Putnam
Managed
High Yield
Trust
[picture of stopwatch]
SEMIANNUAL REPORT
November 30, 1995
[putnam scales logo]
B O S T O N * L O N D O N * T O K Y O
<PAGE>
Fund highlights
> "[Putnam Managed High Yield Trust] has turned in a strong performance in
this year's bull market . . .There are two factors driving [the fund's]
returns. First, the fund has avoided the junk market's biggest credit
disappointments . . . Second, the fund's sector picks -- which include
media, utilities, and financials -- have soared."
-- Morningstar Closed-End Funds, November 3, 1995
> "Over the first 10 months of 1995, [high-yield] bonds (as measured by the
Merrill Lynch High Yield Index) have returned 16.85%, which compares with
15.11% for the Lehman Aggregate Index, which tracks the broad range of
investment-grade government, corporate and mortgage securities."
-- Barron's, November 6, 1995
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
19 Financial statements
2
<PAGE>
From the Chairman
[picture of George Putnam]
(c) Karsh, Ottawa
Dear Shareholder:
Fixed-income investors will long remember 1995 as a year of highs and lows,
emotionally as well as in the market. Putnam Managed High Yield Trust began
its fiscal year as the bond market was starting to recover from one of its
worst periods in history. By the fiscal year's midpoint on November 30, 1995,
investors could look back on a period of impressive recovery.
Because high-yield bonds tend to track the pace of the economy, their
recovery has not been as dramatic as some of the other fixed-income sectors.
In light of this, your fund's performance, which was well ahead of its
competitive index, should appear quite impressive. (Details appear on page
8.)
Fund Manager Jennifer Leichter has skillfully positioned the portfolio to
capture the strength of industries such as telecommunications and chemicals,
while carefully monitoring credit quality and avoiding questionable holdings.
While the lower interest rates now being forecast for 1996 may well have a
favorable effect on high-yield bonds, her research-intensive strategy
continues to prove its value in virtually every type of market environment.
Respectfully yours,
/s/George Putnam
George Putnam
Chairman of the Trustees
January 17, 1996
3
<PAGE>
Report from the Fund Manager
Jennifer E. Leichter
Benefiting from sturdy corporate earnings and current industry trends, Putnam
Managed High Yield Trust was able to produce above-average total returns for
the six months ended November 30, 1995. For the period, your fund returned
7.47% at net asset value and 9.97% at market price, outpacing the 5.33%
return posted by the First Boston High Yield Index.
As economic growth continued to slow throughout the semiannual period, we
focused primarily on growth companies. At the same time, we looked for
opportunities to reduce the fund's cyclical holdings, so called because they
typically strengthen and wane along with the economy. In the
telecommunications and cable television industries, where proposed
deregulation is certain to affect business prospects for some time to come,
careful securities selection and timing became critical. In addition, we
continued to carefully evaluate the credit quality of each bond issuer,
concentrating the fund's holdings in better quality credits.
> TELECOMMUNICATIONS AND CABLE HOLDINGS BENEFIT FROM PROPOSED DEREGULATION
Among the industries that contributed to the fund's solid performance over
the fiscal period, two stood out from the pack and were linked by proposed
federal legislation. One of the portfolio's largest sector allocations was in
the telecommunications industry, which comprises telephone and cellular
communications companies. This sector also includes competitive access
providers such as IntelCom Group Inc., which supplies telecommunications
access through local area networks and satellite uplink teleports. The fund
also has significant holdings in the broadcast and cable television industry.
Over the six-month period, companies in these industries benefited as
investors became more convinced that Congress will ultimately pass new
telecommunications legislation. Such legislation, if passed, will likely
bring about deregulation in the cable television industry and a loosening of
various restrictions on local and long-
4
<PAGE>
distance telephone service. Deregulation may spur consolidation in both the
telecommunications and cable industries, and will likely improve cash flows
and drive down operating costs.
Merger in the chemicals industry enhances total returns. Another boost to
performance came from a particular investment in the chemicals sector, which
is cyclical in nature. During the period, we reduced your portfolio's overall
allocation to cyclicals as economic growth slowed. However, your fund's
investment in OSI Specialties Corp., a producer of specialty chemicals,
proved profitable despite the economic slowdown. OSI was acquired by Witco
Corp., a larger chemicals producer, in October of this year. Near the end of
the semiannual fiscal period, Witco offered to buy back outstanding OSI bonds
at a premium, and the resulting transaction generated an attractive return
for your fund.
> AVOIDANCE OF PROBLEM SECURITIES PROTECTS TOTAL RETURNS
An essential tenet of our high-yield investing philosophy focuses on seeking
to avoid companies with deteriorating credit profiles that do not meet our
rigorous standards. The securities that we decided not to purchase over this
period are almost as important as the ones we did invest in. We rely on our
exhaustive research techniques to identify companies that possess an
unacceptable risk of declaring bankruptcy or otherwise defaulting on their
bonds. Over the past six months, this research uncovered information that
steered us away from several high-yield issuers that defaulted, including
Harrah's Jazz (a casino operator), Burlington Motors, and Bradlees department
stores.
TOP INDUSTRY SECTORS (11/30/95)*
Cable television 6.4%
Gaming and recreation 5.6%
Oil and gas 4.2%
Electric utilities 3.9%
Aerospace and defense 3.7%
Cellular communications 3.6%
*Based on percentage of net assets. Figures represent holdings in corporate
bonds and notes. Sector weightings will vary over time.
5
<PAGE>
> LOW INTEREST RATES AND SUSTAINED DEMAND BOLSTER THE HIGH-YIELD MARKET
As interest rates have declined in recent months, demand for high-yield bonds
has remained strong. The underlying logic is not difficult to understand: the
lower yields being offered by Treasuries and other investment-grade bonds
have made high-yield securities more attractive to income-hungry investors.
At the same time, growth in the supply of high-yield bonds has been modestly
restrained by several prevailing market conditions. First, an abundance of
available cash at banks has made it easier for larger, creditworthy bond
issuers to borrow from banks at currently low interest rates to pay off
outstanding high-yield bonds or as an alternative to issuing new high-yield
bonds. Second, corporate consolidation has often resulted in new owners
tendering for outstanding bonds. Lastly, a vibrant equity market has made it
more cost effective for corporations to issue equity rather than debt. While
these trends suggest a resulting slowdown in supply of high-yield bonds, the
effect has been slight. In fact, a more visible result has been an
improvement in the overall credit profile of high-yield bond issuers, which
are now able to borrow money at lower interest rates and reduce their cost of
capital.
> OUTLOOK: OPPORTUNITIES AMONG GROWTH COMPANIES AND LOWER-RATED HIGH-YIELD
BONDS
Going forward, we plan to further reduce the portfolio's allocation to
cyclical securities in favor of growth companies and the telecommunications
and cable television industries. In addition, we plan to maintain the
portfolio's energy holdings at or near current levels. In the near term, we
may temporarily shift a portion of the portfolio's assets into B-rated bonds.
As a result of a recent sell-off among these securities, many may now be
purchased at low prices. Further, they offer attractive value opportunities
in the immediate future because investors have historically reduced holdings
in this sector in the late quarters and increased holdings in the early
quarters of each calendar year.
We believe that consistently avoiding securities with significant potential
for default is basic to solid performance in the high-yield industry. To this
end, we will continue to conduct diligent
6
<PAGE>
TOP 10 HOLDINGS (11/30/95)
PSF Finance 12.00%, 2000
Financial services
Midland Funding Corp. 11.75%, 2005
Electric utility
Loehmanns' Holdings, Inc. 10.50%, 1997
Retail apparel
Pricecellular Wireless Corp. 12.25%, 2003
Cellular communications
Fresh Del Monte Produce Corp. 10.00%, 2003
Fresh foods
California Federal Bank $10.625 pfd.
Financial services
Transtexas Gas Corp. 11.50%, 2002
Natural gas
First PV Funding Corp. 10.15%, 2016
Electric utility
First Nationwide Bank $11.50 pdf.
Financial services
Comdata Network, Inc. 13.25%, 2002
Financial services
These holdings represent 15.5% of the fund's assets. Portfolio holdings will
vary over time.
research to distinguish between attractive investment opportunities and
unstable companies.
Although there can be no assurances, we expect that interest rates may remain
low or fall farther, and that demand for high-yield bonds may remain strong.
Overall, we are optimistic about prospects in the high-yield market in the
coming months.
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 11/30/95, there is no guarantee the fund will continue to
hold these securities in the future. Putnam Managed High Yield Trust is a
portfolio managed for high current income primarily through investments in
high-yielding lower-rated fixed-income securities, which pose a greater risk
to principal than higher-rated securities. High-yield securities are rated
lower than investment-grade securities because there is a greater possibility
that negative changes in the issuer's business conditions or in general
economic conditions may hinder the issuer's ability to pay principal and
interest on the securities.
7
<PAGE>
Performance summary
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.
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 in the fund.
TOTAL RETURN FOR PERIODS ENDED 11/30/95
<TABLE>
<CAPTION>
NAV Market price
<S> <C> <C>
6 months 7.47% 9.97%
1 year 19.06 32.33
Life of fund
(since 6/25/93) 21.92 17.28
Annual average 8.50 6.78
</TABLE>
COMPARATIVE RETURNS FOR PERIODS ENDED 11/30/95
<TABLE>
<CAPTION>
First Boston
High Yield Consumer
Bond Index Price Index
<S> <C> <C>
6 months 5.33% 0.92%
1 year 17.14 2.61
Life of fund
(since 6/25/93) 22.82 6.37
Annual average 8.87 2.57
</TABLE>
Performance data represent past results and do not reflect future
performance. They do not take into account any adjustment for taxes payable
on reinvested distributions. Investment returns, net asset value and market
price will fluctuate so that an investor's shares, when sold, may be worth
more or less than their original cost.
8
<PAGE>
TOTAL RETURN FOR PERIODS ENDED 12/31/95
(most recent calendar quarter)
<TABLE>
<CAPTION>
NAV Market price
<S> <C> <C>
1 year 20.26% 29.55%
3 years
Life of fund
(since 6/25/93) 24.00 17.15
Annual average 8.91 6.48
</TABLE>
PRICE AND DISTRIBUTION INFORMATION
6 months ended 11/30/95
<TABLE>
<CAPTION>
<S> <C> <C>
Distributions (number) 6
Income $ 0.66
Capital gains --
Total $ 0.66
Share value: NAV Market price
5/31/95 $13.04 $13.125
11/30/95 $13.35 $13.750
Current return:
End of period
Current dividend rate(1) 9.89% 9.60%
</TABLE>
(1)Income portion of most recent distribution, annualized and divided by NAV
or market price at end of period.
9
<PAGE>
TERMS AND DEFINITIONS
Net asset value (NAV) is the value of the 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
First Boston High Yield Bond Index is an unmanaged list of lower-rated,
high-yielding U.S. corporate bonds. The index does not take into account
brokerage commissions or other costs and may pose different risks than the
fund. Securities in the fund's portfolio will differ from those in the index.
It is not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation. It does
not represent an investment return.
10
<PAGE>
Portfolio of investments owned
November 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES (80.7%)*
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Advertising (1.2%)
$750,000 Outdoor Systems, Inc. sr. notes 10-3/4s, 2003 $ 720,000
495,000 Universal Outdoor, Inc. sub. deb. 11s, 2003 480,150
1,200,150
Aerospace and Defense (3.7%)
850,000 BE Aerospace sr. notes 9-3/4s, 2003 850,000
400,000 Fairchild Corp. sr. notes 12-1/4s, 1999 417,000
440,000 Howmet Corp. 144A sr. sub. notes 10s, 2003 453,200
1,000,000 K&F Industries Inc. sub. deb. 13-3/4s, 2001 1,036,250
1,000,000 UNC, Inc. sr. notes 9-1/8s, 2003 960,000
3,716,450
Agriculture (3.2%)
1,102,000 PMI Holdings Corp. Ser. B, sub. disc. deb.
stepped-coupon zero % (11-1/2s, 9/1/00), 2005++ 573,040
300,000 PSF Finance (L.P.) sr. exch. notes 12-1/4s,
2004 309,525
2,250,000 PSF Finance (L.P.) sr. notes 12s, 2000 2,345,625
3,228,190
Aluminum (1.1%)
1,000,000 Kaiser Aluminum & Chemical Corp. sr. sub. notes
12-3/4s, 2003 1,095,000
Automotive Parts (1.6%)
500,000 Aftermarket Technology corp. sr. sub. notes
12s, 2004 521,250
500,000 Exide Corp. sr. notes 10s, 2005 537,500
500,000 Key Plastics Corp. sr. notes 14s, 1999 515,000
1,573,750
Banks (0.8%)
840,000 Banco del Sud S.A. sr. unsub. med. term notes
10-1/8s, 1997 (Argentina) 785,400
Basic Industrial Products (0.3%)
500,000 Inter-City Products sr. notes 9-3/4s, 2000 327,500
Broadcasting (3.3%)
600,000 Act III Broadcasting, Inc. sr. sub. notes 9-5/8s,
2003 621,000
250,000 Argyle Television Corp. sr. sub. notes 9-3/4s,
2005 246,250
750,000 New City Broadcasting Corp. sr. sub. notes
11-3/8s, 2003 690,000
650,000 Panamsat (L.P.) sr. sub. notes stepped-coupon
zero % (11-3/8s, 8/1/98), 2003++ 523,250
750,000 Paxson Communications Corp. 144A sr. sub. notes
11-5/8s, 2002 740,625
500,000 SFX Broadcasting, Inc. sr. sub. notes 11-3/8s,
2000 528,750
3,349,875
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Building and Construction (2.4%)
$100,000 Miles Homes Services sr. notes 12s, 2001 $ 74,500
1,000,000 Presley Co. sr. notes 12-1/2s, 2001 800,000
1,000,000 Schuller International Corp. sr. notes 10-7/8s,
2004 1,116,250
400,000 Scotsman Group, Inc. sr. notes 9-1/2s, 2000 402,000
2,392,750
Building Products (0.9%)
500,000 American Standard, Inc. sr. sub. notes
stepped-coupon zero % (10-1/2s, 6/1/98), 2005++ 420,625
500,000 American Standard, Inc. deb. 9-1/4s, 2016 520,000
940,625
Business Services (0.7%)
720,000 Corporate Express, Inc. Ser. B, sr. sub. notes
9-1/8s, 2004 720,000
Cable Television (6.4%)
887,756 Adelphia Communications Corp. sr. notes 9-1/2s,
2004## 736,837
250,000 CF Cable TV, Inc. sr. notes 11-5/8s, 2005
(Canada) 272,500
250,000 CF Cable TV, Inc. sr. notes 9-1/8s, 2007 (Canada) 254,375
800,000 Continental Cablevision, Inc. sr. deb. 9-1/2s,
2013 842,000
1,055,000 Falcon Holdings Group, Inc. sr. sub. notes 11s,
2003## 1,012,800
750,000 Insight Communications Co. sr. sub. notes
stepped-coupon 8-1/4s (11-1/4s, 3/1/96), 2000++ 750,000
900,000 Lenfest Communications sr. notes 8-3/8s, 2005 895,500
750,000 Marcus Cable Co. (L.P.) sr. sub. disc. notes
stepped-coupon zero % (13-1/2s, 8/1/99), 2004++ 547,500
1,885,000 Telewest Communications PLC deb.
stepped-coupon zero % (11s, 10/1/00), 2007
(United Kingdom)++ 1,112,150
6,423,662
Cellular Communications (3.6%)
945,000 Call-Net Enterprises sr. disc. notes
stepped-coupon zero % (13-1/4s, 12/1/99), 2004++ 666,225
1,900,000 NEXTEL Communications, Inc. sr. disc. notes
stepped-coupon zero % (11-1/2s, 9/1/98), 2003++ 1,144,750
250,000 NEXTEL Communications, Inc. sr. disc. notes
stepped-coupon zero % (9-3/4s, 2/15/99), 2004++ 129,375
2,150,000 Pricellular Wireless Corp. sr. disc. notes
stepped-coupon zero % (12 1/4s, 10/1/98), 2003++ 1,634,000
3,574,350
Chemicals (3.6%)
500,000 Acetex Corp. 144A sr. notes 9-3/4s, 2003 511,250
1,000,000 G-I Holdings, Inc. Ser. B, sr. notes zero %,
1998 760,000
700,000 Harris Chemical Corp. sr. secd. disc. notes
stepped-coupon zero % (10-1/4s, 1/15/96), 2001++ 651,000
1,250,000 OSI Specialties Corp. Ser. B, sr. secd. disc.
deb. stepped-coupon zero % (11-1/2s, 4/15/99),
2004++ 1,087,500
500,000 OSI Specialties Inc. sr. sub. notes 9-1/4s,
2003 560,625
3,570,375
Computer Equipment (1.2%)
1,100,000 Computervision Corp. sr. sub. notes 11-3/8s,
1999 1,155,000
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Conglomerates (1.2%)
$600,000 Axia, Inc. sr. sub. notes Ser. B, 11s, 2001 $ 588,000
850,000 Talley Industries, Inc. sr. disc. deb.
stepped-coupon zero % (12-1/4s, 10/15/98),
2005++ 626,875
1,214,875
Consumer Services (0.4%)
422,000 Coinmach Corp. 144A sr. notes 11-3/4s, 2005 425,165
Containers (1.1%)
1,000,000 Ivex Holdings Corp. sr. disc. deb.
stepped-coupon zero % (13-1/4s, 3/15/00), 2005++ 550,000
500,000 Ivex Packaging Corp. sr. sub. notes 12-1/2s,
2002 530,000
1,080,000
Electric Utilities (3.9%)
150,000 Cleveland Electric Illuminating Co. Ser. B,
1st mtge. 9-1/2s, 2005 154,125
1,250,000 First PV Funding deb. 10.15s, 2016 1,278,125
350,000 Long Island Lighting Co. deb. 9s, 2022 353,269
1,600,000 Midland Funding Corp. II Ser. A, deb. 11-3/4s,
2005 1,680,000
500,000 Niagara Mohawk Power Corp. 1st. mtge. 8-3/4s,
2022 472,500
3,938,019
Electronics (1.8%)
366,000 Amphenol Corp. sr. sub. notes 12-3/4s, 2002 419,070
500,000 Amphenol Corp. sr. notes 10.45s, 2001 550,000
1,600,000 International Semi-Tech. Corp. sr. disc. notes
stepped-coupon zero % (11-1/2s, 8/15/00), 2003
(Canada)++ 824,000
1,793,070
Entertainment (0.3%)
250,000 Premier Parks, Inc. 144A sr. notes 12s, 2003 255,000
Financial Services (1.8%)
1,000,000 Comdata Network, Inc. sr. sub. deb. 13-1/4s,
2002 1,190,000
600,000 Keystone Group, Inc. sr. secd. notes 9-3/4s,
2003 576,000
1,766,000
Food (1.6%)
1,800,000 Fresh Del Monte Produce Corp. NV 144A Ser. B,
sr. notes 10s, 2003 (Netherlands) 1,575,000
Food Chains (1.3%)
500,000 Safeway, Inc. med. term notes 8.57s, 2003 537,500
500,000 Southland Corp. 1st priority sr. sub. deb. 5s,
2003 416,250
500,000 Southland Corp. deb. Ser. A, 4-1/2s, 2004 385,625
1,339,375
Forest Products (2.2%)
500,000 APP International Finance Co. notes 11-3/4s,
2005 (Netherlands) 487,500
1,050,000 Riverwood International Corp. sr. sub. notes
11-1/4s, 2002 1,126,125
200,000 Stone Container Corp. sr. sub. notes 11-1/2s,
1999 202,000
350,000 Stone Container Corp. 1st mtge. 10-3/4s, 2002 359,188
2,174,813
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Gaming (0.8%)
$750,000 Stratosphere Corp. 1st mtge. 14-1/4s, 2002 $ 843,750
Health Care (2.4%)
1,000,000 Graphic Controls Corp. 144A sr. sub. notes 12s,
2005 1,020,000
750,000 Ivac Corp. sr. notes 9-1/4s, 2002 761,250
200,000 Merit Behavioral Care 144A sr. sub. notes
11-1/2s, 2005 204,000
400,000 Paracelsus Healthcare Corp. sr. sub. notes
9-7/8s, 2003 404,000
2,389,250
Home Furnishings (1.1%)
1,128,150 Simmons Mattress Corp. 144A deb. 8s, 2003## 1,128,150
Hospital Management (1.6%)
750,000 Integrated Health Services sr. sub. notes 9-5/8s,
2002 763,125
750,000 Tenet Healthcare Corp. sr. sub. notes 10-1/8s,
2005 813,750
1,576,875
Insurance (1.5%)
300,000 Reliance Group Holdings, Inc. sr. sub. deb.
9-3/4s, 2003 307,125
1,100,000 Terra Nova Insurance Holdings sr. notes 10-3/4s,
2005 (United Kingdom) 1,188,000
1,495,125
Lodging (1.5%)
1,000,000 John Q. Hammons Hotels, Inc. 144A 1st mtge.
9-3/4s, 2005 997,500
500,000 John Q. Hammons Hotels, Inc. 1st mtge. 8-7/8s,
2004 480,000
1,477,500
Media (1.2%)
1,150,000 Commodore Media, Inc. sr. sub. notes
stepped-coupon 7-1/2s (13-1/4s, 5/1/98), 2003++ 1,058,000
248,000 Petracom Hldgs. 144A notes stepped-coupon zero
% (17-1/2s, 8/1/98), 2003++ 168,950
1,226,950
Motion Picture Distribution (1.4%)
300,000 Cinemark Mexico notes 12s, 2003 (Mexico) 279,000
1,000,000 Cinemark USA sr. notes 12s, 2002 1,090,000
1,369,000
Office Equipment (0.1%)
100,000 United Stationer Supply, Inc. sr. sub. notes
12-3/4s, 2005 108,750
Oil and Gas (4.2%)
1,000,000 Chesapeake Energy Corp. sr. notes 12s, 2001 1,060,000
700,000 Flores & Rucks, Inc. sr. notes 13-1/2s, 2004 791,000
250,000 Maxus Energy Corp. deb. 11-1/4s, 2013 257,500
100,000 Maxus Energy Corp. global notes 9-7/8s, 2002 100,000
750,000 Maxus Energy Corp. notes 9-1/2s, 2003 723,750
1,250,000 Transtexas Gas Corp. sr. secd. notes 11-1/2s,
2002 1,290,625
4,222,875
Paging (3.2%)
1,000,000 Metrocall, Inc. sr. sub. notes 10-3/8s, 2007 1,037,500
1,000,000 Mobile Telecommunications Tech. Corp. sr. notes
13-1/2s, 2002 1,137,500
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Paging (continued)
$500,000 Mobilemedia Corp. sr. sub. notes 9-3/8s, 2007 $ 503,750
700,000 Pagemart, Inc. sr. disc. notes stepped-coupon
zero % (12-1/4s, 11/1/98), 2003++ 518,000
3,196,750
Publishing (0.9%)
500,000 Marvel Holdings, Inc. Ser. B, sr. notes zero
%, 1998 355,000
750,000 Marvel Parent Holdings, Inc. sr. secd. disc.
notes zero %, 1998 525,000
880,000
Real Estate (1.2%)
50,000 Chelsea Piers 144A Ser. B, stepped-coupon zero
% (11s, 6/15/99), 2009++ 47,438
750,000 Chelsea Piers Ser. B, 1st mtge. stepped-coupon
zero % (12-1/2s, 6/15/96), 2004++ 705,938
500,000 HMH Properties, Inc. sr. notes 9-1/2s, 2005 503,750
1,257,126
Recreation (4.8%)
550,000 Arizona Charlies Corp. Ser. B, 1st mtge. 12s,
2000 (In Default)+ 385,000
200,000 Capitol Queen Corp. Ser. B, 1st mtge. notes
12s, 2000 (In Default)+ 160,000
250,000 Elsinore Corp. 1st mtge. 12-1/2s, 2000 (In
Default)+ 237,500
500,000 Fitzgerald Gaming Co. 144A sr. notes 13s, 1996 395,000
600,000 Grand Casinos, Inc. 1st mtge. 10-1/8s, 2003 615,000
1,150,000 Lady Luck Gaming Corp. Ser. B, 1st mtge. 10-1/2s,
2001 885,500
414,000 Louisiana Casino Cruises Corp. 1st mtge.
11-1/2s, 1998 405,720
500,000 Mohegan Tribal Gaming 144A sr. notes 13-1/2s,
2002 537,500
432,000 Trump Castle Funding Corp. sr. sub. notes
11-1/2s, 2000 432,000
500,000 Trump Holdings & Funding Corp. sr. notes 15-1/2s,
2005 512,500
250,000 Trump Plaza Funding, Inc. 1st mtge. notes
10-7/8s, 2001 250,000
4,815,720
Restaurants (0.1%)
201,000 Flagstar Corp. sr. sub. deb. 11-1/4s, 2004 146,730
Retail (2.7%)
1,500,000 Finlay Enterprises, Inc. sr. disc. deb.
stepped-coupon zero % (12s, 5/1/98), 2005++ 1,035,000
1,650,000 Loehmanns' Holdings, Inc. sr. notes 10-1/2s,
1997 1,650,000
2,685,000
School Buses (0.5%)
500,000 Blue Bird Body Co. Ser. B, sub. deb. 11-3/4s,
2002 512,500
Specialty Consumer Products (0.9%)
500,000 Herff Jones, Inc. 144A sr. sub. notes 11s, 2005 527,500
400,000 Selmer Co., Inc. sr. sub. notes 11s, 2005 394,000
921,500
Steel (1.0%)
1,150,000 Ispat Mexicana, SA 144A deb. 10-3/8s,
2001(Mexico) 1,012,000
Total Corporate Bonds and Notes
(cost $78,394,619) $80,879,945
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
UNITS (9.0%)*
NUMBER OF UNITS VALUE
<S> <C> <C>
1,000 Australis Media units stepped-coupon zero %
(14s, 5/15/00), 2003 (Australia)++ $ 725,000
90 Celcaribe S.A. 144A units stepped-coupon zero
% (13-1/2s, 3/15/98), 2004++ 837,000
1,315 Cellnet Data Systems Inc. units stepped-coupon
zero % (13s, 6/15/05), 2005++ 746,263
250 Comunicacion Celular SA 144A units
stepped-coupon zero % (8s, 11/15/00),
2003 (Columbia)++ 137,188
500 Health-O-Meter Product units 13s, 2002 425,000
1,000 Heartland Wireless Communication 144A units
13s, 2003 1,135,000
1,000 ICF Kaiser International, Inc. units 12s, 2003 940,000
1,270 IntelCom Group (USA) Inc., 144A units stepped-
coupon zero % (13-1/2s, 9/15/00), 2005++ 730,250
450,000 Intermedia Communications of Florida units Ser.
B, sr. notes 13-1/2s, 2005 492,750
3,710 SDW Holdings Corp. 144A units $15.00 pfd. 1,038,800
750 Terex Corp. 144A units 13-3/4s, 2002 645,000
650 Total Renal Care Holdings units sr. disc. notes
stepped-coupon zero % (12s, 8/15/97), 2004++ 617,500
350 Winstar Communications, Inc. 144A units
stepped-coupon zero % (14s, 10/15/00), 2005++ 546,000
Total Units (cost $8,362,833) $9,015,751
</TABLE>
<TABLE>
<CAPTION>
Preferred Stocks (3.2%)*
NUMBER OF SHARES VALUE
<S> <C> <C>
14,000 California Federal Bank Ser. B, $10.625 exch.
pfd. $1,522,500
11,000 First Nationwide Bank $11.50 pfd. 1,225,125
17,477 Pyramid Communications, Inc. Ser. C, $3.125
exch. pfd. 408,515
Total Preferred Stocks (cost $3,000,314) $3,156,140
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS (2.7%)*
NUMBER OF SHARES VALUE
<S> <C> <C>
1,800 Axia Holding Corp. 144A $ 50,400
10,250 Chesapeake Energy Corp. 435,625
10,504 Elsinore Corp. 6,565
3,333 Finlay Enterprises, Inc. 52,495
40,650 Grand Union Co.(acquired various dates from
7/13/94 to 1/10/95, cost $1,727,265)# 304,875
106,701 Loehmanns' Holdings, Inc. 144A 186,727
60,000 NEXTEL Communications, Inc. Class A 922,500
303 PMI Holdings Corp. 144A 60,600
244 Premium Holdings L.P. 144A 24,448
525 Pyramid Communications, Inc. New Class B 144A 12,602
12,750 Specialty Foods Corp. 12,750
2,273 Taj Mahal Holding Corp. Class A 34,095
13,000 Tele-Communications Inc. Class A+ 240,500
9,000 Total Renal Care Holdings, Inc. Class B 161,010
20,000 Total Renal Care Holdings, Inc. 144A 145,000
Total Common Stocks (cost $3,378,789) $2,650,192
</TABLE>
<TABLE>
<CAPTION>
Convertible Preferred Stocks (1.1%)*
Number of Shares Value
<S> <C> <C>
20,000 Cablevision Systems Corp. Ser. I, $2.125 cv.
pfd. $ 555,000
10,000 Granite Broadcasting $1.938 cv. pfd. 582,500
Total Convertible Preferred Stocks
(cost $1,101,250) $1,137,500
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
BRADY BONDS* (0.5%)* (cost $467,500)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$1,000,000 Argentina (Republic of) Floating Rate Notes
(FRN) 5s, 2023 $ 522,500
</TABLE>
<TABLE>
<CAPTION>
WARRANTS (0.4%)*+
NUMBER OF WARRANTS EXPIRATION DATE VALUE
<S> <C> <C> <C>
25,000 Becker Gaming Corp. 144A 11/15/00 $12,500
4,550 Capital Gaming International, Inc. 2/1/99 569
1,142 Casino America, Inc. 11/15/96 114
6,900 Casino Magic Finance Corp. 10/14/96 345
5,885 Cinemark Mexico USA, Inc. 8/1/03 54,525
1,150 Commodore Media 144A 5/1/00 115,000
500 Dial Page, Inc. 1/1/97 5
6,450 Echostar Communications Corp. 6/1/04 72,563
10,000 Elsinore Corp. 10/8/98 1,000
2,350 Fitzgerald Gaming Co. 144A 3/15/99 11,750
450 Intermedia Communications 144A 6/1/00 4,500
492 Louisiana Casino Cruises, Inc. 144A 12/1/98 7,380
6,000 Miles Homes, Inc. 4/1/97 3,000
6,900 Pagemart, Inc. 144A 12/31/03 62,100
600 Petracom Holdings, Inc. 8/1/05 4,275
1,800 President Riverboat Casinos, Inc. 144A 9/23/96 90
4,560 UCC Investor Holding, Inc. 10/30/99 43,320
750 Universal Outdoor, Inc. 144A 7/1/04 30,000
101 Wright Medical Technology, Inc. 144A 6/30/03 16,602
Total Warrants (cost $416,981) $439,638
</TABLE>
<TABLE>
<CAPTION>
Short-Term Investments (1.5%)*
Principal Amount Value
<S> <C> <C>
$1,000,000 Interest in $798,484,000 joint repurchase
agreement dated November 30, 1995 with Morgan
(J.P.) & Co., Inc. due December 1, 1995 with
respect to various U.S. Treasury
obligations-maturity value of $1,000,163 for
an effective yield of 5.86% $ 1,000,163
500,000 Maxus Energy corp. med. term notes 10.2s, May
10, 1996 498,525
Total Short-Term Investments (cost $1,500,163) $ 1,498,688
Total Investments (cost $96,622,449)** $99,300,354
</TABLE>
17
<PAGE>
*Percentages indicated are based on net assets of $100,204,804.
+Non-income-producing security.
++The interest rate and date shown parenthetically represent the new interest
rate to be paid and the date the fund will begin receiving interest at this
rate.
#Restricted, excluding 144A securities, as to public resale. At the date of
acquisition, these securities were valued at cost. There were no
outstanding unrestricted securities of the same class as those held. Total
market value of restricted securities owned at November 30, 1995 was
$304,875 or 0.3% of net assets.
##Income may be received in cash or additional securities at the discretion
of the issuer.
**The aggregate identified cost on a tax basis is $96,635,259, resulting in
gross unrealized appreciation and depreciation of $8,765,214 and
$6,100,119, respectively, or net unrealized appreciation of $2,665,095.
144A after the name of a security represents those 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.
The rates shown on FRNs are the current interest rates at November 30,
1995, which are subject to change based on the terms of the security.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Statement of assets and liabilities
November 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments in securities, at value (identified
cost $96,622,449) (Note 1) $ 99,300,354
Dividends and interest receivable 2,007,124
Receivable for securities sold 1,012,372
Unamortized organization expenses (Note 1) 15,353
Total assets 102,335,203
Liabilities
Payable to subcustodian (Note 1) 599,651
Distribution payable to shareholders 826,203
Payable for securities purchased 440,000
Payable for compensation of Trustees (Note 2) 155
Payable for compensation of Manager (Note 2) 187,211
Payable for administrative services (Note 2) 982
Payable for investor servicing and custodian fees
(Note 2) 29,107
Other accrued expenses 47,090
Total liabilities 2,130,399
Net assets $100,204,804
Represented by
Paid-in capital $105,342,573
Distributions in excess of net investment income (247,657)
Accumulated net realized loss on investments (7,568,017)
Net unrealized appreciation of investments 2,677,905
Total--Representing net assets applicable to
capital shares outstanding $100,204,804
Computation of net asset value and offering price
Net asset value per share ($100,204,804 divided
by 7,507,107 shares) $13.35
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Statement of operations
Six months ended November 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment income:
Interest $5,104,419
Dividends 192,116
Total investment income 5,296,535
Expenses:
Compensation of Manager (Note 2) 375,909
Investor servicing and custodian fees (Note 2) 71,288
Compensation of Trustees (Note 2) 4,510
Reports to shareholders 30,445
Auditing 10,078
Legal 1,874
Postage 18,802
Administrative services (Note 2) 3,452
Exchange listing fees 8,085
Amortization of organization expenses (Note 1) 2,988
Registration fees 433
Other expenses 1,731
Total expenses 529,595
Expense reduction (9,993)
Net expenses 519,602
Net investment income 4,776,933
Net realized gain on investments (Notes 1 and 3) 817,541
Net unrealized appreciation of investments during the period 1,663,817
Net gain on investment transactions 2,481,358
Net increase in net assets resulting from operations $7,258,291
</TABLE>
20
<PAGE>
Statement of changes in net assets
<TABLE>
<CAPTION>
Six months ended Year ended
November 30* May 31
1995
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income $ 4,776,933 $ 9,915,722
Net realized gain (loss) on investment transactions 817,541 (7,982,715)
Net unrealized appreciation of investments 1,663,817 5,262,308
Net increase in net assets resulting from operations 7,258,291 7,195,315
Distributions to shareholders:
From net investment income (4,954,524) (9,909,206)
Total increase (decrease) in net assets 2,303,767 (2,713,891)
Net assets:
Beginning of period 97,901,037 100,614,928
End of period (including distributions in excess of
net investment income of $247,657 and $70,066,
respectively) $100,204,804 $ 97,901,037
Number of fund shares
Shares outstanding at beginning and end of period 7,507,107 7,507,107
</TABLE>
*Unaudited.
21
<PAGE>
Financial highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
June 25, 1993
(commencement
Six months ended Year ended of operations) to
November 30* May 31 May 31
1995 1994
<S> <C> <C> <C>
Net asset value, beginning of period $13.04 $13.40 $14.01**
Investment operations
Net investment income .64 1.32 1.23
Net realized and unrealized gain (loss) on
investments .33 (.36) (.59)
Total from investment operations .97 .96 .64
Less distributions:
From net investment income (.66) (1.32) (1.22)
In excess of net investment income -- -- (.03)
Total distributions (.66) (1.32) (1.25)
Net asset value, end of period $13.35 $13.04 $13.40
Market value, end of period $13.75 $13.125 $13.375
Total investment return at market value
(%)(b) 9.97(a) 9.20 (2.52)(a)
Net assets, end of period
(in thousands) $100,205 $97,901 $100,615
Ratio of expenses to average net assets (%)
(c) .53(a) 1.00 1.00(a)
Ratio of net investment income to average
net assets (%) 4.82(a) 10.32 8.82(a)
Portfolio turnover rate (%) 55.21 103.91 80.21(a)
</TABLE>
* Unaudited.
** Represents initial asset value of $14.07 less offering expenses of
approximately $0.06.
(a) Not annualized
(b) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charge.
(c) The ratio of expenses to average net assets for the year ended November
30, 1995 included amounts paid through expenses offset arrangements.
Prior period ratios exclude these amounts.
22
<PAGE>
Notes to financial statements
November 30, 1995 (Unaudited)
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 or brokers, 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) 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, 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 the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis and dividend
income is recorded on the ex-dividend date.
Discount on zero coupon bonds, original issue discount bonds, stepped-coupon
bonds, and payment in kind securities are accreted according to the effective
yield method.
23
<PAGE>
E) Federal taxes It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986. Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation of securities held and excise tax on
income and capital gains.
At May 31, 1995, the fund had capital loss carryovers of approximately
$4,314,000 available to offset future realized capital gains, if any. The
amount of the carryover and the expiration dates are as follows:
<TABLE>
<CAPTION>
Loss Carryover Expiration
<S> <C>
$307,397 May 31, 2002
$4,006,372 May 31, 2003
</TABLE>
F) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain 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.
G) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public offering
of its shares were $29,884. These expenses are being amortized on a
straight-line basis over a five-year period.
H) Payable to subcustodian As part of the custodian contract between the
subcustodian bank and PFTC, the subcustodian has a lien on the securities of
the fund to the extent permitted by the funds investment restrictions to
cover any advances made by the subcustodian bank for the settlement of
securities purchased by the fund. At November 30, 1995, the payable to the
subcustodian bank represents the amount due for cash advance for the
settlement of security purchases.
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 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. The fund also compensates Putnam Management for administrative
services based on average weekly 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 and are included in the Compensation to Manager
in the Statement of Operations.
The fund also 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 are provided by Putnam Fiduciary Trust
Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are currently provided by Putnam Investor
Services, a division of PFTC.
Trustees of the fund receive an annual Trustee's fee of $600 and an addi-
24
<PAGE>
tional 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.
During the period ended November 30, 1995, 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.
For the period ended November 30, 1995, fund expenses were reduced by $9,993
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.
Note 3
Purchases and sales of securities
During the period ended November 30, 1995, purchases and sales of investment
securities other than short-term investments aggregated $51,687,895 and
$52,850,593, respectively. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost
basis.
25
<PAGE>
Selected quarterly data
(unaudited)
<TABLE>
<CAPTION>
Net increase
Net realized (decrease) in
Net and unrealized net assets Net assets
Investment investment gain (loss) on from at end
income income investments operations of period
Quarter Per Per Per Per Per
ended Total Share Total Share Total Share Total Share Total Share
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/93 $1,748,199 $.24 $1,558,106 $.21 $(796,716) $(.09) $761,390 $.12 $105,218,364 $14.02
11/30/93 2,883,439 .38 2,565,194 .34 1,684,482 .22 4,249,676 .56 106,943,904 14.25
2/28/94 2,824,221 .37 2,571,558 .34 2,811,315 .37 5,382,873 .71 108,708,327 14.48
5/31/94 2,784,355 .38 2,504,991 .34 (8,148,590) (1.09) (5,643,599) (.75) 100,614,928 13.40
8/31/94 2,602,834 .34 2,357,192 .31 (3,421,646) (.45) (1,064,454) (.14) 97,073,166 12.93
11/30/94 2,960,538 .40 2,721,030 .37 (4,144,729) (.56) (1,423,699) (.19) 93,172,166 12.41
2/28/95 2,681,975 .36 2,454,668 .33 1,360,907 .18 3,815,575 .51 94,510,448 12.59
5/31/95 2,632,637 .35 2,382,832 .31 3,485,061 .47 5,867,893 .787 97,901,037 13.04
8/31/95 2,719,048 .36 2,452,855 .33 1,237,195 .16 3,690,050 .49 99,113,819 13.20
11/30/95 2,577,487 .35 2,324,078 .31 1,244,163 .17 3,568,241 .48 100,204,804 13.35
</TABLE>
26
<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
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
Beverly Marcus
Clerk and Assistant Treasurer
Call 1-800-225-1581 weekdays from
9 a.m. to 5 p.m. Eastern Time for
up-to-date information about the fund's
NAV or to request Putnam's quarterly
Closed-End Fund Commentary.
27
<PAGE>
[PUTNAM INVESTMENTS logo]
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
22196-590 1/96
<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); Service Mark symbol is replaced
with (SM)
