PUTNAM
HIGH YIELD
MUNICIPAL
TRUST
[GRAPHIC OMITTED:
art work]
ANNUAL REPORT
MARCH 31, 1996
[LOGO:
BOSTON O LONDON O TOKYO]
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FUND HIGHLIGHTS
O ACCORDING TO LIPPER ANALYTICAL SERVICES, PUTNAM HIGH YIELD MUNICIPAL TRUST'S
TOTAL RETURN RANKED 2 OUT OF 13 HIGH YIELD MUNICIPAL DEBT FUNDS FOR THE
1-YEAR PERIOD ENDED MARCH 31, 1996, PLACING THE FUND IN THE TOP 15% IN THIS
CATEGORY.*
O "OF COURSE, IF YOU THINK THAT THE STOCK MARKET WILL CONTINUE TO GENERATE
DOUBLE-DIGIT RETURNS, BY ALL MEANS BET THE STORE ON EQUITIES. BUT IF YOU ARE
IN THE MARKET FOR BONDS, EVEN FOR PART OF YOUR PORTFOLIO, MUNIS OFFER
SUPERIOR VALUE....IF YOU WANT TO OWN BONDS AND YOU ARE IN A HIGH TAX
BRACKET, IT'S MUNICIPAL BONDS -- NO CONTEST."
-- FORBES, FEBRUARY 26, 1996
CONTENTS
4 REPORT FROM PUTNAM MANAGEMENT
8 FUND PERFORMANCE SUMMARY
12 PORTFOLIO HOLDINGS
18 FINANCIAL STATEMENTS
*Lipper Analytical Services, an independent research organization, ranks
funds according to total-return performance. Their rankings vary over time
and do not reflect the effects of sales charges. For periods ended 3/31/96,
the fund ranked 4 out of 12 and 2 out of 12 high yield municipal debt funds
for 3- and 5-year performance, respectively. Past performance is not
indicative of future results.
<PAGE>
FROM THE CHAIRMAN
[GRAPHIC OMITTED:
Photo of
George Putnam]
(C) Karsh, Ottawa
Dear Shareholder:
For most of Putnam High Yield Municipal Trust's fiscal year, the 12 months ended
March 31, 1996, tax-exempt bonds rose in the updraft of one of the most vibrant
bond markets in recent memory. Concern over the possible negative effects of a
flat tax on municipal bonds, however, dampened performance relative to other
fixed-income investments.
On the other hand, when the bond market turned abruptly downward toward the end
of the period, flat-tax fears were abating. This improved outlook for municipal
bonds tended to cushion their decline.
The bond market was reacting to concern over a pickup in inflation resulting
from economic overheating. Putnam Management believes this new worry is
premature and expects the rest of 1996 to bring steady but manageable growth.
I am pleased to introduce Leslie J. Burke, who has joined your fund's management
team and will be managing the fund with lead manager Triet Nguyen. Leslie has
been a municipal bond analyst at Putnam since 1992. She has nine years of
investment experience, having served as a research associate at Fidelity
Investments before joining Putnam.
Respectfully yours,
/s/ George Putnam
George Putnam
Chairman of the Trustees
May 15, 1996
<PAGE>
REPORT FROM THE FUND MANAGERS
TRIET M. NGUYEN, LEAD MANAGER
LESLIE J. BURKE
Although somewhat tainted by a rise in interest rates that shook the
fixed-income markets in March, your fund's performance for fiscal 1996 has
proved quite commendable. Over the 12 months ended March 31, 1996, we were
able to meet the fund's objective of high current income while taking
advantage of the market's strength to build the value of the portfolio. At
the end of its fiscal year, your fund's total return was 9.47% at net asset
value (13.60% at market price).
O MARKET SLIDE MAY BE OVERDONE
Calendar 1995's bond market performance will no doubt go down as one of the
most stellar in recent memory. Although this positive momentum continued into
February 1996, the tide quickly turned in March. Evidence of rapid employment
growth fueled fears of inflation and a possible end to the Federal Reserve
Board's program of lowering short-term interest rates, bringing the extended
rally to an abrupt halt.
In our opinion, investor anxieties concerning an overheating economy are
premature. We expect the remainder of 1996 to be marked by steady but
manageable economic growth, and foresee only limited risk of a sharp increase
in inflationary pressures. Such an environment, in contrast with last year's
slowing economy, is unlikely in our view to lead to falling interest rates
and price appreciation for the bond market. Rather, we believe coupon income
will provide the bulk of total return for fixed-income investors for the
remainder of 1996.
The flat tax, which in its purest form would jeopardize the tax advantages
enjoyed by these bonds, no longer seems to be a hot topic in Washington.
Although we expect discussion of broader tax reform to reappear this fall as
the presidential election nears, our current assessment is that any radical
changes in the tax code appear less likely than they did a few months ago.
<PAGE>
We believe this development, along with the recent market correction, may
offer investors who have shied away from municipals an ideal opportunity to
retest the waters. Furthermore, municipal yields remain generous on a
taxable-equivalent basis, providing an attractive alternative to Treasuries
and investment-grade corporate bonds.
O INSURANCE COMPANIES SEEK VALUE IN MUNICIPALS
Since last summer, insurance companies have been the mainstay of the
municipal market, providing much-needed price support at a time when retail
investors remained skittish. These infrequent buyers often enter the market
when yields on municipals, particularly intermediate maturities, reach
bargain levels compared with alternative taxable investments. Since their
objective is to capture potential gains as municipals eventually revert to a
more "normal" relationship vis-a-vis taxable bonds, insurance companies are
loath to assume credit risk and tend to buy only the highest-quality bonds.
While your fund emphasizes holdings in lower-rated higher-yielding bonds, one
portion of the portfolio generally consists of higher-quality investments.
Consequently, we have been able to position the fund to benefit from this
trend. During the last six months of the fiscal year, we have added insured
bonds with 10-year or 15-
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW* showing:
B 19.1%
BBB/Baa 25.6%
Below B 1.1%
Other and cash 2.7%
AAA/Aaa 24.1%
A 1.4%
AA/Aa 0.4%
BB/Ba 25.6%
with a footnote of
*Based on net assets on 3/31/96. Holdings will vary over time.]
<PAGE>
year maturities to the portfolio. At the same time, we reduced the fund's
exposure to insured bonds maturing in 30 years or more. Since shorter
maturities tend to experience less price fluctuation than longer maturities,
this strategy provides the added bonus of lessening the fund's overall price
volatility while still taking advantage of possible price gains that could
occur as a result of insurance company demand.
O FUND BENEFITS FROM OPPORTUNITIES IN RECYCLING AND HEALTH-CARE SECTORS
Improved technologies and a heightened sensitivity toward environmental
concerns have invited a relatively new entrant to the high-yield sector of
the municipal market -- recycling plants. One such security owned by your
fund is issued by Ponderosa Fibres Project, which has facilities in both
Pennsylvania and Washington state. These plants recycle linerboard into paper
products targeted for the government office market. Although paper prices
have softened somewhat from their peak last year, these facilities operate at
a relatively low break-even point, providing a cushion against potentially
weaker margins. These bonds provide very attractive interest income to your
fund.
In addition to recycling bonds, the fund's investments in hospital and
health-care bonds continue to contribute to performance. At 15% of assets,
this industry allocation is one of the portfolio's largest. The most
significant change we made during the year was to reallocate the fund's
position in Michigan health-care bonds into Pennsylvania health-care bonds,
based on our outlook for the market in both states.
Despite the failed efforts of the federal government to reform these
industries, more fundamental reforms of both operations and strategy are well
underway, prompted by the increasing pressures of managed care. We believe
there is still opportunity in well-managed, well-positioned hospital names,
and many are available at attractive prices.
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TOP 10 HOLDINGS (3/31/96)
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PENNSYLVANIA ECONOMIC DEVELOPMENT, 9.25%, 1/1/22
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PORT CORPUS CHRISTI (TEXAS) INDUSTRIAL DEVELOPMENT CORP., 10.25%, 6/1/17
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LOS ANGELES (CALIFORNIA) REGIONAL AIRPORTS, 9.25%, 8/1/24
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DENVER (COLORADO) CITY AND COUNTY AIRPORT, 8.5%, 11/15/23
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IOWA FINANCING AUTHORITY HEALTH CARE FACILITY, 9.95%, 7/1/19
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BUTLER (ALABAMA) INDUSTRIAL DEVELOPMENT BOARD, 8%, 9/1/28
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MASSACHUSETTS PORT AUTHORITY, 10%, 3/1/26
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PORT CORPUS CHRISTI (TEXAS) INDUSTRIAL DEVELOPMENT CORP., 10.625%, 6/1/08
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HAMMOND (INDIANA) INDUSTRIAL PORT AUTHORITY, 9.65%, 6/1/14
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DENVER (COLORADO) CITY AND COUNTY AIRPORT, 8.75%, 11/15/23
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These holdings represent 29.1% of the fund's net assets. Portfolio holdings
will vary over time.
O OUTLOOK CAUTIOUS, BUT CONSTRUCTIVE
Municipal new-issue supply for 1996 is expected to remain even with last
year's pace, while insurance company interest appears likely to stay firm. As
the flat-tax issue wanes, record levels of cash in tax-exempt money market
funds could further buoy the market, should these investors venture back to
municipal bond mutual funds.
A climate of steadier economic growth clearly requires a more cautious
approach to fixed-income investing. Continued emphasis on interest income
stresses the importance of astute credit analysis and attention to call
features. Enhancing the price stability and liquidity of the portfolio will
play an increasingly vital role in your fund's strategy over the next six
months.
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 3/31/96, there is no guarantee the fund will continue to hold
these securities in the future.
<PAGE>
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
HIGH 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 3/31/96
NAV MARKET PRICE
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1 year 9.47% 13.60%
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5 years 55.08 64.19
Annual average 9.17 10.43
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Life of fund (since 5/25/89) 72.55 74.44
Annual average 8.29 8.46
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/96
LEHMAN BROS.
MUNICIPAL
BOND INDEX CPI
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1 year 8.38% 2.84%
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5 years 44.68 15.33
Annual average 7.66 2.89
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Life of fund (since 5/25/89) 67.18 25.77
Annual average 7.81 3.40
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Performance data represent past results. They do not take into account any
adjustment for taxes payable on reinvested distributions. 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.
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>
PRICE AND DISTRIBUTION INFORMATION
12 months ended 3/31/96
NAV
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DISTRIBUTIONS (number) 12
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(Common shares)
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Income $0.715
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TOTAL $0.715
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(Preferred shares) Series A (900 shares)
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Income $1,940.84
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Capital gains --
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TOTAL $1,940.84
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SHARE VALUE: (common shares) NAV MARKET PRICE
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3/31/95 $ 9.03 $ 9.50
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3/31/96 9.16 10.00
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CURRENT RETURN: (common shares)
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End of period
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Current dividend rate(1) 7.53% 6.90%
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Taxable equivalent(2) 12.47 11.42
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Performance data represent past results and do not reflect future performance.
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 federal tax rate of
39.6%. Results for investors subject to lower tax rates would not be as
advantageous.
<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>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of Putnam High Yield Municipal Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments owned (except for bond ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Putnam High Yield Municipal Trust (the "Fund") at March 31, 1996, the results of
its operations, the changes in its net assets, and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments owned at March 31, 1996 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
May 14, 1996
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
March 31, 1996
KEY TO ABBREVIATIONS
AMBAC --AMBAC Indemnity Corporation
COP --Certificate of Participation
FGIC --Financial Guaranty Insurance Company
FNMA --Federal National Mortgage Association
FSA --Financial Security Assurance
GNMA --Government National Mortgage Association
IF --Inverse Floater
MBIA --Municipal Bond Investors Assurance Corporation
VRDN --Variable Rate Demand Notes
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (98.3%)<F1>
PRINCIPAL AMOUNT RATINGS<F3> VALUE
ALABAMA (2.6%)
- -------------------------------------------------------------------------------------------
<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 $ 6,396,875
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 3,427,500
CALIFORNIA (7.6%)
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CA Hlth. Fac. Auth. Rev. Bonds
905,000 (Summit Med. Ctr.), Ser. 85A, 9s, 5/1/15 Ba 909,742
5,685,000 (Valley Presbyterian Hosp. Project),
Ser. A, 9s, 5/1/12 BB 5,684,201
5,700,000 CA Statewide Cmntys., Dev. Auth. IF, COP
(Motion Picture & TV Fund), AMBAC,
5.136s, 1/1/22 AAA 4,353,375
6,415,000 Los Angeles Regional Arpts. Impt. Corp Rev.
Bonds (Continental Airlines), 9 1/4s, 8/1/24 B/P 7,401,306
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18,348,624
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 5,950,000
6,350,000 Ser. A, MBIA, 8 1/2s, 11/15/23 AAA 7,397,750
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13,347,750
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS<F3> VALUE
GEORGIA (3.1%)
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$ 3,025,000 De Kalb Cnty., Hsg. Auth. Muni. Rev. Bonds
(Briarcliff Park Apts. Project), Ser. B, 10s, 4/1/17 B/P $ 3,127,094
3,900,000 GA Med. Ctr. Hosp. Auth. IF, MBIA
(Columbus Regl. Hlth. Care Syst.),
Ser. B, 8.844s, 8/1/10 AAA 4,299,750
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7,426,844
ILLINOIS (5.4%)
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Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds
1,418,000 (United Air Lines, Inc.), Ser. B, 8.95s, 5/1/18 Baa 1,595,250
1,870,000 (United Air Lines, Inc.), Ser. 84A, 8.85s, 5/1/18 Baa 2,096,738
4,250,000 (American Airlines Inc. Project), 8.2s, 12/1/24 Baa 4,898,125
2,355,000 IL Dev. Fin. Auth. Rev. Bonds
(Community Rehab Facs.), Ser. A, 7 7/8s, 7/1/20 BB/P 2,284,350
1,990,000 IL Edl. Fac. Auth. Rev. Bonds
(Steppenwolf Theatre Project), 9.65s, 7/1/19 BB/P 2,099,450
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12,973,913
INDIANA (2.5%)
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5,662,824 Hammond, Indl. Port Auth. COP 9.65s, 6/1/14 BB/P 5,960,123
IOWA (2.7%)
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6,500,000 IA Fin. Auth. Hlth. Care Fac. Rev. Bonds
(Mercy Hlth. Initiatives Project), 9.95s, 7/1/19 B/P 6,630,000
KENTUCKY (1.4%)
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1,485,000 Jefferson Cnty., 1st Mtge. Rev. Bonds
(AHF/KY-IOWA Inc. Project), 10 1/4s, 1/1/20 B/P 1,555,538
1,675,000 Louisville & Jefferson Cnty., Regl. Arpt. Syst.
Rev. Bonds, Ser. A, MBIA, 8 1/2s, 7/1/17 AAA 1,798,531
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3,354,069
LOUISIANA (8.5%)
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5,000,000 Hodge, Combined Util. Rev. Bonds
(Stone Container Corp.), 9s, 3/1/10 BB/P 5,443,750
LA Pub. Fac. Auth. 1st Mtge. Rev. Bonds
1,934,674 (Emily Morten Foundation), 10 1/4s, 5/1/19 B/P 2,067,683
2,500,000 (St. James Place Project), 10s, 11/1/21 B/P 2,750,000
900,000 LA State Recvy. Dist. Sales Tax, VRDN, MBIA
3.8s, 7/1/98 VMIG1 900,000
2,000,000 Port of New Orleans, Indl. Dev. Rev. Bonds
(Continental Grain Co. Project), 14 1/2s, 1/1/02 BB 2,106,360
3,440,000 St. James Parish, Solid Waste Disp. Rev. Bonds
(Kaiser Aluminum Project), 7 3/4s, 8/1/22 B/P 3,590,500
W. Feliciana Parish, Poll. Control Rev. Bonds
3,000,000 (Gulf States Utils. Co.), 8s, 12/1/24 Baa 3,202,500
500,000 (Gulf States Utils. Co.), VRDN 3.8s, 12/1/15 A-1 500,000
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20,560,793
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS<F3> VALUE
MASSACHUSETTS (12.8%)
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$ 5,800,000 MA Port Auth. Special Project Rev. Bonds
(Harborside Hyatt), 10s, 3/1/26 B/P $ 6,322,000
MA State Hlth. & Edl. Fac. Auth. IF
3,000,000 (St. Elizabeth Hosp.), Ser. E, FSA, 9.63s, 8/15/21 AAA 3,393,750
2,000,000 (New England Medical Ctr.), MBIA, 6.58s, 7/1/18 AAA 1,742,500
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 1,676,250
3,500,000 Ser. A, 9s, 7/1/15 BB/P 3,898,125
MA State Indl. Fin. Agcy. Rev. Bonds
975,000 (Odd Fellows Home of MA), 9.6s, 1/1/15 BB/P 1,045,688
4,500,000 (Orchard Cove Inc.), 9s, 5/1/22 BB/P 5,096,250
4,250,000 MA State Indl. Fin. Agcy. Rev. Bonds
(Emerson College), 8.9s, 1/1/18 BB/P 4,717,500
2,475,000 MA State Indl. Fin. Agcy. Tunnel Rev. Bonds
(Mass Tpk.), 9s, 10/1/20 AAA/P 2,948,344
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30,840,407
MICHIGAN (6.5%)
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2,773,000 Detroit, Hosp. Fac. Fin. Auth. Rev. Bonds
(MI Hlth. Care Corp.), 10s, 12/1/20
(acquired 12/12/91, cost $2,744,715
(In default))<F5><F4> Caa 1,053,740
2,665,000 Detroit, Loc. Dev. Fin. Auth. Tax Increment
Rev. Bonds Ser. A, 9 1/2s, 5/1/21 BBB/P 3,264,625
4,000,000 MI State Hosp. Fin. Auth. Rev. Bonds
(Genesys Hlth. Syst.) Ser. A, 7 1/2s, 10/1/27 Baa 4,135,000
5,000,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds
(Mercy Svcs. for Aging Project), 9.4s, 5/15/20 BBB/P 5,675,000
975,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds
(MI Hlth. Care Corp. Project), (In default),
9.1s, 12/1/14 (acquired 1/31/90,
cost $961,223)<F5><F4> B/P 370,500
1,000,000 Midland Cnty., Econ. Dev. Corp. Poll. Control
Rev. Bonds, Ser. B, 9 1/2s, 7/23/09 B/P 1,101,250
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15,600,115
MISSOURI (2.2%)
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4,900,000 Kansas City, Indl. Dev. Auth. Hlth. Fac. Rev. Bonds
(Park Lane Med. Ctr. Project), 8 3/4s, 1/1/15 BB/P 5,212,375
NEBRASKA (0.5%)
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1,000,000 NE Investment Fin. Auth. Hosp.
IF, MBIA, 9.385s, 12/8/16 AAA 1,133,750
NEW HAMPSHIRE (2.5%)
- -------------------------------------------------------------------------------------------
1,915,000 NH Higher Edl. & Hlth. Fac. Auth. Rev. Bonds
(Havenwood/Heritage Heights),
9 3/4s, 12/1/19 AAA/P 2,293,213
3,500,000 NH State Indl. Dev. Auth. Poll. Control
Rev. Bonds (United Illuminating Co.),
Ser. B, 10 3/4s, 10/1/12 BBB 3,867,500
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6,160,713
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS<F3> VALUE
NEW YORK (6.1%)
- -------------------------------------------------------------------------------------------
$ 2,350,000 NY State Energy Research & Dev. Auth.
Poll. Control IF, FGIC, 8.506s, 7/1/29
(acquired 12/19/94, cost $2,453,729)<F5> AAA $ 2,855,250
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 4,430,000
3,000,000 NY State Hsg. Fin. Agcy. Svcs. Contract Oblig.
Rev. Bonds, Ser. A, 7 3/8s, 9/15/21 AAA 3,476,250
NY State Local Govt. Assistance Corp. Rev. Bonds
1,500,000 Ser. A, 7s, 4/1/16 AAA 1,689,375
2,000,000 Ser. D, 6 3/4s, 4/1/21 AAA 2,252,500
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14,703,375
OHIO (2.2%)
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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 5,312,125
PENNSYLVANIA (11.2%)
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280,000 Allegheny Cnty., Indl. Dev. Auth. Arpt. Spl. Fac.
Rev. Bonds (U.S. Air, Inc. Project),
Ser. A, 8 7/8s, 3/1/21 B 302,750
Montgomery Cnty., Higher Edl. & Hlth. Auth.
Hosp. Rev. Bonds (United Hosp. Inc. Project),
1,940,000 8 1/2s, 11/1/17 Ba 2,027,300
2,000,000 Ser. A, 8 3/8s, 11/1/11 Ba 2,137,500
3,250,000 PA Econ. Dev. Fing. Auth. Rev. Bonds
(MacMillan Ltd. Partnership Project),
7.6s, 12/1/20 Baa 3,562,813
10,000,000 PA Econ. Dev. Fing. Auth. Recycling Rev. Bonds
(Ponderosa Fibres Project), Ser. A, 9 1/4s, 1/1/22 B/P 10,325,000
2,500,000 PA State Higher Edl. Assistance Agcy.
Student Loan IF, AMBAC, 9.774s, 9/3/26 AAA 2,675,000
2,100,000 Philadelphia, Muni. Auth. Rev. Bonds
(Justice Lease), Ser. C, 8 5/8s, 11/15/16 AAA 2,535,750
3,400,000 Philadelphia, Regl. Port Auth. Lease IF,
MBIA, 8.61s, 9/1/13 AAA 3,621,000
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27,187,113
TEXAS (9.3%)
- -------------------------------------------------------------------------------------------
955,000 Bell Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds
(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 798,750
2,964,840 Maverick Cnty., COP
(Jail Facility), 9.1s, 6/15/10 (acquired 6/30/89,
cost $2,964,840)<F5> CCC/P 1,778,904
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS<F3> VALUE
TEXAS (continued)
- -------------------------------------------------------------------------------------------
Port Corpus Christi, Indl. Dev. Corp. Rev. Bonds
(Valero Refining & Marketing Co.),
$ 5,500,000 Ser. B, 10 5/8s, 6/1/08 Baa $ 5,995,000
7,230,000 Ser. A, 10 1/4s, 6/1/17 Baa 7,844,550
4,800,000 TX State Hsg. & Cmnty. Affairs Home Mtg. IF,
GNMA, FNMA, Ser. C, 9.917s, 7/2/24 AAA 5,214,000
------------
22,462,054
UTAH (1.4%)
- -------------------------------------------------------------------------------------------
3,300,000 Carbon Cnty. Util. Rev. Bonds
(Solid Waste Disposal Laidlaw Project),
Ser. A, 7 1/2s, 2/1/10 Baa 3,460,875
WASHINGTON (2.5%)
- -------------------------------------------------------------------------------------------
5,000,000 Port Walla Walla Pub. Corp. Solid Waste
Recycling Rev. Bonds
(Ponderosa Fibres Project), 9 1/8s, 1/1/26 B/P 5,125,000
1,000,000 WA State Hlth. Care Facs. Auth. VRDN
(Sisters Providence), Ser. B, 3 3/4s, 10/1/05 VMIG1 1,000,000
------------
6,125,000
WISCONSIN (0.4%)
- -------------------------------------------------------------------------------------------
865,000 WI Hsg. & Econ. Auth. IF
Home Ownership, 10.321s, 10/25/22 AA 923,388
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $233,768,555)<F2> $237,547,781
- -------------------------------------------------------------------------------------------
<PAGE>
<FN>
<F1> Percentages indicated are based on net assets of $241,598,571.
<F2> The aggregate identified cost for federal income tax purposes is $233,777,307,
resulting in gross unrealized appreciation and depreciation of $11,559,453 and
$7,788,979, respectively, or net unrealized appreciation of $3,770,474.
<F3> The Moody's or Standard & Poor's ratings indicated are believed to be the most recent
ratings available at March 31, 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 securities at March
31, 1996. Securities rated by Putnam are indicated by "/P" and are not publicly rated.
Ratings are not covered by the Report of Independent Accountants.
<F4> Non-income-producing security.
<F5> 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 March 31, 1996 was $6,058,394
or 2.5% of net assets.
The rates shown on IF, 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 March 31,1996, 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 March 31,1996:
Hospitals/Health Care 28.8%
Transportation 19.3
Paper/Forest Products 12.8
The table below shows the percentage of the fund's investments on March 31, 1996 in
securities assigned to the various rating categories by Standard & Poor's and Moody'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" 21.9% 2.2%
"AA"/"Aa" .4 --
"A"/"A" 1.4 --
"BBB"/"Baa" 21.9 3.7
"BB"/"Ba" 5.3 20.3
"B"/"B" .2 18.9
"CCC"/"Caa" .4 .7
"A-1/VMIG1" 1.0 --
--------------------------------------------------------------------------------------
52.5% 45.8%
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
ASSETS
- -------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $233,768,555) (Note 1) $237,547,781
- -------------------------------------------------------------------------------
Cash 186,490
- -------------------------------------------------------------------------------
Interest and other receivables 5,604,630
- -------------------------------------------------------------------------------
Receivable for securities sold 20,000
- -------------------------------------------------------------------------------
TOTAL ASSETS 243,358,901
LIABILITIES
- -------------------------------------------------------------------------------
Distributions payable to shareholders 1,233,849
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 3) 425,991
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 3) 43,038
- -------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 3) 344
- -------------------------------------------------------------------------------
Payable for administrative services (Note 3) 2,052
- -------------------------------------------------------------------------------
Other accrued expenses 55,056
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 1,760,330
- -------------------------------------------------------------------------------
NET ASSETS $241,598,571
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;
21,458,424 shares outstanding (Note 1) 197,852,205
- -------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 210,536
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (5,243,396)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments 3,779,226
- -------------------------------------------------------------------------------
TOTAL--REPRESENTING NET ASSETS APPLICABLE TO CAPITAL
SHARES OUTSTANDING $241,598,571
NET ASSETS AVAILABLE TO:
- -------------------------------------------------------------------------------
Remarketed preferred shares at liquidation preference $ 45,000,000
- -------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 17,213
- -------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares
at liquidation preference 45,017,213
- -------------------------------------------------------------------------------
Net assets available to common shares: 196,581,358
- -------------------------------------------------------------------------------
NET ASSETS $241,598,571
- -------------------------------------------------------------------------------
Net asset value per common share
($196,581,358 divided by 21,458,424 shares $9.16
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF OPERATIONS
Year ended March 31, 1996
- -------------------------------------------------------------------------------
TAX EXEMPT INTEREST INCOME $19,285,340
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 3) 1,692,630
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 3) 247,373
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 3) 12,741
- -------------------------------------------------------------------------------
Administrative services (Note 3) 8,877
- -------------------------------------------------------------------------------
Reports to shareholders 40,475
- -------------------------------------------------------------------------------
Auditing 54,570
- -------------------------------------------------------------------------------
Legal 15,233
- -------------------------------------------------------------------------------
Postage 62,331
- -------------------------------------------------------------------------------
Exchange listing fees 33,309
- -------------------------------------------------------------------------------
Preferred share remarketing agent fees 127,801
- -------------------------------------------------------------------------------
Other 9,286
- -------------------------------------------------------------------------------
TOTAL EXPENSES 2,304,626
- -------------------------------------------------------------------------------
Expense reduction (Note 3) (70,214)
- -------------------------------------------------------------------------------
NET EXPENSES 2,234,412
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 17,050,928
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 4) 1,740,824
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 1,057,318
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 2,798,142
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $19,849,070
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED MARCH 31
1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
- -----------------------------------------------------------------------------------------
OPERATIONS:
- -----------------------------------------------------------------------------------------
Net investment income $ 17,050,928 $ 17,118,758
- -----------------------------------------------------------------------------------------
Net realized gain (loss) on investments 1,740,824 (3,986,048)
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 1,057,318 (104,620)
- -----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 19,849,070 13,028,090
- -----------------------------------------------------------------------------------------
Distributions to remarketed preferred shareholders
from net investment income (1,746,756) (1,538,892)
- -----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
APPLICABLE TO COMMON SHAREHOLDERS (EXCLUDING
CUMULATIVE UNDECLARED DIVIDENDS ON REMARKETED
PREFERRED SHARES OF $17,213 AND $10,355, RESPECTIVELY) 18,102,314 11,489,198
- -----------------------------------------------------------------------------------------
Distributions to common shareholders from
net investment income (15,256,630) (15,805,873)
- -----------------------------------------------------------------------------------------
Issuance of common shares in connection with
reinvestment of distributions 2,419,406 2,501,794
- -----------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 5,265,090 (1,814,881)
NET ASSETS
- -----------------------------------------------------------------------------------------
Beginning of year 236,333,481 238,148,362
- -----------------------------------------------------------------------------------------
END OF YEAR (including undistributed net investment
income of $210,536 and $100,198, respectively) $241,598,571 $236,333,481
NUMBER OF FUND SHARES
- -----------------------------------------------------------------------------------------
Common shares outstanding at beginning of year 21,198,632 20,924,115
- -----------------------------------------------------------------------------------------
Common shares issued in connection with
reinvestment of distributions 259,792 274,517
- -----------------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING AT END OF YEAR 21,458,424 21,198,632
- -----------------------------------------------------------------------------------------
REMARKETED PREFERRED SHARES OUTSTANDING AT
BEGINNING AND END OF YEAR 900 900
- -----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
YEAR ENDED MARCH 31
- ------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR
(common shares) $9.03 $9.23 $9.49 $8.99 $8.85
- ------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income .80 .81 .81 .86 .84
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments .13 (.19) (.27) .51 .22
- ------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .93 .62 .54 1.37 1.06
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------
From net investment income:
- ------------------------------------------------------------------------------------------------------
To preferred shareholders (.08) (.07) (.05) (.06) (.06)+
- ------------------------------------------------------------------------------------------------------
To common shareholders (.72) (.75) (.75) (.81) (.81)
- ------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.80) (.82) (.80) (.87) (.87)
- ------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- -- -- (.05)
- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR
(common shares) $9.16 $9.03 $9.23 $9.49 $8.99
- ------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF YEAR
(common shares) $10.00 $9.50 $9.25 $10.50 $9.88
- ------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT MARKET VALUE (%)
(common shares)(a) 13.60 11.50 (4.99) 15.48 18.15
- ------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(total fund) (in thousands) $241,599 $236,333 $238,148 $241,187 $228,735
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) (b)(c) 1.17 1.17 1.17 1.17 1.13
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) (b) 7.79 8.27 7.97 8.58 8.77
- ------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 34.45 49.11 28.55 53.89 62.28
- ------------------------------------------------------------------------------------------------------
<FN>
+ 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 includes amounts
paid through expense offset arrangements. Prior period ratios exclude these amounts. (See Note 3.)
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
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 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.
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 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 DATE
- -------------------------------------
$ 228,000 March 31, 1999
64,000 March 31, 2002
3,642,000 March 31, 2003
1,308,000 March 31, 2004
<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 seven day period. The applicable dividend rate for the remarketed preferred
shares on March 31, 1996 is 3.49%.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
These differences include treatment of market discount, defaulted bond interest
and the utilization of capital loss carryover. Reclassifications are made to the
fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. For the
year ended March 31, 1996, the fund reclassified $62,796 to increase
undistributed net investment income and $35 to decrease paid-in-capital, with an
increase to accumulated net realized loss of $62,761. The calculation of net
investment income per share in the financial highlights table excludes these
adjustments.
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. Original issue discounts are 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.
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 March 31,
1996, no such restrictions have been placed on the fund.
<PAGE>
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
period plus any expenses attributable to remarketed preferred shares for that
period exceed the fund's net income attributable to the proceeds of the
remarketed preferred shares 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.
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 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 year ended March 31, 1996, fund expenses were reduced by $70,214 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 the assets utilized in connection with the expense offset
arrangements in an income producing asset if it had not entered into such
arrangements.
NOTE 4
PURCHASES AND SALES OF SECURITIES
During the year ended March 31, 1996, purchases and sales of investment
securities other than short-term investments aggregated $81,268,500 and
$80,512,280, 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.
<PAGE>
FEDERAL TAX INFORMATION
(Unaudited)
The fund has designated 100% of dividends paid from net investment income during
the fiscal year as tax exempt for Federal income tax purposes.
The Form 1099 you receive in January 1997 will show the tax status of all
distributions paid to your account in calendar 1996.
<PAGE>
<TABLE>
SELECTED QUARTERLY DATA
(Unaudited)
Available to common shareholders
NET REALIZED NET INCREASE
AND UNREALIZED (DECREASE)
INVESTMENT NET INVESTMENT GAIN (LOSS) IN NET ASSETS
INCOME INCOME* ON INVESTMENTS* FROM OPERATIONS*
PER PER PER PER
QUARTER COMMON COMMON COMMON COMMON
ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3/31/96 $4,888,542 $.23 $3,940,510 $.18 $(4,329,140) $(.19) $ (388,630) $(.01)
12/31/95 4,764,936 .22 3,756,903 .18 4,155,915 .19 7,912,818 .37
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)
* Available to common shareholders.
</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
John D. Hughes
CUSTODIAN Senior Vice President and Treasurer
Putnam Fiduciary Trust Company
Lawrence J. Lasser
LEGAL COUNSEL Vice President
Ropes & Gray
Gordon H. Silver
INDEPENDENT ACCOUNTANTS Vice President
Price Waterhouse LLP
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
Leslie J. Burke
John A. Hill Vice President and Fund Manager
Elizabeth T. Kennan William N. Shiebler
Vice President
Lawrence J. Lasser
John R. Verani
Robert E. Patterson Vice President
Donald S. Perkins Paul M. O'Neil
Vice President
George Putnam, III
Beverly Marcus
Eli Shapiro Clerk and Assistant Treasurer
A.J.C. Smith
W. Nicholas Thorndike
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 net asset value.
<PAGE>
[LOGO: PUTNAM INVESTMENTS] -------------
Bulk Rate
THE PUTNAM FUNDS U.S. Postage
One Post Office Square PAID
Boston, Massachusetts 02109 Putnam
Investments
-------------
24531-054 5/96
