PUTNAM HIGH YIELD MUNICIPAL TRUST, N-30D, 1997-05-30

PUTNAM HIGH YIELD MUNICIPAL TRUST
N-30D, 1997-05-30

Previous: PUTNAM HIGH YIELD MUNICIPAL TRUST, NSAR-B, 1997-05-30

Next: BEST COLLATERAL INC, 10KSB40, 1997-05-30

Putnam
High Yield
Municipal
Trust

ANNUAL REPORT
March 31, 1997

[LOGO: BOSTON * LONDON * TOKYO]

Fund highlights

* "The name of the game with this fund is balance. We're trying to
achieve balance between risk and reward, between income and total
return, and between opportunistic investing and stable net asset
value. The key to it all is a highly disciplined, team-oriented,
value-focused investing process that emphasizes the outperformance
of individual securities in the portfolio."

-- Blake E. Anderson, manager,
Putnam High Yield Municipal Trust

* "Based on tax-equivalent yields alone, muni funds easily outshine
most taxable bond funds."

-- Morningstar Mutual Funds, March 1997

CONTENTS

4 Report from Putnam Management

8 Fund performance summary

12 Portfolio holdings

17 Financial statements

25 Results of October 31, 1996 shareholder meeting

From the Chairman

[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa

Dear Shareholder:

The Federal Reserve Board's increase in the federal funds rate just
before the end of Putnam High Yield Municipal Trust's fiscal year was
hardly a surprise to your fund's management team. The portfolio had
already been positioned defensively in response to the unsettled market
environment that had prevailed during much of the period.

Besides taking several defensive actions, the team, including newly
appointed Fund Manager Blake Anderson, has been seeking investments in
industry sectors likely to benefit from a strong economy. As a result,
Blake believes the portfolio is positioned not only to weather continued
market volatility but also to benefit from what, in his view, will be
sustained strong demand for municipal bonds.

Blake has been with Putnam since 1987 and also serves as director of
tax-exempt credit research. He has 10 years of investment experience. In
the following report, he reviews your fund's fiscal 1997 performance and
presents his views on prospects for the year ahead.

Respectfully yours,

/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 21, 1997

Report from the Fund Manager
Blake E. Anderson

Putnam High Yield Municipal Trust concluded its fiscal year on a
positive note, as in-depth credit research and a steady focus on the
relative value and credit fundamentals of individual securities drove
the fund's successful performance. For the 12 months ended March 31,
1997, the fund earned total returns of 7.10% at net asset value and
10.26% at market price.

* RISING INTEREST RATES, STRENGTHENING ECONOMY CHALLENGE BOND MARKET

The past year has been a somewhat difficult period for the bond market
as a whole, with market psychology dominated by fears of higher
inflation brought on by the economy's relentless strength. As bond
investors tried to anticipate if, when, and how much the Federal Reserve
Board would raise short-term interest rates, prices of fixed-income
investments fluctuated up and down. The changes were most pronounced at
the short-term end of the market, where fears of inflation drove up
rates more quickly than in the longer end of the yield curve. The big
question on everyone's mind: Is this economic recovery different from
others or will today's near-full employment and high industrial capacity
utilization lead to inflation as past recoveries have?

The Fed kept the market guessing for much of the period, meeting time
and again without adjusting monetary policy. Finally, at its March 25
session, the board chose action over words, raising short-term interest
rates by a quarter of a percentage point. Yet despite all the bond
market's concern over inflation, yields remained range bound throughout
the fund's fiscal year, as evidenced by the 30-year Treasury bond, whose
yield fluctuated between 6.75% and 7.12% over the period.

* MUNICIPALS OUTPERFORM TAXABLE BONDS OVER PERIOD

Amid these choppy market conditions, municipal bond investments
generally outperformed their taxable counterparts. The fading prominence
of last year's flat-tax proposals explains some of this outperformance,
although favorable supply and demand trends probably account for much
more. Over the past year, insurance companies have become large buyers
of municipal bonds, keeping demand high. Issuers have continued to meet
the demand by structuring municipal offerings with terms that are
especially attractive to the insurance companies, who are interested
mainly in high quality intermediate-term securities. The result has been
strong municipal market performance, especially relative to the market
for similar taxable investments.

* DEFENSIVE "BARBELL" STRUCTURE BENEFITS FUND

The strengthening economy has also helped compress credit quality
spreads between various sectors of the municipal market. Lower-rated
securities have been outperforming other credits as the growing economy
has bolstered the financial standing of many of their issuers. The
result has meant increased demand for these higher-yielding investments.
For some issuers, the stronger bottom lines have led to improved credit
ratings.

With only a narrow gap between yields on lower-rated and investment-
grade bonds, high-yield bond investors are pursuing a lower level of
potential reward for the additional risk they assume. So, in order to
take full advantage of these narrower credit quality spreads, we have
shaped the portfolio into a barbell configuration. By selectively
selling Baa-rated credits in the paper, steel, and pollution control
industries, we have concentrated holdings in the highest-yielding
credits at one end and the highest-quality issues at the other. This
defensive strategy is designed to generate the greatest possible amount
of tax-free current income while protecting the fund's net asset value.

[GRAPHIC OMITTED: pie chart: CREDIT QUALITY OVERVIEW]

CREDIT QUALITY OVERVIEW*

Below B -- 1.0%
B -- 20.5%
Ba -- 24.4%
Baa -- 25.8%
A -- 1.4%
Aa -- 0.4%
Aaa -- 24.5%
VMIGI -- 2.0%

Footnote reads:
* As a percentage of market value as of 3/31/97. All ratings reflect
Moody's descriptions, unless noted otherwise; percentages may include
unrated bonds considered by Putnam Management to be of comparable
quality. Ratings will vary over time.

For the higher-yielding securities that form the majority of your fund's
holdings, Putnam's credit research capability continues to play an
essential role in identifying appropriate issues. Through diligent
research and analysis, we have been able to identify securities with
strong credit fundamentals that also pay the highest possible rate of
income. Because these securities trade on their own credit quality and
structural merits, they are less sensitive than other high-yield
investments to interest-rate movements.

Among these high-yield issues, the fund's holdings in health care have
been particularly strong performers during the period. This sector
benefited substantially from the compression of credit quality spreads,
as increased investor demand for these high-coupon bonds has driven up
their value.

Two of the portfolio's larger high-yield transportation holdings have
also provided significant boosts to the fund's income stream. The first
was the Hammond, Indiana, Port Authority, which substantially enhanced
its bonds' revenue stream as a result of huge payments received by a
gaming boat docked in the community's harbor. The second was Denver
International Airport, which has become a critical airline hub and
continues to exceed all financial projections. Denver's success has
translated into significant revenue enhancements for bondholders.

At the high-quality end of the barbell, state general obligation bonds
from New York and Pennsylvania continue to play an important role. In
our opinion, the normal price relationship between municipal bonds and
Treasuries should re-establish itself over the next several months, as
interest rates rise and the economy slows. When this happens, higher-
grade municipal bonds like these have the opportunity to outperform the
market at large as a result of their greater liquidity and solid credit
quality fundamentals.

* FOCUS ON DEFENSIVE STRUCTURE, HIGH INCOME TO CONTINUE

One key aspect of the fund's defensive posture has been its duration,
which was approximately a half year shorter than the duration of the
average municipal bond fund at the close of the fiscal year. Duration is
a measure of the price sensitivity of a portfolio of bonds to changes in
interest rates. Like maturity, with which it is often confused, duration
is measured in years.

[GRAPHIC OMITTED: TOP 10 HOLDINGS]

TOP 10 HOLDINGS

Iowa Financing Authority Health Care Facility
9.25%, 7/1/25

Pennsylvania State Economic Development Financing Authority Recycling
9.25%, 1/1/22

Los Angeles (California) Regional Airports Improvement Corp.
9.25%, 8/1/24

Port Corpus Christi (Texas) Industrial Development Corp.
10.25%, 6/1/17

Denver (Colorado) City and County Airport
8.50%, 11/15/23

Butler (Alabama) Industrial Development Board
8.00%, 9/1/28

Massachusetts Port Authority Special Project
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 29.6% of the fund's assets as of 3/31/97.
Portfolio holdings will vary over time.

In a rising interest-rate environment, a shorter duration helps protect
the fund's net asset value by cushioning the effect of interest-rate
changes.

In the coming months, we expect to see additional Fed action to raise
short-term interest rates. If this strategy achieves its intended
effect, the economy will eventually slow. In the meantime, we plan to
hold steady in our defensive positioning and emphasis on high current
income as we work to cushion the fund's net asset value against a backup
in interest rates. Once the interest-rate cycle peaks, we will look for
opportunities to lock in the higher rates through the purchase of
longer-term securities. Until then, however, we intend to remain focused
on increasing the portfolio's call protection while optimizing the
credit quality and structure of each portfolio holding.

The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. While these holdings and others
discussed in the report were viewed favorably as of 3/31/97, all are
subject to review and adjustment in accordance with the fund's
investment strategy and may well vary in the future. The fund invests in
lower-rated, high-yield debt securities. The lower ratings reflect a
great 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 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 3/31/97
(common shares)

Lehman Bros. Consumer
Market Municipal Price
NAV price Bond Index Index
- ----------------------------------------------------------------
1 year 7.10% 10.26% 5.47% 2.76%
- ----------------------------------------------------------------
5 years 49.75 53.22 41.42 14.86
Annual average 8.41 8.91 7.18 2.81
- ----------------------------------------------------------------
Life of fund (5/25/89) 84.80 92.33 79.73 29.24
Annual average 8.14 8.69 7.77 3.32
- ----------------------------------------------------------------

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
12 months ended 3/31/97

- ---------------------------------------------------
Distributions (common shares)
- ---------------------------------------------------
Number 12
- ---------------------------------------------------
Income1 $0.69
- ---------------------------------------------------
Capital gains1 --
- ---------------------------------------------------
Total $0.69
- ---------------------------------------------------
Preferred shares Series A (900 shares)
- ---------------------------------------------------
Income1 $1,753.30
- ---------------------------------------------------
Capital gains --
- ---------------------------------------------------
Total $1,753.30
- ---------------------------------------------------
Share value
(common shares): NAV Market price
- ---------------------------------------------------
3/31/96 $9.16 $10.000
- ---------------------------------------------------
3/31/97 9.12 10.250
- ---------------------------------------------------
Current return
(common shares): NAV Market price
- ---------------------------------------------------
End of period
- ---------------------------------------------------
Current dividend rate2 7.57% 6.73%
- ---------------------------------------------------
Taxable equivalent3 12.53 11.14
- ---------------------------------------------------

1 Capital gains, if any, are taxable for federal and,
in most cases, state tax purposes. For some investors,
investment income may also be subject to the federal
alternative minimum tax. Investment income may be subject
to state and local taxes.

2 Income portion of most recent distribution, annualized and
divided by NAV or market price at end of period.

3 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 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.

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, 1997, and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the fund's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at March 31, 1997 by correspondence
with the custodian and broker, provide a reasonable basis for the
opinion expressed above.

Price Waterhouse LLP
Boston, Massachusetts
May 12, 1997

Portfolio of investments owned
March 31, 1997

Key to Abbreviations
AMBAC - AMBAC Indemnity Corporation
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Company
FNMA Coll. - Federal National Mortgage Association Collateralized
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
SPA - Stand-by Purchase Agreement
VRDN - Variable Rate Demand Notes

MUNICIPAL BONDS AND NOTES (98.2%) *
PRINCIPAL AMOUNT RATING** VALUE

<S> <C> <C> <C>
Alabama (2.6%)
- ------------------------------------------------------------------------------------------------------------
$ 5,750,000 Butler, Indl. Dev. Board Rev. Bonds (Solid Waste
Disp. James River Corp.), 8s, 9/1/28 BBB $ 6,440,000

Arizona (1.4%)
- ------------------------------------------------------------------------------------------------------------
3,000,000 Tucson, Arpt. Auth. Special Fac. Rev. Bonds
(Lockheed Aermod Ctr. Inc.), 8.7s, 9/1/19 A 3,371,250

California (7.3%)
- ------------------------------------------------------------------------------------------------------------
5,535,000 CA Hlth. Fac. Auth. Rev. Bonds (Valley Presbyterian
Hosp.), Ser. A, 9s, 5/1/12 BB 5,539,705
5,700,000 CA Statewide Cmntys. Dev. Auth. IF COP (Motion
Picture & TV Fund), AMBAC, 6.01s, 1/1/22 AAA 4,581,375
6,415,000 Los Angeles, Regl. Arpts. Impt. Corp Rev. Bonds
(Continental Airlines), 9 1/4s, 8/1/24 B/P 7,601,775
--------------
17,722,855

Colorado (5.4%)
- ------------------------------------------------------------------------------------------------------------
Denver City & Cnty. Arpt. Rev. Bonds, Ser. A
5,000,000 8 3/4s, 11/15/23 Baa 5,843,750
6,350,000 MBIA, 8 1/2s, 11/15/23 AAA 7,246,936
--------------
13,090,686

Georgia (3.1%)
- ------------------------------------------------------------------------------------------------------------
3,025,000 De Kalb Cnty., Hsg. Auth. Muni Rev. Bonds
(Briarcliff Park Apts.), Ser. B, 10s, 4/1/17 B/P 3,142,219
3,900,000 GA Med. Ctr. Hosp. Auth. IFB (Columbus Regl.
Hlth. Care Syst.), Ser. B, MBIA, 8.851s, 8/1/10 AAA 4,309,500
--------------
7,451,719
Illinois (5.3%)
- ------------------------------------------------------------------------------------------------------------
Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds
1,393,000 (United Air Lines, Inc.), Ser. B, 8.95s, 5/1/18 Baa 1,561,901
1,800,000 (United Air Lines, Inc.), Ser. 84A, 8.85s, 5/1/18 Baa 2,011,500
4,250,000 (American Airlines Inc.), 8.2s, 12/1/24 Baa 4,924,688
2,355,000 IL Dev. Fin. Auth. Rev. Bonds (Cmnty. Rehab Fac.),
Ser. A, 7 7/8s, 7/1/20 BB/P 2,302,013
1,970,000 IL Edl. Fac. Auth. Rev. Bonds (Steppenwolf Theatre),
9.65s, 7/1/19 BB/P 2,054,887
--------------
12,854,989

Indiana (2.5%)
- ------------------------------------------------------------------------------------------------------------
5,544,938 Hammond, Indl. Port Auth. COP, 9.65s, 6/1/14 BB/P 5,974,672

Iowa (4.3%)
- ------------------------------------------------------------------------------------------------------------
8,500,000 IA Fin. Auth. Hlth. Care Fac. Rev. Bonds
(Care Initiatives), 9 1/4s, 7/1/25 BB/P 10,359,375

Kentucky (0.6%)
- ------------------------------------------------------------------------------------------------------------
1,470,000 Jefferson Cnty., 1st Mtge. Rev. Bonds
(AHF/KY-IOWA Inc.), 10 1/4s, 1/1/20 B/P 1,521,450

Louisiana (6.4%)
- ------------------------------------------------------------------------------------------------------------
5,000,000 Hodge, Combined Util. Rev. Bonds
(Stone Container Corp.), 9s, 3/1/10 B/P 5,443,750
LA Pub. Fac. Auth. 1st Mtge. Rev. Bonds
1,912,898 (Emily Morten Foundation), 10 1/4s, 5/1/19 B/P 2,030,063
2,500,000 (St. James Place), 10s, 11/1/21 B/P 2,743,750
2,000,000 St. Charles Parish, Poll. Control Rev. Bonds
(LA Pwr. & Lt.), 8 1/4s, 6/1/14 Baa 2,157,500
3,000,000 W. Feliciana Parish Poll. Control Rev. Bonds
(Gulf States Utils.), 8s, 12/1/24 Baa 3,198,750
--------------
15,573,813

Massachusetts (14.1%)
- ------------------------------------------------------------------------------------------------------------
MA State Hlth. & Edl. Fac. Auth. IFB
3,000,000 (St. Elizabeth Hosp.), Ser. E, FSA, 10.03s, 8/15/21 Aaa 3,367,500
2,000,000 (New England Medical Ctr.), MBIA, 6.98s, 7/1/18 Aaa 1,705,000
MA State Indl. Fin. Agcy. Res. Recvy. Rev. Bonds
(Southeastern MA)
1,500,000 Ser. B 9 1/4s, 7/1/15 BB/P 1,698,750
3,500,000 Ser. A, 9s, 7/1/15 BB/P 3,955,000
MA State Indl. Fin. Agcy. Rev. Bonds
950,000 (Odd Fellows Home of MA), 9.6s, 1/1/15 BB/P 1,011,750
4,500,000 (Orchard Cove Inc.), 9s, 5/1/22 BB/P 5,405,625
4,250,000 (Emerson College), 8.9s, 1/1/18 BB/P 4,653,750
3,400,000 (Evanswood Bethzatha), 7.85s, 1/15/17 B/P 3,400,000
2,445,000 MA State Indl. Fin. Agcy. Tunnel Rev. Bonds
(Mass Tpk.,), 9s, 10/1/20 AAA/P 2,814,806
5,800,000 MA State Port Auth. Special Project Rev. Bonds
(Harborside Hyatt), 10s, 3/1/26 B/P 6,300,250
--------------
34,312,431

Michigan (4.3%)
- ------------------------------------------------------------------------------------------------------------
2,763,000 Detroit, Hosp. Fac. Fin. Auth. Rev. Bonds
(MI Hlth. Care Corp.), 10s, 12/1/20 (In default) + Caa 538,785
2,635,000 Detroit, Loc. Dev. Fin. Auth. Tax Increment
Rev. Bonds, Ser. A, 9 1/2s, 5/1/21 BBB/P 3,201,525
960,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds
(MI Hlth. Care Corp.), 9.1s, 12/1/14 (In default) + CAA/P 187,200
4,900,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds
(Mercy Svcs. for Aging), 9.4s, 5/15/20 BBB/P 5,451,250
1,000,000 Midland Cnty., Econ. Dev. Corp. Poll. Control
Rev. Bonds, Ser. B, 9 1/2s, 7/23/09 B/P 1,087,500
--------------
10,466,260

Mississippi (1.4%)
- ------------------------------------------------------------------------------------------------------------
3,035,000 Claiborne Cnty., Poll. Control Rev. Bonds (Middle
South Energy, Inc.), Ser. C, 9 7/8s, 12/1/14 Ba 3,323,325

Missouri (2.1%)
- ------------------------------------------------------------------------------------------------------------
4,800,000 Kansas City, Indl. Dev. Auth. Hlth. Fac. Rev. Bonds
(Park Lane Med. Ctr.), 8 3/4s, 1/1/15 BB/P 5,100,000

Nebraska (0.5%)
- ------------------------------------------------------------------------------------------------------------
1,000,000 NE Investment Fin. Auth. Hosp. IFB, MBIA,
9.477s, 12/8/16 AAA 1,125,000

New Hampshire (3.1%)
- ------------------------------------------------------------------------------------------------------------
1,895,000 NH Higher Edl. & Hlth. Fac. Auth. Rev. Bonds
(Havenwood-Heritage Heights), 9 3/4s, 12/1/19 AAA/P 2,183,988
1,500,000 NH State Bus. Fin. Auth. Swr. & Solid Waste
Rev. Bonds, 7 7/8s, 7/1/26 BB/P 1,588,125
3,500,000 NH State Indl. Dev. Auth. Poll. Control Rev. Bonds
(United Illuminating Co.), Ser. B, 10 3/4s, 10/1/12 BBB 3,696,280
--------------
7,468,393

New York (7.1%)
- ------------------------------------------------------------------------------------------------------------
700,000 NY State Dorm. Auth. VRDN (Osborn
Mem. Home), Ser. A, 4.9s, 7/1/24 VMIG1 700,000
2,350,000 NY State Energy Research & Dev. Auth.
Poll. Control IFB, FGIC, 10.33s, 7/1/29
(acquired 12/1/94, cost $2,453,729)[DBL. DAGGERS] AAA 2,861,125
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 4,310,000
3,000,000 NY State Hsg. Fin. Agcy. Svcs. Contract Oblig.
Rev. Bonds, Ser. A, 7 3/8s, 9/15/21 AAA 3,378,750
NY State Local Govt. Assistance Corp. Rev. Bonds
1,500,000 Ser. A, 7s, 4/1/16 AAA 1,648,125
2,000,000 Ser. D, 6 3/4s, 4/1/21 AAA 2,200,000
1,000,000 Port Auth NY & NJ Special Oblig. Rev. Bonds
(Continental/Eastern Laguardia), 9 1/8s, 12/1/15 B 1,130,000
1,000,000 Triborough Bridge & Tunnel Auth. Special Oblig.
VRDN, FGIC, SPA, 3.20s, 1/01/24 VMIGI 1,000,000
--------------
17,228,000

Ohio (2.1%)
- ------------------------------------------------------------------------------------------------------------
4,550,000 Dayton, Special Fac. Rev. Bonds (Emery Air
Freight Corp.), Ser. A, 12 1/2s, 10/1/09 BB/P 5,084,625

Oregon (1.2%)
- ------------------------------------------------------------------------------------------------------------
3,000,000 Oregon State VRDN, Ser. 73G, 3.4s, 12/1/18 VMIGI 3,000,000

Pennsylvania (9.8%)
- ------------------------------------------------------------------------------------------------------------
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 312,550
2,000,000 Montgomery Cnty., Higher Edl. & Hlth. Auth. Hosp.
Rev. Bonds (United Hosp. Inc.), Ser. A,
8 3/8s, 11/1/11 AAA 2,217,500
3,250,000 PA Econ. Dev. Fin. Auth. Rev. Bonds (MacMillan Ltd.
Partnership), 7.6s, 12/1/20 Baa 3,595,313
10,000,000 PA Econ. Dev. Fin. Auth. Recycling Rev. Bonds
(Ponderosa Fibres), Ser. A, 9 1/4s, 1/1/22 B/P 8,937,500
2,500,000 PA State Higher Edl. Assistance Agcy. Student
Loan IFB, AMBAC, 9.863s, 9/3/26 AAA 2,800,000
2,100,000 Philadelphia, Muni. Auth. Rev. Bonds (Justice Lease),
Ser. C, 8 5/8s, 11/15/16 AAA 2,459,625
3,400,000 Philadelphia, Regl. Port Auth. Lease IFB, MBIA,
8.53s, 9/1/13 AAA 3,565,750
--------------
23,888,238

Texas (9.9%)
- ------------------------------------------------------------------------------------------------------------
2,500,000 Alliance, Arpt. Auth. Special Fac. Rev. Bonds
(American Airlines, Inc.), 7 1/2s, 12/1/29 Baa 2,659,375
730,000 Cherokee Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds
(Nancy Travis Memorial Hosp.), 10s, 5/15/13 B/P 793,875
200,000 Houston, Arpt. Syst. Special Fac. Rev. Bonds
(Continental Airlines), Ser. B, 6 1/8s, 7/15/27## Ba 190,000
2,855,393 Maverick Cnty., COP (Jail Facility), 9.1s, 6/15/10 CCC/P 1,713,236
Port Corpus Christi, Indl. Dev. Corp. Rev. Bonds
(Valero Refining & Marketing Co.)
5,500,000 Ser. B, 10 5/8s, 6/1/08 Baa 5,715,765
7,230,000 Ser. A, 10 1/4s, 6/1/17 Baa 7,508,138
4,800,000 TX State Hsg. & Cmnty. Affairs Home Mtge. IFB,
Ser. C, FNMA Coll. GNMA Coll, 9.987s, 7/2/24 AAA 5,496,000
--------------
24,076,389
Utah (1.5%)
- ------------------------------------------------------------------------------------------------------------
3,300,000 Carbon Cnty., Util. Rev. Bonds (Solid Waste
Disposal Laidlaw), Ser. A, 7 1/2s, 2/1/10 Baa 3,597,000

Washington (1.8%)
- ------------------------------------------------------------------------------------------------------------
5,000,000 Port Walla Walla, Pub. Corp. Solid Waste Recycling
Rev. Bonds (Ponderosa Fibres), 9 1/8s, 1/1/26 B/P 4,400,000

Wisconsin (0.4%)
- ------------------------------------------------------------------------------------------------------------
865,000 WI Hsg. & Econ. Dev. Auth. IFB Home Ownership,
10.006s, 10/25/22 AA 937,444
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $237,216,550) *** $ 238,367,914
- ------------------------------------------------------------------------------------------------------------

* Percentages indicated are based on net assets of $242,836,355.

** The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
March 31, 1997 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, 1997. Securities rated by Putnam are indicated by "/P" and are not publicly rated.

The table below shows the percentage of the fund's investments on March 31, 1997 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
Rating fund's net assets fund's net assets

AAA/Aaa 21.9% 2.1%
AA/Aa 0.4 --
A/A 1.4 --
BBB/Baa 21.8 3.6
BB/Ba 3.7 20.3
B/B 0.6 19.5
Caa/CCC 0.2 0.8
Ca/CC -- --
C -- --
D -- --
A-1/VMIGI 1.9 --
---- ----
51.9% 46.3%

Ratings are not covered by the Report of independent accountants.

+ Non-income producing security

[DOUBLE DAGGER] 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, 1997 was $2,861,125 or 1.2% of net assets.

## When-issued securities (Note 1).

The fund had the following industry concentrations greater than 10% of
net assets at March 31, 1997:

Transportation Industries 26.7%
Hospitals/Health Care 24.2
Paper/Forest Products 12.5

*** The aggregate identified cost for federal income tax purposes is $237,216,550, resulting
in gross unrealized appreciation and depreciation of $12,184,552 and $11,033,188, respectively,
or net unrealized appreciation of $1,151,364.

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 March 31, 1997.

The accompanying notes are an integral part of these financial statements.

</TABLE>

Statement of assets and liabilities
March 31, 1997

<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $237,216,550)(Note 1) $ 238,367,914
- ---------------------------------------------------------------------------------------------------
Cash 978,523
- ---------------------------------------------------------------------------------------------------
Interest receivable 5,407,995
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 60,000
- ---------------------------------------------------------------------------------------------------
Total assets 244,814,432

Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 1,246,570
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 193,065
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 412,579
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 34,348
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 5,178
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,810
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 84,527
- ---------------------------------------------------------------------------------------------------
Total liabilities 1,978,077
- ---------------------------------------------------------------------------------------------------
Net assets $ 242,836,355

Represented by
- ---------------------------------------------------------------------------------------------------
Series A remarketed preferred shares (8,000 shares authorized;
900 shares issued at $50,000 per share) (Note 4) $ 45,000,000
- ---------------------------------------------------------------------------------------------------
Paid in capital-common shares 199,935,297
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,192,763
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (4,443,069)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,151,364
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $ 242,836,355

Computation of net asset value:
- ---------------------------------------------------------------------------------------------------
Series A remarketed preferred shares $ 45,000,000
- ---------------------------------------------------------------------------------------------------
Cumulative undeclared dividends on
Series A remarketed preferred shares 22,191
- ---------------------------------------------------------------------------------------------------
Net assets allocated to Series A remarketed preferred shares-
liquidation preference $ 45,022,191
- ---------------------------------------------------------------------------------------------------
Net assets available to common shares $ 197,814,164
- ---------------------------------------------------------------------------------------------------
Net asset value per common share
($197,814,164 divided by 21,679,818 shares) $ 9.12
- ---------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.

</TABLE>

Statement of operations
Year ended March 31, 1997

<S> <C>
Tax exempt interest income: $ 19,649,975
- --------------------------------------------------------------------------------------------------

Expenses:
Compensation of Manager (Note 2) 1,695,142
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 211,589
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 18,593
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,393
- --------------------------------------------------------------------------------------------------
Reports to shareholders 38,926
- --------------------------------------------------------------------------------------------------
Auditing 53,099
- --------------------------------------------------------------------------------------------------
Legal 17,184
- --------------------------------------------------------------------------------------------------
Postage 45,164
- --------------------------------------------------------------------------------------------------
Exchange listing fees 33,538
- --------------------------------------------------------------------------------------------------
Preferred share remarketing agent fees 127,220
- --------------------------------------------------------------------------------------------------
Other 16,965
- --------------------------------------------------------------------------------------------------
Total expenses 2,264,813
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (65,679)
- --------------------------------------------------------------------------------------------------
Net expenses 2,199,134
- --------------------------------------------------------------------------------------------------
Net investment income 17,450,841
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 768,165
- --------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 32,162
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (2,627,862)
- --------------------------------------------------------------------------------------------------
Net loss on investments (1,827,535)
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 15,623,306
- --------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.

</TABLE>

Statement of changes in net assets

Year ended March 31
--------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 17,450,841 $ 17,050,928
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 800,327 1,740,824
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments (2,627,862) 1,057,318
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 15,623,306 19,849,070
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Series A remarketed preferred
shareholders from net investment income (1,577,970) (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 14,045,336 18,102,314
- ----------------------------------------------------------------------------------------------------------------------
Distributions to common shareholders from
net investment income (14,890,644) (15,256,630)
- ----------------------------------------------------------------------------------------------------------------------
Increase from issuance of common shares in
connection with reinvestment of distributions 2,083,092 2,419,406
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 1,237,784 5,265,090

Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 241,598,571 236,333,481
- ----------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $1,192,763 and $210,536, respectively) 242,836,355 241,598,571

Number of fund shares
- ----------------------------------------------------------------------------------------------------------------------
Common shares outstanding at beginning of year 21,458,424 21,198,632
- ----------------------------------------------------------------------------------------------------------------------
Shares issued in connection with reinvestment of distributions 221,394 259,792
- ----------------------------------------------------------------------------------------------------------------------
Common shares outstanding at end of year 21,679,818 21,458,424
- ----------------------------------------------------------------------------------------------------------------------
Remarketed preferred shares outstanding at
beginning and end of year 900 900
- ----------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.

</TABLE>

Financial highlights
(For a share outstanding throughout the period)

- ---------------------------------------------------------------------------------------------------------------------
Year ended March 31
- ---------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period (common sh $9.16 $9.03 $9.23 $9.49 $8.99
- ---------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .80 .80 .81 .81 .86
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.08) .13 (.19) (.27) .51
- ---------------------------------------------------------------------------------------------------------------------
Total from
investment operations .72 .93 .62 .54 1.37
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------
From net
investment income:
- ---------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.07) (.08) (.07) (.05) (.06)
- ---------------------------------------------------------------------------------------------------------------------
To common shareholders (.69) (.72) (.75) (.75) (.81)
- ---------------------------------------------------------------------------------------------------------------------
Total distributions (.76) (.80) (.82) (.80) (.87)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period (common shares) $9.12 $9.16 $9.03 $9.23 $9.49
- ---------------------------------------------------------------------------------------------------------------------
Market value,
end of period (common shares) $10.25 $10.00 $9.50 $9.25 $10.50
- ---------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------
Total investment return at
market value (%)(common shares)(a) 10.26 13.60 11.50 (4.99) 15.48
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(total fund) (in thousands) $242,836 $241,599 $236,333 $238,148 $241,187
- ---------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) 1.15 1.17 1.17 1.17 1.17
- ---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(b) 8.05 7.79 8.27 7.97 8.58
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 9.30 34.45 49.11 28.55 53.89
- ---------------------------------------------------------------------------------------------------------------------

(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>

Note 1
Significant accounting policies

Putnam High Yield Municipal Trust (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. Securities
purchased or sold on a when-issued or delayed delivery basis may be settled a
month or more after the trade date; interest income is accrued based on the
terms of the security. Losses may arise due to changes in the market value of
the underlying securities or if the counterparty does not perform under the
contract.

C) 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 nor for excise tax
on income and capital gains.

At March 31, 1997, the fund had a capital loss carryover of approximately
$4,443,000 available to offset future capital gains, if any. The amount of the
carryover and the expiration dates are:

Loss Carryover Expiration
- ----------------------------------
$3,135,000 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 March 31, 1997 was 3.6%. 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 defaulted bond interest.
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, 1997, there were no
reclassifications. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.

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
the liquidation preference 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. Discounts on zero coupon bonds and
original issue discounts are accreted according to the effective yield method.

G) Futures and options contracts. The fund may use futures and options
contracts to hedge against changes in the values of securities the fund owns
or expects to purchase. The fund may also write options on securities it owns
or in which it may invest to increase its current returns.

The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of the
underlying instruments, if there is an illquid secondary market for the
contracts, or if the counterparty to the contract is unable to perform.

Futures contracts are valued at the quoted daily settlement prices established
by the exchange on which they trade. Exchange traded options are valued at the
last sale price, or if no sales are reported, the last bid price for purchased
options and the last ask price for written options. Options traded
over-the-counter are valued using prices supplied by dealers.

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 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 Management for that period will be reduced by the amount of the excess
(but not more than .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 year ended March 31, 1997, fund expenses were reduced by $65,679 under
expense offset arrangements with PFTC and brokerage service arrangements.
Investor servicing and custodian fees reported in the Statement of operations
exclude these credits. The fund could have invested a portion of the assets
utilized in connection with the 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 $580 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.

The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.

Note 3
Purchase and sales of securities

During the year ended March 31, 1997, purchases and sales of investment
securities other than short-term investments aggregated $22,503,891 and
$21,842,619, 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 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, 1997, no such restrictions have been placed on the fund.

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 1998 will show the tax status of
all distributions paid to your account in calendar 1997.

Results of October 31, 1996 shareholder meeting
(Unaudited)

A meeting of shareholders of the fund was held on October 31, 1996. At the
meeting, each of the nominees for Trustees was elected, as follows:

Common Shares Preferred Shares
Votes Votes
Votes for withheld Votes for withheld

<S> <C> <C> <C> <C>
Jameson Adkins Baxter 13,356,513 348,466 559 0
Hans H. Estin 13,354,613 350,366 559 0
R.J. Jackson 13,357,413 347,566 559 0
Elizabeth T. Kennan 13,358,513 346,466 559 0
Lawrence J. Lasser 13,356,513 348,466 559 0
Donald S. Perkins 13,353,613 351,366 559 0
William F. Pounds 13,356,613 348,366 559 0
George Putnam 13,351,013 353,966 559 0
George Putnam, III 13,356,613 348,366 559 0
Eli Shapiro 13,350,528 354,451 559 0
A.J.C. Smith 13,354,513 350,466 559 0
W. Nicholas Thorndike 13,353,513 351,466 559 0

</TABLE>

- -----------------------------------------------------------------------------------------------------------------------
Common Shares Preferred shares
- -----------------------------------------------------------------------------------------------------------------------
Abstentions Abstentions
Votes Votes and BrokerVotes Votes Votes and Broker
For Against Non-Votes For Against Non-Votes
- -----------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction with
respect to concentration of its assets
was approved as follows 11,450,121 901,808 1,353,050 559 0 0
- -----------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to investments in securities of
issuers in which management of the fund
or Putnam Investment Management, Inc.
owns securities was approved as
follows 11,002,962 1,310,340 1,391,677 559 0 0
- -----------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to margin transactions was
approved as follows 10,753,825 1,611,914 1,339,240 459 100 0
- -----------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to short sales was approved
as follows 10,911,365 1,453,293 1,340,321 459 100 0
- -----------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction which
limits the fund's ability to pledge assets
was approved as
follows 10,784,824 1,518,634 1,401,521 559 0 0
- -----------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to investments in restricted
securities was approved as
follows 10,856,572 1,434,943 1,413,464 559 0 0
- -----------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to investments in certain oil,
gas and mineral interests was approved
as follows 11,044,994 1,331,111 1,328,874 459 100 0
- -----------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to invest to gain control of a
company's management was approved
as follows 11,064,791 1,327,211 1,312,977 559 0 0
- -----------------------------------------------------------------------------------------------------------------------

All tabulations are rounded to nearest whole number.

</TABLE>

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

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP

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
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

Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for
up-to-date information about the fund's NAV.

[PUTNAM LOGO OMITTED]

The Putnam Funds
One Post Office Square
Boston, Massachusetts

- -----------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- -----------------

32907-054 5/97