Putnam
Investment Grade
Municipal
Trust III
ANNUAL REPORT
October 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Although we expect discussions of broader tax reform to continue, it
is our belief that the flat tax will not be an issue in the near future
and that the municipal market will tend to maintain its current
valuation level relative to the taxable markets. These valuations have
strengthened recently as investor confidence has increased.
-- Richard P. Wyke, Fund Manager,
Putnam Investment Grade Municipal Trust III
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
17 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
Putnam Investment Grade Municipal Trust III spent much of the second
half of fiscal 1996 recovering from the challenges presented during the
first half. As you will recall, your fund began its year in November
1995 amid widespread concerns by municipal bond investors that a flat
tax would erase the advantage enjoyed by tax-exempt securities. Later
the entire bond market recoiled in worry that the economy's still-robust
growth would touch off greater inflation.
During the second half, the fixed-income markets -- and your fund --
made up some lost ground, as investors regained their composure.
Prospects for the year ahead 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.
Shortly before the end of fiscal 1996, Richard Wyke assumed management
of your fund. Rick has 14 years of investment experience and has been
managing municipal bond portfolios at Putnam 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
Richard P. Wyke
Putnam Investment Grade Municipal Trust III finished its 1996 fiscal
year with positive momentum, thanks in part to the municipal bond
market's gradual shift toward a more favorable environment. During the
first half of the fiscal year, while the rest of the bond market was
well into one of the strongest advances in recent memory, tax-exempt
investors were left behind, haunted by tax-reform proposals with the
potential to change -- or even end -- the tax advantages of municipal
bond investing. However, during the year's second half, flat-tax fears
declined. Your fund was able to benefit from a relatively flat interest-
rate environment and a strategic shift in emphasis toward intermediate-
term bonds, completing the 12 months ended October 31, 1996, with total
returns of 5.28% at net asset value and 6.89% at market value.
Additional information is shown in the performance tables that begin on
page 9.
* SUPPLY/DEMAND BALANCE SHIFT NOW FAVORS GROWING SUPPLY
Although we expect discussions of broader tax reform to continue, it is
our belief that the flat tax will not be an issue in the near future and
that the municipal market will tend to maintain its current valuation
level relative to the taxable markets. These valuations have
strengthened recently as investor confidence has increased. Demand
benefited from strong retail investor interest as well as from insurance
companies. Those two sectors, along with the mutual fund sector,
represent almost all of the demand for municipal bonds. While the mutual
fund sector saw negligible cash inflow and outflow during the period,
there was sufficient demand from the other two sectors to support prices
in the municipal market.
On the supply side, approximately $170 billion worth of new-issue
municipal bonds is expected to reach the market by the end of calendar
1996. While that is still much lower than the market's peak (roughly
$295 billion in 1993), it represents an increase over last year's new-
issue level. This means that earlier concerns about vanishing municipal
bond supply have not materialized.
One aspect of municipal bond demand we have discussed in past reports
has been the large number of pre-refunded bonds awaiting redemption.
These pre-refundings in the past have allowed us to know the exact point
at which the bonds would be retired and thus have enabled us to plan
effectively for reinvestment of the assets. With the passing of 1996, we
expect to see fewer bonds redeemed through pre-refundings. Instead, we
believe the cash flows into the retail, insurance company, and mutual
fund sectors of the market will be the primary sources of demand.
* SHIFT TO BULLETED STRUCTURE INTENDED TO BOOST INCOME
There are basically five variables with which we work in terms of your
fund's portfolio structure and strategy: First and most important is
duration -- a measure of sensitivity to interest- rate changes. A longer
duration can mean a more volatile portfolio if rates rise. But a longer
duration is also more likely to provide greater capital appreciation if
rates decline. Conversely a shorter duration can help preserve portfolio
value when interest rates rise. During the fiscal year, the fund's net
interest-rate sensitivity has roughly coincided with the average
duration for the long-term municipal bond fund universe. This means that
your fund's exposure to interest-rate risk is neither more nor less than
that of the broader market.
[GRAPHIC BAR CHART OMITTED: TOP INDUSTRY SECTORS*]
TOP INDUSTRY SECTORS*
Utilities/water and sewerage 32.4%
Hospitals/health care 26.3%
Transportation 16.4%
Education 4.2%
Waste management 1.8%
Footnote reads:
*Based on net assets as of 10/31/96. Holdings will vary over time.
The second important variable in terms of fund performance is the
portfolio's yield curve positioning. During the period, we reallocated
the fund's assets from a barbell maturity structure to a bulleted
maturity structure. By this we mean that we made a pronounced shift of
assets roughly positioned at the short-term and the long-term ends of
the interest-rate spectrum to a concentration of holdings with midrange
maturities between 15 and 25 years. That strategy is intended to
generate a higher-yielding portfolio.
* CREDIT AND SECTOR SELECTION STRATEGIES PROVE REWARDING
The fund's credit quality breakdown and sector selection make up the
third performance variable. In our opinion, it is more advantageous in
today's market to allocate some portion of the portfolio to Baa-rated
bonds. While your fund's portfolio has an average credit quality of Aa,
the fund is underweighted in Aa-rated and A-rated bonds. The fund's Aa
credit quality average comes from a mixture of Aaa-rated and Baa-rated
bonds.
A look at the fund's sector selection reveals that bonds issued to
support the Denver International Airport, fixtures in the portfolio for
some time, remain key holdings. These bonds continue to offer attractive
financial performance and are rated as investment grade by both major
rating agencies. In our view, these bonds are worthwhile holdings
because of their potential for generating a high level of income with
periodic opportunities to provide attractive market price returns.
In the health-care sector, we believe the opportunities offered by
corporate mergers and taxable buyouts have been fully priced into the
market. We now view this sector as more of a trading market in which the
focus is on buying bonds that have lagged a rally or selling bonds that
have outperformed in a market correction. We anticipate that in coming
months we will diversify the fund's sector risk further by shifting more
assets into the airline, waste management, and nursing home sectors.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO QUALITY OVERVIEW*]
PORTFOLIO QUALITY OVERVIEW*
Aaa -- 44.6%
Aa -- 6.7%
A -- 17.2%
BBB/Baa -- 29.9%
VMGI -- 1.6%
Footnote reads:
*As a percentage of portfolio market value as of 10/31/96. A bond rated
BBB/Baa or higher is considered investment grade. All ratings reflect
Standard & Poor's and Moody's terminologies, unless noted otherwise and
may include unrated bonds considered by Putnam Management to be of
comparable quality. Portfolio quality will vary over time.
* NONCALLABLE STRUCTURE AND FINANCIAL LEVERAGE PROVE BENEFICIAL
The management of price volatility is the fourth variable affecting your
fund's performance. Volatility is reflected in how much and how often
the price of a security changes, up or down. Rapid, wide price swings
indicate a high degree of volatility. We believe there are unique
valuations that occur in the municipal bond market because of call
structure in conjunction with shapes of the yield curve and the coupon
on a bond. It is our belief, in general, that noncallable bonds are
currently undervalued in the municipal market and have been for a long
time. In other words, we believe the market is underestimating their
potential for rising volatility. We have attempted where possible to
build a noncallable structure into the portfolio and to focus on other
areas in which such potential, in our view, is being overlooked by the
market.
The last primary driver of your fund's performance is financial
leverage. To enhance income stream, the fund issues preferred shares
that pay dividends at prevailing short-term rates. These shares are sold
to corporate and institutional investors; the resulting assets are then
invested in longer-term bonds with higher yields. The difference between
the dividends paid to holders of preferred shares and the income earned
by the fund augments the flow of income to holders of common shares.
Given the continuing prospect for low short-term interest rates in
general, we believe the effects of leverage should continue to be
positive over the near term.
* OUTLOOK: UNDERVALUED MUNICIPAL BOND MARKET BODES WELL FOR FUND IN 1997
Fundamentally, given the growing prospect for slow growth in 1997 and
the lack of evidence that wage pressures are pushing on general
inflation rates, we believe interest-rate levels should continue to
decline. That prospect, coupled with the seasonal bulge in the municipal
market, should result in what we expect will be an undervalued municipal
bond market. We expect that prices in the municipal bond market may move
up over the near term, a situation that could bode well for your fund.
Footnote reads:
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 10/31/96, there is no guarantee the fund
will continue to hold these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Investment Grade Municipal Trust III 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
- ------------------------------------------------------------------------
1 year 5.28% 6.89% 5.71% 2.99%
- ------------------------------------------------------------------------
Life (11/29/93) 12.60 -4.02 17.17 8.57
Annual average 4.15 -1.40 5.58 2.86
- ------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most recent calendar quarter)
(common shares)
Market
NAV price
- ------------------------------------------------------------------------
1 year 5.84% 10.31%
- ------------------------------------------------------------------------
Life (11/29/93) 11.38 -2.54
Annual average 3.87 -0.90
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions.
Investment returns and net asset value will fluctuate so that an
investor's shares, when sold, may be worth more or less than their
original cost.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 10/31/96
- ------------------------------------------------------------------------
Distributions (common shares)
- ------------------------------------------------------------------------
Number 12
- ------------------------------------------------------------------------
Income $0.8004
- ------------------------------------------------------------------------
Total $0.8004
- ------------------------------------------------------------------------
Preferred shares (200 shares)
- ------------------------------------------------------------------------
Income $1,800.63
- ------------------------------------------------------------------------
Total $1,800.63
- ------------------------------------------------------------------------
Share value (common shares) NAV Market price
- ------------------------------------------------------------------------
10/31/95 $13.22 $11.875
- ------------------------------------------------------------------------
10/31/96 13.02 11.875
- ------------------------------------------------------------------------
Current return (common shares) NAV Market price
- ------------------------------------------------------------------------
End of period
Current dividend rate1 6.15% 6.74%
- ------------------------------------------------------------------------
Taxable equivalent2 10.18 11.16
- ------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by
NAV or market price at end of period.
2Assumes maximum 39.6% federal tax rate. Results for investors subject
to lower tax rates would not be as advantageous.
TERMS AND DEFINITIONS
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, the liquidation preference and cumulative undeclared
dividends paid on the remarketed preferred shares, divided by the number
of outstanding common shares.
Market price is the current trading price of one share of the fund.
Market prices are set by transactions between buyers and sellers on the
New York Stock Exchange.
COMPARATIVE BENCHMARKS
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the
municipal bond market. The index does not take into account brokerage
commissions or other costs, may include bonds different from those in
the fund, and may pose different risks than the fund. The index assumes
reinvestment of all distributions and interest payments and does not
take into account brokerage fees or taxes. Securities in the fund do not
match those in the index and performance of the fund will differ. It is
not possible to invest directly in an index.
Report of independent accountants
For the fiscal year ended October 31, 1996
To the Trustees and Shareholders of
Putnam Investment Grade Municipal Trust III
We have audited the accompanying statement of assets and liabilities of
Putnam Investment Grade Municipal Trust III, including the portfolio of
investments owned, as of October 31, 1996, and the related statement of
operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of
the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1996, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Putnam Investment Grade Municipal Trust III as of
October 31, 1996, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 12, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
October 31, 1996
Key to Abbreviations
AMBAC --AMBAC Indemnity Corporation
FGIC --Financial Guaranty Insurance Company
FSA --Financial Security Assurance
G.O. Bonds --General Obligation Bonds
IFB --Inverse Floating Rate Bonds
IF COP --Inverse Floating Rate Certificate of Participation
MBIA --Municipal Bond Investors Assurance Corporation
VRDN --Variable Rate Demand Notes
<S> <C> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (102.2%) *
PRINCIPAL AMOUNT RATINGS** VALUE
California (16.4%)
- ----------------------------------------------------------------------------------------------------------------------------
$2,500,000 Beverly Hills, Pub. Fin. Auth. Lease Rev. Bonds, MBIA, 5.65s, 6/1/15 Aaa $ 2,475,000
1,000,000 CA Poll. Ctrl. Fin. Auth. VRDN (Shell Oil Co.), Ser. B, 3.5s, 10/1/11 VMIGI 1,000,000
2,000,000 CA Poll. Ctrl. Fin. Auth. Rev. Bonds (San Diego Gas & Elec.), Ser. A, 5.9s,
6/1/14 A 2,085,000
1,250,000 CA State U. IFB, AMBAC, 9.985s, 11/1/21 (acquired 9/2/94, cost $1,339,094)
(double dagger) Aaa 1,481,250
1,000,000 CA State G.O. Bonds, 6 1/4s, 9/1/08 A 1,103,750
1,500,000 Foothill/Eastern, Corridor Agcy. Toll Rd. Rev. Bonds, Sr. Lien, Ser. A,
zero %, 1/1/08 Baa 952,500
1,000,000 San Diego Cnty., Wtr. Auth. IF COP, FGIC, 7.540s, 4/23/08 # Aaa 1,081,250
-----------
10,178,750
Colorado (10.4%)
- ----------------------------------------------------------------------------------------------------------------------------
Denver, City & Cnty. Arpt. Rev. Bonds
3,000,000 Ser. A, 8 3/4s, 11/15/23 Baa 3,532,500
1,500,000 Ser. A, 8 1/2s, 11/15/23 Baa 1,715,623
1,000,000 Ser. D, 7 3/4s, 11/15/13 Baa 1,201,250
-----------
6,449,373
Florida (1.8%)
- ----------------------------------------------------------------------------------------------------------------------------
1,000,000 Broward Cnty., Resource Recvy. Rev. Bonds (SES Broward Cnty. LP South),
7.95s, 12/1/08 A 1,102,500
Georgia (2.2%)
- ----------------------------------------------------------------------------------------------------------------------------
1,250,000 GA Muni. Elec. Auth. Special Obligation Rev. Bonds (Crossover Ser. Project
One), AMBAC, 6.4s, 1/1/13 Aaa 1,359,375
Illinois (3.4%)
- ----------------------------------------------------------------------------------------------------------------------------
1,830,000 IL Hlth. Facs. Auth. Rev. Bonds (Glenoaks Med. Ctr.), Ser. D, 9 1/2s, 11/15/15 BBB 2,095,350
Indiana (3.5%)
- ----------------------------------------------------------------------------------------------------------------------------
2,000,000 Marion Cnty., Ind. Convention & Rectl. Facs. Auth. Rev. Bonds (Excise Tax
Rev. Lease Rental), Ser. A, AMBAC, 7s, 6/1/21 Aaa 2,187,500
Kansas (4.2%)
- ----------------------------------------------------------------------------------------------------------------------------
2,400,000 Burlington, Poll. Control Rev. Bonds (Kansas Gas & Electric Co.), MBIA,
7s, 6/1/31 Aaa 2,646,000
Louisiana (2.5%)
- ----------------------------------------------------------------------------------------------------------------------------
1,420,000 Beauregard, Parish Rev. Bonds (Boise Cascade Corp.), 7 3/4s, 6/1/21 Baa 1,533,600
Maryland (3.4%)
- ----------------------------------------------------------------------------------------------------------------------------
2,000,000 MD State Hlth. & Higher Edl. Fac. Auth. Rev. Bonds (Johns Hopkins U.),
7 1/2s, 7/1/20 Aa 2,130,000
Massachusetts (3.5%)
- ----------------------------------------------------------------------------------------------------------------------------
750,000 MA State Hlth. & Edl. Fac. Auth. IFB (Med. Ctr. of Central MA), Ser. B,
AMBAC, 9.220s, 6/23/22 Aaa 855,938
830,000 MA State Port Auth. Rev. Bonds, 13s, 7/1/13 Aaa 1,324,888
-----------
2,180,826
Michigan (8.2%)
- ----------------------------------------------------------------------------------------------------------------------------
3,000,000 Cadillac, Pub. School G.O. Bonds, FGIC, 5 3/8s, 5/1/17 Aaa 2,891,250
2,000,000 Western Townships Util. Auth. Swr. Disp. Syst. Rev. Bonds, 8.2s, 1/1/18 BBB 2,177,500
-----------
5,068,750
Minnesota (9.1%)
- ----------------------------------------------------------------------------------------------------------------------------
925,000 SCA Multi-Fam. Mtge. Rev. Bonds (Nicollet Ridge), Ser. A-9, FSA, 7.1s, 1/1/30 Aaa 1,005,938
St. Paul, Hsg. & Hosp. Redev. Auth. Rev. Bonds (Healtheast), Ser. B
1,000,000 9 3/4s, 11/1/17 Baa 1,065,620
1,440,000 9 5/8s, 11/1/08 Baa 1,532,765
2,000,000 Western MN Muni. Pwr. Agcy. Supply Rev. Bonds, Ser. A, 7s, 1/1/13 A 2,050,340
-----------
5,654,663
New Jersey (3.5%)
- ----------------------------------------------------------------------------------------------------------------------------
2,035,000 NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds (Newcomb Med. Ctr.), Ser. A, 7 7/8s,
7/1/03 Baa 2,192,713
New York (10.4%)
- ----------------------------------------------------------------------------------------------------------------------------
2,000,000 NY City, Muni. Wtr. Fin. Auth. Wtr. & Swr. Syst. Rev. Bonds, Ser. C, 7 3/4s,
6/15/20 Aaa 2,292,500
1,000,000 NY State Dorm. Auth. Rev. Bonds (Cornell U.), Ser. A, 7 3/8s, 7/1/30 Aa 1,105,000
NY State Energy Research & Dev. Auth. Elec. Fac. Rev. Bonds (Cons. Edison
Co.), Ser. A
1,000,000 7 3/4s, 1/1/24 A 1,047,500
1,000,000 7 1/2s, 1/1/26 A 1,078,750
1,000,000 NY State Urban Dev. Corp. Rev. Bonds (Correctional Fac.), Ser. A, 5 1/2s,
1/1/14 Baa 962,500
-----------
6,486,250
Oklahoma (1.7%)
- ----------------------------------------------------------------------------------------------------------------------------
1,000,000 Muskogee Indl. Tr. Poll. Control Rev. Bonds (Oklahoma Gas & Electric Co.),
Ser. A, 7s, 3/1/17 AA 1,026,050
Puerto Rico (3.1%)
- ----------------------------------------------------------------------------------------------------------------------------
1,500,000 Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds, Ser. Y, 5 1/2s, 7/1/36 A 1,434,375
500,000 PR Elec. Pwr. Auth. IFB, FSA, 8.338s, 7/1/23 Aaa 513,125
-----------
1,947,500
Tennessee (4.5%)
- ----------------------------------------------------------------------------------------------------------------------------
2,700,000 Metro. Govt. Nashville & Davidson Cnty. Tenn. Wtr. & Swr. IFB, AMBAC,
8.317s, 1/1/22 Aaa 2,781,000
Texas (10.4%)
- ----------------------------------------------------------------------------------------------------------------------------
2,400,000 Bexar Cnty., Hlth. Fac. Dev. Corp. Rev. Bonds (St. Luke's Lutheran
Hosp.), 7.9s, 5/1/18 Aaa 2,811,000
2,500,000 North Central TX Hlth. Fac. Dev. Corp. Rev. Bonds (Presbyterian Hlth.
Syst.), MBIA, 6.685s, 6/22/21 Aaa 2,640,625
1,000,000 Texarkana, Hlth. Fac. Rev. Bonds (Wadley Regl. Med.), 8 1/2s, 10/1/12 A 1,038,420
-----------
6,490,045
- ----------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $62,469,128)*** $ 63,510,245
- ----------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $62,165,989.
Net assets available to common shareholders are $52,152,756.
** 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. Ratings
are not covered by the Report of independant accountants.
*** The aggregate identified cost on a tax basis is
$62,540,393, resulting in gross unrealized appreciation and
depreciation of $1,383,393 and $413,541, respectively,
or net unrealized appreciation of $969,852.
(double dagger) Restricted, excluding 144A securities, as to public resale.
The total market value of restricted securities held at
October 31, 1996 was $1,481,250 or 2.4% of
net assets.
# A portion of this security was pledged and
segregated with the custodian to cover margin requirements
for futures contracts at October 31, 1996.
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.
The fund had the following industry group
concentrations greater than 10% at
October 31, 1996 (as a percentage of net assets):
Utilities/Water & Sewerage 32.4%
Hospitals/Health Care 26.3%
Transportation 16.4%
The fund had the following insurance
concentrations greater than 10% at
October 31,1996 (as a percentage of net assets):
AMBAC 13.9%
MBIA 12.5%
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Futures Contracts Outstanding at October 31, 1996
Aggregate
Total Face Expiration Unrealized
Value Value Date Depreciation
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Muni Index Futures (Short) $811,125 $806,810 Dec-96 $(4,315)
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31, 1996
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $62,469,128) (Note 1) $63,510,245
- ----------------------------------------------------------------------------------------------------
Cash 356,048
- ----------------------------------------------------------------------------------------------------
Interest receivable 1,409,186
- ----------------------------------------------------------------------------------------------------
Receivable for securities sold 130,000
- ----------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 11,269
- ----------------------------------------------------------------------------------------------------
Total assets 65,416,748
Liabilities
- ----------------------------------------------------------------------------------------------------
Payable for variation margin 4,375
- ----------------------------------------------------------------------------------------------------
Distributions payable to shareholders 267,261
- ----------------------------------------------------------------------------------------------------
Payable for securities purchased 2,860,280
- ----------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 110,984
- ----------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 3,520
- ----------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 61
- ----------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,627
- ----------------------------------------------------------------------------------------------------
Other accrued expenses 2,651
- ----------------------------------------------------------------------------------------------------
Total liabilities 3,250,759
- ----------------------------------------------------------------------------------------------------
Net assets $62,165,989
Represented by
- ----------------------------------------------------------------------------------------------------
Remarketed preferred shares, (200 shares issued and
outstanding at $50,000 per share) (Note 4) $10,000,000
- ----------------------------------------------------------------------------------------------------
Paid-in capital -- common shares (Note 1) 55,817,217
- ----------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 266,215
- ----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (4,954,245)
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,036,802
- ----------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $62,165,989
Computation of net asset value
- ----------------------------------------------------------------------------------------------------
Remarketed preferred shares $10,000,000
- ----------------------------------------------------------------------------------------------------
Cumulative undeclared dividends on remarketed preferred shares 13,233
- ----------------------------------------------------------------------------------------------------
Net assets allocated to remarketed preferred shares--liquidation preference $10,013,233
- ----------------------------------------------------------------------------------------------------
Net assets available to common shares $52,152,756
- ----------------------------------------------------------------------------------------------------
Net asset value per common share ($52,152,756 divided by 4,007,092 shares) $13.02
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended October 31, 1996
<S> <C>
Tax exempt interest income: $3,940,963
- ----------------------------------------------------------------------------------------------------
Expenses
- ----------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 437,835
- ----------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 70,959
- ----------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 7,862
- ----------------------------------------------------------------------------------------------------
Administrative services (Note 2) 4,976
- ----------------------------------------------------------------------------------------------------
Reports to shareholders 39,681
- ----------------------------------------------------------------------------------------------------
Auditing 43,706
- ----------------------------------------------------------------------------------------------------
Legal 6,315
- ----------------------------------------------------------------------------------------------------
Postage 30,999
- ----------------------------------------------------------------------------------------------------
Exchange listing fees 4,000
- ----------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 5,025
- ----------------------------------------------------------------------------------------------------
Preferred share remarketing agent fees 25,667
- ----------------------------------------------------------------------------------------------------
Other 4,686
- ----------------------------------------------------------------------------------------------------
Total expenses 681,711
- ----------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (38,079)
- ----------------------------------------------------------------------------------------------------
Net expenses 643,632
- ----------------------------------------------------------------------------------------------------
Net investment income 3,297,331
- ----------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (365,408)
- ----------------------------------------------------------------------------------------------------
Net realized gain on future contracts (Note 1) 84,677
- ----------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures during the year (268,149)
- ----------------------------------------------------------------------------------------------------
Net loss on investments (548,880)
- ----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $2,748,451
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended October 31
-----------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------
Net investment income $3,297,331 $3,606,020
- ------------------------------------------------------------------------------------------------------------
Net realized loss on investments (280,731) (2,666,613)
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (268,149) 6,087,229
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,748,451 7,026,636
- ------------------------------------------------------------------------------------------------------------
Distributions to remarketed preferred shareholders from
net investment income (360,126) (362,203)
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations
applicable to common shareholders (excluding
cumulative undeclared dividends on remarketed
preferred shares of $13,233 and $12,493, respectively) 2,388,325 6,664,433
- ------------------------------------------------------------------------------------------------------------
Distributions to common shareholders from:
- ------------------------------------------------------------------------------------------------------------
Net investment income (3,207,079) (3,197,815)
- ------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (818,754) 3,466,618
- ------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------
Beginning of year 62,984,743 59,518,125
- ------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $266,215 and $535,310, respectively) $62,165,989 $62,984,743
- ------------------------------------------------------------------------------------------------------------
Common shares outstanding at beginning and end of year 4,007,092 4,007,092
- ------------------------------------------------------------------------------------------------------------
Remarketed preferred shares outstanding at beginning and end of year 200 200
- ------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the period
November 29, 1993
(commencement
of operations)
Year ended October 31 to October 31
----------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period (common shares) $13.22 $12.36 $14.02(a)
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income .82 .90 .85(c)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.13) .85 (1.69)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .69 1.75 (.84)
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income
- ---------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.09) (.09) (.06)(b)
- ---------------------------------------------------------------------------------------------------------------------------
To common shareholders (.80) (.80) (.67)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.89) (.89) (.73)
- ---------------------------------------------------------------------------------------------------------------------------
Preferred share offering costs -- -- (.09)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period (common shares) $13.02 $13.22 $12.36
- ---------------------------------------------------------------------------------------------------------------------------
Market value, end of period (common shares) $11.875 $11.875 $10.125
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at market value (common shares) (%)(d) 6.89 25.77 (28.60)*
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $62,166 $62,985 $59,518
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(e)(f) 1.30 1.23 .85(c)*
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(e) 5.59 6.30 5.89(c)*
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 123.89 165.21 148.90*
- ---------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Represents initial net asset value of $14.10 less offering expenses
of $0.08. Of these expenses $0.02 are due to a revision of offering
expenses on August 31, 1994.
(b) Preferred shares were issued on February 10, 1994. (Note 4)
(c) Reflects an expense limitation in effect during the period. As a result
of such limitation, expenses of the fund for the period reflect a
reduction of $0.02 per share.
(d) Total investment return assumes dividend reinvestment.
(e) Ratios reflect net assets available to common shares only; net investment
income ratio also reflects reduction for dividend payments to preferred
shareholders.
(f) The ratio of expenses to average net assets for the year ended October 31,
1995 and thereafter includes amounts paid through expense offset
arrangements. Prior period ratios exclude these amounts. (Note 2)
</TABLE>
Notes to financial statements
October 31, 1996
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, closed-end management investment company. The
fund's investment objective is to provide as high a level of current
income exempt from federal income tax as is believed to be consistent
with preservation of capital. The fund intends to achieve its objective
by investing in a diversified portfolio of investment grade municipal
securities that Putnam Investment Management, Inc. ("Putnam
Management"), the fund's Manager, a wholly-owned subsidiary of Putnam
Investments, Inc., believes does not involve undue risk to income or
principal.
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
market value of restricted securities is determined by Putnam Management
following procedures approved by the Trustees, and such valuations and
procedures are reviewed periodically by the Trustees.
B) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Interest income is recorded on the accrual basis.
C) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices
supplied by dealers.
D) Federal taxes It is the policy of the fund to distribute all of
its 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 gain.
At October 31, 1996, the fund had a capital loss carryover of
approximately $4,220,000 available to offset future net capital gains,
if any. The amount of the carryover and expiration dates are:
Loss Carryover Expiration
-------------- --------------
$1,912,000 10/31/2002
1,863,000 10/31/2003
445,000 10/31/2004
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 3.45%. The
amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles.
These differences include treatment of realized and unrealized gains and
losses on certain futures contracts and losses on wash sale
transactions. Reclassifications are made to the fund's capital accounts
to reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
For the year ended October 31, 1996, the fund reclassified $780 to
increase undistributed net investment income with an increase to
accumulated net realized loss on investments of $780. The calculation of
net investment income per share in the financial highlights table
excludes these adjustments.
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 value 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 and original issue bonds and payment in kind
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 $27,157. These expenses are being amortized
on a straight-line basis over a five-year period.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.70% of the
first $500 million of the average net value of the fund, 0.60% of the
next $500 million, 0.55% of the next $500 million, and 0.50% of any
excess over $1.5 billion of such average net asset value subject under
current law, to reduction in any year 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.
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 year ended October 31, 1996, fund expenses were reduced by
$38,079 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 $520 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund
and are invested in certain Putnam funds until distribution in
accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in compensation of Trustees. 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 year ended October 31, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$72,299,201 and $85,400,975, respectively. 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 preferred shares are redeemable at the option of the fund
on a dividend payment date at a redemption price of $50,000 per share,
plus an amount equal to any dividends accumulated on a daily basis but
unpaid through the redemption date (whether or not such dividends have
been declared) and, in certain circumstances, a call premium.
It is anticipated that dividends paid to holders of remarketed preferred
shares will be considered tax-exempt dividends under the Internal
Revenue Code of 1986. To the extent that the fund earns taxable income
and capital gains by the conclusion of a fiscal year, it will be
required to apportion to the holders of the remarketed preferred shares
throughout that year additional dividends as necessary to result in an
after-tax equivalent to the applicable dividend rate for the period.
Under the Investment Company Act of 1940, the fund is required to
maintain asset coverage of at least 200% with respect to the remarketed
preferred shares as of the last business day of each month in which any
such shares are outstanding. Additionally, the fund is required to meet
more stringent asset coverage requirements under terms of the remarketed
preferred shares and the shares' rating agencies.Should these
requirements not be met, or should dividends accrued on the remarketed
preferred shares not be paid, the fund may be restricted in its ability
to declare dividends to common shareholders or may be required to redeem
certain of the remarketed preferred shares. At October 31, 1996, no such
restrictions have been placed on the fund.
Federal tax information
(Unaudited)
The fund has designated 100% of dividends paid from net investment
income during the fiscal year as tax exempt for Federal income tax
purposes.
The Form 1099 you receive in January 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
Results of October 3, 1996 shareholder meeting
(Unaudited)
A meeting of shareholders of the fund was held on October 3, 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 2,185,360 40,522 118 0
Hans H. Estin 2,185,360 40,522 118 0
R.J. Jackson 2,185,360 40,522 118 0
Elizabeth T. Kennan 2,185,360 40,522 118 0
Lawrence J. Lasser 2,185,360 40,522 118 0
Donald S. Perkins 2,184,035 41,847 118 0
William F. Pounds 2,185,360 40,522 118 0
George Putnam 2,185,360 40,522 118 0
George Putnam, III 2,185,360 40,522 118 0
Eli Shapiro 2,185,360 40,522 118 0
A.J.C. Smith 2,185,360 40,522 118 0
W. Nicholas Thorndike 2,184,035 41,847 118 0
<TABLE>
<CAPTION>
Results of October 3, 1996 shareholder meeting
- --------------------------------------------------------------------------------------------------------------------
Common Shares Preferred shares
- --------------------------------------------------------------------------------------------------------------------
Abstentions Abstentions
Votes Votes and Broker Votes Votes and Broker
For Against Non-Votes For Against Non-Votes
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A proposal to ratify the selection of
Coopers & Lybrand L.L.P. as auditors for
the fund was approved as follows 2,146,199 29,012 50,671 117 1 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 1,888,092 102,051 235,739 117 1 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 1,809,933 168,291 247,658 117 1 0
- --------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction with
respect to investments in commodities or
commodity contracts was approved
as follows 1,723,154 262,577 240,151 117 1 0
- --------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction with
respect to concentration of its assets
was approved as follows 1,813,507 179,218 233,157 117 1 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 1,823,061 183,436 219,385 117 1 0
- --------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to margin transactions was
approved as follows 1,724,428 272,472 228,982 117 1 0
- --------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to short sales was approved
as follows 1,787,940 217,854 220,088 117 1 0
- --------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction which
limits the fund's ability to pledge assets
was approved as follows 1,781,037 214,539 230,306 117 1 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 1,790,709 217,033 218,140 117 1 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 1,760,412 247,643 217,827 117 1 0
- --------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to investments in other
investment companies was approved
as follows 1,783,274 221,860 220,748 117 1 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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
Jerome J. Jacobs
Vice President
Blake E. Anderson
Vice President
Richard P. Wyke
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for up-
to-date information about the fund's net asset value.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- ---------------------
29183-215 12/96
