<PAGE>
Putnam
High Income
Convertible
and Bond Fund
ANNUAL REPORT
August 31, 1994
[LOGO OF PUTNAM APPEARS HERE]
BOSTON * LONDON * TOKYO
<PAGE>
PERFORMANCE HIGHLIGHTS
The fund continued to receive Morningstar's highest ranking of five stars,
based on risk-adjusted 3-, 5-, and 10-year performance through August 31,
1994, a ranking it has held since November 30, 1993.*
According to Lipper Analytical Services, the fund was ranked number one among
all closed-end convertible securities funds for the three-year period ended
August 31, 1994. The fund's one-year return through August received Lipper's
number two ranking.+
Performance should always be considered in light of a fund's investment
strategy. Putnam High Income Convertible and Bond Fund is designed for
investors aggressively seeking high current income through a portfolio of
high-yielding convertible and debt securities with potential for capital
appreciation.
<TABLE>
<CAPTION>
FISCAL 1994 RESULTS AT A GLANCE
--------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL RETURN: NAV MARKET PRICE
12 MONTHS ENDED 8/31/94
(change in value during
period plus reinvested
distributions) 5.09% 6.84%
SHARE VALUE: NAV MARKET PRICE
8/31/93 $9.52 $10.00
8/31/94 9.13 9.75
DISTRIBUTIONS: NUMBER INCOME TOTAL
Common shares 12 $0.871 $0.871
CURRENT RETURNS: NAV MARKET PRICE
(end of period)
Current dividend rate/1/ 9.33% 8.74%
</TABLE>
Performance data represent past results. For performance over longer periods,
see pages 8 and 9.
/1/ Income portion of most recent distribution, annualized and divided by NAV
or market price at end of period. The lower-credit ratings of high-yield
corporate bonds reflect a greater possibility that adverse changes in the
economy or their issuers may affect their ability to pay principal and
interest on the bonds.
* Morningstar Inc., a mutual fund research firm, rates a fund relative to
other funds with similar objectives. Ratings are based on risk-adjusted 3-,
5-, and 10-year total return, as applicable, adjusted for sales charges and
updated monthly. A five-star rating put the fund in the top 10% of rated
funds.
+ Rankings by Lipper vary over time and do not include the effects of sales
charges. The firm ranked the fund 2nd out of 7 funds for one year; 2nd out of
7 funds for two years; 1st out of 7 funds for three years; and 2nd out of 7
funds for five years. Past performance is not indicative of future results.
2
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF GEORGE PUTNAM APPEARS HERE]
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 ABRUPT
HALT. WHILE THE RESULTING TURBULENCE DAMPENED YOUR FUND'S PERFORMANCE, THE
OUTCOME MIGHT HAVE BEEN FAR WORSE HAD FUND MANAGERS CHARLES POHL AND JENNIFER
LEICHTER NOT ATTEMPTED TO POSITION THE FUND FOR BOND MARKET VOLATILITY.
IN ALL LIKELIHOOD, THE MARKETS WILL CONTINUE TO EXPERIENCE ONGOING VOLATILITY
OVER THE NEXT FEW MONTHS. IN THE REPORT THAT FOLLOWS, CHARLIE AND JENNIFER
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,
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
OCTOBER 19, 1994
3
<PAGE>
REPORT FROM THE FUND MANAGERS
CHARLES G. POHL, LEAD MANAGER
JENNIFER E. LEICHTER
As the performance figures for fiscal 1994 show, Putnam High Income
Convertible and Bond Fund navigated this year's interest rate rapids with
defensiveness and selectivity. The fund's 5.09% total return at net asset
value for the fiscal year ended August 31, 1994, compares favorably with the
0.01% return of the Merrill Lynch All Convertible Index and the 3.65% return
of the First Boston High Yield Bond Index. Moreover, the fund continued to
deliver substantial current income, as reflected in its 9.33% dividend rate
at net asset value at the end of August. The tables on pages 8 and 9 provide
additional performance information.
DEFENSIVE TACTICS EXPLAINED
Last fall, we sensed that the economy was accelerating and that interest
rates were unlikely to move lower. We took preemptive action by initiating a
series of defensive tactics. These included purchasing convertible securities
that were trading to short call dates, reducing the weighting in zero-coupon
high-yield bonds, and taking profits on some of the fund's early cyclical
investments.
When convertible securities trade to short call dates, investors believe
these securities will be redeemed by the issuer prior to their stated
maturities. This means they are more likely to behave like shorter-term
securities, which tend to exhibit more stability than longer-term bonds when
interest rates are rising. By shifting as much as 10% of the portfolio into
such securities, we reduced its overall average maturity, which provided a
cushion against market volatility.
In similar fashion, cutting the fund's stake in zero-coupon bonds -- from
11.5% of the portfolio last November to 8% at the end of the period -- also
reduced sensitivity to interest-rate changes. Zero-coupon bonds pay no
interest and are priced far below the customary $1,000 face value. When
interest rates fall, causing
4
<PAGE>
bond prices to rise, "zeros" can produce handsome returns. However, when
rates move up, they lose value more rapidly than most other types of
fixed-income securities.
Selling the fund's early cyclical investments meant reducing, on a selected
basis, the high-yield bond investments in industries such as autos and
housing. These sectors performed extremely well in the earlier stages of the
economic recovery. However, rising interest rates tend to slow demand for new
cars and houses. High-yield bonds, like stocks, are influenced to a great
extent by companies' earnings. When bond prices rise to reflect those
earnings fully, it is prudent to sell the bonds and reinvest the proceeds in
undervalued securities in still-accelerating industries.
SELECTIVE BUYING OF UNDERVALUED OPPORTUNITIES; "DEEP CYCLICALS" ATTRACTIVE
In the midst of significant market volatility, our investment approach became
highly selective. We focused our purchases in several areas, including
special situations where the securities of creditworthy issuers were
available at bargain prices.
An excellent example of this was our investment in CML Group, the
Massachusetts-based maker of the popular Nordic-Track system and other sports
and fitness equipment. CML's common stock declined
BARGRAPH OF TOP 5 INDUSTRY SECTORS*
Electronics 5.28%
Computer equipment 4.24%
Conglomerates 3.98%
Insurance 3.84%
Retail 3.56%
*Based on net assets on 8/31/94.
5
<PAGE>
when the company reported disappointing earnings. The prices of its
convertible bonds also declined, driving the yields up to more than 10%. It
was at this point that we purchased the bonds for your fund.
CML's balance sheet is strong, especially since the convertible issue is its
only significant public debt. We purchased this high-yielding convertible
from a company where the underlying common stock price may not fully reflect
the company's earnings potential. The stock's already-depressed price reduces
sensitivity to further market declines.
So-called "deep cyclicals" also offered attractive opportunities. These are
industries such as paper, chemicals, and aluminum where profits tend to
accelerate in the later stages of an economic recovery. Portfolio standouts
in this group included the high-yield bonds of Gaylord Container. The company
is one of the largest producers of linerboard, used to make cardboard boxes.
The stronger economy has resulted in increased sales of goods that must be
packed and shipped, increasing the demand for boxes and linerboard. As a
result, linerboard prices have risen dramatically. Gaylord's increased
pricing power has translated into improved profitability. This has made its
high-yield bonds more attractive to investors, thus enhancing their
performance.
INCREASED OPPORTUNITIES IN CONVERTIBLE MARKET;
CREDIT QUALITY EXPECTED TO REMAIN STRONG
Numerous bonds issued in 1993's bull market were driven to unsustainably high
price levels by aggressive buying activity. As a result of the market
correction in the first half of 1994, many recently issued convertibles are
now attractively priced and carry relatively high yields. We view this as an
excellent buying opportunity and plan to redeploy proceeds from the sales of
fully valued holdings positions into those with improved prospects and
valuations.
The risk and return characteristics of the high-yield convertible universe
are now much more favorable than they were earlier this year. Because of
this, we are considering an incremental increase in the percentage of the
fund's assets invested in convertibles. We will invest selectively, seeking
securities offering fundamental value, good credit quality, and yields in our
target range of 8% to 10%.
6
<PAGE>
TOP 10 HOLDINGS (8/31/94)
TIME-WARNER, INC. CV. DEB.
Media/entertainment with operations in over 16 countries
UNISYS CORP. SER. A CONVERTIBLE PREFERRED
Computer-based information systems, and related services
USF&G CORP. SER. A CONVERTIBLE PREFERRED
Property-casualty and life insurer
WAINOCO OIL CORP. CV. SUB. DEB.
Explores for and produces oil and natural gas
TENNECO INC. CV. PFD.
Natural gas pipelines, construction, and farm equipment
FLAGSTAR CORP. CV. JR. SUB. DEB.
One of the largest food service businesses in the U.S.
GREAT LAKES BANCORP CV. SUB. DEB.
One of the largest savings institutions in Michigan
SFP PIPELINE HOLDINGS INC. 10.67% VARIABLE RATE NOTES
Refined petroleum products and pipeline business
WESTINGHOUSE ELECTRIC SER. C PREFERREDS
Television and radio broadcasting, and advanced electronics
SEARS, ROEBUCK & CO. CV. PFD.
Apparel, home appliances, and electronics
These holdings represent 14.7% of the fund's net assets. Portfolio holdings
are subject to change.
We expect the credit quality of high-yield bonds -- both convertible and
conventional -- to remain strong for the duration of the economic recovery.
We expect to continue our focus on the securities of late-cycle companies
that are either reducing their debt or increasing their profits, either of
which can result in credit-rating upgrades and improving prices. Although
there can never be any assurances, this approach should enable the fund to
continue providing its sizable yield advantage over Treasury bonds (which, of
course, have no credit risk), while benefiting from the improved credit risk
profile in the high-yield securities markets.
The views expressed throughout the report are exclusively those of Putnam
Management. They are not meant as investment advice. Although the described
holdings are viewed favorably as of August 31, 1994, there is no guarantee
the fund will continue to hold these securities in the future. The lower
credit ratings of the high-yield securities in which the fund invests reflect
a greater possibility that adverse changes in the economy or their issuers
may affect issuers' ability to pay principal and interest on the securities.
7
<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>
First Boston
High Yield
NAV Market price Bond Index CPI
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year 5.09% 6.84% 3.65% 2.90%
- ------------------------------------------------------------------------------------------
5 years 93.85 120.04 74.98 19.58
Annual average 14.15 17.08 11.84 3.64
- ------------------------------------------------------------------------------------------
Life of fund 117.80 117.87 114.04 31.28
(since 7/9/87)
Annual average 11.52 11.52 11.20 3.89
- ------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN FOR PERIODS ENDED 9/30/94
(most current calendar quarter)
<TABLE>
<CAPTION>
NAV Market price
- ------------------------------------------------------------------------------------------
<S> <C> <C>
1 year 3.44% 3.33%
- ------------------------------------------------------------------------------------------
5 years 95.18 119.42
Annual average 14.31 17.02
- ------------------------------------------------------------------------------------------
Life of fund 117.32 112.29
(since 7/9/87)
Annual average 11.33 10.97
- ------------------------------------------------------------------------------------------
</TABLE>
Performance data represent past results. Investment returns and net asset
value will fluctuate so an investor's shares, when sold, may be worth more or
less than their original cost. Fund performance data do not take into account
any adjustment for taxes payable on reinvested distributions.
8
<PAGE>
TERMS AND DEFINITIONS
NET ASSET VALUE (NAV) is the value of all your fund's assets minus
liabilities divided by the number of outstanding shares, not reflecting any
sales charge.
MARKET PRICE is the current trading price of one share of the fund. Market
prices are set by transactions between buyers and sellers on the New York
Stock Exchange.
COMPARATIVE BENCHMARKS
THE FIRST BOSTON HIGH YIELD BOND INDEX is a market-weighted index including
publicly traded bonds having a rating below BBB by Standard & Poor's/(R)/ and
Moody's. Performance figures for the index reflect changes of market prices,
interest, and reinvestment of all interest payments. The average quality of
bonds included in the index may be lower than the average quality of those
bonds in which the fund customarily invests. Securities in the fund's
portfolio will differ from those in the index.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it does
not represent an investment return.
THE MERRILL LYNCH ALL-CONVERTIBLE BOND INDEX is an unmanaged list of
convertible securities. The index does not take into account brokerage
commissions or other costs.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDERS OF
PUTNAM HIGH INCOME CONVERTIBLE AND BOND FUND
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam High
Income Convertible and Bond Fund (the "fund") at August 31, 1994, and the
results of its operations, the changes in its net assets, and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence support
ing the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments owned at August 31, 1994
by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
October 18, 1994
10
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
August 31, 1994
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES (40.4%)(a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
RECREATION(3.0%)
- --------------------------------------------------------------------------------------------------------
$ 330,000 Arizona Charlies Corp. sub. deb. Ser. B, 12s, 2000 $ 300,094
240,000 Capitol Queen and Casino Corp. sr. sub. deb.
Ser. B, 12s, 2000 (b) 169,800
190,000 Casino America Inc. 1st mtge. deb. 11 1/2s, 2001 165,300
830,000 Casino Magic Finance Corp. 1st. mtge. deb. 11 1/2s, 2001 688,900
400,000 Elsinore Corp. 1st mtge. 12 1/2s, 2000 (b)(c) 248,000
425,000 Fitzgerald Gaming sr. notes 13s, 1996 (b) 335,750
400,000 Golden Nugget Finance Corp. 1st mtge. deb.
Ser. B, 10 5/8s, 2003 232,000
365,000 Grand Casino Resorts Inc. notes 12 1/2s, 2000 359,525
195,000 Louisiana Casino Cruises Corp. sr. sub. deb. 11 1/2s, 1998 173,550
243,000 Trump Castle Funding Corp. sr. sub. notes 11 1/2s, 2000 (b) 243,000
989,845 Trump Taj Mahal deb. Ser. A, 11.35s, 1999 (d) 692,893
------------
3,608,812
BROADCASTING(2.5%)
- --------------------------------------------------------------------------------------------------------
500,000 Adelphia Communications sr. note 9 1/2s, 2004 (d) 395,000
500,000 Continental Broadcasting Inc. sr. sub. notes 10 5/8s, 2003 505,000
400,000 Granite Broadcasting Corp. sr. sub. deb. 12 3/4s, 2002 412,000
250,000 New City Broadcasting Corp. sr. sub. notes 11 3/8s, 2003 246,250
1,050,000 Panamsat L.P. sr. sub. notes stepped-coupon zero %
(11 3/8s, 8/1/98), 2003 (b)(f) 677,250
1,015,000 Spectravision Inc. sr. sub. ext. reset notes 11.65s, 2002 (d) 578,550
365,000 Telemedia Broadcasting deb. 6.4s, 2004 (b) 219,000
------------
3,033,050
FOREST PRODUCTS(2.4%)
- --------------------------------------------------------------------------------------------------------
1,500,000 Gaylord Container Corp. sr. sub. disc. deb.
stepped-coupon zero % (12 3/4s, 5/15/96), 2005 (f) 1,237,500
400,000 Repap Wisconsin Inc. sr. secd. notes 9 1/4s, 2002 356,000
300,000 Stone Container Corp. deb. sr. sub. notes 11 1/2s, 1999 297,000
100,000 Stone Container Corp. sr. sub. notes 9 7/8s, 2001 93,000
400,000 Stone Savannah River Pulp & Paper Corp. sr. sub. notes 14 1/8s, 2000 424,500
500,000 Williamhouse Regency Delaware, Inc. sr. sub. deb. 11 1/2s, 2005 502,500
------------
2,910,500
CONGLOMERATES(2.0%)
- --------------------------------------------------------------------------------------------------------
750,000 Haynes International, Inc. sr. sub. notes 13 1/2s, 1999 390,000
250,000 Huntsman Corp. 1st mtge. 11s, 2004 260,625
475,000 Jordan Industries, Inc. sr. notes 10 3/8s, 2003 437,000
750,000 MacAndrews & Forbes Holdings Inc. sub. deb. 13s, 1999 750,000
1,000,000 Talley Industries, Inc. sr. disc. deb. stepped-coupon zero %
(12 1/4s, 10/15/98), 2005 (f) 520,000
------------
2,357,625
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
METALS AND MINING(1.9%)
- --------------------------------------------------------------------------------------------------------
$ 650,000 Horsehead Industries, Inc. sr. sub. ext.
reset notes 15 3/4s, 1994 $ 669,500
1,000,000 Horsehead Industries, Inc. sub. notes 14s, 1999 970,000
600,000 Kaiser Aluminum & Chemical Corp. sr. sub. notes 12 3/4s, 2003 603,000
------------
2,242,500
RETAIL(1.9%)
- --------------------------------------------------------------------------------------------------------
530,000 Duane Reade Corp. sr. notes 12s, 2002 515,425
250,000 Finlay Enterprises Inc. sr. disc. deb. stepped-coupon
zero % (12s, 5/1/98), 2005 (f) 147,500
20,000 Loehmanns' Holdings Inc. sr. sub. notes 13 3/4s, 1999 19,400
1,100,000 Loehmanns' Holdings Inc. sr. sub. notes 10 1/2s, 1997 1,034,000
250,000 Parisian Inc. sr. sub. notes 9 7/8s, 2003 218,750
315,000 Specialty Retailers, Inc. sr. sub. notes 11s, 2003 302,400
------------
2,237,475
RESTAURANTS(1.7%)
- --------------------------------------------------------------------------------------------------------
250,000 American Restaurant Group, Inc. sr. notes 12s, 1998 238,125
125,000 American Restaurant Group, Inc. sr. secd. notes 12s, 1998 119,688
1,250,000 American Restaurant Group, Inc. sr. notes stepped-coupon
zero % (14s, 12/15/98), 2005 (f) 600,000
200,000 Family Restaurants Inc. sr. notes 9 3/4s, 2002 178,000
1,000,000 Flagstar Corp. sr. sub. notes 11 3/8s, 2003 875,000
1,000 Flagstar Corp. sr. sub. deb. 11 1/4s, 2004 870
------------
2,011,683
STEEL(1.5%)
- --------------------------------------------------------------------------------------------------------
500,000 AK Steel Corp. sr. notes 10 3/4s, 2004 510,000
250,000 Armco Inc. sr. notes 11 3/8s, 1999 257,500
250,000 Armco Inc. sr. notes 9 3/8s, 2000 232,500
400,000 WCI Steel Inc. sr. notes 10 1/2s, 2002 400,000
450,000 Wheeling-Pittsburgh Corp. sr. notes 9 3/8, 2003 410,625
------------
1,810,625
CELLULAR COMMUNICATIONS(1.4%)
- --------------------------------------------------------------------------------------------------------
500,000 Cellular, Inc. sr. sub. disc. notes stepped-coupon
zero % (11 3/4s, 9/1/98), 2003 (f) 312,500
400,000 Centennial Cellular Corp. sr. notes 8 7/8s, 2001 358,000
1,500,000 Horizon Cellular Telephone Co. sr. sub. disc. notes
stepped-coupon zero % (11 3/8s, 10/1/97), 2000 (f) 1,035,000
------------
1,705,500
CHEMICALS(1.4%)
- --------------------------------------------------------------------------------------------------------
125,000 Arcadian Partners L.P. sr. notes Ser. B, 10 3/4s, 2005 124,688
500,000 G-I Holdings Inc. sr. notes zero %, 1998 306,250
250,000 Harris Chemical Corp. sr. sub. notes 10 3/4s, 2003 230,000
250,000 OSI Specialty Inc. sr. sub. notes 9 1/4s, 2003
(acquired 9/29/93, cost $250,000) (e) 230,000
750,000 UCC Investors Holding, Inc. sr. notes 10 1/2s, 2002 768,750
------------
1,659,688
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
CABLE TELEVISION(1.4%)
- --------------------------------------------------------------------------------------------------------
$ 250,000 Adelphia Communications Corp.
notes Ser. B, 9 7/8s, 2005 (d) $ 217,500
100,000 Cablevision Industries Corp. sub. deb. 9 1/4s, 2008 87,000
443,100 Falcon Holdings Group Inc. sr. sub. notes 11s, 2003 (d) 407,650
650,000 Insight Communications Co. sr. sub. stepped-coupon
notes 8 1/4s (11 1/4s, 3/1/96), 2000 (f) 617,500
300,000 Summit Communications Group, Inc. sr. sub. deb. 10 1/2s, 2005 309,000
------------
1,638,650
FOOD(1.3%)
- --------------------------------------------------------------------------------------------------------
393,000 Del Monte Corp. sub. deb. notes 12 1/4s, 2002
($350,000 par acquired 3/12/93, cost $360,675,
$21,000 par acquired 10/18/93, cost $21,000,
$22,000 par acquired 3/1/94, cost $22,734) (d)(e) 393,000
600,000 Fresh Delmonte Produce Corp. sr. notes Ser. B, 10s, 2003 547,500
500,000 Mafco, Inc. sr. sub. notes 11 7/8s, 2002 482,500
175,000 Specialty Foods Corp. sr. sub. notes 11 1/4s, 2003 146,563
50,000 Specialty Foods Acquisition Corp. sr. secd. disc. deb.
stepped-coupon zero %, (13s, 8/15/99), 2005 (f) 17,500
------------
1,587,063
ELECTRONICS(1.2%)
- --------------------------------------------------------------------------------------------------------
850,000 Amphenol Corp. sr. sub. notes 12 3/4s, 2002 (b) 960,500
1,000,000 International Semi-Tech. sr. disc. notes stepped-coupon
zero % (11 1/2s, 8/15/00), 2003 (f) 477,500
------------
1,438,000
INSURANCE(1.2%)
- --------------------------------------------------------------------------------------------------------
500,000 American Annuity Group, Inc. sr. notes 9 1/2s, 2001 490,000
500,000 Penn Corp. Financial Group sr. sub. notes 9 1/4s, 2003 465,000
200,000 Reliance Group Holdings sr. sub. deb. 9 3/4s, 2003 180,000
275,000 Reliance Group Holdings sr. notes 9s, 2000 253,000
------------
1,388,000
OIL AND GAS(1.0%)
- --------------------------------------------------------------------------------------------------------
100,000 Maxus Energy Corp. global notes 9 3/8s, 2003 94,125
200,000 Noble Drilling Corp. deb. 9 1/4s, 2003 193,000
950,000 TransTexas Gas Corp. sr. secd. notes 10 1/2s, 2000 935,750
------------
1,222,875
HEALTH CARE(1.0%)
- --------------------------------------------------------------------------------------------------------
500,000 Charter Medical sr. sub. notes 11 1/4s, 2004
(acquired 4/22/94, cost $500,000) (e) 515,000
250,000 General Medical Corp. sr. sub. notes 10 7/8s, 2003 249,375
400,000 Quorum Health Group, Inc. sr. sub. notes 11 7/8s, 2002 426,000
------------
1,190,375
AGRICULTURE(0.9%)
- --------------------------------------------------------------------------------------------------------
1,385,000 Premium Standard Farms deb. stepped coupon zero %,
10 1/2s, 9/15/96, 2003 (b)(f) 1,082,031
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<S> <C>
MOTION PICTURE DISTRIBUTION(0.8%)
- --------------------------------------------------------------------------------------------------------
$ 600,000 Act III Theatres sr. sub. notes 11 7/8s, 2003 $ 642,000
275,000 Cinemark USA sr. notes 12s, 2002 297,000
------------
939,000
FINANCIAL SERVICES(0.8%)
- --------------------------------------------------------------------------------------------------------
300,000 Comdata Network, Inc. sr. sub. deb. 13 1/4s, 2002 331,500
550,000 Comdata Network, Inc. sr. notes 12 1/2s, 1999 591,250
------------
922,750
ELECTRIC UTILITIES(0.7%)
- --------------------------------------------------------------------------------------------------------
400,000 Midland Funding Corp. II deb. Ser. B, 13 1/4s, 2006 408,000
483,547 Midland Cogeneration Venture L.P. sr. deb. 10.33s, 2002 (b) 473,876
------------
881,876
NURSING HOMES(0.7%)
- --------------------------------------------------------------------------------------------------------
250,000 Hillhaven Corp. sr. sub. notes 10 1/8s, 2001 250,000
563,000 Multicare Cos., Inc. sr. sub. notes 12 1/2s, 2002 622,115
------------
872,115
AUTOMOTIVE PARTS(0.7%)
- --------------------------------------------------------------------------------------------------------
750,000 Key Plastics Corp. sr. notes 14s, 1999 840,000
ENTERTAINMENT(0.7%)
- --------------------------------------------------------------------------------------------------------
1,000,000 Viacom International sub. deb. 8s, 2006 822,500
PUBLISHING(0.7%)
- --------------------------------------------------------------------------------------------------------
101,000 Enquirer/Star sr. sub. notes zero %, 1997 77,770
150,000 Marvel Holdings, Inc. Ser. B, 9 1/8s, 1998 130,875
1,000,000 Marvel Parent Holdings, Inc. sr. secd. disc. notes zero %, 1998 600,000
------------
808,645
SPECIALTY CONSUMER PRODUCTS(0.7%)
- --------------------------------------------------------------------------------------------------------
500,000 Coleman Holdings sr. secd. disc. notes zero %, 1998 332,500
500,000 Playtex Family Products Corp. sr. sub. notes 9s, 2003 442,500
------------
775,000
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<S> <C>
CONTAINERS(0.6%)
- --------------------------------------------------------------------------------------------------------
$ 500,000 Anchor Glass Container Corp. sr. sub. deb. 9 7/8s, 2008 $ 465,000
250,000 Ivex Packaging Corp. sr. sub. notes 12 1/2s, 2002 260,000
------------
725,000
SHIPPING(0.6%)
- --------------------------------------------------------------------------------------------------------
750,000 Viking Star Shipping sr. secd. notes 9 5/8s, 2003 718,125
SCHOOL BUSES(0.6%)
- --------------------------------------------------------------------------------------------------------
700,000 Blue Bird Body Co. sub. deb. Ser. B, 11 3/4s, 2002 714,000
REAL ESTATE(0.5%)
- --------------------------------------------------------------------------------------------------------
390,000 Chelsea Piers stepped-coupon zero % (12 1/2s, 6/15/99) 2004 (b)(f) 312,000
25,000 Chelsea Piers stepped-coupon zero % (11s, 6/15/99), 2009 (b)(f) 20,469
300,000 Kearny St. Realty pay-thru notes 9.56s, 2003 306,000
------------
638,469
APPAREL(0.5%)
- --------------------------------------------------------------------------------------------------------
600,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 565,500
BUILDING AND CONSTRUCTION(0.4%)
- --------------------------------------------------------------------------------------------------------
350,000 Presley Co. sr. notes 12 1/2s, 2001 343,000
200,000 Scotsman Group Inc. sr. notes 9 1/2s, 2000 187,000
------------
530,000
CONSUMER SERVICES(0.4%)
- --------------------------------------------------------------------------------------------------------
250,000 Solon Automated Services, Inc. sr. sub. deb. 13 3/4s, 2002 255,625
250,000 Solon Automated Services, Inc. notes 12 3/4s, 2001 252,500
------------
508,125
CONSUMER PRODUCTS(0.4%)
- --------------------------------------------------------------------------------------------------------
750,000 Equitable Bag Co. sr. notes 12 3/8s, 2002 (c) 487,500
ADVERTISING(0.4%)
- --------------------------------------------------------------------------------------------------------
500,000 Universal Outdoor Inc. sub. deb. 11s, 2003 475,000
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<S> <C>
ENVIRONMENTAL CONTROL(0.4%)
- --------------------------------------------------------------------------------------------------------
$ 500,000 Envirosource, Inc. sr. notes 9 3/4s, 2003 $ 450,000
LODGING(0.4%)
- --------------------------------------------------------------------------------------------------------
500,000 John Q. Hammons Hotels 1st. mtge. notes 8 7/8s, 2004 445,000
BUILDING PRODUCTS(0.4%)
- --------------------------------------------------------------------------------------------------------
250,000 American Standard, Inc. sr. sub. deb. stepped-coupon
zero % (10 1/2s, 6/1/98), 2005 (f) 163,125
250,000 Overhead Door Corp. sr. notes 12 1/4s, 2000 252,500
------------
415,625
AIRLINES(0.3%)
- --------------------------------------------------------------------------------------------------------
350,000 USAir, Inc. sr. notes 10 3/8s, 2013 316,750
MACHINERY(0.3%)
- --------------------------------------------------------------------------------------------------------
300,000 Specialty Equipment Co. sr. sub. notes 11 3/8s, 2003 300,000
FINANCE(0.2%)
- --------------------------------------------------------------------------------------------------------
250,000 PSF Finance L.P sr. notes 12 1/4s, 2004 (b) 255,469
FOOD CHAINS(0.2%)
- --------------------------------------------------------------------------------------------------------
2,500,000 Grand Union Capital Corp. gtd. sr. sub. notes zero %, 2007 143,750
250,000 Grand Union Capital Corp. sr. notes stepped-coupon
zero % (15s, 12/15/99), 2004 (f) 43,750
------------
187,500
COMPUTER EQUIPMENT(0.1%)
- --------------------------------------------------------------------------------------------------------
200,000 Computervision Corp. sr. sub. notes 11 3/8s, 1999 167,500
MEDICAL SUPPLIES(0.1%)
- --------------------------------------------------------------------------------------------------------
100,000 Wright Medical Technology Inc. sr. secd. notes Ser. B,
10 3/4s, 2000 99,000
BUSINESS SERVICES(0.1%)
- --------------------------------------------------------------------------------------------------------
100,000 Corporate Express, Inc. sr. notes 9 5/8s, 2004
(acquired 2/22/94, cost $100,000) (e) 89,000
COMMUNICATIONS(-%)
- --------------------------------------------------------------------------------------------------------
50,000 Paging Network, Inc. sr. sub. notes 8 7/8s, 2006 42,500
------------
Total Corporate Bonds and Notes (cost $51,962,205) $ 48,116,401
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS (33.4%)(a)
PRINCIPAL AMOUNT VALUE
<S> <C>
ELECTRONICS(2.9%)
- --------------------------------------------------------------------------------------------------------
1,200,000 GenRad, Inc. cv. sub. deb. 7 1/4s, 2011 882,000
1,100,000 M/A Com. Inc. cv. sub. deb. 9 1/4s, 2006 1,056,000
250,000 Network Equipment Technologies Inc. cv. sub. deb. 7 1/4s, 2014 206,563
1,700,000 Richardson Electronics Ltd. cv. sub. deb. 7 1/4s, 2006 1,309,000
------------
3,453,563
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS
PRINCIPAL AMOUNT VALUE
<S> <C>
ENVIRONMENTAL CONTROL(2.8%)
- --------------------------------------------------------------------------------------------------------
$ 1,200,000 Enclean, Inc. cv. sub. deb. 7 1/2s, 2001 $ 1,260,000
1,000,000 OHM Corp. cv. sub. deb. 8s, 2006 875,000
1,500,000 Riedel Environmental Technologies, Inc. sub. cv. deb. 7s, 1999 (c) 225,000
1,300,000 Weston (Roy F.) Inc. cv. deb. 7s, 2002 1,014,000
------------
3,374,000
BANKS(2.8%)
- --------------------------------------------------------------------------------------------------------
1,500,000 Great Lakes Bancorp cv. sub. deb. 7 1/4s, 2011 1,503,750
719,000 Independence Bancorp Inc. cv. sub. deb. 7s, 2011 833,141
1,000,000 Midlantic Bank, Inc. cv. sub. deb. 8 1/4s, 2010 1,000,000
------------
3,336,891
COMPUTER EQUIPMENT(2.4%)
- --------------------------------------------------------------------------------------------------------
950,000 Computer Products, Inc. cv. sub. deb. 9 1/2s, 1997 964,250
2,500,000 Maxtor Corp. cv. sub. deb. 5 3/4s, 2012 1,287,500
700,000 Seagate Technology Inc. cv. sub. deb. 6 3/4s, 2012 602,875
------------
2,854,625
MEDIA(2.4%)
- --------------------------------------------------------------------------------------------------------
2,824,000 Time-Warner, Inc. cv. deb. 8 3/4s, 2015 2,841,650
CONSUMER SERVICES(1.9%)
- --------------------------------------------------------------------------------------------------------
1,800,000 National Education Corp. cv. sub. deb. 6 1/2s, 2011 1,107,000
800,000 ADT Inc. Ltd. cv. deb. 6s, 2002 1,092,000
------------
2,199,000
TEXTILES(1.7%)
- --------------------------------------------------------------------------------------------------------
1,000,000 Dixie Yarns, Inc. cv. deb. 7s, 2012 757,500
1,500,000 Fieldcrest Cannon, Inc. cv. sub. deb. 6s, 2012 1,297,500
------------
2,055,000
OIL AND GAS(1.7%)
- --------------------------------------------------------------------------------------------------------
350,000 Kelley Oil Corp. sub. cv. deb. 11 1/2s, 2002 360,500
1,850,000 Wainoco Oil Corp. cv. sub. deb. 7 3/4s, 2014 1,665,000
------------
2,025,500
TOBACCO(1.3%)
- --------------------------------------------------------------------------------------------------------
300,000 Dibrell Brothers, Inc. cv. sub. deb. 7 3/4s, 2006 285,000
1,665,000 Standard Commercial Corp. cv. sub. deb. 7 1/4s, 2007 1,273,725
------------
1,558,725
RESTAURANTS(1.3%)
- --------------------------------------------------------------------------------------------------------
2,000,000 Flagstar Corp. cv. jr. sub. deb. 10s, 2014 1,510,000
PIPELINES(1.2%)
- --------------------------------------------------------------------------------------------------------
1,200,000 SFP Pipeline Holdings Inc. var. rate exch. deb. 9.67s, 2010 (d) 1,488,000
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS
PRINCIPAL AMOUNT VALUE
<S> <C>
FOOD CHAINS(1.1%)
- --------------------------------------------------------------------------------------------------------
$ 1,250,000 Kroger Co. cv. sub. deb. 8 1/4s, 2011 $ 1,325,000
NON-FERROUS METALS(1.0%)
- --------------------------------------------------------------------------------------------------------
3,500,000 Freeport-McMoRan, Inc. cv. deb. zero %, 2006 1,216,250
INSURANCE(1.0%)
- --------------------------------------------------------------------------------------------------------
1,150,000 Alexander & Alexander Services, Inc. cv. sub. deb.
11s, 2007 1,181,625
BUILDING PRODUCTS(0.8%)
- --------------------------------------------------------------------------------------------------------
1,200,000 Nortek, Inc. sr. cv. deb. 7 1/2s, 2006 960,000
MEDICAL SUPPLIES(0.8%)
- --------------------------------------------------------------------------------------------------------
1,050,000 Cabot Medical Corp. cv. deb. 7 1/2s, 1999 929,250
AEROSPACE(0.8%)
- --------------------------------------------------------------------------------------------------------
1,100,000 UNC Inc. cv. sub. deb. 7 1/2s, 2006 896,500
FOOD(0.7%)
- --------------------------------------------------------------------------------------------------------
1,000,000 Chiquita Brands International cv. deb. 7s, 2001 856,250
COMPUTERS(0.7%)
- --------------------------------------------------------------------------------------------------------
1,000,000 Data General Corp. cv. sub. deb. 7 3/4s, 2001 827,500
AVIATION SERVICES(0.7%)
- --------------------------------------------------------------------------------------------------------
1,000,000 Hudson General Corp. cv. sub. deb. 7s, 2011 825,000
SPECIALTY CONSUMER PRODUCTS(0.7%)
- --------------------------------------------------------------------------------------------------------
1,000,000 CML Group, Inc. cv. jr. deb. 5 1/2s, 2003 775,000
CONGLOMERATES(0.6%)
- --------------------------------------------------------------------------------------------------------
1,000,000 Fuqua Industries, Inc. cv. deb. 6 1/2s, 2002 723,750
CELLULAR COMMUNICATIONS(0.6%)
- --------------------------------------------------------------------------------------------------------
850,000 Cellular Communications, Inc. cv. sub. deb. zero %, 1999 701,250
RETAIL(0.5%)
- --------------------------------------------------------------------------------------------------------
700,000 Perry Drug Stores Inc. cv. sub. deb. 8 1/2s, 2010 622,125
BROADCASTING(0.4%)
- --------------------------------------------------------------------------------------------------------
1,250,000 Comcast Corp. cv. notes 1 1/8s, 2007 521,875
BUSINESS EQUIPMENT AND SERVICES(0.4%)
- --------------------------------------------------------------------------------------------------------
600,000 Conner Peripherals Inc. cv. sub. deb. 6 1/2s, 2002 485,250
AIRLINES(0.2%)
- --------------------------------------------------------------------------------------------------------
500,000 Alaska Air Group, Inc. cv. deb. zero %, 2006 206,250
------------
Total Convertible Bonds (cost $36,917,403) $ 39,749,829
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCKS (13.4%(a))
NUMBER OF SHARES VALUE
<S> <C>
COMPUTER EQUIPMENT(1.7%)
- --------------------------------------------------------------------------------------------------------
54,000 Unisys Corp. Ser. A, $3.75 cv. pfd. $ 2,025,000
INSURANCE(1.7%)
- --------------------------------------------------------------------------------------------------------
41,800 USF&G Corp. Ser. A, $4.10 cv. pfd, 2,001,175
STEEL(1.4%)
- --------------------------------------------------------------------------------------------------------
24,500 Armco Inc. Class B, $4.50 cv. pfd. 1,139,250
10,000 Bethlehem Steel Corp. $5.00 cum. cv. pfd. 538,750
------------
1,678,000
CONGLOMERATES(1.3%)
- --------------------------------------------------------------------------------------------------------
40,000 Tenneco Inc. $2.80 cv. pfd. 1,655,000
ELECTRONICS AND ELECTRICAL EQUIPMENT(1.2%)
- --------------------------------------------------------------------------------------------------------
93,000 Westinghouse Electric Co. Ser. C, $1.30 cv. pfd. 1,395,000
RETAIL(1.2%)
- --------------------------------------------------------------------------------------------------------
25,000 Sears, Roebuck & Co. $3.75 cv. pfd. 1,384,375
FOREST PRODUCTS(1.1%)
- --------------------------------------------------------------------------------------------------------
18,000 Boise Cascade Corp. Ser. G, $1.58 cv. pfd. 468,000
30,000 Bowater, Inc. $1.645 cv. pfd. 791,250
------------
1,259,250
ENERGY(0.9%)
- --------------------------------------------------------------------------------------------------------
28,200 Maxus Energy Corp. $4.00 cv. pfd. 1,078,650
CONSTRUCTION(0.9%)
- --------------------------------------------------------------------------------------------------------
50,000 Perini Corp. dep. shares $2.125 cv. pfd. 1,075,000
OIL AND GAS(0.8%)
- --------------------------------------------------------------------------------------------------------
31,364 Arco/Lyondell Co. $2.23 cv. pfd. 964,443
METALS AND MINING(0.5%)
- --------------------------------------------------------------------------------------------------------
13,000 Freeport-McMoRan, Inc. $4.375 cv. pfd. 620,750
OILS(0.4%)
- --------------------------------------------------------------------------------------------------------
25,325 Santa Fe Energy Resources, Inc. $1.40 cv. pfd. 455,850
SPECIALTY CONSUMER PRODUCTS(0.3%)
- --------------------------------------------------------------------------------------------------------
25,000 Galoob (Lewis) Toys, Inc. $1.70 cv. pfd. (c) 390,625
------------
Total Convertible Preferred Stocks (cost $15,650,566) $ 15,983,118
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
UNITS(3.2%)(a)
NUMBER OF UNITS VALUE
<S> <C> <C>
32 Celcaribe S.A. units stepped-coupon zero %
(13 1/2s, 3/15/98), 2004 (b)(f) $ 267,200
500,000 County Seat Stores units 12s, 2001 490,000
250 Dial Corp. Call units stepped-coupon zero %
(12 1/4s, 9/1/03), 2004 (f) 153,750
850 Echostar Communication Corp. units stepped-coupon
zero % (12 7/8s, 6/1/99), 2004 (f) 420,750
350 Health-O-Meter Product units 13s, 2002 346,500
400,000 Hollywood Casino units 13 1/2s, 1998 (b) 368,000
650,000 ICF Kaiser International Inc. sr. sub. units 12s, 2003 594,750
50 Miles Homes units 12s, 2001 48,500
1,250,000 OSI Specialties units stepped-coupon zero %
(11 1/2s, 4/15/99), 2004 (acquired 4/12/94,
cost $714,776) (e)(f) 737,500
585,000 PMI Acquisition Corp. units sub. disc. deb. stepped-coupon
zero % (11 1/2s, 9/1/00), 2005 (f) 298,350
112 Total Renal Care units stepped-coupon zero %
(12s, 8/15/99), 2004 (f) 79,520
100 Treasure Bay Gaming 1st. mtge. units 12 1/4s, 2000 (b) 38,000
------------
Total Units (cost $3,911,538) $ 3,842,820
<CAPTION>
PREFERRED STOCKS(2.0%)(a)
NUMBER OF SHARES VALUE
<S> <C> <C>
2,500 Calfed Inc. Ser. B, $10.625 pfd. $ 263,125
4,000 First Madison Bank Ltd. $11.50 pfd. 413,500
10,531 National Intergroup Corp. Ser. A, $4.20 exch. pfd. (d) 368,585
8,250 Pyramid Commerce Ser. C, $3.125 exch. pfd. 190,781
5,625 Stone Savannah River Pulp & Paper Corp.
$3.84 exch. pfd. (f) 561,094
25,000 Supermarkets General Holdings Corp. $3.52 exch. pfd. (d) 637,500
------------
Total Preferred Stocks (cost $2,323,691) $ 2,434,585
<CAPTION>
COMMON STOCKS(1.2%)(a)
NUMBER OF SHARES VALUE
<S> <C> <C>
1,250 American Restaurant Group, Inc. $ 25,000
1,000 Arcadian Corp. 35,000
61 CDK Holding Corp. rights (acquired 8/31/88,
cost $3,440) (c)(e) 2,318
25,142 Charter Medical Corp. (c) 710,260
63,006 Computervision Corp. (acquired 7/23/91, cost $835,950) (e) 173,265
3,157 Computervision Corp. (acquired 8/21/92, cost $42,633) (e) 6,511
4,126 Grand Casinos, Inc. (c) 79,426
1,885 IFINT Diversified Holdings 122,525
14,351 Lady Luck Gaming Corp. 58,301
58,685 Loehmanns' Holdings, Inc. 58,685
197 PMI Holdings Corp. 39,400
94 Premium Holdings L.P. (acquired 1/4/94, cost $5,640) (e) 9,400
280 Pyramid Commerce, Inc. New Class B 7,124
71 RJR Nabisco Holdings Corp. (c) 497
27,066 Solon Automated Services, Inc. (acquired 6/18/92,
cost $16,163) (e) 16,916
4,500 Specialty Foods Corp. 3,375
9,232 Spectra Vision, Inc. 21,926
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C> <C>
1,477 Taj Mahal Holding Corp. Class A $ 17,724
------------
Total Common Stocks (cost $1,373,777) $ 1,387,653
<CAPTION>
YANKEE BONDS AND NOTES(1.1%)(a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$ 195,000 Cinemark Mexico notes 12s, 2003 (b) $ 189,150
500,000 Ispat Mexicana deb. 10 3/8s, 2001 (acquired 3/1/90,
cost $496,955) (e) 473,750
300,000 Methanex Corp. sr. secd. notes 8 7/8s, 2001 297,000
400,000 Pharmaceutical Marketing sub. note 5 1/4s, 2003 310,000
------------
Total Yankee Bonds and Notes (cost $1,231,007) $ 1,269,900
<CAPTION>
WARRANTS(0.3%)(a)(f)
NUMBER OF WARRANTS EXPIRATION DATE VALUE
<S> <C> <C> <C>
15,000 Becker Gaming Corp. 11/15/00 $ 16,875
102 CDK Holding Corp. Class A
(acquired 10/31/88, cost $5,694) (e) 7/7/99 3,876
109 CDK Holding Corp. Class B
(acquired 10/31/88, cost $3,045) (e) 7/7/99 3,924
620 Casino America Inc. 11/15/96 620
4,980 Casino Magic Finance Corp. 10/14/96 2,490
2,160 Cinemark Mexico 8/01/03 19,980
500 County Seat Holdings, Inc. 10/15/98 10,000
21,318 Elsinore Corp. Warrants 10/4/98 15,988
425 Fitzgerald Gaming
(acquired 3/8/94, cost $21,076) (e) 3/15/99 21,250
28,850 Gaylord Container Corp. 7/31/95 155,069
285 Louisiana Casino Cruises, Inc. 12/01/98 4,275
1,250 OSI Specialties Corp. 4/15/99 12,500
900 President Riverboat Casinos, Inc. 9/15/96 450
10,000 Southdown, Inc. 11/01/96 41,250
9 Telemedia Broadcasting 4/1/99 6,451
2,700 UCC Investor Holding, Inc. 10/30/99 35,100
21 Wright Medical Technology Inc. 6/30/03 2,566
------------
Total Warrants (cost $365,727) $ 352,664
<CAPTION>
SHORT-TERM INVESTMENTS(4.3%)(a)(cost $5,167,688)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$ 5,167,000 Interest in $300,000,000 joint repurchase agreement
dated August 31, 1994 with Bankers Trust New York
Corp., due September 1, 1994 with respect to various
U.S. Treasury obligations--maturity value of $5,167,688
for an effective yield of 4.79% $ 5,167,688
------------
Total Investments (cost $118,903,602) (g) $118,304,658
============
</TABLE>
21
<PAGE>
NOTES
(a) Percentages indicated are based on total net assets of $118,988,423,
which correspond to a net asset value per common share of $9.13.
(b) Security exempt from registration under 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 $5,859,495 or 4.9% of net assets.
(c) Non-income-producing security.
(d) Income may be received in cash or additional securities at the discretion
of the issuer.
(e) Restricted as to public resale, except Rule 144A securities. At the date
of acquisition, these securities were valued at cost. There were no
outstanding unrestricted securities of the same class as those held. Total
market value of restricted securities owned at August 31, 1994 was
$2,675,710 or 2.2% of net assets.
(f) The interest rate and date shown paranthetically represent the next
interest rate to be paid and the date the fund will begin receiving interest
at this rate.
(g) The aggregate identified cost for federal income tax purposes is
$118,841,297 resulting in gross unrealized appreciation and depreciation of
$6,754,668 and $7,291,307, respectively, or net unrealized depreciation of
$536,639.
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1994
<TABLE>
<S> <C>
ASSETS
- ----------------------------------------------------------------------------
Investments in securities, at value
(identified cost $118,903,602) (Note 1) $118,304,658
- ----------------------------------------------------------------------------
Cash 506
- ----------------------------------------------------------------------------
Dividends, interest and other receivables 2,528,492
- ----------------------------------------------------------------------------
Receivable for securities sold 1,020,538
- ----------------------------------------------------------------------------
Total Assets 121,854,194
LIABILITIES
- ----------------------------------------------------------------------------
Payable for securities purchased 1,589,613
- ----------------------------------------------------------------------------
Distributions payable to shareholders 927,176
- ----------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 229,537
- ----------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,511
- ----------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 262
- ----------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 19,957
- ----------------------------------------------------------------------------
Other accrued expenses 97,715
- ----------------------------------------------------------------------------
Total Liabilities 2,865,771
- ----------------------------------------------------------------------------
Net Assets $118,988,423
REPRESENTED BY
- ----------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $121,180,785
- ----------------------------------------------------------------------------
Undistributed net investment income (Notes 1 and 4) 645,295
- ----------------------------------------------------------------------------
Accumulated net realized loss on investment transactions
(Notes 1 and 4) (2,238,713)
- ----------------------------------------------------------------------------
Net unrealized depreciation of investments (598,944)
- ----------------------------------------------------------------------------
Total - Representing net assets applicable to capital
shares outstanding $118,988,423
COMPUTATION OF NET ASSET VALUE
- ----------------------------------------------------------------------------
Net asset value per share ($118,988,423 divided by 13,037,556 shares) $9.13
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
STATEMENT OF OPERATIONS
Year ended August 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------
Interest $10,397,967
- ----------------------------------------------------------------------------
Dividends 1,107,844
- ----------------------------------------------------------------------------
Total investment income 11,505,811
EXPENSES:
- ----------------------------------------------------------------------------
Compensation of Manager (Note 2) 930,418
- ----------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 112,714
- ----------------------------------------------------------------------------
Compensation of Trustees (Note 2) 12,960
- ----------------------------------------------------------------------------
Reports to shareholders 54,896
- ----------------------------------------------------------------------------
Exchange listing fees 24,450
- ----------------------------------------------------------------------------
Auditing 48,004
- ----------------------------------------------------------------------------
Legal 28,457
- ----------------------------------------------------------------------------
Postage 73,590
- ----------------------------------------------------------------------------
Administrative services (Note 2) 3,527
- ----------------------------------------------------------------------------
Other expenses 5,256
- ----------------------------------------------------------------------------
Total expenses 1,294,272
- ----------------------------------------------------------------------------
Net investment income 10,211,539
- ----------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 8,210,595
- ----------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (12,273,492)
- ----------------------------------------------------------------------------
Net loss on investments (4,062,897)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 6,148,642
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year ended August 31, 1994
<TABLE>
<CAPTION>
Year Ended August 31
----------------------------
1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
- ----------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------
Net investment income $ 10,211,539 $ 10,849,629
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments 8,210,595 8,922,192
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (12,273,492) 4,586,371
- ----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 6,148,642 24,358,192
DISTRIBUTIONS TO SHAREHOLDERS:
- ----------------------------------------------------------------------------------------------------
From net investment income (11,317,308) (10,849,629)
- ----------------------------------------------------------------------------------------------------
In excess of net investment income (Note 1) -- (261,376)
- ----------------------------------------------------------------------------------------------------
Increase in capital share transactions from
reinvestment of distributions 872,159 1,129,005
- ----------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (4,296,507) 14,376,192
- ----------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------
Beginning of year 123,284,930 108,908,738
- ----------------------------------------------------------------------------------------------------
END OF YEAR (including undistributed and distributions
in excess of net investment income of
$645,295 and ($890,635), respectively) $118,988,423 $123,284,930
NUMBER OF FUND SHARES
- ----------------------------------------------------------------------------------------------------
Shares outstanding at beginning of year 12,945,798 12,821,159
Shares issued in connection with
reinvestment of distributions 91,758 124,639
- ----------------------------------------------------------------------------------------------------
SHARES OUTSTANDING AT END OF YEAR 13,037,556 12,945,798
- ----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Year ended August 31
---------------------------------------------
1994 1993 1992 1991
---------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.52 $8.49 $7.56 $6.94
- ----------------------------------------------------------------------------------------
Investment operations
Net investment income .78 .84 .88 .83
- ----------------------------------------------------------------------------------------
Net realized and unrealized
Gain (loss) on investments (.30) 1.05 .99 .65
- ----------------------------------------------------------------------------------------
Total from investment operations .48 1.89 1.87 1.48
- ----------------------------------------------------------------------------------------
Less distributions:
From net investment income (.87) (.84) (.94) (.85)
- ----------------------------------------------------------------------------------------
In excess of net income -- (.02) -- --
- ----------------------------------------------------------------------------------------
From net realized gain on investments -- -- -- (.01)
- ----------------------------------------------------------------------------------------
Total distributions (.87) (.86) (.94) (.86)
- ----------------------------------------------------------------------------------------
Net asset value, end of period $9.13 $9.52 $8.49 $7.56
- ----------------------------------------------------------------------------------------
Market value, end of period $9.750 $10.000 $8.875 $7.625
- ----------------------------------------------------------------------------------------
Total investment return at
market value (%) (a) 6.84 23.78 30.71 48.65
- ----------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $118,988 $123,285 $108,909 $95,770
========================================================================================
Ratio of expenses to average
net assets (%) 1.04 1.03 1.13 1.31
- ----------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 8.23 9.39 10.92 12.35
- ----------------------------------------------------------------------------------------
Portfolio turnover (%) 52.10 71.63 45.84 68.36
- ----------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
For the period
July 9, 1987
(commencement
of operations)
Year Ended August 31 to August 31
--------------------------------------------------
1990 1989 1988 1987
--------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $8.37 $8.32 $9.24 $9.30
- --------------------------------------------------------------------------------------------------
Investment operations
Net investment income .83 .93 .88 .09
- --------------------------------------------------------------------------------------------------
Net realized and unrealized
Gain (loss) on investments (1.32) (.03) (.95) (.08)
- --------------------------------------------------------------------------------------------------
Total from investment operations (.49) .90 (.07) .01
- --------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (.92) (.85) (.85) (.07)
- --------------------------------------------------------------------------------------------------
In excess of net income -- -- -- --
- --------------------------------------------------------------------------------------------------
From net realized gain on investments (.02) -- -- --
- --------------------------------------------------------------------------------------------------
Total distributions (.94) (.85) (.85) (.07)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $6.94 $8.37 $8.32 $9.24
- --------------------------------------------------------------------------------------------------
Market value, end of period $5.875 $7.875 $8.000 $9.625
- --------------------------------------------------------------------------------------------------
Total investment return at
market value (%) (a) (14.36) 9.45 (7.89) (1.78)(b)
- --------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $87,866 $105,845 $105,304 $116,691
==================================================================================================
Ratio of expenses to average
net assets (%) 1.26 1.15 1.18 .18(b)
- --------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 11.07 11.00 10.52 1.07(b)
- --------------------------------------------------------------------------------------------------
Portfolio turnover (%) 53.30 69.68 85.34 12.90
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charge.
(b) Not annualized.
27
<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, closed-end management investment company. The fund's
primary investment objective is high current income; its secondary objective
is capital appreciation. The fund invests in high-yielding convertible
securities. The fund seeks to augment current income by investing in
nonconvertible high-yielding, lower-rated, or nonrated debt securities, which
are believed not to involve undue risk to income or principal.
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. 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. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market value, and
other investments, including restricted securities, are stated at fair value
following procedures approved by the Trustees.
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.
(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
28
<PAGE>
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
stepped-coupon bonds is accreted according to the effective yield method.
E 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.
At August 31, 1994, the fund had a capital loss carryover of approximately
$2,239,000, which may be available to offset realized capital gains to the
extent provided by regulations. This amount will expire August 31, 1999. To
the extent that capital loss carryovers are used to offset realized capital
gains, it is unlikely that gains so offset will be distributed to
shareholders, since any distribution might be taxable as ordinary income.
F DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded by
the fund on the ex-dividend date.
At certain times, the fund may pay distributions at a level rate even though,
as a result of market conditions or investment decisions, the fund may not
achieve projected investment results for a given period.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences include payment in kind
income, market discount and defaulted interest income. 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
$715,751 to increase undistributed net investment income, $1,208,437 to
increase accumulated net realized loss on investments and $492,686 to
increase paid-in capital.
29
<PAGE>
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 weekly net assets of the fund.
Under the management contract, such fee is based on the following annual
rates: 0.75% of the first $500 million of average weekly net assets, 0.65% of
the next $500 million, 0.60% of the next $500 million and 0.55% of any amount
over $1.5 billion, subject, under current law, to reductions in any year 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 $3,527 for these services.
Trustees of the fund receive an annual Trustee's fee of $820 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 $112,714.
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.
30
<PAGE>
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 $61,681,787 and
$63,544,519, 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
RECLASSIFICATION OF CAPITAL ACCOUNTS
Effective September 1, 1993, Putnam High Income Convertible and Bond Fund
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 purpose
of this SOP is to report the accumulated net investment income (loss) and
accumulated net realized gain (loss) accounts in such a manner as to
approximate amounts available for future distributions (or to offset future
realized capital gains) and to achieve uniformity in the presentation of
distributions by investment companies.
As a result of the SOP, the fund has reclassified amounts to reflect an
increase in paid-in capital of $192,858, an increase in undistributed net
investment income of $1,925,948 and an increase in accumulated net realized
loss on investments of $2,118,806.
These reclassifications represent the cumulative amounts necessary to report
these balances through August 31, 1994.
These reclassifications, which have no impact on the total net asset value of
the fund, are primarily attributable to market discounts and payment in kind
income which are treated differently in the computation of distributable
income and capital gains under federal income tax rules and regulations
versus generally accepted accounting principles.
31
<PAGE>
SELECTED QUARTERLY DATA
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Three months ended
- --------------------------------------------------------------------------------------------------
August 31 May 31 February 28 November 30
- --------------------------------------------------------------------------------------------------
1994 1994 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total investment
income
Total $ 2,799,478 $ 3,021,383 $ 2,792,040 $ 2,892,910
Per share $ .21 $ .22 $ .22 $ .23
- --------------------------------------------------------------------------------------------------
Net investment
income
Total $ 2,557,000 $ 2,659,542 $ 2,449,653 $ 2,545,344
Per share $ .19 $ .20 $ .19 $ .20
- --------------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss)
on investments
Total $ (1,773,495) $ (8,127,565) $ 2,732,945 $ 3,105,218
Per share $ ( .13) $ ( .62) $ .21 $ .24
- --------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from
operations
Total $ 783,506 $ (5,468,023) $ 5,182,598 $ 5,650,562
Per share $ .06 $ (.42) $ .40 $ .44
- --------------------------------------------------------------------------------------------------
Net assets at
end of period
Total $118,988,423 $120,697,701 $128,746,190 $126,456,409
Per share $ 9.13 $ 9.28 $ 9.91 $ 9.75
- --------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
August 31 May 31 February 28 November 30
- --------------------------------------------------------------------------------------------------
1993 1993 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total investment
income
Total $ 2,948,672 $ 2,908,563 $ 3,219,026 $ 2,962,280
Per share $ .22 $ .22 $ .26 $ .23
- --------------------------------------------------------------------------------------------------
Net investment
income
Total $ 2,668,240 $ 2,578,556 $ 2,920,535 $ 2,682,298
Per share $ .20 $ .20 $ .23 $ .21
- --------------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss)
on investments
Total $ 3,395,626 $ 4,222,993 $ 4,412,959 $ 1,476,985
Per share $ .26 $ 33 $ .34 $ .12
- --------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from
operations
Total $ 6,063,866 $ 6,801,549 $ 7,333,494 $ 4,159,283
Per share $ .46 $ .53 $ .57 $ .33
- --------------------------------------------------------------------------------------------------
Net assets at
end of period
Total $123,284,930 $119,697,299 $115,365,761 $110,611,045
Per share $ 9.52 $ 9.27 $ 8.95 $ 8.61
- --------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
FEDERAL TAX INFORMATION
For federal income tax purposes, distributions from net investment income of
$0.871 per share constitute "dividend income." The fund has designated 9.57%
of this amount 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 year 1994.
If you are a shareholder in an IRA or other tax-sheltered retirement plan,
this statement is for information only. Money invested in these plans
generally is not subject to federal income tax until you withdraw it.
As required by law, your fund reports to the Internal Revenue Service on a
calendar year basis the amount of distributions paid to each shareholder.
34
<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
Price Waterhouse LLP
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
John R. Verani
Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Charles G. Pohl
Vice President and Fund Manager
Jennifer E. Leichter
Vice President and Fund Manager
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
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for
up-to-date information about the fund's NAV or to request Putnam's quarterly
Closed-End Fund Commentary.
35
<PAGE>
PUTNAM INVESTMENTS Bulk Rate
U.S. Postage
THE PUTNAM FUNDS PAID
One Post Office Square Putnam
Boston, Massachusetts 02109 Investments
061-14156
