(logo)
Putnam
Tax-Free
High Yield
Fund
Semiannual
Report
January 31, 1994
(artwork)
For investors seeking
high current income
free from federal income
tax through higher-
yielding, lower-rated
tax-exempt securities
A member
of the Putnam
Family of Funds
Contents
2 How your fund performed
3 From the Chairman
4 Report from Putnam Management
Semiannual Report
6 Report of Independent Accountants
7 Portfolio of investments owned
24 Financial statements
35 Fund performance supplement
<PAGE>
How your
fund performed
For periods ended January 31, 1994
Total return* Fund (Class B shares)Lehman Bros.Consumer
Municipal Price
NAV CDSC Bond Index Index
6 months 5.57% 0.57% 5.91% 0.97%
1 year 12.46 7.46 12.26 2.25
5 years 57.08 55.08 61.37 20.40
annualized 9.45 9.17 10.04 3.78
Life-of-fund 126.47 126.47 135.16 35.00
annualized 10.23 10.23 10.73 3.64
Share data Class B Class A
NAV NAV POP
July 31, 1993 $15.01 -- --
September 20, 1993
(inception of class A shares) -- $15.34 $16.10
January 31, 1994 $15.27 $15.27 $16.03
Distributions (a)
6 months ended Investment Capital
January 31, 1994 Number income gains Total
Class B: 7/31/93-1/31/94 7$0.440570 $0.125 $0.565570
Class A: 9/20/93-1/31/94 5$0.362371 $0.125 $0.487371
Current returns
at the end of the period Class B Taxable equivalents+
NAV
Current dividend rate 5.63% 9.32%
Current 30-day yield 5.23% 8.66%
*Performance data represent past results. Investment return and
net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. The
fund began investment operations September 9, 1985 offering
shares now known as class B. On September 20, 1993, the fund
began offering class A shares. Performance for each share class
will differ.
(a)Capital gains are taxable and income from this fund may be
subject to the alternative minimum tax and/or state and local
taxes.
+Taxable equivalent rates cited assume the maximum federal tax
rate of 39.6%. Results for investors subject to lower tax rates
would not be as advantageous, although many such investors would
have the opportunity to receive attractive tax benefits from a
fund investment. Consult your tax advisor for more guidance.
Please see the fund performance supplement on page 35 for
additional information about the fund's most recent calendar
quarter performance and performance comparisons.<PAGE>
Terms you need to know
Total return is the change in value of an investment from the
beginning to the end of a period, assuming the reinvestment of
all distributions. It may be shown at net asset value or at
public offering price.
Net asset value (NAV) is the value of all your fund's assets,
minus any liabilities, divided by the number of outstanding
shares, not reflecting any sales charge.
Public offering price (POP) is the price of a mutual fund share
plus the maximum sales charge levied at the time of purchase.
Contingent deferred sales charge (CDSC) is a charge applied at
the time of the redemption of shares rather than the time of
purchase. It generally declines and eventually disappears over a
stated period.
Class A shares are the shares of your fund offered subject to an
initial sales charge. Your fund's POP includes the maximum 4.75%
sales charge.
Class B shares are the shares of your fund offered with no
initial sales charge. Within the first six years of purchase,
they are subject to a CDSC declining from 5% to 1%. After the
sixth year, the CDSC no longer applies.
Current dividend rate is calculated by annualizing the net
investment income paid to shareholders in the fund's most recent
distribution, then dividing by the NAV or POP on the last day of
the period.
Current 30-day yield, based only on the fund's net investment
income earnings, is calculated in accordance with Securities and
Exchange Commission guidelines.
Taxable equivalent return is the rate at which a taxable
investment would have to generate income to equal the fund's
current dividend rate or yield.
<PAGE>
From the
Chairman
(photograph of George Putnam)
(c) Karsh, Ottawa
George Putnam
Chairman
of the Trustees
Dear Shareholder:
Putnam Tax-Free High Yield Fund posted attractive performance
results, providing a total return at net asset value of well over
5% for class B shares for the six months ended January 31, 1994.
Your fund's strong performance has not gone unnoticed.
Morningstar Mutual Fund Values, an industry research firm,
awarded your fund its highest, five-star ranking for risk
adjusted performance as of January 31, 1994. Morningstar notes
that its "recent success has merely reinforced the fund's stellar
risk/reward profile." Morningstar rankings are updated biweekly
and are based on risk-adjusted 3-, 5- and 10-year total return,
as applicable, adjusted for sales charges.
The past six months have been characterized by modest growth in
the U.S. economy, low interest rates, and a low rate of
inflation. Amid this encouraging investment environment, the
municipal bond market has flourished, providing its most
impressive performance in decades. Your fund's strategy of
investing in a diversified portfolio of high-yield municipal
bonds enabled it to benefit fully from the favorable market
conditions.
Finally, I would like to draw your attention to the new format of
this report. Previous reports contained information on both of
the portfolios that make up Putnam Tax-Free Income Trust: Putnam
Tax-Free Insured Fund, and your fund, Putnam Tax-Free High Yield
Fund. Now, each fund will publish a separate report, which we
hope will save you the time and trouble of sorting through
information not directly related to your fund.
Please turn now to the Report from Putnam Management that follows
for fund manager Triet Nguyen's overview of the past six months,
and his insight into what lies ahead.
Respectfully yours,
(signature)
George Putnam
March 16, 1994
<PAGE>
Report from
Putnam Management
Putnam Tax-Free High Yield Fund provided shareholders with a high
level of tax-free income over the six-month period ended January
31, 1994. For the period, class B shares posted a total return at
net asset value of 5.57%.
The current dividend rate for class B shares on January 31, 1994,
was 5.63%, based on net asset value. For an investor in the new
maximum federal tax bracket of 39.6%, a fully taxable investment
would have had to provide a current dividend rate of more than
9.32% to equal the tax-free yield offered by your fund's
portfolio.* These figures reflect performance of class B shares;
results for class A shares, which became available September 20,
1993, will differ and will be reported in greater detail in the
fund's upcoming annual report.
Muni market shines The municipal bond market's strength remained
in evidence during the fund's semiannual period. The U.S. economy
grew at a moderate rate, while inflation and interest rates
remained low. The entire fixed-income market responded positively
to this environment, rallying almost daily from June through
September. Bond prices moved upward as yields on U.S. Treasury
securities fell to 20-year lows.
In October, the Treasury market corrected, and the municipal bond
market followed suit. Still, the relative value of municipal
securities was so attractive that by January, these securities
began to outperform Treasuries on an after-tax basis.
Favorable dynamics For more than two years, the supply of
municipal bonds surged as municipalities took advantage of low
interest rates to refinance existing debt issued at higher
interest rates.
In January 1994, the pace of this refinancing finally began to
decrease. At the same time, investor demand for municipal bonds
has continued to grow. We believe the true implications of
President Clinton's tax increase have not yet been realized by
many Americans, but when they are, even more individuals will
turn to municipal bonds to reduce their tax burden.
Additionally, low inflation and strong economic results, which
continued to prevail in the U.S. throughout the first half of
fiscal 1994, are positive conditions for the high-yield market.
We expect that these conditions will continue to prevail at least
for the next several months.
Sector strategies Overall, our portfolio allocation among various
sectors has remained relatively stable. The fund continues to be
primarily invested in longer-term bonds, with sector
concentrations in health care and transportation. We continued to
increase the fund's position in the environmental field. Because
it has lagged in recent years, we feel this sector is now poised
for a recovery.
During December and January, the supply of paper recycling issues
increased, providing us with opportunities to buy these bonds,
which typically carry a yield premium to bonds in other sectors.
We also believe that certain bonds issued on behalf of the health
care industry will perform well. While any health care reform
package is likely to affect this sector of the municipal bond
market, we strongly believe that those organizations that survive
reform will emerge as profitable, well-run organizations. Our
research team is working to identify those candidates most likely
to succeed in this changing environment.
Looking ahead We are maintaining our positive outlook for the
municipal bond market as a whole. The market's shift in the
supply/demand balance toward higher demand and lower supply
should lead to strong performance by municipal bonds. However,
looking ahead, we expect more of an income emphasis--reflecting
the trend toward higher interest rates.
Rates began moving upward after the end of the semiannual period,
and while they may go somewhat higher, there seems to be no
serious inflationary threat during this shift. In this climate,
municipal bonds should provide solid income but not the
significant price appreciation we have seen in recent years.
Although there can never be any assurances, your fund's emphasis
on sectors we feel are promising and its portfolio of
higher-yielding bonds position it well for what we see ahead.
*Results for investors subject to lower tax rates would not be as
advantageous, although many could receive tax benefits from a
fund investment.
<PAGE>
Putnam
Tax-Free
High Yield
Fund
Semiannual
Report
For the six months ended January 31, 1994
Report of Independent Accountants
To the Trustees and Shareholders of
Putnam Tax-Free High Yield Fund
(a portfolio of Putnam Tax-Free Income Trust)
In our opinion, the accompanying statement of assets and
liabilities, including the portfolio of investments owned (except
for bond ratings), and the related statements of operations and
of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of
Putnam Tax-Free High Yield Fund (a portfolio of Putnam Tax-Free
Income Trust) at January 31, 1994, and the results of its
operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits
of these financial statements in accordance with generally
accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits,
which included confirmation of investments owned at January 31,
1994 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where
confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse
Boston, Massachusetts
March 18, 1994
<PAGE>
Portfolio of
investments owned
January 31, 1994
Municipal Bonds and Notes (99.2%)(a)
Principal Amount Ratings(b) Value
Alabama (0.2%)
$ 3,500,000 Huntsville, Hlth. Care
Auth. Fac. Rev
Bonds Ser. B,
Municipal Bonds
Insurance Assn.
(MBIA), Variable
Rate Demand
Notes (VRDN),
2.3s, 6/1/22 VMIG1 $ 3,500,000
Alaska (0.6%)
12,000,000 Valdez, Marine Term
Rev. Bonds (Pipelines
Inc.), Ser. A, 5.85s,
8/1/25 A 12,165,000
Arizona (1.2%)
11,500,000 AZ Hlth. Facs. Auth.
Hosp. Syst. Rev.
Bonds (St. Luke's
Hosp. Syst.), Ser. A,
10 1/8s, 11/1/15 Ba 12,391,250
4,000,000 Phoenix, Indl. Dev.
Auth. Rev. Bonds
(Christian Care
Retirement Apts.)
Ser. A, 10 1/4s,
1/1/18 BB/P 4,055,000
Pinal Cnty. Indl. Dev.
Auth. Rev. Bonds
(Casa Grande Regl.
Med. Ctr.)
3,625,000 Ser. B, 8 1/8s, 12/1/22 BB/P 4,050,938
1,875,000 Ser. A, 8 1/8s, 12/1/22 BB/P 2,095,313
22,592,501
Arkansas (0.8%)
12,890,000 Pope Cnty., Poll.
Control Rev. Bonds
(AR Pwr. & Lt. Co.
Project), 11s,
12/1/15 Baa 14,775,163
California (16.9%)
6,500,000 Alameda Cnty. Certif.
of Participation
(Santa Rita Jail
Project), MBIA, 5s,
12/1/15 AAA 6,288,750
CA General Obligation
(G.O.) Bonds
2,300,000 MBIA, 5 1/2s, 4/1/10 AAA 2,403,500
10,000,000 MBIA, 5 1/2s, 4/1/09 AAA 10,487,500
7,000,000 Financial Security
Assurance, Inc. (FSA)
4 3/4s, 9/1/18 AAA 6,492,500
15,000,000 4 3/4s, 9/1/13 AAA 14,212,500
11,420,000 CA Hlth. Fac. Auth.
Rev. Bonds (Valley
Presbyterian Hosp.
Project) Ser. A, 9s,
5/1/12 B 11,591,300
CA State Pub. Works
Board Lease Rev. Bonds
5,000,000 (U. of CA.Project),
Ser. A, 6.6s, 12/1/22 AAA 5,925,000
5,000,000 (Dept. of Corr.-State
Prisons), American
Muni. Bonds
Assurance Corp.
(AMBAC), 5s,
12/1/19 AAA 4,837,500
Carson, Redev. Agcy.
Rev. Bonds (Redev.
Project Area 2)
2,000,000 6s, 10/1/13 Baa 2,017,500
3,000,000 5 7/8s, 10/1/09 Baa 3,007,500
Central Valley, Fin.
Auth. Rev. Bonds
8,400,000 (Carson Ice-
Cogeneration Project),
6.2s, 7/1/20 BBB 8,652,000
4,000,000 (Cogeneration Project),
6.1s, 7/1/13 BBB 4,105,000
6,000,000 Corona, Certif. of
Participation (Vista
Hosp. Syst.), Ser. B,
9 1/2s, 7/1/20 BB/P 6,615,000
8,850,000 East Bay, Muni. Util.
Dist. Wtr. Syst.
Rev. Bonds MBIA,
5s, 6/1/21 AAA 8,473,875
Irvine Ranch, Wtr.
Dist. VRDN
1,000,000 Ser. A, 5.65s, 11/15/13 A-1 1,000,000
2,000,000 Ser. B, 1.55s, 10/1/09 A-1 2,000,000
10,000,000 La Habra, Certif. of
Participation
(Friendly Hills Hlth.
Care Foundation),
Ser. A, 7.15s,
7/1/23 BB/P 10,550,000
<PAGE>
LA Cnty., Metro.
Trans. Auth. Sales
Tax Rev. Bonds
27,000,000 Ser. A, Federal
Guaranty Insurance
Co. (FGIC), 5s,
7/1/21 AAA 25,920,000
5,000,000 Ser. B, AMBAC 4 3/4s,
7/1/18 AAA 4,668,750
10,720,000 LA Cnty., Pub. Works
Fin. Auth. Lease
Rev. Bonds (Multi-
Capital Facs.
Project IV), MBIA
4 3/4s, 12/1/10 AAA 10,291,200
4,500,000 LA, Dept. of Wtr. &
Pwr. Elec. Rev.
Bonds 4 3/4s,
11/15/19 AA 4,140,000
LA, Regl. Arpt. Impt.
Corp. Lease Rev.
Bonds
4,870,000 (United Airlines Inc.),
6 7/8s, 11/15/12 Baa 5,150,025
8,500,000 (Western Airlines-
Delta Airlines),
11 1/4s, 11/1/25(c) Baa 9,732,500
LA, Wste. Wtr. Syst.
Rev. Bonds
5,000,000 Residual Interest
Bond (RIBS), FGIC,
7.56s, 11/1/06
(acquired 11/8/93,
cost $5,414,006)(f) AAA 5,468,750
19,500,000 Residual Interest
Bond (RIBS), Ser. D,
FGIC, 4.7s, 11/1/17
(acquired $15,000,000
on 10/27/93, cost
$13,699,110; $4,500,000
on 11/3/93, cost
$4,051,350)(f) AAA 18,086,250
4,750,000 Northern CA Pwr.
Agcy. Pub. Pwr.
Rev. Bonds
(Geothermal Project
No. 3), Ser. A, 5.8s,
7/1/09 A 5,023,125
Orange Cnty.,
Sanitation Dist.
Certif. of
Participation,
VRDN
9,800,000 3.4s, 8/1/15 VMIG1 9,800,000
13,000,000 Ser. C, 2.1s, 8/1/17 VMIG1 13,000,000
Redondo Beach,
Redev. Agcy.
Multi-Fam. Hsg.
Rev. Bonds
(Heritage Point
Project)
3,130,000 Ser. B, 8 1/2s, 9/1/23 BBB/P 3,282,588
5,100,000 Ser. A, 6 1/2s, 9/1/23 BBB/P 5,374,125
2,000,000 San Bernardino,
Hosp. Rev. Bonds
(San Bernardino,
Cmnty. Hosp.),
7 7/8s, 12/1/08 Ba 2,132,500
10,000,000 San Diego, Regl.
Bldg. Auth. Lease
RIBS MBIA, 3.81s,
5/1/23 AAA 10,475,000
San Joaquin Hills,
Trans. Toll Agcy.
Rev. Bonds
14,500,000 6 3/4s, 1/1/32 BB/P 15,061,875
10,495,000 5s, 1/1/33 BB/P 8,684,613
8,000,000 San Jose, Redev.
Agcy. Tax Allocation
Rev. Bonds
(Merged Area
Redev. Project),
MBIA, 5s, 8/1/20 AAA 7,690,000
5,000,000 Santa Clara, Certif.
of Participation
Ser. A, MBIA, 4 3/4s,
2/1/14 AAA 4,743,750
3,000,000 Southern CA Pub.
Pwr. Auth. RIBS
(Transmission
Project), 8.925s,
7/1/12 AA 3,367,500
29,000,000 U. of CA Rev. Bonds
(Multi. Purpose
Projects), Ser. C,
AMBAC, 5s, 9/1/23 AAA 27,622,500
10,000,000 Valley Hlth. Syst.
Certif. of Partici-
pation 6 7/8s,
5/15/23 BB/P 10,437,500
318,811,976
Colorado (3.8%)
Denver, City & Cnty.
Aprt. Rev. Bonds
27,805,000 Ser. A, 8 3/4s,
11/15/23 Baa 33,226,975
8,000,000 Ser. A, 8 1/2s,
11/15/23 Baa 9,280,000
4,000,000 Ser. B, 7 1/4s,
11/15/23 Baa 4,400,000
24,000,000 (United Air Lines
Project), Ser. A,
6 7/8s, 10/1/32 Baa 25,140,000
72,046,975
Connecticut (1.6%)
CT Dev. Auth. 1st
Mtge. Rev. Bonds
1,720,000 (Gladeview Hlth.
Care Project),
9 3/4s, 12/15/16 BB/P 2,055,400
7,000,000 (East Hill Woods
Project), 8 3/4s,
7/1/19 B/P 7,122,500
CT Dev. Auth. Hlth.
Care Rev. Bonds
6,500,000 (Alzheimer Resource
Ctr.), Ser. A, 10s,
8/15/21 B/P 7,531,875
4,000,000 (AHF/Windsor Inc.
Project), Ser. A,
91/2s, 1/1/22 B/P 4,350,000
5,000,000 CT Hlth. & Edl. Facs.
Auth. RIBS (Yale U.),
9.241s, 6/10/30 AAA 5,550,000
2,825,000 CT State Dev. Auth.
Solid Waste and
Elec. Rev. Bonds
(Ogden Martin Sysr.
Bristol, Inc.), 10s,
7/1/14 BBB 3,111,031
29,720,806
District of Columbia (0.4%)
District of Columbia,
Natl. Pub. Radio
Rev. Bonds
4,400,000 7.7s, 1/1/23 BB/P 4,812,500
2,500,000 7 5/8s, 1/1/18 BB/P 2,721,875
7,534,375
Florida (4.1%)
5,000,000 FL Board of Ed.,
Capital Outlay Rev.
Bonds (Pub. Ed.),
Ser. D, 5 1/8s,
6/1/22 Aa 4,937,500
25,000,000 Hernando Cnty., Indl.
Dev. Rev. Bonds
(FL Crushed Stone
Co.), 8 1/2s, 12/1/14 B/P 26,625,000
<PAGE>
7,300,000 Hillsborough Cnty.,
Aviation Auth.
Special Purpose
Rev. Bonds (USAir
Project), 8.6s,
1/15/22 Ba 8,312,875
1,130,000 Jacksonville, Hlth.
Fac. Auth. Rev.
Bonds (Mental Hlth.
Ctr.), 9 1/8s,
10/15/19 A/P 1,197,800
3,310,000 Levy Cnty., Indl. Dev.
Rev. Bonds
(National Med.
Assn. Inc. Project),
10s, 7/1/19 AA/P 3,318,275
Miami, Hlth. Facs.
Auth. Rev. Bonds
(Cedars Med.
Ctr.), Ser. A
7,750,000 8 3/8s, 10/1/17 AAA/P 9,125,625
2,000,000 8.3s, 10/1/07 AAA/P 2,350,000
2,000,000 Orange Cnty., Hlth.
Fac. Auth. RIBS,
Ser. 91-C, MBIA,
10.217s, 10/29/21 AAA 2,385,000
8,000,000 Orange Cnty., Hlth.
Fac. Auth. Rev.
Bonds (Princeton
Hosp.), 9s, 7/1/21 BB/P 8,890,000
7,000,000 Palm Beach Cnty.,
Solid Waste Indl.
Dev. Rev. Bonds
(Okeelanta Pwr. &
Lt. Project), Ser. A,
6.7s, 2/15/15 BB/P 7,183,750
3,485,000 Palm Beach Cnty.,
Student Hsg. Rev.
Bonds (Palm Beach
Cmnty. College),
Ser. A, 8 1/2s,
3/1/23 BB/P 3,450,150
77,775,975
Georgia (4.7%)
6,000,000 Atlanta, Special Fac.
Rev. Bonds (Delta
Air Lines Project),
Ser. B, 7.9s, 12/1/18 Ba 6,577,500
De Kalb Cnty., Hsg.
Auth. Muni. Rev.
Bonds (Briarcliff
Park Apts. Project)
8,000,000 Ser. B, 10s, 4/1/17 BB/P 8,370,000
5,900,000 Ser. A, 7 1/2s, 4/1/17 B/P 6,069,625
6,480,000 Fulton Cnty., Res.
Elderly Care Fac.
Auth. Rev. Bonds
(Lenbrook Sq.
Foundation Inc.
Project), 9 3/4s,
1/1/17 B/P 6,917,400
22,000,000 GA Muni. Elec. Auth.
Pwr. Rev. Bonds
Ser. Z, 5 1/2s,
1/1/20 A 22,687,500
3,900,000 GA Med. Ctr. Hosp.
Auth. Rev. Antici-
pated Certificates
RIB, MBIA, (Columbus
Regl. Hlth. Care
Syst.) Ser. B, 9.67s,
8/1/10 AAA 4,714,125
8,500,000 Monroe Cnty., Dev.
Auth. Poll. Control
Rev. Bonds (GA
Pwr. Co. Plant
Scherer Project),
10 1/2s, 9/1/15 A 9,551,875
55,260,000 Richmond Cnty., Dev.
Auth. Rev. Bonds
Ser. C, zero%,
12/1/21 AAA 9,186,975
Rockdale Cnty., Dev.
Auth. Solid Waste
Disposal Rev.
Bonds (Vishay
Paper Inc. Project),
3,000,000 7 1/2s, 1/1/26 B/P 3,086,250
12,000,000 7.4s, 1/1/16 B/P 12,345,000
89,506,250
Hawaii (0.6%)
10,000,000 HI Dept. of Budget &
Fin. Special
Purpose Mtge.
RIBS (Citizens'
Utilities), 8.033s,
12/15/23 A 10,450,000
Illinois (1.5%)
2,280,000 Chicago, O'Hare Intl.
Arpt. Special Fac.
Rev. Bonds (United
Airlines Inc.),
Ser. 84A, 8.85s,
5/1/18 Baa 2,698,950
<PAGE>
5,000,000 IL Dev. Fin. Auth.
Retirement Hsg.
Rev. Bonds
(Regency Park-
Lincolnwood),
Ser. A, 10 1/4s,
4/15/19(e) B/P 3,175,000
IL Dev. Fin. Auth.
Rev. Bonds (Cmnty.
Rehab. Providers
Facs.)
1,500,000 8 3/4s, 7/1/11 BBB/P 1,584,375
2,975,000 8 1/4s, 8/1/12 BBB/P 3,082,844
IL Hlth. Fac. Auth.
Rev. Bonds
5,000,000 (Cmnty. Provider
Pooled Loan
Program), Ser. A,
8s, 8/15/17 BBB/P 5,043,750
4,000,000 (Grant Hosp. of
Chicago), 7 1/2s,
6/1/13 AAA 4,105,000
1,270,000 Kane Cnty., 1st Mtge.
Rev. Bonds
(Mercy Hsg. Project),
9 3/4s, 10/1/19 B/P 1,282,700
6,050,000 Lansing, Tax Increment
Rev. Bonds (Lansing
Redev. Project),
10s, 4/1/07 AAA/P 6,874,313
27,846,932
Indiana (0.7%)
7,532,159 Hammond, Indl. Port
Auth. Certif. of
Participation 9.65s,
6/1/14 B/P 8,162,977
2,325,000 Mishawaka, Ind. Rev.
Bonds (Stone
Container Corp.
Project), 9 1/4s,
2/1/97 B/P 2,409,269
1,791,056 Westfield, Econ. Dev.
Rev. Bonds
(Westfield Village
Hlth. Care Ctr.),
FHA Insd., 12s,
5/15/14 AA/P 2,113,446
12,685,692
Iowa (0.7%)
11,500,000 IA Fin. Auth. Hlth.
Care Facs. Rev.
Bonds (Mercy Hlth.
Initiatives Project),
9.95s, 7/1/19 BB/P 12,218,750
215,000 Marion, 1st Mtge.
Rev. Bonds
(Kentucky Iowa,
Inc. Project),
10 1/4s, 1/1/20 B/P 217,688
12,436,438
Kentucky (1.3%)
5,000,000 Jefferson Cnty., Hosp.
RIBS (Alliant Hlth.
Syst. Project),
MBIA, 9.952s,
10/1/14 AAA 6,087,500
Kenton Cnty., Arpt.
Rev. Bonds (Delta
Airlines Project), Ser. A,
2,750,000 7 1/2s, 2/1/12 Ba 3,000,938
6,900,000 71/8s, 2/1/21 Ba 7,357,125
1,285,000 Lexington-Fayette
Urban Cnty., Govt.
1st Mtge. Rev.
Bonds (AHF/KY-Iowa
Inc. Project),
10 1/4s, 1/1/20 B/P 1,378,163
3,795,000 Muhlenberg Cnty.,
Hosp. Rev. Bonds
(Muhlenberg Cmnty.
Hosp. Project),
9 1/2s, 8/1/10 BB 4,307,325
2,015,000 Owensboro, Hosp.
Auth. Rev. Bonds
(Children's
Psychiatric Hosp.),
13s, 11/1/10 BBB/P 2,072,931
24,203,982
Louisiana (5.7%)
Beauregard, Parish
Rev. Bonds (Boise
Cascade Corp.
Project),
1,900,000 7 3/4s, 6/1/21 Baa 2,144,625
12,000,000 6.3s, 8/1/23 Baa 12,150,000
3,000,000 6 1/8s, 3/1/23 Baa 2,977,500
11,885,000 Hodge, Combined
Util. Rev. Bonds
(Stone Container
Corp.), 9s, 3/1/10 B/P 12,330,688
LA Pub. Fac. Auth.
1st Mtge. Rev.
Bonds
2,462,311 (Emily Morten
Foundation),
10 1/4s, 5/1/19 B/P 2,699,308
<PAGE>
2,000,000 (St. James Place
Project), 10s,
11/1/21 BB/P 2,172,500
3,000,000 LA Recvy. Dist. Sales
Tax VRDN FGIC,
1.9s, 7/1/97 VMIG1 3,000,000
23,115,000 Lake Charles,
Harbor & Term.
Dist. Port Facs.
Rev. Bonds (Trunkline
Co. Project), 7 3/4s,
8/15/22 BBB/P 26,206,631
3,000,000 Lee Cnty., Rev.
Bonds 7s, 9/15/13 B/P 3,067,500
Port of New Orleans,
Indl. Dev. Rev. Bonds
(Continental Grain
Co. Project)
3,700,000 Ser. A, 14 1/2s, 2/1/02 BB 4,458,500
4,500,000 14 1/2s, 1/1/02 BB 5,422,500
5,000,000 Ser. 82B, 7 1/2s, 7/1/13 BB 5,350,000
13,000,000 St. James Parish,
Solid Waste Disposal
Rev. Bonds (Kaiser
Aluminum Project),
7 3/4s, 8/1/22 B/P 14,202,500
West Feliciana Parish,
Poll. Control Rev.
Bonds (Gulf States
Util. Co. Project)
9,500,000 Ser. D, 12s, 5/1/14 BBB/P 10,378,750
1,500,000 9s, 5/1/15 BBB/P 1,831,875
108,392,877
Maine (0.8%)
ME Fin. Auth. Solid
Waste Disp./Recycling
Rev. Bonds
8,900,000 (Boise Cascade
Corp. Project), 7.9s,
6/1/15 BB 9,845,625
5,000,000 (Great Northern
Paper Project),
7 3/4s, 10/1/22 Baa 5,712,500
15,558,125
Maryland (0.2%)
3,000,000 Denton, 1st Mtge.
Rev. Bonds
(Wesleyan Hlth.
Care Ctr. Project),
10 1/4s, 4/1/20 Baa 3,262,500
<PAGE>
Massachusetts (8.1%)
MA Bay Trans. Auth.
Rev. Bonds
15,000,000 MBIA, Ser. B, 11s,
3/1/22 A 15,393,750
2,300,000 Ser. B, 6.2s, 3/1/16 A 2,642,125
MA Hlth. & Edl. Fac.
Auth. RIBS
5,000,000 (St. Elizabeth's Hosp.),
Ser. E, 10.11s,
8/15/21 AAA 6,256,250
5,600,000 (Beth Israel Hosp.),
AMBAC, 9.384s,
7/1/25 AAA 6,356,000
2,000,000 RIBS, (Boston U.),
Ser. L, MBIA,
10.693s, 10/1/31 AAA 2,422,500
MA Hlth. & Edl. Fac.
Auth. Rev. Bonds
2,535,000 (Summerfield Nursing
Home), Ser. A,
9 1/2s, 7/1/14 BB/P 2,842,369
3,000,000 (Cooley Dickinson
Hosp.), Ser. A,
7 1/8s, 11/15/18 BB/P 3,277,500
23,250,000 MA Indl. Fin. Agcy.
Resource Recvy.
Rev. Bonds
(Southeastern MA
Project), Ser. A, 9s,
7/1/15 BB/P 27,231,563
MA Indl. Fin. Agcy.
Rev. Bonds
6,200,000 (Atlanticare Med. Ctr.),
Ser. B, 10 1/8s,
11/1/14 BB/P 7,230,750
2,000,000 (Atlanticare Med.
Ctr.), Ser. A,
10 1/8s, 11/1/14 BB/P 2,332,500
2,500,000 (Berkshire Retirement
Home 1st. mtge.),
9 7/8s, 7/1/18 AAA/P 2,865,625
2,345,000 (Morton Hosp. &
Med. Ctr.), Ser. A,
8 3/4s, 7/1/11 AAA/P 2,887,281
MA Muni. Wholesale
Elec. Co. Pwr. Supply
Syst. Rev. Bonds
12,605,000 Ser. A, 8 3/4s, 7/1/18 AAA 14,889,656
10,690,000 Ser. B, 6 3/4s, 7/1/17 A 11,745,638
4,000,000 Ser. A, AMBAC, 5.1s,
7/1/08 AAA 4,030,000
7,000,000 Ser. A, AMBAC, 5s,
7/1/10 AAA 6,912,500
3,000,000 MA State G.O. Bonds
Ser. B, VRDN,
2.15s, 12/1/97 VMIG1 3,000,000
3,000,000 MA State Indl. Fin.
Agcy. Resource
Recvy. Rev. Bonds
(Southeastern MA
Project), Ser. B,
9 1/4s, 7/1/15 BB/P 3,528,750
6,000,000 MA State Indl. Fin.
Agcy. Rev. Bonds
(Orchard Cove
Inc.), 9s, 5/1/22 BB/P 6,682,500
2,435,000 MA State Indl. Fin.
Agcy. Tunnel Rev.
Bonds (MA Tpk.),
9s, 10/1/20 BB/P 2,584,144
MA State Wtr.
Resource Auth.
Rev. Bonds
7,500,000 Ser. C, 5 1/4s, 12/1/15 A 7,471,875
4,000,000 Ser. B, 5s, 3/1/22 A 3,730,000
2,000,000 MA VRDN, Ser. E,
2.55s, 12/1/97 A 2,000,000
4,000,000 Worcester, Mtge.
Rev. Bonds
(Briarwood Issue),
9 1/4s, 12/1/22 BB/P 4,195,000
152,508,276
Michigan (6.3%)
2,640,000 Ann Arbor, Econ.
Dev. Corp. Ltd.
Oblig. Rev. Bonds
(Glacier Hills Inc.
Project), 10 3/8s,
1/15/19 B/P 2,801,700
23,500,000 Detroit, Dev. Fin.
Auth. Tax Increment
Rev. Bonds Ser. A,
9 1/2s, 5/1/21 B/P 30,520,625
18,762,000 Detroit, Hosp. Fin.
Auth. Rev. Bonds
(MI Hlth. Care Corp.),
10s, 12/1/20 B 21,130,703
8,875,000 Greater Detroit
Resource Recvy.
Auth. Rev. Bonds
Ser. A, 9 1/4s,
12/13/08 Baa 9,718,125
<PAGE>
5,790,000 Highland Park, Hosp.
Facs. Fin. Auth.
Rev. Bonds (MI
Hlth. Care Corp.
Project), Ser. A,
9 7/8s, 12/1/19 B 6,238,725
8,000,000 MI Hsg. Dev. Auth.
Rental Hsg. Rev.
Bonds, FSA, Ser. A,
7.55s, 4/1/23 AAA 8,880,000
MI State Hosp. Fin.
Auth. Rev. Bonds
(Detroit-Macomb
Hosp. Corp.), Ser. A
8,000,000 7.4s, 6/1/13 BB 8,190,000
1,000,000 7.3s, 6/1/01 BB 1,027,500
MI State Strategic
Fund Ltd. Oblig.
Rev. Bonds
3,900,000 (Mercy Svcs. for
Aging Project),
9.4s, 5/15/20 BBB/P 4,304,625
945,000 (MI Hlth. Care Corp.
Project), 9.1s,
12/1/14 B/P 1,001,700
9,500,000 Midland Cnty., Econ.
Dev. Corp. Poll.
Control Rev. Bonds,
Ser. B, 9 1/2s,
7/23/09 B/P 10,877,500
5,390,000 Waterford, Econ.
Dev. Corp. Rev.
Bonds (Centerbury
Hlth. Care), 8 3/8s,
7/1/23 BB/P 5,747,088
7,000,000 Wayne Charter Cnty.,
Special Arpt. Facs.
Rev. Bonds
(Republic Airlines
Inc. Project),
Ser. C, 10 3/8s, B/P 7,586,250
118,024,541
Minnesota (0.5%)
3,000,000 Chaska, Indl. Dev.
Rev. Bonds
(Lifecore Biomedical
Inc. Project),
10 1/4s, 9/1/20 BB/P 3,577,500
Minneapolis, Cmnty.
Dev. Agcy. Multi-Fam.
Hsg. Rev. Rental
Bonds (Lindsay
Bros. Project)
1,850,000 9 1/2s, 12/1/07 CCC/P 1,905,500
1,200,000 Ser. B, 1 1/2s,
12/1/07 CCC/P 369,000
3,200,000 Shakopee, Multi-Fam.
Rev. Bonds 8 1/2s,
12/1/08(e) B/P 3,292,000
9,144,000
Mississippi (1.7%)
Claiborne Cnty., Poll.
Control Rev. Bonds
5,000,000 (Middle South
Energy Inc.), Ser. C,
9 7/8s, 12/1/14 BBB/P 6,212,500
4,620,000 (Syst. Energy
Resources Inc.),
9 1/2s, 4/1/16 BBB/P 5,209,050
10,000,000 (Middle South
Energy Inc.),
Ser. A, 9 1/2s,
12/1/13 Baa 12,262,500
2,250,000 Lee Cnty., Indl. Rev.
Bonds (Southern
Box Co. Inc.
Project), 9 1/4s,
5/1/97 B/P 2,348,438
4,000,000 MS Hosp. Equip. &
Fac. Auth. Rev.
Rfdg. Bonds (MS
Methodist Hosp &
Rehab.), Ser. 1,
9 3/8s, 5/1/12 BB/P 4,955,000
5,000,000 MS Hsg. Fin. Corp.
Single-Fam. Mtge.
Rev. Bonds zero%,
6/1/15 AAA 1,481,250
32,468,738
Missouri (0.1%)
St. Louis Cnty., Indl.
Dev. Auth. Multi-Fam.
Mtge. Rev. Bonds
130,000 (Westbrooke Village
Apts.), Ser. H, 10s,
12/15/15 B/P 123,988
990,000 (Pinetree Apts.
Project), Ser. B,
10s, 6/15/09 B/P 944,213
350,000 (Westbrooke Village
Apts.), Ser. E, 10s,
12/15/03 B/P 333,375
1,401,576
Montana (0.2%)
3,000,000 Missoula Cnty., Rev.
Bonds (Cmnty. Med.
Ctr. Inc.), Ser. B, 9s,
6/1/18 BBB 3,371,250
1,000,000 MT Hlth. Fac. Hosp.
Auth. RIBS
(Deaconess Med.
Ctr. Project) Ser. B,
AMBAC, 10.523s,
2/15/16 AAA 1,192,500
4,563,750
Nebraska (0.8%)
2,000,000 NE Investment Fin.
Auth. Hosp. Rev.
RIBS MBIA, 10.643s,
11/15/16 AAA 2,422,500
NE Investment Fin.
Auth. Single Fam.
Mtge. RIBS
3,900,000 Ser. 2, GNMA Coll.,
12.98s, 9/10/30 AAA 4,611,750
2,700,000 Ser. B, GNMA Coll.
12.606s, 3/15/22 AAA 3,165,750
2,000,000 GNMA Coll., 11.364s,
9/19/23 AAA 2,340,000
2,100,000 GNMA Coll., 9.93s,
9/15/24 AAA 2,383,500
14,923,500
Nevada (0.8%)
Clark Cnty., Indl. Dev.
Rev. Bonds
9,000,000 (Nevada Power Co.
Project), Ser. C,
7.2s, 10/1/22 Baa 10,046,250
5,000,000 (Southwest Gas Corp.)
6 1/2s, 12/1/33 Ba 5,106,250
15,152,500
New Hampshire (0.7%)
NH Higher Edl. &
Hlth. Fac. Auth.
Rev. Bonds
2,945,000 (Havenwood/Heritage
Heights), 9 3/4s,
12/1/19 BB/P 3,250,544
2,475,000 (Franklin Regl. Hosp.),
8 3/4s, 9/1/19 BBB/P 2,716,313
8,000,000 (1st Mtge. River
Woods), 8s, 3/1/00 BB/P 8,000,000
13,966,857
New Jersey (2.3%)
7,000,000 NJ Econ. Dev. Auth.
Elec. Energy Fac.
Rev. Bonds
(Vineland Cogeneration
L.P. Project), 7 7/8s,
6/1/19 BB/P 7,918,750
<PAGE>
NJ Econ. Dev. Auth.
Rev. Bonds
2,700,000 (Stolt Terminals
Project), 10 1/2s,
1/15/18 BB/P 3,202,875
4,700,000 (Holt Hauling Co.),
Ser. D, 10 1/4s,
9/15/14 BB/P 5,358,000
NJ Hlth. Care Fac.
Fin. Auth. Rev.
Bonds
5,000,000 (St. Elizabeth Hosp.),
Ser. B, 8 1/4s,
7/1/20 Baa 5,643,750
2,480,000 (Kimball Med. Ctr.),
7.3s, 7/1/99 BBB/P 2,588,500
5,000,000 (Union Hosp./Mega
Care Inc.), 5 7/8s,
7/1/07 Baa 5,062,500
2,000,000 NJ State Hsg. & Mtge.
Fin. Agcy. RIBS
Ser. 1, 8.831s, 11/1/07
(acquired, 2/11/93,
cost $2,073,120)(f) BBB/P 2,182,500
10,000,000 NJ State Tpk. Auth.
Rev. Bonds Ser. C,
6 1/2s, 1/1/16 A 11,812,500
43,769,375
New York (8.1%)
4,295,000 Metro. Trans. Auth.
(NY Svc. Contract
Commuter Fac.),
Ser. O, 5 3/4s,
7/1/07 Baa 4,445,325
8,250,000 Metro. Trans. Auth.
Svc. Contract Fac.
Rev. Bonds Ser. O,
5 3/4s, 7/1/13 Baa 8,538,750
5,000,000 NY City, G.O. Bonds
Ser. D, 5 3/4s, 8/15/08 A 5,093,750
5,000,000 NY City, Hlth. & Hosp.
Auth. Local Govt. Rev.
Bonds Ser. A, 6.3s,
2/15/20 Baa 5,212,500
8,000,000 NY Local Govt. Asst.
Corp. Rev. Bonds
Ser. C, 5 1/2s, 4/1/17 A 8,210,000
NY State Dorm. Auth.
Rev. Bonds
14,500,000 (State U. Edl. Facs.),
Ser. C, 7 3/8s,
5/15/10 Baa 17,617,500
10,880,000 (City U. Syst.), Ser. C,
6s, 7/1/16 Baa 11,111,200
5,000,000 (State U. Edl. Fac.),
Ser. A, 5 1/2s,
5/15/10 Baa 5,056,250
2,500,000 (State U. Edl. Fac.),
Ser. A, 5 1/2s,
5/15/09 Baa 2,537,500
5,000,000 (State U. Edl. Fac.),
Ser. A, 5 1/2s,
5/15/07 Baa 5,093,750
2,000,000 (State U. Edl. Fac.),
Ser. B, 5s,
5/15/18 Baa 1,870,000
7,750,000 (City U. Syst.), Ser. F,
5s, 7/1/14 Baa 7,333,438
2,375,000 NY State Hsg. Fin.
Agcy. Svcs.
Contract Oblig.
Rev. Bonds, Ser. A,
7 1/4s, 9/15/12 Baa 2,695,625
NY State Local Govt.
Assistance Corp.
2,225,000 Ser. E, 5 1/4s, 4/1/16 A 2,211,094
7,500,000 Ser. D, 5s, 4/1/23 A 7,115,625
NY State Med. Care
Fac. Fin. Agcy. Rev.
Bonds (Mental Hlth.
Svcs. Fac.)
1,350,000 Ser. A, 7 1/2s, 2/15/21 AAA 1,582,876
3,650,000 Ser. A, 7 1/2s, 2/15/01 AAA 4,430,187
2,935,000 Ser. D. 7.4s, 2/15/18 Baa 3,371,581
9,000,000 Ser. F, 6 1/2s, 2/15/19 Baa 9,708,750
10,080,000 Ser. F, 6 1/2s, 8/15/12 Baa 10,911,600
9,830,000 Ser. F, 5 1/4s, 2/15/19 Baa 9,436,800
NY State Urban Dev.
Corp. Rev. Bonds
7,000,000 (State Fac.), 7 1/2s,
4/1/20 Baa 8,067,500
4,000,000 (Correctional Fac.),
5 1/2s, 1/1/15 Baa 3,965,000
7,500,000 (Correctional Fac.),
Ser. 4, 5 3/8s,
1/1/23 Baa 7,284,375
152,900,976
North Carolina (0.7%)
NC Eastern Muni. Pwr.
Syst. Agcy. Rev.,
Ser. B
6,500,000 6 1/8s, 1/1/09 A 7,020,000
3,210,000 6s, 1/1/26 A 3,434,700
2,500,000 6s, 1/1/22 A 2,668,750
13,123,450<PAGE>
Ohio (1.7%)
7,200,000 Dayton, Special Facs.
Rev. Bonds (Emery
Air Freight Corp.),
Ser. A, 12 1/2s,
10/1/09 B/P 8,649,000
2,410,000 Hamilton Cnty., Indl.
Dev. Rev. Bonds
(Provident Assn.),
9s, 12/1/08(e) D/P 1,205,000
3,500,000 Lorraine Cnty., OH
Fac. Rev. Bonds
(Laurel Lake
Project), 7 1/8s,
12/15/18 BB/P 3,438,750
5,700,000 OH State Air Quality
Dev. Auth. Poll.
Control Rev. Bonds
(Cincinnati Gas &
Elec.), 10 1/8s,
12/1/15 Baa 6,476,625
4,000,000 OH State Wtr. Dev.
Auth. Rev. Bonds
(Mid-American
Waste Syst. Inc.
Project), 7 3/4s,
9/1/07 BBB/P 4,460,000
7,000,000 OH Wtr. Dev. Auth.
Poll. Control Facs.
Rev. Bonds
(Toledo Edison
Co.), Ser. A,
7.55s, 6/1/23 Baa 7,735,000
31,964,375
Oklahoma (0.7%)
6,000,000 Tulsa, Indl. Auth.
Hosp. Rev. Bonds
(Tulsa Regl. Med.
Ctr.), Ser. A, 7 5/8s,
6/1/17 BBB 6,622,500
5,950,000 Tulsa, Muni. Arpt.
Rev. Bonds
(American Airlines,
Inc.), 7 3/8s, 12/1/20 Baa 6,463,188
13,085,688
Pennsylvania (5.8%)
8,535,000 Allegheny Cnty.,
Airport Rev. Bonds
(Pittsburgh Intl.
Arpt.), Ser. C,
MBIA, 8 1/4s,
1/1/16 AAA 9,868,594
<PAGE>
Allegheny Cnty., Indl.
Dev. Auth. Arpt.
Special Facs. Rev.
Bonds (USAir Inc.
Project)
2,000,000 Ser. A, 8 7/8s, 3/1/21 Ba 2,310,000
7,450,000 Ser. B, 8 1/2s, 3/1/21 Ba 8,381,250
1,650,000 Allegheny Cnty.,
Indl. Dev. Auth.
Rev. Bonds
(Southwestern
Arpt. Cargo Fac.),
8 3/4s, 2/15/09 Ba 1,810,875
11,575,000 Allentown Redev.
Auth. Multi-Fam.
Hsg. VRDN (Oxford
Project) 3.1s,
11/1/06 A-1 11,575,000
Beaver Cnty., Indl.
Dev. Auth. Poll.
Control Rev.
Bonds (Toledo
Edison Co.,
Beaver Valley),
3,420,000 Ser. B, 12 1/4s, 9/15/15 Ba 3,890,250
2,500,000 (OH Edison Co.-
Beaver Valley),
10 1/2s, 10/1/15 Baa 2,825,000
(Cleveland Elec.
Illuminating Co.
Project)
5,000,000 10 1/2s, 9/1/15 Ba 5,581,250
3,250,000 Erie Cnty., Higher
Edl. Blg. Auth.
College Rev.
Bonds (Mercyhurst
College Project),
Ser. A, 5 3/4s,
3/15/13 BBB/P 3,310,938
2,000,000 Fayette Cnty., Indl.
Dev. Auth. Rev.
Bonds (Beverly
Enterprises
Project), 6 1/2s,
6/1/13 BB/P 2,012,500
Montgomery Cnty.,
Higher Ed. & Hlth.
Auth. Rev. Bonds
(United Hosp. Inc.
Project)
5,300,000 Ser. A, 8 3/8s,
11/1/11 Ba 5,803,500
3,745,000 8 1/2s, 11/1/17 Ba 4,030,556
<PAGE>
6,000,000 Montgomery Cnty.,
Indl. Dev. Auth.
Poll. Control Rev.
Bonds (Philadelphia
Elec. Co.) Ser. A,
10 1/2s, 5/15/15 BBB 6,675,000
4,750,000 PA Certif. of Participation
Bonds Ser. A,
AMBAC, 5s, 7/1/15 AAA 4,619,375
5,500,000 PA Econ. Dev. Fin.
Auth. Res. Recvy.
Rec. Bonds
(Northampton
Generating), Ser. A,
6.6s, 1/1/19 BB/P 5,555,000
2,500,000 PA Higher Ed.
Assistance Agcy.
Student Loan
RIBS AMBAC,
10.839s, 9/3/26 AAA 2,900,000
4,400,000 PA Port Auth. Fac.
Rev. Bonds (Shell
Oil Co.), Ser. A,
4.1s, 12/1/05 Aa 4,400,000
Philadelphia, Auth.
for Indl. Dev.
Replacement Rev.
Bonds
290,000 (Logan Square East
Care), 5 1/2s,
3/1/16 CCC/P 159,500
5,400,000 (Lutheran Retirement),
Ser. A, 5s, 1/1/17 CCC/P 3,226,500
Philadelphia, Muni.
Auth. Rev. Bonds
(Justice Lease),
700,000 Ser. C, 8 5/8s,
11/15/16 AAA 799,750
5,300,000 Ser. C, 8 5/8s,
11/15/01 AAA 6,856,875
Philadelphia, Wtr. &
Swr. RIBS
4,760,000 Linked Forward, FGIC,
5.2s, 6/15/05
(acquired 8/10/93,
cost $4,760,000)(f) AAA 4,938,500
4,760,000 Linked Floater Annuity
FGIC, 4.8s, 6/15/05
(acquired 8/10/93,
cost $1,995,868)(f) AAA 2,088,450
<PAGE>
5,000,000 Schuylkill Cnty., Indl.
Dev. Auth. Res.
Recvy. Rev. Bonds
(Schuylkill Energy
Res. Inc.) 6 1/2s,
1/1/10 BB/P 5,031,250
108,649,913
Puerto Rico (2.7%)
4,000,000 Cmnwlth. of Puerto
Rico, G.O. RIBS
MBIA, 8.534s,
7/1/08 AAA $4,555,000
Cmnwlth. of Puerto
Rico, G.O. Bonds
3,220,000 AMBAC, 7s, 7/1/10 AAA 3,952,550
13,000,000 zero%, stepped
coupon (8s, 1/1/97)
7/1/02(g) A 13,650,000
5,000,000 Cmnwlth. of Puerto
Rico, Hwy. & Trans.
Auth. VRDN Ser. X,
2.9s, 7/1/99 A 5,000,000
10,300,000 Puerto Rico, Pub.
Bldgs. Auth. Gtd.
Edl. & Hlth. Fac.
Rev. Bonds, Ser. M,
5 1/2s, 7/1/06 A 10,750,625
Puerto Rico, Tel.
Auth. RIBS
8,000,000 MBIA, 7.522s, 1/1/05
(acquired 4/23/93,
cost $8,349,280)(f) A 8,540,000
5,000,000 AMBAC, 6.742s,
1/1/03 AAA 5,162,500
51,610,675
Rhode Island (0.7%)
RI Depositors Econ.
Protection Corp.
Rev. Bonds
11,000,000 Ser. B, 10s, 7/1/07 B/P 11,660,000
3,440,490 Ser. C, 4 7/8s, 7/1/96 B/P 3,453,392
15,113,392
South Carolina (0.8%)
3,000,000 Darlington Cnty.,
Indl. Dev. Rev.
Bonds (Nucor
Corp. Project),
Ser. A, 5 3/4s,
8/1/23 A 3,071,250
Piedmont Muni. Elec.
Pwr. Agcy. Rev.
Bonds
2,600,000 MBIA, 5 1/2s, 1/1/10 AAA 2,720,250
1,830,000 MBIA, 5 1/2s, 1/1/08 AAA 1,923,788
<PAGE>
5,000,000 Spartansburg Cnty.,
Hosp. Fac. Rev.
RIBS 10.242s, 4/13/22 AAA 5,968,750
13,684,038
Tennessee (0.3%)
5,200,000 McMinn Cnty., Indl.
Dev. Board Solid
Waste Rev.
Recycling Rev.
Bonds (Calhoun
Newsprint Bowater),
7.4s, 12/1/22 Baa 5,824,000
Texas (5.6%)
6,495,000 Alliance Arpt. Auth.
Special Fac. Rev.
Bonds (American
Airlines Project),
7 1/2s, 12/1/29 Baa 7,071,431
Bell Cnty., Hlth. Fac.
Dev. Corp. Rev.
Bonds (Adv. Living
Tech. Inc. Project),
Ser. A
1,600,000 10 1/2s, 12/1/27 BB/P 1,552,000
5,500,000 10 1/2s, 6/15/18 BB/P 5,060,000
4,870,000 Bexar Cnty., Hlth.
Facs. Dev. Corp.
Rev. Bonds
(Heartway Corp.),
Ser. A-1, 10 1/4s,
3/1/19 BB/P 4,882,175
5,915,000 Cherokee Cnty., Hlth.
Fac. Dev. Corp.
Rev. Bonds
(Nancy Travis
Memorial Hosp.
Project), 10s,
5/15/13 B/P 6,602,619
Dallas Fort Worth,
Intl. Arpt. Fac.
Impt. Corp. Rev.
Bonds (American
Airlines, Inc.)
2,125,000 7 5/8s, 11/1/21 Ba 2,324,219
10,135,000 7 1/4s, 11/1/30 Baa 11,034,481
6,700,000 Harris Cnty., Cultural
Ed. Fac. Fin. Corp.
Rev. Bonds
(Space Center
Houston Project),
9 1/4s, 8/15/15 BB/P 7,688,250
Harris Cnty., Hsg. Fin.
Corp. Single Fam.
Mtge. Rev. Bonds
480,000 10 1/2s, 10/15/09 Baa 488,400
1,290,000 Ser. 1983A, 10 3/8s,
7/15/14 B 1,294,838
1,110,000 9 7/8s, 3/15/14 CC 1,115,550
3,099,810 Harris Cnty., Indl.
Dev. Corp. Arpt.
Facs. Rev. Bonds
(Continental Airlines
Inc.), 7.95s, 7/1/19 CCC/P 3,138,558
Houston, Hsg. Fin.
Corp. Single Fam.
Mtge. Rev. Bonds
4,747,000 Ser. 84-A, 10 7/8s,
2/15/16 Baa 4,913,145
2,560,000 10s, 9/15/14 Baa 2,617,600
6,635,000 (Lomas & Nettleton
Administration Co.),
Ser. B, 10 3/8s,
12/15/13 Baa 6,825,756
2,000,000 Port Corpus Christi,
Indl. Dev. Corp.
Rev. Bonds (Valero
Refining & Marketing
Co.), Ser. A, 10 1/4s,
6/1/17 Baa 2,392,500
5,000,000 Sam Rayburn, Muni.
Pwr. Agcy. Supply
Systs. Rev. Bonds
Ser. B, 5 1/2s,
10/1/20 BB 4,425,000
Southeast TX Hsg.
Fin. Corp. Multi-Fam.
Rev. Bonds
5,500,000 (Bayou Park Village
Apt. Project),
Ser. B, 10.175s,
8/1/16 B/P 5,630,625
4,500,000 (Promenade Place
Apts. Project),
Ser. B, 9 1/2s,
8/1/16 B/P 4,561,875
9,700,000 (Pavilion Place Apts.
Project), Ser. B,
9 1/2s, 7/1/16 B/P 9,966,750
6,000,000 (Pavilion Place Apts.
Project), Ser. A,
7.6s, 7/1/16 BBB/P 6,300,000
5,000,000 Tarrant Cnty., Hlth.
Facs. Dev. Corp.
Hosp. Rev. Bonds
(Cmnty. Hlth. Care
Foundation Inc.
Project), 10 1/8s,
4/1/21 B/P 5,493,750
<PAGE>
105,379,522
Vermont (0.2%)
VT Edl. & Hlth. Bldg.
Fin. Agcy. RIBS
2,000,000 10.019s, 9/1/16
(acquired 1/15/93,
cost $2,000,000)(f) AAA 2,317,500
1,700,000 FGIC, 9.969s, 9/1/13
(acquired 1/15/93,
cost $1,700,000)(f) AAA 1,969,875
4,287,375
Virginia (0.7%)
4,500,000 Fredericksburg, Indl.
Dev. Auth. Hosp.
Facs. RIBS FGIC,
10.474s, 8/15/23 AAA 5,439,375
2,000,000 Henrico Cnty., Indl.
Dev. Auth. RIBS
(Secours Hlth.
Syst. Project),
9.293s, 8/23/27 AAA 2,390,000
3,250,000 Lynchburg, Redev. &
Hsg. Auth. Multi
Fam. Hsg. Rev.
Bonds (Walden
Pond III Apts.),
VRDN, 3.4s, 4/1/07 A-1 3,250,000
2,760,000 Roanoke, Redev. &
Hsg. Auth. Multi
Fam. Hsg. Rev.
(Westwind II Apts.),
VRDN, 3.1s,
4/1/07 A-1 2,760,000
13,839,375
Washington (1.0%)
6,600,000 Spokane, Regl. Solid
Waste Mgmt. Syst.
Rev. Bonds AMBAC,
8.4s, 12/1/10 AAA 6,616,500
1,000,000 WA Cnty., Indl. Dev.
Auth. Rev. Bonds
(Beverly Enter-
prises Project),
6.55s, 4/15/05 BB/P 1,018,750
WA Pub. Pwr. Supply
Syst. Rev. Bonds
(Nuclear Project No. 3)
4,000,000 Ser. C, MBIA, 7 1/2s,
7/1/08 AAA 4,980,000
5,000,000 Ser. B, MBIA, 7 1/8s,
7/1/16 AAA 6,162,500
18,777,750<PAGE>
West Virginia (2.7%)
5,505,000 Kanawha Cnty.,
Bldg. Cmnty. Rev.
Bonds (Kanawha
Valley Memorial
Hosp.), 11 1/4s,
6/1/13 AAA 6,103,669
Marion Cnty., Cmnty.
Solid Waste Disp.
Fac. Rev. Bonds
(American Pwr.
Paper Recycling
Project)
5,000,000 9s, 12/1/11 B/P 5,037,500
15,000,000 8 1/4s, 12/1/11(d) B/P 15,112,500
5,000,000 7 3/4s, 12/1/11(d) B/P 5,037,500
2,980,000 Mercer Cnty., Coml.
Dev. Rev. Bonds
(American Hlth.
Enterprises Ltd.),
12s, 12/1/15 BB/P 3,281,725
2,935,000 Preston Cnty., Bldg.
Cmnty. Rev. Bonds
(Preston Mem.
Hosp. Corp.), Ser. B,
10s, 4/1/14 BB/P 3,257,850
4,045,000 WV Certif. of
Participation
(Morris Sq.
Complex), 9 1/4s,
8/15/08 B/P 4,085,450
6,115,000 WV State Hosp. Fin.
Auth. Hosp. Rev.
Bonds (St. Francis
Hosp. Charleston),
7 3/4s, 8/15/13 B 6,267,875
2,750,000 Weirton, Poll. Control
Rev. Bonds
(Weirton Steel
Project), Ser. B,
8.62s, 11/1/14 B 2,884,063
51,068,132
Wisconsin (0.2%)
2,500,000 WI Hsg. & Econ. Dev.
Auth. RIBS 11.305s,
10/25/22 AA 2,940,625
Total Investments
(cost $1,745,991,196)(h) $1,871,437,966
<PAGE>
(a) Percentages indicated are based on total net assets of
$1,886,604,625, which correspond to a net asset value per class A
and class B share of $15.27.
(b) The Moody's or Standard & Poor's ratings indicated are
believed to be the most recent ratings available at January 31,
1994 for the securities listed. Ratings are generally ascribed to
securities at the time of issuance. While the agencies may from
time to time revise such ratings, they undertake no obligation to
do so, and the ratings do not necessarily represent what the
agencies whould ascribe to these securities at January 31, 1994.
Securities rated by Putnam are indicated by "/P" and are not
publicly rated. Ratings are not covered by the Report of
Independent Accountants.
(c) A portion of this security was pledged to cover margin
requirements for futures contracts at January 31, 1994. The
market value segregated with the custodian for transactions in
futures contracts was $5,725,000.
(d) A portion of these securities, valued at $20,150,000 or 1.1%
of the Fund's net assets have been purchased on a "forward
commitment" basis, that is, the Fund has agreed to take delivery
of and make payment for such securities beyond the settlement
time of five business days after the trade date and subsequent to
the date of this report. The purchase price and interest rate of
such securities are fixed at the trade date although the Fund
does not earn any interest until settlement date.
(e) Non-income producing security.
(f) Restricted as to public resale. At the date of acquisition,
these securities were valued at cost. There were no outstanding
unrestricted securities of the same class as those held. Total
market value of restricted securities owned at Janaury 31, 1994
was $45,591,825, or 2.4% of net assets.
(g) The interest rate and date shown parenthetically represent
the new interest rate to be paid and the date the fund will begin
accruing this rate.
(h) The aggregate identified cost for federal income tax purposes
is $1,746,089,053, resulting in gross unrealized appreciation of
$132,616,041, and $7,267,128, repectively, or net unrealized
appreciation of $125,348,913.
The rates shown on Variable Rate Demand Notes and Residual
Interest Bonds are the current interest rates at January 31,
1994, which are subject to change based on the terms of the
security.
U.S. Treasury Bond Future
Aggregate Expiration Appreciation
Total Value Face Value Date(Depreciation)
U.S. Treasury Bond
Future (Sell) $34,293,750$33,845,260 Mar/94 $(448,490)
<PAGE>
The Fund had the following industry group concentrations greater
than 10% on January 31, 1994, as a percentage of net assets:
Hospital/Healthcare 20.6
Transportation 14.8
Utilities 12.8
The table below shows the percentages of the Fund's investments
invested at January 31, 1994 in securities assigned to the
various rating categories by Moody's and Standard & Poor's and in
unrated securities determined by Putnam Management to be of
comparable quality.
Unrated securities
Rated securities, of comparable quality,
as a percentage of as a percentage of
Rating Fund's net assets Fund's net assets
"AAA:/"Aaa" 19.7% 1.3%
"AA"/"Aa" 1.0 0.3
"A"/"A" 11.3 0.1
"BBB"/"Baa" 21.2 5.1
"BB"/"Ba" 6.5 13.7
"B"/"B" 2.6 14.0
"CCC"/"Caa" -- 0.5
"CC"/"Ca" 0.1 --
"D"/"D"-- 0.1
"VMIG"1.7 --
64.1% 35.1%
<PAGE>
<TABLE>
<CAPTIONS>
Statement of
assets and liabilities
January 31, 1994
<S> <C> <C>
Assets
Investments in securities, at value (identified cost
$1,745,991,196) (Note 1) $1,871,437,966
Cash 25,866
Interest receivable 29,035,678
Receivable for shares of the Fund sold 13,143,642
Receivable for securities sold 30,306,450
Receivable for variation margin on open futures contracts 80,265
Total assets 1,944,029,867
Liabilities
Payable for securities purchased $49,595,487
Distributions payable to shareholders 3,760,995
Payable for shares of the Fund repurchased 1,551,340
Payable for compensation of Manager (Note 2) 729,377
Payable for investor servicing and custodian fees (Note 2) 310,008
Payable for distribution fees (Note 2) 1,285,019
Other accrued expenses 193,016
Total liabilities 57,425,242
Net assets $1,886,604,625
Represented by
Paid-in capital (Note 4) $1,765,391,868
Distributions in excess of net investment income (776,742)
Accumulated net realized gain on investments and
futures transactions (3,008,781)
Net unrealized appreciation of investments and futures 124,998,280
Total -- Representing net assets applicable to capital
shares outstanding $1,886,604,625
Computation of net asset value and offering price
Net asset value and redemption price per class A share ($345,773,709
divided by 22,639,038 shares) $15.27
Offering price per class A share (100/95.25 x $15.27)* $16.03
Net asset value and offering price per class B share ($1,540,830,916
divided by 100,885,605 shares)** $15.27
*On single retail sales of less than $25,000. On sales of $25,000 or more and on group
sales the offering price is reduced.
**Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
operations
Six months ended January 31, 1994
<S> <C> <C>
Tax exempt interest income $61,191,633
Expenses:
Compensation of Manager (Note 2) $4,086,199
Investor servicing and custodian fees (Note 2) 719,646
Compensation of Trustees (Note 2) 16,131
Auditing 30,246
Legal 15,123
Postage 94,773
Reports to shareholders 30,246
Administrative services (Note 2) 12,602
Distribution fees -- class A (Note 2) 239,203
Distribution fees -- class B (Note 2) 6,189,844
Registration fee 63,014
Other 20,584
Total expenses 11,517,611
Net investment income 49,674,022
Net realized gain on investments (Notes 1 and 3) 6,047,641
Net realized loss on futures contracts (Notes 1 and 3) (559,162)
Net unrealized appreciation of investments and
futures during the year 36,962,800
Net gain on investments 42,451,279
Net increase in net assets resulting from operations $92,125,301
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
changes in net assets
Six months ended Year ended
January 31 July 31
1994 1993
<S> <C> <C>
Increase in net assets
Operations:
Net investment income $ 49,674,022 $ 78,593,225
Net realized gain on investments 6,047,641 9,319,512
Net realized loss on futures contracts (559,162) (1,776,751)
Net unrealized appreciation of investments and futures 36,962,80031,607,334
Net increase in net assets resulting from operations 92,125,301117,743,320
Distributions to shareholders from:
Net investment income -- class A (7,792,436) --
Net investment income -- class B (42,470,100) (78,691,816)
Net realized gain on investments -- class A (2,712,623) --
Net realized gain on investments -- class B (11,971,418) (3,367,783)
Increase from capital share transactions (Note 4) 357,891,263449,984,489
Total increase in net assets 385,069,987 485,668,210
Net assets
Beginning of year 1,501,534,638 1,015,866,428
End of year (including distributions in excess of net
investment income of $776,742 and $317,082, respectively) $1,886,604,625$1,501,534,638
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Financial highlights*
(For a share outstanding
throughout the period)
For the period
September 20, 1993
(commencement Six months
of operations) to ended
January 31 January 31 Year ended July 31
1994 1994 1993 1992
Class A Class B
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $15.34 $15.01 $14.64 $13.79
Investment operations
Net Investment Income .36 .44 .95 .99
Net Realized and Unrealized
Gain (Loss) on Investments .06 .39 .41 .94
Total from
Investment Operations .42 .83 1.36 1.93
Less Distributions from:
Net Investment Income (.36) (.44) (.95) (.99)
Net Realized Gain
on Investments (.13) (.13) (.04) (.09)
Total Distributions (.49) (.57) (.99) (1.08)
Net Asset Value,
End of Period $15.27 $15.27 $15.01 $14.64
Total Investment Return
at Net Asset Value (%)(b) 7.72(c) 11.14(c) 9.68 14.60
Net Assets, End of Period
(in thousands) $345,774 $1,540,831 $1,501,535 $1,015,866
Ratio of Expenses to Average
Net Assets (%) .80(c) 1.42(c) 1.38 1.45
Ratio of Net Investment Income
to Average Net Assets (%) 6.36(c) 5.63(c) 6.39 7.03
Portfolio Turnover (%) 21.14(d) 21.14(d) 52.29 82.31
See page 29 for notes to Financial highlights.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Financial highlights* (cont.)
For the period
September 9, 1985
(commencement
of operations) to
Year ended July 31 July 31
1991 1990 1989 1988 1987 1986
Class B
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $13.87 $14.30 $13.72 $13.77 $13.91 $12.57
Investment operations
Net Investment Income .99 1.00 .98 .96 .98 .94(a)
Net Realized and Unrealized
Gain (Loss) on Investments (.07) (.43) .56 (.05) .04 1.41
Total from
Investment Operations .92 .57 1.54 .91 1.02 2.35
Less Distributions from:
Net Investment Income (1.00) (1.00) (.96) (.96) (.98) (1.01)
Net Realized Gain
on Investments -- -- -- -- (.18) --
Total Distributions (1.00) (1.00) (.96) (.96) (1.16) (1.01)
Net Asset Value,
End of Period $13.79 $13.87 $14.30 $13.72 $13.77 $13.91
Total Investment Return
at Net Asset Value (%)(b) 6.98 4.20 11.71 6.96 7.48 21.62(c)
Net Assets, End of Period
(in thousands) $738,113 $651,152 $635,899 $586,721 $582,023 $251,736
<PAGE>
Ratio of Expenses to Average
Net Assets (%) 1.52 1.66 1.75 1.77 1.78 1.69(a)(c)
Ratio of Net Investment Income
to Average Net Assets (%) 7.26 7.12 7.02 7.11 6.71 7.60(a)(c)
Portfolio Turnover (%) 49.83 46.66 96.97 101.02 132.87 148.70(d)
*Financial highlights for periods ended through July 31, 1992 have been restated to conform with requirements issued by
the SEC in April 1993.
(a)Reflects a waiver of a portion of the distribution plan payments during the period. As a result of this waiver,
expenses of the Fund for the period ended July 31, 1986 reflect a reduction of $0.02 per share.
(b)Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c)Annualized.
(d)Not annualized.
/TABLE
<PAGE>
Notes to
financial statements
January 31, 1994
Note 1 Significant accounting policies
The Fund is a series of Putnam Tax-Free Income Trust, which is
registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The
Fund pursues its objective of seeking high current income exempt
from federal income tax consistent with its investment policies.
Putnam Tax-Free High Yield Fund invests primarily in
high-yielding, lower-rated tax exempt securities, constituting a
portfolio that Putnam Management believes does not involve undue
risk to income or principal.
The Fund offers both Class A and Class B shares. The Fund
commenced its public offering of Class A shares on September 20,
1993. Class A shares are sold with a maximum front-end sales
charge of 4.75%. Class B shares do not pay a front-end sales
charge but pay a higher ongoing distribution fee than Class A
shares, and may be subject to a contingent deferred sales charge
if those shares are redeemed within six years of purchase.
Expenses of the Fund are borne pro-rata by the holders of both
classes of shares, except that each class bears expenses unique
to that class (including the distribution fees applicable to such
class) and votes as a class only with respect to its own
distribution plan or other matters on which a class vote is
required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the
Fund, if the Fund were liquidated. In addition, the Trustees
declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with
generally accepted accounting principles.
A) Security valuation Tax-exempt bonds and notes are stated on
the basis of valuations provided by a pricing service, approved
by the Trustees, which uses information with respect to
transactions in bonds, quotations from bond dealers, market
transactions in comparable securities and various relationships
between securities in determining value.
B) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the
accrual basis.
C) Futures and index futures A futures contract is an agreement
between two parties to buy and sell a security at a set price on
a future date. An index futures contract is a contract to buy or
sell units of an index at a specified future date at a price
agreed upon when the contract is made. Upon entering into such a
contract the Fund is required to pledge to the broker an amount
of cash or securities equal to the minimum "initial margin"
requirements of the futures exchange. Pursuant to the contract,
the Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as "variation margin," and
are recorded by the Fund as unrealized gains or losses. 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.
Options on futures Options on futures generally operate in the
same manner as options purchased or written directly on the
underlying debt securities. The Fund is required to deposit, in a
manner similar to futures contracts, "initial margin" and
"variation margin" with respect to put and call options written
on futures contracts. In addition, upon exercise, net premiums
will decrease the unrealized loss or increase the unrealized gain
on the future.
D) Federal taxes It is the policy of the Fund to distribute all
of its income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the
Fund to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Internal Revenue Code of
1986. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation of securities
held or excise tax on income and capital gains.
E) Distributions to shareholders Income dividends are recorded
daily by the Fund and are distributed monthly. Capital gain
distributions are recorded on the ex-dividend date and paid
annually, or as necessary to meet the distribution requirements
described above.
F) Amortization of bond premium and discount Any premium
resulting from the purchase of securities is amortized using the
effective yield method for bonds issued after September 27, 1985,
and on a straight-line basis for bonds issued prior thereto. The
premium in excess of the call price, if any, is amortized to the
call date; thereafter, the remaining excess premium is amortized
to maturity. Discount on zero-coupon bonds, original issue bonds
and stepped coupon bonds is amortized according to the effective
yield method.
G) Expenses of the Trust Expenses directly charged or
attributable to a Fund will be paid from the assets of that Fund.
Generally, expenses of the Trust will be allocated between and
charged to the assets of each Fund on a basis that the Trustees
deem fair and equitable, which may be based on the relative
assets of each Fund or the nature of the services performed and
relative applicability to each Fund.
Note 2 Management fee, administrative services, and other
transactions
Compensation of Putnam Management, the Fund's Manager, a
wholly-owned subsidiary of Putnam Investments, Inc., for
management and investment advisory services is paid quarterly
based on the average net assets of the Fund for the quarter. Such
fee is based on 0.7% of the first $100 million of average net
assets; 0.6% of the next $100 million; 0.5% of the next $300
million; 0.45% of the next $500 million, and 0.425% of any amount
over $1.0 billion, subject to reduction under current law in any
year to the extent that expenses (exclusive of distribution fees,
brokerage, interest and taxes) of the Fund exceed 2.5% of the
first $30 million of average net assets, 2.0% of the next $70
million and 1.5% of any excess over $100 million and by the
amount of certain brokerage commissions and fees (less expenses)
received by affiliates of the Manager on the Fund's portfolio
transactions.
The Fund also reimburses the Manager for the compensation and
related expenses of certain officers of the Fund and their staff
who provide administrative services to the Fund. The aggregate
amount of all such reimbursements is determined annually by the
Trustees. For the six months ended January 31, 1994, the Fund
paid $12,602 for these services.
Trustees of the Fund receive an annual Trustee's fee of $2,740,
and an additional fee for each Trustees' meeting attended.
Trustees who are not interested persons of the Manager and who
serve on committees of the Trustees receive additional fees for
attendance at certain committee meetings.
Custodial functions for the Fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided
by Putnam Investor Services, a division of PFTC. Fees paid for
these investor servicing and custodial functions for the six
months ended January 31, 1994 amounted to $719,646. Investor
servicing and custodian fees reported in the Statement of
operations for the six months ended January 31, 1994 have been
reduced by credits allowed by PFTC.
The Fund has adopted a distribution plan with respect to class
A shares (the "class A Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the class A Plan
is to compensate Putnam Mutual Funds Corp., a wholly-owned
subsidiary of Putnam Investments, Inc., for services provided and
expenses incurred by it in distributing class A shares. The
Trustees have approved payment by the Fund to Putnam Mutual Funds
Corp. at an annual rate of 0.20% of the Fund's average net assets
attributable to class A shares. For the six months ended January
31, 1994, the Fund paid $239,203 in distribution fees for class A
shares.
During the six months ended January 31, 1994, Putnam Mutual Funds
Corp., acting as an underwriter, received net commissions of
$58,948 from the sale of class A shares of the Fund.
A deferred sales charge of up to 1.00% is assessed on certain
redemptions of class A shares purchased as part of an investment
of $1 million or more. For the six months ended January 31, 1994
there were no such redemptions, therefore, Putnam Mutual Funds
Corp., acting as an underwriter, received no monies on such
redemptions.
The Fund has adopted a distribution plan with respect to class B
shares (the "class B Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of class B Plan is to
compensate Putnam Mutual Funds Corp. for services provided and
expenses incurred by it in distributing class B shares. The class
B Plan provides for payments by the Fund to Putnam Mutual Funds
Corp. at an annual rate of up to 0.85% of the Fund's average net
assets attributable to class B shares. For the period ended
January 31, 1994, the Fund paid Putnam Mutual Funds Corp.
distribution fees of $6,189,844 for class B shares.
Putnam Mutual Funds Corp. also receives the proceeds on the
contingent deferred sales charges on its class B share
redemptions within six years of purchase. The charge is based on
declining rates, which begin at 5.00% of the net asset value of
the redeemed shares. For the six months ended January 31, 1994,
Putnam Mutual Funds Corp., acting as underwriter, received
$950,561 in contingent deferred sales charges from redemptions.
<PAGE>
Note 3 Purchases and sales of securities
During the six months ended January 31, 1994, purchases and sales
of investment securities other than short-term municipal
obligations aggregated $629,828,794 and $352,551,311
respectively. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the
identified cost basis.
The following is a summary of futures contracts activity during
the period:
Sales of Futures Contracts
Number of Aggregate
Contracts Face Value
Contracts open at beginning of year 300 $ 34,029,070
Contracts opened 1,450 166,304,224
1,750 200,333,294
Contracts closed (1,450) (166,488,034)
Open at end of period 300 $ 33,845,260
Note 4 Capital shares
For the period
September 20, 1993
(commencement
of opertions) to
January 31
1994
Class A Shares Amount
Shares sold 23,962,501 $367,318,896
Shares issued in connection with
reinvestment of distributions 392,450 5,967,892
24,354,951 373,286,788
Shares repurchased (1,715,913) (26,263,961)
Net increase 22,639,038 $347,022,827
<PAGE>
<TABLE>
<CAPTION>
Six months ended Year ended
January 31 July 31
1994 1993
Class B Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 23,501,094 $ 358,168,309 34,172,255 $501,446,796
Shares issued in connection
with reinvestment of
distributions 1,899,926 28,913,483 2,969,034 43,517,956
25,401,020 387,081,792 37,141,289 544,964,752
Shares repurchased (24,555,964) (376,213,356) (6,493,677) (94,980,263)
Net Increase 845,056 $ 10,868,436 30,647,612 $449,984,489
/TABLE
<PAGE>
Note 5 Reclassification of Capital Accounts
Effective August 1, 1993, Putnam Tax-Free Income Trust -- Putnam
Tax-Free High Yield Fund has adopted the provisions of Statement
of Position 93-2 "Determination, Disclosure and Financial
Statement Presentation of Income, Capital Gain and Return of
Capital Distributions by Investment Companies (SOP)." The purpose
of this SOP is to report the accumulated net investment income
(loss) and accumulated net realized gain (loss) accounts in such
a manner as to approximate amounts available for future
distributions (or to offset future realized capital gains) and to
achieve uniformity in the presentation of distributions by
investment companies.
As a result of the SOP, the Fund has reclassified $128,854
reducing distributions in excess of net investment income,
$57,417 increasing accumulated net realized gain on investments
and futures transactions and $186,271 decreasing additional
paid-in capital.
These adjustments represent the cumulative amounts necessary to
report these balances through July 31, 1993, the close of the
Fund most recent fiscal year-end, for financial reporting and tax
purposes.
Fund
performance
supplement
Putnam Tax-Free High Yield Fund is one of two separate portfolios
comprising Putnam Tax-Free Income Trust, a series investment
company. Each portfolio seeks high current income exempt from
federal income tax, consistent with its particular investment
policies. Putnam Tax-Free High Yield Fund invests primarily in
high-yielding, higher-risk, lower-rated tax exempt securities
constituting a portfolio which Putnam Management believes does
not involve undue risk to income or principal. High-yielding
securities are rated lower than investment-grade secuirites
because there is a greater possibility that a negative change in
general economic conditions or in the issuer's financial
condition may hinder the issuer's ability to pay principal and
interest on the securities.
The Lehman Brothers Municipal Bond Index is an unmanaged list of
approximately 8,000 investment-grade, fixed rate, long-term
maturity tax-exempt bonds, which are selected to be
representative of the market in terms of price movement and
sector distribution. The average quality of bonds held in the
index may differ from the average quality of those bonds in which
the fund invests. The index does not include bonds in certain of
the lower rating classifications in which the fund may invest.
The index does not take into account brokerage commissions or
other costs and may pose different risks from the fund. Total
return performance for the index reflects mathematically derived
changes of market price and reinvestment of interest payments, as
computed by Lehman Brothers. The fund portfolio contains
securities that do not match those in the index.
The fund performance supplement has been prepared by Putnam
Management to provide additional information about the fund and
the indexes used for performance comparisons. The information is
not part of the portfolio of investments owned or the financial
statements.
Total return at end of most recent calendar quarter
Periods ended December 31, 1993*
Cumulative Annualized
Class B NAV CDSC NAV CDSC
1 year 12.55% 7.55% 12.55% 7.55%
5 years 56.83 54.83 9.42 9.14
Life-of-fund 123.92 123.92 10.19 10.19
(since 9/9/85)
*The fund began operations on September 9, 1985, offering shares
now known as class B shares. Effective September 20, 1993, the
fund began offering class A shares. Performance for each share
class will differ.
<PAGE>
Putnam
Tax-Free
High Yield
Fund
Fund information
Investment manager
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
Marketing services
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
Investor servicing agent
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
1-800-225-1581
Custodian
Putnam Fiduciary
Trust Company
Legal counsel
Ropes & Gray
Independent accountants
Price Waterhouse
(DALBAR logo)
Putnam Investor Services
has received the DALBAR
award each year since the
award's 1990 inception.
In more than 10,000 tests
of 38 shareholder
service components,
Putnam outperformed
the industry standard
in every category.
<PAGE>
Officers
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
James P. Erickson
Vice President
Triet Nguyen
Vice President
and Fund Manager
William N. Shiebler
Vice President
Paul O'Neil
Vice President
John R. Verani
Vice President
John D. Hughes
Vice President
and Treasurer
Beverly Marcus
Clerk and
Assistant Treasurer
Trustees
George Putnam, Chairman
William F. Pounds, Vice Chairman
Hans H. Estin, Jameson Adkins Baxter,
John A. Hill, Elizabeth T. Kennan,
Lawrence J. Lasser, Robert E. Patterson,
Donald S. Perkins, George Putnam, III,
A.J.C. Smith, W. Nicholas Thorndike
<PAGE>
This report is for the information of shareholders of Putnam
Tax-Free High Yield Trust. It may also be used as sales
literature when preceded or accompanied by the current
prospectus, which gives details of sales charges, investment
objectives, and operating policies of the fund.
A11/12-11151
PUTNAMINVESTMENTS
The Putnam Funds
One Post Office square
Boston, Massachusetts 02109
- ------------------
Bulk Rate
U.S. Postage
Paid
Boston, MA
Permit No. 53749
- ------------------
<PAGE>
APPENDIX TO FORM N30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS:
(1) Rule lines for tables are omitted.
(2) Boldface and italic typefaces are displayed in normal type.
(3) Headers (e.g, the name of the fund) and footers (e.g., page
numbers and "The accompanying notes are an integral part of these
financial statements") are omitted.
(4) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(5) Bullet points and similar graphic signals are omitted.
(6) Page numbering is different.
