Putnam
Investment Grade
Municipal Trust
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-04
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
During the past several months, Putnam has introduced a number of
reforms for the benefit of shareholders, including increasing the amount
of disclosure for our funds. We are now including additional information
about your fund's management team. Following the Outlook for Your Fund,
we list any changes in your fund's Portfolio Leader and Portfolio
Members during the prior year period, as well as the current Portfolio
Leader's and Portfolio Members' other fund management responsibilities
at Putnam. We also show how much these individuals have invested in the
fund (in dollar ranges). Fund ownership (in dollar ranges) is also being
shown for the members of Putnam's Executive Board.
We are also pleased to announce that three new Trustees have joined your
fund's Board of Trustees. Nominated by your fund's independent Trustees,
these individuals have had outstanding careers as leaders in the
investment management industry. Myra R. Drucker is a Vice Chair of the
Board of Trustees of Sarah Lawrence College and serves as Chair of the
New York Stock Exchange (NYSE) Pension Managers Advisory Committee and
as a Trustee of Commonfund, a not-for-profit asset management firm.
Richard B. Worley is Managing Partner of Permit Capital LLC, an
investment management firm. Both Ms. Drucker and Mr. Worley are
independent Trustees (i.e., Trustees who are not "interested persons" of
your fund or its investment advisor). Charles E. Haldeman, Jr., the
third new Trustee, is President and Chief Executive Officer of Putnam
Investments.
During the period covered by the following report, Putnam Investment
Grade Municipal Trust delivered respectable results. In the following
pages, the fund managers discuss fund performance, strategy, and their
outlook for fiscal 2005.
We thank you for your support of the Putnam funds throughout 2004 and
wish you all the best in 2005.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
January 19, 2005
Report from Fund Management
Fund highlights
* For the 12 months ended November 30, 2004, common shares of Putnam
Investment Grade Municipal Trust had a total return of 7.42% at net
asset value (NAV) and -3.46% at market price.
* The fund's benchmark, the Lehman Municipal Bond Index, returned 4.07%.
* The average return for the fund's Lipper category, General Municipal
Debt Funds (leveraged closed-end), was 5.69%.
* In June 2004, the fund's monthly dividend was reduced to $0.0566 per
share. Details can be found on page 5.
* See the Performance Summary beginning on page 10 for additional fund
performance, comparative performance, and Lipper data.
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TOTAL RETURN FOR
PERIODS ENDED 11/30/04
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Market
(inception 10/26/89) NAV price
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1 year 7.42% -3.46%
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5 years 44.37 16.73
Annual average 7.62 3.14
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10 years 99.02 69.47
Annual average 7.12 5.42
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Annual average
(life of fund) 7.55 6.22
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Data is historical. Past performance does not guarantee future results.
More recent returns may be less or more than those shown. Investment
return, net asset value, and market price will fluctuate and you may
have a gain or a loss when you sell your shares. Performance assumes
reinvestment of distributions and does not account for taxes.
Performance commentary
Although your fund is primarily an investment-grade fund, during the 2004
fiscal year it benefited from its modest exposure to higher-yielding bonds,
which outperformed lower-yielding, higher-rated issues during the fiscal
year. Based on results at NAV, the fund outperformed its benchmark, which
consists solely of investment-grade bonds. Fund results at NAV were also
ahead of the average for the fund's Lipper peer group, partly due to the
fund's lower exposure to airline-related industrial development bonds
(IDBs), which in most cases performed poorly. It is important to note that
a fund's performance at market price may differ from its results at NAV.
Although market price performance generally reflects investment results, it
may also be influenced by several other factors, including changes in
investor perceptions of the fund or its investment advisor, market
conditions, fluctuations in supply and demand for the fund's shares, and
changes in fund distributions.
FUND PROFILE
Putnam Investment Grade Municipal Trust is a leveraged fund that seeks
to provide as high a level of current income free from federal income
tax as is consistent with preservation of capital by investing primarily
in investment-grade municipal bonds. The fund may be suitable for inves
tors seeking tax-exempt income who can accept a higher level of risk in
exchange for the potentially higher level of income offered by a
leveraged fund.
Market overview
The bond market experienced volatility during the fund's fiscal year as
yields reflected conflicting signals on the direction of the economy.
During the first few months of the fiscal year, yields fell and bond
prices, which move in the opposite direction of yields, rose. This trend
reversed in mid-March, as bond investors began to anticipate a change in
monetary policy. Signs of strengthening economic growth and rising
corporate profitability had increased the likelihood that the Federal
Reserve Board (the Fed) would raise short-term interest rates. Treasury
bonds sold off sharply, pushing yields upward. Interestingly, after the
Fed announced what had been a widely anticipated 25-basis-point (one
quarter of a percentage point) increase at its June 30 meeting, the bond
market reversed course again, and yields trended downward, despite three
subsequent rate increases of 25 basis points each during the fiscal
year. Over the one-year period, long-term bond yields have fallen while
short-term rates have risen. This resulted in a flattening of the yield
curve -- that is, shorter- and longer-term interest rates began to
converge.
Among uninsured bonds and bonds rated A and below, yield spreads
generally tightened, and bond prices rose. These higher-yielding
securities provided attractive income streams that contributed to the
fund's total return during the period. Municipal bonds issued by the
State of California were generally strong performers, as the economy
improved and rating agencies upgraded the state's credit rating. Yields
on tobacco settlement bonds varied with the results of ongoing legal
battles, but declined overall for the year, and these bonds' prices rose
accordingly. Airline-related IDBs performed poorly, in general, as the
industry continued to face financial difficulties exacerbated by record
high oil prices.
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MARKET SECTOR PERFORMANCE 12 MONTHS ENDED 11/30/04
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Bonds
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Lehman Municipal Bond Index (tax-exempt bonds) 4.07%
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Lehman Aggregate Bond Index (broad bond market) 4.44%
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Lehman Government Bond Index (U.S. Treasury and agency
securities) 3.47%
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JP Morgan Global High Yield Index (global high-yield
corporate bonds) 12.61%
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Equities
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S&P 500 Index (broad stock market) 12.86%
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Russell 1000 Index (large-company stocks) 12.66%
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Russell 2000 Index (stocks of small and midsize companies) 17.26%
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These indexes provide an overview of performance in different market
sectors for the 12 months ended 11/30/04.
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Strategy overview
Because we believe that interest rates will rise, we are positioning the
portfolio more defensively. This involves shortening the fund's
duration, which means reducing its sensitivity to changes in interest
rates. Because we believe the yield curve will continue to flatten, we
have concentrated our bond sales in shorter and intermediate maturities,
which we believe will underperform. Meanwhile, we continued to trim and
diversify the fund's positions in uninsured bonds and bonds rated A and
below, which have performed strongly. The fund maintained an overweight
position in tobacco settlement bonds relative to its benchmark. We
closely monitored developments in this sector. The fund had less
exposure to airline-related IDBs during the period than did its peers, a
positive amid continued difficulty in this sector. We trimmed the fund's
exposure to this sector during the period, because we believe the
airline industry still faces significant challenges over the near term.
Prior to the beginning of the fund's fiscal year, the fund emphasized
non-callable bonds -- bonds that the issuer is not permitted to redeem
(or call) before the maturity date. These issues performed well as rates
fell through March 2004, but during the spring, we began to moderate
this position, selling non-callable bonds and purchasing longer callable
issues. We believe these callable bonds may perform better than
non-callable bonds if interest rates rise and the yield curve flattens
further.
[GRAPHIC OMITTED: horizontal bar chart THE FUND'S MATURITY AND DURATION
COMPARED]
THE FUND'S MATURITY AND DURATION COMPARED
11/30/03 5/31/03 11/30/04
Average effective
maturity in years 8.9 8.6 7.0
Duration in years 9.6 9.4 8.1
Footnotes read:
This chart compares changes in the fund's duration (a measure of its
sensitivity to interest-rate changes) and its average effective maturity
(a weighted average of the holdings' maturities).
Average effective maturity also takes into account put and call
features, where applicable, and reflects prepayments for mortgage-backed
securities.
How fund holdings affected performance
As noted earlier, the fund's modest stake in lower-rated bonds helped
performance substantially. The more credit-sensitive sectors of the
municipal bond market performed very well due to increased demand from
investors who were hungry for yield in a low-interest-rate environment.
Several of the fund's holdings in the health-care sector proved
especially rewarding. Bonds issued by Johnson City Health and Education
Facilities Board for Mountain States Health enjoyed an added boost when
the rating services agency Fitch upgraded its outlook for this holding.
Given the rally in this sector and the added appreciation that
contributed to its disproportionate representation within the portfolio,
we trimmed the fund's investment in Escambia County Health Facilities
Authority revenue bonds for Baptist Hospital and Baptist Manor and sold
its position in Tyler Health Facility Development Corp. revenue bonds
for Mother Frances Hospital.
Tobacco settlement bonds also enjoyed strong performance during the
fiscal year, and the fund's greater-than-benchmark weighting magnified
this effect. These bonds are secured by the income stream from tobacco
companies' settlement obligations to the states and generally offer
higher yields than bonds of comparable quality. This income could be
jeopardized as a result of multibillion-dollar judgments against the
tobacco companies, and prices in this sector have shifted as concerns
about litigation overshadowed optimism. Our analyst believes that,
despite several highly visible lawsuits against the tobacco industry,
litigation risk is receding from where it was in 1999. The fund holds
tobacco settlement bonds issued by several states, including South
Carolina, New Jersey, Washington, and Wisconsin.
One sector of the lower-rated municipal bond market in which the fund
invests did not perform particularly well. Airline-related industrial
development bonds (IDBs) lagged during the fiscal year, due to, among other
factors, rising fuel costs and bankruptcy fears. We sold Kenton County,
Kentucky IDBs for Delta Airlines early in the period in advance of some of
the weakness that characterized the sector for much of the fiscal year.
Late in the fiscal year, however, bonds in the sector began to improve
somewhat, due in part to falling oil prices. The fund retains bonds backed
by British Airways, Continental Airlines, and American Airlines -- three
carriers that we believe will survive the industry's consolidation. We plan
to continue to underweight the sector -- a decision that proved wise during
the past year -- until market conditions markedly improve.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW
Aaa (50.7%)
Aa (2.6%)
A (15.1%)
Baa (20.9%)
Ba (4.0%)
B (1.6%)
Caa (0.8%)
D (0.3%)
Other (VMIG1) (4.0%)
Footnote reads:
As a percentage of market value as of 11/30/04. A bond rated Baa or
higher is considered investment grade. The chart reflects Moody's
ratings; percentages may include bonds not rated by Moody's but
considered by Putnam Management to be of comparable quality. Ratings
will vary over time.
The prerefunding of a municipal bond often translates into a performance
boost for the fund. Prerefunding occurs when an issuer raises the money
to refinance an older, higher-coupon bond by issuing new bonds at
current lower interest rates. This money is then invested in a secure
investment, usually U.S. Treasury securities, that matures at the older
bond's first call date, when it is used to pay off the old bonds. This
added security is often perceived as a credit upgrade by the market, and
can boost the price of the older bonds. A recent example involved the
fund's holdings in Oklahoma Development Financing Authority revenue
bonds issued for Hillcrest Healthcare, which had a relatively low bond
rating and a history of operating difficulties. The entire Hillcrest
system was purchased recently by Ardent Health Services, a for-profit
hospital manager expanding its operations in acute-care facilities. The
bonds rose in value when Ardent announced plans to prerefund the
outstanding bonds.
With the Fed's tighter monetary policy and the return of higher interest
rates, we've been taking steps to reduce the fund's exposure to
non-callable bonds and increase its investments in callable bonds.
Non-callable bonds performed very well for the fund as rates fell to
40-year lows, because demand was high for these bonds and prices rose.
But now that interest rates have reversed course, non-callable bonds are
beginning to give up some of their premium. We think it is a good time
to begin paring back the portfolio's investments in non-callable bonds,
while investors still find these bonds attractive. An example of the
type of bond we sold is non-callable Massachusetts Water Resources
Authority revenue bonds, and an example of the type of bond we purchased
is Chicago, Illinois general obligation series A bonds, which have a
call date in 2014. Please note that all holdings discussed in this
report are subject to review in accordance with the fund's investment
strategy and may vary in the future.
OF SPECIAL INTEREST
DIVIDEND REDUCED IN JUNE
As holdings in the portfolio have matured, newer issues have offered
lower yields. Based on market conditions, the fund has not made any
large allocation moves to compensate for the yield decrease. Therefore,
the fund's monthly dividend was reduced in June from $0.0626 to $0.0566
per share to accommodate the shortfall in income.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
Judging from the flattened yield curve, the bond market appears to have
largely shrugged off the recent Fed rate hikes. However, we believe that
interest rates all along the yield curve are more likely to rise than
fall. The Fed has raised the federal funds rate four times in
25-basis-point increments since June 2004, bringing it to two percent at
the end of the period. We believe the Fed will continue to raise
short-term rates incrementally through mid-2005, actions that are likely
to cause rising yields among bonds with shorter maturities. This also
suggests further flattening of the yield curve. The fund is positioned
defensively in terms of duration, and we will continue to monitor and
adjust the fund's duration as seems appropriate. We believe inflation
will remain low, despite the threat posed by high oil prices. We also
anticipate that the rate of GDP growth will slow during the next two
quarters, as the effects of the Fed's tightening policy are felt.
In general, these signs indicate that we are headed into a potentially
more challenging environment for bond investing. Our task will be to
continue to search for the most attractive opportunities among
tax-exempt securities, and to balance the pursuit of attractive current
income with prudent risk management.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. Capital gains, if
any, are taxable for federal and, in most cases, state purposes. For
some investors, investment income may be subject to the federal
alternative minimum tax. Income from federally exempt funds may be
subject to state and local taxes. Mutual funds that invest in bonds are
subject to certain risks, including interest-rate risk, credit risk, and
inflation risk. As interest rates rise, the prices of bonds fall.
Long-term bonds are more exposed to interest-rate risk than short-term
bonds. Unlike bonds, bond funds have ongoing fees and expenses.
Your fund's management
Your fund is managed by the members of the Putnam Tax Exempt
Fixed-Income Team. David Hamlin is the Portfolio Leader, and Paul Drury,
Susan McCormack, and James St. John are Portfolio Members of your fund.
The Portfolio Leader and Portfolio Members coordinate the team's
management of the fund.
For a complete listing of the members of the Putnam Tax Exempt
Fixed-Income Team, including those who are not Portfolio Leaders or
Portfolio Members of your fund, visit Putnam's Individual Investor Web
site at www.putnaminvestments.com.
Fund ownership
The table below shows how much the fund's current Portfolio Leader and
Portfolio Members have invested in the fund (in dollar ranges).
Information shown is for the current and prior year ended November 30.
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FUND PORTFOLIO LEADER AND PORTFOLIO MEMBERS
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$1 - $10,001 - $50,001 - $100,001 - $500,001 - $1,000,001
Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over
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David Hamlin 2004 *
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Portfolio Leader 2003 *
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Paul Drury 2004 *
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Portfolio Member 2003 *
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Susan McCormack 2004 *
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Portfolio Member 2003 *
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James St. John 2004 *
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Portfolio Member 2003 *
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Other funds managed by the Portfolio Leader and Portfolio Members
David Hamlin is the Portfolio Leader and Paul Drury, Susan McCormack,
and James St. John are Portfolio Members for Putnam's tax-exempt funds
for the following states: Arizona, California, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, New York, Ohio, and Pennsylvania. The
same group also manages Putnam AMT-Free Insured Municipal Fund*, Putnam
California Investment Grade Municipal Trust, Putnam High Yield Municipal
Trust, Putnam Managed Municipal Income Trust, Putnam Municipal Bond
Fund, Putnam Municipal Income Fund, Putnam Municipal Opportunities
Trust, Putnam New York Investment Grade Municipal Trust, Putnam Tax
Exempt Income Fund, Putnam Tax-Free Health Care Fund, and Putnam
Tax-Free High Yield Fund.
David Hamlin, Paul Drury, Susan McCormack, and James St. John may also
manage other accounts advised by Putnam Management or an affiliate.
Changes in your fund's Portfolio Leader and Portfolio Members
During the year ended November 30, 2004, Portfolio Member Richard Wyke
left your fund's management team.
* Formerly Putnam Tax-Free Insured Fund.
Fund ownership
The table below shows how much the members of Putnam's Executive Board
have invested in the fund (in dollar ranges). Information shown is for
the current and prior year ended December 31.
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PUTNAM EXECUTIVE BOARD
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$1 - $10,001 - $50,001 - $100,001
Year $0 $10,000 $50,000 $100,000 $500,000
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Philippe Bibi 2004 *
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Chief Technology Officer 2003 *
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John Boneparth 2004 *
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Head of Global Institutional Mgmt 2003 *
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Kevin Cronin 2004 *
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Deputy Head of Investments N/A
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Charles Haldeman, Jr. 2004 *
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President and CEO 2003 *
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Amrit Kanwal 2004 *
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Chief Financial Officer N/A
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Steven Krichmar 2004 *
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Chief of Operations N/A
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Francis McNamara, III 2004 *
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General Counsel N/A
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Richard Monaghan 2004 *
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Head of Retail Management 2003 *
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Stephen Oristaglio 2004 *
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Head of Investments 2003 *
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Richard Robie, III 2004 *
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Chief Administrative Officer N/A
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N/A indicates the individual was not a member of Putnam's Executive Board
as of 12/31/03.
Performance summary
This section shows your fund's performance during its fiscal year, which
ended November 30, 2004. In accordance with regulatory requirements, we
also include performance for the most current calendar quarter-end.
Performance should always be considered in light of a fund's investment
strategy. Data represents past performance. Past performance does not
guarantee future results. More recent returns may be less or more than
those shown. Investment return, net asset value, and market price will
fluctuate and you may have a gain or a loss when you sell your shares.
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TOTAL RETURN AND COMPARATIVE INDEX RESULTS FOR PERIODS ENDED 11/30/04
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Lipper General
Municipal
Lehman Debt Funds
Municipal (leveraged
Bond closed-end)
NAV Market price Index category average*
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1 year 7.42% -3.46% 4.07% 5.69%
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5 years 44.37 16.73 38.84 49.24
Annual average 7.62 3.14 6.78 8.32
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10 years 99.02 69.47 99.68 118.46
Annual average 7.12 5.42 7.16 8.10
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Annual average
Life of fund
(since 10/26/89) 7.55 6.22 7.05 7.50
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Performance assumes reinvestment of distributions and does not account
for taxes.
Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 1-, 5-, and 10-year periods ended 11/30/04, there were 65,
51, and 46 funds, respectively, in this Lipper category.
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PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 11/30/04
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Distributions from common shares
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Number 12
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Income 1 $0.7152
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Capital gains 1 --
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Total $0.7152
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Distributions from Series A
preferred shares (1,400 shares)
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Income 1 $1,204.47
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Capital gains 1 --
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Total $1,204.47
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Share value (common shares): NAV Market price
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11/30/03 $10.71 $10.74
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11/30/04 10.73 9.67
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Current return (common shares, end of period)
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Current dividend rate 2 6.33% 7.02%
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Taxable equivalent 3 9.74 10.80
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1 Capital gains, if any, are taxable for federal and, in most cases,
state purposes. For some investors, investment income may be subject to
the federal alternative minimum tax. Income from federally exempt funds
may be subject to state and local taxes.
2 Most recent distribution, excluding capital gains, annualized and
divided by NAV or market price at end of period.
3 Assumes maximum 35% federal tax rate for 2004. Results for investors
subject to lower tax rates would not be as advantageous.
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TOTAL RETURN FOR PERIODS ENDED 12/31/04 (MOST RECENT CALENDAR QUARTER)
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NAV Market price
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1 year 8.13% -5.19%
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5 years 49.22 24.07
Annual average 8.33 4.41
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10 years 97.71 67.02
Annual average 7.05 5.26
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Annual average
Life of fund
(since 10/26/89) 7.65 6.13
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Terms and definitions
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.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities and the net assets allocated to 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
exchanges such as the American Stock Exchange and the New York Stock
Exchange.
Comparative indexes
JP Morgan Global High Yield Index is an unmanaged index used to mirror
the investable universe of the U.S. dollar global high-yield corporate
debt market of both developed and emerging markets.
Lehman Aggregate Bond Index is an unmanaged index used as a general
measure of U.S. fixed-income securities.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and
agency securities.
Lehman Municipal Bond Index is an unmanaged index of long-term
fixed-rate investment-grade tax-exempt bonds.
Russell 1000 Index is an unmanaged index of the largest 1,000 companies
in the Russell 3000 Index.
Russell 2000 Index is an unmanaged index of common stocks that generally
measure performance of small to midsize companies within the Russell
3000 Index.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
Putnam's policy on confidentiality
In order to conduct business with our shareholders, we must obtain
certain personal information such as account holders' addresses,
telephone numbers, Social Security numbers, and the names of their
financial advisors. We use this information to assign an account number
and to help us maintain accurate records of transactions and account
balances.
It is our policy to protect the confidentiality of your information,
whether or not you currently own shares of our funds, and in particular,
not to sell information about you or your accounts to outside marketing
firms. We have safeguards in place designed to prevent unauthorized
access to our computer systems and procedures to protect personal
information from unauthorized use.
Under certain circumstances, we share this information with outside
vendors who provide services to us, such as mailing and proxy
solicitation. In those cases, the service providers enter into
confidentiality agreements with us, and we provide only the information
necessary to process transactions and perform other services related to
your account. We may also share this information with our Putnam
affiliates to service your account or provide you with information about
other Putnam products or services. It is also our policy to share
account information with your financial advisor, if you've listed one on
your Putnam account.
If you would like clarification about our confidentiality policies or
have any questions or concerns, please don't hesitate to contact us at
1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or
Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. The Putnam funds' proxy voting guidelines and
procedures, as well as information regarding how your fund voted proxies
relating to portfolio securities during the 12-month period ended June
30, 2004, are available on the Putnam Individual Investor Web site,
www.putnaminvestments.com/individual, and on the SEC's Web site,
www.sec.gov. If you have questions about finding forms on the SEC's Web
site, you may call the SEC at 1-800-SEC-0330. You may also obtain the
Putnam funds' proxy voting guidelines and procedures at no charge by
calling Putnam's Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
For periods ending on or after July 9, 2004, the fund will file a
complete schedule of its portfolio holdings with the SEC for the first
and third quarters of each fiscal year on Form N-Q. Shareholders may
obtain the fund's Forms N-Q on the SEC's Web site at www.sec.gov. In
addition, the fund's Forms N-Q may be reviewed and copied at the SEC's
public reference room in Washington, D.C. You may call the SEC at
1-800-SEC-0330 for information about the SEC's Web site or the operation
of the public reference room.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
preceded by the Report of Independent Registered Public Accounting Firm,
constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or
loss the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal year.
Statement of changes in net assets shows how the fund's net assets were
affected by the fund's net investment gain or loss, by distributions to
shareholders, and by changes in the number of the fund's shares. It
lists distributions and their sources (net investment income or realized
capital gains) over the current reporting period and the most recent
fiscal year-end. The distributions listed here may not match the sources
listed in the Statement of operations because the distributions are
determined on a tax basis and may be paid in a different period from the
one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment
income ratios, and portfolio turnover in one summary table, reflecting
the five most recent reporting periods. In a semiannual report, the
highlight table also includes the current reporting period. For open-end
funds, a separate table is provided for each share class.
Report of Independent Registered
Public Accounting Firm
The Board of Trustees and Shareholders
Putnam Investment Grade Municipal Trust
We have audited the accompanying statement of assets and liabilities of
Putnam Investment Grade Municipal Trust, including the fund's portfolio,
as of November 30, 2004, 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 presented. 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform our 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 November 30, 2004 by
correspondence with the custodian and brokers or by other appropriate
auditing procedures. 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 as of
November 30, 2004, 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
presented, in conformity with accounting principles generally accepted
in the United States of America.
KPMG LLP
Boston, Massachusetts
January 10, 2005
The fund's portfolio
November 30, 2004
Key to Abbreviations
-------------------------------------------------------------------------------
AMBAC AMBAC Indemnity Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance Company
FNMA Coll. Federal National Mortgage Association Collateralized
FSA Financial Security Assurance
GNMA Coll. Government National Mortgage Association Collateralized
G.O. Bonds General Obligation Bonds
IFB Inverse Floating Rate Bonds
MBIA MBIA Insurance Company
PSFG Permanent School Fund Guaranteed
U.S. Govt. Coll. U.S. Government Collateralized
VRDN Variable Rate Demand Notes
Municipal bonds and notes (100.0%) (a)
Principal amount Rating (RAT) Value
Arizona (0.8%)
-------------------------------------------------------------------------------
$500,000 AZ Hlth. Fac. Auth. Hosp. Syst.
Rev. Bonds (John C. Lincoln Hlth.
Network), 6 3/8s, 12/1/37 BBB $518,510
1,175,000 Casa Grande, Indl. Dev. Auth.
Rev. Bonds (Casa Grande Regl. Med.
Ctr.), Ser. A, 7 5/8s, 12/1/29 B-/P 1,238,192
1,000,000 Scottsdale, Indl. Dev. Auth. Hosp.
Rev. Bonds (Scottsdale Hlth. Care),
5.8s, 12/1/31 A3 1,041,490
--------------
2,798,192
Arkansas (2.5%)
-------------------------------------------------------------------------------
3,080,000 AR Dev. Fin. Auth. Rev. Bonds,
Ser. D, GNMA/FNMA Coll., 3s, 1/1/24 AAA 3,121,549
3,000,000 AR State Hosp. Dev. Fin. Auth.
Rev. Bonds (Washington Regl. Med.
Ctr.), 7 3/8s, 2/1/29 Baa3 3,307,410
1,000,000 Little Rock G.O. Bonds (Cap. Impt.),
FSA, 3.95s, 4/1/19 Aaa 991,310
1,900,000 Northwest Regl. Arpt. Auth.
Rev. Bonds, 7s, 2/1/10 BB/P 1,931,198
--------------
9,351,467
California (9.0%)
-------------------------------------------------------------------------------
1,600,000 Anaheim, Pub. Fin. Auth. Tax Alloc.
IFB, MBIA, 11.27s, 12/28/18 Aaa 1,995,888
800,000 Anaheim, Pub. Fin. Auth. Tax Alloc.
Rev. Bonds, MBIA, 6.31s, 12/28/18 Aaa 898,464
2,500,000 CA Hlth. Fac. Auth. Rev. Bonds
(Sutter Hlth.), Ser. A, MBIA,
5 3/8s, 8/15/30 Aaa 2,601,775
CA State G.O. Bonds
500,000 5 1/8s, 4/1/23 A 521,625
750,000 5.1s, 2/1/34 A 758,063
CA State Dept. of Wtr. Resources
Rev. Bonds, Ser. A
1,500,000 6s, 5/1/15 A2 1,712,265
13,000,000 AMBAC, 5 1/2s, 5/1/13 Aaa 14,747,980
1,500,000 5 1/2s, 5/1/11 A2 1,673,640
1,000,000 CA State Econ. Recvy. G.O. Bonds,
Ser. A, 5s, 7/1/16 Aa3 1,061,460
1,750,000 CA Statewide Cmnty. Dev. Auth. COP
(The Internext Group), 5 3/8s,
4/1/30 BBB- 1,701,508
1,475,000 Gilroy, Rev. Bonds (Bonfante Gardens
Park), 8s, 11/1/25 D/P 1,038,857
Golden State Tobacco Securitization
Corp. Rev.Bonds
1,000,000 Ser. 2003 A-1, 6 1/4s, 6/1/33 BBB 975,340
1,500,000 Ser. B, 5 5/8s, 6/1/38 A- 1,574,820
450,000 Orange Cnty., Cmnty. Fac. Dist.
Special Tax Rev. Bonds (No. 02-1
Ladera Ranch), Ser. A,
5.55s, 8/15/33 BB+/P 453,830
1,400,000 Vallejo, COP (Marine World
Foundation), 7.2s, 2/1/26 BBB-/P 1,433,012
--------------
33,148,527
Colorado (2.4%)
-------------------------------------------------------------------------------
2,500,000 CO Hlth. Fac. Auth. Rev. Bonds
(Hlth. Fac.-Evangelical Lutheran),
3.35s, 10/1/06 A3 2,524,275
CO Springs, Hosp. Rev. Bonds
1,515,000 6 3/8s, 12/15/30 A3 1,655,880
1,485,000 6 3/8s, 12/15/30 (prerefunded) A3 1,757,661
CO State Hsg. Fin. Auth. Rev. Bonds
(Single Fam.)
190,000 Ser. B-2, 7s, 5/1/26 Aa2 196,126
100,000 Ser. B-3, 6.8s, 11/1/28 Aa2 100,622
2,500,000 Denver, City & Cnty. Arpt.
Rev. Bonds, MBIA, 5 1/2s, 11/15/25 Aaa 2,640,100
--------------
8,874,664
Delaware (0.4%)
-------------------------------------------------------------------------------
GMAC Muni. Mtge. Trust 144A sub.
notes
500,000 Ser. A1-3, 5.3s, 10/31/39 A3 493,890
1,000,000 Ser. A1-2, 4.9s, 10/31/39 A3 990,680
--------------
1,484,570
District of Columbia (1.1%)
-------------------------------------------------------------------------------
4,000,000 DC G.O. Bonds, Ser. B, FSA, 5 1/4s,
6/1/26 Aaa 4,168,440
Florida (2.0%)
-------------------------------------------------------------------------------
1,500,000 Cap. Trust Agcy. Rev. Bonds
(Seminole Tribe Convention), Ser. A,
10s, 10/1/33 B/P 1,841,805
2,395,000 Escambia Cnty., Hlth. Fac. Auth.
Rev. Bonds (Baptist Hosp. & Baptist
Manor), 5 1/8s, 10/1/19 A3 2,395,431
1,000,000 Lee Cnty., Indl. Dev. Auth.
Rev. Bonds (Alliance Cmnty.
Project), Ser. C, 5 1/2s, 11/15/29 BBB- 969,630
2,000,000 Miami Beach, Hlth. Fac. Auth. Hosp.
Rev. Bonds (Mount Sinai Med. Ctr.),
5 3/8s, 11/15/28 BB 1,800,040
375,000 Okeechobee Cnty., Solid Waste
Rev. Bonds (Waste Management/
Landfill), Ser. A, 4.2s, 7/1/39 BBB 378,724
--------------
7,385,630
Georgia (3.7%)
-------------------------------------------------------------------------------
1,500,000 Atlanta, Arpt. Rev. Bonds, Ser. B,
FGIC, 5 5/8s, 1/1/30 Aaa 1,563,465
1,045,000 Atlanta, Waste Wtr. Rev. Bonds,
Ser. A, FGIC, 5s, 11/1/38 Aaa 1,155,885
2,300,000 Burke Cnty., Poll. Control Dev.
Auth. Mandatory Put Bonds (GA Power
Co.), 4.45s, 12/1/08 A2 2,419,347
5,215,000 Cobb Cnty., Dev. Auth. U. Fac.
Rev. Bonds (Kennesaw State U. Hsg.),
Ser. A, MBIA, 5s, 7/15/29 Aaa 5,290,305
300,000 GA Med. Ctr. Hosp. Auth. IFB, MBIA,
10 5/8s, 8/1/10 Aaa 301,893
1,500,000 Muni. Elec. Auth. Rev. Bonds, AMBAC,
5s, 1/1/26 Aaa 1,617,900
1,315,000 Rockdale Cnty., Dev. Auth. Solid
Waste Disp. Rev. Bonds (Visy Paper,
Inc.), 7.4s, 1/1/16 B+/P 1,354,792
--------------
13,703,587
Illinois (5.5%)
-------------------------------------------------------------------------------
4,270,000 Chicago, G.O. Bonds, Ser. A, FSA,
5s, 1/1/27 Aaa 4,347,799
2,500,000 Chicago, Board of Ed. G.O. Bonds
(School Reform), Ser. A, AMBAC,
5 1/4s, 12/1/27 Aaa 2,564,100
1,580,000 Cook Cnty., Cmnty. G.O. Bonds (Cons.
School Dist. No. 64 Pk. Ridge), FSA,
5 1/2s, 12/1/16 Aaa 1,808,910
1,600,000 IL Dev. Fin. Auth. Rev. Bonds
(Midwestern U.), Ser. B, 6s, 5/15/26 A- 1,718,080
2,500,000 IL Dev. Fin. Auth. Hosp. Rev. Bonds
(Adventist Hlth. Syst./Sunbelt
Obligation), 5.65s, 11/15/24 A 2,595,550
1,945,000 IL U. Rev. Bonds (Auxiliary Fac.
Syst.), Ser. A, AMBAC, 5 1/4s,
4/1/19 Aaa 2,176,455
5,000,000 Schaumburg, G.O. Bonds, Ser. B,
FGIC, 5s, 12/1/27 Aaa 5,098,550
--------------
20,309,444
Indiana (1.0%)
-------------------------------------------------------------------------------
2,600,000 IN State Dev. Fin. Auth. Env. Impt.
Rev. Bonds (USX Corp.), 5.6s,
12/1/32 Baa1 2,649,790
1,000,000 Rockport, Poll. Control
Rev. Bonds (Indiana-Michigan Pwr.),
Ser. A, 4.9s, 6/1/25 Baa2 1,038,010
--------------
3,687,800
Iowa (0.6%)
-------------------------------------------------------------------------------
1,715,000 IA Fin. Auth. Hlth. Care Fac.
Rev. Bonds (Care Initiatives),
9 1/4s, 7/1/25 BBB-/P 2,076,591
Kansas (0.6%)
-------------------------------------------------------------------------------
2,145,000 Olathe, Hlth. Fac. VRDN (Olathe Med.
Ctr.), Ser. A, AMBAC, 1.67, 9/1/32 A-1+ 2,145,000
Louisiana (0.8%)
-------------------------------------------------------------------------------
1,500,000 Ernest N. Morial-New Orleans,
Exhibit Hall Auth. Special Tax
Bonds, Ser. A, AMBAC, 5 1/4s,
7/15/21 Aaa 1,610,565
1,140,000 LA Pub. Fac. Auth. Hosp. Rev. Bonds
(Lake Charles Memorial Hosp.),
8 5/8s, 12/1/30 CCC/P 918,430
300,000 Tangipahoa Parish Hosp. Svcs.
Rev. Bonds (North Oaks Med. Ctr.),
Ser. A, 5s, 2/1/25 A 295,485
--------------
2,824,480
Maine (0.4%)
-------------------------------------------------------------------------------
1,425,000 ME State Hsg. Auth. Rev. Bonds,
Ser. D-2-AMT, 5s, 11/15/27 Aa1 1,495,153
Maryland (0.1%)
-------------------------------------------------------------------------------
500,000 MD State Hlth. & Higher Edl. Fac.
Auth. Rev. Bonds (Medstar Hlth.),
5 3/4s, 8/15/15 Baa2 542,510
Massachusetts (7.9%)
-------------------------------------------------------------------------------
10,330,000 MA State G.O. Bonds, Ser. A, MBIA,
5 3/8s, 8/1/08 AAA 11,316,928
2,785,000 MA State Dev. Fin. Agcy. Rev. Bonds
(MA Biomedical Research), Ser. C,
6 3/8s, 8/1/17 A1 3,107,698
8,400,000 MA State Hlth. & Edl. Fac. Auth. IFB
(Med. Ctr. of Central MA), Ser. B,
AMBAC, 11.17s, 6/23/22 Aaa 10,247,580
MA State Hlth. & Edl. Fac. Auth.
Rev. Bonds
1,000,000 (Civic Investments), Ser. A, 9s,
12/15/15 BB/P 1,142,750
750,000 (Jordan Hosp.), Ser. E, 6 3/4s,
10/1/33 BBB- 783,330
2,500,000 MA State Hsg. Fin. Agcy. Rev. Bonds
(Rental Mtge.), Ser. C, AMBAC,
5 5/8s, 7/1/40 Aaa 2,567,175
--------------
29,165,461
Michigan (3.1%)
-------------------------------------------------------------------------------
4,400,000 Detroit, Swr. Disp. VRDN, Ser. B,
FSA, 1.68s, 7/1/33 VMIG1 4,400,000
1,400,000 Dickinson Cnty., Econ. Dev. Corp.
Poll. Control Rev. Bonds (Intl.
Paper Co.), Ser. A, 4.8s, 11/1/18 Baa2 1,390,116
300,000 Flint, Hosp. Bldg. Auth. Rev. Bonds
(Hurley Med. Ctr.), 6s, 7/1/20 Baa3 301,380
MI State Hosp. Fin. Auth. Rev. Bonds
1,000,000 (Oakwood Hosp.), Ser. A, 5 3/4s,
4/1/32 A2 1,031,940
1,250,000 (Holland Cmnty. Hosp.), Ser. A,
FGIC, 5 3/4s, 1/1/21 A2 1,331,763
1,650,000 MI State Strategic Fund, Ltd.
Rev. Bonds (Detroit Edison Poll.
Control), 5.65s, 9/1/29 A3 1,694,468
1,210,000 Saginaw Cnty., G.O. Bonds
(Healthsource Saginaw, Inc.), MBIA,
5s, 5/1/26 Aaa 1,245,598
--------------
11,395,265
Minnesota (0.5%)
-------------------------------------------------------------------------------
1,705,000 Minneapolis, Cmnty. Dev. Agcy.
Supported Dev. Rev. Bonds, Ser. G-3,
5.45s, 12/1/31 A- 1,758,946
Mississippi (1.3%)
-------------------------------------------------------------------------------
525,000 Lowndes Cnty., Solid Waste Disp. &
Poll. Control Rev. Bonds
(Weyerhaeuser Co.), Ser. B, 6.7s,
4/1/22 Baa2 612,848
2,750,000 MS Bus. Fin. Corp. Poll. Control
Rev. Bonds (Syst. Energy Resources,
Inc.), 5 7/8s, 4/1/22 BBB 2,764,850
1,385,000 MS Dev. Bk. Special Obligation
Rev. Bonds (Jackson MS Project),
FSA, 5 1/4s, 3/1/21 Aaa 1,535,868
--------------
4,913,566
Missouri (3.5%)
-------------------------------------------------------------------------------
1,250,000 Cape Girardeau Cnty., Indl. Dev.
Auth. Hlth. Care Fac. Rev. Bonds
(St. Francis Med. Ctr.),
Ser. A, 5 1/2s, 6/1/16 A 1,323,863
1,455,000 MO Hsg. Dev. Comm. Rev. Bonds (Home
Ownership), GNMA/FNMA Coll., 5.55s,
9/1/34 AAA 1,580,028
1,000,000 MO State Hlth. & Edl. Fac. Auth.
Rev. Bonds (BJC Hlth. Syst.),
5 1/4s, 5/15/32 Aa2 1,019,790
8,810,000 SCA Tax Exempt Trust Multi-Fam.
Mtge. Rev. Bonds, FSA, 7.1s, 1/1/30 Aaa 8,999,591
--------------
12,923,272
Montana (0.3%)
-------------------------------------------------------------------------------
1,175,000 Forsyth, Poll. Control Mandatory Put
Bonds (Avista Corp.), AMBAC, 5s,
12/30/08 Aaa 1,252,397
Nevada (1.8%)
-------------------------------------------------------------------------------
5,105,000 Clark Cnty., Arpt. Rev. Bonds,
Ser. A-2, FGIC, 5 1/8s, 7/1/26 Aaa 5,278,570
1,205,000 Henderson, Local Impt. Dist. Special
Assmt. Bonds (No. T-14), 4 3/4s,
3/1/10 BB-/P 1,220,038
--------------
6,498,608
New Hampshire (0.3%)
-------------------------------------------------------------------------------
950,000 NH State Bus. Fin. Auth. Poll.
Control Rev. Bonds, 3 1/2s, 7/1/27 Baa2 949,972
New Jersey (3.9%)
-------------------------------------------------------------------------------
NJ Econ. Dev. Auth. Rev. Bonds
650,000 (Cedar Crest Vlg., Inc.), Ser. A,
7 1/4s, 11/15/31 BB-/P 682,331
1,750,000 (Cigarette Tax), 5 3/4s, 6/15/29 Baa2 1,781,168
5,000,000 (Motor Vehicle), Ser. A, MBIA, 5s,
7/1/27 Aaa 5,118,300
3,100,000 NJ State G.O. Bonds, Ser. F, MBIA,
5 1/2s, 8/1/11 AAA 3,502,721
NJ State Edl. Fac. Auth. Rev. Bonds
750,000 (Fairleigh Dickinson), Ser. C, 6s,
7/1/20 BBB-/F 805,313
1,000,000 (Drew U.), Ser. C, FGIC, 5 1/4s,
7/1/18 Aaa 1,125,470
Tobacco Settlement Fin. Corp.
Rev. Bonds
500,000 6 3/4s, 6/1/39 BBB 498,005
1,000,000 (Asset Backed Bonds), 6s, 6/1/37 BBB 909,010
--------------
14,422,318
New Mexico (2.3%)
-------------------------------------------------------------------------------
Farmington, Poll. Control VRDN
$7,450,000 (AZ Pub. Svc. Co.), Ser. A, 1.69s,
5/1/24 VMIG1 $7,450,000
1,000,000 (AZ Pub. Svc. Co.), Ser. B, 1.68s,
9/1/24 VMIG1 1,000,000
--------------
8,450,000
New York (9.4%)
-------------------------------------------------------------------------------
1,800,000 Long Island, Pwr. Auth. NY Elec.
Syst. Rev. Bonds, Ser. A, 5 3/4s,
12/1/24 A- 1,968,606
7,780,000 NY City, G.O. Bonds, Ser. B, 5 1/4s,
12/1/09 A2 8,492,026
NY City, Indl. Dev. Agcy. Rev. Bonds
1,000,000 (Visy Paper, Inc.), 7.95s, 1/1/28 B-/P 1,051,180
2,000,000 (Brooklyn Navy Yard Cogen.
Partners), Ser. G, 5 3/4s, 10/1/36 BBB- 1,845,600
750,000 NY City, Indl. Dev. Agcy. Special
Fac. Rev. Bonds (British Airways),
5 1/4s, 12/1/32 BB+ 576,743
4,100,000 NY City, Muni. Wtr. & Swr. Fin.
Auth. Rev. Bonds, Ser. C, 5 3/4s,
6/15/26 AA+ 4,441,448
4,000,000 NY State Env. Fac. Corp. Rev. Bonds,
5s, 6/15/32 Aaa 4,061,000
10,500,000 Port. Auth. NY & NJ Special
Obligation Rev. Bonds (JFK Intl. Air
Term. - 6), MBIA, 5.9s, 12/1/17 Aaa 11,377,800
650,000 Suffolk Cnty., Indl. Dev. Agcy.
Rev. Bonds (Peconic Landing),
Ser. A, 8s, 10/1/30 B+/P 687,765
--------------
34,502,168
North Carolina (1.9%)
-------------------------------------------------------------------------------
NC Eastern Muni. Pwr. Agcy. Syst.
Rev. Bonds
1,000,000 Ser. D, 6 3/4s, 1/1/26 Baa2 1,105,220
2,000,000 Ser. A, 5 3/4s, 1/1/26 Baa2 2,085,140
3,500,000 NC State Muni. Pwr. Agcy. Rev. Bonds
(No. 1, Catawba Elec.), Ser. B,
6 1/2s, 1/1/20 Baa1 3,935,575
--------------
7,125,935
Ohio (2.0%)
-------------------------------------------------------------------------------
1,000,000 Brookville, Local School Dist. G.O.
Bonds, FSA, 5s, 12/1/31 Aaa 1,012,280
2,000,000 OH State Air Quality Dev. Auth.
Rev. Bonds (Toledo Poll. Control),
Ser. A, 6.1s, 8/1/27 Baa2 2,079,440
1,500,000 OH State Solid Waste Rev. Bonds
(General Motors Corp.), 6.3s,
12/1/32 Baa2 1,563,720
2,500,000 Rickenbacker, Port Auth. Rev. Bonds
(OASBO Expanded Asset Pooled),
Ser. A, 5 3/8s, 1/1/32 A2 2,570,425
--------------
7,225,865
Oklahoma (0.3%)
-------------------------------------------------------------------------------
1,050,000 OK Dev. Fin. Auth. Rev. Bonds
(Hillcrest Hlth. Care Syst.),
Ser. A, U.S. Govt. Coll., 5 5/8s,
8/15/29 AAA 1,179,560
Oregon (0.3%)
-------------------------------------------------------------------------------
1,000,000 OR State Hsg. & Cmnty. Svcs. Dept.
Rev. Bonds (Single Family Mtg.),
Ser. K, 5 5/8s, 7/1/29 Aa2 1,071,470
Pennsylvania (4.0%)
-------------------------------------------------------------------------------
1,110,000 Carbon Cnty., Indl. Dev. Auth.
Rev. Bonds (Panther Creek Partners),
6.65s, 5/1/10 BBB- 1,197,923
1,500,000 Lancaster Cnty., Hosp. Auth.
Rev. Bonds (Gen. Hosp.), 5 1/2s,
3/15/26 A- 1,520,715
1,000,000 Lehigh Cnty., Gen. Purpose Auth.
Rev. Bonds (Lehigh Valley Hosp.
Hlth. Network), Ser. A, 5 1/4s,
7/1/32 A2 1,005,600
1,000,000 PA Econ. Dev. Fin. Auth. Rev. Bonds
(Amtrak), Ser. A, 6 3/8s, 11/1/41 A3 1,034,180
PA State Econ. Dev. Fin. Auth.
Resource Recvy. Rev. Bonds
750,000 (Colver), Ser. E, 8.05s, 12/1/15 BBB-/P 775,140
750,000 (Northampton Generating), Ser. A,
6.6s, 1/1/19 BBB- 758,100
1,045,000 PA State Higher Edl. Fac. Auth.
Rev. Bonds (Philadelphia College of
Osteopathic Med.), 5s, 12/1/08 A 1,117,429
5,000,000 Philadelphia, School Dist. G.O.
Bonds, Ser. D, FGIC, 5s, 6/1/27 Aaa 5,121,500
2,200,000 West Shore, Area Hosp. Auth.
Rev. Bonds (Holy Spirit Hosp.),
6 1/4s, 1/1/32 BBB+ 2,263,096
--------------
14,793,683
Puerto Rico (1.6%)
-------------------------------------------------------------------------------
5,000,000 Cmnwlth. of PR, Hwy. & Trans. Auth.
Rev. Bonds, Ser. B, 6s, 7/1/39 A 5,804,550
South Carolina (1.8%)
-------------------------------------------------------------------------------
2,515,000 Florence Cnty., Hosp. Rev. Bonds
(McLeod Regl. Med. Ctr.), Ser. A,
FSA, 5 1/4s, 11/1/23 Aaa 2,689,290
500,000 Lexington Cnty. Hlth. Svcs. Dist.
Inc. Hosp. Rev. Bonds, 5 3/4s,
11/1/28 A2 523,745
1,000,000 SC Hosp. Auth. Rev. Bonds (Med. U.),
Ser. A, 6 1/2s, 8/15/32 BBB+ 1,064,560
600,000 SC Jobs Econ. Dev. Auth. Hosp. Fac.
Rev. Bonds (Palmetto Hlth.
Alliance), Ser. A, 7 3/8s, 12/15/21 Baa2 734,826
1,750,000 SC Tobacco Settlement Rev. Mgt.
Rev. Bonds, Ser. B, 6 3/8s, 5/15/28 BBB 1,691,148
--------------
6,703,569
South Dakota (0.5%)
-------------------------------------------------------------------------------
2,000,000 SD Edl. Enhancement Funding Corp.
Rev. Bonds, Ser. B, 6 1/2s, 6/1/32 BBB 1,935,440
Tennessee (6.1%)
-------------------------------------------------------------------------------
Johnson City, Hlth. & Edl. Fac.
Board Hosp. Rev. Bonds (First Mtg. -
Mountain States Hlth.)
7,000,000 Ser. A, MBIA, 6s, 7/1/21 Aaa 7,835,240
3,000,000 Ser. A, 7 1/2s, 7/1/25 BBB+ 3,519,540
10,900,000 SCA- Tax Exempt Trust Multi-Fam.
Mtge. Rev. Bonds (Steeplechase
Falls), Ser. A-10, FSA, 7 1/8s,
1/1/30 Aaa 11,134,452
--------------
22,489,232
Texas (5.9%)
-------------------------------------------------------------------------------
2,500,000 Alliance, Arpt. Auth. Rev. Bonds
(Federal Express Corp.), 6 3/8s,
4/1/21 Baa2 2,616,650
4,525,000 Columbus, Indpt. School Dist. G.O.
Bonds, PSFG, 5 1/8s, 8/15/29 Aaa 4,648,261
500,000 Comal Cnty., Hlth. Fac. Dev. Corp.
Rev. Bonds (Hlth. Care Syst. -
McKenna Memorial), Ser. A, 6 1/4s,
2/1/32 Baa2 508,245
2,905,000 Conroe, Indpt. School Dist. G.O.
Bonds (School House), PSFG, 5s,
2/15/26 Aaa 2,958,423
1,135,000 Dallas-Fort Worth, Intl. Arpt. Fac.
Impt. Corp. Rev. Bonds (American
Airlines, Inc.), 6 3/8s, 5/1/35 Caa2 705,073
750,000 Gateway, Pub. Fac. Corp. Rev. Bonds
(Stonegate Villas Apt.), FNMA Coll.,
4.55s, 7/1/34 Aaa 769,905
1,250,000 Gulf Coast, Waste Disp. Auth.
Rev. Bonds, Ser. A, 6.1s, 8/1/24 Baa2 1,305,788
1,500,000 Harris Cnty., Hlth. Fac. Rev. Bonds
(Memorial Hermann Hlth. Care),
Ser. A, 6 3/8s, 6/1/29 A2 1,640,625
1,500,000 Houston, Arpt. Syst. Rev. Bonds
(Continental Airlines, Inc.),
Ser. E, 6 3/4s, 7/1/29 B- 1,223,115
1,500,000 Sam Rayburn Muni. Pwr. Agcy.
Rev. Bonds, 6s, 10/1/21 Baa2 1,600,065
1,360,000 Socorro, Indpt. School Dist. G.O.
Bonds, PSFG, 5s, 8/15/29 A 1,378,686
Tomball, Hosp. Auth. Rev. Bonds
(Tomball Regl. Hosp.)
600,000 6s, 7/1/25 Baa2 594,372
1,700,000 6s, 7/1/19 Baa2 1,719,210
--------------
21,668,418
Utah (4.6%)
-------------------------------------------------------------------------------
1,000,000 Carbon Cnty., Solid Waste Disp.
Rev. Bonds (Laidlaw Env.), Ser. A,
7.45s, 7/1/17 BB-/P 1,028,830
1,000,000 Tooele Cnty., Harbor & Term. Dist.
Port Fac. Rev. Bonds (Union
Pacific), Ser. A, 5.7s, 11/1/26 Baa2 1,026,020
675,000 UT Cnty., Env. Impt. Rev. Bonds
(Marathon Oil), 5.05s, 11/1/17 Baa1 732,355
UT State Pwr. Supply Rev. Bonds
(Intermountain Pwr. Agcy.), Ser. A,
MBIA
4,720,000 6.15s, 7/1/14 Aaa 5,080,183
8,280,000 6.15s, 7/1/14 (prerefunded) Aaa 8,961,941
--------------
16,829,329
Vermont (0.3%)
-------------------------------------------------------------------------------
1,000,000 VT Hsg. Fin. Agcy. Rev. Bonds, Ser.
19A, FSA, 4.62s, 5/1/29 Aaa 1,041,120
Virginia (0.6%)
-------------------------------------------------------------------------------
2,000,000 Prince William Cnty., Indl. Dev.
Auth. Hosp. Rev. Bonds (Potomac
Hosp. Corp.), 5.35s, 10/1/36 A3 2,021,140
Washington (0.7%)
-------------------------------------------------------------------------------
2,420,000 Tobacco Settlement Auth. of WA
Rev. Bonds, 6 1/2s, 6/1/26 BBB 2,417,217
West Virginia (2.1%)
-------------------------------------------------------------------------------
7,500,000 Econ. Dev. Auth. Lease Rev. Bonds
(Correctional Juvenile Safety),
Ser. A, MBIA, 5s, 6/1/29 Aaa 7,613,250
Wisconsin (2.1%)
-------------------------------------------------------------------------------
Badger Tobacco Settlement
Asset Securitization Corp.
Rev. Bonds
1,800,000 7s, 6/1/28 BBB 1,819,800
3,500,000 6 3/8s, 6/1/32 BBB 3,332,700
2,500,000 WI State Hlth. & Edl. Fac. Auth.
Rev. Bonds (Wheaton Franciscan),
5 3/4s, 8/15/30 A2 2,604,175
--------------
7,756,675
-------------------------------------------------------------------------------
Total Investments
(cost $353,556,707) $367,904,481
-------------------------------------------------------------------------------
(a) Percentages indicated are based on portfolio market value.
(RAT) The Moody's, Standard & Poor's or Fitch ratings indicated are
believed to be the most recent ratings available at November 30, 2004
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 November 30, 2004. Securities rated by Putnam are
indicated by "/P". Ratings are not covered by the Report of Independent
Registered Public Accounting Firm. Security ratings are defined in the
Statement of Additional Information.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
The rates shown on VRDN and Mandatory Put Bonds are the current interest
rates at November 30, 2004.
The dates shown on Mandatory Put Bonds are the next mandatory put dates.
The rates shown on IFB, which are securities paying interest rates that
vary inversely to changes in the market interest rates, are the current
interest rates at November 30, 2004.
The fund had the following industry group concentrations greater than
10% at November 30, 2004 (as a percentage of market value):
Health care 22.2%
Utilities and power 22.0
The fund had the following insurance concentrations greater than 10% at
November 30, 2004 (as a percentage of market value):
MBIA 20.6%
FSA 11.5
AMBAC 10.6
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
November 30, 2004
Assets
-------------------------------------------------------------------------------
Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $353,556,707) $367,904,481
-------------------------------------------------------------------------------
Cash 604,611
-------------------------------------------------------------------------------
Interest and other receivables 6,339,211
-------------------------------------------------------------------------------
Receivable for securities sold 100,607
-------------------------------------------------------------------------------
Total assets 374,948,910
Liabilities
-------------------------------------------------------------------------------
Distributions payable to shareholders 1,213,362
-------------------------------------------------------------------------------
Accrued preferred shares distribution payable (Note 1) 26,080
-------------------------------------------------------------------------------
Payable for securities purchased 2,967,309
-------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 601,620
-------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 44,685
-------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 35,610
-------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,524
-------------------------------------------------------------------------------
Other accrued expenses 120,341
-------------------------------------------------------------------------------
Total liabilities 5,010,531
-------------------------------------------------------------------------------
Series A remarketed preferred shares: (1,400 shares
authorized and outstanding at $100,000 per share) (Note 4) 140,000,000
-------------------------------------------------------------------------------
Net assets $229,938,379
Represented by
-------------------------------------------------------------------------------
Paid-in capital -- common shares (unlimited shares
authorized) (Note 1) $237,411,614
-------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 96,293
-------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (21,917,302)
-------------------------------------------------------------------------------
Net unrealized appreciation of investments 14,347,774
-------------------------------------------------------------------------------
Total -- Representing net assets applicable to common shares
outstanding $229,938,379
Computation of net asset value
-------------------------------------------------------------------------------
Net asset value per common share ($229,938,379 divided by
21,438,811 shares) $10.73
-------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of operations
Year ended November 30, 2004
Interest income: $19,478,991
-------------------------------------------------------------------------------
Expenses:
-------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,404,948
-------------------------------------------------------------------------------
Investor servicing fees (Note 2) 117,967
-------------------------------------------------------------------------------
Custodian fees (Note 2) 126,887
-------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 15,104
-------------------------------------------------------------------------------
Administrative services (Note 2) 8,853
-------------------------------------------------------------------------------
Preferred share remarketing agent fees 356,326
-------------------------------------------------------------------------------
Other 176,406
-------------------------------------------------------------------------------
Total expenses 3,206,491
-------------------------------------------------------------------------------
Expense reduction (Note 2) (8,742)
-------------------------------------------------------------------------------
Net expenses 3,197,749
-------------------------------------------------------------------------------
Net investment income 16,281,242
-------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,613,430
-------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (563,619)
-------------------------------------------------------------------------------
Net gain on investments 1,049,811
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations $17,331,053
-------------------------------------------------------------------------------
Distributions to Series A remarketed
preferred shareholders: (Note 1)
-------------------------------------------------------------------------------
From tax exempt income (1,686,256)
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations
(applicable to common shareholders) $15,644,797
-------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of changes in net assets
Year ended November 30
Increase in net assets 2004 2003
-------------------------------------------------------------------------------
Operations:
-------------------------------------------------------------------------------
Net investment income $16,281,242 $17,938,467
-------------------------------------------------------------------------------
Net realized gain (loss) on investments 1,613,430 (12,673,654)
-------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments (563,619) 20,337,621
-------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 17,331,053 25,602,434
Distributions to Series A remarketed
preferred shareholders: (Note 1)
-------------------------------------------------------------------------------
From tax exempt income (1,686,256) (1,494,296)
-------------------------------------------------------------------------------
Net increase in net assets resulting from
operations (applicable to common
shareholders) 15,644,797 24,108,138
-------------------------------------------------------------------------------
Distributions to common shareholders: (Note 1)
-------------------------------------------------------------------------------
From tax exempt income (15,326,794) (17,791,911)
-------------------------------------------------------------------------------
Increase from issuance of common shares in
connection with reinvestment of
distributions 479,878 1,392,553
-------------------------------------------------------------------------------
Total increase in net assets 797,881 7,708,780
Net assets
-------------------------------------------------------------------------------
Beginning of year 229,140,498 221,431,718
-------------------------------------------------------------------------------
End of year (including undistributed net
investment income of $96,293 and $711,448,
respectively) $229,938,379 $229,140,498
-------------------------------------------------------------------------------
Number of fund shares
-------------------------------------------------------------------------------
Common shares outstanding at beginning of
year 21,394,578 21,262,820
-------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 44,233 131,758
-------------------------------------------------------------------------------
Common shares outstanding at end of year 21,438,811 21,394,578
-------------------------------------------------------------------------------
Remarketed preferred shares outstanding at
beginning and end of year 1,400 1,400
-------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
Per-share Year ended November 30
operating performance 2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period
(common shares) $10.71 $10.41 $10.96 $10.88 $10.71
----------------------------------------------------------------------------------------------------------------------------
Investment operations:
----------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .76 .84 .95 1.01 1.03
----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .06 .36 (.60) (.02) .26
----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .82 1.20 .35 .99 1.29
----------------------------------------------------------------------------------------------------------------------------
Distributions to preferred shareholders:
----------------------------------------------------------------------------------------------------------------------------
From net investment income (.08) (.07) (.10) (.20) (.28)
----------------------------------------------------------------------------------------------------------------------------
Total from investment
operations: (applicable to
common shareholders) .74 1.13 .25 .79 1.01
----------------------------------------------------------------------------------------------------------------------------
Distributions to
common shareholders:
----------------------------------------------------------------------------------------------------------------------------
From net investment income (.72) (.83) (.80) (.71) (.84)
----------------------------------------------------------------------------------------------------------------------------
Total distributions (.72) (.83) (.80) (.71) (.84)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $10.73 $10.71 $10.41 $10.96 $10.88
----------------------------------------------------------------------------------------------------------------------------
Market price, end of period
(common shares) $9.67 $10.74 $10.75 $10.67 $9.81
----------------------------------------------------------------------------------------------------------------------------
Total return at market price
(common shares) (%)(b) (3.46) 8.07 8.58 15.96 (11.14)
----------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
common shares (in thousands) $229,938 $229,140 $221,432 $231,983 $229,854
----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) 1.39 1.42 1.46 1.49 1.47
----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(c) 6.34 7.26 7.99 7.19 7.10
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 29.59 32.72 19.25 23.05 24.90
----------------------------------------------------------------------------------------------------------------------------
(a) Per share net investment income has been determined on the basis of
the weighted number of shares outstanding during the period.
(b) Total 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) Includes amounts paid through expense offset arrangements (Note 2).
The accompanying notes are an integral part of these financial
statements.
Notes to financial statements
November 30, 2004
Note 1
Significant accounting policies
Putnam Investment Grade Municipal Trust (the "fund"), a Massachusetts
business trust, 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 tax-exempt municipal securities
that Putnam Investment Management, LLC ("Putnam Management"), the fund's
manager, an indirect wholly-owned subsidiary of Putnam, LLC, believes do
not involve undue risk to income or principal. Under normal circumstances,
the fund will invest at least 80% of its net assets in investment grade
securities (rated "investment grade" at the time of investment or, if not
rated, determined by Putnam Management to be of comparable quality).
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 accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in the financial
statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results could
differ from those estimates.
A) Security valuation Tax-exempt bonds and notes are valued at fair
value on the basis of valuations provided by an independent pricing
service, approved by the Trustees. Such services use information with
respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Other investments are valued at fair
value following procedures approved by the Trustees. Such valuations and
procedures are reviewed periodically by the Trustees.
B) Security transactions and related investment income Security
transactions are recorded on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. All premiums/discounts
are amortized/accreted on a yield-to-maturity basis. The premium in
excess of the call price, if any, is amortized to the call date;
thereafter, any remaining premium is amortized to maturity.
C) 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 of 1986 (the "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 Code, as amended. 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 November 30, 2004, the fund had a capital loss carryover of
$19,431,165 available to the extent allowed by the Code to offset future
net capital gain, if any. The amount of the carryover and the expiration
dates are:
Loss Carryover Expiration
--------------------------------------
$612,177 November 30, 2005
1,661,946 November 30, 2006
2,968,039 November 30, 2007
535,007 November 30, 2009
1,282,640 November 30, 2010
12,371,356 November 30, 2011
D) Distributions to shareholders Distributions to common and preferred
shareholders from net investment income are recorded by the fund on the
ex-dividend date. Distributions from capital gains, if any, are recorded on
the ex-dividend date and paid at least annually. 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
seven day period. The applicable dividend rate for the remarketed preferred
shares on November 30, 2004 was 1.70%. 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 temporary and permanent differences
of the expiration of a capital loss carryover, dividends payable, market
discount and straddle loss deferrals. 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 November 30, 2004, the fund reclassified
$116,653 to decrease distributions in excess of net investment income and
$855,275 to decrease paid-in-capital, with a decrease to accumulated net
realized loss of $738,622.
The tax basis components of distributable earnings and the federal tax
cost as of period end were as follows:
Unrealized appreciation $16,331,495
Unrealized depreciation (1,983,721)
------------
Net unrealized appreciation 14,347,774
Undistributed tax-exempt
income 1,121,859
Undistributed ordinary income 164,237
Capital loss carryforward (19,431,165)
Cost for federal income
tax purposes $353,556,707
E) Determination of net asset value Net asset value of the common shares is
determined by dividing the value of all assets of the fund, less all
liabilities and the liquidation preference of any outstanding remarketed
preferred shares, by the total number of common shares outstanding as of
period end.
Note 2
Management fee, administrative
services and other transactions
Putnam Management is paid for management and investment advisory services
quarterly based on the average net assets of the fund. Such fee is based on
the annual rate of 0.65% of the weekly average net assets of the fund.
If dividends payable on remarketed preferred shares during any dividend
payment period plus any expenses attributable to remarketed preferred shares
for that period exceed the fund's gross 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 the amount of the
excess (but not more than 0.65% of the liquidation preference of the
remarketed preferred shares outstanding during the period).
The fund reimburses Putnam Management an allocated amount 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 subsidiary of Putnam, LLC. Putnam Investor
Services, a division of PFTC, provides investor servicing agent functions to
the fund. During the year ended November 30, 2004, the fund paid PFTC
$244,854 for these services.
The fund has entered into an arrangement with PFTC whereby credits realized
as a result of uninvested cash balances are used to reduce a portion of the
fund's expenses. For the year ended November 30, 2004, the fund's expenses
were reduced by $8,742 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $710, as a quarterly retainer, has been allocated to the fund, and an
additional fee for each Trustees meeting attended. Trustees receive
additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral 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 invested in
certain Putnam funds until distribution in accordance with the Deferral
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 a 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 Trustee compensation and expenses in the statement of
operations. Accrued pension liability is included in Payable for Trustee
compensation and expenses in the statement of assets and liabilities. The
Trustees have terminated the Pension Plan with respect to any Trustee first
elected after 2003.
Note 3
Purchases and sales of securities
During the year ended November 30, 2004, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $104,673,429 and $104,969,985, respectively. There were no
purchases or sales of U.S. government securities.
Note 4
Preferred shares
The Series A shares are redeemable at the option of the fund on any
dividend payment date at a redemption price of $100,000 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.
Additionally, the fund has authorized a separate series of 2,000 Serial
Remarketed Preferred shares, which are issuable only under certain
conditions in exchange for Series A shares. No Serial Remarketed
Preferred shares are currently outstanding.
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 may 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 November 30, 2004, no
such restrictions have been placed on the fund.
Note 5
Regulatory matters and litigation
On April 8, 2004, Putnam Management entered into agreements with the
Securities and Exchange Commission and the Massachusetts Securities
Division representing a final settlement of all charges brought against
Putnam Management by those agencies on October 28, 2003 in connection with
excessive short-term trading by Putnam employees and, in the case of the
charges brought by the Massachusetts Securities Division, by participants
in some Putnam-administered 401(k) plans. The settlement with the SEC
requires Putnam Management to pay $5 million in disgorgement plus a civil
monetary penalty of $50 million, and the settlement with the Massachusetts
Securities Division requires Putnam Management to pay $5 million in
restitution and an administrative fine of $50 million. The settlements also
leave intact the process established under an earlier partial settlement
with the SEC under which Putnam Management agreed to pay the amount of
restitution determined by an independent consultant, which may exceed the
disgorgement and restitution amounts specified above, pursuant to a plan to
be developed by the independent consultant.
Putnam Management, and not the investors in any Putnam fund, will bear all
costs, including restitution, civil penalties and associated legal fees
stemming from both of these proceedings. The SEC's and Massachusetts
Securities Division's allegations and related matters also serve as the
general basis for numerous lawsuits, including purported class-action
lawsuits filed against Putnam Management and certain related parties,
including certain Putnam funds. Putnam Management has agreed to bear any
costs incurred by Putnam funds in connection with these lawsuits. Based on
currently available information, Putnam Management believes that the
likelihood that the pending private lawsuits and purported class-action
lawsuits will have a material adverse financial impact on the fund is
remote, and the pending actions are not likely to materially affect its
ability to provide investment management services to its clients, including
the Putnam funds.
--------------------------------------------------------------------------
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 2005 will show the tax status of
all distributions paid to your account in calendar 2004.
Results of October 14, 2004 shareholder meeting
(Unaudited)
An annual meeting of shareholders of the fund was held on October 14,
2004. At the meeting, each of the nominees for Trustees was elected, as
follows:
Common Shares
Votes
Votes for withheld
----------------------------------------------------------------
Jameson A. Baxter 18,111,991 487,219
Charles B. Curtis 18,111,991 487,219
Myra R. Drucker 18,095,503 503,707
Charles E. Haldeman, Jr. 18,096,563 502,647
Ronald J. Jackson 18,108,193 491,017
Paul L. Joskow 18,110,817 488,393
Elizabeth T. Kennan 18,108,193 491,017
John H. Mullin, III 18,118,183 481,027
George Putnam, III 18,108,497 490,713
A.J.C. Smith 18,099,156 500,054
W. Thomas Stephens 18,085,389 513,821
Richard B. Worley 18,102,733 496,477
Preferred Shares
Votes
Votes for withheld
----------------------------------------------------------------
Jameson A. Baxter 1,346 46
Charles B. Curtis 1,346 46
Myra R. Drucker 1,346 46
Charles E. Haldeman, Jr. 1,346 46
Ronald J. Jackson 1,346 46
Paul L. Joskow 1,346 46
Elizabeth T. Kennan 1,346 46
John H. Mullin, III 1,346 46
George Putnam, III 1,346 46
A.J.C. Smith 1,346 46
W. Thomas Stephens 1,346 46
Richard B. Worley 1,346 46
John A. Hill 1,346 46
Robert E. Patterson 1,346 46
All tabulations are rounded to nearest whole number.
Compliance certifications
(Unaudited)
On November 11, 2004, your fund submitted a CEO annual certification to the
New York Stock Exchange (NYSE) on which the fund's principal executive
officer certified that he was not aware, as of that date, of any violation
by the fund of the NYSE's Corporate Governance listing standards. In
addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and
related SEC rules, the fund's principal executive and principal financial
officers have made quarterly certifications, included in filings with the
SEC on Forms N-CSR and N-Q, relating to, among other things, the fund's
disclosure controls and procedures and internal control over financial
reporting.
About the Trustees
Jameson A. Baxter (9/6/43), Trustee since 1994
Ms. Baxter is the President of Baxter Associates, Inc., a private
investment firm that she founded in 1986.
Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Banta
Corporation (a printing and digital imaging firm), Ryerson Tull, Inc. (a
steel service corporation), Advocate Health Care and BoardSource,
formerly the National Center for Nonprofit Boards. She is Chairman
Emeritus of the Board of Trustees, Mount Holyoke College, having served
as Chairman for five years and as a board member for thirteen years.
Until 2002, Ms. Baxter was a Director of Intermatic Corporation (a
manufacturer of energy control products).
Ms. Baxter has held various positions in investment banking and
corporate finance, including Vice President and Principal of the Regency
Group, and Vice President of and Consultant to First Boston Corporation.
She is a graduate of Mount Holyoke College.
Charles B. Curtis (4/27/40), Trustee since 2001
Mr. Curtis is President and Chief Operating Officer of the Nuclear
Threat Initiative (a private foundation dealing with national security
issues) and serves as Senior Advisor to the United Nations Foundation.
Mr. Curtis is a member of the Council on Foreign Relations and the
Trustee Advisory Council of the Applied Physics Laboratory, Johns
Hopkins University. Until 2003, Mr. Curtis was a member of the Electric
Power Research Institute Advisory Council and the University of Chicago
Board of Governors for Argonne National Laboratory. Prior to 2002, Mr.
Curtis was a Member of the Board of Directors of the Gas Technology
Institute and the Board of Directors of the Environment and Natural
Resources Program Steering Committee, John F. Kennedy School of
Government, Harvard University. Until 2001, Mr. Curtis was a member of
the Department of Defense Policy Board and Director of EG&G Technical
Services, Inc. (a fossil energy research and development support
company).
From August 1997 to December 1999, Mr. Curtis was a Partner at Hogan &
Hartson L.L.P., a Washington, D.C. law firm. Prior to May 1997, Mr.
Curtis was Deputy Secretary of Energy. He served as Chairman of the
Federal Energy Regulatory Commission from 1977 to 1981 and has held
positions on the staff of the U.S. House of Representatives, the U.S.
Treasury Department, and the SEC.
Myra R. Drucker (1/16/48), Trustee since 2004
Ms. Drucker is a Vice Chair of the Board of Trustees of Sarah Lawrence
College, a Trustee of Commonfund (a not-for-profit firm specializing in
asset management for educational endowments and foundations) and a
member of the Investment Committee of the Kresge Foundation (a
charitable trust). She is also Chair of the New York Stock Exchange
(NYSE) Pension Managers Advisory Committee and a member of the Executive
Committee of the Committee on Investment of Employee Benefit Assets.
Until August 31, 2004, Ms. Drucker was Managing Director and a member of
the Board of Directors of General Motors Asset Management and Chief
Investment Officer of General Motors Trust Bank. Ms. Drucker also served
as a member of the NYSE Corporate Accountability and Listing Standards
Committee and the NYSE/NASD IPO Advisory Committee.
Prior to joining General Motors Asset Management in 2001, Ms. Drucker
held various executive positions in the investment management industry.
Ms. Drucker served as Chief Investment Officer of Xerox Corporation (a
technology and service company in the document industry), where she was
responsible for the investment of the company's pension assets. Ms.
Drucker was also Staff Vice President and Director of Trust Investments
for International Paper (a paper, paper distribution, packaging and
forest products company) and previously served as Manager of Trust
Investments for Xerox Corporation. Ms. Drucker received a B.A. degree in
Literature and Psychology from Sarah Lawrence College and pursued
graduate studies in economics, statistics and portfolio theory at Temple
University.
John A. Hill (1/31/42), Trustee since 1985 and Chairman since 2000
Mr. Hill is Vice Chairman of First Reserve Corporation, a private equity
buyout firm that specializes in energy investments in the diversified
worldwide energy industry.
Mr. Hill is a Director of Devon Energy Corporation, TransMontaigne Oil
Company, Continuum Health Partners of New York and various private
companies controlled by First Reserve Corporation, as well as a Trustee
of TH Lee, Putnam Investment Trust (a closed-end investment company
advised by an affiliate of Putnam Management). He is also a Trustee of
Sarah Lawrence College.
Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held
executive positions in investment banking and investment management with
several firms and with the federal government, including Deputy
Associate Director of the Office of Management and Budget and Deputy
Director of the Federal Energy Administration. He is active in various
business associations, including the Economic Club of New York, and
lectures on energy issues in the United States and Europe. Mr. Hill
holds a B.A. degree in Economics from Southern Methodist University and
pursued graduate studies there as a Woodrow Wilson Fellow.
Ronald J. Jackson (12/17/43), Trustee since 1996
Mr. Jackson is a private investor.
Mr. Jackson is President of the Kathleen and Ronald J. Jackson
Foundation (a charitable trust). He is also a member of the Board of
Overseers of WGBH (a public television and radio station) and was,
through 2004, a member of the Board of Overseers of the Peabody Essex
Museum.
Mr. Jackson is the former Chairman, President and Chief Executive
Officer of Fisher-Price, Inc. (a major toy manufacturer), from which he
retired in 1993. He previously served as President and Chief Executive
Officer of Stride-Rite, Inc. (a manufacturer and distributor of
footwear) and of Kenner Parker Toys, Inc. (a major toy and game
manufacturer). Mr. Jackson was President of Talbots, Inc. (a distributor
of women's apparel) and has held financial and marketing positions with
General Mills, Inc. and Parker Brothers (a toy and game company). Mr.
Jackson is a graduate of Michigan State University Business School.
Paul L. Joskow (6/30/47), Trustee since 1997
Dr. Joskow is the Elizabeth and James Killian Professor of Economics and
Management, and Director of the Center for Energy and Environmental
Policy Research at the Massachusetts Institute of Technology.
Dr. Joskow serves as a Director of National Grid Transco (a UK-based
holding company with interests in electric and gas transmission and
distribution and telecommunications infrastructure) and TransCanada
Corporation (an energy company focused on natural gas transmission and
power services). He also serves on the board of the Whitehead Institute
for Biomedical Research (a non-profit research institution) and has been
President of the Yale University Council since 1993. Prior to February
2002, he was a Director of State Farm Indemnity Company (an automobile
insurance company), and, prior to March 2000, he was a Director of New
England Electric System (a public utility holding company).
Dr. Joskow has published five books and numerous articles on topics in
industrial organization, government regulation of industry, and
competition policy. He is active in industry restructuring,
environmental, energy, competition and privatization policies -- serving
as an advisor to governments and corporations worldwide. Dr. Joskow
holds a Ph.D. and M. Phil from Yale University and B.A. from Cornell
University.
Elizabeth T. Kennan (2/25/38), Trustee since 1992
Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse and
cattle breeding). She is President Emeritus of Mount Holyoke College.
Dr. Kennan served as Chairman and is now Lead Director of Northeast
Utilities and is a Director of Talbots, Inc. She has served as Director
on a number of other boards, including Bell Atlantic, Chastain Real
Estate, Shawmut Bank, Berkshire Life Insurance and Kentucky Home Life
Insurance. She is a Trustee of the National Trust for Historic
Preservation, of Centre College and of Midway College in Midway,
Kentucky. She is also a member of The Trustees of Reservations. Dr.
Kennan has served on the oversight committee of the Folger Shakespeare
Library, as President of Five Colleges Incorporated, as a Trustee of
Notre Dame University and is active in various educational and civic
associations.
As a member of the faculty of Catholic University for twelve years,
until 1978, Dr. Kennan directed the post-doctoral program in Patristic
and Medieval Studies, taught history and published numerous articles.
Dr. Kennan holds a Ph.D. from the University of Washington in Seattle,
an M.S. from St. Hilda's College at Oxford University and an A.B. from
Mount Holyoke College. She holds several honorary doctorates.
John H. Mullin, III (6/15/41), Trustee since 1997
Mr. Mullin is the Chairman and CEO of Ridgeway Farm (a limited liability
company engaged in timber and farming).
Mr. Mullin serves as a Director of The Liberty Corporation (a
broadcasting company), Progress Energy, Inc. (a utility company,
formerly known as Carolina Power & Light) and Sonoco Products, Inc. (a
packaging company). Mr. Mullin is Trustee Emeritus of The National
Humanities Center and Washington & Lee University, where he served as
Chairman of the Investment Committee. Prior to May 2001, he was a
Director of Graphic Packaging International Corp. Prior to February
2004, he was a Director of Alex Brown Realty, Inc.
Mr. Mullin is also a past Director of Adolph Coors Company; ACX
Technologies, Inc.; Crystal Brands, Inc.; Dillon, Read & Co., Inc.;
Fisher-Price, Inc.; and The Ryland Group, Inc. Mr. Mullin is a graduate
of Washington & Lee University and The Wharton Graduate School,
University of Pennsylvania.
Robert E. Patterson (3/15/45), Trustee since 1984
Mr. Patterson is Senior Partner of Cabot Properties, L.P. and Chairman
of Cabot Properties, Inc. (a private equity firm investing in commercial
real estate).
Mr. Patterson serves as Chairman of the Joslin Diabetes Center and as a
Director of Brandywine Trust Company. Prior to June 2003, he was a
Trustee of Sea Education Association. Prior to December 2001, he was
President and Trustee of Cabot Industrial Trust (a publicly traded real
estate investment trust). Prior to February 1998, he was Executive Vice
President and Director of Acquisitions of Cabot Partners Limited
Partnership (a registered investment adviser involved in institutional
real estate investments). Prior to 1990, he served as Executive Vice
President of Cabot, Cabot & Forbes Realty Advisors, Inc. (the
predecessor company of Cabot Partners) and as a Senior Vice President of
the Beal Companies (a real estate management, investment and development
firm).
Mr. Patterson practiced law and held various positions in state
government and was the founding Executive Director of the Massachusetts
Industrial Finance Agency. Mr. Patterson is a graduate of Harvard
College and Harvard Law School.
W. Thomas Stephens (9/2/42), Trustee since 1997
Mr. Stephens serves on a number of corporate boards.
Mr. Stephens is Chairman and Chief Executive Officer of Boise Cascade,
L.L.C. (a paper, forest products and timberland assets company). Mr.
Stephens serves as a Director of TransCanada Pipelines Limited. Until
2004, Mr. Stephens was a Director of Xcel Energy Incorporated (a public
utility company), Qwest Communications, and Norske Canada, Inc. (a paper
manufacturer). Until 2003, Mr. Stephens was a Director of Mail-Well,
Inc. (a diversified printing company). He served as Chairman of
Mail-Well until 2001 and as CEO of MacMillan-Bloedel, Ltd. (a forest
products company) until 1999.
Prior to 1996, Mr. Stephens was Chairman and Chief Executive Officer of
Johns Manville Corporation. He holds B.S. and M.S. degrees from the
University of Arkansas.
Richard B. Worley (11/15/45), Trustee since 2004
Mr. Worley is Managing Partner of Permit Capital, LLC, an investment
management firm.
Mr. Worley serves on the Executive Committee of the University of
Pennsylvania Medical Center, is a Trustee of The Robert Wood Johnson
Foundation (a philanthropic organization devoted to health care issues)
and is a Director of The Colonial Williamsburg Foundation (a historical
preservation organization). Mr. Worley also serves on the investment
committees of Mount Holyoke College and World Wildlife Fund (a wildlife
conservation organization).
Prior to joining Permit Capital LLC in 2002, Mr. Worley served as Chief
Strategic Officer of Morgan Stanley Investment Management. He previously
served as President, Chief Executive Officer and Chief Investment
Officer of Morgan Stanley Dean Witter Investment Management and as a
Managing Director of Morgan Stanley, a financial services firm. Mr.
Worley also was the Chairman of Miller Anderson & Sherrerd, an
investment management firm.
Mr. Worley holds a B.S. degree from University of Tennessee and pursued
graduate studies in economics at the University of Texas.
Charles E. Haldeman, Jr.* (10/29/48), Trustee since 2004
Mr. Haldeman is President and Chief Executive Officer of Putnam, LLC
("Putnam Investments"). He is a member of Putnam Investments' Executive
Board of Directors and Advisory Council. Prior to November 2003, Mr.
Haldeman served as Co-Head of Putnam Investments' Investment Division.
Prior to joining Putnam Investments in 2002, Mr. Haldeman held executive
positions in the investment management industry. He previously served as
Chief Executive Officer of Delaware Investments and President & Chief
Operating Officer of United Asset Management. Mr. Haldeman was also a
partner and director of Cooke & Bieler, Inc. (an investment management
firm).
Mr. Haldeman currently serves as a Trustee of Dartmouth College and as
Emeritus Trustee of Abington Memorial Hospital. He is a graduate of
Dartmouth College, Harvard Law School and Harvard Business School. Mr.
Haldeman is also a Chartered Financial Analyst (CFA) charterholder.
George Putnam, III* (8/10/51), Trustee since 1984 and President
since 2000
Mr. Putnam is President of New Generation Research, Inc. (a publisher of
financial advisory and other research services), and of New Generation
Advisers, Inc. (a registered investment advisor to private funds). Mr.
Putnam founded the New Generation companies in 1986.
Mr. Putnam is a Director of The Boston Family Office, LLC (a registered
investment adviser). He is a Trustee of St. Mark's School, Shore Country
Day School, and until 2002 was a Trustee of the Sea Education
Association.
Mr. Putnam previously worked as an attorney with the law firm of Dechert
LLP (formerly known as Dechert Price & Rhoads) in Philadelphia. He is a
graduate of Harvard College, Harvard Business School and Harvard Law
School.
A.J.C. Smith* (4/13/34), Trustee since 1986
Mr. Smith is the Chairman of Putnam Investments and Consultant to Marsh
& McLennan Companies, Inc.
Mr. Smith is also a Director of Trident Corp. (a limited partnership
with over thirty institutional investors). He is also a Trustee of the
Carnegie Hall Society, the Educational Broadcasting Corporation, and the
National Museums of Scotland. He is Chairman of the Central Park
Conservancy and a Member of the Board of Overseers of the Joan and
Sanford I. Weill Graduate School of Medical Sciences of Cornell
University. Prior to November 2004, Mr. Smith was a Director of Marsh &
McLennan Companies, Inc. Prior to May 2000 and November 1999, Mr. Smith
was Chairman and CEO, respectively, of Marsh & McLennan Companies, Inc.
The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of November 30, 2004, there were 110 Putnam Funds. All Trustees serve
as Trustees of all Putnam funds.
Each Trustee serves for an indefinite term, until his or her
resignation, retirement at age 72, death, or removal.
* Trustees who are or may be deemed to be "interested persons" (as
defined in the Investment Company Act of 1940) of the fund, Putnam
Management, Putnam Retail Management, or Marsh & McLennan Companies,
Inc., the parent company of Putnam, LLC and its affiliated companies.
Messrs. Haldeman, Putnam, III, and Smith are deemed "interested persons"
by virtue of their positions as officers of the fund, Putnam Management,
Putnam Retail Management or Marsh & McLennan Companies, Inc. and as
shareholders of Marsh & McLennan Companies, Inc. Mr. Putnam, III is the
President of your fund and each of the other Putnam funds. Mr. Haldeman
is President and Chief Executive Officer of Putnam Investments. Mr.
Smith serves as a Consultant to Marsh & McLennan Companies, Inc. and as
Chairman of Putnam Investments.
Officers
In addition to George Putnam, III, the other officers of the
fund are shown below:
Charles E. Porter (7/26/38)
Executive Vice President, Associate Treasurer
and Principal Executive Officer
Since 1989
Managing Director, Putnam Investments
and Putnam Management
Jonathan S. Horwitz (6/4/55)
Senior Vice President and Treasurer
Since 2004
Managing Director, Putnam Investments
Steven D. Krichmar (6/27/58)
Vice President and Principal Financial Officer
Since 2002
Senior Managing Director, Putnam Investments.
Prior to July 2001, Partner,
PricewaterhouseCoopers LLP
Michael T. Healy (1/24/58)
Assistant Treasurer and Principal
Accounting Officer
Since 2000
Managing Director, Putnam Investments
Beth S. Mazor (4/6/58)
Vice President
Since 2002
Senior Vice President, Putnam Investments
Daniel T. Gallagher (2/27/62)
Vice President and Legal and Compliance
Liaison Officer
Since 2004
Vice President, Putnam Investments. Prior to
2004, Associate, Ropes & Gray LLP; prior to
2000, Law Clerk, Massachusetts Supreme
Judicial Court
Francis J. McNamara, III (8/19/55)
Vice President and Chief Legal Officer
Since 2004
Senior Managing Director, Putnam
Investments, Putnam Management and
Putnam Retail Management. Prior to 2004
General Counsel, State Street Research &
Management Company
James P. Pappas (2/24/53)
Vice President
Since 2004
Managing Director, Putnam Investments and
Putnam Management. During 2002, Chief
Operating Officer, Atalanta/Sosnoff Management
Corporation; prior to 2001, President and Chief
Executive Officer, UAM Investment Services, Inc.
Richard S. Robie, III (3/30/60)
Vice President
Since 2004
Senior Managing Director, Putnam
Investments, Putnam Management and
Putnam Retail Management. Prior to 2003,
Senior Vice President, United Asset
Management Corporation
Charles A. Ruys de Perez (10/17/57)
Vice President and Chief Compliance Officer
Since 2004
Managing Director, Putnam Investments
Mark C. Trenchard (6/5/62)
Vice President and BSA Compliance Officer
Since 2002
Senior Vice President, Putnam Investments
Judith Cohen (6/7/45)
Clerk and Assistant Treasurer
Since 1993
Clerk and Assistant Treasurer, The Putnam Funds
The address of each Officer is One Post Office Square,
Boston, MA 02109.
Fund information
About Putnam Investments
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary
Trust Company
Legal Counsel
Ropes & Gray LLP
Independent Registered
Public Accounting Firm
KPMG LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Myra R. Drucker
Charles E. Haldeman, Jr.
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin, III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
Richard B. Worley
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President,
Associate Treasurer and
Principal Executive
Officer
Jonathan S. Horwitz
Senior Vice President
and Treasurer
Steven D. Krichmar
Vice President and Principal
Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Beth S. Mazor
Vice President
Daniel T. Gallagher
Vice President and Legal and
Compliance Liaison Officer
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and BSA
Compliance Officer
Francis J. McNamara, III
Vice President and
Chief Legal Officer
Charles A. Ruys de Perez
Vice President and Chief
Compliance Officer
Judith Cohen
Clerk and Assistant Treasurer
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time, or visit
our Web site (www.putnaminvestments.com) any time for up-to-date
information about the fund's NAV.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
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216550 1/05
Item 2. Code of Ethics:
-----------------------
All officers of the Fund, including its principal executive, financial and
accounting officers, are employees of Putnam Investment Management, LLC,
the Fund's investment manager. As such they are subject to a comprehensive
Code of Ethics adopted and administered by Putnam Investments which is
designed to protect the interests of the firm and its clients. The Fund
has adopted a Code of Ethics which incorporates the Code of Ethics of
Putnam Investments with respect to all of its officers and Trustees who are
employees of Putnam Investment Management, LLC. For this reason, the Fund
has not adopted a separate code of ethics governing its principal
executive, financial and accounting officers.
Item 3. Audit Committee Financial Expert:
-----------------------------------------
The Funds' Audit and Pricing Committee is comprised solely of Trustees
who are "independent" (as such term has been defined by the Securities
and Exchange Commission ("SEC") in regulations implementing Section 407
of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe
that each of the members of the Audit and Pricing Committee also possess
a combination of knowledge and experience with respect to financial
accounting matters, as well as other attributes, that qualify them for
service on the Committee. In addition, the Trustees have determined
that all members of the Funds' Audit and Pricing Committee meet the
financial literacy requirements of the New York Stock Exchange's rules
and that Mr. Patterson, Mr. Stephens and Mr. Worley qualify as "audit
committee financial experts" (as such term has been defined by the
Regulations) based on their review of their pertinent experience and
education. Certain other Trustees, although not on the Audit and Pricing
Committee, would also qualify as "audit committee financial experts."
The SEC has stated that the designation or identification of a person
as an audit committee financial expert pursuant to this Item 3 of Form
N-CSR does not impose on such person any duties, obligations or liability
that are greater than the duties, obligations and liability imposed on
such person as a member of the Audit and Pricing Committee and the Board
of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services:
-----------------------------------------------
The following table presents fees billed in each of the last two
fiscal years for services rendered to the fund by the fund's
independent auditors:
Audit Audit-Related Tax All Other
Fiscal year ended Fees Fees Fees Fees
----------------- ---------- ------------- ------- ---------
November 30, 2004 $34,850 $20,200 $4,150 $40
November 30, 2003 $29,300 $18,233 $3,600 $--
For the fiscal years ended November 30, 2004 and November 30, 2003,
the fund's independent auditors billed aggregate non-audit fees in
the amounts of $24,390 and $21,833, respectively, to the fund,
Putnam Management and any entity controlling, controlled by or
under common control with Putnam Management that provides ongoing
services to the fund.
Audit Fees represents fees billed for the fund's last two fiscal
years.
Audit-Related Fees represents fees billed in the fund's last two
fiscal years for services traditionally performed by the fund's
auditor, including accounting consultation for proposed transactions
or concerning financial accounting and reporting standards and other
audit or attest services not required by statute or regulation.
Tax Fees represent fees billed in the fund's last two fiscal years
for tax compliance, tax planning and tax advice services. Tax
planning and tax advice services include assistance with tax audits,
employee benefit plans and requests for rulings or technical advice
from taxing authorities.
All Other Fees Fees represent fees billed for services relating
relating interfund trading .
Pre-Approval Policies of the Audit and Pricing Committee. The Audit
and Pricing Committee of the Putnam funds has determined that, as a
matter of policy, all work performed for the funds by the funds'
independent auditors will be pre-approved by the Committee and will
generally not be subject to pre-approval procedures.
Under certain circumstances, the Audit and Pricing Committee
believes that it may be appropriate for Putnam Investment
Management, LLC ("Putnam Management") and certain of its affiliates
to engage the services of the funds' independent auditors, but only
after prior approval by the Committee. Such requests are required
to be submitted in writing to the Committee and explain, among other
things, the nature of the proposed engagement, the estimated fees,
and why this work must be performed by that particular audit firm.
The Committee will review the proposed engagement at its next
meeting.
Since May 6, 2003, all work performed by the independent auditors
for the funds, Putnam Management and any entity controlling,
controlled by or under common control with Putnam Management that
provides ongoing services to the fund was pre-approved by the
Committee or a member of the Committee pursuant to the pre-approval
policies discussed above. Prior to that date, the Committee had a
general policy to pre-approve the independent auditor's engagements
for non-audit services with the funds, Putnam Management and any
entity controlling, controlled by or under common control with
Putnam Management that provides ongoing services to the fund.
The following table presents fees billed by the fund's principal
auditor for services required to be approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X.
Audit-Related Tax All Other Total Non-
Fiscal year ended Fees Fees Fees Audit Fees
----------------- ------------- ---- --------- ----------
November 30, 2004 $-- $-- $-- $--
November 30, 2003 $-- $-- $-- $--
Item 5. Audit Committee
------------------------
(a) The fund has a separately-designated audit committee
established in accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended. The Audit Committee of the fund's
Board of Trustees is composed of the following persons:
Myra R. Drucker
Paul L. Joskow (Chairperson)
Robert E. Patterson
W. Thomas Stephens
Richard B. Worley
(b) Not applicable
Item 6. Schedule of Investments: Not applicable
--------------------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End
-------------------------------------------------------------------------
Management Investment Companies:
--------------------------------
Proxy voting guidelines of the Putnam funds
-------------------------------------------
The proxy voting guidelines below summarize the funds' positions on
various issues of concern to investors, and give a general
indication of how fund portfolio securities will be voted on
proposals dealing with particular issues. The funds' proxy voting
service is instructed to vote all proxies relating to fund portfolio
securities in accordance with these guidelines, except as otherwise
instructed by the Proxy Coordinator, a member of the Office of the
Trustees who is appointed to assist in the coordination and voting
of the funds' proxies.
The proxy voting guidelines are just that - guidelines. The
guidelines are not exhaustive and do not include all potential
voting issues. Because proxy issues and the circumstances of
individual companies are so varied, there may be instances when the
funds may not vote in strict adherence to these guidelines. For
example, the proxy voting service is expected to bring to the Proxy
Coordinator's attention proxy questions that are company-specific
and of a non-routine nature and that, even if covered by the
guidelines, may be more appropriately handled on a case-by-case
basis.
Similarly, Putnam Management's investment professionals, as part of
their ongoing review and analysis of all fund portfolio holdings,
are responsible for monitoring significant corporate developments,
including proxy proposals submitted to shareholders, and notifying
the Proxy Coordinator of circumstances where the interests of fund
shareholders may warrant a vote contrary to these guidelines. In
such instances, the investment professionals will submit a written
recommendation to the Proxy Coordinator and the person or persons
designated by Putnam Management's Legal and Compliance Department to
assist in processing referral items pursuant to the funds' "Proxy
Voting Procedures." The Proxy Coordinator, in consultation with the
funds' Senior Vice President, Executive Vice President, and/or the
Chair of the Board Policy and Nominating Committee, as appropriate,
will determine how the funds' proxies will be voted. When
indicated, the Chair of the Board Policy and Nominating Committee
may consult with other members of the Committee or the full Board of
Trustees.
The following guidelines are grouped according to the types of
proposals generally presented to shareholders. Part I deals with
proposals that have been put forth by management and approved and
recommended by a company's board of directors. Part II deals with
proposals submitted by shareholders for inclusion in proxy
statements. Part III addresses unique considerations pertaining to
non-U.S. issuers.
The Putnam funds will disclose their proxy votes in accordance with
the timetable established by SEC rules (i.e., not later than August
31 of each year for the most recent 12-month period ended June 30).
I. BOARD-APPROVED PROPOSALS
----------------------------
The vast majority of matters presented to shareholders for a vote
involve proposals made by a company itself (sometimes referred to as
"management proposals"), which have been approved and recommended by
its board of directors. In view of the enhanced corporate
governance practices currently being implemented in public companies
and of the funds' intent to hold corporate boards accountable for
their actions in promoting shareholder interests, the funds' proxies
generally will be voted for the decisions reached by majority
independent boards of directors, except as otherwise indicated in
these guidelines. Accordingly, the funds' proxies will be voted for
board-approved proposals, except as follows:
Matters relating to the Board of Directors
------------------------------------------
Uncontested Election of Directors
The funds' proxies will be voted for the election of a company's
nominees for the board of directors, except as follows:
The funds will withhold votes for the entire board of directors if
* the board does not have a majority of independent directors,
* the board has not established independent nominating, audit, and
compensation committees,
* the board has more than 19 members or fewer than five members,
absent special circumstances,
* the board has not acted to implement a policy requested in a
shareholder proposal that received the support of a majority of the
shares of the company at its previous two annual meetings, or
* the board has adopted or renewed a shareholder rights plan
(commonly referred to as a "poison pill") without shareholder
approval during the current or prior calendar year.
The funds will withhold votes for any nominee for director who:
* is considered an independent director by the company and who has
received compensation from the company other than for service as a
director (e.g., investment banking, consulting, legal, or financial
advisory fees),
* attends less than 75% of board and committee meetings without
valid reasons for the absences (e.g., illness, personal emergency,
etc.),
* as a director of a public company (Company A), is employed as a
senior executive of another public company (Company B) if a director
of Company B serves as a senior executive of Company A (commonly
referred to as an "interlocking directorate"), or
* serves on more than five unaffiliated public company boards (for
the purpose of this guideline, boards of affiliated registered
investment companies will count as one board).
Commentary:
Board independence: Unless otherwise indicated, for the purposes of
determining whether a board has a majority of independent directors
and independent nominating, audit, and compensation committees, an
"independent director" is a director who (1) meets all requirements
to serve as an independent director of a company under the final
NYSE Corporate Governance Rules (e.g., no material business
relationships with the company and no present or recent employment
relationship with the company (including employment of an immediate
family member as an executive officer)), and (2) has not accepted
directly or indirectly any consulting, advisory, or other
compensatory fee from the company other than in his or her capacity
as a member of the board of directors or any board committee. The
funds' Trustees believe that the receipt of compensation for
services other than service as a director raises significant
independence issues.
Board size: The funds' Trustees believe that the size of the board
of directors can have a direct impact on the ability of the board to
govern effectively. Boards that have too many members can be
unwieldy and ultimately inhibit their ability to oversee management
performance. Boards that have too few members can stifle innovation
and lead to excessive influence by management.
Time commitment: Being a director of a company requires a
significant time commitment to adequately prepare for and attend the
company's board and committee meetings. Directors must be able to
commit the time and attention necessary to perform their fiduciary
duties in proper fashion, particularly in times of crisis. The
funds' Trustees are concerned about over-committed directors. In
some cases, directors may serve on too many boards to make a
meaningful contribution. This may be particularly true for senior
executives of public companies (or other directors with
substantially full-time employment) who serve on more than a few
outside boards. The funds may withhold votes from such directors on
a case-by-case basis where it appears that they may be unable to
discharge their duties properly because of excessive commitments.
Interlocking directorships: The funds' Trustees believe that
interlocking directorships are inconsistent with the degree of
independence required for outside directors of public companies.
Corporate governance practices: Board independence depends not only
on its members' individual relationships, but also on the board's
overall attitude toward management. Independent boards are
committed to good corporate governance practices and, by providing
objective independent judgment, enhancing shareholder value. The
funds may withhold votes on a case-by-case basis from some or all
directors who, through their lack of independence, have failed to
observe good corporate governance practices or, through specific
corporate action, have demonstrated a disregard for the interest of
shareholders.
Contested Elections of Directors
The funds will vote on a case-by-case basis in contested elections
of directors.
Classified Boards
The funds will vote against proposals to classify a board, absent
special circumstances indicating that shareholder interests would be
better served by this structure.
Commentary: Under a typical classified board structure, the
directors are divided into three classes, with each class serving a
three-year term. The classified board structure results in
directors serving staggered terms, with usually only a third of the
directors up for re-election at any given annual meeting. The
funds' Trustees generally believe that it is appropriate for
directors to stand for election each year, but recognize that, in
special circumstances, shareholder interests may be better served
under a classified board structure.
Other Board-Related Proposals
The funds will generally vote for board-approved proposals that have
been approved by a majority independent board, and on a case-by-case
basis on board-approved proposals where the board fails to meet the
guidelines' basic independence standards (i.e., majority of
independent directors and independent nominating, audit, and
compensation committees).
Executive Compensation
----------------------
The funds generally favor compensation programs that relate
executive compensation to a company's long-term performance. The
funds will vote on a case-by-case basis on board-approved proposals
relating to executive compensation, except as follows:
Except where the funds are otherwise withholding votes for the
entire board of directors, the funds will vote for stock option and
restricted stock plans that will result in an average annual
dilution of 1.67% or less (based on the disclosed term of the plan
and including all equity-based plans).
The funds will vote against stock option and restricted stock
plans that will result in an average annual dilution of greater than
1.67% (based on the disclosed term of the plan and including all
equity-based plans).
The funds will vote against any stock option or restricted stock
plan where the company's actual grants of stock options and
restricted stock under all equity-based compensation plans during
the prior three (3) fiscal years have resulted in an average annual
dilution of greater than 1.67%.
The funds will vote against stock option plans that permit the
replacing or repricing of underwater options (and against any
proposal to authorize such replacement or repricing of underwater
options).
The funds will vote against stock option plans that permit
issuance of options with an exercise price below the stock's current
market price.
Except where the funds are otherwise withholding votes for the
entire board of directors, the funds will vote for an employee stock
purchase plan that has the following features: (1) the shares
purchased under the plan are acquired for no less than 85% of their
market value; (2) the offering period under the plan is 27 months or
less; and (3) dilution is 10% or less.
Commentary: Companies should have compensation programs that are
reasonable and that align shareholder and management interests over
the longer term. Further, disclosure of compensation programs
should provide absolute transparency to shareholders regarding the
sources and amounts of, and the factors influencing, executive
compensation. Appropriately designed equity-based compensation
plans can be an effective way to align the interests of long-term
shareholders with the interests of management. The funds may vote
against executive compensation proposals on a case-by-case basis
where compensation is excessive by reasonable corporate standards,
or where a company fails to provide transparent disclosure of
executive compensation. In voting on a proposal relating to
executive compensation, the funds will consider whether the proposal
has been approved by an independent compensation committee of the
board.
Capitalization
--------------
Many proxy proposals involve changes in a company's capitalization,
including the authorization of additional stock, the issuance of
stock, the repurchase of outstanding stock, or the approval of a
stock split. The management of a company's capital structure
involves a number of important issues, including cash flow,
financing needs, and market conditions that are unique to the
circumstances of the company. As a result, the funds will vote on a
case-by-case basis on board-approved proposals involving changes to
a company's capitalization, except that where the funds are not
otherwise withholding votes from the entire board of directors:
The funds will vote for proposals relating to the authorization
and issuance of additional common stock (except where such proposals
relate to a specific transaction).
The funds will vote for proposals to effect stock splits
(excluding reverse stock splits).
The funds will vote for proposals authorizing share repurchase
programs.
Commentary: A company may decide to authorize additional shares of
common stock for reasons relating to executive compensation or for
routine business purposes. For the most part, these decisions are
best left to the board of directors and senior management. The
funds will vote on a case-by-case basis, however, on other proposals
to change a company's capitalization, including the authorization of
common stock with special voting rights, the authorization or
issuance of common stock in connection with a specific transaction
(e.g., an acquisition, merger or reorganization), or the
authorization or issuance of preferred stock. Actions such as these
involve a number of considerations that may affect a shareholder's
investment and that warrant a case-by-case determination.
Acquisitions, Mergers, Reincorporations, Reorganizations and Other
------------------------------------------------------------------
Transactions
------------
Shareholders may be confronted with a number of different types of
transactions, including acquisitions, mergers, reorganizations
involving business combinations, liquidations, and the sale of all
or substantially all of a company's assets, which may require their
consent. Voting on such proposals involves considerations unique to
each transaction. As a result, the funds will vote on a
case-by-case basis on board-approved proposals to effect these types
of transactions, except as follows:
The funds will vote for mergers and reorganizations involving
business combinations designed solely to reincorporate a company in
Delaware.
Commentary: A company may reincorporate into another state through
a merger or reorganization by setting up a "shell" company in a
different state and then merging the company into the new company.
While reincorporation into states with extensive and established
corporate laws - notably Delaware - provides companies and
shareholders with a more well-defined legal framework, shareholders
must carefully consider the reasons for a reincorporation into
another jurisdiction, including especially an offshore jurisdiction.
Anti-Takeover Measures
----------------------
Some proxy proposals involve efforts by management to make it more
difficult for an outside party to take control of the company
without the approval of the company's board of directors. These
include the adoption of a shareholder rights plan, requiring
supermajority voting on particular issues, the adoption of fair
price provisions, the issuance of blank check preferred stock, and
the creation of a separate class of stock with disparate voting
rights. Such proposals may adversely affect shareholder rights,
lead to management entrenchment, or create conflicts of interest.
As a result, the funds will vote against board-approved proposals to
adopt such anti-takeover measures, except as follows:
The funds will vote on a case-by-case basis on proposals to ratify
or approve shareholder rights plans; and
The funds will vote on a case-by-case basis on proposals to adopt
fair price provisions.
Commentary: The funds' Trustees recognize that poison pills and
fair price provisions may enhance shareholder value under certain
circumstances. As a result, the funds will consider proposals to
approve such matters on a case-by-case basis.
Other Business Matters
----------------------
Many proxies involve approval of routine business matters, such as
changing a company's name, ratifying the appointment of auditors,
and procedural matters relating to the shareholder meeting. For the
most part, these routine matters do not materially affect
shareholder interests and are best left to the board of directors
and senior management of the company. The funds will vote for
board-approved proposals approving such matters, except as follows:
The funds will vote on a case-by-case basis on proposals to amend
a company's charter or bylaws (except for charter amendments
necessary or to effect stock splits to change a company's name or to
authorize additional shares of common stock).
The funds will vote against authorization to transact other
unidentified, substantive business at the meeting.
The funds will vote on a case-by-case basis on other business
matters where the funds are otherwise withholding votes for the
entire board of directors.
Commentary: Charter and bylaw amendments and the transaction of
other unidentified, substantive business at a shareholder meeting
may directly affect shareholder rights and have a significant impact
on shareholder value. As a result, the funds do not view such items
as routine business matters. Putnam Management's investment
professionals and the funds' proxy voting service may also bring to
the Proxy Coordinator's attention company-specific items that they
believe to be non-routine and warranting special consideration.
Under these circumstances, the funds will vote on a case-by-case
basis.
II. SHAREHOLDER PROPOSALS
--------------------------
SEC regulations permit shareholders to submit proposals for
inclusion in a company's proxy statement. These proposals generally
seek to change some aspect of the company's corporate governance
structure or to change some aspect of its business operations. The
funds generally will vote in accordance with the recommendation of
the company's board of directors on all shareholder proposals,
except as follows:
The funds will vote for shareholder proposals to declassify a
board, absent special circumstances which would indicate that
shareholder interests are better served by a classified board
structure.
The funds will vote for shareholder proposals to require
shareholder approval of shareholder rights plans.
The funds will vote for shareholder proposals that are consistent
with the funds' proxy voting guidelines for board-approved
proposals.
The funds will vote on a case-by-case basis on other shareholder
proposals where the funds are otherwise withholding votes for the
entire board of directors.
Commentary: In light of the substantial reforms in corporate
governance that are currently underway, the funds' Trustees believe
that effective corporate reforms should be promoted by holding
boards of directors - and in particular their independent directors
- accountable for their actions, rather than imposing additional
legal restrictions on board governance through piecemeal proposals.
Generally speaking, shareholder proposals relating to business
operations are often motivated primarily by political or social
concerns, rather than the interests of shareholders as investors in
an economic enterprise. As stated above, the funds' Trustees
believe that boards of directors and management are responsible for
ensuring that their businesses are operating in accordance with high
legal and ethical standards and should be held accountable for
resulting corporate behavior. Accordingly, the funds will generally
support the recommendations of boards that meet the basic
independence and governance standards established in these
guidelines. Where boards fail to meet these standards, the funds
will generally evaluate shareholder proposals on a case-by-case
basis.
III. VOTING SHARES OF NON-U.S. ISSUERS
---------------------------------------
Many of the Putnam funds invest on a global basis, and, as a result,
they may be required to vote shares held in non-U.S. issuers - i.e.,
issuers that are incorporated under the laws of foreign
jurisdictions and that are not listed on a U.S. securities exchange
or the NASDAQ stock market. Because non-U.S. issuers are
incorporated under the laws of countries and jurisdictions outside
the U.S., protection for shareholders may vary significantly from
jurisdiction to jurisdiction. Laws governing non-U.S. issuers may,
in some cases, provide substantially less protection for
shareholders. As a result, the foregoing guidelines, which are
premised on the existence of a sound corporate governance and
disclosure framework, may not be appropriate under some
circumstances for non-U.S. issuers.
In many non-U.S. markets, shareholders who vote proxies of a
non-U.S. issuer are not able to trade in that company's stock on or
around the shareholder meeting date. This practice is known as
"share blocking." In countries where share blocking is practiced,
the funds will vote proxies only with direction from Putnam
Management's investment professionals.
In addition, some non-U.S. markets require that a company's shares
be re-registered out of the name of the local custodian or nominee
into the name of the shareholder for the meeting. This practice is
known as "share re-registration." As a result, shareholders,
including the funds, are not able to trade in that company's stock
until the shares are re-registered back in the name of the local
custodian or nominee. In countries where share re-registration is
practiced, the funds will generally not vote proxies.
The funds will vote proxies of non-U.S. issuers in accordance with
the foregoing guidelines where applicable, except as follows:
Uncontested Election of Directors
---------------------------------
Japan
For companies that have established a U.S.-style corporate
structure, the funds will withhold votes for the entire board of
directors if
* the board does not have a majority of outside directors,
* the board has not established nominating and compensation
committees composed of a majority of outside directors, or
* the board has not established an audit committee composed of a
majority of independent directors.
The funds will withhold votes for the appointment of members of a
company's board of statutory auditors if a majority of the members
of the board of statutory auditors is not independent.
Commentary:
Board structure: Recent amendments to the Japanese Commercial Code
give companies the option to adopt a U.S.-style corporate structure
(i.e., a board of directors and audit, nominating, and compensation
committees). The funds will vote for proposals to amend a company's
articles of incorporation to adopt the U.S.-style corporate
structure.
Definition of outside director and independent director: Corporate
governance principles in Japan focus on the distinction between
outside directors and independent directors. Under these
principles, an outside director is a director who is not and has
never been a director, executive, or employee of the company or its
parent company, subsidiaries or affiliates. An outside director is
"independent" if that person can make decisions completely
independent from the managers of the company, its parent,
subsidiaries, or affiliates and does not have a material
relationship with the company (i.e., major client, trading partner,
or other business relationship; familial relationship with current
director or executive; etc.). The guidelines have incorporated
these definitions in applying the board independence standards
above.
Korea
The funds will withhold votes for the entire board of directors if
* the board does not have a majority of outside directors,
* the board has not established a nominating committee composed of
at least a majority of outside directors, or
* the board has not established an audit committee composed of at
least three members and in which at least two-thirds of its members
are outside directors.
Commentary: For purposes of these guideline, an "outside director"
is a director that is independent from the management or controlling
shareholders of the company, and holds no interests that might
impair performing his or her duties impartially from the company,
management or controlling shareholder. In determining whether a
director is an outside director, the funds will also apply the
standards included in Article 415-2(2) of the Korean Commercial Code
(i.e., no employment relationship with the company for a period of
two years before serving on the committee, no director or employment
relationship with the company's largest shareholder, etc.) and may
consider other business relationships that would affect the
independence of an outside director.
United Kingdom
The funds will withhold votes for the entire board of directors if
* the board does not have at least a majority of independent
non-executive directors,
* the board has not established nomination committees composed of a
majority of independent non-executive directors, or
* the board has not established compensation and audit committees
composed of (1) at least three directors (in the case of smaller
companies, two directors) and (2) solely of independent
non-executive directors.
The funds will withhold votes for any nominee for director who is
considered an independent director by the company and who has
received compensation from the company other than for service as a
director (e.g., investment banking, consulting, legal, or financial
advisory fees).
Commentary:
Application of guidelines: Although the U.K.'s Combined Code on
Corporate Governance ("Combined Code") has adopted the "comply and
explain" approach to corporate governance, the funds' Trustees
believe that the guidelines discussed above with respect to board
independence standards are integral to the protection of investors
in U.K. companies. As a result, these guidelines will be applied in
a prescriptive manner.
Definition of independence: For the purposes of these guidelines, a
non-executive director shall be considered independent if the
director meets the independence standards in section A.3.1 of the
Combined Code (i.e., no material business or employment
relationships with the company, no remuneration from the company for
non-board services, no close family ties with senior employees or
directors of the company, etc.), except that the funds do not view
service on the board for more than nine years as affecting a
director's independence.
Smaller companies: A smaller company is one that is below the FTSE
350 throughout the year immediately prior to the reporting year.
Canada
In January 2004, Canadian securities regulators issued proposed
policies that would impose new corporate governance requirements on
Canadian public companies. The recommended practices contained in
these new corporate governance requirements mirror corporate
governance reforms that have been adopted by the NYSE and other U.S.
national securities exchanges and stock markets. As a result, the
funds will vote on matters relating to the board of directors of
Canadian issuers in accordance with the guidelines applicable to
U.S. issuers.
Commentary: Like the U.K.'s Combined Code, the proposed policies on
corporate governance issued by Canadian securities regulators embody
the "comply and explain" approach to corporate governance. Because
the funds' Trustees believe that the board independence standards
contained in the proxy voting guidelines are integral to the
protection of investors in Canadian companies, these standards will
be applied in a prescriptive manner.
Other Matters
-------------
The funds will vote for shareholder proposals calling for a
majority of a company's directors to be independent of management.
The funds will vote for shareholder proposals seeking to increase
the independence of board nominating, audit, and compensation
committees.
The funds will vote for shareholder proposals that implement
corporate governance standards similar to those established under
U.S. federal law and the listing requirements of U.S. stock
exchanges, and that do not otherwise violate the laws of the
jurisdiction under which the company is incorporated.
The funds will vote on a case-by-case basis on proposals relating
to (1) the issuance of common stock in excess of 20% of the
company's outstanding common stock where shareholders do not have
preemptive rights, or (2) the issuance of common stock in excess of
100% of the company's outstanding common stock where shareholders
have preemptive rights.
As adopted December 10, 2004
Proxy Voting Procedures of the Putnam Funds
-------------------------------------------
The Role of the Funds' Trustees
-------------------------------
The Trustees of the Putnam Funds exercise control of the voting of
proxies through their Board Policy and Nominating Committee, which is
composed entirely of independent Trustees. The Board Policy and
Nominating Committee oversees the proxy voting process and participates,
as needed, in the resolution of issues which need to be handled on a
case-by-case basis. The Committee annually reviews and recommends for
approval by the Trustees guidelines governing the Funds' proxy votes,
including how the Funds vote on specific proposals and which matters are
to be considered on a case-by-case basis. The Trustees are assisted in
this process by their independent administrative staff ("Fund
Administration"), independent legal counsel, and an independent proxy
voting service. The Trustees also receive assistance from Putnam
Investment Management, LLC ("Putnam Management"), the Funds' investment
adviser, on matters involving investment judgments. In all cases, the
ultimate decision on voting proxies rests with the Trustees, acting as
fiduciaries on behalf of the shareholders of the Funds.
The Role of the Proxy Voting Service
------------------------------------
The Funds have engaged an independent proxy voting service to assist in
the voting of proxies. The proxy voting service is responsible for
coordinating with the Funds' custodians to ensure that all proxy
materials received by the custodians relating to the Funds' portfolio
securities are processed in a timely fashion. To the extent applicable,
the proxy voting service votes all proxies in accordance with the proxy
voting guidelines established by the Trustees. The proxy voting service
will refer proxy questions to the Proxy Coordinator (described below)
for instructions under circumstances where: (1) the application of the
proxy voting guidelines is unclear, (2) a particular proxy question is
not covered by the guidelines, or (3) the guidelines call for specific
instructions on a case-by-case basis. The proxy voting service is also
requested to call to the Proxy Coordinator's attention specific proxy
questions which, while governed by a guideline, appear to involve
unusual or controversial issues. The Funds also utilize research
services relating to proxy questions provided by the proxy voting
service and by other firms.
The Role of the Proxy Coordinator
---------------------------------
Each year, a member of Fund Administration is appointed Proxy
Coordinator to assist in the coordination and voting of the Funds'
proxies. The Proxy Coordinator will deal directly with the proxy voting
service and, in the case of proxy questions referred by the proxy voting
service, will solicit voting recommendations and instructions from Fund
Administration, the Chair of the Board Policy and Nominating Committee,
and Putnam Management's investment professionals, as appropriate. The
Proxy Coordinator is responsible for ensuring that these questions and
referrals are responded to in a timely fashion and for transmitting
appropriate voting instructions to the proxy voting service.
Voting Procedures for Referral Items
------------------------------------
As discussed above, the proxy voting service will refer proxy questions
to the Proxy Coordinator under certain circumstances. When the
application of the proxy voting guidelines is unclear or a particular
proxy question is not covered by the guidelines (and does not involve
investment considerations), the Proxy Coordinator will assist in
interpreting the guidelines and, as appropriate, consult with the Senior
Vice President of Fund Administration, the Executive Vice President of
Fund Administration and the Chair of the Board Policy and Nominating
Committee on how the Funds' shares will be voted.
For proxy questions that require a case-by-case analysis pursuant to the
guidelines or that are not covered by the guidelines but involve
investment considerations, the Proxy Coordinator will refer such
questions, through a written request, to Putnam Management's investment
professionals for a voting recommendation. Such referrals will be made
in cooperation with the person or persons designated by Putnam
Management's Legal and Compliance Department to assist in processing
such referral items. In connection with each such referral item, the
Legal and Compliance Department will conduct a conflicts of interest
review, as described below under "Conflicts of Interest," and provide a
conflicts of interest report (the "Conflicts Report") to the Proxy
Coordinator describing the results of such review. After receiving a
referral item from the Proxy Coordinator, Putnam Management's investment
professionals will provide a written recommendation to the Proxy
Coordinator and the person or persons designated by the Legal and
Compliance Department to assist in processing referral items. Such
recommendation will set forth (1) how the proxies should be voted, (2)
the basis and rationale for such recommendation, and (3) any contacts
the investment professionals have had with respect to the referral item
with non-investment personnel of Putnam Management or with outside
parties (except for routine communications from proxy solicitors). The
Proxy Coordinator will then review the investment professionals'
recommendation and the Conflicts Report with the Senior Vice President
and/or Executive Vice President in determining how to vote the Funds'
proxies. The Proxy Coordinator will maintain a record of all proxy
questions that have been referred to Putnam Management's investment
professionals, the voting recommendation and the Conflicts Report.
In some situations, the Proxy Coordinator, the Senior Vice President
and/or the Executive Vice President may determine that a particular
proxy question raises policy issues requiring consultation with the
Chair of the Board Policy and Nominating Committee who, in turn, may
decide to bring the particular proxy question to the Committee or the
full board of Trustees for consideration.
Conflicts of Interest
---------------------
Occasions may arise where a person or organization involved in the proxy
voting process may have a conflict of interest. A conflict of interest
may exist, for example, if Putnam Management has a business relationship
with (or is actively soliciting business from) either the company
soliciting the proxy or a third party that has a material interest in
the outcome of a proxy vote or that is actively lobbying for a
particular outcome of a proxy vote. Any individual with knowledge of a
personal conflict of interest (e.g., familial relationship with company
management) relating to a particular referral item shall disclose that
conflict to the Proxy Coordinator and the Legal and Compliance
Department and otherwise remove himself or herself from the proxy voting
process. The Legal and Compliance Department will review each item
referred to Putnam Management's investment professionals to determine if
a conflict of interest exists and will provide the Proxy Coordinator
with a Conflicts Report for each referral item that (1) describes any
conflict of interest; (2) discusses the procedures used to address such
conflict of interest; and (3) discloses any contacts from parties
outside Putnam Management (other than routine communications from proxy
solicitors) with respect to the referral item not otherwise reported in
an investment professional's recommendation. The Conflicts Report will
also include written confirmation that any recommendation from an
investment professional provided under circumstances where a conflict of
interest exists was made solely on the investment merits and without
regard to any other consideration.
As adopted March 14, 2003
Item 8. Purchases of Equity Securities by Closed-End Management Investment
--------------------------------------------------------------------------
Companies and Affiliated Purchasers: Not applicable
------------------------------------
Item 9. Submission of Matters to a Vote of Security Holders:
------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
--------------------------------
(a) The registrant's principal executive officer and principal
financial officer have concluded, based on their evaluation of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as of a date within 90 days of
the filing date of this report on Form N-CSR, that the design and
operation of such procedures are generally effective to provide
reasonable assurance that information required to be disclosed by
the investment company in the reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Commission's rules and forms.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
------------------
(a) The Code of Ethics of The Putnam Funds, which incorporates the
Code of Ethics of Putnam Investments, is filed herewith.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: January 28, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: January 28, 2005
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: January 28, 2005