Putnam
Municipal
Opportunities
Trust
SEMIANNUAL REPORT
October 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "As always, we continue to pursue pockets of opportunity in areas that
enable us to maintain a balance of high current tax-free income and
capital preservation."
-- Blake E. Anderson, manager
Putnam Municipal Opportunities Trust
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
17 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
The first half of Putnam Municipal Opportunities Trust's fiscal year
finished on a more propitious note than it began. During the six months
ended October 31, 1996, your fund -- and the rest of the tax-exempt bond
market -- made up ground lost to the challenges presented by the flat-
tax concerns and to the worry that a still-vibrant economy would ignite
the fires of inflation.
As investors gradually concluded that their fears may have been
misplaced, the fixed-income market environment began to show steady
improvement. Prospects for the second half of your fund's fiscal year
now seem more positive. Demand for tax-exempt securities is strong,
especially relative to their fairly modest supply. The economy, interest
rates, and inflation remain generally favorable.
I am pleased to announce that Blake Anderson has assumed management of
your fund. Blake has 10 years of investment experience and has been a
member of Putnam's municipal bond group since 1987. He reviews the
fund's performance and prospects in the report that follows.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
December 18, 1996
Report from the Fund Manager
Blake E. Anderson
In the past six months, municipal bonds have staged an impressive
turnaround. Talk of tax reform, an uncertain political climate and
changing expectations with regard to economic growth, and future
inflation all plagued the tax-exempt market early this year. However, as
the year progressed, the impact of these political and economic
uncertainties faded. The municipal bond market regained stability and
started to generate positive returns, a recovery that is quite evident
in the performance of Putnam Municipal Opportunities Trust.
Your fund delivered solid performance over the six months ended October
31, 1996. We are particularly pleased with the fund's total return
relative to that of the greater municipal bond market and as a hedge
against inflation. During the period, your fund generated a total return
of 5.55% at net asset value (NAV) and 5.54% at market price, which
compares favorably with the 4.54% return for the Lehman Brothers
Municipal Bond Index and the modest 1.28% rise in the Consumer Price
Index (CPI) over the same period. In fact, since the fund's inception on
May 28, 1993, it has produced a cumulative total return of 25.33% at
NAV, an annual average of 6.80%, well ahead of the annual averages of
6.07% for the Lehman Brothers index and 2.76% for the CPI.
* POLITICS, INTEREST RATES, AND ECONOMY SHAPED YEAR'S MARKET ENVIRONMENT
Politics and the direction of interest rates dictated the municipal bond
market's course last spring. Initially mired in concerns that flat-tax
proposals would threaten the tax-favored status of municipal bonds,
investors pushed bond prices lower during the presidential primary
campaigning in late 1995 and early 1996. The market's tone improved
dramatically as prospects for enactment of any tax reform proposals this
year became less likely and as other political uncertainties became
resolved in investors' minds.
Just when the municipal bond market had begun to gain stability from
this more positive political environment, however, an influx of changing
economic and interest rate expectations precipitated another brief loss
of momentum. Interest rates had fallen to near-historic lows through
much of 1995 and early 1996 on the prospects of slow economic growth and
low inflation. However, in March 1996, rates reversed course as reports
of increasing strength in employment began to appear. Investors
developed concerns that strong employment growth would stimulate robust
economic activity and future inflation. Volatility increased through
June as investors waited for longer-term trends to emerge.
By midyear, moderate economic growth had been confirmed and inflation
remained well contained. Investors were still watchful for signs of
future inflation but started to feel more confident that economic growth
and inflation would remain under control. Volatility began to subside
and interest rates moved within a narrow range. That environment
continues to prevail as your fund enters the second half of fiscal 1997.
[GRAPHIC OMITTED: HORIZONTAL BAR CHART OF TOP INDUSTRY SECTORS*]
TOP INDUSTRY SECTORS*
Transportation 27.4%
Utilities 26.0%
Health care 11.3%
Housing 8.1%
Resource management 5.9%
Footnote reads:
*Based on net assets as of 10/31/96. Holdings will vary over time.
* TRANSPORTATION SECTOR OFFERS OPPORTUNITIES FOR INCOME AND TOTAL RETURN
The fund's investment in the transportation sector, particularly in
airlines and airports, has contributed substantially to total return.
Supply and demand factors, the increasing globalization of business, and
a healthy business and economic climate have enabled the airline
industry to recover from the unprofitablity that plagued it through the
early 1990s. As a consequence, many companies in the industry were able
to announce record earnings this year. With so many positive events, it
is not surprising that the prices of airline-related bonds have risen
faster than those linked to many other industries.
Furthermore, airlines have enjoyed a high load factor, an important
industry gauge of supply and demand. Demand for air travel is determined
by revenue passenger miles, and supply by available seat miles. The load
factor is the percentage of seats filled. Because demand has outstripped
supply, the load factor has been high. Capacity expansion remains
modest, another factor that bodes well for the future.
Other industries may also be due for some improvement, and we will
continue to pursue investments that are what we believe to be pockets of
opportunity. Among the industries we are watching closely are utility
and paper and forest products. A series of negative events in the
utility industry has pushed security prices to a point at which we
believe they may be becoming undervalued. As we monitor the paper and
forest product industry, which has been in decline, we are beginning to
notice some firmness in the prices of selected grades of paper. This
leads us to believe that industry may be nearing a bottom in its cycle
and preparing for a recovery.
* STABLE-TO-POSITIVE ENVIRONMENT FORECAST FOR BALANCE OF FISCAL YEAR
We expect a stable-to-positive environment for municipal bonds over the
next six months. While we are always alert for developments on the
political front, we believe a continuation of the political status quo
will help maintain stability in the tax-exempt market. Lack of a
consensus on tax-reform proposals would represent a positive situation.
We also look for economic strength and for the direction of interest
rates to remain favorable for municipal bonds. The economy has been able
to maintain a pattern of moderate growth amid low inflation. While
investors will be watchful of the behavior of commodity prices and other
preliminary signs of future inflation, we are optimistic that this
period of stable trend growth and benign inflation will be sustained.
With this type of environment, we believe interest rates will move
within a relatively narrow range, which should lend support to municipal
bond prices.
[GRAPHIC OMITTED: PIE CHART OF PORTFOLIO QUALITY OVERVIEW]
Aaa 31.7%
Aa 4.3%
A 7.3%
Baa 39.1%
Ba 14.4%
B 1.0%
VMIGI 2.3%
Footnote reads:
*As a percentage of market value as of 10/31/96. A bond rated Baa or
higher is considered investment grade. All ratings reflect Moody's
descriptions, unless noted otherwise; percentages may include unrated
bonds considered by Putnam Management to be of comparable quality.
Ratings will vary over time.
Finally, with the stock market at record highs, we would not be
surprised to see investors shift a larger portion of their assets into
the municipal bond market. Over the long term, we look for municipal
bonds to provide an attractive level of dividends and to generate solid
total returns for investors seeking tax-advantaged income.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 10/31/96, there is no guarantee the fund
will continue to hold these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Municipal Opportunities Trust is designed for investors
seeking high current income free from federal income tax, consistent
with preservation of capital.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions in the fund.
TOTAL RETURN FOR PERIODS ENDED 10/31/96
(common shares)
Lehman Bros.
Market Municipal Consumer
NAV price Bond Index Price Index
- ------------------------------------------------------------------------
6 months 5.55% 5.54% 4.54% 1.28%
- ------------------------------------------------------------------------
1 year 7.17 10.38 5.71 2.99
- ------------------------------------------------------------------------
Life of fund
(since 5/28/93) 25.33 18.63 22.31 9.78
Annual average 6.80 5.11 6.07 2.76
- ------------------------------------------------------------------------
Performance data represent past results and do not reflect future
performance. They do not take into account any adjustment for taxes
payable on reinvested distributions. Investment returns, 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.
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most recent calendar quarter)
Market
NAV price
- ------------------------------------------------------------------------
6 months 4.11% 6.56%
- ------------------------------------------------------------------------
1 year 7.19 12.54
- ------------------------------------------------------------------------
Life of fund
(since 5/28/93) 23.69 16.87
Annual average 6.55 4.76
- ------------------------------------------------------------------------
PRICE AND DISTRIBUTION INFORMATION
6 months ended 10/31/96
- ------------------------------------------------------------------------
Distributions (common shares) (number) 6
- ------------------------------------------------------------------------
Income $0.495
- ------------------------------------------------------------------------
Total $0.495
- ------------------------------------------------------------------------
Preferred shares (800 shares)
- -----------------------------------------------------------------------
Income $953.33
- ------------------------------------------------------------------------
Total $953.33
- ------------------------------------------------------------------------
Share value
(common shares): NAV Market price
- ------------------------------------------------------------------------
4/30/96 $13.50 $13.625
- ------------------------------------------------------------------------
10/31/96 13.75 13.875
- ------------------------------------------------------------------------
Current return
(common shares): NAV Market price
- ------------------------------------------------------------------------
End of period
- -----------------------------------------------------------------------
Current dividend rate1 7.19% 7.14%
- ------------------------------------------------------------------------
Taxable equivalent2 11.90 11.82
- ------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by
NAV or market price at end of period.
2 Assumes maximum 39.6% federal income tax rate. Certain high-income
investors may be subject to the Alternative Minimum Tax on a portion of
investment income. Income may be subject to state and local taxes.
Results for investors subject to lower tax rates would not be as
advantageous.
TERMS AND DEFINITIONS
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities and the liquidation preference on the remarketed preferred
shares, divided by the number of outstanding common shares.
Market price is the current trading price of one share of the fund.
Market prices are set by transactions between buyers and sellers on the
New York Stock Exchange.
COMPARATIVE BENCHMARKS
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the
municipal bond market. The index reinvests all distributions, 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. It is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Portfolio of investments owned
October 31, 1996 (Unaudited)
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
GNMA Coll. -- Government National Mortgage Association Collateralized
IFB -- Inverse Floating Rate Bonds
IF COP -- Inverse Floating Rate Certificate of Participation
MBIA -- Municipal Bond Investors Assurance Corporation
VRDN -- Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (97.3%)*
PRINCIPAL AMOUNT RATINGS** VALUE
<S> <C> <C> <C> <C>
Alabama (2.1%)
- ------------------------------------------------------------------------------------------------------------------------------
$5,000,000 Butler, Indl. Dev. Board Rev. Bonds (Solid Waste
Disp. James River Corp. ), 8s, 9/1/28 BBB 5,556,250
Arizona (1.2%)
- ------------------------------------------------------------------------------------------------------------------------------
2,860,000 Scottsdale, Indl. Dev. Auth. Rev. Bonds
(Westminster Village ), 7 7/8s, 6/1/09 BB/P 3,053,050
California (10.3%)
- ------------------------------------------------------------------------------------------------------------------------------
5,000,000 Foothill/Eastern Trans. Corridor Agcy. Rev. Bonds
(CA Toll Roads), Ser. A, 5s, 1/1/35 Baa 4,212,500
3,000,000 Metro. Wtr. Dist. IFB (Southern CA Waterwks.),
7.282s, 8/10/18 Aa 3,093,750
2,000,000 Orange Cnty., Pub. Fac. Corp. COP (Solid Waste
Management), 7 7/8s, 12/1/13 Baa 2,110,000
5,000,000 San Bernardino Cnty. COP (Med. Ctr. Fin. ),
Ser. A, MBIA, 6 1/2s, 8/1/17 Aaa 5,562,500
3,000,000 San Diego, IF COP, AMBAC, 8.12s, 9/1/07 Aaa 3,142,500
6,000,000 San Diego Cnty., COP, AMBAC, 5 5/8s, 9/1/12 Aaa 6,067,500
3,000,000 So. CA Pub. Pwr. Auth. IFB, FGIC, 6.79s, 7/1/17 Aaa 2,771,250
-----------
26,960,000
Colorado (6.5%)
- ------------------------------------------------------------------------------------------------------------------------------
Denver, City & Cnty. Arpt. Rev. Bonds,
9,440,000 Ser. A, 8 3/4s, 11/15/23 Baa 11,115,600
3,160,000 MBIA, 8 1/2s, 11/15/23 Aaa 3,673,500
2,000,000 Ser. D, 7 3/4s, 11/15/21 Baa 2,215,000
-----------
17,004,100
Florida (1.3%)
- ------------------------------------------------------------------------------------------------------------------------------
3,000,000 Broward Cnty., Resource Recvy. Rev. Bonds (SES
Broward Cnty. LP South ), 7.95s, 12/1/08 A 3,307,500
Illinois (14.2%)
- ------------------------------------------------------------------------------------------------------------------------------
Chicago, O'Hare Intl. Arpt. Special Fac.
Rev. Bonds (United Air Lines, Inc.)
10,900,000 Ser. 84A, 8.85s, 5/1/18 Baa 12,289,750
8,930,000 Ser. C, 8.2s, 5/1/18 Baa 9,689,050
10,000,000 IL Hsg. Dev. Auth. Multi-Fam. Rev. Bonds,
Ser. 91A, 8 1/4s, 7/1/16 A 10,687,500
1,900,000 IL Hsg. Dev. Auth. Res. Mtge. IFB, 9.907s, 2/1/20
(acquired 5/28/93, cost $2,152,225) (double dagger) Aa 2,052,000
8,330,000 IL Hsg. Dev. Auth. Metropolitan Pier & Exposition
Auth. Rev. Bonds (McCormick), Ser. A, MBIA,
zero %, 12/15/16 Aaa 2,592,712
-----------
37,311,012
Indiana (2.0%)
- ------------------------------------------------------------------------------------------------------------------------------
3,000,000 IL State Dev. Fin. Auth. Rev. Bonds
(Inland Steel Co. ), 6.85s, 12/1/12 BB 3,108,750
2,000,000 Indianapolis, Indl. Arpt. Auth. Special Fac. Rev. Bonds
(Federal Express Corp. ), 7.1s, 1/15/17 Baa 2,137,500
-----------
5,246,250
Kentucky (1.9%)
- ------------------------------------------------------------------------------------------------------------------------------
Kenton Cnty., Arpt. Board Special Fac. Rev. Bonds
(Delta Air Lines, Inc. )
3,400,000 Ser. A, 7 1/2s, 2/1/20 Baa 3,655,000
1,300,000 Ser. B, 7 1/4s, 2/1/22 Baa 1,387,750
-----------
5,042,750
Louisiana (3.4%)
- ------------------------------------------------------------------------------------------------------------------------------
5,500,000 Port of New Orleans, Indl. Dev. Rev. Bonds
(Continental Grain Co. ), 7 1/2s, 7/1/13 BB 5,857,500
2,850,000 St. Charles Parish, Poll. Control Rev. Bonds
(LA Pwr. & Lt. Co.), 8s, 12/1/14 Baa 3,110,063
-----------
8,967,563
Massachusetts (4.9%)
- ------------------------------------------------------------------------------------------------------------------------------
MA State Hlth. & Edl. Fac. Auth. Rev. Bonds
3,135,000 (Norwood Hosp.), Ser. E, 8s, 7/1/12 Ba 3,189,863
3,000,000 (Rehab. Hosp. Cape & Islands),
Ser. A, 7 7/8s, 8/15/24 BB/P 3,116,250
MA State Indl. Fin. Agcy. Resource Recvy.
3,000,000 Rev. Bonds (Southeastern MA ), Ser. A, 9s, 7/1/15 BB/P 3,393,750
1,000,000 (1st Mtge. Brookhaven), Ser. A, 7s, 1/1/15 BBB/P 1,030,000
2,500,000 MA State Wtr. Resources Auth. Rev. Bonds,
Ser. B, MBIA, 4 3/4s, 12/1/21 Aaa 2,140,625
-----------
12,870,488
Michigan (1.7%)
- ------------------------------------------------------------------------------------------------------------------------------
1,700,000 Dickinson Cnty., Hosp. Rev. Bonds (Memorial
Hosp. Syst.), 8 1/8s, 11/1/24 BBB 1,863,625
2,500,000 MI State Hsg. Dev. Auth. Rental Hsg. Rev. Bonds,
Ser. A, FSA, 7.55s, 4/1/23 Aaa 2,690,625
-----------
4,554,250
Mississippi (1.0%)
- ------------------------------------------------------------------------------------------------------------------------------
2,500,000 Claiborne Cnty., Poll. Control Rev. Bonds (Middle
South Energy, Inc.), Ser. B, 8 1/4s, 6/1/14 BB/P 2,709,375
Missouri (0.5%)
- ------------------------------------------------------------------------------------------------------------------------------
1,300,000 Kansas City, Indl. Dev. Auth. VRDN (Resh Hlth.
Svcs. Syst.), MBIA, 3.7s, 10/15/15 VMIG1 1,300,000
Nebraska (1.1%)
- ------------------------------------------------------------------------------------------------------------------------------
2,500,000 NE Investment Fin. Auth. Single Fam. Mtge.
IFB, Ser. 2, GNMA Coll., 11.51s, 9/10/30 Aaa 2,787,500
Nevada (2.3%)
- ------------------------------------------------------------------------------------------------------------------------------
Clark Cnty., Indl. Dev. Rev. Bonds (Southwest Gas Corp.)
2,750,000 Ser. B, 7 1/2s, 9/1/32 Baa 2,942,500
3,000,000 Ser. A, 6 1/2s, 12/1/33 Baa 3,003,750
-----------
5,946,250
New Jersey (9.8%)
- ------------------------------------------------------------------------------------------------------------------------------
9,000,000 NJ Econ. Dev. Auth. Elec. Energy Fac. Rev. Bonds
(Vineland Cogeneration L.P.), 7 7/8s, 6/1/19 BB 9,731,250
Hlth. Care Fac. Fin. Auth. Rev. Bonds
1,500,000 (Kimball Med. Ctr.), Ser. C, 8s, 7/1/13 BBB 1,608,750
2,590,000 (Raritan Bay Med. Ctr.), 7 1/4s, 7/1/14 BB/P 2,725,975
10,000,000 Salem Cnty. Indl. Poll. Control Fin. Auth. IFB, MBIA,
8.954s, 10/1/29 (acquired 10/28/94, cost $9,750,000) (double dagger) Aaa 11,712,500
-----------
25,778,475
New York (2.8%)
- ------------------------------------------------------------------------------------------------------------------------------
4,600,000 NY City, Indl. Dev. Agcy. Special Fac. Rev. Bonds
(American Airlines, Inc.), 8s, 7/1/20 Baa 4,916,250
2,500,000 NY State Dorm. Auth. Rev. Bonds (U. Syst. Construction),
Ser. A, 5 5/8s, 7/1/16 Baa 2,431,250
-----------
7,347,500
North Carolina (0.8%)
- ------------------------------------------------------------------------------------------------------------------------------
2,000,000 NC Eastern Muni. Pwr. Agcy. Syst. Rev. Bonds,
Ser. B, 6s, 1/1/22 Baa 1,970,000
Ohio (1.2%)
- ------------------------------------------------------------------------------------------------------------------------------
2,813,000 OH Hsg. Fin. Agcy. Single Fam. Mtge. IFB,
Ser. A-2, GNMA Coll., 9.909s, 3/24/31 Aaa 3,009,910
Pennsylvania (7.3%)
- ------------------------------------------------------------------------------------------------------------------------------
5,000,000 Allegheny Cnty., Hosp. Dev. Auth. Rev. Bonds
(Pittsburgh Mercy Hlth. Syst.), AMBAC,
5 5/8s, 8/15/26 Aaa 4,912,500
7,000,000 Montgomery Cnty., Higher Edl. & Hlth. Auth. Hosp.
Rev. Bonds (UTD Hosp.), Ser. B, 8 3/8s, 11/1/11 Aaa 7,883,750
1,000,000 PA State Econ. Dev. Fin. Auth. Resource Recvy.
Rev. Bonds (Colver), Ser. D, 7.15s, 12/1/18 BBB 1,053,750
5,000,000 PA State Higher Ed. Assistance Agcy. Student
Loan IFB, AMBAC, 9.834s, 9/3/26 Aaa 5,325,000
-----------
19,175,000
South Carolina (1.8%)
- ------------------------------------------------------------------------------------------------------------------------------
4,500,000 Spartanburg Cnty., Solid Waste Disp. Rev. Bonds
(Bayerische Motoren Werke), 7.55s, 11/1/24 A/P 4,848,750
Tennessee (0.3%)
- ------------------------------------------------------------------------------------------------------------------------------
900,000 Metro. Nashville Arpt. Auth. Fac. VRDN (American Airlines),
Ser. A, 3.65s, 10/1/12 VMIG1 900,000
Texas (11.7%)
- ------------------------------------------------------------------------------------------------------------------------------
5,500,000 Alliance Arpt. Auth. Special Fac. Rev. Bonds (American
Airlines, Inc.), 7 1/2s, 12/1/29 Baa 5,864,375
Bexar Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds (Baptist Memorial Hosp.)
4,800,000 7.9s, 5/1/18 Aaa 5,622,000
2,000,000 7.9s, 5/1/11 Aaa 2,342,500
4,500,000 Brazos River, Poll. Control Auth. Rev. Bonds
(TX Utils. Elec. Co.), Ser. A, 7 7/8s, 3/1/21 Baa 4,961,250
2,420,000 Jefferson Cnty., Hlth. Fac. Dev. Corp. Hosp. Rev. Bonds
(Baptist Healthcare Syst.), 8 7/8s, 6/1/21 Ba 2,528,900
3,535,000 Port Corpus Christi, Indl. Dev. Corp. Rev. Bonds (Valero
Refining & Marketing Co.), Ser. A, 10 1/4s, 6/1/17 Baa 3,753,569
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 5,737,500
-----------
30,810,094
Virginia (1.4%)
- ------------------------------------------------------------------------------------------------------------------------------
3,000,000 Fairfax Cnty., Indl. Dev. Auth. IFB (Fairfax Hosp. Syst.),
Ser. C, 9.595s, 8/29/23 Aaa 3,682,500
Washington (5.8%)
- ------------------------------------------------------------------------------------------------------------------------------
7,150,000 Pierce Cnty., Econ. Dev. Corp. Rev. Bonds (Solid
Waste-Occidental Petroleum), 5.8s, 9/1/29 Baa 6,703,125
3,450,000 WA State Hlth. Care Fac. VRDN (Sisters Providence),
Ser. E, 3.6s, 10/1/05 VMIG1 3,450,000
5,000,000 WA State Pub. Pwr. Auth. Rev. Bonds (Nuclear No. 2),
Ser. A, MBIA, 5.7s, 7/1/12 Aaa 5,012,500
-----------
15,165,625
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $250,342,381)*** 255,304,192
- ------------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $262,262,632.
Net assets available to common shareholders are $222,240,341.
** The Moody's or Standard & Poor's ratings indicated are
believed to be the most recent ratings available at
October 31, 1996 for the securities listed. Ratings
are generally ascribed to securities at the time of
issuance. While the agencies may from time to time revise
such ratings, they undertake no obligation to do so, and the
ratings do not necessarily represent what the agencies would
ascribe to these securities at October 31, 1996. Securities
rated by Putnam are indicated by "/P" and are not publicly
rated.
The table below shows the percentage of the fund's
investment on October 31, 1996 in securities
assigned to various rating categories by Moody's and
Standard & Poor's and in unrated securities determined by
Putnam Management to be of comparable quality.
<CAPTION>
Unrated securities
Rated securities of comparable quality,
as a percentage of as a percentage of
Rating fund's net assets fund's net assets
- -----------------------------------------------------------------------------------------
<S> <C> <C>
AAA/Aaa 30.8% --
AA/Aa 4.1 --
A/A 5.3 1.8%
BBB/Baa 37.6 0.4
BB/Ba 8.3 5.7
B/B 1.0 --
A-1/VMIGI 2.2 --
- -----------------------------------------------------------------------------------------
89.3% 8.0%
- -----------------------------------------------------------------------------------------
*** The aggregate identified cost on a tax basis is
$250,342,381, resulting in gross unrealized appreciation and
depreciation of $8,760,753 and $3,798,942, respectively,
or net unrealized appreciation of $4,961,811.
(double dagger) Restricted, excluding 144A securities, as to public resale.
The total market value of restricted securities held at
October 31, 1996 was $13,764,500 or 5.2% of
net assets.
The fund had the following industry group
concentrations greater than 10% at
October 31, 1996 (as a percentage of net assets):
Transportation 27.4%
Utilities 26.10
Healthcare 11.3
The rates shown on IFB and IF COP, which are securities
paying interest rates that vary inversely to changes in the
market interest rates, and VRDN's are the current interest
rates at October 31, 1996.
Footnote reads:
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31, 1996 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------
Investments in securities, at value (identified
cost $250,342,381) (Note 1) $255,304,192
- ---------------------------------------------------------------------------------
Cash 66,417
- ---------------------------------------------------------------------------------
Interest receivable 5,761,252
- ---------------------------------------------------------------------------------
Receivable for securities sold 3,086,417
- ---------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 10,047
- ---------------------------------------------------------------------------------
Total assets 264,228,325
Liabilities
- ---------------------------------------------------------------------------------
Distributions payable to shareholders 1,332,920
- ---------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 470,744
- ---------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 16,004
- ---------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 81
- ---------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,589
- ---------------------------------------------------------------------------------
Payable for organization expense (Note 1) 36,681
- ---------------------------------------------------------------------------------
Other accrued expenses 106,674
- ---------------------------------------------------------------------------------
Total liabilities 1,965,693
- ---------------------------------------------------------------------------------
Net Assets $262,262,632
Represented by
- ---------------------------------------------------------------------------------
Remarketed preferred shares (800 shares issued and
outstanding at $50,000 per share) (Note 4) $40,000,000
- ---------------------------------------------------------------------------------
Paid in capital-common shares (Note 1) 226,378,559
- ---------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 140,090
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (9,217,828)
- ---------------------------------------------------------------------------------
Net unrealized appreciation of investments 4,961,811
- ---------------------------------------------------------------------------------
Total - Representing net assets applicable
to capital shares outstanding $262,262,632
Computation of net asset value:
- ---------------------------------------------------------------------------------
Remarketed preferred shares $40,000,000
- ---------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed
preferred shares 22,291
- ---------------------------------------------------------------------------------
Net assets allocated to remarketed
preferred shares -- liquidation preference $40,022,291
- ---------------------------------------------------------------------------------
Net assets available to common shares $222,240,341
- ---------------------------------------------------------------------------------
Net asset value per common share ($222,240,341
divided by 16,157,092 shares) $13.75
- ---------------------------------------------------------------------------------
Footnote reads:
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six months ended October 31, 1996 (Unaudited)
- ----------------------------------------------------------------------------------
<S> <C>
Tax exempt interest income: $9,188,225
- ----------------------------------------------------------------------------------
Expenses:
- ----------------------------------------------------------------------------------
Compensation of Manager (Note 2) 926,251
- ----------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 103,945
- ----------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 6,254
- ----------------------------------------------------------------------------------
Administrative services (Note 2) 3,862
- ----------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 3,211
- ----------------------------------------------------------------------------------
Reports to shareholders 31,553
- ----------------------------------------------------------------------------------
Auditing 27,245
- ----------------------------------------------------------------------------------
Legal 8,135
- ----------------------------------------------------------------------------------
Postage 89,055
- ----------------------------------------------------------------------------------
Exchange listing fees 12,130
- ----------------------------------------------------------------------------------
Preferred share remarketing agent fees 46,098
- ----------------------------------------------------------------------------------
Other 587
- ----------------------------------------------------------------------------------
Total expenses 1,258,326
- ----------------------------------------------------------------------------------
Expense reduction (Note 2) (29,916)
- ----------------------------------------------------------------------------------
Net expenses 1,228,410
- ----------------------------------------------------------------------------------
Net investment income 7,959,815
- ----------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 356,037
- ----------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 440,942
- ----------------------------------------------------------------------------------
Net unrealized appreciation of investments
and futures contracts during the period 4,146,583
- ----------------------------------------------------------------------------------
Net gain on investments 4,943,562
- ----------------------------------------------------------------------------------
Net increase in net assets resulting from operations $12,903,377
- ----------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
October 31 April 30
1996+ 1995
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $7,959,815 $16,028,262
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 796,979 2,139,601
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 4,146,583 3,617,324
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 12,903,377 21,785,187
- ---------------------------------------------------------------------------------------------------------------
Distributions to remarketed preferred shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income (762,664) (1,455,352)
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations
(excluding cumulative undeclared dividends on
remarketed preferred shares of $22,291 and $71,506,
respectively) 12,140,713 20,329,835
- ---------------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income (7,997,478) (15,995,243)
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 4,143,235 4,334,592
- ---------------------------------------------------------------------------------------------------------------
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 258,119,397 253,784,805
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $140,090 and $940,417, respectively) $262,262,632 $258,119,397
- ---------------------------------------------------------------------------------------------------------------
Number of fund shares
- ---------------------------------------------------------------------------------------------------------------
Common shares outstanding at beginning and end of period 16,157,092 16,157,092
- ---------------------------------------------------------------------------------------------------------------
Remarketed preferred shares outstanding
at beginning and end of period 800 800
- ---------------------------------------------------------------------------------------------------------------
+Unaudited
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Six months ended Year ended
October 31 April 30 April 30
--------------------------------------------------------------
1996+ 1996 1995
--------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period (common shares) $13.50 $13.23 $13.57
- ---------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .49 .99 1.02
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .31 .36 (.16)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations .80 1.35 .86
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------
From net investment income:
- ---------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.05) (.09) (.08)
- ---------------------------------------------------------------------------------------------------------------------
To common shareholders (.50) (.99) (.99)
- ---------------------------------------------------------------------------------------------------------------------
From net realized gains on investments:
- ---------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- (.09)
- ---------------------------------------------------------------------------------------------------------------------
In excess of capital gains:
- ---------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- (.03)
- ---------------------------------------------------------------------------------------------------------------------
Total distributions (.55) (1.08) (1.19)
- ---------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Common share offering costs -- -- (.01)(g)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period (common shares) $13.75 $13.50 $13.23
- ---------------------------------------------------------------------------------------------------------------------
Market value, end of period (common shares) $13.875 $13.625 $12.250
- ---------------------------------------------------------------------------------------------------------------------
Total investment return, at market value (common shares) (%)(b) 5.54* 19.64 5.82
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $262,263 $258,119 $253,785
- ---------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c)(d) .57* 1.05 .95
- ---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(c) 3.29* 6.54 6.04
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 12.36* 49.97 59.13
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights (continued)
(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(e)
- --------------------------------------------------------------------------------------
Investment operations:
- --------------------------------------------------------------------------------------
Net investment income .94(a)
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.59)
- --------------------------------------------------------------------------------------
Total from investment operations .35
- --------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------
From net investment income:
- --------------------------------------------------------------------------------------
To preferred shareholders (.05)(f)
- --------------------------------------------------------------------------------------
To common shareholders (.70)
- --------------------------------------------------------------------------------------
From net realized gains on investments:
- --------------------------------------------------------------------------------------
To common shareholders (.05)
- --------------------------------------------------------------------------------------
In excess of capital gains:
- --------------------------------------------------------------------------------------
To common shareholders --
- --------------------------------------------------------------------------------------
Total distributions (.80)
- --------------------------------------------------------------------------------------
Preferred share offering costs (.05)
- --------------------------------------------------------------------------------------
Common share offering costs --
- --------------------------------------------------------------------------------------
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) (11.22)*
- --------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $259,295
- --------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c)(d) .94*
- --------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(c) 6.14*
- --------------------------------------------------------------------------------------
Portfolio turnover rate (%) 60.52*
- --------------------------------------------------------------------------------------
* Not annualized.
+ Unaudited
(a) Reflects a waiver of the management fee.
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.
(b) Total investment return assumes dividend reinvestment.
(c) Ratios reflect net assets available to common shares only: net investment
income ratio also reflects reduction for dividend payments to preferred
shareholders.
(d) The ratio of expenses to average net assets for the year ended April 30,
1996 and thereafter, include amounts paid through expense offset
arrangements. Prior period ratios exclude these amounts. (Note 2)
(e) Represents initial net asset value of $14.10 less offering expenses of $0.03.
(f) Preferred shares were issued on August 3, 1993.
(g) Adjustments of the original offering costs to reflect actual costs incurred.
</TABLE>
Notes to financial statements
October 31, 1996 (Unaudited)
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, closed-end management investment company.
The fund's investment objective is to seek 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 preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
A) Security valuation Tax-exempt bonds and notes are stated on the basis
of valuations provided by a pricing service, approved by the Trustees,
which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and
various relationships between securities in determining value. The fair
value of restricted securities is determined by the Manager following
procedures approved by the Trustees, and such valuations and procedures
are reviewed periodically by the Trustees.
B) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Interest income is recorded on the accrual basis.
C) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices
supplied by dealers.
D) Federal taxes It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
At April 30, 1996, the fund had a capital loss carryover of
approximately $9,215,000 available to offset future capital gains, if
any. The amount of the carryover and the expiration dates are:
Loss Carryover Expiration
-------------------- --------------------
$4,634,000 4/30/2003
4,581,000 4/30/2004
E) Distributions to shareholders Distributions to common and preferred
shareholders are recorded by the fund on the ex-dividend date. Dividends
on remarketed preferred shares become payable when, as and if declared
by the Trustees. Each dividend period for the remarketed preferred
shares is generally a 28 day period. The applicable dividend rate for
the remarketed preferred shares on October 31, 1996 was 3.39%. The
amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. Reclassifications are
made to the fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under
income tax regulations.
F) Determination of net asset value Net asset value of the common
shares is determined by dividing the value of all assets of the fund
(including accrued interest and dividends), less all liabilities
(including accrued expenses) and the liquidation preference of any
outstanding remarketed preferred shares, by the total number of common
shares outstanding.
G) Amortization of bond premium and accretion of bond discount Any
premium resulting from the purchase of securities in excess of maturity
value is amortized on a yield-to-maturity basis. Discounts on zero
coupon bonds, and original issue bonds are accreted according to the
effective yield method.
H) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities
and Exchange Commission and with various states and the initial public
offering of its shares were $36,681. These expenses are being amortized
on straight-line basis over a five year period.
The fund will reimburse Putnam Management for the payment of these
expenses.
Note 2
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 fees
in the aggregate are 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 by the amount of
certain brokerage commissions and fees (less expenses) received by
affiliates of Putnam Management on the fund's portfolio transactions.
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."
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the six months ended October 31, 1996, fund expenses were reduced by
$29,916 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized
in connection with the expense offset arrangements in an income
producing asset if it had not entered into such arrangements.
Trustees of the fund receive an annual Trustees fee of $780 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund
and are invested in certain Putnam funds until distribution in
accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the Fund who have
served as Trustee for at least five years. Benefits under the plan are
equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund
is included in Compensation of trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
Note 3
Purchase and sales of securities
During the six months ended October 31, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$30,914,992 and $36,851,509, respectively. There were no purchases and
sales of U.S. government obligations. In determining the net gain or
loss on securities sold, the cost of securities has been determined on
the identified cost basis.
Note 4
Remarketed preferred shares
The remarketed shares are redeemable at the option of the fund on any
dividend payment date at a redemption price of $50,000 per share, plus
an amount equal to any dividends accumulated on a daily basis but unpaid
through the redemption date (whether or not such dividends have been
declared) and, in certain circumstances, a call premium.
It is anticipated that approximately 100% of total distributions and
dividends paid during fiscal 1996 to holders of remarketed preferred
shares will be considered tax-exempt dividends under the Internal
Revenue Code of 1986. To the extent that the fund earns taxable income
and capital gains by the conclusion of a fiscal year, it will be
required to apportion to the holders of the remarketed preferred shares
throughout that year additional dividends as necessary to result in an
after-tax equivalent to the applicable dividend rate for the period.
Under the Investment Company Act of 1940, the fund is required to
maintain asset coverage of at least 200% with respect to the remarketed
preferred shares as of the last business day of each month in which any
such shares are outstanding. Additionally, the fund is required to meet
more stringent asset coverage requirements under terms of the remarketed
preferred shares and the shares' rating agencies. Should these
requirements not be met, or should dividends accrued on the remarketed
preferred shares not be paid, the fund may be restricted in its ability
to declare dividends to common shareholders or may be required to redeem
certain of the remarketed preferred shares. At October 31, 1996, no such
restrictions have been placed on the fund.
Results of October 31, 1996 shareholder meeting
(Unaudited)
A meeting of shareholders of the fund was held on October 31, 1996. At
the meeting, each of the nominees for Trustees was elected, as follows:
Common Shares Preferred Shares
Votes Votes Votes Votes
for withheld for withheld
Jameson Adkins Baxter 9,433,547 202,241 458 44
Hans H. Estin 9,431,783 204,005 458 44
R.J. Jackson 9,432,047 203,741 458 44
Elizabeth T. Kennan 9,431,747 204,041 458 44
Lawrence J. Lasser 9,433,247 202,541 458 44
Donald S. Perkins 9,431,783 204,005 458 44
William F. Pounds 9,431,783 204,005 458 44
George Putnam 9,431,783 204,005 458 44
George Putnam, III 9,433,247 202,541 458 44
Eli Shapiro 9,431,153 204,635 358 144
A.J.C. Smith 9,433,547 202,241 458 44
W. Nicholas Thorndike 9,433,547 202,241 458 44
Results of October 31, 1996 shareholder meeting
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Common Shares Preferred shares
- --------------------------------------------------------------------------------------------------------------------------
Abstentions Abstentions
Votes Votes and Broker Votes Votes and Broker
For Against Non-Votes For Against Non-Votes
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A proposal to ratify the selection of
Coopers & Lybrand L.L.P. as auditors for
the fund was approved as follows: 9,332,198 68,496 235,094 488 14 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's fundamental
investment restriction with respect to
diversification of investments was approved
as follows 7,846,215 367,643 1,421,930 418 84 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's fundamental
investment restriction with respect to
investments in the securities of a
single issuer was approved as follows 7,490,989 622,895 1,521,904 418 84 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's fundamental
investment restriction with respect to
making loans through purchases of debt
obligations, repurchase agreements and
securities loans was approved as follows 7,309,968 839,572 1,486,248 418 84 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction with
respect to concentration of its assets was
approved as follows 7,656,431 518,087 1,461,270 418 84 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction with
respect to investments in commodities
or commodity contracts was approved
as follows 7,278,542 908,635 1,448,611 418 84 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to investments in securities of
issuers in which management of the fund
or Putnam Investment Management, Inc.
owns securities was approved as follows 7,416,237 705,172 1,514,379 418 84 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to margin transactions was
approved as follows 7,230,941 947,245 1,457,602 318 184 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to short sales was approved
as follows 7,250,322 913,291 1,472,175 318 184 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction which
limits the fund's ability to pledge assets
was approved as follows 7,198,776 973,362 1,463,650 418 84 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to investments in certain oil, gas
and mineral interests was approved
as follows 7,436,924 759,324 1,439,540 318 184 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to investing to gain control of a
company's management was approved
as follows 7,444,427 712,657 1,478,704 418 84 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to investments in other
investment companies was approved
as follows 7,483,362 711,185 1,441,241 418 84 0
- --------------------------------------------------------------------------------------------------------------------------
All tabulations are rounded to nearest whole number.
</TABLE>
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary Coburn
Vice President
Jerome J. Jacobs
Vice President
Blake E. Anderson
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for up-
to-date information about the fund's NAV.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- ---------------------
29213-582 12/96
