<PAGE> 1
Putnam
Ohio
Tax Exempt
Income Fund II
Annual Report
May 31, 1994
BOSTON * LONDON * TOKOYO
<PAGE> 2
Performance highlights
Morningstar awarded the fund its (****) rating as of May 31,
1994, among funds with similar investment objectives.*
Performance should always be considered in light of a fund's
investment strategy. Putnam Ohio Tax Exempt Income Fund II is
designed for investors seeking a high level of current income free
from federal and state income tax consistent with preservation of capital.
<TABLE>
<CAPTION>
FISCAL 1994 results at a glance
Class A Class B(1)
NAV POP NAV CDSC
<S> <C> <C> <C> <C>
12 months ended 5/31/94
Total return:
(change in value during period
plus reinvested earnings) 1.88% -2.95% -0.79% -5.48%
Current return:
(end of period:) NAV POP NAV
Current dividend rate(2) 5.87% 5.59% 5.25%
Taxable equivalent(3) 10.51 10.01 9.52
Current 30-day SEC yield(4) 4.96 4.73 4.27
Taxable equivalent(3) 8.88 8.47 7.64
Share value: NAV POP NAV
5/31/93 $9.26 $9.72 $ --
7/15/93 (Inception of class B shares) 9.37
5/31/94 8.80 9.24 8.79
Capital gains(4)
Short- Long-
Distributions: No. Income term term Total
Class A 13 $0.52268 $0.065 $0.056 $0.64368
Class B(1) 11 0.396399 0.065 0.056 0.517399
</TABLE>
Performance data represent past results and will differ for each share class.
For performance over longer periods, see pages 8 and 9. POP assumes 4.75%
maximum sales charge. CDSC assumes 5% maximum contingent deferred sales charge.
(1) Inception date of class B shares is 7/15/93. (2) Income portion of most
recent distribution, annualized and divided by NAV or POP at end of period. (3)
Assumes maximum combined 44.13% federal and state tax rate. Results for
investors subject to lower tax rates would not be as advantageous. For some
investors, investment income may also be subject to the federal Alternative
Minimum Tax. (4) Based only on investment income, calculated using SEC
guidelines. Capital gains are taxable. Investment income may be subject to
state and local taxes.
*Morningstar, an independent research firm, rates a fund in relation to funds
with similar investment objectives based on risk-adjusted 3- , 5- , and 10-
year annual returns, as applicable, adjusted for sales charges. The highest
rating is five stars. Ratings are updated every two weeks.
2
<PAGE> 3
From the Chairman
Dear Shareholder:
The Federal Reserve Board's primary concern remains fighting not only inflation
but the fear of inflation. It is addressing this issue by gradually raising the
short-term interest rates under its control to slow the economy's growth to
what it regards as a sustainable pace.
The combination of the Fed's continuing policy and the response by individuals
and businesses to last year's tax increase could produce more of a slowdown in
business than many observers now expect.
As this slowing becomes more obvious, the Fed will come under growing pressure
from politicians to ease up. The Fed is not likely to yield. But the very fact
that investors think it might could cause some more volatility in the bond
markets in the months ahead.
Meanwhile, you can take comfort in the tax shelter provided for the income
generated by your Putnam tax-exempt fund shares. In the following report, Fund
Manager Thomas Goggins explains how he is positioning your fund's portfolio to
respond to 1994's unfolding events.
Respectfully yours,
George Putnam
Chairman of the Trustees
July 20, 1994
3
<PAGE> 4
Report from the fund manager
Thomas C. Goggins
Putnam Ohio Tax Exempt Income Fund II, like many fixed-income
investments, felt the effects of the sudden downturn in the bond market when
the Federal Reserve Board raised short-term interest rates in February and
later this spring. For the 12 months ended May 31, 1994, the fund's class A
shares provided a total return of 1.88% at net asset value and -2.95% at public
offering price.
RISING RATES IMPACT MARKET
Responding to what was perceived as unexpectedly strong economic growth, the
Fed raised short-term interest rates four times between February and May.
Because the board anticipated that too rapid economic growth could spur
inflation, it responded by tightening the money supply. The higher rates,
intended to curb inflation, affected the entire securities market and
prompted a widespread sell-off.
Market moves like the one we have recently experienced cannot be ignored, of
course. Insofar as possible, however, we try to anticipate them and take
appropriate defensive action when justified. But in general we tend to hold a
longer view of your fund, one that considers underlying economic fundamentals,
which do not necessarily drive short-term market trends. We also believe that
every market, whether rising or declining, has the potential to create
opportunities for your fund.
A positive outgrowth of the recent interest rate increases is that municipal
bonds, in our opinion, are now undervalued. Whenever rates rise, the value of
existing bonds falls; ironically, the very people who are most eager to
preserve bond prices often contribute indirectly to their further decline.
Although your fund did not experience heavy redemptions, many no-load fund
shareholders redeemed heavily. As these funds' managers sold bonds to meet
liquidation requests, prices fell even more and there were more bonds being
sold than requests to buy.
4
<PAGE> 5
CALL PROTECTION KEY TO CURRENT STRATEGY
Bonds are often called - redeemed prior to maturity - when current interest
rates are lower than the prevailing rate when the bonds were issued. Having a
higher-yielding security called away forces the investor to reinvest at the
current lower rates. In the past six months, we have been buying bonds with
longer call dates, lengthening the time before their issuers have an
opportunity to redeem them. This should help keep the fund's income stream
relatively stable.
We strive to minimize the fund's call risk as an ongoing part of our strategy.
Currently, we are doing this by purchasing bonds with the first call dates that
extend beyond the year 2000. Despite the recent rise in interest rates,
reinvestment risk is still substantial, since many of the bonds now being
called were issued during the 1980s when rates were far higher. Bonds with
longer call dates should provide optimum yield and total return for your fund.
MUNICIPAL BOND DEMAND SHOULD OUTPACE SUPPLY
Another side of the municipal bond story is the supply and demand relationship
affecting these securities. While we don't expect any decline in the demand for
tax exempt securities, we do anticipate a fairly dramatic decrease in the issue
of new municipal bonds over the next several months.
<TABLE>
<CAPTION>
TOP INDUSTRY SECTORS*
<S> <C>
Hospitals/Health Care Industry 15.9%
Utilities Industry 13.6%
Housing Industry 13.3%
Water and Sewer Industry 9.9%
</TABLE>
*Based on net assets on 5/31/94.
5
<PAGE> 6
Last year, roughly $290 billion in municipal bonds were issued. Of this total,
$170 billion represented refinancing of existing issues. Just as homeowners
aren't eager to refinance their mortgages in a rising interest environment,
bond issuers are now much less willing to refinance their old debt.
Consequently, we believe new bond issuances will be in the $150 billion-$200
billion range in 1994.
In a climate of rising interest rates, we expect this smaller supply to keep
municipal bond prices from falling as quickly as those of taxable issues. It
may also lead to a narrowing of the spread between tax-exempt and taxable
securities. Of course, there can be no guarantee that this will happen.
OUTLOOK: OHIO ECONOMY STRENGTHENING
Ohio continues to offer strong economic opportunities. Our credit research has
shown that Cleveland Public Power bonds have the potential to provide an
attractive and consistent stream of income. This low-cost energy provider is
well positioned in the marketplace. Another opportunity in the Cleveland area
is the Cleveland Gateway Center. The center is the new home for the Cleveland
Indians baseball team and is part of a major revitalization project in the
downtown Cleveland area.
We will continue to position the fund's portfolio to take advantage of
the strengthening Ohio economy. We are maintaining our positive outlook for the
municipal bond market as a whole, although we remain cautious in the near term.
6
<PAGE> 7
<TABLE>
<CAPTION>
TOP 10 HOLDINGS as of 5/31/94
Name of Security Value % of net
assets
<S> <C> <C>
OH Hsg. Fin. Agcy.
Single Fam. Mtge. RIBS, 19,324,877 9.11
Cmnwlth. of Puerto Rico,
G.O. Bonds 12,207,000 5.76
OH State Wtr. Dev. Auth. Poll.
Control Facs. Rev. Bonds 9,349,438 4.41
Cleveland, Pkg. Facs. Rev. Bonds 7,953,125 3.75
OH Air Quality Dev. Auth. Poll.
Control Rev. Bonds 7,876,251 3.72
Cleveland, RIBS, G.O. Bonds 7,286,025 3.44
Cleveland, Pub. Pwr. Syst. Impt.
1st Mtge. Rev. Bonds, 6,605,875 3.11
Columbus, G.O. Bonds, 5,800,276 2.73
OH Higher Ed. Fac. Rev. Bonds 5,472,188 2.58
OH State G.O. Bonds 5,395,875 2.54
$87,270,930 41.14%
</TABLE>
These holdings represent 41.1% of the fund's assets and are
subject to change.
Despite the market's reaction - or overreaction - to the Fed's increase in
short-term interest rates, inflation is still quite low and there seems to be
no real sign that it is rising. Once the market recognizes this, we believe it
will stabilize and focus once again on the strong fundamentals that make
municipal bonds such an attractive long-term investment for tax-conscious
investors.
7
<PAGE> 8
Performance summary
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 back into the fund. We show total return in two ways: On a
cumulative long-term basis and how the fund might have grown each year, on
average, over varying periods. For comparative purposes, we show how the fund
performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDINGS 5/31/94
<TABLE>
<CAPTION>
Lehman Bros.
Class A Class B Municipal
NAV POP NAV CDSC Bond Index CPI
<S> <C> <C> <C> <C> <C> <C>
1 year 1.88% -2.95% -- -- 2.47% 2.29%
3 years 25.04 19.06 -- 25.99 8.78
Annual average 7.73 5.99 -- -- 8.01 2.84
Life of class A 40.48 33.87 -- -- 44.97 17.44
Annual average 7.65 6.53 -- -- 8.39 3.55
Life of class B
(since 7/15/93) -- -- -0.79% -5.48 0.78 2.15
</TABLE>
TOTAL RETURN FOR PERIODS ENDING 6/30/94
(most recent calendar quarter)
<TABLE>
<CAPTION>
Class A Class B
NAV POP NAV CDSC
<S> <C> <C> <C> <C>
1 year -0.40% -5.17% -- --
3 years 24.04 18.20 -- --
Annual average 7.44 5.73 -- --
Life of class A 39.32 32.75 -- --
Annual average 7.33 6.23 -- --
Life of class B -- -1.63% -6.27%
</TABLE>
Performance data represent past results. Investment returns and principal value
will fluctuate so an investor's shares, when sold, may be worth more or less
than their original cost. Fund performance data do not take into account any
adjustment for taxes payable on reinvested distributions or, for class A
shares, distribution fees prior to implementation of the class A distribution
plan in 1990. Effective July 15, 1993, the fund began offering class B shares.
Performance for each share class will differ.
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.
Consumer Price Index is a commonly used measure of inflation. Does not
represent an investment return.
8
<PAGE> 9
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 10/23/89
Putnam Ohio Tax Exempt Income II
Cost of Living Index
Lehman Bros Municipal Bond Index
[LINE GRAPH]
<TABLE>
<CAPTION>
LEHMAN BROS. CONSUMER
DATE/YEAR FUND AT POP MUNI BOND INDEX PRICE INDEX
<S> <C> <C> <C>
10/23/89 9525 10000 10000
5/31/90 9814 10453 10287
5/31/91 10706 11506 10796
5/31/92 11739 12636 11123
5/31/93 13141 14148 11481
5/31/94 13387 14497 11744
</TABLE>
Past performance is no assurance of future results. A $10,000 investment in the
fund's class B shares at inception (July 15, 1993) would have been valued at
$9,921 by May 31, 1994. ($9,452 with a redemption at the end of the period.)
TERMS AND DEFINITIONS
Class A fund shares are generally subject to an initial sales charge.
Class B fund shares may be subject to a sales charge on redemption.
Net asset value (NAV) is the value of all fund assets, minus liabilities,
divided by the number of outstanding shares. It does not include any initial or
contingent deferred sales charges.
Public offering price (POP) is the price of a 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.
Contingent deferred sales charge (CDSC) is applied on redemption of fund
shares. 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.
9
<PAGE> 10
The Putnam Fund Selector(TM)
The Putnam Fund Selector shows the many opportunities for investors within
every investment strategy. All investors should first accumulate a base of
conservative, cash-equivalent investments. Then, with the help of your
investment advisor, diversify your portfolio by investing in the Putnam Family
of Funds.
PUTNAM GROWTH FUNDS
PUTNAM GROWTH [GRAPH]
AND INCOME FUNDS
PUTNAM INCOME OR TAX-FREE FUNDS
MOST CONSERVATIVE INVESTMENTS
10
<PAGE> 11
PUTNAM GROWTH FUNDS
Asia Pacific Growth 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 income 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 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
Daily Dividend Trust
Tax Exempt Money Market Fund
CDs and savings accounts++
*Not available in all states.
+Relative to above.
++ 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 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.
11
<PAGE> 12
Report of independent accountants
For the fiscal year ended May 31, 1994
To the Trustees and Shareholders of Putnam Ohio Tax Exempt Income Fund II
We have audited the accompanying statement of assets and liabilities of Putnam
Ohio Tax Exempt Income Fund II, including the portfolio of investments owned,
as of May 31, 1994, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the "Financial Highlights" for each of the four years in
the period then ended and for the period October 23, 1989 (commencement of
operations) to May 31, 1990 for Class A shares and for the period July 15, 1993
(commencement of operations) to May 31, 1994 for Class B shares. These
financial statements and "Financial Highlights" are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and "Financial Highlights" based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and "Financial
Highlights" are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and "Financial Highlights" referred to
above present fairly, in all material respects, the financial position of
Putnam Ohio Tax Exempt Income Fund II as of May 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the "Financial Highlights" for each
of the four years in the period then ended and for the period October 23, 1989
(commencement of operations) to May 31, 1990 for Class A shares and for the
period July 15, 1993 (commencement of operations) to May 31, 1994 for Class B
shares, in conformity with generally accepted accounting principles.
Coopers & Lybrand
Boston, Massachusetts
July 13, 1994
12
<PAGE> 13
Portfolio of investments owned
May 31, 1994
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (98.2%) (a)
PRINCIPAL AMOUNT RATINGS (b) VALUE
Ohio (85.7%)
__________________________________________________________________________________________________
<S> <C> <C> <C>
$ 100,000 Akron-Wilbeth, Hsg. Dev. Corp.
1st Mtge. Rev. Bonds
Federal Housing Administration (FHA) Insd., 7.9s,
8/1/03 A $ 116,750
5,000,000 Alliance, Wtr. Works Rev. Bonds
Federal Guaranty Insurance Co. (FGIC),
6.65s, 10/15/17 AAA 5,275,000
2,150,000 Bedford, Hosp. Impt., Rev. Bonds
(Bedford Cmnty. Hosp. Inc.), 8 1/2s, 5/15/09 BB/P 2,268,250
1,500,000 Clermont Cnty., Hosp. Facs.,
Residual Interest Bonds
(RIBS) American Municipal Bond Assurance
Corporation (AMBAC), 10.091s, 9/1/21 AAA 1,646,250
Cleveland, City School Dist. Bonds
General Obligation (G.O.)
900,000 9s, 12/1/08 Aaa 1,059,750
2,500,000 8 1/4s, 12/1/08 Aaa 2,996,875
1,000,000 AMBAC, 7.35s, 12/1/08 AAA 1,113,750
4,870,000 Cleveland, G.O. Bonds
Ser. B, AMBAC, 6 3/4s, 10/1/08 AAA 5,393,525
Cleveland, Parking Facs. Impt. Rev. Bonds
5,000,000 8.1s, 9/15/22 BBB/P 5,312,500
2,500,000 8s, 9/15/12 BBB/P 2,640,625
Cleveland, Pub. Pwr. Syst. Impt. 1st Mtge.
Rev. Bonds
1,900,000 8 3/8s, 8/1/17 AAA 2,132,750
4,250,000 7s, 11/15/17 BBB 4,473,125
2,000,000 Cleveland, RIBS, G.O. Bonds
Ser. 9A, AMBAC, 6.397s, 9/1/04
(acquired 4/30/93, cost $1,985,480)(c) AAA 1,892,500
Cleveland, Urban Renewal Increment
Rev. Bonds (Rock & Roll Hall of Fame Project)
1,650,000 6 3/4s, 3/15/18 BBB/P 1,594,312
2,000,000 6 5/8s, 3/15/11 BBB/P 1,927,500
Cleveland, Waterworks 1st Mtge. Rev. Bonds
2,000,000 Ser. F-92A, AMBAC, 6 1/2s, 1/1/21 AAA 2,175,000
3,000,000 Ser. G, MBIA, 5 1/2s, 1/1/21 AAA 2,775,000
1,000,000 Clyde, Elec. Syst. Mtge. Rev. Bonds
Ser. B, 8 3/8s, 11/15/14 BB/P 1,033,750
Columbus, G.O. Bonds
1,000,000 Ser. B, 6 1/2s, 1/1/10 AA 1,053,750
1,770,000 Ser. 2 5 1/2s, 5/15/15 AA 1,652,737
3,165,000 Ser. 2, 5 1/2s, 5/15/08 AA 3,093,787
1,750,000 Columbus, Swr. Rev. Bonds
6 1/4s, 6/1/08 AA 1,824,375
2,000,000 Cuyahoga Cnty., Hosp. Impt. Rev. Bonds
(Univ. Hosp. Hlth. Project), 6s, 1/15/22 AA 1,935,000
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS (b) VALUE
Ohio (continued)
_____________________________________________________________________________________________________
<S> <C> <C> <C>
$ 275,000 Dayton, Arpt. Rev. Bonds
(James M. Cox Intl. Arpt.), AMBAC,
8 1/4s, 1/1/16 AAA $ 296,312
2,200,000 Erie Cnty., Hosp. Impt. Rev. Bonds
(Firelands Cmnty. Hosp.), 8 7/8s, 1/1/15 AAA 2,442,000
1,300,000 Franklin Cnty., Convention Facs.
Auth. Tax & Lease
Revenue Anticipation Bonds
Municipal Bond Insurance Assn.
(MBIA), 7s, 12/1/19 AAA 1,454,375
Franklin Cnty., Rev. Bonds (Online Computer
Library Ctr.)
1,250,000 9 3/4s, 7/15/09 BBB/P 1,320,312
2,500,000 6s, 4/15/09 BBB/P 2,406,250
700,000 Gateway Econ. Dev. Corp. Excise
Tax Rev. Bonds 7 1/2s, 9/1/05 A 776,125
3,850,000 Geauga Cnty., Hosp. Impt. Rev. Bonds
(Geauga Hosp. Assn. Project), 8 3/4s, 11/15/13 BBB 4,090,625
Granville, School Dist. G.O. Bonds
1,100,000 AMBAC, zero %, 12/1/15 AAA 286,000
1,375,000 AMBAC, zero %, 12/1/13 AAA 409,062
1,380,000 AMBAC, zero %, 12/1/11 AAA 464,025
Hamilton, Elec. Syst. Mtge. Rev. Bonds
700,000 Ser. B, FGIC, 8s, 10/15/22 AAA 794,500
2,600,000 Ser. B, FGIC, 7 1/4s, 10/15/23 AAA 2,837,250
1,000,000 Hubbard, Swr. Syst. Mtge. Rev. Bonds
8.8s, 11/15/17 BBB/P 1,111,250
1,320,000 Kirtland, G.O. Bonds
AMBAC, 7 1/2s, 12/1/16 AAA 1,496,550
375,780 Lake Cnty., Ind. Dev. Rev. Bonds
(Madison Inn Hlth. Ctr. Project), FHA Insd.,
12s, 5/1/14 BBB/P 393,083
1,000,000 Lakota Local School Dist., Rev. Bonds
AMBAC, 7s, 12/1/10 AAA 1,128,750
866,845 Logan Cnty., Indl. Dev. Rev. Bonds
(Indian Lake Hlth. Project), FHA Insd.,
12s, 3/15/14 BBB/P 990,313
Lorain Cnty., Fac. Rev. Bonds
(Laurel Lake Project)
1,500,000 7.3s, 12/15/14 BB/P 1,426,875
1,750,000 7 1/8s, 12/15/18 BB/P 1,612,187
2,100,000 Lucas Cnty. Hosp. Rev. Bonds
(Toledo Hosp. Impt.), MBIA, 5 1/4s, 11/15/15 AAA 1,863,750
18,000,000 Lucas Plaza Hsg. Dev. Corp. Mtge.
Rev. Bonds, FHA Insd., zero %, 6/1/24 AAA 2,160,000
Marion Cnty., Hlth. Care Fac. Rev. Bonds
(United Church Homes Project)
460,000 8 7/8s, 12/1/12 BBB/P 552,000
3,000,000 6 3/8s, 11/15/10 BBB 2,797,500
2,000,000 6.3s, 11/15/15 BBB 1,810,000
1,755,000 Massillon City School Dist.,
AMBAC, zero %, 12/1/10 AAA 642,768
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS (b) VALUE
Ohio (continued)
_______________________________________________________________________________________________________
<S> <C> <C> <C> <C>
$ 875,000 Montgomery Cnty., Hlth. Care Facs.
Rev. Bonds (Friendship Village of Dayton),
Ser. A, 9 1/4s, 2/1/16 BB/P $ 929,687
1,895,000 Montgomery Conifers, Hsg. Dev. Corp.
Mtge. Rev. Bonds (Conifers Project),
FHA Insd., 8.45s, 6/1/28 A 1,987,381
2,800,000 Mount Vernon, Hosp. Rev. Bonds
(Knox Cmnty. Hosp.), 7 7/8s, 6/1/12 BB/P 2,989,000
1,250,000 Northeast Regl. Swr. Dist. Wastewater
Impt. Rev. Bonds AMBAC, 6 1/2s, 11/15/16 AAA 1,331,250
835,000 Northwestern Local School Dist.
(Wayne & Ashland Cntys. School Impt.),
FGIC, 7.2s, 12/1/10 AAA 947,725
1,000,000 Northwood Local School Dist.
AMBAC, 6.2s, 12/1/13 AAA 1,003,750
OH Air Quality Dev. Auth. Poll.
Control Rev. Bonds
4,125,000 (Cincinnati Gas & Elec.), 10 1/8s, 12/1/15 BBB 4,527,188
250,000 (Toledo Edison), Ser. B, 8s, 5/15/19 Baa 270,313
3,000,000 (PA Pwr. Co.), Ser. A, AMBAC, 6.45s, 5/1/27 AAA 3,078,750
3,000,000 OH Cap. Hsg. Corp. Multi-Fam. Rev. Bonds
Ser. A, Federal National Mortgage Assn.
(FNMA), 7.6s, 11/1/23 AAA 3,138,750
OH Econ. Dev. Rev. Bonds
1,615,000 (Sponge, Inc. Project), Ser. 5-A, 8 3/8s, 6/1/14 A 1,782,556
710,000 (Superior Forge & Steel Corp.),
Ser. 3, 7 5/8s, 6/1/11 A 765,025
OH Higher Ed. Fac. Rev. Bonds
(Case Western Reserve Univ.)
750,000 6 1/2s, 10/1/20 AA 797,813
4,500,000 6 1/4s, 10/1/18 AA 4,674,375
6,950,000 OH Hsg. Fin. Agcy. Single Fam. Mtge. RIBS
Ser. A-2, GNMA Coll., 10.599s, 3/1/31 AAA 7,132,438
OH Hsg. Fin. Agcy. Single Fam. Mtge.
Rev. Bonds
20,000 Ser. 85-B, FGIC, 9s, 1/15/09 AAA 20,400
921,000 Ser. B, GNMA, 8 1/4s, 12/15/19 AAA 956,689
660,000 Ser. C, GNMA Coll., 8 1/8s, 3/1/20 AAA 699,600
740,000 Ser. C, GNMA Coll., 7.85s, 9/1/21 AAA 788,100
1,840,000 Ser. A, GNMA Coll., 7.65s, 3/1/29 AAA 1,996,400
1,000,000 Ser. 85-A, FGIC, zero %, 1/15/15 AAA 143,750
10,000,000 GNMA Coll. stepped coupon,
zero %, (9s, 9/1/01) 9/1/18 (d) AAA 7,587,500
1,000,000 OH Poll. Control Rev. Bonds
(Standard Oil Co.), 6 3/4s, 12/1/15 AA 1,057,500
100,000 OH State Building Auth. Rev. Bonds
(Senator Ocasek Govt. Office Bldg.), Ser. A, 9.1s,
10/1/04 A 108,375
OH State G.O. Bonds
2,935,000 6s, 8/1/10 AA 3,008,375
7,640,000 zero %, 8/1/13 AA 2,387,500
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS (b) VALUE
Ohio (continued)
__________________________________________________________________________________________________________
<S> <C> <C> <C>
OH State Wtr. Dev. Auth. Poll. Control
Facs. Rev. Bonds
$ 550,000 (PA Pwr. Co. Project), 12s, 12/1/14 BBB $ 587,125
4,400,000 (OH Edison Co. Project), 10 5/8s, 7/1/15 BBB 4,779,500
2,500,000 (PA Pwr. Project), Ser. B, 8.1s, 9/1/18 BBB 2,671,875
1,250,000 (Cleveland Elec. Illuminating Project),
8s, 10/1/23 BB 1,310,938
OH State Wtr. Dev. Auth. Rev. Bonds
440,000 AMBAC, 9 3/8s, 12/1/18 AAA 471,900
3,425,000 (Mid-American Waste Syst. Inc. Project),
7 3/4s, 9/1/07 BBB 3,562,000
1,000,000 Ser. A, AMBAC, 7 3/4s, 12/1/09 AAA 1,090,000
400,000 Oberlin Swr., 1st Mtge. Rev. Bonds
Bond Investors Guaranty Insurance (BIGI), 7.8s,
12/15/08 AAA 453,000
500,000 Olmsted Falls, Local School Dist. Rev. Bonds,
FGIC, 7.05s, 12/15/11 AAA 545,625
2,275,000 Orrville, Elec. Syst. Mtge. Rev. Bonds,
Ser. A & B, AMBAC, 7 1/2s, 12/1/10 AAA 2,528,094
1,000,000 Oxford, Wtr. Supply Syst. Mtge. Rev. Bonds,
AMBAC, 7 5/8s, 12/1/14 AAA 1,125,000
1,000,000 Pickerington Local School Dist., Rev. Bonds,
FGIC, 5.8s, 12/1/09 AAA 995,000
890,000 Portage Cnty., Hosp. Rev. Bonds
(Robinson Memorial Hosp.), 9 3/8s, 10/1/07 A 957,863
Sandusky Cnty., Hosp. Fac. Rev. Bonds
(Memorial Hosp. Project)
1,750,000 7 3/4s, 12/1/09 BB 1,754,375
795,000 7 3/8s, 12/1/01 BB 786,056
2,600,000 Southwest Local School Dist. G.O. Bonds
(Hamilton Cnty.), AMBAC, 7.65s, 12/1/10 AAA 2,938,000
Stark Cnty., Hosp. Rev. Bonds, (Doctors
Hosp. Inc.)
800,000 8 5/8s, 4/1/18 BAA 916,000
5,000,000 6s, 4/1/24 BBB 4,300,000
2,360,000 Student Loan Funding Corp. of Cincinnati
Rev. Bonds, Ser. B, 6 3/4s, 1/1/07 BBB 2,333,450
1,100,000 Tuscarawas Cnty., Hosp. Facs. Rev. Bonds
(Union Hosp. Project), Ser. A, 6 1/2s, 10/1/21 Baa 980,375
1,150,000 Washington, Wtr. Syst. Mtge. Rev. Bonds,
AMBAC, zero %, 12/1/09 AAA 447,063
Zanesville, Hsg. Dev. Corp. Mtge. Rev. Bonds
220,000 7 3/8s, 10/1/21 AAA 250,525
205,000 7 3/8s, 10/1/20 AAA 233,444
185,000 7 3/8s, 10/1/19 AAA 210,669
180,000 7 3/8s, 10/1/18 AAA 204,975
160,000 7 3/8s, 10/1/17 AAA 182,200
155,000 7 3/8s, 10/1/16 AAA 176,506
_______________
181,850,471
</TABLE>
Puerto Rico (10.0%)
<TABLE>
__________________________________________________________________________________________________________
<S> <C> <C> <C>
Cmnwlth of Puerto Rico, Elec. Pwr. Auth. Rev. Bonds
1,000,000 Ser. N, 7s, 7/1/07 A 1,071,250
1,500,000 Ser. T, 6s, 7/1/16 A 1,453,125
1,500,000 Cmnwlth. of Puerto Rico, Aqueduct & Swr.
Auth. Rev. Bonds, Ser. A, 7 7/8s, 7/1/17 Baa 1,636,875
8,000,000 Cmnwlth. of Puerto Rico, G.O. Bonds,
stepped-coupon zero % (8s, 7/1/96),
7/1/02 (d) A 8,040,000
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS (b) VALUE
Puerto Rico (continued)
__________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Cmnwlth. of Puerto Rico, Hwy. Auth. Rev. Bonds
$ 50,000 Ser. O, 8s, 7/1/05 AAA $ 56,688
1,350,000 Ser. Q, 7 3/4s, 7/1/16 AAA 1,566,000
3,600,000 Cmnwlth. of Puerto Rico, Pub. Impt.
G.O. Bonds, 7.7s, 7/1/20 AAA 4,167,000
225,000 Cmnwlth. of Puerto Rico, Urban Renewal
& Hsg. Corp. Rev. Bonds, 7 7/8s, 10/1/04 BBB 251,438
950,000 Puerto Rico, Muni. Fin. Agcy. Rev. Bonds,
Ser. A, 8 1/4s, 7/1/08 A 1,056,875
Puerto Rico, Pub. Bldgs. Auth. Edl. &
Hlth. Fac. Rev. Bonds
1,500,000 Ser. H, 7 7/8s, 7/1/16 AAA 1,666,875
330,000 Ser. H, zero %, 7/1/05 A 169,538
____________
21,135,664
</TABLE>
Virgin Islands (2.5%)
<TABLE>
__________________________________________________________________________________________________________
<S> <C> <C> <C>
3,050,000 Virgin Islands, Pub. Fin. Auth. Rev. Bonds
(Matching Funds Loan Notes),
Ser. A, 7 1/4s, 10/1/18 BBB/P 3,206,313
2,000,000 Virgin Islands, Wtr. & Pwr. Auth. Elec. Syst. Rev.
Bonds, Ser. A, 7.4s, 7/1/11 BBB/P 2,115,000
___________
5,321,313
___________
Total Investments
(cost $206,285,443)(e) $208,307,448
</TABLE>
17
<PAGE> 18
(a) Percentages indicated are based on net assets of
$212,088,413, which correspond to a net asset value per Class A
share and Class B share of $8.80 and $8.79, respectively.
(b) The Moody's or Standard & Poor's ratings indicated are
believed to be the most recent ratings available at May 31, 1994
for the securities listed. Ratings are generally ascribed to
securities at the time of issuance. While the rating agencies may
from time to time revise such ratings, they undertake no obligation
to do so, and the ratings indicated do not necessarily represent
ratings which the agencies would ascribe to these securities at May
31, 1994. Securities rated by Putnam are indicated by "/P" and are
not publicly rated. The ratings are not covered by the Report of
Independent Accountants.
(c) Restricted as to public resale. At the date of acquisition
this security was valued at cost. There were no outstanding
unrestricted securities of the same class as that held. Total
market value of the restricted security owned at May 31, 1994 was
$1,892,500 or 0.9% of net assets.
(d) The interest rate and date shown parenthetically represent the
new interest rate to be paid and the date the fund will begin
receiving interest at this rate.
(e) The aggregate identified cost on a federal income tax basis
is $206,285,694, resulting in gross unrealized appreciation and
depreciation of $8,125,127 and $6,103,373 respectively, or net
unrealized appreciation of $2,021,754.
The rates shown on Variable Rate Demand Notes (VRDN) and
Residual Interest Bonds (RIBS) are the current interest rates at
May 31, 1994, which are subject to change based on the terms of the
security.
The fund had the following industry group concentrations greater
than 10% on May 31, 1994 (as a percentage of net assets):
Hospitals/Health Care 15.9%; Utilities 13.6% and Housing 13.3%
The fund had the following insurance concentrations greater than
10% at May 31, 1994 (as a percentage of net assets): AMBAC 14.1%
The accompanying notes are an integral part of these financial
statements.
18
<PAGE> 19
Statement of assets and liabilities
May 31, 1994
<TABLE>
<S> <C>
Assets
Investments in securities at value (identified cost $206,285,443) (Note 1) $208,307,448
Cash 393,677
Interest receivable 3,624,532
Receivable for shares of the fund sold 719,408
Receivable for securities sold 1,080,979
Unamortized organization expenses (Note 1) 5,446
Receivable for variation margin 31,404
Total assets $214,162,894
Liabilities
Payable for securities purchased $517,808
Payable for shares of the fund repurchased 379,246
Distributions payable to shareholders 678,385
Payable for compensation of Manager (Note 2) 317,453
Payable for administrative services (Note 2) 1,479
Payable for compensation of Trustees (Note 2) 168
Payable for distribution fees (Note 2) 76,906
Payable for investor servicing and custodian fees (Note 2) 65,866
Other accrued expenses 37,170
Total liabilities 2,074,481
Net assets $212,088,413
Represented by
Paid-in capital (Notes 4 and 5) $210,271,212
Distributions in excess of net investment income (115,422)
Accumulated net realized loss on investments (89,382)
Net unrealized appreciation of investments 2,022,005
Total -- Representing net assets applicable to capital shares outstanding $212,088,413
Computation of net asset value and offering price
Net asset and redemption of class A shares
($194,129,517 divided by 22,067,955 shares) $8.80
Offering price per share (100/ 95.25 of $8.80)* $9.24
Net asset value and offering price of class B shares
($17,958,896 divided by 2,042,303 shares)+ $8.79
</TABLE>
*On single retail sales of less than $25,000. On sales of
$25,000 or more and on group sales the offering price is reduced.
+Redemption price per share is equal to net asset value less
any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 20
<TABLE>
<CAPTION>
Statement of operations
Year ended May 31, 1994
<S> <C>
Tax exempt interest income: $13,398,569
Expenses:
Compensation of Manager (Note 2) $1,206,826
Investor servicing and custodian fees (Note 2) 258,199
Compensation of Trustees (Note 2) 11,208
Auditing 23,220
Legal 17,456
Postage 13,454
Reports to shareholders 21,390
Registration fees 15,787
Administrative services (Note 2) 6,362
Amortization of organization expenses (Note 1) 2,806
Distribution fees -- Class A 383,968
Distribution fees -- Class B 72,223
Other expenses 7,008
Total expenses 2,039,907
Net investment income 11,358,662
Net realized gain on investments (Notes 1 and 3) 1,382,639
Net realized gain on futures contracts (Notes 1 and 3) 705,130
Net unrealized depreciation of investments during the year (10,780,015)
Net loss on investments (8,692,246)
Net increase in net assets resulting from operations $2,666,416
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 21
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended May 31
--------------------------------
1994 1993
<S> <C> <C>
Increase in net assets
Operations:
Net investment income $ 11,358,662 $9,344,800
Net realized gain on investments 1,382,639 1,054,686
Net realized gains on futures contracts 705,130 --
Net unrealized appreciation (depreciation) of investments (10,780,015) 7,199,495
Net increase in net assets
resulting from operations 2,666,416 17,598,981
Distributions to shareholders:
From net investment income
class A (10,890,642) (9,449,262)
class B (418,444) --
From net realized gains
class A (2,534,385) --
class B (107,263) --
Increase from capital shares transactions
(Note 4) 45,493,937 29,420,327
Total increase in net assets 34,209,619 37,570,046
Net assets
Beginning of year 177,878,794 140,308,748
End of year (including distributions in excess of
net investment income of $115,422 and $169,743
respectively) $212,088,413 $177,878,794
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 22
<TABLE>
<CAPTION>
Financial Highlights*
(For a share outstanding throughout the year)
For the period For the period
July 15, 1993 October 23, 1989
(commencement (commencement
of operations) of operations)
to May 31 Year ended May 31 to May 31
______________ __________________________________________________________________
1994 1994 1993 1992 1991 1990
______________ __________________________________________________________________
Class B Class A
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.37 $9.26 $8.78 $8.55 $8.40 $8.50
Investment Operations
Net Investment Income .40 .53 .54 .57(a) .59(a) .35(a)
Net Realized and Unrealized Gain (Loss)
on Investments (.46) (.35) .48 .23 .14 (.10)
Total from Investment Operations (.06) .18 1.02 .80 .73 .25
Less Distributions From:
Net Investment Income (.40) (.52) (.54) (.57) (.58) (.35)
Net Realized Gain on Investments (.12) (.12) -- -- -- --
Total Distributions (.52) (.64) (.54) (.57) (.58) (.35)
Net Asset Value, End of Period $8.79 $8.80 $9.26 $8.78 $8.55 $8.40
Total Investment Return at Net Asset
Value (%) (b) (1.70)(c) 1.88 11.94 9.65 9.09 4.94(c)
Net Assets, End of Period (in thousands) $17,959 $194,130 $177,879 $140,309 $21,136 $7,684
Ratio of Expenses to Average Net
Assets (%) 1.61 (c) .99 1.04 .90(a) .87(a) .47(a)(d)
Ratio of Net Investment Income to
Average Net Assets (%) 4.95 (c) 5.68 5.90 6.41(a) 6.83(a) 4.19(a)(d)
Portfolio Turnover (%) 44.45 (d) 44.45 21.57 15.20(e) 17.40 23.27(d)
<FN>
*Financial highlights for periods ended through May 31, 1992 have been
restated to conform with requirements issued by the SEC in April, 1993.
(a) Reflects an expense limitation, and, during the period ended May
31, 1990, an absorption of expenses incurred by the fund. As a result, net
investment income of the fund for the years ended 1992, 1991, and the
period ended May 31, 1990 reflect expense reductions of approximately
$0.01, $0.05, and $0.05 per share, respectively.
(b) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(c) Annualized.
(d) Not annualized.
(e) Portfolio turnover excludes the impact of assets
received from the acquisition of Putnam Ohio Tax Exempt Income Fund.
</TABLE>
22 23
<PAGE> 23
Notes to financial statements
May 31, 1994
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 Ohio
personal income tax as Putnam Management believes is consistent with
preservation of capital by investing primarily in a portfolio of Ohio tax-exempt
securities. The fund offers both class A and class B shares. The fund commenced
its public offering of class B shares on July 15, 1993. Class A shares are sold
with a maximum front-end sales charge of 4.75%. Class B shares do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than class A
shares, and may be subject to a contingent deferred sales charge if those shares
are redeemed within four years of purchase. Expenses of the fund are borne
pro-rata by the holders of both classes of shares, except that each class bears
expenses unique to that class (including the distribution fees applicable to
such class) and 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 FUTURES A futures contract is an agreement between two parties to buy and
sell a security at a set price on a future date. Upon entering into such a
contract, the fund is required to pledge to the broker an amount of cash or
tax-exempt securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the fund agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as "variation margin," and are
recorded by the fund as unrealized gains or losses. 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. The
24
<PAGE> 24
potential risk to the fund is that the change in value of the underlying
securities may not correspond to the change in value of the futures contracts.
D 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.
E DISTRIBUTIONS TO SHAREHOLDERS Income dividends are recorded daily by the fund
and are distributed monthly. Capital gains distributions, if any, are recorded
on the ex-dividend date and paid annually, or as necessary to meet the
distribution requirements described above.
F 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. Discount on zero-coupon bonds is accreted according to
the effective yield method.
G UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by the fund in connection
with its organization, its registration with the Securities and Exchange
Commission and with various states, and the initial public offering of its
shares aggregated $15,011. These expenses are being amortized over a five-year
period based on projected net assets of the fund.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Investment Management, Inc., the fund's Manager, a
wholly owned subsidiary of Putnam Investments, Inc., for management and
investment advisory services is accrued daily and 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 also reimburses the Manager 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. For the year ended May 31, 1994, the
fund paid $6,362 for these services.
Trustees of the fund receive an annual Trustee's fee of $1,090 and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of the
25
<PAGE> 25
Manager and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
Custodial functions for the fund are provided by Putnam Fiduciary Trust Company
(PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent
functions are provided to the fund by Putnam Investor Services, a division of
PFTC. Fees paid for these investor servicing and custodial functions for the
year ended May 31, 1994, amounted to $258,199.
Investor servicing and custodian fees reported in the Statement of Operations
for the year ended May 31, 1994, have been reduced by credits allowed by PFTC.
The fund has adopted a distribution plan with respect to class A shares
(the "Class A Plan) pursuant to Rule 12b-1 of the Investment Company Act of
1940. The purpose of the Class A Plan is to compensate Putnam Mutual Funds
Corp., a wholly owned subsidiary of Putnam Investments, Inc., for services
provided and expenses incurred in distributing class A shares. The Trustees
have approved payments by the fund to Putnam Mutual Funds Corp. at an annual
rate of 0.20% of average net assets attributable to class A shares. For the
year ended May 31, 1994, the fund paid $383,968 in distribution fees for class
A shares.
The fund has been informed that during the year ended May 31, 1994, Putnam
Mutual Funds Corp., acting as an underwriter, received net commissions of
$73,168 from the sale of class A shares of the fund.
A deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares purchased as part of an investment of $1 million or more. For
the year ended May 31, 1994, Putnam Mutual Funds Corp., acting as an
underwriter, received no monies on such redemptions.
The fund has adopted a separate distribution plan with respect to its class B
shares (the "Class B Plan") pursuant to Rule 12b-1 of the Investment Company
Act of 1940. The purpose of the Class B Plan is to compensate Putnam Mutual
Funds Corp. for services provided and expenses incurred in distributing class
B shares. The Class B Plan provides for payments by the fund to Putnam Mutual
Funds Corp. at an annual rate of 0.85% of the fund's average net assets
attributable to class B shares. For the year ended May 31, 1994, the fund paid
Putnam Mutual Funds Corp. distribution fees of $72,223 for class B shares.
Putnam Mutual Funds Corp., acting as an underwriter, also receives the proceeds
of the contingent deferred sales charges levied on class B share redemptions
within four years of purchase. The charge is based on declining rates, which
begin at 5.0% of the net asset value of the redeemed shares. Putnam Mutual
Funds Corp. received $9,032 in contingent deferred sales charges from such
redemptions for the year ended May 31, 1994.
26
<PAGE> 26
Note 3
Purchases and sales of securities
During the year ended May 31, 1994, purchases and sales of investment
securities other than short-term municipal obligations aggregated $126,083,846
and $83,763,642 respectively. Purchases and sales of short-term municipal
obligations aggregated $19,800,000 and $19,800,000, respectively. In
determining the net gain or loss on securities sold, the cost of securities has
been determined on the identified cost basis.
<TABLE>
<CAPTION>
Sales of Futures Contracts
Number Aggregate
of Contracts Face Value
<S> <C> <C>
Contracts opened 405 $40,289,910
Contracts closed (405) (40,289,910)
Contracts open
at end of year -- $ --
</TABLE>
Note 4
Capital shares
At May 31, 1994, there was an unlimited number of shares of beneficial interest
authorized, divided into two classes, class A and class B capital shares.
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Year ended May 31, 1994
Class A Shares Amount
<S> <C> <C>
Shares sold 3,670,439 $ 31,805,692
Shares issued in
connection with
reinvestment of
distributions 948,291 10,995,305
4,618,730 42,800,997
Shares
repurchased (1,764,710) (16,222,202)
Net increase 2,854,020 $ 26,578,795
</TABLE>
<TABLE>
<Caption
Year ended May 31, 1993
Class A Shares Amount
<S> <C> <C>
Shares sold 4,180,525 $ 37,989,323
Shares issued in
connection with
reinvestment of
distributions 657,287 5,961,518
4,837,812 43,950,841
Shares
repurchased (1,602,335) (14,530,514)
Net increase 3,235,477 $ 29,420,327
</TABLE>
<TABLE>
<CAPTION>
For the period July 15, 1993
(commencement of operations)
to May 31, 1994
Class B Shares Amount
<S> <C> <C>
Shares sold 2,105,600 $ 19,494,216
Shares issued in
connection with
reinvestment of
distributions 35,468 323,882
2,141,068 19,818,098
Shares
repurchased (98,765) (902,956)
Net increase 2,042,303 $ 18,915,142
</TABLE>
27
<PAGE> 27
Note 5
Reclassification of Capital Account
Effective June 1, 1993, Putnam Ohio Tax Exempt Income Fund II has adopted the
provisions of Statement of Position (SOP) 93-2 "Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies." The purpose of this SOP is to report
the accumulated net investment income (loss) and accumulated net realized gain
(loss) accounts in such a manner as to approximate amounts available for
future distributions (or to offset future realized capital gains) and to
achieve uniformity in the presentation of distributions by investment
companies.
As a result of the SOP, the fund has reclassified $463,167 to decrease
accumulated net realized gain, $4,745 to decrease distributions in excess of
net investment income, with an increase of $458,422 to additional paid-in
capital.
These adjustments represent the cumulative amounts necessary to report these
balances through May 31, 1993, the close of the fund's last fiscal year-end,
for financial reporting and tax purposes.
28
<PAGE> 28
Federal tax information
The fund has designated all dividends paid from net investment income during
the fiscal year as exempt-interest dividends. Thus, 100% of these distributions
are exempt from federal income tax. For residents of the state of Ohio,
100% of the fund's distributions are also exempt from Ohio personal income tax.
In addition, the fund paid short-term capital gains of $0.065 for Class A
and Class B, and long-term capital gains of $0.056 for Class A and Class B.
The Form 1099 you will receive in January 1995 will tell you the tax status of
any capital gain distributions paid to your account in calendar 1994.
29
<PAGE> 29
Our commitment to quality service
CHOOSE AWARD-WINNING SERVICE.
Putnam Investor Services has won the DALBAR Quality Tested Service
Seal every year since the award's 1990 inception. DALBAR, an
independent research firm, ran more than 10,000 tests of 38 shareholder
service components. In every category, Putnam outperformed the industry
standard.
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 their
original cost.
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.
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Fund information
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Coopers & Lybrand
TRUSTEES
George Putnam, Chairman
William 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
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
Thomas C. Goggins
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Ohio Tax Exempt
Income Fund II. 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 by the most
recent Putnam Quarterly Performance Summary.
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__________________
The Putnam Funds Bulk Rate
One Post Office U.S. Postage
Square PAID
Boston, Massachusetts 02109 Boston, MA
Permit No. 53749
__________________
848/240-12999
