Putnam
New York
Investment Grade
Municipal Trust
SEMIANNUAL REPORT
October 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
(copyright) Karsh, Ottawa
Fund highlights
* "We believe the credit situation in New York is brightening. Higher-
than-expected tax revenues, largely the result of a booming year on Wall
Street, and recent affirmation of New York City's investment-grade
credit rating by the major rating agencies are fostering greater
confidence in this municipal bond market."
-- Howard Manning, Manager,
Putnam New York Investment Grade Municipal Trust
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
13 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
The first half of Putnam New York Investment Grade Municipal Trust'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 to the 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 began to show 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 Howard Manning has assumed management of
your fund. Howard has 14 years of investment experience and has been a
member of Putnam's municipal bond group since 1986. 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
Howard K. Manning
Putnam New York Investment Grade Municipal Trust continues to add to its
record of performance gains despite a period of investor anxiety. For
the six months ended October 31, 1996, the fund's common shares provided
a total return of 4.16% at net asset value and 6.07% at market price.
Your fund achieved its primary objective of providing a high level of
tax-free income. An investment taxed at the maximum 46.27% federal,
state, and city rate would have to provide a current yield of 11.02% to
equal the fund's 5.92% current dividend rate at net asset value on
October 31, 1996.
* PROSPECT OF HIGHER INTEREST RATES UNNERVES MARKET
Fixed income markets began calendar 1996 on firm ground, but investor
enthusiasm for bonds abruptly changed to apprehension as evidence of
brisk economic activity late in the first quarter rekindled fears of
inflation. By mid-May, bond prices had recovered somewhat as futher
economic news indicated a more moderate growth pace. The rally proved
short-lived, however; comments from several Federal Reserve officials
hinting at the prospect of higher short-term interest rates over the
next few months unnerved the market shortly after Memorial Day.
For the balance of the period, each Fed meeting was preceded by waves of
speculation about the possibility of a short-term rate increase. While
the Fed, to the surprise of many, held short-term interest rates steady,
prices of fixed-income investments seesawed as the markets tried to
anticipate the future course of rates.
* NEW YORK CREDIT ENVIRONMENT REMAINS STRESSED
Credit issues continue to be a concern at the state and local level. New
York City and Albany are feeling the pinch as fewer dollars flow from
Washington. With more budget tightening in the cards, state-appropriated
issues and New York City government obligations may undergo further
pricing pressure. With little expectation for improvement, we
significantly reduced holdings in state-appropriated bonds, which are
used to finance public programs, in favor of essential-service issues.
Essential-service bonds are attractive because they are self-funding,
that is, user fees paid for the services become the source of the bonds'
payment to investors. Since the issuers have the ability to set user
fees, income from these bonds is relatively stable and carries a lower
risk of default than income from other types of municipal bonds. These
essential-service bonds have another important advantage: they don't
rely on New York budgetary processes for their long-term survival. New
York State Local Government Assistance Corp. and Port Authority of New
York are examples of essential-service bonds in your fund's portfolio at
the end of the period.
One positive factor in New York's credit picture has been the stellar
year on Wall Street -- a period in which the U.S. stock market surged to
record highs, including the milestone 6000 mark for the Dow Jones
Industrial Average just prior to the close of the semiannual period.
This market environment proved especially beneficial for New York City.
As tax-paying investors earned more money, it boosted both city and
state tax revenues. This boost, in turn, helped ease chronic budget
deficit problems and improved perceptions of New York's
creditworthiness. In fact, New York City was in healthier financial
shape this fall than we had anticipated. All three major rating agencies
have acknowledged the city's healthier prospects.
[GRAPHIC BAR CHART OMITTED: TOP INDUSTRY SECTORS*]
TOP INDUSTRY SECTORS*
Health care 25.1%
Housing 15.2%
Education 15.1%
Transportation 14.5%
Utilities 12.0%
Footnote reads:
*Based on net assets as of 10/31/96. Holdings will vary over time.
* BOND STRUCTURE A KEY FACTOR IN PERFORMANCE
The call structure of bonds has taken on increasing importance in recent
months. This is largely the result of the fact that, in 1993, the
municipal bond market witnessed the largest issuance of tax-free bonds
ever. With such a large portion of the municipal marketplace callable in
2003 -- just seven years away -- many investors are now selling these
bonds in favor of more recent issues.
To minimize your fund's exposure to call risk and to protect the higher-
coupon bonds in the portfolio, we extended call protection by swapping
out of bonds approaching their call dates and purchasing bonds with a
minimum of 10 years or more before their call dates. In the later months
of the period, we also targeted premium bonds, which sell at prices
above par value. Premium bonds are important for the level of income
they provide and because they generally experience less price volatility
in response to interest-rate changes than do discount bonds.
* MAXIMIZING NEAR-TERM OPPORTUNITIES
The fund maintained its high-quality focus, with nearly three quarters
of its assets invested in bonds rated AAA or AA. The emphasis on
essential-service bonds and a shift away from several lower-quality
holdings are improving the fund's overall credit quality. During the
period, we eliminated the fund's position in BB-rated bonds (3.2% of net
assets at midyear). We also shifted assets from the far end of the yield
curve (25- to 30-year bonds) into the 10- to 25-year sector of the
curve. We began this process in anticipation of a steepening in the
municipal bond yield curve. A steep yield curve reflects market
expectations that rates will fall and bond prices will rise -- a
scenario that, in fact, did occur in the later months of the period.
[GRAPHIC WORM CHART OMITTED: CREDIT QUALITY OVERVIEW*]
A - 9.6%
Aa - 25.8%
Aaa - 45.0%
Baa - 18.2%
VMIG1 - 1.4%
Footnote reads:
*As a percentage of market value as of 10/31/96. A bond rated Baa or
higher is considered investment grade. All ratings reflect Moody's
descriptions unless noted otherwise; percentages may include unrated
bonds considered by Putnam Management to be of comparable quality.
Ratings will vary over time.
* OUTLOOK: SIGNS OF ECONOMIC SLOWDOWN
In the months ahead, we will focus on identifying investments that
should perform favorably in a stable or declining interest-rate
environment. With inflation likely to remain well behaved at 3% to 3.5%,
we believe the Fed is unlikely to raise interest rates any time soon. Of
course, careful attention to bond structure and credit analysis will
continue to form a major component of our strategy. With no real
inflationary pressure on the horizon, we remain optimistic about the
prospects for your fund and the municipal bond market as a whole.
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 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 10/31/96
Lehman Bros.
Market Municipal Consumer
NAV price Bond Index Price Index
- ------------------------------------------------------------------------
6 months 4.16% 6.07% 4.54% 1.28%
- ------------------------------------------------------------------------
1 year 4.49 4.37 5.71 2.99
- ------------------------------------------------------------------------
Life (11/27/92) 27.56 16.31 30.16 11.48
Annual average 6.39 3.92 6.96 2.80
- ------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most recent calendar quarter)
Market
NAV price
- ------------------------------------------------------------------------
6 months 2.43% 2.14%
- ------------------------------------------------------------------------
1 year 4.69 0.64
- ------------------------------------------------------------------------
Life (11/27/92) 25.90 13.57
Annual average 6.18 3.37
- -----------------------------------------------------------------------
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 (number) 6
- ------------------------------------------------------------------------
Income $0.405
- ------------------------------------------------------------------------
Total $0.405
- ------------------------------------------------------------------------
Preferred shares (200 shares) $923.24
- ------------------------------------------------------------------------
Share value (common shares) NAV Market price
- ------------------------------------------------------------------------
4/30/96 $13.54 $13.000
- ------------------------------------------------------------------------
10/31/96 13.68 13.375
- ------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------
Current dividend rate1 5.92% 6.06%
- ------------------------------------------------------------------------
Taxable equivalent2 10.55 10.80
- ------------------------------------------------------------------------
Taxable equivalent3 11.02 11.28
- ------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by
NAV or market price at end of period.
2Assumes maximum combined federal and New York state tax rate of 43.90%.
3Assumes 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 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
FHA Insd. --Federal Housing Administration Insured
FSA --Financial Security Assurance
G.O. Bonds --General Obligation Bonds
IFB --Inverse Floating Rate Bonds
VRDN --Variable Rate Demand Notes
<S> <C> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (98.7%) *
PRINCIPAL AMOUNT RATINGS ** VALUE
New York (86.8%)
- --------------------------------------------------------------------------------------------------------------------------
$925,000 Ithaca, Hsg. Corp. Mtge. Rev. Bonds (Eddygate Park Apts.), 9s, 6/1/06 BBB/P 964,544
1,000,000 Metro. Trans. Auth. Svcs. Contract Fac. Rev. Bonds (Trans. Fac.), Ser. O,
5 3/4s, 7/1/13 Baa 995,000
1,385,000 NY City, G.O. Bonds, Ser. A, 8s, 8/15/19 AAA/P 1,604,869
2,000,000 NY City, G.O. IFB, AMBAC, 8.32s, 9/1/11 Aaa 2,137,500
100,000 NY City Hlth. & Hosp. Corp. Rev. Bonds, IFB, AMBAC, 5.635s, 2/15/23 Aaa 98,000
1,400,000 NY City, Indl. Dev. Agcy. Special Fac. Rev. Bonds (American Airlines, Inc.),
8s, 7/1/20 Baa 1,496,250
1,300,000 NY State Dorm Auth. IFB (Cornell U.), 10.898s, 7/1/30 (aquired 1/6/93 cost
$1,533,675) (double dagger) Aa 1,556,750
NY State Dorm. Auth. Rev. Bonds
1,500,000 (City U.), Ser. C, 8 1/8s, 7/1/08 Baa 1,612,500
2,000,000 (Cornell U.), Ser. A, 7 3/8s, 7/1/20 Aa 2,210,000
1,800,000 (State U. Edl. Fac.), Ser. A, 6 3/4s, 5/15/21 Aaa 2,016,000
2,970,000 NY State Energy Research & Dev. Auth Rev. Bonds (Cons. Edison Co.), Ser. A,
7 1/2s, 1/1/26 A 3,203,888
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 1,133,750
1,600,000 NY State Env. Fac. Corp. Poll. Control Rev. Bonds (State Wtr. Revolving Fund),
Ser. A, 7 1/2s, 6/15/12 Aa 1,770,000
700,000 NY State Local Govt. Assistance Corp. VRDN, Ser. B, 3.4s, 4/1/23 VMIGI 700,000
NY State Med. Care Fac. Fin. Agcy. Rev. Bonds
1,730,000 (Hosp. & Nursing Home), Ser. B, FHA, 8s, 2/15/28 AAA 1,864,075
1,600,000 (Hosp. & Nursing Home Insd. Mtge.), Ser. A, FHA, 8s, 2/15/27 AAA/P 1,684,496
1,310,000 (Mental Hlth. Svcs. Fac.), Ser. D, 7.4s, 2/15/18 Baa 1,454,100
NY State Med. Care Fac. Fin. Agcy. Rev. Bonds
1,800,000 (Hosp. & Nursing Home Insd. Mtge.), Ser. C, 6.65s, 8/15/32 Aa 1,883,250
1,800,000 (Hosp. & Nursing Home Insd. Mtge.), Ser. D, FHA, 6.6s, 2/15/31 AAA 1,883,250
1,800,000 (Hosp. & Nursing Home Insd. Mtge.), Ser. C, FHA, 6 3/8s, 8/15/29 AAA 1,863,000
1,800,000 NY State Mtge. Agcy. Rev. Bonds (Homeownership Dev. Program), Ser. BB-2,
7.95s, 10/1/15 Aa 1,859,290
NY State Urban Dev. Corp. Rev. Bonds
2,075,000 (Correctional Fac.), 7 1/2s, 4/1/20 Aaa 2,355,125
1,000,000 (Correctional Fac.), Ser. A, 5 1/2s, 1/1/14 Baa 962,500
2,000,000 Onondaga Cnty., Indl. Dev. Agcy. Rev. Bonds (Bristol-Meyers Squibb Co.),
5 3/4s, 3/1/24 Aaa 2,022,500
1,500,000 Port Auth. NY & NJ Cons. Rev. Bonds, Ser. 93rd, 6 1/8s, 6/1/94 AA 1,569,375
1,400,000 Port Auth. NY & NJ Cons. Rev. IFB, 9.278s, 8/1/26 (acquired 7/19/93 cost
$1,687,700) (double dagger) AA 1,583,750
------------
42,483,762
Puerto Rico (11.9%)
- --------------------------------------------------------------------------------------------------------------------------
1,500,000 Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds, Ser. Y, 5 1/2s, 7/1/36 A 1,434,375
1,500,000 PR Elec. Pwr. Auth. IFB, FSA, 8.338s, 7/1/23 Aaa 1,539,375
1,166,774 PR Hsg. Fin. Corp. Rev. Bonds (Bayamon Hsg. Dev.), FHA, 7 1/2s, 7/1/21 BBB/P 1,292,203
1,365,000 PR Pub. Bldgs. Auth. Gtd. Ed. & Hlth. Fac. Rev. Bonds, Ser. L, 6 7/8s, 7/1/21 Aaa 1,540,744
------------
5,806,697
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $47,375,262) *** $ 48,290,459
- --------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $48,940,787.
Net assets available to common shareholders are $38,934,650.
** 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
$47,375,562, resulting in gross unrealized appreciation and
depreciation of $1,205,503 and $290,606, respectively,
or net unrealized ap(de)preciation of $914,897.
(double dagger) Restricted as to public resale. The total market value of restricted
securities held at October 31, 1996 was $3,140,500 or 6.4% of net assets.
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):
Health Care 25.1%
Housing 15.2
Education 15.1
Transportation 14.5
Utilities 12.0
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liablilities
October 31, 1996
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $47,375,262) (Note 1) $48,290,459
- ---------------------------------------------------------------------------------------------------
Cash 224,202
- ---------------------------------------------------------------------------------------------------
Interest receivable 810,294
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 2,489
- ---------------------------------------------------------------------------------------------------
Total assets 49,327,444
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 192,163
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 87,041
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,627
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 105,826
- ---------------------------------------------------------------------------------------------------
Total liabilities 386,657
- ---------------------------------------------------------------------------------------------------
Net assets $48,940,787
Represented by
- ---------------------------------------------------------------------------------------------------
Remarketed preferred shares (200 shares issued and outstanding at
$50,000 per share) (Note 4) $10,000,000
- ---------------------------------------------------------------------------------------------------
Paid-in capital -- common shares (Note 1) 39,508,828
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 35,641
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (1,518,879)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 915,197
- ---------------------------------------------------------------------------------------------------
Total - Representing net assets applicable to capital shares outstanding $48,940,787
- ---------------------------------------------------------------------------------------------------
Computation of net asset value:
Remarketed preferred shares $10,000,000
- ---------------------------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 6,137
- ---------------------------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares -- liquidation preference $10,006,137
- ---------------------------------------------------------------------------------------------------
Net assets available to common shares $38,934,650
- ---------------------------------------------------------------------------------------------------
Net asset value per common share ($38,934,650 divided by 2,847,092 shares) $13.68
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statment of operations
Six months ended October 31, 1996 (Unaudited)
<S> <C>
Tax exempt interest income: $1,555,768
- ---------------------------------------------------------------------------------
Expenses:
- ---------------------------------------------------------------------------------
Compensation of Manager (Note 2) 172,752
- ---------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 21,003
- ---------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 3,932
- ---------------------------------------------------------------------------------
Administrative services (Note 2) 2,429
- ---------------------------------------------------------------------------------
Reports to shareholders 23,041
- ---------------------------------------------------------------------------------
Auditing 12,026
- ---------------------------------------------------------------------------------
Legal 4,153
- ---------------------------------------------------------------------------------
Postage 19,708
- ---------------------------------------------------------------------------------
Exchange listing fees 2,000
- ---------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,155
- ---------------------------------------------------------------------------------
Other 1,774
- ---------------------------------------------------------------------------------
Total expenses 263,973
- ---------------------------------------------------------------------------------
Expense reduction (Note 2) (37,801)
- ---------------------------------------------------------------------------------
Net expenses 226,172
- ---------------------------------------------------------------------------------
Net investment income 1,329,596
- ---------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (594,041)
- ---------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 46,374
- ---------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 913,799
- ---------------------------------------------------------------------------------
Net gain on investments 366,132
- ---------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,695,728
- ---------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statment of changes in net assets
Six months ended Year ended
October 31 April 30
1996* 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $1,329,596 $2,809,568
- ------------------------------------------------------------------------------------------------------------------------------
Net realized loss on investments (547,667) (670,420)
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 913,799 875,627
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,695,728 3,014,775
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to remarketed preferred shareholders from net investment income (184,648) (370,010)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations applicable to common shareholders
(excluding cumulative undeclared dividends on remarketed preferred shares of
$6,137 and $19,521, respectively) 1,511,080 2,644,765
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to common shareholders from net investment income (1,152,962) (2,505,203)
- ------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 358,118 139,562
- ------------------------------------------------------------------------------------------------------------------------------
Net assets
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of period 48,582,669 48,443,107
- ------------------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income
of $35,641 and $43,655, respectively) $48,940,787 $48,582,669
- ------------------------------------------------------------------------------------------------------------------------------
Number of fund shares
- ------------------------------------------------------------------------------------------------------------------------------
Common shares outstanding at beginning and end of period 2,847,092 2,847,092
- ------------------------------------------------------------------------------------------------------------------------------
Remarketed preferred shares outstanding at beginning and end of period 200 200
- ------------------------------------------------------------------------------------------------------------------------------
* 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 (common shares) $13.54 $13.50 $13.86
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income .47 .98 1.06
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .14 .07 (.26)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .61 1.05 .80
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income:
- ---------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.06) (.13) (.13)
- ---------------------------------------------------------------------------------------------------------------------------
To common shareholders (.41) (.88) (.94)
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments:
- ---------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- (.08)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.47) (1.01) (1.16)
- ---------------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period (common shares) $13.68 $13.54 $13.50
- ---------------------------------------------------------------------------------------------------------------------------
Market value, end of period (common shares) $13.375 $13.000 $13.625
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at market value (common shares) (%)(a) 6.07* 1.78 9.09
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (total fund) (in thousands) $48,941 $48,583 $48,443
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b)(c) .69* 1.34 1.35
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(b) 3.01* 6.19 6.87
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 31.07* 84.87 8.55
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the period
November 27, 1992
(commencement of
operations) to
April 30
--------------------------------
1994 1993
--------------------------------
<S> <C> <C>
Net asset value, beginning of period (common shares) $14.57 $13.99(d)
- ------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------
Net investment income 1.05 .40(e)
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.53) .64
- ------------------------------------------------------------------------------------------------------
Total from investment operations .52 1.04
- ------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------
From net investment income:
- ------------------------------------------------------------------------------------------------------
To preferred shareholders (.13) (.03)(f)
- ------------------------------------------------------------------------------------------------------
To common shareholders (.93) (.31)
- ------------------------------------------------------------------------------------------------------
From net realized gain on investments:
- ------------------------------------------------------------------------------------------------------
To preferred shareholders (.02) --
- ------------------------------------------------------------------------------------------------------
To common shareholders (.15) --
- ------------------------------------------------------------------------------------------------------
Total distributions (1.23) (.34)
- ------------------------------------------------------------------------------------------------------
Preferred share offering costs -- (.12)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period (common shares) $13.86 $14.57
- ------------------------------------------------------------------------------------------------------
Market value, end of period (common shares) $13.500 $15.000
- ------------------------------------------------------------------------------------------------------
Total investment return at market value (common shares) (%)(a) (3.25) 2.09*
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (total fund) (in thousands) $49,480 $51,491
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b)(c) 1.23 .35*(e)
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(b) 6.23 2.60*(e)
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 15.18 32.27*
- ------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Ratios reflect net assets available to common shares only; net investment
income ratio also reflects reduction for distributions to preferred
shareholders.
(c) The ratio of expenses to average net assets for the year ended April 30, 1996
and thereafter, includes amounts paid through expense offset arrangements.
Prior period ratios exclude these amounts. (Note 2)
(d) Represents initial net asset value of $14.10 less offering expenses of
approximately $0.11.
(e) 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.
(f) Preferred shares were issued on February 18, 1993.
</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 non-diversified, closed-end management investment company.
The fund's investment objective is to seek as high a 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 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) 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
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
At April 30, 1996, the fund had a capital loss carryover of
approximately $839,000 available to offset future capital gains, if any.
The amount of the carryover and the expiration dates are:
Loss Carryover Expiration
---------------- ------------------
$21,000 April 30, 2003
818,000 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 rate for
the remarketed preferred shares on October 31, 1996 was 3.20%. 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 accretion of bond discount Any
premium resulting from the purchase of securities in excess of maturity
value is amortized on a yield-to-maturity basis. Discounts on original
issue bonds are accreted according to the effective yield method.
H) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities
and Exchange Commission and with various states and the initial public
offering of its shares were $11,494. These expenses are being amortized
on straight-line basis over a five-year period.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.70% of the
first $500 million of the average net asset value of the fund, 0.60% of
the next $500 million, 0.55% of the next $500 million, and 0.50% of any
excess over $1.5 billion 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 outstanding during the period).
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the six months ended October 31, 1996, fund expenses were reduced by
$37,801 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 $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 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
$24,697,503 and $22,947,378, 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 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 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 Votes
for withheld for withheld
Jameson Adkins Baxter 1,493,552 16,653 90 33
Hans H. Estin 1,493,552 16,653 90 33
R.J. Jackson 1,493,552 16,653 90 33
Elizabeth T. Kennan 1,493,552 16,653 90 33
Lawrence J. Lasser 1,493,552 16,653 90 33
Donald S. Perkins 1,493,552 16,653 90 33
William F. Pounds 1,493,552 16,653 90 33
George Putnam 1,493,552 16,653 90 33
George Putnam, III 1,493,552 16,653 90 33
Eli Shapiro 1,493,552 16,653 90 33
A.J.C. Smith 1,493,552 16,653 90 33
W. Nicholas Thorndike 1,493,552 16,653 90 33
<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
Price Waterhouse LLP as auditors for
the fund was approved as follows 1,448,103 12,175 49,927 90 18 15
- ---------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction
with respect to diversification of
investments was approved as follows 1,223,218 58,612 228,375 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
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 1,200,510 70,944 238,751 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
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 1,169,315 112,608 228,282 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction
with respect to concentration of its
assets was approved as follows 1,192,858 87,727 229,620 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction
with respect to investments in
commodities or commodity contracts
was approved as follows 1,159,147 115,870 235,188 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
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 1,173,575 112,192 224,448 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
with respect to margin transactions
was approved as follows 1,157,869 134,911 217,435 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
with respect to short sales was
approved as follows 1,162,416 130,441 217,358 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
which limits the fund's ability to
pledge assets was approved as follows 1,154,617 131,144 224,454 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
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 1,185,619 108,967 215,629 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
with respect to invest to gain control
of a company's management was
approved as follows 1,177,943 109,555 222,717 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction
with respect to investments in other
investment companies was approved
as follows 1,189,392 107,126 213,687 89 19 15
- ---------------------------------------------------------------------------------------------------------------------
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
Howard K. Manning
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
- ---------------------
29209-185 12/96
