Putnam
Tax-Free
High Yield
Fund
SEMIANNUAL REPORT
January 31, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Municipal bond credit quality is the strongest in more than a
decade, according to Moody's Investors Service, Inc."
-- The Wall Street Journal, February 5, 1998
* "Although the municipal market is now offering yields at
historically low absolute rates, the fund has been able to capture
many credit upgrade and prerefunding opportunities as today's low
interest rates prove irresistible to issuers. In fact, the fund's
portfolio stillcontains many excellent upgrade and prerefunding
candidates, which provide enormous price appreciation potential."
-- Triet M. Nguyen, manager
Putnam Tax-Free High Yield Fund
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
27 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
It might seem difficult to conceive how the continuing turmoil in the
international securities markets could possibly affect municipal bonds to any
measurable degree. Yet the flight of global investors to the comparative
safety of U.S. bonds, especially following the Asian currency troubles last
fall, swept the U.S. fixed-income market to new highs, catching tax-free bonds
in the updraft. Putnam Tax-Free High Yield Fund was clearly among the
beneficiaries of this phenomenon during the first half of its current fiscal
year.
Since the tax-exempt market did not rise quite as far as the U.S. Treasury
securities that commanded most of the recent investor attention, yields on
municipal securities did not fall as far either. Because of this inverse
relationship of yields and prices, as Fund Manager Triet Nguyen explains in
the following report, tax-free yields stood near 90% of yields on comparable
Treasuries at period's end, making them all the more attractive on an
after-tax basis.
In his report, Triet discusses fund performance in general during the first
half of fiscal 1998 and then looks at prospects for the remaining half.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
March 18, 1998
Report from the Fund Manager
Triet M. Nguyen
During the six months ended January 31, 1998, the U.S. stock market repeatedly
soared to record highs, and the U.S. bond market also gave a favorable
performance. This situation was due in part to its status as one of the most
attractively valued among major global bond markets. Near-ideal conditions
prevailed on all fronts until late October, when the fiscal ills of Southeast
Asia spilled over into financial markets around the world. While it is
difficult to see any connection between Asian woes and U.S. municipal bonds,
the municipal bond market generally echoes trends in the broad market to some
extent. Nonetheless, Putnam Tax-Free High Yield Fund closed the first half of
fiscal 1998 on a positive note, posting attractive gains at net asset value
and public offering price. You will find full performance details on pages 9
and 10.
* FLIGHT-TO-QUALITY RALLY TAKES MUNICIPALS TO HISTORIC LEVELS
Against a backdrop of continued economic strength, falling interest rates, and
negligible inflation, fixed-income investors enjoyed positive performance
during the fund's semiannual period. By way of background, as 1997 progressed,
economic activity tapered off in a way that convinced the Federal Reserve
Board to leave short-term interest rates unchanged after its preemptive March
increase. Fixed-income markets responded quite favorably to the new
environment of more moderate growth and negligible inflation; bond prices rose
throughout the summer, while yields fell. Then, at the end of October, the
financial crisis in Asia and the ensuing flight to quality further energized
the bull market in U.S. bonds, helping to bring benchmark 30-year Treasury
yields just under 6% by the end of the period.
Municipal bond investors shared in the rally. In fact, at the end of the
period, municipal yields had reached historic lows and prices, which tend to
rise as yields fall, had climbed to historic highs. Municipal values have not
risen as much as Treasury values, however, since municipals do not attract the
foreign investors that have helped drive up Treasury prices in recent months.
As a result, long-term high-grade municipal bonds are now providing yields
that are 80% to 90% of yields on comparable taxable Treasuries -- the most
attractive levels in more than a year.
* DEFENSIVE STRATEGY EMPHASIZES INCOME
Throughout the period, your fund maintained a relatively defensive strategy in
order to maximize income while limiting share price volatility. Although
inflation remains extremely low, the economy is vibrant and the future
direction of interest rates is anything but certain. In this environment, your
fund's defensive orientation has served it well.
A key component of that strategy has been keeping the portfolio's average
duration at a relatively neutral 5.75 years. Duration, which is measured in
years, indicates a bond portfolio's sensitivity to changes in interest rates.
A longer duration can mean a more volatile net asset value if rates change,
while a shorter duration can offer some measure of protection. Over the past
six months, the portfolio's neutral duration helped stabilize net asset value,
although it may have limited the portfolio's appreciation somewhat during the
recent rally.
[GRAPHIC OMITTED: pie chart PORTFOLIO QUALITY OVERVIEW]
PORTFOLIO QUALITY OVERVIEW*
Aaa 39.4%
Aa 5.6%
A 6.4%
Baa 12.3%
Under Baa 40.8%
Footnote reads:
*As a percentage of market value on 1/31/98. A bond rated Baa or higher
is considered investment grade. All ratings reflect Moody's
descriptions, unless noted otherwise; percentages may include unrated
bonds considered by Putnam Management to be of comparable quality.
Allocations and ratings will vary over time.
The other essential aspect of the fund's conservative strategy has been a
portfolio that emphasizes high income on the one hand and high quality on the
other. This modified barbell structure has favored holdings with ratings at
both ends of the Aaa-Baa credit-quality spectrum but leans somewhat more
heavily on the higher-yielding securities at the lower end of this spectrum.
Higher-yielding lower-rated securities performed well as the strong economy
bolstered the balance sheets of many issuers, thereby reducing credit risk in
the fund. Since municipal bond yields remain at low absolute rates, compared
with those of two or three years ago, we believe your fund's portfolio of both
lower-rated and higher-rated bonds continues to offer the best opportunity for
outperformance in the months ahead.
* CREDIT UPGRADES, SECTOR SELECTIONS CONTINUE TO BOOST PERFORMANCE
In-depth credit research and sector analysis continued to enhance the fund's
value during the period. Once again, transportation holdings were top
performers, specifically airline/airport and highway/toll road issues. In
fact, the fund's E470 Beltway bonds, which are being used to fund a new
highway leading into the Denver International Airport, were prerefunded during
the period, which led to appreciation among these holdings. In a prerefunding,
the municipality issues enough new bonds to pay off the original issue at the
first call date or maturity. Proceeds from the new issue, in an amount
sufficient to pay off the entire original bond issue, are invested in an
escrow fund made up of U.S. Treasury issues. Because of the safety of
principal represented by these securities, the underlying bonds generally are
considered to have the equivalent of an Aaa rating. The perception of higher
quality produced higher bond prices in the fund's portfolio.
Elsewhere in the transportation sector, most of the fund's Denver
International Airport holdings were also upgraded to Aaa. These upgrades
resulted in significant price appreciation. The success of Denver
International Airport has helped boost the performance of other related
holdings as well. In fact, your fund's Denver Aquarium bonds have been top
performers already, and we believe there is more price appreciation potential.
Another new holding, Northwest Arkansas Airport bonds, has also been
performing quite well, providing solid current income along with potential for
price appreciation.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Hospitals/Health care 20.3%
Transportation 14.8%
Utilities 12.4%
Housing 8.8%
Waste management 5.6%
Footnote reads:
*Based on net assets as of 1/31/98. Sector allocations will vary over
time.
Industrial revenue holdings in the metals sector have also contributed
significantly to fund returns over the period. Steel and aluminum issues have
been particularly strong, although we are monitoring this sector carefully to
assess potential fallout from the Asian crisis, which has produced a general
decline in global commodity prices.
Performance in the forestry products sector continued to lag, as high Asian
capacity produced a precipitous drop in paper prices. Fortunately the fund
sold most of its holdings in this sector, avoiding any major negative
performance impact. Health care was another disappointing sector during the
period, as the scandal at industry giant Columbia Healthcare dampened merger
and acquisition activity and investor enthusiasm for hospital and health-care
issues. However, the fund continues to explore promising opportunities
associated with long-term care facilities, utilizing Putnam's superior credit
research capabilities to identify appropriate bonds for the fund. This sector
has benefited substantially from the compression of bond credit quality
spreads as increased investor demand continues to drive up prices. Despite
these price increases, long-term care facility bonds have remained relatively
attractive compared to other sectors and should remain a key area of
opportunity over the next few years.
* FUND APPEARS WELL POSITIONED TO MEET FUTURE CHALLENGES
With municipal bond yields now at historically low absolute rates, the fund's
primary challenge will be to continue to produce substantial tax-free income
in such an environment. However, the fund is particularly well positioned to
do just that in two significant ways. First, the portfolio possesses strong
call protection, which should enable many of its current holdings to continue
producing solid income rather than being called out of the market. Second,
many of the portfolio's higher-yielding lower-rated bonds have the potential
for prerefunding as issuers look to refinance their debt at today's lower
interest rates. Many high-grade municipal issues have already been
prerefunded, but the wave of prerefunding among higher-yielding lower-rated
bonds has just begun in the health-care, highway, and multifamily housing
sectors -- sectors that we believe are amply represented in the fund's
portfolio.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 1/31/98, there is no guarantee the fund will continue to hold
these securities in the future. The lower credit ratings of high-yield bonds
reflect a greater possibility that adverse changes in the economy or poor
performance by the issuers of these bonds may affect the issuer's ability to
pay principal and interest.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Tax-Free High Yield Fund seeks to provide as high a level of current
income free from federal income tax as is consistent with the preservation
of capital.
TOTAL RETURN FOR PERIODS ENDED 1/31/98
Class A Class B Class M
(inception date) (9/20/93) (9/9/85) (12/29/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 4.12% -0.85% 3.92% -1.08% 4.04% 0.65%
- ------------------------------------------------------------------------
1 year 9.68 4.46 9.04 4.04 9.35 5.78
- ------------------------------------------------------------------------
5 years 39.72 33.04 35.97 33.97 37.12 32.65
Annual average 6.92 5.88 6.34 6.02 6.52 5.81
- ------------------------------------------------------------------------
10 years 112.19 102.02 106.46 106.46 108.23 101.50
Annual average 7.81 7.29 7.52 7.52 7.61 7.26
- ------------------------------------------------------------------------
Life of fund 181.38 167.93 173.81 173.81 176.14 167.22
Annual average 8.71 8.28 8.47 8.47 8.54 8.26
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 1/31/98
Lehman Muni Consumer
Bond Index Price Index
- ------------------------------------------------------------------------
6 months 4.02% 0.69%
- ------------------------------------------------------------------------
1 year 10.12 1.57
- ------------------------------------------------------------------------
5 years 42.49 13.32
Annual average 7.34 2.53
- ------------------------------------------------------------------------
10 years 122.40 39.67
Annual average 8.32 3.40
- ------------------------------------------------------------------------
Life of fund 198.46 49.63
Annual average 9.20 3.30
- ------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 4.75% and 3.25%, respectively. Class B share returns for
the 1- and 5-year periods reflect the applicable contingent deferred sales
charge (CDSC), which is 5% in the first year, declines to 1% in the sixth
year, and is eliminated thereafter. Returns shown for class A and class M
shares for periods prior to their inception are derived from the
historical performance of class B shares, adjusted in the case of public
offering price to reflect the initial sales charge currently applicable to
each class, but have not been adjusted to reflect differences in expenses,
which are lower for class A and M shares than for class B shares. All
returns assume reinvestment of distributions at NAV and represent past
performance; they do not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 1/31/98
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------
Income $0.409541 $0.362155 $0.387453
- ------------------------------------------------------------------------
Capital gains1 -- -- --
- ------------------------------------------------------------------------
Total $0.409541 $0.362155 $0.387453
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
7/31/97 $14.56 $15.29 $14.56 $14.55 $15.04
- ------------------------------------------------------------------------
1/31/98 14.74 15.48 14.76 14.74 15.24
- ------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------
Current dividend rate2 5.41% 5.15% 4.76% 5.11% 4.94%
- ------------------------------------------------------------------------
Taxable equivalent3 8.96 8.53 7.88 8.46 8.18
- ------------------------------------------------------------------------
Current 30-day SEC yield4 5.03 4.79 4.38 4.73 4.57
- ------------------------------------------------------------------------
Taxable equivalent3 8.33 7.93 7.25 7.83 7.57
- ------------------------------------------------------------------------
1Capital gains, if any, are taxable for federal and, in most cases, state
tax purposes. For some investors, investment income may also be subject to
the federal alternative minimum tax. Investment income may be subject to
state and local taxes.
2Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
3Assumes maximum 39.6% federal tax rate. Results for investors subject to
lower tax rates would not be as advantageous.
4Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 12/31/97
(most recent calendar quarter)
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 5.67% 0.67% 5.40% 0.40% 5.58% 2.15%
- ------------------------------------------------------------------------
1 year 9.14 3.96 8.43 3.43 8.81 5.26
- ------------------------------------------------------------------------
5 years 40.20 33.54 36.42 34.42 37.64 33.12
Annual average 6.99 5.96 6.41 6.09 6.60 5.89
- ------------------------------------------------------------------------
10 years 117.19 106.83 111.32 111.32 113.20 106.28
Annual average 8.06 7.54 7.77 7.77 7.86 7.51
- ------------------------------------------------------------------------
Life of class 178.95 165.62 171.41 171.41 173.82 164.99
Annual average 8.69 8.26 8.45 8.45 8.53 8.24
- ------------------------------------------------------------------------
Performance data assumes reinvestment of distributions and reflects past
performance, which is not indicative of future results. Investment return
and principal value will fluctuate so that an investor's shares when
redeemed may be worth more or less than their original cost. See first
page of performance summary for method of calculation.
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.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred 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. POP performance
figures shown here assume the maximum 4.75% sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the
municipal bond market. The index assumes reinvestment of all distributions
and interest payments and does not take into account brokerage fees or
taxes. Securities in the fund do not match those in the indexes and
performance of the fund will differ. It is not possible to invest directly
in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
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Portfolio of investments owned
January 31, 1998 (Unaudited)
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FHA Insd. -- Federal Housing Administration Insured
FNMA Coll. -- Federal National Mortgage Association Collateralized
FSA -- Financial Security Assurance
GNMA Coll. -- Government National Mortgage Association Collateralized
G.O. Bonds -- General Obligation Bonds
IFB -- Inverse Floating Rate Bonds
IF COP -- Inverse Floating Rate Certificate of Participation
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
TRAN -- Tax Revenue Anticipation Notes
VRDN -- Variable Rate Demand Notes
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (99.5%) *
PRINCIPAL AMOUNT RATINGS** VALUE
Alabama (0.7%)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
$ 5,000,000 AL State Indl. Dev. Auth. Solid Waste Disposal
Rev. Bonds (Pine City Fiber Co.), 6.45s, 12/1/23 Baa3 $ 5,450,000
5,000,000 Anniston, Indl. Dev. Rev. Bonds (Hoover Group
Inc.), 8 1/2s, 9/1/10 B/P 5,656,250
2,000,000 Jackson Cnty., Hlth. Care Auth. Hosp. TRAN,
7 7/8s, 5/1/19 BB/P 2,240,000
--------------
13,346,250
Alaska (0.8%)
- ------------------------------------------------------------------------------------------------------------
AK State Hsg. Fin. Corp. Rev. Bonds
12,000,000 Ser. A, 5.55s, 6/1/34 Aaa 12,300,000
3,850,000 7.7s, 12/1/35 [DBL. DAGGER] AAA/P 4,186,875
--------------
16,486,875
Arizona (1.5%)
- ------------------------------------------------------------------------------------------------------------
Phoenix, Indl. Dev. Auth. Arpt. Fac. Rev. Bonds
(American West Airlines, Inc.)
6,061,235 Ser. A 95-1, 8.3s, 1/1/06 B+/P 6,156,700
1,052,631 Ser. B 95-2, 8.2s, 1/1/99 B+/P 1,069,221
1,000,000 Pima Cnty., Indl. Dev. Auth. VRDN (Tucson Elec.),
3.6s, 12/1/22 VMIG1 1,000,000
3,625,000 Pinal Cnty., Indl. Dev. Auth. Rev. Bonds (Casa
Grande Regl. Med. Ctr.), Ser. B, 8 1/8s, 12/1/22 B+/P 3,905,938
11,370,000 Salt River, Agriculture Rev. Bonds, Ser. B,
7s, 1/1/05 Aa2 13,274,475
Scottsdale, Indl. Dev. Auth. 1st Mtge. Rev. Bonds
(Westminster Vlillage)
2,300,000 Ser. A, 8s, 6/1/11 BB-/P 2,596,125
3,150,000 Ser. B, 7.05s, 6/1/16 BB-/P 3,484,688
--------------
31,487,147
Arkansas (1.1%)
- ------------------------------------------------------------------------------------------------------------
14,500,000 Northwest Regl. Apt. Auth. Apt. Rev. Bonds,
7 5/8s, 2/1/27 B/P 16,584,375
5,000,000 AR State Hosp. Equip. Fin. Auth. VRDN (Baptist
Hlth.), 3.6s, 11/1/10 VMIG1 5,000,000
--------------
21,584,375
California (11.6%)
- ------------------------------------------------------------------------------------------------------------
ABAG Fin. Auth. COP (American Baptist
Homes), Ser. A
7,000,000 5.85s, 10/1/27 BBB 7,210,000
3,000,000 5 3/4s, 10/1/17 BBB 3,093,750
Anaheim, Pub. Fin. Auth. Lease Rev. Bonds,
Ser. C, FSA
3,025,000 6s, 9/1/14 Aaa 3,467,406
3,000,000 6s, 9/1/13 Aaa 3,438,750
4,000,000 6s, 9/1/11 # Aaa 4,565,000
CA State G.O. Bonds
10,410,000 6.6s, 2/1/10 A1 12,452,963
13,700,000 6 1/2s, 2/1/08 A1 16,046,125
16,065,000 CA State Pub. Wks. Board. Rev. Bonds (Dept.
of Corrections-State Prisons), Ser. A, AMBAC,
5s, 12/1/19 Aaa 16,326,056
7,640,000 Contra Costa, Wtr. Dist. Rev. Bonds, Ser. G,
MBIA, 5s, 10/1/24 Aaa 7,525,400
8,000,000 Corona, COP (Vista Hosp. Syst.), Ser. B,
9 1/2s, 7/1/20 B/P 9,650,000
Los Angeles, Regl. Arpt. Impt. Corp. Lease
Rev. Bonds
5,700,000 (Air Canada), 8 3/4s, 10/1/14 B1 6,704,625
5,070,000 (United Airlines, Inc.), 6 7/8s, 11/15/12 Baa3 5,621,363
5,000,000 Los Angeles, Wastewater Syst. IFB, FGIC, 6.871s,
11/1/06 (acquired 11/8/93, cost $5,417,200) [DBL. DAGGER] Aaa 5,718,750
2,515,000 Oakland, VRDN (Cap. Equip.), 3.35s, 12/1/15
(National Westminister Bank (LOC)) VMIG1 2,515,000
1,100,000 Orange Cnty., Arpt. Dev. VRDN (Park Ridge),
Ser. I, 3.2s, 11/1/08 VMIG1 1,100,000
10,000,000 Orange Cnty., Pub. Fac. Corp. COP (Solid Waste
Management), 7 7/8s, 12/1/13 Baa 10,533,600
Redondo Beach, Redev. Agcy. Multi-Fam. Hsg.
Rev. Bonds (Heritage Pointe)
3,130,000 Ser. B, 8 1/2s, 9/1/23 BBB/P 3,298,238
5,100,000 Ser. A, 6 1/2s, 9/1/23 BBB/P 5,425,125
1,705,000 Riverside Cnty., COP VRDN (Riverside Cnty.
Pub. Fac.), Ser. D, 3.2s, 12/1/15 VMIG1 1,705,000
380,000 San Bernadino Cnty., Multi-Fam. VRDN
(Woodview Apts.), Ser. I, 3.2s, 4/1/07 VMIG1 380,000
5,000,000 San Bernardino Cnty., COP (Med. Ctr. Fin.),
Ser. A, MBIA, 6 1/2s, 8/1/17 Aaa 6,031,250
21,000,000 San Bernardino Cnty., IF COP (PA-100-Med.
Ctr. Fin.), MBIA, 8.71s, 8/1/28 (acquired 6/27/95,
cost $22,664,040) [DBL. DAGGER] AAA/P 28,192,500
1,600,000 San Diego, Hsg. Auth. VRDN (Carmel Del Mar
Apts.), Ser. A, 3.3s, 12/1/15 A-1+ 1,600,000
10,000,000 San Diego, Regl. Bldg. Auth. Lease Rev. Bonds,
MBIA, 6.9s, 5/1/23 Aaa 10,537,500
5,000,000 San Jose, Redev. Agcy. (Merged Area Redev.),
MBIA, 6s, 8/1/07 Aaa 5,681,250
10,000,000 San Luis Obispo, COP (Vista Hosp. Sys. Inc.),
8 3/8s, 7/1/29 B/P 10,850,000
9,650,000 Southern CA Pub. Pwr. Auth. IFB (Transmission),
7.508s, 7/1/12 Aa3 11,085,438
19,100,000 Vallejo, COP (Marine World Foundation),
7.2s, 2/1/26 BB+/P 21,201,000
10,500,000 Valley Hlth. Syst. COP, 6 7/8s, 5/15/23 BB+/P 11,300,625
Valley Hlth. Syst. Hosp. Rev. Bonds
1,500,000 6 1/2s, 5/15/25 BBB- 1,627,500
3,000,000 Ser. A, 6 1/2s, 5/15/15 BBB- 3,277,500
--------------
238,161,714
Colorado (6.5%)
- ------------------------------------------------------------------------------------------------------------
13,000,000 Arapahoe Cnty., Hwy. Rev. Bonds, Ser. E-470,
7s, 8/31/26 Aaa 15,632,500
9,500,000 CO Hsg. Fin. Auth. Rev. Bonds, Ser. C-3, FHA
Insd., 5.7s, 10/1/21 Aa2 9,654,375
CO Edl. Fac. Auth. Rev. Bonds (Ocean
Journey, Inc.)
10,000,000 8 3/8s, 12/1/26 B+/P 11,837,500
5,000,000 8.3s, 12/1/17 B+/P 5,912,500
Denver, City & Cnty. Arpt. Rev. Bonds
17,925,000 Ser. A, 8 3/4s, 11/15/23 Baa1 21,084,281
6,475,000 Prerefunded, Ser A, 8 3/4s, 11/15/23 Aaa 7,616,219
7,355,000 Ser. A, MBIA, 8 3/4s, 11/15/23 Aaa 8,678,900
2,645,000 Prerefunded, Ser. A, MBIA, 8 3/4s, 11/15/23 Aaa 3,111,181
11,650,000 Ser. A, MBIA, 8 1/2s, 11/15/23 Aaa 13,237,313
1,100,000 Prerefunded, Ser. A, MBIA, 8 1/2s, 11/15/23 Aaa 1,247,125
8,000,000 Ser. D, MBIA, 7 3/4s, 11/15/13 Aaa 10,420,000
3,915,000 Ser. A, 7 1/4s, 11/15/25 AAA 4,516,931
6,350,000 Douglas Cnty., School Distr. G.O. Bonds (North
Regl. 1, Douglas & Elebert Cntys.), MBIA, 7s,
12/15/12 Aaa 7,985,125
10,740,000 Jefferson Cnty., School Dist. G.O. Bonds, MBIA,
6 1/2s, 12/15/11 Aaa 12,807,450
--------------
133,741,400
Connecticut (1.3%)
- ------------------------------------------------------------------------------------------------------------
7,195,000 CT State Dev. Auth. 1st Mtge. Rev. Bonds
(East Hill Woods), 8 3/4s, 7/1/19 (In default) + D/P 5,036,500
6,430,000 CT State Dev. Auth. Hlth. Care Rev. Bonds
(Alzheimers Resource Ctr.), Ser. A, 10s, 8/15/21 AAA/P 7,828,525
5,500,000 CT State Hlth. & Edl. Fac. Auth. IFB (Yale U.),
7.944s, 6/10/30 Aaa 6,166,875
6,500,000 CT. State Hlth. & Edl. Fac. Auth. Rev. Bonds
(Edgehill), Ser. A, 6 7/8s, 7/1/27 BB-/P 6,946,875
--------------
25,978,775
District of Columbia (2.8%)
- ------------------------------------------------------------------------------------------------------------
DC G.O. Bonds, Ser. A
17,000,000 6 3/8s, 6/1/26 Ba2 18,445,000
10,000,000 6s, 6/1/26 Ba2 10,512,500
DC Rev. Bonds
4,400,000 (National Public Radio), 7.7s, 1/1/23 BB/P 4,873,000
2,500,000 (National Public Radio), 7 5/8s, 1/1/18 BB/P 2,771,875
18,630,000 COP, 7.3s, 1/1/13 B- 21,191,625
--------------
57,794,000
Florida (2.8%)
- ------------------------------------------------------------------------------------------------------------
9,260,000 Brevard Cnty., Hlth. Auth. Rev. Bonds
(Courtenay Springs Village), 7 3/4s, 11/15/24 BB-/P 10,186,000
24,000,000 Hernando Cnty., Indl. Dev. Rev. Bonds
(FL Crushed Stone Co.), 8 1/2s, 12/1/14 B+/P 28,230,000
5,970,000 Hillsborough Cnty., Aviation Auth. Special
Purpose Fac. Rev. Bonds (U.S. Airways, Inc.),
8.6s, 1/15/22 B2 6,828,188
1,070,000 Jacksonville, Hlth. Fac. Auth. Rev. Bonds (Mental
Hlth. Ctr.), 9 1/8s, 10/15/19 A 1,102,143
Palm Beach Cnty., Student Hsg. Rev. Bonds
(Palm Beach Cmnty. College)
4,000,000 Ser. A, 8s, 3/1/23 B-/P 4,000,000
135,000 Ser. B, zero%, 3/1/23 B-/P 124,369
Sanford, Arpt. Auth. Indl. Dev. Rev. Bonds
(FL Term., Inc.), Ser. A
3,125,000 7 3/4s, 5/1/21 BB-/P 3,457,031
2,880,000 7 1/2s, 5/1/15 BB-/P 3,160,800
--------------
57,088,531
Georgia (4.5%)
- ------------------------------------------------------------------------------------------------------------
5,100,000 Cobb Cnty., Dev. Auth. Indl. Dev. Rev. Bonds
(Boise Cascade Corp.), 7s, 9/1/14 Baa3 5,775,750
8,000,000 De Kalb Cnty., Hsg. Auth. Muni Rev. Bonds
(Briarcliff Park Apts.), Ser. B, 10s, 4/1/17 B+/P 9,140,000
5,900,000 De Kalb Cnty., Muni. Hsg. Auth. Rev. Bonds
(Briarcliff Park Apts.), Ser. A, 7 1/2s, 4/1/17 BBB+/P 6,460,500
9,500,000 Forsyth Cnty., Dev. Auth. Indl. Rev. Bonds
(Hoover Group Inc.), 8 1/2s, 12/1/05 VMIG1 11,162,500
9,200,000 GA Muni. Elec. Pwr. Auth. Rev. Bonds, Ser. B, FSA,
6 3/8s, 1/1/16 Aaa 10,833,000
GA State G.O. Bonds
6,620,000 Ser. E, 6 3/4s, 12/1/12 Aaa 8,059,850
7,070,000 Ser. C, 6 1/2s, 4/1/10 Aaa 8,307,250
6,000,000 Marietta, Hsg. Auth. Multi-Fam. VRDN (Wood
Pointe Apts.), 3.6s, 10/1/07 A+ 6,000,000
Rockdale Cnty., Dev. Auth. Solid Waste Disp.
Rev. Bonds (Visy Paper, Inc.)
5,875,000 7 1/2s, 1/1/26 BB/P 6,455,156
14,440,000 7.4s, 1/1/16 BB/P 15,884,000
3,160,000 Savannah, Econ. Dev. Auth. Poll. Control
Rev. Bonds (Stone Container Corp.),
8 1/8s, 7/1/15 B/P 3,657,700
--------------
91,735,706
Hawaii (1.1%)
- ------------------------------------------------------------------------------------------------------------
HI State G.O. Bonds
8,330,000 Ser. CM, FGIC, 6 1/2s, 12/1/16 Aaa 10,120,950
5,330,000 Ser. C, FGIC, 6 1/2s, 12/1/15 Aaa 6,455,963
5,000,000 Ser. C, FGIC, 6 1/2s, 12/1/14 Aaa 6,037,500
--------------
22,614,413
Illinois (2.7%)
- ------------------------------------------------------------------------------------------------------------
5,000,000 Chicago, Gas Supply Rev. Bonds (Peoples Gas
& Lt.), Ser. A, 6 7/8s, 3/1/15 Aa3 5,537,500
2,125,000 Chicago, O'Hare Intl. Arpt. Special Fac.
Rev. Bonds (United Air Lines, Inc.), Ser. 84A,
8.85s, 5/1/18 Baa2 2,425,156
IL Dev. Fin. Auth. Retirement Hsg. Rev. Bonds
5,000,000 (Regency Park-Lincolnwood), Ser. A, 10 1/4s,
4/15/19 (In default) + Baa3 3,600,000
1,180,000 (Mercy Hsg. Corp.), 7s, 8/1/24 Baa1 1,314,225
IL Dev. Fin. Auth. Rev. Bonds (Cmnty. Rehab.
Providers Fac.)
2,585,000 8 1/4s, 8/1/12 BB/P 2,620,544
2,580,000 Ser. A, 7 7/8s, 7/1/20 BB/P 2,970,225
4,840,000 Prerefunded, Ser. A, 7 7/8s, 7/1/20 BB/P 5,995,550
3,065,000 Ser. A, 7 1/2s, 3/1/14 BB/P 3,616,700
5,990,000 (Victor C. Neumann Associates), 7 1/4s, 7/1/18 B/P 6,049,900
925,000 Ser. A, 7 1/4s, 3/1/04 BB/P 1,020,969
IL Hlth. Fac. Auth. Rev. Bonds
3,000,000 (Glen Oaks Med. Ctr.), Ser. B, 7s, 11/15/19 Baa1 3,465,000
5,000,000 (Glen Oaks Med. Ctr.), Ser. B, 6.95s, 11/15/13 Baa1 6,137,500
3,000,000 (Hinsdale Hosp.), Ser. A, 7s, 11/15/19 Baa1 3,465,000
5,170,000 (Hinsdale Hosp.), Ser. A, 6.95s, 11/15/13 Baa1 6,346,175
--------------
54,564,444
Indiana (1.9%)
- ------------------------------------------------------------------------------------------------------------
East Chicago, Poll. Control Rev. Bonds
(Inland Steel Co.)
12,000,000 7 1/8s, 6/1/07 Ba3 13,815,000
8,000,000 6.8s, 6/1/13 Ba3 8,720,000
6,948,163 Hammond, Indl. Port Auth. COP, 9.65s, 6/1/14 BB 7,599,554
1,400,000 Indianapolis Multi-Fam. VRDN (Canal Square),
3.55s, 12/1/15 VMIG1 1,400,000
4,500,000 Plainfield, Indl. Econ. Dev. Rev. Bonds
(Earl M. Jorgensen Co.), 8 1/2s, 9/1/04 B-/P 5,011,875
1,684,954 Westfield, Econ. Dev. Rev. Bonds (Westfield
Village Hlth. Care Ctr.), FHA Insd., 12s, 5/15/14 A-/P 1,855,556
--------------
38,401,985
Iowa (1.6%)
- ------------------------------------------------------------------------------------------------------------
IA Fin. Auth. Hlth. Care Fac. Rev. Bonds
(Care Initiatives)
22,000,000 9 1/4s, 7/1/25 BB/P 29,865,000
1,500,000 9.15s, 7/1/09 BB/P 1,985,625
215,000 Marion Cnty., 1st Mtge. Rev. Bonds
(AHF/Kentucky Iowa, Inc.), 10 1/4s, 1/1/20 B-/P 226,288
--------------
32,076,913
Kentucky (1.1%)
- ------------------------------------------------------------------------------------------------------------
5,000,000 Jefferson Cnty., Hosp. IFB (Alliant Hlth. Syst.),
MBIA, 9.019s, 10/1/14 Aaa 6,018,750
10,000,000 Kenton Cnty., Special Fac. Arpt. Rev. Bonds
(Delta Airlines, Inc.), Ser. A, 7 1/2s, 2/1/12 Baa3 11,200,000
1,255,000 Lexington-Fayette Cnty., Urban Govt. 1st Mtge.
Rev. Bonds (AHF/Kentucky Iowa, Inc.),
10 1/4s, 1/1/20 B-/P 1,320,888
3,300,000 Muhlenberg Cnty., Rev. Bonds (Muhlenberg
Cmnty. Hosp.), 9 1/2s, 8/1/10 AAA/P 3,456,354
--------------
21,995,992
Louisiana (4.4%)
- ------------------------------------------------------------------------------------------------------------
2,900,000 Beauregard, Parish Rev. Bonds (Boise Cascade
Corp.), 7 3/4s, 6/1/21 Baa3 3,233,500
8,050,000 Hodge, Combined Util. Rev. Bonds (Stone
Container Corp.), 9s, 3/1/10 B/P 8,774,500
2,000,000 LA Pub. Fac. Auth. 1st Mtge. Rev. Bonds
(St. James Place), 10s, 11/1/21 B-/P 2,222,500
20,500,000 Lake Charles, Harbor & Term. Dist. Port Fac.
Rev. Bonds (Trunkline Co.), 7 3/4s, 8/15/22 A3 23,805,625
7,000,000 Port of New Orleans, Indl. Dev. Rev. Bonds
(Continental Grain Co.), 7 1/2s, 7/1/13 BB 7,805,000
6,500,000 St. Charles Parish, Poll. Control Rev. Bonds
(LA Pwr. & Lt. Co.), 8s, 12/1/14 Baa3 7,052,500
9,000,000 St. James Parish, Solid Waste Disp. Rev. Bonds
(Kaiser Aluminum), 7 3/4s, 8/1/22 B-/P 10,080,000
W. Feliciana Parish Poll. Control Rev. Bonds
(Gulf States Util. Co.)
6,000,000 8s, 12/1/24 Ba1 6,495,000
19,000,000 Ser. I, 7.7s, 12/1/14 Ba1 21,731,250
--------------
91,199,875
Maryland (0.5%)
- ------------------------------------------------------------------------------------------------------------
2,500,000 Denton, 1st Mtge. Rev. Bonds (Shore Nursing
Rehab. Ctr.), 9s, 4/1/20 B/P 2,675,000
6,250,000 Prince Georges Cnty., Poll. Control Rev. Bonds
(Potomac Electric), 5 3/4s, 3/15/10 A1 6,875,000
--------------
9,550,000
Massachusetts (7.7%)
- ------------------------------------------------------------------------------------------------------------
3,935,000 Agawam, Res. Recvy. Rev. Bonds (Springfield
Res. Recvy.), 8 1/2s, 12/1/08 BBB- 4,060,684
MA State G.O. Bonds, Ser. A
19,330,000 6s, 11/1/11 A1 22,229,500
7,600,000 AMBAC, 5 3/4s, 8/1/11 Aaa 8,540,500
7,850,000 AMBAC, 5 3/4s, 8/1/09 Aaa 8,821,438
MA State Hlth. & Edl. Fac. Auth. IFB
5,000,000 (St. Elizabeth Hosp.), Ser. E, FSA, 9.62s, 8/15/21 Aaa 5,950,000
2,000,000 (Boston U.), MBIA, 9.234s, 10/1/31 Aaa 2,395,000
5,600,000 (Beth Israel-Deaconess Hosp.), AMBAC,
8.42s, 7/1/25 Aaa 6,307,000
3,325,000 MA State Hlth. & Edl. Fac. Auth. Rev. Bonds
(MA Eye & Ear Infirmary), Ser. A, 7 3/8s, 7/1/11 Ba1 3,553,594
MA State Indl. Fin. Agcy. Resource Recvy.
Rev. Bonds (Southeastern MA)
4,000,000 Ser. B, 9 1/4s, 7/1/15 BB-/P 4,580,000
30,225,000 Ser. A, 9s, 7/1/15 BB-/P 34,494,281
MA State Indl. Fin. Agcy. Rev. Bonds
1,800,000 (Atlanticare Med. Ctr.), Ser. A, 10 1/8s, 11/1/14 B/P 1,998,000
5,800,000 (Atlanticare Med. Ctr.), Ser. B, 10 1/8s, 11/1/14 B/P 6,438,000
2,330,000 (Mass Tpk.), 9s, 10/1/20 AAA/P 2,662,025
8,800,000 (Orchard Cove Inc.), 9s, 5/1/22 AAA/P 10,670,000
2,080,000 (Morton Hosp. & Med. Ctr.), Ser. A, 8 3/4s,
7/1/11 Aaa 2,246,400
3,000,000 (Emerson College), 8 1/4s, 1/1/17 BBB-/P 3,330,000
5,000,000 (1st Mtge.-Evanswood Bethzatha Corp.),
8s, 1/15/18 B+/P 5,337,500
3,500,000 (1st Mtge.-Evanswood Bethzatha Corp.),
Ser. A, 7 7/8s, 1/15/20 B+/P 3,801,875
10,000,000 MA State Special Oblig. Rev. Bonds, Ser. A,
5 3/8s, 6/1/11 Aa3 10,700,000
5,500,000 MA State Wtr. Resources Auth. Rev. Bonds,
Ser. D, MBIA, 5s, 8/1/24 Aaa 5,365,855
3,925,000 Worcester Mtge. Rev. Bonds (Briarwood
Issue), 9 1/4s, 12/1/22 BB-/P 4,366,563
--------------
157,848,215
Michigan (5.2%)
- ------------------------------------------------------------------------------------------------------------
2,530,000 Ann Arbor, Econ. Dev. Corp. Ltd. Oblig.
Rev. Bonds (Glacier Hills Inc.), 8 3/8s, 1/15/19 B+/P 2,621,232
20,400,000 Detroit, Loc. Dev. Fin. Auth. Tax Increment
Rev. Bonds, Ser. A, 8.72s, 5/1/21 BBB+/P 25,704,000
26,955,000 Midland Cnty., Econ. Dev. Corp. Rev. Bonds
(Poll. Control), Ser. B, 9 1/2s, 7/23/09 B/P 30,021,131
10,740,000 MI State Hosp. Fin. Auth. Adj. Rate Rev. Bonds
(Detroit-Macomb Hosp. Corp.), Ser. A,
7.4s, 6/1/13 BB/P 10,777,268
MI State Hosp. Fin. Auth. Rev. Bonds
4,130,000 (Garden City Hosp.), 8.3s, 9/1/02 Ba3 4,517,188
5,000,000 (Detroit-Macomb Hosp. Corp), Ser. A, 7s, 6/1/15 BB+/P 5,011,000
MI State Strategic Fund Ltd. Oblig. Rev. Bonds
5,800,000 (Mercy Svcs. for Aging), 9.4s, 5/15/20 AAA/P 6,539,500
15,000,000 (Detroit Edison Co. Coll- AA), MBIA,
6.4s, 9/1/25 Aaa 16,706,250
5,390,000 Waterford, Econ. Dev. Corp. Rev. Bonds
(Canterbury Hlth. Care, Inc.), 8 3/8s, 7/1/23 B-/P 5,390,000
--------------
107,287,569
Minnesota (1.1%)
- ------------------------------------------------------------------------------------------------------------
2,885,000 Chaska, Indl. Dev. Rev. Bonds (Lifecore
Biomedical, Inc.), 10 1/4s, 9/1/20 BB-/P 3,191,214
5,000,000 Intl. Falls, Env. Fac. Rev. Bonds (Boise Cascade
Corp.), 7.2s, 10/1/24 Baa3 5,718,750
Minneapolis, Cmnty. Dev. Agcy. Multi-Fam. Hsg.
Rev. Bonds (Lindsay Bros.)
1,760,000 Ser. A, 9 1/2s, 12/1/07 B/P 1,790,941
1,200,000 Ser. B, 1 1/2s, 12/1/07 B/P 741,000
8,000,000 Minneapolis Single Fam. Rev. Bonds (Phase V),
FNMA & GNMA Coll., 6 1/4s, 4/1/22 Aaa 8,610,000
3,200,000 Shakopee Multi-Fam. Adj. Rate Rev. Bonds
(Riva Ridge Apts.), 8 1/2s, 12/1/08 B-/P 3,200,000
--------------
23,251,905
Mississippi (1.2%)
- ------------------------------------------------------------------------------------------------------------
Clairborne Cnty., Poll. Control Rev. Bonds
(Middle South Energy, Inc.)
4,500,000 Ser. C, 9 7/8s, 12/1/14 Ba1 4,823,325
10,000,000 Ser. A, 9 1/2s, 12/1/13 Ba1 10,688,500
4,000,000 MS Hosp. Equip. & Fac. Auth. Rev. Bonds
(MS Methodist Hosp & Rehab.), Ser. 1,
9 3/8s, 5/1/12 BB/P 4,172,960
4,200,000 Perry Cnty., Poll. Control VRDN (Leaf River
Forest), 3.55s, 10/1/12 P-1 4,200,000
--------------
23,884,785
Montana (0.8%)
- ------------------------------------------------------------------------------------------------------------
3,000,000 Missoula Cnty., Rev. Bonds (Cmnty. Med.
Ctr. Inc.), Ser. B, 9s, 6/1/18 Aaa 3,110,790
13,850,000 MT State Hlth. Fac. Auth. Hosp. Fac. IFB,
AMBAC, 6.75s, 2/25/25 Aaa 14,092,375
--------------
17,203,165
Nebraska (0.8%)
- ------------------------------------------------------------------------------------------------------------
2,000,000 NE Investment Fin. Auth. Hosp. IFB, MBIA,
9.386s, 12/8/16 Aaa 2,407,500
12,100,000 NE Investment Fin. Auth. Single Fam. Mtge.
IFB, Ser. D, GNMA Coll., 7.949s, 3/24/26 Aaa 13,476,375
--------------
15,883,875
New Hampshire (1.5%)
- ------------------------------------------------------------------------------------------------------------
NH Higher Ed. & Hlth. Fac. Auth. Rev. Bonds
2,810,000 (Havenwood-Heritage Heights), 9 3/4s, 12/1/19 AAA/P 3,171,788
2,360,000 (Franklin Regl. Hosp.), 8 3/4s, 9/1/19 BBB/P 2,572,400
9,000,000 (1st Mtge.-Rivermead Peterborough),
8 1/2s, 7/1/24 B+/P 10,473,750
5,900,000 (Havenwood-Heritage Heights), 7.35s, 1/1/18 BB/P 6,313,000
7,700,000 NH State Bus. Fin. Auth. Poll. Control &
Solid Waste Rev. Bonds (Crown Paper Co.),
7 3/4s, 1/1/22 BB- 8,960,875
--------------
31,491,813
New Jersey (3.2%)
- ------------------------------------------------------------------------------------------------------------
5,000,000 Camden Cnty., Impt. Auth. Rev. Bonds, 8.4s, 4/1/24 B/P 5,600,000
NJ Econ. Dev. Auth. Rev. Bonds
2,700,000 (Stolt Terminals), 10 1/2s, 1/15/18 BB/P 2,804,463
7,000,000 (Winchester Gardens), Ser. A, 8 5/8s, 11/1/25 B/P 7,770,000
12,000,000 (Newark Arpt. Marriot Hotel), 7s, 10/1/14 B+/P 13,125,000
5,000,000 NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds
(St. Elizabeth Hosp.), Ser. B, 8 1/4s, 7/1/20 Aaa 5,587,500
4,000,000 NJ State Hsg. & Mtge. Fin. Agcy. IFB, Ser. I, 8.083s,
11/1/07 (acquired various dates from 2/11/93
to 8/24/95, cost $4,143,120) [DBL. DAGGER] A+ 4,435,000
10,000,000 NJ State Trans. Trust Fund Auth. Rev. Bonds
(Trans. Syst.), Ser. B, MBIA, 6 1/2s, 6/15/10 Aaa 12,050,000
2,500,000 NJ State Tpk. Auth. VRDN, FGIC, 3.2s, 1/1/18 VMIG1 2,500,000
5,905,000 NJ Wastewtr. Treatment Rev. Bonds (Wastewtr.
Treatment), Ser. C, 6 7/8s, 6/15/08 Aa2 7,174,575
4,000,000 Salem Cnty., Indl. Poll. Control Fin. Auth. IFB,
MBIA, 8.896s, 10/1/29 (acquired 10/28/94,
cost $3,785680) [DBL. DAGGER] Aaa 5,020,000
--------------
66,066,538
New Mexico (0.5%)
- ------------------------------------------------------------------------------------------------------------
9,000,000 Farmington, Poll. Control Rev. Bonds (Tucson
Elec. Pwr Co., San Juan), Ser. A, 6.95s, 10/1/20 B2 10,147,500
New York (10.8%)
- ------------------------------------------------------------------------------------------------------------
Metropolitan Trans. Auth. Fac. Rev. Bonds
13,640,000 Ser. A, MBIA, 6 1/4s, 4/1/12 Aaa 15,839,450
5,000,000 Ser. B-1, AMBAC, 5 1/2s, 7/1/08 Aaa 5,462,500
5,000,000 Ser. B-1, 5 1/2s, 7/1/09 Aaa 5,443,750
Metropolitan Trans. Auth. Svcs. Contract Rev. Bonds
4,000,000 (Commuter Fac.), Ser. O, 5 3/4s, 7/1/13 Baa1 4,410,000
8,250,000 (Trans. Fac.), Ser. O, 5 3/4s, 7/1/13 Baa1 9,095,625
NY City, G.O. Bonds
10,000,000 Ser. L, 8s, 8/1/03 Baa1 11,700,000
10,000,000 Ser. F, 5s, 8/1/23 Baa1 9,650,000
6,280,000 NY City, Rev. Bonds, 6s, 8/1/06 [DBL. DAGGER] BBB+/P 7,763,650
NY City, Indl. Dev. Agcy. Rev. Bonds
1,000,000 (Visy Paper, Inc.), 7.95s, 1/1/28 BB-/P 1,151,250
9,000,000 (Visy Paper, Inc.), 7.8s, 1/1/16 BB-/P 10,338,750
5,000,000 (Brooklyn Navy Yard Cogen Partners),
5.65s, 10/1/27 Baa3 5,125,000
NY City, Muni. Assistance Corp. Rev.
Bonds, Ser. G
10,000,000 6s, 7/1/08 Aa2 11,375,000
10,000,000 6s, 7/1/07 Aa2 11,312,500
1,000,000 NY City, Muni. Wtr. & Swr. Fin. Auth. VRDN,
Ser. G, FGIC, 3.25s, 6/15/24 VMIG1 1,000,000
NY State Dorm. Auth. Rev. Bonds
10,750,000 (PA 199), 7.45s, 6/15/10 [DBL. DAGGER] AAA/P 13,450,938
7,200,000 (State U. Edl. Fac.), Ser. A, FGIC, 5 7/8s, 5/15/11 Aaa 8,064,000
7,000,000 (Cons. City U.), Ser. A, AMBAC, 5 3/4s, 7/1/09 Aaa 7,761,250
8,000,000 NY State Energy Research & Dev. Auth.
Poll. Control IFB, FGIC, 10.048s, 7/1/29
(acquired 12/19/94, cost $8,353,120) [DBL. DAGGER] Aaa 10,690,000
NY State Env. Fac. Corp. Poll. Control Rev. Bonds
11,185,000 (PA 198), 7.95s, 7/1/13 [DBL. DAGGER] AAA 14,330,781
5,000,000 Ser. E, MBIA, 6s, 6/15/11 Aaa 5,718,750
5,500,000 NY State Med. Care Fac. Fin. Agcy. Rev. Bonds,
Ser. A, AMBAC, 6 1/2s, 8/15/29 Aaa 6,345,625
NY State Pwr. Auth. Rev. Bonds, Ser. Z
6,330,000 Refunded, 6 1/2s, 1/1/19 Aa2 6,978,825
3,420,000 6 1/2s, 1/1/19 Aa2 3,736,350
7,000,000 NY State Urban Dev. Corp. Rev. Bonds,
7 1/2s, 4/1/20 Aaa 7,857,500
12,590,000 NY State, G.O. Bonds, 6s, 3/1/07 A2 14,069,325
Port Auth. NY & NJ Rev. Bonds
7,000,000 (Delta Airlines, Inc.), Ser. 1R, 6.95s, 6/1/08 Baa3 7,726,250
5,000,000 (JFK Intl. Arpt. Term. 6), MBIA, 6 1/4s, 12/1/10 Aaa 5,806,250
--------------
222,203,319
North Carolina (1.9%)
- ------------------------------------------------------------------------------------------------------------
NC Eastern Muni. Pwr. Agcy. Syst. Rev. Bonds
4,000,000 Ser. B, MBIA, 7s, 1/1/08 Aaa 4,785,000
14,940,000 Ser. B, MBIA, 6 1/8s, 1/1/09 Aaa 17,012,925
5,000,000 Ser. C, MBIA, 5 1/2s, 1/1/07 Aaa 5,387,500
4,000,000 NC Med. Care Cmnty. Hosp. VRDN (Lincoln
Hlth. Syst.), Ser. A, 3.55s, 4/1/16 A+ 4,000,000
7,500,000 NC Muni. Pwr. Agcy. Rev. Bonds (No. 1,
Catawba Elec.), MBIA, 6s, 1/1/11 Aaa 8,475,000
--------------
39,660,425
Ohio (0.7%)
- ------------------------------------------------------------------------------------------------------------
7,200,000 Dayton, Special Fac. Rev. Bonds (Emery Air
Freight Corp.), 12 1/2s, 10/1/09 BBB-/P 7,815,744
6,150,000 OH State Solid Waste Rev. Bonds, (CSC
Ltd.), 8 1/2s, 8/1/22 B-/P 6,519,000
--------------
14,334,744
Oklahoma (0.7%)
- ------------------------------------------------------------------------------------------------------------
6,000,000 Ottawa Cnty., Fin. Auth. Indl. Rev. Bonds
(Doane Prods Co.), 7 1/4s, 6/1/17 B/P 6,375,000
6,475,000 Tulsa, Indl. Auth. Rev. Bonds (U. of Tulsa),
Ser. A, MBIA, 6s, 10/1/11 Aaa 7,454,344
--------------
13,829,344
Pennsylvania (6.0%)
- ------------------------------------------------------------------------------------------------------------
Allegheny Cnty., Hosp. Dev. Auth. Rev. Bonds
(UPMC Hlth. Syst.), Ser. B, MBIA
8,700,000 6s, 7/1/25 Aaa 10,059,375
9,775,000 6s, 7/1/27 Aaa 11,351,219
Allegheny Cnty., Indl. Dev. Auth. Arpt. Special
Fac. Rev. Bonds
1,290,000 (U.S. Airways, Inc. ), Ser. A, 8 7/8s, 3/1/21 B3 1,477,050
1,415,000 (Southwestern Arpt. Cargo Fac.), 8 3/4s,
2/15/09 BB+/P 1,495,683
5,035,000 (U.S. Airways, Inc.), Ser. B, 8 1/2s, 3/1/21 B3 5,676,963
4,600,000 Montgomery Cnty., Higher Ed. & Hlth. Auth.
VRDN, 3.55s, 7/1/25 VMIG1 4,600,000
5,300,000 Montgomery Cnty., Higher Ed. & Hlth. Auth.
Hosp. Rev. Bonds (United Hosp. Inc.),
Ser. A, 8 3/8s, 11/1/11 AAA 5,796,875
5,370,000 PA Convention Ctr. Auth. Rev. Bonds,
Ser. A, FSA, 6 3/4s, 9/1/19 Aaa 6,148,650
PA Econ. Dev. Fin. Auth. Qualified Res.
Properties Rev. Bonds
4,400,000 (RSI Properties/Buttler LLC), Ser. A, 8s,
9/1/27 B/P 4,532,000
3,500,000 (RSI Properties/Greensburg LLC), Ser. B,
8s, 9/1/27 B/P 3,605,000
4,800,000 PA Hsg. Fin. Agcy. IFB, 8.273s, 4/1/25 Aa2 5,190,000
PA State Econ. Dev. Fin. Auth. Resource
Recvy. Rev. Bonds
13,000,000 (Colver), Ser. E, 8.05s, 12/1/15 BB/P 15,096,250
6,250,000 (Northhampton), Ser. B, 6 3/4s, 1/1/07 BB+/P 6,890,625
7,250,000 (Northampton Generating), Ser. A, 6.6s, 1/1/19 BB+/P 7,757,500
PA State Higher Ed. Assistance Agcy.
Student Loan
2,500,000 IFB AMBAC, 9.674s, 9/3/26 Aaa 2,846,875
8,400,000 Ser. A&B, 7 1/4s, 7/1/18 B2- 8,568,000
5,300,000 Philadelphia, Muni. Auth. Rev. Bonds, Ser. C,
8 5/8s, 11/15/16 Aaa 6,234,125
Philadelphia, Wtr. & Wastewtr. Rev. Bonds
4,760,000 FGIC, 10s, 6/15/05 Aaa 6,426,000
5,000,000 MBIA, 5 5/8s, 6/15/08 Aaa 5,475,000
4,000,000 Pottsville Hosp. Auth Hosp. Rev. Bonds
(Pottsville Hosp. Warne Clinic), 7s, 7/1/14 BBB 4,435,000
--------------
123,662,190
Puerto Rico (1.5%)
- ------------------------------------------------------------------------------------------------------------
8,000,000 Cmnwlth. of PR, Rev. Bonds, MBIA, 5.782s, 7/1/08 Aaa 8,540,000
3,305,000 Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds,
Ser. Z, MBIA, 6 1/4s, 7/1/12 Aaa 3,866,850
PR Elec. Pwr. Auth. Rev. Bonds
2,000,000 Ser. BB, MBIA, 6 1/4s, 7/1/10 Aaa 2,347,500
7,000,000 Ser. AA, MBIA, 6s, 7/1/12 Aaa 7,945,000
7,000,000 PR Pub. Bldg. Auth. Pub. Ed. & Hlth. Fac. Rev.
Bonds, Ser. M, AMBAC, 5 3/4s, 7/1/10 Aaa 7,910,000
--------------
30,609,350
South Carolina (1.6%)
- ------------------------------------------------------------------------------------------------------------
13,945,000 Florence Cnty., Indl. Dev. Auth. Rev. Bonds
(Stone Container Corp.), 7 3/8s, 2/1/07 B+/P 15,269,775
10,355,000 SC Jobs Econ. Dev. Auth. Econ. Dev. Rev. Bonds
(St. Francis Hosp.-Franciscan Sisters), 7s, 7/1/15 Baa1 11,390,500
5,000,000 Spartanburg Cnty., Hosp. Fac. IFB, FSA, 8.877s,
4/13/22 Aaa 6,100,000
--------------
32,760,275
Tennessee (0.6%)
- ------------------------------------------------------------------------------------------------------------
4,000,000 Clarksville, Pub. Bldg. Auth. VRDN (TN Muni.
Bond Fund), 3.55s, 11/1/27 VMIG1 4,000,000
7,500,000 McMinn Cnty., Indl. Dev. Brd. Poll. Control
Rev. Bonds (Newsprint Co.), 7 5/8s, 3/1/16 A 8,232,750
--------------
12,232,750
Texas (3.3%)
- ------------------------------------------------------------------------------------------------------------
5,040,000 Alliance, Arpt. Auth. Special Fac. Rev. Bonds
(American Airlines, Inc.), 7 1/2s, 12/1/29 Baa2 5,518,800
5,000,000 Amarillo, Hlth. Fac. Corp. Rev. Bonds (Sears
Panhandle Retirement), Ser. B, 7 3/4s, 8/15/26 BB-/P 5,643,750
Bell Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds
(Heartway Corp.)
635,000 Ser. B, 10s, 3/1/19 (in default) + B/P 160,338
3,765,000 Ser. A, 9 1/2s, 3/1/19 (in default) + B/P 3,859,125
5,615,000 Cherokee Cnty., Hlth. Fac. Dev. Corp.
Rev. Bonds (Nancy Travis Memorial Hosp.),
10s, 5/15/13 B/P 7,004,713
Harris Cnty., Hsg. Fin. Corp. Dev. Bonds
720,000 Ser. 1983A, 10 3/8s, 7/15/14 Baa3 722,261
565,000 9 7/8s, 3/15/14 BB 565,825
10,000,000 (Flood Control Dist. No. 1), stepped-coupon
zero %, (8 1/2s, 10/1/99) 4/1/16 ++ BB-/P 10,850,000
15,000,000 Houston City, G.O. Bonds, Ser. C, 7s, 3/1/08 Aa3 18,112,500
5,135,000 San Antonio Indept. School Dist. G.O. Bonds,
PSFG, 6s, 8/15/09 Aaa 5,815,388
8,000,000 TX State Hsg. & Cmnty. Affairs Home Mtge. IFB,
Ser. C, GNMA Coll, FNMA Coll, 9.785s, 7/2/24 AAA 10,000,000
--------------
68,252,700
Utah (0.6%)
- ------------------------------------------------------------------------------------------------------------
5,000,000 Salt Lake City, Hosp. Rev. Bonds (IHC Hosps., Inc.),
MBIA, 6 1/4s, 2/15/23 Aaa 5,412,500
5,500,000 Tooele Cnty., Poll. Control Rev. Bonds (Laidlaw
Enviromental), Ser. A, 7.55s, 7/1/27 B-/P 6,015,625
--------------
11,428,125
Virginia (1.2%)
- ------------------------------------------------------------------------------------------------------------
3,900,000 Culpepper, Ind. Dev. Auth. Res. Care Fac. VRDN
(Baptist Homes), 3.55s, 11/1/17 A-1+ 3,900,000
4,500,000 Fredericksburg, Indl. Dev. Auth. Hosp. Fac. IFB,
FGIC, 9.377s, 8/15/23 Aaa 5,422,500
2,000,000 Henrico Cnty., Indl. Dev. Auth. IFB (Bon Secours
Hlth. Syst.), FSA, 7.924s, 8/23/27 Aaa 2,552,500
10,435,000 Hopewell, Indl. Dev. Rev. Bonds (Stone Container
Corp.), 8 1/4s, 6/1/16 B/P 11,830,681
--------------
23,705,681
Washington (1.7%)
- ------------------------------------------------------------------------------------------------------------
3,500,000 Spokane Cnty., Indl. Dev. Corp. Solid Waste
Disp. Rev Bonds (Kiaser Alummin. & Chemical
Corp.), 7.6s, 3/1/27 B-/P 4,011,875
8,200,000 WA State Hsg. Fin. Comm. Single Fam. Mtge.
IFB, GNMA Coll., 10.274s, 12/1/17 (acquired
4/12/95, cost $9,225,000) [DBL. DAGGER] AAA 8,784,250
WA State Pub. Pwr. Supply Syst. Rev. Bonds
4,000,000 (Nuclear No. 3), Ser. C, MBIA, 7 1/2s, 7/1/08 Aaa 4,960,000
5,000,000 (Nuclear No. 3), Ser. B, MBIA, 7 1/8s, 7/1/16 Aaa 6,243,750
9,690,000 (Nuclear No. 2), Ser. A, FSA, 6s, 7/1/09 Aaa 10,889,128
--------------
34,889,003
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,863,992,166) *** 2,038,441,666
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $2,049,205,426.
** The Moody's or Standard & Poor's ratings indicated are believed
to be the most recent ratings available at January 31, 1998, 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 would ascribe
to these securities at January 31, 1998. Securities rated by Putnam
are indicated by "/P" and are not publicly rated.
*** The aggregate identified cost on a tax basis is $1,863,992,170,
resulting in gross unrealized appreciation and depreciation of
$179,994,562 and $5,545,066, respectively, or net unrealized
appreciation of $174,449,496.
+ Non-income-producing security.
[DBL. DAGGER] Restricted, excluding 144A securities, as to public resale.
The total market value of restricted securities held at
January 31, 1998, was $102,572,744 or 5.0% of net assets.
++ The interest or dividend rate and date shown parenthetically
represent the new interest or dividend rate to be paid and the date
the fund will begin receiving interest or dividend income at this rate.
# A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at
January 31, 1998.
The rates shown on IFB and IF COP, which are securities paying
interest rates that vary inversely to changes in the market interest
rates, and VRDNs are the current interest rates at January 31, 1998.
The fund had the following industry group concentrations greater
than 10% at January 31, 1998 (as a percentage of net assets):
Hospitals/Health Care 20.3%
Transportation 14.8
Utilities 12.4
The fund had the following insurance concentration greater that
10% at January 31, 1998 (as a percentage of net assets):
MBIA 13.1%
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Futures Contracts Outstanding at January 31, 1998 (Unaudited)
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
U.S. Treasury Bond
Futures (short) $162,022,657 $157,757,813 Mar-98 $(4,264,844)
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
January 31, 1998 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,863,992,166) (Note 1) $2,038,441,666
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 26,782,751
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 5,552,712
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 15,645,966
- ---------------------------------------------------------------------------------------------------
Total assets 2,086,423,095
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable to subcustiodian (Note 2) 501,188
- ---------------------------------------------------------------------------------------------------
Payable for variation margin 538,281
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 4,441,976
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 23,635,194
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 5,604,387
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 932,913
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 251,814
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 30,014
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,635
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,123,550
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 156,717
- ---------------------------------------------------------------------------------------------------
Total liabilities 37,217,669
- ---------------------------------------------------------------------------------------------------
Net assets $2,049,205,426
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,985,998,294
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (1,498,711)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment (Note 1) (105,478,813)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 170,184,656
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $2,049,205,426
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($641,385,246 divided by 43,508,941 shares) $14.74
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $14.74)* $15.48
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,389,723,298 divided by 94,183,556 shares)** $14.76
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($18,096,882 divided by 1,227,573 shares) $14.74
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $14.74)* $15.24
- ---------------------------------------------------------------------------------------------------
* 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.
*** On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales
the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended January 31, 1998 (Unaudited)
<S> <C>
Tax exempt interest income: $64,674,737
- --------------------------------------------------------------------------------------------------
Expenses:
Compensation of Manager (Note 2) 5,496,195
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 931,773
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 19,358
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 9,911
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 627,495
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 5,971,888
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 45,036
- --------------------------------------------------------------------------------------------------
Reports to shareholders 47,896
- --------------------------------------------------------------------------------------------------
Registration fees 520
- --------------------------------------------------------------------------------------------------
Auditing 33,731
- --------------------------------------------------------------------------------------------------
Legal 8,730
- --------------------------------------------------------------------------------------------------
Postage 158,585
- --------------------------------------------------------------------------------------------------
Other 70,747
- --------------------------------------------------------------------------------------------------
Total expenses 13,421,865
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (174,159)
- --------------------------------------------------------------------------------------------------
Net expenses 13,247,706
- --------------------------------------------------------------------------------------------------
Net investment income 51,427,031
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (49,745,572)
- --------------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (6,839,071)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the period 84,223,169
- --------------------------------------------------------------------------------------------------
Net gain on investments 27,638,526
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $79,065,557
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
January 31 July 31
1998* 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 51,427,031 $ 110,373,832
- ----------------------------------------------------------------------------------------------------------------------
Net realized loss on investments (56,584,643) (2,973,761)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 84,223,169 75,459,771
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 79,065,557 182,859,842
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (17,580,160) (34,200,705)
- ----------------------------------------------------------------------------------------------------------------------
Class B (34,677,452) (75,427,802)
- ----------------------------------------------------------------------------------------------------------------------
Class M (472,851) (797,574)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (46,288,859) 24,687,444
- ----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (19,953,765) 97,121,205
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 2,069,159,191 1,972,037,986
- ----------------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $1,498,711 and $195,279,
respectively) $2,049,205,426 $2,069,159,191
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share January 31 Sept. 20, 1993+
operating performance (Unaudited) Year ended July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.56 $14.05 $14.14 $14.24 $15.34
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .40 .84 .90 .94 .83
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .19 .52 (.10) (.10) (.98)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .59 1.36 .80 .84 (.15)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.41) (.85) (.89) (.94) (.83)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- -- (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investment -- -- -- -- (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.41) (.85) (.89) (.94) (.95)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.74 $14.56 $14.05 $14.14 $14.24
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 4.12* 9.97 5.76 6.24 (.99)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $641,385 $625,602 $540,607 $474,984 $361,593
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) .43* .85 .84 .87 .71*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.76* 5.94 6.27 6.73 5.58*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.33* 56.22 67.70 60.41 44.41
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended July 31, 1996 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios
exclude these amounts (Note 2)
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share January 31
operating performance (Unaudited) Year ended July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.56 $14.05 $14.14 $14.24 $15.01 $14.64
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .35 .75 .80 .85 .86 .95
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .21 .51 (.09) (.10) (.65) .41
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .56 1.26 .71 .75 .21 1.36
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.36) (.75) (.80) (.85) (.85) (.95)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- -- (.03) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investment -- -- -- -- (.05) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.05) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.36) (.75) (.80) (.85) (.98) (.99)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.76 $14.56 $14.05 $14.14 $14.24 $15.01
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 3.92* 9.26 5.08 5.54 1.36 9.68
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,389,723 $1,427,365 $1,421,448 $1,436,481 $1,522,955 $1,501,535
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) .76* 1.50 1.50 1.51 1.45 1.38
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.43* 5.30 5.62 6.10 5.76 6.39
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.33* 56.22 67.70 60.41 44.41 52.29
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended July 31, 1996 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios
exclude these amounts (Note 2)
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share January 31 Dec. 29, 1994+
operating performance (Unaudited) Year ended July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $14.55 $14.04 $14.13 $13.43
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .38 .80 .84 .58
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .20 .51 (.08) .70
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .58 1.31 .76 1.28
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.39) (.80) (.85) (.58)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investment -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.39) (.80) (.85) (.58)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.74 $14.55 $14.04 $14.13
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 4.04* 9.64 5.44 9.69*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $18,097 $16,192 $9,984 $2,331
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .58* 1.15 1.13 .71*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.59* 5.63 5.87 3.98*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.33* 56.22 67.70 60.41
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended July 31, 1996 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios
exclude these amounts (Note 2)
</TABLE>
Notes to financial statements
January 31, 1998 (Unaudited)
Note 1
Significant accounting policies
Putnam Tax-Free High Yield Fund (the "fund") is a series of Putnam Tax-Free
Income Trust (the "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 by investing primarily in high-yielding, lower rated
tax exempt securities constituting a portfolio that Putnam Investment
Management, Inc. ("Putnam Management") the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc., believes does not involve undue risk
to income or principal.
The fund offers class A, class B and class M shares. Class A shares are sold
with a maximum front-end sales charge of 4.75%. Class B shares, which convert
to class A shares after approximately eight years, do not pay a front-end
sales charge, but pay a higher ongoing distribution fee than class A shares,
and are subject to a contingent deferred sales charge, if those shares are
redeemed within six years of purchase. Class M shares are sold with a maximum
front-end sales charge of 3.25% and pay an ongoing distribution fee that is
lower than class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class 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
preparation of financial statements is in conformity with generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation 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. The fair value of
restricted securities is determined by Putnam Management following procedures
approved by trustees, and such valuation and procedures are reviewed
periodically by the trustees.
B) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis.
C) 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. 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.
D) Line of credit The fund has entered into a committed line of credit with
certain banks. This line of credit agreement includes restrictions that the
fund maintain an asset coverage ratio of at least 300% and borrowings must not
exceed prospectus limitations. For the period ended January 31, 1998, the fund
had no borrowings against the line of credit.
E) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
At July 31, 1997, the fund had a capital loss carryover of approximately
$36,876,000 available to offset future capital gains, if any. The amount of
the carryover and the expiration dates are:
Loss Carryover Expiration
- -------------------------------------------
$24,399,000 July 31, 2003
12,477,000 July 31, 2004
F) Distributions to shareholders Income dividends are recorded daily by the
fund and are distributed monthly. Capital gain distributions 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. 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.
G) Expenses of the trust Expenses directly charged or attributable to any fund
will be paid from the assets of that fund. Generally, expenses of the trust
will be allocated among 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.
H) Amortization of bond premium and accretion of bond discount Any premium
resulting from the purchase of securities in excess of maturity value is
amortized on a yield-to-maturity basis. 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. Discounts on zero coupon bonds and original
issue discount bonds are accreted according to the yield to maturity basis.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.65% of the first $500 million of
average net assets; 0.55% of the next $500 million; 0.50% of the next $500
million, 0.45% of the next $5 billion, 0.425% of the next $5 billion, 0.405%
of the next $5 billion, 0.39% of the next $5 billion and 0.38% of any excess
thereafter.
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 Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a division
of PFTC.
As part of the subcustodian contract between the subcustodian bank and PFTC,
the subcustodian bank has a lien on the securities of the fund to the extent
permitted by the fund's investment restrictions to cover any advances made by
the subcustodian bank for the settlement of securities purchased by the fund.
At January 31, 1998, the payable to the subcustodian bank represents the
amount due for cash advance for the settlement of a security purchased.
For the six months ended January 31, 1998, fund expenses were reduced by
$174,159 under expense offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these credits.
The fund could have invested a portion of the assets utilized in connection
with the expense offset arrangements in an income producing asset if it had
not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,440 has
been allocated to the fund, and an additional fee for each Trustee's meeting
attended. Trustees who are not interested persons of Putnam Management and who
serve on committees of the Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "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 in the fund and are
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
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans 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 shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00%, and 1.00% of the average net
assets attributable to class A, class B, and class M shares, respectively. The
Trustees currently limit payment by the fund to an annual rate of 0.20%, 0.85%
and 0.50% of the average net assets attributable to class A, class B and class
M shares respectively.
For the six months ended January 31, 1998, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $48,239 and $2,476 from the sale of
class A and class M shares, respectively and received $1,070,058 in contingent
deferred sales charges from redemptions of class B shares. A deferred sales
charge of up to 1% is assessed on certain redemptions of class A shares that
were purchased without an initial sales charge as part of an investment of $1
million or more. For the six months ended January 31, 1998, Putnam Mutual
Funds Corp., acting as underwriter received $14,276 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended January 31, 1998, purchases and sales of
investment securities other than short-term investments aggregated
$561,498,756 and $624,550,098, respectively. There were no purchases and sales
of U.S. government obligations. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the identified
cost basis.
Note 4
Capital shares
At January 31, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
January 31, 1998
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 5,072,063 $73,585,602
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 615,417 8,947,347
- ------------------------------------------------------------
5,687,480 82,532,949
Shares
repurchased (5,157,408) (74,775,600)
- ------------------------------------------------------------
Net increase 530,072 $7,757,349
- ------------------------------------------------------------
Year ended
July 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 17,469,517 $247,871,332
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,233,532 17,525,638
- ------------------------------------------------------------
18,703,049 265,396,970
Shares
repurchased (14,205,309) (201,674,072)
- ------------------------------------------------------------
Net increase 4,497,740 $63,722,898
- ------------------------------------------------------------
Six months ended
January 31, 1998
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 6,093,397 $88,563,599
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,091,927 15,879,981
- ------------------------------------------------------------
7,185,324 104,443,580
Shares
repurchased (11,022,102) (160,138,869)
- ------------------------------------------------------------
Net decrease (3,836,778) $(55,695,289)
- ------------------------------------------------------------
Year ended
July 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 19,278,563 $273,428,476
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,486,227 35,319,294
- ------------------------------------------------------------
21,764,790 308,747,770
Shares
repurchased (24,895,016) (353,480,814)
- ------------------------------------------------------------
Net decrease (3,130,226) $(44,733,044)
- ------------------------------------------------------------
Six months ended
January 31, 1998
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 250,308 $3,622,291
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 20,948 304,457
- ------------------------------------------------------------
271,256 3,926,748
Shares
repurchased (156,626) (2,277,667)
- ------------------------------------------------------------
Net increase 114,630 $1,649,081
- ------------------------------------------------------------
Year ended
July 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 633,553 $8,978,501
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 35,274 500,706
- ------------------------------------------------------------
668,827 9,479,207
Shares
repurchased (266,903) (3,781,617)
- ------------------------------------------------------------
Net increase 401,924 $5,697,590
- ------------------------------------------------------------
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund *
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. DAGGER]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund +
High Yield Total Return Fund
High Yield Trust +
Income Fund
Money Market Fund **
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply. Contact Putnam
for details.
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to
maintain a price of $1.00 per share, although there is no
assurance that this price will be maintained in the future.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
William J. Curtin
Vice President
Gary N. Coburn
Vice President
Jerome J. Jacobs
Vice President
Blake E. Anderson
Vice President
Triet M. Nguyen
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Tax-Free High
Yield Fund. 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, and the most recent
copy of Putnam's Quarterly Performance Summary. For more information or to
request a prospectus, call toll free: 1-800-225-1581. You can also learn more
at Putnam Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution; are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency;
and involve risk, including the possible loss of the principal amount
invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
SA042-40526-500/036/679 3/98
