Putnam
New Jersey
Tax Exempt
Income Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-98
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "We're at historical highs in terms of muni yields relative to
Treasuries. They represent an unprecedented bargain and
opportunity."
-- Money, December 1998
* "We have put a high priority on ensuring that your fund's income stream
remains competitive with other, more volatile funds with longer
maturities, but it is also our goal to minimize fluctuations in the value
of the portfolio."
-- Leslie J. Burke, manager
Putnam New Jersey Tax Exempt Income Fund
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
17 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The rush of foreign investors to the safety of U.S. Treasury bonds in
recent months has driven prices on these securities markedly higher.
Because of the inverse relationship of yields to prices, yields on 30-year
Treasuries have declined to virtually the same level as those on long-term
municipals. This near parity has made New Jersey tax-exempt bonds
unusually attractive for the state's tax-conscious investors.
During the first half of Putnam New Jersey Tax Exempt Income Fund's fiscal
1999, Fund Manager Leslie Burke focused closely on portfolio structure,
adjusting duration and credit quality in search of the highest current
income consistent with the fund's secondary emphasis on preservation of
capital.
In the following report from Leslie, you will find a detailed discussion
of this strategy and other aspects of the fund's performance during the
six months ended November 30, 1998. She also offers her views on prospects
for the remainder of fiscal 1999.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 20, 1999
Report from the Fund Manager
Leslie J. Burke
Putnam New Jersey Tax Exempt Income Fund's performance for the six months
ended November 30, 1998, reflected price and yield fluctuations at work
nationwide. After a turbulent autumn, the municipal bond market calmed
down and even outperformed the Treasury market slightly. Yields on
long-term municipal bonds declined this fall and are now almost the same
as the 30-year Treasury bond yield, which is extremely rare. Normally when
interest rates fall, a flurry of new borrowings boosts supply. However,
rates have been low for some time and most issuers have already funded
their projects, so the supply of new issues has slowed in most states.
Against this backdrop, your fund's diversification and structure helped it
to remain in good standing. For the first six months of its fiscal year,
class A shares generated a total return of 2.74% at net asset value
(-2.10% at public offering price). Performance for class B and class M
shares and results for other periods can be found beginning on page 9.
* IN LOWER-RATE ENVIRONMENT, INCOME IS MAJOR FOCUS
Although the economy as a whole is stronger as a result of the downtrend
in interest rates, it has become increasingly difficult for fixed-income
investors to sustain attractive levels of income. We have put a high
priority on ensuring that your fund's income stream remains competitive
with other, more volatile funds with longer maturities, but it is also our
goal to minimize fluctuations in the value of the portfolio. Long-term
bonds pay a higher coupon than shorter ones, but they are more volatile in
price. Consequently, we have maintained Putnam New Jersey Tax Exempt
Income Fund's maturity on the long side of intermediate (10 to 20 years)
- -- a moderately conservative position. To boost income, we have relied on
our extensive credit research department to identify undervalued issues
with higher return potential.
Credit analysts are often viewed as number crunchers. But Putnam's credit
research team goes further. The team members look carefully at each issue
and the overall industry in which the issuer operates -- transportation,
health care, pollution control, and so on -- often meeting with project
managers and potential end users. After their financial analysis is
complete, the credit analysts may work with underwriters to structure a
deal, negotiating bondholder covenants such as call features, the coupon
payment, and the security of the payment.
For example, Columbus Hospital is going through a difficult period, but
after carefully studying this project, our analysts concluded that the
problems are likely to be temporary. Meanwhile, with a 7.5% coupon, the
bonds issued to fund this project offer exceptional value in the
tax-exempt market. Other, similar deals that required hard work for our
analysts but appear to offer substantial potential include bonds issued by
Continental Airlines, Franciscan Oaks, and Fellowship Village. These
projects offered the portfolio an opportunity for tax-free income.
* INVESTING OUTSIDE NEW JERSEY OFFERS REWARDS
From time to time, tax-conscious New Jersey investors ask us why their
fund's portfolio includes New York and Puerto Rican bonds. The answer is
simply that these investments combine tax-free income with broader
diversification and superior total returns. If you study the portfolio
section, beginning on page 13 of this report, you will notice that the New
York bonds in your fund's portfolio are all Port Authority issues,
representing the port of New York and New Jersey, which are exempt from
both New York and New Jersey taxes.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Transportation 20.0%
Health care 17.7%
Water and sewerage 13.4%
Education 8.5%
Housing 6.0%
Footnote reads:
*Based on net assets as of 11/30/98. Holdings will vary over time.
Puerto Rico debt combines tax-free income with broader diversification and
superior total returns. Dividends of all U.S. territory and commonwealth
securities bonds -- including Puerto Rico, Guam, and the U.S. Virgin
Islands -- pass tax free to U.S. investors, attracting tax-sensitive
investors all over the country. These bonds are also among the highest
yielding of all municipal securities to compensate investors for their
sensitivity to changes in the U.S. economy. The island economies are
dominated by tourism and oil, which would both be vulnerable to any
slowdown in the United States.
We have used bond insurance, however, to nullify credit risk because our
interest in Puerto Rican bonds is based on opportunity as much as yield.
If you look at the portfolio listings, you will notice that some of the
issues have the initials MBIA, FGIC, or AMBAC after them. This represents
the insurance carried on these securities.
Between September 1997 and this past April, Puerto Rico issued a large
amount of debt to fund new projects, resulting in an abundance of supply.
We were active buyers. Over the summer, the supply of new issues
diminished, while demand remained strong. At that point, we began paring
down the fund's holdings in these securities, selling them at a profit. We
could not have foreseen the hurricane that hit the islands this summer,
but fortunately we had a security net in the insurance protecting the fund
from any drop in credit quality. Since the insurance feature stays with
the bond even when it is sold, we were able to continue to profit on the
sale of Puerto Rican bonds.
* PORTFOLIO STRUCTURE IS CRUCIAL IN UNCERTAIN INTEREST-RATE ENVIRONMENT
The squalls that have been buffeting the economy this year have made
projecting the direction of interest rates especially difficult. Since
relative price stability is an important part of your fund's investment
objective, we remain unwilling to accept the price risk that would be
associated with lengthening duration. Consequently, we have balanced the
fund between bonds selling at a discount, which offer upside price
potential in a rising market, and those trading at a premium, which act as
protection if bond prices turn down.
[GRAPHIC OMITTED: pie chart PORTFOLIO QUALITY OVERVIEW]
PORTFOLIO QUALITY OVERVIEW*
B 4.5%
Aaa/AAA 52.3%
Aa/AA 13.5%
A 7.9%
Baa/BBB 8.3%
Ba/BB 13.5%
Footnote reads:
*As a percentage of market value as of 11/30/98. A bond rated Baa or
higher is considered investment grade. All ratings reflect Moody's and
Standard & Poor's descriptions; percentages may include unrated bonds
considered by Putnam Management to be of comparable quality. Ratings will
vary over time.
To illustrate how this works, consider that a bond selling at 99 7/8 is
about to reach 100, its face amount on the date it is set to expire (also
called its par value). If the market rises, a bond trading near par will
not rise as much as one trading at a discount -- at $92, $93, or $94, for
example. If the market trends down, bonds trading at or near par offer
substantially less downside protection than those trading at a premium --
$104, $105, or $106, for example. By balancing the portfolio with discount
and premium bonds, our goal is to allow the fund to make the most of
upturns and minimize the impact of downturns.
* EVEN SLOW MARKET OFFERS OPPORTUNITIES FOR MUNICIPAL BOND INVESTORS
Typically at this time of year, the municipal markets slow down for the
holiday season. However, your fund is fully invested and has coupon
payments due in December and January. The fund was able to take advantage
of an increase in supply late in the calendar year, ahead of reinvestment
demand.
Looking ahead over the balance of the fund's fiscal year, we anticipate a
slow economy but a strong one, supported by the Federal Reserve Board and
consumers' willingness to spend. As of period's end, the Fed had cut
interest rates three times, sending a positive message to the world and to
Wall Street. Many problems still loom, especially in the international
markets, but the U.S. economy seems steady.
While we continue to believe it is in shareholders' best interest to
minimize the fund's sensitivity to changing interest rates, your fund's
industrial development bonds, high-coupon health care, and local general
obligations bonds should prove advantageous in a climate of slow, steady
economic growth.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 11/30/98, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
New Jersey Tax Exempt Income Fund is designed for investors seeking high
current income free from federal and state income taxes, consistent with
capital preservation.
TOTAL RETURN FOR PERIODS ENDED 11/30/98
Class A Class B Class M
(inception date) (2/20/90) (1/4/93) (5/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 2.74% -2.10% 2.51% -2.49% 2.58% -0.72%
- ------------------------------------------------------------------------------
1 year 6.14 1.10 5.56 0.56 5.93 2.49
- ------------------------------------------------------------------------------
5 years 30.97 24.75 26.81 24.82 29.26 25.03
Annual average 5.54 4.52 4.87 4.53 5.27 4.57
- ------------------------------------------------------------------------------
Life of fund 88.75 79.86 76.75 76.75 82.99 77.09
Annual average 7.51 6.92 6.71 6.71 7.13 6.73
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/98
Lehman Bros.
Municipal Bond Consumer
Index Price Index
- ------------------------------------------------------------------------------
6 months 3.84% 0.74%
- ------------------------------------------------------------------------------
1 year 7.77 1.55
- ------------------------------------------------------------------------------
5 years 37.81 12.48
Annual average 6.63 2.38
- ------------------------------------------------------------------------------
Life of fund 97.57 28.13
Annual average 8.09 2.87
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 4.75% and
3.25% respectively. Class B share returns for the 1-, 5-, and life-of-fund
periods reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declines to 1% in the sixth year, and is
eliminated thereafter. Returns shown for class B and class M shares for
periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the initial sales
charge or CDSC, if any, currently applicable to each class and in the
case of class B and class M shares, the higher operating expenses
applicable to such shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 11/30/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------------
Income $0.222 $0.192 $0.208
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Capital gains1 -- -- --
- ------------------------------------------------------------------------------
Total $0.222 $0.192 $0.208
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
5/31/98 $9.32 $9.78 $9.31 $9.33 $9.64
- ------------------------------------------------------------------------------
11/30/98 9.35 9.82 9.35 9.36 9.67
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate2 4.68% 4.45% 4.02% 4.38% 4.24%
- ------------------------------------------------------------------------------
Taxable equivalent3 8.28 7.87 7.11 7.75 7.50
- ------------------------------------------------------------------------------
Current 30-day SEC yield4 4.08 3.88 3.38 3.73 3.61
- ------------------------------------------------------------------------------
Taxable equivalent3 7.21 6.86 5.98 6.60 6.38
- ------------------------------------------------------------------------------
1Capital gains, if any, are taxable for federal and, in most cases, state
tax purposes. For some investors, investment income may also be subject to
the federal alternative minimum tax. Investment income may be subject to
state and local taxes.
2Income portion of most recent distribution, annualized and divided by NAV
or POP at end of period.
3Assumes maximum 43.45% combined federal and state tax rate. Results for
investors subject to lower tax rates would not be as advantageous.
4Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 12/31/98
(most recent calendar quarter)
Class A Class B Class M
(inception date) (2/20/90) (1/4/93) (5/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 2.87% -1.98% 2.53% -2.47% 2.71% -0.60%
- ------------------------------------------------------------------------------
1 year 4.90 -0.13 4.22 -0.78 4.59 1.22
- ------------------------------------------------------------------------------
5 years 28.84 22.74 24.76 22.79 26.97 22.83
Annual average 5.20 4.18 4.52 4.19 4.89 4.20
- ------------------------------------------------------------------------------
Life of fund 89.34 80.42 77.01 77.01 83.31 77.40
Annual average 7.47 6.89 6.66 6.66 7.08 6.68
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 4.75% maximum sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the
municipal bond market. The index does not take into account brokerage
commissions or other costs, may include bonds different from those in the
fund, and may pose different risks than the fund. Securities in the fund
do not match those in the indexes and performance of the fund will differ.
It is not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Quality Bond Fund [DAGGER]
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund**
Preferred Income Fund
Strategic Income Fund*
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
+ Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is neither insured nor guaranteed
by the U.S. government. These funds are managed to maintain a price of
$1.00 per share, although there is no assurance that this price will be
maintained in the future.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a
prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you invest
or send money.
<TABLE>
<CAPTION>
Portfolio of investments owned
November 30, 1998 (Unaudited)
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FHA Insd. -- Federal Housing Administration Insured
FSA -- Financial Security Assurance
G.O. Bonds -- General Obligation Bonds
IFB -- Inverse Floating Rate Bonds
MBIA -- Municipal Bond Investors Assurance Corporation
MUNICIPAL BONDS AND NOTES (99.0%) (a)
PRINCIPAL AMOUNT RATINGS (RAT) VALUE
<S> <C> <C> <C> <C>
New Jersey (79.1%)
- --------------------------------------------------------------------------------------------------------------------------
$ 1,000,000 Atlantic City, Muni. Utils. Auth. Wtr. Rev. Bonds,
7 3/4s, 5/1/17 A- $ 1,080,000
Atlantic Cnty. COP
2,000,000 FGIC, 7.4s, 3/1/10 Aaa 2,540,000
1,000,000 (Pub. Fac. Lease Agreement), FGIC, 7.4s, 3/1/09 Aaa 1,257,500
4,250,000 Camden Cnty., Impt. Auth. Rev. Bonds, 8.4s, 4/1/24
(acquired 4/12/94, cost $4,250,000) (RES) B/P 4,744,063
5,850,000 Camden Cnty., Muni. Util. Auth. Rev. Bonds,
FGIC, 6s, 7/15/07 Aaa 6,669,000
6,625,000 Camden Cnty., Muni. Util. Auth. Swr. Rev. Bonds,
FGIC, 6s, 7/15/08 Aaa 7,519,375
3,000,000 Jersey City, G.O. Bonds, Ser. A, AMBAC, 6s, 10/1/10 Aaa 3,461,250
1,700,000 Jersey City, Swr. Auth. Rev. Bonds, AMBAC,
6 1/4s, 1/1/14 Aaa 2,003,875
1,200,000 Middle Township, School Dist. Rev. Bonds, FGIC,
7s, 7/15/06 Aaa 1,428,000
2,000,000 Middlesex Cnty., Poll. Control Auth. Rev. Bonds,
6 7/8s, 12/1/22 BBB-/P 2,155,000
3,000,000 Middlesex Cnty., Utils. Auth. Swr. IFB, Ser. A, MBIA,
6 1/4s, 8/15/10 Aaa 3,551,250
2,105,000 NJ Econ. Dev. Auth. Elec. Energy Fac. Rev. Bonds
(Vineland Cogeneration L.P.), 7 7/8s, 6/1/19 BB+ 2,310,200
8,000,000 NJ Econ. Dev. Auth. Hlth. Care Fac. Rev. Bonds
(Ocean Nursing Pavilion), Ser. A, 7 3/8s, 12/1/25 BB/P 8,750,000
NJ Econ. Dev. Auth. Rev. Bonds
5,000,000 (Tevco Inc.), 8 1/8s, 10/1/09 BBB+/P 5,290,600
7,000,000 (1st Mtge.-Cranes Mill), Ser. A, 7 1/2s, 2/1/27 BB-/P 7,980,000
2,000,000 (Hartz Mountain Industries, Inc.), 7s, 2/1/14 A+ 2,182,500
2,725,000 (Lakewood School), Ser. R, 6.9s, 12/1/11 Aa3 2,936,188
1,500,000 (NJ Performing Arts Ctr.), 6 3/4s, 6/15/12 Aaa 1,642,500
1,895,000 (Urban Holding Co.), 6 1/2s, 6/1/15 A 2,093,975
1,550,000 (Burlington Coat Factory), 6 1/8s, 9/1/10 Aa3 1,701,125
4,000,000 (Franciscan Oaks), 5 3/4s, 10/1/23 BB/P 3,970,000
2,000,000 (Continental Airlines, Inc.), 5 1/2s, 4/1/28 Ba2 1,977,500
3,000,000 (Fellowship Village, Inc.), Ser. A, 5 1/2s, 1/1/25 BBB- 2,955,000
NJ Econ. Dev. Auth. Rev. Bonds
1,500,000 (NJ Performing Arts Ctr.), Ser. C, AMBAC,
5 1/2s, 6/15/13 Aaa 1,612,500
2,000,000 (EDL Testing Svc.), Ser. A, 4 3/4s, 5/15/25 Aaa 1,947,500
2,925,000 NJ Econ. Dev. Auth. Waste Paper Recycling
Rev. Bonds (Marcal Paper Mills Inc.),
8 1/2s, 2/1/10 BB/P 3,462,469
9,750,000 NJ Econ. Dev. Auth. Wtr. Facs. Rev. Bonds
(American Wtr. Co., Inc.), FGIC, 6 1/2s, 4/1/22 (SEG) Aaa 10,603,125
NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds
7,250,000 (St. Elizabeth Hosp.), Ser. B, 8 1/4s, 7/1/20 Aaa 7,920,625
8,500,000 (Kimball Med. Ctr.), Ser. C, 8s, 7/1/13 Baa3 9,254,375
1,000,000 (East Orange Gen. Hosp.), Ser. B, 7 3/4s, 7/1/20 BBB+ 1,058,750
5,395,000 (Columbus Hosp.), Ser. A, 7 1/2s, 7/1/21 Ba2 5,631,031
500,000 (Columbus Hosp.), Ser. A, 7 1/2s, 7/1/08 Ba2 523,125
9,000,000 (Raritan Bay Med. Ctr.), 7 1/4s, 7/1/27 B-/P 9,540,000
3,300,000 (Christ Hosp. Group), 7s, 7/1/06 AAA 3,914,625
5,000,000 (Gen. Hosp. Ctr.-Passaic Inc.), FSA, 6 3/4s, 7/1/19 Aaa 6,056,250
2,000,000 (AHS Hosp. Corp.), Ser. A, 6s, 7/1/07 Aaa 2,270,000
1,355,000 (Cathedral Hlth. Svcs.), FHA Insd., MBIA,
5 1/2s, 8/1/11 Aaa 1,492,194
4,065,000 NJ State G.O. Bonds, FGIC, 6s, 2/15/11 Aaa 4,684,913
3,000,000 NJ State Edl. Fac. Auth. Rev. Bonds (Princeton U.),
Ser. C, 6 3/8s, 7/1/22 Aaa 3,318,750
765,000 NJ State Hsg. & Mtge. Fin. Agcy. Rev. Bonds
(Home Buyer), Ser. D, MBIA, 7.7s, 10/1/29 AAA 789,885
3,000,000 NJ State Hsg. & Mtge. Fin. Agcy. Rev. IFB, Ser. I,
8.103s, 11/1/07 (acquired various dates from
2/11/93 to 6/14/93, cost $3,134,370) (RES) A+/P 3,382,500
NJ State Hwy. Auth. Gen. Rev. Bonds
(Garden State Pkwy.)
1,500,000 6.2s, 1/1/10 AA- 1,726,875
2,370,000 6s, 1/1/19 Aaa 2,719,575
1,800,000 NJ State Tpk. Auth. IFB, MBIA, 9.031s, 1/1/16
(acquired 03/27/92, cost $1,817,856) (RES) Aaa 2,542,500
NJ State Tpk. Auth. Rev. Bonds, Ser. C
6,000,000 MBIA, 6 1/2s, 1/1/16 Aaa 7,260,000
5,000,000 AMBAC, 6 1/2s, 1/1/08 Aaa 5,875,000
3,000,000 NJ State Trans. Trust Fund Auth. Rev. Bonds
(Trans. Syst.), Ser. A, MBIA, 6s, 12/15/06 Aaa 3,405,000
8,500,000 NJ Trans. Fund Auth. IFB (PA 345A), 9.597s,
6/15/11 (acquired 4/3/98, cost $11,581,250) (RES) AAA/P 11,857,500
NJ Wastewtr. Treatment Rev. Bonds
(Wastewtr. Treatment Trust)
6,670,000 Ser. C, 7s, 6/15/10 Aa2 8,262,463
2,955,000 Ser. B, 7s, 5/15/09 Aa2 3,605,100
7,000,000 NJ Wastewtr. Treatment Trust Rev. Bonds,
Ser. A, 9/1/07 Aaa 4,908,750
1,800,000 Passaic Valley, Cmnty. Wtr. Supply Rev. Bonds,
Ser. A., FGIC, 6.4s, 12/15/22 Aaa 2,011,500
7,500,000 Rutgers State U. Rev. Bonds, Ser. A, 6.4s, 5/1/13 AA 8,812,500
7,665,000 Salem Cnty., Indl. Poll. Ctrl. Fin. Auth. IFB, 8.1s, 8/1/30
(acquired 4/23/98, cost $9,149,864) (RES) Aaa 9,456,694
South River, School Dist. G.O. Bonds
1,300,000 FGIC, 5s, 12/1/12 Aaa 1,369,875
1,250,000 FGIC, 5s, 12/1/11 Aaa 1,321,875
1,250,000 FGIC, 5s, 12/1/10 Aaa 1,328,125
1,000,000 Stony Brook, Regional Swr. Rev. Bonds, Ser. B,
5.45s, 12/1/12 Aa 1,086,250
8,695,000 U. of Medicine & Dentistry Rev. Bond, Ser. E, MBIA,
6 1/2s, 12/1/12 Aaa 10,499,213
3,400,000 Union Cnty., Indl. Poll. Ctrl. Fin. Auth. Rev. Bonds
(American Cynamid Co.), 5.8s, 9/1/09 A3 3,731,500
3,200,000 Union Cnty., Utilils. Auth. Rev. Bonds
(Ogden Martin Sys.), Ser. A, 5s, 6/1/23 AAA 3,176,000
--------------
252,617,813
New York (9.3%)
- --------------------------------------------------------------------------------------------------------------------------
NY & NJ Port Auth. Rev. Bonds
3,000,000 (Delta Airlines, Inc.), Ser. 1R, 6.95s, 6/1/08 Baa3 3,273,750
5,000,000 (Kennedy Intl. Arpt.), 6 3/4s, 10/1/19 BB/P 5,593,750
2,075,000 6 3/4s, 10/1/11 BB/P 2,329,188
Port Auth. NY & NJ Cons. IFB
2,100,000 8.716s, 11/15/15 (acquired 02/09/94,
cost $2,107,875) (RES) A+/P 2,236,500
1,500,000 5.2s, 11/15/15 A+/P 1,522,500
5,000,000 Port Auth. NY & NJ Cons. Rev. IFB, 9.513s, 8/1/26
(acquired various dates from 8/29/91 to 1/21/92,
cost $5,164,940) (RES) AA- 5,737,500
7,500,000 Port Auth. NY & NJ Cons. Rev. Bonds, Ser. 93rd,
6 1/8s, 6/1/94 AA- 8,850,000
--------------
29,543,188
Puerto Rico (10.6%)
- --------------------------------------------------------------------------------------------------------------------------
Cmnwlth. of PR, G.O. Bonds
3,000,000 MBIA, 6 1/4s, 7/1/08 Aaa 3,502,500
2,000,000 5s, 7/1/27 A 1,972,500
4,000,000 Cmnwlth. of PR, Pub. Impt. G.O. Bonds, 6.8s, 7/1/21 AAA 4,470,000
5,665,000 Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds,
6 1/4s, 7/1/12 A 6,620,969
3,830,000 Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds,
Ser. GG, FSA, 4 3/4s, 7/1/21 AAA 3,762,975
1,500,000 Cmnwlth. of PR, Hwy. Auth. Rev. Bonds, Ser. Q,
7 3/4s, 7/1/16 AAA 1,629,375
1,000,000 Cmnwlth. of PR, Hwy. Trans. Auth. Rev. Bonds,
Ser. W, MBIA, 5 1/2s, 7/1/15 Aaa 1,098,750
PR Elec. Pwr. Auth. Rev. Bonds
2,000,000 10.15s, 7/1/07 (acquired 10/30/97,
cost $2,765,000) (RES) AAA/P 2,870,000
1,375,000 Ser. S, MBIA, 6 1/8s, 7/1/08 Aaa 1,593,281
2,000,000 PR Indl. Med. & Env. Poll. Control Fac. Fin. Auth.
Rev. Bonds (Special Facilities-American Airlines),
Ser. A, 6.45s, 12/1/25 Baa1 2,192,500
3,750,000 PR Pub. Bldg. Auth. Rev. Bonds, Ser. K, 6 7/8s, 7/1/21 Aaa 4,200,000
--------------
33,912,850
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $293,323,156) (b) $ 316,073,851
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $319,311,015.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
November 30, 1998 for the securities listed. Ratings are generally ascribed to securities at the time of issuance.
While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings
do not necessarily represent what the agencies would ascribe to these securities at November 30, 1998. Securities
rated by Putnam are indicated by "/P" and are not publicly rated.
(b) The aggregate identified cost on a tax basis is $293,323,156, resulting in gross unrealized appreciation and
depreciation of $22,975,399 and $224,704, respectively, or net unrealized appreciation of $22,750,695.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities
held at November 30, 1998 was $42,827,257 or 13.4% of net assets.
(SEG) A portion of this security was pledged and segregated with the custodian to cover margin requirements for
futures contracts at November 30, 1998.
The rates shown on IFB, which are securities paying interest rates that vary inversely to changes in the
market interest rates are the current interest rates at November 30, 1998.
The fund had the following industry group concentrations greater than 10% at November 30, 1998 (as a
percentage of net assets):
Transportation 20.0%
Health care 17.7
Water and sewer 13.4
The fund had the following insurance concentrations greater than 10% at November 30, 1998 (as a percentage of
net assets):
FGIC 12.8%
MBIA 11.2
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1998 (Unaudited)
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bond Index
(Short) $ 4,552,875 $ 4,558,411 Dec-98 $ 5,536
Municipal Bond Index
(Short) 1,260,938 1,258,691 Mar-99 (2,247)
U.S. Treasury Bond
(Short) 11,556,094 11,280,811 Dec-98 (275,283)
U.S. Treasury Bond 20 yr.
(Short) 2,203,094 2,199,832 Mar-99 (3,262)
- -------------------------------------------------------------------------------
$(275,256)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1998 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $293,323,156) (Note 1) $316,073,851
- -----------------------------------------------------------------------------------------------
Interest and other receivables 6,582,617
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 192,039
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 125,000
- -----------------------------------------------------------------------------------------------
Total assets 322,973,507
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for variation margin 165,947
- -----------------------------------------------------------------------------------------------
Payable to subcustodian 2,246,432
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 317,352
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 225,917
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 476,295
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 48,366
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 9,668
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,045
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 143,502
- -----------------------------------------------------------------------------------------------
Other accrued expenses 27,968
- -----------------------------------------------------------------------------------------------
Total liabilities 3,662,492
- -----------------------------------------------------------------------------------------------
Net assets $319,311,015
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $305,343,614
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (76,356)
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (8,431,682)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 22,475,439
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $319,311,015
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($217,684,848 divided by 23,269,899 shares) $9.35
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.35)* $9.82
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($100,721,958 divided by 10,776,273 shares)** $9.35
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($904,209 divided by 96,641shares) $9.36
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.36)*** $9.67
- -----------------------------------------------------------------------------------------------
* 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.
*** 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.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended November 30, 1998 (Unaudited)
<S> <C>
Tax exempt interest income: $ 9,067,508
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 951,506
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 206,395
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 4,986
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,118
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 218,130
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 417,661
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,896
- -----------------------------------------------------------------------------------------------
Reports to shareholders 7,440
- -----------------------------------------------------------------------------------------------
Registration fees 75
- -----------------------------------------------------------------------------------------------
Auditing 13,911
- -----------------------------------------------------------------------------------------------
Legal 1,589
- -----------------------------------------------------------------------------------------------
Postage 21,245
- -----------------------------------------------------------------------------------------------
Other 17,173
- -----------------------------------------------------------------------------------------------
Total expenses 1,865,125
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,144)
- -----------------------------------------------------------------------------------------------
Net expenses 1,863,981
- -----------------------------------------------------------------------------------------------
Net investment income 7,203,527
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 98,905
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (1,843,263)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
futures contracts during the period 2,888,837
- -----------------------------------------------------------------------------------------------
Net gain on investments 1,144,479
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $8,348,006
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
November 30 May 31
1998* 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 7,203,527 $ 14,650,378
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments (1,744,358) (167,449)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 2,888,837 10,720,753
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 8,348,006 25,203,682
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (5,181,579) (10,966,516)
- ---------------------------------------------------------------------------------------------------------------
Class B (2,012,777) (3,781,411)
- ---------------------------------------------------------------------------------------------------------------
Class M (16,851) (28,287)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) 3,878,851 (7,272,377)
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 5,015,650 3,155,091
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 314,295,365 311,140,274
- ---------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $76,356 and
$68,676, respectively) $319,311,015 $314,295,365
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months Eleven
ended months Year
Per-share November 30 ended ended
operating performance (Unaudited) Year ended May 31 May 31 June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995++ 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.32 $9.02 $8.76 $8.98 $8.75 $9.46
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .22(c) .45 .47 .48 .46 .51
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .03 .30 .26 (.22) .23 (.58)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .25 .75 .73 .26 .69 (.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.22) (.45) (.47) (.48) (.46) (.51)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- -- (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of realized
gain on investments -- -- -- -- -- (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.22) (.45) (.47) (.48) (.46) (.64)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.35 $9.32 $9.02 $8.76 $8.98 $8.75
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.74* 8.48 8.57 2.92 8.25* (0.94)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $217,685 $218,312 $228,361 $227,940 $242,569 $246,336
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .49* .96 .96 .96 .87* .95
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.38* 4.84 5.28 5.36 5.36* 5.43
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 3.19* 29.03 27.14 52.82 51.86* 51.74
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ 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) The ratio of expenses to average net assets for the year ended May 31, 1996 and thereafter, includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months Eleven
ended months Year
Per-share November 30 ended ended
operating performance (Unaudited) Year ended May 31 May 31 June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995++ 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.31 $9.01 $8.75 $8.97 $8.75 $9.46
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .19 .39 .41 .42 .41 .45
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .04 .30 .27 (.22) .22 (.58)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .23 .69 .68 .20 .63 (.13)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.19) (.39) (.42) (.42) (.41) (.45)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- -- (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of realized
gain on investments -- -- -- -- -- (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.19) (.39) (.42) (.42) (.41) (.58)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.35 $9.31 $9.01 $8.75 $8.97 $8.75
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.51* 7.78 7.87 2.25 7.51* (1.59)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $100,722 $95,315 $82,407 $72,083 $58,591 $44,916
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .82* 1.61 1.61 1.61 1.46* 1.59
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.05* 4.18 4.63 4.69 4.72* 4.77
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 3.19* 29.03 27.14 52.82 51.86* 51.74
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ 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) The ratio of expenses to average net assets for the year ended May 31, 1996 and thereafter, includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share November 30 May 1, 1995+
operating performance (Unaudited) Year ended May 31 to May 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995++
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.33 $9.02 $8.76 $8.98 $8.74
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .21 .42 .45(c) .45 .04
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .03 .31 .26 (.21) .28
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .24 .73 .71 .24 .32
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) (.42) (.45) (.46) (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of realized
gain on investments -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.21) (.42) (.45) (.46) (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.36 $9.33 $9.02 $8.76 $8.98
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.58* 8.28 8.25 2.65 3.21*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $904 $668 $372 $355 $1
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .64* 1.26 1.26 1.24 .09*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.23* 4.48 4.95 4.92 .42*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 3.19* 29.03 27.14 52.82 51.86*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ 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) The ratio of expenses to average net assets for the year ended May 31, 1996 and thereafter, includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
Notes to financial statements
November 30, 1998 (Unaudited)
Note 1
Significant accounting policies
Putnam New Jersey Tax Exempt Income (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 Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc. believes is
consistent with preservation of capital by investing primarily in a
portfolio of longer-term New Jersey tax exempt securities.
The fund offers class A, class B, and class M shares. Class A shares are
sold with a maximum front-end sales charge of 4.75%. Class B shares, which
convert to class A shares after approximately eight years, do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than
class A shares, and are subject to a contingent deferred sales charge, if
those shares are redeemed within six years of purchase. Class M shares are
sold with a maximum front-end sales charge of 3.25% and pay an ongoing
distribution fee that is lower than class B shares and higher than class A
shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
A) Security valuation Tax-exempt bonds and notes are stated on the basis
of valuations provided by a pricing service, approved by the Trustees,
which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and
various relationships between securities in determining value.
B) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Interest income is recorded on the accrual basis.
C) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on securities
it owns or in which it may invest to increase its current returns. The
potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of
the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to
perform. When the contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices supplied
by dealers.
D) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended November 30, 1998, the fund had no borrowings against the line of
credit.
E) Federal taxes It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
It is also the intention of the fund to distribute an amount sufficient to
avoid imposition of any excise tax under Section 4982 of the Internal
Revenue Code of 1986, as amended. Therefore, no provision has been made
for federal taxes on income, capital gains or unrealized appreciation on
securities held nor for excise tax on income and capital gains.
At May 31, 1998, the fund had a capital loss carryover of approximately
$3,768,000 available to offset future capital gains, if any. The amount of
the carryover and the expiration dates are:
Loss Carryover Expiration
--------------- ----------------
$ 284,000 May 31, 2003
$3,484,000 May 31, 2004
F) Distributions to shareholders Income dividends are recorded daily by
the fund and are distributed monthly. Capital gain distributions if any,
are recorded on the ex-dividend date and paid at least annually. The
amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences include temporary and
permanent differences of unrealized gains and losses on certain futures
contracts, market discount, and current year straddles. Reclassifications
are made to the fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under
income tax regulations.
G) Amortization of bond premium and accretion of bond discount Any premium
resulting from the purchase of securities in excess of maturity value is
amortized on a yield-to-maturity basis. Discounts on zero coupon bonds and
original issue discount bonds are accreted according to the
yield-to-maturity basis.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.60% of the first $500
million of average net assets, 0.50% of the next $500 million, 0.45% of
the next $500 million, 0.40% of the next $5 billion, 0.375% of the next $5
billion, 0.355% of the next $5 billion, 0.34% of the next $5 billion and
0.33% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended November 30, 1998, fund expenses were reduced by
$1,144 under expense offset arrangements with PFTC.
Investor servicing and custodian fees reported in the Statement of
operations exclude these credits. The fund could have invested a portion
of the assets utilized in connection with the expense offset arrangements
in an income producing asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $400 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution in
accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing
shares of the fund. The Plans provide for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the
average net assets attributable to class A, class B and class M shares,
respectively. The Trustees currently limit payment by the fund to an
annual rate of 0.20%, 0.85% and 0.50% of the average net assets
attributable to class A, class B and class M shares respectively.
For the six months ended November 30, 1998, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $19,470 and $1,866 from
the sale of class A and class M shares, respectively and $70,828 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the six months ended November 30, 1998, Putnam Mutual
Funds Corp., acting as underwriter received $171 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended November 30, 1998, purchases and sales of
investment securities other than short-term investments aggregated
$14,407,183 and $9,982,775, respectively. There were no purchases and
sales of U.S. government obligations. In determining the net gain or loss
on securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At November 30, 1998, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
November 30, 1998
- -------------------------------------------------------------------------
Class A Shares Amount
- -------------------------------------------------------------------------
Shares sold 1,159,345 $ 10,824,879
- -------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 317,148 2,963,431
- -------------------------------------------------------------------------
1,476,493 13,788,310
Shares
repurchased (1,629,035) (15,213,734)
- -------------------------------------------------------------------------
Net decrease (152,542) $ (1,425,424)
- -------------------------------------------------------------------------
Year ended
May 31, 1998
- -------------------------------------------------------------------------
Class A Shares Amount
- -------------------------------------------------------------------------
Shares sold 3,181,106 $ 29,288,985
- -------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 661,801 6,125,121
- -------------------------------------------------------------------------
3,842,907 35,414,106
Shares
repurchased (5,748,224) (53,010,798)
- -------------------------------------------------------------------------
Net decrease (1,905,317) $(17,596,692)
- -------------------------------------------------------------------------
Six months ended
November 30, 1998
- -------------------------------------------------------------------------
Class B Shares Amount
- -------------------------------------------------------------------------
Shares sold 1,124,396 $10,496,104
- -------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 132,418 1,235,993
- -------------------------------------------------------------------------
1,256,814 11,732,097
Shares
repurchased (713,979) (6,660,066)
- -------------------------------------------------------------------------
Net increase 542,835 $ 5,072,031
- -------------------------------------------------------------------------
Year ended
May 31, 1998
- -------------------------------------------------------------------------
Class B Shares Amount
- -------------------------------------------------------------------------
Shares sold 2,345,444 $21,689,342
- -------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 244,904 2,265,279
- -------------------------------------------------------------------------
2,590,348 23,954,621
Shares
repurchased (1,504,576) (13,907,312)
- -------------------------------------------------------------------------
Net increase 1,085,772 $10,047,309
- -------------------------------------------------------------------------
Six months ended
November 30, 1998
- -------------------------------------------------------------------------
Class M Shares Amount
- -------------------------------------------------------------------------
Shares sold 35,500 $ 331,187
- -------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,096 10,242
- -------------------------------------------------------------------------
36,596 341,429
Shares
repurchased (11,615) (109,185)
- -------------------------------------------------------------------------
Net increase 24,981 $ 232,244
- -------------------------------------------------------------------------
Year ended
May 31, 1998
- -------------------------------------------------------------------------
Class M Shares Amount
- -------------------------------------------------------------------------
Shares sold 44,476 $ 409,490
- -------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,145 19,859
- -------------------------------------------------------------------------
46,621 429,349
Shares
repurchased (16,246) (152,343)
- -------------------------------------------------------------------------
Net increase 30,375 $ 277,006
- -------------------------------------------------------------------------
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Jerry J. Jacobs
Vice President
Blake E. Anderson
Vice President
Leslie J. Burke
Vice President and Fund Manager
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam 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. You can also learn more at Putnam Investments' website:
http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
www.putnaminv.com
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
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SA050 48659 019/329/537 1/99
