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| UNITED STATES SECURITIES AND EXCHANGE COMMISSION |
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| CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
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| Investment Company Act file number: | (811-04345) |
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| Exact name of registrant as specified in charter: | Putnam Tax Free Income Trust |
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| Address of principal executive offices: | One Post Office Square, Boston, Massachusetts 02109 |
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| Name and address of agent for service: | Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109 |
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| Copy to: | John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600 |
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| Registrant’s telephone number, including area code: | (617) 292-1000 |
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| Date of fiscal year end: | July 31, 2012 |
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| Date of reporting period: | August 1, 2011 — January 31, 2012 |
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Item 1. Report to Stockholders: | |
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| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |
Putnam
AMT-Free
Municipal Fund
Semiannual report
1 | 31 | 12
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Message from the Trustees | 1 | |
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About the fund | 2 | |
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Performance snapshot | 4 | |
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Interview with your fund’s portfolio manager | 5 | |
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Your fund’s performance | 10 | |
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Your fund’s expenses | 12 | |
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Terms and definitions | 14 | |
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Other information for shareholders | 15 | |
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Financial statements | 16 | |
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Message from the Trustees
Dear Fellow Shareholder:
Markets in early 2012 have signaled a more consistently positive direction, supported by strengthening fundamentals. In the United States, where corporate earnings have been strong for more than a year, the employment picture has also brightened in recent months. The Federal Reserve has pledged to leave rates at historic lows at least through the end of 2014, and the beleaguered U.S. housing market has finally shown signs of recovery. The European debt situation and likely recession in that region continue to weigh heavily on markets, of course, alongside high unemployment here at home. However, we are encouraged by the change in investor sentiment.
We believe there are numerous investment opportunities resulting from the many market dislocations in recent years. Putnam’s rigorous bottom-up, fundamental investment approach is well suited to this environment, and the Putnam team is committed to uncovering returns for our shareholders, while seeking to guard against downside risk.
Please join us in welcoming the return of Elizabeth T. Kennan to the Board of Trustees. Dr. Kennan, who served as a Trustee from 1992 until 2010, has rejoined the Board, effective January 1, 2012. Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse breeding and general farming), and is also President Emeritus of Mount Holyoke College.
We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.
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About the fund
Seeking high current income free from federal taxes
Municipal bonds have long been popular investments because they provide income exempt from federal tax, though capital gains are taxable. Putnam AMT-Free Municipal Fund seeks income exempt from traditional income tax as well as from the federal alternative minimum tax, or AMT.
The AMT is a federal tax that operates in tandem with the regular income tax system. Taxpayers subject to the AMT generally must pay a larger amount in tax determined by AMT rules — and the difference can be thousands of dollars for many with household incomes above $150,000. It is estimated that in 2012, an additional 29 million taxpayers might be paying the AMT, unless the federal government changes the law.
If you are subject to the AMT, investments that could increase your tax liability include private-activity municipal bonds, which back development projects, such as certain housing and resource recovery projects.
Putnam AMT-Free Municipal Fund aims to serve investors subject to the AMT. The fund seeks to avoid bonds whose income would be taxable under AMT rules, though income may be subject to state taxes.
The fund’s portfolio managers research the municipal market to buy bonds that are not subject to the AMT. Pursuing the fund’s mandate, they also keep the fund invested in high-quality bonds, favoring those that have intermediate- to long-term maturities. The managers’ goal is to provide an attractive level of income exempt from all federal taxes.
Consider these risks before investing: Capital gains, if any, are taxable for federal and, in most cases, state purposes. Income from federal tax-exempt funds may be subject to state and local taxes. Funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. The fund may invest significantly in particular segments of the tax-exempt debt market, making it more vulnerable to fluctuations in the values of the securities it holds than a fund that invests more broadly.
Understanding the AMT
The AMT is a separate, parallel federal income tax system, with two marginal tax rates, 26% and 28%, and different exemption amounts.
Under AMT rules, certain exclusions, exemptions, deductions, and credits that would reduce your regular taxable income are not allowed. You must “adjust” your regular taxable income to arrive at your alternative minimum taxable income. Then, after subtracting your AMT exemption amount, if your AMT liability is greater than your regular tax liability, you must pay both your regular tax and the difference. It is important to understand that a higher level of income will not necessarily cause you to owe the AMT. Rather, it is the relationship between your income and various trigger items, such as credits and deductions, that determines your AMT liability.
Managing this relationship can help avoid a costly surprise at tax time. Any number of items may trigger the tax, but large capital gains, personal exemptions, and deductions are the worst culprits.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 4.00%; had they, returns would have been lower. See pages 5 and 10–12 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.
* Performance for class A shares before their inception (9/20/93) is derived from the historical performance of class B shares.
† Returns for the six-month period are not annualized, but cumulative.
4
Interview with your fund’s portfolio manager
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How would you describe the environment in the municipal bond market during the six months ended January 31, 2012?
In the second half of the year, the municipal bond market gained back a good deal of what it had lost in the broad sell-off that occurred in the early months of 2011.
Despite last year’s dire predictions for the municipal bond market, widespread defaults never materialized, and the fiscal picture for states in general has been gradually improving. Defaults in 2011 were higher year over year, but generally were contained to the lower-rated sectors of the market. States continued to face challenges in balancing their budgets, but by late in the period all state legislatures that were slated to enact budgets had done so. Income tax receipts also began to modestly improve versus last year. All told, as investors ultimately realized that municipal credit conditions were not nearly as bleak as some had feared, they re-entered the municipal bond market and prices benefited.
Against this backdrop, tax-exempt bonds posted solid returns and outpaced the broad taxable bond market, as measured by the Barclays Capital U.S. Aggregate Bond Index. Moreover, I am pleased to report that the fund outperformed its benchmark, although it slightly trailed the average return of its Lipper peer group.
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This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 1/31/12. See pages 4 and 10–12 for additional fund performance information. Index descriptions can be found on pages 14–15.
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In August 2011, Standard & Poor’s [S&P] downgraded its credit rating for U.S. Treasuries and a number of municipal bonds. What impact did that have on the market?
On the heels of its August 5 downgrade of U.S. sovereign debt, S&P lowered its ratings from AAA to AA+ for more than 11,000 municipal securities, including taxable and tax-exempt securities. While this number does seem large, it covers less than 1% of the nearly $4 trillion municipal bond market. These securities all had links to the federal government, and according to S&P, the affected issues fall into four broad categories: municipal housing bonds backed by the federal government or invested in U.S. government securities; bonds of certain government-related entities in the housing and public power sectors; bonds backed by federal leases; and defeased bonds secured by U.S. Treasury and government agency securities held in escrow.
The downgrade was not surprising given the interdependence of state and federal finances, and S&P had been suggesting such a move was imminent for some time. That said, the change didn’t necessarily impact the ratings of states, 13 of which maintained their AAA general obligation, or “G.O.,” bond ratings as of January 2012. Rather, we believe S&P’s downgrades underscore the importance of performing intensive fundamental research when investing in the municipal bond market, and at Putnam, we independently research every bond we hold and assess the credit risk it represents before we add it to the portfolio.
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Allocations are represented as a percentage of the fund’s net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, the exclusion of as-of trades, if any, and the use of different classifications of securities for presentation purposes. Holdings and allocations may vary over time.
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What effect did recent policy developments have on the tax-exempt bond market?
Congress’s negotiations over raising the debt ceiling last July created a 12-member bipartisan “super committee” tasked with recommending a plan to reduce the deficit by at least $1.2 trillion over the next 10 years. As their November deadline approached, many in the political press speculated that the committee would be unable to agree on a compromise, and that turned out to be the case. As a result, automatic, across-the-board cuts are slated to be implemented over 10 years, beginning in January 2013, in a process called “sequestration.”
Overall, we believe that this sequestration of funding is not necessarily a negative for municipal bonds, particularly given the recommendations that the super committee might have made. Some speculation arose that the committee, in an effort to raise revenue, would have recommended limiting the amount of municipal-bond interest that top income earners could exclude from their taxable income. In fact, a similar idea resurfaced in President Obama’s fiscal 2013 budget proposal, under which individuals and married couples earning more than $200,000 and $250,000, respectively, would only be able to exclude from federal taxes 28 cents of every dollar of municipal bond income earned. This new taxation of municipal bond interest could have the dual effect of reducing the demand for municipal bonds and increasing the costs to
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Credit qualities are shown as a percentage of portfolio market value as of 1/31/12. A bond rated Baa or higher (MIG3/VMIG3 or higher, for short-term debt) is considered investment grade. The chart reflects Moody’s ratings; percentages may include bonds or derivatives not rated by Moody’s but rated by Standard & Poor’s (S&P) or, if unrated by S&P, by Fitch, and then included in the closest equivalent Moody’s rating. Ratings will vary over time. Credit qualities are included for portfolio securities and are not included for derivative instruments and cash. The fund itself has not been rated by an independent rating agency.
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municipal issuers. Although we believe such a change is not imminent, it is likely that a more wide-ranging debate over taxes will continue throughout the 2012 election year.
On the subject of taxes, we should also point out that the failure of the super committee to come to an agreement has left a number of other issues unresolved, including the fate of the Bush-era tax cuts and the future of the annual alternative minimum tax [AMT] “patch,” which sets the income threshold associated with the AMT. We believe these issues and others will be debated over the coming months, and we will be closely monitoring developments.
How did you position the portfolio during the past six months?
We positioned the portfolio to benefit from improving fundamentals in the municipal bond market. While we felt that the budget challenges faced by many states were significant, we were confident that conditions would improve as long as the broad economy did not stall. Against this backdrop, we believed that essential service revenue bonds remained attractive, while we remained highly selective regarding the fund’s positioning in local G.O.s, which are securities issued at the city or county level. We believe that as the federal government looks to reduce transfer payments to the states — and as states, in turn, seek to close their deficits by reducing spending — these types of bonds are at risk for downgrades or other headline-driven price volatility. And unlike state general obligation bonds, local G.O.s rely more on property tax revenue than on income or sales taxes. With real-estate prices still under pressure in many markets, property taxes have been slower to recover than other tax sources.
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This chart illustrates the fund’s composition by effective maturity, showing the percentage of holdings in different maturity ranges and how the composition has changed over the past six months. Holdings and maturity ranges will vary over time. The effective maturity dates of bonds with call features may change as a result of market conditions.
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From a credit perspective, we held an overweight position in A- and Baa-rated securities versus the fund’s benchmark. In terms of sectors, we favored higher-education, utility, and health-care bonds, particularly those of hospitals and continuing-care retirement communities. Overall, this positioning generally helped the fund’s relative performance during the past six months.
What is your outlook for the months ahead?
While technical factors in the market have been positive — specifically, lighter supply and stable demand — uncertainty remains. We believe that states will continue to face financial challenges as the economy struggles to find its footing. For the most part, however, we believe that the fiscal conditions of states and municipalities are showing signs of improvement: Tax receipts are beginning to improve, albeit slowly, and we believe defaults will remain relatively low.
We remain focused on the economy and Congress’s plans to reduce the deficit. Higher federal income tax rates, a change in the tax status of municipal bonds, or significant cuts in state funding all would have consequences for the municipal bond market. But for investors with longer time horizons, we believe that our actively managed approach remains a prudent way to diversify holdings and generate tax-exempt income in the municipal bond market.
Thank you, Thalia, for your time and insights today.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.
Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.
Portfolio Manager Thalia Meehan holds a B.A. from Williams College. A CFA charterholder, Thalia joined Putnam in 1989 and has been in the investment industry since 1983.
In addition to Thalia, your fund’s portfolio managers are Paul M. Drury, CFA, and Susan A. McCormack, CFA.
IN THE NEWS
The U.S. unemployment rate fell to 8.3% in January, with the nation’s employers adding 243,000 jobs, according to the Labor Department. This was the fastest pace of job growth since April 2011 and was the fifth straight month of unemployment rate declines. The nation’s jobless rate is still above the 5.2%-to-6% range that Federal Reserve (Fed) officials say is consistent with maximum employment. According to the Labor Department, 12.8 million Americans remain unemployed. In testimony before the Senate Budget Committee in early February, Fed Chairman Ben S. Bernanke said that the U.S. job market is far from “operating normally.” The Fed chairman reiterated that the Fed’s benchmark interest rate will remain near zero at least through late 2014, and again called on U.S. lawmakers to reduce the federal deficit.
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Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended January 31, 2012, the end of the first half of its current fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class Y shares are not available to all investors. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.
Fund performance Total return for periods ended 1/31/12
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| Class A | Class B | Class C | Class M | Class Y |
(inception dates) | (9/20/93) | (9/9/85) | (7/26/99) | (6/1/95) | (1/2/08) |
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| Before | After | | | | | Before | After | Net |
| sales | sales | Before | After | Before | After | sales | sales | asset |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value |
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Annual average | | | | | | | | | |
(life of fund) | 6.36% | 6.19% | 5.99% | 5.99% | 5.73% | 5.73% | 6.12% | 5.99% | 6.13% |
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10 years | 60.08 | 53.78 | 50.14 | 50.14 | 47.95 | 47.95 | 55.45 | 50.35 | 55.53 |
Annual average | 4.82 | 4.40 | 4.15 | 4.15 | 3.99 | 3.99 | 4.51 | 4.16 | 4.52 |
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5 years | 29.07 | 24.01 | 24.99 | 22.99 | 24.30 | 24.30 | 27.31 | 23.26 | 29.54 |
Annual average | 5.24 | 4.40 | 4.56 | 4.23 | 4.45 | 4.45 | 4.95 | 4.27 | 5.31 |
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3 years | 24.78 | 19.68 | 22.37 | 19.37 | 22.02 | 22.02 | 23.76 | 19.78 | 25.71 |
Annual average | 7.66 | 6.17 | 6.96 | 6.08 | 6.86 | 6.86 | 7.36 | 6.20 | 7.93 |
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1 year | 14.90 | 10.27 | 14.19 | 9.19 | 13.97 | 12.97 | 14.55 | 10.86 | 15.15 |
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6 months | 7.74 | 3.42 | 7.46 | 2.46 | 7.34 | 6.34 | 7.61 | 4.16 | 7.90 |
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 4.00% and 3.25% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class Y shares have no initial sales charge or CDSC. Performance for class A, C, M, and Y shares before their inception is derived from the historical performance of class B shares, adjusted for the applicable sales charge (or CDSC) and, for class C shares, the higher operating expenses for such shares.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
Class B share performance does not assume conversion to class A shares.
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Comparative index returns For periods ended 1/31/12
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| Barclays Capital | Lipper General Municipal Debt Funds |
| Municipal Bond Index | category average* |
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Annual average (life of fund) | 7.18% | 6.62% |
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10 years | 69.79 | 55.89 |
Annual average | 5.44 | 4.52 |
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5 years | 32.32 | 24.05 |
Annual average | 5.76 | 4.37 |
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3 years | 26.31 | 30.14 |
Annual average | 8.10 | 9.13 |
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1 year | 14.10 | 15.26 |
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6 months | 7.37 | 8.05 |
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Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
* Over the 6-month, 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 1/31/12, there were 258, 246, 223, 194, 161, and 30 funds, respectively, in this Lipper category.
Fund price and distribution information For the six-month period ended 1/31/12
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Distributions | Class A | Class B | Class C | Class M | Class Y |
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Number | 6 | 6 | 6 | 6 | 6 |
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Income 1 | $0.310229 | $0.263525 | $0.252171 | $0.289944 | $0.327654 |
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Capital gains 2 | — | — | — | — | — |
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Total | $0.310229 | $0.263525 | $0.252171 | $0.289944 | $0.327654 |
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| Before | After | Net | Net | Before | After | Net |
| sales | sales | asset | asset | sales | sales | asset |
Share value | charge | charge | value | value | charge | charge | value |
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7/31/11 | $14.66 | $15.27 | $14.67 | $14.69 | $14.69 | $15.18 | $14.66 |
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1/31/12 | 15.47 | 16.11 | 15.49 | 15.51 | 15.51 | 16.03 | 15.48 |
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| Before | After | Net | Net | Before | After | Net |
| sales | sales | asset | asset | sales | sales | asset |
Current yield (end of period) | charge | charge | value | value | charge | charge | value |
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Current dividend rate 3 | 3.87% | 3.71% | 3.25% | 3.10% | 3.59% | 3.48% | 4.09% |
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Taxable equivalent 4 | 5.95 | 5.71 | 5.00 | 4.77 | 5.52 | 5.35 | 6.29 |
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Current 30-day SEC yield 5 | N/A | 2.56 | 2.06 | 1.91 | N/A | 2.33 | 2.88 |
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Taxable equivalent 4 | N/A | 3.94 | 3.17 | 2.94 | N/A | 3.58 | 4.43 |
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The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (4.00% for class A shares and 3.25% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
1 For some investors, investment income may be subject to the federal alternative minimum tax.
2 Capital gains, if any, are taxable for federal and, in most cases, state purposes.
3 Most recent distribution, excluding capital gains, annualized and divided by share price before or after sales charge at period-end.
4 Assumes maximum 35.00% federal and state combined tax rate for 2012. Results for investors subject to lower tax rates would not be as advantageous.
5 Based only on investment income and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.
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Fund performance as of most recent calendar quarter
Total return for periods ended 12/31/11
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| Class A | Class B | Class C | Class M | Class Y |
(inception dates) | (9/20/93) | (9/9/85) | (7/26/99) | (6/1/95) | (1/2/08) |
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| Before | After | | | | | Before | After | Net |
| sales | sales | Before | After | Before | After | sales | sales | asset |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value |
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Annual average | | | | | | | | | |
(life of fund) | 6.27% | 6.10% | 5.90% | 5.90% | 5.64% | 5.64% | 6.03% | 5.90% | 6.04% |
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10 years | 58.81 | 52.58 | 49.04 | 49.04 | 46.87 | 46.87 | 54.25 | 49.25 | 54.46 |
Annual average | 4.73 | 4.32 | 4.07 | 4.07 | 3.92 | 3.92 | 4.43 | 4.09 | 4.44 |
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5 years | 25.20 | 20.28 | 21.19 | 19.19 | 20.54 | 20.54 | 23.48 | 19.53 | 25.59 |
Annual average | 4.60 | 3.76 | 3.92 | 3.57 | 3.81 | 3.81 | 4.31 | 3.63 | 4.66 |
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3 years | 25.36 | 20.36 | 22.88 | 19.88 | 22.42 | 22.42 | 24.22 | 20.29 | 26.26 |
Annual average | 7.83 | 6.37 | 7.11 | 6.23 | 6.98 | 6.98 | 7.50 | 6.35 | 8.08 |
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1 year | 10.40 | 5.93 | 9.75 | 4.75 | 9.55 | 8.55 | 10.03 | 6.45 | 10.74 |
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6 months | 6.35 | 2.14 | 5.95 | 0.95 | 5.85 | 4.85 | 6.09 | 2.64 | 6.43 |
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Your fund’s expenses
As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.
Expense ratios
| | | | | |
| Class A | Class B | Class C | Class M | Class Y |
|
Total annual operating expenses for the fiscal year | | | | | |
ended 7/31/11 | 0.77% | 1.39% | 1.54% | 1.04% | 0.54% |
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Annualized expense ratio for the six-month period | | | | | |
ended 1/31/12 | 0.78% | 1.40% | 1.55% | 1.05% | 0.55% |
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Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report. Expenses are shown as a percentage of average net assets.
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Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from August 1, 2011, to January 31, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
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| Class A | Class B | Class C | Class M | Class Y |
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Expenses paid per $1,000*† | $4.07 | $7.30 | $8.08 | $5.48 | $2.87 |
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Ending value (after expenses) | $1,077.40 | $1,074.60 | $1,073.40 | $1,076.10 | $1,079.00 |
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* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 1/31/12. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended January 31, 2012, use the following calculation method. To find the value of your investment on August 1, 2011, call Putnam at 1-800-225-1581.
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Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| | | | | |
| Class A | Class B | Class C | Class M | Class Y |
|
Expenses paid per $1,000*† | $3.96 | $7.10 | $7.86 | $5.33 | $2.80 |
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Ending value (after expenses) | $1,021.22 | $1,018.10 | $1,017.34 | $1,019.86 | $1,022.37 |
|
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 1/31/12. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
13
Terms and definitions
Important terms
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 4.00% maximum sales charge for class A shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
Share classes
Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC.
Class Y shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.
Fixed-income terms
Current yield is the annual rate of return earned from dividends or interest of an investment. Current yield is expressed as a percentage of the price of a security, fund share, or principal investment.
Yield curve is a graph that plots the yields of bonds with equal credit quality against their differing maturity dates, ranging from shortest to longest. It is used as a benchmark for other debt, such as mortgage or bank lending rates.
Comparative indexes
Barclays Capital Municipal Bond Index is an unmanaged index of long-term fixed-rate investment-grade tax-exempt bonds.
Barclays Capital U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA (Bank of America) Merrill Lynch U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.
Lipper is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based
14
on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (SEC) regulations, Putnam sends a single copy of annual and semiannual shareholder reports, prospectuses, and proxy statements to Putnam shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call Putnam at 1-800-225-1581, and Putnam will begin sending individual copies within 30 days.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2011, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Forms N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the Public Reference Room.
Trustee and employee fund ownership
Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of January 31, 2012, Putnam employees had approximately $325,000,000 and the Trustees had approximately $75,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.
15
Financial statements
A guide to financial statements
These sections of the report, as well as the accompanying Notes, constitute the fund’s financial statements.
The fund’s portfolio lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification.
Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year.
Financial highlights provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlights table also includes the current reporting period.
16
The fund’s portfolio 1/31/12 (Unaudited)
| | |
Key to holding’s abbreviations | | |
| | |
ABAG Association Of Bay Area Governments | FRB Floating Rate Bonds: the rate shown is the current | |
AGM Assured Guaranty Municipal Corporation | interest rate at the close of the reporting period | |
AMBAC AMBAC Indemnity Corporation | G.O. Bonds General Obligation Bonds | |
ASC 820 Accounting Standards Codification | GNMA Coll. Government National Mortgage | |
ASC 820 Fair Value Measurements and Disclosures | Association Collateralized | |
COP Certificates of Participation | NATL National Public Finance Guarantee Corp. | |
FGIC Financial Guaranty Insurance Company | PSFG Permanent School Fund Guaranteed | |
FHA Insd. Federal Housing Administration Insured | SGI Syncora Guarantee, Inc. | |
FHLMC Coll. Federal Home Loan Mortgage | VRDN Variable Rate Demand Notes, which are | |
Corporation Collateralized | floating-rate securities with long-term maturities, | |
FNMA Coll. Federal National Mortgage | that carry coupons that reset every one or seven | |
Association Collateralized | days. The rate shown is the current interest rate at the | |
| close of the reporting period. | |
| | |
| | | |
MUNICIPAL BONDS AND NOTES (99.7%)* | Rating** | Principal amount | Value |
|
Alabama (2.0%) | | | |
AL Hsg. Fin. Auth. Rev. Bonds (Single Fam. | | | |
Mtge.), Ser. G, GNMA Coll., FNMA Coll., FHLMC | | | |
Coll., 5 1/2s, 10/1/37 | Aaa | $1,350,000 | $1,363,500 |
|
AL State Port Auth. Docks Fac. Rev. Bonds, | | | |
6s, 10/1/40 | BBB+ | 1,000,000 | 1,091,550 |
|
Cullman Cnty., Hlth. Care Auth. Rev. Bonds | | | |
(Cullman Regl. Med. Ctr.), Ser. A, 6 3/4s, 2/1/29 | Ba1 | 1,000,000 | 1,012,750 |
|
Mobile, Special Care Fac. Fin. Auth. VRDN | | | |
(Infirmary Hlth. Syst.), Ser. A, 0.07s, 2/1/40 | VMIG1 | 2,900,000 | 2,900,000 |
|
Selma, Indl. Dev. Board Rev. Bonds (Gulf | | | |
Opportunity Zone Intl. Paper Co.), Ser. A, | | | |
6 1/4s, 11/1/33 | BBB | 1,500,000 | 1,662,690 |
|
| | | 8,030,490 |
Alaska (0.9%) | | | |
Anchorage, G.O. Bonds, Ser. D, AMBAC, | | | |
5s, 8/1/25 | AA | 3,420,000 | 3,907,316 |
|
| | | 3,907,316 |
Arizona (4.3%) | | | |
Coconino Cnty., Poll. Control Rev. Bonds | | | |
(Tucson Elec. Pwr. Co. — Navajo), Ser. A, | | | |
5 1/8s, 10/1/32 | Baa3 | 1,000,000 | 1,011,610 |
|
Glendale, Indl. Dev. Auth. Rev. Bonds | | | |
(Midwestern U.), 5 1/8s, 5/15/40 | A– | 2,125,000 | 2,235,351 |
|
Glendale, Wtr. & Swr. Rev. Bonds | | | |
5s, 7/1/28 ∆ | AA | 1,000,000 | 1,176,700 |
AMBAC, 5s, 7/1/28 (Prerefunded 7/1/13) | AA | 2,000,000 | 2,132,560 |
|
Navajo Cnty., Poll. Control Corp. Mandatory | | | |
Put Bonds (6/1/16), Ser. E, 5 3/4s, 6/1/34 | Baa2 | 3,250,000 | 3,684,883 |
|
Pinal Cnty., Elec. Rev. Bonds (Dist. No. 3), | | | |
5 1/4s, 7/1/36 | A | 1,400,000 | 1,507,604 |
|
Scottsdale, Indl. Dev. Auth. Hosp. Rev. Bonds | | | |
(Scottsdale Hlth. Care), Ser. C, AGM, 5s, 9/1/35 | Aa3 | 2,000,000 | 2,168,120 |
|
17
| | | |
MUNICIPAL BONDS AND NOTES (99.7%)* cont. | Rating** | Principal amount | Value |
|
Arizona cont. | | | |
Tempe, Indl. Dev. Auth. Lease Rev. Bonds | | | |
(ASU Foundation), AMBAC, 5s, 7/1/28 | AA/P | $1,715,000 | $1,724,192 |
|
U. Med. Ctr. Corp. AZ Hosp. Rev. Bonds, | | | |
6 1/2s, 7/1/39 | Baa1 | 1,750,000 | 1,954,400 |
|
| | | 17,595,420 |
California (14.8%) | | | |
ABAG Fin. Auth. for Nonprofit Corps. Rev. Bonds | | | |
(Episcopal Sr. Cmnty.), 6 1/8s, 7/1/41 | BBB+ | 500,000 | 523,815 |
(St. Rose Hosp.), Ser. A, 6s, 5/15/29 | A– | 3,000,000 | 3,385,770 |
|
CA Rev. Bonds | | | |
(Catholic Hlth. Care West), Ser. A, 6s, 7/1/39 | A2 | 750,000 | 852,045 |
(Adventist Hlth. Syst.-West), Ser. A, | | | |
5 3/4s, 9/1/39 | A | 1,000,000 | 1,104,450 |
|
CA Muni. Fin. Auth. Rev. Bonds (U. of La Verne), | | | |
Ser. A, 6 1/4s, 6/1/40 | Baa2 | 1,000,000 | 1,089,900 |
|
CA Muni. Fin. Auth. Sr. Living Rev. Bonds | | | |
(Pilgrim Place Claremont), Ser. A, 5 7/8s, 5/15/29 | A– | 1,500,000 | 1,669,065 |
|
CA State G.O. Bonds, 6 1/2s, 4/1/33 | A1 | 5,000,000 | 6,119,950 |
|
CA State Econ. Recvy. G.O. Bonds, Ser. A, | | | |
5 1/4s, 7/1/21 | Aa3 | 1,000,000 | 1,242,260 |
|
CA State Pub. Wks. Board Rev. Bonds | | | |
(Riverside Campus), Ser. B, 6s, 4/1/25 | A2 | 3,000,000 | 3,653,670 |
Ser. G-1, 5 1/4s, 10/1/23 | A2 | 3,000,000 | 3,449,970 |
|
CA Statewide Cmnty., Dev. Auth. Rev. Bonds | | | |
(Sutter Hlth.), Ser. B, 5 1/4s, 11/15/48 | Aa3 | 1,550,000 | 1,628,477 |
(Sr. Living — Presbyterian Homes), | | | |
6 5/8s, 11/15/24 | BBB– | 2,000,000 | 2,227,680 |
(St. Joseph), NATL, 5 1/8s, 7/1/24 | AA– | 2,000,000 | 2,226,400 |
|
Golden State Tobacco Securitization Corp. Rev. Bonds | | | |
(Tobacco Settlement), Ser. B, AMBAC, FHLMC Coll., | | | |
5s, 6/1/38 (Prerefunded 6/1/13) | Aaa | 2,475,000 | 2,622,535 |
Ser. A, AMBAC, zero %, 6/1/24 | A2 | 5,000,000 | 2,816,950 |
|
Grossmont-Cuyamaca, Cmnty. College Dist. G.O. | | | |
Bonds (Election of 2002), Ser. B, FGIC, NATL, | | | |
zero %, 8/1/17 | Aa2 | 2,100,000 | 1,746,780 |
|
Infrastructure & Econ. Dev. Bank Rev. Rev. Bonds | | | |
(J. David Gladstone Inst.), Ser. A, 5s, 10/1/31 | A– | 1,000,000 | 1,040,360 |
|
Los Angeles, Dept. Arpt. Rev. Bonds (Los Angeles | | | |
Intl. Arpt.), Ser. A, 5s, 5/15/40 | AA | 1,000,000 | 1,097,200 |
|
M-S-R Energy Auth. Rev. Bonds, Ser. A, | | | |
6 1/2s, 11/1/39 | A– | 750,000 | 915,165 |
|
Merced, City School Dist. G.O. Bonds | | | |
(Election of 2003), NATL | | | |
zero %, 8/1/25 | A | 1,190,000 | 608,709 |
zero %, 8/1/24 | A | 1,125,000 | 609,953 |
zero %, 8/1/23 | A | 1,065,000 | 614,633 |
zero %, 8/1/22 | A | 1,010,000 | 619,009 |
|
Northern CA Pwr. Agcy. Rev. Bonds | | | |
(Hydroelec. Project No. 1), Ser. A | | | |
5s, 7/1/31 | A | 500,000 | 559,395 |
5s, 7/1/30 | A | 500,000 | 564,020 |
|
18
| | | |
MUNICIPAL BONDS AND NOTES (99.7%)* cont. | Rating** | Principal amount | Value |
|
California cont. | | | |
Oakland, Unified School Dist. Alameda Cnty., G.O. | | | |
Bonds (Election 2006), Ser. A, 6 1/2s, 8/1/24 | A2 | $2,500,000 | $2,947,350 |
|
Sacramento, City Fin. Auth. Tax Alloc. Bonds, | | | |
Ser. A, FGIC, NATL, zero %, 12/1/21 | A– | 5,500,000 | 3,467,310 |
|
Sacramento, Muni. Util. Dist. Rev. Bonds, Ser. X, | | | |
5s, 8/15/28 | A1 | 650,000 | 764,751 |
|
San Diego, Unified School Dist. G.O. Bonds | | | |
(Election of 1998), Ser. E, AGM, 5 1/4s, 7/1/19 | | | |
(Prerefunded 7/1/13) | Aa2 | 2,000,000 | 2,147,340 |
|
San Francisco, City & Cnty. Arpt. Comm. Rev. | | | |
Bonds (Intl. Arpt.), Ser. F, 5s, 5/1/40 | A1 | 1,250,000 | 1,338,788 |
|
Santa Ana, Fin. Auth. Lease Rev. Bonds | | | |
(Police Admin. & Hldg. Fac.), Ser. A, NATL, | | | |
6 1/4s, 7/1/17 | Baa2 | 3,680,000 | 4,329,446 |
|
Tuolumne Wind Project Auth. Rev. Bonds | | | |
(Tuolumne Co.), Ser. A, 5 1/4s, 1/1/24 | A+ | 1,000,000 | 1,144,170 |
|
Ventura Cnty., COP (Pub. Fin. Auth. III), | | | |
5s, 8/15/20 | AA | 1,000,000 | 1,166,200 |
|
Yucaipa Special Tax Bonds (Cmnty. Fac. Dist. | | | |
No. 98-1 Chapman Heights), 5 3/8s, 9/1/30 | BBB+ | 375,000 | 389,344 |
|
| | | 60,682,860 |
Colorado (1.6%) | | | |
CO Hlth. Fac. Auth. Rev. Bonds | | | |
(Evangelical Lutheran), Ser. A, 6 1/8s, 6/1/38 | A3 | 2,545,000 | 2,600,252 |
(Valley View Assn.), 5 1/4s, 5/15/42 | BBB+ | 2,000,000 | 2,012,660 |
|
CO Pub. Hwy. Auth. Rev. Bonds (E-470 Pub. Hwy.), | | | |
Ser. C1, NATL, 5 1/2s, 9/1/24 | Baa2 | 1,000,000 | 1,042,020 |
|
E-470 Pub. Hwy. Auth. Rev. Bonds, Ser. A, NATL, | | | |
zero %, 9/1/34 | Baa2 | 3,525,000 | 880,334 |
|
| | | 6,535,266 |
Florida (9.6%) | | | |
Brevard Cnty., Hlth. Care Fac. Auth. Rev. Bonds | | | |
(Health First, Inc.), 7s, 4/1/39 | A3 | 1,250,000 | 1,453,525 |
|
Broward Cnty., Arpt. Syst. Rev. Bonds, Ser. O, | | | |
5 3/8s, 10/1/29 | A1 | 1,000,000 | 1,127,860 |
|
FL State Board of Ed. G.O. Bonds (Capital Outlay | | | |
2011), Ser. F, 5s, 6/1/30 | AAA | 2,520,000 | 2,988,166 |
|
Hernando Cnty., Rev. Bonds (Criminal Justice | | | |
Complex Fin.), FGIC, NATL, 7.65s, 7/1/16 | BBB | 10,000,000 | 12,049,800 |
|
Lee Cnty., Rev. Bonds, SGI, 5s, 10/1/25 | Aa2 | 2,000,000 | 2,183,620 |
|
Marco Island, Util. Sys. Rev. Bonds, Ser. A, | | | |
5s, 10/1/34 | Aa3 | 1,000,000 | 1,090,120 |
|
Miami-Dade Cnty., Expressway Auth. Toll Syst. | | | |
Rev. Bonds, Ser. A, 5s, 7/1/40 | A | 1,000,000 | 1,047,060 |
|
Miami-Dade Cnty., Wtr. & Swr. Rev. Bonds, AGM, | | | |
SGI, 5s, 10/1/23 | Aa2 | 1,000,000 | 1,128,920 |
|
Orlando & Orange Cnty., Expressway Auth. Rev. | | | |
Bonds, FGIC, NATL, 8 1/4s, 7/1/14 | A2 | 5,000,000 | 5,725,500 |
|
Orlando Cmnty. Redev. Agcy. Tax Alloc. | | | |
(Republic Drive/Universal), 5s, 4/1/23 ∆ | A–/F | 1,630,000 | 1,818,281 |
|
19
| | | |
MUNICIPAL BONDS AND NOTES (99.7%)* cont. | Rating** | Principal amount | Value |
|
Florida cont. | | | |
Palm Beach Cnty., Hlth. Fac. Auth. Rev. Bonds | | | |
(Acts Retirement-Life Cmnty.), 5 1/2s, 11/15/33 | BBB+ | $3,000,000 | $3,088,140 |
|
South Lake Hosp. Dist. (South Lake Hosp.), | | | |
Ser. A, 6s, 4/1/29 | Baa2 | 660,000 | 716,206 |
|
Sumter Cnty., School Dist. Rev. Bonds | | | |
(Multi-Dist. Loan Program), AGM, 7.15s, 11/1/15 | | | |
(Escrowed to maturity) | Aa3 | 3,935,000 | 4,853,232 |
|
| | | 39,270,430 |
Georgia (1.7%) | | | |
Atlanta, Arpt. Rev. Bonds, Ser. C, 5 7/8s, 1/1/24 | A1 | 1,500,000 | 1,882,500 |
|
Atlanta, Wtr. & Waste Wtr. Rev. Bonds, Ser. A, | | | |
6 1/4s, 11/1/39 | A1 | 1,500,000 | 1,754,325 |
|
Fulton Cnty., Dev. Auth. Rev. Bonds (Klaus Pkg. & | | | |
Fam. Hsg. Project), NATL, 5 1/4s, 11/1/20 | Aa3 | 3,360,000 | 3,556,325 |
|
| | | 7,193,150 |
Guam (0.3%) | | | |
Territory of GU, Rev. Bonds, Ser. A, 5 3/8s, 12/1/24 | BBB– | 1,000,000 | 1,070,750 |
|
| | | 1,070,750 |
Illinois (6.5%) | | | |
Chicago, Board of Ed. G.O. Bonds, Ser. A, NATL, | | | |
5 1/4s, 12/1/19 | Aa3 | 1,500,000 | 1,548,720 |
|
Chicago, O’Hare Intl. Arpt. Rev. Bonds | | | |
Ser. A, 5 3/4s, 1/1/39 | A1 | 700,000 | 796,103 |
Ser. F, 5s, 1/1/40 | A1 | 1,045,000 | 1,092,150 |
|
Cicero, G.O. Bonds, Ser. A, SGI, 5 1/4s, 1/1/21 | A/P | 2,250,000 | 2,301,638 |
|
Du Page Cnty., Cmnty. High School Dist. | | | |
G.O. Bonds (Dist. No. 108 — Lake Park), | | | |
AGM, 5.6s, 1/1/20 | Aa2 | 1,000,000 | 1,042,820 |
|
IL Fin. Auth. Rev. Bonds | | | |
(Roosevelt U.), 6 1/4s, 4/1/29 | Baa2 | 1,500,000 | 1,628,925 |
(Rush U. Med. Ctr.), Ser. B, NATL, 5 3/4s, 11/1/28 | A2 | 2,500,000 | 2,756,225 |
(Elmhurst Memorial), Ser. A, 5 5/8s, 1/1/37 | Baa1 | 1,000,000 | 1,035,730 |
(American Wtr. Cap. Corp.), 5 1/4s, 10/1/39 | BBB+ | 1,575,000 | 1,587,726 |
|
IL State Toll Hwy. Auth. Rev. Bonds, Ser. A-1, | | | |
AGM, 5s, 1/1/22 | Aa3 | 2,500,000 | 2,819,625 |
|
Metro. Pier & Exposition Auth. Dedicated State | | | |
Tax Rev. Bonds (McCormick), Ser. A, NATL, | | | |
zero %, 12/15/22 | A3 | 5,500,000 | 3,634,070 |
|
Regl. Trans. Auth. Rev. Bonds, Ser. A, AMBAC, | | | |
8s, 6/1/17 | Aa3 | 5,000,000 | 6,349,950 |
|
| | | 26,593,682 |
Indiana (1.5%) | | | |
IN Muni. Pwr. Agcy. Supply Syst. Rev. Bonds, | | | |
Ser. B, 5 3/4s, 1/1/29 | A1�� | 1,000,000 | 1,159,640 |
|
IN State Fin. Auth. Rev. Bonds (BHI Sr. Living), | | | |
5 3/4s, 11/15/41 | A–/F | 1,000,000 | 1,055,010 |
|
IN State Hsg. Fin. Auth. Rev. Bonds (Single | | | |
Family Mtge.), Ser. A-1, GNMA Coll., FNMA Coll., | | | |
4.1s, 7/1/15 | Aaa | 55,000 | 57,229 |
|
Rockport, Poll. Control FRB (IN-MI Pwr. Co.) | | | |
Ser. A, 6 1/4s, 6/1/25 | Baa2 | 2,000,000 | 2,201,220 |
Ser. B, 6 1/4s, 6/1/25 | Baa2 | 1,500,000 | 1,651,275 |
|
| | | 6,124,374 |
20
| | | |
MUNICIPAL BONDS AND NOTES (99.7%)* cont. | Rating** | Principal amount | Value |
|
Kansas (0.4%) | | | |
KS State Dev. Fin. Auth. Rev. Bonds | | | |
(Lifespace Cmnty’s. Inc.), Ser. S, 5s, 5/15/30 | A/F | $1,455,000 | $1,515,979 |
|
| | | 1,515,979 |
Kentucky (0.5%) | | | |
Owen Cnty., Wtr. Wks. Syst. Rev. Bonds | | | |
(American Wtr. Co.) | | | |
Ser. A, 6 1/4s, 6/1/39 | BBB+ | 800,000 | 861,168 |
Ser. B, 5 5/8s, 9/1/39 | BBB+ | 1,000,000 | 1,039,620 |
|
| | | 1,900,788 |
Louisiana (0.8%) | | | |
LA Pub. Fac. Auth. Rev. Bonds (Entergy LA LLC), | | | |
5s, 6/1/30 | A3 | 3,000,000 | 3,184,080 |
|
| | | 3,184,080 |
Maryland (0.5%) | | | |
MD State Hlth. & Higher Edl. Fac. Auth. | | | |
Rev. Bonds (U. of MD Med. Syst.), AMBAC, | | | |
5 1/4s, 7/1/28 | A2 | 2,000,000 | 2,201,780 |
|
| | | 2,201,780 |
Massachusetts (3.7%) | | | |
MA Edl. Fin. Auth. I Ser. A, 5 1/2s, 1/1/22 | AA | 1,000,000 | 1,157,860 |
|
MA State Dept. Trans. Rev. Bonds (Metro Hwy. | | | |
Syst.), Ser. B, 5s, 1/1/37 | A | 1,000,000 | 1,072,120 |
|
MA State Dev. Fin. Agcy. Rev. Bonds | | | |
(Sabis Intl.), Ser. A, 6.8s, 4/15/22 | BBB | 700,000 | 777,756 |
(Emerson College), Ser. A, 5 1/2s, 1/1/30 | BBB+ | 2,000,000 | 2,169,200 |
(Suffolk U.), 5 1/8s, 7/1/40 | Baa2 | 500,000 | 512,505 |
|
MA State Dev. Fin. Agcy. Solid Waste Disp. | | | |
Mandatory Put Bonds (5/1/19) (Dominion Energy | | | |
Brayton 1), Ser. 1, 5 3/4s, 12/1/42 | A– | 1,000,000 | 1,156,670 |
|
MA State Hlth. & Edl. Fac. Auth. Rev. Bonds | | | |
(Suffolk U.), Ser. A, 6 1/4s, 7/1/30 | Baa2 | 2,000,000 | 2,223,720 |
(Baystate Med. Ctr.), Ser. I, 5 3/4s, 7/1/36 | A+ | 500,000 | 537,690 |
(Harvard U.), Ser. A, 5 1/2s, 11/15/36 | Aaa | 1,815,000 | 2,134,150 |
(Northeastern U.), Ser. A, 5s, 10/1/35 | A2 | 1,650,000 | 1,782,231 |
|
Metro. Boston, Trans. Pkg. Corp. Rev. Bonds, | | | |
5 1/4s, 7/1/36 | A1 | 1,500,000 | 1,665,675 |
|
| | | 15,189,577 |
Michigan (5.0%) | | | |
Detroit, Swr. Disp. Rev. Bonds, Ser. B, AGM, | | | |
7 1/2s, 7/1/33 | AA– | 1,000,000 | 1,264,310 |
|
Detroit, Wtr. Supply Syst. Rev. Bonds, Ser. B, | | | |
AGM, 6 1/4s, 7/1/36 | AA– | 1,575,000 | 1,818,842 |
|
MI State Hosp. Fin. Auth. Rev. Bonds | | | |
Ser. A, 6 1/8s, 6/1/39 | A1 | 1,000,000 | 1,119,600 |
(Henry Ford Hlth. Syst.), Ser. A, 5 1/4s, 11/15/46 | A1 | 1,250,000 | 1,282,825 |
(Henry Ford Hlth.), 5 1/4s, 11/15/24 | A1 | 1,000,000 | 1,114,670 |
|
MI State Strategic Fund Rev. Bonds | | | |
(Dow Chemical), Ser. B-2, 6 1/4s, 6/1/14 | BBB | 1,000,000 | 1,108,720 |
|
MI State Strategic Fund Ltd. Rev. Bonds | | | |
(Detroit Edison Co.), AMBAC, 7s, 5/1/21 | A2 | 4,000,000 | 5,298,360 |
|
Midland Cnty., Bldg. Auth. G.O. Bonds, AGM, | | | |
5s, 10/1/25 | Aa3 | 1,000,000 | 1,126,980 |
|
21
| | | |
MUNICIPAL BONDS AND NOTES (99.7%)* cont. | Rating** | Principal amount | Value |
|
Michigan cont. | | | |
Northern Michigan U. Rev. Bonds, Ser. A, AGM, | | | |
5s, 12/1/27 | Aa3 | $1,775,000 | $1,994,461 |
|
Wayne Charter Cnty., G.O. Bonds (Bldg. Impt.), | | | |
Ser. A, 6 3/4s, 11/1/39 | BBB+ | 490,000 | 549,658 |
|
Western MI U. Rev. Bonds, AGM, 5s, 11/15/28 | Aa3 | 3,500,000 | 3,851,680 |
|
| | | 20,530,106 |
Minnesota (1.3%) | | | |
Minneapolis, Rev. Bonds (National Marrow Donor | | | |
Program), 4 7/8s, 8/1/25 | BBB | 1,350,000 | 1,369,872 |
|
Northfield, Hosp. Rev. Bonds, 5 3/8s, 11/1/26 | BBB– | 1,500,000 | 1,571,715 |
|
St. Paul, Hsg. & Redev. Auth. Hlth. Care Fac. | | | |
Rev. Bonds (HealthPartners Oblig. Group), | | | |
5 1/4s, 5/15/36 | A3 | 1,800,000 | 1,848,816 |
|
Tobacco Securitization Auth. Rev. Bonds | | | |
(Tobacco Settlement), Ser. B, 5 1/4s, 3/1/31 | A– | 500,000 | 541,905 |
|
| | | 5,332,308 |
Mississippi (0.7%) | | | |
Bus. Fin. Corp. Gulf Opportunity Zone Rev. Bonds, | | | |
Ser. A, 5s, 5/1/37 | A3 | 1,750,000 | 1,832,110 |
|
MS Home Corp. Rev. Bonds (Single Fam. Mtge.), | | | |
Ser. D-1, GNMA Coll., FNMA Coll., 6.1s, 6/1/38 | Aaa | 1,140,000 | 1,243,751 |
|
| | | 3,075,861 |
Missouri (2.5%) | | | |
Cape Girardeau Cnty., Indl. Dev. Auth. Hlth. Care | | | |
Fac. Rev. Bonds (St. Francis Med. Ctr.), Ser. A, | | | |
5 3/4s, 6/1/39 | A+ | 1,150,000 | 1,252,281 |
|
MO State Hlth. & Edl. Fac. Auth. Rev. Bonds | | | |
(Washington U. (The)), Ser. A, 5 3/8s, 3/15/39 | Aaa | 2,000,000 | 2,262,380 |
|
MO State Hlth. & Edl. Fac. Auth. VRDN | | | |
(Washington U. (The)), Ser. B, 0.08s, 9/1/30 | VMIG1 | 6,850,000 | 6,850,000 |
|
| | | 10,364,661 |
New Hampshire (0.3%) | | | |
NH State Bus. Fin. Auth. Rev. Bonds (Elliot Hosp. | | | |
Oblig. Group), Ser. A, 6s, 10/1/27 | Baa1 | 1,300,000 | 1,388,621 |
|
| | | 1,388,621 |
New Jersey (1.6%) | | | |
NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds | | | |
(St. Peter’s U. Hosp.), 5 3/4s, 7/1/37 | Baa3 | 1,000,000 | 1,030,160 |
|
NJ State Higher Ed. Assistance Auth. Rev. Bonds | | | |
(Student Loan), Ser. A, 5 5/8s, 6/1/30 | AA | 1,000,000 | 1,098,280 |
|
NJ State Tpk. Auth. Rev. Bonds, Ser. A, AMBAC, | | | |
5s, 1/1/30 | A+ | 3,000,000 | 3,140,010 |
|
NJ State Trans. Trust Fund Auth. Rev. Bonds, | | | |
Ser. B, 5 1/4s, 6/15/36 | A1 | 1,000,000 | 1,120,870 |
|
| | | 6,389,320 |
New York (6.9%) | | | |
Erie Cnty., Indl. Dev. Agcy. School Fac. Rev. | | | |
Bonds (City School Dist. Buffalo), Ser. A, AGM | | | |
5 3/4s, 5/1/28 | Aa3 | 2,275,000 | 2,686,934 |
5 3/4s, 5/1/27 | Aa3 | 5,590,000 | 6,637,621 |
|
Hudson Yards, Infrastructure Corp. Rev. Bonds, | | | |
Ser. A, 5 3/4s, 2/15/47 | A2 | 1,000,000 | 1,129,950 |
|
22
| | | |
MUNICIPAL BONDS AND NOTES (99.7%)* cont. | Rating** | Principal amount | Value |
|
New York cont. | | | |
Metro. Trans. Auth. Rev. Bonds, Ser. D, | | | |
5s, 11/15/36 | A2 | $3,000,000 | $3,240,750 |
|
NY City, G.O. Bonds, Ser. D-1, 5s, 10/1/36 | Aa2 | 1,400,000 | 1,576,932 |
|
NY City, Muni. Wtr. & Swr. Fin. Auth. Rev. Bonds, | | | |
Ser. AA, 5s, 6/15/34 | AA+ | 1,000,000 | 1,144,650 |
|
NY State Dorm. Auth. Rev. Bonds | | | |
(Brooklyn Law School), Ser. B, SGI | | | |
5 3/8s, 7/1/22 | Baa1 | 2,270,000 | 2,326,773 |
5 3/8s, 7/1/20 | Baa1 | 2,215,000 | 2,281,206 |
|
NY State Dorm. Auth. Personal Income Tax Rev. | | | |
Bonds (Ed.), Ser. B, 5 3/4s, 3/15/36 | AAA | 2,000,000 | 2,343,040 |
|
Port Auth. NY & NJ Special Oblig. Rev. Bonds | | | |
(JFK Intl. Air Term.), 6s, 12/1/42 | Baa3 | 900,000 | 982,998 |
|
Port Auth. of NY & NJ Rev. Bonds, 5s, 7/15/30 | Aa2 | 2,250,000 | 2,696,714 |
|
Syracuse, Indl. Dev. Agcy. School Fac. Rev. | | | |
Bonds (Syracuse City School Dist.), Ser. A, AGM, | | | |
5s, 5/1/25 | Aa3 | 1,000,000 | 1,144,910 |
|
| | | 28,192,478 |
North Carolina (1.0%) | | | |
NC Cap. Fin. Agcy. Edl. Fac. Rev. Bonds | | | |
(Meredith College), 6s, 6/1/31 | BBB | 500,000 | 527,905 |
|
NC Eastern Muni. Pwr. Agcy. Syst. Rev. Bonds, | | | |
Ser. A, 5 1/2s, 1/1/26 | A– | 1,500,000 | 1,740,570 |
|
U. of NC Syst. Pool Rev. Bonds, Ser. C, | | | |
5 3/8s, 10/1/29 | A3 | 1,500,000 | 1,697,190 |
|
| | | 3,965,665 |
Ohio (5.5%) | | | |
Allen Cnty., Hosp. Fac. VRDN (Catholic Hlth. | | | |
Care), Ser. B, 0.06s, 10/1/31 | VMIG1 | 1,170,000 | 1,170,000 |
|
Buckeye, Tobacco Settlement Fin. Auth. Rev. | | | |
Bonds, Ser. A-2 | | | |
5 3/4s, 6/1/34 | B3 | 500,000 | 373,340 |
5 3/8s, 6/1/24 | B3 | 4,195,000 | 3,392,371 |
5 1/8s, 6/1/24 | B3 | 1,735,000 | 1,373,790 |
|
Erie Cnty., Hosp. Fac. Rev. Bonds (Firelands | | | |
Regl. Med. Ctr.), Ser. A, 5 1/2s, 8/15/22 | A– | 3,150,000 | 3,203,456 |
|
Hamilton Cnty., Sales Tax Rev. Bonds, Ser. A, | | | |
5s, 12/1/32 | A1 | 2,000,000 | 2,164,480 |
|
Lorain Cnty., Hosp. Rev. Bonds (Catholic), | | | |
Ser. C-2, AGM, 5s, 4/1/24 | Aa3 | 2,000,000 | 2,194,520 |
|
Lucas Cnty., Hlth. Care Fac. Rev. Bonds | | | |
(Sunset Retirement Cmntys.), 5 1/2s, 8/15/30 | A–/F | 650,000 | 678,801 |
|
OH Hsg. Fin. Agcy. Rev. Bonds | | | |
(Single Fam. Mtge.), Ser. 1, 5s, 11/1/28 | Aaa | 755,000 | 820,579 |
|
OH Hsg. Fin. Agcy. Single Fam. Mtge. Rev. Bonds, | | | |
Ser. 85-A, FGIC, FHA Insd., zero %, 1/15/15 | | | |
(Escrowed to maturity) | AAA/P | 10,000 | 8,608 |
|
OH State Air Quality Dev. Auth. Rev. Bonds | | | |
(First Energy), Ser. A, 5.7s, 2/1/14 | Baa2 | 1,500,000 | 1,610,115 |
(Valley Elec. Corp.), Ser. E, 5 5/8s, 10/1/19 | Baa3 | 750,000 | 838,088 |
|
23
| | | |
MUNICIPAL BONDS AND NOTES (99.7%)* cont. | Rating** | Principal amount | Value |
|
Ohio cont. | | | |
OH State Higher Edl. Fac. Rev. Bonds | | | |
(U. of Dayton), Ser. A, 5 5/8s, 12/1/41 | A2 | $1,000,000 | $1,115,860 |
|
U. of Akron Rev. Bonds, Ser. B, AGM, | | | |
5 1/4s, 1/1/26 | Aa3 | 3,375,000 | 3,856,073 |
|
| | | 22,800,081 |
Oklahoma (0.3%) | | | |
Tulsa, Arpt. Impt. Trust Rev. Bonds, Ser. A, | | | |
5 3/8s, 6/1/24 | A3 | 1,300,000 | 1,401,738 |
|
| | | 1,401,738 |
Oregon (0.2%) | | | |
OR Hlth. Sciences U. Rev. Bonds, Ser. A, | | | |
5 3/4s, 7/1/39 | A1 | 750,000 | 845,730 |
|
| | | 845,730 |
Pennsylvania (6.2%) | | | |
Allegheny Cnty., Hosp. Dev. Auth. Rev. Bonds | | | |
(U. of Pittsburgh Med.), 5 5/8s, 8/15/39 | Aa3 | 3,000,000 | 3,320,520 |
|
Berks Cnty., Muni. Auth. Rev. Bonds (Reading | | | |
Hosp. & Med. Ctr.), Ser. A-3, 5 1/2s, 11/1/31 | AA | 3,000,000 | 3,382,080 |
|
Dauphin Cnty., Gen. Auth. Hlth. Syst. Rev. Bonds | | | |
(Pinnacle Hlth. Syst.), Ser. A, 6s, 6/1/29 | A2 | 2,500,000 | 2,764,550 |
|
Lycoming Cnty., Auth. Hlth. Syst. Rev. Bonds | | | |
(Susquehanna Hlth. Syst.), Ser. A, 5 3/8s, 7/1/23 | BBB+ | 3,000,000 | 3,266,220 |
|
Monroe Cnty., Hosp. Auth. Rev. Bonds | | | |
(Pocono Med. Ctr.), 5s, 1/1/27 | A– | 950,000 | 980,400 |
|
Montgomery Cnty., Indl. Dev. Auth. Retirement | | | |
Cmnty. Rev. Bonds (Acts Retirement-Life Cmnty.), | | | |
Ser. A-1, 5 1/4s, 11/15/16 | BBB+ | 1,100,000 | 1,208,954 |
|
PA Econ. Dev. Fin. Auth. Wtr. Fac. Rev. Bonds | | | |
(American Wtr. Co.), 6.2s, 4/1/39 | A2 | 1,900,000 | 2,193,721 |
|
PA State Higher Edl. Fac. Auth. Rev. Bonds | | | |
(Edinboro U. Foundation), 6s, 7/1/43 | Baa3 | 500,000 | 531,145 |
|
PA State Higher Edl. Fac. Auth. Student Hsg. | | | |
Rev. Bonds (East Stroudsburg U.), 5s, 7/1/31 | Baa3 | 2,760,000 | 2,774,932 |
|
Philadelphia, Gas Wks. Rev. Bonds, Ser. 9, | | | |
5 1/4s, 8/1/40 | BBB+ | 1,400,000 | 1,446,480 |
|
Pittsburgh G.O. Bonds, Ser. B, 5s, 9/1/25 ∆ | A1 | 1,250,000 | 1,419,550 |
|
Pittsburgh & Allegheny Cnty., Passports & Exhib. | | | |
Auth. Hotel Rev. Bonds, AGM, 5s, 2/1/35 | Aa3 | 1,225,000 | 1,286,373 |
|
Wilkes-Barre, Fin. Auth. Rev. Bonds | | | |
(U. of Scranton), 5s, 11/1/40 | A | 1,000,000 | 1,076,180 |
|
| | | 25,651,105 |
Puerto Rico (3.5%) | | | |
Cmnwlth. of PR, G.O. Bonds, Ser. C-7, NATL, | | | |
6s, 7/1/27 | Baa1 | 1,500,000 | 1,666,320 |
|
Cmnwlth. of PR, Aqueduct & Swr. Auth. | | | |
Rev. Bonds, Ser. A, 6s, 7/1/38 | Baa2 | 1,390,000 | 1,509,776 |
|
Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds, | | | |
Ser. XX, 5 1/4s, 7/1/40 | A3 | 2,250,000 | 2,379,914 |
|
Cmnwlth. of PR, Infrastructure Fin. Auth. Special | | | |
Tax Bonds, Ser. C, FGIC, 5 1/2s, 7/1/19 | Baa1 | 865,000 | 981,879 |
|
Cmnwlth. of PR, Sales Tax Fin. Corp. Rev. Bonds, | | | |
Ser. A, 6s, 8/1/42 | A1 | 7,000,000 | 7,894,040 |
|
| | | 14,431,929 |
24
| | | |
MUNICIPAL BONDS AND NOTES (99.7%)* cont. | Rating** | Principal amount | Value |
|
South Dakota (0.3%) | | | |
SD Hsg. Dev. Auth. Rev. Bonds (Home Ownership | | | |
Mtge.), Ser. J, 4.6s, 5/1/19 | AAA | $1,250,000 | $1,252,650 |
|
| | | 1,252,650 |
Tennessee (0.5%) | | | |
Johnson City, Hlth. & Edl. Fac. Board Hosp. | | | |
Rev. Bonds (Mountain States Hlth. Alliance), | | | |
6s, 7/1/38 | Baa1 | 1,850,000 | 1,974,357 |
|
| | | 1,974,357 |
Texas (8.2%) | | | |
Dallas Cnty., Util. & Reclamation Dist. G.O. | | | |
Bonds, Ser. B, AMBAC, 5 3/8s, 2/15/29 | A3 | 2,500,000 | 2,689,475 |
|
Dallas, Indpt. School Dist. G.O. Bonds | | | |
(School Bldg.), PSFG, 6s, 2/15/27 | Aaa | 2,500,000 | 3,051,375 |
|
Harris Cnty., Cultural Ed. Fac. Fin. Corp. VRDN | | | |
(Texas Med. Ctr.), Ser. B-1, 0.06s, 9/1/31 | VMIG1 | 6,720,000 | 6,720,000 |
|
Hays Cnty., G.O. Bonds, AGM, 5s, 8/15/24 | Aa2 | 1,190,000 | 1,278,060 |
|
Houston, Arpt. Syst. Rev. Bonds, AGM, 5s, 7/1/21 | Aa3 | 3,000,000 | 3,038,700 |
|
La Joya, Indpt. School Dist. G.O. Bonds | | | |
(School Bldg.), PSFG, 5s, 2/15/30 | Aaa | 2,500,000 | 2,815,174 |
|
Laredo, I S D Pub. Fac. Corp. Rev. Bonds, Ser. C, | | | |
AMBAC, 5s, 8/1/29 | A | 1,000,000 | 1,005,970 |
|
Mansfield, Indpt. School Dist. G.O. Bonds, PSFG, | | | |
5s, 2/15/27 | Aaa | 2,000,000 | 2,199,920 |
|
Matagorda Cnty., Poll. Control Rev. Bonds | | | |
(Cent Pwr. & Light Co.), Ser. A, 6.3s, 11/1/29 | Baa2 | 600,000 | 683,784 |
|
North TX Thruway Auth. Rev. Bonds, | | | |
Ser. A, NATL, 5 1/8s, 1/1/28 | A2 | 1,500,000 | 1,641,660 |
(First Tier), Ser. A, 6 1/4s, 1/1/24 | A2 | 3,500,000 | 4,159,435 |
|
Pharr, San Juan — Alamo, Indpt. School Dist. G.O. | | | |
Bonds (School Bldg.), PSFG, 5s, 2/1/30 | Aaa | 2,000,000 | 2,250,660 |
|
Texas Tech. U. Rev. Bonds, Ser. A, 5s, 8/15/37 ∆ | AA | 1,000,000 | 1,125,000 |
|
TX Muni. Gas Acquisition & Supply Corp. I Rev. | | | |
Bonds, Ser. A, 5 1/4s, 12/15/24 | A– | 1,000,000 | 1,062,540 |
|
| | | 33,721,753 |
Virginia (0.4%) | | | |
Chesterfield Cnty., Econ. Dev. Auth. Poll. | | | |
Control Rev. Bonds (VA Elec. & Pwr.), Ser. A, | | | |
5s, 5/1/23 | A3 | 1,575,000 | 1,792,964 |
|
| | | 1,792,964 |
Washington (3.3%) | | | |
WA State Higher Ed. Fac. Auth. Rev. Bonds | | | |
(Whitworth U.), 5 1/8s, 10/1/24 | Baa1 | 2,500,000 | 2,626,600 |
|
WA State Hlth. Care Fac. Auth. Rev. Bonds | | | |
(WA Hlth. Svcs.), 7s, 7/1/39 | Baa2 | 1,000,000 | 1,081,390 |
Ser. B, NATL, 5s, 2/15/27 | Baa2 | 2,235,000 | 2,265,127 |
|
WA State Pub. Pwr. Supply Syst. Rev. Bonds | | | |
(Nuclear No. 3), Ser. B, NATL, 7 1/8s, 7/1/16 | Aa1 | 6,000,000 | 7,599,720 |
|
| | | 13,572,837 |
West Virginia (1.4%) | | | |
Econ. Dev. Auth. Lease Rev. Bonds (Correctional | | | |
Juvenile Safety), Ser. A, NATL, 5s, 6/1/29 | Aa2 | 5,000,000 | 5,280,800 |
|
WV Econ. Dev. Auth. Solid Waste Disp. Fac. FRB | | | |
(Appalachian Pwr. Co.), Ser. A, 5 3/8s, 12/1/38 | Baa2 | 500,000 | 524,860 |
|
| | | 5,805,660 |
25
| | | |
MUNICIPAL BONDS AND NOTES (99.7%)* cont. | Rating** | Principal amount | Value |
|
Wisconsin (1.0%) | | | |
WI State Rev. Bonds, Ser. A, 6s, 5/1/27 | Aa3 | $2,000,000 | $2,485,100 |
|
WI State Hlth. & Edl. Fac. Auth. Rev. Bonds | | | |
(Prohealth Care, Inc.), 6 5/8s, 2/15/39 | A1 | 1,250,000 | 1,430,463 |
|
| | | 3,915,563 |
Wyoming (0.5%) | | | |
Sweetwater Cnty., Poll. Control Rev. Bonds | | | |
(Idaho Power Co.), 5 1/4s, 7/15/26 | A2 | 1,800,000 | 2,052,198 |
|
| | | 2,052,198 |
|
|
TOTAL INVESTMENTS | | | |
|
Total investments (cost $371,707,402) | | | $409,453,527 |
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from August 1, 2011 through January 31, 2012 (the reporting period).
* Percentages indicated are based on net assets of $410,676,048.
** The Moody’s, Standard & Poor’s or Fitch ratings indicated are believed to be the most recent ratings available at the close of the reporting period 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 the close of the reporting period. Securities rated by Putnam are indicated by “/P.” Securities rated by Fitch are indicated by “/F.” The rating of an insured security represents what is believed to be the most recent rating of the insurer’s claims-paying ability available at the close of the reporting period and does not reflect any subsequent changes. Security ratings are defined in the Statement of Additional Information.
∆ Forward commitment, in part or in entirety (Note 1).
The rates shown on Mandatory Put Bonds are the current interest rates at the close of the reporting period.
The dates shown parenthetically on Mandatory Put Bonds represent the next mandatory put dates.
The dates shown parenthetically on prerefunded bonds represent the next prerefunding dates.
The dates shown on debt obligations are the original maturity dates.
The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):
| |
Health care | 20.1% |
Local government | 15.8 |
Utilities | 15.3 |
Education | 12.5 |
Transportation | 10.1 |
The fund had the following insurance concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):
26
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| | | |
| | Valuation inputs | |
|
Investments in securities: | Level 1 | Level 2 | Level 3 |
|
Municipal bonds and notes | $— | $409,453,527 | $— |
|
Totals by level | $— | $409,453,527 | $— |
The accompanying notes are an integral part of these financial statements.
27
Statement of assets and liabilities 1/31/12 (Unaudited)
| |
ASSETS | |
Investment in securities, at value (Note 1): | |
Unaffiliated issuers (identified cost $371,707,402) | $409,453,527 |
|
Cash | 6,467,924 |
|
Interest and other receivables | 4,260,254 |
|
Receivable for shares of the fund sold | 1,536,557 |
|
Receivable for sales of delayed delivery securities (Note 1) | 100,076 |
|
Receivable for investments sold | 1,625,700 |
|
Total assets | 423,444,038 |
|
LIABILITIES | |
Distributions payable to shareholders | 281,594 |
|
Payable for investments purchased | 5,677,958 |
|
Payable for purchases of delayed delivery securities (Note 1) | 5,484,789 |
|
Payable for shares of the fund repurchased | 906,636 |
|
Payable for compensation of Manager (Note 2) | 151,547 |
|
Payable for investor servicing fees (Note 2) | 16,475 |
|
Payable for custodian fees (Note 2) | 4,093 |
|
Payable for Trustee compensation and expenses (Note 2) | 101,921 |
|
Payable for administrative services (Note 2) | 791 |
|
Payable for distribution fees (Note 2) | 95,972 |
|
Other accrued expenses | 46,214 |
|
Total liabilities | 12,767,990 |
| |
Net assets | $410,676,048 |
|
|
REPRESENTED BY | |
|
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $379,303,059 |
|
Distributions in excess of net investment income (Note 1) | (142,838) |
|
Accumulated net realized loss on investments (Note 1) | (6,230,298) |
|
Net unrealized appreciation of investments | 37,746,125 |
|
Total — Representing net assets applicable to capital shares outstanding | $410,676,048 |
(Continued on next page)
28
| |
Statement of assets and liabilities (Continued) | |
| |
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
Net asset value and redemption price per class A share | |
($355,207,889 divided by 22,954,858 shares) | $15.47 |
|
Offering price per class A share (100/96.00 of $15.47)* | $16.11 |
|
Net asset value and offering price per class B share ($3,416,952 divided by 220,623 shares)** | $15.49 |
|
Net asset value and offering price per class C share ($29,543,668 divided by 1,904,921 shares)** | $15.51 |
|
Net asset value and redemption price per class M share ($913,661 divided by 58,899 shares) | $15.51 |
|
Offering price per class M share (100/96.75 of $15.51)† | $16.03 |
|
Net asset value, offering price and redemption price per class Y share | |
($21,593,878 divided by 1,394,754 shares) | $15.48 |
|
* On single retail sales of less than $100,000. On sales of $100,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
† On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
29
Statement of operations Six months ended 1/31/12 (Unaudited)
| |
INTEREST INCOME | $9,473,700 |
|
|
EXPENSES | |
|
Compensation of Manager (Note 2) | $857,937 |
|
Investor servicing fees (Note 2) | 98,339 |
|
Custodian fees (Note 2) | 4,284 |
|
Trustee compensation and expenses (Note 2) | 15,964 |
|
Administrative services (Note 2) | 5,505 |
|
Distribution fees — Class A (Note 2) | 389,849 |
|
Distribution fees — Class B (Note 2) | 15,213 |
|
Distribution fees — Class C (Note 2) | 138,980 |
|
Distribution fees — Class M (Note 2) | 2,265 |
|
Other | 75,171 |
|
Total expenses | 1,603,507 |
| |
Expense reduction (Note 2) | (695) |
|
Net expenses | 1,602,812 |
| |
Net investment income | 7,870,888 |
|
|
Net realized loss on investments (Notes 1 and 3) | (135,898) |
|
Net unrealized appreciation of investments during the period | 21,289,068 |
|
Net gain on investments | 21,153,170 |
| |
Net increase in net assets resulting from operations | $29,024,058 |
|
The accompanying notes are an integral part of these financial statements.
30
Statement of changes in net assets
| | |
INCREASE (DECREASE) IN NET ASSETS | Six months ended 1/31/12* | Year ended 7/31/11 |
|
Operations: | | |
Net investment income | $7,870,888 | $17,885,068 |
|
Net realized loss on investments | (135,898) | (1,363,365) |
|
Net unrealized appreciation (depreciation) of investments | 21,289,068 | (10,228,708) |
|
Net increase in net assets resulting from operations | 29,024,058 | 6,292,995 |
|
Distributions to shareholders (Note 1): | | |
From ordinary income | | |
Taxable net investment income | | |
|
Class A | (169,626) | (2,651) |
|
Class B | (1,927) | (44) |
|
Class C | (13,471) | (203) |
|
Class M | (471) | (8) |
|
Class Y | (6,916) | (80) |
|
From tax-exempt net investment income | | |
Class A | (6,769,753) | (15,897,356) |
|
Class B | (60,615) | (211,320) |
|
Class C | (449,362) | (997,972) |
|
Class M | (16,928) | (45,639) |
|
Class Y | (314,571) | (563,717) |
|
Increase in capital from settlement payments (Note 6) | — | 2,927 |
|
Redemption fees (Note 1) | — | 201 |
|
Increase (decrease) from capital share transactions (Note 4) | 13,147,704 | (40,791,046) |
|
Total increase (decrease) in net assets | 34,368,122 | (52,213,913) |
|
NET ASSETS | | |
|
Beginning of period | 376,307,926 | 428,521,839 |
|
End of period (including distributions in excess of net | | |
investment income of $142,838 and $210,086, respectively) | $410,676,048 | $376,307,926 |
|
* Unaudited
The accompanying notes are an integral part of these financial statements.
31
Financial highlights (For a common share outstanding throughout the period)
| | | | | | | | | | | | | | | |
INVESTMENT OPERATIONS: | LESS DISTRIBUTIONS: | | RATIOS AND SUPPLEMENTAL DATA: | |
|
| | | | | | | | | | | | | | Ratio | |
| Net asset | | Net realized | | | | | | | | | | Ratio | of net investment | |
| value, | | and unrealized | Total from | From | From | | | | | Total return | Net assets, | of expenses | income (loss) | |
| beginning | Net investment | gain (loss) | investment | net investment | net realized gain | Total | Redemption | Non-recurring | Net asset value, | at net asset | end of period | to average | to average | Portfolio |
Period ended | of period | income (loss) | on investments | operations | income | on investments | distributions | fees | reimbursements | end of period | value (%) a | (in thousands) | net assets (%) b | net assets (%) | turnover (%) |
|
Class A | | | | | | | | | | | | | | | |
January 31, 2012** | $14.66 | .31 | .81 | 1.12 | (.31) | — | (.31) | — | — | $15.47 | 7.74* | $355,208 | .39* | 2.09* | 15* |
July 31, 2011 | 14.92 | .63 | (.26) | .37 | (.63) | — | (.63) | — c | — d | 14.66 | 2.58 | 332,098 | .77 | 4.34 | 25 |
July 31, 2010 | 14.27 | .63 | .64 | 1.27 | (.62) | — | (.62) | — c | — | 14.92 | 8.99 | 378,440 | .79 e | 4.24 e | 13 |
July 31, 2009 | 14.33 | .58 | (.05) | .53 | (.59) | — | (.59) | — c | — | 14.27 | 3.84 | 317,964 | .85 e | 4.07 e | 22 |
July 31, 2008 | 14.59 | .56 | (.23) | .33 | (.57) | (.02) | (.59) | — | — | 14.33 | 2.30 | 267,448 | .85 e | 3.85 e | 39 |
July 31, 2007 | 14.70 | .56 | (.06) | .50 | (.57) | (.04) | (.61) | — | — | 14.59 | 3.41 | 257,709 | .85 e | 3.78 e | 19 |
|
Class B | | | | | | | | | | | | | | | |
January 31, 2012** | $14.67 | .27 | .81 | 1.08 | (.26) | — | (.26) | — | — | $15.49 | 7.46* | $3,417 | .70* | 1.77* | 15* |
July 31, 2011 | 14.94 | .54 | (.27) | .27 | (.54) | — | (.54) | — c | — d | 14.67 | 1.84 | 3,774 | 1.39 | 3.68 | 25 |
July 31, 2010 | 14.29 | .54 | .64 | 1.18 | (.53) | — | (.53) | — c | — | 14.94 | 8.36 | 8,780 | 1.41 e | 3.61 e | 13 |
July 31, 2009 | 14.35 | .49 | (.05) | .44 | (.50) | — | (.50) | — c | — | 14.29 | 3.21 | 15,259 | 1.48 e | 3.43 e | 22 |
July 31, 2008 | 14.61 | .47 | (.23) | .24 | (.48) | (.02) | (.50) | — | — | 14.35 | 1.62 | 23,548 | 1.49 e | 3.21 e | 39 |
July 31, 2007 | 14.72 | .47 | (.07) | .40 | (.47) | (.04) | (.51) | — | — | 14.61 | 2.73 | 33,472 | 1.49 e | 3.13 e | 19 |
|
Class C | | | | | | | | | | | | | | | |
January 31, 2012** | $14.69 | .26 | .81 | 1.07 | (.25) | — | (.25) | — | — | $15.51 | 7.34* | $29,544 | .78* | 1.70* | 15* |
July 31, 2011 | 14.96 | .52 | (.27) | .25 | (.52) | — | (.52) | — c | — d | 14.69 | 1.76 | 25,825 | 1.54 | 3.56 | 25 |
July 31, 2010 | 14.30 | .51 | .66 | 1.17 | (.51) | — | (.51) | — c | — | 14.96 | 8.31 | 30,968 | 1.56 e | 3.47 e | 13 |
July 31, 2009 | 14.36 | .47 | (.05) | .42 | (.48) | — | (.48) | — c | — | 14.30 | 3.05 | 18,802 | 1.63 e | 3.29 e | 22 |
July 31, 2008 | 14.61 | .45 | (.22) | .23 | (.46) | (.02) | (.48) | — | — | 14.36 | 1.57 | 11,689 | 1.64 e | 3.06 e | 39 |
July 31, 2007 | 14.73 | .44 | (.07) | .37 | (.45) | (.04) | (.49) | — | — | 14.61 | 2.60 | 8,405 | 1.64 e | 2.99 e | 19 |
|
Class M | | | | | | | | | | | | | | | |
January 31, 2012** | $14.69 | .29 | .82 | 1.11 | (.29) | — | (.29) | — | — | $15.51 | 7.61* | $914 | .53* | 1.95* | 15* |
July 31, 2011 | 14.96 | .59 | (.27) | .32 | (.59) | — | (.59) | — c | — d | 14.69 | 2.27 | 918 | 1.04 | 4.06 | 25 |
July 31, 2010 | 14.31 | .59 | .64 | 1.23 | (.58) | — | (.58) | — c | — | 14.96 | 8.78 | 1,354 | 1.06 e | 3.96 e | 13 |
July 31, 2009 | 14.37 | .54 | (.05) | .49 | (.55) | — | (.55) | — c | — | 14.31 | 3.57 | 1,236 | 1.13 e | 3.79 e | 22 |
July 31, 2008 | 14.63 | .52 | (.23) | .29 | (.53) | (.02) | (.55) | — | — | 14.37 | 2.03 | 1,028 | 1.14 e | 3.56 e | 39 |
July 31, 2007 | 14.74 | .52 | (.06) | .46 | (.53) | (.04) | (.57) | — | — | 14.63 | 3.19 | 1,059 | 1.14 e | 3.49 e | 19 |
|
Class Y | | | | | | | | | | | | | | | |
January 31, 2012** | $14.66 | .33 | .82 | 1.15 | (.33) | — | (.33) | — | — | $15.48 | 7.90* | $21,594 | .28* | 2.21* | 15* |
July 31, 2011 | 14.93 | .67 | (.28) | .39 | (.66) | — | (.66) | — c | — d | 14.66 | 2.80 | 13,693 | .54 | 4.59 | 25 |
July 31, 2010 | 14.27 | .66 | .65 | 1.31 | (.65) | — | (.65) | — c | — | 14.93 | 9.39 | 8,980 | .56 e | 4.47 e | 13 |
July 31, 2009 | 14.34 | .61 | (.06) | .55 | (.62) | — | (.62) | — c | — | 14.27 | 4.01 | 5,033 | .63 e | 4.33 e | 22 |
July 31, 2008† | 14.71 | .34 | (.36) | (.02) | (.35) | — | (.35) | — | — | 14.34 | (.09)* | 10 | .37*e | .28*e | 39 |
|
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
Financial highlights (Continued)
* Not annualized.
** Unaudited.
† For the period January 2, 2008 (commencement of operations) to July 31, 2008.
a Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
b Includes amounts paid through expense offset arrangements (Note 2).
c Amount represents less than $0.01 per share.
d Reflects a non-recurring reimbursement related to restitution amounts in connection with a distribution plan approved by the Securities and Exchange Commission (the SEC) which amounted to less than $0.01 per share outstanding on July 21, 2011. Also reflects a non-recurring reimbursement related to short-term trading related lawsuits, which amounted to less than $0.01 per share outstanding on May 11, 2011 (Note 5).
e Reflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts (Note 2):
| |
| Percentage of |
| average net assets |
|
July 31, 2010 | 0.02% |
|
July 31, 2009 | 0.01 |
|
July 31, 2008 | 0.01 |
|
July 31, 2007 | <0.01 |
|
The accompanying notes are an integral part of these financial statements.
34
Notes to financial statements 1/31/12 (Unaudited)
Note 1: Significant accounting policies
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC.
Putnam AMT-Free Municipal Fund (the fund), formerly Putnam AMT-Free Insured Municipal Fund, is a diversified series of Putnam Tax-Free Income Trust (the trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The investment objective of the fund is to seek high current income exempt from federal income tax by investing in tax-exempt securities that are investment-grade in quality, and have intermediate-to-long-term maturities.
The fund offers class A, class B, class C, class M and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 4.00% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. The expenses for class A, class B, class C, and class M shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, and class M shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
Prior to August 2, 2010, a 1.00% redemption fee applied to certain shares that were redeemed (either by selling or exchanging into another fund) within 7 days of purchase. The redemption fee was accounted for as an addition to paid-in-capital. Effective August 2, 2010, redemption fee no longer applies to shares redeemed.
Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.
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 accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. Unless otherwise noted, the “reporting period” represents the period from August 1, 2011 through January 31, 2012.
Security valuation Tax-exempt bonds and notes are generally valued on the basis of valuations provided by an independent pricing service approved by the Trustees. Such services use information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. These securities will generally be categorized as Level 2.
Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs. The fair value of securities is generally determined
35
as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis. Interest income is recorded on the accrual basis. All premiums/discounts are amortized/accreted on a yield-to-maturity basis. The premium in excess of the call price, if any, is amortized to the call date; thereafter, any remaining premium is amortized to maturity.
Securities purchased or sold on a delayed delivery basis may be settled a month or more after the trade date; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Line of credit The fund participates, along with other Putnam funds, in a $325 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.13% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the 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 Code. The fund is subject to the provisions of Accounting Standards Codification ASC 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. 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. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
At July 31, 2011 the fund had a capital loss carryover of $3,898,492 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:
| | | |
Loss carryover |
Short-term | Long-term | Total | Expiration |
|
$106,659 | $— | $106,659 | July 31, 2017 |
|
3,365,138 | — | 3,365,138 | July 31, 2018 |
|
426,695 | — | 426,695 | July 31, 2019 |
|
Under the recently enacted Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
The aggregate identified cost on a tax basis is $371,707,402, resulting in gross unrealized appreciation and depreciation of $37,861,307 and $115,182, respectively, or net unrealized appreciation of $37,746,125.
36
Distributions to shareholders Income dividends are recorded daily by the fund and are paid monthly. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. 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. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year. 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.
Expenses of the Trust Expenses directly charged or attributable to any fund will be paid from the assets of that fund. Generally, expenses of the Trust will be allocated among and charged to the assets of each fund on a basis that the Trustees deem fair and equitable, which may be based on the relative assets of each fund or the nature of the services performed and relative applicability to each fund.
Note 2: Management fee, administrative services and other transactions
The fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
| |
0.590% | of the first $5 billion, |
0.540% | of the next $5 billion, |
0.490% | of the next $10 billion, |
0.440% | of the next $10 billion, |
0.390% | of the next $50 billion, |
0.370% | of the next $50 billion, |
0.360% | of the next $100 billion and |
0.355% | of any excess thereafter. |
Putnam Management has contractually agreed, through June 30, 2012, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.
Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. Putnam Management pays a quarterly sub-management fee to PIL for its services at an annual rate of 0.40% of the average net assets of the portion of the fund managed by PIL.
The fund reimburses Putnam Management an allocated amount 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 State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing based on the fund’s retail asset level, the number of shareholder accounts in the fund and the level of defined contribution plan assets in the fund. Investor servicing fees will not exceed an annual rate of 0.375% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations.
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $695 under the expense offset arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $302, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral 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 invested in certain Putnam funds until distribution in accordance with the Deferral Plan.
37
The fund has adopted an unfunded noncontributory defined benefit pension plan (the Pension Plan) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the Plans) with respect to its class A, class B, class C and class M shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, a wholly-owned subsidiary of Putnam Investments, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C and class M shares, respectively. The Trustees have approved payment by the fund at the annual rate of 0.85%, 1.00% and 0.50% of the average net assets for class B, class C and class M shares, respectively. For class A shares, the annual payment rate will equal the weighted average of (i) 0.20% on the net assets of the fund attributable to class A shares purchased and paid for prior to April 1, 2005 and (ii) 0.25% on all other net assets of the fund attributable to class A shares.
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $22,376 and $76 from the sale of class A and class M shares, respectively, and received $1,685 and $400 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $9,917 on class A redemptions.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $68,158,657 and $53,348,114, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| | | | |
| Six months ended 1/31/12 | Year ended 7/31/11 |
|
Class A | Shares | Amount | Shares | Amount |
|
Shares sold | 3,153,357 | $47,330,435 | 5,929,285 | $87,881,705 |
|
Shares issued in connection with | | | | |
reinvestment of distributions | 366,018 | 5,496,788 | 801,806 | 11,667,746 |
|
| 3,519,375 | 52,827,223 | 6,731,091 | 99,549,451 |
|
Shares repurchased | (3,225,521) | (48,322,394) | (9,428,208) | (135,873,715) |
|
Net increase (decrease) | 293,854 | $4,504,829 | (2,697,117) | $(36,324,264) |
|
|
| Six months ended 1/31/12 | Year ended 7/31/11 |
|
Class B | Shares | Amount | Shares | Amount |
|
Shares sold | 16,689 | $251,391 | 23,985 | $349,720 |
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Shares issued in connection with | | | | |
reinvestment of distributions | 3,398 | 51,043 | 10,141 | 148,168 |
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| 20,087 | 302,434 | 34,126 | 497,888 |
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Shares repurchased | (56,725) | (849,411) | (364,546) | (5,299,025) |
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Net decrease | (36,638) | $(546,977) | (330,420) | $(4,801,137) |
|
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| | | | |
| Six months ended 1/31/12 | Year ended 7/31/11 |
|
Class C | Shares | Amount | Shares | Amount |
|
Shares sold | 342,450 | $5,147,219 | 458,601 | $6,778,181 |
|
Shares issued in connection with | | | | |
reinvestment of distributions | 24,091 | 362,631 | 48,868 | 713,375 |
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| 366,541 | 5,509,850 | 507,469 | 7,491,556 |
|
Shares repurchased | (219,888) | (3,303,436) | (819,688) | (11,859,398) |
|
Net increase (decrease) | 146,653 | $2,206,414 | (312,219) | $(4,367,842) |
|
|
| Six months ended 1/31/12 | Year ended 7/31/11 |
|
Class M | Shares | Amount | Shares | Amount |
|
Shares sold | 5,856 | $88,563 | 6,332 | $96,151 |
|
Shares issued in connection with | | | | |
reinvestment of distributions | 845 | 12,709 | 2,253 | 32,955 |
|
| 6,701 | 101,272 | 8,585 | 129,106 |
|
Shares repurchased | (10,320) | (155,329) | (36,581) | (531,842) |
|
Net decrease | (3,619) | $(54,057) | (27,996) | $(402,736) |
|
|
| Six months ended 1/31/12 | Year ended 7/31/11 |
|
Class Y | Shares | Amount | Shares | Amount |
|
Shares sold | 682,581 | $10,350,585 | 928,447 | $13,668,533 |
|
Shares issued in connection with | | | | |
reinvestment of distributions | 12,058 | 181,403 | 15,755 | 229,283 |
|
| 694,639 | 10,531,988 | 944,202 | 13,897,816 |
|
Shares repurchased | (233,812) | (3,494,493) | (611,793) | (8,792,883) |
|
Net increase | 460,827 | $7,037,495 | 332,409 | $5,104,933 |
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Note 5: Market and credit risk
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default.
Note 6: Regulatory matters and litigation
In late 2003 and 2004, Putnam Management settled charges brought by the SEC and the Massachusetts Securities Division in connection with excessive short-term trading in Putnam funds. In July 2011, the fund recorded a receivable of $2,893 related to restitution amounts in connection with a distribution plan approved by the SEC. This amount, which was received by the fund in December 2011, is reported as part of Increase in capital from settlement payments on the Statement of changes in net assets. These allegations and related matters have served as the general basis for certain lawsuits, including purported class action lawsuits against Putnam Management and, in a limited number of cases, some Putnam funds. In May 2011, the fund received a payment of $34 related to settlement of those lawsuits. This amount is reported as a part of Increase in capital from settlement payments on the Statement of changes in net assets. Putnam Management has agreed to bear any costs incurred by the Putnam funds as a result of these matters.
39
Note 7: New accounting pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011–04 “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. ASU 2011–04 amends FASB Topic 820 “Fair Value Measurement” and seeks to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. ASU 2011–04 is effective for fiscal years and interim periods beginning after December 15, 2011. Putnam Management is currently evaluating the application of ASU 2011–04 and its impact, if any, on the fund’s financial statements.
40
Fund information
Founded over 70 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.
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Investment Manager | Paul L. Joskow | Mark C. Trenchard |
Putnam Investment | Elizabeth T. Kennan | Vice President and |
Management, LLC | Kenneth R. Leibler | BSA Compliance Officer |
One Post Office Square | Robert E. Patterson | |
Boston, MA 02109 | George Putnam, III | Robert T. Burns |
| Robert L. Reynolds | Vice President and |
Investment Sub-Manager | W. Thomas Stephens | Chief Legal Officer |
Putnam Investments Limited | | |
57–59 St James’s Street | Officers | James P. Pappas |
London, England SW1A 1LD | Robert L. Reynolds | Vice President |
| President | |
Marketing Services | | Judith Cohen |
Putnam Retail Management | Jonathan S. Horwitz | Vice President, Clerk and |
One Post Office Square | Executive Vice President, | Assistant Treasurer |
Boston, MA 02109 | Principal Executive | |
| Officer, Treasurer and | Michael Higgins |
Custodian | Compliance Liaison | Vice President, Senior Associate |
State Street Bank | | Treasurer and Assistant Clerk |
and Trust Company | Steven D. Krichmar | |
| Vice President and | Nancy E. Florek |
Legal Counsel | Principal Financial Officer | Vice President, Assistant Clerk, |
Ropes & Gray LLP | | Assistant Treasurer and |
| Janet C. Smith | Proxy Manager |
Trustees | Vice President, Assistant | |
Jameson A. Baxter, Chair | Treasurer and Principal | Susan G. Malloy |
Ravi Akhoury | Accounting Officer | Vice President and |
Barbara M. Baumann | | Assistant Treasurer |
Charles B. Curtis | Robert R. Leveille | |
Robert J. Darretta | Vice President and | |
John A. Hill | Chief Compliance Officer | |
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This report is for the information of shareholders of Putnam AMT-Free Municipal Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
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| Item 3. Audit Committee Financial Expert: |
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| Item 4. Principal Accountant Fees and Services: |
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| Item 5. Audit Committee of Listed Registrants |
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| Item 6. Schedule of Investments: |
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| The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above. |
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| Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies: |
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| Item 8. Portfolio Managers of Closed-End Investment Companies |
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| Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers: |
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| Item 10. Submission of Matters to a Vote of Security Holders: |
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| Item 11. Controls and Procedures: |
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| (a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. |
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| (b) Changes in internal control over financial reporting: Not applicable |
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| (a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith. |
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| (b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith. |
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| Putnam Tax Free Income Trust |
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| By (Signature and Title): |
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| /s/Janet C. Smith Janet C. Smith Principal Accounting Officer
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| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. |
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| By (Signature and Title): |
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| /s/Jonathan S. Horwitz Jonathan S. Horwitz Principal Executive Officer
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| By (Signature and Title): |
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| /s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer
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| UNITED STATES SECURITIES AND EXCHANGE COMMISSION |
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| CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
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| Investment Company Act file number: | (811-04345) |
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| Exact name of registrant as specified in charter: | Putnam Tax Free Income Trust |
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| Address of principal executive offices: | One Post Office Square, Boston, Massachusetts 02109 |
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| Name and address of agent for service: | Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109 |
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| Copy to: | John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600 |
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| Registrant’s telephone number, including area code: | (617) 292-1000 |
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| Date of fiscal year end: | July 31, 2012 |
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| Date of reporting period: | August 1, 2011 — January 31, 2012 |
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Item 1. Report to Stockholders: | |
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| The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: | |
Putnam
Tax-Free High Yield
Fund
Semiannual report
1 | 31 | 12
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Message from the Trustees | 1 | | |
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About the fund | 2 | | |
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Performance snapshot | 4 | | |
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Interview with your fund’s portfolio manager | 5 | | |
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Your fund’s performance | 10 | | |
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Your fund’s expenses | 12 | | |
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Terms and definitions | 14 | | |
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Other information for shareholders | 15 | | |
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Financial statements | 16 | | |
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Message from the Trustees
Dear Fellow Shareholder:
Markets in early 2012 have signaled a more consistently positive direction, supported by strengthening fundamentals. In the United States, where corporate earnings have been strong for more than a year, the employment picture has also brightened in recent months. The Federal Reserve has pledged to leave rates at historic lows at least through the end of 2014, and the beleaguered U.S. housing market has finally shown signs of recovery. The European debt situation and likely recession in that region continue to weigh heavily on markets, of course, alongside high unemployment here at home. However, we are encouraged by the change in investor sentiment.
We believe there are numerous investment opportunities resulting from the many market dislocations in recent years. Putnam’s rigorous bottom-up, fundamental investment approach is well suited to this environment, and the Putnam team is committed to uncovering returns for our shareholders, while seeking to guard against downside risk.
Please join us in welcoming the return of Elizabeth T. Kennan to the Board of Trustees. Dr. Kennan, who served as a Trustee from 1992 until 2010, has rejoined the Board, effective January 1, 2012. Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse breeding and general farming), and is also President Emeritus of Mount Holyoke College.
We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.
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About the fund
Seeking high current income exempt from federal income tax
Two of the most significant challenges of fixed-income investing are low interest rates and taxes on income. Putnam Tax-Free High Yield Fund can help investors reduce the impact of both by investing in higher-yielding municipal bonds, which offer the potential for a greater stream of income along with tax advantages.
Municipal bonds are typically issued by states and local municipalities to raise funds for building and maintaining public facilities. The income from a municipal bond is generally exempt from federal income tax, and from state taxes for residents of the state in which the bond is issued. Municipal bonds are backed by either the issuing city or town or by revenues collected from usage fees, and, as a result, have varying degrees of credit risk (the risk that the issuer will not be able to repay the bond).
Many high-yield municipal bonds are not rated by independent rating agencies such as Standard & Poor’s and Moody’s. This is mainly because many issuers decide not to pursue a rating that might be below investment grade. As a result, investment managers must do additional research to determine whether these bonds are prudent investments.
Once the fund has invested in a bond, the fund’s managers continue to monitor developments that affect the bond market, the sector, and the issuer of the bond.
The goal of this in-depth research and active management is to stay a step ahead of the industry and pinpoint opportunities for investors.
Consider these risks before investing: Lower-rated bonds may offer higher yields in return for more risk. Capital gains, if any, are taxable for federal and, in most cases, state purposes. For some investors, investment income may be subject to the federal alternative minimum tax. Income from federal tax-exempt funds may be subject to state and local taxes. Funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. The fund may invest significantly in particular segments of the tax-exempt debt market, making it more vulnerable to fluctuations in the values of the securities it holds than a fund that invests more broadly.
Understanding tax-equivalent yield
To understand the value of tax-free income, it is helpful to compare a municipal bond’s yield with the “tax-equivalent yield” — the before-tax yield that must be offered by a taxable bond in order to equal the municipal bond’s yield after taxes.
How to calculate tax-equivalent yield: The tax-equivalent yield equals the municipal bond’s yield divided by “one minus the tax rate.” For example, if a municipal bond’s yield is 5%, then its tax-equivalent yield is 7.7%, assuming the maximum 35% federal tax rate for 2012.
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Results for investors subject to lower tax rates would not be as advantageous.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 4.00%; had they, returns would have been lower. See pages 5 and 10–12 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus. To obtain the most recent month-end performance, visit putnam.com.
* Performance for class A shares before their inception (9/20/93) is derived from the historical performance of class B shares.
† Returns for the six-month period are not annualized, but cumulative.
4
Interview with your fund’s portfolio manager
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How would you describe the environment in the municipal bond market during the six months ended January 31, 2012?
In the second half of the year, the municipal bond market gained back a good deal of what it had lost in the broad sell-off that occurred in the early months of 2011.
Despite last year’s dire predictions for the municipal bond market, widespread defaults never materialized, and the fiscal picture for states in general has been gradually improving. Defaults in 2011 were higher year over year, but generally were contained to the lower-rated sectors of the market. States continued to face challenges in balancing their budgets, but by late in the period all state legislatures that were slated to enact budgets had done so. Income tax receipts also began to modestly improve versus last year. All told, as investors ultimately realized that municipal credit conditions were not nearly as bleak as some had feared, they re-entered the municipal bond market and prices benefited.
Against this backdrop, tax-exempt bonds posted solid returns and outpaced the broad taxable bond market, as measured by the Barclays Capital U.S. Aggregate Bond Index. Moreover, I am pleased to report that the fund outperformed its benchmark and also beat the average return of its Lipper peer group.
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This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 1/31/12. See pages 4 and 10–12 for additional fund performance information. Index descriptions can be found on pages 14–15.
5
In August 2011, Standard & Poor’s [S&P] downgraded its credit rating for U.S. Treasuries and a number of municipal bonds. What impact did that have on the market?
On the heels of its August 5 downgrade of U.S. sovereign debt, S&P lowered its ratings from AAA to AA+ for more than 11,000 municipal securities, including taxable and tax-exempt securities. While this number does seem large, it covers less than 1% of the nearly $4 trillion municipal bond market. These securities all had links to the federal government, and according to S&P, the affected issues fall into four broad categories: municipal housing bonds backed by the federal government or invested in U.S. government securities; bonds of certain government-related entities in the housing and public power sectors; bonds backed by federal leases; and defeased bonds secured by U.S. Treasury and government agency securities held in escrow.
The downgrade was not surprising given the interdependence of state and federal finances, and S&P had been suggesting such a move was imminent for some time. That said, the change didn’t necessarily impact the ratings of states, 13 of which maintained their AAA general obligation, or “G.O.,” bond ratings as of January 2012. Rather, we believe S&P’s downgrades underscore the importance of performing intensive fundamental research when investing in the municipal bond market, and at Putnam, we independently research every bond we hold and assess the credit risk it represents before we add it to the portfolio.
What effect did recent policy developments have on the tax-exempt bond market?
Congress’s negotiations over raising the debt ceiling last July created a 12-member
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Allocations are represented as a percentage of the fund’s net assets. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, the exclusion of as-of trades, if any, and the use of different classifications of securities for presentation purposes. Holdings and allocations may vary over time.
6
bipartisan “super committee” tasked with recommending a plan to reduce the deficit by at least $1.2 trillion over the next 10 years. As their November deadline approached, many in the political press speculated that the committee would be unable to agree on a compromise, and that turned out to be the case. As a result, automatic, across-the-board cuts are slated to be implemented over 10 years, beginning in January 2013, in a process called “sequestration.”
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Overall, we believe that this sequestration of funding is not necessarily a negative for municipal bonds, particularly given the recommendations that the super committee might have made. Some speculation arose that the committee, in an effort to raise revenue, would have recommended limiting the amount of municipal-bond interest that top income earners could exclude from their taxable income. In fact, a similar idea resurfaced in President Obama’s fiscal 2013 budget proposal, under which individuals and married couples earning more than $200,000 and $250,000, respectively, would only be able to exclude from federal taxes 28 cents of every dollar of municipal bond income earned. This new taxation of municipal bond interest could have the dual effect of reducing the demand for municipal bonds and increasing the costs to municipal issuers. Although we believe such a change is not imminent, it is likely that a more wide-ranging debate over taxes will continue throughout the 2012 election year.
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Credit qualities are shown as a percentage of portfolio market value as of 1/31/12. A bond rated Baa or higher (MIG3/VMIG3 or higher, for short-term debt) is considered investment grade. The chart reflects Moody’s ratings; percentages may include bonds or derivatives not rated by Moody’s but rated by Standard & Poor’s (S&P) or, if unrated by S&P, by Fitch, and then included in the closest equivalent Moody’s rating. Ratings will vary over time. Credit qualities are included for portfolio securities and are not included for derivative instruments and cash. The fund itself has not been rated by an independent rating agency.
7
On the subject of taxes, we should also point out that the failure of the super committee to come to an agreement has left a number of other issues unresolved, including the fate of the Bush-era tax cuts and the future of the annual alternative minimum tax [AMT] “patch,” which sets the income threshold associated with the AMT. We believe these issues and others will be debated over the coming months, and we will be closely monitoring developments.
How did you position the portfolio during the past six months?
We positioned the portfolio to benefit from improving fundamentals in the municipal bond market. While we felt that the budget challenges faced by many states were significant, we were confident that conditions would improve as long as the broad economy did not stall. Against this backdrop, we believed that essential service revenue bonds remained attractive, while we remained highly selective regarding the fund’s positioning in local G.O.s, which are securities issued at the city or county level. We believe that as the federal government looks to reduce transfer payments to the states — and as states, in turn, seek to close their deficits by reducing spending — these types of bonds are at risk for downgrades or other headline-driven price volatility. And unlike state general obligation bonds, local G.O.s rely more on property tax revenue than on income or sales taxes. With real-estate prices still under pressure in many markets, property taxes have been slower to recover than other tax sources.
From a credit perspective, we held an overweight position in Baa- and Ba-rated securities versus the fund’s benchmark. In terms of sectors, we favored higher-education, utility, and health-care bonds,
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This chart illustrates the fund’s composition by effective maturity, showing the percentage of holdings in different maturity ranges and how the composition has changed over the past six months. Holdings and maturity ranges will vary over time. The effective maturity dates of bonds with call features may change as a result of market conditions.
8
particularly those of hospitals and continuing-care retirement communities. Overall, this positioning generally helped the fund’s relative performance during the past six months.
What is your outlook for the months ahead?
While technical factors in the market have been positive — specifically, lighter supply and stable demand — uncertainty remains. We believe that states will continue to face financial challenges as the economy struggles to find its footing. For the most part, however, we believe that the fiscal conditions of states and municipalities are showing signs of improvement: Tax receipts are beginning to improve, albeit slowly, and we believe defaults will remain relatively low.
We remain focused on the economy and Congress’s plans to reduce the deficit. Higher federal income tax rates, a change in the tax status of municipal bonds, or significant cuts in state funding all would have consequences for the municipal bond market. But for investors with longer time horizons, we believe that our actively managed approach remains a prudent way to diversify holdings and generate tax-exempt income in the municipal bond market.
Thank you, Paul, for your time and insights today.
The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.
Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.
Portfolio Manager Paul M. Drury has a B.A. from Suffolk University. A CFA charterholder, Paul has been in the investment industry since he joined Putnam in 1989.
In addition to Paul, your fund’s portfolio managers are Susan A. McCormack, CFA and Thalia Meehan, CFA.
IN THE NEWS
The U.S. unemployment rate fell to 8.3% in January, with the nation’s employers adding 243,000 jobs, according to the Labor Department. This was the fastest pace of job growth since April 2011 and was the fifth straight month of unemployment rate declines. The nation’s jobless rate is still above the 5.2%-to-6% range that Federal Reserve (Fed) officials say is consistent with maximum employment. According to the Labor Department, 12.8 million Americans remain unemployed. In testimony before the Senate Budget Committee in early February, Fed Chairman Ben S. Bernanke said that the U.S. job market is far from “operating normally.” The Fed chairman reiterated that the Fed’s benchmark interest rate will remain near zero at least through late 2014, and again called on U.S. lawmakers to reduce the federal deficit.
9
Your fund’s performance
This section shows your fund’s performance, price, and distribution information for periods ended January 31, 2012, the end of the first half of its current fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class Y shares are not available to all investors. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.
Fund performance Total return for periods ended 1/31/12
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| Class A | Class B | Class C | Class M | Class Y |
(inception dates) | (9/20/93) | (9/9/85) | (2/1/99) | (12/29/94) | (1/2/08) |
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| Before | After | | | | | Before | After | Net |
| sales | sales | Before | After | Before | After | sales | sales | asset |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value |
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Annual average | | | | | | | | | |
(life of fund) | 6.31% | 6.15% | 5.87% | 5.87% | 5.47% | 5.47% | 6.07% | 5.94% | 6.02% |
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10 years | 60.48 | 53.97 | 50.84 | 50.84 | 48.51 | 48.51 | 56.07 | 50.85 | 56.56 |
Annual average | 4.84 | 4.41 | 4.20 | 4.20 | 4.03 | 4.03 | 4.55 | 4.20 | 4.58 |
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5 years | 22.87 | 18.06 | 19.11 | 17.24 | 18.43 | 18.43 | 21.21 | 17.18 | 23.66 |
Annual average | 4.21 | 3.38 | 3.56 | 3.23 | 3.44 | 3.44 | 3.92 | 3.22 | 4.34 |
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3 years | 52.76 | 46.73 | 49.86 | 46.86 | 49.42 | 49.42 | 51.55 | 46.64 | 54.06 |
Annual average | 15.17 | 13.63 | 14.44 | 13.67 | 14.32 | 14.32 | 14.86 | 13.61 | 15.50 |
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1 year | 16.23 | 11.62 | 15.50 | 10.50 | 15.33 | 14.33 | 15.92 | 12.18 | 16.58 |
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6 months | 8.29 | 4.00 | 7.97 | 2.97 | 7.88 | 6.88 | 8.09 | 4.54 | 8.42 |
|
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 4.00% and 3.25% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class Y shares have no initial sales charge or CDSC. Performance for class A, C, M, and Y shares before their inception is derived from the historical performance of class B shares, adjusted for the applicable sales charge (or CDSC) and, for class C shares, the higher operating expenses for such shares.
For a portion of the periods, the fund had expense limitations, without which returns would have been lower.
A short-term trading fee of 1% may apply to redemptions or exchanges from certain funds within the time period specified in the fund’s prospectus.
Class B share performance does not assume conversion to class A shares.
10
Comparative index returns For periods ended 1/31/12
| | |
| Barclays Capital | Lipper High Yield Municipal Debt |
| Municipal Bond Index | Funds category average* |
|
Annual average (life of fund) | 7.18% | 6.34% |
|
10 years | 69.79 | 54.23 |
Annual average | 5.44 | 4.40 |
|
5 years | 32.32 | 12.34 |
Annual average | 5.76 | 2.26 |
|
3 years | 26.31 | 46.19 |
Annual average | 8.10 | 13.47 |
|
1 year | 14.10 | 15.95 |
|
6 months | 7.37 | 7.77 |
|
Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.
* Over the 6-month, 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 1/31/12, there were 127, 125, 104, 88, 64, and 5 funds, respectively, in this Lipper category.
Fund price and distribution information For the six-month period ended 1/31/12
| | | | | | | |
Distributions | Class A | Class B | Class C | Class M | Class Y |
|
Number | 6 | 6 | 6 | 6 | 6 |
|
Income 1 | $0.315896 | $0.279218 | $0.270309 | $0.300067 | $0.329668 |
|
Capital gains 2 | — | — | — | — | — |
|
Total | $0.315896 | $0.279218 | $0.270309 | $0.300067 | $0.329668 |
|
| Before | After | Net | Net | Before | After | Net |
| sales | sales | asset | asset | sales | sales | asset |
Share value | charge | charge | value | value | charge | charge | value |
|
7/31/11 | $11.56 | $12.04 | $11.58 | $11.58 | $11.57 | $11.96 | $11.59 |
|
1/31/12 | 12.19 | 12.70 | 12.21 | 12.21 | 12.19 | 12.60 | 12.22 |
|
| Before | After | Net | Net | Before | After | Net |
| sales | sales | asset | asset | sales | sales | asset |
Current yield (end of period) | charge | charge | value | value | charge | charge | value |
|
Current dividend rate 3 | 4.64% | 4.45% | 4.02% | 3.87% | 4.38% | 4.23% | 4.86 |
|
Taxable equivalent 4 | 7.14 | 6.85 | 6.18 | 5.95 | 6.74 | 6.51 | 7.48 |
|
Current 30-day SEC yield 5 | N/A | 4.22 | 3.79 | 3.64 | N/A | 4.00 | 4.62 |
|
Taxable equivalent 4 | N/A | 6.49 | 5.83 | 5.60 | N/A | 6.15 | 7.11 |
|
The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (4.00% for class A shares and 3.25% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.
1 For some investors, investment income may be subject to the federal alternative minimum tax.
2 Capital gains, if any, are taxable for federal and, in most cases, state purposes.
3 Most recent distribution, excluding capital gains, annualized and divided by share price before or after sales charge at period-end.
4 Assumes maximum 35.00% federal and state combined tax rate for 2012. Results for investors subject to lower tax rates would not be as advantageous.
5 Based only on investment income and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.
11
Fund performance as of most recent calendar quarter
Total return for periods ended 12/31/11
| | | | | | | | | |
| Class A | Class B | Class C | Class M | Class Y |
(inception dates) | (9/20/93) | (9/9/85) | (2/1/99) | (12/29/94) | (1/2/08) |
|
| Before | After | | | | | Before | After | Net |
| sales | sales | Before | After | Before | After | sales | sales | asset |
| charge | charge | CDSC | CDSC | CDSC | CDSC | charge | charge | value |
|
Annual average | | | | | | | | | |
(life of fund) | 6.19% | 6.03% | 5.75% | 5.75% | 5.35% | 5.35% | 5.95% | 5.82% | 5.89% |
|
10 years | 55.91 | 49.70 | 46.67 | 46.67 | 44.36 | 44.36 | 51.63 | 46.67 | 52.10 |
Annual average | 4.54 | 4.12 | 3.90 | 3.90 | 3.74 | 3.74 | 4.25 | 3.90 | 4.28 |
|
5 years | 18.59 | 13.87 | 14.97 | 13.16 | 14.31 | 14.31 | 16.98 | 13.12 | 19.28 |
Annual average | 3.47 | 2.63 | 2.83 | 2.50 | 2.71 | 2.71 | 3.19 | 2.50 | 3.59 |
|
3 years | 57.11 | 50.93 | 54.11 | 51.11 | 53.62 | 53.62 | 55.85 | 50.79 | 58.37 |
Annual average | 16.25 | 14.71 | 15.51 | 14.75 | 15.38 | 15.38 | 15.94 | 14.67 | 16.56 |
|
1 year | 10.63 | 6.22 | 9.93 | 4.93 | 9.76 | 8.76 | 10.34 | 6.72 | 10.97 |
|
6 months | 6.00 | 1.73 | 5.65 | 0.65 | 5.58 | 4.58 | 5.85 | 2.46 | 6.10 |
|
Your fund’s expenses
As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.
Expense ratios
| | | | | |
| Class A | Class B | Class C | Class M | Class Y |
|
Total annual operating expenses for the fiscal year | | | | | |
ended 7/31/11 | 0.80% | 1.42% | 1.57% | 1.07% | 0.57% |
|
Annualized expense ratio for the six-month period | | | | | |
ended 1/31/12 | 0.81% | 1.43% | 1.58% | 1.08% | 0.58% |
|
Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report. Expenses are shown as a percentage of average net assets.
12
Expenses per $1,000
The following table shows the expenses you would have paid on a $1,000 investment in the fund from August 1, 2011, to January 31, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| | | | | |
| Class A | Class B | Class C | Class M | Class Y |
|
Expenses paid per $1,000*† | $4.24 | $7.48 | $8.26 | $5.65 | $3.04 |
|
Ending value (after expenses) | $1,082.90 | $1,079.70 | $1,078.80 | $1,080.90 | $1,084.20 |
|
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 1/31/12. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended January 31, 2012, use the following calculation method. To find the value of your investment on August 1, 2011, call Putnam at 1-800-225-1581.
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Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| | | | | |
| Class A | Class B | Class C | Class M | Class Y |
|
Expenses paid per $1,000*† | $4.12 | $7.25 | $8.01 | $5.48 | $2.95 |
|
Ending value (after expenses) | $1,021.06 | $1,017.95 | $1,017.19 | $1,019.71 | $1,022.22 |
|
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 1/31/12. The expense ratio may differ for each share class.
† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
13
Terms and definitions
Important terms
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.
Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 4.00% maximum sales charge for class A shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
Share classes
Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC.
Class Y shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.
Fixed-income terms
Current yield is the annual rate of return earned from dividends or interest of an investment. Current yield is expressed as a percentage of the price of a security, fund share, or principal investment.
Yield curve is a graph that plots the yields of bonds with equal credit quality against their differing maturity dates, ranging from shortest to longest. It is used as a benchmark for other debt, such as mortgage or bank lending rates.
Comparative indexes
Barclays Capital Municipal Bond Index is an unmanaged index of long-term fixed-rate investment-grade tax-exempt bonds.
Barclays Capital U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
BofA (Bank of America) Merrill Lynch U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.
Lipper is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based
14
on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.
Other information for shareholders
Important notice regarding delivery of shareholder documents
In accordance with Securities and Exchange Commission (SEC) regulations, Putnam sends a single copy of annual and semiannual shareholder reports, prospectuses, and proxy statements to Putnam shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call Putnam at 1-800-225-1581, and Putnam will begin sending individual copies within 30 days.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2011, are available in the Individual Investors section of putnam.com, and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Forms N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the Public Reference Room.
Trustee and employee fund ownership
Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of January 31, 2012, Putnam employees had approximately $325,000,000 and the Trustees had approximately $75,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.
15
Financial statements
A guide to financial statements
These sections of the report, as well as the accompanying Notes, constitute the fund’s financial statements.
The fund’s portfolio lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification.
Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year.
Financial highlights provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlights table also includes the current reporting period.
16
The fund’s portfolio 1/31/12 (Unaudited)
| |
Key to holding’s abbreviations | |
ABAG Association Of Bay Area Governments | G.O. Bonds General Obligation Bonds |
AGM Assured Guaranty Municipal Corporation | GNMA Coll. Government National Mortgage |
AGO Assured Guaranty, Ltd. | Association Collateralized |
AMBAC AMBAC Indemnity Corporation | NATL National Public Finance Guarantee Corp. |
ASC 820 Accounting Standards Codification | Radian Insd. Radian Group Insured |
ASC 820 Fair Value Measurements and Disclosures | U.S. Govt. Coll. U.S. Government Collateralized |
COP Certificates of Participation | VRDN Variable Rate Demand Notes, which are |
FNMA Coll. Federal National Mortgage | floating-rate securities with long-term maturities, |
Association Collateralized | that carry coupons that reset every one or seven |
FRB Floating Rate Bonds: the rate shown is the current | days. The rate shown is the current interest rate at the |
interest rate at the close of the reporting period | close of the reporting period. |
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* | Rating** | Principal amount | Value |
|
Alabama (1.0%) | | | |
Cullman Cnty., Hlth. Care Auth. Rev. Bonds | | | |
(Cullman Regl. Med. Ctr.), Ser. A, 7s, 2/1/36 | Ba1 | $6,000,000 | $6,062,580 |
|
Selma, Indl. Dev. Board Rev. Bonds (Gulf | | | |
Opportunity Zone Intl. Paper Co.), Ser. A | | | |
6 1/4s, 11/1/33 | BBB | 3,000,000 | 3,325,380 |
5.8s, 5/1/34 | BBB | 1,750,000 | 1,870,313 |
|
| | | 11,258,273 |
Arizona (3.1%) | | | |
Calhoun Cnty., Sales & Use Tax Rev. Bonds | | | |
(Georgia-Pacific Corp.), 6 3/8s, 11/1/26 | Baa3 | 2,000,000 | 2,020,000 |
|
Casa Grande, Indl. Dev. Auth. Rev. Bonds (Casa | | | |
Grande Regl. Med. Ctr.), Ser. A | | | |
7 5/8s, 12/1/29 | BB–/P | 5,575,000 | 5,753,622 |
7 1/4s, 12/1/19 | BB–/P | 500,000 | 517,340 |
|
Cochise Cnty., Indl. Dev. Auth. Rev. Bonds | | | |
(Sierra Vista Cmnty. Hosp.), 6.45s, 12/1/17 | BBB+/P | 1,510,000 | 1,548,777 |
(Sierra Vista Regl. Hlth. Ctr.), 7 3/4s, 12/1/30 | BBB+/P | 2,835,000 | 2,896,916 |
(Sierra Vista Regl. Hlth. Ctr.), Ser. A, | | | |
6.2s, 12/1/21 | BBB+/P | 825,000 | 931,145 |
|
Coconino Cnty., Poll. Control Rev. Bonds | | | |
(Tucson Elec. Pwr. Co. - Navajo), Ser. A, | | | |
5 1/8s, 10/1/32 | Baa3 | 4,000,000 | 4,046,440 |
|
Glendale, Indl. Dev. Auth. Rev. Bonds (John C. | | | |
Lincoln Hlth. Network), 5s, 12/1/42 | BBB | 1,000,000 | 964,900 |
|
Maricopa Cnty., Poll. Control Rev. Bonds (El Paso | | | |
Elec. Co.), Ser. A, 7 1/4s, 2/1/40 | Baa2 | 4,800,000 | 5,488,655 |
|
Phoenix, Indl. Dev. Auth. Ed. Rev. Bonds | | | |
(Career Success Schools), 7 1/8s, 1/1/45 | BB+ | 500,000 | 503,100 |
(Great Hearts Academies Project), 6.3s, 7/1/42 | BBB/F | 430,000 | 434,528 |
|
17
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Arizona cont. | | | |
Pima Cnty., Indl. Dev. Auth. Rev. Bonds | | | |
(Tucson Elec. Pwr.), Ser. A, 6 3/8s, 9/1/29 | Baa3 | $2,500,000 | $2,560,050 |
(Tucson Elec. Pwr. Co.), 5 3/4s, 9/1/29 | Baa3 | 1,000,000 | 1,046,110 |
(Horizon Cmnty. Learning Ctr.), 5 1/4s, 6/1/35 | BBB | 1,395,000 | 1,243,573 |
(Horizon Cmnty. Learning Ctr.), 5.05s, 6/1/25 | BBB | 2,450,000 | 2,250,961 |
|
Salt Verde, Fin. Corp. Gas Rev. Bonds, 5s, 12/1/37 | A3 | 1,430,000 | 1,442,341 |
|
| | | 33,648,458 |
Arkansas (0.3%) | | | |
Arkadelphia, Pub. Ed. Fac. Board Rev. Bonds | | | |
(Ouachita Baptist U.), 6s, 3/1/33 | BBB–/P | 2,000,000 | 2,114,340 |
|
Little River Cnty., Rev. Bonds | | | |
(Georgia-Pacific Corp.), 5.6s, 10/1/26 | Baa3 | 1,290,000 | 1,293,754 |
|
| | | 3,408,094 |
California (12.3%) | | | |
ABAG Fin. Auth. for Nonprofit Corps. Rev. Bonds | | | |
(Episcopal Sr. Cmnty.), 6s, 7/1/31 | BBB+ | 1,295,000 | 1,360,436 |
|
CA Rev. Bonds (Catholic Hlth. Care West), Ser. A, | | | |
6s, 7/1/39 | A2 | 5,000,000 | 5,680,300 |
|
CA Edl. Fac. Auth. Rev. Bonds | | | |
(Pacific U.), Ser. A, 5s, 11/1/42 | A2 | 785,000 | 835,389 |
(U. of La Verne), Ser. A, 5s, 6/1/35 | Baa2 | 1,500,000 | 1,495,800 |
|
CA Muni. Fin. Auth. COP (Cmnty. Hosp. Central CA) | | | |
5 1/4s, 2/1/46 | Baa2 | 7,000,000 | 6,742,540 |
5 1/4s, 2/1/37 | Baa2 | 3,205,000 | 3,165,450 |
|
CA Muni. Fin. Auth. Rev. Bonds (Emerson College), | | | |
6s, 1/1/42 | Baa1 | 3,330,000 | 3,675,254 |
|
CA Poll. Control Fin. Auth. Solid Waste Disp. | | | |
Rev. Bonds (Waste Management, Inc.), Ser. A-2, | | | |
5.4s, 4/1/25 | BBB | 2,000,000 | 2,078,720 |
|
CA State G.O. Bonds | | | |
5 1/4s, 3/1/30 | A1 | 7,225,000 | 8,183,830 |
5s, 9/1/30 | A1 | 7,500,000 | 8,454,150 |
|
CA State Pub. Wks. Board Rev. Bonds | | | |
Ser. I-1, 6 5/8s, 11/1/34 | A2 | 3,750,000 | 4,402,463 |
Ser. A-1, 6s, 3/1/35 | A2 | 2,000,000 | 2,266,340 |
(States Prisons — LA), Ser. C, 5 3/4s, 10/1/31 | A2 | 1,000,000 | 1,140,760 |
(Dept. of Forestry & Fire), Ser. E, 5s, 11/1/32 | A2 | 1,750,000 | 1,839,828 |
(Judicial Council Projects), Ser. D, 5s, 12/1/31 | A2 | 1,000,000 | 1,077,180 |
|
CA Statewide Cmnty. Dev. Auth. Rev. Bonds | | | |
(American Baptist Homes West), 6 1/4s, 10/1/39 | BBB | 2,500,000 | 2,596,724 |
(Irvine LLC-UCI East Campus), 6s, 5/15/40 | Baa2 | 6,000,000 | 6,399,480 |
(Sr. Living-Presbyterian Homes), Ser. A, | | | |
4 7/8s, 11/15/36 | BBB– | 1,000,000 | 886,290 |
(Thomas Jefferson School of Law), Ser. A, | | | |
7 1/4s, 10/1/38 | BB+ | 2,025,000 | 2,114,687 |
(U. CA Irvine E. Campus Apts. Phase 1), | | | |
5 3/8s, 5/15/38 | Baa2 | 1,500,000 | 1,563,885 |
|
CA Statewide Cmnty. Dev. Auth. 144A Rev. Bonds | | | |
(Front Porch Cmntys. & Svcs.), Ser. A, | | | |
5 1/8s, 4/1/37 | BBB | 3,300,000 | 3,027,189 |
|
18
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
California cont. | | | |
CA Statewide Cmnty. Dev. Auth. Special Tax Rev. | | | |
Bonds (Citrus Garden Apt. Project - D1), 5 1/4s, | | | |
7/1/22 (Prerefunded 7/1/12) | AAA | $1,000,000 | $1,040,720 |
|
Cathedral City, Impt. Board Act of 1915 Special | | | |
Assmt. Bonds (Cove Impt. Dist.), Ser. 04-02 | | | |
5.05s, 9/2/35 | BBB–/P | 1,785,000 | 1,668,332 |
5s, 9/2/30 | BBB–/P | 1,695,000 | 1,650,913 |
|
Chula Vista, Cmnty. Fac. Dist. Special Tax Rev. Bonds | | | |
(No. 07-1 Otay Ranch Village Eleven), 5.8s, 9/1/28 | BB+/P | 1,795,000 | 1,821,871 |
(No. 07-I Otay Ranch Village Eleven), 5.1s, 9/1/26 | BB+/P | 335,000 | 337,023 |
|
Foothill/Eastern Corridor Agcy. Rev. Bonds | | | |
(Toll Road), 5.85s, 1/15/23 | Baa3 | 1,500,000 | 1,536,990 |
(CA Toll Roads), 5 3/4s, 1/15/40 | Baa3 | 3,200,000 | 3,199,711 |
zero %, 1/15/38 | Baa3 | 9,000,000 | 1,660,590 |
zero %, 1/15/37 | Baa3 | 5,000,000 | 987,000 |
zero %, 1/15/30 | Baa3 | 6,000,000 | 1,967,220 |
|
Irvine Pub. Fac. & Infrastructure Auth. Special | | | |
Assmt., Ser. A, 4 1/2s, 9/2/26 | BBB+ | 1,000,000 | 1,028,200 |
|
Irvine, Impt. Board Act of 1915 Special Assmt. | | | |
(Dist. No. 03-19) | | | |
5s, 9/2/29 | B/P | 1,670,000 | 1,476,764 |
5s, 9/2/25 | B/P | 1,270,000 | 1,175,347 |
|
Irvine, Impt. Board Act of 1915 Ltd. Oblig. Special | | | |
Assmt. Bonds (No. 03-19 Group 4), 5s, 9/2/29 | BB-/P | 660,000 | 633,857 |
|
Los Angeles, Dept. Arpt. Rev. Bonds (Los Angeles | | | |
Intl. Arpt.), Ser. A, 5s, 5/15/40 | AA | 2,000,000 | 2,194,400 |
|
M-S-R Energy Auth. Rev. Bonds | | | |
Ser. A, 6 1/2s, 11/1/39 | A– | 1,250,000 | 1,525,275 |
Ser. B, 6 1/2s, 11/1/39 | A– | 2,000,000 | 2,440,440 |
|
North Natomas, Cmnty. Fac. Special Tax Bonds | | | |
(Dist. No. 4), Ser. D, 5s, 9/1/33 | BBB–/P | 340,000 | 317,441 |
Ser. D, 5s, 9/1/26 | BBB–/P | 1,070,000 | 1,050,419 |
|
Oakley, Pub. Fin. Auth. Rev. Bonds, 5 7/8s, 9/2/24 | BBB–/P | 1,345,000 | 1,385,982 |
|
Orange Cnty., Cmnty. Fac. Dist. Special Tax | | | |
Rev. Bonds (Ladera Ranch No. 02-1), Ser. A, | | | |
5.55s, 8/15/33 | BBB–/P | 2,875,000 | 2,881,065 |
|
Poway, Unified School Dist. G.O. Bonds, | | | |
zero %, 8/1/40 | Aa2 | 7,000,000 | 1,504,090 |
|
Sacramento, Special Tax Rev. Bonds (North Natomas | | | |
Cmnty. Fac.) | | | |
Ser. 01-03, 6s, 9/1/28 | BBB/P | 680,000 | 683,747 |
Ser. 97-01, 5.1s, 9/1/35 | BB+/P | 2,895,000 | 2,735,601 |
Ser. 97-01, 5s, 9/1/29 | BB+/P | 1,355,000 | 1,304,323 |
|
San Bernardino, Cmnty. College Dist. G.O. Bonds | | | |
(Election of 2008), Ser. B, zero %, 8/1/44 | Aa2 | 15,000,000 | 2,672,400 |
|
San Diego, Unified School Dist. G.O. Bonds | | | |
Ser. C, zero %, 7/1/47 | Aa2 | 10,000,000 | 1,563,300 |
Ser. C, zero %, 7/1/46 | Aa2 | 5,000,000 | 823,700 |
(Election of 2008), Ser. C, zero %, 7/1/40 | Aa2 | 5,000,000 | 1,137,450 |
|
19
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
California cont. | | | |
San Francisco City & Cnty. Redev. Agcy. Cmnty. | | | |
Fac. Dist. Special Tax (No. 6 Mission Bay | | | |
South), Ser. A, 5.15s, 8/1/35 | BB+/P | $1,000,000 | $942,840 |
|
San Francisco, City & Cnty. Redev. Fin. Auth. Tax | | | |
Alloc. Bonds (Mission Bay South Redev.), Ser. D, | | | |
6 1/2s, 8/1/31 | BBB | 500,000 | 538,955 |
|
San Joaquin Hills, Trans. Corridor Agcy. Toll Rd. | | | |
Rev. Bonds, Ser. A, 5 1/2s, 1/15/28 | BB– | 1,500,000 | 1,344,135 |
|
Santaluz, Cmnty. Facs. Dist. No. 2 Special Tax | | | |
Rev. Bonds (Impt. Area No. 1), Ser. A | | | |
Ser. A 5s, 9/1/29 | BBB+ | 1,000,000 | 1,033,800 |
Ser. A 5s, 9/1/28 | BBB+ | 1,000,000 | 1,036,160 |
Ser. B, 6 3/8s, 9/1/30 (Prerefunded 3/1/12) | BBB/P | 5,785,000 | 5,812,767 |
|
Selma, Unified School Dist. G.O. Bonds (Election | | | |
of 2006), Ser. C, AGO, zero %, 8/1/37 | AA– | 2,400,000 | 506,016 |
|
Southern CA Pub. Pwr. Auth. Rev. Bonds | | | |
(Natural Gas), Ser. A, 5 1/4s, 11/1/21 | Baa1 | 1,500,000 | 1,597,605 |
|
Sunnyvale, Special Tax Rev. Bonds (Cmnty. Fac. | | | |
Dist. No. 1), 7 3/4s, 8/1/32 | B+/P | 3,780,000 | 3,783,704 |
|
Thousand Oaks, Cmnty. Fac. Dist. Special Tax Rev. | | | |
Bonds (Marketplace 94-1), zero %, 9/1/14 | B-/P | 2,665,000 | 2,239,506 |
|
Vernon, Elec. Syst. Rev. Bonds, Ser. A, | | | |
5 1/2s, 8/1/41 | A– | 750,000 | 782,820 |
|
| | | 133,009,174 |
Colorado (2.2%) | | | |
CO Hlth. Fac. Auth. Rev. Bonds | | | |
(Christian Living Cmntys.), Ser. A, 9s, 1/1/34 | BB–/P | 750,000 | 801,450 |
(Christian Living Cmnty.), 6 3/8s, 1/1/41 | BB–/P | 810,000 | 824,766 |
(Total Longterm Care National), Ser. A, | | | |
6 1/4s, 11/15/40 | BBB–/F | 800,000 | 845,840 |
(Evangelical Lutheran), Ser. A, 6 1/8s, 6/1/38 | A3 | 4,810,000 | 4,914,424 |
(Evangelical Lutheran), 5.9s, 10/1/27 | A3 | 5,000,000 | 5,048,000 |
(Christian Living Cmntys.), Ser. A, 5 3/4s, 1/1/26 | BB–/P | 2,850,000 | 2,880,153 |
(Valley View Assn.), 5 1/4s, 5/15/42 | BBB+ | 3,025,000 | 3,044,148 |
(Valley View Assn.), 5 1/8s, 5/15/37 | BBB+ | 1,000,000 | 1,003,360 |
|
CO Pub. Hwy. Auth. Rev. Bonds (E-470), | | | |
zero %, 9/1/41 | Baa2 | 1,000,000 | 154,710 |
|
CO Springs, Hosp. Rev. Bonds, 6 3/8s, 12/15/30 | A3 | 755,000 | 756,359 |
|
E-470 Pub. Hwy. Auth. Rev. Bonds, Ser. A, NATL, | | | |
zero %, 9/1/34 | Baa2 | 12,000,000 | 2,996,880 |
|
| | | 23,270,090 |
Connecticut (0.4%) | | | |
CT State Dev. Auth. 1st. Mtg. Gross Rev. Hlth. | | | |
Care Rev. Bonds (Elim Street Park | | | |
Baptist, Inc.), 5.85s, 12/1/33 | BBB | 1,735,000 | 1,744,664 |
|
Hamden, Fac. Rev. Bonds (Whitney Ctr.), Ser. A, | | | |
7 3/4s, 1/1/43 | BB/P | 2,800,000 | 2,905,028 |
|
| | | 4,649,692 |
Delaware (0.8%) | | | |
DE St. Econ. Dev. Auth. Rev. Bonds | | | |
(Delmarva Pwr.), 5.4s, 2/1/31 | BBB+ | 1,700,000 | 1,816,926 |
(Indian River Pwr.), 5 3/8s, 10/1/45 | Baa3 | 6,200,000 | 6,287,357 |
|
| | | 8,104,283 |
20
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
District of Columbia (2.2%) | | | |
DC Rev. Bonds | | | |
(Howard U.), Ser. A, 6 1/2s, 10/1/41 | A3 | $7,000,000 | $7,785,400 |
(Gallaudet U.), 5 1/2s, 4/1/41 | A+ | 2,000,000 | 2,194,320 |
|
DC Tobacco Settlement Fin. Corp. Rev. Bonds, | | | |
Ser. A, zero %, 6/15/46 | B+/F | 94,730,000 | 6,808,244 |
|
Metro. Washington, Arpt. Auth. Dulles Toll Rd. | | | |
Rev. Bonds (2nd Sr. Lien), Ser. B | | | |
zero %, 10/1/40 | Baa1 | 995,000 | 190,592 |
zero %, 10/1/39 | Baa1 | 10,000,000 | 2,029,200 |
zero %, 10/1/38 | Baa1 | 20,000,000 | 4,299,200 |
|
| | | 23,306,956 |
Florida (5.1%) | | | |
Escambia Cnty., Env. Impt. Rev. Bonds (Intl. | | | |
Paper Co.), Ser. A, 5s, 8/1/26 | BBB | 1,500,000 | 1,500,345 |
|
Fishhawk, Cmnty. Dev. Dist. II Rev. Bonds, | | | |
Ser. B, 7.04s, 11/1/14 | B–/P | 155,000 | 155,209 |
|
Heritage Harbour Marketplace Cmnty., Dev. Dist. | | | |
Special Assmt., 5.6s, 5/1/36 | B/P | 2,350,000 | 2,075,168 |
|
Jacksonville, Econ. Dev. Comm. Hlth. Care Fac. | | | |
Rev. Bonds (Proton Therapy Inst.), Class A, | | | |
6s, 9/1/17 | BB–/P | 860,000 | 941,597 |
|
Jacksonville, Econ. Dev. Comm. Indl. Dev. Rev. | | | |
Bonds (Gerdau Ameristeel US, Inc.), 5.3s, 5/1/37 | Baa3 | 5,250,000 | 5,003,985 |
|
Lakeland, Retirement Cmnty. Rev. Bonds | | | |
(1st Mtge. — Carpenters), 6 3/8s, 1/1/43 | BBB–/F | 1,820,000 | 1,823,385 |
|
Lee Cnty., Indl. Dev. Auth. Hlth. Care Fac. Rev. Bonds | | | |
(Shell Pt./Alliance Oblig. Group), 5 1/8s, 11/15/36 | BB | 4,925,000 | 4,214,372 |
(Shell Pt./Alliance), 5s, 11/15/32 | BB | 3,210,000 | 2,790,068 |
|
Miami Beach, Hlth. Fac. Auth. Hosp. Rev. Bonds | | | |
(Mount Sinai Med. Ctr.), Ser. A, 6.7s, 11/15/19 | Baa3 | 2,000,000 | 2,024,860 |
|
Miami-Dade Cnty., Aviation Rev. Bonds | | | |
(Miami Intl. Arpt.), Ser. A-1, 5 3/8s, 10/1/41 | A2 | 1,000,000 | 1,082,250 |
Ser. B, 5s, 10/1/41 | A2 | 4,500,000 | 4,715,550 |
|
Middle Village Cmnty. Dev. Dist. Special Assmt., | | | |
Ser. A, 6s, 5/1/35 | BB/P | 2,000,000 | 1,847,000 |
|
Myrtle Creek, Impt. Dist. Special Assmt. Bonds, | | | |
Ser. A, 5.2s, 5/1/37 | BB–/P | 2,090,000 | 1,695,345 |
|
Orlando Cmnty. Redev. Agcy. Tax Alloc. (Republic | | | |
Drive/Universal), 5s, 4/1/24 ∆ | A–/F | 2,760,000 | 3,051,594 |
|
Palm Beach Cnty., Hlth. Fac. Auth. Rev. Bonds | | | |
(Acts Retirement-Life Cmnty.), 5 1/2s, 11/15/33 | BBB+ | 7,000,000 | 7,205,660 |
|
Palm Coast Pk. Cmnty. Dev. Dist. Special Assmt. | | | |
Bonds, 5.7s, 5/1/37 | B–/P | 2,550,000 | 1,541,781 |
|
Sarasota Cnty., Hlth. Fac. Auth. Retirement Fac. | | | |
Rev. Bonds (Village On The Isle), 5 1/2s, 1/1/27 | BBB/F | 1,850,000 | 1,893,901 |
|
Six Mile Creek, Cmnty. Dev. Dist. Special Assmt., | | | |
5 7/8s, 5/1/38 | CCC/P | 2,000,000 | 620,000 |
|
South Bay, Cmnty. Dev. Dist. Rev. Bonds, | | | |
Ser. B-1, 5 1/8s, 11/1/12 (In default) † | D/P | 2,035,000 | 671,550 |
|
21
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Florida cont. | | | |
Tampa Bay, Cmnty. Dev. Dist. Special Assmt. Bonds | | | |
(New Port), Ser. A, 5 7/8s, | | | |
5/1/38 (In default) † | D/P | $1,880,000 | $564,000 |
|
Tolomato, Cmnty. Dev. Dist. Special Assmt. | | | |
(Split Pine Cmnty. Dev. Dist.), Ser. A, 5 1/4s, | | | |
5/1/39 (In default) † | D/P | 4,605,000 | 1,999,077 |
|
Tolomato, Cmnty. Dev. Dist. Special Assmt. Bonds | | | |
6.55s, 5/1/27 (In default) † | D/P | 1,300,000 | 560,794 |
5.4s, 5/1/37 | CCC/P | 3,220,000 | 2,702,965 |
|
Town Ctr. at Palm Coast, Cmnty. Dev. Dist. | | | |
Special Assmt., 6s, 5/1/36 | B/P | 1,860,000 | 1,331,258 |
|
Verandah, West Cmnty. Dev. Dist. Rev. Bonds (Cap. | | | |
Impt.), Ser. A, 6 5/8s, 5/1/33 | BB/P | 865,000 | 867,647 |
|
Verano Ctr. Cmnty. Dev. Dist. Special Assmt. | | | |
Bonds (Cmnty. Infrastructure), Ser. A, | | | |
5 3/8s, 5/1/37 | B–/P | 970,000 | 668,854 |
|
Village Cmnty. Dev. Dist. No. 8 Special Assmt. | | | |
Bonds (Dist. No. 8 Phase II), 6 1/8s, 5/1/39 | BB–/P | 965,000 | 1,016,213 |
|
VLG CDD No. 9 Special Assmt. Rev., 5s, 5/1/22 ∆ | B+/P | 850,000 | 864,943 |
|
| | | 55,429,371 |
Georgia (2.5%) | | | |
Atlanta, Wtr. & Waste Wtr. Rev. Bonds, Ser. A, | | | |
6 1/4s, 11/1/39 | A1 | 5,000,000 | 5,847,750 |
|
Clayton Cnty., Dev. Auth. Special Fac. Rev. Bonds | | | |
(Delta Airlines), Ser. B, 9s, 6/1/35 | CCC+ | 4,000,000 | 4,349,040 |
|
Fulton Cnty., Res. Care Fac. Rev. Bonds | | | |
(Canterbury Court), Class A, 6 1/8s, 2/15/34 | BB/P | 1,800,000 | 1,685,556 |
|
GA State Private College & U. Auth. Rev. Bonds | | | |
(Mercer U.), Ser. A | | | |
5 1/4s, 10/1/27 ∆ | Baa2 | 2,625,000 | 2,811,715 |
5s, 10/1/32 ∆ | Baa2 | 1,100,000 | 1,117,633 |
|
Gainesville & Hall Cnty., Devauth Retirement | | | |
Cmnty. Rev. Bonds (Acts Retirement-Life Cmnty.), | | | |
Ser. A-2, 6 5/8s, 11/15/39 | BBB+ | 1,200,000 | 1,301,004 |
|
Main St. Natural Gas, Inc. Rev. Bonds (GA Gas), | | | |
Ser. A, 5 1/2s, 9/15/21 | A– | 1,255,000 | 1,352,024 |
|
Marietta, Dev. Auth. Rev. Bonds (U. Fac. — Life | | | |
U., Inc.), 7s, 6/15/39 | Ba3 | 4,150,000 | 4,247,650 |
|
Med. Ctr. Hosp. Auth. Rev. Bonds (Spring Harbor | | | |
Green Island), 5 1/4s, 7/1/27 | B+/P | 2,800,000 | 2,633,455 |
|
Rockdale Cnty., Dev. Auth. Rev. Bonds | | | |
(Visy Paper), Ser. A, 6 1/8s, 1/1/34 | B–/P | 1,400,000 | 1,435,924 |
|
| | | 26,781,751 |
Guam (0.1%) | | | |
Territory of GU, Rev. Bonds, Ser. A, | | | |
5 3/8s, 12/1/24 | BBB– | 1,000,000 | 1,070,750 |
|
Territory of GU, Dept. of Ed. COP (John F. | | | |
Kennedy High School), Ser. A, 6 7/8s, 12/1/40 | B | 500,000 | 538,105 |
|
| | | 1,608,855 |
22
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Hawaii (0.9%) | | | |
HI State Dept. Budget & Fin. Rev. Bonds | | | |
(Craigside), Ser. A, 9s, 11/15/44 | B/P | $1,350,000 | $1,580,391 |
(Hawaiian Elec. Co. — Subsidary), 6 1/2s, 7/1/39 | Baa1 | 7,000,000 | 7,826,910 |
|
| | | 9,407,301 |
Illinois (4.9%) | | | |
Chicago, Special Assmt. Bonds (Lake Shore East), | | | |
6 3/4s, 12/1/32 | BB/P | 5,616,000 | 5,803,406 |
|
Chicago, O’Hare Intl. Arpt. Rev. Bonds, Ser. A, | | | |
5 3/4s, 1/1/39 | A1 | 5,000,000 | 5,686,450 |
|
Du Page Cnty., Special Svc. Area No. 31 Special | | | |
Tax Bonds (Monarch Landing), 5 5/8s, 3/1/36 | B/P | 900,000 | 726,723 |
|
IL Fin. Auth. Rev. Bonds | | | |
(Elmhurst Memorial), Ser. A, 5 5/8s, 1/1/37 | Baa1 | 2,000,000 | 2,071,460 |
(IL Rush U. Med Ctr.), Ser. C, 6 5/8s, 11/1/39 | A2 | 1,425,000 | 1,662,035 |
(Landing At Plymouth Place), Ser. A, 6s, 5/15/25 | B+/P | 1,550,000 | 1,448,894 |
(Navistar Intl. Recvy. Zone), 6 1/2s, 10/15/40 | BB– | 1,300,000 | 1,384,175 |
(Provena Hlth.), Ser. A, 7 3/4s, 8/15/34 | Baa1 | 3,500,000 | 4,200,105 |
(Roosevelt U.), 6 1/2s, 4/1/39 | Baa2 | 4,000,000 | 4,343,200 |
(Roosevelt U.), 6 1/2s, 4/1/44 | Baa2 | 245,000 | 265,215 |
(Rush U. Med. Ctr.), Ser. A, 7 1/4s, 11/1/38 | A2 | 2,150,000 | 2,600,296 |
(Silver Cross Hosp. & Med. Ctr.), 7s, 8/15/44 | BBB– | 5,250,000 | 5,895,277 |
|
IL Fin. Auth. Solid Waste Disposal (Waste | | | |
Mgmt., Inc.), Ser. A, 5.05s, 8/1/29 | BBB | 5,045,000 | 5,134,497 |
|
IL Hlth. Fac. Auth. Rev. Bonds | | | |
(Cmnty. Rehab. Providers Fac.), 8 1/4s, 8/1/12 | CCC/P | 100,503 | 60,463 |
(Cmnty. Rehab. Providers Fac.), Ser. A, | | | |
7 7/8s, 7/1/20 | CCC/P | 541,784 | 392,447 |
(Elmhurst Memorial Hlth. Care), 5 5/8s, 1/1/28 | Baa1 | 6,000,000 | 6,066,840 |
|
Metro. Pier & Exposition Auth. Dedicated State | | | |
Tax Rev. Bonds (McCormick), Ser. B, AGM, | | | |
zero %, 6/15/43 | AAA | 13,500,000 | 2,431,755 |
|
Railsplitter, Tobacco Settlement Auth. Rev. | | | |
Bonds, 6s, 6/1/28 | A– | 2,150,000 | 2,403,722 |
|
| | | 52,576,960 |
Indiana (1.4%) | | | |
IN State Fin. Auth. Rev. Bonds (U.S. | | | |
Steel Corp.), 6s, 12/1/26 | BB | 2,000,000 | 2,060,520 |
|
IN State Fin. Auth. VRDN, Ser. A-2, 0.05s, 2/1/37 | VMIG1 | 11,000,000 | 11,000,000 |
|
IN State Fin. Auth. Edl. Fac. VRDN | | | |
(Depauw U.), Ser. A, 0.07s, 7/1/36 | VMIG1 | 500,000 | 500,000 |
Ser. A-1, 0.05s, 2/1/37 | VMIG1 | 1,100,000 | 1,100,000 |
|
| | | 14,660,520 |
Iowa (0.9%) | | | |
IA Fin. Auth. Hlth. Fac. Rev. Bonds | | | |
|
(Care Initiatives), Ser. A, 5 1/4s, 7/1/18 | BB+ | 2,500,000 | 2,463,825 |
(Care Initiatives), Ser. A, 5 1/2s, 7/1/25 | BB+ | 3,185,000 | 2,886,693 |
(Care Initiatives), Ser. A, 5s, 7/1/20 | BB+ | 1,700,000 | 1,585,709 |
|
Marion Hlth. Care Fac. Rev. Bonds (First Mtge.), | | | |
Ser. IA, 8s, 1/1/29 | CCC | 45,000 | 45,519 |
|
Tobacco Settlement Auth. of IA Rev. Bonds, | | | |
Ser. C, 5 3/8s, 6/1/38 | B+ | 3,000,000 | 2,414,040 |
|
| | | 9,395,786 |
23
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Kansas (0.5%) | | | |
Lenexa, Hlth. Care Fac. Rev. Bonds | | | |
(LakeView Village), 7 1/4s, 5/15/39 | BB/P | $1,500,000 | $1,566,015 |
5 1/2s, 5/15/39 | BB/P | 500,000 | 438,180 |
5 3/8s, 5/15/27 | BB/P | 3,400,000 | 3,131,467 |
|
| | | 5,135,662 |
Kentucky (1.0%) | | | |
Breckinridge Cnty., Lease Program VRDN, Ser. A, | | | |
0.06s, 2/1/32 | VMIG1 | 3,335,000 | 3,335,000 |
|
KY Econ. Dev. Fin. Auth. Rev. Bonds | | | |
(First Mtge.), Ser. IA, 8s, 1/1/29 | B+/P | 230,000 | 233,220 |
(Masonic Home Indpt. Living II), 7 3/8s, 5/15/46 | BB–/P | 1,350,000 | 1,415,840 |
(Masonic Home Indpt. Living II), 7 1/4s, 5/15/41 | BB–/P | 900,000 | 940,635 |
|
Louisville & Jefferson Cnty., Metro. Govt. Hlth. | | | |
Syst. Rev. Bonds (Norton Hlth. Care, Inc.), | | | |
5s, 10/1/30 | A– | 4,000,000 | 4,159,720 |
|
Louisville/Jefferson Cnty., Metro. Govt. College | | | |
Rev. Bonds (Bellarmine U.), Ser. A, 6s, 5/1/38 | Baa3 | 855,000 | 902,641 |
|
| | | 10,987,056 |
Louisiana (1.3%) | | | |
LA Hlth. Ed. Auth. Rev. Bonds (Lambeth House), | | | |
Ser. A, 6.2s, 1/1/28 | B+/P | 3,000,000 | 3,000,780 |
|
Rapides, Fin. Auth. FRB (Cleco Pwr.), AMBAC, | | | |
4.7s, 11/1/36 | Baa2 | 2,250,000 | 2,130,165 |
|
St. John Baptist Parish Rev. Bonds (Marathon | | | |
Oil Corp.), Ser. A, 5 1/8s, 6/1/37 | Baa2 | 3,690,000 | 3,749,003 |
|
Tobacco Settlement Fin. Corp. Rev. Bonds, | | | |
Ser. 01-B, 5 7/8s, 5/15/39 | A3 | 5,350,000 | 5,403,232 |
|
| | | 14,283,180 |
Maine (0.7%) | | | |
ME Hlth. & Higher Edl. Fac. Auth. Rev. Bonds | | | |
(ME Gen. Med. Ctr.), 7 1/2s, 7/1/32 | Baa3 | 3,000,000 | 3,459,870 |
|
Rumford, Solid Waste Disp. Rev. Bonds (Boise | | | |
Cascade Corp.), 6 7/8s, 10/1/26 | B2 | 5,000,000 | 4,587,200 |
|
| | | 8,047,070 |
Maryland (1.3%) | | | |
MD Econ. Dev. Corp. Poll. Control Rev. Bonds | | | |
(Potomac Electric Power Co.), 6.2s, 9/1/22 | A | 1,700,000 | 2,087,107 |
|
MD State Hlth. & Higher Edl. Fac. Auth. Rev. | | | |
Bonds (Washington Cnty. Hosp.), 6s, 1/1/43 | BBB– | 4,760,000 | 4,983,434 |
|
MD State Indl. Dev. Fin. Auth. Econ. Dev. Rev. | | | |
Bonds (Our Lady of Good Counsel School), Ser. A, | | | |
6s, 5/1/35 | B–/P | 600,000 | 613,206 |
|
Westminster, Econ. Dev. Rev. Bonds (Carroll | | | |
Lutheran Village), Ser. A | | | |
6 1/4s, 5/1/34 | BB/P | 4,800,000 | 4,472,928 |
6s, 5/1/24 | BB/P | 2,000,000 | 1,930,920 |
|
| | | 14,087,595 |
24
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Massachusetts (5.8%) | | | |
MA Dev. Fin. Agcy. Sr. Living Fac. Rev. Bonds | | | |
(Groves-Lincoln), Ser. A, 7 3/4s, 6/1/39 | BB–/P | $2,000,000 | $2,064,920 |
|
MA State Dev. Fin. Agcy. Rev. Bonds | | | |
(Berklee College of Music), 5 1/4s, 10/1/41 | A2 | 2,000,000 | 2,170,200 |
(Eastern Nazarene College), 5 5/8s, 4/1/29 | BB+ | 2,000,000 | 1,966,360 |
(Linden Ponds, Inc. Fac.), Ser. A-1, | | | |
6 1/4s, 11/15/31 | B–/P | 704,147 | 570,739 |
(Linden Ponds, Inc. Fac.), Ser. A-1, | | | |
6 1/4s, 11/15/39 | B–/P | 1,159,997 | 888,094 |
(Linden Ponds, Inc. Fac.), Ser. A-1, | | | |
6 1/4s, 11/15/46 | B–/P | 2,616,363 | 1,961,670 |
(Linden Ponds, Inc. Fac.), Ser. A-2, | | | |
5 1/2s, 11/15/46 | B–/P | 238,451 | 158,911 |
(Linden Ponds, Inc. Fac.), Ser. B, | | | |
zero %, 11/15/56 | B–/P | 1,186,016 | 13,046 |
(Sabis Intl.), Ser. A, 8s, 4/15/39 | BBB | 1,840,000 | 2,117,894 |
(Suffolk U.), 5 1/8s, 7/1/40 | Baa2 | 2,000,000 | 2,050,020 |
(Wheelock College), Ser. C, 5 1/4s, 10/1/29 | BBB | 1,300,000 | 1,344,226 |
(Wheelock College), Ser. C, 5 1/4s, 10/1/37 | BBB | 2,000,000 | 2,034,100 |
|
MA State Dev. Fin. Agcy. Hlth. Care Fac. Rev. | | | |
Bonds (Adventcare), Ser. A, 6.65s, 10/15/28 | B/P | 2,150,000 | 2,183,261 |
|
MA State Hlth. & Edl. Fac. Auth. Rev. Bonds | | | |
(Berkshire Hlth. Syst.), Ser. E, 6 1/4s, 10/1/31 | BBB+ | 4,400,000 | 4,446,244 |
(Civic Investments/HPHC), Ser. A, 9s, 12/15/15 | | | |
(Prerefunded 12/15/12) | AAA/P | 5,115,000 | 5,571,156 |
(Emerson Hosp.), Ser. E, Radian Insd., 5s, 8/15/25 | BB/P | 3,500,000 | 3,289,860 |
(Fisher College), Ser. A, 5 1/8s, 4/1/37 | BBB– | 1,400,000 | 1,317,918 |
(Hlth. Care Syst.-Covenant Hlth.), 6s, 7/1/31 | A | 5,685,000 | 5,750,378 |
(Jordan Hosp.), Ser. E, 6 3/4s, 10/1/33 | BB– | 6,035,000 | 6,090,702 |
(Milford Regl. Med.), Ser. E, 5s, 7/15/27 | Baa3 | 2,750,000 | 2,738,203 |
(Milford Regl. Med.), Ser. E, 5s, 7/15/32 | Baa3 | 1,000,000 | 956,770 |
(Milton Hosp.), Ser. D, 5 3/8s, 7/1/35 | BB– | 3,950,000 | 3,780,071 |
(Quincy Med. Ctr.), Ser. A, 6 1/2s, | | | |
1/15/38 (In default) † | D/P | 1,279,242 | 29,423 |
(Springfield College), 5 5/8s, 10/15/40 | Baa1 | 3,500,000 | 3,635,835 |
(Suffolk U.), Ser. A, 5 3/4s, 7/1/39 | Baa2 | 2,125,000 | 2,256,346 |
(Suffolk U.), Ser. A, 6 1/4s, 7/1/30 | Baa2 | 1,400,000 | 1,556,604 |
(Winchester Hosp.), 5 1/4s, 7/1/38 | BBB+ | 2,000,000 | 2,060,200 |
|
| | | 63,003,151 |
Michigan (1.6%) | | | |
Advanced Tech. Academy Pub. School Rev. Bonds, | | | |
6s, 11/1/28 | BBB– | 1,695,000 | 1,604,131 |
|
Ann Arbor, Econ. Dev. Corp. Ltd. Oblig. Rev. | | | |
Bonds (Glacier Hills, Inc.), State & Local Govt. | | | |
Coll., 8 3/8s, 1/15/19 (Escrowed to maturity) | AA+ | 1,668,000 | 2,096,809 |
|
Detroit, G.O. Bonds (Cap. Impt.), Ser. A-1, | | | |
5s, 4/1/15 | BB | 2,880,000 | 2,645,510 |
|
Flint, Hosp. Bldg. Auth. Rev. Bonds (Hurley Med. Ctr.) | | | |
7 1/2s, 7/1/39 | Ba1 | 700,000 | 747,551 |
6s, 7/1/20 | Ba1 | 1,640,000 | 1,653,546 |
|
Garden City, Hosp. Fin. Auth. Rev. Bonds (Garden | | | |
City Hosp.), Ser. A, 5 3/4s, 9/1/17 | Ba3 | 1,405,000 | 1,405,998 |
|
25
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Michigan cont. | | | |
MI Higher Ed. Fac. Auth. VRDN (U. of Detroit), | | | |
0.07s, 11/1/36 | VMIG1 | $2,525,000 | $2,525,000 |
|
MI State Hosp. Fin. Auth. Rev. Bonds (Henry Ford | | | |
Hlth.), 5 3/4s, 11/15/39 | A1 | 4,400,000 | 4,790,588 |
|
| | | 17,469,133 |
Minnesota (1.5%) | | | |
Douglas Cnty., Gross Hlth. Care Fac. Rev. Bonds | | | |
(Douglas Cnty. Hosp.), Ser. A, 6 1/4s, 7/1/34 | BBB– | 2,400,000 | 2,592,720 |
|
Inver Grove Heights, Nursing Home Rev. Bonds | | | |
(Presbyterian Homes Care) | | | |
5 1/2s, 10/1/41 | B/P | 1,000,000 | 946,870 |
5 3/8s, 10/1/26 | B/P | 250,000 | 244,650 |
|
North Oaks, Sr. Hsg. Rev. Bonds | | | |
(Presbyterian Homes), 6 1/8s, 10/1/39 | BB/P | 1,375,000 | 1,399,489 |
(Presbyterian Homes), 6s, 10/1/27 | BB/P | 1,250,000 | 1,279,938 |
|
Northfield, Hosp. Rev. Bonds, 5 3/8s, 11/1/31 | BBB– | 1,500,000 | 1,549,575 |
|
Sauk Rapids Hlth. Care & Hsg. Fac. Rev. Bonds | | | |
(Good Shepherd Lutheran Home), 6s, 1/1/34 | B+/P | 800,000 | 756,232 |
|
St. Paul, Hsg. & Redev. Auth. Charter School | | | |
Lease Rev. Bonds (Nova Classical Academy), | | | |
Ser. A, 6 3/8s, 9/1/31 | BBB– | 500,000 | 520,500 |
|
St. Paul, Hsg. & Redev. Auth. Hlth. Care Fac. | | | |
Rev. Bonds (HealthPartners Oblig. Group), | | | |
5 1/4s, 5/15/36 | A3 | 5,035,000 | 5,171,549 |
|
St. Paul, Hsg. & Redev. Auth. Hosp. Rev. Bonds | | | |
(Healtheast), 6s, 11/15/35 | Ba1 | 1,250,000 | 1,271,388 |
|
Washington Cnty., Hsg. & Redev. Auth. Rev. Bonds | | | |
(Healtheast), 5 1/2s, 11/15/27 | Ba1 | 1,000,000 | 1,000,300 |
|
| | | 16,733,211 |
Mississippi (0.7%) | | | |
Bus. Fin. Corp. Gulf Opportunity Zone Rev. Bonds, | | | |
Ser. A, 5s, 5/1/37 | A3 | 1,000,000 | 1,046,920 |
|
Warren Cnty., Gulf Opportunity Zone (Intl. | | | |
Paper Co.), Ser. A, 6 1/2s, 9/1/32 | BBB | 5,400,000 | 6,051,186 |
|
| | | 7,098,106 |
Missouri (0.2%) | | | |
MO State Hlth. & Edl. Fac. Auth. VRDN (BJC Hlth. | | | |
Syst.), Ser. B, 0.04s, 5/15/34 | VMIG1 | 1,900,000 | 1,900,000 |
|
MO State Hsg. Dev. Comm. Mtge. Rev. Bonds (Single | | | |
Fam. Home Ownership Loan), Ser. A-1, GNMA Coll., | | | |
FNMA Coll., 6 3/4s, 3/1/34 | AA+ | 395,000 | 416,314 |
|
| | | 2,316,314 |
Montana (0.1%) | | | |
MT Fac. Fin. Auth. Rev. Bonds (Sr. Living St. | | | |
John’s Lutheran), Ser. A, 6s, 5/15/25 | B+/P | 750,000 | 748,560 |
|
| | | 748,560 |
Nebraska (0.3%) | | | |
Central Plains, Energy Rev. Bonds (NE Gas No. 1), | | | |
Ser. A, 5 1/4s, 12/1/18 | Ba3 | 1,500,000 | 1,552,035 |
|
Lancaster Cnty., Hosp. Auth. Rev. Bonds (Immanuel | | | |
Oblig. Group), 5 5/8s, 1/1/40 | A–/F | 1,825,000 | 1,937,858 |
|
| | | 3,489,893 |
26
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Nevada (0.9%) | | | |
Clark Cnty., Impt. Dist. Special Assmt. Bonds | | | |
(Summerlin No. 142), 6 3/8s, 8/1/23 | BB/P | $910,000 | $940,403 |
(Summerlin No. 151), 5s, 8/1/25 | BB–/P | 300,000 | 226,329 |
(Summerlin No. 151), 5s, 8/1/20 | BB–/P | 335,000 | 278,254 |
(Summerlin No. 151), 5s, 8/1/19 | BB–/P | 1,140,000 | 970,072 |
(Summerlin No. 151), 5s, 8/1/18 | BB–/P | 1,095,000 | 956,264 |
(Summerlin No. 151), 5s, 8/1/17 | BB–/P | 1,295,000 | 1,162,146 |
|
Henderson, Local Impt. Dist. Special Assmt. Bonds | | | |
(No. T-17), 5s, 9/1/25 | BB+/P | 780,000 | 727,436 |
(No. T-18), 5s, 9/1/14 | CCC/P | 2,320,000 | 1,448,585 |
|
Las Vegas, Local Impt. Board Special Assmt. | | | |
(Special Impt. Dist. No. 607), 6s, 6/1/19 | BB/P | 955,000 | 931,746 |
(Dist. No. 607), 5.9s, 6/1/18 | BB/P | 195,000 | 191,258 |
(Dist. No. 607), 5.9s, 6/1/17 | BB/P | 1,440,000 | 1,428,854 |
|
| | | 9,261,347 |
New Hampshire (0.8%) | | | |
NH Higher Edl. & Hlth. Fac. Auth. Rev. Bonds | | | |
(Rivermead at Peterborough), 5 3/4s, 7/1/28 | BB+/P | 6,000,000 | 5,795,820 |
|
NH Hlth. & Ed. Fac. Auth. Rev. Bonds (Huntington | | | |
at Nashua), Ser. A, 6 7/8s, 5/1/33 | BB–/P | 2,400,000 | 2,426,232 |
|
| | | 8,222,052 |
New Jersey (5.3%) | | | |
Burlington Cnty., Bridge Comm. Econ. Dev. Rev. | | | |
Bonds (The Evergreens), 5 5/8s, 1/1/38 | BB+/P | 5,500,000 | 5,393,135 |
|
NJ Econ. Dev. Auth. Rev. Bonds | | | |
(Cigarette Tax), 5 1/2s, 6/15/24 | BBB | 5,000,000 | 5,046,400 |
(Cranes Mill), Ser. A, 6s, 7/1/38 | BBB–/F | 1,750,000 | 1,774,010 |
(First Mtge. Lions Gate), Ser. A, 5 7/8s, 1/1/37 | B/P | 800,000 | 757,488 |
(First Mtge. Presbyterian Home), Ser. A, | | | |
6 1/4s, 11/1/20 | BB/P | 550,000 | 546,651 |
(First Mtge. Presbyterian Home), Ser. A, | | | |
6 3/8s, 11/1/31 | BB/P | 500,000 | 466,260 |
(MSU Student Hsg.), 5 7/8s, 6/1/42 | Baa3 | 5,110,000 | 5,501,222 |
(Newark Arpt. Marriott Hotel), 7s, 10/1/14 | Ba1 | 4,000,000 | 4,012,240 |
(United Methodist Homes), Ser. A-1, 6 1/4s, 7/1/33 | BB+ | 3,000,000 | 3,035,430 |
|
NJ Econ. Dev. Auth. Retirement Cmnty. Rev. Bonds | | | |
(Seabrook Village, Inc.), 5 1/4s, 11/15/36 | BB–/P | 3,590,000 | 3,314,073 |
|
NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds | | | |
(St. Joseph Hlth. Care Syst.), 6 5/8s, 7/1/38 | BBB– | 6,000,000 | 6,232,260 |
(St. Peter’s U. Hosp.), 6 1/4s, 7/1/35 | Baa3 | 2,500,000 | 2,699,075 |
(St. Peter’s U. Hosp.), 5 3/4s, 7/1/37 | Baa3 | 2,000,000 | 2,060,320 |
(Holy Name Hosp.), 5s, 7/1/36 | Baa2 | 3,500,000 | 3,361,610 |
|
NJ State Trans. Trust Fund Auth. Rev. Bonds, | | | |
Ser. B, 5 1/4s, 6/15/36 | A1 | 8,000,000 | 8,966,960 |
|
Tobacco Settlement Fin. Corp. Rev. Bonds, | | | |
Ser. 1A, 4 3/4s, 6/1/34 | B2 | 5,000,000 | 3,729,150 |
|
| | | 56,896,284 |
27
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
New Mexico (1.2%) | | | |
Farmington, Poll. Control Rev. Bonds | | | |
(Public Service Co. of NM San Juan), Ser. D, | | | |
5.9s, 6/1/40 | Baa3 | $3,000,000 | $3,146,430 |
(San Juan), Ser. A, 4 7/8s, 4/1/33 | Baa3 | 7,660,000 | 7,447,588 |
(San Juan), Ser. B, 4 7/8s, 4/1/33 | Baa3 | 2,750,000 | 2,673,743 |
|
| | | 13,267,761 |
New York (4.9%) | | | |
Albany, Indl. Dev. Agcy. Rev. Bonds | | | |
(Charitable Leadership), Ser. A, 5 3/4s, 7/1/26 | | | |
(In default) † | D/P | 2,000,000 | 1,162,640 |
|
Brooklyn Arena Local Dev. Corp. Rev. Bonds | | | |
(Barclays Ctr.), 6 3/8s, 7/15/43 | Baa3 | 3,000,000 | 3,214,950 |
|
Broome Cnty., Indl. Dev. Agcy. Continuing Care | | | |
Retirement Rev. Bonds (Good Shepherd Village), | | | |
Ser. A, 6 7/8s, 7/1/40 | B/P | 715,000 | 733,275 |
|
Huntington, Hsg. Auth. Sr. Hsg. Fac. Rev. Bonds | | | |
(Gurwin Jewish Sr. Residence), Ser. A, 6s, 5/1/39 | B+/P | 1,250,000 | 1,228,463 |
|
NY City, Indl. Dev. Agcy. Rev. Bonds | | | |
(Yankee Stadium — Pilot), AGO, 7s, 3/1/49 | Aa3 | 1,000,000 | 1,173,870 |
(Staten Island U. Hosp. Project), 6.45s, 7/1/32 | | | |
(Prerefunded 7/1/12) | AAA/P | 1,370,000 | 1,417,101 |
(Liberty-7 World Trade Ctr.), Ser. A, | | | |
6 1/4s, 3/1/15 | BB/P | 3,000,000 | 3,004,770 |
(Brooklyn Navy Yard Cogen. Partners), | | | |
5.65s, 10/1/28 | Ba3 | 3,250,000 | 2,756,910 |
|
NY City, Indl. Dev. Agcy. Civic Fac. Rev. Bonds | | | |
(Staten Island U. Hosp.), Ser. A, U.S. Govt. | | | |
Coll., 6 3/8s, 7/1/31 (Prerefunded 7/1/12) | AAA/P | 570,000 | 584,336 |
|
NY City, Indl. Dev. Agcy. Special Fac. Rev. Bonds | | | |
(JFK Intl. Arpt.), Ser. A, 8s, | | | |
8/1/12 (In default) † | D/P | 4,500,000 | 4,071,555 |
(American Airlines — JFK Intl. Arpt.), 7 1/2s, | | | |
8/1/16 (In default) † | D/P | 3,465,000 | 3,101,660 |
(British Airways PLC), 5 1/4s, 12/1/32 | BB– | 2,325,000 | 1,899,711 |
(Jetblue Airways Corp.), 5 1/8s, 5/15/30 | B– | 3,680,000 | 3,235,898 |
(Jetblue Airways Corp.), 5s, 5/15/20 | B– | 675,000 | 628,459 |
|
NY City, Muni. Wtr. & Swr. Fin. Auth. Rev. Bonds, | | | |
Ser. AA, 5s, 6/15/34 | AA+ | 3,250,000 | 3,720,113 |
|
NY City, Transitional Fin. Auth. Bldg. Aid Rev. | | | |
Bonds, Ser. S-1A, 5 1/4s, 7/15/37 | Aa3 | 3,000,000 | 3,414,090 |
|
NY State Dorm. Auth. Non-State Supported Debt | | | |
Rev. Bonds (Orange Regl. Med. Ctr.), | | | |
6 1/4s, 12/1/37 | Ba1 | 4,180,000 | 4,322,454 |
|
NY State Energy Research & Dev. Auth. Gas Fac. | | | |
Rev. Bonds (Brooklyn Union Gas), 6.952s, 7/1/26 | A3 | 1,800,000 | 1,822,878 |
|
Oneida Cnty., Indl. Dev. Agcy. Rev. Bonds (St. | | | |
Elizabeth Med.), Ser. A, 5 7/8s, 12/1/29 | BB+/P | 1,500,000 | 1,500,045 |
|
Port Auth. NY & NJ Special Oblig. Rev. Bonds | | | |
(JFK Intl. Air Term.), 6s, 12/1/42 | Baa3 | 2,100,000 | 2,293,662 |
|
Seneca Cnty., Indl. Dev. Agcy. Solid Waste Disp. | | | |
Mandatory Put Bonds (10/1/13) (Seneca | | | |
Meadows, Inc.), 6 5/8s, 10/1/35 | BB– | 1,660,000 | 1,675,106 |
|
28
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
New York cont. | | | |
Suffolk Cnty., Indl. Dev. Agcy. Civic Fac. Rev. Bonds | | | |
(Southampton Hosp. Assn.), Ser. B, 7 5/8s, 1/1/30 | B–/P | $3,325,000 | $3,327,826 |
(Southampton Hosp. Assn.), Ser. A, 7 1/4s, 1/1/30 | B–/P | 750,000 | 750,413 |
(Gurwin Jewish-Phase II), 6.7s, 5/1/39 | B+/P | 960,000 | 980,419 |
|
Yonkers, Indl. Dev. Agcy. Civic Fac. Rev. Bonds | | | |
(St. John’s Riverside Hosp.), Ser. A, 7 1/8s, 7/1/31 | B | 500,000 | 500,300 |
|
| | | 52,520,904 |
North Carolina (0.6%) | | | |
NC Cap. Fin. Agcy. Edl. Fac. Rev. Bonds | | | |
(Meredith College), 6s, 6/1/31 | BBB | 1,000,000 | 1,055,810 |
|
NC Med. Care Cmnty. Hlth. Care Fac. Rev. Bonds | | | |
(Deerfield), Ser. A, 6 1/8s, 11/1/38 | BBB+/F | 400,000 | 422,880 |
(First Mtge. — Presbyterian Homes), | | | |
5 3/8s, 10/1/22 | BB/P | 750,000 | 772,185 |
|
NC Med. Care Comm. Retirement Fac. Rev. Bonds | | | |
(Carolina Village), 6s, 4/1/38 | BB/P | 2,500,000 | 2,499,750 |
(First Mtge. United Methodist), Ser. C, | | | |
5 1/2s, 10/1/32 | BB+/P | 2,000,000 | 1,990,060 |
|
| | | 6,740,685 |
Ohio (3.5%) | | | |
Allen Cnty., Hosp. Fac. VRDN (Catholic Hlth. | | | |
Care), Ser. B, 0.06s, 10/1/31 | VMIG1 | 200,000 | 200,000 |
|
Buckeye, Tobacco Settlement Fin. Auth. Rev. | | | |
Bonds, Ser. A-2 | | | |
5 7/8s, 6/1/30 | B3 | 8,480,000 | 6,592,437 |
5 3/4s, 6/1/34 | B3 | 13,300,000 | 9,930,844 |
5 1/8s, 6/1/24 | B3 | 2,500,000 | 1,979,525 |
|
Columbus, Swr. VRDN, Ser. B, 0.03s, 6/1/32 | VMIG1 | 2,230,000 | 2,230,000 |
|
Erie Cnty., OH Hosp. Fac. Rev. Bonds (Firelands | | | |
Regl. Med. Ctr.) | | | |
5 5/8s, 8/15/32 | A– | 2,900,000 | 2,923,403 |
Ser. A, 5 1/4s, 8/15/46 | A– | 4,950,000 | 4,957,821 |
|
Hickory Chase, Cmnty. Auth. Infrastructure Impt. | | | |
Rev. Bonds (Hickory Chase), 7s, 12/1/38 | BB–/P | 1,695,000 | 1,055,561 |
|
Lake Cnty., Hosp. Fac. Rev. Bonds (Lake Hosp. | | | |
Syst.), Ser. C, 6s, 8/15/43 | Baa1 | 1,550,000 | 1,622,277 |
|
OH State Air Quality Dev. Auth. Rev. Bonds | | | |
(Valley Elec. Corp.), Ser. E, 5 5/8s, 10/1/19 | Baa3 | 1,450,000 | 1,620,303 |
|
OH State Higher Edl. Fac. Comm. Rev. Bonds | | | |
(Kenyon College), 5s, 7/1/44 | A1 | 4,850,000 | 5,129,409 |
|
| | | 38,241,580 |
Oklahoma (1.1%) | | | |
OK State Tpk. Auth. VRDN, Ser. E, 0.06s, 1/1/28 | VMIG1 | 11,820,000 | 11,820,000 |
|
| | | 11,820,000 |
Oregon (0.8%) | | | |
Multnomah Cnty., Hosp. Fac. Auth. Rev. Bonds | | | |
(Terwilliger Plaza), 6 1/2s, 12/1/29 | BB/P | 6,900,000 | 6,908,487 |
|
OR State Hsg. & Cmnty. Svcs. Dept. Rev. Bonds | | | |
(Single Fam. Mtge.), Ser. B, 5 3/8s, 7/1/34 | Aa2 | 2,000 | 2,027 |
|
Warm Springs Reservation, Confederated Tribes | | | |
Rev. Bonds (Pelton Round Butte Tribal), Ser. B, | | | |
6 3/8s, 11/1/33 | A3 | 1,800,000 | 1,908,522 |
|
| | | 8,819,036 |
29
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Pennsylvania (4.5%) | | | |
Allegheny Cnty., Higher Ed. Bldg. Auth. Rev. | | | |
Bonds (Robert Morris U.), Ser. A, 5 3/4s, 10/15/40 | Baa3 | $765,000 | $797,337 |
|
Allegheny Cnty., Hosp. Dev. Auth. Rev. Bonds | | | |
(Hlth. Syst.-West PA), Ser. A, 5 3/8s, 11/15/40 | B+ | 4,765,000 | 3,850,739 |
|
Allegheny Cnty., Indl. Dev. Auth. Rev. Bonds | | | |
(Env. Impt. — USX Corp.), 6 7/8s, 5/1/30 | BB | 3,400,000 | 3,671,218 |
(U.S. Steel Corp.), 6 3/4s, 11/1/24 | BB | 1,000,000 | 1,077,860 |
|
Bucks Cnty., Indl. Dev. Auth. Rev. Bonds | | | |
(US Steel Corp.), 6 3/4s, 6/1/26 | BB | 1,460,000 | 1,592,349 |
|
Bucks Cnty., Indl. Dev. Auth. Retirement Cmnty. | | | |
Rev. Bonds (Ann’s Choice, Inc.), Ser. A, | | | |
6 1/8s, 1/1/25 | BB/P | 3,840,000 | 3,852,403 |
|
Chester Cnty., Hlth. & Ed. Fac. Auth. Rev. Bonds | | | |
(Jenners Pond, Inc.) | | | |
7 5/8s, 7/1/34 (Prerefunded 7/1/12) | AAA/P | 1,700,000 | 1,785,442 |
7 1/4s, 7/1/24 (Prerefunded 7/1/12) | AAA/P | 1,725,000 | 1,809,042 |
|
Cumberland Cnty., Muni. Auth. Rev. Bonds | | | |
(Diakon Lutheran Ministries), 5s, 1/1/36 | BBB+/F | 1,790,000 | 1,717,362 |
|
Lancaster Cnty., Hosp. Auth. Rev. Bonds | | | |
(Brethren Village), Ser. A | | | |
6 1/2s, 7/1/40 | BB–/P | 3,000,000 | 3,097,560 |
6 3/8s, 7/1/30 | BB–/P | 1,375,000 | 1,429,918 |
|
Montgomery Cnty., Higher Ed. & Hlth. Auth. Rev. | | | |
Bonds (Arcadia U.), 5 1/4s, 4/1/30 | BBB+ | 1,530,000 | 1,606,500 |
|
Montgomery Cnty., Indl. Auth. Resource Recvy. | | | |
Rev. Bonds (Whitemarsh Cont. Care), | | | |
6 1/4s, 2/1/35 | B–/P | 2,400,000 | 2,205,936 |
|
PA Econ. Dev. Fin. Auth. Exempt Fac. Rev. Bonds | | | |
(Allegheny Energy Supply Co.), 7s, 7/15/39 | Baa3 | 4,000,000 | 4,542,920 |
|
PA State Higher Edl. Fac. Auth. Rev. Bonds | | | |
(Shippensburg U.), 6 1/4s, 10/1/43 | Baa3 | 1,000,000 | 1,074,150 |
(Edinboro U. Foundation), 6s, 7/1/43 | Baa3 | 1,400,000 | 1,487,206 |
(Edinboro U.), 5 7/8s, 7/1/38 | Baa3 | 1,000,000 | 1,045,770 |
(Widener U.), 5.4s, 7/15/36 | BBB+ | 1,500,000 | 1,523,970 |
|
PA State Higher Edl. Fac. Auth. Student Hsg. Rev. | | | |
Bonds (East Stroudsburg U.), 5s, 7/1/42 | Baa3 | 1,655,000 | 1,637,060 |
|
Philadelphia, Auth. for Indl. Dev. Rev. Bonds | | | |
(Master Charter School), 6s, 8/1/35 | BBB+ | 1,720,000 | 1,820,775 |
|
Philadelphia, Hosp. & Higher Ed. Fac. Auth. Rev. | | | |
Bonds (Graduate Hlth. Syst. Oblig. Group), | | | |
7 1/4s, 7/1/18 (In default) † | D/P | 5,515,765 | 552 |
|
Philadelphia, Hosp. & Higher Edl. Fac. Auth. | | | |
Hosp. Rev. Bonds (Graduate Hlth. Syst.), Ser. B, | | | |
6 1/4s, 7/1/13 (In default) † | D/P | 535,300 | 54 |
|
Pittsburgh G.O. Bonds, Ser. B, 5s, 9/1/26 ∆ | A1 | 2,000,000 | 2,250,620 |
|
Susquehanna, Area Regl. Arpt. Syst. Auth. Rev. | | | |
Bonds, Ser. A, 6 1/2s, 1/1/38 | Baa3 | 3,675,000 | 3,829,901 |
|
Washington Cnty., Indl. Dev. Auth. Hlth. Care | | | |
Fac. Rev. Bonds (First Mtge. AHF/Central), | | | |
8 1/2s, 1/1/29 | B/P | 1,141,000 | 1,141,605 |
|
| | | 48,848,249 |
30
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Puerto Rico (4.2%) | | | |
Cmnwlth. of PR, G.O. Bonds | | | |
Ser. C, 6s, 7/1/39 | Baa1 | $2,515,000 | $2,775,378 |
(Pub. Impt.), Ser. A, 5 3/4s, 7/1/41 | Baa1 | 5,000,000 | 5,507,250 |
|
Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds, | | | |
Ser. A, 6s, 7/1/44 | Baa2 | 8,500,000 | 9,188,160 |
|
Cmnwlth. of PR, Indl. Tourist Edl. Med. & Env. | | | |
Control Facs. Rev. Bonds (Cogen. Fac.-AES), | | | |
6 5/8s, 6/1/26 | Baa3 | 7,400,000 | 7,401,406 |
|
Cmnwlth. of PR, Pub. Bldg. Auth. Rev. Bonds | | | |
(Govt. Fac.), Ser. P, 6 3/4s, 7/1/36 | Baa1 | 5,000,000 | 5,773,600 |
|
Cmnwlth. of PR, Sales Tax Fin. Corp. Rev. Bonds, | | | |
Ser. A | | | |
NATL, zero %, 8/1/43 | Aa2 | 20,000,000 | 3,534,000 |
zero %, 8/1/31 | A1 | 31,000,000 | 11,309,420 |
|
| | | 45,489,214 |
South Carolina (—%) | | | |
Georgetown Cnty., Env. Impt. Rev. Bonds | | | |
(Intl. Paper Co.), Ser. A, 5.3s, 3/1/28 | BBB | 500,000 | 504,180 |
|
| | | 504,180 |
South Dakota (0.3%) | | | |
SD Edl. Enhancement Funding Corp. SD Tobacco | | | |
Rev. Bonds, Ser. B, 6 1/2s, 6/1/32 | A3 | 3,615,000 | 3,716,365 |
|
| | | 3,716,365 |
Tennessee (0.7%) | | | |
Elizabethton, Hlth. & Edl. Fac. Board Rev. Bonds | | | |
(Hosp. Ref. & Impt.), Ser. B, 8s, 7/1/33 | | | |
(Prerefunded 7/1/12) | BBB+/F | 4,000,000 | 4,221,520 |
|
Johnson City, Hlth. & Edl. Fac. Board Hosp. Rev. | | | |
Bonds (First Mtge. Mountain States Hlth.), | | | |
Ser. A, 7 1/2s, 7/1/25 (Prerefunded 7/1/12) | Baa1 | 3,000,000 | 3,160,020 |
|
| | | 7,381,540 |
Texas (9.7%) | | | |
Abilene, Hlth. Fac. Dev. Corp. Rev. Bonds (Sears | | | |
Methodist Retirement), Ser. A | | | |
7s, 11/15/33 | B+/P | 2,500,000 | 2,217,950 |
5.9s, 11/15/25 | B+/P | 6,122,000 | 5,153,867 |
|
Alliance, Arpt. Auth. Rev. Bonds (American | | | |
Airlines, Inc.), 5 1/4s, 12/1/29 (In default) † | D/P | 2,520,000 | 656,258 |
|
Bexar Cnty., Hsg. Fin. Auth. Corp. Rev. Bonds | | | |
(American Opty-Waterford), Ser. A1, 7s, 12/1/36 | B1 | 4,500,000 | 4,390,875 |
|
Brazoria Cnty., Brazos River Harbor Naval Dist. | | | |
Env. FRB (Dow Chemical Co.), Ser. A-4, | | | |
5.95s, 5/15/33 | BBB | 5,150,000 | 5,532,388 |
|
Brazos River, Auth. Poll. Control Rev. Bonds (TXU | | | |
Energy Co., LLC) | | | |
Ser. D-1, 8 1/4s, 5/1/33 | Ca | 3,000,000 | 631,650 |
5s, 3/1/41 | Ca | 1,000,000 | 150,050 |
|
Brazos, Harbor Indl. Dev. Corp. Env. Fac. | | | |
Mandatory Put Bonds (5/1/18) (Dow Chemical), | | | |
5.9s, 5/1/38 | BBB | 1,850,000 | 1,984,292 |
|
Crawford Ed. Fac. Rev. Bonds (U. St. Thomas), | | | |
5 3/8s, 10/1/27 | BBB+ | 3,985,000 | 3,997,911 |
|
31
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Texas cont. | | | |
Dallas-Fort Worth, Intl. Arpt. Fac. Impt. Rev. | | | |
Bonds (American Airlines, Inc.), 5 1/2s, | | | |
11/1/30 (In default) † | D/P | $1,500,000 | $390,600 |
|
Houston, Arpt. Syst. Rev. Bonds | | | |
(Continental Airlines, Inc. Term. Project), | | | |
6 1/2s, 7/15/30 | B3 | 2,000,000 | 2,039,480 |
(Continental Airlines, Inc.), Ser. C, | | | |
5.7s, 7/15/29 | B3 | 4,985,000 | 4,726,378 |
(Continental Airlines, Inc.), Ser. E, | | | |
6 3/4s, 7/1/29 | B3 | 2,505,000 | 2,517,826 |
(Continental Airlines, Inc.), Ser. E, 7s, 7/1/29 | B3 | 500,000 | 502,560 |
(Special Fac. — Continental Airlines, Inc.), | | | |
Ser. E, 6 3/4s, 7/1/21 | B3 | 8,400,000 | 8,457,960 |
|
La Vernia, Higher Ed. Fin. Corp. Rev. Bonds | | | |
(Kipp, Inc.), Ser. A, 6 3/8s, 8/15/44 | BBB | 2,450,000 | 2,681,770 |
(Kipp, Inc.), Ser. A, 6 1/4s, 8/15/39 | BBB | 2,375,000 | 2,593,643 |
|
Love Field, Arpt. Modernization Corp. Special | | | |
Fac. Rev. Bonds (Southwest Airlines Co.), | | | |
5 1/4s, 11/1/40 | Baa3 | 8,000,000 | 8,139,600 |
|
Matagorda Cnty., Poll. Control Rev. Bonds | | | |
(Cent Pwr. & Light Co.), Ser. A, 6.3s, 11/1/29 | Baa2 | 2,400,000 | 2,735,136 |
(Dist. No. 1), Ser. A, AMBAC, 4.4s, 5/1/30 | Baa2 | 3,000,000 | 2,959,080 |
|
North TX, Thruway Auth. Rev. Bonds | | | |
(Toll 2nd Tier), Ser. F, 5 3/4s, 1/1/38 | A3 | 3,370,000 | 3,595,352 |
Ser. B, zero %, 9/1/37 | AA | 3,000,000 | 706,620 |
|
North TX, Thruway Auth. stepped-coupon Rev. | | | |
Bonds, zero %, (6.5s, 1/1/15), 1/1/43 †† | A2 | 5,300,000 | 5,326,924 |
|
Tarrant Cnty., Cultural Ed. Fac. Fin. Corp. VRDN | | | |
(TX Hlth. Resources), Ser. C, 0.08s, 11/15/33 | VMIG1 | 2,100,000 | 2,100,000 |
|
Tarrant Cnty., Cultural Ed. Fac. Fin. Corp. | | | |
Retirement Fac. Rev. Bonds | | | |
(Sr. Living Ctr.), Ser. A, 8 1/4s, 11/15/44 | B+/P | 8,000,000 | 8,516,960 |
(Sr. Living Ctr.), Ser. A, 8 1/4s, 11/15/39 | B+/P | 1,000,000 | 1,069,540 |
(Air Force Village), 6 3/8s, 11/15/44 | BBB/F | 5,825,000 | 6,091,086 |
|
TX Muni. Gas Acquisition & Supply Corp. I Rev. | | | |
Bonds, Ser. A, 5 1/4s, 12/15/24 | A– | 4,500,000 | 4,781,430 |
|
TX Private Activity Surface Trans. Corp. Rev. Bonds | | | |
(LBJ Infrastructure), 7s, 6/30/40 | Baa3 | 4,500,000 | 5,081,715 |
(NTE Mobility), 6 7/8s, 12/31/39 | BBB–/F | 3,350,000 | 3,739,840 |
|
Uptown, Dev. Auth. Tax Increment Contract Tax | | | |
Alloc. (Infrastructure Impt. Fac.), 5 1/2s, 9/1/29 | BBB | 1,000,000 | 1,043,990 |
|
| | | 104,512,731 |
Utah (1.5%) | | | |
Murray City, Hosp. Rev. VRDN (IHC Hlth. | | | |
Svcs., Inc.), Ser. B, 0.06s, 5/15/37 | VMIG1 | 15,970,000 | 15,970,000 |
|
| | | 15,970,000 |
Virginia (2.4%) | | | |
Albemarle Cnty., Indl. Dev. Auth. Res. Care Fac. | | | |
Rev. Bonds (Westminster-Canterbury), 5s, 1/1/31 | B+/P | 1,100,000 | 1,102,321 |
|
Chesterfield Cnty., Hlth. Ctr. Cmnty. Res. Care | | | |
Fac. Rev. Bonds (Lucy Corr Village), Ser. A, | | | |
6 1/4s, 12/1/38 | BB–/P | 2,000,000 | 1,981,800 |
|
32
| | | |
MUNICIPAL BONDS AND NOTES (98.3%)* cont. | Rating** | Principal amount | Value |
|
Virginia cont. | | | |
Henrico Cnty., Econ. Dev. Auth. Res. Care Fac. | | | |
Rev. Bonds (United Methodist), Ser. A | | | |
6.7s, 6/1/27 | BB+/P | $3,860,000 | $3,881,076 |
6 1/2s, 6/1/22 | BB+/P | 2,825,000 | 2,842,685 |
|
James Cnty., Indl. Dev. Auth. Rev. Bonds | | | |
(Williamsburg), Ser. A, 6 1/8s, 3/1/32 | BB–/P | 2,500,000 | 2,511,325 |
|
Lexington, Indl. Dev. Auth. Res. Care Fac. Rev. | | | |
Bonds (Kendal at Lexington), Ser. A, 5 1/2s, 1/1/37 | B+/P | 1,460,000 | 1,350,208 |
|
Peninsula Ports Auth. Rev. Bonds (VA Baptist | | | |
Homes), Ser. A, 7 3/8s, 12/1/32 (Prerefunded | | | |
12/1/13) | AA+ | 4,000,000 | 4,505,960 |
|
Washington Cnty., Indl. Dev. Auth. Hosp. Fac. | | | |
Rev. Bonds (Mountain States Hlth. Alliance), | | | |
Ser. C, 7 3/4s, 7/1/38 | Baa1 | 5,100,000 | 5,972,457 |
|
Winchester, Indl. Dev. Auth. Res. Care Fac. | | | |
Rev. Bonds (Westminster-Canterbury), Ser. A, | | | |
5.3s, 1/1/35 | BBB+/F | 2,000,000 | 2,008,980 |
|
| | | 26,156,812 |
Washington (1.3%) | | | |
Tobacco Settlement Auth. of WA Rev. Bonds | | | |
6 5/8s, 6/1/32 | Baa1 | 2,065,000 | 2,149,789 |
6 1/2s, 6/1/26 | A3 | 4,470,000 | 4,670,748 |
|
WA State Higher Ed. Fac. Auth. Rev. Bonds | | | |
(Whitworth U.), 5 5/8s, 10/1/40 | Baa1 | 1,600,000 | 1,646,464 |
|
WA State Hlth. Care Fac. Auth. Rev. Bonds | | | |
(WA Hlth. Svcs.), 7s, 7/1/39 | Baa2 | 3,000,000 | 3,244,170 |
(Kadlec Med. Ctr.), 5 1/2s, 12/1/39 | Baa2 | 2,000,000 | 2,057,580 |
|
| | | 13,768,751 |
West Virginia (0.7%) | | | |
Pleasants Cnty., Poll. Control Rev. Bonds | | | |
(Allegheny), Ser. F, 5 1/4s, 10/15/37 | BBB | 500,000 | 520,165 |
|
Princeton, Hosp. Rev. Bonds (Cmnty. Hosp. | | | |
Assn., Inc.), 6.1s, 5/1/29 | BBB– | 4,525,000 | 4,524,548 |
|
WV State Hosp. Fin. Auth. Rev. Bonds (Thomas | | | |
Hlth. Syst.), 6 3/4s, 10/1/43 | B/P | 2,330,000 | 2,359,568 |
|
| | | 7,404,281 |
Wisconsin (0.8%) | | | |
Badger, Tobacco Settlement Asset | | | |
Securitization Corp. Rev. Bonds, 7s, 6/1/28 | | | |
(Prerefunded 6/1/12) | Aaa | 2,280,000 | 2,330,776 |
|
WI State Hlth. & Edl. Fac. Auth. Rev. Bonds | | | |
(St. Johns Cmntys. Inc.), Ser. A, 7 5/8s, 9/15/39 | BB/P | 1,350,000 | 1,479,830 |
(St. Johns Cmntys. Inc.), Ser. A, 7 1/4s, 9/15/29 | BB/P | 1,000,000 | 1,103,700 |
(Prohealth Care, Inc.), 6 5/8s, 2/15/39 | A1 | 3,000,000 | 3,433,110 |
|
| | | 8,347,416 |
| | | |
Total municipal bonds and notes (cost $1,021,590,045) | | | $1,061,803,683 |
33
| | | | |
PREFERRED STOCKS (0.9%)* | | | Shares | Value |
|
MuniMae Tax Exempt Bond Subsidiary, LLC 144A Ser. A, 7.50% | | | |
cum. pfd. | | | 5,151,996 | $4,902,794 |
|
MuniMae Tax Exempt Bond Subsidiary, LLC 144A Ser. B, 7 3/4s | | | |
cum. pfd. | | | 6,000,000 | 5,161,380 |
|
Total preferred stocks (cost $11,151,996) | | | | $10,064,174 |
|
|
COMMON STOCKS (—%)* | | | Shares | Value |
|
Tembec, Inc. (Canada) † | | | 10,751 | $40,208 |
|
Total common stocks (cost $8,077,612) | | | | $40,208 |
|
|
WARRANTS (—%)* † | Expiration | Strike | | |
| date | price | Warrants | Value |
|
Tembec, Inc. (Canada) | 3/3/12 | CAD 0.13 | 23,892 | $119 |
|
Total warrants (cost $979,144) | | | | $119 |
|
|
TOTAL INVESTMENTS | | | | |
|
Total investments (cost $1,041,798,797) | | | | $1,071,908,184 |
| |
Key to holding’s currency abbreviations |
CAD | Canadian Dollar |
Notes to the fund’s portfolio
Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from August 1, 2011 through January 31, 2012 (the reporting period).
* Percentages indicated are based on net assets of $1,080,088,051.
** The Moody’s, Standard & Poor’s or Fitch ratings indicated are believed to be the most recent ratings available at the close of the reporting period 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 the close of the reporting period. Securities rated by Putnam are indicated by “/P.” Securities rated by Fitch are indicated by “/F.” The rating of an insured security represents what is believed to be the most recent rating of the insurer’s claims-paying ability available at the close of the reporting period and does not reflect any subsequent changes. Security ratings are defined in the Statement of Additional Information.
† Non-income-producing security.
†† The interest rate and date shown parenthetically represent the new interest rate to be paid and the date the fund will begin accruing interest at this rate.
∆ Forward commitment, in part or in entirety (Note 1).
144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
The rates shown on Mandatory Put Bonds are the current interest rates at the close of the reporting period.
The dates shown parenthetically on Mandatory Put Bonds represent the next mandatory put dates.
The dates shown parenthetically on prerefunded bonds represent the next prerefunding dates.
The dates shown on debt obligations are the original maturity dates.
The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):
| |
Health care | 36.3% |
Transportation | 10.7 |
34
ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| | | | |
| | | | Valuation inputs | |
|
Investments in securities: | | Level 1 | Level 2 | Level 3 |
|
Common stocks: | | | | |
|
Basic materials | | $40,208 | $— | $— |
|
Total common stocks | | 40,208 | — | — |
| | | | |
Municipal bonds and notes | | $— | $1,061,803,683 | $— |
|
Preferred stocks | | — | 10,064,174 | — |
|
Warrants | | 119 | — | — |
|
Totals by level | | $40,327 | $1,071,867,857 | $— |
The accompanying notes are an integral part of these financial statements.
35
Statement of assets and liabilities 1/31/12 (Unaudited)
| |
ASSETS | |
|
Investment in securities, at value (Note 1): | |
Unaffiliated issuers (identified cost $1,041,798,797) | $1,071,908,184 |
|
Cash | 1,398,002 |
|
Interest and other receivables | 12,932,638 |
|
Receivable for shares of the fund sold | 2,451,141 |
|
Receivable for investments sold | 6,362,316 |
|
Receivable for sales of delayed delivery securities (Notes 1) | 30,776 |
|
Total assets | 1,095,083,057 |
|
LIABILITIES | |
|
Distributions payable to shareholders | 1,298,341 |
|
Payable for investments purchased | 1,015,540 |
|
Payable for purchases of delayed delivery securities (Note 1) | 10,020,879 |
|
Payable for shares of the fund repurchased | 1,576,819 |
|
Payable for compensation of Manager (Note 2) | 432,387 |
|
Payable for investor servicing fees (Note 2) | 42,939 |
|
Payable for custodian fees (Note 2) | 6,702 |
|
Payable for Trustee compensation and expenses (Note 2) | 297,119 |
|
Payable for administrative services (Note 2) | 2,028 |
|
Payable for distribution fees (Note 2) | 232,157 |
|
Other accrued expenses | 70,095 |
|
Total liabilities | 14,995,006 |
| |
Net assets | $1,080,088,051 |
|
|
REPRESENTED BY | |
|
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $1,260,183,875 |
|
Undistributed net investment income (Note 1) | 3,396,386 |
|
Accumulated net realized loss on investments (Note 1) | (213,601,597) |
|
Net unrealized appreciation of investments | 30,109,387 |
|
Total — Representing net assets applicable to capital shares outstanding | $1,080,088,051 |
(Continued on next page)
36
Statement of assets and liabilities (Continued)
| |
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
Net asset value and redemption price per class A share | |
($918,964,858 divided by 75,398,381 shares) | $12.19 |
|
Offering price per class A share (100/96.00 of $12.19)* | $12.70 |
|
Net asset value and offering price per class B share ($11,961,244 divided by 979,864 shares)** | $12.21 |
|
Net asset value and offering price per class C share ($50,137,184 divided by 4,106,903 shares)** | $12.21 |
|
Net asset value and redemption price per class M share ($8,992,482 divided by 737,755 shares) | $12.19 |
|
Offering price per class M share (100/96.75 of $12.19)† | $12.60 |
|
Net asset value, offering price and redemption price per class Y share | |
($90,032,283 divided by 7,368,802 shares) | $12.22 |
|
* On single retail sales of less than $100,000. On sales of $100,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
† On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
37
Statement of operations Six months ended 1/31/12 (Unaudited)
| |
INTEREST INCOME | $30,680,854 |
|
EXPENSES | |
|
Compensation of Manager (Note 2) | $2,440,556 |
|
Investor servicing fees (Note 2) | 257,215 |
|
Custodian fees (Note 2) | 7,167 |
|
Trustee compensation and expenses (Note 2) | 41,227 |
|
Administrative services (Note 2) | 14,631 |
|
Distribution fees — Class A (Note 2) | 1,025,974 |
|
Distribution fees — Class B (Note 2) | 49,769 |
|
Distribution fees — Class C (Note 2) | 222,499 |
|
Distribution fees — Class M (Note 2) | 22,106 |
|
Other | 143,878 |
|
Total expenses | 4,225,022 |
| |
Expense reduction (Note 2) | (1,389) |
|
Net expenses | 4,223,633 |
| |
Net investment income | 26,457,221 |
|
|
Net realized loss on investments (Notes 1 and 3) | (3,556,662) |
|
Net unrealized appreciation of investments during the period | 57,408,617 |
|
Net gain on investments | 53,851,955 |
| |
Net increase in net assets resulting from operations | $80,309,176 |
|
The accompanying notes are an integral part of these financial statements.
38
Statement of changes in net assets
| | |
INCREASE (DECREASE) IN NET ASSETS | Six months ended 1/31/12* | Year ended 7/31/11 |
|
Operations: | | |
Net investment income | $26,457,221 | $55,753,334 |
|
Net realized loss on investments | (3,556,662) | (16,849,206) |
|
Net unrealized appreciation (depreciation) of investments | 57,408,617 | (6,507,080) |
|
Net increase in net assets resulting from operations | 80,309,176 | 32,397,048 |
|
Distributions to shareholders (Note 1): | | |
From ordinary income | | |
Taxable net investment income | | |
|
Class A | (525,053) | (30,601) |
|
Class B | (6,866) | (571) |
|
Class C | (28,040) | (1,446) |
|
Class M | (5,180) | (317) |
|
Class Y | (36,700) | (1,474) |
|
From tax-exempt net investment income | | |
Class A | (22,940,575) | (47,968,529) |
|
Class B | (268,231) | (757,371) |
|
Class C | (981,933) | (1,892,802) |
|
Class M | (218,461) | (472,058) |
|
Class Y | (1,595,513) | (2,549,190) |
|
Increase in capital from settlement payments (Note 7) | 2,171 | 204,004 |
|
Redemption fees (Note 1) | 356 | 300,889 |
|
Increase (decrease) from capital share | | |
transactions (Note 4) | 43,958,385 | (11,515,688) |
|
Total increase (decrease) in net assets | 97,663,536 | (32,288,106) |
|
NET ASSETS | | |
|
Beginning of period | 982,424,515 | 1,014,712,621 |
|
End of period (including undistributed net investment | | |
income of $3,396,386 and $3,545,717, respectively) | $1,080,088,051 | $982,424,515 |
|
* Unaudited
The accompanying notes are an integral part of these financial statements.
39
Financial highlights (For a common share outstanding throughout the period)
| | | | | | | | | | | | | | |
INVESTMENT OPERATIONS: | | | | LESS DISTRIBUTIONS: | | | | | RATIOS AND SUPPLEMENTAL DATA: | |
|
| | | | | | | | | | | | Ratio | Ratio | |
| | | Net realized | | | | | | | | | of expenses | of net investment | |
| Net asset value, | | and unrealized | Total from | From | | | | | Total return | Net assets, | to average | income (loss) | Portfolio |
| beginning | Net investment | gain (loss) | investment | net investment | Total | Redemption | Non-recurring | Net asset value, | at net asset | end of period | net assets | to average | turnover |
Period ended | of period | income (loss) | on investments | operations | income | distributions | fees | reimbursements | end of period | value (%) a | (in thousands) | (%) b | net assets (%) | (%) |
|
Class A | | | | | | | | | | | | | | |
January 31, 2012 ** | $11.56 | .31 | .64 | .95 | (.32) | (.32) | — c | — d | $12.19 | 8.29 * | $918,965 | .41 * | 2.67 * | 15 * |
July 31, 2011 | 11.77 | .65 | (.23) | .42 | (.63) | (.63) | — c | — e | 11.56 | 3.79 | 862,832 | .80 | 5.74 | 14 |
July 31, 2010 | 10.39 | .65 | 1.36 | 2.01 | (.63) | (.63) | — c | — f | 11.77 | 19.64 | 908,190 | .83 | 5.71 | 23 |
July 31, 2009 | 11.93 | .62 | (1.52) | (.90) | (.64) | (.64) | — c | — | 10.39 | (7.15) | 806,921 | .83 g | 6.31 g | 16 |
July 31, 2008 | 12.88 | .64 | (.96) | (.32) | (.63) | (.63) | — c | — | 11.93 | (2.57) | 1,049,449 | .82 g | 5.14 g | 46 |
July 31, 2007 | 12.95 | .62 | (.07) | .55 | (.62) | (.62) | — | — | 12.88 | 4.26 | 1,216,301 | .82 g | 4.72 g | 10 |
|
Class B | | | | | | | | | | | | | | |
January 31, 2012 ** | $11.58 | .28 | .63 | .91 | (.28) | (.28) | — c | — d | $12.21 | 7.97 * | $11,961 | .72 * | 2.36 * | 15 * |
July 31, 2011 | 11.79 | .58 | (.23) | .35 | (.56) | (.56) | — c | — e | 11.58 | 3.20 | 11,987 | 1.42 | 5.09 | 14 |
July 31, 2010 | 10.40 | .58 | 1.37 | 1.95 | (.56) | (.56) | — c | — f | 11.79 | 18.99 | 21,822 | 1.45 | 5.12 | 23 |
July 31, 2009 | 11.94 | .56 | (1.52) | (.96) | (.58) | (.58) | — c | — | 10.40 | (7.76) | 32,843 | 1.46 g | 5.65 g | 16 |
July 31, 2008 | 12.90 | .57 | (.98) | (.41) | (.55) | (.55) | — c | — | 11.94 | (3.25) | 64,075 | 1.45 g | 4.49 g | 46 |
July 31, 2007 | 12.97 | .54 | (.07) | .47 | (.54) | (.54) | — | — | 12.90 | 3.67 | 103,765 | 1.45 g | 4.09 g | 10 |
|
Class C | | | | | | | | | | | | | | |
January 31, 2012 ** | $11.58 | .27 | .63 | .90 | (.27) | (.27) | — c | — d | $12.21 | 7.88 * | $50,137 | .79 * | 2.28 * | 15 * |
July 31, 2011 | 11.79 | .57 | (.23) | .34 | (.55) | (.55) | — c | — e | 11.58 | 2.99 | 40,797 | 1.57 | 4.98 | 14 |
July 31, 2010 | 10.40 | .56 | 1.37 | 1.93 | (.54) | (.54) | — c | — f | 11.79 | 18.83 | 36,864 | 1.60 | 4.92 | 23 |
July 31, 2009 | 11.93 | .54 | (1.51) | (.97) | (.56) | (.56) | — c | — | 10.40 | (7.78) | 21,010 | 1.61 g | 5.56 g | 16 |
July 31, 2008 | 12.88 | .55 | (.97) | (.42) | (.53) | (.53) | — c | — | 11.93 | (3.27) | 19,022 | 1.60 g | 4.36 g | 46 |
July 31, 2007 | 12.96 | .52 | (.08) | .44 | (.52) | (.52) | — | — | 12.88 | 3.35 | 19,265 | 1.60 g | 3.95 g | 10 |
|
Class M | | | | | | | | | | | | | | |
January 31, 2012 ** | $11.57 | .30 | .62 | .92 | (.30) | (.30) | — c | — d | $12.19 | 8.09 * | $8,992 | .54 * | 2.53 * | 15 * |
July 31, 2011 | 11.77 | .62 | (.22) | .40 | (.60) | (.60) | — c | — e | 11.57 | 3.61 | 8,544 | 1.07 | 5.47 | 14 |
July 31, 2010 | 10.39 | .62 | 1.36 | 1.98 | (.60) | (.60) | — c | — f | 11.77 | 19.32 | 9,549 | 1.10 | 5.44 | 23 |
July 31, 2009 | 11.92 | .59 | (1.51) | (.92) | (.61) | (.61) | — c | — | 10.39 | (7.35) | 7,781 | 1.11 g | 6.02 g | 16 |
July 31, 2008 | 12.88 | .61 | (.98) | (.37) | (.59) | (.59) | — c | — | 11.92 | (2.89) | 10,204 | 1.10 g | 4.85 g | 46 |
July 31, 2007 | 12.95 | .58 | (.07) | .51 | (.58) | (.58) | — | — | 12.88 | 4.01 | 10,816 | 1.10 g | 4.44 g | 10 |
|
Class Y | | | | | | | | | | | | | | |
January 31, 2012 ** | $11.59 | .33 | .63 | .96 | (.33) | (.33) | — c | — d | $12.22 | 8.42 * | $90,032 | .29 * | 2.78 * | 15 * |
July 31, 2011 | 11.79 | .68 | (.22) | .46 | (.66) | (.66) | — c | — e | 11.59 | 4.17 | 58,265 | .57 | 5.98 | 14 |
July 31, 2010 | 10.40 | .68 | 1.36 | 2.04 | (.65) | (.65) | — c | — f | 11.79 | 20.01 | 38,287 | .60 | 5.85 | 23 |
July 31, 2009 | 11.93 | .64 | (1.50) | (.86) | (.67) | (.67) | — c | — | 10.40 | (6.88) | 4,340 | .61 g | 6.57 g | 16 |
July 31, 2008 † | 12.49 | .40 | (.57) | (.17) | (.39) | (.39) | — c | — | 11.93 | (1.41) * | 167 | .35 *g | 3.21 *g | 46 |
|
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
Financial highlights (Continued)
* Not annualized.
** Unaudited.
† For the period January 2, 2008 (commencement of operations) to July 31, 2008.
a Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
b Includes amounts paid through expense offset arrangements (Note 2).
c Amount represents less than $0.01 per share.
d Reflects a non-recurring reimbursement pursuant to a settlement between the Securities and Exchange Commission (the SEC) and Southwest Securities, Inc., which amounted to less than $0.01 per share outstanding as of August 22, 2011.
e Reflects a non-recurring reimbursement related to restitution amounts in connection with a distribution plan approved by the SEC which amounted to less than $0.01 per share outstanding on July 21, 2011. Also reflects a non-recurring reimbursement related to short-term trading related lawsuits, which amounted to less than $0.01 per share outstanding on May 11, 2011 (Note 7).
f Reflects a non-recurring reimbursement pursuant to a settlement between the SEC and Prudential Securities, Inc., which amounted to less than $0.01 per share outstanding as of March 30, 2010.
g Reflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts (Note 2):
| |
| Percentage of |
| average net assets |
|
July 31, 2009 | 0.02% |
|
July 31, 2008 | 0.01 |
|
July 31, 2007 | <0.01 |
|
The accompanying notes are an integral part of these financial statements.
42
Notes to financial statements 1/31/12 (Unaudited)
Note 1: Significant accounting policies
Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission and references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC.
Putnam Tax-Free High Yield Fund (the fund) is a diversified series of Putnam Tax-Free Income Trust (the trust), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The investment objective of the fund is to seek high current income exempt from federal income tax by investing in a combination of lower rated and investment-grade securities. The fund may invest in higher yielding, lower rated bonds that may have a higher rate of default.
The fund offers class A, class B, class C, class M and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 4.00% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. The expenses for class A, class B, class C, and class M shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, and class M shares, but do not bear a distribution fee. Class Y shares are not available to all investors.
A 1.00% redemption fee may apply on any shares that are redeemed (either by selling or exchanging into another fund) within 30 days of purchase. The redemption fee is accounted for as an addition to paid-in-capital.
Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.
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 accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. Unless otherwise noted, the “reporting period” represents the period from August 1, 2011 through January 31, 2012.
Security valuation Tax-exempt bonds and notes are generally valued on the basis of valuations provided by an independent pricing service approved by the Trustees. Such services use information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. These securities will generally be categorized as Level 2.
Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
43
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income is recorded on the accrual basis. All premiums/discounts are amortized/accreted on a yield-to-maturity basis. The premium in excess of the call price, if any, is amortized to the call date; thereafter, any remaining premium is amortized to maturity.
Securities purchased or sold on a delayed delivery basis may be settled a month or more after the trade date; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.
Line of credit The fund participates, along with other Putnam funds, in a $325 million unsecured committed line of credit and a $185 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the Federal Funds rate plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.13% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.
Federal taxes It is the policy of the fund to distribute all of its income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the 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 Code. The fund is subject to the provisions of Accounting Standards Codification ASC 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. 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. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
At July 31, 2011, the fund had a capital loss carryover of $194,867,361 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:
| | | |
Loss carryover |
Short-term | Long-term | Total | Expiration |
|
$87,799,907 | $— | $87,799,907 | July 31, 2012 |
|
36,670,752 | — | 36,670,752 | July 31, 2013 |
|
4,270,473 | — | 4,270,473 | July 31, 2016 |
|
17,411,277 | — | 17,411,277 | July 31, 2017 |
|
33,971,635 | — | 33,971,635 | July 31, 2018 |
|
14,743,317 | — | 14,743,317 | July 31, 2019 |
|
Under the recently enacted Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
44
Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer $17,014,757 of losses recognized during the period from November 1, 2010 to its fiscal year ending July 31, 2011.
The aggregate identified cost on a tax basis is $1,041,554,251, resulting in gross unrealized appreciation and depreciation of $80,044,243 and $49,690,310, respectively, or net unrealized appreciation of $30,353,933.
Distributions to shareholders Income dividends are recorded daily by the fund and are paid monthly. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. 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. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year. 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.
Expenses of the Trust Expenses directly charged or attributable to any fund will be paid from the assets of that fund. Generally, expenses of the Trust will be allocated among and charged to the assets of each fund on a basis that the Trustees deem fair and equitable, which may be based on the relative assets of each fund or the nature of the services performed and relative applicability to each fund.
Note 2: Management fee, administrative services and other transactions
The fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:
| |
0.630% | of the first $5 billion, |
0.580% | of the next $5 billion, |
0.530% | of the next $10 billion, |
0.480% | of the next $10 billion, |
0.430% | of the next $50 billion, |
0.410% | of the next $50 billion, |
0.400% | of the next $100 billion and |
0.395% | of any excess thereafter. |
Putnam Management has contractually agreed, through June 30, 2012, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.
Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. Putnam Management pays a quarterly sub-management fee to PIL for its services at an annual rate of 0.40% of the average net assets of the portion of the fund managed by PIL.
The fund reimburses Putnam Management an allocated amount 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 State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing based on the fund’s retail asset level, the number of shareholder accounts in the fund and the level of defined contribution plan assets in the fund. Investor servicing fees will not exceed an annual rate of 0.375% of the fund’s average net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations.
45
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $1,389 under the expense offset arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $775, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral 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 invested in certain Putnam funds until distribution in accordance with the Deferral 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 a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the Plans) with respect to its class A, class B, class C and class M shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, a wholly-owned subsidiary of Putnam Investments, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C and class M shares, respectively. The Trustees have approved payment by the fund at the annual rate of 0.85%, 1.00% and 0.50% of the average net assets for class B, class C and class M shares, respectively. For class A shares, the annual payment rate will equal the weighted average of (i) 0.20% on the net assets of the fund attributable to class A shares purchased and paid for prior to March 21, 2005 and (ii) 0.25% on all other net assets of the fund attributable to class A shares.
For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $41,408 and $707 from the sale of class A and class M shares, respectively, and received $6,252 and $739 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $11 on class A redemptions.
Note 3: Purchases and sales of securities
During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $184,667,677 and $146,410,972, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.
Note 4: Capital shares
At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| | | | |
| Six months ended 1/31/12 | Year ended 7/31/11 |
|
Class A | Shares | Amount | Shares | Amount |
|
Shares sold | 5,092,026 | $60,386,759 | 12,816,839 | $149,595,440 |
|
Shares issued in connection with | | | | |
reinvestment of distributions | 1,506,931 | 17,756,580 | 2,939,350 | 33,679,745 |
|
| 6,598,957 | 78,143,339 | 15,756,189 | 183,275,185 |
|
Shares repurchased | (5,808,588) | (68,568,105) | (18,305,486) | (210,072,411) |
|
Net increase (decrease) | 790,369 | $9,575,234 | (2,549,297) | $(26,797,226) |
|
46
| | | | |
| Six months ended 1/31/12 | Year ended 7/31/11 |
|
Class B | Shares | Amount | Shares | Amount |
|
Shares sold | 134,997 | $1,592,246 | 205,258 | $2,383,505 |
|
Shares issued in connection with | | | | |
reinvestment of distributions | 16,312 | 192,466 | 41,869 | 481,863 |
|
| 151,309 | 1,784,712 | 247,127 | 2,865,368 |
|
Shares repurchased | (206,339) | (2,424,295) | (1,063,411) | (12,269,968) |
|
Net decrease | (55,030) | $(639,583) | (816,284) | $(9,404,600) |
|
|
| Six months ended 1/31/12 | Year ended 7/31/11 |
|
Class C | Shares | Amount | Shares | Amount |
|
Shares sold | 809,471 | $9,552,274 | 1,233,241 | $14,311,369 |
|
Shares issued in connection with | | | | |
reinvestment of distributions | 44,286 | 523,095 | 79,472 | 911,535 |
|
| 853,757 | 10,075,369 | 1,312,713 | 15,222,904 |
|
Shares repurchased | (269,079) | (3,173,330) | (918,178) | (10,392,635) |
|
Net increase | 584,678 | $6,902,039 | 394,535 | $4,830,269 |
|
|
| Six months ended 1/31/12 | Year ended 7/31/11 |
|
Class M | Shares | Amount | Shares | Amount |
|
Shares sold | 33,556 | $395,673 | 27,463 | $317,532 |
|
Shares issued in connection with | | | | |
reinvestment of distributions | 15,961 | 188,026 | 33,323 | 381,955 |
|
| 49,517 | 583,699 | 60,786 | 699,487 |
|
Shares repurchased | (50,523) | (594,684) | (133,234) | (1,515,158) |
|
Net decrease | (1,006) | $(10,985) | (72,448) | $(815,671) |
|
|
| Six months ended 1/31/12 | Year ended 7/31/11 |
|
Class Y | Shares | Amount | Shares | Amount |
|
Shares sold | 3,598,299 | $42,784,657 | 3,019,572 | $34,695,803 |
|
Shares issued in connection with | | | | |
reinvestment of distributions | 23,061 | 272,796 | 37,836 | 434,925 |
|
| 3,621,360 | 43,057,453 | 3,057,408 | 35,130,728 |
|
Shares repurchased | (1,279,682) | (14,925,773) | (1,276,951) | (14,459,188) |
|
Net increase | 2,341,678 | $28,131,680 | 1,780,457 | $20,671,540 |
|
Note 5: Summary of derivative activity
The following is a summary of the market values of derivative instruments as of the close of the reporting period:
Market values of derivative instruments as of the close of the reporting period
| | | | |
| Asset derivatives | Liability derivatives |
|
Derivatives not | | | | |
accounted for as | Statement of | | Statement of | |
hedging instruments | assets and | | assets and | |
under ASC 815 | liabilities location | Market value | liabilities location | Market value |
|
Equity contracts | Investments | $119 | Payables | $— |
|
Total | | $119 | | $— |
|
47
The following is a summary of unrealized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1) (there were no realized gains or losses on derivative instruments):
Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) on investments
| | |
Derivatives not accounted for as hedging | | |
instruments under ASC 815 | Warrants* | Total |
|
Equity contracts | $(2,382) | $(2,382) |
|
Total | $(2,382) | $(2,382) |
|
* For the reporting period, the transaction volume for warrants was minimal.
Note 6: Market and credit risk
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default.
Note 7: Regulatory matters and litigation
In late 2003 and 2004, Putnam Management settled charges brought by the SEC and the Massachusetts Securities Division in connection with excessive short-term trading in Putnam funds. In July 2011, the fund recorded a receivable of $199,294 related to restitution amounts in connection with a distribution plan approved by the SEC. This amount, which was received by the fund in December 2011, is reported as part of Increase in capital from settlement payments on the Statement of changes in net assets. These allegations and related matters have served as the general basis for certain lawsuits, including purported class action lawsuits against Putnam Management and, in a limited number of cases, some Putnam funds. In May 2011, the fund received a payment of $4,710 related to settlement of those lawsuits. This amount is reported as a part of Increase in capital from settlement payments on the Statement of changes in net assets. Putnam Management has agreed to bear any costs incurred by the Putnam funds as a result of these matters.
Note 8: New accounting pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011–04 “Fair Value Measurements and Disclosures (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. ASU 2011–04 amends FASB Topic 820 “Fair Value Measurement” and seeks to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. ASU 2011–04 is effective for fiscal years and interim periods beginning after December 15, 2011. Putnam Management is currently evaluating the application of ASU 2011–04 and its impact, if any, on the fund’s financial statements.
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Fund information
Founded over 70 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.
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Investment Manager | Elizabeth T. Kennan | Mark C. Trenchard |
Putnam Investment | Kenneth R. Leibler | Vice President and |
Management, LLC | Robert E. Patterson | BSA Compliance Officer |
One Post Office Square | George Putnam, III | |
Boston, MA 02109 | Robert L. Reynolds | Robert T. Burns |
| W. Thomas Stephens | Vice President and |
Investment Sub-Manager | | Chief Legal Officer |
Putnam Investments Limited | Officers | |
57–59 St James’s Street | Robert L. Reynolds | James P. Pappas |
London, England SW1A 1LD | President | Vice President |
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Marketing Services | Jonathan S. Horwitz | Judith Cohen |
Putnam Retail Management | Executive Vice President, | Vice President, Clerk and |
One Post Office Square | Principal Executive | Assistant Treasurer |
Boston, MA 02109 | Officer, Treasurer and | |
| Compliance Liaison | Michael Higgins |
Custodian | | Vice President, Senior Associate |
State Street Bank | Steven D. Krichmar | Treasurer and Assistant Clerk |
and Trust Company | Vice President and | |
| Principal Financial Officer | Nancy E. Florek |
Legal Counsel | | Vice President, Assistant Clerk, |
Ropes & Gray LLP | Janet C. Smith | Assistant Treasurer and |
| Vice President, Assistant | Proxy Manager |
Trustees | Treasurer and Principal | |
Jameson A. Baxter, Chair | Accounting Officer | Susan G. Malloy |
Ravi Akhoury | | Vice President and |
Barbara M. Baumann | Robert R. Leveille | Assistant Treasurer |
Charles B. Curtis | Vice President and | |
Robert J. Darretta | Chief Compliance Officer | |
John A. Hill | | |
Paul L. Joskow | | |
This report is for the information of shareholders of Putnam Tax-Free High Yield Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
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| Item 3. Audit Committee Financial Expert: |
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| Item 4. Principal Accountant Fees and Services: |
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| Item 5. Audit Committee of Listed Registrants |
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| Item 6. Schedule of Investments: |
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| The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above. |
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| Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies: |
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| Item 8. Portfolio Managers of Closed-End Investment Companies |
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| Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers: |
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| Item 10. Submission of Matters to a Vote of Security Holders: |
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| Item 11. Controls and Procedures: |
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| (a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. |
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| (b) Changes in internal control over financial reporting: Not applicable |
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| (a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith. |
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| (b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith. |
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| Putnam Tax Free Income Trust |
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| By (Signature and Title): |
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| /s/Janet C. Smith Janet C. Smith Principal Accounting Officer
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| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. |
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| By (Signature and Title): |
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| /s/Jonathan S. Horwitz Jonathan S. Horwitz Principal Executive Officer
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| By (Signature and Title): |
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| /s/Steven D. Krichmar Steven D. Krichmar Principal Financial Officer
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