Putnam
High Yield Municipal Trust
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:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-03
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
You may have seen media coverage of market timing allegations involving
Putnam Investments. A separate letter has been sent to you detailing the
steps being taken by Putnam Investments to address these matters. In
addition, the Board of Trustees of The Putnam Funds is conducting an
independent investigation of these issues. When that investigation is
complete, we will report to you on the steps we are taking to make sure
that nothing like this happens in the future. We will, of course, ensure
that your fund is fully compensated for any losses resulting from
improper trading activity at Putnam. We appreciate your loyalty and want
you to know that we intend to restore full confidence in Putnam, an
organization that aspires to the highest ethical and business standards.
The balance of this report focuses on the performance of your fund. It
is a pleasure to report positive results for Putnam High Yield Municipal
Trust during the six months ended September 30, 2003. Your fund's
results at net asset value were also ahead of results for its benchmark
index, and just slightly above the average for its Lipper category. You
will find the details on the facing page.
During the semiannual period, the fund was definitely the beneficiary of
a much improved mood among investors in the lower-rated higher-yielding
bonds that represent its primary focus. Similarly, in marked contrast to
the situation at the conclusion of the previous fiscal year, once
beleaguered airline-related industrial development bonds in the fund's
portfolio also recovered smartly to make a strong positive contribution
to results. In the following report, your fund's managers discuss the
performance during the period and also offer their view of prospects for
the fiscal year's second half.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
November 19, 2003
Report from Fund Management
Fund highlights
* Putnam High Yield Municipal Trust's total return for the six months
ended September 30, 2003, was 5.00% for class A shares at net asset
value (NAV) and 1.13% at market price.
* Improving performance of lower-rated bonds in general, and
airline-related holdings in particular, helped the fund at NAV
outperform its benchmark, the Lehman Municipal Bond Index, which
returned 2.66% for the period.
* The fund's results at net asset value edged ahead of the average
return for its Lipper category, Closed-End High Yield Municipal Debt
Funds, which returned 4.55% for the six months ended September 30, 2003.
We attribute this to performance of the airline-related holdings and
appreciation from two pre-refunded bonds.
* See the Performance Summary beginning on page 8 for complete fund
performance, comparative performance, and Lipper data.
Performance commentary
Improving economic numbers and a climate of optimism this spring made
income-oriented investors more willing to accept the risks associated
with high-yield bonds. Consequently, for the first time in many months,
investment-grade and high-yield securities outperformed Treasuries,
apparently ending the "flight to quality" for this cycle. The
best-performing bonds in the fund's portfolio were all airline-related
industrial development bonds (IDBs) -- the same positions that had hurt
the fund in the past. The fund also benefited when two of its holdings
were pre-refunded during the period, as discussed on page 4. Adjustments
we made to the fund's duration -- a measure of interest-rate sensitivity
- -- also helped its performance during a period when rates first fell and
then rose again. Another positive contributor was our decision at the
end of July to close out the cross-market arbitrage position we had
established in an earlier period allowing the fund to lock in profits.
Although returns at market price lagged those at net asset value for the
period, the market price has improved significantly as demand for
lower-quality bonds has been mounting.
FUND PROFILE
Putnam High Yield Municipal Trust seeks to provide high current income
free from federal income tax by investing in higher-yielding lower-rated
municipal securities. The fund invests in a nationally diversified
portfolio and draws on Putnam's extensive research capabilities to help
manage the additional risk associated with high-yield bonds. The fund
may be suitable for investors seeking tax-exempt income who are willing
to accept the risks associated with below-investment-grade bonds.
Market overview
Municipal bond yields and prices (which rise as yields fall) changed
direction twice during the first half of your fund's 2004 fiscal year.
In April, as the fiscal year began, weak economic data and the Federal
Reserve Board's concern about deflation encouraged higher bond prices
and falling yields. This trend prevailed through mid June, but reversed
when better-than-expected economic data emerged and demand for bonds
cooled, resulting in lower bond prices and higher yields. During
September, unfavorable figures on housing and joblessness clouded the
economic outlook, and yields receded again, with a corresponding
increase in price.
At the beginning of the period, the spread, or difference between yields
of 10-year municipal bonds and 10-year Treasuries, was small. Thus, the
ratio of municipal yields to Treasury yields was unusually high. By the
end of September, this muni/Treasury yield ratio fell back toward its
long-term average, with 10-year municipals yielding about 85% of
comparable 10-year Treasuries. In general, the difference between yields
of high- and low-quality municipal bonds also narrowed during the
period, reflecting growing investor demand for the higher yields that
lower-quality bonds offered. As the economy improved and fear of airline
bankruptcies faded, airline-related industrial development bonds (IDBs)
rebounded strongly, and outperformed most other municipal bonds.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 9/30/03
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Fixed-income securities
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Lehman Municipal Bond Index 2.66%
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Lehman Aggregate Bond Index (taxable bonds) 2.35%
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Lehman Government Bond Index 1.72%
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Lehman Intermediate Treasury Bond Index
(U.S. Treasuries maturing in 1-10 years) 1.57%
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Stocks
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S&P 500 Index (broad stock market) 18.45%
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S&P Utilities Index (utilities stocks) 20.75%
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Russell 2000 Growth Index (small-company growth stocks) 37.14%
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These indexes provide an overview of performance in different market
sectors for the six months ended 9/30/03.
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Strategy overview
We shortened the portfolio's duration (a defensive move that reduced its
sensitivity to changes in interest rates) in April and May, after taking
similar steps in early 2003. We did this because interest rates had
fallen to historically low levels and we believed they were more likely
to rise than fall. Since rising rates reduce the value of older,
lower-yielding bonds, our conservative duration stance helped preserve
portfolio value when rates rose sharply between mid June and the end of
July. We resumed a more neutral duration in August and September, as
interest rates hovered in a narrower range and we no longer anticipated
a dramatic uptick.
In late July, we closed out the cross-market arbitrage position we had
established in an earlier period, which we discussed in the annual
report this March. You may recall that we sought to take advantage of a
market anomaly in which municipal bond yields, which are generally
tax-exempt, were nearly as high as comparable taxable Treasury yields.
We bought intermediate-term municipal bonds and sold 10-year Treasury
futures contracts, anticipating that the muni/Treasury yield ratios
would revert to their historic norms and create an opportunity for gain.
In fact, the yield ratios did fall and a loss in value of the municipal
bonds was more than offset by a gain in the value of the Treasury
futures position. We sold the municipal bonds and bought back the
Treasury futures contracts, thereby ending the trade and locking in a
profit for the fund. We have since sold our Treasury futures position.
We continued to diversify the fund's high-yield holdings. As strong
demand for higher-yielding municipal bonds pushed prices higher, the
fund reduced the size of a number of positions and eliminated some
completely. We established new positions in different high-yield bonds.
Lastly, we reduced the fund's exposure to airline-related IDBs, selling
into strength as they rebounded.
[GRAPHIC OMITTED: horizontal bar chart THE FUND'S MATURITY AND DURATION
COMPARED]
THE FUND'S MATURITY AND DURATION COMPARED
3/31/03 6/30/03 9/30/03
Average effective
maturity in years 11.6 10.1 9.3
Duration
in years 8.3 7.4 7.4
Footnote reads:
This chart compares changes in the fund's duration (a measure of its
sensitivity to interest-rate changes) and its average effective maturity
(a weighted average of the holdings' maturities).
Average effective maturity also takes into account put and call
features, where applicable, and reflects prepayments for mortgage-backed
securities.
How fund holdings affected performance
The fund's top performers during the period were all airline-related
industrial development bonds (IDBs). This type of municipal bond is
usually issued to finance local expansion by various businesses, and is
backed by revenues from the companies benefiting from the financing. As
a result, IDB prices are affected by investor perceptions of the health
of the backing company or of the industry group. Especially since the
terrorist attacks of September 11, 2001, airline-backed IDBs (generally
issued to finance airport facility expansion) have been negatively
affected by declining air traffic, high fixed costs, and high-profile
bankruptcies. As the prospects for economic recovery improved, the
airline market has improved and concerns about bankruptcies have
diminished. This led to a sharp price recovery for these bonds, and we
used this opportunity to trim the fund's airline-related holdings, which
included airport facility improvement bonds issued in California,
Illinois, Minnesota, and Texas for Continental Airlines, United
Airlines, American Airlines, and Northwest Airlines. Since all of them
have been in the portfolio for some time, none of the sales resulted in
a profit based on their acquisition cost, but the fund was able to sell
on strength rather than in distress. We believe the airline industry
will continue to recover with the economy, but we also see potentially
greater opportunities in other market areas.
Price appreciation resulting from two pre-refundings that occurred
during the past six months also benefited the fund. In one case, in
March of 2000 we purchased $600,000 in IDBs issued by South Carolina
Jobs Economic Development Authority for Palmetto Health Alliance, a
hospital system. The bonds had a coupon of 7 3/8s, had a maturity date
of 2021, and were rated Baa2 by Moody's. In August of 2003, Palmetto
pre-refunded the issue to the nearest call date (2010), replacing their
old debt and buying Treasury securities. This effectively elevated the
credit quality of the bond to AAA. Similarly, we purchased $750,000 in
general obligations (GOs) issued by the city of Scranton, Pennsylvania
in February of 2001. (GOs are issued by municipalities and backed by
receipts from taxpayers.) These were issued at 7.10% and had a maturity
date of 2031. Scranton was experiencing financial difficulties at the
time and the bonds were not rated, but our credit analysts rated them
BB. Late in July of 2003, Scranton had recovered sufficiently to issue
new, insured debt. The new bonds pre-refund those held by the fund,
elevating their credit quality and shortening the maturity date to the
nearest call date, 2011. Although the maturities of both of these issues
are now shorter, their market value has risen and in both cases the
maturity dates are still seven years out.
We have also been actively seeking ways to broaden the fund's
diversification in the past six months, trimming some of the largest
positions while capitalizing on increased demand for higher-yielding
municipal bonds. We have purchased some real estate development deals,
which gives the fund a presence in an additional industry. These issues are
relatively hard to come by and the deals are relatively small, but we
believe our analysts' experience in this market is of value here. Two
recent real estate development purchases are bonds issued for developments
in Florida: Verandah West Community Development, located in Lee County, and
Fishhawk Community Development, 16 miles southeast of downtown Tampa. The
Verandah bonds have a coupon of 6 5/8% and mature in 2033, while the
Fishhawk bonds offer a 5.00% coupon and mature in 2007. In both cases, the
developers purchased a large tract of land and are using the bond proceeds
for such municipal improvements as roads, sewer systems, and street
lighting. Currently, taxes paid by the developers are funding the bonds.
The developers will sell large chunks of land to home-building contractors
who create developments that will include residential, retail, and office
properties. As builders acquire tracts, their taxes fund the issues. As
people buy the new homes, their taxes pay the interest on the bonds,
spreading out bondholders' risks still further. Since these issues are not
rated, we are careful about which developments we choose, often preferring
to deal with developers we know from past experience.
The past several months have been positive for the bond market as a
whole, especially higher-yielding municipal bonds. However, not
everything has gone up. For example, some bonds issued by Allegheny
County, Pennsylvania Hospital Development Authority for West
Pennsylvania Allegheny Health, a hospital system, that we bought in 2000
have done poorly. The bonds had a coupon of 9 1/4%, maturing in 2015,
with a Moody's rating of B. We knew that this was a risky situation when
we purchased $985,000 of the bonds in August of 2000, but it was a
turnaround story that appeared to be working. Competition for these
bonds had driven the market price up over par value, but in recent
months news came out that the system was starting to falter. We analyzed
the situation and decided to sell the bonds while they were still close
to par value, rather than risk seeing them decline further.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW
Aaa/AAA (22.4%)
Aa/AA (0.2%)
A (10.3%)
Baa/BBB (30.0%)
Ba/BB (16.8%)
B and below (9.5%)
Other(VMIG1) (11.0%)
Footnote reads:
As a percentage of market value as of 9/30/03. A bond rated Baa or
higher is considered investment grade. The chart reflects Moody's and
Standard & Poor's ratings; percentages may include unrated bonds
considered by Putnam Management to be of comparable quality. Ratings
will vary over time.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary
in the future.
The fund's management team
The fund is managed by the Putnam Tax Exempt Fixed-Income Team. The
members of the team are David Hamlin (Portfolio Leader), Paul Drury
(Portfolio Member), Susan McCormack (Portfolio Member), James St. John
(Portfolio Member), and Richard Wyke (Portfolio Member).
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
We anticipate continued volatility in the coming six months, and we
believe the Federal Reserve Board will hold the federal funds rate
steady at 1%. Our 12- to 18-month outlook is less certain. If current
fiscal and monetary economic policies succeed, we could experience a
classic bear market for bonds that may push yields higher. However, it
is also possible that the economy may not respond satisfactorily to such
policies, and the yield on 10-year Treasuries could fall. Given this
degree of uncertainty, at this time we have positioned the fund's
duration at neutral, relative to its benchmark. Currently, we no longer
see much opportunity to capitalize on yield spreads between municipal
bonds and Treasuries, as we believe the relationship between them is now
near the long-term average. We expect that the credit quality of general
obligation municipal bonds will remain under pressure, because tax
revenues cannot be expected to grow significantly until taxpayers begin
to report improved earnings. Although yield spreads between high- and
low-quality municipal bonds have narrowed somewhat, we believe they
could narrow further. As a result, we may see more opportunity for
potential gain in this area. In keeping with the fund's objective, we
will continue to monitor market conditions as we pursue a high level of
tax-free income and manage the fund's risk exposures.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. Lower-rated bonds
may offer higher yields in return for more risk.
Performance summary
This section provides information about your fund's performance during
the first half of its fiscal year, which ended September 30, 2003.
Performance should always be considered in light of a fund's investment
strategy. Past performance does not indicate future results. More recent
returns may be less or more than those shown. Investment return, net
asset value, and market price will fluctuate and you may have a gain or
a loss when you sell your shares. A profile of your fund's strategy
appears on the first page of this report. See page 9 for definitions of
some terms used in this section.
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TOTAL RETURN FOR PERIODS ENDED 9/30/03
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Lipper Closed-End
Lehman High Yield
Municipal Municipal Debt
Market Bond Funds category
NAV price Index average*
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6 months 5.00% 1.13% 2.66% 4.55%
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1 year 4.38 -6.35 3.90 4.59
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5 years 16.32 -10.39 31.74 18.17
Annual average 3.07 -2.17 5.67 3.35
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10 years 59.22 29.93 79.58 65.83
Annual average 4.76 2.65 6.03 5.15
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Annual average
Life of fund
(since 5/25/89) 6.37 4.86 7.29 6.07
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Performance does not reflect taxes on reinvested distributions.
Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 6-month and 1-, 5-, and 10-year periods ended 9/30/03, there
were 12, 12, 12, and 12 funds, respectively, in this Lipper category.
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PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 9/30/03
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Putnam High Yield Municipal Trust
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Distributions from common shares
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Number 6
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Income $0.231
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Capital gains 1 --
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Total $0.231
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Preferred shares Series A
(900 shares)
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Income $248.85
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Capital gains 1 --
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Total $248.85
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Share value: NAV Market price
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3/31/03 $7.53 $6.97
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9/30/03 7.65 6.82
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Current return (common shares,
end of period)
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Current dividend rate 2 6.04% 6.77%
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Taxable equivalent 3 9.29 10.42
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1 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 federally exempt funds
may be subject to state and local taxes.
2 Most recent distribution, excluding capital gains, annualized and
divided by NAV or market price at end of period.
3 Assumes maximum 35% federal tax rate for 2003. Results for investors
subject to lower tax rates would not be as advantageous.
Terms and definitions
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.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities and the net assets allocated to remarketed preferred shares
divided by the number of outstanding common shares.
Market price is the current trading price of one share of the fund.
Market prices are set by transactions between buyers and sellers on the
New York Stock Exchange.
Comparative indexes
Lehman Aggregate Bond Index is an unmanaged index used as a general
measure of U.S. fixed-income securities.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and
agency securities.
Lehman Intermediate Treasury Bond Index is an unmanaged index of
Treasury bonds with maturities between 1 and up to 10 years.
Lehman Municipal Bond Index is an unmanaged index of long-term
fixed-rate investment-grade tax-exempt bonds.
Russell 2000 Growth Index is an unmanaged index of those companies in
the Russell 2000 Index chosen for their growth orientation.
S&P 500 Index is an unmanaged index of common stock performance.
S&P Utilities Index is an unmanaged index of common stock issued by
utilities companies.
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 Inc. is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
A guide to the 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 noninvestment 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 net assets allocated to
remarketed 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 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.
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
highlight table also includes the current reporting period. For open-end
funds, a separate table is provided for each share class.
The fund's portfolio
September 30, 2003 (Unaudited)
Key to Abbreviations
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AMBAC AMBAC Indemnity Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance Company
FNMA Coll. Federal National Mortgage Association Collateralized
FRB Floating Rate Bonds
FSA Financial Security Assurance
GNMA Coll. Government National Mortgage Association Collateralized
G.O. Bonds General Obligation Bonds
IFB Inverse Floating Rate Bonds
MBIA MBIA Insurance Company
VRDN Variable Rate Demand Notes
Municipal bonds and notes (99.9%) (a)
Principal amount Rating (RAT) Value
Alabama (0.7%)
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$1,000,000 Butler, Indl. Dev. Board Rev. Bonds
(Solid Waste Disp. James River
Corp.), 8s, 9/1/28 BB+ $1,005,000
500,000 Phenix City., Indl. Dev. Board
Rev. Bonds (Mead Coated Board),
Ser. A, 5.3s, 4/1/27 Baa2 463,750
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1,468,750
Arizona (2.7%)
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500,000 AZ Hlth. Fac. Auth. Hosp. Syst.
Rev. Bonds (John C. Lincoln Hlth.
Network), 6 3/8s, 12/1/37 BBB 518,125
1,000,000 Casa Grande, Indl. Dev. Auth.
Rev. Bonds (Casa Grande Regl. Med.
Ctr.), Ser. A, 7 1/4s, 12/1/19 B-/P 1,042,500
750,000 Coconino Cnty., Poll. Control
Rev. Bonds (Tuscon/Navajo Elec.
Pwr.), Ser. A, 7 1/8s, 10/1/32 Ba3 763,125
1,260,000 Phoenix Civic Impt. Corp. Wtr. Syst.
Rev. Bonds, FGIC, 5 1/2s, 7/1/21 Aaa 1,455,300
800,000 Scottsdale, Indl. Dev. Auth.
Rev. Bonds (Westminster Village 1st.
Mtge.), Ser. A, 8 1/4s, 6/1/15 BB-/P 843,000
1,000,000 Yavapai Cnty., Indl. Dev. Auth.
Solid Waste Disposal Rev. Bonds
(Waste Management, Inc. Project),
4 5/8s, 6/1/27 BBB 1,026,250
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5,648,300
Arkansas (1.5%)
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2,110,000 AR Dev. Fin. Auth. Rev. Bonds,
Ser. D, GNMA/FNMA Coll., 3s, 1/1/24 AAA 2,146,925
1,000,000 Northwest Regl. Arpt. Auth.
Rev. Bonds, 7 5/8s, 2/1/27 BB/P 1,091,250
--------------
3,238,175
California (8.7%)
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1,500,000 CA State Dept. of Wtr. Resources
Rev. Bonds, Ser. A, 5 1/4s, 5/1/20 A3 1,556,250
1,000,000 Chula Vista, Cmnty. Fac. Dist.
Special Tax Rev. Bonds (No. 06-1
Eastlake Woods Area), 6.1s, 9/1/21 BB/P 1,003,750
2,000,000 Foothill/Eastern Corridor Agcy.
Rev. Bonds (CA Toll Roads), 5 3/4s,
1/15/40 Baa3 2,047,500
985,000 Gilroy, Rev. Bonds (Bonfante Gardens
Park), 8s, 11/1/25 B/P 806,469
1,000,000 Golden State Tobacco Securitization
Corp. Rev. Bonds, Ser. B, 5 5/8s,
6/1/38 BB+/P 987,500
500,000 Irvine, Impt. Board Act of 1915
Special Assmt. Bonds (Assmt. Dist.
No. 00-18-GRP 3), 5.55s, 9/2/26 BBB-/P 500,625
1,425,000 Los Angeles Cnty., Metro. Trans.
Auth. Rev. Bonds (First Tier), FSA,
5s, 7/1/11 Aaa 1,604,906
1,000,000 Los Angeles, Regl. Arpt. Impt. Corp.
Lease Rev. Bonds (Continental
Airlines, Inc.), 9 1/4s, 8/1/24 B 993,750
1,000,000 Orange Cnty., Cmnty. Fac. Dist.
Rev. Bonds (Ladera Ranch - No. 1),
6s, 8/15/25 BB/P 1,022,500
250,000 Orange Cnty., Cmnty. Fac. Dist.
Special Tax Bonds (Ladera Ranch -
No. 02-1), Ser. A, 5.55s, 8/15/33 BB/P 244,375
2,000,000 San Francisco, City & Cnty. Redev.
Fin. Agcy. Auth. Tax Alloc.
Rev. Bonds (Redev. Project), Ser. B,
FGIC, 5 1/4s, 8/1/13 Aaa 2,270,000
500,000 Santaluz, Cmnty. Fac. Dist. No. 2
Special Tax (Impt. Area No. 1),
6 3/8s, 9/1/30 BB/P 509,375
835,000 Sunnyvale, Special Tax Rev. Bonds
(Cmnty. Fac. Dist. No. 1), 7 3/4s,
8/1/32 BB-/P 838,131
2,000,000 Vallejo, COP (Marine World
Foundation), 7.2s, 2/1/26 BB+/P 2,065,000
1,710,000 West Contra Costa Unified School
Dist. G.O. Bonds, Ser. A, MBIA,
5.7s, 2/1/21 Aaa 1,983,600
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18,433,731
Colorado (--%)
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683,099 CO State Edl. Fac. Auth. Rev. Bonds
(Ocean Journey, Inc.), 8 3/8s,
12/1/26 (In default) (NON) D/P 23,908
Connecticut (0.4%)
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750,000 CT State Dev. Auth. 1st Mtg. Gross
Rev. Hlth. Care Rev. Bonds (The Elm
Street Park Baptist, Inc. Project),
5.85s, 12/1/33 BBB+ 770,625
Florida (3.4%)
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500,000 Cap. Trust Agcy. Multi-Fam.
Rev. Bonds
(American Opportunity-Senior),
Ser. A, 5 7/8s, 12/1/38 Baa1 475,000
500,000 Cap. Trust Agcy. Rev. Bonds
(Seminole Tribe Convention), Ser. A,
10s, 10/1/33 B/P 590,000
1,000,000 Double Branch Cmnty. Dev. Dist.
Rev. Bonds, Ser. A, 6.7s, 5/1/34 BB-/P 1,033,750
500,000 Fishhawk, Cmnty. Dev. Dist. II
Rev. Bonds, Ser. B, 5s, 11/1/07 BB-/P 503,125
1,100,000 Lee Cnty., Indl. Dev. Auth. Hlth.
Care Fac. Rev. Bonds (Cypress Cove
Hlth. Pk.), Ser. A, 6 3/8s, 10/1/25 BB-/P 1,072,500
1,075,000 Lee Cnty., Indl. Dev. Auth.
Rev. Bonds (Alliance Cmnty.
Project), Ser. C, 5 1/2s, 11/15/29 BBB- 1,003,781
600,000 Miami Beach, Hlth. Fac. Auth. Hosp.
Rev. Bonds (Mount Sinai Med. Ctr.),
Ser. A, 6.8s, 11/15/31 BB 562,500
500,000 Orange Cnty., Hlth. Fac. Auth.
Rev. Bonds (Orlando Regl. Hlth.
Care), 5 3/4s, 12/1/32 A2 513,750
1,050,000 St. Johns Cnty., Hlth. Care Indl.
Dev. Auth. Rev. Bonds (Glenmoor St.
Johns Project), Ser. A, 8s, 1/1/30 B-/P 1,064,438
500,000 Verandah, West Cmnty. Dev. Dist.
Rev. Bonds (Cap. Impt.), Ser. A,
6 5/8s, 5/1/33 BB-/P 499,375
--------------
7,318,219
Georgia (4.9%)
- -------------------------------------------------------------------------------
4,550,000 Atlanta, Waste Wtr. VRDN, Ser. C,
FSA, 1.1s, 11/1/41 VMIG1 4,550,000
2,000,000 Burke Cnty., Poll. Control Dev.
Auth. Mandatory Put Bonds (GA Power
Co.), 4.45s, 1/1/32 A2 2,127,500
2,000,000 Forsyth Cnty., Hosp. Auth.
Rev. Bonds (Baptist Hlth. Care
Syst.), 6 1/4s, 10/1/18 AAA/P 2,407,500
1,200,000 GA Med. Ctr. Hosp. Auth. IFB, MBIA,
11.618s, 8/1/10 Aaa 1,255,668
--------------
10,340,668
Illinois (1.9%)
- -------------------------------------------------------------------------------
1,750,000 Chicago, O'Hare Intl. Arpt. Special
Fac. Rev. Bonds (American Airlines,
Inc.), 8.2s, 12/1/24 Caa2 1,032,500
750,000 IL Dev. Fin. Auth. Hosp. Rev. Bonds
(Adventist Hlth. Syst./Sunbelt
Obligation), 5.65s, 11/15/24 A 763,125
IL Hlth. Fac. Auth. Rev. Bonds
1,175,000 (Cmnty. Rehab. Providers Fac.),
Ser. A, 7 7/8s, 7/1/20 (Prerefunded) AAA/P 1,335,094
890,000 (Cmnty. Rehab. Providers Fac.),
Ser. A, 7 7/8s, 7/1/20 (In default)
(NON) D/P 380,475
500,000 (Elmhurst Memorial Hlth. Care),
5 5/8s, 1/1/28 A2 508,125
--------------
4,019,319
Indiana (2.5%)
- -------------------------------------------------------------------------------
2,500,000 Indianapolis, Arpt. Auth. Special
Fac. Rev. Bonds (Federal Express
Corp.), 7.1s, 1/15/17 Baa2 2,638,200
500,000 Jasper Hosp. Auth. Rev. Bonds
(Memorial Hosp. Project), 5 1/2s,
11/1/32 AA 513,750
2,000,000 Rockport, Poll. Control
Rev. Bonds (Indiana-Michigan Pwr.),
Ser. A, 4.9s, 6/1/25 Baa2 2,067,500
--------------
5,219,450
Iowa (1.4%)
- -------------------------------------------------------------------------------
2,460,000 IA Fin. Auth. Hlth. Care Fac.
Rev. Bonds (Care Initiatives),
9 1/4s, 7/1/25 BBB-/P 2,933,550
Kentucky (2.2%)
- -------------------------------------------------------------------------------
4,000,000 Boone Cnty., Poll. Control
Rev. Bonds (Dayton Pwr. & Lt. Co.),
Ser. A, 6 1/2s, 11/15/22 Baa1 4,058,000
1,370,000 Jefferson Cnty., 1st Mtge.
Rev. Bonds (AHF/KY-IOWA, Inc.),
5 1/8s, 1/1/20 (In default) (NON) D/P 616,500
--------------
4,674,500
Louisiana (2.2%)
- -------------------------------------------------------------------------------
500,000 Desoto Parish, Rev. Bonds (Intl.
Paper Co. Project), Ser. A, 5s,
10/1/12 Baa2 515,625
1,050,000 Hodge, Combined Util. Rev. Bonds
(Stone Container Corp.), 9s, 3/1/10 B/P 1,066,664
2,150,000 LA Local Govt. Env. Fac. Cmnty. Dev.
Auth. Rev. Bonds (St. James Place),
Ser. A, 8s, 11/1/25 B-/P 2,004,875
1,000,000 St. Charles Parish, Poll. Control
Rev. Bonds, Ser. A, 4.9s, 6/1/30 Baa3 1,036,250
--------------
4,623,414
Maine (0.5%)
- -------------------------------------------------------------------------------
1,000,000 Rumford, Solid Waste Disp.
Rev. Bonds (Boise Cascade Corp.),
6 7/8s, 10/1/26 Ba2 1,015,000
Massachusetts (10.0%)
- -------------------------------------------------------------------------------
Atlas Boston Tax Exempt Rev. Bonds
735,000 Ser. 99-1, 7 1/4s, 1/1/35 (In
default) (NON) D/P 5,513
375,000 Ser. 1, 6.65s, 1/1/35 (In default)
(NON) D/P 247,500
1,000,000 Boston, Indl. Dev. Fin. Auth.
Rev. Bonds (Springhouse, Inc.), 6s,
7/1/28 BB-/P 907,500
950,000 MA State Dev. Fin. Agcy. Rev. Bonds
(Beverly Enterprises, Inc.), 7 3/8s,
4/1/09 B+/P 966,625
MA State Hlth. & Edl. Fac. Auth.
Rev. Bonds
750,000 (Civic Investments), Ser. A, 9s,
12/15/15 BB/P 855,000
350,000 (Jordan Hosp.), Ser. E, 6 3/4s,
10/1/33 BBB- 350,000
1,575,000 (UMass Memorial), Ser. C, 6 1/2s,
7/1/21 Baa2 1,638,000
500,000 (Milford-Whitinsville Hosp.),
Ser. D, 6.35s, 7/15/32 Baa2 504,375
1,350,000 (Hlth. Care Syst. Covenant Hlth.),
Ser. E, 6s, 7/1/31 A- 1,402,313
1,000,000 (Baystate Med. Ctr.), Ser. F, 5.7s,
7/1/27 A1 1,036,250
500,000 (Caritas Christi Oblig. Group),
Ser. A, 5 1/4s, 7/1/08 BBB 507,500
2,995,000 MA State Hsg. Fin. Agcy. Rev. Bonds,
Ser. 53, MBIA, 6.15s, 12/1/29 Aaa 3,118,544
MA State Indl. Fin. Agcy. Rev. Bonds
1,531,530 (Evanswood Bethzatha),
7.85s, 1/15/17 (In default) (NON) D/P 1,914
500,000 (1st Mtge. Brookhaven), Ser. A, 7s,
1/1/15 BBB/P 516,250
250,000 (1st Mtge. Brookhaven), Ser. A, 7s,
1/1/09 BBB/P 258,233
8,950,000 MA State Wtr. Resource Auth. VRDN
(Multi-Modal), Ser. C, 1.2s, 8/1/20 VMIG1 8,950,000
--------------
21,265,517
Michigan (5.4%)
- -------------------------------------------------------------------------------
7,000,000 Detroit, Swr. Disp. VRDN, Ser. B,
FSA, 1.2s, 7/1/33 VMIG1 7,000,000
1,000,000 MI State Hosp. Fin. Auth. Rev. Bonds
(Oakwood Hosp.), Ser. A, 5 3/4s,
4/1/32 A2 1,026,250
1,000,000 MI State Strategic Fund Resource
Recvy. Rev. Bonds (Central Wayne
Energy Rec.), Ser. A, 7s, 7/1/27 (In
default) (NON) D/P 50,000
1,900,000 MI State Strategic Fund Solid Waste
Disp. Rev. Bonds (Genesee Pwr.
Station), 7 1/2s, 1/1/21 B/P 1,797,875
1,350,000 MI State Strategic Fund, Ltd.
Rev. Bonds (Worthington Armstrong
Venture), 5 3/4s, 10/1/22 A/P 1,528,875
--------------
11,403,000
Minnesota (2.7%)
- -------------------------------------------------------------------------------
300,000 Duluth, Econ. Dev. Auth. Hlth. Care
Fac. Rev. Bonds (BSM Properties,
Inc. Project), AMBAC, 5 7/8s,
12/1/28 BB/P 284,625
1,490,000 Minneapolis & St. Paul, Metro. Arpt.
Comm. Special Fac. Rev. Bonds
(Northwest Airlines, Inc.), Ser. A,
7s, 4/1/25 B-/P 1,272,088
1,000,000 MN State Higher Ed. Fac. Auth.
Rev. Bonds (The College of St.
Catherine), 5s, 10/1/18 Baa1 1,023,750
900,000 Northfield, Healthcare Fac.
Rev. Bonds (Retirement Ctr.), Ser. A
, 6s, 5/1/28 BB-/P 871,875
2,000,000 Southern MN Muni. Pwr. Agcy. Syst.
Rev. Bonds, Ser. A, AMBAC, 5 1/4s,
1/1/16 Aaa 2,270,000
--------------
5,722,338
Missouri (1.6%)
- -------------------------------------------------------------------------------
1,000,000 Cape Girardeau Cnty., Indl. Dev.
Auth. Hlth. Care Fac. Rev. Bonds
(St. Francis Med. Ctr.),
Ser. A, 5 1/2s, 6/1/16 A 1,058,750
2,285,000 MO State Hlth. & Edl. Fac. Auth.
VRDN (St. Francis Med. Ctr.),
Ser. A, 1.2s, 6/1/26 A-1+ 2,285,000
--------------
3,343,750
Montana (0.7%)
- -------------------------------------------------------------------------------
700,000 Forsyth, Poll. Control FRB (Avista
Corp.), AMBAC, 5s, 10/1/32 Aaa 770,000
750,000 MT State Board Inv. Exempt Fac.
Rev. Bonds (Still Water Mining
Project), 8s, 7/1/20 Ba3 719,063
--------------
1,489,063
Nebraska (0.5%)
- -------------------------------------------------------------------------------
1,000,000 NE Investment Fin. Auth. Hosp. IFB
(Bishop Clarkson Memorial Hosp.),
MBIA, 12.072s, 12/8/16 Aaa 1,006,510
Nevada (2.3%)
- -------------------------------------------------------------------------------
3,500,000 Clark Cnty., G.O. Bonds (Pk. & Regl.
Justice Ctr.), FGIC, 5 5/8s, 11/1/19 Aaa 3,893,750
850,000 Henderson, Local Impt. Dist. Special
Assmt. Bonds (No. T-14), 5.55s,
3/1/17 BB-/P 833,000
250,000 Las Vegas, Special Impt. Dist. No.
809 Rev. Bonds (Summerlin Area),
5.65s, 6/1/23 BB/P 237,188
--------------
4,963,938
New Hampshire (1.2%)
- -------------------------------------------------------------------------------
1,000,000 NH Higher Ed. & Hlth. Fac. Auth.
Rev. Bonds (NH College), 6 3/8s,
1/1/27 BBB- 1,033,750
600,000 NH Hlth. & Ed. Fac. Auth. Rev. Bonds
(Huntington at Nashua), Ser. A,
6 7/8s, 5/1/33 B/P 575,250
1,000,000 NH State Bus. Fin. Auth. Rev. Bonds
(Franklin Regl. Hosp. Assn.),
Ser. A, 6.05s, 9/1/29 BB/P 875,000
1,394,189 NH State Bus. Fin. Auth. Swr. &
Solid Waste Rev. Bonds (Crown Paper
Co.), 7 7/8s, 7/1/26 (In default)
(NON) D/P 1,743
--------------
2,485,743
New Jersey (2.1%)
- -------------------------------------------------------------------------------
500,000 NJ Econ. Dev. Auth. Rev. Bonds (1st
Mtge.- Cranes Mill), Ser. A, 7 1/2s,
2/1/27 BB-/P 521,250
NJ Hlth. Care Fac. Fin. Auth.
Rev. Bonds
2,200,000 (Trinitas Hosp. Oblig. Group),
7 1/2s, 7/1/30 Baa3 2,420,000
395,000 (Columbus Regl. Hosp.), Ser. A,
7 1/2s, 7/1/21 B2 349,081
660,000 (Trinitas Hosp. Oblig. Group),
7 3/8s, 7/1/15 Baa3 730,125
500,000 NJ State Ed. Fac. Auth. Rev. Bonds
(Stevens Inst. of Tech.), Ser. C,
5 1/8s, 7/1/22 A- 505,000
--------------
4,525,456
New York (10.7%)
- -------------------------------------------------------------------------------
750,000 Huntington, Hsg. Auth. Sr. Hsg. Fac.
Rev. Bonds (Gurwin Jewish Sr.
Residence), Ser. A, 6s, 5/1/29 B+/P 633,750
1,000,000 Metro. Trans. Auth. Rev. Bonds,
Ser. A, AMBAC, 5 1/2s, 11/15/13 Aaa 1,162,500
1,000,000 Metro. Trans. Auth. Svc. Contract
Rev. Bonds, Ser. A , MBIA, 5 1/2s,
1/1/20 Aaa 1,100,000
1,000,000 NY City, G.O. Bonds, Ser. C, 5 1/4s,
8/1/11 A2 1,100,000
800,000 NY City, Indl. Dev. Agcy. Rev. Bonds
(Visy Paper, Inc.), 7.95s, 1/1/28 B+/P 828,000
NY City, Indl. Dev. Agcy. Civic Fac.
Rev. Bonds
1,985,000 (Staten Island U. Hosp.), Ser. A,
6 3/8s, 7/1/31 Baa3 2,066,876
200,000 (Brooklyn Polytech. U. Project J),
6 1/8s, 11/1/30 Ba1 172,500
300,000 NY City, Indl. Dev. Agcy. Special
Arpt. Fac. Rev. Bonds (Airis JFK I
LLC), Ser. A, 5 1/2s, 7/1/28 Baa3 291,750
1,500,000 NY City, Indl. Dev. Agcy. Special
Fac. Rev. Bonds (British Airways),
5 1/4s, 12/1/32 BB+ 1,016,250
NY State Dorm. Auth. Rev. Bonds
1,000,000 (NY U.), Ser. B, MBIA, 5s, 7/1/11 Aaa 1,120,000
4,385,000 (School Dist. Fin. Project), Ser. D,
MBIA, 5s, 10/1/10 Aaa 4,944,088
2,350,000 NY State Energy Resource & Dev.
Auth. Poll. Control IFB, FGIC,
12.948s, 7/1/29 (acquired 12/19/94,
cost $2,453,729) (RES) Aaa 2,639,285
1,500,000 Onondaga Cnty., Indl. Dev. Agcy.
Rev. Bonds (Solvay Paperboard, LLC),
7s, 11/1/30 BB-/P 1,584,375
1,000,000 Otsego Cnty., Indl. Dev. Agcy.
Rev. Bonds (Hartwick College), 5.9s,
7/1/22 Baa3 1,047,500
1,000,000 Suffolk Cnty., Indl. Dev. Agcy.
Rev. Bonds (Peconic Landing),
Ser. A, 8s, 10/1/30 B+/P 1,010,000
1,000,000 Suffolk Cnty., Indl. Dev. Agcy.
Cont. Care Ret. Rev. Bonds
(Jefferson's Ferry), Ser. A, 7 1/4s,
11/1/28 BB-/P 1,043,750
800,000 Syracuse, Indl. Dev. Agcy.
Rev. Bonds (1st Mtge. - Jewish
Home), Ser. A, 7 3/8s, 3/1/21 BB-/P 840,000
--------------
22,600,624
North Carolina (2.1%)
- -------------------------------------------------------------------------------
1,500,000 NC Eastern Muni. Pwr. Agcy. Syst.
Rev. Bonds, Ser. C, 5.3s, 1/1/15 BBB 1,595,625
750,000 NC Med. Care Comm. Retirement Fac.
Rev. Bonds (1st Mtge. -Givens
Estates Project), Ser. A, 6 1/2s,
7/1/32 BB-/P 759,375
NC State Muni. Pwr. Agcy. Rev. Bonds
1,000,000 (No. 1, Catawba Elec.), Ser. B,
6 1/2s, 1/1/20 Baa1 1,101,250
1,000,000 Ser. A, 5 1/2s, 1/1/13 Baa1 1,096,250
--------------
4,552,500
North Dakota (1.0%)
- -------------------------------------------------------------------------------
2,000,000 Grand Forks, Hlth. Care Syst.
Rev. Bonds (Altru Hlth. Syst.
Oblig. Group), 7 1/8s, 8/15/24 Baa1 2,190,000
Ohio (4.0%)
- -------------------------------------------------------------------------------
1,000,000 Cuyahoga Cnty., Rev. Bonds, Ser. A,
6s, 1/1/32 A1 1,065,000
500,000 Dayton, Fac. Rev. Bonds (Emery Air
Freight), Ser. A, 5 5/8s, 2/1/18 BB+ 377,500
1,940,000 Erie Cnty., Ohio Hosp. Fac.
Rev. Bonds (Firelands Regl. Med.
Ctr.), 5 5/8s, 8/15/32 A2 1,990,925
740,000 Marion Cnty., Hlth. Care Fac.
Rev. Bonds (United Church Homes),
6 3/8s, 11/15/10 BBB- 755,732
1,500,000 Montgomery Cnty., Hosp. Rev. Bonds
(Kettering Med. Ctr.), 6 3/4s,
4/1/22 Baa1 1,599,375
1,000,000 OH State Higher Edl. Fac. FRB
(Kenyon College Project), 4.85s,
7/1/37 A2 1,045,000
1,000,000 OH State Poll. Control Rev. Bonds
(General Motors Corp. Project),
5 5/8s, 3/1/15 Baa1 1,065,000
500,000 Toeldo-Lucas Cnty., Port Auth.
Rev. Bonds (CSX Transn, Inc.
Project), 6.45s, 12/15/21 Baa2 565,000
--------------
8,463,532
Oklahoma (0.9%)
- -------------------------------------------------------------------------------
825,000 OK Dev. Fin. Auth. Rev. Bonds
(Continuing Care Retirement),
Ser. A, 8s, 2/1/32 B/P 846,656
1,000,000 OK State Indl. Dev. Auth. Rev. Bonds
(Hlth. Syst.-Oblig. Group), Ser. A,
MBIA, 5 3/4s, 8/15/29 Aaa 1,080,000
--------------
1,926,656
Oregon (0.4%)
- -------------------------------------------------------------------------------
1,000,000 Multnomah Cnty., Hosp. Fac. Auth.
Rev. Bonds (Terwilliger Plaza
Project), 6 1/2s, 12/1/29 BB-/P 955,000
Pennsylvania (6.3%)
- -------------------------------------------------------------------------------
750,000 Allegheny Cnty., Indl. Dev. Auth.
Rev. Bonds (Env. Impt. - USX
Corp.), 6s, 1/15/14 Baa1 788,438
965,000 Carbon Cnty., Indl. Dev. Auth.
Rev. Bonds (Panther Creek
Partners), 6.65s, 5/1/10 BBB- 1,034,963
750,000 PA Convention Ctr. Auth. Rev. Bonds,
Ser. A, 6 3/4s, 9/1/19 Baa2 789,105
PA Econ. Dev. Fin. Auth. Rev. Bonds
3,250,000 (MacMillan Ltd. Partnership), 7.6s,
12/1/20 Baa2 3,745,625
500,000 (Amtrak Project), Ser. A, 6 3/8s,
11/1/41 A3 503,125
2,000,000 PA State Econ. Dev. Fin. Auth.
Resource Recvy. Rev. Bonds
(Northampton Generating), Ser. A,
6.6s, 1/1/19 BBB- 2,020,000
1,280,000 PA State Higher Edl. Fac. Auth.
Rev. Bonds (Philadelphia College of
Osteopathic Medicine), 5s, 12/1/12 A 1,387,200
2,000,000 Philadelphia, School Dist. G.O.
Bonds, Ser. A, FSA, 5 1/2s, 2/1/31 Aaa 2,117,500
2,948,969 Philadelphia, Indl. Dev. Auth.
Special Fac. Rev. Bonds (U.S.
Airways, Inc.), 8 1/8s, 5/1/30 (In
default) (NON) D/P 29,490
750,000 Scranton, G.O. Bonds, Ser. C, 7.1s,
9/1/31 BB/P 948,750
--------------
13,364,196
Puerto Rico (0.5%)
- -------------------------------------------------------------------------------
1,000,000 PR Indl. Tourist Edl. Med. & Env.
Control Fac. Rev. Bonds (Cogen.
Fac.-AES PR Project), 6 5/8s,
6/1/26 Baa2 1,057,500
South Carolina (0.8%)
- -------------------------------------------------------------------------------
1,000,000 SC Jobs Econ. Dev. Auth.
Rev. Bonds (Palmetto Hlth.), Ser. C,
6s, 8/1/20 Baa2 1,011,250
600,000 SC Jobs Econ. Dev. Auth. Hosp. Fac.
Rev. Bonds (Palmetto Hlth.
Alliance), Ser. A, 7 3/8s, 12/15/21 Baa2 769,500
--------------
1,780,750
Tennessee (1.3%)
- -------------------------------------------------------------------------------
1,500,000 Johnson City, Hlth. & Edl. Fac.
Board Hosp. Rev. Bonds (Mountain
States Hlth.), Ser. A, 7 1/2s,
7/1/33 Baa2 1,625,625
1,000,000 Shelby Cnty. Hlth. Edl. & Hsg. Fac.
Board Rev. Bonds (Methodist
Healthcare), 6 1/2s, 9/1/26 A- 1,096,250
--------------
2,721,875
Texas (6.8%)
- -------------------------------------------------------------------------------
1,000,000 Abilene, Hlth. Fac. Dev. Corp.
Rev. Bonds (Sears Methodist
Retirement), 5 7/8s, 11/15/18 BB+/P 937,500
970,000 Alliance, Arpt. Auth. Rev. Bonds
(American Airlines, Inc.), 7 1/2s,
12/1/29 Caa2 572,300
1,000,000 Gulf Coast, Waste Disp. Rev. Bonds,
Ser. A, 6.1s, 8/1/24 Baa2 1,017,500
Houston, Arpt. Syst. Rev. Bonds
1,700,000 (Continental Airlines, Inc.),
Ser. E, 6 3/4s, 7/1/29 B- 1,423,750
1,800,000 Ser. B, FSA, 5 1/2s, 7/1/30 Aaa 1,867,500
250,000 Lufkin, Hlth. Fac. Dev. Corp.
Rev. Bonds (Memorial Hlth. Syst. of
East TX), 5.7s, 2/15/28 BBB- 209,063
2,500,000 Tomball, Hosp. Auth. Rev. Bonds
(Tomball Regl. Hosp.), 6s, 7/1/29 Baa2 2,481,250
5,600,000 TX State Dept. of Hsg. & Cmnty.
Affairs Rev. Bonds, Ser. C,
GNMA/FNMA Coll., 6.758s, 7/2/24 AAA 5,929,000
--------------
14,437,863
Utah (1.9%)
- -------------------------------------------------------------------------------
1,550,000 Carbon Cnty., Solid Waste Disp.
Rev. Bonds (Laidlaw Env.), Ser. A,
7 1/2s, 2/1/10 BB- 1,586,813
1,700,000 Tooele Cnty., Harbor & Term. Dist.
Port Fac. Rev. Bonds (Union
Pacific), Ser. A, 5.7s, 11/1/26 BBB 1,725,500
750,000 UT Cnty., Env. Impt. Rev. Bonds
(Marathon Oil Project), 5.05s,
11/1/17 Baa1 801,563
--------------
4,113,876
Virginia (1.1%)
- -------------------------------------------------------------------------------
Henrico Cnty. Econ. Dev. Auth.
Rev. Bonds (United Methodist),
Ser. A
400,000 6.7s, 6/1/27 BB+/P 405,500
600,000 6 1/2s, 6/1/22 BB+/P 604,500
500,000 James Cnty., Indl. Dev. Auth.
Rev. Bonds (1st Mtge. Williamsburg),
Ser. A, 6 1/8s, 3/1/32 BB-/P 501,250
1,000,000 Pocahontas Parkway Assn. Toll Rd.
Rev. Bonds, Ser. A, 5 1/2s, 8/15/28 BB 716,250
--------------
2,227,500
Washington (0.4%)
- -------------------------------------------------------------------------------
1,000,000 Tobacco Settlement Auth. of WA
Rev. Bonds, 6 1/2s, 6/1/26 Baa2 906,250
West Virginia (0.8%)
- -------------------------------------------------------------------------------
2,300,000 Princeton, Hosp. Rev. Bonds (Cmnty.
Hosp. Assn., Inc.), 6.1s, 5/1/29 Ba3 1,667,500
Wisconsin (1.4%)
- -------------------------------------------------------------------------------
1,500,000 Badger Tobacco Settlement
Asset Securitization Corp.
Rev. Bonds, 6 3/8s, 6/1/32 Baa2 1,286,250
1,600,000 WI State Hlth. & Edl. Fac. Auth.
Rev. Bonds (Wheaton Franciscan),
5 3/4s, 8/15/30 A2 1,648,000
--------------
2,934,250
--------------
Total Municipal bonds and notes
(cost $216,674,184) $211,832,796
Common stocks (0.1%) (a) (cost $1,428,766)
Number of shares Value
- -------------------------------------------------------------------------------
29,974 Tembec, Inc. (Canada) (NON) $181,088
- -------------------------------------------------------------------------------
Total Investments
(cost $218,102,950) $212,013,884
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on portfolio market value of
$212,013,884.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to
be the most recent ratings available at September 30, 2003 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 September 30, 2003. Securities rated by Putnam are
indicated by "/P" and are not publicly rated.
(NON) Non-income-producing security.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at September 30, 2003
was $2,639,285 or 1.2% of portfolio market value.
The rates shown on IFB, which are securities paying interest rates that
vary inversely to changes in the market interest rates, VRDN's,
mandatory put bonds and Floating Rate Bonds (FRB) are the current
interest rates at September 30, 2003.
The fund had the following industry group concentrations greater than
10% at September 30, 2003 (as a percentage of portfolio market value):
Health care 30.2%
Utilities 12.8
Water and sewer 10.5
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
September 30, 2003 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investments in securities, at value (identified cost
$218,102,950) (Note 1) $212,013,884
- -------------------------------------------------------------------------------
Cash 71,394
- -------------------------------------------------------------------------------
Interest and other receivables 3,227,098
- -------------------------------------------------------------------------------
Receivable for securities sold 3,382,044
- -------------------------------------------------------------------------------
Total assets 218,694,420
Liabilities
- -------------------------------------------------------------------------------
Distributions payable to common shareholders 857,775
- -------------------------------------------------------------------------------
Accrued preferred shares distribution payable (Note 1) 8,023
- -------------------------------------------------------------------------------
Payable for securities purchased 2,115,275
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 377,988
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 24,340
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 27,305
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 523
- -------------------------------------------------------------------------------
Other accrued expenses 49,224
- -------------------------------------------------------------------------------
Total liabilities 3,460,453
- -------------------------------------------------------------------------------
Series A remarketed preferred shares: (8,000 shares
authorized; 900 shares issued at $50,000 per share) (Note 4) 45,000,000
- -------------------------------------------------------------------------------
Net assets $170,233,967
Represented by
- -------------------------------------------------------------------------------
Paid-in capital -- common shares (Note 1) $202,528,979
- -------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (420,721)
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (25,785,225)
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments (6,089,066)
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to common shares
outstanding $170,233,967
Computation of net asset value
- -------------------------------------------------------------------------------
Net asset value per common share ($170,233,967 divided by
22,267,310 shares) $7.65
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of operations
Six months ended September 30, 2003 (Unaudited)
Interest income: $6,427,869
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 749,929
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 91,320
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 7,255
- -------------------------------------------------------------------------------
Administrative services (Note 2) 3,393
- -------------------------------------------------------------------------------
Preferred share remarketing agent fees 47,448
- -------------------------------------------------------------------------------
Other 74,703
- -------------------------------------------------------------------------------
Total expenses 974,048
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (9,882)
- -------------------------------------------------------------------------------
Net expenses 964,166
- -------------------------------------------------------------------------------
Net investment income 5,463,703
- -------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (5,746,690)
- -------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 607,735
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures
contracts during the period 7,542,456
- -------------------------------------------------------------------------------
Net gain on investments 2,403,501
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $7,867,204
- -------------------------------------------------------------------------------
Distributions to Series A remarketed preferred shareholders: (Note 1)
- -------------------------------------------------------------------------------
From tax exempt income (223,964)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations
applicable to common shareholders $7,643,240
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of changes in net assets
Six months ended Year ended
September 30 March 31
Increase (decrease) in net assets 2003* 2003
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $5,463,703 $12,159,817
- -------------------------------------------------------------------------------
Net realized loss on investments (5,138,955) (2,875,748)
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments 7,542,456 (2,874,667)
- -------------------------------------------------------------------------------
Distributions to Series A remarketed
preferred shareholders: (Note 1)
- -------------------------------------------------------------------------------
From tax exempt income (223,964) (614,056)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations applicable to common shareholders 7,643,240 5,795,346
Distributions to common shareholders: (Note 1)
- -------------------------------------------------------------------------------
From tax exempt income (5,143,748) (11,609,228)
- -------------------------------------------------------------------------------
Increase from issuance of common shares in
connection with reinvestment of
distributions -- 141,946
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets 2,499,492 (5,671,936)
Net assets
- -------------------------------------------------------------------------------
Beginning of period 167,734,475 173,406,411
- -------------------------------------------------------------------------------
End of period (including distributions in
excess of net investment income of $420,721
and $516,712, respectively) $170,233,967 $167,734,475
- -------------------------------------------------------------------------------
Number of fund shares
- -------------------------------------------------------------------------------
Common shares outstanding at beginning of
period 22,267,310 22,249,306
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions -- 18,004
- -------------------------------------------------------------------------------
Common shares outstanding at end of period 22,267,310 22,267,310
- -------------------------------------------------------------------------------
Remarketed preferred shares outstanding at
beginning and end of period 900 900
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
Six months
ended
Sept. 30
Per-share (Unaudited) Year ended March 31
operating performance 2003 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period
(common shares) $7.53 $7.79 $8.22 $8.18 $9.14 $9.28
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .25 .55 .61 .63 .68 .71
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .11 (.26) (.46) .06 (.95) (.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations: .36 .29 .15 .69 (.27) .62
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to preferred shareholders:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.01) (.03) (.04) (.08) (.07) (.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations:
(applicable to
common shareholders) .35 .26 .11 .61 (.34) .55
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.52) (.54) (.57) (.62) (.69)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.52) (.54) (.57) (.62) (.69)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period (common shares) $7.65 $7.53 $7.79 $8.22 $8.18 $9.14
- ---------------------------------------------------------------------------------------------------------------------------------
Market value,
end of period (common shares) $6.82 $6.97 $7.59 $8.22 $7.25 $10.94
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at market value (%)
(common shares) (a) 1.13* (1.55) (1.23) 21.63 (28.75) 11.35
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(common shares)
(in thousands) $170,234 $167,734 $173,406 $182,614 $181,352 $201,679
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) .57* 1.17 1.15 1.14 1.19 1.14
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(b) 3.09* 6.70 7.04 6.74 7.09 6.90
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 20.72* 34.56 18.38 12.30 16.17 6.92
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total return assumes dividend reinvestment.
(b) Ratios reflect net assets available to common shares only; net
investment income ratio also reflects reduction for dividend payments to
preferred shareholders.
(c) The ratio of expenses to average net assets includes amounts paid
through expense offset arrangements (Note 2).
The accompanying notes are an integral part of these financial statements.
Notes to financial statements
September 30, 2003 (Unaudited)
Note 1
Significant accounting policies
Putnam High Yield Municipal Trust (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The fund's investment objective is to
seek high current income exempt from federal income tax. The fund
intends to achieve its objective by investing in high yielding
tax-exempt municipal securities constituting a portfolio that the fund's
manager, Putnam Investment Management, LLC, ("Putnam Management"), an
indirect wholly owned subsidiary of Putnam, LLC, believes to be
consistent with prudent investment management. The fund invests in
higher yielding, lower rated bonds that have a higher rate of default
due to the nature of the investments.
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 during the reporting period. Actual results could
differ from those estimates.
A) Security valuation Tax-exempt bonds and notes are 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. Investments for which market quotations are readily
available are valued at the last reported sales price on their principal
exchange, or official closing price for certain markets. If no sales are
reported -- as in the case of some securities traded over-the-counter --
a security is valued at its last reported bid price. Restricted
securities are valued at fair value following procedures approved by the
Trustees. Such valuations and procedures are reviewed periodically by
the Trustees.
B) Security transactions and related investment income Security
transactions are recorded on the trade date (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. Dividend income is
recognized on the ex-dividend date. Non-cash dividends, if any, are
recorded at the fair market value of the securities received.
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.
C) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed. Realized gains and losses on purchased options are included in
realized gains and losses on investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. The fund and the broker
agree to exchange an amount of cash equal to the daily fluctuation in
the value of the futures contract. Such receipts or payments are known
as "variation margin." Exchange traded options are valued at the last
sale price, or if no sales are reported, the last bid price for
purchased options and the last ask price for written options. Options
traded over-the-counter are valued using prices supplied by dealers.
Futures and written option contracts outstanding at period end are
listed after The fund's portfolio.
D) Federal taxes It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
At March 31, 2003, the fund had a capital loss carryover of $17,881,022
available to the extent allowed by tax law to offset future capital
gains, if any. The amount of the carryover and the expiration dates
are:
Loss Carryover Expiration
- ------------------------------------
$1,308,755 March 31, 2004
7,978,665 March 31, 2006
3,861,203 March 31, 2007
1,445,345 March 31, 2008
1,742,951 March 31, 2009
865,353 March 31, 2010
678,750 March 31, 2011
Pursuant to federal income tax regulations applicable to regulated
investment companies, the fund has elected to defer to its fiscal year
ending March 31, 2004 $2,336,132 of losses recognized during the period
November 1, 2002 to March 31, 2003.
The aggregate identified cost on a tax basis is $218,097,597, resulting
in gross unrealized appreciation and depreciation of $8,408,717 and
$14,492,430, respectively, or net unrealized depreciation of
$6,083,713.
E) Distributions to shareholders Distributions to common and preferred
shareholders from net investment income are recorded by the fund on the
ex-dividend date. Distributions from capital gains, if any, are recorded
on the ex-dividend date and paid at least annually. Dividends on
remarketed preferred shares become payable when, as and if declared by
the Trustees. Each dividend period for the remarketed preferred shares
is generally a seven-day period. The applicable dividend rate for the
remarketed preferred shares on September 30, 2003 was 1.09%. The amount
and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations.
F) Determination of net asset value Net asset value of the common shares
is determined by dividing the value of all assets of the fund, less all
liabilities and the liquidation preference of any outstanding remarketed
preferred shares, by the total number of common shares outstanding as of
period end.
Note 2
Management fee, administrative
services and other transactions
Putnam Management is paid for management and investment advisory
services quarterly based on the average net assets of the fund. Such fee
is based on the annual rates of 0.70% of average weekly net assets.
If dividends payable on remarketed preferred shares during any dividend
payment period plus any expenses attributable to remarketed preferred
shares for that period exceed the fund's gross income attributable to
the proceeds of the remarketed preferred shares during that period, then
the fee payable to Putnam Management for that period will be reduced by
the amount of the excess (but not more than 0.70% of the liquidation
preference of the remarketed preferred shares outstanding during the
period).
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 Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam, LLC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. For the six months ended September 30,
2003, the fund's expenses were reduced by $9,882 under these
arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $678 has been allocated to the fund, and an additional fee for
each Trustees meeting attended. Trustees receive additional fees for
attendance at certain committee meetings.
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. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Trustees compensation and expenses in the
Statement of operations. Accrued pension liability is included in
Payable for Trustees compensation and expenses in the Statement of
assets and liabilities.
Note 3
Purchases and sales of securities
During the six months ended September 30, 2003, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $42,135,532 and $64,105,790, respectively. There
were no purchases and sales of U.S. government obligations. Purchases
and sales of short-term municipal obligations aggregated $49,935,000 and
$29,150,000, respectively.
Note 4
Remarketed preferred shares
The Series A shares are redeemable at the option of the fund on any
dividend payment date at a redemption price of $50,000 per share, plus
an amount equal to any dividends accumulated on a daily basis but unpaid
through the redemption date (whether or not such dividends have been
declared) and, in certain circumstances, a call premium.
It is anticipated that dividends paid to holders of remarketed preferred
shares will be considered tax-exempt dividends under the Internal
Revenue Code of 1986. To the extent that the fund earns taxable income
and capital gains by the conclusion of a fiscal year, it may be required
to apportion to the holders of the remarketed preferred shares
throughout that year additional dividends as necessary to result in an
after-tax equivalent to the applicable dividend rate for the period.
Under the Investment Company Act of 1940, the fund is required to
maintain asset coverage of at least 200% with respect to the remarketed
preferred shares as of the last business day of each month in which any
such shares are outstanding. Additionally, the fund is required to meet
more stringent asset coverage requirements under terms of the remarketed
preferred shares and the shares' rating agencies. Should these
requirements not be met, or should dividends accrued on the remarketed
preferred shares not be paid, the fund may be restricted in its ability
to declare dividends to common shareholders or may be required to redeem
certain of the remarketed preferred shares. At September 30, 2003, no
such restrictions have been placed on the fund.
Note 5
Regulatory matters and litigation
On November 13, 2003, Putnam Management agreed to entry of an order by the
Securities and Exchange Commission in partial resolution of administrative
and cease-and-desist proceedings initiated by the SEC on October 28, 2003
in connection with alleged excessive short-term trading by certain
investment professionals. Under the order, Putnam Management will institute
new employee trading restrictions and enhanced employee trading compliance,
retain an independent compliance consultant, and take other remedial
actions. Putnam Management neither admitted nor denied the order's findings
that it willfully violated provisions of the securities laws. A civil
monetary penalty and other monetary relief, if any, will be determined at a
later date. Putnam Management, and not the investors in any Putnam fund,
will bear all costs, including civil penalties and associated legal fees.
Administrative proceedings initiated by the Commonwealth of Massachusetts
on October 28, 2003 against Putnam Management in connection with alleged
market timing activities by Putnam employees and by participants in some
Putnam-administered 401(k) plans are pending. The SEC's and Commonwealth's
allegations also serve as the general basis for numerous lawsuits,
including purported class action lawsuits, filed against Putnam Management
and certain related parties. Based on currently available information,
Putnam Management believes that the pending actions are not likely to
materially affect its ability to provide investment management services to
its clients, including the Putnam funds.
Review of these matters by counsel for Putnam Management and by separate
independent counsel for the Putnam funds and their independent Trustees
is continuing. In addition, Marsh & McLennan Companies, Inc., Putnam
Management's parent company, has engaged counsel to conduct a separate
review of Putnam Management's trading policies and controls.
Results of October 9, 2003 shareholder meeting
(Unaudited)
An annual meeting of shareholders of the fund was held on October 9,
2003. At the meeting, each of the nominees for Trustees was elected, as
follows:
Common shares
Votes
Votes for withheld
- ----------------------------------------------------------------
Jameson Adkins Baxter 18,800,476 628,107
Charles B. Curtis 18,794,291 634,292
Ronald J. Jackson 18,806,218 622,365
Paul L. Joskow 18,798,032 630,551
Elizabeth T. Kennan 18,789,942 638,641
John H. Mullin III 18,798,556 630,027
George Putnam, III 18,800,896 627,687
A.J.C. Smith 18,773,687 654,896
W. Thomas Stephens 18,795,512 633,071
W. Nicholas Thorndike 18,767,258 661,325
Preferred Shares
Votes
Votes for withheld
- ----------------------------------------------------------------
Jameson Adkins Baxter 888 --
Charles B. Curtis 888 --
John A. Hill 888 --
Ronald J. Jackson 888 --
Paul L. Joskow 888 --
Elizabeth T. Kennan 888 --
John H. Mullin III 888 --
Robert E. Patterson 888 --
George Putnam, III 888 --
A.J.C. Smith 888 --
W. Thomas Stephens 888 --
W. Nicholas Thorndike 888 --
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds. Please
call your financial advisor or Putnam at 1-800-225-1581 to obtain a
prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you invest
or send money.
Growth Funds
Discovery Growth Fund
Growth Opportunities Fund
Health Sciences Trust
International New Opportunities Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Small Cap Growth Fund
Vista Fund
Voyager Fund
Blend Funds
Capital Appreciation Fund
Capital Opportunities Fund
Europe Equity Fund
Global Equity Fund
Global Natural Resources Fund
International Capital Opportunities Fund
International Equity Fund
Investors Fund
Research Fund
Tax Smart Equity Fund
Utilities Growth and Income Fund
Value Funds
Classic Equity Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
International Growth and Income Fund
Mid Cap Value Fund
New Value Fund
Small Cap Value Fund*
Income Funds
American Government Income Fund
Diversified Income Trust
Global Income Trust
High Yield Advantage Fund*
High Yield Trust
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund +
U.S. Government Income Trust
Tax-free Income Funds
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund +
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
Asset Allocation Funds
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Closed to new investors.
+ An investment in a money market fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government
agency. Although the funds seek to preserve your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
Check your account balances and current performance at
www.putnaminvestments.com.
Fund information
About Putnam Investments
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 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 presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President, Treasurer and Principal Financial Officer
Patricia C. Flaherty
Senior Vice President
Karnig H. Durgarian
Vice President and
Principal Executive Officer
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Beth S. Mazor
Vice President
Gordon H. Silver
Vice President
Mark C. Trenchard
Vice President and
BSA Compliance Officer
William H. Woolverton
Vice President and Chief
Legal Officer
Judith Cohen
Clerk and Assistant Treasurer
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time, or
visit our Web site (www.putnaminvestments.com) any time for up-to-date
information about the fund's NAV.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Do you want to save paper and receive this document faster?
Shareholders can sign up for email delivery of shareholder reports on
www.putnaminvestments.com.
203393 054 11/03
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Items 5-6. [Reserved]
- ---------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. [Reserved]
- ------------------
Item 9. Controls and Procedures:
- --------------------------------
(a) The registrant's principal executive officer and principal financial
officers 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
on Form N-CSR, that the design and operation of such procedures are
effective to provide reasonable assurance that information required to
be disclosed by the investment company in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported within the time periods specified in
the Commission's rules and forms.
(b) Changes in internal control over financial reporting:
Not applicable
Item 10. Exhibits:
- ------------------
(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002
are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: November 25, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
an 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.
By (Signature and Title): /s/Karnig H. Durgarian
---------------------------
Karnig H. Durgarian
Principal Executive Officer
Date: November 25, 2003
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Financial Officer
Date: November 25, 2003
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: November 25, 2003