Putnam
New York
Tax Exempt
Income Fund
ANNUAL REPORT
November 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Municipals' main draw, the tax-exempt interest, won't find much
competition from the new law's tax-free alternatives such as Roth IRAs and
the $250,000 exemption on home profits."
-- The Orange County (California) Register, September 7, 1997
* "For investors in higher tax brackets, say 31% or greater,
municipal bonds are almost always a better choice. At these tax rates,
taxable bonds' after-tax yields can't compare to municipal bonds, even
though munis' stated yields generally are lower."
-- The (New Orleans) Times-Picayune, September 30, 1997
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
13 Portfolio holdings
19 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The global flight to the relative safety of bonds in the aftermath of the
Southeast Asian currency crisis in late October provided a dramatic and
positive finale to Putnam New York Tax Exempt Income Fund's fiscal year. In
the 11 months prior to that occasion, the U.S. municipal bond market had
demonstrated solid, albeit tenuous, strength as many investors cautiously set
aside their lingering concerns about the economy, interest rates, and renewed
inflation.
Recognizing the fragility of the generally positive environment both prior to
and following the disruption in global markets, Fund Manager Howard Manning
had pursued a slightly defensive policy in managing the fund. As the year
unfolded, however, he concluded that a somewhat more dynamic strategy was in
order and began adjusting the portfolio accordingly.
In the report that follows, Howard provides the specifics of his strategic
shift as well as details about the fiscal year's performance. Then he offers
some insights into what he believes is in store for the months ahead.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 21, 1998
Report from the Fund Manager
Howard K. Manning
Over the past year, New York municipal bond investors benefited from a
favorable economic and interest-rate environment at the national, state, and
local levels. With this as a backdrop, Putnam New York Tax Exempt Income
Fund's class A shares delivered returns of 6.69% at net asset value and 1.67%
at public offering price by emphasizing yield curve positioning, noncallable
bonds, and credit selection. These strategies have created a solid, yet
flexible structure that should continue to help the portfolio produce a high
level of income free from federal, New York state, and New York City income
taxes. For a look at more detailed performance figures, please refer to the
performance summary that begins on page 8.
* MUNICIPAL MARKET FEELS EFFECTS OF OCTOBER CORRECTION
Although an atmosphere of low volatility and narrow trading ranges
characterized fixed-income markets for the early part of this reporting
period, the last week of October changed all that. The Pacific Rim crisis and
resulting worldwide equity market correction sparked enormous day-to-day
volatility in the stock and bond markets. For a short time afterward, the
municipal market, normally somewhat removed from such events, became caught up
in the worldwide volatility.
Immediately following the October correction, the municipal market experienced
an explosive rally. Since then, it has settled down, but municipal bond yields
have remained amazingly attractive relative to taxable Treasuries, and we have
been taking full advantage of the development.
* NEW YORK MUNICIPAL INVESTORS BENEFIT FROM STATE'S FISCAL STRENGTH
Within this relatively positive national economic and interest-rate
environment, New York municipal bond investors found the year ripe with
opportunity. The state's sound economic health and fiscal management earned it
rating upgrades for its general obligation and state-appropriated bonds. The
year's highlight, however, was New York City. Shining from Wall Street's
banner year and investor demand for higher-yielding bonds, the city's general
obligation bonds rose in price to become some of the top-performing credits
within the national tax-exempt market. The conservative assumptions in Mayor
Giuliani's fiscal 1998 budget, especially with regard to earnings expectations
for Wall Street firms, led us to conclude that the bonds' prospects in the
months ahead remain positive.
While the rating agencies did not raise New York City's credit ratings,
investors recognized the situation as a promising opportunity. Higher tax
revenues offset some of the city's need to issue new debt. This led to
anticipation of a lower bond supply, which investors believed could boost
prices of existing bonds. Furthermore, the city's longer-term debt burdens
were expected to be alleviated in part by the establishment of the
Transitional Finance Authority.
In addition to credit factors, we believe quality spread compression helped
stimulate demand for New York municipal bonds. This phenomenon drove the
prices of lower-rated bonds higher -- and yields lower -- than their
higher-rated counterparts. Demand was particularly strong for New York
municipal bonds in general, since New York City and New York
state-appropriated bonds represent the largest and most liquid Baa-rated
market within the national tax-exempt sector.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Transportation 29.6%
Education 16.4%
Hospitals/health care 9.8%
Utilities 6.0%
Water and sewerage 5.3%
Footnote reads:
*Based on net assets as of 11/30/97. Holdings will vary over time.
* TARGETED RESEARCH POINTS TO TOP-PERFORMING AIRLINE BONDS
Careful security selection and in-depth credit research often represent
important tools for improving fund returns, and this year was no exception.
This process entails identifying the most promising issues within the credit
markets and is especially important when reviewing higher-risk bond issuers.
For the past three years, tremendous profitability among leading airline
carriers and attractive revenue bond structures have led Putnam's research
department to view airline industry bonds very positively. The fund benefited
from this bullishness through its substantial position in New York City
Industrial Development Agency Bonds, which are backed by American Airlines. In
fact, these bonds were among the best-performing credits in the municipal
marketplace during the period.
* FOCUS ON INTERMEDIATE MATURITIES AND NONCALLABLE BONDS
In general, your fund focused on capturing relative value rather than making
interest-rate management a key focus. We structured the portfolio to reflect a
neutral interest-rate stance and built positions we believed would provide
attractive income over the long term.
One of our strategies was to sell interest-rate sensitive bonds, including
zero-coupon bonds and bonds that had low coupons with maturities longer than
20 years. We replaced them with bonds in the 6% to 6.5% coupon range with
maturities from 10 to 20 years. These bonds offer extremely attractive yields
now along with the potential to increase in value as they approach maturity
and shift to the shorter end of the yield curve.
Another way your fund's management team seeks to provide high and durable
returns is by improving call risk within the fund. Our goal is to enhance the
durability of the income stream by extending call dates on holdings. Callable
bonds carry the option of being redeemed, or called away, by the issuer at a
certain future date. Bonds are normally called away if interest rates are
lower than when the bonds were originally issued. By avoiding callable bonds,
the portfolio has a better chance of maintaining a certain level of income.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
Short-term/VMIGI 0.8%
Aaa 43.0%
Aa 12.8%
A 12.4%
Baa 28.5%
Ba 2.5%
Footnote reads:
*As a percentage of market value as of 11/30/97. A bond rated Baa or higher is
considered investment grade. All ratings reflect Moody's descriptions unless
noted otherwise; percentages may include unrated bonds considered by Putnam
Management to be of comparable quality. Ratings will vary over time.
*OUTLOOK CAUTIOUS AS MUNICIPAL MARKET BEGINS TO SETTLE DOWN
Although the Pacific Rim crisis and its repercussions are still the focus of
worldwide markets, U.S. economic growth remains robust supported by favorable
labor conditions. While the municipal market seems to be settling down, there
still may be periods of moderate volatility caused by the uncertainty over the
impact of the Asian debacle. It is quite possible that the crisis will help
the Federal Reserve Board's efforts to keep inflation at bay by keeping the
U.S. economy in check.
We realize that volatility can be unsettling for investors, but as
professional money managers, we can take advantage of short-term distortions
and improve the fund's return over time. While national trends may remain a
bit unsettled for some time, the credit outlook for New York City and New York
state remains strong. This, combined with ongoing healthy demand for municipal
bonds, should cause the state's municipal bond prices to rise further relative
to alternative investments.
As time goes on, we still believe that there will be some moderate upward
pressure on interest rates driven by healthy employment and the strong economy
in the United States. Our focus on key strategies such as reducing call risk
and careful security selection, especially among the lower quality credits,
should serve us very well as we move into 1998.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 11/30/97, there is no guarantee the fund will continue to hold
these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
New York Tax Exempt Income Fund is designed for investors seeking high
current income free from federal, New York state, and New York City income
taxes consistent with capital preservation.
TOTAL RETURN FOR PERIODS ENDED 11/30/97
Class A Class B Class M
(inception date) (9/2/83) (1/4/93) (4/10/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 6.69% 1.67% 5.89% 0.89% 6.37% 2.90
- ------------------------------------------------------------------------------
5 years 36.02 29.53 31.04 29.04 33.68 29.26
Annual average 6.35 5.31 5.56 5.23 5.98 5.27
- ------------------------------------------------------------------------------
10 years 121.00 110.49 103.86 103.86 111.57 104.70
Annual average 8.25 7.73 7.38 7.38 7.78 7.43
- ------------------------------------------------------------------------------
Life of fund 253.15 236.34 214.20 214.20 231.15 220.41
Annual average 9.26 8.88 8.37 8.37 8.77 8.51
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/97
Lehman Bros.
Municipal Bond Consumer
Index Price Index
- ------------------------------------------------------------------------------
1 year 7.18% 1.83%
- ------------------------------------------------------------------------------
5 years 42.06 13.73
Annual average 7.27 2.61
- ------------------------------------------------------------------------------
10 years 127.95 39.95
Annual average 8.59 3.42
- ------------------------------------------------------------------------------
Life of fund 269.02 61.18
Annual average 9.60 3.41
- ------------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 4.75% and 3.25%, respectively. Class B share returns for
the 1-, 5-, and 10-year (where available) and life-of-fund periods reflect
the applicable contingent deferred sales charge (CDSC), which is 5% in the
first year, declines to 1% in the sixth year, and is eliminated
thereafter. Returns shown for class B and class M shares for periods prior
to their inception are derived from the historical performance of class A
shares, adjusted to reflect both the initial sales charge or CDSC, if any,
currently applicable to each class and, in the case of class B and class M
shares, the higher operating expenses applicable to such shares. All
returns assume reinvestment of distributions at NAV and represent past
performance; they do not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return since 11/30/87
Plot points read:
Fund's class A Lehman Bros Consumer
shares at POP Muni Bond Index Price Index
11/30/87 9525 10000 10000
11/30/88 10762 11063 10425
11/30/89 11921 12281 10911
11/30/90 12443 13227 11595
11/30/91 13992 14584 11942
11/30/92 15475 16046 12306
11/30/93 17335 17826 12636
11/30/94 15945 16894 12973
11/30/95 18806 20088 13312
11/30/96 19730 21272 13746
11/30/97 21049 22795 13995
Footnote reads:
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B shares
would have been valued at $20,386 and no contingent deferred sales
charges would apply; a $10,000 investment in the fund's class M shares
would have been valued at $21,157 ($20,470 at public offering price).
See first page of performance section for performance calculation
method.
PRICE AND DISTRIBUTION INFORMATION
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 12 12 12
- ------------------------------------------------------------------------------
Income $0.467216 $0.408547 $0.440426
- ------------------------------------------------------------------------------
Total $0.467216 $0.408547 $0.440426
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
11/30/96 $8.91 $9.35 $8.90 $8.91 $9.21
- ------------------------------------------------------------------------------
11/30/97 9.02 9.47 9.00 9.02 9.32
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate2 5.14% 4.90% 4.49% 4.84% 4.68%
- ------------------------------------------------------------------------------
Taxable equivalent(a)3 9.14 8.71 7.98 8.60 8.32
- ------------------------------------------------------------------------------
Taxable equivalent(b)3 9.53 9.09 8.33 8.98 8.68
- ------------------------------------------------------------------------------
Current 30-day SEC yield4 4.71 4.48 4.02 4.37 4.23
- ------------------------------------------------------------------------------
Taxable equivalent(a)3 8.37 7.96 7.15 7.77 7.52
- ------------------------------------------------------------------------------
Taxable equivalent(b)3 8.74 8.31 7.46 8.10 7.84
- ------------------------------------------------------------------------------
1Capital gains, if any, are taxable for federal and, in most cases, state
tax purposes. For some investors, investment income may also be subject to
the federal alternative minimum tax. Investment income may be subject to
state and local taxes.
2Income portion of most recent distribution, annualized and divided by NAV
or POP at end of period.
3Assumes (a) maximum 43.74% combined federal income tax and New York state
personal income tax rate or (b) maximum 46.08% combined federal income
tax, New York state and New York City personal income tax rate. Results
for investors subject to lower tax rates would not be as advantageous.
4Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 12/31/97
(most recent calendar quarter)
Class A Class B Class M
(inception date) (9/2/83) (1/4/93) (4/10/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 8.96% 3.79% 8.38% 3.38% 8.64% 5.06%
- ------------------------------------------------------------------------------
5 years 36.48 29.94 31.68 29.68 34.09 29.77
Annual average 6.42 5.38 5.66 5.34 6.04 5.35
- ------------------------------------------------------------------------------
10 years 119.88 109.43 103.11 103.11 110.62 103.77
Annual average 8.20 7.67 7.34 7.34 7.73 7.38
- ------------------------------------------------------------------------------
Life of fund 259.03 241.95 219.62 219.62 236.58 225.66
Annual average 9.33 8.96 8.45 8.45 8.84 8.59
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns and
principal value will fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost. See first page of
performance section for performance calculation method.
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.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 4.75% sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the
municipal bond market. The index does not take into account brokerage
commissions or other costs, may include bonds different from those in the
fund, and may pose different risks than the fund. Securities in the fund
do not match those in the indexes and performance of the fund will differ.
It is not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Report of independent accountants
For the fiscal year ended November 30, 1997
To the Trustees and Shareholders of
Putnam New York Tax Exempt Income Fund
We have audited the accompanying statement of assets and liabilities of Putnam
New York Tax Exempt Income Fund, including the portfolio of investments owned,
as of November 30, 1997, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of November 30, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Putnam New York Tax Exempt Income Fund as of November 30, 1997, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 12, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
November 30, 1997
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
FGIC -- Financial Guaranty Insurance Company
FHA Insd. -- Federal Housing Administration Insured
FRB -- Floating Rate Bonds
FSA -- Financial Security Assurance
G.O. Bonds -- General Obligation Bonds
IFB -- Inverse Floating Rate Bonds
MBIA -- Municipal Bond Investors Assurance Corporation
VRDN -- Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (99.1%) *
PRINCIPAL AMOUNT RATINGS** VALUE
New York (92.9%)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$14,500,000 Battery Park, City Auth. Rev. Bonds, 7.7s, 5/1/15 Aaa $ 15,515,000
15,000,000 Metropolitan Trans. Auth. Commuter Facs.
Rev. Bonds, Ser. B, AMBAC, 5 1/8s, 7/1/24 Aaa 14,625,000
Metropolitan Trans. Auth. Rev. Bonds
15,400,000 Ser. A, MBIA, 6 1/4s, 4/1/14 Aaa 17,613,750
14,495,000 Ser. A, MBIA, 6 1/4s, 4/1/13 Aaa 16,578,656
5,000,000 Ser. O, MBIA, 6 3/8s, 7/1/20 Aaa 5,606,250
Metropolitan Trans. Auth. Svcs. Contract Fac.
Rev. Bonds
3,750,000 (Trans. Fac.), Ser. 3, 7 3/8s, 7/1/08 BBB 4,485,938
3,000,000 (Trans. Fac.), Ser. 6, 7s, 7/1/09 BBB 3,318,750
12,000,000 (Commuter Fac.), Ser. O, 5 3/4s, 7/1/13 BBB 12,645,000
20,570,000 (Trans. Fac.), Ser. O, 5 3/4s, 7/1/13 BBB 21,675,638
12,500,000 (Commuter Fac.), Ser. O, 5 1/2s, 7/1/17 BBB 12,781,250
24,345,000 (Trans. Fac), Ser. O, 5 1/2s, 7/1/17 BBB 24,892,763
25,950,000 Metropolitan Trans. Auth. Tran. Facs. Rev. Bonds,
Ser. B-1, AMBAC, 5s, 7/1/17 Aaa 25,236,375
5,480,000 Metropolitan Trans. Auth. Fac. Rev. Bonds, Ser. A,
MBIA, 6s, 7/1/12 Aaa 6,130,750
NY City, G.O. Bonds
12,325,000 Ser. B, 8 1/4s, 6/1/05 BBB+ 14,990,281
9,200,000 Ser. L, MBIA, 8s, 8/1/06 Aaa 11,431,000
8,000,000 Ser. B, AMBAC, 7 1/4s, 8/15/07 Aaa 9,620,000
18,675,000 Ser. B, MBIA, 6 1/2s, 8/15/11 Aaa 21,592,969
21,495,000 Ser. D, 6 1/2s, 11/1/10 Aaa 24,826,725
5,240,000 Ser. B, 6 1/2s, 8/15/10 Aaa 6,039,100
20,685,000 Ser. I, 6 1/4s, 4/15/27 BBB+ 21,951,956
5,000,000 Ser. I, 6 1/4s, 4/15/17 BBB+ 5,300,000
15,000,000 Ser. A, 6 1/4s, 8/1/08 BBB+ 16,331,250
10,000,000 Ser. H, 6 1/8s, 8/1/25 BBB+ 10,462,500
14,275,000 Ser. D, 5 1/4s, 8/1/21 BBB+ 13,757,531
2,100,000 NY City, Hsg. Dev. Corp. Mtge. VRDN
(Parkgate Tower), Ser. 1, 4.85s, 12/1/07 VMIG1 2,100,000
NY City, Indl. Dev. Agcy. Rev. Bonds
20,350,000 (Paper Inc.), 7.95s, 1/1/28 BB-/P 23,275,313
8,000,000 (Paper Inc.), 7.8s, 1/1/16 BB-/P 9,130,000
8,970,000 (Northwest Airlines, Inc.), 6s, 6/1/27 BB+ 9,239,100
NY City, Indl. Dev. Agcy. Special Fac. Rev. Bonds
10,625,000 (American Airlines, Inc.), 6.9s, 8/1/24 Baa2 11,820,313
24,465,000 (Terminal One Group Assn.), 6 1/8s, 1/1/24 A 25,718,831
26,250,000 (Terminal One Group Assn.), 6s, 1/1/19 A 27,398,438
2,100,000 NY City, Indl. Dev. Agcy. VRDN (Columbia
Grammar School), 3.35s, 6/30/14 A-1 2,100,000
NY City, Muni. Assistance Corp. Rev. Bonds
14,455,000 6 1/4s, 7/1/08 Aa2 16,261,875
15,670,000 6 1/4s, 7/1/07 Aa 17,589,575
19,435,000 6 1/4s, 7/1/06 Aa 21,670,025
21,500,000 Ser. G, 6s, 7/1/08 Aa2 23,730,625
13,000,000 NY City, Muni. Fin. Auth. Wtr. and Swr. Syst.
FRB, FGIC, 11.23s, 6/15/11 (acquired 8/9/91,
cost $13,587,860) ++++# Aaa 20,215,000
NY City, Muni. Wtr. & Swr. Fin. Auth. Rev. Bonds
8,000,000 Ser. B, 5 3/4s, 6/15/29 A2 8,220,000
25,300,000 Ser. A, 5 1/8s, 6/15/21 A2 24,477,750
17,500,000 NY City, Muni. Wtr. Fin. Auth. IFB, MBIA,
6.170s, 6/15/08 Aaa 18,506,250
NY City, Transitional Fin. Auth. Rev. Bonds
(Future Tax Secd.), Ser. A
19,775,000 5 1/8s, 8/15/21 Aa 19,354,781
36,500,000 5s, 8/15/27 Aa 35,085,625
100,000 NY City Trust Cultural Res. VRDN, (Soloman
Guggenhein-B), 3.75s, 12/1/15 VMIG1 100,000
NY & NJ Port Auth. Special Oblig. Rev. Bonds
(JFK Intl. Arpt.)
6,000,000 6 3/4s, 10/1/19 BB/P 6,502,500
12,000,000 MBIA, 6 1/4s, 12/1/13 Aaa 13,635,000
9,455,000 MBIA, 6 1/4s, 12/1/10 Aaa 10,636,875
NY State Dorm. Auth. Cap. Appn. Rev. Bonds
(State U.), Ser. B
48,000,000 MBIA, zero%, 5/15/09 Aaa 27,660,000
53,490,000 MBIA, zero%, 5/15/08 Aaa 32,628,900
13,000,000 NY State Dorm. Auth. IFB (Cornell U.), 10.499s,
7/1/30 (acquired 8/9/91, cost $13,315,900) ++++ Aa 15,453,750
NY State Dorm. Auth. Rev. Bonds
5,000,000 (NY Dept of Ed.), 7 3/4s, 7/1/21 Baa1 5,662,500
9,000,000 (State U. Edl. Fac.), Ser. A, 7 5/8s, 5/15/05 Aaa 9,900,000
18,800,000 (City U. Syst.), Ser. C, 7 1/2s, 7/1/10 BBB+ 22,818,500
13,250,000 (Rites-PA), 7.45s, 6/15/10 Aaa 15,850,313
4,000,000 (State U. Athletic Fac.), 7 1/4s, 7/1/21 Baa1 4,380,000
8,950,000 (State U. Edl. Fac.), Ser. A, FSA, 5 7/8s, 5/15/17 Aaa 9,856,188
13,200,000 (State U. Edl. Fac.), Ser. A, 5 7/8s, 5/15/11 A- 14,272,500
45,385,000 (City U. Syst. Construction), Ser. A, 5 3/4s, 7/1/18 BBB+ 47,597,507
14,645,000 (City U. Syst. Construction), Ser. A, 5 3/4s, 7/1/13
(2nd Gen) BBB+ 15,432,169
10,000,000 (Columbia U.), Ser. A, 5 3/4s, 7/1/10 Aaa 11,000,000
15,600,000 (U. Syst. Construction), Ser. A, 5 5/8s, 7/1/16 BBB+ 16,165,500
16,055,000 (State U. Edl. Fac.), Ser. A, 5 1/2s, 5/15/13 A- 16,536,650
9,000,000 (State U. Edl. Fac.), Ser. A, 5 1/2s, 5/15/10 A- 9,416,250
5,000,000 (State U. Edl. Fac.), Ser. B, FGIC, 5 1/2s, 5/15/08 Aaa 5,325,000
20,000,000 (City U. Syst. Construction), Ser. 1, 5 1/4s, 7/1/17 BBB+ 19,425,000
30,000,000 (State U. Edl. Fac.), Ser. A, 5 1/4s, 5/15/15 A- 30,187,500
6,850,000 (City U. Syst. Construction), Ser. 1, MBIA,
5 1/8s, 7/1/27 Aaa 6,653,063
5,000,000 NY State Energy Research & Dev. Auth. Fac.
Rev. Bonds (Cons. Edison Co. of NY, Inc.),
Ser. A, 7 1/8s, 12/1/29 A+ 5,762,500
NY State Energy Research & Dev. Auth. Poll.
Control Rev. Bonds (Niagara Mohawk Pwr.
Corp.), Ser. A, FGIC
10,000,000 7.2s, 7/1/29 Aaa 11,512,500
12,500,000 6 5/8s, 10/1/13 Aaa 13,593,750
9,460,000 NY State Energy Research & Dev. Auth.
Rev. Bonds, AMBAC, 6.1s, 5/15/20 Aaa 10,110,375
10,000,000 NY State Energy Research & Dev. Auth. Gas
Fac. IFB (Brooklyn Union Gas Co.), Ser. B,
9.747s, 7/1/26 A1 12,700,000
NY State Env. Fac. Corp. Poll. Control Rev. Bonds,
10,675,000 MBIA, 7.95s, 6/15/11 Aaa 13,103,563
10,655,000 (State Wtr. Revolving Fund), Ser. A, 7 1/2s,
6/15/12 Aa2 11,680,544
550,000 (State Wtr. Revolving Fund), Ser. E, 6 7/8s,
6/15/11 Aa2 601,563
4,500,000 (State Wtr. Revolving Fund), Ser. E, 6 7/8s,
6/15/11 AAA 4,966,875
6,870,000 (State Wtr. Revolving Fund), Ser. B, 6.65s, 9/15/13 Aaa 7,574,175
5,265,000 (State Wtr. Revolving Fund), Ser. A, 6.55s, 9/15/10 Aaa 5,811,244
20,000,000 (State Wtr. Sub-Revolving Fund), Ser. E, MBIA,
6s, 6/15/12 Aaa 22,225,000
15,965,000 NY State G.O. Bonds, Ser. A, 6 1/8s, 6/15/14 A 17,062,594
NY State Hsg. Fin. Agcy. Rev. Bonds
4,790,000 8s, 11/1/08 BBB+ 5,298,938
9,440,000 (Multi-Fam. Hsg. Insd. Mtge. Program), Ser. A,
FHA, 7s, 8/15/22 AAA 10,136,200
23,310,000 Prerefunded, 8s, 11/1/08 Aaa 26,165,475
7,500,000 NY State Hsg. Fin. Agcy. Svcs. Contract Oblig.
Rev. Bonds, Ser. C, 7.3s, 3/15/21 Aaa 8,437,500
NY State Local Govt. Assistance Corp. Rev. Bonds
11,900,000 Ser. A, 6 1/2s, 4/1/20 A+ 12,762,750
12,510,000 Ser. E, 6s, 4/1/14 A+ 13,651,538
6,000,000 Ser. E, AMBAC, 6s, 4/1/14 Aaa 6,682,500
24,700,000 NY State Med. Care Fac. Fin. Agcy. FRB
(Monterfiore Med. Ctr.), Ser. A, MBIA, 10.264s,
2/15/24 (acquired various dates from 10/3/91
to 4/8/92, cost $26,795,648) ++++ Aaa 27,540,500
NY State Med. Care Fac. Fin. Agcy. Rev. Bonds
11,000,000 (Hosp. & Nursing Home), Ser. B, FHA Insd., 8s,
2/15/28 AAA 11,522,280
2,125,000 (Mental Hlth. Svcs. Fac.), Ser. B, 7 7/8s, 8/15/20 BBB+ 2,326,875
11,625,000 (Mental Hlth. Svcs. Fac.), Ser. B, Refunded, 7 7/8s,
8/15/20 Aaa 12,932,813
3,750,000 (Mental Hlth. Svcs. Fac.), Ser. A, 7.8s, 2/15/19 A- 3,970,313
3,525,000 (Mental Hlth. Svcs. Fac.), Ser. A, Prerefunded, 7.8s,
2/15/19 Aaa 3,749,719
22,525,000 (Presbyterian Hosp.), Ser. A, FHA Insd., 7.7s,
2/15/25 Aaa 24,974,594
5,000,000 (Hosp. & Nursing Home), Ser. C, FHA Insd.,
7.7s, 2/15/22 Aaa 5,232,900
24,775,000 (Mental Hlth. Svcs. Fac.), Ser. A, Prerefunded,
7 1/2s, 2/15/21 Aaa 27,655,094
18,500,000 (St. Luke's Hosp.), Ser. B, FHA Insd., 7.45s, 2/15/29 Aaa 20,141,875
6,625,000 (Methodist Hosp. & Nursing Home), Ser. A,
FHA Insd., 6.7s, 8/15/23 Aa 7,146,719
12,325,000 Ser. A, AMBAC, FHA, 6 1/2s, 8/15/29 Aaa 13,649,938
7,040,000 NY State Mtge. Agcy. Rev. Bonds (Homeowner
Mtge.), Ser. 50, 6 5/8s, 4/1/25 AAA 7,594,400
4,250,000 NY State Muni. Bond Bk. Agcy. Special Program
Rev. Bonds (Rochester), Ser. A, 6 3/4s, 3/15/11 A+ 4,574,063
8,400,000 NY State Pwr. Auth. Rev. Bonds, Ser. Y, 6 3/4s, 1/1/18 Aa 9,082,500
NY State Thruway Auth. Rev. Bonds
5,000,000 6s, 4/1/12 BBB+ 5,362,500
4,500,000 5s, 4/1/17 BBB+ 4,275,000
NY State Thruway Auth. Svcs. Contract Rev. Bonds
13,300,000 (Local Hwy. & Bridge), 7 1/4s, 1/1/10 BBB+ 14,679,875
16,385,000 6.45s, 4/1/15 BBB+ 17,798,206
23,500,000 (Hwy. & Brdg.), 6s, 4/1/11 BBB+ 25,145,000
NY State Urban Dev. Corp. Rev. Bonds
9,000,000 (Onondaga Cnty. Convention), 7 7/8s, 1/1/20 Aaa 10,113,750
33,250,000 (Correctional Fac.), Ser. 2, 7 1/2s, 1/1/18 AAA/P 37,032,188
10,000,000 (Correctional Cap. Fac.), Ser. A, FSA,
6 1/2s, 1/1/11 Aaa 11,437,500
6,000,000 (Correctional Fac.), Ser. A. FSA, 6 1/2s, 1/1/10 Aaa 6,840,000
6,920,000 (Correctional Fac.), Ser. A, 6 1/2s, 1/1/10 BBB+ 7,741,750
5,250,000 (State Fac.), 5 3/4s, 4/1/12 Baa1 5,532,188
5,830,000 (Correctional Fac.), Ser. 7, 5.7s, 1/1/16 BBB+ 5,932,025
11,225,000 (State Fac.), 5.7s, 4/1/10 BBB+ 11,884,469
19,100,000 5.6s, 4/1/15 Baa 19,720,750
7,710,000 (Correctional Cap. Fac.), Ser. A, 5 1/2s, 1/1/09 Baa 7,989,488
7,775,000 (Correctional Cap. Fac.), Ser. A, FSA, 5 1/2s,
1/1/08 Aaa 8,222,063
8,600,000 Port Auth. NY & NJ Cons. IFB, 9.204s, 8/1/26
(acquired 8/29/91, cost $8,814,828) ++++ AA- 9,976,000
Port Auth. NY & NJ Split Oblig. Rev. Bonds
(JFK Intl. Air Terminal), MBIA, Ser. 6
10,000,000 6 1/4s, 12/1/11 Aaa 11,262,500
10,000,000 6 1/4s, 12/1/09 Aaa 11,275,000
5,000,000 Suffolk Cnty., Indl. Dev. Agcy. Rev. Bonds
(Southwest Swr. Syst.), FGIC, 6s, 2/1/08 Aaa 5,531,250
Triborough Bridge & Tunnel Auth. Rev. Bonds
11,250,000 6.95s, 1/1/12 VMIG1 12,403,125
3,500,000 5 1/4s, 1/1/28 Aa3 3,447,500
Triborough Bridge & Tunnel Auth. Gen.
Purpose Rev. Bonds
38,750,000 (Convention Ctr.), Ser. E, 7 1/4s, 1/1/10 BBB+ 45,918,750
7,000,000 Ser. A, 6 1/2s, 1/1/09 Aa 8,041,250
17,700,000 Ser. Y, 6s, 1/1/12 Aa 19,624,875
9,915,000 Ser. A, 6s, 1/1/10 Aa 10,943,681
Triborough Bridge & Tunnel Auth. Rev. Bonds
18,850,000 Ser. X, MBIA, 6 5/8s, 1/1/12 Aa 22,078,063
12,500,000 (Convention Ctr.), Ser. E, 6s, 1/1/11 BBB+ 13,484,375
18,000,000 Triborough Bridge & Tunnel Auth. Special Oblig.
IFB, Ser. A, AMBAC, 7.969s, 1/1/12 (acquired
7/10/92, cost $18,135,000) ++++ Aaa 20,745,000
--------------
$1,816,769,886
Puerto Rico (6.2%)
- -----------------------------------------------------------------------------------------------------------
Cmnwlth. of PR, G.O. Bonds
15,750,000 MBIA, 6 1/2s, 7/1/23 Baa 17,403,750
3,915,000 6 1/2s, 7/1/13 Baa 4,580,550
11,110,000 6 1/2s, 7/1/12 Baa 12,984,813
Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
3,000,000 Ser. V, 6 5/8s, 7/1/12 Baa 3,292,500
7,000,000 Ser. Z, FSA, 6 1/4s, 7/1/16 Aaa 8,032,500
9,000,000 Ser. X, MBIA, 5 1/2s, 7/1/13 Aaa 9,618,750
PR Elec. Pwr. Auth. Rev. Bonds
10,000,000 MBIA, 10.15s, 7/1/07 AAA/P 13,950,000
10,315,000 Ser. R, 6 1/4s, 7/1/17 Baa 10,972,581
15,775,000 Ser. S, MBIA, 6 1/8s, 7/1/09 Aaa 17,806,031
9,000,000 Ser. BB, MBIA, 6s, 7/1/11 Aaa 10,046,250
11,350,000 PR Tel. Auth. IFB, 7.829s, 1/1/20 (acquired 9/25/92,
cost $10,981,125) ++++ A 12,470,813
--------------
121,158,538
- -----------------------------------------------------------------------------------------------------------
Total Investments (cost $1,800,726,422) *** $1,937,928,424
- -----------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,955,384,178.
** The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available
at November 30, 1997 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 Report
Date - November 30, 1997. Securities rated by Putnam are indicated by "/P" and are not publicly rated. Ratings
are not covered by the Report of independent accountants.
*** The aggregate identified cost on a tax basis is $1,802,917,726, resulting in gross unrealized appreciation
and depreciation of $140,026,074 and $5,015,376, respectively, or net unrealized appreciation of $135,010,698.
++++ Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held
at November 30, 1997 was $106,401,063 or 5.4% of net assets.
# A portion of this security was pledged and segregated with the custodian to cover margin requirements for
futures contracts at November 30, 1997.
The rates shown on IFB's, which are securities paying interest rates that vary inversely to changes in the
market interest rates, FRB's, and VRDN's are the current interest rates at November 30, 1997.
The fund had the following industry group concentrations greater than 10% at November 30, 1997 (as a percentage
of net assets):
Transportation 29.6%
Education 16.4
The fund had the following insurance concentration greater than 10% at November 30, 1997. (as a percentage of
net assets):
MBIA 18.7%
<CAPTION>
- ----------------------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1997
Total Aggregate Face Expiration Unrealized
Market Value Value Date Depreciation
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bond
Futures (Short) $179,734,750 $175,432,792 Dec-97 $(4,301,958)
Municipal Bond Index
Futures (Short) 26,901,875 26,785,000 Dec-97 (116,875)
- ----------------------------------------------------------------------------------------------
$(4,418,833)
- ----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,800,726,422) (Note 1) $1,937,928,424
- ---------------------------------------------------------------------------------------------------
Cash 3,326,001
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 36,224,264
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 622,883
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 100,000
- ---------------------------------------------------------------------------------------------------
Total assets 1,978,201,572
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for variation margin 148,250
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 4,013,432
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 13,252,924
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,935,838
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,400,605
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 183,403
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 31,133
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3,345
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 738,568
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 109,896
- ---------------------------------------------------------------------------------------------------
Total liabilities 22,817,394
- ---------------------------------------------------------------------------------------------------
Net assets $1,955,384,178
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,818,424,403
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,613,130
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 2,563,476
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 132,783,169
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,955,384,178
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,725,772,645 divided by 191,323,755 shares) $9.02
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.02)* $9.47
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($227,746,918 divided by 25,297,659 shares)+ $9.00
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,864,615 divided by 206,730 shares) $9.02
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.02)** $9.32
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $25,000. On sales of $25,000 or more and on group sales the
offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
** On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales
the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended November 30, 1997
<S> <C>
Tax exempt interest income: $119,161,429
- --------------------------------------------------------------------------------------------------
Expenses:
Compensation of Manager (Note 2) 9,766,704
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,637,181
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 55,505
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 20,651
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 3,554,079
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,915,549
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 8,035
- --------------------------------------------------------------------------------------------------
Reports to shareholders 84,752
- --------------------------------------------------------------------------------------------------
Auditing 71,924
- --------------------------------------------------------------------------------------------------
Legal 97,582
- --------------------------------------------------------------------------------------------------
Other 16,197
- --------------------------------------------------------------------------------------------------
Total expenses 17,228,159
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (532,240)
- --------------------------------------------------------------------------------------------------
Net expenses 16,695,919
- --------------------------------------------------------------------------------------------------
Net investment income 102,465,510
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 64,729,751
- --------------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Notes 1) (6,498,090)
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures during the year (34,125,200)
- --------------------------------------------------------------------------------------------------
Net gain on investments 24,106,461
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $126,571,971
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended November 30
----------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 102,465,510 $ 114,783,195
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 58,231,661 28,864,977
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (34,125,200) (44,401,444)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 126,571,971 99,246,728
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (93,569,135) (104,395,042)
- ----------------------------------------------------------------------------------------------------------------------
Class B (10,384,042) (10,533,538)
- ----------------------------------------------------------------------------------------------------------------------
Class M (79,842) (49,718)
- ----------------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (169,474,559) (111,172,908)
- ----------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (146,935,607) (126,904,478)
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 2,102,319,785 2,229,224,263
- ----------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $1,613,130 and $2,766,182, respectively) $1,955,384,178 $2,102,319,785
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended November 30
- -----------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.91 $8.97 $8.05 $9.38 $8.98
- -----------------------------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income .46 .48 .49 .53 .53
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .12 (.06) .92 (1.24) .52
- -----------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .58 .42 1.41 (.71) 1.05
- -----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------
From net
investment income (.47) (.48) (.49) (.51) (.53)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.05) (.10)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- (.06) (.02)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.47) (.48) (.49) (.62) (.65)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.02 $8.91 $8.97 $8.05 $9.38
- -----------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 6.69 4.92 17.95 (8.02) 12.02
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,725,773 $1,873,649 $2,013,022 $1,901,901 $2,280,604
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .79 .81 .78 .75 .76
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.19 5.47 5.63 5.82 5.67
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 81.95 59.60 73.85 47.56 26.60
- -----------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 investment return assumes dividend reinvestment and does not reflect the effect of sales charge.
(c) The ratio of expenses to average net assets for the year ended November 30, 1995 and thereafter,
includes amounts paid through expense offset arrangements and brokerage service arrangements.
Prior period ratios exclude these amounts. (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- -------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Jan. 4, 1993+
operating performance Year ended November 30 to Nov. 30
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.90 $8.95 $8.02 $9.37 $8.95
- -------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------
Net investment income .40 .42 .43 .46 .40
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .11 (.05) .93 (1.24) .42
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .51 .37 1.36 (.78) .82
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------
From net
investment income (.41) (.42) (.43) (.46) (.40)
- -------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.05) --
- -------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- (.06) --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.41) (.42) (.43) (.57) (.40)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.00 $8.90 $8.95 $8.02 $9.37
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 5.89 4.35 17.26 (8.75) 9.25*
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $227,747 $227,405 $215,614 $173,213 $146,665
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.44 1.46 1.43 1.39 1.28*
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.53 4.81 4.95 5.16 4.29*
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 81.95 59.60 73.85 47.56 26.60
- -------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 investment return assumes dividend reinvestment and does not reflect the effect of sales charge.
(c) The ratio of expenses to average net assets for the year ended November 30, 1995 and thereafter,
includes amounts paid through expense offset arrangements and brokerage service arrangements.
Prior period ratios exclude these amounts. (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ----------------------------------------------------------------------------------------------------------
For the period
Per-share Apr. 10, 1995+
operating performance Year ended November 30 to Nov. 30
- ----------------------------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $8.91 $8.97 $8.79
- ----------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------
Net investment income .43 .45 .26(a)
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .12 (.06) .21
- ----------------------------------------------------------------------------------------------------------
Total from
investment operations .55 .39 .47
- ----------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------
From net
investment income (.44) (.45) (.29)
- ----------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- --
- ----------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- --
- ----------------------------------------------------------------------------------------------------------
Total distributions (.44) (.45) (.29)
- ----------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.02 $8.91 $8.97
- ----------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 6.37 4.59 5.44*
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,865 $1,266 $588
- ----------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.09 1.11 .65*
- ----------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.87 5.17 3.30*
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 81.95 59.60 73.85
- ----------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(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 investment return assumes dividend reinvestment and does not reflect the effect of sales charge.
(c) The ratio of expenses to average net assets for the year ended November 30, 1995 and thereafter,
includes amounts paid through expense offset arrangements and brokerage service arrangements.
Prior period ratios exclude these amounts. (Note 2).
</TABLE>
Notes to financial statements
November 30, 1997
Note 1
Significant accounting policies
Putnam New York Tax Exempt Income Trust, ("the trust"), registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund seeks as high a level of current
income exempt from federal income tax and New York State and City personal
income tax as Putnam Investment Management, Inc. ("Putnam Management"), the
fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc. believes
is consistent with preservation of capital by investing primarily in a
portfolio of longer-term New York tax exempt securities.
The fund offers class A, class B and class M shares. Class A shares are sold
with a maximum front-end sales charge of 4.75%. Class B shares, which convert
to class A shares after approximately eight years, do not pay a front-end
sales charge, but pay a higher ongoing distribution fee than class A shares,
and are subject to a contingent deferred sales charge, if those shares are
redeemed within six years of purchase. Class M shares are sold with a maximum
front-end sales charge of 3.25% and pay an ongoing distribution fee that is
lower than class B shares and higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate dividends on
each class of shares.
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 generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation Tax-exempt bonds and notes are stated on the basis of
valuations provided by a pricing service, approved by the Trustees, which uses
information with respect to transactions in bonds, quotations from bond
dealers, market transactions in comparable securities and various
relationships between securities in determining value. The fair value of
restricted securities is determined by Putnam Management following procedures
approved by the Trustees.
B) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis.
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. 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.
D) Line of credit The fund has entered into a committed line of credit with
certain banks. This line of credit agreement includes restrictions that the
fund maintain an asset coverage ratio of at least 300% and borrowings must not
exceed prospectus limitations.
For the year ended November 30, 1997, the fund had no borrowings against the
line of credit.
E) 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.
F) Distributions to shareholders Income dividends are recorded daily by the
fund and are distributed monthly. Capital gain distributions if any, are
recorded on the ex-dividend date and paid annually. 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
realized and unrealized gains and losses on certain futures contracts, market
discount and losses on wash sale transactions. Reclassifications are made to
the fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. For the year ended November 30, 1997, the fund reclassified
$414,457 to increase undistributed net investment income and $218,135 to
increase paid-in-capital, with a decrease to accumulated net realized gain on
investments of $632,592. The calculation of net investment income per share in
the financial highlights table excludes these adjustments.
G) Amortization of bond premium and accretion of bond discount Any premium
resulting from the purchase of securities in excess of maturity value is
amortized on a yield-to-maturity basis. The premium in excess of the call
price, if any, is amortized to the call date; thereafter, the remaining excess
premium is amortized to maturity. Discounts on zero coupon bonds, original
issue discount and stepped-coupon bonds are accreted according to the yield to
maturity basis.
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 net assets of the fund. Such
fee is based on the following annual rates: 0.60% of the first $500 million of
average net assets, 0.50% of the next $500 million, 0.45% of the next $500
million, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355%
of the next $5 billion, 0.34% of the next $5 billion, and 0.33% thereafter.
Prior to January 20, 1997, any amount over $1.5 billion was based on 0.40%
The fund reimburses Putnam Management an allocated amount for the compensation
and related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a division
of PFTC.
For the year ended November 30, 1997, fund expenses were reduced by $532,240
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the Statement
of operations exclude these credits. The fund could have invested a portion of
the assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustees fee, of which $1,450 has
been allocated to the fund, and an additional fee for each Trustee's meeting
attended. Trustees who are not interested persons of Putnam Management and who
serve on committees of the 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 in the fund and are
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
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.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees currently limit payment by the fund to an annual rate of 0.20%, 0.85%
and 0.50% of the average net assets attributable to class A, class B and class
M shares respectively.
For the year ended November 30, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $95,446 and $947 from the sale of
class A and class M shares, respectively and $446,822 in contingent deferred
sales charges from redemptions of class B shares. A deferred sales charge of
up to 1% is assessed on certain redemptions of class A shares. For the year
ended November 30, 1997, Putnam Mutual Funds Corp., acting as underwriter
received $16,199 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended November 30, 1997, purchases and sales of investment
securities other than short-term investments aggregated $1,603,180,186 and
$1,698,936,834, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost basis.
Note 4
Capital shares
At November 30, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
November 30, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 36,261,786 $320,642,390
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,025,152 53,518,532
- ------------------------------------------------------------
42,286,938 374,160,922
Shares
repurchased (61,135,199) (541,902,998)
- ------------------------------------------------------------
Net decrease (18,848,261) $(167,742,076)
- ------------------------------------------------------------
Year ended
November 30, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 49,874,885 $435,955,284
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,955,843 61,013,314
- ------------------------------------------------------------
Shares issued in
connection with
the merger of
Putnam New York
Intermediate Tax
Exempt Income
Fund 262,921 2,303,192
- ------------------------------------------------------------
57,093,649 499,271,790
Shares
repurchased (71,315,173) (624,195,830)
- ------------------------------------------------------------
Net decrease (14,221,524) $(124,924,040)
- ------------------------------------------------------------
Year ended
November 30, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 3,266,192 $28,907,810
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 757,115 6,711,840
- ------------------------------------------------------------
4,023,307 35,619,650
Shares
repurchased (4,283,296) (37,917,173)
- ------------------------------------------------------------
Net decrease (259,989) $(2,297,523)
- ------------------------------------------------------------
Year ended
November 30, 1996
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 4,772,161 $41,813,876
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 780,326 6,829,056
- ------------------------------------------------------------
Shares issued in
connection with
the merger of
Putnam New York
Intermediate Tax
Exempt Income
Fund 193,968 1,695,279
- ------------------------------------------------------------
5,746,455 50,338,211
Shares
repurchased (4,269,501) (37,263,730)
- ------------------------------------------------------------
Net increase 1,476,954 $13,074,481
- ------------------------------------------------------------
Year ended
November 30, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 125,505 $1,108,550
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,020 71,332
- ------------------------------------------------------------
133,525 1,179,882
Shares
repurchased (68,859) (614,842)
- ------------------------------------------------------------
Net increase 64,666 $565,040
- ------------------------------------------------------------
Year ended
November 30, 1996
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 89,297 $787,821
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,984 43,584
- ------------------------------------------------------------
94,281 831,405
Shares
repurchased (17,785) (154,754)
- ------------------------------------------------------------
Net increase 76,496 $676,651
- ------------------------------------------------------------
Note 5
Acquisition of Putnam New York
Intermediate Tax Exempt Income
Fund
On March 11, 1996, the fund issued 262,921 and 193,968 of class A and B
shares, respectively, to the shareholders of New York Intermediate Tax Exempt
Fund to acquire that fund's net assets in a tax-free exchange approved by the
shareholders. The assets of the fund and New York Intermediate Tax Exempt Fund
on March 11, 1996, valuation date, were $2,150,121,682 and $3,998,472,
respectively. On March 11, 1996, New York Intermediate Tax Exempt Fund had
unrealized appreciation of $130,627.
The aggregate net assets of the fund immediately following the acquisition
were $2,154,120,154.
Federal tax information
(Unaudited)
Pursuant to Section 852 of the International Revenue Code, the Fund hereby
designates $21,032,426 as capital gain for its taxable year ended November
30, 1997.
The fund has designated 98% 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 1998 will show the tax status of all
distributions paid to your account in calender 1997.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William J. Curtin
Vice President
Jerome J. Jacobs
Vice President
Blake E. Anderson
Vice President
Howard K. Manning
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam New York Tax
Exempt Income Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund, and the most recent
copy of Putnam's Quarterly Performance Summary. For more information, or to
request a prospectus, call toll free: 1-800-225-1581. You can also learn more
at Putnam Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other agency,
and involve risk, including the possible loss of principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
AN051-36878-279 1/98
