Putnam
Municipal
Opportunities
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
4-30-03
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From the Trustees
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Dear Fellow Shareholder:
We are pleased to report that Putnam Municipal Opportunities Trust closed
its fiscal year on April 30, 2003, showing a solid gain, though it came in
somewhat below its benchmark index and the average for its Lipper peer
group. Details are on page 8.
A number of factors combined to bolster the municipal-bond market during
the fiscal year's first half as safety-conscious investors continued to
seek refuge in the fixed-income markets. During the second half, however,
the environment became somewhat more volatile as investor interest faded in
the wake of a significant decline in tax revenues and subsequent downgrades
in credit quality. In the following report, your fund's managers provide a
discussion of how this situation affected the fund's performance and how
they view prospects in the months ahead.
As we look back on one of the most challenging periods in recent investment
history, we would like you to know how much we appreciate your continued
confidence in Putnam. We believe that those who ride out the current
turbulence will be rewarded for their patience over the long term.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
June 18, 2003
Report from Fund Management
Fund highlights
* Putnam Municipal Opportunities Trust's total return for the fiscal year
ended April 30, 2003, was 7.35% at net asset value. Based on the market
price of shares, the fund returned 7.35% for the period.
* Due to its higher exposure to certain industrial development bonds, the
fund's returns lagged its benchmark, the Lehman Municipal Bond Index, which
returned 8.50% for the period.
* For the same reason, the fund underperformed the average for its Lipper
category, Closed-End General Municipal Debt Funds (Leveraged), which was
10.27% for the period.
* Effective as of the March payment, the fund's monthly dividend was
increased to $0.0795 per share. (See page 6 for details.)
* See the Performance Summary on page 8 for complete fund performance,
comparative performance, and Lipper data.
Performance commentary
The overall decline in interest rates during the 12 months ended April 30,
2003, drove bond prices up and contributed to the fund's positive results.
The fund also benefited when some of its holdings were pre-refunded (see
page 5). However, higher-quality bonds were in greater demand during the
uncertain market environment of the past fiscal year. Because the fund
invests a portion of assets in lower-quality, higher-yielding municipal
bonds, it trailed the Lehman benchmark, which is composed entirely of
investment-grade securities.
Another factor that detracted from performance relative to its benchmark
and Lipper peer group was the fund's exposure to certain types of
industrial development bonds (IDBs). Although issued by municipalities,
IDBs are backed by the credit of private companies and their prices tend to
reflect perceptions of these companies and the industries in which they
operate. A relatively small position in airline-backed IDBs was affected by
the industry's struggles and detracted from competitive performance.
FUND PROFILE
The fund seeks to provide high current income free from federal income tax
consistent with the preservation of capital, by investing in
investment-grade and some below-investment-grade municipal bonds. The fund
may be appropriate for investors seeking tax-free income and who are
willing to accept a moderate degree of risk.
Market overview
The first half of the fiscal year was generally positive for the
municipal-bond market. In an environment marked by earnings
disappointments, economic weakness, and numerous allegations of corporate
malfeasance, investors sought the relative safety of high-quality bonds.
Increased demand for bonds pushed their prices higher, and some of your
fund's holdings benefited.
In the fiscal second half, however, several factors tempered municipal-bond
performance, including significant declines in tax revenues and subsequent
downgrades in municipalities' credit quality. Difficulties in two sectors
dampened the performance of industrial development bonds (IDBs), which are
issued by municipalities but backed by the credit of companies. Notably,
the fund's airline IDBs suffered as United Airlines followed US Airways
into bankruptcy. In late April, American Airlines narrowly avoided a
similar fate. The electric power sector was under pressure, affecting
performance of IDBs there as well. Lastly, over $320 billion in municipal
bonds was issued in 2002, an all-time record. The $12 billion California
Department of Water Resources' bond issue was the largest individual issue
ever brought to market. New tobacco settlement bonds further boosted
supply. (For a discussion of these bonds, see page 4). Supply has continued
to swell in 2003. These factors had a dampening effect on municipal-bond
prices. The municipal sector underperformed, relative to Treasuries, in
the annual period.
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MARKET SECTOR PERFORMANCE 12 months ended 4/30/03
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Bonds
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Lehman Municipal Bond Index 8.50%
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Lehman Aggregate Bond Index (taxable U.S. bonds) 10.47%
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Lehman Government Bond Index (taxable U.S. government bonds) 11.28%
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Credit Suisse First Boston High Yield Index (taxable U.S.
low-grade bonds) 11.25%
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Equities
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S&P 500 Index (broad market) -13.31%
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Russell 1000 Growth Index (growth stocks) -14.35%
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Russell 1000 Value Index (value stocks) -13.01%
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These indexes provide an overview of performance in different market
sectors for the 12 months ended 4/30/03.
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Strategy overview
We positioned the portfolio more defensively in advance of the October
sell-off, but subsequently moved closer to a neutral stance by extending
the fund's duration. (Duration is a measure of sensitivity to interest-rate
changes. A fund with a longer duration is more sensitive to changes in
rates, whether up or down.)
During the period, falling interest rates prompted municipal-bond issuers
to refinance outstanding debt. As older, higher-yielding bonds were called
out of the market or matured, we sought new holdings that would provide the
most attractive income stream relative to the level of risk. At the same
time, we worked to increase the fund's diversification, by industry sector,
maturity, issuer, quality, and industry, as well as geographically. Some of
the changes resulting from our efforts include an increased position in New
York and California municipal bonds, which we feel offer excellent value at
present, and a reduced exposure to tobacco settlement bonds.
[GRAPHIC OMITTED: horizontal bar chart TOP SECTOR WEIGHTINGS COMPARED]
TOP SECTOR WEIGHTINGS COMPARED
as of as of
10/31/02 4/30/03
Health care 24.6% 18.5%
Utilities 8.1% 15.9%
Housing 10.5% 9.3%
Transportation 11.5% 8.1%
Water and sewer 9.7% 7.2%
Footnote reads:
Based on portfolio market value as of 4/30/03. Holdings will vary over
time.
How key holdings and allocations affected performance
This fund's exposure to lower-quality, higher-yielding bonds put it at a
competitive disadvantage during the 12 months ended April 30, 2003, as
investors sought relative safety in high-quality issues. In particular, the
fund's performance was hurt by its exposure to industrial development bonds
(IDBs) backed by airline companies. Prices of IDBs are affected by investor
perception of the company backing the bonds. Troubles in the airline
industry have had negative repercussions on the municipal markets ever
since the terrorist attacks of September 11, 2001, when passenger counts
plummeted. The sluggish economy subsequently curtailed business travel,
while high jet-fuel prices increased costs. Finally, the war in Iraq and
(most recently) concern about SARS put up another barrier in the industry's
efforts to recover. Although airline IDBs accounted for a little over 2% of
your fund's assets as of the end of April, they have been the
worst-performing group in the portfolio.
The value of the fund's United Airlines IDBs fell sharply when United was
forced into bankruptcy in December. Although American Airlines has recently
avoided bankruptcy, the fund's holdings in this airline's IDBs have been
volatile in the past four months. In fact, the majority of the fund's IDBs
are backed by two of the nation's strongest carriers -- Northwest and Delta
-- but they, too, succumbed to negative pressure affecting the entire
industry. Recently, however, we have been encouraged by the
labor/management negotiations that enabled American Airlines to stay in
business. Their success may show the way for a turnaround for the industry
as a whole once the economy recovers.
In the meantime, we have been diversifying the portfolio, taking advantage
of some of the wealth of new issues that have come to market. One example
was the California Department of Water Resources bonds -- the largest
single issue in municipal issuance history. We purchased two intermediate
bonds: $2 million of the uninsured bonds with a 6% coupon, maturing in
2015, rated A3 by Moody's and BBB+ by Standard & Poor's; and $2 million of
the insured bonds with a 5.5% coupon, maturing in 2016. The latter are
rated Aaa because of their insurance feature. These new positions satisfy
several of our current selection criteria -- expanding diversification by
issuer, quality, and maturity -- and they have performed well to date.
Tobacco settlement bonds are issued by municipalities and secured by the
settlement from class-action lawsuits against the tobacco industry. The
fund has had what we regard as a modest exposure to these bonds, reflecting
our concern that their income stream could be disrupted by financial
weakness in the tobacco companies providing the settlement money. We
decided against purchasing any of the recently-issued Golden State bonds
issued by the state of California and in February we sold some Wisconsin
tobacco settlement bonds to further reduce the fund's exposure to this
sector. We felt there were enough other, attractive municipal offerings on
the horizon. The recent price weakness in tobacco settlement bonds has
reinforced the prudence of our decisions.
The pre-refunding of two bond holdings contributed positively to fund
performance. When a bond is pre-refunded, a new bond is issued to decrease
the outstanding debt, with the proceeds typically invested in U.S. Treasury
securities, enhancing credit quality. Investors continue to receive
interest at the original coupon rate, typically until the next call date,
which makes the bond's effective maturity that much shorter. In December,
one of the fund's largest holdings, District of Columbia General
Obligations bonds (GOs), with a coupon of 6% and rated Baa1/BBB+, was
pre-refunded and the bonds increased in value to reflect their improved
credit quality due to collateralization in U.S. government securities and
shorter maturity. (GOs are backed by the taxes levied by the issuing
municipality.) Another fund holding, Jefferson County Alabama Sewer
Authority bonds, with a coupon of 5.75%, was also pre-refunded. However,
since these bonds were already high quality by virtue of a bond insurance
policy, the positive impact on the bonds' market price was a bit less.
Three recent purchases are also noteworthy because they are non-callable,
insured bonds that broadened the fund's diversification by state, coupon,
quality, and industry. Non-callable bonds offer investors opportunities for
interest payments that cannot be interrupted by redemption before the
maturity date. We recently purchased $4 million of the Delaware Valley
Regional Finance Authority bonds with a 5.5% coupon due in 2028; $3 million
of Metropolitan Pier and Exposition Authority, Illinois bonds with a coupon
of 7% due in 2026; and $2 million of Georgia Local Governments COPs with a
coupon of 4.75% maturing in 2028. All three of the issues we purchased are
both insured and non-callable.
[GRAPHIC OMITTED pie chart QUALITY DIVERSIFICATION]
QUALITY DIVERSIFICATION
Aaa/AAA (47.1%)
Aa/AA (8.2%)
A (14.1%)
Baa/BBB (19.6%)
BB/Ba (6.8%)
B (2.9%)
VMIG1 (0.6%)
Other (0.7%)
Footnote reads:
As a percentage of market value as of 4/30/03. A bond rated Baa or higher
is considered investment grade. All ratings reflect Moody's and Standard &
Poor's descriptions unless noted otherwise; percentages may include unrated
bonds considered by Putnam Management to be of comparable quality. Ratings
will vary over time.
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
As interest on the fund's bonds accrue during the year we try to set level
payments that approximate income -- both actual and projected -- to provide
shareholders with a relatively stable income stream. Based on our most
recent projections, the fund's dividend was raised to $0.0795 per share in
March. Please bear in mind that future dividends cannot be assured.
The fund's management team
This fund is managed by the Putnam Tax Exempt Fixed-Income Team. Team
members are David Hamlin (Portfolio Leader), Joyce Dragone, Paul Drury,
Jerome Jacobs, Susan McCormack, and Richard Wyke.
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.
Our current outlook for the municipal-bond market is cautiously optimistic.
Fear of war has subsided. The focus is now on rebuilding Iraq and
addressing economic concerns on the home front. While much remains to be
answered, the level of uncertainty in the world seems to have eased. We
expect business activity to accelerate slowly and with continued
volatility. Although the tax-free marketplace is certainly not immune to
the forces that buffet other markets, it has historically been less
volatile. We believe municipal bonds should perform well relative to other
fixed-income sectors as some measure of calm returns to financial markets.
We believe that municipal budgets will continue to face meaningful
pressures in the months ahead. Historically, improvement in the credit
quality of state and local governments has lagged a general economic
recovery by six to nine months, so we expect municipal credit quality to
remain fragile for some time to come. Currently, municipal-bond yields
remain high relative to yields on taxable issues. In time, we expect that
relationship to revert to a normal range. In our opinion, the market
continues to offer attractive value and compelling risk/reward
characteristics and we have positioned your fund to seek to take advantage
of the market's potential.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice.
Performance summary
This section provides information about your fund's performance during its
fiscal year, which ended April 30, 2003. 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. Past performance does not indicate 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 does not reflect
taxes on reinvested distributions. A profile of your fund's strategy
appears on the first page of this report. See page 9 for definitions of
some terms used in this section.
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TOTAL RETURN FOR PERIODS ENDED 4/30/03
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Lipper Closed-
Lehman End General
Municipal Municipal Debt
Bond Funds (Leveraged)
NAV Market price Index category average*
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1 year 7.35% 7.35% 8.50% 10.27%
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5 years 30.22 27.36 35.78 35.05
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Annual average 5.42 4.96 6.31 6.18
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Life of fund
(since 5/28/93) 84.01 65.95 85.08 85.62
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Annual average 6.34 5.24 6.41 6.42
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* Over the 1-, 5-, and life- of-fund periods ended 4/30/03, there were 58,
48, and 40 funds, respectively, in this Lipper category. Index and Lipper
results should be compared to fund performance at net asset value.
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TOTAL RETURN FOR PERIODS ENDED 3/31/03 (most recent calendar quarter)
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NAV Market price
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1 year 7.99% 4.48%
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5 years 28.00 20.80
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Annual average 5.06 3.85
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Life of fund
(since 5/28/93) 81.31 60.82
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Annual average 6.23 4.95
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PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 4/30/03
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Putnam Municipal Opportunities Trust
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Distributions from common shares
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Number 12
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Income 1 $0.9143
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Capital gains 1 --
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Total $0.9143
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Series A Series B Series C
Preferred shares (800 shares) (1,620 shares) (1,620 shares)
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Income 1 $649.22 $320.05 $328.31
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Capital gains 1 -- -- --
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Total $649.22 $320.05 328.31
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Share value: NAV Market price
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4/30/02 $13.00 $12.50
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4/30/03 12.98 12.48
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Current return (common shares, end of period)
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Current dividend rate 2 7.35% 7.64%
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Taxable equivalent 3 11.97 12.44
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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 38.60% federal tax rate for 2003. Results for investors
subject to lower tax rates would not be as advantageous.
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 the New York
Stock Exchange.
Comparative indexes
Lehman Municipal Bond Index is an unmanaged index of long-term fixed-rate
investment-grade tax-exempt bonds.
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.
Credit Suisse First Boston (CSFB) High Yield Index is an unmanaged index of
high-yield debt securities.
S&P 500 Index is an unmanaged index of common stock performance.
Russell 1000 Growth Index is an unmanaged index of those companies in the
Russell 1000 chosen for their growth orientation.
Russell 1000 Value Index is an unmanaged index of those companies in the
Russell 1000 chosen for their value orientation.
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 Inc. 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 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.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes, preceded
by the Report of independent accountants, 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 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 accountants
To the Trustees and Shareholders of
Putnam Municipal Opportunities Trust
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, (except for bond ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position
of Putnam Municipal Opportunities Trust (the "fund") at April 30, 2003, and
the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the fund's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements
in accordance with auditing standards generally accepted in the United
States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at April 30, 2003 by correspondence with
the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 9, 2003
The fund's portfolio
April 30, 2003
Key to Abbreviations
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AMBAC AMBAC Indemnity Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance Company
FHA Insd. Federal Housing Administration Insured
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
IF COP Inverse Floating Rate Certificate of Participation
MBIA MBIA Insurance Company
PSFG Permanent School Fund Guaranteed
VRDN Variable Rate Demand Notes
Municipal bonds and notes (100.0%) (a)
Principal amount Rating (RAT) Value
Alabama (3.3%)
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$1,500,000 Butler, Indl. Dev. Board Rev. Bonds
(Solid Waste Disp. James River
Corp.), 8s, 9/1/28 BB+ $1,395,000
Jefferson Cnty., Swr. Rev. Bonds
7,000,000 Ser. D, FGIC, 5 3/4s, 2/1/27 Aaa 7,980,000
1,500,000 (Cap. Impt.), Ser. A, FGIC, 5s,
2/1/41 Aaa 1,516,875
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10,891,875
Alaska (1.6%)
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5,000,000 Valdez Marine Term Rev. Bonds (BP
Pipeline, Inc.), Ser. B, 5 1/2s,
10/1/28 Aa1 5,093,750
Arizona (3.6%)
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750,000 AZ Hlth. Fac. Auth. Hosp. Syst.
Rev. Bonds (John C. Lincoln Hlth.
Network), 6 3/8s, 12/1/37 BBB 773,438
950,000 Casa Grande, Indl. Dev. Auth.
Rev. Bonds (Casa Grande Regl. Med.
Ctr.), Ser. A, 7 5/8s, 12/1/29 B-/P 980,875
490,000 Cochise Cnty., Indl. Dev. Auth.
Rev. Bonds (Sierra Vista Cmnty.
Hosp.), Ser. A, 6 3/4s, 12/1/26 BB+/P 494,288
Mesa, Util. Syst. Rev. Bonds, FGIC
4,000,000 5 1/4s, 7/1/16 Aaa 4,595,000
1,530,000 5 1/4s, 7/1/15 Aaa 1,751,850
2,860,000 Scottsdale, Indl. Dev. Auth.
Rev. Bonds (Westminster Village),
7 7/8s, 6/1/09 BB-/P 2,992,275
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11,587,726
Arkansas (0.5%)
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600,000 AR Hosp. Equip. Fin. Auth. VRDN
(Baptist Hlth.), MBIA, 1.4s, 11/1/10 VMIG1 600,000
1,000,000 Northwest Regl. Arpt. Auth.
Rev. Bonds, 7 5/8s, 2/1/27 BB/P 1,101,250
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1,701,250
California (11.2%)
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CA State Dept. of Wtr. Res.
Rev. Bonds, Ser. A
2,000,000 6s, 5/1/15 A3 2,272,500
2,000,000 AMBAC, 5 1/2s, 5/1/16 Aaa 2,262,500
1,750,000 CA Statewide Cmnty. Dev. Auth. COP
(The Internext Group), 5 3/8s,
4/1/30 BBB 1,682,188
4,000,000 Chula Vista COP, MBIA, 5s, 8/1/32 Aaa 4,140,000
1,475,000 Gilroy, Rev. Bonds (Bonfante Gardens
Park), 8s, 11/1/25 B/P 1,340,406
3,000,000 Metropolitan Wtr. Dist. IFB
(Southern CA Waterworks), 10.05s,
8/10/18 Aa2 4,158,750
5,000,000 San Bernardino Cnty., COP (Med. Ctr.
Fin.), Ser. A, MBIA, 6 1/2s, 8/1/17 Aaa 6,343,750
San Diego Cnty., IF COP, AMBAC
3,000,000 9.72s, 9/1/12 Aaa 4,008,750
3,000,000 9.47s, 9/1/07 Aaa 3,866,250
2,500,000 San Jose, Redev. Agcy. Tax Alloc.
Bonds (Merged Area Redev. Project),
MBIA, 5s, 8/1/32 Aaa 2,568,750
3,000,000 Southern CA Pub. Pwr. Auth. IFB,
FGIC, 9.27s, 7/1/17 AAA 3,158,430
830,000 Sunnyvale, Cmnty. Fac. Dist. Special
Tax Rev. Bonds, 7.65s, 8/1/21 BB+/P 810,288
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36,612,562
Colorado (4.0%)
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7,700,000 CO Pub. Hwy. Auth. Rev. Bonds, MBIA,
zero %, 9/1/33 Aaa 1,511,125
683,099 CO State Edl. Fac. Auth. Rev. Bonds
(Ocean Journey, Inc.), 8 3/8s,
12/1/26 (In default) (NON) D/P 27,324
10,000,000 Denver, City & Cnty. Arpt.
Rev. Bonds, Ser. A, MBIA, 5.7s,
11/15/25 Aaa 10,775,000
600,000 Northwest Parkway Pub. Hwy. Auth.
Rev. Bonds, Ser. D, 7 1/8s, 6/15/41 Ba1 619,500
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12,932,949
Delaware (1.4%)
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4,000,000 Delaware Valley, Regl. Fin. Auth.
Rev. Bonds, Ser. A, AMBAC, 5 1/2s,
8/1/28 Aaa 4,545,000
District of Columbia (4.5%)
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12,450,000 DC G.O. Bonds, Ser. A, 6s, 6/1/26 Baa1 14,582,063
Florida (0.4%)
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1,000,000 Lee Cnty., Indl. Dev. Auth.
Rev. Bonds (Alliance Cmnty.
Project), Ser. C, 5 1/2s, 11/15/29 BBB- 907,500
600,000 Miami Beach, Hlth. Fac. Auth. Hosp.
Rev. Bonds (Mount Sinai Med. Ctr.),
Ser. A, 6.8s, 11/15/31 BB 534,750
------------
1,442,250
Georgia (1.4%)
-------------------------------------------------------------------------------
1,500,000 Burke Cnty., Poll. Control Dev.
Auth. Mandatory Put (GA Power Co.),
4.45s, 1/1/32 A2 1,582,500
1,400,000 Effingham Cnty., Indl. Dev. Auth.
Rev. Bonds (Pacific Corp.), 6 1/2s,
6/1/31 BBB- 1,081,500
2,000,000 GA Loc. Govt. COP (Grantor Trust),
Ser. A, MBIA, 4 3/4s, 6/1/28 Aaa 2,020,000
------------
4,684,000
Hawaii (0.6%)
-------------------------------------------------------------------------------
1,950,000 HI State Hsg. Fin. & Dev. Corp.
Rev. Bonds, Ser. A, FNMA Coll.,
5 3/4s, 7/1/30 AAA 2,015,813
Illinois (6.2%)
-------------------------------------------------------------------------------
3,500,000 Chicago, O'Hare Intl. Arpt. Special
Fac. Rev. Bonds (United Airlines,
Inc.), Ser. C, 6.3s, 5/1/16 (In
default) (NON) D/P 350,000
5,000,000 Chicago, Pub. Bldg. Comm. Rev. Bonds
(School Reform Project), FGIC,
5 1/4s, 12/1/15 Aaa 5,706,250
10,000,000 IL Hsg. Dev. Auth. Multi-Fam. Hsg.
Rev. Bonds, Ser. 91-A, 8 1/4s,
7/1/16 A1 10,007,400
3,000,000 Metropolitan Pier & Exposition Auth.
Rev. Bonds (McCormick Place
Convention), 7s, 7/1/26 AAA 4,050,000
------------
20,113,650
Indiana (1.9%)
-------------------------------------------------------------------------------
4,150,000 IN State Dev. Fin. Auth. Env. Impt.
Rev. Bonds (USX Corp.), 5.6s,
12/1/32 Baa1 4,108,500
2,000,000 Indianapolis, Arpt. Auth. Special
Fac. Rev. Bonds (Federal Express
Corp.), 7.1s, 1/15/17 Baa2 2,122,500
------------
6,231,000
Kentucky (0.7%)
-------------------------------------------------------------------------------
Kenton Cnty., Arpt. Board Rev. Bonds
(Special Fac. - Delta Airlines,
Inc.)
1,750,000 Ser. A, 7 1/2s, 2/1/20 BB- 1,295,000
1,300,000 Ser. B, 7 1/4s, 2/1/22 BB- 936,000
------------
2,231,000
Louisiana (2.3%)
-------------------------------------------------------------------------------
2,000,000 LA Local Govt. Env. Fac. Cmnty. Dev.
Auth. Rev. Bonds (St. James Place),
Ser. A, 8s, 11/1/19 B-/P 1,982,500
5,500,000 Port of New Orleans, Indl. Dev.
Rev. Bonds (Continental Grain Co.),
7 1/2s, 7/1/13 BB- 5,624,575
------------
7,607,075
Maine (0.9%)
-------------------------------------------------------------------------------
3,000,000 Rumford Solid Waste Disp. Rev. Bonds
(Boise Cascade Corp.), 6 7/8s,
10/1/26 Baa3 3,003,750
Maryland (1.5%)
-------------------------------------------------------------------------------
4,770,000 MD Cmnty. Dev. Admin. Multi-Fam.
Hsg. Rev. Bonds, Ser. E, GNMA Coll.,
FHA Insd., 6.85s, 5/15/25 Aa3 4,944,010
Massachusetts (6.8%)
-------------------------------------------------------------------------------
1,300,000 Atlas Boston Tax Exempt Rev. Bonds,
Ser. 1, 6.65s, 1/1/35 (In default)
(NON) D/P 858,000
MA State Hlth. & Edl. Fac. Auth.
Rev. Bonds
2,620,000 (Rehab. Hosp. Cape & Islands),
Ser. A, 7 7/8s, 8/15/24 AAA/P 2,868,900
1,875,000 (UMass Memorial), Ser. C, 6 1/2s,
7/1/21 Baa2 1,950,000
1,300,000 (Berkshire Hlth. Syst.), Ser. E,
6 1/4s, 10/1/31 BBB+ 1,339,000
1,800,000 (Hlth. Care Syst. Covenant Hlth.),
Ser. E, 6s, 7/1/31 A- 1,869,750
MA State Hsg. Fin. Agcy. Rev. Bonds
3,855,000 (Res. Dev.), Ser. C, FNMA Coll.,
6.9s, 11/15/21 Aaa 3,899,757
8,120,000 Ser. 53, MBIA, 6.15s, 12/1/29 Aaa 8,465,100
1,000,000 MA State Indl. Fin. Agcy. Rev. Bonds
(1st. Mtge. Brookhaven), Ser. A,
7s, 1/1/15 BBB/P 1,033,750
------------
22,284,257
Michigan (2.8%)
-------------------------------------------------------------------------------
4,500,000 Detroit, G.O. Bonds, Ser. A, FGIC,
5s, 7/1/30 Aaa 4,590,000
1,000,000 MI State Hosp. Fin. Auth. Rev. Bonds
(Oakwood Hosp.), Ser. A, 5 3/4s,
4/1/32 A2 1,022,500
1,650,000 MI State Strategic Fund Ltd.
Rev. Bonds (Worthington Armstrong
Venture), 5 3/4s, 10/1/22 AAA/P 1,878,938
1,500,000 Northern Michigan U. VRDN, FGIC,
1.4s, 6/1/31 VMIG1 1,500,000
------------
8,991,438
Minnesota (0.9%)
-------------------------------------------------------------------------------
1,860,000 Minneapolis & St. Paul Metropolitan
Arpt. Comm. Special Fac. Rev. Bonds
(Northwest Airlines, Inc.), Ser. A,
7s, 4/1/25 B-/P 1,227,600
1,500,000 Southern MN Muni. Pwr. Agcy. Syst.
Rev. Bonds, Ser. A, AMBAC, 5 1/4s,
1/1/16 Aaa 1,706,250
------------
2,933,850
Mississippi (1.2%)
-------------------------------------------------------------------------------
1,350,000 Clairborne Cnty., Poll. Control
Rev. Bonds (Syst. Energy Resources,
Inc.), 7.3s, 5/1/25 BBB- 1,364,756
1,580,000 Mississippi Bus. Fin. Corp.
Rev. Bonds (Syst. Energy Resources,
Inc.), 5 7/8s, 4/1/22 BBB- 1,556,300
1,000,000 Mississippi Bus. Fin. Corp. Poll.
Control Rev. Bonds (Syst. Energy
Resources, Inc.), 5.9s, 5/1/22 BBB- 987,500
------------
3,908,556
Missouri (1.4%)
-------------------------------------------------------------------------------
1,750,000 Cape Girardeau Cnty. Indl. Dev.
Auth. Hlth. Care Rev. Bonds (St.
Francis Med. Ctr.), Ser. A, 5 1/2s,
6/1/16 A 1,846,250
2,500,000 MO State Hlth. & Edl. Fac. Auth.
Rev. Bonds (Washington U.), Ser. A,
5s, 2/15/33 Aa1 2,559,368
------------
4,405,618
Montana (0.6%)
-------------------------------------------------------------------------------
2,000,000 MT State Board Inv. Exempt Fac.
Rev. Bonds (Still Water Mining
Project), 8s, 7/1/20 Ba2 1,975,000
Nevada (2.1%)
-------------------------------------------------------------------------------
3,505,000 Clark Cnty., G.O. Bonds (Pk. & Regl.
Justice Ctr.), FGIC, 5 5/8s, 11/1/19 Aaa 3,881,788
3,000,000 Clark Cnty., Indl. Dev. Rev. Bonds
(Southwest Gas Corp.), Ser. A,
6 1/2s, 12/1/33 Baa2 3,041,250
------------
6,923,038
New Hampshire (1.2%)
-------------------------------------------------------------------------------
NH Higher Ed. & Hlth. Fac. Auth.
Rev. Bonds
2,600,000 (Riverwoods at Exeter), Ser. A,
6 1/2s, 3/1/23 Aa2 2,564,250
1,250,000 (NH College), 6 3/8s, 1/1/27 BBB- 1,292,188
------------
3,856,438
New Jersey (4.4%)
-------------------------------------------------------------------------------
1,890,000 NJ Hlth. Care Fac. Fin. Auth.
Rev. Bonds (Raritan Bay Med. Ctr.),
7 1/4s, 7/1/14 BB/P 1,963,238
500,000 NJ State Ed. Fac. Auth. Rev. Bonds
(Stevens Inst. of Tech.), Ser. C,
5 1/8s, 7/1/22 A- 508,750
10,000,000 Salem Cnty., Indl. Poll Ctrl. Fin.
Auth. Rev. Bonds, 8.841s, 10/1/29
(acquired 10/28/94, cost $9,750,000)
(RES) Aaa 11,750,000
------------
14,221,988
New York (3.2%)
-------------------------------------------------------------------------------
1,000,000 Buffalo, G.O. Bonds, Ser. D, FGIC,
5 1/2s, 12/15/13 Aaa 1,135,000
3,000,000 NY City, G.O. Bonds, Ser. C, 5 1/4s,
8/1/11 A2 3,225,000
1,000,000 NY City, Transitional Fin. Auth.
Rev. Bonds (Future Tax), AMBAC,
5 1/4s, 8/1/15 Aaa 1,110,000
2,000,000 NY State Dormitory Auth. Rev. Bonds
(State Personal Income Tax),
Ser. A, 5 1/2s, 3/15/13 AA 2,275,000
2,500,000 Triborough Bridge & Tunnel Auth.
Rev. Bonds, Ser. A, 5s, 1/1/32 Aa3 2,550,000
------------
10,295,000
North Carolina (0.7%)
-------------------------------------------------------------------------------
2,000,000 NC Eastern Muni. Pwr. Agcy. Syst.
Rev. Bonds, Ser. B, MBIA, 6s, 1/1/22 Aaa 2,417,500
Ohio (1.4%)
-------------------------------------------------------------------------------
1,270,000 Erie Cnty., Ohio Hosp. Fac.
Rev. Bonds (Firelands Regl. Med.
Ctr.), 5 5/8s, 8/15/32 A2 1,301,750
1,000,000 Montgomery Cnty., Hosp. Rev. Bonds
(Kettering Med. Ctr.), 6 3/4s,
4/1/22 Baa1 1,068,750
2,165,000 Rickenbacker Port Auth. Rev. Bonds
(OASBO Expanded Asset Pooled),
Ser. A, 5 3/8s, 1/1/32 A2 2,311,138
------------
4,681,638
Oklahoma (0.7%)
-------------------------------------------------------------------------------
OK Dev. Fin. Auth. Rev. Bonds
1,500,000 (Continuing Care Retirement),
Ser. A, 8s, 2/1/32 B/P 1,464,375
1,000,000 (Hillcrest Hlth. Care), Ser. A,
5 5/8s, 8/15/29 B1 732,500
------------
2,196,875
Pennsylvania (5.6%)
-------------------------------------------------------------------------------
5,000,000 Allegheny Cnty., Hosp. Dev. Auth.
Rev. Bonds (Pittsburgh Mercy Hlth.
Syst. ), AMBAC, 5 5/8s, 8/15/26 Aaa 5,406,250
965,000 Carbon Cnty., Indl. Dev. Auth.
Rev. Bonds (Panther Creek
Partners), 6.65s, 5/1/10 BBB- 1,002,394
1,000,000 Delaware Cnty., Hosp. Auth. G.O.
Bonds (Crozer-Chester Med. Ctr.),
6 1/4s, 12/15/31 Baa2 991,250
3,000,000 PA Econ. Dev. Fin. Auth. Wastewtr.
Treatment Rev. Bonds (Sun Co.,
Inc.), Ser. A, 7.6s, 12/1/24 Baa2 3,187,500
PA State Econ. Dev. Fin. Auth. Res.
Recvy. Rev. Bonds
3,000,000 (Colver), Ser. E, 8.05s, 12/1/15 BBB-/P 3,146,250
1,000,000 Ser. D, 7.15s, 12/1/18 BBB- 1,038,750
1,750,000 PA State Higher Edl. Fac. Auth.
Rev. Bonds (UPMC Hlth. Syst.),
Ser. A, 6s, 1/15/31 A 1,820,000
2,217,883 Philadelphia, Indl. Dev. Auth.
Special Fac. Rev. Bonds (U.S.
Airways, Inc.), 8 1/8s, 5/1/30 (In
default) (NON) D/P 66,536
1,450,000 Sayre Healthcare Fac. Auth.
Rev. Bonds (Guthrie Hlth.), Ser. A,
5 7/8s, 12/1/31 A- 1,491,688
------------
18,150,618
South Carolina (2.3%)
-------------------------------------------------------------------------------
3,000,000 SC Tobacco Settlement Rev. Mgt.
Rev. Bonds, Ser. B, 6 3/8s, 5/15/30 A3 2,550,000
4,500,000 Spartanburg Cnty., Solid Waste Disp.
Rev. Bonds (BMW Project), 7.55s,
11/1/24 A1 4,876,875
------------
7,426,875
Tennessee (1.4%)
-------------------------------------------------------------------------------
4,000,000 Johnson City, Hlth. & Edl. Fac.
Hosp. Board Rev. Bonds (Mtn. States
Hlth.), Ser. A, 7 1/2s, 7/1/33 Baa2 4,465,000
Texas (12.1%)
-------------------------------------------------------------------------------
2,600,000 Alliance, Arpt. Auth. Rev. Bonds
(American Airlines, Inc.), 7 1/2s,
12/1/29 Caa2 858,000
Bexar Cnty., Hlth. Fac. Dev. Corp.
Rev. Bonds
4,800,000 (St. Luke's Lutheran Hospital),
7.9s, 5/1/18 AAA/P 4,800,000
1,760,000 (St. Luke's Lutheran Hosp.), 7.9s,
5/1/11 AAA/P 1,760,000
12,000,000 (St. Luke's Hlth. Syst.), FSA, 6.1s,
11/15/23 Aaa 13,305,000
1,000,000 Comal Cnty. Hlth. Fac. Dev. Corp.
Rev. Bonds (Hlth. Care System -
McKenna Memorial Project), Ser. A,
6 1/4s, 2/1/32 Baa2 1,007,500
2,000,000 Hays, Cons. Indpt. School Dist. G.O.
Bonds, PSFG, 5 1/2s, 8/15/10 Aaa 2,295,000
3,000,000 Houston, Wtr. & Swr. Rev. Bonds (Jr.
Lien), FSA, 5s, 12/1/30 Aaa 3,056,250
3,000,000 Lower Neches Valley Indl. Dev. Swr.
Auth. Rev. Bonds (Mobil Oil
Refining Corp.), 6.4s, 3/1/30 Aaa 3,153,750
2,000,000 San Antonio Wtr. Rev. Bonds, Ser. A,
FSA, 5s, 5/15/32 Aaa 2,035,000
5,000,000 Titus Cnty. Fresh Wtr. Supply Dist.
No. 1 Poll. Rev. Bonds.
(Southwestern Elec.Pwr. Co.),
Ser. A, 8.2s, 8/1/11 Baa1 5,095,550
2,000,000 Tomball, Hosp. Auth. Rev. Bonds
(Tomball Regl. Hosp.), 6s, 7/1/29 Baa2 2,025,000
------------
39,391,050
Utah (0.3%)
-------------------------------------------------------------------------------
1,000,000 Salt Lake City, Hosp. IFB (IHC Hosp.
Inc.), AMBAC, 12.05s, 5/15/20
(acquired 6/6/97, cost $1,168,906)
(RES) Aaa 1,002,500
Virginia (0.4%)
-------------------------------------------------------------------------------
500,000 Fredericksburg Indl. Dev. Auth.
Rev. Bonds (Medicorp Hlth. Syst.),
Ser. B, 5 1/8s, 6/15/33 A3 500,625
1,500,000 Pocahontas Parkway Assn. Toll Rd.
Rev. Bonds, Ser. A, 5 1/2s, 8/15/28 BB 997,500
------------
1,498,125
Washington (2.6%)
-------------------------------------------------------------------------------
4,000,000 Chelan Cnty. Dev. Corp. Rev. Bonds
(Poll. Control-Alcoa), 5.85s,
12/1/31 A2 4,165,000
2,250,000 King Cnty., G.O. Bonds, Ser. C,
6 1/4s, 1/1/32 Aa1 2,534,063
2,850,000 Port of Seattle, Special Fac.
Rev. Bonds (Northwest Airlines,
Inc.), 7 1/4s, 4/1/30 B-/P 1,852,500
------------
8,551,563
West Virginia (0.5%)
-------------------------------------------------------------------------------
2,000,000 Princeton, Hosp. Rev. Bonds (Cmnty.
Hosp. Assn., Inc.), 6.1s, 5/1/29 Ba3 1,545,000
Wisconsin (1.4%)
-------------------------------------------------------------------------------
2,500,000 Badger Tobacco Settlement Asset
Securitization Corp. Rev. Bonds,
6 3/8s, 6/1/32 A3 2,106,250
2,400,000 WI Stare Hlth. & Edl. Fac. Auth.
Rev. Bonds (Wheaton Franciscan),
5 3/4s, 8/15/30 A2 2,460,000
------------
4,566,250
-------------------------------------------------------------------------------
Total Investments
(cost $323,049,213) $325,907,900
-------------------------------------------------------------------------------
(a) Percentages indicated are based on portfolio market value.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be
the most recent ratings available at April 30, 2003 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
April 30, 2003. Securities rated by Putnam are indicated by "/P" and
are not publicly rated. Ratings are not covered by the Report of
independent accountants.
(NON) Non-income-producing security.
(RES) Restricted, excluding 144A securities, as to public resale. The total
market value of restricted securities held at April 30, 2003 was
$12,752,500 or 3.9% of portfolio market value.
The rates shown on IFB and IF COP, which are securities paying interest
rates that vary inversely to changes in the market interest rates, VRDN's
and mandatory puts are the current interest rates at April 30, 2003.
The fund had the following industry group concentrations greater than 10%
at April 30, 2003
(as a percentage of portfolio market value):
Health care 18.5%
Utilities 15.9
The fund had the following insurance concentrations greater than 10% at
April 30, 2003
(as a percentage of portfolio market value):
MBIA 11.9%
FGIC 11.0
The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities
April 30, 2003
Assets
-----------------------------------------------------------------------------
Investments in securities, at value (identified cost
$323,049,213) (Note 1) $325,907,900
-----------------------------------------------------------------------------
Cash 100,012
-----------------------------------------------------------------------------
Interest and other receivables 6,577,400
-----------------------------------------------------------------------------
Receivable for securities sold 90,000
-----------------------------------------------------------------------------
Total assets 332,675,312
Liabilities
-----------------------------------------------------------------------------
Distributions payable to common shareholders 1,284,402
-----------------------------------------------------------------------------
Accrued preferred shares distribution payable (Note 1) 39,586
-----------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 519,235
-----------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 25,165
-----------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 25,437
-----------------------------------------------------------------------------
Payable for administrative services (Note 2) 773
-----------------------------------------------------------------------------
Other accrued expenses 83,822
-----------------------------------------------------------------------------
Total liabilities 1,978,420
-----------------------------------------------------------------------------
Series A remarketed preferred shares: (800 shares
authorized and issued at $50,000 per share) (Note 4) 40,000,000
-----------------------------------------------------------------------------
Series B and C remarketed preferred shares: (3,240 shares
authorized and issued at $25,000 per share) (Note 4) 81,000,000
-----------------------------------------------------------------------------
Net assets $209,696,892
Represented by
-----------------------------------------------------------------------------
Paid-in capital -- common shares (Note 1) $223,156,275
-----------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,756,377
-----------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (18,074,447)
-----------------------------------------------------------------------------
Net unrealized appreciation of investments 2,858,687
-----------------------------------------------------------------------------
Total -- Representing net assets applicable to common shares
outstanding $209,696,892
Computation of net asset value
-----------------------------------------------------------------------------
Net asset value per common share ($209,696,892 divided by
16,157,092 shares) $12.98
-----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of operations
Year ended April 30, 2003
Interest income: $20,589,190
-----------------------------------------------------------------------------
Expenses:
-----------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,265,481
-----------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 220,824
-----------------------------------------------------------------------------
Compensation of Trustees (Note 2) 13,841
-----------------------------------------------------------------------------
Administrative services (Note 2) 8,651
-----------------------------------------------------------------------------
Preferred share remarketing agent fees 325,458
-----------------------------------------------------------------------------
Other 129,993
-----------------------------------------------------------------------------
Total expenses 2,964,248
-----------------------------------------------------------------------------
Expense reduction (Note 2) (17,694)
-----------------------------------------------------------------------------
Net expenses 2,946,554
-----------------------------------------------------------------------------
Net investment income 17,642,636
-----------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (3,665,014)
-----------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 202,616
-----------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 1,777,603
-----------------------------------------------------------------------------
Net loss on investments (1,684,795)
-----------------------------------------------------------------------------
Net increase in net assets resulting from operations $15,957,841
-----------------------------------------------------------------------------
Distributions to Series A, B, and C remarketed preferred shareholders:
(Note 1)
-----------------------------------------------------------------------------
From tax exempt income (1,569,492)
-----------------------------------------------------------------------------
From ordinary income (231)
-----------------------------------------------------------------------------
Net increase in net assets resulting from operations
applicable to common shareholders $14,388,118
-----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
Year ended April 30
Decrease in net assets 2003 2002
-----------------------------------------------------------------------------
Operations:
-----------------------------------------------------------------------------
Net investment income $17,642,636 $18,763,305
-----------------------------------------------------------------------------
Net realized loss on investments (3,462,398) (3,546,841)
-----------------------------------------------------------------------------
Net unrealized appreciation of investments 1,777,603 1,900,395
-----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 15,957,841 17,116,859
Distributions to Series A, B, and C remarketed preferred shareholders:
(Note 1)
-----------------------------------------------------------------------------
From tax exempt income (1,569,492) (2,494,618)
-----------------------------------------------------------------------------
From ordinary income (231) --
-----------------------------------------------------------------------------
Net increase in net assets resulting from operations
applicable to common shareholders 14,388,118 14,622,241
-----------------------------------------------------------------------------
Distributions to common shareholders: (Note 1)
-----------------------------------------------------------------------------
From tax exempt income (14,767,169) (14,638,326)
-----------------------------------------------------------------------------
From ordinary income (4,847) --
-----------------------------------------------------------------------------
Total decrease in net assets (383,898) (16,085)
Net assets
-----------------------------------------------------------------------------
Beginning of year 210,080,790 210,096,875
-----------------------------------------------------------------------------
End of year (including undistributed net
investment income of $1,756,377 and
$483,856, respectively) $209,696,892 $210,080,790
-----------------------------------------------------------------------------
Number of fund shares
-----------------------------------------------------------------------------
Common shares outstanding at beginning and
end of year 16,157,092 16,157,092
-----------------------------------------------------------------------------
Remarketed preferred shares outstanding at
beginning and end of year 4,040 4,040
-----------------------------------------------------------------------------
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 April 30
operating performance 2003 2002 2001
-------------------------------------------------------------------------------
Net asset value, beginning of
period (common shares) $13.00 $13.00 $12.51
-------------------------------------------------------------------------------
Investment operations:
-------------------------------------------------------------------------------
Net investment income (a) 1.09 1.16 1.15
-------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.10) (.10) .56
-------------------------------------------------------------------------------
Total from investment
operations .99 1.06 1.71
-------------------------------------------------------------------------------
Distributions to preferred shareholders:
-------------------------------------------------------------------------------
From net investment income (.10) (.15) (.31)
-------------------------------------------------------------------------------
Total from investment
operations applicable to
common shareholders .89 .91 1.40
-------------------------------------------------------------------------------
Distributions to common shareholders:
-------------------------------------------------------------------------------
From net investment income (.91) (.91) (.91)
-------------------------------------------------------------------------------
Total distributions: (.91) (.91) (.91)
-------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $12.98 $13.00 $13.00
-------------------------------------------------------------------------------
Market price, end of period
(common shares) $12.480 $12.500 $13.590
-------------------------------------------------------------------------------
Total return at market price
(%) (common shares) (b) 7.35 (1.57) 25.32
-------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------
Net assets, end of period
(common shares) (in thousands) $209,697 $210,081 $210,097
-------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(c)(d) 1.41 1.43 1.44
-------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(d) 7.65 7.63 6.50
-------------------------------------------------------------------------------
Portfolio turnover (%) 12.30 20.84 14.59
-------------------------------------------------------------------------------
Financial highlights (continued)
(For a common share outstanding throughout the period)
Per-share Year ended April 30
operating performance 2000 1999
-------------------------------------------------------------------------------
Net asset value, beginning of
period (common shares) $14.11 $14.05
-------------------------------------------------------------------------------
Investment operations:
-------------------------------------------------------------------------------
Net investment income (a) 1.18 1.19
-------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.59) .03
-------------------------------------------------------------------------------
Total from investment
operations (.41) 1.22
-------------------------------------------------------------------------------
Distributions to preferred shareholders:
-------------------------------------------------------------------------------
From net investment income (.28) (.25)
-------------------------------------------------------------------------------
Total from investment
operations applicable to
common shareholders (.69) .97
-------------------------------------------------------------------------------
Distributions to common shareholders:
-------------------------------------------------------------------------------
From net investment income (.91) (.91)
-------------------------------------------------------------------------------
Total distributions: (.91) (.91)
-------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $12.51 $14.11
-------------------------------------------------------------------------------
Market price, end of period
(common shares) $11.625 $14.750
-------------------------------------------------------------------------------
Total return at market price
(%) (common shares) (b) (15.25) 13.57
-------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------
Net assets, end of period
(common shares) (in thousands) $202,063 $228,031
-------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(c)(d) 1.46 1.42
-------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(d) 6.93 6.58
-------------------------------------------------------------------------------
Portfolio turnover (%) 13.84 10.18
-------------------------------------------------------------------------------
(a) Per share net investment income has been determined on the basis of the
weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Ratios reflect net assets available to common shares only: net
investment income ratio also reflects reduction for dividend payments to
preferred shareholders.
The accompanying notes are an integral part of these financial statements.
Notes to financial statements
April 30, 2003
Note 1
Significant accounting policies
Putnam Municipal Opportunities Trust (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified,
closed-end management investment company. The fund's investment objective
is to seek a high level of current income exempt from federal income tax
and consistent with the preservation of capital. The fund intends to
achieve its objective by investing in a portfolio of investment grade
municipal bonds that Putnam Investment Management, LLC ("Putnam
Management"), the fund's manager, an indirect wholly-owned subsidiary of
Putnam, LLC, believes to be consistent with preservation of capital.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with 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 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. Restricted securities 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) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on securities
it owns or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparty to the contract is unable to perform.
When the contract is closed, the fund records a realized gain or loss equal
to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. Realized gains and losses
on purchased options are included in realized gains and losses on
investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. The fund and the broker
agree to exchange an amount of cash equal to the daily fluctuation in the
value of the futures contract. Such receipts or payments are known as
"variation margin." Exchange traded options are valued at the last sale
price, or if no sales are reported, the last bid price for purchased
options and the last ask price for written options. Options traded
over-the-counter are valued using prices supplied by dealers. Futures and
written option contracts outstanding at period end are listed after The
fund's portfolio.
D) Federal taxes It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
It is also the intention of the fund to distribute an amount sufficient to
avoid imposition of any excise tax under Section 4982 of the Internal
Revenue Code of 1986, 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 April 30, 2003, the fund had a capital loss carryover of approximately
$14,831,000 available to the extent allowed by tax law to offset future
capital gains, if any. The amount of the carryover and the expiration dates
are:
Loss Carryover Expiration
--------------------------------
$4,581,000 April 30, 2004
126,000 April 30, 2007
2,789,000 April 30, 2008
1,503,000 April 30, 2009
2,244,000 April 30, 2010
3,588,000 April 30, 2011
Pursuant to federal income tax regulations applicable to regulated
investment companies, the fund has elected to defer to its fiscal year
ending April 30, 2004 $2,849,439 of losses recognized during the period
November 1, 2002 to April 30, 2003.
F) 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
28-day period for Series A and a 7-day period for Series B and Series C.
The applicable dividend rate for the remarketed preferred shares on April
30, 2003 was Series A 1.00%, Series B 1.25%, and Series C 1.25%. 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 losses on wash sales transactions, post October
loss deferrals, the expiration of capital loss carryover, dividends
payable, realized gains and losses on certain futures contracts, 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 April 30, 2003, the fund reclassified
$28,376 to decrease undistributed net investment income and $2,044,912 to
decrease paid-in-capital, with a decrease to accumulated net realized
losses of $2,073,288.
The tax basis components of distributable earnings and the federal tax cost
as of period end were as follows:
Unrealized appreciation $19,602,524
Unrealized depreciation (16,743,731)
------------
Net unrealized appreciation 2,858,793
Undistributed tax exempt income 3,061,967
Undistributed ordinary income 389
Capital loss carryforward (14,831,099)
Post October loss (2,849,439)
Cost for federal income
tax purposes $323,049,107
G) 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
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average weekly net assets of the
fund. On January 1, 2003, fees payable to Putnam Management under the
fund's management contracts were changed to 0.65% of the fund's weekly
average net assets.
Prior to January 1, 2003, these fees were equal to the following annual
rates: 0.70% of the first $500 million of the average net asset value of
the fund, 0.60% of the next $500 million, 0.55% of the next $500 million
and 0.5 0% thereafter.
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 wholly-owned subsidiary of Putnam, LLC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
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 April 30, 2003, the fund's expenses
were reduced by $17,694 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $701 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 Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
Note 3
Purchases and sales of securities
During the year ended April 30, 2003, cost of purchases and proceeds from
sales of investment securities other than short-term investments aggregated
$42,715,913 and $39,438,068, respectively. There were no purchases and
sales of U.S. government obligations.
Note 4
Preferred shares
The Series A, B and C shares are redeemable at the option of the fund on
any dividend payment date at a redemption price of $50,000, $25,000 and
$25,000, respectively per share, plus an amount equal to any dividends
accumulated on a daily basis but unpaid through the redemption date
(whether or not such dividends have been declared) and, in certain
circumstances, a call premium.
It is anticipated that dividends paid to holders of remarketed preferred
shares will be considered tax-exempt dividends under the Internal Revenue
Code of 1986. To the extent that the fund earns taxable income and capital
gains by the conclusion of a fiscal year, it 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 April 30, 2003, no such restrictions have been placed
on the fund.
Federal tax information
(Unaudited)
The fund has designated 99.97% 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 2004 will show the tax status of all
distributions paid to your account in calendar 2003.
About the Trustees
Jameson A. Baxter (9/6/43),
Trustee since 1994
President, Baxter Associates, Inc. (a consulting and private investments
firm)
Director of ASHTA Chemicals, Inc., Banta Corporation (a printing and
digital imaging firm), Ryerson Tull, Inc. (a steel service corporation),
Advocate Health Care, and the National Center for Nonprofit Boards.
Chairman Emeritus of the Board of Trustees, Mount Holyoke College. Until
2002, Mrs. Baxter was a director of Intermatic Corporation, a manufacturer
of energy control products. Also held various positions in investment
banking and corporate finance, including Vice President and principal of
the Regency Group and Vice President and consultant to First Boston Corp.
Charles B. Curtis (4/27/40),
Trustee since 2001
President and Chief Operating Officer, Nuclear Threat Initiative (a private
foundation dealing with national security issues), also serves as Senior
Advisor to the United Nations Foundation
Member of the Council on Foreign Relations and the Trustee Advisory Council
of the Applied Physics Laboratory at 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's Policy Board and Director of
EG&G Technical Services, Inc. (fossil energy research and development
support). Prior to May 1997, Mr. Curtis was Deputy Secretary of Energy. He
served as Chairman of the Federal Energy Regulatory Commission from 1977 to
1987 and has held positions on the staff of the U.S. House of
Representatives, the U.S. Treasury Department, and the Securities and
Exchange Commission. Mr. Curtis is also a lawyer with over 15 years of
experience.
John A. Hill (1/31/42),
Trustee since 1985 and Chairman since 2000
Vice-Chairman and Managing Director, First Reserve Corporation (a
registered investment advisor investing in companies in the world-wide
energy industry on behalf of institutional investors)
Director of Devon Energy Corporation (formerly known as Snyder Oil
Corporation), TransMontaigne Oil Company, Continuum Health Partners of New
York, Sarah Lawrence College, and various private companies owned by First
Reserve Corporation. Trustee of TH Lee, Putnam Investment Trust (a
closed-end investment company). Prior to acquiring First Reserve in 1983,
Mr. Hill held executive positions with several advisory firms and various
positions with the federal government, including Associate Director of the
Office of Manage ment and Budget and Deputy Director of the Federal Energy
Administration.
Ronald J. Jackson (12/17/43),
Trustee since 1996
Private investor
Former Chairman, President, and Chief Executive Officer of Fisher-Price,
Inc. (a toy manufacturer). Previously served as President and Chief
Executive Officer of Stride-Rite, Inc. and Kenner Parker Toys. Also held
financial and marketing positions with General Mills, Parker Brothers, and
Talbots. President of the Kathleen and Ronald J. Jackson Foundation
(charitable trust). Member of the Board of Overseers of WGBH (public
television and radio). Member of the Board of Overseers of the Peabody
Essex Museum.
Paul L. Joskow (6/30/47),
Trustee since 1997
Elizabeth and James Killian Professor of Economics and Management and
Director of the Center for Energy and Environmental Policy Research,
Massachusetts Institute of Technology
Director, National Grid Transco (formerly National Grid Group, a UK-based
holding company with interests in electric and gas transmission and
distribution and telecommunications infrastructure), and the Whitehead
Institute for Biomedical Research (a non-profit research institution).
President of the Yale University Council. Prior to February 2002, March
2000, and September 1998, Dr. Joskow was a Director of State Farm Indemnity
Company (an automobile insurance company), Director of New England Electric
System (a public utility holding company) and a consultant to National
Economic Research Associates, respectively.
Elizabeth T. Kennan (2/25/38),
Trustee since 1992
Chairman, Cambus-Kenneth Bloodstock (a limited liability company involved
in thoroughbred horse breeding and farming), President Emeritus of Mount
Holyoke College
Director, Northeast Utilities, and Talbots (a distributor of women's
apparel). Trustee of Centre College. Prior to 2001, Dr. Kennan was a member
of the Oversight Committee of Folger Shakespeare Library. Prior to
September 2000, June 2000, and November 1999, Dr. Kennan was a Director of
Chastain Real Estate, Bell Atlantic, and Kentucky Home Life Insurance,
respectively. Prior to 1995, Dr. Kennan was a Trustee of Notre Dame
University. For 12 years, she was on the faculty of Catholic University.
John H. Mullin, III (6/15/41),
Trustee since 1997
Chairman and CEO of Ridgeway Farm (a limited liability company engaged in
timber and farming)
Director Alex. Brown Realty, Inc., Sonoco Products, Inc. (a packaging
company), The Liberty Corporation (a company engaged in the broadcasting
industry), and Progress Energy, Inc. (a utility company, formerly known as
Carolina Power & Light). Trustee Emeritus of Washington & Lee University.
Prior to October 1997, January 1998, and May 2001, Mr. Mullin was a
Director of Dillon, Read & Co. Inc., The Ryland Group, Inc., and Graphic
Packaging International Corp., respectively.
Robert E. Patterson (3/15/45),
Trustee since 1984
Senior Partner of Cabot Properties, L.P. and Chairman of Cabot Properties,
Inc.
Chairman of the Joslin Diabetes Center, Trustee of SEA Education
Association, and Director of Brandywine Trust Company (a trust company).
Prior to February 1998, Mr. Patterson was Executive Vice President and
Director of Acquisitions of Cabot Partners Limited Partnership. Prior to
December 2001, Mr. Patterson was President and Trustee of Cabot Industrial
Trust (publicly traded real estate investment trust). Prior to 1990, Mr.
Patterson was Executive Vice President of Cabot, Cabot & Forbes Realty
Advisors, the predecessor of Cabot Partners, and prior to that was Senior
Vice President of the Beal Companies.
W. Thomas Stephens (9/2/42),
Trustee since 1997
Corporate Director
Director of Xcel Energy Incorporated (public utility company), TransCanada
Pipelines, Norske Canada, Inc. (paper manufacturer), and Qwest
Communications (communications company). Until 2003, Mr. Stephens was a
Director of Mail-Well, a printing and envelope company. Prior to July 2001
and October 1999, Mr. Stephens was Chairman of Mail-Well and
MacMillan-Bloedel (forest products company). Prior to 1996, Mr. Stephens
was Chairman and Chief Executive Officer of Johns Manville.
W. Nicholas Thorndike (3/28/33),
Trustee since 1992
Director of various corporations and charitable organizations, including
Courier Corporation (a book manufacturer and publisher) and Providence
Journal Co. (a newspaper publisher)
Trustee of Northeastern University and Honorary Trustee of Massachusetts
General Hospital. Prior to September 2000, April 2000, and December 2001,
Mr. Thorndike was a Director of Bradley Real Estate, Inc., a Trustee of
Eastern Utilities Associates, and a Trustee of Cabot Industrial Trust,
respectively. Previously served as Chairman of the Board and managing
partner of Wellington Management/Thorndike Doran Paine & Lewis, and
Chairman and Director of Ivest Fund.
Lawrence J. Lasser* (11/1/42),
Trustee since 1992 and Vice President since
1981 President and Chief Executive Officer of
Putnam Investments and Putnam Management
Director of Marsh & McLennan Companies, Inc. and the United Way of
Massachusetts Bay. Member of the Board of Governors of the Investment
Company Institute, Trustee of the Museum of Fine Arts, Boston, a Trustee
and Member of the Finance and Executive Committees of Beth Israel Deaconess
Medical Center, Boston, and a Member of the CareGroup Board of Managers
Investment Committee, the Council on Foreign Relations, and the Commercial
Club of Boston.
George Putnam, III* (8/10/51),
Trustee since 1984 and President since 2000
President, New Generation Research, Inc. (a publisher of financial advisory
and other research services relating to bankrupt and distressed companies)
and New Generation Advisers, Inc. (a registered investment adviser)
Director of The Boston Family Office, L.L.C. (registered investment
advisor), Trustee of St. Mark's School, and Trustee of Shore Country Day
School. Until 2002, Mr. Putnam was a Trustee of the SEA Education
Association. Previously, Mr. Putnam was an attorney with the firm of
Dechert Price & Rhoads.
A.J.C. Smith* (4/13/34),
Trustee since 1986
Director of Marsh & McLennan Companies, Inc.
Director of Trident Corp. (a limited partnership with over 30 institutional
investors). Trustee of the Carnegie Hall Society, the Educational
Broadcasting Corporation and the National Museums of Scotland. Chairman of
the Central Park Conservancy. Member of the Board of Overseers of the Joan
and Sanford I. Weill Graduate School of Medical Sciences of Cornell
University. Fellow of the Faculty of Actuaries in Edinburgh, the Canadian
Institute of Actuaries, and the Conference of Actuaries. Associate of the
Society of Actuaries. Member of the American Actuaries, the International
Actuarial Association and the International Association of Consulting
Actuaries. 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 April 30, 2003, there were 104 Putnam Funds.
Each Trustee serves for an indefinite term, until his or her resignation,
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. Putnam, III, Lasser and Smith are deemed "interested
persons" by virtue of their positions as officers or shareholders of
the fund or Putnam Management, Putnam Retail Management or Marsh &
McLennan Companies, Inc. George Putnam, III is the President of your
fund and each of the other Putnam funds. Lawrence J. Lasser is the
President and Chief Executive Officer of Putnam Investments and
Putnam Management. Mr. Lasser and Mr. Smith serve as Directors of
Marsh & McLennan Companies, Inc.
Officers
In addition to George Putnam, III and Lawrence J. Lasser, the other
officers of the fund are shown below:
Charles E. Porter (7/26/38)
Executive Vice President, Treasurer and
Principal Financial Officer
Since 1989
Managing Director, Putnam Investments and Putnam Management
Patricia C. Flaherty (12/1/46)
Senior Vice President
Since 1993
Senior Vice President, Putnam Investments and Putnam Management
Karnig H. Durgarian (1/13/56)
Vice President and Principal Executive
Officer Since 2002
Senior Managing Director, Putnam Investments
Steven D. Krichmar (6/27/58)
Vice President and Principal Financial Officer
Since 2002
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
Brett C. Browchuk (2/27/63)
Vice President
Since 1994
Managing Director, Putnam Investments and Putnam Management
Charles E. Haldeman Jr. (10/29/48)
Vice President
Since 2002
Senior Managing Director, Putnam Investments and Putnam Management. Prior
to October 2002, Chief Executive Officer, Lincoln National Investment
Companies; prior to January 2000, President and Chief Operating Officer,
United Asset Management.
Beth S. Mazor (4/6/58)
Vice President
Since 2002
Senior Vice President, Putnam Investments
Richard A. Monaghan (8/25/54)
Vice President
Since 1998
Senior Managing Director, Putnam Investments and Putnam Retail Management.
Prior to November 1998, Managing Director, Merrill Lynch
Stephen M. Oristaglio (8/21/55)
Vice President
Since 1998
Senior Managing Director, Putnam Investments and Putnam Management. Prior
to July 1998, Managing Director, Swiss Bank Corp.
Gordon H. Silver (7/3/47)
Vice President
Since 1990
Senior Managing Director, Putnam Investments, Putnam Management and Putnam
Retail Management
Mark C. Trenchard (6/5/62)
Vice President
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
Jerome J. Jacobs (8/20/58)
Vice President
Since 1996
Managing Director of Putnam Management
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
Independent Accountants
PricewaterhouseCoopers LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President, Treasurer and Principal Financial Officer
Patricia C. Flaherty
Senior Vice President
Karnig H. Durgarian
Vice President and Principal Executive Officer
Steven D. Krichmar
Vice President and Principal Financial Officer
Michael T. Healy
Assistant Treasurer and Principal Accounting Officer
Brett C. Browchuk
Vice President
Charles E. Haldeman, Jr.
Vice President
Lawrence J. Lasser
Vice President
Beth S. Mazor
Vice President
Richard A. Monaghan
Vice President
Stephen M. Oristaglio
Vice President
Gordon H. Silver
Vice President
Mark C. Trenchard
Vice President
Jerome J. Jacobs
Vice President
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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88650 582 6/03
Item 2. Code of Ethics:
-----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
-----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
-----------------------------------------------
Not applicable
Items 5-6. [Reserved]
---------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
-------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. [Reserved]
------------------
Item 9. Controls and Procedures:
--------------------------------
The registrant's principal executive officer and principal financial
officers 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
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.
There have been no significant changes in the registrant's internal
controls subsequent to the date of their evaluation.
Item 10. Exhibits:
------------------
(a) Not applicable
(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: June 24, 2003
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/Karnig H. Durgarian
---------------------------
Karnig H. Durgarian
Principal Executive Officer
Date: June 24, 2003
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Financial Officer
Date: June 24, 2003
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: June 24, 2003