PUTNAM INVESTMENT GRADE MUNICIPAL TRUST II
Amendment No. 3 to Amended and Restated Bylaws
WHEREAS, Section 12. 1, Part I, paragraph 6(c), of the Bylaws (the
"Bylaws") of Putnam Investment Grade Municipal Trust II (the "Trust") permits
the Trustees of the Trust (the "Trustees") to amend, alter or repeal certain
provisions of the Bylaws, subject to written confirmation from Standard & Poor's
Rating Services ("S&P") and Moody's Investor Services, Inc. ("Moody's") that
such amendment, alteration or repeal will not affect the ratings then assigned
to the Trust's outstanding Remarketed Preferred Shares ("RP"; terms used without
definition in this amendment have the respective meanings ascribed to them in
the Bylaws);
WHEREAS, the Trustees desire to amend Section 12.1, Part I, paragraph
12 of the Bylaws;
WHEREAS, Moody's and S&P have confirmed to the Trust that such
amendment will not impair its ratings of outstanding RP;
NOW, THEREFORE, the Bylaws are hereby amended as follows:
Section 12. 1, Part 1, paragraph 12 is amended and restated to read in
full as follows:
12. Futures and Options Transactions: Forward Commitments. (a) For so long as
any shares of RP are rated by S&P, the Trust will not purchase or sell futures
contracts, write, purchase or sell options on futures contracts or write put
options (except covered put options) or call options (except covered call
options) on portfolio securities unless it receives written confirmation from
S&P that engaging in such transactions will not impair the rating then assigned
to such shares of RP by S&P, except that the Trust may purchase or sell futures
contracts based on the Bond Buyer Municipal Bond Index (the "Municipal Index")
or on U.S. Treasury Bonds, Bills or Notes ("Treasury Futures") and write,
purchase or sell put and call options on such contracts (collectively "S&P
Hedging Transactions"), subject to the following limitations:
(A) the Trust will not engage in any S&P Hedging Transactions based on
the Municipal Index (other than transactions which terminate a futures
contract or option held by the Trust by the Trust's taking an
opposition position thereto ("Closing Transactions")), which would
cause the Trust at the time of such transaction to own or have sold (1)
1,001 or more outstanding futures contracts based on the Municipal
Index, (2) outstanding futures contracts based on the Municipal Index
exceeding in number 25% of the quotient of the Market Value of the
Trust's total assets divided by $100,000 or (3) outstanding futures
contracts based on the Municipal Index exceeding in number 10% of the
average daily open interest in futures contracts based on the Municipal
Index in the
thirty days preceding the time of effecting such transaction as
reported by The Wall Street Journal;
(B) the Trust will not engage in any S&P Hedging Transaction based on
Treasury Futures (other than Closing Transactions) which would cause
the Trust at the time of such transaction to own or have sold (1)
outstanding futures contracts based on Treasury Futures exceeding in
number 50% of the quotient of the Market Value of the Trust's total
assets divided by $100,000 ($200,000 in the case of futures on the two
year Treasury Note and $1,000,000 in the case of futures on Treasury
Bills) or (2) outstanding futures contracts based on a particular
Treasury instrument exceeding in number 10% of the average daily open
interest in such futures contracts in the thirty days preceding the
time of effecting such transaction as reported by The Wall Street
Journal;
(C) the Trust will engage in Closing Transactions to close out any
outstanding futures contracts which the Trust owns or has sold or any
outstanding option thereon owned by the Trust in the event (1) the
Trust does not have S&P Eligible Assets with an aggregate Discounted
Value equal to or greater than the RP Basic Maintenance Amount on two
consecutive Valuation Dates and (2) the Trust is required to pay
Variation Margin on the second such Valuation Date; and
(D) when the Trust engages in an S&P Hedging Transaction, it will
maintain an amount of cash, cash equivalents or short-term, money
market securities or longer term fixed income obligations rated, in the
case of longer term securities, at least A in a segregated account with
the Trust's custodian, so that the amount so segregated plus the amount
of Initial Margin and Variation Margin held in the account of or on
behalf of the Trust's broker with respect to such futures contract or
option equals the following:
Writing covered call options on futures:
the higher of the Market Value of the instruments
underlying the options contract or the strike price
of the options contract.
Writing covered put options on futures:
the strike price of the options contract.
Buying futures:
the Trust's purchase obligation under the futures
contract.
Selling futures:
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the higher of the Market Value of the instruments or
index underlying the futures contract and the market
price at which the futures will settle at expiration.
For purposes of determining whether the Trust has S&P Eligible Assets
with a Discounted Value that equals or exceeds the RP Basic Maintenance Amount,
amounts deposited as Initial Margin and, for futures contracts only, Variation
Margin shall not constitute S&P Eligible Assets and securities held in the
segregated account contemplated by paragraph 12 (a) (D) above shall have the
following Discount Factors.
Type Of Contract Discounted Value
Of Segregated Securities
Writing covered call options on futures:
The Discounted Value of segregated securities is
equal to the lower of the strike price of the option
or the Discounted Value of the segregated securities.
Writing covered put options on futures:
The Discounted Value of segregated securities is
equal to the lower of the Discounted Value of the
segregated securities and the Trust's purchase
obligation.
Futures:
The Discounted Value of segregated securities is
determined by reference to the S&P Exposure Period
from the date of calculation to the contract
expiration date.
(b) For so long as any shares of RP are rated by Moody's, the Trust will not buy
or sell futures contracts, write, purchase or sell put or call options on
futures contracts or write put or call options (except covered call or put
options) on portfolio securities unless it receives written confirmation from
Moody's that engaging in such transactions would not impair the rating then
assigned to any shares of RP by Moody's, except that the Trust may purchase or
sell exchange-traded futures contracts based on the Municipal Index or Treasury
Futures and purchase, write or sell exchange-traded put options on such futures
contracts and purchase, write or sell exchange-traded call options on such
futures contracts (collectively "Moody's Hedging Transactions"), subject to the
following limitations:
(A) the Trust will not engage in any Moody's Hedging Transaction based
on the Municipal Index (other than Closing Transactions) which would
cause the Trust at the time of such transaction to own or have sold
outstanding futures contracts based on the
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Municipal Index exceeding in number 10% of the average number of daily
traded futures contracts based on the Municipal Index in the thirty
days preceding the time of effecting such transaction as reported by
The Wall Street Journal;
(B) the Trust will engage in Closing Transactions to close out any
outstanding futures contract based on the Municipal Index if the amount
of open interest in the Municipal Index as reported by The Wall Street
Journal is less than 5,000.
(C) the Trust will not enter into an option or futures transaction
unless, after giving effect thereto, the Trust would continue to have
Moody's Eligible Assets with an aggregate Discounted Value equal to or
greater than the RP Basic Maintenance Amount; and
(D) when the Trust engages in a Moodys Hedging Transaction, it will
maintain an amount of cash, cash equivalents or short-term, money
market securities or longer term fixed income obligations rated, in the
case of longer term obligations, at least A2 in a segregated account
with the Trust's custodian, so that the amount so segregated plus the
amount of Initial Margin and Variation Margin held in the account of or
on behalf of the Trust's broker with respect to such futures contract
or option equals the following:
Writing covered call options on futures:
the higher of the Market Value of the instruments
underlying the options contract or the strike price
of the options contract.
Writing covered put options:
the strike price of the options contract.
Buying futures:
the Trust's purchase obligation under the futures
contract.
Selling futures:
the higher of the Market Value of the instruments or
index underlying the futures contract and the price
at which the futures contract will settle at
expiration.
For purposes of determining whether the Trust has Moody's Eligible Assets with
an aggregate Discounted Value that equals or exceeds the RP Basic Maintenance
Amount, the Discounted Value of Moody's Eligible Assets which the Trust is
obligated to deliver pursuant to an outstanding futures contract or option shall
be as follows (unless the Trust receives written confirmation to the contrary
from Moody's): (i) assets subject to call options written by the Trust which are
either exchange-traded and "readily reversible" or which expire within 48 days
after
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the date as of which such valuation is made shall be valued at the lesser of
(a) Discounted Value and (b) the exercise price of the call option written by
the Trust; (ii) assets subject to call options written by the Trust not meeting
the requirements of clause (i) shall have no value and (iii) assets subject to
put options written by the Trust shall be valued at the lesser of (a) the
exercise price and (b) the Discounted Value of such security.
For purposes of determining whether the Trust has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the RP Basic
Maintenance Amount, the following amounts shall be added to the RP Basic
Maintenance Amount required to be maintained by the Trust under paragraph 8 (a)
of this Part I of Section 12.1 (unless the Trust receives written confirmation
to the contrary from Moody's): (i) 10% of the exercise price of a written call
option; (ii) the exercise price of any written put option; (iii) where the Trust
is the seller under a futures contract which does not settle in cash, 10% of the
settlement price of the futures contract; (iv) where the Trust is the purchaser
under a futures contract which does not settle in cash, 10% of the settlement
price of assets to be purchased under such futures contract; (v) the settlement
price of the underlying futures contract if the Trust writes put options on a
futures contract; and (vi) 105% of the Market Value of the underlying futures
contracts if the Trust writes call options on futures contracts and does not own
the underlying contract.
(c) For so long as any shares of RP are rated by Moody's, the Trust
will not enter into any contract to purchase securities for a fixed price at a
future date beyond customary settlement time (other than such contracts that
constitute Moody's Hedging Transactions that are permitted under paragraph 12(b)
of this Part I of Section 12. 1) unless it receives written confirmation from
Moody's that engaging in such transactions would not impair the rating then
assigned to such shares of RP by Moody's except that the Trust may enter into
such contracts ("Forward Commitments"), subject to the following limitations:
(A) the Trust will maintain in a segregated account with its custodian
cash, cash equivalents or short-term, fixed income securities rated
P-1, MIG-1 or VMIG-1 by Moody's with a face value that equals or
exceeds the amount of the Trust's obligations under any Forward
Commitments to which it is from time to time a party or longer-term
fixed income securities with a Discounted Value that equals or exceeds
the amount of the Trust's obligations under any Forward Commitments to
which it is from time to time a party; and
(B) the Trust will not enter into a Forward Commitment unless, after
giving effect thereto, the Trust would continue to have Moody's
Eligible Assets with an aggregate Discounted Value equal to or greater
than the RP Basic Maintenance Amount.
For purposes of determining whether the Trust has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the RP Basic
Maintenance Amount, the Discounted Value of all Forward Commitments to which the
Trust is a party and of all securities deliverable to the Trust pursuant to such
Forward Commitments shall be zero.
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This amendment is effective as of May 24, 1999.
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