp. of America deb.
stepped-coupon zero % (15-1/2s, 12/1/94),
2004(c)(d) 33,742,500
9,100,000 Container Corp. of America sub. deb. 14s,
2001 9,930,375
122,500,000 Gaylord Container Corp. sr. sub. disc.
deb. stepped- coupon zero % (12-3/4s,
5/15/96), 2005(d) 101,062,500
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Forest Products (continued)
$ 21,500,000 Riverwood International Corp. sr. sub.
notes 11-1/4s, 2002 $ 22,413,750
3,500,000 Williamhouse Regency Delaware, Inc. sr.
sub. deb.
11-1/2s, 2005 3,517,500
183,004,125
Finance (4.4%)
15,000,000 Comdata Network, Inc. sr. notes 12-1/2s,
1999 16,125,000
22,000,000 Delaware Management sr. notes Ser. B,
10-1/4s, 2004(b) 21,642,500
25,000,000 Ford Motor Credit Co. med. term notes 14s,
1996 28,187,500
40,000,000 General Electric Capitol Corp. med. term
notes
14s, 1996 45,075,000
17,500,000 General Electric Capitol Corp. med. term
notes
14s, 1996 19,731,250
6,500,000 PRT Funding Corp. sr. notes 11-5/8s, 2004 4,615,000
13,000,000 PSF Finance L.P. sr. notes 12-1/4s, 2004 13,284,375
148,660,625
Health Care (4.3%)
23,700,000 Abbey Healthcare Group, Inc. sr. sub.
notes 9-1/2s, 2002 21,744,750
6,000,000 American Medical International Inc. jr.
sub. deb.
stepped-coupon zero % (15s, 11/25/95),
2005(c)(d) 10,702,500
3,000,000 Charter Medical Corp. sr. sub. notes
11-1/4s, 2004 ($1,000,000 par acquired
6/24/94 cost $1,033,750; $2,000,000 par
acquired 6/30/94 cost $2,040,000)(e) 3,090,000
12,000,000 Community Health Systems Inc. sr. sub.
deb. 10-1/4 11/30/2003 11,700,000
10,000,000 General Medical Corp. sr. sub. notes
10-7/8s, 2003 9,975,000
5,900,000 Integrated Health Services sr. sub. notes
10-3/4s, 2004 5,900,000
15,000,000 Mediplex Group, Inc. sr. sub. notes
11-3/4s, 2002 15,900,000
7,500,000 Multicare Cos., Inc. sr. sub. notes
12-1/2s, 2002 8,287,500
20,150,000 Ornda Healthcorp sr. sub. notes 12-1/4s,
2002 21,207,875
6,600,000 Quorum Health Group, Inc. sr. sub. notes
11-7/8s, 2002 7,029,000
15,000,000 Smithkline Beecham Corp. med. term notes
17-3/4 03/15/1996 17,456,250
1,500,000 Surgical Health Corp. sr. sub. notes
11-1/2s, 2004 1,500,000
13,250,000 U.S. Home Corp. sr. notes 9-3/4s, 2003 11,958,125
146,451,000
Cellular Communications (4.2%)
24,000,000 Cellular, Inc. sr. sub. disc. notes
stepped-coupon zero % (11-3/4s, 9/1/98),
2003(d) 15,000,000
50,925,000 Cencall Communications Corp. sr. disc.
notes stepped- coupon zero % (10-1/8s,
1/15/99), 2004(d) 27,754,125
41,300,000 Centennial Cellular Corp. sr. notes
8-7/8s, 2001 36,963,500
8,000,000 Horizon Cellular Telephone Co. sr. sub.
disc. notes stepped-coupon zero %
(11-3/8s, 10/1/97), 2000(d) 5,520,000
36,000,000 NEXTEL Communications Inc. sr. disc. notes
stepped- coupon zero % (9-3/4s, 2/15/99),
2004(d) 19,440,000
63,500,000 NEXTEL Communications Inc. sr. disc. notes
stepped- coupon zero % (11-1/2s, 9/1/98),
2003(d) 38,576,250
143,253,875
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Chemicals (4.2%)
$ 6,450,000 Arcadian Partners L.P. sr. notes, ser. B,
10-3/4s, 2005 $ 6,433,875
68,103,000 G-I Holdings Inc. sr. notes zero %, 1998 41,713,087
38,725,000 Harris Chemical Corp. sr. sub. notes
10-3/4s, 2003 35,627,000
6,000,000 Harris Chemical Corp. sr. secd. disc.
notes stepped- coupon zero % (10-1/4s,
1/15/96), 2001(d) 4,785,000
19,500,000 OSI Specialties Corp. sr. secd. disc.
notes stepped-coupon zero % (11-1/2s,
4/15/99), 2004 (acquired 4/12/94, cost
$11,150,510)(d)(e) 11,505,000
22,000,000 UCC Investors Holding, Inc. sr. sub. notes
11s, 2003 22,660,000
28,960,000 UCC Investors Holding, Inc. sub. disc.
notes stepped- coupon zero % (12s,
5/1/98), 2005(d) 19,113,600
141,837,562
Food (3.3%)
67,575,000 Del Monte Corp. sub. deb. notes 121/4s,
2002 ($60,000,000 par acquired 3/12/93,
cost $61,830,000; $3,675,000 par acquired
10/18/93, cost $3,675,000; $3,900,000 par
acquired 3/23/94, cost $3,902,352)(c)(e) 67,575,000
25,600,000 Fresh Delmonte Produce Corp. sr. notes
Ser. B, 10s, 2003 23,360,000
10,000,000 Mafco, Inc. sr. sub. notes 117/8s, 2002 9,650,000
3,135,000 Specialty Foods Acquisition Corp. sr.
secd. disc. deb. stepped-coupon zero %,
(13s, 8/15/99), 2005 1,097,250
13,700,000 Specialty Foods Corp. sr. sub. notes
11-1/4s, 2003 11,473,750
113,156,000
Broadcasting (3.0%)
9,000,000 Act III Broadcasting Inc. sr. sub. notes
9-5/8s, 2003 8,505,000
11,500,000 Granite Broadcasting Corp. sr. sub. deb.
12-3/4s, 2002 11,845,000
13,875,000 New City Broadcasting Corp. sr. sub. notes
11-3/8s, 2003 13,666,875
8,125,000 Outlet Broadcasting, Inc. sr. sub. notes
10-7/8s, 2003 8,043,750
59,500,000 Panamsat L.P. sr. sub. notes
stepped-coupon zero % (11-3/8s, 8/1/98),
2003(d) 38,377,500
10,000,000 SFX Broadcasting sr. sub. notes 11-3/8s,
2000 10,275,000
21,460,000 Telemedia Broadcasting 6.4s, 2004(b) 12,876,000
103,589,125
Food Chains (2.9%)
83,050,000 Grand Union Co. sr. sub. notes 12-1/4s,
2002 65,817,125
1,750,000 Penn Traffic Co. sr. notes 10-3/8s, 2004 1,771,875
6,750,000 Penn Traffic Co. sr. sub. notes 9-5/8s,
2005 6,260,625
9,000,000 Ralphs Grocery sr. sub. notes 10-1/4s,
2002 8,775,000
18,500,000 Stater Brothers sr. notes 11s, 2001(b) 18,222,500
100,847,125
Consumer Services (2.7%)
86,693,000 Flagstar Corp. sr. sub. deb. 11-1/4s, 2004 75,422,910
1,000,000 Flagstar Corp. sr. note 10-7/8s, 2002 940,000
15,600,000 Solon Automated Services, Inc. sr. sub.
deb. 13-3/4s, 2002 15,951,000
1,500,000 Solon Automated Services, Inc. notes
12-3/4s, 2001 1,515,000
93,828,910
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Metals and Mining (2.6%)
$13,750,000 Haynes International, Inc. sr. sub. notes
13-1/2s, 1999 $ 7,150,000
8,750,000 Haynes International, Inc. Ser. B sr.
notes 11-1/4s, 1998 7,175,000
19,450,000 Horsehead Industries, Inc. sub. notes 14s,
1999 18,866,500
2,082,000 Horsehead Industries, Inc. sr. sub. ext.
reset notes 13-1/2s, 1994 2,144,460
54,750,000 Kaiser Aluminum & Chemical Corp. sr. sub.
notes 12-3/4s, 2003 55,023,750
90,359,710
Agriculture (2.5%)
29,600,000 Premium Standard Farms sr. secd. notes
12s, 2000(b) 32,116,000
69,739,000 Premium Standard Farms deb. stepped-coupon
zero % (12s, 9/15/96), 2003 54,483,594
86,599,594
Oil and Gas (2.3%)
27,250,000 Maxus Energy Corp. notes 9-3/8s, 2003 25,649,063
52,800,000 TransTexas Gas Corp. sr. secd. notes
10-1/2s, 2000 52,008,000
77,657,063
Electronics (2.1%)
34,450,000 Amphenol Corp. sr. sub. notes 12-3/4s,
2002 38,928,500
72,250,000 International Semi-Tech. Corp. sr. disc.
notes stepped- coupon zero % (11-1/2s,
8/15/00), 2003(d) 34,499,375
73,427,875
Containers (2.1%)
29,525,000 Anchor Glass Container Corp. sr. sub. deb.
9-7/8s, 2008 27,458,250
27,800,000 Ivex Packaging Corp. sr. sub. notes
12-1/2s, 2002 28,912,000
13,770,000 United States Can Co. sr. sub. notes
13-1/2s, 2002 15,319,125
71,689,375
Conglomerates (2.1%)
58,700,000 Jordan Industries, Inc. sr. notes 10-3/8s,
2003 54,004,000
9,100,000 MacAndrews & Forbes Holdings Inc. sub.
deb. 13s, 1999 9,100,000
7,797,000 PA Holdings Corp. sr. sub. notes 13-3/4s,
1999 8,201,469
71,305,469
Building Products (1.9%)
9,347,000 American Standard, Inc. sub. disc. deb.
14-1/4s, 2003 9,463,838
2,190,000 Axia, Inc. sr. sub. notes 11s, 2001(b) 2,124,300
12,500,000 Nortek, Inc. sr. sub. notes 9-7/8s, 2004 11,375,000
25,000,000 Southdown, Inc. sr. sub. notes Ser. B,
14s, 2001 28,250,000
13,000,000 Triangle Pacific Corp. sr. notes 10-1/2s,
2003 12,935,000
64,148,138
Publishing (1.8%)
9,140,000 General Media sr. secd. notes 10-5/8s,
2000 8,545,900
16,500,000 Marvel Holdings, Inc. Ser. B, 9-1/8s, 1998 14,396,250
56,000,000 Marvel Holdings, Inc. sr. secd. disc.
notes zero %, 1998 33,600,000
8,000,000 Marvel Holdings, Inc. sr. secd. disc.
notes zero %, 1998 4,880,000
61,422,150
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Retail (1.7%)
$8,320,000 Brylane L.P. sr. sub. notes 10s, 2003 $ 7,841,600
7,000,000 Duane Reade Corp. sr. notes 12s, 2002 6,807,500
46,610,000 Duane Reade Holding sub. notes
stepped-coupon zero % (15s, 9/15/99),
2004(d) 24,237,200
6,550,000 Finlay Enterprises, Inc. sr. notes
10-5/8s, 2003 6,353,500
6,650,000 Finlay Enterprises, Inc. sr. disc. deb.
stepped-coupon zero % (12s, 5/1/98),
2005(d) 3,923,500
9,700,000 Specialty Retailers, Inc. sr. sub. notes
11s, 2003 9,312,000
58,475,300
Insurance (1.7%)
5,500,000 National RE Holdings Corp. sr. sub. notes
14-1/2s, 1999 5,995,000
34,800,000 Reliance Group Holdings sr. sub. deb.
9-3/4s, 2003 31,320,000
21,750,000 Reliance Group Holdings sr. notes 9s, 2000 20,010,000
57,325,000
Building and Construction (1.3%)
5,000,000 Beazer Homes sr. notes 9s, 2004 4,300,000
2,000,000 Del. Webb Corp. sr. sub. deb. 9-3/4s, 2003 1,820,000
2,250,000 Del. Webb Corp. sr. sub. deb. 9s, 2006 1,890,000
21,900,000 Presley Co. sr. notes 12-1/2s, 2001 21,462,000
16,750,000 Scotsman Group Inc. sr. notes 9-1/2s, 2000 15,661,250
45,133,250
Specialty Consumer Products (1.2%)
3,000,000 Coleman Holdings sr. secd. disc. notes
zero %, 1998 1,995,000
38,240,000 Playtex Family Products Corp. sr. sub.
notes 9s, 2003 33,842,400
5,000,000 Revlon Consumer Products Corp. sr. notes
Ser. B, 9-3/8s, 2001 4,275,000
40,112,400
Steel (1.1%)
16,000,000 AK Steel Corp. sr. notes 10-3/4s, 2004 16,320,000
4,500,000 Bayou Steel Corp. 1st mtge. 10-1/4s, 2001 4,286,250
8,000,000 Geneva Steel Corp. sr. notes 9-1/2s, 2004 7,280,000
10,000,000 WCI Steel Inc. sr. secd. notes 10-1/2s,
2002 10,000,000
37,886,250
Lodging (1.1%)
21,700,000 John Q. Hammons Hotels 1st mtge. notes
8-7/8s, 2004 19,313,000
19,500,000 Red Roof Inns sr. notes 9.625s, 2003 18,183,750
37,496,750
Entertainment (1.1%)
45,500,000 Viacom International sub. deb. 8s, 2006 37,423,750
Electric Utilities (0.9%)
8,000,000 Midland Funding Corp. II deb. Ser. B,
13-1/4s, 2006 8,160,000
22,000,000 Texas New Mexico Power Corp. secd. deb.
12-1/2s, 1999 23,430,000
31,590,000
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Apparel (0.9%)
$32,500,000 Guess Jeans, Inc. sr. sub. notes 9-1/2s,
2003 $ 30,631,250
Advertising (0.9%)
9,150,000 Lamar Advertising Co. sr. secd. notes 11s,
2003 8,967,000
12,000,000 Outdoor Systems, Inc. sr. notes 10-3/4s,
2003 11,280,000
10,700,000 Universal Outdoor Inc. sub. deb. 11s, 2003 10,165,000
30,412,000
Automotive (0.8%)
10,000,000 JPS Automotive sr. notes 11-1/8s, 2001 10,000,000
10,000,000 Key Plastics Corp. sr. notes 14s, 1999 11,200,000
7,375,000 SPX Corp. sr. sub. notes 11-3/4s, 2002 7,559,375
28,759,375
Textiles (0.8%)
22,000,000 Foamex (L.P.) Capital Corp. sr. sub. deb.
11-7/8s, 2004 22,660,000
5,500,000 Foamex (L.P.) Capital Corp. sr. notes
11-1/4s, 2002 5,637,500
28,297,500
Motion Picture Distribution (0.7%)
875,000 Act III Theatres sr. sub. notes 11-7/8s,
2003 936,250
8,900,000 Cinemark USA sr. notes 12s, 2002 9,612,000
13,950,000 Plitt Theatres, Inc. sr. sub. notes
10-7/8s, 2004 13,880,250
24,428,500
Telephone Services (0.5%)
25,200,000 MFS Communications sr. disc. notes
stepped-coupon zero % (9-3/8s, 1/15/99),
2004(d) 14,742,000
3,420,000 USA Mobile Communications sr. notes
9-1/2s, 2004 3,043,800
17,785,800
Machinery (0.5%)
17,550,000 Specialty Equipment Co. sr. sub. notes
11-3/8s, 2003 17,550,000
Tobacco (0.4%)
17,000,000 Consolidated Cigar Corp. deb. 10-1/2s,
2003 14,960,000
School Buses (0.4%)
12,500,000 Blue Bird Acquisition Corp. sub. deb. Ser.
B 11-3/4s, 2002 12,750,000
Environmental Control (0.3%)
7,250,000 Envirotest Systems Corp. sr. sub. notes
9-5/8s, 2003 6,742,500
2,500,000 Envirotest Systems Corp. sr. notes 9-1/8s,
2001 2,337,500
9,080,000
Business Services (0.2%)
8,915,000 Corporate Express, Inc. sr. notes 9-5/8s,
2004 (acquired 2/22/94, cost
$8,915,000)(e) 7,934,350
Shipping (0.2%)
8,000,000 Viking Star Shipping sr. secd. notes
9-5/8s, 2003 7,660,000
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Home Furnishings (0.2%)
$8,113,028 Simmons Mattress Corp. deb. 8s, 2003(b)(c) $ 7,605,964
Printing (0.2%)
7,980,000 U.S. Banknote Corp. sr. notes 10-3/8s,
2002 6,783,000
Consumer Products (0.2%)
10,000,000 Equitable Bag Co. sr. notes 12-3/8s,
2002(f) 6,500,000
Medical Supplies (0.2%)
6,500,000 Wright Medical Technology Inc. sr. secd.
notes Ser. B,
10-3/4s, 2000 6,435,000
Banks (0.1%)
4,950,000 Chevy Chase Savings Bank Inc. sub. deb.
9-1/4s, 2005 4,529,250
Soft Drinks (0.1%)
5,000,000 Dr. Pepper Bottling Co. (Texas) sr. disc.
notes stepped- coupon zero % (11-5/8s,
2/15/98), 2003(d) 3,375,000
Total Corporate Bonds and Notes
(cost $3,046,787,008) $2,900,397,319
UNITS (4.7%)(a)
NUMBER OF UNITS VALUE
6,000,000 Capital Gaming Inc. sr. secd. units
11-1/2s, 2001 $ 5,280,000
7,000,000 Chesapeake Energy Corp. deb. units 12s,
2001 8,155,000
20,000,000 County Seat Stores units 12s, 2001 19,600,000
57,500,000 Echostar Communication Corp. units stepped
coupon zero % (12-7/8s, 12/1/99), 2004(d) 28,462,500
27,135,000 Foamex L.P. Capital Corp. units
stepped-coupon zero % (13-1/2s, 1999),
2004(d) 15,195,600
25,000,000 ICF Kaiser International Inc. sr. sub.
units 12s, 2003 22,875,000
32,846,000 PMI Holdings Corp. units sub. disc. deb.
stepped coupon zero % (11-1/2s, 9/1/00),
2005(d) 16,751,460
1,570,000 Page Mart Inc. sr. disc. units
stepped-coupon zero %
(12-1/4s, 11/1/98), 2003(b)(d) 9,812,500
6,650,000 Premium Standard Farms exch. pfd. units
12-1/2s, 2000(b) 7,215,250
8,000,000 Renaissance Cosmetics units 13-3/4s, 2001
(acquired 8/4/94, cost $7,912,480)(e) 7,920,000
12,860,000 Santa Fe Hotel, Inc. units 11s, 2000 11,574,000
7,100,000 Total Renal Care units stepped-coupon zero
% (12s, 8/15/99), 2004(d) 5,041,000
7,475,000 Treasure Bay Gaming 1st mtge. units
12-1/4s, 2000(b)(f) 2,840,500
Total Units (cost $165,624,611) $ 160,722,810
PREFERRED STOCKS (1.3%)(a)
NUMBER OF SHARES VALUE
112,000 Calfed Inc. Ser. B, $10.625 pfd. $ 11,788,000
7,407 Duane Reade Corp. zero % pfd. (acquired
9/24/92, cost $1,999,999)(e) 1,199,999
220,000 First Madison Bank Ltd. $11.50 pfd. 22,742,500
418,140 Pyramid Commerce $3.125 exch. pfd. Ser. C 9,669,488
Total Preferred Stocks (cost $44,593,036) $45,399,987
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YANKEE BONDS AND NOTES (1.3%)(a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$5,395,000 Banco de Galicia Inc. global notes 9s, 2003 $ 4,643,072
10,850,000 Cinemark Mexico notes 12s, 2003(b) 10,524,500
5,850,000 Eletson Holdings, Inc. mtge. notes 9-1/4s, 2003 5,484,375
25,000,000 Ispat Mexicana, deb. 10-3/8s, 2001 (acquired 3/1/94,
cost $24,847,777)(e) 23,687,500
Total Yankee Bonds and Notes (cost $45,783,655) $44,339,447
COMMON STOCKS (0.7%)(a)
NUMBER OF SHARES VALUE
6,570 Axia Holding Corp.(f) $ 411
2,426 CDK Holding Corp. rights (acquired 10/31/88,
cost $135,898)(e)(f) 92,188
1,347,039 Computervision Corp.(f) 3,704,357
64,149 Computervision Corp. (acquired 8/21/92,
cost $577,341)(e)(f)(h) 132,307
55,025 Dr Pepper/Seven-Up Companies, Inc.(f) 1,272,453
66,667 Duane Reade Corp. (acquired 9/24/92,
cost $133,333)(e)(f) 133,333
13,300 Finlay Enterprises Inc. Class A(f) 159,600
70,086 Grand Casinos, Inc.(f) 1,349,156
95,331 Kendall International, Inc.(f) 5,243,205
61,710 Lear Seating Corp.(f) 1,087,639
11,048 PMI Holdings Corp.(f) 2,209,600
5,502 Premium Holdings L.P. (acquired 1/4/94,
cost $330,120)(e)(f) 550,200
14,193 Pyramid Communications, Inc. New Class B(b)(f) 361,046
79 RJR Nabisco Holdings Corp.(f) 553
1,688,900 Solon Automated Services, Inc. ($1,515,680 par
acquired 6/18/92, cost $905,100; $173,220 par
acquired
8/14/94, cost $96,529)(e)(f) 1,055,563
236,025 Specialty Foods Corp.(f) 177,019
196,147 Spectra Vision, Inc.(f) 465,849
81,372 Taj Mahal Holding Corp. Class A(f) 976,464
100,000 UCC Investors Holding, Inc.(f) 1,375,000
120,330 Wang Laboratories, Inc.(f) 1,428,919
Total Common Stocks (cost $33,271,102) $ 21,774,862
CONVERTIBLE PREFERRED STOCKS (0.6%)(a)(COST $9,037,891)
NUMBER OF SHARES VALUE
147,500 Chrysler Corp. Ser. A, $4.625 dep. shs. cv. pfd. $19,765,000
</TABLE>
<TABLE>
<CAPTION>
WARRANTS (0.4%)(a)(f)
NUMBER OF WARRANTS EXPIRATION
DATE VALUE
<S> <C> <C> <C>
265,000 Becker Gaming Corp.(b) 11/15/00 298,125
4,015 CDK Holding Corp. Class A
(acquired 10/31/88, cost $224,921)(e) 7/1/99 152,570
4,294 CDK Holding Corp. Class B
(acquired 10/31/88, cost $120,273)(e) 7/1/99 154,584
15,000 Capital Gaming Inc. 2/1/99 48,750
42,125 Casino America Inc. 11/15/96 42,125
53,280 Casino Magic Finance Corp. 10/14/96 26,640
120,548 Cinemark Mexico 8/1/03 1,115,069
20,000 County Seat Holdings, Inc. 10/15/98 400,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WARRANTS (continued)
EXPIRATION
NUMBER OF WARRANTS DATE VALUE
<S> <C> <C> <C>
1,688,688 Gaylord Container Corp. 7/31/96 $ 9,076,698
8,140 General Media(b) 12/31/00 81,400
16,740 Louisiana Casino Cruises, Inc. 12/1/98 251,100
19,500 OSI Specialties Corp. 4/15/99 195,000
44,150 President Riverboat Casinos, Inc. 9/16/96 154,526
30,000 President Riverboat Casinos, Inc. 9/15/96 15,000
220,000 Southdown, Inc. 10/15/96 907,500
8,936 Southland Corp. 3/5/96 25,691
506 Telemedia Broadcasting 4/1/99 379,621
403 Wright Medical Technology Inc. 6/30/03 50,345
Total Warrants (cost $10,802,950) $ 13,374,744
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS (0.1%)(a)(cost $4,825,000)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$4,825,000 Sahara Mission cv. sub. notes 12s, 1995 $ 4,825,000
SHORT-TERM INVESTMENTS (2.7%)(a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$ 15,000,000 Ciesco, Inc. 4.72s, September 26, 1994 $ 14,948,867
25,000,000 Federal National Mortgage Assn. 4.67s,
September 19, 1994 24,938,382
15,000,000 Sears Roebuck Accept. Corp. 4.7s,
September 6, 1994 14,988,250
38,333,000 Interest in $300,000,000 joint repurchase
agreement dated August 31, 1994 with
Bankers Trust Co., Inc. due September 1,
1994 with respect to various U.S.
Treasury obligations--maturity value of
$38,338,100, for an effective yield of
4.79% 38,333,000
Total Short-Term Investments (cost
$93,208,499) $ 93,208,499
Total Investments (cost
$3,453,933,752)(g) $3,303,807,668
<PAGE>
<FN>
NOTES
(a) Percentages indicated are based on net assets of $3,420,750,001, which
correspond to a Net asset value per share for class A and class B
shareholders of $12.06 and $12.03, respectively.
(b) Securities exempt from registration under rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At August 31, 1994,
these securities were valued at $143,651,385 or 4.2% of net assets.
(c) Income may be received in cash or additional securities at the discretion of
the issuer.
(d) The interest rate and date shown paranthetically represent the next interest
rate to be paid and the date the fund will begin accruing this rate.
(e) Restricted as to public resale. At the date of acquisition, these securities
were valued at cost. There were no outstanding unrestricted securities,
except for rule 144A securities of the same class as those held, except where
noted by (h). Total market value of restricted securities owned at August 31,
1994 was $125,182,594 or 3.7% of net assets.
(f) Non-income-producing security.
(g) The aggregate identified cost for federal income tax purposes is
$3,453,933,752, resulting in gross unrealized appreciation and depreciation
of $69,518,420 and $(219,644,504), respectively, or net unrealized
depreciation of $(150,126,084).
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of assets and liabilities
August 31,1994
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments in securities, at value (identified cost $3,453,933,752) (Note 1) $3,303,807,668
Cash 866
Dividends, interest and other receivables 77,113,165
Receivable for shares of the fund sold 10,158,572
Receivable for securities sold 66,385,155
Total assets 3,457,465,426
Liabilities
Payable for securities purchased 24,651,076
Payable for shares of the fund repurchased 4,590,641
Distributions payable to shareholders 5,099
Payable for compensation of Manager (Note 2) 4,823,181
Payable for administrative services (Note 2) 8,346
Payable for compensation of Trustees (Note 2) 8,350
Payable for investor servicing and custodian fees (Note 2) 532,259
Payable for distribution fees (Note 2) 1,685,026
Other accrued expenses 411,447
Total liabilities 36,715,425
Net assets $3,420,750,001
Represented by
Paid-in capital (Notes 1, 4 and 5) $4,085,157,161
Undistributed net investment income (Notes 1 and 5) 1,422,557
Accumulated net realized loss on investment transactions (Note 1) (515,703,633)
Net unrealized depreciation of investments (150,126,084)
Total--Representing net assets applicable
to capital shares outstanding $3,420,750,001
Computation of net asset value and offering price
Net asset value and redemption price of class A shares ($2,885,747,587 divided
by 239,306,549 shares) $ 12.06
Offering price per share (100/95.25 of $12.06)* $ 12.66
Net asset value and offering price of class B shares
($535,002,414 divided by 44,490,198 shares)+ $ 12.03
</TABLE>
* On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<S> <C>
Statement of operations Investment income:
Interest $ 381,976,150
Year ended August 31, 1994 Dividends 1,268,785
Total investment income 383,244,935
Expenses:
Compensation of Manager (Note 2) 19,565,957
Investor servicing and custodian fees (Note 2) 3,780,294
Compensation of Trustees (Note 2) 95,850
Auditing 131,454
Report to shareholders 233,575
Legal 66,976
Postage 559,109
Administrative services (Note 2) 20,257
Registration fees 89,029
Distribution fees--class A (Note 2) 7,787,469
Distribution fees--class B (Note 2) 4,331,909
Other expenses 86,556
Total expenses 36,748,435
Net investment income 346,496,500
Net realized gain on investments (Notes 1 and 3) 59,173,723
Net unrealized depreciation of investments during the year (318,941,272)
Net loss on investment transactions (259,767,549)
Net increase in net assets resulting from operations $ 86,728,951
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
Year ended
August 31
Statement of changes in net assets 1994 1993
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income $ 346,496,500 $ 325,034,555
Net realized gain on investments 59,173,723 68,362,748
Net realized loss on forward currency contracts -- (40,307)
Net realized loss on foreign currency -- (108,122)
Net unrealized appreciation (depreciation) of
investments, options and forward currency contracts (318,941,272) 3,469,456
Net increase in net assets resulting from operations 86,728,951 396,718,330
Undistributed net investment income inclued in price
of shares sold and repurchaed, net -- 1,485,874
Distributions to shareholders from:
Net investment income
Class A (312,520,631) (320,268,578)
Class B (40,210,044) (5,027,877)
In excess of net investment income (Note 1)
Class A -- (7,618,377)
Increase from capital share transactions (Note 4) 258,156,724 914,023,769
Total increase (decrease) in net assets (7,845,000) 979,313,141
Net assets
Beginning of year 3,428,595,001 2,449,281,860
End of year (including undistributed net investment
income of and distributions in excess of $1,422,557
and $4,761,597, respectively) $3,420,750,001 $3,428,595,001
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Financial Highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
March 1, 1993
(commencement
of operations)
Year ended to
August 31 August 31 Year ended August 31
1994 1993 1994 1993 1992
Class B Class A
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 12.99 $ 12.84 $ 13.01 $ 12.76 $ 11.55
Investment operations
Net investment income 1.18 .62 1.27 1.46 1.57
Net realized and unrealized gain
(loss) on investments (.94) .23 (.93) .28 1.22
Total from investment operations .24 .85 .34 1.74 2.79
Less distributions from:
Net investment income (1.20) (.70) (1.29) (1.45) (1.56)
In excess of net investment income -- -- -- (.04) --
Net realized gain on investments -- -- -- -- (.02)
Paid-in Capital -- -- -- -- --
Total distributions (1.20) (.70) (1.29) (1.49) (1.58)
Net asset value, end of period $ 12.03 $ 12.99 $ 12.06 $ 13.01 $ 12.76
Total investment return at net asset
value (%) (a) 1.66 6.80(b) 2.46 14.50 25.50
Net assets, end of period
(in thousands) $535,002 $238,647 $2,885,748 $3,189,948 $2,449,282
Ratio of expenses to average
net assets (%) 1.69 .85(b) .94 .92 .97
Ratio of net investment income to
average net assets (%) 9.06 4.92(b) 9.82 11.27 12.63
Portfolio turnover (%) 55.00 50.90(b) 55.00 50.90 47.05
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year ended August 31
1991 1990 1989 1988 1987 1986 1985
Class A
<S> <C> <C> <C> <C> <C> <C>
$10.99 $ 13.84 $ 14.57 $ 15.28 $ 15.52 $ 15.42 $ 14.82
1.52 1.64 1.89 1.82 1.91 1.96 2.11
.66 (2.69) (.71) (.67) (.22) .34 .71
2.18 (1.05) 1.18 1.15 1.69 2.30 2.82
(1.52) (1.67) (1.86) (1.86) (1.93) (2.20) (2.22)
- -- -- -- -- -- -- --
- -- (.02) (.05) -- -- -- --
(.10) (.11) -- -- -- -- --
(1.62) (1.80) (1.91) (1.86) (1.93) (2.20) (2.22)
$11.55 $ 10.99 $ 13.84 $ 14.57 $ 15.28 $ 15.52 $ 15.42
22.47 (7.58) 8.47 8.25 11.34 15.76 20.32
$1,832,181 $1,651,544 $2,415,203 $2,390,123 $2,287,344 $2,361,819 $1,308,290
1.09 .95 .72 .61 .61 .57 .60
14.18 13.76 13.15 12.38 12.15 12.34 13.64
72.53 47.64 51.03 75.38 92.81 77.21 160.84
<FN>
(a)Total Investment Return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b)Not annualized
</TABLE>
<PAGE>
Notes to financial statements
August 31, 1994
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The fund seeks high
current income by investing primarily in high-yielding, lower-rated
fixed-income securities constituting a portfolio that Putnam Management
believes does not involve undue risk to income or principal.
The fund offers both class A and class B shares. The fund commenced its
public offering of class B shares on March 1, 1993. Class A shares are sold
with a maximum front-end sales charge of 4.75%. Class B shares do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than class
A shares, and may be subject to a contingent deferred sales charge, if those
shares are redeemed within six years of purchase. Expenses of the fund are
borne pro-rata by the holders of both classes of shares, except that each
class bears expenses unique to that class (including the distribution fees
applicable to such class), and votes as a class only with respect to its own
distribution plan or other matters on which a class vote is required by law
or determined by the Trustees. Shares of each class would receive their
pro-rata share of the net assets of the fund, if the fund were liquidated. In
addition, the Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported--as in the case of some
securities traded over-the-counter--the last reported bid price, except that
certain U.S. government obligations are stated at the mean between the last
reported bid and asked prices. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost which approximates market, and other investments, including
restricted securities, are stated at fair market value following procedures
approved by the Trustees. Market quotations are not considered to be readily
available for long-term corporate bonds and notes; such investments are
stated at fair value on the basis of valuations furnished by a pricing
service, approved by the Trustees, which determines valuations for normal,
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships
between securities that are generally recognized by institutional traders.
(See Section E of Note 1 with respect to valuation of options and forward
currency contracts.)
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account, along with the cash of other
registered investment companies managed by Putnam Investment Management, Inc.
<PAGE>
(Putnam Management), the fund's Manager, a wholly-owned subsidiary of Putnam
Investments, Inc., and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money market
instruments.
C) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value
of which at the time of purchase is required to be in an amount at least
equal to the resale price, including accrued interest. The fund's Manager is
responsible for determining that the value of these underlying securities is
at all times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis and dividend
income is recorded on the ex-dividend date.
Discount on zero coupon bonds, original issue discount bonds and step-up
bonds is accreted according to the effective yield method. Certain securities
held by the Fund pay interest in the form of additional securities; interest
on such securities is recorded on the accrual basis by means of the effective
yield method, and is allocated to the cost of the securities received on the
payment date.
Foreign-denominated receivables and payables are "marked-to-market" using the
current exchange rate. The fluctuation between the original exchange rate and
the current exchange rate is recorded as unrealized gain or loss. Upon
receipt or payment, the fund realizes a gain or loss on foreign currency
amounting to the difference between the original value and the ending value
of the receivable or payable. Foreign currency gains and losses related to
interest receivable are reported as part of interest income.
E) Option accounting principles When the fund writes a call or put option an
amount equal to the premium received by the fund is included in the fund's
"Statement of assets and liabilities" as an asset and an equivalent
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. The current market
value of an option is the last sale price or, in the absence of a sale, the
last offering price. If an option expires on its stipulated expiration date,
or if the fund enters into a closing purchase transaction, the fund realizes
a gain or loss if the cost of a closing purchase transaction exceeds the
premium received when the option was written without regard to any unrealized
gain or loss on the underlying security, and the liability related to such
option is extinguished. If a written call option is exercised, the fund
realizes a gain or loss from the sale of the underlying security and the
proceeds of the sale are increased by the premium originally received. If a
written put option is exercised, the amount of the premium originally
received reduces the cost of the security which the fund purchases upon
exercise of the option.
The fund writes covered call options; that is, options for which it holds the
underlying security or its equivalent. Accordingly, the risk in writing a
call option is that the fund relinquishes the opportunity to profit if the
market price of the underlying security increases and the option is
exercised. In writing a put option, the fund assumes the risk of incurring a
loss if the market price of the underlying security decreases and the option
is exercised.
The premium paid by the fund for the purchase of a call or put option is
included in the fund's "Statement of
<PAGE>
assets and liabilities" as an investment and subsequently "marked-to-market"
to reflect the current market value of the option. If an option which the
fund has purchased expires on the stipulated expiration date, the fund
realizes a loss in the amount of the cost of the option. If the fund enters
into a closing sale transaction, the fund realizes a gain or loss, depending
on whether proceeds from the closing sale transaction are greater or less
than the cost of the option. If the fund exercises a call option, the cost of
the securities acquired by exercising the call is increased by the premium
paid to buy the call. If the fund exercises a put option, it realizes a gain
or loss from the sale of the underlying security and the proceeds from such
sale are decreased by the premium originally paid.
Options on foreign currencies The fund writes and purchases put and call
options on foreign currencies. The accounting principles and risks involved
are similar to those described above relating to options on securities. The
amount of potential loss to the fund upon exercise of a written call option
is the value (in U.S. dollars) of the currency sold, converted at the spot
price, less the value of U.S. dollars received in exchange. The amount of
potential loss to the fund upon exercise of a written put option is the value
(in U.S. dollars) of the currency received converted at the spot price, less
the value of the U.S. dollars paid in exchange.
Forward currency contracts A forward currency contract is an agreement
between two parties to buy and sell a currency at a set price on a future
date. The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is "marked-to-market" daily and the
change in market value is recorded by the fund as an unrealized gain or loss.
When the contract is closed, the fund records a realized gain or loss equal
to the difference between the value of the contract at the time it was opened
and the value at the time it was closed. The maximum potential loss from
forward currency contracts is that the aggregate face value in U.S. dollars
at the time the contract was opened; however, management believes the
likelihood of such a loss to be remote.
F) Federal taxes It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986. Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation of securities held and excise tax on
income and capital gains.
At August 31, 1994, The fund had approximately $504,037,458 in capital loss
carryovers available to offset future realized capital gains, if any. To the
extent that the capital loss carryovers are used to offset realized gains, it
is unlikely that the gains so offset will be distributed to shareholders,
since any such distribution might be taxable as ordinary income.
Loss Carryover Expiration
$ 20,860,516 August 31, 1996
53,128,974 August 31, 1997
23,057,542 August 31, 1998
296,761,877 August 31, 1999
110,228,549 August 31, 2000
$504,037,458
G) Distributions to shareholders Distributions to shareholders are recorded
by the fund on the ex-dividend date. The amount and character of income and
gains to be distributed are determined in accordance with income tax
regulations which may differ from
<PAGE>
generally accepted accounting principles. These differences include treatment
of post-October losses, payment in-kind and market discount.
Reclassifications are made to the fund's capital accounts to reflect income
and gains available for distribution (or available capital loss carryovers)
under income tax regulations. For the year ended August 31, 1994 the fund
reclassified $7,101,694 to increase undistributed net investment income,
$32,760,952 to increase accumulated net realized loss, and $25,659,258 to
increase paid-in capital.
H) Equalization Prior to September 1, 1993, the fund used the accounting
practice known as equalization to keep a continuing shareholder's per share
interest in undistributed net investment income unaffected by sales or
repurchases of fund shares. This was accomplished by allocating a per share
portion of the proceeds from sales and the costs of repurchases of shares to
undistributed net investment income.
As of September 1, 1993, the fund discontinued using equalization. This
change has no effect on the fund's total net assets, net asset value per
share, or its net increase (decrease) in net assets from operations.
Discontinuing the use of equalization will result in simpler financial
statements. The cumulative effect of the change was to decrease undistributed
net investment income and increase paid-in capital previously reported
through August 31, 1993 by $45,083,291.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Management for management and investment advisory
services is paid quarterly based on the average net assets of the fund for
the quarter. Such fee is based on the following annual rates: 0.70% of the
first $500 million of average net assets, 0.6% of the next $500 million,
0.55% of the next $500 million, 0.50% of any amount over $1.5 billion,
subject to reduction under current law in any year to the extent that
expenses (exclusive of brokerage, interest and taxes) of the fund exceed 2.5%
of the first $30 million of average net assets, 2.0% of the next $70 million
and 1.5% of any amount over $100 million, and by the amount of certain
brokerage commissions and fees (less expenses) received by affiliates of the
Manager on the fund's portfolio transactions.
The fund also reimburses the Manager for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees. For the year ended
August 31, 1994, the fund paid $20,257 for these services.
Trustees of the fund receive an annual Trustee's fee of $4,990 and an
additional fee for each Trustees'meeting attended. Trustees who are not
interested persons of the Manager and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.
Custodial functions for the fund are provided by Putnam Fiduciary Trust
Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing
agent functions are provided by Putnam Investor Services, a division of PFTC.
Fees paid for these investor servicing and custodial functions for the year
ended August 31, 1994 amounted to $3,780,294.
Investor servicing and custodian fees reported in the Statement of operations
for the year ended August 31, 1994 have been reduced by credits allowed by
PFTC.
The fund has adopted a distribution plan with respect to its class A shares
(the "Class A Plan") pursuant to Rule
<PAGE>
12b-1 under the Investment Company Act of 1940. The purpose of the Class A
Plan is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by it in
distributing class A shares. The Trustees have approved payment by the fund
to Putnam Mutual Funds Corp. at an annual rate of 0.25% of the fund's average
net assets attributable to class A shares. For the year ended August 31,
1994, the fund paid $7,787,469 in distribution fees for class A shares.
During the year ended August 31, 1994, Putnam Mutual Funds Corp., acting as
an underwriter, received net commissions of $1,144,967 from the sale of class
A shares of The fund.
A deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares repurchased as part of an investment of $1 million or more.
For the year ended August 31, 1994, Putnam Mutual Funds Corp., acting as
underwriter, received $117,538 on class A redemptions.
The fund has adopted a distribution plan with respect to its class B shares
(the "Class B Plan") pursuant to Rule 12b-1 under the Investment Company Act
of 1940. The purpose of Class B Plan is to compensate Putnam Mutual Funds
Corp. for services provided and expenses incurred by it in distributing class
B shares. The Class B Plan provides for payments by the fund to Putnam Mutual
Funds Corp. at an annual rate of 1.00% of the fund's average net assets
attributable to class B shares. For the year ended August 31, 1994, the fund
paid Putnam Mutual Funds Corp. distribution fees of $4,331,909 for class B
shares.
Putnam Mutual Funds Corp. also receives the proceeds on the contingent
deferred sales charges on its class B share redemptions within six years of
purchase. The charge is based on declining rates, which begin at 5% of the
net asset value of the redeemed shares. Putnam Mutual Funds Corp. received
contingent deferred sales charges of $1,152,336 from redemptions during the
year ended August 31, 1994.
As part of the custodian contract between PFTC and the subcustodian bank, the
subcustodian bank has a lien on the securities of the fund to the extent
permitted by the fund's investment restrictions to cover any advances made by
the subcustodian for the settlement of securities purchased by the fund.
Note 3
Purchases and sales of securities
During the year ended August 31, 1994, purchases and sales of investment
securities other than short- term investments aggregated $2,048,488,095 and
$1,979,279,645 respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost
basis.
Note 4
Capital shares
At August 31, 1994, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
<PAGE>
<TABLE>
<CAPTION>
Year ended August 31
1994 1993
Class A Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 71,549,404 $ 922,107,257 106,922,442 $1,365,004,561
Shares issued in
connection with
reinvestment of
distributions 11,702,459 150,364,549 12,527,891 159,850,188
83,251,863 1,072,471,806 119,450,333 1,524,854,749
Shares repurchased (89,047,285) (1,152,902,095) (66,328,158) (847,829,579)
Portion represented by
undistributed net
investment income -- -- -- (1,062,770)
Net increase (decrease) (5,795,422) $ (80,430,289) 53,122,175 $ 675,962,400
</TABLE>
<TABLE>
<CAPTION>
March 1, 1993
(commencement of
Year ended operations) to
August 31 August 31
1994 1993
Class B Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 38,919,687 $ 513,222,364 19,267,231 $250,134,448
Shares issued in
connection with
reinvestment of
distributions 2,339,679 19,411,308 194,584 2,522,150
41,259,366 532,633,672 19,461,815 252,656,598
Shares repurchased (15,141,949) (194,046,659) (1,089,034) (14,172,126)
Portion represented by
undistributed net
investment income -- -- -- (423,103)
Net increase 26,117,417 $ 338,587,013 18,372,781 $238,061,369
</TABLE>
Note 5
Reclassification of Capital Accounts
Effective September 1, 1993, Putnam High Yield Trust has adopted the
provisions of Statement of Position 93-2 "Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of
Capital Distributions by Investment Companies (SOP)." The SOP requires the
fund to report the undistributed net investment income (accumulated loss) and
accumulated net realized gain (loss) accounts in such a manner as to
approximate amounts available for future tax distributions (or to approximate
amounts available for future tax distributions (or to offset future realized
capital gains). In implementing the SOP the fund has reclassified $20,782,687
to increase accumulated realized loss, $50,399,926 to decrease distributions
in excess of net investment income, with a decrease of $29,617,239 to
additional paid-in capital. These adjustments represent the cumulative
amounts necessary to report these balances on a tax basis through August 31,
1993. These reclassifications, which have no impact on the total impact on
the total net asset value of the fund, are primarily attributable to tax
equalization which is treated differently in the computation of distributable
income and capital gains under federal income tax rules and regulations
versus generally accepted accounting principles.
<PAGE>
Federal tax information
The distributions shown in the table from "net investment income" totaling
$1.29 and $1.20, respectively, for class A and class B shares constitute
"dividend income" for federal income tax purposes. The fund has designated
.36% of the investment income as qualifying for the dividends received
deduction for corporations.
The Form 1099 you receive in January 1995 will show you the tax status of all
distributions paid to your account in calendar 1994.
<PAGE>
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
Edward H. D'Alelio
Vice President and Fund Manager
Jin W. Ho
Vice President and Fund Manager
F. Mark Turner
Vice President
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam High Yield
Trust. It may also be used as sales literature when preceded or accompanied
by the current prospectus, which gives details of sales charges, investment
objectives and operating policies of the fund, and the most recent copy of
Putnam's quarterly Performance Summary.
<PAGE>
Bulk Rate
U.S. Postage
PAID
Putnam Investments
014/324-14154
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS:
(1) Bold and italic typefaces are displayed in normal type.
(2) Headers (e.g., the name of the fund) are omitted.
(3) Certain tabular and columnar headings and symbols are displayed
differently in this filing.
(4) Bullet points and similar graphic signals are omitted.
(5) Page numbering is omitted.
(6) Trademark symbol replaced with (TM)
(7) Section symbol replaced with (S)
(8) Dagger symbol replaced with + and double-dagger replaced with ++
