PUTNAM
INTERMEDIATE
GOVERNMENT
INCOME TRUST
ANNUAL REPORT
November 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "The period's relatively stable interest-rate environment
translated into very low volatility in the U.S. bond market. This
was an excellent backdrop for many of your fund's U.S. holdings,
especially those in the mortgage-backed security sector, which was
the best-performing U.S. investment-grade sector during the fiscal
period. By the end of the period, more than 40% of assets were
allocated to mortgage-backed securities."
-- Kenneth J. Taubes, lead manager
Putnam Intermediate Government Income Trust
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
16 Financial statements
25 Results of October 9, 1997 shareholder meeting
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The sharp decline in global equity markets triggered by the devaluation of
certain Southeast Asian currencies in late October was accompanied by dramatic
advances in fixed-income markets as investors abandoned stocks and turned to
bonds for safety.
U.S. Treasury bonds seem to have been the major beneficiary of this flight to
more solid ground, but government bonds of many other nations also fared well.
This flurry of activity provided the backdrop to Putnam Intermediate
Government Income Trust's fiscal year end on November 30, 1997.
In October, shareholders approved a merger of your fund into Putnam Master
Intermediate Income Trust, which while similar in most aspects, will expand
your fund's investments into the high-yield corporate bond sector. Details of
the shareholder meeting are provided on page 25. We look forward to continuing
our relationship with you and will be providing a report of the results of the
fund's fiscal 1998 semiannual period this spring.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 21, 1998
Report from the Fund Managers
Kenneth J. Taubes, lead manager
D. William Kohli
Gail S. Attridge
Putnam Intermediate Government Income Trust's fiscal 1997 could aptly be
called a tale of two markets. Your fund's ability to invest in both U.S and
international markets gave it the flexibility needed to search out the best of
times -- the strength and relative stability of U.S. fixed-income securities
- -- while attempting to cushion against the worst of times -- foreign market
turbulence at an unprecedented level. For the 12 months ended November 30,
1997, your fund recorded a total return of 2.76% at net asset value and 5.60%
at market price. For more information, please turn to pages 8 and 9.
* U.S. BONDS RALLY AS INVESTORS TAKE REFUGE
While your fund offers investors the ability to seek opportunities in the U.S.
and international fixed-income markets, the majority of its assets are
allocated to domestic bonds, including U.S. government securities, agencies,
and mortgages. During fiscal 1997, U.S. interest rates remained generally
stable, making U.S. bonds attractive to investors worldwide. Much of the
strength of long-term bonds was predicated on the unusual combination of a
strong economy, low unemployment, and low inflation. All of these issues,
while positive factors for the economy, placed some cyclical pressures on the
short end of the yield curve, resulting in a slight rise in short-term rates.
Five-year Treasury notes were unchanged, and 10-year and 30-year bonds
rallied, resulting in a flattening of the yield curve. Your fund's
intermediate-range focus meant that the portfolio had little exposure to
shorter- or longer-term securities.
Early in your fund's fiscal period, the Federal Reserve Board had taken steps
to attempt to cool the economy down. In March 1997, the Fed issued what was
touted as a preemptive strike with a quarter-point increase in the target for
the federal funds rate, the first tightening in more than two years. Although
the increase was generally expected at the time, it triggered a substantial
equity selloff and pushed yields of 30-year Treasury bonds past the 7% mark
for the first time since the summer of 1996. In retrospect, the rate
tightening seemed to have had no material effect. At period's end, the economy
was just as strong as it was when the Fed fired its single shot. We extended
the fund's duration in the spring after the Fed tightening. Duration is a
measure of a portfolio's sensitivity to interest-rate changes, and a longer
duration can be beneficial during a period of declining rates and harmful in a
rising-rate environment. The move proved fortuitous because spring represented
the high-water mark for bond yields; rates have generally declined since then.
Many economists have since come to recognize that inflationary expectations
have probably been too high and have been based on the remnants and the
memories of the 1980s rather than on an accurate assessment of current
conditions. With today's low inflation, longer-term investors can see beyond
the cyclical events and appreciate the many advantages offered by fixed-income
securities. This gradual realization should help provide support for the
fixed-income securities in which your fund invests.
* MORTGAGE-BACKED SECURITIES EMPHASIZED
The period's relatively stable interest-rate environment translated into low
volatility in the U.S. bond market. This was an excellent backdrop for many of
your fund's U.S. holdings, especially mortgage-backed securities. Mortgage
backeds were the best-performing U.S. investment-grade sector during the
period, outperforming both Treasury securities and corporate bonds.
Mortgage-backed securities generally offer higher yields than Treasuries in
order to compensate investors for the risk that their principal may be
returned in full at some point prior to the security's stated maturity date.
Such prepayments may cause an investor's actual rate of return to differ from
the expected rate of return and are more likely to occur in falling
interest-rate environments.
[GRAPHIC OMITTED: TOP FIVE HOLDINGS PER SECTOR]
TOP FIVE HOLDINGS PER SECTOR*
U.S. GOVERNMENT OBLIGATIONS
GNMA 7.50%, 2004-2007
FNMA 6.50%, 2026-2027
U.S. Treasury bonds 11.625%, 2004
U.S. Treasury notes 6.25%, 1999
GNMA 8.50%, 2026-2027
FOREIGN BONDS
United Kingdom Treasury bonds 7.50%, 2006
Germany (Federal Republic of) bonds 6.00%, 2007
Banco Nacional (Mexico) debentures 7.25%, 2004
South Africa (Republic of) bonds 12.00%, 2005
Denmark (Government of) bonds 8.00%, 2006
Footnote reads:
* Based on net assets of 11/30/97. Portfolio holdings will vary over time.
Prepayment risk was not an issue for a large part of the year, however, since
economic growth was generally strong and interest rates appeared to us to be
relatively stable. Only during the summer did Treasuries gain the upper hand.
Their sensitivity to changing interest rates translated into relatively
greater price appreciation as the market rallied and rates moved lower.
Mortgages were hurt somewhat during this period, as the prospect of lower
rates rekindled concern over the potential of increased homeowner prepayments.
By the end of the fund's fiscal period, more than 40% of assets were allocated
to mortgage-backed securities.
* FLIGHT TO QUALITY FAVORS U.S. BONDS
During the period, we saw significant inflows of cash from overseas,
supporting the U.S. bond market. Not only was the dollar one of the strongest
currencies in the world during the period -- a factor that helped attract
assets -- but U.S. interest rates were also at compelling levels. Much of the
foreign capital was from Japan, where investors were dealing with the double
whammy of extremely low interest rates and a persistently weak economy. The
dollar stood strong against the yen as Japanese investors sought the benefits
of our slightly higher rates as well as capital appreciation on their
currency.
Toward the end of the period, turmoil in Asia intensified the foreign capital
inflow. What had begun as a matter of interest-rate differentials quickly
became an onslaught as investors ran to the safety of U.S. bonds in an attempt
to stop losing money overseas. This flight to quality, coupled with low
inflation in the United States, resulted in a dramatic rally in U.S. bonds at
the end of the period.
* INTERNATIONAL BONDS PRESENT CHALLENGES
On the international front, we continued our focus on European markets,
although in dollar terms their performance has been a bit disappointing. Bonds
from Germany and Denmark were our primary interest mainly because of the
attractively steep yield curves present there. While these holdings performed
well in local currency terms, the surge in value of the U.S. dollar against
those currencies resulted in lackluster dollar-adjusted returns.
We maintained a significant exposure in U.K. bonds, the best-performing
government securities thus far in this calendar year. The Bank of England's
independence and tighter monetary policy as well as the possibility that the
United Kingdom may enter the European Economic and Monetary Union (EMU) after
All provided the catalysts that U.K. bonds needed to rally. Other positive
dollar-bloc performances came from holding dollar surrogates in Australia
and Canada.
* MARKET UNCERTAINTIES DICTATE CAUTION
With the continued financial turmoil around the globe and because the United
States offers one of the strongest economies in the world, we believe that
U.S. markets will continue to attract capital. There is some question whether
potential weaknesses in Asian and Latin American domestic markets will create
enough of a slowing in the U.S. economy to hold inflation in check. We intend
to keep an attentive eye on the opportunities in the mortgage sector. We will
also be closely monitoring challenges overseas, where we are cautiously
optimistic about several markets, including Germany, the United Kingdom,
and France.
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 11/30/97, there is no guarantee the fund will continue to hold
these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Intermediate Government Income Trust is designed for
investors seeking high current income and relative stability of net asset
value through a portfolio of U.S. government and foreign government
securities with limited maturities.
TOTAL RETURN FOR PERIODS ENDED 11/30/97
Market
NAV price
- ------------------------------------------------------------------------------
1 year 2.76% 5.60%
- ------------------------------------------------------------------------------
5 years 37.26 26.84
Annual average 6.54 4.87
- ------------------------------------------------------------------------------
Life (6/27/88) 113.32 79.49
Annual average 8.37 6.40
- ------------------------------------------------------------------------------
COMPARATIVE INDEXES AND BENCHMARKS
Lehman Bros. Lehman Bros. Salomon Bros.
Govt. Mortgage- Non-U.S. Consumer
Intermed Backed World Govt. Price
Bond Index Securities Index Bond Index Index
- ------------------------------------------------------------------------------
1 year 6.28% 7.93% -0.28% 1.83%
- ------------------------------------------------------------------------------
5 years 36.97 42.20 44.61 13.73
Annual average 6.50 7.30 7.66 2.61
- ------------------------------------------------------------------------------
Life (6/27/88) 108.09 127.49 117.56 36.86
Annual average 8.09 9.12 8.60 3.39
- ------------------------------------------------------------------------------
Performance data represent past results and do not reflect future
performance. They do not take into account any adjustment for taxes
payable on reinvested distributions. Investment returns, net asset value,
and market price will fluctuate so that an investor's shares when sold may
be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 11/30/97
- ------------------------------------------------------------------------------
Distributions (number) 12
- ------------------------------------------------------------------------------
Income $0.329
- ------------------------------------------------------------------------------
Capital gains --
- ------------------------------------------------------------------------------
Return of capital1 0.271
- ------------------------------------------------------------------------------
Total $0.600
- ------------------------------------------------------------------------------
Share value NAV Market price
- ------------------------------------------------------------------------------
11/30/96 $8.66 $7.625
- ------------------------------------------------------------------------------
11/30/97 8.22 7.438
- ------------------------------------------------------------------------------
Current return (end of period) NAV Market price
- ------------------------------------------------------------------------------
Current dividend rate2 4.00% 4.42%
- ------------------------------------------------------------------------------
1 See page 24.
2 Income portion of most recent distribution, annualized and divided by NAV
or Market price at end of period.
TOTAL RETURN FOR PERIODS ENDED 12/31/97
(most recent calendar quarter)
Market
NAV price
- ------------------------------------------------------------------------------
1 year 4.15% 8.28%
- ------------------------------------------------------------------------------
5 years 36.22 29.64
Annual average 6.38 5.33
- ------------------------------------------------------------------------------
Life (6/27/88) 114.10 82.20
Annual average 8.33 6.51
- ------------------------------------------------------------------------------
Performance data represent past results and do not reflect future
performance. They do not take into account any adjustment for taxes
payable on reinvested distributions. Investment returns, net asset value
and market price will fluctuate so that an investor's shares when sold may
be worth more or less than their original cost.
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, 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 Government Intermediate Bond Index* is composed of all
bonds covered by the Lehman Brothers Government Bond Index+ with
maturities between 1 and 9.99 years.
Lehman Brothers Mortgage-Backed Securities Index* reflects performance of
15- and 30-year fixed-rate securities backed by mortgage pools of the
GNMA, FHLMC, and FNMA.
Salomon Brothers Non-U.S. World Government Bond Index* is an unmanaged
list of bonds issued by 10 countries.
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 in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
+ The Lehman Brothers Government Bond Index is an unmanaged list of
U.S. Government and mortgage-backed securities.
Report of independent accountants
To the Trustees and Shareholders of
Putnam Intermediate Government Income 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
Intermediate Government Income Trust (the "fund") at November 30, 1997, 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,
1997 by correspondence with the custodian and the application of alternative
auditing procedures where investments purchased were not yet received by the
custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
January 13, 1998
Portfolio of investments owned
November 30, 1997
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (68.0%) *
PRINCIPAL AMOUNT VALUE
U.S. Government Agency Mortgage Pass-Through Certificates (45.9%)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Mortgage Association
$ 2,535,000 8 1/2s, TBA, December 16, 2027 $ 2,645,095
8,745,000 7s, TBA, December 15, 2012 8,848,804
206,771 Federal Home Loan Mortgage Association 6 1/2s,
September 1, 2002 205,674
Federal National Mortgage Association
17,290,152 7s, with due dates from November 1, 2023 to
April 15, 2027 17,322,493
33,683,417 6 1/2s, with due dates from March 1, 2026 to
September 15, 2027 33,030,648
10,180,000 Government National Mortgage Association 5 1/2s,
TBA, December 16, 2027 10,175,215
Government National Mortgage Association
23,591,659 8 1/2s, with due dates from May 15, 2026 to
September 15, 2027 24,675,240
61,897 8s, with due dates from July 15, 2023 to
September 15, 2026 64,635
121,035,930 7 1/2s, with due dates from May 15, 2024 to
October 15, 2027 123,460,963
22,471,731 7s, with due dates from January 15, 2025 to
November 15, 2027 22,537,008
--------------
242,965,775
U.S. Treasury Obligations (22.1%)
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
10,960,000 12 3/8s, May 15, 2004 14,725,746
20,000,000 11 5/8s, November 15, 2004 26,434,400
U.S. Treasury Notes
15,020,000 9 1/8s, May 15, 1999 15,712,272
7,650,000 7s, July 15, 2006 8,204,625
3,745,000 6 7/8s, May 15, 2006 3,981,984
9,819,000 6 1/2s, October 15, 2006 10,210,189
25,055,000 6 1/4s, March 31, 1999 25,207,585
1,265,000 6 1/8s, August 15, 2007 1,289,312
9,950,000 5 7/8s, July 31, 1999 9,960,846
1,170,000 5 3/4s, November 15, 2000 1,168,350
--------------
116,895,309
--------------
Total U.S. Government and Agency Obligations
(cost $358,130,993) $ 359,861,084
FOREIGN GOVERNMENT BONDS AND NOTES (22.6%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
ARP 5,000,000 Argentina (Republic of) bonds Ser. PRE1,
FRB 3.205s, 2001 5,039,516
AUD 2,530,000 Australia (Government of) bonds Ser. 302,
9 3/4s, 2002 1,976,762
CAD 10,065,000 Canada (Government of) bonds Ser. WB60,
7 1/4s, 2007 7,920,939
DKK 61,655,000 Denmark (Government of) bonds 8s, 2006 10,474,531
DEM 6,200,000 Germany (Federal Republic of) Unity Fund
bonds 8s, 2002 3,912,536
DEM 48,870,000 Germany (Federal Republic of) bonds Ser. 97,
6s, 2007 28,777,185
USD 7,953,000 Ministry of Finance Russia 9 1/4s, 2001 7,595,115
USD 3,200,000 Mendoza (Province of) 144A 10s, 2007 2,992,000
NZD 10,945,000 New Zealand (Government of) bonds
8s, 2004 7,150,128
ZAR 67,007,000 South Africa (Republic of) bonds 12s, 2005 12,442,580
GBP 17,545,000 United Kingdom Treasury bonds 7 1/2s, 2006 31,501,956
--------------
Total Foreign Government Bonds and Notes
(cost $119,668,472) $ 119,783,248
CORPORATE BONDS AND NOTES (4.2%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 5,387,000 Banco Nacional Comercio Exterior 8s, 2003 (Mexico) $ 5,090,715
5,000,000 Banco Nacional de Desenvolvi Econo 144A bonds
9s, 2007 (Brazil) 4,337,500
13,530,000 Banco Nacional deb. 7 1/4s, 2004 (Mexico) 12,549,075
--------------
Total Corporate Bonds and Notes
(cost $22,791,415) $ 21,977,290
PURCHASED OPTIONS OUTSTANDING (--%)*
NUMBER OF EXPIRATION DATE/
CONTRACTS STRIKE PRICE VALUE
- ------------------------------------------------------------------------------------------------------------
JPY 18,800,000 U.S. Dollars in exchange for
Japanese Yen (call) Dec. 97/121.22 JPY $ 8,460
ITL 96,000,000 Italian Government Bond
futures contract (call) Feb. 98/113.0 ITL 92,222
ITL 96,000,000 Italian Government Bond
futures contract (put) Feb. 98/113.0 ITL 32,778
--------------
Total Purchased Options Outstanding
(cost $237,555) $ 133,460
SHORT-TERM INVESTMENTS (9.2%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 48,676,000 Interest in $724,372,000 joint repurchase agreement dated
November 28, 1997 with S.B.C. Warburg, Inc. due
December 1, 1997 with respect to various U.S. Treasury
obligations -- maturity value of $48,698,999 for an
effective yield of 5.67% $ 48,698,999
40,000 Interest in $571,175,000 joint repurchase agreement dated
November 28, 1997 with Merrill Lynch, Pierce,
Fenner, & Smith, Inc. due December 1, 1997 with respect
to various U.S. Treasury obligations -- maturity value
of $40,019 for an effective yield of 5.70% 40,019
--------------
Total Short-Term Investments (cost $48,739,018) $ 48,739,018
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $549,567,453) *** $ 550,494,100
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $528,909,025.
*** The aggregate identified cost on a tax basis is $554,834,238,
resulting in gross unrealized appreciation and depreciation of
$3,061,878 and $7,402,016, respectively, or net unrealized depreciation
of $4,340,138.
TBA after the name of a security represents to be announced
securities (Note 1).
The rate shown on FRB are the current interest rates shown at November 30, 1997,
which are subject to change based on the terms of the security.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Forward Currency Contracts to Buy at November 30, 1997
(aggregate face value $178,234,370)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars $ 2,090,665 $ 2,117,726 3/18/97 $ (27,061)
Canadian Dollars 1,548,915 1,589,797 12/17/97 (40,882)
Deutschemarks 48,952,280 49,287,597 12/17/97 (335,317)
French Franc 8,475 8,464 12/17/97 11
Indonesian Rupiah 1,546,049 1,457,796 2/23/98 88,253
Indonesian Rupiah 4,535,331 4,678,485 6/23/98 (143,154)
Italian Lira 16,515,834 16,192,384 12/17/97 323,450
Japanese Yen 55,815,071 59,773,967 12/17/97 (3,958,896)
Mexican Peso 1,001,096 973,564 5/11/98 27,532
Mexican Peso 806,471 778,850 5/12/98 27,621
Philippines Peso 1,443,844 1,486,899 3/25/98 (43,055)
Polish Zloty 4,104,212 4,392,478 12/17/97 (288,266)
Spanish Peseta 9,712,695 9,548,819 12/17/97 163,876
Swiss Franc 9,546,815 9,213,356 12/17/97 333,459
Swedish Krona 14,214,918 14,387,679 12/17/97 (172,761)
Venezuelan Bolivar 1,803,045 1,792,264 6/5/98 10,781
Venezuelan Bolivar 546,150 554,245 6/19/98 (8,095)
- ----------------------------------------------------------------------------------------
$(4,042,504)
- ----------------------------------------------------------------------------------------
Forward Currency Contracts to Sell at November 30, 1997
(aggregate face value $188,251,150)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- ----------------------------------------------------------------------------------------
Australian Dollars $ 646,151 $ 654,371 3/18/98 $ 8,220
British Pounds 32,622,699 32,402,711 12/17/97 (219,988)
Danish Krone 4,974,255 4,864,562 12/17/97 (109,693)
Deutschemarks 78,928,952 78,407,820 12/17/97 (521,132)
Japanese Yen 36,649,052 38,922,042 12/17/97 2,272,990
New Zealand Dollar 10,918,472 11,202,654 12/17/97 284,182
South African Rand 12,494,989 12,670,078 12/17/97 175,089
Swiss Franc 9,450,571 9,126,912 12/17/97 (323,659)
- ----------------------------------------------------------------------------------------
$1,566,009
- ----------------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1997
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- ----------------------------------------------------------------------------------------
Euro DM (Short) $57,063,827 $56,900,863 Sep-98 $(162,964)
Japanese Government Bond
10 YR (Short) 23,235,793 23,334,631 Mar-98 98,838
Spanish 10 YR (Short) 6,623,469 6,519,467 Dec-97 (104,002)
U.S. Treasury Bond (Short) 8,332,188 8,337,563 Mar-98 5,375
Euro DM (Long) 57,290,389 57,197,582 Mar-98 92,807
German 10 YR (Long) 6,476,746 6,414,280 Dec-97 62,466
Japanese Government Bond
10 YR (Long) 23,417,590 23,530,037 Dec-97 (112,447)
U.S. Treasury Note (Long) 30,516,750 30,536,692 Mar-98 (19,942)
Municipal Bond Index (Long) 8,522,500 8,496,656 Mar-98 25,844
- ----------------------------------------------------------------------------------------
$(114,025)
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TBA Sale Commitments Outstanding at November 30, 1997
(proceeds receivable $11,594,990)
Principal Settlement Market
Description Amount Date Value
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
GNMA 8.5s, December 1999 $4,745,000 12/16/97 $ 4,962,938
GNMA 7.5s, December 2039 6,500,000 12/16/97 6,630,000
- ----------------------------------------------------------------------------------------
$11,592,938
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Written Options Outstanding at November 30, 1997
(premium received $231,623)
Contract Expiration Date/ Market
Amount Strike Price Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
DEM 32,200,000 Deutchemarks in exchange for
Japanese Yen (put) Dec. 97/74.58 JPY $ 48,356
DEM 107,500 German Government Bond
futures contracts (put) Feb. 98/102.00 DEM 27,403
DEM 107,500 German Government Bond
futures contracts (call) Feb. 98/102.00 DEM 104,132
- ----------------------------------------------------------------------------------------
$179,891
- ----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $549,567,453) (Note 1) $550,494,100
- ---------------------------------------------------------------------------------------------------
Cash 2,962,763
- ---------------------------------------------------------------------------------------------------
Foreign currency (cost $134,745) 137,128
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 7,209,520
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 11,766,117
- ---------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 4,449,899
- ---------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 2,371,509
- ---------------------------------------------------------------------------------------------------
Total assets 579,391,036
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 3,220,194
- ---------------------------------------------------------------------------------------------------
Payable for variation margin 166,899
- ---------------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 365,375
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 21,828,823
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 974,162
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 78,590
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 16,881
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,801
- ---------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 6,926,394
- ---------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 5,032,257
- ---------------------------------------------------------------------------------------------------
Written options outstanding, at value (premiums received $231,623) 179,891
- ---------------------------------------------------------------------------------------------------
TBA sales commitments, at value (proceeds receivable $11,594,990) 11,592,938
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 97,806
- ---------------------------------------------------------------------------------------------------
Total liabilities 50,482,011
- ---------------------------------------------------------------------------------------------------
Net assets $528,909,025
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Note 1) $538,588,059
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (2,713,937)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments
and foreign currency transactions (Note 1) (5,443,815)
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets and
liabilities in foreign currencies (1,521,282)
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $528,909,025
Computation of net asset value
- ---------------------------------------------------------------------------------------------------
Net asset value per share ($528,909,025 divided by 64,333,052 shares) $8.22
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended November 30, 1997
<S> <C>
Interest income (net of foreign tax $2,571) $37,937,026
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,976,958
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 657,913
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 20,894
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 11,088
- --------------------------------------------------------------------------------------------------
Reports to shareholders 74,460
- --------------------------------------------------------------------------------------------------
Auditing 45,094
- --------------------------------------------------------------------------------------------------
Postage 127,215
- --------------------------------------------------------------------------------------------------
Exchange listing fees 55,212
- --------------------------------------------------------------------------------------------------
Other 117,599
- --------------------------------------------------------------------------------------------------
Total expenses 5,086,433
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (125,248)
- --------------------------------------------------------------------------------------------------
Net expenses 4,961,185
- --------------------------------------------------------------------------------------------------
Net investment income 32,975,841
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (12,213,865)
- --------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1 and 3) 347,081
- --------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 465,925
- --------------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (7,086,453)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the year 1,358,300
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments, futures,
written options, and TBA sale commitments during the year (5,430,786)
- --------------------------------------------------------------------------------------------------
Net loss on investments (22,559,798)
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $10,416,043
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended November 30
--------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 32,975,841 $ 34,846,381
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
and foreign currency transactions (18,487,312) 7,561,592
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments
and assets and liabilities in foreign currencies (4,072,486) (7,096,906)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 10,416,043 35,311,067
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (16,407,769) (38,008,000)
- ----------------------------------------------------------------------------------------------------------------------
In excess of net investment income (4,776,814) (959,831)
- ----------------------------------------------------------------------------------------------------------------------
Return of capital (17,431,196)
- ----------------------------------------------------------------------------------------------------------------------
Shares repurchased (2,028,163) (3,254,878)
- ----------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (30,227,899) (6,911,642)
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 559,136,924 566,048,566
- ----------------------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of
net investment income and undistributed net
investment income of $2,713,937 and
$279,021, respectively) $528,909,025 $559,136,924
- ----------------------------------------------------------------------------------------------------------------------
Number of fund shares
- ----------------------------------------------------------------------------------------------------------------------
Shares outstanding at beginning of year 64,600,552 65,037,152
- ----------------------------------------------------------------------------------------------------------------------
Shares repurchased (Note 4) (267,500) (436,600)
- ----------------------------------------------------------------------------------------------------------------------
Shares outstanding at end of year 64,333,052 64,600,552
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended November 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $8.66 $8.70 $8.07 $9.05 $9.32
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .51 .54 .58 .56 .55
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.35) .01 .65 (.84) .21
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .16 .55 1.23 (.28) .76
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.26) (.59) (.60) (.39) (.55)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.07) (.01) -- -- (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.07) (.44)
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital (.27) -- -- (.24) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.60) (.60) (.60) (.70) (1.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net asset value
from shares repurchased (a) --(d) .01 --(d) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $8.22 $8.66 $8.70 $8.07 $9.05
- ------------------------------------------------------------------------------------------------------------------------------------
Market value,
end of year $7.438 $7.625 $7.750 $7.250 $8.125
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at market value (%)(b) 5.60 6.44 15.58 (2.38) (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(in thousands) $528,909 $559,137 $566,049 $525,592 $589,227
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .95 .90 1.00 .87 .89
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 6.16 6.31 6.85 6.64 5.98
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 285.83 326.92 416.86 242.42 303.68
- ------------------------------------------------------------------------------------------------------------------------------------
(a) See (Note 4) to the financial statements.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(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) Increase in net asset value from shares repurchased amounted to less than $0.01 per share.
</TABLE>
Notes to financial statements
November 30, 1997
Note 1
Significant accounting policies
Putnam Intermediate Government Income Trust (the "fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The fund's investment objective is to seek,
with equal emphasis, high current income and relative stability of net asset
value by investing in a portfolio of U.S. government and agency obligations
and foreign governmental obligations with limited maturities.
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 Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported--as in the case of some
securities traded over-the-counter--the last reported bid price. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value, and other investments are
stated at fair value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.. These balances may be invested in one
or more repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) 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.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities, currency
holdings, and other assets and liabilities are recorded in the books and
records of the fund after translation to U.S. dollars based on the exchange
rates on that day. The cost of each security is determined using historical
exchange rates. Income and withholding taxes are translated at prevailing
exchange rates when accrued or incurred. The fund does not isolate that
portion of realized or unrealized gains or losses resulting from changes in
the foreign exchange rate on investments from fluctuations arising from
changes in the market prices of the securities. Such gains and losses are
included with the net realized and unrealized gain or loss on investments. Net
realized gains and losses on foreign currency transactions represent net
exchange gains or losses on closed forward currency contracts, disposition of
foreign currencies and the difference between the amount of investment income
and foreign withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation and
depreciation of assets and liabilities in foreign currencies arise from
changes in the value of open forward currency contracts and assets and
liabilities other than investments at the period end, resulting from changes
in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell currencies
at a set price on a future date, to protect against a decline in value
relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of a
currency in which securities a fund intends to buy are denominated, when a
fund holds cash reserves and short-term investments). The U.S. dollar value of
forward currency contracts is determined using current forward currency
exchange rates supplied by a quotation service. The market value of the
contract will fluctuate with changes in currency exchange rates. The contract
is "marked to market" daily and the change in market value is recorded as an
unrealized gain or loss. 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 fund could be exposed to risk if the value of the currency changes
unfavorably, if the counterparties to the contracts are unable to meet the
terms of their contracts or if the fund is unable to enter into a closing
position.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund owns
or expects to purchase. The fund may also write options on securities it owns
or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparty to the contract is unable to perform. When
the contract is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Realized gains and losses on purchased
options are included in realized gains and losses on investment securities.
Futures contracts are valued at the quoted daily settlement prices established
by the exchange on which they trade. Exchange traded options are valued at the
last sale price, or if no sales are reported, the last bid price for purchased
options and the last ask price for written options. Options traded
over-the-counter are valued using prices supplied by dealers.
H) TBA purchase commitments The fund may enter into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed unit price at a future
date beyond customary settlement time. Although the unit price has been
established, the principal value has not been finalized. However, the amount
of the commitments will not fluctuate more than 1.0% from the principal
amount. The fund holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the fund may enter into offsetting contracts for the forward sale of
other securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in the value of the fund's other assets. Unsettled TBA
purchase commitments are valued at the current market value of the underlying
securities, according to the procedures described under "Security valuation"
above.
Although the fund will generally enter into TBA purchase commitments with the
intention of acquiring securities for their portfolio or for delivery pursuant
to options contracts it has entered into, the fund may dispose of a commitment
prior to settlement if Putnam Management deems it appropriate to do so.
I) TBA sale commitments The fund may enter into TBA sale commitments to hedge
its portfolio positions or to sell mortgage-backed securities it owns under
delayed delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time a TBA sale
commitment is outstanding, equivalent deliverable securities, or an offsetting
TBA purchase commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
"Security valuation" above. The contract is "marked-to-market" daily and the
change in market value is recorded by the fund as an unrealized gain or loss.
If the TBA sale commitment is closed through the acquisition of an offsetting
purchase commitment, the fund realizes a gain or loss. If the fund delivers
securities under the commitment, the fund realizes a gain or a loss from the
sale of the securities based upon the unit price established at the date the
commitment was entered into.
J) Federal taxes It is the policy of the fund to distribute all of its taxable
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, 1997, the fund had a capital loss carryover of approximately
$203,000 available to offset future net capital gain, if any, which will
expire on November 30, 2002.
K) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. 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 temporary
and permanent differences of losses on wash sale transactions, foreign
currency gains and losses, paydown gains and losses on mortgage-backed
securities, post-October loss deferrals, and market discount.
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 year ended November 30, 1997, the fund
reclassified $2,646,980 to decrease distributions in excess of net investment
income and $21,925,822 to decrease paid-in-capital, with a decrease to
accumulated net realized loss on investments and foreign currency transactions
of $19,278,842. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
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. Such
fee is based on the following annual rates: 0.75 % of the first $500 million
of average weekly net assets, 0.65% of the next $500 million, 0.60% of the
next $500 million, and 0.55% of any amount over $1.5 billion.
As part of the subcustodian contract between the subcustodian bank and PFTC,
the sub-custodian bank has a lien on the securities of the fund to the extent
permitted by the fund's investment restrictions to cover any advances made by
the subcustodian bank for the settlement of securities purchased by the fund.
At November 30, 1997 the payable to the subcustodian bank represents the
amount due for cash advance for the settlement of a security purchased.
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 year ended November 30, 1997, fund expenses were reduced by $125,248
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 Trustees fee, of which $790 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 year ended November 30, 1997, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $719,406,616 and $734,356,820, respectively. Purchases and sales of
U.S. government obligations aggregated $752,015,559 and $752,998,186,
respectively. In determining the net gain or loss on securities sold, the cost
of securities has been determined on the identified cost basis.
Written option transactions during the year are summarized as follows:
Contract Premiums
Amounts Received
- ------------------------------------------------------------
Written options
outstanding at
beginning of year -- $ --
Options opened 80,683,100 802,371
Options expired (28,675,000) (269,994)
Options closed (19,593,100) (300,754)
- ------------------------------------------------------------
Written options
outstanding at
end of year 32,415,000 $ 231,623
- ------------------------------------------------------------
Note 4
Share Repurchase Program
On November 30, 1995, the Trustees authorized the fund to repurchase up to
3,250,000 of its shares in the open market. Repurchases will only be made when
the fund's shares are trading at less than net asset value and at such times
and amounts as is believed to be in the best interest of the fund's
shareholders. Any repurchases of shares will have the effect of increasing the
net asset value per share of remaining shares outstanding.
For the year ended November 30, 1997, the fund repurchased 267,500 shares for
$2,028,163, which reflects a discount from net asset value of $241,981 or
10.64%.
As of November 30, 1997, 765,200 shares have been repurchased since the
inception of the program.
Note 5
Merger into Master Intermediate Income Trust
On October 9, 1997, the shareholders of the fund approved the transfer of all
of the assets of the fund to Master Intermediate Income Trust (the Master
Fund) in exchange for the shares of the Master Fund and the assumption by the
Master Fund of all of the liabilities of the fund. The tax-free exchange is
expected to occur on January 23, 1998.
Federal tax information
(Unaudited)
For the year ended November 30, 1997, a portion of the fund's distribution
represents a return of capital and is therefore not taxable to shareholders.
The Form 1099 you receive in January 1998 will show the tax status of all
distributions paid to your account in calendar year 1997.
Results of October 9, 1997 shareholder meeting
An annual meeting of shareholders of the fund was held on October 9, 1997. At
the meeting, each of the nominees for Trustees was elected, as follows:
Votes
Votes for withheld
Jameson Adkins Baxter 56,999,567 3,791,089
Hans H. Estin 56,993,337 3,797,319
John A. Hill 57,015,706 3,774,950
R.J. Jackson 57,004,111 3,786,545
Elizabeth T. Kennan 56,976,062 3,814,594
Lawrence J. Lasser 56,992,997 3,797,659
Robert E. Patterson 57,020,209 3,770,447
Donald S. Perkins 56,982,502 3,808,154
William F. Pounds 56,994,973 3,795,683
George Putnam 56,967,138 3,823,518
George Putnam, III 56,983,833 3,806,823
A.J.C. Smith 57,012,961 3,777,695
W. Nicholas Thorndike 56,986,324 3,804,332
A proposal to approve of the Agreement and Plan of Reorganization providing
for the transfer of all of the assets of Putnam Intermediate Government Income
Trust (the "fund") to Putnam Master Intermediate Income Trust (the "Master
Fund") in exchange for shares of the Master Fund and the assumption by the
Master Fund of all of the liabilities of the fund, and the distribution of
such shares to the shareholders of the fund in liquidation of the fund was
approved as follows: 33,634,143 votes for, and 7,067,941 votes against, with
20,088,572 abstentions and broker non-votes.
A proposal to ratify the selection of Price Waterhouse LLP as the independent
auditors of your fund was approved as follows: 58,994,129 votes for and
837,476 votes against, with 959,051 abstentions and broker non-votes.
A proposal to convert your fund from closed-end to open-end status and
authorize certain related amendments to the Agreement and Declaration of Trust
was as follows: 11,017,955 votes for and 27,706,398 votes against, with
22,066,303 abstentions and broker non-votes.
All tabulations are rounded to nearest whole number.
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
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
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
Gary N. Coburn
Vice President
William J. Curtin
Vice President
Kenneth J. Taubes
Vice President and Fund Manager
D. William Kohli
Vice President and Fund Manager
Gail S. Attridge
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for up-to-date
information about the fund's NAV.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
36880-076 1/98
