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<PAGE> PAGE 2
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<PAGE> PAGE 9
SIGNATURE PAUL BUCUVALAS
TITLE MANAGING DIRECTOR
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Putnam Investment Grade Municipal Trust III
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME>
<S> <C>
<PERIOD-TYPE> ANNUAL
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<INVESTMENTS-AT-COST> 58,425,752
<INVESTMENTS-AT-VALUE> 57,245,575
<RECEIVABLES> 1,613,456
<ASSETS-OTHER> 1,817,074
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 60,676,105
<PAYABLE-FOR-SECURITIES> 976,345
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 651,304
<TOTAL-LIABILITIES> 1,627,649
<SENIOR-EQUITY> 10,000,000
<PAID-IN-CAPITAL-COMMON> 55,813,561
<SHARES-COMMON-STOCK> 4,007,092
<SHARES-COMMON-PRIOR> 4,007,092
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (308,110)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (4,957,049)
<ACCUM-APPREC-OR-DEPREC> (1,499,946)
<NET-ASSETS> 59,048,456
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,022,495
<OTHER-INCOME> 0
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<REALIZED-GAINS-CURRENT> (478,078)
<APPREC-INCREASE-CURRENT> (4,526,104)
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<EQUALIZATION> 0
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[AVG-DEBT-OUTSTANDING] 0
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</TABLE>
December 9, 1999
To the Board of Trustees of Putnam Investment Grade
Municipal Trust III:
In planning and performing our audit of the financial
statements of Putnam Investment Grade Municipal Trust III
for the year ended October 31, 1999, we considered its
internal control, including control activities for
safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the
financial statements and to comply with the requirements of
Form N-SAR, not to provide assurance on internal control.
The management of Putnam Investment Grade Municipal Trust
III is responsible for establishing and maintaining internal
control. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected
benefits and related costs of controls. Generally, controls
that are relevant to an audit pertain to the entity's
objective of preparing financial statements for external
purposes that are fairly presented in conformity with
generally accepted accounting principles. Those controls
include the safeguarding of assets against unauthorized
acquisition, use or disposition.
Because of inherent limitations in internal controls, errors
or fraud may occur and may not be detected. Also,
projection of any evaluation of internal control to future
periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness
of the design and operation may deteriorate.
Our consideration of internal control would not necessarily
disclose all matters in internal control that might be
material weaknesses under standards established by the
American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or
operation of one or more of the internal control components
does not reduce to a relatively low level the risk that
misstatements caused by errors or fraud in amounts that
would be material in relation to the financial statements
being audited may occur and not be detected within a timely
period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving
internal control and its operation, including controls for
safeguarding securities, that we consider to be material
weaknesses as defined above as of October 31, 1999.
This report is intended solely for the information and use
of management and the Board of Trustees and the Securities
and Exchange Commission and is not intended to be and should
not be used by anyone other than these specified parties.
Results of October 7, 1999 shareholder meeting
(Unaudited)
An annual meeting of shareholders of the fund
was held on
October 7, 1999. At the meeting, each of the
nominees for
Trustees was elected, as follows:
Common Shares Preferred
Shares
Votes
Votes
Votes for withheld
Votes for withheld
Jameson Adkins Baxter 3,681,871
43,437 137 0
Hans H. Estin 3,685,096 40,212
137 0
J.A. Hill not applicable
137 0
Ronald J. Jackson 3,683,008
42,300 137 0
Paul L. Joskow 3,684,106 41,202
137 0
Elizabeth T. Kennan 3,682,796
42,512 137 0
Lawrence J. Lasser 3,683,571
41,737 137 0
John H. Mullin III 3,684,106
41,202 137 0
Robert E. Patterson
not applicable 137 0
William F. Pounds 3,682,996
42,312 137 0
George Putnam 3,685,096 40,212
137 0
George Putnam, III 3,683,971
41,337 137 0
A.J.C. Smith 3,682,796 42,512
137 0
W. Thomas Stephens 3,681,806
43,502 137 0
W. Nicholas Thorndike 3,685,096
77,279 137 0
A proposal to ratify the selection of
PricewaterhouseCoopers LLP
as the independent auditors of your fund was
approved as follows:
Common Shares -- 3,680,569 votes for, and
12,398 votes
against, with 32,341 abstentions and broker
non-votes.
Preferred Shares - 137 votes for, and 0 votes
against, with
0 abstenations and broker non-votes.
All tabulations are rounded to nearest whole
number.
