CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number:
(811-02796)
Exact name of registrant as specified in charter:
Putnam High Yield Trust
Address of principal executive offices:
One Post Office Square, Boston, Massachusetts 02109
Name and address of agent for service:
Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109
Copy to:
Bryan Chegwidden, Esq. Ropes & Gray LLP 1211 Avenue of the Americas New York, New York 10036
Registrant’s telephone number, including area code:
(617) 292-1000
Date of fiscal year end:
August 31, 2015
Date of reporting period:
September 1, 2014 – February 28, 2015
Item 1. Report to Stockholders:
The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940:
Putnam High Yield Trust
Semiannual report 2 | 28 | 15
Message from the Trustees
1
About the fund
2
Performance snapshot
4
Interview with your fund’s portfolio manager
5
Your fund’s performance
10
Your fund’s expenses
12
Terms and definitions
14
Other information for shareholders
15
Financial statements
16
Consider these risks before investing: The value of bonds in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general financial market conditions, changing market perceptions of the risk of default, changes in government intervention, and factors related to a specific issuer or industry. These factors may also lead to periods of high volatility and reduced liquidity in the bond markets. Lower-rated bonds may offer higher yields in return for more risk. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is generally greater for longer term bonds, and credit risk is generally greater for below-investment-grade bonds. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Unlike bonds, funds that invest in bonds have fees and expenses. You can lose money by investing in the fund.
Message from the Trustees
Dear Fellow Shareholder:
Conditions for investors in early 2015 offer reasons for both optimism and a degree of caution. After losing ground at the start of the year, many stock markets around the world have delivered positive results, but not without some volatility. Markets in the United States, Europe, and Japan have hit record or multiyear highs. An improving U.S. economy, global economic data, and the accommodative policies of several central banks provide sources of confidence.
The European Central Bank’s asset-purchase program, begun in early March, seeks to stimulate growth and combat the eurozone’s deflation risk. Investors have responded by sending European equities to record highs. Meanwhile, the U.S. Federal Reserve has stated that it will be patient in raising interest rates, while also acknowledging the nation’s strengthening economic recovery.
In the United States, the unemployment rate has dropped, while the nation’s gross domestic product has expanded for three consecutive quarters. Europe’s gross domestic product expanded by 0.3% in the fourth quarter of 2014 from the third quarter, and a weaker euro has boosted the competitiveness of the region.
In today’s environment, investors should consider a range of investment opportunities. An example would be Putnam’s new ways of thinking, which integrate innovative investment ideas into time-tested, traditional strategies. Our experienced equity and fixed-income teams invest across many asset classes and pursue flexible strategies that seek out opportunities for growth or income while being mindful of risk. We also believe that it is important to rely on the counsel of your financial advisor, who can help your portfolio match your individual goals and tolerance for risk.
As always, thank you for investing with Putnam.
Respectfully yours,
Robert L. Reynolds President and Chief Executive Officer Putnam Investments
Jameson A. Baxter Chair, Board of Trustees
April 9, 2015
Performance snapshot
Annualized total return (%) comparison as of 2/28/15
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 4.00%; had they, returns would have been lower. See pages 5 and 10–12 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.
* The fund’s benchmark, the JPMorgan Developed High Yield Index, was introduced on 12/31/94, which post-dates the inception of the fund’s class A shares.
† Returns for the six-month period are not annualized, but cumulative.
4 High Yield Trust
Interview with your fund’s portfolio manager
Paul D. Scanlon, CFA
Paul, what was the market environment like for high-yield bonds during the six months ended February 28, 2015?
The market environment was volatile during the first half of the reporting period. A selloff that began in September continued through the first half of October, with volatility reaching a fever pitch in mid-October. After that, however, a number of stabilizing factors helped high-yield bonds rebound into early November. These positive developments included improvement in third-quarter U.S. gross domestic product, better-than-expected third-quarter U.S. corporate earnings, indications by both the European Central Bank [ECB] and the Bank of Japan that they were preparing to ease their respective monetary policies, and long-term interest rates that remained low. Selling pressure resumed in mid-November, as oil prices continued to decline on concerns that the global market was oversupplied. Supply worries were partly fueled by a November 27 announcement by the Organization of Petroleum Exporting Countries [OPEC] — reiterated in January 2015 — that the cartel would not cut its output. Meanwhile, widespread deceleration of global economic growth, particularly in Europe and China, sapped demand. With energy composing anywhere from 15% to 20% of the high-yield market, depending on which index is consulted, it is not surprising that falling oil prices weighed on the asset class.
Broad market index and fund performance
This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 2/28/15. See pages 4 and 10–12 for additional fund performance information. Index descriptions can be found on page 14.
High Yield Trust 5
December was a tale of two halves for high-yield bonds. Indiscriminate selling through the first half of the month gave way to a partial recovery in prices during the second half amid reduced global stress. Oil prices, which continued to fall, dampened investor sentiment during December’s first half. Investor confidence received a lift in the second half of the month, however, as fear about the global economic impact of declining oil prices receded somewhat. Investor sentiment was also buoyed by signs that the ECB, after many months of deliberation, appeared poised to launch a stimulative bond-buying program. The ECB introduced its version of quantitative easing in January, announcing that it would purchase approximately €60 billion per month of various types of debt securities. This equates to roughly US$67 billion per month at the February 27, 2015, euro–U.S. dollar exchange rate.
High-yield bonds rallied in January and February, fueled by oil prices settling into a trading range of $48–$53 per barrel. Dovish comments by Federal Reserve Chair Janet Yellen, an extension of aid to Greece, and a cease-fire in Ukraine also contributed to a relatively stable market backdrop. Low bond yields around the globe, record U.S. stock prices, and renewed investor demand for higher-yielding securities helped high-yield bond prices move back toward early November levels.
Credit quality overview
Credit qualities are shown as a percentage of the fund’s net assets as of 2/28/15. A bond rated Baa or higher (Prime-3 or higher, for short-term debt) is considered investment grade. The chart reflects Moody’s ratings; percentages may include bonds or derivatives not rated by Moody’s but rated by Standard & Poor’s (S&P) or, if unrated by S&P, by Fitch ratings, and then included in the closest equivalent Moody’s rating based on analysis of these agencies’ respective ratings criteria. Moody’s ratings are used in recognition of its prominence among rating agencies and breadth of coverage of rated securities. Ratings may vary over time.
Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. The fund itself has not been rated by an independent rating agency.
6 High Yield Trust
“Despite the risk of interest-rate volatility, we continue to have a reasonably positive outlook for the asset class, excluding the energy sector.”
Paul Scanlon
Although the fund registered a negative absolute return, it outpaced its benchmark and the average return of its Lipper peer group. What factors aided its relative performance?
At the sector/industry level, an underweight in metals/mining, favorable overall positioning in industrials, and an overweight in gaming/lodging/leisure helped the most versus the benchmark. With respect to individual investments, the top contributor was an overweight in Penn National Gaming, which operates casinos and racetracks in 18 states and Canada. Underweights in coal producer Arch Coal and oil and gas exploration and production [E&P] company Sabine Pass — a subsidiary of Sabine Oil & Gas — also bolstered the fund’s relative performance. We sold our position in Arch Coal during the period.
Which areas hampered the fund’s performance versus the benchmark?
From a sector/industry perspective, a lighter-than-benchmark allocation in energy — a sector that sharply rebounded during the final month of the period — along with overweights in utilities and financials, worked against the
Top 10 holdings
This table shows the fund’s top 10 holdings and the percentage of the fund’s net assets that each represented as of 2/28/15. Short-term holdings, TBA commitments, and derivatives, if any, are excluded. Holdings may vary over time.
High Yield Trust 7
fund’s relative return. Looking at individual holdings, we selectively invested in the oil and gas industry, but the group was hurt by expectations of lower future demand due to the sharp decline in oil prices. Consequently, our biggest detractors were overweights in four energy-related companies: Vantage Drilling, Paragon Offshore, Seventy Seven Energy, and Lightstream Resources.
What is your outlook for the high-yield market over the coming months, and how are you positioning the fund?
We believe the U.S. economy remains solidly in the midcycle phase of expansion. Consequently, we think this continues to provide a supportive backdrop for domestic corporate fundamentals. Although fourth-quarter 2014 earnings declined due to poor results in the energy and telecommunications sectors, accelerating revenue growth contributed substantially to a modest reacceleration in full-year 2014 earnings. In our view, favorable revenue trends may continue and could drive solid mid- to high-single-digit earnings growth in 2015.
Against this backdrop, high-yield issuers appear to be in reasonably good financial shape. Corporations continue to take a
Credit quality comparison
This chart shows how the fund’s credit quality has changed over the past six months. Credit qualities are shown as a percentage of the fund’s net assets. A bond rated Baa or higher (Prime-3 or higher, for short-term debt) is considered investment grade. The chart reflects Moody’s ratings; percentages may include bonds or derivatives not rated by Moody’s but rated by Standard & Poor’s (S&P) or, if unrated by S&P, by Fitch ratings, and then included in the closest equivalent Moody’s rating based on analysis of these agencies’ respective ratings criteria. Moody’s ratings are used in recognition of its prominence among rating agencies and breadth of coverage of rated securities. Ratings may vary over time.
Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. The fund itself has not been rated by an independent rating agency.
8 High Yield Trust
conservative approach toward managing their assets and liabilities, in our view. This can be seen by the fact that most of the recent new-issue activity was for refinancing existing debt, which helps issuers lower their overall borrowing costs.
If U.S. economic growth continues to strengthen, we think it’s likely that the Fed will begin raising its target for short-term interest rates, possibly in the mid to latter part of this year. Financial markets typically attempt to price in Fed policy changes prior to the central bank’s formal announcements. So we would not be surprised to see some market volatility in the coming months as investors try to gauge the Fed’s intentions.
At period-end, the high-yield default rate had decreased slightly to 2.97% from 3.00% in January, which was the highest rate since May 2010. For context, the default rate was 0.67% a year ago, and it is expected to fall in April when bankrupt electric utility TXU Energy is removed from the default calculation. Excluding TXU, the default rate was 1.69%. We believe the default rate is likely to remain low overall, but sustained weakness in energy prices would likely elevate defaults among energy-related issuers. All told, despite the risk of interest-rate volatility, we continue to have a reasonably positive outlook for the asset class, excluding the energy sector. In spite of the challenges presented by the energy sector, we believe the fund held up relatively well amid the recent market selloff. With valuations improved after the selloff, we believe the yield advantage that high-yield bonds provide over U.S. Treasuries offer the potential for attractive loss-adjusted returns versus other fixed-income alternatives.
As for portfolio positioning, we are broadly diversified across market sectors, and the majority of our holdings are bonds rated split Ba or B, occupying the middle tiers of high-yield credit quality. Additionally, to compensate for marketplace liquidity constraints, as well as potentially higher interest rates, we have increased the portfolio’s cash allocation and are keeping its interest-rate sensitivity slightly below that of the benchmark.
Thanks for your time and for bringing us up to date, Paul.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.
Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.
Portfolio Manager Paul D. Scanlon is Co-Head of Fixed Income at Putnam. He has an M.B.A. from The University of Chicago Booth School of Business and a B.A. from Colgate University. Paul joined Putnam in 1999 and has been in the investment industry since 1986.
In addition to Paul, your fund’s portfolio managers are Norman P. Boucher and Robert L. Salvin.
High Yield Trust 9
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended February 28, 2015, the end of the first half of its current fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance information as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R and Y shares are not available to all investors. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.
Fund performance Total return for periods ended 2/28/15
Class A
Class B
Class C
Class M
Class R
Class Y
(inception dates)
(2/14/78)
(3/1/93)
(3/19/02)
(7/3/95)
(1/21/03)
(12/31/98)
Before sales charge
After sales charge
Before CDSC
After CDSC
Before CDSC
After CDSC
Before sales charge
After sales charge
Net asset value
Net asset value
Annual average
(life of fund)
8.69%
8.57%
8.45%
8.45%
7.86%
7.86%
8.33%
8.23%
8.38%
8.79%
10 years
94.98
87.18
84.24
84.24
81.04
81.04
90.22
84.04
88.45
99.17
Annual average
6.91
6.47
6.30
6.30
6.12
6.12
6.64
6.29
6.54
7.13
5 years
49.84
43.85
44.31
42.31
44.28
44.28
48.15
43.33
47.67
51.62
Annual average
8.42
7.54
7.61
7.31
7.61
7.61
8.18
7.47
8.11
8.68
3 years
23.28
18.35
20.57
17.57
20.60
20.60
22.43
18.45
22.33
24.22
Annual average
7.23
5.78
6.43
5.54
6.44
6.44
6.98
5.81
6.95
7.50
1 year
2.25
–1.84
1.60
–3.26
1.64
0.67
2.18
–1.14
2.13
2.61
6 months
–0.45
–4.43
–0.84
–5.68
–0.83
–1.80
–0.48
–3.72
–0.48
–0.30
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 4.00% and 3.25% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares, except for class Y shares, for which 12b-1 fees are not applicable.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
Class B share performance reflects conversion to class A shares after eight years.
10 High Yield Trust
Comparative index returns For periods ended 2/28/15
JPMorgan Developed High Yield Index
Lipper High Yield Funds category average*
Annual average (life of fund)
—†
8.46%
10 years
117.97%
88.50
Annual average
8.10
6.51
5 years
59.10
48.30
Annual average
9.73
8.18
3 years
25.26
20.81
Annual average
7.80
6.48
1 year
2.29
1.25
6 months
–0.70
–1.12
Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
* Over the 6-month, 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 2/28/15, there were 658, 624, 497, 415, 282, and 9 funds, respectively, in this Lipper category.
† The fund’s benchmark, the JPMorgan Developed High Yield Index, was introduced on 12/31/94, which post-dates the inception of the fund’s class A shares.
Fund price and distribution information For the six-month period ended 2/28/15
Distributions
Class A
Class B
Class C
Class M
Class R
Class Y
Number
6
6
6
6
6
6
Income
$0.210
$0.179
$0.180
$0.197
$0.198
$0.222
Capital gains
—
—
—
—
—
—
Total
$0.210
$0.179
$0.180
$0.197
$0.198
$0.222
Share value
Before sales charge
After sales charge
Net asset value
Net asset value
Before sales charge
After sales charge
Net asset value
Net asset value
8/31/14
$8.20
$8.54
$8.19
$8.13
$8.23
$8.51
$8.03
$8.04
2/28/15
7.95
8.28
7.94
7.88
7.99
8.26
7.79
7.79
Current rate (end of period)
Before sales charge
After sales charge
Net asset value
Net asset value
Before sales charge
After sales charge
Net asset value
Net asset value
Current dividend rate 1
5.28%
5.07%
4.53%
4.57%
4.96%
4.79%
5.08%
5.70%
Current 30-day SEC yield 2
N/A
4.70
4.15
4.15
N/A
4.50
4.65
5.14
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (4.00% for class A shares and 3.25% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
1 Most recent distribution, including any return of capital and excluding capital gains, annualized and divided by share price before or after sales charge at period-end.
2 Based only on investment income and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.
High Yield Trust 11
Fund performance as of most recent calendar quarter Total return for periods ended 3/31/15
Class A
Class B
Class C
Class M
Class R
Class Y
(inception dates)
(2/14/78)
(3/1/93)
(3/19/02)
(7/3/95)
(1/21/03)
(12/31/98)
Before sales charge
After sales charge
Before CDSC
After CDSC
Before CDSC
After CDSC
Before sales charge
After sales charge
Net asset value
Net asset value
Annual average
(life of fund)
8.66%
8.54%
8.42%
8.42%
7.83%
7.83%
8.29%
8.20%
8.35%
8.75%
10 years
100.24
92.23
89.23
89.23
85.49
85.49
95.10
88.76
93.30
104.30
Annual average
7.19
6.75
6.59
6.59
6.37
6.37
6.91
6.56
6.81
7.41
5 years
44.89
39.09
39.71
37.71
39.50
39.50
43.05
38.41
42.73
46.36
Annual average
7.70
6.82
6.92
6.61
6.88
6.88
7.42
6.72
7.38
7.92
3 years
22.82
17.91
20.10
17.10
19.99
19.99
21.80
17.84
21.86
23.60
Annual average
7.09
5.64
6.29
5.40
6.26
6.26
6.79
5.62
6.81
7.32
1 year
1.62
–2.44
0.85
–3.98
0.76
–0.20
1.30
–1.99
1.36
1.83
6 months
1.41
–2.65
1.03
–3.91
0.92
–0.07
1.24
–2.05
1.29
1.46
See the discussion following the fund performance table on page 10 for information about the calculation of fund performance.
Your fund’s expenses
As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.
Expense ratios
Class A
Class B
Class C
Class M
Class R
Class Y
Total annual operating expenses for the fiscal year ended 8/31/14
1.01%
1.76%
1.76%
1.26%
1.26%
0.76%
Annualized expense ratio for the six-month period ended 2/28/15
0.99%
1.74%
1.74%
1.24%
1.24%
0.74%
Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.
Expenses are shown as a percentage of average net assets.
12 High Yield Trust
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from September 1, 2014, to February 28, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Class A
Class B
Class C
Class M
Class R
Class Y
Expenses paid per $1,000*†
$4.90
$8.59
$8.59
$6.13
$6.13
$3.66
Ending value (after expenses)
$995.50
$991.60
$991.70
$995.20
$995.20
$997.00
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 2/28/15. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended February 28, 2015, use the following calculation method. To find the value of your investment on September 1, 2014, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Class A
Class B
Class C
Class M
Class R
Class Y
Expenses paid per $1,000*†
$4.96
$8.70
$8.70
$6.21
$6.21
$3.71
Ending value (after expenses)
$1,019.89
$1,016.17
$1,016.17
$1,018.65
$1,018.65
$1,021.12
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 2/28/15. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period; and then dividing that result by the number of days in the year.
High Yield Trust 13
Terms and definitions
Important terms
Total return shows how the value of the fund’s shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 4.00% maximum sales charge for class A shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
Share classes
Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class B shares are not subject to an initial sales charge and may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and are available only to employer-sponsored retirement plans.
Class Y shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.
Fixed-income terms
Current rate is the annual rate of return earned from dividends or interest of an investment. Current rate is expressed as a percentage of the price of a security, fund share, or principal investment.
Yield curve is a graph that plots the yields of bonds with equal credit quality against their differing maturity dates, ranging from shortest to longest. It is used as a benchmark for other debt, such as mortgage or bank lending rates.
Comparative indexes
Barclays U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA Merrill Lynch U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.
JPMorgan Developed High Yield Index is an unmanaged index of high-yield fixed-income securities issued in developed countries.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.
14 High Yield Trust
Lipper is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (SEC) regulations, Putnam sends a single copy of annual and semiannual shareholder reports, prospectuses, and proxy statements to Putnam shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call Putnam at 1-800-225-1581, and Putnam will begin sending individual copies within 30 days.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2014, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Form N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Form N-Q may be reviewed and copied at the SEC��s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the Public Reference Room.
Trustee and employee fund ownership
Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of February 28, 2015, Putnam employees had approximately $499,000,000 and the Trustees had approximately $142,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.
High Yield Trust 15
Financial statements
A guide to financial statements
These sections of the report, as well as the accompanying Notes, constitute the fund’s financial statements.
The fund’s portfolio lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification.
Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year.
Financial highlights provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlights table also includes the current reporting period.
16 High Yield Trust
The fund’s portfolio 2/28/15 (Unaudited)
CORPORATE BONDS AND NOTES (86.6%)*
Principal amount
Value
Advertising and marketing services (0.9%)
Alliance Data Systems Corp. 144A company guaranty sr. unsec. notes 5 3/8s, 2022
$4,645,000
$4,633,388
Lamar Media Corp. company guaranty sr. sub. notes 5 7/8s, 2022
1,815,000
1,928,438
Lamar Media Corp. company guaranty sr. unsec. notes 5 3/8s, 2024
989,000
1,048,340
Outfront Media Capital LLC/Outfront Media Capital Corp. company guaranty sr. unsec. notes 5 7/8s, 2025
1,340,000
1,420,400
Outfront Media Capital LLC/Outfront Media Capital Corp. company guaranty sr. unsec. notes 5 5/8s, 2024
2,465,000
2,625,225
11,655,791
Automotive (1.4%)
Chrysler Group, LLC/CG Co-Issuer, Inc. company guaranty notes 8 1/4s, 2021
4,800,000
5,358,000
Dana Holding Corp. sr. unsec. notes 5 1/2s, 2024
1,315,000
1,359,381
Dana Holding Corp. sr. unsec. unsub. notes 6s, 2023
3,597,000
3,821,813
Dana Holding Corp. sr. unsec. unsub. notes 5 3/8s, 2021
1,020,000
1,071,000
General Motors Co. sr. unsec. unsub. notes 5.2s, 2045
Texas Competitive Electric Holdings Co., LLC/TCEH Finance, Inc. 144A company guaranty sr. notes 11 1/2s, 2020 (In default) †
1,345,000
914,600
62,439,552
Total corporate bonds and notes (cost $1,111,379,312)
$1,113,585,153
SENIOR LOANS (5.3%)* c
Principal amount
Value
Basic materials (0.1%)
Oxea Sarl bank term loan FRN 8 1/4s, 2020 (Germany)
$680,000
$632,400
632,400
Capital goods (0.1%)
Gates Global, LLC/Gates Global Co. bank term loan FRN 4 1/4s, 2021
1,536,150
1,525,397
1,525,397
Communication services (0.2%)
Asurion, LLC bank term loan FRN 8 1/2s, 2021
3,050,000
3,066,522
3,066,522
36 High Yield Trust
SENIOR LOANS (5.3%)* ccont.
Principal amount
Value
Consumer cyclicals (2.9%)
Caesars Entertainment Operating Co., Inc. bank term loan FRN Ser. B6, 9.005s, 2017
$5,210,117
$4,788,968
Caesars Entertainment Operating Co., Inc. bank term loan FRN Ser. B7, 9 3/4s, 2017
1,029,825
950,014
Caesars Growth Properties Holdings, LLC bank term loan FRN 6 1/4s, 2021
3,716,325
3,344,693
CCM Merger, Inc. bank term loan FRN Ser. B, 4 1/2s, 2021
628,392
629,570
CPG International, Inc. bank term loan FRN Ser. B, 4 3/4s, 2020
2,056,250
2,020,266
Delta 2 (Lux) Sarl bank term loan FRN 4 3/4s, 2021 (Luxembourg)
1,875,000
1,865,625
Dollar Tree Stores, Inc. bank term loan FRN Ser. B, 4 1/4s, 2022
780,000
785,432
Getty Images, Inc. bank term loan FRN Ser. B, 4 3/4s, 2019
1,486,784
1,283,413
iHeartCommunications, Inc. bank term loan FRN Ser. D, 6.921s, 2019
3,241,000
3,100,827
JC Penney Corp., Inc. bank term loan FRN 5s, 2019
3,882,411
3,804,763
Navistar, Inc. bank term loan FRN Ser. B, 5 3/4s, 2017
1,210,000
1,216,050
Neiman Marcus Group, Ltd., Inc. bank term loan FRN 4 1/4s, 2020
2,819,772
2,796,275
PetSmart, Inc. bank term loan FRN Ser. B, 5s, 2022
3,125,000
3,145,834
ROC Finance, LLC bank term loan FRN 5s, 2019
1,727,506
1,645,450
Talbots, Inc. (The) bank term loan FRN 8 1/4s, 2021
770,000
739,200
Travelport Finance Sarl bank term loan FRN Ser. B, 6s, 2021 (Luxembourg)
2,817,938
2,833,538
Univision Communications, Inc. bank term loan FRN 4s, 2020
1,432,843
1,428,253
Yonkers Racing Corp. bank term loan FRN 4 1/4s, 2019
1,361,195
1,279,524
37,657,695
Consumer staples (0.5%)
BC ULC bank term loan FRN Ser. B, 4 1/2s, 2021 (Canada)
1,975,000
1,982,132
CEC Entertainment, Inc. bank term loan FRN Ser. B, 4s, 2021
1,890,713
1,862,944
Del Monte Foods, Inc. bank term loan FRN 8 1/4s, 2021
1,440,000
1,299,600
Rite Aid Corp. bank term loan FRN 4 7/8s, 2021
1,145,000
1,147,147
6,291,823
Energy (0.4%)
Fieldwood Energy, LLC bank term loan FRN 8 3/8s, 2020
3,046,887
2,334,677
Offshore Group Investment, Ltd. bank term loan FRN Ser. B, 5 3/4s, 2019 (Cayman Islands)
859,688
522,260
Shelf Drilling Holdings, Ltd. bank term loan FRN 10s, 2018 ‡‡
2,546,000
1,782,200
Tervita Corp. bank term loan FRN Ser. B, 6 1/4s, 2018 (Canada)
944,684
886,586
5,525,723
Financials (—%)
iStar Financial, Inc. bank term loan FRN Ser. A2, 7s, 2017 R
445,633
455,102
455,102
Health care (0.6%)
CHS/Community Health Systems, Inc. bank term loan FRN Ser. D, 4 1/4s, 2021
1,522,113
1,525,495
Par Pharmaceutical Cos., Inc. bank term loan FRN Ser. B, 4s, 2019
3,188,591
3,171,319
Patheon, Inc. bank term loan FRN Ser. B, 4 1/4s, 2021 (Canada)
2,576,526
2,550,761
7,247,575
Technology (0.1%)
Avaya, Inc. bank term loan FRN Ser. B3, 4.668s, 2017
969,721
940,479
940,479
High Yield Trust 37
SENIOR LOANS (5.3%)* ccont.
Principal amount
Value
Transportation (0.2%)
Air Medical Group Holdings, Inc. bank term loan FRN 7 5/8s, 2018 ‡‡
$1,860,000
$1,855,350
1,855,350
Utilities and power (0.2%)
Texas Competitive Electric Holdings Co., LLC bank term loan FRN 4.662s, 2017
4,891,407
3,078,896
Texas Competitive Electric Holdings Co., LLC bank term loan FRN 4.662s, 2017
50,201
31,599
3,110,495
Total senior loans (cost $72,942,799)
$68,308,561
COMMON STOCKS (1.2%)*
Shares
Value
Ally Financial, Inc. † F
113,460
$2,357,699
CIT Group, Inc.
35,508
1,642,245
DISH Network Corp. Class A †
28,200
2,116,128
EP Energy Corp. Class A †
116,332
1,308,735
General Motors Co.
76,511
2,854,625
Huntsman Corp.
67,975
1,526,719
Live Nation Entertainment, Inc. †
25,100
642,309
Lone Pine Resources Canada, Ltd. (Canada) † F
87,188
3,488
Lone Pine Resources, Inc. Class A (Canada) † F
87,188
3,488
Penn National Gaming, Inc. †
72,100
1,174,509
Seventy Seven Energy, Inc. †
60,780
291,744
Spectrum Brands Holdings, Inc.
13,280
1,244,070
Tribune Co. Class 1C F
297,958
74,489
Vantage Drilling Co. †
949,728
351,399
Total common stocks (cost $17,325,577)
$15,591,647
CONVERTIBLE PREFERRED STOCKS (0.8%)*
Shares
Value
Actavis PLC Ser. A, 5.50% cv. pfd. †
2,467
$2,531,142
American Tower Corp. $5.50 cv. pfd. † R
18,500
1,873,125
Crown Castle International Corp. Ser. A, $4.50 cv. pfd. R
14,630
1,558,095
EPR Properties Ser. C, $1.44 cv. pfd. R
114,663
2,837,909
Tyson Foods, Inc. $2.375 cv. pfd.
29,624
1,512,898
Total convertible preferred stocks (cost $9,426,585)
$10,313,169
PREFERRED STOCKS (0.5%)*
Shares
Value
Ally Financial, Inc. 144A 7.00% cum. pfd.
3,958
$3,968,514
Citigroup, Inc. Ser. K, $1.719 ARP
26,600
713,678
M/I Homes, Inc. Ser. A, $2.438 pfd.
53,597
1,382,803
Total preferred stocks (cost $4,272,705)
$6,064,995
CONVERTIBLE BONDS AND NOTES (0.3%)*
Principal amount
Value
iStar Financial, Inc. cv. sr. unsec. unsub. notes 3s, 2016 R
$1,377,000
$1,672,194
Jazz Technologies, Inc. 144A cv. company guaranty sr. unsec. notes 8s, 2018
1,132,000
1,805,540
Total convertible bonds and notes (cost $2,631,135)
$3,477,734
38 High Yield Trust
WARRANTS (0.1%)* †
Expiration date
Strike price
Warrants
Value
General Motors Co.
7/10/19
$18.33
18,319
$353,190
General Motors Co.
7/10/16
10.00
18,319
501,574
Tower Semiconductor, Ltd. 144A (Israel) F
6/30/15
1.70
672,570
15
Total warrants (cost $769,037)
$854,779
SHORT-TERM INVESTMENTS (4.5%)*
Shares
Value
Putnam Short Term Investment Fund 0.10% L
57,610,468
$57,610,468
SSgA Prime Money Market Fund Class N 0.02% P
120,000
120,000
Total short-term investments (cost $57,730,468)
$57,730,468
TOTAL INVESTMENTS
Total investments (cost $1,276,477,618)
$1,275,926,506
Key to holding’s currency abbreviations
CAD
Canadian Dollar
EUR
Euro
GBP
British Pound
Key to holding’s abbreviations
EMTN
Euro Medium Term Notes
FRB
Floating Rate Bonds: the rate shown is the current interest rate at the close of the reporting period
FRN
Floating Rate Notes: the rate shown is the current interest rate at the close of the reporting period
GMTN
Global Medium Term Notes
MTN
Medium Term Notes
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from September 1, 2014 through February 28, 2015 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures and references to “OTC”, if any, represent over-the-counter.
*
Percentages indicated are based on net assets of $1,285,179,891.
†
This security is non-income-producing.
‡‡
Income may be received in cash or additional securities at the discretion of the issuer.
c
Senior loans are exempt from registration under the Securities Act of 1933, as amended, but contain certain restrictions on resale and cannot be sold publicly. These loans pay interest at rates which adjust periodically. The interest rates shown for senior loans are the current interest rates at the close of the reporting period. Senior loans are also subject to mandatory and/or optional prepayment which cannot be predicted. As a result, the remaining maturity may be substantially less than the stated maturity shown (Notes 1 and 6).
F
This security is valued at fair value following procedures approved by the Trustees. Securities may be classified as Level 2 or Level 3 for ASC 820 based on the securities’ valuation inputs (Note 1).
L
Affiliated company (Note 5). The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period.
High Yield Trust 39
P
This security was pledged, or purchased with cash that was pledged, to the fund for collateral on certain derivative contracts. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period (Note 1).
R
Real Estate Investment Trust.
At the close of the reporting period, the fund maintained liquid assets totaling $1,850,000 to cover the settlement of certain securities.
Debt obligations are considered secured unless otherwise indicated.
144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
The dates shown on debt obligations are the original maturity dates.
FORWARD CURRENCY CONTRACTS at 2/28/15 (aggregate face value $13,558,071) (Unaudited)
Counterparty
Currency
Contract type
Delivery date
Value
Aggregate face value
Unrealized appreciation/ (depreciation)
Bank of America N.A.
Canadian Dollar
Sell
4/15/15
$44,768
$47,415
$2,647
Credit Suisse International
British Pound
Buy
3/18/15
817,383
806,550
10,833
Goldman Sachs International
Euro
Sell
3/18/15
1,851,447
2,068,164
216,717
JPMorgan Chase Bank N.A.
Canadian Dollar
Sell
4/15/15
1,441,459
1,527,488
86,029
Euro
Buy
3/18/15
606,404
614,821
(8,417)
State Street Bank and Trust Co.
Canadian Dollar
Sell
4/15/15
2,276,468
2,410,932
134,464
UBS AG
British Pound
Sell
3/18/15
4,451,070
4,524,619
73,549
Euro
Sell
3/18/15
1,392,334
1,558,082
165,748
Total
$681,570
40 High Yield Trust
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
Valuation inputs
Investments in securities:
Level 1
Level 2
Level 3
Common stocks*:
Basic materials
$1,526,719
$—
$—
Communication services
2,116,128
—
—
Consumer cyclicals
4,671,443
—
74,489
Consumer staples
1,244,070
—
—
Energy
1,951,878
—
6,976
Financials
1,642,245
2,357,699
—
Total common stocks
13,152,483
2,357,699
81,465
Convertible bonds and notes
$—
$3,477,734
$—
Convertible preferred stocks
2,531,142
7,782,027
—
Corporate bonds and notes
—
1,113,585,081
72
Preferred stocks
713,678
5,351,317
—
Senior loans
—
68,308,561
—
Warrants
854,764
15
—
Short-term investments
57,730,468
—
—
Totals by level
$74,982,535
$1,200,862,434
$81,537
Valuation inputs
Other financial instruments:
Level 1
Level 2
Level 3
Forward currency contracts
$—
$681,570
$—
Totals by level
$—
$681,570
$—
* Common stock classifications are presented at the sector level, which may differ from the fund’s portfolio presentation.
During the reporting period, transfers within the fair value hierarchy, if any, did not represent, in the aggregate, more than 1% of the fund’s net assets measured as of the end of the period.
At the start and close of the reporting period, Level 3 investments in securities represented less than 1% of the fund’s net assets and were not considered a significant portion of the fund’s portfolio.
The accompanying notes are an integral part of these financial statements.
High Yield Trust 41
Statement of assets and liabilities 2/28/15 (Unaudited)
Affiliated issuers (identified cost $57,610,468) (Notes 1 and 5)
57,610,468
Cash
61,201
Dividends, interest and other receivables
21,974,020
Receivable for shares of the fund sold
1,409,816
Receivable for investments sold
6,704,578
Unrealized appreciation on forward currency contracts (Note 1)
689,987
Prepaid assets
79,211
Total assets
1,306,845,319
LIABILITIES
Payable for investments purchased
17,695,310
Payable for shares of the fund repurchased
1,812,565
Payable for compensation of Manager (Note 2)
540,347
Payable for custodian fees (Note 2)
12,765
Payable for investor servicing fees (Note 2)
283,793
Payable for Trustee compensation and expenses (Note 2)
538,869
Payable for administrative services (Note 2)
3,964
Payable for distribution fees (Note 2)
445,239
Distributions payable to shareholders
22
Unrealized depreciation on forward currency contracts (Note 1)
8,417
Collateral on certain derivative contracts, at value (Note 1)
120,000
Other accrued expenses
204,137
Total liabilities
21,665,428
Net assets
$1,285,179,891
REPRESENTED BY
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)
$1,514,333,119
Undistributed net investment income (Note 1)
7,275,309
Accumulated net realized loss on investments and foreign currency transactions (Note 1)
(236,557,072)
Net unrealized appreciation of investments and assets and liabilities in foreign currencies
128,535
Total — Representing net assets applicable to capital shares outstanding
$1,285,179,891
(Continued on next page)
42 High Yield Trust
Statement of assets and liabilities (Continued)
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price per class A share ($962,698,033 divided by 121,053,204 shares)
$7.95
Offering price per class A share (100/96.00 of $7.95)*
$8.28
Net asset value and offering price per class B share ($16,710,364 divided by 2,104,407 shares)**
$7.94
Net asset value and offering price per class C share ($52,585,127 divided by 6,674,832 shares)**
$7.88
Net asset value and redemption price per class M share ($16,379,652 divided by 2,050,975 shares)
$7.99
Offering price per class M share (100/96.75 of $7.99)†
$8.26
Net asset value, offering price and redemption price per class R share ($11,004,915 divided by 1,413,455 shares)
$7.79
Net asset value, offering price and redemption price per class Y share ($225,801,800 divided by 28,992,988 shares)
$7.79
*
On single retail sales of less than $100,000. On sales of $100,000 or more the offering price is reduced.
**
Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
†
On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
High Yield Trust 43
Statement of operations Six months ended 2/28/15 (Unaudited)
INVESTMENT INCOME
Interest (including interest income of $22,075 from investments in affiliated issuers) (Note 5)
$38,005,347
Dividends
572,464
Total investment income
38,577,811
EXPENSES
Compensation of Manager (Note 2)
3,487,096
Investor servicing fees (Note 2)
850,756
Custodian fees (Note 2)
19,041
Trustee compensation and expenses (Note 2)
8,689
Distribution fees (Note 2)
1,605,800
Administrative services (Note 2)
18,064
Other
226,340
Total expenses
6,215,786
Expense reduction (Note 2)
(5,881)
Net expenses
6,209,905
Net investment income
32,367,906
Net realized gain on investments (Notes 1 and 3)
6,997,958
Net realized gain on foreign currency transactions (Note 1)
1,069,582
Net unrealized appreciation of assets and liabilities in foreign currencies during the period
311,565
Net unrealized depreciation of investments during the period
(49,084,040)
Net loss on investments
(40,704,935)
Net decrease in net assets resulting from operations
$(8,337,029)
The accompanying notes are an integral part of these financial statements.
44 High Yield Trust
Statement of changes in net assets
DECREASE IN NET ASSETS
Six months ended 2/28/15*
Year ended 8/31/14
Operations:
Net investment income
$32,367,906
$76,111,666
Net realized gain on investments and foreign currency transactions
8,067,540
28,936,674
Net unrealized appreciation (depreciation) of investments and assets and liabilities in foreign currencies
(48,772,475)
28,702,660
Net increase (decrease) in net assets resulting from operations
(8,337,029)
133,751,000
Distributions to shareholders (Note 1):
From ordinary income
Net investment income
Class A
(25,490,415)
(59,041,534)
Class B
(396,833)
(920,372)
Class C
(1,102,148)
(2,648,870)
Class M
(466,033)
(1,156,061)
Class R
(296,055)
(617,043)
Class Y
(5,632,006)
(13,062,980)
Decrease from capital share transactions (Note 4)
(17,133,542)
(57,863,785)
Total decrease in net assets
(58,854,061)
(1,559,645)
NET ASSETS
Beginning of period
1,344,033,952
1,345,593,597
End of period (including undistributed net investment income of $7,275,309 and $8,290,893, respectively)
$1,285,179,891
$1,344,033,952
*
Unaudited.
The accompanying notes are an integral part of these financial statements.
High Yield Trust 45
Financial highlights (For a common share outstanding throughout the period)
INVESTMENT OPERATIONS:
LESS DISTRIBUTIONS:
RATIOS AND SUPPLEMENTAL DATA:
Period ended
Net asset value, beginning of period
Net investment income (loss)a
Net realized and unrealized gain (loss) on investments
Total from investment operations
From net investment income
Total distributions
Redemption fees
Non-recurring reimbursements
Net asset value, end of period
Total return at net asset value (%)b
Net assets, end of period (in thousands)
Ratio of expenses to average net assets (%)c
Ratio of net investment income (loss) to average net assets (%)
Portfolio turnover (%)
Class A
February 28, 2015**
$8.20
.20
(.24)
(.04)
(.21)
(.21)
—
—
$7.95
(.45)*
$962,698
.49*
2.57*
28*
August 31, 2014
7.88
.43
.33
.76
(.44)
(.44)
—
—
8.20
9.77
1,058,920
1.01
5.29
51
August 31, 2013
7.76
.49
.11
.60
(.48)
(.48)
—d
—
7.88
7.84
1,060,905
1.02
6.11
51
August 31, 2012
7.39
.51
.38
.89
(.52)
(.52)
—d
—
7.76
12.49
1,200,821
1.02
6.81
46
August 31, 2011
7.40
.56
(.03)
.53
(.54)
(.54)
—d
—e,f,g
7.39
7.07
1,108,763
1.00
7.15
72
August 31, 2010
6.68
.56
.70
1.26
(.54)
(.54)
—d
—h
7.40
19.29
1,120,786
1.04i
7.67i
71
Class B
February 28, 2015**
$8.19
.17
(.24)
(.07)
(.18)
(.18)
—
—
$7.94
(.84)*
$16,710
.86*
2.19*
28*
August 31, 2014
7.86
.37
.33
.70
(.37)
(.37)
—
—
8.19
9.11
19,427
1.76
4.54
51
August 31, 2013
7.74
.43
.11
.54
(.42)
(.42)
—d
—
7.86
7.05
20,077
1.77
5.34
51
August 31, 2012
7.38
.45
.37
.82
(.46)
(.46)
—d
—
7.74
11.51
20,589
1.77
6.08
46
August 31, 2011
7.39
.50
(.03)
.47
(.48)
(.48)
—d
—e,f,g
7.38
6.24
22,545
1.75
6.43
72
August 31, 2010
6.67
.50
.70
1.20
(.48)
(.48)
—d
—h
7.39
18.39
41,109
1.79i
6.96i
71
Class C
February 28, 2015**
$8.13
.17
(.24)
(.07)
(.18)
(.18)
—
—
$7.88
(.83)*
$52,585
.86*
2.20*
28*
August 31, 2014
7.81
.37
.33
.70
(.38)
(.38)
—
—
8.13
9.05
49,810
1.76
4.54
51
August 31, 2013
7.69
.42
.12
.54
(.42)
(.42)
—d
—
7.81
7.10
48,785
1.77
5.36
51
August 31, 2012
7.34
.45
.36
.81
(.46)
(.46)
—d
—
7.69
11.48
55,496
1.77
6.02
46
August 31, 2011
7.35
.49
(.02)
.47
(.48)
(.48)
—d
—e,f,g
7.34
6.34
38,589
1.75
6.39
72
August 31, 2010
6.65
.50
.69
1.19
(.49)
(.49)
—d
—h
7.35
18.19
38,400
1.79i
6.92i
71
Class M
February 28, 2015**
$8.23
.19
(.23)
(.04)
(.20)
(.20)
—
—
$7.99
(.48)*
$16,380
.61*
2.43*
28*
August 31, 2014
7.90
.41
.33
.74
(.41)
(.41)
—
—
8.23
9.55
22,440
1.26
5.04
51
August 31, 2013
7.78
.47
.11
.58
(.46)
(.46)
—d
—
7.90
7.50
20,741
1.27
5.84
51
August 31, 2012
7.41
.49
.38
.87
(.50)
(.50)
—d
—
7.78
12.16
20,501
1.27
6.56
46
August 31, 2011
7.42
.54
(.03)
.51
(.52)
(.52)
—d
—e,f,g
7.41
6.74
18,768
1.25
6.90
72
August 31, 2010
6.69
.54
.71
1.25
(.52)
(.52)
—d
—h
7.42
19.12
19,218
1.29i
7.46i
71
Class R
February 28, 2015**
$8.03
.19
(.23)
(.04)
(.20)
(.20)
—
—
$7.79
(.48)*
$11,005
.61*
2.44*
28*
August 31, 2014
7.72
.40
.32
.72
(.41)
(.41)
—
—
8.03
9.53
12,336
1.26
5.04
51
August 31, 2013
7.61
.46
.11
.57
(.46)
(.46)
—d
—
7.72
7.60
12,462
1.27
5.83
51
August 31, 2012
7.26
.48
.37
.85
(.50)
(.50)
—d
—
7.61
12.17
10,744
1.27
6.54
46
August 31, 2011
7.30
.52
(.04)
.48
(.52)
(.52)
—d
—e,f,g
7.26
6.49
8,473
1.25
6.86
72
August 31, 2010
6.61
.53
.69
1.22
(.53)
(.53)
—d
—h
7.30
18.80
5,085
1.29i
7.36i
71
Class Y
February 28, 2015**
$8.04
.21
(.24)
(.03)
(.22)
(.22)
—
—
$7.79
(.30)*
$225,802
.37*
2.72*
28*
August 31, 2014
7.73
.44
.33
.77
(.46)
(.46)
—
—
8.04
10.16
181,102
.76
5.54
51
August 31, 2013
7.63
.49
.11
.60
(.50)
(.50)
—d
—
7.73
8.03
182,624
.77
6.30
51
August 31, 2012
7.28
.52
.37
.89
(.54)
(.54)
—d
—
7.63
12.71
164,060
.77
7.01
46
August 31, 2011
7.31
.57
(.04)
.53
(.56)
(.56)
—d
—e,f,g
7.28
7.18
84,635
.75
7.41
72
August 31, 2010
6.61
.57
.69
1.26
(.56)
(.56)
—d
—h
7.31
19.49
99,244
.79i
7.80i
71
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
46
High Yield Trust
High Yield Trust
47
Financial highlights (Continued)
* Not annualized.
** Unaudited.
a Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.
b Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
c Includes amounts paid through expense offset and brokerage/service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.
d Amount represents less than $0.01 per share.
e Reflects a non-recurring reimbursement pursuant to a settlement between the Securities and Exchange Commission (the SEC) and Zurich Capital Markets, Inc., which amounted to less than $0.01 per share outstanding on December 21, 2010.
f Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Southwest Securities, which amounted to less than $0.01 per share outstanding on August 22, 2011.
g Reflects a non-recurring reimbursement related to restitution amounts in connection with a distribution plan approved by the SEC which amounted to less than $0.01 per share outstanding on July 21, 2011. Also reflects a non-recurring reimbursement related to short-term trading related lawsuits, which amounted to less than $0.01 per share outstanding on May 11, 2011.
h Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Prudential Securities, Inc., which amounted to less than $0.01 per share outstanding on March 30, 2010.
i Reflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation and/or waivers, the expenses of each class reflect a reduction of the following amounts:
Percentage of average net assets
August 31, 2010
0.01%
The accompanying notes are an integral part of these financial statements.
48 High Yield Trust
Notes to financial statements 2/28/15 (Unaudited)
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from September 1, 2014 through February 28, 2015.
Putnam High Yield Trust (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The goal of the fund is to seek high current income. Capital growth is a secondary goal when consistent with achieving high current income. The fund invests mainly in bonds that are obligations of U.S. companies, are below-investment-grade in quality (sometimes referred to as “junk bonds”), and have intermediate- to long-term maturities (three years or longer). Putnam Management may also invest in other debt instruments, including loans. Putnam Management may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments. The fund may also use derivatives, such as futures, options, warrants and swap contracts, for both hedging and non-hedging purposes.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 4.00% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are not available to all investors, are sold at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.
Note 1: Significant accounting policies
The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.
Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class 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. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.
Security valuation Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.
Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820). If no sales are
High Yield Trust 49
reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.
Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
Market quotations are not considered to be readily available for certain debt obligations and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value, and are classified as Level 2 securities.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.
To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income, net of any applicable withholding taxes, is recorded on the accrual basis. Dividend income, net of any applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain. All premiums/discounts are amortized/accreted on a yield-to-maturity basis.
The fund earned certain fees in connection with its senior loan purchasing activities. These fees are treated as market discount and are amortized into income in the Statement of operations.
Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The fair value of foreign securities, currency holdings, and other assets and liabilities is recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange
50 High Yield Trust
rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate.
Forward currency contracts The fund buys and sells forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to hedge foreign exchange risk, for hedging currency exposures and to gain exposure to currencies.
The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The fair value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in fair value is recorded as an unrealized gain or loss. 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 when the contract matures or by delivery of the currency. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the Statement of assets and liabilities.
Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio.
Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and with respect to those amounts which can be sold or repledged, is presented in the fund’s portfolio. Collateral posted to the fund which cannot be sold or repledged totaled $380,034 at the close of the reporting period.
Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.
Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.
At the close of the reporting period, the fund did not have a net liability position on open derivative contracts subject to the Master Agreements.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from or lend to other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Lines of credit The fund participates, along with other Putnam funds, in a $392.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted
High Yield Trust 51
line of credit. A closing fee equal to 0.04% of the committed line of credit and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.11% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the 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 Code.
The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
The fund may also be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. In some cases, the fund may be entitled to reclaim all or a portion of such taxes, and such reclaim amounts, if any, are reflected as an asset on the fund’s books. In many cases, however, the fund may not receive such amounts for an extended period of time, depending on the country of investment.
At August 31, 2014, the fund had a capital loss carryover of $242,418,665 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:
Loss carryover
Short-term
Long-term
Total
Expiration
$8,546,084
N/A
$8,546,084
August 31, 2016
96,252,247
N/A
96,252,247
August 31, 2017
137,620,334
N/A
137,620,334
August 31, 2018
Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
The aggregate identified cost on a tax basis is $1,278,683,565, resulting in gross unrealized appreciation and depreciation of $41,981,614 and $44,738,673, respectively, or net unrealized depreciation of $2,757,059.
Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations.
Note 2: Management fee, administrative services and other transactions
The fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end
52 High Yield Trust
funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
0.720%
of the first $5 billion,
0.670%
of the next $5 billion,
0.620%
of the next $10 billion,
0.570%
of the next $10 billion,
0.520%
of the next $50 billion,
0.500%
of the next $50 billion,
0.490%
of the next $100 billion and
0.485%
of any excess thereafter.
Putnam Management has contractually agreed, through June 30, 2015, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.
Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. Putnam Management pays a quarterly sub-management fee to PIL for its services at an annual rate of 0.40% of the average net assets of the portion of the fund managed by PIL.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing that included (1) a per account fee for each direct and underlying non-defined contribution accounts (“retail accounts”) of the fund and each of the other funds in its specified category, which was totaled and then allocated to each fund in the category based on its average daily net assets; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) for the portion of the fund’s fiscal year beginning after January 1, 2015, a specified rate based on the average net assets in retail accounts. Putnam Investor Services has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts will not exceed an annual rate of 0.320% of the fund’s average assets attributable to such accounts. During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:
Class A
$654,100
Class B
11,921
Class C
32,623
Class M
13,064
Class R
7,885
Class Y
131,163
Total
$850,756
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. The fund also reduced expenses through brokerage/service arrangements. For the reporting period, the fund’s expenses were reduced by $2,298 under the expense offset arrangements and by $3,583 under the brokerage/service arrangements.
Each Independent Trustee of the fund receives an annual Trustee fee, of which $696, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan (the Pension Plan) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for
High Yield Trust 53
the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the Plans) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.50% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. During the reporting period, the class specific expenses related to distribution fees were as follows:
Class A
$1,201,579
Class B
87,693
Class C
239,351
Class M
48,187
Class R
28,990
Total
$1,605,800
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $22,323 and $295 from the sale of class A and class M shares, respectively, and received $5,849 and $670 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.40% is assessed on certain redemptions of class A and class M shares, respectively. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $15 and no monies on class A and class M redemptions, respectively.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales, excluding short-term investments were as follows:
Cost of purchases
Proceeds from sales
Investments in securities, including TBA commitments (Long-term)
$339,943,808
$344,363,623
U.S. government securities (Long-term)
—
—
Total
$339,943,808
$344,363,623
Note 4: Capital shares
At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
Six months ended 2/28/15
Year ended 8/31/14
Class A
Shares
Amount
Shares
Amount
Shares sold
15,679,650
$124,430,302
19,922,386
$161,548,427
Shares issued in connection with reinvestment of distributions
2,747,306
21,749,348
6,154,333
49,978,343
18,426,956
146,179,650
26,076,719
211,526,770
Shares repurchased
(26,475,447)
(209,845,694)
(31,676,837)
(257,589,200)
Net decrease
(8,048,491)
$(63,666,044)
(5,600,118)
$(46,062,430)
54 High Yield Trust
Six months ended 2/28/15
Year ended 8/31/14
Class B
Shares
Amount
Shares
Amount
Shares sold
90,420
$716,849
339,041
$2,750,413
Shares issued in connection with reinvestment of distributions
43,470
343,640
97,030
786,752
133,890
1,060,489
436,071
3,537,165
Shares repurchased
(401,929)
(3,181,493)
(616,732)
(4,998,172)
Net decrease
(268,039)
$(2,121,004)
(180,661)
$(1,461,007)
Six months ended 2/28/15
Year ended 8/31/14
Class C
Shares
Amount
Shares
Amount
Shares sold
1,457,804
$11,362,255
2,376,563
$18,999,324
Shares issued in connection with reinvestment of distributions
124,570
977,024
292,860
2,358,715
1,582,374
12,339,279
2,669,423
21,358,039
Shares repurchased
(1,037,348)
(8,111,851)
(2,788,084)
(22,409,268)
Net increase (decrease)
545,026
$4,227,428
(118,661)
$(1,051,229)
Six months ended 2/28/15
Year ended 8/31/14
Class M
Shares
Amount
Shares
Amount
Shares sold
249,325
$1,970,763
406,962
$3,281,690
Shares issued in connection with reinvestment of distributions
53,339
424,600
128,471
1,047,149
302,664
2,395,363
535,433
4,328,839
Shares repurchased
(977,105)
(7,565,268)
(434,982)
(3,541,375)
Net increase (decrease)
(674,441)
$(5,169,905)
100,451
$787,464
Six months ended 2/28/15
Year ended 8/31/14
Class R
Shares
Amount
Shares
Amount
Shares sold
246,263
$1,905,952
462,442
$3,689,521
Shares issued in connection with reinvestment of distributions
37,608
291,579
76,607
609,632
283,871
2,197,531
539,049
4,299,153
Shares repurchased
(406,237)
(3,127,366)
(617,880)
(4,892,939)
Net decrease
(122,366)
$(929,835)
(78,831)
$(593,786)
Six months ended 2/28/15
Year ended 8/31/14
Class Y
Shares
Amount
Shares
Amount
Shares sold
26,536,749
$204,923,395
26,424,864
$209,628,481
Shares issued in connection with reinvestment of distributions
712,606
5,514,631
1,538,182
12,253,031
27,249,355
210,438,026
27,963,046
221,881,512
Shares repurchased
(20,783,996)
(159,912,208)
(29,050,971)
(231,364,309)
Net increase (decrease)
6,465,359
$50,525,818
(1,087,925)
$(9,482,797)
High Yield Trust 55
Note 5: Affiliated transactions
Transactions during the reporting period with Putnam Short Term Investment Fund, which is under common ownership and control, were as follows:
Name of affiliate
Fair value at the beginning of the reporting period
Purchase cost
Sale proceeds
Investment income
Fair value at the end of the reporting period
Putnam Short Term Investment Fund*
$56,222,398
$371,863,357
$370,475,287
$22,075
$57,610,468
* Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management.
Note 6: Senior loan commitments
Senior loans are purchased or sold on a when-issued or delayed delivery basis and may be settled a month or more after the trade date, which from time to time can delay the actual investment of available cash balances; interest income is accrued based on the terms of the securities. Senior loans can be acquired through an agent, by assignment from another holder of the loan, or as a participation interest in another holder’s portion of the loan. When the fund invests in a loan or participation, the fund is subject to the risk that an intermediate participant between the fund and the borrower will fail to meet its obligations to the fund, in addition to the risk that the borrower under the loan may default on its obligations.
Note 7: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations. The fund may invest in higher yielding, lower rated bonds that may have a higher rate of default.
Note 8: Summary of derivative activity
The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was as follows based on an average of the holdings at the end of each fiscal quarter:
Forward currency contracts (contract amount)
$17,700,000
Warrants (number of warrants)
710,000
The following is a summary of the fair value of derivative instruments as of the close of the reporting period:
Fair value of derivative instruments as of the close of the reporting period
Asset derivatives
Liability derivatives
Derivatives not accounted for as hedging instruments under ASC 815
Statement of assets and liabilities location
Fair value
Statement of assets and liabilities location
Fair value
Foreign exchange contracts
Receivables
$689,987
Payables
$8,417
Equity contracts
Investments
854,779
Payables
—
Total
$1,544,766
$8,417
56 High Yield Trust
The following is a summary of realized and change in unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1):
Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments
Derivatives not accounted for as hedging instruments under ASC 815
Warrants
Forward currency contracts
Total
Foreign exchange contracts
$—
$1,102,758
$1,102,758
Equity contracts
44,502
—
44,502
Total
$44,502
$1,102,758
$1,147,260
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
Derivatives not accounted for as hedging instruments under ASC 815
Warrants
Forward currency contracts
Total
Foreign exchange contracts
$—
$311,766
$311,766
Equity contracts
49,028
—
49,028
Total
$49,028
$311,766
$360,794
High Yield Trust 57
Note 9: Offsetting of financial and derivative assets and liabilities
The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.
Bank of America N.A.
Credit Suisse International
Goldman Sachs International
JPMorgan Chase Bank N.A.
State Street Bank and Trust Co.
UBS AG
Total
Assets:
Forward currency contracts#
$2,647
$10,833
$216,717
$86,029
$134,464
$239,297
$689,987
Total Assets
$2,647
$10,833
$216,717
$86,029
$134,464
$239,297
$689,987
Liabilities:
Forward currency contracts#
—
—
—
8,417
—
—
8,417
Total Liabilities
$—
$—
$—
$8,417
$—
$—
$8,417
Total Financial and Derivative Net Assets
$2,647
$10,833
$216,717
$77,612
$134,464
$239,297
$681,570
Total collateral received (pledged)†##
$—
$—
$125,519
$77,612
$—
$239,297
Net amount
$2,647
$10,833
$91,198
$—
$134,464
$—
†
Additional collateral may be required from certain brokers based on individual agreements.
#
Covered by master netting agreement (Note 1).
##
Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.
58
High Yield Trust
High Yield Trust
59
Services for shareholders
Investor services
Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.
Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.
Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.
Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.
Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.
Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.
Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.
Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.
For more information
Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.
Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.
60 High Yield Trust
Fund information
Founded over 75 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.
Investment Manager
Putnam Investment Management, LLC One Post Office Square Boston, MA 02109
Investment Sub-Manager
Putnam Investments Limited 57–59 St James’s Street London, England SW1A 1LD
Marketing Services
Putnam Retail Management One Post Office Square Boston, MA 02109
Custodian
State Street Bank and Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
Jameson A. Baxter, Chair Liaquat Ahamed Ravi Akhoury Barbara M. Baumann Charles B. Curtis Robert J. Darretta Katinka Domotorffy John A. Hill Paul L. Joskow Kenneth R. Leibler Robert E. Patterson George Putnam, III Robert L. Reynolds W. Thomas Stephens
Officers
Robert L. Reynolds President
Jonathan S. Horwitz Executive Vice President, Principal Executive Officer, and Compliance Liaison
Steven D. Krichmar Vice President and Principal Financial Officer
Robert T. Burns Vice President and Chief Legal Officer
Robert R. Leveille Vice President and Chief Compliance Officer
Michael J. Higgins Vice President, Treasurer, and Clerk
Janet C. Smith Vice President, Principal Accounting Officer, and Assistant Treasurer
Susan G. Malloy Vice President and Assistant Treasurer
James P. Pappas Vice President
Mark C. Trenchard Vice President and BSA Compliance Officer
Nancy E. Florek Vice President, Director of Proxy Voting and Corporate Governance, Assistant Clerk, and Associate 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, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
Item 2. Code of Ethics:
Not applicable
Item 3. Audit Committee Financial Expert:
Not applicable
Item 4. Principal Accountant Fees and Services:
Not applicable
Item 5. Audit Committee of Listed Registrants
Not applicable
Item 6. Schedule of Investments:
The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:
Not applicable
Item 8. Portfolio Managers of Closed-End Investment Companies
Not Applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:
Not applicable
Item 10. Submission of Matters to a Vote of Security Holders:
Not applicable
Item 11. Controls and Procedures:
(a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.
(b) Changes in internal control over financial reporting: Not applicable
Item 12. Exhibits:
(a)(1) Not applicable
(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.
(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.
Putnam High Yield Trust
By (Signature and Title):
/s/ Janet C. Smith Janet C. Smith Principal Accounting Officer
Date: April 28, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title):
/s/ Jonathan S. Horwitz Jonathan S. Horwitz Principal Executive Officer
Date: April 28, 2015
By (Signature and Title):
/s/ Steven D. Krichmar Steven D. Krichmar Principal Financial Officer
Date: April 28, 2015
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