Putnam
New Jersey
Tax Exempt
Income Fund
ANNUAL REPORT
May 31, 1995
[PUTNAM LOGO]
B O S T O N * L O N D O N * T O K Y O
<PAGE>
Performance highlights
> "The gap is narrowing between Treasury and municipal yields, making munis
look increasingly attractive. Among municipal-bond experts, there is little
concern that any radical change in the tax system could happen before 1997
and plenty of doubt that any such revolution will happen at all."
- --The Wall Street Journal, May 19, 1995
FISCAL 1995 RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Class A Class B
<S> <C> <C> <C> <C> <C> <C>
Total return: NAV POP NAV CDSC
...........................................................................................
(change in value during period
plus reinvested distributions)
11 months ended 5/31/95 8.25% 3.07% 7.51% 2.51%
Class A Class B Class M
Share value: NAV POP NAV NAV POP
...........................................................................................
6/30/94 $8.75 $9.19 $8.75 -- --
5/1/95 -- -- -- $8.74 $9.03
5/31/95 8.98 9.43 8.97 8.98 9.28
Distributions: No. Income Capital gains(1) Total
...........................................................................................
Class A 11 $0.460401 -- $0.460401
Class B 11 0.410132 -- 0.410132
Class M 1 0.040342 -- 0.040342
Class A Class B
Current return: NAV POP NAV
...........................................................................................
(end of period:)
Current dividend rate(2) 5.42% 5.16% 4.80%
Taxable equivalent(3) 9.60 9.14 8.51
Current 30-day SEC yield(4) 5.58 5.31 4.86
Taxable equivalent(3) 9.89 9.41 8.61
</TABLE>
Performance data represent past results, are no indication of future results
and will differ for each share class. For performance over longer periods,
see pages 8 and 9. POP assumes a 4.75% maximum sales charge for class A
shares and 3.25% for class M shares. Class B shares assume a 5% maximum CDSC.
Effective 1/4/93, the fund began offering class B shares, and on 5/1/95,
class M shares. Performance for class M shares not shown due to brevity of
reporting period. (1)Capital gains, if any, are taxable for federal and, in
most cases, state purposes. (2)Income portion of most recent distribution,
annualized and divided by NAV or POP at end of period. (3)Assumes maximum
43.57% 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.
<PAGE>
From the Chairman
[Photo of George Putnam]
(c) Karsh, Ottawa
Dear Shareholder:
You may not have noticed, but this annual report for Putnam New Jersey Tax
Exempt Income Fund has arrived somewhat earlier than usual. Putnam Management
has decided to realign many of its tax-exempt bond funds' fiscal years so
they have common fiscal year ends.
Your fund was among those affected by this change. In the future its fiscal
year will end on May 31, instead of June 30, as in the past. Consequently,
this report covers a fiscal period of only 11 months, instead of a full
fiscal year.
The change should provide considerable savings for your fund in the future.
We believe it will allow us to take advantage of economies of scale in
financial reporting, accounting, literature production, and the like.
We are also pleased to announce the appointment of Triet Nguyen as your
fund's manager. Triet, who has been with Putnam since 1985, has 15 years of
investment experience.
In the report that follows, Triet reviews performance during this abbreviated
period, then offers some insights on prospects for the months ahead.
Respectfully yours,
[Putnam Signature]
George Putnam
Chairman of the Trustees
July 19, 1995
<PAGE>
Report from the Fund Manager
Triet M. Nguyen
Like most fixed-income investments, Putnam New Jersey Tax Exempt Income Fund
began its fiscal year in one of the most hostile bond market environments in
recent memory. Fortunately, the year ended on a much brighter note. For the
11 months ended May 31, 1995, your fund's total return was 8.25% for class A
shares and 7.51% for class B shares, both at net asset value.
Your fund's most important distinguishing factor, however, was the high level
of current tax-free income it continued to provide. The fund's 12-month yield
for the period ended May 31, 1995 was 5.58%, compared with the 5.15% average
yield of the 39 New Jersey funds tracked by Lipper Analytical Services.
Your fund weathered the market's ups and downs well. Initially, our defensive
posture focusing on bonds with strong call protection and the use of hedging
techniques helped reduce share price volatility. As the economy began to
slow, shifts in duration and sector allocation boosted the fund's income
stream.
> ECONOMIC SLOWDOWN SPARKS MARKET RALLY
For much of 1994, fixed-income markets were turned upside-down by the Federal
Reserve Board's tighter stance on U.S. monetary policy and by bond investors'
fears of inflation--all in response to accelerating economic growth.
Ultimately, the Fed raised interest rates six times during the calendar year,
and finally succeeded in calming inflation fears considerably.
During the first quarter of 1995, the municipal-bond market, along with most
other fixed-income investments, began to rally. Several factors contributed
to this welcome change. First, some weakness had begun to emerge in housing
sales and consumer spending; at last the U.S. economy appeared to be heading
for a "soft landing," that is, a combination of steady growth and low
inflation. Meanwhile, as the impact of the Mexican currency crisis began to
fade, central banks around the world have been supporting the weak dollar by
purchasing U.S. Treasury bonds. This helped spark a rally in Treasuries,
which, in turn, produced a rally in the municipal bond market.
<PAGE>
Economic data in April and May continued to support the notion that the U.S.
economy was indeed slowing down, and the fixed-income market rally
continued. At the same time, however, Congressional lawmakers began to
consider proposals for tax reform. Concern about the potential effects of
such legislation dampened investor demand for municipal securities somewhat
toward the end of the fiscal year, although the market did continue to rally,
albeit less vigorously.
> FOCUSED ON INCOME AND AFTER-TAX RETURNS
Your fund's primary goal is to maximize after-tax returns, and our tendency
has been to preserve the fund's tax-free income stream through all kinds of
market conditions. The prospect of tax reform ahead makes this focus on
current income more appropriate than ever. Municipal securities are unlikely
to appreciate much until these tax issues are settled, but tax-free income
will continue to be highly prized, since few other investment tax shelters
remain.
In fact, the recent decline in demand for municipal securities has enhanced
your fund's investment strategy. Municipals now offer some of the best values
in years. Tax reform--if it occurs at all--
MUNICIPAL BOND PRICES
<TABLE>
<CAPTION>
<S> <C> <C>
1994 May 91.160004
June 90.470001
July 92.190002
August 91.910004
September 89.129997
October 86.059998
November 82.940002
December 85.279999
1995 January 88.190002
February 90.970001
March 91.190002
April 91.089996
May 94.059998
</TABLE>
Source: Bond Buyer 40 Municipal Index, which represents the average price of
40 actively traded municipal bonds. Data plotted monthly. Not intended to
reflect performance of the fund.
<PAGE>
will not likely take place until at least 1997, after the next presidential
election. In the meantime, although we remain somewhat cautious, Putnam's
superior research capabilities are enabling us to uncover some excellent
buying opportunities. For example, we recently purchased some bonds issued by
the Educational Testing Services, which runs the SAT, GMAT, LSAT, and other
national tests. These new issues were available at an excellent value and
offer solid current income for the fund.
We have also begun to explore opportunities in the resource-recovery sector,
where bonds are now selling at excellent values. Industries in this sector
produce power by recycling trash, landfill, and other waste products. Certain
legal restrictions just lifted by Congress have hampered companies in this
sector, but it now has a very promising outlook.
Health care continues to be a dominant theme in your fund's portfolio.
Although the bearish fixed-income market of 1994 and issues of cost control
and consolidation depressed health care bond performance for some time, the
sector is now on an upward swing.
> ACUTE SUPPLY SHORTAGE STRENGTHENS MARKET
For some time, we have been discussing the prospect of an upcoming
supply/demand imbalance that could be favorable for municipal bond funds like
yours. At this point, supply of new and outstanding New Jersey municipal
issues has reached an extreme low.
In fact, 1995 will be the first year in which both the new and outstanding
supply of municipal bonds across the country will shrink relative to the
demand for these securities. Higher interest rates and a high debt load
incurred by massive financing undertaken in the 1980's have discouraged
municipalities from issuing new bonds or refinancing older ones. Already,
municipal bond supply in the first quarter of 1995 has dropped 45% compared
with new issuances and refinancings in the first quarter of 1994. In
July-1995, a huge number of municipal issues will mature and be called out of
the market. The resulting surge in demand appears
<PAGE>
TOP INDUSTRY SECTORS (5/31/95)*
Health Care 19.5%
Transportation 17.5%
Housing 6.0%
Education 4.5%
Utilities 4.2%
*Based on net assets on 5/31/95. Holdings will vary over time.
likely to exceed the available supply of new municipal securities for the
first time in history. While there can be no assurances, this huge inequity
between supply and demand could help support stronger municipal bond
performance ahead.
> OUTLOOK: ROOM FOR CAUTIOUS OPTIMISM
Along with the Federal Reserve's Board of Governors, we believe it is too
early to tell whether the economy is headed for the desired "soft landing" of
moderate growth and low inflation or if the slowdown will be more dramatic.
Either situation should lead to stable or declining interest rates, which
would create a positive environment for fixed-income investments, including
municipal securities. The big unknown is how the tax reform proposal now
before Congress will affect municipal bond market psychology.
Given this uncertainty, we will continue to emphasize current income by
pursuing appropriate investment opportunities as they arise. At the same
time, we will protect the fund's net asset value by keeping the portfolio
average duration relatively neutral, rather than aggressively long. Although
the market will probably remain somewhat volatile over the next few months,
fundamentals remain exceptionally strong and we believe investors should
continue to find the double tax-free returns of New Jersey municipal
securities quite appealing.
The views expressed about the securities mentioned in this report are
exclusively those of Putnam Management they are not meant as investment
advice. Although the described holdings were viewed favorably as of May 31,
1995, there is no guarantee the fund will continue to hold these securities
in the future.
<PAGE>
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.
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 free from federal income taxes, and
New Jersey personal income tax consistent with capital preservation.
TOTAL RETURN FOR PERIODS ENDED 5/31/95
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Lehman Bros.
Class A Class B Municipal Bond
NAV POP NAV CDSC Index CPI
11 months 8.25% 3.07% 7.51% 2.51% 9.75% 2.84%
1 year 7.78 2.67 6.98 1.98 9.11 3.19
5 years 49.01 41.97 -- -- 51.33 17.80
Annual average 8.30 7.26 -- -- 8.64 3.33
Life of class A
(2/20/90) 51.57 44.43 -- -- 53.56 18.91
Annual average 8.19 7.21 -- -- 8.46 3.33
Life of class B
(1/4/93) -- -- 13.43 9.45 17.78 7.26
Annual average -- -- 5.37 3.82 7.03 2.95
</TABLE>
TOTAL RETURN FOR PERIODS ENDED 6/30/95
(MOST RECENT CALENDAR QUARTER)
<TABLE>
<CAPTION>
CLASS A CLASS B
NAV POP NAV CDSC
<S> <C> <C> <C> <C>
1 year 6.78% 1.67% 6.00% 1.00%
5 years 45.54 38.69 -- --
Annual average 7.79 6.76 -- --
Life of class
A
(2/20/90) 49.50 42.46 -- --
Annual average 7.79 6.82 -- --
Life of class
B
(1/4/93) -- -- 11.83 7.92
Annual average -- -- 4.59 3.11
</TABLE>
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions. The fund began offering what are now
known as Class A shares on 2/20/90. Effective 1/4/93 the fund began offering
Class B shares. 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. Performance for Class M shares, which were first offered on
May 1, 1995 is not shown because of the brevity of the reporting period.
<PAGE>
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
PUTNAM N.J. LEHMAN BROS.
TAX EXEMPT MUNICIPAL BOND COST OF
INCOME FUND A INDEX LIVING INDEX
<S> <C> <C>
9525 10000 10000
9693 10147 10094
10699 11170 10594
11710 12267 10914
13194 13735 11266
13400 14074 11523
14443 15356 11891
</TABLE>
Past performance is no assurance of future results. A $10,000 investment in
the fund's class B shares at inception on 1/4/93 would have been valued at
$11,343 on 5/31/95 ($10,945 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.
Class M shares have a lower initial sales charge and a higher 12b-1 fee then
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
assume the maximum 4.75% sales charge for class A shares and 3.25% for class
M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year to
1% during the sixth year. After the sixth year, the CDSC no longer applies.
COMPARATIVE BENCHMARKS
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the municipal
bond market. The index does not take into account brokerage commissions or
other costs, may include bonds different from those in the fund, and may pose
different risks than the fund.
Consumer Price Index (CPI) is a commonly used measure of inflation; it does
not represent an investment return.
<PAGE>
A Putnam perspective on risk and reward
You've probably been told how important it is to understand the relationship
between an investment's potential rewards and its accompanying risks. Given
the cautionary nature of such instructions, it may take most investors a
while to realize that risk has a positive side.
Every risk signals a potential reward. Selecting only those investments that
offer the greatest degree of security generally leads to only modest rewards.
Furthermore, even insured or guaranteed investments may be subject to changes
in their rates of return or, in some cases, in their principal values.
Experienced investors know that no investment is truly risk free and are
therefore willing to take on some measure of risk in order to increase their
potential gains.
The greater the risk, the greater the potential reward.
Accepting an appropriate level of investment risk can give you a better
chance of outpacing inflation over time and seeking to maximize your
investment's return. How much risk? Your financial
> A RUNDOWN OF RISK TYPES
MARKET RISK
Most important for stock funds, but relevant to all funds, this
is a measure of how sensitive a fund's holdings are to changes in general
market conditions. Remember, though, that securities that lose value quickly
in market declines may also show the strongest gains in more favorable
environments.
INTEREST-RATE RISK Since bond prices fall as interest rates rise, this type
of risk is a particular concern for fixed-income investors. However,
interest-rate increases can also have a substantial negative effect on the
stock market.
INFLATION RISK If your investments cannot keep pace with inflation, your
money will begin to lose its purchasing power. Stock investments are
generally considered among the best ways of addressing inflation risk over
the long term.
<PAGE>
advisor's feedback and your time horizon can make all the difference in
determining how much risk is compatible with your investment goals and your
peace of mind.
> FITTING YOUR FUND SELECTION TO YOUR
RISK TOLERANCE
How do you find the right balance between investment risks and their
potential rewards. It's helpful to understand the types of risks that can
apply to different types of investments, and to look at your own portfolio
with this perspective.
For short-term goals, your first priority may be managing market risk.
Longer-term investors may be more concerned with inflation risk. And all
income-oriented investors should consider interest-rate, credit, and
prepayment risks carefully. Within each of Putnam's four investment
categories, you can select funds with differing levels of risk and reward
potential to customize your portfolio.
CREDIT AND PREPAYMENT RISK Credit risk is the concern that the security's
issuer will not be able to meet its payment, while prepayment risk involves
the premature payoff of a loan, with a resulting loss of interest income.
Professional management and in-depth research are invaluable in managing both
these risks.
LIQUIDITY RISK Not all investments can be readily converted into cash at
their perceived market values. Liquidity risk can affect the price of
securities held in the fund's portfolio and, thus, the fund's share prices.
This list covers only the most general types of risks; however, each
investment will also have its own specific risks. You will find a more
detailed discussion of these risk considerations in each fund's prospectus.
<PAGE>
Relative risk/reward potential of Putnam funds
These illustrations provide a simplified guide to the risk/reward potential
for funds within each category of the Putnam Family of Funds and are not
intended as investment advice. Your investment advisor can help you evaluate
your risk tolerance.
These rankings are relative only to Putnam funds and should not be compared
to other investments. There is no guarantee that one Putnam fund will be less
volatile than another, since each fund has its own investment risks. That's
why it is essential to read the fund's prospectus before investing.
PUTNAM GROWTH FUNDS
Lower Risk Lower Reward Potential
Investors Diversified Equity(1) Global Growth(1) Vista Natural
Resources Health Sciences Voyager Overseas Growth(1) Europe Growth(1)
New Opportunities(2) OTC Emerging Growth(2) Asia Pacific Growth(1)
Higher Risk Higher Reward Potential
PUTNAM GROWTH AND INCOME FUNDS
Lower Risk Lower Reward Potential
Balanced Retirement Utilities Growth and Income
George Putnam Convertible Income-Growth Equity Income
Fund for Growth and Income Putnam Growth and Income Fund II
Higher Risk Higher Reward Potential
(1) Foreign investments are subject to certain risks, such as currency
fluctuations and political developments, that are not present with domestic
investments.
(2) This fund invests all or a portion of its assets in small to medium-sized
companies, which increases the risk of price fluctuations.
(3) While U.S. government backing of individual securities does not insure
your principal, which will fluctuate, it does guarantee that the fund's
government-backed holdings will make timely payments of interest and
principal.
<PAGE>
PUTNAM INCOME FUNDS
Lower Risk Lower Reward Potential
Money Market(4) Adjustable Rate U.S. Gov't.(3) Intermediate U.S.
Gov't.(3) U.S. Gov't. Income(3) American Gov't. Income(3)
Federal Income (3) Diversified Income (1, 3, 5) Income
Preferred Income Global Gov't. (1.5) High Yield(5)
High Yield Advantage(5)
Higher Risk Higher Reward Potential
PUTNAM TAX-FREE FUNDS(6)
Lower Risk Lower Reward Potential
Tax Exempt Money Market(4) Intermediate Tax Exempt Tax-Free
Insured(7) Tax Exempt Income Single-state tax-free funds*
Municipal Income Tax-Free High Yield (5)
Higher Risk Higher Reward Potential
*State tax-free funds available for Arizona, California, Florida,
Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio, and
Pennsylvania. Not available in all states.
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 are:
> Putnam Asset Allocation: Balanced Portfolio
> Putnam Asset Allocation: Conservative Portfolio
> Putnam Asset Allocation: Growth Portfolio
Please call your financial advisor -- or Putnam at 1-800-225-1581 -- to
obtain a prospectus for any Putnam fund. The prospectus contains more
complete information, including risk considerations, charges, and expenses.
Read it carefully before you invest or send money.
(4)The fund is managed to maintain a steady price of $1.00 per share,
although there is no assurance this price can be maintained in the future.
(5)The lower credit ratings of high-yield corporate and municipal bonds
reflect a greater possibility that adverse changes in the economy or their
issuers may affect their ability to pay principal and interest on the bonds.
(6)Income may be subject to state and local taxes. Capital gains, if any, are
taxable for federal and, in most cases, state purposes.
(7)Bond insurance does not guarantee principal or protect against changes in
market price.
<PAGE>
Report of Independent Accountants
eleven months ended May 31, 1995
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 May 31, 1995, and the related statement of
operations for the eleven months then ended, the statement of changes in net
assets for the eleven months then ended and the year ended June 30, 1994, and
the "Financial Highlights" for each of the periods indicated therein. 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 audit 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 May 31, 1995 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 May 31, 1995, the results of
its operations for the eleven months then ended, the changes in its net
assets for the eleven months then ended and for the year ended June 30, 1994,
and the "Financial Highlights" for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
July 14, 1995
<PAGE>
Portfolio of investments owned
May 31, 1995
MUNICIPAL BONDS AND NOTES (97.6%)*
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT RATINGS** VALUE
Key to Abbreviations
AMBAC -- American Municipal Bond Assurance Corporation
COP -- Certificate of Participation
GNMA Coll. -- Government National Mortgage Association Collateralized
G.O. Bonds -- General Obligation Bonds
FGIC -- Federal Guarantee Insurance Corporation
FHA -- Federal Housing Administration Insured
FSA -- Financial Security Assurance
IFB -- Inverse Floating Bond
MBIA -- Municipal Bond Assurance Corporation
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
New Jersey (83.4%)
$ 1,000,000 Atlantic City, Muni. Utils. Auth. Wtr. Rev. Bonds,
7-3/4s, 5/1/17 A $ 1,147,500
Atlantic Cnty. COP
2,000,000 FGIC, 7.4s, 3/1/10 AAA 2,392,500
1,000,000 (Pub. Facs. Lease Agreement), FGIC, 7.4s, 3/1/09 AAA 1,192,500
4,250,000 Camden Cnty., Impt. Auth. Rev. Bonds (acquired 4/12/94 cost
$4,250,000), 8.4s, 4/1/24++ BB/P 4,441,250
1,200,000 Middle Township Sch. Dist. Rev. Bonds, FGIC, 7s, 7/15/06 AAA 1,383,000
2,000,000 Middlesex Cnty., Poll. Control Auth. Rev. Bonds, 6-7/8s, 12/1/22 BBB/P 2,087,500
3,000,000 Middlesex Cnty., Utils. Auth. Swr. Rev. IFB, Ser. A, MBIA, 7.95s,
8/15/10# AAA 3,225,000
1,338,000 Morris Cnty., G.O. Bonds, 5-1/8s, 5/13/11 AAA 1,287,825
NJ Bldg. Auth. State Bldg. Rev. Bonds
3,750,000 5s, 6/15/18 AA 3,407,813
7,000,000 MBIA, 5s, 6/15/17 AAA 6,396,250
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 1,077,500
11,105,000 NJ Econ. Dev. Auth. Elec. Energy Fac. Rev. Bonds (Vineland
Cogeneration L.P. Project), 7-7/8s, 6/1/19 BB/P 11,993,400
5,000,000 NJ Econ. Dev. Auth. Hlth. Care Fac. Rev. Bonds (Ocean Nursing
Pavilion), Ser. A, 7-3/8s, 12/1/25 BB/P 4,956,250
NJ Econ. Dev. Auth. Natural Gas Fac. Rev. Bonds
(NJ Natural Gas Co. Project)
2,500,000 9s, 12/1/17 A 2,800,000
2,500,000 Ser. 84A, 7.05s, 3/1/16 A 2,665,625
NJ Econ. Dev. Auth. Rev. Bonds
2,800,000 (Stolt Terminals Project), 10-1/2s, 1/15/18 BB/P 3,174,500
4,550,000 (Holt Hauling Co.), Ser. D, 10-1/4s, 9/15/14 Aaa 4,902,625
5,000,000 (Tevco Inc. Project), 8-1/8s, 10/1/09 A/P 5,618,750
3,260,000 (Cadbury Corp.), 8s, 7/1/15 BB/P 3,337,425
1,200,000 (Ninette Group L P Project), 7-3/4s, 8/1/11 A 1,290,000
2,000,000 (Hartz Mountain Industries, Inc.), 7s, 2/1/14 A 2,207,500
3,185,000 (Lakewood School), Ser. R, 6.9s, 12/1/11 Aa 3,435,819
1,500,000 (NJ Performing Arts Ctr.), 6-3/4s, 6/15/12 A 1,597,500
3,040,000 (Insd. Edl. Testing Svcs.), Ser. A, 5.9s, 5/15/15 AAA 3,066,600
1,635,000 (American Wtr. Co. Project), FGIC, Ser. A, 5.35s, 6/1/23 AAA 1,547,119
4,500,000 NJ Econ. Dev. Auth. St. Contract Rev. Bonds, zero %, Ser. A,
9/15/13 AAA 1,591,875
<PAGE>
New Jersey (continued)
$ 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 $ 3,334,500
NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds
1,300,000 (Gen. Hosp. Ctr.-Passaic Inc.), Ser. B, 10-3/8s, 7/1/14 BBB 1,345,747
4,300,000 (Dover Gen. Hosp. & Med. Ctr.), Issue C, 9s, 7/1/12 A 4,403,759
4,250,000 (St. Elizabeth Hosp.), Ser. B, 8-1/4s, 7/1/20 Baa 4,563,438
3,095,000 (Jersey Shore Med. Ctr.), AMBAC, 8s, 7/1/18 AAA 3,466,400
2,000,000 (Kimball Med. Ctr.), Ser. C, 8s, 7/1/13 Baa 2,125,000
1,000,000 (East Orange Gen. Hosp.), Ser. B, 7-3/4s, 7/1/20 BBB 1,062,500
4,720,000 (Kimball Med. Ctr.), 7.3s, 7/1/99 Baa 4,820,300
9,000,000 (Raritan Bay Med. Ctr.) 7-1/4s, 7/1/27 BB/P 8,943,750
3,300,000 (Christ Hosp. Group) 7s, 7/1/06 AAA 3,729,000
5,000,000 (Gen. Hosp. Ctr.-Passaic Inc.), FSA, 6-3/4s, 7/1/19 AAA 5,437,500
1,070,000 (Union Hosp./Mega Care Inc.), 5-7/8s, 7/1/14 Baa 988,413
4,400,000 (St. Mary's Hosp.), 5-7/8s, 7/1/12 Baa 4,075,500
5,325,000 (Union Hosp./Mega Care Inc.), 5-7/8s, 7/1/07 Baa 5,098,688
7,285,000 (Somerset Med. Ctr.), Ser. A, FGIC, 5.2s, 7/1/24 AAA 6,665,775
3,500,000 (St. Peters Med. Ctr.), Ser. F, MBIA, 5s, 7/1/21 AAA 3,119,375
3,425,000 NJ Sports & Exposition Auth. Convention Ctr. Luxury Tax Rev.
Bonds, Ser. A, MBIA, 5-1/2s, 7/1/22 AAA 3,369,344
NJ State G.O. Bonds
12,800,000 FGIC, 6s, 2/15/11 AAA 13,600,000
5,000,000 FGIC, zero %, 2/15/07 AAA 2,693,750
NJ State Hsg. & Mtge. Fin. Agcy. Rev. Bonds
3,000,000 IFB, Ser. I, (acquired $2,000,000 par 2/11/93 cost $2,068,074,
acquired $1,000,000 par 6/14/93 cost $1,061,250) 7.717s, 11/1/07++ A 3,318,750
1,745,000 (Home Buyer Project), Ser. D, MBIA, 7.7s, 10/1/29 AAA 1,845,338
NJ State Hwy. Auth. Gen. Rev. Bonds
1,500,000 (Garden State Pkwy. Project), 6.2s, 1/1/10 AA 1,608,750
2,370,000 (Garden State Pkwy. Project), 6s, 1/1/19 Aaa 2,541,825
NJ State Tpk. Auth. Rev. Bonds,
1,800,000 (acquired 3/27/92, cost $1,817,856) 8.22921s, 1/1/16++ AAA 2,184,750
20,000,000 Ser. C, 6-1/2s, 1/1/16 AAA 22,200,000
5,000,000 NJ State Trans. Trust Fund Auth. Trans. Syst. Rev. Bonds, Ser.
A, MBIA, 6-1/4s, 12/15/03 AAA 5,462,500
10,870,000 NJ Wastewater Treatment Trust Rev. Bonds, zero %, Ser. A, 9/1/07 AAA 5,747,513
1,800,000 Passaic Valley, Cmnty. Wtr. Supply Rev. Bonds, Ser. A., FGIC,
6.4s, 12/15/22 AAA 2,018,250
4,500,000 Rutgers State U. Rev. Bonds, Ser. A, 6.4s, 5/1/13 AA 4,927,500
13,000,000 Salem Cnty., Indl. Poll. Control Fin. Auth. Rev. Bonds (Pub.
Svc. Elec. & Gas Co. Project), Ser. C, MBIA, 5.55s, 11/1/33 AAA 12,642,500
1,985,000 Sayreville, Hsg. Dev. Corp. Mtge. Rev. Bonds (Lakeview Section
8), FHA, 7-3/4s, 8/1/24# AAA 2,195,906
1,000,000 Stony Brook, Regional Swr. Rev. Bonds, Ser. B, 5.45s, 12/1/12 AA 988,750
4,695,000 U. of Medicine & Dentistry G.O. Bonds, Ser. E, 6-1/2s, 12/1/12 AA 5,281,875
1,300,000 Union Cnty., Indl. Poll. Ctrl. Fin. Auth. Rev. Bonds (American
Cynamid Co.) 5.8s, 9/1/09 A 1,337,375
Union Cnty., Util. Auth. Solid Waste Rev. Bonds
7,400,000 Ser. A, 7.2s, 6/15/14 A 7,705,250
<PAGE>
New Jersey (continued)
$4,000,000 Ser. A, 7.15s, 6/15/09 A $ 4,180,000
251,253,197
New York (5.5%)
Port Auth. NY & NJ Cons. IFB
5,000,000 (acquired 8/29/91, cost $5,164,940) 8.90895s, 8/1/26++ AA 5,725,000
2,100,000 (acquired 2/9/94, cost $2,107,875) 5.65808s, 11/15/15++ AA 1,693,125
Port Auth. NY & NJ Cons. Rev. Bonds,
7,500,000 93rd Ser. 6-1/8s, 6/1/94 AA 7,734,375
1,500,000 5.2s, 11/15/15 A 1,413,750
16,566,250
Puerto Rico (8.7%)
Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
1,000,000 Ser. W, 5-1/2s, 7/1/15 A 962,500
2,000,000 Ser. X, 5-1/4s, 7/1/21 A 1,810,000
1,500,000 Ser. X, 2.2s, 7/1/99 VMIG 1,500,000
1,500,000 Cmnwlth. of PR, Hwy. Auth. Rev. Bonds Ser. Q, 7-3/4s, 7/1/16 AAA 1,749,375
Cmnwlth. of PR, Pub. Impt. G.O. Bonds
4,000,000 6.8s, 7/1/21 AAA 4,595,000
2,250,000 Ser. A, MBIA, 5-3/8s, 7/1/22 AAA 2,148,750
PR, Hsg. Fin. Corp. Single Fam. Mtge. IFB
2,500,000 GNMA Coll., 8.585s, 8/4/25 AAA 2,693,750
1,765,000 Ser. B, GNMA Coll., 7.65s, 10/15/22 AAA 1,877,515
2,000,000 PR, Indl. Med. & Env. Poll. Control Fac. Fin. Auth. Rev. Bonds
(American Airlines), Ser. A, 8-3/4s, 12/1/25 Baa 2,077,500
PR, Pub. Bldgs. Auth. Gtd. Edl. & Hlth. Fac. Rev. Bonds
1,250,000 Ser. G, 7-7/8s, 7/1/16 AAA 1,368,750
1,000,000 Ser. H, 7-7/8s, 7/1/16 AAA 1,095,000
3,750,000 PR, Pub. Bldgs. Auth. Rev. Bonds, Ser. K, 6-7/8s, 7/1/21 AAA 4,326,563
26,204,703
$294,024,150
Total Investments (cost $282,179,370)***
</TABLE>
<PAGE>
*Percentages indicated are based on net assets of $301,160,552, which
correspond to a net asset value per class A, class B and class M shares of
$8.98, $8.97 and $8.98, respectively.
**The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at May 31, 1995 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 May 31, 1995. Securities rated
by Putnam are indicated by "/P" and are not publicly rated. Ratings are not
covered by the Report of Independent Accountants.
++Restricted, excluding 144A securities, 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 May 31, 1995 was $17,362,875 or 5.8% of net
assets.
#These securities was pledged to cover margin requirements for futures
contracts at May 31, 1995. The market value segregated with the custodian for
transactions in futures contracts was $5,420,906, or 1.8% of net assets.
***The aggregate identified cost for federal income tax purposes is
$282,188,091, resulting in gross unrealized appreciation and depreciation of
$14,308,267 and $2,472,208, respectively, or net unrealized appreciation of
$11,836,059.
The rates shown on VRDN's and IFB's which are securities paying variable
interest rates that vary inversely to changes in the market rates are the
current interest rates at May 31, 1995, which are subject to change based on
the terms of the security.
The fund had the following industry group concentrations greater than 10% on
May 31, 1995 (as a percentage of net assets):
Health Care 19.5%
Transportation 17.5
U.S. Treasury Bond Futures Outstanding
<TABLE>
<CAPTION>
Aggregate
Total Face Expiration Unrealized
Value Value Date Depreciation
<S> <C> <C> <C>
U.S. Treasury Bond Futures
(Sell) $10,511,906 $9,875,437 June 95 $636,469
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
Statement of assets and liabilities
May 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Investments in securities at value
(identified cost $282,179,370) (Note 1) $294,024,150
Cash 229,821
Interest receivable 6,785,631
Unamortized organization expenses (Note 1) 1,285
Receivable for shares of the fund sold 686,951
Receivable for securities sold 1,025,213
Total assets 302,753,051
Liabilities
Payable for shares of the fund repurchased $ 677,959
Distributions payable to shareholders 433,450
Payable for compensation of Manager (Note 2) 296,017
Payable for administrative services (Note 2) 1,562
Payable for compensation of Trustees (Note
2) 212
Payable for investor servicing and custodian
fees (Note 2) 1,201
Payable for distribution fees (Note 2) 121,023
Payable for variation margin on futures
contracts 8,719
Other accrued expenses 52,356
Total liabilities 1,592,499
Net assets $301,160,552
Represented by
Paid-in capital (Notes 1 and 4) $300,090,590
Distributions in excess of net investment
income (Note 1) (18,267)
Accumulated net realized loss on investment
transactions (Note 1) (10,120,082)
Net unrealized appreciation of investments,
written options and futures contracts
(Notes 1 and 3) 11,208,311
Total--Representing net assets applicable to
capital shares outstanding $301,160,552
Computation of net asset value and offering price
Net asset value and redemption price of
class A shares ($242,568,828 divided by
27,009,966 shares) $8.98
Offering price per class A share (100/95.25
of $8.98)* $9.43
Net asset value and offering price of class
B shares ($58,590,691 divided by 6,530,449
shares)+ $8.97
Net asset value and redemption price of
class M shares($1,033 divided by 115
shares) $8.98
Offering price per share (100/96.75 of
$8.98)** $9.28
</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.
**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 charge.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of operations
Eleven months ended May 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Tax exempt interest income $17,853,607
Expenses:
Compensation of Manager (Note 2) 1,588,880
Investor servicing and custodian fees (Note 2) 211,127
Compensation of Trustees (Note 2) 10,151
Auditing 21,324
Legal 31,200
Reports to shareholders 45,095
Administrative services (Note 2) 5,133
Distribution fees--Class A (Note 2) 431,012
Distribution fees--Class B (Note 2) 394,057
Other expenses 67,083
Total expenses 2,805,062
Net investment income 15,048,545
Net realized loss on investments and options (Notes 1 and
3) (6,565,473)
Net realized loss on written options (Notes 1 and 3) (129,643)
Net realized loss on futures contracts (Note 1) (1,758,627)
Net unrealized appreciation of investments, written
options
and future contracts during the eleven months 15,717,027
Net gain on investment transactions 7,263,284
Net increase in net assets resulting from operations $22,311,829
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of changes in net assets
<TABLE>
<CAPTION>
Eleven months
ended Year ended
May 31 June 30
1995 1994
<S> <C> <C>
Increase in net assets
Operations:
Net investment income $ 15,048,545 $ 15,328,319
Net realized loss on investments, written
options and futures contracts (8,453,743) (38,889)
Net unrealized appreciation
(depreciation) of investments, written
options and futures contracts 15,717,027 (19,449,337)
Net increase (decrease) in net assets
resulting from operations 22,311,829 (4,159,907)
Distributions to shareholders from:
Net investment income
Class A (12,600,443) (13,734,969)
Class B (2,404,816) (1,545,308)
Net realized gain on investments:
Class A -- (2,166,642)
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) 2,601,270 64,287,614
Total increase in net assets 9,907,840 40,896,834
Net assets
Beginning of period 291,252,712 250,355,878
End of period (including undistributed
and distributions in excess of net
investment income of $21,490 and
$21,796 respectively) $301,160,552 $291,252,712
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Financial Highlights
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
For the period For the period
May 1, 1995 For the January 4, 1993
(commencement eleven months (commencement
of operations) to ended Year ended of operations) to
May 31, May 31 June 30 June 30
1995 1995+ 1994 1993
Class M Class B
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $8.74 $8.75 $9.46 $9.02
Investment operations
Net investment income .04 .41 .45 .21
Net realized and unrealized
gain (loss) on investments .28 .22 (.58) .43
Total from investment
operations .32 .63 (.13) .64
Less distributions:
From net investment income (.08) (.41) (.45) (.20)
Net realized gain on
investments -- (.02) --
In excess of realized gain on
investments -- -- (.11) --
Total distributions (.08) (.41) (.58) (.20)
Net asset value,
end of period $8.98 $8.97 $8.75 $9.46
Total investment return at
net asset value (%) (a) 3.21(b) 7.51(b) (1.59) 7.21(b)
Net assets, end of period
(in thousands) $ 1 $58,591 $44,916 $15,113
Ratio of expenses to average
net assets (%) .09(b) 1.46(b) 1.59 .77(b)
Ratio of net investment
income to average net
assets (%) .42(b) 4.72(b) 4.77 2.42(b)
Portfolio turnover (%) 51.86(b) 51.86(b) 51.74 44.58(b)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the period
For the February 20,
eleven 1990
months (commencement
ended of operations)
May 31 Year ended June 30 to June 30
1995+ 1994 1993 1992 1991 1990
Class A
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 8.75 $ 9.46 $ 8.97 $ 8.64 $ 8.50 $ 8.50
Investment operations
Net investment income .46 .51 .54 .59(c) .62(c) .22(c)
Net realized and unrealized
gain (loss) on investments .23 (.58) .58 .38 .13 .01
Total from investment
operations .69 (.07) 1.12 .97 .75 .23
Less distributions:
From net investment income (.46) (.51) (.55) (.60) (.61) (.23)
Net realized gain on
investments -- (.08) (.08) (.04) -- --
In excess of realized gain
on investments -- (.05) -- -- -- --
Total distributions (.46) (.64) (.63) (.64) (.61) (.23)
Net asset value, end of
period $8.98 $ 8.75 $9.46 $ 8.97 $ 8.64 $8.50
Total investment return at
net asset value (%) (a) 8.25(b) (.94) 13.02 11.52 9.17 2.71(b)
Net assets, end of period
(in thousands) $242,569 $246,336 $235,243 $159,658 $99,978 $34,588
Ratio of expenses to average
net assets (%) .87(b) .95 .92 .75(c) .66(c) .26(b)(c)
Ratio of net investment
income to average net
assets (%) 5.36(b) 5.43 5.90 6.69(c) 7.09(c) 3.06(b)(c)
Portfolio turnover (%) 51.86(b) 51.74 44.58 80.21 101.21 7.58(b)
</TABLE>
+ The fiscal year has been advanced from June 30 to May 31.
(a) Total Investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(b) Not annualized.
(c) Reflects a voluntary expenses 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
May 31, 1995
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 class A, class B and class M shares. The fund commenced its
public offering of class M shares on May 1, 1995, however, there were no
shares sold to non-affiliates as of May 31, 1995. 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. Class M shares are sold
with a maximum front-end sales charge of 3.25% and pay a distribution fee
that is higher than class A shares. In addition, the Trustees declare
separate dividends on each class of 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 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.
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 The fund may purchase and sell financial futures contracts to
hedge against changes in the values of tax-exempt municipal securities the
fund owns or expects to purchase.
A futures contract is an agreement between two parties to buy or sell units
of a particular index or a certain amount of a U.S. Government 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 securities equal to the minimum "initial margin"
requirements of the futures. 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
<PAGE>
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 futures
contracts primarily corresponds with the value of underlying instruments
which may not correspond to the change in value of the hedged instruments. In
addition, there is a risk that the fund may not be able to close out its
futures positions due to an illiquid secondary market.
D) Option accounting principles The fund may, to the extent consistent with
its investment objective and policies, seek to increase its current returns
by writing covered call and put options on securities it owns or in which it
may invest. When a fund writes a call or put option, an amount equal to the
premium received by the fund is included in the fund's "Statement of assets
and liabilities" as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of an option written. The current market value of an option is the last
sale price or, in the absence of a sale, the last offering price. If an
option expires on its stipulated expiration date, or if the fund enters into
a closing purchase transaction, the fund realizes a gain (or loss if the
closing purchase transaction exceeds the premium received when the option was
written) without regard to an unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written call option is exercised, the fund realizes a gain or loss from the
sale of the underlying security and the proceeds of the sale are increased by
the premium originally received. If a written put option is exercised, the
amount of the premium originally received reduces the cost of the security
that the fund purchases upon exercise of the option.
The risk in writing a call option is that the fund relinquishes the
opportunity to profit if the market price of the underlying security
increases and the option is exercised. In writing a put option, the fund
assumes the risk of incurring a loss if the market price of the underlying
security decreases and the option is exercised. In addition, there is the
risk the fund may not be able to enter into a closing transaction because of
an illiquid secondary market.
The fund may also, to the extent consistent with its investment objectives
and policies, buy put options to protect its portfolio holdings in an
underlying security against a decline in market value. The fund may buy call
options to hedge against an increase in the price of the securities that the
fund ultimately wants to buy. These funds may also buy and sell combinations
of put and call options on the same underlying security to earn additional
income. The premium paid by a fund for the purchase of a put or call option
is included in the fund's "Statement of assets and liabilities" as an
investment and is subsequently "marked-to-market" to reflect the current
market value of the option. If an option the fund has purchased expires on
the stipulated expiration date, the fund realizes a loss in the amount of the
cost of the option. If the fund enters into a closing sale transaction, the
fund realizes a gain or loss, depending on whether proceeds from the closing
sale transaction are greater or less than the cost of the option. If the fund
exercises a call option, the cost of securities acquired by exercising the
call is increased by the premium paid to buy the call. If the fund exercises
a put option, it realizes a gain or loss from the
<PAGE>
sale of the underlying security and the proceeds from such sale are decreased
by the premium originally paid. The risk associated with purchasing options
is limited to the premium originally paid.
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. 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. At May 31, 1995 the fund had a capital loss
carryover of approximately $2,871,609 which may be available to offset future
realized capital gains to the extent provided by regulations. This amount
will expire on May 31, 2003.
F) 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
eleven months ended May 31, 1995, the fund reclassified $39,757 to increase
distributions in excess of net investment income, $51,839 to increase paid-in
capital and $12,082 to decrease accumulated net realized loss.
G) 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. The premium in excess of the call price, if any, is
amortized to the call date; thereafter, the remaining excess premium is
amortized to maturity. Discount on zero-coupon bonds is accreted according to
the effective yield method.
H) 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: 0.60% of the first $500 million of average net assets, 0.50% of the
next $500 million, 0.45% of the next $500 million and 0.40% 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
<PAGE>
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.
Trustees of the fund receive an annual Trustee's fee of $780 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 being provided to the fund by Putnam Fiduciary Trust
Company (PFTC), a subsidiary of the Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
Investor servicing and custodian fees reported in the Statement of operations
for the eleven months ended May 31, 1995 have been reduced by credits allowed
by PFTC.
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 Trustees have approved payment by the fund at an
annual rate of 0.20%, 0.85% and 0.50% of the average net assets attributable
to class A, class B and class M shares respectively.
For the eleven months ended May 31, 1995, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $48,327 and $0 from the sale of
class A shares and class M shares, respectively, and $150,939 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
purchased as part of an investment of $1 million or more. For the eleven months
ended May 31, 1995, Putnam Mutual Funds Corp., acting as underwriter received
$2,864 on class A redemptions.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the eleven months ended May 31, 1995, purchases and sales of
investment securities other than short-term investments aggregated
$146,627,753 and $157,433,605 respectively. Purchases and sales of short-term
municipal obligations aggregated $6,300,000, and $10,900,000, respectively.
In determining the net gain or loss on securities sold, the cost of
securities has been determined on the identified cost basis.
Written options transactions during the period are summarized as follows:
<TABLE>
<CAPTION>
Contract Premiums
Amount Received
<S> <C> <C>
Options written 28,200,052 $630,036
Options closed 28,200,052 630,036
Written options
outstanding at end
of period 0 $ 0
</TABLE>
<PAGE>
NOTE 4
CAPITAL SHARES
At May 31, 1995 there was an unlimited number of shares of beneficial
interest authorized divided into three classes of shares, class A, class B and
class M capital shares. Class M shares became effective on May 1, 1995 and 115
shares were sold to Putnam Investments, Inc. for $1,000. Transactions in capital
shares were as follows:
<TABLE>
<CAPTION>
Eleven months ended May 31 Year ended June 30
1995 1994
Class A Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 3,583,766 $ 30,919,620 6,502,086 $ 60,620,771
Shares issued in
connection with
reinvestment of
distributions 815,266 7,017,119 1,019,504 9,472,472
4,399,032 37,936,739 7,521,590 70,093,243
Shares
repurchased (5,543,768) (47,448,932) (4,232,774) (38,876,147)
Net increase
(decrease) (1,144,736) $ (9,512,193) 3,288,816 $ 31,217,096
</TABLE>
<TABLE>
<CAPTION>
Eleven months ended May 31 Year ended June 30
1995 1994
Class B Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 2,071,094 $17,921,544 3,704,434 $34,534,469
Shares issued in
connection with
reinvestment of
distributions 163,594 1,407,101 129,718 1,197,579
2,234,688 19,328,645 3,834,152 35,732,048
Shares repurchased (839,933) (7,216,182) (296,170) (2,661,530)
Net increase 1,394,755 $12,112,463 3,537,982 $33,070,518
</TABLE>
<PAGE>
FEDERAL TAX INFORMATION
MAY 31, 1995
The fund has designated all income dividends paid 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.
The Form 1099 you receive in January 1996 will show the tax status of any
taxable distributions paid to your account in calendar 1995.
<PAGE>
Our commitment to quality service
> CHOOSE AWARD-WINNING SERVICE.
Putnam Investor Services has won the DALBAR Quality Tested Service Seal every
year since the award's 1990 inception. DALBAR, an independent research firm,
ran more than 10,000 tests of 38 shareholder service components. In every
category, Putnam outperformed the industry standard.
> HELP YOUR INVESTMENT GROW.
Set up a systematic program for investing with as little as $25 a month from
a Putnam money market fund or from your checking or savings account.*
> SWITCH FUNDS EASILY.
You can move money from one account to another with the same class of shares
without a service charge. (This privilege is subject to change or
termination.)
> ACCESS YOUR MONEY QUICKLY.
You can get checks sent regularly or redeem shares any business day at the
then-current net asset value, which may be more or less than the original
cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a helpful
Putnam representative.
> To make an additional investment in this or any other Putnam fund, contact
your financial advisor or call our toll-free number: 1-800-225-1581.
*Regular investing, of course, does not guarantee a profit or protect against
a loss in a declining market.
<PAGE>
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
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
James Erickson
Vice President
Triet M. Nguyen
Vice President
and Fund Manager
William N. Shiebler
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. For more information or to
request a prospectus, call toll-free: 1-800-225-1581.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any other
agency, and involve risk, including the possible loss of principal amount
invested.
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
19003-019/329
<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)
