Putnam
New York
Tax Exempt
Income Fund
SEMIANNUAL REPORT
May 31, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "As always, we've maintained our strategy by focusing on
yield-curve positioning, bond structure, and credit research. This
focus has enabled us to create a strong portfolio that produces more
profit for shareholders free from federal, state, and local income
taxes for New York residents."
-- Jerome J. Jacobs, manager
Putnam New York Tax Exempt Income Fund
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
17 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Analyzing risk premiums, yield spreads, call dates, yield curves, credit
ratings, supply-and-demand dynamics, taxable versus tax-exempt yield
relationships, and a host of other factors is all in a day's work for Putnam's
Tax Exempt Bond Group. The result was another period of competitive
performance for Putnam New York Tax Exempt Income Fund's semi annual period
which closed on May 31, 1998.
I am pleased to inform you that Jerome J. Jacobs has been named the manager of
your fund. Jerry, who joined Putnam in 1996, is also chief investment officer
of the Tax Exempt Fixed Income Group. He was previously with the Vanguard
Group of Investment Companies and Butcher and Singer and has 18 years of
investment experience.
In the following report, Jerry discusses the fund's performance during this
semi annual period and then takes a look at prospects for the tax-exempt
market, especially with regard to New York, in the months ahead.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
July 15, 1998
Report from the Fund Manager
Jerome J. Jacobs
Once again, New York municipal bond investors benefited as the state continued
to thrive from Wall Street's boom, surging employment, and a falling crime
rate. With this economic backdrop, Putnam New York Tax Exempt Income Fund's
class A shares delivered returns of 3.49% at net asset value and -1.43% at
public offering price for the six months ended May 31, 1998. In comparison,
the Lehman Brothers Municipal Bond Index returned 3.78% over the same period.
For complete performance details, please refer to the performance summaries
that begin on page 8.
* LOW BOND PRICES CREATE BUYING OPPORTUNITIES
Despite the relative calm that has fallen over the $1.3 trillion municipal
bond market, these bonds have actually become attractively priced relative to
the Treasury market -- a state of affairs that hasn't occurred since the
flat-tax scare of 1996. Municipal bonds (as represented by 30-year insured
municipals) are offering almost 90% of the yield of long-term Treasury bonds.
Since the typical level is 84%, the current percentage makes municipal prices
remarkably low.
Upon this quiet playing field, there are fewer opportunities for profit, but
your fund continued to deliver what it has promised to shareholders: a
reliable stream of income exempt from federal taxes along with relatively low
share price volatility.
* INVESTORS BENEFIT FROM STRONG LOCAL ECONOMY AND NEW ISSUES
The news keeps getting better for New York City. Earlier this spring, Moody's
Investors Service, Inc. raised its credit rating for most of the city's
general obligation bonds from Baa1 to A3.* The upgrade, which the market had
anticipated for some time, was the result of the city's financial security and
its strong fiscal management team.
Footnote reads:
*The A3 rating means that the issue is rated in the lower end of the upper
medium grade category.
A new tax cut provided additional good news for New York residents. "We have
taken a giant step in returning economic power to the people," stated New
York's Mayor Rudolph Giuliani. Through fiscal conservatism and strong economic
policies, New York is expected to end the year with a budget surplus even
larger than last year's $1.4 billion.
So far 1998 has been most notable for its huge supply, including the sale of
the largest municipal bond issue in history -- $3.4 billion by the Long Island
Power Authority. When these bonds came to market in May, prices were
attractive, reflecting the supply increase. The low prices, in turn,
maintained investors' interest and enabled demand to keep pace with the
supply. Proceeds from the LIPA issue will be used to retire the expensive
Shorum Nuclear Power Plant, which politicians and residents alike termed the
$7 billion black hole. The plant never operated or produced any power, but
residents still had to pay for the hotly debated project. The power plant's
retirement is positive news for investors because it should bring about lower
utility rates over time. While these securities and others discussed in this
report were viewed favorably during the period, all holdings are subject to
review in accordance with the fund's investment strategy.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Transportation 23.7%
Education 15.9%
Hospitals/health care 8.7%
Housing 8.5%
Utilities 8.0%
Footnote reads:
*Based on net assets as of 5/31/98. Holdings will vary over time.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
VMIG1 0.4%
Aaa 42.5%
Aa 11.4%
A 19.4%
BBB 23.1%
BB 3.2%
Footnote reads:
*Based on percentage of market value as of 5/31/98. 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.
* MANAGEMENT TEAM SEEKS TO TARGET BONDS WITH BEST VALUE
The unusually flat tax-exempt yield curve that prevailed during the fiscal
year is also noteworthy. With the 30-year bond paying only a modest 30 to 40
basis points more than a 10-year bond, investors are not sufficiently
compensated for taking on higher risk. For this reason, we have found the best
values (attractive yield with minimal volatility) in the intermediate range of
the yield curve -- anywhere from 10 to 15 years.
Another way we seek to offer shareholders the best value is to improve the
call risk within the fund. Investing in noncallable bonds or bonds with
distant call dates enables us to provide the highest and most durable level of
income. Callable bonds have the option of being called away by the issuer at a
certain future date, usually if interest rates are lower than when the bonds
are first issued. By avoiding callable bonds, the portfolio has a better
chance of maintaining a reliable level of income.
It is always important to highlight careful security selection and in-depth
credit analysis as part of your fund's fundamental investment strategy. These
become even more important when we invest in bonds that carry ratings below
investment grade. Such bonds can contribute substantially to a fund's income
level, but they also mean greater credit risk and require the most meticulous
research efforts.
* TEAM FAVORS CAUTIOUS APPROACH DESPITE FAVORABLE RATES
While the Asian crisis has been widely publicized as negative for economic
growth around the world, it has produced some positive effects in the United
States. Fears of the financial turmoil in Asia and in other emerging markets
have helped keep interest rates low. In turn, low interest rates have helped
improve corporate balance sheets, encouraged construction, and contributed to
low unemployment.
Although we are quite satisfied with the financial condition of New York,
there is room for caution. Eventually the current environment may give way to
slightly higher inflation as we move into fiscal 1999. In our opinion, this is
not a good time to expose the portfolio to bonds with longer maturities and
higher interest-rate risk. We believe that a cautious strategy emphasizing
intermediate maturities, low call risk, and in-depth credit research will
produce the best returns in the months ahead.
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 5/31/98, 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 a high level of current income free from federal
and state income tax consistent with preservation of capital.
TOTAL RETURN FOR PERIODS ENDED 5/31/98
Class A Class B Class M
(inception date) (9/2/83) (1/4/93) (4/10/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 3.49% -1.43% 3.16% -1.84% 3.34% 0.01%
- ------------------------------------------------------------------------
1 year 8.71 3.53 8.01 3.01 8.38 4.81
- ------------------------------------------------------------------------
5 years 30.20 24.06 25.98 24.05 27.98 23.76
Annual
average 5.42 4.41 4.73 4.40 5.06 4.36
- ------------------------------------------------------------------------
10 years 115.04 104.82 98.66 98.66 106.17 99.47
Annual
average 7.96 7.43 7.11 7.11 7.50 7.15
- ------------------------------------------------------------------------
Life of fund 265.32 247.94 224.00 224.00 242.06 230.97
Annual
average 9.19 8.83 8.30 8.30 8.70 8.46
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 5/31/98
Lehman Bros.
Municipal Consumer
Bond Index Price Index
- ------------------------------------------------------------------------
6 months 3.78% 0.80%
- ------------------------------------------------------------------------
1 year 9.39 1.69
- ------------------------------------------------------------------------
5 years 38.53 12.90
Annual average 6.74 2.46
- ------------------------------------------------------------------------
10 years 124.39 38.55
Annual average 8.42 3.32
- ------------------------------------------------------------------------
Life of fund 282.97 62.48
Annual average 9.53 3.35
- ------------------------------------------------------------------------
Past performance is not indicative of future results. 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. 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.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 5/31/98
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------
Income $0.217225 $0.187571 $0.203683
- ------------------------------------------------------------------------
Capital gains1
- ------------------------------------------------------------------------
Long-term 0.103000 0.103000 0.103000
- ------------------------------------------------------------------------
Short-term -- -- --
- ------------------------------------------------------------------------
Total $0.320225 $0.290571 $0.306683
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
11/30/97 $9.02 $9.47 $9.00 $9.02 $9.32
- ------------------------------------------------------------------------
5/31/98 9.01 9.46 8.99 9.01 9.31
- ------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------
Current dividend rate2 4.88% 4.64% 4.23% 4.58% 4.44%
- ------------------------------------------------------------------------
Taxable equivalent (a)3 8.67 8.25 7.52 8.14 7.89
- ------------------------------------------------------------------------
Taxable equivalent (b)3 9.05 8.61 7.85 8.50 8.23
- ------------------------------------------------------------------------
Current 30-day SEC yield4 4.40 4.19 3.77 4.13 4.00
- ------------------------------------------------------------------------
Taxable equivalent (a)3 7.82 7.45 6.70 7.34 7.11
- ------------------------------------------------------------------------
Taxable equivalent (b)3 8.16 7.77 6.99 7.66 7.42
- ------------------------------------------------------------------------
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, 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 6/30/98
(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
- ------------------------------------------------------------------------
6 months 1.96% -2.88% 1.53% -3.45% 1.81% -1.46%
- ------------------------------------------------------------------------
1 year 7.72 2.62 7.02 2.02 7.39 3.88
- ------------------------------------------------------------------------
5 years 35.62 29.19 30.94 28.94 33.15 28.77
Annual average 6.28 5.26 5.54 5.21 5.89 5.19
- ------------------------------------------------------------------------
10 years 111.99 101.93 95.81 95.81 103.28 96.66
Annual average 7.80 7.28 6.95 6.95 7.35 7.00
- ------------------------------------------------------------------------
Life of fund 266.08 248.66 224.49 224.49 242.68 231.57
Annual average 9.14 8.79 8.26 8.26 8.66 8.42
- ------------------------------------------------------------------------
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 4.75%maximum 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. 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.
Portfolio of investments owned
May 31, 1998 (Unaudited)
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
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (99.4%) (a)
PRINCIPAL AMOUNT RATINGS (RAT) VALUE
New York (92.8%)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$14,500,000 Battery Park, City Auth. Rev. Bonds, 7.7s, 5/1/15 Aaa $15,285,175
835,000 Chemung Ctny., Indl. Dev. Agcy. Civic Fac. VRDN
(Arnot Ogden Med. Ctr.), Ser. A, 3.85s, 3/1/19 VMIG1 835,000
13,750,000 Long Island, Pwr. Auth. NY Elec. Syst. IFB, 7 1/4s,
12/1/24 (acquired 5/14/98, cost $14,946,250) (RES) A- 15,210,938
Long Island, Pwr. Auth. NY Elec. Syst. Rev. Bonds,
Ser. A, FSA
5,600,000 5 1/8s, 12/1/22 Aaa 5,544,000
8,730,000 5s, 12/1/18 Aaa 8,577,225
Metropolitan Trans. Auth. Rev. Bonds
5,000,000 Ser. O, MBIA, 6 3/8s, 7/1/20 Aaa 5,637,500
15,400,000 Ser. A, MBIA, 6 1/4s, 4/1/14 Aaa 17,748,500
14,495,000 Ser. A, MBIA, 6 1/4s, 4/1/13 Aaa 16,687,369
6,395,000 Ser. C, AMBAC, 5 5/8s, 7/1/27 AAA 6,698,763
5,480,000 Metropolitan Trans. Auth. Fac. Rev. Bonds, Ser. A,
MBIA, 6s, 7/1/12 Aaa 6,199,250
Metropolitan Trans. Auth. Svcs. Contract Fac.
Rev. Bonds
3,750,000 (Trans. Fac.), Ser. 3, 7 3/8s, 7/1/08 Baa1 4,518,750
3,000,000 (Trans. Fac.), Ser. 6, 7s, 7/1/09 AAA 3,311,250
12,000,000 (Commuter Fac.), Ser. O, 5 3/4s, 7/1/13 Baa1 12,960,000
20,820,000 (Trans. Fac.), Ser. O, 5 3/4s, 7/1/13 Baa1 22,485,600
12,500,000 (Commuter Fac.), Ser. O, 5 1/2s, 7/1/17 Baa1 13,015,625
24,345,000 (Trans. Fac), Ser. O, 5 1/2s, 7/1/17 Baa1 25,349,231
3,000,000 Monroe Cnty., Indl. Dev. Auth. VRDN
(Canal Ponds), Ser. D, 3.6s, 6/15/16 VMIG1 3,000,000
10,750,000 Muni. Assistance Corp. IFB, Ser. 337B, 8.075s,
7/1/08 (acquired 3/19/98, cost $13,383,965) (RES) Aa2 13,450,938
10,000,000 Muni. Assistance Corp. Rev. Bonds, Ser. M,
5 1/2s, 7/1/07 Aa2 10,787,500
NY City, G.O. Bonds
12,325,000 Ser. B, 8 1/4s, 6/1/05 A3 15,005,688
9,200,000 Ser. L, MBIA, 8s, 8/1/06 Aaa 11,419,500
18,675,000 Ser. B, MBIA, 6 1/2s, 8/15/11 AAA 21,989,813
9,565,000 Ser. I, 6 1/2s, 4/15/27 A3 10,916,056
NY City, G.O. Bonds
21,495,000 Ser. D, 6 1/2s, 11/1/10 Aaa 25,283,494
11,120,000 Ser. I, 6 1/4s, 4/15/27 A3 12,065,200
5,000,000 Ser. I, 6 1/4s, 4/15/17 A3 5,487,500
15,000,000 Ser. A, 6 1/4s, 8/1/08 A3 16,781,250
10,000,000 Ser. H, 6 1/8s, 8/1/25 A3 10,787,500
15,000,000 Ser. H, 5 1/8s, 8/1/18 A3 14,718,750
11,410,000 Ser. F, 5s, 8/1/23 A3 10,925,075
20,940,000 Ser. G, 5s, 8/1/22 A3 20,050,050
15,000,000 Ser. H, 5s, 8/1/22 A3 14,362,500
15,000,000 Ser. G, 5s, 8/1/15 A3 14,700,000
100,000 NY City, Cultural Res. VRDN
(Soloman R. Guggenheim), Ser. B, 3.95s,
12/1/15 VMIG1 100,000
2,200,000 NY City, Hsg. Dev. Corp. Mtge. Rev. Bonds
(Multi-Fam. James Twr.), Ser. A, 2 3/4s, 7/1/05 A-1+ 2,200,000
2,100,000 NY City, Hsg. Dev. Corp. Mtge. VRDN
(Parkgate Tower), Ser. 1, 3.55s, 12/1/07 VMIG1 2,100,000
NY City, Indl. Dev. Agcy. Rev. Bonds
25,350,000 (Visy Paper Inc.), 7.95s, 1/1/28 BB-/P 29,722,875
8,000,000 (Paper Inc.), 7.8s, 1/1/16 BB-/P 9,360,000
8,970,000 (Northwest Airlines, Inc.), 6s, 6/1/27 Ba2 9,362,438
30,750,000 (Brooklyn Navy Yard Cogen. Partners),
Ser. G, 5 3/4s, 10/1/36 Baa3 31,365,000
NY City, Indl. Dev. Agcy. Special Fac. Rev. Bonds
10,625,000 (American Airlines, Inc.), 6.9s, 8/1/24 Baa2 11,873,438
24,465,000 (Terminal One Group Assn.), 6 1/8s, 1/1/24 A 25,871,738
26,250,000 (Terminal One Group Assn.), 6s, 1/1/19 A 27,660,938
NY City, Indl. Dev. Agcy. VRDN
300,000 (Columbia Grammar School), 3.85s, 6/30/14 A-1 300,000
400,000 (Heavenly Rest Day Church), 2 3/4s, 7/1/21 VMIG1 400,000
14,455,000 NY City, Muni. Assistance Corp. Rev. Bonds,
6 1/4s, 7/1/08 Aa2 16,514,838
13,000,000 NY City, Muni. Fin. Auth. Wtr. and Swr. Syst.
FRB, FGIC, 10.573s, 6/15/11
(acquired 8/9/91, cost $13,587,860) (RES)(SEG) Aaa 20,263,750
NY City, Muni. Wtr. & Swr. Fin. Auth. Rev. Bonds
12,000,000 Ser. B, MBIA, 5 1/2s, 6/15/27 Aaa 12,435,000
7,200,000 Ser. A, MBIA, 5 1/2s, 6/15/23 Aaa 7,353,000
17,500,000 NY City, Muni. Wtr. Fin. Auth. IFB, MBIA,
6 1/2s, 6/15/08 Aaa 19,031,250
27,100,000 NY City, Transitional Fin. Auth. Rev. Bonds
(Future Tax Secd.), Ser. A, 5s, 8/15/27 Aa3 26,490,250
NY & NJ Port Auth. Rev. Bonds
7,100,000 (Kennedy Intl. Arpt.), 6 3/4s, 10/1/19 BB/P 7,898,750
4,075,000 6 3/4s, 10/1/11 BB/P 4,558,906
NY State Dorm. Auth. Cap. Appn. Rev. Bonds
(State U.), Ser. B, MBIA
48,000,000 5/15/09 Aaa 28,980,000
53,490,000 5/15/08 Aaa 33,966,150
NY State Dorm. Auth. IFB
13,000,000 (Cornell U.), 10.599s, 7/1/30
(acquired 8/9/91, cost $13,315,900) (RES) Aa 15,193,750
13,250,000 7.574s, 7/1/13 (acquired 10/22/97,
cost $15,191,120) (RES) AAA/P 16,065,625
NY State Dorm. Auth. Rev. Bonds
5,000,000 (NY Dept of Ed.), 7 3/4s, 7/1/21 Baa1 5,618,750
9,000,000 (State U. Edl. Fac.), Ser. A, 7 5/8s, 5/15/05 AAA 9,787,500
18,800,000 (City U. Syst.), Ser. C, 7 1/2s, 7/1/10 Baa1 23,241,500
4,000,000 (State U. Athletic Fac.), 7 1/4s, 7/1/21 A3 4,415,000
8,950,000 (State U. Edl. Fac.), Ser. A, FSA, 5 7/8s, 5/15/17 AAA 9,979,250
13,200,000 (State U. Edl. Fac.), Ser. A, 5 7/8s, 5/15/11 A3 14,454,000
6,000,000 (NY U.), Ser. A, MBIA, 5 3/4s, 7/1/27 Aaa 6,645,000
20,000,000 (Mental Hlth. Svcs. Fac.), Ser. A, 5 3/4s, 8/15/22 A- 21,000,000
6,000,000 (NY U.), Ser. A, MBIA, 5 3/4s, 7/1/20 Aaa 6,607,500
45,385,000 (U. Syst. Construction), Ser. A, 5 3/4s, 7/1/18 Baa1 49,015,800
14,645,000 (U. Syst. Construction), Ser. A, 5 3/4s, 7/1/13
(2nd Gen) Baa1 15,816,600
10,000,000 (Columbia U.), Ser. A, 5 3/4s, 7/1/10 Aaa 11,025,000
10,930,000 (City U. Syst.), Ser. A, FGIC, 5 3/4s, 7/1/09 Aaa 12,077,650
15,600,000 (U. Syst. Construction), Ser. A, 5 5/8s, 7/1/16 Baa1 16,575,000
16,055,000 (State U. Edl. Fac.), Ser. A, 5 1/2s, 5/15/13 A3 16,978,163
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 A1 5,781,250
10,000,000 NY State Energy Research & Dev. Auth. Gas
Fac. IFB (Brooklyn Union Gas Co.), Ser. B,
9.939s, 7/1/26 A1 12,912,500
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 11,550,000
12,500,000 6 5/8s, 10/1/13 Aaa 13,578,125
9,460,000 NY State Energy Research & Dev. Auth. Rev.
Bonds, AMBAC, 6.1s, 8/15/20 Aaa 10,240,450
10,675,000 NY State Env. Fac. Corp. IFB (PA 221), 8.075s,
6/15/11 (acquired 11/24/97, cost $12,993,315) (RES) AAA/P 13,437,156
NY State Env. Fac. Corp. Poll. Control Rev. Bonds
(State Wtr. Revolving Fund)
10,655,000 Ser. A, 7 1/2s, 6/15/12 Aa2 11,600,631
6,870,000 Ser. B, 6.65s, 9/15/13 Aaa 7,599,938
5,265,000 Ser. A, 6.55s, 9/15/10 Aaa 5,844,150
NY St. Env. Facs. Corp. Poll. Control Rev. Bonds
4,500,000 (State Wtr. Revolving Fund), Ser. E, 6 7/8s,
6/15/10 AAA 4,944,375
550,000 (State Wtr. Revolving Fund), Ser. E, 6 7/8s,
6/15/10 Aaa 602,938
20,000,000 (State Wtr. Sub-Revolving Fund), Ser. E, MBIA,
6s, 6/15/12 Aaa 22,550,000
15,965,000 NY State G.O. Bonds, Ser. A, 6 1/8s, 6/15/14 A2 17,481,675
NY State Hsg. Fin. Agcy. Rev. Bonds
4,790,000 8s, 11/1/08 Baa 5,263,013
9,440,000 (Multi-Fam. Hsg. Insd. Mtge. Program), Ser. A,
FHA Insd., 7s, 8/15/22 Aa2 10,136,200
23,310,000 NY State Hsg. Fin. Agcy. Rev. Bonds, 8s, 11/1/08 Aaa 25,874,100
7,500,000 NY State Hsg. Fin. Agcy. Svcs. Contract Oblig.
Rev. Bonds, Ser. C, 7.3s, 3/15/21 Aaa 8,381,250
300,000 NY State Hsg. Fin. Agcy. VRDN
(Normadie Court I), 3.9s, 5/15/15 VMIG1 300,000
NY State Local Govt. Assistance Corp. Rev. Bonds
11,900,000 Ser. A, 6 1/2s, 4/1/20 AAA 12,896,625
12,510,000 Ser. E, 6s, 4/1/14 A3 14,042,475
6,000,000 Ser. E, AMBAC, 6s, 4/1/14 Aaa 6,727,500
200,000 NY State Local Govt. Assistance Corp. VRDN,
Ser. E, 3.9s, 4/1/25 VMIG1 200,000
NY State Med. Care Fac. Fin. Agcy. FRB
(Monterfiore Med. Ctr.), Ser. A, MBIA,
24,700,000 10.33s, 2/15/24 (acquired various dates from
10/3/91 to 4/8/92, cost $26,795,648) (RES) AAA 26,802,958
NY State Med. Care Fac. Fin. Agcy. Rev. Bonds
10,945,000 (Hosp. & Nursing Home Insd. Mtge.), Ser. B,
FHA Insd., 8s, 2/15/28 AAA 11,253,540
2,125,000 (Mental Hlth. Svcs. Fac.), Ser. B, 7 7/8s, 8/15/20 Baa1 2,326,875
11,625,000 (Mental Hlth. Svcs. Fac.), Ser. B, Refunded,
7 7/8s, 8/15/20 Aaa 12,802,031
3,750,000 (Mental Hlth. Svcs. Fac.), Ser. A, 7.8s, 2/15/19 A- 3,918,375
3,525,000 (Mental Hlth. Svcs. Fac.), Ser. A, Prerefunded,
7.8s, 2/15/19 Aaa 3,691,838
22,525,000 (Presbyterian Hosp.), Ser. A, FHA Insd., 7.7s,
2/15/25 Aaa 24,721,188
5,000,000 (Hosp. & Nursing Home Insd. Mtge.), Ser. C,
FHA Insd., 7.7s, 2/15/22 AAA 5,138,950
24,775,000 (Mental Hlth. Svcs. Fac.), Ser. A, 7 1/2s, 2/15/21 Aaa 27,407,344
18,500,000 (St. Luke's Hosp.), Ser. B, FHA Insd., 7.45s,
2/15/29 Aaa 19,910,625
6,625,000 (Methodist Hosp. & Nursing Home), Ser. A,
FHA Insd., 6.7s, 8/15/23 AA 7,155,000
12,325,000 Ser. A, AMBAC, FHA Insd., 6 1/2s, 8/15/29 Aaa 14,112,125
200,000 NY State Med. Care Fac. Fin. Agcy. VRDN
(Lenox Hill Hosp.), Ser. A, 3.95s, 11/1/08 VMIG1 200,000
6,940,000 NY State Mtge. Agcy. Rev. Bonds
(Homeowner Mtge.), Ser. 50, 6 5/8s, 4/1/25 Aaa 7,521,225
4,250,000 NY State Muni. Bond Bk. Agcy. Special Program
Rev. Bonds (Rochester), Ser. A, 6 3/4s, 3/15/11 A+ 4,627,188
NY State Pwr. Auth. Rev. Bonds
8,400,000 Ser. Y, 6 3/4s, 1/1/18 Aa 9,103,500
10,000,000 Ser. A, 5 1/2s, 2/15/06 Aa3 10,725,000
5,000,000 NY State Thruway Auth. Rev. Bonds, 6s, 4/1/12 Baa1 5,456,250
23,500,000 NY State Thruway Auth. Svcs. Contract Rev.
Bonds (Hwy. & Brdg.), 6s, 4/1/11 Baa1 25,438,750
NY State Thruway Auth. Svcs. Contract Rev. Bonds
13,300,000 (Local Hwy. & Bridge), 7 1/4s, 1/1/10 Baa1 14,580,125
16,385,000 6.45s, 4/1/15 Baa1 18,064,463
NY State Urban Dev. Corp. Rev. Bonds
9,000,000 (Onondaga Cnty. Convention), 7 7/8s, 1/1/20 Aaa 10,012,500
33,250,000 (Correctional Fac.), Ser. 2, 7 1/2s, 1/1/18 AAA 36,699,688
10,000,000 (Correctional Fac.), Ser. A, FSA, 6 1/2s, 1/1/11 Aaa 11,637,500
6,920,000 (Correctional Fac.), Ser. A, 6 1/2s, 1/1/10 Baa1 7,923,400
6,000,000 (Correctional Fac.), Ser. A, FSA, 6 1/2s, 1/1/10 Aaa 6,982,500
5,250,000 (State Fac.), 5 3/4s, 4/1/12 Baa1 5,650,313
5,830,000 (Correctional Fac.), Ser. 7, 5.7s, 1/1/16 Baa1 6,085,063
11,225,000 (State Fac.), 5.7s, 4/1/10 Baa1 12,038,813
19,100,000 5.6s, 4/1/15 Baa1 20,293,750
7,710,000 (Correctional Fac.), Ser. A, 5 1/2s, 1/1/09 Baa1 8,124,413
1,000,000 Onondaga Cnty. Indl. Dev. Agcy. VRDN
(Pass & Seymour, Inc.), Ser. B, 4s, 11/13/98 A-1 1,000,000
8,600,000 Port Auth. NY & NJ Cons. Rev. IFB, 9.513s,
8/1/26 (acquired 8/29/91, cost $8,814,828) (RES) AA- 9,954,500
11,225,000 Triborough Bridge & Tunnel Auth. Rev. Bonds, 6.95s,
1/1/12 (acquired 10/24/97, cost $12,264,211)(RES) Aa 12,543,938
Triborough Bridge & Tunnel Auth. Gen. Purpose
Rev. Bonds
38,750,000 (Convention Ctr.), Ser. E, 7 1/4s, 1/1/10 Baa1 46,354,688
7,000,000 Ser. A, 6 1/2s, 1/1/09 Aa 8,155,000
17,700,000 Ser. Y, 6s, 1/1/12 Aa 19,824,000
9,915,000 Ser. A, 6s, 1/1/10 Aa 11,129,588
Triborough Bridge & Tunnel Auth. Rev. Bonds
18,850,000 Ser. X, MBIA, 6 5/8s, 1/1/12 Aa 22,407,938
14,000,000 (Convention Ctr.), Ser. E, 6s, 1/1/11 Baa1 15,400,000
18,000,000 Triborough Bridge & Tunnel Auth. Special
Oblig. IFB, Ser. A, 8.291s, 1/1/12
(acquired 7/10/92, cost $18,135,000) (RES) Aaa 20,700,000
--------------
1,763,918,692
Puerto Rico (6.6%)
- -------------------------------------------------------------------------------------------------------------
Cmnwlth. of PR, G.O. Bonds
15,750,000 MBIA, 6 1/2s, 7/1/23 Aaa 17,955,000
3,915,000 6 1/2s, 7/1/13 A 4,565,869
11,110,000 6 1/2s, 7/1/12 A 12,943,150
Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
3,000,000 Ser. V, 6 5/8s, 7/1/12 A 3,281,250
7,000,000 Ser. Z, FSA, 6 1/4s, 7/1/16 Aaa 8,198,750
29,835,000 Cmnwlth. of PR, Hwy. Trans. Auth. Rev. Bonds,
Ser. A, AMBAC, 5s, 7/1/28 Aaa 29,462,063
10,000,000 PR Elec. Pwr. Auth. IFB, MBIA, 10.173s, 7/1/07
(acquired 10/30/97, cost $13,651,251)(RES) AAA/P 14,137,500
PR Elec. Pwr. Auth. Rev. Bonds
10,315,000 Ser. R, 6 1/4s, 7/1/17 Baa1 11,294,925
9,000,000 Ser. BB, MBIA, 6s, 7/1/11 Aaa 10,192,500
11,350,000 PR Tel. Auth. IFB, 7.875s, 1/1/20
(acquired 9/25/92, cost $10,981,125) (RES) A+ 12,669,424
--------------
124,700,431
- -------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,747,971,066) (b) $1,888,619,123
- -------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,900,021,475.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings
available at May 31, 1998 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 May 31, 1998. Securities rated by Putnam are indicated by "/P" and are not
publicly rated.
(b) The aggregate identified cost on a tax basis is $1,750,162,370, resulting in gross unrealized
appreciation and depreciation of $140,294,211 and $1,837,458 respectively, or net unrealized
appreciation of $138,456,753.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted
securities held at May 31, 1998 was $190,430,491 or 10.0% of net assets.
(SEG) A portion of this security was pledged and segregated with the custodian to cover margin
requirements for futures contracts at May 31, 1998.
The rates shown on FRB's are the current interest rates shown at May 31, 1998, which are subject to
change based on the terms of the security.
The rates shown on IFB's which are securities paying interest rates that vary inversely to changes in
the market interest rates and VRDN's are the current interest rates at May 31,1998.
The fund had the following industry group concentrations greater than 10% at May 31, 1998.
(as a percentage of net assets):
Transportation 23.7%
Education 15.9
The fund had the following insurance concentration greater than 10% at May 31, 1998.
(as a percentage of net assets):
MBIA 16.3%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Futures Contracts Outstanding at May 31, 1998 (Unaudited)
Unrealized
Total Market Aggregate Face Expiration Appreciation/
Value Value Date (Depreciation)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bond
Index (long) $ 18,361,250 $ 17,704,500 Jun-98 $ 656,750
U.S. Treasury
Notes (short) 190,733,281 188,472,999 Jun-98 (2,260,282)
- -------------------------------------------------------------------------------------------
$(1,603,532)
- -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
May 31, 1998 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,747,971,066) (Note 1) $1,888,619,123
- ---------------------------------------------------------------------------------------------------
Cash 458,319
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 34,899,352
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 200,270
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,131,577
- ---------------------------------------------------------------------------------------------------
Total assets 1,925,308,641
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for variation margin 364,000
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 3,743,415
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 14,946,250
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 2,741,184
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,367,803
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 284,593
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 26,147
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3,121
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 723,330
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 87,323
- ---------------------------------------------------------------------------------------------------
Total liabilities 25,287,166
- ---------------------------------------------------------------------------------------------------
Net assets $1,900,021,475
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,765,929,238
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 2,302,372
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments (Note 1) (7,254,660)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 139,044,525
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,900,021,475
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,670,843,783 divided by 185,499,586 shares) $9.01
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.01)* $9.46
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($226,962,641 divided by 25,244,290 shares)+ $8.99
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($2,215,051 divided by 245,929 shares) $9.01
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.01)** $9.31
- ---------------------------------------------------------------------------------------------------
* 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
Six months ended May 31, 1998 (Unaudited)
<S> <C>
Tax exempt interest income: $54,975,363
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 4,737,304
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,094,291
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 16,436
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 9,247
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,701,920
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 968,534
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 5,284
- --------------------------------------------------------------------------------------------------
Reports to shareholders 40,289
- --------------------------------------------------------------------------------------------------
Registration fees 75
- --------------------------------------------------------------------------------------------------
Auditing 32,601
- --------------------------------------------------------------------------------------------------
Legal 49,248
- --------------------------------------------------------------------------------------------------
Other 24,167
- --------------------------------------------------------------------------------------------------
Total expenses 8,679,396
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (230,206)
- --------------------------------------------------------------------------------------------------
Net expenses 8,449,190
- --------------------------------------------------------------------------------------------------
Net investment income 46,526,173
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 20,211,530
- --------------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (7,807,880)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures contracts
during the period 6,261,356
- --------------------------------------------------------------------------------------------------
Net gain on investments 18,665,006
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $65,191,179
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
May 31 November 30
1998* 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 46,526,173 $ 102,465,510
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 12,403,650 58,231,661
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 6,261,356 (34,125,200)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 65,191,179 126,571,971
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (41,082,239) (93,569,135)
- ----------------------------------------------------------------------------------------------------------------------
Class B (4,707,020) (10,384,042)
- ----------------------------------------------------------------------------------------------------------------------
Class M (47,672) (79,842)
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (19,600,027) --
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,600,474) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (21,285) --
- ----------------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (52,495,165) (169,474,559)
- ----------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (55,362,703) (146,935,607)
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 1,955,384,178 2,102,319,785
- ----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $2,302,372 and $1,613,130, respectively) $1,900,021,475 $1,955,384,178
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share May 31
operating performance (Unaudited) Year ended November 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.02 $8.91 $8.97 $8.05 $9.38 $8.98
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .22 .46 .48 .49 .53 .53
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .09 .12 (.06) .92 (1.24) .52
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .31 .58 .42 1.41 (.71) 1.05
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.22) (.47) (.48) (.49) (.51) (.53)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.10) -- -- -- (.05) (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.06) (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.32) (.47) (.48) (.49) (.62) (.65)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.01 $9.02 $8.91 $8.97 $8.05 $9.38
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 3.49* 6.69 4.92 17.95 (8.02) 12.02
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,670,844 $1,725,773 $1,873,649 $2,013,022 $1,901,901 $2,280,604
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .41* .79 .81 .78 .75 .76
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.44* 5.19 5.47 5.63 5.82 5.67
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 48.31* 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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share May 31 Jan. 4, 1993+
operating performance (Unaudited) Year ended November 30 to Nov. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.00 $8.90 $8.95 $8.02 $9.37 $8.95
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .19 .40 .42 .43 .46 .40
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .09 .11 (.05) .93 (1.24) .42
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .28 .51 .37 1.36 (.78) .82
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.19) (.41) (.42) (.43) (.46) (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.10) -- -- -- (.05) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.29) (.41) (.42) (.43) (.57) (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.99 $9.00 $8.90 $8.95 $8.02 $9.37
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 3.16* 5.89 4.35 17.26 (8.75) 9.25*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $226,963 $227,747 $227,405 $215,614 $173,213 $146,665
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .73* 1.44 1.46 1.43 1.39 1.28*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.12* 4.53 4.81 4.95 5.16 4.29*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 48.31* 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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share May 31 Apr. 10, 1995+
operating performance (Unaudited) Year ended November 30 to Nov. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.02 $8.91 $8.97 $8.79
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .21 .43 .45 .26 (a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .08 .12 (.06) .21
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .29 .55 .39 .47
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.20) (.44) (.45) (.29)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.10) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.30) (.44) (.45) (.29)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.01 $9.02 $8.91 $8.97
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 3.34* 6.37 4.59 5.44*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,215 $1,865 $1,266 $588
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .56* 1.09 1.11 .65*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.29* 4.87 5.17 3.30*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 48.31* 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
May 31, 1998 (Unaudited)
Note 1
Significant accounting policies
Putnam New York Tax Exempt Income Fund (the "fund") is 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 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 diversified 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 within approximately six to 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, and such valuations and procedures are reviewed
periodically 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 six months ended May 31, 1998 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 at least 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. 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.
G) Amortization of bond premium and accretion of bond discount 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 and original issue discount 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.
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 six months ended May 31, 1998, fund expenses were reduced by $230,206
under expense offset arrangements with PFTC. 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 Trustee fee, of which $1,250 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 six months ended May 31, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $54,109 and $308 from the sale of
class A and class M shares, respectively and $210,181 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 six
months ended May 31, 1998, Putnam Mutual Funds Corp., acting as underwriter
received $8,264 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended May 31, 1998, purchases and sales of investment
securities other than short-term municipal investments aggregated $456,491,876
and $536,397,415, 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 May 31, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
May 31, 1998
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 3,121,200 $ 28,156,185
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,074,358 36,729,850
- ------------------------------------------------------------
7,195,558 64,886,035
Shares
repurchased (13,019,727) (117,278,168)
- ------------------------------------------------------------
Net decrease (5,824,169) $(52,392,133)
- ------------------------------------------------------------
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)
- ------------------------------------------------------------
Six months ended
May 31, 1998
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 1,566,404 $ 14,090,393
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 562,073 5,057,554
- ------------------------------------------------------------
2,128,477 19,147,947
Shares
repurchased (2,181,846) (19,607,683)
- ------------------------------------------------------------
Net decrease (53,369) $ (459,736)
- ------------------------------------------------------------
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)
- ------------------------------------------------------------
Six months ended
May 31, 1998
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 46,684 $424,181
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 7,428 66,950
- ------------------------------------------------------------
54,112 491,131
Shares
repurchased (14,913) (134,427)
- ------------------------------------------------------------
Net increase 39,199 $356,704
- ------------------------------------------------------------
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
- ------------------------------------------------------------
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
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Paul L. Joskow
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
Ian C. Ferguson
Vice President
William J. Curtin
Vice President
Jerome J. Jacobs
Vice President and Fund Manager
Blake E. Anderson
Vice President
William N. Shiebler
Vice President
John R. Verani
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 the 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
- --------------------
SA051-43777 030/345/681
