<PAGE> 1
Putnam
Investment
Grade
Municipal Trust
SEMIANNUAL REPORT
May 31, 1994
<PAGE> 2
Performance highlights
Lipper Analytical Services, an industry research firm, ranked
the fund first in three-year performance ended May 31, 1994
against other funds with similar objectives.*
Kiplinger's Personal Finance Magazine calls Putnam Investment
Grade Municipal Trust one of the "top performers" of the closed-end
municipal bond funds they survey as well as a fund "worth looking at."+
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.
SEMIANNUAL RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Market
NAV price
<S> <C>
6 months ended 5/31/94
Total return:
(Common Shares)
(change in value plus
reinvested earnings) -3.60% -1.87%
Share value: Market
(Common Shares)
NAV price
11/30/93 $13.44 $14.000
5/31/94 12.26 13.000
Distributions:1 Number Income Capital Gains Total
6 months ended
5/31/94
Common shares 7 $0.48 $0.24 $0.72
Number Income Capital Gains Total
Preferred shares
Series A 1400 1194.22 62.54 1256.76
Taxable equivalent2
Market Market
Current return NAV price NAV price
(end of period)
(Common Shares)
Current dividend rate3 7.83% 7.38% 12.96% 12.22%
</TABLE>
Performance data represent past results. For performance over longer periods,
see page 8. 1Capital gains are taxable. Investment income may be subject to
state and local taxes. 2Assumes maximum 39.6% federal tax rate. Results for
investors subject to lower tax rates would not be as advantageous. For some
investors, investment income may also be subject to the federal alternative
minimum tax. 3Income portion of most recent distribution, annualized and
divided by NAV or market price at end of period.
*Rankings by Lipper vary over time and do not include the effects of sales
charges. The firm ranked the fund for one year, 18th out of 56 funds; for two
years, 3rd out of 31 funds; for three years, 1st out of 21 funds. Past
performance is not indicative of future results. +Kiplinger's Personal
Finance Magazine (June 1994)
<PAGE> 3
From the Chairman
Dear Shareholder:
I am pleased to announce the appointment of Michael F. Bouscaren as lead
portfolio manager for Putnam Investment Grade Municipal Trust. Mike worked as
a portfolio manager for Putnam Tax Exempt Income Fund and Putnam California Tax
Exempt Income Fund from 1980 to 1986. Afterwards he served as a director of
Salomon Brothers Asset Management and also president, chairman of the board,
and portfolio manager for Salomon Brothers Series Funds Inc. He returned to
Putnam in April as a senior portfolio manager for the Tax-Exempt Bond Group.
William Reeves, your fund's previous manager, continues to serve as a senior
portfolio manager in the group. Meanwhile, the year is now into its third
quarter, with the economy still gaining ground slowly, inflation still under
control, and the markets still responding in line with expectations. In the
following report, Bill discusses the progress of your fund over the past six
months while Mike provides some thoughts about the fund's future. Respectfully
yours,
George Putnam
July 20, 1994
<PAGE> 4
Report from the fund managers
William H. Reeves
Michael F. Bouscaren
The first five months of 1994 have brought increases in short-term interest
rates, a major bond market correction, and general uncertainty about the market
as a whole. The municipal bond market, and Putnam Investment Grade Municipal
Trust in particular, were not immune to the dampening effects of these events.
The fund's flexibility, however, enabled it to outperform the average
closed-end municipal bond fund for the semiannual period ended May 31, 1994.
Early in fiscal 1994, in anticipation of rising short-term interest rates, we
took a series of defensive steps. They included emphasizing municipal bonds
with shorter maturities, buying bonds with higher coupons, and maintaining an
increased level of call protection. While overall market conditions forced us
to adjust some of the fund's basic strategies, we still see highly favorable
conditions in the municipal bond market.
STRATEGY CHANGES
We began our defensive strategies with changes designed to reduce the overall
volatility of the portfolio. Shortening the average maturity of the municipal
bonds in the portfolio helped decrease volatility. This is because bonds that
mature in one, three, or five years, for example, tend to experience fewer
price fluctuations than those with 10- or 30-year maturities. Additionally, we
took a defensive position with regard to the coupons we selected.
<PAGE> 5
Demand for bonds with coupons below 6% is more likely to be
significantly affected by interest rate shifts, whereas those bonds
with coupons in the 7% to 10% range are generally considered
less vulnerable.
As we instituted these strategies, we also continued to use active
call protection. In order to maintain the fund's income stream
over time, we continuously replace bonds with approaching call
dates (the ones most likely to be called in by issuers refinancing
at lower rates) with bonds having later call dates. These may offer
better and more consistent yields over a longer period.
FAVORABLE SUPPLY/DEMAND ENVIRONMENT
For the past few months, the financial media have reported on a
dramatic decline in the issuance of municipal bonds. To some
extent, this decrease in supply, coupled with an increase in
demand, has helped support prices. The fund's use of leverage, or
the issuing of debt at short-term rates to investors in order to
[LINE GRAPH]
MUNICIPAL BOND PRICES
$115
110
105
100 5/31/93-5/31/94 Monthly
95
M J J A S O N D J F M A M
1993 1994
Source: Lehman Brothers Municipal Bond Index
LEHMAN
MUNI BOND
DATE PRICES
May-93 108.15
Jun-93 109.07
Jul-93 105.93
Aug-93 107.34
Sep-93 107.7
Oct-93 107.18
Nov-93 105.41
Dec-93 106.86
Jan-94 107.37
Feb-94 103.87
Mar-94 98.94
Apr-94 99.25
May-94 99.59
<PAGE> 6
reinvest the proceeds in tax-free bonds, also took advantage of the
supply/demand relationship. In recent months, the relatively wide
gap between short- and long-term interest rates made leverage a
useful tool. In the current rising interest rate environment,
however, we will continue to monitor the effectiveness of this
strategy and make adjustments as market conditions warrant.
On the whole, we believe the market will continue to offer
attractive buying opportunities for the fund. This is mainly
because we anticipate continuing slow but steady growth in the
economy, combined with relatively low interest rates and inflation.
We also believe that higher yields and generally higher taxes will
continue to make municipal bond investments attractive relative to
many taxable investments, including U.S. Treasury securities.
Our confidence in the municipal bond market is further evidenced
by the fact that we are not currently recommending any dividend
adjustments. We also believe this demonstrates the effectiveness of
the fund's strategy even in a difficult environment.
<PAGE> 7
<TABLE>
<CAPTION>
CONCENTRATION OF HOLDINGS BY STATE
<S> <C>
California 20.2%
New York 13.1%
Massachusetts 12.3%
Texas 10.5%
Pennsylvania 7.8%
</TABLE>
Geographically, the fund is diversified among 25 states. The top five states
represent 63.9% of the portfolio, based on net assets as of 5/31/94.
OUTLOOK: POSITIONED OPPORTUNISTICALLY
Like all fixed-income portfolios, your fund has had to weather
a significant market correction during this period. However,
because of the strength of the market and the favorable economic
conditions we have outlined here, we believe the uncertainty of the
first half of fiscal 1994 will translate into opportunity for the
remainder of the year and beyond.
<PAGE> 8
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
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 how
the fund might have grown each year, on average, over varying
periods. For comparative purposes, we show how the fund
performed relative to appropriate indexes and benchmarks.
Total return for periods ending 5/31/94*
<TABLE>
<CAPTION>
Lehman Bros.
Market Municipal
NAV Price Bond Index CPI
<S> <C> <C> <C> <C>
6 months -3.60% -1.87% -1.83% 1.17%
1 year 2.69 3.50 2.47 2.29
3 years 40.27 42.28 25.99 8.78
Annual average 11.94 12.47 8.01 2.84
Life of fund 58.24 55.35 44.97 17.44
(since 10/26/89)
Annual average 10.49 10.05 8.41 3.56
</TABLE>
Total return for periods ending 6/30/94
(most recent calendar quarter)
<TABLE>
<CAPTION>
NAV Mkt price
<S> <C> <C>
6 months -6.86 -3.25
1 year -0.75 1.12
3 years 38.89 41.20
Annual average 11.57 12.19
Life of fund 56.56 56.84
(since 10/26/89)
Annual average 10.05 10.09
</TABLE>
*Performance data represent past results. Investment returns and principal
value will fluctuate so an investor's shares, when sold, may be worth more or
less than their original cost. Fund performance data do not take into account
any adjustment for taxes payable on reinvested distributions.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, the liquidation preference and cumulative undeclared dividends on
the remarketed preferred shares, divided by the number of outstanding common
shares. (See Note 1b).
Market price is the current trading price of one share of the fund. Market
prices are set by transactions between buyers and sellers on the New York Stock
Exchange.
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the municipal
bond market. The index does not take into account brokerage commissions or
other costs, may include bonds different from those in the fund, and may pose
different risks than the fund.
Consumer Price Index is a commonly used measure of inflation. It does not
represent an investment return.
<PAGE> 9
Portfolio of investments owned
May 31, 1994 (Unaudited)
Municipal bonds and notes (99.2%)(a)
Principal Amount Ratings (b)
Value
<TABLE>
<S> <C> <C>
Alabama (1.9%)
$5,500,000 Gadsden, Eastern AL Med. Clinic Board
Rev. Bonds (Baptist Hosp. of Gadsden Inc.),
Ser. A, 7.8s, 11/1/21 BBB $ 6,407,500
1,000,000 Mobile, Arpt. Auth. Rev. Bonds, 11 1/4s, 10/1/14 Baa 1,042,500
257,450,000
California (20.2%)
2,500,000 CA Hlth. Facs. Fin. Auth. Variable Rate Demand
Notes (VRDN) (St. Joseph Hlth. Syst.),
Ser. A, 2.9s, 7/1/13 VMIG1 2,500,000
5,000,000 CA State Pub. Works Board Lease Rev. Bonds
(Dept. of Corrections-State Prisons), Ser. A,
American Municipal Bond Assurance Corp.
(AMBAC), 5 1/4s, 12/1/07 AAA 4,756,250
8,400,000 CA State U. Residual Interest Bonds (RIBS),
AMBAC, 10.272s, 11/1/21
(acquired 8/5/91, cost $8,592,696)(c) AAA 9,639,000
8,200,000 Irvine Ranch, Impt. Board Act 1915 VRDN,
2.8s, 9/2/15 VMIG1 8,200,000
Los Angeles Cnty., Pub. Works Fin. Auth.
Lease Rev. Bonds (Multi-Cap. Facs. Project IV),
Municipal Bond Insurance Assn. (MBIA )
5,000,000 5 1/4s, 12/1/16 AAA 4,412,500
9,500,000 4 3/4s, 12/1/10 AAA 8,241,250
1,580,000 Los Angeles, Regl. Arpts. Impt. Corp. Rev. Bonds
(Western Air Lines, Inc. Delta AirLines, Inc.),
11 1/4s, 11/1/25 Ba 1,753,800
5,000,000 Northern CA Transmission Rev. Bonds
(CA-OR Transmission Project), Ser. A, MBIA,
5.1s, 5/1/06 AAA 4,712,500
10,600,000 Orange Cnty., Variable Certif. of Participation,
2.8s, 8/1/15 VMIG1 10,600,000
1,100,000 Orange Cnty., Wtr. Dist. Variable Certif. of
Participation, Ser. B, 2.8s, 8/15/15VMIG11,100,000
San Bernardino Cnty., Certif. of Participation
(Med Ctr. Financing Project)
7,000,000 5 1/2s, 8/1/24 A 5,915,000
5,000,000 5s, 8/1/26 A 3,881,250
San Diego Cnty., Regl. Transmission Comm.
Sales Tax Rev. Bonds, Ser. A-2,
Financial Guaranty Insurance Co. (FGIC)
4,000,000 5 1/4s, 4/1/07 AAA 3,815,000
3,000,000 5 1/4s, 4/1/06 AAA 2,891,250
5,000,000 U. of CA Rev. Rfdg. Bonds (USCD Med. Ctr.
Satellite Med. Ctr. Fac.), 7.9s, 12/1/19
(acquired 3/2/92, cost $5,229,150) (c) BBB 5,318,750
77,736,550
Colorado (1.3%)
5,000,000 Denver, City & Cnty. Arpt. Rev. Bonds,
Ser. D, 7 3/4s, 11/15/21 Baa 5,031,250
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C>
Florida (0.9%)
$ 2,000,000 Hernando Cnty., Indl. Dev. Rev. Bonds
(FL Crushed Stone Co.), 8 1/2s, 12/1/14 B/P $ 2,080,000
1,500,000 Tampa, Wtr. & Swr. RIBS,
Ser. A, FGIC, 3.34s, 10/1/12 AAA 1,447,500
3,527,500
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 AA 1,680,000
4,800,000 De Kalb Cnty., Hsg. Auth. Muni. Rev. Bonds
(Briarcliff Park Apts. Project), Ser. A, 7 1/2s, 4/1/17 A/P 4,872,000
6,552,000
Hawaii (1.2%)
4,500,000 HI State Dept. of Budget & Fin. Special
Purpose Mtge. RIBS (Citizens Util. Co.),
Ser. 91-B, 10.018s, 11/1/21 AAA 4,623,750
Illinois (2.4%)
1,800,000 IL Dev. Fin. Auth. Poll. Control Rev. Bonds
(Cmnwlth. Edison Co. Project), 10 5/8s, 3/1/15 Baa 1,905,750
8,000,000 IL State Sales Tax Rev. Bonds, Ser. S, 5s, 6/15/08 AAA 7,260,000
9,165,750
Louisiana (1.4%)
2,000,000 LA State Recvy. Dist. Sales Tax VRDN,
MBIA, 2.85s, 7/1/98 VMIG1 2,000,000
3,000,000 West Feliciana, Poll. Control Rev. Bonds
(Gulf States Util. Co.), 7.7s, 12/1/14 BBB 3,273,750
5,273,750
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 2,397,500
Massachusetts (12.3%)
5,000,000 MA State Indl. Fin. Agcy. Rev. Bonds
(Cape Cod Hlth. Syst.), 8 1/2s, 11/15/20 Aaa 5,987,500
MA State Cons. Loan General Obligation
(G.O.) Bonds
6,000,000 Ser. D, 6s, 7/1/12 A 5,985,000
12,000,000 Ser. A, 6s, 6/1/11 A 11,970,000
15,000,000 MA State Wtr. Resource Auth. Rev. Bonds,
Ser. A, 7 5/8s, 4/1/14 AAA 17,100,000
6,100,000 MA State VRDN, Ser. D, 2.8s, 6/1/95 VMIG1 6,100,000
47,142,500
Michigan (3.5%)
1,875,000 Detroit, Dev. Fin. Auth. Tax Increment Rev. Bonds,
Ser. A, 9.5s, 5/1/21 BBB/P 2,315,625
</TABLE>
<PAGE> 11
MUMICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS (b) VALUE
<TABLE>
<S> <C> <C>
Michigan (continued)
$1,690,000 Highland Park, Fin. Auth. Hosp. Fac. Rev. Bonds
(MI Hlth. Care Corp. Project), Ser. A, 9 3/4s,
12/1/06 B $ 1,742,813
3,000,000 MI State Strategic Fund Ltd. Oblig. Rev. Bonds
(Mercy Svcs. for Aging Project), 9.4s, 5/15/20 BBB/P 3,213,750
5,435,000 Monroe Cnty., Poll. Control Rev. Bonds
(Detroit Edison Co.), Ser. A, 10 1/2s, 12/1/16 BBB 6,012,469
13,284,657
Minnesota (1.5%)
2,200,000 Duluth, Tax Increment VRDN
(Lake Superior Paper), 2.9s, 9/1/10 VMIG 2,200,000
3,800,000 St. Paul, Hsg. & Redev. Auth. Rev. Bonds
(Healtheast Project), Ser. A, 6 5/8s, 11/1/17 Baa 3,591,000
5,791,000
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 5,723,437
Nebraska (3.6%)
3,000,000 NE Investment Fin. Auth. Single Fam. Mtge. RIBS
Ser. B, Government National Mortgage Assn.
(GNMA) coll., 11.784s, 3/15/22 AAA 3,352,500
10,010,000 NE Investment Fin. Auth. Single Fam. Mtge. Rev.
1st. Ser., GNMA Coll., MBIA, 8 1/8s, 8/15/38 AAA 10,510,500
13,863,000
Nevada (1.8%)
6,500,000 Clark Cnty., Indl. Dev. Rev. Bonds
(NV Pwr. Co. Project), 7.8s, 6/1/20 Baa 6,987,500
New York (13.1%)
15,735,000 NY City, G.O. Bonds, Ser. B, 7s, 10/1/15 A 16,502,081
NY City, Variable G.O. Bonds
3,800,000 Ser. B-3, 3.45s, 8/15/18 VMIG 13,800,000
2,700,000 Ser. B, FGIC, 1.55s, 10/1/22 VMIG 12,700,000
2,000,000 Ser. B-4, 3.4s, 8/15/23 VMIG 12,000,000
1,865,000 NY City, Hsg. Dev. Corp. Multi-Fam. Rev. Bonds,
Ser. 85-1, Federal Housing Authority (FHA) Insd., AA 1,939,600
9 1/2s, 10/1/00
13,400,000 NY City, Muni. Wtr. Fin. Auth. VRDN,
Ser. G, FGIC, 2.95s, 6/15/24 VMIG 13,400,000
NY State Energy Research & Dev.
Auth. Poll. Control VRDN
4,000,000 Ser A, 2.2s, 7/1/15 AA 4,000,000
2,000,000 3.6s, 12/1/23 AAA 2,000,000
3,080,000 NY State Local Govt. Assistance Corp.
G.O. Bonds, Ser. D, 5.1s, 4/1/09 A 2,772,000
1,125,000 Riverton, Hsg. Corp. Mtge. Rev. Bonds
(Conifer Genesee Apt.), FHA Insd.,
10 1/2s, 1/15/25 A 1,170,000
-----------
50,283,681
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C>
North Dakota (3.0%)
$10,850,000 Mercer Cnty., Poll. Control Rev. Bonds (Basin Elec.
Pwr. Coop.-Antelope), AMBAC, 10 1/2s, 6/30/13 AAA $11,446,750
Ohio (2.6%)
OH State Air Quality Dev. Auth. Poll.
Control Rev. Bonds
3,600,000 (Cincinnati Gas & Elec. Co.), 10 1/8s, 12/1/15 BBB 3,951,000
5,000,000 (Cleveland Co. Project), FGIC, 8s, 12/1/13 AAA 5,800,000
9,751,000
Oklahoma (0.9%)
3,500,000 Tulsa, Muni. Arpt. Rev. Bonds
(American Airlines, Inc.), 7 3/8s, 12/1/20 Baa 3,500,000
Pennsylvania (7.8%)
2,760,000 Allegheny Cnty., Hosp. Dev. Auth. VRDN,
Ser. B, MBIA, 2.75s, 3/1/20 VMIG 12,760,000
4,140,000 Allegheny Cnty., Res. Fin. Auth. Single Fam.
Mtge. Rev. Bonds, Ser. M, GNMA Coll., 7.9s, 6/1/11 Aaa 4,347,000
4,500,000 Geisinger, Auth. Hlth. Syst. Rev. Bonds,
Ser. A, 5.45s, 7/1/22A A 4,196,250
5,000,000 Montgomery Cnty., Indl. Dev. Auth. Resource
Recvy. Rev. Bonds, 7 1/2s, 1/1/12 A 5,281,250
7,600,000 PA State Higher Ed. Assistance Agcy. Student Loan
RIBS, Ser. B, MBIA, 11.406s, 3/1/20 (d) AAA 8,673,500
PA State Indl. Dev. Auth. Rev. Bonds, AMBAC
1,500,000 7s, 1/1/07 AAA 1,657,500
3,215,000 5.8s, 1/1/08 AAA 3,198,925
30,114,425
Tennessee (0.3%)
1,000,000 Metro. Nashville & Davidson Cnty., Hlth. & Ed. Fac.
Board Rev. Bonds (Vanderbilt U.), Ser. A, 10 1/2s,
12/1/14 A 1,052,500
Texas (10.5%)
2,500,000 Bexar Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds
(St. Lukes Lutheran Hosp. Project), 7.9s, 5/1/11 Baa 2,659,375
15,500,000 Dallas-Fort Worth, Intl. Arpt. Fac. Impt. Corp. Rev.
Bonds (American Airlines, Inc.), 7 1/2s, 11/1/25 Baa 15,577,500
3,500,000 Dallas-Fort Worth, Regl. Arpt. Rev. Bonds,
Ser. 84-A, 11s, 11/1/12 A 3,679,375
11,000,000 North Central TX Hlth. Fac. Dev. Corp. RIBS
(Presbyterian Hlth. Care Syst.), Ser. C, MBIA,
10.095s, 6/15/21 AAA 11,605,000
7,000,000 Northeast Hosp. Auth. Rev. Bonds
(Northeast Med. Ctr. Hosp.), Ser. B, FGIC,
7 1/4s, 7/1/22 Baa 6,965,000
40,486,250
Washington (4.7%)
1,000,000 Port Longview, Indl. Dev. Corp. Export Fac. Rev. Bonds
(Atlantic Richfield Co.), 10 3/4s, 9/1/12 A 1,037,500
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C>
Washington (continued)
WA State Pub. Pwr. Supply Syst. Rev. Bonds
(Nuclear Project No. 1), Ser. A
$ 9,425,000 71/2s, 7/1/15 AA $ 10,544,219
6,075,000 7 1/2s, 7/1/15 AA 6,561,000
------------
18,142,719
West Virginia (0.5%)
2,000,000 Marion Cnty., Cmnty. Solid Waste Disp.
Fac. Rev. Bonds (American Pwr. Paper
Recycling Project), 8 1/4s, 12/1/11(e) B/P 2,002,500
------------
Total Investments
(cost $368,977,281)(f) $381,329,969
------------
</TABLE>
(a) Percentages indicated are based on total net assets of $384,287,163.
Net assets available to common shareholders are $244,275,695 which
correspond to a net asset value per share
of $12.26.
(b) The Moody's or Standard & Poor's ratings indicated are believed to be
the most recent ratings available at May 31, 1994 for the securities
listed. Ratings are generally ascribed to securities at the time of
issuance. While the agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings do not necessarily
represent what the agencies would ascribe to these securities at May 31,
1994. Securities rated by Putnam are indicated by "/P" and are not
publicly rated.
(c) Restricted as to public resale. At the date of acquisition, this
security was valued at cost. There were no outstanding unrestricted
securities of the same class as that held. Total market value of restricted
securities owned at May 31, 1994 was $14,947,750 or 3.9% of net assets.
(d) A portion of this security was pledged to cover margin requirements for
future contracts at May 31, 1994. The market value segregated with the
custodian for transactions in future contracts was $8,673,500.
(e) This security, having a total value of $2,002,500 or .5% of net assets,
has been purchased on a #forward commitment# basis, that is, the Fund has
agreed to take delivery of and make payment for this security beyond the
settlement time of five business days after the trade date and subsequent
to the date of this report. The purchase price and interest rate of such
security is fixed at the trade date although the Fund does not earn any
interest on such security until settlement date.
(f) The aggregate identified cost on a tax cost basis is $369,216,196,
resulting in gross unrealized appreciation and depreciation of $18,507,084
and $6,393,311 respectively, or net unrealized appreciation of $12,113,773.
The rates shown on Residual Interest Bonds (RIBS), Variable
Certificates of Participation, Variable G.O. Bonds and Variable Rate Demand
Notes (VRDN) are the current interest rates at May 31, 1994, which are
subject to change based on terms of the security.
The Fund had the following industry group concentrations greater than
10% at May 31, 1994 (as a percentage of net assets):
Hospital/Health Care 11.7%
Utilities 10.0
<PAGE> 14
U.S. TREASURY BOND FUTURES OUTSTANDING AT
MAY 31, 1994
<TABLE>
<CAPTION>
Aggregate Expiration Unrealized
Total Value Face Value Date Appreciation
<S> <C> <C> <C> <C>
U.S. Treasury
Bonds Futures (Sell) $15,393,750 $15,600,000 Sept/94 $206,250
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 15
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments in securities (identified cost
$368,977,281) (Note 1) $381,329,969
Cash 468,302
Interest and other receivables 6,752,377
Receivable for variation margin on futures contracts 75,000
Unamortized organization expenses (Note 1) 3,402
Total assets $388,629,050
Liabilities
Payable for securities purchased $2,000,000
Distributions payable to shareholders 1,594,395
Payable for compensation of Manager (Note 3) 671,768
Payable for administrative services (Note 3) 2,161
Payable for compensation of Trustees (Note 3) 838
Payable for investor servicing and custodian fees (Note 3) 61,413
Other accrued expenses 11,312
Total liabilities 4,341,887
Net assets $384,287,163
Represented by
Series A remarketed preferred shares, without par value; 2,000
shares authorized (1,400 shares issued at $100,000 per share
liquidation preference) (Note 2) $140,000,000
Common shares, without par value; unlimited shares
authorized; 19,930,021 shares outstanding 219,665,616
Undistributed net investment income 12,676,645
Accumulated net realized loss on investments (614,036)
Net unrealized appreciation of investments and futures contracts 12,558,938
Net assets $384,287,163
Computation of net asset value
Remarketed preferred shares at liquidation preference $140,000,000
Cumulative undeclared income dividends on remarketed
preferred shares 11,468
Net assets allocated to remarketed preferred shares at
liquidation preference 140,011,468
Net assets available to common shares: Net asset value per
share $12.26 ($244,275,695 divided by 19,930,021) $244,275,695
Net assets $384,287,163
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 16
<TABLE>
<C> <C>
Statement of operations
Six months ended May 31, 1994 (Unaudited)
Tax exempt interest income: $13,967,764
Expenses:
Compensation of Manager (Note 3) $1,364,766
Investor servicing and custodian fees (Note 3) 103,307
Compensation of Trustees (Note 3) 8,070
Registration fees 200
Reports to shareholders 12,378
Auditing 27,393
Postage 16,722
Legal 5,786
Administrative services (Note 3) 5,347
Amortization of organization expenses (Note 1) 3,003
Preferred share remarketing agent fees 176,944
Exchange listing fees 12,076
Other expenses 2,435
Total expenses 1,738,427
Net investment income 12,229,337
Net realized loss on investments (Notes 1 and 4) (646,599)
Net realized gain on future contracts (Notes 1 and 4)) 678,660
Net unrealized depreciation of investments and
futures contracts during the period (19,774,889)
Net loss on investment transactions (19,742,828)
- ------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(7,513,491)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 17
Statement of changes in net assets
<TABLE>
<CAPTION>
Six months Year
ended ended
May 31 November 30
--------------------------
1994* 1993
Increase (decrease) in net assets
<S> <C> <C>
Operations:
Net investment income $ 12,229,337 $25,957,759
Net realized gain (loss) on investments (646,599) 5,190,582
Net realized gain (loss) on future contracts 678,660 (189,197)
Net unrealized appreciation (depreciation)
of investments (19,774,889) 12,914,296
Net increase (decrease) in net assets
resulting from operations $(7,513,491) $43,873,440
Distributions to remarketed preferred
shareholders from:
Net investment income (1,671,908) (3,172,332)
Net realized gain on investments (87,553) (551,080
Net increase (decrease) in net assets
resulting from operations applicable to common
shareholders (excluding cumulative undeclared
income dividends on remarketed preferred shares of
$11,468 and $9,590, respectively, and cumulative
undeclared capital gain dividends on remarketed
preferred shares of $0 and $30,643, respectively) (9,272,952) 40,150,028
Distributions to common shareholders from:
Net investment income (9,531,202) (18,883,406)
Net realized gain on investments (4,747,698) -
Increase from capital share transactions from
issuance of common shares 2,168,834 2,722,866
Total increase (decrease) in net assets (21,383,018) 23,989,488
Net assets
Beginning of period 405,670,181 381,680,693
End of period (including undistributed
net investment income of
$12,676,645 and $11,091,758, respectively) $384,287,163 $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 165,582 203,523
Common shares outstanding at end of period 19,930,021 19,764,439
Remarketed preferred shares outstanding at
the beginning and end of period 1,400 1,400
<FN>
*Unaudited.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 18
(dd) = Double Dagger
Financial Highlights*
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
Six months
ended
May 31
1994++ 1993 1992
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $13.44 $12.36 $11.51
Investment Operations
Net Investment Income .61 1.32 1.35
Net Realized and Unrealized
Gain (Loss) on Investments (.99) .91 .65
Total from Investment Operations (.38) 2.23 2.00
Less Distributions From:
Net Investment Income
To Preferred Shareholders (.08) (.16) (.24)
To Common Shareholders (.48) (.96) (.91)
Net Realized Gain on Investments
To Common Shareholders (.24) - -
To Preferred Shareholders - (.03) 1
Total Distributions (.80) (1.15) (1.15)
Preferred Shares Offering Costs - - -
Net Asset Value, End of Period $12.26 $13.44 $12.36
Market Value, End of Period (Common Shares) $13.00 $14.00 $13.25
Total Investment Return at Market Price
(Common Shares) (%) (a) (3.74)(b) 13.54 20.24
Net Assets, End of Period (Total Fund)
(In Thousands) $384,287 $405,670 $381,681
Ratio of Expenses to Average
Net Assets (%) (c) 1.36(b) 1.40 1.45
Ratio of Net Investment Income to
Average Net Assets (%) (c) 8.25(b) 8.59 9.20
Portfolio Turnover (%) 9.95(d) 33.73 44.39
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
For the period
October 26, 1989
Year (commencement
ended of operations) to
November 30 November 30
1991 1990 1989
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $11.03 $11.19 $11.11+
Investment Operations
Net Investment Income 1.27 1.14 .07
Net Realized and Unrealized
Gain (Loss) on Investments .43 (.08) .01
Total from Investment Operations 1.70 1.06 .08
Less Distributions From:
Net Investment Income
To Preferred Shareholders (.29) (.23) -
To Common Shareholders (.89) (.87) -
Net Realized Gain on Investments
To Common Shareholders - (.01) -
To Preferred Shareholders - - -
Total Distributions (1.18) (1.11) -
Preferred Shares Offering Costs (.04) (.11) -
Net Asset Value, End of Period $11.51 $11.03 $11.19
Market Value, End of Period (Common Shares) $11.88 $11.25 $11.88
Total Investment Return at Market Price
(Common Shares) (%) (a) 14.23 2.58 (10.40)(b)
Net Assets, End of Period (Total Fund)
(In Thousands) $362,974 $311,731 $213,924
Ratio of Expenses to Average
Net Assets (%) (c) 1.46 1.21 1.25(b)
Ratio of Net Investment Income to
Average Net Assets (%) (c) 8.70 8.29 -
Portfolio Turnover (%) 72.49 89.65 13.17(d)
<FN>
* Financial highlights for periods ended through November 30, 1992 have been
restated to conform with requirements issued by the SEC in December, 1992.
+ Represents initial net asset value of $11.16 less offering expenses of
approximately $0.05 per share.
++ Unaudited.
(a) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(b) Annualized.
(c) Ratios reflect net assets available to common shares only; net
investment income ratio also reflects reduction for dividend payments to
preferred shareholders.
(d) Not annualized.
</TABLE>
<PAGE> 20
Notes to financial statements
May 30, 1994 (Unaudited)
Note 1
Significant accounting policies
The Fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, closed-end management investment company. The
Fund's investment objective is to provide as high a level of current income
exempt from federal income tax as is believed to be consistent with
preservation of capital. The Fund intends to achieve its objective by
investing in a diversified portfolio of tax-exempt municipal securities
that the Fund's Manager believes does
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.
The fair value of restricted securities is determined by the Manager
following procedures approved by the Trustees, and such valuations and
procedures are reviewed periodically by the Trustees. The fair value of
restricted securities represents the amount the Fund can reasonably expect
to realize from an orderly disposition of such securities over a reasonable
period of time. In making this determination, consideration is given to the
financial position of the issuer and other fundamental analytical data
relating to the investment and to the nature of the restrictions on
disposition of the securities (including any registration expenses that
might be borne by the Fund in connection with such disposition). In
addition, such specific factors as the cost of the investment, the market
value of any unrestricted securities of the same class (both at the time of
purchase and at the time of valuation), the size of the holding, the prices
of any recent transactions or offers with respect to such securities and
any available analysts# reports regarding the issuer are also considered.
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.
<PAGE> 21
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
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 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 May 31, 1994 was 2.99%.
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 are
being 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.
<PAGE> 22
Approximately 83% of total distributions and dividends paid during fiscal
1993 to holders of remarketed preferred shares were considered tax-exempt
dividends under the Internal Revenue Code of 1986, as amended. To the
extent that the Fund earns taxable income and capital gains at the
conclusion of a fiscal year, it will be required to apportion to the
holders of the remarketed preferred shares throughout that year additional
dividends as necessary to result in an after-tax yield equivalent to the
applicable dividend rate for the year. Of the total additional dividends
required to be paid, $192,878 was paid during the year ended November 30,
1993 and the remaining $30,643 was paid during the six months ended May 31,
1994.
Under the Investment Company Act of 1940, the Fund is required to maintain
asset coverage of at least 200% with respect to the remarketed preferred
shares as of the last business day of each month in which any such shares
are outstanding. Additionally, the Fund is required to meet more stringent
asset coverage requirements under the terms of the remarketed preferred
shares and the shares' rating agencies. Should these requirements not be
met, or should dividends accrued on the remarketed preferred shares not be
paid, the Fund may be restricted in its ability to declare dividends to
common shareholders or may be required to redeem certain of the remarketed
preferred shares. At May 31, 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. For the six months
ended May 31, 1994, the Fund paid $5,347 for these services.
Trustees of the Fund receive an annual Trustee's fee of $890 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
<PAGE> 23
Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing
agent functions for the Fund's common shares are being provided by PFTC.
Fees paid for these investor servicing and custodial functions for the six
months ended May 31, 1994 amounted to $103,307.
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 six months ended
May 31, 1994, purchases and sales of investment securities other than
short-term municipal obligations aggregated $36,812,407 and $89,038,970,
respectively. Purchases and sales of short-term municipal obligations
aggregated $94,145,000 and $54,085,000, 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 U.S. Treasury Bond futures contracts during the period
are summarized as follows:
Sales of Futures Contracts
<TABLE>
<CAPTION>
Number Aggregate
of Contracts Face Value
<S> <C> <C>
Contracts
opened 1,000 $108,629,565
Contracts
closed (850) (93,029,565)
Open at end
of period 150 $ 15,600,000
</TABLE>
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, $552,744 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, 1993, 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 primarily attributable to organization expenses and
additional dividends on preferred stock, 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.
<PAGE> 24
<TABLE>
Selected Quarterly Data
(Unaudited)
<CAPTION>
Three months ended
May 31 February 28 November 30 August 31 May 31
1994 1994 1993 1993 1993
<S> <C> <C> <C> <C> <C>
Total investment income
Total $ 6,855,768 $ 7,111,996 $ 7,299,845 $ 7,412,198 $ 7,460,790
Per Share* $ .35 $ .35 $ .37 $ .38 $ .37
Net investment income available
to common shareholders
Total $ 5,062,217 $ 5,495,212 $ 5,266,270 $ 5,650,335 $ 5,679,969
Per Share* $ .26 $ .27 $ .27 $ .29 $ .28
Net realized and unrealized
gain (loss) on investments
Total $(16,604,981) $ (3,137,847) $ (3,629,890) $ 9,372,959 $ (4,510,500)
Per Share* $ (.84) $ (.15) $ (.19) $ .48 $ (.22)
Net increase (decrease) in net
assets available to common
shareholders resulting from
operations
Total $(11,630,317) $ 2,357,365 $ 1,636,380 $ 15,023,294 $ 1,169,469
Per Share* $ (.58) $ .12 $ .08 $ .77 $ .06
Net assets available to common
shareholders at the end of
the period
Total $244,275,695 $259,982,643 $265,629,948 $268,053,202 $257,065,067
Per Share* $ 12.26 $ 13.08 $ 13.44 $ 13.60 $ 13.07
<FN>
* Per common share.
</TABLE>
<PAGE> 25
Selected Quarterly Data
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
February 28 November 30 August 31 May 31 February 29
1993 1992 1992 1992 1992
<S> <C> <C> <C> <C> <C>
Total investment income
Total $ 7,410,737 $ 7,508,063 $ 7,584,063 $ 7,395,574 $ 7,237,837
Per Share* $ .38 $ .38 $ .39 $ .38 $ .37
Net investment income available
to common shareholders
Total $ 5,637,773 $ 5,509,821 $ 5,781,715 $ 5,211,323 $ 5,103,734
Per Share* $ .29 $ .29 $ .29 $ .27 $ .26
Net realized and unrealized
gain (loss) on investments
Total $ 16,683,112 $ (3,419,262) $ 8,679,987 $ 4,286,298 $ 3,026,406
Per Share* $ .84 $ (.17) $ .45 $ .22 $ .15
Net increase (decrease) in net
assets available to common
shareholders resulting from
operations
Total $ 22,320,885 $ 2,090,559 $ 14,461,702 $ 9,497,621 $ 8,130,140
Per Share* $ 1.13 $ .12 $ .74 $ .49 $ .41
Net assets available to common
shareholders at the end of
the period
Total $259,927,102 $241,680,693 $243,565,922 $233,041,423 $227,253,559
Per Share* $ 13.25 $ 12.36 $ 12.48 $ 11.97 $ 11.70
</TABLE>
* Per common share.
<PAGE> 26
Fund information
Investment Manager
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary Trust Company
Legal Counsel
Ropes & Gray
Trustees
George Putnam, Chairman
William Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Donald S. Perkins
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
Officers
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
James E. Erickson
Vice President
William H. Reeves
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O#Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Investment
Grade Municipal Trust. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details of
sales charges, investment objectives, and operating policies of the fund,
and the most recent Putnam Quarterly Performance Summary.
<PAGE> 27
piv
The Putnam Funds
One Post Office Square
Boston, MA 02109
58-13003
Bulk Rate
U.S. Postage
PAID
Boston, MA
Permit No. 53749
