Putnam
New Jersey
Tax Exempt
Income Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
5-31-00
[SCALE LOGO OMITTED]
From the Trustees
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years in which
Putnam has experienced tremendous growth and transformed itself from a
respected U.S. investment management firm to a financial institution
with a global presence.
As the organization makes its way into the new century, we are certain
that the changes that lie ahead will be even more breathtaking in their
scope. What will not change is the Trustees' dedication to serving the
best interests of our shareholders.
We embark upon this new era of Putnam's rich heritage with confidence
and we look forward to the opportunity of continuing to help you meet
your financial objectives for many years to come.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
July 19, 2000
REPORT FROM THE FUND MANAGER
Susan A. McCormack
Compared with the stock market's roller coaster ride in recent months,
the municipal market has offered relatively calm waters for
tax-conscious investors. At the same time, New Jersey's robust
service-based economy has continued to provide a solid backdrop for
municipal investors. Unfortunately steady interest-rate increases
throughout the annual period have put a damper on municipal performance.
Municipal bond funds such as yours had also to contend with a limited
securities supply and cash outflows as the stock market's attractive
returns lured away some municipal investors. Putnam New Jersey Tax
Exempt Income Fund has met these challenges with solid income-generating
strategies and prudent total return management designed to position it
well for what lies ahead.
Total return for 12 months ended 5/31/00
Class A Class B Class M
NAV POP NAV CDSC NAV POP
-----------------------------------------------------
-2.32% -7.00% -2.97% -7.59% -2.73% -5.92%
-----------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 6.
* MUNIS RETAIN VALUE AS TREASURIES STUMBLE AND STOCKS SELL OFF
When the stock market first began to exhibit weakness in early April,
fixed-income investments enjoyed a bump up in price as nervous investors
flocked to bonds. The rise was short lived, however, as inflation
concerns and fears of continued interest-rate increases by the Federal
Reserve Board pushed down prices throughout the fixed-income market. The
good news is that municipal bond prices held up better than most -- and
these bonds continue to offer solid opportunity for investors with tax
considerations.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Transportation 23.6%
Health care 21.4%
Water and sewer 16.0%
Utilities 9.9%
Education 8.3%
Footnote reads:
*Based on net assets as of 5/31/00. Holdings will vary over time.
Against the backdrop of falling Treasury prices and general investor
apathy toward bonds, municipal bonds retained more of their value. In
fact, after wavering from a year of steady interest-rate increases, the
municipal bond market may slowly be approaching the point at which the
news gets better. It may not always seem like a positive thing, but a
responsible Fed that proactively seeks to contain inflation is good news
for bond investors. True, Fed policy and rising interest rates have been
the main reason for the choppy municipal bond market this year, but if
you look closely, you will notice that municipal bond yields are really
not much higher and bond prices have not gone much lower than they were
in October 1999. Rather, it is the short-term Treasury rates and
mortgage interest rates that have seen the greatest volatility.
It is difficult to know exactly when the economy will slow
significantly and interest rates will begin to fall, but we do know that
the signs are there: At the close of the period, 30-year mortgage
interest rates were close to 9%, corporate bond rates were approaching
9%, and the Nasdaq was experiencing problems. These could be indicators
of a weakening economy, a slowdown in consumer spending, and lower
interest rates.
* FUND SEEKS HIGHER INCOME AMID WIDENING CREDIT SPREADS
Your fund has continued to provide a high level of tax-exempt income
throughout the fiscal year. Total return performance suffered somewhat,
however, as credit spreads between investment-quality municipal bonds
and higher-yielding issues widened over the past several months. This
widening put price pressure on interest-rate sensitive sectors of the
market such as airlines and hospitals, which are well represented in
the fund's portfolio.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
A 12.3%
AA/Aa 12.8%
AAA/Aaa 50.7%
B 6.9%
BB/Ba 9.2%
BBB/Baa 7.3%
VMIG1 0.8%
Footnote reads:
*As a percentage of market value as of 5/31/00. A bond rated BBB/Baa or
higher is considered investment grade. Percentages may include unrated bonds
considered by Putnam Management to be of comparable quality. Ratings will
vary over time.
Gradually extending the portfolio's duration was one effective way we
kept income strong. As weakness in the bond market persisted, we took
advantage of falling bond prices by adding some bonds with higher yields
and longer maturities, and simultaneously selling bonds in the
intermediate-maturity range. Putnam has an experienced team of credit
analysts who add a great deal of value to the fund by enabling us to
consider even those bonds that are unrated by the major rating agencies.
Their expertise allows us to purchase securities whose current ratings
may not accurately reflect their performance potential as well as to
purchase undervalued securities, with a higher degree of confidence.
For investors in the highest combined U.S. and New Jersey tax bracket,
the fund's 30-day SEC yield of 5.12% for class A shares at POP was
equivalent to a 9.05% yield from a taxable investment.
See pages 6 and 7 for complete performance information.
During the recent period, we took advantage of recession-like credit
spreads to purchase some BBB/Baa-rated bonds. At the start of the fiscal
period, a BBB-rated bond yielded about a half percentage point more than
a AAA-rated bond, but now we are seeing a three-quarter point difference
between the two bonds, an extremely attractive difference that, in our
view, compensates investors for the slightly higher risk inherent in a
BBB-rated bond. One noteworthy purchase we made in December involved
bonds issued by Trinitas Hospital in Elizabeth. These bonds, rated BBB
by Standard & Poor's, were issued to refinance the old debt of Elizabeth
General Hospital when it merged with St. Elizabeth Hospital to form
Trinitas.
Fiscal policy? Monetary policy?
Fiscal policy refers to the federal government's use of spending and
taxation to control the economy. If the government raises taxes, people
will have less money to spend, therefore reducing demand. If the
government lowers taxes, people will be more inclined to spend money.
The government can also spend money to influence demand.
Monetary policy attempts to influence the economy by controlling the
money supply. Monetary policy is normally carried out by a central bank.
The U.S. central bank is the Federal Reserve Bank. Monetary policy can
influence the economy by altering interest rates.
By reducing the supply of money, monetary policy can raise interest
rates and discourage lending. Decreased lending results in less
investment and less production. Right now, the Fed is implementing
tighter monetary policy. Bond funds, including municipal bonds, are not
performing well. This is because of the inverse relationship of interest
rates and bond prices. Treasury bonds take the brunt of the impact when
interest rates rise, while municipal bonds (attracting only domestic
investors) are somewhat insulated but by no means exempt. Rising
interest rates also affect the supply of municipal bonds because cities
and towns do not want to float new bonds or refund outstanding bonds
when interest rates are rising.
(First two paragraphs adapted from The Importance of Independence by
David W. Gallivan.)
As long-time shareholders of the fund know, we often purchase bonds from
the Commonwealth of Puerto Rico. With the supply of New Jersey issues
remaining so low over the past year, we have used Puerto Rican bonds to
help diversify the fund's assets. At the end of the period, we took
advantage of an excellent buying opportunity for some bonds rated Baa2
by Moody's and issued by the Puerto Rico Industrial, Tourist,
Educational, Medical, and Environmental Control Facilities. The bonds
were issued to finance construction of a coal-fired power plant that
will help ease the island's power shortage.
* POSITIONING FUND FOR WHAT LIES AHEAD
One of our goals in the past year, as rising interest rates caused bond
prices to decline, has been to create tax swaps. We have been realizing
capital losses by selling some securities purchased in previous years
when interest rates were lower. Then we have invested the proceeds in
higher yielding issues with comparable characteristics. The losses the
fund realizes on the sale of old securities will be available to offset
any future capital gains the fund may realize, which would otherwise be
taxable to shareholders. (Only the net investment income your fund earns
is tax exempt.) During the recent period, we used this strategy to swap
some Puerto Rico Electric Power Authority bonds for Puerto Rico general
obligation bonds.
Although the fund's overweight position in higher-yielding lower-rated
bonds hurt performance when credit spreads widened so dramatically in
December and January, we continue to believe in the value of these
issues and in the performance potential of every bond in the portfolio.
Signs that the economy may slow are now emerging. Once the change takes
hold and interest rates begin to drop, investors seeking higher yields
will push up demand for the kind of bonds that form the backbone of this
portfolio. These higher-yielding bonds should then be poised for solid
price appreciation.
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 5/31/00, 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 New Jersey state income taxes,
consistent with capital preservation.
TOTAL RETURN FOR PERIODS ENDED 5/31/00
Class A Class B Class M
(inception dates) (2/20/90) (1/4/93) (5/1/95)
NAV POP NAV CDSC NAV POP
-----------------------------------------------------------------------
1 year -2.32% -7.00% -2.97% -7.59% -2.73% -5.92%
-----------------------------------------------------------------------
5 years 22.01 16.19 18.10 16.22 20.09 16.21
Annual average 4.06 3.05 3.38 3.05 3.73 3.05
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10 years 81.81 73.22 68.77 68.77 75.48 69.79
Annual average 6.16 5.65 5.37 5.37 5.78 5.44
-----------------------------------------------------------------------
Life of fund 84.94 76.22 71.29 71.29 78.08 72.33
Annual average 6.16 5.67 5.37 5.37 5.77 5.44
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 5/31/00
Lehman Brothers Municipal Consumer
Bond Index price index
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1 year -0.86% 3.07%
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5 years 28.55 12.55
Annual average 5.15 2.39
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10 years 94.58 32.59
Annual average 6.88 2.86
-----------------------------------------------------------------------
Life of fund 97.45 33.83
Annual average 6.86 2.88
-----------------------------------------------------------------------
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 10-year
(where available) 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.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 5/31/90
Lehman Brothers
Fund's class A Municipal Bond Consumer price
Date shares at POP Index index
5/31/90 9,527 10,000 10,000
5/31/91 10,516 11,008 10,495
5/31/92 11,511 12,089 10,813
5/31/93 12,970 13,535 11,161
5/31/94 13,173 13,869 11,416
5/31/95 14,197 15,137 11,780
5/31/96 14,612 15,828 12,121
5/31/97 15,842 17,141 12,392
5/31/98 17,209 18,750 12,601
5/31/99 17,734 19,627 12,864
5/31/00 $17,322 $19,458 $13,259
Footnote reads:
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B shares
would have been valued at $16,877 and no contingent deferred sales
charges would apply; a $10,000 investment in the fund's class M shares
would have been valued at $17,548 ($16,979 at public offering price).
See first page of performance section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 5/31/00
Class A Class B Class M
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Distributions (number) 12 12 12
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Income $0.466648 $0.409522 $0.440100
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Capital gains1 -- -- --
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Total $0.466648 $0.409522 $0.440100
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Share value: NAV POP NAV NAV POP
-----------------------------------------------------------------------
5/31/99 $9.15 $9.61 $9.14 $9.15 $9.46
-----------------------------------------------------------------------
5/31/00 8.47 8.89 8.46 8.46 8.74
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Current return (end of period)
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Current dividend rate2 5.42% 5.17% 4.77% 5.12% 4.96%
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Taxable equivalent3 9.58 9.14 8.44 9.05 8.77
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Current 30-day SEC yield4 5.38 5.12 4.73 5.07 4.91
-----------------------------------------------------------------------
Taxable equivalent3 9.51 9.05 8.36 8.97 8.68
-----------------------------------------------------------------------
1 Capital gains, if any, are taxable for federal and, in most cases,
state tax purposes. For some investors, investment income may also be
subject to the federal alternative minimum tax. Investment income may be
subject to state and local taxes.
2 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
3 Assumes maximum 43.45% combined federal and New Jersey state tax
rate. Results for investors subject to lower tax rates would not be as
advantageous.
4 Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 6/30/00 (most recent calendar quarter)
Class A Class B Class M
(inception dates) (2/20/90) (1/4/93) (5/1/95)
NAV POP NAV CDSC NAV POP
-----------------------------------------------------------------------
1 year 1.64% -3.22% 1.11% -3.72% 1.34% -1.94%
-----------------------------------------------------------------------
5 years 26.53 20.53 22.65 20.69 24.68 20.58
Annual average 4.82 3.81 4.17 3.83 4.51 3.81
-----------------------------------------------------------------------
10 years 84.42 75.74 71.36 71.36 78.20 72.44
Annual average 6.31 5.80 5.53 5.53 5.95 5.60
-----------------------------------------------------------------------
Life of fund 89.44 80.52 75.61 75.61 82.60 76.71
Annual average 6.36 5.87 5.59 5.59 5.98 5.65
-----------------------------------------------------------------------
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. See first
page of performance section for performance calculation method.
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 assumes reinvestment of all
distributions and interest payments and does not take into account
brokerage fees or taxes. Securities in the fund do not match those in
the index 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.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
For the fiscal year ended May 31, 2000
To the Trustees and Shareholders of
Putnam New Jersey Tax Exempt Income Fund
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio (except for bond ratings), and the
related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the
financial position of Putnam New Jersey Tax Exempt Income Fund (the
"fund") at May 31, 2000, and the results of its operations, the changes
in its net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted
in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States, which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
investments owned at May 31, 2000 by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 7, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
May 31, 2000
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
VRDN -- Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (98.5%) (a)
PRINCIPAL AMOUNT RATING (RAT) VALUE
<S> <C> <C> <C>
Guam (0.5%)
-------------------------------------------------------------------------------------------------------------------
$ 1,500,000 Guam, Pwr. Auth. Rev. Bonds, Ser. A, MBIA,
5 1/8s, 10/1/29 AAA $ 1,314,375
New Jersey (73.4%)
-------------------------------------------------------------------------------------------------------------------
Atlantic Cnty., COP, FGIC
2,000,000 7.4s, 3/1/10 Aaa 2,300,000
1,000,000 (Pub. Fac. Lease Agreement), 7.4s, 3/1/09 Aaa 1,138,750
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 4,319,063
6,625,000 Camden Cnty., Muni. Util. Auth. Swr. Rev. Bonds,
FGIC, 6s, 7/15/08 Aaa 6,914,844
6,010,000 Essex Cnty., Impt. Auth. Lease Rev. Bonds
(Cnty. Correctional Fac.), FGIC, 5 1/2s, 10/1/18 Aaa 5,762,088
3,000,000 Jersey City, G.O. Bonds, Ser. A, AMBAC, 6s, 10/1/10 Aaa 3,153,750
1,700,000 Jersey City, Swr. Auth. Rev. Bonds, AMBAC,
6 1/4s, 1/1/14 Aaa 1,789,250
890,000 Lafayette Yard, Cmnty. Dev. Rev. Bonds
(Hotel/Conference Ctr.), MBIA, 6 1/8s, 4/1/16 Aaa 921,150
1,200,000 Middle Township, School Dist. Rev. Bonds, FGIC,
7s, 7/15/06 Aaa 1,314,000
2,000,000 Middlesex Cnty., Poll. Control Auth. Rev. Bonds,
6 7/8s, 12/1/22 BBB-/P 2,030,000
3,000,000 Middlesex Cnty., Utils. Auth. Swr. IFB, Ser. A, MBIA,
6 1/4s, 8/15/10 Aaa 3,172,500
2,005,000 NJ Econ. Dev. Auth. Elec. Energy Fac. Rev. Bonds
(Vineland Cogeneration L.P.), 7 7/8s, 6/1/19 BB+ 2,092,719
8,000,000 NJ Econ. Dev. Auth. Hlth. Care Fac. Rev. Bonds
(Ocean Nursing Pavilion), Ser. A, 7 3/8s, 12/1/25 AAA 8,700,000
NJ Econ. Dev. Auth. Rev. Bonds
5,000,000 (Tevco Inc.), 8 1/8s, 10/1/09 BBB+/P 5,187,700
7,000,000 (1st Mtge.-Cranes Mill), Ser. A, 7 1/2s, 2/1/27 BB-/P 6,868,750
2,000,000 (Hartz Mountain Industries, Inc.), 7s, 2/1/14 A+ 2,085,000
2,590,000 (Lakewood School), Ser. R, 6.9s, 12/1/11 Aa3 2,683,888
1,895,000 (Urban Holding Co.), 6 1/2s, 6/1/15 A+ 1,966,063
NJ Econ. Dev. Auth. Rev. Bonds
1,550,000 (Burlington Coat Factory), 6 1/8s, 9/1/10 Aa3 1,584,875
3,000,000 (United Methodist Homes) 5 3/4s, 7/1/29 BBB- 2,317,500
3,000,000 (Franciscan Oaks), 5 3/4s, 10/1/23 BB/P 2,377,500
1,500,000 (NJ Performing Arts Ctr.), Ser. C, AMBAC,
5 1/2s, 6/15/13 Aaa 1,486,875
2,000,000 (EDL Testing Svc.), Ser. A, 4 3/4s, 5/15/25 Aaa 1,632,500
2,000,000 NJ Econ. Dev. Auth. Special Fac. Rev. Bonds
(Continental Airlines, Inc.), 6 1/4s, 9/15/29 Ba2 1,757,500
2,925,000 NJ Econ. Dev. Auth. Waste Paper Recycling
Rev. Bonds (Marcal Paper Mills Inc.),
8 1/2s, 2/1/10 BB/P 3,169,969
7,250,000 NJ Econ. Dev. Auth. Wtr. Facs. Rev. Bonds
(American Wtr. Co., Inc.), FGIC, 6 1/2s, 4/1/22 (SEG) Aaa 7,376,875
NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds
1,000,000 (East Orange Gen. Hosp.), Ser. B, 7 3/4s, 7/1/20 BBB+ 1,015,000
1,500,000 (Trinitas Hosp. Oblig. Group), 7 1/2s, 7/1/30 BBB- 1,483,125
5,395,000 (Columbus Hosp.), Ser. A, 7 1/2s, 7/1/21 B2 4,949,913
500,000 (Columbus Hosp.), Ser. A, 7 1/2s, 7/1/08 B2 485,000
9,000,000 (Raritan Bay Med. Ctr.), 7 1/4s, 7/1/27 B/P 7,908,750
3,300,000 (Christ Hosp. Group), 7s, 7/1/06 AAA 3,580,500
5,000,000 (Gen. Hosp. Ctr.-Passaic, Inc.), FSA, 6 3/4s, 7/1/19 Aaa 5,362,500
1,000,000 (AHS Hosp. Corp.), Ser. A, 6s, 7/1/07 Aaa 1,038,750
1,355,000 (Cathedral Hlth. Svcs.), FHA Insd., MBIA,
5 1/2s, 8/1/11 Aaa 1,348,225
6,000,000 (St. Barnabas Hlth.), Ser. B, 4 3/4s, 7/1/28 AAA 4,800,000
5,000,000 NJ Sports & Expo Auth. Rev. Bonds, Ser. A, MBIA,
4 1/2s, 3/1/24 Aaa 3,950,000
4,065,000 NJ State G.O. Bonds, FGIC, 6s, 2/15/11 Aaa 4,278,413
3,000,000 NJ State Hsg. & Mtge. Fin. Agcy. IFB, Ser. I, 7.838s,
11/1/07 (acquired various dates from 2/11/93
to 6/14/93, cost $3,134,370) (RES) A+/P 3,120,000
NJ State Hwy. Auth. Gen. Rev. Bonds
(Garden State Pkwy.)
1,500,000 6.2s, 1/1/10 AA- 1,591,875
2,370,000 6s, 1/1/19 Aaa 2,432,213
3,000,000 5 5/8s, 1/1/30 AA- 2,842,500
1,800,000 NJ State Tpk. Auth. IFB, MBIA, 8.5s, 1/1/16
(acquired 3/27/92, cost $1,817,856) (RES) AAA 2,117,250
6,000,000 NJ State Tpk. Auth. Rev. Bonds, Ser. C, MBIA,
6 1/2s, 1/1/16 Aaa 6,502,500
4,500,000 NJ Trans. Fund Auth. IFB (PA 345A), 7.257s,
6/15/11 (acquired 4/3/98, cost $6,131,250) (RES) Aa2 5,276,250
NJ Wastewtr. Treatment Rev. Bonds
(Wastewtr. Treatment Trust)
2,955,000 Ser. B, 7s, 5/15/09 Aa2 3,298,519
7,000,000 Ser. A, zero %, 9/1/07 Aaa 4,751,250
1,800,000 Passaic Valley, Cmnty. Wtr. Supply Rev. Bonds,
Ser. A., FGIC, 6.4s, 12/15/22 Aaa 1,894,500
7,500,000 Rutgers State U. Rev. Bonds, Ser. A, 6.4s, 5/1/13 A1 8,053,125
7,665,000 Salem Cnty., Indl. Poll. Ctrl. Fin. Auth. IFB, 7.35s,
8/1/30 (acquired 4/23/98, cost $9,149,864) (RES) Aaa 7,799,138
1,000,000 Stony Brook, Regional Swr. Rev. Bonds,
Ser. B, 5.45s, 12/1/12 Aa3 998,750
2,500,000 Trenton, Pkg. Auth. Rev. Bonds, FGIC, 5 1/2s, 4/1/30 Aaa 2,346,875
8,695,000 U. of Medicine & Dentistry Rev. Bonds, Ser. E,
MBIA, 6 1/2s, 12/1/12 A3 9,390,600
3,400,000 Union Cnty., Indl. Poll. Ctrl. Fin. Auth. Rev. Bonds
(American Cynamid Co.), 5.8s, 9/1/09 A3 3,336,250
----------------
190,054,880
New York (10.1%)
-------------------------------------------------------------------------------------------------------------------
Port Auth. NY & NJ Cons. IFB
5,000,000 9.246s, 8/1/26 (acquired various dates from
8/29/91 to 1/21/92, cost $5,164,940) (RES) AA- 5,275,000
2,100,000 8.672s, 11/15/15 (acquired 2/9/94,
cost $2,107,875) (RES) AA- 1,603,875
1,500,000 5.2s, 11/15/15 A1 1,389,375
Port Auth. NY & NJ Rev. Bonds
3,000,000 (Delta Airlines, Inc.), Ser. IR, 6.95s, 6/1/08 Baa3 3,071,250
5,000,000 (Kennedy Intl. Arpt.), 6 3/4s, 10/1/19 BB/P 5,006,250
2,075,000 6 3/4s, 10/1/11 BB/P 2,113,906
7,500,000 Ser. 93rd, 6 1/8s, 6/1/94 AA- 7,584,375
----------------
26,044,031
Pennsylvania (2.8%)
-------------------------------------------------------------------------------------------------------------------
7,500,000 Delaware River Port Auth. Rev. Bonds
(Port Dist. Project), Ser. B, FSA, 5 5/8s, 1/1/26 AAA 7,171,875
Puerto Rico (10.3%)
-------------------------------------------------------------------------------------------------------------------
5,665,000 Cmnwlth. of PR, Aquaduct & Swr. Auth. Rev. Bonds,
MBIA, 6 1/4s, 7/1/12 Aaa 6,125,281
2,500,000 Cmnwlth. of PR, G.O. Bonds, MBIA, 4 3/4s, 7/1/23 AAA 2,087,500
2,000,000 Cmnwlth. of PR, Govt. Dev. Bank VRDN, MBIA,
3.4s, 12/1/15 VMIG1 2,000,000
2,000,000 Cmnwlth. of PR, Pub. Impt. G.O. Bonds, 6.8s, 7/1/21 AAA 2,105,000
PR Elec. Pwr. Auth. Rev Bonds
2,000,000 10.15s, 7/1/07 (acquired 10/30/97,
cost $2,765,000) (RES) Baa1 2,462,500
5,900,000 Ser. EE, FSA, 4 3/4s, 7/1/24 AAA 4,926,500
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 A3 1,980,000
1,000,000 PR Indl. Tourist Edl. Med. & Env. Control Facs.
Rev. Bonds (Cogen Facs.--AES PR Project),
6 5/8s, 6/1/26 Baa2 1,006,250
3,750,000 PR Pub. Bldg. Auth. Rev. Bonds, Ser. K, 6 7/8s, 7/1/21 Aaa 3,956,250
----------------
26,649,281
South Dakota (1.4%)
-------------------------------------------------------------------------------------------------------------------
South River, School Dist. G.O. Bonds, FGIC
1,300,000 5s, 12/1/12 Aaa 1,235,000
1,250,000 5s, 12/1/11 Aaa 1,192,188
1,250,000 5s, 12/1/10 Aaa 1,206,245
----------------
3,633,433
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $261,095,308) (b) $ 254,867,875
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $258,843,133.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to
be the most recent ratings available at May 31, 2000 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, 2000. Securities rated by Putnam are indicated by
"/P" and are not publicly rated. Ratings are not covered by the Report
of independent accountants.
(b) The aggregate identified cost on a tax basis is $261,095,308,
resulting in gross unrealized appreciation and depreciation of
$4,337,771 and $10,565,204, respectively, or net unrealized depreciation
of $6,227,433.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at May 31, 2000 was
$31,973,076, or 12.4% of net assets.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at May 31,
2000.
The rates shown on IFB's, which are securities paying interest
rates that vary inversely to changes in the market interest rates, and
VRDN's are the current interest rates at May 31, 2000.
The fund had the following industry group concentrations greater
than 10% at May 31, 2000 (as a percentage of net assets):
Transportation 23.6%
Health care 21.4
Water and sewer 16.0
The fund had the following insurance concentrations greater than
10% at May 31, 2000 (as a percentage of net assets):
MBIA 15.0%
FGIC 14.3
---------------------------------------------------------------------------
Futures Contracts Outstanding at May 31, 2000
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
---------------------------------------------------------------------------
Muni Bond Index
(Short) $2,883,000 $2,869,539 Sep-00 $(13,461)
---------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $261,095,308) (Note 1) $254,867,875
-------------------------------------------------------------------------------------------
Cash 322,295
-------------------------------------------------------------------------------------------
Interest and other receivables 5,691,248
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 157,773
-------------------------------------------------------------------------------------------
Receivable for securities sold 100,000
-------------------------------------------------------------------------------------------
Total assets 261,139,191
Liabilities
-------------------------------------------------------------------------------------------
Payable for variation margin 26,156
-------------------------------------------------------------------------------------------
Distributions payable to shareholders 370,158
-------------------------------------------------------------------------------------------
Payable for securities purchased 996,920
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 364,344
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 334,281
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 22,307
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 12,192
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 979
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 120,361
-------------------------------------------------------------------------------------------
Other accrued expenses 48,360
-------------------------------------------------------------------------------------------
Total liabilities 2,296,058
-------------------------------------------------------------------------------------------
Net assets $258,843,133
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $274,821,123
-------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (20,390)
-------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (9,716,706)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (6,240,894)
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $258,843,133
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($173,871,530 divided by 20,537,176 shares) $8.47
-------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $8.47)* $8.89
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($84,296,234 divided by 9,965,433 shares)** $8.46
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($675,369 divided by 79,789 shares) $8.46
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $8.46)*** $8.74
-------------------------------------------------------------------------------------------
* 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
Year ended May 31, 2000
<S> <C>
Tax exempt interest income: $ 17,658,383
-------------------------------------------------------------------------------------------
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,455,732
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 295,540
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 12,496
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 5,446
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 385,942
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 785,802
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 4,744
-------------------------------------------------------------------------------------------
Reports to shareholders 18,185
-------------------------------------------------------------------------------------------
Auditing 39,081
-------------------------------------------------------------------------------------------
Legal 9,204
-------------------------------------------------------------------------------------------
Postage 17,289
-------------------------------------------------------------------------------------------
Other 35,305
-------------------------------------------------------------------------------------------
Total expenses 3,064,766
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (109,791)
-------------------------------------------------------------------------------------------
Net expenses 2,954,975
-------------------------------------------------------------------------------------------
Net investment income 14,703,408
-------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (1,826,720)
-------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (44,097)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and
futures contracts during the year (21,049,420)
-------------------------------------------------------------------------------------------
Net loss on investments (22,920,237)
-------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (8,216,829)
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended May 31
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 14,703,408 $ 14,765,035
--------------------------------------------------------------------------------------------------
Net realized loss on investments (1,870,817) (1,158,565)
--------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (21,049,420) (4,778,076)
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (8,216,829) 8,828,394
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A (10,322,968) (10,496,304)
--------------------------------------------------------------------------------------------------
Class B (4,340,048) (4,169,877)
--------------------------------------------------------------------------------------------------
Class M (47,800) (43,160)
--------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (34,013,140) 7,369,500
--------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (56,940,785) 1,488,553
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 315,783,918 314,295,365
--------------------------------------------------------------------------------------------------
End of year (including distributions in excess of net
investment income of $20,390 and $12,982, respectively) $258,843,133 $315,783,918
--------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended May 31
------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.15 $9.32 $9.02 $8.76 $8.98
------------------------------------------------------------------------------------------------
Investment operations
------------------------------------------------------------------------------------------------
Net investment income .47 .45 .45 .47 .48
------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.68) (.17) .30 .26 (.22)
------------------------------------------------------------------------------------------------
Total from
investment operations (.21) .28 .75 .73 .26
------------------------------------------------------------------------------------------------
Less distributions:
------------------------------------------------------------------------------------------------
From net
investment income (.47) (.45) (.45) (.47) (.48)
------------------------------------------------------------------------------------------------
Total distributions (.47) (.45) (.45) (.47) (.48)
------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.47 $9.15 $9.32 $9.02 $8.76
------------------------------------------------------------------------------------------------
Ratios and supplemental data
------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (2.32) 3.05 8.48 8.57 2.92
------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $173,872 $214,876 $218,312 $228,361 $227,940
------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .86 .99 .96 .96 .96
------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.35 4.87 4.84 5.28 5.36
------------------------------------------------------------------------------------------------
Portfolio turnover (%) 14.61 7.19 29.03 27.14 52.82
------------------------------------------------------------------------------------------------
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (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
------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended May 31
------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.14 $9.31 $9.01 $8.75 $8.97
------------------------------------------------------------------------------------------------
Investment operations
------------------------------------------------------------------------------------------------
Net investment income .41 .39 .39 .41 .42
------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.68) (.17) .30 .27 (.22)
------------------------------------------------------------------------------------------------
Total from
investment operations (.27) .22 .69 .68 .20
------------------------------------------------------------------------------------------------
Less distributions:
------------------------------------------------------------------------------------------------
From net
investment income (.41) (.39) (.39) (.42) (.42)
------------------------------------------------------------------------------------------------
Total distributions (.41) (.39) (.39) (.42) (.42)
------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.46 $9.14 $9.31 $9.01 $8.75
------------------------------------------------------------------------------------------------
Ratios and supplemental data
------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (2.97) 2.37 7.78 7.87 2.25
------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $84,296 $99,781 $95,315 $82,407 $72,083
------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.51 1.64 1.61 1.61 1.61
------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.70 4.22 4.18 4.63 4.69
------------------------------------------------------------------------------------------------
Portfolio turnover (%) 14.61 7.19 29.03 27.14 52.82
------------------------------------------------------------------------------------------------
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (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
------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended May 31
------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.15 $9.33 $9.02 $8.76 $8.98
------------------------------------------------------------------------------------------------
Investment operations
------------------------------------------------------------------------------------------------
Net investment income .44 .42 .42 .45(c) .45
------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.69) (.18) .31 .26 (.21)
------------------------------------------------------------------------------------------------
Total from
investment operations (.25) .24 .73 .71 .24
------------------------------------------------------------------------------------------------
Less distributions:
------------------------------------------------------------------------------------------------
From net
investment income (.44) (.42) (.42) (.45) (.46)
------------------------------------------------------------------------------------------------
Total distributions (.44) (.42) (.42) (.45) (.46)
------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.46 $9.15 $9.33 $9.02 $8.76
------------------------------------------------------------------------------------------------
Ratios and supplemental data
------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (2.73) 2.63 8.28 8.25 2.65
------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $675 $1,127 $668 $372 $355
------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.16 1.29 1.26 1.26 1.24
------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.05 4.61 4.48 4.95 4.92
------------------------------------------------------------------------------------------------
Portfolio turnover (%) 14.61 7.19 29.03 27.14 52.82
------------------------------------------------------------------------------------------------
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (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
May 31, 2000
Note 1
Significant accounting policies
Putnam New Jersey Tax Exempt Income Fund (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 state 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 higher than class A but lower than
class B 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 of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. 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.
Restricted securities are stated at fair value following procedures
approved by the Trustees. Such valuations and procedures are reviewed
periodically 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). Gains or losses on securities sold are determined
on the identified cost basis.
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 year ended
May 31, 2000, 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, 2000, the fund had a capital loss carryover of approximately
$7,464,000 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
589,000 May 31, 2007
3,107,000 May 31, 2008
F) Distributions to shareholders Income dividends are recorded daily by
the fund and are paid 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 post-October loss deferrals, dividends payable,
unrealized gains and losses on certain futures contracts and prior and
current year straddle loss deferrals. Reclassifications are made to the
fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. For the year May 31, 2000, the fund required no such
reclassifications.
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 lesser of (i) on annual rate of 0.50%
of the average net assets of the fund or (ii) 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. Prior to July 1, 1999, the management fee was
based on (ii) above.
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 year ended May 31, 2000, fund expenses were reduced by $109,791
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 $569
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. 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
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 a 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 Retail Management, Inc., 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 Retail Management Inc. at an annual rate up to 0.35%,
1.00% and 1.00% of the average net assets attributable to class A, class
B and class M shares, respectively. The Trustees have approved payment
by the fund to an annual rate of 0.20%, 0.85% and 0.50% of the average
net assets attributable to class A, class B and class M shares,
respectively.
For the year ended May 31, 2000, Putnam Retail Management Inc., acting
as underwriter received net commissions of $19,771 and $934 from the
sale of class A and class M shares, respectively and $224,205 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 year ended May 31, 2000, Putnam Retail
Management Inc., acting as underwriter received $5,377 on class A
redemptions.
Note 3
Purchases and sales of securities
During the year ended May 31, 2000, cost of purchases and proceeds from
sales of investment securities other than short-term investments
aggregated $41,014,044 and $72,422,518, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At May 31, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended May 31, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 1,859,621 $ 16,208,147
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 637,751 5,541,638
---------------------------------------------------------------------------
2,497,372 21,749,785
Shares
repurchased (5,447,349) (47,260,953)
---------------------------------------------------------------------------
Net decrease (2,949,977) $(25,511,168)
---------------------------------------------------------------------------
Year ended May 31, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 3,311,199 $30,755,143
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 642,823 5,992,077
---------------------------------------------------------------------------
3,954,022 36,747,220
Shares
repurchased (3,889,310) (36,237,969)
---------------------------------------------------------------------------
Net increase 64,712 $ 509,251
---------------------------------------------------------------------------
Year ended May 31, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 1,435,621 $12,561,443
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 298,740 2,591,316
---------------------------------------------------------------------------
1,734,361 15,152,759
Shares
repurchased (2,684,167) (23,281,180)
---------------------------------------------------------------------------
Net decrease (949,806) $(8,128,421)
---------------------------------------------------------------------------
Year ended May 31, 1999
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 2,307,954 $21,504,022
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 272,783 2,540,129
---------------------------------------------------------------------------
2,580,737 24,044,151
Shares
repurchased (1,898,936) (17,667,196)
---------------------------------------------------------------------------
Net increase 681,801 $ 6,376,955
---------------------------------------------------------------------------
Year ended May 31, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 32,541 $ 287,988
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,770 24,012
---------------------------------------------------------------------------
35,311 312,000
Shares
repurchased (78,677) (685,551)
---------------------------------------------------------------------------
Net decrease (43,366) $(373,551)
---------------------------------------------------------------------------
Year ended May 31, 1999
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 88,836 $830,619
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,683 24,971
---------------------------------------------------------------------------
91,519 855,590
Shares
repurchased (40,024) (372,296)
---------------------------------------------------------------------------
Net increase 51,495 $483,294
---------------------------------------------------------------------------
FEDERAL TAX INFORMATION
(Unaudited)
The fund has designated 100% of dividends paid from net investment
income during the fiscal year as tax exempt for Federal income tax
purposes.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
THE PUTNAM FAMILY OF FUNDS
The following is a complete list of Putnam's open-end mutual funds.
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.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Classic Equity 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
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
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
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund **
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION 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 Growth and Income Fund II
[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 not insured or
guaranteed by the Federal Deposit Insurance Corporation
or any other government agency. Although the funds seek
to preserve your investment at $1.00 per shar, it is
possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
FUND INFORMATION
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, 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
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
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
Stephen Oristaglio
Vice President
Jerome J. Jacobs
Vice President
Susan A. McCormack
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
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' Web site: 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
---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
AN050-62272 019/329/537 7/00
