-----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, I15DRH88D/iNYaR5SK9Q1FuOxj4Nh+a//EQVxbP/6ppEAocmsOteKdN7PsIR2Vo8 GDaI7XgsRTb1mqBSz8OBag== 0000928816-99-000237.txt : 19990723 0000928816-99-000237.hdr.sgml : 19990723 ACCESSION NUMBER: 0000928816-99-000237 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990531 FILED AS OF DATE: 19990722 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: SEC FILE NUMBER: 811-05901 FILM NUMBER: 99668535 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 ON PERFORMANCE AND OUTLOOK 5-31-99 [LOGO: BOSTON * LONDON * TOKYO] From the Chairman [GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM] [copyright] Karsh, Ottawa Dear Shareholder: Rising interest rates are not good news for bond investors, but the impact of this news in the municipal bond market was somewhat deflected in the face of steady demand for municipals and shrinking supply. Recently, long-term Treasuries edged past 6% for the first time in more than a year. Long-term municipal bond yields have risen too but not as dramatically, illustrating the resistance of the municipal market to a rise in interest rates. This relative stability in an uncertain rate environment has enabled Putnam Investment Grade Municipal Trust to deliver solid performance and attractive levels of income for the six months ended May 31, 1999. Total return for 6 months ended 5/31/99 Net asset value Market price - ---------------------------------------------------------------- 1.18% 0.77% - ---------------------------------------------------------------- Past performance is no indication of future results. Performance information for longer periods begins on page 6. * SUPPLY LOW; DEMAND REMAINS STRONG This year's climbing interest rates continued to take their toll on new-issue volume, as the national supply fell 40% compared with the spring of 1998. On the demand side, cash flow into municipal bonds has increased - -- a by-product of a volatile stock market and investors' need to rebalance their portfolios. The ensuing supply/demand relationship is positive for the municipal bond market and should help support bond prices in a rising interest-rate environment. [GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS] TOP INDUSTRY SECTORS* Utilities 24.9% Transportation 22.4% Health care 16.5% Housing 11.1% Education 7.1% Footnote reads: *Based on net assets as of 5/31/99. Holdings will vary over time. As interest rates have moved up, Fund Manager Richard Wyke has begun the process of increasing maturities incrementally in order to lock in higher yields. He cannot predict when interest rates will reach their peak, of course, but he does believe that this is a good time to implement this strategy. * EMPHASIS ON TRANSPORTATION, UTILITY SECTORS Rick has identified two industry sectors that continue to provide rewarding results: transportation and utilities. The economy's strength affords solid underpinnings for the transportation industry -- especially airlines and air freight. As an example, Denver City & County Airport revenue bonds continue to provide solid income for the fund. A record number of passengers traveled through this airport in 1998, and net income and revenues increased as well. "Though municipal bonds aren't the conspicuous value they were last year -- when yields on Treasury bonds and municipals were nearly identical -- tax-free bonds are still attractive." - -- Forbes, April 5, 1999 In the utility sector, Rick believes that while deregulation and restructuring are still in the early stages, the prices of many municipal electric utility bonds have already been fully discounted and now represent significant value. For example, two Nevada revenue bond issues, Southwest Gas Company and Nevada Power Company, contributed to the fund's positive performance. Nevada Power has a strong service territory with a concentration of nonnuclear power assets. The proposed merger of Southwest Gas with ONEOK would create the largest independent gas distributor in the United States. While these holdings, along with others discussed in this report, were viewed favorably at the end of the period, all are subject to review and adjustment in accordance with the fund's investment strategy and may vary in the future. [GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW] CREDIT QUALITY OVERVIEW* A -- 11.5% Baa/BBB -- 31.1% Ba/BB and below -- 8.7% Aaa/AAA -- 45.4% Aa/AA -- 3.3% Footnote reads: * As a percentage of market value as of 5/31/99. A bond rated Baa or higher is considered investment grade. All ratings reflect Standard & Poor's and Moody's descriptions unless noted otherwise; percentages may include unrated bonds considered by Putnam Management to be of comparable quality. Ratings will vary over time. * OUTLOOK: INFLATION SLIGHTLY HIGHER BUT STILL LOW With some indications that inflation may be starting to rise, the consumer price index is moving toward an annualized core inflation rate of approximately 2%. Since inflation in 1998 was practically nonexistent, a move to 2% may seem tremendous but is actually still well below the 4% that has generally been considered average. Despite some signs of inflation, we still live in a strong economy in a deflationary world in which many prices are falling. Just look at online stock trading prices and the discounts available from online bookstores for evidence of deflation. It is important to keep inflation in mind when investors determine what constitutes a good rate of return. Simply put, a yield of 6% with 2% inflation is still a solid return, especially once the psychology of an advancing stock market begins to shift. When that happens, a steady 4% after-tax, after-inflation yield looks exceptionally good in addition to the benefit of substantially less volatility. Respectfully yours, /S/GEORGE PUTNAM George Putnam Chairman of the Trustees July 21, 1999 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 5/31/99, there is no guarantee the fund will continue to hold these securities in the future. Performance summary This section provides information about your fund's performance, which should always be considered in light of its investment strategy. Putnam Investment Grade Municipal Trust is designed for investors seeking high current income free from federal income tax, consistent with preservation of capital. TOTAL RETURN FOR PERIODS ENDED 5/31/99 Lehman Bros. Market Municipal Consumer NAV price Bond Index price index - --------------------------------------------------------------------------- 6 months 1.18% 0.77% 0.80% 1.34% - --------------------------------------------------------------------------- 1 year 4.63 11.90 4.67 2.09 - --------------------------------------------------------------------------- 5 years 38.39 61.71 41.51 12.68 Annual average 6.71 10.09 7.19 2.42 - --------------------------------------------------------------------------- Life of fund (10/26/89) 118.98 151.20 105.16 32.32 Annual average 8.52 10.08 7.79 2.97 - --------------------------------------------------------------------------- Past performance is no assurance of future results. More recent returns may be more or less than those shown. 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 6/30/99 (most recent calendar quarter) NAV Market price - --------------------------------------------------------------------------- 6 months -0.38% -3.89% - --------------------------------------------------------------------------- 1 year 3.12 3.85 - --------------------------------------------------------------------------- 5 years 37.31 54.54 Annual average 6.55 9.10 - --------------------------------------------------------------------------- Life of fund (10/26/89) 116.34 143.92 Annual average 8.30 9.65 - --------------------------------------------------------------------------- Past performance is no assurance of future results. More recent returns may be more or less than those shown. They do not take into account any adjustment for taxes payable on reinvested distributions. Investment returns and principal value will fluctuate so that an investor's shares when sold may be worth more or less than their original cost. PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 5/31/99 - ----------------------------------------------------------------------------- Distributions (common shares) - ----------------------------------------------------------------------------- Number 6 - ----------------------------------------------------------------------------- Income $0.4812 - ----------------------------------------------------------------------------- Capital gains1 -- - ----------------------------------------------------------------------------- Total $0.4812 - ----------------------------------------------------------------------------- Preferred shares Series A (1,400 shares) - ----------------------------------------------------------------------------- Income $1,607.96 - ----------------------------------------------------------------------------- Capital gains1 -- - ----------------------------------------------------------------------------- Total $1,607.96 - ----------------------------------------------------------------------------- Share value (common shares) NAV Market price - ----------------------------------------------------------------------------- 11/30/98 $11.98 $14.937 - ----------------------------------------------------------------------------- 5/31/99 11.64 14.562 - ----------------------------------------------------------------------------- Current return (common shares/end of period) - ----------------------------------------------------------------------------- Current dividend rate2 8.25% 6.59% - ----------------------------------------------------------------------------- Taxable equivalent3 13.65 10.91 - ----------------------------------------------------------------------------- 1 Capital 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. 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. Terms and definitions Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities and the net assets allocated to remarketed preferred shares, divided by the number of outstanding common shares. Market price is the current trading price of one share of the fund. Market prices are set by transactions between buyers and sellers on the New York Stock Exchange. Comparative 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 and may pose different risks than the fund. Securities in the fund do not match those in the index and performance of the fund will differ. 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. A guide to the financial statements These sections of the report constitute the fund's financial statements. The fund's portfolio lists all the fund's investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification. Statement of assets and liabilities shows how the fund's net assets and share price is determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the net assets allocated to remarketed preferred shares.) Statement of operations shows the fund's net investment gain or loss for the reporting period. This is determined by adding up all the fund's earnings -- from dividends and interest income -- and subtracting its operating expenses. This statement also lists any net gain or loss the fund realized on the sales of its holdings and -- for holdings that remain in the portfolio -- any change in unrealized gains or losses over the period. Statement of changes in net assets shows how the fund's net assets were affected by distributions to shareholders and by changes in the number of the fund's shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the amounts listed in the Statement of Operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Financial highlights provide an overview of the fund's investment results, per-share distributions, expense ratios, net investment income ratios and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlight table also includes the current reporting period. For open-ended funds, a separate table is provided for each share class.
The fund's portfolio May 31, 1999 (Unaudited) KEY TO ABBREVIATIONS AMBAC -- AMBAC Indemnity Corporation COP -- Certificate of Participation FGIC -- Financial Guaranty Insurance Company 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 MUNICIPAL BONDS AND NOTES (97.4%) (a) PRINCIPAL AMOUNT RATING(RAT) VALUE Alabama (1.6%) - -------------------------------------------------------------------------------------------------------------------------- $ 5,500,000 Gadsden East, Med. Clinic Board Rev. Bonds (Baptist Hosp. of Gadsden Inc.), Ser. A, 7.8s, 11/1/21 BBB $ 6,105,000 Arkansas (1.1%) - -------------------------------------------------------------------------------------------------------------------------- 4,000,000 Northwest Regl. Apt. Auth. Rev. Bonds, 7s, 2/1/10 BB-/P 4,350,000 California (6.1%) - -------------------------------------------------------------------------------------------------------------------------- 2,000,000 Anaheim, Pub. Fin. Auth. IFB, MBIA, 9.32s, 12/28/18 Aaa 2,570,000 4,650,000 CA State U. IFB, AMBAC, 10.088s, 11/1/21 (acquired 3/2/92, cost $4,659,603) (RES) Aaa 5,295,188 1,750,000 CA Statewide Cmnty. Dev. Auth. COP (The Internext Group), 5 3/8s, 4/1/30 BBB 1,690,938 5,200,000 Central Valley Fin. Auth. Rev. Bonds (Carson Ice-Cogeneration), 6s, 7/1/09 BBB/P 5,499,000 Los Angeles Cnty., Metro. Trans. Auth. Sales Tax Rev. Bonds 3,235,000 1st Tier Lien, Ser. A, MBIA , 5 3/4s, 7/1/11 Aaa 3,558,500 3,030,000 2nd Tier Lien, MBIA 5 5/8s, 7/1/11 Aaa 3,310,275 1,400,000 Orange Cnty., Local Trans. Auth. IFB, FGIC, 8.468s, 2/14/11 (acquired 2/6/96, cost $1,474,153) (RES) Aaa 1,620,500 -------------- 23,544,401 Colorado (8.6%) - -------------------------------------------------------------------------------------------------------------------------- CO Hsg. Fin. Auth. Rev. Bonds (Single Fam.), Ser. B-2 2,000,000 7s, 5/1/26 Aa2 2,202,500 1,000,000 6.8s, 11/1/28 Aa2 1,111,250 Denver, City & Cnty. Arpt. Rev. Bonds 735,000 Ser. A, 8 3/4s, 11/15/23 Baa1 814,013 265,000 Prerefunded, Ser. A, 8 3/4s, 11/15/23 Aaa 299,781 4,365,000 Ser. A, 8 1/2s, 11/15/23 Baa1 4,686,919 Denver, City & Cnty. Arpt. Rev. Bonds 410,000 Prerefunded, Ser. A, 8 1/2s, 11/15/23 Aaa 445,875 4,480,000 Ser. A, 8 1/4s, 11/15/12 Baa1 4,816,000 420,000 Prerefunded, Ser. A, 8 1/4s, 11/15/12 Aaa 455,175 3,820,000 Ser. A, 8s, 11/15/25 Baa1 4,096,950 1,380,000 Prerefunded, Ser. A, 8s, 11/15/25 Aaa 1,511,100 6,330,000 Ser. A, 7 3/4s, 11/15/21 Baa1 6,891,788 1,670,000 Prerefunded, Ser. A, 7 3/4s, 11/15/21 Aaa 1,849,525 3,000,000 Ser. D, 7 3/4s, 11/15/13 Baa1 3,716,250 -------------- 32,897,126 Connecticut (1.8%) - -------------------------------------------------------------------------------------------------------------------------- 4,825,000 CT State Dev. Auth. Poll. Control Rev. Bonds (New England Power Co.), 7 1/4s, 10/15/15 A1 4,990,642 2,000,000 CT State Resource Recvy. Auth. Muni. Rev. Bonds (Bridgeport Service Fee), Ser. A, 7 1/2s, 1/1/09 A2 2,043,200 -------------- 7,033,842 Florida (3.5%) - -------------------------------------------------------------------------------------------------------------------------- 10,525,000 Broward Cnty., Resource Recvy. Rev. Bonds (SES Broward Cnty. LP South), 7.95s, 12/1/08 A3 11,029,674 2,000,000 Hernando Cnty., Indl. Dev. Rev. Bonds (FL Crushed Stone Co.), 8 1/2s, 12/1/14 B+/P 2,287,500 -------------- 13,317,174 Georgia (2.9%) - -------------------------------------------------------------------------------------------------------------------------- 4,000,000 Burke Cnty., Dev. Auth. Poll. Control Rev. Bonds (Oglethorpe Pwr. Co. Vogtle), MBIA, 8s, 1/1/22 Aaa 4,630,000 4,800,000 De Kalb Cnty., Muni. Hsg. Auth. Rev. Bonds (Briarcliff Park Apts.), Ser. A, 7 1/2s, 4/1/17 AAA 5,346,000 1,000,000 GA Med. Ctr. Hosp. Auth. IFB (Columbus Regl. Hlth. Care Syst.), Ser. B, MBIA, 9.104s, 8/1/10 Aaa 1,165,000 -------------- 11,141,000 Hawaii (1.6%) - -------------------------------------------------------------------------------------------------------------------------- 5,500,000 HI State Dept. of Budget & Fin. Special Purpose Mtge. IFB, 8.473s, 11/1/21 AA- 6,276,875 Illinois (5.3%) - -------------------------------------------------------------------------------------------------------------------------- 8,405,000 Chicago, Midway Arpt. Rev. Bonds, Ser. A, MBIA, 5 1/8s, 1/1/35 Aaa 7,911,206 Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds 2,335,000 (United Air Lines, Inc.), Ser. B, 8.95s, 5/1/18 Baa2 2,542,231 6,500,000 (American Airlines, Inc.), 8.2s, 12/1/24 Baa1 7,629,375 2,500,000 IL, Dev. Fin. Auth. Hosp. Rev. Bonds (Adventist Hlth. Syst./Sunbelt Obligation), 5.65s, 11/15/24 A- 2,428,125 -------------- 20,510,937 Indiana (2.5%) - -------------------------------------------------------------------------------------------------------------------------- 5,000,000 IN State Dev. Fin. Auth. Rev. Bonds (USX Corp.), 5.6s, 12/1/32 Baa2 4,887,500 215,000 Indiana Bond Bank Rev. Bonds (Special Loan Program), Ser. B, 8 1/2s, 2/1/18 A+ 218,548 3,000,000 Indianapolis Indl. Arpt. Auth. Special Fac. Rev. Bonds (United Airlines), Ser. A, 6 1/2s, 11/15/31 Baa2 3,221,250 1,000,000 Rockport, Indl. Poll. Ctrl. Rev. Bonds (Indiana- Michigan Pwr.), Ser. B, FGIC, 7.6s, 3/1/16 Aaa 1,077,500 -------------- 9,404,798 Kansas (1.3%) - -------------------------------------------------------------------------------------------------------------------------- 4,500,000 Burlington, Poll. Control Rev. Bonds (Kansas Gas & Electric Co.), MBIA, 7s, 6/1/31 Aaa 4,837,500 Kentucky (1.1%) - -------------------------------------------------------------------------------------------------------------------------- 4,000,000 Kenton Cnty., Special Fac. Arpt. Rev. Bonds (Delta Airlines), Ser. A, 7 1/2s, 2/1/12 Baa3 4,335,000 Louisiana (7.2%) - -------------------------------------------------------------------------------------------------------------------------- 9,250,000 St. Charles Parish, Poll. Control Rev. Bonds (LA Pwr. & Lt. Co.), 8s, 12/1/14 Baa3 9,667,638 W. Feliciana, Parish Poll. Control Rev. Bonds (Gulf States Util. Co.) 2,500,000 8s, 12/1/24 Ba1 2,589,450 5,100,000 Ser. II, 7.7s, 12/1/14 Ba1 5,565,375 3,000,000 Ser. III, 7.7s, 12/1/14 Ba1 3,273,750 6,000,000 Ser. A, 7 1/2s, 5/1/15 BB+ 6,555,000 -------------- 27,651,213 Maine (1.4%) - -------------------------------------------------------------------------------------------------------------------------- 5,000,000 ME Fin. Auth. Solid Waste Recycling Fac. Rev. Bonds (Great Northern Paper-Bowater), 7 3/4s, 10/1/22 Baa1 5,525,000 Maryland (1.4%) - -------------------------------------------------------------------------------------------------------------------------- 3,035,000 MD Econ. Dev. Corp. Hlth. Care Facs. Rev. Bonds (Crescent Cities), Ser. A, GNMA Coll., 5.45s, 12/20/37 AAA 3,038,794 2,000,000 MD State Hlth. & Higher Edl. Fac. Auth. Rev. Bonds (Doctors Cmnty. Hosp.), 8 3/4s, 7/1/12 Aaa 2,154,580 -------------- 5,193,374 Massachusetts (5.5%) - -------------------------------------------------------------------------------------------------------------------------- 8,750,000 MA State Hlth. & Edl. Fac. Auth. IFB (Med. Ctr. of Central MA), Ser. B, AMBAC, 9.47s, 6/23/22 Aaa 11,210,938 4,000,000 MA State Hlth. & Edl. Fac. Auth. Rev. Bonds (MA Eye & Ear Infirmary), Ser. A, 7 3/8s, 7/1/11 Baa3 4,355,000 5,000,000 MA State Indl. Fin. Agcy. Rev. Bonds (Cape Cod Hlth. Syst. Issue), 8 1/2s, 11/15/20 Aaa 5,450,000 -------------- 21,015,938 Michigan (2.0%) - -------------------------------------------------------------------------------------------------------------------------- 1,695,000 Detroit, Dev. Fin. Auth. Tax Increment Rev. Bonds, Ser. A, 9 1/2s, 5/1/21 BBB+/P 2,021,288 2,200,000 Detroit, Wtr. Supply Syst. IFB, FGIC, 9.17s, 7/1/22 Aaa 2,532,750 2,800,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds (Mercy Svcs. for Aging), 9.4s, 5/15/20 Aaa 2,976,764 -------------- 7,530,802 Missouri (3.2%) - -------------------------------------------------------------------------------------------------------------------------- 2,500,000 MO State Hlth. & Edl. Fac. Auth. Rev. Bonds (BJC Hlth. Syst.), Ser. A, 6 1/2s, 5/15/20 Aa2 2,803,125 8,900,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds (Whispering Lake), Ser. A-11, FSA, 7.1s, 1/1/30 Aaa 9,578,625 -------------- 12,381,750 Nebraska (0.4%) - -------------------------------------------------------------------------------------------------------------------------- 1,500,000 NE Investment Fin. Auth. Single Fam. Mtge. IFB, Ser. B, GNMA Coll., 11.623s, 3/15/22 Aaa 1,606,200 Nevada (2.6%) - -------------------------------------------------------------------------------------------------------------------------- Clark Cnty., Indl. Dev. Rev. Bonds 6,500,000 (NV Pwr. Co.), 7.8s, 6/1/20 Baa3 6,818,955 3,000,000 (Southwest Gas Corp.), Ser. B, 7 1/2s, 9/1/32 Baa2 3,273,750 -------------- 10,092,705 New York (6.2%) - -------------------------------------------------------------------------------------------------------------------------- 4,000,000 Long Island, Pwr. Auth. NY Elec. Syst. Rev. Bonds, Ser. A, 5 1/4s, 12/1/26 A- 3,910,000 2,000,000 NY City, Indl. Dev. Agcy. Rev. Bonds (Brooklyn Navy Yard Cogen. Partners), Ser. G, 5 3/4s, 10/1/36 Baa3 2,035,000 4,100,000 NY City, Muni. Wtr. & Swr. Fin. Auth. Rev. Bonds, Ser. C, 5 3/4s, 6/15/26 A1 4,279,375 NY State Dorm. Auth. Rev. Bonds 4,500,000 (City U. Syst.), Ser. F, 7 7/8s, 7/1/17 Aaa 4,803,930 6,250,000 (State U. Edl. Fac.), Ser. A, 7.7s, 5/15/12 Aaa 6,630,375 2,000,000 (City U. Syst.), Ser. A, 7 5/8s, 7/1/20 Aaa 2,130,940 -------------- 23,789,620 North Carolina (0.5%) - -------------------------------------------------------------------------------------------------------------------------- 2,000,000 NC Muni. Pwr. Agcy. Syst. Rev. Bonds, Ser. A, 5 3/4s, 1/1/26 BBB 2,000,000 Ohio (1.5%) - -------------------------------------------------------------------------------------------------------------------------- 5,000,000 OH State Air Quality Dev. Auth. Rev. Bonds (Cleveland Co.), FGIC, 8s, 12/1/13 Aaa 5,668,750 Pennsylvania (4.1%) - -------------------------------------------------------------------------------------------------------------------------- 2,000,000 Allegheny Cnty., Res. Fin. Auth. Rev. Bonds, Ser. M, GNMA Coll., 7.9s, 6/1/11 Aaa 2,080,000 5,000,000 Montgomery Cnty., Indl. Dev. Auth. Resource Recvy. Rev. Bonds, 7 1/2s, 1/1/12 A 5,243,750 7,600,000 PA State Higher Ed. Assistance Agcy. IFB, Ser. B, MBIA, 11.463s, 3/1/20 Aaa 8,407,500 -------------- 15,731,250 Tennessee (3.9%) - -------------------------------------------------------------------------------------------------------------------------- 2,600,000 Metropolitan Govt. Nashville & Davidson Cnty., Tenn. Wtr. & Swr. IFB, AMBAC, 8.783s, 1/1/22 Aaa 2,970,500 10,900,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds (Steeplechase Falls), Ser. A-10, FSA, 7 1/8s, 1/1/30 Aaa 11,990,000 -------------- 14,960,500 Texas (11.6%) - -------------------------------------------------------------------------------------------------------------------------- 11,500,000 Alliance, Arpt. Auth. Rev. Bonds (Federal Express Corp.), 6 3/8s, 4/1/21 Baa2 12,218,750 2,500,000 Bexar Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds (St. Luke's Lutheran Hosp.), 7.9s, 5/1/11 AAA/P 2,846,875 5,000,000 Brazos River, Poll. Control Auth. Rev. Bonds (TX Utils. Elec. Co.), Ser. A, 7 7/8s, 3/1/21 A3 5,362,500 2,500,000 Dallas-Fort Worth, Intl. Arpt. Fac. Impt. Corp. Rev. Bonds (American Airlines, Inc.), 7 1/2s, 11/1/25 Baa1 2,650,000 3,000,000 Houston, Arpt. Syst. Rev. Bonds (Continental), Ser. B, 5.7s, 7/15/29 Ba1 2,936,250 4,390,000 Matagorda Cnty., Poll. Control Rev. Bonds (Houston Pwr. & Lt. Co.), Ser. D, FGIC, 7.6s, 10/1/19 Aaa 4,531,354 8,000,000 North Central Hlth. Fac. Dev. Corp. IFB (Presbyterian Hlth. Care Syst.), Ser. C, MBIA, 9.605s, 6/22/21 Aaa 9,170,000 4,500,000 TX State G.O. Bonds (Nat'l. Research Lab. Communication Superconductor), 7 1/8s, 4/1/20 Aaa 4,729,410 -------------- 44,445,139 Utah (4.6%) - -------------------------------------------------------------------------------------------------------------------------- 3,000,000 Carbon Cnty., Solid Waste Disp. Rev. Bonds (Ladilaw Env.), Ser. A, 7.45s, 7/1/17 B/P 3,288,750 13,000,000 Utah Pwr. Supply Rev. Bonds (Intermountain Pwr. Agcy.), Ser. A, MBIA, 6.15s, 7/1/14 Aaa 14,495,000 -------------- 17,783,750 Vermont (1.4%) - -------------------------------------------------------------------------------------------------------------------------- 4,700,000 VT Edl. & Hlth. Bldg. Fin. Agcy. Rev. Bonds (Brattleboro Memorial Hosp.), 7s, 3/1/24 BBB+ 5,246,375 Wisconsin (2.5%) - -------------------------------------------------------------------------------------------------------------------------- 3,400,000 WI Hsg. & Econ. Dev. Auth. Rev. Bonds, Ser. B, 7.05s, 11/1/22 A1 3,616,750 5,600,000 WI State Hlth. & Edl. Fac. Auth. Rev. Bonds (United Hlth. Group, Inc.), Ser. B, MBIA, 5 1/2s, 2020 Aaa 5,768,000 -------------- 9,384,750 -------------- Total Municipal Bonds and Notes (cost $357,653,059) $ 373,760,769 PREFERRED STOCKS (0.5%) (a) (cost $2,000,000) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------------------- $ 2,000,000 MuniMae Tax Exempt Bond Subsidiary, LLC 144A, 6 7/8s, 6/30/49 (acquired 5/7/99, cost $2,000,000) (RES) BB/P $ 2,020,000 - -------------------------------------------------------------------------------------------------------------------------- Total Investments (cost $359,653,059) (b) $ 375,780,769 - -------------------------------------------------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $383,564,136. (RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at May 31, 1999 for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to these securities at May 31, 1999. Securities rated by Putnam are indicated by "/P" and are not publicly rated. (b) The aggregate identified cost on a tax basis is $359,653,059, resulting in gross unrealized appreciation and depreciation of $19,822,979 and $3,695,269, respectively, or net unrealized appreciation of $16,127,710. (RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held at May 31, 1999 was $8,935,688 or 2.3% of net assets. The rates shown on IFB's, which are securities paying interest rates that vary inversely to changes in the market interest rates, are the current interest rates at May 31, 1999. The fund had the following industry group concentrations greater than 10% at May 31, 1999 (as a percentage of net assets): Utilities 24.9% Transportation 22.4 Hospitals/health care 16.5 Housing 11.1 The fund had the following insurance concentration greater than 10% at May 31, 1999 (as a percentage of net assets): MBIA 17.6% The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities May 31, 1999 (Unaudited) Assets - ----------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $359,653,059 (Note 1) $375,780,769 - ----------------------------------------------------------------------------------------------- Cash 423,903 - ----------------------------------------------------------------------------------------------- Interest receivable 6,797,776 - ----------------------------------------------------------------------------------------------- Receivable for securities sold 3,009,792 - ----------------------------------------------------------------------------------------------- Total assets 386,012,240 Liabilities - ----------------------------------------------------------------------------------------------- Distributions payable to shareholders 1,674,152 - ----------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 686,640 - ----------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 31,057 - ----------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 11,786 - ----------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 1,116 - ----------------------------------------------------------------------------------------------- Other accrued expenses 43,353 - ----------------------------------------------------------------------------------------------- Total liabilities 2,448,104 - ----------------------------------------------------------------------------------------------- Net assets $383,564,136 Represented by - ----------------------------------------------------------------------------------------------- Series A remarketed preferred shares, (1,400 shares authorized and outstanding at $100,000 per share) (Note 4) $140,000,000 - ----------------------------------------------------------------------------------------------- Paid-in capital -- common shares (unlimited shares authorized) (Note 1) 232,541,343 - ----------------------------------------------------------------------------------------------- Undistributed net investment income (Note 1) 2,579,420 - ----------------------------------------------------------------------------------------------- Accumulated net realized loss on investments (Note 1) (7,684,337) - ----------------------------------------------------------------------------------------------- Net unrealized appreciation of investments 16,127,710 - ----------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $383,564,136 Computation of net asset value - ----------------------------------------------------------------------------------------------- Series A remarketed preferred shares $140,000,000 - ----------------------------------------------------------------------------------------------- Cumulative undeclared dividends on remarketed preferred shares 56,896 - ----------------------------------------------------------------------------------------------- Net assets allocated to remarketed preferred shares -- liquidation preference $140,056,896 - ----------------------------------------------------------------------------------------------- Net assets available to common shares $243,507,240 - ----------------------------------------------------------------------------------------------- Net asset value per common share ($243,507,240 divided by 20,927,598 shares) $11.64 - ----------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Statement of operations Six months ended May 31, 1999 (Unaudited) Tax exempt interest income: $12,936,943 - ----------------------------------------------------------------------------------------------- Expenses: - ----------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 1,335,526 - ----------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 155,634 - ----------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 4,988 - ----------------------------------------------------------------------------------------------- Administrative services (Note 2) 3,263 - ----------------------------------------------------------------------------------------------- Reports to shareholders 10,185 - ----------------------------------------------------------------------------------------------- Registration fees 75 - ----------------------------------------------------------------------------------------------- Auditing 36,005 - ----------------------------------------------------------------------------------------------- Legal 7,675 - ----------------------------------------------------------------------------------------------- Postage 7,237 - ----------------------------------------------------------------------------------------------- Exchange listing fees 16,505 - ----------------------------------------------------------------------------------------------- Preferred share remarketing agent fees 196,555 - ----------------------------------------------------------------------------------------------- Other 5,811 - ----------------------------------------------------------------------------------------------- Total expenses 1,779,459 - ----------------------------------------------------------------------------------------------- Expense reduction (Note 2) (12,074) - ----------------------------------------------------------------------------------------------- Net expenses 1,767,385 - ----------------------------------------------------------------------------------------------- Net investment income 11,169,558 - ----------------------------------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 737,892 - ----------------------------------------------------------------------------------------------- Net unrealized depreciation of investments during the period (6,874,734) - ----------------------------------------------------------------------------------------------- Net loss on investments (6,136,842) - ----------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $ 5,032,716 - ----------------------------------------------------------------------------------------------- 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 1999* 1998 - --------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets - --------------------------------------------------------------------------------------------------------------- Operations: - --------------------------------------------------------------------------------------------------------------- Net investment income $ 11,169,558 $ 22,137,047 - --------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 737,892 (1,368,499) - --------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investments (6,874,734) 2,425,356 - --------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 5,032,716 23,193,904 Distributions to remarketed preferred shareholders: - --------------------------------------------------------------------------------------------------------------- From net investment income (2,251,143) (5,081,552) - --------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations applicable to common shareholders (excluding cumulative undeclared dividends on remarketed preferred shares of $56,896 and $36,822 respectively) 2,781,573 18,112,352 - --------------------------------------------------------------------------------------------------------------- Distributions to common shareholders: - --------------------------------------------------------------------------------------------------------------- From net investment income (10,052,324) (19,919,416) - --------------------------------------------------------------------------------------------------------------- Issuance of common shares in connection with reinvestment of distributions 1,213,338 2,597,553 - --------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (6,057,413) 790,489 Net assets - --------------------------------------------------------------------------------------------------------------- Beginning of period 389,621,549 388,831,060 - --------------------------------------------------------------------------------------------------------------- End of period (including undistributed net investment income of $2,579,420 and $3,713,329 respectively) $383,564,136 $389,621,549 - --------------------------------------------------------------------------------------------------------------- Number of fund shares - --------------------------------------------------------------------------------------------------------------- Common shares outstanding at beginning of period 20,838,596 20,646,799 - --------------------------------------------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 89,002 191,797 - --------------------------------------------------------------------------------------------------------------- Common shares outstanding at end of period 20,927,598 20,838,596 - --------------------------------------------------------------------------------------------------------------- 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 Per-share May 31 operating performance (Unaudited) Year ended November 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period (common shares) $11.98 $12.05 $11.94 $12.37 $11.22 $13.44 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income .53 1.07 1.09 1.06 1.17 1.20 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (.28) .06 .23 (.28) 1.23 (2.03) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations .25 1.13 1.32 .78 2.40 (.83) - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net investment income - ------------------------------------------------------------------------------------------------------------------------------------ to Common Shareholders (.48) (.96) (.96) (.96) (.94) (.97) - ------------------------------------------------------------------------------------------------------------------------------------ to Preferred Shareholders (.11) (.24) (.25) (.25) (.28) (.19) - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments - ------------------------------------------------------------------------------------------------------------------------------------ to Common Shareholders -- -- -- -- -- (.21) - ------------------------------------------------------------------------------------------------------------------------------------ to Preferred Shareholders -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net realized gain on investments - ------------------------------------------------------------------------------------------------------------------------------------ to Common Shareholders -- -- -- -- (.02) (.02) - ------------------------------------------------------------------------------------------------------------------------------------ to Preferred Shareholders -- -- -- --(d) (.01) -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.59) (1.20) (1.21) (1.21) (1.25) (1.39) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period (common shares) $11.64 $11.98 $12.05 $11.94 $12.37 $11.22 - ------------------------------------------------------------------------------------------------------------------------------------ Market value, end of period (common shares) $14.562 $14.937 $14.750 $13.625 $13.500 $11.880 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total return at market price (common shares) (%)(a) .77* 8.73 16.25 8.65 22.95 (6.74) - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (total fund) (in thousands) $383,564 $389,622 $388,831 $384,490 $391,003 $364,814 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b)(c) .72* 1.47 1.43 1.49 1.50 1.45 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%)(b) 3.59* 6.82 7.13 6.84 7.50 8.07 - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 6.09* 14.44 26.91 146.43 122.65 78.97 - ------------------------------------------------------------------------------------------------------------------------------------ * Not annualized (a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) Ratios reflect net assets available to common shares only; net investment income ratio also reflects reduction for dividend payments to preferred shareholders. (c) The ratio of expenses to average net assets for the year ended November 30, 1995 and thereafter, includes amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (Note 2). (d) Distributions in excess of net realized gain to the preferred stockholders amounted to less than $0.01 per common share.
Notes to financial statements May 31, 1999 (Unaudited) Note 1 Significant accounting policies Putnam Investment Grade Municipal Trust (the "fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The fund's investment objective is to 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 Inc. ("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. 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. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value and other investments including restricted securities are stated at fair market value following procedures approved by the Trustees. B) 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. C) Federal taxes It is the policy of the fund to distribute all of its income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. At November 30, 1998, the fund had a capital loss carryover of approximately $4,259,000 available to offset future capital gains, if any. The amount of the carryover and the expiration dates are: Loss Carryover Expiration - -------------- ----------------- $1,985,000 November 30, 2004 612,000 November 30, 2005 1,662,000 November 30, 2006 D) Distributions to shareholders Distributions to common and preferred shareholders are recorded by the fund on the ex-dividend date. If the market price of your fund's shares is equal to or exceeds their net asset value on the payment date, you will be issued shares of the fund at a value equal to the higher of the net asset value or 95% of the market price on that 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, 1999 was 3.245%. 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. E) Determination of net asset value Net asset value of the common shares is determined by dividing the value of all assets of the fund less all liabilities and the liquidation preference of any outstanding remarketed preferred shares, by the total number of common shares outstanding. F) Amortization of bond premium and accretion of bond 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 yield-to-maturity basis. 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 an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. For the six months ended May 31, 1999, fund expenses were reduced by $12,074 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. Each Trustee of the fund receives an annual Trustee fee, of which $530 has been allocated to the fund, 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 has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees Fees payable on or after July 1, 1995. The deferred fees remain in the fund and are invested in certain Putnam funds until distribution in accordance with the Deferral Plan. The fund has adopted an unfunded noncontributory defined benefit pension plan (the "Pension Plan") covering all Trustees of the fund who have served as Trustee for at least five years. Benefits under the Pension Plan are equal to 50% of the Trustee's average total retainer and meeting fees for the three years preceding retirement. Pension expense for the fund is included in Compensation of Trustees in the Statement of operations. Accrued pension liability is included in Payable for compensation of Trustees in the Statement of assets and liabilities. Note 3 Purchase and sales of securities During the six months ended May 31, 1999, purchases and sales of investment securities other than short-term investments aggregated $36,319,869 and $23,175,895, 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. Additionally, the fund has authorized a separate series of 2,000 Serial Remarketed Preferred shares, which are issuable only under certain conditions in exchange for Series A shares. No Serial Remarketed Preferred shares are currently outstanding. 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, 1999, no such restrictions have been placed on the fund. Fund information WEB SITE www.putnaminv.com 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 John A. Hill, Vice Chairman Jameson Adkins Baxter Hans H. Estin Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan Lawrence J. Lasser John H. Mullin III Robert E. Patterson George Putnam, III A.J.C. Smith W. Thomas Stephens 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 Ian C. Ferguson Vice President Brett C. Browchuk Vice President Stephen Oristaglio Vice President Jerome J. Jacobs Vice President Richard P. Wyke Vice President and Fund Manager Richard A. Monaghan Vice President John R. Verani Vice President Beverly Marcus Clerk and Assistant Treasurer Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time, or visit our Web site (www.putnaminv.com) any time for up-to-date information about the fund's NAV. [LOGO OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 - --------------------- BULK RATE U.S. POSTAGE PAID PUTNAM INVESTMENTS - --------------------- For account balances, economic forecasts, and the latest on Putnam funds, visit www.putnaminv.com 53215 058 7/99 -----END PRIVACY-ENHANCED MESSAGE-----