Putnam
Investment
Grade
Municipal
Trust II
SEMIANNUAL REPORT
October 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Although we expect discussions of broader tax reform to continue, it
is our belief that the flat tax will not be an issue in the near future
and that the municipal market will tend to maintain its current
valuation level relative to the taxable markets. These valuations have
strengthened recently as investor confidence has increased."
-- Richard P. Wyke, Fund Manager
Putnam Investment Grade Municipal Trust II
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
12 Portfolio holdings
17 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
The first half of Putnam Investment Grade Municipal Trust II's fiscal
year finished on a more propitious note than it began. During the six
months ended October 31, 1996, your fund -- and the rest of the tax-
exempt bond market -- made up ground lost to the challenges presented by
the flat-tax concerns and worry that a still-vibrant economy would
ignite the fires of inflation.
As investors gradually concluded that their fears may have been
misplaced, the fixed-income market environment has shown steady
improvement. Prospects for the second half of your fund's fiscal year
now seem more positive. Demand for tax-exempt securities is strong,
especially relative to their fairly modest supply. The economy,
interest rates, and inflation remain generally favorable.
I am pleased to announce that Richard Wyke has assumed management of
your fund. Rick has 14 years of investment experience and has been
managing municipal bond portfolios at Putnam since 1987. He reviews the
fund's performance and prospects in the report that follows.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
December 18, 1996
Report from the Fund Manager
Richard P. Wyke
During the first half of Putnam Investment Grade Municipal Trust II's
fiscal year, your fund has benefited from a relatively flat interest-
rate environment, increasing levels of investor confidence, and a
strategic shift in emphasis toward intermediate-term bonds. We are
pleased to report that the fund completed the first half of fiscal 1997
on October 31, 1996, with solid performance and optimistic prospects for
the remainder of the fiscal year. Total returns were 4.20% at net asset
value and 3.45% at market price. Additional information is shown in the
performance tables that begin on page 9.
* SUPPLY/DEMAND BALANCE SHIFT NOW FAVORS GROWING SUPPLY
Although we expect discussions of broader tax reform to continue, it is
our belief that the flat tax will not be an issue in the near future and
that the municipal market will tend to maintain its current valuation
level relative to the taxable markets. These valuations have
strengthened recently as investor confidence has increased. Demand
benefited from strong retail investor interest as well as from insurance
companies. Those two sectors, along with the mutual fund sector,
represent almost all of the demand for municipal bonds. While the mutual
fund sector saw negligible cash inflow and outflow during the period,
there was sufficient demand from the other two sectors to support prices
in the municipal market.
On the supply side, approximately $170 billion worth of new issue
municipal bonds is expected to reach the market by the end of calendar
1996. While that amount is still much lower than the market's peak
(roughly $295 billion in 1993), it represents an increase over last
year's new issue level. This means that earlier concerns about the
vanishing municipal bond supply have not materialized.
One aspect of municipal bond demand we have discussed in past reports
has been the large number of pre-refunded bonds awaiting redemption.
These pre-refundings in the past have allowed us to know the exact point
at which the bonds would be retired and thus have enabled us to plan
effectively for reinvestment of the assets. With the passing of 1996, we
expect to see fewer bonds redeemed through pre-refundings. Instead, we
believe the cash flows into the retail, insurance company, and mutual
fund sectors of the market will be the primary sources of demand.
* SHIFT TO BULLETED STRUCTURE INTENDED TO BOOST INCOME
There are basically five variables with which we work in terms of your
fund's portfolio structure and strategy. First and most important is
duration -- a measure of sensitivity to interest-rate changes. A longer
duration can mean a more volatile portfolio if rates rise. But a longer
duration is also more likely to provide greater capital appreciation if
rates decline. Conversely a shorter duration can help preserve portfolio
value when interest rates rise. During the semiannual period, the fund's
net interest-rate sensitivity has roughly coincided with the average
duration for the long-term municipal bond fund universe. This means that
your fund's exposure to interest-rate risk is neither more nor less than
that of the broader market.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: TOP INDUSTRY SECTORS*]
TOP INDUSTRY SECTORS*
Water and sewerage 17.0%
Utilities 15.8%
Hospitals/health care 15.7%
Transportation 13.5%
Education 8.2%
Footnote reads:
*Based on net assets as of 10/31/96. Holdings will vary over time.
The second important variable in terms of fund performance is the
portfolio's yield curve positioning. During the period, we reallocated
the fund's assets from a barbell maturity structure to a bulleted
maturity structure. By this we mean that we made a pronounced shift of
assets roughly positioned at the short-term and the long-term ends of
the interest-rate spectrum to a concentration of holdings with midrange
maturities between 15 and 25 years. That strategy is intended to
generate a higher-yielding portfolio.
* CREDIT AND SECTOR SELECTION STRATEGIES PROVE REWARDING
The fund's credit quality breakdown and sector selection make up the
third performance variable. In our opinion, it is more advantageous in
today's market to allocate some portion of the portfolio to Baa-rated
bonds. While your fund's portfolio has an average credit quality of Aa,
the fund is underweighted in Aa-rated and A-rated bonds. The fund's Aa
credit quality average comes from a mixture of Aaa-rated and Baa-rated
bonds.
A look at the fund's sector selection reveals that bonds issued to
support Denver International Airport, fixtures in the portfolio for some
time, remain key holdings. These bonds continue to offer attractive
financial performance and are rated as investment grade by both major
rating agencies. In our view, these bonds are worthwhile holdings
because of their potential for generating a high level of income with
periodic opportunities to provide attractive market price returns.
In the health-care sector, we believe the opportunities offered by
corporate mergers and taxable buyouts have been fully priced into the
market. We now view this sector as more of a trading market in which the
focus is on buying bonds that have lagged a rally or selling bonds that
have outperformed in a market correction. We anticipate that in coming
months we will diversify the fund's sector risk further by shifting more
assets into the airline, waste management, and nursing home sectors.
* NONCALLABLE STRUCTURE AND FINANCIAL LEVERAGE PROVE BENEFICIAL
The management of price volatility is the fourth variable affecting your
fund's performance. Volatility is reflected in how much and how often
the price of a security changes, up or down. Rapid, wide price swings
indicate a high degree of volatility. We believe there are unique
valuations that occur in the municipal bond market because of call
structure in conjunction with shapes of the yield curve and the coupon
on a bond. It is our belief, in general, that noncallable bonds are
currently undervalued in the municipal market and have been for a long
time. In other words, we believe the market is underestimating their
potential for rising volatility. We have attempted whenever possible to
build a noncallable structure into the portfolio and to focus on other
areas in which such potential, in our view, is being overlooked by the
market.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Broward County Resource Recovery Revenue Bonds (Florida)
7.95s, 12/1/08
Metro Government Nashville and Davidson County, Tennessee Water and
Sewer
Inverse floating bonds, AMBAC, 8.317s, 1/1/22
Central Lake County, Joint Action Water Agency Revenue Bonds (Illinois)
6s, 2/1/19
Burke County Development Authority Control Revenue Bonds (Georgia)
Municipal Bond Investors Assurance Corporation 8s, 1/1/22
New York State Dormitory Authority Revenue Bonds
Series A, 7.7s, 5/15/12
New York City Water and Sewer Revenue Bonds
Refunded, Series C, 7 3/4s, 6/15/20
Babylon Industrial Development Agency Resource Recovery Revenue Bonds
(New York)
Series A, 8 1/2s, 1/1/19
Western Township Utility Authority Sewer Disposal System Revenue Bonds
(Michigan)
8.2s, 1/1/18
Claiborne County Pollution Control Revenue Bonds (Mississippi)
Series C, 9 7/8s, 12/1/14
California State General Obligation Bonds
6 1/4s, 9/1/08
Footnote reads:
These holdings represent 31.2% of the fund's assets as of 10/31/96.
Portfolio holdings will vary over time.
The last primary driver of your performance is financial leverage. To
enhance the income stream, 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 longer-term bonds with higher yields. The difference between
the dividends paid to holders of preferred shares and the income earned
by the fund augments the flow of income to holders of common shares.
Given the continuing prospect for low short-term interest rates in
general, we believe the effects of leverage should continue to be
positive over the near term.
* OUTLOOK: UNDERVALUED MUNICIPAL BOND MARKET BODES WELL FOR FUND IN 1997
Fundamentally, given the growing prospect for slow growth in 1997 and
the lack of evidence that wage pressures are pushing on general
inflation rates, we believe interest-rate levels should continue to
decline. That prospect, coupled with the seasonal bulge in the municipal
market, should result in what we expect will be an undervalued municipal
bond market. We expect that prices in the municipal bond market may move
up over the near term, a situation that could bode well for your fund.
Footnote reads:
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 10/31/96, there is no guarantee the fund
will continue to hold these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Investment Grade Municipal Trust II is designed for
investors seeking high current income free from federal income tax,
consistent with preservation of capital.
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 in the fund.
TOTAL RETURN FOR PERIODS ENDED 10/31/96
(common shares)
Lehman Bros.
Market Municipal Consumer
NAV price Bond Index Price Index
- ------------------------------------------------------------------------
6 months 4.20% 3.45% 4.54% 1.28%
- ------------------------------------------------------------------------
1 year 4.36 7.96 5.71 2.99
- ------------------------------------------------------------------------
3 years 11.37 14.82 16.14 8.65
Annual average 3.66 4.72 5.11 2.80
- ------------------------------------------------------------------------
Life (11/27/92) 31.47 23.10 30.16 11.48
Annual average 7.21 5.43 6.96 2.80
- ------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most recent calendar quarter)
(common shares)
Market
NAV price
- ------------------------------------------------------------------------
6 months 2.34% -0.21%
- ------------------------------------------------------------------------
1 year 5.09 7.00
- ------------------------------------------------------------------------
3 year 12.70 10.69
Annual average 4.07 3.44
- ----------------------------------------------------------------------
Life (11/27/92) 30.07 20.20
Annual average 7.09 4.91
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions.
Investment returns and net asset value will fluctuate so that an
investor's shares, when sold, may be worth more or less than their
original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 10/31/96
- ------------------------------------------------------------------------
Distributions (common shares) 6
- ------------------------------------------------------------------------
Income $0.48
- -----------------------------------------------------------------------
Total $0.48
- -----------------------------------------------------------------------
Preferred shares Series A Series B
(630 shares) (630 shares)
- ------------------------------------------------------------------------
Income $945.52 $828.81
- ------------------------------------------------------------------------
Total $945.52 $828.81
- ------------------------------------------------------------------------
Share value (common shares) NAV Market price
- -----------------------------------------------------------------------
4/30/96 $13.79 $13.875
- ------------------------------------------------------------------------
10/31/96 13.89 13.875
- -----------------------------------------------------------------------
Current return (common shares) NAV Market price
End of Period
- ------------------------------------------------------------------------
Current dividend rate1 6.91% 6.92%
- ------------------------------------------------------------------------
Taxable equivalent2 11.44 11.46
- ------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by
NAV or market price at end of period.
2Assumes maximum 39.6% federal tax rate. Results for investors subject
to lower tax rates would not be as advantageous.
TERMS AND DEFINITIONS
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, the liquidation preference and cumulative undeclared
dividends paid on the remarketed preferred shares, divided by the number
of outstanding common shares.
Market price is the current trading price of one share of the fund.
Market prices are set by transactions between buyers and sellers on the
New York Stock Exchange.
COMPARATIVE BENCHMARKS
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.
<TABLE>
<CAPTION>
Portfolio of investments owned
October 31, 1996 (Unaudited)
Key to Abbreviations
AMBAC --AMBAC Indemnity Corporation
FGIC --Financial Guaranty Insurance Company
FSA --Financial Security Assurance
G.O. Bonds --General Obligation Bonds
IFB --Floating Rate Bonds
MBIA --Municipal Bond Investors Assurance Corporation
VRDN --Variable Rate Demand Notes
<S> <C> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (98.2%) *
PRINCIPAL AMOUNT RATINGS** VALUE
Arizona (0.9%)
- ------------------------------------------------------------------------------------------------------------------------
$2,235,000 Gila Cnty., Indl. Dev. Auth. Poll.
Control Rev. Bonds (Asarco Inc.),
Ser. 85, 8.9s, 7/1/06 Baa 2,356,517
California (8.2%)
- ------------------------------------------------------------------------------------------------------------------------
1,000,000 CA Poll. Control Fin. Auth. VRDN
(Shell Oil Co.), Ser. A, 3.5s, 10/1/07 VMIGI 1,000,000
CA State G.O. Bonds
3,855,000 7s, 8/1/07 A 4,466,981
6,000,000 6 1/4s, 9/1/08 A 6,622,500
2,500,000 CA State U. IFB, AMBAC, 9.985s, 11/1/21
(aquired 9/2/94, cost $2,681,272) (double dagger) Aaa 2,962,500
6,000,000 Foothill/Eastern, Corridor Agcy. Toll Rd. Rev. Bonds,
Sr. Lien, Ser. A, zero %, 1/1/08 Baa 3,810,000
1,465,000 Fountain Valley, Cmnty. Dev. Agcy. Tax Alloc.
Rev. Bonds (Indl. Area Redev.), 9.1s, 1/1/16 BBB 1,492,645
------------
20,354,626
Colorado (9.2%)
- ------------------------------------------------------------------------------------------------------------------------
Denver, City & Cnty. Arpt Rev. Bonds, Ser. A
5,000,000 8 3/4s, 11/15/23 Baa 5,887,500
2,500,000 8 1/2s, 11/15/23 Baa 2,859,375
1,670,000 8s, 11/15/25 Baa 1,880,838
1,000,000 8s, 11/15/25 Baa 1,121,250
2,175,000 8s, 11/15/17 Baa 2,287,382
1,000,000 Ser. D, 7 3/4s, 11/15/13 Baa 1,201,250
Highlands Ranch, G.O. Bonds, Dist. No. 2, FSA
1,000,000 6 1/2s, 6/15/09 Aaa 1,103,750
780,000 6 1/4s, 6/15/08 Aaa 846,300
5,250,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds
(Newport Village), Ser. A-8, FSA, 7.1s, 1/1/30 Aaa 5,709,375
------------
22,897,020
Florida (7.1%)
- ------------------------------------------------------------------------------------------------------------------------
11,000,000 Broward Cnty., Resource Recvy. Rev. Bonds
(SES Broward Cnty. LP South), 7.95s, 12/1/08 A 12,127,500
1,000,000 FL State Board of Education Cap. Outlay G.O. Bonds,
Ser. A, 7 1/4s, 6/1/23 Aa 1,100,000
5,000,000 Port Everglades, Auth. Port Impt. Rev. Bonds,
Ser. A, 5s, 9/1/16 BBB 4,331,250
------------
17,558,750
Georgia (3.0%)
- ------------------------------------------------------------------------------------------------------------------------
6,340,000 Burke Cnty., Dev. Auth. Control Rev. Bonds
(Oglethorpe Pwr. Co. Vogtle), MBIA, 8s, 1/1/22# Aaa 7,512,900
Illinois (4.1%)
- ------------------------------------------------------------------------------------------------------------------------
7,750,000 Central Lake Cnty., Joint Action Wtr. Agcy.
Rev. Bonds, 6s, 2/1/19 Aa 7,905,000
2,090,000 Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds
(United Air Lines, Inc.), Ser. C, 8.2s, 5/1/18 Baa 2,267,650
------------
10,172,650
Indiana (0.9%)
- ------------------------------------------------------------------------------------------------------------------------
2,000,000 Marion Cnty., Ind. Convention & Rec. Fac. Auth. Rev. Bonds
(Excise Tax Rev. Lease Rental), Ser. A, AMBAC, 7s, 6/1/21 Aaa 2,187,500
Kansas (1.2%)
- ------------------------------------------------------------------------------------------------------------------------
2,600,000 Burlington Poll. Control Rev. Bonds (Kansas Gas
& Electric Co.), MBIA, 7s, 6/1/31 Aaa 2,866,500
Louisiana (1.1%)
- ------------------------------------------------------------------------------------------------------------------------
2,000,000 Beauregard, Parish Rev. Bonds (Boise Cascade Corp.),
7 3/4s, 6/1/21 Baa 2,160,000
500,000 St. Charles Parish, Poll. Control Rev. Bonds
(LA Pwr. & Lt.), 8 1/4s, 6/1/14 Baa 545,625
------------
2,705,625
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 3,195,000
Massachusetts (5.4%)
- ------------------------------------------------------------------------------------------------------------------------
MA State Hlth. & Edl. Fac. Auth. IFB
5,500,000 (Med. Ctr. of Central MA), Ser. B, AMBAC, 9.22s, 6/23/22 Aaa 6,276,875
2,000,000 (Boston U.), Ser. L, MBIA, 9.495s, 10/1/31 Aaa 2,292,500
3,000,000 MA State Port Auth. Rev. Bonds, 13s, 7/1/13 Aaa 4,788,750
------------
13,358,125
Michigan (4.4%)
- ------------------------------------------------------------------------------------------------------------------------
2,000,000 Detroit, Wtr. Supply Syst. IFB, FGIC, 8.841s, 7/1/22 Aaa 2,202,500
2,000,000 MI State Job Dev. Auth. Rev. Bonds
(Pontiac Hosp.), 6s, 2/1/24 Baa 1,895,000
6,250,000 Western Township, Util. Auth. Swr. Disp. Syst.
Rev. Bonds, 8.2s, 1/1/18 BBB 6,804,688
------------
10,902,188
Minnesota (5.6%)
- ------------------------------------------------------------------------------------------------------------------------
St. Paul, Hsg. & Hosp. Redev. Auth. Rev. Bonds
(Healtheast), Ser. B
5,500,000 9 3/4s, 11/1/17 Baa 5,860,910
4,790,000 9 5/8s, 11/1/08 Baa 5,098,572
3,000,000 Western MN Muni. Pwr. Agcy. Supply Rev. Bonds,
Ser. A, 7s, 1/1/13 A 3,075,510
------------
14,034,992
Mississippi (2.7%)
- ------------------------------------------------------------------------------------------------------------------------
6,000,000 Claiborne Cnty., Poll. Control Rev. Bonds (Middle
South Energy, Inc.), Ser. C, 9 7/8s, 12/1/14 Ba 6,682,500
New York (20.2%)
- ------------------------------------------------------------------------------------------------------------------------
6,370,000 Babylon, Indl. Dev. Agcy. Resource Recvy. Rev. Bonds
(Ogden Martin Syst.), Ser. A, 8 1/2s, 1/1/19 Aaa 6,983,113
2,600,000 NY City, Muni. Wtr. Fin. Auth. VRDN,
Ser. G, FGIC, 3.6s, 6/15/24 VMIGI 2,600,000
6,250,000 NY City, Wtr. & Swr. Syst. Rev. Bonds,
Ser. C, 7 3/4s, 6/15/20 Aaa 7,164,063
NY State G.O. Bonds
2,000,000 Ser. A, 6s, 7/15/07 A 2,175,000
2,000,000 Ser. C, 6s, 10/1/04 A 2,157,500
NY State Dorm. Auth. Rev. Bonds (State U.
Edl. Fac.), Ser. A
6,500,000 7.7s, 5/15/12 Aaa 7,304,375
5,000,000 5 7/8s, 5/15/17 Baa 5,000,000
NY State Energy Research & Dev. Auth. Rev. Bonds
(Cons. Edison Co.), Ser. A
2,000,000 7 3/4s, 1/1/24 A 2,095,000
5,000,000 7 1/2s, 1/1/26 A 5,393,750
NY State Urban Dev. Corp. Rev. Bonds (Syracuse U.)
1,440,000 6s, 1/1/07 Baa 1,485,000
1,360,000 6s, 1/1/06 Baa 1,402,500
1,000,000 (Correctional Fac.), Ser. A, 5 1/2s, 1/1/14 Baa 962,500
5,165,000 Suffolk Cnty., Wtr. Auth. Rev. Bonds, Sub. Lien,
MBIA, 6s, 6/1/14 Aaa 5,552,375
------------
50,275,176
North Carolina (1.1%)
- ------------------------------------------------------------------------------------------------------------------------
2,800,000 NC Muni Pwr. Agcy., MBIA, 5 1/4s, 1/1/07 AAA 2,831,500
Pennsylvania (5.2%)
- ------------------------------------------------------------------------------------------------------------------------
3,000,000 Allegheny Cnty., Hosp. Dev. Auth. Rev. Bonds
(Magee-Womens Hosp.), FGIC, 6s, 10/1/13 Aaa 3,090,000
5,000,000 Dauphin Cnty., Auth. Hosp. Rev. Bonds (Hapsco-Western
PA Hosp. Project), Ser. A, MBIA, 6 1/2s, 7/1/12 Aaa 5,325,000
1,800,000 Lehigh Cnty., Gen. Purp. Auth. Rev. Bonds (Hosp.
Healtheast Inc.), Ser. A, 9s, 7/1/15 A 1,896,210
2,700,000 Philadelphia, Hosp. & Higher Ed. Auth. Rev. Bonds
(Graduate Hlth. Syst.), Ser. A, 6 1/4s, 7/1/13 BBB 2,581,875
------------
12,893,085
Puerto Rico (4.9%)
- ------------------------------------------------------------------------------------------------------------------------
2,000,000 Cmnwlth. of PR, Aqueduct & Swr. Auth.
Rev. Bonds, 6 1/4s, 7/1/12 A 2,175,000
4,500,000 Cmnwlth. of PR, Med. and Env. Poll. Ctrl. Fac.
Rev. Bonds (Baxter Int. Inc.), 8s, 9/1/12 A 4,888,125
3,000,000 PR Elec. Pwr. Auth. Rev. Bonds, Ser. N, 5s, 7/1/12 A 2,790,000
2,500,000 PR Hwy. & Trans. Auth. Rev. Bonds, 5 1/2s, 7/1/26 A 2,400,000
------------
12,253,125
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%)
- ------------------------------------------------------------------------------------------------------------------------
8,300,000 Metro. Govt. Nashville & Davidson Cnty., Wtr.
& Swr. IFB, AMBAC, 8.317s, 1/1/22 Aaa 8,549,000
1,750,000 Metro. Govt. Nashville & Davidson Cnty., Wtr.
& Swr. Rev. Bonds, MBIA, 6s, 1/1/07 Aaa 1,883,438
------------
10,432,438
Texas (4.5%)
- ------------------------------------------------------------------------------------------------------------------------
3,815,000 Dallas, Indpt Schl. Dist Rev. Bonds, 8/15/07 Aaa 2,165,010
5,060,000 Matagorda Cnty., Poll. Control Rev. Bonds
(Houston Pwr. & Lt. Co.), MBIA, 7 7/8s, 2/1/19 Aaa 5,357,275
3,500,000 North Central, Hlth. Fac. Dev. Corp. Rev. Bonds
(Presbyterian Hlth. Syst.), MBIA, 6.685s, 6/22/21 Aaa 3,696,875
------------
11,219,160
Utah (0.8%)
- ------------------------------------------------------------------------------------------------------------------------
2,800,000 Salt Lake Cnty., Wtr. Conservancy Dist.
Rev. Bonds, Ser. A, AMBAC, 10/1/02 Aaa 2,100,000
- ------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $240,512,474)*** $ 244,176,877
- ------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $248,564,707.
** The Moody's or Standard & Poor's ratings indicated are
believed to be the most recent ratings available at
October 31, 1996 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 October 31, 1996.
Securities rated by Putnam are indicated by "/P" and
are not publicly rated.
*** The aggregate identified cost on a tax basis is
$240,512,474, resulting in gross unrealized appreciation and
depreciation of $6,353,545 and $2,689,142, respectively,
or net unrealized appreciation of $3,664,403.
(double dagger) Restricted, excluding 144A securities, as to public resale.
The total market value of restricted securities held at
October 31, 1996 was $2,962,500 or
1.2% of net assets.
# A portion of this security was pledged and segregated
with the custodian to cover margin requirements for
futures contracts at October 31, 1996.
The rates shown on IFB, which are securities
paying interest rates that vary inversely to changes in the
market interest rates, and VRDN's are the current interest
rates at October 31, 1996.
The fund had the following industry group
concentrations greater than 10% at
October 31, 1996 (as a percentage of net assets):
Water & sewerage 17.0%
Utilities 15.8
Hospitals/health care 15.7
Transportation 13.5
The fund had the following insurance
concentration greater than 10% at
October 31, 1996 (as a percentage of net assets):
MBIA 15.0%
<CAPTION>
Futures Contracts Outstanding at October 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------------------
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bond Futures (Short) $3,476,250 $3,457,759 Dec 96 $(18,491)
- -------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31, 1996 (Unaudited)
<S> <C>
Assets
- -------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $240,512,474) (Note 1) $244,176,877
- -------------------------------------------------------------------------------------------------
Cash 400,811
- -------------------------------------------------------------------------------------------------
Interest receivable 5,437,164
- -------------------------------------------------------------------------------------------------
Receivable for securities sold 210,000
- -------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 5,692
- -------------------------------------------------------------------------------------------------
Total assets 250,230,544
Liabilities
- -------------------------------------------------------------------------------------------------
Payable for variation margin 18,750
- -------------------------------------------------------------------------------------------------
Distributions payable to shareholders 1,068,509
- -------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 445,930
- -------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 23,118
- -------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 78
- -------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,574
- -------------------------------------------------------------------------------------------------
Other accrued expenses 106,878
- -------------------------------------------------------------------------------------------------
Total liabilities 1,665,837
- -------------------------------------------------------------------------------------------------
Net assets $248,564,707
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 (Note 1) 186,297,698
- -------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,615,584
- -------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment (Note 1) (5,994,487)
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 3,645,912
- -------------------------------------------------------------------------------------------------
Total - Representing net assets applicable to
capital shares outstanding $248,564,707
Computation of net asset value:
- -------------------------------------------------------------------------------------------------
Remarketed preferred shares $63,000,000
- -------------------------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 70,889
- -------------------------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares liquidation preference $63,070,889
- -------------------------------------------------------------------------------------------------
Net assets available to common shares $185,493,818
- -------------------------------------------------------------------------------------------------
Net asset value per common share ($185,493,818 divided by 13,357,092) $13.89
- -------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended October 31, 1996 (Unaudited)
<S> <C>
Tax exempt interest income: $8,192,035
- ----------------------------------------------------------------------------------------------------------
Expenses:
- ----------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 879,390
- ----------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 83,735
- ----------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 6,177
- ----------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,836
- ----------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,674
- ----------------------------------------------------------------------------------------------------------
Reports to shareholders 19,149
- ----------------------------------------------------------------------------------------------------------
Registration fees 935
- ----------------------------------------------------------------------------------------------------------
Auditing 36,922
- ----------------------------------------------------------------------------------------------------------
Legal 7,932
- ----------------------------------------------------------------------------------------------------------
Postage 77,294
- ----------------------------------------------------------------------------------------------------------
Exchange listing fees 12,130
- ----------------------------------------------------------------------------------------------------------
Preferred share remarketing agent fees 73,500
- ----------------------------------------------------------------------------------------------------------
Other 2,409
- ----------------------------------------------------------------------------------------------------------
Total expenses 1,206,083
- ----------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (18,626)
- ----------------------------------------------------------------------------------------------------------
Net expenses 1,187,457
- ----------------------------------------------------------------------------------------------------------
Net investment income 7,004,578
- ----------------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (1,508,190)
- ----------------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1 and 3) 209,861
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures contracts during the period 3,153,259
- ----------------------------------------------------------------------------------------------------------
Net gain on investments 1,854,930
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $8,859,508
- ----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
<S> <C> <C>
Six months
ended Year ended
October 31 April 30
1996* 1996
- ------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
- ------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------
Net investment income $7,004,578 $14,514,332
- ------------------------------------------------------------------------------------------------------
Net realized loss on investments (1,298,329) (1,182,577)
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 3,153,259 (153,702)
- ------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 8,859,508 13,178,053
- ------------------------------------------------------------------------------------------------------
Distributions to remarketed preferred shareholders from:
- ------------------------------------------------------------------------------------------------------
Net investment income (1,117,832) (2,344,964)
- ------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations
applicable to common shareholders (excluding
cumulative undeclared dividends on remarketed preferred
shares of $70,889 and $57,495, respectively) 7,741,676 10,833,089
- ------------------------------------------------------------------------------------------------------
Distributions to common shareholders from:
- ------------------------------------------------------------------------------------------------------
Net investment income (6,411,095) (12,822,245)
- ------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 1,330,581 (1,989,156)
- ------------------------------------------------------------------------------------------------------
Net assets
- ------------------------------------------------------------------------------------------------------
Beginning of period 247,234,126 249,223,282
- ------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $1,615,584 and $2,139,933, respectively) $248,564,707 $247,234,126
- ------------------------------------------------------------------------------------------------------
Number of fund shares
- ------------------------------------------------------------------------------------------------------
Common shares outstanding at beginning and end of period 13,357,092 13,357,092
- ------------------------------------------------------------------------------------------------------
Remarketed preferred shares outstanding at
beginning and end of period 1,260 1,260
- ------------------------------------------------------------------------------------------------------
*Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Six months
ended
October 31
(Unaudited) Year ended April 30
--------------------------------------------------------------
1996 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.79 $13.94 $14.30
- ------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------------------------------------------------
Net investment income .52 1.09 1.14
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .14 (.10) (.16)
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations .66 .99 .98
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------
From net investment income
- ------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.08) (.18) (.15)
- ------------------------------------------------------------------------------------------------------------------------
To common shareholders (.48) (.96) (.96)
- ------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
- ------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- -- --
- ------------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- --
- ------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments
- ------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- -- (.03)
- ------------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- (.20)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (.56) (1.14) (1.34)
- ------------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period (common shares) $13.89 $13.79 $13.94
- ------------------------------------------------------------------------------------------------------------------------
Market value, end of period (common shares) $13.875 $13.875 $12.75
- ------------------------------------------------------------------------------------------------------------------------
Total investment return at market value (common shares) (%)(d) 3.45* 16.62 5.39
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (total fund) (in thousands) $248,565 $247,234 $249,223
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(e)(f) .66* 1.24 1.28
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(e) 3.20* 6.41 7.10
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 35.19* 160.28 85.63
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the period
November 27, 1992
(commencement of
Year ended operations) to
April 30 April 30
------------------------------------------------------
1994 1993
------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $15.00 $14.06 (a)
- --------------------------------------------------------------------------------------------------------
Investment operations:
- --------------------------------------------------------------------------------------------------------
Net investment income 1.16 .44 (b)
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.66) .95
- --------------------------------------------------------------------------------------------------------
Total from investment operations .50 1.39
- --------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------
From net investment income
- --------------------------------------------------------------------------------------------------------
To preferred shareholders (.15) (.03)(c)
- --------------------------------------------------------------------------------------------------------
To common shareholders (.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 -- --
- --------------------------------------------------------------------------------------------------------
To common shareholders -- --
- --------------------------------------------------------------------------------------------------------
Total distributions (1.20) (.35)
- --------------------------------------------------------------------------------------------------------
Preferred share offering costs -- (.10)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period (common shares) $14.30 $15.00
- --------------------------------------------------------------------------------------------------------
Market value, end of period (common shares) $13.25 $14.63
- --------------------------------------------------------------------------------------------------------
Total investment return at market value (common shares) (%)(d) (2.81) (0.88)*
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (total fund) (in thousands) $254,025 $263,388
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(e)(f) 1.14 .27(b)*
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(e) 6.66 2.89(b)*
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 32.27 4.65*
- --------------------------------------------------------------------------------------------------------
* 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, 1996 and thereafter, includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts.(Note 2)
</TABLE>
Notes to financial statements
October 31, 1996 (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 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. 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 October 31, 1996, the fund had a capital loss carryover of
approximately $2,578,000 available to offset future net capital gain, if
any, which will expire on April 30, 2004.
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 rates for
the remarketed preferred shares on October 31, 1996 were: Series A -
3.45%, Series B - 3.45%. The amount and character of income and gains to
be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
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 discount Any premium resulting from
the purchase of securities in excess of maturity value is amortized on a
yield-to-maturity basis. Discounts on zero coupon bonds, and original
issue bonds are accreted according to the effective yield method.
H) Unamortized organization expenses Expenses incurred by the fund in
connection with it 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.
Note 2
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. 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, 0.50% of any excess over $1.5 billion of
such average net asset value subject, under current law, to reduction in
any year by the amount of certain brokerage commissions and fees (less
expenses) received by affiliates of Putnam Management on the fund's
portfolio transactions.
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 six months ended October 31, 1996, fund expenses were reduced by
$18,626 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 $780 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 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 six months ended October 31, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$105,894,647 and $83,713,399, 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) and B (630) 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. 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 October 31, 1996, no such
restrictions have been placed on the fund.
Results of October 31, 1996 shareholder meeting
(Unaudited)
A meeting of shareholders of the fund was held on October 31, 1996. At
the meeting, each of the nominees for Trustees was elected, as follows:
Common Shares Preferred Shares
Votes Votes
Votes for withheld Votes for withheld
Jameson Adkins Baxter 8,147,151 103,215 830 0
Hans H. Estin 8,147,151 103,215 830 0
John A. Hill 830 0
R.J. Jackson 8,147,151 103,215 830 0
Elizabeth T. Kennan 8,147,151 103,215 830 0
Lawrence J. Lasser 8,146,818 103,548 830 0
Robert E. Patterson 830 0
Donald S. Perkins 8,144,380 105,986 830 0
William F. Pounds 8,144,380 105,986 830 0
George Putnam 8,146,818 103,548 830 0
George Putnam, III 8,147,151 103,215 830 0
Eli Shapiro 8,142,240 108,126 830 0
A.J.C. Smith 8,147,151 103,215 830 0
W. Nicholas Thorndike 8,147,151 103,215 830 0
<TABLE>
<CAPTION>
Results of October 31, 1996 shareholder meeting (continued)
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Common Shares Preferred shares
- ---------------------------------------------------------------------------------------------------------------------
Abstentions Abstentions
Votes Votes and Broker Votes Votes and Broker
For Against Non-Votes For Against Non-Votes
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A proposal to ratify the selection of
Coopers & Lybrand L.L.P. as auditors
for the fund was approved as follows 8,056,529 58,453 135,384 828 0 2
- ---------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction
with respect to diversification of
investments was approved as follows 6,779,762 253,048 1,217,556 827 0 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction
with respect to investments in the
securities of a single issuer was
approved as follows 6,607,136 378,074 1,265,156 826 1 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction
with respect to making loans through
purchases of debt obligations,
repurchase agreements and securities
loans was approved as follows 6,380,006 612,317 1,258,043 826 1 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction
with respect to concentration of its
assets was approved as follows 6,629,109 360,191 1,261,066 826 1 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction
with respect to investments in
commodities or commodity contracts
was approved as follows 6,349,726 668,285 1,232,355 826 1 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
with respect to investments in
securities of issuers in which
management of the fund or Putnam
Investment Management, Inc. owns
securities was approved as follows 6,430,239 566,559 1,253,568 827 0 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
with respect to margin transactions
was approved as follows 6,281,460 725,150 1,243,756 826 1 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
with respect to short sales was
approved as follows 6,327,850 661,756 1,260,760 826 1 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
which limits the fund's ability to
pledge assets was approved as follows 6,281,983 703,892 1,264,491 827 0 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
with respect to investments in
certain oil, gas and mineral interests
was approved as follows 6,457,401 550,297 1,242,668 826 1 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
with respect to investing to gain
control of a company's management
was approved as follows 6,427,280 542,463 1,280,623 826 1 3
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
with respect to investments in
other investment companies
was approved as follows 6,561,691 454,459 1,234,216 827 0 3
- ---------------------------------------------------------------------------------------------------------------------
All tabulations are rounded to nearest whole number.
</TABLE>
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 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
Eli Shapiro
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
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 net asset value.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- ---------------------
29184-183 12/96
