Putnam
Pennsylvania
Tax Exempt
Income Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
This is the last letter to you and the other shareholders of Putnam
Pennsylvania Tax Exempt Income Fund that I will be signing. After more
than 30 years as Chairman of the Trustees and President of the Putnam
Funds, the time has come for me to step aside.
In June, John Hill will become Chairman. John is currently an independent
Trustee and has served on the board for the past 14 years. In addition, my
son, George Putnam, III, will take on the role of President. I am
confident that the leadership of the funds will be in exceptionally strong
hands.
I will become Chairman Emeritus, remain a shareholder, and stay in close
touch with the funds. It has been my privilege to serve you.
In one final piece of news, I am pleased to announce the appointment of
Susan A. McCormack as your fund's manager. Before joining Putnam as a
tax-exempt bond analyst in 1994, Susan was with Merrill Lynch. She has 13
years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 19, 2000
Report from the Fund Manager
Susan A. McCormack
Fixed-income investors had a tough time making money in 1999. A strong
U.S. economy and tight labor markets prompted the Federal Reserve Board to
raise interest rates on three occasions, which made the yields on existing
bonds less attractive. Although bond prices suffered and Putnam
Pennsylvania Tax Exempt Income Fund's returns for the six months ended
November 30 reflect this unfavorable environment, we took advantage of
opportunities to boost the fund's yield and position the portfolio for the
next turn in the market. The fund's 30-day SEC yield for class A shares at
NAV increased more than a full percentage point during the period to 4.96%
on November 30, 1999, equivalent to an 8.45% after-tax yield for investors
in Pennsylvania's top tax bracket.
Total return for 6 months ended 11/30/99
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- -------------------------------------------------------------------------
-3.40% -7.94% -3.72% -8.42% -3.54% -6.71%
- -------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
* FUND'S CONSERVATIVE APPROACH HELPS
Your fund's chief investment objective is tax-free income. Where possible,
we also try to achieve the best total return with the least amount of
risk. This conservative approach means we are more likely to outperform in
a down market than to be industry leaders in an up market. Although
performance for this period was negative, the fund's makeup at the start
of the period enabled us to avoid greater losses.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Health care 23.6%
Education 18.1%
Water and
sewer 11.3%
Transportation 10.5%
Utilities 7.2%
Footnote reads:
*Based on net assets as of 11/30/99. Holdings will vary over time.
We began the fiscal year with a healthy amount of money invested in
short-term bonds, those maturing in less than five years. All bonds share
an inverse relationship with interest rates -- that is, their prices tend
to decline as rates rise -- but short-term instruments are generally less
sensitive to rate increases than longer-term bonds. Our roughly 20%
weighting in these short-term investments provided a buffer against some
of the market's selloff. The fund's modest holdings of higher-yielding,
lower-rated bonds also helped. From a credit standpoint, bonds rated below
investment grade are riskier investments. However, when interest rates are
rising these lower-rated bonds tend to be relatively stable as long as
investors are earning premium yields.
* STRATEGY FOCUSED ON HIGHER YIELDS
After nine consecutive years of economic growth, most states in the Union
are running fiscal surpluses, and Pennsylvania is no exception. With tax
revenues high, municipalities have fewer reasons to take on additional
debt, so new bond issuance is down sharply. The dearth of new issues this
year has prompted money managers to look for opportunity in the secondary
market, and the selloff provided plenty of it.
As the period progressed, we pared back our short-term holdings and bought
long-term bonds on weakness. The transfer of assets from short- to
long-term investments helped the fund in two ways. First, we were able to
increase the fund's yield more than a full percentage point without
increasing our exposure to credit risk. Second, by adding bonds with
greater sensitivity to interest rates, we believe the fund is better
positioned for a positive turn in the market.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
Aa/AA -- 4.8%
A -- 4.6%
Baa/BBB -- 32.3%
Ba/BB -- 5.2%
B -- 0.4%
Other -- 1.4%
Aaa/AAA -- 51.3%
Footnote reads:
*As a percentage of market value as of 11/30/99. A bond rated BBB/Baa or
higher is considered investment grade. Percentages may include unrated
bonds considered by Putnam Management to be of comparable quality. Ratings
will vary over time.
Within the municipal market, we also found opportunity in weaker sectors,
including the hospital sector. Hospitals continue to suffer from the
Balanced Budget Act of 1996, which set reimbursement limits for Medicare
patients regardless of cost and effectively capped hospital income.
Hospitals have also been the victims of poor management, acquiring
physician practices and HMOs, for example, that eventually lost far more
money than they earned. Although many hospital issues remained downtrodden
throughout the period, some have begun to shape up. With our staff of
seasoned analysts, we believe we have the ability to pick and choose
successfully in this distressed sector. One opportunity we took advantage
of during the period was a bond for Bloomsberg Hospital, offering a 6%
yield on a depressed price. While this holding and others discussed in
this report were viewed favorably at the end of the period, all are
subject to review and adjustment in accordance with the fund's investment
strategy and may vary in the future.
For the 12 months ended December 31, 1999, the fund's class A share return
ranked in the top third of its peers (20 out of 60 Pennsylvania tax-free
funds), according to Lipper.
Lipper is an industry research firm, whose rankings are based on total return
performance, vary overtime, and do not reflect the effects of sales charges.
The fund's class A shares ranked 20 out of 60 (33rd percentile), 32 out of 50
(63rd percentile), and 4 out of 12 (31st percentile) for l- 5- and 10-year
performance, respectively, as of 12/31/99. Performance of other share classes
will vary. Past performance is not indicative of future results.
Thousands of projects, just two types of bonds
Although municipal bonds are used to finance thousands of different public
projects, from highways to water treatment plants, there are only two basic
types of bonds. The difference is in how each type repays its investors. With
general obligation bonds (GOs), investors receive their interest and principal
from property taxes. The bonds are secured by the ability of the municipality
to raise taxes. Cities and towns usually issue general obligation bonds to
finance schools, parks, or public building projects. Revenue bonds, on the
other hand, are repaid through fees derived from tolls, charges, or rents.
Highways, bridges, and water and sewage treatment plants are typical projects
financed or improved by revenue bond proceeds. Industrial revenue bonds
operate under the same principle but are used to finance projects for
corporations and other private users in cases where a state or local
government thinks the project is good for the community.
Outside the hospital sector, the pickings were slimmer. Our purchases
included two Philadelphia school district bonds bought with the proceeds
from sales of Puerto Rico bonds. Occasionally, we look to Puerto Rico as a
source of portfolio diversification because municipal bonds issued by the
commonwealth offer tax-free yields to U.S. residents. As state issuance
has dropped around the Continental United States, investors have bid up
the prices of Puerto Rico municipal bonds despite a generally higher
degree of credit risk. We sold several Puerto Rico holdings at a premium
during the period, including Puerto Rico Electric and Puerto Rico Highway,
and these sales reduced the fund's overall stake in the island to 3.63% at
the end of November.
* TAX-EFFICIENT INVESTING
One of the byproducts of active portfolio management is the generation of
capital gains distributions. When the fund sells a holding at a profit,
the gain must by law be passed to shareholders unless offset by capital
losses. Unlike income distributions, which are generally tax free, capital
gains are taxable at a 20% rate. Since shareholders in the fund generally
wish to limit the taxes they pay, we try to make our portfolio decisions
tax efficient by either trading less or offsetting capital gains with
losses. During the period just ended, the market afforded us ample
opportunity to make use of tax losses while accomplishing some of our
other objectives. The following is a good example. At the start of the
period, we bought $5 million worth of a Westmoreland County bond earning a
5.32% yield. By the end of the period, the price had declined enough so
that the yield, which moves in the opposite direction, had risen to 6.24%.
Just after the close of the period, we sold the Westmoreland issue at a
loss and purchased Bethlehem Water bonds yielding 6.24% and 6.23% with
maturity dates farther in the future. In short, we used the tax loss to
offset gains in other areas and secured a higher yield for a longer period
of time.
* OPTIMISTIC OUTLOOK FAVORS LONG-TERM BONDS
Our outlook is cautiously optimistic. Municipal bond yields have risen and
the fund is earning more income than just six months ago. Prices are cheap
in our estimation. We have taken advantage of this opportunity by
purchasing longer-term bonds that are more sensitive to changes in
interest rates. If rates change direction and start falling, the fund
should benefit. If rates rise further, we intend to add to our long-term
position. Either way, we believe the fund is well positioned for the
balance of fiscal year 2000.
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 11/30/99, 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 Pennsylvania
Tax Exempt Income Fund is designed for investors seeking high current income
free from federal and state income taxes, consistent with capital preservation.
TOTAL RETURN FOR PERIODS ENDED 11/30/99
Class A Class B Class M
(inception dates) (7/21/89) (7/15/93) (7/3/95)
NAV POP NAV CDSC NAV POP
- ---------------------------------------------------------------------------
6 months -3.40% -7.94% -3.72% -8.42% -3.54% -6.71%
- ---------------------------------------------------------------------------
1 year -3.04 -7.66 -3.57 -8.14 -3.33 -6.52
- ---------------------------------------------------------------------------
5 years 35.63 29.18 31.30 29.30 33.43 29.15
Annual average 6.28 5.25 5.60 5.27 5.94 5.25
- ---------------------------------------------------------------------------
10 years 88.86 79.91 75.04 75.04 81.91 75.99
Annual average 6.56 6.05 5.76 5.76 6.17 5.82
- ---------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/99
Lehman Bros. Municipal Consumer
Bond Index price index
- ---------------------------------------------------------------------------
6 months -1.87% 1.32%
- ---------------------------------------------------------------------------
1 year -1.08 2.68
- ---------------------------------------------------------------------------
5 years 43.85 12.49
Annual average 7.54 2.38
- ---------------------------------------------------------------------------
10 years 97.86 33.76
Annual average 7.06 2.95
- ---------------------------------------------------------------------------
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.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 11/30/99
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------------
Income $0.231849 $0.202928 $0.218697
- ------------------------------------------------------------------------------
Capital gains1 -- -- --
- ------------------------------------------------------------------------------
Total $0.231849 $0.202928 $0.218697
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
5/31/99 $9.12 $9.57 $9.11 $9.12 $9.43
- -----------------------------------------------------------------------------
11/30/99 8.58 9.01 8.57 8.58 8.87
- -----------------------------------------------------------------------------
Current return (end of period)
- -----------------------------------------------------------------------------
Current dividend rate2 5.44% 5.18% 4.80% 5.15% 4.98%
- -----------------------------------------------------------------------------
Taxable equivalent3 9.27 8.82 8.18 8.77 8.48
- -----------------------------------------------------------------------------
Current 30-day SEC yield4 4.96 4.72 4.30 4.66 4.51
- -----------------------------------------------------------------------------
Taxable equivalent3 8.45 8.04 7.32 7.94 7.68
- -----------------------------------------------------------------------------
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 maximum 41.29% combined federal and state 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 12/31/99 (most recent calendar quarter)
Class A Class B Class M
(inception dates) (7/21/89) (7/15/93) (7/3/95)
NAV POP NAV CDSC NAV POP
- --------------------------------------------------------------------------
6 months -3.22% -7.84% -3.54% -8.25% -3.37% -6.50%
- --------------------------------------------------------------------------
1 year -4.23 -8.75 -4.86 -9.40 -4.62 -7.70
- --------------------------------------------------------------------------
5 years 30.87 24.62 26.68 24.72 28.88 24.67
Annual average 5.53 4.50 4.84 4.52 5.20 4.51
- --------------------------------------------------------------------------
10 years 86.24 77.38 72.68 72.68 79.51 73.65
Annual average 6.42 5.90 5.61 5.61 6.03 5.67
- --------------------------------------------------------------------------
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. See first
page of performance section for performance calculation method.
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 4.75% maximum sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's class B CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
Comparative benchmarks
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the
municipal bond market. The index does not take into account brokerage
commissions or other costs, may include bonds different from those in the
fund, and may pose different risks than the fund. Securities in the fund
do not match those in the indexes and performance of the fund will differ.
It is not possible to invest directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
<TABLE>
<CAPTION>
The fund's portfolio
November 30, 1999 (Unaudited)
KEY TO ABBREVIATIONS
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FHA Insd. -- Federal Housing Administration Insured
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 (100.9%) (a)
PRINCIPAL AMOUNT RATING (RAT) VALUE
<S> <C> <C> <C>
Pennsylvania (97.5%)
- --------------------------------------------------------------------------------------------------------------------------
Allegheny Cnty. G.O. Bonds, Ser. C-49 MBIA
$ 1,280,000 5s, 4/1/09 Aaa $ 1,259,200
2,115,000 5s, 4/1/08 Aaa 2,091,206
3,000,000 Allegheny Cnty., Arpt. Rev. Bonds (Pittsburgh
Intl. Arpt.), Ser. A, MBIA, 5 3/4s, 1/1/14 Baa1 3,018,750
5,000,000 Allegheny Cnty., Higher Ed. Bldg. Auth. Rev. Bonds
(Robert Morris College), Ser. A, 6 1/4s, 2/15/26 Baa3 4,900,000
Allegheny Cnty., Hosp. Dev. Auth. Rev. Bonds
2,450,000 (Childrens Hosp.), MBIA, 5 3/8s, 7/1/17 Aaa 2,327,500
3,450,000 (South Hills Hlth.), Ser. A, MBIA, 5 1/8s, 5/1/25 A2 2,850,563
Allegheny Cnty., Indl. Dev. Auth. Rev. Bonds
1,790,000 (Med. Ctr.), FHA Insd., 6 3/4s, 2/1/26 AAA 1,848,175
4,305,000 (Environmental Impt. -- USX Corp.), 6s, 1/15/14 Baa2 4,175,850
4,000,000 (Environmental Impt. -- USX Corp.), Ser. A,
5.6s, 9/1/30 Baa2 3,485,000
Allentown, Hosp. Auth. Rev. Bonds
(Sacred Heart Hosp.), Ser. A
6,650,000 6 3/4s, 11/15/14 Baa2 6,816,250
1,200,000 6 1/2s, 11/15/08 Baa2 1,230,000
1,500,000 Blair Cnty., Hosp. Auth. Rev. Bonds (Altoona Hosp.),
AMBAC, 6 1/2s, 7/1/22 Aaa 1,603,125
660,000 College Township, Indl. Dev. Auth. 1st Mtge. Hlth.
Fac. Rev. Bonds (Nittany Valley Rehab. Hosp.),
7 5/8s, 11/1/07 BBB-/P 691,350
775,000 Columbia Cnty., Hosp. Auth. Healthcare Rev. Bonds
(Bloomsburg Hosp.), 5.9s, 6/1/29 BBB- 671,344
2,500,000 Dauphin Cnty., Gen. Auth. Rev. Bonds
(Office & Pkg.), Ser. A, 6s, 1/15/25 BB-/P 2,278,125
2,300,000 Dauphin Cnty., Gen. Auth. Hosp. Rev. Bonds
(Northwest Med. Ctr.), 8 5/8s, 10/15/13 BBB- 2,587,500
1,000,000 Dauphin Cnty., Indl. Dev. Auth. Wtr. Rev. Bonds
(Dauphin Cons. Wtr. Supply), Ser. A, 6.9s, 6/1/24 A 1,112,500
2,200,000 Delaware Cnty., College Auth. Rev. Bonds
(Neumann College), Ser. A, 5 3/8s, 10/1/26 BBB- 1,897,500
Delaware Cnty., Hosp. Auth. Rev. Bonds
(Crozer-Chester Med. Ctr.)
1,000,000 MBIA, 7 1/2s, 12/15/20 Aaa 1,054,890
1,000,000 6s, 12/15/20 Baa1 922,500
3,235,000 Ser. A, 5.3s, 12/1/27 Baa1 2,616,306
4,000,000 Delaware Cnty., Indl. Dev. Auth. Resource Recvy.
Rev. Bonds, Ser. A, 6.1s, 7/1/13 BB- 3,745,000
3,000,000 Delaware Valley, Regl. Fin. Auth. Local Govt.
Rev. Bonds, Ser. B, AMBAC, 5.7s, 7/1/27 Aaa 2,921,250
4,100,000 Doylestown, Hosp. Auth. Rev. Bonds (Doylestown
Hosp. Pine Run), Ser. A, 7.2s, 7/1/23 AAA/P 4,515,125
Erie, Higher Ed. Bldg. Auth. College Rev. Bonds
2,000,000 (Gannon U.), Ser. D, 5.85s, 6/1/15 Baa2 1,895,000
1,865,000 (Mercyhurst College), Ser. A, 5 3/4s, 3/15/20 BBB 1,736,781
750,000 (Mercyhurst College), Ser. A, 5 3/4s, 3/15/13 BBB 721,875
3,500,000 Erie, Wtr. Auth. Rev. Bonds, 7 1/8s, 12/1/11 (SEG) BBB 3,688,125
Erie-Western PA Port Auth. Rev. Bonds
750,000 8 5/8s, 6/15/10 BBB/P 782,625
915,000 6 7/8s, 6/15/16 BBB/P 951,600
1,365,000 6 1/4s, 6/15/10 BBB/P 1,412,775
2,000,000 Exeter Township, Swr. Auth. Rev. Bonds, MBIA,
6.2s, 7/15/22 Aaa 2,087,500
2,100,000 General Mclane School Dist. G.O. Bonds, FGIC,
5 3/4s, 5/15/17 Aaa 2,207,625
1,200,000 Gettysburg, Muni. Auth. College Rev. Bonds
(Gettysburg College), Ser. B, AMBAC,
4 3/4s, 8/15/18 Aaa 1,035,000
4,150,000 Harrisburg, Auth. Wtr.IFB, FGIC, 7.47s, 6/18/15 Aaa 4,227,813
2,350,000 Hazleton, Hlth. Svcs. Auth. Rev. Bonds
(St. Joseph Med. Ctr.), 6.2s, 7/1/26 BBB+ 2,167,875
5,050,000 Lehigh Cnty., Indl. Dev. Auth. Poll. Control IFB
(PA Pwr. & Lt. Co.), 8.362s, 9/1/29
(acquired 6/20/95, cost $5,572,473) (RES) AAA/P 5,390,875
Lehigh Cnty., Indl. Dev. Auth. Poll. Control Rev. Bonds
3,575,000 (PA Pwr. & Lt. Co.), Ser. B, MBIA, 6.4s, 9/1/29 Aaa 3,695,656
3,000,000 (PA Pwr. & Ltg. Co.), Ser. A, MBIA, 5 1/2s, 2/15/27 Aaa 2,786,250
2,000,000 Luzerne Cnty., Indl. Dev. Auth. Rev. Bonds
(Gas & Wtr. Co.), Ser. B, 7 1/8s, 12/1/22 A 2,120,000
1,345,000 McKeesport, Hosp. Auth. Rev. Bonds, 6 1/4s, 7/1/03 Baa2 1,387,031
2,000,000 Montgomery Cnty., Higher Ed. & Hlth. Auth. Hosp.
IFB (Abington Hosp.), Ser. A, AMBAC,
8.695s, 7/5/11 Aaa 2,160,000
3,000,000 Montgomery Cnty., Higher Ed. & Hlth. Auth. Hosp.
Rev. Bonds (Sacred Heart Hosp. Norristown),
Ser. A, MBIA, 6.8s, 2/1/13 Aaa 3,010,650
3,000,000 New Morgan, Indl. Dev. Auth. Solid Waste Disp.
Rev. Bonds (New Morgan Landfill Co., Inc.),
6 1/2s, 4/1/19 BB- 2,898,750
880,000 Northampton Cnty., Indl. Dev. Auth. Rev. Bonds
(Citizens Util. Co.), 6.95s, 8/1/15 A+ 911,733
2,000,000 Northeastern PA Hosp. & Edl. Auth. College
Rev. Bonds (Kings College), Ser. B, 6s, 7/15/11 BBB 1,995,000
PA Convention Ctr. Auth. Rev. Bonds
1,150,000 MBIA, 6 3/4s, 9/1/19 Aaa 1,250,625
5,000,000 Ser. A, 6 3/4s, 9/1/19 Baa3 5,212,500
3,000,000 PA Econ. Dev. Fin. Auth. Indl. Dev. Rev. Bonds
(GEHL Co. Inc.), 9s, 9/1/10 BBB/P 3,149,970
4,000,000 PA Econ. Dev. Fin. Auth. Rev. Bonds
(MacMillan Ltd. Partnership), 7.6s, 12/1/20 A2 4,600,000
PA G.O. Bonds (Canon McMillan School Dist.)
3,200,000 FGIC, zero %, 12/1/19 AAA 976,000
3,230,000 FGIC, zero %, 12/1/18 AAA 1,053,788
2,000,000 FGIC, zero %, 12/1/17 AAA 700,000
2,600,000 PA Gas Works Rev. Bonds, Ser. 2, FSA,
5 1/2s, 7/1/16 AAA 2,535,000
PA Hsg. Fin. Agcy. Single Fam. Mtge. Rev. Bonds
135,000 Ser. 29, 7 3/8s, 10/1/16 AA+ 135,159
1,150,000 Ser. 33, 6.9s, 4/1/17 AA+ 1,194,563
3,650,000 Ser. 61A, 5 1/2s, 4/1/29 AA+ 3,344,313
2,000,000 PA School Dist. G.O. Bonds, Ser. C, MBIA,
5 1/2s, 3/1/24 Aaa 1,880,000
7,830,000 PA State COP, Ser. A, AMBAC, 5s, 7/1/15 Aaa 7,144,875
PA State Econ. Dev. Fin. Auth. Resource Recvy.
Rev. Bonds
2,490,000 Ser. D, 7.15s, 12/1/18 BBB- 2,611,388
1,000,000 (Colver), Ser. D, 7 1/8s, 12/1/15 BBB- 1,047,500
1,500,000 (Northhampton), Ser. B, 6 3/4s, 1/1/07 BBB-/P 1,548,750
2,300,000 (Northampton Generating), Ser. A, 6.6s, 1/1/19 BBB- 2,337,375
2,000,000 (Northampton Generating), Ser. A, 6 1/2s, 1/1/13 BBB- 2,025,000
PA State Higher Ed. Assistance Agcy. IFB, Ser. B
3,850,000 AMBAC, 8.381s, 3/1/22 Aaa 3,989,563
2,400,000 MBIA, 8.253s, 3/1/20 Aaa 2,766,000
4,450,000 PA State Higher Ed. Assistance Agcy. Student Loan,
Ser. A&B, 7 1/4s, 7/1/18 (acquired various dates
from 1/8/97 to 3/18/98, cost $4,651,703)
(In default) (NON) (RES) CCC 1,468,500
PA State Higher Ed. Fac. Auth. College &
U. Rev. Bonds
2,500,000 (Duquesne U.), Ser. C, MBIA, 6 3/4s, 4/1/20 Aaa 2,581,250
2,600,000 (Allegheny College), Ser. B, 6 1/8s, 11/1/13 BBB+ 2,632,500
PA State Higher Ed. Fac. Auth. Rev. Bonds
3,000,000 (Med. College), Ser. A, 7 3/8s, 3/1/21 AAA 3,165,000
9,500,000 (U. of Pennsylvania), 4 3/4s, 7/15/33 Aa2 7,611,875
PA State, Tpk. Comm. Oil Franchise Tax Rev. Bonds
4,135,000 6.6s, 12/1/10 (acquired 8/7/98, cost $4,561,897) (RES) AAA 4,176,350
3,250,000 Ser. B, AMBAC, 4 3/4s, 12/1/27 Aaa 2,685,313
2,000,000 Philadelphia, G.O. Bonds, FGIC, 4 3/4s, 5/15/20 Aaa 1,710,000
2,220,000 Philadelphia, Auth. For Indl. Dev. Arpt. Rev. Bonds
(Aero Philadelphia LLC), 5 1/2s, 1/1/24 BB/P 1,909,200
Philadelphia, Gas Works Rev. Bonds
1,225,000 Ser. 13, 7.7s, 6/15/21 Aaa 1,309,219
2,550,000 FSA, 6 3/8s, 7/1/26 Aaa 2,610,563
Philadelphia, Hosp. & Higher Ed. Fac. Auth.
Rev. Bonds
500,000 (Graduate Hlth. Syst.), 7s, 7/1/01
(acquired 1/30/98, cost $499,375) (In default) (NON) (RES) B2 165,000
1,315,000 (Graduate Hlth. Syst.), 6 5/8s, 7/1/21
(acquired various dates from 3/18/97 to
1/22/98, cost $1,301,113) (In default) (NON) (RES) B2 433,950
4,600,000 (Jeanes Hlth. Syst.), 6.6s, 7/1/10 BBB+ 4,709,250
5,150,000 Philadelphia, Indl. Dev. Auth. Rev. Bonds
(Gallery II Garage), 6.4s, 2/15/13 BBB-/P 5,137,125
1,000,000 Philadelphia, Muni. Auth. Rev. Bonds, Ser. B, FGIC,
7 1/8s, 11/15/18 Aaa 1,071,250
2,000,000 Philadelphia, School Dist. G.O. Bonds, Ser. A,
AMBAC, 6 1/4s, 9/1/09 Aaa 2,172,500
3,250,000 Philadelphia, Wtr. & Swr. Rev. Bonds, Ser. 16, FSA,
7s, 8/1/21 Aaa 3,453,125
Philadelphia, Wtr. & Wastewtr. Rev. Bonds
3,400,000 MBIA, 6 1/4s, 8/1/09 Aaa 3,689,000
3,000,000 MBIA, 6 1/4s, 8/1/08 Aaa 3,247,500
4,160,000 Pittsburgh, G.O. Bonds, AMBAC, 5 1/2s, 9/1/14 Aaa 4,128,800
1,435,000 Pittsburgh, Urban Redev. Auth. Rev. Bonds, Ser. C,
5.9s, 10/1/22 AAA 1,406,300
2,850,000 Pittsburgh, Wtr. & Swr. Auth. Rev. Bonds, Ser. 415,
9.1s, 9/1/13 (acquired 9/3/98, cost $3,950,727) (RES) Aaa 3,377,250
2,000,000 Pottsville, Hosp. Auth. Rev. Bonds (Pottsville Hosp.
& Warne Clinic), 7 1/4s, 7/1/24 BB/P 2,237,500
1,000,000 Schuylkill Cnty., Redev. Auth. Lease Rev. Bonds,
Ser. A, FGIC, 7 1/8s, 6/1/13 Aaa 1,057,500
3,000,000 Scranton-Lackawanna, Hlth. & Welfare Auth.
Rev. Bonds (Moses Taylor Hosp.), Ser. B,
8 1/2s, 7/1/20 AAA 3,247,500
1,000,000 Smithfield, Swr. Auth. Gtd. Rev. Bonds,
8 5/8s, 1/15/11 AAA/P 1,047,500
2,470,000 Trafford, School Dist. Rev. Bonds, MBIA, 6.6s, 5/1/08 Aaa 2,704,650
400,000 Washington Cnty., Indl. Dev. Auth. 1st Mtge.
Rev. Bonds (AHF/Central States Inc.),
10 1/4s, 11/1/19 B-/P 408,000
5,000,000 Westmoreland Cnty., Muni. Auth. Svc. Rev. Bonds,
Ser. A, MBIA, 8/15/23 AAA 1,200,000
3,000,000 Wilkes-Barre, School Dist. Rev. Bonds, FGIC,
6 3/8s, 4/1/15 Aaa 3,225,000
1,800,000 Wilkins Area, Indl. Dev. Auth. 1st Mtge. Rev. Bonds
(Fairview Extended Care), Ser. A, 10 1/4s, 1/1/21 Aaa 1,961,874
1,030,000 York Cnty., Hosp. Auth. Rev. Bonds (Hlth. Ctr. Village
at Sprenkle Drive), Ser. A, 7 3/4s, 4/1/21 AAA/P 1,122,700
1,330,000 York Cnty., Indl. Dev. Auth. lst Mtge. Hlth. Fac.
Rev. Bonds (Rehabilitation Hosp. of York),
7 1/2s, 9/1/07 BBB-/P 1,388,184
--------------
243,843,145
Puerto Rico (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
2,000,000 Cmnwlth. of PR, Govt. Dev. Bank VRDN, MBIA,
3.4s, 12/1/15 VMIG1 2,000,000
200,000 Cmnwlth. of PR, IFB, MBIA, 8.91s, 7/1/08 AAA 213,250
3,500,000 Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds,
Ser. T, 6 5/8s, 7/1/12 Aaa 3,745,000
2,500,000 Cmnwlth. of PR, Hwy. Auth. Rev. Bonds, Ser. Q,
7 3/4s, 7/1/10 AAA 2,606,350
--------------
8,564,600
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $260,578,850) (b) $ 252,407,745
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $250,189,226.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
November 30, 1999 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, 1999. Securities
rated by Putnam are indicated by "/P" and are not publicly rated.
(b) The aggregate identified cost on a tax basis is $260,578,850, resulting in gross unrealized appreciation and
depreciation of $5,454,847 and $13,625,952 respectively, or net unrealized depreciation of $8,171,105.
(NON) Non-income-producing security.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held
at November 30, 1999 was $15,011,925 or 6.0% 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, 1999.
The rates shown on IFB, which are securities paying interest rates that vary inversely to changes in the market
interest rates, and VRDN's are the current interest rates at November 30, 1999.
The fund had the following industry group concentrations greater than 10% at November 30, 1999 (as a percentage of
net assets):
Health care 23.6%
Education 18.1
Water & sewer 11.3
Transportation 10.5
The fund had the following insurance concentrations greater than 10% at November 30, 1999 (as a percentage of net
assets):
MBIA 18.3%
AMBAC 11.1
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1999 (Unaudited)
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
- -------------------------------------------------------------------------------
Municipal Bond Index
(Long) $7,150,000 $7,289,477 Dec-99 $(139,477)
Municipal Bond Index
(Long) 3,181,125 3,182,539 Mar-00 (1,414)
- -------------------------------------------------------------------------------
$(140,891)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $260,578,850) (Note 1) $252,407,745
- -----------------------------------------------------------------------------------------------
Cash 1,417,116
- -----------------------------------------------------------------------------------------------
Interest and other receivables 4,751,014
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 125,633
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 924,085
- -----------------------------------------------------------------------------------------------
Receivable for variation margin 40,501
- -----------------------------------------------------------------------------------------------
Total assets 259,666,094
Liabilities
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 557,537
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 8,100,580
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 318,478
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 320,073
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 18,529
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 10,720
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,058
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 118,191
- -----------------------------------------------------------------------------------------------
Other accrued expenses 31,702
- -----------------------------------------------------------------------------------------------
Total liabilities 9,476,868
- -----------------------------------------------------------------------------------------------
Net assets $250,189,226
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $261,168,589
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 108,676
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (2,776,043)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (8,311,996)
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $250,189,226
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($159,569,366 divided by 18,607,814 shares) $8.58
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $8.58)* $9.01
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($87,981,617 divided by 10,272,088 shares)+ $8.57
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($2,638,243 divided by 307,423 shares) $8.58
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $8.58)** $8.87
- -----------------------------------------------------------------------------------------------
* 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, 1999 (Unaudited)
<S> <C>
Tax exempt interest income: $ 8,064,460
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 689,084
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 139,723
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 5,821
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,131
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 169,243
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 395,945
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 6,570
- -----------------------------------------------------------------------------------------------
Reports to shareholders 9,889
- -----------------------------------------------------------------------------------------------
Auditing 22,721
- -----------------------------------------------------------------------------------------------
Legal 4,494
- -----------------------------------------------------------------------------------------------
Postage 7,163
- -----------------------------------------------------------------------------------------------
Other 17,595
- -----------------------------------------------------------------------------------------------
Total expenses 1,471,379
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (26,059)
- -----------------------------------------------------------------------------------------------
Net expenses 1,445,320
- -----------------------------------------------------------------------------------------------
Net investment income 6,619,140
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (493,565)
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (528,890)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and
futures contracts during the period (15,309,153)
- -----------------------------------------------------------------------------------------------
Net loss on investments (16,331,608)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (9,712,468)
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
November 30 May 31
1999* 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 6,619,140 $ 13,242,425
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (1,022,455) 457,099
- ---------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (15,309,153) (9,168,628)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (9,712,468) 4,530,896
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (4,452,110) (9,139,589)
- ---------------------------------------------------------------------------------------------------------------
Class B (2,145,559) (4,093,772)
- ---------------------------------------------------------------------------------------------------------------
Class M (65,414) (116,254)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A -- (1,742,908)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (903,508)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (24,458)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (14,572,431) 13,057,811
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (30,947,982) 1,568,218
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 281,137,208 279,568,990
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $108,676 and $152,619 respectively) $250,189,226 $281,137,208
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share November 30
operating performance (Unaudited) Year ended May 31
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value
beginning of period 9.12 9.49 $9.21 $9.08 $9.24
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .23 .46 .49 .50 .51
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.54) (.28) .31 .20 (.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.31) .18 .80 .70 .35
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.46) (.48) (.49) (.51)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.09) (.04) (.08) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.55) (.52) (.57) (.51)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.58 $9.12 $9.49 $9.21 $9.08
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (3.40)* 1.91 8.92 7.94 3.82
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $159,569 $179,327 $187,272 $185,041 $183,117
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .44* .98 .98 .98 .98
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.62* 4.89 5.16 5.39 5.46
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 2.76* 14.28 40.76 38.10 41.40
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year end advanced from February 28 to May 31.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended May 31, 1996 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 A (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
Three months
Per-share ended Year ended
operating performance May 31 February 28
- ---------------------------------------------------------------------------------------------------------------------------------
1995++ 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value
beginning of period $8.98 $9.39
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .13 .53
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .26 (.40)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .39 .13
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.13) (.53)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.13) (.54)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.24 $8.98
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 4.39* 1.60
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $178,785 $171,568
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .21* .92
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.44* 5.94
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 4.15* 26.09
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year end advanced from February 28 to May 31.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended May 31, 1996 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
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share November 30
operating performance (Unaudited) Year ended May 31
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value
beginning of period $9.11 $9.48 $9.20 $9.07 $9.23
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .20 .40 .42 .44 .44
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.54) (.28) .32 .20 (.15)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.34) .12 .74 .64 .29
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.20) (.40) (.42) (.43) (.45)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.09) (.04) (.08) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (.49) (.46) (.51) (.45)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.57 $9.11 $9.48 $9.20 $9.07
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (3.72)* 1.24 8.22 7.24 3.14
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $87,982 $98,447 $90,303 $77,399 $65,669
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .77* 1.63 1.63 1.63 1.62
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.29* 4.24 4.51 4.73 4.78
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 2.76* 14.28 40.76 38.10 41.40
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year end advanced from February 28 to May 31.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended May 31, 1996 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 (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
Three months
Per-share ended Year ended
operating performance May 31 February 28
- ---------------------------------------------------------------------------------------------------------------------------------
1995++ 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value
beginning of period $8.97 $9.38
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .11 .47
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .27 (.40)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .38 .07
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.12) (.47)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.12) (.48)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.23 $8.97
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 4.23* 0.93
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $44,252 $36,670
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .38* 1.57
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.26* 5.23
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 4.15* 26.09
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year end advanced from February 28 to May 31.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended May 31, 1996 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
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share November 30 July 3, 1995+
operating performance (Unaudited) Year ended May 31 to May 31
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value
beginning of period $9.12 $9.49 $9.22 $9.09 $9.10
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .22 .43 .46 .47 .44
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.54) (.28) .30 .21 (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.32) .15 .76 .68 .43
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.22) (.43) (.45) (.47) (.44)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.09) (.04) (.08) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.22) (.52) (.49) (.55) (.44)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.58 $9.12 $9.49 $9.22 $9.09
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (3.54)* 1.60 8.47 7.61 4.70*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,638 $3,363 $1,994 $660 $337
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .59* 1.28 1.28 1.28 1.13*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.47* 4.59 4.85 5.04 4.49*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 2.76* 14.28 40.76 38.10 41.40
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year end advanced from February 28 to May 31.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended May 31, 1996 and thereafter, includes amounts paid through
expense offset arrangements. Prior period ratios exclude these amounts (Note 2).
</TABLE>
Notes to financial statements
November 30, 1999 (Unaudited)
Note 1
Significant accounting policies
Putnam Pennsylvania 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 Pennsylvania 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 Pennsylvania tax-exempt securities.
The fund offers class A, class B and class M shares. Class A shares are
sold with a maximum front-end sales charge of 4.75%. Class B shares, which
convert to class A shares after approximately eight years, do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than
class A shares, and are subject to a contingent deferred sales charge, if
those shares are redeemed within six years of purchase. Class M shares are
sold with a maximum front-end sales charge of 3.25% and pay an ongoing
distribution fee that is higher than class A but lower than class B
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
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
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. Restricted
securities are stated at fair value following procedures approved by the
Trustees. 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). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis.
C) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on securities
it owns or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of
the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to
perform. When the contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices supplied
by dealers.
D) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended November 30, 1999, 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 paid monthly.Capital gain distributions, if any, are
recorded on the ex-dividend date and paid at least annually. The amount
and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations.
G) Amortization of bond premium and accretion of bond discount 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 discount 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, 0.340% of the next $5 billion, and
0.330% thereafter. On June 4, 1999, the trustees approved a management fee
schedule which became effective on July 1, 1999, based upon the lesser of
(I) an annual rate of 0.50% of the average net asset value of the fund or
(ii) the initial tiers mentioned above.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended November 30, 1999, fund expenses were reduced by
$26,059 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 $557 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. 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
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 a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and meeting
fees for the three years preceding retirement. Pension expense for the
fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing
shares of the fund. The Plans provide for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the
average net assets attributable to class A, class B and class M shares,
respectively. The Trustees currently limit payment by the fund to an
annual rate of 0.20%, 0.85% and 0.50% of the average net assets
attributable to class A, class B and class M shares respectively.
For the six months ended November 30, 1999, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $9,969 and $187 from the
sale of class A and class M shares, respectively and $134,889 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the six months ended November 30, 1999, Putnam Mutual
Funds Corp., acting as underwriter received no monies on class A
redemptions.
Note 3
Purchase and sales of securities
During the six months ended November 30, 1999, purchases and sales of
investment securities other than short-term investments aggregated
$7,263,824 and $19,024,327, respectively. There were no purchases and
sales of U.S. government obligations.
Note 4
Capital shares
At November 30, 1999, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended November 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,162,388 $ 10,208,185
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 293,363 2,567,491
- -----------------------------------------------------------------------------
1,455,751 12,775,676
Shares
repurchased (2,516,988) (22,076,767)
- -----------------------------------------------------------------------------
Net decrease (1,061,237) $ (9,301,091)
- -----------------------------------------------------------------------------
Year ended May 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,873,907 $26,965,937
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 685,831 6,400,031
- -----------------------------------------------------------------------------
3,559,738 33,365,968
Shares
repurchased (3,616,548) (33,827,464)
- -----------------------------------------------------------------------------
Net decrease (56,810) $ (461,496)
- -----------------------------------------------------------------------------
Six months ended November 30, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 596,007 $ 5,239,653
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 150,375 1,314,182
- -----------------------------------------------------------------------------
746,382 6,553,835
Shares
repurchased (1,285,143) (11,266,299)
- -----------------------------------------------------------------------------
Net decrease (538,761) $(4,712,464)
- -----------------------------------------------------------------------------
Year ended May 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,135,123 $19,982,461
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 335,184 3,123,172
- -----------------------------------------------------------------------------
2,470,307 23,105,633
Shares
repurchased (1,184,516) (11,065,780)
- -----------------------------------------------------------------------------
Net increase 1,285,791 $12,039,853
- -----------------------------------------------------------------------------
Six months ended November 30, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 79,309 $ 697,485
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,058 44,102
- -----------------------------------------------------------------------------
84,367 741,587
Shares
repurchased (145,657) (1,300,463)
- -----------------------------------------------------------------------------
Net decrease (61,290) $(558,876)
- -----------------------------------------------------------------------------
Year ended May 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 171,232 $1,597,191
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 10,853 101,148
- -----------------------------------------------------------------------------
182,085 1,698,339
Shares
repurchased (23,439) (218,885)
- -----------------------------------------------------------------------------
Net increase 158,646 $1,479,454
- -----------------------------------------------------------------------------
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investments has won the DALBAR Service Award 8 times in the past 9
years. In 1997 and 1998, Putnam was the only company to win all three
DALBAR awards: for service to investors, to financial advisors, and to
variable annuity contract holders.*
* HELP YOUR INVESTMENTS 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
Within the same class of shares, you can move money from one account to
another 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 learn more about Putnam, visit our Web site.
www.putnaminv.com
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
* DALBAR, Inc., an independent research firm, presents the awards to financial
services firms that provide consistently excellent service.
+ Regular investing, of course, does not guarantee a profit or protect against
a loss in a declining market.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds. 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. Please read it carefully before you invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]**
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
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
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
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
Susan McCormack
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Pennsylvania
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: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA054-57655 047/226/2AE 1/00
