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PUTNAM CALIFORNIA INVESTMENT GRADE MUNICIPAL TRUST
PUTNAM INVESTMENT GRADE MUNICIPAL TRUST II
PUTNAM INVESTMENT GRADE MUNICIPAL TRUST III
PUTNAM NEW YORK INVESTMENT GRADE MUNICIPAL TRUST
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
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Q & A for: Putnam California Investment Grade
Municipal Trust/Putnam Investment Grade Municipal
Trust II/ Putnam Investment Grade Municipal
Trust III/ Putnam New York Investment Grade
Municipal Trust
On or July 30, 1998 a proxy statement was sent to shareholders of
[Putnam California Investment Grade Municipal Trust/Putnam
Investment Grade Municipal Trust II/Putnam Investment Grade
Municipal Trust III/Putnam New York Investment Grade Municipal
Trust] asking for their vote on the following matters: (1) for
fixing the number of and electing the fund's Trustees; (2)
ratifying the selection of the fund's independent auditors; (3)
approving an amendment to the fund's fundamental investment
restriction with respect to making loans; (4) approving an
amendment to the fund's fundamental policy regarding the purchase
of bonds paying interest subject to the federal Alternative
Minimum Tax.
Listed below are questions shareholders are likely to ask and
recommended responses.
Proposal 1
Election of Trustees
What is being proposed?
The Nominating Committee of the Trustees, which consists solely
of Trustees who are independent with no financial interest in
Putnam Management, recommends that the number of Trustees be
fixed at sixteen and that shareholders vote for the election of
the nominees for Trustees.
What are the Trustees' responsibilities?
The Trustees are responsible for the general oversight of your
fund's business and for assuring that your fund is managed in the
best interests of the shareholders.
Proposal 2
Election of Auditors
Who has selected the independent auditors of the fund?
The Trustees have selected PricewaterhouseCoopers LLP as the
independent auditors of your fund and shareholders are being
asked to ratify the selection for the current year.
What were the reasons for the selection of PricewaterhouseCoopers
LLP as the independent auditors of the fund?
The Trustees selected PricewaterhouseCoopers LLP primarily based
on its expertise as auditors of investment companies, the quality
of its audit services and the competitiveness of its fees.
Proposal 3
Amending the fund's fundamental investment
restriction with respect to making loans
What are the Trustees proposing?
The Trustees are recommending that the fund's fundamental
investment restriction with respect to making loans be revised to
reflect the standard restriction expected to be used by other
Putnam funds and to clarify that the fund is permitted to
participate in a proposed interfund lending program as described
in Proposal 3 in the Proxy Statement.
If the proposal is approved, the fund would be able to
participate in an interfund lending program and make loans to
other Putnam funds. The fund would only make loans under the
program if it could receive an interest rate higher than those
available for repurchase agreements. There is a risk that the
fund could experience a delay in obtaining prompt repayment of a
loan and, unlike repurchase agreements, the fund would not
necessarily have received collateral for its loan. A delay in
obtaining prompt payment could cause the fund to miss an
investment opportunity or to incur costs to borrow money to
replace the delayed payment.
Since the Putnam funds may be considered affiliated parties,
interfund lending may be prohibited by the Investment Company Act
of 1940 and would be implemented only upon receipt of an
exemptive order of the Securities and Exchange Commission.
If the proposal is not approved, the fund will continue to
operate under the existing fundamental investment restriction.
Proposal 4
Amending the fund's fundamental policy
concerning the purchase of bonds paying
interest subject to the federal
Alternative Minimum Tax
What are the Trustees proposing?
The Trustees are recommending that the fund's fundamental
investment policy with respect to purchasing tax-exempt
securities be amended to eliminate a provision that limits bonds
paying interest subject to the federal Alternative Minimum Tax
("AMT") to 20% of the fund's assets. At the same time, the
Trustees propose to adopt a non-fundamental policy limiting AMT
bonds to 40% of the fund's assets as described in Proposal 4 in
the Proxy Statement.
AMT bonds comprise a significant percentage of tax-exempt market,
especially in certain sectors such as housing, student loans and
industrial development issues. If the proposal is approved, the
fund's choice of bonds in these areas will increase and thus its
ability to diversify its portfolio will be enhanced. In
addition, under current market conditions AMT bonds pay
moderately higher interest rates than similar non-AMT bonds of
the same credit quality and duration. Therefore, amending the
policy would allow the fund, without affecting credit quality or
duration to further diversify while seeking attractive levels of
dividends.
While the Trustees believe the changes are in the interests of
the fund and its shareholders they realize increased use of AMT
bonds will result in those shareholders subject to the AMT having
to include a greater percentage of the fund's investment income
in their AMT calculation. In order to limit the scope of the
change, if the proposal is approved, the Trustees will adopt a
non-fundamental policy of limiting AMT bonds to 40% of total
assets.
The revised policy will not affect the fund's ability to invest
up to 20% of its assets in securities the interest on which is
fully taxable; however, Putnam Management currently does not
intend to invest a material amount of its assets in taxable
securities.
If the proposal is not approved, the fund will continue to
operate under the existing investment policy.
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