Putnam
New York
Investment Grade
Municipal Trust
ANNUAL REPORT
April 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Receding flat-tax fears, low inflation, and a relatively tight supply
of New York municipal bonds are contributing to a very favorable
environment for tax-free securities. Furthermore, investment-grade
municipal bonds are capturing close to 90% of the 30-year Treasury bond
yield, suggesting that the municipal bond market could be poised for
another period of advance."
-- David J. Eurkus, Manager,
Putnam New York Investment Grade Municipal Trust
* "When the yield on the 30-year Treasury bond spiked to around 6.8%
after ending last year at a two-year low of 5.9%, bond investors had a
right to feel panicky.... Despite the frightening selloff, this may be a
good time to hold or even increase your positions in bonds."
-- Kiplinger Personal Finance Magazine, May 1996
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
15 Financial statements
[GRAPHIC OMITTED: photo of George Putnam]
(copyright) Karsh, Ottawa
From the Chairman
Dear Shareholder:
The tax-exempt bond market provided quite a ride for shareholders of
Putnam New York Investment Grade Municipal Trust during the fiscal year
ended April 30, 1996. The year got off to a solid start as the U.S. bond
market enjoyed what would become one of the strongest advances in recent
memory. The euphoria proved short-lived for municipal bond investors,
however, as talk of a flat tax gave rise to concern over the continued
viability of tax-exempt securities.
Once raised, the flat-tax worries provided a negative undercurrent
throughout much of the remainder of the year. It subsided just in time
to temper the decline in tax-exempt securities when the entire bond
market suddenly plunged in March. Through all these market gyrations,
your fund was able to close fiscal 1996 solidly in the black.
As Fund Manager David Eurkus explains in the report that follows, he
believes the continuing demand for tax-free investments, coupled with a
relatively subdued pace in new issuance, bodes well for your fund in the
fiscal year that has just begun.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
June 19, 1996
Report from the Fund Manager
David J. Eurkus
Bond market events during the past year have shown more ups and downs
than a ride on a roller coaster. Fixed-income investors everywhere had
to buckle their seat belts just to hang on as news of stronger-than-
expected economic growth brought the 10-month rally to an abrupt halt.
Much of Putnam New York Investment Grade Municipal Trust's fiscal year,
which ended April 30, 1996, occurred during this period of market
euphoria, which was driven by declining interest rates, benign
inflation, and slow economic growth. Despite uncertainty over the
various political proposals to reform the tax code, your fund was an
active participant in the rally. In the aftermath of a decision by the
Federal Reserve Board to reduce short-term interest rates by a quarter
of a percentage point on December 19, the fund finished calendar 1995
with a total return of 17.14% at net asset value and 17.12% at market
price.
An additional quarter-point drop in rates at the end of January only
served to bolster bond investors' optimism further. Despite the
breakdown of budget talks in Washington, bond prices climbed. However,
by early March, evidence of rapid employment growth fueled fears of
inflation and a possible end to the Federal Reserve's program of
lowering short-term interest rates.
During the last few weeks of the fund's reporting period, the bond
market continued to sell off amid further evidence of a stronger-than-
expected economy. Thanks to strong headway made earlier in the period,
the fund's returns for the 12 months ended April 30, 1996, were 6.99% at
net asset value and 1.78% at market price, compared with the category
average of 7.57% for the 12 New York closed-end municipal bond funds
tracked by Lipper Analytical Services* over this period. Results for
longer periods can be found on page 9.
*Lipper is an industry research firm whose rankings are based on total
return performance, vary over time, and do not reflect the effects of
sales charges.
* MUNICIPAL BOND VALUATIONS BECOME APPEALING AS FLAT-TAX FEARS RECEDE
While the sudden reversal in the direction of interest rates affected
all fixed-income securities, tax-free bonds fared better than their
fully taxable counterparts. An improving outlook for the municipal bond
market is largely responsible for this trend. For the better part of a
year, prices of tax-free bonds had reflected lingering investor concerns
about the perceived effect of tax-reform proposals. Central to this
debate has been the flat-tax proposal, which in its purest form would
jeopardize the tax advantages enjoyed by these bonds. However, much of
the momentum for a major overhaul to the current tax structure has
evaporated and with it investor anxieties. Although we expect
discussions of broader tax reform to reappear this fall as the
presidential election nears, our current assessment is that any radical
changes to the tax code appear less likely than they did a few months
ago.
[GRAPHIC OF WORM CHART OMITTED: YIELD RATIO: MUNICIPAL BOND YIELDS AS A
PERCENTAGE OF U.S. TREASURY BONDS*
30 Yr. Treas Vs. 30 Yr. Muni]
Chart reads:
5/31/95 84.6%
6/30/95 88.5%
7/30/95 84.9%
8/31/95 88.2%
9/30/95 89.2%
10/31/95 88.2%
11/30/95 88.1%
12/31/95 88.6%
1/31/96 86.1%
2/28/96 82.3%
3/31/96 85.3%
4/30/96 82.9%
*Many market professionals consider it a buying signal when municipal
bond yields are between 78% and 82% of Treasuries. The chart shows the
yield of an average 30-year general obligation bond versus the yield of
an average 30-year U.S. Treasury bond. Treasuries are backed by the full
faith and credit of the U.S. government. Source: Bloomberg.
Any time municipal bonds underperform relative to Treasuries, as they
did in 1995, we believe a buying opportunity exists. Most high-grade,
long-term municipal bonds are currently providing 85% to 90% of the
yield that Treasury bonds are offering on a before-tax basis. While
there can be no assurances, the failure of municipal bonds to
participate in 1995 to the same degree as their taxable counterparts
leaves the potential for further price appreciation. This, in our
opinion, represents attractive value.
Furthermore, the supply of new issues coming to market is starkly lower
than in previous years. With refinancings sharply curtailed as a result
of relatively higher interest rates, a significant source of new bonds
coming to market has all but disappeared. In addition, the fiscal
realities of balanced budgets are also reducing the volume of debt
issuance. This pronounced imbalance of supply and demand of New York
municipal bonds is having a positive impact on prices of existing bonds.
* BUDGET CONSTRAINTS IN ALBANY AND NEW YORK CITY CAUSE CONCERN
The inability of Albany and New York City to balance their respective
budgets has been a great concern for several months. With less money
flowing from Washington and state lawmakers wrestling with dwindling
resources, we think the likelihood of a balanced state budget is smaller
than ever. Further fiscal tightening will necessitate budgetary cutbacks
in programs, which we believe will only make the economics of public
agencies more problematic. Most of the state-appropriated agencies are
likely to feel continued stress. Moody's, an independent rating service,
has indicated that New York City is in jeopardy of being downgraded from
its current rating of Baa-1 to a lower investment-grade rating of Baa.
We do not believe New York City bonds will drop below investment grade.
However, the potential downgrade is likely to have a negative effect on
the price of the bonds. This, in turn, will cause their yields to
increase, compensating investors for the uncertainty. Looking ahead, we
believe the yield spread between investment-grade state-appropriated
bonds and bonds from other municipalities around the state can be
expected to widen.
* EMPHASIS ON INCOME AND CALL PROTECTION
A climate of steadier economic growth clearly requires a more cautious
approach to fixed-income investing. We are placing greater emphasis on
coupon income, stressing the importance of astute credit analysis. As
more weight is given to enhancing the portfolio's price stability and
liquidity, careful maturity selection and a focus toward larger, well-
known municipal issuers will play an increasingly vital role in your
fund's strategy over the next few months.
[GRAPHIC OF PIE CHART OMITTED: PORTFOLIO QUALITY OVERVIEW*]
Chart reads:
A - 11.4%
AA - 23.7%
AAA - 41.0%
BB - 3.2%
BBB - 12.3%
VMIG1 (short-term) - 8.4%
*as a percentage of market value as of 4/30/96. A bond rated BBB or
higher is considered investment grade. The ratings reflect Standard and
Poor's(registered trademark) descriptions unless noted otherwise.
Holdings will vary over time.
Given the secular decline in interest rates over the past several years,
bonds with higher coupons are at risk of being called away. Tax-free
bond issuers can refund older, higher-interest debts and offer new
issues at lower rates. To reduce the fund's exposure to this risk, we
have been extending call protection by swapping out of bonds approaching
their call dates -- one to three years, for example -- and purchasing
bonds with a minimum of 10 years or longer before their call dates. This
strategy can be an effective tool for protecting the higher-coupon bonds
in your portfolio and thus the fund's stream of tax-free income.
Some of your fund's income is generated by the selective use of
leveraging strategies. 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 longer-term bonds with higher yields. The
difference between the rates paid to holders of preferred shares and the
rates earned by the fund augments the flow of income to holders of
common shares. Since the yield curve steepened during the year,
resulting in a profitable spread between short- and long-term yields,
the fund's leveraging strategies proved to be beneficial.
* OUTLOOK: CAUTIOUS OPTIMISM PREVAILS
In our opinion, investor anxieties concerning an overheating economy are
premature. We anticipate that the remainder of 1996 will be marked by
steady, but manageable economic growth and foresee only limited risk of
a sharp increase in inflationary pressures. Such an environment, in
contrast with last year's slowing economy, is unlikely to lead to
falling interest rates and price appreciation for the bond market.
Rather, we believe coupon income will provide most of the total return
for fixed-income investors during the rest of 1996.
The new-issue supply in the state of New York is expected to remain
light until there is a budget agreement, probably sometime in the third
quarter of 1996. Total issuance for calendar 1996 is expected to level
off around $10 billion, a sharp drop from the $18 billion to $20 billion
coming to market annually in the early 1990s.
We believe these developments, along with the recent market correction,
may offer investors who have shied away from municipals an attractive
opportunity to retest the waters. Furthermore, municipal yields should
remain generous on a taxable-equivalent basis, providing an attractive
alternative to Treasuries and investment-grade bonds.
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 4/30/96, 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 New York Investment Grade Municipal Trust is designed
for investors seeking high current income free from federal, state, and
New York City 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 4/30/96
(common shares)
Market
NAV price
- ----------------------------------------------------
1 year 6.99% 1.78%
- ----------------------------------------------------
Lifetime (11/27/92) 22.46 9.66
Annual average 6.08 2.72
- ----------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED
4/30/96
Lehman Bros.
Municipal Consumer
Bond Index Price Index
- ----------------------------------------------------
1 year 7.95% 2.90%
- ----------------------------------------------------
Lifetime (11/27/92) 22.14 10.07
Annual average 6.03 2.84
- ----------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 3/31/96
(common shares)
(most recent calendar quarter)
Market
NAV price
- ----------------------------------------------------
1 year 7.66% 7.74%
- ----------------------------------------------------
Lifetime (11/27/92) 22.91 11.19
Annual average 6.37 3.23
- ----------------------------------------------------
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, market price,
and net asset value will fluctuate so an investor's shares, when sold,
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 4/30/96
Distributions
(common shares):
- -------------------------------------------------------
Number 12
- -------------------------------------------------------
Income $0.88
- -------------------------------------------------------
Capital gains1 --
- -------------------------------------------------------
Total $0.88
- -------------------------------------------------------
Preferred shares
series Th (200 shares)
- -------------------------------------------------------
Income $1,850.05
- -------------------------------------------------------
Total $1,850.05
- -------------------------------------------------------
Share value
(common shares): NAV Market price
- -------------------------------------------------------
4/30/95 $13.50 $13.625
- -------------------------------------------------------
4/30/96 13.54 13.000
- -------------------------------------------------------
Current return
(common shares): NAV Market price
- -------------------------------------------------------
End of period
- -------------------------------------------------------
Current dividend
rate2 5.98% 6.23%
- -------------------------------------------------------
Taxable equivalent3 10.66 11.11
- -------------------------------------------------------
Taxable equivalent4 11.13 11.60
- -------------------------------------------------------
1Capital 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. 2Income portion of most recent
distribution, annualized and divided by NAV or market price at end of
period. 3Assumes maximum combined federal and New York state tax rate of
43.90%. 4Assumes maximum combined federal, New York state, and New York
City tax rate of 46.27%. 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 accrued on the remarketed preferred shares, divided by the
number of outstanding common shares.
Market price is the current trading price of one common share of the
fund. Market prices are set by transactions between buyers and sellers
on the American 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
To the Trustees and Shareholders of
New York Investment Grade Municipal Trust
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned (except for bond ratings),
and the related statements of operations and of changes in net assets
and the financial highlights present fairly, in all material respects,
the financial position of New York Investment Grade Municipal Trust (the
"fund") at April 30, 1996, and the results of its operations, the
changes in its net assets, and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at April 30, 1996 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
June 11, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
April 30, 1996
Key to Abbreviations
AMBAC -- American Municipal Bond Assurance Corp.
FGIC -- Financial Guaranty Insurance Co.
FHA -- Federal Housing Authority
FSA -- Financial Security Assurance
G.O. Bonds -- General Obligation Bonds
IFB -- Inverse Floating Bonds
MBIA -- Municipal Bond Investor's Assurance Corp.
VRDN -- Variable Rate Demand Notes
Municipal Bonds and Notes (95.2%) *
PRINCIPAL AMOUNT RATING VALUE
<S> <C> <C> <C> <C>
New York (88.9%)
- -----------------------------------------------------------------------------------------------------
$945,000 Ithaca, Hsg. Corp. Mtge. Rev. Bonds (Eddygate
Park Apts. Project), 9s, 6/1/06 BBB $985,454
2,000,000 New York City G.O. IFB, AMBAC, 8.22s, 9/1/11 AAA 2,105,000
500,000 NY City Cultural Res. VRDN (American Museum
of Natural History), Ser. B, MBIA, 2.1s, 4/1/21 VMIG1 500,000
1,385,000 NY City G.O. Bonds, Ser. A, 8s, 8/15/19 BBB 1,616,988
100,000 NY City Hlth. & Hosp. Rev. IFB, AMBAC,
5.635s, 2/15/23 AAA 94,750
1,400,000 NY City, Indl. Dev. Agcy. Special Fac. Rev. Bonds
(American Airlines, Inc. Project), 8s, 7/1/20 BB 1,498,000
2,000,000 NY City, Muni. Wtr. Fin. Auth. Rev. Bonds,
Ser. A, 6s, 6/15/09 A 2,087,500
1,900,000 NY City, Muni. Wtr. Fin. Auth. VRDN, Ser. G,
FGIC, 0.95s, 6/15/24 VMIG1 1,900,000
1,500,000 NY St. Dorm. Auth. Rev. Bonds (City Univ.),
Ser. C, 8 1/8s, 7/1/08 BBB 1,636,875
1,300,000 NY State Dorm. Auth. IFB (Cornell U.), 10.597s,
7/1/30 (acquired 1/6/93, cost $1,533,675) ++ AA 1,527,500
1,800,000 NY State Dorm. Auth.Rev. Bonds
(State U. Edl. Facs.), Ser. A, 6 3/4s, 5/15/21 AAA 2,018,250
2,850,000 NY State Dorm. Auth.Rev. Bonds (Mt. Sinai
Medical School), Ser. A, MBIA, 5s, 7/1/21 AAA 2,536,500
1,000,000 NY State Energy Research & Dev. Auth. Poll.
Control Rev. Bonds
(Niagara Mohawk Pwr. Corp.), Ser. A, FGIC,
7.2s, 7/1/29 AAA 1,113,750
1,500,000 NY State Energy Research & Dev. Auth. Poll.
Control VRDN (NY State Elec. & Gas Co.),
Ser. C, 3.4s, 6/1/29 VMIG1 1,500,000
1,600,000 NY State Env. Fac. Corp. Poll. Control Rev. Bonds
(State Wtr. Revolving Fund),
Ser. A, 7 1/2s, 6/15/12 A 1,760,000
1,650,000 NY State Local Govt. Assistance Corp. Rev. Bonds,
Ser. C, 5s, 4/1/21 A 1,416,938
NY State Med. Care Fac. Fin. Agcy. Rev. Bonds
1,310,000 (Mental Hlth. Svcs. Fac.), Ser. D, 7.4s, 2/15/18 BBB 1,444,275
$1,800,000 (Hosp. & Nursing Home Insd. Mtge.),
Ser. C, 6.65s, 8/15/32 AA $1,851,750
1,800,000 NY State Med. Care Fac. Fin. Agcy. Rev. Bonds
(Hosp. & Nursing Home Insd. Mtge.),
Ser. D, FHA, 6.6s, 2/15/31 AAA 1,847,250
1,800,000 NY State Med. Care Fac. Fin. Agcy. Rev. Bonds
(Hosp. & Nursing Home Insd. Mtge.),
Ser. C, FHA, 6 3/8s, 8/15/29 AAA 1,818,000
1,800,000 NY State Mtge. Agcy. Rev. Bonds
(Homeownership Dev. Program),
Ser. BB-2, 7.95s, 10/1/15 Aa 1,867,500
2,075,000 NY State Urban Dev. Corp. Rev. Bonds
(State Fac.), 7 1/2s, 4/1/20 AAA 2,370,688
2,000,000 Onondaga Cnty., Indl. Dev. Agcy. Rev. Bonds
(Bristol-Meyers Squibb Co. Project),
5 3/4s, 3/1/24 AAA 1,990,000
1,500,000 Port Auth. NY & NJ Cons. Rev. Bonds,
Ser. 93, 6 1/8s, 6/1/94 AA 1,531,875
1,400,000 Port Auth. NY & NJ Cons. Rev. IFB, 9.383s,
8/1/26 (acquired 7/19/93, cost $1,687,700)++ AA 1,559,250
3,000,000 Triborough Brdg. & Tunl. Auth. General
Purpose Rev. Bonds, Ser. A, 5s, 1/1/24 Aa 2,598,750
-----------
43,176,843
Puerto Rico (6.3%)
- -----------------------------------------------------------------------------------------------------
1,500,000 Puerto Rico Elec. Pwr. Auth. Pwr. IFB, FSA,
8.348s, 7/1/23 AAA 1,511,250
1,365,000 Puerto Rico, Pub. Bldg. Auth. Gtd. Ed. & Hlth.
Fac. Rev. Bonds, Ser. L, 6 7/8s, 7/1/21 AAA 1,540,744
----------
3,051,994
- -----------------------------------------------------------------------------------------------------
Total Investments (cost $46,227,439)*** $46,228,837
- -----------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $48,582,669.
** The Moody's or Standard & Poor's rating are believed to be the most recent
ratings available at April 30, 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 rating, 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., 1996. Securities rated by Putnam are indicated by "/P" and are not publicly
rated. These ratings are not covered by the Report of Independent Accountants.
*** The aggregate identified cost for federal income tax purposes is $46,227,739,
resulting in gross unrealized appreciation and depreciation of $837,333 and $836,235,
respectively, or net unrealized appreciation of $1,098.
++ Restricted excluding 144A, as to public resale. The total market value of
the restricted securities held at April 30, 1996 was $3,086,750 or 6.4% of net assets.
The rates shown on IFBs which are securities paying variable interest rates
that vary inversely to changes in the market interest rates and VRDNs are the current
interest rates at April 30, 1996, which are subject to change based on the terms of
the security.
The Fund had the following industry group concentrations greater than 10% on
April 30, 1996 (as a percentage of net assets):
Utilities 20.30% Transportation 14.80%
Education 15.9 Healthcare 14.5
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
30-Apr-96
Assets
- -----------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (identified
cost $ 46,227,439) (Note 1) $46,228,837
- -----------------------------------------------------------------------------------
Cash 304,180
- -----------------------------------------------------------------------------------
Interest receivable 806,253
- -----------------------------------------------------------------------------------
Receivable for securities sold 1,616,394
- -----------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 3,644
- -----------------------------------------------------------------------------------
Total assets 48,959,308
Liabilities
- -----------------------------------------------------------------------------------
Distributions payable to shareholders 192,165
- -----------------------------------------------------------------------------------
Payable for compensation of Manager (Note 3) 80,979
- -----------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 3) 85
- -----------------------------------------------------------------------------------
Payable for administrative services (Note 3) 419
- -----------------------------------------------------------------------------------
Other accrued expenses 102,991
- -----------------------------------------------------------------------------------
Total liabilities 376,639
- -----------------------------------------------------------------------------------
Net assets $48,582,669
Represented by
- -----------------------------------------------------------------------------------
Remarketed preferred shares (200 shares issued and outstanding
at $50,000 per share liquidation preference) (Note 2) $10,000,000
- -----------------------------------------------------------------------------------
Paid in capital-common shares (Note 1) 39,508,828
- -----------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 43,655
- -----------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (971,212)
- -----------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,398
- -----------------------------------------------------------------------------------
Net assets $48,582,669
Net assets available to:
- -----------------------------------------------------------------------------------
Remarketed preferred shares at liquidation preference $10,000,000
- -----------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 19,521
- -----------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares $10,019,521
- -----------------------------------------------------------------------------------
Net assets available to common shares $38,563,148
- -----------------------------------------------------------------------------------
Net asset value per common share ($38,563,148 divided by 2,847,092) $13.54
- -----------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended April 30, 1996
Tax exempt interest income $3,279,153
- -----------------------------------------------------------------------------------
<S> <C>
Expenses:
- -----------------------------------------------------------------------------------
Compensation of Manager (Note 3) 346,077
- -----------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 3) 52,274
- -----------------------------------------------------------------------------------
Compensation of Trustees (Note 3) 7,537
- -----------------------------------------------------------------------------------
Reports to shareholders 22,387
- -----------------------------------------------------------------------------------
Auditing 46,112
- -----------------------------------------------------------------------------------
Legal 5,879
- -----------------------------------------------------------------------------------
Postage 9,751
- -----------------------------------------------------------------------------------
Exchange listing fees 2,090
- -----------------------------------------------------------------------------------
Preferred share remarketing agent fees 25,000
- -----------------------------------------------------------------------------------
Administrative services (Note 3) 4,270
- -----------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,292
- -----------------------------------------------------------------------------------
Other expenses 3,353
- -----------------------------------------------------------------------------------
Total expenses 527,022
- -----------------------------------------------------------------------------------
Expense reduction (Note 3) (57,437)
- -----------------------------------------------------------------------------------
Net expenses 469,585
- -----------------------------------------------------------------------------------
Net investment income 2,809,568
- -----------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 4) (670,420)
- -----------------------------------------------------------------------------------
Net unrealized appreciation on investments during the year 875,627
- -----------------------------------------------------------------------------------
Net gain on investments 205,207
- -----------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,014,775
- -----------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended April 30
-----------------------
1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- -------------------------------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------------------------------
Net investment income $2,809,568 $3,008,728
- -------------------------------------------------------------------------------------------------------
Net realized loss on investments (670,420) (300,792)
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment transactions 875,627 (455,878)
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,014,775 2,252,058
- -------------------------------------------------------------------------------------------------------
Distributions to remarketed preferred shareholders:
- -------------------------------------------------------------------------------------------------------
From net investment income (370,010) (354,950)
- -------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (31,431)
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations applicable
to common shareholders (excluding cumulative undeclared
dividends on remarketed preferred shares of $19,521 and
$20,465, respectively) 2,644,765 1,865,677
- -------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
- -------------------------------------------------------------------------------------------------------
From net investment income (2,505,203) (2,679,970)
- -------------------------------------------------------------------------------------------------------
From net realized gains -- (222,304)
- -------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 139,562 (1,036,597)
- -------------------------------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------------------
Beginning of year 48,443,107 49,479,704
- -------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income
of $43,655 and $109,410, respectively) $48,582,669 $48,443,107
- -------------------------------------------------------------------------------------------------------
Common shares outstanding at beginning and end of year 2,847,092 2,847,092
- -------------------------------------------------------------------------------------------------------
Remarketed preferred shares outstanding at beginning and
end of year 200 200
- -------------------------------------------------------------------------------------------------------
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
November 27, 1996
(commencement of
operations) to
Year ended April 30 April 30
- ---------------------------------------------------------------------------------------------------
1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period
(common shares) $13.50 $13.86 $14.57 $13.99*
- ---------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------
Net investment income .98 1.06 1.05 .40(a)
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .07 (.26) (.53) .64
- ---------------------------------------------------------------------------------------------------
Total from investment operations 1.05 .80 .52 1.04
- ---------------------------------------------------------------------------------------------------
Less distributions from:
- ---------------------------------------------------------------------------------------------------
Net investment income:
- ---------------------------------------------------------------------------------------------------
To preferred shareholders (.13) (.13) (.13) (.03)**
- ---------------------------------------------------------------------------------------------------
To common shareholders (.88) (.94) (.93) (.31)
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments:
- ---------------------------------------------------------------------------------------------------
To preferred shareholders -- (.01) (.02) --
- ---------------------------------------------------------------------------------------------------
To common shareholders -- (.08) (.15) --
- ---------------------------------------------------------------------------------------------------
Total distributions (1.01) (1.16) (1.23) (.34)
- ---------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- (.12)
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $13.54 $13.50 $13.86 $14.57
- ---------------------------------------------------------------------------------------------------
Market value, end of period
(common shares) $13.00 $13.63 $13.50 $15.00
- ---------------------------------------------------------------------------------------------------
Total investment return at market
value (common shares) (%) (c) 1.78 9.09 (3.25) 2.09(d)
- ---------------------------------------------------------------------------------------------------
Net assets, end of period
(total fund) (in thousands) $48,583 $48,443 $49,480 $51,491
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) (b)(e) 1.34 1.35 1.23 .35(a)(d)
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (b) 6.19 6.87 6.23 2.60(a)(d)
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 84.87 8.55 15.18 32.27(d)
- ---------------------------------------------------------------------------------------------------
* Represents initial net asset value of $14.10 less offering expenses of approximately $0.11.
** Preferred shares were issued on February 18, 1993.
(a) Reflects a waiver of the management fee for the period November 27, 1992 to February 19, 1993.
As a result of such waiver, expenses of the fund for the period ended April 30, 1993 reflect a
reduction of approximately $0.02 per share.
(b) Ratios reflect net assets available to common shares only; net investment income ratio also reflects
reduction for distributions to preferred shareholders.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(d) Not annualized.
(e) The ratio of expenses to average net assets for the period ended April 30, 1996 includes amounts paid
through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 3)
The accompanying notes are an integral part of these financial statements.
</TABLE>
Notes to financial statements
April 30, 1996
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, closed-end management investment company.
The fund's investment objective is to seek high current income exempt
from federal income tax and New York State and City personal income tax.
The fund intends to achieve its objective by investing in investment
grade municipal securities constituting a portfolio that Putnam
Investment Management, Inc., ("Putnam Management") the fund's Manager, a
wholly-owned subsidiary of Putnam Investments, Inc., believes to be
consistent with preservation of capital.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of the 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 Putnam Management
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) 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 and for excise tax on income and capital
gains.
At April 30, 1996, the fund had a capital loss carryover of
approximately $839,000 available to offset future net capital gain, if
any.
The amount of the carryover and expiration dates are:
Loss Carryover Expiration
- ------------------------------------
$ 21,000 April 30, 2003
818,000 April 30, 2004
D) 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, 1996 was 3.75%.
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 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, 1996, the fund reclassified
$110 to decrease undistributed net investment income and $146 to
increase paid-in-capital, with a increase to accumulated net realized
losses on investments of $36. The calculation of net investment income
per share in the financial highlights table excludes these adjustments.
E) 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), less all liabilities (including accrued
expenses and undeclared dividends on remarketed preferred shares) and
the liquidation value of any outstanding remarketed preferred shares, by
the total number of common shares outstanding.
F) 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 original issue bonds are accreted
according to the effective yield method.
G) 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 $11,494. These expenses are being amortized
on a straight-line basis over a five-year period.
Note 2
Remarketed preferred shares
The remarketed preferred shares are redeemable at the option of the fund
on any 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 April 30, 1996, no such
restrictions have been placed on the fund.
Note 3
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 of such average net asset value.
If dividends payable on remarketed preferred shares during any dividend
payment period plus any expenses attributable to remarketed preferred
shares for the 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 0.70% 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.
Trustees of the fund receive an annual Trustees fee of $510 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 the fund or in other Putnam funds until distribution
in accordance with the Plan.
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, 1996, fund expenses were reduced by $57,437
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.
Note 4
Purchase and sales of securities
During the year ended April 30, 1996, purchases and sales of investment
securities other than short-term investments aggregated $39,130,898 and
$42,134,190, 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.
<TABLE>
<CAPTION>
Selected quarterly data
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------
Net realized Net increase
Net and unrealized (decrease) in
Investment investment gain (loss) on net assets
income income* investments* from operations*
- ------------------------------------------------------------------------------------------------------------------
Per Per Per Per
Quarter Common Common Common Common
Ended Total Share Total Share Total Share Total Share
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7/31/94 $891,663 $.31 $662,851 $.23 $(44,806) $(.02) $618,045 $.21
10/31/94 $882,892 $.31 $638,855 $.23 $(1,859,549) $(.64) $(1,220,694) $(.41)
1/31/95 $876,850 $.31 $687,134 $.24 $445,389 $.16 $1,132,523 $.40
4/30/95 $874,620 $.31 $644,473 $.23 $702,296 $.23 $1,346,769 $.46
7/31/95 $844,956 $.30 $634,552 $.22 $396,964 $.14 $1,031,516 $.36
10/31/95 $815,354 $.28 $600,033 $.21 $913,832 $.32 $1,513,865 $.53
1/31/96 $828,745 $.29 $613,742 $.22 $800,609 $.28 $1,414,351 $.50
4/30/96 $790,098 $.20 $592,175 $.20 $(1,906,198) $(.67) $(1,314,023) $(.47)
- ------------------------------------------------------------------------------------------------------------------
* Available to common shareholders
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Federal tax information
The fund has designated 100% 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 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
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
James E. Erickson
Vice President
Blake E. Anderson
Vice President
David J. Eurkus
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
- ----------------
25127-185 6/96
