Putnam
Managed
High Yield
Trust
ANNUAL REPORT
May 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Morningstar, Inc., an independent rating agency, awarded the fund 4
out of a possible 5 stars for the 3-year period as of
June 30, 1997. Only 22.5% of the 146 fixed-income funds
rated received 4 stars.*
* "Given the possibility of further interest-rate hikes by the
Federal Reserve Board, which in turn would cause prices to decline and
yields to rise across the fixed-income market, many investors may wonder,
why own high-yield bonds? The answer is simple: the high-yield sector
actually exhibits relatively lower price volatility when it comes to
interest-rate risk than other fixed-income sectors, primarily because
high-yield bonds inherently have lower average durations. While credit
risk is greater, interest-rate risk is not."
-- Jennifer E. Leichter, manager
Putnam Managed High-Yield Trust
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
12 Portfolio holdings
27 Financial statements
*Morningstar ratings reflect risk-adjusted performance through June 30,
1997, and are subject to change every month. Morningstar ratings are
calculated from a fund's 3-, 5-, and 10-year returns if available (with
fee adjustments) in excess of 90-day Treasury bill returns and a risk
factor that reflects performance below 90-day Treasury bill returns. Past
performance is not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
While most other areas of the fixed-income market endured considerable anxiety
over the 12 months ended May 31, 1997, high-yield bonds found the environment
to be somewhat more hospitable. In this environment, Putnam Managed High Yield
Trust provided investors with a positive total return for the period, which
encompassed your fund's fiscal 1997.
The strong stock market that improved the bottom lines of many issuers of
high-yield bonds and significantly lowered the occurrence of defaults, coupled
with increased demand from institutional and foreign investors, allowed Fund
Manager Jennifer Leichter to upgrade the overall quality profile of the
portfolio. Merger and acquisition activity also enhanced fund performance.
Jennifer discusses these and other factors in the following report, in which
she also looks at prospects for the fiscal year just begun.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
July 16, 1997
Report from the Fund Manager
Jennifer E. Leichter
Over the past year, the uneven temperament of the broad fixed-income market
combined with investors' concerns about interest rates and inflation to
produce many nerve-racking moments for bond investors. High-yield bonds,
however, remained relatively unaffected. Robust corporate earnings, a vibrant
economy, record-breaking stock market activity, and strong demand stoked the
high-yield market's fire to a strong enough extent that these negative
influences were effectively offset.
Given such a backdrop, Putnam Managed High Yield Trust weathered the broader
market's jitters, generating a total return of 12.27% at net asset value and
14.88% at market price for the fiscal year ended May 31, 1997. More complete
performance information can be found on pages 9 and 10.
* IN GENERAL, BACKDROP FOR HIGH-YIELD INVESTING WAS IDEAL
For several years now, fixed-income investors have been handsomely rewarded
for dipping below the investment-grade mark (Ba-rated or below) as they
searched for yield- and price-appreciation opportunities. With five years of
corporate cost-cutting and restructuring under its belt, corporate America has
become leaner and more fiscally healthy. This has resulted in a paradigm shift
that has helped boost the credit profile of many high-yield issuers and
positively changed investors' attitudes and perceptions about high-yield bond
investing.
Highly favorable technical factors further enhanced the market's ability to
post attractive gains this past year. Powerful equity markets enabled many
issuers to sell stock and improve their balance sheets. Defaults, commonly
associated with high-yield bonds in the late 1980s, have been extremely low.
Finally, steady demand from insurance companies, pension funds, and foreign
investors has allowed the market to digest heavy new-issue supply without
sacrificing price appreciation potential. Together, these factors have caused
the yield spread -- the difference in yield -- between high-yield bonds and
Treasury bonds to narrow dramatically, more than at any other time during the
past five years. Spreads between high-yield bonds of varying credit quality
also narrowed, and until most recently, B-rated bonds, which make up the
majority of your fund's portfolio, outperformed Ba-rated bonds.
* DIVERSIFICATION ENHANCED WITH MORE UNCORRELATED EXPOSURE
As yield spreads have narrowed and investors have become more comfortable
owning lower-rated securities, risk premiums -- the level of return or yield
one hopes to receive for assuming higher risk -- have come down. The yields on
lower-rated bonds are now closer to those offered by Treasury securities of
comparable maturities. Not surprisingly, then, some investors may wonder if
the current valuations in the high-yield market are too high. Given the many
positive factors driving the market today, we believe they are somewhat
justified.
We do recognize, however, that the reward for being accurate in terms of
security selection is not as great as it was a year or two ago. Therefore, we
have pursued a strategy designed to create a portfolio composed of
uncorrelated securities -- issues that do not necessarily react in a similar
manner to the same market or economic events. We increased diversification by
purchasing more securities in industries where we had previously limited the
fund's exposure, and bolstered the weighting in industries that we've favored
for some time. Radio broadcasting, semiconductor manufacturers, electric
utilities, independent-power producers that have growing overseas operations,
and energy companies focusing on oil and gas exploration within the United
States, are several areas where exposure has been increased. As a result of
this strategy, the number of holdings in the fund's portfolio increased from
roughly 200 issues at the beginning of the period to more than 300 by fiscal
year's end.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Telecommunications 7.9%
Recreation and gaming 7.1%
Cable television 6.2%
Electric utilities 5.7%
Cellular communications 5.2%
Footnote reads:
*Based on net assets as of 5/31/97. Holdings will vary over time.
* CONSOLIDATION TREND GIVES FUND HOLDINGS
A BOOST
Merger and acquisition activity has been an ongoing theme in the market and
continues to help drive returns and boost the performance of many of the
fund's holdings. Deregulation seems to be the primary catalyst for change and
consolidation in many industries, such as telecommunications, banking, radio
broadcasting, U.K. cable holdings, and aerospace.
Issues that significantly contributed to the fund's returns included
California Federal Savings and Loan and First Nationwide, two fund holdings
that merged, resulting in price appreciation for both securities. While these
securities and others discussed in this report were viewed favorably during
the period, all portfolio holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may vary in the future.
United Kingdom phone companies that sell competing phone services bundled with
cable services also enjoyed price appreciation on the heels of industry-wide
merger activity. Bell Cable Media and Videotron are two former fund
investments worth mentioning. They merged and were then acquired by Cable and
Wireless PLC. After a handsome run-up in price, we sold these issues for a
profit.
Over the course of the year, we witnessed the entrance of larger
telecommunication players into local markets through the acquisition of
competitive local access providers. Bonds issued by MFS, a local provider,
delivered solid gains for the fund once it was acquired by WorldCom, a
long-distance provider. We liquidated the position at a substantial profit
before period's end.
[GRAPHIC OMITTED: Top 10 Holdings]
TOP 10 HOLDINGS*
Midland Funding Corporation
Debentures Series A, 11 3/4s, 2005
PSF Holdings LLC
Class A (Common Stock)
Terex Corporation
Senior notes Series B, 13 1/4s 2002
Commodore Media, Incorporated
Senior subordinated notes, stepped-coupon 7 1/2s, (13 1/4s, 5/1/98). 2003
California Federated Bankcorp, Incorporated
Series B, $11.50, preferred
Falcon Holdings Group, Incorporated
Senior subordinated notes, 11s, 2003
Graphic Controls Corporation
Senior subordinated notes, Series A, 12s, 2005
Long Island Lighting Company
Debentures, 9s, 2022
Ralph's Grocery Company
Senior notes, 10.45s, 2004
ICG Holdings, Incorporated
Senior discretionary notes, stepped-coupon zero% (13 1/2s, 9/15/00), 2005
Footnote reads:
*These holdings represent 11.7% of the fund's assets as of 5/31/97.
* OUTLOOK IS CONSTRUCTIVE, YET CAUTIOUS
As we enter fiscal 1998, our outlook for the high-yield market remains
constructive, yet cautious. Technically and fundamentally, the backdrop for
investing in high-yield bonds remains favorable. In our view, firm demand,
improved creditworthiness, ongoing consolidation, and the generally solid
structure of the market appear to be setting the stage for many fund holdings
to perform well.
Of course, we are also aware of the possibility that volatility may lie ahead,
particularly considering that the Federal Reserve Board took no action on
interest rates in May. It now appears that the Fed may well be caught between
a rock and a hard place. If the Fed doesn't move to raise short-term interest
rates this summer or fall, the market most likely will interpret the inaction
as a green light for inflation and turbulence may follow. If the Fed does
raise interest rates, investor speculation about how weak the economy might
become down the road could dampen price appreciation potential and undermine
investors' confidence in the creditworthiness of many high-yield issuers.
The current economy is in its seventh year of expansion and history suggests
that sooner or later growth will need to be corralled in order to keep
inflation at bay. We will keep a watchful eye on the market's movements and
continue to use in-depth credit research to construct a well-diversified
portfolio that can offer the potential to provide solid performance 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 5/31/97, there is no guarantee the fund will continue to hold
these securities in the future. High-yielding lower-rated securities 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 its securities.
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.
TOTAL RETURN FOR PERIODS ENDED 5/31/97
First Boston
Market High Yield Consumer
NAV price Bond Index Price Index
- ------------------------------------------------------------------------------
1 year 12.27% 14.88% 13.38% 2.23%
- ------------------------------------------------------------------------------
3 years 41.41 44.58 39.02 8.54
Annual average 12.24 13.08 11.61 2.77
- ------------------------------------------------------------------------------
Life (6/25/93) 48.14 41.26 46.03 10.87
Annual average 10.52 9.19 10.15 2.67
- ------------------------------------------------------------------------------
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.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 5/31/97
- ------------------------------------------------------------------------------
Distributions (number) 12
- ------------------------------------------------------------------------------
Income $1.334
- ------------------------------------------------------------------------------
Total $1.334
- ------------------------------------------------------------------------------
Share value NAV Market price
- ------------------------------------------------------------------------------
5/31/96 $13.78 $13.750
- ------------------------------------------------------------------------------
5/31/97 14.08 14.375
- ------------------------------------------------------------------------------
Current return (end of period) NAV Market price
- ------------------------------------------------------------------------------
Current dividend rate1 9.38% 9.18%
- ------------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by NAV
or Market price at end of period.
TOTAL RETURN FOR PERIODS ENDED 6/30/97
(most recent calendar quarter)
Market
NAV price
- ------------------------------------------------------------------------------
1 year 14.16% 15.83%
- ------------------------------------------------------------------------------
3 years 43.80 57.44
Annual average 12.87 16.33
- ------------------------------------------------------------------------------
Life (6/25/93) 51.17 43.56
Annual average 10.85 9.44
- ------------------------------------------------------------------------------
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.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Net asset value (NAV) is the 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
First Boston High Yield Bond Index is an unmanaged list of lower-rated,
high-yielding U.S. corporate bonds. The index assumes reinvestment of all
distributions, 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.
Report of independent accountants
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, 1997, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, 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 audits. We conducted our audits 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 audits, which included
confirmation of investments owned at May 31, 1997 by correspondence with the
custodian and the application of alternative auditing procedures where
investments purchased were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
July 15, 1997
Portfolio of investments owned
May 31, 1997
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES (80.4%) *
PRINCIPAL AMOUNT VALUE
Advertising (0.1%)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 50,000 Adams Outdoor Advertising, Ltd. sr. notes
10 3/4s, 2006 $ 53,500
Aerospace and Defense (1.8%)
- ------------------------------------------------------------------------------------------------------------
850,000 BE Aerospace sr. sub. notes Ser. B, 9 7/8s, 2006 884,000
440,000 Howmet Corp. sr. sub. notes 10s, 2003 475,200
130,000 L-3 Communications Corp. 144A sr. sub. notes
10 3/8s, 2007 136,825
100,000 Moog, Inc. sr. sub. notes Ser. B, 10s, 2006 104,000
200,000 Sequa Corp. med. term notes 10s, 2001 205,222
140,000 Tracor, Inc. sr. sub. notes 8 1/2s, 2007 140,350
--------------
1,945,597
Agriculture (1.5%)
- ------------------------------------------------------------------------------------------------------------
1,102,000 PMI Holdings Corp. sub. disc. deb. stepped-coupon
Ser. B, zero % (11 1/2s, 9/1/00), 2005 ++ 837,520
668,553 Premium Standard Farms, Inc. sr. secd. notes
11s, 2003 [2 DBL. DAGGERS] 712,009
--------------
1,549,529
Apparel (0.2%)
- ------------------------------------------------------------------------------------------------------------
65,000 GFSI, Inc. 144A sr. sub. notes 9 5/8s, 2007 65,813
135,000 William Carter Co. 144A sr. sub. notes 12s, 2008 141,075
--------------
206,888
Automotive (0.4%)
- ------------------------------------------------------------------------------------------------------------
415,000 Lear Corp. sub. notes 9 1/2s, 2006 439,900
Automotive Parts (1.2%)
- ------------------------------------------------------------------------------------------------------------
375,000 Aftermarket Technology Corp. sr. sub. notes
Ser. D, 12s, 2004 416,250
525,000 A.P.S., Inc. company guaranty 11 7/8s, 2006 548,625
250,000 Exide Corp. sr. notes 10s, 2005 260,625
240,000 Harvard Industries Inc. sr. notes 11 1/8s, 2005
(in default) + 84,000
--------------
1,309,500
Banks (1.7%)
- ------------------------------------------------------------------------------------------------------------
500,000 Advanta Corp. med. term notes Ser. C, 7.075s, 1999 491,220
85,000 Dime Capital Trust bank guaranty Ser. A, 9.33s, 2027 88,400
85,000 Greenpoint Capital Trust 144A company guaranty
9.1s, 2027 85,697
175,000 Investors Capital Trust I 144A company guaranty
9.77s, 2027 174,043
165,000 Ocwen Federal Bank sub. deb. 12s, 2005 177,994
100,000 Ocwen Financial Corp. notes 11 7/8s, 2003 107,250
150,000 Peoples Heritage Capital Trust company guaranty
Ser. B, 9.06s, 2027 150,680
150,000 Provident Capital Trust company guaranty 8.6s, 2026 145,095
85,000 Riggs Capital Trust 144A bonds 8 5/8s, 2026 82,339
125,000 Sovereign Capital Trust 144A company guaranty
9s, 2027 123,375
110,000 Webster Capital Trust I 144A bonds 9.36s, 2027 112,470
--------------
1,738,563
Broadcasting (4.4%)
- ------------------------------------------------------------------------------------------------------------
500,000 Argyle Television Corp. sr. sub. notes 9 3/4s, 2005 516,250
435,000 Capstar Broadcasting 144A sr. disc. notes
stepped-coupon zero % (12 3/4s, 2/1/02), 2009 ++ 265,350
1,150,000 Commodore Media, Inc. sr. sub. notes stepped-coupon
7 1/2s, (13 1/4s, 5/1/98), 2003 ++ 1,236,250
310,000 Globo Communicacoes 144A company guaranty
10 1/2s, 2006 (Brazil) 321,625
95,000 Jacor Communications, Inc. company guaranty
9 3/4s, 2006 98,800
200,000 Paxson Communications Corp. 144A sr. sub. notes
11 5/8s, 2002 215,500
100,000 Pegasus Media & Communications notes Ser. B,
12 1/2s, 2005 109,500
848,000 Petracom Holdings, Inc. notes stepped-coupon zero %
(17 1/2s, 8/1/98), 2003 ++ 814,080
145,000 Radio One Inc. 144A sr. sub. structured notes
stepped-coupon 7s, (12s, 5/1/00), 2004 ++ 127,963
105,000 RBS Participacoes S.A. 144A company guaranty
11s, 2007 (Brazil) 109,200
515,000 SFX Broadcasting, Inc. sr. sub. notes Ser. B,
10 3/4s, 2006 556,200
165,000 Spanish Broadcasting Systems 144A sr. notes
11s, 2004 172,425
70,000 TV Azteca Sa De Cv 144A sr. notes 10 1/2s, 2007
(Mexico) 71,819
--------------
4,614,962
Building Products (1.6%)
- ------------------------------------------------------------------------------------------------------------
175,000 Atrium Companies Inc. sub. notes 10 1/2s, 2006 180,906
60,000 Building Materials Corp. sr. notes Ser. B, 8 5/8s, 2006 60,000
335,000 Cemex S.A. 144A bonds 12 3/4s, 2006 (Mexico) 385,669
575,000 Inter-City Products sr. notes 9 3/4s, 2000 586,500
250,000 Nortek, Inc. sr. sub. notes 9 7/8s, 2004 252,500
250,000 Southdown Inc. sr. sub. notes Ser. B, 10s, 2006 268,125
--------------
1,733,700
Building and Construction (2.7%)
- ------------------------------------------------------------------------------------------------------------
70,000 Cia Latino Americana 144A company guaranty
11 5/8s, 2004 (Argentina) 72,800
85,000 Continental Homes Holding Corp. sr. notes 10s, 2006 88,400
750,000 NVR, Inc. sr. notes 11s, 2003 798,750
600,000 Presley Cos. sr. notes 12 1/2s, 2001 594,000
1,100,000 Terex Corp. sr. notes Ser. B, 13 1/4s, 2002 1,237,500
85,000 Webb Corp. sr. sub. notes 9 3/4s, 2008 82,663
--------------
2,874,113
Buses (0.6%)
- ------------------------------------------------------------------------------------------------------------
45,000 Atlantic Express, Inc. 144A company guaranty
10 3/4s, 2004 46,800
715,000 Consorcio/MCII Holdings secd. notes stepped-coupon
zero % (12s, 11/15/98), 2002 ++ 620,263
--------------
667,063
Business Services (1.1%)
- ------------------------------------------------------------------------------------------------------------
720,000 Corporate Express, Inc. sr. sub. notes Ser. B,
9 1/8s, 2004 712,800
100,000 Outsourcing Solutions, Inc. sr. sub. notes Ser. B,
11s, 2006 106,500
155,000 Pierce Leahy Corp. sr. sub. notes 11 1/8s, 2006 169,725
100,000 United Stationer Supply, Inc. sr. sub. notes
12 3/4s, 2005 111,500
105,000 Williams Scotsman Inc. 144A sr.notes 9 7/8s, 2007 106,050
--------------
1,206,575
Cable Television (5.3%)
- ------------------------------------------------------------------------------------------------------------
310,000 Adelphia Communications Corp. 144A sr. notes
9 7/8s, 2007 [2 DBL. DAGGERS] 296,050
1,020,364 Adelphia Communications Corp. sr. notes
9 1/2s, 2004 [2 DBL. DAGGERS] 928,531
200,000 Bell Cablemedia PLC sr. disc. notes zero %
stepped-coupon (11.95s, 7/15/99), 2004
(United Kingdom)++ 178,500
250,000 CF Cable TV, Inc. sr. notes 11 5/8s, 2005 (Canada) 285,000
500,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (11 3/4s, 12/15/00), 2005
(United Kingdom)++ 338,750
795,000 Diamond Cable Communications Co. 144A sr. disc.notes
stepped-coupon zero % (10 3/4s, 2/15/02),
2007 (United Kingdom) ++ 466,069
1,238,824 Falcon Holdings Group, Inc. sr. sub. notes 11s, 2003 [2 DBL. DAGGERS] 1,118,039
500,000 Lenfest Communications, Inc. sr. notes 8 3/8s, 2005 487,500
750,000 Marcus Cable Co. (L.P.) sr. sub. disc. notes
stepped-coupon zero % (13 1/2s, 8/1/99), 2004 ++ 645,000
90,000 TV Filme, Inc. 144A sr. notes 12 7/8s, 2004 (Brazil) 93,825
1,045,000 UIH Australia/Pacific, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (14s, 5/15/01), 2006 (Australia) ++ 593,038
190,000 Wireless One, Inc. sr. notes 13s, 2003 121,125
--------------
5,551,427
Cellular Communications (5.2%)
- ------------------------------------------------------------------------------------------------------------
300,000 Cencall Communications Corp. sr. disc. notes
stepped-coupon zero % (10 1/8s, 1/15/99),
2004 ++ 231,000
500,000 Comcast UK Cable, Ltd. deb. stepped-coupon zero %
(11.2s, 11/15/00), 2007 (Bermuda) ++ 371,250
250,000 Comunicacion Celular bonds stepped-coupon zero %
(13 1/8s, 11/15/00), 2003 (Colombia)++ 178,750
250,000 Dial Call Communications, Inc. sr. disc. notes
stepped-coupon zero % (12 1/4s, 4/15/99),
2004 ++ 202,500
200,000 Dobson Communications Corp. 144A sr. notes
11 3/4s, 2007 194,500
500,000 Heartland Wireless Communications, Inc. sr. notes
13s, 2003 175,000
1,000,000 Intercel, Inc. sr. disc. notes stepped-coupon zero %
(12s, 5/1/01), 2006 ++ 590,000
635,000 Millicom International Cellular S.A. sr. disc. notes
stepped-coupon zero % (13 1/2s, 6/1/00), 2006
(Luxembourg) ++ 465,138
510,000 NEXTEL Communications, Inc. sr. disc. notes
stepped-coupon zero % (9 3/4s, 2/15/99), 2004 ++ 387,600
990,000 NEXTEL Communications, Inc. sr. disc. notes
stepped-coupon zero % (11 1/2s, 9/1/98), 2003 ++ 851,400
285,000 Omnipoint Corp. sr. notes Ser. A, 11 5/8s, 2006 250,800
160,000 Omnipoint Corp. sr. notes 11 5/8s, 2006 140,800
1,000,000 Pricellular Wireless Corp. sr. disc. notes
stepped-coupon zero % (12 1/4s, 10/1/98),
2003 ++ 932,500
250,000 Pricellular Wireless Corp. sr. notes 10 3/4s, 2004 262,500
200,000 Sprint Spectrum L.P. sr. notes 11s, 2006 221,000
--------------
5,454,738
Chemicals (1.7%)
- ------------------------------------------------------------------------------------------------------------
600,000 Acetex Corp. sr. notes 9 3/4s, 2003 (Canada) 606,000
85,000 Freedom Chemicals, Inc. sr. sub. notes 10 5/8s, 2006 88,825
490,000 Harris Chemical Corp. sr. sub. notes 10 3/4s, 2003 506,538
300,000 ISP Holdings, Inc. sr. notes Ser. B, 9 3/4s, 2002 315,000
100,000 NL Industries, Inc. sr. notes stepped-coupon zero %
(13s, 10/15/98), 2005 ++ 94,750
100,000 NL Industries, Inc. sr. notes 11 3/4s, 2003 110,000
155,000 Sterling Chemicals Holdings sr. disc. notes
stepped-coupon zero % (13 1/2s, 8/15/01),
2008 ++ 101,331
--------------
1,822,444
Computer Equipment (0.4%)
- ------------------------------------------------------------------------------------------------------------
400,000 Computervision Corp. sr. sub. notes 11 3/8s, 1999 392,000
Computer Services (0.3%)
- ------------------------------------------------------------------------------------------------------------
285,000 Unisys Corp. sr. notes 11 3/4s, 2004 306,731
Conglomerates (0.3%)
- ------------------------------------------------------------------------------------------------------------
315,000 Axia, Inc. sr. sub. notes Ser. B, 11s, 2001 327,600
Consumer Durable Goods (0.5%)
- ------------------------------------------------------------------------------------------------------------
585,000 Coleman Escrow Corp. 144A (1st priority) sr. disc.
notes zero %, 2001 377,325
85,000 Coleman Escrow Corp. 144A (2nd priority) sr. disc.
notes zero %, 2001 51,425
275,000 Icon Fitness Corp. sr. disc. notes stepped-coupon
zero % (14s, 11/1/01), 2006 ++ 147,125
--------------
575,875
Consumer Non Durables (0.8%)
- ------------------------------------------------------------------------------------------------------------
85,000 Foamex L.P. 144A sr. sub. notes 9 7/8s, 2007 86,488
1,085,000 International Semi-Tech. Corp. sr. secd. disc. notes
stepped-coupon zero %(11 1/2s 8/15/00), 2003
(Canada) ++ 661,850
40,000 Windy Hill Pet Food Co. 144A sr.sub.notes
9 3/4s, 2007 40,400
--------------
788,738
Consumer Services (0.6%)
- ------------------------------------------------------------------------------------------------------------
522,000 Coinmach Corp. sr. notes Ser. B, 11 3/4s, 2005 576,810
Containers (1.9%)
- ------------------------------------------------------------------------------------------------------------
320,000 Consumers International 144A sr. notes 10 1/4s, 2005 340,000
215,000 Innova S De R.L. 144A sr. notes 12 7/8s, 2007
(Mexico) 218,225
500,000 Ivex Packaging Corp. sr. sub. notes 12 1/2s, 2002 542,500
120,000 Printpack, Inc. sr. notes Ser. B, 9 7/8s, 2004 124,200
485,000 Radnor Holdings Inc. sr.notes 10s, 2003 494,700
290,000 Vicap SA. 144A company guaranty 11 3/8s, 2007 301,600
--------------
2,021,225
Cosmetics (0.9%)
- ------------------------------------------------------------------------------------------------------------
80,000 French Fragrances, Inc. 144A sr. notes 10 3/8s, 2007 82,000
1,305,000 Revlon Worldwide Corp. 144A sr. disc. notes
zero %, 2001 879,244
--------------
961,244
Electric Utilities (5.1%)
- ------------------------------------------------------------------------------------------------------------
500,000 BVPS II Funding Corp. secd. lease oblig. bonds 9s, 2017 508,055
250,000 El Paso Electric Co. 1st mtge. Ser. E, 9.4s, 2011 269,588
599,000 First PV Funding deb. 10.15s, 2016 642,817
1,000,000 Long Island Lighting Co. deb. 9s, 2022 1,099,440
1,600,000 Midland Funding Corp. deb. Ser. A, 11 3/4s, 2005 1,828,752
500,000 Niagara Mohawk Power Corp. 1st mtge. 8 3/4s, 2022 495,835
542,530 Northeast Utilities System notes Ser. A, 8.58s, 2006 516,353
--------------
5,360,840
Electronic Components (0.6%)
- ------------------------------------------------------------------------------------------------------------
115,000 Celestica International Ltd. 144A sr. sub. notes
10 1/2s, 2006 (Canada) 123,338
135,597 Cirent Semiconductor sr. sub. notes 10.22s, 2002 [DBL. DAGGER] 128,293
136,153 Cirent Semiconductor sr. sub. notes
10.14s, 2004 [DBL. DAGGER] 136,153
100,000 HCC Industries, Inc. 144A sr. sub. notes 10 3/4s, 2007 104,375
85,000 Therma-Wave Inc. 144A sr. notes 10 5/8s, 2004 89,038
--------------
581,197
Energy-Related (0.9%)
- ------------------------------------------------------------------------------------------------------------
105,000 AES China Generating Co. sr. notes 10 1/8s,
2006 (China) 112,875
300,000 Calpine Corp. sr. notes 9 1/4s, 2004 306,000
545,000 Panda Global Energy Co. 144A sr. notes 12 1/2s, 2004 528,650
--------------
947,525
Entertainment (0.8%)
- ------------------------------------------------------------------------------------------------------------
250,000 Premier Parks, Inc. sr. notes 9 3/4s, 2007 259,375
250,000 Premier Parks, Inc. sr. notes Ser. A, 12s, 2003 277,500
250,000 Six Flags Corp. sr. sub. notes stepped-coupon zero %
(12 1/4s, 6/15/98), 2005 ++ 255,000
--------------
791,875
Environmental Control (0.4%)
- ------------------------------------------------------------------------------------------------------------
355,000 Allied Waste Industries, Inc. 144A sr. disc. notes
stepped-coupon zero % (11.3s, 6/1/02), 2007 ++ 214,775
195,000 Allied Waste Industries, Inc. 144A sr. sub. notes
10 1/4s, 2006 208,163
--------------
422,938
Financial Services (0.8%)
- ------------------------------------------------------------------------------------------------------------
325,000 Aames Financial Corp. sr. notes 9 1/8s, 2003 320,125
85,000 Colonial Capital I 144A company guaranty 8.92s, 2027 82,902
220,000 Contifinancial Corp. sr. notes 8 3/8s, 2003 222,200
90,000 Imperial Credit Industries, Inc. sr. notes 9 7/8s, 2007 89,100
150,000 Intertek Finance PLC 144A sr. sub. notes 10 1/4s, 2006
(United Kingdom) 155,625
--------------
869,952
Food and Beverages (0.9%)
- ------------------------------------------------------------------------------------------------------------
250,000 Canandaigua Wine Co. sr. sub. notes Ser. C,
8 3/4s, 2003 250,000
65,000 Del Monte Corp. 144A sr. sub. notes 12 1/4s, 2007 69,713
300,000 Doane Products Co. sr. notes 10 5/8s, 2006 319,500
250,000 Mafco, Inc. sr. sub. notes 11 7/8s, 2002 270,000
50,000 MBW Foods, Inc. 144A sr. sub. notes 9 7/8s, 2007 50,500
--------------
959,713
Food Chains (2.2%)
- ------------------------------------------------------------------------------------------------------------
900,000 Ralphs Grocery Co. sr. notes 10.45s, 2004 987,750
500,000 Southland Corp. 1st priority sr. sub. deb. 5s, 2003 420,625
500,000 Southland Corp. 2nd priority sr. sub. deb. 4 1/2s, 2004 392,500
400,000 Stater Brothers sr. notes 11s, 2001 430,500
100,000 Supermercados Norte 144A 10 7/8s, 2004
(Argentina) 103,250
--------------
2,334,625
Health Care (1.4%)
- ------------------------------------------------------------------------------------------------------------
90,000 Genesis Health Ventures, Inc. sr. sub. notes 9 1/4s, 2006 91,575
420,000 Integrated Health Services, Inc. 144A sr. sub. notes
9 1/2s, 2007 432,600
200,000 Merit Behavioral Care sr. sub. notes 11 1/2s, 2005 217,000
700,000 Paracelsus Healthcare sr. sub. notes 10s, 2006 696,500
--------------
1,437,675
Insurance (0.5%)
- ------------------------------------------------------------------------------------------------------------
500,000 Reliance Group Holdings, Inc. sr. sub. deb. 9 3/4s, 2003 522,500
Lodging (0.9%)
- ------------------------------------------------------------------------------------------------------------
150,000 Host Marriott Corp. sr. notes Ser. B, 9 1/2s, 2005 156,750
500,000 John Q Hammons Hotels, Inc. 1st mtge. 9 3/4s, 2005 524,375
250,000 Prime Hospitality Corp. sub. notes 9 3/4s, 2007 257,500
--------------
938,625
Medical Supplies and Devices (1.9%)
- ------------------------------------------------------------------------------------------------------------
500,000 Dade International, Inc. sr. sub. notes Ser. B,
11 1/8s, 2006 558,750
1,000,000 Graphic Controls Corp. sr. sub. notes Ser. A, 12s, 2005 1,110,000
350,000 Wright Medical Technology, Inc. sr. secd. notes Ser. B,
10 3/4s, 2000 354,375
--------------
2,023,125
Metals and Mining (0.5%)
- ------------------------------------------------------------------------------------------------------------
70,000 Acindar Industria Argentina de Aceros S.A. bonds
11 1/4s, 2004 (Argentina) 72,975
170,000 Continental Global Group 144A sr. notes Ser. A,
11s, 2007 177,650
115,000 Echo Bay Mines jr. sub. deb. 11s, 2027 (Canada) 116,438
150,000 Royal Oak Mines, Inc. company guaranty Ser. B,
11s, 2006 (Canada) 149,625
35,000 Wells Aluminum 144A notes 10 1/8s, 2005 35,525
--------------
552,213
Motion Picture Distribution (0.9%)
- ------------------------------------------------------------------------------------------------------------
280,000 AMC Entertainment, Inc. 144A sr. sub. notes
9 1/2s, 2009 284,550
340,500 Cinemark Mexico notes Ser. B, 13s, 2003 [2 DBL. DAGGERS] 328,583
23,000 Cinemark Mexico notes Ser. D, 13s, 2003 [2 DBL. DAGGERS] 22,195
340,000 Cinemark USA, Inc. sr. sub. notes 9 5/8s, 2008 345,100
--------------
980,428
Networking (0.8%)
- ------------------------------------------------------------------------------------------------------------
1,315,000 CellNet Data Systems, Inc. sr. disc. notes stepped-coupon
Ser. B, zero % (13s, 6/15/00), 2005 ++ 831,738
Oil and Gas (4.8%)
- ------------------------------------------------------------------------------------------------------------
145,000 Abraxas Petroleum Corp. 144A sr. notes Ser. B,
11 1/2s, 2004 158,050
250,000 Chesapeake Energy Corp. sr. notes 9 1/8s, 2006 256,875
110,000 Cliffs Drilling Co. company guaranty Ser. B,
10 1/4s, 2003 115,500
500,000 Flores & Rucks, Inc. sr. notes 13 1/2s, 2004 592,500
100,000 Flores & Rucks, Inc. sr. sub. notes 9 3/4s, 2006 105,000
65,000 Kelley Oil & Gas Corp. sr. sub. notes Ser. B,
10 3/8s, 2006 67,275
85,000 Magnum Hunter Resources Inc. 144A sr. notes
10s, 2007 85,213
250,000 Maxus Energy Corp. deb. 11 1/4s, 2013 258,750
100,000 Maxus Energy Corp. global notes 9 7/8s, 2002 104,000
750,000 Maxus Energy Corp. notes 9 1/2s, 2003 776,250
120,000 Mesa Operating Co. company guaranty zero %
(11 5/8s 7/1/01), 2006 ++ 90,000
155,000 Parker Drilling Corp. sr. notes Ser. B, 9 3/4s, 2006 160,813
40,000 Pogo Producing Co. 144A notes 8 3/4s, 2007 39,900
125,000 Pride Petroleum Services, Inc. 9 3/8s, 2007 130,313
85,000 Texas Petrochemical Corp. sr. sub. notes 11 1/8s, 2006 90,100
165,000 Transamerican Refining 144A 15s, 1998 165,000
700,000 Transamerican Refining Corp. 1st mtge. stepped-coupon
zero % (18.5s 2/15/98), 2002 ++ 687,750
656,000 TransTexas Gas Corp. sr. disc. notes 144A stepped-coupon
zero % (13 1/4s, 12/16/01), 2003 ++ 426,400
600,000 TransTexas Gas Corp. sr. secd. notes 11 1/2s, 2002 669,000
85,000 Wiser Oil Co. 144A sr. sub. notes 9 1/2s, 2007 85,000
--------------
5,063,689
Paging (2.1%)
- ------------------------------------------------------------------------------------------------------------
500,000 Metrocall, Inc. sr. sub. notes 10 3/8s, 2007 448,750
750,000 Mobile Telecommunications Tech. sr. notes
13 1/2s, 2002 772,500
300,000 Pagemart Nationwide, Inc. sr. disc. notes stepped-coupon
zero % (15s, 2/1/00), 2005 ++ 219,000
700,000 Pagemart Nationwide, Inc. sr. disc. notes stepped-coupon
zero % (12 1/4s, 11/1/98), 2003 ++ 596,750
200,000 Pronet, Inc. sr. sub. notes 11 7/8s, 2005 192,000
--------------
2,229,000
Paper and Forest Products (2.2%)
- ------------------------------------------------------------------------------------------------------------
200,000 APP International Finance Co. notes 11 3/4s, 2005
(Netherlands) 215,500
100,000 Domtar, Inc. deb. 9 1/2s, 2016 (Canada) 99,000
520,000 Florida Coast Paper LLC 1st mtge. Ser. B,
12 3/4s, 2003 525,200
300,000 Gaylord Container Corp. sr. sub. disc. deb.
12 3/4s, 2005 328,500
620,000 Repap New Brunswick sr. notes 10 5/8s, 2005
(Canada) 579,700
330,000 Riverwood International Corp. company guaranty
10 7/8s, 2008 300,300
250,000 Stone Container Corp. sr. notes 12.58, 2016 268,750
--------------
2,316,950
Publishing (0.4%)
- ------------------------------------------------------------------------------------------------------------
300,000 Affinity Group Holdings 144A sr. notes 11s, 2007 313,500
65,000 Sun Media Corp. 144A sr. sub. notes 9 1/2s, 2007
(Canada) 64,838
85,000 Von Hoffman Press Inc. 144A sr. sub. notes
10 3/8s, 2007 89,250
--------------
467,588
Real Estate (0.2%)
- ------------------------------------------------------------------------------------------------------------
250,000 Tanger Properties L.P. Gtd. notes 8 3/4s, 2001 (R) 255,445
Recreation and Gaming (5.7%)
- ------------------------------------------------------------------------------------------------------------
155,000 Alliance Gaming Corp. 12 7/8s, 2003 167,013
550,000 Arizona Charlies Corp. 1st mtge. Ser. B, 12s, 2000 313,500
250,000 Aztar Corp. sr. sub. notes 13 3/4s, 2004 284,375
280,000 Casino America, Inc. sr. notes 12 1/2s, 2003 284,900
100,000 Casino Magic Finance Corp. 1st mtge. 11 1/2s, 2001 83,500
80,000 Casino Magic of Louisiana Corp. 144A 1st mtge.
13s, 2003 67,200
500,000 Coast Hotels & Casinos, Inc. 144A company guaranty
Ser. B, 13s, 2002 555,000
321,183 Elsinore Corp. 144A exch. 1st mortgage 11 1/2s, 2000 308,336
355,000 Grand Casinos, Inc. 1st mtge. 10 1/8s, 2003 368,313
120,000 Harveys Casino Resorts sr. sub. notes 10 5/8s, 2006 126,600
700,000 Hollywood Casino Corp. sr. notes 12 3/4s, 2003 738,500
950,000 Lady Luck Gaming 1st mtge. 11 7/8s, 2001 951,188
357,000 Louisiana Casino Cruises Corp. 1st mtge.
11 1/2s, 1998 364,140
500,000 Mohegan Tribal Gaming sr. secd. notes Ser. B,
13 1/2s, 2002 657,500
425,000 PRT Funding Corp. sr. notes 11 5/8s, 2004 331,500
432,000 Trump Castle notes 11 1/2s, 2000 432,000
--------------
6,033,565
Restaurants (0.3%)
- ------------------------------------------------------------------------------------------------------------
70,000 AmeriKing, Inc. sr. notes 10 3/4s, 2006 73,500
250,000 FRD Acquisition Co. sr. notes Ser. B, 12 1/2s, 2004 265,000
--------------
338,500
Retail (1.7%)
- ------------------------------------------------------------------------------------------------------------
80,000 Guitar Center Management Co. 144A sr. notes
11s, 2006 86,800
850,000 K mart Corp. med. term notes 7.85s, 2002 817,981
275,000 Loehmann's, Inc. sr. notes 11 7/8s, 2003 284,625
600,000 Mothers Work, Inc. sr. notes 12 5/8s, 2005 618,000
--------------
1,807,406
Satellite Services (1.0%)
- ------------------------------------------------------------------------------------------------------------
260,000 Echostar Communications Corp. stepped-coupon
zero % (12 7/8s, 6/1/99), 2004 ++ 214,500
630,000 Orbcomm Global Capital Corp. sr. notes Ser. B,
14s, 2004 658,350
165,000 TCI Satellite Entertainment 144A sr. sub. notes
10 7/8s, 2007 166,650
--------------
1,039,500
Semiconductors (0.3%)
- ------------------------------------------------------------------------------------------------------------
175,000 Fairchild Semiconductor Corp. 144A sr. sub. notes
11.74s, 2008 [2 DBL. DAGGERS] 175,000
160,000 Fairchild Semiconductor Corp. 144A sr. sub. notes
10 1/8s, 2007 170,400
--------------
345,400
Specialty Consumer Products (0.3%)
- ------------------------------------------------------------------------------------------------------------
295,000 Sassco Fashions Ltd. 144A notes 12 3/4s, 1999 ## 306,800
Steel (1.2%)
- ------------------------------------------------------------------------------------------------------------
170,000 AK Steel Corp. sr. notes 9 1/8s, 2006 173,400
185,000 Altos Hornos de Mexico 144A bonds 11 3/8s,
2002 (Mexico) 194,019
900,000 Ispat Mexicana, S.A. 144A bonds 10 3/8s, 2001
(Mexico) 936,000
--------------
1,303,419
Telecommunications (5.8%)
- ------------------------------------------------------------------------------------------------------------
520,000 American Communications Services, Inc. sr. disc. notes
stepped-coupon zero % (12 3/4s, 4/1/01), 2006 ++ 249,600
400,000 Brooks Fiber Properties, Inc. sr. disc. notes
stepped-coupon zero % (10 7/8s, 3/1/01), 2006 ++ 272,000
280,000 Brooks Fiber Properties, Inc. 144A sr. notes 10s, 2007 282,100
85,000 Consorcio Ecuatoriano 144A notes 14s, 2002
(Ecuador) 89,038
1,000,000 GST Telecommunications,Inc. company guaranty
stepped-coupon zero % (13 7/8s, 12/15/00),
2005 ++ 620,000
270,000 Hyperion Telecommunication Corp. sr. disc. notes
stepped-coupon Ser. B, zero % (13s, 4/15/01),
2003 ++ 143,100
1,370,000 ICG Holdings, Inc. sr. disc. notes stepped-coupon
zero % (13 1/2s, 9/15/00), 2005 ++ 972,700
750,000 Intermedia Communications, Inc. sr. disc. notes
stepped-coupon zero % (12 1/2s, 5/15/01),
2006 ++ 517,500
450,000 Intermedia Communications, Inc. sr. notes Ser. B,
13 1/2s, 2005 508,500
1,200,000 International Cabletel, Inc. sr. notes stepped-coupon
Ser. B, zero % (11 1/2s, 2/01/01), 2006 ++ 816,000
430,000 International Cabletel, Inc. 144A sr. notes 10s, 2007 432,150
200,000 International Wireless Communications, Inc. sr. disc.
notes stepped-coupon zero %, 2001 109,000
220,000 ITC Deltacom, Inc. 144A sr. notes 11s, 2007 226,600
340,000 McLeod, Inc. 144A sr. disc. notes stepped-coupon
zero % (10 1/2s, 3/01/02), 2007 ++ 202,300
250,000 Teleport Communications Group Inc. sr. disc. notes
stepped-coupon zero % (11 1/8s, 7/1/01), 2007 ++ 175,625
550,000 Winstar Communications, Inc. sr. disc. notes
stepped-coupon zero % (14s, 10/15/00), 2005 ++ 310,750
170,000 Winstar Equipment Corp. 144A company guaranty
12 1/2s, 2004 165,750
--------------
6,092,713
Textiles (0.4%)
- ------------------------------------------------------------------------------------------------------------
85,000 Glenoit Corp. 144A sr. sub. notes 11s, 2007 87,975
330,000 Polysindo International Finance company guaranty
11 3/8s, 2006 (Indonesia) 358,875
--------------
446,850
Utilities (0.2%)
- ------------------------------------------------------------------------------------------------------------
200,000 CMS Energy Corp. sr. notes 8 1/8s, 2002 200,714
--------------
Total Corporate Bonds and Notes
(cost $81,452,750) $ 84,921,230
PREFERRED STOCKS (5.6%)*
NUMBER OF SHARES VALUE
Banks (1.6%)
- ------------------------------------------------------------------------------------------------------------
11,000 California Federated Bankcorp Inc. Ser. B, $11.50 pfd. $ 1,226,500
2,000 California Federal Bank Ser. B, $10.625 exch. pfd. 217,500
6,240 Chevy Chase Capital Corp. Ser. A, $5.188 pfd. 307,320
--------------
1,751,320
Broadcasting (0.8%)
- ------------------------------------------------------------------------------------------------------------
614 American Radio Systems Corp. 144A, $11.375,
cum. pfd. [2 DBL. DAGGERS] 65,084
2,100 Chancellor Radio Broadcasting 144A, $12.00, pfd. 227,850
3,240 SFX Broadcasting, Inc. Ser. E, $12.625, cum. pfd. [2 DBL. DAGGERS] 349,110
215 Spanish Broadcasting Systems 144A, 14.25%,
cum. pfd. [2 DBL. DAGGERS] 191,350
--------------
833,394
Cable Television (0.9%)
- ------------------------------------------------------------------------------------------------------------
9,872 Cablevision Systems Corp. Ser. M, $11.125, dep. shs.
cum. pfd. [2 DBL. DAGGERS] 932,904
Electric Utilities (0.6%)
- ------------------------------------------------------------------------------------------------------------
5,733 El Paso Electric Co., $11.40, cum. pfd. [2 DBL. DAGGERS] 639,230
Gaming (0.3%)
- ------------------------------------------------------------------------------------------------------------
3,228 Alliance Gaming Corp. Ser. B, $15.00, pfd. [2 DBL. DAGGERS] 326,835
Health Care (0.3%)
- ------------------------------------------------------------------------------------------------------------
260 Fresenius Medical Care AG Ser. D, $9.00 pfd. (Germany) 266,500
Restaurants (0.1%)
- ------------------------------------------------------------------------------------------------------------
4,000 AmeriKing, Inc. $3.25, cum. pfd. [2 DBL. DAGGERS] 112,000
Telecommunications (1.0%)
- ------------------------------------------------------------------------------------------------------------
27 Intermedia Communications, Inc. 144A, 13.50%, pfd. [2 DBL. DAGGERS] 280,800
5,570 Nextlink Communications, Inc. Ser. 144A Ser. 144A,
$7.00, cum. pfd. 278,500
472 NTL Inc. 144A 13.00%, pfd. [2 DBL. DAGGERS] 476,720
--------------
1,036,020
--------------
Total Preferred Stocks (cost $5,640,941) $ 5,898,203
UNITS (5.0%) *
NUMBER OF UNITS VALUE
- ------------------------------------------------------------------------------------------------------------
150 Advanced Radio Telecommunications units 14s, 2007 $ 157,500
40 Anvil Holdings 144A units 13s, 2009 [2 DBL. DAGGERS] 39,800
550 Australis Media, Ltd. units stepped-coupon zero %
(15 3/4s, 5/15/00), 2003 (Australia) ++ 341,000
70 Celcaribe S.A. 144A units stepped-coupon zero %
(13 1/2s, 3/15/98), 2004 (Colombia) ++ 966,000
200 Colt Telecommunications Group PLC units
stepped-coupon zero % (12s, 12/15/01), 2006
(United Kingdom) ++ 127,000
190 Esat Holdings Ltd. 144A units stepped-coupon
zero % (12 1/2s, 2/1/02), 2007 (Ireland) ++ 113,525
1,050 Fitzgerald Gaming Co. units 13s, 2002 819,000
245 Globalstar L.P. Capital units 11 3/8s, 2004 248,063
500 Health-O-Meter Products, Inc. units 13s, 2002 540,000
815 McCaw International Ltd. 144A units stepped-coupon
zero % (13s, 4/15/02), 2007 ++ 393,238
110 Paging Net Brazil Holding Co. LLC 144A units sr. notes
13 1/2s, 2005 (Brazil) 110,000
380 Real Time Data 144A units stepped-coupon zero %
(13 1/2s, 8/15/01), 2006 ++ 210,900
170 Stone Container Corp. units sr. sub. 12 1/4s, 2002 173,825
500 Urohealth Systems, Inc. 144A units 12 1/2s, 2004 520,000
300 Wireless One Inc. units stepped-coupon zero %
(13 1/2s,8/1/01 ), 2006 ++ 81,000
2,950 XCL Ltd Unit Cum. pfd., 9.50% 250,750
220 XCL Ltd units sr. sec. notes, 13 1/2s, 2004 222,200
--------------
Total Units (cost $5,299,815) $ 5,313,801
COMMON STOCKS (2.1%) *
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
100 AmeriKing, Inc. + $ 5,000
1,800 Axia Holding Corp. 144A + 90,000
10,124 Chesapeake Energy Corp. + 143,002
10,504 Elsinore Corp. + 998
4,500 Exide Corp. 98,438
3,333 Finlay Enterprises, Inc. 54,995
10,000 NEXTEL Communications, Inc. Class A + 147,500
303 PMI Holdings Corp. + 96,960
244 Premium Holdings L.P. 144A + 1,222
57,579 PSF Holdings LLC Class A 1,525,844
12,750 Specialty Foods Corp. + 6,375
4,400 Terex Corp. Rights expiration date 5/15/00 + 47,300
--------------
Total Common Stocks (cost $2,477,369) $ 2,217,634
CONVERTIBLE BONDS AND NOTES (1.8%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 450,000 Argosy Gaming cv. sub. notes 12s, 2001 $ 325,125
275,000 Corp. Express Inc., cv. notes 4 1/2s, 2000 240,625
500,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 305,000
140,000 GST Telecommunications, Inc. cv. sr. disc. notes
stepped-coupon zero % (13 7/8s, 15/15/00),
2005 ++ 88,200
200,000 Integrated Device Technology, Inc. cv. sub. notes
5 1/2s, 2002 179,000
100,000 National Semiconductor Corp. cv. deb. 6 1/2s, 2002 102,500
150,000 VLSI Technology, Inc. cv. sub. notes 8 1/4s, 2005 148,125
800,000 Winstar Communications. Inc. cv sr. disc. notes stepped-coupon
zero %, (14s, 10/15/00) 2005 488,000
--------------
Total Convertible Bonds and Notes
(cost $1,652,138) $ 1,876,575
FOREIGN GOVERNMENT BONDS AND NOTES (0.5%) * (cost $498,525)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
USD 920,000 Bank of Foreign Economic Affairs of Russia
(Vnesheconombank) principal loan floating
rate bonds LIBOR + 13/16, 2020 +##[2 DBL. DAGGERS] $ 573,850
WARRANTS (0.5%) EXPIRATION
NUMBER OF WARRANTS+ DATE VALUE
- ------------------------------------------------------------------------------------------------------------
25,000 Becker Gaming Corp. 144A 11/15/00 $ 250
4,550 Capital Gaming International, Inc. 2/1/99 182
5,260 Cellnet Data Systems, Inc. 6/15/00 73,640
250 Comunicacion Cellular 144A (Colombia) 11/15/20 18,750
500 Fitzgerald Gaming Co. 144A 3/15/99 50
6,000 Heartland Wireless Communications 144A 4/15/00 60
270 Hyperion Telecommunications 144A 4/15/01 8,100
4,191 Intelcom Group 144A 10/15/05 54,483
450 Intermedia Communications, Inc. 144A 6/1/00 12,375
200 International Wireless Communications
Holdings 144A 8/15/01 2
492 Louisiana Casino Cruises, Inc. 144A 12/1/98 24,600
500 NEXTEL Communications Inc. 1/1/99 5
5,380 Nextlink Communications, Inc. 144A 2/1/09 54
6,900 Pagemart, Inc. 144A 12/31/03 44,850
600 Petracom Holdings, Inc. 144A 8/1/05 4,275
3,710 SDW Holdings Corp. 144A 12/15/06 48,230
215 Spanish Broadcasting Systems 144A 6/30/99 23,865
155 Sterling Chemicals Holdings 8/15/08 5,425
35,000 Transamerican Refining Corp. 2/15/02 157,500
4,560 UCC Investor Holding, Inc. (acquired 3/16/94,
cost $59,280) [DBL. DAGGERS] 144A 10/30/99 57,000
101 Wright Medical Technology, Inc. 144A 6/30/03 11,070
--------------
Total Warrants (cost $545,433) $ 544,766
CONVERTIBLE PREFERRED STOCKS (0.5%) * (cost $601,250)
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
10,000 Granite Broadcasting, $1.938, cv. pfd. $ 520,000
SHORT-TERM INVESTMENTS (3.8%) * (cost $3,976,219)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$3,975,000 Interest in $386,564,000 joint repurchase agreement
dated May 30, 1997 with UBS Securities due June 2, 1997
with respect to various U.S. Treasury obligations --
maturity value of $3,976,829 for an effective yield
of 5.52% $ 3,976,219
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $102,144,440) *** $ 105,842,278
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $105,689,707.
*** The aggregate identified cost on a tax basis is $102,147,497, resulting in gross unrealized appreciation
and depreciation of $6,003,655 and $2,308,874, respectively, or net unrealized appreciation of $3,694,781.
+ Non-income-producing security.
++ The interest or dividend rate and date shown parenthetically represent the new interest or
dividend rate to be paid and the date the fund will begin receiving interest or dividend income
at this rate.
[DBL. DAGGER] Restricted, excluding 144A securities, as to public resale. The total market value of
restricted securities held at May 31, 1997 was $321,446 or less than 1.0% of net assets.
[2 DBL. DAGGERS] Income may be received in cash or additional securities at the discretion of the issuer.
## When-issued securities (Note 1).
(R) Real Estate Investment Trust.
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.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
May 31, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $102,144,440) (Note 1) $105,842,278
- ---------------------------------------------------------------------------------------------------
Cash 856,952
- ---------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 1,866,839
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 370,909
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 6,360
- ---------------------------------------------------------------------------------------------------
Total assets 108,943,338
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 824,875
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 2,174,551
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 195,026
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 3,026
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 5,786
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,242
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 49,125
- ---------------------------------------------------------------------------------------------------
Total liabilities 3,253,631
- ---------------------------------------------------------------------------------------------------
Net assets $105,689,707
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Note 1) $105,735,101
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 149,955
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (3,893,187)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 3,697,838
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $105,689,707
Computation of net asset value
- ---------------------------------------------------------------------------------------------------
Net asset value per share ($105,689,707 divided by
7,507,107 shares) $14.08
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended May 31, 1997
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Interest income $10,572,703
- --------------------------------------------------------------------------------------------------
Dividends 557,743
- --------------------------------------------------------------------------------------------------
Total investment income 11,130,446
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 778,903
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 145,687
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 16,932
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,436
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 5,977
- --------------------------------------------------------------------------------------------------
Reports to shareholders 34,005
- --------------------------------------------------------------------------------------------------
Registration fees 250
- --------------------------------------------------------------------------------------------------
Auditing 30,740
- --------------------------------------------------------------------------------------------------
Legal 23,152
- --------------------------------------------------------------------------------------------------
Postage 26,762
- --------------------------------------------------------------------------------------------------
Exchange listing fees 14,823
- --------------------------------------------------------------------------------------------------
Other 15,532
- --------------------------------------------------------------------------------------------------
Total expenses 1,100,199
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (43,034)
- --------------------------------------------------------------------------------------------------
Net expenses 1,057,165
- --------------------------------------------------------------------------------------------------
Net investment income 10,073,281
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 2,080,249
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 84,513
- --------------------------------------------------------------------------------------------------
Net gain on investments 2,164,762
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $12,238,043
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended May 31
------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 10,073,281 $ 9,564,010
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 2,080,249 3,310,311
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 84,513 2,599,237
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 12,238,043 15,473,558
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (10,013,933) (9,771,229)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (137,769)
- ----------------------------------------------------------------------------------------------------------------------
Total increase net assets 2,224,110 5,564,560
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 103,465,597 97,901,037
- ----------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income
and distributions in excess of net investment income
of $149,955 and $207,835, respectively) $105,689,707 $103,465,597
Number of fund shares
- ----------------------------------------------------------------------------------------------------------------------
Shares outstanding at beginning and end of year 7,507,107 7,507,107
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share June 25, 1993+
operating performance Year ended May 31 to May 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $13.78 $13.04 $13.40 $14.01 (c)
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.34 1.27 1.32 1.23
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .29 .79 (.36) (.59)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.63 2.06 .96 .64
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (1.33) (1.30) (1.32) (1.22)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- (.02) -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.33) (1.32) (1.32) (1.25)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.08 $13.78 $13.04 $13.40
- ------------------------------------------------------------------------------------------------------------------------------------
Market value,
end of period $14.375 $13.750 $13.125 $13.375
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at market value (%)(a) 14.88 15.30 9.20 (2.52)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $105,690 $103,466 $97,901 $100,615
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.06 1.04 1.00 1.00 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 9.70 9.49 10.32 8.82 *
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 62.57 74.70 103.91 80.21 *
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended May 31, 1996, and thereafter,
includes amounts paid through expense offset arangements. Prior period ratios exclude
these amounts. (Note 2)
(c) Represents initial net asset value of $14.07 less offering expenses of approximately $0.06.
</TABLE>
Notes to financial statements
May 31, 1997
Note 1
Significant accounting policies
Putnam Managed High Yield Trust (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
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. 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 certain 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 or dealers, 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 and certain other accounts managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.. 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
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. Dividend income
is recorded on the ex-dividend date. Discounts on zero coupon bonds, original
issue discounts, stepped-coupon bonds and payment in kind bonds are accreted
according to the effective yield method. Securities purchased or sold on a
when-issued basis may be settled a month or more after the trade date;
interest income is accrued based on the terms of the security. Losses may
arise due to changes in market value of the underlying securities or if the
counterparty does not perform under the contract.
E) 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, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
At May 31, 1997, the fund had a capital loss carryover of approximately
$3,122,000 available to offset future capital gains, if any. The amount of the
carryover and the expiration dates are:
Loss Carryover Expiration
-------------- ------------
$1,876,000 May 31, 2003
$1,246,000 May 31, 2004
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. These differences include treatment of losses
on wash sale transactions, post-October loss deferrals, organization expenses,
amortization of bond premium, market discount, interest on payment-in-kind
securities and capital loss carryover. 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. For the
year ended May 31, 1997, the fund reclassified $298,442 to increase
undistributed net investment income and $315,964 to decrease paid-in-capital,
with a decrease to accumulated net realized loss on investments of $17,522.
The calculation of net investment income per share in the financial highlights
table excludes these adjustments.
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.
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 net assets of the fund. Such
fee is based on the following annual rates: 0.75% of the first $500 million of
average 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 Fiduciary
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 year ended May 31, 1997, fund expenses were reduced by $43,034 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 a portion of 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 $630 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 has 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 certain Putnam funds until distribution in accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
Note 3
Purchase and sales of securities
During the year ended May 31, 1997, purchases and sales of investment
securities other than short-term investments aggregated $63,524,857 and
$69,250,388, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost basis.
Federal tax information
(Unaudited)
The fund has designated 5.42% of the distributions from net investment income
as qualifying for the dividends received deduction for corporations.
The Form 1099 you receive in January 1998 will show the tax status of all
distributions paid to your account in calendar 1997.
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 F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
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
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William J. Curtin
Vice President
Tim Ferguson
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.
Putnam Investments
[LOGO OMITTED]
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
34406-590 7/97
