PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND, N-30D, 1994-08-31

PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND
N-30D, 1994-08-31

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Putnam
New Jersey
Tax Exempt
Income Fund

ANNUAL REPORT
June 30, 1994

(Art of Balance Scales)
BOSTON-LONDON-TOKYO

Performance highlights

Putnam New Jersey Tax Exempt Income Fund outperformed
the average New Jersey municipal bond fund as measured by Lipper Analytical
Services for one year performance ended June 30, 1994.*

Performance should always be considered in light of a fund's investment
strategy. Putnam New Jersey Tax Exempt Income Fund is designed for investors
seeking a high level of current income exempt from federal and New Jersey
personal income tax consistent with preservation of capital.

FISCAL 1994 RESULTS AT A GLANCE

<TABLE>
<CAPTION>
Class A Class B
<S> <C> <C> <C> <C> <C>
Total return: NAV POP NAV CDSC
..................................................................................................................
12 months ended 6/30/94
(change in value during period
plus reinvested distributions) -0.94% -5.62% -1.59% -6.22%
Share value: NAV POP NAV
..................................................................................................................
6/30/93 $ 9.46 $ 9.93 $ 9.46
6/30/94 8.75 9.19 $ 8.75
Distributions: Capital In Excess of
No. Income Gains (1) Capital Gains Total
..................................................................................................................
Class A 13 $0.508501 $.08 $.05 $0.638501
Class B 13 0.446800 .02 .11 0.576800
Current return: NAV POP NAV
..................................................................................................................
(end of period:)
Current dividend rate(2) 5.74% 5.47% 5.08%
Taxable equivalent(3) 10.22 9.74 9.04
Current 30-day SEC yield(4) 5.60 5.33 4.93
Taxable equivalent(3) 9.97 9.49 8.78
</TABLE>

Performance data represent past results and will differ for each share class.
For performance over longer periods, see pages 8 and 9. POP assumes 4.75%
maximum sales charge. CDSC assumes 5% maximum contingent deferred sales
charge. (1)Capital gains, if any, are taxable for federal tax purposes.
(2)Income portion of most recent distribution, annualized and divided by NAV
or POP at end of period. (3)Assumes maximum combined 43.83% federal and state
tax rate. Results for investors subject to lower tax rates would not be as
advantageous. For some investors, investment income may also be subject to
the federal Alternative Minimum Tax. (4)Based only on investment income,
calculated using SEC guidelines.

*Rankings by Lipper vary over time and do not include the effects of sales
charges. The firm ranked the fund, 14th out of 31 funds for one year; and for
three years, 11th out of 17 funds. Past performance is not indicative of
future results.

From the Chairman

Dear Shareholder:

(Photo of George Putnam)

The first six months of 1994 have been both the best and worst of times for
financial markets worldwide, a reminder that markets are always shifting and
sometimes do so dramatically.

Tax-free municipal bonds are now among the few fixed-income investments that
seem well on their way to a solid recovery. After a buffeting early in the
year, investors have come to realize that tax-free bonds will be in short
supply through the rest of 1994 and that demand will probably outpace supply
as wealthy individuals seek shelter from higher taxes.

Although the unique position of tax-free bonds in the marketplace makes them
somewhat less sensitive to the forces that impact taxable investments, namely
higher interest rates, they are not invulnerable. This means Putnam
Management must continue to keep a keen eye on markets, currencies, and
economies around the world, as well as on the rate of growth in the U.S.
economy and the tentative recoveries now emerging in Europe and Japan.

Despite these strengthening economic fundamentals, many investors remain
apprehensive. While awaiting a more confident mood in the markets, you can
take comfort in the tax-sheltered income provided by the shares of your
Putnam tax-exempt fund.

Respectfully yours,

(Signature of George Putnam)

George Putnam
Chairman of the Trustees
August 17, 1994

Report from the fund manager
Thomas C. Goggins

Over the past several months we have seen substantial -- and often costly --
volatility in the financial markets as a result of the Federal Reserve
Board's increases in short-term interest rates. New Jersey Tax Exempt Income
Fund, along with the rest of the municipal bond market, has felt the impact
of these changes. Despite the fund's return of -0.94% at net asset value for
class A shares for the fiscal year ended June 30, 1994, there are several
reasons to believe that municipal bonds still have much to offer
tax-conscious investors. New Jersey bonds, in particular, remain attractive.

We have been making some changes in the fund's portfolio, both to protect
assets against further market disruptions and to derive maximum benefit from
current market opportunities. As a result, in what has been a tough year for
all New Jersey municipal bond funds, your fund's performance remains quite
competitive.

HIGHER INTEREST RATES PROMPT DEFENSIVE SHIFTS

Municipal bonds often have provisions that allow the issuer to call them in
prior to maturity, at or after a specified date. This redemption is often
done if current interest rates are lower than they were when the bonds were
issued. Redemptions can force an investor to reinvest at the current lower
rates. Therefore, exposure to callable bonds always has some potential to
affect a fund's income stream. Callable bonds purchased in the current rising
rate environment are more likely to be called when rates change direction
again.

More than a fifth of the fund's portfolio is now made up of noncallable
bonds, as opposed to about half that amount at this time last year. One
example: New Jersey Turnpike Authority revenue bonds, which made up roughly
7% of the portfolio at fiscal year's end.

In addition, through several types of hedging techniques, we have lowered the
fund's volatility by decreasing its susceptibility to interest rate changes.
One measure has been to shorten the average duration of the portfolio.
Duration is a mathematical formula that shows a bond (or a bond fund's)
sensitivity to interest rate changes. It is a more reliable measure of
potential volatility than maturity, with which it is frequently confused. The
shorter the duration, the less volatility you can expect from the portfolio.
In a rising interest rate environment, keeping the portfolio's average
duration relatively short can be instrumental in protecting the fund's net
asset value.

SEEKING STRENGTH IN SECTORS
While defensive positioning allowed us to lessen the dampening effects of the
market downturn, our credit research helped us to identify those sectors and
issues that may prove the most advantageous to the fund in the future.

PERCENT CHANGE OF FEDERAL FUNDS RATE AND MUNICIPAL BOND PRICES

[Tabular representation of line graph]

Federal Funds Municipal Bond
Rate* Prices+
1993 1993
<S> <C> <C>

J 19.1 0.9
J 6.4 -2.1
A 8.5 -0.7
S 2.1 -0.4
O 4.3 -0.9
N 6.4 -2.5

Federal Funds Municipal Bond
Rate* Prices+
1994 1994

D 2.1 -1.2
J 19.1 -0.7
F 19.1 -4
M 23.4 -8.5
A 36.2 -8.2
M 57.4 -7.9
J -9

</TABLE>

*Results for June 1994 are not included because of distortions created by
abnormally high lending activity.
+Source: Lehman Brothers Municipal Bond Index

We increased the fund's stake in the state's health care industry.
Specifically, the fund acquired issues such as the Franciscan Sisters of the
Poor Health System (a division of St. Mary's Hospital), Union Hospital's Mega
Care unit, and Raritan Hospital. These issues were selected for their credit
quality as well as their potential for capital appreciation.

We also emphasized several transportation bonds that we believe will prove
valuable in the future. These included those of the Port Authority of New
York and New Jersey, Holt Hauling Co. (which operates at the ports of Camden
and Philadelphia), and the turnpike revenue bonds mentioned earlier.

However, with the exception of the Union County facility, we consider bonds
issued to support the state's publicly funded disposal facilities as being
too expensive to be competitive with those in other states. A U.S. Supreme
Court ruling last May that struck down local laws forcing haulers to use
these expensive facilities only confirmed our belief. Consequently, one of
our more substantial shifts was to reduce the fund's holdings of trash
disposal systems.

POSITIVE PROSPECTS FOR NEW JERSEY BONDS

We believe the municipal bond market retains the potential to reward
long-term investors for their patience. Late last year, we predicted a
significant decrease in supply in the municipal bond market, particularly in
New Jersey. That prediction came to pass this year as the dollar amount of
new issues coming to market dropped by more than 40% nationwide. We also
expect an increase in demand because of higher taxes and the attractiveness
of municipal bonds relative to taxable Treasury bonds. Taken together, these
factors should continue to act as a strong price support for New Jersey
tax-exempt securities.

Besides a supply/demand relationship that favors investors, the market drop
has created a significant increase in the number of undervalued securities
available, many of which are of the highest quality.

TOP HOLDINGS*

NJ Economic Development Authority
............................................................................
NJ Health Care Facilities Authority
............................................................................
NJ State Tpk.
............................................................................
NJ State Housing
............................................................................
Port Authority of NY & NJ
............................................................................
NJ General Obligation
............................................................................
Union County Solid Waste Revenue
............................................................................
NJ Building Authority.
............................................................................
NJ Wastewater Treatment
............................................................................
Camden County Impt. Authority

*Represent 72.3% of net assets as of 6/30/94.

OUTLOOK: TAX CUTS SHOULD SPUR ECONOMY, ENHANCE BONDS' APPEAL

We continue to monitor economic and political conditions in New Jersey and
across the country in order to determine the right course for the fund. In
the near term, we believe Governor Whitman's tax-cutting program can help
draw businesses to a state noted for high taxes. It also has the potential to
make the state's general obligation debt more attractive in the future.

Looking further ahead, we anticipate a national economy of slow but steady
growth with relatively low interest rates and inflation. We also believe
municipal bonds will look attractive compared with Treasuries and some
taxable investments, especially since municipal bond yields are relatively
high and taxes remain on the increase.

Performance summary

This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares changed
over time, assuming you held the shares through the entire period and
reinvested all distributions back into the fund. We show total return in two
ways: on a cumulative long-term basis and on average how the fund might have
grown each year over varying periods. For comparative purposes, we show how
the fund performed relative to appropriate indexes and benchmarks.

TOTAL RETURN FOR PERIODS ENDING 6/30/94

<TABLE>
<CAPTION>
Class A Class B
Lehman Bros.
Municipal Bond
NAV POP NAV CDSC Index CPI
<S> <C> <C> <C> <C> <C> <C>
1 year -0.94% -5.62% -1.59% -6.22% 0.20% 2.49%
3 years 24.86 18.93 -- -- 25.38 8.82
Annual average 7.68 5.95 -- -- 7.83 2.86
Life of class A
2/20/90 40.01 33.42 -- -- 39.92 15.63
Annual average 8.02 6.84 -- -- 8.01 3.39
Life of class B
1/4/93 -- -- 5.50 1.62 7.32 4.30
Annual average -- -- 3.66 1.09 4.85 2.87
</TABLE>
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions or, for class A shares, distribution fees
prior to implementation of the class A distribution plan in 1993. Performance
of share classes will differ. Performance data represent past results.
Investment returns and principal value will fluctuate so an investor's
shares, when sold, may be worth more or less than their original cost.

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.

Consumer Price Index (CPI) is a commonly used measure of inflation; it does
not represent an investment return.

Growth of a $10,000 Investment
Cumulative total return of a $10,000 investment since 2/20/90

[Tabular representation of line graph]

<TABLE>
<CAPTION>
Lehman Bros. Fund's Class A Consumer Price
Municipal Bond Index Shares at POP Index

<S> <C> <C> <C>
2/20/90 $10,000 $ 9,529 $10,000
6/30/90 10,236 9,788 10,148
6/30/91 11,159 10,685 10,625
6/30/92 12,472 11,916 10,953
6/30/93 13,964 13,468 11,281
6/30/94 13,992 13,342 11,563

</TABLE>

Past performance is no assurance of future results. A $10,000 investment in
the fund's class B shares at their inception on 1/4/93 would have been valued
at $10,550 by 6/30/94 ($10,162 with a redemption at the end of the period).

TERMS AND DEFINITIONS

Class A shares are generally subject to an initial sales charge.

Class B shares may be subject to a sales charge upon redemption.

Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including any
initial or contingent deferred sales charge.

Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance figures
shown here assume the maximum 4.75% sales charge.

Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of 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.

The Putnam Fund Selector(TM)

The Putnam Fund Selector shows the many opportunities for investors within
every investment strategy. All investors should first accumulate a base of
conservative, cash-equivalent investments. Then, with the help of your
investment advisor, diversify your portfolio by investing in the Putnam
Family of Funds.

[Graphic, Pyramid, Risk/Reward of Putnam Funds]
RISK/REWARD
PUTNAM GROWTH FUNDS
PUTNAM GROWTH AND INCOME FUNDS
PUTNAM INCOME OR TAX-FREE FUNDS
MOST CONSERVATIVE INVESTMENTS

PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Health Sciences Trust
Investors Fund
Natural Resources Fund
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund

PUTNAM GROWTH AND INCOME FUNDS
Convertible Income-Growth Trust
Dividend Growth Fund
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Managed Income Trust
Utilities Growth and Income Fund

PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund
American Government Income Fund
Balanced Government Fund
Corporate Asset Trust
Diversified Income Trust
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
U.S. Government Income Trust

PUTNAM TAX-FREE INCOME FUNDS
Intermediate Tax Exempt Fund
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds*

Arizona, California, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, New York, Ohio,
and Pennsylvania

LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative
Portfolio
Putnam Asset Allocation: Growth Portfolio

MOST CONSERVATIVE
INVESTMENTS+
Putnam money market funds:
Daily Dividend Trust
New York Tax-Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts++

*Not available in all states.
+ Relative to above.
++Not offered by Putnam Investments. Certificates of deposit offer a fixed
rate of return and may be insured, up to certain limits, by federal/state
agencies. Savings accounts may also be insured up to certain limits.

Please call your financial advisor or Putnam to obtain a prospectus for any
Putnam fund. It contains more complete information, including charges and
expenses. Read it carefully before you invest or send money.

Report of Independent Accountants
For the Fiscal Year Ended June 30, 1994

To the Trustees and Shareholders of
Putnam New Jersey Tax Exempt Income Fund

We have audited the accompanying statement of assets and liabilities of
Putnam New Jersey Tax Exempt Income Fund, including the portfolio of
investments owned, as of June 30, 1994, the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and the "Financial Highlights" for
each of the four years in the period then ended and for the period February
20, 1990 (commencement of operations) to June 30, 1990 for Class A shares and
for the year ended June 30, 1994 and the period January 4, 1993 (commencement
of operations) to June 30, 1993 for Class B shares. 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 June 30, 1994, by correspondence with the custodian
and brokers. 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 New Jersey Tax Exempt Income Fund as of June 30, 1994, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the "Financial Highlights"
for each of the four years in the period then ended, and for the period
February 20, 1990 (commencement of operations) to June 30, 1990 for Class A
shares and for the year ended June 30, 1994 and the period January 4, 1993
(commencement of operations) to June 30, 1993 for Class B shares, in
conformity with generally accepted accounting principles.

Coopers & Lybrand L.L.P.
Boston, Massachusetts
August 16, 1994

Portfolio of investments owned
June 30, 1994

<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (102.3%)(a)
PRINCIPAL AMOUNT RATINGS(b) VALUE

<C> <S> <C> <C>
New Jersey (89.9%)
$ 1,000,000 Atlantic City, Muni. Utils. Auth. Wtr. Rev. Bonds, 7-3/4s,
5/1/17 A $1,138,750
4,250,000 Camden Cnty. Impt. Auth. Rev. Bonds, 8.4s, 4/1/24 BB/P 4,430,625
Essex Cnty., General Obligation (G.O.) Bonds, American
Municipal Bond Assurance Corp. (AMBAC),
1,350,000 5-1/2s, 12/1/20 AAA 1,231,875
3,000,000 5-1/2s, 12/1/13 AAA 2,786,250
2,100,000 Jersey City Sew. Auth. Rev. Bonds, Federal Guaranty Insurance
Company (FGIC) 4-1/2s, 1/1/19 AAA 1,606,500
1,200,000 Middle Township Sch. Dist. Rev. Bonds (FGIC.), 7s, 7/15/06 AAA 1,323,000
2,000,000 Middlesex Cnty., Poll. Control Auth. Rev. Bonds, 6.87s, 12/1/22 BBB/P 2,027,500
3,000,000 Middlesex Cnty., Utils. Auth. Swr. Residual Interest Bonds
(RIBS)
Ser. A, MBIA, 8.55s, 8/15/10 (e) AAA 3,063,750
Monroe, Board of Ed. Rev. Bonds (Gloucester Cnty.) FGIC,
825,000 5.2s, 8/1/15 AAA 742,500
875,000 5.2s, 8/1/16 AAA 785,313
875,000 5.2s, 8/1/17 AAA 783,125
898,000 5.2s, 8/1/18 AAA 796,975
1,338,000 Morris Cnty., General Obligation (G.O.) Bonds, 5.12s, 5/13/11 AAA 1,220,925
7,000,000 NJ Bldg. Auth. St. Bldg. Rev. Bonds, 5s, 6/15/17 AA 5,923,750
1,000,000 NJ Econ. Dev. Auth. 1st Mtge. Gross Rev. Bonds (Stone Arch
Nursing Home Project), 8-3/4s, 12/1/10 Bb/P 1,061,250
575,000 NJ Econ. Dev. Auth. 1st Mtge. Rev. Bonds (Delaire Nursing
Home), Ser. A, 8.62s, 11/1/06 BB/P 604,469
7,695,000 NJ Econ. Dev. Auth. Elec. Energy Fac. Rev. Bonds (Vineland
Cogeneration L.P. Project), 7.87s, 6/1/19 BB/P 8,166,319
NJ Econ. Dev. Auth. Natural Gas Fac. Rev. Bonds
2,500,000 (NJ Natural Gas Co. Project), 9s, 12/1/17 A 2,803,125
2,000,000 (Elizabethtown Gas Co.), 11s, 6/1/14 A 2,097,500
2,500,000 (NJ Natural Gas Co. Project), 7.05s, 3/1/16 A 2,628,125
NJ Econ. Dev. Auth. Rev. Bonds
2,800,000 (Stolt Terminals Project), 10-1/2s, 1/15/18 BB/P 3,216,500
4,550,000 (Holt Hauling Co.), Ser. D, 10-1/4s, 9/15/14 BB/P 5,044,813
3,000,000 (Tevco Inc. Project), 8.12s, 10/1/09 A/P 3,243,750
3,260,000 (Cadbury Corp.), 8s, 7/1/15 BB/P 3,317,050
1,200,000 (Ninette Group L.P Project), 7-3/4s, 8/1/11 A 1,261,500
5,000,000 (Ocean Nursing Pavilion), 7.37s, 12/1/25 BB/P 4,806,250
2,000,000 (Hartz Mountain Industries, Inc.), 7s, 2/1/14 A 2,102,500
3,280,000 (Lakewood School), 6.9s, 12/1/11 Aa 3,374,300
1,500,000 (Performing Arts Ctr.), 6-3/4s, 6/15/12 A 1,578,750
1,500,000 Ser. S, 6-1/2s, 6/1/12 Aa 1,509,375
1,355,000 Ser. Q2, 5.9s, 12/1/12 Aa 1,253,375
1,635,000 (American Wtr. Co. Project) 5.35s, 6/1/23 AAA 1,432,669
4,500,000 NJ Econ. Dev. Auth. St. Contract Rev. Bonds zero %, 9/15/13 AAA 1,344,375
2,925,000 NJ Econ. Dev. Auth. Waste Paper Recycling Rev. Bonds (Marcal
Paper Mills Inc. Project), 8-1/2s, 2/1/10 BB/P 3,243,094
NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds
1,300,000 (Gen. Hosp. Ctr.-Passaic Inc.), Ser. B, 10.37s, 7/1/14 BBB 1,389,375

MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS(b) VALUE

New Jersey (continued)
$3,095,000 (Jersey Shore Med. Ctr.), AMBAC, 8s, 7/1/18 AAA $ 3,443,188
1,000,000 (East Orange Gen. Hosp.), Ser. B, 7-3/4s, 7/1/20 BBB 1,065,000
4,250,000 (St. Elizabeth Hosp.), Ser. B, 8-1/4s, 7/1/20 Baa 4,563,438
5,480,000 (Kimball Med. Ctr.), 7.3s, 7/1/99 BBB/P 5,637,550
5,325,000 (Union Hosp./Mega Care Inc.), 5.87s, 7/1/07 Baa 4,992,188
1,070,000 (Union Hosp./Mega Care Inc.), 5.87s, 7/1/14 Baa 967,013
4,400,000 (St. Mary's Hosp.) 5.87s, 7/1/12 Baa 4,026,000
3,500,000 (St. Peters Med. Ctr.) 5s, 7/1/21 AAA 2,926,875
4,300,000 (Dover Gen. Hosp. & Med. Ctr.), Issue C, 9s, 7/1/12 A 4,536,500
2,000,000 (Kimball Med. Ctr.), Ser. C, 8s, 7/1/13 Baa 2,122,500
3,000,000 (Elizabeth Genl. Med. Ctr.) 7.37s, 7/1/15 A 3,090,000
10,300,000 (Raritan Bay Med. Ctr.) 7-1/4s, 7/1/27(d) BB/P 9,952,375
2,100,000 NJ Sports & Expo Auth. St. Contracts Rev. Bonds, Ser. C., MBIA
2.6s, 9/1/24 VMIG1 2,100,000
3,425,000 NJ Sports & Exposition Auth. Convention Ctr. Luxury Tax Rev.
Bonds, Ser. A, MBIA, 5-1/2s, 7/1/22 AAA 3,125,313
NJ State G.O. Bonds,
11,050,000 Ser. D, 6s, 2/15/11 AA 11,036,181
5,000,000 Ser. D zero %, 2/15/07 AA 2,381,250
3,000,000 Ser. D 5.8s, 2/15/07 AA 3,000,000
NJ State Hsg. & Mtge. Fin. Agcy. RIBS
3,000,000 Ser. 1, (acquired 2/11/93, cost $3,134,370) 8.852s,
11/1/07(c) A 3,003,750
455,000 (Home Mtge. Purchase), Ser. C, MBIA, 8.37s, 4/1/17 AAA 489,694
2,390,000 (Home Buyer Project), Ser. 89D, MBIA, 7.7s, 10/1/29 AAA 2,503,525
4,000,000 Ser. 1, 6.7s, 11/1/28 A 4,030,000
4,750,000 6.6s, 11/1/14 A 4,785,625
5,000,000 Ser. A, 6.95s, 11/1/13 A 5,137,500
NJ State Hwy. Auth. Gen. Rev. Bonds (Garden State Pkwy.
Project),
1,500,000 6.2s, 1/1/10 AA 1,522,500
2,370,000 6s, 1/1/19 Aaa 2,355,188
NJ State Tpk. Auth. RIBS
1,800,000 (acquired 3/27/92, cost $1,817,856) 9.81s, 1/1/16(c) AAA 1,912,500
19,775,000 Ser. C, 6-1/2s, 1/1/16 A 20,392,969
10,000,000 NJ Trans. Auth. Rev. Bonds, Ser. A 6-1/4s, 12/15/03 Aa 10,512,500
NJ Wastewater Treatment Rev. Bonds,
1,000,000 AMBAC, 4.8s, 3/1/13 AAA 837,500
10,870,000 zero %, 9/1/07 AAA 5,054,550
Passaic Valley, Comnty. Wtr. Supply Rev. Bonds, Ser. A; FGIC,
1,800,000 6.4s, 12/15/22 AAA 1,944,000
200,000 6.4s, 12/15/22 AAA 201,000
Port Auth. NY & NJ Cons, Rev. Bonds,
2,000,000 92nd Ser. 5s, 7/15/24 AA 1,635,000
5,000,000 (acquired 8/29/91, cost $5,164,940) 10.33s, 8/1/26(c) AA 5,287,500
3,225,000 74th Ser., 6-3/4s, 8/1/26 AA 3,362,063
7,500,000 93rd Ser. 6.12s, 6/1/94 AA 7,153,125
750,000 5.2s, 11/15/15 A 652,500
2,350,000 Port Auth. NY & NJ RIBS 9.01s, 11/15/15 AA/P 1,451,125
2,000,000 Rutgers State U. Rev. Bonds, Ser. A, 6.4s, 5/1/13 AA 2,055,000
5,000,000 Salem Cnty., Indl. Poll. Control Fin. Auth. Rev. Bonds (Pub.
Svc. Elec. & Gas Co. Project), Ser. C, MBIA, 5.55s, 11/1/33 AAA 4,375,000

MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS(b) VALUE

New Jersey (continued)
$2,000,000 Sayreville, Hsg. Dev. Corp. Mtge. Rev. Bonds (Lakeview Section
8), FHA Insd., 7-3/4s, 8/1/24 AAA $ 2,080,000
1,000,000 Stony Brook, Regional Swr. Rev. Bonds, Ser. B, 5.45s, 12/1/12 AA 927,500
995,000 Union City, G.O. Bonds, 6.4s, 11/1/13 AAA 1,028,581
1,300,000 Union Cnty., Indl. Poll. Ctrl. Fin. Auth. Rev. Bonds, 5.8s,
9/1/09 A 1,244,750
Union Cnty., Util. Auth. Solid Waste Rev. Bonds,
4,500,000 Ser. A, 7.15s, 6/15/09 A 4,561,875
9,000,000 Ser. A, 7.2s, 6/15/14 A 9,090,000
261,891,493
Puerto Rico (11.4%)
2,000,000 Cmnwlth of Puerto Rico, Tel. Auth. RIBS AMBAC, 6.74s, 1/1/03 AAA 1,760,000
2,900,000 Cmnwlth. of Puerto Rico, Aqueduct & Swr. Auth. Rev. Bonds, Ser.
A, 7-7/8s, 7/1/17 BBB 3,088,500
Cmnwlth. of Puerto Rico, Hwy. & Trans. Auth. Rev. Bonds,
300,000 Ser. T, 6.62s, 7/1/02 A 329,625
4,000,000 Ser. X, 2.52s, 7/1/99 VMIG1 4,000,000
1,500,000 Cmnwlth. of Puerto Rico, Hwy. Auth. Rev. Bonds, Ser. Q, 7-3/4s,
7/1/16 AAA 1,728,750
4,000,000 Cmnwlth. of Puerto Rico, Pub. Impt. G.O. Bonds, 6.8s, 7/1/21 AAA 4,440,000
1,200,000 Comwlth. of Puerto Rico, Hwy. & Trans. Auth. Rev. Bonds,
Ser. T 6.62s, 7/1/18 A 1,225,500
Puerto Rico, Hsg. Fin. Corp. Single Fam. Mtge. RIBS
1,250,000 GNMA Coll., 1.02s, 8/1/16 AAA 1,150,000
2,105,000 Ser. B, GNMA Coll., 7.65s, 10/15/22 AAA 2,178,675
2,500,000 GNMA, 9.9s, 8/4/25 AAA 2,487,500
2,000,000 Puerto Rico, Indl. Med. & Env. Poll. Control Fac. Fin. Auth.
Rev. Bonds (American Airlines), Ser. A, 8-3/4s, 12/1/25 Baa 2,132,500
1,000,000 Puerto Rico, Port Auth. Special Fac. Rev. Bonds
(American Airlines), Ser. A, 6.3s, 6/1/23 BB 886,250
Puerto Rico, Pub. Bldgs. Auth. Gtd. Edl. & Hlth. Fac. Rev.
Bonds,
1,000,000 Ser. H, 7.87s, 7/1/16 AAA 1,108,750
1,250,000 Ser. G, 7.87s, 7/1/16 AAA 1,385,938
1,000,000 Ser. M, 5-1/2s, 7/1/06 A 957,500
3,750,000 Puerto Rico, Pub. Bldgs. Auth. Rev. Bonds, Ser. K, 6.87s,
7/1/21 AAA 4,181,250
33,040,738
Virgin Islands (1.0%)
Virgin Islands, Pub. Fin. Auth. Rev. Bonds, Ser. A
(Matching Funds Loan Notes),
845,000 6.9s, 10/1/01 BBB/P 872,463
2,000,000 7-1/4s, 10/1/18 BBB/P 2,087,500
2,959,963
Total Investments (cost $302,713,098)(f) $297,892,194
</TABLE>

(a) Percentages indicated are based on total net assets of $291,252,712,
which correspond to a net asset value per class A and class B share of $8.75
and $8.75, respectively.

(b) The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at June 30, 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 ratings
which the agencies would ascribe to these securities at June 30, 1994.
Securities rated by Putnam are indicated by "/P" and are not publicly rated.
These ratings are not covered by the Report of Independent Accountants.

(c) Restricted as to public resale. At the date of acquisition these
securities were valued at cost. There were no outstanding unrestricted
securities of the same class held. Total market value of restricted
securities owned at June 30, 1994 was $10,856,250 or 3.7% of net assets.

(d) A portion of this security, having a total value of $290,775, or .10% of
net assets has been purchased on a "forward commitment" basis--that is, the
Fund has agreed to take delivery of and make payment for this security beyond
the settlement time of five business days after the trade and subsequent to
the date of this report. The purchase price and interest rate of this
security is fixed at the trade date, although the Fund does not earn any
interest on such security until the settlement date.

(e) This security was pledged to cover margin requirements for futures
contracts at June 30, 1994. The market value of Middlesex Cnty. RIBS, 8.55s,
8/15/10, segregated with the custodian for transactions on futures contracts
is $3,063,750.

(f) The aggregate identified cost for federal income tax purposes is
$302,833,988, resulting in gross unrealized appreciation and depreciation of
$4,583,213 and $9,525,007, respectively, or net unrealized depreciation of
$4,941,794.

The rates shown on Variable Rate Demand Notes (VRDN) and Residual Interest
Bonds (RIBS) which are securities paying variable interest rates that vary
inversely to changes in market interest rates, are the current interest rates
at June 30, 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
June 30, 1994 (as a percentage of net assets):

Transportation 25.7%
Hospitals/Health Care 20.1%
Housing 11.9%

U.S. Treasury Bonds Futures Outstanding
at June 30, 1994

<TABLE>
<CAPTION>
Aggregate
Total Face Expiration Unrealized
Value Value Date Appreciation
<S> <C> <C> <C> <C>
U.S. Treasury Bond Futures (Sell) $25,304,687 $25,616,875 Sept/94 $312,188
</TABLE>

The accompanying notes are an integral part of these financial statements.

Statement of assets and liabilities
June 30, 1994

<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Investments in securities at value (identified cost
$302,713,098) (Note 1) $297,892,194
Cash 46,894
Interest receivables 6,011,587
Unamortized organization expenses (Note 1) 11,674
Receivable for shares of the fund sold 1,918,913
Receivable for variation margin on futures contracts 328,125
Total assets 306,209,387
Liabilities
Payable for securities purchased $13,282,051
Payable for shares of the fund repurchased 605,654
Distributions payable to shareholders 407,230
Payable for compensation of Manager (Note 2) 424,677
Payable for administrative services (Note 2) 5,274
Payable for compensation of Trustees (Note 2) 1,261
Payable for investor servicing and custodian fees (Note 2) 36,708
Payable for distribution fees (Note 2) 158,133
Other accrued expenses 35,687
Total liabilities 14,956,675
Net assets $291,252,712
Represented by
Paid-in capital (Notes 4 and 5) $297,437,481
Distributions in excess of net investment income (21,796)
Distributions in excess of net realized gain on investments (1,654,257)
Net unrealized depreciation of investments and futures
contracts (4,508,716)
Total--Representing net assets applicable to capital shares
outstanding $291,252,712
Computation of net asset value and offering price
Net asset value and redemption price of class A shares
($246,336,498 divided by 28,154,702 shares) $8.75
Offering price per class A share (100/95.25 of $8.75) * $9.19
Net asset value and offering price of class B shares
($44,916,214 divided by 5,135,694 shares)+ $8.75
</TABLE>
*On single retail sales of less than $25,000. On sales of $25,000 or more and
on group sales the offering price is reduced.

+Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.

The accompanying notes are an integral part of these financial statements.

Statement of operations
Year ended June 30, 1994

<TABLE>
<CAPTION>
<S> <C>
Tax exempt interest income $ 18,240,402
Expenses:
Compensation of Manager (Note 2) 1,702,343
Investor servicing and custodian fees (Note 2) 270,315
Compensation of Trustees (Note 2) 14,001
Auditing 20,998
Legal 22,002
Reports to shareholders 37,211
Administrative services (Note 2) 10,001
Amortization of organization expenses (Note 1) 11,151
Distribution fees--class A (Note 2) 502,995
Distribution fees--class B (Note 2) 275,377
Registration fees 19,371
Postage 20,658
Other expenses 5,660
Total expenses 2,912,083
Net investment income 15,328,319
Net realized (loss) on investments (Notes 1 and 3) (1,063,401)
Net realized gain on futures contracts 1,024,512
Net unrealized depreciation of investments and futures
contracts during the year (19,449,337)
Net loss on investments (19,488,226)
Net decrease in net assets resulting from operations $ (4,159,907)
</TABLE>
The accompanying notes are an integral part of these financial statements.

<PAGE>

Statement of changes in net assets

<TABLE>
<CAPTION>
Year ended
June 30
1994 1993
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income $ 15,328,319 $ 11,469,655
Net realized gain (loss) on investments (1,063,401) 3,235,878
Net realized gain (loss) on futures contracts 1,024,512 (53,129)
Net unrealized appreciation (depreciation) of
investments (19,449,337) 9,627,934
Net increase (decrease) in net assets
resulting from operations (4,159,907) 24,280,338
Distributions to shareholders:
Net investment income
Class A (13,734,969) (11,401,026)
Class B (1,545,308) (170,038)
Net realized gain on investments
Class A (2,166,642) (1,649,611)
Class B (78,061) --
In excess of realized gain on investments
Class A (1,336,885) --
Class B (369,008) --
Increase from capital share transactions (Note
4) 64,287,614 79,638,108
Total increase in net assets 40,896,834 90,697,771
Net assets
Beginning of year 250,355,878 159,658,107
End of year (including distributions in excess
of and undistributed net investment income
of $21,796 and $69,838 respectively) $291,252,712 $250,355,878
</TABLE>

The accompanying notes are an integral part of these financial statements.

Financial Highlights*
(For a share outstanding throughout the period)

<TABLE>
<CAPTION>
For the period For the period

January 4, 1993 February 20, 1990

Year (commencement (commencement

ended of operations) to Year ended of operations) to

June 30 June 30 June 30 June 30

1994 1993 1994 1993 1992 1991 1990

Class B Class A

<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.46 $9.02 $9.46 $8.97 $8.64 $8.50 $8.50

Investment operations
Net investment income .45 .21 .51 .54 .59(a) .62(a) .22(a)

Net realized and
unrealized gain (loss)
on investments (.58) .43 (.58) .58 .38 .13 .01

Total from investment
operations (.13) .64 (.07) 1.12 .97 .75 .23

Less distributions:
From net investment
income (.45) (.20) (.51) (.55) (.60) (.61) (.23)

Net realized gain on
investments (.02) -- (.08) (.08) (.04) -- --
In excess of realized
gain on investments (.11) -- (.05) -- -- -- --
Total distributions (.58) (.20) (.64) (.63) (.64) (.61) (.23)

Net asset value, end of
period $8.75 $9.46 $8.75 $9.46 $8.97 $8.64 $8.50

Total investment return
at net asset value (%)
(b) (1.59) 14.71(c) (0.94) 13.02 11.52 9.17 7.53(c)

Net assets, end of
period (in thousands) $44,916 $15,113 $246,336 $235,243 $159,658 $99,978 $34,588

Ratio of expenses to
average net assets (%) 1.59 1.59(c) .95 .92 .75(a) .66(a) .59(a)(c)

Ratio of net investment
income to average net
assets (%) 4.77 4.62(c) 5.48 5.90 6.69(a) 7.09(a) 6.99(a)(c)

Portfolio turnover (%) 51.74 44.58(d) 51.74 44.58 80.21 101.21 7.58(d)

</TABLE>
* Financial highlights for periods ended through June 30, 1992 have been
reclassified and data has been presented to conform with requirements issued
by the SEC in April, 1993.

(a) Reflects a voluntary expense limitation. As a result, expenses of the
Fund for the years ended June 30, 1992 and 1991 and for the period ended June
30, 1990 reflect a reduction of $0.01, $0.03 and $0.02, respectively.

(b) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.

(d) Not annualized.

Notes to financial statements
June 30, 1994

Note 1
Significant accounting policies

The fund is registered under the Investment Company Act of 1940, as amended,
as a non-diversified, open-end management investment company. The fund seeks
as high a level of current income exempt from federal income tax and New
Jersey personal income tax as Putnam Management believes is consistent with
preservation of capital by investing primarily in a portfolio of longer-term
New Jersey tax exempt securities.

The fund offers both class A and class B shares. Class A shares are sold with
a maximum front-end sales charge of 4.75%. Class B shares do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than class
A shares, and may be subject to a contingent deferred sales charge if those
shares are redeemed within six years of purchase. Expenses of the fund are
borne pro-rata by the holders of both classes of shares, except that each
class bears expenses unique to that class (including the distribution fees
applicable to such class) and votes as a class only with respect to its own
distribution plan or other matters on which a class vote is required by law
or determined by the Trustees. Shares of each class would receive their
pro-rata share of the net assets of the fund, if the fund were
liquidated. In addition, the Trustees declare separate dividends on each
class of shares.

The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.

A) Security valuation Tax-exempt bonds and notes are stated on the basis of
valuations provided by a pricing service, approved by the Trustees, which
uses information with respect to transactions in bonds, quotations from bond
dealers, market transactions in comparable securities and various
relationships between securities in determining value. The fair value of
restricted securities is determined by the Manager following procedures
approved by the Trustees.

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 A futures contract is an agreement between two parties to buy and
sell a security at a set price on a future date. Upon entering into such a
contract, the fund is required to pledge to the broker an amount of cash or
tax- exempt securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value
of the contract. Such receipts or payments are known as variation margin, and
are recorded by the fund as unrealized gains or losses. 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. The potential risk to the fund is that the change in
value of the underlying securities may not correspond to the change in value
of the futures contracts.

D) 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.

E) Distributions to shareholders Income dividends are recorded daily by the
fund and are distributed to the shareholders monthly. Capital gains
distributions, if any, are recorded on the ex-dividend date and paid
annually.

The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryovers) under income tax regulations. For the year
ended June 30, 1994, the fund increased accumulated capital gains by $51,636
and decreased paid-in capital by the same amount.

F) Amortization of bond premium and discount Any premium resulting from the
purchase of securities in excess of maturity value is amortized on a
yield-to-maturity basis. Discount on zero-coupon bonds is accreted according
to the effective yield method.

G) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states, and the initial public offering
of its class A shares aggregated $49,086. 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, 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 to the extent of certain brokerage
commissions and fees (less expenses) received by affiliates of the Manager on
the fund's portfolio transactions.

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
June 30, 1994, the fund paid $10,001 for these services.

Trustees of the fund receive an annual Trustee's fee of $790 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 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 June 30, 1994 amounted to $270,315.

Investor servicing and custodian fees reported in the Statement of operations
for the year ended June 30, 1994 have been reduced by credits allowed by
PFTC.

The fund has adopted a distribution plan with respect to its class A shares
(the "Class A Plan") pursuant to Rule 12b-1 under the Investment Company Act
of 1940. The purpose of the Class A Plan is to compensate Putnam Mutual Funds
Corp. for services provided and expenses incurred by it in distributing class
A shares. The Class A Plan provides for payments by the fund to Putnam Mutual
Funds Corp. at an annual rate of up to 0.35% of the fund's average net assets
attributable to class A shares. Currently, the Trustees have limited payments
to 0.2% of such assets. For the year ended June 30, 1994, the fund paid
$502,995 in distribution fees for class A shares.

For the year ended June 30, 1994, Putnam Mutual Funds Corp., acting as an
underwriter, received net commissions of $123,856 from the sale of class A
shares of the fund.

A deferred sales charge of up to 1.00% is assessed on certain redemptions of
class A shares purchased as part of an investment of $ 1 million or more. For
the year ended June 30, 1994, Putnam Mutual Funds Corp., acting as an
underwriter, did not receive any commissions on such redemptions.

The fund has adopted a separate distribution plan with respect to its class B
shares (the "Class B Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The purpose of the class B Plan is to compensate Putnam
Mutual Funds Corp. for services provided and expenses incurred by it in
distributing class B shares. The class B plan provides for payments by the
fund to Putnam Mutual Funds Corp. at an annual rate of up to 1% of the fund's
average net assets attributable to class B shares. Currently the Trustees
have limited payments to .85% of such assets. For the year ended June 30,
1994, the fund paid Putnam Mutual Funds Corp. distribution fees of $275,377
for class B shares.

Putnam Mutual Funds Corp. also receives the proceeds of the contingent
deferred sales charges levied on class B share redemptions within six years
of purchase. The charge is based on declining rates, which begin at 5% of the
net asset value of the redeemed shares. Putnam Mutual Funds Corp. has
received contingent deferred sales charges of $62,483 from such redemptions
during the year ended June 30, 1994.

Note 3
Purchases and sales of securities
During the year ended June 30, 1994, purchases and sales of investment
securities other than short-term investments aggregated $209,668,532 and
$142,749,262 respectively. Purchases and sales of short-term municipal
obligations aggregated $43,706,180, and $39,005,840, respectively. In
determining the net gain or loss on securities sold, the cost of securities
has been determined on the identified cost basis.

Transactions in futures contracts during the year are summarized as follows:

<TABLE>
<CAPTION>
Sales of
Futures Contracts
Aggregate
Number of Face
Contracts Value
<S> <C> <C>
Contracts opened 1,022 $105,025,821
Contracts closed (772) (79,408,946)
Open at end of year 250 $ 25,616,875
</TABLE>

Note 4
Capital shares
At June 30, 1994 there was an unlimited number of shares of beneficial
interest authorized divided into two classes of shares, class A and class B
capital shares. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Year ended June 30 1994 Year ended June 30, 1993
Class A Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 6,502,086 $ 60,620,771 9,255,847 $ 84,801,517
Shares issued in
connection with
reinvestment of
distributions 1,019,504 9,472,472 727,399 6,637,885
7,521,590 70,093,243 9,983,246 91,439,402
Shares repurchased (4,232,774) (38,876,147) (2,909,789) (26,589,103)
Net increase 3,288,816 $ 31,217,096 7,073,457 $ 64,850,299
</TABLE>

<TABLE>
<CAPTION>
January 4, 1993
(commencement
of operations) to
Year ended June 30, 1994 June 30, 1993
Class B Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 3,704,434 $34,534,469 1,621,688 $15,009,092
Shares issued in
connection with
reinvestment of
distributions 129,718 1,197,579 9,539 88,917
3,834,152 35,732,048 1,631,227 15,098,009
Shares repurchased (296,170) (2,661,530) (33,515) (310,200)
Net increase 3,537,982 $33,070,518 1,597,712 $14,787,809
</TABLE>

Note 5
Reclassification of Capital Account
Effective July 1, 1993, Putnam New Jersey 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.

Tax Information

The Fund has designated all income dividends paid during the fiscal year as
exempt-interest dividends. Thus, 100% of the net investment income
distributions are exempt from federal income tax. For residents of the state
of New Jersey, 100% of the Fund's income dividends are also exempt from New
Jersey personal income tax.

During the fiscal year the fund paid long-term capital gains distribution of
$0.053 and $0.053 per share and short-term capital gains of $0.077 and $0.077
on December 22, 1993 on class A and class B shares, respectively.

The Form 1099 you receive in January 1995 will show the tax status of any
taxable distributions paid to your account in calendar 1994.

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

INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.

TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike

OFFICERS
George Putnam
President

Charles E. Porter
Executive Vice President

Patricia C. Flaherty
Senior Vice President

Lawrence J. Lasser
Vice President

Gordon H. Silver
Vice President

Gary N. Coburn
Vice President

James E. Erickson
Vice President

Thomas C. Goggins
Vice President
and Fund Manager

William N. Shiebler
Vice President

John R. Verani
Vice President

Paul M. O'Neil
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 New Jersey 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.

PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109

..................
Bulk Rate
U.S. Postage Paid
Boston, MA
Permit No. 53749
..................

019/329/13354

<PAGE>

APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS:

(1) Bold and italic typefaces are displayed in normal type.

(2) Headers (e.g., the name of the fund) are omitted.

(3) Certain tabular and columnar headings and symbols are displayed
differently in this filing.

(4) Bullet points and similar graphic signals are omitted.

(5) Page numbering is omitted.

(6) Trademark symbol replaced with (TM)