Putnam
Ohio
Tax Exempt
Income Fund
SEMIANNUAL REPORT
November 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Solid economic growth, relatively low supply, and positive
demographics are favorably impacting the Ohio municipal bond
market. We believe our hands-on approach will be instrumental
in finding unrealized opportunities before the rest of the
market does."
-- Howard K. Manning, manager
Putnam Ohio Tax Exempt Income Fund
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
16 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The global flight to the relative safety of bonds in the aftermath of the
Southeast Asian currency crisis in late October provided a dramatic and
positive finale to the first half of Putnam Ohio Tax Exempt Income Fund's
fiscal year. In the five months prior to that flare-up, the U.S. municipal
bond market had demonstrated solid, albeit tenuous, strength as many investors
cautiously set aside their lingering concerns about the economy, interest
rates, and renewed inflation.
Recognizing the fragility of the generally positive environment both prior to
and following the disruption in global markets, Fund Manager Howard Manning
had pursued a slightly defensive policy in managing the fund. As the year
unfolded, however, he concluded that a somewhat more dynamic strategy was in
order and began adjusting the portfolio accordingly.
In the report that follows, Howard provides the specifics of his strategic
shift as well as details about the fiscal year's first half. Then he offers
some insights into what he believes is in store for the rest of the period.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 21, 1998
Report from the Fund Manager
Howard K. Manning
In today's low inflation climate, the strong U.S. economy has been shining on
just about every municipal bond issuer, raising tax revenues and improving
business prospects in most industries. Yield-hungry investors have been
snapping up tax-free securities, often regardless of credit quality, and
municipal bond funds have chalked up attractive gains due in part to this
heavy demand.
Putnam Ohio Tax Exempt Income Fund rose with the tide. The fund's class A
shares provided total returns at net asset value of 4.85% and - 0.15% at
public offering price for the six months ended November 30, 1997. The fund's
competitive benchmark, the Lehman Brothers Municipal Bond Index, posted a
5.40% return for the same period. Performance results for longer periods can
be found on pages 8 and 9.
* MAINTAINING SLIGHTLY DEFENSIVE TONE
An atmosphere of low volatility and narrow trading ranges characterized the
fixed-income markets for much of the period. The lack of direction stemmed
from an ongoing tug of war between high economic growth (negative for the bond
market) and favorable low inflation (positive for the bond market).
But the Pacific Rim crisis and resulting correction in worldwide equity
markets in late October changed all that. While the enormous day-to-day
volatility in the stock and bond markets has certainly been felt in the
tax-free markets, municipal bonds suffered less in comparison and, in fact,
had settled down by the end of November.
One way your fund's management team seeks to provide high, durable returns is
by taking advantage of quantifiable factors such as seasonal supply/demand
trends rather than attempting to predict the direction of interest rates.
Historically, December has been one of the heaviest months for new issuance,
and volume is expected to reach $18 billion, dramatically higher than the
average $10 billion coming to market in preceding months.
Since we believe that taking on excessive risk would not reward the fund,
we're only selecting bonds with strong credit profiles -- those most likely to
perform well in all market conditions. Furthermore, we will keep a slightly
shorter-than-market duration of from 6.5 to 7 years with maturities falling in
the 10- to 20-year range. As we have stated before, shorter durations can help
preserve principal value as interest rates gradually move upward.
* FLATTER YIELD CURVE, CONTINUED YIELD SPREAD TIGHTENING
With inflation practically nonexistent, interest rates fell throughout the
semiannual period. As bond investors moved farther out on the yield curve to
pick up the higher yields offered by longer-term bonds, demand for
shorter-term bonds evaporated. The result was a flatter Treasury yield curve.
While the municipal bond yield curve remains steeper than that of the Treasury
market, it too has experienced increased flattening.
Municipal bond yields, which have traditionally traded between 78% and 84% of
Treasury yields, were trading as high as 86% of equivalent Treasury bond
yields by the close of November. The higher yield ratio suggests municipal
bonds have become quite attractive on a valuation basis. In fact, municipal
bonds offer some of the best value since the failed flat-tax proposals
initially surfaced more than two years ago.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Hospital/health care 22.9%
Education 14.3%
Housing 10.8%
Water and sewerage 7.3%
Utilities 6.8%
Transportation 5.0%
Footnote reads:
*Based on net assets as of 11/30/97. Portfolio holdings will vary
over time.
Another defining characteristic of the period is the narrowing spread between
the yields of lower-rated and higher-rated securities. In periods of low
interest rates and solid economic growth, investors usually have greater
confidence in higher-risk investments. As a result, lower quality bonds have
outperformed higher quality bonds and investors have been rewarded for taking
on extra credit risk. While we are taking profits on selected lower-rated
bonds as their valuations peak, we would expect the tighter spreads to
continue as long as economic growth remains strong.
* FUND PURSUES TWIN GOALS OF INCOME, TOTAL RETURN THROUGH QUALITY INVESTMENTS
One of our ongoing goals is to build both healthy yield and solid total return
potential into the portfolio. This involves structuring the portfolio very
carefully in terms of both coupon and credit quality. Slightly greater than
60% of the fund's portfolio holdings are securities of the highest credit
quality of Aaa, while approximately 25% of the holdings are invested in bonds
rated Baa or below. This translates into an average quality rating of Aa.
Your fund remains well diversified by industry and municipality. Health care
dominates the fund's sector strategy and makes up 22.9% of the fund's net
assets. Demographic trends as well as limited availability of beds and
apartment units are creating a burgeoning demand for nursing homes and
assisted living/elderly care facilities. General obligation (GO) bonds, backed
by the general credit and taxing power of the state or local government, are
benefiting from the strong local economy and higher tax receipts. With limited
public funding of projects at the government level, however, our research
efforts have also focused on essential-service bonds, such as Cleveland
Waterworks. While these holdings, along with others discussed in this report,
were viewed favorably at the end of the period, all are subject to review and
adjustment in accordance with the fund's investment strategy and may vary in
the future.
High-quality, single-family housing bonds are another big contributor to the
fund's income stream. This is an area in which Putnam's extensive research
capabilities can add value as we carefully weigh the risk of prepayments
versus the attractive income payout of these bonds. On a final note, the fund
added bonds of Cleveland's Rock and Roll Hall of Fame and Kroger Food Stores
during the period. Both holdings exemplify a one-of-a-kind investment
opportunity in a market with extremely limited supply.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
Ba/BB 6.5%
Aaa 60.8%
Aa 5.7%
A 8.8%
Baa/BBB 18.2%
Footnote reads:
*As a percentage of market value as of 11/30/97. 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.
* OUTLOOK: CONTINUED VOLATILITY, MODERATE UPWARD PRESSURE ON INTEREST RATES
While the municipal bond market seems to have settled down, there still may be
periods of moderate volatility. We realize that volatility can be unsettling
for investors, but as professional money managers, we can take advantage of
short-term distortions and improve the fund's return over time.
As time goes on, we still believe that there will be moderate upward pressure
on interest rates driven by the tight market conditions in the United States.
Our focus on key strategies such as reducing call risk and careful security
selection, especially among the lower quality credits, should serve us very
well as we move into 1998.
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 11/30/97, 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 high current income free from federal and state taxes consistent
with capital preservation.
TOTAL RETURN FOR PERIODS ENDED 11/30/97
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 4.85% -0.15% 4.51% -0.49% 4.58% 1.20%
- --------------------------------------------------------------------------
1 year 6.49 1.47 5.80 0.80 6.17 2.67
- --------------------------------------------------------------------------
5 years 36.90 30.36 32.23 30.23 34.80 30.47
Annual average 6.48 5.45 5.75 5.42 6.15 5.46
- --------------------------------------------------------------------------
Life of fund 77.64 69.28 67.04 67.04 72.18 66.62
Annual average 7.35 6.71 6.54 6.54 6.94 6.51
- --------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/97
Lehman Bros.
Municipal Consumer
Bond Index Price Index
- --------------------------------------------------------------------------
6 months 5.40% 0.87%
- --------------------------------------------------------------------------
1 year 7.18 1.83
- --------------------------------------------------------------------------
5 years 42.06 13.73
Annual average 7.27 2.61
- --------------------------------------------------------------------------
Life of fund 88.86 28.58
Annual average 8.18 3.16
- --------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 4.75% and 3.25%, respectively. Class B share returns for
the 1-, 5-, and 10-year (where available) and life-of-fund periods reflect
the applicable contingent deferred sales charge (CDSC), which is 5% in the
first year, declines to 1% in the sixth year, and is eliminated
thereafter. Returns shown for class B and class M shares for periods prior
to their inception are derived from the historical performance of class A
shares, adjusted to reflect both the initial sales charge or CDSC, if any,
currently applicable to each class and, in the case of class B and class M
shares, the higher operating expenses applicable to such shares. All
returns assume reinvestment of distributions at NAV and represent past
performance; they do not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost. Returns shown for
class A shares have not been adjusted to reflect payments under the class
A distribution plan prior to its implementation.
TOTAL RETURN FOR PERIODS ENDED 12/31/97
(most recent calendar quarter)
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 4.99% 0.02% 4.69% -0.31% 4.85% 1.49%
- --------------------------------------------------------------------------
1 year 8.17 3.02 7.63 2.63 7.98 4.50
- --------------------------------------------------------------------------
5 years 37.12 30.60 32.56 30.56 35.15 30.68
Annual average 6.52 5.48 5.80 5.48 6.21 5.50
- --------------------------------------------------------------------------
Life of class 79.82 71.36 69.06 69.06 74.28 68.66
Annual average 7.43 6.80 6.62 6.62 7.02 6.59
- --------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns and
principal value will fluctuate so that an investor's shares when sold may
be worth more or less than their original cost. See first page of
performance section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 11/30/97
Class A Class B Class M
- --------------------------------------------------------------------------
Distributions (number) 6 6 6
- --------------------------------------------------------------------------
Income $0.232062 $0.201846 $0.218370
- --------------------------------------------------------------------------
Capital gains1 -- -- --
- --------------------------------------------------------------------------
Total $0.232062 $0.201846 $0.218370
- --------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- --------------------------------------------------------------------------
5/31/97 $8.99 $9.44 $8.98 $9.00 $9.30
- --------------------------------------------------------------------------
11/30/97 9.19 9.65 9.18 9.19 9.50
- --------------------------------------------------------------------------
Current return (end of period)
- --------------------------------------------------------------------------
Current dividend rate2 5.11% 4.87% 4.46% 4.81% 4.66%
- --------------------------------------------------------------------------
Taxable equivalent3 9.10 8.67 7.94 8.56 8.30
- --------------------------------------------------------------------------
Current 30-day SEC yield4 4.65 4.43 4.06 4.37 4.23
- --------------------------------------------------------------------------
Taxable equivalent3 8.28 7.89 7.23 7.78 7.53
- --------------------------------------------------------------------------
1 Capital gains, if any, are taxable for federal and, in most cases, state
tax purposes. For some investors, investment income may also be subject
to the federal alternative minimum tax. Investment income may be subject
to state and local taxes.
2 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
3 Assumes maximum 43.83% combined federal, state tax rate and city 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.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher
12b-1 fee than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 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 assumes reinvestment of all distributions
and interest payments and do not take in account brokerage fees or taxes.
Securities in the fund do not match those in the indexes and performance
of the fund will differ. It is not possible to invest directly in an
index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Portfolio of investments owned
November 30, 1997 (Unaudited)
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FHA Insd. -- Federal Housing Administration Insured
FSA -- Financial Security Assurance
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
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (98.2%) *
PRINCIPAL AMOUNT RATINGS ** VALUE
Ohio (82.9%)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Akron, Econ. Dev. Rev. Bonds
$ 875,000 MBIA, 6s, 12/1/13 Aaa $ 964,688
1,000,000 MBIA, 5s, 12/1/18 Aaa 966,250
100,000 Akron-Wilbeth, Hsg. Dev. Corp. 1st Mtge.
Rev. Bonds, FHA Insd., 7.9s, 8/1/03 A 116,375
1,900,000 Bedford, Hosp. Impt. Rev. Bonds (Bedford Cmnty.
Hosp., Inc.), 8 1/2s, 5/15/09 AAA 2,085,250
1,500,000 Brecksville-Broadview Heights, City School Dist.
G.O. Bonds, FGIC, 6 1/2s, 12/1/16 Aaa 1,695,000
5,000,000 Butler Cnty., Hosp. Impt. Rev. Bonds
(Fort Hamilton-Hughes), 7 1/2s, 1/1/10 Baa3 5,475,000
1,250,000 Cincinnati, Student Loan Funding Corp. Rev. Bonds,
Ser. B, 8 7/8s, 8/1/08 BBB/P 1,331,250
Cleveland, City School Dist. G.O. Bonds
900,000 9s, 12/1/08 Aaa 962,118
2,500,000 8 1/4s, 12/1/08 Aaa 2,912,500
1,000,000 AMBAC, 7.35s, 12/1/08 Aaa 1,053,580
2,000,000 Cleveland, G.O. Bonds, MBIA, 5 3/4s, 8/1/11 Aaa 2,170,000
2,500,000 Cleveland, Pkg. Fac. Impt. Rev. Bonds, 8s, 9/15/12 BB/P 2,925,000
2,000,000 Cleveland, Pub. Pwr. Syst. Rev. Bonds 1st Mtge.,
Ser. 1, MBIA, 5s, 11/15/24 Aaa 1,920,000
Cleveland, Urban Renewal Increment Rev. Bonds
(Rock & Roll Hall of Fame)
1,900,000 6 3/4s, 3/15/18 BBB-/P 2,006,875
2,000,000 6 5/8s, 3/15/11 BBB-/P 2,110,000
Cleveland, Waterworks 1st Mtge. Rev. Bonds
2,000,000 Ser. F-92A, AMBAC, 6 1/2s, 1/1/21 Aaa 2,197,500
7,950,000 Ser. G, MBIA, 5 1/2s, 1/1/13 Aaa 8,436,938
1,350,000 Cleveland-Cuyahoga Cnty., Port Auth. Rev. Bonds
(Rock & Roll Hall of Fame), 5.2s, 12/1/03 BBB-/P 1,373,625
1,000,000 Clyde, Elec. Syst. Mtge. Rev. Bonds, Ser. B,
8 3/8s, 11/15/14 BB+/P 1,033,240
5,050,000 Cuyahoga Cnty., Hosp. Rev. Bonds
(Cleveland-Fairview Gen. Hosp. &
Lutheran Med. Ctr.), MBIA, 6 1/4s, 8/15/10 Aaa 5,510,813
1,300,000 Dublin, G.O. Bonds, Ser. B, 6.4s, 12/1/14 Aa 1,514,500
1,300,000 Franklin Cnty., Convention Fac. Auth. Tax & Lease
RAN,, MBIA, 7s, 12/1/19 Aaa 1,426,750
1,750,000 Franklin Cnty., Hlth. Care Facs. Rev. Bonds
(Friendship Dublin), 5 5/8s, 11/1/22 A- 1,728,125
1,250,000 Greene Cnty., Rev. Bonds (Farview), Ser. B, MBIA,
4 1/2s, 1/1/11 Aaa 1,250,000
700,000 Hamilton Cnty., Elec. Syst. Mtge. Rev. Bonds, Ser. B,
FGIC, 8s, 10/15/22 Aaa 738,640
2,750,000 Hamilton Cnty., Hlth. Syst. Rev. Bonds
(Providence Hosp.), 6 7/8s, 7/1/15 Baa1 2,949,375
1,000,000 Hubbard, Swr. Syst. Mtge. Rev. Bonds, 8.8s,
11/15/17 AAA/P 1,041,710
1,800,000 Huron Cnty., Human Svcs. Rev. Bonds, MBIA,
6.55s, 12/1/20 Aaa 2,112,750
1,320,000 Kirtland, G.O. Bonds, AMBAC, 7 1/2s, 12/1/16 Aaa 1,476,750
356,074 Lake Cnty., Indl. Dev. Rev. Bonds (Madison Inn
Hlth. Ctr.), FHA Insd., 12s, 5/1/14 A-/P 380,554
1,000,000 Lakota, Local School Dist. Rev. Bonds, AMBAC,
7s, 12/1/10 Aaa 1,215,000
817,883 Logan Cnty., Indl. Dev. Rev. Bonds (Indian
Lake Hlth.), FHA Insd., 12s, 3/15/14 AAA/P 921,142
1,910,000 Lorain Cnty., Elderly Hsg. Corp. Multi-Fam. Rev.
Bonds (Harr Plaza & Intl.), Ser. A, 6 3/8s, 7/15/19 A 1,986,400
Lorain Cnty., Fac. Rev. Bonds (Laurel Lake)
1,500,000 7.3s, 12/15/14 BB-/P 1,625,625
1,750,000 7 1/8s, 12/15/18 BB-/P 1,881,250
5,325,000 Lorain Cnty., Hosp. Rev. Bonds (EMH Regl.
Med. Ctr.), AMBAC, 7 3/4s, 11/1/13 Aaa 6,383,344
3,100,000 Lucas Cnty., Indl. Dev. Rev. Bonds (Kroger Co.),
8 1/2s, 7/1/11 Baa3 3,522,375
Marion Cnty., Hlth. Care Fac. Rev. Bonds
(United Church Homes)
460,000 8 7/8s, 12/1/12 BBB 514,625
4,000,000 6 3/8s, 11/15/10 BBB 4,230,000
2,000,000 6.3s, 11/15/15 BBB 2,085,000
1,205,000 Massillon, Rev. Bonds (Lincoln Ctr. Phase II),
AMBAC, 6.95s, 12/1/10 Aaa 1,458,050
2,500,000 Miami Cnty., Hosp. Fac. Rev. Bonds (Upper Valley
Med. Ctr.), Ser. A, 6 3/8s, 5/15/26 Baa2 2,656,250
2,000,000 Montgomery Cnty., Hlth. Syst. Rev. Bonds
(Franciscan Brothers Hosp.), Ser. B-1, 8.1s, 7/1/18 Baa1 2,385,000
580,000 Montgomery Cnty., Hosp. Rev. Bonds
(Grandview Hosp. & Med Ctr.), 5.6s, 12/1/11 BBB 582,175
2,705,000 Mount Vernon, Hosp. Rev. Bonds
(Knox Cmnty. Hosp.), 7 7/8s, 6/1/12 BBB+/P 2,774,491
5,200,000 North Olmsted, G.O. Bonds, AMBAC, 6.2s, 12/1/11 Aaa 5,895,500
1,885,000 North Royalton, City School Dist. G.O. Bonds,
MBIA, 6 5/8s, 12/1/06 Aaa 2,174,819
835,000 Northwestern, School Dist. Rev. Bonds (Wayne &
Ashland Cntys. School Impt.), FGIC, 7.2s, 12/1/10 Aaa 1,028,094
6,160,000 OH Hsg. Fin. Agcy. Mtge. Rev. Bonds, Ser. 25, 8.05s,
3/1/29 (acquired 9/24/97, cost $6,881,610) [DBL. DAGGER] AAA 6,883,800
OH Hsg. Fin. Agcy. Single Fam. Mtge. IFB
5,864,000 Ser. A-2, GNMA Coll., 9.588s, 3/24/31 Aaa 6,648,310
5,550,000 Ser. G-2, GNMA Coll., 10.224s, 3/2/23 Aaa 6,715,500
OH Hsg. Fin. Agcy. Single Fam. Mtge. Rev. Bonds
535,000 Ser. C, GNMA Coll., 7.85s, 9/1/21 AAA 573,788
359,115 Ser. 85-A, FGIC, zero %, 1/15/15 # Aaa 65,090
3,000,000 OH Hsg. Finl. Agcy. Mtge. Rev. Bonds, Ser. A,
GNMA, 6.05s, 9/1/17 AAA 3,161,250
OH State Air Qlty. Dev. Auth. Rev. Bonds
(Poll. Control)
5,000,000 Ser. B, 6s, 8/1/20 Ba1 5,125,000
2,500,000 Ser. A, 5.95s, 5/15/29 Baa2 2,562,500
1,000,000 OH State Bldg. Auth. Rev. Bonds (Adult
Correctional Fac.), Ser. A, AMBAC, 6s, 4/1/06 Aaa 1,098,750
OH State Econ. Dev. Rev. Bonds
1,475,000 (Sponge, Inc.), Ser. 5-A, 8 3/8s, 6/1/14 A- 1,576,406
630,000 (Superior Forge & Steel Corp.), Ser. 3,
7.625 s, 6/1/11 A- 696,938
OH State Higher Ed. Fac. Rev. Bonds
(Case Western Reserve U.)
4,500,000 6 1/4s, 10/1/18 Aa 5,214,375
1,000,000 6s, 10/1/14 Aa 1,123,750
1,500,000 Ser. C, 5 1/8s, 10/1/17 Aa3 1,485,000
1,800,000 Ohio State Indl. Dev. Auth. Rev. Bonds
(Kroger Co.), 8.65s, 6/1/11 Baa3 2,049,750
3,350,000 OH State Poll. Control Rev. Bonds (Standard
Oil Co.), 6 3/4s, 12/1/15 Aa3 4,045,125
1,250,000 OH State Wtr. Dev. Auth. Poll. Control Fac. Rev.
Bonds (Cleveland Elec. Illuminating), 8s, 10/1/23 Ba2 1,307,813
5,700,000 OH State Wtr. Dev. Auth. Solid Waste Disp.
Rev. Bonds (North Star Broken Hill Steel),
6.45s, 9/1/20 A2 6,163,125
2,275,000 Orrville, Elec. Syst. Mtge. Rev. Bonds, Ser. A,
AMBAC, 7 1/2s, 12/1/10 Aaa 2,398,123
1,000,000 Oxford, Wtr. Supply Syst. Mtge. Rev. Bonds,
AMBAC, 7 5/8s, 12/1/14 Aaa 1,056,240
1,000,000 Pickerington, Local School Dist. Construction &
Impt. Rev. Bonds, FGIC, 5.8s, 12/1/09 Aaa 1,106,250
Sandusky Cnty., Hosp. Fac. Rev. Bonds
(Memorial Hosp.)
1,750,000 7 3/4s, 12/1/09 BBB-/P 1,764,560
795,000 7 3/8s, 12/1/01 BBB-/P 796,789
2,600,000 Southwest, Local School Dist. G.O. Bonds
(Hamilton Cnty.), AMBAC, 7.65s, 12/1/10 Aaa 2,853,500
2,260,000 Springboro Cmnty., City School Dist. G.O. Bonds,
AMBAC, 6s, 12/1/11 Aaa 2,531,200
2,925,000 Toledo, Swr. Syst. Mtge. Rev. Bonds, AMBAC,
6.2s, 11/15/12 Aaa 3,316,219
1,175,000 Toledo, Waterworks Mtge. Rev. Bonds, AMBAC,
6.2s, 11/15/12 Aaa 1,332,156
3,200,000 Toledo-Lucas Cnty., Rev. Bond (Lodging
Tax-Convention Ctr.), 5.7s, 10/1/15 # Aaa 3,308,000
1,100,000 Tuscarawas Cnty., Hosp. Fac. Rev. Bonds
(Union Hosp.), Ser. A, 6 1/2s, 10/1/21 Baa3 1,150,875
1,000,000 Twin Valley, Cmnty. Local School Dist. Rev. Bonds,
FGIC, 7.05s, 12/1/11 Aaa 1,222,500
2,000,000 U. of Cincinnati COP (U. of Cincinnati Ctr.),
MBIA, 5 1/8s, 6/1/24 Aaa 1,962,500
1,200,000 Washington Cnty., Hlth. Care Fac. Rev. Bonds
(Glenwood Retirement Cmnty.), 6.35s, 10/1/27 BB-/P 1,204,500
Westerville, City School Dist. Rev. Bonds
(School Impt.)
1,610,000 6 1/4s, 12/1/09 A+ 1,813,263
1,590,000 6 1/4s, 12/1/08 A+ 1,794,713
3,000,000 Woodridge, School Dist. Rev. Bonds, AMBAC,
6.8s, 12/1/14 Aaa 3,641,250
Zanesville, Hsg. Dev. Corp. Mtge. Rev. Bonds,
FHA Insd.
220,000 7 3/8s, 10/1/21 Aaa 273,625
205,000 7 3/8s, 10/1/20 Aaa 258,044
185,000 7 3/8s, 10/1/19 Aaa 230,325
180,000 7 3/8s, 10/1/18 Aaa 223,200
160,000 7 3/8s, 10/1/17 Aaa 199,000
155,000 7 3/8s, 10/1/16 Aaa 191,619
--------------
196,309,017
Puerto Rico (15.3%)
- ------------------------------------------------------------------------------------------------------------
Cmnwlth. of PR G.O. Bonds, MBIA
1,100,000 6 1/2s, 7/1/08 Aaa 1,271,875
5,425,000 6 1/2s, 7/1/07 Aaa 6,272,651
4,000,000 Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds, Ser. Y,
MBIA, 6 1/2s, 7/1/06 Aaa 4,570,000
1,350,000 Cmnwlth. of PR, Hwy. Auth. Rev. Bonds, Ser. Q,
7 3/4s, 7/1/16 Aaa 1,495,125
Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
1,000,000 Ser. Z, MBIA, 6 1/4s, 7/1/15 Aaa 1,148,750
4,000,000 Ser. W, 5 1/2s, 7/1/15 A 4,160,000
3,600,000 Cmnwlth. of PR, Impt. G.O. Bonds, 7.7s, 7/1/20 Aaa 3,982,500
4,180,000 Cmnwlth. of PR, Muni. Fin. Agcy. Rev. Bonds, Ser. A,
FSA, 6s, 7/1/11 Aaa 4,660,700
Cmnwlth. of PR, Pub. Bldg. Auth. Fac. Rev. Bonds,
Ser. A Aaa 1,654,200
1,440,000 6 1/4s, 7/1/12
3,875,000 6 1/4s, 7/1/11 Aaa 4,441,719
1,100,000 AMBAC, 6 1/4s, 7/1/15 Aaa 1,263,625
1,400,000 Cmnwlth. of PR, Tel. Auth. IFB, MBIA,
6.875s, 1/16/15 Aaa 1,454,250
--------------
36,375,395
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $219,644,761) *** $ 232,684,412
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $236,836,508.
** The Moody's or Standard & Poor's ratings indicated are believed
to be the most recent ratings available at November 30, 1997 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, 1997. Securities rated by Putnam
are indicated by "/P" and are not publicly rated.
*** The aggregate identified cost on a tax basis is $219,644,761,
resulting in gross unrealized appreciation and depreciation of
$13,396,245 and $356,594, respectively, or net unrealized appreciation
of $13,039,651.
[DBL. DAGGER] Restricted, excluding 144A securities, as to public resale. The
total market value of the restricted security held at November 30,
1997 was $6,883,800 or 2.9% of net assets.
# A portion of these securities were pledged and segregated with
the custodian to cover margin requirements for futures contracts at
November 30, 1997.
The rates shown on IFB, which are securities paying interest rates
that vary inversely to changes in the market interest rates, are the
current interest rates at November 30, 1997.
The fund had the following industry group concentrations greater
than 10% at November 30, 1997 (as a percentage of net assets):
Hospitals/health care 22.9%
Education 14.3
Housing 10.8
The fund had the following insurance concentrations greater than
10% at November 30, 1997 (as a percentage of net assets):
MBIA 18.4%
AMBAC 16.5
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1997 (Unaudited)
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
U.S. Muni Index Future
(long) $ 1,222,813 $ 1,214,375 Dec 97 $ 8,438
U.S. Treasury Bond Future
(short) 17,997,313 17,676,656 Dec 97 (320,657)
- ----------------------------------------------------------------------------------------
(312,219)
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $219,644,761) (Note 1) $232,684,412
- ---------------------------------------------------------------------------------------------------
Cash 512,177
- ---------------------------------------------------------------------------------------------------
Interest receivables 4,611,872
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 347,621
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 10,000
- ---------------------------------------------------------------------------------------------------
Total assets 238,166,082
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for variation margin 13,844
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 568,599
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 188,961
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 353,010
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 59,564
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 7,294
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,092
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 98,069
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 39,141
- ---------------------------------------------------------------------------------------------------
Total liabilities 1,329,574
- ---------------------------------------------------------------------------------------------------
Net assets $236,836,508
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $224,832,955
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 350,752
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (1,074,631)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 12,727,432
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $236,836,508
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($184,022,779 divided by 20,022,036 shares) $9.19
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.19)* $9.65
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($51,238,414 divided by 5,582,009 shares)+ $9.18
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,575,315 divided by 171,362 shares) $9.19
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.19)** $9.50
- ---------------------------------------------------------------------------------------------------
* 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 charges.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended November 30, 1997 (Unaudited)
<S> <C>
Tax exempt interest income: $ 7,244,197
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 711,045
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 141,233
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 4,706
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,230
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 186,001
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 211,947
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 2,860
- --------------------------------------------------------------------------------------------------
Reports to shareholders 10,841
- --------------------------------------------------------------------------------------------------
Auditing 14,444
- --------------------------------------------------------------------------------------------------
Legal 10,400
- --------------------------------------------------------------------------------------------------
Postage 11,517
- --------------------------------------------------------------------------------------------------
Other 5,822
- --------------------------------------------------------------------------------------------------
Total expenses 1,314,046
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (15,964)
- --------------------------------------------------------------------------------------------------
Net expenses 1,298,082
- --------------------------------------------------------------------------------------------------
Net investment income 5,946,115
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,797,415
- --------------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (1,163,184)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 4,331,516
- --------------------------------------------------------------------------------------------------
Net gain on investments 4,965,747
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $10,911,862
- --------------------------------------------------------------------------------------------------
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
1997* 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 5,946,115 $ 11,849,465
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 634,231 1,845,011
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 4,331,516 4,190,338
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 10,911,862 17,884,814
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
- ----------------------------------------------------------------------------------------------------------------------
Class A (4,683,899) (9,691,029)
- ----------------------------------------------------------------------------------------------------------------------
Class B (1,094,800) (2,018,939)
- ----------------------------------------------------------------------------------------------------------------------
Class M (27,034) (32,971)
- ----------------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (1,260,132) (1,934,629)
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 3,845,997 4,207,246
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 232,990,511 228,783,265
- ----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $350,752 and
$210,370, respectively) $236,836,508 $232,990,511
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share Nov. 30
operating performance (Unaudited) Year ended May 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.99 $8.76 $8.95 $8.80 $9.26 $8.78
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .24 .46 .48 .52 .53 .54
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .19 .23 (.19) .15 (.35) .48
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .43 .69 .29 .67 .18 1.02
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.46) (.48) (.51) (.52) (.54)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.01) (.12) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.46) (.48) (.52) (.64) (.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.19 $8.99 $8.76 $8.95 $8.80 $9.26
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 4.85* 8.05 3.30 8.04 1.88 11.94
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $184,023 $185,030 $186,633 $193,176 $194,130 $177,879
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .49* .98 .96 .93 .99 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.59* 5.22 5.39 5.97 5.68 5.90
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 14.45* 33.92 33.23 66.29 44.45 21.57
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share Nov. 30 July 15, 1994+
operating performance (Unaudited) Year ended May 31 to May 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.98 $8.75 $8.94 $8.79 $9.37
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .20 .41 .42 .46 .40
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .20 .22 (.19) .16 (.46)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .40 .63 .23 .62 (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.20) (.40) (.42) (.46) (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.01) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (.40) (.42) (.47) (.52)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.18 $8.98 $8.75 $8.94 $8.79
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 4.51 * 7.35 2.63 7.39 (1.49)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $51,238 $47,050 $41,655 $32,847 $17,959
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .81 * 1.63 1.61 1.58 1.42*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.25 * 4.56 4.71 5.24 4.35*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 14.45 * 33.92 33.23 66.29 44.45
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share Nov. 30 April 3, 1995+
operating performance (Unaudited) Year ended May 31 to May 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.00 $8.76 $8.95 $8.76
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .22 .44 .45 .08
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .19 .23 (.18) .19
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .41 .67 .27 .27
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.22) (.43) (.46) (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.22) (.43) (.46) (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.19 $9.00 $8.76 $8.95
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 4.58* 7.85 3.00 3.05*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,575 $911 $495 $1
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .64* 1.28 1.27 .20*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.40* 4.87 4.85 .89*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 14.45* 33.92 33.23 66.29
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) 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).
</TABLE>
Notes to financial statements
November 30, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam Ohio Tax Exempt Income Fund (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund seeks as high a level of current
income exempt from federal income tax and 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. When
the contract is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Realized gains and losses on purchased
options are included in realized gains and losses on investment securities.
Futures contracts are valued at the quoted daily settlement prices established
by the exchange on which they trade. Exchange traded options are valued at the
last sale price, or if no sales are reported, the last bid price for purchased
options and the last ask price for written options. Options traded
over-the-counter are valued using prices supplied by dealers.
D) Line of credit The fund has entered into a committed line of credit with
certain banks. This line of credit agreement includes restrictions that the
fund maintain an asset coverage ratio of at least 300% and borrowings must not
exceed prospectus limitations. For the period ended November 30, 1997, the
fund had no borrowings against the line of credit.
E) Federal taxes It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is also
the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
At May 31, 1997, the fund had a capital loss carryover of approximately
$1,216,000 available to offset future capital gains, if any. The amount of the
carryover and the expiration dates are:
Loss Carryover Expiration
- ------------------------------------------------------------
825,000 May 31, 2003
391,000 May 31, 2004
F) 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 at least annually. The amount and
character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the fund's capital
accounts to reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
G) Amortization of bond premium and accretion of bond discount Any premium
resulting from the purchase of securities in excess of maturity value is
amortized on a yield-to-maturity basis. Discounts on zero coupon bonds and
original issue discount bonds are accreted according to the yield to maturity
basis.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.60% of the first $500 million of
average net assets, 0.50% of the next $500 million, 0.45% of the next $500
million, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355%
the next $5 billion, 0.34% of the next $5 billion and 0.33% thereafter.
The fund reimburses Putnam Management an allocated amount for the compensation
and related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a division
of PFTC.
For the six months ended November 30, 1997, fund expenses were reduced by
$15,964 under expense offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these credits.
The fund could have invested a portion of the assets utilized in connection
with the expense offset arrangements in an income producing asset if it had
not entered into such arrangements.
Trustees of the funds receive an annual Trustees fee of which $433 has been
allocated to the fund 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 has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of Trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees currently limit payment by the fund to an annual rate of 0.20%, 0.85%
and 0.50% of the average net assets attributable to class A, class B and class
M shares respectively.
For the six months ended November 30, 1997, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $10,314 and $75 from the sale of
class A and class M shares, respectively and $51,209 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, 1997, 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, 1997, purchases and sales of
investment securities other than short-term investments aggregated $33,891,977
and $38,901,749, 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, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
November 30, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 649,766 $5,939,977
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distribution 325,612 2,969,560
- ------------------------------------------------------------
975,378 8,909,537
Shares
repurchased (1,524,977) (13,945,794)
- ------------------------------------------------------------
Net decrease (549,599) $(5,036,257)
- ------------------------------------------------------------
Year ended
May 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 1,198,774 $10,700,758
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distribution 689,750 6,142,339
- ------------------------------------------------------------
1,888,524 16,843,097
Shares
repurchased (2,622,181) (23,383,041)
- ------------------------------------------------------------
Net decrease (733,657) $(6,539,944)
- ------------------------------------------------------------
Six months ended
November 30, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 673,429 $6,136,377
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 69,270 630,949
- ------------------------------------------------------------
742,699 6,767,326
Shares
repurchased (398,468) (3,633,843)
- ------------------------------------------------------------
Net increase 344,231 $3,133,483
- ------------------------------------------------------------
Year ended
May 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 1,305,642 $11,620,146
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 131,755 1,171,868
- ------------------------------------------------------------
1,437,397 12,792,014
Shares
repurchased (961,610) (8,580,550)
- ------------------------------------------------------------
Net increase 475,787 $4,211,464
- ------------------------------------------------------------
Six months ended
November 30, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 73,433 $672,478
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,908 17,411
- ------------------------------------------------------------
75,341 689,889
Shares
repurchased (5,176) (47,247)
- ------------------------------------------------------------
Net increase 70,165 $642,642
- ------------------------------------------------------------
Year ended
May 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 44,589 $393,371
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,895 25,792
- ------------------------------------------------------------
47,484 419,163
Shares
repurchased (2,815) (25,312)
- ------------------------------------------------------------
Net increase 44,669 $393,851
- ------------------------------------------------------------
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund *
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. 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
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
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 Total Return Fund
High Yield Trust +
Income Fund
Money Market 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 Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
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
* Formerly Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply. Contact Putnam
for details.
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** 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.
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.
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
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
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 the principal amount
invested.
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PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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SA053-36874 848/240/130 1/98
