-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ebs8LGru45bAd8ixxgZPzDcdo8IYEcEcDeIsXpDAT0YZpOa+Ay14MZ/VQ6pQoVCx X+Ey/Fx7woZVEBU5Tx7BMg== 0000928816-96-000204.txt : 19960726 0000928816-96-000204.hdr.sgml : 19960726 ACCESSION NUMBER: 0000928816-96-000204 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960725 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM INVESTMENT GRADE MUNICIPAL TRUST CENTRAL INDEX KEY: 0000855048 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046629611 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05901 FILM NUMBER: 96598732 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQUARE CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 MAIL ADDRESS: STREET 1: ONE POST OFFICE SQU CITY: BOSTON STATE: MA ZIP: 02109 N-30D 1 PUTNAM INVESTMENT GRADE MUNICIPAL TRUST Putnam Investment Grade Municipal Trust SEMIANNUAL REPORT May 31, 1996 [LOGO: BOSTON * LONDON * TOKYO] Fund highlights * "[G]iven that 1996 is an election year, the popularity of tax deductions and complexity of implementing any substantial changes to the tax codes help make the outlook for the muni market optimistic." -- The Value Line Mutual Fund Survey, March 19, 1996 *"[I]n the months ahead, municipal bond funds may begin to provide investors fewer bumps and better returns, many bond analysts say . . . . Investors are becoming skittish about the sky-high returns on equity funds and are beginning to seek some less-risky tax-free income; yields on municipal bonds hover around an attractive 6 percent range, and investors in some tax-high states can do better on an after-tax basis investing in municipals than in Treasuries." -- The New York Times, April 7, 1996 CONTENTS 4 Report from Putnam Management 8 Fund performance summary 11 Portfolio holdings 17 Financial statements From the Chairman [GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM] (copyright) Karsh, Ottawa Dear Shareholder: One of the fascinating things about market watching is that you can never tell what's going to trigger a defining event. Often what seems like a defining event one moment is history the next. Who would have guessed, for example, that a flat-tax proposal would swirl out of the presidential primary election campaign to douse the municipal bond market, only to blow away just as the rest of the bond market was stumbling on statistics suggesting that inflation might flare up? These were some of the challenges facing Fund Manager Michael F. Bouscaren during the first half of Putnam Investment Grade Municipal Trust's fiscal year, the six months ended May 31, 1996. Mike handled them with his usual aplomb as the results on the following pages reveal. Besides having the luxury of leaving the day-to-day details to Mike, shareholders with a long-term investment perspective have the added advantage of being able to let such events run their course without undue concern. Respectfully yours, /S/George Putnam George Putnam Chairman of the Trustees July 17, 1996 Report from the Fund Manager Michael F. Bouscaren As Putnam Investment Grade Municipal Trust began fiscal 1996, slowing economic growth, low interest rates, and low inflation had created an appealing environment for fixed-income investments. However, by the fiscal year's midpoint on May 31, 1996, the bond market was dancing to a different beat. Stronger-than-expected employment growth had fueled fears of inflation, signaling a possible end to the Federal Reserve Board's program of lowering short-term interest rates and bringing the 10-month bond market rally to an abrupt halt. Your fund was poised to adapt to this changing economic environment. Although sector weightings and core holdings remained essentially unchanged throughout the period, we maximized the fund's potential by exploring opportunities nationwide, purchasing bonds in states in which economic activity was accelerating and maintaining those holdings that continued to provide combinations of attractive income and possible appreciation. For the semiannual period, the fund's common shares provided a total return of -2.03% at net asset value and 1.84% at market price. * DURATION ADJUSTMENTS HELP FUND RESPOND TO CHANGING CONDITIONS Adjusting duration in response to interest-rate trends is an important component of the fund's strategy. Duration is a measure of the portfolio's maturity structure and reflects the price sensitivity of portfolio holdings to changes in interest rates. Typically, bonds with longer maturities are more sensitive to these changes and, as a result, may offer greater potential for appreciation when rates are declining. Since the direction of interest rates was uncertain at the period's start, we reviewed the portfolio duration in the expectation of a rising-rate environment -- something of a worst-case scenario. At the beginning of the period, the portfolio's duration was a relatively long 10 years. In light of recent volatility, it seemed prudent to us to reduce this to 7 1/2 years, and we were able to accomplish the shift by period's end. The move proved timely; it softened the impact of the market decline as bond prices readjusted to the prospect of a stronger economy. More recently, we've seen indications that this may not, in fact, be the case; the employment and inflation data that sparked the market downward appear to reflect short-term anomalies rather than true forecasts of a change in direction. However, whether or not the Fed makes a change in its interest-rate policy, our decision to acquire additional short- to intermediate-term municipal bonds will bolster the fund's level of call protection -- another important consideration in a volatile rate environment. * FUND BENEFITS FROM PROSPERING STATE ECONOMIES We are considering selling additional New York, New Jersey, and Pennsylvania bonds and increasing the fund's holdings in Texas and California securities. The California and Texas economies are currently growing faster than the national average, the result of flourishing new businesses, rising employment rates, and accelerating residential construction. When a state economy is strengthening, investor perceptions of its bonds improve, the risk of any interruption in interest payments lessens, and demand for the bonds may well increase. This sequence of events, in turn, can lead to higher prices for the bonds. [GRAPHIC OMITTED; horizontal bar chart TOP INDUSTRY SECTORS*] Utilities 13.6% Transportation 8.5% Housing 8.4% Water and sewerage 6.9% Hospitals 6.1% Footnote reads: Based on net assets as of 5/31/96. Holdings will vary over time. Bonds issued to support the new Denver International Airport remain as a significant portfolio position because of their favorable income and credit features. Current law prohibits many municipal issuers from refunding outstanding bonds with lower-cost debt. However, issuers do have the ability to make tender offers, giving bondholders the opportunity to sell securities back to them at an agreed-upon price. Issuers generally must pay bondholders above-market prices to persuade them to tender their higher-coupon securities. Although there was an offer to tender higher-coupon Denver airport bonds in March, we did not offer the bonds for sale, since we perceived the tender prices to be unattractive. Some of your fund's income is generated by the selective use of leveraging strategies. With this approach, the fund issues preferred shares that pay dividends at prevailing short-term rates. These shares are sold to corporate and institutional investors; the resulting assets are then invested in longer-term bonds with higher yields. The difference between the rates paid to holders of preferred shares and the rates earned by the fund augment the flow of income to holders of common shares. Since the yield curve steepened during the reporting period, resulting in a profitable spread between short- and long-term yields, the fund's leveraging strategies proved to be beneficial. * FADING FLAT-TAX FEARS HELP IMPROVE INVESTOR PERSPECTIVES During the past several months, investors have been particularly sensitive to the potential effects of the flat-tax proposal being considered by Congress. In its purest form, the flat tax would deprive municipal bonds of their advantage as tax-exempt investments. Although such discussions have influenced the municipal market for more than a year now, investor concerns and fears have recently subsided, since the flat tax did not appear to be a near-term event after all. Although we expect discussions of broader tax reform to reappear this fall as the presidential election nears, our current assessment is that any radical changes to the tax code now appear unlikely. As a result, investors may rediscover overlooked tax-advantaged opportunities. An increase in investor demand is likely to have a beneficial effect on municipal bond valuations. [GRAPHIC OMITTED: pie chart PORTFOLIO QUALITY OVERVIEW*] A 16.3% Aa 5.9% Aaa 46.3% B 0.9% Ba 6.5% Baa 22.4% Caa 0.1% VMG1 1.6% Footnote reads: *As a percentage of market value as of 5/31/96. A bond rated Baa or higher is considered investment grade. All ratings reflect Moody's descriptions, unless noted otherwise.These may include unrated bonds judged by Putnam management to be of considerable quality. Ratings will vary over time. * GUARDED APPROACH NECESSARY A steadily growing economy presents a challenging environment for fixed- income investing and clearly requires a more cautious strategy. Careful attention to bond structure and emphasis on larger, well-known issuers will play an important role in enhancing the price stability and liquidity of your fund for the remainder of its fiscal period. On a cheerier note, the summer months have historically been friendly to municipal bonds, since cash from interest payments and bond calls is frequently reinvested in the tax-exempt market. New-issue supply over the next few months is not expected to keep pace with this year's potential demand, creating the opportunity for a favorable supply/demand imbalance. Sustained interest from nontraditional buyers, including banks and insurance companies, could provide further support. In addition, as the risk of a flat tax diminishes, municipal returns could continue to outpace those of taxables throughout the course of the year. The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of 5/31/96, there is no guarantee the fund will continue to hold these securities in the future. Performance summary Performance should always be considered in light of a fund's investment strategy. Putnam Investment Grade Municipal Trust is designed for investors seeking high current income free from federal income tax and consistent with preservation of capital. This section provides, at a glance, information about your fund's performance. Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. TOTAL RETURN FOR PERIODS ENDED 5/31/96 NAV Market price - ------------------------------------------------------------------------ 6 months -2.03% 1.84% - ------------------------------------------------------------------------ 1 year 4.26 12.06 - ------------------------------------------------------------------------ 5 years 56.03 69.32 Annual average 9.31 11.11 - ------------------------------------------------------------------------ Life of fund (since 10/26/89) 76.01 84.87 Annual average 8.94 9.76 - ------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 5/31/96 Lehman Bros. Municipal Consumer Bond Index Price Index - ------------------------------------------------------------------------ 6 months -0.58% 1.95% - ------------------------------------------------------------------------ 1 year 4.57 2.89 - ------------------------------------------------------------------------ 5 years 41.06 15.49 Annual average 7.12 2.92 - ------------------------------------------------------------------------ Life of fund (since 10/26/89) 62.31 24.68 Annual average 7.64 3.40 - ------------------------------------------------------------------------ Performance data for common shares represent past results and do not reflect future performance. They do not take into account any adjustment for taxes payable on reinvested distributions. Investment returns, net asset value, and market price will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. TOTAL RETURN FOR PERIODS ENDED 6/30/96 (most recent calendar quarter) NAV Market price - ------------------------------------------------------------------------ 6 months -2.92% 0.29% - ------------------------------------------------------------------------ 1 year 5.16 10.25 - ------------------------------------------------------------------------ 5 years 56.68 66.42 Annual average 9.40 10.72 - ------------------------------------------------------------------------ Life of fund (since 10/26/89) 76.61 84.87 Annual average 8.89 9.64 - ------------------------------------------------------------------------ PRICE AND DISTRIBUTION INFORMATION 6 months ended 5/31/96 Distributions (common shares) (number) 6 - ------------------------------------------------------------------------ Income $0.480 - ------------------------------------------------------------------------ Total $0.480 - ------------------------------------------------------------------------ (Preferred shares) Series A (1400 shares) - ------------------------------------------------------------------------ Income $1,955.89 - ------------------------------------------------------------------------ Capital gains1 32.17 - ------------------------------------------------------------------------ Total $1,988.06 - ------------------------------------------------------------------------ Share value: (common shares) NAV Market price - ------------------------------------------------------------------------ 11/30/95 $12.37 $13.50 - ------------------------------------------------------------------------ 5/31/96 11.68 13.25 - ------------------------------------------------------------------------ Current return: (common shares) (end of period) - ------------------------------------------------------------------------ Current dividend rate2 8.22% 7.25% - ------------------------------------------------------------------------ Taxable equivalent3 13.61 12.00 - ------------------------------------------------------------------------ 1Capital gains, if any, are taxable for federal, and in most cases, state tax purposes. For some investors, investment income may also be subject to the federal alternative minimum tax. Investment income may be subject to state and local taxes. 2Income portion of most recent distribution, annualized and divided by NAV or market price at end of period. 3Assumes maximum 39.60% federal tax rate. Results for investors subject to lower tax rates would not be as advantageous. TERMS AND DEFINITIONS Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, the liquidation preference and cumulative undeclared dividends paid on the remarketed preferred shares, divided by the number of outstanding 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 BENCHMARKS Lehman Brothers Municipal Bond Index is an unmanaged list of long-term fixed-rate investment-grade tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund. It is not possible to invest directly in an index. Consumer Price Index (CPI) is a commonly used measure of inflation; it does not represent an investment return.
Portfolio of investments owned May 31,1996 (Unaudited) Key to Abbreviations AMBAC -- AMBAC Indemnity Corporation COP -- Certificate of Participation FGIC -- Financial Guaranty Insurance Company FHA Insd. -- Federal Housing Administration FSA -- Financial Security Assurance GNMA Coll. -- Government National Mortgage Association Collateralized G.O. Bonds -- General Obligation Bonds IFB -- Inverse Floating Rate Bonds MBIA -- Municipal Bond Investors Assurance Corporation VRDN -- Variable Rate Demand Notes MUNICIPAL BONDS AND NOTES (94.2%)* PRINCIPAL AMOUNT RATINGS ** VALUE Alabama (1.7%) - ---------------------------------------------------------------------------------------------------------------------------- $5,500,000 Gadsden East, Med. Clinic Board Rev. Bonds (Baptist Hosp. of Gadsden Inc.), Ser. A, 7.8s, 11/1/21 BBB $6,345,625 Arizona (1.1%) - ---------------------------------------------------------------------------------------------------------------------------- 4,000,000 Gila Cnty., Indl. Dev. Auth. Poll. Control Rev. Bonds (Asarco Inc. Project), Ser. 85, 8.9s, 7/1/06 Baa 4,261,760 California (10.8%) - ---------------------------------------------------------------------------------------------------------------------------- 1,500,000 CA Hlth. Facs. Fin. Auth. VRDN (St. Joseph Hlth. Syst.), Ser. A, 3.4s, 7/1/13 VMIG1 1,500,000 4,650,000 CA State U. IFB AMBAC 9.787s, 11/1/21 (aquired various dates from 8/5/91 to 8/31/94, cost $4,659,603) (double dagger) AAA 5,248,688 6,800,000 CA State G.O. Bonds 6.4s, 7/1/13 A 7,344,000 3,000,000 CA State G.O. Bonds 6 1/4s, 9/1/08 A 3,202,500 5,200,000 Central Valley Fin. Auth. Rev. Bonds (Carson Ice-Cogeneration Project), 6s, 7/1/09 BBB 4,992,000 10,000,000 Foothill/Eastern Trans. Corridor Agcy. Rev. Bonds (CA Toll Rd.), Ser. A, zero %, 1/1/09 Baa 5,975,000 1,580,000 Los Angeles, Regl. Arpt. Impt. Corp. Rev. Bonds (Western Air Lines, Inc. - Delta Air LineS, Inc.), 11 1/4s, 11/1/25 Baa 1,655,066 2,800,000 Orange Cnty., Local Trans. Auth. Sales Tax Rev. Bonds, FGIC, 6.1s, 2/14/11 Aaa 2,807,000 2,550,000 Orange Cnty., Pub. Fac. Corp. COP (Solid Waste Management), 7 7/8s, 12/1/13 Baa 2,658,375 5,000,000 U. of CA Rev. Bonds (UCSD Med. Ctr. Satellite Med. Fac.), 7.9s, 12/1/19 (aquired 3/2/92, cost $5,229,150) (double dagger) BBB 5,450,000 ------------ 40,832,629 Colorado (7.7%) - ---------------------------------------------------------------------------------------------------------------------------- Denver, City & Cnty. Arpt. Rev. Bonds, Ser. A 1,000,000 8 3/4s, 11/15/23 Baa 1,176,250 4,775,000 8 1/2s, 11/15/23 Baa 5,467,375 4,900,000 8 1/4s, 11/15/12 Baa 5,561,500 5,200,000 8s, 11/15/25 Baa 5,817,500 Denver, City & Cnty. Arpt. Rev. Bonds, Ser. D 7,000,000 7 3/4s, 11/15/21 Baa 7,708,750 3,000,000 7 3/4s, 11/15/13 Baa 3,457,500 ------------ 29,188,875 Connecticut (0.6%) - ---------------------------------------------------------------------------------------------------------------------------- 2,000,000 CT State Res. Recvy. Auth. Rev. Bonds (Bridgeport Service Fee), Ser. A, 7 1/2s, 1/1/09 A 2,100,000 Florida (4.1%) - ---------------------------------------------------------------------------------------------------------------------------- 12,000,000 Broward Cnty. Resource Recvy. Rev. Bonds (SES Broward Cnty. LP South Project), 7.95s, 12/1/08 A 13,185,000 2,000,000 Hernando Cnty. Indl. Dev. Rev. Bonds (FL Crushed Stone Co.), 8 1/2s, 12/1/14 B/P 2,167,500 ------------ 15,352,500 Georgia (2.5%) - ---------------------------------------------------------------------------------------------------------------------------- 4,000,000 Burke Cnty. Dev. Auth. Control Rev. Bonds (Oglethorpe Pwr. Co. Vogtle Proj.), MBIA, 8s, 1/1/22 AAA 4,680,000 4,800,000 De Kalb Cnty., Muni. Hsg. Auth. Rev. Bonds (Briarcliff Park Apts. Project), Ser. A, 7 1/2s, 4/1/17 A 4,878,000 ------------ 9,558,000 Hawaii (1.2%) - ---------------------------------------------------------------------------------------------------------------------------- 4,500,000 HI State Dept. of Budget & Fin. Special Purpose Mtge. IFB, (Citizens Utility Co.), Ser 91-B, 9.187s, 11/1/21 AAA 4,843,125 Illinois (2.6%) - ---------------------------------------------------------------------------------------------------------------------------- 10,000,000 Chicago Schl. Dist. Fin. Auth. Rev. Bonds, Ser. A, MBIA 4 1/2s, 6/1/01 AAA 9,812,500 Indiana (0.3%) - ---------------------------------------------------------------------------------------------------------------------------- 1,000,000 Indiana Bond Bank Note (Special Loan Program), Ser. B, 8 1/2s, 2/1/18 A 1,065,000 Kansas (1.4%) - ---------------------------------------------------------------------------------------------------------------------------- 5,000,000 Burlington Poll. Control Rev. Bonds (Kansas Gas & Electric Co. Project), MBIA, 7s, 6/1/31 AAA 5,443,750 Louisiana (6.1%) - ---------------------------------------------------------------------------------------------------------------------------- 5,000,000 St. Charles Parish Poll. Control Rev. Bonds (LA Pwr. & Lt.), 8s, 12/1/14 Baa 5,437,500 W. Feliciana Parish Poll. Control Rev. Bonds 2,500,000 (Gulf States Utils. Co.) 8s, 12/1/24 Ba 2,653,125 5,100,000 (Gulf States Utils. II) 7.7s, 12/1/14 Ba 5,450,624 3,000,000 (Gulf States Utils. III) 7.7s, 12/1/14 Ba 3,206,206 6,000,000 (Gulf States Utils. Co.) Ser. A, 7 1/2s, 5/1/15 Ba 6,315,000 ------------ 23,062,499 Maryland (0.6%) - ---------------------------------------------------------------------------------------------------------------------------- 2,000,000 MD, State Hlth. & Higher Edl. Facs. Auth. Rev. Bonds (Doctors Cmnty. Hosp.), 8 3/4s, 7/1/12 AAA 2,330,000 Massachusetts (4.1%) - ---------------------------------------------------------------------------------------------------------------------------- 8,750,000 MA State Hlth. & Edl. Fac. Auth. IFB (Med. Ctr. of Central MA), Ser. B, AMBAC, 9.12s, 6/23/22 AAA 9,570,313 5,000,000 MA State Indl. Fin. Agcy. Rev. Bonds (Cape Cod Hlth. Syst. Issue), 8 1/2s, 11/15/20 Aaa 5,837,500 ------------ 15,407,813 Michigan (3.8%) - ---------------------------------------------------------------------------------------------------------------------------- 2,200,000 Detroit Wtr. Supply Syst. Rev. IFB, FGIC, 8.714s, 7/1/22 AAA 2,277,000 1,755,000 Detroit, Loc. Dev. Fin. Auth. Tax Increment Rev. Bonds, Ser. A, 9 1/2s, 5/1/21 BBB/P 2,123,550 6,000,000 Greater Detroit Resource Recvy. Auth. Rev. Bonds Ser, A, AMBAC 5s, 12/12/2 AAA 5,962,500 1,690,000 Highland Park, Fin. Auth. Hosp. Fac. Rev. Bonds (MI Hlth. Care Corp. Project), Ser. A, 9 3/4s, 12/1/06(In Default) + Caa 473,200 3,000,000 MI State Strategic Fund Rev. Bonds (Mercy Svcs. for Aging Project), 9.4s, 5/15/20 BBB/P 3,397,500 ------------ 14,233,750 Mississippi (1.5%) - ---------------------------------------------------------------------------------------------------------------------------- 4,950,000 Claiborne Cnty. Poll. Control Rev. Bonds (Middle South Energy, Inc.), Ser. C, 9 7/8s, 12/1/14 Ba 5,556,375 Missouri (0.7%) - ---------------------------------------------------------------------------------------------------------------------------- 2,500,000 MD State Hlth. & Edl. Facs. Rev. Bonds (BJC Hlth. Syst.), Ser. A, 6 1/2s, 5/15/20 Aa 2,671,875 Montana (2.4%) - ---------------------------------------------------------------------------------------------------------------------------- 8,900,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds (Whispering Lake Project), Ser. A-11, FSA, 7.1s, 1/1/30 AAA 9,244,875 Nebraska (2.7%) - ---------------------------------------------------------------------------------------------------------------------------- 2,400,000 NE Investment Fin. Auth. Single Fam. Mtge. IFB, Ser. B, GNMA Coll., 11.141s, 3/15/22 AAA 2,655,000 7,065,000 NE Invt. Fin. Auth. Single Fam. Mtge. Rev. Bonds, Ser. 1, MBIA, 8 1/8s, 8/15/38 AAA 7,418,250 ------------ 10,073,250 Nevada (1.8%) - ---------------------------------------------------------------------------------------------------------------------------- 6,500,000 Clark Cnty. Indl. Dev. Rev. Bonds (NV Pwr. Co. Project), 7.8s, 6/1/20 Baa 6,971,250 New Jersey (0.3%) - ---------------------------------------------------------------------------------------------------------------------------- 1,000,000 NJ State G.O. Bonds Ser. E, 6s, 7/15/3 Aa 1,063,750 New York (12.3%) - ---------------------------------------------------------------------------------------------------------------------------- 9,070,000 NY City, Muni. Assit. Corp. G.O. Bonds Ser. E, 4.8s, 7/1/3 Aa 8,967,961 NY City Muni. Wtr. Fin. Auth. Wtr. & Swr. VRDN 1,400,000 Ser. A, FGIC 3.8s, 6/15/25 VMIG1 1,400,000 2,500,000 Ser G, FGIC 3.7s, 6/15/24 VMIG1 2,500,000 6,000,000 Ny City, Muni. Wtr. Fin. Auth. Wtr. & Swr. Rev. Bonds Ser. C, 7 3/4s, 6/15/20 Aaa 6,885,000 NY State Dorm. Auth. Rev. Bonds ( City U. Syst.) 4,500,000 Ser. F, 7 7/8s, 7/1/17 AAA 5,118,750 6,250,000 Ser. A, 7.7s, 5/15/12 AAA 7,046,875 2,000,000 Ser. A, 7 5/8s, 7/1/20 AAA 2,255,000 2,985,000 NY State Med. Care Facs. Fin. Agcy. Rev. Bonds (Mental Hlth. Svcs, Facs. ) Ser. A, 7 3/4s, 8/15/11 Aaa 3,402,900 2,450,000 NY State Energy Research & Dev. Auth. Elec. Fac. Rev. Bonds (Cons. Edison Co. of NY, Inc. Project), Ser. A, 7 3/4s, 1/1/24 A 2,578,625 NY State Urban Dev. Corp. Rev. Bonds 1,535,000 (Syracuse U. Ctr.) 6s, 1/1/8 Baa 1,511,975 2,960,000 (Correctional Cap. Facs. ) Ser. 5, MBIA, AAA 2,763,900 1,115,000 Riverton Hsg. Corp. Mtge. Rev. Bonds (Conifer Genesee Apts. Sect. 8), FHA Insd., 10 1/2s, 1/15/25 A 1,161,540 1,000,000 United Nations Dev. Corp. Rev. Bonds, Ser. A, 6s, 7/1/26 A 970,000 ------------ 46,562,526 Ohio (1.6%) - ---------------------------------------------------------------------------------------------------------------------------- 5,000,000 OH State Air Quality Dev. Auth. Rev. Bonds (Cleveland Co. Project), FGIC, 8s, 12/1/13 AAA 5,881,250 Oklahoma (0.3%) - ---------------------------------------------------------------------------------------------------------------------------- 1,000,000 Tulsa OK Univeristy Indl. Dev. Rev. Bonds. MBIA 6s, 10/01/2016 AAA 1,021,250 Pennslyvania (4.9%) - ---------------------------------------------------------------------------------------------------------------------------- 3,270,000 Alleghny Cnty. Resc. Fin. Auth. Mtge. Rev. Bonds (Single Fam.-GNMA Mtge. Backed Secs.), GNMA Coll., Ser. M, 7.9s, 6/1/11 AAA 3,408,975 5,000,000 Montgomery Cnty., Indl. Dev. Auth. Rev. Bonds, 7 1/2s, 1/1/12 A 5,231,250 2,000,000 PA Intergovernmental Coop. Auth. Rev. Bonds, FGIC, 5 1/2s, 6/15/16 AAA 1,900,000 7,600,000 PA State Higher Ed. Assistance Agcy. IFB, Ser. B, MBIA, 8.253s, 3/1/20 AAA 8,189,000 ------------ 18,729,225 Puerto Rico (0.7%) - ---------------------------------------------------------------------------------------------------------------------------- 3,000,000 Cmnwlth of PR, Hwy & Trans. Auth. Rev. Bonds, Ser Y, 5 1/2s, 07/01/2036 A 2,722,500 South Dakota (3.6%) - ---------------------------------------------------------------------------------------------------------------------------- 13,100,000 SD State Bldg. Auth. COP (Building Authority), Ser. A, 7 1/2s, 12/1/16 A 13,536,885 Tennessee (3.8%) - ---------------------------------------------------------------------------------------------------------------------------- 2,600,000 Metro. Nashville & Davidson Cnty. Tenn. Wtr. & Swr. IFB, AMBAC, 8.216s, 1/1/22 AAA 2,616,250 10,900,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds (Steeplechase Falls Project), Ser. A-10, FSA, 7 1/8s, 1/1/30 AAA 11,731,126 ------------ 14,347,376 Texas (7.0%) - ---------------------------------------------------------------------------------------------------------------------------- 2,500,000 Bexar Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds (St. Luke's Lutheran Hosp. Project), 7.9s, 5/1/11 AAA/P 2,909,375 2,300,000 Dallas Waterworks & Swr. Syst. Rev. Bonds, 4 1/2s, 4/1/14 Aa 1,934,875 16,000,000 North Central TX Hlth. Fac. Dev. Corp. Rev. Bonds (Presbyterian Hlth. Syst.), MBIA, 6.685s, 6/22/21 AAA 16,680,000 4,500,000 TX State Nat'l Research Lab Communication Superco, 7 1/8s, 4/1/20 Aaa 4,950,000 ------------ 26,474,250 Washington (1.7%) - ---------------------------------------------------------------------------------------------------------------------------- 6,075,000 WA State Pub. Pwr. Supply Syst. Rev. Bonds (Nuclear Project No. 1), Ser. A, 7 1/2s, 7/1/15 Aa 6,530,625 West Virginia (0.3%) - ---------------------------------------------------------------------------------------------------------------------------- 1,400,000 Marion Cnty. Cmnty. Solid Waste Disp. Fac. Rev. Bonds (American Pwr. Paper Recycling Project), 8 1/4s, 12/1/11 B/P 980,000 - ---------------------------------------------------------------------------------------------------------------------------- Total Investments (cost $346,655,411)*** $356,205,088 - ---------------------------------------------------------------------------------------------------------------------------- * Percentages indicated are based on net assets of $378,054,261. Net assets available to common shareholders are $238,040,683. *** The aggregate identified cost on a tax basis is $346,893,536, resulting in gross unrealized appreciation and depreciation of $13,710,453 and $4,398,901, respectively, or net unrealized appreciation of $9,311,552. ** The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at May 31, 1996 for the securities listed. Ratings are generally sascribed 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 May 31, 1996. Securities rated by Putnam are indicated by "/P" and are not publicly rated. + Non Income-producing security. ++ Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held by the fund at May 31, 1996 was $10,698,688 or 2.8% of net assets. The fund had the following industry group concentration greater than 10% of net assets at May 31, 1996: Utilities 13.6% The fund had the following insurance concentrations greater than 10% of net assets at May 31, 1996: MBIA 16.8% AMBAC 11.1% The rates shown on IFB, which are securities paying interest rates that vary inversely to changes in the market interest rates, and VRDN's are the current interest rates at May 31, 1996. - ----------------------------------------------------------------- Futures contracts outstanding at May 31, 1996 Aggregate Face Expiration Unrealized Total Value Value Date Appreciation - ------------------------------------------------------------------------- UST Bonds (Short) $13,441,406 $135,519,531 Sep 96 $78,125 - ------------------------------------------------------------------------- The accompanaying notes are an integral part of these financial statements.
Statement of assets and liabilities May 31, 1996 (Unaudited) Assets - ------------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $346,655,411) (Note 1) $356,205,088 - ------------------------------------------------------------------------------------------------- Cash 191,453 - ------------------------------------------------------------------------------------------------- Interest receivable 6,735,551 - ------------------------------------------------------------------------------------------------- Receivable for securities sold 42,207,093 - ------------------------------------------------------------------------------------------------- Receivable for variation margin 216,630 - ------------------------------------------------------------------------------------------------- Total assets 405,555,815 Liabilities - ------------------------------------------------------------------------------------------------- Distributions payable to shareholders 1,712,476 - ------------------------------------------------------------------------------------------------- Payable for securities purchased 24,996,051 - ------------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 684,482 - ------------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 51,904 - ------------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 300 - ------------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 1,379 - ------------------------------------------------------------------------------------------------- Other accrued expenses 54,962 - ------------------------------------------------------------------------------------------------- Total liabilities 27,501,554 - ------------------------------------------------------------------------------------------------- Net assets $378,054,261 Represented by - ------------------------------------------------------------------------------------------------- Series A Remarketed preferred shares (1,400 shares issued and outstanding at $100,000 per share liquidation preference) (Note 4) $140,000,000 - ------------------------------------------------------------------------------------------------- Paid in capital-common shares (Note 1) 225,182,073 - ------------------------------------------------------------------------------------------------- Undistributed net investment income (Note 1) 9,803,208 - ------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments (Note 1) (6,558,822) - ------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments 9,627,802 - ------------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $378,054,261 Computation of net asset value: - ------------------------------------------------------------------------------------------------- Remarketed preferred shares at liquidation preference $140,000,000 - ------------------------------------------------------------------------------------------------- Cumulative undeclared dividends on remarketed preferred shares 13,578 - ------------------------------------------------------------------------------------------------- Net assets allocated to remarketed preferred shares $140,013,578 - ------------------------------------------------------------------------------------------------- Net assets available to common shares $238,040,683 - ------------------------------------------------------------------------------------------------- Net asset value per common share ($238,040,683 divided by 20,379,278 shares) $11.68 - ------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Statement of operations Six months ended May 31, 1996 (Unaudited) Tax exempt interest income: $12,713,359 - ------------------------------------------------------------------------------------------------------ Expenses: - ------------------------------------------------------------------------------------------------------ Compensation of Manager (Note 2) 1,356,406 - ------------------------------------------------------------------------------------------------------ Investor servicing and custodian fees (Note 2) 130,739 - ------------------------------------------------------------------------------------------------------ Compensation of Trustees (Note 2) 7,360 - ------------------------------------------------------------------------------------------------------ Administrative services (Note 2) 4,069 - ------------------------------------------------------------------------------------------------------ Reports to shareholders 18,998 - ------------------------------------------------------------------------------------------------------ Registration fees 75 - ------------------------------------------------------------------------------------------------------ Auditing 16,384 - ------------------------------------------------------------------------------------------------------ Legal 2,857 - ------------------------------------------------------------------------------------------------------ Postage 25,649 - ------------------------------------------------------------------------------------------------------ Exchange listing fees 16,588 - ------------------------------------------------------------------------------------------------------ Preferred share remarketing agent fees 193,556 - ------------------------------------------------------------------------------------------------------ Other 3,136 - ------------------------------------------------------------------------------------------------------ Total expenses 1,775,817 - ------------------------------------------------------------------------------------------------------ Expense reduction (Note 2) (47,853) - ------------------------------------------------------------------------------------------------------ Net expenses 1,727,964 - ------------------------------------------------------------------------------------------------------ Net investment income 10,985,395 - ------------------------------------------------------------------------------------------------------ Net realized gain on investments (Notes 1 and 3) 570,222 - ------------------------------------------------------------------------------------------------------ Net realized gain on futures contracts (Notes 1 and 3) 611,297 - ------------------------------------------------------------------------------------------------------ Net unrealized depreciation of investments and futures contracts during the period (13,955,754) - ------------------------------------------------------------------------------------------------------ Net loss on investments (12,774,235) - ------------------------------------------------------------------------------------------------------ Net decrease in net assets resulting from operations ($1,788,840) - ------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets Six months ended Year ended May 31 November 30 1996* 1995 - ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets - ------------------------------------------------------------------------------------------------------------------- Operations: - ------------------------------------------------------------------------------------------------------------------- Net investment income $10,985,395 $23,652,493 - ------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 1,181,519 (5,837,577) - ------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investments (13,955,754) 30,521,242 - ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (1,788,840) 48,336,158 - ------------------------------------------------------------------------------------------------------------------- Distributions to remarketed preferred shareholders: - ------------------------------------------------------------------------------------------------------------------- From net investment income (2,738,246) (5,504,552) - ------------------------------------------------------------------------------------------------------------------- From net realized gains (45,038) - - ------------------------------------------------------------------------------------------------------------------- In excess of net realized gains - (107,562) - ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations applicable to common shareholders (excluding cumulative undeclared income dividends on remarketed preferred shares of $13,578 and $161,420, respectively) (4,572,124) 42,724,044 - ------------------------------------------------------------------------------------------------------------------- Distributions to common shareholders: - ------------------------------------------------------------------------------------------------------------------- From net investment income (9,760,269) (18,869,148) - ------------------------------------------------------------------------------------------------------------------- In excess of net realized gains - (492,000) - ------------------------------------------------------------------------------------------------------------------- Increase from capital share transactions from issuance of common shares 1,383,894 2,826,196 - ------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (12,948,499) 26,189,092 - ------------------------------------------------------------------------------------------------------------------- Net Assets - ------------------------------------------------------------------------------------------------------------------- Beginning of period 391,002,760 364,813,668 - ------------------------------------------------------------------------------------------------------------------- End of period (including undistributed net investment income of $9,803,208 and $11,316,328, respectively) $378,054,261 $391,002,760 - ------------------------------------------------------------------------------------------------------------------- Number of fund shares - ------------------------------------------------------------------------------------------------------------------- Common shares outstanding at beginning of period 20,272,824 20,039,145 - ------------------------------------------------------------------------------------------------------------------- Common shares issued in connection with reinvestment of distributions 106,454 233,679 - ------------------------------------------------------------------------------------------------------------------- Common shares outstanding at end of period 20,379,278 20,272,824 - ------------------------------------------------------------------------------------------------------------------- Remarketed preferred shares outstanding at beginning and end of period 1,400 1,400 - ------------------------------------------------------------------------------------------------------------------- *Unaudited The accompanying notes are an integral part of these financial statements.
Financial highlights (For a share outstanding throughout the period) Six months ended May 31, Year ended November 30 -------------------------------------------------------------------- 1996 * 1995 1994 1993 1992 1991 -------------------------------------------------------------------- Net asset value, beginning of period (common shares) $12.37 $11.22 $13.44 $12.36 $11.51 $11.03 - --------------------------------------------------------------------------------------------------------------------- Investment operations - --------------------------------------------------------------------------------------------------------------------- Net investment income .54 1.17 1.20 1.32 1.35 1.27 - --------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (.61) 1.23 (2.03) .91 .65 .43 - --------------------------------------------------------------------------------------------------------------------- Total from investment operations (.07) 2.40 (.83) 2.23 2.00 1.70 - --------------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------------- From net investment income - --------------------------------------------------------------------------------------------------------------------- to Common Shareholders (.48) (.94) (.97) (.96) (.91) (.89) - --------------------------------------------------------------------------------------------------------------------- to Preferred Shareholders (.14) (.28) (.19) (.16) (.24) (.29) - --------------------------------------------------------------------------------------------------------------------- From net realized gain on investments - --------------------------------------------------------------------------------------------------------------------- to Common Shareholders -- -- (.21) -- -- -- - --------------------------------------------------------------------------------------------------------------------- to Preferred Shareholders -- -- -- (.03) -- -- - --------------------------------------------------------------------------------------------------------------------- In excess of realized gains - --------------------------------------------------------------------------------------------------------------------- to Common Shareholders -- (.02) (.02) -- -- -- - --------------------------------------------------------------------------------------------------------------------- to Preferred Shareholders -- (.01) -- -- -- -- - --------------------------------------------------------------------------------------------------------------------- Total distributions (.62) (1.25) (1.39) (1.15) (1.15) (1.18) - --------------------------------------------------------------------------------------------------------------------- Preferred shares offering costs -- -- -- -- -- (.04) - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period (common shares) $11.68 $12.37 $11.22 $13.44 $12.36 $11.51 - --------------------------------------------------------------------------------------------------------------------- Market value, end of period (common shares) $13.25 $13.50 $11.88 $14.00 $13.25 $11.88 - --------------------------------------------------------------------------------------------------------------------- Total investment return at market price (common shares) (%)(a) 1.84 (d) 22.95 (6.74) 13.54 20.24 14.23 - --------------------------------------------------------------------------------------------------------------------- Net assets, end of period (total fund) (in thousands) $378,054 $391,003 $364,814 $405,670 $381,681 $362,974 - --------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b)(c) .72 (d) 1.50 1.45 1.40 1.45 1.46 - --------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%)(b) 4.46 (d) 7.50 8.07 8.59 9.20 8.70 - --------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 104.86 (d) 122.65 78.97 33.73 44.39 72.49 - --------------------------------------------------------------------------------------------------------------------- * Unaudited (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) Ratio reflect net assets available to common shares only; net investment income ratio also reflects reduction for dividend payments to preferred shareholders. (c) The ratio of expenses to average net assets for the year ended November 30, 1995 and thereafter, include amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (See Note 3). (d) Not annualized
Notes to financial statements May 31, 1996 (Unaudited) 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 provide as high a level of current income exempt from federal income tax as is believed to be consistent with preservation of capital. The fund intends to achieve its objective by investing in a diversified portfolio of tax-exempt municipal securities that Putnam Investment Management ("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., believes do not involve undue risk to income or principal. Under normal market conditions, the fund will invest at least 80% of its total assets in tax-exempt municipal securities rated "investment grade" at the time of investment or, if not rated, determined by Putnam Management to be of comparable quality. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with generally accepted accounting principles and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates. Certain amounts from the prior year have been reclassified to conform with their current year presentation. 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. 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) less all liabilities (including accrued expenses and undeclared dividends on remarketed preferred shares) 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) 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. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by dealers. E) Federal taxes It is the policy of the fund to distribute all of its income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held and for excise tax on income and capital gains. F) Distributions to shareholders Distributions to common and preferred shareholders are recorded by the fund on the ex-dividend date. Dividends on remarketed preferred shares become payable when, as and if declared by the Trustees. Each dividend period for the remarketed preferred shares is generally a seven day period. The applicable dividend rate for the remarketed preferred shares on May 31, 1996 was 3.54%. 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. G) 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. Discounts on zero coupon bonds and original issue bonds are accreted according to the effective yield method. Note 2 Management fee, administrative services, and other transactions Compensation of Putnam Management for management and investment advisory services is paid quarterly based on the average net assets of the fund, including those allocated to the remarketed preferred shares. Such fee is based on the annual rate of 0.70% of the average weekly net assets. If dividends payable on remarketed preferred shares during any dividend payment period plus any expenses attributable to remarketed preferred shares for that period exceed the fund's net income attributable to the proceeds of the remarketed preferred shares during that period, then the fee payable to Putnam 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 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. Trustees of the fund receive an annual Trustees fee of $840 and an additional fee for each Trustee's meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees Fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Plan. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. For the six months ended May 31, 1996, fund expenses were reduced by $47,853 under expense offset arrangements with PFTC. Investor servicing and custodian fees reported in the Statement of operations exclude these credits. The fund could have invested a portion of the assets utilized in connection with the expense offset arrangements in an income producing asset if it had not entered into such arrangements. Note 3 Purchase and sales of securities During the six months ended May 31, 1996, purchases and sales of investment securities other than short-term investments aggregated $380,317,645 and $403,394,684 respectively. There were no purchases and sales of U.S. government obligations. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Note 4 Remarketed preferred shares The Series A remarketed preferred shares are redeemable at the option of the fund on any dividend payment date at a redemption price of $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. It is anticipated that dividends paid to holders of remarketed preferred shares will be considered tax-exempt dividends under the Internal Revenue Code of 1986. To the extent that the fund earns taxable income and capital gains by the conclusion of a fiscal year, it will be required to apportion to the holders of the remarketed preferred shares throughout that year additional dividends as necessary to result in an after-tax equivalent to the applicable dividend rate for the period. Under the Investment Company Act of 1940, the fund is required to maintain asset coverage of at least 200% with respect to the remarketed preferred shares as of the last business day of each month in which any such shares are outstanding. Additionally, the fund is required to meet more stringent asset coverage requirements under terms of the remarketed preferred shares and the shares' rating agencies. Should these requirements not be met, or should dividends accrued on the remarketed preferred shares not be paid, the fund may be restricted in its ability to declare dividends to common shareholders or may be required to redeem certain of the remarketed preferred shares. At May 31, 1996, no such restrictions have been placed on the fund.
Selected Quarterly Data (Unaudited) Net realized and Net increase (decrease) Investment Net investment unrealized gain in net assets income income* (loss) on investments* from operations* - ---------------------------------------------------------------------------------------------------------- Quarter Per Per Per Per Ended Total Share Total Share Total Share Total Share - ---------------------------------------------------------------------------------------------------------- 2/28/94 $7,111,996 $.35 $5,495,212 $.27 $(3,137,847) $(.15) $2,357,365 $.12 5/31/94 6,855,768 .35 5,062,217 .26 (16,604,981) (.84) (11,630,317) (.58) 8/31/94 6,585,179 .34 4,650,396 .24 616,807 .02 5,267,203 .26 11/30/94 6,977,508 .33 4,852,138 .24 (21,330,357) (1.06) (16,480,666) (.82) 2/28/95 6,674,323 .33 4,383,933 .22 15,132,946 .75 19,516,879 .97 5/31/95 6,817,481 .34 4,437,600 .22 2,944,726 .15 7,382,326 .37 8/31/95 6,665,460 .33 4,454,620 .22 (1,310,532) (.07) 3,144,088 .15 11/30/95 6,960,711 .35 4,784,941 .23 7,763,925 .39 12,574,346 .63 2/29/96 6,491,527 .32 4,306,717 .21 (1,770,768) (.09) 2,535,949 .12 5/31/96 6,221,832 .30 4,043,236 .19 (11,003,467) (.53) (6,960,231) (.34) * Available to common shareholders. 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 TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman Jameson Adkins Baxter Hans H. Estin John A. Hill Ronald J. Jackson Elizabeth T. Kennan Lawrence J. Lasser Robert E. Patterson Donald S. Perkins George Putnam, III Eli Shapiro A.J.C. Smith W. Nicholas Thorndike OFFICERS George Putnam President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President John D. Hughes Senior Vice President and Treasurer Lawrence J. Lasser Vice President Gordon H. Silver Vice President Gary N. Coburn Vice President James E. Erickson Vice President Michael F. Bouscaren Vice President and Fund Manager William N. Shiebler Vice President John R. Verani Vice President Paul M. O'Neil Vice President Beverly Marcus Clerk and Assistant Treasurer Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for up- to-date information about the fund's NAV. PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 - -------------- Bulk Rate U.S. Postage PAID Putnam Investments - -------------- 25865--058 7/96
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