PUTNAM
MUNICIPAL
OPPORTUNITIES
TRUST
[GRAPHIC OMITTED:
art work]
SEMIANNUAL REPORT
October 31, 1995
[LOGO:
BOSTON - LONDON - TOKYO]
<PAGE>
FUND HIGHLIGHTS
o "ONE INVESTOR'S WORRY IS ANOTHER'S OPPORTUNITY. THAT'S THE MORAL OF THE
STORY OF THE MUNICIPAL BOND MARKET NOW, WHERE FEARS OF A FLAT TAX HAVE
MADE MUNIS EXTREMELY ATTRACTIVE."
-- Fortune Magazine, September 1995
o "[T]HE UPHEAVAL IN THE MUNI MARKET HAS CREATED SOME GREAT DEALS FOR
INVESTORS WHO KNOW WHERE TO LOOK."
-- Money, November 1995
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
10 Portfolio holdings
15 Financial statements
<PAGE>
FROM THE CHAIRMAN
[GRAPHIC OMITTED:
Photo of
George Putnam]
(C) Karsh, Ottawa
Dear Shareholder:
The period encompassing the first half of Putnam Municipal Opportunities Trust's
fiscal year followed one of the most severe bond market downturns on record and
ended in the midst of one of the market's strongest rallies.
The benefits of the market's upturn during the six months ended October 31,
1995, were dampened somewhat for tax-free bond investors. Talk of a flat tax
ignited concerns that the tax advantage long enjoyed by municipal securities
would be lost. As is so often the case, however, the market overreacted, and by
the fiscal year's midpoint it had recognized the fact.
Fund Manager Triet Nguyen believes that prospects of a flat tax being enacted
anytime soon are quite slim. Furthermore, the Federal Reserve Board's success in
slowing the pace of the economy has contributed to a favorable environment for
bonds. Low inflation and relatively stable bond yields point to a continuation
of these positive conditions through the second half of the fund's fiscal year.
Respectfully yours,
/s/ George Putnam
George Putnam
Chairman of the Trustees
December 20, 1995
<PAGE>
REPORT FROM THE FUND MANAGER
TRIET M. NGUYEN
An encouraging environment for fixed-income securities prevailed for most of
the first half of Putnam Municipal Opportunities Trust's 1996 fiscal year.
Despite ongoing flat-tax fears that have shown the potential to dampen the
performance of tax-free investments, your fund was largely able to keep pace
with the persistently strong bond market.
For the six months ended October 31, l995, your fund delivered a total return
of 8.11% at net asset value and 14.38% at market price, while continuing to
provide an attractive level of tax-free income. We are optimistic that
strength in the municipal-bond market will persist in the coming months, even
as we carefully monitor the domestic economy for signs of too dramatic a
slowdown.
o TAKING ADVANTAGE OF A POSITIVE ENVIRONMENT
Since the beginning of calendar 1995, U.S. financial markets have experienced
an enduring rally. Fueling the rise in bond prices (as well as stock prices)
was stability in short-term interest rates -- even a slight decline -- set by
the Federal Reserve Board. Another positive factor for investments throughout
1995 has been low inflation. The municipal market, along with the equity and
Treasury markets, responded favorably to these factors.
The municipal market has succeeded in holding its own thus far in 1995, even
in the face of potentially deleterious tax-policy shifts. Most significantly,
the tax-free market experienced some turbulence earlier this year when
discussions of a flat tax began in earnest in Washington. A flat tax, if
implemented, would effectively remove the raison d'etre for tax-free
investments.
In our last report to you, which was written in the midst of the market's
initial reaction, we stated our belief that implementation of a flat tax --
or any other radical change in the current tax system -- is probably years
away and that the strength of the market's fundamentals should eventually
stave off short-term concerns. In other
<PAGE>
developments in Washington, evidence of mounting fiscal conservatism could
have a generally positive effect on fixed-income investments and in turn,
support municipal-bond prices.
o AIRLINES, AIRPORTS POSITIVE HOLDINGS
Over its semiannual period, your fund benefited from a substantial stake in
strong-performing airline issues. Indeed, despite an apparently slowing
economy, we continue to be upbeat about prospects for both airline and
airport bonds. The air transportation industry -- along with many other U.S.
industries -- has emerged from a period of dramatic restructuring in stronger
shape, operating with greater efficiency. This has been reflected in prices
for airline stocks and corporate bonds. We were able to participate in the
industry's strength by purchasing so-called private-activity issues, which
enjoy tax-exempt status even though they are backed by private corporations.
Municipal bonds issued by airports were also very strong over the period. A
substantial portion of the fund was invested in Chicago's O'Hare Airport
revenue bonds. These bonds, supported by earnings from one of the world's
busiest airports, continue to offer superior income. We also remain confirmed
in our upbeat assessment about the new Denver International Airport. Much
maligned at its beginning, the airport at long last has begun to function
smoothly. Furthermore, when we first bought Denver International Airport
bonds, they were rated BB -- a notch below investment grade. Standard &
Poor's has just announced an investment-grade rating of BBB for the bonds, an
upgrade that could help bolster their price.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS* showing
Transportation/Airlines 22.03%
Utilities/Water and Sewerage 15.33%
Health care 11.61%
Energy 10.29%
Housing 8.45%
Footnote reads:
*Based on net assets as of 10/31/95. Holdings will vary over time.]
<PAGE>
Elsewhere in the portfolio, we have trimmed the fund's exposure to
health-care issues somewhat. We believe that ongoing spending reductions in
this sector could accelerate. Indeed, Congress appears to have tightened its
stance on reducing Medicare, which could further roil the health-care sector.
However, we still have roughly 10% committed in this sector and believe that
pockets of strength remain. Furthermore, most of the fund's health-care
holdings carry very high coupons, which increase their potential for quality
upgrading through refunding.
o SUPPLY/DEMAND CHARACTERISTICS REMAIN POSITIVE
The ongoing decline in supply has provided important support for the
municipal-bond market. New issuance and refinancing of municipal bonds have
declined significantly over the fund's fiscal period; nationally, issuance of
these bonds is off approximately 25% from 1994 levels. As more bonds are
called out of the market, the lower supply could support prices -- and
bolster the performance of your fund over time.
o LOOKING FORWARD
The average credit quality rating for fund holdings is A-. With the economy
still relatively buoyant, we have sought higher-yielding issues that offered
strong value. However, if the domestic economy continues to soften, we may
raise the overall credit quality by purchasing higher-quality bonds, which
tend to do well in a slower economic environment.
We have also extended duration to take advantage of a stable-to-declining
interest rate environment. Duration is a measure of the interest rate
sensitivity of a bond. By extending duration, we hope to capture the benefit
of declining interest rates as the economy slows. Furthermore, we are upbeat
about prospects for the municipal market as investors begin to take profits
on equity gains, which could prompt a renewed interest in tax-exempt
securities.
Whatever the conditions, Putnam will continue to follow closely the
developments in today's information-sensitive municipal market. Indeed,
Putnam employs its extensive research capabilities to
<PAGE>
-----------------------------------------------------------------------------
TOP 10 HOLDINGS (10/31/95)
-----------------------------------------------------------------------------
CHICAGO, O'HARE INTERNATIONAL AIRPORT, SPECIAL FACILITIES REVENUE BONDS
(SER. 84A)
-----------------------------------------------------------------------------
CHICAGO, O'HARE INTERNATIONAL AIRPORT, SPECIAL FACILITIES REVENUE BONDS
(SER. C)
-----------------------------------------------------------------------------
SALEM COUNTY, STATE INDUSTRIAL POLLUTION CONTROL FINANCING AUTHORITY, NEW
JERSEY
-----------------------------------------------------------------------------
DENVER, CITY AND COUNTY AIRPORT REVENUE BONDS
-----------------------------------------------------------------------------
ILLINOIS HOUSING, DEVELOPMENT AUTHORITY MULTIFAMILY REVENUE BONDS
-----------------------------------------------------------------------------
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY, ELECTRIC ENERGY FACILITY REVENUE
BONDS
-----------------------------------------------------------------------------
MONTGOMERY COUNTY, STATE HIGHER EDUCATIONAL AND HEALTH AUTHORITY, HOSPITAL
REVENUE BONDS, PENNSYLVANIA
-----------------------------------------------------------------------------
ALLIANCE AIRPORT AUTHORITY, SPECIAL FACILITIES REVENUE BONDS, TEXAS
-----------------------------------------------------------------------------
TITUS COUNTY, STATE FRESH WATER SUPPLY DISTRICT, REVENUE BONDS, TEXAS
-----------------------------------------------------------------------------
BEXAR COUNTY, STATE HEALTH FACILITIES DEVELOPMENT CORPORATION, REVENUE
BONDS, TEXAS
-----------------------------------------------------------------------------
These holdings represent 35.1% of the fund's assets. Portfolio holdings will
vary over time.
stay apprised of germane developments. While we are generally optimistic for
the months ahead, tougher rhetoric or action from Washington could cause
renewed difficulties in the municipal-bond market. Furthermore, an overly
slow economy could also lead to some volatility in the months ahead.
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 10/31/95, there is no guarantee the fund will continue to
hold these securities in the future.
<PAGE>
PERFORMANCE SUMMARY
PERFORMANCE SHOULD ALWAYS BE CONSIDERED IN LIGHT OF A FUND'S INVESTMENT
STRATEGY. PUTNAM MUNICIPAL OPPORTUNITIES TRUST IS DESIGNED FOR INVESTORS SEEKING
AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAXES AS IS
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 10/31/95
NAV MARKET PRICE
- --------------------------------------------------------------------------------
6 months 8.11% 14.38%
- --------------------------------------------------------------------------------
1 year 17.33 22.60
- --------------------------------------------------------------------------------
Life-of-fund (since 5/28/93) 16.94 7.47
Annual average 6.65 3.01
- --------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/95
LEHMAN BROS.
MUNICIPAL CONSUMER
BOND INDEX PRICE INDEX
- --------------------------------------------------------------------------------
6 months 6.76% 1.19%
- --------------------------------------------------------------------------------
1 year 14.84 2.81
- --------------------------------------------------------------------------------
Life-of-fund (since 5/28/93) 15.67 6.59
Annual average 6.17 2.66
- --------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 9/30/95
(most recent calendar quarter)
NAV MARKET PRICE
- --------------------------------------------------------------------------------
6 months 7.06% 6.90%
- --------------------------------------------------------------------------------
1 year 12.69 14.52
- --------------------------------------------------------------------------------
Life-of-fund (since 5/28/93) 15.39 3.85
Annual average 6.31 1.63
- --------------------------------------------------------------------------------
Performance data represent past results, do not reflect future performance, and
do not take into account any adjustment for taxes payable on reinvested
distributions. Investment returns, net asset value and market price will
fluctuate so that an investor's shares, when sold, may be worth more or less
than their original cost.
<PAGE>
- --------------------------------------------------------------------------------
PRICE AND DISTRIBUTION INFORMATION
- --------------------------------------------------------------------------------
6 months ended 10/31/95
DISTRIBUTIONS PER SHARE:
COMMON SHARES PER SHARE
- --------------------------------------------------------------------------------
Number 6
Income $0.495
Total 0.495
PREFERRED SHARES
- --------------------------------------------------------------------------------
Number 6
Income (Series A 800) $956.69
Total $956.69
SHARE VALUE COMMON SHARES NAV MARKET PRICE
- --------------------------------------------------------------------------------
4/30/95 $13.23 $12.25
10/31/95 13.78 13.50
CURRENT RETURN COMMON SHARES
- --------------------------------------------------------------------------------
End of period
Current dividend rate(1) 7.18% 7.33%
Taxable equivalent(2) 11.89 12.14
- --------------------------------------------------------------------------------
Capital gains are taxable for federal and, in most
cases, state tax purposes. Investment income may be subject to state and local
taxes. (1)Income portion of most recent distribution, annualized and divided by
NAV or market price at end of period. (2)Assumes maximum 39.60% federal tax
rate. Results for investors subject to lower tax rates would not be as
advantageous. For some investors, investment income may also be subject to the
alternative minimum tax.
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
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.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it does not
represent an investment return.
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
October 31, 1995 (Unaudited)
KEY TO ABBREVIATIONS
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Federal Guaranty Insurance Corporation
FSA -- Financial Security Assurance
GNMA Coll. -- Government National Mortgage Association Collateralized
G.O. Bonds -- General Obligation Bonds
IF -- Inverse Floater
IFB -- Inverse Floating Bonds
MBIA -- Municipal Bond Investors Assurance Corporation
VRDN -- Variable Rate Demand Notes
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (99.9%)*
PRINCIPAL AMOUNT RATINGS** VALUE
ALABAMA (2.1%)
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$ 5,000,000 Butler, Indl. Dev. Board Rev. Bonds
(Solid Waste Disp. James River Corp. Project),
8s, 9/1/28 BBB $ 5,600,000
ARIZONA (1.1%)
- --------------------------------------------------------------------------------------------
2,860,000 Scottsdale, Indl. Dev. Auth. Rev. Bonds
(Westminster Village Project), 7 7/8s, 6/1/09 BB/P 3,035,175
CALIFORNIA (12.7%)
- --------------------------------------------------------------------------------------------
5,000,000 Foothill/Eastern Trans. Corridor Agcy. Rev. Bonds
(CA Toll Roads), Ser. A, 5s, 1/1/35 Baa 4,025,000
2,730,000 Loma Linda Hosp. Rev. Bonds
(Loma Linda U. Med. Center), Ser. C, MBIA,
5s, 12/1/08 AAA 2,644,688
3,000,000 Metro. Wtr. Dist. IFB
(Southern CA Waterworks), 7.112s, 8/10/18 AA 3,022,500
2,000,000 Orange Cnty., Pub. Fac. Corp. COP
(Solid Waste Management), 7 7/8s, 12/1/13 BBB 2,027,500
5,000,000 San Bernardino Cnty., COP
(Med. Ctr. Fin. Project), Ser. A, MBIA, 6 1/2s, 8/1/17 AAA 5,468,750
San Diego, IF COP, AMBAC
3,000,000 7.07s, 9/1/12 AAA 3,018,750
3,000,000 6.82s, 9/1/07 AAA 3,180,000
4,000,000 Santa Ana, Cmnty. Redev. Agcy. Tax Alloc. Rev. Bonds
Ser. B, 7 1/2s, 9/1/16 BBB 4,170,000
3,000,000 So. CA Pub. Pwr. Auth. IFB
FGIC, 5.22s, 7/1/17 AAA 2,745,000
3,000,000 Thousand Oaks, Cmnty. Fac. Dist. Special. Tax Rev.
Bonds (No. 94-1), 6 7/8s, 9/1/24 BB/P 2,992,500
------------
33,294,688
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
COLORADO (5.6%)
- --------------------------------------------------------------------------------------------
Denver, City & Cnty. Arpt. Rev. Bonds, Ser. A
$ 9,440,000 8 3/4s, 11/15/23 BBB $ 11,009,400
3,160,000 MBIA, 8 1/2s, 11/15/23 AAA 3,736,700
------------
14,746,100
FLORIDA (1.6%)
- --------------------------------------------------------------------------------------------
3,775,000 Martin Cnty., Indl. Dev. Auth. Rev. Bonds
(Indiantown Co-generation Project), Ser. A, 7 7/8s,
12/15/25 Baa 4,289,344
ILLINOIS (15.6%)
- --------------------------------------------------------------------------------------------
Chicago, O'Hare Intl. Arpt. Special. Fac. Rev. Bonds
(United Air Lines, Inc.),
11,095,000 Ser. 84A, 8.85s, 5/1/18 Baa 12,454,138
11,135,000 Ser. C, 8.2s, 5/1/18 Baa 12,053,638
3,000,000 IL Hlth. Fac. Auth. Rev. Bonds
(Grant Hosp. of Chicago), 7 1/2s, 6/1/13 AAA 3,168,660
10,000,000 IL Hsg. Dev. Auth. Multi-Fam. Rev. Bonds
Ser. 91A, 8 1/4s, 7/1/16 A 10,800,000
2,200,000 IL Hsg. Dev. Auth. Res. Mtge. IFB
10.381s, 2/1/20 (acquired 5/28/93, cost $2,492,050)++ A 2,414,500
------------
40,890,936
INDIANA (1.2%)
- --------------------------------------------------------------------------------------------
3,000,000 IN State Dev. Fin. Auth. Rev. Bonds
(Inland Steel Co. Project), 6.85s, 12/1/12 Ba 3,078,750
KENTUCKY (3.0%)
- --------------------------------------------------------------------------------------------
Kenton Cnty., Arpt. Board. Special. Facs. Rev. Bonds
(Delta Air Lines, Inc. Project),
3,400,000 Ser. A, 7 1/2s, 2/1/20 Ba 3,621,000
3,000,000 Ser. A, 6 1/2s, 2/1/22 Ba 2,880,000
1,300,000 Ser. B, 7 1/4s, 2/1/22 Ba 1,374,750
------------
7,875,750
LOUISIANA (5.0%)
- --------------------------------------------------------------------------------------------
LA State Recvy. Dist. Sales Tax, VRDN
2,200,000 3.733s, 7/1/98 VMIG1 2,200,000
2,000,000 FGIC, 3.9s, 7/1/97 VMIG1 2,000,000
5,500,000 Port of New Orleans, Indl. Dev. Rev. Bonds
(Continental Grain Co. Project), 7 1/2s, 7/1/13 BB 5,671,875
2,850,000 St. Charles Parish, Poll. Control Rev. Bonds
(LA Pwr. & Lt. Co.), 8s, 12/1/14 Baa 3,138,563
------------
13,010,438
MASSACHUSETTS (4.4%)
- --------------------------------------------------------------------------------------------
MA State Hlth. & Edl. Fac. Auth. Rev. Bonds
3,135,000 (Norwood Hosp.), Ser. E, 8s, 7/1/12 Ba 3,142,838
3,000,000 (Rehab. Hosp. Cape & Islands), Ser. A, 7 7/8s,
8/15/24 BB/P 3,063,750
3,000,000 MA State Indl. Fin. Agcy. Resource Recvy. Rev. Bonds
(Southeastern MA Project), Ser. A, 9s, 7/1/15 BB/P 3,348,750
2,000,000 MA State VRDN
Ser. B, 3.7s, 12/1/97 VMIG1 2,000,000
------------
11,555,338
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
MICHIGAN (2.1%)
- --------------------------------------------------------------------------------------------
$ 1,700,000 Dickinson Cnty., Hosp. Rev. Bonds
(Memorial Hosp. Syst.), 8 1/8s, 11/1/24 Ba $ 1,833,875
1,000,000 Grand Rapids Wtr. Supply Syst. VRDN
FGIC, 2.1s, 1/1/20 VMIG1 1,000,000
2,500,000 MI State Hsg. Dev. Auth. Rental Hsg. Rev. Bonds
Ser. A, FSA, 7.55s, 4/1/23 AAA 2,668,750
------------
5,502,625
MISSISSIPPI (1.1%)
- --------------------------------------------------------------------------------------------
2,500,000 Claiborne Cnty., Poll. Control Rev. Bonds
(Middle South Energy, Inc.), Ser. B, 8 1/4s, 6/1/14 BBB/P 2,759,375
NEBRASKA (1.2%)
- --------------------------------------------------------------------------------------------
2,700,000 NE Investment Fin. Auth. Single Fam. Mtge. IFB
Ser. 2, GNMA Coll., 11.134s, 9/10/30 AAA 3,111,750
NEVADA (1.1%)
- --------------------------------------------------------------------------------------------
2,750,000 Clark Cnty., Indl. Dev. Rev. Bonds
(Southwest Gas Corp.), Ser. B, 7 1/2s, 9/1/32 Baa 2,901,250
NEW JERSEY (9.1%)
- --------------------------------------------------------------------------------------------
9,000,000 NJ Econ. Dev. Auth. Elec. Energy Fac. Rev. Bonds
(Vineland Co-generation L.P. Project), 7 7/8s, 6/1/19 BB/P 9,686,250
2,590,000 NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds
(Raritan Bay Med. Ctr.), 7 1/4s, 7/1/14 BB/P 2,602,950
10,000,000 Salem Cnty., Indl. Poll. Control Fing. Auth. IFB
8.72s, 10/1/29 (acquired 10/28/94,
cost $9,750,000)++ Aaa 11,487,500
------------
23,776,700
NEW YORK (4.6%)
- --------------------------------------------------------------------------------------------
4,500,000 NY City, G.O. Bonds
Ser. D, 6s, 2/15/25 BBB 4,359,375
4,600,000 NY City, Indl. Dev. Agcy. Special. Fac. Rev. Bonds
(American Airlines, Inc. Project), 8s, 7/1/20 Baa 4,933,500
3,000,000 NY State Dorm. Auth. Rev. Bonds
(Court Facs. Lease), Ser. A, 5 1/2s, 5/15/23 Baa 2,763,750
------------
12,056,625
NORTH CAROLINA (0.7%)
- --------------------------------------------------------------------------------------------
2,000,000 NC Eastern Muni. Pwr. Agcy. Pwr. Syst. Rev. Bonds
Ser. B, 6s, 1/1/22 A 1,962,500
OHIO (1.2%)
- --------------------------------------------------------------------------------------------
2,963,000 OH Hsg. Fin. Agcy. Single Fam. Mtge. IFB
Ser. A-2, GNMA Coll., 9.627s, 3/24/31 AAA 3,214,855
PENNSYLVANIA (7.9%)
- --------------------------------------------------------------------------------------------
3,000,000 Beaver Cnty., Indl. Dev. Auth. Rev. Bonds
(Cleveland Elec. Project), 7 5/8s, 5/1/25 Ba 3,105,000
7,000,000 Montgomery Cnty., Higher Edl. & Hlth. Auth. Hosp.
Rev. Bonds (UTD Hosp. Project), Ser. B, 8 3/8s, 11/1/11 BB/P 7,437,500
5,000,000 PA State Econ. Dev. Fin. Auth. Resource Recvy.
Rev. Bonds (Northampton Generating Project), Ser. A,
6.4s, 1/1/09 BB/P 4,893,750
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
PENNSYLVANIA (continued)
- --------------------------------------------------------------------------------------------
$ 5,000,000 PA State Higher Edl. Assistance Agcy. Student Loan IFB
AMBAC, 9.48s, 9/3/26 AAA $ 5,431,250
------------
20,867,500
SOUTH CAROLINA (1.9%)
- --------------------------------------------------------------------------------------------
4,500,000 Spartanburg Cnty., Solid Waste Disp. Rev. Bonds
(Bayerische Motoren Werke), 7.55s, 11/1/24 A/P 4,899,375
TEXAS (10.0%)
- --------------------------------------------------------------------------------------------
5,500,000 Alliance Arpt. Auth. Special. Fac. Rev. Bonds
(American Airlines, Inc. Project), 7 1/2s, 12/1/29 Baa 5,823,125
Bexar Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds
(St. Luke's Lutheran Hosp. Project),
4,800,000 7.9s, 5/1/18 AAA 5,730,000
2,000,000 7.9s, 5/1/11 AAA/P 2,387,500
2,450,000 Jefferson Cnty., Hlth. Fac. Dev. Corp. Hosp. Rev. Bonds
(Baptist Healthcare Syst. Project), 8 7/8s, 6/1/21 BBB 2,593,938
3,535,000 Port Corpus Christi, Indl. Dev. Corp. Rev. Bonds
(Valero Refining & Marketing Co.),
Ser. A, 10 1/4s, 6/1/17 Baa 3,910,594
5,000,000 Titus Cnty., Fresh Wtr. Supply Dist. No. 1 Poll. Rev.
Bonds (Southwestern Elec. Pwr. Co.),
Ser. A, 8.2s, 8/1/11 Aa 5,818,750
------------
26,263,907
VIRGINIA (3.0%)
- --------------------------------------------------------------------------------------------
3,000,000 Fairfax Cnty., Indl. Dev. Auth. IFB
(Fairfax Hosp. Syst.), Ser. C, 9.528s, 8/29/23 AA 3,821,250
4,000,000 Henrico Cnty., Indl. Dev. Auth. Rev. Bonds
(Bon Secours Hlth. Syst. Project), FSA,
5.929s, 8/15/27 AAA 4,155,000
------------
7,976,250
WASHINGTON (3.7%)
- --------------------------------------------------------------------------------------------
4,650,000 Pierce Cnty., Econ. Dev. Corp. Rev. Bonds
(Solid Waste-Occidental Petroleum), 5.8s, 9/1/29 Baa 4,248,934
2,600,000 WA State Hlth. Care Fac. Auth. IFB
(Sisters Providence ), Ser. C, 3 1/2s, 10/1/05 AAA 2,600,000
3,000,000 WA State Hlth. Care Facs. Auth. VRDN
(Sisters of Providence), Ser. D, 3.8s, 10/1/05 VMIG1 3,000,000
------------
9,848,934
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $257,454,558)*** $262,518,165
- --------------------------------------------------------------------------------------------
<PAGE>
* Percentages indicated are based on net assets of $262,714,584.
** The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at October 31, 1995 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, 1995. Securities
rated by Putnam are indicated by "/P" and are not publicly rated.
*** The aggregate identified cost on a tax cost basis is $257,454,558 resulting
in gross unrealized and appreciation and depreciation of $8,404,609 and
$3,341,002, respectively, or net unrealized appreciation of $5,063,607.
++ Restricted as to public resale. At the date of acquisition these securities
were valued at cost. There were no outstanding securities of the same class
as those held. Total market value of restricted securities owned at October
31, 1995 was $13,902,000 or 5.3% of net assets.
The fund had the following industry group concentrations greater than
10% of net assets at October 31, 1995 (as a percent of net assets):
Transportation/Airlines 22.03%
Utilities 15.33
Health Care 11.61
The rates shown on IFs and IFBs, which are securities paying variable
interest rates that vary inversely to changes in the market interest rates,
and VRDNs are the current interest rates at October 31, 1995, which are
subject to change based on the terms of the security.
UNRATED SECURITIES
RATED SECURITIES OF COMPARABLE QUALITY,
AS A PERCENTAGE OF AS A PERCENTAGE OF
RATINGS FUND'S NET ASSETS FUND'S NET ASSETS
----------------------------------------------------------------------------
"AAA"/"Aaa" 23.7% 1.0%
"AA"/"Aa" 4.8 1.9
"A"/"A" 5.8 --
"BBB"/"Baa" 34.4 1.0
"BB"/"Ba" 9.4 14.0
"VMIG1" 3.9 --
----------------------------------------------------------------------------
82.0% 17.9%
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995 (Unaudited)
ASSETS
- -------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $257,454,558) (Note 1) $262,518,165
- -------------------------------------------------------------------------------
Cash 255,043
- -------------------------------------------------------------------------------
Interest receivable 5,966,595
- -------------------------------------------------------------------------------
Receivable for securities sold 500,000
- -------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 16,416
- -------------------------------------------------------------------------------
TOTAL ASSETS 269,256,219
LIABILITIES
- -------------------------------------------------------------------------------
Payable for securities purchased 4,349,160
- -------------------------------------------------------------------------------
Distributions payable to shareholders 1,609,627
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 3) 467,248
- -------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 3) 1,841
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 3) 37,903
- -------------------------------------------------------------------------------
Payable for administrative services (Note 3) 9,355
- -------------------------------------------------------------------------------
Payable for offering and organization costs (Note 1) 36,681
- -------------------------------------------------------------------------------
Other accrued expenses 29,820
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 6,541,635
- -------------------------------------------------------------------------------
NET ASSETS $262,714,584
REPRESENTED BY
- -------------------------------------------------------------------------------
Series A remarketed preferred shares, without par value; 800
shares authorized (800 shares issued at $50,000 per share
liquidation preference) (Note 2) $ 40,000,000
- -------------------------------------------------------------------------------
Common shares, without par value; unlimited shares authorized;
16,157,092 shares outstanding 226,378,559
- -------------------------------------------------------------------------------
Undistributed net investment income 1,500,240
- -------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (10,227,822)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments 5,063,607
- -------------------------------------------------------------------------------
NET ASSETS $262,714,584
COMPUTATION OF NET ASSET VALUE
- -------------------------------------------------------------------------------
Remarketed preferred shares at liquidation preference $ 40,000,000
- -------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 16,702
- -------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares
at liquidation preference 40,016,702
- -------------------------------------------------------------------------------
Net assets available to common shares:
Net asset value per share $13.78
($222,697,882 divided by 16,157,092 shares) 222,697,882
- -------------------------------------------------------------------------------
NET ASSETS $262,714,584
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF OPERATIONS
Six months ended October 31, 1995 (Unaudited)
- -------------------------------------------------------------------------------
TAX EXEMPT INTEREST INCOME $ 9,122,995
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 3) 923,955
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 3) 85,801
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 3) 5,993
- -------------------------------------------------------------------------------
Reports to shareholders 20,080
- -------------------------------------------------------------------------------
Auditing 34,656
- -------------------------------------------------------------------------------
Legal 8,583
- -------------------------------------------------------------------------------
Postage 28,470
- -------------------------------------------------------------------------------
Administrative services (Note 3) 5,234
- -------------------------------------------------------------------------------
Exchange listing fees 9,578
- -------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 3,211
- -------------------------------------------------------------------------------
Preferred share remarketing agent fees 49,667
- -------------------------------------------------------------------------------
Other 1,938
- -------------------------------------------------------------------------------
TOTAL EXPENSES 1,177,166
- -------------------------------------------------------------------------------
EXPENSE REDUCTION (Note 3) (45,078)
- -------------------------------------------------------------------------------
NET EXPENSES 1,132,088
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,990,907
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 4) 1,836,330
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 7,865,703
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 9,702,033
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $17,692,940
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31 APRIL 30
1995* 1995
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
- ------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------
Net investment income $ 7,990,907 $ 16,512,895
- ------------------------------------------------------------------------------
Net realized gain (loss) on investments 1,836,330 (11,564,849)
- ------------------------------------------------------------------------------
Net unrealized appreciation of investments 7,865,703 9,027,102
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 17,692,940 13,975,148
- ------------------------------------------------------------------------------
Distributions to remarketed preferred
shareholders from:
- ------------------------------------------------------------------------------
Net investment income (765,352) (1,287,696)
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS APPLICABLE TO COMMON SHAREHOLDERS 16,927,588 12,687,452
- ------------------------------------------------------------------------------
Distributions to common shareholders from:
- ------------------------------------------------------------------------------
Net investment income (7,997,809) (15,998,793)
- ------------------------------------------------------------------------------
Capital gains -- (1,481,046)
- ------------------------------------------------------------------------------
In excess of net realized gains -- (499,303)
- ------------------------------------------------------------------------------
Common share offering and closing costs charged
to paid-in-capital -- (218,436)+
- ------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 8,929,779 (5,510,126)
NET ASSETS
- ------------------------------------------------------------------------------
Beginning of period 253,784,805 259,294,931
- ------------------------------------------------------------------------------
END OF PERIOD (including undistributed net
investment income of $1,500,240 and
$2,272,494, respectively) $262,714,584 $253,784,805
- ------------------------------------------------------------------------------
Common shares outstanding at beginning of period
(Note 2) 16,157,092 16,157,092
- ------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING AT END OF PERIOD 16,157,092 16,157,092
- ------------------------------------------------------------------------------
Remarketed preferred shares at beginning of period 800 800
- ------------------------------------------------------------------------------
REMARKETED PREFERRED SHARES OUTSTANDING AT
END OF PERIOD 800 800
- ------------------------------------------------------------------------------
* Unaudited
+ Adjustments of the original offering costs to reflect cost incurred.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
FOR THE PERIOD
MAY 28, 1993
(COMMENCEMENT
SIX MONTHS ENDED YEAR ENDED OF OPERATIONS) TO
OCTOBER 31 APRIL 30 APRIL 30
1995*** 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD
(common shares) $13.23 $13.57 $14.07*
- ---------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS:
- ---------------------------------------------------------------------------------------------------
Net investment income .49 1.02 .94(a)
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .61 (.16) (.59)
- ---------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.10 .86 .35
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
- ---------------------------------------------------------------------------------------------------
Net investment income:
- ---------------------------------------------------------------------------------------------------
To preferred shareholders (.05) (.08) (.05)**
- ---------------------------------------------------------------------------------------------------
To common shareholders (.50) (.99) (.70)
- ---------------------------------------------------------------------------------------------------
Capital gains:
- ---------------------------------------------------------------------------------------------------
To common shareholders -- (.09) (.05)
- ---------------------------------------------------------------------------------------------------
In excess of capital gains:
- ---------------------------------------------------------------------------------------------------
To common shareholders -- (.03) --
- ---------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.55) (1.19) (.80)
- ---------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- (.05)
- ---------------------------------------------------------------------------------------------------
COMMON SHARE OFFERING COSTS -- (.01)+ --
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD
(common shares) $13.78 $13.23 $13.57
- ---------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD
(common shares) $13.500 $12.250 $12.625
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT MARKET VALUE
(common shares) (%)(b) 14.38(c) 5.82 (11.22)(c)
- ---------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(in thousands) $262,715 $253,785 $259,295
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (d)(e) .54(c) .95 .94(c)
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) (d)(e) 3.64(c) 6.04 6.14(c)
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 27.71 59.13 60.52
- ---------------------------------------------------------------------------------------------------
<PAGE>
* 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 2.)
*** Unaudited.
+ Adjustments of the original costs to reflect actual costs incurred.
(a) Reflects a waiver of the management fee for the period May 28, 1993 to June 13, 1993. As a
result of the waiver, expenses of the fund for the period ended April 30, 1994 reflect a
reduction of less than $0.01 per share. (See Note 3.)
(b) Total investment return assumes dividend reinvestment.
(c) Not 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) The ratio of expenses to average net assets for the period ended October 31, 1995 includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts
(See Note 3).
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1995 (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 a high level of current income exempt from
federal income tax, consistent with preservation of capital. The fund intends to
achieve its objective by investing in a portfolio of investment grade municipal
bonds 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
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 on securities held and for excise tax on income and
capital gains.
At April 30, 1995 the fund had a capital loss carryover of approximately
$4,634,000 available to offset future net capital gain, if any, which will
expire April 30, 2003.
<PAGE>
E DISTRIBUTION 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 shares is generally a 28 day
period. The applicable dividend rate for the remarketed preferred shares on
October 31, 1995 was 3.81%. 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.
F AMORTIZATION OF BOND PREMIUM AND DISCOUNT Any premium resulting from the
purchase of securities in excess of maturity value is amortized on a
yield-to-maturity basis. Discounts on zero-coupon bonds, stepped-coupon bonds
and original issue discount bonds are accreted according to the effective yield
method.
G 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.
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 $131,878. These expenses are being amortized on a straight-line basis over
a five-year period. The fund will reimburse Putnam Management for the payment of
these expenses.
NOTE 2
REMARKETED PREFERRED SHARES
The Series A remarketed preferred shares are redeemable at the option of the
fund on any dividend payment date at a redemption price of $50,000 per share,
plus an amount equal to any dividends accumulated on a daily basis but unpaid
through the redemption date (whether or not such dividends have been declared)
and, in certain circumstances, a call premium.
<PAGE>
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 October 31,
1995, no such restrictions have been placed on the fund.
NOTE 3
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management, for management and investment advisory
services 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 fee in the aggregate is based on 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 0.50% of any
amount 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 an agreed upon formula. See
"Administration Services Contract."
In connection with the initial offering of share of the fund, Putnam Management
agreed to waive its management fee from the period May 28, 1993 (commencement of
operations) to June 13, 1993.
The fund reimburses Putnam Management for the compensation and related expenses
of certain officers of the fund and their staff who provide administrative
services to the fund. The aggregate amount of all such reimbursements is
determined annually by the Trustees.
Trustees of the fund receive an annual Trustees fee of $810 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 meetings.
During the six months ended October 31, 1995, the fund adopted a Trustee Fee
Deferral Plan (the "Plan") which allows the Trustees to defer the receipt of all
or
<PAGE>
a portion of Trustees fees payable on or after July 1, 1995. The deferred fees
remain in the fund and are invested in the fund or in other Putnam funds until
distribution in accordance with the Plan.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended October 31, 1995, fund expenses were reduced by $45,078
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 the assets utilized in connection with the expense offset
arrangement in an income-producing asset if it had not entered into such
arrangements.
NOTE 4
PURCHASES AND SALES OF SECURITIES
During the six months ended October 31, 1995, purchases and sales of investment
securities other than short-term investments aggregated $68,892,157 and
$72,909,996 respectively. Purchases and sales of short-term municipal
obligations aggregated $39,000,000 and $31,400,000, respectively. In determining
the net gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
<PAGE>
<TABLE>
<CAPTION>
SELECTED QUARTERLY DATA*
(Unaudited)
NET REALIZED
AND UNREALIZED NET INCREASE
INVESTMENT NET INVESTMENT GAIN (LOSS) ON IN NET ASSETS
INCOME+ INCOME+ INVESTMENTS+ FROM OPERATIONS+
QUARTER PER PER PER PER
ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
-----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/95 $4,550,958 $.28 $3,565,681 $.21 $ 5,783,632 $.37 $ 9,349,313 $.58
7/31/95 4,572,037 .28 3,659,874 .23 3,918,401 .24 7,578,275 .47
4/30/95 4,579,698 .29 3,626,511 .22 6,565,282 .40 10,191,793 .62
1/31/95 4,693,515 .28 3,814,166 .24 2,986,140 .18 6,800,306 .42
10/31/94 4,800,324 .30 3,864,423 .24 (11,848,099) (.73) (7,983,676) (.49)
7/31/94 4,830,847 .30 3,920,099 .24 (241,070) (.01) (3,679,029) .23
4/30/94 4,762,164 .30 3,863,391 .25 (19,384,620) (1.20) (15,521,229) (.95)
1/31/94 4,826,033 .30 3,957,895 .24 1,382,956 .09 5,340,851 .33
**10/31/93 4,810,626 .29 3,933,551 .24 5,512,842 .34 9,446,393 .58
*7/31/93 2,859,558 .18 2,560,752 .16 2,964,206 .18 5,524,958 .34
+ Per common share.
* In connection with the initial offering of shares of the fund, Putnam Management agreed to
waive its management fee and administration services fee for the period May 28, 1993
(commencement of operations) to June 13, 1993. As a result of such waiver, expenses of the
fund reflect a reduction of less than $0.01 per share.
** Preferred shares were issued on August 3, 1993.
</TABLE>
<PAGE>
RESULTS OF OCTOBER 5, 1995 SHAREHOLDER MEETING
An annual meeting of shareholders of the fund was held on October 5, 1995. At
the meeting, each of the nominees for Trustees was elected, as follows:
VOTES FOR VOTES WITHHELD
- --------------------------------------------------------------------------------
Jameson Adkins Baxter 15,263,280 219,622
Hans H. Estin 15,259,167 223,735
Elizabeth T. Kennan 15,268,786 214,116
Lawrence J. Lasser 15,263,157 219,744
Donald S. Perkins 15,255,405 227,496
William F. Pounds 15,263,683 219,219
George Putnam 15,260,989 221,913
George Putnam, III 15,257,368 225,534
E. Shapiro 15,246,396 236,506
A.J.C. Smith 15,267,868 215,034
W. Nicholas Thorndike 15,270,266 212,636
- --------------------------------------------------------------------------------
A proposal to ratify the selection of Coopers & Lybrand L.L.P. as auditors for
the fund was approved as follows: 15,167,917 votes for, and 69,508 votes
against, with 245,477 abstentions and broker non-votes. A proposal to fix the
number of Trustees at 13 was approved as follows: 34,351,246 for, and 773,771
against. All tabulations have been rounded to the nearest whole number.
<PAGE>
FUND INFORMATION
INVESTMENT MANAGER OFFICERS
Putnam Investment George Putnam
Management, Inc. President
One Post Office Square
Boston, MA 02109 Charles E. Porter
Executive Vice President
MARKETING SERVICES
Putnam Mutual Funds Corp. Patricia C. Flaherty
One Post Office Square Senior Vice President
Boston, MA 02109
Lawrence J. Lasser
CUSTODIAN Vice President
Putnam Fiduciary Trust Company
Gordon H. Silver
LEGAL COUNSEL Vice President
Ropes & Gray
James E. Erickson
TRUSTEES Vice President
George Putnam, Chairman
Blake Anderson
William F. Pounds, Vice Chairman Vice President
Jameson Adkins Baxter Triet M. Nguyen
Vice President and Fund Manager
Hans H. Estin
William N. Shiebler
John A. Hill Vice President
Elizabeth T. Kennan John R. Verani
Vice President
Lawrence J. Lasser
Paul M. O'Neil
Robert E. Patterson Vice President
Donald S. Perkins John D. Hughes
Vice President and Treasurer
George Putnam, III
Beverly Marcus
Eli Shapiro Clerk and Assistant Treasurer
A.J.C. Smith
W. Nicholas Thorndike
<PAGE>
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>
[LOGO: PUTNAM INVESTMENTS] ------------
Bulk Rate
U.S. Postage
THE PUTNAM FUNDS PAID
One Post Office Square Putnam
Boston, Massachusetts 02109 Investments
------------
21694-582 12/95
