Putnam
New York
Tax Exempt
Income Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-98
[LOGO: BOSTON * LONDON * TOKYO]
* "This year the fund has benefited from its positions in New York City
and New York State obligations and its 13% position in inverse floaters.
The fund's bulleted portfolio has also helped as the curve has steepened."
-- Morningstar Mutual Funds, October 20, 1998
* "When a whiff of recession sends equity markets into a panic, bond funds
will be a rock. The rest of the time their regular monthly income payments
will help stabilize your portfolio's overall returns."
-- Fortune, December 21, 1998
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 rush of foreign investors to the safety of U.S. Treasury bonds in
recent months has driven prices on these securities markedly higher.
Because of the inverse relationship of yields to prices, yields on 30-year
Treasuries have declined to virtually the same level as those on long-term
municipals. This near parity has made New York tax-exempt bonds unusually
attractive for tax-conscious Empire State investors. Continued heavy
demand for municipal bonds, however, made the search for securities that
meet Putnam New York Tax Exempt Income Fund's exacting selection criteria
more challenging than ever.
I am pleased to announce the appointment of David E. Hamlin as your fund's
new manager. David, who joined Putnam in August from the Vanguard Group,
is also responsible for the management of a number of other municipal bond
funds and institutional portfolios. He has 16 years of investment
experience. Jerome J. Jacobs, who had served as interim manager, continues
to monitor the fund in his role as chief investment officer of the Tax
Exempt Group.
In the following report, David discusses the fund's performance during
fiscal 1998 and comments on his expectations for fiscal 1999.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 20, 1999
Report from the Fund Manager
David E. Hamlin
In the midst of the uncertainty clouding world financial markets,
municipal bonds offered a welcome refuge for U.S. investors this fall.
Prices of municipal bonds have fluctuated less than those of their taxable
counterparts. Furthermore, falling interest rates brought long-term
municipal bond yields in line with the 30-year Treasury bond yield
throughout the fall, suggesting tax-free securities are undervalued
relative to Treasuries. Putnam New York Tax Exempt Income Fund's
performance demonstrates this relative safety, with class A shares
delivering a total return of 6.47% at net asset value (1.41% at public
offering price) for the 12 months ended November 30, 1998. Performance for
other share classes and over longer time periods can be found on page 8.
* MUNICIPAL BONDS OFFER EXCEPTIONAL VALUE
After a turbulent autumn, the municipal bond market has calmed down and
even slightly outperformed the Treasury market. Long-term municipal bond
yields are approximately the same as those of the 30-year Treasury market
- -- exhibiting a remarkable level of cheapness relative to Treasuries. This
ratio dropped to 97% during November but by the end of the month, it had
returned to 100%. Until the last few months, the ratio of municipal bond
yields to Treasury yields had been in the 84% to 87% range.
We arrived at the current unprecedented yield ratios after a string of
international problems set off the stock market volatility and the bond
market rallies. As foreign investors and hedge fund investors panicked
about plummeting stock markets, they began a flight to quality -- selling
investments with virtually any element of risk and rushing for the safety
of U.S. Treasury bonds. This buying drove up the prices of Treasuries
while pushing down their yields. Since foreign investors do not benefit
from the tax advantages of municipal bonds, prices in this market didn't
rise as much as prices of Treasuries. For the past few months, municipal
bond yields have been extremely close or equal to Treasury yields, making
them an exceptional investment choice for U.S. investors.
Normally when interest rates fall, prerefundings boost the bond supply.
But rates have been low for some time; most issuers have already completed
their refundings and we expect that the supply of new issues will slow --
a positive factor for municipal bond prices. The calendar of municipal
bond sales usually slows during the holiday season as well.
The yield relationship of Treasury yields to municipal securities is also
contributing to the decline in supply. Since Treasury yields fell so
dramatically relative to municipal yields, the Treasury escrows used in
prerefundings are not adequate to pay off new municipal issues.
* STRONG CREDIT FUNDAMENTALS AND VIBRANT ECONOMY BUOY SECTORS
Strong economic growth, which propelled the U.S. stock market to record
highs during the period, is contributing to rising city and state tax
revenues. This, in turn, is improving investors' perception of New York's
creditworthiness -- prompting a series of credit upgrades by the major
rating agencies. Since the credit quality of the state's university system
closely tracks that of the state, this trend has had a positive effect on
the education bonds held in your fund's portfolio. Among our newer
additions to the portfolio is the insured New York Dormitory Authority for
St. John's University bonds, which are being used to finance the
construction of living and dining facilities. College and university
holdings amounted to 17.1% of net assets and made up one of the fund's
largest industry sectors at period's end. Although these securities and
others discussed in this report were viewed favorably at the end of the
reporting period, all holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may vary in the future.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS*]
TOP INDUSTRY SECTORS*
Transportation 20.6%
Education 17.1%
Utilities 6.9%
Water and sewerage 6.3%
Hospitals/health care 2.5%
Footnote reads:
*Based on net assets as of 11/30/98. Holdings will vary over time.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW
Aaa/AAA 47.4%
Aa/AA 12.0%
A 15.1%
Baa/BBB 23.7%
Other 1.5%
VMIGI 0.3%
Footnote reads:
Based on percentage of market value as of 11/30/98. A bond rated Baa or
higher is considered investment grade. Ratings reflect Moody's and
Standard & Poor's(R) descriptions; percentages may include unrated bonds
considered by Putnam Management to be of comparable quality. Ratings will
vary over time.
We expect the credit quality of the state's bonds to remain stable for the
foreseeable future, especially since tax receipts are high and New York
City has a reputation for sound fiscal management. But with so much good
news factored into prices, New York City's bonds are trading at a premium
and we have been looking for more reasonably priced bonds. New York Water
Authority bonds, a recent purchase, are revenue bonds and consequently
self-funding; user fees paid by consumers of water become the source of
the bonds' payment to investors. Since the issuers have the ability to set
user fees, income from these bonds is relatively stable and they carry a
lower risk of default than other types of municipal bonds. The economic
health and potential growth of the service area are important variables
when evaluating the credit risk of these public utility bond issuers.
The strength of the economy along with low petroleum prices also
contributed to the strong performance of the transportation sector.
Airlines are posting record profits and are in the best fiscal shape of
the decade. Current airline-related bonds include those backed by carriers
that are diversified and operate primarily in several regions of the
world, such as American Airlines. Just following the close of the fiscal
year, we participated in a rare offering by the New York City Industrial
Development Authority for British Airways. This event marked the first
time British Airways issued bonds in the New York municipal bond market.
As a result, the bonds, which are rated Aaa by Moody's, add valuable
diversification to your fund's airline holdings.
With interest rates in a steady decline, we have been using inverse
floaters to protect and enhance the fund's income stream. Inverse
floaters, also known as residual interest bonds (RIBs), are variable-rate
bonds whose yields move in the opposite direction of short-term interest
rates. Like all other derivative products, these securities require
careful handling but can offer attractive benefits when used
appropriately. At the end of the fiscal year, inverse floaters represented
about 10% of net assets.
* PRO-GROWTH FED CALMS FINANCIAL MARKETS
The bond markets are moving away from their obsession with international
markets, comfortable with the knowledge that the Federal Reserve Board is
prepared to step in to stabilize the financial markets when a crisis
occurs. As of period's end, the Fed had cut interest rates three times in
seven weeks, totaling 75 basis points. Its relaxed monetary policy is
sending a reassuring message to the world and Wall Street that the Fed is
willing to do its part to keep U.S. economic growth on track. Strong
consumer spending is also likely to contribute to a slowing but still
strong economy well into 1999, which we believe will keep public finances
healthy and municipal bonds attractive investments.
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 11/30/98, 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 11/30/98
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 6.47% 1.41% 5.91% 0.91% 6.15% 2.74%
- -----------------------------------------------------------------------
5 years 29.29 23.12 25.20 23.27 27.02 22.86
Annual average 5.27 4.25 4.60 4.27 4.90 4.20
- -----------------------------------------------------------------------
10 years 108.24 98.37 92.78 92.78 99.86 93.37
Annual average 7.61 7.09 6.78 6.78 7.17 6.82
- -----------------------------------------------------------------------
Life of fund 276.00 258.10 232.74 232.74 251.52 240.12
Annual average 9.08 8.73 8.21 8.21 8.60 8.36
- -----------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/98
Lehman Bros.
Municipal Consumer
Bond Index Price Index
- -----------------------------------------------------------------------
1 year 7.77% 1.55%
- -----------------------------------------------------------------------
5 years 37.81 12.48
Annual average 6.63 2.38
- -----------------------------------------------------------------------
10 years 122.05 36.33
Annual average 8.31 3.15
- -----------------------------------------------------------------------
Life of fund 297.68 63.67
Annual average 9.47 3.28
- -----------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. 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.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 11/30/88
Date/year Fund's class A Lehman Brothers Consumer
shares at POP Municipal Bond Index Price Index
11/30/88 9,525 10,000 10,000
11/30/89 10,563 11,101 10,466
11/30/90 11,013 11,956 11,122
11/30/91 12,383 13,183 11,455
11/30/92 13,697 14,505 11,804
11/30/93 15,342 16,113 12,120
11/30/94 14,112 15,270 12,444
11/30/95 16,644 18,156 12,768
11/30/96 17,462 19,225 13,184
11/30/97 18,630 20,605 13,425
11/30/98 $19,837 $22,205 $13,633
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 $19,278 and no contingent deferred sales charges would
apply; a $10,000 investment in the fund's class M shares would have been
valued at $19,986 ($19,337 at public offering price). See first page of
performance section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 11/30/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 12 12 12
- ------------------------------------------------------------------------------
Income $0.434275 $0.374745 $0.406983
- ------------------------------------------------------------------------------
Capital gains1
- ------------------------------------------------------------------------------
Long-term 0.103000 0.103000 0.103000
- ------------------------------------------------------------------------------
Short-term -- -- --
- ------------------------------------------------------------------------------
Total $0.537275 $0.477745 $0.509983
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
11/30/97 $9.02 $9.47 $9.00 $9.02 $9.32
- ------------------------------------------------------------------------------
11/30/98 9.05 9.50 9.04 9.05 9.35
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate2 4.67% 4.45% 4.02% 4.38% 4.24%
- ------------------------------------------------------------------------------
Taxable equivalent(a)3 8.30 7.91 7.15 7.79 7.54
- ------------------------------------------------------------------------------
Taxable equivalent(b)3 8.66 8.25 7.46 8.12 7.86
- ------------------------------------------------------------------------------
Current 30-day SEC yield4 4.05 3.86 3.35 3.68 3.56
- ------------------------------------------------------------------------------
Taxable equivalent(a)3 7.20 6.86 5.95 6.54 6.33
- ------------------------------------------------------------------------------
Taxable equivalent(b)3 7.51 7.16 6.21 6.82 6.60
- ------------------------------------------------------------------------------
1 Capital 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.
2 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
3 Assumes (a) maximum 43.74% combined federal income tax and New York
state personal income tax rate or (b) 46.08% combined federal income tax,
New York state, and New York city income tax rate. Results for investors
subject to lower tax rates would not be as advantageous.
4 Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 12/31/98
(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
- ------------------------------------------------------------------------------
1 year 4.99% 0.01% 4.20% -0.75% 4.68% 1.31%
- ------------------------------------------------------------------------------
5 years 26.53 20.53 22.37 20.48 24.39 20.34
Annual average 4.82 3.81 4.12 3.80 4.46 3.77
- ------------------------------------------------------------------------------
10 years 105.00 95.26 89.52 89.52 96.75 90.36
Annual average 7.44 6.92 6.60 6.60 7.00 6.65
- ------------------------------------------------------------------------------
Life of fund 276.96 259.02 233.04 233.04 252.33 240.90
Annual average 9.04 8.70 8.16 8.16 8.56 8.33
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. 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.
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.
Report of independent accountants
For the fiscal year ended November 30, 1998
To the Trustees and Shareholders of
Putnam New York Tax Exempt Income Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned (except for bond ratings),
and the related statements of operations and of changes in net assets and
the financial highlights present fairly, in all material respects, the
financial position of Putnam New York Tax Exempt Income Fund (the "fund")
at November 30, 1998, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements
in accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of investments owned at November
30, 1998 by correspondence with the custodian, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 12, 1999
<TABLE>
<CAPTION>
Portfolio of investments owned
November 30, 1998
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 (98.7%) (a)
PRINCIPAL AMOUNT RATINGS(RAT) VALUE
<S> <C> <C> <C>
New York (93.0%)
- --------------------------------------------------------------------------------------------------------------------------
$14,500,000 Battery Park, City Auth. Rev. Bonds, 7.7s, 5/1/15 Aaa $ 15,065,065
13,750,000 Long Island, Pwr. Auth. NY Elec. Syst. IFB, 7 1/4s,
12/1/24 (acquired 5/19/98, cost $14,946,250) (RES) A-/P 15,640,625
1,900,000 Long Island, Pwr. Auth. NY Elec. Syst. VRDN,
Ser. A, 2.7s, 5/1/33 VMIG1 1,900,000
Metropolitan Trans. Auth. Rev. Bonds
5,000,000 Ser. O, MBIA, 6 3/8s, 7/1/20 Aaa 5,675,000
15,400,000 Ser. A, MBIA, 6 1/4s, 4/1/14 Aaa 18,075,750
14,495,000 Ser. A, MBIA, 6 1/4s, 4/1/13 Aaa 17,031,625
6,395,000 Ser. C, AMBAC, 5 5/8s, 7/1/27 AAA 6,858,638
5,480,000 Metropolitan Trans. Auth. Fac. Rev. Bonds,
Ser. A, MBIA, 6s, 7/1/12 Aaa 6,329,400
Metropolitan Trans. Auth. Svcs. Contract
Fac. Rev. Bonds
3,000,000 (Trans. Fac.), Ser. 6, 7s, 7/1/09 Aaa 3,303,750
12,000,000 (Commuter Fac.), Ser. O, 5 3/4s, 7/1/13 Baa1 13,245,000
20,820,000 (Trans. Fac.), Ser. O, 5 3/4s, 7/1/13 Baa1 22,980,075
12,500,000 (Commuter Fac.), Ser. O, 5 1/2s, 7/1/17 Baa1 13,375,000
24,345,000 (Trans. Fac.), Ser. O, 5 1/2s, 7/1/17 Baa1 26,049,150
3,750,000 (Trans. Fac.), Ser. 3, 7 3/8s, 7/1/08 Baa1 4,467,188
135,000 Niagara Cnty., Indl. Dev. Agcy. Solid Waste Disp.
Rev. Bonds, VRDN (American Fuel Co.),
Ser. A,3.35s, 11/15/24 A-1+ 135,000
6,000,000 NY & NJ Port Auth. Rev. Bonds
(Kennedy Intl. Arpt.), 6 3/4s, 10/1/19 BB/P 6,712,500
1,000,000 NY & NJ Port Auth. Rev. Bonds, 6 3/4s, 10/1/11 BB/P 1,122,500
NY City, G.O. Bonds
12,325,000 Ser. B, 8 1/4s, 6/1/05 A3 15,082,719
9,200,000 Ser. L, MBIA, 8s, 8/1/06 Aaa 11,500,000
18,675,000 Ser. B, MBIA, 6 1/2s, 8/15/11 Aaa 22,316,625
21,495,000 Ser. D, 6 1/2s, 11/1/10 Aaa 25,579,050
10,910,000 Ser. I, 6 1/4s, 4/15/27 A3 12,028,275
9,775,000 Ser. I, Prerefunded, 6 1/4s, 4/15/27 A3 11,314,563
5,000,000 Ser. I, 6 1/4s, 4/15/17 A3 5,562,500
15,000,000 Ser. A, 6 1/4s, 8/1/08 A3 17,025,000
10,000,000 Ser. H, 6 1/8s, 8/1/25 A3 10,962,500
NY City, G.O. Bonds
15,000,000 Ser. H, FSA, 5 1/8s, 8/1/18 AAA 15,150,000
11,410,000 Ser. F, 5s, 8/1/23 A3 11,181,800
15,000,000 Ser. H, 5s, 8/1/22 A3 14,737,500
5,000,000 Ser. G, FSA, 5s, 8/1/15 AAA 5,043,750
100,000 NY City, Cultural Res. VRDN
(Soloman R. Guggenheim), Ser. B, 3.2s, 12/1/15 VMIG1 100,000
NY City, Indl. Dev. Agcy. Rev. Bonds
17,350,000 (Visy Paper Inc.), 7.95s, 1/1/28 B/P 19,605,500
7,000,000 (Horace Mann School), MBIA, 5s, 7/1/28 Aaa 6,938,750
9,000,000 (Horace Mann School), MBIA, 5s, 7/1/23 Aaa 8,932,500
NY City, Indl. Dev. Agcy. Special Fac. Rev. Bonds
10,625,000 (American Airlines, Inc.), 6.9s, 8/1/24 Baa2 11,780,468
14,465,000 (Terminal One Group Assn.), 6 1/8s, 1/1/24 A 15,513,712
18,250,000 (Terminal One Group Assn.), 6s, 1/1/19 A 19,504,688
NY City, Indl. Dev. Agcy. VRDN
340,000 (Heavenly Rest Day Church), 3s, 7/1/21 VMIG1 340,000
1,900,000 (American Civil Liberties), 3s, 6/1/12 VMIG1 1,900,000
200,000 (Columbia Grammar School), 2.8s, 6/30/14 A-1 200,000
10,750,000 NY City, Muni. Assistance Corp. IFB, Ser. 337B, 8.2s,
7/1/08 (acquired 3/19/98, cost $13,344,611) (RES) AAA/P 13,921,250
NY City, Muni. Assistance Corp. Rev. Bonds
14,455,000 6 1/4s, 7/1/08 Aa2 16,858,144
10,000,000 Ser. M, 5 1/2s, 7/1/07 Aa2 10,987,500
13,000,000 NY City, Muni. Fin. Auth. Wtr. & Swr. Syst. FRB,
FGIC, 11.102s, 6/15/11
(acquired 8/9/91, cost $13,587,860) (RES)(SEG) Aaa 20,410,000
NY City, Muni. Wtr. & Swr. Fin. Auth. Rev. Bonds
12,000,000 Ser. B, MBIA, 5 1/2s, 6/15/27 Aaa 12,555,000
7,200,000 Ser. A, MBIA, 5 1/2s, 6/15/23 Aaa 7,425,000
33,500,000 Ser. A, 4 3/4s, 6/15/31 Aaa 32,201,875
17,500,000 NY City, Muni. Wtr. Fin. Auth. IFB, MBIA, 8.45s,
6/15/08 Aaa 19,468,750
NY City, Transitional Fin. Auth. Rev. Bonds
4,485,000 Ser. A, 5 1/4s, 11/15/12 AA 4,731,675
27,100,000 (Future Tax Secd.), Ser. A, 5s, 8/15/27 AA 26,930,625
NY State Dorm. Auth. Cap. Appn. Rev. Bonds
(State U.), Ser. B
48,000,000 MBIA, zero %, 5/15/09 Aaa 30,540,000
53,490,000 MBIA, zero %, 5/15/08 Aaa 35,905,161
NY State Dorm. Auth. IFB
13,000,000 (Cornell U.), 10.903s, 7/1/30 (acquired 8/9/91,
cost $13,315,900) (RES) Aa 14,933,750
13,250,000 MBIA, 7.45s, 7/1/13 (acquired 10/22/97,
cost $15,237,500) (RES) AAA/P 16,545,938
NY State Dorm. Auth. Rev. Bonds
5,000,000 (NY Dept of Ed.), 7 3/4s, 7/1/21 Baa1 5,593,750
9,000,000 (State U. Edl. Fac.), Ser. A, 7 5/8s, 5/15/05 AAA 9,720,000
18,800,000 (City U. Syst.), Ser. C, 7 1/2s, 7/1/10 Baa1 23,171,000
4,000,000 (State U. Athletic Fac.), 7 1/4s, 7/1/21 Baa1 4,425,000
8,950,000 (State U. Edl. Fac.), Ser. A, FSA, 5 7/8s, 5/15/17 AAA 10,180,625
13,200,000 (State U. Edl. Fac.), Ser. A, 5 7/8s, 5/15/11 A3 14,817,000
6,000,000 (NY U.), Ser. A, MBIA, 5 3/4s, 7/1/27 Aaa 6,840,000
20,000,000 (Mental Hlth. Svcs. Fac.), Ser. A, 5 3/4s, 8/15/22 A3 21,075,000
6,000,000 (NY U.), Ser. A, MBIA, 5 3/4s, 7/1/20 AAA 6,757,500
NY State Dorm. Auth. Rev. Bonds
45,385,000 (U. Syst. Construction), Ser. A, 5 3/4s, 7/1/18 Baa1 49,753,306
14,645,000 (U. Syst. Construction), Ser. A, 5 3/4s, 7/1/13
(2nd Gen) Baa1 16,091,194
10,000,000 (Columbia U.), Ser. A, 5 3/4s, 7/1/10 Aaa 11,350,000
10,930,000 (City U. Syst.), Ser. A, FGIC, 5 3/4s, 7/1/09 Aaa 12,296,250
15,600,000 (U. Syst. Construction), Ser. A, 5 5/8s, 7/1/16 Baa1 16,867,500
16,055,000 (State U. Edl. Fac.), Ser. A, 5 1/2s, 5/15/13 A3 17,299,262
3,000,000 (Westchester Cnty.), 5 1/4s, 8/1/18 Aa1 3,075,000
7,500,000 Bonds (Columbia U.), 5s, 7/1/22 Aaa 7,528,125
23,250,000 (St. John's U.), MBIA, 4 3/4s, 7/1/28 Aaa 22,378,125
10,000,000 NY State Energy Research & Dev. Auth. Gas Fac.
IFB (Brooklyn Union Gas Co.),
Ser. B, 10 3/8s, 7/1/26 A1 13,137,500
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 5,718,750
NY State Energy Research & Dev. Auth.
Poll. Control Rev. Bonds
10,000,000 (Niagara Mohawk Pwr. Corp.), Ser. A, FGIC,
7.2s, 7/1/29 Aaa 11,625,000
12,500,000 6 5/8s, 10/1/13 Aaa 13,593,750
10,000,000 (Niagara Mohawk), Ser. A, AMBAC, 5.15s,
11/1/25 Aaa 10,125,000
9,460,000 NY State Energy Research & Dev. Auth. Rev. Bonds,
AMBAC, 6.1s, 8/15/20 Aaa 10,394,175
10,675,000 NY State Env. Fac. Corp. IFB, MBIA, 8.4s, 6/15/11
(acquired 11/24/97,cost $13,050,187) (RES) AAA/P 13,970,906
NY State Env. Fac. Corp. Poll. Control Rev. Bonds
10,655,000 (State Wtr. Revolving Fund), Ser. A, 7 1/2s,
6/15/12 Aa2 11,440,805
550,000 (State Wtr. Revolving Fund), Ser. E, 6 7/8s,
6/15/10 Aaa 600,875
4,500,000 (State Wtr. Revolving Fund), Ser. E, Prerefunded,
6 7/8s, 6/15/10 Aaa 4,944,375
6,870,000 (State Wtr. Revolving Fund), Ser. B, 6.65s, 9/15/13 Aaa 7,625,700
5,265,000 (State Wtr. Revolving Fund), Ser. A, 6.55s, 9/15/10 Aaa 5,850,732
20,000,000 (State Wtr. Sub-Revolving Fund), Ser. E, MBIA,
6s, 6/15/12 Aaa 23,075,000
10,975,000 NY State G.O. Bonds, 6 1/8s, 6/15/14 A2 12,017,625
4,990,000 NY State G.O. Bonds, Prerefunded, 6 1/8s, 6/15/14 A2 5,607,510
NY State Hsg. Fin. Agcy. Rev. Bonds
23,310,000 Prerefunded, 8s, 11/1/08 Aaa 25,728,412
4,790,000 8s, 11/1/08 Baa+ 5,239,062
9,440,000 (Multi-Fam. Hsg. Insd. Mtge. Program), Ser. A,
FHA Insd., 7s, 8/15/22 Aa1 10,266,000
600,000 NY State Hsg. Fin. Agcy. VRDN (Mt. Sinai School),
Ser. A, 2.8s, 11/1/14 VMIG1 600,000
7,500,000 NY State Hsg. Fin. Agcy. Svcs. Contract Oblig.
Rev. Bonds, Ser. C, 7.3s, 3/15/21 Aaa 8,362,500
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 14,433,412
6,000,000 Ser. E, AMBAC, 6s, 4/1/14 Aaa 6,832,500
24,700,000 NY State Med. Care Fac. Fin. Agcy. FRB
(Monterfiore Med. Ctr.), Ser. A, MBIA,
10.176s, 2/15/24
(acquired various dates from 10/3/91 to 4/8/92,
cost $26,795,648) (RES) AAA 26,101,726
NY State Med. Care Fac. Fin. Agcy. Rev. Bonds
700,000 (Hosp. & Nursing Home Insd. Mtge.), Ser. B,
FHA Insd., 8s, 2/15/28 AAA 716,625
11,625,000 (Mental Hlth. Svcs. Fac.), Ser. B, 7 7/8s, 8/15/20
(Refunded) Aaa 12,700,312
2,125,000 (Mental Hlth. Svcs. Fac.), Ser. B, 7 7/8s, 8/15/20 A3 2,295,000
3,750,000 (Mental Hlth. Svcs. Fac.), Ser. A, 7.8s, 2/15/19 A3 3,851,888
3,525,000 (Mental Hlth. Svcs. Fac.), Ser. A, 7.8s, 2/15/19
(Prerefunded) Aaa 3,628,600
22,525,000 (Presbyterian Hosp.), Ser. A, FHA Insd., 7.7s,
2/15/25 Aaa 24,524,094
24,775,000 (Mental Hlth. Svcs. Fac.), Ser. A, 7 1/2s, 2/15/21
(Prerefunded) Aaa 27,283,469
18,500,000 (St. Luke's Hosp.), Ser. B, FHA Insd., 7.45s,
2/15/29 Aaa 19,771,875
6,625,000 (Methodist Hosp. & Nursing Home), Ser. A,
FHA Insd., 6.7s, 8/15/23 AA 7,229,530
12,325,000 Ser. A, AMBAC, FHA Insd., 6 1/2s, 8/15/29 Aaa 14,235,375
6,835,000 NY State Mtge. Agcy. Rev. Bonds
(Homeowner Mtge.), Ser. 50, 6 5/8s, 4/1/25 Aa2 7,356,169
4,250,000 NY State Muni. Bond Bk. Agcy. Special Program
Rev. Bonds (Rochester), Ser. A, 6 3/4s, 3/15/11 A+ 4,669,688
NY State Pwr. Auth. Rev. Bonds
8,400,000 Ser. Y, 6 3/4s, 1/1/18 Aa2 9,093,000
10,000,000 Ser. A, 5 1/2s, 2/15/06 Aa3 10,862,500
5,000,000 NY State Thruway Auth. Rev. Bonds, 6s, 4/1/12 Baa1 5,468,750
NY State Thruway Auth. Svcs. Contract Rev. Bonds
13,300,000 (Local Hwy. & Bridge), 7 1/4s, 1/1/10 Baa1 14,530,250
16,385,000 6.45s, 4/1/15 Baa1 18,863,230
23,500,000 (Hwy. & Brdg.), 6s, 4/1/11 Baa1 25,850,000
8,000,000 NY State Urban Dev. Corp. IFB, FSA, 9.1s, 1/1/11
(acquired 9/2/98, cost $10,832,480) (RES) Aaa 11,040,000
NY State Urban Dev. Corp. Rev. Bonds
9,000,000 (Onondaga Cnty. Convention), 7 7/8s, 1/1/20 Aaa 9,945,000
33,250,000 (Correctional Fac.), Ser. 2, 7 1/2s, 1/1/18 Aaa 36,491,875
6,920,000 (Correctional Fac.), Ser. A, 6 1/2s, 1/1/10 Baa1 8,087,750
5,250,000 (State Fac.), 5 3/4s, 4/1/12 Baa1 5,788,125
5,830,000 (Correctional Fac.), Ser. 7, 5.7s, 1/1/16 Baa1 6,208,950
11,225,000 (State Fac.), 5.7s, 4/1/10 Baa1 12,361,530
19,100,000 5.6s, 4/1/15 Baa1 20,628,000
7,710,000 (Correctional Fac), Ser. A, 5 1/2s, 1/1/09 Baa1 8,326,800
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- 9,868,500
Triborough Bridge & Tunnel Auth. Gen. Purpose
Rev. Bonds
38,750,000 (Convention Ctr.), Ser. E, 7 1/4s, 1/1/10 Baa1 46,645,313
7,000,000 Ser. A, 6 1/2s, 1/1/09 Aa 8,251,250
17,700,000 Ser. Y, 6s, 1/1/12 Aa 20,332,875
9,915,000 Ser. A, 6s, 1/1/10 Aa 11,315,494
11,225,000 Triborough Bridge & Tunnel Auth. IFB, 6.95s, 1/1/12
(acquired 10/24/97, cost $12,264,211) (RES) Aa 13,371,782
Triborough Bridge & Tunnel Auth. Rev. Bonds
18,850,000 Ser. X, MBIA, 6 5/8s, 1/1/12 Aa 22,572,875
14,000,000 (Convention Ctr.), Ser. E, 6s, 1/1/11 Baa1 15,837,500
18,000,000 Triborough Bridge & Tunnel Auth. Special Oblig.
IFB, Ser. A, AMBAC, 8.063s, 1/1/12
(acquired 7/10/92, cost $18,135,000) (RES) Aaa 20,767,500
--------------
1,723,858,885
Puerto Rico (5.7%)
- --------------------------------------------------------------------------------------------------------------------------
Cmnwlth. of PR, G.O. Bonds
15,750,000 MBIA, 6 1/2s, 7/1/23 Aaa 18,014,062
3,915,000 6 1/2s, 7/1/13 Baa1 4,668,638
11,110,000 6 1/2s, 7/1/12 Baa1 13,262,564
Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
3,000,000 Ser. V, 6 5/8s, 7/1/12 Baa1 3,288,750
7,000,000 Ser. Z, FSA, 6 1/4s, 7/1/16 Aaa 8,312,500
10,000,000 Ser. A, AMBAC, 5s, 7/1/28 Aaa 10,062,500
10,000,000 PR Elec. Pwr. Auth. IFB, MBIA, 10.15s, 7/1/07
(acquired 10/30/97, cost $13,825,000) (RES) AAA/P 14,225,000
PR Elec. Pwr. Auth. Rev. Bonds
10,315,000 Ser. R, 6 1/4s, 7/1/17 Baa1 11,320,716
9,000,000 Ser. BB, MBIA, 6s, 7/1/11 Aaa 10,451,250
11,350,000 PR Tel. Auth. IFB, 8.327s, 1/1/20 (acquired 9/25/92,
cost $10,981,125) (RES) A+ 12,811,312
--------------
106,417,292
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,672,599,809) (b) $1,830,276,177
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,853,559,376.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
November 30, 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 November 30, 1998. Securities
rated by Putnam are indicated by"/P" and are not publicly rated. Ratings are not covered by the Report of
independent accountants.
(b) The aggregate identified cost on a tax basis is $1,673,935,758, resulting in gross unrealized appreciation and
depreciation of $157,178,876 and $838,457, respectively, or net unrealized appreciation of $156,340,419.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities
held at November 30, 1998 was $203,608,289 or 11.0% of net assets.
(SEG) A portion of this security was pledged and segregated with the custodian to cover margin requirements for
futures contracts at November 30, 1998.
The rate 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, 1998.
The fund had the following industry group concentrations greater than 10% at November 30, 1998. (as a
percentage of net assets):
Transportation 20.6%
Education 17.1
The fund had the following insurance concentration greater than 10% at November 30,1998. (as a percentage of
net assets):
MBIA 20.7%
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1998
Unrealized
Aggregate Face Expiration Appreciation
Total Value Value Date (Depreciation)
- -------------------------------------------------------------------------------
Municipal Bond
Index (Short) $25,167,281 $25,180,009 Dec-98 $ 12,728
U.S. Treasury
Bond (Short) 91,410,000 88,908,096 Dec-98 (2,501,904)
U.S. Treasury
20 yr. Bond (Short) 25,659,563 25,551,381 Mar.-99 (108,182)
- -------------------------------------------------------------------------------
$(2,597,358)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1998
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,672,599,809) (Note 1) $1,830,276,177
- -----------------------------------------------------------------------------------------------
Cash 2,213,790
- -----------------------------------------------------------------------------------------------
Interest and other receivables 32,432,016
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 549,470
- -----------------------------------------------------------------------------------------------
Total assets 1,865,471,453
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for variation margin 1,326,338
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 3,218,694
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 3,088,465
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 986,818
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,301,126
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 131,916
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 30,696
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3,126
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 708,288
- -----------------------------------------------------------------------------------------------
Other accrued expenses 116,610
- -----------------------------------------------------------------------------------------------
Total liabilities 11,912,077
- -----------------------------------------------------------------------------------------------
Net assets $1,853,559,376
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,709,273,884
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 2,295,836
- -----------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments (Note 1) (13,089,354)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 155,079,010
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,853,559,376
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,620,108,336 divided by 178,926,269 shares) $9.05
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.05)* $9.50
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($231,057,359 divided by 25,568,725 shares)+ $9.04
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($2,393,681 divided by 264,371 shares) $9.05
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.05)** $9.35
- -----------------------------------------------------------------------------------------------
* 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, 1998
<S> <C>
Tax exempt interest income: $106,637,046
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 9,373,424
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,062,954
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 31,198
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 18,587
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 3,349,288
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,943,701
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 11,020
- -----------------------------------------------------------------------------------------------
Reports to shareholders 62,198
- -----------------------------------------------------------------------------------------------
Auditing 70,872
- -----------------------------------------------------------------------------------------------
Legal 69,313
- -----------------------------------------------------------------------------------------------
Postage 107,023
- -----------------------------------------------------------------------------------------------
Other 274,287
- -----------------------------------------------------------------------------------------------
Total expenses 17,373,865
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (429,327)
- -----------------------------------------------------------------------------------------------
Net expenses 16,944,538
- -----------------------------------------------------------------------------------------------
Net investment income 89,692,508
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 25,984,624
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (18,717,252)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures contracts during the year 22,295,841
- -----------------------------------------------------------------------------------------------
Net gain on investments 29,563,213
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $119,255,721
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended November 30
-------------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 89,692,508 $ 102,465,510
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 7,267,372 58,231,661
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 22,295,841 (34,125,200)
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 119,255,721 126,571,971
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (80,596,474) (93,569,135)
- ---------------------------------------------------------------------------------------------------------------
Class B (9,492,244) (10,384,042)
- ---------------------------------------------------------------------------------------------------------------
Class M (99,145) (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) (108,670,874) (169,474,559)
- ---------------------------------------------------------------------------------------------------------------
Total decrease in net assets (101,824,802) (146,935,607)
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 1,955,384,178 2,102,319,785
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $2,295,836 and $1,613,130, respectively) $1,853,559,376 $1,955,384,178
- ---------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.02 $8.91 $8.97 $8.05 $9.38
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .43 .46 .48 .49 .53
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .13 .12 (.06) .92 (1.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .56 .58 .42 1.41 (.71)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.43) (.47) (.48) (.49) (.51)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.10) -- -- -- (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.53) (.47) (.48) (.49) (.62)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.05 $9.02 $8.91 $8.97 $8.05
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 6.47 6.69 4.92 17.95 (8.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,620,108 $1,725,773 $1,873,649 $2,013,022 $1,901,901
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .83 .79 .81 .78 .75
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.79 5.19 5.47 5.63 5.82
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 31.55 81.95 59.60 73.85 47.56
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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. Prior period ratios exclude these amounts. (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended November 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.00 $8.90 $8.95 $8.02 $9.37
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .37 .40 .42 .43 .46
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .14 .11 (.05) .93 (1.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .51 .51 .37 1.36 (.78)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.37) (.41) (.42) (.43) (.46)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.10) -- -- -- (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.47) (.41) (.42) (.43) (.57)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.04 $9.00 $8.90 $8.95 $8.02
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 5.91 5.89 4.35 17.26 (8.75)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $231,057 $227,747 $227,405 $215,614 $173,213
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.48 1.44 1.46 1.43 1.39
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.12 4.53 4.81 4.95 5.16
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 31.55 81.95 59.60 73.85 47.56
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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. 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
- ------------------------------------------------------------------------------------------------------------------------------------
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 .41 .43 .45 .26(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .13 .12 (.06) .21
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .54 .55 .39 .47
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.41) (.44) (.45) (.29)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.10) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.51) (.44) (.45) (.29)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.05 $9.02 $8.91 $8.97
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 6.15 6.37 4.59 5.44*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,394 $1,865 $1,266 $588
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.13 1.09 1.11 .65*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.47 4.87 5.17 3.30*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 31.55 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. Prior period ratios exclude these amounts. (Note 2).
</TABLE>
Notes to financial statements
November 30, 1998
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 after 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 the 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 year ended
November 30, 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. These differences include temporary and
permanent differences of 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,
1998, the fund reclassified $1,178,061 to increase undistributed net
investment income and $479,645 to decrease paid-in-capital, with an
increase to distributions in excess of net realized gain on investments of
$698,416. 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
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 year ended November 30, 1998, fund expenses were reduced by
$429,327 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 $1,170
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 have approved 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, 1998, Putnam Mutual Funds Corp., acting as
underwriter, received net commissions of $90,866 and $379 from the sale of
class A and class M shares, respectively and received $380,815 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 that were purchased without an initial sales charge as part
of an investment of $1 million or more. For the year ended November 30,
1998, Putnam Mutual Funds Corp., acting as underwriter received $8,264 on
class A redemptions.
Note 3
Purchase and sales of securities
During the year ended November 30, 1998, purchases and sales of investment
securities other than short-term investments aggregated $563,085,261 and
$718,183,006 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, 1998, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended
November 30, 1998
- ------------------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------------------
Shares sold 6,075,882 $ 54,846,447
- ------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,620,568 59,746,462
- ------------------------------------------------------------------------
12,696,450 114,592,909
Shares
repurchased (25,093,936) (226,291,535)
- ------------------------------------------------------------------------
Net decrease (12,397,486) $(111,698,626)
- ------------------------------------------------------------------------
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, 1998
- ------------------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------------------
Shares sold 3,362,245 $30,305,679
- ------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 905,213 8,153,712
- ------------------------------------------------------------------------
4,267,458 38,459,391
Shares
repurchased (3,996,392) (35,954,621)
- ------------------------------------------------------------------------
Net increase 271,066 $ 2,504,770
- ------------------------------------------------------------------------
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, 1998
- ------------------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------------------
Shares sold 70,227 $636,484
- ------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 12,577 113,496
- ------------------------------------------------------------------------
82,804 749,980
Shares
repurchased (25,163) (226,998)
- ------------------------------------------------------------------------
Net increase 57,641 $522,982
- ------------------------------------------------------------------------
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
- ------------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $8,547,585 as capital gain, for its taxable year ended
November 30, 1998.
The fund has designated 100% 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 1999 will show the tax status of all
distributions paid to your account in calendar 1998.
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
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
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
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Jerome J. Jacobs
Vice President
David E. Hamlin
Vice President and Fund Manager
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' web site:
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
www.putnaminv.com
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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AN051-48661 030/345/681 1/99
