PUTNAM
OHIO
TAX EXEMPT
INCOME FUND
SEMIANNUAL REPORT
November 30, 1995
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE>
FUND HIGHLIGHTS
"Not only is serious consideration of a major tax overhaul unlikely
until well after the 1996 election, but most current proposals leave
the deductibility of municipal bond interest in place. . . . The
difficulty and cost of buying and selling individual bonds make muni
funds the best choice for most people."
-- Money, OIncome Investing '96,O Forecast 1996
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
21 Financial statements
<PAGE>
FROM THE CHAIRMAN
DEAR SHAREHOLDER:
[PHOTO OF GEORGE PUTNAM]
(C) KARSH, OTTAWA
TAX-EXEMPT BOND INVESTORS WILL LONG REMEMBER 1995 AS A YEAR OF HIGHS
AND LOWS IN THE MARKET. THE YEAR BEGAN AS THE BOND MARKET WAS COMING
OFF ONE OF ITS WORST PERIODS IN RECENT MEMORY. JUST AS THINGS BEGAN TO
LOOK BRIGHTER FOR TAX-EXEMPT BONDS, TALK IN WASHINGTON ABOUT TAX
REFORM THREW A FRIGHT INTO INVESTORS.
BY THE TIME PUTNAM OHIO TAX EXEMPT INCOME FUND ENTERED ITS NEW FISCAL
YEAR IN JUNE, INVESTORS HAD BEGUN TO REGAIN THEIR COMPOSURE, REALIZING
HOW REMOTE ENACTMENT OF ANY TAX-REFORM LEGISLATION WAS LIKELY TO BE
DURING AN ELECTION YEAR. AS THE FUND REACHED THE FISCAL YEAR'S
MIDPOINT ON NOVEMBER 30, 1995, SHAREHOLDERS COULD LOOK BACK ON A
PERIOD OF IMPRESSIVE RECOVERY.
FURTHERMORE, BECAUSE OF THE EARLIER INTERRUPTION OVER TAX-REFORM
PROPOSALS, FUND MANAGER RICHARD WYKE BELIEVES THE RALLY WILL BE
SUSTAINED DURING THE SECOND HALF OF FISCAL 1996 AS THE TAX-EXEMPT BOND
MARKET CONTINUES TO MAKE UP LOST GROUND. HIS REPORT, WHICH FOLLOWS,
PROVIDES MORE DETAILS.
RESPECTFULLY YOURS,
[SIGNATURE]
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
JANUARY 17, 1996
<PAGE>
REPORT FROM THE FUND MANAGER
RICHARD P. WYKE
The municipal market may not have been the belle of the ball during
this year's fixed-income rally. But it was certainly no wallflower
either. In an environment that raised more than a few eyebrows, Putnam
Ohio Tax Exempt Income Fund produced solid results for the first half
of fiscal 1996. Over the six months ended November 30, 1995, your fund
posted gains of 4.74% and 4.29% at net asset value for class A and
class B shares, respectively. For performance for longer periods and
for class M shares, which became available on April 3, 1995, see page
9.
STRONG RELATIVE PERFORMANCE: A MATTER OF PERSPECTIVE
After overcoming a brief stall in midsummer, the broad fixed-income
market continued its impressive run right through November. Increased
investor confidence in the Federal Reserve Board's ability to thwart
inflation and effectively manage economic growth over the long term
fueled the gains of most fixed-income investments. Indeed, the rally
had gained such momentum by period's end that the current yield on the
benchmark 30-year Treasury bond seems to be fast approaching the
historically low level of 5.79% (as of October 15, 1993).
On an absolute basis, municipal bonds participated in the rally's
strength in a highly respectable fashion. However, their performance
relative to taxable investments may appear somewhat lackluster because
of investors' lingering concerns about the perceived effects of the
flat-tax proposal introduced in April, which, in its purest form,
would deprive municipal bonds of their beneficial tax treatment.
Investor concerns prevented your fund's investments from attaining the
full price appreciation potential presented by the favorable
investment environment.
We, on the other hand, prefer to look at the semiannual returns in a
historical context, noting that they are the highest on
<PAGE>
record for any semiannual period over the past decade. In any good
year, this performance would have been quite satisfactory and during
1994's bear market, it would have been considered a blessing.
Furthermore, on a tax-equivalent basis, an Ohio investor in the
combined maximum federal and state income tax bracket of 44.13% would
have had to earn 9.61% and 8.46%, respectively, to match the 5.37% and
4.73% current dividend rates, at NAV, your fund's class A and class B
shares produced over this period.
POSITIONED FOR THE NEXT TURN IN THE ROAD
As the municipal market becomes increasingly complex, our ability to
effectively position the fund's holdings at the most optimum points
along the yield curve is one of the ways we believe we can
differentiate ourselves successfully from the competition. With this
in mind, we sought to focus on bonds we believed offered not only
better value but also better balance of income and market risk during
this past summer's decreased liquidity and ambiguous interest rate
movements.
To do this, we moved away from a "barbell" configuration of clustering
bonds at both the short end and the long end of the yield curve,
selectively selling bonds with 10-year or shorter maturities and those
within the 20 to 30+ maturity range.
MUNICIPAL BONDS CURRENTLY OFFER
AN EXCELLENT BUYING OPPORTUNITY
[MOUNTAIN CHART]
- ----------------------
11/94 86.6%
12/94 85.1
1/95 83.0
2/95 80.6
3/95 80.8
4/95 82.2
5/95 86.6
6/95 90.7
7/95 87.7
8/95 90.6
9/95 91.6
10/95 90.7
11/95 90.6
- ----------------------
This chart shows the yield of an average 30-year general obligation
bond as a percentage of the yield of an average 30-year U.S. Treasury
bond, plotted monthly. Treasury bonds are backed by the full faith and
credit of the U.S. government. Source: Bloomberg.
<PAGE>
We then regrouped those assets into a "bulleted" position, purchasing
more bonds within the 10- to 20-year range. By period's end, the 10-
to 20-year bonds comprised 56.48% of net assets, up from 48.8% on May
31, 1995, while the fund's weighting in 20- to 30+-year bonds
decreased to 37.41% from 47.7% of net assets.
This strategy has enabled your fund to take advantage of the solid
price appreciation that 10- to 20-year bonds experienced as a result
of heightened demand later in the period. It should also be of use in
preparing the portfolio for what we think may well be the next turn in
the road: the possibility of a steepening yield curve.
OUR GOAL: CREATE RIGHT MIX OF BONDS FOR CURRENT ENVIRONMENT
Our investment decisions throughout the period reflect our desire to
construct a portfolio that offers not only the right mix of credit
quality and yield but also the potential to go up farther in price --
without taking on unnecessary market risk. We sought to achieve this
by focusing on bonds we believe are more structurally favorable for
the current market environment.
Bonds with a high degree of call protection were one area of increased
emphasis. When interest rates decline -- as they did this past fall --
bond issuers rush to refinance their debt. To safeguard your fund from
the increasing prospects of early bond redemptions, we stepped up our
purchases of noncallable issues, such as discount-coupon bonds.
Discount-coupon bonds have a lower probability of being called and
stand to offer greater price appreciation potential given the
favorable backdrop for interest rates.
Moving toward higher-rated investment-grade bonds is another
enhancement we've made. Because of the ongoing appetite for yield from
all corners of the market, the yield spread between AAA- and BBB-rated
bonds has remained narrow despite the rally. It seemed hardly worth
the additional credit risk to continue adding to the fund's weighting
in BBB-rated bonds when AAA-rated securities were offering relatively
comparable yields. In addition, the fund's AAA-rated and insured
holdings have already risen in price as a result of declining rates
and
<PAGE>
TOP INDUSTRY SECTORS*
[BAR CHART]
- -----------------------------------------
Education 17.9%
Hospital/Health care 17.0%
Utilities 13.1%
Water and sewerage 16.3%
Housing 6.6%
- -----------------------------------------
* Based on net assets as of 11/30/95. Holdings may vary over time.
stand to appreciate farther should the yield spread widen. We chose,
therefore, to increase the fund's position in AAA-rated bonds from
nearly 60% of net assets on May 31, 1995, to approximately 65% by
period's end; conversely, the fund's allocation to BBB- and BB-rated
bonds decreased to 20.4% of net assets from roughly 25%.
We have also worked to spread assets across different regions of the
state and, of course, different industries. At period's end, the water
and sewer sector and hospitals were among the largest industry sectors
in the fund.
FUNDAMENTALS ARE SOUND, VALUATIONS APPEALING
As we enter the second half of fiscal 1996, we expect conditions for
investing in fixed-income securities to remain advantageous. Subsiding
inflation, a benign interest rate environment, and decelerating
economic growth seem likely to continue.
The debate over tax reform is probably the most critical factor that
will influence tax-exempt bond performance over the next 12 months.
While more instability cannot be ruled out, we believe investors have
come to realize that a revision of the income tax code would not
likely occur until after the 1996 presidential election, at which time
it would most likely involve a simplification of the existing system
rather than a major overhaul. That said, we are upbeat about the
prospects for the municipal-bond market for several reasons:
<PAGE>
First, any time municipal bonds underperform relative to Treasuries we
believe a buying opportunity exists. Most high-grade, long-term
municipal bonds are now providing 90% of the yield that Treasury bonds
are offering on a before-tax basis. While there can be no assurance,
the failure of municipal bonds to participate in the 1995 rally to the
same degree as their taxable counterparts leaves the potential for
additional price appreciation.
Second, new issue supply has been scant in 1995, down by roughly 10%
to 15% from 1994 levels, while investor demand for municipal bonds has
once again picked up with the easing of flat-tax concerns. This
presents a positive dynamic for continued price support.
Last, government, on both the state and national levels, is addressing
for the first time in history the issue of how to be more efficient.
Such attention to fiscal responsibility bodes well for the fundamental
structure of the municipal market.
The views expressed throughout this report are exclusively those of
Putnam Management. They are not meant as investment advice. Although
the described holdings were viewed favorably as of 11/30/95, there is
no guarantee the fund will continue to hold these securities in the
future.
<PAGE>
PERFORMANCE SUMMARY
PERFORMANCE SHOULD ALWAYS BE CONSIDERED IN LIGHT OF A FUND'S
INVESTMENT STRATEGY. PUTNAM OHIO TAX EXEMPT INCOME FUND IS DESIGNED
FOR INVESTORS SEEKING A HIGH LEVEL OF CURRENT INCOME FREE FROM FEDERAL
AND STATE INCOME TAX CONSISTENT WITH PRESERVATION OF CAPITAL.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions in the fund.
TOTAL RETURN FOR PERIODS ENDED 11/30/95
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CLASS A CLASS B CLASS M
(10/23/89)* (7/15/93)* (4/3/95)*
NAV POP NAV CDSC NAV CDSC
- ----------------------------------------------------------------------
6 months 4.74% -0.28% 4.29% -0.71% 4.60% 1.21%
- ----------------------------------------------------------------------
1 year 17.38 11.81 16.40 11.40 -- --
- ----------------------------------------------------------------------
5 years 48.40 41.36 -- -- -- --
Annual average 8.21 7.17 -- -- -- --
- ----------------------------------------------------------------------
Life of class 58.97 51.48 11.12 8.21 7.78 4.33
Annual average 7.88 7.03 4.53 3.37 -- --
- ----------------------------------------------------------------------
<FN>
* Commencement of operations.
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/95
LEHMAN BROS.
MUNICIPAL CONSUMER
BOND INDEX PRICE INDEX
- ----------------------------------------------------------------------
6 months 5.18% 0.92%
- ----------------------------------------------------------------------
1 year 18.90 2.61
- ----------------------------------------------------------------------
5 years 51.82 14.80
Annual average 8.71 2.80
- ----------------------------------------------------------------------
Life of class A 66.37 22.29
Annual average 8.69 3.35
- ----------------------------------------------------------------------
Life of class B 15.66 6.37
Annual average 6.30 2.63
- ----------------------------------------------------------------------
Life of class M 8.66 1.45
- ----------------------------------------------------------------------
<FN>
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Class A share
performance data do not take into account distribution fees prior to
implementation of the class A distribution plan in 1990. Investment
returns and net asset value will fluctuate so that an investor's
shares, when sold, may be worth more or less than their original cost.
POP assumes 4.75% maximum sales charge for class A shares and 3.25%
for class M shares. CDSC for class B shares assumes 5% maximum
contingent deferred sales charge.
<PAGE>
TOTAL RETURN FOR PERIODS ENDED 12/31/95
(most recent calendar quarter)
CLASS A CLASS B CLASS M
(10/23/89)* (7/15/93)* (4/3/95)*
NAV POP NAV CDSC NAV POP
- ----------------------------------------------------------------------
1 year 15.35% 9.85% 14.56% 9.56% -- --
- ----------------------------------------------------------------------
5 years 48.47 41.43 -- -- -- --
Annual average 8.23 7.18 -- -- -- --
- ----------------------------------------------------------------------
Life of class 59.94 52.40 11.78 8.85 8.43% 4.96%
Annual average 7.88 7.04 4.63 3.51 -- --
- ----------------------------------------------------------------------
<FN>
* Commencement of operations.
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns
and net asset value fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 11/30/95
CLASS A CLASS B CLASS M
- ----------------------------------------------------------------------
Distributions (number) 6 6 6
- ----------------------------------------------------------------------
Income $0.245849 $0.217267 $0.233942
- ----------------------------------------------------------------------
TOTAL $0.245849 $0.217267 $0.233942
- ----------------------------------------------------------------------
SHARE VALUE: NAV POP NAV NAV POP
- ----------------------------------------------------------------------
5/31/95 $8.95 $9.40 $8.94 $8.95 $9.25
- ----------------------------------------------------------------------
11/30/95 9.12 9.57 9.10 9.12 9.43
- ----------------------------------------------------------------------
CURRENT RETURN:
End of period
- ----------------------------------------------------------------------
Current dividend
rate(1) 5.37% 5.12% 4.73% 5.07% 4.91%
Taxable equivalent(2) 9.61 9.16 8.46 9.08 8.78
- ----------------------------------------------------------------------
Current 30-day
SEC yield(3) 4.86 4.63 4.22 4.61 4.45
Taxable equivalent(2) 8.70 8.29 7.55 8.25 7.96
- ----------------------------------------------------------------------
<FN>
(1)Income portion of most recent distribution, annualized and divided
by NAV or POP at end of period. (2)Assumes maximum combined state and
federal tax rates of 44.13% . (3)Based on investment income,
calculated using SEC guidelines. Results for investors subject to
lower tax rates would not be as advantageous.
</TABLE>
<PAGE>
TERMS AND DEFINITIONS
CLASS A SHARES are generally subject to an initial sales charge.
CLASS B SHARES may be subject to a sales charge upon redemption.
CLASS M SHARES have a lower initial sales charge and a higher 12b-1
fee than class A shares and no sales charge on redemption.
NET ASSET VALUE (NAV) is the value of the fund's assets, minus any
liabilities, divided by the number of outstanding shares, not
including any initial or contingent deferred sales charge.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus
the maximum sales charge levied at the time of purchase. POP
performance figures shown here assume the maximum 4.75% sales charge
for class A shares and 3.25% for class M shares.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the
time of the redemption of class B shares and assumes redemption at the
end of the period. Your fund's CDSC declines from a 5% maximum during
the first year to 1% during the sixth year. After the sixth year, the
CDSC no longer applies.
COMPARATIVE BENCHMARKS
LEHMAN BROTHERS MUNICIPAL BOND INDEX is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the
municipal bond market. The index does not take into account brokerage
commissions or other costs, may include bonds different from those in
the fund, and may pose different risks than the fund. It is not
possible to invest directly in an index.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
<PAGE>
RELATIVE RISK/REWARD POTENTIAL OF PUTNAM FUNDS
These illustrations provide a simplified guide to the risk/reward
potential for funds within each category of the Putnam Family of Funds
and are not intended as investment advice. Your investment advisor can
help you evaluate your risk tolerance.
These rankings are relative only to Putnam funds and should not be
compared to other investments. There is no guarantee that one Putnam
fund will be less volatile than another, since each fund has its own
investment risks. ThatOs why it is essential to read the fundOs
prospectus before investing.
PUTNAM GROWTH FUNDS
[GRAPHIC]
HIGHER RISK
HIGHER REWARD POTENTIAL
ASIA PACIFIC GROWTH(1)
OTC EMERGING GROWTH(2)
NEW OPPORTUNITIES(2)
EUROPE GROWTH(1)
OVERSEAS GROWTH(1)
VOYAGER
HEALTH SCIENCES
NATURAL RESOURCES
VISTA
GLOBAL GROWTH(1)
DIVERSIFIED EQUITY(1)
INVESTORS
LOWER RISK
LOWER REWARD POTENTIAL
PUTNAM GROWTH AND INCOME FUNDS
[GRAPHIC]
HIGHER RISK
HIGHER REWARD POTENTIAL
PUTNAM GROWTH AND INCOME FUND II
FUND FOR GROWTH AND INCOME
EQUITY INCOME
CONVERTIBLE INCOME-GROWTH
GEORGE PUTNAM
UTILITIES GROWTH AND INCOME
BALANCED RETIREMENT
LOWER RISK
LOWER REWARD POTENTIAL
(1) Foreign investments are subject to certain risks, such as
currency fluctuations and political developments, that are not
present with domestic investments.
(2) This fund invests all or a portion of its assets in small to
medium-sized companies, which increases the risk of price
fluctuations.
(3) While U.S. government backing of individual securities does not
insure your principal, which will fluctuate, it does guarantee
that the fundOs government-backed holdings will make timely
payments of interest and principal.
<PAGE>
PUTNAM INCOME FUNDS
[GRAPHIC]
HIGHER RISK
HIGHER REWARD POTENTIAL
HIGH YIELD ADVANTAGE(5)
HIGH YIELD(5)
GLOBAL GOVOT.(1)(5)
PREFERRED INCOME
INCOME
DIVERSIFIED INCOME(1)(3)(5)
FEDERAL INCOME(3)
AMERICAN GOVOT INCOME
U.S. GOVOT INCOME(3)
INTERMEDIATE U.S. GOVOT(3)
ADJUSTABLE RATE U.S. GOVOT(3)
MONEY MARKET(4)
LOWER RISK
LOWER REWARD POTENTIAL
PUTNAM TAX-FREE FUNDS(6)
[GRAPHIC]
HIGHER RISK
HIGHER REWARD POTENTIAL
TAX-FREE HIGH YIELD(5)
MUNICIPAL INCOME
SINGLE-STATE TAX-FREE FUNDS*
TAX EXEMPT INCOME
TAX-FREE INSURED(7)
INTERMEDIATE TAX EXEMPT
TAX EXEMPT MONEY MARKET(4)
LOWER RISK
LOWER REWARD POTENTIAL
* State tax-free funds available for Arizona, California, Florida,
Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio,
and Pennsylvania. Not available in all states.
LIFESTAGE(SM) 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 are:
PUTNAM ASSET ALLOCATION: BALANCED PORTFOLIO
PUTNAM ASSET ALLOCATION: CONSERVATIVE PORTFOLIO
PUTNAM ASSET ALLOCATION: GROWTH PORTFOLIO
Please call your financial advisor - or Putnam at 1-800-225-1581 - to
obtain a prospectus for any Putnam fund. The prospectus contains more
complete information, including risk considerations, charges, and
expenses. Read it carefully before you invest or send money.
(4) The fund is managed to maintain a steady price of $1.00 per
share, although there is no assurance this price can be
maintained in the future. An investment in the fund is neither
insured nor guaranteed by the U.S. government.
(5) The lower credit ratings of high-yield corporate and municipal
bonds reflect a greater possibility that adverse changes in the
economy or their issuers may affect their ability to pay
principal and interest on the bonds.
(6) Income may be subject to state and local taxes. Capital gains, if
any, are taxable for federal and, in most cases, state purposes.
(7) Bond insurance does not guarantee principal or protect against
changes in market price.
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
November 30, 1995 (Unaudited)
KEY TO ABBREVIATIONS
AMBAC -AMBAC Indemnity Corporation
FGIC -Federal Guaranty Insurance Company
FHA Insd. -Federal Housing Administration Insured
FNMA Coll. -Federal National Mortgage Association Collateralized
FSA Insd. -Financial Security Assurance Insured
GNMA Coll. -Government National Mortgage Association Collateralized
G.O. Bonds -General Obligation Bonds
IFB -Inverse Floating Rate Bonds
MBIA -Municipal Bond Investors Assurance Corporation
RAN -Revenue Anticipation Notes
VRDN -Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (96.7%)*
<TABLE><CAPTION>
<C> <S> <C> <C>
PRINCIPAL AMOUNT RATINGS** VALUE
OHIO (85.4%)
- ----------------------------------------------------------------------
$ 100,000 Akron-Wilbeth, Hsg. Dev. Corp.
1st Mtge. Rev. Bonds, FHA Insd., 7.9s, 8/1/03AAA $ 119,375
1,200,000 Allen Cnty., G.O. Bonds, AMBAC, 5.3s, 12/1/15AAA 1,176,000
2,070,000 Bedford, Hosp. Impt. Rev. Bonds
(Bedford Cmnty. Hosp. Inc.), 8 1/2s, 5/15/09 BB 2,403,788
1,765,000 Cincinnati, Student Loan Funding Corp.
Rev. Bonds, 8 7/8s, 8/1/08 BBB/P 1,868,694
2,000,000 Clermont Cnty., Swr. Sys. Rev. Bonds,
AMBAC, 5.2s, 12/1/21 AAA 1,907,500
Cleveland, City School Dist. G.O. Bonds
900,000 9s, 12/1/08 Aaa 1,039,500
2,500,000 8 1/4s, 12/1/08 Aaa 3,043,750
1,000,000 AMBAC, 7.35s, 12/1/08 Aaa 1,110,000
4,870,000 Cleveland, G.O. Bonds, Ser. B, AMBAC,
6 3/4s, 10/1/08 AAA 5,539,625
2,500,000 Cleveland, Pkg. Facs. Impt. Rev. Bonds,
8s, 9/15/12 BBB 2,681,250
Cleveland, Pub. Pwr. Syst. Impt. 1st Mtge.
Rev. Bonds
1,900,000 8 3/8s, 8/1/17 AAA 2,071,000
2,145,000 Ser. A, MBIA, zero %, 11/15/13 AAA 815,100
2,775,000 Ser. A, MBIA, zero %, 11/15/12 AAA 1,123,875
3,000,000 Ser. A, MBIA, zero %, 11/15/11 AAA 1,290,000
3,000,000 Ser. A, MBIA, zero %, 11/15/10 AAA 1,372,500
2,450,000 Ser. A, MBIA, zero %, 11/15/09 AAA 1,194,375
Cleveland, Urban Renewal Increment Rev.
Bonds (Rock & Roll Hall of Fame Project)
1,900,000 6 3/4s, 3/15/18 BBB/P 1,930,870
2,000,000 6 5/8s, 3/15/11 BBB/P 2,027,500
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
OHIO (continued)
- ----------------------------------------------------------------------
Cleveland, Waterworks 1st Mtge. Rev. Bonds
$2,000,000 Ser. F-92A, AMBAC, 6 1/2s, 1/1/21 AAA
$2,247,500
4,000,000 Ser. G, MBIA, 5 1/2s, 1/1/21 AAA 4,095,000
7,950,000 Ser. G, MBIA, 5 1/2s, 1/1/13 AAA 8,188,500
1,000,000 Clyde, Elec. Syst. Mtge. Rev. Bonds,
Ser. B, 8 3/8s, 11/15/14 BB/P 1,051,250
1,000,000 Cuyahoga Cnty., G.O. Bonds, 5.65s,
5/15/18 A 1,003,750
275,000 Dayton, Arpt. Rev. Bonds (James M. Cox
Intl. Arpt.), AMBAC, 8 1/4s, 1/1/16 AAA 282,766
1,640,000 Delaware City School Dist. Rev. Bonds,
FGIC, 5 3/4s, 12/1/15 AAA 1,676,900
1,300,000 Dublin, G.O. Bonds, Ser. B, 6.4s, 12/1/14 Aa 1,462,500
2,200,000 Erie Cnty., Hosp. Impt. Rev. Bonds
(Firelands Cmnty. Hosp.), 8 7/8s, 1/1/15 AAA 2,335,322
1,300,000 Franklin Cnty., Convention Facs. Auth.
Tax & Lease RAN, MBIA, 7s, 12/1/19 AAA 1,480,375
4,020,000 Geauga Cnty., Hosp. Impt. Rev. Bonds
(Geauga Hosp. Assn. Project), 8 3/4s,
11/15/13 Baa 4,301,400
Granville, School Dist. G.O. Bonds
1,100,000 AMBAC, zero %, 12/1/15 AAA 376,750
1,375,000 AMBAC, zero %, 12/1/13 AAA 527,656
1,380,000 AMBAC, zero %, 12/1/11 AAA 589,950
1,400,000 Hamilton Cnty., Hlth. Care Syst. Rev. Bonds
(Sisters of Charity), MBIA, 5 1/4s, 5/15/13 AAA 1,368,500
2,000,000 Hamilton Cnty., Swr. Syst. Impt. Rev. Bonds
(Metro. Swr. Dist.), Ser. A, FGIC, 5 1/4s,
12/1/16 AAA 1,962,500
Hamilton, Elec. Syst. Mtge. Rev. Bonds
700,000 Ser. B, FGIC, 8s, 10/15/22 AAA 785,750
2,600,000 Ser. B, FGIC, 7 1/4s, 10/15/23 AAA 2,821,000
2,855,000 Hillard, School Dist. Impt. Rev. Bonds,
Ser. A, FGIC, zero %, 12/1/11 AAA 1,209,806
1,000,000 Hubbard, Swr. Syst. Mtge. Rev. Bonds, 8.8s,
11/15/17 BBB 1,095,000
1,800,000 Huran Cnty., Human Svcs. Rev. Bonds, MBIA,
6.55s, 12/1/20 AAA 2,072,250
1,320,000 Kirtland, G.O. Bonds, AMBAC, 7 1/2s, 12/1/16 AAA 1,488,300
369,221 Lake Cnty., Indl. Dev. Rev. Bonds (Madison
Inn Hlth. Ctr. Project), FHA Insd., 12s,
5/1/14 BBB/P 406,604
1,000,000 Lakota, Local School Dist. Rev. Bonds,
AMBAC, 7s, 12/1/10 AAA 1,193,750
849,037 Logan Cnty., Indl. Dev. Rev. Bonds
(Indian Lake Hlth. Project), FHA Insd.,
12s, 3/15/14 AAA/P 1,071,909
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
OHIO (continued)
- ----------------------------------------------------------------------
$1,910,000 Lorain Cnty., Elderly Hsg. Corp. Multi-Fam.
Rev. Bonds (Harr Plaza & Intl.), Ser. A, 6 3/8s,
7/15/19 A $1,936,263
Lorain Cnty., Fac. Rev. Bonds (Laurel Lake
Project)
1,500,000 7.3s, 12/15/14 BB/P 1,546,875
1,750,000 7 1/8s, 12/15/18 BB/P 1,782,813
5,325,000 Lorain Cnty., Hosp. Rev. Bonds (EMH Regl.
Med. Ctr.), AMBAC, 7 3/4s, 11/1/13 AAA 6,323,438
2,100,000 Lucas Cnty. Hosp. Rev. Bonds (Toledo Hosp.
Impt.), MBIA, 5 1/4s, 11/15/15 AAA 2,034,375
Marion Cnty., Hlth. Care Fac. Rev. Bonds
(United Church Homes Project)
460,000 8 7/8s, 12/1/12 BBB 549,125
4,000,000 6 3/8s, 11/15/10 BBB 4,020,000
2,000,000 6.3s, 11/15/15 BBB 1,965,000
1,755,000 Massillon, City School Dist. Rev. Bonds,
AMBAC, zero %, 12/1/10 AAA 807,300
1,205,000 Massillon, Lincoln Ctr. Phase II Rev. Bonds,
AMBAC, 6.95s, 12/1/10 AAA 1,432,444
1,895,000 Montgomery Conifers, Hsg. Dev. Corp. Mtge.
Rev. Bonds (Conifers Project), FHA Insd.,
8.45s, 6/1/28 AA 2,000,286
2,800,000 Mount Vernon, Hosp. Rev. Bonds (Knox Cmnty.
Hosp.), 7 7/8s, 6/1/12 BBB/P 2,877,000
North Royalton City School Dist. G.O. Bonds
1,885,000 MBIA, 6 5/8s, 12/1/06 AAA 2,179,531
1,000,000 AMBAC, 5.65s, 12/1/08 AAA 1,073,750
1,020,000 MBIA, zero %, 12/1/09 AAA 489,600
835,000 Northwestern Local School Dist. Rev. Bonds
(Wayne & Ashland Cntys. School Impt.), FGIC,
7.2s, 12/1/10 AAA 1,010,350
3,000,000 OH Cap. Hsg. Corp. Multi-Fam. Rev. Bonds,
Ser. A, FNMA Coll., 7.6s, 11/1/23 AAA 3,221,250
OH Econ. Dev. Rev. Bonds
1,545,000 (Sponge, Inc. Project), Ser. 5-A, 8 3/8s,
6/1/14 A 1,716,881
680,000 (Superior Forge & Steel Corp.), Ser. 3, 7 5/8s,
6/1/11 A 766,700
OH Higher Ed. Fac. Rev. Bonds (Case
Western Reserve U.)
4,500,000 6 1/4s, 10/1/18 AA 5,028,750
1,000,000 6s, 10/1/14 AA 1,082,500
6,664,000 OH Hsg. Fin. Agcy. Single Fam. Mtge. IFB,
Ser. A-2, GNMA Coll., 9.517s, 3/24/31 AAA 7,380,380
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
OHIO (continued)
- ----------------------------------------------------------------------
OH Hsg. Fin. Agcy. Single Fam. Mtge. Rev. Bonds
$ 515,000 Ser. C, GNMA Coll., 8 1/8s, 3/1/20 AAA $ 547,188
680,000 Ser. C, GNMA Coll., 7.85s, 9/1/21 AAA 728,450
690,645 Ser. 85-A, FGIC, zero %, 1/15/15# AAA 103,597
3,350,000 OH Poll. Control Rev. Bonds (Standard Oil Co.),
6 3/4s, 12/1/15 AA 4,103,750
1,015,000 OH State Bldg. Auth. Rev. Bonds
(Workers Comp.-W. Green Bldg.) Ser. A, 4 3/4s,
4/1/14 A 921,113
7,640,000 OH State G.O. Bonds, MBIA, zero %, 8/1/13 AAA 2,979,600
OH State Wtr. Dev. Auth. Poll. Control Facs.
Rev. Bonds
2,500,000 (PA Pwr. Co. Project), Ser. B, 8.1s, 9/1/18 Baa 2,662,500
1,250,000 (Cleveland Elec. Illuminating Project),
8s, 10/1/23 Baa 1,301,563
2,200,000 MBIA, 6 1/2s, 6/1/05 AAA 2,486,000
5,555,000 MBIA, 5 1/2s, 6/1/15 AAA 5,596,663
OH State Wtr. Dev. Auth. Rev. Bonds
175,000 AMBAC, 9 3/8s, 12/1/18 AAA 183,388
1,000,000 Ser. A, AMBAC, 7 3/4s, 12/1/09 AAA 1,049,400
2,155,000 (Mid-American Waste Syst. Inc. Project),
7 3/4s, 9/1/07 BB/P 2,130,756
2,900,000 (Impt. Pure Wtr.), AMBAC, 5 1/2s, 12/1/11 AAA 2,939,875
4,500,000 (Coll. Wtr. Cincinnati Gas), Ser. A, MBIA,
5.45s, 1/1/24 AAA 4,449,375
5,700,000 OH State Wtr. Dev. Auth. Solid Waste Disp.
Rev. Bonds (North Star Broken Hill Steel
Project), 6.45s, 9/1/20 A 5,956,500
2,275,000 Orville, Elec. Syst. Mtge. Rev. Bonds,
Ser. A & B, AMBAC, 7 1/2s, 12/1/10 AAA 2,493,969
1,000,000 Oxford, Wtr. Supply Syst. Mtge. Rev.
Bonds, AMBAC, 7 5/8s, 12/1/14 AAA 1,117,500
1,000,000 Pickerington, Local School Dist. Construction
& Impt. Rev. Bonds, FGIC, 5.8s, 12/1/09 AAA 1,082,500
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
OHIO (continued)
- ----------------------------------------------------------------------
Sandusky Cnty., Hosp. Fac. Rev. Bonds
(Memorial Hosp. Project)
$1,750,0007 3/4s, 12/1/09 BB $1,736,875
795,000 7 3/8s, 12/1/01 BB 793,013
1,100,000 Scioto Cnty. Hosp. Facs. VRDN (VHA Ctr. Inc.
Cap. Asset), Ser. B, AMBAC, 3.6s, 12/1/25 VMIGI 1,100,000
2,600,000 Southwest Local School Dist. G.O. Bonds
(Hamilton Cnty.), AMBAC, 7.65s, 12/1/10 AAA 2,996,500
2,925,000 Toledo, Swr. Syst. Mtge. Rev. Bonds, AMBAC,
6.2s, 11/15/12 AAA 3,254,063
1,175,000 Toledo, Wtrwks. Mtge. Rev. Bonds, AMBAC,
6.2s, 11/15/12 AAA 1,293,969
1,100,000 Tuscarawas Cnty., Hosp. Facs. Rev. Bonds
(Union Hosp. Project), Ser. A, 6 1/2s,
10/1/21 Baa 1,067,000
1,000,000 Twin Valley, Cmnty. Local School Dist.
Rev. Bonds, FGIC, 7.05s, 12/1/11 AAA 1,191,250
3,240,000 U. of OH Rev. Bonds, FGIC, 5s, 12/1/13 AAA 3,090,150
1,955,000 U. Toledo, Gen. Recpt. Rev. Bonds, FGIC,
5.35s, 6/1/25 AAA 1,884,131
1,150,000 Washington, Wtr. Syst. Mtge. Rev. Bonds,
AMBAC, zero %, 12/1/09 AAA 552,000
Westerville City School Dist. Rev. Bonds
(School Impt.)
1,610,000 6 1/4s, 12/1/09 A 1,777,038
1,590,000 6 1/4s, 12/1/08 A 1,762,913
3,000,000 Woodridge, School Dist. Rev. Bonds, AMBAC,
6.8s, 12/1/14 AAA 3,558,750
Zanesville, Hsg. Dev. Corp. Mtge. Rev. Bonds
220,000 7 3/8s, 10/1/21 AAA 265,375
205,000 7 3/8s, 10/1/20 AAA 247,281
185,000 7 3/8s, 10/1/19 AAA 223,156
180,000 7 3/8s, 10/1/18 AAA 217,125
160,000 7 3/8s, 10/1/17 AAA 193,000
155,000 7 3/8s, 10/1/16 AAA 186,969
$199,258,546
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
PUERTO RICO (11.3%)
- ----------------------------------------------------------------------
$1,800,000 Cmnwlth. of PR, Govt. Dev. Bank VRDN,
3.3s, 12/1/15 VMIGI $1,800,000
1,350,000 Cmnwlth. of PR, Hwy. Auth. Rev. Bonds,
Ser. Q, 7 3/4s, 7/1/16 AAA 1,572,750
Cmnwlth. of PR, Hwy. & Trans. Auth. Hwy.
Rev. Bonds
4,000,000 Ser. W, 5 1/2s, 7/1/15 A 3,975,000
1,250,000 Ser. X, 5s, 7/1/22 A 1,131,250
Cmnwlth. of PR, Pub. Impt. G.O. Bonds
3,600,000 7.7s, 7/1/20 AAA 4,194,000
3,500,000 FSA, 7.677s, 7/1/20 AAA 3,727,500
1,250,000 AMBAC, 5 1/4s, 7/1/18 AAA 1,225,000
PR Elec. Pwr. Auth. Rev. Bonds
4,000,000 Ser. Y, MBIA, 6 1/2s, 7/1/06 AAA 4,535,000
1,310,000 Ser. N, 5s, 7/1/12 A 1,231,400
1,500,000 PR Pub. Bldgs. Auth. Gtd. Edl. & Hlth. Fac.
Rev. Bonds, Ser. H, 7 7/8s, 7/1/16 AAA 1,623,750
1,400,000 PR Tel. Auth. IFB, MBIA, 6.736s, 1/16/15 AAA 1,417,500
- ----------------------------------------------------------------------
$26,433,150
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (cost $209,626,440)*** $225,691,696
- ----------------------------------------------------------------------
<PAGE>
<FN>
NOTES
* Percentages indicated are based on net assets of $233,319,747.
** The Moody's or Standard & Poor's ratings indicated are believed
to be the most recent ratings available at November 30, 1995 for
the securities listed. Ratings are generally ascribed to
securities at the time of issuance. While 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, 1995.
Securities rated by Putnam are indicated by "/P" and are not
publicly rated.
# This security was pledged to cover margin requirements for future
contracts at November 30, 1995. The market value of the security
segregated with the custodian for transactions on future
contracts is $103,597 or less than 0.1% of net assets.
*** The aggregate identified cost on a tax cost basis is
$209,626,589, resulting in gross unrealized appreciation and
depreciation of $16,804,721 and $739,614, respectively, or net
unrealized appreciation of $16,065,107.
The fund had the following insurance concentrations greater than
10% at November 30, 1995 (as a percentage of net assets):
MBIA 21.1%
AMBAC 20.5
The fund had the following industry group concentrations greater
than 10% at November 30, 1995 (as a percentage of net assets):
Education 17.9%
Hospitals/Health Care 17.0
Water & Sewerage 16.3
Utilities 13.1
The rates shown on IFB, which are securities paying variable
interest rates that vary inversely to changes in the market
interest rates, and VRDN, are the current interest rates at
November 30, 1995, which are subject to change based on the terms
of the security.
FUTURES CONTRACTS OUTSTANDING
at November 30, 1995
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
UNREALIZED
TOTAL AGGREGATE EXPIRATION APPRECIATION/
VALUE FACE VALUE DATE (DEPRECIATION)
- ----------------------------------------------------------------------
Municipal Bond
Futures (Sell) $595,000 $595,000 Mar96 $--
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1995 (Unaudited)
<TABLE>
<S> <C>
ASSETS
- ----------------------------------------------------------------------
Investments in securities, at value
(identified cost $209,626,440) (Note 1) $225,691,696
- ----------------------------------------------------------------------
Interest and other receivables 4,270,618
- ----------------------------------------------------------------------
Receivable for shares of the fund sold 413,060
- ----------------------------------------------------------------------
Receivable for securities sold 4,308,125
- ----------------------------------------------------------------------
TOTAL ASSETS $234,683,499
LIABILITIES
- ----------------------------------------------------------------------
Payable to subcustodian (Note 2) 861
- ----------------------------------------------------------------------
Payable for shares of the fund repurchased 278,771
- ----------------------------------------------------------------------
Distributions payable to shareholders 594,913
- ----------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 342,437
- ----------------------------------------------------------------------
Payable for administrative services (Note 2) 1,390
- ----------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 120
- ----------------------------------------------------------------------
Payable for distribution fees (Note 2) 90,845
- ----------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 15,113
- ----------------------------------------------------------------------
Other accrued expenses 39,302
- ----------------------------------------------------------------------
TOTAL LIABILITIES 1,363,752
- ----------------------------------------------------------------------
NET ASSETS $233,319,747
- ----------------------------------------------------------------------
REPRESENTED BY
- ----------------------------------------------------------------------
Paid-in capital (Note 4) $223,297,213
- ----------------------------------------------------------------------
Distributions in excess of net investment income (21,845)
- ----------------------------------------------------------------------
Accumulated net realized loss on investments (6,020,877)
- ----------------------------------------------------------------------
Net unrealized appreciation of investments and
futures contracts 16,065,256
TOTAL--REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $233,319,747
- ----------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- ----------------------------------------------------------------------
Net asset value and redemption price of class A shares
($194,973,719 divided by 21,387,208 shares) $9.12
- ----------------------------------------------------------------------
Offering price per share (100/ 95.25 of $9.12)* $9.57
- ----------------------------------------------------------------------
Net asset value and offering price of class B shares
($38,261,207 divided by 4,203,149 shares)+ $9.10
- ----------------------------------------------------------------------
Net asset value and redemption price of class M shares
($84,821 divided by 9,304 shares) $9.12
- ----------------------------------------------------------------------
Offering price per share (100/96.75 of $9.12)** $9.43
- ----------------------------------------------------------------------
<FN>
* 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.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Six months ended November 30, 1995 (Unaudited)
<TABLE>
<S> <C>
TAX EXEMPT INTEREST INCOME $7,210,189
- ----------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------
Compensation of Manager (Note 2) 681,545
- ----------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 134,181
- ----------------------------------------------------------------------
Compensation of Trustees (Note 2) 5,757
- ----------------------------------------------------------------------
Auditing 19,171
- ----------------------------------------------------------------------
Legal 11,518
- ----------------------------------------------------------------------
Postage 18,944
- ----------------------------------------------------------------------
Reports to shareholders 9,113
- ----------------------------------------------------------------------
Registration fees 4,868
- ----------------------------------------------------------------------
Administrative services (Note 2) 4,165
- ----------------------------------------------------------------------
Distribution fees--class A (Note 2) 191,751
- ----------------------------------------------------------------------
Distribution fees--class B (Note 2) 151,475
- ----------------------------------------------------------------------
Distribution fees--class M (Note 2) 152
- ----------------------------------------------------------------------
Other expenses 3,052
- ----------------------------------------------------------------------
TOTAL EXPENSES 1,235,692
- ----------------------------------------------------------------------
Expense reduction (Note 2) (141,235)
- ----------------------------------------------------------------------
NET EXPENSES 1,094,457
- ----------------------------------------------------------------------
NET INVESTMENT INCOME 6,115,732
- ----------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (1,478,398)
- ----------------------------------------------------------------------
Net realized loss on futures contracts (Notes 1 and 3) (161,322)
- ----------------------------------------------------------------------
Net unrealized appreciation of investments during the period 5,924,784
- ----------------------------------------------------------------------
NET GAIN ON INVESTMENTS 4,285,064
- ----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,400,796
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
<S> <C> <C>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30 MAY 31
- ----------------------------------------------------------------------
- --
1995* 1995
- ----------------------------------------------------------------------
- --
INCREASE IN NET ASSETS
- ----------------------------------------------------------------------
- --
Operations:
- ----------------------------------------------------------------------
- --
Net investment income $6,115,732 $12,620,205
- ----------------------------------------------------------------------
- --
Net realized loss on investment transactions (1,639,720) (3,996,686)
- ----------------------------------------------------------------------
- --
Net unrealized appreciation of investments 5,924,784 8,118,467
- ----------------------------------------------------------------------
- --
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 10,400,796 16,741,986
- ----------------------------------------------------------------------
- --
Distributions to shareholders
- ----------------------------------------------------------------------
- --
From net investment income:
- ----------------------------------------------------------------------
- --
Class A (5,274,193) (11,195,160)
- ----------------------------------------------------------------------
- --
Class B (866,695) (1,307,862)
- ----------------------------------------------------------------------
- --
Class M (1,608) --
- ----------------------------------------------------------------------
- --
From net realized gains:
- ----------------------------------------------------------------------
- --
Class A -- (258,158)
- ----------------------------------------------------------------------
- --
Class B -- (33,773)
- ----------------------------------------------------------------------
- --
Increase from capital shares transactions
(Note 4) 3,037,880 9,988,121
- ----------------------------------------------------------------------
- --
TOTAL INCREASE IN NET ASSETS 7,296,180 13,935,154
NET ASSETS
- ----------------------------------------------------------------------
- --
Beginning of period 226,023,567 212,088,413
- ----------------------------------------------------------------------
- --
END OF PERIOD (including distributions in
excess of net investment income and
undistributed net investment income of
$21,845 and $4,919, respectively) $233,319,747 $226,023,567
- ----------------------------------------------------------------------
- --
<FN>
* Unaudited.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
FOR THE PERIOD
APRIL 3, 1995
SIX MONTHS (COMMENCEMENT SIX MONTHS YEAR
ENDED OF OPERATIONS) TO ENDED ENDED
NOVEMBER 30 MAY 31 NOVEMBER 30 MAY 31
- ----------------------------------------------------------------------
- --
1995* 1995 1995* 1995
- ----------------------------------------------------------------------
- --
Class M Class B
- ----------------------------------------------------------------------
- --
NET ASSET VALUE,
BEGINNING OF PERIOD $8.95 $8.76 $8.94 $8.79
- ----------------------------------------------------------------------
- --
INVESTMENT OPERATIONS
Net investment income .22 .08 .21 .46
Net realized and unrealized
gain (loss) on investments .18 .19 17 .16
- ----------------------------------------------------------------------
- --
TOTAL FROM INVESTMENT OPERATIONS .40 .27 .38 .62
- ----------------------------------------------------------------------
- --
LESS DISTRIBUTIONS:
From net investment income(.23) (.08) (.22) (.46)
From net realized gain on
investments -- -- -- (.01)
- ----------------------------------------------------------------------
- --
TOTAL DISTRIBUTIONS (.23) (.08) (.22) (.47)
- ----------------------------------------------------------------------
- --
NET ASSET VALUE, END OF
PERIOD $9.12 $8.95 $9.10 $8.94
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(b) 4.60(c) 3.05(c) 4.29(c) 7.39
- ----------------------------------------------------------------------
- --
NET ASSETS, END OF PERIOD
(in thousands) $84 $1 $38,261 $32,847
- ----------------------------------------------------------------------
- --
Ratio of expenses to average
net assets (%)(e) .62(c) 0.20(c) .82(c) 1.58
- ----------------------------------------------------------------------
- --
Ratio of net investment income to
average net assets (%) 2.50(c) 0.89(c) 2.41(c) 5.24
- ----------------------------------------------------------------------
- --
Portfolio turnover (%) 8.70 66.29 8.70 66.29
- ----------------------------------------------------------------------
- --
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<C> <C> <C> <C> <C> <C>
FOR THE PERIOD
JULY 15, 1993
(COMMENCEMENT SIX MONTHS
OF OPERATIONS) TO ENDED
MAY 31 NOVEMBER 30 YEAR ENDED MAY 31
- --------------------------------------------------------------------------------
- ----------------
1994 1995* 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
- ----------------
Class B Class A
- --------------------------------------------------------------------------------
- ----------------
$9.37 $8.95 $8.80 $9.26 $8.78 $8.55 $8.40
- --------------------------------------------------------------------------------
- ----------------
.40 .24 .52 .53 .54 .57(a) .59(a)
(.46) .18 .15 (.35) .48 .23 .14
- --------------------------------------------------------------------------------
- ----------------
(.06) .42 .67 .18 1.02 .80 .73
- --------------------------------------------------------------------------------
- ----------------
(.40) (.25) (.51) (.52) (.54) (.57) (.58)
(.12) -- (.01) (.12) -- -- --
- --------------------------------------------------------------------------------
- ----------------
(.52) (.25) (.52) (.64) (.54) (.57) (.58)
- --------------------------------------------------------------------------------
- ----------------
$8.79 $9.12 $8.95 $8.80 $9.26 $8.78 $8.55
- --------------------------------------------------------------------------------
- ----------------
(1.49)(c) 4.74(c) 8.04 1.88 11.94 9.65 9.09
- --------------------------------------------------------------------------------
- ----------------
$17,959 $194,974 $193,176 $194,130 $177,879 $140,309 $21,136
- --------------------------------------------------------------------------------
- ----------------
1.42(c) .49(c) .93 .99 1.04 .90(a) .87(a)
- --------------------------------------------------------------------------------
- ----------------
4.35(c) 2.75(c) 5.97 5.68 5.90 6.41(a) 6.83(a)
- --------------------------------------------------------------------------------
- ----------------
44.45 8.70 66.29 44.45 21.57 15.20(d) 17.40
- --------------------------------------------------------------------------------
- ----------------
<FN>
* Unaudited.
(a)Reflects an expense limitation in effect during the period. As a result, net
investment income of the fund for the years ended May 31, 1992 and 1991
reflect expense reductions of approximately $0.01 and $0.05 per share,
respectively.
(b)Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c)Not annualized.
(d)Portfolio turnover excludes the impact of assets received by the fund, then
known as Putnam Ohio Tax Exempt Income Fund II, from the acquisition of
Putnam Ohio Tax Exempt Income Fund.
(e)The ratio of expenses to average net assets for the period ended November
30, 1995 included amounts paid through expense offset arrangements. Prior
period ratios exclude these amounts.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1995 (Unaudited)
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 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 portfolio of Ohio 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 do not pay a front-end sales charge, but pay a higher ongoing
distribution fee than class A shares and are subject to a contingent
deferred sales charge, if those shares are redeemed within six years
of purchase. Class M shares are sold with a maximum front-end sales
charge of 3.25% and pay an ongoing distribution fee that is lower than
class B shares and higher than class A shares. Expenses of the fund
are borne pro-rata by the holders of each classes of shares, except
that each class bears expenses unique to that class (including the
distribution fees applicable to such class). Each class votes as a
class only with respect to its own distribution plan or other matters
on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of
the net assets of the fund, if the fund were liquidated. In addition,
the Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles.
A SECURITY VALUATION Tax-exempt bonds and notes are stated on the
basis of valuations provided by a pricing service, approved by the
Trustees, which uses information with respect to transactions in
bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in determining
value.
B SECURITY TRANSACTIONS and related investment income Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual
basis.
C FEDERAL TAXES It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to
distribute an amount sufficient to avoid imposition of any excise tax
under Section 4982 of the Internal Revenue Code of 1986. Therefore, no
provision has been made for federal taxes on income or capital gains
on securities held and excise tax on income and capital gains.
At May 31, 1995, the fund had a capital loss carryover of
approximately $1,981,000 which may be available to offset realized
gains, if any, which will expire on May 31, 2003.
<PAGE>
D DISTRIBUTIONS TO SHAREHOLDERS Income dividends are recorded daily by
the fund and are distributed monthly. Capital gain distributions if
any, are recorded on the ex-dividend date and paid annually. The
amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles.
E 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 which it invests 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.
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.
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 and original issue
discount bonds are accreted according to the effective yield method.
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.60% of
the first $500 million of average net assets, 0.50% of the next $500
million, 0.45% of the next $500 million and 0.40% of any amount over
$1.5 billion, subject, under current law, to reduction in any year by
the amount of certain brokerage commissions and fees (less expenses)
received by affiliates of Putnam Management on the fund's portfolio
transactions.
The fund also reimburses Putnam Management for the compensation and
related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of
all such reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustees fee of $750 and an
additional fee for each Trustee's meeting attended. Trustees who are
not interested persons
<PAGE>
of Putnam Management and who serve on committees of the Trustess
receive additional fees for attendence at certain meetings.
During the period ended November 30, 1995, the fund adopted a Trustee
Fee Deferral Plan (the "Plan") which allows the Trustees to defer the
receipt of all or a portion of Trustees fees payable on or after July
1, 1995. The deferred fees remain in the fund and are invested in the
fund or in other Putnam funds until distribution in accordance with
the Plan.
For the period ended November 30, 1995, fund expenses were reduced by
$141,235 under expense offset arrangements with PFTC. Investor
servicing and custodian fees reported in the Statement of operations
exclude these credits. The fund could have invested the assets
utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred
by it in distributing shares of the fund. The Plans provide for
payments by the fund to Putnam Mutual Funds Corp. at an annual rate up
to 0.35%, 1.00% and 1.00% of the average net assets attributable to
class A, class B and class M shares, respectively. The Trustees have
approved payment by the fund at an annual rate of 0.20%, 0.85% and
0.50% of the average net assets attributable to class A, class B and
class M shares, respectively.
For the period ended November 30, 1995, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $20,966 from the
sale of class A shares and no monies from the sale of class M shares.
There were no monies received in contingent deferred sales charges
from redemptions of class B shares. A deferred sales charge of up to
1% is assessed on certain redemptions of class A shares. For the
period ended November 30, 1995, Putnam Mutual Funds Corp., acting as
underwriter received no monies on class A redemptions.
NOTE 3
PURCHASES AND SALES OF SECURITIES During the period ended November 30,
1995, purchases and sales of investment securities other than short-
term municipal obligations aggregated $19,224,111 and $27,792,726,
respectively. Purchases and sales of short-term municipal obligations
aggregated $14,000,000 and $13,100,000, respectively. In determining
the net gain or loss on securities sold, the cost of securities has
been determined on the identified cost basis.
<PAGE>
NOTE 4
CAPITAL SHARES
At November 30, 1995, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
<TABLE><CAPTION>
<S> <C> <C>
SIX MONTHS ENDED
NOVEMBER 30
- ----------------------------------------------------------------------
- --
1995
- ----------------------------------------------------------------------
- --
CLASS A SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 715,488 $6,378,163
Shares issued in connection
with reinvestment of distributions 379,444 3,389,146
- ----------------------------------------------------------------------
- --
1,094,932 9,767,309
- ----------------------------------------------------------------------
- --
Shares repurchased (1,292,910) (11,521,534)
- ----------------------------------------------------------------------
- --
NET DECREASE (197,978) $(1,754,225)
- ----------------------------------------------------------------------
- --
YEAR ENDED
MAY 31
- ----------------------------------------------------------------------
- --
1995
- ----------------------------------------------------------------------
- --
CLASS A SHARES AMOUNT
- ----------------------------------------------------------------------
- ----
Shares sold 1,641,894 $14,154,333
Shares issued in connection
with reinvestment of distributions 851,961 7,339,952
- ----------------------------------------------------------------------
- --
2,493,855 21,494,285
- ----------------------------------------------------------------------
- --
Shares repurchased (2,976,624) (25,590,365)
- ----------------------------------------------------------------------
- --
NET DECREASE (482,769) $(4,096,080)
- ----------------------------------------------------------------------
- --
SIX MONTHS ENDED
NOVEMBER 30
- ----------------------------------------------------------------------
- --
1995
- ----------------------------------------------------------------------
- --
CLASS B SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 894,677 $7,969,290
Shares issued in connection
with reinvestment of distributions 57,090 509,321
- ----------------------------------------------------------------------
- --
951,767 8,478,611
- ----------------------------------------------------------------------
- --
Shares repurchased (422,639) (3,768,110)
- ----------------------------------------------------------------------
- --
NET INCREASE 529,128 $4,710,501
- ----------------------------------------------------------------------
- --
YEAR ENDED
MAY 31
- ----------------------------------------------------------------------
- --
1995
- ----------------------------------------------------------------------
- --
CLASS B SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 1,872,645 $16,128,281
Shares issued in connection
with reinvestment of distributions 94,617 814,451
- ----------------------------------------------------------------------
- --
1,967,262 16,942,732
Shares repurchased (335,544) (2,859,532)
- ----------------------------------------------------------------------
- --
NET INCREASE 1,631,718 $14,083,200
- ----------------------------------------------------------------------
- --
SIX MONTHS ENDED
NOVEMBER 30
- ----------------------------------------------------------------------
- --
1995
- ----------------------------------------------------------------------
- --
CLASS M SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 9,063 $80,474
Shares issued in connection
with reinvestment of distributions 126 1,130
- ----------------------------------------------------------------------
- --
9,189 81,604
- ----------------------------------------------------------------------
- --
Shares repurchased (--) (--)
- ----------------------------------------------------------------------
- --
NET INCREASE 9,189 $81,604
- ----------------------------------------------------------------------
- --
FOR THE PERIOD
ENDED APRIL 3, 1995
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31
- ----------------------------------------------------------------------
- --
1995
- ----------------------------------------------------------------------
- --
CLASS M SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 115 $1,006
Shares issued in connection
with reinvestment of distributions -- --
- ----------------------------------------------------------------------
- --
-- --
- ----------------------------------------------------------------------
- --
Shares repurchased (--) (--)
- ----------------------------------------------------------------------
- --
NET INCREASE 115 $1,006
- ----------------------------------------------------------------------
- --
</TABLE>
<PAGE>
OUR COMMITMENT TO QUALITY SERVICE
CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service
Seal for the past five years. In 1994, over 80,000 tests of 55
shareholder service components demonstrated that Putnam outperformed
the industry standard in every category.
HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a
month from a Putnam money market fund or from your checking or savings
account.*
SWITCH FUNDS EASILY
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change
or terminations.)
ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your
financial advisor or call the toll-free number shown below and speak
with a helpful Putnam representative.
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number: 1-800-225-
1581.
* Regular investing, of course, does not guarantee a profit or
protect against a loss in a declining market.
<PAGE>
FUND INFORMATION
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
James E. Erickson
Vice President
Richard P. Wyke
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Senior Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Ohio Tax
Exempt Income Fund. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details
of sales charges, investment objectives, and operating policies of the
fund, and the most recent copy of Putnam's Quarterly Performance
Summary. For more information, or to request a prospectus, call toll
free: 1-800-225-1581.
SHARES OF MUTUAL FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
22180 1/96
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typefaces is displayed in normal type.
(3) Boldface type is displayed in capital letters.
(4) Headers (e.g. the names of the fund) and footers (e.g. page
numbers and OThe accompanying notes are an integral part of these
financial statementsO) are omitted.
(5) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(6) Bullet points and similar graphic symbols are omitted.
(7) Page numbering is different.
