Putnam
Investment
Grade
Municipal
Trust II
ANNUAL REPORT
April 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Depending on your tax bracket, municipal bonds may offer juicier
after-tax yields than Treasuries of comparable maturities."
-- Money, May 1997
* "Putnam Investment Grade Municipal Trust II has, by nature, a
defensive orientation because of its focus on income for the
major portionof total return. The strategies we employed and
the bonds we chose have given the fund a relatively short
duration, which in turn, has helped the fund weather the
market's setback fairly well in comparison with other
long-term bond funds in its competitive universe. Should
the market's volatility continue, we believe the fund's
defensive structure going forward should further help buoy
performance."
-- Richard Wyke, fund manager
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
17 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
In few places is the power of suggestion more aptly demonstrated than the
securities markets. For months, the market has translated conjecture over
the prospect of an increase in short-term interest rates by the Federal
Reserve Board into volatility. Instead of settling down after the Fed
finally raised rates by a quarter point in late March, the market
immediately began responding to the suggestion that the Fed was about to
raise rates again, if not in May, then at some point.
Uncertainty heightens the intensity of volatility, as we have seen
throughout Putnam Investment Grade Municipal Trust II's fiscal year just
ended. Over the long term, however, rational research and analysis, backed
by expertise and experience, play a larger role in investment success --
and thus generally work to the advantage of those who maintain a long-term
investment perspective.
Since Fund Manager Richard Wyke believes the current volatility may
continue for a while, this seems an appropriate time to counsel patience.
In the following report, Rick explains how he has been dealing with the
current market environment and what he sees in prospect for the months
ahead.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 18, 1997
Report from the Fund Manager
Richard P. Wyke
Putnam Investment Grade Municipal Trust II closed the books on fiscal 1997
with positive results, weathering an erratic fixed-income market that
seesawed between bouts of strength and spells of weakness on mixed
economic news and inflation concerns. The market's volatility culminated
with the Federal Reserve Board's quarter of a percentage point interest-
rate increase on March 25, 1997. Since then, investors seem to have
regained some confidence, enabling the municipal market to rebound nicely
in the last month of the period. Your fund closed its fiscal year on April
30, 1997, with total returns of 6.27% at net asset value and 9.86% at
market price for common shareholders. For more performance information,
please turn to pages 8 and 9.
* INCOME FOCUS GIVES FUND A NATURALLY DEFENSIVE TONE
Because your fund takes an income-oriented approach toward total return,
its strategies and target investments create a defensive orientation as
a natural byproduct. During periods of market volatility, particularly
in February and March of this year, this orientation made a valuable
contribution to performance.
Our primary focus has been premium bonds -- bonds selling at prices above
par value -- because they typically carry coupons higher than the current
market rates and tend to be less seriously affected when prices decline.
These bonds' higher income stream represents a greater portion of their
return than current-coupon or discount bonds and consequently provides a
temporary floor for their prices.
As the fiscal year progressed, we shifted assets among maturity ranges,
placing greater emphasis on bonds within the 15- to 25-year range in our
efforts to generate a higher-yielding portfolio In addition to their
attractive yield levels, these bonds have the potential to increase in
value as they approach maturity and shift to the shorter end of the yield
curve -- a phenomenon known as curve (or coupon) roll. Capitalizing on
this appreciation potential, which operates independently of interest-rate
changes, can enable us to build the overall value of the portfolio.
Our selective use of financial leverage also contributed to your fund's
income stream and performance over the period. With this approach, the
fund issues preferred shares that pay dividends at prevailing short-term
rates. These shares are sold to corporate and institutional investors; the
resulting assets are then invested in long-term bonds with higher yields.
The difference between the rates paid to holders of preferred shares and
the rates earned by the fund augmented the flow of income to holders of
common shares.
* PORTFOLIO IS WELL DIVERSIFIED BY REGION AND INDUSTRY
Throughout the fiscal year, your fund benefited from its broad exposure to
states across the nation. At fiscal year's end, municipal bonds issued by
21 states and Puerto Rico were represented in the portfolio. New York
State and New York City general obligation and revenue bonds remain the
fund's heaviest weighting, accounting for 20.7% of net assets at period's
end. Improving financial and economic conditions and consistent levels of
demand should allow these holdings to continue benefiting the fund.
Significant exposure was further given to California, Colorado, Florida,
and Michigan.
We entered the Maryland market over the period, purchasing Aa-rated
Maryland State Health & Higher Education Facility Authority revenue bonds
from John Hopkins University. An attractive coupon rate (7.5%) as well as
the generally strong financial condition of the health-care sector made
this issue particularly attractive.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Hospital/health care 19.7%
Water and sewer 19.6%
Transportation 14.6%
Utilities 13.0%
Education 10.4%
Footnote reads:
*Based on net assets as of 4/30/97. Holdings will vary over time.
In addition to its countrywide diversification, the fund held securities
in more than 15 industry sectors. At the close of the period, hospitals,
water and sewer, state general obligation, and airline bonds were key
areas of emphasis. Our greatest shift in emphasis involved health care
and municipal utilities. We increased the fund's hospital exposure from
roughly 11% of net assets at the beginning of the fiscal year to 19.7% by
period's end.
* TAXABLE-EQUIVALENT YIELDS AND AVERAGE PORTFOLIO QUALITY REMAIN HIGH
Because your fund focuses its investments on long-term bonds, it is able
to produce a relatively high level of tax-free income. A taxable
investment at the maximum federal income tax rate of 39.6% would have had
to provide a current return of 11.61% to equal the fund's 7.01% current
dividend rate at net asset value. In today's low-inflation and high-tax
environment, we believe these figures represent attractive real rates of
return.
In addition to the potential for high current income, your fund also
offers you a portfolio that remains heavily weighted in the higher end of
the investment-grade spectrum, those bonds rated Baa or higher. As of
period's end, more than 50% of your fund's holdings were rated Aa or
above.
* MUNICIPAL BONDS AND YOUR FUND SHOULD BE ABLE TO HOLD THEIR OWN
Although the Fed opted to leave interest rates unchanged at its May 20
meeting, the fixed-income market in general is likely to remain unsettled
in the months ahead in anticipation of another increase at some point.
Municipal bonds, however, should be able to hold their own. For the most
part, they have performed as we expected -- outperforming their taxable
counterparts when bond prices fell and keeping pace with Treasuries when
the market rebounded, causing yields to decline. We have no reason to
believe this pattern will change anytime soon.
TOP 10 HOLDINGS
Broward County Resource Recovery Revenue Bonds (Florida)
7.95s, 12/1/08
Metropolitan Government Nashville & Davidson County
Tennessee Water and Sewer
Inverse floating bonds, AMBAC, 8.378s, 1/1/22
Central Lake County Joint Action Water Agency Revenue Bonds
(Illinois)
6s, 2/1/19
Burke County Development Authority Pollution Control Revenue
Bonds (Georgia)
Municipal Bond Investors Assurance Corporation 8s, 1/1/22
New York State Dormitory Authority Revenue Bonds
Ser. A 7.7s, 5/15/12
NY City Municipal Water and Sewer Finance Authority System
Revenue Bonds
Ser. C, 7 3/4s, 6/15/20
Babylon Industrial Development Agency Resource Recovery
Revenue Bonds (New York)
Ser. A, 8 1/2s, 1/1/19
Western Township Utility Authority Sewer Disposal System
Revenue Bonds (Michigan)
8.2s, 1/1/18
California State General Obligation Bonds
6 1/4s, 9/1/08
Claiborne County. Pollution Control Revenue Bonds (Mississippi)
Ser. C, 9 7/8s, 12/1/14
Footnote reads:
These holdings represent 30.9% of the fund's assets as of 4/30/97.
Portfolio holdings will vary over time.
Furthermore, we believe the supply/demand relationship for the municipal
market remains positive. The strong economy has expanded the capacity of
municipal bond borrowers to meet infrastructure needs by issuing new debt,
while demand from insurance companies and other institutional investors
should remain strong, helping to sustain market values.
From a total return standpoint, we believe your fund's defensive nature
and relatively short duration should continue to lend support and cushion
its net asset value in the event additional rate increases come to pass.
Once the interest-rate cycle peaks, we will look for opportunities to
extend duration without sacrificing income potential.
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 4/30/97, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Investment Grade Municipal Trust II is designed for investors seeking high
current income free from federal income tax, consistent with preservation
of capital.
TOTAL RETURN FOR PERIODS ENDED 4/30/97
Lehman Bros.
Market Municipal Consumer
(common shares) NAV price Bond Index Price Index
- ----------------------------------------------------------------
1 year 6.27% 9.86% 6.65% 2.50%
- ----------------------------------------------------------------
3 years 20.29 35.03 22.82 8.68
Annual average 6.35 10.53 7.09 2.82
- ----------------------------------------------------------------
Life (11/27/92) 34.08 30.73 32.79 12.82
Annual average 6.86 6.25 6.64 2.77
- ----------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 3/31/97
(most recent calendar quarter)
Market
(common shares) NAV price
- ----------------------------------------------------------------
1 year 4.53% 5.09%
- ----------------------------------------------------------------
3 years 19.23 30.30
Annual average 6.04 9.22
- ----------------------------------------------------------------
Life (11/27/92) 32.85 26.58
Annual average 6.76 5.58
- ----------------------------------------------------------------
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 4/30/97
- ----------------------------------------------------------------
Distributions (common shares)
- ----------------------------------------------------------------
Number 12
- ----------------------------------------------------------------
Income $0.96
- ----------------------------------------------------------------
Capital gains1 --
- ----------------------------------------------------------------
Total $0.96
- ----------------------------------------------------------------
Preferred shares Series A (630 shares) Series B (630 shares)
- ----------------------------------------------------------------
Income $1,737.61 $1,769.16
- ----------------------------------------------------------------
Capital gains -- --
- ----------------------------------------------------------------
Total $1,737.61 $1,769.16
- ----------------------------------------------------------------
Share value:
- ----------------------------------------------------------------
(common shares): NAV Market price
- ----------------------------------------------------------------
4/30/96 $13.79 $13.875
- ----------------------------------------------------------------
4/30/97 13.70 14.250
- ----------------------------------------------------------------
Current return (end of period)
- ----------------------------------------------------------------
(common shares): NAV Market price
- ----------------------------------------------------------------
Current dividend rate2 7.01% 6.74%
- ----------------------------------------------------------------
Taxable equivalent3 11.61% 11.16%
- ----------------------------------------------------------------
1 Capital gains, if any, are taxable for federal and, in most cases,
state tax purposes. For some investors, investment income may also
be subject to the federal alternative minimum tax. Investment income
may be subject to state and local taxes.
2 Income portion of most recent distribution, annualized and divided
by NAV or market price at end of period.
3 Assumes maximum 39.6% federal tax rate. Results for investors subject
to lower tax rates would not be as advantageous.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities and the net assets allocated to remarketed preferred shares,
divided by the number of outstanding common shares.
Market price is the current trading price of one share of the fund. Market
prices are set by transactions between buyers and sellers on the New York
Stock Exchange.
COMPARATIVE BENCHMARKS
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
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. The index assumes
reinvestment of all distributions and interest payments and does not take
into account brokerage fees or taxes. Securities in the fund do not match
those in the index and performance of the fund will differ. It is not
possible to invest directly in an index.
Report of independent accountants
For the fiscal year ended April 30, 1997
To the Trustees and Shareholders of
Putnam Investment Grade Municipal Trust II
We have audited the accompanying statement of assets and liabilities of
Putnam Investment Grade Municipal Trust II, including the portfolio of
investments owned, as of April 30, 1997, and the related statement of
operations for the year then ended and the statements of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of
the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of April 30, 1997, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Putnam Investment Grade Municipal Trust II as of April 30, 1997, the
results of its operations for the year then ended and the changes in its
net assets for each of the two years in the period then ended and the
financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
June 13, 1997
<TABLE>
<CAPTION>
Portfolio of investments owned
April 30, 1997
Key to Abbreviations
AMBAC - AMBAC Indemnity Corporation
CLI Insd. - Connie Lee Insurance Insured
G.O. Bonds - General Obligation Bonds
FGIC - Financial Guaranty Insurance Company
FSA - Financial Security Assurance
IFB - Inverse Floating Rate Bonds
MBIA - Municipal Bond Investors Assurance Corporation
PSFG - Permanent School Fund Guaranteed
MUNICIPAL BONDS AND NOTES (98.2%) *
PRINCIPAL AMOUNT RATINGS** VALUE
Arizona (0.9%)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
2,235,000 Gila Cnty., Indl. Dev. Auth. Poll. Control Rev. Bonds
(Asarco Inc.), Ser. 85, 8.9s, 7/1/06 Baa $ 2,315,952
California (9.5%)
- ------------------------------------------------------------------------------------------------------------
5,000,000 CA Hlth. Fac. Fin. Auth. Rev. Bonds (Catholic
Healthcare West), AMBAC, 6.786s, 7/1/17 Aaa 4,112,500
CA State G.O. Bonds
3,855,000 7s, 8/1/07 AA 4,428,431
6,000,000 6 1/4s, 9/1/08 AA 6,562,500
2,500,000 CA State U. IFB, AMBAC, 9.861s, 11/1/21
(acquired 9/2/94, cost $2,681,272) [DBL. DAGGER] Aaa 2,937,500
6,000,000 Foothill/Eastern Trans. Corridor Agcy. Toll Rd.
Rev. Bonds, Sr. Lien, Ser. A, zero % 1/1/08 Baa 3,930,000
1,450,000 Fountain Valley, Agcy. for Cmnty. Dev. Tax Alloc.
Rev. Bonds (Indl. Area Redev.), 9.1s, 1/1/16 BBB 1,470,068
----------
23,440,999
Colorado (9.3%)
- ------------------------------------------------------------------------------------------------------------
5,000,000 Arapahoe Cnty., Cap. Impt. Rev. Bonds, Ser. C, A,
8 3/4s, 11/15/23 Baa 5,843,750
Denver, City & Cnty. Arpt. Rev. Bonds
2,500,000 Ser. A, 8 1/2s, 11/15/23 Baa 2,834,375
1,670,000 Ser. A, 8s, 11/15/25 Baa 1,868,312
1,000,000 Ser. A, 8s, 11/15/25 Baa 1,116,250
2,175,000 Ser. A, 8s, 11/15/17 Baa 2,255,062
1,000,000 Ser. D, 7 3/4s, 11/15/13 Baa 1,203,750
Highlands Ranch, Dist. No. 2 G.O. Bonds, FSA
1,000,000 6 1/2s, 6/15/09 Aaa 1,111,250
780,000 6 1/4s, 6/15/08 Aaa 852,150
5,250,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds
(Newport Village), Ser. A-8, FSA, 7.1s, 1/1/30 Aaa 5,683,125
----------
22,768,024
Florida (7.4%)
- ------------------------------------------------------------------------------------------------------------
Broward Cnty., Resource Recvy. Rev. Bonds
10,595,000 (SES Broward CA Cnty. LP South), 7.95s, 12/1/08 A 11,522,063
1,150,000 (Waste-Energy LP North), 7.95s, 12/1/08 A 1,250,625
1,000,000 FL State Board of Ed. Cap. Outlay G.O. Bonds,
Ser. A, 7 1/4s, 6/1/23 Aa 1,083,750
5,000,000 Port Everglades, Auth. Port Impt. Rev. Bonds,
Ser. A, 5s, 9/1/16 BBB 4,281,250
----------
18,137,688
Georgia (3.0%)
- ------------------------------------------------------------------------------------------------------------
6,340,000 Burke Cnty., Dev. Auth. Poll. Control Rev. Bonds
(Oglethorpe Pwr. Co. Vogtle), MBIA, 8s, 1/1/22 Aaa 7,401,950
Illinois (4.1%)
- ------------------------------------------------------------------------------------------------------------
7,750,000 Central Lake Cnty., Joint Action Wtr. Agcy.
Rev. Bonds, 6s, 2/1/19 Aa 7,798,438
2,050,000 Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds
(United Air Lines, Inc.), Ser. C, 8.2s, 5/1/18 Baa 2,201,188
----------
9,999,626
Indiana (0.9%)
- ------------------------------------------------------------------------------------------------------------
2,000,000 Marion Cnty., Ind. Convention & Rectl. Fac. Auth.
Rev. Bonds (Excise Tax Rev. Lease Rental),
Ser. A, AMBAC, 7s, 6/1/21 Aaa 2,162,500
Kansas (1.2%)
- ------------------------------------------------------------------------------------------------------------
2,600,000 Burlington, Poll. Control Poll. Control Rev. Bonds
(Kansas Gas & Electric Co.), MBIA, 7s, 6/1/31 Aaa 2,834,000
Louisiana (1.1%)
- ------------------------------------------------------------------------------------------------------------
2,000,000 Beauregard Parish Rev. Bonds (Boise Cascade
Corp.), 7 3/4s, 6/1/21 Baa 2,170,000
500,000 St. Charles Parish, Poll. Control Rev. Bonds
(LA Pwr. & Lt.), 8 1/4s, 6/1/14 Baa 539,375
----------
2,709,375
Maryland (1.3%)
- ------------------------------------------------------------------------------------------------------------
3,000,000 MD State Hlth. & Higher Edl. Fac. Auth. Rev. Bonds
(Johns Hopkins U.), 7 1/2s, 7/1/20 Aa 3,150,000
Massachusetts (5.4%)
- ------------------------------------------------------------------------------------------------------------
MA State Hlth. & Edl. Fac. Auth. IFB
5,500,000 (Med. Ctr. of Central MA), Ser. B, AMBAC,
9.12s, 6/23/22 Aaa 6,105,000
2,000,000 (Boston U.), Ser. L, MBIA, 9.335s, 10/1/31 Aaa 2,232,500
3,000,000 MA State Port Auth. Rev. Bonds, 13s, 7/1/13 Aaa 4,987,500
----------
13,325,000
Michigan (5.9%)
- ------------------------------------------------------------------------------------------------------------
2,000,000 Detroit, Wtr. Supply Syst. IFB, FGIC, 8.968s, 7/1/22 Aaa 2,132,500
6,000,000 MI State Hosp. Fin. Auth. Rev. Bonds
(Pontiac Osteopathic Hosp.), Ser. A, 6s, 2/1/24 Baa 5,775,000
6,250,000 Western Township, Util. Auth. Swr. Disp. Syst.
Rev. Bonds, 8.2s, 1/1/18 BBB 6,687,500
----------
14,595,000
Minnesota (4.4%)
- ------------------------------------------------------------------------------------------------------------
St. Paul, Hsg. & Hosp. Redev. Auth. Rev. Bonds
(Healtheast)
4,790,000 Ser. B, 9 5/8s, 11/1/08 Baa 4,995,060
5,500,000 Ser. B, 9 3/4s, 11/1/17 Baa 5,738,755
----------
10,733,815
Mississippi (2.7%)
- ------------------------------------------------------------------------------------------------------------
6,000,000 Claiborne Cnty., Poll. Ctrl. Rev. Bonds (Middle
South Energy, Inc.), Ser. C, 9 7/8s, 12/1/14 Ba 6,555,000
New York (20.7%)
- ------------------------------------------------------------------------------------------------------------
6,370,000 Babylon, Indl. Dev. Agcy. Resource Recvy. Rev. Bonds
(Ogden Martin Syst.), Ser. A, 8 1/2s, 1/1/19 AAA 6,855,713
NY City, G.O. Bonds
4,000,000 Ser. B, 7 1/2s, 2/1/06 Baa 4,415,000
2,600,000 Ser. H, 6 1/8s, 8/1/25 Baa 2,551,250
6,250,000 NY City, Muni. Wtr. & Swr. Fin. Auth. Syst.
Rev. Bonds, Ser. C, 7 3/4s, 6/15/20 AAA 7,023,438
2,000,000 NY State G.O. Bonds, Ser. A, 6s, 7/15/07 A 2,125,000
NY State Dorm. Auth. Rev. Bonds
(State U. Edl. Fac.), Ser. A
6,500,000 7.7s, 5/15/12 Aaa 7,174,375
5,000,000 5 7/8s, 5/15/17 Baa 5,018,750
2,000,000 NY State Energy Res. & Dev. Auth. Elec. Fac.
Rev. Bonds (Cons. Edison Co. of NY, Inc.),
Ser. A, 7 3/4s, 1/1/24 A 2,069,820
5,000,000 NY State Energy Res. & Dev. Auth. Rev. Bonds
(Cons. Edison Co.), Ser. A, 7 1/2s, 1/1/26 A 5,350,000
NY State Urban Dev. Corp. Rev. Bonds
(Syracuse U.)
1,440,000 6s, 1/1/07 Baa 1,490,400
1,360,000 6s, 1/1/06 Baa 1,407,600
5,165,000 Suffolk Cnty., Wtr. Auth. Rev. Bonds, Sub. Lien,
MBIA, 6s, 6/1/14 Aaa 5,474,900
----------
50,956,246
Oklahoma (1.5%)
- ------------------------------------------------------------------------------------------------------------
3,555,000 Tulsa, Indl. Auth. Hosp. Rev. Bonds
(Hillcrest Med. Ctr.), CLI Insd., 6 1/4s, 6/1/10 AAA 3,714,975
Pennsylvania (5.2%)
- ------------------------------------------------------------------------------------------------------------
3,000,000 Allegheny Cnty., Hosp. Dev. Auth. Rev. Bonds
(Magee-Womens Hosp.), FGIC, 6s, 10/1/13 Aaa 3,060,000
5,000,000 Dauphin Cnty., Auth. Hosp. Rev. Bonds (Hapsco-
Western PA Hosp.), Ser. A, MBIA, 6 1/2s, 7/1/12 Aaa 5,293,750
1,800,000 Lehigh Cnty. Gen. Purp. Auth. Rev. Bonds
(Hosp. Healtheast Inc.), Ser. A, 9s, 7/1/15 A 1,849,626
2,700,000 Philadephia Hosp. & Higher Ed. Fac. Auth. Rev. Bonds
(GraduateHlth, Syst.) Ser. A, 6 1/4s, 7/1/13 Baa 2,635,875
----------
12,839,251
Puerto Rico (3.9%)
- ------------------------------------------------------------------------------------------------------------
2,000,000 Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds,
6 1/4s, 7/1/12 A 2,152,500
4,500,000 Cmnwlth. of PR, Med. and Env. Poll. Ctrl. Fac.
Rev. Bonds (Baxter Int. Inc.), 8s, 9/1/12 A 4,820,625
3,000,000 PR, Elec. Pwr. Auth. Rev. Bonds, Ser. N, 5s, 7/1/12 A 2,741,250
----------
9,714,375
South Carolina (2.2%)
- ------------------------------------------------------------------------------------------------------------
5,000,000 Spartanburg Cnty. Solid Waste Disp. Rev. Bonds
(Bayerische Motoren Werke), 7.55s, 11/1/24 A/P 5,387,500
Tennessee (4.2%)
- ------------------------------------------------------------------------------------------------------------
1,750,000 Metro. Govt. Nashville & Davidson Cnty., Wtr. &
Swr. Rev. Bonds, MBIA, 6s, 1/1/07 Aaa 1,872,500
8,300,000 Metro Govt. Nashville & Davidson Cnty., Wtr. &
Swr. IFB, AMBAC, 8.378s, 1/1/22 Aaa 8,434,875
----------
10,307,375
Texas (2.5%)
- ------------------------------------------------------------------------------------------------------------
7,000,000 Judson, Indpt. School Dist. G.O. Bonds, PSFG
zero %, 2/1/07 Aaa 4,191,250
1,750,000 North Central TX. Hlth. Fac. Dev. Corp. IFB
(Presbyterian Hlth. Care Syst.), Ser. C, MBIA,
9.345s, 6/15/21 Aaa 2,049,685
----------
6,240,935
Washington (0.9%)
- ------------------------------------------------------------------------------------------------------------
2,000,000 Tacoma, Elec. Syst. IFB, AMBAC, 8.85s, 1/2/15 Aaa 2,320,000
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $239,936,150) *** 241,609,586
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $246,028,023.
** The Moody's or Standard & Poor's ratings indicated are believed to be the most recent
ratings available at April 30, 1997 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 April 30,
1997. Securities rated by Putnam are indicated by "/P" and are not publicly rated. Ratings
are not covered by the Report of independent accountants.
*** The aggregate identified cost on a tax basis is $239,936,150, resulting in gross unrealized
appreciation and depreciation of $5,446,918 and $3,773,482, respectively, or net unrealized
appreciation of $1,673,436.
[DBL. DAGGER] Restricted, excluding 144A securities, as to public resale. The total market value of
restricted securities held at April 30, 1997 was $2,937,500 or 1.2% of net assets.
The rates shown on IFBs, which are securities paying interest rates that vary inversely to
changes in the market interest rates, are the current interest rates at April 30, 1997.
The fund had the following industry group concentrations greater than 10% at April 30, 1997
as a percentage of net assets):
Hospital/Health care 19.7%
Water & Sewer 19.6
Transportation 14.6
Utilities 13.0
Education 10.4
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
April 30, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $239,936,150) (Note 1) $241,609,586
- ---------------------------------------------------------------------------------------------------
Cash 122,915
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 5,386,512
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 4,475,733
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 3,063
- ---------------------------------------------------------------------------------------------------
Total assets 251,597,809
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 1,068,503
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 4,026,190
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 417,308
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 28,605
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 6,351
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 609
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 22,220
- ---------------------------------------------------------------------------------------------------
Total liabilities 5,569,786
- ---------------------------------------------------------------------------------------------------
Net assets $246,028,023
Represented by
- ---------------------------------------------------------------------------------------------------
Series A and B remarketed preferred shares (1,260 shares
issued and outstanding at $50,000 per share) (Note 4) $63,000,000
- ---------------------------------------------------------------------------------------------------
Paid-in capital -- common shares (unlimited shares authorized)
(Note 1) 186,297,698
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,336,951
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (6,280,062)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments (Note 1) 1,673,436
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $246,028,023
Computation of net asset value
- ---------------------------------------------------------------------------------------------------
Series A and B Remarketed preferred shares $63,000,000
- ---------------------------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 67,420
- ---------------------------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares -
liquidation preference 63,067,420
- ---------------------------------------------------------------------------------------------------
Net assets available to common shares 182,960,603
- ---------------------------------------------------------------------------------------------------
Net asset value per common share
($182,960,603 divided by 13,357,092 shares) $13.70
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended April 30,1997
<S> <C>
Tax exempt interest income: $16,502,387
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,730,243
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 193,775
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 18,138
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,373
- --------------------------------------------------------------------------------------------------
Amortization of organization expense (Note1) 5,303
- --------------------------------------------------------------------------------------------------
Reports to shareholders 44,511
- --------------------------------------------------------------------------------------------------
Auditing 60,235
- --------------------------------------------------------------------------------------------------
Legal 15,522
- --------------------------------------------------------------------------------------------------
Postage 35,458
- --------------------------------------------------------------------------------------------------
Exchange listing fees 22,238
- --------------------------------------------------------------------------------------------------
Preferred share remarketing agent fees 166,000
- --------------------------------------------------------------------------------------------------
Other 29,731
- --------------------------------------------------------------------------------------------------
Total expenses 2,328,527
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (51,480)
- --------------------------------------------------------------------------------------------------
Net expenses 2,277,047
- --------------------------------------------------------------------------------------------------
Net investment income 14,225,340
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (1,743,794)
- --------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 162,855
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
futures contracts during the year 1,180,783
- --------------------------------------------------------------------------------------------------
Net loss on investments (400,156)
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $13,825,184
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended Year ended
April 30 April 30
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 14,225,340 $14,514,332
- ----------------------------------------------------------------------------------------------------------------------
Net realized loss on investments (1,580,939) (1,182,577)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments 1,180,783 (153,702)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 13,825,184 13,178,053
- ----------------------------------------------------------------------------------------------------------------------
Distribution to remarketed preferred shareholders from:
Net investment income (2,209,265) (2,344,964)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations
applicable to common shareholders (excluding
cumulative undeclared dividends on remarketed preferred
shares of $67,420 and $57,495, respectively) 11,615,919 10,833,089
- ----------------------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (12,822,022) (12,822,245)
- ----------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (1,206,103) (1,989,156)
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 247,234,126 249,223,282
- ----------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $1,336,951 and $2,139,933, respectively) 246,028,023 247,234,126
- ----------------------------------------------------------------------------------------------------------------------
Number of fund shares
- ----------------------------------------------------------------------------------------------------------------------
Common shares outstanding at beginning and
end of year 13,357,092 13,357,092
- ----------------------------------------------------------------------------------------------------------------------
Remarketed preferred shares outstanding at
beginning and end of year 1,260 1,260
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ----------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Nov. 27, 1992+
operating performance Year ended April 30 to April 30
- ----------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.79 $13.94 $14.30 $15.00 $14.06 (a)
- ----------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 1.07 1.09 1.14 1.16 .44 (b)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.03) (.10) (.16) (.66) .95
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.04 .99 .98 .50 1.39
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------
From net investment income
- ----------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.17) (.18) (.15) (.15) (.03)(c)
- ----------------------------------------------------------------------------------------------------------------------------
To common shareholders (.96) (.96) (.96) (.96) (.32)
- ----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
- ----------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- -- -- (.01) --
- ----------------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- -- (.08) --
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments
- ----------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- -- (.03) -- --
- ----------------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- (.20) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions (1.13) (1.14) (1.34) (1.20) (.35)
- ----------------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- -- -- (.10)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $13.70 $13.79 $13.94 $14.30 $15.00
- ----------------------------------------------------------------------------------------------------------------------------
Market value, end of period
(common shares) $14.250 $13.875 $12.75 $13.25 $14.63
- ----------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------
Total investment return at market value
(common shares) (%)(d) 9.86 16.62 5.39 (2.81) (0.88)*
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(total funds) (in thousands) $246,028 $247,234 $249,223 $254,025 $263,388
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(e)(f) 1.26 1.24 1.28 1.14 .27 (b)*
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(e) 6.51 6.41 7.10 6.66 2.89 (b)*
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 45.48 160.28 85.63 32.27 4.65 *
- ----------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Represents initial net asset value of $14.10 less offering expenses of approximately $0.04.
(b) Reflects an expense limitation in effect during the period November 27, 1992 to February 19, 1993.
As a result of such limitation, expenses for the period ended April 30, 1993 reflect a reduction
of $0.02 per share.
(c) Preferred shares were issued on February 18, 1993.
(d) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(e) Ratios reflect net assets available to common shares only; net investment income ratio also reflects
reduction for dividend payments to preferred shareholders.
(f) The ratio of expenses to average net assets for the period ended April 30, 1997 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios
exclude these amounts. (Note 2).
</TABLE>
Notes to financial statements
April 30, 1997
Note 1
Significant accounting policies
Putnam Investment Grade Municipal Trust II (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
portfolio of investment grade municipal securities that the fund's
Manager believes does not involve undue risk to income or principal.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
A) Security valuation Tax-exempt bonds and notes are stated on the basis
of valuations provided by a pricing service, approved by the Trustees,
which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and
various relationships between securities in determining value. 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.
B) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Interest income is recorded on the accrual basis.
C) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices
supplied by dealers.
D) Federal taxes It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
At April 30, 1997, the fund had a capital loss carryover of
approximately $4,855,000 available to offset future capital gains, if
any. The amount of the carryover and expiration dates are:
Loss Carryover Expiration
- ------------------------------------------------
$2,204,000 April 30, 2004
2,651,000 April 30, 2005
E) 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 28 day period. The applicable dividend rate for
the remarketed preferred shares on April 30, 1997 was Series A-3.70%,
Series B-3.76%. 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 treatment of realized gains and losses on certain
futures contracts, dividends payable, market discount and post-October
loss deferrals. 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 April 30, 1997, the fund reclassified $2,965 to increase
undistributed net investment income, with an increase to accumulated net
realized loss on investments of $2,965. The calculation of net
investment income per share in the financial highlights table excludes
these adjustments.
F) 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 preference of any outstanding remarketed
preferred shares, by the total number of common shares outstanding.
G) Amortization of bond premium and accretion of bond discount Any premium
resulting from the purchase of securities in excess of maturity value is
amortized on a yield-to-maturity basis. Discounts on zero coupon bonds and
original issue discount are accreted according to the effective yield method.
H) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities
and Exchange Commission and with various states and the initial public
offering of its shares were $26,528. These expenses are being amortized
on a straight-line basis over a five-year period. The fund will reimburse
Putnam Management for the payment of these expenses.
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: 0.70% of the
first $500 million of the average net asset value of the fund, 0.60% of
the next $500 million, 0.55% of the next $500 million, and 0.50% of any
excess over $1.5 billion. 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 Management for that
period will be reduced by the amount of the excess (but not more than
.70% of the liquidation preference of the remarketed preferred shares
outstanding during the period).
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the year ended April 30, 1997, fund expenses were reduced by $51,480
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.
Trustees of the fund receive an annual Trustees fee of $570 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 "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 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 April 30, 1997, purchases and sales of investment
securities other than short-term investments aggregated $134,638,909 and
$109,295,904, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Remarketed preferred shares
The Series A (630 shares) and B (630 shares) shares are redeemable at
the option of the fund on an dividend payment date at a redemption price
of $50,000 per share, plus an amount equal to any dividends accumulated
on a daily basis but unpaid through the redemption date (whether or not
such dividends have been declared) and, in certain circumstances, a call
premium.
It is anticipated that dividends paid to holders of remarketed preferred
shares will be considered tax-exempt dividends under the Internal
Revenue Code of 1986, as amended. To the extent that the fund earns
taxable income and capital gains by the conclusion of a fiscal year, it
will be required to apportion to the holders of the remarketed preferred
shares throughout that year additional dividends as necessary to result
in an after-tax equivalent to the applicable dividend rate for the
period.
Under the Investment Company Act of 1940, the fund is required to
maintain asset coverage of at least 200% with respect to the remarketed
preferred shares as of the last business day of each month in which any
such shares are outstanding. Additionally, the fund is required to meet
more stringent asset coverage requirements under terms of the remarketed
preferred shares and the shares' rating agencies. Should these
requirements not be met, or should dividends accrued on the remarketed
preferred shares not be paid, the fund may be restricted in its ability
to declare dividends to common shareholders or may be required to redeem
certain of the remarketed preferred shares. At April 30, 1997, no such
restrictions have been placed on the fund.
Federal tax information
(Unaudited)
The fund has designated 99.92% of dividends paid from net investment
income during the fiscal year as tax exempt for Federal income tax
purposes.
The Form 1099 you receive in January 1998 will show the tax status
of all distributions paid to your account in calendar 1997.
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
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William J. Curtin
Vice President
Jerome J. Jacobs
Vice President
Blake E. Anderson
Vice President
Richard P. Wyke
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]
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
33895-183 6/97
