Putnam
Managed
High Yield
Trust
ANNUAL REPORT
May 31, 1994
(Logo of Balance Scales)
B O S T O N * L O N D O N * T O K Y O
<PAGE>
Performance highlights
Morningstar, an independent research firm, said in its
most recent analysis of the fund, dated May 5, 1994, that "despite its youth,
[Putnam Managed High Yield Trust] has weathered this year's market turbulence
well."
Performance should always be considered in light of a fund's investment
strategy. Putnam Managed High Yield Trust is designed for investors seeking
high current income with a secondary objective of capital growth.
FISCAL 1994 RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Market
Total return: NAV price
<S> <C> <C> <C> <C> <C>
..............................................................................
Period ended 5/31/94
(since 6/25/93)(1) 4.76% -2.34%
Share value: Market
NAV price
..............................................................................
6/25/93 $14.01 $15.000
5/31/94 13.40 13.375
Capital gains
Distributions: No. Income Long-term Short-term Total
..............................................................................
Period ended 5/31/94
(since 6/25/93)(1) 10 $1.252 -- -- $ 1.252
Current returns Market
(end of period) NAV price
..............................................................................
Current dividend rate(2) 9.85% 9.87%
</TABLE>
Performance data represent past results. Investment return, net asset value
and market price will fluctuate so an investor's shares, when sold, may be
worth more or less than their original cost. For performance over longer
periods, see page 8.
(1) Commencement of operations.
(2) Income portion of most recent distribution, annualized and divided by NAV
or market price at end of period.
<PAGE>
From the Chairman
(George Putnam photo)
(c)Karsh, Ottawa
Dear Shareholder:
The Federal Reserve Board's primary concern remains fighting not only
inflation but the fear of inflation. It is pursuing this goal by gradually
raising the short-term interest rates under its control to slow the economy's
growth to what it regards as a sustainable pace.
The policy continues as the effects of last year's tax increase are being
keenly felt by individuals and businesses. Dr. Robert Goodman, Putnam
Investments' senior economic advisor, believes this confluence could result
in a slowing of business greater than many observers now expect.
Bob also believes that as this slowing becomes more obvious, the Fed will
come under growing pressure from both the White House and Capitol Hill to
ease up. Insulated as it is from such political demands, the Fed is not
likely to yield. But the very fact that investors think it might retreat
could cause some more volatility in the bond markets in the months ahead.
In the following report, Fund Manager Jennifer Leichter explains how she is
positioning your fund's portfolio to respond to 1994's unfolding events.
Respectfully yours,
(Signature George Putnam)
George Putnam
Chairman of the Trustees
July 20, 1994
<PAGE>
Report from the fund manager
Jennifer E. Leichter
In its first year, Putnam Managed High Yield Trust experienced both the best
and worst of times for a bond fund, finishing the period with more than
respectable results. The fund's 4.76% total return at net asset value, while
slightly behind that of the First Boston High Yield Index, was still
significantly ahead of most other fixed-income investments (see chart on page
5).
MARKET OVERVIEW: A THREE-YEAR RALLY RUNS DRY
At the time of the fund's inception last year, the market for higher-yielding
lower-rated corporate bonds was in the midst of an extended rally. For over
two and a half years, as interest rates fell and the economy gained strength,
the rally showed no signs of slowing. At the same time, corporate credit was
less problematic than it was in the 1980s, and investors' level of concern
over the risks of high-yield investments lessened significantly. The market
saw minor corrections in the summer and fall of 1993 but generally continued
moving upward through early February.
Market conditions shifted from relative calm to widespread turbulence last
February when the Federal Reserve Board, believing that a stronger economy
would bring rising inflation, began implementing a series of increases in
short-term interest rates. By the end of the second quarter, the resulting
sell-off in the bond market had significantly dampened returns of
fixed-income as well as equity funds.
STRATEGY: REDUCE INTEREST RATE SENSITIVITY
Weeks before the Fed began raising short-term rates, we had begun positioning
the fund's portfolio defensively to help reduce its sensitivity to interest
rate changes. These measures had the added effect of giving the fund
competitive performance relative to funds with similar objectives.
<PAGE>
One protective move was to increase the fund's holdings of private placement
bonds. These bonds, which are often sold directly to institutional investors
and not registered with the Securities and Exchange Commission, are often
purchased with a buy-and-hold strategy in mind and generally do not encounter
heavy selling pressure. Consequently, their prices are often less volatile
than those of publicly traded bonds. With Putnam as lead investor in many
private placements, we often insist on protective covenants that restrict the
amount of additional debt a company can take on, thus seeking to protect
shareholders.
In addition, we sought to acquire issues previously identified as candidates
for potential performance. One of these was NEXTEL Communications, Inc.,
which provides mobile and cellular phone and paging services to individuals
and businesses throughout Los Angeles, San Francisco, New York, Chicago,
Dallas, and Houston. Another profitable selection was Epic Holdings, Inc., a
hospital management company whose securities were later purchased at a
premium by Health Trust, Inc., as part of a merger agreement.
(Line chart showing High-yield Bonds versus Treasuries)
Plot points
High-yield Treasuries
10000 10000
10223 10224
10323 10284
10434 10513
10459 10554
10662 10593
10720 10477
10838 10518
11073 10663
11022 10433
10612 10200
10515 10120
10552 10108
Chart compares performance of high-yield bonds and Treasury bonds during the
12 months ended 5/31/94. Sources: Salomon Bros. High-Yield Market Index,
Lehman Bros. Treasury Bond Index.
<PAGE>
THE PRESENT: SETTLING DOWN TO SLOWER GROWTH
With interest rates at their highest level in two and a half years, we
believe the market has finally begun to stabilize. The slowdown in bond
underwriting also helped support the prices of existing issues. What's more,
it is generally agreed that the recent volatility was compounded by leverage
or borrowing on the part of large investors, rather than a reflection of
serious problems in the economy.
We expect the fund's largest holdings to benefit in this environment. One
company we believe has significant growth potential is Premium Standard
Farms, a private placement that produces low-fat, extra-tender pork popular
with gourmet restaurants and home cooks. Viking Star Shipping, another
private placement, has a fleet of tankers designed to meet new
environmentally friendly regulations. Other large holdings are in paper
container companies, which are growing along with the economy, and casinos, a
steadily expanding industry as gaming becomes a regular night out.
<PAGE>
TOP INDUSTRY SECTORS*
(Bar chart)
Recreation 9.0%
Broadcasting 6.4%
Cable Television 6.0%
Forest Products 5.9%
Metals and Mining 4.9%
*Based on net assets on 5/31/94. Figures represent holdings in corporate
bonds and notes.
OUTLOOK: FOCUS TO REMAIN ON DIVERSIFICATION
Historically, returns from high-yield securities have come from income and we
anticipate this pattern to continue. As the fund
has matured over the past year, we have increased the diversification of the
portfolio in order to protect against downturns in any particular sector. We
expect to continue using this strategy in the future.
Looking further ahead, we believe the economy will continue its slow but
steady growth with relatively low inflation and interest rates. In this new
market environment, we believe your fund is positioned to continue to take
advantage of buying opportunities.
The views expressed throughout the report are exclusively those of Putnam
Management. They are not meant as investment advice. Although the described
holdings are viewed favorably as of May 31, 1994, there is no guarantee the
fund will continue to hold these securities in the future.
<PAGE>
Performance summary
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares changed
over time, assuming you held the shares through the entire period and
reinvested all distributions back into the fund. For comparative purposes, we
show how the fund performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIOD ENDED 5/31/94
<TABLE>
<CAPTION>
First
Boston
High- Consumer
Market Yield Price
NAV price Index Index
<S> <C> <C> <C> <C>
Life-of-fund 4.76% -2.34% 5.20% 2.15%
</TABLE>
TOTAL RETURN FOR PERIOD ENDED 6/30/94
(most recent calendar quarter)
<TABLE>
<CAPTION>
Market
NAV price
<S> <C> <C>
Life-of-fund 4.21% -9.64%
</TABLE>
Performance data represent past results. Investment returns, net asset value
and market price will fluctuate so an investor's shares, when sold, may be
worth more or less than their original cost. The fund began investment
operations on 6/25/93.
Net asset value (NAV) is the value of all fund assets, minus liabilities,
divided by the number of outstanding 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.
The First Boston High Yield Index is a market-weighted index including
publicly traded bonds having a rating below BBB by Standard & Poor's and
Moody's. Performance figures for the index reflect changes of market prices,
interest, and reinvestment of all interest payments. The average quality of
bonds included in the index may be different than the average quality of
those bonds in which the fund customarily invests. Because the fund is a
managed portfolio investing in a variety of higher-yielding, lower rated
securities, the securities it owns will not match those in the index.
Consumer Price Index is a commonly used measure of inflation. It does not
represent an investment return.
<PAGE>
Report of Independent Accountants
For the period June 25, 1993
(commencement of operations) to May 31, 1994
To the Trustees and Shareholders of Putnam Managed High Yield Trust
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam Managed
High Yield Trust (the "fund") at May 31, 1994, and the results of its
operations, the changes in its net assets and the financial highlights for
the period June 25, 1993 (commencement of operations) to May 31, 1994, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the fund's management; our
responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of investments owned at May 31, 1994 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
July 22, 1994
<PAGE>
Portfolio of investments owned
May 31, 1994
<TABLE>
<CAPTION>
Corporate Bonds and Notes (86.6%)(a)
Principal Amount Value
<C> <S> <C>
Recreation (9.0%)
$550,000 Arizona Charlies Corp. sub. deb.
12s, 2000 (b) $550,000
150,000 Belle Casinos Inc. sr. sub. deb.
12s, 2000 (b) 144,000
400,000 Capitol Queen Corp. sr. sub.
deb. 12s, 2000 (b) 340,000
350,000 Casino America Inc. 1st mtge.
deb. 11-1/2s, 2001 343,000
1,400,000 Casino Magic Finance Corp. 1st
mtge. deb. 11-1/2s, 2001 1,260,000
725,000 Fitzgerald Gaming sr. notes 13s,
1996 (b) 659,750
1,000,000 Golden Nugget Finance Corp. 1st
mtge. deb. Ser. B, 10-5/8s, 2003 750,000
1,750,000 Grand Casino Resorts Inc. notes
12-1/2s, 2000 1,850,625
414,000 Louisiana Casino Cruises Corp.
sr. sub. deb.
11-1/2s, 1998 (b) 322,920
1,500,000 Sam Houston Race Park notes
11-3/4s, 1999 (b) 1,275,000
432,000 Trump Castle Funding sr. sub.
notes 11-1/2s, 2000 (b) 432,000
1,270,336 Trump Taj Mahal deb. 11.35s,
1999 (c) 1,111,544
9,038,839
Broadcasting (6.3%)
1,250,000 Continental Broadcasting Inc.
sr. sub. notes 10-5/8s, 2003 1,259,375
1,000,000 Granite Broadcasting Corp. sr.
sub. deb. 12-3/4s, 2002 1,030,000
500,000 New City Broadcasting Corp. sr.
sub. notes 11-3/8s, 2003 510,000
1,500,000 Outlet Broadcasting, Inc. sr.
sub. notes 10-7/8s, 2003 1,477,500
2,000,000 Panamsat L.P. sr. sub. notes
stepped-coupon zero % (11-3/8s,
8/1/98), 2003 (d) 1,265,000
1,500,000 Spectravision Inc. sr. sub. ext.
reset notes 11.65s, 2002 (c) 855,000
6,396,875
Cable Television (6.0%)
$500,000 Cablevision Industries Corp.
sub. deb. 9-1/4s, 2008 $435,000
1,600,000 Continental Cablevision, Inc.
sr. deb. 9-1/2s, 2013 1,472,000
2,000,000 Insight Communications Co. sr.
sub. stepped-coupon notes 8-1/4s
(11-1/4s, 3/1/96), 2000 (d) 1,870,000
1,250,000 Jones Intercable, Inc. sr. sub.
deb. 10-1/2s, 2008 1,250,000
1,000,000 Summit Communications Group,
Inc. sr. sub. deb. 10-1/2s, 2005 997,500
6,024,500
Forest Products (5.9%)
2,500,000 Gaylord Container Corp. sr. sub.
deb. stepped-coupon zero %
(12-3/4s, 5/15/96), 2005 (d) 2,075,000
1,000,000 Repap Wisconsin Inc. sr. secd.
notes 9-1/4s, 2002 920,000
1,750,000 Stone Container Corp. sr. sub.
notes 10-3/4s, 1997 1,732,500
700,000 Stone Savannah River Pulp &
Paper Corp. sr. sub. notes
14-1/8s, 2000 696,500
500,000 Williamhouse Regency Delaware,
Inc. sr. sub. deb. 11-1/2s, 2005 510,000
5,934,000
Metals and Mining (4.9%)
1,500,000 Haynes International, Inc. Ser.
B sr. notes 11-1/4s, 1998 1,447,500
2,000,000 Horsehead Industries, Inc. sub.
notes 14s, 1999 1,930,000
1,500,000 Kaiser Aluminum & Chemical Corp.
sr. sub. notes 12-3/4s, 2003 1,530,000
4,907,500
Chemicals (4.9%)
900,000 Agricultural Minerals &
Chemicals Corp. sr. notes
10-3/4s, 2003 906,750
1,500,000 Arcadian Partners L.P. sr.
notes, 10-3/4s, 2005 1,477,500
<PAGE>
$1,000,000 G-I Holdings Inc. sr. notes
zero %, 1998 $610,000
250,000 Huntsman Corp. 1st mtge. 11s, 2004 251,875
2,500,000 UCC Investors Holding, Inc. sub.
disc. notes stepped-coupon zero
% (12s, 5/1/98), 2005 (d) 1,650,000
4,896,125
Retail (3.8%)
2,500,000 Finlay Enterprises Inc. sr.
disc. deb. stepped-coupon zero %
(12s, 5/1/98), 2005 (d) 1,550,000
2,000,000 Loehmanns' Holdings Inc. sr.
sub. notes 10-1/2s, 1997 1,900,000
500,000 Parisian Inc. sr. sub. notes
9-7/8s, 2003 425,000
3,875,000
Agriculture (3.8%)
600,000 PMI Acquisition Corp. sr. sub.
notes 10-1/4s, 2003 604,500
902,000 PMI Holdings Corp. sub. disc.
deb. stepped-coupon zero %
(11-1/2s, 9/1/00), 2005 (d) 445,362
300,000 PSF Finance L.P. sr. notes
12-1/4s, 2004 (b) 300,000
2,250,000 Premium Standard Farms sr. secd.
notes 12s,
2000 (b) 2,463,750
3,813,612
Advertising (3.3%)
1,600,000 Lamar Advertising Co. sr. secd.
notes 11s, 2003 1,592,000
1,000,000 Outdoor Systems, Inc. deb.
10-3/4s, 2003 980,000
745,000 Universal Outdoor Inc. sub. deb.
11s, 2003 748,725
3,320,725
Publishing (3.2%)
1,750,000 Affinity Group Inc. sr. sub.
notes 11-1/2s, 2003 1,758,750
500,000 Marvel Holdings, Inc. sr. notes
9-1/8s, 1998 (b) 447,500
1,750,000 Marvel Holdings, Inc. sr. secd.
disc. notes zero %, 1998 1,067,500
3,273,750
Restaurants (2.8%)
$500,000 American Restaurant Group, Inc.
sr. notes 12s, 1998 $ 467,500
1,500,000 American Restaurant Group, Inc.
sr. notes stepped-coupon zero %,
(14s, 12/15/98), 2005 (d) 705,000
1,250,000 Flagstar Corp. sr. sub. notes
11-3/8s, 2003 1,162,500
500,000 Flagstar Corp. sr. sub. deb.
11-1/4s, 2004 462,500
2,797,500
Food Chains (2.5%)
8,500,000 Grand Union Capital Corp. gtd.
sr. sub. notes zero %, 2007 998,750
200,000 Megafoods Stores Inc. sr. notes
10-1/4s, 2000 164,000
500,000 Safeway, Inc. 8.57s, 2003 482,500
900,000 Stater Brothers sr. notes 11s,
2001 (b) 902,250
2,547,500
Textiles (2.5%)
500,000 Dan River Inc. deb. 10-1/8s,
2003 445,000
1,500,000 Foamex L.P. Capital Corp. sr.
notes 11-1/4s, 2002 1,560,000
500,000 JPS Textile Group deb. sub.
notes 9-1/4s, 1999 470,000
2,475,000
Conglomerates (2.3%)
1,000,000 Collins & Aikman Group, Inc. sr.
sub. deb. 11-7/8s, 2001 1,000,000
1,500,000 Jordan Industries, Inc. sr. sub.
disc. deb. zero %,
(11-3/4s, 8/1/98) 2002 (d) 870,000
850,000 Talley Industries, Inc. sr.
disc. deb. stepped-coupon zero %
(12-1/4s, 10/15/98), 2005 (d) 467,500
2,337,500
Specialty Consumer Products (2.3%)
500,000 Coleman Holdings sr. secd. disc.
notes zero %, 1998 330,000
1,140,000 Equitable Bag Co. sr. notes
12-3/8s, 2002 (e) 866,400
<PAGE>
$1,040,000 Playtex Family Products Corp.
sr. sub. notes 9s, 2003 $928,200
500,000 Revlon Worldwide Corp. sr. secd.
disc. notes zero % , 1998 210,000
2,334,600
Steel (2.3%)
500,000 AK Steel Corp. sr. notes
10-3/4s, 2004 507,500
750,000 Armco Inc. sr. notes 9-3/8s,
2000 701,250
500,000 Bayou Steel Corp. 1st mtge.
10-1/4s, 2001 482,500
600,000 WCI Steel Inc. sr. notes
10-1/2s, 2002 (b) 603,000
2,294,250
Cellular Communications (1.9%)
750,000 Cellular, Inc. sr. sub. disc.
notes stepped-coupon zero %
(11-3/4s, 9/1/98), 2003 (d) 457,500
1,250,000 Horizon Cellular Telephone Co.
sr. sub. disc. notes
stepped-coupon zero % (11-3/8s,
10/1/97), 2000 (d) 862,500
1,000,000 NEXTEL Communications Inc. sr.
disc. notes stepped-coupon zero
% (9-3/4s, 2/15/99), 2004 (d) 585,000
1,905,000
Building Products (1.8%)
2,500,000 American Standard, Inc. sr. sub.
deb. stepped-coupon zero %
(10-1/2s, 6/1/98), 2005 (d) 1,531,250
250,000 Triangle Pacific Corp. sr. notes
10-1/2s, 2003 250,000
1,781,250
Shipping (1.6%)
400,000 OMI Corp. sr. notes 10-1/4s,
2003 369,000
1,250,000 Viking Star Shipping sr. secd.
notes 9-5/8s, 2003 1,231,250
1,600,250
Electric Utilities (1.4%)
1,383,269 Midland Cogeneration Venture
L.P. sr. deb. 10.33s, 2002 1,386,726
Health Care (1.3%)
$1,250,000 Charter Medical sr. sub notes
11-1/4s, 2004 (acquired 4/22/94,
cost $1,250,000) (f) $1,275,000
Insurance (1.2%)
1,000,000 American Annuity Group, Inc. sr.
notes 9-1/2s, 2001 976,250
300,000 Reliance Group Holdings sr. sub.
notes 9-3/4s, 2003 274,500
1,250,750
Oil and Gas (1.2%)
1,250,000 TransTexas Gas Corp. sr. secd.
notes 10-1/2s, 2000 1,250,000
Motion Picture Distribution (1.1%)
1,000,000 Cinemark USA sr. notes 12s, 2002 1,080,000
Finance (1.1%)
1,000,000 Comdata Network, Inc. sr. sub.
deb. 13-1/4s, 2002 1,080,000
Health Care Services (1.0%)
1,000,000 Healthtrust, Inc. sub. notes
10-1/4s, 2004 1,005,000
Apparel (0.9%)
1,000,000 Guess Jeans, Inc. sr. sub. notes
9-1/2s, 2003 950,000
Containers (0.9%)
1,000,000 Anchor Glass Container Corp. sr.
sub. deb. 9-7/8s, 2008 922,500
Environmental Control (0.9%)
1,000,000 Envirosource, Inc. sr. notes
9-3/4s, 2003 915,000
Airlines (0.8%)
1,000,000 USAir, Inc. sr. notes 10-3/8s,
2013 842,500
Electronics (0.8%)
1,600,000 International Semi-Tech. Corp.
sr. disc. notes stepped-coupon
zero % (11-1/2s, 8/15/00), 2003
(d) 800,000
Home Furnishings (0.6%)
666,293 Simmons Mattress Corp. deb. 8s,
2003 (b)(c) 649,636
Automotive Parts (0.6%)
500,000 Key Plastics Corp. sr. notes
14s, 1999 572,500
<PAGE>
Computers (0.6%)
$ 650,000 Computervision Corp. sr. sub.
notes 11-3/8s, 1999 $572,000
Food (0.5%)
250,000 Chiquita Brands sr. notes
9-1/8s, 2004 232,500
250,000 Specialty Foods Corp. sr. sub.
notes 11-1/4s, 2003 240,000
472,500
Electrical Equipment (0.4%)
366,000 Amphenol Corp. sr. sub. notes
12-3/4s, 2002 406,260
Business Services (0.2%)
220,000 Corporate Express, Inc. sr.
notes 9-5/8s, 2004 (acquired
2/22/94, cost $220,000) (f) 198,000
Total Corporate Bonds and Notes
(cost $91,214,210) $87,182,148
Units (8.1%) (a)
Number of Units Value
100 Axia, Inc. units 11.00s, 2001
(b) $ 99,000
200 Capital Gaming Inc. sr. secd.
units 11-1/2s, 2001 (b) 220,000
65 Celcaribe S.A. units
stepped-coupon zero % (13-1/2s,
3/15/98), 2004 (d) 533,000
500,000 Chesapeake Energy Corp. deb.
units 12s, 2001 500,000
1,000 Dial Call units stepped-coupon
zero % (12-1/4s, 10/15/99), 2004
(b)(d) 595,000
1,865,000 Echostar Communication Corp.
units stepped-coupon zero %
(12-7/8s, 12/1/99), 2004 (d) 1,001,449
800,000 Elsinore Corp. 1st mtge. units
12-1/2s, 2000 (b) 648,000
750,000 Hollywood Casino units 13-1/2s, 1998 750,000
1,000,000 ICF Kaiser International Inc.
sr. sub. units 12s, 2003 850,000
500 Miles Homes Service units 12s, 2001 502,500
200,000 New Street Acquisition units
12s, 1998 $200,000
750 OSI Specialty Inc. sr. sub.
units stepped-coupon zero %
(11-1/2s, 4/15/99), 2004
(acquired 4/12/94, cost
$429,338) (d)(f) 450,000
150 Page Mart Inc. sr. disc. units
stepped-coupon zero % (12-1/4s,
11/1/98), 2003 (b) 934,500
15,000 Pyramid Communications units
$3.125, pfd. (c) 375,000
25 Santa Fe Hotel, Inc. units 11s,
2000 250,000
250 Treasure Bay Gaming 1st. mtge.
units 12-1/4s, 2000 (b) 245,000
Total Units
(cost $8,280,532) $8,153,449
Yankee Bonds and Notes (1.6%) (a)
Principal Amount Value
$300,000 Cinemark Mexico notes 12s, 2003
(b) $294,000
500,000 Fresh Del Monte Produce N.V.
Corp. deb. 10s, 2003 (b) 457,500
400,000 Ispat Mexicana, deb. 10-3/8s,
2001 (acquired 3/1/94, cost
$397,564) (f) 376,000
500,000 Maxus Energy Corp. global notes
9-7/8s, 2002 450,000
Total Yankee Bonds and Notes
(cost $1,566,682) $1,577,500
Preferred Stocks (0.8%) (a) (cost $791,163)
Number of Shares Value
9,475 Stone Savannah River Pulp &
Paper Corp. $3.84, exch. pfd.
(c) $805,375
Common Stocks (0.6%) (a)(e)
Number of Shares Value
1,500 American Restaurant Group, Inc. $30,000
3,000 Arcadian Corp. 105,000
5,000 Finlay Enterprises Inc. Class A 70,000
106,701 Loehmanns' Holdings, Inc. 106,701
303 PMI Holdings Corp. 60,600
<PAGE>
160 Premium Holdings L.P. (acquired
1/4/94, cost $9,600) (f) $16,000
12,750 Specialty Foods Corp. 12,750
2,273 Taj Mahal Holding Corp. Class A 45,460
10,000 Triangle Pacific Corp. 117,500
Total Common Stocks (cost
$557,402) $564,011
Convertible Bonds and Notes (0.5%) (a) (cost
$500,000)
Principal Amount Value
$500,000 Sahara Mission cv. sub. notes
12s, 1995 $500,000
Warrants (0.4%) (a)(e)
Expiration
Number of Warrants Date Value
25,000 Becker Gaming
Corp. (b) 11/15/00 $62,500
150 Belle Casinos Inc. 10/15/03 750
500 Capital Gaming 2/1/99 500
1,142 Casino America Inc. 11/15/96 3,712
8,400 Casino Magic
Finance Corp. 10/14/96 4,200
3,340 Cinemark Mexico 8/1/03 30,895
725 Fitzgerald Gaming
(acquired 3/8/94,
cost $35,953) (f) 3/15/99 36,250
49,280 Gaylord Container
Corp. 7/31/96 190,960
492 Louisiana Casino
Cruises, Inc. 12/1/98 1,968
1,800 President Riverboat
Casinos 9/15/96 3,600
6,000 Sam Houston Corp. 7/15/99 30,000
4,560 UCC Investor
Holding, Inc. 10/30/99 59,280
101 Wright Medical
Technology Inc. 6/30/03 7,549
Total Warrants
(cost $552,878) $432,164
Short-Term Investments (2.3%)(a)
(cost $2,285,269
Principal Amount Value
$2,285,000 Interest in $489,000,000 joint
repurchase agreement dated May
31, 1994 with Kidder, Peabody &
Co., Inc., due June 1, 1994 with
respect to various U.S. Treasury
obligations--maturity value of
$2,285,269 for an effective
yield of 4.24% $2,285,269
Total Investments
(cost $105,748,136) (g)
$101,499,916
</TABLE>
(a) Percentages indicated are based on net assets of $100,614,928, which
correspond to a net asset value per share of $13.40.
(b) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 1994,
these securities were valued at $12,645,306 or 12.6% of net assets.
(c) Income may be received in additional securities or cash at the discretion
of the issuer.
(d) The interest rate and date shown paranthetically represent the next
interest rate to be paid and the date the fund will begin receiving interest
at this rate.
(e) Non-income-producing security.
(f) Restricted as to public resale (excluding 144A securities). At the date
of acquistion these securities were valued at cost. There were no outstanding
unrestricted securities of the same class as those held. Total market value
of restricted securities owned at May 31, 1994 was $2,351,250 or 2.3% of net
assets.
(g) The aggregate identified cost for federal income tax purposes is
$105,774,073, resulting in gross unrealized appreciation and depreciation of
$942,641 and $5,216,798, respectively, or net unrealized depreciation of
$4,274,157.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of assets and liabilities
May 31, 1994
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments in securities, at value (identified cost $105,748,136) (Note 1) $101,499,916
Cash 874
Interest receivable 2,245,136
Receivable for securities sold 1,644,942
Unamortized organization expenses (Note 1) 24,318
Total assets 105,415,186
Liabilities
Distributions payable to shareholders 824,195
Payable for securities purchased 3,297,633
Payable for compensation of Manager (Note 3) 212,412
Payable for investor servicing and custodian fees (Note 3) 25,466
Payable for administrative services (Note 3) 1,534
Payable for compensation of Trustees (Note 3) 209
Payable for offering and organization expense (Notes 1 and 2) 392,020
Other accrued expenses 46,789
Total liabilities 4,800,258
Net assets 100,614,928
Represented by
Paid-in capital (Note 2) 105,342,659
Distributions in excess of net investment income (146,176)
Accumulated net realized loss on investments (333,335)
Net unrealized depreciation of investments (4,248,220)
Total--Representing net assets applicable
to capital shares outstanding $100,614,928
Computation of net asset value
Net asset value per share ($100,614,928 divided
by 7,507,107 shares) $ 13.40
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of operations
For the period June 25, 1993 (commencement of operations) to May 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Interest income $10,240,214
Expenses:
Compensation of Manager (Note 3) 743,865
Investor servicing and custodian fees (Note 3) 149,224
Compensation of Trustees (Note 3) 8,452
Reports to shareholders 23,190
Auditing 45,029
Legal 24,288
Postage 3,944
Administrative services (Note 3) 6,935
Exchange listing fees 27,754
Amortization of organization expenses (Notes 1 and 2) 5,566
Other expenses 2,118
Total expenses 1,040,365
Net investment income 9,199,849
Net realized loss on investments (Notes 1 and 4) (201,289)
Net unrealized depreciation of investments during the
period (4,248,220)
Net loss on investment transactions (4,449,509)
Net increase in net assets resulting from operations $ 4,750,340
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of changes in net assets
<TABLE>
<CAPTION>
For the period
June 25, 1993
(commencement of
operations) to
May 31
1994
<S> <C>
Increase in net assets
Operations:
Net investment income $ 9,199,849
Net realized loss on investments (201,289)
Net unrealized depreciation of investments (4,248,220)
Net increase in net assets resulting from operations 4,750,340
Distributions to shareholders:
From net investment income (9,199,919)
In excess of net investment income (198,427)
Increase from capital share transactions (Note 2) 105,162,864
Total increase in net assets 100,514,858
Net Assets
Beginning of period 100,070
End of period (including distributions in excess of
net
investment income of $146,176) $100,614,928
Number of fund shares
Shares outstanding at beginning of period 7,107
Shares issued in public offering 7,500,000
Shares outstanding at end of period (Note 2) 7,507,107
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Financial Highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
June 25, 1993
(commencement
of operations) to
May 31
1994
<S> <C>
Net asset value, beginning of period $ 14.01*
Investment operations:
Net investment income 1.23
Net realized and unrealized loss on investments (.59)
Total from investment operations .64
Less distributions:
From net investment income (1.22)
In excess of net investment income (.03)
Total distributions (1.25)
Net asset value, end of period $ 13.40
Market value, end of period $ 13.375
Total investment return at market price (%)(c) (2.52)(a)
Net assets, end of period (in thousands) $100,615
Ratio of expenses to average net assets (%) 1.07(a)
Ratio of net investment income to average net assets
(%) 9.44(a)
Portfolio turnover rate (%) 80.21(b)
</TABLE>
* Represents initial asset value of $14.07 less offering expenses of
approximately $0.06.
(a) Annualized.
(b) Not annualized.
(c) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
<PAGE>
Notes to financial statements
May 31, 1994
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as amended,
as a non-diversified, closed-end management investment company. The fund's
investment objective is to seek high current income. The fund intends to
achieve its objective by investing in high yielding income securities. The
following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported--as in the case of some
securities traded over-the-counter--the last reported bid price, except that
certain U.S. government obligations are stated at the mean between the last
reported bid and asked prices. Market quotations are not considered to be
readily available for long-term corporate bonds and notes; such investments
are stated at fair value on the basis of valuations furnished by a pricing
service, approved by the Trustees, which determines valuations for normal,
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships
between securities that are generally recognized by institutional traders.
Short-term investments having remaining maturities of 60 days or less are
stated at amortized cost, which approximates market value, and other
investments including restricted securities are stated at fair market value
following procedures approved by the Trustees.
B) 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, except that certain dividends
from foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
Discount on zero coupon bonds, original issue discount bonds, stepped-coupon
bonds, and payment in kind securities is accreted according to the effective
yield method.
C) Federal taxes It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986. Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation of securities held and excise tax on
income and capital gains.
At May 31, 1994, the fund had capital loss carryovers of approximately
$307,000, available to offset future realized capital gains, if any. This
amount will expire May 31, 2002. To the extent that capital loss carryovers
are used to offset realized gains, it is unlikely that gains so offset will
be distributed to
<PAGE>
shareholders, since any such distribution might be taxable as ordinary
income.
D) Distributions to shareholders Income dividends are declared and
distributed monthly by the fund. Capital gains distributions, if any, are
recorded on the ex-dividend date and paid 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. These differences include treatment of market
discount, payment-in-kind securities, and losses on wash sale transactions.
Reclassifications are made to the fund's capital accounts in order that they
reflect income and gains available for distribution (or available capital
loss carryovers) under income tax regulations. During the period ended May
31, 1994, the fund reclassified $52,251 to decrease distributions in excess
of net investment income, $132,046 to increase accumulated net realized loss
on investments, with an increase of $79,795 to paid-in capital for the period
ended May 31, 1994.
E) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization aggregated $29,884. These expenses are being
amortized on a straight-line basis over a five-year period.
Note 2
Initial capitalization and offering of shares
The fund was established as a Massachusetts business trust under the laws of
Massachusetts on April 16, 1993.
During the period June 10, 1993 to June 24, 1993, the fund had no operations
other than those related to organizational matters, including the initial
capital contribution of $100,000 and the issuance of common shares to Putnam
Investments, Inc., on June 10, 1993.
On June 25, 1993, the fund completed the initial offering of 6,600,000 of its
common shares for which it received net proceeds of $92,862,000 before
deducting $362,136 of initial offering expenses. Such offering expenses and
the fund's organizational expenses of $29,884 were paid initially by Putnam
Investment Management, Inc., the fund's Manager, a wholly-owned subsidiary of
Putnam Investments, Inc., and the fund will reimburse the Manager for such
costs. During the period June 10, 1993 to June 25, 1993, invested initial
capital resulted in interest income of $70. Regular investment operations
commenced on June 25, 1993.
On August 3, 1993, the fund completed a supplemental offering of 900,000
shares for which it received net proceeds of $12,663,000.
Note 3
Management fee, administrative
services, and other transactions
Compensation of Putnam Investment Management Inc., a wholly owned subsidiary
of Putnam Investments, Inc., the fund's Manager, for management and
investment advisory services is paid quarterly based on the average weekly
net assets of the fund. Such management and investment advisory fee is based
on the following annual rates: 0.55% of the first $500 million, 0.48% of the
next $500 million, 0.44% of the next $500 million, and 0.40% of any amount
over $1.5 billion.
<PAGE>
The fund compensates the Manager for administrative services based on
quarterly net assets of the fund. Such administrative fees are based on the
following annual rate: 0.20% of the first $500 million, 0.17% of the next
$500 million, 0.16% of the next $500 million, and 0.15% of any amount over
$1.5 billion. For the period ended May 31, 1994, the fund paid $198,364 for
these services.
The fund also reimburses the Manager for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees. For the period ended
May 31, 1994, the fund paid $6,935 for these services.
Trustees of the fund receive an annual Trustees fee of $810 and an additional
fee for each Trustees' meeting attended. Trustees who are not interested
persons of the Manager and who serve on committees of the Trustees receive
additional fees for attendance at certain committee meetings. For the period
ended May 31, 1994, the fund paid $8,452 for these services.
Custodial functions for the fund are provided by Putnam Fiduciary Trust
Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing
agent functions are currently provided by Putnam Investor Services, a
division of PFTC. Fees paid for these investor servicing and custodial
functions for the period ended May 31, 1994 amounted to $149,224.
Investor servicing and custodian fees reported in the Statement of operations
for the period ended May 31, 1994 have been reduced by credits allowed by
PFTC.
Note 4
Purchases and sales of securities
During the period ended May 31, 1994, purchases and sales of investment
securities other than short-term investments aggregated $182,595,086 and
$81,221,453, respectively. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost
basis.
<PAGE>
Selected quarterly data
(Unaudited)
<TABLE>
<CAPTION>
For the period
June 25, 1993
(commencement
Three months ended of operations) to
May 31, February 28, November 30, August 31
1994 1994 1993 1993
<S> <C> <C> <C> <C>
Total investment income:
Total $ 2,784,355 $ 2,824,221 $ 2,883,439 $ 1,748,199
Per Share $ .38 $ .37 $ .38 $ .24
Net investment income:
Total $ 2,504,991 $ 2,571,558 $ 2,565,194 $ 1,558,106
Per share $ .34 $ .34 $ .34 $ .21
Net realized and
unrealized gains
(losses) on
investments:
Total $ (8,148,590) $ 2,811,315 $ 1,684,482 $ (796,716)
Per share $ (1.09) $ .37 $ .22 $ (.09)
Net increase in net
assets:
Total $ (5,643,599) $ 5,382,873 $ 4,249,676 $ 761,390
Per share $ (.75) $ .71 $ .56 $ .12
Net assets at end of
period:
Total $ 100,614,928 $ 108,708,327 $ 106,943,904 $ 105,218,364
Per share $ 13.40 $ 14.48 $ 14.25 $ 14.02
</TABLE>
Federal tax information
The fund had $1.252 in distributions from net investment income constituting
dividend income for federal income tax purposes.
The Form 1099 you receive in January 1995 will show the tax status of all
distributions paid to your account in calendar 1994.
<PAGE>
Fund information
INVESTMENT
MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Donald S. Perkins
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
Edward H. D'Alelio
Vice President
Jennifer E. Leichter
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Managed High
Yield Trust. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales charges,
investment objectives, operating policies of the fund, and the most recent
Putnam Quarterly Performance Summary.
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------
Bulk Rate
U.S. Postage
Paid
Boston, MA
Permit No. 53749
- ---------------
590-13002
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS:
(1) Bold and italic typefaces are displayed in normal type.
(2) Headers (e.g., the name of the fund) are omitted.
(3) Certain tabular and columnar headings and symbols are displayed
differently in this filing.
(4) Bullet points and similar graphic signals are omitted.
(5) Page numbering is omitted.
(6) Trademark symbol replaced with (TM)
