(logo)
Putnam
Texas
Tax Exempt
Income Fund
Annual
Report
January 31, 1994
(artwork)
For investors seeking high current income free from federal
income tax, consistent with capital preservation
Contents
2 How your fund performed
3 From the Chairman
4 Report from Putnam Management
Annual Report
6 Report of Independent Accountants
7 Portfolio of investments owned
10 Financial statements
18 Tax information
18 Fund performance supplement
19 Your Trustees
A member
of the Putnam
Family of Funds
<PAGE>
How your
fund performed
For periods ended January 31, 1994
Total return* Lehman
Brothers
Fund Municipal Consumer
NAV POP Bond Index Price Index
1 year 12.17% 6.79% 12.26% 2.53%
Life-of-fund
(since 3/4/92) 24.49 18.64 23.26 5.48
annualized 12.15 9.36 11.57 2.83
Share data NAV POP
January 31, 1993 $8.94 $9.39
January 31, 1994 $9.48 $9.95
Distributions(a) Investment Short-term
12 months ended Number income capital gains Total
January 31, 1994 13$0.516986 $0.007 $0.523986
Current returns Taxable equivalents+
at the end of the period NAV POP NAV POP
Current dividend rate5.46% 5.21% 9.04% 8.63%
Current 30-day yield**5.20 4.95 8.61 8.20
Total return at end of most recent calendar quarter
Periods ended December 31, 1993
Cumulative Annualized
NAV POP NAV POP
1 year 12.57% 7.26% -- --
Life-of-fund
(since 3/4/92) 23.65 17.84 12.30% 9.38%
*Performance data represent past results. Investment return and
net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
(a) Capital gains, if any, are taxable for federal purposes.
<PAGE>
+Taxable equivalent rates cited assume the maximum federal tax
rate of 39.6%. Results for investors subject to lower tax rates
would not be as advantageous, although many such investors would
have the opportunity to receive attractive tax benefits from a
fund investment. Consult your tax advisor for more guidance.
**Subsidized yields. Without the benefits of subsidization, the
yields would be 5.02% and 4.78% at NAV and POP, respectively.
Terms you need to know
Total return is the change in value of an investment from the
beginning to the end of a period, assuming the reinvestment of
all distributions. It may be shown at net asset value or at
public offering price.
Net asset value (NAV) is the value of all your fund's assets,
minus any liabilities, divided by the number of outstanding
shares, not reflecting any sales charge.
Public offering price (POP) is the price of a mutual fund share
plus the maximum 4.75% sales charge levied at the time of
purchase.
Current dividend rate is calculated by annualizing the net
investment income paid to shareholders in the fund's most recent
distribution, then dividing by the NAV or POP on the last day of
the period.
Current 30-day yield, based only on the fund's net investment
income, is calculated in accordance with Securities and Exchange
Commission guidelines.
Taxable equivalent return is the rate at which a taxable
investment would have to generate income to equal the fund's
current dividend rate or yield.
Please see the fund performance supplement on page 18 for
additional information about performance comparisons.
<PAGE>
Cumulative total return on a $10,000 investment since 3/4/92*
(line graph)
Putnam Texas Tax Exempt Income Fund
- ------ NAV
++++++ POP
****** Lehman Municipal Bond Index
...... Consumer Price Index
(plot points)
date/year Lehman Muni CPI fund at fund at
Bond Index NAV POP
3/4/92 10000 10000 10000 9525
1/31/93 10980 10289 11099 10577
1/31/94 12326 10519 12449 11864
<PAGE>
From the
Chairman
(photograph of George Putnam)
(C) Karsh, Ottawa
George Putnam
Chairman
of the Trustees
Dear Shareholder:
During the 12 months ended January 31, 1994, performance for
Putnam Texas Tax Exempt Income Fund was favorably impacted by
several factors, including low inflation, modest economic growth,
and increased investor demand.
This favorable influence is apparent in the figures on the
adjacent page. Although the fund's total return at net asset
value for the fiscal year lagged just slightly behind the Lehman
Brothers Municipal Bonds Index, results at net asset value over
the fund's 22-month life outperformed the index. Fund Manager
Howard Manning's deliberate overweighting in the hospital/health
care sector and addition of lower-rated, higher-coupon bonds from
the airline industry contributed to this accomplishment.
While performance of this fund has been quite competitive, Putnam
Management has recommended, and your fund's Trustees have
approved, the merging of this fund with Putnam Tax Exempt Income
Fund -- one of the nation's oldest tax-exempt bond funds. A
shareholder vote is scheduled for May 5, 1994. If approved by a
shareholder majority, the merger will take place shortly
thereafter.
Please be sure to review your proxy statement, which was mailed
in late March. This document will explain in further detail the
reasons for the merger. If you have any questions, call your
financial advisor or a Putnam representative toll-free at
1-800-225-1581, weekdays from 8:30 a.m. to 8:00 p.m., Eastern
time.
Tax-free investing remains an important consideration for all
investors. Although interest rate shifts after the fiscal year's
end have affected bond prices -- and, thus, your fund's net asset
value -- Putnam Management continues to believe that a favorable
supply/demand relationship should continue to support the
long-term value of municipal bonds.
Respectfully yours,
(signature)
George Putnam
March 16, 1994
<PAGE>
Report from
Putnam Management
The 12 months ended January 31, 1994, were rewarding ones for the
municipal bond market. Putnam Texas Tax Exempt Income Fund's
performance reflects the positive trends that contributed to the
market's rally as well as our fortuitous decisions to overweight
the hospital/health care sector and selectively add lower-rated
bonds from the airline industry.
Throughout the year, interest rates declined, precipitating
several bond market rallies. Given the narrowing differential
between taxable and tax-free yields, increasing numbers of
investors were attracted to municipal bonds for their tax
advantages as well as their relatively high yields. The
combination of strong demand and price appreciation that
naturally results from a declining interest rate environment
helped your fund to deliver attractive total return results.
The fund's current income remains attractive, particularly in
comparison with taxable investments. To keep pace with the fund's
yield at the end of the period, shareholders who pay the maximum
federal tax rate of 39.6% would have had to receive 9.04% from an
equivalent taxable investment to match the fund's 5.46% dividend
rate at net asset value.
Hospital bond emphasis pays off On a total return basis, the
hospital sector was the best-performing sector of the tax-free
market in 1993. With the benefit of hindsight, our decision to
emphasize hospital bonds throughout the year proved quite timely
and was a major contributor to the fund's overall performance. At
the end of the period, this sector represented approximately 25%
of the portfolio, up from 16.5% a year ago. The increased
allocation is due to a deliberate shift of assets into this
sector, as well as to price appreciation resulting from favorable
market perception. The entire health-care sector has experienced
some market volatility as a result of reform efforts.
Nevertheless, we believe there are many promising investment
opportunities to be found among well-managed hospitals.
Our analysis looks at various health-care markets and how they
are positioned relative to our expectations for industry reform.
Our top-down and bottom-up research has helped us to uncover
hospitals with some common characteristics. Typically, these
hospitals have a large market penetration (and may even be the
sole provider of services in their areas), established market
presence, a stable population base and a location within a
community whose economic base is relatively resistant to a
downturn in any single industry.
<PAGE>
Timely positioning in airlines Taking advantage of inefficiencies
in the market, we selectively added lower-rated, higher-coupon
airline bonds during the year. These issues pay for the leasing
and maintenance of terminal facilities for major U.S. airlines.
While our strategy did lower the average quality rating of the
portfolio from AA to A, we believe it enabled us to provide you
with income and total return rewards along the way. This was
especially evident during the later part of the period, when the
economy strengthened. Typically, an economic recovery bodes well
for the airline industry, as travel is likely to increase.
Texas economy steadily improving During the past three years,
Texas has experienced increasingly positive growth trends.
Contributing factors include the stabilization of oil and gas
prices, a much improved real estate market, and the rise of the
service sector (which has reduced the state's dependence on the
highly cyclical oil and gas industry). A lower cost of living and
the lack of a state income tax have been a huge draw for
residents of California and Arizona who have relocated to the
Lone Star state.
Optimistic outlook While the rally in municipal bonds may have
been one of the major factors helping the fund to deliver an
attractive total return for 1993, we believe opportunities in
1994 will carry more of an income emphasis as the economy gains
momentum. In addition, an anticipated reduction in the supply of
new and refinancing issuance from 1993's lofty levels could
favorably impact the value of tax-free securities from around the
state. In the face of higher taxes and strengthening demand,
shrinking supply could further enhance the value of the bonds in
the portfolio and thus the fund's net asset value. Although
higher interest rates may negatively affect bond prices to offset
these trends in the short term, we believe that, over the
long-term, municipal bonds remain an important -- and rewarding
- -- component of any diversified portfolio.
Top industry sectors (at 1/31/94 as a percentage of net assets)
- ---------------------------------------------------------------
(bar chart)
Health care/hospitals ...........................24.5%
Utilities ...........................24.5%
Transportation ...............10.2%
<PAGE>
Putnam
Texas
Tax Exempt
Income Fund
Annual
Report
For the Year ended January 31, 1994
Report of Independent Accountants
To the Trustees and Shareholders of
Putnam Texas Tax Exempt Income Fund
We have audited the accompanying statement of assets and
liabilities of Putnam Texas Tax Exempt Income Fund, including the
portfolio of investments owned, as of January 31, 1994, the
related statement of operations for the year then ended, and the
statement of changes in net assets and the "Financial Highlights"
for the year then ended and for the period from March 4, 1992
(commencement of operations) to January 31, 1993. These financial
statements and "Financial Highlights" are the responsibility of
the Fund's Management. Our responsibility is to express an
opinion on these financial statements and "Financial Highlights"
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements and "Financial Highlights" are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of January 31, 1994 by correspondence with
the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and "Financial
Highlights" referred to above present fairly, in all material
respects, the financial position of Putnam Texas Tax Exempt
Income Fund as of January 31, 1994, the results of its operations
for the year then ended, and the changes in its net assets and
the "Financial Highlights" for the year then ended and for the
period from March 4, 1992 (commencement of operations) to January
31, 1993, in conformity with generally accepted accounting
principles.
Coopers & Lybrand
Boston, Massachusetts
March 17, 1994<PAGE>
<TABLE>
<CAPTION>
Portfolio of
investments owned
January 31, 1994
Municipal Bonds and Notes (98.3%)(a)
Principal Amount Ratings(b) Value
<S> <C> <C> <C> <C>
Texas (91.3%)
$400,000 Alliance Arpt. Auth. Special Fac. Rev.
Bonds (American Airlines, Inc. Project),
7 1/2s, 12/1/29 Baa $435,500
100,000 Amarillo, Hlth. Fac. Residual Interest
Bonds (RIBS) (High Plains Baptist Hosp.),
10.532s, 1/3/22 AAA 119,250
250,000 Austin, Util. Rev. Bonds, Municipal Bond
Insurance Assn. (MBIA), 6 1/4s, 11/15/19 AAA 271,562
Bexar Cnty., Hlth. Facs. Dev. Corp. Rev.
Bonds (St. Luke's Lutheran Hosp. Project)
400,000 7.9s, 5/1/18 Baa 444,000
200,000 7s, 5/1/21 Baa 211,000
400,000 Brazoria Cnty., Hlth. Facs. Dev. Corp. Hosp.
Rev. Bonds, 5 1/2s, 7/1/13 AAA 402,500
100,000 Brazos River, Auth. Rev. Bonds (Houston Lt.
& Pwr.), Ser. A, American Municipal Bond
Assurance Corp. (AMBAC), 6.7s, 3/1/17 AAA 111,125
50,000 Central TX Hsg. Fin. Corp., Single Fam.
Mtge. Rev. Bonds, Financial Guaranty
Insurance Co. (FGIC), 10s, 10/15/07 AAA 53,562
195,000 Cherokee Cnty., Hlth. Fac. Dev. Corp.
Rev. Bonds (Nancy Travis Memorial Hosp.
Project), 10s, 5/15/13 B/P 217,669
230,000 Conroe, TX Independent School Dist. Rev.
Bonds, 6 1/2s, 2/1/11 AAA 230,000
125,000 Dallas Cnty., TX Cmnty. College Dist. Rev.
Bonds, 6 1/4s, 8/15/12 Aa 133,594
Dallas-Fort Worth, Intl. Arpt. Fac. Impt.
Corp. Rev. Bonds
200,000 (American Airlines, Inc.), 7 5/8s, 11/1/21 Ba 218,750
500,000 (Delta Airlines Inc.), 7.6s, 11/1/11 Ba 548,125
100,000 (American Airlines Inc.), 7 1/2s, 11/1/25 Baa 109,250
103,000 Dallas, Hsg. Fin. Corp. Single Fam. Mtge.
Rev. Bonds, MBIA, 10s, 10/1/07 AAA 107,506
250,000 Dallas, Limited Tax General Obligations
(G.O.) Bonds, 6.2s, 2/15/13 AAA 272,500
45,000 East Texas, Hsg. Fin. Corp. Single Fam.
Mtge. Rev. Bonds, Government National
Mortgage Assn./Federal National Mortgage
Assn. (GNMA/FNMA) Coll., 7s, 1/1/19 AAA 49,331
100,000 Gulf Coast, Waste Disposal Auth. Poll.
Control Rev. Bonds (Monsanto Co. Project),
11 1/2s, 7/1/01 A 116,500
250,000 Gulf Coast, Waste Disposal Auth. Rev. Bonds
(Champion Intl. Corp.), 7.45s, 5/1/26 Baa 279,062
300,000 Harris Cnty., Cultural Ed. Fac. Fin. Corp.
Rev. Bonds (Space Center Houston Project),
9 1/4s, 8/15/15 BB/P 344,250
325,000 Harris Cnty., Hsg. Fin. Corp. Single Fam.
Mtge. Rev. Bonds, Ser. 1983A, 10 3/8s,
7/15/14 B 326,219
300,000 Harris Cnty., Memorial Hosp. Rev. Bonds,
7 1/8s, 6/1/15 A 339,375
Harris Cnty., Toll Rd. Rev. Bonds
100,000 Ser. B, FGIC, 6 5/8s, 8/15/11 AAA 108,375
100,000 Ser. A, AMBAC, 6 1/2s, 8/15/17 AAA 110,125
100,000 Ser. A, FGIC, 6 1/2s, 8/15/11 AAA 115,750
80,000 Houston, Hsg. Fin. Corp. Single Fam. Mtge.
Rev. Bonds, 10s, 9/15/14 Baa 81,800
500,000 Houston, Wtr. & Swr. Rev. Bonds, 6 3/8s,
12/1/14 A 541,875
475,000 Jefferson Cnty., Rev. Bonds (Baptist Hosp.
Project), 8 7/8s, 6/1/21 Baa 592,563
500,000 Metro. TX Hlth. Fac. Auth. Rev. Bonds
(Wilson Hosp.), 5 3/8s, 1/1/23 AAA 487,500
250,000 Midland Cnty., Hosp. Rev. Bonds, 7 1/2s,
6/1/16 BBB 275,000
350,000 Mills Road, Muni. Util. Rev. Bonds,
6 1/2s, 9/1/14 BB/P 357,875
475,000 Montgomery, Wtr. & Swr. Rev. Bonds,
6 1/4s, 3/1/17 AAA 507,063
North Central Hlth. Fac. Dev. Corp. Rev.
Bonds
245,000 (U. Med. Ctr. Inc. Project), 8.2s,
4/1/19 AA/P 267,050
600,000 (U. Med. Ctr. Inc. Project), 7 3/4s,
4/1/17 AA/P 633,750
200,000 (Presbyterian Med. Ctr.), Ser. C, 2.2s,
12/1/15 Aaa 200,000
200,000 Northern TX, Higher Ed. Student Loan Rev.
Bonds, 6.3s, 4/1/09 A 211,000
500,000 Pharr, G.O. Bonds, 5 1/4s, 8/15/14 AAA 501,250
200,000 Port Arthur, TX Navigation Dist. Poll.
Control Rev. Bonds, 6 1/4s, 6/1/08 A 200,750
Port Corpus Christi, Indl. Dev. Corp. Rev.
Bonds (Valero Refining & Marketing Co.)
150,000 Ser. B, 10 5/8s, 6/1/08 Baa 181,125
480,000 Ser. A, 10 1/4s, 6/1/17 Baa 574,200
200,000 Rio Grande, Valley Hlth. Fac. Dev. Corp.
RIBS (Golden Palms), Ser. D, MBIA, 8.9s,
8/1/06 AAA 228,000
500,000 Round Rock, TX Independent School Dist. Rev.
Bonds, MBIA, zero %, 8/15/11 AAA 195,625
Sabine, River Auth. Poll. Control Rev. Bonds
(TX Util. Elec. Co. Project)
250,000 9s, 9/1/07 Baa 289,688
250,000 Ser. A, FGIC, 6.55s, 10/1/22 AAA 278,438
500,000 Sam Rayburn, Muni. Pwr. Supply Agcy. Rev.
Bonds, Ser. A, 6 3/4s, 10/1/14 Baa 517,500
400,000 San Antonio, TX Elec. & Gas Rev. Bonds,
Ser. A, 6 1/2s, 2/1/12 AA 432,500
190,000 San Antonio, TX Wtr. Rev. Bonds, MBIA,
6 1/2s, 5/15/10 AAA 210,425
200,000 Sherman, Metropolitan Hlth. Fac. Rev. Bonds,
7 3/4s, 1/1/05 AAA 226,250
625,000 Southeast TX Hsg. Fin. Corp. Multi-Fam. Rev.
Bonds (Bayou Pk. Village Project), Ser. A,
8s, 8/1/16 A/P 632,031
200,000 Spring Branch, TX Independent School Dist.
Rev. Bonds, 6 3/8s, 2/1/09 AAA 217,750
250,000 TX Dept. of Hsg. & Cmnty. Affairs Home Mtge.
RIBS, Ser. A, GNMA Coll., 11.207s, 7/18/23 AAA 269,375
150,000 TX Natl. Research Comm. Fin. Corp.
(Superconducting Super Collider Project),
6.95s, 12/1/12 A 156,000
50,000 TX Pub. Fin. Auth. Bldg. Rev. Bonds, zero %,
2/1/10 AAA 21,375
TX State G.O. RIBS
250,000 Ser. B, 9.176s, 9/30/11 AA 316,250
250,000 5 1/2s, 4/1/20 AA 251,563
500,000 Tomball, Hosp. Auth. Rev. Bonds, 6 1/8s,
7/1/23 Baa 496,875
250,000 Trinity River Auth., Red Oak Creek Syst. Rev.
Bonds, FGIC, 6 1/2s, 2/1/14 AAA 280,938
250,000 University of Texas Rev. Bonds, Ser. B,
6 3/4s, 8/15/13 AA 283,438
16,591,700
Virgin Islands (3.7%)
600,000 Virgin Islands, Pub. Fin. Auth. Rev. Bonds,
Ser. A, 7 1/4s, 10/1/18 BBB/P 680,250
Puerto Rico (3.3%)
250,000 Puerto Rico, Hwy. & Trans Auth. Hwy. Rev.
Bonds, Ser. S, 6 5/8s, 7/1/18 AAA 295,312
250,000 Puerto Rico, Pub. Bldgs. Auth. Rev. Bonds,
Ser. K, 6 7/8s, 7/1/21 AAA 299,688
595,000
Total Investments (cost $16,716,696)(c) $17,866,950
/TABLE
<PAGE>
Notes
(a) Percentages indicated are based on net assets of $18,170,924,
which correspond to a net asset value per share of $9.48.
(b) The Moody's or Standard & Poor's ratings indicated are believed
to be the most recent ratings available at January 31, 1994 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 January 31, 1994. Securities rated
by Putnam are indicated by "/P" and are not publicly rated. Ratings
are not covered by the Report of Independent Accountants.
(c) The aggregate identified cost for federal income tax purposes
is $16,716,696, resulting in gross unrealized appreciation and
depreciation of $1,157,555 and $7,301, respectively, or net
unrealized appreciation of $1,150,254.
The rates shown on Variable Rate Demand Notes and Residual Interest
Bonds are the current interest rates at January 31, 1994, which are
subject to change based on the terms of the security.
The Fund had the following industry group concentrations greater
than 10% on January 31, 1994 (as a percentage of net assets):
Health Care 24.5%
Utilities 24.5
Transportation 10.2
<PAGE>
<TABLE>
<CAPTION>
Statement of
assets and liabilities
January 31, 1994
<S> <C> <C>
Assets
Investments in securities, at value (identified cost
$16,716,696) (Note 1) $17,866,950
Cash 61,520
Interest receivable 339,338
Receivable for shares of the Fund sold 142
Unamortized organization expenses (Note 1) 24,166
Total assets 18,292,116
Liabilities
Distributions payable to shareholders $29,847
Payable for compensation of Manager (Note 2) 19,856
Payable for Fund shares repurchased 40,727
Payable for compensation of Trustees (Note 2) 26
Payable for investor servicing and custodian fees
(Note 2) 6,022
Payable for distribution fees (Note 2) 3,040
Payable for administrative services (Note 2) 18
Payable for organization expenses (Note 1) 2,507
Other accrued expenses 19,149
Total liabilities 121,192
Net assets $18,170,924
<PAGE>
Represented by
Paid-in capital (Note 4) 17,000,492
Distributions in excess of net investment income (1,225)
Accumulated net realized gain on investment transactions 21,403
Net unrealized appreciation of investments 1,150,254
Total -- Representing net assets applicable to capital
shares outstanding $18,170,924
Computation of net asset value and offering price
Net asset value and redemption price per share
($18,170,924 divided by 1,917,029 shares) $9.48
-----
Offering price per share (100/95.25 of $9.48)* $9.95
*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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of
operations
Year ended January 31, 1994
<S> <C> <C>
Tax exempt interest income $1,047,886
Expenses:
Compensation of Manager (Note 2) $95,517
Compensation of Trustees (Note 2) 1,236
Investor servicing and custodian fees (Note 2) 23,404
Reports to shareholders 20,011
Auditing 260
Legal 16,654
Postage 4,507
Administrative services (Note 2) 70
Registration fees 2,076
Distribution fees (Note 2) 31,889
Amortization of organization expenses (Note 1) 2,161
Other 631
Fees waived and other expenses assumed by Manager
(Note 2) (23,516)
Total expenses 174,900
Net investment income 872,986
Net realized gain on investments (Notes 1 and 3) 41,624
Net unrealized appreciation of investments during the year 818,448
Net gain on investments 860,072
Net increase in net assets resulting from operations $1,733,058
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
changes in net assets
For the period
March 4, 1992
(commencement
Year ended of operations) to
January 31 January 31
---------- -----------------
1994 1993
<S> <C> <C>
Increase in net assets
Operations:
Net investment income $872,986 $382,663
Net realized gain on investments 41,624 15,810
Net unrealized appreciation of investments 818,448 331,806
Net increase in net assets resulting from
operations 1,733,058 730,279
Distributions to shareholders
From net investment income (875,470) (383,320)
In excess of net investment income (1,225) --
From net realized gain on investment (13,451) (23,770)
Increase from capital share transactions
(Note 4) 5,260,356 11,644,313
Total increase in net assets 6,103,268 11,967,502
Net assets
Beginning of period 12,067,656 100,154
End of period (including distributions
in excess of net investment income
of $1,225 and $503, respectively) $18,170,924 $12,067,656
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Financial
Highlights*
(For a share outstanding throughout the period)
For the period
March 4, 1992
(commencement
Year ended of operations) to
January 31 January 31
---------- -----------------
1994 1993
<S> <C> <C>
Net Asset Value, Beginning of Period $8.94 $8.51
Investment Operations:
Net Investment Income .52(a) .45(a)
Net Realized and Unrealized Gain on
Investments .55 .46
Total from Investment Operations 1.07 .91
Less Distributions:
From Net Investment Income (.52) (.46)
In Excess of Net Investment Income -- --
From Net Realized Gain on Investments (.01) (.02)
Total Distributions (.53) (.48)
Net Asset Value, End of Period $9.48 $8.94
Total Investment Return at Net Asset
Value (%)(b) 12.17 12.08(c)
Net Assets, End of Period (in thousands) $18,171 $12,068
Ratio of Expenses to Average Net Assets (%)1.10(a) .96(a)(c)
Ratio of Net Investment Income to Average
Net Assets (%) 5.48(a) 5.79(a)(c)
Portfolio Turnover (%) 15.29 34.42(d)
*Financial Highlights for the period ended January 31, 1993 have been reclassified and
data has been presented to conform with requirements issued by the SEC in April, 1993.
(a) Reflects a voluntary absorption of expenses incurred by the Fund and an expense
limitation period applicable during the period. As a result of these limitations, expenses
of the Fund for the year ended January 31, 1994 and for the period ended January 31, 1993,
reflect a reduction of less than $0.01 and $0.09, respectively, per share.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect
of sales charges.
(c) Annualized.
(d) Not annualized.
/TABLE
<PAGE>
Notes to
financial statements
January 31, 1994
Note 1 Significant accounting policies
The Fund is registered under the Investment Company Act of 1940, as
amended, as a nondiversified, open-end management investment
company. The Fund was established as a Massachusetts business trust
under the laws of Massachusetts on January 16, 1992. The Fund seeks
as high a level of current income exempt from federal income tax as
Putnam Management believes is consistent with preservation of
capital by investing primarily in a portfolio of Texas tax-exempt
securities.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles.
A) Security valuation Tax-exempt bonds and notes are stated on the
basis of valuations provided by a pricing service, approved by the
Trustees, which uses information with respect to transactions in
bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities
in determining value.
B) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the
accrual basis.
C) Federal taxes It is the policy of the Fund to distribute all of
its income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the Fund to
distribute an amount sufficient to avoid imposition of any excise
tax under Section 4982 of the Internal Revenue Code of 1986.
Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation of securities held and
excise tax on income and capital gains.
D) Distributions to shareholders Income dividends are declared
daily by the Fund and are distributed monthly. Capital gains
distributions, if any, are recorded on the ex-dividend date and
paid annually.
<PAGE>
E) 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. Discount
on zero-coupon bonds is accreted according to the effective yield
method.
F) Unamortized organization expenses Expenses incurred by the Fund
in connection with its organization, its registration with the
Securities & Exchange Commission and with various states, and the
initial public offering of its shares aggregated $30,541. These
expenses are being amortized over a five-year period based on
current and projected net asset levels.
Note 2 Management fee, administrative services, and other
transactions
Compensation of Putnam Investment Management, Inc., the Fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc., for
management and investment advisory services is paid quarterly based
on the average net assets of the Fund for the quarter. Such fee is
based on the following annual rates: 0.6% of the first $500 million
of average net assets, 0.5% of the next $500 million, 0.45% of the
next $500 million, and 0.4% of any amount over $1.5 billion,
subject to reduction in any year by the amount of certain brokerage
commissions and fees (less expenses) received by affiliates of the
Manager on the Fund's portfolio transactions.
Until further notice, the Manager has voluntarily agreed to reduce
its compensation and, to the extent necessary, absorb other
expenses of the Fund in order that expenses of the Fund not exceed
the annual rate of 0.90% of average daily net assets. The Fund's
expenses subject to this limitation are exclusive of brokerage,
interest, taxes, deferred organizational and extraordinary
expenses, if any and payments under the Fund's distribution plan.
This limitation is accomplished by a reduction of the compensation
payable under the management contract to the Manager and, to the
extent necessary, by the Manager's assumption of additional Fund
expenses. As a result of these limitations, the expenses for the
year ended January 31, 1994, were reduced by $23,516.
The Fund also reimburses the Manager for the compensation and
related expenses of certain officers of the Fund and their staff
who provide administrative services to the Fund. The aggregate
amount of all such reimbursements is determined annually by the
Trustees. For the year ended January 31, 1994, the Fund paid $70
for these services.
Trustees of the Fund receive an annual Trustee's fee of $100 and an
additional fee for each Trustees' meeting attended. Trustees who
are not interested persons of the Manager and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings.
Custodial functions for the Fund are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC. Fees paid for these investor
servicing and custodial functions for the year ended January 31,
1994, amounted to $23,404. Investor servicing and custodian fees
reported in the Statement of operations for the year ended January
31, 1994, have been reduced by credits allowed by PFTC.
The Fund has adopted a distribution plan pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the plan
is to compensate Putnam Mutual Funds Corp. for services provided
and expenses incurred by it in distributing shares of the Fund. The
Trustees have approved payment by the Fund to Putnam Mutual Funds
Corp. at an annual rate of 0.20% of the Fund's average net assets.
For the year ended January 31, 1994, the Fund paid $31,889 in
distribution fees.
During the year ended January 31, 1994, Putnam Mutual Funds Corp.,
acting as an underwriter, received net commissions of $13,325 from
the sale of shares of the Fund.
A deferred sales charge of up to 1% is assessed on certain
redemptions of Fund shares purchased as part of an investment of $1
million or more. For the year ended January 31, 1994, Putnam Mutual
Funds Corp., acting as an underwriter, received $23 on such
redemptions.
Note 3 Purchases and sales of securities
During the year ended January 31, 1994, purchases and sales of
investment securities other than short-term municipal obligations
aggregated $8,183,006 and $2,336,014, respectively. Purchases and
sales of short-term municipal obligations aggregated $3,400,000,
and $4,305,528, respectively. In determining the net gain or loss
on securities sold, the cost of securities has been determined on
the identified cost basis.
<PAGE>
<TABLE>
<CAPTION>
Note 4 Capital shares
At January 31, 1994, there was an unlimited number of shares of beneficial interest
authorized. Transactions in capital shares were as follows:
For the period
March 4, 1992
(commencement
Year ended of operations) to
January 31 January 31
1994 1993
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
Shares sold 756,480 $7,016,169 1,417,476 $12,353,707
Shares issued in connection
with reinvestment of
distributions 60,704 566,020 26,483 234,002
817,184 7,582,189 1,443,959 12,587,709
Shares repurchased (249,279) (2,321,833) (106,600) (943,396)
Net increase 567,905 $5,260,356 1,337,359 $11,644,313
/TABLE
<PAGE>
Note 5 Reclassification of capital accounts
Effective February 1, 1993, Putnam Texas Tax Exempt Income Fund has
adopted the provisions of Statement of Position 93-2
"Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain and Return of Capital Distributions by
Investment Companies (SOP)." The purpose of this SOP is to report
the accumulated net investment income (loss) and accumulated net
realized gain (loss) accounts in such a manner as to approximate
amounts available for future distributions (or to offset future
realized capital gains) and to achieve uniformity in the
presentation of distributions by investment companies.
As a result of the SOP, the adjustments are as follows:
Undistributed Accumulated Net
Net Investment Realized Capital Additional
Income Gain/(Loss) Paid-in Capital
-------------- ---------------- ---------------
$2,987 $1,190 $(4,177)
These adjustments represent the cumulative amounts necessary to
report these balances through January 31, 1993, the close of the
Fund's last fiscal year-end for financial reporting and tax
purposes.
Note 6 Proposed Merger
A shareholder meeting is scheduled for May 5, 1994 to vote on a
proposal to transfer all of the assets of the Fund to Putnam Tax
Exempt Income Fund (the "Income Fund") in exchange for shares of
the Income Fund and the assumption by the Income Fund of all of
the liabilities of the Fund, and the distribution of such shares
to the shareholders of the Fund in liquidation of the Fund.
Tax information
The Fund has designated all dividends paid from net investment
income during the fiscal year as exempt-interest dividends. Thus,
100% of the net investment income distributions are exempt from
federal income tax. The Texas Tax Exempt Income Fund paid a
short-term capital gain of $0.007 on December 27, 1993.
<PAGE>
Fund performance supplement
Putnam Texas Tax Exempt Income Fund is a portfolio managed for high
current income, exempt from federal income taxes, consistent with
capital preservation. This fund invests at least 80% of its
portfolio in investment-grade tax-exempt bonds.
The Lehman Brothers Municipal Bond Index is an unmanaged list of
approximately 8,000 investment-grade, fixed rate, long-term
maturity tax-exempt bonds, which are selected to be representative
of the market in terms of price movement and sector distribution.
The average quality of bonds held in the index may differ from the
average quality of those bonds in which the fund invests. The index
does not include bonds in certain of the lower rating
classifications in which the fund may invest. The index does not
take into account brokerage commissions or other costs and may pose
different risks from the fund. Total return performance for the
index reflects mathematically derived changes of market price and
reinvestment of interest payments, as computed by Lehman Brothers.
The fund's portfolio contains securities that do not match those in
the index.
The Consumer Price Index is a commonly used measure of inflation;
it does not represent an investment return.
The fund performance supplement has been prepared by Putnam
Management to provide additional information about the fund and the
indexes used for performance comparisons. The information is not
part of the portfolio of investments owned or the financial
statements.
<PAGE>
Your
Trustees
George Putnam
Chairman
Chairman and President,
The Putnam Funds
William F. Pounds
Vice Chairman
The Putnam Funds,
Professor of Management,
Alfred P. Sloan
School of Management,
Massachusetts Institute of
Technology
Jameson Adkins Baxter
President,
Baxter Associates, Inc.
Hans H. Estin
Vice Chairman,
North American
Management Corporation
John A. Hill
Principal and
Managing Director,
First Reserve Corp.
Elizabeth T. Kennan
President
Mount Holyoke College
Lawrence J. Lasser
President and
Chief Executive Officer,
Putnam Investments, Inc.
Robert E. Patterson
Executive Vice President,
Cabot Partners
Limited Partnership
Donald S. Perkins
Director of various
corporations
George Putnam, III
President, New Generation
Research, Inc.
<PAGE>
A.J.C. Smith
Chairman of the Board
and Chief Executive Officer,
Marsh & McLennan
Companies, Inc.
W. Nicholas Thorndike
Director of various
corporations
<PAGE>
Putnam
Texas
Tax Exempt
Income Fund
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
Investor servicing agent
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
1-800-225-1581
Custodian
Putnam Fiduciary
Trust Company
Legal counsel
Ropes & Gray
Independent accountants
Coopers & Lybrand
(DALBAR logo)
Putnam Investor Services has received the DALBAR award each year
since the award's 1990 inception. In more than 10,000 tests of 38
shareholder service components, Putnam outperformed the industry
standard in every category.
57-11147<PAGE>
Officers
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Howard Manning
Vice President
and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
John D. Hughes
Vice President
and Treasurer
Beverly Marcus
Clerk and Assistant
Treasurer
This report is for the information of shareholders of Putnam Texas
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.
- ---------------
Bulk Rate
U.S. Postage
Paid
Boston, MA
Permit No. 53749
- ---------------
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
APPENDIX TO FORM N30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS:
(1) Rule lines for tables are omitted.
(2) Boldface and italic typefaces are displayed in normal type.
(3) Headers (e.g, the name of the fund) and footers (e.g., page
numbers and "The accompanying notes are an integral part of these
financial statements") are omitted.
(4) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed differently
in this filing.
(5) Bullet points and similar graphic signals are omitted.
(6) Page numbering is different.
