SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrant / X /
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e) (2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
PUTNAM HIGH YIELD MUNICIPAL TRUST
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rule 14a 6(i)(1) and 0-11
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(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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IMPORTANT INFORMATION
FOR SHAREHOLDERS IN
PUTNAM HIGH YIELD MUNICIPAL TRUST
The document you hold in your hands contains your proxy statement and
proxy card. A proxy card is, in essence, a ballot. When you vote your
proxy, it tells us how to vote on your behalf on important issues
relating to your fund. If you complete and sign the proxy, we'll vote
it exactly as you tell us. If you simply sign the proxy, we'll vote
it in accordance with the Trustees' recommendations on page 4.
We urge you to spend a couple of minutes with the proxy statement,
and either fill out your proxy card and return it to us via mail, or
record your voting instructions via the Internet. When shareholders
don't return their proxies in sufficient numbers, we have to incur
the expense of follow-up solicitations, which can cost your fund
money.
We want to know how you would like to vote and welcome your comments.
Please take a few moments with these materials and return your proxy
to us.
[scale logo]
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<TABLE>
<CAPTION>
Table of contents
<S> <C>
A Message from the Chairman................................................ 1
Notice of Shareholder Meeting.............................................. 3
Trustees' Recommendations.................................................. 4
</TABLE>
Proxy card enclosed
If you have any questions, please contact
us at the special toll-free number we have
set up for you (1-800-225-1581)
or call your financial advisor.
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<PAGE>
A Message from the Chairman
[Photo of John A. Hill]
Dear Shareholder:
I am writing to you to ask for your vote on important questions that affect
your investment in your fund. While you are, of course, welcome to join us at
your fund's meeting, most shareholders cast their vote by either filling out
and signing the enclosed proxy card or by voting via the Internet. Instructions
are listed at the top of your proxy card. We are asking for your vote on the
following matters: (1) fixing the number of Trustees and electing your fund's
Trustees; (2) ratifying the selection of your fund's independent auditors; and
(3) converting your fund from a closed-end fund to an open-end fund.
Your Trustees unanimously recommend that shareholders vote "For" the first two
proposals. On the third proposal, whether to convert Putnam High Yield
Municipal Trust to an open-end fund, the Trustees, including the Trustees who
are not affiliated with the fund's manager, unanimously recommend that
shareholders vote "Against" the conversion. The third proposal is on the agenda
as a result of provisions in your fund's governing legal documents that require
that shareholders be given the opportunity to consider a conversion in the
event the fund's shares trade at a discount from net asset value greater than
10% over a specified period of time.
The Trustees believe that remaining a closed-end fund provides significant
investment benefits that are not available to open-end funds. In general, if
the fund remains a closed-end fund, the portfolio manager can continue to
manage the fund with a steadier, longer term perspective without the short-term
pressures from sales and redemptions of fund shares typically experienced by
open-end funds. Under some circumstances this flexibility can allow a
closed-end fund to out-perform an open-end fund with a similar investment
strategy. If your fund converts to open-end status it will be required to
redeem its outstanding preferred shares. Having preferred shares allows your
fund to benefit from leverage, which means that the income to you as a common
shareholder is increased if earnings on the fund's portfolio and interest on
the fund's assets are greater than the dividend rate on the preferred shares.
In addition, conversion is likely to result in a lower yield
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because of increased fund expenses. This result would be inconsistent with the
fund's investment objective of seeking high current income exempt from federal
income tax.
Despite the advantages of maintaining your fund's closed-end status, you would
receive a short-term benefit if the fund were converted to open-end status. As
of July 3, 2000 shares of your fund were traded at a 4.98% discount to their
net asset value. Upon conversion of the fund, your shares would be redeemable
at their net asset value with no discount, subject to the imposition by the
Trustees of a redemption fee payable to the fund. Of course the size of the
discount fluctuates and may be greater or less than 4.98% at the time any
conversion goes into effect. While it may appear that your shares of the fund
would increase in value by 5.2% upon conversion, transaction costs involved
with selling a portion of your fund's portfolio would reduce this gain.
The Trustees do not believe that the current level of discounts justifies the
fundamental changes that would result from conversion, and are therefore
recommending that you vote against the conversion.
Although we would like very much to have you attend your fund's meeting, we
realize this may not be possible. Whether or not you plan to be present, we
need your vote. We urge you to record your voting instructions on the Internet
or complete, sign, and return the enclosed proxy card promptly. A postage-paid
envelope is enclosed.
I'm sure that you, like most people, lead a busy life and are tempted to put
this proxy aside for another day. Please don't. When shareholders do not return
their proxies, your fund may have to incur the expense of follow-up
solicitations. All shareholders benefit from the speedy return of proxies.
Your vote is important to us. We appreciate the time and consideration that I
am sure you will give this important matter. If you have questions about the
proposals, contact your financial advisor or call a Putnam customer service
representative at 1-800-225-1581.
Sincerely yours,
/s/ John A. Hill
John A. Hill, Chairman
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PUTNAM HIGH YIELD MUNICIPAL TRUST
Notice of Annual Meeting of Shareholders
> This is the formal agenda for your fund's shareholder meeting. It tells you
what matters will be voted on and the time and place of the meeting, if you
can attend in person.
To the Shareholders of Putnam High Yield Municipal Trust:
The Annual Meeting of Shareholders of your fund will be held on October 5,
2000 at 2:00 p.m., Boston time, on the eighth floor of One Post Office
Square, Boston, Massachusetts, to consider the following:
1. Fixing the number of Trustees and electing Trustees. See page 6.
2. Ratifying the selection by the Trustees of the independent auditors of your
fund for its current fiscal year. See page 21.
3. Approving or disapproving the conversion of your fund from closed-end to
open-end status and the authorization of related amendments to your fund's
Agreement and Declaration of Trust. See page 22.
By the Trustees
John A. Hill, Chairman
George Putnam, III, President
<TABLE>
<S> <C>
Jameson A. Baxter John H. Mullin, III
Hans H. Estin Robert E. Patterson
Ronald J. Jackson A.J.C. Smith
Paul L. Joskow W. Thomas Stephens
Elizabeth T. Kennan W. Nicholas Thorndike
Lawrence J. Lasser
</TABLE>
WE URGE YOU TO MARK, SIGN, DATE, AND MAIL
THE ENCLOSED PROXY IN THE POSTAGE-PAID
ENVELOPE PROVIDED OR RECORD YOUR VOTING
INSTRUCTIONS VIA THE INTERNET SO YOU WILL
BE REPRESENTED AT THE MEETING.
August 18, 2000
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Proxy Statement
> This document will give you the information you need to vote on the matters
listed on the previous page. Much of the information in the proxy statement
is required under rules of the Securities and Exchange Commission ("SEC");
some of it is technical. If there is anything you don't understand, please
contact us at our special toll-free number, 1-800-225-1581, or call your
financial advisor.
> Who is asking for your vote?
The enclosed proxy is solicited by the Trustees of Putnam High Yield
Municipal Trust for use at the Annual Meeting of Shareholders of the fund to
be held on October 5, 2000 and, if the fund's meeting is adjourned, at any
later meetings, for the purposes stated in the Notice of Annual Meeting (see
previous page).
> How do your fund's Trustees recommend that shareholders vote on these
proposals?
The Trustees recommend that you vote
1. For fixing the number of Trustees as proposed and the election of all
---
nominees;
2. For ratifying the selection of PricewaterhouseCoopers LLP as the
---
independent auditors of your fund; and
3. Against converting your fund from closed-end to open end status and
------
authorizing certain related amendments to your fund's Agreement and
Declaration of Trust.
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> Who is eligible to vote?
Shareholders of record at the close of business on July 14, 2000 are entitled
to be present and to vote at the meeting or any adjourned meeting. The Notice
of Meeting, the proxy, and the Proxy Statement are being mailed on or about
August 21, 2000.
Each share is entitled to one vote. Shares represented by duly executed
proxies will be voted in accordance with your instructions. If you sign the
proxy, but don't fill in a vote, your shares will be voted in accordance with
the Trustees' recommendations. If any other business is brought before your
fund's meeting, your shares will be voted at the Trustees' discretion.
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The Proposals
I. ELECTION OF TRUSTEES
> Who are the nominees for Trustees?
The Board Policy and Nominating Committee of the Trustees of your fund makes
recommendations concerning the Trustees of your fund. The Board Policy and
Nominating Committee consists solely of Trustees who are not "interested
persons" (as defined in the Investment Company Act of 1940) of your fund or
of Putnam Investment Management, Inc., your fund's investment manager
("Putnam Management").
The Board Policy and Nominating Committee of the Trustees of your fund
recommends that the number of Trustees be fixed at 13 and that you vote for
the election of the nominees described below. Each nominee is currently a
Trustee of your fund and of the other Putnam funds.
Pursuant to the bylaws of your fund and the Investment Company Act of 1940,
holders of the preferred shares of your fund, voting as a class, are entitled
to elect two nominees for Trustees. The holders of the preferred shares and
the common shares of your fund, voting together as a single class, are
entitled to vote for the remaining 11 of the 13 nominees. Therefore, Messrs.
Hill and Patterson have been nominated as Trustees to be elected by the
holders of the preferred shares, while the other 11 Trustees have been
nominated to be elected by the holders of the preferred shares and common
shares voting together as a single class.
> Jameson Adkins Baxter
[Photo of Jameson Adkins Baxter]
Ms. Baxter, age 57, is the President of Baxter Associates, Inc., a management
consulting and private investment firm that she founded in 1986. During that
time, she was also a Vice President and Principal of the Regency Group, Inc.
and a Consultant to First Boston Corporation, both of which are investment
banking firms. From 1965 to 1986, Ms. Baxter held various positions in
investment banking and corporate finance at First Boston.
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Nominees for Trustees
Ms. Baxter currently also serves as a Director of Banta Corporation, Ryerson
Tull and ASHTA Chemicals, Inc. She is also the Chairman Emeritus of the Board
of Trustees of Mount Holyoke College, having previously served as Chairman
for five years and as a Board member for thirteen years; an Honorary Trustee
and past President of the Board of Trustees of the Emma Willard School;
Member of the Board of Governors of Good Shepherd Hospital; and Chair of the
National Center for Non-profit Boards. Ms. Baxter is a graduate of Mount
Holyoke College.
> Hans H. Estin
[Photo of Hans H. Estin]
Mr. Estin, age 72, is a Chartered Financial Analyst and the Vice Chairman of
North American Management Corp., a registered investment advisor serving
individual clients and their families. Mr. Estin currently also serves as a
Corporation Member of The Schepens Eye Research Institute and as a Trustee of
New England Aquarium. He previously served as the Chairman of the Board of
Trustees of Boston University and is currently active in various other civic
associations, including the Boys & Girls Clubs of Boston, Inc. Mr. Estin is a
graduate of Harvard College and holds honorary doctorates from Merrimack
College and Boston University.
> John A. Hill
[Photo of John A. Hill]
Nominee for Trustee representing holders of preferred shares.
Mr. Hill, age 57 is Chairman of the Trustees. He is the Vice-Chairman and
Managing Director of First Reserve Corporation, a registered investment
advisor investing in companies in the world-wide energy industry on behalf of
institutional investors.
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Nominees for Trustees
Prior to acquiring First Reserve in 1983, Mr. Hill held executive positions
with several investment advisory firms and held various positions with the
Federal government, including Associate Director of the Office of Management
and Budget and Deputy Administrator of the Federal Energy Administration.
Mr. Hill currently also serves as a Director of Santa Fe Snyder Corporation,
an exploration and production company, TransMontaingne Oil Company, a refined
oil product pipeline and distribution company and various private companies
controlled by First Reserve Corporation. He is also a Member of the Board of
Advisors of Fund Directions. He is currently active in various business
associations, including the Economic Club of New York, and lectures on energy
issues in the United States and Europe. Mr. Hill is a graduate of Southern
Methodist University.
> Ronald J. Jackson
[Photo of Ronald J. Jackson]
Mr. Jackson, age 55, retired as Chairman of the Board, President and Chief
Executive Officer of Fisher-Price, Inc., a major toy manufacturer, in 1993, a
position which he held since 1990. He previously served as President and
Chief Executive Officer of Stride-Rite, Inc., a manufacturer and distributor
of footwear, from 1989 to 1990, and as President and Chief Executive Officer
of Kenner Parker Toys, Inc., a major toy and game manufacturer, from 1985 to
1987. Prior to that, he held various financial and marketing positions at
General Mills, Inc. from 1966 to 1985, including Vice President, Controller
and Vice President of Marketing for Parker Brothers, a toy and game company,
and President of Talbots, a retailer and direct marketer of women's apparel.
Mr. Jackson is a graduate of Michigan State University Business School.
8
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Nominees for Trustees
> Paul L. Joskow*
[Photo of Paul L. Joskow]
Dr. Joskow, age 52, is Elizabeth and James Killian Professor of Economics and
Director of the Center for Energy and Environmental Policy Research at the
Massachusetts Institute of Technology. He has published five books and
numerous articles on topics in industrial organization, government regulation
of industry, and competition policy. Dr. Joskow currently serves as a
Director of the New England Electric System, a public utility holding
company, State Farm Indemnity Company, an automobile insurance company, and
the Whitehead Institute for Biomedical Research, a non-profit research
institution. He has been President of the Yale University Council since 1993.
Dr. Joskow is active on industry restructuring, environmental, energy,
competition, and privatization policies and has served as an advisor to
governments and corporations around the world.
Dr. Joskow is a graduate of Cornell University and Yale University. He is a
Fellow of the Econometric Society and the American Academy of Arts and
Sciences.
> Elizabeth T. Kennan
[Photo of Elizabeth T. Kennan]
Dr. Kennan, age 61, is President Emeritus of Mount Holyoke College. From 1978
through June 1995, she was President of Mount Holyoke College. From 1966 to
1978, she was on the faculty of Catholic University, where she taught
history, published numerous articles, and directed the post-doctoral programs
in Patristic and Medieval Studies.
Dr. Kennan currently serves as a Director of Northeast Utilities, Talbots and
Cambus-Kenneth Bloodstock, a corporation involved in thoroughbred horse
breeding and farming. She is a Member of The Folger Shakespeare Library
Committee and a Trustee of Franklin Pierce College. Dr. Kennan previously
served as a Director of Bell Atlantic
9
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Nominees for Trustees
Corporation, Chastain Real Estate, and Kentucky Home Life Insurance. Active
in various educational and civic associations, Dr. Kennan is a graduate of
Mount Holyoke College, the University of Washington, and St. Hilda's College,
Oxford University. She holds several honorary doctorates.
> Lawrence J. Lasser*
[Photo of Lawrence J. Lasser]
Mr. Lasser, age 57, is a Vice President of your fund and each of the other
Putnam funds. He has been the President, Chief Executive Officer and a
Director of Putnam Investments, Inc. and Putnam Management since 1985, having
begun his career there in 1969.
Mr. Lasser currently also serves as a Director of Marsh & McLennan Companies,
Inc., the parent company of Putnam Management. He is a Member of the Board of
Directors of the United Way of Massachusetts Bay, a Member of the Board of
Governors of the Investment Company Institute, a Trustee of the Museum of
Fine Arts, Boston, a Trustee and Member of the Finance and Executive
Committees of the Beth Israel Deaconess Medical Center, Boston and a Member
of the CareGroup Board of Managers Investment Committee, the Council on
Foreign Relations, and the Commercial Club of Boston. Mr. Lasser is a
graduate of Antioch College and Harvard Business School.
> John H. Mullin, III
[Photo of John H. Mullin, III]
Mr. Mullin, age 58, is Chairman and CEO of Ridgeway Farm, a limited liability
company engaged in timber activities and farming. Prior to establishing
Ridgeway Farm in 1989, Mr. Mullin was a Managing Director of Dillon, Read &
Co. Inc., an investment banking firm.
Mr. Mullin currently serves as a Director of ACX Technologies, Inc., a
company engaged in the manufacture of packaging products; Alex. Brown Realty,
Inc., a real estate investment company; Carolina Power and Light, a public
utility company; and The Liberty Corporation, a
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Nominees for Trustees
company engaged in the life insurance and broadcasting industries. Mr. Mullin
previously served as a Director of Dillon, Read & Co. Inc., Adolph Coors
Company, Crystal Brands, Inc., Fisher-Price, Inc., Mattel, Inc. and The
Ryland Group, Inc. Mr. Mullin is a Trustee Emeritus of Washington & Lee
University where he served as Chairman of the Investment Committee. Mr.
Mullin is a graduate of Washington & Lee University and The Wharton Graduate
School at the University of Pennsylvania.
> Robert E. Patterson
[Photo of Robert E. Patterson]
Nominee for Trustee representing holders of preferred shares.
Mr. Patterson, age 54, is the President and a Trustee of Cabot Industrial
Trust, a publicly traded real estate investment trust. Prior to February
1998, he was Executive Vice President and Director of Acquisitions of Cabot
Partners Limited Partnership, a registered investment advisor which managed
real estate investments for institutional investors. Prior to 1990, he was
the Executive Vice President of Cabot, Cabot & Forbes Realty Advisors, Inc.,
the predecessor company of Cabot Partners. Prior to that, he was a Senior
Vice President of the Beal Companies, a real estate management, investment
and development company. He has also worked as an attorney and held various
positions in state government, including the founding Executive Director of
the Massachusetts Industrial Finance Agency.
Mr. Patterson currently also serves as Chairman of the Joslin Diabetes
Center, a Trustee of SEA Education Association and a Director of Brandywine
Trust Company. Mr. Patterson is a graduate of Harvard College and Harvard Law
School.
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Nominees for Trustees
> George Putnam, III*
[Photo of George Putnam, III]
Mr. Putnam, age 48, is the President of your fund and each of the other
Putnam Funds. He is also the President of New Generation Research, Inc., a
publisher of financial advisory and other research services relating to
bankrupt and distressed companies, and New Generation Advisers, Inc., a
registered investment advisor which provides advice to private funds
specializing in investments in such companies. Prior to founding New
Generation in 1985, Mr. Putnam was an attorney with the Philadelphia law firm
Dechert Price & Rhoads. Mr. Putnam currently also serves as a Director of The
Boston Family Office, L.L.C., a registered investment advisor that provides
financial advice to individuals and families. He is also a Trustee of the SEA
Education Association and St. Mark's School. Mr. Putnam is a graduate of
Harvard College, Harvard Business School and Harvard Law School.
> A.J.C. Smith*
[Photo of A.J.C. Smith]
Mr. Smith, age 65, is the Chairman of Marsh & McLennan Companies, Inc. From
May 1992 to November 1999, he served as the company's Chairman and Chief
Executive Officer. He has been employed by Marsh & McLennan and related
companies in various capacities since 1961. Mr. Smith is a Director of the
Trident Corp.; a Trustee of the Carnegie Hall Society, the Central Park
Conservancy, the Educational Broadcasting Corporation, the Economic Club of
New York, and the U.S. Chamber of Commerce; a Member of the Board of
Overseers of the Joan and Sanford I. Weill Graduate School of Medical
Sciences of Cornell University; and a Founder of the Museum of Scotland
Society. He was educated in Scotland and is a Fellow of the Faculty of
Actuaries in Edinburgh, a Fellow of the Canadian Institute of Actuaries, a
Fellow of the
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Nominees for Trustees
Conference of Actuaries, an Associate of the Society of Actuaries, a Member
of the American Academy of Actuaries, the International Actuarial Association
and the International Association of Consulting Actuaries.
> W. Thomas Stephens
[Photo of W. Thomas Stephens]
Mr. Stephens, age 57, was, until 1999, the President and Chief Executive
Officer of MacMillan Bloedel Limited, a forest products and building
materials company.
In 1996, Mr. Stephens retired as Chairman of the Board of Directors,
President and Chief Executive Officer of Johns Manville Corporation.
Mr. Stephens serves as a Director for Qwest Communications, a communications
company, New Century Energies, a public utility company, TransCanada
Pipelines, and Fletcher Challenge Canada, a paper manufacturer. Mr. Stephens
has B.S. and M.S. degrees from the University of Arkansas.
> W. Nicholas Thorndike
[Photo of W. Nicholas Thorndike]
Mr. Thorndike, age 66, serves as a Director of various corporations and
charitable organizations, including Bradley Real Estate, Inc., a real estate
investment firm, Providence Journal Co., a newspaper publisher, and Courier
Corporation, a book binding and printing company. He is also a Trustee of
Cabot Industrial Trust and Northeastern University, a member of the Advisory
Board of New England Electric Systems, and an Honorary Trustee of
Massachusetts General Hospital, where he previously served as chairman and
president.
Prior to December 1988, Mr. Thorndike was the Chairman of the Board and
Managing Partner of Wellington Management Company/Thorndike, Doran, Paine &
Lewis, a registered investment advisor that manages mutual funds and
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Nominees for Trustees
institutional assets. He also previously served as a Trustee of the
Wellington Group of Funds (now The Vanguard Group) and was the Chairman and a
Director of Ivest Fund, Inc. Mr. Thorndike is a graduate of Harvard College.
--------------------
* Nominees who are or may be deemed to be "interested persons" (as defined in
the Investment Company Act of 1940) of your fund, Putnam Management, and
Putnam Retail Management, Inc. ("Putnam Retail Management"), the principal
underwriter for all the open-end Putnam funds and an affiliate of Putnam
Management. Messrs. Lasser, Putnam, III, and Smith are deemed "interested
persons" by virtue of their positions as officers or affiliates of your fund,
or directors of Putnam Management, Putnam Retail Management, or Marsh &
McLennan Companies, Inc., the parent company of Putnam Management and Putnam
Retail Management.
Mr. Joskow is not currently an "interested person" of your fund but could be
deemed by the Securities and Exchange Commission to be an "interested person"
on account of his prior consulting relationship with National Economic
Research Associates, Inc. a wholly-owned subsidiary of Marsh & McLennan
Companies, Inc., which was terminated as of August 31, 1998.
The balance of the nominees are not "interested persons."
Except as indicated above, the principal occupations and business experience
of the nominees for the last five years have been with the employers
indicated, although in some cases they have held different positions with
those employers.
All the nominees were elected by the shareholders in October 1999. The 11
nominees for election as Trustees by holders of the common and preferred
shares, voting as a single class, at the shareholder meeting who receive the
greatest number of votes from the preferred and common shareholders will be
elected as Trustees of your fund. In addition, the two nominees for election
as Trustees by holders of the preferred shares, voting as a single class, at
the shareholder meeting who receive the greatest number of votes from the
preferred shareholders will be elected as Trustees of your fund. The
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Trustees serve until their successors are elected and qualified. Each of the
nominees has agreed to serve as a Trustee if elected. If any of the nominees
is unavailable for election at the time of the meeting, which is not
anticipated, the Trustees may vote for other nominees at their discretion, or
the Trustees may fix the number of Trustees at less than 13 for your fund.
The address for each of the current Trustees and each of the nominees is One
Post Office Square, Boston, Massachusetts 02109.
> What are the Trustees' responsibilities?
Your fund's Trustees are responsible for the general oversight of your fund's
business and for assuring that your fund is managed in the best interests of
its shareholders. The Trustees periodically review your fund's investment
performance as well as the quality of other services provided to your fund
and its shareholders by Putnam Management and its affiliates, including
administration, custody, and investor servicing. At least annually, the
Trustees review the fees paid to Putnam Management and its affiliates for
these services and the overall level of your fund's operating expenses. In
carrying out these responsibilities, the Trustees are assisted by an
independent administrative staff and by your fund's auditors and legal
counsel, which are selected by the Trustees and are independent of Putnam
Management and its affiliates.
> Do the Trustees have a stake in your fund?
The Trustees believe it is important that each Trustee have a significant
investment in the Putnam funds. The Trustees allocate their investments among
the more than 114 Putnam funds based on their own investment needs. The
Trustees' aggregate investments in the Putnam funds total over $29 million.
The table below lists each Trustee's current investments in the fund and in
the Putnam funds as a group based on beneficial ownership. Except as
otherwise noted, each Trustee has sole voting power and sole investment power
with respect to his or her shares.
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Share Ownership by Trustees
<TABLE>
<CAPTION>
Number of shares owned as of May 31, 2000:
All
Year first Putnam
elected as funds Putnam
Trustee of (including High Yield
the Putnam notional Municipal
Trustees funds shares)(1)(2) Trust
---------------------------------------------------------------------
<S> <C> <C> <C>
Jameson A. Baxter 1994 161,048 129
Hans H. Estin 1972 35,915 200
John A. Hill 1985 231,092 100
Ronald J. Jackson 1996 165,186(3) 200(3)
Paul L. Joskow 1997 52,285 100
Elizabeth T. Kennan 1992 27,584(4) 150(4)
Lawrence J. Lasser 1992 521,035 100
John H. Mullin, III 1997 73,938 100
Robert E. Patterson 1984 91,400 6,800
George Putnam, III 1984 516,910 300
A.J.C. Smith 1986 46,333(5) 200(5)
W. Thomas Stephens 1997 139,100 100
W. Nicholas Thorndike 1992 85,531 184
</TABLE>
(1) These holdings do not include shares of Putnam money market funds.
(2) Notional shares represent economic interests in a fund acquired by the
Trustees pursuant to the terms of the Trustee Compensation Deferral Plan,
and they do not have any voting power. None of the Trustees held notional
shares in your fund.
(3) Mr. Jackson has shared investment power and shared voting power with respect
to such shares.
(4) Dr. Kennan is the custodian of a trust which owns all of these shares and in
which she has no economic interest.
(5) Mr. Smith has shared investment power and shared voting power with respect
to such shares.
As of May 31, 2000, the Trustees and officers of Putnam High Yield Municipal
Trust owned a total of 8,663 shares, comprising less than 1% of the outstanding
shares of such fund on that date. None of the Trustees own any of the fund's
preferred shares.
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> What are some of the ways in which the Trustees represent shareholder
interests?
The Trustees believe that, as substantial investors in the Putnam funds,
their interests are closely aligned with those of individual shareholders.
Among other ways, the Trustees seek to represent shareholder interests:
o by carefully reviewing your fund's investment performance on an individual
basis with your fund's managers;
o by also carefully reviewing the quality of the various other services
provided to the funds and their shareholders by Putnam Management and its
affiliates;
o by discussing with senior management of Putnam Management steps being taken
to address any performance deficiencies;
o by conducting an in-depth review of the fees paid by your fund and by
negotiating with Putnam Management to ensure that such fees remain
reasonable and competitive with those of other mutual funds, while at the
same time providing Putnam Management sufficient resources to continue to
provide high quality services in the future;
o by reviewing brokerage costs and fees, allocations among brokers, soft
dollar expenditures and similar expenses of each fund;
o by monitoring potential conflicts between the funds and Putnam Management
and its affiliates to ensure that the funds continue to be managed in the
best interests of their shareholders; and
o by also monitoring potential conflicts among funds to ensure that
shareholders continue to realize the benefits of participation in a large
and diverse family of funds.
> How often do the Trustees meet?
The Trustees meet each month (except August) over a two-day period to review
the operations of your fund and of the other Putnam funds. A portion of
these meetings is devoted to
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meetings of various committees of the board which focus on particular matters.
These currently include: the Contract Committee, which reviews all the
contractual arrangements with Putnam Management and its affiliates; the
Communication, Service and Marketing Committee, which reviews the quality of
services provided by your fund's investor servicing agent and custodian; the
Brokerage and Custody Committee, which reviews matters relating to custody of
securities, best execution, brokerage costs and allocations and new investment
techniques; the Audit Committee, which reviews procedures for the valuation of
securities, the funds' accounting policies and the adequacy of internal
controls and supervises the engagement of the funds' auditors; the Board Policy
and Nominating Committee, which is composed of non-interested Trustees and
which reviews the compensation of the Trustees and their administrative staff,
supervises the engagement of the funds' independent counsel and selects
nominees for election as Trustees; the Closed-end Funds and Variable Trust
Committee, which is responsible for reviewing special issues applicable to
closed-end funds such as your fund, and the Pricing Committee, which reviews
procedures for the valuation of securities.
Each Trustee generally attends at least two formal committee meetings during
each regular meeting of the Trustees. During 1999, the average Trustee
participated in approximately 40 committee and board meetings. In addition, the
Trustees meet in small groups with Chief Investment Officers and Portfolio
Managers to review recent performance and the current investment climate for
selected funds. These meetings ensure that your fund's performance is reviewed
in detail at least twice a year. The Contract Committee typically meets on
several additional occasions during the year to carry out its responsibilities.
Other committees, including an Executive Committee, may also meet on special
occasions as the need arises.
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<PAGE>
> What are the Trustees paid for their services?
Each Trustee of your fund receives a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of the other Putnam funds.
The Trustees periodically review their fees to assure that such fees
continue to be appropriate in light of their responsibilities as well as in
relation to fees paid to trustees of other mutual fund complexes. The Board
Policy and Nominating Committee, which consists solely of Trustees not
affiliated with Putnam Management, estimates that committee and Trustee
meeting time, together with the appropriate preparation, requires the
equivalent of at least three business days per Trustee meeting. The
following table shows the fees paid to each Trustee by the fund for its most
recent fiscal year and the fees paid to each Trustee by all of the Putnam
funds during calendar year 1999:
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PUTNAM HIGH YIELD MUNICIPAL TRUST
Compensation Table
<TABLE>
<CAPTION>
Estimated
Pension or annual
retirement benefits
benefits from all
Aggregate accrued as Putnam Total
compensation part of funds compensation
from the fund upon from all
Trustee fund(1) expenses retirement(2) Putnam funds(3)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jameson A. Baxter $590 $126 $ 95,000 $191,000(4)
Hans H. Estin 553 295 95,000 190,000
John A. Hill 592 148 115,000 239,750(4)(5)
Ronald J. Jackson 589 155 95,000 193,500(4)
Paul L. Joskow 553 55 95,000 191,000(4)
Elizabeth T. Kennan 580 187 95,000 190,000
Lawrence J. Lasser 547 143 95,000 189,000
John H. Mullin, III 561 83 95,000 196,250(4)
Robert E. Patterson 553 99 95,000 190,250
George Putnam, III 550 68 95,000 190,000
A.J.C. Smith 538 213 95,000 188,000
W. Thomas Stephens 550 77 95,000 188,000(4)
W. Nicholas Thorndike 553 263 95,000 190,000
--------------------------------------------------------------------------------------
</TABLE>
(1)Includes an annual retainer and an attendance fee for each meeting attended.
(2)Assumes that each Trustee retires at the normal retirement date. Estimated
benefits for each Trustee are based on Trustee fee rates in effect during
calendar 1999.
(3)As of December 31, 1999, there were 114 funds in the Putnam family.
(4)Includes compensation deferred pursuant to a Trustee Compensation Deferral
Plan.
(5)Includes additional compensation for service as Vice Chairman of the Putnam
funds. Mr. Hill became Chairman of the Board of Trustees on July 1, 2000.
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Under a Retirement Plan for Trustees of the Putnam funds (the "Plan"), each
Trustee who retires with at least five years of service as a Trustee of the
funds is entitled to receive an annual retirement benefit equal to one-half
of the average annual compensation paid to such Trustee by the funds for the
last three years of service prior to retirement. This retirement benefit is
payable during a Trustee's lifetime, beginning the year following
retirement, for a number of years equal to such Trustee's years of service
compensated by the funds. A death benefit is also available under the Plan
which assures that the Trustee and his or her beneficiaries will receive
benefit payments for the lesser of an aggregate period of (i) ten years or
(ii) such Trustee's total years of service.
The Plan Administrator (a committee comprised of Trustees that are not
"interested persons" of the fund, as defined in the Investment Company Act
of 1940) may terminate or amend the Plan at any time, but no termination or
amendment will result in a reduction in the amount of benefits (i) currently
being paid to a Trustee at the time of such termination or amendment, or
(ii) to which a current Trustee would have been entitled had he or she
retired immediately prior to such termination or amendment.
For additional information about your fund, including further information
about its Trustees and officers, please see "Fund Information," on page 38.
2. RATIFICATION OF INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110,
independent accountants, has been selected by the Trustees as the
independent auditors of your fund for the current fiscal year. Among the
country's preeminent accounting firms, this firm also serves as the auditor
for various other funds in the Putnam family. It was selected primarily on
the basis of its expertise as auditors of investment companies, the quality
of its audit services, and the competitiveness of its fees.
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A majority of the votes on the matter is necessary to ratify the selection
of auditors. A representative of the independent auditors is expected to be
present at the meeting to make statements and to respond to appropriate
questions.
3. APPROVAL OR DISAPPROVAL OF THE CONVERSION OF YOUR FUND FROM CLOSED-END TO
OPEN-END STATUS AND CERTAIN RELATED AMENDMENTS TO YOUR FUND'S AGREEMENT AND
DECLARATION OF TRUST
> What is being considered under this item?
Shareholders will have the opportunity to vote at the meeting on the
question of whether your fund should be converted from a closed-end fund to
an open-end fund. The Trustees, as discussed in more detail below,
unanimously recommend that shareholders vote against converting your fund to
an open-end fund. This recommendation is based on the Trustees' view that,
as a closed-end fund, your fund is afforded significant investment
advantages.
If approved, the conversion would result in the "delisting" of your fund's
shares from the New York Stock Exchange where they currently may be bought
or sold at prevailing market prices. Your shares would then become
redeemable directly from your fund at net asset value, eliminating any
discount of market price to net asset value. Other differences between
closed-end and open-end investment companies are described below.
A conversion from closed-end to open-end status would also require a number
of changes in the Agreement and Declaration of Trust (the "Declaration of
Trust") under which your fund was established. Accordingly, approval of this
proposal would also authorize your fund's Trustees to make such amendments
as they may deem necessary to operate your fund in open-end form if this
proposal is approved. These changes are described in greater detail below.
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<PAGE>
> Why is this question being submitted to shareholders now?
Your fund's governing legal documents require that shareholders of your fund
be given the opportunity to vote on a proposal to convert your fund from
closed-end to open-end status if the fund's shares have traded at an average
discount of more than 10% from their net asset value during the last twelve
calendar weeks of the preceding fiscal year (measured as of the last trading
day in each such week). For the twelve-week period ended March 31, 2000,
your fund's shares traded at an average discount of 11.05%, requiring that
this proposal be submitted to shareholders.
> What is the recommendation of the Trustees?
The Trustees regularly review the overall performance and trading
information for your fund and all of the Putnam closed-end funds. At
meetings held in May and June of this year, the Trustees of your fund
carefully evaluated the fund's investment performance, the trading history
of its shares since its inception in May 1989, and information about the
possible advantages and disadvantages of converting to an open-end fund. For
the reasons described below, the Trustees of your fund have unanimously
concluded that the conversion of your fund to open-end status would not be
in the best long-term interests of shareholders. Accordingly, the Trustees
of your fund unanimously recommend that shareholders vote "AGAINST" this
proposal.
> Why are the Trustees recommending a vote against a conversion?
The Trustees of your fund are recommending a vote against converting your
fund to open-end status for the following reasons:
o The Trustees believe that your fund's closed-end status provides
investment benefits not available to open-end fund investors. Because
your fund's shares are not redeemable, your fund is not required to
maintain short-term, lower-
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yielding investments in anticipation of possible redemptions, but can be
fully invested in higher-yielding securities in pursuit of the fund's
investment objective.
o Furthermore, as a closed-end fund, your fund does not experience the cash
flows associated with sales and redemptions of open-end fund shares. As a
result, your fund's portfolio manager does not have to invest additional
cash from new sales at times when market conditions are unfavorable or sell
securities to meet redemptions at inopportune times.
o As a closed-end fund, your fund is permitted to issue, and has issued,
preferred shares. This provides holders of common shares with the benefits
and risks of leverage. The fund has the potential to increase the return and
the yield on your investment if the fund's return on its portfolio and
interest on its assets exceeds the dividend rate paid to holders of
preferred shares. Open-end funds do not have the ability to issue a
preferred class of shares. Consequently, your fund would lose the benefits
of this flexibility upon conversion.
o The Trustees believe that your fund's operating expenses are likely to
increase if it is converted to open-end status. As an open-end fund, your
fund would be required, as a practical matter, to make a continuous public
offering of its shares in order to offset redemptions and maintain the
economies of scale available at its current size. The Trustees expect that
in order to market your fund's shares effectively and to conform generally
to sales practices of competing dealer-sold funds, following a conversion to
open-end status, the Trustees would likely recommend that shareholders
approve the adoption of a distribution plan under Rule 12b-1. Such a plan
would permit your fund to pay annual distribution fees of up to 0.35% of
your fund's net assets. If such a distribution plan were approved, the
Trustees would expect to authorize the payment of distribution fees at the
annual rate of 0.20% of net assets,
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<PAGE>
as is the case with similar open-end Putnam funds. In addition, all
shareholders would bear the brokerage and other transactional costs
associated with purchases and sales of securities by your fund in response
to the sale or redemption of shares if your fund were converted to open-end
status (except to the extent that the Trustees decide to impose a temporary
redemption fee, as described below).
o It is possible that redemptions by shareholders would cause your fund to
shrink following conversion to open-end status, and, everything else being
equal, thereby resulting in an increase of expense ratio for the remaining
shareholders. However, open-end funds, which continually offer new shares to
the public, also have the ability to increase in size. Growth in your fund's
size could result in efficiencies and spread fixed costs over a larger pool
of assets. Putnam Management has advised the Trustees that it is likely that
your fund would experience significant net redemptions following any
conversion, thereby shrinking in size. Depending on the size of future
redemptions or sales, increased expense ratios could result for either
temporary or indefinite periods.
o The need to sell securities to meet redemptions may have adverse tax
consequences to shareholders remaining in your fund. If your fund sells
securities to meet redemptions and realizes a gain for tax purposes, your
fund will be required to make capital gain distributions and allocate the
tax gain to all shareholders, not simply to those redeeming.
o Converting the fund to open-end status would eliminate the possibility that
your shares could be sold at a premium. Although your shares currently trade
at a discount to their net asset value, for most of your fund's history its
shares have traded at a premium above their net asset value. If the market
conditions that led to the premium were to recur, and if the fund were
converted, you would not benefit from any possible premium.
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<PAGE>
o In light of the potential loss of the advantages of closed-end status,
including redemption of the preferred shares, and the potential increase of
expenses that would likely follow, conversion is likely to result in a lower
yield for the shareholders. This result is inconsistent with the fund's
investment objective of seeking high current income exempt from federal
income tax.
The Trustees believe that most shareholders of your fund purchased their
shares with a long-term investment perspective that recognizes the special
advantages of the closed-end structure as well as the disadvantages of
potential discounts. Consequently, the Trustees do not believe that recent
discount levels should be viewed as grounds for depriving shareholders of
the advantages of the closed-end structure, especially in light of the fact
that historically the fund's discount levels fluctuate and have not always
been as large as they currently are.
> Are there any advantages to converting the fund to open-end status?
Yes. By converting to an open-end fund, your fund would immediately offer
you the ability to redeem your shares at their net asset value less any
redemption fee that the Trustees may impose. As of July 3, 2000 the price of
your shares in the fund represented a discount of 4.98% to their net asset
value. This means that if you sold shares on July 3, 2000 you would receive
only 95.02% of your pro rata share of your fund's assets. If the fund were
converted, you would be able to receive 100% of your pro rata share less any
redemption fee imposed by the Trustees. This would represent a one-time
increase in the value of your shares.
The Trustees have also considered the potential decrease in expense ratio
that would arise if your fund grows in size as a result of net sales of new
shares. As an open-end fund your fund would constantly be offering new
shares to the public. If more new shares are sold than redeemed, the fund
could grow
26
<PAGE>
in size, resulting in a lower expense ratio. As stated above, Putnam
Management has advised the Trustees that Putnam Management does not expect
that the fund would grow in size following a conversion to open-end status.
After considering the reasons set forth above, the Trustees do not believe
that the current discount justifies the fundamental changes that would
result from a conversion to open-end status. The Trustees unanimously
recommend that shareholders vote against this proposal.
> How has your fund performed?
The following table summarizes the annualized total return of your fund for
the periods shown based on the net asset value and the market value of its
shares:
Total Return (Annualized) Through May 31, 2000
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
--------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value -5.09% 2.17% 4.21% 6.46%
Market Value -28.83% -13.65% 0.76% 5.49%*
</TABLE>
* Market value performance from inception, unlike net asset value performance,
reflects the cost of the dealer commission upon initial sale.
Of course, relative performance is also important. In addition to reviewing
the fund's overall performance, the Trustees regularly review the fund's
performance compared to that of a group of comparable funds. To compare the
funds, the Trustees use a formula that assigns a weighting to three factors:
yield, total return and risk. Based on this formula, as of December 31, 1999
your fund ranked second out of twelve or in the top 15% of funds in its peer
group.
> What are the principal differences between a closed-end and open-end fund?
In evaluating this proposal, shareholders may wish to consider the following
differences between closed-end and open-end funds:
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<PAGE>
o Changes in capital. Closed-end funds raise their capital through an initial
public offering and generally do not raise additional capital after that
time. Closed-end funds therefore have limited opportunities to gain
additional economies of scale through growth of assets. At the same time,
because shares of closed-end funds cannot be redeemed, the risk of higher
expense ratios resulting from a decline in assets is also limited.
Open-end funds, in contrast, generally engage in a continuous public
offering of their shares, which provides the opportunity for growth of
assets and reduced expense ratios. However, because shares of open-end funds
are generally redeemable at any time, such funds face the risk of higher
expense ratios if significant redemptions are not offset by sales of new
shares.
o Sale of shares. Shares of open-end funds may be redeemed at any time at
their net asset value (subject only to the right of the fund to withhold
payment for up to seven days or, with the permission of the SEC, to suspend
redemptions under emergency conditions). In contrast, shares of closed-end
funds are not redeemable and can generally be bought and sold at current
market prices only on the exchange on which such funds are listed. Thus,
converting your fund from closed-end to open-end status would eliminate the
current discount between market price and net asset value. Shareholders who
wish to dispose of shares would receive a higher price at net asset value
than if shares remained at a discount.
o Leverage. Open-end funds are not permitted to sell a class of senior or
preferred securities, and a fund that is converted from open-end to
closed-end status would be required to redeem any of its outstanding
preferred shares. A closed-end fund can use the leverage provided by a class
of senior or preferred securities to increase the yield on the investment of
a common shareholder. An investment in common shares of a fund that uses
leverage also involves a
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<PAGE>
risk of lower yields if the fund's return on its portfolio and income on
other assets is lower than the dividend rate payable to the fund's preferred
shareholders.
o Regulatory requirements. Both closed-end and open-end funds are registered
with the SEC under the Investment Company Act of 1940 and, with certain
differences relating largely to the sale and redemption of shares, are
generally subject to the same regulatory requirements of that Act. Your
fund's shares are listed for trading on the New York Stock Exchange. That
listing would be terminated in the event of a conversion to open-end status.
Since open-end funds generally engage in a continuous public offering of
their shares they are required to maintain current registrations under
federal and state securities laws, which involves additional costs.
o Annual shareholder meetings. Your fund is currently required by the rules of
the New York Stock Exchange to hold annual meetings of shareholders for the
purpose of electing Trustees and ratifying the selection of auditors. As
noted above, conversion of your fund to open-end status would result in
termination of the fund's listing on the New York Stock Exchange with the
result that your fund would no longer be required to hold annual meetings.
In such event, your fund expects that meetings would be held only on an
as-needed basis.
o Investment flexibility. As noted above, the cash flows associated with sales
and redemptions of open-end fund shares, as well as the need to maintain
cash reserves in anticipation of possible redemptions, might tend to reduce
the investment flexibility of open-end funds.
o Shareholder privileges. Shareholders of your fund currently have the option
of participating in the fund's Dividend Reinvestment Plan, under which cash
distributions paid by your fund are generally reinvested through the
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<PAGE>
purchase of additional fund shares at market prices, which currently reflect
a discount from net asset value. (At times when your fund's shares are
trading at a premium over their net asset value, such reinvestments are made
at the higher of net asset value or 95% of market value.) If the fund were
to convert to open-end status, shareholders would no longer be able to
reinvest dividends at a price below net asset value per share. Shareholders
of open-end Putnam funds have the option to reinvest their distributions in
additional shares at net asset value at all times.
Shareholders of open-end funds in the Putnam family of funds currently have
the privilege of exchanging their investment at net asset value and without
sales charges for shares of more than 75 open-end funds in the Putnam group.
Shareholders of your fund currently do not have that privilege.
> What other possible consequences might result from conversion of your fund
to open-end status?
In addition to those matters described above, you should consider the
following possible consequences of conversion of your fund to open-end
status:
o Certain legal, accounting and other costs would be incurred in
connection with the conversion of your fund to open-end status. Although
it is difficult to estimate these costs with precision, these costs are
estimated to be at least $100,000. Based on your fund's current size it
is not anticipated that these costs would materially increase your
fund's expense ratio.
o The Trustees reserve the right to impose a temporary redemption fee of
up to 2.00% of the value of shares redeemed for a period of up to one
year following the fund's conversion to an open-end investment company.
The Trustees may impose this fee if they believe that immediately
following a conversion to open-end status there would likely be
significant redemptions of shares that would disrupt long-term portfolio
management of
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<PAGE>
the fund and dilute the interests of the remaining shareholders. Imposition
of a redemption fee may deter certain redemptions and would compensate
remaining long-term shareholders for the costs of the liquidation of a
significant percentage of the fund's portfolio.
The fund will notify shareholders in writing prior to the imposition of any
temporary redemption fee.
> What changes would be made in your fund's Declaration of Trust if
shareholders vote to convert the fund to open-end status?
Conversion of your fund from a closed-end to an open-end fund would require
certain changes to your fund's Declaration of Trust and, therefore, a vote
in favor of such conversion would also authorize the Trustees to amend your
fund's Declaration of Trust to reflect such changes. These changes would
bring your fund's Declaration of Trust more in line with most other Putnam
open-end funds.
The Declaration of Trust would be amended to require your fund to purchase
all shares offered to it for redemption at a price equal to the net asset
value of the shares next determined, less any redemption or sales charge
fixed by the Trustees. In addition, the fund would be authorized, at its
option, to redeem shares held in a shareholder's account at net asset value
if at any time a shareholder owned shares in an amount either less than or
greater than, as the case may be, an amount determined by the Trustees.
Notwithstanding this provision, all shares would be redeemable at a
shareholder's option.
The Declaration of Trust would also be amended to eliminate certain
provisions that relate specifically to the fund's closed-end status, such as
the conversion provision that has necessitated this proposal.
Finally, the Trustees would also make certain necessary technical and
non-material changes to the Declaration of Trust
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<PAGE>
and conforming changes to your fund's Bylaws if the shareholders vote in
favor of the conversion.
> What percentage of shareholders' votes are required to approve the
conversion?
Approval of the conversion of your fund to open-end status and of the
related amendments to your fund's Declaration of Trust will require the
"yes" vote of both the holders of a majority of your fund's outstanding
common shares entitled to vote and the holders of a majority of your fund's
outstanding preferred shares entitled to vote, each voting separately as a
class.
If such conversion were approved, the conversion would become effective
following compliance with all necessary regulatory requirements under
federal and state law. Your fund would seek to complete this process as soon
as reasonably practicable, but it is estimated that this process may require
at least several months.
> If the conversion is not approved, will the fund continue in its current
form?
Yes. In the event that shareholders do not approve the conversion of your
fund to open-end status, your fund would continue to operate as a closed-end
fund. Shareholders would be given the opportunity to vote on a proposed
conversion to open-end status in future years if your fund's shares again
trade at discounts sufficient to meet the requirement of the Declaration of
Trust described above.
The Trustees believe that the continued operation of your fund as a
closed-end fund is in the best long-term interests of shareholders, and
unanimously recommend a vote against the conversion of your fund to open-end
status at this time.
The Trustees recommend that you vote "AGAINST" Proposal 3.
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Further Information About Voting and the Meeting
Quorum and Methods of Tabulation. A majority of the shares entitled to
vote--present in person or represented by proxy--constitutes a quorum for
the transaction of business with respect to any proposal at the meeting
(unless otherwise noted in the proxy statement), except that where the
preferred shares or common shares shall vote as a separate class, then a
majority of the aggregate number of shares of that class shall be necessary
to constitute a quorum for the transaction of business by that class. Shares
represented by proxies that reflect abstentions and "broker non-votes"
(i.e., shares held by brokers or nominees as to which (i) instructions have
not been received from the beneficial owners or the persons entitled to vote
and (ii) the broker or nominee does not have the discretionary voting power
on a particular matter) will be counted as shares that are present and
entitled to vote on the matter for purposes of determining the presence of a
quorum. Votes cast by proxy or in person at the meeting will be counted by
persons appointed by your fund as tellers for the meeting.
The tellers will count the total number of votes cast "for" approval of the
proposals for purposes of determining whether sufficient affirmative votes
have been cast. With respect to the election of Trustees and selection of
auditors, neither abstentions nor broker non-votes have any effect on the
outcome of the proposal. With respect to any other proposals, abstentions
and broker non-votes have the effect of a negative vote on the proposal.
Special Rule for Proportional Voting. In accordance with New York Stock
Exchange rules, brokerage firms may vote for or against a proposal, on
behalf of their clients who beneficially own remarketed preferred shares and
from whom they have not received voting instructions, in the same proportion
as votes for and against such proposal have been received from holders of
preferred shares if (i) the holders of a minimum of 30% of the outstanding
preferred shares have been
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<PAGE>
voted by the holders of preferred shares, (ii) holders of less than 10% of
the outstanding preferred shares have voted against such proposal and (iii)
the holders of the common shares have approved such proposal.
The tellers will count the total number of votes cast "for" approval of the
proposals for purposes of determining whether sufficient affirmative votes
have been cast. With respect to the election of Trustees and selection of
auditors, neither abstentions nor broker non-votes have any effect on the
outcome of the proposal. With respect to any other proposals, abstentions
and broker non-votes have the effect of a negative vote on the proposal.
Other business. The Trustees know of no other business to be brought before
the meeting. However, if any other matters properly come before the meeting,
it is their intention that proxies that do not contain specific restrictions
to the contrary will be voted on such matters in accordance with the
judgment of the persons named as proxies in the enclosed form of proxy.
Solicitation of proxies. In addition to soliciting proxies by mail, Trustees
of your fund and employees of Putnam Management, Putnam Fiduciary Trust
Company and Putnam Retail Management may solicit proxies in person or by
telephone. Your fund may also arrange to have voting instructions recorded
by telephone. The telephone voting procedure is designed to authenticate
shareholders' identities, to allow them to authorize the voting of their
shares in accordance with their instructions and to confirm that their
instructions have been properly recorded. Your fund has been advised by
counsel that these procedures are consistent with the requirements of
applicable law. If these procedures were subject to a successful legal
challenge, such votes would not be counted at the meeting. Your fund is
unaware of any such challenge at this time. Shareholders would be called at
the phone number Putnam Investments has in its records for their accounts,
and would be asked for their Social Security number or other identifying
information. The shareholders would then be given
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<PAGE>
an opportunity to authorize proxies to vote their shares at the meeting in
accordance with their instructions. To ensure that the shareholders'
instructions have been recorded correctly, they will also receive a
confirmation of their instructions in the mail. A special toll-free number
will be available in case the information contained in the confirmation is
incorrect.
Holders of common shares of the fund may have the opportunity to submit
their voting instructions via the Internet by utilizing a program provided
by a third party vendor hired by Putnam Management. The giving of such a
proxy will not affect your right to vote in person should you decide to
attend the meeting. To vote via the Internet, you will need the 14-digit
"control" number that appears on your proxy card. To use the Internet,
please access the Internet address found on your proxy card on the World
Wide Web. The Internet voting procedures are designed to authenticate
shareholder identities, to allow shareholders to give their voting
instructions, and to confirm that shareholders' instructions have been
recorded properly. Shareholders voting via the Internet should understand
that there may be costs associated with Internet access, such as usage
charges from Internet access providers and telephone companies, that must be
borne by the shareholders.
Your fund's Trustees have adopted a general policy of maintaining
confidentiality in the voting of proxies. Consistent with that policy, your
fund may solicit proxies from shareholders who have not voted their shares
or who have abstained from voting.
Persons holding shares as nominees will upon request be reimbursed for their
reasonable expenses in soliciting instructions from their principals. Your
fund has retained at its expense D. F. King & Co., Inc., 77 Water Street,
New York, New York 10005, to aid in the solicitation instructions for
nominee accounts, for a fee not to exceed $3,500 plus reasonable
out-of-pocket expenses for mailing and phone costs.
Revocation of proxies. Proxies, including proxies given by telephone or over
the Internet, may be revoked at any
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<PAGE>
time before they are voted either (i) by a written revocation received by
the Associate Clerk of your fund, (ii) by properly executing a later-dated
proxy, (iii) by recording later-dated voting instructions via the Internet
or (iv) by attending the meeting and voting in person.
Date for receipt of shareholders' proposals for the next annual meeting. It
is currently anticipated that your fund's next annual meeting of
shareholders will be held in October 2001. Shareholder proposals to be
included in the proxy statement for that meeting must be received by your
fund before March 28, 2001. Shareholders who wish to make a proposal at the
2001 annual meeting--other than one that will be included in the fund's
proxy materials--should notify the fund no later than June 5, 2001. The
Board Policy and Nominating Committee will also consider nominees
recommended by shareholders of the fund to serve as Trustees, provided that
shareholders submit their recommendations by the above date. If a
shareholder who wishes to present a proposal fails to notify the fund by
that date, the proxies solicited for the meeting will have discretionary
authority to vote on the shareholder's proposal if it is properly brought
before the meeting. If a shareholder makes a timely notification, the
proxies may still exercise discretionary voting authority under
circumstances consistent with the SEC's proxy rules.
Adjournment. If sufficient votes in favor of any of the proposals set forth
in the Notice of the Meeting are not received by the time scheduled for the
meeting, the persons named as proxies may propose adjournments of the
meeting for a period or periods of not more than 60 days in the aggregate to
permit further solicitation of proxies with respect to those proposals. Any
adjournment will require the affirmative vote of a majority of the votes
cast on the question in person or by proxy at the session of the meeting to
be adjourned. The persons named as proxies will vote in favor of adjournment
those proxies that they are entitled to vote in favor of such
36
<PAGE>
proposals. They will vote against adjournment those proxies required to be
voted against such proposals. Your fund pays the costs of any additional
solicitation and of any adjourned session. Any proposals for which
sufficient favorable votes have been received by the time of the meeting may
be acted upon and considered final regardless of whether the meeting is
adjourned to permit additional solicitation with respect to any other
proposal.
Financial information. Your fund will furnish to you upon request and
without charge, a copy of the fund's annual report for its most recent
fiscal year, and a copy of its semiannual report for any subsequent
semiannual period. Such requests may be directed to Putnam Investor
Services, P.O. Box 41203, Providence, RI 02940-1203 or 1-800-225-1581.
37
<PAGE>
Fund Information
Putnam Investments. Putnam Investment Management, Inc., the fund's
investment manager, and its affiliates, Putnam Retail Management, Inc., the
fund's principal underwriter, and Putnam Fiduciary Trust Company, the fund's
investor servicing agent and custodian (collectively, the "Putnam
companies"), are owned by Putnam Investments, Inc., a holding company that
is, except for a minority stake owned by employees, is in turn owned by
Marsh & McLennan Companies, Inc., a leading professional services firm that
includes risk and insurance services, investment management and consulting
businesses. The address of the executive offices of Marsh & McLennan
Companies, Inc. is 1166 Avenue of the Americas, New York, New York 10036.
Limitation of Trustee liability. The Declaration of Trust of your fund
provides that the fund will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with litigation in which
they may be involved because of their offices with the fund, except if it is
determined in the manner specified in the Declaration of Trust that they
have not acted in good faith in the reasonable belief that their actions
were in the best interests of the fund or that such indemnification would
relieve any officer or Trustee of any liability to the fund or its
shareholders arising by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of his or her duties. Your fund, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.
Audit Committee and Board Policy and Nominating Committee. The members of
the Audit Committee of your fund include only Trustees who are not
"interested persons" of the fund or Putnam Management. The Audit Committee
currently consists of Dr. Kennan and Messrs. Estin and Stephens (Chairman).
The Board Policy and Nominating Committee consists only of Trustees who are
not "interested persons" of your fund or
38
<PAGE>
Putnam Management. The Board Policy and Nominating Committee currently
consists of Dr. Kennan (Chairperson), Messrs. Hill, Patterson and Thorndike.
Officers and other information. All of the officers of your fund are
employees of Putnam Management or its affiliates. Because of their positions
with Putnam Management or its affiliates or their ownership of stock of
Marsh & McLennan Companies, Inc., the parent corporation of Putnam
Management and Putnam Retail Management, Messrs. Putnam, III, Lasser and
Smith (nominees for Trustees of your fund), as well as the officers of your
fund, will benefit from the management fees, custodian fees, and investor
servicing fees paid or allowed by the fund. In addition to George Putnam,
III and Lawrence J. Lasser, the officers of your fund are as follows:
<TABLE>
<CAPTION>
Putnam High Yield Municipal Trust
Year first
elected to
Name (age) Office office
-----------------------------------------------------------------------
<S> <C> <C>
Charles E. Porter (61) Executive Vice President 1989
Patricia C. Flaherty (53) Senior Vice President 1993
John D. Hughes (65) Senior Vice President
& Treasurer 1989
Gordon H. Silver (52) Vice President 1990
Blake E. Anderson* (43) Vice President 1996
Richard A. Monaghan** (45) Vice President 1999
John R. Verani (60) Vice President 1989
-----------------------------------------------------------------------
</TABLE>
*The fund's portfolio manager
**President of Putnam Retail Management
39
<PAGE>
<TABLE>
<CAPTION>
Assets and shares outstanding of your fund as of May 31, 2000
----------------------------------------------------------------------------
Net assets $176,251,245.80
----------------------------------------------------- ----------------------
<S> <C>
Common shares outstanding and authorized to vote 22,161,671.688 shares
Preferred shares outstanding and authorized to vote 900 shares
</TABLE>
<TABLE>
<CAPTION>
5% beneficial ownership of your fund as of May 31, 2000
---------------------------------------------------------------------
<S> <C>
Persons beneficially owning more than 5% of the fund's shares none
</TABLE>
40
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
62708 8/00
<PAGE>
PUTNAM INVESTMENTS (Logo)
NOTE: PHONE AND INTERNET VOTING IS
NOT AVAILABLE FOR THIS ACCOUNT.
This is your PROXY CARD.
To vote by mail, please record your voting instructions in this proxy card, sign
it below, and return it promptly in the envelope provided. Your vote is
important.
PLEASE FOLD AT PERFORATION BEFORE DETACHING
Proxy for a meeting of shareholders to be held on October 5, 2000 for Putnam
High Yield Municipal Trust (Preferred Shares).
This proxy is solicited on behalf of the Trustees of the fund.
The undersigned shareholder hereby appoints John A. Hill, Hans H. Estin, and
Robert E. Patterson, and each of them separately, Proxies, with power of
substitution, and hereby authorizes them to represent such shareholder and to
vote, as designated below, at the meeting of shareholders of Putnam High Yield
Municipal Trust on October 5, 2000, at 2:00 p.m., Boston time, and at any
adjournments thereof, all of the shares of the fund that the undersigned
shareholder would be entitled to vote if personally present.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
Please sign your name exactly as it appears on this card. If you are a joint
owner, each owner should sign. When signing as executor, administrator,
attorney, trustee, or guardian, or as custodian for a minor, please give your
full title as such. If you are signing for a corporation, please sign the full
corporate name and indicate the signer's office. If you are a partner, sign in
the partnership name.
-------------------------------------------------
Shareholder sign here Date
-------------------------------------------------
Co-owner sign here Date
If you complete and sign the proxy, we'll vote exactly as you tell us. The
Proxies are authorized to vote in their discretion upon any matters as may
properly come before the meeting or at any adjournments of the meeting. If you
simply sign the proxy, or fail to provide your voting instructions on a
proposal, the Proxies will vote FOR fixing the number of Trustees as set forth
in Proposal 1, FOR Proposal 2 and AGAINST Proposal 3.
-1-
<PAGE>
THE TRUSTEES RECOMMEND A VOTE FOR FIXING THE NUMBER OF TRUSTEES AND ELECTING ALL
OF THE NOMINEES:
Please vote by filling in the appropriate boxes below.
1. Proposal to fix the number of Trustees and elect all nominees.
The nominees for Trustees are: J.A. Baxter, H.H. Estin, J.A. Hill, R.J.
Jackson, P.L. Joskow, E.T. Kennan, L.J. Lasser, J.H. Mullin, III, R.E.
Patterson, G. Putnam, III, A.J.C. Smith, W.T. Stephens and W.N. Thorndike.
/ / FOR fixing the number of Trustees as proposed and electing all the
nominees (except as marked to the contrary below)
To withhold authority to vote for one or more of the nominees, write the
name(s) of the nominee(s) below:
---------------------------------------------
/ / WITHHOLD authority to vote for all nominees
THE TRUSTEES RECOMMEND A VOTE FOR PROPOSAL 2:
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. Proposal to ratify the selection of / / / / / /
PricewaterhouseCoopers LLP as the
independent auditors of your fund.
</TABLE>
HE TRUSTEES RECOMMEND A VOTE AGAINST PROPOSAL 3:
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
3. Proposal to convert / / / / / /
your fund from closed-end to
open-end status and authorize
certain related amendments to the
Agreement and Declaration of Trust.
</TABLE>
Note: If you have questions on any of the proposals, please call 1-800-225-1581.
-2-
<PAGE>
PUTNAM INVESTMENTS (Logo)
P.O. Box 9131
Hingham, MA 02043-9131
FOR YOUR CONVENIENCE YOU MAY RECORD YOUR VOTING INSTRUCTIONS VIA THE INTERNET OR
BY RETURNING THIS PROXY CARD BY MAIL
Your vote is very important. If you choose to record your voting instructions
via the Internet, visit the website at www.proxyweb.com/Putnam. Please refer to
the instructions below. Your voting instructions will be immediately confirmed
if you provide your e-mail address.
To record your voting instructions on the Internet
1. Read the proxy statement.
2. Go to www.proxyweb.com/Putnam.
3. Enter the 14-digit control number printed on your proxy card.
4. Follow the instructions on the site.
If you submit your voting instructions on the Internet, do not return your proxy
card.
This is your PROXY CARD.
To vote by mail, please record your voting instructions on this proxy card, sign
it below, and return it promptly in the envelope provided. Your vote is
important.
PLEASE FOLD AT PERFORATION BEFORE DETACHING
Proxy for a meeting of shareholders to be held on October 5, 2000 for Putnam
High Yield Municipal Trust (Common Shares).
This proxy is solicited on behalf of the Trustees of the fund.
The undersigned shareholder hereby appoints John A. Hill, Hans H. Estin, and
Robert E. Patterson, and each of them separately, Proxies, with power of
substitution, and hereby authorizes them to represent such shareholder and to
vote, as designated below, at the meeting of shareholders of Putnam High Yield
Municipal Trust on October 5, 2000, at 2:00 p.m., Boston time, and at any
adjournments thereof, all of the shares of the fund that the undersigned
shareholder would be entitled to vote if personally present.
-1-
<PAGE>
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
Please sign your name exactly as it appears on this card. If you are a joint
owner, each owner should sign. When signing as executor, administrator,
attorney, trustee, or guardian, or as custodian for a minor, please give your
full title as such. If you are signing for a corporation, please sign the full
corporate name and indicate the signer's office. If you are a partner, sign in
the partnership name.
------------------------------------------------------
Shareholder sign here Date
------------------------------------------------------
Co-owner sign here Date
HAS YOUR ADDRESS CHANGED?
Please use this form to notify us of any change in address or telephone number
or to provide us with your comments. Detach this form from the proxy card and
return it with your signed proxy in the enclosed envelope.
Name
--------------------------------------------------------------------------------
Street
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
City State Zip
--------------------------------------------------------------------------------
Telephone
DO YOU HAVE ANY COMMENTS?
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-2-
<PAGE>
DEAR SHAREHOLDER:
Your vote is important. Please help us to eliminate the expense of follow-up
mailings by signing and returning this proxy card or by recording your voting
instructions via the Internet as soon as possible. A postage-paid envelope is
enclosed for your convenience.
THANK YOU!
PLEASE FOLD AT PERFORATION BEFORE DETACHING
If you complete and sign the proxy, we'll vote exactly as you tell us. The
Proxies are authorized to vote in their discretion upon any matters as may
properly come before the meeting or at any adjournments of the meeting.
If you simply sign the proxy, or fail to provide your voting instructions on
a proposal, the Proxies will vote FOR fixing the number of Trustees as
set forth in Proposal 1, FOR Proposal 2 and AGAINST Proposal 3.
THE TRUSTEES RECOMMEND A VOTE FOR FIXING THE NUMBER OF TRUSTEES AND ELECTING
ALL THE NOMINEES:
Please vote by filling in the appropriate boxes below.
1. Proposal to fix the number of Trustees and elect all nominees.
The nominees for Trustees are: J.A. Baxter, H.H. Estin, J.A. Hill, R.J.
Jackson, P.L. Joskow, E.T. Kennan, L.J. Lasser, J.H. Mullin, III, R.E.
Patterson, G. Putnam, III, A.J.C. Smith, W.T. Stephens and W.N.
Thorndike.
/ / FOR fixing the number of Trustees as proposed and electing all the
nominees (except as marked to the contrary below)
To withhold authority to vote for one or more of the nominees, write
the name(s) of the nominee(s) below:
----------------------------------------------------------------------
-3-
<PAGE>
/ / WITHHOLD authority to vote for all nominees
THE TRUSTEES RECOMMEND A VOTE FOR PROPOSAL 2:
FOR AGAINST ABSTAIN
2. Proposal to ratify / / / / / /
the selection of
PricewaterhouseCoopers LLP as the independent auditors of your
fund.
THE TRUSTEES RECOMMEND A VOTE AGAINST PROPSAL 3:
FOR AGAINST ABSTAIN
3. Proposal to convert / / / / / /
your fund from closed-end to
open-end status and authorize
certain related amendments to the
Agreement and Declaration of Trust.
Note: If you have questions on any of the proposals, please call 1-800-225-1581.
