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<IMS-DOCUMENT>0000950146-95-000003.txt : 19950110
<IMS-HEADER>0000950146-95-000003.hdr.sgml : 19950110
ACCESSION NUMBER: 0000950146-95-000003
CONFORMED SUBMISSION TYPE: N-30D
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 19941031
FILED AS OF DATE: 19950109
SROS: NONE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PUTNAM MANAGED MUNICIPAL INCOME TRUST
CENTRAL INDEX KEY: 0000844790
STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000]
IRS NUMBER: 046608976
STATE OF INCORPORATION: MA
FISCAL YEAR END: 1031
FILING VALUES:
FORM TYPE: N-30D
SEC ACT: 1940 Act
SEC FILE NUMBER: 001-10158
FILM NUMBER: 95500651
BUSINESS ADDRESS:
STREET 1: ONE POST OFFICE SQ
STREET 2: MAILSTOP A14
CITY: BOSTON
STATE: MA
ZIP: 02109
BUSINESS PHONE: 6172921536
</IMS-HEADER>
<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<DESCRIPTION>PUTNAM MANAGED MUNICIPAL INCOME TRUST A/R
<TEXT>
Putnam
Managed
Municipal
Income Trust
(Cover artwork)
ANNUAL REPORT
October 31, 1994
(Scale graphic)
BOSTON * LONDON * TOKYO
<PAGE>
Performance highlights
> ". . . Putnam Managed Municipal Income Trust has been able to post good
relative returns throughout its history: over the trailing five-year period,
its 9.8% annualized return is one of the best in its objective."
- -- Morningstar Mutual Funds analysis, September 23, 1994.
> Performance should always be considered in light of a fund's investment
strategy. Putnam Managed Municipal Income Trust is designed for investors
seeking high current income exempt from federal income tax through a
diversified portfolio of tax-exempt municipal securities.
FISCAL 1994 RESULTS AT A GLANCE
Total return NAV Market price
...............................................................................
(change in value during period plus
reinvested distributions)
12 months ended 10/31/94 -5.14% -11.56 %
Share value (common shares) NAV Market price
...............................................................................
10/31/93 $10.88 $ 11.375
10/31/94 9.49 9.250
Capital gains(1)
Distributions Long- Short-
No. Income term term Total
...............................................................................
Period ended 10/31/94
Common shares 12 $0.762 $0.059 $0.034 $0.855
Preferred shares Total
Series A (550) $2772.58
Series B (550) $2776.85
Series C (650) $2733.17
Current return NAV Market price
...............................................................................
End of period
Current dividend rate(2) 8.03% 8.24%
Taxable equivalent(3) 13.29 13.64
Performance data represent past results. For performance over longer periods,
see page 7.
(1)Capital gains are taxable for federal and, in most cases, state tax
purposes.
(2)Income portion of most recent distribution, annualized and divided by NAV
or market price at end of period.
(3)Assumes maximum 39.6% federal tax rate. Results for investors subject to
lower tax rates would not be as advantageous. For some investors, investment
income may also be subject to the federal Alternative Minimum Tax. Investment
income may be subject to state and local taxes.
<PAGE>
From the Chairman
(Photo)
(C)Karsh, Ottawa
Dear Shareholder:
When markets turn down, investors with vision look beyond the unfolding
negatives for opportunities farther down the road. Throughout Putnam Managed
Municipal Income Trust's fiscal year that ended on October 31, 1994, there
was plenty to obstruct the view.
The period had hardly begun when signs appeared that the sustained bond
market rise was about to end. Fund Manager Howard Manning began taking
defensive action. Had he not done so, the toll on the fund's results would
likely have been greater. Even so, the fund joined most other fixed-income
investments in the decline.
But Howard sees emerging strengths for tax-exempt securities. Supplies may
become tighter as fewer issues come to market and more investors seek tax
relief. Putnam Management believes that many sectors of the tax-exempt
market, including health care, education, and resource recovery, are poised
for growth. Both signs bode well for municipal bond investors.
Howard will focus on these positive factors as he seeks out the most
promising opportunities for your fund. His report on fiscal '94 performance
and what he sees in store for fiscal '95 follows.
Respectfully yours,
(Signature)
George Putnam
Chairman of the Trustees
December 14, 1994
<PAGE>
Report from the fund manager
Howard Manning
Many municipal bond fund investors will undoubtedly breathe a sigh of relief
when this year's volatile market brought on by inflation fears and rising
interest rates comes to a close. Putnam Managed Municipal Income Trust was
not alone in feeling the dampening effects of this market as we report a
total return of -5.14% at net asset value for the fiscal year ended October
31, 1994.
While these results are somewhat disappointing, we consider them
understandable in light of the year's bond market decline. The fund continues
to provide attractive current income: the fund's tax-free current dividend
rate was 8.03% at net asset value at period's end. Investors who pay the
maximum 39.6% federal income tax bracket would have had to receive a 13.29%
taxable return to match this rate.*
Investors can also take heart in the fact that the portfolio, in our opinion,
is positioned well both in terms of coupon structure and sector allocation
for any upturn in the municipal bond market. We also believe that the fund's
solid long-term performance is an indicator of its ability to benefit from
periods of market strength.
> SUPPLY/DEMAND BALANCE SHIFT EXPECTED
In the municipal bond market nationwide, there has been a decrease of more
than 40% in the issuance of debt this year. While the supply side of the
equation has tightened, one of the factors that has hindered the demand from
taking shape, we believe, is the market's short-term overreactions to
inflationary expectations. Mutual fund managers have been forced to raise
cash to meet redemptions, which, in turn, has brought more selling in the
market.
While there can be no guarantees, we believe that demand will rise as more
investors seek relief from higher taxes and increasingly recognize the
attractiveness of municipal bonds relative to
*Investors in lower brackets would also have benefited, but not to the same
extent. Certain high-income investors may be subject to the federal
Alternative Minimum Tax. Investment income may be subject to state and local
taxes.
<PAGE>
taxable U.S. Treasury bonds. Taken together, these factors should act as a
strong price support for tax-exempt securities, although, of course, prices
of fixed-income securities are determined by many factors, including changes
in interest rates.
> RESPONDING TO INTEREST RATE MOVEMENTS
In attempting to steer your fund's portfolio through this choppy market, we
have undertaken several defensive measures. While anticipating and reacting
to changes in interest rates is important, we believe these changes will not
compromise the fund's ability to participate in any future market rallies.
We have focused on purchasing bonds that will not be paid off for several
years. This is designed to prevent attractive securities from being called
away early. We have also taken steps to shorten the portfolio's duration
somewhat. Duration is a measure of the price sensitivity of a bond or bond
fund to a given change in interest rates. Shortening it can help to reduce a
portfolio's volatility as well as protect its value.
Most importantly, we have also begun to "swap up" into premium-coupon bonds.
These bonds' higher coupons tend to make their prices less sensitive to
rising interest rates and their higher income stream represents a greater
portion of their return. This provides at least a temporary floor for their
prices.
> HEALTH CARE COULD ADD TO A BRIGHT FUTURE
A fund's success with its sector weightings has a direct relationship to the
strength of its research team. In our opinion, Putnam has the strong research
capabilities needed to find tomorrow's attractive sectors. Although the fund
holds debt across many sectors of the municipal bond market, we believe the
health care sector holds the greatest promise.
TOP FIVE INDUSTRY SECTORS*
Health care 26.5%
Utilities 14.3%
Transportation 12.4%
Education 6.8%
Water & Sewer 6.1%
*Based on a percentage of net assets as of 10/31/94.
Figures may vary in the future.
<PAGE>
Despite congressional failure to pass health care reform, tremendous changes
are going on in the nation's hospitals and health care systems. We are
finding undervalued health care securities nationwide. For several years, a
significant cost cutting and consolidation have made this sector more
efficient and cost effective.
Additionally, some of the health care debt the fund does own has been or
appears likely to be, in our opinion, the subject of takeovers by for-profit
organizations or merger/affiliation with stronger not-for-profits. This is
typically a positive event for bondholders because it often leads to a
refinancing of the bond issue. When this occurs, the revenue source for
interest payments of the bond shifts from the underlying cash flow of the
project itself to AAA-rated U.S. government securities. We believe this
elimination of the issue's exposure to credit risk could result in capital
appreciation and increases in the fund's NAV.
Some of the securities that have benefited or are likely to benefit from
prerefunding include: St. Luke's Hospital of Arizona, Miami Cedars health
system (which went from a BB- rating to AAA after prerefunding). An example
of a beneficial merger/affiliation was Bexar County (Texas) St. Luke's
Hospital, which went from a Baa rating to an A rating after a merger.
> A LONG-TERM VIEW
Despite recent financial problems in Orange County, California, we believe
the state's municipal bond market offers tremendous value. While the fund has
no direct exposure to Orange County, it currently holds 16% of its assets in
California securities. We will continue to draw on Putnam Management's strong
research capabilities in order to find attractive opportunities.
As the fund enters fiscal 1995, we believe the economy will continue its
current pace of slow but steady growth with relatively low inflation. We also
believe that as time goes on, municipal bonds will become more attractive to
tax-conscious investors when compared to taxable alternatives.
The views expressed about the securities mentioned in this report are
exclusively those of Putnam Management, and not meant as investment advice.
Although the described holdings were viewed favorably as of October 31, 1994,
there is no guarantee the fund will continue to hold these securities in the
future.
<PAGE>
Performance summary
TOTAL RETURN FOR PERIODS ENDED 10/31/94
Lehman Bros.
Municipal
NAV Market price Bond Index CPI
1 year -5.14% -11.56% -4.36% 2.61%
5 years 53.48 46.61 42.50 19.03
Annual average 8.95 7.95 7.34 3.55
Life of Fund
since (2/24/89) 61.45 46.35 52.52 22.94
Annual average 8.78 6.92 7.70 3.70
TOTAL RETURN FOR PERIODS ENDED 9/30/94
(most recent calendar quarter)
Lehman Bros.
Municipal
NAV Market price Bond Index CPI
1 year -2.35% -8.07% -2.44% 2.96%
5 years 58.49 48.62 46.85 19.52
Annual average 9.65 8.25 7.99 3.63
5 years 65.08 51.24 55.28 22.86
Annual average 9.36 7.67 8.18 3.75
Performance data represent past results. Investment returns and principal
value will fluctuate so an investor's shares, when sold, may be worth more or
less than their original cost. Fund performance data do not take into account
any adjustment for taxes payable on reinvested distributions.
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 back into the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, the liquidation preference and cumulative undeclared dividends
paid on the fund's preferred shares, divided by the number of oustanding
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.
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the municipal
bond market. The index does not take into account brokerage commissions or
other costs, may include bonds different from those in the fund, and may pose
different risks than the fund.
Consumer Price Index (CPI) is a commonly used measure of inflation; it does
not represent an investment return.
<PAGE>
Report of Independent Accountants
For the Year Ended October 31, 1994
To the Trustees and Shareholders of
Putnam Managed Municipal Income Trust
We have audited the accompanying statement of assets and liabilities of
Putnam Managed Municipal Income Trust ("the Fund"), including the portfolio
of investments owned, as of October 31, 1994, the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the "Financial
Highlights" for each of the five years in the period then ended, and for the
period February 24, 1989 (commencement of operations) to October 31, 1989.
These financial statements and "Financial Highlights" are the responsibility
of the Fund's management. Our responsibility is to express an opinion on
these financial statements and "Financial Highlights" based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
"Financial Highlights" are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1994, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and "Financial Highlights" referred
to above present fairly, in all material respects, the financial position of
Putnam Managed Municipal Income Trust as of October 31, 1994, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the "Financial
Highlights" for each of the five years in the period then ended and for the
period February 24, 1989 (commencement of operations) to October 31, 1989, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 16, 1994
<PAGE>
Portfolio of investments owned
October 31, 1994
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (98.2%)(a)
PRINCIPAL AMOUNT RATINGS(b) VALUE
Arizona (3.4%)
<S> <C> <C> <C>
AZ Hlth. Fac. Auth. Hosp. Syst. Rev. Bonds
$ 3,000,000 (St. Luke's Hosp. Syst.), Ser. A, 10-1/8s, 11/1/15 Ba $ 3,135,000
3,500,000 (St. Luke's Hlth. Syst.), 7-1/4s, 11/1/14 Ba 3,325,000
2,000,000 Gila Cnty., Indl. Dev. Auth. Poll. Control Rev. Bonds Ser. 85, 8.9s, 7/1/06 Baa 2,190,000
4,000,000 Payson, Ind. Dev. Auth. Hosp. Rev. Bonds (Payson Regl. Med. Ctr. Inc.
Project), 7.7s, 10/1/23 B/P 3,845,000
9,900,000 Salt River, Agricultural Impt. & Pwr. Dist. Elec. Syst. Rev. Bonds (Salt
River Project), Ser. B, 5-1/4s, 1/1/19 AA 8,093,250
$20,588,250
California (16.0%)
$ 5,700,000 Berkeley, Hlth. Fac. Rev. Bonds (Alta Bates Med. Ctr.), Ser. A, 6.55s,
12/1/22 Baa $ 5,080,125
2,000,000 CA Hlth. Facs. Auth. Rev. Bonds (Pacific Presbyterian Med. Ctr.), Ser 89A,
6.85s, 6/1/19 BBB 1,787,500
7,430,000 CA Health Facs. Fing. Auth. Rev. Bonds (Pac. Presbyterian), Ser. B,
Industrial Indemnity Insurance, 6-3/4s, 6/1/15 A 7,114,225
CA State Pub. Works Board Lease Rev. Bonds
12,605,000 (Various Cmnty. College Projects), Ser. A, 5-5/8s, 12/1/13 A 10,714,250
3,500,000 (Various U. of CA Projects), Ser. A, 5-1/2s, 6/1/21 A 2,817,500
(U. of CA Projects),
5,000,000 Ser. B, 5-1/2s, 6/1/14 A 4,162,500
6,220,000 Ser. B, 5-3/8s, 6/1/09 A 5,333,650
5,000,000 Contra Costa, Wtr. Dist. Wtr. Rev. Bonds, Ser. G, Municipal Bond Insurance
Association (MBIA), 5-1/2s, 10/1/19 AAA 4,275,000
2,775,000 Corona, Certif. of Participation (COP) (Vista Hosp. Syst.), Ser. B, 9-1/2s,
7/1/20 BB/P 2,851,305
2,760,000 Glendale, Hosp. Rev. Bonds (Verdugo Hills Hosp.), Ser. A, 10-1/8s, 1/1/15 A 2,832,450
5,000,000 Los Angeles, Dept. Wtr. & Pwr. Elec. Plant Rev. Bonds, MBIA, 5-1/4s,
11/15/26 AAA 3,937,500
22,800,000 Metro. Wtr. Dist. Southern CA Wtrwrks. Rev Bonds, 6-3/4s, 7/1/18 AA 24,624,000
5,000,000 Riverside, Redev. Agcy. Rev. Bonds (Tax Allocation Merged Redev. Project),
Ser. A, MBIA, 5-5/8s, 8/1/23 AAA 4,250,000
15,000,000 U. of CA Rev. Bonds (USCD Med. Ctr. Satellite Med. Fac.), 7.9s, 12/1/19 BBB 15,581,250
$95,361,255
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS(b) VALUE
Colorado (6.6%)
Denver, City & Cnty. Arpt. Rev. Bonds
$ 4,000,000 Ser. A, 8-3/4s, 11/15/23 Baa $ 4,145,000
7,000,000 Ser. A, 8-1/2s, 11/15/23 Baa 7,131,250
1,050,000 Ser. D, 7-3/4s, 11/15/13 Baa 1,015,875
2,000,000 Ser. B, 7-1/4s, 11/15/23 Baa 1,815,000
12,000,000 Ser. D, 7s, 11/15/25 Baa 10,530,000
2,800,000 Ser. C, 6-3/4s, 11/15/13 Baa 2,464,000
14,470,000 Denver, City & Cnty. Special Fac. Arpt. Rev. Bonds (United Air Lines, Inc.
Project), Ser. A, 6-7/8s, 10/1/32 Baa 12,426,113
$39,527,238
Florida (6.6%)
$ 5,000,000 Hernando Cnty., Indl. Dev. Rev. Bonds (FL Crushed Stone Co.), 8-1/2s,
12/1/14 B/P $ 5,125,000
2,000,000 Hillsborough Cnty., Aviation Auth. Special Purpose Rev. Bonds (USAir Inc.
Project), 8.6s, 1/15/22 B 1,800,000
7,900,000 Lee Cnty., Hosp. Board of Directors Hosp. Residual Interest Bonds (RIBS)
(Lee Memorial Hosp.), MBIA, 8.327s, 3/26/20 AAA 7,179,125
3,000,000 Miami, Hlth. Facs. Auth. Rev. Bonds (Cedars Med. Ctr.), Ser. A, 8.3s,
10/1/07 AAA/P 3,303,750
1,500,000 Orange Cnty., Hlth. Fac. Auth. 1st. Mtge. Rev. Bonds (RHA/Princeton Hosp.),
9s, 7/1/21 B/P 1,485,000
Palm Beach Cnty., Hlth. Fac. Auth. Rev. Bonds (JFK Med. Ctr. Inc. Project),
1,260,000 8-7/8s, 12/1/18 AAA 1,365,525
1,705,000 Prerefunded 8-7/8s, 12/1/18 AAA 1,954,356
16,350,000 Tampa, Cap. Impt. Rev. Bonds
Ser. B, 8-3/8s, 10/1/18 BBB 17,249,250
$39,462,006
Georgia (0.9%)
$ 3,250,000 Gwinnett Cnty., Indl. Dev. Auth. Rev. Bonds (Kawneer Co. Inc. Project),
Ser. 1984, 9-1/2s, 6/1/15 BBB/P $ 3,440,938
1,815,000 Savannah, Hosp. Auth. Rev. Bonds
(Impt.-Candler Hosp.), 7s, 1/1/23 Baa 1,642,575
$ 5,083,513
Idaho (0.7%)
$ 4,000,000 Owyhee Cnty., Indl. Dev. Corp. Rev. Bonds (Envirosafe Svcs. of Idaho Inc.),
8-1/4s, 11/1/02 B/P $ 3,905,000
Illinois (3.1%)
$ 5,000,000 Chicago, O'Hare Intl. Arpt. Rev. Bonds,
Ser. B, 10-3/8s, 1/1/09 A $ 5,187,500
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS(b) VALUE
Illinois (continued)
Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds
$5,528,000 (United Air Lines, Inc.), Ser. B,
8.95s, 5/1/18 Baa $ 5,977,150
3,325,000 (United Air Lines, Inc.), Ser. 84A,
8.85s, 5/1/18 Baa 3,582,688
1,895,000 (United Air Lines, Inc.), Ser. 84B,
8.85s, 5/1/18 Baa 2,041,863
2,500,000 IL Dev. Fin. Auth. Retirement Hsg. Rev. Bonds (Regency Park-Lincolnwood),
Ser. A, 10-1/4s, 4/15/19(c) B/P 1,750,000
$18,539,201
Iowa (0.9%)
IA Fin. Auth. Hlth. Care Fac. Rev. Bonds (Mercy Hlth. Initiatives Project),
$3,000,000 9.95s, 7/1/19 B/P $ 3,000,000
2,350,000 9.85s, 7/1/09 BB/P 2,350,000
$ 5,350,000
Kansas (2.6%)
$7,500,000 Burlington, Poll. Control, RIBS (KS Gas & Electric), Ser. 91-4, MBIA,
9.86s, 6/1/31 (acquired 12/17/91, cost $7,800,000)(d) AAA $ 7,753,125
8,400,000 Witchita, Hosp. RIBS Ser. 111-A, MBIA, 9.229s, 10/1/17 AAA 8,001,000
$15,754,125
Kentucky (0.2%)
$1,000,000 Scott Cnty., Indl. Dev. Variable Rate Demand Notes (VRDN) (Hoover Group
Inc. Project), 8-1/2s, 11/1/14 VMIG1 $ 965,000
Louisiana (3.7%)
$5,000,000 Hodge, Combined Util. Rev. Bonds (Stone Container Corp.), 9s, 3/1/10 B/P $ 5,175,000
Port of New Orleans, Indl. Dev. Rev. Bonds (Continental Grain Co. Project),
4,000,000 Ser. A, 14-1/2s, 2/1/02 BB 4,500,000
3,500,000 14-1/2s, 1/1/02 BB 3,933,125
West Feliciana Parish, Poll. Control Rev. Bonds (Gulf States Util. Co.
Project),
2,000,000 Ser. C, 12s, 5/1/14 Baa 2,075,000
5,500,000 Ser. A, 10-5/8s, 5/1/14 Baa 5,706,250
$21,389,375
Maine (0.5%)
$3,000,000 ME Fin. Auth. Solid Waste Recycling Facs. Rev. Bonds (Great Northern Paper
Project), 7-3/4s, 10/1/22 Baa $ 3,090,000
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS(b) VALUE
Maryland (0.8%)
$4,000,000 MD State Hlth. & Higher Edl. Facs. Auth. Rev. Bonds (Doctors Cmnty. Hosp.),
8-3/4s, 7/1/12 Aaa $ 4,675,000
Massachusetts (4.6%)
$4,750,000 Boston, General Obligation (G.O.) Rev. Bonds (City Hospital), MBIA, Ser. B,
5-3/4s, 2/15/23 AAA $ 4,132,500
MA State Hlth. & Edl. Fac. Auth. Rev Bonds
3,000,000 (Norwood Hosp.), Ser. E, 8s, 7/1/12 Ba 2,883,750
4,000,000 (Rehab. Hosp. Cape & Islands), Ser. A, 7-7/8s, 8/15/24 BB/P 3,870,000
(MA Eye & Ear Infirmary),
1,010,000 Ser. A, 7-3/8s, 7/1/11 Baa 951,925
2,340,000 Ser. A, 7.2s, 7/1/02 Baa 2,252,250
MA State Indl. Fin. Agcy. 1st. Mtge. Rev. Bonds (Pioneer Valley Living
Ctr.),
2,000,000 7s, 10/1/20 B/P 1,837,500
1,323,784 zero %s, 10/1/20(c) B/P 1,655
5,000,000 MA State Indl. Fin. Agcy. Resource Recvy. Rev. Bonds (Southeastern MA
Project), Ser. B, 9-1/4s, 7/1/15 BB/P 5,493,750
2,000,000 MA State Indl. Fin. Agcy. Rev. Bonds (Orchard Cove Inc.), 9s, 5/1/22 BB/P 2,162,500
2,900,000 MA State Indl. Fin. Agcy. Tunnel Rev. Bonds (MA Tpk.), 9s, 10/1/20 BAA/P 3,023,250
$26,609,080
Michigan (9.7%)
$4,690,000 Detroit, Local Dev. Fin. Auth. Tax Increment Rev. Bonds Ser. A, 9-1/2s,
5/1/21 BBB/P $ 5,669,038
4,000,000 Detroit, Swr. Disp. Rev. Bonds Federal Guaranty Insurance Co. (FGIC),
5.7s, 7/1/23 AAA 3,460,000
6,000,000 Dickinson Cnty., Econ. Dev. Corp. Poll. Control Rev. Bonds (Champion Intl.
Corp. Project), 5.85s, 10/1/18 Baa 5,025,000
3,550,000 Grand Rapids, Cmnty. College Rev. Bonds, MBIA, 5.9s, 5/1/19 AAA 3,217,188
2,000,000 Greater Detroit, Resource Recvy. Auth. Rev. Bonds, Ser. B, 9-1/4s, 12/13/08 BBB 2,107,500
4,780,000 Highland Park, Hosp. Fin. Auth. Fac. Rev. Bonds (MI Hlth. Care Corp.
Project), Ser. A, 9-7/8s, 12/1/19 B 4,869,625
5,500,000 Kalamazoo Hosp. Fin. Auth. Hosp. Fac. Rev. Bonds (Borgess Med. Ctr.), Ser.
A, FGIC, 5-1/4s, 6/1/17 AAA 4,489,375
MI State Hosp. Fin. Auth. Rev. Bonds
3,035,000 (Detroit-Macomb Hosp. Corp.), Ser. A, 7.4s, 6/1/13 B 2,849,106
4,800,000 (Detroit-Macomb Hosp. Corp.), Ser. A, 7.3s, 6/1/01 B 4,686,000
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS(b) VALUE
Michigan (continued)
$2,000,000 (Pontiac Osteopathic), Ser. A, 6s, 2/1/24 BBB $ 1,580,000
3,000,000 (Detroit Med. Ctr.), Ser. B, 5-1/2s, 8/15/23 A 2,328,750
MI State Strategic Fund Ltd. Oblig. Rev. Bonds
7,000,000 (Env. Research Project), 8-1/8s, 10/1/14 A/P 7,420,000
4,000,000 (Blue Wtr. Fiber Project), 8s, 1/1/12 B/P 3,835,000
4,000,000 Midland Cnty., Econ. Dev. Corp. Poll. Control Rev. Bonds, Ser. B, 9-1/2s,
7/23/09 B/P 4,320,000
2,150,000 Wayne Charter Cnty., Special Arpt. Fac. Rev. Bonds (Republic Air Lines Inc.
Project), 10-3/8s, 12/1/15 B/P 2,270,938
$58,127,520
Minnesota (1.3%)
$1,985,000 Chaska, Indl. Dev. Rev. Bonds (Lifecore Biomedical Inc. Project), 10-1/4s,
9/1/20 BB/P $ 2,248,013
1,000,000 Rochester, Hlth. Care Fac. RIBS (Mayo Foundation), Ser. H, 8.837s, 11/15/15 AA 867,500
5,595,000 St. Paul, Hsg, & Redev. Auth. Hosp. Rev. Bonds (Healtheast Project) Ser. A,
6-5/8s, 11/1/17 Baa 4,923,600
$ 8,039,113
Mississippi (1.3%)
Claiborne Cnty., Poll. Control Rev. Bonds (Middle South Energy Inc.),
$2,500,000 Ser. C, 9-7/8s, 12/1/14 BBB/P $ 2,853,125
4,100,000 Ser. A, 9-1/2s, 12/1/13 BBB/P 4,622,750
$ 7,475,875
Missouri (1.2%)
$4,000,000 Kansas City, Indl. Dev. Auth. Hlth. Fac. Rev. Bonds (Park Lane Med. Ctr.
Project),
8-3/4s, 1/1/15 BBB/P $ 4,290,000
3,000,000 MO State Hlth. & Edl. Facs. Auth. Rev. Bonds (BJC Hlth. Sys.), Ser. A,
6-1/2s, 5/15/20 AA 2,887,500
$ 7,177,500
Nebraska (1.8%)
$2,000,000 Gage Cnty. Indl. Dev. VRDN (Hoover Group Inc. Project) 8-1/2s, 12/1/07 VMIG3 $ 1,942,500
NE Investment Fin. Auth. Single Fam. Mtge. RIBS
1,500,000 Ser. B, Government National Mortgage Assn. Coll. (GNMA), 11.419s, 3/15/22 AAA 1,567,500
7,070,000 Ser. 1, MBIA, GNMA Coll., 8-1/8s, 8/15/38 AAA 7,343,963
$10,853,963
Nevada (1.5%)
Clark Cnty., Indl. Dev. Rev. Bonds
$4,000,000 (NV Pwr. Co. Project), 7.8s, 6/1/20 Baa $ 4,175,000
4,850,000 (Southwest Gas Corp.), Ser. B,
7-1/2s, 9/1/32 Ba 4,722,688
$ 8,897,688
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS(b) VALUE
New Hampshire (0.9%)
$ 2,260,000 NH Higher Edl. & Hlth. Fac. Auth. Rev. Bonds (Alice Peck Day Memorial Hosp.
Project), 9-3/8s, 11/1/20 BAA/P $ 2,293,900
2,800,000 NH State Indl. Dev. Auth. Poll. Control Rev. Bonds (United Illuminating
Co.), Ser. B, 10-3/4s, 10/1/12 Baa 3,192,000
$ 5,485,900
New Jersey (2.8%)
$ 3,000,000 NJ Econ. Dev. Auth. Elec. Energy Fac. Rev. Bonds (Vineland Cogeneration
L.P. Project), 7-7/8s, 6/1/19 BB/P $ 3,120,000
2,000,000 NJ Econ. Dev. Auth. Rev. Bonds (Tevco Inc. Project), 8-1/8s, 10/1/09 A/P 2,137,500
NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds
4,680,000 (Mountainside Hosp.), Ser. A, 9s, 8/1/25 AA 4,931,550
5,000,000 (St. Elizabeth Hosp.), Ser. B, 8-1/4s, 7/1/20 Baa 5,281,250
1,500,000 Union Cnty., Util. Auth. Solid Waste Rev. Bonds, Ser. A, 7.2s, 6/15/14 A 1,481,250
$16,951,550
New York (4.6%)
NY City, General Obligation (G.O.) Bonds,
$ 7,000,000 Ser. F, 8-1/4s, 11/15/10 A $ 7,761,250
4,925,000 Ser. D, Group C, 8s, 8/1/01 Aaa 5,651,438
NY State Urban Dev. Corp. Rev. Bonds (Correctional Fac.), Financial
Security Assurance, Inc. (FSA),
10,685,000 5-1/2s, 1/1/15 Baa 8,975,400
6,000,000 5-1/2s, 1/1/15 Baa 5,106,600
$27,494,688
North Carolina (1.5%)
$10,500,000 NC Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev. Bonds, Ser. B, 6s, 1/1/22 A $ 9,161,250
Ohio (4.1%)
$ 1,950,000 Dayton, Special Fac. Rev. Bonds (Emery Air Freight Corp.), Ser. A, 12-1/2s,
10/1/09 B/P $ 2,254,688
20,000,000 OH State Air Quality Dev. Auth. Poll. Control Rev. Bonds (Cleveland Co.
Project), FGIC, 8s, 12/1/13 AAA 22,450,000
$24,704,688
Oklahoma (1.1%)
$ 3,000,000 Oklahoma Cnty., Indl. Auth. Rev. Bonds (Epworth Villa Project), Ser. A,
10-1/4s, 4/1/19 BB/P $ 3,258,750
Tulsa, Indl. Auth. Hosp. Rev. Bonds (Tulsa Regl. Med. Ctr.),
2,500,000 7.2s, 6/1/17 BBB 2,346,875
1,080,000 7s, 6/1/06 BBB 1,071,900
$ 6,677,525
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS(b) VALUE
Pennsylvania (2.3%)
$4,000,000 Allegheny Cnty., Indl. Dev. Auth. Arpt. Special Facs. Rev. Bonds (USAir
Inc. Project), Ser. B, 8-1/2s, 3/1/21 B $ 3,620,000
4,000,000 Geisinger, Auth. Hlth. Syst. Rev. Muni. Cap. Rev. Bonds, Ser. A, 5.45s,
7/1/22 AA 3,930,000
6,000,000 PA State Higher Edl. Assistance Agcy. Student Loan, RIBS, Ser. B, MBIA,
11.062s, 3/1/20 AAA 6,367,500
$13,917,500
South Carolina (0.9%)
$5,000,000 SC State Hsg. Fin. & Dev. Auth. Multi-Fam. Mtge. Rev. Bonds 8-1/2s, 10/1/21 BBB $ 5,443,750
Tennessee (1.5%)
$8,840,000 Metro. Nashville & Davidson Cnty., Hlth. & Edl. Fac. Board Rev. Bonds
(Vanderbilt U.), Ser. A, 10-1/2s, 12/1/14 A $ 9,049,950
Texas (7.3%)
$2,850,000 Amarillo, Hlth. Fac. Hosp. Corp. RIBS (High Plains Baptist Hosp.),
Financial Security Assurance, Inc. (FSA), 9.353s, 1/3/22 AAA $ 2,614,875
3,200,000 Bexar Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds (Heartway Corp.), Ser. A-1,
10-1/4s, 3/1/19 B/P 3,388,000
(St. Luke's Lutheran Hosp. Project),
500,000 7.9s, 5/1/18 A 513,750
3,200,000 7.9s, 5/1/11 A 3,328,000
7,250,000 Brazos River, Poll. Control Auth. Rev. Bonds (TX Utils. Elec. Co. Project),
Ser. A,
7-7/8s, 3/1/21 Baa 7,621,563
5,000,000 Dallas-Fort Worth, Intl. Arpt. Fac. Impt. Corp. Rev. Bonds (American
Airlines, Inc.),
7-1/2s, 11/1/25 Baa 4,725,000
Houston, Hsg. Fin. Corp. Single Fam. Mtge. Rev. Bonds
2,556,000 Ser. A, Verex Mtg. Ins., 10-7/8s, 2/15/16 Baa 2,603,925
2,065,000 (Lomas & Nettleton Administration Co.), Ser. B, 10-3/8s, 12/15/13 Baa 2,111,463
3,000,000 Southeast TX Hsg. Fin. Corp. Multi-Fam. Hsg. Rev. Bonds (Bayou Pk. Village
Apt. Project), Ser. B, 10.175s, 8/1/16 B/P 3,015,000
2,500,000 (Promenade Place Apts. Project), Ser. B, 10.175s, 8/1/16 B/P 2,484,375
5,000,000 (Pavilion Place Apts. Project), Ser. A,
7.6s, 7/1/16 BBB/P 5,006,250
3,000,000 Tarrant Cnty., Hlth. Facs. Dev. Corp. Hosp. Rev. Bonds (Cmnty. Hlth. Care
Fndtn. Inc. Project), 10-1/8s, 4/1/21 B/P 3,112,500
4,000,000 Tomball, Hosp. Auth. Rev. Bonds
6-1/8s, 7/1/23 Baa 3,280,000
$43,804,701
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS(b) VALUE
Virginia (0.9%)
$5,400,000 Fredericksburg, Indl. Dev. Auth. Hosp. Fac. RIBS, FGIC, 9.773s, 8/15/23 AAA $ 5,123,250
Washington (2.9%)
WA State Pub. Pwr. Supply Syst. Rev. Bonds (Nuclear Project No. 1),
$9,685,000 Ser. A, Prerfdg, 7-1/2s, 7/1/15 AA $ 10,641,394
6,315,000 Ser. A, Rfdg, 7-1/2s, 7/1/15 AA 6,670,219
$ 17,311,613
Total Investments (cost $587,687,697)(e) $585,997,067
</TABLE>
<PAGE>
NOTES
(a) Percentages indicated are based on total net assets of $596,991,556. Net
assets available to common shareholders are $421,754,447, which corresponds
to a net asset value per common share of $9.49.
(b) The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at October 31, 1994 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 indicated do not necessarily represent
ratings which the agencies would ascribe to these securities at October 31,
1994. Securities rated by Putnam are indicated by "/P" and are not publicly
rated. Ratings are not covered by the Report of Independent Accountants.
(c) Non-income-producing security.
(d) Restricted, excluding 144A securities, as to public resale. At the date of
acquisition, these securities were valued at cost. There were no outstanding
unrestricted securities of the same class as those held. Total market value
of restricted securities owned at October 31, 1994 was $7,753,125 or 1.3% of
net assets.
(e) The aggregate identified cost for federal income tax purposes is
$587,863,540, resulting in gross unrealized appreciation and depreciation of
$16,894,009, and $18,760,482, respectively, or net unrealized depreciation of
$1,866,473.
The rates shown on Residual Interest Bonds (RIBS) which are securities paying
variable rates that vary inversely to changes in market interest rates,
Floating rate notes, Variable Certificates of Participation (COP) and
Variable Rate Demand Notes (VRDN) are the current interest rates at October
31, 1994, which are subject to change based on the terms of the security.
The fund had the following industry group concentrations greater than 10% on
October 31, 1994 (as a percentage of net assets):
Health Care 26.5%
Utilities 14.3
Transportation 12.4
The table below shows the percentage of the fund's investments at October 31,
1994 assigned to the various rating categories by Moody's and Standard and
Poor's and in unrated securities determined by Putnam Management to be of
comparable quality.
Unrated securities of
Rated securities comparable quality,
as percentage of as percentage of
Rating Fund's net assets Fund's net assets
"AAA"/"Aaa" 18.4% 0.6%
"AA"/"Aa" 10.5 --
"A"/"A" 12.0 1.6
"BBB"/"Baa" 29.9 5.2
"BB"/"Ba" 3.8 4.3
"B"/"B" 3.0 8.5
VMIG1 0.1 --
VMIG3 --
0.3
The accompanying notes are an integral of these financial statements.
<PAGE>
Statement of assets and liabilities
October 31, 1994
<TABLE>
<S> <C>
Assets
Investments in securities, at value (identified cost $587,687,697) (Note 1) $585,997,067
Interest receivable 14,375,967
Receivable for securities sold 13,904,512
Total assets 614,277,546
Liabilities
Payable to subcustodian (Note 3) 928,993
Distributions payable to shareholders 2,822,551
Payable for securities purchased 12,251,633
Payable for compensation of Manager (Note 3) 1,066,057
Payable for administrative services (Note 3) 4,782
Payable for investor servicing and custodian fees (Note 3) 85,046
Other accrued expenses 126,928
Total liabilities 17,285,990
Net assets $596,991,556
Represented by
Series A, B, and C remarketed preferred shares, without par value; 8,000
shares authorized (1,750 shares issued at $100,000 per share liquidation
preference) (Note 2) $175,000,000
Common shares, without par value; unlimited shares authorized; 44,449,876
shares outstanding 409,823,599
Undistributed net investment income 18,238,370
Accumulated net realized loss on investments (4,379,783)
Net unrealized depreciation of investments (1,690,630)
Net assets $596,991,556
Computation of net asset value
Remarketed preferred shares at liquidation preference $175,000,000
Cumulative undeclared dividends on remarketed preferred shares 237,109
Net assets allocated to remarketed preferred shares at liquidation preference 175,237,109
Net assets available to common shares: Net asset value per share $9.49
($421,754,447 divided by 44,449,876 shares) 421,754,447
Net assets $596,991,556
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of operations
Year ended October 31, 1994
Tax exempt income $ 47,130,238
Expenses:
Compensation of Manager (Note 3) 4,250,515
Investor servicing and custodian fees (Note 3) 514,749
Compensation of Trustees (Note 3) 20,962
Auditing 51,549
Reports to shareholders 74,757
Legal 14,023
Postage 84,271
Administrative services (Note 3) 13,859
Exchange listing fees 38,157
Preferred share remarketing agent fees 463,579
Other 13,322
Total expenses 5,539,743
Net investment income 41,590,495
Net realized loss on investments (Notes 1 and 4) (5,006,849)
Net realized gain on futures (Notes 1 and 4) 728,251
Net unrealized depreciation of investments during the year (56,090,200)
Net loss on investments (60,368,798)
Net decrease in net assets resulting from operations $(18,778,303)
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of changes in net assets
<TABLE>
<CAPTION>
Year ended
October 31
1994 1993
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income $ 41,590,495 $ 42,995,265
Net realized gain (loss) on investments (5,006,849) 4,171,187
Net realized gain (loss) on futures contracts 728,251 (80,733)
Net unrealized appreciation (depreciation) of investments (56,090,200) 40,690,659
Net increase (decrease) in assets resulting from operations (18,778,303) 87,776,378
Distributions to remarketed prefered shareholders from net
investment income (4,753,458) (4,480,767)
Net increase (decrease) in assets resulting from operations
applicable to common shareholders (excluding cumulative
undeclared dividends on remarketed preferred shares of
$237,109 and $161,821 respectively) (23,531,761) 83,295,611
Distributions to common shareholders from:
Net investment income (33,732,841) (33,293,276)
Net realized gain on investments (4,069,833) (3,434,385)
Increase from capital share transactions, common shares 5,504,121 5,405,135
Total increase (decrease) in net assets (55,830,314) 51,973,085
Net assets
Beginning of year 652,821,870 600,848,785
End of year (including undistributed net investment income
of $18,238,370 and $15,145,211 respectively) $596,991,556 $652,821,870
Number of fund shares
Common shares outstanding at beginning of year 43,918,097 43,395,575
Common shares issued in connection with reinvestment of
distributions 531,779 522,522
Common shares outstanding at end of year 44,449,876 43,918,097
Remarketed preferred shares outstanding at end of year 1,750 1,750
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Financial Highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
February 24, 1989
(commencement
of operations) to
Year ended October 31 October 31
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period
(common shares) $ 10.88 $ 9.81 $ 9.44 $ 8.94 $ 9.31 $ 9.30
Investment Operations:
Net Investment Income .94 .98 1.01 1.02 1.02 .54
Net Realized and Unrealized Gain
(Loss) on Investments (1.37) 1.04 .26 .44 (.35) --*
Total from Investment Operations (.43) 2.02 1.27 1.46 .67 .54
Distributions to Shareholders from:
Net Investment Income to Preferred
Shareholders (.11) (.11) (.14) (.20) (.25) (.02)
to Common Shareholders (.76) (.76) (.76) (.76) (.76) (.47)
Net Realized Gain on Investments to
Common Shareholders (.09) (.08) -- -- (.02) --
Total Distributions (.96) (.95) (.90) (.96) (1.03) (.49)
Change in Cumulative Undeclared
Dividends on Remarketed Preferred
Shares -- -- -- -- -- (.01)
Initial Offering Expenses -- -- -- -- (.01) (.03)
Net Asset Value, End of Period
(common shares) $ 9.49 $ 10.88 $ 9.81 $ 9.44 $ 8.94 $ 9.31
Market Value, End of Period
(common shares) $ 9.25 $ 11.38 $ 9.88 $ 10.00 $ 8.88 $ 9.50
Total Investment Return at Market
Value (common shares) (%) -11.56 24.84 6.72 22.33 1.72 -0.17(b)
Net Assets, End of Period
(Total Fund) (in thousands) $596,992 $652,660 $600,849 $580,495 $555,583 $567,749
Ratio of Expenses to Average Net
Assets (%)(a) 1.23 1.22 1.24 1.33 1.29 .62(b)
Ratio of Net Investment Income to
Average Net Assets (%)(a) 9.20 8.44 8.94 8.92 8.39 5.76(b)
Portfolio Turnover Rate (%) 48.40 35.16 67.72 49.62 41.48 107.11(b)
</TABLE>
* The amount shown in this caption, while mathematically determinable by the
summation of amounts computed daily is also the balancing figure derived from
the other figures in the statement and has been so computed.
(a) Ratios reflect net assets available to common shares only; net investment
income ratio also reflects reduction for dividend payments to preferred
shareholders.
(b) Not annualized.
<PAGE>
Notes to financial statements
October 31, 1994
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company. The fund's
investment objective is to seek a high level of current income exempt from
federal income tax. The fund intends to achieve its objective by investing in
a diversified portfolio of tax-exempt municipal securities which Putnam
believes does not involve undue risk to income or principal. Up to 50% of the
fund's assets may consist of high- yield tax-exempt municipal securities that
are below investment grade and involve special risk considerations. The fund
also uses leverage by issuing preferred shares in an effort to increase the
income to the common shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Security valuation Tax-exempt bonds and notes are stated on the basis of
valuations provided by a pricing service, approved by the Trustees, which
uses information with respect to transactions in bonds, quotations from bond
dealers, market transactions in comparable securities and various
relationships between securities in determining value. The fair value of
restricted securities is determined by the Manager following procedures
approved by the Trustees, and such valuations and procedures are reviewed
periodically by Trustees.
B Determination of net asset value Net asset value of the common shares is
determined by dividing the value of all assets of the fund (including accrued
interest and dividends), less all liabilities (including accrued expenses),
and the liquidation value of any outstanding remarketed preferred shares, by
the total number of common shares outstanding.
C Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis.
D Federal taxes It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986. Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation of securities held and excise tax on
income and capital gains.
At October 31, 1994, the fund had capital loss carryovers of approximately
$3,958,000, available to offset future realized capital gains, if any. This
amount will expire October 31, 2002. To the extent that capital loss
carryovers are used to offset realized gains, it is unlikely that gains so
offset will be distributed to shareholders, since any such distribution might
be taxable as ordinary income.
E Distributions to shareholders Distributions to common and preferred
shareholders are recorded by the fund on the ex-dividend date. Dividends on
each share of remarketed preferred shares will accumulate from its Date of
Original Issue and will be payable, when, as and if declared by the Board of
Trustees, on the applicable Dividend Payment Dates. The dividend period
<PAGE>
for Series A and B is a 28-day period, and the dividend period for Series C
is a 7-day period. The applicable dividend rates for the remarketed preferred
shares on October 31, 1994 were: Series A 3.300%; Series B 3.375%; Series C
3.293%.
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. For the
period ended October 31, 1994 there were no current adjustments as a result
of the AICPA Statement of Position (SOP) 93-2 "Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of
Capital Distributions, by Investment Companies."
F Amortization of bond premium and discount Any premium resulting from the
purchase of securities in excess of maturity value is amortized on a
yield-to-maturity basis. Discount on zero-coupon bonds, original issued
discount bonds and step-up bonds is accreted according to the effective yield
method.
Note 2
Remarketed Preferred Shares
On September 28, 1989 the fund issued 550 shares Series A Remarketed
Preferred (RP), 550 shares Series B RP and 650 shares Series C RP
(collectively, the "Original RP"). The Original RP Shares are redeemable at
the option of the fund on any dividend payment date at a redemption price of
$100,000 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.
Undeclared dividends on preferred shares on October 31, 1994 amounted to
$237,109.
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, as amended. To the extent that the fund earns taxable income
and capital gains by the conclusion of a fiscal year, it will be required to
apportion to the holders of the remarketed preferred shares throughout that
year additional dividends as necessary to result in an after-tax yield
equivalent to the applicable dividend rate for the period. For the year ended
October 31, 1994, the fund has earned no such taxable income or gains.
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 the 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
October 31, 1994, no such restrictions have been placed on the fund.
Note 3
Management fee, administrative services, and other transactions
Compensation of Putnam Investment Management for management and investment
advisory services, is paid quarterly based on the average net assets of the
fund, including proceeds from the remarketed preferred offering. Such fee is
based on the annual rate of 0.70% of the first $500 million, 0.60% of the
next $500 million, 0.55% of the next $500 million and 0.50% of any amount
over $1.5 billion.
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
<PAGE>
fund's net income attributable to the proceeds of the remarketed preferred
shares during that period, then the fee payable to Putnam for that period
will be reduced by the amount of the excess (but not more than .70% of the
liquidation preference of the remarketed preferred shares outstanding during
the period).
The fund also reimburses the Manager 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. For the year ended
October 31, 1994, the fund paid $13,859 for these services.
Trustees of the fund receive an annual Trustee's fee of $1,290 and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of the Manager and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.
Custodial functions for the fund are provided by Putnam Fiduciary Trust
Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing
agent functions for the fund's common shares are currently provided by Putnam
Investor Services, Inc., a division of PFTC. Fees paid for these investor
servicing and custodial functions for the year ended October 31, 1994,
amounted to $514,749.
Investor servicing and custodian fees reported in the Statement of Operations
for the year ended October 31, 1994, have been reduced by credit allowed by
PFTC.
As part of the custodian contract between Putnam Fiduciary Trust Company and
the sub-custodian bank, the subcustodian bank has a lien on the securities of
the fund to the extent permitted by the fund's investment restrictions to
cover any advances made by the sub-custodian for the settlement of securities
purchased by the fund. At October 31, 1994 the payable to subcustodian
represents the amount due for cash advanced for the settlement of a security
purchase.
Note 4
Purchases and sales of securities
During the year ended October 31, 1994, purchases and sales of investment
securities other than short-term investments aggregated $307,130,395 and
$296,656,225, respectively. Purchases and sales of short-term obligations
aggregated $138,285,000 and $156,585,000, respectively. In determining the
net gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
Note 5
Reclassification of Capital Accounts
Effective November 1, 1993, Putnam Managed Municipal Income Trust has adopted
the provisions of Statement of Position 93-2 (SOP) "Determination, Disclosure
and Financial Statement Presentation of Income, Capital Gain and Return of
Capital Distributions by Investment Companies". The purpose of this SOP is to
report the accumulated net investment income (loss) and accumulated net
realized gain (loss) accounts in such a manner as to approximate amounts
available for future distributions (or to offset future realized capital
gains) and to achieve uniformity in the presentation of distributions by
investment companies.
As a result of the SOP, the fund has reclassified $11,037 to decrease
undistributed net investment income and $11,033 to increase accumulated net
realized gain and $4 to increase additional paid-in capital.
These adjustments represent the cumulative amounts necessary to report these
balances through October 31, 1993, the close of the fund's prior fiscal year
end for financial reporting and tax purposes.
<PAGE>
Selected Quarterly Data
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
October 31 July 31 April 30 January 31
1994 1994 1994 1994
<S> <C> <C> <C> <C>
Total investment income
Total $ 11,693,577 $ 11,598,178 $ 11,884,996 $ 11,953,487
Per Share+ $ .26 $ .26 $ .27 $ .27
Net investment income available to
common shareholders
Total $ 8,924,821 $ 8,899,135 $ 9,602,081 $ 9,411,000
Per Share+ $ .20 $ .20 $ .22 $ .21
Net realized and unrealized gain (loss)
on investments and futures
Total $(22,814,166) $ (76,157) $(40,050,878) $ 2,572,403
Per Share+ $ (.51) $ -- $ (.92) $ .06
Net increase (decrease) in net assets
available to common shareholders
resulting from operations
Total $(13,889,345) $ 8,822,978 $(30,448,797) $ 11,983,403
Per Share+ $ (.31) $ .20 $ (.70) $ .27
Net assets available to common
shareholders at end of period
Total $421,754,447 $443,326,292 $441,574,763 $479,160,197
Per Share+ $ 9.49 $ 9.99 $ 9.98 $ 10.87
</TABLE>
<TABLE>
<CAPTION>
Three months ended
October 31 July 31 April 30 January 31
1993 1993 1993 1993
<S> <C> <C> <C> <C>
Total investment income
Total $ 12,131,634 $ 12,114,324 $ 12,113,227 $ 12,176,829
Per Share+ $ .28 $ .28 $ .28 $ .27
Net investment income available to common
shareholders
Total $ 9,644,213 $ 9,601,179 $ 9,772,176 $ 9,469,930
Per Share+ $ .21 $ .22 $ .23 $ .21
Net realized and unrealized gain on
investments and futures
Total $ 12,792,002 $ 8,635,842 $ 7,911,957 $ 15,441,312
Per Share+ $ .30 $ .20 $ .18 $ .36
Net increase in net assets available to
common shareholders resulting from
operations
Total $ 22,436,215 $ 18,237,021 $ 17,684,133 $ 24,938,242
Per Share+ $ .51 $ .42 $ .41 $ .57
Net assets available to common
shareholders at end of period
Total $477,660,049 $462,370,289 $451,177,789 $440,618,960
Per Share+ $ 10.88 $ 10.56 $ 10.33 $ 10.11
</TABLE>
+Per common share
<PAGE>
Federal Tax information
The Fund has designated all net investment income dividends paid during the
fiscal year as exempt-interest dividends. The fund has also distributed
$0.0340 and $0.0590 per share as short term and long term capital gains
respectively.
The Form 1099 you will receive in January 1995 will show the tax status of
any taxable distributions paid to your account in calendar 1994, if any. The
income distributions from each state will also be reported to you at this
time.
<PAGE>
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
James E. Erickson
Vice President
Blake Anderson
Vice President
Howard K. Manning
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Managed
Municipal Income Trust. It may also be used as sales literature when preceded
or accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and the
most recent copy of Putnam's Quarterly Performance Summary.
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
052-15435
</TEXT>
</DOCUMENT>
</IMS-DOCUMENT>
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