Putnam
Ohio
Tax Exempt
Income
Fund
SEMIANNUAL REPORT
November 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "While the stock market's higher returns may be a lure,
diversification is imperative in any investment portfolio, and municipal
bonds can provide that variety."
-- Business Week, December 16, 1996
* "Technicals have remained positive for Ohio municipal investors so far
this year: moderate but stable economic growth, benign inflation, and a
favorable supply/demand ratio created a constructive environment for
positive returns."
-- Howard K. Manning, manager
Putnam Ohio Tax Exempt Income Fund
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
17 Financial statements
26 Results of December 5, 1996, shareholder meeting
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
The first half of Putnam Ohio Tax Exempt Income Fund's fiscal year 1997
presented a significantly brighter municipal bond market environment
than the one that had prevailed in preceding months. As the semiannual
period unfolded, the municipal bond market -- including the market for
Ohio tax-exempt bonds -- began to develop a sense of serenity. The
period closed on November 30, 1996, in an almost upbeat mood.
That is not to imply there were no challenges. Your fund's manager,
Howard Manning, continues to address the potential impact of interest-
rate trends and the periodic release of economic data on the market and
to make the appropriate adjustments to the portfolio. Howard believes
the ongoing scarcity of attractive securities bodes well for the market
and for your fund in the months ahead. Backed by Putnam's extensive
credit research capability, he is confident he will continue to find
attractive opportunities.
In the report that follows, Howard discusses the events and strategies
that drove the fund's performance during the fiscal year's first half
and then takes a look at prospects for the second half.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
January 15, 1997
Report from the Fund Manager
Howard K. Manning
Moderate price gains in the municipal bond market and an attractive
income stream from portfolio holdings combined to lead Putnam Ohio Tax
Exempt Income Fund to solid total returns for the semiannual period
ended November 30, 1996. In the first six months of fiscal year 1997,
class A, class B, and class M shares' total returns were 6.39%, 6.05%,
and 6.22%, respectively, all at net asset value (1.30%, 1.05%, and
2.82%, respectively, at public offering price). For additional
performance information, including a look at your fund's taxable
equivalent dividend rate -- the amount of income a person in the top
income tax bracket would need from a taxable investment to equal your
fund's distributions on an after-tax basis -- please refer to the
performance summary that begins on page 8.
* SLOWING ECONOMY AND STRONG DEMAND SPARK MUNICIPAL BOND RALLY
After a difficult and volatile year, the municipal bond market shifted
gears and rallied during your fund's semiannual period. The U.S.
economy's fast-paced growth of 4.6% during the summer quarter of 1996
gave way to a projection of 2.2% growth for the final three months of
the year. Economists expect this slowdown to continue into early 1997.
This cooling of economic growth soothed investors' concerns over rising
interest rates and helped lead fixed-income investments, including
municipal bonds, to higher price levels.
Strong demand also helped spur the period's municipal bond rally. While
large numbers of individual U.S. investors focused their attention on
the unprecedented gains in the stock market, overseas investors
purchased upward of $175 billion in U.S. bonds -- an amount that exceeds
the federal budget deficit. Although foreign investors -- ineligible for
the tax benefits of municipal bonds -- invested primarily in U.S.
Treasury securities, their interest sparked greater demand, which
consequently, resulted in rising prices for the municipal market.
In terms of supply, the market for municipal securities was relatively
tight through the first few months of the period. June and July are
traditionally months in which many bonds mature or reach their call
dates and September's municipal bond issuance was the lowest in more
than a year. Autumn's lower interest rates, however, made bond issuance
more attractive for cash-strapped municipalities, and the overall supply
of new bonds rose slightly. Availability of Ohio issues, however,
remained slight relative to other regions, as the Buckeye State
continued its conservative approach to new bond issuance.
We capitalized on the positive performance of the municipal bond market
by maintaining an above-market duration for the past six months.
Duration is a measure of a portfolio's sensitivity to interest-rate
changes. A longer duration can mean a more volatile net asset value if
rates change -- but also one more likely to appreciate substantially if
rates decline. A shorter duration can help preserve portfolio value as
interest rates rise. Your fund's longer duration helped boost
performance during the period as interest rates on medium- and long-term
municipal bonds dropped by 46 and 50 basis points, respectively.
* CREDIT RESEARCH CRUCIAL TO PORTFOLIO STRUCTURE
Ohio's economy exemplifies the robust economic strength of the Midwest
region. Increased property tax collections and other signs of an
improved economy have favored general obligation bonds at both the state
and local government levels. With the previously mentioned scarcity of
Ohio municipal bonds, our analysts are constantly scouring the secondary
and, especially, the new-issue markets for available securities that
meet our stringent investment criteria.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: TOP INDUSTRY SECTORS*]
TOP INDUSTRY SECTORS*
Health care 22.8%
Water and sewerage 14.6%
Education 13.6%
Housing 9.4%
Utilities 6.6%
Footnote reads:
* Based on net assets as of 11/30/96. Industry sectors will vary over
time.
The health-care sector is still a key emphasis for the fund, and likely
to remain so for some time. Consolidations, improved methods of cost
containment, and a near-total lack of new hospital construction support
our favorable view of this sector's potential. In addition to the
traditional hospital holdings, our investments include demographically
attractive geriatric care facilities such as nursing homes and
retirement communities. Since beginning our focus on this sector two
years ago, our analysts have become adept at identifying uninsured
health-care bonds with steady revenue streams and strong potential for
credit upgrades or prerefunding. Prerefunding occurs when an issuer
floats a bond to raise capital to pay off, or retire, an older bond. The
proceeds from the newer issue are held in top-quality short-term
instruments until the old debt can be retired, usually at its first call
date. The typical effect of a prerefunding is the same as that of an
actual credit upgrade -- price appreciation. In the meantime, these
issues make up some of your portfolio's core yield holdings.
* CONSTRUCTIVE, YET CAUTIOUS, OUTLOOK PREVAILS
After the market's positive performance during the past six months, we
now believe municipal bonds may be fully priced and we are scaling back
your portfolio's duration accordingly. We are also aiming to re-position
the portfolio from a barbell structure, which favors holdings in both
short- and long-term bonds, to one that emphasizes bonds in the 15- to
20-year maturity range, where we expect to find better values. Seeking
improved call protection is another of our priorities and is intended to
help protect your fund against any eventual market downturns.
As your fund enters the second half of fiscal l997, we will continue to
scrutinize existing and new municipal bond issues to find securities
that will contribute to your fund's stream of tax-exempt income. In a
post-rally environment, however, we must remain mindful of an inevitable
tax consequence -- taxable capital gains from the sales of portfolio
holdings that have risen in value. In keeping with the fund's objective
of providing tax-free income, we plan to shift portfolio holdings only
when the potential benefits will substantially outweigh the effects of
any taxable distributions.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO QUALITY OVERVIEW]
PORTFOLIO QUALITY OVERVIEW*
Aaa --59.3%
Aa --13.4%
A --8.8%
Baa --12.7%
Ba --3.7%
A-1 --2.1%
Footnote reads:
*As a percentage of market value as of 11/30/96. A bond rated Baa or
higher is considered investment grade. All ratings reflect Moody's
descriptions, unless noted otherwise; percentages may include unrated
bonds considered by Putnam Management to be of comparable quality.
Ratings will vary over time.
Pre-election talks of sweeping tax reforms, such as the flat tax and the
elimination of the Internal Revenue Service, have been shelved, most
likely for the duration of the current administration. Although we
remain aware that these issues are merely dormant, not dead, the short-
term outlook for tax-advantaged income investments remains constructive.
Footnote reads:
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 11/30/96, there is no guarantee the fund
will continue to hold these securities in the future.
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 taxes 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 11/30/96
Class A Class B Class M
(inception date) (10/23/89) (7/15/93) (4/3/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 6.39% 1.30% 6.05% 1.05% 6.22% 2.82%
- ------------------------------------------------------------------------
1 year 4.93 -0.01 4.35 -0.63 4.60 1.16
- ------------------------------------------------------------------------
5 years 41.63 34.94 -- -- -- --
Annual average 7.21 6.18 -- -- -- --
- ------------------------------------------------------------------------
Life of class 66.80 58.95 15.96 13.06 12.74 9.13
Annual average 7.46 6.74 4.48 3.70 7.49 5.40
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/96
Lehman Bros.
Municipal Consumer
Bond Index Price Index
- ------------------------------------------------------------------------
6 months 6.50% 1.28%
- ------------------------------------------------------------------------
1 year 5.89 3.26
- ------------------------------------------------------------------------
5 years 45.83 15.09
Annual average 7.83 2.85
- ------------------------------------------------------------------------
Life of class A 76.21 26.27
Annual average 8.33 3.34
- ------------------------------------------------------------------------
Life of class B 22.34 9.83
Annual average 6.23 2.81
- ------------------------------------------------------------------------
Life of class M 15.06 4.76
Annual average 8.76 2.84
- ------------------------------------------------------------------------
POP assumes 4.75% maximum sales charge for class A shares and 3.25% for
class M shares. CDSC for class B shares assumes the applicable sales
charge, with the maximum being 5%.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 11/30/96
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------
Income1 $0.231664 $0.202300 $0.217887
- ------------------------------------------------------------------------
Total $0.231664 $0.202300 $0.217887
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
5/31/96 $8.76 $9.20 $8.75 $8.76 $9.05
- ------------------------------------------------------------------------
11/30/96 9.08 9.53 9.07 9.08 9.39
- ------------------------------------------------------------------------
Current return
(end of period)
- ------------------------------------------------------------------------
Current dividend rate2 5.01% 4.77% 4.36% 4.71% 4.55%
- ------------------------------------------------------------------------
Taxable equivalent3 8.97 8.54 7.80 8.43 8.14
- ------------------------------------------------------------------------
Current 30-day SEC yield4 4.62 4.40 3.97 4.29 4.15
- ------------------------------------------------------------------------
Taxable equivalent3 8.27 7.88 7.11 7.68 7.43
- ------------------------------------------------------------------------
1 For some investors, investment income may be subject to the federal
alternative minimum tax. Investment income may be subject to state and
local taxes.
2 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
3 Assumes maximum 44.13% combined federal and state tax rate. Results
for investors subject to lower tax rates would not be as advantageous.
4 Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 12/31/96
(most recent calendar quarter)
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 4.67% -0.31% 4.25% -0.75% 4.41% -0.98%
- ------------------------------------------------------------------------
1 year 3.36 -1.58 2.72 -2.20 2.94 -0.42
- ------------------------------------------------------------------------
5 years 38.22 31.62 -- -- -- --
Annual average 6.69 5.65 -- -- -- --
- ------------------------------------------------------------------------
Life of class 65.77 57.96 15.09 12.22 11.91 8.32
Annual average 7.28 6.56 4.13 3.38 6.64 4.68
- ------------------------------------------------------------------------
Footnote reads:
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions or
for distribution fees prior to implementation of the class A
distribution plan in 1990. Investment returns and principal value will
fluctuate so that an investor's shares, when sold, may be worth more or
less than their original cost.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 4.75% sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
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.
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<TABLE>
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Portfolio of investments owned
November 30, 1996 (Unaudited)
Key to Abbreviations
AMBAC --AMBAC Indemnity Corporation
CLI Insd. --Connie Lee Insurance Insured
FGIC --Financial Guaranty Insurance Company
FHA Insd. --Federal Housing Administration Insured
FNMA Coll. --Federal National Mortgage Association Collateralized
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
<S> <C> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (99.2%) *
PRINCIPAL AMOUNT RATINGS** VALUE
Ohio (87.0%)
- --------------------------------------------------------------------------------------------------------------------------------
$100,000 Akron-Wilbeth, Hsg. Dev. Corp. 1st Mtge. Rev. Bonds, FHA Insd.,
7.9s, 8/1/03 Aaa $ 117,250
1,990,000 Bedford, Hosp. Impt. Rev. Bonds (Bedford Cmnty. Hosp. Inc.),
8 1/2s, 5/15/09 AAA/P 2,221,338
1,500,000 Brecksville-Broadview Heights, City School Dist. G.O. Bonds, FGIC, 6 1/2s, 12/1/16 Aaa 1,674,375
1,625,000 Cincinnati, Student Loan Funding Corp. Rev. Bonds, Ser. B, 8 7/8s, 8/1/08 BBB/P 1,704,219
Cleveland, City School Dist. G.O. Bonds
900,000 9s, 12/1/08 Aaa 1,004,625
2,500,000 8 1/4s, 12/1/08 Aaa 2,981,250
1,000,000 AMBAC, 7.35s, 12/1/08 Aaa 1,086,250
4,870,000 Cleveland, G.O. Bonds, Ser. B, AMBAC, 6 3/4s, 10/1/08 # Aaa 5,472,663
2,500,000 Cleveland, Pkg. Fac. Impt. Rev. Bonds, 8s, 9/15/12 BB/P 2,978,125
Cleveland, Urban Renewal Increment Rev. Bonds (Rock & Roll Hall of Fame)
1,900,000 6 3/4s, 3/15/18 BBB/P 1,957,000
2,000,000 6 5/8s, 3/15/11 BBB/P 2,057,500
Cleveland, Waterworks 1st Mtge. Rev. Bonds
2,000,000 Ser. F-92A, AMBAC, 6 1/2s, 1/1/21 Aaa 2,225,000
3,000,000 Ser. G, MBIA, 5 1/2s, 1/1/21 Aaa 3,067,500
7,950,000 Ser. G, MBIA, 5 1/2s, 1/1/13 Aaa 8,198,438
1,000,000 Clyde, Elec. Syst. Mtge. Rev. Bonds, Ser. B, 8 3/8s, 11/15/14 BB/P 1,040,000
Cuyahoga Cnty., Hosp. Rev. Bonds
4,050,000 (Cleveland-Fairview Gen. Hosp. & Lutheran Med. Ctr.), MBIA, 6 1/4s, 8/15/10 Aaa 4,374,000
1,940,000 (U. Hosp.), Ser. A, MBIA, 6s, 1/15/06 Aaa 2,112,175
1,640,000 Delaware, School Dist. Rev. Bonds, FGIC, 5 3/4s, 12/1/15 Aaa 1,685,100
1,300,000 Dublin, G.O. Bonds, Ser. B, 6.4s, 12/1/14 Aa 1,464,125
2,000,000 Evendale, Indl. Dev. VRDN (Real Estate Inc.), 3.35s, 9/1/15 A-1 2,000,000
2,000,000 Findlay, G.O. Bonds, 5 7/8s, 7/1/17 AA 2,062,500
1,300,000 Franklin Cnty., Convention Fac. Auth. Tax & Lease RAN, MBIA, 7s, 12/1/19 Aaa 1,457,625
8,000,000 Franklin Cnty., Hosp. Rev. Bonds (Holy Cross Hlth. Syst., Corp.), 5.8s, 6/1/16 Aa 8,170,000
4,020,000 Geauga Cnty., Hosp. Impt. Rev. Bonds (Geauga Hosp. Assn.), 8 3/4s, 11/15/13 BBB 4,194,589
Hamilton Cnty., Elec. Syst. Mtge. Rev. Bonds, Ser. B
700,000 FGIC, 8s, 10/15/22 Aaa 764,750
2,600,000 FGIC, 7 1/4s, 10/15/23 Aaa 2,759,250
3,300,000 Hamilton Cnty., Swr. Syst. Rev. Bonds, Ser. A, FGIC, 5 1/2s, 12/1/17 Aaa 3,328,875
1,000,000 Hubbard, Swr. Syst. Mtge. Rev. Bonds, 8.8s, 11/15/17 BBB/P 1,066,250
1,800,000 Huron Cnty., Human Svcs. Rev. Bonds, MBIA, 6.55s, 12/1/20 Aaa 2,076,750
1,320,000 Kirtland, G.O. Bonds, AMBAC, 7 1/2s, 12/1/16 Aaa 1,491,600
363,018 Lake Cnty., Indl. Dev. Rev. Bonds (Madison Inn Hlth. Ctr.), FHA Insd., 12s, 5/1/14 BBB/P 392,967
1,000,000 Lakota, Local School Dist. Rev. Bonds, AMBAC, 7s, 12/1/10 Aaa 1,190,000
834,389 Logan Cnty., Indl. Dev. Rev. Bonds (Indian Lake Hlth.), FHA Insd., 12s, 3/15/14 AAA/P 998,391
1,910,000 Lorain Cnty., Elderly Hsg. Corp. Multi-Fam. Rev. Bonds (Harr Plaza & Intl.),
Ser. A, 6 3/8s, 7/15/19 A 1,933,875
Lorain Cnty., Fac. Rev. Bonds (Laurel Lake)
1,500,000 7.3s, 12/15/14 BB/P 1,560,000
1,750,000 7 1/8s, 12/15/18 BB/P 1,800,313
5,325,000 Lorain Cnty., Hosp. Rev. Bonds (EMH Regl. Med. Ctr.), AMBAC, 7 3/4s, 11/1/13 Aaa 6,270,188
Marion Cnty., Hlth. Care Fac. Rev. Bonds (United Church Homes)
460,000 8 7/8s, 12/1/12 BBB/P 533,025
4,000,000 6 3/8s, 11/15/10 BBB 4,095,000
2,000,000 6.3s, 11/15/15 BBB 2,015,000
1,205,000 Massillon, Rev. Bonds (Lincoln Ctr. Phase II), AMBAC, 6.95s, 12/1/10 Aaa 1,429,431
2,500,000 Miami Cnty., Hosp. Fac. Rev. Bonds (Upper Valley Med. Ctr.), Ser. A, 6 3/8s, 5/15/26 Baa 2,534,375
1,895,000 Montgomery-Conifers, Hsg. Dev. Corp. Mtge. Rev. Bonds (Conifers ), FHA Insd.,
8.45s, 6/1/28 AA 1,994,677
2,800,000 Mount Vernon, Hosp. Rev. Bonds (Knox Cmnty. Hosp.), 7 7/8s, 6/1/12 BBB/P 2,880,556
Muskingum Cnty., Hosp. Fac. Rev. Bonds
1,000,000 (Franciscan Sisters), CLI Insd., 5 3/8s, 2/15/12 AAA 970,000
1,000,000 (Bethesda Care Syst.), CLI Insd., 5.1s, 12/1/05 AAA 1,020,000
2,700,000 North Olmsted, G.O. Bonds, AMBAC, 6.2s, 12/1/11 Aaa 2,980,125
North Royalton, City School Dist. G.O. Bonds
1,885,000 MBIA, 6 5/8s, 12/1/06 Aaa 2,167,750
1,000,000 AMBAC, 5.65s, 12/1/08 Aaa 1,073,750
835,000 Northwestern, School Dist. Rev. Bonds (Wayne & Ashland Cntys. School Impt.),
FGIC, 7.2s, 12/1/10 Aaa 1,006,175
3,350,000 OH Poll. Control Rev. Bonds (Standard Oil Co.), 6 3/4s, 12/1/15 AA 3,957,188
3,000,000 OH Cap. Corp. Multi-Fam. Hsg. Rev. Bonds, Ser. A, FNMA Coll., 7.6s, 11/1/23 AAA 3,214,440
6,414,000 OH Hsg. Fin. Agcy. Single Fam. Mtge. IFB, Ser. A-2, GNMA Coll., 9.909s, 3/24/31 Aaa 6,935,138
OH Hsg. Fin. Agcy. Single Fam. Mtge. Rev. Bonds
600,000 Ser. C, GNMA Coll., 7.85s, 9/1/21 AAA 645,000
490,000 Ser. 85-A, FGIC, zero %, 1/15/15 Aaa 79,625
OH State Bldg. Auth. Rev. Bonds
1,000,000 (Adult Correctional Fac.), Ser. A, AMBAC, 6s, 4/1/06 Aaa 1,095,000
7,000,000 (Correctional Fac.), Ser. S, 5s, 9/1/12 AA 6,667,500
1,015,000 (Workers Comp. W. Green Bldg.), Ser. A, 4 3/4s, 4/1/14 AA 931,263
OH State Econ. Dev. Rev. Bonds
1,510,000 (Sponge, Inc.), Ser. 5-A, 8 3/8s, 6/1/14 A 1,642,125
665,000 (Superior Forge & Steel Corp.), Ser. 3, 7 5/8s, 6/1/11 A 739,813
OH State Higher Ed. Fac. Rev. Bonds (Case Western Reserve U.)
4,500,000 6 1/4s, 10/1/18 Aa 5,017,500
1,000,000 6s, 10/1/14 Aa 1,086,250
3,900,000 OH State Tpk. Comm. Rev. Bonds, Ser. A, MBIA, 5.7s, 2/15/17 Aaa 3,982,875
OH State Wtr. Dev. Auth. Poll. Control Fac. Rev. Bonds
2,500,000 (PA Pwr.), Ser. B, 8.1s, 9/1/18 Baa 2,600,250
1,250,000 (Cleveland Elec. Illuminating), 8s, 10/1/23 Ba 1,301,563
OH State Wtr. Dev. Auth. Rev. Bonds
15,000 AMBAC, 9 3/8s, 12/1/18 Aaa 15,539
2,900,000 (Impt. Pure Wtr.), AMBAC, 5 1/2s, 12/1/11 Aaa 2,947,125
OH State Wtr. Dev. Auth. Poll. Control Fac. Rev. Bonds
5,555,000 (Wtr. Qlty. Loan Fund), Ser. 95, MBIA, 5 1/2s, 6/1/15 Aaa 5,610,550
2,200,000 (State Match Loan Fund), Ser. 95, MBIA, 6 1/2s, 6/1/05 Aaa 2,488,750
5,700,000 OH State Wtr. Dev. Auth. Solid Waste Disp. Rev. Bonds (North Star Broken Hill Steel),
6.45s, 9/1/20 A 5,977,875
2,275,000 Orville, Elec. Syst. Mtge. Rev. Bonds, Ser. A, AMBAC, 7 1/2s, 12/1/10 Aaa 2,445,625
1,000,000 Oxford, Wtr. Supply Syst. Mtge. Rev. Bonds, AMBAC, 7 5/8s, 12/1/14 Aaa 1,091,250
1,000,000 Pickerington, Local School Dist. Construction & Impt. Rev. Bonds, FGIC, 5.8s, 12/1/09 Aaa 1,077,500
Sandusky Cnty., Hosp. Fac. Rev. Bonds (Memorial Hosp.)
1,750,000 7 3/4s, 12/1/09 BBB/P 1,721,563
795,000 7 3/8s, 12/1/01 BBB/P 790,031
2,895,000 Scioto Cnty., Hosp. Fac. VRDN (VHA Cent. Inc. Cap. Asset), Ser. B, AMBAC, 3.5s, 12/1/25 A-1 2,895,000
2,600,000 Southwest, Local School Dist. G.O. Bonds (Hamilton Cnty.), AMBAC, 7.65s, 12/1/10 Aaa 2,931,500
1,500,000 Springboro,Cmnty. City School Dist. G.O. Bonds, AMBAC, 6s, 12/1/11 Aaa 1,633,125
2,925,000 Toledo, Swr. Syst. Mtge. Rev. Bonds, AMBAC, 6.2s, 11/15/12 Aaa 3,239,438
1,175,000 Toledo, Waterworks Mtge. Rev. Bonds, AMBAC, 6.2s, 11/15/12 Aaa 1,288,094
1,100,000 Tuscarawas Cnty., Hosp. Fac. Rev. Bonds (Union Hosp.), Ser. A, 6 1/2s, 10/1/21 Baa 1,105,500
1,000,000 Twin Valley, Local School Dist. Rev. Bonds, FGIC, 7.05s, 12/1/11 Aaa 1,195,000
3,240,000 U. of OH Rev. Bonds, FGIC, 5s, 12/1/13 Aaa 3,118,500
Westerville, City School Dist. Rev. Bonds
1,610,000 (School Impt.), 6 1/4s, 12/1/09 A 1,781,063
1,590,000 (School Impt.), 6 1/4s, 12/1/08 A 1,766,880
3,000,000 Woodridge, School Dist. Rev. Bonds, AMBAC, 6.8s, 12/1/14 Aaa 3,551,250
Zanesville, Hsg. Dev. Corp. Mtge. Rev. Bonds, FHA Insd.
220,000 7 3/8s, 10/1/21 Aaa 265,925
205,000 7 3/8s, 10/1/20 Aaa 247,794
185,000 7 3/8s, 10/1/19 Aaa 223,619
180,000 7 3/8s, 10/1/18 Aaa 217,575
160,000 7 3/8s, 10/1/17 Aaa 193,200
155,000 7 3/8s, 10/1/16 Aaa 187,163
------------
205,540,684
Puerto Rico (12.2%)
- --------------------------------------------------------------------------------------------------------------------------------
4,000,000 Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds, Ser. Y, MBIA, 6 1/2s, 7/1/06 Aaa 4,570,000
Cmnwlth. of PR, G.O. Bonds
1,100,000 MBIA, 6 1/2s, 7/1/08 Aaa 1,260,875
5,425,000 MBIA, 6 1/2s, 7/1/07 Aaa 6,238,750
4,000,000 Cmnwlth. of PR, Hwy. & Trans. Auth. Hwy. Rev. Bonds, Ser. W, 5 1/2s, 7/1/15 A 4,030,000
1,000,000 Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds, Ser. Z, MBIA, 6 1/4s, 7/1/15 Aaa 1,120,000
1,350,000 Cmnwlth. of PR, Hwy. Auth. Rev. Bonds, Ser. Q, 7 3/4s, 7/1/16 AAA 1,535,625
3,600,000 Cmnwlth. of PR, Impt. G.O. Bonds, 7.7s, 7/1/20 AAA 4,090,500
3,000,000 Cmnwlth. of PR, Pub. Bldg. Auth. Ed. & Hlth. Fac. Rev. Bonds, 4.8s,
(5.7s, 7/1/98), 7/1/16 ++ A 2,853,750
1,440,000 Cmnwlth. of PR, Pub. Bldg. Auth. Fac. Rev. Bonds, Ser. A, AMBAC, 6 1/4s, 7/1/12 Aaa 1,609,200
1,400,000 Cmnwlth. of PR, Tel. Auth. IFB, MBIA, 6.458s, 1/16/15 Aaa 1,407,000
------------
28,715,700
- --------------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $221,724,994) *** $ 234,256,384
- --------------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $236,199,099.
** The Moody's or Standard & Poor's ratings indicated are
believed to be the most recent ratings available at
November 30, 1996 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, 1996.
Securities rated by Putnam are indicated by "/P" and
are not publicly rated.
*** The aggregate identified cost on a tax basis is
$221,724,994, resulting in gross unrealized appreciation and
depreciation of $24,872,071 and $12,340,681, respectively,
or net unrealized appreciation of $12,531,390.
++ 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.
# A portion of this security was pledged and
segregated with the custodian to cover margin requirements
for futures contracts at November 30, 1996.
The rates shown on IFB, which are securities
paying interest rates that vary inversely to changes in the
market interest rates, and VRDN's are the current interest
rates at November 30, 1996.
The fund had the following industry group
concentrations greater than 10% at
November 30, 1996 (as a percentage of net assets):
Healthcare 22.8%
Water & Sewer 14.6
Education 13.6
The fund had the following insurance
concentrations greater than 10% at
November 30, 1996 (as a percentage of net assets):
MBIA 20.7%
AMBAC 20.3
<CAPTION>
- --------------------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1996
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bond Index
Futures (Long) $5,946,875 $5,902,969 Dec-96 $43,906
U.S. Treasury Bond
Futures (Short) 5,793,750 5,750,104 Mar-96 (43,646)
- --------------------------------------------------------------------------------------------
$260
- --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1996 (Unaudited)
<S> <C>
Assets
- --------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $221,724,994) (Note 1) $234,256,384
- --------------------------------------------------------------------------------------------
Cash 1,098,414
- --------------------------------------------------------------------------------------------
Interest receivable 4,828,166
- --------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 331,911
- --------------------------------------------------------------------------------------------
Receivable for securities sold 85,000
- --------------------------------------------------------------------------------------------
Total assets 240,599,875
Liabilities
- --------------------------------------------------------------------------------------------
Payable for variation margin 3,125
- --------------------------------------------------------------------------------------------
Distributions payable to shareholders 595,270
- --------------------------------------------------------------------------------------------
Payable for securities purchased 2,957,991
- --------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 296,082
- --------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 347,097
- --------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 17,448
- --------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 5,946
- --------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,195
- --------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 94,543
- --------------------------------------------------------------------------------------------
Other accrued expenses 82,079
- --------------------------------------------------------------------------------------------
Total liabilities 4,400,776
- --------------------------------------------------------------------------------------------
Net Assets $236,199,099
Represented by
- --------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $227,070,470
- --------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 129,317
- --------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (3,532,338)
- --------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 12,531,650
- --------------------------------------------------------------------------------------------
Total - Representing net assets applicable to capital shares outstanding $236,199,099
Computation of net asset value and offering price
- --------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($190,207,920 divided by 20,946,818 shares) $9.08
- --------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.08)* $9.53
- --------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($45,302,611 divided by 4,996,094 shares)** $9.07
- --------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($688,568 divided by 75,843 shares) $9.08
- --------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.08)*** $9.39
- --------------------------------------------------------------------------------------------
* On single retail sales of less than $25,000. On sales of $25,000
or more and on group sales the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
*** On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended November 30, 1996 (Unaudited)
<S> <C>
Tax exempt interest income: $7,250,511
- -----------------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 695,917
- -----------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 124,075
- -----------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 11,678
- -----------------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,562
- -----------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 187,390
- -----------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 185,383
- -----------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,595
- -----------------------------------------------------------------------------------------------------
Reports to shareholders 20,783
- -----------------------------------------------------------------------------------------------------
Registration fees 291
- -----------------------------------------------------------------------------------------------------
Auditing 13,848
- -----------------------------------------------------------------------------------------------------
Legal 12,175
- -----------------------------------------------------------------------------------------------------
Postage 53,045
- -----------------------------------------------------------------------------------------------------
Other 7,331
- -----------------------------------------------------------------------------------------------------
Total expenses 1,317,073
- -----------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (53,322)
- -----------------------------------------------------------------------------------------------------
Net expenses 1,263,751
- -----------------------------------------------------------------------------------------------------
Net investment income 5,986,760
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (38,763)
- -----------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 31,760
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the period 8,326,072
- -----------------------------------------------------------------------------------------------------
Net gain on investments 8,319,069
- -----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $14,305,829
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
November 30 May 31
---------------------------------------
1996* 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- --------------------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------------------
Net investment income $5,986,760 $12,129,002
- --------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (7,003) 938,453
- --------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments 8,326,072 (5,934,894)
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 14,305,829 7,132,561
- --------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- --------------------------------------------------------------------------------------------------------------
From net investment income
Class A (4,919,142) (10,350,980)
- --------------------------------------------------------------------------------------------------------------
Class B (998,241) (1,781,308)
- --------------------------------------------------------------------------------------------------------------
Class M (15,716) (8,960)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (956,896) 7,768,385
- --------------------------------------------------------------------------------------------------------------
Total increase in net assets 7,415,834 2,759,698
- --------------------------------------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------------------------------
Beginning of period 228,783,265 226,023,567
- --------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $129,317 and $75,656, respectively) $236,199,099 $228,783,265
- --------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the period
Six months April 3, 1995
ended Year (commencement of
November 30 ended operations) to
(unaudited) May 31 May 31
- ----------------------------------------------------------------------------------------------------------------------------
1996 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
Class M
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.76 $8.95 $8.76
- ----------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income .22 .45 .08
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .32 (.18) .19
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .54 .27 .27
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------
From net investment income (.22) (.46) (.08)
- ----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions (.22) (.46) (.08)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.08 $8.76 $8.95
- ----------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 6.22* 3.00 3.05*
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $689 $495 $1
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .66* 1.27 .20*
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 2.46* 4.85 .89*
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 11.65* 33.23 66.29
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Six months ended
November 30 Year ended Year ended
(unaudited) May 31 May 31
- -----------------------------------------------------------------------------------------------------------------------------
1996 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.75 $8.94 $8.79
- -----------------------------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income .20 .42 .46
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .32 (.19) .16
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .52 .23 .62
- -----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income (.20) (.42) (.46)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- -- (.01)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (.42) (.47)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.07 $8.75 $8.94
- -----------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 6.05* 2.63 7.39
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $45,303 $41,655 $32,847
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .83* 1.61 1.58
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 2.31* 4.71 5.24
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 11.65* 33.23 66.29
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the period
July 15, 1993
(commencement Six months ended
of operations) to November 30 Year ended
May 31 (unaudited) May 31
- ----------------------------------------------------------------------------------------------------------------------------
1994 1996 1996
- ----------------------------------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.37 $8.76 $8.95
- ----------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income .40 .23 .48
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.46) .32 (.19)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.06) .55 .29
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------
From net investment income (.40) (.23) (.48)
- ----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.12) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions (.52) (.23) (.48)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.79 $9.08 $8.76
- ----------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) (1.49)* 6.39* 3.30
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $17,959 $190,208 $186,633
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.42* .51* .96
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 4.35* 2.65* 5.39
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 44.45 11.65* 33.23
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended May 31
- -----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.80 $9.26 $8.78
- -----------------------------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income .52 .53 .54
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .15 (.35) .48
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations .67 .18 1.02
- -----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income (.51) (.52) (.54)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.01) (.12) --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.52) (.64) (.54)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.95 $8.80 $9.26
- -----------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 8.04 1.88 11.94
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $193,176 $194,130 $177,879
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .93 .99 1.04
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 5.97 5.68 5.90
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 66.29 44.45 21.57
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended May 31
- -----------------------------------------------------------------------------------
1992
- -----------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $8.55
- -----------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------
Net investment income .57(a)
- -----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .23
- -----------------------------------------------------------------------------------
Total from investment operations .80
- -----------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------
From net investment income (.57)
- -----------------------------------------------------------------------------------
From net realized gain on investments --
- -----------------------------------------------------------------------------------
Total distributions (.57)
- -----------------------------------------------------------------------------------
Net asset value, end of period $8.78
- -----------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 9.65
- -----------------------------------------------------------------------------------
Net assets, end of period (in thousands) $140,309
- -----------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .90(a)
- -----------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 6.41(a)
- -----------------------------------------------------------------------------------
Portfolio turnover (%) 15.20(d)
- -----------------------------------------------------------------------------------
* Not annualized.
(a) Reflects an expense limitation. As a result, net investment income for the year ended May 31, 1992
reflects expense reductions of approximately $0.01 per class A share.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets for the year ended May 31,
1996 and thereafter, includes amounts paid through expense offset
arrangements. Prior period ratios exclude these amounts. (Note 2).
(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.
</TABLE>
Notes to financial statements
November 30, 1996 (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,
which convert to class A shares after approximately eight years, do not
pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class
M shares are sold with a maximum front-end sales charge of 3.25% and pay
an ongoing distribution fee that is lower than class B shares and higher
than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
A) Security valuation Tax-exempt bonds and notes are stated on the basis
of valuations provided by a pricing service, approved by the Trustees,
which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and
various relationships between securities in determining value.
B) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Interest income is recorded on the accrual basis.
C) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices
supplied by dealers.
D) Federal taxes It is the policy of the fund to distribute all of its
taxable 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 on securities held nor for excise tax on income and capital
gains.
At May 31, 1996, the fund had a capital loss carryover of approximately
$2,917,000 available to offset future capital gains, if any. The amount
of the carryover and the expiration dates are:
Loss Carryover Expiration
- ------------------------------------------
$1,981,000 May 31, 2003
936,000 May 31, 2004
E) 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. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations.
F) Amortization of bond premium and accretion of bond discount Any
premium resulting from the purchase of securities in excess of maturity
value is amortized on a yield-to-maturity basis. The premium in excess
of the call price, if any, is amortized to the call date; thereafter,
the remaining excess premium is amortized to maturity. Discounts on zero
coupon bonds, original issue and stepped-coupon 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, 0.50% of the next $500 million, 0.45% of the next
$500 million, 0.40% of the next $5 billion, 0.375% of the next $5
billion, 0.355% of the next $5 billion, 0.340% of the next $5 billion
and 0.330% thereafter. Prior to September 20, 1996, any amount over $1.5
billion was based on 0.40%.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the six months ended November 30, 1996, fund expenses were reduced
by $53,322 under expense offset arrangements with PFTC and brokerage
service arrangements. Investor servicing and custodian fees reported in
the Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Trustees of the fund receive an annual Trustees fee of $730 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund 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 certain Putnam funds until distribution in
accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%,
1.00% and 1.00% of the average net assets attributable to class A, class
B and class M shares, respectively. The Trustees have approved payment
by the fund 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 six months ended November 30, 1996, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $11,553 and $201 from
the sale of class A and class M shares, respectively and $69,977 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the six months ended November 30, 1996, Putnam
Mutual Funds Corp., acting as underwriter received no monies on class A
redemptions.
Note 3
Purchase and sales of securities
During the six months ended November 30, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$26,399,196 and $28,490,080, respectively. There were no purchases and
sales of U.S. government obligations. In determining the net gain or
loss on securities sold, the cost of securities has been determined on
the identified cost basis.
Note 4
Capital shares
At November 30, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
November 30, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 554,211 $4,913,394
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distribution 354,682 3,140,974
- ----------------------------------------------------
908,893 8,054,368
Shares
repurchased (1,267,367) (11,235,692)
- ----------------------------------------------------
Net decrease (358,474) $(3,181,324)
- ----------------------------------------------------
Year ended
May 31, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 1,664,704 $14,921,281
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distribution 739,838 6,620,990
- ----------------------------------------------------
2,404,542 21,542,271
Shares
repurchased (2,684,436) (23,982,793)
- ----------------------------------------------------
Net decrease (279,894) $(2,440,522)
- ----------------------------------------------------
Six months ended
November 30, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 678,348 $6,003,104
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 66,450 587,658
- ----------------------------------------------------
744,798 6,590,762
Shares
repurchased (510,695) (4,535,854)
- ----------------------------------------------------
Net increase 234,103 $2,054,908
- ----------------------------------------------------
Year ended
May 31, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 1,827,306 $16,326,847
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 116,237 1,038,592
- ----------------------------------------------------
1,943,543 17,365,439
Shares
repurchased (855,573) (7,662,401)
- ----------------------------------------------------
Net increase 1,087,970 $9,703,038
- ----------------------------------------------------
Six months ended
November 30, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 17,753 $155,674
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,562 13,846
- ----------------------------------------------------
19,315 169,520
Shares
repurchased -- --
- ----------------------------------------------------
Net increase 19,315 $169,520
- ----------------------------------------------------
Year ended
May 31, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 56,781 $509,049
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 767 6,820
- ----------------------------------------------------
57,548 515,869
Shares
repurchased (1,135) (10,000)
- ----------------------------------------------------
Net increase 56,413 $505,869
- ----------------------------------------------------
Results of December 5, 1996 shareholder meeting
A meeting of shareholders of the fund was held on December 5, 1996. At
the meeting, each of the nominees for Trustees was elected, as follows:
Votes
Votes for withheld
--------- --------
Jameson Adkins Baxter 14,940,719 194,808
Hans H. Estin 14,914,726 220,801
John A. Hill 14,939,691 195,836
Ronald J. Jackson 14,929,148 206,379
Elizabeth T. Kennan 14,940,808 194,719
Lawrence J. Lasser 14,935,963 199,564
Robert E. Patterson 14,943,608 191,919
Donald S. Perkins 14,922,138 213,389
William F. Pounds 14,911,456 224,071
George Putnam 14,906,415 229,112
George Putnam, III 14,884,011 251,516
Eli Shapiro 14,852,936 282,591
A.J.C. Smith 14,942,406 193,121
W. Nicholas Thorndike 14,930,009 205,518
A proposal to ratify the selection of Coopers & Lybrand L.L.P. as
auditors for the fund was approved as follows: 14,670,093 votes for, and
84,854 votes against, with 380,580 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments was approved as follows:
13,478,625 votes for, and 615,847 votes against, with 1,041,055
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in the securities of a single issuer was approved
as follows: 13,333,202 votes for, and 691,588 votes against, with
1,110,737 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to making loans through purchases of debt obligations,
repurchase agreements and securities loans was approved as follows:
12,942,295 votes for, and 1,101,549 votes against, with 1,091,683
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in real estate was approved as follows:
13,197,763 votes for, and 877,696 votes against, with 1,060,068
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to concentration of its assets was approved as follows:
13,500,917 votes for, and 561,598 votes against, with 1,073,012
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in senior securities was approved as follows:
13,549,178 votes for, and 543,359 votes against, with 1,042,990
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in commodities or commodity contracts was
approved as follows: 12,869,624 votes for, and 1,192,425 votes against,
with 1,073,478 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in securities of issuers in which management
of the fund or Putnam Investment Management, Inc. owns securities was
approved as follows: 13,104,299 votes for, and 945,680 votes against,
with 1,085,548 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to margin transactions was approved as follows: 12,797,808
votes for, and 1,273,551 votes against, with 1,064,168 abstentions and
broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to short sales was approved as follows: 12,932,590 votes
for, and 1,094,905 votes against, with 1,108,032 abstentions and broker
non-votes.
A proposal to eliminate the fund's fundamental investment restriction
which limits the fund's ability to pledge assets was approved as
follows: 12,831,395 votes for, and 1,171,156 votes against, with
1,132,976 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in restricted securities was approved as
follows: 13,067,706 votes for, and 908,771 votes against, with 1,159,050
abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in certain oil, gas and mineral interests
was approved as follows: 13,140,921 votes for, and 897,958 votes
against, with 1,096,648 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investing to gain control of a company's management was
approved as follows: 13,066,324 votes for, and 903,959 votes against,
with 1,165,244 abstentions and broker non-votes.
All tabulations are rounded to nearest whole number.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund *
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC & Emerging Growth Fund [DOUBLE DAGGER]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS **
Putnam money market funds: ++
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts [2 DBL. DAGGERS]
* Formerly Natural Resources Fund
+ Formerly Overseas Growth Fund
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** Relative to above.
++ An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to
maintain a price of $1.00 per share, although there is no
assurance that this price will be maintained in the future.
[2 DBL. DAGGERS] Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be insured
up to certain limits by federal/state agencies. Savings
accounts may also be insured up to certain limits. Please
call your financial advisor or Putnam at 1-800-225-1581 to
obtain a prospectus for any Putnam fund. It contains more
complete information, including charges and expenses. Please
read it carefully before you invest or send money.
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past six years. In 1995, over 146,000 tests of 56 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
* HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.*
* SWITCH FUNDS EASILY
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative.
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number: 1-800-225-
1581.
* Regular investing of course, does not guarantee a profit or protect
against a loss in a declining market.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
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
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William J. Curtin
Vice President
Jerome J. Jacobs
Vice President
Blake E. Anderson
Vice President
Howard K. Manning
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
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. You can also learn more at Putnam Investments'
website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- ---------------------
29929-848/240/130 1/97
