Putnam
High Yield
Municipal
Trust
SEMIANNUAL REPORT
September 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Lipper Analytical Services, an independent research organization,
ranked Putnam High Yield Municipal Trust as number 3 out...of the 13
high yield municipal debt funds tracked for the fiscal year ended
September 30, 1996. The fund also earned the number 2 spot out of 12
in its category for the 5 years ended September 30, 1996 -- a show of
consistent past performance.*
* "Putnam High Yield Municipal Trust knows how to swim with the sharks
without getting eaten alive...By marrying respectable returns with
solid income, PHYM makes itself an attractive prospect for investors
willing to accept credit risk."
-- Morningstar Closed End Funds, June 14, 1996
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
13 Portfolio holdings
19 Financial statements
*Lipper Analytical Services ranks funds according to total return
performance. Their rankings vary over time and do not reflect the
effects of sales charges. Past performance is not indicative of future
results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
When the rest of the bond market took a rather steep drop last February,
just before the start of Putnam High Yield Municipal Trust's new fiscal
year, the decline in municipal bond prices was markedly milder. They had
taken their hit earlier in the wake of worry over how a flat tax might
affect the tax advantage of municipal bonds. The tax-exempt bond market
has since gained a modicum of stability, but prices remain mildly
erratic.
Overall, Fund Manager Blake Anderson believes positive forces at work in
the municipal bond market outweigh the negatives. Demand is strong,
especially relative to fairly modest supply. The economy, interest
rates, and inflation remain generally favorable. In sum, after a half
year full of challenges, the outlook for the remainder of fiscal 1997
appears positive.
Blake, who has recently taken over as your fund's manager, has been a
member of Putnam's municipal bond group since 1986. He has 10 years of
investment experience. In the report that follows, Blake discusses your
fund's performance so far in fiscal 1997 and what she sees in prospect
for the year's second half.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
November 20, 1996
Report from the Fund Manager
Blake E. Anderson
Diligent credit research continued to drive Putnam High Yield Municipal
Trust to success in the opening half of fiscal 1997. For the six months
ended September 30, 1996, your fund earned total returns of 3.21% at net
asset value and 3.78% at market price. The fund's dividend rate of 7.57%
at net asset value, or 6.90% at market price, at period's end is even
more attractive when you consider the tax advantages of investing in a
municipal bond fund. For investors subject to the maximum federal income
tax rate of 39.6%, a fully taxable investment would have had to pay a
dividend rate of 12.53% at net asset value, or 11.42% at market price,
to equal the fund's income. Results for investors subject to lower tax
rates would be proportionately lower and the fund's investment income
may be subject to state and local taxes and, for some investors, the
federal alternative minimum tax.
* EVIDENCE OF SLOWER ECONOMIC GROWTH STEADIES BOND MARKET
While the sometimes contradictory economic figures of the past few
months have kept many investors wary, we believe -- and the Federal
Reserve Board apparently concurs -- that anxiety over rising
inflationary pressures can be put to rest for the time being. Although
the rapid employment growth we witnessed at the beginning of the fund's
fiscal year led many to believe higher interest rates were ahead, lower
orders for durable goods and a decline in housing starts have since
signaled a slower-moving economy.
In the face of a steadier, more manageable rate of economic growth, the
Fed elected at its September meeting to hold short-term interest rates
steady. This confirmed our earlier expectation that interest rates and
bond prices would remain relatively flat overall. In contrast to the
rising bond prices that accompanied last year's falling interest rates,
interest income was the key component of bond market returns during this
semiannual period.
* ECONOMIC OUTLOOK DRIVES INDUSTRY SECTOR STRATEGY
Given our expectation of steady economic growth, we have continued to
invest in the industry sectors that brought success last year, seeking
holdings within these sectors that we believe would add a favorable
balance of income and liquidity to the fund.
Our in-depth credit research paid off handsomely within the
airlines/airports sector on the last day of the period when Continental
Airlines and Delta Airlines announced an agreement that benefited the
Los Angeles Regional Airports bonds held in your fund's portfolio. These
bonds are secured by Continental's credit, so when the troubled airline
was able to lease its Los Angeles gates to Delta, the arrangement added
the potential for price appreciation to a bond issue that already
carried an extremely attractive coupon.
Wide yield spreads in the health-care sector, as well as our ability to
locate issues within the sector that were not subject to the federal
alternative minimum tax, provided another notable industry emphasis.
Although the Clinton administration failed to introduce the sweeping
health-care reforms it described in the 1992 election, the attempt did
spur the industry to make its own positive changes. Health-care
providers in general have lowered their cost structures and become
better business managers. Specific benefits to your fund have come from
the prerefunding of a Pennsylvania hospital holding and the operational
turnaround of two high-yielding California positions. Within this
sector, we continue to seek holdings that offer upgrade potential either
through their issuer's own improvements or through acquisition and
prerefunding by larger, private institutions.
[GRAPHIC PIE CHART OMITTED: CREDIT QUALITY OVERVIEW*]
Aaa -- 26.1%
Aa -- 0.4%
A -- 1.4%
Baa -- 27.2%
Ba -- 22.5%
B -- 20.3%
Caa -- 1.1%
VMIGI/A-1 -- 1.0%
Footnote reads:
*Based on market value as of 9/30/96. Holdings will vary over time.
A third major industry sector, forestry and paper products, was not as
successful overall during the period. Large swings in pulp prices drove
down the market for paper companies across the board, pulling the good
down with the bad. We maintained confidence in the fund's portfolio
holdings, however, secure in our selection of issues from projects with
solid market shares and strong parent companies. After the market shakes
out, we expect prices in this sector to stabilize while the bonds
continue to provide attractive income. Project finance issues from pulp
and de-inking mills are a particularly interesting subsector that we are
exploring for opportunities.
* DEDICATED HIGH-YIELD ANALYSTS SHAPE PORTFOLIO SELECTION
While Putnam's economic outlook guides our sector strategies from the
top down, our team of dedicated high-yield municipal bond analysts helps
shape portfolio composition from the bottom up. Credit research is
crucial to the fund's success, especially given the period's flat
trading market. Prices on existing bonds remained in a narrow range
throughout the period, refundings have been largely exhausted, and new
bond issues have dwindled in number; meanwhile, strong corporate
earnings and rising stock prices helped companies generate sufficient
cash internally. Given such an investment climate, we believe we made
the most of our municipal market experience to seek out high-yielding
issues backed by recognizable names, thereby adding both income and
liquidity to the portfolio.
Our in-depth credit research adds one other strong benefit to your fund
- -- one of the lowest default rates in the industry for a fund of this
type. Currently the fund holds only the bonds issued to support a
Detroit hospital, which has filed for bankruptcy. Talks are under way
between the hospital and its creditors, and we remain hopeful that the
debt will be paid.
* STEADY COURSE EXPECTED THROUGH REMAINDER OF FISCAL YEAR
We expect the current economic climate to continue through the second
half of fiscal 1997. Given the outlook for continued mild inflation and
the markets' favorable response to the presidential and congressional
elections, the narrow trading range is likely to continue in the bond
market, placing further emphasis on income over price appreciation as a
key to your fund's total return performance.
[GRAPHIC OMITTED: TOP 10 HOLDINGS (9/30/96)]
Pennsylvania Economic Development, 9.25%, 1/1/22
Port Corpus Christi (Texas) Industrial Development Corp.,
10.25%, 6/1/17
Iowa Financing Authority Health Care Facility, 9.25%, 7/1/25
Los Angeles (California) Regional Airports, 9.25%, 8/1/24
Denver (Colorado) City and County Airport, 8.50%, 11/15/23
Butler (Alabama) Industrial Development Board, 8.00%, 9/1/28
Massachusetts Port Authority, 10.00%, 3/1/26
Hammond (Indiana) Industrial Port Authority, 9.65%, 6/1/14
Denver (Colorado) City and County Airport, 8.75%, 11/15/23
Port Corpus Christi (Texas) Industrial Development Corp.,
10.625%, 6/1/08
Footnote reads:
* These holdings represent 28.9% of the fund's assets. Portfolio holdings
will vary over time.
We remain committed to our current sector strategy, with the possible
addition of utility holdings. We are investigating this sector -- which
could offer a solid defensive position against future economic shifts --
on a regional basis, seeking opportunities that may arise from industry
deregulation. Amidst the investor confusion generally caused by
regulatory changes, our analysts will put their skills to work to
uncover solid opportunities for high current income, consistent with
your fund's objective.
Footnote reads:
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 9/30/96, there is no guarantee the
fund will continue to hold these securities in the future. The fund
invests in lower-rated, high-yield debt securities. The lower ratings
reflect a greater possibility that adverse changes in an issuer's
business or financial condition or in general economic conditions may
impair the issuer's ability to pay principal and interest on the
securities.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam High Yield Municipal Trust is designed for investors
seeking current income free from federal income tax through higher-
yielding lower-rated municipal securities.
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 in the fund.
TOTAL RETURN FOR PERIODS ENDED 9/30/96
Lehman Bros. Consumer
Market Municipal Price
NAV Price Bond Index Index
- -----------------------------------------------------------------------
6 months 3.21% 3.78% 3.09% 1.35%
- -----------------------------------------------------------------------
1 year 7.18 13.32 6.04 3.00
- ------------------------------------------------------------------------
5 years 51.54 58.62 43.28 15.02
Annual average 8.67 9.67 7.46 2.84
- -----------------------------------------------------------------------
Life of fund (5/25/89) 78.09 81.03 75.67 27.46
Annual average 8.17 8.41 7.98 3.36
- ------------------------------------------------------------------------
Footnote reads:
Performance data represent past results and do not reflect future
performance. They do not take into account any adjustment for taxes
payable on reinvested distributions. Investment returns, net asset value
and market price will fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 9/30/96
- ------------------------------------------------------------------------
Distributions (common shares)
- -----------------------------------------------------------------------
Number 6
- ----------------------------------------------------------------------
Income $0.345
- ------------------------------------------------------------------------
Total $0.345
- ------------------------------------------------------------------------
Preferred shares (900 shares)
- ------------------------------------------------------------------------
Income $886.76
- ------------------------------------------------------------------------
Total $886.76
- ------------------------------------------------------------------------
Share value: (common shares)
NAV Market price
- ------------------------------------------------------------------------
3/31/96 $9.16 $10.00
- ------------------------------------------------------------------------
9/30/96 $9.11 $10.00
- ------------------------------------------------------------------------
Current return: (common shares)
NAV Market price
- ------------------------------------------------------------------------
End of period
- ------------------------------------------------------------------------
Current dividend rate1 7.57% 6.90%
- ------------------------------------------------------------------------
Taxable equivalent2 12.53 11.42
- ------------------------------------------------------------------------
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 income tax rate. Results for investors
subject to lower tax rates would not be as advantageous.
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. It is impossible
to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
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.
*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. Within each of Putnam's four investment
categories, you can select funds with differing levels of risk and
reward potential to customize your portfolio.
This list covers only the most general types of risks; however, each
investment will also have its own specific risks. You will find a more
detailed discussion of these risk considerations in each fund's
prospectus.
*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.
<TABLE>
<CAPTION>
Portfolio of investments owned
September 31, 1996 (Unaudited)
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FNMA Coll. -- Federal National Mortgage Association Collateralized
FRN -- Floating Rate Notes
FSA -- Financial Security Assurance
GNMA Coll. -- Government National Mortgage Association Collateralized
IF -- Inverse Floater
IFB -- Inverse Floating Rate Bonds
MBIA -- Municipal Bond Investors Assurance Corporation
RAC -- Revenue Anticipation Certificates
VRDN -- Variable Rate Demand Notes
<S> <C> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (98.3%) *
PRINCIPAL AMOUNT RATINGS** VALUE
Alabama (2.6%)
- --------------------------------------------------------------------------------------------------------------------------
$5,750,000 Butler, Indl. Dev. Board Rev. Bonds (Solid Waste Disp. James River Corp.),
8s, 9/1/28 BBB $ 6,353,750
Arizona (1.4%)
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3,000,000 Tucson, Arpt. Auth. Special Fac. Rev. Bonds (Lockheed Aermod Ctr. Inc.),
8.7s, 9/1/19 A 3,412,500
California (7.5%)
- --------------------------------------------------------------------------------------------------------------------------
CA Hlth. Fac. Auth. Rev. Bonds
905,000 (Summit Med. Ctr.), Ser. 85A, 9s, 5/1/15 Baa 914,177
5,535,000 (Valley Presbyterian Hosp.), Ser. A, 9s, 5/1/12 BB 5,539,317
5,700,000 CA Statewide Cmntys. Dev. Auth. IF COP (Motion Picture & TV Fund), AMBAC,
5.35s, 1/1/22 Aaa 4,239,375
6,415,000 Los Angeles, Regl. Arpts. Impt. Corp Rev. Bonds (Continental Airlines),
9 1/4s, 8/1/24 B/P 7,425,363
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18,118,232
Colorado (5.5%)
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Denver, City & Cnty. Arpt. Rev. Bonds
5,000,000 Ser. A, 8 3/4s, 11/15/23 Baa 5,875,000
6,350,000 Ser. A, MBIA, 8 1/2s, 11/15/23 Aaa 7,373,938
------------
13,248,938
Georgia (3.1%)
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3,025,000 De Kalb Cnty., Hsg. Auth. Muni. Rev. Bonds (Briarcliff Park Apts.),
Ser. B, 10s, 4/1/17 B/P 3,138,438
3,900,000 GA Med. Ctr. Hosp. Auth. IF RAC (Columbus Regl. Hlth. Care Syst.),
Ser. B, MBIA, 8.78s, 8/1/10 Aaa 4,260,750
------------
7,399,188
Illinois (5.3%)
- --------------------------------------------------------------------------------------------------------------------------
Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds
1,418,000 (United Air Lines, Inc.), Ser. B, 8.95s, 5/1/18 Baa 1,598,795
1,835,000 (United Air Lines, Inc.), Ser. 84A, 8.85s, 5/1/18 Baa 2,064,375
4,250,000 (American Airlines Inc.), 8.2s, 12/1/24 Baa 4,914,063
2,355,000 IL Dev. Fin. Auth. Rev. Bonds (Community Rehab. Facs.), Ser. A, 7 7/8s, 7/1/20 BB/P 2,275,519
1,970,000 IL Edl. Fac. Auth. Rev. Bonds (Steppenwolf Theatre), 9.65s, 7/1/19 BB/P 2,066,018
------------
12,918,770
Indiana (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
5,605,852 Hammond, Indl. Port Auth. COP, 9.65s, 6/1/14 BB/P 6,061,328
Iowa (3.2%)
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6,500,000 IA Fin. Auth. Hlth. Care Fac. Rev. Bonds (Care Initiatives), 9 1/4s, 7/1/25 BB/P 7,661,875
Kentucky (1.4%)
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1,485,000 Jefferson Cnty., 1st Mtge. Rev. Bonds (AHF/KY-IOWA Inc.), 10 1/4s, 1/1/20 B/P 1,529,550
1,675,000 Louisville & Jefferson Cnty., Regl. Arpt. Syst. Rev. Bonds, Ser. A, MBIA,
8 1/2s, 7/1/17 Aaa 1,764,010
------------
3,293,560
Louisiana (9.0%)
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5,000,000 Hodge, Combined Util. Rev. Bonds (Stone Container Corp.), 9s, 3/1/10 B/P 5,406,250
LA Pub. Fac. Auth. 1st Mtge. Rev. Bonds
1,912,898 (Emily Morten Foundation), 10 1/4s, 5/1/19 B/P 2,034,846
2,500,000 (St. James Place), 10s, 11/1/21 B/P 2,740,625
2,000,000 Port of New Orleans, Indl. Dev. Rev. Bonds (Continental Grain Co.), 14 1/2s,
1/1/02 BB 2,034,600
2,000,000 St. Charles Parish, Poll. Control Rev. Bonds (LA Pwr. & Lt.), 8 1/4s, 6/1/14 Baa 2,180,000
3,440,000 St. James Parish Solid Waste Disp. Rev. Bonds (Kaiser Aluminum), 7 3/4s, 8/1/22 B/P 3,573,300
3,000,000 W. Feliciana Parish Poll. Control Rev. Bonds (Gulf States Utils. Co.), 8s,
12/1/24 Baa 3,195,000
500,000 W. Feliciana Parish Poll. Control VRDN (Gulf States Utils. Co.), 3.95s, 12/1/15 A-1 500,000
------------
21,664,621
Massachusetts (12.7%)
- --------------------------------------------------------------------------------------------------------------------------
5,800,000 MA Port Auth. Special Project Rev. Bonds (Harborside Hyatt), 10s, 3/1/26 B/P 6,278,500
MA State Hlth. & Edl. Fac. Auth. IFB
3,000,000 (St. Elizabeth Hosp.), Ser. E, FSA, 9.879s, 8/15/21 Aaa 3,412,500
2,000,000 (New England Medical Ctr.), MBIA, 6.63s, 7/1/18 Aaa 1,735,000
MA State Indl. Fin. Agcy. Res. Recvy. Rev. Bonds (Southeastern MA)
1,500,000 Ser. B, 9 1/4s, 7/1/15 BB/P 1,696,875
3,500,000 Ser. A, 9s, 7/1/15 BB/P 3,946,250
MA State Indl. Fin. Agcy. Rev. Bonds
975,000 (Odd Fellows Home of MA), 9.6s, 1/1/15 BB 1,040,813
4,500,000 (Orchard Cove Inc.), 9s, 5/1/22 BB/P 5,045,625
4,250,000 (Emerson College), 8.9s, 1/1/18 BB/P 4,675,000
2,445,000 MA State Indl. Fin. Agcy. Tunnel Rev. Bonds (Mass Tpk.), 9s, 10/1/20 AAA/P 2,869,819
------------
30,700,382
Michigan (4.4%)
- --------------------------------------------------------------------------------------------------------------------------
2,763,000 Detroit, Hosp. Fac. Fin. Auth. Rev. Bonds (MI Hlth. Care Corp.), 10s, 12/1/20
(In Default) + Caa 635,490
2,635,000 Detroit, Loc. Dev. Fin. Auth. Tax Increment Rev. Bonds, Ser. A, 8.72s, 5/1/21 BBB/P 3,241,050
4,900,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds (Mercy Svcs. for Aging), 9.4s,
5/15/20 BBB/P 5,530,875
960,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds (MI Hlth. Care Corp.), 9.1s,
12/1/14 (In Default) + Caa/P 220,800
1,000,000 Midland Cnty., Econ. Dev. Corp. Poll. Control Rev. Bonds, Ser. B, 9 1/2s,
7/23/09 B/P 1,091,250
------------
10,719,465
Missouri (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
4,900,000 Kansas City, Indl. Dev. Auth. Hlth. Fac. Rev. Bonds (Park Lane Med. Ctr.),
8 3/4s, 1/1/15 BB/P 5,224,625
Nebraska (0.5%)
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1,000,000 NE Investment Fin. Auth. Hosp. IFB, MBIA, 9.132s, 12/8/16 Aaa 1,141,250
New Hampshire (2.9%)
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1,915,000 NH Higher Edl. & Hlth. Fac. Auth. Rev. Bonds (Havenwood-Heritage Heights),
9 3/4s, 12/1/19 AAA/P 2,252,513
1,000,000 NH State Bus. Fin. Auth. Swr. & Soild Waste Rev. Bonds, 7 7/8s, 7/1/26 BB 1,028,750
3,500,000 NH State Indl. Dev. Auth. Poll. Control Rev. Bonds (United Illuminating Co.),
Ser. B, 10 3/4s, 10/1/12 Baa 3,787,070
------------
7,068,333
New York (6.0%)
- --------------------------------------------------------------------------------------------------------------------------
2,350,000 NY State Energy Research & Dev. Auth. Poll. Control IFB, FGIC, 9.754s,
7/1/29 (acquired 12/1/94 cost $2,453,729)(double dagger) Aaa 2,914,000
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 4,385,000
3,000,000 NY State Hsg. Fin. Agcy. Svcs. Contract Oblig. Rev. Bonds, Ser. A, 7 3/8s,
9/15/21 Aaa 3,427,500
NY State Local Govt. Assistance Corp. Rev. Bonds
1,500,000 Ser. A, 7s, 4/1/16 Aaa 1,668,750
2,000,000 Ser. D, 6 3/4s, 4/1/21 Aaa 2,227,500
------------
14,622,750
Ohio (2.1%)
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4,550,000 Dayton Special Fac. Rev. Bonds (Emery Air Freight Corp.), Ser. A, 12 1/2s,
10/1/09 BB/P 5,192,688
Pennsylvania (12.6%)
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280,000 Allegheny Cnty., Indl. Dev. Auth. Arpt. Special Fac. Rev. Bonds (U.S.
Air, Inc.), Ser. A, 8 7/8s, 3/1/21 B 306,600
4,000,000 Allentown Hosp. Auth. Rev. Bonds (Sacred Heart Hosp.), Ser. A, 6 3/4s, 11/15/14 BBB 4,055,000
Montgomery Cnty., Higher Edl. & Hlth. Auth. Hosp. Rev. Bonds (United Hosp. Inc.)
1,940,000 8 1/2s, 11/1/17 AAA 2,070,407
2,000,000 Ser. A, 8 3/8s, 11/1/11 AAA 2,252,500
3,250,000 PA Econ. Dev. Fin. Auth. Rev. Bonds (MacMillan Ltd. Partnership), 7.6s, 12/1/20 Baa 3,599,375
10,000,000 PA Econ. Dev. Fin. Auth. Recycling Rev. Bonds (Ponderosa Fibres),
Ser. A, 9 1/4s, 1/1/22 B/P 9,375,000
2,500,000 PA State Higher Edl. Assistance Agcy. Student Loan IFB, AMBAC, 9.814s, 9/3/26 Aaa 2,646,875
2,100,000 Philadelphia, Muni. Auth. Rev. Bonds (Justice Lease), Ser. C, 8 5/8s, 11/15/16 Aaa 2,504,250
3,400,000 Philadelphia, Regl. Port Auth. Lease IFB, MBIA, 8.451s, 9/1/13 Aaa 3,625,250
------------
30,435,257
Texas (8.8%)
- --------------------------------------------------------------------------------------------------------------------------
730,000 Cherokee Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds (Nancy Travis Memorial
Hosp.), 10s, 5/15/13 B/P 794,788
2,911,415 Maverick Cnty., COP (Jail Facility), 9.1s, 6/15/10 CCC/P 1,746,849
Port Corpus Christi, Indl. Dev. Corp. Rev. Bonds (Valero Refining &
Marketing Co.)
5,500,000 Ser. B, 10 5/8s, 6/1/08 Baa 5,859,150
7,230,000 Ser. A, 10 1/4s, 6/1/17 Baa 7,681,730
4,800,000 TX State Hsg. & Cmnty. Affairs Home Mtge. IFB, Ser. C, FNMA Coll., GNMA Coll.,
9.845s, 7/2/24 AAA 5,166,000
------------
21,248,517
Utah (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
3,300,000 Carbon Cnty. Util. Rev. Bonds (Solid Waste Disposal Laidlaw), Ser. A,
7 1/2s, 2/1/10 Baa 3,613,500
Washington (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
5,000,000 Port Walla Walla Pub. Corp. Solid Waste Recycling Rev. Bonds (Ponderosa Fibres
Project), 9 1/8s, 1/1/26 B/P 4,618,750
2,000,000 WA State Hlth. Care Fac. Auth. VRDN (Sisters Providence), Ser. B, 3.75s, 10/1/05 VMIGI 2,000,000
------------
6,618,750
Wisconsin (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
865,000 WI Hsg. & Econ. Dev. Auth. IFB (Home Ownership), 10.209s, 10/25/22 Aa 919,063
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $235,771,372) *** $237,637,342
- --------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $241,633,796.
Net assets available to common shareholders are $196,611,605.
** The Moody's or Standard & Poor's ratings indicated are
believed to be the most recent ratings available at September
30, 1996 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 securites at September 30, 1996.
Securities rated by Putnam are indicated by "/P"and are not
publicly rated.
*** The aggregate identified cost on a tax basis is
$235,780,124, resulting in gross unrealized appreciation and
depreciation of $11,984,769 and $10,127,551, respectively,
or net unrealized appreciation of $1,857,218.
+ Non-income-producing security.
(double dagger) Restricted as to public resale. The total market value of restricted
securities held at September 30, 1996 was $2,914,000 or 1.2%
of net assets.
The table below shows the percentage of the fund's
investment on September 30, 1996 in securities
assigned to 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 fund's net assets fund's net assets
- -------------------------------------------------------------------------------------------------------
AAA/Aaa 23.5% 2.1%
AA/Aa 0.4 --
A/A 1.5 --
BBB/Baa 23.0 3.6
BB/Ba 4.0 18.1
B/B 0.1 19.9
CCC/Caa 0.3 0.8
A-1/VMIGI 1.0 --
- -------------------------------------------------------------------------------------------------------
53.8% 44.5%
The rates shown on FRB and FRN are the current interest rates shown at September 30, 1996,
which are subject to change based on the terms of the security.
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 VRDN's are the current interest
rates at September 30, 1996.
The fund had the following industry group
concentrations greater than 10% at September 30,
1996 (as a percentage of net assets):
Hospitals / Health Care 26.6%
Transportation 20.6
Forest Products / Paper 12.6
Utilities 12.6
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1996 (Unaudited)
<S> <C>
Assets
- -------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $235,771,372) (Note 1) $237,637,342
- -------------------------------------------------------------------------------------------
Cash 309,279
- -------------------------------------------------------------------------------------------
Interest receivable 5,402,596
- -------------------------------------------------------------------------------------------
Receivable for securities sold 30,000
- -------------------------------------------------------------------------------------------
Total assets 243,379,217
Liabilities
- -------------------------------------------------------------------------------------------
Distributions payable to shareholders 1,240,396
- -------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 425,100
- -------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 29,668
- -------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,942
- -------------------------------------------------------------------------------------------
Other accrued expenses 48,315
- -------------------------------------------------------------------------------------------
Total liabilities 1,745,421
- -------------------------------------------------------------------------------------------
Net assets $241,633,796
Represented by
- -------------------------------------------------------------------------------------------
Remarketed preferred shares (900 shares issued and outstanding at
$50,000 per share liquidation preference) (Note 4) $45,000,000
- -------------------------------------------------------------------------------------------
Paid-in capital - common shares (Note 1) 198,910,803
- -------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 825,798
- -------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (4,968,775)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,865,970
- -------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $241,633,796
Computation of net asset value:
- -------------------------------------------------------------------------------------------
Remarketed preferred shares $45,000,000
- -------------------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 22,191
- -------------------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares $45,022,191
- -------------------------------------------------------------------------------------------
Net assets available to common shares $196,611,605
- -------------------------------------------------------------------------------------------
Net asset value per common share ($196,611,605 divided by 21,572,363 shares) $9.11
- -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended September 30, 1996 (Unaudited)
<S> <C>
Tax exempt interest income: $9,919,274
- -----------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 846,275
- -----------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 102,662
- -----------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 6,408
- -----------------------------------------------------------------------------------------
Administrative services (Note 2) 3,851
- -----------------------------------------------------------------------------------------
Reports to shareholders 15,334
- -----------------------------------------------------------------------------------------
Auditing 16,879
- -----------------------------------------------------------------------------------------
Legal 9,704
- -----------------------------------------------------------------------------------------
Postage 22,185
- -----------------------------------------------------------------------------------------
Exchange listing fees 14,376
- -----------------------------------------------------------------------------------------
Preferred share remarketing agent fees 58,500
- -----------------------------------------------------------------------------------------
Other 3,108
- -----------------------------------------------------------------------------------------
Total expenses 1,099,282
- -----------------------------------------------------------------------------------------
Expense reduction (Note 2) (19,800)
- -----------------------------------------------------------------------------------------
Net expenses 1,079,482
- -----------------------------------------------------------------------------------------
Net investment income 8,839,792
- -----------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 274,621
- -----------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (1,913,256)
- -----------------------------------------------------------------------------------------
Net loss on investments (1,638,635)
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $7,201,157
- -----------------------------------------------------------------------------------------
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
September 30 March 31
1996* 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- --------------------------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------------------------
Net investment income $8,839,792 $17,050,928
- --------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 274,621 1,740,824
- --------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (1,913,256) 1,057,318
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 7,201,157 19,849,070
- --------------------------------------------------------------------------------------------------------------------
Distributions to remarketed preferred shareholders from net investment income (798,084) (1,746,756)
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations applicable to common
shareholders (excluding cumulative undeclared dividends on remarketed
preferred shares of $22,191 and $17,213, respectively) 6,403,073 18,102,314
- --------------------------------------------------------------------------------------------------------------------
Distributions to common shareholders from net investment income (7,426,446) (15,256,630)
- --------------------------------------------------------------------------------------------------------------------
Issuance of common shares in connection with reinvestment of distributions 1,058,598 2,419,406
- --------------------------------------------------------------------------------------------------------------------
Total increase in net assets 35,225 5,265,090
Net assets
- --------------------------------------------------------------------------------------------------------------------
Beginning of period 241,598,571 236,333,481
- --------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of
$825,798 and $210,536, respectively) $241,633,796 $241,598,571
Number of fund shares
- --------------------------------------------------------------------------------------------------------------------
Common shares outstanding at beginning of period 21,458,424 21,198,632
- --------------------------------------------------------------------------------------------------------------------
Common shares issued in connection with reinvestment of distributions 113,939 259,792
- --------------------------------------------------------------------------------------------------------------------
Common shares outstanding at end of period 21,572,363 21,458,424
- --------------------------------------------------------------------------------------------------------------------
Remarketed preferred shares outstanding at beginning and end of period 900 900
- --------------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Six months
ended
September 30 Year ended
(Unaudited) March 31
- ----------------------------------------------------------------------------------------------------------------------------
1996 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period (common shares) $9.16 $9.03 $9.23
- ----------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income .41 .80 .81
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.07) .13 (.19)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .34 .93 .62
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------
From net investment income:
- ----------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.04) (.08) (.07)
- ----------------------------------------------------------------------------------------------------------------------------
To common shareholders (.35) (.72) (.75)
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions (.39) (.80) (.82)
- ----------------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period (common shares) $9.11 $9.16 $9.03
- ----------------------------------------------------------------------------------------------------------------------------
Market value, end of period (common shares) $10.00 $10.00 $9.50
- ----------------------------------------------------------------------------------------------------------------------------
Total investment return at market value (%)(common shares)(a) 3.78* 13.60 11.50
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (total fund) (in thousands) $241,634 $241,599 $236,333
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b)(c) .36* 1.17 1.17
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(b) 4.11* 7.79 8.27
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 11.40* 34.45 49.11
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended March 31
- ------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period (common shares) $9.49 $8.99 $8.85
- ------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------
Net investment income .81 .86 .84
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.27) .51 .22
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations .54 1.37 1.06
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------
From net investment income:
- ------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.05) (.06) (.06)+
- ------------------------------------------------------------------------------------------------------------------------
To common shareholders (.75) (.81) (.81)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (.80) (.87) (.87)
- ------------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- (.05)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period (common shares) $9.23 $9.49 $8.99
- ------------------------------------------------------------------------------------------------------------------------
Market value, end of period (common shares) $9.25 $10.50 $9.88
- ------------------------------------------------------------------------------------------------------------------------
Total investment return at market value (%)(common shares)(a) (4.99) 15.48 18.15
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (total fund) (in thousands) $238,148 $241,187 $228,735
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b)(c) 1.17 1.17 1.13
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(b) 7.97 8.58 8.77
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.55 53.89 62.28
- ------------------------------------------------------------------------------------------------------------------------
* Not annualized
+ 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 payments to
preferred shareholders.
(c) The ratio of expenses to average net assets for the year ended March 31,
1996 and thereafter, includes amounts paid through expense offset arrangements.
Prior period ratios exclude these amounts (Note 2.)
</TABLE>
Notes to financial statements
September 30, 1996 (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 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 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) 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. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held and for excise tax on income and capital
gains.
At March 31, 1996, the fund had a capital loss carryover of
approximately $5,242,000 available to offset future capital gains, if
any. The amount of the carryover and the expiration dates are:
Loss Carryover Expiration
- -------------- ------------
$ 228,000 March 31, 1999
64,000 March 31, 2002
3,642,000 March 31, 2003
1,308,000 March 31, 2004
D) 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 seven day period. The applicable dividend rate for
the remarketed preferred shares on September 30, 1996 was 3.45%. 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.
E) 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 and dividends), less all liabilities (including accrued
expenses and undeclared dividends on remarketed preferred shares) and
the liquidation value of any outstanding remarketed preferred shares, by
the total number of common shares outstanding.
F) 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. Original issue
discounts are accreted according to the effective yield method.
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 annual rate of 0.70% of average
weekly net assets.
If dividends payable on remarketed preferred shares during any dividend
payment period plus any expenses attributable to remarketed preferred
shares for the period exceed the fund's net income attributable to the
proceeds of the remarketed during that 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.
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, 1996, fund expenses were reduced
by $19,800 under expense offset arrangements with PFTC. Investor
servicing and custodian fees reported in the Statement of operations
exclude these credits. The fund could have invested a portion of the
assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Trustees of the fund receive an annual Trustees fee of $790 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 adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund
and are invested in certain Putnam funds until distribution in
accordance with the Plan.
Note 3
Purchase and sales of securities
During the six months ended September 30, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$21,826,859 and $19,954,176, 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
Remarketed preferred shares
The 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.
It is anticipated that dividends paid to holders of remarketed preferred
shares will be considered tax-exempt dividends under the Internal
Revenue Code of 1986. To the extent that the fund earns taxable
income and capital gains by the conclusion of a fiscal year, it will be
required to apportion to the holders of the remarketed preferred shares
throughout that year additional dividends as necessary to result in an
after-tax equivalent to the applicable dividend rate for the period.
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 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, 1996, no
such restrictions have been placed on the fund.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
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
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
Jerome J. Jacobs
Vice President
Blake E. Anderson
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam High Yield
Municipal Trust. It may also be used as sales literature when preceded
or accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, 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
principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- -------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- -------------------
28358-054 11/96
