Putnam
Ohio
Tax Exempt
Income Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-98
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "On a national level, it is reassuring to know that we have a Federal
Reserve Board that is prepared to step in to stabilize the markets when a
crisis occurs."
-- David E. Hamlin, manager
Putnam Ohio Tax Exempt Income Fund
* "We're at historical highs in terms of muni yields relative to
Treasuries. They represent an unprecedented bargain and opportunity."
-- Money, Year End, 1998
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 rush of foreign investors to the safety of U.S. Treasury bonds in
recent months has driven prices on these securities markedly higher.
Because of the inverse relationship of yields to prices, yields on 30-year
Treasuries have declined to virtually the same level as those on long-term
municipals. This near parity has made Ohio tax-exempt bonds unusually
attractive for the state's tax-conscious investors.
On the other side, however, the ability to find appropriate investments
for Putnam Ohio Tax Exempt Income Fund's portfolio has become the biggest
challenge for David E. Hamlin, who was recently appointed as your fund's
manager. David, who joined Putnam in August from the Vanguard Group, is
also responsible for the management of a number of other municipal bond
funds and institutional portfolios. He has 16 years of investment
experience. Jerome Jacobs, who had served as interim manager, continues to
monitor the fund in his role as chief investment officer of the Tax Exempt
Group.
In the following report, David discusses the fund's performance during the
first half of fiscal 1999 and comments on his current expectations for the
months ahead.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 20, 1999
Report from the Fund Manager
David E. Hamlin
After a turbulent autumn, the municipal bond market has calmed down and
even slightly outperformed the Treasury market. Long-term municipal bond
yields are approximately the same as 30-year Treasury bond yields --
exhibiting a remarkable level of cheapness against Treasuries. This ratio
dropped to 97% during November but by the end of the month, had returned
to 100%. Considering that this ratio stood between 85% and 95% for most of
the 1990s, today's ratio is quite unusual and, in our opinion, indicates a
buying opportunity.
It is within this environment that Putnam Ohio Tax Exempt Income Fund
continued to produce high current income exempt from federal and state
taxes. For the six months ended November 30, 1998, the fund earned total
returns of 2.37% at net asset value and -2.48% at public offering price.
For complete performance information, please see pages 8 and 9.
* FLIGHT TO QUALITY DRIVES TREASURY YIELDS DOWN
We arrived at the current unprecedented yield ratios after a string of
international problems set off the stock market volatility and the bond
market rallies. As foreign investors and hedge fund investors panicked
about plummeting stock markets, they began a flight to quality -- selling
hedge funds and emerging-markets funds in favor of the safety of U.S.
Treasury bonds. This buying drove up the prices of Treasuries while
pushing down their yields. Since foreign investors do not benefit from the
tax advantages of municipal bonds, prices in this market didn't rise as
much as those of Treasuries. For the past few months, municipal bond
yields have been extremely close or equal to Treasury yields, making
municipal bonds an exceptional investment choice for U.S. investors.
* REFUNDINGS SLOW; MUNICIPAL SUPPLY BEGINS TO MODERATE
Normally when interest rates fall, refundings boost the bond supply. But
rates have been low for some time; most issuers have already completed
their refundings and we expect that the supply of new issues will slow --
a positive factor for municipal bond prices. The calendar of municipal
bond sales usually slows during the holiday season as well.
The yield relationship of Treasury and municipal securities is also
contributing to the decline in refunding supply. Since Treasury yields
fell so dramatically relative to municipal yields, the Treasury escrows
used in prerefundings are not adequate to pay off the municipal issues.
All these factors, combined with the fact that the Ohio bond supply has
rarely been an abundant one, help support the prices of existing bonds but
make it a challenge to find the kind of issues we want for your fund's
portfolio.
* FUND SEARCHES FOR INCOME OPPORTUNITIES IN LOWER-YIELDING MARKET
Since last spring, your management team has been working to deliver an
attractive level of income in a market in which yields have fallen. We
have tried to meet this challenge by exploring attractive opportunities in
key industry sectors, including health care, housing, and education.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Health care 21.9%
Housing 11.4%
Education 11.2%
Transportation 9.9%
Water and sewer 5.5%
Footnote reads:
*Based on net assets as of 11/30/98. Holdings will vary over time.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
Aa -- 6.8%
A -- 6.4%
Baa -- 19.8%
Ba -- 8.3%
VMIG1 -- 1.2%
Aaa -- 57.5%
Footnote reads:
*As a percentage of market value as of 11/30/98. 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.
Additionally, the growing predominance of insured bonds, particularly in
states like Ohio where the bond supply is limited, makes it difficult to
find higher-yielding paper. This is evident when you look at the fund's
quality composition and see that nearly 60% of the portfolio is
insured/Aaa rated. In September, we added to our Aaa position by
purchasing FGIC (Financial Guaranty Insurance Company) insured revenue
bonds issued by the Ohio Turnpike Authority because we approved of the
structure and the underlying credit. While this holding was viewed
favorably as of November 30, 1998, all holdings are subject to review in
accordance with the fund's investment strategy and may vary in the future.
At the end of the semiannual period, health-care and hospital bonds made
up 21.9% of the fund's portfolio, making this industry the largest sector
in the fund. Based on MBIA's recent announcement that in order to reduce
risk, the agency would no longer insure hospitals with credit ratings
lower than A, we believe the health-care sector will be offering increased
opportunities for higher income. This announcement is good news for
investors looking for higher yields in an extremely thin investment grade
market. Of course, taking advantage of these opportunities means that we
will depend heavily on the expertise of our credit research department to
scrutinize the financial background of health-care issuers being
considered for the portfolio.
Another strategy we have used to maintain income levels has been to extend
call protection as we make new investments. This is done by purchasing
noncallable bonds or bonds with distant call dates. Callable bonds carry
the option of being redeemed, or called away, by the issuer at a certain
future date. Bonds are normally called away if interest rates are lower
than they were when the bonds were originally issued. By avoiding callable
bonds, the portfolio has a better chance of maintaining a consistent level
of income.
* INTEREST-RATE CUTS SEND POSITIVE MESSAGE
On a national level, it is reassuring to know that we have a Federal
Reserve Board that is prepared to step in to stabilize the markets when a
crisis occurs. As of November 30, the Fed has cut interest rates three
times -- totaling 75 basis points -- sending a positive message to the
world and Wall Street. With the Fed's encouragement, we anticipate a
slowing, but still strong U.S. economy supported by consumers' willingness
to spend.
Ohio is a well-managed, fiscally conservative state that is enjoying a
slight revenue surplus for the second year in a row. However, because of
its dependence on manufacturing and auto equipment services for
employment, the state is vulnerable to economic downturns, and such an
occurrence could affect the prices of Ohio municipal bonds. For the
present, we consider that the Ohio market offers superb value for
tax-conscious investors and we will continue to focus on generating
competitive levels of income and total return in today's low interest-rate
environment.
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 11/30/98, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Ohio Tax Exempt Income Fund is designed for investors seeking high current
income free from federal and state income taxes, consistent with capital
preservation.
TOTAL RETURN FOR PERIODS ENDED 11/30/98
Class A Class B Class M
(inception date) (10/23/89) (7/15/93) (4/3/95)
NAV POP NAV CDSC NAV POP
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6 months 2.37% -2.48% 1.92% -3.06% 2.21% -1.10%
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1 year 5.77 0.73 4.97 -0.03 5.46 2.01
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5 years 31.10 24.84 26.69 24.72 29.13 24.87
Annual average 5.57 4.54 4.85 4.52 5.25 4.54
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Life of fund 87.89 79.05 75.34 75.34 81.57 75.71
Annual average 7.18 6.61 6.37 6.37 6.77 6.39
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/98
Lehman Bros.
Municipal
Bond Consumer
Index Price Index
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6 months 3.84% 0.74%
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1 year 7.77 1.55
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5 years 37.81 12.48
Annual average 6.63 2.38
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Life of fund 103.52 30.57
Annual average 8.14 2.98
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Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 4.75% and
3.25% respectively. Class B share returns for the 1-, 5-, and life-of-fund
periods reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declines to 1% in the sixth year, and is
eliminated thereafter. Returns shown for class B and class M shares for
periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the initial sales
charge or CDSC, if any, currently applicable to each class and in the case
of class B and class M shares, the higher operating expenses applicable to
such shares. All returns assume reinvestment of distributions at NAV.
Investment return and principal value will fluctuate so that an investor's
shares when redeemed may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 11/30/98
Class A Class B Class M
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Distributions (number) 6 6 6
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Income $0.236193 $0.205745 $0.222167
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Capital gains1 -- -- --
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Total $0.236193 $0.205745 $0.222167
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Share value: NAV POP NAV NAV POP
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5/31/98 $9.26 $9.72 $9.25 $9.26 $9.57
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11/30/98 9.24 9.70 9.22 9.24 9.55
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Current return (end of period)
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Current dividend rate2 5.10% 4.86% 4.45% 4.80% 4.64%
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Taxable equivalent3 9.10 8.67 7.94 8.56 8.28
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Current 30-day SEC yield4 4.14 3.94 3.49 3.84 3.72
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Taxable equivalent3 7.39 7.03 6.23 6.85 6.64
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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 43.95% 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 12/31/98
(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
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6 months 2.42% -2.43% 2.09% -2.86% 2.27% -1.05%
- ------------------------------------------------------------------------------
1 year 4.46 -0.47 3.78 -1.14 4.15 0.78
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5 years 29.41 23.21 25.18 23.22 27.40 23.20
Annual average 5.29 4.26 4.59 4.26 4.96 4.26
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Life of fund 88.37 79.51 75.89 75.89 81.99 76.12
Annual average 7.13 6.57 6.34 6.34 6.73 6.35
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TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 4.75% maximum sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the
municipal bond market. The index does not take into account brokerage
commissions or other costs, may include bonds different from those in the
fund, and may pose different risks than the fund. Securities in the fund
do not match those in the indexes and performance of the fund will differ.
It is not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
<TABLE>
<CAPTION>
Portfolio of investments owned
November 30, 1998 (Unaudited)
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
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
VRDN -- Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (96.2%) (a)
PRINCIPAL AMOUNT RATINGS(RAT) VALUE
<S> <C> <C> <C> <C>
Ohio (84.8%)
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$1,000,000 Akron, G.O. Bonds, 6s, 12/1/12 AA- $ 1,142,500
875,000 Akron, Econ. Dev. Rev. Bonds, MBIA, 6s, 12/1/13 Aaa 1,004,063
100,000 Akron-Wilbeth, Hsg. Dev. Corp. 1st Mtge.
Rev. Bonds, FHA Insd., 7.9s, 8/1/03 A 115,750
1,805,000 Bedford, Hosp. Impt. Rev. Bonds (Bedford Cmnty.
Hosp. Inc.), 8 1/2s, 5/15/09 AAA/P 1,931,350
1,500,000 Brecksville-Broadview Heights, City School Dist.
G.O. Bonds, FGIC, 6 1/2s, 12/1/16 Aaa 1,726,875
5,000,000 Butler Cnty., Hosp. Impt. Rev. Bonds
(Fort Hamilton-Hughes), 7 1/2s, 1/1/10 Baa3 5,431,250
870,000 Cincinnati, Student Loan Funding Corp. Rev. Bonds,
Ser. B, 8 7/8s, 8/1/08 BBB/P 913,500
2,500,000 Cleveland, Arpt. Rev. Bonds (Continental
Airlines, Inc.), 5 3/8s, 9/15/27 Ba2 2,375,000
2,500,000 Cleveland, City School Dist. G.O. Bonds,
8 1/4s, 12/1/08 Aaa 2,871,875
1,350,000 Cleveland-Cuyahoga Cnty., Port Auth. Rev. Bonds
(Rock & Roll Hall of Fame), 5.2s, 12/1/03 BBB-/P 1,383,750
Cleveland, G.O. Bonds, MBIA
1,255,000 5 3/4s, 8/1/15 Aaa 1,405,600
1,000,000 5 3/4s, 8/1/14 Aaa 1,121,250
2,000,000 5 3/4s, 8/1/11 Aaa 2,247,500
2,500,000 Cleveland, Pkg. Fac. Impt. Rev. Bonds, 8s, 9/15/12 BB/P 2,915,625
Cleveland Urban Renewal Increment Rev. Bonds
(Rock & Roll Hall of Fame)
1,900,000 6 3/4s, 3/15/18 BBB-/P 2,025,875
2,000,000 6 5/8s, 3/15/11 BBB-/P 2,130,000
Cleveland, Waterworks 1st Mtge. Rev. Bonds
2,000,000 Ser. F-92A, AMBAC, 6 1/2s, 1/1/21 Aaa 2,200,000
7,950,000 Ser. G, MBIA, 5 1/2s, 1/1/13 Aaa 8,695,313
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
4,500,000 Dayton, Fac. Rev Bonds (Emery Air Freight), Ser. A,
5 5/8s, 2/1/18 BBB 4,606,875
1,300,000 Dublin, G.O. Bonds, Ser. B, 6.4s, 12/1/14 Aa 1,545,375
1,300,000 Franklin Cnty., Convention Fac. Auth. Tax & Lease
RAN, MBIA, 7s, 12/1/19 Aaa 1,413,750
Franklin Cnty., Hlth. Care Fac. Rev. Bonds
2,480,000 (Holy Cross Hlth. Syst.), 5 7/8s, 6/1/21 Aa3 2,684,600
1,750,000 (Friendship Dublin), 5 5/8s, 11/1/22 BBB+/P 1,756,563
1,500,000 (OH Presbyterian Svcs.), 5 1/2s, 7/1/21 BBB-/P 1,471,875
2,750,000 Hamilton Cnty., Hlth. Syst. Rev. Bonds
(Providence Hosp.), 6 7/8s, 7/1/15 Baa1 2,973,438
2,000,000 Hamilton Cnty., Sales Tax Rev. Bonds (Hamilton
Cnty. Football), Ser. B, MBIA, 5s, 12/1/27 Aaa 1,990,000
1,800,000 Huran Cnty., Human Svcs. Rev. Bonds, MBIA,
6.55s, 12/1/20 Aaa 2,207,250
1,320,000 Kirtland G.O. Bonds, AMBAC, 7 1/2s, 12/1/16 Aaa 1,488,300
349,401 Lake Cnty. Indl. Dev. Rev. Bonds (Madison Inn
Hlth. Ctr.), FHA Insd., 12s, 5/1/14 A-/P 364,289
1,000,000 Lakota, Local School Dist. Rev. Bonds, AMBAC,
7s, 12/1/10 Aaa 1,242,500
799,305 Logan Cnty., Indl. Dev. Rev. Bonds (Indian Lake Hlth.),
FHA Insd., 12s, 3/15/14 AAA/P 842,995
1,910,000 Lorain Cnty., Elderly Hsg. Corp. Multi-Fam.
Rev. Bonds (Harr Plaza & Intl.), Ser. A,
6 3/8s, 7/15/19 A 2,005,500
Lorain Cnty., Fac. Rev. Bonds (Laurel Lake)
1,500,000 7.3s, 12/15/14 BB-/P 1,623,750
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 6,516,469
3,100,000 Lucas Cnty., Indl. Dev. Rev. Bonds (Kroger Co.),
8 1/2s, 7/1/11 Baa3 3,468,125
Marion Cnty., Hlth. Care Fac. Rev. Bonds
(United Church Homes)
460,000 8 7/8s, 12/1/12 AAA/P 499,201
4,000,000 6 3/8s, 11/15/10 BBB- 4,260,000
2,000,000 6.3s, 11/15/15 BBB- 2,107,500
1,205,000 Massillon Rev. Bonds (Lincoln Ctr. Phase II),
AMBAC, 6.95s, 12/1/10 Aaa 1,491,188
2,700,000 Miami, Cnty., Hosp. Fac. Rev. Bonds
(Upper Valley Med. Ctr.), Ser. A, 6 3/8s, 5/15/26 Baa2 2,916,000
Montgomery Cnty., Hlth. Syst. Rev. Bonds
280,000 Ser. B-1, 8.1s, 7/1/18 A2 338,450
1,720,000 Prerefunded, Ser. B-1, 8.1s, 7/1/18 Aaa 2,195,150
580,000 Montgomery Cnty., Hosp. Rev. Bonds
(Grandview Hosp. & Med Ctr.), 5.6s, 12/1/11 BBB 563,325
2,605,000 Mount Vernon, Hosp. Rev. Bonds
(Knox Cmnty. Hosp.), 7 7/8s, 6/1/12 BBB+/P 2,661,997
3,000,000 North Olmsted, G.O. Bonds, AMBAC, 6.2s, 12/1/11 Aaa 3,510,000
835,000 Northwestern, School Dist. Rev. Bonds (Wayne &
Ashland Cntys. School Impt.), FGIC, 7.2s, 12/1/10 AAA 1,053,144
OH Hsg. Fin. Agcy. Mtge. Rev. Bonds
6,155,000 Ser. 25, 8.05s, 3/1/29 (acquired 9/24/97
cost $6,876,982) (RES) AAA/P 6,947,456
2,995,000 Ser. A, GNMA Coll., 6.05s, 9/1/17 AAA 3,178,444
2,620,000 OH Hsg. Fin. Agcy. Rev. Bonds, Ser. B, GNMA Coll.,
5 5/8s, 9/1/17 AAA 2,692,050
OH Hsg. Fin. Agcy. Single Fam. Mtge. IFB
4,550,000 Ser. G-2, GNMA Coll., 10.295s, 3/2/23 Aaa 5,408,813
5,064,000 Ser. A-2, GNMA Coll., 9.973s, 3/24/31 Aaa 5,697,000
OH Hsg. Fin. Agcy. Single Fam. Mtge. Rev. Bonds
435,000 Ser. C, GNMA Coll., 7.85s, 9/1/21 AAA 458,381
215,000 Ser. 85-A, FGIC, zero %, 1/15/15 Aaa 44,344
OH State Air Qlty. Dev. Auth. Rev. Bonds
(Poll. Control)
5,000,000 Ser. B, 6s, 8/1/20 Ba1 5,106,250
2,500,000 Ser. A, 5.95s, 5/15/29 Baa2 2,603,125
OH State Econ. Dev. Rev. Bonds
1,435,000 (Sponge, Inc.), Ser. 5-A, 8 3/8s, 6/1/14 A- 1,491,252
605,000 (Superior Forge & Steel Corp.), Ser. 3,
7 5/8s, 6/1/11 A- 659,450
5,750,000 OH State Ed. Rev. Bonds, Ser. A-1, AMBAC,
5.85s, 12/1/19 Aaa 5,994,375
OH State Higher Ed. Fac. Rev. Bonds
(Case Western Reserve U.)
4,500,000 6 1/4s, 10/1/18 Aa 5,394,375
1,000,000 6s, 10/1/14 Aa 1,140,000
1,800,000 OH State Indl. Dev. Auth. Rev. Bonds (Kroger Co.),
8.65s, 6/1/11 Baa3 2,013,750
3,350,000 OH State Poll. Control Rev. Bonds
(Standard Oil Co.), 6 3/4s, 12/1/15 AA 4,049,313
1,250,000 OH State Wtr. Dev. Auth. Poll. Control Fac.
Rev. Bonds (Cleveland Elec. Illuminating),
8s, 10/1/23 Ba1 1,280,213
OH State Wtr. Dev. Auth. Solid Waste Disp.
Rev. Bonds
5,700,000 (North Star Broken Hill Steel), 6.45s, 9/1/20 A2 6,220,125
2,500,000 (Bay Shore Power Co.), Ser. A, 5 7/8s, 9/1/20 BB-/P 2,521,875
OH State, Tpk. Comm. Rev. Bonds, Ser. B, FGIC
1,000,000 5 1/4s, 2/15/11 AAA 1,061,250
2,000,000 5 1/4s, 2/15/10 AAA 2,137,500
2,000,000 4 3/4s, 2/15/28 AAA 1,907,500
Sandusky Cnty., Hosp. Fac., Rev. Bonds
(Memorial Hosp.)
830,000 5.15s, 1/1/10 BBB- 828,963
500,000 5.15s, 1/1/08 BBB- 507,500
685,000 5.05s, 1/1/07 BBB- 691,850
2,480,000 Southwest, Local School Dist. G.O. Bonds
(Hamilton Cnty.), AMBAC, 7.65s, 12/1/10 Aaa 2,663,098
2,260,000 Sprigboro Cmnty., City School Dist. G.O. Bonds,
AMBAC, 6s, 12/1/11 Aaa 2,601,825
1,500,000 Toledo, G.O. Bonds (Macys), Ser. A, MBIA,
6.35s, 12/1/25 Aaa 1,689,375
2,925,000 Toledo Swr. Syst. Mtge. Rev. Bonds, AMBAC,
6.2s, 11/15/12 (SEG) Aaa 3,444,188
1,175,000 Toledo Waterworks Mtge. Rev. Bonds, AMBAC,
6.2s, 11/15/12 Aaa 1,383,563
3,200,000 Toledo-Lucas Cnty., Rev. Bond (Lodging
Tax-Convention Ctr.) MBIA, 5.7s, 10/1/15 Aaa 3,456,000
1,100,000 Tuscarawas Cnty., Hosp. Fac. Rev. Bonds
(Union Hosp.), Ser. A, 6 1/2s, 10/1/21 Baa2 1,177,000
1,000,000 Twin Valley, Cmnty. Local School Dist. Rev. Bonds,
FGIC, 7.05s, 12/1/11 Aaa 1,255,000
1,850,000 Washington Cnty., Hlth. Care Fac. Rev. Bonds
(Glenwood Retirement Cmnty.), 6.35s, 10/1/27 BB-/P 1,875,438
Westerville, City School Dist. Rev. Bonds
(School Impt.)
1,610,000 6 1/4s, 12/1/09 A+ 1,895,775
1,590,000 6 1/4s, 12/1/08 A+ 1,844,400
3,000,000 Woodridge, School Dist. Rev. Bonds, AMBAC,
6.8s, 12/1/14 Aaa 3,723,750
Zanesville, Hsg. Dev. Corp. Mtge. Rev. Bonds
FHA Insd.
220,000 7 3/8s, 10/1/21 Aaa 284,900
205,000 7 3/8s, 10/1/20 Aaa 268,294
185,000 7 3/8s, 10/1/19 Aaa 238,881
180,000 7 3/8s, 10/1/18 Aaa 231,075
160,000 7 3/8s, 10/1/17 Aaa 206,000
155,000 7 3/8s, 10/1/16 Aaa 198,013
--------------
207,298,477
Puerto Rico (11.4%)
- --------------------------------------------------------------------------------------------------------------------------
2,000,000 Cmnwlth. of PR, Govt. Dev. Bank VRDN, MBIA,
3.05s, 12/1/15 VMIG1 2,000,000
Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
1,000,000 Ser. Z, MBIA, 6 1/4s, 7/1/15 Aaa 1,185,000
4,000,000 Ser. W, MBIA, 5 1/2s, 7/1/15 Aaa 4,395,000
830,000 Cmnwlth. of PR, Hwy. & Trans. Auth. VRDN, Ser. X,
3.05s, 7/1/99 VMIG1 830,000
1,350,000 Cmnwlth. of PR, Hwy. Auth. Rev. Bonds, Ser. Q,
7 3/4s, 7/1/16 AAA 1,466,438
3,600,000 Cmnwlth. of PR, Impt. G.O. Bonds, 7.7s, 7/1/20 AAA 3,906,000
4,180,000 Cmnwlth of PR, Muni. Fin. Agcy. Rev. Bonds, Ser. A,
FSA, 6s, 7/1/11 Aaa 4,854,025
Cmnwlth of PR, Pub. Bldg. Auth. Fac. Rev. Bond, Ser. A
1,100,000 AMBAC, 6 1/4s, 7/1/15 Aaa 1,303,500
1,440,000 AMBAC, 6 1/4s, 7/1/12 Aaa 1,706,400
3,875,000 6 1/4s, 7/1/11 Aaa 4,596,712
1,400,000 Cmnwlth. of PR, Tel. Auth. IFB, MBIA, 7.168s, 1/16/15 AAA 1,520,750
--------------
27,763,825
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $221,129,115) (b) $ 235,062,302
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $244,435,364.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
November 30, 1998 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, 1998. Securities
rated by Putnam are indicated by "/P" and are not publicly rated.
(b) The aggregate identified cost on a tax basis is $221,129,264, resulting in gross unrealized appreciation and
depreciation of $14,614,885 and $681,847, respectively, or net unrealized appreciation of $13,933,038.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held at
November 30, 1998 was $6,947,456 or 2.8% of net assets.
(SEG) A portion of this security was pledged and segregated with the custodian to cover margin requirements for
futures contracts at November 30, 1998.
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, 1998.
The fund had the following industry group concentrations greater than 10% at November 30, 1998 (as a
percentage of net assets):
Health care 21.9%
Housing 11.4
Education 11.2
The fund had the following insurance concentrations greater than 10% at November 30, 1998 (as a percentage of
net assets):
MBIA 16.3%
AMBAC 16.1
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1998 (Unaudited)
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- -------------------------------------------------------------------------------
Muni Index (long) $6,196,969 $6,151,798 Dec-98 $ 45,171
U.S. Treasury Bond
20yr (short) 3,369,438 3,355,232 Mar-99 (14,206)
U.S. Treasury Bond
20yr (short) 7,530,938 7,375,103 Dec-98 (155,835)
- -------------------------------------------------------------------------------
$(124,870)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1998 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $221,129,115) (Note 1) $235,062,302
- -----------------------------------------------------------------------------------------------
Cash 328,407
- -----------------------------------------------------------------------------------------------
Interest and other receivables 4,788,353
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 360,104
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 5,413,500
- -----------------------------------------------------------------------------------------------
Total assets 245,952,666
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for variation margin 75,737
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 624,567
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 340,287
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 303,514
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 25,532
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 9,132
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,030
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 102,941
- -----------------------------------------------------------------------------------------------
Other accrued expenses 34,562
- -----------------------------------------------------------------------------------------------
Total liabilities 1,517,302
- -----------------------------------------------------------------------------------------------
Net assets $244,435,364
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $231,302,844
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 280,605
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (956,402)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 13,808,317
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $244,435,364
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($186,162,808 divided by 20,157,004 shares) $9.24
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.24)* $9.70
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($55,964,066 divided by 6,069,067 shares)+ $9.22
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($2,308,490 divided by 249,920 shares) $9.24
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.24)** $9.55
- -----------------------------------------------------------------------------------------------
* 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, 1998 (Unaudited)
<S> <C>
Tax exempt interest income: $7,245,123
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 647,422
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 148,236
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 4,562
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,087
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 185,826
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 232,656
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 5,752
- -----------------------------------------------------------------------------------------------
Reports to shareholders 9,340
- -----------------------------------------------------------------------------------------------
Auditing 13,730
- -----------------------------------------------------------------------------------------------
Legal 10,367
- -----------------------------------------------------------------------------------------------
Postage 9,407
- -----------------------------------------------------------------------------------------------
Other 29,822
- -----------------------------------------------------------------------------------------------
Total expenses 1,300,207
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (10,651)
- -----------------------------------------------------------------------------------------------
Net expenses 1,289,556
- -----------------------------------------------------------------------------------------------
Net investment income 5,955,567
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (114,387)
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Notes 1) (942,503)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the period 508,006
- -----------------------------------------------------------------------------------------------
Net loss on investments (548,884)
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $5,406,683
- -----------------------------------------------------------------------------------------------
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
1998* 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 5,955,567 $ 11,697,722
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (1,056,890) 1,881,153
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 508,006 4,904,395
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 5,406,683 18,483,270
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (4,734,922) (9,347,168)
- ---------------------------------------------------------------------------------------------------------------
Class B (1,214,941) (2,242,174)
- ---------------------------------------------------------------------------------------------------------------
Class M (55,138) (72,254)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 3,002,118 2,219,379
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 2,403,800 9,041,053
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 242,031,564 232,990,511
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $280,605 and
$330,039, respectively) $244,435,364 $242,031,564
- ---------------------------------------------------------------------------------------------------------------
* 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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.26 $8.99 $8.76 $8.95 $8.80 $9.26
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .23 .47 .46 .48 .52 .53
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.01) .27 .23 (.19) .15 (.35)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .22 .74 .69 .29 .67 .18
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.24) (.47) (.46) (.48) (.51) (.52)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- (.01) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.24) (.47) (.46) (.48) (.52) (.64)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.24 $9.26 $8.99 $8.76 $8.95 $8.80
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.37* 8.35 8.05 3.30 8.04 1.88
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $186,163 $186,130 $185,030 $186,633 $193,176 $194,130
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .46* .98 .98 .96 .93 .99
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.53* 5.06 5.22 5.39 5.97 5.68
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 2.43* 31.07 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 B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share Nov. 30 July 15, 1993+
operating performance (Unaudited) Year ended May 31 to May 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.25 $8.98 $8.75 $8.94 $8.79 $9.37
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .20 .41 .41 .42 .46 .40
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.02) .27 .22 (.19) .16 (.46)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .18 .68 .63 .23 .62 (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) (.41) (.40) (.42) (.46) (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- (.01) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.21) (.41) (.40) (.42) (.47) (.52)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.22 $9.25 $8.98 $8.75 $8.94 $8.79
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 1.92* 7.65 7.35 2.63 7.39 (1.49)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $55,964 $53,689 $47,050 $41,655 $32,847 $17,959
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .79* 1.63 1.63 1.61 1.58 1.42*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.21* 4.40 4.56 4.71 5.24 4.35*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 2.43* 31.07 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
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.26 $9.00 $8.76 $8.95 $8.76
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .22 .43 .44 .45 .08
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.02) .27 .23 (.18) .19
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .20 .70 .67 .27 .27
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.22) (.44) (.43) (.46) (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.22) (.44) (.43) (.46) (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.24 $9.26 $9.00 $8.76 $8.95
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.21* 7.90 7.85 3.00 3.05*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,308 $2,212 $911 $495 $1
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .61* 1.28 1.28 1.27 .20*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.38* 4.76 4.87 4.85 .89*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 2.43* 31.07 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, 1998 (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 six months
ended November 30, 1998, the fund had no borrowings against the line of
credit.
E) Federal taxes It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
It is also the intention of the fund to distribute an amount sufficient to
avoid imposition of any excise tax under Section 4982 of the Internal
Revenue Code of 1986, as amended. Therefore, no provision has been made
for federal taxes on income, capital gains or unrealized appreciation on
securities held nor for excise tax on income and capital gains.
F) Distributions to shareholders Income dividends are recorded daily by
the fund and are 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,
original issue discount, stepped-coupon bonds and payment-in-kind 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, 0.40% of the next $500 million, 0.35% of
the next $500 million, 0.30% of the next $5 billion, 0.275% of the next $5
billion, 0.255% thereafter. Effective August 1, 1998, the Trustees voted
to reduce the annual rate for the first $500 million of average net assets
to 0.50%. This reduction will remain in effect until January 31, 2000.
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, 1998, fund expenses were reduced by
$10,651 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized in
connection with the expense offset arrangements in an income producing
asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $380 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 have approved 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, 1998, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $14,748 and $200 from
the sale of class A and class M shares, respectively and $42,242 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 that were purchased without an initial sales charge as part
of an investment of $1 million or more. For the six months ended November
30, 1998, 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, 1998, purchases and sales of
investment securities other than short-term investments aggregated
$5,802,860 and $13,774,314, 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, 1998, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
November 30, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 797,687 $ 7,373,337
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distribution 319,724 2,954,741
- -----------------------------------------------------------------------------
1,117,411 10,328,078
Shares
repurchased (1,065,608) (9,849,156)
- -----------------------------------------------------------------------------
Net increase 51,803 $ 478,922
- -----------------------------------------------------------------------------
Year ended
May 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,819,091 $ 16,761,794
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distribution 634,747 5,836,587
- -----------------------------------------------------------------------------
2,453,838 22,598,381
Shares
repurchased (2,920,272) (26,871,144)
- -----------------------------------------------------------------------------
Net decrease (466,434) $ (4,272,763)
- -----------------------------------------------------------------------------
Six months ended
November 30, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 548,305 $ 5,064,490
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 76,749 708,375
- -----------------------------------------------------------------------------
625,054 5,772,865
Shares
repurchased (362,897) (3,349,590)
- -----------------------------------------------------------------------------
Net increase 262,157 $ 2,423,275
- -----------------------------------------------------------------------------
Year ended
May 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,246,389 $ 11,440,556
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 140,190 1,287,791
- -----------------------------------------------------------------------------
1,386,579 12,728,347
Shares
repurchased (817,447) (7,507,988)
- -----------------------------------------------------------------------------
Net increase 569,132 $ 5,220,359
- -----------------------------------------------------------------------------
Six months ended
November 30, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 52,327 $ 482,789
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,963 45,866
- -----------------------------------------------------------------------------
57,290 528,655
Shares
repurchased (46,372) (428,734)
- -----------------------------------------------------------------------------
Net increase 10,918 $ 99,921
- -----------------------------------------------------------------------------
Year ended
May 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 141,914 $1,309,414
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,675 52,317
- -----------------------------------------------------------------------------
147,589 1,361,731
Shares
repurchased (9,784) (89,948)
- -----------------------------------------------------------------------------
Net increase 137,805 $1,271,783
- -----------------------------------------------------------------------------
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities 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 [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
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
Global Governmental Income Trust
High Quality Bond Fund +
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
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
LIFESTAGE SM FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
*Formerly Putnam Diversified Income Trust II
+Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
**An investment in a money market fund is 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
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
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
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Jerry J. Jacobs
Vice President
David E. Hamlin
Vice President and Fund Manager
John R. Verani
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' web site:
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
www.putnaminv.com
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PUTNAM
INVESTMENTS
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