-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AuKfijNAwp9QK1L/1JmbomTyYqk4S2v0yXfAc1HqKGPVk19W7rVOnGIUm7DF2BSq /xYfp8J0kSkc+3OMAfwdtQ== 0000928816-03-000852.txt : 20031223 0000928816-03-000852.hdr.sgml : 20031223 20031223164642 ACCESSION NUMBER: 0000928816-03-000852 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031031 FILED AS OF DATE: 20031223 EFFECTIVENESS DATE: 20031223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM MASTER INCOME TRUST CENTRAL INDEX KEY: 0000824463 IRS NUMBER: 042993219 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05375 FILM NUMBER: 031071586 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921562 N-CSR 1 mit1.txt PUTNAM MASTER INCOME TRUST Putnam Master Income Trust Item 1. Report to Stockholders: - ------------------------------- The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: ANNUAL REPORT ON PERFORMANCE AND OUTLOOK 10-31-03 [GRAPHIC OMITTED: WATCH] [SCALE LOGO OMITTED] From the Trustees [GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III] John A. Hill and George Putnam, III Dear Fellow Shareholder: You may have read recent press coverage regarding investigations involving Putnam Investments. Last month all Putnam shareholders were sent a letter detailing the steps being taken by Putnam to address the issues raised by federal and state regulators. Since then, a number of remedial actions, some of which were discussed in last month's letter, are being instituted under the terms of an order from the Securities and Exchange Commission (SEC). These include stringent employee trading restrictions, enhanced compliance standards and systems, new redemption fees for certain fund shares held less than three months, and a process for making full monetary restitution for any losses to fund shareholders. This process will be directed by an independent third party approved by the SEC and by Putnam's Board of Trustees. The Board is also continuing its own independent investigation of these issues and when complete a report will be issued detailing the additional steps being taken to make sure that nothing like this happens at Putnam again. We believe that the new senior management team at Putnam is fully committed to re-establishing the firm as a model for the highest ethical standards in the mutual fund industry. Our Board is committed to working with Putnam's management to ensure that everything possible is done to restore your full confidence in the Putnam organization. We are pleased to report that Putnam Master Income Trust delivered positive results for the fiscal year ended October 31, 2003, strongly outperforming its primary benchmark at net asset value and only slightly lagging its Lipper peer group average (at NAV), which was mainly due to an underweighting in emerging-market securities. In the following report, you will find the details of these results as well as a full discussion of fund performance and strategy during the period. The management team also offers its view of prospects for the coming fiscal year. Respectfully yours, /S/ JOHN A. HILL /S/ GEORGE PUTNAM, III John A. Hill George Putnam, III Chairman of the Trustees President of the Funds December 17, 2003 Report from Fund Management Fund highlights * During the fiscal year ended October 31, 2003, Putnam Master Income Trust had a total return at net asset value (NAV) of 21.84%. The fund's return at market price was 15.48%. * Because of its inclusion of higher-yielding securities, the fund outperformed its primary benchmark, the Lehman Government Credit Index, which returned 6.17%, and another comparative index, the Citigroup Non-U.S. World Government Bond Index, which returned 17.75%. The fund lagged a third comparative index, the JP Morgan Global High Yield Index, which returned 30.49% during the period. * Primarily as a result of its underweighting of emerging-market securities, the fund underperformed the average return of 22.33% for the Lipper Flexible Income Funds (closed-end) category. * The fund's lower performance at market price was primarily the result of a reduction in the dividend, which occurred in March 2003. See page 5 for details. * See the Performance Summary beginning on page 8 for complete fund performance, comparative performance, and Lipper data. Performance commentary Starting in mid October 2002, higher-yielding, non-Treasury bonds began to significantly outperform Treasuries. The fund was invested predominantly in such bonds -- corporate investment-grade and high-yield bonds, emerging-market bonds, and mortgage-backed securities. As bonds from these sectors appreciated, the credit spread, or difference in yield between Treasuries and these securities, narrowed, bolstering the fund's returns. As a result, the fund strongly outperformed its benchmark index, which is composed of lower-yielding, higher-quality bonds (including Treasuries). The fund's underperformance of its Lipper category average reflects our lower weighting in emerging-market securities, discussed further on page 3. The significantly lower return at market price reflects a reduction in the fund's dividend, which caused investor demand for the fund -- a key factor in market price performance -- to decline. FUND PROFILE Putnam Master Income Trust seeks high current income, consistent with preservation of capital, by investing in a portfolio diversified among U.S. investment-grade, corporate high-yield, and international fixed-income securities. The fund may be appropriate for investors seeking high current income, asset class diversification, or both. Market overview The beginning of this fund's fiscal year in November 2002 marked a seminal change in the global credit markets. Hints of an economic recovery, a passing of the September 11 anniversary, and an improvement in the stock market all contributed to a sudden improvement in the direction of credit spreads. As a result, investment-grade corporate bonds, high-yield corporate bonds, and emerging-market bonds all significantly outperformed U.S. Treasuries over the course of the reporting period. In July and August of 2003, Treasury prices declined sharply after rallying in May and the first half of June. Having reached a historical low of 3.11% on June 13, the benchmark 10-year Treasury yield -- which moves in the opposite direction to its price -- then increased by over one and a half percentage points by the beginning of September -- an extremely large increase for a 10-week period. While this event shook all fixed-income sectors, higher-yielding bonds with lower sensitivity to interest-rate changes (which made up much of the fund's portfolio) fared much better than Treasuries. Mortgage-backed securities performed well for much of the year, but their performance suffered somewhat during the summer because of excessive refinancing. When homeowners refinance their mortgages at lower rates, they "prepay" their existing mortgages, hurting investors who have been receiving these higher levels of interest income. Emerging markets generally fared well, with above-average returns that we attribute to higher commodity prices, especially oil prices. The dollar continued to move lower relative to other major currencies, including the yen and the euro, as low interest rates and the perceived threat of deflation in the United States caused global investors to seek higher returns in other countries. - ------------------------------------------------------------------------------- MARKET SECTOR PERFORMANCE 12 MONTHS ENDED 10/31/03 - ------------------------------------------------------------------------------- Bonds - ------------------------------------------------------------------------------- Lehman Government Credit Index (U.S. government and corporate bonds) 6.17% - ------------------------------------------------------------------------------- Lehman Aggregate Bond Index (broad bond market) 4.90% - ------------------------------------------------------------------------------- Citigroup Non-U.S. World Government Bond Index (international government bonds) 17.75% - ------------------------------------------------------------------------------- JP Morgan Global High Yield Index (global high-yield corporate bonds) 30.49% - ------------------------------------------------------------------------------- Equities - ------------------------------------------------------------------------------- S&P 500 Index (broad stock market) 20.80% - ------------------------------------------------------------------------------- Citigroup World Ex U.S. Primary Markets Growth Index (international growth stocks) 24.43% - ------------------------------------------------------------------------------- Russell 2000 Index (stocks of small and midsize companies) 43.37% - ------------------------------------------------------------------------------- These indexes provide an overview of performance in different market sectors for the 12 months ended 10/31/03. - ------------------------------------------------------------------------------- Strategy overview Several of the fund's areas of emphasis -- including high-yield bonds, mortgage-backed securities (MBSs), and international bonds -- performed well during the period. Our significant allocation to high-yield corporate bonds, which increased during the second half of the period, was particularly helpful, as these bonds were among the strongest-performing fixed-income securities over the period. As yield spreads narrowed toward the end of the period, we reduced this allocation, but still maintained a large high-yield weighting. We sought to keep the fund's exposure to another higher-risk area of the portfolio - -- emerging-market securities -- low (relative to the fund's competitors). Because this subgroup of the fund's international holdings delivered strong performance, our conservative approach detracted from the fund's relative performance. Over the second half of the fiscal year, we believe the fund was less sensitive to interest-rate changes than other funds in its category, reflecting our decision to keep the portfolio interest-rate sensitivity lower. While rates continued to decline in May and June, this positioning hurt relative performance, but when rates spiked in July and August, the fund gained ground against funds in its peer group. The fund's currency strategy has been on target; we emphasized the Australian dollar and European currencies, and continued to underweight the U.S. dollar. Toward the end of the fiscal year, we also began to increase our emphasis on the yen. These positions were generally beneficial for the fund's performance. [GRAPHIC OMITTED: horizontal bar chart TOP SECTOR WEIGHTINGS COMPARED] TOP SECTOR WEIGHTINGS COMPARED as of 4/30/03 as of 10/31/03 High yield 46.8% 48.7% International 23.0% 25.7% U.S. investment grade 30.2% 25.6% Footnote reads: This chart shows how the fund's top weightings have changed over the last six months. Weightings are shown as a percentage of total investment portfolio. Holdings will vary over time. How fund sector allocations affected performance Throughout the year, the fund's largest sector weighting (close to half of its assets) was in high-yield bonds, and this position was a significant contributor to the fund's strong returns during the period. High-yield bonds have performed well during the past 12 months for several reasons. Among the most important is the decline in default rates. Although still high by historical standards, corporate defaults have steadily declined since hitting a peak in January 2002. This trend has been seen as a positive sign that, if it continues, may help high-yield bond performance over the next several years. Second, fixed-income investors have been seeking higher yields and have become more willing to take on risk in exchange. As a result, high-yield bonds have significantly outperformed Treasuries, causing a narrowing in the yield spread between Treasuries and high-yield bonds. This narrowing has been another strong driver of high-yield bond performance. Finally, corporations are generally focusing on reducing debt, improving their balance sheets, and increasing profits -- all of which have generally helped improve credit quality in the high-yield market. [GRAPHIC OMITTED: TOP HOLDINGS] TOP HOLDINGS High-Yield Sector 1 HMH Properties, Inc. Company guaranty, Series B, 7 7/8s, 2008 2 PSF Group Holdings, Inc. 144A, Class A 3 Qwest Services Corp. 144A notes, 13.5s, 2010 International Sector 1 United Kingdom Treasury bonds Treasury bonds, 7 1/2s, 2006 2 United Kingdom Treasury bonds Treasury bonds, 5s, 2004 3 Canada (Government of) Bonds, 6s, 2011 U.S. Investment-Grade Sector 1 U.S. Treasury bonds 7 1/2s, November 15, 2016 2 U.S. Treasury bonds 6 1/4s, August 15, 2023 3 U.S. Treasury notes 1 5/8s, March 31, 2005 Footnote reads: These holdings represent 10.7% of the fund's net assets as of 10/31/03. The fund's holdings will change over time. Bonds of several corporate high-yield issuers performed well for the fund during the past year, including those of HMH Properties, Inc. and Qwest Services Corp. HMH, which owns the Marriott hotel chain, has benefited from an improvement in the hotel business since 9/11. The company is financially strong and has dependable cash flows. Qwest, a telecommunications company, has increased significantly in price and is one of the fund's top-performing high-yield holdings. We felt it was attractively valued, and the market has concurred in the past six months. Qwest has worked through an SEC investigation of its accounting practices, sold its directory business, and cut costs and reduced debt. Some industrial holdings made positive contributions in the high-yield portion of the fund, including bonds issued by Tyco, a conglomerate, and Georgia Pacific, a large paper company. These firms benefited from the strength of the high-yield bond market and the recovering economy, which has translated into increased availability of funding for them. The fund's holdings of AK Steel Corp. and Collins and Aikman Products, an auto and truck parts maker, detracted from performance during the period due to disappointing earnings. However, if the economy continues to grow, as we believe it will, we expect these holdings to benefit. We have maintained the fund's positions. Mortgage-backed securities (MBSs), a subgroup within the fund's U.S. investment-grade sector, were among the weakest-performing securities in the fund on a relative basis, primarily because of the refinancing crunch that occurred in the spring and summer of 2003. However, our strategy of investing in different types of MBSs helped us take advantage of the diversification this sector offers while maximizing the available opportunities. For example, we invested in commercial mortgage-backed securities, which are less prone to refinancing than residential mortgages, as well as agency-wrapped FHA/VA reperforming MBSs. These are traditional mortgage-backed securities in which the borrowers have become delinquent on making payments for a period of time and, as a result, the securities are less likely to be re-financed. Because these securities are guaranteed by government-sponsored agencies (Fannie Mae and Freddie Mac), they do not represent a major credit risk, and the fund has benefited from the higher income that they produce. The fund's international bonds benefited from slowing global economies, especially in Europe, where the fund's Swedish government bonds outperformed. These securities attracted investors in part because they outperformed German government bonds. Canadian and New Zealand government bonds also performed well for the fund, benefiting from the countries' commodity-based economies. European high-yield bonds, a small allocation in the fund, had weaker performance than their U.S. counterparts, primarily as a result of slower economic growth in Europe, but they still made a solid contribution during the year. Please note that all holdings discussed in this report are subject to review in accordance with the fund's investment strategy and may vary in the future. OF SPECIAL INTEREST The level of income generated by the fund's holdings has declined over the period. This reflects generally declining yields in the bond markets. Another factor was the narrowing of yield spreads between high-yield bonds, investment-grade corporate bonds, and emerging-market bonds. Consequently, in March 2003, the fund lowered its distribution rate from $0.048 per share to $0.040 per share. Between July 2003 and the end of the fiscal year, however, the dividend increased from $0.040 per share to $0.042 per share. The fund's management team This fund is managed by the Putnam Core Fixed-Income Team. The members of this team are D. William Kohli (Portfolio Leader), David Waldman (Portfolio Member), Carl Bell, Rob Bloemker, Andrea Burke, Kevin Cronin, Steve Horner, Michael Salm, and John Van Tassel. The outlook for your fund The following commentary reflects anticipated developments that could affect your fund over the next six months, as well as your management team's plans for responding to them. We anticipate continued interest-rate volatility in the coming months, as the direction for the major global economies becomes clearer to investors. In the United States, we may see a continuation of the cyclical recovery from recession, which has been stimulated by tax cuts, low interest rates, and increased capital spending among corporations, as well as signs of growth in Asia. These trends, if they continue, could lead to faster growth and potentially higher inflation. Higher inflation, in turn, could lead to higher interest rates, which would hurt your fund's performance. Tempering this scenario are certain structural "headwinds" that could dampen growth. These inhibitors may include lower-than-expected corporate profits, a decline in consumer spending, a lack of new job creation, and a dearth of much-needed corporate capital spending. A positive effect of slower growth would be lower inflation and lower interest rates, which would be positive for the bond market and for your fund. In the coming months, the conflict between stimulating and inhibiting forces on the economy may produce higher volatility in the bond market. However, we believe that, because of the fund's diversity, different sectors and holdings in its portfolio have the potential to benefit from either faster or slower growth. We would like to caution shareholders that the strong returns of the past year are well above the historical average for a fund of this type, and that this strong performance is not likely to be repeated. That being said, we believe that for those seeking income, investing in a well-diversified fund such as this one remains a sensible approach. The views expressed in this report are exclusively those of Putnam Management. They are not meant as investment advice. International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. Lower-rated bonds may offer higher yields in return for more risk. Mutual funds that invest in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk. Performance summary This section provides information about your fund's performance during its fiscal year, which ended October 31, 2003. In accordance with regulatory requirements, we also include performance for the most current calendar quarter-end. Performance should always be considered in light of a fund's investment strategy. Past performance does not indicate future results. More recent returns may be less or more than those shown. Investment return, net asset value, and market price will fluctuate and you may have a gain or a loss when you sell your shares. A profile of your fund's strategy appears on the first page of this report. See page 9 for definitions of some terms used in this section. - ---------------------------------------------------------------- TOTAL RETURN FOR PERIODS ENDED 10/31/03 - ---------------------------------------------------------------- NAV Market price - ---------------------------------------------------------------- 1 year 21.84% 15.48% - ---------------------------------------------------------------- 5 years 36.59 27.22 Annual average 6.43 4.93 - ---------------------------------------------------------------- 10 years 85.25 83.74 Annual average 6.36 6.27 - ---------------------------------------------------------------- Life of fund (since 12/28/87) Annual average 8.66 7.55 - ---------------------------------------------------------------- Performance does not reflect taxes on reinvested distributions.
- ------------------------------------------------------------------------------------------------------------------- COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/03 - ------------------------------------------------------------------------------------------------------------------- Citigroup Non-U.S. Lipper Flexible Lehman World JP Morgan Income Funds Government Government Global High CSFB High (closed end) Credit Index Bond Index Yield Index* Yield Index category average+ - ------------------------------------------------------------------------------------------------------------------- 1 year 6.17% 17.75% 30.49% 31.46% 22.33% - ------------------------------------------------------------------------------------------------------------------- 5 years 37.46 21.39 35.15 38.08 33.30 Annual average 6.57 3.95 6.21 6.67 5.61 - ------------------------------------------------------------------------------------------------------------------- 10 years 92.56 80.40 -- 99.93 80.58 Annual average 6.77 6.08 -- 7.17 6.02 - ------------------------------------------------------------------------------------------------------------------- Life of fund (since 12/28/87) Annual average 8.39 6.87 -- 9.41 8.48 - ------------------------------------------------------------------------------------------------------------------- Index and Lipper results should be compared to fund performance at net asset value. * This comparative index replaced the CSFB High Yield Index on 12/30/02 because, in Putnam Management's opinion, the securities tracked by this index more accurately reflect the types of securities generally held by the fund. The JP Morgan Global High Yield Index's inception date was 12/31/93. + Over the 1-, 5-, and 10-year periods ended 10/31/03, there were 12, 12, and 10 funds, respectively, in this Lipper category.
- ------------------------------------------------------------------- PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 10/31/03 - ------------------------------------------------------------------- Putnam Master Income Trust - ------------------------------------------------------------------- Distributions (number) 12 - ------------------------------------------------------------------- Income $0.520 - ------------------------------------------------------------------- Capital gains -- - ------------------------------------------------------------------- Total $0.520 - ------------------------------------------------------------------- Share value: NAV Market price - ------------------------------------------------------------------- 10/31/02 $6.37 $6.15 - ------------------------------------------------------------------- 10/31/03 7.18 6.57 - ------------------------------------------------------------------- Current return (end of period) - ------------------------------------------------------------------- Current dividend rate 1 7.02% 7.67% - ------------------------------------------------------------------- 1 Most recent distribution, excluding capital gains, annualized and divided by NAV or market price at end of period. - --------------------------------------------------------------------------- TOTAL RETURN FOR PERIODS ENDED 9/30/03 (MOST RECENT CALENDER QUARTER) - --------------------------------------------------------------------------- NAV Market price - --------------------------------------------------------------------------- 1 year 20.34% 11.02% - --------------------------------------------------------------------------- 5 years 32.04 30.67 Annual average 5.72 5.50 - --------------------------------------------------------------------------- 10 years 85.92 88.59 Annual average 6.40 6.55 - --------------------------------------------------------------------------- Life of fund (since 12/28/87) Annual average 8.63 7.72 - --------------------------------------------------------------------------- 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 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 indexes Citigroup (formerly Salomon Smith Barney) Non-U.S. World Government Bond Index is an unmanaged index of government bonds from 10 countries. Citigroup (formerly Salomon Smith Barney) World Ex U.S. Primary Markets Growth Index is an unmanaged index of mostly large- and some small-capitalization stocks from developed countries excluding the United States chosen for their growth orientation. JP Morgan Global High Yield Index is an unmanaged index used to mirror the investable universe of the U.S. dollar global high-yield corporate debt market of both developed and emerging markets. Lehman Aggregate Bond Index is an unmanaged index used as a general measure of U.S. fixed-income securities. Lehman Government Credit Index is an unmanaged index of U.S fixed-income securities. Russell 2000 Index is an unmanaged index of common stocks that generally measure performance of small to midsize companies within the Russell 3000 Index. S&P 500 Index is an unmanaged index of common stock performance. Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index. Lipper Inc. is a third-party industry ranking entity that ranks funds (without sales charges) with similar current investment styles or objectives as determined by Lipper. Lipper category averages reflect performance trends for funds within a category and are based on results at net asset value. Putnam's policy on confidentiality In order to conduct business with our shareholders, we must obtain certain personal information such as account holders' addresses, telephone numbers, Social Security numbers, and the names of their financial advisors. We use this information to assign an account number and to help us maintain accurate records of transactions and account balances. It is our policy to protect the confidentiality of your information, whether or not you currently own shares of our funds, and in particular, not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use. Under certain circumstances, we share this information with outside vendors who provide services to us, such as mailing and proxy solicitation. In those cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. We may also share this information with our Putnam affiliates to service your account or provide you with information about other Putnam products or services. It is also our policy to share account information with your financial advisor, if you've listed one on your Putnam account. If you would like clarification about our confidentiality policies or have any questions or concerns, please don't hesitate to contact us at 1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time. Putnam is committed to managing our mutual funds in the best interests of our shareholders. Our proxy voting guidelines and policies are available on the Putnam Individual Investor Web site, www.putnaminvestments.com, by calling Putnam's Shareholder Services at 1-800-225-1581, or on the SEC's Web site, www.sec.gov. A guide to the financial statements These sections of the report, as well as the accompanying Notes, preceded by the Independent Auditors' Report, constitute the fund's financial statements. The fund's portfolio lists all the fund's investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification. Statement of assets and liabilities shows how the fund's net assets and share price are determined. All investment and noninvestment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the net assets allocated to remarketed preferred shares.) Statement of operations shows the fund's net investment gain or loss. This is done by first adding up all the fund's earnings -- from dividends and interest income -- and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings -- as well as any unrealized gains or losses over the period -- is added to or subtracted from the net investment result to determine the fund's net gain or loss for the fiscal year. Statement of changes in net assets shows how the fund's net assets were affected by distributions to shareholders and by changes in the number of the fund's shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Financial highlights provide an overview of the fund's investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlight table also includes the current reporting period. For open-end funds, a separate table is provided for each share class. Independent auditors' report The Board of Trustees and Shareholders Putnam Master Income Trust: We have audited the accompanying statement of assets and liabilities of Putnam Master Income Trust, including the fund's portfolio, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003 by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Putnam Master Income Trust as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Boston, Massachusetts December 9, 2003 The fund's portfolio October 31, 2003 Corporate bonds and notes (52.7%) (a) Principal amount Value Advertising and Marketing Services (0.1%) - ------------------------------------------------------------------------------- $128,941 Adams Outdoor Advertising bank term loan FRN Ser. B, 4.42s, 2008 (acquired 4/02/03, cost $128,619) (RES) $129,371 100,000 Lamar Media Corp. bank term loan FRN Ser. B, 3.438s, 2010 (acquired 2/27/03, cost $100,100) (RES) 100,813 305,000 Lamar Media Corp. company guaranty 7 1/4s, 2013 321,013 -------------- 551,197 Automotive (1.3%) - ------------------------------------------------------------------------------- 155,000 ArvinMeritor, Inc. notes 8 3/4s, 2012 162,750 540,000 Collins & Aikman Products company guaranty 10 3/4s, 2011 456,300 90,000 Dana Corp. notes 10 1/8s, 2010 101,700 310,000 Dana Corp. notes 9s, 2011 344,100 EUR 30,000 Dana Corp. notes 9s, 2011 37,484 $50,000 Dana Corp. notes 7s, 2029 44,375 155,000 Dana Corp. notes 6 1/2s, 2009 153,450 85,000 Delco Remy International, Inc. company guaranty 11s, 2009 77,988 205,000 Delco Remy International, Inc. company guaranty 10 5/8s, 2006 194,750 330,000 Dura Operating Corp. company guaranty Ser. D, 9s, 2009 303,600 100,000 Dura Operating Corp. 144A sr. notes 8 5/8s, 2012 101,500 97,500 Hayes Lemmerz International, Inc. bank term loan FRN 5.928s, 2009 (acquired 6/03/03, cost $96,525) (RES) 98,384 345,000 Lear Corp. company guaranty Ser. B, 8.11s, 2009 397,613 650,000 Lear Corp. company guaranty Ser. B, 7.96s, 2005 698,750 EUR 110,000 Lear Corp. sr. notes 8 1/8s, 2008 143,835 $215,000 Meritor Automotive, Inc. notes 6.8s, 2009 208,550 340,000 Metaldyne Corp. 144A sr. notes 10s, 2013 331,500 56,681 SPX Corp. bank term loan FRN Ser. B, 3.438s, 2009 (acquired various dates from 7/23/03 to 8/26/03, cost $56,681) (RES) 57,091 EUR 200,000 Teksid Aluminum 144A company guaranty 11 3/8s, 2011 (Luxembourg) 235,947 $260,000 Tenneco Automotive, Inc. company guaranty Ser. B, 11 5/8s, 2009 269,750 410,000 Tenneco Automotive, Inc. sec. notes Ser. B, 10 1/4s, 2013 453,050 100,000 TRW Automotive bank term loan FRN Ser. C-1, 4.116s, 2011 (acquired 7/21/03, cost $100,000) (RES) 100,875 -------------- 4,973,342 Basic Materials (5.3%) - ------------------------------------------------------------------------------- 270,000 Acetex Corp. sr. notes 10 7/8s, 2009 (Canada) 302,400 75,000 Acetex Corp. 144A sr. notes 10 7/8s, 2009 (Canada) 84,000 280,000 AK Steel Corp. company guaranty 7 7/8s, 2009 196,000 380,000 AK Steel Corp. company guaranty 7 3/4s, 2012 258,400 77,072 Appleton Papers, Inc. bank term loan FRN Ser. C, 4.376s, 2006 (acquired 6/04/02, cost $77,361) (RES) 77,361 425,000 Appleton Papers, Inc. company guaranty Ser. B, 12 1/2s, 2008 469,625 200,000 Avecia Group PLC company guaranty 11s, 2009 (United Kingdom) 186,000 315,000 Better Minerals & Aggregates Co. company guaranty 13s, 2009 198,450 290,000 Compass Minerals Group, Inc. company guaranty 10s, 2011 321,900 584,169 Doe Run Resources Corp. company guaranty Ser. A1, 11 3/4s, 2008 (acquired various dates from 7/27/01 to 9/03/03, cost $314,392) (RES) (PIK) 233,668 415,000 Dow Chemical Co. (The) notes 5 3/4s, 2009 434,972 105,000 Equistar Chemical notes 6 1/2s, 2006 103,425 100,000 Equistar Chemicals LP notes 8 3/4s, 2009 99,500 910,000 Equistar Chemicals LP/Equistar Funding Corp. company guaranty 10 1/8s, 2008 955,500 210,000 Equistar Chemicals LP/Equistar Funding Corp. 144A sr. notes 10 5/8s, 2011 219,450 230,000 Georgia-Pacific Corp. bonds 7 3/4s, 2029 217,350 110,000 Georgia-Pacific Corp. company guaranty 8 7/8s, 2010 125,675 170,000 Georgia-Pacific Corp. debs. 9 1/2s, 2011 197,200 455,000 Georgia-Pacific Corp. debs. 7.7s, 2015 473,200 160,000 Georgia-Pacific Corp. sr. notes 7 3/8s, 2008 170,400 295,000 Gerdau Ameristeel Corp/Gusap Partners 144A sr. notes 10 3/8s, 2011 (Canada) 308,275 75,000 Graphics Packaging bank term loan FRN Ser. B, 3.894s, 2010 (acquired 8/06/03, cost $75,000) (RES) 75,581 99,250 Hercules, Inc. bank term loan FRN Ser. B, 4.372s, 2007 (acquired 12/17/02, cost $99,002) (RES) 99,664 1,015,000 Hercules, Inc. company guaranty 11 1/8s, 2007 1,179,938 300,000 Huntsman Advanced Materials, LLC 144A sec. notes 11s, 2010 321,375 248,935 Huntsman Corp. bank term loan FRN Ser. A, 5.957s, 2007 (acquired various dates from 7/17/02 to 9/24/03, cost $225,152) (RES) 218,025 161,456 Huntsman Corp. bank term loan FRN Ser. B, 8.938s, 2007 (acquired various dates from 7/17/02 to 9/24/03, cost $144,050) (RES) 141,409 550,000 Huntsman ICI Chemicals, Inc. company guaranty 10 1/8s, 2009 523,875 740,000 Huntsman ICI Holdings sr. disc. notes zero %, 2009 296,000 EUR 225,000 Huntsman International, LLC sr. sub. notes Ser. EXCH, 10 1/8s, 2009 228,828 $150,000 IMC Global, Inc. company guaranty Ser. B, 10 7/8s, 2008 154,875 765,000 ISP Chemco, Inc. company guaranty Ser. B, 10 1/4s, 2011 852,975 50,000 ISP Holdings, Inc. sec. sr. notes Ser. B, 10 5/8s, 2009 54,500 30,000 Kaiser Aluminum & Chemical Corp. sr. notes Ser. B, 10 7/8s, 2006 (In default) (NON) 25,500 915,000 Kaiser Aluminum & Chemical Corp. sr. sub. notes 12 3/4s, 2003 (In default) (NON) 137,250 215,000 Louisiana-Pacific Corp. sr. notes 8 7/8s, 2010 252,625 400,000 Lyondell Chemical Co. company guaranty 9 1/2s, 2008 400,000 70,000 Lyondell Chemical Co. company guaranty Ser. (a), 9 1/2s, 2008 69,125 435,000 Lyondell Chemical Co. notes Ser. A, 9 5/8s, 2007 441,525 EUR 425,000 MDP Acquisitions PLC sr. notes 10 1/8s, 2012 (Ireland) 538,188 $45,000 MDP Acquisitions PLC sr. notes 9 5/8s, 2012 (Ireland) 49,950 174,561 MDP Acquisitions PLC sub. notes 15 1/2s, 2013 (Ireland) (PIK) 200,745 EUR 120,000 Messer Griesheim Holdings AG sr. notes 10 3/8s, 2011 (Germany) 159,003 100,000 Millennium America, Inc. 144A sr. notes 9 1/4s, 2008 105,750 130,000 Millennium America, Inc. company guaranty 7 5/8s, 2026 111,150 510,000 Millennium America, Inc. company guaranty 9 1/4s, 2008 539,325 310,000 Nalco Co. 144A sr. notes 7 3/4s, 2011 322,400 EUR 40,000 Nalco Co. 144A sr. notes 7 3/4s, 2011 47,887 $40,000 Nalco Co. 144A sr. sub. notes 9s, 2013 47,887 280,000 Nalco Co. 144A sr. sub. notes 8 7/8s, 2013 291,200 287,550 Noveon International bonds 13s, 2011 296,177 250,000 Noveon International company guaranty Ser. B, 11s, 2011 287,500 500,000 OM Group, Inc. company guaranty 9 1/4s, 2011 505,000 485,000 Pacifica Papers, Inc. sr. notes 10s, 2009 (Canada) 514,100 233,383 PCI Chemicals Canada sec. sr. notes 10s, 2008 (Canada) 210,045 73,902 Pioneer Cos., Inc. sec. FRN 4.64s, 2006 66,512 430,000 Potlatch Corp. company guaranty 10s, 2011 482,138 265,000 Resolution Performance Products, LLC sr. notes 9 1/2s, 2010 275,600 100,000 Rhodia SA 144A sr. notes 7 5/8s, 2010 (France) 94,000 190,000 Royster-Clark, Inc. 1st mtge. 10 1/4s, 2009 158,650 155,000 Salt Holdings Corp. 144A sr. disc. notes stepped-coupon zero % (12s, 6/1/06), 2013 (STP) 94,550 420,000 Salt Holdings Corp. 144A sr. notes stepped-coupon zero % (12 3/4s, 12/15/07), 2012 (STP) 298,200 105,000 Smurfit-Stone Container Corp. company guaranty 8 1/4s, 2012 110,250 70,000 Solutia, Inc. company guaranty 11 1/4s, 2009 62,300 50,000 Solutia, Inc. debs. 7 3/8s, 2027 30,750 445,000 Solutia, Inc. debs. 6.72s, 2037 373,800 475,000 Steel Dynamics, Inc. company guaranty 9 1/2s, 2009 522,500 76,698 Sterling Chemicals, Inc. sec. notes 10s, 2007 (PIK) 72,096 450,000 Stone Container Corp. sr. notes 9 3/4s, 2011 490,500 180,000 Stone Container Corp. sr. notes 9 1/4s, 2008 196,200 240,000 Stone Container Corp. sr. notes 8 3/8s, 2012 253,200 200,000 Tembec Industries, Inc. company guaranty 8 1/2s, 2011 (Canada) 193,000 30,000 Texas Petrochemical Corp. sr. sub. notes 11 1/8s, 2006 (In default) (NON) 8,400 110,000 Texas Petrochemical Corp. sr. sub. notes Ser. B, 11 1/8s, 2006 (In default) (NON) 30,800 420,000 Ucar Finance, Inc. company guaranty 10 1/4s, 2012 465,150 325,000 United States Steel Corp. sr. notes 9 3/4s, 2010 342,875 280,000 WCI Steel, Inc. sr. notes Ser. B, 10s, 2004 (In default) (NON) 84,000 22,000 Weirton Steel Corp. sr. notes 10s, 2008 (In default) (NON) 4,070 380,000 Wheeling-Pittsburgh Steel Corp. sr. notes 9 1/4s, 2007 (In default) (NON) 1 21,772 Wheeling-Pittsburgh Steel Corp. sr. notes 6s, 2010 8,708 43,545 Wheeling-Pittsburgh Steel Corp. sr. notes 5s, 2011 21,773 230,000 WHX Corp. sr. notes 10 1/2s, 2005 197,800 -------------- 20,269,951 Building Materials (0.4%) - ------------------------------------------------------------------------------- 65,000 Atrium Cos., Inc. company guaranty Ser. B, 10 1/2s, 2009 69,063 180,000 Building Materials Corp. company guaranty 8s, 2008 177,300 415,000 Dayton Superior Corp. 144A sec. notes 10 3/4s, 2008 432,638 114,000 NCI Building Systems, Inc. bank term loan FRN Ser. B, 4.389s, 2008 (acquired 9/04/02, cost $114,000) (RES) 114,522 250,000 Nortek, Inc. sr. notes Ser. B, 8 7/8s, 2008 260,625 50,000 Nortek, Inc. sr. sub. notes Ser. B, 9 7/8s, 2011 53,875 170,000 Nortek, Inc. 144A sr. notes Ser. B, 9 1/8s, 2007 175,950 115,000 Owens Corning bonds 7 1/2s, 2018 (In default) (NON) 49,450 460,000 Owens Corning notes 7 1/2s, 2005 (In default) (NON) 197,800 -------------- 1,531,223 Capital Goods (5.1%) - ------------------------------------------------------------------------------- 130,000 Advanced Glass Fiber Yarns bank term loan FRN Ser. A, 6 1/2s, 2004 (acquired 9/12/02, cost $91,000) (RES) 78,000 120,000 Advanced Glass Fiber Yarns sr. sub. notes 9 7/8s, 2009 (In default) (NON) 1,200 445,000 AEP Industries, Inc. sr. sub. notes 9 7/8s, 2007 440,550 520,612 Air2 US 144A sinking fund Ser. D, 12.266s, 2020 (In default) (NON) 15,618 104,277 Alliant Techsystems, Inc. bank term loan FRN Ser. C, 3.493s, 2009 (acquired 5/07/02, cost $104,277) (RES) 104,951 82,526 Allied Waste Industries, Inc. bank term loan FRN 4.393s, 2010 (acquired 4/25/03, cost $82,526) (RES) 83,610 13,929 Allied Waste Industries, Inc. bank term loan FRN Ser. C, 4.56s, 2010 (acquired 4/25/03, cost $13,929) (RES) 14,086 780,000 Allied Waste North America, Inc. company guaranty Ser. B, 9 1/4s, 2012 877,500 250,000 Allied Waste North America, Inc. company guaranty Ser. B, 8 7/8s, 2008 276,250 645,000 Allied Waste North America, Inc. company guaranty Ser. B, 8 1/2s, 2008 706,275 99,750 Amsted Industries bank term loan FRN 5.129s, 2010 (acquired 8/12/03, cost $99,251) (RES) 100,124 765,000 Argo-Tech Corp. company guaranty 8 5/8s, 2007 757,350 335,000 BE Aerospace, Inc. sr. sub. notes 9 1/2s, 2008 317,413 110,000 BE Aerospace, Inc. sr. sub. notes Ser. B, 8 7/8s, 2011 99,000 245,000 BE Aerospace, Inc. sr. sub. notes Ser. B, 8s, 2008 222,950 120,000 BE Aerospace, Inc. 144A sr. notes 8 1/2s, 2010 123,600 155,000 Berry Plastics Corp. company guaranty 10 3/4s, 2012 174,763 465,000 Blount, Inc. company guaranty 13s, 2009 444,075 425,000 Blount, Inc. company guaranty 7s, 2005 418,625 295,000 Briggs & Stratton company guaranty 8 7/8s, 2011 337,775 825,000 Browning-Ferris Industries, Inc. debs. 7.4s, 2035 775,500 290,000 Browning-Ferris Industries, Inc. sr. notes 6 3/8s, 2008 284,200 EUR 290,000 BSN Financing Co. SA company guaranty Ser. EUR, 10 1/4s, 2009 (Luxembourg) 356,448 EUR 185,000 BSN Glasspack 144A sec. notes 9 1/4s, 2009 (France) 225,777 $100,000 Crown Cork & Seal Company, Inc. bank term loan FRN Ser. B, 4.14s, 2008 (acquired 2/21/03, cost $99,000) (RES) 100,800 290,000 Crown Holdings SA notes 10 7/8s, 2013 (France) 330,600 845,000 Crown Holdings SA notes 9 1/2s, 2011 (France) 937,950 500,000 Decrane Aircraft Holdings Co. company guaranty Ser. B, 12s, 2008 235,000 74,813 EaglePicher bank term loan FRN Ser. B, 4.64s, 2009 (acquired 8/06/03, cost $75,250) (RES) 75,529 380,000 Earle M. Jorgensen Co. sec. notes 9 3/4s, 2012 413,250 450,000 FIMEP SA sr. notes 10 1/2s, 2013 (France) 524,250 EUR 195,000 Flender Holdings 144A sr. notes 11s, 2010 (Denmark) 246,480 $65,956 Flowserve Corp. bank term loan FRN Ser. C, 3.927s, 2009 (acquired 4/30/02, cost $65,956) (RES) 66,357 297,000 Flowserve Corp. company guaranty 12 1/4s, 2010 341,550 EUR 50,000 Flowserve Finance BV company guaranty 12 1/4s, 2010 (Netherlands) 65,670 $50,000 Fonda Group, Inc. sr. sub. notes Ser. B, 9 1/2s, 2007 42,500 99,825 Graham Packaging bank term loan FRN Ser. B, 5.105s, 2010 (acquired 2/18/03, cost $99,325) (RES) 100,249 365,000 Hexcel Corp. sr. sub. notes 9 3/4s, 2009 380,513 250,000 Insilco Holding Co. sr. disc. notes zero %, 2008 (In default) (NON) 1,250 EUR 145,000 Invensys, PLC sr. unsub. notes 5 1/2s, 2005 (United Kingdom) 167,185 $230,000 Jordan Industries, Inc. sr. notes Ser. D, 10 3/8s, 2007 103,500 275,000 K&F Industries, Inc. sr. sub. notes Ser. B, 9 5/8s, 2010 308,000 129,000 K&F Industries, Inc. sr. sub. notes Ser. B, 9 1/4s, 2007 132,870 120,000 L-3 Communications Corp. company guaranty 7 5/8s, 2012 130,800 220,000 L-3 Communications Corp. company guaranty Ser. B, 8s, 2008 229,900 180,000 L-3 Communications Corp. 144A Structured Notes 8 1/2s, 2006 (Issued by Credit and Repackaged Securities, Ltd.) (Cayman Islands) 202,140 95,550 Laidlaw International, Inc. bank term loan FRN 7s, 2009 (acquired 6/18/03, cost $93,639) (RES) 96,297 560,000 Laidlaw International, Inc. 144A sr. notes 10 3/4s, 2011 604,800 105,000 Legrand SA debs. 8 1/2s, 2025 (France) 110,250 160,000 Manitowoc Co., Inc. (The) company guaranty 10 1/2s, 2012 181,600 EUR 100,000 Manitowoc Co., Inc. (The) company guaranty 10 3/8s, 2011 124,773 $123,376 Michigan Electric Transmission Co./Michigan Electric Transmission, Inc. bank term loan FRN Ser. B, 3.62s, 2007 (acquired 4/22/02, cost $123,376) (RES) 123,787 290,000 Motors and Gears, Inc. sr. notes Ser. D, 10 3/4s, 2006 243,600 355,000 Owens-Brockway Glass company guaranty 8 7/8s, 2009 384,288 300,000 Owens-Brockway Glass company guaranty 8 1/4s, 2013 316,500 280,000 Owens-Brockway Glass company guaranty 7 3/4s, 2011 295,400 370,000 Owens-Brockway Glass sr. sec. notes 8 3/4s, 2012 405,150 55,000 Pliant Corp. company guaranty 13s, 2010 51,975 275,000 Pliant Corp. sec. notes 11 1/8s, 2009 294,250 320,000 Roller Bearing Company of America company guaranty Ser. B, 9 5/8s, 2007 297,600 630,000 Sequa Corp. sr. notes 9s, 2009 689,850 110,000 Sequa Corp. sr. notes Ser. B, 8 7/8s, 2008 118,800 110,000 Siebe PLC 144A sr. unsub. 6 1/2s, 2010 (United Kingdom) 106,150 195,000 Silgan Holdings, Inc. 144A sr. sub. notes 6 3/4s, 2013 195,000 295,000 Sweetheart Cup Co. company guaranty 12s, 2004 294,263 275,000 TD Funding Corp. 144A sr. sub. notes 8 3/8s, 2011 292,188 675,000 Tekni-Plex, Inc. company guaranty Ser. B, 12 3/4s, 2010 693,563 100,000 Terex Corp. company guaranty 9 1/4s, 2011 110,250 380,000 Terex Corp. company guaranty Ser. B, 10 3/8s, 2011 425,600 148,128 Titan Corp. (The) bank term loan FRN Ser. B, 4.435s, 2009 (acquired various dates from 5/14/02 to 6/03/02, cost $148,753) (RES) 148,128 25,000 Transdigm, Inc. bank term loan FRN 4.13s, 2010 (acquired 7/21/03, cost $25,000) (RES) 25,234 350,000 Trimas Corp. company guaranty 9 7/8s, 2012 351,750 200,000 Vought Aircraft Industries Inc. 144A sr. notes 8s, 2011 201,000 -------------- 19,554,029 Commercial and Consumer Services (0.3%) - ------------------------------------------------------------------------------- 87,949 Coinmach Corp. bank term loan FRN Ser. B, 3.966s, 2009 (acquired 1/31/02, cost $87,839) (RES) 88,260 650,000 Coinmach Corp. sr. notes 9s, 2010 711,750 24,938 Corrections Corporation of America bank term loan FRN Ser. C, 3.88s, 2008 (acquired 8/05/03, cost $24,938) (RES) 25,187 240,472 Derby Cycle Corp. (The) sr. notes 10s, 2008 (In default) (NON) 13,226 DEM 688,142 Derby Cycle Corp. (The) sr. notes 9 3/8s, 2008 (In default) (NON) 22,492 $50,000 IESI Corp. bank term loan FRN 4.16s, 2010 (acquired various dates from 10/20/03 to 10/21/03, cost $50,281) (RES) 50,344 345,000 IESI Corp. company guaranty 10 1/4s, 2012 374,325 -------------- 1,285,584 Communication Services (4.6%) - ------------------------------------------------------------------------------- 770,000 ACC Escrow Corp. 144A sr. notes 10s, 2011 839,300 340,000 Alamosa Delaware, Inc. company guaranty 13 5/8s, 2011 326,400 150,000 Alamosa Delaware, Inc. company guaranty 12 1/2s, 2011 144,000 105,000 American Cellular Corp. company guaranty 9 1/2s, 2009 (In default) (NON) 99,750 155,000 American Tower Corp. sr. notes 9 3/8s, 2009 162,750 300,000 Asia Global Crossing, Ltd. sr. notes 13 3/8s, 2010 (Bermuda) (In default) (NON) 43,500 1,005,000 Centennial Cellular Operating Co. 144A sr. notes 10 1/8s, 2013 1,045,200 150,000 Cincinnati Bell, Inc. notes 7 1/4s, 2023 139,500 545,000 Cincinnati Bell, Inc. 144A company guaranty 7 1/4s, 2013 555,900 235,000 Cincinnati Bell, Inc. 144A sr. sub. notes 8 3/8s, 2014 242,344 193,432 Colo.com, Inc. 144A sr. notes 13 7/8s, 2010 (In default) (NON) 725 30,000 Colt Telecommunications Group PLC sr. disc. notes 12s, 2006 (United Kingdom) 30,038 GBP 115,000 Colt Telecommunications Group PLC sr. notes 10 1/8s, 2007 (United Kingdom) 195,144 EUR 60,000 Colt Telecommunications Group PLC sr. notes 7 5/8s, 2009 (United Kingdom) 65,205 $50,000 Crown Castle International Corp. bank term loan FRN 4.66s, 2010 (acquired 10/03/03, cost $50,000) (RES) 50,438 310,000 Crown Castle International Corp. sr. disc. notes stepped-coupon zero % (10 3/8s, 5/15/04), 2011 (STP) 317,750 410,000 Crown Castle International Corp. sr. notes 9 3/8s, 2011 448,950 50,000 Crown Castle International Corp. sr. notes 9s, 2011 52,875 50,000 Dobson Communications Corp. bank term loan FRN 4.41s, 2010 (acquired 10/20/03, cost $50,000) (RES) 50,552 590,000 Dobson Communications Corp. 144A sr. notes 8 7/8s, 2013 595,900 140,000 Eircom Funding 144A sr. sub. notes 8 1/4s, 2013 (Ireland) 152,250 210,000 Fairpoint Communications, Inc. sr. sub. notes 12 1/2s, 2010 225,750 210,000 Firstworld Communication Corp. sr. disc. notes zero %, 2008 (In default) (NON) 21 180,443 Globix Corp. company guaranty 11s, 2008 (PIK) 153,377 80,000 Horizon PCS, Inc. company guaranty 13 3/4s, 2011 (In default) (NON) 18,400 30,000 Intermedia Communications, Inc. sr. notes Ser. B, 8.6s, 2008 (In default) (NON) 28,200 500,000 iPCS, Inc. sr. disc. notes stepped-coupon zero % (14s, 7/15/05), 2010 (In default) (NON) (STP) 50,000 273,000 IWO Holdings, Inc. company guaranty 14s, 2011 46,410 40,000 Level 3 Communications, Inc. sr. notes 9 1/8s, 2008 36,300 835,000 Level 3 Financing Inc. 144A sr. notes 10 3/4s, 2011 868,400 390,000 Madison River Capital Corp. sr. notes 13 1/4s, 2010 417,300 180,000 Metromedia Fiber Network, Inc. sr. notes 10s, 2009 (In default) (NON) 11,250 420,000 Metromedia Fiber Network, Inc. sr. notes Ser. B, 10s, 2008 (In default) (NON) 26,250 418,000 Millicom International Cellular SA 144A sr. notes 11s, 2006 (Luxembourg) 427,405 61,874 Nextel Communications, Inc. bank term loan FRN Ser. B, 4.563s, 2008 (acquired 12/19/02, cost $57,234) (RES) 62,046 61,874 Nextel Communications, Inc. bank term loan FRN Ser. C, 4.813s, 2008 (acquired 12/19/02, cost $57,234) (RES) 62,046 5,000 Nextel Communications, Inc. sr. disc. notes 9.95s, 2008 5,263 220,000 Nextel Communications, Inc. sr. notes 9 1/2s, 2011 247,500 15,000 Nextel Communications, Inc. sr. notes 9 3/8s, 2009 16,350 795,000 Nextel Communications, Inc. sr. notes 7 3/8s, 2015 826,800 30,000 Nextel Partners, Inc. sr. notes 12 1/2s, 2009 34,725 290,000 Nextel Partners, Inc. sr. notes 11s, 2010 321,175 705,000 Nextel Partners, Inc. 144A sr. notes 8 1/8s, 2011 724,388 390,000 Orbital Imaging Corp. sr. notes Ser. B, 11 5/8s, 2005 (In default) (NON) 226,200 175,500 PanAmSat Corp. bank term loan FRN 3.66s, 2010 (acquired 10/29/03, cost $175,500) (RES) 176,816 175,500 PanAmSat Corp. bank term loan FRN Ser. B, 4.62s, 2009 (acquired 2/21/02, cost $175,281) (RES) 176,221 450,000 PanAmSat Corp. company guaranty 8 1/2s, 2012 484,875 105,625 Qwest Communications International, Inc. bank term loan FRN Ser. A, 6 1/2s, 2007 (acquired 6/05/03, cost $104,569) (RES) 108,332 1,105,000 Qwest Corp. 144A notes 8 7/8s, 2012 1,248,650 1,456,000 Qwest Services Corp. 144A notes 13 1/2s, 2010 1,699,880 25,000 Rogers Cantel, Ltd. debs. 9 3/8s, 2008 (Canada) 26,156 145,000 Rogers Wireless, Inc. sec. notes 9 5/8s, 2011 (Canada) 168,200 170,000 Rural Cellular Corp. sr. sub. notes Ser. B, 9 5/8s, 2008 152,150 830,000 Telus Corp. notes 8s, 2011 (Canada) 954,225 190,000 Telus Corp. notes 7 1/2s, 2007 (Canada) 211,009 99,250 Time Warner Telecom, Inc. bank term loan FRN Ser. B, 5.14s, 2009 (acquired 1/15/03, cost $86,756) (RES) 99,746 300,000 TSI Telecommunication Services, Inc. company guaranty Ser. B, 12 3/4s, 2009 303,000 220,000 U S West, Inc. notes 5 5/8s, 2008 215,600 225,000 UbiquiTel Operating Co. bonds stepped-coupon zero % (14s, 4/15/05), 2010 (STP) 155,250 505,000 US UnWired, Inc. company guaranty stepped-coupon Ser. B, zero % (13 3/8s, 11/1/04), 2009 (STP) 328,250 580,000 Western Wireless Corp. sr. notes 9 1/4s, 2013 606,100 130,000 Williams Communications Group, Inc. notes zero %, 2008 (In default) (NON) 1 110,000 Williams Communications Group, Inc. notes zero %, 2007 (In default) (NON) 1 -------------- 17,508,489 Conglomerates (0.4%) - ------------------------------------------------------------------------------- 175,000 Tyco International Group SA company guaranty 7s, 2028 (Luxembourg) 177,625 90,000 Tyco International Group SA company guaranty 6 3/4s, 2011 (Luxembourg) 95,738 120,000 Tyco International Group SA company guaranty 6 3/8s, 2005 (Luxembourg) 125,850 915,000 Tyco International Group SA notes 6 3/8s, 2011 (Luxembourg) 951,600 -------------- 1,350,813 Consumer (0.5%) - ------------------------------------------------------------------------------- 570,000 Icon Health & Fitness company guaranty 11 1/4s, 2012 618,450 100,000 Jostens, Inc. bank term loan FRN Ser. B, 3.64s, 2010 (acquired 7/28/03, cost $100,000) (RES) 100,708 285,000 Jostens, Inc. sr. sub. notes 12 3/4s, 2010 330,600 900,000 Samsonite Corp. sr. sub. notes 10 3/4s, 2008 945,000 -------------- 1,994,758 Consumer Staples (8.0%) - ------------------------------------------------------------------------------- 50,000 Adelphia Communications Corp. notes Ser. B, 9 7/8s, 2005 (In default) (NON) 40,500 250,000 Adelphia Communications Corp. sr. notes 10 7/8s, 2010 (In default) (NON) 203,750 30,000 Adelphia Communications Corp. sr. notes 9 3/8s, 2009 (In default) (NON) 25,200 110,000 Adelphia Communications Corp. sr. notes Ser. B, 9 7/8s, 2007 (In default) (NON) 89,100 405,000 Adelphia Communications Corp. sr. notes Ser. B, 7 3/4s, 2009 (In default) (NON) 330,075 EUR 145,000 Ahold Finance USA eurobonds 6 3/8s, 2005 170,977 $350,000 AMC Entertainment, Inc. sr. sub. notes 9 7/8s, 2012 384,125 250,000 AMC Entertainment, Inc. sr. sub. notes 9 1/2s, 2011 262,813 375,000 AMC Entertainment, Inc. sr. sub. notes 9 1/2s, 2009 387,188 443,940 American Seafood Group, LLC bank term loan FRN Ser. B, 4.37s, 2009 (acquired 4/11/02, cost $443,496) (RES) 445,235 106,930 AMF Bowling Worldwide bank term loan FRN Ser. B, 5.446s, 2008 (acquired 3/1/02, cost $106,663) (RES) 107,242 185,242 Archibald Candy Corp. company guaranty 10s, 2007 (PIK) 79,654 350,000 Armkel, LLC/Armkel Finance sr. sub. notes 9 1/2s, 2009 386,750 70,000 Aurora Foods, Inc. sr. sub. notes Ser. B, 9 7/8s, 2007 (In default) (NON) 48,300 235,000 Aurora Foods, Inc. 144A sr. sub. notes Ser. D, 9 7/8s, 2007 (In default) (NON) 162,150 300,000 Brand Services, Inc. company guaranty 12s, 2012 345,000 900,000 British Sky Broadcasting PLC company guaranty 6 7/8s, 2009 (United Kingdom) 992,541 355,000 Capital Records, Inc. 144A company guaranty 8 3/8s, 2009 362,100 85,962 Carmike Cinemas, Inc. bank term loan FRN Ser. B, 7 3/4s, 2005 (acquired 10/04/02, cost $83,779) (RES) 86,427 100,000 Century Cable Holdings bank term loan FRN 6s, 2009 (acquired 6/11/02, cost $80,500) (RES) 91,900 79,395 Charter Communications Holdings, LLC bank term loan FRN Ser. B, 3.92s, 2008 (acquired 1/09/03, cost $68,975) (RES) 76,785 225,000 Charter Communications Holdings, LLC/Capital Corp. sr. disc. notes stepped-coupon zero % (12 1/8s, 1/15/07), 2012 (STP) 122,063 285,000 Charter Communications Holdings, LLC/Capital Corp. sr. disc. notes stepped-coupon zero % (11 3/4s, 5/15/06), 2011 (STP) 167,438 240,000 Charter Communications Holdings, LLC/Capital Corp. sr. disc. notes stepped-coupon zero % (11 3/4s, 1/15/05), 2010 (STP) 177,000 810,000 Charter Communications Holdings, LLC/Capital Corp. sr. notes 11 1/8s, 2011 688,500 440,000 Charter Communications Holdings, LLC/Capital Corp. sr. notes 10 3/4s, 2009 371,800 225,000 Charter Communications Holdings, LLC/Capital Corp. sr. notes 10 1/4s, 2010 186,750 955,000 Charter Communications Holdings, LLC/Capital Corp. sr. notes 10s, 2011 766,388 495,000 Charter Communications Holdings, LLC/Capital Corp. sr. notes 9 5/8s, 2009 398,475 50,000 Charter Communications Holdings, LLC/Capital Corp. sr. notes 8 5/8s, 2009 40,125 350,000 Cinemark USA, Inc. sr. sub. notes 9s, 2013 383,250 345,000 Cinemark USA, Inc. sr. sub. notes Ser. B, 8 1/2s, 2008 358,369 80,000 Constellation Brands, Inc. company guaranty 8 1/2s, 2009 84,200 210,000 Constellation Brands, Inc. sr. sub. notes Ser. B, 8 1/8s, 2012 229,950 84,910 Constellation Energy Group, Inc. bank term loan FRN Ser. B, 3 5/8s, 2008 (acquired various dates from 1/17/02 to 12/17/02, cost $84,910) (RES) 85,696 300,000 Cott Beverages USA, Inc. company guaranty 8s, 2011 322,500 1,070,000 CSC Holdings, Inc. sr. notes 7 7/8s, 2007 1,094,075 90,000 Dean Foods Co. sr. notes 6 5/8s, 2009 94,500 120,000 Del Monte Corp. company guaranty Ser. B, 9 1/4s, 2011 132,600 305,000 Del Monte Corp. 144A sr. sub. notes 8 5/8s, 2012 337,025 115,513 Del Monte Foods Co. bank term loan FRN Ser. B, 4.914s, 2010 (acquired 12/16/02, cost $114,936) (RES) 116,837 100,000 DirecTV bank term loan FRN Ser. B, 4.004s, 2010 (acquired various dates from 3/04/03 to 8/05/03, cost $100,000) (RES) 100,413 695,000 DirecTV Holdings, LLC sr. notes 8 3/8s, 2013 781,875 1,162,000 Diva Systems Corp. sr. disc. notes Ser. B, 12 5/8s, 2008 (In default) (NON) 92,960 430,000 Doane Pet Care Co. sr. sub. debs. 9 3/4s, 2007 387,000 14,184 Dole Food Co. bank term loan FRN Ser. B, 5.19s, 2008 (acquired 3/28/03, cost $14,184) (RES) 14,296 145,000 Dole Food Co. sr. notes 8 7/8s, 2011 156,600 105,000 Dole Food Co. sr. notes 7 1/4s, 2009 113,400 365,000 Domino's, Inc. 144A sr. sub. notes 8 1/4s, 2011 385,531 30,000 Eagle Family Foods company guaranty Ser. B, 8 3/4s, 2008 21,000 786,000 Echostar DBS Corp. sr. notes 9 1/8s, 2009 886,215 890,000 Echostar DBS Corp. 144A sr. notes 6 3/8s, 2011 886,663 62,500 Echostar DBS Corp. 144A sr. notes FRN 4.41s, 2008 64,219 36,000 Elizabeth Arden, Inc. sec. notes Ser. B, 11 3/4s, 2011 41,220 99,000 Emmis Communications Corp. bank term loan FRN Ser. B, 3.38s, 2009 (acquired 6/20/02, cost $98,876) (RES) 99,894 130,000 Emmis Communications Corp. company guaranty Ser. B, 8 1/8s, 2009 136,013 35,000 Emmis Communications Corp. sr. disc. notes stepped-coupon zero % (12 1/2s, 3/15/06), 2011 (STP) 32,113 355,000 Fleming Cos., Inc. company guaranty 10 1/8s, 2008 (In default) (NON) 55,025 280,000 Fleming Cos., Inc. sr. notes 9 1/4s, 2010 (In default) (NON) 46,200 90,000 French Fragrances, Inc. company guaranty Ser. D, 10 3/8s, 2007 93,600 75,000 French Fragrances, Inc. sr. notes Ser. B, 10 3/8s, 2007 78,000 20,000 Granite Broadcasting Corp. sr. sub. notes 10 3/8s, 2005 19,600 380,000 Granite Broadcasting Corp. sr. sub. notes 9 3/8s, 2005 370,500 385,000 Granite Broadcasting Corp. sr. sub. notes 8 7/8s, 2008 369,600 220,000 Gray Television, Inc. company guaranty 9 1/4s, 2011 243,100 35,000 Insight Midwest LP/Insight Capital, Inc. bank term loan FRN 3.938s, 2009 (acquired 11/5/01, cost $34,934) (RES) 35,137 18,258 Knology, Inc. 144A sr. notes 12s, 2009 (PIK) 18,258 305,000 Land O'Lakes, Inc. sr. notes 8 3/4s, 2011 260,775 205,000 Mediacom LLC/Mediacom Capital Corp. sr. notes 9 1/2s, 2013 194,750 490,000 News America Holdings, Inc. company guaranty 9 1/4s, 2013 631,003 30,743 Nexstar Broadcasting bank term loan FRN Ser. B, 4.12s, 2011 (acquired 2/05/03, cost $30,743) (RES) 30,852 13,007 Nexstar Mission Broadcasting bank term loan FRN 4.12s, 2011 (acquired 2/05/03, cost $13,007) (RES) 13,053 610,000 North Atlantic Trading Co. company guaranty Ser. B, 11s, 2004 582,550 270,000 Olympus Cable bank term loan FRN Ser. B, 6s, 2010 (acquired 3/10/03, cost $270,000) (RES) 253,125 125,000 ONO Finance PLC sr. notes 14s, 2011 (United Kingdom) 113,906 55,000 ONO Finance PLC sr. notes 13s, 2009 (United Kingdom) 49,569 EUR 80,000 ONO Finance PLC sr. notes Ser. REGS, 14s, 2011 (United Kingdom) 84,615 $60,000 Pegasus Communications Corp. sr. notes Ser. B, 9 3/4s, 2006 48,600 210,000 Pegasus Satellite sr. notes 12 3/8s, 2006 176,400 98,500 Playtex Products, Inc. bank term loan FRN Ser. C, 4.658s, 2009 (acquired 6/03/02, cost $98,500) (RES) 98,213 855,000 Playtex Products, Inc. company guaranty 9 3/8s, 2011 844,313 250,000 Polaroid Corp. sr. notes 11 1/2s, 2006 (In default) (NON) 55,000 350,000 Premier International Foods PLC sr. notes 12s, 2009 (United Kingdom) 385,875 220,000 Premier Parks, Inc. sr. notes 10s, 2007 223,300 265,000 Premium Standard Farms, Inc. sr. notes 9 1/4s, 2011 268,975 1,030,516 Quorum Broadcast Holdings, LLC notes stepped-coupon zero % (15s, 5/15/06), 2009 (STP) 772,165 89,000 Rayovac Corp. bank term loan FRN Ser. B, 4.877s, 2009 (acquired 9/26/02, cost $88,911) (RES) 89,185 210,000 RCN Corp. sr. disc. notes Ser. B, zero %, 2008 92,400 215,000 Regal Cinemas, Inc. company guaranty Ser. B, 9 3/8s, 2012 242,950 385,000 Remington Arms Co., Inc. company guaranty 10 1/2s, 2011 402,806 245,000 Revlon Consumer Products sr. notes 9s, 2006 164,150 195,000 Revlon Consumer Products sr. notes 8 1/8s, 2006 128,700 GBP 50,000 RHM Finance, Ltd. bonds stepped-coupon Ser. B1, 11 1/2s (17 1/4s, 2/28/11), 2011 (Cayman Islands) (STP) 75,512 $65,000 Rite Aid Corp. bank term loan FRN Ser. B, 4.12s, 2008 (acquired 5/16/03, cost $64,919) (RES) 65,853 305,000 Rite Aid Corp. company guaranty 9 1/2s, 2011 343,125 20,000 Rite Aid Corp. debs. 6 7/8s, 2013 19,000 40,000 Rite Aid Corp. notes 7 1/8s, 2007 40,400 205,000 Rite Aid Corp. sec. notes 8 1/8s, 2010 219,350 340,000 Rite Aid Corp. sr. notes 9 1/4s, 2013 365,500 20,000 Rite Aid Corp. 144A notes 6s, 2005 19,950 300,000 Rogers Cablesystems, Ltd. sr. notes Ser. B, 10s, 2005 (Canada) 322,500 385,000 Sbarro, Inc. company guaranty 11s, 2009 333,506 50,000 Scotts Co. (The) bank term loan FRN 3 1/8s, 2010 (acquired 10/16/03, cost $50,000) (RES) 50,607 140,000 Scotts Co. (The) 144A 6 5/8s, 2013 141,750 170,000 Sinclair Broadcast Group, Inc. company guaranty 8 3/4s, 2011 186,150 205,000 Sinclair Broadcast Group, Inc. company guaranty 8s, 2012 216,275 46,875 Six Flags, Inc. bank term loan FRN Ser. B, 3.37s, 2009 (acquired 1/15/03, cost $46,816) (RES) 46,758 1,265,000 Six Flags, Inc. sr. notes 8 7/8s, 2010 1,201,750 590,000 TeleWest Communications PLC debs. 11s, 2007 (United Kingdom) (In default) (NON) 320,075 190,000 TeleWest Communications PLC debs. 9 5/8s, 2006 (United Kingdom) (In default) (NON) 100,700 130,000 TeleWest Communications PLC sr. notes Ser. S, 9 7/8s, 2010 (United Kingdom) (In default) (NON) 68,250 50,000 TeleWest Communications PLC 144A sr. notes 11 1/4s, 2008 (United Kingdom) (In default) (NON) 27,000 30,000 TM Group Holdings sr. notes 11s, 2008 (United Kingdom) 31,650 160,000 United Rentals (North America), Inc. company guaranty Ser. B, 10 3/4s, 2008 179,200 65,000 Vivendi Universal SA bank term loan FRN Ser. B, 3.912s, 2008 (acquired 6/23/03, cost $65,000) (France) (RES) 65,358 540,000 Vivendi Universal SA 144A notes 6 1/4s, 2008 (France) 564,300 355,000 Vivendi Universal SA 144A sr. notes 9 1/4s, 2010 (France) 412,688 390,000 Williams Scotsman, Inc. company guaranty 9 7/8s, 2007 395,850 754,000 Young Broadcasting, Inc. company guaranty 10s, 2011 803,010 48,000 Young Broadcasting, Inc. company guaranty Ser. B, 8 3/4s, 2007 48,360 20,000 Yum! Brands, Inc. sr. notes 8 7/8s, 2011 23,800 140,000 Yum! Brands, Inc. sr. notes 8 1/2s, 2006 155,750 255,000 Yum! Brands, Inc. sr. notes 7.7s, 2012 287,513 325,000 Yum! Brands, Inc. sr. notes 7.65s, 2008 364,000 -------------- 30,466,505 Energy (5.1%) - ------------------------------------------------------------------------------- 430,000 Arch Western Finance, LLC 144A sr. notes 6 3/4s, 2013 445,050 375,000 Belden & Blake Corp. company guaranty Ser. B, 9 7/8s, 2007 354,375 350,000 BRL Universal Equipment sec. notes 8 7/8s, 2008 380,625 180,000 Chesapeake Energy Corp. company guaranty 9s, 2012 205,200 40,000 Chesapeake Energy Corp. company guaranty 8 3/8s, 2008 43,800 140,000 Chesapeake Energy Corp. company guaranty 8 1/8s, 2011 153,650 685,000 Chesapeake Energy Corp. 144A sr. notes 7 1/2s, 2013 736,375 470,000 Comstock Resources, Inc. company guaranty 11 1/4s, 2007 509,950 380,000 Dresser, Inc. company guaranty 9 3/8s, 2011 390,450 115,000 El Paso Energy Partners LP company guaranty Ser. B, 8 1/2s, 2011 125,350 295,000 Encore Acquisition Co. company guaranty 8 3/8s, 2012 317,125 330,000 Forest Oil Corp. company guaranty 7 3/4s, 2014 343,613 560,000 Forest Oil Corp. sr. notes 8s, 2011 600,600 115,000 Forest Oil Corp. sr. notes 8s, 2008 123,050 200,000 Gazprom OAO notes Ser. REGS, 9 5/8s, 2013 (Russia) 217,000 560,000 Gazprom OAO 144A notes 9 5/8s, 2013 (Russia) 607,600 235,000 Hornbeck Offshore Services, Inc. sr. notes 10 5/8s, 2008 259,675 160,000 Key Energy Services, Inc. sr. notes 6 3/8s, 2013 160,800 40,000 Leviathan Gas Corp. company guaranty Ser. B, 10 3/8s, 2009 43,400 380,000 Newfield Exploration Co. sr. notes 7 5/8s, 2011 416,100 255,000 Offshore Logistics, Inc. company guaranty 6 1/8s, 2013 244,800 50,000 Parker Drilling Co. bank term loan FRN 5.41s, 2007 (acquired 10/22/03, cost $49,500) (RES) 50,156 290,000 Parker Drilling Co. company guaranty Ser. B, 10 1/8s, 2009 301,600 48,506 Peabody Energy Corp. bank term loan FRN Ser. B, 3.638s, 2010 (acquired 3/20/03, cost $48,506) (RES) 48,931 595,000 Pemex Project Funding Master Trust company guaranty 8 5/8s, 2022 638,138 720,000 Pemex Project Funding Master Trust company guaranty 7 3/8s, 2014 752,400 630,000 Petroleos Mexicanos company guaranty 9 1/2s, 2027 (Mexico) 719,775 470,000 Petroleos Mexicanos company guaranty 9 1/4s, 2018 (Mexico) 540,500 550,000 Petronas Capital, Ltd. company guaranty 7 7/8s, 2022 (Malaysia) 623,590 125,000 Petronas Capital, Ltd. company guaranty 7s, 2012 (Malaysia) 139,225 895,000 Petronas Capital, Ltd. 144A company guaranty 7 7/8s, 2022 (Malaysia) 1,014,751 440,000 Petronas Capital, Ltd. 144A company guaranty 7s, 2012 (Malaysia) 490,072 1,230,000 Pioneer Natural Resources Co. company guaranty 9 5/8s, 2010 1,496,924 60,000 Pioneer Natural Resources Co. company guaranty 7.2s, 2028 62,298 205,000 Plains All American Pipeline LP/Plains All American Finance Corp. company guaranty 7 3/4s, 2012 226,525 310,000 Plains Exploration & Production Co. company guaranty Ser. B, 8 3/4s, 2012 337,900 260,000 Plains Exploration & Production Co. sr. sub. notes 8 3/4s, 2012 283,400 350,000 Pogo Producing Co. sr. sub. notes Ser. B, 8 1/4s, 2011 386,750 209,000 Pride Petroleum Services, Inc. sr. notes 9 3/8s, 2007 215,793 320,000 Seabulk International, Inc. 144A sr. notes 9 1/2s, 2013 329,600 170,000 Seven Seas Petroleum, Inc. sr. notes Ser. B, 12 1/2s, 2005 (In default) (NON) 2,243 400,000 Star Gas Partners LP/Star Gas Finance Co. sr. notes 10 1/4s, 2013 430,000 198,462 Star Gas Propane 1st Mtge. 8.04s, 2009 198,084 380,000 Stone Energy Corp. sr. sub. notes 8 1/4s, 2011 406,600 180,000 Swift Energy Co. sr. sub. notes 10 1/4s, 2009 192,600 250,000 Swift Energy Co. sr. sub. notes 9 3/8s, 2012 266,250 190,000 Tesoro Petroleum Corp. sec. notes 8s, 2008 201,400 120,000 Tom Brown Inc. unit 7 1/4s, 2013 125,400 500,000 Trico Marine Services, Inc. company guaranty 8 7/8s, 2012 340,000 80,000 Universal Compression, Inc. sr. notes 7 1/4s, 2010 83,200 170,000 Vintage Petroleum, Inc. sr. notes 8 1/4s, 2012 186,150 320,000 Vintage Petroleum, Inc. sr. sub. notes 9 3/4s, 2009 340,000 80,000 Vintage Petroleum, Inc. sr. sub. notes 7 7/8s, 2011 84,600 65,000 Weg Acquistion bank term loan FRN 5.61s, 2008 (acquired 6/13/03, cost $64,350) (RES) 65,488 500,000 Westport Resources Corp. company guaranty 8 1/4s, 2011 551,250 150,000 Westport Resources Corp. 144A company guaranty 8 1/4s, 2011 165,375 205,000 XTO Energy, Inc. sr. notes 7 1/2s, 2012 223,450 165,000 XTO Energy, Inc. sr. notes 6 1/4s, 2013 172,219 -------------- 19,371,225 Financial (1.8%) - ------------------------------------------------------------------------------- 580,000 Advanta Corp. 144A company guaranty Ser. B, 8.99s, 2026 371,200 520,000 Chevy Chase Savings Bank, Inc. sub. debs. 9 1/4s, 2005 522,600 200,000 Conseco, Inc. 144A notes zero %, 2009 (In default) (NON) 1 165,000 Crescent Real Estate Equities LP notes 7 1/2s, 2007 (R) 169,125 420,000 Crescent Real Estate Equities LP sr. notes 9 1/4s, 2009 (R) 453,600 1,182,000 Finova Group, Inc. notes 7 1/2s, 2009 591,000 109,806 Hilb, Rogal & Hamilton Co. bank term loan FRN Ser. B, 3.938s, 2007 (acquired 6/20/02, cost $109,806) (RES) 110,767 96,403 Infinity Inc. bank term loan FRN 3.64s, 2010 (acquired 7/02/03, cost $96,403) (RES) 96,965 445,000 iStar Financial, Inc. sr. notes 8 3/4s, 2008 (R) 502,850 70,000 iStar Financial, Inc. sr. notes 7s, 2008 (R) 74,900 129,000 Nationwide Credit, Inc. sr. notes Ser. A, 10 1/4s, 2008 (In default) (NON) 1 DKK 12,500,000 Realkredit Danmark A/S mtge. Ser. 23D, 5s, 2035 (Denmark) 1,855,654 $415,000 Resource America, Inc. 144A sr. notes 12s, 2004 419,150 1,125,000 Sovereign Bancorp, Inc. sr. notes 10 1/2s, 2006 1,335,164 290,000 Western Financial Bank sub. debs. 9 5/8s, 2012 319,725 -------------- 6,822,702 Gaming & Lottery (2.8%) - ------------------------------------------------------------------------------- 265,000 Ameristar Casinos, Inc. company guaranty 10 3/4s, 2009 305,413 235,000 Argosy Gaming Co. company guaranty 10 3/4s, 2009 257,031 90,000 Argosy Gaming Co. sr. sub. notes 9s, 2011 99,225 70,000 Borgata Resorts bank term loan FRN Ser. B, 5.137s, 2007 (acquired 6/05/02, cost $69,825) (RES) 70,613 400,000 Boyd Gaming Corp. sr. sub. notes 8 3/4s, 2012 434,000 190,000 Chumash Casino & Resort Enterprise 144A sr. notes 9 1/4s, 2010 209,475 480,000 Herbst Gaming, Inc. sec. notes Ser. B, 10 3/4s, 2008 536,400 335,000 Hollywood Park, Inc. company guaranty Ser. B, 9 1/4s, 2007 342,119 490,000 Horseshoe Gaming Holdings company guaranty 8 5/8s, 2009 521,850 295,000 Inn of the Mountain Gods 144A sr. notes 12s, 2010 308,275 235,000 Mandalay Resort Group 144A sr. notes 6 1/2s, 2009 242,344 1,050,000 MGM Mirage, Inc. company guaranty 8 1/2s, 2010 1,190,438 260,000 Mirage Resorts, Inc. notes 6 3/4s, 2008 273,975 30,000 Mohegan Tribal Gaming Authority sr. notes 8 1/8s, 2006 32,588 100,000 Mohegan Tribal Gaming Authority sr. sub. notes 8 3/8s, 2011 109,250 685,000 Mohegan Tribal Gaming Authority 144A sr. sub. notes 6 3/8s, 2009 701,269 550,000 Park Place Entertainment Corp. sr. notes 7 1/2s, 2009 597,438 205,000 Park Place Entertainment Corp. sr. notes 7s, 2013 213,713 200,000 Park Place Entertainment Corp. sr. sub. notes 8 7/8s, 2008 222,250 60,000 Park Place Entertainment Corp. sr. sub. notes 8 1/8s, 2011 65,550 99,500 Penn National Gaming, Inc. bank term loan FRN Ser. B, 4.642s, 2010 (acquired 2/19/03, cost $99,376) (RES) 100,072 255,000 Penn National Gaming, Inc. company guaranty Ser. B, 11 1/8s, 2008 287,513 500,000 Penn National Gaming, Inc. sr. sub. notes 8 7/8s, 2010 544,375 64,838 Pinnacle Entertainment, Inc. bank term loan FRN Ser. B, 5.745s, 2008 (acquired 9/19/03, cost $196,738) (RES) 65,162 200,000 Pinnacle Entertainment, Inc. sr. sub. notes 8 3/4s, 2013 200,000 305,000 Resorts International Hotel and Casino, Inc. company guaranty 11 1/2s, 2009 315,675 305,000 Riviera Holdings Corp. company guaranty 11s, 2010 311,100 124,063 Scientific Gaming bank term loan FRN Ser. B, 4.62s, 2008 (acquired 12/11/02, cost $123,442) (RES) 124,295 405,000 Station Casinos, Inc. sr. notes 8 3/8s, 2008 439,425 380,000 Trump Atlantic City Associates company guaranty 11 1/4s, 2006 286,900 830,000 Trump Casino Holdings, LLC company guaranty 11 5/8s, 2010 731,438 515,000 Venetian Casino Resort, LLC company guaranty 11s, 2010 594,181 -------------- 10,733,352 Health Care (3.6%) - ------------------------------------------------------------------------------- 27,113 ALARIS Medical Systems, Inc. bank term loan FRN Ser. B, 3.87s, 2009 (acquired 6/30/03, cost $27,113) (RES) 27,384 275,000 ALARIS Medical Systems, Inc. sr. sub. notes 7 1/4s, 2011 280,500 47,880 Alderwoods Group, Inc. bank term loan FRN 4.372s, 2008 (acquired 9/09/03, cost $47,880) (RES) 48,448 745,400 Alderwoods Group, Inc. company guaranty 12 1/4s, 2009 831,121 374,000 Alliance Imaging, Inc. sr. sub. notes 10 3/8s, 2011 395,505 315,000 AmerisourceBergen Corp. company guaranty 7 1/4s, 2012 324,450 310,000 AmerisourceBergen Corp. sr. notes 8 1/8s, 2008 335,575 535,000 Ardent Health Services 144A sr. sub. notes 10s, 2013 572,450 62,500 Beverly Enterprises, Inc. bank term loan FRN 4.41s, 2008 (acquired 10/20/03, cost $62,500) (RES) 63,125 470,000 Biovail Corp. sr. sub. notes 7 7/8s, 2010 (Canada) 458,250 148,500 Community Health Systems, Inc. bank term loan FRN Ser. B, 3.64s, 2010 (acquired 7/11/02, cost $148,500) (RES) 149,614 99,750 Concentra bank term loan FRN 4.92s, 2009 (acquired 8/12/03, cost $99,750) (RES) 100,623 100,000 Dade Behring, Inc. company guaranty 11.91s, 2010 113,250 99,731 DaVita, Inc. bank term loan FRN Ser. C, 3.616s, 2009 (acquired 7/17/03, cost $99,731) (RES) 100,437 270,000 Extendicare Health Services, Inc. company guaranty 9 1/2s, 2010 297,000 67,627 Fisher Scientific International, Inc. bank term loan FRN Ser. B, 3.638s, 2010 (acquired 2/13/03, cost $67,627) (RES) 68,050 50,000 Hanger Orthopedic Group, Inc. bank term loan FRN 3.87s, 2009 (acquired 9/29/03, cost $50,000) (RES) 50,375 325,000 Hanger Orthopedic Group, Inc. company guaranty 10 3/8s, 2009 367,250 115,000 HCA, Inc. debs. 7.19s, 2015 118,832 640,000 HCA, Inc. notes 8.36s, 2024 685,558 150,000 HCA, Inc. notes 7.69s, 2025 152,202 445,000 HCA, Inc. notes 7s, 2007 478,989 600,000 Healthsouth Corp. notes 7 5/8s, 2012 522,000 255,000 Healthsouth Corp. sr. notes 8 1/2s, 2008 225,675 130,000 Healthsouth Corp. sr. notes 8 3/8s, 2011 115,050 110,000 Healthsouth Corp. sr. notes 7s, 2008 95,700 215,000 IASIS Healthcare Corp. company guaranty 13s, 2009 241,338 45,000 IASIS Healthcare Corp. company guaranty 8 1/2s, 2009 47,025 490,000 Integrated Health Services, Inc. sr. sub. notes Ser. A, 9 1/2s, 2007 (In default) (NON) 1 250,000 Integrated Health Services, Inc. sr. sub. notes Ser. A, 9 1/4s, 2008 (In default) (NON) 1 74,813 Kinetic Concepts, Inc. bank term loan FRN Ser. B, 3.89s, 2011 (acquired 8/05/03, cost $74,984) (RES) 75,325 775,000 Magellan Health Services, Inc. sr. sub. notes 9s, 2008 (In default) (NON) 441,750 140,000 Magellan Health Services, Inc. 144A sr. notes 9 3/8s, 2007 (In default) (NON) 152,600 81,047 Medex, Inc. bank term loan FRN Ser. B, 4s, 2009 (acquired various dates from 5/16/03 to 6/16/03, cost $81,007) (RES) 81,385 380,000 Mediq, Inc. debs. zero %, 2009 (In default) (NON) 38 495,000 MedQuest, Inc. company guaranty Ser. B, 11 7/8s, 2012 534,600 1,080,000 Multicare Companies, Inc. sr. sub. notes 9s, 2007 (In default) (NON) 16,200 195,000 NeighborCare, Inc. 144A sr. sub. notes 6 7/8s, 2013 198,169 405,000 Omnicare, Inc. sr. sub. notes 6 1/8s, 2013 399,938 610,000 PacifiCare Health Systems, Inc. company guaranty 10 3/4s, 2009 703,025 360,000 Province Healthcare Co. sr. sub. notes 7 1/2s, 2013 360,000 70,000 Service Corp. International debs. 7 7/8s, 2013 68,425 40,000 Service Corp. International notes 7.2s, 2006 40,700 15,000 Service Corp. International notes 6 7/8s, 2007 15,225 60,000 Service Corp. International notes 6 1/2s, 2008 60,150 790,000 Service Corp. International notes 6s, 2005 795,925 145,000 Service Corp. International notes Ser. (a), 7.7s, 2009 150,438 390,000 Stewart Enterprises, Inc. notes 10 3/4s, 2008 440,700 40,000 Tenet Healthcare Corp. notes 7 3/8s, 2013 38,800 10,000 Tenet Healthcare Corp. sr. notes 6 1/2s, 2012 9,275 320,000 Tenet Healthcare Corp. sr. notes 6 3/8s, 2011 296,800 45,000 Tenet Healthcare Corp. sr. notes 5 3/8s, 2006 43,200 1,085,000 Triad Hospitals Holdings company guaranty Ser. B, 11s, 2009 1,193,500 285,000 Universal Hospital Services, Inc. 144A sr. notes 10 1/8s, 2011 297,825 165,000 Ventas Realty LP/Capital Corp. company guaranty 9s, 2012 183,150 -------------- 13,862,921 Homebuilding (1.0%) - ------------------------------------------------------------------------------- 240,000 Beazer Homes USA, Inc. company guaranty 8 5/8s, 2011 262,200 80,000 Beazer Homes USA, Inc. company guaranty 8 3/8s, 2012 87,600 350,000 D.R. Horton, Inc. sr. notes 7 7/8s, 2011 388,500 100,000 D.R. Horton, Inc. sr. notes 6 7/8s, 2013 105,250 325,000 D.R. Horton, Inc. sr. notes 5 7/8s, 2013 318,500 250,000 K. Hovnanian Enterprises, Inc. company guaranty 10 1/2s, 2007 295,938 310,000 K. Hovnanian Enterprises, Inc. company guaranty 8 7/8s, 2012 337,900 100,000 K. Hovnanian Enterprises, Inc. company guaranty 8s, 2012 108,500 160,000 K. Hovnanian Enterprises, Inc. sr. notes 6 1/2s, 2014 159,200 140,000 KB Home sr. sub. notes 9 1/2s, 2011 155,400 160,000 Meritage Corp. 144A sr. notes 9 3/4s, 2011 177,600 335,000 Ryland Group, Inc. sr. notes 9 3/4s, 2010 385,250 210,000 Schuler Homes, Inc. company guaranty 10 1/2s, 2011 239,663 100,000 Technical Olympic USA, Inc. company guaranty 10 3/8s, 2012 109,500 205,000 Technical Olympic USA, Inc. company guaranty 9s, 2010 218,581 290,000 WCI Communities, Inc. company guaranty 9 1/8s, 2012 317,550 -------------- 3,667,132 Household Furniture and Appliances (0.2%) - ------------------------------------------------------------------------------- 430,000 Sealy Mattress Co. company guaranty Ser. B, 10 7/8s 2007 449,350 430,000 Sealy Mattress Co. sr. sub. notes Ser. B, 9 7/8s, 2007 442,900 -------------- 892,250 Lodging/Tourism (1.6%) - ------------------------------------------------------------------------------- 390,000 FelCor Lodging LP company guaranty 9 1/2s, 2008 (R) 423,150 275,000 Gaylord Entertainment Co. 144A sr. notes 8s, 2013 281,875 455,000 Hilton Hotels Corp. notes 7 5/8s, 2012 502,775 2,290,000 HMH Properties, Inc. company guaranty Ser. B, 7 7/8s, 2008 2,364,425 151,000 Host Marriott LP sr. notes Ser. E, 8 3/8s, 2006 (R) 160,438 390,000 Host Marriott LP 144A sr. notes 7 1/8s, 2013 390,000 320,000 ITT Corp. notes 6 3/4s, 2005 337,600 870,000 John Q. Hammons Hotels LP/John Q. Hammons Hotels Finance Corp. III 1st mtge. Ser. B, 8 7/8s, 2012 950,475 165,000 Meristar Hospitality Corp. company guaranty 9 1/8s, 2011 (R) 174,488 360,000 RFS Partnership LP company guaranty 9 3/4s, 2012 385,200 50,000 Starwood Hotels & Resorts Worldwide, Inc. company guaranty 7 7/8s, 2012 55,250 210,000 Starwood Hotels & Resorts Worldwide, Inc. company guaranty 7 3/8s, 2007 226,275 -------------- 6,251,951 Publishing (2.2%) - ------------------------------------------------------------------------------- 23,098 Affinity Group Holdings bank term loan FRN Ser. B1, 5.188s, 2009 (acquired 5/27/03, cost $23,040) (RES) 23,112 57,746 Affinity Group Holdings bank term loan FRN Ser. B2, 5.152s, 2009 (acquired 5/27/03, cost $57,601) (RES) 57,782 658,000 Affinity Group Holdings sr. notes 11s, 2007 674,450 96,667 Dex Media West, LLC bank term loan FRN 3.891s, 2010 (acquired 9/09/03, cost $96,667) (RES) 97,553 600,000 Dex Media West, LLC 144A sr. notes 8 1/2s, 2010 654,000 290,000 Garden State Newspapers, Inc. sr. sub. notes 8 5/8s, 2011 305,225 70,000 Garden State Newspapers, Inc. sr. sub. notes Ser. B, 8 3/4s, 2009 72,188 245,000 Hollinger International Publishing, Inc. sr. notes 9s, 2010 259,700 820,595 Hollinger Participation Trust 144A sr. notes 12 1/8s, 2010 (Canada) (PIK) 943,684 290,000 Key3media Group, Inc. company guaranty 11 1/4s, 2011 (In default) (NON) 2,900 64,838 Moore Wallace bank term loan FRN Ser. B, 3.638s, 2010 (acquired 3/13/03, cost $64,838) (RES) 65,141 94,239 PRIMEDIA, Inc. bank term loan FRN Ser. B, 3.924s, 2009 (acquired 2/10/03, cost $90,234) (RES) 92,678 590,000 PRIMEDIA, Inc. company guaranty 8 7/8s, 2011 609,175 180,000 PRIMEDIA, Inc. company guaranty 7 5/8s, 2008 179,100 435,000 PRIMEDIA, Inc. 144A sr. notes 8s, 2013 443,700 10,000 Quebecor Media, Inc. sr. disc. notes stepped-coupon zero % (13 3/4s, 7/15/06), 2011 (Canada) (STP) 8,650 620,000 Quebecor Media, Inc. sr. notes 11 1/8s, 2011 (Canada) 714,550 124,060 RH Donnelley Finance Corp. I bank term loan FRN Ser. B, 5.147s, 2010 (acquired 12/04/02, cost $124,060) (RES) 126,093 70,000 RH Donnelley Finance Corp. I company guaranty 8 7/8s, 2010 78,488 500,000 RH Donnelley Finance Corp. I 144A sr. notes 8 7/8s, 2010 560,625 250,000 RH Donnelley Finance Corp. I 144A sr. sub. notes 10 7/8s, 2012 298,125 83,800 Sum Media bank term loan FRN Ser. B, 3.61s, 2009 (acquired 2/04/03, cost $83,800) (RES) 84,036 470,000 Vertis, Inc. company guaranty Ser. B, 10 7/8s, 2009 482,925 390,000 Vertis, Inc. sub. notes 13 1/2s, 2009 358,800 245,000 Vertis, Inc. 144A sec. notes 9 3/4s, 2009 260,313 155,000 Videotron Ltee 144A notes 6 7/8s, 2014 (Canada) 160,038 270,000 Von Hoffman Press, Inc. company guaranty 10 1/4s, 2009 290,250 170,000 Von Hoffman Press, Inc. company guaranty FRN 10 3/8s, 2007 174,250 193,854 Von Hoffman Press, Inc. debs. 13s, 2009 (PIK) 180,284 100,000 Von Hoffman Press, Inc. 144A company guaranty 10 1/4s, 2009 107,750 36,000 Yell Finance BV sr. notes 10 3/4s, 2011 (Netherlands) 41,670 -------------- 8,407,235 Retail (1.0%) - ------------------------------------------------------------------------------- 43,527 Advance Stores bank term loan FRN Ser. C, 3.99s, 2007 (acquired 3/04/03, cost $43,527) (RES) 43,826 240,000 Asbury Automotive Group, Inc. company guaranty 9s, 2012 249,600 475,000 Autonation, Inc. company guaranty 9s, 2008 541,500 180,000 Gap, Inc. (The) notes 6.9s, 2007 195,750 200,000 Hollywood Entertainment Corp. sr. sub. notes 9 5/8s, 2011 217,000 445,000 J. Crew Operating Corp. 144A sr. sub. notes 10 3/8s, 2007 458,350 620,000 JC Penney Co., Inc. debs. 7.95s, 2017 664,950 95,000 JC Penney Co., Inc. debs. 7.65s, 2016 100,225 15,000 JC Penney Co., Inc. notes 8s, 2010 16,688 170,000 JC Penney Co., Inc. notes Ser. MTNA, 7.05s, 2005 179,350 109,414 PETCO Animal Supplies, Inc. bank term loan FRN Ser. D, 3.64s, 2009 (acquired 8/06/03, cost $109,414) (RES) 110,508 750,000 Saks, Inc. company guaranty 8 1/4s, 2008 847,500 270,000 United Auto Group, Inc. company guaranty 9 5/8s, 2012 298,350 -------------- 3,923,597 Technology (1.7%) - ------------------------------------------------------------------------------- 242,000 AMI Semiconductor, Inc. company guaranty 10 3/4s, 2013 280,115 80,844 Amkor Technologies, Inc. bank term loan FRN 5.12s, 2006 (acquired 4/17/03, cost $81,088) (RES) 81,804 210,000 Amkor Technologies, Inc. structured notes 12.58s, 2005 (issued by STEERS Credit Linked Trust 2000) 220,500 105,000 Avaya, Inc. sec. sr. notes 11 1/8s, 2009 123,375 269,000 DigitalNet Holdings Inc. 144A sr. notes 9s, 2010 293,210 EUR 460,000 Getronics NV sub. notes 13s, 2008 (Netherlands) 264,656 $130,000 Iron Mountain, Inc. company guaranty 8 5/8s, 2013 141,375 94,000 Iron Mountain, Inc. company guaranty 8 1/8s, 2008 (Canada) 97,995 720,000 Iron Mountain, Inc. sr. sub. notes 8 1/4s, 2011 750,600 40,000 Lucent Technologies, Inc. debs. 6 1/2s, 2028 31,000 555,000 Lucent Technologies, Inc. debs. 6.45s, 2029 428,738 30,000 Lucent Technologies, Inc. notes 5 1/2s, 2008 27,900 570,000 Nortel Networks Corp. notes 6 1/8s, 2006 (Canada) 583,538 425,000 ON Semiconductor Corp. company guaranty 13s, 2008 493,000 305,000 SCG Holding & Semiconductor Corp. company guaranty 12s, 2009 324,825 335,000 Seagate Technology Hdd Holdings company guaranty 8s, 2009 (Cayman Islands) 364,313 84,588 Telex Communications Group, Inc. sr. sub. notes Ser. A, zero %, 2006 46,523 100,000 Xerox Capital Europe PLC company guaranty 5 7/8s, 2004 (United Kingdom) 101,000 420,000 Xerox Capital Trust I company guaranty 8s, 2027 380,100 110,000 Xerox Corp. company guaranty 9 3/4s, 2009 124,575 215,000 Xerox Corp. notes Ser. MTN, 7.2s, 2016 209,625 EUR 100,000 Xerox Corp. sr. notes 9 3/4s, 2009 128,434 $575,000 Xerox Corp. sr. notes 7 5/8s, 2013 586,500 430,000 Xerox Corp. sr. notes 7 1/8s, 2010 439,675 -------------- 6,523,376 Textiles (0.4%) - ------------------------------------------------------------------------------- 300,000 Galey & Lord, Inc. company guaranty 9 1/8s, 2008 (In default) (NON) 2,250 160,000 Levi Strauss & Co. bank term loan FRN Ser. B, 10s, 2009 (acquired 9/23/03, cost $160,000) RES) 165,467 505,000 Levi Strauss & Co. sr. notes 12 1/4s, 2012 419,150 245,000 Oxford Industries, Inc. 144A sr. notes 8 7/8s, 2011 263,681 360,000 Russell Corp. company guaranty 9 1/4s, 2010 377,100 330,000 William Carter Holdings Co. (The) company guaranty Ser. B, 10 7/8s, 2011 372,900 -------------- 1,600,548 Tire & Rubber (0.1%) - ------------------------------------------------------------------------------- 120,000 Goodyear Tire & Rubber Co. (The) notes 7.857s, 2011 102,600 Transportation (1.2%) - ------------------------------------------------------------------------------- 240,000 Allied Holdings, Inc. company guaranty Ser. B, 8 5/8s, 2007 225,600 295,000 American Airlines, Inc. pass-through certificates Ser. 01-1, 6.817s, 2011 259,600 40,000 American Airlines, Inc. pass-through certificates Ser. 99-1, 7.024s, 2009 40,600 530,000 Calair, LLC/Calair Capital Corp. company guaranty 8 1/8s, 2008 466,400 170,000 Continental Airlines, Inc. pass-through certificates Ser. D, 7.568s, 2006 136,000 510,000 CSX Corp. notes 6 1/4s, 2008 559,805 210,000 Delta Air Lines, Inc. pass-through certificates Ser. 00-1, 7.779s, 2005 191,846 138,285 Delta Air Lines, Inc. pass-through certificates Ser. 02-1, 7.779s, 2012 118,234 500,000 Evergreen International Aviation, Inc. 144A sec. notes 12s, 2010 440,000 EUR 200,000 Fixed-Link Finance BV sec. notes Ser. B2-X, 7.85s, 2009 (Netherlands) 153,424 $500,000 Kansas City Southern Railway Co. company guaranty 9 1/2s, 2008 555,000 100,000 Kansas City Southern Railway Co. company guaranty 7 1/2s, 2009 103,750 380,000 Navistar International Corp. company guaranty Ser. B, 9 3/8s, 2006 418,000 85,000 Navistar International Corp. sr. notes Ser. B, 8s, 2008 86,275 115,000 Northwest Airlines, Inc. company guaranty 8 3/8s, 2004 115,000 310,000 Northwest Airlines, Inc. company guaranty 7 5/8s, 2005 294,500 134,585 NWA Trust sr. notes Ser. A, 9 1/4s, 2012 138,117 101,260 Pacer International, Inc. bank term loan FRN 4.477s, 2010 (acquired 6/10/03, cost $101,742) (RES) 102,019 100,000 Travel Centers of America, Inc. company guaranty 12 3/4s, 2009 115,000 179,561 US Air, Inc. pass-through certificates Ser. 93-A2, 9 5/8s, 2004 (In default) (NON) 62,846 113,407 US Air, Inc. pass-through certificates Ser. 93-A3, 10 3/8s, 2013 (In default) (NON) 39,693 -------------- 4,621,709 Utilities & Power (4.0%) - ------------------------------------------------------------------------------- 30,000 AES Corp. (The) sr. notes 8 7/8s, 2011 30,825 17,000 AES Corp. (The) sr. notes 8 3/4s, 2008 17,553 420,000 AES Corp. (The) 144A sec. notes 9s, 2015 449,925 595,000 AES Corp. (The) 144A sec. notes 8 3/4s, 2013 635,163 505,000 Allegheny Energy Supply 144A bonds 8 1/4s, 2012 470,913 180,000 Allegheny Energy, Inc. notes 7 3/4s, 2005 182,700 230,000 Avon Energy Partners Holdings 144A notes 7.05s, 2007 (United Kingdom) 194,350 20,000 Avon Energy Partners Holdings 144A notes 6.46s, 2008 (United Kingdom) 17,885 235,000 Calpine Canada Energy Finance company guaranty 8 1/2s, 2008 (Canada) 172,138 124,688 Calpine Corp. bank term loan FRN 6.9s, 2007 (acquired 7/11/03, cost $124,688) (RES) 116,411 210,000 Calpine Corp. sr. notes 8 1/2s, 2011 150,150 685,000 Calpine Corp. sr. notes 7 7/8s, 2008 482,925 225,000 Calpine Corp. sr. notes 7 5/8s, 2006 182,250 1,050,000 Calpine Corp. 144A sec. notes 8 1/2s, 2010 960,750 150,000 CenterPoint Energy Resources Corp. debs. 6 1/2s, 2008 160,909 120,000 CenterPoint Energy Resources Corp. 144A notes 7 7/8s, 2013 136,354 80,000 CMS Energy Corp. pass-through certificates 7s, 2005 80,800 500,000 CMS Energy Corp. sr. notes 8.9s, 2008 527,500 120,000 CMS Energy Corp. sr. notes 8 1/2s, 2011 125,400 100,000 CMS Energy Corp. 144A sr. notes 7 3/4s, 2010 102,250 160,000 Dynegy Holdings, Inc. sr. notes 6 7/8s, 2011 139,200 980,000 Dynegy Holdings, Inc. 144A sec. notes 10 1/8s, 2013 1,063,300 20,000 Dynegy-Roseton Danskamme company guaranty Ser. A, 7.27s, 2010 19,400 65,000 Dynegy-Roseton Danskamme company guaranty Ser. B, 7.67s, 2016 57,850 145,000 Edison Mission Energy sr. notes 10s, 2008 134,850 200,000 Edison Mission Energy sr. notes 9 7/8s, 2011 184,000 170,000 Edison Mission Energy sr. notes 7.73s, 2009 145,350 80,000 El Paso CGP Co. notes 6 3/8s, 2009 65,000 360,000 El Paso Corp. sr. notes 7 3/8s, 2012 297,000 225,000 El Paso Corp. sr. notes Ser. MTN, 7 3/4s, 2032 170,438 105,000 El Paso Natural Gas Co. debs. 8 5/8s, 2022 100,275 90,000 El Paso Natural Gas Co. sr. notes Ser. A, 7 5/8s, 2010 88,650 500,000 El Paso Production Holding Co. 144A sr. notes 7 3/4s, 2013 480,000 50,000 Gemstone Investor, Ltd. 144A company guaranty 7.71s, 2004 50,063 115,000 Kansas Gas & Electric debs. 8.29s, 2016 120,319 91,644 Midland Funding II Corp. debs. Ser. A, 11 3/4s, 2005 101,725 210,000 Midwest Generation LLC pass-through certificates Ser. A, 8.3s, 2009 205,800 150,000 Mirant Americas Generation, Inc. sr. notes 8.3s, 2011 (In default) (NON) 124,500 115,000 Mirant Americas Generation, Inc. sr. notes 7 5/8s, 2006 (In default) (NON) 95,450 150,000 Mirant Americas Generation, Inc. sr. notes 7.2s, 2008 (In default) (NON) 124,500 150,000 Mission Energy Holding Co. sec. notes 13 1/2s, 2008 99,750 360,000 Nevada Power Co. 144A 2nd mtge. 9s, 2013 382,500 206 Northeast Utilities notes Ser. A, 8.58s, 2006 225 185,000 Northwest Pipeline Corp. company guaranty 8 1/8s, 2010 203,963 185,000 Northwestern Corp. notes 7 7/8s, 2007 (In default) (NON) 165,575 205,000 Orion Power Holdings, Inc. sr. notes 12s, 2010 235,750 200,000 Pacific Gas & Electric Co. 144A sr. notes 7 3/8s, 2005 (In default) (NON) 204,000 460,000 PG&E Corp. 144A sec. notes 6 7/8s, 2008 487,600 85,000 PG&E Gas Transmission Northwest sr. notes 7.1s, 2005 86,386 330,000 PSEG Energy Holdings, Inc. notes 7 3/4s, 2007 333,300 260,000 SEMCO Energy, Inc. 144A sr. notes 7 3/4s, 2013 267,800 490,000 Southern California Edison Co. 1st mtge. 8s, 2007 550,025 50,000 Southern California Edison Co. notes 6 3/8s, 2006 52,375 170,000 Teco Energy, Inc. notes 10 1/2s, 2007 191,675 100,000 Teco Energy, Inc. notes 7.2s, 2011 100,750 255,000 Teco Energy, Inc. notes 7s, 2012 251,813 205,000 Teco Energy, Inc. sr. notes 7 1/2s, 2010 210,638 40,000 Tennessee Gas Pipeline Co. debs. 7s, 2028 35,700 355,000 Utilicorp Canada Finance Corp. company guaranty 7 3/4s, 2011 (Canada) 330,150 320,000 Western Resources, Inc. sr. notes 9 3/4s, 2007 365,600 80,000 Williams Cos., Inc. (The) notes 8 3/4s, 2032 83,600 80,000 Williams Cos., Inc. (The) notes 8 1/8s, 2012 86,400 290,000 Williams Cos., Inc. (The) notes 6 1/2s, 2006 298,700 400,000 Williams Cos., Inc. (The) notes Ser. A, 6 3/4s, 2006 412,000 380,000 Williams Cos., Inc. (The) sr. notes 8 5/8s, 2010 416,100 200,000 Williams Holdings Of Delaware notes 6 1/2s, 2008 202,000 64,838 Williams Products bank term loan FRN 4.9s, 2007 (acquired 6/04/03, cost $64,838) (RES) 65,364 537,243 York Power Funding 144A notes 12s, 2007 (Cayman Islands) (In default) (NON) 376,070 -------------- 15,460,630 -------------- Total Corporate bonds and notes (cost $197,520,823) $201,727,119 Foreign government bonds and notes (17.3%) (a) Principal amount Value - ------------------------------------------------------------------------------- EUR 2,000,000 Austria (Republic of) notes Ser. E MTN, 3.8s, 2013 $2,219,761 $1,025,000 Brazil (Federal Republic of) bonds 10 1/8s, 2027 962,475 585,000 Brazil (Federal Republic of) bonds 2.188s, 2012 493,623 410,000 Brazil (Federal Republic of) notes 9 1/4s, 2010 412,050 820,000 Brazil (Federal Republic of) unsub. 10s, 2011 840,500 505,000 Bulgaria (Republic of) bonds 1.938s, 2024 498,688 1,436,000 Bulgaria (Republic of) 144A bonds 8 1/4s, 2015 1,629,860 CAD 4,650,000 Canada (Government of) bonds 6s, 2011 3,828,249 CAD 1,005,000 Canada (Government of) bonds 5 1/2s, 2010 806,044 CAD 410,000 Canada (Government of) bonds Ser. WL43, 5 3/4s, 2029 327,403 $500,000 Chile (Republic of) bonds 5 1/2s, 2013 511,250 191,151 Colombia (Republic of) bank guaranty 9 3/4s, 2011 211,700 945,000 Colombia (Republic of) bonds 10 3/8s, 2033 949,725 245,000 Colombia (Republic of) bonds Ser. NOV, 9 3/4s, 2009 263,743 1,725,000 Colombia (Republic of) notes 10 3/4s, 2013 1,897,500 EUR 335,000 Colombia (Republic of) unsub. bonds Ser. 15A, 11 3/8s, 2008 431,423 $2,055,000 Ecuador (Republic of) bonds stepped-coupon Ser. REGS, 7s (8s, 8/15/04), 2030 (STP) 1,371,713 290,000 El Salvador (Republic of) 144A bonds 8 1/4s, 2032 276,225 830,000 El Salvador (Republic of) 144A bonds 7 3/4s, 2023 856,145 EUR 760,000 France (Government of) bonds 5 3/4s, 2032 984,050 EUR 1,470,000 France (Government of) bonds 5 1/2s, 2010 1,862,353 EUR 440,000 France (Government of) deb. 4s, 2009 515,759 EUR 2,480,000 Germany (Federal Republic of) bonds Ser. 97, 6s, 2007 3,123,139 EUR 730,000 Hellenic Greece (Republic of) bonds 3 1/2s, 2008 844,576 $100,000 Indonesia (Republic of) FRN 2.005s, 2006 89,000 250,000 Indonesia (Republic of) FRN 2.005s, 2005 232,500 EUR 655,000 Italy (Government of) treasury bonds 4 3/4s, 2006 793,586 NZD 2,970,000 New Zealand (Government of) bonds 8s, 2006 1,929,348 NZD 1,925,000 New Zealand (Government of) bonds 6 1/2s, 2013 1,206,771 NZD 3,152,000 New Zealand (Government of) bonds Ser. 709, 7s, 2009 2,019,515 $680,000 Philippines (Republic of) bonds 9 7/8s, 2019 704,820 825,000 Philippines (Republic of) notes 8 1/4s, 2014 806,438 1,720,000 Russia (Federation of) unsub. stepped-coupon 5s (7 1/2s, 3/31/07), 2030 (STP) 1,602,180 3,481,250 Russia (Federation of) 144A unsub. stepped-coupon 5s (7 1/2s, 3/31/07), 2030 (STP) 3,242,784 520,000 Russia (Ministry of Finance) deb. Ser. V, 3s, 2008 456,300 EUR 165,000 South Africa (Republic of) bonds 5 1/4s, 2013 183,149 $1,550,000 South Africa (Republic of) notes 7 3/8s, 2012 1,738,325 SEK 16,800,000 Sweden (Government of) bonds 6 3/4s, 2014 2,465,215 SEK 14,640,000 Sweden (Government of) bonds Ser. 3101, 4s, 2008 2,285,681 $775,000 Turkey (Republic of) notes 9 7/8s, 2008 866,063 215,602 Ukraine (Government of) sr. notes Ser. REGS, 11s, 2007 237,701 EUR 127,401 Ukraine (Government of) sr. notes Ser. REGS, 10s, 2007 159,258 $400,000 Ukraine (Government of) 144A bonds 7.65s, 2013 398,600 GBP 425,000 United Kingdom treasury bonds 8 3/4s, 2017 985,856 GBP 490,000 United Kingdom treasury bonds 5s, 2012 830,234 GBP 2,765,000 United Kingdom treasury bonds 5s, 2004 4,720,080 GBP 3,745,000 United Kingdom treasury bonds 7 1/2s, 2006 6,847,395 $725,000 United Mexican States bonds Ser. MTN, 8.3s, 2031 805,838 925,000 United Mexican States notes 8 1/8s, 2019 1,022,125 540,000 United Mexican States notes 7 1/2s, 2012 602,100 350,000 United Mexican States notes 5 7/8s, 2014 343,000 345,000 United Mexican States notes 4 5/8s, 2008 345,863 990,000 Venezuela (Republic of) bonds 9 1/4s, 2027 796,950 1,178,540 Venezuela (Republic of) FRB 1 7/8s, 2007 1,090,150 255,000 Venezuela (Republic of) 144A notes 10 3/4s, 2013 241,613 -------------- Total Foreign government bonds and notes (cost $59,888,918) $66,166,392 U.S. government and agency obligations (10.1%) (a) Principal amount Value U.S. Government and Agency Mortgage Obligations (3.3%) - ------------------------------------------------------------------------------- $31,854 Federal Home Loan Mortgage Corporation 7 1/2s, May 1, 2027 $34,018 Federal National Mortgage Association Pass-Through Certificates 16,640 8s, July 1, 2024 18,097 137,372 7 1/2s, with due dates from January 1, 2030 to August 1, 2030 146,423 340,440 6 1/2s, August 1, 2032 353,732 4,684,000 6 1/2s, TBA, November 1, 2032 4,865,505 1,929,100 5s, TBA, November 1, 2033 1,902,575 Government National Mortgage Association Pass-Through Certificates 5,279,511 5s, with due dates from December 15, 2032 to October 15, 2033 5,223,478 -------------- 12,543,828 U.S. Treasury Obligations (6.8%) - ------------------------------------------------------------------------------- U.S. Treasury Bonds 5,440,000 7 1/2s, November 15, 2016 6,880,115 3,423,000 6 1/4s, May 15, 2030 3,913,851 5,965,000 6 1/4s, August 15, 2023 6,732,063 3,000 4s, November 15, 2012 2,955 6,060,000 U.S. Treasury Notes 1 5/8s, March 31, 2005 6,071,363 7,990,000 U.S. Treasury Strip zero %, November 15, 2024 2,475,110 -------------- 26,075,457 -------------- Total U.S. government and agency obligations (cost $37,532,405) $38,619,285 Asset-backed securities (7.8%) (a) Principal amount Value - ------------------------------------------------------------------------------- $132,000 Aames Mortgage Trust FRN Ser. 03-1, Class M6, 4.12s, 2033 $110,649 227,561 ABSC Nims Trust 144A Ser. 03-HE5, Class A, 7s, 2033 222,441 Ameriquest Mortgage Securities, Inc. 50,000 FRB Ser. 03-8, Class MV6, 4.87s, 2033 42,119 40,000 FRN Ser. 02-4, Class M4, 4.87s, 2033 34,420 228,000 FRN Ser. 03-1, Class M4, 4.2s, 2033 191,355 56,000 FRN Ser. 03-10, Class MV6, 4.87s, 2033 46,480 90,000 FRN Ser. 03-AR3, Class M5, 4.87s, 2033 85,391 Amortizing Residential Collateral Trust 10,510,909 Ser. 02-BC1, Class A, Interest Only (IO), 6s, 2005 352,160 211,000 FRN Ser. 02-BC5, Class B, 3.37s, 2032 180,174 240,661 AQ Finance NIM Trust Ser. 03-N1, Class Note, 9.37s, 2033 240,655 AQ Finance NIM Trust 144A 485,827 Ser. 03-N2, Class Note, 9.3s, 2033 485,827 109,487 Ser. 03-N9A, Class NOTE, 7.385s, 2033 109,487 43,173 Arc Net Interest Margin Trust Ser. 02-5A, Class A, 7 3/4s, 2032 42,896 Arc Net Interest Margin Trust 144A 73,713 Ser. 02-1A, Class A, 7 3/4s, 2032 73,701 147,034 Ser. 02-8A, Class A1, 7 3/4s, 2032 145,823 208,000 Arcap REIT, Inc. 144A Ser. 03-1A, Class E, 6.33s, 2038 209,950 100,000 Argent Securities, Inc. FRB Ser. 03-W1, Class MV6, 4.87s, 2033 79,413 Asset Backed Funding Certificates 208,000 FRB Ser. 03-OPT1, Class M6, 4.62s, 2031 184,242 236,000 FRB Ser. 03-WF1, Class M3, 4.17s, 2032 236,000 72,000 FRB Ser. 03-WF1, Class M4, 4.37s, 2032 66,113 22,106 Asset Backed Funding Corp. NIM Trust Ser. 02-WF1, 9.32s, 2032 22,106 Asset Backed Securities Corp. Home Equity Loan Trust 136,000 FRB Ser. 02-HE3, Class M4, 4.12s, 2032 118,077 86,000 FRB Ser. 03-HE5, Class M5, 5.37s, 2033 74,390 202,000 FRN Ser. 03-HE1, Class M4, 5.62s, 2033 177,094 213,000 FRN Ser. 03-HE3, Class M5, 5.12s, 2033 182,378 197,000 FRN Ser. 03-HE6, Class M6, 5.12s, 2033 172,178 439,000 FRN Ser. 2003-HE2, Class M4, 4.97s, 2033 423,023 183,334 Aviation Capital Group Trust 144A FRB Ser. 03-2A, Class G1, 1.82s, 2033 183,334 1,004,000 Bank One Issuance Trust FRN Ser. 02-C1, Class C1, 2.08s, 2009 998,000 Bayview Financial Acquisition Trust 540,000 Ser. 02-CA, Class A, IO, 5.7s, 2004 23,288 17,168,580 Ser. 03-X, Class A, IO, 1.36s, 2006 284,355 373,867 FRN Ser. 01-DA, Class M3, 2.52s, 2031 370,129 CDC Mortgage Capital Trust 140,000 FRB Ser. 03-HE3, 4.87s, 2033 116,608 169,998 FRN Ser. 03-HE2, Class B3, 4.87s, 2033 145,139 8,927 Chase Funding Net Interest Margin Ser. 02-2, 8 1/2s, 2035 8,905 Chase Funding Net Interest Margin 144A 44,087 Ser. 02-4A, Class Note, 8 1/2s, 2035 44,144 73,433 Ser. 03-1A, 8 3/4s, 2004 73,341 351,074 Ser. 03-4A, Class NOTE, 6 3/4s, 2036 350,744 190,332 Ser. 2003-2A, Class NOTE, 8 3/4s, 2035 190,332 Conseco Finance Securitizations Corp. 135,000 Ser. 00-2, Class A4, 8.48s, 2021 139,871 2,365,000 Ser. 00-4, Class A6, 8.31s, 2032 2,057,376 600,000 Ser. 00-6, Class M2, 8.2s, 2032 300,000 12,000 Ser. 01-04, Class A4, 7.36s, 2019 11,192 9,000 Ser. 01-3, Class A3, 5.79s, 2024 8,816 269,000 Ser. 01-3, Class A4, 6.91s, 2033 243,227 561,000 Ser. 01-4, Class B1, 9.4s, 2010 196,350 1,584,103 Ser. 02-1, Class A, 6.681s, 2032 1,609,255 200,000 Ser. 01-3, Class M2, 7.44s, 2033 66,000 394,000 Consumer Credit Reference IDX Securities FRB Ser. 02-1A, Class A, 3.14s, 2007 392,881 First Franklin Mortgage Loan Asset Backed Certificates 92,000 Ser. 03-FF3, 4.12s, 2033 86,183 101,000 FRB Ser. 03-FF4, Class M6, 4.92s, 2033 91,878 252,859 First Franklin NIM Trust Ser. 03-FF3A, Class A, 6 3/4s, 2033 251,877 272,047 First Plus 144A Ser. 98-A, Class A, 8 1/2s, 2023 195,874 Granite Mortgages PLC EUR 780,000 Ser. 03-2, Class 2C1, 5.2s, 2010 (United Kingdom) 892,995 GBP 585,000 FRN Ser. 03-2, Class 3C, 5.323s, 2043 (United Kingdom) 992,687 Green Tree Financial Corp. $135,529 Ser. 95-F, Class B2, 7.1s, 2021 123,332 87,126 Ser. 99-3, 6.16s, 2031 88,379 678,000 Ser. 99-5, Class A5, 7.86s, 2030 596,248 1,130,486 Greenpoint Manufactured Housing Ser. 00-3, Class IA, 8.45s, 2031 976,966 GSAMP Trust 55,488 Ser. 02-HE2N, Class Note, 8 1/4s, 2032 55,594 117,000 FRB Ser. 03-FM1, Class B3, 5.62s, 2033 104,423 159,847 GSAMP Trust 144A Ser. 03-HE1N, Class NOTE, 7 1/4s, 2033 159,748 Home Equity Asset Trust 50,941 Ser. 02-1N, Class A, 8s, 2032 50,304 208,000 FRB Ser. 03-5, Class B3, 5.62s, 2033 185,167 Home Equity Asset Trust 144A 347,023 Ser. 02-5N, Class A, 8s, 2033 340,083 138,478 Ser. 03-4N, Class A, 8s, 2033 137,564 685,000 LNR CDO, Ltd. Ser. 02-1A, Class FFL, 3.87s, 2037 (Cayman Islands) 633,694 415,000 LNR CDO, Ltd. 144A FRB Ser. 03-1A, Class EFL, 4.119s, 2036 (Cayman Islands) 415,000 299,828 Long Beach Asset Holdings Corp. 144A Ser. 2003-2, Class N1, 7.627s, 2033 299,641 165,303 Long Beach Asset Holdings Corp. NIM Trust 144A Ser. 03-4, Class N1, 6.535s, 2033 165,251 229,000 Long Beach Mortgage Loan Trust FRN Ser. 03-3, Class M4, 4.62s, 2033 187,780 568,528 Madison Avenue Manufactured Housing Contract FRN Ser. 02-A, Class B1, 4.37s, 2032 369,543 Master Asset Backed Securities Trust FRB 74,000 Ser. 03-NC1, Class M6, 5.12s, 2033 61,507 112,000 Ser. 03-OPT1, Class MV5, 4.62s, 2032 99,833 287,000 Ser. 03-OPT2, Class M5, 4.87s, 2033 254,590 Merrill Lynch Mortgage Investors, Inc. 180,646 Ser. 03-WM3N, Class N1, 8s, 2005 178,949 373,000 FRB Ser. 03-WMC1, Class B2, 4.12s, 2033 347,240 163,000 FRB Ser. 03-WMC3, Class B3, 4.12s, 2034 137,553 Mid-State Trust 296,888 Ser. 10, Class B, 7.54s, 2036 262,931 239,401 Ser. 11, Class B, 8.221s, 2038 225,804 216,000 Morgan Stanley ABS Capital I FRN Ser. 03-NC10, Class B3, 4.87s, 2033 180,984 114,779 Morgan Stanley ABS Capital I 144A Ser. 03-NC9N, Class NOTE, 7.6s, 2033 114,779 Morgan Stanley Capital I 193,000 FRB Ser. 02-NC6, Class B2, 4.87s, 2032 168,341 256,000 FRB Ser. 03-NC8, Class B3, 4.87s, 2033 215,160 218,000 FRN Ser. 03-NC6, Class B3, 4.87s, 2033 183,782 Morgan Stanley Dean Witter Capital I 210,000 FRN Ser. 01-NC3, Class B1, 3.57s, 2031 193,288 195,000 FRN Ser. 01-NC4, Class B1, 3.62s, 2032 177,384 350,000 FRN Ser. 02-AM2, Class B1, 3.37s, 2032 313,241 193,000 FRN Ser. 02-HE1, Class B1, 2.92s, 2032 181,684 26,740 Morgan Stanley Dean Witter Capital I 144A Ser. 01-NC4N, Class Note, 8 1/2s, 2032 26,762 218,000 New Century Home Equity Loan Trust FRN Ser. 03-2, Class M4, 4.72s, 2033 185,845 33,547 NovaStar Caps Trust Ser. 02-C1, Class A, 7.15s, 2031 33,547 Option One Mortgage Loan Trust 203,000 FRB Ser. 03-6, Class M6, 4.62s, 2033 174,174 Option One Mortgage Loan Trust 50,000 FRN Ser. 02-6, Class M4, 4.12s, 2032 46,324 205,000 FRN Ser. 03-3, Class M6, 4.62s, 2033 182,386 66,240 Option One Mortgage Securities Corp. Ser. 02-2A, Class CFTS, 8.83s, 2032 66,240 Option One Mortgage Securities Corp. 144A 69,017 Ser. 02-1, Class CTFS, 6 3/4s, 2032 68,726 96,915 Ser. 03-5, 6.9s, 2033 96,915 115,429 Option One Mortgage Securities Corp. NIM Trust 144A Ser. 2003-2B, Class N1, 7.63s, 2033 (Cayman Islands) 115,357 490,310 Pass-Through Amortizing Credit Card Trust Ser. 02-1A, Class A4FL, 6.62s, 2012 489,061 2,246,311 Residential Asset Mortgage Products, Inc. Ser. 03-RZ1, Class A, IO, 5 3/4s, 2005 142,500 228,640 Rural Housing Trust Ser. 87-1, Class D, 6.33s, 2026 239,357 SAIL Net Interest Margin Notes 144A 229,478 Ser. 03-7A, Class A, 7s, 2033 227,775 71,229 Ser. 03-8A, Class A, 7s, 2033 70,870 81,401 Ser. 03-4, Class A, 7 1/2s, 2033 (Cayman Islands) 81,316 380,783 Ser. 03-BC2A, Class A, 7 3/4s, 2033 379,677 69,200 Sasco Arc Net Interest Margin Notes Ser. 02-BC10, Class A, 7 3/4s, 2033 68,571 Sasco Arc Net Interest Margin Notes 144A 219,141 Ser. 03-3, Class A, 7 3/4s, 2033 218,040 416,229 Ser. 03-5, Class A, 7.35s, 2033 (Cayman Islands) 416,107 359,668 Ser. 03-AM1, Class A, 7 3/4s, 2033 357,914 150,307 Sasco Arc Net Interest Margin Trust 144A Ser. 03-BC1, Class B, zero %, 2033 107,634 144,000 Saxon Asset Securities Trust FRB Ser. 03-3, Class M6, 5.12s, 2033 124,133 186,036 Saxon Net Interest Margin Trust 144A Ser. 03-A, Class A, 6.656s, 2033 186,036 80,643 SHARP 144A Ser. 03-TC1N, 7 3/4s, 2033 80,643 Structured Asset Investment Loan Trust 519,000 Ser. 03-BC1, Class M3, 4.12s, 2033 514,378 407,280 Ser. 03-BC1A, Class A, 7 3/4s, 2033 405,300 4,967,191 Ser. 03-BC2, Class A, IO, 6s, 2005 295,336 100,000 Ser. 03-BC2, Class B, 7s, 2033 94,260 1,572,000 Ser. 03-BC8, Class A, IO, 6s, 2005 113,464 200,000 FRN Ser. 2003-BC3, Class B, 4.62s, 2033 178,813 215,000 Structured Asset Securities Corp. FRN Ser. 02-HF2, Class M3, 3.12s, 2032 182,868 212,000 TIAA Commercial Real Estate Securitization Ser. 02-1A, Class IV, 6.84s, 2037 175,181 254,000 TIAA Commercial Real Estate Securitization 144A Ser. 03-1A, Class E, 8s, 2038 228,472 1,597,000 Washington Mutual Ser. 03-S1, Class A11, IO, 5 1/2s, 2033 188,702 492,000 Whole Auto Loan Trust 144A Ser. 03-1, Class D, 6s, 2010 489,771 -------------- Total Asset-backed securities (cost $33,720,665) $29,871,545 Collateralized mortgage obligations (5.7%) (a) Principal amount Value - ------------------------------------------------------------------------------- $2,594,152 Commercial Mortgage Acceptance Corp. Ser. 97-ML1, IO, 0.875104s, 2017 $70,529 757,000 Criimi Mae Commercial Mortgage Trust Ser. 98-C1, Class A2, 7s, 2011 852,808 1,143,000 Criimi Mae Commercial Mortgage Trust 144A Ser. 98-C1, Class B, 7s, 2011 1,171,379 24,138,182 Deutsche Mortgage & Asset Receiving Corp. Ser. 98-C1, Class X, IO, 1.062253s, 2023 791,204 Fannie Mae 818 Ser. 92-15, Class L, IO, 1037.606s, 2022 11,919 114,617 Ser. 98-51, Class SG, IO, 24.44s, 2022 44,986 667,677 Ser. 02-36, Class SJ, 17.325s, 2029 741,017 374,116 Ser. 03-W3, Class 1A3, 7 1/2s, 2042 407,553 6,557 Ser. 03-W2, Class 1A3, 7 1/2s, 2042 7,143 2,805 Ser. 02-14, Class A2, 7 1/2s, 2042 3,056 457,614 Ser. 01-T10, Class A2, 7 1/2s, 2041 498,514 7,717 Ser. 01-T8, Class A1, 7 1/2s, 2041 8,407 1,769,750 Ser. 01-T7, Class A1, 7 1/2s, 2041 1,927,923 258,210 Ser. 01-T3, Class A1, 7 1/2s, 2040 281,288 782,534 Ser. 01-T1, Class A1, 7 1/2s, 2040 852,474 312,107 Ser. 99-T2, Class A1, 7 1/2s, 2039 340,002 168,516 Ser. 00-T6, Class A1, 7 1/2s, 2030 183,577 772,616 Ser. 01-T4, Class A1, 7 1/2s, 2028 841,669 1,751 Ser. 02-W3, Class A5, 7 1/2s, 2028 1,907 1,934,247 Ser. 02-9, Class MS, IO, 6.98s, 2032 165,620 1,446,644 Ser. 02-36, Class QH, IO, 6.93s, 2029 85,442 294,907 Ser. 02-29, Class SL, IO, 6.93s, 2029 5,806 885,934 Ser. 02-63, Class SN, IO, 6.88s, 2032 75,304 822,594 Ser. 02-52, Class SL, IO, 6.88s, 2032 64,394 1,515,122 Ser. 02-92, Class SA, IO, 6.83s, 2033 202,648 699,007 Ser. 02-28, Class SA, IO, 6.68s, 2032 57,122 807,311 Ser. 03-7, Class SM, IO, 6.63s, 2023 34,058 2,263,371 Ser. 03-49, Class TS, IO, 6.58s, 2018 296,714 983,123 Ser. 03-14, Class KS, IO, 6.48s, 2017 86,945 500,810 Ser. 03-23, Class SC, IO, 6.43s, 2033 39,809 1,839,400 Ser. 03-41, Class SP, IO, 6.08s, 2015 158,361 841,336 Ser. 03-58, IO, 6s, 2033 167,216 1,081,767 Ser. 03-26, Class IG, IO, 6s, 2033 198,099 692,747 Ser. 322, Class 2, IO, 6s, 2032 127,509 877,750 Ser. 318, Class 2, IO, 6s, 2032 157,446 339,276 Ser. 01-74, Class MI, IO, 6s, 2015 25,577 581 Ser. 02-27, Class IA, IO, 6s, 2013 1 6,262,611 Ser. 03-34, IO, 5.98s, 2032 643,875 5,343,175 Ser. 03-34, Class ES, IO, 5.88s, 2033 549,345 2,137,290 Ser. 03-34, Class SG, IO, 5.88s, 2033 223,080 945,565 Ser. 343, Class 14, IO, 5 1/2s, 2033 211,718 986,603 Ser. 343, Class 15, IO, 5 1/2s, 2033 221,986 449,277 Ser. 343, Class 17, IO, 5 1/2s, 2033 103,123 1,465,569 Ser. 329, Class 2, IO, 5 1/2s, 2033 345,783 1,366,069 Ser. 03-45, Class PI, IO, 5 1/2s, 2029 174,976 1,847,221 Ser. 03-37, Class IC, IO, 5 1/2s, 2027 205,503 2,881,111 Ser. 03-63, Class SE, IO, 5.48s, 2031 323,225 Fannie Mae 3,061,442 Ser. 03-23, Class AI, IO, 5s, 2017 362,965 1,043,600 Ser. 03-24, Class IC, IO, 5s, 2015 174,128 7,415,773 Ser. 03-W10, Class 3A, IO, 2.22s, 2043 314,012 6,213,307 Ser. 03-W10, Class 1A, IO, 2.204s, 2043 266,007 7,147,991 Ser. 00-T6, IO, 0.745s, 2030 155,245 104,810 Ser. 02-97, Principal Only (PO), zero %, 2033 91,022 146,475 Ser. 99-51, Class N, PO, zero %, 2029 126,884 107,069 Ser. 99-52, Class MO, PO, zero %, 2026 104,875 38,903 Ser. 96-5, Class PB, PO, zero %, 2024 37,880 8,344 Federal Home Loan Mortgage Corp. Structured Pass-Through Securities Ser. T-58, Class 4A, 7 1/2s, 2043 9,076 8,289,173 FFCA Secured Lending Corp. Ser. 00-1, Class X, IO, 1.654s, 2020 574,978 Freddie Mac 723,300 Ser. 2412, Class GS, FRN, 18.018s, 2032 867,056 274,451 Ser. 2478, Class SY, IO, 7.03s, 2021 14,937 329,056 Ser. 2448, Class SE, IO, 6.98s, 2029 8,638 1,487,200 Ser. 2448, Class SM, IO, 6.88s, 2032 204,490 1,604,832 Ser. 2579, Class GS, IO, 6.53s, 2017 143,751 2,996,015 Ser. 216, IO, 6s, 2032 529,920 786,800 Ser. 2515, Class IG, IO, 5 1/2s, 2032 257,648 404,800 Ser. 2590, Class IH, IO, 5 1/2s, 2028 110,308 361,180 Ser. 215, Class PO, PO, zero %, 2031 324,836 302,052 Ser. 2235, PO, zero %, 2030 259,623 2 Ser. 2078, C2 Government National Mortgage Association 210,884 Ser. 02-36, Class SD, IO, 7.03s, 2029 4,150 564,048 Ser. 02-51, Class SA, IO, 6.98s, 2032 20,813 653,161 Ser. 02-29, Class SX, IO, 6.93s, 2029 18,778 79,487 Ser. 02-40, Class IB, IO, 6 1/2s, 2028 1,528 1,012,540 Ser. 01-43, Class SJ, IO, 6.48s, 2029 52,051 312,897 Ser. 01-43, Class SD, IO, 6.44s, 2028 4,318 1,768,410 Ser. 01-19, Class S, IO, 6.38s, 2031 165,788 2,729,722 Ser. 03-83, Class SI, IO, 5.38s, 2032 239,277 1,740,298 Ser. 02-47, Class SM, IO, 4.85s, 2032 104,418 155,563 Ser. 98-2, Class EA, PO, zero %, 2028 134,903 726,388 Hermione (European Loan Conduit No. 14) 144A FRB Class A, 4.102s, 2011 (Ireland) 1,230,512 4,451,841 Merrill Lynch Mortgage Investors, Inc. Ser. 96-C2, IO, 2.513s, 2028 307,532 1,728,504 Merrill Lynch Mortgage Trust 144A Ser. 02-MW1, Class XP, IO, 1.616s, 2034 120,455 3,606,024 Mortgage Capital Funding, Inc. Ser. 97-MC2, Class X, IO, 1.33s, 2012 136,055 Starwood Asset Receivables Trust 144A 105,000 FRB Ser. 03-1A, Class F, 2.22s, 2022 105,063 135,000 FRB Ser. 03-1A, Class E, 2.17s, 2022 135,081 140,000 FRB Ser. 03-1A, Class A2, 1.47s, 2022 140,084 100,000 Trizechahn Office Properties Trust 144A Ser. 01-TZHA, Class D3, 6.943s, 2013 106,941 -------------- Total Collateralized mortgage obligations (cost $21,300,021) $21,954,068 Preferred stocks (1.0%) (a) Number of shares Value - ------------------------------------------------------------------------------- 3,756 Chevy Chase Preferred Capital Corp. Ser. A, $5.188 pfd. $215,031 10,460 CSC Holdings, Inc. Ser. M, $11.125 cum. pfd. 1,090,454 27,930 Diva Systems Corp. Ser. C, 6.00% cum. pfd. 279 7,700 Doane Pet Care Co. $7.125 pfd. 308,000 538 Dobson Communications Corp. 13.00% pfd. (PIK) 564,900 329 Dobson Communications Corp. 12.25% pfd. (PIK) 345,471 210 First Republic Capital Corp. 144A 10.50% pfd. 220,500 6,895 iStar Financial, Inc. $1.95 cum. pfd. 179,270 26 Leiner Health Products Ser. C, zero % pfd. 1 8,795 Lodgian, Inc. Ser. A, $7.06 cum. pfd. (PIK) 195,689 58 Metrocall Holdings, Inc. Ser. A, 15.00% cum. pfd. 638 1,906 Microcell Telecommunications, Inc. zero % pfd. (Canada) 24,528 718 North Atlantic Trading Co. 12.00% pfd. (PIK) 12,206 11 NTL Europe, Inc. Ser. A, zero % cum. pfd. 53 44 Paxson Communications Corp. 13.25% cum. pfd. (PIK) 413,600 676 Rural Cellular Corp. 12.25% pfd. (PIK) 419,120 -------------- Total Preferred stocks (cost $4,583,538) $3,989,740 Common stocks (0.9%) (a) Number of shares Value - ------------------------------------------------------------------------------- 1,153 Alderwoods Group, Inc. (NON) $8,590 350,000 AMRESCO Creditor Trust (NON) (R) 9,800 958 Archibald Candy Corp. (NON) 2,730 7,792 Aurora Foods, Inc. (NON) 218 1,941 Birch Telecom, Inc. (NON) 6,716 244 Comdisco Holding Co., Inc. (NON) 16,348 9,324 Conseco, Inc. (NON) 190,210 1,883,299 Contifinancial Corp. Liquidating Trust Units 28,249 8,378 Covad Communications Group, Inc. (NON) 36,696 5,442 Dobson Communications Corp. (NON) 47,182 1,228 Genesis Health Ventures, Inc. (NON) 33,033 18,922 Globix Corp. (NON) 77,580 4,442 Jasper Energy 144A (NON) 278 10,420 Lodgian, Inc. (NON) 79,609 60,000 Loewen Group International, Inc. (NON) 6 947 Mariner Health Care, Inc. (NON) 11,733 810 Mediq, Inc. (NON) 81 480 Metrocall Holdings, Inc. (NON) 15,600 16 Microcell Telecommunications, Inc. Class A (Canada) (NON) 201 1,894 Microcell Telecommunications, Inc. Class B (Canada) (NON) 24,503 7,221 Millennium Chemicals, Inc. 72,354 470,000 Morrison Knudsen Corp. (NON) 59,925 15,092 Pioneer Cos., Inc. (NON) 75,913 2,642 Polymer Group, Inc. Class A (NON) 13,871 480 Premium Holdings (LP) 144A (NON) 10,315 1,004 PSF Group Holdings, Inc. 144A Class A (NON) 1,756,755 91 Quorum Broadcast Holdings, Inc. Class E (acquired 5/15/01, cost $90,498) (RES) (NON) 48,471 45,630 Regal Entertainment Group (NON) 841,873 129 Sterling Chemicals, Inc. (NON) 2,193 467 Sun Healthcare Group, Inc. (NON) 3,124 503,130 VFB LLC (NON) 95,595 1,154 Washington Group International, Inc. (NON) 31,989 139 WilTel Communications, Inc. (NON) 2,464 1 WorldCom, Inc. -- WorldCom Group (NON) 1 909 York Research Corp. 144A (NON) 57 -------------- Total Common stocks (cost $10,092,780) $3,604,263 Brady bonds (0.9%) (a) Principal amount Value - ------------------------------------------------------------------------------- $1,010,000 Argentina (Government of) FRB Ser. L-GL, 2.063s, 2023 $489,850 795,000 Argentina (Republic of) govt. guaranty Ser. L-GP, 6s, 2023 (In default) (NON) 385,575 258,596 Brazil (Federal Republic of) bonds 8s, 2014 242,124 625,000 Brazil (Federal Republic of) govt. guaranty FRB Ser. RG, 2.063s, 2012 527,375 911,800 Peru (Republic of) bonds Ser. PDI, 5s, 2017 851,439 225,000 Peru (Republic of) coll. FLIRB 4 1/2s, 2017 (acquired various dates from 5/14/03 to 8/23/03, cost $156,000) (RES) 199,688 880,000 Peru (Republic of) coll. FLIRB Ser. 20YR, 4 1/2s, 2017 781,000 -------------- Total Brady bonds (cost $2,972,928) $3,477,051 Convertible bonds and notes (0.5%) (a) Principal amount Value - ------------------------------------------------------------------------------- $60,000 AES Corp. (The) cv. sub. notes 4 1/2s, 2005 $56,700 505,000 American Tower Corp. cv. notes 5s, 2010 475,963 280,000 Amkor Technologies, Inc. cv. notes 5 3/4s, 2006 280,700 125,000 CenterPoint Energy, Inc. 144A cv. sr. notes 3 3/4s, 2023 134,063 1,210,000 Cybernet Internet Services International, Inc. 144A cv. sr. disc. notes stepped-coupon zero % (13s, 8/15/04) 2009 (Denmark) (In default) (NON) (STP) 1,210 145,000 Kulicke & Soffa Industries, Inc. cv. sub. notes 4 3/4s, 2006 139,563 9,000 Millicom International Cellular SA 144A cv. bonds zero %, 2006 (Luxembourg) (PIK) 27,000 750,000 Nextel Communications, Inc. cv. sr. notes 6s, 2011 862,500 50,000 Rogers Communications cv. debs. 2s, 2005 (Canada) 45,813 20,000 Tower Automotive, Inc. cv. sub. notes 5s, 2004 19,300 -------------- Total Convertible bonds and notes (cost $2,722,600) $2,042,812 Convertible preferred stocks (0.2%) (a) Number of shares Value - ------------------------------------------------------------------------------- 4,915 Crown Castle International Corp. $3.125 cv. pfd. $208,273 996 Knology, Inc. 144A Ser. D, zero % cv. pfd. 996 2,600 LTV Corp. 144A $4.125 cv. pfd. (In default) (NON) 26 2,910 Omnicare, Inc. zero % cv. pfd. 170,963 32 Paxson Communications Corp. 144A 9.75% cv. pfd. (PIK) 249,600 4,014 Telex Communications, Inc. zero % cv. pfd. (In default) (NON) 4,013 3,690 Williams Cos., Inc. (The) 144A $2.75 cv. pfd. 241,695 -------------- Total Convertible preferred stocks (cost $886,338) $875,566 Units (0.1%) (a) Number of units Value - ------------------------------------------------------------------------------- 641,000 HMP Equity Holdings Corp. units zero %, 2008 $320,500 376 XCL Equity Units zero % 167,075 -------------- Total Units (cost $1,239,290) $487,575 Warrants (--%) (a) (NON) Expiration Number of warrants date Value - ------------------------------------------------------------------------------- 560 Dayton Superior Corp. 144A 6/15/09 $1 1,174 Diva Systems Corp. 144A 5/15/06 12 2 Doe Run Resources Corp. 144A 12/31/12 1 150 MDP Acquisitions PLC 144A (Ireland) 10/1/13 375 1,173 Microcell Telecommunications (Canada) 5/1/08 1,914 704 Microcell Telecommunications (Canada) 5/1/05 748 210 Mikohn Gaming Corp. 144A 8/15/08 525 220 ONO Finance PLC 144A (United Kingdom) 2/15/11 1 230 Pliant Corp. 144A 6/1/10 115 261 Solutia, Inc. 144A 7/15/09 6,003 1,169 Sun Healthcare Group, Inc. 2/28/05 1 570 Travel Centers of America, Inc. 144A 5/1/09 5,700 900 Ubiquitel, Inc. 144A 4/15/10 9 645,000 United Mexican States Ser. B (Mexico) (Rights) 6/30/04 5,805 645,000 United Mexican States Ser. C (Mexico) (Rights) 6/30/05 1,613 645,000 United Mexican States Ser. D (Mexico) (Rights) 6/30/06 645 645,000 United Mexican States Ser. E (Mexico) (Rights) 6/30/07 323 20 Versatel Telecom NV (Netherlands) 5/15/08 1 711 Washington Group International, Inc. Ser. A 1/25/06 4,302 813 Washington Group International, Inc. Ser. B 1/25/06 3,699 439 Washington Group International, Inc. Ser. C 1/25/06 1,752 320 XM Satellite Radio Holdings, Inc. 144A 3/15/10 8,320 -------------- Total Warrants (cost $330,689) $41,865 Short-term investments (2.6%) (a) Principal amount Value - ------------------------------------------------------------------------------- $941,000 U.S. Treasury Bill zero %, November 6, 2003 (SEG) $940,860 9,000,000 Interest in $300,000,000 joint repurchase agreement dated October 31, 2003 with Bank of America due November 3, 2003 with respect to various U.S. Government obligations -- maturity value of $9,000,788 for an effective yield of 1.05% 9,000,000 -------------- Total Short-term investments (cost $9,940,860) $9,940,860 - ------------------------------------------------------------------------------- Total Investments (cost $382,731,855) $382,798,141 - ------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $382,818,330. (NON) Non-income-producing security. (STP) 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 accruing interest or dividend income at this rate. (RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held at October 31, 2003 was $8,564,648 or 2.2% of net assets. (PIK) Income may be received in cash or additional securities at the discretion of the issuer. (SEG) This security was pledged and segregated with the custodian to cover margin requirements for futures contracts at October 31, 2003. (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. TBA after the name of a security represents to be announced securities (Note 1). FLIRB represents Front Loaded Interest Reduction Bond. The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes (FRN) are the current interest rates shown at October 31, 2003.
- ------------------------------------------------------------------------------------------------------ Forward currency contracts to buy at October 31, 2003 (aggregate face value $30,340,466) - ------------------------------------------------------------------------------------------------------ Market Aggregate Delivery Unrealized value face value date appreciation - ------------------------------------------------------------------------------------------------------ Australian Dollars $10,504,809 $9,672,114 12/17/03 $832,695 British Pounds 2,442,920 2,324,291 12/17/03 118,629 Canadian Dollar 1,828,743 1,817,375 12/17/03 11,368 Japanese Yen 17,083,714 16,136,742 12/17/03 946,972 Swedish Krona 168,934 162,889 12/17/03 6,045 Swiss Franc 239,973 227,055 12/17/03 12,918 - ------------------------------------------------------------------------------------------------------ $1,928,627 - ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------ Forward currency contracts to sell at October 31, 2003 (aggregate face value $38,655,752) - ------------------------------------------------------------------------------------------------------ Market Aggregate Delivery Unrealized value face value date depreciation - ------------------------------------------------------------------------------------------------------ British Pounds $7,527,775 $7,155,369 12/17/03 $(372,406) Canadian Dollar 4,053,563 3,847,140 12/17/03 (206,423) Danish Krone 1,305,769 1,259,985 12/17/03 (45,784) Euro 16,736,922 15,871,811 12/17/03 (865,111) Japanese Yen 1,497,100 1,452,325 12/17/03 (44,775) New Zealand Dollars 5,202,894 4,806,574 12/17/03 (396,320) Swedish Krona 4,628,787 4,262,548 12/17/03 (366,239) - ------------------------------------------------------------------------------------------------------ $(2,297,058) - ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------ Futures contracts outstanding at October 31, 2003 - ------------------------------------------------------------------------------------------------------ Unrealized Market Aggregate Expiration appreciation/ value face value date (depreciation) - ------------------------------------------------------------------------------------------------------ 3 Month Eurodollar (Long) $17,661,950 $17,650,620 Sep-06 $11,330 3 Month Eurodollar (Long) 16,983,200 17,020,064 Jun-06 (36,864) 3 Month Eurodollar (Short) 18,119,825 18,140,991 Sep-04 21,166 3 Month Eurodollar (Short) 17,457,125 17,474,933 Jun-04 17,808 Euro-Bobl 5 yr (Long) 8,198,214 8,133,090 Dec-03 65,124 Euro-Bund 10 yr (Long) 11,794,440 11,709,125 Dec-03 85,315 Interest Rate Swap 10 yr (Long 876,750 866,069 Dec-03 10,681 Japanese Government Bond 10 yr (Long) 6,852,639 6,775,183 Dec-03 77,456 U.K. Gilt (Long) 13,024,588 13,160,831 Dec-03 (136,243) U.S. Treasury Bond 20 yr (Long 19,025,781 18,355,056 Dec-03 670,725 U.S. Treasury Note 10 yr (Long 11,117,391 10,798,007 Dec-03 319,384 U.S. Treasury Note 10 yr (Shor 28,748,000 28,760,933 Dec-03 12,933 U.S. Treasury Note 5 yr (Short 21,020,750 20,709,456 Dec-03 (311,294) - ------------------------------------------------------------------------------------------------------ $807,521 - ------------------------------------------------------------------------------------------------------ Interest rate swap contracts outstanding at October 31, 2003 Notional Termination Unrealized amount date appreciation - ------------------------------------------------------------------------------------------------------ Agreement with Merrill Lynch Capital Services, Inc. dated November 17, 2000 to pay semi-annually the notional amount multiplied by the three month USD-LIBOR- BBA and receive the notional amount multiplied by 6.68%. $3,500,000 11/21/05 $313,889 Agreement with Merrill Lynch Capital Services, Inc. dated September 27, 2002 to receive semi-annually the notional amount multiplied by the six month JPY-LIBOR-BBA and pay monthly the notional amount multiplied by 0.399%. JPY 1,334,000,000 10/1/07 102,041 Agreement with Credit Suisse First Boston dated October 30, 2003 to receive semi- annually the notional amount multiplied by the three month USD LIBOR and pay quarterly the notional amount multiplied by 2.225%, and pay quarterly the notional amount multiplied by the three month USD LIBOR. $167,000 11/3/05 132 Agreement with Credit Suisse First Boston dated October 30, 2003 to receive semi-annually the notional amount multiplied by the three month USD LIBOR and pay quarterly the notional amount multiplied by 4.764% and pay quarterly the notional amount multiplied by the three month USD LIBOR. 1,939,000 11/3/13 8,281 - ------------------------------------------------------------------------------------------------------ $424,343 - ------------------------------------------------------------------------------------------------------ Credit default contracts outstanding at October 31, 2003 (premiums received $141,064) Notional Market amount value - ------------------------------------------------------------------------------------------------------ Agreement with Deutsche Bank effective July 17, 2003, maturing on September 20, 2008 to receive a premium equal to 9.795% times the notional amount. Upon a credit default event of Petroleos Mexicanos, 6.125% due 8/15/08 the fund makes a payment of the proportional notional amount times the difference between the par value and the then-market value of Petroleos Mexicanos 6.125%, 2008. $225,000 $18,639 Agreement with Lehman Brothers Special Financing, Inc. effective July 17, 2003, maturing on September 20, 2008 to receive a premium equal to 10.02% times the notional amount. Upon a credit default event of Petroleos Mexicanos, 9.50% due 9/15/27 the fund makes a payment of the proportional notional amount times the difference between the par value and the then-market value of Petroleos Mexicanos 9.50%, 2027. 225,000 19,211 Agreement with Deutsche Bank effective September 8, 2003, maturing on September 20, 2013 to receive a premium equal to 21.44% times the notional amount. Upon a credit default event of Petroleos Mexicanos, 7.375% due 12/12/14 the fund makes a payment of the proportional notional amount times the difference between the par value and the then-market value of Petroleos Mexicanos 7.375%, 2014. 450,000 87,246 - ------------------------------------------------------------------------------------------------------ $125,096 - ------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities October 31, 2003 Assets - ------------------------------------------------------------------------------- Investments in securities, at value (identified cost $382,731,855) (Note 1) $382,798,141 - ------------------------------------------------------------------------------- Cash 635,462 - ------------------------------------------------------------------------------- Foreign currency (cost $1,615,789) (Note 1) 1,651,710 - ------------------------------------------------------------------------------- Dividends, interest and other receivables 6,920,168 - ------------------------------------------------------------------------------- Receivable for securities sold 6,068,823 - ------------------------------------------------------------------------------- Receivable for variation margin (Note 1) 27,511 - ------------------------------------------------------------------------------- Receivable for open swap contracts (Note 1) 424,343 - ------------------------------------------------------------------------------- Receivable for open forward currency contracts (Note 1) 1,958,201 - ------------------------------------------------------------------------------- Receivable for closed forward currency contracts (Note 1) 540,378 - ------------------------------------------------------------------------------- Total assets 401,024,737 Liabilities - ------------------------------------------------------------------------------- Distributions payable to shareholders 2,238,284 - ------------------------------------------------------------------------------- Payable for securities purchased 12,340,370 - ------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 728,796 - ------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 88,008 - ------------------------------------------------------------------------------- Payable for Trustee compensation and expenses (Note 2) 32,747 - ------------------------------------------------------------------------------- Payable for administrative services (Note 2) 566 - ------------------------------------------------------------------------------- Payable for open forward currency contracts (Note 1) 2,326,632 - ------------------------------------------------------------------------------- Payable for closed forward currency contracts (Note 1) 223,110 - ------------------------------------------------------------------------------- Credit default contracts outstanding, at value (premiums received $141,064) (Note 1) 125,096 - ------------------------------------------------------------------------------- Other accrued expenses 102,798 - ------------------------------------------------------------------------------- Total liabilities 18,206,407 - ------------------------------------------------------------------------------- Net assets $382,818,330 Represented by - ------------------------------------------------------------------------------- Paid-in capital (Note 1) $467,264,687 - ------------------------------------------------------------------------------- Undistributed net investment income (Note 1) 5,069,939 - ------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (Note 1) (90,539,844) - ------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 1,023,548 - ------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $382,818,330 Computation of net asset value - ------------------------------------------------------------------------------- Net asset value per share ($382,818,330 divided by 53,329,917 shares) $7.18 - ------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. Statement of operations Year ended October 31, 2003 Investment income: - ------------------------------------------------------------------------------- Interest $29,279,555 - ------------------------------------------------------------------------------- Dividends 1,069,391 - ------------------------------------------------------------------------------- Total investment income 30,348,946 Expenses: - ------------------------------------------------------------------------------- Compensation of Manager (Note 2) 2,744,965 - ------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 502,719 - ------------------------------------------------------------------------------- Trustee compensation and expenses (Note 2) 17,798 - ------------------------------------------------------------------------------- Administrative services (Note 2) 8,512 - ------------------------------------------------------------------------------- Other 161,783 - ------------------------------------------------------------------------------- Total expenses 3,435,777 - ------------------------------------------------------------------------------- Expense reduction (Note 2) (17,634) - ------------------------------------------------------------------------------- Net expenses 3,418,143 - ------------------------------------------------------------------------------- Net investment income 26,930,803 - ------------------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 6,536,520 - ------------------------------------------------------------------------------- Net realized loss on futures contracts (Note 1) (2,199,537) - ------------------------------------------------------------------------------- Net realized gain on credit default contracts (Note 1) 84,756 - ------------------------------------------------------------------------------- Net realized gain on swap contracts (Note 1) 285,398 - ------------------------------------------------------------------------------- Net realized gain on foreign currency transactions (Note 1) 2,242,469 - ------------------------------------------------------------------------------- Net unrealized appreciation of assets and liabilities in foreign currencies during the year 5,465 - ------------------------------------------------------------------------------- Net unrealized appreciation of investments, futures contracts, swap contracts and credit default contracts during the year 37,065,703 - ------------------------------------------------------------------------------- Net gain on investments 44,020,774 - ------------------------------------------------------------------------------- Net increase in net assets resulting from operations $70,951,577 - ------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. Statement of changes in net assets Year ended October 31 Increase (decrease) in net assets 2003 2002 - ------------------------------------------------------------------------------- Operations: - ------------------------------------------------------------------------------- Net investment income $26,930,803 $29,156,604 - ------------------------------------------------------------------------------- Net realized gain (loss) on investments and foreign currency transactions 6,949,606 (29,544,414) - ------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 37,071,168 7,731,062 - ------------------------------------------------------------------------------- Net increase in net assets resulting from operations 70,951,577 7,343,252 - ------------------------------------------------------------------------------- Distributions to shareholders: (Note 1) - ------------------------------------------------------------------------------- From net investment income (27,721,585) (30,618,134) - ------------------------------------------------------------------------------- Increase from issuance of common shares in connection with reinvestment of dividends 360,652 1,205,083 - ------------------------------------------------------------------------------- Total increase (decrease) in net assets 43,590,644 (22,069,799) Net assets - ------------------------------------------------------------------------------- Beginning of year 339,227,686 361,297,485 - ------------------------------------------------------------------------------- End of year (including undistributed net investment income and distributions in excess of net investment income of $5,069,939 and $2,253,654, respectively) $382,818,330 $339,227,686 - ------------------------------------------------------------------------------- Number of fund shares - ------------------------------------------------------------------------------- Shares outstanding at beginning of year 53,275,878 53,095,749 - ------------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 54,039 180,129 - ------------------------------------------------------------------------------- Shares outstanding at end of year 53,329,917 53,275,878 - ------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period) Per-share Year ended October 31 operating performance 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $6.37 $6.80 $7.13 $7.72 $8.27 - ------------------------------------------------------------------------------------------------------------- Investment operations: - ------------------------------------------------------------------------------------------------------------- Net investment income (a) .50 .55 .61 .66 .64 - ------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments .83 (.40) (.31) (.58) (.48) - ------------------------------------------------------------------------------------------------------------- Total from investment operations 1.33 .15 .30 .08 .16 - ------------------------------------------------------------------------------------------------------------- Less distributions: - ------------------------------------------------------------------------------------------------------------- From net investment income (.52) (.58) (.58) (.56) (.65) - ------------------------------------------------------------------------------------------------------------- Return of capital -- -- (.05) (.11) (.06) - ------------------------------------------------------------------------------------------------------------- Total distributions (.52) (.58) (.63) (.67) (.71) - ------------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.18 $6.37 $6.80 $7.13 $7.72 - ------------------------------------------------------------------------------------------------------------- Market value, end of period $6.570 $6.150 $6.530 $6.438 $6.625 - ------------------------------------------------------------------------------------------------------------- Total return at market value (%)(b) 15.48 2.71 11.27 7.70 (10.50) - ------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $382,818 $339,228 $361,297 $378,800 $410,012 - ------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .94 .98 .94 .94 .94 - ------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 7.36 8.22 8.63 8.66 7.93 - ------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (%) 118.17 (d) 205.33 (d) 131.14 (d) 147.33 124.21 - -------------------------------------------------------------------------------------------------------------
(a) Per share net investment income has been determined on the basis of the weighted number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through expense offset arrangements. (Note 2) (d) Portfolio turnover excludes certain treasury note transactions executed in connection with a short-term trading strategy. The accompanying notes are an integral part of these financial statements. Notes to financial statements October 31, 2003 Note 1 Significant accounting policies Putnam Master Income Trust (the "fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The investment objective of the fund is to seek high current income consistent with the preservation of capital. The fund intends to diversify its investments among the following three sectors of the fixed-income securities market: a U.S. investment-grade sector, consisting of debt obligations of the U.S. government and investment-grade U.S. corporate bonds, a high-yield sector, consisting of high yielding, lower-rated U.S. corporate fixed income securities and an international sector, consisting of obligations of foreign governments, their agencies and instrumentalities and other fixed-income securities denominated in foreign currencies. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. A) Security valuation Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets. If no sales are reported -- as in the case of some securities traded over-the-counter -- a security is valued at its last reported bid price. Market quotations are not considered to be readily available for certain debt obligations; such investments are valued at fair value on the basis of valuations furnished by an independent pricing service or dealers, approved by the Trustees. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities. For foreign investments, if trading or events occurring in other markets after the close of the principal exchange in which the securities are traded are expected to materially affect the value of the investments, then those investments are valued, taking into consideration these events, at their fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. Short-term investments having remaining maturities of 60 days or less are valued at amortized cost, which approximates fair value. Other investments, including restricted securities, are valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. B) Joint trading account The fund may transfer uninvested cash balances, including cash collateral received under security lending arrangements, into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Investment Management, LLC ("Putnam Management"), the fund's manager, an indirect wholly-owned subsidiary of Putnam, LLC. These balances may be invested in issuers of high-grade short-term investments having maturities of up to 397 days for collateral received under security lending arrangements and up to 90 days for other cash investments. C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are recorded on the trade date (date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis. Interest income is recorded on the accrual basis. Dividend income is recognized on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. All premiums/discounts are amortized/accreted on a yield-to-maturity basis. E) Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The market value of foreign securities, currency holdings, and other assets and liabilities are recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. F) Forward currency contracts The fund may buy and sell forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of a currency in which securities a fund intends to buy are denominated, when a fund holds cash reserves and short term investments). The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in market value is recorded as an unrealized gain or loss. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Forward currency contracts outstanding at period end are listed after The fund's portfolio. G) Futures and options contracts The fund may use futures and options contracts to hedge against changes in the values of securities the fund owns or expects to purchase. The fund may also write options on securities it owns or in which it may invest to increase its current returns. The potential risk to the fund is that the change in value of futures and options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparty to the contract is unable to perform. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as "variation margin." Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by dealers. Futures and written option contracts outstanding at period end are listed after The fund's portfolio. H) Total return swap contracts The fund may enter into total return swap contracts, which are arrangements to exchange a market linked return for an interest payment, both based on a notional principal amount. To the extent that the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty, respectively. Total return swap contracts are marked to market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made at the end of the measurement period are recorded as realized gains or losses. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. Total return swap contracts outstanding at period end are listed after The fund's portfolio. I) Interest rate swap contracts The fund may enter into interest rate swap contracts, which are arrangements between two parties to exchange cash flows based on a notional principal amount, to manage the fund's exposure to interest rates. Interest rate swap contracts are marked to market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments made or received are recognized as part of interest income. A portion of the payments received or made upon early termination are recognized as realized gain or loss. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or if the counterparty defaults on its obligation to perform. Interest rate swap contracts outstanding at period end are listed after The fund's portfolio. J) Credit default contracts The fund may enter into credit default contracts where one party, the protection buyer, makes an upfront payment to a counter party, the protection seller, in exchange for the right to receive a contingent payment as a result of a credit event related to a specified security or index. The upfront payment received by the fund, as the protection seller, is recorded as a liability on the fund's books. The credit default contracts are marked to market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses. In addition to bearing the risk that the credit event will occur, the fund could be exposed to market risk due to unfavorable changes in interest rates or in the price of the underlying security or index, the possibility that the fund may be unable to close out its position at the same time or at the same price as if it had purchased comparable publicly traded securities or that the counterparty may default on its obligation to perform. Credit default contracts outstanding at period end are listed after The fund's portfolio. K) 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 October 31, 2003, the fund had a capital loss carryover of $88,941,607 available to the extent allowed by tax law to offset future net capital gain, if any. The amount of the carryover and the expiration dates are: Loss Carryover Expiration - --------------------------------- $3,536,796 October 31, 2006 23,414,014 October 31, 2007 11,528,221 October 31, 2008 15,951,444 October 31, 2009 34,511,132 October 31, 2010 L) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences include temporary and permanent differences of losses on wash sales transactions, foreign currency gains and losses, dividends payable, defaulted bond interest, unrealized and realized gains and losses on certain futures contracts, market discount, and interest on payment-in-kind securities. 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 October 31, 2003, the fund reclassified $8,114,375 to increase undistributed net investment income and $229,020 to decrease paid-in-capital, with an increase to accumulated net realized losses of $7,885,355. The tax basis components of distributable earnings and the federal tax cost as of period end were as follows: Unrealized appreciation $24,606,752 Unrealized depreciation (26,082,733) ------------ Net unrealized depreciation (1,475,981) Undistributed ordinary income 8,251,272 Capital loss carryforward (88,941,607) Cost for federal income tax purposes $384,274,122 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 0.75% of the average weekly net assets. The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam, LLC. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. The fund has entered into an arrangement with PFTC whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the fund's expenses. For the year ended October 31, 2003, the fund's expenses were reduced by $17,634 under these arrangements. Each independent Trustee of the fund receives an annual Trustee fee, of which $788 has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees receive additional fees for attendance at certain committee meetings. The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan. The fund has adopted an unfunded noncontributory defined benefit pension plan (the "Pension Plan") covering all Trustees of the fund who have served as a Trustee for at least five years. Benefits under the Pension Plan are equal to 50% of the Trustee's average total retainer and meeting fees for the three years preceding retirement. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. Note 3 Purchases and sales of securities During the year ended October 31, 2003, cost of purchases and proceeds from sales of investment securities other than U.S. government obligations and short-term investments aggregated $358,700,530 and $350,148,429, respectively. Purchases and sales of U.S. government obligations aggregated $54,805,255 and $62,815,705, respectively. Note 4 Regulatory matters and litigation On November 13, 2003, Putnam Management agreed to entry of an order by the Securities and Exchange Commission (SEC) in partial resolution of administrative and cease-and-desist proceedings initiated by the SEC on October 28, 2003 in connection with alleged excessive short-term trading by at least six Putnam Management investment professionals. The SEC's findings reflect that four of those employees engaged in such trading in funds over which they had investment decision-making responsibility and had access to non-public information regarding, among other things, current portfolio holdings, and valuations. The six individuals no longer have investment responsibilities with Putnam Management. Under the order, Putnam Management will make restitution for losses attributable to excessive short-term trading by Putnam employees, institute new employee trading restrictions and enhanced employee trading compliance, retain an independent compliance consultant, and take other remedial actions. Putnam Management neither admitted nor denied the order's findings, which included findings that Putnam Management willfully violated provisions of the federal securities laws. A civil monetary penalty and other monetary relief, if any, will be determined at a later date. If a hearing is necessary to determine the amounts of such penalty or other relief, Putnam Management will be precluded from arguing that it did not violate the federal securities laws in the manner described in the SEC order, the findings set forth in the SEC order will be accepted as true by the hearing officer and additional evidence may be presented. Putnam Management, and not the investors in any Putnam fund, will bear all costs, including restitution, civil penalties and associated legal fees. Administrative proceedings instituted by the Commonwealth of Massachusetts on October 28, 2003 against Putnam Management in connection with alleged market timing activities by Putnam employees and by participants in some Putnam-administered 401(k) plans are pending. Putnam Management has committed to make complete restitution for any losses suffered by Putnam shareholders as a result of any improper market-timing activities by Putnam employees or within Putnam-administered 401(k) plans. The SEC's and Commonwealth's allegations and related matters also serve as the general basis for numerous lawsuits, including purported class action lawsuits filed against Putnam Management and certain related parties, including certain Putnam funds. Putnam Management has agreed to bear any costs incurred by Putnam funds in connection with these lawsuits. Based on currently available information, Putnam Management believes that the likelihood that the pending private lawsuits and purported class action lawsuits will have a material adverse financial impact on the fund is remote, and the pending actions are not likely to materially affect its ability to provide investment management services to its clients, including the Putnam funds. Review of these matters by counsel for Putnam Management and by separate independent counsel for the Putnam funds and their independent Trustees is continuing. In addition, Marsh & McLennan Companies, Inc., Putnam Management's parent company, has engaged counsel to conduct a separate review of Putnam Management's policies and controls related to short-term trading. Federal tax information (Unaudited) The fund has designated 3.03% of the distributions from net investment income as qualifying for the dividends received deduction for corporations. For its tax year ended 10/31/03, the fund hereby designates 2.12% or the maximum amount allowable, of its net taxable income as qualified dividends taxed at individual net capital gain rates. The Form 1099 you receive in January 2004 will show the tax status of all distributions paid to your account in calendar 2003. Results of October 7, 2003 shareholder meeting (Unaudited) An annual meeting of shareholders of the fund was held on October 7, 2003. At the meeting, each of the nominees for Trustees was elected, as follows: Common shares Votes Votes for withheld - ------------------------------------------------------------------ Jameson Adkins Baxter 48,771,489 1,053,460 Charles B. Curtis 48,810,479 1,014,470 John A. Hill 48,791,963 1,032,986 Ronald J. Jackson 48,777,431 1,047,518 Paul L. Joskow 48,757,996 1,066,953 Elizabeth T. Kennan 48,751,293 1,073,656 Lawrence J. Lasser* 48,755,373 1,069,576 John H. Mullin III 48,773,347 1,051,610 Robert E. Patterson 48,815,538 1,009,411 George Putnam, III 48,760,460 1,064,489 A.J.C. Smith 48,760,751 1,064,198 W. Thomas Stephens 48,768,670 1,056,279 W. Nicholas Thorndike 48,752,579 1,072,370 *Mr. Lasser resigned from the Board of Trustees of the Putnam funds on November 3, 2003. About the Trustees Jameson A. Baxter (9/6/43), Trustee since 1994 Ms. Baxter is the President of Baxter Associates, Inc., a private investment firm that she founded in 1986. Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Banta Corporation (a printing and digital imaging firm), Ryerson Tull, Inc. (a steel service corporation), Advocate Health Care, and BoardSource, formerly the National Center for Nonprofit Boards. She is Chairman Emeritus of the Board of Trustees, Mount Holyoke College, having served as Chairman for five years and as a board member for thirteen years. Until 2002, Ms. Baxter was a Director of Intermatic Corporation (a manufacturer of energy control products). Ms. Baxter has held various positions in investment banking and corporate finance, including Vice President and Principal of the Regency Group, and Vice President of and Consultant to First Boston Corporation. She is a graduate of Mount Holyoke College. Charles B. Curtis (4/27/40), Trustee since 2001 Mr. Curtis is President and Chief Operating Officer of the Nuclear Threat Initiative (a private foundation dealing with national security issues) and serves as Senior Advisor to the United Nations Foundation. Mr. Curtis is a member of the Council on Foreign Relations and the Trustee Advisory Council of the Applied Physics Laboratory, Johns Hopkins University. Until 2003, Mr. Curtis was a member of the Electric Power Research Institute Advisory Council and the University of Chicago Board of Governors for Argonne National Laboratory. Prior to 2002, Mr. Curtis was a Member of the Board of Directors of the Gas Technology Institute and the Board of Directors of the Environment and Natural Resources Program Steering Committee, John F. Kennedy School of Government, Harvard University. Until 2001, Mr. Curtis was a member of the Department of Defense Policy Board and Director of EG&G Technical Services, Inc. (a fossil energy research and development support company). Prior to May 1997, Mr. Curtis was Deputy Secretary of Energy. He served as Chairman of the Federal Energy Regulatory Commission from 1977 to 1981 and has held positions on the staff of the U.S. House of Representatives, the U.S. Treasury Department, and the Securities and Exchange Commission. John A. Hill (1/31/42), Trustee since 1985 and Chairman since 2000 Mr. Hill is Vice Chairman and Managing Director of First Reserve Corporation, a private equity buyout firm that specializes in energy investments in the diversified worldwide energy industry. Mr. Hill is a Director of Devon Energy Corporation, TransMontaigne Oil Company, Continuum Health Partners of New York, and various private companies controlled by First Reserve Corporation, as well as a Trustee of TH Lee Putnam Investment Trust (a closed-end investment company). He is also a Trustee of Sarah Lawrence College. Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held executive positions in investment banking and investment management with several firms and with the federal government, including Deputy Associate Director of the Office of Management and Budget, and Deputy Director of the Federal Energy Administration. He is active in various business associations, including the Economic Club of New York, and lectures on energy issues in the United States and Europe. Mr. Hill holds a B.A. degree in Economics from Southern Methodist University and pursued graduate studies there as a Woodrow Wilson Fellow. Ronald J. Jackson (12/17/43), Trustee since 1996 Mr. Jackson is a private investor. Mr. Jackson is President of the Kathleen and Ronald J. Jackson Foundation (a charitable trust). He is also a member of the Board of Overseers of WGBH (a public television and radio station) as well as a member of the Board of Overseers of the Peabody Essex Museum. Mr. Jackson is the former Chairman, President, and Chief Executive Officer of Fisher-Price, Inc. (a major toy manufacturer), from which he retired in 1993. He previously served as President and Chief Executive Officer of Stride-Rite, Inc. (a manufacturer and distributor of footwear) and of Kenner Parker Toys, Inc. (a major toy and game manufacturer). Mr. Jackson was President of Talbots, Inc. (a distributor of women's apparel) and has held financial and marketing positions with General Mills, Inc. and Parker Brothers (a toy and game company). Mr. Jackson is a graduate of the University of Michigan Business School. Paul L. Joskow (6/30/47), Trustee since 1997 Dr. Joskow is the Elizabeth and James Killian Professor of Economics and Management, and Director of the Center for Energy and Environmental Policy Research at the Massachusetts Institute of Technology. Dr. Joskow serves as a Director of National Grid Transco (a UK-based holding company with interests in electric and gas transmission and distribution, and telecommunications infrastructure). He also serves on the board of the Whitehead Institute for Biomedical Research (a non-profit research institution) and has been President of the Yale University Council since 1993. Prior to February 2002, he was a Director of State Farm Indemnity Company (an automobile insurance company) and prior to March 2000 he was a Director of New England Electric System (a public utility holding company). Dr. Joskow has published five books and numerous articles on topics in industrial organization, government regulation of industry, and competition policy. He is active in industry restructuring, environmental, energy, competition, and privatization policies -- serving as an advisor to governments and corporations worldwide. Dr. Joskow holds a Ph.D. and M. Phil from Yale University and B.A. from Cornell University. Elizabeth T. Kennan (2/25/38), Trustee since 1992 Dr. Kennan is a partner in and Chairman of Cambus-Kenneth Bloodstock, LLC (cattle and thoroughbred horses). She is President Emeritus of Mount Holyoke College. Dr. Kennan serves as a Trustee of Northeast Utilities and is a Director of Talbots, Inc. She has served as Director on a number of other boards, including Bell Atlantic, Chastain Real Estate, Shawmut Bank, Berkshire Life Insurance, and Kentucky Home Life Insurance. She is a Trustee of Centre College and of Midway College in Midway, Kentucky. She is also a member of The Trustees of Reservations. Dr. Kennan has served on the oversight committee of the Folger Shakespeare Library, as President of Five Colleges Incorporated, as a Trustee of Notre Dame University, and is active in various educational and civic associations. As a member of the faculty of Catholic University for twelve years, until 1978, Dr. Kennan directed the post-doctoral program in Patristic and Medieval Studies, taught history, and published numerous articles. Dr. Kennan holds a Ph.D. from the University of Washington in Seattle, an M.S. from St. Hilda's College at Oxford University, and an A.B. from Mount Holyoke College. She holds several honorary doctorates. John H. Mullin, III (6/15/41), Trustee since 1997 Mr. Mullin is the Chairman and CEO of Ridgeway Farm (a limited liability company engaged in timber and farming). Mr. Mullin serves as a Director of Alex. Brown Realty, Inc., The Liberty Corporation (a broadcasting company), Progress Energy, Inc. (a utility company, formerly known as Carolina Power & Light), and Sonoco Products, Inc. (a packaging company). Mr. Mullin is Trustee Emeritus of Washington & Lee University, where he served as Chairman of the Investment Committee. Prior to May 2001, he was a Director of Graphic Packaging International Corp. Mr. Mullin also served as a Director of Dillon, Read & Co., Inc. until October 1997 and The Ryland Group, Inc. until January 1998. Mr. Mullin is a graduate of Washington & Lee University and The Wharton Graduate School, University of Pennsylvania. Robert E. Patterson (3/15/45), Trustee since 1984 Mr. Patterson is Senior Partner of Cabot Properties, L.P. and Chairman of Cabot Properties, Inc. Mr. Patterson serves as Chairman of the Joslin Diabetes Center, as a Trustee of Sea Education Association, and as a Director of Brandywine Trust Company. Prior to December 2001, he was President and Trustee of Cabot Industrial Trust (a publicly traded real estate investment trust). Prior to February 1998, Mr. Patterson was Executive Vice President and Director of Acquisitions of Cabot Partners Limited Partnership (a registered investment advisor involved in institutional real estate investments). Prior to 1990, he served as Executive Vice President of Cabot, Cabot & Forbes Realty Advisors, Inc. (the predecessor company of Cabot Partners) and as a Senior Vice President of the Beal Companies (a real estate management, investment, and development firm). Mr. Patterson practiced law and held various positions in state government, and was the founding Executive Director of the Massachusetts Industrial Finance Agency. Mr. Patterson is a graduate of Harvard College and Harvard Law School. W. Thomas Stephens (9/2/42), Trustee since 1997 Mr. Stephens serves on a number of corporate boards. Mr. Stephens serves as a Director of Xcel Energy Incorporated (a public utility company), TransCanada Pipelines Limited, Norske Canada, Inc. (a paper manufacturer), and Qwest Communications. Until 2003, Mr. Stephens was a Director of Mail-Well, Inc. (a diversified printing company). He served as Chairman of Mail-Well until 2001 and as CEO of MacMillan-Bloedel, Ltd. (a forest products company) until 1999. Prior to 1996, Mr. Stephens was Chairman and Chief Executive Officer of Johns Manville Corporation. He holds B.S. and M.S. degrees from the University of Arkansas. W. Nicholas Thorndike (3/28/33), Trustee since 1992 Mr. Thorndike serves on the boards of various corporations and charitable organizations. Mr. Thorndike is a Director of Courier Corporation (a book publisher and manufacturer) and The Providence Journal Co. (a newspaper publisher). He is also a Trustee of Northeastern University and an honorary Trustee of Massachusetts General Hospital, where he previously served as Chairman and President. Prior to September 2000, he was a Director of Bradley Real Estate, Inc.; prior to April 2000, he was a Trustee of Eastern Utilities Associates; and prior to December 2001, he was a Trustee of Cabot Industrial Trust. Mr. Thorndike has also served as Chairman of the Board and Managing Partner of Wellington Management Company/Thorndike, Doran, Paine & Lewis (a registered investment advisor that manages mutual funds and institutional assets), as a Trustee of the Wellington Group of Funds (currently The Vanguard Group), and as Chairman and a Director of Ivest Fund, Inc. Mr. Thorndike is a graduate of Harvard College. George Putnam, III* (8/10/51), Trustee since 1984 and President since 2000 Mr. Putnam is President of New Generation Research, Inc. (a publisher of financial advisory and other research services), and of New Generation Advisers, Inc. (a registered investment advisor to private funds). Mr. Putnam founded the New Generation companies in 1986. Mr. Putnam is a Director of The Boston Family Office, LLC (a registered investment advisor). He is a Trustee of St. Mark's School, Shore Country Day School, and until 2002 was a Trustee of the Sea Education Association. Mr. Putnam previously worked as an attorney with the law firm of Dechert Price & Rhoads in Philadelphia. He is a graduate of Harvard College, Harvard Business School, and Harvard Law School. A.J.C. Smith* (4/13/34), Trustee since 1986 Mr. Smith is Chairman of Putnam Investments and a Director of Marsh & McLennan Companies, Inc. Mr. Smith is also a Director of Trident Corp. (a limited partnership with over thirty institutional investors). He is also a Trustee of the Carnegie Hall Society, the Educational Broadcasting Corporation, and the National Museums of Scotland. He is Chairman of the Central Park Conservancy and a Member of the Board of Overseers of the Joan and Sanford I. Weill Graduate School of Medical Sciences of Cornell University. Prior to May 2000 and November 1999, Mr. Smith was Chairman and CEO, respectively, of Marsh & McLennan Companies, Inc. The address of each Trustee is One Post Office Square, Boston, MA 02109. As of October 31, 2003, there were 102 Putnam Funds. Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 72, death, or removal. * Trustees who are or may be deemed to be "interested persons" (as defined in the Investment Company Act of 1940) of the fund, Putnam Management, Putnam Retail Management, or Marsh & McLennan Companies, Inc., the parent company of Putnam, LLC and its affiliated companies. Messrs. Putnam, III, and Smith are deemed "interested persons" by virtue of their positions as officers or shareholders of the fund or Putnam Management, Putnam Retail Management, or Marsh & McLennan Companies, Inc. George Putnam, III is the President of your fund and each of the other Putnam funds. Mr. Smith serves as a Director of Marsh & McLennan Companies, Inc. Officers In addition to George Putnam, III, the other officers of the fund are shown below: Charles E. Porter (7/26/38) Executive Vice President, Treasurer and Principal Financial Officer Since 1989 Managing Director, Putnam Investments and Putnam Management Patricia C. Flaherty (12/1/46) Senior Vice President Since 1993 Senior Vice President, Putnam Investments and Putnam Management Karnig H. Durgarian (1/13/56) Vice President and Principal Executive Officer Since 2002 Senior Managing Director, Putnam Investments Steven D. Krichmar (6/27/58) Vice President and Principal Financial Officer Since 2002 Managing Director, Putnam Investments. Prior to July 2001, Partner, PricewaterhouseCoopers LLP Michael T. Healy (1/24/58) Assistant Treasurer and Principal Accounting Officer Since 2000 Managing Director, Putnam Investments Beth S. Mazor (4/6/58) Vice President Since 2002 Senior Vice President, Putnam Investments Gordon H. Silver (7/3/47) Vice President Since 1990 Senior Managing Director, Putnam Investments, Putnam Management and Putnam Retail Management Mark C. Trenchard (6/5/62) Vice President and BSA Compliance Officer Since 2002 Senior Vice President, Putnam Investments William H. Woolverton (1/17/51) Vice President and Chief Legal Officer Since 2003 Managing Director, Putnam Investments, Putnam Management and Putnam Retail Management Judith Cohen (6/7/45) Clerk and Assistant Treasurer Since 1993 Clerk and Assistant Treasurer, The Putnam Funds The address of each Officer is One Post Office Square, Boston, MA 02109. Fund information About Putnam Investments One of the largest mutual fund families in the United States, Putnam Investments has a heritage of investment leadership dating back to Judge Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition and practice since 1830. Founded over 65 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We presently manage over 100 mutual funds in growth, value, blend, fixed income, and international. Investment Manager Putnam Investment Management, LLC One Post Office Square Boston, MA 02109 Marketing Services Putnam Retail Management One Post Office Square Boston, MA 02109 Custodian Putnam Fiduciary Trust Company Legal Counsel Ropes & Gray LLP Independent Auditors KPMG LLP Trustees John A. Hill, Chairman Jameson Adkins Baxter Charles B. Curtis Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan John H. Mullin III Robert E. Patterson George Putnam, III A.J.C. Smith W. Thomas Stephens W. Nicholas Thorndike Officers George Putnam, III President Charles E. Porter Executive Vice President, Treasurer and Principal Financial Officer Patricia C. Flaherty Senior Vice President Karnig H. Durgarian Vice President and Principal Executive Officer Steven D. Krichmar Vice President and Principal Financial Officer Michael T. Healy Assistant Treasurer and Principal Accounting Officer Beth S. Mazor Vice President Gordon H. Silver Vice President Mark C. Trenchard Vice President and BSA Compliance Officer William H. Woolverton Vice President and Chief Legal Officer Judith Cohen Clerk and Assistant Treasurer Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time, or visit our Web site (www.putnaminvestments.com) any time for up-to-date information about the fund's NAV. [LOGO OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 PRSRT STD U.S. POSTAGE PAID PUTNAM INVESTMENTS Do you want to save paper and receive this document faster? Shareholders can sign up for email delivery of shareholder reports on www.putnaminvestments.com. 203416 072 12/03 Item 2. Code of Ethics: - ----------------------- All officers of the Fund, including its principal executive, financial and accounting officers, are employees of Putnam Investment Management, LLC, the Fund's investment manager. As such they are subject to a comprehensive Code of Ethics adopted and administered by Putnam Investments which is designed to protect the interests of the firm and its clients. The Fund has adopted a Code of Ethics which incorporates the Code of Ethics of Putnam Investments with respect to all of its officers and Trustees who are employees of Putnam Investment Management, LLC. For this reason, the Fund has not adopted a separate code of ethics governing its principal executive, financial and accounting officers. Item 3. Audit Committee Financial Expert: - ----------------------------------------- The Funds' Audit and Pricing Committee is comprised solely of Trustees who are "independent" (as such term has been defined by the Securities and Exchange Commission ("SEC") in regulations implementing Section 407 of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe that each of the members of the Audit and Pricing Committee also possess a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualify them for service on the Committee. In addition, the Trustees have determined that all members of the Funds' Audit and Pricing Committee meet the financial literacy requirements of the New York Stock Exchange's rules and that Mr. Patterson and Mr. Stephens qualify as "audit committee financial experts" (as such term has been defined by the Regulations) based on their review of their pertinent experience and education. Certain other Trustees, although not on the Audit and Pricing Committee, would also qualify as "audit committee financial experts." The SEC has stated that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit and Pricing Committee and the Board of Trustees in the absence of such designation or identification. Item 4. Principal Accountant Fees and Services: - ----------------------------------------------- Not applicable Items 5-6. [Reserved] - --------------------- Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End - ------------------------------------------------------------------------- Management Investment Companies: -------------------------------- Proxy Voting Guidelines of the Putnam Funds - ------------------------------------------- The proxy voting guidelines below summarize the Funds' positions on various issues of concern to investors, and give a general indication of how Fund portfolio securities will be voted on proposals dealing with a particular issue. The Funds' proxy voting service is instructed to vote all proxies relating to Fund portfolio securities in accordance with these guidelines, except as otherwise instructed by the Proxy Coordinator. The proxy voting guidelines are just that - guidelines. The guidelines are not exhaustive and do not include all potential voting issues. Because proxy issues and the circumstances of individual companies are so varied, there may be instances when the Funds may not vote in strict adherence to these guidelines. For example, the proxy voting service is expected to bring to the Proxy Coordinator's attention proxy questions that are company-specific and of a non-routine nature and, although covered by the guidelines, may be more appropriately handled on a case-by-case basis. Similarly, Putnam Management's investment professionals, as part of their ongoing review and analysis of all Fund portfolio holdings, are responsible for monitoring significant corporate developments, including proxy proposals submitted to shareholders, and notifying the Proxy Coordinator of circumstances where the interests of Fund shareholders may warrant a vote contrary to these guidelines. In such instances, the investment professionals will submit a written recommendation to the Proxy Coordinator and the person or persons designated by Putnam Management's Legal and Compliance Department to assist in processing referral items pursuant to the Funds' "Proxy Voting Procedures." The Proxy Coordinator, in consultation with the Senior Vice President, Executive Vice President and/or the Chair of the Board Policy and Nominating Committee, as appropriate, will determine how the Funds' proxies will be voted. When indicated, the Chair of the Board Policy and Nominating Committee may consult with other members of the Committee or the full board of Trustees. The following guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals which have been approved and recommended by a company's board of directors. Part II deals with proposals submitted by shareholders for inclusion in proxy statements. Part III addresses unique considerations pertaining to foreign issuers. I. Board-Approved Proposals - --------------------------- The vast majority of matters presented to shareholders for a vote involve proposals made by a company itself (sometimes referred to as "management proposals"), which have been approved and recommended by its board of directors. In view of the enhanced corporate governance practices currently being implemented in public companies and the Funds' intent to hold corporate boards accountable for their actions in promoting shareholder interests, the Funds' proxies generally will be voted in support of decisions reached by independent boards of directors. Accordingly, the Funds' proxies will be voted for board-approved proposals, except as follows: A. Matters Relating to the Board of Directors - --------------------------------------------- The board of directors has the important role of overseeing management and its performance on behalf of shareholders. The Funds' proxies will be voted for the election of the company's nominees for directors and for board-approved proposals on other matters relating to the board of directors (provided that such nominees and other matters have been approved by an independent nominating committee), except as follows: * The Funds will withhold votes for the entire board of directors if * The board does not have a majority of independent directors; or * The board does not have nominating, audit and compensation committees composed solely of independent directors. Commentary: While these requirements will likely become mandatory for most public companies in the near future as a result of pending NYSE and NASDAQ rule proposals, the Funds' Trustees believe that there is no excuse for public company boards that fail to implement these vital governance reforms at their next annual meeting. For these purposes, an "independent director" is a director who meets all requirements to serve as an independent director of a company under the pending NYSE rule proposals (i.e., no material business relationships with the company, no present or recent employment relationship with the company (including employment of immediate family members) and, in the case of audit committee members, no compensation for non-board services). As indicated below, the Funds will generally vote on a case-by-case basis on board-approved proposals where the board fails to meet these basic independence standards. * The Funds will withhold votes for any nominee for director who is considered an independent director by the company and who has received compensation from the company other than for service as a director (e.g., investment banking, consulting, legal or financial advisory fees). Commentary: The Funds' Trustees believe that receipt of compensation for services other than service as a director raises significant independence issues. The Funds will withhold votes for any nominee for director who is considered an independent director by the company and who receives such compensation. * The Funds will withhold votes for the entire board of directors if the board has more than 19 members or fewer than five members, absent special circumstances. Commentary: The Funds' Trustees believe that the size of the board of directors can have a direct impact on the ability of the board to govern effectively. Boards that have too many members can be unwieldy and ultimately inhibit their ability to oversee management performance. Boards that have too few members can stifle innovation and lead to excessive influence by management. * The Funds will vote on a case-by-case basis in contested elections of directors. * The Funds will withhold votes for any nominee for director who attends less than 75% of board and committee meetings without valid reasons for the absences (i.e., illness, personal emergency, etc.). Commentary: Being a director of a company requires a significant time commitment to adequately prepare for and attend the company's board and committee meetings. Directors must be able to commit the time and attention necessary to perform their fiduciary duties in proper fashion, particularly in times of crisis. The Funds' Trustees are concerned about over-committed directors. In some cases, directors may serve on too many boards to make a meaningful contribution. This may be particularly true for senior executives of public companies (or other directors with substantially full-time employment) who serve on more than a few outside boards. The Funds may withhold votes from such directors on a case-by-case basis where it appears that they may be unable to discharge their duties properly because of excessive commitments. * The Funds will withhold votes for any nominee for director of a public company (Company A) who is employed as a senior executive of another public company (Company B) if a director of Company B serves as a senior executive of Company A (commonly referred to as an "interlocking directorate"). Commentary: The Funds' Trustees believe that interlocking directorships are inconsistent with the degree of independence required for outside directors of public companies. Board independence depends not only on its members' individual relationships, but also the board's overall attitude toward management. Independent boards are committed to good corporate governance practices and, by providing objective independent judgment, enhancing shareholder value. The Funds may withhold votes on a case-by-case basis from some or all directors that, through their lack of independence, have failed to observe good corporate governance practices or, through specific corporate action, have demonstrated a disregard for the interest of shareholders. * The Funds will vote against proposals to classify a board, absent special circumstances indicating that shareholder interests would be better served by this structure. Commentary: Under a typical classified board structure, the directors are divided into three classes, with each class serving a three-year term. The classified board structure results in directors serving staggered terms, with usually only a third of the directors up for re-election at any given annual meeting. The Funds' Trustees generally believe that it is appropriate for directors to stand for election each year, but recognize that, in special circumstances, shareholder interests may be better served under a classified board structure. B. Executive Compensation - ------------------------- The Funds generally favor compensation programs that relate executive compensation to a company's long-term performance. The Funds will vote on a case-by-case basis on board-approved proposals relating to executive compensation, except as follows: * Except where the Funds are otherwise withholding votes for the entire board of directors, the Funds will vote for stock option plans which will result in an average annual dilution of 1.67% or less (including all equity-based plans). * The Funds will vote against stock option plans that permit replacing or repricing of underwater options (and against any proposal to authorize such replacement or repricing of underwater options). * The Funds will vote against stock option plans that permit issuance of options with an exercise price below the stock's current market price. * Except where the Funds are otherwise withholding votes for the entire board of directors, the Funds will vote for employee stock purchase plans that have the following features: (1) the shares purchased under the plan are acquired for no less than 85% of their market value, (2) the offering period under the plan is 27 months or less, and (3) dilution is 10% or less. Commentary: Companies should have compensation programs that are reasonable and that align shareholder and management interests over the longer term. Further, disclosure of compensation programs should provide absolute transparency to shareholders regarding the sources and amounts of, and the factors influencing, executive compensation. Appropriately designed equity-based compensation plans can be an effective way to align the interests of long-term shareholders with the interests of management. The Funds may vote against executive compensation proposals on a case-by-case basis where compensation is excessive by reasonable corporate standards, or where a company fails to provide transparent disclosure of executive compensation. In voting on proposals relating to executive compensation, the Funds will consider whether the proposal has been approved by an independent compensation committee of the board. C. Capitalization - ----------------- Many proxy proposals involve changes in a company's capitalization, including the authorization of additional stock, the repurchase of outstanding stock or the approval of a stock split. The management of a company's capital structure involves a number of important issues, including cash flow, financing needs and market conditions that are unique to the circumstances of each company. As a result, the Funds will vote on a case-by-case basis on board-approved proposals involving changes to a company's capitalization, except that where the Funds are not otherwise withholding votes from the entire board of directors: * The Funds will vote for proposals relating to the authorization of additional common stock (except where such proposals relate to a specific transaction). * The Funds will vote for proposals to effect stock splits (excluding reverse stock splits.) * The Funds will vote for proposals authorizing share repurchase programs. Commentary: A company may decide to authorize additional shares of common stock for reasons relating to executive compensation or for routine business purposes. For the most part, these decisions are best left to the board of directors and senior management. The Funds will vote on a case-by-case basis, however, on other proposals to change a company's capitalization, including the authorization of common stock with special voting rights, the authorization or issuance of common stock in connection with a specific transaction (e.g., an acquisition, merger or reorganization) or the authorization or issuance of preferred stock. Actions such as these involve a number of considerations that may impact a shareholder's investment and warrant a case-by-case determination. D. Acquisitions, Mergers, Reincorporations, Reorganizations and Other Transactions - --------------------------------------------------------------- Shareholders may be confronted with a number of different types of transactions, including acquisitions, mergers, reorganizations involving business combinations, liquidations and sale of all or substantially all of a company's assets, which may require their consent. Voting on such proposals involves considerations unique to each transaction. As a result, the Funds will vote on a case-by-case basis on board-approved proposals to effect these types of transactions, except as follows: * The Funds will vote for mergers and reorganizations involving business combinations designed solely to reincorporate a company in Delaware. Commentary: A company may reincorporate into another state through a merger or reorganization by setting up a "shell" company in a different state and then merging the company into the new company. While reincorporation into states with extensive and established corporate laws - notably Delaware - provides companies and shareholders with a more well-defined legal framework, generally speaking, shareholders must carefully consider the reasons for a reincorporation into another jurisdiction, including especially offshore jurisdictions. E. Anti-Takeover Measures - ------------------------- Some proxy proposals involve efforts by management to make it more difficult for an outside party to take control of the company without the approval of the company's board of directors. These include adoption of a shareholder rights plan, requiring supermajority voting on particular issues, adoption of fair price provisions, issuance of blank check preferred stock and creating a separate class of stock with disparate voting rights. Such proposals may adversely affect shareholder rights, lead to management entrenchment, or create conflicts of interest. As a result, the Funds will vote against board-approved proposals to adopt such anti-takeover measures, except as follows: * The Funds will vote on a case-by-case basis on proposals to ratify or approve shareholder rights plans (commonly referred to as "poison pills"); and * The Funds will vote on a case-by-case basis on proposals to adopt fair price provisions. Commentary: The Funds' Trustees recognize that poison pills and fair price provisions may enhance shareholder value under certain circumstances. As a result, the Funds will consider proposals to approve such matters on a case-by-case basis. F. Other Business Matters - ------------------------- Many proxies involve approval of routine business matters, such as changing the company's name, ratifying the appointment of auditors and procedural matters relating to the shareholder meeting. For the most part, these routine matters do not materially affect shareholder interests and are best left to the board of directors and senior management of the company. The Funds will vote for board-approved proposals approving such matters, except as follows: * The Funds will vote on a case-by-case basis on proposals to amend a company's charter or bylaws (except for charter amendments necessary or to effect stock splits to change a company's name or to authorize additional shares of common stock). * The Funds will vote against authorization to transact other unidentified, substantive business at the meeting. * The Funds will vote on a case-by-case basis on other business matters where the Funds are otherwise withholding votes for the entire board of directors. Commentary: Charter and bylaw amendments and the transaction of other unidentified, substantive business at a shareholder meeting may directly affect shareholder rights and have a significant impact on shareholder value. As a result, the Funds do not view such items as routine business matters. Putnam Management's investment professionals and the Funds' proxy voting service may also bring to the Proxy Coordinator's attention company-specific items which they believe to be non-routine and warranting special consideration. Under these circumstances, the Funds will vote on a case-by-case basis. II. Shareholder Proposals - ------------------------- SEC regulations permit shareholders to submit proposals for inclusion in a company's proxy statement. These proposals generally seek to change some aspect of a company's corporate governance structure or to change some aspect of its business operations. The Funds will vote in accordance with the recommendation of the company's board of directors on all shareholder proposals, except as follows: * The Funds will vote for shareholder proposals to declassify a board, absent special circumstances which would indicate that shareholder interests are better served by a classified board structure. * The Funds will vote for shareholder proposals to require shareholder approval of shareholder rights plans. * The Funds will vote for shareholder proposals that are consistent with the Fund's proxy voting guidelines for board-approved proposals. * The Funds will vote on a case-by-case basis on other shareholder proposals where the Funds are otherwise withholding votes for the entire board of directors. Commentary: In light of the substantial reforms in corporate governance that are currently underway, the Funds' Trustees believe that effective corporate reforms should be promoted by holding boards of directors - and in particular, their independent directors - accountable for their actions, rather than imposing additional legal restrictions on board governance through piecemeal proposals. Generally speaking, shareholder proposals relating to business operations are often motivated primarily by political or social concerns, rather than the interests of shareholders as investors in an economic enterprise. As stated above, the Funds' Trustees believe that boards of directors and management are responsible for ensuring that their businesses are operating in accordance with high legal and ethical standards and should be held accountable for resulting corporate behavior. Accordingly, the Funds will generally support the recommendations of boards that meet the basic independence and governance standards established in these guidelines. Where boards fail to meet these standards, the Funds will generally evaluate shareholder proposals on a case-by-case basis. III. Voting Shares of Foreign Issuers - ------------------------------------- Many of the Funds invest on a global basis and, as a result, they may be required to vote shares held in foreign issuers - i.e., issuers that are incorporated under the laws of a foreign jurisdiction and that are not listed a U.S. securities exchange or the NASDAQ stock market. Because foreign issuers are incorporated under the laws of countries and jurisdictions outside the U.S., protection for shareholders may vary significantly from jurisdiction to jurisdiction. Laws governing foreign issuers may, in some cases, provide substantially less protection for shareholders. As a result, the foregoing guidelines, which are premised on the existence of a sound corporate governance and disclosure framework, may not be appropriate under some circumstances for foreign issuers. The Funds will vote proxies of foreign issuers in accordance with the foregoing guidelines where applicable, except as follows: * The Funds will vote for shareholder proposals calling for a majority of the directors to be independent of management. * The Funds will vote for shareholder proposals seeking to increase the independence of board nominating, audit and compensation committees. * The Funds will vote for shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated. * The Funds will vote on case-by-case basis on proposals relating to (1) the issuance of common stock in excess of 20% of a company's outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of a company's outstanding common stock where shareholders have preemptive rights. Commentary: In many non-U.S. markets, shareholders who vote proxies for shares of a foreign issuer are not able to trade in that company's stock within a given period of time on or around the shareholder meeting date. This practice is known as "share blocking." In countries where share blocking is practiced, the Funds will vote proxies only with direction from Putnam Management's investment professionals. As adopted March 14, 2003 Proxy Voting Procedures of the Putnam Funds - ------------------------------------------- The Role of the Funds' Trustees - ------------------------------- The Trustees of the Putnam Funds exercise control of the voting of proxies through their Board Policy and Nominating Committee, which is composed entirely of independent Trustees. The Board Policy and Nominating Committee oversees the proxy voting process and participates, as needed, in the resolution of issues which need to be handled on a case-by-case basis. The Committee annually reviews and recommends for approval by the Trustees guidelines governing the Funds' proxy votes, including how the Funds vote on specific proposals and which matters are to be considered on a case-by-case basis. The Trustees are assisted in this process by their independent administrative staff ("Fund Administration"), independent legal counsel, and an independent proxy voting service. The Trustees also receive assistance from Putnam Investment Management, LLC ("Putnam Management"), the Funds' investment adviser, on matters involving investment judgments. In all cases, the ultimate decision on voting proxies rests with the Trustees, acting as fiduciaries on behalf of the shareholders of the Funds. The Role of the Proxy Voting Service - ------------------------------------ The Funds have engaged an independent proxy voting service to assist in the voting of proxies. The proxy voting service is responsible for coordinating with the Funds' custodians to ensure that all proxy materials received by the custodians relating to the Funds' portfolio securities are processed in a timely fashion. To the extent applicable, the proxy voting service votes all proxies in accordance with the proxy voting guidelines established by the Trustees. The proxy voting service will refer proxy questions to the Proxy Coordinator (described below) for instructions under circumstances where: (1) the application of the proxy voting guidelines is unclear, (2) a particular proxy question is not covered by the guidelines, or (3) the guidelines call for specific instructions on a case-by-case basis. The proxy voting service is also requested to call to the Proxy Coordinator's attention specific proxy questions which, while governed by a guideline, appear to involve unusual or controversial issues. The Funds also utilize research services relating to proxy questions provided by the proxy voting service and by other firms. The Role of the Proxy Coordinator - --------------------------------- Each year, a member of Fund Administration is appointed Proxy Coordinator to assist in the coordination and voting of the Funds' proxies. The Proxy Coordinator will deal directly with the proxy voting service and, in the case of proxy questions referred by the proxy voting service, will solicit voting recommendations and instructions from Fund Administration, the Chair of the Board Policy and Nominating Committee, and Putnam Management's investment professionals, as appropriate. The Proxy Coordinator is responsible for ensuring that these questions and referrals are responded to in a timely fashion and for transmitting appropriate voting instructions to the proxy voting service. Voting Procedures for Referral Items - ------------------------------------- As discussed above, the proxy voting service will refer proxy questions to the Proxy Coordinator under certain circumstances. When the application of the proxy voting guidelines is unclear or a particular proxy question is not covered by the guidelines (and does not involve investment considerations), the Proxy Coordinator will assist in interpreting the guidelines and, as appropriate, consult with the Senior Vice President of Fund Administration, the Executive Vice President of Fund Administration and the Chair of the Board Policy and Nominating Committee on how the Funds' shares will be voted. For proxy questions that require a case-by-case analysis pursuant to the guidelines or that are not covered by the guidelines but involve investment considerations, the Proxy Coordinator will refer such questions, through a written request, to Putnam Management's investment professionals for a voting recommendation. Such referrals will be made in cooperation with the person or persons designated by Putnam Management's Legal and Compliance Department to assist in processing such referral items. In connection with each such referral item, the Legal and Compliance Department will conduct a conflicts of interest review, as described below under "Conflicts of Interest," and provide a conflicts of interest report (the "Conflicts Report") to the Proxy Coordinator describing the results of such review. After receiving a referral item from the Proxy Coordinator, Putnam Management's investment professionals will provide a written recommendation to the Proxy Coordinator and the person or persons designated by the Legal and Compliance Department to assist in processing referral items. Such recommendation will set forth (1) how the proxies should be voted, (2) the basis and rationale for such recommendation, and (3) any contacts the investment professionals have had with respect to the referral item with non-investment personnel of Putnam Management or with outside parties (except for routine communications from proxy solicitors). The Proxy Coordinator will then review the investment professionals' recommendation and the Conflicts Report with the Senior Vice President and/or Executive Vice President in determining how to vote the Funds' proxies. The Proxy Coordinator will maintain a record of all proxy questions that have been referred to Putnam Management's investment professionals, the voting recommendation and the Conflicts Report. In some situations, the Proxy Coordinator, the Senior Vice President and/or the Executive Vice President may determine that a particular proxy question raises policy issues requiring consultation with the Chair of the Board Policy and Nominating Committee who, in turn, may decide to bring the particular proxy question to the Committee or the full board of Trustees for consideration. Conflicts of Interest - --------------------- Occasions may arise where a person or organization involved in the proxy voting process may have a conflict of interest. A conflict of interest may exist, for example, if Putnam Management has a business relationship with (or is actively soliciting business from) either the company soliciting the proxy or a third party that has a material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote. Any individual with knowledge of a personal conflict of interest (e.g., familial relationship with company management) relating to a particular referral item shall disclose that conflict to the Proxy Coordinator and the Legal and Compliance Department and otherwise remove himself or herself from the proxy voting process. The Legal and Compliance Department will review each item referred to Putnam Management's investment professionals to determine if a conflict of interest exists and will provide the Proxy Coordinator with a Conflicts Report for each referral item that (1) describes any conflict of interest; (2) discusses the procedures used to address such conflict of interest; and (3) discloses any contacts from parties outside Putnam Management (other than routine communications from proxy solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation. The Conflicts Report will also include written confirmation that any recommendation from an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration. As adopted March 14, 2003 Item 8. [Reserved] - ------------------ Item 9. Controls and Procedures: - -------------------------------- (a) The registrant's principal executive officer and principal financial officers have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report on Form N-CSR, that the design and operation of such procedures are effective to provide reasonable assurance that information required to be disclosed by the investment company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Commission's rules and forms. (b) Changes in internal control over financial reporting: Not applicable Item 10. Exhibits: - ------------------ (a) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith. (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Investment Company Act of 1940, as amended, and the officer certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002 are filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 an the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NAME OF REGISTRANT By (Signature and Title): /s/Michael T. Healy -------------------------- Michael T. Healy Principal Accounting Officer Date: December 23, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 an the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title): /s/Karnig H. Durgarian --------------------------- Karnig H. Durgarian Principal Executive Officer Date: December 23, 2003 By (Signature and Title): /s/Charles E. Porter --------------------------- Charles E. Porter Principal Financial Officer Date: December 23, 2003 By (Signature and Title): /s/Steven D. Krichmar --------------------------- Steven D. Krichmar Principal Financial Officer Date: December 23, 2003 EX-99.CERT 3 exnn2.txt EX-99.CERT Certifications - -------------- I, Charles E. Porter, a principal financial officer of the funds listed on Attachment A, certify that: 1. I have reviewed each report on Form N-CSR of the funds listed on Attachment A: 2. Based on my knowledge, each report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by each report; 3. Based on my knowledge, the financial statements, and other financial information included in each report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in each report; 4. Each registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act) for the registrants and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which each report are being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report (the "Evaluation Date") based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. Each registrant's other certifying officers and I have disclosed to each registrant's auditors and the audit committee of each registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect each registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in each registrant's internal controls. /s/Charles E. Porter Date: December 23, 2003 - ---------------------- ------------------------ Charles E. Porter, Principal Financial Officer Certifications - -------------- I, Karnig H. Durgarian, the principal executive officer of the funds listed on Attachment A, certify that: 1. I have reviewed each report on Form N-CSR of the funds listed on Attachment A: 2. Based on my knowledge, each report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by each report; 3. Based on my knowledge, the financial statements, and other financial information included in each report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in each report; 4. Each registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act) for the registrants and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which each report are being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report (the "Evaluation Date") based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. Each registrant's other certifying officers and I have disclosed to each registrant's auditors and the audit committee of each registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect each registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in each registrant's internal controls. /s/Karnig H. Durgarian Date: December 23, 2003 - ---------------------- ------------------------ Karnig H. Durgarian, Principal Executive Officer Certifications - -------------- I, Steven D. Krichmar, a principal financial officer of the funds listed on Attachment A, certify that: 1. I have reviewed each report on Form N-CSR of the funds listed on Attachment A: 2. Based on my knowledge, each report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by each report; 3. Based on my knowledge, the financial statements, and other financial information included in each report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in each report; 4. Each registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act) for the registrants and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which each report are being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report (the "Evaluation Date") based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. Each registrant's other certifying officers and I have disclosed to each registrant's auditors and the audit committee of each registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect each registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in each registrant's internal controls. /s/Steven D. Krichmar Date: December 23, 2003 - ---------------------- ------------------------ Steven D. Krichmar, Principal Financial Officer Attachment A - -------------- Period(s) ended October 31, 2003 002 The Putnam Fund for Growth and Income 004 Putnam Income Fund 005 Putnam Global Equity Fund 008 Putnam Convertible Income-Growth Trust 041 Putnam Global Income Trust 052 Putnam Managed Municipal Income Trust 072 Putnam Master Income Trust 183 Putnam Municipal Bond Fund 184 Putnam California Investment Grade Municipal Trust 185 Putnam New York Investment Grade Municipal Trust 2IE Putnam Growth Fund 2II Putnam Capital Opportunities Fund 2MI Putnam Tax Smart Equity Fund 2OV Putnam Mid Cap Value Fund 582 Putnam Municipal Opportunities Trust 840 Putnam Utilities Growth and Income Fund EX-99.906 CERT 4 exnos3.txt EX-99.906 CERT Section 906 Certifications - --------------------------- I, Charles E. Porter, a principal financial officer of the Funds listed on Attachment A, certify that, to my knowledge: 1. The form N-CSR of the Funds listed on Attachment A for the period ended October 31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR of the Funds listed on Attachment A for the period ended October 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of the Funds listed on Attachment A. /s/Charles E. Porter Date: December 23, 2003 - ---------------------- ------------------------ Charles E. Porter, Principal Financial Officer Section 906 Certifications - --------------------------- I, Karnig H. Durgarian, the principal executive officer of the Funds listed on Attachment A, certify that, to my knowledge: 1. The form N-CSR of the Funds listed on Attachment A for the period ended October 31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR of the Funds listed on Attachment A for the period ended October 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of the Funds listed on Attachment A. /s/Karnig H. Durgarian Date: December 23, 2003 - ---------------------- ------------------------ Karnig H. Durgarian, Principal Executive Officer Section 906 Certifications - --------------------------- I, Steven D. Krichmar, a principal financial officer of the Funds listed on Attachment A, certify that, to my knowledge: 1. The form N-CSR of the Funds listed on Attachment A for the period ended October 31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR of the Funds listed on Attachment A for the period ended October 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of the Funds listed on Attachment A. /s/Steven D. Krichmar Date: December 23, 2003 - ---------------------- ------------------------ Steven D. Krichmar, Principal Financial Officer Attachment A - -------------- Period(s) ended October 31, 2003 002 The Putnam Fund for Growth and Income 004 Putnam Income Fund 005 Putnam Global Equity Fund 008 Putnam Convertible Income-Growth Trust 041 Putnam Global Income Trust 052 Putnam Managed Municipal Income Trust 072 Putnam Master Income Trust 183 Putnam Municipal Bond Fund 184 Putnam California Investment Grade Municipal Trust 185 Putnam New York Investment Grade Municipal Trust 2IE Putnam Growth Fund 2II Putnam Capital Opportunities Fund 2MI Putnam Tax Smart Equity Fund 2OV Putnam Mid Cap Value Fund 582 Putnam Municipal Opportunities Trust 840 Putnam Utilities Growth and Income Fund EX-99.CODE ETH 5 md.txt THE PUTNAM FUNDS Code of Ethics Each of The Putnam Funds (the "Funds") has determined to adopt this Code of Ethics with respect to certain types of personal securities transactions by officers and Trustees of the Funds which might be deemed to create possible conflicts of interest and to establish reporting requirements and enforcement procedures with respect to such transactions. I. Rules Applicable to Officers and Trustees Affiliated with Putnam Investments, Inc. A. Incorporation of Adviser's Code of Ethics. The provisions of the Code of Ethics for employees of Putnam Investments, Inc. and its Subsidiaries (the "Putnam Investments Code of Ethics"), which is attached as Appendix A hereto, are hereby incorporated herein as the Funds' Code of Ethics applicable to officers and Trustees of the Funds who are employees of the Funds or officers, directors or employees of Putnam Investments, Inc. or its subsidiaries. A violation of the Putnam Investments Code of Ethics shall constitute a violation of the Funds' Code. B. Reports. Officers and Trustees of each of the Funds who are made subject to the Putnam Investments Code of Ethics pursuant to the preceding paragraph shall file the reports required by the Putnam Investments Code of Ethics with the Compliance Director designated therein. A report filed with the Compliance Director shall be deemed to be filed with each of the Funds of which the reporting individual is an officer or Trustee. C. Review. (1) The Compliance Director shall compare the reported personal securities transactions with completed and contemplated portfolio transactions of each of the Funds to determine whether a violation of this Code may have occurred. Before making any determination that a violation has been committed by any person, the Compliance Director shall give such person an opportunity to supply additional explanatory material. (2) If the Compliance Director determines that a violation of this Code has or may have occurred, he shall submit his written determination, together with the confidential quarterly report and any additional explanatory material provided by the individual, to the Chairman of the Funds, who shall make an independent determination of whether a violation has occurred. D. Sanctions. If the Chairman of the Funds finds that a violation has occurred, he shall report the violation and any sanction imposed under the Putnam Code of Ethics to the Trustees of the Funds who may impose such additional sanctions as they deem appropriate. If a securities transaction of the Chairman is under consideration, the Vice Chairman of the Funds shall act in all respects in the manner prescribed herein for the Chairman. II. Rules Applicable to Unaffiliated Trustees A. Definitions. (1) "Beneficial ownership" shall be interpreted in the same manner as it would be in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder. Application of this definition is explained in more detail in Exhibit A hereto. (2) "Control" means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. (3) "Interested Trustee" means a Trustee of a Fund who is an "interested person" of the Fund within the meaning of the Investment Company Act. (4) "Purchase or sale of a security" includes, among other things, the writing of an option to purchase or sell a security. (5) "Security" shall have the same meaning as that set forth in Section 2(a)(36) of the Investment Company Act (in effect, all securities) except that it shall not include securities issued by the Government of the United States or an agency thereof, bankers' acceptances, bank certificates of deposit, commercial paper and shares of registered open-end investment companies. (6) "Unaffiliated Trustee" means a Trustee who is not made subject to the Putnam Investments Code of Ethics pursuant to Part I hereof. B. Prohibited Purchases and Sales. No Unaffiliated Trustee of any of the Funds shall purchase or sell, directly or indirectly, any security in which he has or by reason of such transaction acquires, any direct or indirect beneficial ownership and which to his actual knowledge at the time of such purchase or sale: (1) is being considered for purchase or sale by the Fund; (2) is being purchased or sold by the Fund; or (3) was purchased or sold by the Fund within the most recent five days if such person participated in the recommendation to, or the decision by, Putnam Management to purchase or sell such security for the Fund. C. Exempted Transactions. The prohibitions of Section II-B of this Code shall not apply to: (1) purchases or sales effected in any account over which the Unaffiliated Trustee has no direct or indirect influence or control; (2) purchases or sales which are non-volitional on the part of either the Unaffiliated Trustee or the Fund; (3) purchases which are part of an automatic dividend reinvestment plan; (4) purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; (5) purchases or sales other than those exempted in (1) through (4) above which do not cause the Unaffiliated Trustee to gain improperly a personal benefit through his relationship with the Fund and are only remotely potentially harmful to a Fund because they would be very unlikely to affect a highly institutional market, and are previously approved by the Compliance Director under the Putnam Code of Ethics or the Chairman of the Funds, which approval shall be confirmed in writing. D. Reporting. (1) Whether or not one of the exemptions listed in Section II-C applies, every Unaffiliated Trustee of a Fund shall file with the Chairman of the Funds a report containing the information described in Section II-D(2) of this Code with respect to transactions in any security in which such Unaffiliated Trustee has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, if such Trustee, at the time of that transaction, knew or, in the ordinary course of fulfilling his official duties as a Trustee of the Fund, should have known that, during the 15-day period immediately preceding or after the date of the transaction by the Trustee: (a) such security was or is to be purchased or sold by the Fund or (b) such security was or is being considered for purchase or sale by the Fund; provided, however, that an Unaffiliated Trustee shall not be required to make a report with respect to transactions effected for any account over which such person does not have any direct or indirect influence or control. (2) Every report shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information: (a) The date of the transaction, the title and the number of shares, and the principal amount of each security involved; (b) The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); (c) The price at which the transaction was effected; and (d) The name of the broker, dealer or bank with or through whom the transaction was effected. (3) Every report concerning a purchase or sale prohibited under Section II-B hereof with respect to which the reporting person relies upon one of the exemptions provided in Section IIC shall contain a brief statement of the exemption relied upon and the circumstances of the transaction. (4) Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he has any direct or indirect beneficial ownership in the security to which the report relates. (5) Notwithstanding anything to the contrary contained herein, an Unaffiliated Trustee who is an Interested Trustee shall also file the reports required by Rule 17j-1(c)(1) under the Investment Company Act of 1940. E. Review. (1) The Chairman of the Funds shall compare the reported personal securities transactions with completed and contemplated portfolio transactions of the Funds to determine whether any transaction ("Reviewable Transactions") listed in Section II-B (disregarding exemptions provided by Section II-C(1) through (5)) may have occurred. (2) If the Chairman determines that a Reviewable Transaction may have occurred, he shall then determine whether a violation of this Code may have occurred, taking into account all the exemptions provided under Section II-C. Before making any determination that a violation has occurred, the Chairman shall give the person involved an opportunity to supply additional information regarding the transaction in question. F. Sanctions. If the Chairman determines that a violation of this Code has occurred, he shall so advise a committee consisting of the Unaffiliated Trustees, other than the person whose transaction is under consideration, and shall provide the committee with a report of the matter, including any additional information supplied by such person. The committee may impose such sanction as it deems appropriate. III. Miscellaneous. A. Amendments to The Putnam Companies Code of Ethics. Any amendment to the Putnam Companies Code of Ethics shall be deemed an amendment to Section I-A of this Code effective 30 days after written notice of such amendment shall have been received by the Chairman of the Funds, unless the Trustees of the Funds expressly determine that such amendment shall become effective at an earlier or later date or shall not be adopted. B. Records. The Funds shall maintain records in the manner and to the extent set forth below, which records may be maintained on microfilm under the conditions described in Rule 31a-2(f)(1) under the Investment Company Act and shall be available for examination by representatives of the Securities and Exchange Commission. (1) A copy of this Code and any other code which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place; (2) A record of any violation of this Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs; (3) A copy of each report made by an officer or Trustee pursuant to this Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; and (4) A list of all person who are, or within the past five years have been, required to make reports pursuant to this Code shall be maintained in an easily accessible place. C. Confidentiality. All reports of securities transactions and any other information filed with any Fund pursuant to this Code shall be treated as confidential, but are subject to review as provided herein and by personnel of the Securities and Exchange Commission. D. Interpretation of Provisions. The Directors and Trustees may from time to time adopt such interpretations of this Code as they deem appropriate. E. Delegation by Chairman. The Chairman of the Funds may from time to time delegate any or all of his responsibilities under this Code, either generally or as to specific instances, to such officer or Trustee of the Funds as he may designate. As revised July 8, 1994 Code of Ethics PUTNAM INVESTMENTS [SCALE LOGO OMITTED] It is the personal responsibility of every Putnam employee to avoid any conduct that could create a conflict, or even the appearance of a conflict, with our clients, or to do anything that could damage or erode the trust our clients place in Putnam and its employees. 44156 9/2003 * Table of Contents Overview iii Preamble vii Definitions: Code of Ethics ix Section I. Personal Securities Rules for All Employees 1 A. Restricted List 1 B. Prohibited Transactions 6 C. Discouraged Transactions 10 D. Exempted Transactions 11 Section II. Additional Special Rules for Personal Securities Transactions of Access Persons and Certain Investment Professionals 13 Section III. Prohibited Conduct for All Employees 19 Section IV. Special Rules for Officers and Employees of Putnam Investments Limited. 31 Section V. Reporting Requirements for All Employees 33 Section VI. Education Requirements 37 Section VII. Compliance and Appeal Procedures 39 Appendix A 41 Preamble 43 Definitions: Insider Trading 45 Section 1. Rules Concerning Inside Information 47 Section 2. Overview of Insider Trading 51 Appendix B. Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds 57 Appendix C. Clearance Form for Portfolio Manager Sales Out of Personal Account of Securities Also Held by Fund (For compliance with "Contra-Trading" Rule) 59 Appendix D. Procedures for Approval of New Financial Instruments 61 Appendix E. AIMR Code of Ethics and Standards of Professional Responsibility 63 Index 71 * Overview Every Putnam employee is required, as a condition of continued employment, to read, understand, and comply with the entire Code of Ethics. Additionally, employees are expected to comply with the policies and procedures contained within the Putnam Employee Handbook, which can be accessed on-line through www.ibenefitcenter.com. This Overview is provided only as a convenience and is not intended to substitute for a careful reading of the complete document. It is the personal responsibility of every Putnam employee to avoid any conduct that could create a conflict, or even the appearance of a conflict, with our clients, or do anything that could damage or erode the trust our clients place in Putnam and its employees. This is the spirit of the Code of Ethics. In accepting employment at Putnam, every employee accepts the absolute obligation to comply with the letter and the spirit of the Code of Ethics. Failure to comply with the spirit of the Code of Ethics is just as much a violation of the Code as failure to comply with the written rules of the Code. The rules of the Code cover activities, including personal securities transactions, of Putnam employees, certain family members of employees, and entities (such as corporations, trusts, or partnerships) that employees may be deemed to control or influence. Sanctions will be imposed for violations of the Code of Ethics. Sanctions may include bans on personal trading, reductions in salary increases or bonuses, disgorgement of trading profits, suspension of employment, and termination of employment. - -- Insider trading: Putnam employees are forbidden to buy or sell any security while either Putnam or the employee is in possession of non-public information ("inside information") concerning the security or the issuer. A violation of Putnam's insider trading policies may result in criminal and civil penalties, including imprisonment and substantial fines. - -- Conflicts of interest: The Code of Ethics imposes limits on activities of Putnam employees where the activity may conflict with the interests of Putnam or its clients. These include limits on the receipt and solicitation of gifts and on service as a fiduciary for a person or entity outside of Putnam. For example, Putnam employees generally may not accept gifts over $100 in total value in a calendar year from any entity or any supplier of goods or services to Putnam. In addition, a Putnam employee may not serve as a director of any corporation without prior approval of the Code of Ethics Officer, and Putnam employees may not be members of investment clubs. - -- Confidentiality: Information about Putnam clients and Putnam investment activity and research is proprietary and confidential and may not be disclosed or used by any Putnam employee outside Putnam without a valid business purpose. - -- Personal securities trading: Putnam employees may not buy or sell any security for their own account without clearing the proposed transaction in advance through the on-line pre-clearance system or with the Code of Ethics Administrator. Certain securities are excepted from this requirement (e.g., Marsh & McLennan stock and shares of open-end (not closed-end) Putnam Funds). Clearance must be obtained in advance, between 11:30 a.m. and 4:00 p.m. EST on the day of the trade. Clearance may be obtained between 9:00 a.m. and 4:00 p.m. on the day of the trade for up to 1,000 shares of stock of an issuer whose capitalization exceeds $5 billion. A clearance is valid only for the day it is obtained. The Code also strongly discourages excessive trading by employees for their own account (i.e., more than 10 trades in any calendar quarter). Trading in excess of this level will be reviewed with the Code of Ethics Oversight Committee. - -- Short Selling: Putnam employees are prohibited from short selling any security, whether or not it is held in a Putnam client portfolio, except that short selling against broad market indexes and "against the box" are permitted. - -- Confirmations of trading and periodic account statements: All Putnam employees must have their brokers send confirmations of personal securities transactions, including transactions of immediate family members and accounts over which the employee has investment discretion, to the Code of Ethics Officer. Employees must contact the Code of Ethics Administrator to obtain an authorization letter from Putnam for setting up a personal brokerage account. - -- Quarterly and annual reporting: Certain Putnam employees (so-called "Access Persons" as defined by the SEC and in the Code of Ethics) must report all their securities transactions in each calendar quarter to the Code of Ethics Officer within 10 days after the end of the quarter. All Access Persons must disclose all personal securities holdings upon commencement of employment and thereafter on an annual basis. You will be notified if these requirements apply to you. If these requirements apply to you and you fail to report as required, salary increases and bonuses will be reduced. - -- IPOs and private placements: Putnam employees may not buy any securities in an initial public offering or in a private placement, except in limited circumstances when prior written authorization is obtained. - -- Procedures for Approval of New Financial Instruments: No new types of securities or instruments may be purchased for any Putnam fund or other client account without the prior approval of the Risk Management Committee. - -- Personal securities transactions by Access Persons and certain investment professionals: The Code imposes several special restrictions on personal securities transactions by Access Persons and certain investment professionals, which are summarized as follows: - -- "60-Day Holding Period". No Access Person shall purchase and then sell at a profit, or sell and then repurchase at a lower price, any security or related derivative security within 60 calendar days. - -- "7-Day" Rule. Before a portfolio manager places an order to buy a security for any portfolio he manages, he must sell from his personal account any such security or related derivative security purchased within the preceding 7 calendar days and disgorge any profit from the sale. - -- "Blackout" Rules. No portfolio manager may sell any security or related derivative security for her personal account until 7 calendar days have passed since the most recent purchase of that security or related derivative security by any portfolio she manages. No portfolio manager may buy any security or related derivative security for his personal account until 7 calendar days have passed since the most recent sale of that security or related derivative security by any portfolio he manages. - -- "Contra-Trading" Rule. No portfolio manager may sell out of her personal account any security or related derivative security that is held in any portfolio she manages unless she has received the written approval of a CIO and the Code of Ethics Officer. - -- No manager may cause a Putnam client to take action for the manager's own personal benefit. - -- SIMILAR RULES LIMIT PERSONAL SECURITIES TRANSACTIONS BY ANALYSTS, CO-MANAGERS, AND CHIEF INVESTMENT OFFICERS. PLEASE READ THESE RULES CAREFULLY. YOU ARE RESPONSIBLE FOR UNDERSTANDING THE RESTRICTIONS. This Overview is qualified in its entirety by the provisions of the Code of Ethics. The Code requires that all Putnam employees read, understand, and comply with the entire Code of Ethics. * Preamble It is the personal responsibility of every Putnam employee to avoid any conduct that would create a conflict, or even the appearance of a conflict, with our clients, or embarrass Putnam in any way. This is the spirit of the Code of Ethics. In accepting employment at Putnam, every employee also accepts the absolute obligation to comply with the letter and the spirit of the Code of Ethics. Failure to comply with the spirit of the Code of Ethics is just as much a violation of the Code as failure to comply with the written rules of the Code. Sanctions will be imposed for violations of the Code of Ethics, including the Code's reporting requirements. Sanctions may include bans on personal trading, reductions in salary increases or bonuses, disgorgement of trading profits, suspension of employment and termination of employment. Putnam Investments is required by law to adopt a Code of Ethics. The purposes of the law are to ensure that companies and their employees comply with all applicable laws and to prevent abuses in the investment advisory business that can arise when conflicts of interest exist between the employees of an investment adviser and its clients. Having an effective Code of Ethics is good business practice, as well. By adopting and enforcing a Code of Ethics, we strengthen the trust and confidence reposed in us by demonstrating that, at Putnam, client interests come before personal interests. Putnam has had a Code of Ethics for many years. The first Putnam Code was written more than 30 years ago by George Putnam. It has been revised periodically, and was re-drafted in its entirety in 1989 to take account of legal and regulatory developments in the investment advisory business. Since 1989, the Code has been revised regularly to reflect developments in our business and the law. The Code that follows represents a balancing of important interests. On the one hand, as a registered investment adviser, Putnam owes a duty of undivided loyalty to its clients, and must avoid even the appearance of a conflict that might be perceived as abusing the trust they have placed in Putnam. On the other hand, Putnam does not want to prevent conscientious professionals from investing for their own account where conflicts do not exist or are so attenuated as to be immaterial to investment decisions affecting Putnam clients. When conflicting interests cannot be reconciled, the Code makes clear that, first and foremost, Putnam employees owe a fiduciary duty to Putnam clients. In most cases, this means that the affected employee will be required to forego conflicting personal securities transactions. In some cases, personal investments will be permitted, but only in a manner which, because of the circumstances and applicable controls, cannot reasonably be perceived as adversely affecting Putnam client portfolios or taking unfair advantage of the relationship Putnam employees have to Putnam clients. The Code contains specific rules prohibiting defined types of conflicts. Because every potential conflict cannot be anticipated in advance, the Code also contains certain general provisions prohibiting conflict situations. In view of these general provisions, it is critical that any individual who is in doubt about the applicability of the Code in a given situation seek a determination from the Code of Ethics Officer about the propriety of the conduct in advance. The procedures for obtaining such a determination are described in Section VII of the Code. It is critical that the Code be strictly observed. Not only will adherence to the Code ensure that Putnam renders the best possible service to its clients, it will ensure that no individual is liable for violations of law. It should be emphasized that adherence to this policy is a fundamental condition of employment at Putnam. Every employee is expected to adhere to the requirements of this Code of Ethics despite any inconvenience that may be involved. Any employee failing to do so may be subject to such disciplinary action, including financial penalties and termination of employment, as determined by the Code of Ethics Oversight Committee or the Chief Executive Officer of Putnam Investments. * Definitions: Code of Ethics The words given below are defined specifically for the purposes of Putnam's Code of Ethics. Gender references in the Code of Ethics alternate. Rule of construction regarding time periods. Unless the context indicates otherwise, time periods used in the Code of Ethics shall be measured inclusively, i.e., including the dates from and to which the measurement is made. Access Persons. Access Persons are (i) all officers of Putnam Investment Management, LLC (the investment manager of Putnam's mutual funds), (ii) all employees within Putnam's Investment Division, and (iii) all other employees of Putnam who, in connection with their regular duties, have access to information regarding purchases or sales of portfolio securities by a Putnam mutual fund, or who have access to information regarding recommendations with respect to such purchases or sales. Code of Ethics Administrator. The individual designated by the Code of Ethics Officer to assume responsibility for day-to-day, non-discretionary administration of this Code. The current Code of Ethics Administrator is Laura Rose, who can be reached at extension 11104. Code of Ethics Officer. The Putnam officer who has been assigned the responsibility of enforcing and interpreting this Code. The Code of Ethics Officer shall be the General Counsel or such other person as is designated by the President of Putnam Investments. If the Code of Ethics Officer is unavailable, the Deputy Code of Ethics Officer (to be appointed by the Code of Ethics Officer) shall act in his stead. Code of Ethics Oversight Committee. Has oversight responsibility for administering the Code of Ethics. Members include the Code of Ethics Officer, the Head of Investments, and other members of Putnam's senior management approved by the Chief Executive Officer of Putnam. Immediate family. Spouse, minor children, or other relatives living in the same household as the Putnam employee. Policy Statements. The Policy Statement Concerning Insider Trading Prohibitions attached to the Code as Appendix A and the Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds attached to the Code as Appendix B. Private placement. Any offering of a security not to the public, but to sophisticated investors who have access to the kind of information which would be contained in a prospectus, and which does not require registration with the relevant securities authorities. Purchase or sale of a security. Any acquisition or transfer of any interest in the security for direct or indirect consideration, and includes the writing of an option. Putnam. Any or all of Putnam Investments, Inc., and its subsidiaries, any one of which shall be a "Putnam company." Putnam client. Any of the Putnam Funds, or any advisory, trust, or other client of Putnam. Putnam employee (or "employee"). Any employee of Putnam. Restricted List. The list established in accordance with Rule 1 of Section I.A. Security. Any type or class of equity or debt security and any rights relating to a security, such as put and call options, warrants, and convertible securities. Unless otherwise noted, the term "security" does not include: currencies, direct and indirect obligations of the U.S. government and its agencies, commercial paper, certificates of deposit, repurchase agreements, bankers' acceptances, any other money market instruments, shares of open-end mutual funds (including Putnam open-end mutual funds), exchange traded index funds containing a portfolio or securities of 25 or more issuers (e.g., SPDRs, WEBs, QQQs), securities of The Marsh & McLennan Companies, Inc., commodities, and any option on a broad-based market index or an exchange-traded futures contract or option thereon. Transaction for a personal account (or "personal securities transaction"). Securities transactions: (a) for the personal account of any employee; (b) for the account of a member of the immediate family of any employee; (c) for the account of a partnership in which a Putnam employee or immediate family member is a general partner or a partner with investment discretion; (d) for the account of a trust in which a Putnam employee or immediate family member is a trustee with investment discretion; (e) for the account of a closely-held corporation in which a Putnam employee or immediate family member holds shares and for which he has investment discretion; and (f) for any account other than a Putnam client account which receives investment advice of any sort from the employee or immediate family member, or as to which the employee or immediate family member has investment discretion. * Section I. Personal Securities Rules for All Employees A. Restricted List RULE 1 No Putnam employee shall purchase or sell for his personal account any security without prior clearance obtained through Putnam's Intranet pre-clearance system (in the "Workplace Community" section of ibenefitcenter.com) or from the Code of Ethics Administrator. No clearance will be granted for securities appearing on the Restricted List. Securities shall be placed on the Restricted List in the following circumstances: (a) when orders to purchase or sell such security have been entered for any Putnam client, or the security is being actively considered for purchase or sale for any Putnam client; (b) with respect to voting securities of corporations in the banking, savings and loan, communications, or gaming (i.e., casinos) industries, when holdings of Putnam clients exceed 7% (for public utilities, the threshold is 4%); (c) when, in the judgment of the Code of Ethics Officer, other circumstances warrant restricting personal transactions of Putnam employees in a particular security; (d) the circumstances described in the Policy Statement Concerning Insider Trading Prohibitions, attached as Appendix A. Reminder: Securities for an employee's "personal account" include securities owned by certain family members of a Putnam employee. Thus, this Rule prohibits certain trades by family members of Putnam employees. See Definitions. Compliance with this rule does not exempt an employee from complying with any other applicable rules of the Code, such as those described in Section III. In particular, Access Persons and certain investment professionals must comply with the special rules set forth in Section II. EXCEPTIONS A. "Large Cap" Exception. If a security appearing on the Restricted List is an equity security for which the issuer has a market capitalization (defined as outstanding shares multiplied by current price per share) of over $5 billion, then a Putnam employee may purchase or sell up to 1,000 shares of the security per day for his personal account. This exception does not apply if the security appears on the Restricted List in the circumstances described in subpart (b), (c), or (d) of Rule 1. B. Investment Grade Or Higher Fixed-Income Exception. If a security being traded or considered for trade for a Putnam client is a non-convertible fixed-income security which bears a rating of BBB (Standard & Poor's) or Baa (Moody's) or any comparable rating or higher, then a Putnam employee may purchase or sell that security for his personal account without regard to the activity of Putnam clients. This exception does not apply if the security has been placed on the Restricted List in the circumstances described in subpart (b), (c), or (d) of Rule 1. C. Pre-Clearing Transactions Effected by Share Subscription. The purchase and sale of securities made by subscription rather than on an exchange are limited to issuers having a market capitalization of $5 billion or more and are subject to a 1,000 share limit. The following are procedures to comply with Rule 1 when effecting a purchase or sale of shares by subscription: (a) The Putnam employee must pre-clear the trade on the day he or she submits a subscription to the issuer, rather than on the actual day of the trade since the actual day of the trade typically will not be known to the employee who submits the subscription. At the time of pre-clearance, the employee will be told whether the purchase is permitted (in the case of a corporation having a market capitalization of $5 billion or more), or not permitted (in the case of a smaller capitalization issuer). (b) The subscription for any purchase or sale of shares must be reported on the employee's quarterly personal securities transaction report, noting the trade was accomplished by subscription. (c) As no brokers are involved in the transaction, the confirmation requirement will be waived for these transactions, although the Putnam employee must provide the Legal and Compliance Department with any transaction summaries or statements sent by the issuer. SANCTION GUIDELINES A. Failure to Pre-Clear a Personal Trade 1. First violation: One month trading ban with written warning that a future violation will result in a longer trading ban. 2. Second violation: Three month trading ban and written notice to Managing Director of the employee's division. 3. Third violation: Six month trading ban with possible longer or permanent trading ban based upon review by Code of Ethics Oversight Committee. B. Failure to Pre-Clear Securities on the Restricted List 1. First violation: Disgorgement of any profit from the transaction, one month trading ban, and written warning that a future violation will result in a longer trading ban. 2. Second violation: Disgorgement of any profit from the transaction, three month trading ban, and written notice to Managing Director of the employee's division. 3. Third violation: Disgorgement of any profit from the transaction, and six month trading ban with possible longer or permanent trading ban based upon review by Code of Ethics Oversight Committee. NOTE: These are the sanction guidelines for successive failures to pre-clear personal trades within a 2-year period. The Code of Ethics Oversight Committee retains the right to increase or decrease the sanction for a particular violation in light of the circumstances. The Committee's belief that an employee intentionally has violated the Code of Ethics will result in more severe sanctions than outlined in the guidelines above. The sanctions described in Paragraph B apply to Restricted List securities that are: (i) small cap stocks (i.e., stocks not entitled to the "Large Cap" exception) and (ii) large cap stocks that exceed the daily 1,000 share maximum permitted under the "Large Cap" exception. Failure to pre-clear an otherwise permitted trade of up to 1,000 shares of a large cap security is subject to the sanctions described above in Paragraph A. IMPLEMENTATION A. Maintenance of Restricted List. The Restricted List shall be maintained by the Code of Ethics Administrator. B. Consulting Restricted List. An employee wishing to trade any security for his personal account shall first obtain clearance through Putnam's Intranet pre-clearance system. The system may be accessed from your desktop computer through the Putnam ibenefitcenter (https://www.ibenefitcenter.com) Workplace Community tab, Employee Essentials menu. Employees may pre-clear all securities between 11:30 a.m. and 4:00 p.m. EST, and may pre-clear purchases or sales of up to 1,000 shares of issuers having a market capitalization of more than $5 billion between 9:00 a.m. and 4:00 p.m. EST. Requests to make personal securities transactions may not be made using the system or presented to the Code of Ethics Administrator after 4:00 p.m. The pre-clearance system will inform the employee whether the security may be traded and whether trading in the security is subject to the "Large Cap" limitation. The response of the pre-clearance system as to whether a security appears on the Restricted List and, if so, whether it is eligible for the exceptions set forth after this Rule shall be final, unless the employee appeals to the Code of Ethics Officer, using the procedure described in Section VII, regarding the request to trade a particular security. A clearance is only valid for trading on the day it is obtained. Trades in securities listed on Asian or European stock exchanges, however, may be executed within one business day after pre-clearance is obtained. If a security is not on the Restricted List, other classes of securities of the same issuer (e.g., preferred or convertible preferred stock) may be on the Restricted List. It is the employee's responsibility to identify with particularity the class of securities for which permission is being sought for a personal investment. If the pre-clearance system does not recognize a security, or if an employee is unable to use the system or has any questions with respect to the system or pre-clearance, the employee may consult the Code of Ethics Administrator. The Code of Ethics Administrator shall not have authority to answer any questions about a security other than whether trading is permitted. The response of the Code of Ethics Administrator as to whether a security appears on the Restricted List and, if so, whether it is eligible for the exceptions set forth after this Rule shall be final, unless the employee appeals to the Code of Ethics Officer, using the procedure described in Section VII, regarding the request to trade a particular security. C. Removal of Securities from Restricted List. Securities shall be removed from the Restricted List when: (a) in the case of securities on the Restricted List pursuant to Rule 1(a), they are no longer being purchased or sold for a Putnam client or actively considered for purchase or sale for a Putnam client; (b) in the case of securities on the Restricted List pursuant to Rule 1(b), the holdings of Putnam clients fall below the applicable threshold designated in that Rule, or at such earlier time as the Code of Ethics Officer deems appropriate; or (c) in the case of securities on the Restricted List pursuant to Rule 1(c) or 1(d), when circumstances no longer warrant restrictions on personal trading. COMMENTS 1. Pre-Clearance. Subpart (a) of this Rule is designed to avoid the conflict of interest that might occur when an employee trades for his personal account a security that currently is being traded or is likely to be traded for a Putnam client. Such conflicts arise, for example, when the trades of an employee might have an impact on the price or availability of a particular security, or when the trades of the client might have an impact on price to the benefit of the employee. Thus, exceptions involve situations where the trade of a Putnam employee is unlikely to have an impact on the market. 2. Regulatory Limits. Owing to a variety of federal statutes and regulations in the banking, savings and loan, communications, and gaming industries, it is critical that accounts of Putnam clients not hold more than 10% of the voting securities of any issuer (5% for public utilities). Because of the risk that the personal holdings of Putnam employees may be aggregated with Putnam holdings for these purposes, subpart (b) of this Rule limits personal trades in these areas. The 7% limit (4% for public utilities) will allow the regulatory limits to be observed. 3. Options. For the purposes of this Code, options are treated like the underlying security. See Definitions. Thus, an employee may not purchase, sell, or "write" option contracts for a security that is on the Restricted List. A securities index will not be put on the Restricted List simply because one or more of its underlying securities have been put on the Restricted List. The exercise of an options contract (the purchase or writing of which was previously pre-cleared) does not have to be pre-cleared. Note, however, that the sale of securities obtained through the exercise of options must be pre-cleared. 4. Involuntary Transactions. "Involuntary" personal securities transactions are exempted from the Code. Special attention should be paid to this exemption. (See Section I.D.) 5. Tender Offers. This Rule does not prohibit an employee from tendering securities from his personal account in response to an any-and-all tender offer, even if Putnam clients are also tendering securities. A Putnam employee is, however, prohibited from tendering securities from his personal account in response to a partial tender offer, if Putnam clients are also tendering securities. B. Prohibited Transactions RULE 1 Putnam employees are prohibited from short selling any security, whether or not the security is held in a Putnam client portfolio. EXCEPTIONS Short selling against broad market indexes (such as the Dow Jone Industrial Average, the NASDAQ index and the S&P 100 and 500 indexes) and short selling "against the box" are permitted. RULE 2 No Putnam employee shall purchase any security for her personal account in an initial public offering. EXCEPTION Pre-existing Status Exception. A Putnam employee shall not be barred by this Rule or by Rule 1(a) of Section I.A. from purchasing securities for her personal account in connection with an initial public offering of securities by a bank or insurance company when the employee's status as a policyholder or depositor entitles her to purchase securities on terms more favorable than those available to the general public, in connection with the bank's conversion from mutual or cooperative form to stock form, or the insurance company's conversion from mutual to stock form, provided that the employee has had the status entitling her to purchase on favorable terms for at least two years. This exception is only available with respect to the value of bank deposits or insurance policies that an employee owns before the announcement of the initial public offering. This exception does not apply, however, if the security appears on the Restricted List in the circumstances set forth in subparts (b), (c), or (d) of Section I.A., Rule 1. IMPLEMENTATION A. General Implementation. An employee shall inquire, before any purchase of a security for her personal account, whether the security to be purchased is being offered pursuant to an initial public offering. If the security is offered through an initial public offering, the employee shall refrain from purchasing that security for her personal account unless the exception applies. B. Administration of Exception. If the employee believes the exception applies, she shall consult the Code of Ethics Administrator concerning whether the security appears on the Restricted List and if so, whether it is eligible for this exception. COMMENTS 1. The purpose of this rule is twofold. First, it is designed to prevent a conflict of interest between Putnam employees and Putnam clients who might be in competition for the same securities in a limited public offering. Second, the rule is designed to prevent Putnam employees from being subject to undue influence as a result of receiving "favors" in the form of special allocations of securities in a public offering from broker-dealers who seek to do business with Putnam. 2. Purchases of securities in the immediate after-market of an initial public offering are not prohibited, provided they do not constitute violations of other portions of the Code of Ethics. For example, participation in the immediate after-market as a result of a special allocation from an underwriting group would be prohibited by Section III, Rule 3 concerning gifts and other "favors." 3. Public offerings subsequent to initial public offerings are not deemed to create the same potential for competition between Putnam employees and Putnam clients because of the pre-existence of a market for the securities. RULE 3 No Putnam employee shall purchase any security for his personal account in a limited private offering or private placement. COMMENTS 1. The purpose of this Rule is to prevent a Putnam employee from investing in securities for his own account pursuant to a limited private offering that could compete with or disadvantage Putnam clients, and to prevent Putnam employees from being subject to efforts to curry favor by those who seek to do business with Putnam. 2. Exemptions to the prohibition will generally not be granted where the proposed investment relates directly or indirectly to investments by a Putnam client, or where individuals involved in the offering (including the issuers, broker, underwriter, placement agent, promoter, fellow investors and affiliates of the foregoing) have any prior or existing business relationship with Putnam or a Putnam employee, or where the Putnam employee believes that such individuals may expect to have a future business relationship with Putnam or a Putnam employee. 3. An exemption may be granted, subject to reviewing all the facts and circumstances, for investments in: (a) Pooled investment funds, including hedge funds, subject to the condition that an employee investing in a pooled investment fund would have no involvement in the activities or decision-making process of the fund except for financial reports made in the ordinary course of the fund's business. (b) Private placements where the investment cannot relate, or be expected to relate, directly or indirectly to Putnam or investments by a Putnam client. 4. Employees who apply for an exemption will be expected to disclose to the Code of Ethics Officer in writing all facts and relationships relating to the proposed investment. 5. Limited partnership interests are frequently sold in private placements. An employee should assume that investment in a limited partnership is barred by these rules, unless the employee has obtained, in advance of purchase, a written exemption under the ad hoc exemption set forth in Section I.D., Rule 2. The procedure for obtaining an ad hoc exemption is described in Section VII, Part 4. 6. Applications to invest in private placements will be reviewed by the Code of Ethics Oversight Committee. This review will take into account, among other factors, the considerations described in the preceding comments. RULE 4 No Putnam employee shall purchase or sell any security for her personal account or for any Putnam client account while in possession of material, nonpublic information concerning the security or the issuer. EXCEPTIONS NONE. Please read Appendix A, Policy Statement Concerning Insider Trading Prohibitions. RULE 5 No Putnam employee shall purchase from or sell to a Putnam client any securities or other property for his personal account, nor engage in any personal transaction to which a Putnam client is known to be a party, or which transaction may have a significant relationship to any action taken by a Putnam client. EXCEPTIONS None. IMPLEMENTATION It shall be the responsibility of every Putnam employee to make inquiry prior to any personal transaction sufficient to satisfy himself that the requirements of this Rule have been met. COMMENT This rule is required by federal law. It does not prohibit a Putnam employee from purchasing any shares of an open-end Putnam fund. The policy with respect to employee trading in closed-end Putnam funds is attached as Appendix B. RULE 6 No Putnam employee shall engage in market timing strategies within Putnam mutual funds, including within Putnam's Profit Sharing Retirement Plan accounts and deferred compensation accounts. EXCEPTIONS None. COMMENTS "Market timing" occurs when a person frequently purchases and sells shares of mutual funds based upon the activity of equity markets on the days that the purchases and sales are effected. Putnam has determined that market timing has a detrimental effect on the performance of the mutual funds managed by Putnam, and Putnam has taken steps to reduce instances of market timing by brokers and shareholders in the mutual funds. Putnam therefore expects that Putnam employees will avoid making frequent trades into and out of the Putnam mutual funds, including transactions made within Putnam's Profit Sharing Retirement Plan and other deferred compensation vehicles. C. Discouraged Transactions RULE 1 Putnam employees are strongly discouraged from engaging in naked option transactions for their personal accounts. EXCEPTIONS None. COMMENT Naked option transactions are particularly dangerous, because a Putnam employee may be prevented by the restrictions in this Code of Ethics from "covering" the naked option at the appropriate time. All employees should keep in mind the limitations on their personal securities trading imposed by this Code when contemplating such an investment strategy. Engaging in naked options transactions on the basis of material, nonpublic information is prohibited. See Appendix A, Policy Statement Concerning Insider Trading Prohibitions. RULE 2 Putnam employees are strongly discouraged from engaging in excessive trading for their personal accounts. EXCEPTIONS None. COMMENTS 1. Although a Putnam employee's excessive trading may not itself constitute a conflict of interest with Putnam clients, Putnam believes that its clients' confidence in Putnam will be enhanced and the likelihood of Putnam achieving better investment results for its clients over the long term will be increased if Putnam employees rely on their investment -- as opposed to trading -- skills in transactions for their own account. Moreover, excessive trading by a Putnam employee for his or her own account diverts an employee's attention from the responsibility of servicing Putnam clients, and increases the possibilities for transactions that are in actual or apparent conflict with Putnam client transactions. 2. Although this Rule does not define excessive trading, employees should be aware that if their trades exceed 10 trades per quarter the trading activity will be reviewed by the Code of Ethics Oversight Committee. D. Exempted Transactions RULE 1 Transactions which are involuntary on the part of a Putnam employee are exempt from the prohibitions set forth in Sections I.A., I.B., and I.C. EXCEPTIONS None. COMMENTS 1. This exemption is based on categories of conduct that the Securities and Exchange Commission does not consider "abusive." 2. Examples of involuntary personal securities transactions include: (a) sales out of the brokerage account of a Putnam employee as a result of bona fide margin call, provided that withdrawal of collateral by the Putnam employee within the ten days previous to the margin call was not a contributing factor to the margin call; (b) purchases arising out of an automatic dividend reinvestment program of an issuer of a publicly traded security. 3. Transactions by a trust in which the Putnam employee (or a member of his immediate family) holds a beneficial interest, but for which the employee has no direct or indirect influence or control with respect to the selection of investments, are involuntary transactions. In addition, these transactions do not fall within the definition of "personal securities transactions." See Definitions. 4. A good-faith belief on the part of the employee that a transaction was involuntary will not be a defense to a violation of the Code of Ethics. In the event of confusion as to whether a particular transaction is involuntary, the burden is on the employee to seek a prior written determination of the applicability of this exemption. The procedures for obtaining such a determination appear in Section VII, Part 3. RULE 2 Transactions which have been determined in writing by the Code of Ethics Officer before the transaction occurs to be no more than remotely potentially harmful to Putnam clients because the transaction would be very unlikely to affect a highly institutional market, or because the transaction is clearly not related economically to the securities to be purchased, sold, or held by a Putnam client, are exempt from the prohibitions set forth in Sections I.A., I.B., and I.C. EXCEPTIONS N.A. IMPLEMENTATION An employee may seek an ad hoc exemption under this Rule by following the procedures in Section VII, Part 4. COMMENTS 1. This exemption is also based upon categories of conduct that the Securities and Exchange Commission does not consider "abusive." 2. The burden is on the employee to seek a prior written determination that the proposed transaction meets the standards for an ad hoc exemption set forth in this Rule. * Section II. Additional Special Rules for Personal Securities Transactions of Access Persons and Certain Investment Professionals Access Persons (including all Investment Professionals and other employees as defined on page ix) RULE 1 ("60-DAY" RULE) No Access Person shall purchase and then sell at a profit, or sell and then repurchase at a lower price, any security or related derivative security within 60 calendar days. EXCEPTIONS None, unless prior written approval from the Code of Ethics Officer is obtained. Exceptions may be granted on a case-by-case basis when no abuse is involved and the equities of the situation support an exemption. For example, although an Access Person may buy a stock as a long-term investment, that stock may have to be sold involuntarily due to unforeseen activity such as a merger. IMPLEMENTATION 1. The 60-Day Rule applies to all Access Persons, as defined in the Definitions section of the Code. 2. Calculation of whether there has been a profit is based upon the market prices of the securities. The calculation is not net of commissions or other sales charges. 3. As an example, an Access Person would not be permitted to sell a security at $12 that he purchased within the prior 60 days for $10. Similarly, an Access Person would not be permitted to purchase a security at $10 that she had sold within the prior 60 days for $12. If the proposed transaction would be made at a loss, it would be permitted if the pre-clearance requirements are met. See, Section I, Rule 1. COMMENTS 1. The prohibition against short-term trading profits by Access Persons is designed to minimize the possibility that they will capitalize inappropriately on the market impact of trades involving a client portfolio about which they might possibly have information. 2. Although Chief Investment Officers, Portfolio Managers, and Analysts may sell securities at a profit within 60 days of purchase in order to comply with the requirements of the 7-Day Rule applicable to them (described below), the profit will have to be disgorged to charity under the terms of the 7-Day Rule. 3. Access Persons occasionally make a series of transactions in securities over extended periods of time. For example, an Access Person bought 100 shares of Stock X on Day 1 at $100 per share and then bought 50 additional shares on Day 45 at $95 per share. On Day 75, the Access Person sold 20 shares at $105 per share. The question arises whether the Access Person violated the 60-Day Rule. The characterization of the employee's tax basis in the shares sold determines the analysis. If, for personal income tax purposes, the Access Person characterizes the shares sold as having a basis of $100 per share (i.e., shares purchased on Day 1), the transaction would be consistent with the 60-Day Rule. However, if the tax basis in the shares is $95 per share (i.e., shares purchased on Day 45), the transaction would violate the 60-Day Rule. Certain Investment Professionals RULE 2 ("7-DAY" RULE) (a) Portfolio Managers: Before a portfolio manager (including a Chief Investment Officer with respect to an account he manages) places an order to buy a security for any Putnam client portfolio that he manages, he shall sell any such security or related derivative security purchased in a transaction for his personal account within the preceding seven calendar days. (b) Co-Managers: Before a portfolio manager places an order to buy a security for any Putnam client he manages, his co-manager shall sell any such security or related derivative security purchased in transaction for his personal account within the preceding seven calendar days. (c) Analysts: Before an analyst makes a buy recommendation for a security (including designation of a security for inclusion in the portfolio of the Putnam Research Fund), he shall sell any such security or related derivative security purchased in a transaction for his personal account within the preceding seven calendar days. EXCEPTIONS None. COMMENTS 1. This Rule applies to portfolio managers (including Chief Investment Officers with respect to accounts they manage) in connection with any purchase (no matter how small) in any client account managed by that portfolio manager or CIO (even so-called "clone accounts"). In particular, it should be noted that the requirements of this rule also apply with respect to purchases in client accounts, including "clone accounts," resulting from "cash flows." To comply with the requirements of this rule, it is the responsibility of each portfolio manager or CIO to be aware of the placement of all orders for purchases of a security by client accounts that he or she manages for 7 days following the purchase of that security for his or her personal account. 2. An investment professional who must sell securities to be in compliance with the 7-Day Rule must absorb any loss and disgorge to charity any profit resulting from the sale. 3. This Rule is designed to avoid even the appearance of a conflict of interest between an investment professional and a Putnam client. A more stringent rule is warranted because, with their greater knowledge and control, these investment professionals are in a better position than other employees to create an appearance of manipulation of Putnam client accounts for personal benefit. 4. "Portfolio manager" is used in this Section as a functional label, and is intended to cover any employee with authority to authorize a trade on behalf of a Putnam client, whether or not such employee bears the title "portfolio manager." "Analyst" is also used in this Section as a functional label, and is intended to cover any employee who is not a portfolio manager but who may make recommendations regarding investments for Putnam clients. RULE 3 ("BLACKOUT RULE") (a) Portfolio Managers: No portfolio manager (including a Chief Investment Officer with respect to an account she manages) shall: (i) sell any security or related derivative security for her personal account until seven calendar days have elapsed since the most recent purchase of that security or related derivative security by any Putnam client portfolio she manages or co-manages; or (ii) purchase any security or related derivative security for her personal account until seven calendar days have elapsed since the most recent sale of that security or related derivative security from any Putnam client portfolio that she manages or co-manages. (b) Analysts: No analyst shall: (i) sell any security or related derivative security for his personal account until seven calendar days have elapsed since his most recent buy recommendation for that security or related derivative security (including designation of a security for inclusion in the portfolio of the Putnam Research Fund); or (ii) purchase any security or related derivative security for his personal account until seven calendar days have elapsed since his most recent sell recommendation for that security or related derivative security (including the removal of a security from the portfolio of the Putnam Research Fund). EXCEPTIONS None. COMMENTS 1. This Rule applies to portfolio managers (including Chief Investment Officers with respect to accounts they manage) in connection with to any transaction (no matter how small) in any client account managed by that portfolio manager or CIO (even so-called "clone accounts"). In particular, it should be noted that the requirements of this rule also apply with respect to transactions in client accounts, including "clone accounts," resulting from "cash flows." In order to comply with the requirements of this rule, it is the responsibility of each portfolio manager and CIO to be aware of all transactions in a security by client accounts that he or she manages that took place within the 7 days preceding a transaction in that security for his or her personal account. 2. This Rule is designed to prevent a Putnam portfolio manager or analyst from engaging in personal investment conduct that appears to be counter to the investment strategy she is pursuing or recommending on behalf of a Putnam client. 3. Trades by a Putnam portfolio manager for her personal account in the "same direction" as the Putnam client portfolio she manages, and trades by an analyst for his personal account in the "same direction" as his recommendation, do not present the same danger, so long as any "same direction" trades do not violate other provisions of the Code or the Policy Statements. RULE 4 ("CONTRA TRADING" RULE) (a) Portfolio Managers: No portfolio manager shall, without prior clearance, sell out of his personal account securities or related derivative securities held in any Putnam client portfolio that he manages or co-manages. (b) Chief Investment Officers: No Chief Investment Officer shall, without prior clearance, sell out of his personal account securities or related derivative securities held in any Putnam client portfolio managed in his investment group. EXCEPTIONS None, unless prior clearance is given. IMPLEMENTATION A. Individuals Authorized to Give Approval. Prior to engaging in any such sale, a portfolio manager shall seek approval, in writing, of the proposed sale. In the case of a portfolio manager or director, prior written approval of the proposed sale shall be obtained from a Chief Investment Officer to whom he reports or, in his absence, another Chief Investment Officer. In the case of a Chief Investment Officer, prior written approval of the proposed sale shall be obtained from another Chief Investment Officer. In addition to the foregoing, prior written approval must also be obtained from the Code of Ethics Officer. B. Contents of Written Approval. In every instance, the written approval form attached as Appendix C (or such other form as the Code of Ethics Officer shall designate) shall be used. The written approval should be signed by the Chief Investment Officer giving approval and dated the date such approval was given, and shall state, briefly, the reasons why the trade was allowed and why the investment conduct pursued by the portfolio manager, director, or chief investment officer was deemed inappropriate for the Putnam client account controlled by the individual seeking to engage in the transaction for his personal account. Such written approval shall be sent by the Chief Investment Officer approving the transaction to the Code of Ethics Officer within twenty-four hours or as promptly as circumstances permit. Approvals obtained after a transaction has been completed or while it is in process will not satisfy the requirements of this Rule. COMMENT This Rule, like Rule 3 of this Section, is designed to prevent a Putnam portfolio manager from engaging in personal investment conduct that appears to be counter to the investment strategy that he is pursuing on behalf of a Putnam client. RULE 5 No portfolio manager shall cause, and no analyst shall recommend, a Putnam client to take action for the portfolio manager's or analyst's own personal benefit. EXCEPTIONS None. COMMENTS 1. A portfolio manager who trades in, or an analyst who recommends, particular securities for a Putnam client account in order to support the price of securities in his personal account, or who "front runs" a Putnam client order is in violation of this Rule. Portfolio managers and analysts should be aware that this Rule is not limited to personal transactions in securities (as that word is defined in "Definitions"). Thus, a portfolio manager or analyst who "front runs" a Putnam client purchase or sale of obligations of the U.S. government is in violation of this Rule, although U.S. government obligations are excluded from the definition of "security." 2. This Rule is not limited to instances when a portfolio manager or analyst has malicious intent. It also prohibits conduct that creates an appearance of impropriety. Portfolio managers and analysts who have questions about whether proposed conduct creates an appearance of impropriety should seek a prior written determination from the Code of Ethics Officer, using the procedures described in Section VII, Part 3. * Section III. Prohibited Conduct for All Employees RULE 1 All employees must comply with applicable laws and regulations as well as company policies. This includes tax, antitrust, political contribution, and international boycott laws. In addition, no employee at Putnam may engage in fraudulent conduct of any kind. EXCEPTIONS None. COMMENTS 1. Putnam may report to the appropriate legal authorities conduct by Putnam employees that violates this rule. 2. It should also be noted that the U.S. Foreign Corrupt Practices Act makes it a criminal offense to make a payment or offer of payment to any non-U.S. governmental official, political party, or candidate to induce that person to affect any governmental act or decision, or to assist Putnam's obtaining or retaining business. RULE 2 No Putnam employee shall conduct herself in a manner which is contrary to the interests of, or in competition with, Putnam or a Putnam client, or which creates an actual or apparent conflict of interest with a Putnam client. EXCEPTIONS None. COMMENTS 1. This Rule is designed to recognize the fundamental principle that Putnam employees owe their chief duty and loyalty to Putnam and Putnam clients. 2. It is expected that a Putnam employee who becomes aware of an investment opportunity that she believes is suitable for a Putnam client who she services will present it to the appropriate portfolio manager, prior to taking advantage of the opportunity herself. RULE 3 No Putnam employee shall seek or accept gifts, favors, preferential treatment, or special arrangements of material value from any broker-dealer, investment adviser, financial institution, corporation, or other entity, or from any existing or prospective supplier of goods or services to Putnam or Putnam Funds. Specifically, any gift over $100 in value, or any accumulation of gifts which in aggregate exceeds $100 in value from one source in one calendar year, is prohibited. Any Putnam employee who is offered or receives an item prohibited by this Rule must report the details in writing to the Code of Ethics Officer. EXCEPTIONS None. COMMENTS 1. This rule is intended to permit only proper types of customary business amenities. Listed below are examples of items that would be permitted under proper circumstances and of items that are prohibited under this rule. These examples are illustrative and not all-inclusive. Notwithstanding these examples, a Putnam employee may not, under any circumstances, accept anything that could create the appearance of any kind of conflict of interest. For example, acceptance of any consideration is prohibited if it would create the appearance of a "reward" or inducement for conducting Putnam business either with the person providing the gift or his employer. 2. This rule also applies to gifts or "favors" of material value that an investment professional may receive from a company or other entity being researched or considered as a possible investment for a Putnam client account. 3. Among items not considered of "material value" which, under proper circumstances, would be considered permissible are: (a) Occasional lunches or dinners conducted for business purposes; (b) Occasional cocktail parties or similar social gatherings conducted for business purposes; (c) Occasional attendance at theater, sporting or other entertainment events conducted for business purposes; and (d) Small gifts, usually in the nature of reminder advertising, such as pens, calendars, etc., with a value of no more than $100. 4. Among items which are considered of "material value" and which are prohibited are: (a) Entertainment of a recurring nature such as sporting events, theater, golf games, etc.; (b) The cost of transportation to a locality outside the Boston metropolitan area, and lodging while in another locality, unless such attendance and reimbursement arrangements have received advance written approval of the Code of Ethics Officer; (c) Personal loans to a Putnam employee on terms more favorable than those generally available for comparable credit standing and collateral; and (d) Preferential brokerage or underwriting commissions or spreads or allocations of shares or interests in an investment for the personal account of a Putnam employee. 5. As with any of the provisions of the Code of Ethics, a sincere belief by the employee that he was acting in accordance with the requirements of this Rule will not satisfy his obligations under the Rule. Therefore, an employee who is in doubt concerning the propriety of any gift or "favor" should seek a prior written determination from the Code of Ethics Officer, as provided in Part 3 of Section VII. RULE 4 No Putnam employee may pay, offer, or commit to pay any amount of consideration which might be or appear to be a bribe or kickback in connection with Putnam's business. EXCEPTIONS None. COMMENT Although the rule does not specifically address political contributions, Putnam employees should be aware that it is against corporate policy to use company assets to fund political contributions of any sort, even where such contributions may be legal. No Putnam employee should offer or agree to make any political contributions (including political dinners and similar fund-raisers) on behalf of Putnam, and no employee will be reimbursed by Putnam for such contributions made by the employee personally. RULE 5 No contributions may be made with corporate funds to any political party or campaign, whether directly or by reimbursement to an employee for the expense of such a contribution. No Putnam employee shall solicit any charitable, political or other contributions using Putnam letterhead or making reference to Putnam in the solicitation. No Putnam employee shall personally solicit any such contribution while on Putnam business. EXCEPTIONS None. COMMENT 1. Putnam has established a political action committee (PAC) that contributes to worthy candidates for political office. Any request received by a Putnam employee for a political contribution must be directed to Putnam's Legal and Compliance Department. 2. This rule does not prohibit solicitation on personal letterhead by Putnam employees. Nonetheless, Putnam employees should use discretion in soliciting contributions from individuals or entities who provide services to Putnam. There should never be a suggestion that any service provider must contribute to keep Putnam's business. RULE 6 No unauthorized disclosure may be made by any employee or former employee of any trade secrets or proprietary information of Putnam or of any confidential information. No information regarding any Putnam client portfolio, actual or proposed securities trading activities of any Putnam client, or Putnam research shall be disclosed outside the Putnam organization without a valid business purpose. EXCEPTIONS None. COMMENT All information about Putnam and Putnam clients is strictly confidential. Putnam research information should not be disclosed unnecessarily and never for personal gain. RULE 7 No Putnam employee shall serve as officer, employee, director, trustee or general partner of a corporation or entity other than Putnam, without prior approval of the Code of Ethics Officer. EXCEPTION Charitable or Non-profit Exception. This Rule shall not prevent any Putnam employee from serving as officer, director, or trustee of a charitable or not-for-profit institution, provided that the employee abides by the spirit of the Code of Ethics and the Policy Statements with respect to any investment activity for which she has any discretion or input as officer, director, or trustee. The pre-clearance and reporting requirements of the Code of Ethics do not apply to the trading activities of such charitable or not-for-profit institutions for which an employee serves as an officer, director, or trustee. COMMENTS 1. This Rule is designed to ensure that Putnam cannot be deemed an affiliate of any issuer of securities by virtue of service by one of its officers or employees as director or trustee. 2. Certain charitable or not-for-profit institutions have assets (such as endowment funds or employee benefit plans) which require prudent investment. To the extent that a Putnam employee (because of her position as officer, director, or trustee of an outside entity) is charged with responsibility to invest such assets prudently, she may not be able to discharge that duty while simultaneously abiding by the spirit of the Code of Ethics and the Policy Statements. Employees are cautioned that they should not accept service as an officer, director, or trustee of an outside charitable or not-for-profit entity where such investment responsibility is involved, without seriously considering their ability to discharge their fiduciary duties with respect to such investments. RULE 8 No Putnam employee shall serve as a trustee, executor, custodian, any other fiduciary, or as an investment adviser or counselor for any account outside Putnam. EXCEPTIONS Charitable or Religious Exception. This Rule shall not prevent any Putnam employee from serving as fiduciary with respect to a religious or charitable trust or foundation, so long as the employee abides by the spirit of the Code of Ethics and the Policy Statements with respect to any investment activity over which he has any discretion or input. The pre-clearance and reporting requirements of the Code of Ethics do not apply to the trading activities of such a religious or charitable trust or foundation. Family Trust or Estate Exception. This Rule shall not prevent any Putnam employee from serving as fiduciary with respect to a family trust or estate, so long as the employee abides by all of the Rules of the Code of Ethics with respect to any investment activity over which he has any discretion. COMMENT The roles permissible under this Rule may carry with them the obligation to invest assets prudently. Once again, Putnam employees are cautioned that they may not be able to fulfill their duties in that respect while abiding by the Code of Ethics and the Policy Statements. RULE 9 No Putnam employee may be a member of any investment club. EXCEPTIONS None. COMMENT This Rule guards against the danger that a Putnam employee may be in violation of the Code of Ethics and the Policy Statements by virtue of his personal securities transactions in or through an entity that is not bound by the restrictions imposed by this Code of Ethics and the Policy Statements. Please note that this restriction also applies to the spouse of a Putnam employee and any relatives of a Putnam employee living in the same household as the employee, as their transactions are covered by the Code of Ethics (see page x). RULE 10 No Putnam employee may become involved in a personal capacity in consultations or negotiations for corporate financing, acquisitions or other transactions for outside companies (whether or not held by any Putnam client), nor negotiate nor accept a fee in connection with these activities without obtaining the prior written permission of the president of Putnam Investments. EXCEPTIONS None. RULE 11 No new types of securities or instruments may be purchased for a Putnam fund or other client account without following the procedures set forth in Appendix D. EXCEPTIONS None. COMMENT See Appendix D. RULE 12 No employee may create or participate in the creation of any record that is intended to mislead anyone or to conceal anything that is improper. In addition, all employees responsible for the preparation, filing, or distribution of any regulatory filings or public communications must ensure that such filings or communications are timely, complete, fair, accurate, and understandable. EXCEPTIONS None. COMMENTS 1. In many cases, this is not only a matter of company policy and ethical behavior but also required by law. Our books and records must accurately reflect the transactions represented and their true nature. For example, records must be accurate as to the recipient of all payments; expense items, including personal expense reports, must accurately reflect the true nature of the expense. No unrecorded fund or asset shall be established or maintained for any reason. 2. All financial books and records must be prepared and maintained in accordance with Generally Accepted Accounting Principles and Putnam's existing accounting controls, to the extent applicable. RULE 13 No employee should have any direct or indirect (including by a family member or close relative) personal financial interest (other than normal investments not material to the employee in the entity's publicly traded securities) in any business, with which Putnam has dealings unless such interest is disclosed and approved by the Code of Ethics Officer. RULE 14 No employee shall, with respect to any affiliate of Putnam that provides investment advisory services and is listed below in Comment 4 to this Rule, as revised from time to time (each an "NPA"), (a) directly or indirectly seek to influence the purchase, retention, or disposition of, or exercise of voting, consent, approval or similar rights with respect to, any portfolio security in any account or fund advised by the NPA and not by Putnam, (b) transmit any information regarding the purchase, retention or disposition of, or exercise of voting, consent, approval or similar rights with respect to, any portfolio security held in a Putnam or NPA client account to any personnel of the NPA, (c) transmit any trade secrets, proprietary information, or confidential information of Putnam to the NPA without a valid business purpose, (d) use confidential information or trade secrets of the NPA for the benefit of the employee, Putnam, or any other NPA, or (e) breach any duty of loyalty to the NPA by virtue of service as a director or officer of the NPA. COMMENTS 1. Sections (a) and (b) of the Rule are designed to help ensure that the portfolio holdings of Putnam clients and clients of the NPA need not be aggregated for purposes of determining beneficial ownership under Section 13(d) of the Securities Exchange Act or applicable regulatory or contractual investment restrictions that incorporate such definition of beneficial ownership. Persons who serve as directors or officers of both Putnam and an NPA would take care to avoid even inadvertent violations of Section (b). Section (a) does not prohibit a Putnam employee who serves as a director or officer of the NPA from seeking to influence the modification or termination of a particular investment product or strategy in a manner that is not directed at any specific securities. Sections (a) and (b) do not apply when a Putnam affiliate serves as an adviser or subadviser to the NPA or one of its products, in which case normal Putnam aggregation rules apply. 2. As a separate entity, any NPA may have trade secrets or confidential information that it would not choose to share with Putnam. This choice must be respected. 3. When Putnam employees serve as directors or officers of an NPA, they are subject to common law duties of loyalty to the NPA, despite their Putnam employment. In general, this means that when performing their duties as NPA directors or officers, they must act in the best interest of the NPA and its shareholders. Putnam's Legal and Compliance Department will assist any Putnam employee who is a director or officer of an NPA and has questions about the scope of his or her responsibilities to the NPA. 4. Entities that are currently non-Putnam affiliates within the scope of this Rule are: Cisalpina Gestioni, S.p.A., PanAgora Asset Management Inc., PanAgora Asset Management Ltd., Nissay Asset Management Co., Ltd., Thomas H. Lee Partners, L.P., Ampega Asset Management, GMBH, and Sceptre Investment Counsel, Ltd. RULE 15 No employee shall use computer hardware, software, data, Internet, electronic mail, voice mail, electronic messaging ("e-mail" or "cc: Mail"), or telephone communications systems in a manner that is inconsistent with their use as set forth in policy statements governing their use that are adopted from time to time by Putnam. No employee shall introduce a computer "virus" or computer code that may result in damage to Putnam's information or computer systems. EXCEPTIONS None. COMMENT Putnam's policy statements relating to these matters are contained in the "Computer System and Network Responsibilities" section of the "Employment Issues" category within the Employee Handbook. The on-line Employee Handbook is located in the Putnam ibenefitcenter (https://www.ibenefitcenter.com) at the "Policies and Procedures" section of the "Workplace Community" tab. RULE 16 All employees must follow and abide by the spirit of the Code of Ethics and the Standards of Professional Conduct of the Association of Investment Management and Research (AIMR). The texts of the AIMR Code of Ethics and Standards of Professional Conduct are set forth in Exhibit E. RULE 17 Except as provided below, no employee may disclose to any outside organization or person any non-public personal information about any individual who is a current or former shareholder of any Putnam retail or institutional fund, or current or former client of a Putnam company. All employees shall follow the security procedures as established from time to time by a Putnam company to protect the confidentiality of all shareholder and client account information. Except as Putnam's Legal and Compliance Department may expressly authorize, no employee shall collect any non-public personal information about a prospective or current shareholder of a Putnam Fund or prospective or current client of a Putnam company, other than through an account application (or corresponding information provided by the shareholder's financial representative) or in connection with executing shareholder or client transactions, nor shall any information be collected other than the following: name, address, telephone number, social security number, and investment, broker, and transaction information. EXCEPTIONS Putnam Employees. Non-public personal information may be disclosed to Putnam employees in connection with processing transactions or maintaining accounts for shareholders of a Putnam fund and clients of a Putnam company, to the extent that access to such information is necessary to the performance of that employee's job functions. Shareholder Consent Exception. Non-public personal information about a shareholder's or client's account may be provided to a non-Putnam organization at the specific request of the shareholder or client or with the shareholder's or client's prior written consent. Broker or Adviser Exception. Non-public personal information about a shareholder's or client's account may be provided to the shareholder's or client's broker of record. Third Party Service Provider Exception. Non-public personal information may be disclosed to a service provider that is not affiliated with a Putnam fund or Putnam company only when such disclosure is necessary for the service provider to perform the specific services contracted for, and only (a) if the service provider executes Putnam's standard confidentiality agreement, or (b) pursuant to an agreement containing a confidentiality provision that has been approved by the Legal and Compliance Department. Examples of such service providers include proxy solicitors and proxy vote tabulators, mail services and providers of other administrative services, and Information Services Division consultants who have access to non-public personal information. COMMENTS 1. Non-public personal information is any information that personally identifies a shareholder of a Putnam fund or client of a Putnam company and is not derived from publicly available sources. This privacy policy applies to shareholders or clients that are individuals, not institutions. However, as a general matter, all information that we receive about a shareholder of a Putnam fund or client of a Putnam company shall be treated as confidential. No employee may sell or otherwise provide shareholder or client lists or any other information relating to a shareholder or client to any marketing organization.2. All Putnam employees with access to shareholder or client account information must be trained in and follow Putnam's security procedures designed to safeguard that information from unauthorized use. For example, a telephone representative must be trained in and follow Putnam's security procedures to verify the identity of a caller requesting account information. 3. Any questions regarding this privacy policy should be directed to Putnam's Legal and Compliance Department. A violation of this policy will be subject to the sanctions imposed for violations of Putnam's Code of Ethics. 4. Employees must report any violation of this policy or any possible breach of the confidentiality of client information (whether intentional or accidental) to the Managing Director in charge of the employee's business unit. Managing Directors who are notified of such a violation or possible breach must immediately report it in writing to Putnam's General Counsel and, in the event of a breach of computerized data, Putnam's Chief Technology Officer. RULE 18 No employee may engage in any money laundering activity or facilitate any money-laundering activity through the use of any Putnam account or client account. Any situations giving rise to a suspicion that attempted money laundering may be occurring in any account must be reported immediately to the Managing Director in charge of the employee's business unit. Managing Directors who are notified of such a suspicion of money laundering activity must immediately report it in writing to Putnam's General Counsel and Chief Financial Officer. RULE 19 All employees must comply with the record retention requirements applicable to the business unit. COMMENT Employees should check with their managers or the Chief Administrative Officer of their division to determine what record retention requirements apply to their business unit. * Section IV. Special Rules for Officers and Employees of Putnam Investments Limited RULE 1 In situations subject to Section I.A., Rule 1 (Restricted List Personal Securities Transactions), the Putnam Investments Limited. ("PIL") employee must obtain clearance not only as provided in that rule, but also from PIL's Compliance Officer or her designee, who must approve the transaction before any trade is placed and record the approval. EXCEPTIONS None. IMPLEMENTATION Putnam's Code of Ethics Administrator in Boston (the "Boston Administrator") has also been designated the Assistant Compliance Officer of PIL and has been delegated the right to approve or disapprove personal securities transactions in accordance with the foregoing requirement. Therefore, approval from the Code of Ethics Administrator for PIL employees to make personal securities investments constitutes approval under the Code of Ethics and also for purposes of compliance with IMRO, the U.K. self-regulatory organization that regulates PIL. The position of London Code of Ethics Administrator (the "London Administrator") has also been created (Jane Barlow is the current London Administrator). All requests for clearances must be made by e-mail to the Boston Administrator copying the London Administrator. The e-mail must include the number of shares to be bought or sold and the name of the broker(s) involved. Where time is of the essence clearances can be made by telephone to the Boston Administrator but they must be followed up by e-mail. Both the Boston and London Administrators will maintain copies of all clearances for inspection by senior management and regulators. RULE 2 No PIL employee may trade with any broker or dealer unless that broker or dealer has sent a letter to the London Administrator agreeing to deliver copies of trade confirmations to PIL. No PIL employee may enter into any margin or any other special dealing arrangement with any broker-dealer without the prior written consent of the PIL Compliance Officer. EXCEPTIONS None. IMPLEMENTATION PIL employees will be notified separately of this requirement once a year by the PIL Compliance Officer, and are required to provide an annual certification of compliance with the Rule. All PIL employees must inform the London Administrator of the names of all brokers and dealers with whom they trade prior to trading. The London Administrator will send a letter to the broker(s) in question requesting them to agree to deliver copies of confirms to PIL. The London Administrator will forward copies of the confirms to the Boston Administrator. PIL employees may trade with a broker only when the London Administrator has received the signed agreement from that broker. RULE 3 For purposes of the Code of Ethics, including Putnam's Policy Statement on Insider Trading Prohibitions, PIL employees must also comply with Part V of the Criminal Justice Act 1993 on insider dealing. EXCEPTIONS None. IMPLEMENTATION To ensure compliance with U.K. insider dealing legislation, PIL employees must observe the relevant procedures set forth in PIL's Compliance Manual, a copy of which is sent to each PIL employee, and sign an annual certification as to compliance. * Section V. Reporting Requirements for All Employees Reporting of Personal Securities Transactions RULE 1 Each Putnam employee shall ensure that broker-dealers send all confirmations of securities transactions for his personal accounts to the Code of Ethics Officer. (For the purpose of this Rule, "securities" shall include securities of The Marsh & McLennan Companies, Inc., and any option on a security or securities index, including broad-based market indexes.) EXCEPTIONS None. IMPLEMENTATION 1. Putnam employees must instruct their broker-dealers to send confirmations to Putnam and must follow up with the broker-dealer on a reasonable basis to ensure that the instructions are being followed. Putnam employees should contact the Code of Ethics Administrator to obtain a letter from Putnam authorizing the setting up of a personal brokerage account. Confirmations should be submitted to the Code of Ethics Administrator. (Specific procedures apply to employees of Putnam Investments Limited ("PIL"). Employees of PIL should contact the London Code of Ethics Administrator.) Failure of a broker-dealer to comply with the instructions of a Putnam employee to send confirmations shall be a violation by the Putnam employee of this Rule. COMMENTS 1. "Transactions for personal accounts" is defined broadly to include more than transaction in accounts under an employee's own name. See Definitions. 2. A confirmation is required for all personal securities transactions, whether or not exempted or excepted by this Code. 3. To the extent that a Putnam employee has investment authority over securities transactions of a family trust or estate, confirmations of those transactions must also be made, unless the employee has received a prior written exception from the Code of Ethics Officer. RULE 2 Every Access Person shall file a quarterly report, within ten calendar days of the end of each quarter, recording all purchases and sales of any securities for personal accounts as defined in the Definitions. (For the purpose of this Rule, "securities" shall include any option on a security or securities index, including broad-based market indexes.) EXCEPTIONS None. IMPLEMENTATION All employees required to file such a report will receive by e-mail a blank form at the end of the quarter from the Code of Ethics Administrator. The form will specify the information to be reported. The form shall also contain a representation that employees have complied fully with all provisions of the Code of Ethics. COMMENT 1. The date for each transaction required to be disclosed in the quarterly report is the trade date for the transaction, not the settlement date. 2. If the requirement to file a quarterly report applies to you and you fail to report within the required 10-day period, salary increases and bonuses will be reduced in accordance with guidelines stated in the form. Reporting of Personal Securities Holdings RULE 3 Access Persons must disclose all personal securities holdings to the Code of Ethics Officer upon commencement of employment and thereafter on an annual basis. EXCEPTIONS None. COMMENT These requirements are mandated by SEC regulations and are designed to facilitate the monitoring of personal securities transactions. Putnam's Code of Ethics Administrator will provide Access Persons with the form for making these reports and the specific information that must be disclosed at the time that the disclosure is required. Other Reporting Policies The following rules are designed to ensure that Putnam's internal Control and Reporting professionals are aware of all items that might need to be addressed by Putnam or reported to appropriate entities. RULE 4 If a Putnam employee suspects that fraudulent or other irregular activity might be occurring at Putnam, the activity must be reported immediately to the Managing Director in charge of that employee's business unit. Managing Directors who are notified of any such activity must immediately report it in writing to Putnam's Chief Financial Officer or Putnam's General Counsel. RULE 5 Putnam employees must report all communications from regulatory or government agencies (federal, state, or local) to the Managing Director in charge of their business unit. Managing Directors who are notified of any such communication must immediately report it in writing to Putnam's Chief Financial Officer or Putnam's General Counsel. RULE 6 All claims, circumstances or situations that could give rise to a claim against Putnam that come to the attention of a Putnam employee must be reported through the employee's management structure up to the Managing Director in charge of the employee's business unit. Managing Directors who are notified of any such claim, circumstance or situation that might give rise to a claim against Putnam for more than $100,000 must immediately report in writing it to Putnam's Chief Financial Officer or Putnam's General Counsel. RULE 7 All possible violations of law or regulations at Putnam that come to the attention of a Putnam employee must be reported immediately to the Managing Director in charge of the employee's business unit. Managing Directors who are notified of any such activity must immediately report it in writing to Putnam's Chief Financial Officer or Putnam's General Counsel. RULE 8 Putnam employees must report all requests by anyone for Putnam to participate in or cooperate with an international boycott to the Managing Director in charge of their business unit. Managing Directors who are notified of any such request must immediately report it in writing to Putnam's Chief Financial Officer or Putnam's General Counsel. RULE 9 If a Putnam employee believes that there has been a violation of any of the rules of the Code of Ethics, that employee must promptly notify the Code of Ethics Officer, Bill Woolverton, or the Deputy Code of Ethics Officer, Andy Hachey, of the violation. * Section VI. Education Requirements Every Putnam employee has an obligation to fully understand the requirements of the Code of Ethics. The Rules set forth below are designed to enhance this understanding. RULE 1 A copy of the Code of Ethics will be distributed to every Putnam employee periodically. All Access Persons will be required to certify periodically that they have read, understood, and will comply with the provisions of the Code of Ethics, including the Code's Policy Statement Concerning Insider Trading Prohibitions. RULE 2 Every investment professional will attend a meeting periodically at which the Code of Ethics will be reviewed. * Section VII. Compliance and Appeal Procedures 1. Assembly of Restricted List. The Code of Ethics Administrator will coordinate the assembly and maintenance of the Restricted List. The list will be assembled each day by 11:30 a.m. EST. No employee may engage in a personal securities transaction without prior clearance on any day, even if the employee believes that the trade will be subject to an exception. Note that pre-clearance may be obtained after 9:00 a.m. for purchases or sales of up to 1,000 shares of issuers having a market capitalization in excess of $5 billion. 2. Consultation of Restricted List. It is the responsibility of each employee to pre-clear through the pre-clearance system or consult with the Code of Ethics Administrator prior to engaging in a personal securities transaction, to determine if the security he proposes to trade is on the Restricted List and, if so, whether it is subject to the "Large Cap" limitation. The pre-clearance system and the Code of Ethics Administrator will be able to tell an employee whether a security is on the Restricted List. No other information about the Restricted List is available through the pre-clearance system. The Code of Ethics Administrator shall not be authorized to answer any questions about the Restricted List, or to render an opinion about the propriety of a particular personal securities transaction. Any such questions shall be directed to the Code of Ethics Officer. 3. Request for Determination. An employee who has a question concerning the applicability of the Code of Ethics to a particular situation shall request a determination from the Code of Ethics Officer before engaging in the conduct or personal securities transaction about which he has a question. If the question pertains to a personal securities transaction, the request shall state for whose account the transaction is proposed, the relationship of that account to the employee, the security proposed to be traded, the proposed price and quantity, the entity with whom the transaction will take place (if known), and any other information or circumstances of the trade that could have a bearing on the Code of Ethics Officer's determination. If the question pertains to other conduct, the request for determination shall give sufficient information about the proposed conduct to assist the Code of Ethics Officer in ascertaining the applicability of the Code. In every instance, the Code of Ethics Officer may request additional information, and may decline to render a determination if the information provided is insufficient. The Code of Ethics Officer shall make every effort to render a determination promptly. No perceived ambiguity in the Code of Ethics shall excuse any violation. Any person who believes the Code to be ambiguous in a particular situation shall request a determination from the Code of Ethics Officer. 4. Request for Ad Hoc Exemption. Any employee who wishes to obtain an ad hoc exemption under Section I.D., Rule 2, shall request from the Code of Ethics Officer an exemption in writing in advance of the conduct or transaction sought to be exempted. In the case of a personal securities transaction, the request for an ad hoc exemption shall give the same information about the transaction required in a request for determination under Part 3 of this Section, and shall state why the proposed personal securities transaction would be unlikely to affect a highly institutional market, or is unrelated economically to securities to be purchased, sold, or held by any Putnam client. In the case of other conduct, the request shall give information sufficient for the Code of Ethics Officer to ascertain whether the conduct raises questions of propriety or conflict of interest (real or apparent). The Code of Ethics Officer shall make every effort to promptly render a written determination concerning the request for an ad hoc exemption. 5. Appeal to Code of Ethics Officer with Respect to Restricted List. If an employee ascertains that a security that he wishes to trade for his personal account appears on the Restricted List, and thus the transaction is prohibited, he may appeal the prohibition to the Code of Ethics Officer by submitting a written memorandum containing the same information as would be required in a request for a determination. The Code of Ethics Officer shall make every effort to respond to the appeal promptly. 6. Information Concerning Identity of Compliance Personnel. The names of Code of Ethics personnel are available by contacting the Legal and Compliance Department. Appendix A Policy Statement Concerning Insider Trading Prohibitions PUTNAM INVESTMENTS [SCALE LOGO OMITTED] * Preamble Putnam has always forbidden trading on material nonpublic information ("inside information") by its employees. Tougher federal laws make it important for Putnam to restate that prohibition in the strongest possible terms, and to establish, maintain, and enforce written policies and procedures to prevent the misuse of material nonpublic information. Unlawful trading while in possession of inside information can be a crime. Today, federal law provides that an individual convicted of trading on inside information go to jail for some period of time. There is also significant monetary liability for an inside trader; the Securities and Exchange Commission can seek a court order requiring a violator to pay back profits and penalties of up to three times those profits. In addition, private plaintiffs can seek recovery for harm suffered by them. The inside trader is not the only one subject to liability. In certain cases, "controlling persons" of inside traders (including supervisors of inside traders or Putnam itself) can be liable for large penalties. Section 1 of this Policy Statement contains rules concerning inside information. Section 2 contains a discussion of what constitutes unlawful insider trading. Neither material nonpublic information nor unlawful insider trading is easy to define. Section 2 of this Policy Statement gives a general overview of the law in this area. However, the legal issues are complex and must be resolved by the Code of Ethics Officer. If an employee has any doubt as to whether she has received material nonpublic information, she must consult with the Code of Ethics Officer prior to using that information in connection with the purchase or sale of a security for his own account or the account of any Putnam client, or communicating the information to others. A simple rule of thumb is if you think the information is not available to the public at large, don't disclose it to others and don't trade securities to which the inside information relates. If an employee has failed to consult the Code of Ethics Officer, Putnam will not excuse employee misuse of inside information on the ground that the employee claims to have been confused about this Policy Statement or the nature of the information in his possession. If Putnam determines, in its sole discretion, that an employee has failed to abide by this Policy Statement, or has engaged in conduct that raises a significant question concerning insider trading, he will be subject to disciplinary action, including termination of employment. THERE ARE NO EXCEPTIONS TO THIS POLICY STATEMENT AND NO ONE IS EXEMPT. * Definitions: Insider Trading Gender references in Appendix A alternate. Code of Ethics Administrator. The individual designated by the Code of Ethics Officer to assume responsibility for day-to-day, non-discretionary administration of this Policy Statement. Code of Ethics Officer. The Putnam officer who has been assigned the responsibility of enforcing and interpreting this Policy Statement. The Code of Ethics Officer shall be the General Counsel or such other person as is designated by the President of Putnam Investments. If he is unavailable, the Deputy Code of Ethics Officer (to be appointed by the Code of Ethics Officer) shall act in his stead. Immediate family. Spouse, minor children or other relatives living in the same household as the Putnam employee. Purchase or sale of a security. Any acquisition or transfer of any interest in the security for direct or indirect consideration, including the writing of an option. Putnam. Any or all of Putnam Investments, LLC, and its subsidiaries, any one of which shall be a "Putnam company." Putnam client. Any of the Putnam Funds, or any advisory or trust client of Putnam. Putnam employee (or "employee"). Any employee of Putnam. Security. Anything defined as a security under federal law. The term includes any type of equity or debt security, any interest in a business trust or partnership, and any rights relating to a security, such as put and call options, warrants, convertible securities, and securities indices. (Note: The definition of "security" in this Policy Statement varies significantly from that in the Code of Ethics. For example, the definition in this Policy Statement specifically includes securities of The Marsh & McLennan Companies, Inc.) Transaction for a personal account (or "personal securities transaction"). Securities transactions: (a) for the personal account of any employee; (b) for the account of a member of the immediate family of any employee; (c) for the account of a partnership in which a Putnam employee or immediate family member is a partner with investment discretion; (d) for the account of a trust in which a Putnam employee or immediate family member is a trustee with investment discretion; (e) for the account of a closely-held corporation in which a Putnam employee or immediate family member holds shares and for which he has investment discretion; and (f) for any account other than a Putnam client account which receives investment advice of any sort from the employee or immediate family member, or as to which the employee or immediate family member has investment discretion. Officers and employees of Putnam Investments Limited ("PIL") must also consult the relevant procedures on compliance with U.K. insider dealing legislation set forth in PEL's Compliance Manual (see Rule 3 of Section IV of the Code of Ethics). * Section 1. Rules Concerning Inside Information RULE 1 No Putnam employee shall purchase or sell any security listed on the Inside Information List (the "Red List") either for his personal account or for a Putnam client. IMPLEMENTATION When an employee contacts the Code of Ethics Administrator seeking clearance for a personal securities transaction, the Code of Ethics Administrator's response as to whether a security appears on the Restricted List will include securities on the Red List. COMMENT This Rule is designed to prohibit any employee from trading a security while Putnam may have inside information concerning that security or the issuer. Every trade, whether for a personal account or for a Putnam client, is subject to this Rule. RULE 2 No Putnam employee shall purchase or sell any security, either for a personal account or for the account of a Putnam client, while in possession of material, nonpublic information concerning that security or the issuer, without the prior written approval of the Code of Ethics Officer. IMPLEMENTATION In order to obtain prior written approval of the Code of Ethics Officer, a Putnam employee should follow the reporting steps prescribed in Rule 3. COMMENTS 1. Rule 1 concerns the conduct of an employee when Putnam possesses material nonpublic information. Rule 2 concerns the conduct of an employee who herself possesses material, nonpublic information about a security that is not yet on the Red List. 2. If an employee has any question as to whether information she possesses is material and/or nonpublic information, she must contact the Code of Ethics Officer in accordance with Rule 3 prior to purchasing or selling any security related to the information or communicating the information to others. The Code of Ethics Officer shall have the sole authority to determine what constitutes material, nonpublic information for the purposes of this Policy Statement. An employee's mistaken belief that the information was not material nonpublic information will not excuse a violation of this Policy Statement. RULE 3 Any Putnam employee who believes he may have received material, nonpublic information concerning a security or the issuer shall immediately report the information to the Code of Ethics Officer and to no one else. After reporting the information, the Putnam employee shall comply strictly with Rule 2 by not trading in the security without the prior written approval of the Code of Ethics Officer and shall: (a) take precautions to ensure the continued confidentiality of the information; and (b) refrain from communicating the information in question to any person. EXCEPTION This rule shall not apply to material, nonpublic information obtained by Putnam employees who are directors or trustees of publicly traded companies, to the extent that such information is received in their capacities as directors or trustees, and then only to the extent such information is not communicated to anyone else within the Putnam organization. IMPLEMENTATION 1. In order to make any use of potential material, nonpublic information, including purchasing or selling a security or communicating the information to others, an employee must communicate that information to the Code of Ethics Officer in a way designed to prevent the spread of such information. Once the employee has reported potential material, nonpublic information to the Code of Ethics Officer, the Code of Ethics Officer will evaluate whether information constitutes material, nonpublic information, and whether a duty exists that makes use of such information improper. If the Code of Ethics Officer determines either (a) that the information is not material or is public, or (b) that use of the information is proper, he will issue a written approval to the employee specifically authorizing trading while in possession of the information, if the employee so requests. If the Code of Ethics Officer determines (a) that the information may be nonpublic and material, and (b) that use of such information may be improper, he will place the security that is the subject of such information on the Red List. 2. An employee who reports potential inside information to the Code of Ethics Officer should expect that the Code of Ethics Officer will need significant information to make the evaluation described in the foregoing paragraph, including information about (a) the manner in which the employee acquired the information, and (b) the identity of individuals to whom the employee has revealed the information, or who have otherwise learned the information. The Code of Ethics Officer may place the affected security or securities on the Red List pending the completion of his evaluation. 3. If an employee possesses documents, disks, or other materials containing the potential inside information, an employee must take precautions to ensure the confidentiality of the information in question. Those precautions include (a) putting documents containing such information out of the view of a casual observer, and (b) securing files containing such documents or ensuring that computer files reflecting such information are secure from viewing by others. * Section 2. Overview of Insider Trading A. Introduction This section of the Policy Statement provides guidelines for employees as to what may constitute inside information. It is possible that in the course of her employment, an employee may receive inside information. No employee should misuse that information, either by trading for her own account or by communicating the information to others. B. What constitutes unlawful insider trading? The basic definition of unlawful insider trading is trading on material, nonpublic information (also called "inside information") by an individual who has a duty not to "take advantage" of the information. What does this definition mean? The following sections help explain the definition. 1. What is material information? Trading on inside information is not a basis for liability unless the information is material. Information is "material" if a reasonable person would attach importance to the information in determining his course of action with respect to a security. Information which is reasonably likely to affect the price of a company's securities is "material," but effect on price is not the sole criterion for determining materiality. Information that employees should consider material includes but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, reorganization, recapitalization, asset sales, plans to commence a tender offer, merger or acquisition proposals or agreements, major litigation, liquidity problems, significant contracts, and extraordinary management developments. Material information does not have to relate to a company's business. For example, a court considered as material certain information about the contents of a forthcoming newspaper column that was expected to affect the market price of a security. In that case, a reporter for The Wall Street Journal was found criminally liable for disclosing to others the dates that reports on various companies would appear in the Journal's "Heard on the Street" column and whether those reports would be favorable or not. 2. What is nonpublic information? Information is nonpublic until it has been effectively communicated to, and sufficient opportunity has existed for it to be absorbed by, the marketplace. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the Securities and Exchange Commission, or appearing in Dow Jones, Reuters Economic Services, The Wall Street Journal, or other publications of general circulation would be considered public. 3. Who has a duty not to "take advantage" of inside information? Unlawful insider trading occurs only if there is a duty not to "take advantage" of material nonpublic information. When there is no such duty, it is permissible to trade while in possession of such information. Questions as to whether a duty exists are complex, fact-specific, and must be answered by a lawyer. a. Insiders and Temporary Insiders. Corporate "insiders" have a duty not to take advantage of inside information. The concept of "insider" is broad. It includes officers, directors, and employees of a corporation. In addition, a person can be a "temporary insider" if she enters into a special confidential relationship with a corporation and as a result is given access to information concerning the corporation's affairs. A temporary insider can include, among others, accounting firms, consulting firms, law firms, banks and the employees of such organizations. Putnam would generally be a temporary insider of a corporation it advises or for which it performs other services, because typically Putnam clients expect Putnam to keep any information disclosed to it confidential. EXAMPLE An investment adviser to the pension fund of a large publicly-traded corporation, Acme, Inc., learns from an Acme employee that Acme will not be making the minimum required annual contribution to the pension fund because of a serious downturn in Acme's financial situation. The information conveyed is material and nonpublic. COMMENT Neither the investment adviser, its employees, nor clients can trade on the basis of that information, because the investment adviser and its employees could be considered "temporary insiders" of Acme. b. Misappropriators. Certain people who are not insiders (or temporary insiders) also have a duty not to deceptively take advantage of inside information. Included in this category is an individual who "misappropriates" (or takes for his own use) material, nonpublic information in violation of a duty owed either to the corporation that is the subject of inside information or some other entity. Such a misappropriator can be held liable if he trades while in possession of that material, nonpublic information. EXAMPLE The chief financial officer of Acme, Inc., is aware of Acme's plans to engage in a hostile takeover of Profit, Inc. The proposed hostile takeover is material and nonpublic. COMMENT The chief financial officer of Acme cannot trade in Profit, Inc.'s stock for his own account. Even though he owes no duty to Profit, Inc., or its shareholders, he owes a duty to Acme not to "take advantage" of the information about the proposed hostile takeover by using it for his personal benefit. c. Tippers and Tippees. A person (the "tippee") who receives material, nonpublic information from an insider or misappropriator (the "tipper") has a duty not to trade while in possession of that information if he knew or should have known that the information was provided by the tipper for an improper purpose and in breach of a duty owed by the tipper. In this context, it is an improper purpose for a person to provide such information for personal benefit, such as money, affection, or friendship. EXAMPLE The chief executive officer of Acme, Inc., tells his daughter that negotiations concerning a previously-announced acquisition of Acme have been terminated. This news is material and, at the time the father tells his daughter, nonpublic. The daughter sells her shares of Acme. COMMENT The father is a tipper because he has a duty to Acme and its shareholders not to "take advantage" of the information concerning the breakdown of negotiations, and he has conveyed the information for an "improper" purpose (here, out of love and affection for his daughter). The daughter is a "tippee" and is liable for trading on inside information because she knew or should have known that her father was conveying the information to her for his personal benefit, and that her father had a duty not to "take advantage" of Acme information. A person can be a tippee even if he did not learn the information directly from the tipper, but learned it from a previous tippee. EXAMPLE An employee of a law firm which works on mergers and acquisitions learns at work about impending acquisitions. She tells her friend and her friend's stockbroker about the upcoming acquisitions on a regular basis. The stockbroker tells the brother of a client on a regular basis, who in turn tells two friends, A and B. A and B buy shares of the companies being acquired before public announcement of the acquisition, and regularly profit from such purchases. A and B do not know the employee of the law firm. They do not, however, ask about the source of the information. COMMENT A and B, although they have never heard of the tipper, are tippees because they did not ask about the source of the information, even though they were experienced investors, and were aware that the "tips" they received from this particular source were always right. C. Who can be liable for insider trading? The categories of individuals discussed above (insiders, temporary insiders, misappropriators or tippees) can be liable if they trade while in possession of material nonpublic information. In addition, individuals other than those who actually trade on inside information can be liable for trades of others. A tipper can be liable if (a) he provided the information in exchange for a personal benefit in breach of a duty and (b) the recipient of the information (the "tippee") traded while in possession of the information. Most importantly, a controlling person can be liable if the controlling person "knew or recklessly disregarded" the fact that the controlled person was likely to engage in misuse of inside information and failed to take appropriate steps to prevent it. Putnam is a "controlling person" of its employees. In addition, certain supervisors may be "controlling persons" of those employees they supervise. EXAMPLE A supervisor of an analyst learns that the analyst has, over a long period of time, secretly received material inside information from Acme, Inc.'s chief financial officer. The supervisor learns that the analyst has engaged in a number of trades for his personal account on the basis of the inside information. The supervisor takes no action. COMMENT Even if he is not liable to a private plaintiff, the supervisor can be liable to the Securities and Exchange Commission for a civil penalty of up to three times the amount of the analyst's profit. (Penalties are discussed in the following section.) D. Penalties for Insider Trading Penalties for misuse of inside information are severe, both for individuals involved in such unlawful conduct and their employers. A person who violates the insider trading laws can be subject to some or all of the penalties below, even if he does not personally benefit from the violation. Penalties include: - -- jail sentences (of which at least one to three years must be served) - -- criminal penalties for individuals of up to $1,000,000, and for corporations of up to $2,500,000 - -- injunctions permanently preventing an individual from working in the securities industry - -- injunctions ordering an individual to pay over profits obtained from unlawful insider trading - -- civil penalties of up to three times the profit gained or loss avoided by the trader, even if the individual paying the penalty did not trade or did not benefit personally - -- civil penalties for the employer or other controlling person of up to the greater of $1,000,000 or three times the amount of profit gained or loss avoided - -- damages in the amount of actual losses suffered by other participants in the market for the security at issue. Regardless of whether penalties or money damages are sought by others, Putnam will take whatever action it deems appropriate (including dismissal) if Putnam determines, in its sole discretion, that an employee appears to have committed any violation of this Policy Statement, or to have engaged in any conduct which raises significant questions about whether an insider trading violation has occurred. * Appendix B. Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds 1. Pre-clearance for all employees Any purchase or sale of Putnam closed-end fund shares by a Putnam employee must be pre-cleared by the Code of Ethics Officer or, in his absence, the Deputy Code of Ethics Officer. A list of the closed-end funds can be obtained from the Code of Ethics Administrator. Trading in shares of closed-end funds is subject to all the rules of the Code of Ethics. 2. Special Rules Applicable to Managing Directors of Putnam Investment Management, LLC and officers of the Putnam Funds Please be aware that any employee who is a Managing Director of Putnam Investment Management, Inc. (the investment manager of the Putnam mutual funds) and officers of the Putnam Funds will not receive clearance to engage in any combination of purchase and sale or sale and purchase of the shares of a given closed-end fund within six months of each other. Therefore, purchases should be made only if you intend to hold the shares more than six months; no sales of fund shares should be made if you intend to purchase additional shares of that same fund within six months. You are also required to file certain forms with the Securities and Exchange Commission in connection with purchases and sales of Putnam closed-end funds. Please contact the Code of Ethics Officer or Deputy Code of Ethics Officer for further information. 3. Reporting by all employees As with any purchase or sale of a security, duplicate confirmations of all such purchases and sales must be forwarded to the Code of Ethics Officer by the broker-dealer utilized by an employee. If you are required to file a quarterly report of all personal securities transactions, this report should include all purchases and sales of closed-end fund shares. Please contact the Code of Ethics Officer or Deputy Code of Ethics Officer if there are any questions regarding these matters. * Appendix C. Clearance Form for Portfolio Manager Sales Out of Personal Account of Securities Also Held by Fund (For compliance with "Contra-Trading" Rule) TO: Code of Ethics Officer FROM: ------------------------------------------- DATE: ------------------------------------------- RE: Personal Securities Transaction of ------------------------------ This serves as prior written approval of the personal securities transaction described below: NAME OF PORTFOLIO MANAGER CONTEMPLATING PERSONAL TRADE: - ------------------------------------------------------------------------- SECURITY TO BE TRADED: - ------------------------------------------------------------------------- AMOUNT TO BE TRADED: ----------------------------------------------------- FUND HOLDING SECURITIES: ------------------------------------------------- AMOUNT HELD BY FUND: ----------------------------------------------------- REASON FOR PERSONAL TRADE: ----------------------------------------------- SPECIFIC REASON SALE OF SECURITIES IS INAPPROPRIATE FOR FUND: - ------------------------------------------------------------------------- - ------------------------------------------------------------------------- (Please attach additional sheets if necessary.) CIO APPROVAL: DATE: ---------------------------------------------- -------- LEGAL/COMPLIANCE APPROVAL: DATE: --------------------------------- -------- * Appendix D. Procedures for Approval of New Financial Instruments 1. Summary a. Putnam has adopted procedures for the introduction of new instruments and securities, focusing on, but not limited to, derivatives. b. No new types of securities or instruments may be purchased for any Putnam fund or other client account without the approval of Putnam's New Securities Review Committee ("NSRC"). c. Putnam publishes from time to time a list of approved derivatives. The purchase of any derivative not listed is prohibited without specific authorization from the NSRC. 2. Procedures a. Introduction. The purchase and sale of financial instruments that have not been used previously at Putnam raise significant investment, business, operational, and compliance issues. In order to address these issues in a comprehensive manner, Putnam has adopted the following procedures for obtaining approval of the use of new instruments or investments. In addition, to provide guidance regarding the purchase of derivatives, Putnam publishes from time to time a list of approved derivatives. Only derivatives listed may be used for Putnam funds or accounts unless specifically authorized by the NSRC. b. Process of approval. An investment professional wishing to purchase a new type of investment should discuss it with the Investment Division's Administrative office (the current contact is Julie Malloy). Investment Division Administration will coordinate a review of a new instrument by appropriate NSRC members from an investment, operational and compliance perspective, including the review of instruments by the Administrative Services Division of PFTC. Based on this review, the NSRC will then approve or disapprove the proposed new investment. Investment professionals must build in adequate time for this review before planned use of a new instrument. Further, the approval of the NSRC is only a general one. Individual fund and account guidelines must be reviewed in accordance with standard compliance procedures to determine whether purchase is permitted. In addition, if the instrument involves legal documentation, that documentation must be reviewed and be completed before trading. The NSRC may prepare a compliance and operational manual for the new derivative. 3. Violations a. Putnam's Operating Committee has determined that adherence to rigorous internal controls and procedures for novel securities and instruments is necessary to protect Putnam's business standing and reputation. Violation of these procedures will be treated as violation of both compliance guidelines and Putnam's Code of Ethics. Putnam encourages questions and expects that these guidelines will be interpreted conservatively. Appendix E. AIMR Code of Ethics and Standards of Professional Conduct The Code of Ethics (Full Text) Members of the Association for Investment Management and Research shall: 1. Act with integrity, competence, dignity, and in an ethical manner when dealing with the public, clients, prospects, employers, employees, and fellow members. 2. Practice and encourage others to practice in a professional and ethical manner that will reflect credit on members and their profession. 3. Strive to maintain and improve their competence and the competence of others in the profession. 4. Use reasonable care and exercise independent professional judgment. The Standards of Professional Conduct All members of the Association for Investment Management and Research and the holders of and candidates for the Chartered Financial Analyst designation are obligated to conduct their activities in accordance with the following Code of Ethics. Disciplinary sanctions may be imposed for violations of the Code and Standards. Fundamental Responsibilities Relationships with and Responsibilities to a Profession Relationships with and Responsibilities to an Employer Relationships with and Responsibilities to Clients and Prospects Relationships with and Responsibilities to the Public Standards of Practice Handbook Standard I: Fundamental Responsibilities Members shall: A. Maintain knowledge of and comply with all applicable laws, rules, and regulations (including AIMR's Code of Ethics and Standards of Professional Conduct) of any government, governmental agency, regulatory organization, licensing agency, or professional association governing the members' professional activities. B. Not knowingly participate in or assist any violation of such laws, rules, or regulations. Standard II: Relationships with and Responsibilities to the Profession A. Use of Professional Designation. 1. AIMR members may reference their membership only in a dignified and judicious manner. The use of the reference may be accompanied by an accurate explanation of the requirements that have been met to obtain membership in these organizations. 2. Those who have earned the right to use the Chartered Financial Analyst designation may use the marks "Chartered Financial Analyst" or "CFA" and are encouraged to do so, but only in a proper, dignified, and judicious manner. The use of the designation may be accompanied by an accurate explanation of the requirements that have been met to obtain the right to use the designation. 3. Candidates in the CFA Program, as defined in the AIMR Bylaws, may reference their participation in the CFA Program, but the reference must clearly state that an individual is a candidate in the CFA Program and cannot imply that the candidate has achieved any type of partial designation. B. Professional Misconduct. 1. Members shall not engage in any professional conduct involving dishonesty, fraud, deceit, or misrepresentation or commit any act that reflects adversely on their honesty, trustworthiness, or professional competence. 2. Members and candidates shall not engage in any conduct or commit any act that compromises the integrity of the CFA designation or the integrity or validity of the examinations leading to the award of the right to use the CFA designation. C. Prohibition against Plagiarism. Members shall not copy or use, in substantially the same form as the original, material prepared by another without acknowledging and identifying the name of the author, publisher, or source of such material. Members may use, without acknowledgment, factual information published by recognized financial and statistical reporting services or similar sources. Standard III: Relationships with and Responsibilities to the Employer A. Obligation to Inform Employer of Code and Standards. Members shall: 1. Inform their employer in writing, through their direct supervisor, that they are obligated to comply with the Code and Standards and are subject to disciplinary sanctions for violations thereof. 2. Deliver a copy of the Code and Standards to their employer if the employer does not have a copy. B. Duty to Employer. Members shall not undertake any independent practice that could result in compensation or other benefit in competition with their employer unless they obtain written consent from both their employer and the persons or entities for whom they undertake independent practice. C. Disclosure of Conflicts to Employer. Members shall: 1. Disclose to their employer all matters, including beneficial ownership of securities or other investments, that reasonably could be expected to interfere with their duty to their employer or ability to make unbiased and objective recommendations. 2. Comply with any prohibitions on activities imposed by their employer if a conflict of interest exists. D. Disclosure of Additional Compensation Arrangements. Members shall disclose to their employer in writing all monetary compensation or other benefits that they receive for their services that are in addition to compensation or benefits conferred by a member's employer. E. Responsibilities of Supervisors. Members with supervisory responsibility, authority, or the ability to influence the conduct of others shall exercise reasonable supervision over those subject to their supervision or authority to prevent any violation of applicable statutes, regulations, or provisions of the Code and Standards. In so doing, members are entitled to rely on reasonable procedures to detect and prevent such violations. Standard IV: Relationships with and Responsibilities to Clients and Prospects A. Investment Process. A.1 Reasonable Basis and Representations. Members shall: a. Exercise diligence and thoroughness in making investment recommendations or in taking investment actions. b. Have a reasonable and adequate basis, supported by appropriate research and investigation, for such recommendations or actions. c. Make reasonable and diligent efforts to avoid any material misrepresentation in any research report or investment recommendation. d. Maintain appropriate records to support the reasonableness of such recommendations or actions. A.2 Research Reports. Members shall: a. Use reasonable judgment regarding the inclusion or exclusion of relevant factors in research reports. b. Distinguish between facts and opinions in research reports. c. Indicate the basic characteristics of the investment involved when preparing for public distribution a research report that is not directly related to a specific portfolio or client. A.3 Independence and Objectivity. Members shall use reasonable care and judgment to achieve and maintain independence and objectivity in making investment recommendations or taking investment action. B. Interactions with Clients and Prospects. B.1 Fiduciary Duties. In relationships with clients, members shall use particular care in determining applicable fiduciary duty and shall comply with such duty as to those persons and interests to whom the duty is owed. Members must act for the benefit of their clients and place their clients' interests before their own. B.2 Portfolio Investment Recommendations and Actions. Members shall: a. Make a reasonable inquiry into a client's financial situation, investment experience, and investment objectives prior to making any investment recommendations and shall update this information as necessary, but no less frequently than annually, to allow the members to adjust their investment recommendations to reflect changed circumstances. b. Consider the appropriateness and suitability of investment recommendations or actions for each portfolio or client. In determining appropriateness and suitability, members shall consider applicable relevant factors, including the needs and circumstances of the portfolio or client, the basic characteristics of the investment involved, and the basic characteristics of the total portfolio. Members shall not make a recommendation unless they reasonably determine that the recommendation is suitable to the client's financial situation, investment experience, and investment objectives. c. Distinguish between facts and opinions in the presentation of investment recommendations. d. Disclose to clients and prospects the basic format and general principles of the investment processes by which securities are selected and portfolios are constructed and shall promptly disclose to clients and prospects any changes that might significantly affect those processes. B.3 Fair Dealing. Members shall deal fairly and objectively with all clients and prospects when disseminating investment recommendations, disseminating material changes in prior investment recommendations, and taking investment action. B.4 Priority of Transactions. Transactions for clients and employers shall have priority over transactions in securities or other investments of which a member is the beneficial owner so that such personal transactions do not operate adversely to their clients' or employer's interests. If members make a recommendation regarding the purchase or sale of a security or other investment, they shall give their clients and employer adequate opportunity to act on their recommendations before acting on their own behalf. For purposes of the Code and Standards, a member is a "beneficial owner" if the member has a. a direct or indirect pecuniary interest in the securities; b. the power to vote or direct the voting of the shares of the securities or investments; c. the power to dispose or direct the disposition of the security or investment. B.5 Preservation of Confidentiality. Members shall preserve the confidentiality of information communicated by clients, prospects, or employers concerning matters within the scope of the client-member, prospect-member, or employer-member relationship unless a member receives information concerning illegal activities on the part of the client, prospect, or employer. B.6 Prohibition against Misrepresentation. Members shall not make any statements, orally or in writing, that misrepresent a. the services that they or their firms are capable of performing; b. their qualifications or the qualifications of their firm; c. the member's academic or professional credentials. Members shall not make or imply, orally or in writing, any assurances or guarantees regarding any investment except to communicate accurate information regarding the terms of the investment instrument and the issuer's obligations under the instrument. B.7 Disclosure of Conflicts to Clients and Prospects. Members shall disclose to their clients and prospects all matters, including beneficial ownership of securities or other investments, that reasonably could be expected to impair the members' ability to make unbiased and objective recommendations. B.8 Disclosure of Referral Fees. Members shall disclose to clients and prospects any consideration or benefit received by the member or delivered to others for the recommendation of any services to the client or prospect. Standard V: Relationships with and Responsibilities to the Public A. Prohibition against Use of Material Nonpublic Information. Members who possess material nonpublic information related to the value of a security shall not trade or cause others to trade in that security if such trading would breach a duty or if the information was misappropriated or relates to a tender offer. If members receive material nonpublic information in confidence, they shall not breach that confidence by trading or causing others to trade in securities to which such information relates. Members shall make reasonable efforts to achieve public dissemination of material nonpublic information disclosed in breach of a duty. B. Performance Presentation. 1. Members shall not make any statements, orally or in writing, that misrepresent the investment performance that they or their firms have accomplished or can reasonably be expected to achieve. 2. If members communicate individual or firm performance information directly or indirectly to clients or prospective clients, or in a manner intended to be received by clients or prospective clients, members shall make every reasonable effort to assure that such performance information is a fair, accurate, and complete presentation of such performance. * Index "7-Day Rule" for transactions by managers, analysts and CIOs, 14 "60-Day Rule", 13 Access Persons definition, ix special rules on trading, 13, 33 AIMR Code of Ethics and Standards of Professional Conduct, 63 Analysts special rules on trading by, 13 Appeals Procedures, 39 Bankers' acceptances excluded from securities, x Blackout rule on trading by portfolio managers, analysts and CIOs, 15 Boycotts reporting of requests to participate, 35 Bribes, 21 CDs excluded from securities, x Claims against Putnam reporting of, 35 Clearance how long pre-clearance is valid, 4 required for personal securities transactions, 1 Closed-end funds rules on trading, 57 Commercial paper excluded from securities, x Commodities (other than securities indices) excluded from securities, x Computer use compliance with corporate policies required, 27 Confidentiality required of all employees, 22, 27 Confirmations of personal transactions required, 33 Conflicts of interest with Putnam and Putnam clients prohibited, 19 Contra-trading rule transactions by managers and CIOs, 16 Convertible securities defined as securities, x Currencies excluded as securities, x Director serving as for another entity prohibited, 23 Employee serving as for another entity prohibited, 23 Excessive trading (over 10 trades) by employees strongly discouraged, 10 Exchange traded index funds, excluded from securities, x Exemptions basis for, 11 Family members covered in personal securities transactions, x, 45 Fiduciary serving as for another entity prohibited, 23 Fraudulent or irregular activities reporting of, 35 Gifts restrictions on receipt of by employees, 19 Government or regulatory agencies reporting of communications from, 35 Holdings disclosure of by Access Persons, 34 Initial public offerings/IPOs purchases in prohibited, 6 Insider trading policy statement and explanations, 41 prohibited, 9 Investment clubs prohibited, 24 Investment Grade Exception for clearance of fixed income securities on Restricted List, 2 Involuntary personal securities transactions exempted, 11 exemption defined, 6 Large Cap Exception for clearance of securities on Restricted List, 1 Market Timing, prohibition against, 9 Marsh & McLennan Companies stock excluded from securities, x Money market instruments excluded from securities, x Mutual fund shares (open end) excluded from securities, x Naked options by employees discouraged, 10 New financial instruments procedures for approval, 61 Non-Putnam affiliates (NPAs) transactions and relationships with, 25 Officer serving as for another entity prohibited, 26 Options defined as securities, x relationship to securities on Restricted or Red Lists, 5 Partner serving as general partner of another entity prohibited, 23 Partnerships covered in personal securities transactions, x, 45 Personal securities transaction defined, x, 45 Pink sheet reports quarterly reporting requirements, 34 Political contributions, 22 Portfolio managers special rules on trading by, 13 Privacy Policy, 27 Private offerings or placements purchases of prohibited, 7 Putnam Investments Limited special rules for, 31 Quarterly Report of securities transactions, 34 Repurchase agreements excluded from securities, x Sale defined, x, 45 Sanctions, viii for failure to pre-clear properly, 3 Shares by subscription procedures to preclear the purchase and sales of Shares by Subscription, 2 Short sales by employees prohibited conduct, 6 Tender offers partial exemption from clearance rules, 6 Trustee serving as for another entity prohibited, 23 Trusts covered in personal securities transactions, x, 45 U.S. government obligations excluded from securities, x Violations of Law reporting of, 35 Warrants defined as securities, x -----END PRIVACY-ENHANCED MESSAGE-----