-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, f9XePjxuCbbZ759Kfk4/3W3pBvK2XnLCLTYW8+yz6ztkz5pFYeC2UV3XojgKaIna BIWNFnFPeXJGk/emxozyeg== 0000950146-95-000029.txt : 19950608 0000950146-95-000029.hdr.sgml : 19950608 ACCESSION NUMBER: 0000950146-95-000029 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950130 SROS: NYSE 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: 95503818 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQUARE CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 N-30D 1 PUTNAM INVESTMENT GRADE MUNICIPAL TRUST Putnam Investment Grade Municipal Trust ANNUAL REPORT November 30, 1994 (Art--balance scales) B O S T O N * L O N D O N * T O K Y O Performance highlights From the Chairman > According to Lipper Analytical Services, the fund was ranked number one among all closed-end general municipal debt funds for both the three- and five-year periods ended November 30, 1994.* > 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, consistent with preservation of capital. FISCAL 1994 RESULTS AT A GLANCE
Total return Market (common shares) NAV price 12 months ended 11/30/94 (change in value during period plus reinvested distributions) -8.21% -6.74% Market Share value NAV price 11/30/93 $13.44 $ 14.000 11/30/94 11.22 11.875 In Capital Excess Distributions(1) No. Income Gains Gain Total Common shares 12 $ 0.97 $ 0.21 $ 0.02 $ 1.20 Preferred shares Series A (1,400 shares) $2,776.14 $56.60 $ 5.94 $2,838.68 Taxable equivalent(2) Current return Market Market (common shares) NAV price NAV price Year ended 11/30/94 Current dividend rate(3) 8.56% 8.08% 14.17% 13.38%
Performance data represent past results. For performance over longer periods, see pages 8 and 9. (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)Assumes maximum 39.6% federal tax rate. Results for investors subject to lower tax rates would not be as advantageous. (3)Income portion of most recent distribution, annualized and divided by NAV or market price at end of period. *Ratings by Lipper, an independent research firm, vary over time and do not include the effect of sales charges. The firm ranked the fund 28th out of 60 funds for one year; 6th out of 44 funds for two years; 1st out of 26 funds for three years; and 1st out of 17 funds for five years. Past performance is not indicative of future results. From the Chairman (Photo George Putnam) (c) Karsh, Ottawa Dear Shareholder: When markets turn downward, investors with vision look beyond the unfolding negatives for opportunities farther down the road. Throughout Putnam Investment Grade Municipal Trust's fiscal year that ended on November 30, 1994, there was plenty to obstruct the view. Well in advance of the Federal Reserve Board's first increase in interest rates last February, Fund Manager Michael Bouscaren had adopted defensive strategies designed to reduce the impact of rising rates on your fund's portfolio. While defensive strategies proved relatively successful, fund performance generally edged into the negative numbers. Even so, we believe tax-exempt securities should strengthen. Supplies may become tighter, as fewer issues come to market and more investors seek tax relief. Many sectors of the tax-exempt market, including health care, education, and resource recovery, are poised for growth. Mike will focus on these positive factors as he seeks out the most promising opportunities for your fund. His report on fiscal 1994 performance and what he sees in store for fiscal 1995 follows. Respectfully yours, (Signature George Putnam) George Putnam Chairman of the Trustees January 18, 1995 Report from the fund manager Michael F. Bouscaren During Putnam Investment Grade Municipal Trust's fiscal 1994, the municipal bond market endured what can truly be called tough times. Market volatility, investor uncertainty about further interest rate increases, and a tide of no-load fund redemptions helped drive bond prices down, particularly those of high- quality bonds. Your fund was not immune to the dampening effects of these events, providing a total return of -8.21% at net asset value for the 12 months ended November 30, 1994. We encourage you to keep in mind, however, that many mutual funds, particularly those that emphasize long-term municipal bonds, require investors to have a long-term view. Corrections are not only a natural part of any business cycle, but they also frequently bring about rewarding opportunities for investors. > DIVERSIFICATION HELPS CUSHION VOLATILITY Health care, utilities, transportation, housing, and education continue to be the fund's top five industry sectors. Holdings are spread across the country, with greater emphasis on certain regions. For example, California, Massachusetts, and New York are significantly represented in the portfolio, and high-demand states like Texas and Florida are given additional exposure. Primarily, high taxes, strong investor demand, the outlook for an improving state economy -- which can contribute to credit upgrades -- and the availability of some attractively yielding issues have drawn our attention to these states. Issues of particular interest to us, which we believe will do well over time, include the Denver City and County Airport revenue bonds in the fund's portfolio. Although the project incurred cost overruns, experienced technological problems, and underwent contractual disagreements between the city and certain airlines, these concerns seem to have been ironed out to the satisfaction of all parties. The facility is scheduled to open in February 1995, when it will become the only airport serving greater Denver. Because of its distance from downtown Denver, we anticipate there will be more than the usual number of revenue-generating sources from airport operations and associated facilities. Restaurants, parking, hotels, and retail outlets are all sources of fees and cash flow. With such an optimistic long-term outlook, we took the opportunity last summer to increase the fund's position in these bonds. We look forward to the anticipated progress of these issues. Despite recent financial problems in Orange County, California, we believe the state's municipal bond market offers tremendous value. We will continue to draw on Putnam Management's strong research capabilities in order to find attractive opportunities there. > PROVIDING A STREAM OF TAX-FREE INCOME While prices of virtually all fixed-income investments are down this year, municipal bond prices have fallen less than those of U.S. Treasury securities, Meanwhile, the yield spread between the two remains relatively narrow. In today's low-inflation, high- tax environment, this can mean attractive real rates of return for municipal bond fund investors. Because we focus the fund's investments primarily on long-term bonds, we have been able to generate a relatively high level of tax-free income. It is fortunate, however, that Putnam Management established a conservative dividend policy for the fund at its inception. This prudent policy is serving the fund well in today's higher interest rate environment -- we are able to maintain a conservative, top-quality orientation without being TOP INDUSTRY SECTORS* Utilities 19.6% Hospital/Healthcare 18.5% Transportation 13.1% Education 9.4% Housing 5.6% *Based on net assets as of 11/30/94. unduly challenged by high dividend obligations. In the meantime, the fund's dividends remain attractive: A taxable investment at the maximum federal income tax rate of 39.6% would have had to provide a current return of 14.17% to equal the fund's 8.56% current dividend rate at net asset value at the end of the period. Leveraging has also helped bolster the fund's income level. By issuing and selling preferred shares of the fund to institutional short-term investors, we've been able to reinvest the proceeds in longer-term, higher-paying bonds. A portion of the income generated from these higher-paying bonds is then distributed to the fund's common shareholders, enhancing their monthly dividend (38.4% of the fund's net assets were leveraged as of November 30, 1994). > FAVORABLE SUPPLY/DEMAND ENVIRONMENT Supply in the new-issue market was lean at fiscal year's end. At a time when issuers traditionally are flooding the market, sales are running a little less than $2 billion per week. At the end of November 1994, volume was around $140 billion in new issues, compared with $290 billion for all of 1993. In 1995, we expect new-issue supply will be about equal to 1994 supply. The important difference in 1995, however, will be that bond redemptions are likely to match or exceed new-issue supply. This may result in a net supply deficit which would be very positive for municipal bond performance potential. > BUYING OPPORTUNITIES FOR MUNICIPAL BOND INVESTORS Today's post-correction prices may actually represent a buying opportunity for many closed-end municipal bond fund shareholders. For the long-term investor, acquiring shares at current prices, either through direct purchase or reinvestment of dividends, creates a larger income-generating share base for the future. CONCENTRATION OF HOLDINGS BY STATE Massachusetts 17.4% Texas 10.1% California 7.8% Colorado 7.4% New York 6.3% Geographically, the fund is diversified among 25 states. The top five states represent 49.0% of the portfolio, based on net assets as of 11/30/94. Our outlook for municipal bonds remains positive for the long term, although we anticipate continued turmoil in the near term. We believe decreased supply, combined with growing investor demand for tax relief, bodes well for the appreciation potential of tax-free bonds -- which we believe may happen quite suddenly and be sustained when investors come to recognize the positive effect of these two factors. We have endeavored to position the fund accordingly. The views expressed throughout the report are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of November 30, 1994, there is no guarantee the fund will continue to hold these securities in the future. Performance Summary This section provides, at a glance, information about your fund's performance. Total return shows how the value of the fund's shares have changed over time, assuming you held the shares through the entire period and reinvested all distributions back into the fund. We show total return in two ways: on a cumulative long-term basis and on average how the fund might have performed over varying periods. For comparative purposes, we show how the fund performed relative to appropriate indexes and benchmarks. TOTAL RETURN FOR PERIODS ENDED 11/30/94
Lehman Bros. Municipal NAV Market price Bond Index CPI 1 year -8.21% -6.74% -5.25% 2.68% 5 years 49.59 49.19 37.52 18.90 Annual average 8.39 8.33 6.58 3.52 Life of fund (since 10/26/89) 50.68 47.65 39.92 19.19 Annual average 8.37 7.94 6.81 3.50
TOTAL RETURN FOR PERIODS ENDED 12/31/94 (most recent calendar quarter)
NAV Market price 1 year -8.52% -8.92% 5 years 51.72 65.71 Annual average 8.69 10.63 Life of fund (since 10/26/89) 53.76 47.65 Annual average 8.66 7.81
Performance data represent past results. Investment returns and net asset value will fluctuate so an investor's shares, when sold, may be worth more or less than their original cost. Fund performance data do not take into account any adjustment for taxes payable on reinvested distributions. TERMS AND DEFINITIONS Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, the par value of the preferred shares and cumulative undeclared dividends 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. Consumer Price Index (CPI) is a commonly used measure of inflation; it does not represent an investment return. Securities indexes assume reinvestment of all distributions and interest payments and do not take into account brokerage fees or taxes. Securities in the fund do not match those in the indexes and performance of the fund will differ. Report of Independent Accountants For the Year Ended November 30, 1994 To the Trustees and Shareholders of Putnam Investment Grade Municipal Trust In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments owned, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam Investment Grade Municipal Trust (the "fund") at November 30, 1994, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at November 30, 1994 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Boston, Massachusetts January 17, 1995 Portfolio of investments owned November 30, 1994
Municipal Bonds and Notes (101.7%)(a) Principal Amount Ratings (b) 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 $ 6,111,875 California (7.8%) 500,000 CA Poll. Control Fin. Auth. Variable Rate Demand Notes (VRDN) (Shell Oil Co.), 3.4s, 10/1/11 VMIG1 500,000 3,750,000 CA State Pub. Works Board Lease Rev. Bonds (U. of CA Projects), Ser. A, 5-1/2s, 6/1/21 A 2,948,437 9,300,000 CA State U. Rev. Bonds, American Municipal Bond Assurance Corp. (AMBAC), 7s, 11/1/21 ($900,000 par, acquired 8/5/91, cost $920,127 $8,400,000 par, acquired 8/31/94, cost $8,400,000)(c) Aaa 9,393,000 5,000,000 Los Angeles, Dept. Wtr. & Pwr. Elec. Plant Rev. Bonds, Municipal Bond Insurance Association (MBIA), 5-1/4s, 11/15/26 AAA 3,818,750 1,580,000 Los Angeles, Regl. Arpts. Impt. Corp. Rev. Bonds (Western Airlines-Delta Airlines), 11-1/4s, 11/1/25 Ba 1,688,625 5,000,000 Orange Cnty., Sanitation Dist. Certif. of Participation VRDN, 3.35s, 8/1/15 VMIG1 5,000,000 5,000,000 U. of CA Rev. Bonds (USCD Med. Ctr. Satellite Fac.), 7.9s, 12/1/19 (acquired 3/2/92, cost $5,229,150)(c) BBB 5,118,750 28,467,562 Colorado (7.4%) Denver, City & Cnty. Arpt. Rev. Bonds 3,500,000 Ser. A, 8-1/2s, 11/15/23 Baa 3,517,500 4,900,000 Ser. A, 8-1/4s, 11/15/12 Baa 4,875,500 5,200,000 Ser. A, 8s, 11/15/25 Baa 4,946,500 7,000,000 Ser. D, 7-3/4s, 11/15/21 Baa 6,693,750 3,000,000 Ser. D, 7-3/4s, 11/15/13 Baa 2,883,750 4,800,000 Ser. D, 7s, 11/15/25 Baa 4,182,000 27,099,000 Florida (5.3%) 3,670,000 FL State Board Regents U. Syst. Impt. Rev. Bonds, AMBAC 5-1/4s, 7/1/08 AAA 3,142,437 3,665,000 FL State Board of Public Ed. Cap. Outlay Rfdg. Rev. Bonds, 5.7s, 6/1/03 AA 3,573,375 3,000,000 FL State Board of Regents U. Syst. Impt. Rev. Bonds, AMBAC, 5.2s, 7/1/07 AAA 2,595,000 2,000,000 Hernando Cnty., Indl. Dev. Rev. Bonds (FL Crushed Stone Co.), 8-1/2s, 12/1/14 B/P 2,010,000 Municipal Bonds and Notes (101.7%)(a) Principal Amount Ratings (b) Value Florida (continued) $ 7,000,000 Orlando, Util. Coml. Wtr. & El. Rev. Bonds, 5-3/4s, 10/1/05 AA $ 6,693,750 1,500,000 Tampa, Wtr. & Swr. Cap. Inverse Floating Bonds (IFB), Ser. A, Federal Guaranty Insurance Co. (FGIC), 3.34s, 10/1/12 AAA 1,436,250 19,450,812 Georgia (1.7%) 1,600,000 Burke Cnty., Dev. Auth. Poll. Control Rev. Bonds (Oglethorpe Pwr. Corp.-Vogtle Project), 9-7/8s, 1/1/10 A 1,632,000 4,800,000 De Kalb Cnty., Hsg. Auth. Muni. Rev. Bonds (Briarcliff Pk. Apts. Project), Ser. A, 7-1/2s, 4/1/17 A/P 4,686,000 6,318,000 Hawaii (1.1%) 4,500,000 HI State Dept. of Budget & Fin. Mtge. IFB (Citizens Util. Co.), Ser. 91-B, 9.385s, 11/1/21(d) AAA 3,841,875 Illinois (0.5%) 1,800,000 IL Dev. Fin. Auth. Poll. Control Rev. Bonds (Cmnwlth. Edison Co. Project), 10-5/8s, 3/1/15 Baa 1,856,250 Louisiana (0.8%) 3,000,000 West Feliciana, Poll. Control Rev. Bonds (Gulf States Util. Co.), 7.7s, 12/1/14 BBB 2,970,000 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 2,292,500 Massachusetts (17.4%) 6,030,000 MA Muni Whls. Electric Co. Pwr. Supply Sys. Rev. Bonds, Ser. B, 6-3/4s, 7/1/17 A 5,751,113 MA State Cons. Loan General Obligation (G.O.) Bonds 6,000,000 Ser. D, 6s, 7/1/12 A 5,407,500 12,000,000 Ser. A, 6s, 6/1/11(d) A 10,860,000 4,000,000 MA State Hlth. & Ed. Facs. Auth. Rev. Bonds 4.9s, 7/1/06 AAA 3,475,000 16,500,000 MA State Hlth. & Ed. Facs. Auth. Rev. Bonds, AMBAC, 6.41s, 6/23/22 AAA 15,613,125 5,000,000 MA State Indl. Fin. Agcy. Rev. Bonds (Cape Cod Hlth. Syst.), 8-1/2s, 11/15/20(d) Aaa 5,731,250 15,000,000 MA State Wtr. Resource Auth. Rev. Bonds Ser. A, 7-5/8s, 4/1/14(d) AAA 16,462,500 63,300,488 Municipal Bonds and Notes Principal Amount Ratings (b) Value Michigan (5.4%) $1,875,000 Detroit, Dev. Fin. Auth. Tax Increment Rev. Bond, Ser. A, 9-1/2s, 5/1/21 BBB/P $ 2,226,562 1,000,000 Grand Rapids Wtr. Supply Syst. VRDN, FGIC, 3.55s, 1/1/20 VMIG1 1,000,000 1,690,000 Highland Park, Hosp. Fin. Auth. Fac. Rev. Bonds (MI Hlth. Care Corp. Project), Ser. A, 9-3/4s, 12/1/06 B 1,436,500 7,400,000 MI State Hsg. Dev. Auth. Rental Hsg. Rev. Bonds, Ser. B, 5.7s, 4/1/12 A 6,243,750 3,000,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds (Mercy Svcs. for Aging Project), 9.4s, 5/15/20 BBB/P 3,127,500 5,435,000 Monroe Cnty., Poll. Control Rev. Bonds (Detroit Edison Co.), Ser. A, 10-1/2s, 12/1/16 Baa 5,829,038 19,863,350 Mississippi (1.5%) 4,950,000 Claiborne Cnty., Poll. Control Rev. Bonds (Middle South Energy Inc.), Ser. C, 9-7/8s, 12/1/14 BBB/P 5,513,063 Missouri (1.3%) 5,000,000 MO State Hlth. & Edl. Facs. Auth. Rev. Bonds (BJC Hlth. Sys.), Ser. A, 6-1/2s, 5/15/20 AA 4,568,750 Nebraska (3.3%) 2,800,000 NE Investment Fin. Auth. Single Fam. Mtge. IFB, Ser. B. Government National Mortgage Assn. Coll. (GNMA), 10.66s, 3/15/22(d) AAA 2,866,500 8,840,000 NE Investment Fin. Auth. Single Fam. Mtge. Rev. Bonds, Ser. 1, GNMA Coll., 8-1/8s, 8/15/38(d) AAA 9,072,050 11,938,550 Nevada (1.8%) 6,500,000 Clark Cnty., Indl. Dev. Rev. Bonds (NV Pwr. Co. Project), 7.8s, 6/1/20 Baa 6,621,875 New York (6.3%) 6,500,000 Battery Park, City Auth. Rev. Bonds, Ser. A, 4-3/4s, 11/1/19 AA 4,623,125 NY City VRDN 1,000,000 Ser. B, FGIC, 3.7s, 10/1/21 VMIG1 1,000,000 1,000,000 Sub. Ser. B-4, 3.65s, 8/15/21 VMIG1 1,000,000 1,865,000 NY City, Hsg. Dev. Corp. Multi-Fam. Rev. Bonds, Ser. 85-1, Federal Housing Authority (FHA) Insd., 9-1/2s, 10/1/00 AA 1,923,281 6,500,000 NY City, Mun. Wtr. Fin. Auth. VRDN, Ser. G, FGIC, 3.4s, 6/15/24 VMIG1 6,500,000 1,700,000 NY State Dorm. Auth. U. Ed. Facs. Rev. Bonds Ser. A, 6-1/4s, 5/15/08 BBB 1,570,375 Municipal Bonds and Notes Principal Amount Ratings (b) Value New York (continued) $ 1,900,000 NY State Energy Research & Dev. Auth. Poll. Control VRDN (Niagara Mohawk Pwr. Project), Ser. A, 3-3/4s, 7/1/15 A1+ $ 1,900,000 4,050,000 NY State Local Government Assistance Corp. Rev. Bonds, Ser. B, 5-1/2s, 4/1/21 A 3,199,500 1,125,000 Riverton Hsg. Corp. Mtge. Rev. Bonds (Conifer Genesee Apt.), FHA Insd., 10-1/2s, 1/15/25 A 1,170,000 22,886,281 North Dakota (3.1%) 10,850,000 Mercer Cnty., Poll. Control Rev. Bonds (Basin Elec. Pwr. Coop.-Antelope), AMBAC, 10-1/2s, 6/30/13(d) AAA 11,128,031 Ohio (3.0%) OH State Air Quality Dev. Auth. Poll. Control Rev. Bonds 3,600,000 (Cincinnati Gas & Elec.), 10-1/8s, 12/1/15 Baa 3,829,500 5,000,000 (Cleveland Co. Project), FGIC, 8s, 12/1/13 AAA 5,487,500 OH State Wtr. Dev. Auth. Poll. Control Facs. Rev. Bonds 1,575,000 (OH Edison Co. Project), 10-5/8s, 7/1/15 Baa 1,673,438 10,990,438 Oklahoma (0.9%) 3,500,000 Tulsa, Muni. Arpt. Rev. Bonds (American Airlines, Inc.), 7-3/8s, 12/1/20 Baa 3,185,000 Pennsylvania (5.8%) 3,930,000 Allegheny Cnty., Res. Fin. Auth. Single Fam. Mtge. Rev. Bonds, GNMA Coll., 7.9s, 6/1/11 Aaa 4,013,512 4,500,000 Geisinger, Auth. Hlth. Syst. Muni. IFB, Ser. A, 5.45s, 7/1/22 AA 4,320,000 5,000,000 Montgomery Cnty., Indl. Dev. Auth. Resource Recvy. Rev. Bonds, 7-1/2s, 1/1/12 A 5,068,750 7,600,000 PA State Higher Edl. Assistance Agcy. Student Loan IFB, Ser. B, MBIA, 11.123s, 3/1/20(d) AAA 7,847,000 21,249,262 Rhode Island (1.7%) 8,500,000 Convention Ctr. Auth, Rev. Bonds Ser. C, MBIA, 5s, 5/15/23 AAA 6,279,375 South Carolina (1.0%) 4,125,000 Grand Strand Wtr. & Swr. Auth. Rev. Bonds, MBIA, 6s, 6/1/19 AAA 3,630,000 Municipal Bonds and Notes Principal Amount Ratings (b) Value Tennessee (0.3%) $ 1,000,000 Metro. Nashville & Davidson Cnty., Hlth. & Edl. Fac. Board Rev. Bonds (Vanderbilt U.), Ser. A, 10-1/2s, 12/1/14 A $ 1,020,000 Texas (10.1%) 2,500,000 Bexar Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds (St. Luke's Lutheran Hosp. Project), 7.9s, 5/1/11 Baa 2,525,000 4,000,000 Brazos River Auth. Poll. Ctrl. Rev. Bonds, 8-1/4s, 1/1/19 Baa 4,160,000 5,250,000 Dallas-Fort Worth, Intl. Arpt. Fac. Impt. Corp. Rev. Bonds (American Airlines, Inc.), 7-1/2s, 11/1/25(d) Baa 4,830,000 Harris Cnty. Rev. Bonds (Toll Road, Sr. Lien) 6,000,000 FGIC, 5-1/2s, 8/15/21 AAA 4,860,000 7,000,000 AMBAC, 5.3s, 8/15/13 AAA 5,810,000 9,750,000 North Central TX Hlth. Fac. Dev. Corp. IFB (Presbyterian Hlth. Care Syst.), Ser. C, MBIA, 9.295s, 6/15/21(d) AAA 8,385,000 7,000,000 Northeast Hosp. Auth. Rev. Bonds (Northeast Med. Ctr. Hosp.), Ser. B, FGIC, 7-1/4s, 7/1/22 AAA 6,326,250 36,896,250 Washington (5.4%) 1,000,000 Port Longview, Indl. Dev. Corp. Export Fac. Rev. Bonds (Atlantic Richfield Co.), 10-3/4s, 9/1/12 A 1,031,250 WA State Pub. Pwr. Supply Syst. Rev. Bonds (Nuclear Project No. 1) 2,500,000 Ser. B, MBIA, 5.6s, 7/1/15 AAA 2,093,750 9,425,000 Ser. A, prerefunded, 7-1/2s, 7/1/99 AA 10,202,563 6,075,000 Ser. A, 7-1/2s, 7/1/15 AA 6,318,000 19,645,563 West Virginia (4.9%) 2,000,000 Marion Cnty., Cmnty. Solid Waste Disp. Fac. Rev. Bonds (American Pwr. Paper Recycling Project), 8-1/4s, 12/1/11 B/P 1,875,000 15,000,000 Marion Cnty., Ind. Hosp. Auth. Hosp. Fac. Rev. Bonds, 10-1/8s, 11/1/15 Aa 15,862,500 17,737,500 Wisconsin (1.7%) 7,500,000 WI Hsg. & Econ. Dev. Auth. Hsg. Rev. Bonds, Ser. C, 5.8s, 11/1/13 A 6,253,125 Total Investments (cost $378,164,649) $371,114,775
NOTES (a) Percentages indicated are based on a total net assets of $364,813,668. Net assets available to common shareholders are $224,784,133, which correspond to a net asset value per common share of $11.22. (b) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at November 30, 1994 for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the rating agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings indicated do not necessarily represent ratings which the agencies would ascribe to these securities at November 30, 1994. Securities rated by Putnam are indicated by "/P" and are not publicly rated. Ratings are not covered by the Report of Independent Accountants. (c) Restricted to public resale. At the date of acquisition, these securities were valued at cost. There were no outstanding unrestricted securities of the same class as those held. The total market value of restricted securities owned at November 30, 1994 was $14,511,750 or 4.0% of net assets. (d) A portion of these securities was pledged to cover margin requirements for future contracts at November 30, 1994. The market value segregated with the custodian for transactions in future contracts was $81,024,206, or 22% of net assets. (e) The aggregate identified cost for Federal income tax purposes is $378,403,564, resulting in gross unrealized appreciation and depreciation of $7,716,142 and $15,004,931, respectively, or net unrealized depreciation of $7,288,789. The rates shown on Inverse Floating Bonds (IFB), which are securities paying variable interest rates that vary inversely to changes in market interest rates and Variable Rate Demand Notes (VRDN) are the current interest rates at November 30, 1994 which are subject to change based on the terms of the security. The Fund had the following industry group concentrations greater than 10% on November 30, 1994 (as a percentage of net assets): Utilities 19.6% Hospitals/Healthcare 18.5 Transportation 10.1
The Fund had the following insurance group concentrations greater than 10% at November 30, 1994 (as a percentage of net assets): AMBAC 13.1%
Futures Contracts Outstanding at November 30, 1994
Total Aggregate Expiration Unrealized Value Face Value Date Appreciation US Treasury Bond Futures (Sell) $35,204,437 $35,316,625 Mar/95 $112,188
The accompanying notes are an integral part of these financial statements. Statement of assets and liabilities November 30, 1994
Assets Investments in securities (identified cost $378,164,649) (Note 1) $371,114,775 Cash 55,610 Receivable for securities sold 1,099,977 Interest and other receivables 7,049,449 Total assets 379,319,811 Liabilities Distributions payable to common shareholders 1,603,119 Payable for securities purchased 11,846,536 Payable for compensation of Manager (Note 3) 650,241 Payable for administrative services (Note 3) 3,117 Payable for compensation of Trustees (Note 3) 186 Payable for investor servicing and custodian fees (Note 3) 81,602 Payable for variation margin on open futures contracts 235,594 Other accrued expenses 85,748 Total liabilities 14,506,143 Net assets $364,813,668 Represented by Series A remarketed preferred shares, without par value; 2,000 shares authorized (1,400 shares issued at $100,000 per share) (Note 2) $140,000,000 Common shares, without par value; unlimited shares authorized; 20,039,145 shares outstanding (Notes 1 and 5) 221,001,994 Undistributed net investment income (Notes 1 and 5) 12,447,836 Accumulated net realized loss on investments (Notes 1 and 5) (1,698,476) Net unrealized depreciation of investments and futures contracts (6,937,686) Net assets $364,813,668 Computation of net asset value Series A remarketed preferred shares $140,000,000 Cumulative undeclared income dividends on Series A remarketed preferred shares 29,535 Net assets allocated to Series A remarketed preferred shares at liquidation preference 140,029,535 Net assets available to common shares: Net asset value per share $11.22 ($224,784,133 divided by 20,039,145) 224,784,133 Net assets $364,813,668
The accompanying notes are an integral part of these financial statements. Statement of operations Year ended November 30, 1994
Tax exempt investment income $ 27,530,451 Expenses: Compensation of Manager (Note 3) 2,715,985 Investor servicing and custodian fees (Note 3) 288,953 Compensation of Trustees (Note 3) 14,356 Registration fees 974 Reports to shareholders 24,824 Auditing 54,934 Legal 11,603 Postage 62,140 Administrative services (Note 3) 10,724 Amortization of organization expenses (Note 1) 6,405 Preferred share remarketing agent fees 332,667 Exchange listing fees 24,218 Other expenses 36,098 Total expenses 3,583,881 Net investment income 23,946,570 Net realized loss on investments (Notes 1 and 4) (5,277,854) Net realized gain on future contracts (Notes 1 and 4) 4,090,542 Net unrealized depreciation of investments during the period (39,271,513) Net loss on investment transactions (40,458,825) Net decrease in net assets resulting from operations $(16,512,255)
The accompanying notes are an integral part of these financial statements. Statement of changes in net assets
Year ended November 30 1994 1993 Increase (decrease) in net assets Operations: Net investment income $ 23,946,570 $ 25,957,759 Net realized gain (loss) on investments (5,277,854) 5,190,582 Net realized gain (loss) on futures contracts 4,090,542 (189,197) Net unrealized appreciation (depreciation) of investments during the year (39,271,513) 12,914,296 Net increase (decrease) in net assets resulting from operations (16,512,255) 43,873,440 Distributions to remarketed preferred shareholders: From net investment income (3,886,607) (3,172,332) From net realized gain on investments (79,242) (551,080) In excess of realized gain (8,311) -- Net increase (decrease) in net assets resulting from operations applicable to common shareholders (excluding cumulative undeclared income dividends on remarketed preferred shares of $29,535 and $9,590, respectively, and cumulative undeclared capital gain dividends on remarketed preferred shares of $0 and $30,643 respectively) (20,486,415) 40,150,028 Distributions to common shareholders: From net investment income (19,335,095) (18,883,406) From net realized gain on investments (4,109,912) -- In excess of realized gain (431,033) -- Increase from capital share transactions from issuance of common shares 3,505,942 2,722,866 Total increase (decrease) in net assets (40,856,513) 23,989,488 Net assets Beginning of year 405,670,181 381,680,693 End of year (including undistributed net investment income of $12,447,836 and $11,091,758, respectively) $364,813,668 $405,670,181 Number of fund shares Common shares outstanding at beginning of period 19,764,439 19,560,916 Common shares issued in connection with reinvestment of distributions 274,706 203,523 Common shares outstanding at end of year 20,039,145 19,764,439 Remarketed preferred shares outstanding at the beginning and end of year 1,400 1,400
The accompanying notes are an integral part of these financial statements. Financial Highlights (For a common share outstanding throughout the year)
For the period October 26, 1989 (commencement of operations) to Year ended November 30 November 30 1994 1993 1992 1991 1990 1989 Net asset value, beginning of period (common shares) $ 13.44 $ 12.36 $ 11.51 $ 11.03 $ 11.19 $ 11.11* Investment operations Net investment income 1.20 1.32 1.35 1.27 1.14 .07 Net realized and unrealized gain (loss) on investments (2.03) .91 .65 .43 (.08) .01 Total from investment operations (.83) 2.23 2.00 1.70 1.06 .08 Less distributions: From net investment income: to Common Shareholders (.97) (.96) (.91) (.89) (.87) -- to Preferred Shareholders (.19) (.16) (.24) (.29) (.23) -- From net realized gain on investments to Common Shareholders (.21) -- -- -- (.01) -- to Preferred Shareholders -- (.03) -- -- -- -- In excess of realized gains to Common Shareholders (.02) -- -- -- -- -- to Preferred Shareholders -- -- -- -- -- -- Total distributions (1.39) (1.15) (1.15) (1.18) (1.11) -- Preferred shares offering costs -- -- -- (.04) (.11) -- Net asset value, end of period (common shares) $ 11.22 $ 13.44 $ 12.36 $ 11.51 $ 11.03 $ 11.19 Market value, end of period (common shares) $ 11.88 $ 14.00 $ 13.25 $ 11.88 $ 11.25 $ 11.88 Total investment return at market price (common shares) (%)(a) (6.74) 13.54 20.24 14.23 2.58 (1.04)(c) Net assets, end of period (total fund) (in thousands) $364,814 $405,670 $381,681 $362,974 $311,731 $213,924 Ratio of expenses to average net assets (%)(b) 1.45 1.40 1.45 1.46 1.21 .12(c) Ratio of net investment income to average net assets (%)(b) 8.07 8.59 9.20 8.70 8.29 -- Portfolio turnover (%) 78.97 33.73 44.39 72.49 89.65 13.17(c)
* Represents initial net asset value of $11.16 less offering expenses of approximately $0.05. (a) Total investment 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) Not annualized. Notes to financial statements November 30, 1994 Note 1 Significant accounting policies The fund is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The fund's investment objective is to 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 the fund's Manager 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 the fund's Manager 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 policies are in conformity with generally accepted accounting principles. A Security valuation Tax-exempt bonds and notes are stated on the basis of valuations provided by a pricing service, approved by the Trustees, which uses information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. Short term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximated market value, and other investments including restricted securities are stated at fair market value following procedures approved by the Trustees. B Determination of net asset value Net asset value of the common shares is determined by dividing the value of all assets of the fund (including accrued interest and dividends), less all liabilities (including accrued expenses), and the liquidation value of any outstanding remarketed preferred shares, by the total number of common shares outstanding. C Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis. D Futures A futures contract is an agreement between two parties to buy and sell a security at a set price on a future date. Upon entering into such a contract the fund is required to pledge to the broker an amount of cash or U.S. government securities equal to the minimum "initial margin" requirements of the exchange. Pursuant to the contract, the fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as "variation margin" and are recorded by the fund as unrealized gains or losses. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The potential risk to the fund is that the change in value of the underlying securities may not correspond to the change in value of the futures contracts 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 of securities held and 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 7-day period. The applicable dividend rate for the remarketed preferred shares on November 30, 1994 was 3.85%. 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. These differences include market discount and amortization of organization costs. Reclassifications are made to the fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the period ended November 30, 1994, the fund reclassified $72,550 to increase undistributed net investment income, $71,820 to increase net realized loss, and $730 to decrease paid-in capital. 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. Discount on zero-coupon bonds is accreted according to the effective yield method. H Unamortized organization expenses Expenses incurred by the fund in connection with its organization aggregated $35,502. These expenses were amortized on a straight-line basis over a five-year period. Note 2 Remarketed Preferred Shares The Series A RP shares are redeemable at the option of the fund on any dividend payment date at a redemption price of $100,000 per share, plus an amount equal to any dividends accumulated on a daily basis but unpaid through the redemption date (whether or not such dividends have been declared) and, in certain circumstances, a call premium. 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 RP shares. No Serial Remarketed Preferred shares are currently outstanding. It is anticipated that approximately 98% of total distributions and dividends paid during fiscal 1994 to holders of remarketed preferred shares will be considered tax-exempt dividends under the Internal Revenue Code of 1986, as amended. To the extent that the fund earns taxable income and taxable gains by the conclusion of a fiscal year, it is required to apportion to holders of the remarketed preferred shares throughout the year additional dividends as necessary to result in an after-tax yield equivalent to the applicable dividend rate for the period. During the year ended November 30, 1994, the fund paid additional dividends of $30,643 to holders of remarketed preferred shares. Under the Investment Company Act of 1940, the fund is required to maintain asset coverage of at least 200% with respect to the remarketed preferred shares as of the last business day of each month in which any such shares are outstanding. Additionally, the fund is required to meet more stringent asset coverage requirements under the terms of the remarketed preferred shares and by 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 November 30, 1994, there were no such restrictions on the fund. Note 3 Management fee, administrative services, and other transactions Compensation of Putnam Investment Management, Inc. (Putnam Management), the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., 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 also reimburses the Manager for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Trustees of the fund receive an annual Trustee's fee of $870 and an additional fee for each Trustees' meeting attended. Trustees who are not interested persons of the Manager and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. Custodial functions are provided to the fund by Putnam Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc. Investor servicing agent functions for the fund's common shares are provided by PFTC. Investor servicing and custodian fees reported in the Statement of operations have been reduced by credits allowed by PFTC. Note 4 Purchases and sales of securities During the year ended November 30, 1994, purchases and sales of investment securities other than short-term municipal obligations aggregated $294,391,839 and $286,395,534, respectively. Purchases and sales of short-term municipal obligations aggregated $276,245,000 and $282,645,000, respectively. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Transactions in futures contracts during the period are summarized as follows:
Sales of Futures Contracts Number of Contracts Aggregate Face Value Contracts opened 10,443 $ 1,075,962,189 Contracts closed (10,084) $(1,040,645,564) Open at end of period 359 $ 35,316,625
Purchase of Future Contracts Number of Contracts Aggregate Face Value Contracts opened 755,000 $ 71,996,563 Contracts closed (755,000) $(71,996,563) Open at end of period -- --
Note 5 Reclassification of Capital Accounts Effective December 1, 1993 Putnam Investment Grade Municipal Trust has adopted the provisions of the AICPA Statement of Position (SOP) 93-2 "Determination, Disclosure and Financial Statement Presentation of Income, Capital Gain and Return of Capital Distributions by Investment Companies." The purpose of this SOP is to report the accumulated net investment income and accumulated net realized gain (loss) accounts in such a manner as to approximate amounts available for future distributions (or to offset future realized capital gains) and to achieve uniformity in the presentation of distributions by investment companies. As a result of the SOP, the fund has reclassified $558,660 to increase undistributed net investment income, $552,774 to decrease accumulated net realized gain and $5,916 to decrease paid-in capital. These adjustments represent the cumulative amounts necessary to report these balances through November 30, 1994, the close of the fund's most recent fiscal year end for financial reporting and tax purposes. These reclassifications, which have no impact on the total net asset value of the fund, are attributable to organization expenses which are treated differently in the computation of distributable income and capital gains under federal income tax rules and regulations versus generally accepted accounting principles. Selected quarterly data (Unaudited)
Three months ended November 30 August 31 May 31 February 28 1994 1994 1994 1994 Total investment income Total $ 6,977,508 $ 6,585,179 $ 6,855,768 $ 7,111,996 Per share* $ .33 $ .34 $ .35 $ .35 Net investment income available to common shareholders Total $ 4,852,138 $ 4,650,396 $ 5,062,217 $ 5,495,212 Per share* $ .24 $ .24 $ .26 $ .27 Net realized and unrealized gain (loss) on investments Total $(21,330,357) $ 616,807 $(16,604,981) $ (3,137,847) Per share* $ (1.06) $ .02 $ (.84) $ (.15) Net increase (decrease) in net assets available to common shareholders resulting from operations Total $(16,480,666) $ 5,267,203 $(11,630,317) $ 2,357,365 Per share* $ (.82) $ .26 $ (.58) $ .12 Net assets available to common shareholders at the end of the period Total $224,784,133 $245,458,624 $244,275,695 $259,982,643 Per share* $ 11.22 $ 12.28 $ 12.26 $ 13.08
*Per common share. Selected quarterly data (Unaudited)
Three months ended November 30 August 31 May 31 February 28 1993 1993 1993 1993 Total investment income Total $ 7,299,845 $ 7,412,198 $ 7,460,790 $ 7,410,737 Per share* $ .37 $ .38 $ .37 $ .38 Net investment income available to common shareholders Total $ 5,266,270 $ 5,650,335 $ 5,679,969 $ 5,637,773 Per share* $ .27 $ .29 $ .28 $ .29 Net realized and unrealized gain (loss) on investments Total $ (3,629,890) $ 9,372,959 $ (4,510,500) $ 16,683,112 Per share* $ (.19) $ .48 $ (.22) $ .84 Net increase (decrease) in net assets available to common shareholders resulting from operations Total $ 1,636,380 $ 15,023,294 $ 1,169,469 $ 22,320,885 Per share* $ .08 $ .77 $ .06 $ 1.13 Net assets available to common shareholders at the end of the period Total $265,629,948 $268,053,202 $257,065,067 $259,927,102 Per share* $ 13.44 $ 13.60 $ 13.07 $ 13.25
*Per common share. Fund information INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray INDEPENDENT ACCOUNTANTS Price Waterhouse LLP TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman Jameson Adkins Baxter Hans H. Estin John A. Hill Elizabeth T. Kennan Lawrence J. Lasser Robert E. Patterson Donald S. Perkins George Putnam, III A.J.C. Smith W. Nicholas Thorndike OFFICERS George Putnam President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President Lawrence J. Lasser Vice President Gordon H. Silver Vice President Gary 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 John D. Hughes Vice President and Treasurer 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 or to request Putnam's quarterly Closed-End Fund Commentary. PUTNAMINVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 Bulk Rate U.S. Postage PAID Putnam Investments 058-15833 APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED AND EDGAR-FILED TEXTS: (1) Bold and italic typefaces are displayed in normal type. (2) Headers (e.g., the name of the fund) are omitted. (3) Certain tabular and columnar headings and symbols are displayed differently in this filing. (4) Bullet points and similar graphic signals are omitted. (5) Page numbering is omitted. (6) Trademark symbol replaced with (TM) -----END PRIVACY-ENHANCED MESSAGE-----