Putnam
High Yield
Trust
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
2-28-05
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
Over the past year, Putnam has introduced a number of reforms for the
benefit of shareholders, including increasing the amount of disclosure
for our funds. We are now including additional disclosure about your
fund's management team. Following the Outlook for Your Fund, we provide
manager compensation information that pertains to your fund, list any
changes in your fund's Portfolio Leader and Portfolio Members during the
prior year, and disclose these individuals' other fund management
responsibilities at Putnam. We also show how much these individuals, as
well as the members of Putnam's Executive Board, have invested in the
fund (in dollar ranges). Finally, on page 19, we provide information
about the most recent approval by the Trustees of your fund's management
contract with Putnam.
During the reporting period just ended, the Federal Reserve Board's
series of gradual increases in the federal funds rate have occupied much
of investors' attention, but generally did not have a significant impact
on stock and bond prices. However, over the last two months, we have
begun to see a measurable increase in longer-term rates. This, along
with the continued high levels of energy prices, has slowed the stock
market's momentum even though the U.S. economy is continuing to expand
at a moderate pace. Concerns about inflation, dormant for many months,
are beginning to influence the markets once again and may well have a
negative impact on bond prices.
In the following pages, members of your fund's management team discuss
the fund's performance, the strategies used to keep your fund on track
during the reporting period, and the team's plan for responding to the
changing market environment.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
April 20, 2005
Report from Fund Management
Fund highlights
* For the six months ended February 28, 2005, Putnam High Yield Trust's
class A shares returned 7.42% without sales charges.
* For the period, fund's benchmark, the JP Morgan Global High Yield
Index, returned 7.37%.
* The average return for the fund's Lipper category, High Current Yield
Funds, was 7.02%.
* See the Performance Summary beginning on page 10 for additional fund
performance, comparative performance, and Lipper data.
Performance commentary
During the six months ended February 28, 2005, Putnam High Yield Trust's
results at net asset value (NAV, without sales charges) were in line
with those of its benchmark index and slightly ahead of the average for
its Lipper category. Over this period, high-yield bonds with lower
credit quality were generally stronger performers than those in the
higher-quality tiers of the high-yield market. Consequently, our slight
overweighting in this area helped the fund's performance. Returns were
also supported by the strong performance of fund holdings issued by
companies involved in consolidation activity and as well as those from
issuers that came to market with initial public offerings (IPOs) of
stock.
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TOTAL RETURN FOR
PERIODS ENDED 2/28/05
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Class A
(inception 2/14/78) NAV POP
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6 months 7.42% 2.53%
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1 year 10.80 5.79
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5 years 32.66 26.73
Annual average 5.82 4.85
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10 years 93.18 84.47
Annual average 6.81 6.31
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Annual average
(life of fund) 9.35 9.17
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Data is historical. 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 assumes reinvestment of
distributions and does not account for taxes. Returns at NAV do not
reflect a sales charge of 4.50%. For the most recent month-end
performance, visit www.putnaminvestments.com. A short-term trading fee
of up to 2% may apply.
FUND PROFILE
Putnam High Yield Trust seeks high current income through a portfolio of
higher-yielding, lower-rated corporate bonds diversified across
different industry sectors. It has a secondary objective of capital
growth when consistent with high current income. This fund may be
suitable for investors who can accept a higher level of risk in exchange
for a potentially higher level of income than that available from
higher-quality bonds.
Market overview
Although the Federal Reserve Board (the Fed) started to raise short-term
interest rates in June 2004 -- and continued to do so steadily through
the end of the period -- the impact of these increases was generally
confined to the shorter end of the yield curve. To the surprise of many,
longer-term bonds were relatively unaffected. Against this backdrop, the
high-yield market enjoyed a strong rally in the fourth quarter of 2004.
Several factors worked to provide a very positive environment for
high-yield bonds. First, the U.S. economy continued to strengthen,
helping to keep default rates at very low levels. In addition, the
equity market posted a strong rally in the fourth quarter, and a number
of high-yield issuers were able to raise equity in the market, some
through IPOs. The high-yield market consequently experienced the kind of
seasonal strength it typically enjoys at the end of the calendar year.
Finally, the market was buoyed by consolidation activity, in which a
number of high-yield companies were purchased by larger,
investment-grade firms.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 2/28/05
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Bonds
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JP Morgan Global High Yield Index (global high-yield
corporate bonds) 7.37%
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Lehman Aggregate Bond Index (broad bond market) 1.26%
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Lehman Government/Credit Bond Index
(U.S. Treasury and agency securities and corporate bonds) 1.19%
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Lehman Municipal Bond Index (tax-exempt bonds) 2.40%
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Equities
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S&P 500 Index (broad stock market) 9.99%
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Russell 2000 Value Index (small-company value stocks) 15.38%
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Russell 2500 Growth Index (growth stocks of small and
midsize companies) 18.16%
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These indexes provide an overview of performance in different market
sectors for the six months ended 2/28/05.
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Strategy overview
During the past two years, we have emphasized the lower-quality tiers of
the high-yield market, a strategy that helped fund performance during
that time. However, at the beginning of the period, we began to shift
our emphasis, prompted by the rise in short-term interest rates
associated with the Fed's tightening activity. We gradually reduced the
fund's lower-rated holdings, although the fund retained a slight
overweighting in lower-quality issues relative to the index at the end
of the period. Looking at industry weightings, the fund held overweight
positions in chemicals and energy relative to the index. This reflected
our view of favorable prospects for these industries related to supply
and demand. We also overweighted bonds issued by wireless
telecommunications companies, because of the companies' strong
subscriber growth, attractive valuations, and consolidation. Finally, we
emphasized bonds issued by media companies, because advertising rates
had improved and the securities were selling at attractive prices.
On the other hand, we elected to underweight transportation in general
and auto suppliers in particular. Firms in these industries were
squeezed by high steel prices, costs they could not pass through to
their auto-manufacturing customers, who have difficult-to-meet
production schedules. Forest products also remained unattractive, we
felt, due to weakening business prospects and less attractive
valuations. We also decided to maintain the fund's underweight in
technology, because we believed that the securities in the sector were
overvalued.
[GRAPHIC OMITTED: horizontal bar chart TOP SECTOR WEIGHTINGS COMPARED]
TOP SECTOR WEIGHTINGS COMPARED
as of 8/31/04 as of 2/28/05
Consumer
cyclicals 22.1% 21.4%
Consumer
staples 12.8% 13.5%
Basic
materials 10.3% 9.7%
Utilities
and power 9.5% 8.6%
Communications
services 7.3% 8.5%
Footnote reads:
This chart shows how the fund's top weightings have changed over the
last six months. Weightings are shown as a percentage of net assets.
Holdings will vary over time.
How fund holdings affected performance
Bonds issued by companies involved in mergers and acquisitions (M&As)
helped your fund's performance during the semiannual period. In the
markets, there has been a significant increase in M&A activity. In many
instances, companies with lower credit ratings, which tend to be small,
were bought by larger, investment-grade companies. This is a positive
development for bondholders in these companies because bond prices often
rise significantly due to the improvement in credit quality as a result
of the merger. Examples of fund holdings in high-yield bond issuers
positively affected by M&A events included telecommunications companies
Nextel Communications (which is being bought by Sprint), AT&T (which is
being acquired by SBC Communications), and MCI (which tentatively has
agreed to be purchased by Verizon). Non-urban hospital company Province
Healthcare and educational and commercial printer Von Hoffman Press also
rose in value on the strength of being part of a consolidation. We sold
the Von Hoffman Press bonds before the end of the period.
[GRAPHIC OMITTED: TOP HOLDINGS]
TOP HOLDINGS
(Percent of fund's net assets as of 2/28/05)
1 Dow Jones CDX HY 144A (2.1%)
Pass-through certificates Ser. 3-3, 8s, 2009
Other
2 Qwest Corp. 144A (1.0%)
Notes 9 1/8s, 2012
Communications services
3 PSF Group Holdings, Inc. 144A (0.7%)
Class A
Consumer staples
4 AT&T Corp. (0.7%)
Sr. notes 9 3/4s, 2031
Communications services
5 Nextel Communications, Inc. (0.6%)
Sr. notes 5.95s, 2014
Communication services
6 CanWest Media, Inc. 144A
(Canada) (0.6%)
Sr. sub. notes 8s, 2012
Publishing
7 Equistar Chemicals LP/
Equistar Funding Corp. (0.5%)
Company guaranty 10 1/8s, 2008
Basic materials
8 NRG Energy, Inc. 144A (0.5%)
Sr. sec. notes 8s, 2013
Utilities and power
9 Dynegy Holdings, Inc. 144A (0.5%)
Sec. notes 10 1/8s, 2013
Utilities and power
10 Tenneco Automotive, Inc. (0.5%)
Sec. notes Ser. B, 10 1/4s, 2013
Automotive
Footnote reads:
The fund's holdings will change over time.
Other investments that contributed to performance included companies
that gained financing through the equity markets with IPOs. The IPO
market has been very active, and many high-yield companies took
advantage of this backdrop to raise equity capital in order to reduce
debt or pursue other activities to help their businesses. Among fund
holdings that either issued an IPO or announced their intention to do so
were chemical companies Huntsman International and Celanese, consumer
products manufacturer Prestige Brands, laundry facilities management
company Coinmach, and rural telephone service provider FairPoint
Communications (sold before the end of the period). Another investment
that offered strong performance was apparel manufacturer Levi's, which
delivered positive results while implementing its turnaround plans.
Within such a strong environment for high-yield bonds, there were very
few disappointments for the fund during the period, and those bonds that
did experience price declines had little effect on fund performance.
Among them were Star Gas Partners, a distributor of home heating oil in
New England, which was plagued by operational issues and rising oil
prices, and Icon, a manufacturer of home exercise equipment, which was
hurt by rising steel costs and other commodity prices. We maintained
positions in both of these securities due to our belief in their
positive prospects.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary in
the future.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
We believe that the overall business prospects for companies in the
high-yield universe remain positive, at the same time that valuations
are less attractive. Yield spreads -- the difference in yield between
higher- and lower-rated bonds of comparable maturities -- are at
historically narrow levels. While we don't anticipate an imminent or
dramatic spread-widening, which would lead to significant
underperformance for high-yield bonds, several factors that could
negatively impact performance appear to be strengthening at the same
time that valuations are becoming stretched. These factors include a
decline in new-issue credit quality, rising short-term interest rates,
and default rates that appear to have reached a bottom. These
developments lead us to believe that the rally we have enjoyed during
more than two years is likely nearing its end. The yield spread between
lower- and higher-quality tiers of the high-yield bond market also has
compressed to historically low levels, leaving the higher-quality issues
attractively valued. Hence, we've worked to increase the overall credit
quality of the portfolio, in order to position it to benefit from the
environment we anticipate in the months to come.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. Lower-rated bonds
may offer higher yields in return for more risk. Mutual funds that
invest in bonds are subject to certain risks, including interest-rate
risk, credit risk, and inflation risk. As interest rates rise, the
prices of bonds fall. Long-term bonds are more exposed to interest-rate
risk than short-term bonds. Unlike bonds, bond funds have ongoing fees
and expenses.
Your fund's management
Your fund is managed by the members of the Putnam Core Fixed-Income
High-Yield Team. Paul Scanlon is the Portfolio Leader and Rosemary
Thomsen is a Portfolio Member of your fund. The Portfolio Leader and
Portfolio Member coordinate the team's management of the fund.
For a complete listing of the members of the Putnam Core Fixed-Income
High-Yield Team, including those who are not Portfolio Leaders or
Portfolio Members of your fund, visit Putnam's Individual Investor Web
site at www.putnaminvestments.com.
Fund ownership
The table below shows how much the fund's current Portfolio Leader and
Portfolio Member have invested in the fund (in dollar ranges).
Information shown is for February 28, 2005, and February 29, 2004.
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FUND PORTFOLIO LEADER AND PORTFOLIO MEMBER
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$1 - $10,001 - $50,001 - $100,001 - $500,001 - $1,000,001
Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over
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Paul Scanlon 2005 *
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Portfolio Leader 2004 *
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Rosemary Thomsen 2005 *
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Portfolio Member 2004 *
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Fund manager compensation
The total 2004 fund manager compensation that is attributable to your
fund is approximately $1,100,000. This amount includes a portion of 2004
compensation paid by Putnam Management to the fund managers listed in
this section for their portfolio management responsibilities, calculated
based on the fund assets they manage taken as a percentage of the total
assets they manage. The compensation amount also includes a portion of
the 2004 compensation paid to the Group Chief Investment Officer of the
fund's broader investment category for his oversight responsibilities,
calculated based on the fund assets he oversees taken as a percentage of
the total assets he oversees. These percentages are determined as of the
fund's fiscal period-end. For personnel who joined Putnam Management
during or after 2004, the calculation reflects annualized 2004
compensation or an estimate of 2005 compensation, as applicable.
Other Putnam funds managed by the Portfolio Leader and Portfolio Member
Paul Scanlon is also a Portfolio Leader of Putnam Floating Rate Income
Fund, Putnam High Yield Advantage Fund, and Putnam Managed High Yield
Trust. He is also a Portfolio Member of Putnam Diversified Income Trust,
Putnam Master Intermediate Income Trust, and Putnam Premier Income
Trust.
Rosemary Thomsen is also a Portfolio Member of Putnam High Yield
Advantage Fund and Putnam Managed High Yield Trust.
Paul Scanlon and Rosemary Thomsen may also manage other accounts and
variable trust funds advised by Putnam Management or an affiliate.
Changes in your fund's Portfolio Leader and Portfolio Members
During the year ended February 28, 2005, Portfolio Member Norman Boucher
left your fund's management team for another position at Putnam. After
the close of the reporting period, Paul Scanlon became Portfolio Leader
of your fund following the departure of Portfolio Leader Stephen Peacher
from your fund's management team.
Fund ownership
The table below shows how much the members of Putnam's Executive Board
have invested in the fund (in dollar ranges). Information shown is for
February 28, 2005, and February 29, 2004.
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PUTNAM EXECUTIVE BOARD
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$1 - $10,001 - $50,001- $100,001
Year $0 $10,000 $50,000 $100,000 and over
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Philippe Bibi 2005 *
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Chief Technology Officer 2004 *
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John Boneparth 2005 *
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Head of Global Institutional Mgmt 2004 *
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Joshua Brooks 2005 *
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Deputy Head of Investments N/A
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Kevin Cronin 2005 *
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Head of Investments N/A
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Charles Haldeman, Jr. 2005 *
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President and CEO 2004 *
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Amrit Kanwal 2005 *
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Chief Financial Officer N/A
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Steven Krichmar 2005 *
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Chief of Operations N/A
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Francis McNamara, III 2005 *
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General Counsel N/A
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Richard Monaghan 2005 *
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Head of Retail Management 2004 *
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Richard Robie, III 2005 *
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Chief Administrative Officer N/A
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Edward Shadek 2005 *
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Deputy Head of Investments N/A
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N/A indicates the individual was not a member of Putnam's Executive
Board as of 2/29/04.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended February 28, 2005. In accordance with
regulatory requirements, we also include performance for the most
current calendar quarter-end. Performance should always be considered in
light of a fund's investment strategy. Data represents 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. For the most recent month-end performance, please visit
www.putnaminvestments.com.
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TOTAL RETURN FOR PERIODS ENDED 2/28/05
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Class A Class B Class C Class M Class R
(inception dates) (2/14/78) (3/1/93) (3/19/02) (7/3/95) (1/21/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 7.42% 2.53% 7.05% 2.05% 6.91% 5.91% 7.26% 3.75% 7.06%
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1 year 10.80 5.79 10.01 5.01 9.99 8.99 10.48 6.89 10.26
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5 years 32.66 26.73 27.91 26.30 27.34 27.34 30.89 26.69 30.79
Annual average 5.82 4.85 5.05 4.78 4.95 4.95 5.53 4.85 5.52
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10 years 93.18 84.47 79.46 79.46 78.56 78.56 88.44 82.32 88.05
Annual average 6.81 6.31 6.02 6.02 5.97 5.97 6.54 6.19 6.52
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Annual average
(life of fund) 9.35 9.17 8.42 8.42 8.52 8.52 8.96 8.83 9.07
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Performance assumes reinvestment of distributions and does not account
for taxes. Returns at public offering price (POP) for class A and M
shares reflect a sales charge of 4.50% and 3.25% respectively (which for
class A shares does not reflect a reduction in sales charge that went
into effect on April 1, 2005; if this reduction had been in place for
all periods indicated, returns would have been higher). Class B share
returns reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declining to 1% in the sixth year, and is
eliminated thereafter. Class C shares reflect a 1% CDSC the first year
that is eliminated thereafter. Class R shares have no initial sales
charge or CDSC. Performance for class B, C, M, and R shares before their
inception is derived from the historical performance of class A shares,
adjusted for the applicable sales charge (or CDSC) and higher operating
expenses for such shares.
A 2% short-term trading fee may be imposed on shares exchanged or sold
within 5 days of purchase. In addition, there is a 1% short-term trading
fee for this fund on shares sold or exchanged between 6 and 90 days.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/28/05
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JP Morgan Lipper High
Global Current Yield
High Yield Funds category
Index* average+
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6 months 7.37% 7.02%
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1 year 10.95 9.76
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5 years 46.25 30.73
Annual average 7.90 5.32
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10 years 120.98 91.09
Annual average 8.25 6.54
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Annual average
(life of fund) -- 9.09
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Index and Lipper results should be compared to fund performance at net
asset value.
* This index began operations on 12/31/93.
+ Over the 6-month and 1-, 5-, and 10-year periods ended 2/28/05, there
were 425, 414, 280, and 90 funds, respectively, in this Lipper
category.
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PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 2/28/05
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Class A Class B Class C Class M Class R
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Distributions (number) 6 6 6 6 6
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Income 1 $0.303 $0.272 $0.272 $0.291 $0.295
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Capital gains 1 -- -- -- -- --
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Total $0.303 $0.272 $0.272 $0.291 $0.295
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Share value: NAV POP NAV NAV NAV POP NAV
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8/31/04 $7.98 $8.36 $7.94 $7.95 $7.98 $8.25 $7.98
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2/28/05 8.26 8.65 8.22 8.22 8.26 8.54 8.24
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Current return
(end of period)
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Current dividend rate 1 7.12% 6.80% 6.28% 6.28% 6.83% 6.60% 6.84%
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Current 30-day
SEC yield 2 5.76 5.49 5.01 5.00 5.50 5.32 5.51
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1 Most recent distribution, excluding capital gains, annualized and
divided by NAV or POP at end of period.
2 Based only on investment income, calculated using SEC guidelines.
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TOTAL RETURN FOR PERIODS ENDED 3/31/05 (MOST RECENT CALENDAR QUARTER)
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Class A Class B Class C Class M Class R
(inception dates) (2/14/78) (3/1/93) (3/19/02) (7/3/95) (1/21/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 2.74% -1.90% 2.36% -2.59% 2.36% 1.37% 2.59% -0.74% 2.37%
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1 year 6.90 2.07 6.12 1.16 6.23 5.24 6.59 3.13 6.50
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5 years 29.92 24.14 25.25 23.67 24.86 24.86 28.18 24.00 28.03
Annual average 5.38 4.42 4.61 4.34 4.54 4.54 5.09 4.40 5.07
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10 years 85.84 77.45 72.61 72.61 71.86 71.86 81.23 75.36 80.99
Annual average 6.39 5.90 5.61 5.61 5.56 5.56 6.13 5.78 6.11
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Annual average
(life of fund) 9.20 9.02 8.27 8.27 8.37 8.37 8.81 8.68 8.92
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Understanding 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
information below, 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 advisor.
Review your fund's expenses
The table below shows the expenses you would have paid on a $1,000
investment in Putnam High Yield Trust from September 1, 2004, to
February 28, 2005. It also shows how much a $1,000 investment would be
worth at the close of the period, assuming actual returns and expenses.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 2/28/05
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Class A Class B Class C Class M Class R
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Expenses paid per
$1,000* $4.94 $8.78 $8.77 $6.22 $6.21
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Ending value (after
expenses) $1,074.20 $1,070.50 $1,069.10 $1,072.60 $1,070.60
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* 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 net assets for the six months ended 2/28/05. The
expense ratio may differ for each share class (see the table at the
bottom of the next page). 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, 2005, use the calculation method below. To find the value
of your investment on September 1, 2004, go to www.putnaminvestments.com
and log on to your account. Click on the "Transaction History" tab in
your Daily Statement and enter 09/01/2004 in both the "from" and "to"
fields. Alternatively, call Putnam at 1-800-225-1581.
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HOW TO CALCULATE THE EXPENSES YOU PAID
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Total
Value of your Expenses paid expenses
investment on 9/1/04 [DIV] $1,000 X per $1,000 = paid
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Example Based on a $10,000 investment in class A shares of your fund.
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$10,000 [DIV] $1,000 X $4.94 (see table above) = $49.40
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Comparing your fund's expenses with those of other funds
Using the SEC's method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines
to help investors assess fund expenses. Per these guidelines, the table
below 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.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 2/28/05
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Class A Class B Class C Class M Class R
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Expenses paid per
$1,000* $4.81 $8.55 $8.55 $6.06 $6.06
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Ending value (after
expenses) $1,020.03 $1,016.31 $1,016.31 $1,018.79 $1,018.79
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* 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 net assets for the six months ended 2/28/05. The
expense ratio may differ for each share class (see the table at the
bottom of this page). 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.
Using industry averages to compare expenses
You can also compare your fund's expenses with the average expenses of
its peer group, as defined by Lipper, an independent fund-rating agency
that ranks funds relative to others that Lipper considers to have
similar investment styles or objectives. The expense ratio for each
share class shown below indicates how much of your fund's net assets
have been used to pay ongoing expenses during the period.
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EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA
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Class A Class B Class C Class M Class R
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Your fund's annualized
expense ratio 0.96% 1.71% 1.71% 1.21% 1.21%
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Average annualized expense
ratio for Lipper peer
group+ 1.13% 1.88% 1.88% 1.38% 1.38%
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+ Average of the expenses of front-end load funds viewed by Lipper as having
the same investment classification or objective as the fund, as of
12/31/04, calculated in accordance with Lipper's standard reporting
methodology for comparing expenses within a given universe (excluding
12b-1 fees and without giving effect to any expense offset and
brokerage service arrangements that may reduce fund expenses). To
facilitate comparison, Putnam has adjusted this average to reflect the
12b-1 fees carried by each class of shares. The peer group may include
funds that are significantly larger or smaller than the fund, which
may limit the comparability of the fund's expenses to the Lipper
average.
Understanding your fund's
portfolio turnover
Putnam funds are actively managed by teams of experts who buy and sell
securities based on intensive analysis of companies, industries,
economies, and markets. Portfolio turnover is a measure of how often a
fund's managers buy and sell securities for your fund. A portfolio
turnover of 100%, for example, means that the managers sold and replaced
securities valued at 100% of a fund's assets within a one-year period.
Funds with high turnover may be more likely to generate capital gains
and dividends that must be distributed to shareholders as taxable
income. High turnover may also cause a fund to pay more brokerage
commissions and other transaction costs, which may detract from
performance.
Funds that invest in bonds may have higher turnover than funds that
invest only in stocks. Short-term bond funds tend to have higher
turnover than longer-term bond funds, because shorter-term bonds will
mature or be sold more frequently than longer-term bonds. You can use
the table below to compare your fund's turnover with the average
turnover for funds in its Lipper category.
- ------------------------------------------------------------------------------
TURNOVER COMPARISONS
percentage of holdings that change every year
- ------------------------------------------------------------------------------
2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------
Putnam High Yield
Trust 62% 75% 74% 77% 61%
- ------------------------------------------------------------------------------
Lipper High Current Yield
Funds category
average 109% 108% 101% 108% 75%
- ------------------------------------------------------------------------------
Turnover data for the fund is calculated based on the fund's fiscal-year
period, which ends on August 31. Turnover data for the fund's Lipper
category is calculated based on the average of the turnover of each fund
in the category for its fiscal year ended during the indicated year.
Fiscal years vary across funds in the Lipper category, which may limit
the comparability of the fund's portfolio turnover rate to the Lipper
average. Comparative data for 2004 is based on information available as
of 12/31/04.
Risk comparison
This risk comparison is designed to help you understand how your fund
compares with other funds. The comparison utilizes a risk measure
developed by Morningstar, an independent fund-rating agency. This risk
measure is referred to as the fund's Overall Morningstar Risk.
[GRAPHIC OMITTED: chart MORNINGSTAR [REGISTRATION MARK] RISK]
MORNINGSTAR [REGISTRATION MARK] RISK
Fund's Overall
Morningstar Risk 0.58
Taxable bond
fund average 0.30
0% INCREASING RISK 100%
Your fund's Overall Morningstar Risk is shown alongside that of the
average fund in its broad asset class, as determined by Morningstar. The
risk bar broadens the comparison by translating the fund's Overall
Morningstar Risk into a percentile, which is based on the fund's ranking
among all funds rated by Morningstar as of March 31, 2005. A higher
Overall Morningstar Risk generally indicates that a fund's monthly
returns have varied more widely.
Morningstar determines a fund's Overall Morningstar Risk by assessing
variations in the fund's monthly returns -- with an emphasis on downside
variations -- over 3-, 5-, and 10-year periods, if available. Those
measures are weighted and averaged to produce the fund's Overall
Morningstar Risk. The information shown is provided for the fund's class
A shares only; information for other classes may vary. Overall
Morningstar Risk is based on historical data and does not indicate
future results. Morningstar does not purport to measure the risk
associated with a current investment in a fund, either on an absolute
basis or on a relative basis. Low Overall Morningstar Risk does not mean
that you cannot lose money on an investment in a fund. Copyright 2004
Morningstar, Inc. All Rights Reserved. The information contained herein
(1) is proprietary to Morningstar and/or its content providers; (2) may
not be copied or distributed; and (3) is not warranted to be accurate,
complete, or timely. Neither Morningstar nor its content providers are
responsible for any damages or losses arising from any use of this
information.
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. NAV
is calculated by dividing the net assets of each class of shares by the
number of outstanding shares in the class.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 4.50% maximum sales charge for class A
shares (since reduced to 3.75%) and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is 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 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.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without an initial sales charge).
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge 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 sales charge on redemption (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 certain defined contribution plans.
Comparative indexes
JP Morgan Global High Yield Index is an unmanaged index of global
high-yield fixed-income securities.
Lehman Aggregate Bond Index is an unmanaged index of U.S.
investment-grade fixed-income securities.
Lehman Government/Credit Bond Index is an unmanaged index of U.S.
Treasuries, agency securities, and investment-grade corporate bonds.
Lehman Municipal Bond Index is an unmanaged index of long-term
fixed-rate investment-grade tax-exempt bonds.
Russell 2000 Value Index is an unmanaged index of those companies in the
small-cap Russell 2000 Index chosen for their value orientation.
Russell 2500 Growth Index is an unmanaged index of those companies in
the small/mid-cap Russell 2500 Index chosen for their growth
orientation.
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.
Lipper is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
Trustee approval of management contract
General conclusions
The Board of Trustees of the Putnam funds oversees the management of
each fund and, as required by law, determines annually whether to
approve the continuance of each fund's management contract with Putnam
Management. In this regard the Board of Trustees, with the assistance of
its Contract Committee consisting solely of Independent Trustees,
requests and evaluates all information it deems reasonably necessary in
the circumstances. Over the course of several months beginning in March
and ending in June of 2004, the Contract Committee reviewed the
information provided by Putnam Management and other information
developed with the assistance of the Board's independent counsel and
independent staff. The Contract Committee reviewed and discussed key
aspects of this information with all of the Independent Trustees. Upon
completion of this review, the Contract Committee recommended and the
Independent Trustees approved the continuance of your fund's contract,
effective July 1, 2004.
This approval was based on the following conclusions:
* That the fee schedule currently in effect for your fund represents
reasonable compensation in light of the nature and quality of the
services being provided to the fund, the fees paid by competitive funds
and the costs incurred by Putnam Management in providing such service,
and
* That such fee schedule represents an appropriate sharing between fund
shareholders and Putnam Management of such economies of scale as may
exist in the management of the fund at current asset levels.
These conclusions were based on a comprehensive consideration of all
information provided to the Trustees and were not the result of any
single factor. Some of the factors that figured particularly in the
Trustees' deliberations are described below.
Model fee schedules and categories; total expenses
The Trustees, working in cooperation with Putnam Management, have
developed and implemented a series of model fee schedules for the Putnam
funds designed to ensure that each fund's management fee is consistent
with the fees for similar funds in the Putnam complex and compares
favorably with fees paid by competitive funds sponsored by other
advisors. The Trustees reviewed the model fee schedule currently in
effect for the fund, including fee levels and breakpoints, and the
assignment of the fund to a particular fee category under this
structure. The Trustees also reviewed comparative fee and expense
information for competitive funds. The Trustees concluded that no
changes should be made in the fund's current fee schedule at this time.
The Trustees noted that expense ratios for a number of Putnam funds had
been increasing recently as a result of declining net assets and the
natural operation of fee breakpoints. They noted that such expense ratio
increases were currently being controlled by expense limitations
implemented in January 2004. They also noted that the competitive
landscape regarding mutual fund fees may be changing as a result of fee
reductions accepted by various other fund groups in connection with
recent regulatory settlements and greater focus on fees and expenses in
the mutual fund industry generally. The Trustees indicated an intention
to monitor these developments closely.
Economies of scale
As noted above, the Trustees concluded that the fee schedule currently
in effect for your fund represents an appropriate sharing of economies
of scale at current asset levels. The Trustees indicated their intention
to continue their ongoing consideration of economies of scale and in
particular to consider further the possible operation of such economies
in the event that a significant recovery in the equity markets or net
fund sales were to raise asset levels substantially above current
levels. In this regard, the Trustees noted that they had reviewed data
relating to the substantial increase in asset levels of the Putnam funds
that occurred during the years leading up to the market peak in 2000,
the subsequent decline in assets and the resulting impact on revenues
and expenses of Putnam Management. The Trustees also noted that recent
declines in net assets in many Putnam funds, together with significant
changes in the cost structure of Putnam Management have altered the
economics of Putnam Management's business in significant ways. The
Trustees concluded that they would monitor these changes carefully and
evaluate the resulting impact on Putnam Management's economics and the
sharing of economies of scale between the parties.
Investment performance
The quality of the investment process provided by Putnam Management
represented a major factor in the Trustees' evaluation of the quality of
services provided by Putnam Management under the Management Contracts.
The Trustees recognized that a high quality investment process -- as
measured by the experience and skills of the individuals assigned to the
management of fund portfolios, the resources made available to such
personnel, and in general the ability of Putnam Management to attract
and retain high-quality personnel -- does not guarantee favorable
investment results for every fund in every time period. The Trustees
considered the investment performance of each fund over multiple time
periods and considered information comparing the fund's performance with
various benchmarks and with the performance of competitive funds. The
Trustees noted the satisfactory investment performance of many Putnam
funds.
They also noted the disappointing investment performance of certain
funds in recent years and continued to discuss with senior management of
Putnam Management the factors contributing to such under-performance and
actions being taken to improve performance. The Trustees recognized
that, in recent years, Putnam Management has made significant changes in
its investment personnel and processes and in the fund product line in
an effort to address areas of underperformance. The Trustees indicated
their intention to continue to monitor performance trends to assess the
effectiveness of these changes and to evaluate whether additional
remedial changes are warranted. As a general matter, the Trustees
concluded that consultation between the Trustees and Putnam Management
represents the most effective way to address investment performance
problems. The Trustees believe that investors in the Putnam funds and
their financial advisors have, as a general matter, effectively placed
their trust in the Putnam organization, under the supervision of the
funds' Trustees, to make appropriate decisions regarding the management
of the funds. The Trustees believe that the termination of the
Management Contract and engagement of a new investment adviser for
under-performing funds, with all the attendant disruptions, would not
serve the interests of fund shareholders at this time and would not
necessarily provide any greater assurance of improved investment
performance.
Brokerage and soft-dollar allocations; other benefits
The Trustees considered various potential benefits that Putnam
Management may receive in connection with the services it provides under
the Management Contract with your fund. These include principally
benefits related to brokerage and soft-dollar allocations, which pertain
mainly to funds investing in equity securities. The Trustees believe
that soft-dollar credits and other potential benefits associated with
the allocation of fund brokerage represent assets of the funds that
should be used for the benefit of fund shareholders. The Trustees noted
recent trends in the allocation of fund brokerage, including commission
costs, the allocation of brokerage to firms that provide research
services to Putnam Management, and the sources and application of
available soft-dollar credits. Effective December 31, 2003, reflecting a
decision made by the Trustees earlier that year, Putnam Management
ceased allocating brokerage in connection with the sale of fund shares.
In addition, in preparing its budget for commission allocations in 2004,
Putnam Management voluntarily reduced substantially the allocation of
brokerage commissions to acquire research services from third-party
service providers. In light of evolving best practices in the mutual
fund industry, the Trustees concluded that this practice should be
further curtailed and possibly eliminated in the near future. The
Trustees indicated that they would continue to monitor the allocation of
the funds' brokerage to ensure that the principle of "best price and
execution" remains paramount in the portfolio trading process.
Comparison of retail and institutional fee schedules
The information examined by the Trustees as part of the annual contract
reviews included information regarding fees charged by Putnam Management
and its affiliates to institutional clients such as defined benefit
pension plans and college endowments. This information included
comparison of such fees with fees charged to the Putnam funds, as well
as a detailed assessment of the differences in the services provided to
these two types of clients. The Trustees devoted special attention to
these issues and reviewed recent articles by critics of mutual fund
fees, articles by the ICI defending such fee differences, and relevant
guidance provided by decisions of the courts. The Trustees observed, in
this regard, that the differences in fee rates between institutional
clients and mutual funds are by no means uniform when examined by
individual asset sectors, suggesting that differences in the pricing of
investment management services to these types of clients reflects to a
substantial degree historical competitive forces operating in separate
market places. In reaching their conclusions, the Trustees considered
the fact that fee rates across all asset sectors are higher on average
for mutual funds than for institutional clients, and also considered the
differences between the services that Putnam provides to the Putnam
funds and those that it provides to institutional clients of the firm.
Settlement of regulatory charges related to market timing
Finally, in reaching their conclusions, the Trustees considered all
matters pertinent to the administrative charges filed against Putnam
Management by the SEC and the Commonwealth of Massachusetts in October
2003 relating to market timing, the firm's settlement of those charges,
and the conclusions and recommendations of the Trustees' Audit and
Pricing Committee based on its review of these matters. The Trustees
considered the actions taken by the owner of Putnam Management and its
new senior management to terminate or discipline the individuals
involved, to implement new compliance systems, to indemnify the funds
against all costs and liabilities related to these matters, and
otherwise to ensure that the interests of the funds and their
shareholders are fully protected. The Trustees noted that, in addition
to the settlements of the regulatory charges which will provide
comprehensive restitution for any losses suffered by shareholders, the
new senior management of Putnam Management has moved aggressively to
control expense ratios of funds affected by market timing, to reduce
charges to new investors, to improve disclosure of fees and expenses,
and to emphasize the paramount role of investment performance in
achieving shareholders' investment goals.
Other information for shareholders
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
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, 2004, are available on the Putnam Individual Investor Web site,
www.putnaminvestments.com/individual, and on the SEC's Web site,
www.sec.gov. If you have questions about finding forms on the SEC's Web
site, 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
For periods ending on or after July 9, 2004, 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 Forms N-Q on the SEC's Web site at www.sec.gov. In
addition, the fund's Forms 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 Web site or the operation
of the public reference room.
A guide to the 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 noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or loss
the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal 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.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment
income ratios, and portfolio turnover in one summary table, reflecting
the five most recent reporting periods. In a semiannual report, the
highlight table also includes the current reporting period. For open-end
funds, a separate table is provided for each share class.
The fund's portfolio
February 28, 2005 (Unaudited)
Corporate bonds and notes (84.6%) (a)
Principal amount Value
Advertising and Marketing Services (0.2%)
- -------------------------------------------------------------------------------
$2,460,000 Bear Creek Corp. 144A sr. notes 9s,
2013 $2,515,350
3,950,000 Lamar Media Corp. company guaranty
7 1/4s, 2013 4,226,500
--------------
6,741,850
Automotive (1.8%)
- -------------------------------------------------------------------------------
2,350,000 Affinia Group, Inc. 144A sr. sub.
notes 9s, 2014 2,379,375
2,615,000 ArvinMeritor, Inc. notes 8 3/4s,
2012 2,954,950
1,475,000 Dana Corp. notes 10 1/8s, 2010 1,604,297
8,177,000 Dana Corp. notes 9s, 2011 9,857,597
1,199,000 Dana Corp. notes 7s, 2029 1,168,187
1,598,000 Delco Remy International, Inc.
company guaranty 11s, 2009 1,685,890
6,050,000 Delco Remy International, Inc. sr.
sub. notes 9 3/8s, 2012 5,823,125
1,789,000 Dura Operating Corp. company
guaranty Ser. B, 8 5/8s, 2012 1,789,000
3,785,000 Meritor Automotive, Inc. notes 6.8s,
2009 3,889,088
4,105,000 Metaldyne Corp. 144A sr. notes 10s,
2013 4,043,425
12,200,000 Tenneco Automotive, Inc. sec. notes
Ser. B, 10 1/4s, 2013 14,335,000
4,170,000 Tenneco Automotive, Inc. 144A sr.
sub. notes 8 5/8s, 2014 4,441,050
--------------
53,970,984
Basic Materials (9.2%)
- -------------------------------------------------------------------------------
3,000 Abitibi-Consolidated Finance LP
company guaranty 7 7/8s, 2009 3,135
5,169,000 Acetex Corp. sr. notes 10 7/8s, 2009
(Canada) 5,582,520
5,699,000 AK Steel Corp. company guaranty
7 3/4s, 2012 6,040,940
1,835,000 ALROSA Finance SA 144A company
guaranty 8 7/8s, 2014 (Luxembourg) 1,926,750
8,905,000 BCP Caylux Holdings Luxembourg SCA
144A sr. sub. notes 9 5/8s, 2014
(Luxembourg) 10,285,275
2,725,000 Century Aluminum Co. 144A company
guaranty 7 1/2s, 2014 2,929,375
EUR 2,250,000 Cognis Holding GmbH & Co. 144A sr.
notes 9 1/2s, 2014 (Germany) 3,396,803
$6,079,000 Compass Minerals Group, Inc. company
guaranty 10s, 2011 6,823,678
2,540,000 Compass Minerals International, Inc.
sr. disc. notes stepped-coupon Ser. B,
zero % (12s, 6/1/08), 2013 (STP) 2,133,600
7,145,000 Compass Minerals International, Inc.
sr. notes stepped-coupon zero %
(12 3/4s, 12/15/07), 2012 (STP) 6,287,600
5,185,000 Crystal US Holdings, LLC/US Sub 3
Corp. 144A sr. disc. notes
stepped-coupon zero % (10s,
10/1/09), 2014 (STP) 3,849,863
7,020,000 Equistar Chemicals LP notes 8 3/4s,
2009 7,844,850
14,008,000 Equistar Chemicals LP/Equistar
Funding Corp. company guaranty
10 1/8s, 2008 16,144,220
2,650,000 Georgia-Pacific Corp. bonds 7 3/4s,
2029 3,120,375
2,985,000 Georgia-Pacific Corp. company
guaranty 8 7/8s, 2010 3,477,525
4,269,000 Georgia-Pacific Corp. debs. 7.7s,
2015 4,962,713
3,860,000 Georgia-Pacific Corp. sr. notes 8s,
2024 4,612,700
7,150,000 Gerdau Ameristeel Corp. sr. notes
10 3/8s, 2011 (Canada) 8,222,500
10,958,000 Hercules, Inc. company guaranty
11 1/8s, 2007 12,875,650
6,055,000 Hercules, Inc. company guaranty
6 3/4s, 2029 6,236,650
1,705,000 Huntsman Advanced Materials, LLC
144A sec. FRN 10.89s, 2008 1,824,350
310,000 Huntsman Advanced Materials, LLC
144A sec. notes 11s, 2010 365,025
8,227,000 Huntsman International, LLC company
guaranty 10 1/8s, 2009 8,658,918
1,634,000 Huntsman International Holdings sr.
disc. notes zero %, 2009 931,380
2,408,000 Huntsman, LLC company guaranty
11 5/8s, 2010 2,907,660
2,685,000 Huntsman, LLC 144A company guaranty
11 1/2s, 2012 3,195,150
6,915,000 Innophos, Inc. 144A sr. sub. notes
8 7/8s, 2014 7,433,625
1,230,000 International Steel Group, Inc. sr.
notes 6 1/2s, 2014 1,316,100
6,609,000 ISP Chemco, Inc. company guaranty
Ser. B, 10 1/4s, 2011 7,402,080
76,000 Jefferson Smurfit Corp. company
guaranty 8 1/4s, 2012 82,080
200,000 Jefferson Smurfit Corp. company
guaranty 7 1/2s, 2013 210,750
EUR 4,700,000 JSG Holding PLC sr. notes 11 1/2s,
2015 (Ireland) 6,206,651
EUR 360,000 Kappa Beheer BV company guaranty
Ser. EUR, 12 1/2s, 2009
(Netherlands) 511,237
$660,000 Lyondell Chemical Co. bonds 11 1/8s,
2012 778,800
7,294,000 Lyondell Chemical Co. company
guaranty 9 1/2s, 2008 7,877,520
5,849,000 Lyondell Chemical Co. notes Ser. A,
9 5/8s, 2007 6,404,655
8,555,000 MDP Acquisitions PLC sr. notes
9 5/8s, 2012 (Ireland) 9,474,663
EUR 322,000 MDP Acquisitions PLC sr. notes
Ser. EUR, 10 1/8s, 2012 (Ireland) 485,265
$7,858,000 Millennium America, Inc. company
guaranty 9 1/4s, 2008 8,742,025
EUR 685,000 Nalco Co. sr. notes 7 3/4s, 2011 1,004,136
EUR 2,975,000 Nalco Co. sr. sub. notes 9s, 2013 4,479,482
$8,055,000 Nalco Co. sr. sub. notes 8 7/8s,
2013 8,900,775
3,345,000 Norske Skog Canada, Ltd. sr. notes
7 3/8s, 2014 (Canada) 3,512,250
8,350,000 Novelis, Inc. 144A sr. notes 7 1/4s,
2015 (Canada) 8,642,250
2,553,936 PCI Chemicals Canada sec. sr. notes
10s, 2008 (Canada) 2,732,712
1,657,920 Pioneer Companies, Inc. sec. sr.
notes FRN 6.05s, 2006 1,749,106
2,450,000 PQ Corp. 144A company guaranty
7 1/2s, 2013 2,538,813
EUR 3,400,000 Rockwood Specialties Group, Inc.
company guaranty 7 5/8s, 2014 4,738,104
$1,350,000 Rockwood Specialties Group, Inc.
144A sub. notes 7 1/2s, 2014 1,424,250
EUR 4,040,000 SGL Carbon SA 144A sr. notes 8 1/2s,
2012 (Luxembourg) 6,010,676
$400,000 Smurfit Capital Funding PLC notes
6 3/4s, 2005 (Ireland) 406,000
4,379,000 Steel Dynamics, Inc. company
guaranty 9 1/2s, 2009 4,778,584
1,334,122 Sterling Chemicals, Inc. sec. notes
10s, 2007 (PIK) 1,334,122
8,090,000 Stone Container Corp. sr. notes
9 3/4s, 2011 8,818,100
3,555,000 Stone Container Corp. sr. notes
8 3/8s, 2012 3,848,288
1,385,000 Stone Container Finance company
guaranty 7 3/8s, 2014 (Canada) 1,455,981
1,390,000 Tembec Industries, Inc. company
guaranty 7 3/4s, 2012 (Canada) 1,341,350
3,860,000 Ucar Finance, Inc. company guaranty
10 1/4s, 2012 4,294,250
2,289,000 United Agri Products 144A sr. notes
8 3/4s, 2011 2,495,010
1,396,000 United States Steel Corp. sr. notes
9 3/4s, 2010 1,591,440
1,607,000 United States Steel, LLC sr. notes
10 3/4s, 2008 1,908,313
382,617 Wheeling-Pittsburgh Steel Corp. sr.
notes 6s, 2010 (PIK) 325,224
743,687 Wheeling-Pittsburgh Steel Corp. sr.
notes 5s, 2011 (PIK) 632,134
1,646,000 WHX Corp. sr. notes 10 1/2s, 2005 1,547,240
--------------
272,073,246
Beverage (0.1%)
- -------------------------------------------------------------------------------
3,088,000 Constellation Brands, Inc. company
guaranty Ser. B, 8s, 2008 3,358,200
338,000 Constellation Brands, Inc. sr. sub.
notes Ser. B, 8 1/8s, 2012 368,420
--------------
3,726,620
Broadcasting (2.0%)
- -------------------------------------------------------------------------------
23,030,000 Diva Systems Corp. sr. disc. notes
Ser. B, 12 5/8s, 2008 (In default)
(NON) 100,756
12,880,000 Echostar DBS Corp. sr. notes 6 3/8s,
2011 13,266,400
6,960,000 Echostar DBS Corp. 144A company
guaranty 6 5/8s, 2014 7,151,400
11,095,000 Granite Broadcasting Corp. sec.
notes 9 3/4s, 2010 10,623,463
1,783,000 Gray Television, Inc. company
guaranty 9 1/4s, 2011 1,961,300
6,780,000 Intelsat Bermuda, Ltd. 144A sr.
notes 8 5/8s, 2015 (Bermuda) 7,237,650
3,220,000 Intelsat Bermuda, Ltd. 144A sr.
notes 8 1/4s, 2013 (Bermuda) 3,372,950
406,874 Knology, Inc. 144A sr. notes 12s,
2009 (PIK) 392,633
8,810,000 Rainbow National Services, LLC 144A
sr. notes 8 3/4s, 2012 10,043,400
973,000 Young Broadcasting, Inc. company
guaranty 10s, 2011 1,026,515
3,385,000 Young Broadcasting, Inc. sr. sub.
notes 8 3/4s, 2014 3,351,150
--------------
58,527,617
Building Materials (0.6%)
- -------------------------------------------------------------------------------
2,869,000 Building Materials Corp. company
guaranty 8s, 2008 2,965,829
5,074,000 Dayton Superior Corp. sec. notes
10 3/4s, 2008 5,454,550
4,000 Owens Corning bonds 7 1/2s, 2018 (In
default) (NON) 2,600
5,755,000 Owens Corning notes 7 1/2s, 2005 (In
default) (NON) 3,755,138
5,945,000 THL Buildco, Inc. (Nortek Holdings,
Inc.) sr. sub. notes 8 1/2s, 2014 6,063,900
--------------
18,242,017
Cable Television (3.3%)
- -------------------------------------------------------------------------------
3,211,000 Adelphia Communications Corp. sr.
notes 10 7/8s, 2010 (In default)
(NON) 2,905,955
2,918,000 Adelphia Communications Corp. sr.
notes 7 7/8s, 2009 (In default)
(NON) 2,451,120
2,431,000 Adelphia Communications Corp. sr.
notes Ser. B, 9 7/8s, 2007 (In
default) (NON) 2,108,893
3,950,000 Atlantic Broadband Finance, LLC 144A
sr. sub. notes 9 3/8s, 2014 3,871,000
2,600,000 Cablevision Systems Corp. 144A sr.
notes 8s, 2012 2,925,000
2,258,000 Charter Communications Holdings,
LLC/Capital Corp. sr. disc. notes
stepped-coupon zero % (12 1/8s,
1/15/07), 2012 (STP) 1,467,700
4,938,000 Charter Communications Holdings,
LLC/Capital Corp. sr. disc. notes
stepped-coupon zero % (11 3/4s,
5/15/06), 2011 (STP) 3,543,015
10,835,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes
11 1/8s, 2011 9,263,925
10,927,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes
10 3/4s, 2009 9,424,538
13,360,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes 10s,
2011 10,955,200
8,070,000 Charter Communications Holdings,
LLC/Capital Corp. sr. notes 9 5/8s,
2009 6,677,925
5,616,000 CSC Holdings, Inc. debs. 7 5/8s,
2018 6,542,640
3,495,000 CSC Holdings, Inc. sr. notes Ser. B,
7 5/8s, 2011 3,888,188
6,350,000 CSC Holdings, Inc. 144A sr. notes
6 3/4s, 2012 6,826,250
11,975,000 Kabel Deutsheland GmbH 144A sr.
notes 10 5/8s, 2014 (Germany) 13,771,250
7,354,000 Quebecor Media, Inc. sr. notes
11 1/8s, 2011 (Canada) 8,355,983
2,670,000 Videotron Ltee company guaranty
6 7/8s, 2014 (Canada) 2,803,500
--------------
97,782,082
Capital Goods (6.4%)
- -------------------------------------------------------------------------------
6,780,000 AEP Industries, Inc. sr. sub. notes
9 7/8s, 2007 6,924,075
7,867,000 Allied Waste North America, Inc.
company guaranty Ser. B, 8 1/2s,
2008 8,457,025
3,590,000 Amsted Industries, Inc. 144A sr.
notes 10 1/4s, 2011 4,056,700
5,000,000 Argo-Tech Corp. sr. notes 9 1/4s,
2011 5,500,000
3,028,000 BE Aerospace, Inc. sr. sub. notes
Ser. B, 8 7/8s, 2011 3,186,970
6,492,000 BE Aerospace, Inc. sr. sub. notes
Ser. B, 8s, 2008 6,508,230
5,345,000 Blount, Inc. sr. sub. notes 8 7/8s,
2012 5,839,413
3,333,000 Browning-Ferris Industries, Inc.
debs. 7.4s, 2035 2,958,038
4,215,000 Browning-Ferris Industries, Inc. sr.
notes 6 3/8s, 2008 4,183,388
9,435,000 Crown Euro Holdings SA sec. notes
10 7/8s, 2013 (France) 11,204,063
EUR 650,000 Crown Euro Holdings SA sec. notes
10 1/4s, 2011 (France) 992,082
$5,090,000 Crown Euro Holdings SA sec. notes
9 1/2s, 2011 (France) 5,726,250
EUR 1,065,000 Crown Euro Holdings SA sec. notes
6 1/4s, 2011 (France) 1,494,036
$22,984,000 Decrane Aircraft Holdings Co.
company guaranty zero %, 2008 8,733,920
7,166,000 Earle M. Jorgensen Co. sec. notes
9 3/4s, 2012 8,025,920
385,000 FIMEP SA sr. notes 10 1/2s, 2013
(France) 452,375
EUR 405,000 Flender Holdings 144A sr. notes 11s,
2010 (Germany) 652,544
$3,802,000 Flowserve Corp. company guaranty
12 1/4s, 2010 4,182,200
8,030,000 Invensys, PLC notes 9 7/8s, 2011
(United Kingdom) 8,672,400
8,790,000 L-3 Communications Corp. company
guaranty 6 1/8s, 2013 9,075,675
11,095,000 Legrand SA debs. 8 1/2s, 2025
(France) 13,757,800
2,489,000 Manitowoc Co., Inc. (The) company
guaranty 10 1/2s, 2012 2,868,573
EUR 1,550,000 Manitowoc Co., Inc. (The) company
guaranty 10 3/8s, 2011 2,308,134
$2,030,000 Manitowoc Co., Inc. (The) sr. notes
7 1/8s, 2013 2,197,475
1,325,000 Milacron Escrow Corp. sec. notes
11 1/2s, 2011 1,457,500
1,900,000 Mueller Group, Inc. sec. FRN 7.493s,
2011 1,952,250
3,270,000 Mueller Group, Inc. sr. sub. notes
10s, 2012 3,597,000
4,000 Owens-Brockway Glass company
guaranty 8 7/8s, 2009 4,330
6,540,000 Owens-Brockway Glass company
guaranty 8 1/4s, 2013 7,194,000
4,075,000 Owens-Brockway Glass company
guaranty 7 3/4s, 2011 4,401,000
8,313,000 Owens-Brockway Glass sr. sec. notes
8 3/4s, 2012 9,289,778
600,000 Owens-Illinois, Inc. debs. 7.8s,
2018 643,500
1,555,000 Pliant Corp. sec. notes 11 1/8s,
2009 1,679,400
EUR 1,415,000 Polypore, Inc. notes 8 3/4s, 2012 1,906,158
$3,540,000 Polypore, Inc. sr. sub. notes
8 3/4s, 2012 3,540,000
3,561,000 Sequa Corp. sr. notes 9s, 2009 3,952,710
3,255,000 Sequa Corp. sr. notes Ser. B,
8 7/8s, 2008 3,547,950
2,515,000 Siebe PLC 144A sr. unsub. 6 1/2s,
2010 (United Kingdom) 2,420,688
1,970,000 Solo Cup Co. sr. sub. notes 8 1/2s,
2014 2,048,800
3,000 Tekni-Plex, Inc. company guaranty
Ser. B, 12 3/4s, 2010 2,670
1,540,000 Terex Corp. company guaranty 9 1/4s,
2011 1,717,100
6,295,000 Terex Corp. company guaranty Ser. B,
10 3/8s, 2011 7,003,188
5,530,000 Titan Corp. (The) company guaranty
8s, 2011 5,944,750
--------------
190,260,058
Commercial and Consumer Services (0.6%)
- -------------------------------------------------------------------------------
6,193,000 Coinmach Corp. sr. notes 9s, 2010 6,440,720
10,430,000 Laidlaw International, Inc. sr.
notes 10 3/4s, 2011 11,955,388
--------------
18,396,108
Communication Services (7.9%)
- -------------------------------------------------------------------------------
3,170,000 Alamosa Delaware, Inc. company
guaranty 11s, 2010 3,693,050
2,278,000 Alamosa Delaware, Inc. company
guaranty stepped-coupon zero %
(12s, 7/31/05), 2009 (STP) 2,483,020
2,945,000 Alamosa Delaware, Inc. sr. notes
8 1/2s, 2012 3,195,325
1,795,000 American Cellular Corp. company
guaranty 9 1/2s, 2009 1,750,125
3,360,000 American Tower Corp. sr. notes
7 1/2s, 2012 3,536,400
6,940,000 American Towers, Inc. company
guaranty 7 1/4s, 2011 7,391,100
5,681,039 Asia Global Crossing, Ltd. sr. notes
13 3/8s, 2010 (Bermuda) (In default)
(NON) 284,052
15,205,000 AT&T Corp. sr. notes 9 3/4s, 2031 19,329,356
7,110,000 Centennial Cellular Operating Co.
company guaranty 10 1/8s, 2013 8,247,600
965,000 Centennial Cellular Operating Co.,
LLC sr. sub. notes 10 3/4s, 2008 998,775
1,335,000 Cincinnati Bell Telephone Co.
company guaranty 6.3s, 2028 1,241,550
5,915,000 Cincinnati Bell, Inc. sr. sub. notes
8 3/8s, 2014 6,114,631
3,752,000 Cincinnati Bell, Inc. sr. sub. notes
7 1/4s, 2023 3,761,380
7,860,000 Citizens Communications Co. notes
9 1/4s, 2011 9,058,650
6,740,000 Citizens Communications Co. sr.
notes 6 1/4s, 2013 6,689,450
6,266,586 Colo.com, Inc. 144A sr. notes
13 7/8s, 2010 (In default) (NON) (F) 6
8,951,000 Crown Castle International Corp. sr.
notes 9 3/8s, 2011 9,935,610
1,113,102 Globix Corp. company guaranty 11s,
2008 (PIK) 1,057,447
7,475,000 Inmarsat Finance PLC company
guaranty stepped-coupon zero %
(10 3/8s, 10/15/08), 2012 (United
Kingdom) (STP) 5,652,969
2,565,000 iPCS, Inc. sr. no 11 1/2s, 2012 2,975,400
835,000 IWO Escrow Co. 144A sec. FRN 6.32s,
2012 864,225
835,000 IWO Escrow Co. 144A sr. disc. notes
stepped-coupon zero % (10 3/4s,
1/15/10), 2015 (STP) 546,925
5,200,000 Level 3 Financing, Inc. 144A sr.
notes 10 3/4s, 2011 4,680,000
6,660,000 Madison River Capital Corp. sr.
notes 13 1/4s, 2010 7,126,200
11,455,000 MCI, Inc. sr. notes 8.735s, 2014 12,872,556
2,347,000 MCI, Inc. sr. notes 7.688s, 2009 2,473,151
3,483,000 Nextel Communications, Inc. sr.
notes 6 7/8s, 2013 3,761,640
17,435,000 Nextel Communications, Inc. sr.
notes 5.95s, 2014 18,110,606
3,029,000 Nextel Partners, Inc. sr. notes
12 1/2s, 2009 3,388,694
10,280,000 Nextel Partners, Inc. sr. notes
8 1/8s, 2011 11,359,400
699,000 PanAmSat Corp. notes 6 3/8s, 2008 723,465
8,340,000 Qwest Communications International,
Inc. 144A sr. notes 7 3/4s, 2014 8,590,200
24,908,000 Qwest Corp. 144A notes 9 1/8s, 2012 28,831,010
3,310,000 Qwest Services Corp. 144A notes
14 1/2s, 2014 4,154,050
2,435,000 Rogers Cantel, Inc. debs. 9 3/4s,
2016 (Canada) 3,007,225
1,312,000 Rogers Wireless Communications, Inc.
sec. notes 9 5/8s, 2011 (Canada) 1,561,280
2,685,000 Rogers Wireless Communications, Inc.
sec. notes 7 1/2s, 2015 (Canada) 2,909,869
3,355,000 Rogers Wireless Communications, Inc.
sr. sub. notes 8s, 2012 (Canada) 3,635,981
365,000 Rural Cellular Corp. sr. notes
9 7/8s, 2010 385,075
7,135,000 Rural Cellular Corp. sr. sub. notes
9 3/4s, 2010 6,813,925
2,340,000 SBA Communications Corp. 144A sr.
notes 8 1/2s, 2012 2,527,200
4,975,000 SBA Telecommunications Inc./SBA
Communication Corp. sr. disc. notes
stepped-coupon zero % (9 3/4s,
12/15/07), 2011 (STP) 4,353,125
1,317,000 TSI Telecommunication Services, Inc.
company guaranty Ser. B, 12 3/4s,
2009 1,484,918
2,450,000 Valor Telecommunications Enterprises
LLC/Finance Corp. 144A sr. notes
7 3/4s, 2015 2,541,875
11,420,886 Verado Holdings, Inc. sr. disc.
notes zero %, 2008 (In default)
(NON) (F) 343
--------------
234,098,834
Consumer (1.0%)
- -------------------------------------------------------------------------------
6,310,000 Icon Health & Fitness company
guaranty 11 1/4s, 2012 4,921,800
4,945,000 Jostens Holding Corp. sr. disc.
notes stepped-coupon zero %
(10 1/4s, 12/1/08), 2013 (STP) 3,560,400
11,165,000 Jostens IH Corp. 144A company
guaranty 7 5/8s, 2012 11,527,863
9,530,000 Samsonite Corp. sr. sub. notes
8 7/8s, 2011 10,268,575
--------------
30,278,638
Consumer Goods (1.4%)
- -------------------------------------------------------------------------------
4,430,000 Church & Dwight Co., Inc. 144A sr.
sub. notes 6s, 2012 4,507,525
3,005,000 Elizabeth Arden, Inc. company
guaranty 7 3/4s, 2014 3,196,569
8,827,000 Playtex Products, Inc. company
guaranty 9 3/8s, 2011 9,500,059
6,910,000 Playtex Products, Inc. sec. notes
8s, 2011 7,583,725
6,500,000 Prestige Brands, Inc. sr. sub. notes
9 1/4s, 2012 7,052,500
8,140,000 Remington Arms Co., Inc. company
guaranty 10 1/2s, 2011 8,038,250
2,335,000 Scotts Co. (The) sr. sub. notes
6 5/8s, 2013 2,466,344
--------------
42,344,972
Consumer Services (0.7%)
- -------------------------------------------------------------------------------
6,145,000 Brand Services, Inc. company
guaranty 12s, 2012 6,928,488
5,580,000 United Rentals (North America), Inc.
company guaranty 6 1/2s, 2012 5,621,850
7,135,000 Williams Scotsman, Inc. company
guaranty 9 7/8s, 2007 7,152,838
--------------
19,703,176
Energy (7.7%)
- -------------------------------------------------------------------------------
9,375,000 Arch Western Finance, LLC sr. notes
6 3/4s, 2013 9,750,000
3,380,000 Arch Western Finance, LLC 144A sr.
notes 6 3/4s, 2013 3,515,200
4,361,000 Bluewater Finance, Ltd. company
guaranty 10 1/4s, 2012 (Cayman
Islands) 4,818,905
4,815,000 CHC Helicopter Corp. sr. sub. notes
7 3/8s, 2014 (Canada) 5,019,638
3,334,000 Chesapeake Energy Corp. company
guaranty 9s, 2012 3,784,090
3,742,000 Chesapeake Energy Corp. company
guaranty 7 3/4s, 2015 4,125,555
6,425,000 Chesapeake Energy Corp. sr. notes
7 1/2s, 2013 7,131,750
2,715,000 Chesapeake Energy Corp. sr. notes
7s, 2014 2,972,925
4,485,000 Comstock Resources, Inc. sr. notes
6 7/8s, 2012 4,619,550
5,444,000 Dresser, Inc. company guaranty
9 3/8s, 2011 5,879,520
3,050,000 Dresser-Rand Group, Inc. 144A sr.
sub. notes 7 3/8s, 2014 3,187,250
4,873,000 Encore Acquisition Co. company
guaranty 8 3/8s, 2012 5,384,665
2,220,000 Encore Acquisition Co. sr. sub.
notes 6 1/4s, 2014 2,236,650
6,555,000 Exco Resources, Inc. company
guaranty 7 1/4s, 2011 6,964,688
3,151,000 Forest Oil Corp. company guaranty
7 3/4s, 2014 3,418,835
4,174,000 Forest Oil Corp. sr. notes 8s, 2011 4,810,535
2,507,000 Forest Oil Corp. sr. notes 8s, 2008 2,745,165
30,000 Grant Prideco Escrow Corp. company
guaranty 9s, 2009 33,000
3,175,000 Hanover Compressor Co. sr. notes 9s,
2014 3,532,188
2,295,000 Hanover Compressor Co. sr. notes
8 5/8s, 2010 2,490,075
4,990,000 Hanover Compressor Co. sub. notes
zero %, 2007 4,478,525
1,630,000 Hanover Equipment Trust sec. notes
Ser. B, 8 3/4s, 2011 1,768,550
5,755,000 Harvest Operations Corp. sr. notes
7 7/8s, 2011 (Canada) 5,927,650
2,350,000 Hornbeck Offshore Services, Inc.
144A sr. notes 6 1/8s, 2014 2,361,750
6,340,000 Inergy LP/Inergy Finance Corp. 144A
sr. notes 6 7/8s, 2014 6,435,100
3,175,000 KCS Energy, Inc. sr. notes 7 1/8s,
2012 3,341,688
4,420,000 Key Energy Services, Inc. sr. notes
6 3/8s, 2013 4,486,300
7,265,000 Massey Energy Co. sr. notes 6 5/8s,
2010 7,573,763
6,220,000 Newfield Exploration Co. sr. notes
7 5/8s, 2011 7,028,600
6,605,000 Newfield Exploration Co. 144A sr.
sub. notes 6 5/8s, 2014 7,149,913
6,060,000 Offshore Logistics, Inc. company
guaranty 6 1/8s, 2013 6,090,300
4,940,030 Oslo Seismic Services, Inc. 1st
mtge. 8.28s, 2011 5,159,555
3,260,000 Pacific Energy Partners/Pacific
Energy Finance Corp. sr. notes
7 1/8s, 2014 3,463,750
1,718,000 Parker Drilling Co. company guaranty
Ser. B, 10 1/8s, 2009 1,808,195
6,615,000 Peabody Energy Corp. sr. notes
5 7/8s, 2016 6,697,688
1,540,000 Pemex Project Funding Master Trust
company guaranty 8 5/8s, 2022 1,863,400
3,025,000 Pemex Project Funding Master Trust
company guaranty 7 3/8s, 2014 3,384,370
5,200,000 Petroleum Geo-Services notes 10s,
2010 (Norway) 6,006,000
4,430,000 Plains Exploration & Production Co.
sr. notes 7 1/8s, 2014 4,895,150
7,395,000 Plains Exploration & Production Co.
sr. sub. notes 8 3/4s, 2012 8,245,425
6,059,000 Pogo Producing Co. sr. sub. notes
Ser. B, 8 1/4s, 2011 6,483,130
8,020,000 Pride International, Inc. sr. notes
7 3/8s, 2014 8,922,250
5,165,000 Seabulk International, Inc. company
guaranty 9 1/2s, 2013 5,694,413
2,848,000 Seven Seas Petroleum, Inc. sr. notes
Ser. B, 12 1/2s, 2005 (In default)
(NON) (F) 28
8,385,000 Star Gas Partners LP/Star Gas
Finance Co. sr. notes 10 1/4s, 2013 7,651,313
3,355,000 Stone Energy Corp. 144A sr. sub.
notes 6 3/4s, 2014 3,371,775
1,235,000 Tengizchevroll Finance Co. 144A sec.
notes 6.124s, 2014 (Luxembourg) 1,251,981
1,375,000 Universal Compression, Inc. sr.
notes 7 1/4s, 2010 1,457,500
3,408,000 Vintage Petroleum, Inc. sr. notes
8 1/4s, 2012 3,757,320
3,343,000 Vintage Petroleum, Inc. sr. sub.
notes 7 7/8s, 2011 3,585,368
--------------
226,760,934
Entertainment (1.6%)
- -------------------------------------------------------------------------------
2,165,000 AMC Entertainment, Inc. sr. sub.
notes 9 7/8s, 2012 2,365,263
4,775,000 AMC Entertainment, Inc. sr. sub.
notes 9 1/2s, 2011 4,930,188
9,335,000 AMC Entertainment, Inc. sr. sub.
notes 8s, 2014 9,428,350
5,930,000 Cinemark USA, Inc. sr. sub. notes
9s, 2013 6,626,775
8,560,000 Cinemark, Inc. sr. disc. notes
stepped-coupon zero % (9 3/4s,
3/15/07), 2014 (STP) 6,398,600
3,000,000 LCE Acquisition Corp. 144A company
guaranty 9s, 2014 3,142,500
4,480,000 Six Flags, Inc. sr. notes 9 5/8s,
2014 4,200,000
2,740,000 Six Flags, Inc. sr. notes 8 7/8s,
2010 2,613,275
2,340,000 Universal City Florida Holding Co.
144A sr. notes 8 3/8s, 2010 2,462,850
3,321,000 Universal City Florida Holding Co.
144A sr. notes FRN 7.493s, 2010 3,478,748
--------------
45,646,549
Financial (1.1%)
- -------------------------------------------------------------------------------
2,640,000 Crescent Real Estate Equities LP
notes 7 1/2s, 2007 (R) 2,732,400
3,030,000 Crescent Real Estate Equities LP sr.
notes 9 1/4s, 2009 (R) 3,302,700
8,100,000 E*Trade Finance Corp. 144A sr.
notes 8s, 2011 8,748,000
11,722,934 Finova Group, Inc. notes 7 1/2s,
2009 5,187,398
4,570,000 UBS AG/Jersey Branch sr. notes
Ser. EMTN, 9.14s, 2008 (Jersey) 5,004,150
6,274,000 Western Financial Bank sub. debs.
9 5/8s, 2012 7,026,880
--------------
32,001,528
Food (1.0%)
- -------------------------------------------------------------------------------
1,129,898 Archibald Candy Corp. company
guaranty 10s, 2007 (In default)
(NON) (PIK) (F) 240,668
6,180,000 Dean Foods Co. sr. notes 6 5/8s,
2009 6,458,100
5,010,000 Del Monte Corp. sr. sub. notes
8 5/8s, 2012 5,586,150
3,360,000 Del Monte Corp. 144A sr. sub. notes
6 3/4s, 2015 3,452,400
4,291,000 Doane Pet Care Co. sr. sub. debs.
9 3/4s, 2007 4,140,815
8,615,000 Pinnacle Foods Holding Corp. sr.
sub. notes 8 1/4s, 2013 7,839,650
EUR 2,090,000 United Biscuits Finance company
guaranty 10 5/8s, 2011 (United
Kingdom) 2,926,410
--------------
30,644,193
Gaming & Lottery (3.4%)
- -------------------------------------------------------------------------------
$3,160,000 Ameristar Casinos, Inc. company
guaranty 10 3/4s, 2009 3,511,550
1,514,000 Boyd Gaming Corp. sr. sub. notes
8 3/4s, 2012 1,676,755
3,315,000 Boyd Gaming Corp. sr. sub. notes
7 3/4s, 2012 3,584,344
730,000 Boyd Gaming Corp. sr. sub. notes
6 3/4s, 2014 761,938
3,175,000 Chumash Casino & Resort Enterprise
144A sr. notes 9s, 2010 3,476,625
1,805,000 Harrah's Operating Co., Inc. company
guaranty 8s, 2011 2,074,831
4,140,000 Mandalay Resort Group sr. notes
6 3/8s, 2011 4,326,300
5,549,000 MGM Mirage, Inc. company guaranty
8 1/2s, 2010 6,339,733
2,000 MGM Mirage, Inc. company guaranty
8 3/8s, 2011 2,240
2,900,000 MGM Mirage, Inc. company guaranty
6s, 2009 2,972,500
1,755,000 Mirage Resorts, Inc. debs. 7 1/4s,
2017 1,842,750
3,149,000 Mohegan Tribal Gaming Authority sr.
sub. notes 8s, 2012 3,408,793
901,000 Mohegan Tribal Gaming Authority sr.
sub. notes 6 3/8s, 2009 923,525
1,465,000 Park Place Entertainment Corp. sr.
notes 8 1/2s, 2006 1,565,719
4,189,000 Park Place Entertainment Corp. sr.
notes 7 1/2s, 2009 4,655,026
4,000,000 Park Place Entertainment Corp. sr.
notes 7s, 2013 4,450,000
2,834,000 Park Place Entertainment Corp. sr.
sub. notes 8 7/8s, 2008 3,205,963
8,402,000 Penn National Gaming, Inc. sr. sub.
notes 8 7/8s, 2010 9,126,673
2,100,000 Penn National Gaming, Inc. 144A sr.
sub. notes 6 3/4s, 2015 2,142,000
4,305,000 Pinnacle Entertainment, Inc. sr.
sub. notes 8 3/4s, 2013 4,735,500
7,420,000 Pinnacle Entertainment, Inc. sr.
sub. notes 8 1/4s, 2012 7,920,850
6,243,000 Resorts International Hotel and
Casino, Inc. company guaranty
11 1/2s, 2009 7,366,740
5,765,000 Scientific Games Corp. 144A sr. sub.
notes 6 1/4s, 2012 5,937,950
4,485,000 Station Casinos, Inc. sr. notes 6s,
2012 4,647,581
4,485,000 Station Casinos, Inc. sr. sub. notes
6 7/8s, 2016 4,726,069
5,695,000 Wynn Las Vegas, LLC/Wynn Las Vegas
Capital Corp. 144A 1st mtge. 6 5/8s,
2014 5,680,763
--------------
101,062,718
Health Care (6.8%)
- -------------------------------------------------------------------------------
3,495,000 Alderwoods Group, Inc. 144A sr.
notes 7 3/4s, 2012 (Canada) 3,748,388
5,289,000 AmerisourceBergen Corp. company
guaranty 7 1/4s, 2012 5,870,790
5,730,000 AmerisourceBergen Corp. sr. notes
8 1/8s, 2008 6,360,300
9,095,000 Ardent Health Services, Inc. sr.
sub. notes 10s, 2013 9,595,225
3,345,000 Community Health Systems, Inc. 144A
sr. sub. notes 6 1/2s, 2012 3,365,906
3,345,000 Coventry Health Care, Inc. 144A sr.
notes 5 7/8s, 2012 3,436,988
4,795,000 Elan Finance PLC/Elan Finance Corp.
144A sr. notes 7 3/4s,
2011 (Ireland) 4,267,550
2,950,000 Extendicare Health Services, Inc.
company guaranty 9 1/2s, 2010 3,252,375
4,580,000 Extendicare Health Services, Inc.
sr. sub. notes 6 7/8s, 2014 4,671,600
5,993,000 HCA, Inc. debs. 7.19s, 2015 6,326,882
3,080,000 HCA, Inc. med. term notes 8.85s,
2007 3,291,602
3,150,000 HCA, Inc. notes 8.36s, 2024 3,516,310
735,000 HCA, Inc. notes 7.69s, 2025 777,282
716,000 HCA, Inc. notes 7s, 2007 751,542
2,715,000 HCA, Inc. notes 6 3/8s, 2015 2,755,622
2,385,000 HCA, Inc. notes 5 3/4s, 2014 2,331,006
116,000 HCA, Inc. sr. notes 7 7/8s, 2011 127,959
9,659,000 Healthsouth Corp. notes 7 5/8s, 2012 9,803,885
3,722,000 Healthsouth Corp. sr. notes 8 1/2s,
2008 3,870,880
2,125,000 Healthsouth Corp. sr. notes 8 3/8s,
2011 2,236,563
2,041,000 Healthsouth Corp. sr. notes 7s, 2008 2,051,205
845,316 Magellan Health Services, Inc. sr.
notes Ser. A, 9 3/8s, 2008 912,941
3,276,000 MedQuest, Inc. company guaranty
Ser. B, 11 7/8s, 2012 3,718,260
7,880,000 MQ Associates, Inc. sr. disc. notes
stepped-coupon zero % (12 1/4s,
8/15/08), 2012 (STP) 5,831,200
6,090,000 Omnicare, Inc. sr. sub. notes
6 1/8s, 2013 6,105,225
7,409,000 PacifiCare Health Systems, Inc.
company guaranty 10 3/4s, 2009 8,316,603
6,920,000 Province Healthcare Co. sr. sub.
notes 7 1/2s, 2013 7,715,800
3,757,000 Service Corp. International debs.
7 7/8s, 2013 3,991,813
670,000 Service Corp. International notes
7.2s, 2006 692,613
228,000 Service Corp. International notes
6 7/8s, 2007 238,830
1,006,000 Service Corp. International notes
6 1/2s, 2008 1,048,755
2,281,000 Service Corp. International notes
Ser. *, 7.7s, 2009 2,452,075
6,680,000 Service Corp. International/US 144A
sr. notes 6 3/4s, 2016 6,813,600
5,695,000 Stewart Enterprises, Inc. 144A sr.
notes 6 1/4s, 2013 5,695,000
3,285,000 Tenet Healthcare Corp. notes 7 3/8s,
2013 3,112,538
4,040,000 Tenet Healthcare Corp. sr. notes
6 1/2s, 2012 3,726,900
11,515,000 Tenet Healthcare Corp. 144A sr.
notes 9 7/8s, 2014 12,263,475
6,370,000 Triad Hospitals, Inc. sr. notes 7s,
2012 6,744,238
11,815,000 Triad Hospitals, Inc. sr. sub. notes
7s, 2013 12,184,219
7,780,000 Universal Hospital Services, Inc.
sr. notes 10 1/8s, 2011 8,052,300
4,090,000 US Oncology, Inc. 144A sr. notes 9s,
2012 4,468,325
4,190,000 Vanguard Health Holding Co. II, LLC
sr. sub. notes 9s, 2014 4,609,000
6,360,000 Ventas Realty LP/Capital Corp.
company guaranty 9s, 2012 (R) 7,377,600
1,690,000 Ventas Realty LP/Capital Corp. sr.
notes 6 5/8s, 2014 (R) 1,723,800
--------------
200,204,970
Homebuilding (2.5%)
- -------------------------------------------------------------------------------
3,206,000 Beazer Homes USA, Inc. company
guaranty 8 5/8s, 2011 3,486,525
1,405,000 Beazer Homes USA, Inc. company
guaranty 8 3/8s, 2012 1,543,744
5,539,000 D.R. Horton, Inc. sr. notes 7 7/8s,
2011 6,356,003
2,625,000 D.R. Horton, Inc. sr. notes 6 7/8s,
2013 2,874,375
2,628,000 D.R. Horton, Inc. sr. notes 5 7/8s,
2013 2,689,556
1,195,000 K. Hovnanian Enterprises, Inc.
company guaranty 10 1/2s, 2007 1,362,300
4,180,000 K. Hovnanian Enterprises, Inc.
company guaranty 8 7/8s, 2012 4,639,800
3,370,000 K. Hovnanian Enterprises, Inc.
company guaranty 6 3/8s, 2014 3,487,950
2,917,000 K. Hovnanian Enterprises, Inc. sr.
notes 6 1/2s, 2014 3,062,850
2,455,000 KB Home company guaranty 5 7/8s,
2015 2,481,531
3,505,000 KB Home sr. notes 5 3/4s, 2014 3,557,494
2,690,000 Meritage Homes Corp. company
guaranty 9 3/4s, 2011 3,006,156
1,670,000 Meritage Homes Corp. sr. notes 7s,
2014 1,757,675
2,450,000 Meritage Homes Corp. 144A sr. notes
6 1/4s, 2015 2,459,188
3,450,000 Schuler Homes, Inc. company guaranty
10 1/2s, 2011 3,881,250
6,955,000 Standard Pacific Corp. sr. notes
7 3/4s, 2013 7,598,338
440,000 Standard Pacific Corp. sr. notes
6 7/8s, 2011 467,500
3,405,000 Technical Olympic USA, Inc. company
guaranty 10 3/8s, 2012 3,813,600
1,892,000 Technical Olympic USA, Inc. company
guaranty 9s, 2010 2,048,090
3,355,000 Technical Olympic USA, Inc. 144A sr.
sub. notes 7 1/2s, 2015 3,321,450
2,309,000 WCI Communities, Inc. company
guaranty 10 5/8s, 2011 2,551,445
6,427,000 WCI Communities, Inc. company
guaranty 9 1/8s, 2012 7,166,105
--------------
73,612,925
Household Furniture and Appliances (0.3%)
- -------------------------------------------------------------------------------
9,510,000 Sealy Mattress Co. sr. sub. notes
8 1/4s, 2014 9,961,725
Leisure (0.1%)
- -------------------------------------------------------------------------------
1,675,000 K2, Inc. sr. notes 7 3/8s, 2014 1,813,188
Lodging/Tourism (2.2%)
- -------------------------------------------------------------------------------
2,630,000 FelCor Lodging LP company guaranty
9s, 2008 (R) 2,975,188
6,500,000 Gaylord Entertainment Co. sr. notes
8s, 2013 7,044,375
1,367,000 HMH Properties, Inc. company
guaranty Ser. B, 7 7/8s, 2008 (R) 1,404,593
1,695,000 Host Marriott LP company guaranty
Ser. G, 9 1/4s, 2007 (R) 1,864,500
1,200,000 Host Marriott LP sr. notes Ser. E,
8 3/8s, 2006 (R) 1,242,000
9,135,000 Host Marriott LP 144A sr. notes 7s,
2012 (R) 9,591,750
12,210,000 John Q. Hammons Hotels LP/John Q.
Hammons Hotels Finance Corp. III
1st mtge. Ser. B, 8 7/8s, 2012 13,614,150
6,580,000 MeriStar Hospitality Corp. company
guaranty 9 1/8s, 2011 (R) 7,213,325
3,520,000 MeriStar Hospitality Corp. company
guaranty 9s, 2008 (R) 3,748,800
715,000 MeriStar Hospitality Operating
Partnership/MeriStar
Hospitality Finance Corp. company
guaranty 10 1/2s, 2009 775,775
3,670,000 Starwood Hotels & Resorts Worldwide,
Inc. company guaranty 7 7/8s, 2012 4,248,025
3,374,000 Starwood Hotels & Resorts Worldwide,
Inc. company guaranty 7 3/8s, 2007 3,584,875
4,600,000 Starwood Hotels & Resorts Worldwide,
Inc. debs. 7 3/8s, 2015 5,272,750
715,000 Starwood Hotels & Resorts Worldwide,
Inc. notes 6 3/4s, 2005 727,513
--------------
63,307,619
Media (0.3%)
- -------------------------------------------------------------------------------
5,935,000 Affinity Group, Inc. sr. sub. notes
9s, 2012 6,409,800
3,000,000 Interpublic Group Companies, Inc.
notes 6 1/4s, 2014 3,034,653
--------------
9,444,453
Other (2.1%)
- -------------------------------------------------------------------------------
60,000,000 Dow Jones CDX HY 144A pass-through
certificates Ser. 3-3, 8s, 2009 60,675,000
Publishing (3.9%)
- -------------------------------------------------------------------------------
5,020,000 Advertising Directory Solutions,
Inc. 144A sr. notes 9 1/4s, 2012
(Canada) 5,302,375
16,705,213 CanWest Media, Inc. 144A sr. sub.
notes 8s, 2012 (Canada) 17,958,104
12,045,000 Dex Media West, LLC/Dex Media
Finance Co. sr. notes Ser. B,
8 1/2s, 2010 13,189,275
4,720,000 Dex Media, Inc. disc. notes zero %,
2013 3,717,000
9,295,000 Dex Media, Inc. notes 8s, 2013 10,085,075
4,855,000 Houghton Mifflin Co. sr. sub. notes
9 7/8s, 2013 5,134,162
6,947,000 PRIMEDIA, Inc. company guaranty
8 7/8s, 2011 7,502,760
4,517,000 PRIMEDIA, Inc. company guaranty
7 5/8s, 2008 4,584,755
7,360,000 PRIMEDIA, Inc. sr. notes 8s, 2013 7,838,400
3,485,000 Reader's Digest Association, Inc.
(The) sr. notes 6 1/2s, 2011 3,654,893
3,385,000 RH Donnelley Corp. 144A sr. notes
6 7/8s, 2013 3,478,087
1,200,000 RH Donnelley Inc. company guaranty
8 7/8s, 2010 1,326,000
5,220,000 RH Donnelley Finance Corp. I 144A
company guaranty 8 7/8s, 2010 5,768,100
4,242,000 RH Donnelley Finance Corp. I 144A
sr. sub. notes 10 7/8s, 2012 4,973,745
8,978,000 Vertis, Inc. company guaranty
Ser. B, 10 7/8s, 2009 9,180,005
6,870,000 Vertis, Inc. 144A sub. notes
13 1/2s, 2009 6,801,300
4,855,000 WRC Media Corp. sr. sub. notes
12 3/4s, 2009 4,515,150
--------------
115,009,186
Restaurants (0.3%)
- -------------------------------------------------------------------------------
7,558,000 Sbarro, Inc. company guaranty 11s,
2009 7,595,790
Retail (2.6%)
- -------------------------------------------------------------------------------
3,430,000 Asbury Automotive Group, Inc. sr.
sub. notes 8s, 2014 3,541,475
7,838,000 Autonation, Inc. company guaranty
9s, 2008 8,856,940
3,520,000 Finlay Fine Jewelry Corp. sr. notes
8 3/8s, 2012 3,396,800
8,860,000 JC Penney Co., Inc. debs. 7.95s,
2017 10,575,038
6,590,000 JC Penney Co., Inc. debs. 7 1/8s,
2023 7,346,735
680,000 JC Penney Co., Inc. notes 9s, 2012 834,700
240,000 JC Penney Co., Inc. notes 8s, 2010 271,871
3,400,000 Jean Coutu Group, Inc. sr. notes
7 5/8s, 2012 (Canada) 3,570,000
4,085,000 Jean Coutu Group, Inc. sr. sub.
notes 8 1/2s, 2014 (Canada) 4,187,125
5,030,000 Rite Aid Corp. company guaranty
9 1/2s, 2011 5,457,550
335,000 Rite Aid Corp. debs. 6 7/8s, 2013 314,900
1,195,000 Rite Aid Corp. notes 7 1/8s, 2007 1,212,925
5,189,000 Rite Aid Corp. sr. notes 9 1/4s,
2013 5,214,945
3,340,000 Rite Aid Corp. 144A sec. notes
7 1/2s, 2015 3,306,600
1,000,000 Saks, Inc. company guaranty 7 1/2s,
2010 1,072,500
9,155,000 Saks, Inc. company guaranty 7s, 2013 9,521,200
3,595,000 Toys R Us, Inc. notes 7 5/8s, 2011 3,657,913
3,759,000 United Auto Group, Inc. company
guaranty 9 5/8s, 2012 4,172,490
--------------
76,511,707
Technology (2.9%)
- -------------------------------------------------------------------------------
8,360,000 Advanced Micro Devices, Inc. 144A
sr. notes 7 3/4s, 2012 8,527,200
6,143,000 AMI Semiconductor, Inc. company
guaranty 10 3/4s, 2013 7,141,238
2,945,000 Amkor Technologies, Inc. sr. notes
7 3/4s, 2013 2,562,150
3,160,000 Amkor Technologies, Inc. sr. sub.
notes 10 1/2s, 2009 2,978,300
6,680,000 Celestica, Inc. sr.sub. notes
7 7/8s, 2011 (Canada) 7,030,700
6,810,000 Freescale Semiconductor, Inc. sr.
notes Ser. B, 7 1/8s, 2014 7,422,900
8,626,000 Iron Mountain, Inc. company guaranty
8 5/8s, 2013 9,100,430
1,545,000 Iron Mountain, Inc. company guaranty
6 5/8s, 2016 1,444,575
350,000 Lucent Technologies, Inc. debs.
6 1/2s, 2028 331,188
4,029,000 Lucent Technologies, Inc. debs.
6.45s, 2029 3,832,586
2,945,000 New ASAT Finance, Ltd. 144A company
guaranty 9 1/4s, 2011 (Cayman
Islands) 2,532,700
3,040,000 SCG Holding Corp. 144A notes zero %,
2011 4,339,600
6,850,000 UGS Corp. 144A sr. sub. notes 10s,
2012 7,740,500
4,340,000 Xerox Capital Trust I company
guaranty 8s, 2027 4,578,700
4,000 Xerox Corp. company guaranty 9 3/4s,
2009 4,645
3,715,000 Xerox Corp. notes Ser. MTN, 7.2s,
2016 3,984,338
9,424,000 Xerox Corp. sr. notes 7 5/8s, 2013 10,213,260
1,345,000 Xerox Corp. sr. notes 6 7/8s, 2011 1,439,150
--------------
85,204,160
Textiles (1.1%)
- -------------------------------------------------------------------------------
11,383,000 Levi Strauss & Co. sr. notes
12 1/4s, 2012 13,033,535
5,680,000 Levi Strauss & Co. 144A sr. notes
9 3/4s, 2015 5,985,300
4,250,000 Oxford Industries, Inc. sr. notes
8 7/8s, 2011 4,547,500
5,218,000 Russell Corp. company guaranty
9 1/4s, 2010 5,622,395
3,401,000 William Carter Holdings Co. (The)
company guaranty Ser. B, 10 7/8s,
2011 3,800,618
--------------
32,989,348
Tire & Rubber (0.4%)
- -------------------------------------------------------------------------------
2,005,000 Cooper Standard Auto 144A notes
8 3/8s, 2014 1,894,725
670,000 Cooper Standard Auto 144A notes 7s,
2012 659,950
7,845,000 Goodyear Tire & Rubber Co. (The)
notes 7.857s, 2011 8,178,413
1,840,000 Goodyear Tire & Rubber Co. (The)
notes 6 3/8s, 2008 1,858,400
--------------
12,591,488
Transportation (1.0%)
- -------------------------------------------------------------------------------
5,475,000 American Airlines, Inc. pass-through
certificates Ser. 01-1, 6.817s,
2011 5,228,625
7,906,000 Calair, LLC/Calair Capital Corp.
company guaranty 8 1/8s, 2008 6,324,800
8,753,000 Kansas City Southern Railway Co.
company guaranty 9 1/2s, 2008 9,759,595
1,685,000 Kansas City Southern Railway Co.
company guaranty 7 1/2s, 2009 1,765,038
3,505,000 Navistar International Corp. 144A
sr. notes 6 1/4s, 2012 3,531,288
1,950,000 Northwest Airlines, Inc. company
guaranty 8 7/8s, 2006 1,774,500
40,000 Northwest Airlines, Inc. company
guaranty 8.7s, 2007 31,650
1,747,000 Travelcenters of America, Inc.
company guaranty 12 3/4s, 2009 1,947,905
--------------
30,363,401
Utilities & Power (8.1%)
- -------------------------------------------------------------------------------
795,000 AES Corp. (The) sr. notes 8 7/8s,
2011 909,281
171,000 AES Corp. (The) sr. notes 8 3/4s,
2008 188,528
7,235,000 AES Corp. (The) 144A sec. notes 9s,
2015 8,284,075
7,390,000 AES Corp. (The) 144A sec. notes
8 3/4s, 2013 8,406,125
5,190,000 Allegheny Energy Supply Co., LLC
144A bonds 8 1/4s, 2012 5,916,600
3,040,000 Allegheny Energy Supply Co., LLC
144A sec. notes 10 1/4s, 2007 3,416,200
10,000 Cleveland Electric Illuminating Co.
(The) 144A sr. notes Ser. D, 7.88s,
2017 12,264
175,000 CMS Energy Corp. sr. notes 9 7/8s,
2007 195,563
2,199,000 CMS Energy Corp. sr. notes 8.9s,
2008 2,446,388
1,254,000 CMS Energy Corp. sr. notes 8 1/2s,
2011 1,429,560
1,730,000 CMS Energy Corp. sr. notes 7 3/4s,
2010 1,898,675
3,890,000 DPL, Inc. bonds 8 1/8s, 2031 4,759,948
8,230,000 DPL, Inc. sr. notes 6 7/8s, 2011 9,048,556
1,996,000 Dynegy Holdings, Inc. sr. notes
6 7/8s, 2011 1,858,775
12,605,000 Dynegy Holdings, Inc. 144A sec.
notes 10 1/8s, 2013 14,369,700
3,500,000 Dynegy-Roseton Danskamme company
guaranty Ser. A, 7.27s, 2010 3,465,000
5,330,000 Dynegy-Roseton Danskamme company
guaranty Ser. B, 7.67s, 2016 4,996,875
2,399,000 Edison Mission Energy sr. notes 10s,
2008 2,758,850
145,000 Edison Mission Energy sr. notes
9 7/8s, 2011 173,275
1,800,000 El Paso CGP Co. notes 7 3/4s, 2010 1,894,500
5,000,000 El Paso Corp. sr. notes 8.05s, 2030 5,075,000
3,630,000 El Paso Corp. sr. notes 7 3/8s, 2012 3,711,675
3,470,000 El Paso Corp. sr. notes Ser. MTN,
7 3/4s, 2032 3,496,025
1,745,000 El Paso Natural Gas Co. debs.
8 5/8s, 2022 2,085,275
8,425,000 El Paso Production Holding Co.
company guaranty 7 3/4s, 2013 9,035,813
5,460,000 Ferrellgas Partners LP/Ferrellgas
Partners Finance sr. notes 6 3/4s,
2014 5,487,300
1,973,000 Kansas Gas & Electric debs. 8.29s,
2016 2,041,870
10,955,000 Midwest Generation, LLC sec. sr.
notes 8 3/4s, 2034 12,570,863
7,703,000 Mission Energy Holding Co. sec.
notes 13 1/2s, 2008 9,628,750
3,190,000 Monongahela Power Co. 1st mtge.
6.7s, 2014 3,532,925
4,850,000 Nevada Power Co. 2nd mtge. 9s, 2013 5,601,750
2,335,000 Nevada Power Co. 144A general ref.
mtge. 5 7/8s, 2015 2,364,188
3,090,000 Northwest Corp. 144A sec. notes
5 7/8s, 2014 3,127,411
7,465,000 Northwest Pipeline Corp. company
guaranty 8 1/8s, 2010 8,202,169
515,000 Northwestern Corp. debs. 6.95s, 2028
(In default) (NON) (F) 1
915,000 Northwestern Corp. notes 8 3/4s,
2012 (In default) (NON) (F) 1
14,176,000 NRG Energy, Inc. 144A sr. sec. notes
8s, 2013 15,664,480
6,000,000 Orion Power Holdings, Inc. sr. notes
12s, 2010 7,500,000
5,540,000 PSEG Energy Holdings, Inc. notes
7 3/4s, 2007 5,830,850
4,505,000 SEMCO Energy, Inc. sr. notes 7 3/4s,
2013 4,737,039
1,290,000 Sierra Pacific Power Co. general
ref. mtge. 6 1/4s, 2012 1,351,275
7,960,000 Sierra Pacific Resources sr. notes
8 5/8s, 2014 8,795,800
340,000 Southern California Edison Co. notes
6 3/8s, 2006 347,703
2,840,000 Teco Energy, Inc. notes 10 1/2s,
2007 3,266,000
1,645,000 Teco Energy, Inc. notes 7.2s, 2011 1,809,500
2,730,000 Teco Energy, Inc. notes 7s, 2012 3,003,000
695,000 Tennessee Gas Pipeline Co. debs. 7s,
2028 722,800
3,835,000 Tennessee Gas Pipeline Co. unsecd.
notes 7 1/2s, 2017 4,266,438
6,020,000 Texas Genco LLC/Texas Genco
Financing Corp. 144A sr. notes
6 7/8s, 2014 6,426,350
900,000 Transcontinental Gas Pipeline Corp.
debs. 7 1/4s, 2026 1,013,625
9,510,000 Utilicorp Canada Finance Corp.
company guaranty 7 3/4s, 2011
(Canada) 10,080,600
3,385,000 Utilicorp United, Inc. sr. notes
9.95s, 2011 3,884,289
1,330,000 Williams Cos., Inc. (The) notes
8 3/4s, 2032 1,682,450
5,210,000 Williams Cos., Inc. (The) notes
7 5/8s, 2019 6,017,550
3,454,253 York Power Funding 144A notes 12s,
2007 (Cayman Islands) (In default)
(NON) (F) 345
--------------
238,789,848
--------------
Total Corporate bonds and notes
(cost $2,389,981,221) $2,500,336,932
Senior loans (2.3%) (a) (c)
Principal amount Value
Basic Materials (0.2%)
- -------------------------------------------------------------------------------
$598,500 Buckeye Technologies, Inc. bank term
loan FRN 5.1388s, 2010 $604,485
684,411 Graphics Packaging Corp. bank term
loan FRN Ser. C, 5.1367s, 2010 695,875
868,438 Hercules, Inc. bank term loan FRN
Ser. B, 3.9853s, 2010 877,936
3,380,000 Huntsman Corp. bank term loan FRN
Ser. B, 6.15s, 2010 3,435,770
572,245 Nalco Co. bank term loan FRN Ser. B,
4.6665s, 2010 582,498
594,000 St. Mary's Cement Corp. bank term
loan FRN Ser. B, 4.56s, 2009 601,425
--------------
6,797,989
Beverage (--%)
- -------------------------------------------------------------------------------
1,000,000 Constellation Brands, Inc. bank term
loan FRN Ser. B, 4.4041s, 2011 1,014,375
Cable Television (--%)
- -------------------------------------------------------------------------------
875,600 Charter Communications Holdings,
LLC/Capital Corp. bank term loan
FRN Ser. B, 5.9798s, 2011 878,154
Capital Goods (0.3%)
- -------------------------------------------------------------------------------
826,350 AGCO Corp. bank term loan FRN
4.4841s, 2008 840,295
529,547 Allied Waste Industries, Inc. bank
term loan FRN 5.3271s, 2010 530,067
90,160 Allied Waste Industries, Inc. bank
term loan FRN Ser. C, 2.4s, 2010 90,217
3,406,807 Decrane Aircraft Holdings Co. bank
term loan FRN 12s, 2008 3,406,807
434,975 Invensys, PLC bank term loan FRN
Ser. B-1, 6.0913s, 2009 (United
Kingdom) 442,043
519,725 Mueller Group, Inc. bank term loan
FRN 5.3656s, 2011 524,272
404,959 Owens-Illinois, Inc. bank term loan
FRN Ser. B, 5.37s, 2008 411,944
544,500 Solo Cup Co. bank term loan FRN
5.0601s, 2011 554,540
1,053,483 SPX Corp. bank term loan FRN
Ser. B-1, 4 5/8s, 2009 1,057,434
--------------
7,857,619
Communication Services (0.1%)
- -------------------------------------------------------------------------------
248,333 Consolidated Communications Holdings
bank term loan FRN Ser. C, 5.1846s,
2012 250,196
307,666 PanAmSat Corp. bank term loan FRN
Ser. B, 5.34s, 2011 312,340
690,625 Qwest Communications International,
Inc. bank term loan FRN
Ser. A, 7.39s, 2007 719,006
248,750 SBA Senior Finance, Inc. bank term
loan FRN 4.8619s, 2008 251,963
--------------
1,533,505
Consumer Cyclicals (0.4%)
- -------------------------------------------------------------------------------
95,953 Corrections Corporation of America
bank term loan FRN Ser. D, 4.935s,
2008 97,392
810,970 Dex Media West, LLC/Dex Media West
Finance Co. bank term loan
FRN Ser. B, 4.5152s, 2010 821,798
2,735,000 Federal Mogul Corp. bank term loan
FRN Ser. A, 4.65s, 2006 2,584,575
6,365,000 Federal Mogul Corp. bank term loan
FRN Ser. B, 4.9s, 2006 6,032,429
605,271 Hayes Lemmerz International, Inc.
bank term loan FRN 6.2436s, 2009 617,376
250,000 Landsource, Inc. bank term loan FRN
Ser. B, 5.1875s, 2010 253,281
373,750 TRW Automotive bank term loan FRN
Ser. B, 4 3/8s, 2010 375,229
--------------
10,782,080
Consumer Staples (0.7%)
- -------------------------------------------------------------------------------
386,034 AMF Bowling Worldwide bank term loan
FRN Ser. B, 5.3891s, 2009 387,964
5,320,000 Century Cable Holdings bank term
loan FRN 7 1/2s, 2009 5,288,649
440,000 Dole Holding Co. bank term loan FRN
8s, 2010 451,550
440,000 Frontier Vision bank term loan FRN
Ser. B, 6.775s, 2006 441,375
4,950,000 Insight Midwest LP/Insight Capital,
Inc. bank term loan FRN 5.4375s,
2009 5,031,056
1,000,000 Mediacom Communications Corp. bank
term loan FRN Ser. B, 4.8836s, 2012 1,011,786
658,350 MGM Studios, Inc. bank term loan FRN
Ser. B, 5.06s, 2011 658,145
5,053,836 Olympus Cable bank term loan FRN
Ser. B, 7 1/4s, 2010 5,020,673
990,000 Warner Music Group bank term loan
FRN Ser. B, 5.0876s, 2011 1,004,850
--------------
19,296,048
Energy (0.1%)
- -------------------------------------------------------------------------------
160,000 Dresser, Inc. bank term loan FRN
5.84s, 2010 162,400
871,721 Magellan Midstream Holdings bank
term loan FRN Ser. B, 5.09s, 2011 882,617
2,216,714 Trico Marine Services, Inc. bank
term loan FRN 9 1/2s, 2005 2,194,546
--------------
3,239,563
Entertainment (--%)
- -------------------------------------------------------------------------------
202,706 Six Flags, Inc. bank term loan FRN
Ser. B, 5.09s, 2009 205,899
Food (--%)
- -------------------------------------------------------------------------------
1,042,125 Pinnacle Foods Holding Corp. bank
term loan FRN 5.813s, 2010 1,044,296
Health Care (0.2%)
- -------------------------------------------------------------------------------
438,900 Community Health Systems, Inc. bank
term loan FRN Ser. B, 4.15s, 2011 443,632
1,074,229 DaVita, Inc. bank term loan FRN
Ser. B, 4.5836s, 2009 1,074,900
437,800 Fisher Scientific International,
Inc. bank term loan FRN
Ser. B, 4.0775s, 2011 441,084
493,750 Hanger Orthopedic Group, Inc. bank
term loan FRN 6.06s, 2009 496,836
504,063 Kinetic Concepts, Inc. bank term
loan FRN Ser. B, 4.31s, 2011 508,263
523,281 Medex, Inc. bank term loan FRN
Ser. B, 5.6s, 2009 523,281
1,475,243 Triad Hospitals, Inc. bank term loan
FRN Ser. B, 4.83s, 2008 1,498,601
201,373 VWR International, Inc. bank term
loan FRN Ser. B, 5.17s, 2011 204,746
--------------
5,191,343
Household Furniture and Appliances (--%)
- -------------------------------------------------------------------------------
365,357 Sealy Mattress Co. bank term loan
FRN Ser. C, 4.7982s, 2012 370,533
Publishing (--%)
- -------------------------------------------------------------------------------
605,000 WRC Media Corp. bank term loan FRN
6.7613s, 2009 601,975
Technology (--%)
- -------------------------------------------------------------------------------
1,000,000 Iron Mountain, Inc. bank term loan
FRN 4.3464s, 2011 1,007,500
Tire & Rubber (--%)
- -------------------------------------------------------------------------------
440,000 Goodyear Tire & Rubber Co. (The)
bank term loan FRN 7.03s, 2006 444,180
375,000 Goodyear Tire & Rubber Co. (The)
bank term loan FRN 4.6s, 2007 377,109
--------------
821,289
Transportation (--%)
- -------------------------------------------------------------------------------
449,167 Pacer International, Inc. bank term
loan FRN 4.6757s, 2010 458,150
Utilities & Power (0.3%)
- -------------------------------------------------------------------------------
437,800 Dynegy, Inc. bank term loan FRN
Ser. B, 6.59s, 2010 445,188
3,545,760 El Paso Corp. bank term loan FRN
Ser. B, Class B, 5.1875s, 2009 3,606,705
2,140,000 El Paso Corp. bank Corp. term loan
FRN Ser. C, 2.3s, 2009 2,173,104
440,000 Unisource Energy bank term loan FRN
Ser. B, 5.652s, 2011 441,650
418,646 Williams Cos., Inc. bank term loan
FRN Ser. C, 4.99s, 2007 424,182
--------------
7,090,829
--------------
Total Senior loans
(cost $66,217,186) $68,191,147
Common stocks (1.9%) (a)
Number of shares Value
- -------------------------------------------------------------------------------
17,730 AboveNet, Inc. (NON) (S) $531,900
18,922 Alderwoods Group, Inc. (NON)
(Canada) 231,795
8,780,000 AMRESCO Creditor Trust (acquired
various dates from 5/5/99 to
3/18/02, cost $1,860,945) (NON)
(RES) (F) (R) 8,780
10,363 Birch Telecom, Inc. (NON) (F) 104
1,690,908 Capstar Broadcasting 144A (F) 2,231,999
186,410 Celanese Corp. Class A (NON) (S) 3,113,047
4,315 Comdisco Holding Co., Inc. 118,878
4,728 Compass Minerals International, Inc. 118,200
31,440,192 Contifinancial Corp. Liquidating
Trust Units 786,005
148,962 Covad Communications Group, Inc.
(NON) (S) 226,422
8,714 Crown Castle International Corp.
(NON) (S) 142,387
29,311 Decrane Aircraft Holdings, Inc.
(NON) (AFF) (F) 29
645,566 DigitalGlobe, Inc. 144A (NON) (AFF) 645,566
6,026 Genesis HealthCare Corp. (NON) 248,151
286,810 Globix Corp. (NON) 1,003,835
5,700,000 iPCS Escrow, Inc. (NON) (F) 5,700
132,664 iPCS, Inc. (NON) 3,979,920
1,894 Knology, Inc. (NON) 5,114
981 Leucadia National Corp. (S) 32,873
59,030 Lodgian, Inc. (NON) 708,360
985,000 Loewen Group International, Inc.
(NON) (F) 99
46,598 Northwestern Corp. (NON) 1,301,948
6,964 Polymer Group, Inc. Class A (NON)
(S) 139,280
11,906 PSF Group Holdings, Inc. 144A Class
A (NON) (AFF) (F) 20,835,640
484,229 Regal Entertainment Group (F) 9,326,251
4,358 Sterling Chemicals, Inc. (NON) 196,110
9,048 Sun Healthcare Group, Inc. (NON) (S) 61,707
1,733 USA Mobility, Inc. (NON) (S) 68,003
12,695,838 VFB LLC (acquired 5/15/02, cost
$9,558,415) (NON) (RES) (AFF) 2,602,647
327,451 VS Holdings, Inc. (NON) 327
39,019 Washington Group International, Inc.
(NON) 1,707,081
33,000 Wayland Investment Fund II (NON) (F) 6,491,100
--------------
Total Common stocks
(cost $132,998,110) $56,869,258
Foreign government bonds and notes (1.4%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$1,955,000 Brazil (Federal Republic of) bonds
10 1/2s, 2014 $2,285,395
2,685,000 Colombia (Republic of) bonds
10 3/4s, 2013 3,134,738
2,115,000 Colombia (Republic of) bonds
10 3/8s, 2033 2,400,525
1,625,000 Colombia (Republic of) notes
Ser. NOV, 9 3/4s, 2009 1,832,188
3,865,000 Ecuador (Republic of) bonds
stepped-coupon Ser. REGS, 8s (9s,
8/15/05), 2030 (STP) 3,594,450
2,365,000 Peru (Republic of) bonds 8 3/4s,
2033 2,560,113
4,970,000 Philippines (Republic of) bonds
9 1/2s, 2030 4,994,850
6,595,000 Philippines (Republic of) bonds
8 3/8s, 2011 6,835,718
7,135,000 Russia (Federation of) unsub.
stepped-coupon 5s (7 1/2s,
3/31/07), 2030 (STP) 7,495,318
3,300,000 United Mexican States bonds
Ser. MTN, 8.3s, 2031 3,978,150
1,850,000 Venezuela (Republic of) notes
10 3/4s, 2013 2,135,825
--------------
Total Foreign government bonds and
notes (cost $38,361,664) $41,247,270
Preferred stocks (0.9%) (a)
Number of shares Value
- -------------------------------------------------------------------------------
21,000 Decrane Aircraft Holdings, Inc.
$16.00 pfd. (PIK) $147,000
101,546 Doane Pet Care Co. $7.125 pfd. 5,280,392
140 Dobson Communications Corp. 13.00%
pfd. (PIK) 78,400
6,670 First Republic Capital Corp. 144A
10.50% pfd. 6,903,450
88,879 iStar Financial, Inc. Ser. F, $1.95
cum. pfd. (R) 2,310,854
628 Paxson Communications Corp. 14.25%
cum. pfd. (PIK) (S) 5,086,800
36,436 PRIMEDIA, Inc. Ser. F, $9.20 cum.
pfd. 3,661,818
4,674 Rural Cellular Corp. Ser. B, 11.375%
cum. pfd. (PIK) 4,440,300
--------------
Total Preferred stocks
(cost $26,331,633) $27,909,014
Asset-backed securities (0.8%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$4,315,000 CDO Repackaging Trust Series 144A
Ser. 03-3, Class A, 9.49s, 2008 $4,897,525
1,845,000 Denali Capital CLO III Ltd. FRN
Ser. B-2L, 10.68s, 2015 (Cayman
Islands) 1,896,478
2,020,000 Dryden Leveraged Loan CDO 144A FRN
Ser. 03-4A, Class D, 11.188s, 2015 2,083,125
4,295,000 Goldentree Loan Opportunities II,
Ltd. 144A FRN Ser. 2A, Class
5A, 11.59s, 2015 (Cayman Islands) 4,380,900
1,685,000 Octagon Investment Parties VI, Ltd.
FRN Ser. 03-6A, Class B2L, 9.46s,
2016 1,752,400
6,320,000 Providian Gateway Master Trust Ser.
02, Class B, Principal only (PO)
zero %, 2006 5,956,439
3,010,000 Verdi Synthetic CLO 144A Ser. 1A,
Class E2, 11.15s, 2010 3,051,388
--------------
Total Asset-backed securities
(cost $22,279,240) $24,018,255
Convertible preferred stocks (0.7%) (a)
Number of shares Value
- -------------------------------------------------------------------------------
83,650 Crown Castle International Corp.
$3.125 cum. cv. pfd. $4,109,306
24,787 Emmis Communications Corp. Ser. A,
$3.125 cum. cv. pfd. 1,161,891
59,300 Huntsman Corp. $2.50 cv. pfd. 3,485,061
49,600 Omnicare, Inc. $2.00 cv. pfd. 2,579,200
899 Paxson Communications Corp. 144A
9.75% cv. pfd. (PIK) 4,899,550
63,090 Williams Cos., Inc. (The) 144A $2.75
cv. pfd. 5,796,394
--------------
Total Convertible preferred stocks
(cost $20,820,105) $22,031,402
Collateralized mortgage obligations (0.4%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
DLJ Commercial Mortgage Corp.
$1,190,771 Ser. 98-CF2, Class B4, 6.04s, 2031 $1,166,122
3,816,434 Ser. 98-CF2, Class B5, 5.95s, 2031 2,662,617
GE Capital Commercial Mortgage Corp.
144A
2,470,000 Ser. 00-1, Class G, 6.131s, 2033 2,205,085
1,341,000 Ser. 00-1, Class H, 6.131s, 2033 951,753
2,202,750 GMAC Commercial Mortgage Securities,
Inc. 144A Ser. 99-C3, Class G,
6.974s, 2036 1,745,208
1,054,300 LB Commercial Conduit Mortgage Trust
144A Ser. 99-C1, Class G, 6.41s,
2031 1,002,676
Mach One Commercial Mortgage Trust
144A
1,765,000 Ser. 04-1A, Class J, 5.45s, 2040 1,453,919
880,000 Ser. 04-1A, Class K, 5.45s, 2040 707,025
400,000 Ser. 04-1A, Class L, 5.45s, 2040 287,500
--------------
Total Collateralized mortgage
obligations (cost $11,159,343) $12,181,905
U.S. government agency obligations (0.3%) (a) (cost $7,500,000)
Principal amount Value
- -------------------------------------------------------------------------------
$7,500,000 Fannie Mae notes 1.8s, May 27, 2005 $7,483,594
Convertible bonds and notes (0.2%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$19,813,000 Cybernet Internet Services
International, Inc. 144A cv. sr.
disc. notes 13s, 2009 (Denmark) (In
default) (NON) $198
2,935,000 Fairchild Semiconductor
International, Inc. cv. company
guaranty 5s, 2008 2,957,013
2,270,000 WCI Communities, Inc. cv. sr. sub.
notes 4s, 2023 3,124,088
--------------
Total Convertible bonds and notes
(cost $21,893,686) $6,081,299
Brady bonds (0.2%) (a) (cost $4,480,730)
Principal amount Value
- -------------------------------------------------------------------------------
$4,809,200 Peru (Republic of) FRB Ser. 20 YR,
5s, 2017 $4,580,763
Units (0.1%) (a)
Number of units Value
- -------------------------------------------------------------------------------
7,647,000 Morrison Knudsen Corp. $649,995
3,124 XCL Equity Units (AFF) (F) 1,386,703
--------------
Total Units (cost $17,420,897) $2,036,698
Warrants (0.1%) (a) (NON) Expiration
Number of warrants date Value
- -------------------------------------------------------------------------------
6,435 AboveNet, Inc. 9/8/08 $64,350
7,570 AboveNet, Inc. 9/8/10 45,420
8,414 Dayton Superior Corp. 144A 6/15/09 1
1 Decrane Aircraft Holdings Co. Class B 6/30/10 1
1 Decrane Aircraft Holdings Co. Class B 6/30/10 1
4,453 MDP Acquisitions PLC 144A 10/1/13 124,684
3,334 Mikohn Gaming Corp. 144A 8/15/08 60,679
186 ONO Finance PLC 144A (United
Kingdom) 2/15/11 2
3,668 Pliant Corp. 144A 6/1/10 37
5,247 Travelcenters of America, Inc. 144A 5/1/09 26,235
15,004 Ubiquitel, Inc. 144A 4/15/10 1
24,085 Washington Group International, Inc.
Ser. A 1/25/06 366,092
27,526 Washington Group International, Inc.
Ser. B 1/25/06 339,946
14,879 Washington Group International, Inc.
Ser. C 1/25/06 162,925
9,684 XM Satellite Radio Holdings, Inc.
144A 3/15/10 774,720
300,000 ZSC Specialty Chemicals PLC 144A
(United Kingdom) 6/30/11 3,000
300,000 ZSC Specialty Chemicals PLC
(Preferred) 144A (United Kingdom) 6/30/11 3,000
--------------
Total Warrants (cost $6,508,809) $1,971,094
Short-term investments (4.5%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$6,000,000 Citigroup Global Markets for an
effective yield of 2.74%, May 10,
2005 $5,968,734
3,000,000 Danske Corp. for an effective yield
of 2.96%, August 8, 2005 (Denmark) 2,961,201
4,000,000 HBOS Treasury Services PLC for an
effective yield of 3.05%, December
30, 2005 (United Kingdom) 3,995,432
4,450,000 Nordea Bank Finland PLC for an
effective yield of 3.04%, December
30, 2005 (Sweden) 4,444,384
3,000,000 Societe Generale for an effective
yield of 2.92%, August 9, 2005
(France) 2,999,928
12,000,000 WestLB AG for an effective yield of
2.79%, May 31, 2005 (Germany) 11,917,344
86,542,693 Putnam Prime Money Market Fund (d) 86,542,693
9,120,000 Interest in 468,500,000 joint
tri-party repurchase agreement
dated February 28, 2005 with Bank of
America Securities, LLC due March 1,
2005 with respect to various U.S.
government obligations -- maturity
value of 9,120,669 for an effective
yield of 2.64% (collateralized by
Fannie Mae with a rate of 6.00% and
a maturity date of August 1, 2034,
valued at 477,877,001) 9,120,000
5,714,208 Short-term investments held as
collateral for loaned securities with
yields ranging from 2.46% to 2.78% and
due dates ranging from March 1, 2005 to
March 29, 2005 (e) 5,710,277
--------------
Total Short-term investments
(cost $133,659,993) $133,659,993
- -------------------------------------------------------------------------------
Total Investments
(cost $2,899,612,617) $2,908,598,624
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $2,954,907,900.
(NON) Non-income-producing security.
(STP) The interest rate and date shown parenthetically represent the new
interest rate to be paid and the date the fund will begin accruing
interest income at this rate.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at February 28, 2005
was $2,611,427 or 0.1% of net assets.
(PIK) Income may be received in cash or additional securities at the
discretion of the issuer.
(AFF) Affiliated companies (Note 7).
(F) Security is valued at fair value following procedures approved by
the Trustees.
(R) Real Estate Investment Trust.
(S) Securities on loan, in part or in entirety, at February 28, 2005.
(c) Senior loans are exempt from registration under the Security 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 rate shown for senior loans are the current
interest rates at February 28, 2005. 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).
(d) See Note 5 to the financial statements regarding investments in
Putnam Prime Money Market Fund.
(e) See Note 1 to the financial statements.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes
(FRN) are the current interest rates at February 28, 2005.
Forward currency contracts to buy at February 28, 2005 (Unaudited)
Aggregate Delivery Unrealized
Value face value date appreciation
- ------------------------------------------------------------------------------------------------------
Euro $1,007,065 $1,005,898 3/16/05 $1,167
- ------------------------------------------------------------------------------------------------------
Forward currency contracts to sell at February 28, 2005 (Unaudited)
Aggregate Delivery Unrealized
Value face value date depreciation
- ------------------------------------------------------------------------------------------------------
Euro $37,404,246 $37,215,543 3/16/05 $(188,703)
- ------------------------------------------------------------------------------------------------------
Total return swap contracts outstanding at February 28, 2005 (Unaudited)
Notional Termination Unrealized
amount date appreciation
- ------------------------------------------------------------------------------------------------------
Agreement with Deutsche Bank AG dated
February 1, 2005 to receive at maturity
the notional amount multiplied by the return
of the Lehman Brothers U.S. Corporate High
Yield Index and pay at maturity the notional
amount multiplied by the seven month
USD-LIBOR-BBA adjusted by a
specified spread. $5,999,812 9/1/05 $68,000
Agreement with Deutsche Bank AG dated
February 1, 2005 to receive at maturity the
notional amount multiplied by the return of
the Lehman Brothers U.S. Corporate High
Yield Index and pay at maturity the notional
amount multiplied by the six month
USD-LIBOR-BBA adjusted by a
specified spread. 5,999,812 8/1/05 68,243
Agreement with Lehman Brothers Special
Financing, Inc. dated October 9, 2003
to receive (pay) semi-annually the notional
amount multiplied by the total rate of return
of the Lehman Brothers U.S. Corporate High
Yield Index and pay semi-annually the
notional amount multiplied by the six month
USD-LIBOR adjusted by a specified spread. 8,505,022 5/1/06 297,600
Agreement with Lehman Brothers Special
Financing, Inc. dated June 16, 2003 to receive
(pay) quarterly the notional amount multiplied
by the return of the Lehman U.S. Corporate High
Yield Index and pay quarterly the notional
amount multiplied by the three month
USD-LIBOR adjusted by a specified spread. 17,943,855 6/1/05 382,500
- ------------------------------------------------------------------------------------------------------
$816,343
- ------------------------------------------------------------------------------------------------------
Credit default contracts outstanding at February 28, 2005 (Unaudited)
Notional Unrealized
amount appreciation
- ------------------------------------------------------------------------------------------------------
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is
reduced to zero or the date on which the assets securing the
reference obligation are liquidated, the fund receives a payment
of the outstanding notional amount times 2.35% and the fund
pays in the event of a credit default in one of the underlying
securities in the basket of BB CMBS securities. $1,055,704 $52,538
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is
reduced to zero or the date on which the assets securing the
reference obligation are liquidated, the fund receives a payment
of the outstanding notional amount times 2.55625% and the fund
pays in the event of a credit default in one of the underlying
securities in the basket of BB CMBS securities. 1,055,704 27,961
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is
reduced to zero or the date on which the assets securing the
reference obligation are liquidated, the fund receives a payment
of the outstanding notional amount times 2.4625% and the fund
pays in the event of a credit default in one of the underlying
securities in the basket of BB CMBS securities. 527,852 24,553
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is
reduced to zero or the date on which the assets securing the
reference obligation are liquidated, the fund receives a payment
of the outstanding notional amount times 2.433% and the fund
pays in the event of a credit default in one of the underlying
securities in the basket of BB CMBS securities. 395,889 17,367
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is
reduced to zero or the date on which the assets securing the
reference obligation are liquidated, the fund receives a payment
of the outstanding notional amount times 2.475% and the fund
pays in the event of a credit default in one of the underlying
securities in the basket of BB CMBS securities. 263,926 8,631
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is
reduced to zero or the date on which the assets securing the
reference obligation are liquidated, the fund receives a payment
of the outstanding notional amount times 2.5% and the fund
pays in the event of a credit default in one of the underlying
securities in the basket of BB CMBS securities. 131,963 8,382
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is
reduced to zero or the date on which the assets securing the
reference obligation are liquidated, the fund receives a payment
of the outstanding notional amount times 2.6% and the fund
pays in the event of a credit default in one of the underlying
securities in the basket of BB CMBS securities. 131,963 1,339
- ------------------------------------------------------------------------------------------------------
$140,771
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
February 28, 2005 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investment in securities, at value, including $5,503,845 of securities
on loan (Note 1):
- -------------------------------------------------------------------------------
Unaffiliated issuers (identified cost $2,751,714,778) $2,796,585,346
- -------------------------------------------------------------------------------
Affiliated issuers (identified cost $147,897,839) (Notes 5
and 7) 112,013,278
- -------------------------------------------------------------------------------
Cash 13,611,292
- -------------------------------------------------------------------------------
Dividends, interest and other receivables 51,817,856
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,296,122
- -------------------------------------------------------------------------------
Receivable for securities sold 10,801,562
- -------------------------------------------------------------------------------
Receivable for open forward currency contracts (Note 1) 1,167
- -------------------------------------------------------------------------------
Receivable for open swap contracts (Note 1) 816,343
- -------------------------------------------------------------------------------
Receivable for open credit default contracts (Note 1) 140,771
- -------------------------------------------------------------------------------
Total assets 2,988,083,737
Liabilities
- -------------------------------------------------------------------------------
Payable for securities purchased 14,971,121
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 5,683,774
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Notes 2 and 5) 4,058,722
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 573,366
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 316,187
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 17,383
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,372,529
- -------------------------------------------------------------------------------
Payable for open forward currency contracts (Note 1) 188,703
- -------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 5,710,277
- -------------------------------------------------------------------------------
Other accrued expenses 283,775
- -------------------------------------------------------------------------------
Total liabilities 33,175,837
- -------------------------------------------------------------------------------
Net assets $2,954,907,900
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) $4,672,869,147
- -------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (9,834,834)
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (1,717,873,469)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 9,747,056
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $2,954,907,900
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,994,947,207 divided by 241,628,578 shares) $8.26
- -------------------------------------------------------------------------------
Offering price per class A share (100/95.50 of $8.26)* $8.65
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($638,411,574 divided by 77,711,297 shares)** $8.22
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($81,571,011 divided by 9,921,125 shares)** $8.22
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($27,419,797 divided by 3,321,127 shares) $8.26
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $8.26)* $8.54
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($197,684 divided by 23,982 shares) $8.24
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class Y share ($212,360,627 divided by 25,827,439 shares) $8.22
- -------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial
statements.
Statement of operations
Six months ended February 28, 2005 (Unaudited)
Investment income:
- -------------------------------------------------------------------------------
Interest (including interest income of $891,911 from
investments in affiliated issuers) (Note 5) $114,062,608
- -------------------------------------------------------------------------------
Dividends 1,913,082
- -------------------------------------------------------------------------------
Securities lending 9,080
- -------------------------------------------------------------------------------
Total investment income 115,984,770
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 8,216,253
- -------------------------------------------------------------------------------
Investor servicing fees (Note 2) 1,662,561
- -------------------------------------------------------------------------------
Custodian fees (Note 2) 142,134
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 45,235
- -------------------------------------------------------------------------------
Administrative services (Note 2) 54,939
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 2,449,481
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 3,285,815
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 376,284
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 68,639
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 290
- -------------------------------------------------------------------------------
Other 409,403
- -------------------------------------------------------------------------------
Non-recurring costs (Notes 2 and 8) 16,016
- -------------------------------------------------------------------------------
Costs assumed by Manager (Notes 2 and 8) (16,016)
- -------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 5) (67,236)
- -------------------------------------------------------------------------------
Total expenses 16,643,798
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (71,704)
- -------------------------------------------------------------------------------
Net expenses 16,572,094
- -------------------------------------------------------------------------------
Net investment income 99,412,676
- -------------------------------------------------------------------------------
Net realized gain on investments (including realized loss of
$96,467 on sales of affiliated issues) (Notes 1, 3 and 7) 6,644,696
- -------------------------------------------------------------------------------
Net realized gain on swap contracts (Note 1) 3,476,810
- -------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (1,899,869)
- -------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the period (101,535)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments, swap contracts,
and credit default contracts during the period 98,479,271
- -------------------------------------------------------------------------------
Net gain on investments 106,599,373
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $206,012,049
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of changes in net assets
Six months ended Year ended
February 28 August 31
Increase (decrease) in net assets 2005* 2004
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $99,412,676 $241,898,034
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 8,221,637 (59,354,692)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign
currency 98,377,736 253,079,982
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 206,012,049 435,623,324
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
Class A (73,269,022) (159,003,102)
- -------------------------------------------------------------------------------
Class B (22,253,756) (53,982,795)
- -------------------------------------------------------------------------------
Class C (2,557,569) (6,324,076)
- -------------------------------------------------------------------------------
Class M (989,955) (2,802,647)
- -------------------------------------------------------------------------------
Class R (4,302) (4,178)
- -------------------------------------------------------------------------------
Class Y (8,459,473) (18,727,067)
- -------------------------------------------------------------------------------
Redemption fees (Note 1) 54,792 249,803
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (74,291,638) (768,638,567)
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets 24,241,126 (573,609,305)
Net assets
- -------------------------------------------------------------------------------
Beginning of period 2,930,666,774 3,504,276,079
- -------------------------------------------------------------------------------
End of period (including distributions in
excess of net investment income of
$9,834,834 and $1,713,433, respectively) $2,954,907,900 $2,930,666,774
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
February 28
Per-share (Unaudited) Year ended August 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.98 $7.55 $6.86 $8.10 $9.47 $10.46
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .28 (d) .59 (d) .67 .77 .97 1.05
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .30 .43 .71 (1.15) (1.31) (.95)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .58 1.02 1.38 (.38) (.34) .10
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.30) (.59) (.69) (.81) (1.00) (1.09)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.05) (.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.30) (.59) (.69) (.86) (1.03) (1.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.26 $7.98 $7.55 $6.86 $8.10 $9.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 7.42* 13.95 21.27 (5.10) (3.49) .93
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,994,947 $1,924,073 $2,271,756 $1,814,979 $1,584,421 $2,022,516
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .48* (d) .99 (d) .98 1.01 .99 .96
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.44* (d) 7.55 (d) 9.41 10.37 11.40 10.45
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 22.78* 61.68 75.18 74.29 (f) 77.43 60.55
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
February 28, 2005 and August 31, 2004 reflect a reduction of less than
0.01% of average net assets for class A shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam High Yield Trust II.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
February 28
Per-share (Unaudited) Year ended August 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.94 $7.52 $6.84 $8.07 $9.44 $10.42
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .25 (d) .53 (d) .62 .71 .91 .98
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .30 .42 .70 (1.14) (1.31) (.94)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .55 .95 1.32 (.43) (.40) .04
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.27) (.53) (.64) (.76) (.94) (1.02)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.04) (.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.27) (.53) (.64) (.80) (.97) (1.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.22 $7.94 $7.52 $6.84 $8.07 $9.44
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 7.05* 13.01 20.31 (5.69) (4.23) .27
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $638,412 $672,232 $879,566 $793,713 $274,501 $381,093
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .85* (d) 1.74 (d) 1.73 1.76 1.74 1.71
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.07* (d) 6.80 (d) 8.67 9.40 10.67 9.72
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 22.78* 61.68 75.18 74.29 (f) 77.43 60.55
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
February 28, 2005 and August 31, 2004 reflect a reduction of less than
0.01% of average net assets for class B shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam High Yield Trust II.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS C
- -----------------------------------------------------------------------------------------------------------------
Six months
ended For the period
February 28 Year ended March 19, 2002+
Per-share (Unaudited) August 31 to August 31
operating performance 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.95 $7.52 $6.85 $7.60
- -----------------------------------------------------------------------------------------------------------------
Investment operations:
- -----------------------------------------------------------------------------------------------------------------
Net investment income (a) .25 (d) .54 (d) .62 .29
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .29 .42 .68 (.74)
- -----------------------------------------------------------------------------------------------------------------
Total from
investment operations .54 .96 1.30 (.45)
- -----------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------
From net
investment income (.27) (.53) (.63) (.28)
- -----------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.02)
- -----------------------------------------------------------------------------------------------------------------
Total distributions (.27) (.53) (.63) (.30)
- -----------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- --
- -----------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.22 $7.95 $7.52 $6.85
- -----------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 6.91* 13.15 20.08 (6.03)*
- -----------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $81,571 $63,866 $87,008 $48,587
- -----------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .85* (d) 1.74 (d) 1.73 .80*
- -----------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.07* (d) 6.80 (d) 8.49 4.17*
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 22.78* 61.68 75.18 74.29 (f)
- -----------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares
outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund
during the period. As a result of such waivers, the expenses of the fund for the periods ended
February 28, 2005 and August 31, 2004 reflect a reduction of less than 0.01% of average net assets
for class C shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam High Yield Trust II.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
February 28
Per-share (Unaudited) Year ended August 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.98 $7.55 $6.87 $8.10 $9.47 $10.45
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .27 (d) .57 (d) .65 .75 .95 1.03
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .30 .43 .70 (1.15) (1.31) (.94)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .57 1.00 1.35 (.40) (.36) .09
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.29) (.57) (.67) (.79) (.98) (1.07)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.04) (.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.29) (.57) (.67) (.83) (1.01) (1.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.26 $7.98 $7.55 $6.87 $8.10 $9.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 7.26* 13.64 20.80 (5.23) (3.76) .78
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $27,420 $26,295 $45,017 $34,917 $8,601 $11,005
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .60* (d) 1.24 (d) 1.23 1.26 1.24 1.21
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.31* (d) 7.28 (d) 9.12 9.79 11.15 10.21
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 22.78* 61.68 75.18 74.29 (f) 77.43 60.55
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
February 28, 2005 and August 31, 2004 reflect a reduction of less than
0.01% of average net assets for class M shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam High Yield Trust II.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS R
- -----------------------------------------------------------------------------------------------------
For the
Six months period
ended Year January 21,
February 28 ended 2003+ to
Per-share (Unaudited) August 31 August 31
operating performance 2005 2004 2003
- -----------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.98 $7.55 $6.99
- -----------------------------------------------------------------------------------------------------
Investment operations:
- -----------------------------------------------------------------------------------------------------
Net investment income (a) .27 (d) .58 (d) .40
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .29 .42 .54
- -----------------------------------------------------------------------------------------------------
Total from
investment operations .56 1.00 .94
- -----------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------
From net
investment income (.30) (.57) (.38)
- -----------------------------------------------------------------------------------------------------
Total distributions (.30) (.57) (.38)
- -----------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) --
- -----------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.24 $7.98 $7.55
- -----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 7.06* 13.64 13.76*
- -----------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $198 $70 $46
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .60* (d) 1.24 (d) .75*
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.35* (d) 7.29 (d) 5.59*
- -----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 22.78* 61.68 75.18
- -----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
February 28, 2005 and August 31, 2004 reflect a reduction of less than
0.01% of average net assets for class R shares (Note 5).
(e) Amount represents less than $0.01 per share.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS Y
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
February 28
Per-share (Unaudited) Year ended August 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $7.96 $7.53 $6.85 $8.09 $9.47 $10.46
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .29 (d) .61 (d) .68 .77 .99 1.08
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .29 .44 .71 (1.13) (1.31) (.95)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .58 1.05 1.39 (.36) (.32) .13
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.32) (.62) (.71) (.83) (1.03) (1.12)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- (.05) (.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.32) (.62) (.71) (.88) (1.06) (1.12)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.22 $7.96 $7.53 $6.85 $8.09 $9.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 7.34* 14.34 21.45 (4.84) (3.34) 1.17
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $212,361 $244,131 $220,883 $132,382 $14,580 $16,668
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .35* (d) .74 (d) .73 .76 .74 .71
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.57* (d) 7.81 (d) 9.57 10.05 11.61 10.72
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 22.78* 61.68 75.18 74.29 (f) 77.43 60.55
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
February 28, 2005 and August 31, 2004 reflect a reduction of less than
0.01% of average net assets for class Y shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam High Yield Trust II.
The accompanying notes are an integral part of these financial
statements.
Notes to financial statements
February 28, 2005 (Unaudited)
Note 1
Significant accounting policies
Putnam High Yield Trust ("the fund"), a Massa chusetts business trust,
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The fund seeks high
current income by investing primarily in high-yielding, lower-rated
fixed-income securities. These securities may have a higher rate of
default due to the nature of the investments.
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 4.50% and 3.25%, respectively, and do not pay a
contingent deferred sales charge. Effective April 1, 2005, the maximum
front-end sales charge will be 3.75%. 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
are subject to the same fees as class B shares, except that 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 offered to
qualified employee-benefit plans are sold without a front-end sales
charge or a contingent deferred sales charge. The expenses for class A,
class B, class C, class M and class R shares may differ based on each
class' distribution fee, 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 sold to certain
eligible purchasers including certain defined contribution plans
(including corporate IRAs), bank trust departments and trust companies.
Prior to April 19, 2004 a redemption fee of 1.00% which is retained by
the fund, applied to shares of any class redeemed (either by selling or
by exchanging to another fund) within 90 days of purchase. Effective
April 19, 2004 (May 3, 2004 for defined contribution plans administered
by Putnam), a 2.00% redemption fee may apply to any shares that are
redeemed (either by selling or exchanging into another fund) within 5
days of purchase. A 1.00% redemption fee would apply to any shares that
are redeemed (either by selling or exchanging into another fund) within
6-90 days of purchase. The redemption fee is accounted for as an
addition to paid-in-capital.
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. Shares of each
class would receive their pro-rata share of the net assets of the fund,
if the fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in the financial
statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results could
differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are valued at the last reported sales price on their
principal exchange, or official closing price for certain markets. If no
sales are reported -- as in the case of some securities traded
over-the-counter -- a security is valued at its last reported bid price.
Market quotations are not considered to be readily available for certain
debt obligations; such investments are valued at fair value on the basis
of valuations furnished by an independent pricing service or dealers,
approved by the Trustees. 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. 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 securities taking into account
multiple factors, including movements in the U.S. securities markets.
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 are translated into U.S. dollars at the current exchange
rate. Short-term investments having remaining maturities of 60 days or
less are valued at amortized cost, which approximates fair value. Other
investments, including certain restricted securities, are valued at fair
value following procedures approved by the Trustees. Such valuations and
procedures are reviewed periodically by the Trustees.
B) Joint trading account Pursuant to an exemptive order from the
Securities and Exchange Commission ("SEC"), the fund may transfer
uninvested cash balances, including cash collateral received under
security lending arrange ments, into a joint trading account along with
the cash of other registered investment companies and certain other
accounts managed by Putnam Investment Management, LLC ("Putnam
Management"), the fund's manager, an indirect wholly-owned subsidiary of
Putnam, LLC. These balances may be invested in issues of high-grade
short-term investments having maturities of up to 397 days for
collateral received under security lending arrangements and up to 90
days for other cash investments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are recorded on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income, net
of applicable withholding taxes, is recognized on the ex-dividend date.
Non-cash dividends, if any, are recorded at the fair market value of the
securities received. All premiums/discounts are amortized/accreted on a
yield-to-maturity basis. The fund earned certain fees in connection with
its senior loan purchasing activities. These fees are treated as market
discount and are recorded as income in the statement of operations.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when 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. Investments in
foreign securities involve certain risks, including those related to
economic instability, unfavorable political developments, and currency
fluctuations, not present with domestic investments.
F) Forward currency contracts The fund may buy and sell forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date. These contracts are used to
protect against a decline in value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or quoted
(or an increase in the value of a currency in which securities a fund
intends to buy are denominated, when a fund holds cash reserves and
short term investments). The U.S. dollar value of forward currency
contracts is determined using current forward currency exchange rates
supplied by a quotation service. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is
marked to market daily and the change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed. The fund could be exposed to risk if the value of the currency
changes unfavorably, if the counterparties to the contracts are unable
to meet the terms of their contracts or if the fund is unable to enter
into a closing position. 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.
G) Total return swap contracts The fund may enter into total return swap
contracts, which are arrangements to exchange a market linked return for
a periodic payment, both based on a notional principal amount. To the
extent that the total return of the security or index underlying the
transaction exceeds or falls short of the offsetting interest rate
obligation, the fund will receive a payment from or make a payment to
the counterparty. Total return swap contracts are marked to market daily
based upon quotations from market makers and the change, if any, is
recorded as unrealized gain or loss. Payments received or made are
recorded as realized gains or loss. The fund could be exposed to credit
or market risk due to unfavorable changes in the fluctuation of interest
rates or in the price of the underlying security or index, the
possibility that there is no liquid market for these agreements or that
the counterparty may default on its obligation to perform. Risk of loss
may exceed amounts recognized on the statement of assets and
liabilities. Total return swap contracts outstanding at period end, if
any, are listed after the fund's portfolio.
H) Credit default contracts The fund may enter into credit default
contracts where one party, the protection buyer, makes an upfront or
periodic payment to a counter party, the protection seller, in exchange
for the right to receive a contingent payment. The maximum amount of the
payment may equal the notional amount, at par, of the underlying index
or security as a result of a related credit event. An upfront payment
received by the fund, as the protection seller, is recorded as a
liability on the fund's books. An upfront payment made by the fund, as
the protection buyer, is recorded as an asset on the fund's books.
Periodic payments received or paid by the fund are recorded as realized
gains or losses. The credit default contracts are marked to market daily
based upon quotations from market makers and the change, if any, is
recorded as unrealized gain or loss. Payments received or made as a
result of a credit event or termination of the contract are recognized,
net of a proportional amount of the upfront payment, as realized gains
or losses. In addition to bearing the risk that the credit event will
occur, the fund could be exposed to market risk due to unfavorable
changes in interest rates or in the price of the underlying security or
index, the possibility that the fund may be unable to close out its
position at the same time or at the same price as if it had purchased
comparable publicly traded securities or that the counterparty may
default on its obligation to perform. Risks of loss may exceed amounts
recognized on the statement of assets and liabilities. Credit default
contracts outstanding at period end, if any, are listed after the fund's
portfolio.
I) Security lending The fund may lend securities, through its agents, to
qualified borrowers in order to earn additional income. The loans are
collateralized by cash and/or securities in an amount at least equal to
the market value of the securities loaned. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the fund on the next business day. The risk
of borrower default will be borne by the fund's agents; the fund will
bear the risk of loss with respect to the investment of the cash
collateral. Income from securities lending is included in investment
income on the statement of operations. At February 28, 2005, the value
of securities loaned amounted to $5,503,845. The fund received cash
collateral of $5,710,277 which is pooled with collateral of other Putnam
funds into 33 issuers of high grade short-term investments.
J) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code of 1986 (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, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
At August 31, 2004, the fund had a capital loss carryover of
$1,657,591,629 available to the extent allowed by the Code to offset
future net capital gain, if any. The amount of the carryover and the
expiration dates are:
Loss Carryover Expiration
- ----------------------------------
$4,909,410 August 31, 2005
14,566,882 August 31, 2006
135,892,331 August 31, 2007
339,129,540 August 31. 2008
305,968,663 August 31, 2009
298,606,980 August 31, 2010
498,097,278 August 31, 2011
60,420,545 August 31, 2012
Pursuant to federal income tax regulations applicable to regulated
investment companies, the fund has elected to defer to its fiscal year
ending August 31, 2005, $65,092,893 of losses recognized during the
period November 1, 2003 to August 31, 2004.
The aggregate identified cost on a tax basis is $2,917,053,649,
resulting in gross unrealized appreciation and depreciation of
$190,604,641 and $199,059,666, respectively, or net unrealized
depreciation of $8,455,025.
K) 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. 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
Putnam Management is paid for management and investment advisory
services quarterly based on the average net assets of the fund. Such fee
is based on the following annual rates: 0.70% of the first $500 million
of average net assets, 0.60% of the next $500 million, 0.55% of the next
$500 million, 0.50% of the next $5 billion, 0.475% of the next $5
billion, 0.455% of the next $5 billion, 0.44% of the next $5 billion,
and 0.43% thereafter.
Putnam Management has agreed to waive fees and reimburse expenses of the
fund through August 31, 2005 to the extent necessary to ensure that the
fund's expenses do not exceed the average expenses of the front-end load
funds viewed by Lipper Inc. as having the same investment classification
or objective as the fund. The expense reimbursement is based on a
comparison of the fund's expenses with the average annualized operating
expenses of the funds in its Lipper peer group for each calendar quarter
during the fund's last fiscal year, excluding 12b-1 fees and without
giving effect to any expense offset and brokerage service arrangements
that may reduce fund expenses. For the period ended February 28, 2005,
Putnam Management did not waive any of its management fee from the fund.
For the period ended February 28, 2005, Putnam Management has assumed
$16,016 of legal, shareholder servicing and communication, audit and
Trustee fees incurred by the fund in connection with certain legal and
regulatory matters. (including those described in Note 8).
Effective September 13, 2004, Putnam Invest ments 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 Putnam
Fiduciary Trust Company ("PFTC"), a subsidiary of Putnam, LLC. Putnam
Investor Services, a division of PFTC, provides investor servicing agent
functions to the fund. During the six months ended February 28, 2005,
the fund paid PFTC $1,804,695 for these services.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. For the six months ended February 28,
2005, the fund's expenses were reduced by $71,704 under these
arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $3,606, as a quarterly retainer, has been allocated to the fund,
and an additional fee for each Trustees meeting attended. Trustees
receive additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in 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, a wholly-owned
subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., for
services provided and expenses incurred in distributing shares of the
fund. The Plans provide for payments by the fund to Putnam Retail
Management 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.
For the six months ended February 28, 2005, Putnam Retail Management,
acting as underwriter, received net commissions of $76,151 and $807 from
the sale of class A and class M shares, respectively, and received
$374,575 and $1,955 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 six
months ended February 28, 2005, Putnam Retail Management, acting as
underwriter, received $3,091 and no monies on class A and class M
redemptions, respectively.
Note 3
Purchases and sales of securities
During the six months ended February 28, 2005, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $635,561,418 and $712,131,717, respectively.
There were no purchases or sales of U.S. government securities.
Note 4
Capital shares
At February 28, 2005, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended February 28, 2005
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 18,560,474 $151,547,211
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 5,981,916 48,764,589
- ----------------------------------------------------------------
24,542,390 200,311,800
Shares repurchased (23,922,146) (195,478,782)
- ----------------------------------------------------------------
Net increase 620,244 $4,833,018
- ----------------------------------------------------------------
Year ended August 31, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 50,023,108 $392,516,115
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 13,400,828 105,453,710
- ----------------------------------------------------------------
63,423,936 497,969,825
Shares repurchased (123,252,647) (971,979,430)
- ----------------------------------------------------------------
Net decrease (59,828,711) $(474,009,605)
- ----------------------------------------------------------------
Six months ended February 28, 2005
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 5,199,635 $42,268,347
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1,651,817 13,400,182
- ----------------------------------------------------------------
6,851,452 55,668,529
Shares repurchased (13,760,474) (111,799,775)
- ----------------------------------------------------------------
Net decrease (6,909,022) $(56,131,246)
- ----------------------------------------------------------------
Year ended August 31, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 15,560,257 $121,439,032
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,139,845 32,442,704
- ----------------------------------------------------------------
19,700,102 153,881,736
Shares repurchased (52,110,581) (409,116,906)
- ----------------------------------------------------------------
Net decrease (32,410,479) $(255,235,170)
- ----------------------------------------------------------------
Six months ended February 28, 2005
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 3,039,349 $24,771,679
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 209,239 1,701,227
- ----------------------------------------------------------------
3,248,588 26,472,906
Shares repurchased (1,360,074) (11,073,580)
- ----------------------------------------------------------------
Net increase 1,888,514 $15,399,326
- ----------------------------------------------------------------
Year ended August 31, 2004
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 7,314,734 $56,828,327
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 569,122 4,435,878
- ----------------------------------------------------------------
7,883,856 61,264,205
Shares repurchased (11,415,745) (89,931,047)
- ----------------------------------------------------------------
Net decrease (3,531,889) $(28,666,842)
- ----------------------------------------------------------------
Six months ended February 28, 2005
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 429,917 $3,597,758
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 83,012 575,814
- ----------------------------------------------------------------
512,929 4,173,572
Shares repurchased (485,700) (3,971,550)
- ----------------------------------------------------------------
Net increase 27,229 $202,022
- ----------------------------------------------------------------
Year ended August 31, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 1,459,524 $11,428,266
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 262,925 2,070,674
- ----------------------------------------------------------------
1,722,449 13,498,940
Shares repurchased (4,391,949) (34,803,839)
- ----------------------------------------------------------------
Net decrease (2,669,500) $(21,304,899)
- ----------------------------------------------------------------
Six months ended February 28, 2005
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 15,248 $124,934
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 527 4,302
- ----------------------------------------------------------------
15,775 129,236
Shares repurchased (545) (4,437)
- ----------------------------------------------------------------
Net increase 15,230 $124,799
- ----------------------------------------------------------------
Year ended August 31, 2004
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 2,325 $18,542
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 530 4,178
- ----------------------------------------------------------------
2,855 22,720
Shares repurchased (165) (1,306)
- ----------------------------------------------------------------
Net increase 2,690 $21,414
- ----------------------------------------------------------------
Six months ended February 28, 2005
- ----------------------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------------------
Shares sold 4,319,995 $34,013,716
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 892,193 8,459,473
- ----------------------------------------------------------------
5,212,188 42,473,189
Shares repurchased (10,073,592) (81,192,746)
- ----------------------------------------------------------------
Net decrease (4,861,404) $(38,719,557)
- ----------------------------------------------------------------
Year ended August 31, 2004
- ----------------------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------------------
Shares sold 8,040,507 $63,353,008
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 2,383,872 18,727,067
- ----------------------------------------------------------------
10,424,379 82,080,075
Shares repurchased (9,059,160) (71,523,540)
- ----------------------------------------------------------------
Net increase 1,365,219 $10,556,535
- ----------------------------------------------------------------
Note 5
Investment in Putnam
Prime Money Market Fund
Pursuant to an exemptive order from the Securities and Exchange
Commission, the fund invests in Putnam Prime Money Market Fund, an
open-end management investment company managed by Putnam Management.
Management fees paid by the fund are reduced by an amount equal to the
management fees paid by Putnam Prime Money Market Fund with respect to
assets invested by the fund in Putnam Prime Money Market Fund. For
the period ended February 28, 2005, management fees paid were reduced by
$67,236 relating to the fund's investment in Putnam Prime Money Market
Fund. Income distributions earned by the fund are recorded as income in
the statement of operations and totaled $891,911 for the period ended
February 28, 2005.
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; 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
Transactions with affiliated issuers
Transactions during the period with companies in which the fund owned at
least 5% of the voting securities were as follows:
Purchase Sales Dividend Market
Affiliates Cost Cost Income Value
- ------------------------------------------------------------------------------------------------------
Archibald Candy Corp. $-- $2,091,371 $-- $--
Decrane Aircraft Holdings, In -- -- 29
DigitalGlobe, Inc. 144A* -- -- -- 645,566
PSF Group Holdings Inc., 144A -- -- -- 20,835,640
VFB LLC* -- -- 2,602,647
XCL Equity Units -- -- -- 1,386,703
- ------------------------------------------------------------------------------------------------------
Totals $-- $2,091,371 $-- $25,470,585
- ------------------------------------------------------------------------------------------------------
* Securities received as the result of a corporate action.
Market values are shown for those securities affiliated at period end.
Note 8
Regulatory matters and litigation
Putnam Management has entered into agreements with the Securities and
Exchange Commission and the Massachusetts Securities Division settling
charges connected with excessive short-term trading by Putnam employees
and, in the case of the charges brought by the Massachusetts
Secur ities Division, by participants in some Putnam-administered 401(k)
plans. Pursuant to these settlement agreements, Putnam Manage ment will
pay a total of $193.5 million in penalties and restitution, with $153.5
million being paid to shareholders and the funds. The restitution amount
will be allocated to shareholders pursuant to a plan developed by an
independent consultant, with payments to shareholders currently expected
by the end of the summer.
The SEC's and Massachusetts Securities Division's allegations and
related matters also serve as the general basis for numerous lawsuits,
including purported class action lawsuits filed against Putnam
Management and certain related parties, including certain Putnam funds.
Putnam Management will bear any costs incurred by Putnam funds in
connection with these lawsuits. Putnam Management believes that the
likelihood that the pending private lawsuits and purported class action
lawsuits will have a material adverse financial impact on the fund is
remote, and the pending actions are not likely to materially affect its
ability to provide investment management services to its clients,
including the Putnam funds.
Results of November 11, 2004
and January 10, 2005
shareholder meetings
(Unaudited)
A special meeting of shareholders of the fund was held on November 11,
2004. At that meeting consideration of certain proposals was adjourned
to a final meeting held on January 10, 2005.
November 11, 2004 meeting
At the meeting, each of the nominees for Trustees was elected, as follows:
Votes Votes
For Withheld
- -----------------------------------------------------------------
Jameson A. Baxter 225,129,463 7,085,009
Charles B. Curtis 225,019,365 7,195,107
Myra R. Drucker 224,935,025 7,279,447
Charles E. Haldeman, Jr. 225,111,919 7,102,553
John A. Hill 225,294,232 6,920,240
Ronald J. Jackson 225,217,560 6,996,912
Paul L. Joskow 225,378,479 6,835,993
Elizabeth T. Kennan 224,958,866 7,255,606
John H. Mullin, III 225,325,660 6,888,812
Robert E. Patterson 225,242,241 6,972,231
George Putnam, III 224,924,765 7,289,707
A.J.C. Smith* 225,035,501 7,178,971
W. Thomas Stephens 225,073,311 7,141,161
Richard B. Worley 224,906,036 7,308,436
A proposal to amend fund's fundamental investment restriction with
respect to borrowing to allow the fund the investments flexibility
permitted by the Investment Company Act was approved as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
163,294,479 11,496,142 57,423,851
* Mr. Smith resigned from the Board of Trustees on January 14, 2005.
All tabulations are rounded to nearest whole number.
A proposal to amend the fund's fundamental investment restriction with
respect to making loans to enhance the fund's ability to participate in
an interfund borrowing and lending program was approved as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
163,934,149 10,839,013 57,441,310
A proposal to amend the fund's fundamental investment restriction
with respect to diversification of investments to enhance the
fund's ability to invest in registered investment companies such
as Putnam Prime Money Market was approved as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
168,303,944 7,001,556 56,908,972
January 10, 2005 meeting
A proposal to amend the Trust's Agreement and Declaration of Trust to
permit the fund to satisfy redemption requests other than in cash was
defeated as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
165,860,992 8,670,478 58,108,498
All tabulations are rounded to nearest whole number.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds.
Investors should carefully consider the investment objective, risks,
charges, and expenses of a fund before investing. For a prospectus
containing this and other information for any Putnam fund or product,
call your financial advisor at 1-800-225-1581 and ask for a prospectus.
Please read the prospectus carefully before investing.
Growth Funds
Discovery Growth Fund
Growth Opportunities Fund
Health Sciences Trust
International New Opportunities Fund*
New Opportunities Fund
OTC & Emerging Growth Fund
Small Cap Growth Fund
Vista Fund
Voyager Fund
Blend Funds
Capital Appreciation Fund
Capital Opportunities Fund
Europe Equity Fund*
Global Equity Fund*
Global Natural Resources Fund*
International Capital
Opportunities Fund*
International Equity Fund*
Investors Fund
Research Fund
Tax Smart Equity Fund
Utilities Growth and Income Fund
Value Funds
Classic Equity Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth
and Income
International Growth and Income Fund*
Mid Cap Value Fund
New Value Fund
Small Cap Value Fund+
Income Funds
American Government Income Fund
Diversified Income Trust
Floating Rate Income Fund
Global Income Trust*
High Yield Advantage Fund*+
High Yield Trust*
Income Fund
Limited Duration Government
Income Fund++
Money Market Fund [SECTION MARK]
U.S. Government Income Trust
* A 1% redemption fee on total assets redeemed or exchanged between 6 and 90
days of purchase may be imposed for all share classes of these funds.
+ Closed to new investors.
++ Formerly Putnam Intermediate U.S. Government Income Fund.
[SECTION MARK] An investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation
or any other government agency. Although the fund seeks
to preserve your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
The Putnam family of funds
Tax-free Income Funds
AMT-Free Insured Municipal Fund**
Tax Exempt Income Fund
Tax Exempt Money Market Fund
Tax-Free High Yield Fund
State tax-free income funds:
Arizona, California, Florida, Massachusetts, Michigan, Minnesota,
New Jersey, New York, Ohio, and Pennsylvania
Asset Allocation Portfolios
Putnam Asset Allocation Portfolios--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
Putnam RetirementReady[REGISTRATION MARK] Funds
Putnam RetirementReady Funds -- nine investment portfolios that offer
diversification among stocks, bonds, and money market instruments and
adjust to become more conservative over time based on a target date for
withdrawing assets.
The nine portfolios:
Putnam RetirementReady 2045 Fund
Putnam RetirementReady 2040 Fund
Putnam RetirementReady 2035 Fund
Putnam RetirementReady 2030 Fund
Putnam RetirementReady 2025 Fund
Putnam RetirementReady 2020 Fund
Putnam RetirementReady 2015 Fund
Putnam RetirementReady 2010 Fund
Putnam RetirementReady Maturity Fund
** Formerly Putnam Tax-Free Insured Fund.
With the exception of money market funds, a 2% redemption fee will be
applied to shares exchanged or sold within 5 days of purchase.
Check your account balances and the most recent month-end performance at
www.putnaminvestments.com.
Fund information
About Putnam Investments
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Investment Sub-Manager
Putnam Investments Limited
57-59 St. James Street
London, England SW1A 1LD
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Myra R. Drucker
Charles E. Haldeman, Jr.
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin, III
Robert E. Patterson
George Putnam, III
W. Thomas Stephens
Richard B. Worley
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President,
Associate Treasurer and
Principal Executive Officer
Jonathan S. Horwitz
Senior Vice President and Treasurer
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Daniel T. Gallagher
Vice President and Legal and
Compliance Liaison Officer
Beth S. Mazor
Vice President
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and BSA Compliance Officer
Francis J. McNamara, III
Vice President and Chief Legal Officer
Charles A. Ruys de Perez
Vice President and Chief Compliance Officer
Judith Cohen
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam High Yield
Trust. It may also be used as sales literature when preceded or
accompanied by the current prospectus, the most recent copy of Putnam's
Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary.
For more recent performance, please visit www.putnaminvestments.com.
Investors should carefully consider the investment objective, risks,
charges, and expenses of a fund, which are described in its prospectus.
For this and other information or to request a 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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Call 1-800-225-1581 or visit our Web site
www.putnaminvestments.com.
SA034-220223 4/05
Not FDIC Insured May Lose Value No Bank Guarantee
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam High Yield Trust
Supplement to Semiannual Report dated 2/28/05
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to clients that meet the eligibility requirements
specified in the fund's prospectus for such shares. Performance of class Y
shares, which do not incur a front-end load, a distribution fee, or a
contingent deferred sales charge, will differ from the performance of class
A, B, C, M, and R shares, which are discussed more extensively in the
semiannual report.
RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return for periods ended 2/28/05
NAV
6 months 7.34%
1 year 10.90
5 years 33.97
Annual average 6.02
10 years 95.59
Annual average 6.94
Life of fund (since class A inception, 2/14/78)
Annual average 9.40
Share value: NAV
8/31/04 $7.96
2/28/05 $8.22
- ----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
6 $0.315 -- $0.315
- ----------------------------------------------------------------------------
Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. Returns shown for class
Y shares for periods prior to their inception (12/31/98) are derived from
the historical performance of class A shares, and are not adjusted to
reflect the initial sales charge currently applicable to class A shares.
These returns have not been adjusted to reflect differences in operating
expenses which, for class Y shares, are lower than the operating expenses
applicable to class A shares. All returns assume reinvestment of
distributions at net asset value and do not account for taxes. Investment
return and principal value will fluctuate so your shares, when redeemed, may
be worth more or less than their original cost. See full report for
information on comparative benchmarks. If you have questions, please consult
your fund prospectus or call Putnam toll free at 1-800-752-9894.
Please see page 13 of the accompanying shareholder report for a discussion
of the information appearing in the tables below:
- ----------------------------------------------------------------------------
EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 2/28/05
Class Y
Expenses paid per $1,000* $3.65
Ending value (after expenses) $1,073.40
- ----------------------------------------------------------------------------
EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 2/28/05
Class Y
Expenses paid per $1,000* $3.56
Ending value (after expenses) $1,021.27
- ----------------------------------------------------------------------------
EXPENSE RATIO COMPARISON USING ANNUALIZED DATA
Your fund's annualized expense ratio 0.71%
Average annualized expense ratio for Lipper peer group+ 0.88%
+ For class Y shares, Putnam has adjusted the Lipper total expense average
to reflect that class Y shares do not incur 12b-1 fees.
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Item 2. Code of Ethics:
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Not applicable
Item 3. Audit Committee Financial Expert:
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Not applicable
Item 4. Principal Accountant Fees and Services:
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Not applicable
Item 5. Audit Committee: Not applicable
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Item 6. Schedule of Investments: Not applicable
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Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End
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Management Investment Companies: Not applicable
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Item 8. Purchases of Equity Securities by Closed-End Management Investment
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Companies and Affiliated Purchasers: Not applicable
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Item 9. Submission of Matters to a Vote of Security Holders:
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Not applicable
Item 10. Controls and Procedures:
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(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 11. Exhibits:
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(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: April 27, 2005
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/Charles E. Porter
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Charles E. Porter
Principal Executive Officer
Date: April 27, 2005
By (Signature and Title): /s/Steven D. Krichmar
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Steven D. Krichmar
Principal Financial Officer
Date: April 27, 2005