<PAGE>
PERFORMANCE HIGHLIGHTS
PUTNAM
HIGH YIELD
MUNICIPAL
TRUST
[GRAPHIC OMITTED:
art work]
SEMIANNUAL REPORT
September 30, 1995
[LOGO:
BOSTON - LONDON - TOKYO]
<PAGE>
PERFORMANCE HIGHLIGHTS
o "[Putnam High Yield Municipal Trust] is a decent income choice for those who
also want some protection from interest-rate volatility."
-- Morningstar Closed-End Funds, September 22, 1995
o Lipper Analytical Services ranked the fund among the top third of all
closed-end high-yield municipal bond funds tracked for the one-, three-, and
five-year periods ended September 30, 1995.*
--------------------------------------------------------------------
SEMIANNUAL RESULTS AT A GLANCE
--------------------------------------------------------------------
TOTAL RETURN (common shares) NAV MARKET PRICE
--------------------------------------------------------------------
6 months ended 9/30/95 5.42% 4.03%
(change in value during
period plus reinvested
distributions)
SHARE VALUE NAV MARKET PRICE
--------------------------------------------------------------------
3/31/95 $9.03 $9.50
9/30/95 9.15 9.50
DISTRIBUTIONS NO. INCOME TOTAL
--------------------------------------------------------------------
Common shares 6 $0.370 $0.370
SERIES INCOME TOTAL
Preferred shares A $999.70 $999.70
CURRENT RETURN NAV MARKET PRICE
--------------------------------------------------------------------
End of period
Current dividend rate(1) 7.54% 7.26%
Taxable equivalent(2) 12.48 12.02
--------------------------------------------------------------------
Performance data represent past results. For performance over longer periods,
see pages 8 and 9. Capital 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. (1)Income portion of most recent
distribution, annualized and divided by NAV or market price at end of period.
(2)Assumes maximum 39.6% federal tax rate. Results for investors subject to
lower tax rates would not be as advantageous.
*Lipper Analytical Services is an independent research firm whose rankings
vary over time and do not include the effects of sales charges. For the
periods ended 9/30/95, the fund was ranked 4 out of 13 funds for one year, 4
out of 12 funds for three years and 3 of 11 funds for five years. Past
performance is not indicative of future results.
<PAGE>
FROM THE CHAIRMAN
[GRAPHIC OMITTED:
Photo of
George Putnam]
(C) Karsh, Ottawa
Dear Shareholder:
With plenty to be positive about, tax-exempt investors are finally putting their
summer fears behind them. A few months ago flat-tax proposals were floated in
the pre-election wind. The mere talk of such a tax, which would end the
beneficial treatment now accorded municipal bonds, was enough to send the market
into decline.
Interest rates are still moderate, inflation remains low, and the economy seems
to have slowed to a more comfortable pace, all factors that gladden fixed-income
investors' hearts. Municipal bond investors have been further blessed with
yields virtually at the same level as those of taxable bonds and a favorable
ratio of supply to demand.
As Putnam High Yield Municipal Trust reached the halfway point in its fiscal
year on September 30, 1995, the municipal bond market was showing new signs of
strength, poised for what could be another positive period of advance. In the
report that follows, Fund Manager Triet Nguyen reviews performance and
prospects.
Respectfully yours,
/s/ George Putnam
George Putnam
Chairman of the Trustees
November 15, 1995
<PAGE>
REPORT FROM THE FUND MANAGER
TRIET NGUYEN
Putnam High Yield Municipal Trust has benefited from robust fixed-income
market conditions during the first half of its fiscal year. The municipal
bond market, in particular, has been buoyed by continued demand for
tax-exempt investments and a lack of new supply, especially in short maturity
bonds. Of course, the recent rise in bond prices also means that prevailing
interest rates have declined. Consequently, finding bonds that offer both
high yields and acceptable levels of credit risk has become even more
challenging in recent months.
We remain committed to a prudent management approach that refuses to
sacrifice total return in the pursuit of income. As a result, while your
fund's total return remains well ahead of most others in its Lipper category
(details on page 2), we recently recommended a dividend adjustment -- the
fund's first in more than two years. Effective with the September dividend,
the monthly payment has been reduced by $0.005, to $0.0575 per share.
o CURRENT PAYMENT LEVEL ENHANCES FLEXIBILITY
Shareholders should not anticipate further income adjustments over the near
term. The current payout realignment provides enough margin to allow for the
realization of a number of possible, even somewhat unlikely, negative events.
For example, if we began to feel that the economy was going into a stall and
some of the fund's holdings could come under pressure, we would upgrade the
portfolio's credit quality by purchasing higher-grade bonds, which tend to
pay lower yields. In such a scenario, we are confident in the fund's ability
to meet the current dividend.
While government and corporate bond yield curves have flattened, meaning the
difference between short-term and long-term rates has narrowed, the municipal
yield curve has remained steep. Since successful use of leverage requires a
steep yield-curve environment, we can continue to augment the dividend by
using this tech-
<PAGE>
nique. We don't expect the municipal bond yield curve to flatten
significantly in the near future; this is more likely to occur when
short-term rates are rising than when they are falling and our current
outlook is biased in favor of further Federal Reserve easing over the next
year. However, even if the yield curve was to flatten and leverage could no
longer contribute to the dividend, the adjusted dividend should still remain
sustainable over the near term.
In fact, barring any unforeseen circumstances, we do not currently anticipate
any changes in fiscal 1996. There can, of course, be no guarantees.
o SECTOR STRATEGIES BOOST RETURNS
We have maintained our interest in the environmental sector. For example,
when attractive issues have become available, we have continued adding to the
fund's paper recycling position. During this semiannual period, we have
bought securities issued by recycling projects in Pennsylvania and Washington
State.
Our tenacious belief in Denver airport bonds has indeed paid off. With the
baggage transport snafus solved and the airport open, bonds issued to finance
it are now recognized as legitimate credits, well worth investors' attention.
When we purchased the Baa/BB rated bonds, they were trading well below other
bonds with similar ratings. Now, with these bonds' rise in status, Standard &
Poor's has upgraded the securities to
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS* showing:
Hospitals/health care 23.2%
Transportation 19.3%
Resource recovery/cogeneration 11.0%
Forest products 10.7%
Utilities 6.7%
Footnote reads:
*Based on net assets on 9/30/95. Holdings will vary over time.]
<PAGE>
investment grade, in line with the Moody's rating. This surge in confidence
has caused the bonds to trade up nicely, adding significantly to the fund's
performance.
During the euphoria when the airport opened and the market received credit
confirmation, insurance for these bonds became very cheap. We took advantage
of this opportunity and purchased insurance for the bonds, bringing their
quality up to AAA. Not only was the insurance inexpensive, but its
acquisition is in line with our general portfolio strategy. If the economy
slows and higher-rated bonds outperform lower-rated bonds, these securities
will provide significant gains because in effect we will have bought very
inexpensive AAA bonds.
o FLAT-TAX PROPOSAL NO LONGER DAUNTING
The ongoing debate about tax reform, especially the flat-tax proposal, has
raised questions about the tax-exempt market's future. While passage of any
tax-reform package in its current form is far from certain, the perceived
effect on municipal bond investment continues to dampen tax-exempt bond
prices. However, much like the fallout from the Orange County, California,
scare in late 1994, the tax reform debate promises to provide ample buying
opportunities until the proverbial dust settles.
The uncertainty is having much the same effect as it did before enactment of
the 1986 Tax Reform Act, with the yields on high-grade municipals actually
exceeding 90% of comparable Treasury yields. This presents an opportunity in
the tax-exempt market to earn very attractive yields, no matter what your tax
bracket. Meanwhile, our analysts are monitoring the developing situation and
identifying bonds with compelling investment potential.
In any event, we don't expect any tax changes to be taken until after the
1996 elections. Even then, we currently believe that if some tax amendment
were to be passed, it would not be a radical tax overhaul. Municipal bond
investments could face some increased competition from new tax abatements
such as expanded IRAs, but in our opinion, the impact would be fairly
limited.
Interestingly, since a flat tax is designed to tax consumption and encourage
investment, lower consumption could cause the economy
<PAGE>
-----------------------------------------------------------------------
TOP 10 HOLDINGS (9/30/95)
-----------------------------------------------------------------------
PA ECONOMIC DEVELOPMENT. FINANCIAL AUTHORITY PENNSYLVANIA
Recycling revenue bonds
-----------------------------------------------------------------------
PORT OF CORPUS CHRISTI TEXAS
Industrial dev. corp. revenue bonds
(Ser. A)
-----------------------------------------------------------------------
DENVER CITY & COUNTY COLORADO
Airport revenue bonds (Ser. A, 8 3/4)
-----------------------------------------------------------------------
IA FINANCIAL AUTHORITY IOWA
Health care facility revenue bonds
-----------------------------------------------------------------------
BUTLER INDUSTRIAL DEVELOPMENT BOARD ALABAMA
Revenue bonds
-----------------------------------------------------------------------
MA PORT AUTHORITY MASSACHUSETTS
Special project revenue bonds
-----------------------------------------------------------------------
LONE STAR, TX AIRPORT IMPROVEMENT AUTHORITY TEXAS
Revenue bonds
-----------------------------------------------------------------------
PORT OF CORPUS CHRISTI TEXAS
Industrial dev. corp. revenue bonds
(Ser. B)
-----------------------------------------------------------------------
HAMMOND, INDUSTRIAL PORT AUTHORITY INDIANA
COP
-----------------------------------------------------------------------
DENVER CITY & COUNTY COLORADO
Airport revenue bonds (Ser. A, MBIA, 8 1/2)
-----------------------------------------------------------------------
These holdings represent 29.5% of the fund's assets. Portfolio holdings will
vary in the future.
to slow. Therefore, if instituted, the flat tax could indirectly help boost
fixed-income investments, as interest rates decline during an economic
slowdown. While taxable bonds may realize greater benefits from such a
scenario, tax-exempt bonds would also enjoy a boost from declining interest
rates.
Flat tax or no flat tax, tax-exempt bonds should continue to be in demand.
Whatever the form or guise, taxes were, are, and always will be with us and
taxpayers will always be looking for ways to reduce their tax burden. We will
continue to mobilize our proven resources to provide you with the highest
prudently sustainable level of tax-exempt income.
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 9/30/95, there is no guarantee the fund will continue to hold
these securities in the future.
The lower credit ratings of high-yield bonds reflects a greater possibility
that adverse changes in the economy or their issuers may affect their ability
to pay principal and interest on the bonds.
<PAGE>
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's performance.
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions back into the fund. We show total return in two ways: on a
cumulative long-term basis and on average how the fund might have grown each
year over varying periods.
Performance should always be considered in light of a fund's investment
strategy. Putnam High Yield Municipal Trust is designed for investors seeking
high current income free from federal income tax through higher-yielding,
lower-rated municipal securities
TOTAL RETURN FOR PERIODS ENDED 9/30/95
LEHMAN BROS.
MUNICIPAL
NAV MARKET PRICE BOND INDEX CPI
- --------------------------------------------------------------------------------
6 months 5.42% 4.03% 5.35% 1.19%
- --------------------------------------------------------------------------------
1 year 10.94 8.52 11.18 2.54
- --------------------------------------------------------------------------------
5 years 53.59 59.64 52.88 15.45
Annual average 8.96 9.81 8.86 2.91
- --------------------------------------------------------------------------------
Life of fund 66.16 59.75 65.61 23.75
(since 5/25/89)
Annual average 8.32 7.66 8.27 3.41
- --------------------------------------------------------------------------------
Performance data represent past results. Investment returns, market price and
net asset value will fluctuate so an investor's shares, when sold, may be worth
more or less than their original cost. Fund performance data do not take into
account any adjustment for taxes payable on reinvested distributions.
<PAGE>
TERMS AND DEFINITIONS
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus any
liabilities, the liquidation preference and cumulative undeclared dividends paid
on the remarketed preferred shares, divided by the number of outstanding common
shares.
MARKET PRICE is the current trading price of one share of the fund. Market
prices are set by transactions between buyers and sellers on the New York Stock
Exchange.
COMPARATIVE BENCHMARKS
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 does not take into account brokerage commissions or other
costs, may include bonds different from those in the fund, and may pose
different risks than the fund.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it does not
represent an investment return.
<PAGE>
A PUTNAM PERSPECTIVE ON RISK AND REWARD
You've probably been told how important it is to understand the relationship
between an investment's potential rewards and its accompanying risks. Given
the cautionary nature of such instructions, it may take most investors a
while to realize that risk has a positive side.
EVERY RISK SIGNALS A POTENTIAL REWARD. Selecting only those investments that
offer the greatest degree of security generally leads to only modest rewards.
Furthermore, even insured or guaranteed investments may be subject to changes
in their rates of return or, in some cases, in their principal values.
Experienced investors know that no investment is truly risk free and are
therefore willing to take on some measure of risk in order to increase their
potential gains.
THE GREATER THE RISK, THE GREATER THE POTENTIAL REWARD. Accepting an
appropriate level of investment risk can give you a better chance of
outpacing inflation over time and seeking to maximize your investment's
return. How much risk? Your financial advisor's feedback and your time
horizon can make all the difference in determining how much risk is
compatible with your investment goals and your peace of mind.
o FITTING YOUR FUND SELECTION TO YOUR RISK TOLERANCE
How do you find the right balance between investment risks and their
potential rewards? It's helpful to understand the types of risks that can
apply to different types of investments, and to look at your own portfolio
with this perspective.
For short-term goals, your first priority may be managing market risk.
Longer-term investors may be more concerned with inflation risk. And all
income-oriented investors should consider interest-rate, credit, and
prepayment risks carefully.
o A RUNDOWN OF RISK TYPES
-----------------------------------------------------------------------------
MARKET RISK Most important for stock funds, but relevant to all funds, this
is a measure of how sensitive a fund's holdings are to changes in general
market conditions. Remember, though, that securities that lose value quickly
in market declines may also show the strongest gains in more favorable
environments.
INTEREST-RATE RISK Since bond prices fall as interest rates rise, this type
of risk is a particular concern for fixed-income investors. However,
interest-rate increases can also have a substantial negative effect on the
stock market.
INFLATION RISK If your investments cannot keep pace with inflation, your
money will begin to lose its purchasing power. Stock investments are
generally considered among the best ways of addressing inflation risk over
the long term.
CREDIT AND PREPAYMENT RISK Credit risk is the concern that the security's
issuer will not be able to meet its payment, while prepayment risk involves
the premature payoff of a loan, with a resulting loss of interest income.
Professional management and in-depth research are invaluable in managing both
these risks.
LIQUIDITY RISK Not all investments can be readily converted into cash at
their perceived market values. Liquidity risk can affect the price of
securities held in the fund's portfolio and, thus, the fund's share prices.
-----------------------------------------------------------------------------
This list covers only the most general types of risks; however, each
investment will also have its own specific risks.
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
September 30, 1995 (Unaudited)
KEY TO ABBREVIATIONS
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Federal Guaranty Insurance Corporation
FNMA Coll. -- Federal National Mortgage Association Collaterized
FSA -- Financial Security Assurance
GNMA Coll. -- Government National Mortgage Association Collaterized
IF -- Inverse Floater
IFB -- Inverse Floating Rate Bonds
MBIA -- Municipal Bond Investors Assurance Corporation
RAC -- Revenue Anticipation Certificates
VRDN -- Variable Rate Demand Notes
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (97.9%)*
PRINCIPAL AMOUNT RATINGS** VALUE
ALABAMA (2.7%)
- -----------------------------------------------------------------------------------------
<C> <S> <C> <C>
$ 5,750,000 Butler, Indl. Dev. Board Rev. Bonds
(Solid Waste Disp. James River Corp. Project),
8s, 9/1/28 BBB $ 6,404,060
ARIZONA (2.1%)
- -----------------------------------------------------------------------------------------
1,450,000 AZ Hlth. Fac. Auth. Hosp. Syst. Rev. Bonds
(St. Luke's Hosp. Syst.), Ser. A, 10 1/8s, 11/1/15 Aaa 1,486,250
3,000,000 Tucson, Arpt. Auth. Special Fac. Rev. Bonds
(Lockheed Aermod Ctr. Inc.), 8.7s, 9/1/19 A 3,453,750
------------
4,940,000
- -----------------------------------------------------------------------------------------
CALIFORNIA (5.3%)
CA Hlth. Fac. Auth. Rev. Bonds
800,000 (Summit Med. Ctr.), Ser. 85A, 9s, 5/1/15 Ba 813,000
5,685,000 (Valley Presbyterian Hosp. Project),
Ser. A, 9s, 5/1/12 BB 5,685,000
5,700,000 CA Statewide Cmntys., Dev. Auth. IF, COP
(Motion Picture & TV Fund), AMBAC,
5.136s, 1/1/22 AAA 4,232,250
2,000,000 San Francisco, City & Cnty. Swr. Rev. Bonds,
AMBAC, 5 1/2s, 10/1/15 AAA 1,897,500
------------
12,627,750
COLORADO (5.5%)
- -----------------------------------------------------------------------------------------
Denver, City & Cnty. Arpt. Rev. Bonds
5,000,000 Ser. A, 8 3/4s, 11/15/23 Baa 5,768,750
6,350,000 Ser. A, MBIA, 8 1/2s, 11/15/23 AAA 7,477,125
------------
13,245,875
FLORIDA (1.6%)
- -----------------------------------------------------------------------------------------
3,920,000 Levy Cnty., Indl. Dev. Rev. Bonds
(National Med. Assn. Inc. Project), 10s, 7/1/19 B/P 3,910,200
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
GEORGIA (3.1%)
- -----------------------------------------------------------------------------------------
$ 3,025,000 De Kalb Cnty., Muni. Hsg. Auth. Rev. Bonds
(Briarcliff Park Apts. Project), Ser. B, 10s, 4/1/17 BB/P $ 3,146,000
3,900,000 GA Med. Ctr. Hosp. Auth. IF, RAC,
(Columbus Regl. Hlth. Care Syst.),
Ser. B, MBIA, 8.496s, 8/1/10 AAA 4,353,375
------------
7,499,375
ILLINOIS (4.5%)
- -----------------------------------------------------------------------------------------
Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds
1,438,000 (United Air Lines, Inc.), Ser. B, 8.95s, 5/1/18 Baa 1,644,713
1,870,000 (United Air Lines, Inc.), Ser. 84A, 8.85s, 5/1/18 Baa 2,145,825
4,250,000 (American Airlines Inc. Project), 8.2s, 12/1/24 Baa 4,961,875
1,990,000 IL Edl. Fac. Auth. Rev. Bonds
(Steppenwolf Theatre Project), 9.65s, 7/1/19 BB/P 2,099,450
------------
10,851,863
INDIANA (2.5%)
- -----------------------------------------------------------------------------------------
5,715,139 Hammond, Indl. Port Auth. COP, 9.65s, 6/1/14 BB/P 6,050,903
IOWA (2.7%)
- -----------------------------------------------------------------------------------------
6,500,000 IA Fin. Auth. Hlth. Care Fac. Rev. Bonds
(Mercy Hlth. Initiatives Project), 9.95s, 7/1/19 B/P 6,500,000
KENTUCKY (1.4%)
- -----------------------------------------------------------------------------------------
1,500,000 Jefferson Cnty., 1st Mtge. Rev. Bonds
(AHF/KY-IOWA Inc. Project), 10 1/4s, 1/1/20 B/P 1,565,625
1,675,000 Louisville & Jefferson Cnty., Regl. Arpt. Syst. Rev.
Bonds, Ser. A, MBIA, 8 1/2s, 7/1/17 AAA 1,802,719
------------
3,368,344
LOUISIANA (5.7%)
- -----------------------------------------------------------------------------------------
LA Pub. Fac. Auth. 1st Mtge. Rev. Bonds
1,953,099 (Emily Morten Foundation), 10 1/4s, 5/1/19 B/P 2,077,609
2,500,000 (St. James Place Project), 10s, 11/1/21 B/P 2,768,750
2,000,000 Port of New Orleans, Indl. Dev. Rev. Bonds
(Continental Grain Co. Project), 14 1/2s, 1/1/02 BB 2,177,500
3,440,000 St. James Parish, Solid Waste Disp. Rev. Bonds
(Kaiser Aluminum Project), 7 3/4s, 8/1/22 B/P 3,603,400
3,000,000 W. Feliciana Parish, Poll. Control Rev. Bonds
(Gulf States Utils. Co.), 8s, 12/1/24 Ba 3,176,250
------------
13,803,509
MASSACHUSETTS (10.0%)
- -----------------------------------------------------------------------------------------
5,800,000 MA Port Auth. Special Project Rev. Bonds
(Harborside Hyatt), 10s, 3/1/26 B/P 6,351,000
3,000,000 MA State Hlth. & Edl. Fac. Auth. IFB
(St. Elizabeth Hosp.), Ser. E, FSA, 9.02s, 8/15/21 AAA 3,296,250
MA State Indl. Fin. Agcy. Res. Recvy. Rev. Bonds
(Southeastern MA Project),
1,500,000 Ser. B, 9 1/4s, 7/1/15 BB/P 1,680,000
3,500,000 Ser. A, 9s, 7/1/15 BB/P 3,906,875
MA State Indl. Fin. Agcy. Rev. Bonds
1,000,000 (Odd Fellows Home of MA), 9.6s, 1/1/15 BB/P 1,081,250
4,500,000 (Orchard Cove Inc.), 9s, 5/1/22 BB/P 5,101,875
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
MASSACHUSETTS (continued)
- -----------------------------------------------------------------------------------------
$ 2,475,000 MA State Indl. Fin. Agcy. Tunnel Rev. Bonds
(Mass Tpk.,) 9s, 10/1/20 BBB/P $ 2,707,031
------------
24,124,281
MICHIGAN (6.7%)
- -----------------------------------------------------------------------------------------
2,773,000 Detroit, Hosp. Fac. Fin. Auth. Rev. Bonds
(MI Hlth. Care Corp.),
10s, 12/1/20 (In default)+ Caa 1,053,740
2,665,000 Detroit, Loc. Dev. Fin. Auth. Tax Increment
Rev. Bonds, Ser. A, 9.52s, 5/1/21 BBB/P 3,307,931
3,000,000 Detroit, Swr. Disp. Rev. Bonds, FGIC, 5.7s, 7/1/23 AAA 2,910,000
3,000,000 Greater Detroit, Resource Recvy. Auth. Rev.
Bonds, Ser. B, 9 1/4s, 12/13/08 BBB 3,108,750
4,000,000 MI State Hosp. Fin. Auth. Rev. Bonds
(Genesys Hlth. Syst.), Ser. A, 7 1/2s, 10/1/27 Baa 4,050,000
975,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds
(MI Hlth. Care Corp. Project)
9.1s, 12/1/14 (In default)+ CCC/P 370,500
1,250,000 Wayne Charter Cnty., Special Arpt. Fac. Rev. Bonds
(Republic Air Lines, Inc. Project), 10 3/8s, 12/1/15 B/P 1,293,750
------------
16,094,671
MISSOURI (2.2%)
- -----------------------------------------------------------------------------------------
5,000,000 Kansas City, Indl. Dev. Auth. Hlth. Fac. Rev. Bonds
(Park Lane Med. Ctr. Project), 8 3/4s, 1/1/15 BBB/P 5,318,750
NEBRASKA (0.5%)
- -----------------------------------------------------------------------------------------
1,000,000 NE Investment Fin. Auth. Hosp. IFB, MBIA,
8.726s, 11/15/16 AAA 1,086,250
NEW HAMPSHIRE (2.5%)
- -----------------------------------------------------------------------------------------
1,935,000 NH Higher Edl. & Hlth. Fac. Auth. Rev. Bonds
(Havenwood/Heritage Heights), 9 3/4s, 12/1/19 B/P 2,101,894
3,500,000 NH State Indl. Dev. Auth. Poll. Control Rev. Bonds
(United Illuminating Co.), Ser. B, 10 3/4s, 10/1/12 Baa 3,946,250
------------
6,048,144
NEW JERSEY (0.4%)
- -----------------------------------------------------------------------------------------
1,000,000 Camden Cnty., Impt. Auth. Hsg. Dev. Rev. Bonds
(Chestbury Apts. Project), 8 3/4s, 12/15/16 BB/P 1,000,000
NEW YORK (8.4%)
- -----------------------------------------------------------------------------------------
1,000,000 NY City, Muni. Wtr. Fin. Auth. VRDN, Ser. G,
FGIC, 3 1/4s, 6/15/24 VMIG1 1,000,000
4,475,000 NY City, Muni. Wtr. Fin. Auth. Wtr. & Swr. Syst.
Rev. Bonds, Ser.B, MBIA, 5 1/2s, 6/15/19 AAA 4,228,875
2,350,000 NY State Energy Research & Dev. Auth. Poll.
Control IFB, FGIC, 8.804s, 7/1/29
(date acquired 12/19/1994; cost $ 2,453,729)++ AAA 2,934,563
4,000,000 NY State Energy Research & Dev. Auth. Poll.
Control Rev. Bonds (Rochester Gas & Electric,
Co.), Ser. C, FSA, 8 1/8s, 12/1/28 AAA 4,480,000
3,000,000 NY State Hsg. Fin. Agcy. Svcs. Contract Oblig.
Rev. Bonds, Ser. A, 7 3/8s, 9/15/21 AAA 3,506,250
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
NEW YORK (continued)
- -----------------------------------------------------------------------------------------
NY State Local Govt. Assistance Corp. Rev. Bonds
$ 1,500,000 Ser. A, 7s, 4/1/16 AAA $ 1,704,375
2,000,000 Ser. D, 6 3/4s, 4/1/21 AAA 2,267,500
------------
20,121,563
OHIO (2.7%)
- -----------------------------------------------------------------------------------------
4,550,000 Dayton, Special Fac. Rev. Bonds
(Emery Air Freight Corp.), Ser. A, 12 1/2s, 10/1/09 B/P 5,329,188
1,185,000 OH State Air Quality Dev. Auth. Rev. Bonds
(Dayton Pwr. & Lt. Co. Project), 9 1/2s, 12/1/15 AA 1,224,994
------------
6,554,182
PENNSYLVANIA (11.4%)
- -----------------------------------------------------------------------------------------
250,000 Allegheny Cnty., Indl. Dev. Auth. Arpt.
Special Fac. Rev. Bonds (U.S. Air, Inc. Project),
Ser. A, 8 7/8s, 3/1/21 B 265,313
Montgomery Cnty., Higher Edl. & Hlth. Auth. Hosp.
Rev. Bonds (United Hosp. Inc. Project),
1,940,000 8 1/2s, 11/1/17 Ba 2,007,900
2,000,000 Ser. A, 8 3/8s, 11/1/11 Ba 2,085,000
3,250,000 PA Econ. Dev. Fin. Auth. Rev. Bonds
(MacMillan Ltd. Partnership Project), 7.6s, 12/1/20 Baa 3,542,500
10,000,000 PA Econ. Dev. Fing. Auth. Recycling Rev. Bonds
(Ponderosa Fibres Project), Ser. A, 9 1/4s, 1/1/22 B/P 10,562,500
2,500,000 PA State Higher Edl. Assistance Agcy. Student
Loan IFB, AMBAC, 9.49s, 9/3/26 AAA 2,684,375
2,100,000 Philadelphia, Muni. Auth. Rev. Bonds
(Justice Lease), Ser. C, 8 5/8s, 11/15/16 AAA 2,580,375
3,400,000 Philadelphia, Regl. Port Auth. Lease IFB, MBIA,
7.93s, 9/1/13 AAA 3,595,500
------------
27,323,463
TEXAS (12.0%)
- -----------------------------------------------------------------------------------------
955,000 Bell Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds
(Adv. Living Tech. Inc. Project),
Ser. A, 10 1/2s, 6/15/18 B/P 830,850
750,000 Cherokee Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds
(Nancy Travis Memorial Hosp. Project), 10s, 5/15/13 B/P 805,313
6,000,000 Lone Star, TX Arpt. Impt. Auth. Inc. Rev. Bonds
(American Airlines Inc. Project), 9 1/8s, 12/1/15 Baa 6,180,000
3,013,607 Maverick Cnty., COP (Jail Facility), 9.1s, 6/15/10 CCC/P 1,808,164
Port Corpus Christi, Indl. Dev. Corp. Rev. Bonds
(Valero Refining & Marketing Co.),
5,500,000 Ser. B, 10 5/8s, 6/1/08 Baa 6,125,625
7,230,000 Ser. A, 10 1/4s, 6/1/17 Baa 7,998,188
4,800,000 TX State Hsg. & Cmnty. Affairs Home Mtg. IFB,
Ser. C, GNMA Coll., FNMA Coll., 9.313s, 7/2/24 AAA 5,124,000
------------
28,872,140
UTAH (1.5%)
- -----------------------------------------------------------------------------------------
3,300,000 Carbon Cnty. Util. Rev. Bonds (Solid Waste Disposal
Laidlaw Project), Ser. A, 7 1/2s, 2/1/10 Baa 3,510,375
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
WASHINGTON (2.1%)
- -----------------------------------------------------------------------------------------
$ 5,000,000 Port Walla Walla Pub. Corp. Solid Waste
Recycling Rev. Bonds (Ponderosa Fibres Project),
9 1/8s, 1/1/26 B/P $ 5,112,500
WISCONSIN (0.4%)
- -----------------------------------------------------------------------------------------
880,000 WI Hsg. & Econ. Dev. Auth. Home Ownership
IFB, 9.449s, 10/25/22 AA 942,700
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $231,099,414)*** $235,310,898
- -----------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $240,313,836. Net assets available to
common shareholders are $195,299,225 which correspond to a net asset value per common
share of $9.15.
** The Moody's or Standard & Poor's ratings indicated are believed to be the most recent
ratings available at September 30, 1995 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 September 30, 1995. Securities rated by Putnam are indicated by "/P" and
are not publicly rated.
*** The aggregate identified cost for federal income tax purposes is $231,108,166,
resulting in gross unrealized appreciation and depreciation of $11,325,512 and
$7,122,780, respectively, or net unrealized appreciation of $4,202,732.
+ Non-income-producing security.
++ Restricted as to public resale. At the date of acquisition these securities were
valued at cost. There were no outstanding securities of the same class as those held.
Total market value of restricted securities owned at September 30, 1995 was $2,934,563
or 1.2% of net assets.
The rates shown on IF, and IFB, which are securities paying variable interest rates
that vary inversely to changes in the market interest rates, and VRDNs are the
current interest rates at September 30, 1995, which are subject to change based on
the terms of the security.
The fund had the following industry group concentrations greater than 10% of net
assets at September 30, 1995:
Hospitals/Health Care 23.2%
Transportation 19.3
Resource Recovery/Cogeneration 11.0
Forest Products 10.7
The table below shows the percentage of the fund's investments on September 30, 1995
in securities assigned to the various rating categories by Moody's and Standard &
Poor's and in unrated securities determined by Putnam Management to be of comparable
quality:
UNRATED SECURITIES
RATED SECURITIES OF COMPARABLE QUALITY
AS A PERCENTAGE OF AS A PERCENTAGE OF
RATINGS (UNAUDITED) FUND'S NET ASSETS FUND'S NET ASSETS
--------------------------------------------------------------------------------------
"AAA"/"Aaa" 25.7% --
"AA"/"Aa" 0.9 --
"A"/"A" 1.4 --
"BBB"/"Baa" 24.7 4.7%
"BB"/"Ba" 6.6 12.2
"B"/"B" 0.1 19.8
"CCC"/"Caa" 0.5 0.9
"VMIG1" 0.4 --
--------------------------------------------------------------------------------------
60.3% 37.6%
--------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995 (Unaudited)
ASSETS
- ----------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value
(identified cost $231,099,414) (Note 1) $235,310,898
- ----------------------------------------------------------------------------------------
Cash 56,593
- ----------------------------------------------------------------------------------------
Receivable for securities sold 1,048,750
- ----------------------------------------------------------------------------------------
Interest and other receivables 5,828,799
- ----------------------------------------------------------------------------------------
TOTAL ASSETS 242,245,040
LIABILITIES
- ----------------------------------------------------------------------------------------
Distributions payable to shareholders 1,226,803
- ----------------------------------------------------------------------------------------
Payable for securities purchased 183,838
- ----------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 3) 417,444
- ----------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 3) 359
- ----------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 3) 34,331
- ----------------------------------------------------------------------------------------
Payable for administrative services (Note 3) 2,307
- ----------------------------------------------------------------------------------------
Other accrued expenses 66,122
- ----------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,931,204
- ----------------------------------------------------------------------------------------
NET ASSETS $240,313,836
REPRESENTED BY
- ----------------------------------------------------------------------------------------
Series A remarketed preferred shares, without par value; 8,000 shares
authorized (900 shares issued at $50,000 per share liquidation
preference) (Note 2) $ 45,000,000
- ----------------------------------------------------------------------------------------
Common shares, without par value; unlimited shares authorized;
21,335,784 shares outstanding (Note 1) 196,708,539
- ----------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (166,519)
- ----------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (5,439,668)
- ----------------------------------------------------------------------------------------
Net unrealized appreciation of investments 4,211,484
- ----------------------------------------------------------------------------------------
NET ASSETS 240,313,836
COMPUTATION OF NET ASSET VALUE
- ----------------------------------------------------------------------------------------
Remarketed preferred shares at liquidation preference $ 45,000,000
- ----------------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 14,611
- ----------------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares
at liquidation preference 45,014,611
- ----------------------------------------------------------------------------------------
Net assets available to common shares:
- ----------------------------------------------------------------------------------------
Net asset value per share $9.15 ($195,299,225
divided by 21,335,784 shares) $195,299,225
- ----------------------------------------------------------------------------------------
NET ASSETS $240,313,836
- ----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended September 30, 1995 (Unaudited)
<S> <C>
TAX EXEMPT INTEREST INCOME $ 9,631,862
- ----------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Compensation of Manager (Note 3) 839,805
- ----------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 3) 126,724
- ----------------------------------------------------------------------------------------
Compensation of Trustees (Note 3) 6,409
- ----------------------------------------------------------------------------------------
Reports to shareholders 22,922
- ----------------------------------------------------------------------------------------
Auditing 25,147
- ----------------------------------------------------------------------------------------
Legal 12,704
- ----------------------------------------------------------------------------------------
Postage 32,084
- ----------------------------------------------------------------------------------------
Administrative services (Note 3) 4,900
- ----------------------------------------------------------------------------------------
Exchange listing fees 8,344
- ----------------------------------------------------------------------------------------
Preferred share remarketing agent fees 75,510
- ----------------------------------------------------------------------------------------
Other 4,929
- ----------------------------------------------------------------------------------------
TOTAL EXPENSES 1,159,478
- ----------------------------------------------------------------------------------------
FEES PAID INDIRECTLY (Note 3) (31,503)
- ----------------------------------------------------------------------------------------
NET EXPENSES 1,127,975
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 8,503,887
- ----------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 4) 1,481,791
- ----------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 1,489,576
- ----------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 2,971,367
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $11,475,254
- ----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30 MARCH 31
1995* 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
- ----------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------
Net investment income $ 8,503,887 $ 17,118,758
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on investments and futures 1,481,791 (3,986,048)
- ----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments 1,489,576 (104,620)
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 11,475,254 13,028,090
- ----------------------------------------------------------------------------------------
Distributions to remarketed preferred shareholders
from net investment income (899,730) (1,538,892)
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
APPLICABLE TO COMMON SHAREHOLDERS (EXCLUDING CUMULATIVE
UNDECLARED DIVIDENDS ON REMARKETED PREFERRED SHARES OF
$14,611 AND $10,355, RESPECTIVELY) 10,575,524 11,489,198
- ----------------------------------------------------------------------------------------
Distributions to common shareholders from
net investment income (7,870,874) (15,805,873)
- ----------------------------------------------------------------------------------------
Issuance of common shares in connection with
reinvestment of distributions 1,275,705 2,501,794
- ----------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,980,355 (1,814,881)
NET ASSETS
- ----------------------------------------------------------------------------------------
Beginning of period 236,333,481 238,148,362
- ----------------------------------------------------------------------------------------
END OF PERIOD (including distributions in excess
and undistributed net investment income of
$166,519 and $100,198, respectively) $240,313,836 $236,333,481
NUMBER OF FUND SHARES
- ----------------------------------------------------------------------------------------
Common shares outstanding at beginning of period 21,198,632 20,924,115
- ----------------------------------------------------------------------------------------
Common shares issued in connection with
reinvestment of distributions 137,152 274,517
- ----------------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING AT END OF PERIOD 21,335,784 21,198,632
- ----------------------------------------------------------------------------------------
Remarketed preferred shares outstanding at
beginning and end of period 900 900
- ----------------------------------------------------------------------------------------
*Unaudited
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the year)
SIX MONTHS
ENDED
SEPTEMBER 30 YEAR ENDED MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
1995* 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD (common shares) $9.03 $9.23 $9.49 $8.99 $8.85 $9.28+
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .40 .81 .81 .86 .84 .78
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .13 (.19) (.27) .51 .22 (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .53 .62 .54 1.37 1.06 .38
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions from:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income:
- ------------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.04) (.07) (.05) (.06) (.06)+ --
- ------------------------------------------------------------------------------------------------------------------------------------
To common shareholders (.37) (.75) (.75) (.81) (.81) (.81)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.41) (.82) (.80) (.87) (.87) (.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- -- -- (.05) --
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD (common shares) $9.15 $9.03 $9.23 $9.49 $8.99 $8.85
- ------------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD (common shares) $9.50 $9.50 $9.25 $10.50 $9.88 $9.13
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT MARKET VALUE (%)
(common shares)(a) 4.03(d) 11.50 (4.99) 15.48 18.15 7.92
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (total fund) (in thousands) $240,314 $236,333 $238,148 $241,187 $228,735 $178,871
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (b)(c) .60(d) 1.17 1.17 1.17 1.13 .90
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) (b) 3.92(d) 8.27 7.97 8.58 8.77 8.55
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 20.14(d) 49.11 28.55 53.89 62.28 19.69
- ------------------------------------------------------------------------------------------------------------------------------------
* Unaudited
+ Preferred Shares were issued on July 22, 1991.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Ratios reflect net assets available to common shares only; net investment income ratio also reflects reduction for
dividend distributions to preferred shareholders.
(c) The ratio of expenses to average net assets for the six months ended September 30, 1995 includes amounts paid
through brokerage services and expenses offset arrangements. Prior period ratios exclude these amounts.
(d) Not annualized
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 (Unaudited)
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, closed-end management investment company. The fund's investment
objective is to seek high current income exempt from federal income tax. The
fund intends to achieve its objective by investing in high yielding tax-exempt
municipal securities constituting a portfolio that the fund's Manager, Putnam
Investment Management, Inc., ("Putnam Management"), a wholly owned subsidiary of
Putnam Investments, Inc., believes to be consistent with prudent investment
management.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A SECURITY VALUATION Tax-exempt bonds and notes are stated on the basis of
valuations provided by a pricing service, approved by the Trustees, which uses
information with respect to transactions in bonds, quotations from bond dealers,
market transactions in comparable securities and various relationships between
securities in determining value. The fair value of restricted securities is
determined by Putnam Management following procedures approved by the Trustees,
and such valuations 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 DETERMINATION OF NET ASSET VALUE Net asset value of the common shares is
determined by dividing the value of all assets of the fund (including accrued
interest), less all liabilities (including accrued expenses), undeclared
dividends on remarketed preferred shares and the liquidation value of any
outstanding remarketed preferred shares, by the total number of common shares
outstanding.
D FEDERAL TAXES It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is also
the intention of the fund to distribute an amount sufficient to avoid imposition
of any excise tax under Section 4982 of the Internal Revenue Code of 1986.
Therefore, no provision has been made for federal taxes on income, capital gains
or unrealized appreciation of securities held and excise tax on income and
capital gains.
At March 31, 1995, the fund had a capital loss carryover of approximately
$3,934,000 available to offset future capital gains, if any. The amount of the
carryover and expiration dates are:
LOSS CARRYOVER EXPIRATION
- -------------------------------------
$228,000 March 31, 1999
$64,000 March 31, 2002
$3,642,000 March 31, 2003
- -------------------------------------
<PAGE>
E DISTRIBUTIONS TO SHAREHOLDERS Distributions to common and preferred
shareholders are recorded by the fund on the ex-dividend date. Dividends on
remarketed preferred shares become payable when, as and if declared by the
Trustees. Each dividend period for the remarketed preferred shares is generally
a 7 day period. The applicable dividend rate for the remarketed preferred shares
on September 30, 1995 was 3.95%.
F AMORTIZATION OF BOND PREMIUM AND DISCOUNT Any premium resulting from the
purchase of securities in excess of maturity value is amortized on a
yield-to-maturity basis. Discount on zero-coupon bonds, original issued discount
bonds and step-up bonds is accreted according to the effective yield method.
NOTE 2
REMARKETED PREFERRED SHARES
The Series A remarketed preferred shares are redeemable at the option of the
fund on any dividend payment date at a redemption price of $50,000 per share,
plus an amount equal to any dividends accumulated on a daily basis but unpaid
through the redemption date (whether or not such dividends have been declared)
and, in certain circumstances, a call premium.
Under the Investment Company Act of 1940, the fund is required to maintain asset
coverage of at least 200% with respect to the remarketed preferred shares as of
the last business day of each month in which any such shares are outstanding.
Additionally, the fund is required to meet more stringent asset coverage
requirements under the terms of the remarketed preferred shares and the shares'
rating agencies. Should these requirements not be met, or should dividends
accrued on the remarketed preferred shares not be paid, the fund may be
restricted in its ability to declare dividends to common shareholders or may be
required to redeem certain of the remarketed preferred shares. At September 30,
1995 there were no such restrictions on the fund.
NOTE 3
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 annual rate of 0.70% of average weekly net assets.
If dividends payable on remarketed preferred shares during any dividend payment
plus any expenses attributable to remarketed preferred shares for that period
exceeds the funds net income attributable to the proceeds of the remarketed
preferred shares during the period, then the fee payable to Putnam for that
period will be reduced by the amount of the excess (but not more than 0.70% of
the liquidation preference of the remarketed preferred shares outstanding during
the period).
The fund reimburses Putnam Management for the compensation and related expenses
of certain officers of the fund and their staff who provide administrative
services to the fund. The aggregate amount of all such reimbursements is
determined annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $810 and an additional
fee for each Trustees' 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.
During the six months ended September 30, 1995, the fund adopted a Trustee Fee
Deferral Plan (the "Plan") which allows the Trustees to defer the receipt of all
or a portion of Trustees fees payable on or
<PAGE>
after July 1, 1995. The deferred fees remain in the fund and are invested in the
fund or in other Putnam funds until distribution in accordance with the Plan.
Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust
Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a division
of PFTC.
For the six months ended September 30, 1995, fund expenses were reduced by
$31,503 under expenses offset arrangements with PFTC and brokerage service
arrangements. 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 offset arrangements in an income-producing asset if it had not been entered
into such arrangements.
NOTE 4
PURCHASES AND SALES OF SECURITIES
During the six months ended September 30, 1995, purchases and sales of
investment securities other than short-term investments aggregated $46,627,018
and $46,986,635 respectively. Purchases and sales of short-term municipal
obligations aggregated $18,800,000 and $17,800,000, respectively. In determining
the net gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
<PAGE>
SELECTED QUARTERLY DATA
(Unaudited)
<TABLE>
<CAPTION>
Available to common shareholders
NET REALIZED
AND UNREALIZED NET INCREASE (DECREASE)
INVESTMENT NET INVESTMENT GAIN (LOSS) ON IN NET ASSETS RESULTING
INCOME INCOME INVESTMENTS FROM OPERATIONS
QUARTER PER PER PER PER
ENDED TOTAL SHARE* TOTAL SHARE* TOTAL SHARE* TOTAL SHARE*
- ---------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/95 $4,829,580 $.22 $3,827,897 $.18 $ 1,028,441 $.04 $ 4,856,338 $.22
6/30/95 4,802,282 .23 3,772,004 .18 1,942,926 .09 5,714,930 .27
3/31/95 4,869,041 .23 3,888,615 .20 8,498,665 .39 12,381,705 .59
12/31/94 4,835,180 .23 3,869,237 .18 (6,709,983) (.31) (2,840,717) (.13)
9/30/94 4,820,132 .22 3,908,019 .18 (1,792,719) (.08) 2,155,300 .10
6/30/94 4,800,984 .23 3,918,185 .18 (4,086,631) (.19) (168,446) (.01)
3/31/94 4,849,865 .22 4,024,772 .18 (11,569,251) (.54) (7,544,479) (.36)
12/31/93 5,209,897 .26 4,322,207 .21 (1,686,445) (.08) 2,635,762 .12
9/30/93 4,924,600 .23 4,056,742 .19 3,798,438 .18 7,855,180 .38
6/30/93 4,489,459 .22 3,640,145 .18 3,477,578 .17 7,117,723 .35
*Per common share
</TABLE>
<PAGE>
FUND INFORMATION
INVESTMENT MANAGER OFFICERS
Putnam Investment George Putnam
Management, Inc. President
One Post Office Square
Boston, MA 02109 Charles E. Porter
Executive Vice President
MARKETING SERVICES
Putnam Mutual Funds Corp. Patricia C. Flaherty
One Post Office Square Senior Vice President
Boston, MA 02109
Lawrence J. Lasser
CUSTODIAN Vice President
Putnam Fiduciary Trust Company
Gordon H. Silver
LEGAL COUNSEL Vice President
Ropes & Gray
Gary N. Coburn
TRUSTEES Vice President
George Putnam, Chairman
James Erickson
William F. Pounds, Vice Chairman Vice President
Jameson Adkins Baxter Triet Nguyen
Vice President and Fund Manager
Hans H. Estin
William N. Shiebler
John A. Hill Vice President
Elizabeth T. Kennan John R. Verani
Vice President
Lawrence J. Lasser
Paul M. O'Neil
Robert E. Patterson Vice President
Donald S. Perkins John D. Hughes
Vice President and Treasurer
George Putnam, III
Beverly Marcus
Eli Shapiro Clerk and Assistant Treasurer
A.J.C. Smith
W. Nicholas Thorndike
<PAGE>
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for up-to-date
information about the fund's NAV or to request Putnam's quarterly Closed-End
Fund Commentary.
<PAGE>
[LOGO: PUTNAM INVESTMENTS] ------------
Bulk Rate
THE PUTNAM FUNDS U.S. Postage
One Post Office Square PAID
Boston, Massachusetts 02109 Putnam
Investments
------------
20975-054 11/95
