a_mot40app.htm
PUTNAM MUNICIPAL OPPORTUNITIES TRUST 
c/o Putnam Investment Management, LLC
100 Federal Street
Boston, Massachusetts 02110
 
 
February 27, 2019 

 

Securities and Exchange Commission 
100 F Street, N.E. 
Washington, DC 20549 
Attn: Chief Accountant
Division of Investment Management
 
Re:   Putnam Municipal Opportunities Trust—File No. 811-07626   
Request pursuant to Rule 19b-1(e) under the   
Investment Company Act of 1940, as amended   

 

This request (including exhibits) consists of 10 pages. The exhibit index is
  on page 6.

 

Ladies and Gentlemen: 

 

I.  INTRODUCTION 

 

Putnam Municipal Opportunities Trust, a Massachusetts business trust organized under 
the laws of The Commonwealth of Massachusetts (the “Fund”), is filing this request pursuant 
to Rule 19b-1(e) under the Investment Company Act of 1940, as amended (the “1940 Act”). 
The Fund, which is registered as a closed-end investment company under the 1940 Act, 
primarily invests in municipal bonds issued by U.S. states or U.S. territories. The Fund is 
taxed as a regulated investment company (“RIC”) under Subchapter M of the Internal 
Revenue Code of 1986, as amended (the “Code”). The Fund’s inception date was May 28, 
1993. The Fund has a fiscal and taxable year ending on April 30 of each year. The total net 
asset value of the Fund as of April 30, 2018 was $481,133,807. 

 

The Fund is advised by Putnam Investment Management, LLC (“Putnam Management”).
Putnam Management provides day-to-day management for the Fund’s portfolio. 

 

The Fund, because of the circumstances beyond its control described below, proposes to
characterize as capital gain dividends within the meaning of section 852(b)(3)(C) of the Code 

 

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certain distributions1 (or portions thereof) made in respect of the excise period for the twelve 
months ended October 31, 2018 (“Excise 2018”) on its series B preferred shares of beneficial 
interest (the “Series B Preferred Shares”) and series C preferred shares of beneficial interest 
(the “Series C Preferred Shares” and, together with the Series B Preferred Shares, the 
“Preferred Shares”). The Fund declared a capital gain dividend allocable to its common 
shares of beneficial interest (the “Common Shares”) with an ex-dividend date of December 
20, 2018 to shareholders of record on December 21, 2018 in accordance both with Code 
section 855 in respect of the fiscal year ending April 30, 2018 and Code section 4982 in 
respect of Excise 2018 (the “Distribution”). The Fund paid the Distribution on January 2, 
2019. The Distribution, coupled with the various distributions on the Preferred Shares that 
are proposed to be characterized as capital gain dividends, would result in the Fund having 
paid capital gain dividends in excess of the limits of Section 19(b) of the 1940 Act and Rule 
19b-1 thereunder. The Fund must characterize as capital gain dividends certain of the prior 
distributions to the Preferred Shares, along with the Distribution, to avoid the imposition of 
income tax under Code section 852(b)(3) and to comply with Revenue Ruling 89-81, which 
requires distributions of different types of income among different classes of shares to be 
proportional in order for the designation of a distribution as a capital gain dividend to be 
respected. 

 

II.  THE FUND’S DISTRIBUTIONS 

 

The facts and circumstances which required the Distribution and which require the
characterization of certain distributions with respect to the Preferred Shares as capital
gain dividends are as follows:

1. The Fund has Common Shares and Preferred Shares outstanding. The Fund pays
dividends to holders of its Preferred Shares and normally distributes net capital gains (that is, 
the excess, if any, of net long-term capital gains over net short-term capital losses) (as 
“capital gain dividends”) to holders of Common Shares once a year, usually near the end of 
the calendar year. Dividends on each class of Preferred Shares are declared and paid, 
normally at 7-day intervals (a “rate period”), at a rate determined pursuant to an auction 
conducted on the business day immediately prior to the start of the applicable rate period (the 
“Remarketing Procedures”) or, if the remarketing agent is unable to remarket the Preferred 
Shares pursuant to the Remarketing Procedures, at the maximum dividend rate (as defined in 
the Fund’s By-Laws). Because of the failure to remarket the Preferred Shares, the maximum 
dividend rate is currently the applicable rate. 

 

2. In order to avoid a Fund-level tax, the Fund must distribute all net capital gains
realized with resect to each taxable year and with respect to each 12-month period ending on 
October 31. As required by Revenue Ruling 89-81, the Fund allocates net capital gains 
between its Common Shares and Preferred Shares pro rata based on the values of total 
distributions made to the holders of Common Shares and Preferred Shares, respectively, for 
the year in which such income is realized. 

 


1 See Exhibit C for additional detail regarding the distributions of capital gain dividends to the Preferred Shares.

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  3. The Fund realized net capital gains of $7,236,042 during Excise 2018. Although the
Fund monitored the amount of net capital gains realized during Excise 2018, because of the 
unpredictability of market movements and the need to wait until the end of the calendar year 
before determining the final amount of net capital gains to be distributed and the appropriate 
allocation, the Fund did not foresee that the amount of net capital gains realized during the 
year would necessitate distributions of net capital gains on the Preferred Shares in excess of 
the limits of Section 19(b) of the 1940 Act and Rule 19b-1 thereunder. 

 

  4. The portion of the Fund’s net capital gains realized during Excise 2018 that will be
allocated to the Series B Preferred Shares and Series C Preferred Shares is $551,847 and 
$511,452, respectively, which will be allocated to the Preferred Shares through the 
characterization of prior distributions to the holders of Preferred Shares. The Fund will 
characterize prior distributions to the holders of Preferred Shares using the following 
methodology: the net capital gains will be allocated equally to the minimum number of 
distributions necessary to cover the net capital gains allocable to the Preferred Shares. Using 
this methodology, 18 distributions with respect to each of Series B Preferred Shares and 
Series C Preferred Shares (for a total of 36 distributions with respect to the Preferred Shares) 
will be characterized as having consisted, in part, of capital gain dividends.2 
 

 

5. The portion of the Fund’s net capital gains for Excise 2018 that will be allocated to                                  

the Common Shares amounts to $6,172,743. In order to distribute these gains fully, the Fund

paid the Distribution on January 2, 2019.

 

 

6. In light of the Distribution and the proposed characterizations of prior distributions to        

the Preferred Shares, a total of 18 distributions per class of Preferred Shares (36 distributions

 in total) of net capital gains in respect of Excise 2018 will be needed to distribute the full

amount of net capital gains allocable to the Preferred Shares.

 

III. REQUEST FOR RELIEF

 

For the foregoing reasons, the Fund requests authorization to characterize as capital gain
dividends the minimum number of distributions to holders of the Preferred Shares necessary 
to distribute the full amount of net capital gains allocable to the Preferred Shares in respect of 
Excise 2018. It should be recognized that, although Section 19(b) of the 1940 Act and Rule 
19b-1 thereunder serve very important purposes, there are some situations where tax rules 
mandated under the Code could require specific characterizations of the tax character of prior 
distributions. 

 

 

2 See Exhibit C for additional detail regarding the distributions of capital gain dividends to the Preferred Shares.

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Section 19(b) of the 1940 Act provides that:
 
It shall be unlawful in contravention of such rules, regulations, or orders as
the Commission may prescribe as necessary or appropriate in the public 
interest or for the protection of investors for any registered investment  
company to distribute long-term capital gains, as defined in Title 26, more  
often than once every twelve months (emphasis added). 

 

As a result, we believe that relief is justified under Rule 19b-1(e) under the 1940 Act. As
discussed above, a portion of 36 prior distributions to the Preferred Shares will be 
characterized as capital gain dividends and the need to so characterize such distributions was 
unforeseen when the distributions were made. 

 

Further, as discussed above, a failure to properly report and treat the distributions as
capital gain dividends for tax purposes would result in taxation at the Fund level, potential 
penalties to the Fund for incorrect Form 1099-DIV reports, and unfavorable tax treatment for 
Fund shareholders. As a result, an application of Rule 19b-1(e) in the current situation would 
be consistent with the goal of protecting investors under Section 19(b) of the 1940 Act. 

 

Pursuant to Rule 19b-1(e) under the 1940 Act, this request will be deemed granted
unless the Commission, within 15 days after the filing of this request, denies the request as 
not being necessary or appropriate in the public interest or for the protection of investors and 
notifies the Fund in writing of such denial. 

 

The undersigned officer of the Fund is authorized to file this request under Rule
19b-1(e) pursuant to the Fund’s By-Laws and resolutions approved by a majority of the 
Board of Trustees of the Fund at a meeting held on February 21, 2019, attached hereto as 
Exhibit B. 

 

The verification required by Rule 0-2 is attached hereto as Exhibit A.

 

If you have any questions regarding this request, please do not hesitate to contact Venice
Monagan, Esq. of Putnam Management at (617) 760-2577. 

 

[The remainder of this page has been left blank intentionally.] 

 

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A copy of the Amended and Restated Agreement and Declaration of Trust, as amended,
of the Fund is on file with the Secretary of The Commonwealth of Massachusetts, and notice 
is given that this instrument is executed on behalf of the Fund by an officer of the Fund as an 
officer and not individually and the obligations of or arising out of this instrument are not 
binding upon any of the Trustees, officers or shareholders individually but are binding only 
upon the assets and property of the Fund. 

 

Sincerely yours, 
 
 
/s/ Jonathan S. Horwitz 
Jonathan S. Horwitz 
Executive Vice President and Principal Executive 
Officer 
Putnam Municipal Opportunities Trust 

 

cc:  Venice Monagan, Esq., Counsel, Putnam Investment Management, LLC 
  James E. Thomas, Esq., Ropes & Gray LLP 
  Bryan Chegwidden, Esq., Ropes & Gray LLP 

 

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  Exhibits to Request 
 
 
The following materials are made a part of the request and are attached hereto: 
 
Designation  Document 
 
Exhibit A  Verifications 
 
Exhibit B  Resolutions of the Board of Trustees of Putnam 
  Municipal Opportunities Trust 
 
Exhibit C  Dividend Distributions with respect to Preferred Shares 

 

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Exhibit A

Verification of Putnam Municipal Opportunities Trust 

 

The undersigned states that he has duly executed the attached request dated February 27, 
2019 for and on behalf of Putnam Municipal Opportunities Trust (the “Fund”) in his capacity 
as Executive Vice President and Principal Executive Officer of the Fund and that all actions 
by the holders and other bodies necessary to authorize the undersigned to execute and file 
such instrument have been taken. The undersigned further states that he is familiar with such 
instrument, and the contents thereof, and that the facts therein set forth are true to the best of 
his knowledge, information and belief. 

 

/s/ Jonathan S. Horwitz 
Name:   Jonathan S. Horwitz
Title: Executive Vice President and Principal
Executive Officer

 

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Exhibit B

Votes of the Board of Trustees of Putnam Municipal Opportunities Trust 
 
 
VOTED:  That the officers and agents of Putnam Municipal Opportunities Trust (the 
  “Fund”) be, and they are, authorized and directed to file with the Securities 
  and Exchange Commission a request for authorization, pursuant to Rule 19b- 
  1(e) under the 1940 Act, for the Fund to make one or more capital gain 
  distributions which would otherwise be prohibited by Rule 19b-1, and that 
  each of the officers and agents of the Fund, acting alone, is authorized, 
  empowered, and directed on behalf of the Fund to cause to be prepared, 
  executed and filed with the Securities and Exchange Commission any and all 
  amendments of and exhibits to the request, to be in such form as the officers 
  or agents of the Fund shall approve, such approval to be conclusively 
  evidenced by their filing thereof. 
 
VOTED:  That each officer and agent of the Fund, acting with advice of counsel, be, and 
  is, authorized and empowered to make such changes as may be necessary by 
  reason of any comment on such materials by the Securities and Exchange 
  Commission or for any other reason deemed appropriate by the officers or 
  agents of the Fund. 
 
VOTED:  That each officer and agent of the Fund, acting alone, be, and is, authorized, 
  empowered and directed to take any and all additional acts and to prepare, 
  execute and deliver any and all other agreements, documents, instruments and 
  certificates, as they, or any of them acting alone deems necessary, appropriate 
  or convenient to carry out the intent and purposes of the foregoing resolutions, 
  such determination to be conclusively evidenced by the taking of such actions 
  and the preparation, execution and delivery of such agreements, documents, 
  instruments and certificates. 

 

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Exhibit C

 

 

       
  Distributions with respect to 
  Series B Preferred Shares
 
 
   
#  Date Payable  Total Dividend  Portion Characterized as 
      Capital Gain Dividend 
1  5/22/2018  $39,429.96  $30,658.16 
2  7/3/2018  $39,199.88  $30,658.15 
3  7/10/2018  $39,429.96  $30,658.15 
4  8/28/2018  $40,724.16  $30,658.15 
5  9/4/2018  $40,925.48  $30,658.15 
6  9/11/2018  $40,494.08  $30,658.15 
7  9/18/2018  $38,969.80  $30,658.15 
8  9/25/2018  $38,969.80  $30,658.15 
9  10/9/2018  $40,494.08  $30,658.15 
10  10/16/2018  $39,861.36  $30,658.15 
11  10/23/2018  $39,976.40  $30,658.15 
12  10/30/2018  $40,724.16  $30,658.15 
13  11/6/2018  $41,356.88  $30,658.15 
14  11/13/2018  $41,586.96  $30,658.15 
15  11/20/2018  $41,817.04  $30,658.15 
16  11/27/2018  $42,679.84  $30,658.15 
17  12/4/2018  $43,312.56  $30,658.15 
18  12/11/2018  $43,312.56  $30,658.15 

 

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Distributions with respect to
Series C Preferred Shares
 
 
     
#  Date Payable  Total Dividend  Portion Characterized as 
      Capital Gain Dividend 
1  7/6/2018  $36,620.10  $28,413.99 
2  7/13/2018  $36,620.10  $28,413.99 
3  8/24/2018  $37,822.95  $28,413.99 
4  8/31/2018  $38,010.06  $28,413.99 
5  9/7/2018  $37,609.11  $28,413.99 
6  9/14/2018  $36,192.42  $28,413.99 
7  9/21/2018  $36,192.42  $28,413.99 
8  10/5/2018  $37,609.11  $28,413.99 
9  10/12/2018  $37,021.05  $28,413.99 
10  10/19/2018  $37,127.97  $28,413.99 
11  10/26/2018  $37,822.95  $28,413.99 
12  11/2/2018  $38,411.01  $28,413.99 
13  11/9/2018  $38,624.85  $28,413.99 
14  11/16/2018  $38,838.69  $28,413.99 
15  11/23/2018  $39,640.59  $28,413.99 
16  11/30/2018  $39,640.59  $28,413.99 
17  12/7/2018  $40,228.65  $28,413.99 
18  12/14/2018  $40,228.65  $28,413.99 

 

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