Putnam
Master
Intermediate
Income Trust
SEMIANNUAL REPORT
March 31, 1996
[scale logo]
B O S T O N (bullet) L O N D O N (bullet) T O K Y O
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Fund highlights
[dagger] Morningstar, an independent rating agency, awarded the fund its
four-star rating for overall performance (based on the 3- and 5-year
average annual return) as of March 31, 1996. This rating is achieved
by only 22.5% of the funds in the fixed-income investment category.*
[dagger] "Years of consistently good returns, combined with low volatility,
have given Putnam Master Intermediate Income Trust an enviable
long-term record. . . . Thus, while [the fund's] returns may
sometimes seem mediocre, this fund is anything but."
-- Morningstar, December 1, 1995
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
11 Portfolio holdings
22 Financial statements
*Morningstar rates a fund relative to funds with similar investment
objectives based on the fund's 3-, 5-, and 10-year performance, adjusted for
risk factors and sales charges. Ratings are updated monthly; 10% of funds
receive 5 stars and 22.5% receive 4 stars. For the 3- and 5-year periods
ended 3/31/96, there were 86 and 62 funds in the fixed-income category; the
fund received 4 stars for each respective period.
2
<PAGE>
From the Chairman
[photo of George Putnam]
(c) Karsh, Ottawa
Dear Shareholder:
For most of the first half of Putnam Master Intermediate Income Trust's
current fiscal year, the six months ended March 31, 1996, bonds enjoyed one
of the most vibrant markets in recent memory. Toward the end of the period,
however, interest rates rose dramatically and the bond market turned
downward, resulting in losses in most sectors of the market.
Your fund's multisector strategy has often proved effective in this type of
market environment. The U.S. bond market, which characteristically retreats
in anticipation of bad inflation news, was reacting to concern over a pickup
in prices resulting from economic overheating. Long-term U.S. government
securities were hardest hit. Because your fund's managers have the
flexibility to invest also in foreign holdings and high-yield securities,
they were able to minimize the impact of the U.S. Market decline. The fund's
high-yield sector responded positively to signs of economic strength, and
international bonds, especially those in the higher-yielding European
markets, made solid contributions to performance.
Your fund's management team expects the high-yield market to continue to
provide strength and that foreign holdings may outshine many domestic
investment-grade issues in the months ahead. A full discussion of your fund's
performance and outlook is provided in the report that follows.
Respectfully yours,
/s/ George Putnam
George Putnam
Chairman of the Trustees
May 15, 1996
3
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Report from the Fund Managers
Jennifer E. Leichter, lead manager
D. William Kohli
Neil J. Powers
Thanks in large part to its broadly diversified trisector investment
strategy, Putnam Master Intermediate Income Trust wrapped up the first half
of fiscal 1996 with respectable returns: 5.10% at net asset value and 4.10%
at market price. After sprinting out of the starting gate, world bond markets
and your fund slowed in February and March amid increasing evidence that the
U.S. economy's strength was considerably greater than had been thought
earlier. The fund's high-yield bond sector held steady throughout the
turbulence. Meanwhile, the international sleeve regained enough footing to
end the period in positive territory. Full performance details can be found
on pages 9 and 10 of this report.
[dagger] U.S. GOVERNMENT SECTOR TRANSITIONS FROM AGGRESSIVE TO DEFENSIVE
Fiscal 1996 began with the fund's U.S. government holdings aggressively
positioned. Constructing a portfolio with a relatively long duration was an
essential part of our strategy, as was concentrating assets in intermediate-
to long-term Treasury securities. (Duration is a measure of sensitivity to
interest rate changes. A longer duration can mean a more volatile portfolio
if rates increase -- but also one more likely to appreciate substantially if
rates decline.) Our emphasis on mortgage-backed securities was relatively
light. This positioning proved quite successful as the Treasury market
continued its bull run through January.
By early February, it appeared that much of the good news had already been
priced into the market. At that point, we began selling most of the fund's
Treasury holdings and jumped into the mortgage-backed securities market with
both feet, nearly dou-
4
<PAGE>
bling the fund's exposure. We believed prepayment risk -- always a
consideration in this market sector -- had subsided enough to make prices of
current-coupon mortgage-backed securities attractive. We also believed these
securities were poised to appreciate once investors adjusted to the new
prepayment environment. While our early move into mortgages has since proved
its value, our exit from the Treasury market was not quick enough to offset
the market's turbulence in February and March, when yields rose and prices
dropped across the maturity spectrum. As a result, we still felt the impact
of the backup in interest rates during February and March.
[dagger] TELECOMMUNICATIONS, CABLE, MEDIA HOLDINGS LEAD HIGH-YIELD SECTOR
PERFORMANCE
While individual company selection played the most important role in the
high-yield sleeve's ability to deliver steady returns, certain industry
trends undeniably influenced the appreciation potential of the companies we
selected.
Fund holdings in the broadcast, cable television, and telecommunications
industries benefited from the long-awaited passage of the telecommunications
deregulation reform bill. The bill eases business restrictions and encourages
industry consolidation by well-capitalized acquirers. One of the fund's
former holdings, Continental Cablevision, benefited handsomely from its
acquisition by U.S. West. Other performance leaders included competitive
access providers IntelCom Group and Intermedia Communications of Florida,
Echostar, a satellite broadcaster, and Nextel Communications, a cellular
communications company.
We have slightly increased the fund's energy exposure as new technology sets
the stage for an increase in cost-effective oil and natural gas production.
Chesapeake Energy, a small domestic company in which we have built a
substantial position, is poised to benefit from its enhanced ability to
exploit the existing oil fields of larger, multinational producers.
As the economy has picked up steam and valuations have become too compelling
to ignore, we have begun selectively increasing the fund's cyclical and
retail exposure. Retailers in
5
<PAGE>
niche businesses have fared better of late as well. Loehmann's, a discount
clothing retailer, has risen dramatically in price since September.
In general, recreation holdings enjoyed robust performance. Portfolio stars
included Mohegan Tribal Gaming and Lady Luck Gaming. The fund's weighting in
the health-care, banking, and utility industries remained relatively
unchanged. While the holdings mentioned were viewed favorably on March 31,
1996, all holdings are subject to review and adjustment in accordance with
the fund's investment strategy and will vary in the future.
[dagger] EUROPEAN EXPOSURE, SOLID CURRENCY STRATEGY KEY FOCUS IN
INTERNATIONAL SEGMENT
Our focus in the international arena over the past six months has been more
on picking the right countries and advantageous currency hedges than on
managing duration.
We concentrated primarily on the European bond markets, where slow economic
growth, declining interest rates, and low inflation have set the stage for
strong performance. The fund's investments in the higher-yielding markets of
Italy and Spain were particularly profitable as their European Monetary Union
(EMU) prospects appeared brighter and investors became more willing to
tolerate higher risk in return for higher income. By February, we had opted
to realize some of these gains and redeployed assets into the core markets of
Germany, Denmark, and the United Kingdom. In hindsight, this move was a bit
premature, as the higher-yielding markets continued to outperform through the
remainder of the period.
While other world bond markets soared during the first four months of the
fiscal year, the Japanese bond market lagged behind. Then, in February and
March as other markets stumbled in response to the U.S. market's turbulence,
Japanese bonds outperformed. Despite the recent uptick, we have remained wary
of this market's vulnerability, weak fiscal position, and low yields, and
have avoided its bonds throughout the period. The fund's emerging market
exposure remained limited, but early in the period, holdings in Mexico,
Argentina, and Brazil did provide some rewarding returns.
6
<PAGE>
TOP THREE HOLDINGS PER SECTOR
HIGH-YIELD BONDS
Banco Nacional bonds 7-1/4s, 2004
Columbia/HCA Healthcare Corp. med. term notes 8.05s, 2006
Midland Funding II, Ser. A, deb. 11-3/4s, 2005
INTERNATIONAL FIXED-INCOME SECURITIES
Canada (Government of) deb. 7-1/2s, 2001
Germany (Republic of) bonds 6-7/8s, 2005
Treuhandanstalt (Germany Republic of) 7-1/8s, 2003
U.S. GOVERNMENT SECURITIES
GNMA Pass Through Certificates 7s, with various due dates from November 15,
2002 to March 15, 2026
GNMA Pass Through Certificates 7-1/2s, with various due dates from December
15, 2023 to February 15, 2026.
U.S. Treasury Notes 7-1/2s, February 15, 2005
Based on net assets as of 3/31/96. Portfolio holdings will vary in the
future.
Continued positive commitment from the world's central banks has supported
the U.S. dollar, consistent with our positive fundamental dollar outlook. The
currency hedges we placed helped protect the value of the fund's holdings, as
some European currencies declined in value against the dollar. We have also
been able to capitalize on currency movements within Europe as some of the
higher-yielding markets struggle to be eligible for inclusion in the EMU.
[dagger] LONG-TERM OUTLOOK REMAINS OPTIMISTIC DESPITE CURRENT UNCERTAINTY
Combine the current uncertainty concerning inflation and the direction of
interest rates with the federal budget impasse and election year politicking
and it's easy to see how fixed-income investing may seem considerably less
attractive than it did six months ago. We want you to know, however, that
despite the recent volatility, our longer-term view remains optimistic. We
believe the current inflation, interest rate, and economic environments --
both at home and abroad -- are conducive to bond performance when viewed in a
historical context.
That said, we currently intend to stay defensively positioned in
mortgage-backed securities within the U.S. government sleeve. In the fund's
high-yield bond sector, we intend to maintain our focus on B-rated bonds.
These lower-rated high-yield bonds dramatically outperformed their BB-rated
brethren in the first quar-
7
<PAGE>
ter of calendar 1996. And with European economic growth still several steps
behind that of the U.S. and interest rates poised to decline further
overseas, we believe European bonds will likely continue to dominate the
fund's international segment in the months ahead.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 3/31/96, there is no guarantee the fund will continue to hold
these securities in the future.
8
<PAGE>
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Master Intermediate Income Trust is designed for investors
seeking high current income and relative stability of net asset value through
U.S. government, high-yield and international fixed income securities with
limited maturities.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire period and
reinvested all distributions back into the fund.
TOTAL RETURN FOR PERIODS ENDED 3/31/96
NAV Market price
-------------------------------- ----- -------------
6 months 5.10% 4.10%
-------------------------------- ----- -------------
1 year 13.96 12.38
-------------------------------- ----- -------------
5 years 69.88 61.16
Annual average 11.18 10.02
-------------------------------- ----- -------------
Life of fund
(since 4/29/88) 103.86 65.29
Annual average 9.41 6.55
-------------------------------- ----- -------------
COMPARATIVE BENCHMARKS
<TABLE>
<CAPTION>
Salomon Bros.
Lehman Bros. Non-U.S. First Boston Consumer
Gov't. Intermediate World Govt. High-Yield Price
Bond Index Bond Index Index Index
------------------------------- ------------------- --------------- -------------- --------
<S> <C> <C> <C> <C>
6 months 2.64% 0.35% 5.10 1.63%
------------------------------- ----------------- ------------- ------------ ------
1 year 9.10 2.70 14.54 2.84
------------------------------- ----------------- ------------- ------------ ------
5 years 44.19 82.35 99.81 15.33
Annual average 7.59 12.76 14.84 2.89
------------------------------- ----------------- ------------- ------------ ------
Life of Fund 88.00 97.46 137.66 32.96
Annual average 8.30 8.97 11.55 3.66
------------------------------- ----------------- ------------- ------------ ------
</TABLE>
Performance data represent past results. Investment returns and principal
value will fluctuate so an investor's shares, when sold, may be worth more or
less than their original cost. Fund performance data do not take into account
any adjustment for taxes payable on reinvested distributions.
9
<PAGE>
PRICE AND DISTRIBUTION INFORMATION
6 months ended 3/31/96
- -------------------------------------------------------
Distributions (number) 6
- -------------------------------------------------------
Income $0.312
Total $0.312
Market
Share value NAV price
- ------------ ---- -----
9/30/95 $8.38 $7.375
3/31/96 8.46 7.375
Market
Current return NAV price
- --------------------- ---- ----
End of period
Current dividend
rate(1) 7.38% 8.46%
(1)Income portion of most recent distribution, annualized and divided by NAV or
market price at end of period.
TERMS AND DEFINITIONS
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding common shares.
Market price is the current trading price of one share of the fund. Market
prices are set by transactions between buyers and sellers on the New York
Stock Exchange.
COMPARATIVE BENCHMARKS
Lehman Bros. Government Intermediate Bond Index, an unmanaged list of U.S.
government and mortgage- backed securities,* is composed of all bonds covered
by the Lehman Brothers Government Bond Index with maturities between 1 and
9.99 years.
Salomon Brothers Non-U.S. World Government Bond Index* is an unmanaged list
of bonds issued by 10 countries.
First Boston High Yield Index* is an unmanaged list of lower-rated
higher-yielding U.S. corporate bonds.
Consumer Price Index (CPI) is a commonly used measure of inflation; it does
not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes.
It is not possible to invest into an index, and performance of the fund will
differ.
10
<PAGE>
Portfolio of investments owned
March 31, 1996 (Unaudited)
CORPORATE BONDS AND NOTES (31.7%)*
PRINCIPAL AMOUNT VALUE
Advertising (0.5%)
------------------------------------------------------------------------------
$ 800,000 Universal Outdoor, Inc. sub. deb. 11s, 2003 $ 812,000
1,000,000 Universal Outdoor, Inc. sr. notes stepped-coupon
zero % (14s, 7/1/99), 2004++ 710,000
--------
1,522,000
Aerospace and Defense (0.4%)
------------------------------------------------------------------------------
250,000 Alliant Techsystems, Inc. sr. sub. notes 11-3/4s,
2003 275,000
300,000 Howmet Corp. 144A sr. sub. notes 10s, 2003 316,500
728,000 K&F Industries Inc. sub. deb. 13-3/4s, 2001 757,120
--------
1,348,620
Agriculture (1.1%)
------------------------------------------------------------------------------
1,380,000 PMI Holdings Corp. sub. disc. deb. Ser. B,
stepped-coupon zero % (11-1/2s, 9/1/00), 2005++ 786,600
1,000,000 PSF Finance (L.P.) sr. exch. notes 12-1/4s, 2004
(acquired
4/3/95 cost $995,000) (In Default)+ (double
dagger) 850,000
1,225,140 PSF Finance (L.P.) sr. notes 12s, 2000 (acquired
3/15/95 cost $1,224,787) (In Default)+ (double
dagger) 1,041,369
831,000 PSF Finance (L.P.) sr. disc. notes stepped-coupon
zero % (12s, 9/15/96), 2003 (acquired 3/16/95 cost
$599,987) (In Default)+ (double dagger) ++ 664,800
--------
3,342,769
Automotive Parts (0.6%)
------------------------------------------------------------------------------
300,000 A.P.S., Inc. 144A sr. sub. notes 11-7/8s, 2006 305,250
200,000 Aftermarket Technology Corp. sr. sub. notes 12s,
2004 216,000
1,450,000 Key Plastics Corp. sr. notes 14s, 1999 1,504,375
--------
2,025,625
Banks (0.6%)
------------------------------------------------------------------------------
2,600,000 Banco Nacional bonds 7-1/4s, 2004 (Mexico) 2,128,750
Broadcasting (2.3%)
------------------------------------------------------------------------------
250,000 Affinity Group sr. sub. notes 11-1/2s, 2003 256,250
100,000 Chancellor Broadcasting Co. sr. sub. notes 9-3/8s,
2004 96,250
1,150,000 Commodore Media, Inc. sr. sub. notes
stepped-coupon 7-1/2s, (13-1/4s, 5/1/98), 2003++ 1,141,375
250,000 Echostar Comm. sr. notes zero %, 2004 152,350
2,190,000 International Cabletel, Inc. 144A sr. notes
stepped- coupon Ser. A, zero % (11-1/2s, 2/1/01),
2006 1,248,300
250,000 New City Broadcasting Corp. sr. sub. notes
11-3/8s, 2003 253,125
1,000,000 Panamsat (L.P.) sr. sub. notes stepped-coupon zero
% (11-3/8s, 8/1/98), 2003++ 840,000
1,000,000 Paxson Communications Corp. 144A sr. sub. notes
11-5/8s, 2002 1,065,000
579,000 Petracom Holdings notes stepped-coupon zero %
(17-1/2s, 8/1/98), 2003++ 422,670
11
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Broadcasting (continued)
------------------------------------------------------------------------------
$1,250,000 SFX Broadcasting, Inc. sr. sub. notes 11-3/8s,
2000 $ 1,350,000
935,000 Telemedia Broadcasting Corp. 144A deb. stepped-
coupon 6.4s (16s, 6/15/99), 2004++ 844,539
--------
7,669,859
Building and Construction (1.4%)
------------------------------------------------------------------------------
250,000 Miles Homes Services sr. notes 12s, 2001 181,250
1,000,000 NVR, Inc. sr. notes 11s, 2003 1,010,000
1,500,000 Presley Co. sr. notes 12-1/2s, 2001 1,365,000
1,000,000 Schuller International Corp. sr. notes 10-7/8s,
2004 1,092,500
800,000 Scotsman Group, Inc. sr. secd. notes 9-1/2s, 2000 820,000
--------
4,468,750
Business Services (0.2%)
------------------------------------------------------------------------------
500,000 Corporate Express, Inc. Ser. B, sr. sub. notes
9-1/8s, 2004 512,500
Cable Television (2.1%)
------------------------------------------------------------------------------
1,724,063 Adelphia Communications Corp. sr. notes 9-1/2s,
2004 (two double daggers) 1,534,416
500,000 American Telecasting, Inc. sr. disc. notes Ser. B,
stepped-coupon zero % (14-1/2s, 8/15/00), 2005++ 327,500
1,000,000 CF Cable TV, Inc. sr. notes 11-5/8s, 2005 (Canada) 1,075,000
500,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (11-3/4s, 12/15/00), 2005++ 292,500
1,260,634 Falcon Holdings Group, Inc. sr. sub. notes 11s,
2003 (two double daggers) 1,210,209
750,000 Lenfest Communications, Inc. sr. notes 8-3/8s,
2005 716,250
750,000 Marcus Cable Co. (L.P.) sr. sub. disc. notes
stepped-coupon zero % (13-1/2s, 8/1/99), 2004++ 543,750
2,140,000 Telewest Communications PLC deb. stepped-coupon
zero %, (11s, 10/1/00), 2007 (United Kingdom)++ 1,305,400
--------
7,005,025
Cellular Communications (1.6%)
------------------------------------------------------------------------------
285,000 Call-Net Enterprises sr. disc. notes
stepped-coupon zero % (13-1/4s, 12/1/99), 2004++ 213,750
1,000,000 Cellular, Inc. sr. sub. disc. notes stepped-coupon
zero % (11-3/4s, 9/1/98), 2003++ 820,000
250,000 Cencall Communications Corp. sr. disc. notes
stepped- coupon zero % (10-1/8s, 1/15/99), 2004++ 148,750
500,000 Commnet Cellular Inc. bonds 11-1/4s, 2005 530,000
750,000 Dial Call Communications, Inc. sr. disc. notes
stepped- coupon zero % (12-1/4s, 4/15/99), 2004++ 472,500
1,000,000 NEXTEL Communications, Inc. sr. disc. notes
stepped- coupon zero % (9-3/4s, 2/15/99), 2004++ 585,000
1,500,000 NEXTEL Communications, Inc. sr. disc. notes
stepped- coupon zero % (11-1/2s, 9/1/98), 2003++ 997,500
1,700,000 Pricellular Wire Ser. B, sr. disc. notes
stepped-coupon zero % (14s, 11/15/97), 2001++ 1,530,000
--------
5,297,500
Chemicals (0.5%)
------------------------------------------------------------------------------
1,000,000 Acetex Corp. sr. notes 9-3/4s, 2003 (Canada) 1,005,000
500,000 Harris Chemical Corp. sr. disc. notes
stepped-coupon zero % (10-1/4s, 1/15/96), 2001++ 493,750
--------
1,498,750
12
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Computer Equipment (0.3%)
------------------------------------------------------------------------------
$1,000,000 Computervision Corp. sr. sub. notes 11-3/8s, 1999 $ 1,050,000
Conglomerates (1.2%)
------------------------------------------------------------------------------
985,000 Axia, Inc. sr. sub. notes Ser. B, 11s, 2001 965,300
1,500,000 MacAndrews & Forbes Group, Inc. deb. 12-1/4s, 1996 1,485,000
750,000 MacAndrews & Forbes Holdings, Inc. sub. deb. notes
13s, 1999 750,938
1,125,000 Talley Industries, Inc. sr. disc. deb.
stepped-coupon
zero % (12-1/4s, 10/15/98), 2005++ 877,500
--------
4,078,738
Consumer Services (0.5%)
------------------------------------------------------------------------------
1,582,000 Coinmach Corp. 144A sr. notes 11-3/4s, 2005 1,593,865
Containers (0.7%)
------------------------------------------------------------------------------
1,000,000 Ivex Holdings Corp. sr. disc. deb. stepped-coupon
zero % (13-1/4s, 3/15/00), 2005++ 610,000
1,500,000 Ivex Packaging Corp. sr. sub. notes 12-1/2s, 2002 1,590,000
--------
2,200,000
Electric Utilities (1.2%)
------------------------------------------------------------------------------
900,000 Cleveland Electric Illuminating Co. Ser. B, 1st
mtge., 9-1/2s, 2005 906,570
1,000,000 El Paso Electric Co. Ser. D, 1st. mtge. 8.9s, 2006 1,012,500
1,950,000 Midland Funding II. Ser. A, deb. 11-3/4s, 2005 2,086,500
--------
4,005,570
Electronics (0.8%)
------------------------------------------------------------------------------
1,300,000 Amphenol Corp. sr. sub. notes 12-3/4s, 2002 1,446,250
2,100,000 International Semi-Tech. Corp. sr. disc. notes
stepped- coupon zero % (11-1/2s, 8/15/00), 2003
(Canada)++ 1,270,500
--------
2,716,750
Entertainment (0.3%)
------------------------------------------------------------------------------
1,000,000 Premier Parks, Inc. sr. notes Ser. A, 12s, 2003 1,060,000
Financial Services (0.1%)
------------------------------------------------------------------------------
500,000 First Federal Financial Corp. notes 11-3/4s, 2004 475,000
Food (0.9%)
------------------------------------------------------------------------------
1,076,000 Del Monte Corp. sub. notes 12-1/4s, 2002 (two
double daggers) 989,920
135,000 Doane Products Co. sr. notes 10-5/8s, 2006 137,700
800,000 Fresh Del Monte Produce Corp. NV 144A Ser. B, sr.
notes, 10s, 2003 (Netherlands) 744,000
1,000,000 Mafco, Inc. sr. sub. notes 11-7/8s, 2002 1,042,500
--------
2,914,120
Food Chains (0.8%)
------------------------------------------------------------------------------
1,250,000 Southland Corp. deb. 4s, 2004 878,375
1,750,000 Stater Brothers sr. notes 11s, 2001 1,802,500
--------
2,680,875
13
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Health Care (0.4%)
------------------------------------------------------------------------------
$ 250,000 Ivac Corp. sr. notes 9-1/4s, 2002 $ 260,000
650,000 Quorum Health Group, Inc. sr. sub. notes 11-7/8s,
2002 719,875
419,000 Total Renal Care Holdings, Inc. sr. disc. notes
stepped- coupon zero %, (12s, 8/15/97), 2004++ 414,810
--------
1,394,685
Hospital Management (0.6%)
------------------------------------------------------------------------------
2,000,000 Columbia/HCA Healthcare Corp. med. term notes
8.05s, 2006 2,120,480
Insurance (0.5%)
------------------------------------------------------------------------------
500,000 Reliance Group Holdings, Inc. sr. sub. deb.
9-3/4s, 2003 508,750
1,000,000 Reliance Group Holdings, Inc. sr. notes 9s, 2000 1,010,000
--------
1,518,750
Lodging (0.2%)
------------------------------------------------------------------------------
750,000 HMH Properties, Inc. sr. notes Ser. B, 9-1/2s,
2005 731,250
Medical Supplies and Devices (0.4%)
------------------------------------------------------------------------------
1,000,000 Graphic Controls Corp. sr. sub. notes Ser. A, 12s,
2005 1,065,000
350,000 Wright Medical Technology, Inc. Ser. B, sr. secd.
notes 10-3/4s, 2000 360,500
--------
1,425,500
Metals and Mining (0.2%)
------------------------------------------------------------------------------
520,000 Kaiser Aluminum & Chemical Corp. sr. sub. notes
12-3/4s, 2003 551,200
Motion Picture Distribution (0.8%)
------------------------------------------------------------------------------
1,100,000 Act III Theatres, Inc. sr. sub. notes 11-7/8s,
2003 1,210,000
465,000 Cinemark Mexico notes 12s, 2003 (Mexico) 432,450
1,000,000 Cinemark USA Inc. sr. sub. notes 12s, 2002 1,095,000
--------
2,737,450
Oil and Gas (1.5%)
------------------------------------------------------------------------------
500,000 Chesapeake Energy Corp. sr. notes 12s, 2001 542,500
500,000 Chesapeake Energy Corp. sr. notes 10-1/2s, 2002 525,000
600,000 Flores & Rucks, Inc. sr. notes 13-1/2s, 2004 690,000
750,000 Maxus Energy Corp. notes 9-7/8s, 2002 750,000
250,000 Maxus Energy Corp. notes 9-1/2s, 2003 247,500
350,000 Plains Resources, Inc. 144A sr. sub. notes
10-1/4s, 2006 351,750
1,750,000 Trans Texas Gas Corp. sr. secd. notes 11-1/2s,
2002 1,723,750
--------
4,830,500
Paging (0.6%)
------------------------------------------------------------------------------
1,000,000 Mobile Telecommunications Tech. sr. notes 13-1/2s,
2002 1,065,000
1,000,000 Mobilemedia Corp. sr. sub. notes 9-3/8s, 2007 980,000
--------
2,045,000
Paper and Forest Products (0.3%)
------------------------------------------------------------------------------
1,150,000 Stone Container Corp. 1st mtge. 10-3/4s, 2002 1,141,375
14
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Publishing (0.4%)
------------------------------------------------------------------------------
$ 750,000 Marvel Holdings, Inc. Ser. B, sr. notes zero %,
1998 $ 566,250
1,000,000 Marvel Parent Holdings, Inc. sr. secd. disc. notes
zero %, 1998 745,000
--------
1,311,250
Recreation (3.6%)
------------------------------------------------------------------------------
715,000 Arizona Charlies Corp. 1st mtge. Ser. B, 12s,
2000+ 464,750
260,000 Capitol Queen & Casino Corp. 1st mtge. Ser. B,
notes 12s, 2000 (In Default)+ 182,000
875,000 Casino America, Inc. 1st mtge. 11-1/2s, 2001 875,000
400,000 Coast Hotels & Casinos, Inc. 144A 1st. mtge. 13s,
2002 400,000
400,000 Elsinore Corp. 1st mtge. 12-1/2s, 2000 (In
Default)+ 340,000
600,000 Grand Casinos, Inc. 1st mtge. 10-1/8s, 2003 636,000
1,000,000 Grate Bay Property Funding Corp. 1st mtge.
10-7/8s, 2004 890,000
1,000,000 Hollywood Casino Corp. sr. notes 12-3/4s, 2003 915,000
1,500,000 Lady Luck Gaming Corp. Ser. B, 1st mtge. 10-1/2s,
2001 1,365,000
468,000 Louisiana Casino Cruises Corp. 1st mtge. 11-1/2s,
1998 445,770
750,000 Mohegan Tribal Gaming 144A sr. secd. notes
13-1/2s, 2002 892,500
750,000 Stratosphere Corp. 1st mtge. 14-1/4s, 2002 913,125
400,000 Trump Castle Funding Corp. 1st. mtge. 11-3/4s,
2003 390,000
594,000 Trump Castle Funding Corp. sr. sub. notes 11-1/2s,
2000 594,000
550,000 Trump Holdings & Funding Corp. sr. notes 15-1/2s,
2005 629,750
1,650,000 Trump Plaza Funding, Inc. 1st mtge. 10-7/8s, 2001 1,831,500
--------
11,764,395
Retail (1.6%)
------------------------------------------------------------------------------
1,200,000 County Seat Stores Inc. sr. sub. notes 12s, 2002 888,000
2,500,000 Finlay Enterprises, Inc. sr. disc. deb.
stepped-coupon
zero % (12s, 5/1/98), 2005++ 1,737,500
1,330,000 Loehmanns' Holdings, Inc. sr. sub. notes 13-3/4s,
1999 1,236,900
1,200,000 Loehmanns' Holdings, Inc. sr. notes 10-1/2s, 1997 1,176,000
250,000 Specialty Retailers, Inc. sr. sub. notes 11s, 2003 243,750
--------
5,282,150
School Buses (0.1%)
------------------------------------------------------------------------------
220,000 Blue Bird Body Co. sub. deb. Ser. B, 11-3/4s, 2002 224,400
Specialty Consumer Products (--%)
------------------------------------------------------------------------------
75,000 Herff Jones, Inc. sr. sub. notes 11s. 2005 79,875
Steel (0.4%)
------------------------------------------------------------------------------
1,500,000 Ispat Mexicana, SA 144A notes 10-3/8s,
2001(Mexico) 1,350,000
Telecommunication (1.7%)
------------------------------------------------------------------------------
930,000 America Communication Services, Inc. 144A sr.
disc. notes stepped-coupon zero % (12-3/4s,
4/1/01), 2006++ 490,575
425,000 Brooks Fiber Properties 144A sr. disc. notes
stepped- coupon zero %, (10-7/8s, 3/1/01), 2006++ 248,094
750,000 Charter Communications Holdings 144A sr. disc.
notes stepped-coupon zero % (14s, 3/15/01), 2007++ 386,250
2,960,000 Intelcom Group, Inc. sr. disc. notes
stepped-coupon
zero % (13-1/2s, 9/15/00), 2005++ 1,909,200
15
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Telecommunication (continued)
------------------------------------------------------------------------------
$ 700,000 Intermedia Communications of Florida sr. notes
Ser. B, 13-1/2s, 2005 $ 812,000
1,500,000 MFS Communications sr. disc. notes stepped-coupon
zero % (8-7/8s, 1/1/01), 2006++ 930,000
1,300,000 Winstar Communications, Inc. sr. disc. notes
stepped- coupon zero % (14s, 10/15/00), 2005++ 741,000
--------
5,517,119
Telephone Services (0.1%)
------------------------------------------------------------------------------
250,000 Fonorola, Inc. sr. notes 12-1/2s, 2002 (Canada) 272,500
Textiles (0.2%)
------------------------------------------------------------------------------
750,000 Foamex (L.P.) Capital Corp. sr. sub. deb. 11-7/8s,
2004 716,250
- ---------- -------------------------------------------------- --------
Total Corporate Bonds and Notes
(cost $97,475,619) $104,609,195
- ---------- -------------------------------------------------- --------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (31.2%)*
PRINCIPAL AMOUNT VALUE
Federal National Mortgage Association Pass
Through Certificates
$ 7,021 Dwarfs 8-1/2s, March 1, 2006 $ 7,305
10,897,000 TBA 7-1/2s, April 16, 2026 10,869,758
2,225,000 TBA 7s, April 16, 2026 2,167,973
8,655,603 7s, with various due dates from April 1, 2023 to
February 1, 2026 8,433,768
7,631,000 Government National Mortgage Association Pass
Through Certificates
TBA 7-1/2s, April 16, 2026 7,614,288
15,296,102 7-1/2s, with various due dates from December 15,
2023 to February 15, 2026 15,262,602
2,570,000 TBA 7s, April 16, 2026 2,503,334
20,656,789 7s, with various due dates from November 15, 2022
to March 15, 2026 20,120,942
2,335,000 TBA 6-1/2s, April 16, 2026 2,211,665
3,106,068 6-1/2s, with various due dates from February 15,
2026 to March 15, 2026 2,942,008
U.S. Treasury Bonds
3,000,000 10-3/4s, August 15, 2005 3,900,000
5,770,000 10-3/4s, May 15, 2003 7,217,924
3,325,000 9-3/8s, February 15, 2006 4,044,031
U.S. Treasury Notes
2,560,000 8s, August 15, 1999 2,714,010
12,000,000 7-1/2s, February 15, 2005 12,877,440
- ---------- -------------------------------------------------- --------
Total U.S. Government and Agency Obligations (cost
$104,908,381) $102,887,048
- ---------- -------------------------------------------------- --------
FOREIGN GOVERNMENT BONDS AND NOTES (25.5%)*
PRINCIPAL AMOUNT VALUE
USD 1,025,000 Argentina (Republic of) bonds 9-1/4s, 2001 $ 946,844
USD 1,000,000 Argentina (Republic of) sr. sub. notes
8-3/8s, 2003 853,750
AUD 1,765,000 Australia (Government of) bonds 12s, 2001 1,581,810
AUD 2,660,000 Australia (Government of) bonds 9s, 2004 2,100,515
AUD 5,480,000 Australia (Government of) notes 8-3/4s,
2001 4,314,497
16
<PAGE>
FOREIGN GOVERNMENT BONDS AND NOTES (continued)
PRINCIPAL AMOUNT VALUE
CAD 15,170,000 Canada (Government of) deb. 7-1/2s, 2001 $ 11,386,710
CAD 2,980,000 Canada (Government of) bonds 6-1/2s, 2004 2,053,698
DKK 20,265,000 Denmark (Kingdom of) bonds 9s, 2000 3,931,538
DKK 13,400,000 Denmark (Government of) bonds 8s, 2003 2,477,568
DKK 9,780,000 Denmark (Government of) bonds 7s, 2004 1,683,134
FRF 30,050,000 France Treasury bill 7-3/4s, 2000 6,438,349
DEM 5,375,000 Germany (Republic of) bonds 7-3/8s, 2005 3,872,547
DEM 14,635,000 Germany (Republic of) bonds 6-7/8s, 2005 10,207,355
DEM 3,000,000 Germany (Federal Republic of) bonds 5-3/4s,
2000 2,075,127
ITL 3,905,000,000 Italy (Government of) bonds 10-1/2s, 2005 2,473,019
ITL 3,860,000,000 Italy (Government of) deb. 10-1/2s, 2000 2,482,877
USD 1,144,000 Mexico-United Mexican States notes 8-1/2s,
2002 1,025,310
USD 560,000 Panama (Republic of) FRN 6.75s, 2002 498,400
USD 480,000 Poland (Government of) deb. 7-3/4s, 2000 487,200
ESP 283,300,000 Spain (Government of) bonds 10.833s, 2000 2,509,123
ESP 121,900,000 Spain (Government of) bonds 10.15s, 2006 1,003,974
THB 6,000,000 Thailand (IFC of) bonds 8s, 1996 238,006
DEM 9,650,000 Treuhandanstalt (Germany Republic of) bonds
7-1/8s, 2003 6,923,181
US Dollar Certificate of Deposit (Issued by
CSFP (Credit Suisse Financial Products)The
principal at redemption is linked to the
bid price for the Russian Ministry of
Finance dollar denominated local bond.)
USD 397,000 2-1/2s, 1999 282,863
USD 439,000 2-1/2s, 1996 430,220
GBP 3,030,000 United Kingdom Treasury bonds 9-3/4s, 2002 5,046,737
GBP 2,175,000 United Kingdom Treasury bonds 8s, 2000 3,378,038
GBP 2,270,000 United Kingdom Treasury bonds 7-1/2s, 2006 3,294,063
----------------- ------------------------------------------- --------
Total Foreign Government Bonds and Notes
(cost $87,636,404) $ 83,996,453
----------------- ------------------------------------------- --------
UNITS (2.5%)*
NUMBER OF UNITS VALUE
1,000 Australis Media units stepped-coupon zero %,
(14s, 5/15/00), 2003 (Australia)++ $ 690,000
125 Celcaribe S.A. 144A units stepped-coupon zero %
(13-1/2s, 3/15/98), 2004++ 1,206,250
1,735 Cellnet Data Systems Inc. units stepped-coupon
zero % (13s, 6/15/00), 2005++ 1,127,750
1,500 Comunicacion Celular SA 144A units
stepped-coupon zero %, (13-1/8s, 11/15/00), 2003
(Colombia)++ 866,250
1,100 Fitzgerald Gaming Co. units 13s, 2002 1,017,500
164 GST Telecommunications, Inc. 144A units stepped-
coupon zero % (13-7/8s, 12/15/00), 2005
(Canada)++ 947,100
1,350 ICF Kaiser International, Inc. units 12s, 2003 1,282,500
275,200 PSF 144A exch. pfd. units 12-1/2s, 2000
(acquired various dates from 2/8/93 to 9/15/93
cost $275,200) (In Default)+ (double dagger) 137,600
1,000 Terex Corp. 144A units 13-3/4s, 2002 990,000
- ----------- ------------------------------------------------ ---------
Total Units (cost $7,548,300) $ 8,264,950
- ----------- ------------------------------------------------ ---------
17
<PAGE>
COMMON STOCKS (1.6%)*
NUMBER OF SHARES VALUE
58,361 Ampex Corp. Class A (acquired various dates from
1/17/89 to 9/7/89 cost $3,340)+ (double dagger) $ 357,461
12,730 Applause Enterprises, Inc. (acquired various
dates from 1/17/89 to 6/7/89, cost $3,340)+
(double dagger) 38,190
2,955 Axia Holding Corp. 144A+ 88,650
15,375 Chesapeake Energy Corp.+ 711,094
114,603 Computervision Corp.+ 1,189,006
16,807 Elsinore Corp.+ 11,555
10,000 Exide Corp. 233,750
53,023 Grand Union Co. (acquired 06/20/95, cost
$50,875)+ (double dagger) 318,138
3,770 IFINT Diversified Holdings 144A+ 188,500
35,327 Lady Luck Gaming Corp. (acquired 10/1/93 cost
$29,100)+ (double dagger) 70,654
117,371 Loehmanns' Holdings, Inc.+ 172,389
60,000 NEXTEL Communications, Inc. Class A+ 1,132,500
464 PMI Holdings Corp. 144A+ 92,800
327 Premium Holdings L.P.+ 8,175
10,050 Specialty Foods Corp.+ 7,538
3,499 Taj Mahal Holding Corp. Class A+ 90,974
3,870 Total Renal Care Holdings, Inc.+ 120,454
16,667 Total Renal Care Holdings, Inc. 144A+ 376,674
- ----------- ------------------------------------------------ ---------
Total Common Stocks (cost $8,078,518) $ 5,208,502
- ----------- ------------------------------------------------ ---------
BRADY BONDS (1.3%)*
PRINCIPAL AMOUNT VALUE
$2,321,550 Argentina (Republic of) FRN 7.313s, 2005 $ 1,671,516
3,029,940 Brazil (Republic of) FRN 7.813s, 2001 2,715,584
- ----------- ------------------------------------------------ ---------
Total Brady Bonds (cost $3,652,646) $ 4,387,100
- ----------- ------------------------------------------------ ---------
ASSET-BACKED SECURITIES (1.0%)*
PRINCIPAL AMOUNT VALUE
$1,096,000 Chemical Master Credit Card Trust Ser. 95-2,
Class A, 6.23s, 2003 $ 1,089,830
2,255,000 Sears Credit Account Master Trust Ser. 95-5,
Class A, 6.05s, 2004 2,186,628
- ----------- ------------------------------------------------ ---------
Total Asset-Backed Securities (cost $3,376,359) $ 3,276,458
- ----------- ------------------------------------------------ ---------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.9%)*
PRINCIPAL AMOUNT VALUE
$1,000,000 Citicorp Mtg. Securities, Inc. 1992-10 M 8s,
2022 $ 1,021,875
682,161 Resolution Trust Corp. Ser. 94-1 A2A 7-3/4s,
2029 686,212
1,441,653 Resolution Trust Corp. Ser. 94-1 M1 7.14s, 2029 1,392,322
- ----------- ------------------------------------------------ ---------
Total Collateralized Mortgage Obligations
(cost $2,874,154) $ 3,100,409
- ----------- ------------------------------------------------ ---------
PREFERRED STOCKS (0.9%)*
NUMBER OF SHARES VALUE
7,100 Cablevision Systems Corp. 144A Ser. L, $11.125
pfd. $ 710,000
11,765 Fitzgeralds Gaming $3.75 pfd. 294,125
30,754 Foxmeyer Health Corp. Ser. A, $4.20 pfd. (double
double dagger) 999,505
37,000 SDW Hldgs Corp. 144A $3.50 pfd. 1,091,500
- ----------- ------------------------------------------------ ---------
Total Preferred Stocks (cost $3,031,992) $ 3,095,130
- ----------- ------------------------------------------------ ---------
18
<PAGE>
CONVERTIBLE BONDS AND NOTES (0.4%)*
PRINCIPAL AMOUNT VALUE
$ 900,000 Pricellular Wireless 144A cv. sub. notes
stepped-coupon zero %, (10-3/4s, 8/15/00),
2004++ $ 765,000
650,000 Winstar Communications. Inc. cv sr. disc. notes
14s, 2005 390,000
- ----------- ------------------------------------------------ ---------
Total Convertible Bonds and Notes
(cost $865,542) $ 1,155,000
- ----------- ------------------------------------------------ ---------
CONVERTIBLE PREFERRED STOCKS (0.2%)* (cost $700,000)
NUMBER OF SHARES VALUE
28,000 Cablevision Systems Corp. Ser. I, $2.125 cv.
pfd. $ 791,000
- ----------- ------------------------------------------------ ---------
WARRANTS (0.2%)*+
NUMBER OF WARRANTS EXPIRATION DATE VALUE
32,500 Becker Gaming Corp. 11/15/00 $ 8,125
6,825 Capital Gaming International, Inc. 2/1/99 853
1,387 Casino America, Inc. 11/15/96 139
7,860 Casino Magic Finance Corp. 10/14/96 393
9,091 Cinemark Mexico USA, Inc. 8/1/03 84,228
1,150 Commodore Media 144A 5/1/00 138,000
1,200 County Seat Holdings, Inc. 10/15/98 12,000
9,999 Elsinore Corp. 10/8/98 1,000
9,768 Intelcom Group 10/15/05 87,912
700 Intermedia Communications 144A 6/1/00 17,500
1,470 Louisiana Casino Cruises, Inc. 144A 12/1/98 22,050
802 Nextel Communications 9/1/99 8
1,840 Pagemart, Inc. 144A 12/31/03 16,560
1,750 Payless Cashways, Inc. 11/1/96 2
1,400 Petracom Holdings, Inc. 8/1/05 9,975
1,500 President Riverboat Casinos, Inc. 144A 9/23/96 75
3,700 SDW Hldgs Corp. 144A 12/15/06 48,100
12,500 Southdown, Inc. 144A 10/31/96 107,813
21 Telemedia Broadcasting 4/1/04 15,923
500 Universal Outdoor, Inc. 144A 7/1/04 20,000
100 Wright Medical Technology, Inc. 144A 6/30/03 16,538
- ----------- ------------------------------------------------ ---------
Total Warrants (cost $509,118) $ 607,194
- ----------- ------------------------------------------------ ---------
PURCHASED OPTIONS OUTSTANDING (--%)*
EXPIRATION DATE/
Contract Amount STRIKE PRICE VALUE
- -------------------------------------------------------------------------------
JPY 88,450,000 Japan (Government of)
bonds Apr 96/JPY 110.71 $ 17,327
USD 8,300,000 US Dollar In Exchange for
Swiss Francs Apr 96/CHF 1.21 29,880
----------------- --------------------------------------------- ----------
Total Purchased Options
(cost $117,695) $ 47,207
----------------- --------------------------------------------- ----------
19
<PAGE>
SHORT-TERM INVESTMENTS (9.5%)*
PRINCIPAL AMOUNT VALUE
U.S. Dollar Certificates of Deposit (Issued
by J.P. Morgan Securities, Inc. The principal
at redemption is linked to the bid price for
the Polish Treasury Bill, at maturity,
multiplied by the change in the spot rate of
the Polish Zloty from issue date to maturity
date)
$ 289,218 zero %, May 9, 1996 $ 269,956
518,494 zero %, April 18, 1996 486,140
30,453,000 Interest in $844,579,000 joint repurchase
agreement dated March 29, 1996 with Morgan
(J.P.) & Co., Inc. due April 1, 1996 with
respect to various U.S. Treasury
obligations-maturity value of $30,466,704 for
an effective yield of 5.4% 30,466,704
----------------- --------------------------------------------- ----------
Total Short-Term Investments
(cost $31,201,673) $ 31,222,800
----------------- --------------------------------------------- ----------
Total Investments (cost $351,976,401)*** $352,648,446
----------------- --------------------------------------------- ----------
* Percentages indicated are based on net assets of $329,889,751.
+ Non-income-producing security.
++ The interest rate and date shown parenthetically represents the new
interest rate to be paid and the date the fund will begin receiving
interest at this rate.
(double dagger) Restricted, excluding 144A securities, as to public resale.
Total market value of restricted securities held at March
31,1996 was $3,478,212 or 1.1% of net assets.
(double double dagger) Income may be received in cash or additional
securities at the discretion of the issuer.
*** The aggregate identified cost on a tax basis is $353,142,796, resulting
in gross unrealized appreciation and depreciation of $15,255,655 and
$15,750,005, respectively, or net unrealized depreciation of $494,350.
Forward Currency Contracts to Buy at March 31, 1996
(aggregate face value $27,627,299)
Unrealized
Market Aggregate Delivery Appreciation/
Value Face Value Date (Depreciation)
- --------------- ---------- ------------- ------ --------------
Deutschemarks $ 6,099,538 $ 6,114,337 6/12/96 $ (14,799)
French Francs 3,954,040 4,000,443 6/12/96 (46,403)
Italian Lira 1,467,066 1,474,511 6/12/96 (7,445)
Japanese Yen 13,116,077 13,400,570 6/12/96 (284,493)
Spanish Peseta 172,021 174,121 6/12/96 (2,100)
Swedish Krona 2,484,129 2,463,317 6/12/96 20,812
- --------------- -------- ----------- ---- ------------
$(334,428)
- --------------- -------- ----------- ---- ------------
20
<PAGE>
Forward Currency Contracts to Sell at March 31, 1996
(aggregate face value $50,706,122)
Aggregate Unrealized
Market Face Delivery Appreciation/
Value Value Date (Depreciation)
- ------------------- --------- --------- ------ --------------
Australian Dollars $ 6,462,938 $ 6,368,708 6/12/96 $(94,230)
British Pounds 3,793,656 3,825,790 6/12/96 32,134
Canadian Dollars 8,649,850 8,598,021 6/12/96 (51,829)
Danish Krona 1,339,100 1,347,476 6/12/96 8,376
Deutschemarks 222,867 233,052 4/17/96 10,185
Deutschemarks 135,650 136,512 5/8/96 862
Deutschemarks 23,786,431 23,760,273 6/12/96 (26,158)
Italian Lira 515,733 518,848 6/12/96 3,115
Japanese Yen 5,794,043 5,917,442 6/12/96 123,399
- ------------------- ------- ------- ---- ------------
$ 5,854
- ------------------- ------- ------- ---- ------------
Forward Cross Currency Contracts Outstanding at March 31, 1996
(aggregate face value $8,430,978)
<TABLE>
<CAPTION>
Unrealized
Currency Market Currency Market Delivery Appreciation/
Purchased Value Sold Value Date (Depreciation)
- --------------- --------- -------------- --------- ------ -------------
<S> <C> <C> <C> <C> <C>
Spanish Peseta $3,379,438 Deutschemarks $3,372,394 6/12/96 $ 7,044
Danish Krona 2,243,115 Deutschemarks 2,237,609 6/12/96 5,506
Deutschemarks 2,739,868 Swiss Francs 2,744,487 6/12/96 (4,619)
- --------------- ------- ------------ ------- ---- -----------
$ 7,931
- --------------- ------- ------------ ------- ---- -----------
</TABLE>
TBA Sale Commitments Outstanding at March 31,1996
(proceeds receivable $1,439,393)
Principal Delivery Coupon Market
Agency Amount Month Rate Value
- ------- --------- ------- ---- ----------
GNMA $1,482,000 April96 7% $1,443,557
ADR, ADS or GDR after the name of a foreign holding stands for American
Depository Receipt, American Depository Shares or Global Depository Receipts,
respectively, representing ownership of foreign securities on deposit with a
domestic custodian bank.
TBA after the name of a security represents to be announced securities (See
Note 1 to Financial Statements).
The rates shown on FRNs are the current interest rates at March 31, 1996,
which are subject to change based on the terms of the security.
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 accompanying notes are an integral part of these financial statements.
21
<PAGE>
Statement of assets and liabilities
March 31, 1996 (Unaudited)
<TABLE>
<S> <C>
Assets
- ------------------------------------------------------------------------------ -----------
Investments in securities, at value (identified cost $351,976,401) (Note 1) $352,648,446
- ------------------------------------------------------------------------------ -----------
Cash 744
- ------------------------------------------------------------------------------ -----------
Dividends and interest receivable 5,729,567
- ------------------------------------------------------------------------------ -----------
Receivable for securities sold 1,771,203
- ------------------------------------------------------------------------------ -----------
Receivable for open forward currency contracts 250,820
- ------------------------------------------------------------------------------ -----------
Receivable for closed forward currency contracts 244,382
- ------------------------------------------------------------------------------ -----------
Total assets 360,645,162
- ------------------------------------------------------------------------------ -----------
Liabilities
- ------------------------------------------------------------------------------ -----------
Distributions payable to shareholders 1,904,659
- ------------------------------------------------------------------------------ -----------
Payable for securities purchased 25,580,405
- ------------------------------------------------------------------------------ -----------
Payable for shares of the fund repurchased 37,290
- ------------------------------------------------------------------------------ -----------
Payable for compensation of Manager (Note 2) 624,035
- ------------------------------------------------------------------------------ -----------
Payable for investor servicing and custodian fees (Note 2) 96,148
- ------------------------------------------------------------------------------ -----------
Payable for compensation of Trustees (Note 2) 915
- ------------------------------------------------------------------------------ -----------
Payable for administrative services (Note 2) 6,546
- ------------------------------------------------------------------------------ -----------
Payable for open forward currency contracts 571,463
- ------------------------------------------------------------------------------ -----------
Payable for closed forward currency contracts 441,731
- ------------------------------------------------------------------------------ -----------
TBA sale commitments, at value (proceeds receivable $1,439,393) 1,443,557
- ------------------------------------------------------------------------------ -----------
Other accrued expenses 48,662
- ------------------------------------------------------------------------------ -----------
Total liabilities 30,755,411
- ------------------------------------------------------------------------------ -----------
Net assets $329,889,751
- ------------------------------------------------------------------------------ -----------
Represented by
- ------------------------------------------------------------------------------ -----------
Paid-in capital (Notes 1 and 4) $359,260,599
- ------------------------------------------------------------------------------ -----------
Distributions in excess net investment income (Note 1) (2,972,046)
- ------------------------------------------------------------------------------ -----------
Accumulated net realized loss on investments and foreign currency transactions
(Note 1) (26,718,756)
- ------------------------------------------------------------------------------ -----------
Net unrealized appreciation of investments and assets and liabilities in
foreign currencies 319,954
- ------------------------------------------------------------------------------ -----------
Total--Representing net assets applicable to capital shares outstanding $329,889,751
- ------------------------------------------------------------------------------ -----------
Computation of net asset value
- ------------------------------------------------------------------------------ -----------
Net asset value per share ($329,889,751 divided by 38,990,338 shares) $8.46
- ------------------------------------------------------------------------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
Statement of operations
Six months ended March 31, 1996 (Unaudited)
<TABLE>
<S> <C>
Investment income:
- ---------------------------------------------------------------------------- ---------
Dividends $ 108,717
- ---------------------------------------------------------------------------- ---------
Interest (net of foreign tax $52,466) 13,585,951
- ---------------------------------------------------------------------------- ---------
Total investment income 13,694,668
- ---------------------------------------------------------------------------- ---------
Expenses:
- ---------------------------------------------------------------------------- ---------
Compensation of Manager (Note 2) 1,241,331
- ---------------------------------------------------------------------------- ---------
Investor servicing and custodian fees (Note 2) 220,564
- ---------------------------------------------------------------------------- ---------
Compensation of Trustees (Note 2) 7,859
- ---------------------------------------------------------------------------- ---------
Administrative services (Note 2) 8,596
- ---------------------------------------------------------------------------- ---------
Registration fees 609
- ---------------------------------------------------------------------------- ---------
Postage 45,387
- ---------------------------------------------------------------------------- ---------
Exchange listing fees 17,005
- ---------------------------------------------------------------------------- ---------
Other 34,142
- ---------------------------------------------------------------------------- ---------
Total expenses 1,575,493
- ---------------------------------------------------------------------------- ---------
Expense reduction (Note 2) (33,648)
- ---------------------------------------------------------------------------- ---------
Net expenses 1,541,845
- ---------------------------------------------------------------------------- ---------
Net investment income 12,152,823
- ---------------------------------------------------------------------------- ---------
Net realized gain on investments (Notes 1 and 3) 3,816,952
- ---------------------------------------------------------------------------- ---------
Net realized gain on written options (Notes 1 and 3) 33,282
- ---------------------------------------------------------------------------- ---------
Net realized gain on forward currency contracts and
foreign currency translation (Note 1) 54,671
- ---------------------------------------------------------------------------- ---------
Net unrealized appreciation on forward currency contracts and foreign
currency translation during the period 153,162
- ---------------------------------------------------------------------------- ---------
Net unrealized depreciation of investments and written options during
the period (852,149)
- ---------------------------------------------------------------------------- ---------
Net gain on investments 3,205,918
- ---------------------------------------------------------------------------- ---------
Net increase in net assets resulting from operations $15,358,741
- ---------------------------------------------------------------------------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Statement of changes in net assets
<TABLE>
<CAPTION>
Six months ended Year ended
March 31 September 30
1996* 1995
- ---------------------------------------------------- ---------------- -------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------- ---------------- -------------
Operations:
- ---------------------------------------------------- ---------------- -------------
Net investment income $ 12,152,823 $ 26,125,369
- ---------------------------------------------------- ---------------- -------------
Net realized gain (loss) on investments and foreign
currency transactions 3,904,905 (8,566,768)
- ---------------------------------------------------- ---------------- -------------
Net unrealized appreciation (depreciation) of
investment transactions and assets and liabilities
in foreign currencies (698,987) 16,501,196
- ---------------------------------------------------- ---------------- -------------
Net increase in net assets resulting from operations 15,358,741 34,059,797
- ---------------------------------------------------- ---------------- -------------
Distributions to shareholders:
- ---------------------------------------------------- ---------------- -------------
From net investment income (12,166,357) (19,003,541)
- ---------------------------------------------------- ---------------- -------------
From return of capital -- (5,547,437)
- ---------------------------------------------------- ---------------- -------------
Shares repurchased (Note 4) (37,290) (70,000)
- ---------------------------------------------------- ---------------- -------------
Total increase in net assets 3,155,094 9,438,819
- ---------------------------------------------------- ---------------- -------------
Net assets
- ---------------------------------------------------- ---------------- -------------
Beginning of period 326,734,657 317,295,838
- ---------------------------------------------------- ---------------- -------------
End of period (including distributions in excess of
net investment income of $2,972,046 and
$2,958,512, respectively) $329,889,751 $326,734,657
- ---------------------------------------------------- ---------------- -------------
Number of fund shares
- ---------------------------------------------------- ---------------- -------------
Shares outstanding at beginning of period 38,995,338 39,005,338
- ---------------------------------------------------- ---------------- -------------
Shares repurchased (Note 4) (5,000) (10,000)
- ---------------------------------------------------- ---------------- -------------
Share outstanding at end of period 38,990,338 38,995,338
- ---------------------------------------------------- ---------------- -------------
</TABLE>
*Unaudited
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Financial highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Six months ended
March 31 Year ended September 30
- ------------------------------- ---------------- -----------------------------------------------------
1996* 1995 1994 1993 1992 1991
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 8.38 $ 8.13 $ 8.91 $ 8.71 $ 8.16 $ 7.60
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Investment operations
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Net investment income .31 .67 .62 .68 .74 .76
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Net realized and unrealized
gain (loss) on investments .08 .21 (.71) .29 .63 .67
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Total from investment
operations .39 .88 (.09) .97 1.37 1.43
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Less distributions to
shareholders:
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
From net investment income (.31) (.49) (.55) (.68) (.74) (.76)
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
In excess of net investment
income -- -- -- (.09) -- --
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
From net realized gain on
investments -- -- (.06) -- -- --
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
From return of capital -- (.14) (.08) -- (.08) (.11)
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Total distributions (.31) (.63) (.69) (.77) (.82) (.87)
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Net asset value, end of period $ 8.46 $ 8.38 $ 8.13 $ 8.91 $ 8.71 $ 8.16
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Market value, end of period $ 7.375 $ 7.375 $ 7.250 $ 8.375 $ 8.500 $ 7.750
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Total investment return at
market value (%) (a) 4.10(b) 10.90 (5.57) 7.89 21.13 36.82
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Net assets at end of period
(in thousands) $329,890 $326,735 $317,296 $347,620 $339,871 $317,747
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Ratio of expenses to average
net assets (%) (c) .47(b) 1.03 .92 .96 .98 1.08
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Ratio of net investment income
to average net assets (%) 3.66(b) 8.24 7.18 7.83 8.76 9.65
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
Portfolio turnover (%) 121.11(b) 219.63 204.92 237.63 134.43 204.31
- ------------------------------- ---------------- ------- ------- ------- ------- ---------
</TABLE>
* Unaudited.
(a) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(b) Not annualized.
(c) The ratio of expenses to average net assets for the periods ended
September 30, 1995, and thereafter, includes amounts paid through expense
offset arrangements. Prior period ratios exclude these amounts. (Note 2).
25
<PAGE>
Notes to financial statements
March 31, 1996 (Unaudited)
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company. The fund's
investment objective is to seek, with equal emphasis, high current income and
relative stability of net asset value, by allocating its investments among
the U.S. government sector, high-yield sector and international sector.
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 generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities.
Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported--as in the case of some
securities traded over-the-counter--the last reported bid price. Securities
quoted in foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60 days
or less are stated at amortized cost, which approximates market value, and
other investments, including restricted securities, are stated at fair value
following procedures approved by the Trustees. Market quotations are not
considered to be readily available for long-term corporate bonds and notes;
such investments are stated at fair value on the basis of valuations
furnished by a pricing service, approved by the Trustees, which determines
valuations for normal, institutional-size trading units of such securities
using methods based on market transactions for comparable securities and
various relationships between securities which are generally recognized by
institutional traders.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other registered
investment companies managed by Putnam Investment Management, Inc. ("Putnam
Management"), the fund's Manager, a wholly-owned subsidiary of Putnam
Investments, Inc. and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money market
instruments.
C) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value
of which at the time of purchase is required to be in an amount at least
equal to 102% of the resale price, including accrued interest. Putnam
Management is responsible for determining that the value of these underlying
securities is at all times at least equal to 102% of the resale price,
including accrued interest.
26
<PAGE>
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis and dividend
income is recorded on the ex-dividend date. Discounts on zero coupon bonds,
original issue, stepped- coupon bonds and payment in kind bonds are accreted
according to the effective yield method.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities, currency
holdings, 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 accrued 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 fluctuations are included with the net
realized and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign
currencies 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 gains and losses
on foreign currency transactions 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.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, 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 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.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund owns
or expects to purchase. The fund may also write options on securities it owns
or which it invests to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts primarily corresponds with the value of underlying
instruments which may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of the
27
<PAGE>
underlying instruments or if there is an illiquid secondary market for the
contracts, or if the counterparty to the contract is unable to perform.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options are
valued at the last sale price, or if no sales are reported, the last bid
price for purchased options and the last ask price for written options.
Options traded over-the-counter are valued using prices supplied by dealers.
H) TBA purchase commitments The fund, may enter into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed unit price at a
future date beyond customary settlement time. Although the unit price has
been established, the principal value has not been finalized. However, the
amount of the commitments will not fluctuate more than 2.0% from the
principal amount. The fund holds, and maintains until settlement date, cash
or high-grade debt obligations in an amount sufficient to meet the purchase
price, or the fund may enter into offsetting contracts for the forward sale
of other securities it owns. Income on the securities will not be earned
until settlement date. TBA purchase commitments may be considered securities
in themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in the value of the fund's other assets. Unsettled TBA
purchase commitments are valued at the current market value of the underlying
securities, generally according to the procedures described under "Security
valuation" above.
Although the fund will generally enter into TBA purchase commitments with the
intention of acquiring securities for its portfolio or for delivery pursuant
to options contracts it has entered into, the fund may dispose of a
commitment prior to settlement if Putnam Management deems it appropriate to
do so.
I) TBA sale commitments The fund may enter into TBA sale commitments to hedge
its portfolio positions or to sell mortgage-backed securities it owns under
delayed delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time a TBA sale
commitment is outstanding, equivalent deliverable securities, or an
offsetting TBA purchase commitment deliverable on or before the sale
commitment date, are held as "cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
"Security valuation" above. The contract is "marked-to-market" daily and the
change in market value is recorded by a fund as an unrealized gain or loss.
If the TBA sale commitment is closed through the acquisition of an offsetting
purchase commitment, the fund realizes a gain or loss on the underlying
security. If the fund delivers securities under the commitment, the fund
realizes a gain or a loss from the sale of the securities based upon the unit
price established at the date the commitment was entered into.
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 applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986. Therefore, no provision has been made for
federal taxes on income, capital gains or unrealized appreciation on
securities held and for excise tax on income and capital gains.
28
<PAGE>
At September 30, 1995, the fund had a capital loss carryover of approximately
$21,453,892 available to offset future net capital gain, if any. The amount
of the carryover and the expiration dates are:
Loss carryover Expiration Date
- ----------------- -------------------
$14,418,915 September 30, 1999
$ 7,034,977 September 30, 2003
K) Distributions to shareholders Distributions to shareholders are recorded
by the fund on the ex-dividend date. At certain times, the fund may pay
distributions at a level rate even though, as a result of market conditions
or investment decisions, the fund may not achieve projected investment
results for a given period. The amount and character of income and gains to
be distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. 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
Compensation of Putnam Management for management and investment advisory
services is paid quarterly based on the average weekly net assets of the
Fund. Such fee is based on the following annual rates: 0.75% of the first
$500 million of average weekly net assets, 0.65% of the next $500 million,
0.60% of the next $500 million and 0.55% of any amount over $1.5 billion.
The fund reimburses Putnam Management 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 Fidu- ciary
Trust Company (PFTC), a wholly owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services,
a division of PFTC.
For the six months ended March 31, 1996, fund expenses were reduced by
$33,648 under expense offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these credits.
The fund could have invested the assets utilized in connection with the
expense offset arrangements in an income producing asset if it had not
entered into such arrangements.
Trustees of the fund receive an annual Trustees fee of $890 and an additional
fee for each Trustee's meeting attended. Trustees who are not interested
persons of Putnam Management and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.
The fund adopted a Trustee Fee Deferral Plan (the "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 in the fund and are invested
in the fund or in other Putnam funds until distribution in accordance with
the Plan.
Note 3
Purchases and sales of securities
During the six months ended March 31, 1996, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $381,193,641 and $403,374,747, respectively. In determining the
net gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
29
<PAGE>
Written option transactions during the period are summarized as follows:
Contract Premiums
Amounts Received
- ----------------------------------------------- ---------- ---------
Contracts outstanding at beginning of period 7,740,000 $ 33,282
Options expired (7,740,000) (33,282)
- ----------------------------------------------- ---------- ---------
Written options outstanding at end of period -- $ --
- ----------------------------------------------- ---------- ---------
Note 4
Share Repurchase Program
In November 1994, the Trustees authorized the fund to repurchase up to
1,950,000 of its shares in the open market. Repurchases will only be made
when the fund's shares are trading at less than net asset value and at such
times and amounts as is believed to be in the best interest of the fund's
shareholders. Any repurchases of shares will have the effect of increasing
the net asset value per share of remaining shares outstanding.
For the period ended March 31, 1996, the fund repurchased 5,000 shares for
$37,290, which reflects a discount from net asset value of $5,172 or 12.18%.
Selected quarterly data
(Unaudited)
<TABLE>
<CAPTION>
Net realized Net increase
Net and unrealized (decrease)
Investment investment gain (loss) on in net assets
income income investments from operations
----------------- ----------------- ------------------- --------------------
Quarter Per Per Per Per
ended Total Share Total Share Total Share Total Share
- --------- --------- ---- --------- ---- ----------- ---- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/93 $6,708,398 $.17 $5,933,660 $.15 $ 3,721,112 $ .10 $ 9,024,772 .23
3/31/94 6,656,480 .17 5,943,501 .15 (12,399,006) (.32) (5,825,505) (.15)
6/30/94 6,935,539 .18 6,149,111 .16 (13,707,196) (.35) (7,558,085) (.19)
9/30/94 6,930,592 .18 6,125,078 .16 (5,177,254) (.14) 947,824 .02
12/31/94 7,244,967 .19 6,441,101 .17 (10,525,009) (.27) (4,083,908) (.10)
3/31/95 7,421,188 .19 6,807,991 .17 6,599,105 .18 13,407,096 .35
6/30/95 7,261,732 .19 6,450,743 .17 9,489,769 .24 15,940,512 .41
9/30/95 7,246,241 .18 6,425,534 .16 2,370,564 .06 8,796,098 .22
12/31/95 7,083,280 .18 6,328,889 .16 8,331,979 .21 14,660,868 .37
3/31/96 6,611,388 .17 5,823,934 .15 (5,126,061) (.13) 697,873 .02
</TABLE>
30
<PAGE>
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
Jennifer E. Leichter
Vice President and Fund Manager
D. William Kohli
Vice President and Fund Manager
Neil J. Powers
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for
up-to-date information about the fund's net asset value.
31
<PAGE>
[graphic]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
24521-074 5/96
