Putnam
Minnesota
Tax Exempt
Income Fund
[GRAPHIC OMITTED:ARTWORK]
SEMIANNUAL REPORT
November 30, 1995
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
*"One investor's worry is another's opportunity. That's the moral
of the story of the municipal bond market now, where fears of a flat tax
have made munis extremely attractive."
- -- Fortune, September 1995
*"[T]he upheaval in the muni market has created some great deals
for investors who know where to look."
-- Money, November 1995
CONTENTS
5 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
17 Financial statements
[GRAPHIC OMITTED:photo of George Putnam]
(C) Karsh, Ottawa
From the Chairman
Dear Shareholder:
Tax-exempt bond investors will long remember 1995 as a year of highs and
lows in the market. The year began as the bond market was coming off one
of its worst periods in recent memory. Just as things began to look
brighter for tax-exempt bonds, talk in Washington about tax reform
sparked a wave of investor uncertainty.
By the time Putnam Minnesota Tax Exempt Income Fund entered its new
fiscal year in June, investors had begun to regain their composure,
realizing how remote enactment of any tax-reform legislation was likely
to be during an election year. As the fund reached the fiscal year's
midpoint on November 30, 1995, shareholders could look back on a period
of impressive recovery.
Furthermore, because of the earlier interruption over tax-reform
proposals, Fund Manager Howard Manning believes the rally will be
sustained during the second half of fiscal 1996.
As we notified shareholders earlier, the roman numeral "II" will be
omitted from the name of your fund. Since there is only one fund, the
"II" designation is no longer necessary.
Respectfully yours,
/s/George Putnam
-------------
George Putnam
Chairman of the Trustees
January 17, 1996
Report from the Fund Manager
Howard Manning
Although flat-tax concerns dampened investor enthusiasm for municipals
since this past spring, prices of Minnesota bonds have been somewhat
sheltered by an umbrella of firm demand. In addition to Minnesota
investors seeking tax-exempt income, such nontraditional buyers as
insurance companies have shown increased interest in the state's bonds.
This heightened demand, combined with our successful securities
selection, produced attractive performance for the six months ended
November 30, 1995, as class A and class B shares returned 4.59% and
4.27%, respectively, both at net asset value.
* STRONG RELATIVE PERFORMANCE: A MATTER OF PERSPECTIVE
After overcoming a brief stall in midsummer, the broad fixed-income
market continued its impressive run throughout the six months ended
November 30, 1995. Increased investor confidence in the Federal Reserve
Board's ability to thwart inflation and effectively manage economic
growth over the long term fueled the gains of most fixed-income
investments. Indeed, the rally had gained such momentum by period's end
that the current yield on the benchmark 30-year Treasury bond seems to
be fast approaching the historically low level of 5.79% reached in
October 1993.
On an absolute basis, municipal bonds participated in the rally's
strength in a highly respectable fashion. However, their performance
relative to taxable investments may appear somewhat lackluster. Because
of investors' lingering concerns about the perceived effects of the
flat-tax proposal introduced in April, which, in its purest form, would
deprive municipal bonds of their beneficial tax treatment. These
concerns prevented your fund's investments from attaining the full price
appreciation potential presented by the favorable investment
environment.
* FOCUS ON BOND QUALITY, STRUCTURE
Throughout calendar 1995, the reduced quantity of new-issue municipals
coupled with scant secondary market supply and continued strong demand
has had a side effect: quality spreads among various bonds have
contracted considerably. That is, there is little price difference
between top- and lower-quality bonds in the current market. As a result,
although we will still explore opportunities on the lower end of the
quality spectrum when justified by our research, in most instances we
find shareholders are not adequately compensated for assuming added
credit risk. Our strategy, therefore, has been to maintain a portfolio
of high-quality, price-sensitive bonds, reflecting an optimistic outlook
for interest rates.
Credit quality alone, however, is not enough to assure attractive
returns. When considering securities for purchase, we pay particular
attention to the bond structure (coupon, maturity, call features) that
we believe offers the greatest opportunity for price appreciation. We
limit exposure to par bonds (bonds priced at or near face value) and
concentrate our purchases on discount bonds with reasonable levels of
call protection. Discount bonds tend to gain in price quickly as
interest rates decline. Of course, they are also likely to decline in
price rapidly as interest rates rise. Prices of par bonds, on the other
hand, are inclined to rise less than prices of discounts as interest
rates decline. Since we currently believe that rates are more likely to
move downward than up, par bonds appear to be the less desirable
investments at present.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY BREAKDOWN 11/30/95]
showing:
A=8.87%
AA=20.97%
AAA=58.66%
BB and below=2.1%
BBB=5.40%
Baa=4.00%
*Based on net assets at 11/30/95. Based on Standard and Poor's and
Moody's ratings terminology. Investment-grade securities are those rated
BBB or above by Standard & Poor's or Baa or above by Moody's Investor
Service, Inc. Holdings will vary over time.
Our adherence to these quality and structure guidelines proved fruitful
as the market continued to climb over the second half of 1995. Bonds in
the highest-quality, most price-sensitive categories enjoyed the highest
total returns, as evidenced by the strongest performing position in your
fund during the period -- a long-term AAA-insured zero coupon bond
issued by Southern Minnesota Municipal Power Agency.
* OPPORTUNITIES IN MINNESOTA BONDS
The industrial diversity and overall economic strength of the state of
Minnesota provide an attractive backdrop for municipal investing.
Although the state's conservative approach to fiscal management and
desire to maintain moderate debt levels have generally resulted in a
relatively low supply of new bond financings, we have had no trouble
locating attractive situations for your fund. In fact, total new
issuance in the state is actually up slightly for the first 10 months of
calendar 1995.
Hospital bonds continue to dominate the fund's holdings, as health-care
providers, particularly in the dynamic Minneapolis/St. Paul market, are
among the largest issuers in the state. State and local general
obligation and essential service revenue bonds are also strongly
represented, as they often meet our stringent credit and structure
criteria best. In addition to providing the fund with exposure to
Minnesota's favorable tax base, ownership of local general obligations
such as those issued by school districts across the state enhances the
geographic diversification of the portfolio, a very important goal for
your single-state fund. Essential service enterprises such as electric
utilities and water and sewer projects tend to have fairly stable cash
flows, even during periods of slower economic activity, making such
bonds ideal investments for the present environment.
* FUNDAMENTALS ARE SOUND, VALUATIONS APPEALING
As we enter the second half of fiscal 1996, we anticipate that
conditions for investing in fixed-income securities will remain
hospitable. Subsiding inflation, a benign interest rate environment, and
decelerating economic growth seem likely to continue.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS*]
showing
Health care 21.0%
Housing 12.5%
Utilities 9.3%
Forest products 3.5%
Education 2.5%
(bullet) Based on net assets as of 11/30/95. Holdings will vary over
time.
The debate over tax reform is probably the most critical factor that
will influence tax-exempt bond performance over the next 12 months.
While more instability cannot be ruled out, we believe investors have
come to realize that a revision of the income tax code would not likely
occur until after the 1996 presidential election, at which time it would
most likely involve a simplification of the existing system rather than
a major overhaul.
We are also cautiously optimistic because, when any time municipal bonds
underperform relative to Treasuries, as they have during the semiannual
period, we believe a buying opportunity exists. Most high-grade, long-
term municipal bonds are providing 90% of the yield that Treasury bonds
are offering, on a before-tax basis. After taxes are factored in,
municipal bond yields surpass Treasury yields. While there can be no
assurance, the failure of municipal bonds to participate in the 1995
rally to the same degree as their taxable counterparts leaves the
potential for further price appreciation.
[GRAPHIC OMITTED: worm chart BOND YIELDS: MUNICIPALS VERSUS TREASURIES
% of 30_year municipal bond yield to Treasury bond yield
SHOWING:
- ---Municipals
===Treasuries
Vertical bar
9%,8%,7%,6%,5%
The following plot points were used to generatre the worms of the chart
as per the printed piece.
Date Municipals Treasuries
11/94 6.93% 8.00%
12/94 6.70 7.88
1/95 6.39 7.70
2/95 6.00 7.44
3/95 6.00 7.43
4/95 6.03 7.33
5/95 5.76 6.65
6/95 6.00 6.62
7/95 6.00 6.84
8/95 6.02 6.65
9/95 5.96 6.50
10/95 5.74 6.33
11/95 5.56 6.13
A solid black line identifies the Treasuries line.
A solid white line identifies the Municipals line.
Horizontal bar
11/94 12/94 1/95 2/95 3/95 4/95 5/95 6/95 7/95 8/95 9/95 10/95 11/95]
Government, on both the state and national levels, is addressing for the
first time in history the issue of how to be more efficient. We believe
that such attention to fiscal responsibility bodes well for the
fundamental structure of the municipal market. Going forward, we will
continue to carefully monitor market events as they unfold and position
your fund to benefit from longer-term trends.
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 11/30/95, there is no guarantee the fund
will continue to hold these securities in the future.
Chart compares the yield of an average 30-year general obligation
municipal bond with the yield of an average 30-year Treasury bond during
the 12 months ended 11/30/95. The table below the chart shows the
municipal bond's yield relative to the yield of the Treasury bond. A
buying opportunity is usually indicated with municipal bonds yield
between 78% and 82% of Treasury bonds. Interest and principal payments
of Treasury bonds are backed by the full faith and credit of the U.S.
government, while those of municipal bonds have no such guarantee.
Source: Bloomberg.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Minnesota 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.
This section provides, at a glance, information about your fund's
performance. 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.
TOTAL RETURN FOR PERIODS ENDED 11/30/95
Class A Class B Class M
- -----------------------------------------------------------------------
(10/23/89)* (7/15/93)* (4/3/95)*
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------
6 months 4.59% -0.42% 4.27% -0.73% 4.41 1.02
- -----------------------------------------------------------------------
1 year 18.02 12.38 17.23 12.23 -- --
- -----------------------------------------------------------------------
5 years 44.99 38.16 -- -- -- --
Annual average 7.71 6.68 -- -- -- --
- -----------------------------------------------------------------------
Life of class 56.10 48.75 11.39 8.42 7.42% 3.98%
Annual average 7.56 6.72 4.64 3.46 -- --
- -----------------------------------------------------------------------
*Commencement of operations
COMPARATIVE RETURNS FOR PERIODS ENDED 11/30/95
Lehman Bros.
Municipal Bond Consumer
Bond Index Price Index
- -----------------------------------------------------------------------
6 months 5.18% 0.92%
- -----------------------------------------------------------------------
1 year 18.90 2.61
- -----------------------------------------------------------------------
5 years 51.82 14.80
Annual average 8.71 2.80
- -----------------------------------------------------------------------
Life of class A 66.37 22.29
Annual average 8.69 3.35
- -----------------------------------------------------------------------
Life of class B 15.66 23.77
Annual average 6.30 3.40
- -----------------------------------------------------------------------
Life of class M 8.66 1.45
- -----------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. 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. POP assumes 4.75% maximum sales charge for class A shares
and 3.25% for class M shares. CDSC for class B shares assumes 5% maximum
contingent deferred sales charge.
TOTAL RETURN FOR PERIODS ENDED 12/31/95
(most recent calendar quarter)
Class A Class B Class M
(10/23/89)* (7/15/93)* (4/3/95)*
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------
1 year 16.18 10.61 15.42 10.42 -- --
- -----------------------------------------------------------------------
5 years 46.21 39.31 -- -- -- --
Annual average 7.89 6.65 -- -- -- --
- -----------------------------------------------------------------------
Life of class 57.68 50.25 12.48 9.49 8.49 5.02
Annual average 7.63 6.80 4.90 3.76 -- --
- -----------------------------------------------------------------------
*Commencement of operations
PRICE AND DISTRIBUTION INFORMATION
6 months ended 11/30/95
Class A Class B Class M
- -----------------------------------------------------------------------
Distributions (number) 6 6 6
- -----------------------------------------------------------------------
Income $.241564 $.213175 $.226288
- -----------------------------------------------------------------------
Capital gains1
- -----------------------------------------------------------------------
Long-term -- -- --
Short-term -- -- --
- -----------------------------------------------------------------------
Total $.241564 $.213175 $.226288
- -----------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------
5/31/95 $8.95 $9.40 $8.92 8.95 9.25
- -----------------------------------------------------------------------
11/30/95 9.11 9.56 9.08 9.11 9.42
- -----------------------------------------------------------------------
Current return
- -----------------------------------------------------------------------
End of period
- -----------------------------------------------------------------------
Current dividend rate2 4.96% 4.72% 4.31% 4.66% 4.50%
- -----------------------------------------------------------------------
Taxable equivalent3 8.97% 8.54% 7.80% 8.43% 8.14%
- -----------------------------------------------------------------------
Current 30-day SEC yield4 4.96 4.72 4.31 4.66 4.50
- -----------------------------------------------------------------------
Taxable equivalent3 8.97 8.54 7.80 8.43 8.14
- -----------------------------------------------------------------------
1 Capital gains 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 maximum combined state and federal tax rates of 44.73%.
Results for investors subject to lower tax rates would not be as
advantageous.
4 Based on investment income, calculated using SEC guidelines.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 4.75% sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
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.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Health Sciences Trust
Investors Fund
Natural Resources Fund*
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund
PUTNAM GROWTH
AND INCOME FUNDS
Convertible Income-Growth Trust
Dividend Growth Fund
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Managed Income Trust
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund
American Government Income Fund
Balanced Government Fund
Corporate Asset Trust
Diversified Income Trust
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Intermediate Tax Exempt Fund
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free funds+
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money across a variety
of stocks, bonds, and money market investments to help maximize your
return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS++
Putnam money market funds:
Money Market Fund(section mark)
Tax Exempt Money Market Fund
California Tax Exempt Money Market Fund
New York Tax Exempt Money Market Fund
CDs and savings accounts**
(bullet) Formerly Energy-Resources Trust.
+ Not available in all states.
++ Relative to above.
(section mark) Formerly Putnam Daily Dividend Trust.
(bullet)(bullet) Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be insured,
up to certain limits, by federal/state agencies. Savings accounts may
also be insured up to certain limits.
Please call your financial advisor or Putnam at 1-800-225-1581
to obtain a prospectus for any Putnam fund. It contains
more complete information, including charges and expenses. Read it
carefully before you invest or send money.
<TABLE>
Portfolio of investments owned
November 30, 1995 (Unaudited)
Key to Abbreviation of Municipal Instruments
IFB -- Inverse Floating Bonds
G.O. Bonds -- General Obligation Bonds
VRDN -- Variable Rate Demand Notes
Key to Abbreviation of Insurers
AMBAC -- American Municipal Bond Assurance Corporation
CGIC -- Capital Guaranty Insurance Company
FGIC -- Federal Guaranty Insurance Corporation
FSA -- Financial Security Assurance
FHA -- Federal Housing Administration Insured
GNMA Coll. -- Government National Mortgage Association Collateralized
MBIA -- Municipal Bond Investors Assurance Corporation
<CAPTION>
MUNICIPAL BONDS AND NOTES (101.4%)*
PRINCIPAL AMOUNT RATINGS** VALUE
Minnesota (95.1%)
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
$2,350,000 Anoka-Hennepin Independent School Dist. Rev.
Bonds (#11 Crossover), Ser. C, FGIC, 5s, 2/1/10 AAA $2,285,375
1,000,000 Bloomington, Independent School Dist. No. 271
Rev. Bonds, 5 1/4s, 2/1/14 AA 983,750
1,250,000 Breckenridge Hlth. Fac. Rev. Bonds (Catholic Hlth.
Corp.), MBIA, 5 1/4s, 11/15/13 AAA 1,217,188
700,000 Breckenridge, Hosp. Fac. Rev. Bonds (Fransiscan
Sisters Hlth. Care), 9 3/8s, 9/1/17 AAA 776,125
500,000 Centennial Indpendent School Dist. No. 012 Rev.
Bonds, Ser. A, FGIC, 7.15s, 2/1/12 AAA 554,375
3,055,000 Dover & Eyota Independent School Dist. (No. 533
Crossover), AMBAC, 5 1/4s, 2/1/20 AAA 2,970,988
1,000,000 Duluth, Gross Rev. Bonds (Duluth Entertainment),
7.6s, 12/1/11 Baa 1,132,500
950,000 Duluth, Hosp. Rev. Bonds (St. Luke's Hosp. Project),
9s, 5/1/18 AAA 1,073,500
300,000 Duluth, Tax Increment Rev. Bonds (Lake Superior
Paper), 4 3/4s, 9/1/10 VMIG1 300,000
500,000 Fergus Falls, Cmnty. Dev. Rev. Bonds (Lincoln -
St. Andrews Assn. Project), 8 3/4s, 11/1/06 BBB/P 515,620
1,700,000 Hutchinson Indl. Dev. Rev. VRDN (Hutchinson
Technical Inc. Project), 2.4s, 6/1/04 AA 1,700,000
1,565,000 Intl. Falls, Env. Fac. Rev. Bonds (Boise Cascade
Corp. Project), 7.2s, 10/1/24 Baa 1,729,325
2,210,000 Jackson Cnty., Hsg. & Redev. Auth. Indl. Dev. Rev.
Bonds (Chemical Equip. Project), 8 3/4s, 12/1/09 BBB/P 2,370,225
5,325,000 Lakeville Independent School Dist. Rev. Bonds
(No. 194 Crossover), Ser. C, MBIA, 5 1/8s, 12/1/09 AAA 5,211,840
MN Agricultural & Econ. Dev. Board Rev. Bonds
(Small Bus. Dev. Loan Program)
575,000 Ser. E-Lot 1, 8 1/2s, 8/1/10 BB/P 606,625
400,000 Ser. A-Lot 2, 8.2s, 8/1/09 BB/P 422,000
MN Pub. Fac. Auth. Wtr. Poll. Control Rev. Bonds
1,500,000 Ser. A, 6.95s, 3/1/13 AAA 1,665,000
3,000,000 Ser. A, 6 1/2s, 3/1/14 AAA 3,277,500
3,000,000 MN State Duluth Arpt. Tax Increment Rev. Bonds,
Ser. A, 6 1/4s, 8/1/14 AA 3,165,000
1,000,000 MN State Higher Ed. Fac. Auth. Mtge. Rev. Bonds
(St. Thomas U.), Ser. 3-C, 7 1/8s, 9/1/14 AAA 1,130,000
1,500,000 MN State Hsg. Fin. Agcy. Dev. Rev. Bonds, Ser. A,
6.95s, 2/1/14 A 1,599,375
MN State Hsg. Fin. Agcy. Single Fam. Mtge. Rev. Bonds
190,000 Ser. C, 8 1/2s, 7/1/19 AA 199,500
350,000 Ser. A, FHA Insd., 7.45s, 7/1/22 AA 376,688
2,000,000 6.8s, 7/1/25 AA 2,150,000
1,800,000 Ser. B-1, 6 3/4s, 1/1/26 AA 1,890,000
1,000,000 Ser. Q, 6.7s, 1/1/17 AA 1,066,250
2,500,000 Ser. Q, 6s, 2/1/22 AAA 2,515,625
1,500,000 Ser. B, 5.65s, 7/1/22 AA 1,426,875
Mahtomedi Indpt. Sch. Dist. No. 832 Rev. Bonds,MBIA
1,275,000 Ser. B, zero %, 2/1/17 AA 398,438
1,575,000 Ser. B, zero %, 2/1/16 AAA 519,750
MN State Higher Edl. Facs Auth. Rev. Bonds
(Macalester College)
1,070,000 Ser. 4-C, 5 1/2s, 3/1/12 AA 1,072,675
1,000,000 Ser. 4-C, 5.2s, 3/1/08 AA 1,006,250
Minneapolis & St. Paul Hsg. & Redev. Auth. Hlth.
Care Syst. Rev. Bonds
2,000,000 (Hlth. One Obligated Group), Ser. A, MBIA,
6 3/4s, 8/15/14 AAA 2,175,000
4,350,000 (Healthspan), Ser. A, AMBAC, 5s, 11/15/13 AAA 4,045,500
4,000,000 (Group Hlth. Plan Inc. Project), 6.9s, 12/1/22 A 4,340,000
4,000,000 (Children's Hlth. Care), Ser. A, CGIC, 5 1/2s,
8/15/25 AAA 3,995,000
2,500,000 Minneapolis Special School Dist. #001 Rev. Bond,
FGIC, 5 3/8s, 2/1/14 AAA 2,496,875
1,105,000 Minneapolis, Cmnty. Dev. Agcy. Supported Dev.
Rev. Bonds (Grace-Lee Products Inc.), Ser. 91-3,
8 1/4s, 12/1/11 BBB 1,229,313
1,090,000 Minneapolis, Coml. Dev. Rev. Bonds (Mt. Sianai
Hosp. Assn. Project), 9 1/2s, 11/1/06 AAA 1,167,009
710,000 Minneapolis-St. Paul, Hsg. Fin. Board Single Fam.
Mtge. Rev. Bond, (Phase VI), Ser. A, GNMA
Coll., 8.3s, 8/1/21 AAA 740,175
810,000 Minneapolis, Hosp. Rev. Bonds (Lifespan Inc.),
Ser. B, 9 1/8s, 12/1/14 AAA 905,175
Morris, Hosp. Fac. Rev. Bonds (Stevens Comnty.
Mem. Hosp.)
500,000 Ser. A, 8 1/4s, 5/1/10 AAA 581,875
250,000 Ser. B, 8 1/4s, 5/1/10 AAA 290,938
North St. Paul Maplewood Independent School
Dist. No. 622 Rev. Bonds, Ser. A, MBIA
2,000,000 7.1s, 2/1/19 AAA 2,275,000
3,000,000 6 7/8s, 2/1/15 AAA 3,375,000
Northern MN Muni. Pwr. Agcy. Elec. Syst. Rev. Bonds
2,000,000 Ser. A, 7 1/4s, 1/1/16 A 2,162,500
2,000,000 Ser. B, AMBAC, 5 1/2s, 1/1/1/8 AAA 2,007,500
1,000,000 Northfield, College Fac. Rev. Bonds (St. Olaf
College Project), 6.4s, 10/1/21 A 1,053,750
2,500,000 Owatonna, Pub. Util. Comm. Pub. Util. Rev. Bonds,
Ser. A, AMBAC, 5.45s, 1/1/16 AAA 2,509,375
1,000,000 Plymouth, Multi-Fam. Hsg. Dev. Rev. Bonds
(Harbor Lane Apt. Project), 5.95s, 9/1/18 AA 998,750
Rochester, Hlth. Care Fac. IFB
3,300,000 (Mayo Foundation), Ser. H, 7.560s, 11/15/15 AA 3,502,125
3,000,000 (Mayo Foundation), Ser. E, 7.724s, 11/15/12 AA 3,206,250
3,000,000 (Olmsted Med. Group), 7 1/2s, 7/1/19 BB/P 3,116,250
2,500,000 SCA Multi-Fam. Mtg. Rev. Bonds
(Burnsville), Ser. A-9, FSA, 7.1s, 1/1/30 AAA 2,746,875
St. Cloud Hosp. Facs. Rev. Bonds, (St. Cloud Hosp.),
Ser. C, AMBAC
3,500,000 5 1/4s, 10/1/13 AAA 3,434,375
2,400,000 6 3/4s, 7/1/11 AAA 2,658,000
2,500,000 Sartell, Poll. Control Rev. Bonds (Champion Intl.
Project), 6.95s, 10/1/12 BBB 2,681,250
Southern MN Muni. Pwr. Agcy. Supply Syst. Rev. Bonds
300,000 Ser. A, 8 1/8s, 1/1/18 AAA 330,000
2,000,000 Ser. B, 5 3/4s, 1/1/11 AAA 2,167,500
11,500,000 Ser. A, MBIA, zero %, 1/1/21 AAA 2,889,375
1,000,000 St. Paul Port. Auth. G.O. Bonds, 5 1/8s, 3/1/24 AA 947,500
2,000,000 St. Paul Hsg. & Redev. Auth. Sales Tax Rev. Bonds
(Civic Ctr. Project), 5.45s, 11/1/13 A 2,012,500
2,350,000 St. Paul Independent School Dist. #625 Rev. Bonds,
Ser. C, 5 1/4s, 2/1/15 AA 2,311,813
2,000,000 St. Paul, Hsg. & Redev. Auth. Hosp. Rev. Bonds
(Healtheast Project), Ser. B, 9 3/4s, 11/1/17 Baa 2,167,500
1,965,000 Spring Lake Park G.O. Bond, 5.25s, 2/1/12 AAA 1,933,324
------------
119,761,734
<CAPTION>
Puerto Rico (6.3%)
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
5,000,000 PR Cmnwlth., Hwy. & Transn. Auth. Rev. Bonds,
5 1/4s, 7/1/21 AAA 4,843,750
3,075,000 PR Cmnwlth. G.O Bonds, MBIA 5 3/8s, 7/1/22 AAA 3,071,156
------------
7,914,906
------------
Total Investments (cost $120,146,912) *** $127,676,640
- -------------------------------------------------------------------------------------
NOTES
- -------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $125,880,481.
** The Moody's or Standard & Poor's ratings indicated are believed to be the most
recent ratings available at November 30, 1995 for the securities listed. Ratings are
generally ascribed to securities at the time of issuance. While that 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 at
November 30, 1995. Securities rated by Putnam are indicated by and are not publicly
rated.
*** The aggregate identified cost for Federal income tax purposes is $120,146,912,
resulting in gross unrealized appreciation and depreciation of $7,727,289 and
$197,561 respectively, or net unrealized appreciation of $7,529,728.
The rates shown on VRDN and IFB, which are securities paying variable interest rates
that vary inversely in the market interest rates, are the current interest rates at
November 30, 1995, which are subject to change based on the terms of the security.
The fund had the following industry group concentrations greater than 10% on November
30, 1995 (based on net assets):
Hospitals/Health Care 21.0%
Housing 12.5
The fund had the following insurance group concentrations greater than 10% on
November 30, 1995 (based on net assets):
MBIA 16.8%
AMBAC 14.0
</TABLE>
<TABLE>
Statement of assets and liabilities
November 30, 1995 (Unaudited)
<CAPTION>
Assets
- ---------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value
(identified cost $120,146,192 (Note 1) $127,676,640
- ---------------------------------------------------------------------------------
Cash 1,884,034
- ---------------------------------------------------------------------------------
Interest receivable 2,212,659
- ---------------------------------------------------------------------------------
Receivable for shares of the fund sold 230,424
- ---------------------------------------------------------------------------------
Total assets 132,003,757
Liabilities
- ---------------------------------------------------------------------------------
Payable for securities purchased 5,514,957
- ---------------------------------------------------------------------------------
Payable for shares of the fund repurchased 90,830
- ---------------------------------------------------------------------------------
Distributions payable to shareholders 259,977
- ---------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 158,967
- ---------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 99
- ---------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,354
- ---------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 50,700
- ---------------------------------------------------------------------------------
Other accrued expenses 46,392
- ---------------------------------------------------------------------------------
Total liabilities 6,123,276
- ---------------------------------------------------------------------------------
Net assets $125,880,481
Represented by
- ---------------------------------------------------------------------------------
Paid-in-capital (Notes 1 and 4) $121,469,040
- ---------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (21,755)
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (Note 1) (3,096,532)
- ---------------------------------------------------------------------------------
Net unrealized appreciation on investments 7,529,728
- ---------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $125,880,481
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($99,311,103 divided by 10,902,160 shares) $9.11
- ---------------------------------------------------------------------------------
Offering price per Class A share (100/95.25 of $9.11) $9.56
- ---------------------------------------------------------------------------------
Net asset value and offering price of class B shares
($26,075,862 divided by 2,871,993 shares) $9.08
- ---------------------------------------------------------------------------------
Net asset value and redemption price of class M shares
($493,516 divided by 54,171 shares) $9.11
- ---------------------------------------------------------------------------------
Offering price per Class M share (100/96.75 of $9.11) $9.42
- ---------------------------------------------------------------------------------
*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.
**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.
+Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended November 30, 1995 (Unaudited)
<S> <C>
Tax exempt interest income $3,791,022
Expenses:
- --------------------------------------------------------------------------------
Compensation of Manager (Note 2) 359,896
- --------------------------------------------------------------------------------
Investor Servicing and custodian fees (Note 2) 89,196
- --------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 5,119
- --------------------------------------------------------------------------------
Reports to shareholders 7,536
- --------------------------------------------------------------------------------
Auditing 15,447
- --------------------------------------------------------------------------------
Legal 13,039
- --------------------------------------------------------------------------------
Postage 8,896
- --------------------------------------------------------------------------------
Registration Fees 8,582
- --------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 97,315
- --------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 96,115
- --------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 461
- --------------------------------------------------------------------------------
Administrative services (Note 2) 4,063
- --------------------------------------------------------------------------------
Other expenses 1,348
- --------------------------------------------------------------------------------
Total expenses 707,013
- --------------------------------------------------------------------------------
Expense reduction (Note 2) (93,998)
- --------------------------------------------------------------------------------
Net expenses 613,015
- --------------------------------------------------------------------------------
Net investment income 3,178,007
- --------------------------------------------------------------------------------
Net realized gain on investments 153,966
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments during the period 2,099,163
- --------------------------------------------------------------------------------
Net gain on investment transactions 2,253,129
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations $5,431,136
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
Statement of changes in net assets
<CAPTION>
Six months ended Year ended
November 30 May 31
1995* 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------
Net investment income $3,178,007 $6,181,597
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions 153,966 (2,755,350)
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 2,099,163 4,773,882
- ------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 5,431,136 8,200,129
- ------------------------------------------------------------------------------------------------
Distributions to shareholders
- ------------------------------------------------------------------------------------------------
From net investment income:
Class A (2,636,686) (5,435,247)
- ------------------------------------------------------------------------------------------------
Class B (541,127) (711,465)
- ------------------------------------------------------------------------------------------------
Class M (4,502)
- ------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 5,514,286 11,603,580
- ------------------------------------------------------------------------------------------------
Total increase in net assets 7,763,107 13,656,997
- ------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------
Beginning of period 118,117,374 104,460,377
- ------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $21,754
and $17,447, respectively) $125,880,481 $118,117,374
- ------------------------------------------------------------------------------------------------
*(Unaudited)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
Financial highlights
(For a share outstanding throughout the period)
<CAPTION>
April 3, 1995
(commencement Six months
Six months ended of operations) to ended Year ended
November 30 May 31 November 30 May 31
---------------------------------------------------------------
1995* 1995 1995* 1995
---------------------------------------------------------------
Class M
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $8.95 $8.77 $8.92 $8.77
- --------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------
Net investment income .21 .08 .21 .45
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .18 .17 .16 .15
- --------------------------------------------------------------------------------------------------------
Total from investment operations .39 .25 .37 .60
- --------------------------------------------------------------------------------------------------------
Less distributions from:
- --------------------------------------------------------------------------------------------------------
Net investments income (a) (.23) (.07) (.21) (.45)
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments
- --------------------------------------------------------------------------------------------------------
Total distributions (.23) (.07) (.21) (.45)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.11 $8.95 $9.08 $8.92
- --------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (b) 4.41(c) 2.89(c) 4.27(c) 7.17
- --------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $494 $1 $26,076 $19,698
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (e) .79(c) .21(c) .86(c) 1.63
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 2.32(c) .93(c) 2.37(c) 5.15
- --------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 30.33(c) 58.18 30.33(c) 58.18
- --------------------------------------------------------------------------------------------------------
<CAPTION>
July 15,1993
(commencement Six months
of operations) to ended
May 31 November 30 Year ended May 31
--------------------------- ------------------------------------------------
1994 1995* 1995 1994 1993 1992 1991
--------------------------- ------------------------------------------------
Class B Class A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.18 $8.95 $8.79 $9.06 $8.74 $8.56 $8.43
- ----------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income .39 .24 .51 .51 .55 .55(a) .59(a)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (.41) .16 .15 (.27) .33 .18 .13
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.02) .40 .66 .24 .88 .73 .72
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
- ----------------------------------------------------------------------------------------------------------------------------
Net investments income (a) (.39) (.24) (.50) (.51) (.56) (.55) (.59)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions (.39) (.24) (.50) (.51) (.56) (.55) (.59)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.77 $9.11 $8.95 $8.79 $9.06 $8.74 $8.56
- ----------------------------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (b) (.32)(c) 4.59(c) 12.58 2.57 10.33 8.86 8.82
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $8,873 $99,311 $98,418 $95,587 $86,611 $59,914 $16,615
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (e) 1.47(c) .53(c) .99 1.03 1.08 .91(a) .66(a)
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 4.23(c) 2.72(c) 5.85 5.6 6.12 6.34(a) 6.84(a)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.19 30.33(c) 58.18 28.19 37.69 38.79(d) 14.85
- ----------------------------------------------------------------------------------------------------------------------------
* Unaudited
(a) Reflects an expense limitation incurred by the fund. As result, net investment income of the fund for the years ended
May 31, 1992 and 1991 reflect expense reductions of approximately $0.02 and $0.07, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Not annualized.
(d) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Minnesota Tax Exempt Income Fund.
(e) The ratio of expenses to average net assets for the period ended November 30, 1995 included amounts paid through expense
offset expense arrangements. Prior period ratios exclude these amounts. (See Note 2.)
</TABLE>
Notes to financial statements
November 30, 1995
Note 1
Significant accounting policies
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 Minnesota personal income tax as the fund's manager, Putnam
Investment Management, Inc. ("Putnam Management"), a wholly-owned
subsidiary of Putnam Investments, Inc. believes is consistent with
preservation of capital by investing primarily in a portfolio of
Minnesota 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 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 policies are in conformity with generally accepted
accounting principles.
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.
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) 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. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation of securities held and excise tax on income and capital
gains.
At November 30, 1995, the fund had a capital loss carryover of
approximately $1,102,000, which may be available to offset realized
gains, if any, will expire on May 31, 2003.
D) Distributions to shareholders Income dividends are recorded daily by
the fund and are distributed monthly. Capital gain distributions if any,
are recorded on the ex-dividend date and paid annually. The amount and
character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles.
E) Amortization of bond premium and discount Any premium resulting from
the purchase of securities in excess of maturity value is amortized on a
yield-to-maturity basis. Discounts on zero-coupon bonds and original
issue, are accreted according to the effective yield method.
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: 0.6% of the
first $500 million of average net assets, 0.5% of the next $500 million,
0.45% of the next $500 million and 0.4% of any amount over $1.5 billion,
subject, to reduction in any year by the amount of certain brokerage
commissions and fees (less expenses) received by affiliates of the
Manager of the fund's portfolio transactions.
The fund reimburses Putnam Management 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.
Trustees of the fund receive an annual Trustee's fee of $690 and an
additional fee for each Trustees' 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.
During the period ended November 30, 1995 the fund adopted a Trustee Fee
Deferral Plan (the "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 the fund
or in other Putnam funds until distribution in accordance with the Plan.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the period ended November 30, 1995, fund expenses were reduced by
$93,998 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 the assets utilized in connection
with the expense offset arrangements in an income producing asset if it
had not entered into such arrangements.
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 at 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 period November 30, 1995, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $12,288 and $71 from the sale of
class A and class M shares, respectively and received $21,653 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 period ended November 30, 1995, Putnam Mutual
Funds Corp., acting as underwriter received no monies on class A
redemptions.
Note 3
Purchases and sales of securities
During the period ended November 30, 1995, purchases and sales of
investment securities other than short-term investments aggregated
$42,261,134 and $35,239,566, 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, 1995, there was an unlimited number of shares of
beneficial interest authorized. Class M shares became effective on April
13, 1995 and 115 shares were sold to Putnam Investments, Inc. for $1000.
Transactions in capital shares were as follows:
Six months ended
November 30, 1995
Class A Shares Amount
- ----------------------------------------------------
Shares sold 509,119 $4,531,277
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
dividends 198,360 1,761,602
- ----------------------------------------------------
707,479 6,292,879
Shares
repurchased (805,223) (7,125,354)
- ----------------------------------------------------
Net decrease (97,744) $(832,475)
- ----------------------------------------------------
Year ended May 31, 1995
Class A Shares Amount
- ----------------------------------------------------
Shares sold 1,196,795 $10,352,416
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
dividends 424,124 3,662,044
- ----------------------------------------------------
1,620,919 14,014,460
Shares
repurchased (1,492,954) (12,756,180)
- ----------------------------------------------------
Net increase 127,965 $1,258,280
- ----------------------------------------------------
Six months ended
November 30, 1995
Class B Shares Amount
- ----------------------------------------------------
Shares sold 753,581 $6,666,708
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
dividends 38,677 342,555
- ----------------------------------------------------
792,258 7,009,263
Shares
repurchased (128,683) (1,140,648)
- ----------------------------------------------------
Net increase 663,575 $5,868,615
- ----------------------------------------------------
Year ended May 31, 1995
Class B Shares Amount
- ----------------------------------------------------
Shares sold 1,302,085 $11,228,705
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
dividends 51,457 442,963
- ----------------------------------------------------
1,353,542 11,671,668
Shares
repurchased (156,444) (1,327,368)
- ----------------------------------------------------
Net increase 1,197,098 $10,344,300
- ----------------------------------------------------
Six months ended
November 30, 1995
Class M Shares Amount
- ----------------------------------------------------
Shares sold 53,777 $475,636
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
dividends 390 3,512
- ----------------------------------------------------
54,167 479,148
Shares
repurchased (111) (1,000)
- ----------------------------------------------------
Net increase 54,056 $478,148
- ----------------------------------------------------
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE.
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past five years. In 1994, over 80,000 tests of 55 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
* HELP YOUR INVESTMENT GROW.
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.*
* SWITCH FUNDS EASILY.
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY.
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative.
* To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number: 1-800-225-
1581.
*Regular investing of course, does not guarantee a profit or
protect against a loss in a declining market.
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
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
James E. Erickson
Vice President
Howard Manning
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Senior Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Minnesota
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.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
principal amount invested.
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The Putnam Funds
One Post Office Square
Boston Massachusetts, 02109
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