(logo)
Putnam
Municipal
Opportunities
Trust
Annual Report
April 30, 1994
(artwork)
For investors seeking a high level of current income exempt from
federal income tax as Putnam Investment Management believes is
consistent with preservation of capital
Contents
2 How your fund performed
3 From the Chairman
4 Report from Putnam Management
Annual Report
7 Report of Independent Accountants
8 Portfolio of investments owned
12 Financial statements
21 Selected Quarterly Data
22 Fund performance supplement
22 Federal tax information
23 Your Trustees
A
member
of the Putnam
Family of Funds
<PAGE>
How your
fund performed
For periods ended April 30, 1994
Total return* Lehman
Fund Brothers
Market Municipal
(common shares) NAV price Bond Index
LIfe-of-fund
(since 5/28/93) 1.73% 11.22% 1.59%
Share data (common shares) NAV Market price
May 28, 1993 $14.07 $15.000
April 30, 1994 $13.57 $12.625
Distributions
(common shares) Short-term
period ended Investment capital
April 30, 1994 Number income gains(a) Total
9 $0.6975 $0.048 $0.7455
(preferred shares)
period ended Total
April 30, 1994
800 shares -- Series A $958.39 $60.00 $1,018.39
Taxable equivalents+
Current returns Market Market
at the end of the period NAV price NAV price
Current dividend rate 6.85% 7.37% 11.34% 12.20%
* Performance data represent past results. Investment return and
principal value will fluctuate so that an investor's shares, when
sold, may be worth more or less than their original cost.
(a) Capital gains, if any, are taxable for federal and, in most
cases, state purposes. For some investors, investment income may
also be subject to the alternative minimum tax and to state and
local income taxes.
+ Assumes the maximum federal tax rate of 39.6%. Results for
investors subject to lower tax rates would not be as
advantageous, although many such investors would have the
opportunity to receive attractive tax benefits from a fund
investment. Consult your tax advisor for more guidance.
<PAGE>
Terms you need to know
Total return is the change in value of an investment from the
beginning to the end of a period, assuming the reinvestment of
all distributions. It may be shown at net asset value or at
market price.
Net asset value (NAV) is the value of all your fund's assets,
minus any liabilities, the liquidation preference and cumulative
undeclared dividends on the remarketed preferred shares, divided
by the number of outstanding common shares. (See Note 1C in
Notes to financial statements.)
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.
Current dividend rate is calculated by annualizing the income
portion of the fund's most recent distribution and dividing by
the NAV or market price on the last day of the period.
Taxable equivalent return is the return that a taxable investment
would have to produce to equal the fund's current return.
Please see the fund performance supplement on page 22 for
additional information about performance comparisons.
<PAGE>
From the Chairman
(photograph of George Putnam)
(c) Karsh, Ottawa
George Putnam
Chairman
of the Trustees
Dear Shareholder:
Putnam Municipal Opportunities Trust is beginning its second year
of operation on a high note. Shortly after the close of the
fiscal year on April 30, 1994, the fund announced a dividend
increase of $0.005 per share. This dividend increase reflects the
success of Fund Manager Triet Nguyen's asset allocation strategy,
which has provided a stable income stream since the fund's
introduction in May 1993.
While the fund enjoyed a highly favorable investment climate for
three quarters of the fiscal year, increases in interest rates
beginning in February 1994 prompted a market correction. Your
fund weathered the correction better than many fixed-income
portfolios. Higher-yielding, cyclical holdings benefited from the
economy's strong growth, while Triet's hedging strategy provided
a measure of interest-rate protection.
Despite the recent volatility, Triet and his team believe the
municipal bond market remains fundamentally sound. As they
explain in the following Report from Putnam Management, inflation
remains low and, going forward, the market's supply/demand
dynamics are viewed as relatively favorable. Your fund's ongoing
focus on what Putnam Management believes are the most promising
sectors of the municipal bond market should continue to reward
investors in fiscal 1995.
Respectfully yours,
(signature of George Putnam)
George Putnam
June 15, 1994
<PAGE>
Report from
Putnam Management
From its inception on May 28, 1993 through April 30, 1994, Putnam
Municipal Opportunities Trust has provided shareholders with a
steady stream of tax-free income. Fortunately, the fund's higher-
yielding bonds were less affected than most other fixed-income
securities by the sharp decline in the bond market in the closing
months of the fund's initial fiscal year. These holdings continue
to provide attractive levels of income. With a relatively stable
income stream firmly in place, we recommended to the fund's
Trustees that the monthly dividend be raised by $0.005 per share.
Our proposal was approved at the beginning of April, and the new
dividend level made effective with the June 1, 1994 dividend.
Shareholders can also take heart in the tax-free nature of their
dividends: for investors in the maximum federal income tax bracket
of 39.6%, an equivalent taxable investment would have had to
provide a dividend rate of 11.34% to equal the fund's current
dividend rate at net asset value. Investors in lower brackets would
also have had the opportunity for substantial tax benefits.
Market dynamics During much of 1993, the municipal bond market
performed quite well, benefiting from superior market conditions.
The U.S. economy continued to grow steadily, while interest rates
and inflation remained low. Within this environment, the municipal
bond market rallied and credit quality improved, particularly
among higher-yielding, lower-quality issues. In fact, these
holdings contributed strongly to fund performance throughout the
period.
As 1994 began, however, the government released data indicating
stronger-than- anticipated economic growth. In response, the
Federal Reserve Board moved to preempt inflation by raising short-
term rates several times. Unfortunately, many municipal bond
investors viewed these moves as too tentative. Although actual
inflation remained quite low, investors began selling their
municipal securities and demand for these securities dropped off.
Nevertheless, your fund's holdings continued to provide steady tax-
free income and their prices, supported by improving credit
quality, declined to a lesser degree than many other market
sectors.
Strong fundamentals Municipal bonds turned in a positive
performance in the early two-thirds of the fiscal year, and despite
the major market correction in the last three months, we continue
to believe in the underlying strength of this market. For almost
two years, the bond supply has surged to record levels as
municipalities capitalized on low interest rates to refinance
outstanding higher-coupon bonds at new, lower rates. Municipalities
continued refinancing to some degree through January 1994; however,
refinancing became less attractive as interest rates began to creep
back up.
In July, we also expect that supply will be reduced even further as
many older bonds mature or reach their call dates. Investors will
be looking for places to reinvest, which we believe will push up
demand.
While the municipal bond market did not escape the swings that
characterized the first months of the new year, we took full
advantage of the resulting buying opportunities to purchase bonds
at discounted prices.
Strength in sectors Throughout the fiscal year we have focused on
utilities, transportation issues, housing, and to a lesser degree,
health care as the sectors of the municipal bond market we believe
hold the most potential for your fund's performance.
Although we believe carefully selected securities in these sectors
offer attractive yields in relation to Treasury securities, we will
also continue to monitor the individual sectors for changes that
could affect the fund's holdings. In the health care sector, for
example, we are watching the political landscape carefully to gauge
the effect of any developments in the national debate on reform.
Should the market react negatively at any point, we are prepared to
take advantage of many additional buying opportunities that occur.
The country's growing interest in the environment and so-called
"green" companies is providing us with a whole new investment
sector. In fact, we plan to take some profits in the transportation
sector and reinvest in environmentally oriented issues. Recently,
we obtained some attractive values on bonds in the paper recycling
and cogeneration industries. Cogeneration involves the production
of electric power through recycling of waste and other materials.
These holdings have already generated solid income for the fund,
with strong potential for the future.
In an attempt to provide higher income to common shareholders and
as a measure of defense against rising interest rates, we have
extended the dividend period on the fund's preferred shares to May
1995. We believe this strategy will allow holders of the fund's
common shares to benefit from the additional income provided by
leverage, while protecting the level of income from any increase in
short-term rates.
Positive outlook We continue to believe inflation will remain low,
and continue to watch the Fed carefully for any interest rate
changes that could affect municipal bond values. Looking further
ahead, we believe the economy's slow but steady growth will
contribute to strong performance for many of the fund's holdings
toward the end of the year.
In addition, while there are no guarantees, we believe the
municipal bond market remains fundamentally sound. We believe that
the supply of bonds is likely to decline, while demand will remain
strong and municipal bonds will provide attractive yields relative
to Treasuries and taxable securities.
Like most fixed-income investments, your fund has had to adjust to
significant changes in the market. Because of our belief in the
inherent strength of the municipal bond market, a sound asset
allocation strategy, and timely hedging techniques, we see the fund
as well positioned to enter a new fiscal year.
(bar chart)
Top industry sectors (based on percentage of net assets as of
4/30/94)
Utilities, Water & Sewer ................................27.6%
Transportation ...........................26.4%
Hospitals/Health Care .....................19.5%
Housing ..............13.3%<PAGE>
Putnam
Municipal
Opportunities
Trust
Annual
Report
For the period ended
April 30, 1994
Report of Independent Accountants
To the Trustees and Shareholders of Putnam Municipal
Opportunities Trust
We have audited the accompanying statement of assets and
liabilities of Putnam Municipal Opportunities Trust, including
the portfolio of investments owned, as of April 30, 1994 the
related statement of operations, the statement of changes in net
assets and the "Financial Highlights" for the period May 28, 1993
(commencement of operations) to April 30, 1994. These financial
statements and "Financial Highlights" are the responsibility of
the Trust's management. Our responsibility is to express an
opinion on these financial statements and "Financial Highlights"
based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and "Financial Highlights" are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of April 30, 1994 by correspondence with the
custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and "Financial
Highlights" referred to above present fairly, in all material
respects, the financial position of Putnam Municipal
Opportunities Trust as of April 30, 1994, the results of its
operations, the changes in its net assets and the "Financial
Highlights" for the period May 28, 1993 (commencement of
operations) to April 30, 1994, in conformity with generally
accepted accounting principles.
Coopers & Lybrand
Boston, Massachusetts
June 20, 1994
<PAGE>
<TABLE>
<CAPTION>
Portfolio of
investments owned
April 30, 1994
Municipal Bonds and Notes (98.1%)(a)
Principal Amount Ratings(b) Value
<S> <C> <C> <C>
Arizona (2.0%)
$3,000,000 AZ State Hlth. Fac. Auth. Hosp. Syst. Rev.
Bonds (St. Luke's Hlth. Syst.),
7 1/4s, 11/1/14 Ba 2,917,500
2,000,000 Gila Cnty., Indl. Dev. Auth. Poll. Control
Rev. Bonds, Ser. 85, 8.9s, 7/1/06 Baa 2,237,500
5,155,000
California (10.0%)
1,000,000 Irvine Ranch, Wtr. Dist. Variable Rate Demand
Notes (VRDN), Ser. B, 2.95s, 10/1/05 A 1,000,000
3,000,000 Metro. Wtr. Dist. RIBS (Southern CA Project),
8.395s, 8/14/18 AA 2,617,500
2,000,000 Orange Cnty., Variable Certif. of Participation
(Sanitation Dist.), 3.05s, 8/1/15 A 2,000,000
1,500,000 Sacramento Muni. Util. Dist. Elec. Inv. Rate
Floaters, 7.62s, 11/15/06 AAA 1,400,625
3,000,000 San Bernadino Cnty., Certif. of Participation,
5s, 8/1/26 A 2,310,000
San Diego Certif. of Participation, AMBAC
3,000,000 7.72s, 9/1/12 AAA 2,647,500
3,000,000 7.72s, 9/1/07 AAA 2,835,000
12,000,000 San Joaquin Hills, Trans. Corridor Agcy. Toll Rd.
Rev. Bonds (Senior Lien), 5s, 1/1/33 BBB 8,865,000
<PAGE>
3,000,000 So.Ca Public Pwr Auth. I
7.67s, 7/1/17 AAA 2,475,000
26,150,625
Colorado (4.5%)
Denver City & Cnty. Arpt. Rev. Bonds, Ser. A
$ 6,440,000 8 3/4s, 11/15/23 Baa $ 7,011,550
3,000,000 8 1/4s, 11/15/12 Baa 3,157,500
1,335,000 8s, 11/15/25 Baa 1,383,394
11,552,444
Georgia (1.2%)
3,100,000 Atlanta, Special Fac. Rev. Bonds (Delta Air Lines
Project), Ser. B, 7.9s, 12/1/18 Ba 3,200,750
Illinois (16.4%)
Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds
(United Airlines Inc. Project), Ser. 84A
11,440,000 8.85s, 5/1/18(d) Baa 12,741,300
11,495,000 8.2s, 5/1/18(d) Baa 12,314,018
3,000,000 IL Hlth. Fac. Auth. Rev. Bonds (Grant Hosp. of
Chicago), 7 1/2s, 6/1/13 BB 3,262,500
10,000,000 IL Housing Dev. Auth. Multi. Fam. Rev. Bonds
Ser. A, 8 1/4s, 7/1/16 A 11,000,000
3,000,000 IL Hsg. Dev. Auth. Res. Mtge. RIBS, 11.945s,
2/1/20 (acquired 5/28/93, cost $3,398,250)(c) A 3,232,500
42,550,318
Louisiana (6.6%)
8,000,000 Lake Charles, Harbor & Term. Dist. Port Facs. Rev.
Bonds (Trunkline Co. Project), 7 3/4s, 8/15/22 Ba 8,490,000
5,500,000 Port of New Orleans, Indl. Dev. Rev. Bonds
(Continental Grain Co. Project), 7 1/2s,
7/1/13 BB 5,451,875
<PAGE>
2,850,000 St. Charles Parish, Poll
(Pwr & Light), 8s, 12/1/14 Baa 3,102,938
17,044,813
Massachusetts (2.2%)
3,000,000 MA State Indl. Fin. Agcy. Resource Recvy. Rev.
Bonds (Southeastern MA Project),
Ser. A, 9s, 7/1/15 BB/P 3,352,500
2,200,000 Ma State Hlth & Edl Fac. Auth. Rev. Bonds
(Norwood Hosp.), Ser. E, 8s, 7/1/12 Baa 2,296,250
5,648,750
Michigan (5.0%)
12,000,000 MI State Hsg. Dev. Auth. Rental Hsg. Rev.
Bonds, Ser. A, 7.55s, 4/1/23 AAA 12,915,000
Mississippi (1.3%)
3,000,000 Claiborne Cnty., Poll. Control Rev. Bonds
(Middle South Energy, Inc.),
Ser. C, 9 7/8s, 12/1/14 BBB/P 3,461,250
Montana (1.2%)
3,000,000 MT Hlth. Fac. Auth. Hosp. RIBS
(Deaconess Med. Ctr. Project), Ser. B,
AMBAC, 10.218s, 2/15/16 AAA 3,056,250
Nebraska (1.3%)
3,100,000 NE Investment Fin. Auth. Single Fam. Mtge.
RIBS, Ser. 2, GNMA Coll., 12.251s, 9/10/30 AAA 3,452,625
Nevada (1.3%)
$ 3,500,000 Clark Cnty., Indl. Dev. Rev. Bonds
(Southwest Gas Corp.), Ser. A, 6 1/2s, 12/1/33 BBB 3,268,125
New Hampshire (4.0%)
10,000,000 NH State Indl. Dev. Auth. Poll. Control Rev Bonds
(Public Svc. Co. of NH Project),
Ser. B, 7 1/2s, 5/1/21 Baa 10,362,500<PAGE>
New Jersey (3.3%)
8,000,000 NJ Econ. Dev. Auth. Elec. Energy Fac. Rev.
Bonds (Vineland Cogeneration L.P. Project),
7 7/8s, 6/1/19 BB/P 8,480,000
New York (6.1%)
2,000,000 NY City, General Purpose VRDN,
Ser. B-4 2.95s, 8/15/22 A 2,000,000
3,000,000 NY City, Indl. Dev. Agcy. Special Facs. Rev.
Bonds (American Airlines, Inc. Project),
8s, 7/1/20 Baa 3,191,250
10,000,000 NY City, Muni. Fin. Auth. Wtr & Swr. Sys. RIBS,
7.518s, 6/15/20 (acquired 5/28/93,
cost $9,054,200)(c) A 7,650,000
3,000,000 NY State Energy Research & Dev. Auth. Poll.
Control VRDN, Ser. A, 3.05s, 7/1/15 A 3,000,000
15,841,250
Ohio (1.2%)
3,000,000 OH Hsg. Fin. Agcy. Single Fam. Mtge. RIBS, Ser.
A-2, GNMA Coll., 10.855s, 3/1/31 AAA 3,168,750
Oklahoma (3.0%)
$ 7,580,000 Tulsa, Indl. Auth. Hosp. Rev. Bonds
(Tulsa Regl. Med. Ctr.), 7.2s, 6/1/17 BBB $ 7,722,125
Pennsylvania (8.8%)
Cumberland Cnty. Indl. Dev. Auth. Rev Bonds
(Beverly Enterprises Project)
1,350,000 6.8s, 10/1/08 BB/P 1,333,125
1,000,000 6.7s, 10/1/03 BB/P 990,000
10,000,000 Montgomery Cnty., Higher Edl. & Hlth. Auth.
Hosp. Rev. Bonds, Ser. B
(UTD Hosp. Project), 8 3/8s, 11/1/11 Ba 10,475,000
5,100,000 PA Econ. Dev. Fin. Auth. Resource Recvy.
Rev. Bonds (Northampton Generating),
Ser. A, 6 1/2s, 1/1/13 BB/P 4,864,125
<PAGE>
5,000,000 PA State Higher Edl. Ass
Student Loan RIBS, AMBAC, 10.586s, 9/3/26 AAA 5,175,000
22,837,250
South Carolina (1.9%)
5,200,000 So. Carolina State Public Svc. Auth.
RIBS, MBIA, 7.819s, 6/30/06 AAA 4,855,500
Texas (14.0%)
15,000,000 Alliance Arpt. Auth. Special Fac. Rev. Bonds
(American Airlines Project), 7 1/2s, 12/1/29 Baa 15,206,250
Bexar Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds
(St. Luke's Lutheran Hosp. Project)
$ 4,800,000 7.9s, 5/1/18 Baa $5,010,000
2,000,000 7.9s, 5/1/11 Baa 2,115,000
2,500,000 Jefferson Cnty., Hlth Fac. Dev. Corp. Hosp.
Rev. Bonds (Baptist Healthcare Sys. Project),
8 7/8s, 6/1/21 Baa 2,953,125
5,800,000 Sam Rayburn, Muni. Pwr. Agcy. Supply Syst. Rev.
Bonds, Ser.B, 6 1/8s, 10/1/13 Baa 5,307,000
5,000,000 Titus Cnty., Fresh Wtr. Supply Dist. No.1
(Southwestern Elec. Pwr Co.), Ser. A, 8.2s,
8/1/11 Aa 5,731,250
36,322,625
Virginia (2.8%)
3,000,000 Fairfax Cnty., Indl. Dev. Auth. RIBS
(Fairfax Hosp. Syst.), Ser. C,
10.327s, 8/29/23 AA 3,603,750
4,000,000 Henrico Cnty., Indl. Dev. Auth. RIBS
(Bon Secours Hlth.Syst. Project),
5.929s, 8/15/27 AAA 3,830,000
7,433,750
Total Investments (cost $266,808,202)(e) $254,479,700
/TABLE
<PAGE>
(a) Percentages indicated are based on total net assets of
$259,294,931. Net assets available to common shareholders are
$219,294,931, which corresponds to a net asset value per common
share of $13.57.
(b) The Moody's, Standard & Poor's or Fitch's ratings indicated
are believed to be the most recent ratings available at April 30,
1994 for the securities listed. Ratings are generally ascribed to
securities at the time of issuance. While the agencies may from
time to time revise such ratings, they undertake no obligation to
do so, and the ratings do not necessarily represent what the
agencies would ascribe to these securities at April 30, 1994.
Securities rated by Putnam are indicated by "/P" and are not
publicly rated. Ratings are not covered by the Report of
Independent Accountants.
(c) Restricted as to public resale. At the date of acquisition,
these securities were valued at cost. There were no outstanding
unrestricted securities of the same class as those held. Total
market value of the restricted securities owned at April 30, 1994
was $10,882,500 or 4.2% of net assets.
(d) These securities were pledged to cover margin requirements
for future contracts at April 30, 1994. The market value of
segregated securities with the custodian for transactions on
futures contracts is $25,055,318.
(e) The aggregate identified cost for federal income tax
purposes is $266,808,202 resulting in gross unrealized
appreciation and depreciation of $417,830 and $12,746,332,
respectively, or net unrealized depreciation of $12,328,502.
The rates shown on Variable Rate Demand Notes (VRDN), Residual
Interest Bonds (RIBS) and Inverse Floating Rate Notes are the
current interest rates at April 30, 1994, 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, 1994 (as a percentage of net assets):
Utilities/Water & Sewer 27.6%
Transportation 26.4
Hospitals/Health Care 19.5
Housing 13.3
<PAGE>
Futures Contracts Outstanding
Market Aggregate Expiration Unrealized
Value Face Value Date Appreciation
US Treasury
Bond
Futures
(Sell) $20,900,000 $21,399,304 June/94 $499,304
<PAGE>
<TABLE>
<CAPTION>
Statement of
assets and liabilities
April 30, 1994
<S> <C> <C>
Assets
Investments in securities, at value (identified cost $266,808,202)
(Note 1) $254,479,700
Cash 678,743
Interest receivable 6,313,047
Unamortized organization expenses (Note 1) 25,996
Variation margin on futures contracts 50,000
Prepaid expense 136,305
Total assets 261,683,791
Liabilities
Distributions payable to shareholders $1,359,504
Payable for compensation of Manager (Note 4) 452,946
Payable for compensation of Trustees (Note 4) 3,091
Payable for investor servicing and custodian fees (Note 4) 55,277
Payable for administrative services (Note 4) 7,730
Payable for offering and organization costs (Notes 1 and 2) 467,882
Other accrued expenses 42,430
Total liabilities 2,388,860
Net assets $259,294,931
Represented by
Series A remarketed preferred shares, without par value;
800 shares authorized (800 shares issued at $50,000 per
share liquidation preference) (Note 3) $40,000,000
Common shares, without par value; unlimited shares authorized;
16,157,092 shares outstanding 226,596,995
Undistributed net investment income 3,046,088
Accumulated net realized gain on investments and futures contracts 1,481,046
Net unrealized depreciation of investments and futures contracts (11,829,198)
Net assets $259,294,931
Computation of net asset value
Remarketed preferred shares at liquidation preference $40,000,000
Net assets available to common shares:
Net asset value per share $13.57 ($219,294,931 divided by
16,157,092 shares) 219,294,931
Net assets $259,294,931
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of
operations
For the period May 28, 1993 (commencement of operations) to
April 30, 1994*
<S> <C> <C>
Tax exempt interest income $17,258,381
Expenses:
Compensation of Manager (Note 4) $1,703,648
Investor servicing and custodian fees (Note 4) 278,671
Compensation of Trustees (Note 4) 13,501
Reports to shareholders 11,001
Auditing 49,892
Legal 11,001
Postage 18,001
Administrative services (Note 4) 12,001
Exchange listing fees 20,309
Amortization of organization expenses (Note 1) 5,882
Preferred share remarketing agent fees 103,140
Other 3,488
Fees waived by Manager (Note 4) (54,452)
Total expenses 2,176,083
Net investment income 15,082,298
Net realized gain on investments (Notes 1 and 4) 933,279
Net realized gain on futures (Notes 1 and 4) 1,371,303
Net unrealized depreciation of investments and futures
contracts during the period (11,829,198)
Net loss on investments (9,524,616)
Net increase in net assets resulting from operations $5,557,682
* See Note 2
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
changes in net assets
April 30, 1994
For the period
May 28, 1993
(commencement of
operations) to
April 30
1994*
<S> <C>
Increase in net assets
Operations:
Net investment income $15,082,298
Net realized gain on investments 933,279
Net realized gain on futures 1,371,303
Net unrealized depreciation of investments and futures contracts (11,829,198)
Net increase in net assets resulting from operations 5,557,682
Distributions to remarketed preferred shareholders from:
net investment income (766,709)
net realized gains (47,998)
Net increase in net assets resulting from operations applicable to
common shareholders 4,742,975
Distributions to common shareholders from:
net investment income (11,269,501)
capital gains (775,538)
Increase from capital share transactions:
Issuance of remarketed preferred shares (Note 3) 40,000,000
Issuance of common shares (Note 2) 227,278,995
Underwriting commissions and offering costs on remarketed
preferred shares (Note 3) (782,000)
Total increase in net assets 259,194,931
<PAGE>
Net assets
Beginning of period 100,000
End of period (including undistributed net investment income of $3,046,088) $259,294,931
Number of fund shares
Common shares outstanding at beginning of period 7,092
Shares issued in public offering 16,150,000
Common shares outstanding at end of period 16,157,092
Remarketed preferred shares at beginning of period --
Remarketed preferred shares issued in public offering 800**
Remarketed preferred shares outstanding at end of period 800
* See Note 2
** From issuance on August 3, 1993 (See Note 3).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
For the period
May 28, 1993
(commencement
of operations) to
April 30
1994
<S> <C>
Net Asset Value, Beginning of Period (common shares) $14.07*
Investment Operations:
Net Investment Income .94(a)
Net Realized and Unrealized Gain on Investments (.59)
Total from Investment Operations .35
Less Distributions from:
Net Investment Income:
to Preferred Shareholders (.05)
to Common Shareholders (.70)
Capital gains:
to Preferred Shareholders --
to Common Shareholders (.05)
Total Distributions (.80)
Preferred Share Offering Costs (.05)
Net Asset Value, End of period (common shares) $13.57
Market Value, End of period (common shares) 12.625
Total Investment Return at Market Value (%) (common shares)(b) (12.20)(c)
<PAGE>
Net Assets, End of Period (Total Fund) (in thousands) $259,295
Ratio of Expenses to Average Net Assets (%)(d) 1.02(c)
Ratio of Net Investment Income to Average Net Assets (%)(d) 6.69(c)
Portfolio Turnover Rate (%) 60.52(e)
* Represents initial net asset value of $14.10 less offering expenses of approximately
$0.03.
** Preferred shares were issued on August 3, 1993 (See Note 3)
(a) Reflects a waiver of the management fee and administrative service fee for the period
May 28, 1993 to June 13, 1993. As a result of such waiver, expenses of the Fund for the
period ended April 30, 1994, reflect a reduction of less than $0.01 per share. (See Note
4)
(b) Total investment return assumes dividend reinvestment and does not reflect the effect
of sales charges.
(c) Annualized.
(d) Ratios reflect net assets available to common shares only; net investment income
ratio also reflects reduction for dividend payments to preferred shareholders.
(e) Not annualized.
/TABLE
<PAGE>
Notes to
financial statements
April 30, 1994
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 as is believed
to be consistent with preservation of capital. The Fund intends
to achieve its objective by investing in a portfolio of municipal
bonds that the Fund's Manager 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 policies are in conformity with
generally accepted accounting principles.
A) Security valuation Tax-exempt bonds and notes are stated on
the basis of valuations provided by a pricing service, approved
by the Trustees, which uses information with respect to
transactions in bonds, quotations from bond dealers, market
transactions in comparable securities and various relationships
between securities in determining value. The fair value of
restricted securities is determined by the Manager following
procedures approved by the Trustees, and such valuations and
procedures are reviewed periodically by the Trustees.
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) 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 undeclared dividends
on remarketed preferred shares) and the liquidation value of any
outstanding remarketed preferred shares, by the total number of
common shares outstanding.
D) Federal taxes It is the policy of the Fund to distribute all
of its income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the
Fund to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Internal Revenue Code of
1986. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation of securities
held and excise tax on income and capital gains.
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 will
accumulate from their Date of Original Issue and will become
payable, when, as and if declared by the Trustees on the
applicable dividend payment date. The applicable dividend rate
for the remarketed preferred shares on April 30,1994 was 3.22%.
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. Discount on
zero-coupon bonds, stepped-coupon bonds, and original issue
discount bonds is accreted according to the effective yield
method.
G) Futures A futures contract is an agreement between two parties
to buy or sell a security at a set price on a future date. Upon
entering into such a contract the Fund is required to pledge to
the broker an amount of cash or securities equal to the minimum
"initial margin" requirements of the exchange. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as "variation
margin," and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it
was closed. The potential risk to the Fund is that the change in
value of the underlying securities may not correspond to the
change in value of the futures contracts.
H) Unamortized organization expenses Expenses incurred by the
Fund in connection with its organization aggregated $31,878.
These expenses are being amortized on a straight-line basis over
a five-year period.
Note 2 Initial capitalization and offering of shares
The Fund was established as a Massachusetts business trust under
the laws of Massachusetts on April 1, 1993.
During the period April 1, 1993 to May 27, 1993 the Fund had no
operations other than those related to organizational matters,
including the initial capital contribution of $100,000, and the
issuance of 7,092 shares to Putnam Investments, Inc. on May 13,
1993.
On May 28, 1993, the Fund completed the initial offering of
15,000,000 of its shares for which it received net proceeds of
$225,000,000 before deducting $430,610 of initial offering expenses
and closing costs of $13,500,000 (such offering expenses and the
Fund's organizational expenditures were paid initially by Putnam
Investment Management, Inc. "Putnam Management," the Fund's
Manager, and the Fund will reimburse the Manager for such costs.
Regular investment operations commenced on May 28, 1993.
On June 28, 1993, the Fund completed a supplemental offering of
1,150,000 shares for which it received net proceeds of $16,215,000
before deducting $5,394 of initial offering expenses.
Note 3 Remarketed preferred shares
On August 3, 1993, the Fund issued 800 Remarketed Preferred Shares
Series A. Proceeds to the Fund before underwriting expenses of
$600,000 and offering expenses of $182,000, amounted to
$40,000,000. These expenses were charged against net assets of the
Fund available to common shareholders. The Series A remarketed
preferred shares are generally 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. The Series A remarketed preferred shares are not currently
redeemable at the option of the Fund until the next dividend reset
date in May 1995. There were no undeclared dividends on Preferred
Shares at April 30, 1994.
Under the Investment Company Act of 1940, the Fund is required to
maintain asset coverage of at least 200% with respect to the
remarketed preferred shares as of the last business day of each
month in which any such shares are outstanding. Additionally, the
Fund is required to meet more stringent asset coverage requirements
under the terms of the remarketed preferred shares and the shares'
rating agencies. Should these requirements not be met, or should
dividends accrued on the remarketed preferred shares not be paid,
the Fund may be restricted in its ability to declare dividends to
common shareholders or may be required to redeem certain of the
remarketed preferred shares. At April 30, 1994 there were no such
restrictions on the Fund.
Note 4 Management fee, administrative services, and other
transactions
Compensation of Putnam Management, the Fund's Manager, a wholly-
owned subsidiary of Putnam Investments, Inc. (formerly known as The
Putnam Companies, Inc.) for management, investment advisory
services and administrative services fees is paid quarterly based
on the average net assets of the Fund, including amounts
attributable to any preferred shares that may be outstanding. Such
fees, in the aggregate, are equal to the annual rate of 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
.50% of any excess over $1.5 billion of such average net asset
value.
<PAGE>
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 an agreed-upon
formula. See "Administrative Services Contract."
In connection with the initial offering of shares of the Fund,
Putnam Management agreed to waive its management fee from the
period May 28, 1993 (commencement of operations) to June 13, 1993.
As a result of the voluntary waiver, the expenses for the period
ended April 30, 1994 were reduced by $54,452.
The Fund also reimburses the Manager for the compensation and
related expenses of certain officers of the Fund and their staff
who provide administrative services to the Fund. The aggregate
amount of all such reimbursements is determined annually by the
Trustees. For period ended April 30, 1994, the Fund paid $12,001
for these services.
Trustees of the Fund receive an annual Trustee's fee of $820 and an
additional fee for each Trustees' meeting attended. Trustees who
are not interested persons of the Manager and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings.
Custodial functions for the Fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments,
Inc. Investor servicing agent functions are provided by Putnam
Investor Services, a division of PFTC. Fees paid for these investor
servicing and custodial functions for the year ended April 30, 1994
amounted to $278,671.
Investor servicing and custodian fees reported in the Statement of
operations for the period ended April 30, 1994 have been reduced by
credits allowed by PFTC.
<PAGE>
Note 5 Purchases and sales of securities
During the period ended April 30, 1994, purchases and sales of
investment securities other than short-term investments aggregated
$411,198,102 and $153,105,046, respectively. The purchases and
sales of short-term municipal obligations were $176,800,000 and
$168,800,000 respectively. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
Transactions in futures contracts during the period are summarized
as follows:
Sales of Futures Contracts
Number of Aggregate
Contracts Face Value
Contracts opened 1,150 $129,025,761
Contracts closed (950) (107,626,457)
Open at end of period 200 $21,399,304
<PAGE>
<TABLE>
<CAPTION>
Selected Quarterly Data* (Unaudited)
For the period
May 28, 1993
(commencement of
operations) to
Three months ended
April 30, January 31, October 31, July 31,
1994 1994 1993** 1993
<S> <C> <C> <C> <C>
Total Investment income
Total $4,762,164 $4,826,033 $4,810,626 $2,859,558
Per Share+ $.30 $.30 $.29 $.18
Net investment income available to common shareholders
Total $3,863,391 $3,957,895 $3,933,551 $2,560,752
Per Share+ $.25 $.24 $.24 $.16
Net realized and unrealized (loss)/gain on investments
Total $(19,384,620) $1,382,956 $5,512,842 $2,964,206
Per Share+ $(1.20) $.09 $.34 $.18
Net (decrease)/increase in net assets available to common
shareholders resulting from operations
Total $(15,521,229) $5,340,851 $9,446,393 $5,524,958
Per Share+ $(.95) $.33 $.58 $.34
Net assets available to commmon shareholders at end of period
Total $219,294,931 $238,587,197 $237,872,027 $232,982,145
Per Share+ $13.57 $14.77 $14.72 $14.42
/TABLE
<PAGE>
+ Per common share.
* In connection with the initial offering of shares of the Fund,
Putnam Management agreed to waive its management fee and
administrative service fee for the period May 28, 1993 to June 13,
1993. As a result of such waiver, expenses of the Fund reflect a
reduction of less than $.01 per share.
** Preferred shares were issued on August 3, 1993.
<PAGE>
Fund
performance
supplement
Putnam Municipal Opportunities Trust is a portfolio managed for
high current income free from federal income tax, consistent with
preservation of capital through investments in those sectors of the
municipal bond market thought most attractive.
The 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 from the fund.
The Consumer Price Index is a commonly used measure of inflation;
it does not represent an investment return.
The fund performance supplement has been prepared by Putnam
Management to provide additional information about the fund and the
indexes used for performance comparisons. The information is not
part of the portfolio of investments owned or the financial
statements.
Federal tax information
The fund has designated dividends paid from net investment income
during the fiscal year as exempt "interest dividends." Thus 100% of
these distributions are exempt from federal income tax.
During the fiscal year the fund distributed $0.051 per share from
short-term capital gains, constituting "dividend income" for
federal income tax purposes.
The form 1099 that you will receive in January 1995 will show the
tax status of all distributions paid to your account in calendar
1994.
<PAGE>
Your Trustees
George Putnam
Chairman
Chairman and President, The Putnam Funds
William F. Pounds
Vice Chairman
The Putnam Funds, Professor of Management,
Alfred P. Sloan School of Management,
Massachusetts Institute of Technology
Jameson Adkins Baxter
President,
Baxter Associates, Inc.
Hans H. Estin
Vice Chairman,
North American Management Corporatio n
John A. Hill
Principal and Managing Director,
First Reserve Corp.
Elizabeth T. Kennan
President
Mount Holyoke College
Lawrence J. Lasser
President and Chief Executive Officer,
Putnam Investments, Inc.
Robert E. Patterson
Executive Vice President,
Cabot Partners Limited Partnership
Donald S. Perkins
Director
of various corporations
George Putnam, III
President,
New Generation Research, Inc.
A.J.C. Smith
Chairman of the Board and Chief Executive Officer,
Marsh & McLennan Companies, Inc.
W. Nicholas Thorndike
Director
of various corporations
<PAGE>
Putnam
Municipal
Opportunities
Trust
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
Investor servicing agent
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
1-800-225-1581
Custodian
Putnam Fiduciary
Trust Company
Legal counsel
Ropes & Gray
Independent accountants
Coopers & Lybrand
(DALBAR logo)
Putnam Investor Services
has received the DALBAR
award each year since the
award's 1990 inception.
In more than 10,000 tests
of 38 shareholder
service components,
Putnam outperformed
the industry standard
in every category.
582-12465<PAGE>
Officers
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
John R. Verani
Vice President
Gary N. Coburn
Vice President
Triet Nguyen
Vice President and Fund Manager
William N. Shiebler
Vice President
John D. Hughes
Vice President and Treasurer
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern time for
up-to-date information about the fund's NAV or to request Putnam's
quarterly Closed-End Fund Commentary.
<PAGE>
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ------------------
Bulk Rate
U.S. Postage
Paid
Boston, MA
Permit No. 53749
- -------------------
<PAGE>
APPENDIX TO FORM N30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS:
(1) Rule lines for tables are omitted.
(2) Boldface and italic typefaces are displayed in normal type.
(3) Headers (e.g, the name of the fund) and footers (e.g., page
numbers and "The accompanying notes are an integral part of these
financial statements") are omitted.
(4) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed differently
in this filing.
(5) Bullet points and similar graphic signals are omitted.
(6) Page numbering is different.
