Putnam
New Jersey
Tax Exempt
Income Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
This is the last letter to you and the other shareholders of Putnam New
Jersey Tax Exempt Income Fund that I will be signing. After more than 30
years as Chairman of the Trustees and President of the Putnam Funds, the
time has come for me to step aside.
In June, John Hill will become Chairman. John is currently an independent
Trustee and has served on the board for the past 14 years. In addition, my
son, George Putnam, III, will take on the role of President. I am
confident that the leadership of the funds will be in exceptionally strong
hands.
I will become Chairman Emeritus, remain a shareholder, and stay in close
touch with the funds. It has been my privilege to serve you.
In one final piece of news, I am pleased to announce the appointment of
Susan A. McCormack as your fund's manager. Before joining Putnam as a
tax-exempt bond analyst in 1994, Susan was with Merrill Lynch. She has 13
years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 19, 2000
Report from the Fund Manager
Susan A. McCormack
Fixed income investors, whether they are conservative or aggressive, will
almost always feel some sting from higher interest rates. With three
interest rate increases over the past five months, this has certainly been
the case this year. Such was the market backdrop that challenged Putnam
New Jersey Tax Exempt Income Fund's management team during the semiannual
period ended November 30, 1999. As we will describe, however, while a
rising interest rate environment can hurt total returns, it can also
present the opportunity to lock in more attractive streams of tax-exempt
income. Additionally, with municipal bonds at such inexpensive levels
relative to taxable U.S. Treasury bonds and New Jersey finances in such
good shape, we believe there is cause to be more optimistic about the near
future.
Total return for 6 months ended 11/30/99
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- ---------------------------------------------------------------------------
-2.48% -7.15% -2.70% -7.45% -2.63% -5.82%
- ---------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
* PORTFOLIO STRATEGY IN A RISING-RATE ENVIRONMENT
In 1999, the Federal Reserve raised short-term interest rates three times
in a preemptive strike against what the Fed perceived were signs of
overheating in the economy and, thus, the potential for inflation. These
increases erased the cuts the Fed made in 1998 in order to increase
liquidity in the economy in the face of an emerging markets financial
crisis that threatened to spill over into established markets.
As a result of investors' concerns about inflation, bond yields rose and
prices fell for most of the fund's semiannual period while the yield on
the 30-year Treasury bond hovered around 6.25%. As weakness persisted in
the bond market, we took the opportunity to extend the portfolio's
duration or sensitivity to interest rates. While we often favor bonds in
the intermediate range of maturities, we sold lower-yielding bonds and
bought some bonds with higher yields and longer maturities. Should
interest rates in the broader market fall, the portfolio will have an
enhanced income stream and could perform better on a total return basis.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Transportation 20.5%
Health care 16.1%
Water and
sewer 15.7%
Education 12.9%
Utilities 12.7%
Footnote reads:
*Based on net assets as of 11/30/99. Holdings will vary over time.
* HEALTH CARE UNDERPERFORMS, BUT OTHER SECTORS LOOK GOOD
In general, we are satisfied with the credit profile of the fund's
holdings. With a strong economy and fairly secure revenue streams, many
New Jersey municipal sectors performed well relative to taxable bonds of
comparable maturity.
Hospitals and hospital companies have suffered financially for some time.
Poor management of unprofitable physician practices and HMOs acquired over
the years as well as falling Medicare reimbursements and the threat of
further Medicare reimbursement cuts has hurt the sector. Nevertheless, we
maintain a significant position in the hospital sector. This reflects the
fact that in selecting securities for your fund, we rely on a
comprehensive research process backed by a team of analysts. We believe
the hospital sector plays to our research strengths in that within this
large and diverse sector, many individual opportunities exist for those
willing and able to do the legwork. One example was a NJ Health and
Education issue representing a Bristol Glen retirement facility. Through
our own research, we determined that this unrated issuer actually was on
firmer financial ground than a very similar issuer already held in the
portfolio. We were able to sell that issue, invest the proceeds in the
Bristol Glen bonds, and only gave up a very slight amount of yield.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
AA -- 18.6%
A -- 4.9%
BBB -- 5.9%
BB -- 9.0%
B -- 6.7%
AAA -- 54.9%
Footnote reads:
*As a percentage of market value as of 11/30/99. 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.
"States enjoy another year of bulging tax coffers," The Wall Street Journal
reported in its December 15, 1999, issue. Along with the country's economic
expansion, state tax revenues were up 5.7% in fiscal 1999 from an already
strong fiscal 1998, according to the Center for the Study of the States.
One area that we favor that did perform well was the airline sector.
During the period, we purchased bonds supporting the Continental Airlines
terminal at Newark Airport. With the strong economy and air travel
continuing to rise, we believe airline-related bonds could continue to
strengthen in the second half of the year.
* CHANGES IN PUERTO RICO SEGMENT MIRROR PORTFOLIO
As long-time shareholders of the fund know, we often purchase bonds from
the Commonwealth of Puerto Rico. With a light supply of bonds to choose
from in New Jersey, Puerto Rico bonds offer an attractive alternative for
diversifying the fund's assets. The income of all U.S. territory and
commonwealth securities bonds -- including Puerto Rico, Guam, and the U.S.
Virgin Islands -- passes tax free to U.S. investors, attracting
tax-sensitive investors from all over the country.
Thousands of projects, just two types of bonds
Although municipal bonds are used to finance thousands of different public
projects, from highways to water treatment plants, there are only two basic
types of bonds. The difference is in how each type repays its investors.
With general obligation bonds (GOs), investors receive their interest and
principal from property taxes. The bonds are secured by the ability of the
municipality to raise taxes. Cities and towns usually issue general
obligation bonds to finance schools, parks, or public building projects.
Revenue bonds, on the other hand, are repaid through fees derived from tolls,
charges, or rents. Highways, bridges, and water and sewage treatment plants
are typical projects financed or improved by revenue bond proceeds.
Industrial revenue bonds operate under the same principle but are used to
finance projects for corporations and other private users in cases where a
state or local government thinks the project is good for the community.
We often use bond insurance in order to reduce the credit risk of these
bonds. During the period, we moved to insure many of the Puerto Rico bonds
that didn't already offer this protection. Given Puerto Rico's high debt
burden, we are somewhat concerned about the island's economy so insuring
the bonds will allow us to focus on the level of tax-free income these
securities provide rather than their credit risk.
As in the rest of the portfolio, we also used the difficult market
environment to our advantage and sold older, lower yielding Puerto Rico
bonds in favor of higher yielding securities. Given the demand for these
securities in the municipal marketplace in the past, we believe these
bonds could be beneficial to the portfolio should the market improve.
* CAUTIOUSLY OPTIMISTIC ABOUT THE NEAR FUTURE
While we've extended the fund's duration and sought out higher yielding
securities, we've done so in a very disciplined manner. Weighing
interest-rate sensitivity with the challenge of providing attractive
tax-free income is a challenge portfolio managers face daily. Unless the
bond market has another major negative move, we will hold the fund's
duration profile steady for now as we monitor the performance of the
recent additions we've made to the portfolio.
No matter what occurs, municipal bonds will remain a solid investment
option for investors seeking tax-free income. We believe the cheapness of
municipal bonds relative to taxable U.S. Treasuries as well as the
continuing strength of the economy and state revenues, will encourage more
investors to put money to work municipal market as the new year begins.
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 11/30/99, 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 11/30/99
Class A Class B Class M
(inception dates) (2/20/90) (1/4/93) (5/1/95)
NAV POP NAV CDSC NAV POP
- ---------------------------------------------------------------------------
6 months -2.48% -7.15% -2.70% -7.45% -2.63% -5.82%
- ---------------------------------------------------------------------------
1 year -2.18 -6.86 -2.82 -7.47 -2.58 -5.71
- ---------------------------------------------------------------------------
5 years 37.74 31.16 33.52 31.52 35.78 31.43
Annual average 6.61 5.57 5.95 5.63 6.31 5.62
- ---------------------------------------------------------------------------
Life of fund 84.63 75.93 71.77 71.77 78.26 72.51
Annual average 6.48 5.95 5.69 5.69 6.10 5.74
- ---------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/99
Lehman Brothers Municipal Consumer
Bond Index price index
- ---------------------------------------------------------------------------
6 months -1.87% 1.32%
- ---------------------------------------------------------------------------
1 year -1.08 2.68
- ---------------------------------------------------------------------------
5 years 43.85 12.49
Annual average 7.54 2.38
- ---------------------------------------------------------------------------
Life of fund 95.44 31.56
Annual average 7.11 2.85
- ---------------------------------------------------------------------------
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.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 11/30/99
Class A Class B Class M
- -----------------------------------------------------------------------------
Distributions (number) 6 6 6
- -----------------------------------------------------------------------------
Income $0.233241 $0.204170 $0.219819
- -----------------------------------------------------------------------------
Capital gains1 -- -- --
- -----------------------------------------------------------------------------
Total $0.233241 $0.204170 $0.219819
- -----------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------------
5/31/99 $9.15 $9.61 $9.14 $9.15 $9.46
- -----------------------------------------------------------------------------
11/30/99 8.69 9.12 8.69 8.69 8.98
- -----------------------------------------------------------------------------
Current return (end of period)
- -----------------------------------------------------------------------------
Current dividend rate2 5.64% 5.37% 4.95% 5.31% 5.14%
- -----------------------------------------------------------------------------
Taxable equivalent3 9.97 9.50 8.74 9.39 9.09
- -----------------------------------------------------------------------------
Current 30-day SEC yield4 5.12 4.88 4.46 4.82 4.66
- -----------------------------------------------------------------------------
Taxable equivalent3 9.05 8.63 7.89 8.52 8.24
- -----------------------------------------------------------------------------
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 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 12/31/99 (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
- -------------------------------------------------------------------------
6 months -1.98% -6.66% -2.19% -6.96% -2.13% -5.30%
- -------------------------------------------------------------------------
1 year -3.50 -8.13 -4.03 -8.62 -3.79 -6.89
- -------------------------------------------------------------------------
5 years 32.69 26.33 28.62 26.62 30.76 26.53
Annual average 5.82 4.79 5.16 4.83 5.51 4.82
- -------------------------------------------------------------------------
Life of fund 82.71 74.10 69.88 69.88 76.36 70.67
Annual average 6.30 5.78 5.52 5.52 5.92 5.57
- -------------------------------------------------------------------------
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 class B 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 than those in the
fund, and may pose different risks than the fund.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. 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.
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A guide to the financial statements
These sections of the report 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.
<TABLE>
<CAPTION>
The fund's portfolio
November 30, 1999 (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 (97.8%) (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 $ 1,335,000
New Jersey (79.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,000,000 Atlantic City, Muni. Utils. Auth. Wtr. Rev. Bonds,
7 3/4s, 5/1/17 A 1,035,200
Atlantic Cnty. COP, FGIC
2,000,000 7.4s, 3/1/10 Aaa 2,357,500
1,000,000 (Pub. Fac. Lease Agreement), 7.4s, 3/1/09 Aaa 1,168,750
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 4,547,500
Camden Cnty., Muni. Util. Auth. Swr.
Rev. Bonds, FGIC
6,625,000 6s, 7/15/08 Aaa 7,072,188
5,850,000 6s, 7/15/07 Aaa 6,252,188
3,000,000 Jersey City, G.O. Bonds, Ser. A, AMBAC,
6s, 10/1/10 Aaa 3,232,500
1,700,000 Jersey City, Swr. Auth. Rev. Bonds, AMBAC,
6 1/4s, 1/1/14 Aaa 1,832,430
1,200,000 Middle Township, School Dist. Rev. Bonds,
FGIC, 7s, 7/15/06 Aaa 1,351,500
2,000,000 Middlesex Cnty., Poll. Control Auth. Rev. Bonds,
6 7/8s, 12/1/22 BBB-/P 2,077,500
3,000,000 Middlesex Cnty., Utils. Auth. Swr. Ser. A, MBIA,
6 1/4s, 8/15/10 Aaa 3,243,570
2,105,000 NJ Econ. Dev. Auth. Elec. Energy Fac. Rev. Bonds
(Vineland Cogeneration L.P.), 7 7/8s, 6/1/19 BB+ 2,226,038
8,000,000 NJ Econ. Dev. Auth. Hlth. Care Fac. Rev. Bonds
(Ocean Nursing Pavilion), Ser. A, 7 3/8s, 12/1/25 AAA 8,930,000
NJ Econ. Dev. Auth. Rev. Bonds
5,000,000 (Tevco Inc.), 8 1/8s, 10/1/09 BBB+/P 5,193,800
7,000,000 (1st Mtge.-Cranes Mill), Ser. A, 7 1/2s, 2/1/27 BB-/P 7,315,000
2,000,000 (Hartz Mountain Industries, Inc.), 7s, 2/1/14 A+ 2,112,500
2,590,000 (Lakewood School), Ser. R, 6.9s, 12/1/11 Aa3 2,713,025
1,500,000 (NJ Performing Arts Ctr.), 6 3/4s, 6/15/12 Aaa 1,582,500
NJ Econ. Dev. Auth. Rev. Bonds
1,895,000 (Urban Holding Co.), 6 1/2s, 6/1/15 A+ 2,001,594
1,550,000 (Burlington Coat Factory), 6 1/8s, 9/1/10 Aa3 1,617,813
3,000,000 (United Methodist Homes), 5 3/4s, 7/01/29 BBB- 2,595,000
4,000,000 (Franciscan Oaks), 5 3/4s, 10/1/23 BB/P 3,465,000
1,500,000 (NJ Performing Arts Ctr.), Ser. C, AMBAC,
5 1/2s, 6/15/13 Aaa 1,509,375
2,000,000 (EDL Testing Svc.), Ser. A, 4 3/4s, 5/15/25 Aaa 1,680,000
2,000,000 NJ Econ. Dev. Auth. Special Fac. Rev. Bonds
(Continental Airlines, Inc.), 6 1/4s, 9/15/29 Ba2 1,892,500
2,925,000 NJ Econ. Dev. Auth. Waste Paper Recycling
Rev. Bonds (Marcal Paper Mills Inc.),
8 1/2s, 2/1/10 BB/P 3,235,781
9,750,000 NJ Econ. Dev. Auth. Wtr. Facs. Rev. Bonds
(American Wtr. Co., Inc.), FGIC, 6 1/2s, 4/1/22 (SEG) Aaa 10,200,938
NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds
4,250,000 (St. Elizabeth Hosp.), Ser. B, 8 1/4s, 7/1/20 Aaa 4,417,408
4,085,000 (Kimball Med. Ctr.), Ser. C, 8s, 7/1/13 AAA 4,258,490
1,000,000 (East Orange Gen. Hosp.), Ser. B, 7 3/4s, 7/1/20 BBB+ 1,028,240
5,395,000 (Columbus Hosp.), Ser. A, 7 1/2s, 7/1/21 B 5,408,488
500,000 (Columbus Hosp.), Ser. A, 7 1/2s, 7/1/08 B 503,125
9,000,000 (Raritan Bay Med. Ctr.), 7 1/4s, 7/1/27 B-/P 8,471,250
3,300,000 (Christ Hosp. Group), 7s, 7/1/06 AAA 3,683,625
5,000,000 (Gen. Hosp. Ctr.-Passaic Inc.), FSA, 6 3/4s, 7/1/19 Aaa 5,450,000
2,000,000 (AHS Hosp. Corp.), Ser. A, AMBAC, 6s, 7/1/07 Aaa 2,132,500
1,355,000 (Cathedral Hlth. Svcs.), FHA Insd., MBIA,
5 1/2s, 8/1/11 Aaa 1,388,875
6,000,000 (St. Barnabas Hlth.), Ser. B, 4 3/4s, 7/1/28 AAA 4,935,000
5,000,000 NJ Sports & Expo Auth. , Ser. A, MBIA,
4 1/2s, 3/1/24 Aaa 4,075,000
4,065,000 NJ State G.O. Bonds, FGIC, 6s, 2/15/11 Aaa 4,374,956
3,000,000 NJ State Hsg. & Mtge. Fin. Agcy. Rev. IFB,
Ser. I, 8.07s, 11/1/07 (acquired various dates
from 2/11/93 to 6/14/93, cost $3,134,370) (RES) A+ 3,198,750
NJ State Hwy. Auth. Gen. Rev. Bonds
(Garden State Pkwy.)
1,500,000 6.2s, 1/1/10 AA- 1,615,695
2,370,000 6s, 1/1/19 Aaa 2,464,800
1,800,000 NJ State Tpk. Auth. IFB, MBIA, 9.1375s, 1/1/16
(acquired 03/27/92, cost $1,817,856) (RES) AAA 2,124,000
NJ State Tpk. Auth. Rev. Bonds, Ser. C
6,000,000 MBIA, 6 1/2s, 1/1/16 Aaa 6,533,340
5,000,000 AMBAC, 6 1/2s, 1/1/08 Aaa 5,506,250
3,000,000 NJ State Trans. Trust Fund Auth. Rev. Bonds
(Trans. Syst.), Ser. A, MBIA, 6s, 12/15/06 Aaa 3,210,000
8,500,000 NJ Trans. Fund Auth. IFB (PA 345A), 8.966s,
6/15/11 (acquired 4/3/98, cost $11,581,250) (RES) Aa2 10,465,625
NJ Wastewtr. Treatment Rev. Bonds
(Wastewtr. Treatment Trust)
6,670,000 Ser. C, 7s, 6/15/10 Aa2 7,662,163
2,955,000 Ser. B, 7s, 5/15/09 Aa2 3,372,394
7,000,000 Ser. A, FGIC, zero %, 9/1/07 Aaa 4,768,750
1,800,000 Passaic Valley, Cmnty. Wtr. Supply
Rev. Bonds, Ser. A., FGIC, 6.4s, 12/15/22 Aaa 1,932,750
7,500,000 Rutgers State U. Rev. Bonds, Ser. A, 6.4s, 5/1/13 AA 8,118,750
7,665,000 Salem Cnty., Indl. Poll. Ctrl. Fin. Auth. IFB, 9.254s,
8/1/30 (acquired 4/23/98, cost $9,149,864) (RES) Aaa 7,914,113
South River, School Dist. G.O. Bonds, FGIC
1,300,000 5s, 12/1/12 Aaa 1,277,250
1,250,000 5s, 12/1/11 Aaa 1,232,806
1,250,000 5s, 12/1/10 Aaa 1,243,750
1,000,000 Stony Brook, Regional Swr. Rev. Bonds, Ser. B,
5.45s, 12/1/12 Aa3 1,010,000
8,695,000 U. of Medicine & Dentistry Rev. Bond, Ser. E,
MBIA, 6 1/2s, 12/1/12 AAA 9,570,413
3,400,000 Union Cnty., Indl. Poll. Ctrl. Fin. Auth. Rev. Bonds
(American Cynamid Co.), 5.8s, 9/1/09 A3 3,485,000
--------------
229,275,246
New York (9.2%)
- --------------------------------------------------------------------------------------------------------------------------
Port Auth. NY & NJ Cons. IFB
5,000,000 9.499s, 8/1/26 (acquired various dates
from 8/29/91 to 1/21/92, cost $5,164,940) (RES) AA- 5,425,000
2,100,000 7.3545s, 11/15/15 (acquired 02/09/94,
cost $2,107,875) (RES) AA- 1,771,875
1,500,000 5.2s, 11/15/15 AA- 1,421,250
7,500,000 Port Auth. NY & NJ Cons. Rev. Bonds, Ser. 93rd,
6 1/8s, 6/1/94 AA- 7,575,000
Port Auth. NY & NJ Rev. Bonds
3,000,000 (Delta Airlines, Inc.), Ser. 1R, 6.95s, 6/1/08 Baa3 3,168,750
5,000,000 (Kennedy Intl. Arpt.), 6 3/4s, 10/1/19 BB/P 5,137,500
2,075,000 6 3/4s, 10/1/11 BB/P 2,189,125
--------------
26,688,500
Puerto Rico (8.9%)
- --------------------------------------------------------------------------------------------------------------------------
5,665,000 Cmnwlth. of PR, Aquaduct & Swr. Auth.
Rev. Bonds, MBIA, 6 1/4s, 7/1/12 Aaa 6,217,338
4,000,000 Cmnwlth. of PR, Pub. Impt. G.O. Bonds, 6.8s, 7/1/21 AAA 4,310,000
PR Elec. Pwr. Auth. Rev. Bonds
2,000,000 10.15s, 7/1/07 (acquired 10/30/97,
cost $2,765,000) (RES) BBB+ 2,547,500
5,900,000 Ser. EE, FSA, 4 3/4s, 7/1/24 AAA 5,022,375
1,830,000 Ser. GG, FSA, 4 3/4s, 7/1/21 AAA 1,571,513
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 2,042,500
3,750,000 PR Pub. Bldg. Auth. Rev. Bonds, Ser. K, 6 7/8s, 7/1/21 Aaa 4,045,313
--------------
25,756,539
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $282,909,433) (b) $ 283,055,285
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $289,390,830.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
November 30, 1999 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, 1999. Securities
rated by Putnam are indicated by "/P" and are not publicly rated.
(b) The aggregate identified cost on a tax basis is $282,909,433, resulting in gross unrealized appreciation and
depreciation of $7,583,150 and $7,437,298, respectively, or net unrealized appreciation of $145,852.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held
at November 30, 1999 was $37,994,363 or 13.1% 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, 1999.
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 November 30, 1999.
The fund had the following industry group concentrations greater than 10% at November 30, 1999 (as a percentage of
net assets):
Transportation 20.5%
Health care 16.1
Water and sewer 15.7
Education 12.9
Utilities 12.7
The fund had the following insurance concentrations greater than 10% at November 30, 1999 (as a percentage of net
assets):
FGIC 14.9%
MBIA 13.0
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1999 (Unaudited)
(Aggregate face value $8,628,884)
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
- -------------------------------------------------------------------------------
Municipal Index
Future (Long) $5,500,000 $5,534,897 Dec-99 $(34,897)
Municipal Index
Future (Long) 3,087,563 3,093,987 Mar-00 (6,424)
- -------------------------------------------------------------------------------
$(41,321)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $282,909,433) (Note 1) $283,055,285
- -----------------------------------------------------------------------------------------------
Cash 1,023,268
- -----------------------------------------------------------------------------------------------
Interest and other receivables 6,502,412
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 140,580
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 135,000
- -----------------------------------------------------------------------------------------------
Receivable for variation margin 34,717
- -----------------------------------------------------------------------------------------------
Total assets 290,891,262
Liabilities
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 361,689
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 582,605
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 367,189
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 16,788
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 11,124
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,032
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 132,430
- -----------------------------------------------------------------------------------------------
Other accrued expenses 27,575
- -----------------------------------------------------------------------------------------------
Total liabilities 1,500,432
- -----------------------------------------------------------------------------------------------
Net assets $289,390,830
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $297,972,261
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 4,193
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (8,690,155)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 104,531
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $289,390,830
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($193,789,531 divided by 22,287,749 shares) $8.69
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $8.69)* $9.12
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($94,657,638 divided by 10,896,346 shares)** $8.69
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($943,661 divided by 108,558 shares) $8.69
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $8.69)*** $8.98
- -----------------------------------------------------------------------------------------------
* 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, 1999 (Unaudited)
<S> <C>
Tax exempt interest income: $ 9,206,777
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 779,092
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 150,500
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 9,688
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 2,584
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 203,888
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 411,853
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 2,683
- -----------------------------------------------------------------------------------------------
Reports to shareholders 7,791
- -----------------------------------------------------------------------------------------------
Auditing 21,832
- -----------------------------------------------------------------------------------------------
Legal 4,126
- -----------------------------------------------------------------------------------------------
Postage 9,653
- -----------------------------------------------------------------------------------------------
Other 15,264
- -----------------------------------------------------------------------------------------------
Total expenses 1,618,954
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (38,505)
- -----------------------------------------------------------------------------------------------
Net expenses 1,580,449
- -----------------------------------------------------------------------------------------------
Net investment income 7,626,328
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (674,115)
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (170,151)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and
futures contracts during the period (14,703,995)
- -----------------------------------------------------------------------------------------------
Net loss on investments (15,548,261)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (7,921,933)
- -----------------------------------------------------------------------------------------------
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
1999* 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 7,626,328 $ 14,765,035
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments (844,266) (1,158,565)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (14,703,995) (4,778,076)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (7,921,933) 8,828,394
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (5,355,017) (10,496,304)
- ---------------------------------------------------------------------------------------------------------------
Class B (2,227,597) (4,169,877)
- ---------------------------------------------------------------------------------------------------------------
Class M (26,539) (43,160)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (10,862,002) 7,369,500
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (26,393,088) 1,488,553
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 315,783,918 314,295,365
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income and distributions in excess of net investment
income of $4,193 and $12,982, respectively) $289,390,830 $315,783,918
- ---------------------------------------------------------------------------------------------------------------
* 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
ended
Per-share November 30
operating performance (Unaudited) Year ended May 31
- ---------------------------------------------------------------------------------------------------------------------------------
1999 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 .23 .45 .45 .47 .48
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.46) (.17) .30 .26 (.22)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.23) .28 .75 .73 .26
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.45) (.45) (.47) (.48)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of realized
gain on investments -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.45) (.45) (.47) (.48)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.69 $9.15 $9.32 $9.02 $8.76
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (2.48)* 3.05 8.48 8.57 2.92
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $193,790 $214,876 $218,312 $228,361 $227,940
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .43* .99 .96 .96 .96
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.64* 4.87 4.84 5.28 5.36
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 5.80* 7.19 29.03 27.14 52.82
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year has been advanced from June 30 to May 31.
(a) Total 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 A (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
Eleven
months Year
Per-share ended ended
operating performance May 31 June 30
- ---------------------------------------------------------------------------------------------------------------------------------
1995++ 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $8.75 $9.46
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .46 .51
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .23 (.58)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .69 (.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.46) (.51)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.08)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of realized
gain on investments -- (.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.46) (.64)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.98 $8.75
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 8.25* (0.94)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $242,569 $246,336
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .87* .95
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.36* 5.43
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 51.86* 51.74
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year has been advanced from June 30 to May 31.
(a) Total 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
ended
Per-share November 30
operating performance (Unaudited) Year ended May 31
- ---------------------------------------------------------------------------------------------------------------------------------
1999 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 .20 .39 .39 .41 .42
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.45) (.17) .30 .27 (.22)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.25) .22 .69 .68 .20
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.20) (.39) (.39) (.42) (.42)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of realized
gain on investments -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (.39) (.39) (.42) (.42)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.69 $9.14 $9.31 $9.01 $8.75
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (2.70)* 2.37 7.78 7.87 2.25
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $94,658 $99,781 $95,315 $82,407 $72,083
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .76* 1.64 1.61 1.61 1.61
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.31* 4.22 4.18 4.63 4.69
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 5.80* 7.19 29.03 27.14 52.82
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year has been advanced from June 30 to May 31.
(a) Total 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 (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
Eleven
months Year
Per-share ended ended
operating performance May 31 June 30
- ---------------------------------------------------------------------------------------------------------------------------------
1995++ 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $8.75 $9.46
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .41 .45
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .22 (.58)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .63 (.13)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.41) (.45)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of realized
gain on investments -- (.11)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.41) (.58)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.97 $8.75
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 7.51* (1.59)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $58,591 $44,916
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.46* 1.59
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.72* 4.77
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 51.86* 51.74
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year has been advanced from June 30 to May 31.
(a) Total 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
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.15 $9.33 $9.02 $8.76 $8.98 $8.74
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .22 .42 .42 .45 (c) .45 .04
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.46) (.18) .31 .26 (.21) .28
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.24) .24 .73 .71 .24 .32
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.22) (.42) (.42) (.45) (.46) (.08)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of realized
gain on investments -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.22) (.42) (.42) (.45) (.46) (.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.69 $9.15 $9.33 $9.02 $8.76 $8.98
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (2.63)* 2.63 8.28 8.25 2.65 3.21*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $944 $1,127 $668 $372 $355 $1
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .58* 1.29 1.26 1.26 1.24 .09*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.49* 4.61 4.48 4.95 4.92 .42*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 5.80* 7.19 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 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, 1999 (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 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 six months
ended November 30, 1999, 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, 1999, the fund had a capital loss carryover of approximately
$4,357,000 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
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. 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, 0.340% of the next $5 billion and
0.330% thereafter.
On June 4, 1999, the Trustees approved a management fee schedule that
became effective on July 1, 1999, based upon the lesser of (i) an annual
rate of 0.50% of the average net asset value of the Fund or (ii) the
initial tiers mentioned 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 six months ended November 30, 1999, fund expenses were reduced by
$38,505 under expense offset arrangements with PFTC and brokerage service
arrangements. 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 $557 has
been allocated to the fund, and an additional fee for each Trustee's
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 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 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 six months ended November 30, 1999, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $10,457 and $771 from
the sale of class A and class M shares, respectively and $103,271 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, 1999, Putnam Mutual
Funds Corp., acting as underwriter received $4,869 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months period ended November 30, 1999, cost of purchases
and proceeds from sales of investment securities other than short-term
investments aggregated $17,088,827 and $25,912,981, respectively. There
were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At November 30, 1999, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended November 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 923,390 $ 8,185,979
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 332,634 2,938,039
- -----------------------------------------------------------------------------
1,256,024 11,124,018
Shares
repurchased (2,455,428) (21,697,246)
- -----------------------------------------------------------------------------
Net decrease (1,199,404) $(10,573,228)
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Six months ended November 30, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 928,785 $ 8,239,126
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 152,042 1,341,018
- -----------------------------------------------------------------------------
1,080,827 9,580,144
Shares
repurchased (1,099,720) (9,738,004)
- -----------------------------------------------------------------------------
Net decrease (18,893) $ (157,860)
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Six months ended November 30, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 24,274 $ 217,434
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,471 12,956
- -----------------------------------------------------------------------------
25,745 230,390
Shares
repurchased (40,342) (361,304)
- -----------------------------------------------------------------------------
Net decrease (14,597) $(130,914)
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investments has won the DALBAR Service Award 8 times in the past 9
years. In 1997 and 1998, Putnam was the only company to win all three
DALBAR awards: for service to investors, to financial advisors, and to
variable annuity contract holders.*
* HELP YOUR INVESTMENTS GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings account.+
* SWITCH FUNDS EASILY
Within the same class of shares, you can move money from one account to
another without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at the
then-current net asset value, which may be more or less than the original
cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a helpful
Putnam representative. To learn more about Putnam, visit our Web site.
www.putnaminv.com
To make an additional investment in this or any other Putnam fund, contact
your financial advisor or call our toll-free number.
1-800-225-1581
* DALBAR, Inc., an independent research firm, presents the awards to financial
services firms that provide consistently excellent service.
+ Regular investing, of course, does not guarantee a profit or protect against
a loss in a declining market.
Fund information
WEB SITE
www.putnaminv.com
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
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
Jerome J. Jacobs
Vice President
Stephen Oristaglio
Vice President
Susan A. McCormack
Vice President and Fund Manager
Richard A. Monaghan
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
SA050-57645 019/329/537 1/00
