<PAGE> 1
PUTNAM
FLORIDA
TAX EXEMPT
INCOME FUND
ANNUAL REPORT
June 30, 1994
[BOSTON * LONDON * TOKYO LOGO]
<PAGE> 2
PERFORMANCE HIGHLIGHTS
- - The fund's year-to-date total return on June 30, 1994, of -1.79% and -2.55%
at net asset value for class A and class B shares, respectively, surpassed the
average Florida municipal bond fund's -6.29% return, according to Lipper
Analytical Services.*
- - Performance should always be considered in light of a fund's investment
strategy. Putnam Florida Tax Exempt Income Fund is designed for investors
seeking a high level of current income free from federal income taxes,
consistent with capital preservation.
FISCAL 1994 RESULTS AT A GLANCE
<TABLE>
<CAPTION>
CLASS A CLASS B
TOTAL RETURN: NAV POP NAV CDSC
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 months ended 6/30/94
(change in value during period
plus reinvested distributions) -1.79% -6.50% -2.55% -7.15%
</TABLE>
<TABLE>
<CAPTION>
SHARE VALUE: NAV POP NAV
- ----------------------------------------------------------
<S> <C> <C> <C>
6/30/93 $9.53 $10.01 $9.53
- ----------------------------------------------------------
6/30/94 8.77 9.21 8.76
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL CAPITAL
DISTRIBUTIONS: NO. INCOME GAINS GAINS TOTAL
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 13 $0.501833 0.086 0.02 $.0607833
- --------------------------------------------------------------------------------------------
Class B 13 $0.439094 0.086 0.02 $.0545094
- --------------------------------------------------------------------------------------------
Current return:
(end of period:) NAV POP NAV
- ------------------------------------------------------------------------------------------
Current dividend rate(2) 5.81% 5.53% 5.15%
Taxable equivalent(3) 9.62 9.16 8.53
Current 30-day SEC yield(4) 5.60 5.33 4.61
Taxable equivalent(3) 9.27 8.82 7.63
</TABLE>
Performance data represent past results and will differ for each share class.
For performance over longer periods, see pages 8 and 9. POP assumes 4.75%
maximum sales charge. CDSC assumes 5% maximum contingent deferred sales charge.
Effective 1/4/93, the fund began offering class B shares. 1Capital gains, if
any, are taxable for federal and in most cases state purposes. 2Income portion
of most recent distribution, annualized and divided by NAV or POP at end of
period. 3Assumes maximum 39.6% federal tax rate. Results for investors subject
to lower tax rates would not be as advantageous. For some investors, investment
income may also be subject to the federal Alternative Minimum Tax. 4Based only
on investment income, calculated using SEC guidelines.
* Lipper Analytical Services is an independent mutual fund industry research
firm. The Fund's class A and class B shares ranked 22nd and 28th out of 38
funds in one year performance. Class A shares ranked 11th out of 15 funds in
three year performance. Rankings vary over time and do not include the effects
of sales charges. Past performance does not guarantee future results.
2
<PAGE> 3
[PHOTO -- SEE EDGAR APPENDIX]
FROM THE CHAIRMAN
Dear Shareholder:
The first six months of 1994 have been both the best and worst of times for
financial markets worldwide, a reminder that markets are always shifting and
sometimes do so dramatically.
Tax-free municipal bonds are now among the few fixed-income investments that
seem well on their way to a solid recovery. After a buffeting early in the
year, investors have come to realize that tax-free bonds will be in short
supply through the rest of 1994 and that demand will probably outpace supply as
wealthy individuals seek shelter from higher taxes.
Although the unique position of tax-free bonds in the marketplace makes them
somewhat less sensitive to the forces that impact taxable investments, namely
higher interest rates, they are not invulnerable. This means Putnam Management
must continue to keep a keen eye on markets, currencies, and economies around
the world, as well as on the rate of growth in the U.S. economy and the
tentative recoveries now emerging in Europe and Japan.
Despite these strengthening economic fundamentals, many investors remain
apprehensive. While awaiting a more confident mood in the markets, you can take
comfort in the fact that any income you may earn is free from federal income
tax.
Respectfully yours,
/s/ GEORGE PUTNAM
- ----------------
George Putnam
Chairman of the Trustees
August 17, 1994
3
<PAGE> 4
REPORT FROM THE FUND MANAGER
RICHARD WYKE
Fixed-income markets moved from peak to trough in the turbulent atmosphere of
the past 12 months. The Federal Reserve Board, in an attempt to restrict what
had been an extremely accommodative stance on monetary policy, made the first
of four increases in the federal funds rate on February 4, 1994. The increase
in this bellwether short-term interest rate sent the U.S. bond market into a
tailspin.
Our generally cautious and defensive approach enabled Putnam Florida Tax Exempt
Income Fund to hold up relatively well through this topsy-turvy period. The
fund finished its fiscal year on June 30, 1994, with total returns of -1.79%
and -2.55% for class A and class B shares, respectively, based on net asset
value.
While somewhat disappointing, these results were better than those of most
other Florida municipal bond funds. Many of these funds, because of a more
aggressive stance toward interest rates, experienced deeper declines. At the
end of the fiscal year, a Florida investor in the maximum 39.60% federal tax
rate would have had to receive a 9.62% return on a fully taxable investment to
match the fund's 5.81% current dividend rate for class A shares at net asset
value at the end of the period.
- - MANAGING DURATION AND COUPON STRUCTURE
The driving forces behind most fixed-income returns are the prevailing interest
rate environment and whether rates move up or down. Correctly anticipating and
responding to interest rate movements is the primary challenge for fixed-income
portfolio managers. It is also one of the most critical factors in fund
performance.
One of the key tactics we employed during the past year was to shorten the
fund's duration in anticipation of the market's downturn. Duration is a
mathematical formula that indicates how much bond prices will move up or down
with each percentage-point shift in interest rates. Like maturity, with which
it is often confused, duration is measured in years. The shorter the duration,
the less volatility you can generally expect from the portfolio.
4
<PAGE> 5
In a rising interest rate environment, keeping the portfolio's duration
relatively short can be instrumental in helping to protect its value. We
maintained an average duration that was approximately 10% shorter than the
market average.
Adjusting duration is accomplished by a variety of means, which can include
portfolio composition, use of hedging strategies, and, in the case of your
fund, the use of premium-coupon bonds. The coupon is the stated amount of
interest payable annually on a bond's face value.
Prices of bonds tend to fall when interest rates rise. This is especially true
for bonds with coupons that are lower than prevailing interest rates. On the
other hand, prices of premium-coupon bonds, those with coupons higher than
prevailing rates, tend to be less seriously affected. Their higher income
stream represents a greater portion of their return, and this provides at least
a temporary floor for their prices.
Holding premium-coupon bonds in a rising interest rate environment, therefore,
can help reduce price volatility. Your fund's significant weighting in
premium-coupon bonds relative to the market enabled it to be more defensive and
to provide shareholders with attractive levels of dividend income during the
period.
[MUNICIPAL BOND PRICES CHART -- SEE EDGAR APPENDIX]
5
<PAGE> 6
As a result of this emphasis, we sold many of the fund's current-coupon bonds
during the period. In a rising interest rate environment, prices of these
bonds, whose coupons are within half a percentage point of current market
rates, are more likely to decline in value than those of premium-coupon bonds.
These changes to the structure of the portfolio, most of which were instituted
prior to the market sell-off in February and March, are intended to help
improve the fund's long-term performance in both up and down markets.
- - EMPHASIS REMAINS ON HEALTH CARE
In keeping with the fund's defensive posture, the overall credit quality of the
portfolio remains relatively high. At the end of fiscal 1994, insured bonds -
those that carry an automatic AAA credit rating because the insurer guarantees
payment of principal and interest - made up 59.3% of the portfolio.
The securities of hospitals and health maintenance organizations continue to be
a dominant theme. At the end of the period they made up nearly 16.8% of your
fund's portfolio. This remains a dynamic sector of the municipal bond market,
given the anticipated changes that will likely result from the national debate
on health care reforms.
Hospital mergers, the ongoing evolution of managed health care, and the
variations in credit quality among health care bond issuers should continue to
provide many attractive investment opportunities. Our specialized expertise in
this area, combined with rigorous credit research, will continue to guide the
management of this sector.
6
<PAGE> 7
TOP INDUSTRY SECTORS*
- ----------------------------
Transportation 17.4%
- ----------------------------
Healthcare 16.8%
- ----------------------------
Utilities 12.7%
- ----------------------------
Water & Sewer 11.5%
- ----------------------------
* Based on net assets on 6/30/94.
- - OUTLOOK: MUNICIPAL MARKET COULD REMAIN CHOPPY
While demand for tax-free securities remains strong, the supply is down
dramatically from 1993, both within Florida and across the country. If this
correlation continues, fiscal 1995's performance could well prove more
rewarding than that of fiscal 1994 - even in light of recent market volatility.
We anticipate that our strategy for the balance of 1994 will be consistent with
what we have followed thus far. We will maintain a defensive bias in the
portfolio, seeking to keep the fund's coupon structure higher and the duration
lower than average. The fund will remain fully invested and will look for
opportunities in sectors that benefit from an improving economy.
Market volatility could be an ongoing factor in fiscal 1995 decisions.
Depending on the pace of economic growth, further increases in short-term
interest rates by the Fed are possible. We will continue to manage the fund's
duration to seek to lessen the effects of any storminess on the interest rate
front. There are, however, no assurances such efforts will be successful.
Given the state's fast-growing population and vigorous economy, we see a bright
future for Florida municipal securities and will continue working to take full
advantage of it.
7
<PAGE> 8
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's performance.
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions back into the fund. We show total return in two ways: On a
cumulative long-term basis and on average how the fund might have grown each
year over varying periods. For comparative purposes, we show how the fund
performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 6/30/94
<TABLE>
<CAPTION>
LEHMAN BROS.
CLASS A CLASS B MUNICIPAL
NAV POP NAV CDSC BOND INDEX CPI
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year -1.79% -6.50% -2.55% -7.15% 0.20% 2.49%
- -------------------------------------------------------------------------------
3 years 24.30 18.42 -- -- 25.38 8.82
Annual average 7.52 5.80 -- -- 7.83 2.86
- -------------------------------------------------------------------------------
Life of class A 34.31 27.98 -- -- 36.68 12.46
(Since 8/24/90)
Annual average 7.96 6.62 -- -- 8.46 3.10
- -------------------------------------------------------------------------------
Life of class B -- -- 3.57 -0.25 7.32 4.30
(Since 1/4/93)
Annual average -- -- 2.38 -0.17 4.85 2.87
- -------------------------------------------------------------------------------
</TABLE>
Fund performance data do not take into account any adjustment for taxes payable
on reinvested distributions or, for class A shares, distribution fees prior to
implementation of the class A distribution plan on 7/8/93. Effective 1/4/93 the
fund began offering class B shares. Performance of share classes will differ.
Performance data represent past results. Investment returns and principal value
will fluctuate so an investor's shares, when sold, may be worth more or less
than their original cost.
8
<PAGE> 9
[GROWTH OF A $10,000 INVESTMENT CHART -- SEE EDGAR APPENDIX]
TERMS AND DEFINITIONS
CLASS A shares are generally subject to an initial sales charge.
CLASS B shares may be subject to a sales charge upon redemption.
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including any
initial or contingent deferred sales charge.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance figures
shown here assume the maximum 4.75% sales charge.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the time of the
redemption of shares. Your fund's CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
COMPARATIVE BENCHMARKS
LEHMAN BROTHERS MUNICIPAL BOND INDEX is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the municipal
bond market. The index does not take into account brokerage commissions or
other costs, may include bonds different from those in the fund, and may pose
different risks than the fund.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it does not
represent an investment return.
9
<PAGE> 10
LIFE CYCLE INVESTING
As we move through life, our investment needs change. As these needs change, so
does the way we allocate our assets. Here are some basic rules for setting up
and maintaining an investment program and some examples of how assets might be
allocated.
- - DETERMINE YOUR INVESTMENT OBJECTIVES
Objectives may include a new home, college education expenses, or retirement.
- - EVALUATE YOUR RISK TOLERANCE
Generally, risk tolerance is higher for younger investors with longer timelines
and lower for older investors who may depend on their investment for current
income.
- - ALLOCATE YOUR INVESTABLE SAVINGS
Your investment advisor will help you determine how much of your investable
dollars should be allocated to each investment category.
- - CHOOSE THE APPROPRIATE PUTNAM FUNDS
Using Putnam's free exchange privilege, you can adjust your own Putnam
portfolio of funds as your financial needs change - without a service fee.*
Look at the facing page for some ways you can allocate your assets, then turn
the page to see how the Putnam Fund Selector(TM) can help you make your
choices.
* Putnam reserves the right to change or terminate the exchange privilege.
In some cases, a sales charge may apply. See prospectus for details.
10
<PAGE> 11
FOUR WAYS TO ALLOCATE ASSETS
SEEKING MAXIMUM GROWTH
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
RISK TOLERANCE: 30% - 40% Growth and income
Generally
investors with a 40% - 50% Growth [PIE CHART --
higher risk tolerance SEE EDGAR
(often in their 20s and 5% - 20% Income or APPENDIX]
early 30s.)
tax-free income
</TABLE>
SEEKING GROWTH AND SOME INCOME
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
RISK TOLERANCE: 40% - 50% Growth and income
Generally
investors with a 30% - 40% Growth [PIE CHART --
high to moderate SEE EDGAR
risk tolerance 10% - 30% Income or APPENDIX]
(often in their late
30s and early 40s) tax-free income
</TABLE>
SEEKING INCOME AND SOME GROWTH
WITH PROTECTION AGAINST INFLATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
RISK TOLERANCE: 30% - 40% Growth and income
Generally
investors with a 10% - 20% Growth [PIE CHART --
moderate risk SEE EDGAR
tolerance 25% - 60% Income or APPENDIX]
(often in their late
40s and 50s) tax-free income
</TABLE>
SEEKING HIGH CURRENT INCOME AND
PROTECTION AGAINST INFLATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
RISK TOLERANCE: 20% - 30% Growth and income
Generally
investors with 5% - 10% Growth [PIE CHART --
A moderate to SEE EDGAR
low risk 40% - 70% Income or APPENDIX]
tolerance
(often over 60 tax-free income
and retired)
</TABLE>
11
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
For the year ended June 30, 1994
To the Trustees and Shareholders of Putnam Florida Tax Exempt Income Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments owned (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 Florida Tax Exempt Income Fund (the "fund") at June 30, 1994, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards
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 June 30, 1994 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
August 18, 1994
12
<PAGE> 13
PORTFOLIO OF INVESTMENTS OWNED
June 30, 1994
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (95.7%) (A)
PRINCIPAL AMOUNT RATINGS (B) VALUE
<S> <C> <C> <C>
FLORIDA (88.3%)
- ---------------------------------------------------------------------------------------------------
$ 2,345,000 Brevard Cnty., Hlth. Fac. Fin. Auth. Rev. Bonds
(Courtenay Springs Village), 7 1/2 s, 11/15/09 BB/P $ 2,301,031
5,500,000 Brevard Cnty., School Board Certif. of
Participation, Ser. A, American
Municipal Bonds Insurance
Association (AMBAC), 61/2s, 7/1/12 AAA 5,623,750
Broward Cnty., Edl. Fac. Auth. Rev. Bonds
(Nova U. Dorm Project),
2,500,000 Ser. A, 7 1/2 s, 4/1/17 BBB 2,590,625
820,000 Ser. A, 7 1/4 s, 4/1/01 BBB 810,775
2,500,000 (Nova S.E. Univ. Project), 6s, 4/1/10 AAA 2,434,375
1,000,000 Broward Cnty., Hlth. Fac. Auth. Rev. Bonds
(Broward Cnty. Nursing Home), 7 1/2 s, 8/15/20 A 1,066,250
Broward Cnty., Resource Recvy. Rev. Bonds
3,180,000 (South Project), 7.95s, 12/1/08 A 3,446,325
1,420,000 (Broward Waste-to-Energy Project), 7.95s, 12/1/08 A 1,538,925
6,065,000 Cape Coral, Hlth. Fac. Auth. Hosp. Rev. Bonds
(Cape Coral Med. Ctr. Inc. Project), 7 1/2 s, 11/15/21 BBB 6,239,368
Cape Coral, Special Obligation Rev. Bonds,
Federal Security Assurance (FSA)
3,000,000 6 3/8 s, 6/1/09(c) AAA 3,075,000
3,000,000 6 1/4 s, 6/1/06 AAA 3,112,500
Charlotte Cnty., Dev. Auth. Aprt. Fac. Rev.
Bonds, Ser. A,
1,000,000 8 1/8 s, 10/1/10 BBB/P 1,070,000
365,000 8s, 10/1/05 BBB/P 383,706
2,000,000 Charlotte Cnty., Util. Rev. Bonds,
Financial Guaranty Insurance Co. (FGIC), 6 7/8 s,
10/1/21 AAA 2,215,000
2,520,000 Citrus Cnty., Indl. Dev. Auth. Rev. Bonds,
7 1/4 s, 4/1/03 BB/P 2,529,450
1,400,000 Clay Cnty., Multi-Fam. Hsg. Fin. Auth. Rev.
Bonds (Oak Forest), Ser. A, Government
National Mortgage Association (GNMA) Coll.,
7.4s, 12/1/25 AAA 1,489,250
1,500,000 Clay Cnty., Single Fam. Hsg. Fin. Auth. Rev.
Bonds, Ser. A, GNMA Coll., 7.45s, 9/1/23 Aaa 1,569,375
1,100,000 Cocoa, Wtr. & Swr. Rev. Bonds,
Ser. B, AMBAC, 5 1/4 s, 10/1/16 AAA 958,375
1,500,000 Coral Springs, Impt. Dist. Wtr. & Swr. Rev.
Bonds, Municipal Bond Insurance Assn.,
(MBIA), 8 1/4 s, 6/1/14 AAA 1,698,750
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS (B) VALUE
<S> <C> <C> <C>
FLORIDA (CONTINUED)
- ---------------------------------------------------------------------------------------------------
$ 4,250,000 Dade Cnty., Aviation Rev. Bonds,
Ser. B, MBIA, 6.55s, 10/1/13 AAA $ 4,297,813
100,000 Dade Cnty., Hlth. Fac. Auth. Hosp. Rev. Bonds
(North Shore Med. Ctr. Project), AMBAC,
9 1/8 s, 10/1/13 AAA 107,875
1,690,000 Dade Cnty., Single Fam. Hsg. Fin. Auth. Mtge.
Rev. Bonds, Ser. B, GNMA Coll., 8 3/4 s, 7/1/17 AAA 1,776,613
2,325,000 Escambia Cnty., Single Fam. Hsg. Fin. Auth. Mtge.
(Multi-Cnty. Program), Ser. A, GNMA Coll.,
7.15s, 10/1/24 Aaa 2,327,906
FL Hsg. Fin. Agcy. Rev. Bonds
765,000 (Home Ownership Dev. Program), Ser. G-1,
GNMA Coll., 7.9s, 3/1/22 Aaa 794,644
4,810,000 Ser. 1-B, GNMA Coll., 7.1s, 1/1/17 AAA 4,924,238
2,000,000 FL State Board of Ed. Capital Outlay Rev.
Bonds, Ser. E. 5 3/4 s, 6/1/19 AA 1,862,500
FL State Dept. Gen. Svc. Rev. Bonds
(Fac. Mngmnt.),
1,500,000 7 3/4 s, 9/1/16 AAA 1,627,500
7,750,000 AMBAC, 5.4s, 9/1/17 AAA 6,955,625
FL State Mid-Bay Bridge Auth. Rev. Bonds,
Ser. A,
1,500,000 8s, 10/1/06 BBB/P 1,638,750
2,180,000 71/2 s, 10/1/17 BB/P 2,318,975
2,140,000 6.1s, 10/1/22 BBB 1,920,650
2,000,000 FL State Muni. Pwr. Agcy.
Residual Interest Bonds (RIBS), AMBAC, 9.88s,
10/1/20 (acquired 7/10/92 cost $2,101,200)(d) AAA 2,327,500
FL State Muni. Pwr. Agcy. Rev. Bonds,
1,500,000 (Pwr. Supply Project), AMBAC, 6 1/4 s, 10/1/21 AAA 1,603,125
2,600,000 (St. Lucie Project), FGIC, 5.7s, 10/1/16 AAA 2,431,000
FL State Tpk. Auth. Rev. Bonds Ser. A, FGIC
3,700,000 6 1/4 s, 7/1/09 AAA 3,764,750
3,000,000 5 1/4 s, 7/1/22 AAA 2,557,500
2,500,000 5s, 7/1/14 AAA 2,137,500
8,000,000 Gainesville, Util. Syst. Rev. Bonds, Ser. A, 61/2 s,
10/1/22 AA 8,120,000
2,500,000 Gulf Breeze, Local Govt. Rev. Bonds, Ser. E,
FGIC, 7 3/4 s, 12/1/15 AAA 2,768,750
7,000,000 Hillsborough Cnty., Indl. Dev. Auth. Rev. Bonds
(Univ. Cmnty. Hosp), MBIA, 61/2 s, 8/15/19 AAA 7,210,000
3,620,000 Hillsborough Cnty., Aviation Auth. Special
Purpose Rev. Bonds (USAir Project), 8.6s, 1/15/22 Ba 3,665,250
3,000,000 Hillsborough Cnty., Cap. Impt. Program Rev.
Bonds, 8.3s, 8/1/16 AAA 3,232,500
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS (B) VALUE
<S> <C> <C> <C>
FLORIDA (CONTINUED)
- ---------------------------------------------------------------------------------------------------
$ 2,500,000 Hillsborough Cnty., Indl. Dev. Auth. Poll. Control
Rev. Bonds (Tampa Elec. Co. Project), Ser. 91,
7 7/8 s, 8/1/21 (c) AA $ 2,821,875
2,400,000 Hillsborough Cnty., Util. Rev. Bonds, Ser. A,
6 1/2 s, 8/1/16 Baa 2,373,000
1,000,000 Jacksonville, Elec. Auth. Rev. Bonds,
(Bulk Pwr. Supply), Ser. A, 6 3/4 s, 10/1/21 AA 1,092,500
Jacksonville, Hlth. Fac. Auth. Indl. Dev. Rev.
Bonds (Cypress Village Project),
1,350,000 7s, 12/1/22 Baa 1,339,875
3,650,000 7s, 12/1/14 Bbb 3,663,688
990,000 Jacksonville, Hlth. Fac. Auth. Rev. Bonds
(Mental Hlth. Ctr.), 91/8 s, 10/15/19 A/P 1,022,175
2,000,000 Jacksonville, Hlth. Fac. Auth. Variable Rate
Demand Note, (VRDN), MBIA 3 1/4 s, 4/1/15 VMIG1 2,000,000
330,000 Jacksonville, Port Auth. Indl. Dev. Poll.
Control Rev. Bonds (FL Pwr. & Lt. Co. Project),
Ser. 84-B, 9 5/8 s, 6/1/19 A 353,100
3,000,000 Lake Cnty., Res. Recvy. Ind. Dev. Rev. Bonds
(Recovery Group), Ser. A, 5.85s, 10/1/09 BBB 2,730,000
7,000,000 Lee Cnty., Arpt. Rev. Bonds, Ser. A, AMBAC,
5 1/2 s, 10/1/10 AAA 6,615,000
4,000,000 Lee Cnty., Board of Directors Hosp. Inv. Rate
Floater, MBIA, 9.773s, 4/1/20 AAA 4,080,000
2,250,000 Lee Cnty., Cap. & Trans. Fac. Rev. Bonds,
Ser. A, MBIA, 5.55s, 10/1/18 AAA 2,055,937
Leesburg, Hosp. Rev. Bonds
1,000,000 (Leesburg Regl. Med. Ctr. Project),
Ser. 91-A, 7 1/2 s, 7/1/21 AAA 1,143,750
1,750,000 Ser. B, 5.7s, 7/1/18 BBB 1,485,313
Miami, Hlth. Facs. Auth. Rev. Bonds
(Cedars Med. Ctr.), Ser. A,
1,000,000 8 3/8 s, 10/1/17 AAA/P 1,122,500
1,300,000 8.2s, 10/1/02 AAA/P 1,451,125
7,960,000 Orange Cnty., Hlth. Fac. Auth. Rev. Bonds
(Pooled Hosp. Loan Project), Ser. A, FGIC,
7 7/8 s, 12/1/25 AAA 8,188,850
1,835,000 Orange Cnty., Hsg. Fin. Auth. Mtge. Rev. Bonds,
Ser. E, GNMA Coll., 7.9s, 10/1/22 Aaa 1,908,400
3,000,000 Orange Cnty., Tourist Dev. Tax Rev. Bonds,
Ser. A, AMBAC, 61/2 s, 10/1/10 AAA 3,105,000
Orlando & Orange Cnty., Expressway Auth.
Rev. Bonds,
2,500,000 7 1/4 s, 7/1/14 AAA 2,678,125
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS (B) VALUE
<S> <C> <C> <C>
FLORIDA (CONTINUED)
- ----------------------------------------------------------------------------------------------------
$ 2,850,000 FGIC, 5 1/2 s, 7/1/18 AAA $ 2,589,938
4,000,000 AMBAC 5 1/4 s, 7/1/12 AAA 3,575,000
Orlando, Util. Comm. Wtr. & Elec. Rev. Bonds,
10,200,000 Ser. D, 6 3/4 s, 10/1/17 AA 10,824,750
7,500,000 Ser. A, 5 1/4 s, 10/1/23 AA 6,318,750
1,996,000 Osceola Cnty., Indl. Dev. Auth. Rev. Bonds
(Cmnty. Provider Pooled Loan Program),
Ser. A, 7 3/4 s, 7/1/10 AAA 2,065,860
3,350,000 Osceola Cnty., School Board Certif. of
Participation, Ser. A AMBAC, 5 3/4 s, 6/1/14 AAA 3,165,750
2,000,000 Palm Beach Cnty., Arpt. Syst. Rev. Bonds,
MBIA, 7 3/4s, 10/1/10 AAA 2,252,500
Palm Beach Cnty., Hlth. Fac. Auth. Rev. Bonds
(JFK Med. Ctr. Inc. Project),
4,450,000 8 7/8 s, 12/1/18 BBB 5,060,438
7,000,000 FSA, 5 3/4 s, 12/1/14 AAA 6,571,250
215,000 Palm Beach Cnty., Single Fam. Hsg. Fin. Auth.
Mtge. Rev. Bonds, Ser. A, GNMA Coll.
7.2s, 10/1/24 Aaa 224,675
1,500,000 Palm Beach Cnty., Solid Waste Indl. Dev. Rev.
Bonds (Osceola Pwr. LP), Ser. A, 6.95s, 1/1/22 BB/P 1,483,125
4,000,000 Palm Beach Cnty., Student Hsg. Rev. Bonds
(Palm Beach Cmnty. College), Ser. A, 81/2 s, 3/1/23 BB/P 3,880,000
5,000,000 Pinellas Cnty., Poll. Control Rev. Bonds
(FL Pwr. Corp.), 7.2s, 12/1/14 A 5,356,250
655,000 Polk Cnty., Hsg. Fin. Auth. Rev. Bonds, Ser. A,
GNMA Coll., 7 7/8 s, 9/1/22 Aaa 682,837
2,000,000 Polk Cnty. School Board Certif. of Participation,
FSA, 4 7/8 s, 1/1/18 AAA 1,622,500
5,000,000 Port Everglades, Auth. Port Impt. Rev. Bonds,
7 1/8 s, 11/1/16 AAA 5,512,500
2,935,000 Sanibel, Swr. Util. Rev. Bonds, 71/2 s, 8/1/21 Baa 3,342,230
2,390,000 Santa Rosa Cnty., Hlth. Fac. Auth. Rev. Bonds,
(Gulf Breeze Hosp. Inc.), Ser. A, 6.2s, 10/1/14 BBB 2,186,850
1,000,000 Seminole Cnty., School Board Certif. of
Participation, Ser. A., MBIA 61/8 s, 7/1/14 AAA 987,500
2,250,000 South Broward, Hosp. Dist. RIBS Ser. C,
AMBAC, 10.079s, 5/1/21 AAA 2,309,063
775,000 St. Lucie Cnty., Poll. Control Rev. Bonds
(FL Pwr. & Lt. Co. Project), 11s, 10/1/19 A 810,844
3,905,000 St. Lucie Cnty., Util. Syst. Rev. Bonds,
FGIC, 51/2s, 10/1/16 AAA 3,558,431
7,800,000 St. Petersburg, Hlth. Fac. Auth. Rev. Bonds
(Allegheny Hlth.), Ser. A, MBIA, 7s, 12/1/15 AAA 8,287,500
3,820,000 St. Petersburg, Rev. Bonds
(Mirror Lake Project), 81/2 s, 3/1/00 BB/P 1,986,400
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS (B) VALUE
<S> <C> <C> <C>
FLORIDA (CONTINUED)
- ---------------------------------------------------------------------------------------------------
$ 3,490,000 Sumter Cnty., Capital Impt. Rev Bonds, MBIA,
5s, 6/1/24 AAA $ 2,844,350
4,860,000 Sumter Cnty., School Dist. Rev. Bonds
(Multi Dist. Loan Program), Capital Guaranty
Insurance Co., 7.15s, 11/1/15 AAA 5,346,000
9,530,000 Tampa, Cap. Impt. Program Rev. Bonds, Ser. B,
8 3/8 s, 10/1/18 BBB 10,209,012
3,965,000 Tampa, Parking Fac. Rev. Bonds, AMBAC 51/2 s,
10/1/10 AAA 3,732,056
500,000 Tampa, Wtr. & Swr. RIBS, Ser. A, FGIC, 3.34s,
10/1/12 AAA 478,750
1,500,000 Village Ctr., Cmnty. Dev. Dist. FL Util. Rev
Bonds, FGIC, 5 3/8 s, 11/1/23 AAA 1,308,750
1,800,000 Volusia Cnty., Hlth. Fac. Auth. Rev. Bonds
(Memorial Hlth. Syst. Project) 81/8 s, 6/1/08 BBB 2,083,500
------------
276,411,366
------------
PUERTO RICO (7.4%)
- ---------------------------------------------------------------------------------------------------
3,000,000 Cmnwlth. of Puerto Rico General Obligation
(G.O.) Bonds, MBIA 6.45s, 7/1/17 AAA 3,090,000
1,500,000 Cmnwlth. of Puerto Rico, Aqueduct & Swr.
Auth. Rev. Bonds, Ser. A, 7 7/8 s, 7/1/17 BBB 1,597,500
Cmnwlth. of Puerto Rico, Hwy. & Trans. Auth.
Rev. Bonds,
2,400,000 Ser. W 51/2 s, 7/1/17 A 2,121,000
6,250,000 Ser. W, 5 1/4 s, 7/1/20 A 5,257,813
1,000,000 Cmnwlth. of Puerto Rico, Pub. Impt. G.O.
Bonds, 7.7s, 7/1/20 AAA 1,150,000
10,000,000 Puerto Rico Elec. Pwr. Auth. Rev. Bonds, 61/8 s,
7/1/08 A 10,025,000
-----------
23,241,313
------------
TOTAL INVESTMENTS
(cost $303,569,855)(e) $299,652,679
</TABLE>
(a) Percentages indicated are based on total net assets of $313,174,967, which
correspond to a net asset value per class A share and class B share of $8.77
and $8.76, respectively.
(b) The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at June 30, 1994 for the securities listed.
Ratings are generally ascribed to securities at the time of issuance. While the
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings do not necessarily represent what the
agencies should ascribe to these securities at June 30, 1994. Securities rated
by Putnam are indicated by "/P" and are not publicly rated. Ratings are not
covered by the Report of Independent Accountants.
17
<PAGE> 18
(c) A portion of this security was pledged to cover margin requirements for
future contracts at June 30, 1994. The market value segregated with the
custodian for transactions in future contracts was $3,639,375.
(d) Restricted as to public resale. At the date of acquisition, this security
was valued at cost. There were no outstanding unrestricted securities of the
same class as that held. Total market value of restricted securities owned at
June 30, 1994 was $2,327,500 or 0.7% of net assets.
(e) The aggregate identified cost for federal tax purposes is $303,584,222
resulting in gross unrealized appreciation and depreciation of $6,492,613 and
$10,424,156 respectively, or net unrealized depreciation of $3,931,543.
The rates shown on Variable Rate Demand Notes (VRDN), Residual Interest Bonds
(RIBS) and Inverse Floating Rate Notes are the current interest rates at June
30, 1994, which are subject to change based on the terms of the security.
The Fund had the following insurance group concentrations greater than 10% at
June 30, 1994 (as a percentage of net assets): AMBAC 12.1% and MBIA 11.7%.
The Fund had the following industry group concentrations greater than 10% on
June 30, 1994 (as a percentage of net assets): Transportation 17.4%; Healthcare
16.8%; Utilities 12.7%; Water & Sewer 11.5%.
U.S. TREASURY BOND FUTURES OUTSTANDING AT JUNE 30, 1994.
<TABLE>
<CAPTION>
AGGREGATE EXPIRATION UNREALIZED
TOTAL VALUE FACE VALUE DATE APPRECIATION
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bond
- ---------------------------------------------------------------------------------
Futures (Sell) $10,121,873 $10,256,250 Sept 94 $134,377
- ---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 19
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1994
<TABLE>
<S> <C>
ASSETS
- --------------------------------------------------------------------------------------------
Investments in securities at value (identified cost $303,569,855) (Note 1) $299,652,679
- ---------------------------------------------------------------------------------------------
Cash 110,451
- ---------------------------------------------------------------------------------------------
Interest receivable 5,039,690
- ---------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 598,816
- ---------------------------------------------------------------------------------------------
Receivable for securities sold 12,642,845
- ---------------------------------------------------------------------------------------------
Receivable for variation margin on open futures contracts 131,252
- ---------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 32,307
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS 318,208,040
LIABILITIES
- --------------------------------------------------------------------------------------------
Distributions payable to shareholders 390,496
- ---------------------------------------------------------------------------------------------
Payable for securities purchased 1,871,640
- ---------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 2,079,690
- ---------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 472,725
- ---------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 1,748
- ---------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 3,999
- ---------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,289
- ---------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 165,491
- ---------------------------------------------------------------------------------------------
Other accrued expenses 44,995
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES 5,033,073
- ---------------------------------------------------------------------------------------------
NET ASSETS $313,174,967
- ---------------------------------------------------------------------------------------------
REPRESENTED BY
- --------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $320,103,721
- ---------------------------------------------------------------------------------------------
Undistributed net investment income (Notes 1 and 5) 56,157
- ---------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (Notes 1 and 5) (3,202,112)
- ---------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures contacts (3,782,799)
- ---------------------------------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO CAPITAL SHARES OUTSTANDING $313,174,967
- ---------------------------------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- --------------------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($276,245,283 divided by 31,499,499 shares) $8.77
- ---------------------------------------------------------------------------------------------
Offering price per share (100/95.25 of $8.77)* $9.21
- ---------------------------------------------------------------------------------------------
Net asset value and offering price of class B shares
($36,929,684 divided by 4,214,021 shares)+ $8.76
- ---------------------------------------------------------------------------------------------
</TABLE>
* On single retail sales of less than $25,000. On sales of $25,000 or more and
on group sales the offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 20
STATEMENT OF OPERATIONS
Year ended June 30, 1994
<TABLE>
<S> <C>
TAX EXEMPT INTEREST INCOME: $20,136,328
- ----------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,921,362
- ----------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 205,289
- ----------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 15,002
- ----------------------------------------------------------------------------------------
Reports to shareholders 29,636
- ----------------------------------------------------------------------------------------
Postage 21,548
- ----------------------------------------------------------------------------------------
Auditing 16,399
- ----------------------------------------------------------------------------------------
Legal 22,186
- ----------------------------------------------------------------------------------------
Administrative services (Note 2) 6,823
- ----------------------------------------------------------------------------------------
Registration fees 11,993
- ----------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 15,717
- ----------------------------------------------------------------------------------------
Distribution fees -- class A (Note 2) 577,528
- ----------------------------------------------------------------------------------------
Distribution fees -- class B (Note 2) 241,359
- ----------------------------------------------------------------------------------------
Other 16,518
- ----------------------------------------------------------------------------------------
TOTAL EXPENSES 3,101,360
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 17,034,968
- ----------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (3,866,138)
- ----------------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1 and 3) 915,450
- ----------------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures
contracts during the year (20,873,863)
- ----------------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (23,824,551)
- ----------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (6,789,583)
- ----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 21
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------------
1994 1993
<S> <C> <C>
INCREASE IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------------
Net investment income $ 17,034,968 $14,210,952
- -------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (3,866,138) 3,518,716
- -------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on futures contracts 915,450 (221,324)
- -------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and futures contracts (20,873,863) 10,742,202
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (6,789,583) 28,250,546
- -------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
- ------------------------------------------------------------------------------------------------------------------
Net investment income:
Class A (15,593,873) (14,061,548)
Class B (1,398,882) (200,715)
- -------------------------------------------------------------------------------------------------------------------
Net realized gain on investments:
Class A (2,568,554) (2,061,699)
Class B (262,203) --
- -------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments:
Class A (722,405) --
Class B (73,721) --
- -------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 44,663,932 88,030,490
- -------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 17,254,711 99,957,074
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Beginning of year 295,920,256 195,963,182
- -------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income and distributions in excess of net investment
income of $56,157 and $32,884, respectively) $313,174,967 $295,920,256
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 22
FINANCIAL HIGHLIGHTS*
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
JANUARY 4, 1993
(COMMENCEMENT
YEAR ENDED OF OPERATIONS)
JUNE 30 TO JUNE 30
---------- -----------------
1994 1993
---------- -----------------
CLASS B
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.53 $9.17
- -------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net Investment Income .44 .21
- -------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments (.66) .36
- -------------------------------------------------------------------------------------------------
Total from Investment Operations (.22) .57
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net Investment Income (.44) (.21)
- -------------------------------------------------------------------------------------------------
Net Realized Gain on Investments (.09) --
- -------------------------------------------------------------------------------------------------
In excess of Net Realized Gain on Investments (.02) --
- -------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.55) (.21)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $8.76 $9.53
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (B) (2.55) 12.84(C)
- -------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (in thousands) $36,930 $17,881
- -------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets (%) 1.51 .78(d)
- -------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets (%) 4.74 2.21(d)
- -------------------------------------------------------------------------------------------------
Portfolio Turnover (%) 64.83 106.69(d)
- -------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
AUGUST 24, 1990
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED JUNE 30 TO JUNE 30
-------------------------------------------
1994 1993 1992 1991
---------------------------------- ------
CLASS A
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.53 $9.08 $8.65 $8.50
- ---------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------
Net Investment Income .50 .56(a) .60(a) .52(a)
- ---------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments (.65) .53 .45 .15
- ---------------------------------------------------------------------------------------------------------
Total from Investment Operations (.15) 1.09 1.05 .67
- ---------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net Investment Income (.50) (.56) (.60) (.52)
- ---------------------------------------------------------------------------------------------------------
Net Realized Gain on Investments (.09) (.08) (.02) --
- ---------------------------------------------------------------------------------------------------------
In excess of Net Realized Gain on Investments (.02) -- -- --
- ---------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.61) (.64) (.62) (.52)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $8.77 $9.53 $9.08 $8.65
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (B) (1.79) 12.44 12.57 9.46(C)
- ---------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $276,245 $278,039 $195,963 $109,739
- ---------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets (%) .91 .77(a) .60(a) .41(a)(d
- ---------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets (%) 5.38 5.94(a) 6.73(a) 5.94(a)(d
- ---------------------------------------------------------------------------------------------------------
Portfolio Turnover (%) 64.83 106.69 72.73 46.72(d)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Financial highlights for periods ended through June 30, 1992 have been
restated to conform with requirements issued by the SEC in April 1993.
(a) Reflects a voluntary absorption of expenses incurred by the fund and an
expense limitation applicable during the period. As a result of these
limitations, expenses of the fund for the year ended June 30, 1992 and the
period ended June 30, 1991, reflect a reduction of $0.02 and $0.04 per share,
respectively. For the year ended June 30, 1993, expenses reflect a reduction of
less than $0.01 per share.
(b)Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c)Annualized.
(d) Not annualized.
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
June 30, 1994
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as amended, as
a non-diversified, open-end management investment company. The fund seeks as
high a level of current income exempt from federal income tax as Putnam
Investment Management believes is consistent with preservation of capital by
investing primarily in a portfolio of Florida tax-exempt securities.
The fund offers both class A and class B shares. The fund commenced its public
offering of class B shares on January 4, 1993. Class A shares are sold with a
maximum front-end sales charge of 4.75%. Class B shares do not pay a front-end
sales charge, but pay a higher ongoing distribution fee than class A shares,
and may be subject to a contingent deferred sales charge if those shares are
redeemed within six years of purchase. Expenses of the fund are borne pro-rata
by the holders of both classes of shares, except that each class bears expenses
unique to that class (including the distribution fees applicable to such
class). 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 followed by the
fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A SECURITY VALUATION Tax exempt bonds and notes are stated on the basis of
valuations provided by a pricing service, approved by the Trustees, which uses
information with respect to transactions in bonds, quotations from bond
dealers, market transactions in comparable securities and various relationships
between securities in determining value. The fair value of restricted
securities is determined by the Manager following procedures approved by the
Trustees, and 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).
Interest income is recorded on the accrual basis.
C FEDERAL TAXES It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is also
the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code of
1986. Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation of securities held and excise tax on
income and capital gains.
24
<PAGE> 25
At June 30, 1994, the Fund had a capital loss carryover of approximately
$505,868 which may be available to offset realized capital gains to the extent
provided by regulations, this amount will expire June 30, 2002. To the extent
that capital loss carryovers are used to offset realized capital gains, it is
unlikely capital gains will be distributed to shareholders, since any
distribution might be taxable as ordinary income.
D DISTRIBUTIONS TO SHAREHOLDERS Income dividends are declared daily by the fund
and are distributed monthly. Capital gains distributions, if any, are recorded
on the ex-dividend date and paid annually.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences include treatment of realized
and unrealized gain and losses on futures contracts, post-October losses,
distributions for excise tax requirements, market discount and organization
expenses. Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. For the year ended June 30, 1994, the
fund reclassified $21,236 to increase undistributed net investment income,
$544,702 to decrease accumulated net realized loss on investments and $565,938
to decrease paid-in capital.
E AMORTIZATION OF BOND PREMIUM AND DISCOUNT Any premium resulting from the
purchase of securities in excess of maturity value is amortized on a
yield-to-maturity basis. Discount on zero-coupon bonds is accreted according to
the effective yield method.
F FUTURES A futures contract is an agreement between two parties to buy or sell
a security at a set price on a future date. Upon entering into such a contract,
the fund is required to pledge to the broker an amount of cash or securities
equal to the minimum "initial margin" requirements of the exchange. Pursuant to
the contract, the fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as "variation margin," and are recorded by the fund as
unrealized gains or losses. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. The
potential risk to the fund is that the change in value of the underlying
securities may not correspond to the change in value of the futures contracts.
G UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states, and the initial public offering of
its class A
25
<PAGE> 26
shares aggregated $75,474. These expenses are being amortized on a straight
line basis over a five-year period.
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Investment Management, Inc., the fund's Manager, a
wholly-owned subsidiary of Putnam Investments, Inc., for management and
investment advisory services is paid quarterly based on the average net assets
of the fund for the quarter. Such fee is based on the following annual rates:
0.6% of the first $500 million of the fund's average net assets, 0.5% of the
next $500 million, 0.45% of the next $500 million and 0.4% of any amount over
$1.5 billion, subject to reduction in any year by the amount of certain
brokerage commissions and fees (less expenses) received by affiliates of the
Manager on the fund's portfolio transactions.
The fund also reimburses the Manager for the compensation and related expenses
of certain officers of the fund and their staff who provide administrative
services to the fund. The aggregate amount of all such reimbursements is
determined annually by the Trustees. For the year ended June 30, 1994, the fund
paid $6,823 for these services.
Trustees of the fund receive an annual Trustee's fee of $810, and an additional
fee for each Trustees' meeting attended. Trustees who are not interested
persons of the Manager and who serve on committees of the Trustees receive
additional fees for attendance at certain committee meetings.
Custodial functions for the fund are provided by the Putnam Fiduciary Trust
Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing
agent functions are provided by Putnam Investor Services, a division of PFTC.
Fees paid for these investor servicing and custodial functions for the year
ended June 30, 1994 amounted to $205,289.
Investor servicing and custodian fees reported in the Statement of operations
for the year ended June 30, 1994 have been reduced by credits allowed by PFTC.
On July 8, 1993, the fund adopted a distribution plan with respect to its class
A shares (the "Class A Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The purpose of the Class A Plan is to compensate Putnam
Mutual Funds Corp., a wholly owned subsidiary of Putnam Investments Inc., for
services provided and expenses incurred by it in distributing class A shares.
The Trustees have approved payment by the fund to Putnam Mutual Funds Corp. at
an annual rate of 0.20% of average net assets attributable to Class A shares.
For the year ended June 30, 1994, the fund paid Putnam Mutual Funds Corp.
distribution fees of $577,528.
The fund has adopted a Distribution Plan with respect to its class B shares
(the "Class B Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. The purpose of the Class B Plan is to compensate Putnam Mutual Funds
Corp. for
26
<PAGE> 27
services provided and expenses incurred by it in distributing class B shares.
The Class B Plan provides for payments by the fund to Putnam Mutual Funds Corp.
at an annual rate of 0.85% of the fund's average net assets attributable to
class B shares. Payments under the plan cannot exceed 1.00% without shareholder
approval. For the year ended June 30, 1994, the fund paid Putnam Mutual Funds
Corp. net distribution fees of $241,359 for class B shares.
During the year ended June 30, 1994, Putnam Mutual Funds Corp., acting as an
underwriter, received net commissions of $80,999 from the sale of class A
shares of the fund.
A deferred sales charge of up to 1.00% is assessed on certain redemptions of
class A shares purchased as part of an investment of $1 million or more. For
the year ended June 30, 1994, Putnam Mutual Funds Corp., acting as underwriter,
received $584 on such redemptions.
Putnam Mutual Funds Corp. also receives the proceeds on the contingent deferred
sales charges levied on class B share redemptions within six years of purchase.
The charge is based on declining rates, which begin at 5.00% of the net asset
value of the redeemed shares. Putnam Mutual Funds Corp. received contingent
deferred sales charges of $87,903 from redemptions during the year ended June
30, 1994.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 1994, purchases and sales of investment
securities other than short-term municipal obligations aggregated $225,477,916
and $196,388,685, respectively. Purchases and sales of short-term municipal
obligations aggregated $17,600,000 and $18,800,000, respectively. In
determining the net gain or loss on securities sold, the cost of securities has
been determined on the identified cost basis.
Transactions in futures contracts during the year are summarized as follows:
SALES OF FUTURES CONTRACTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------
NUMBER AGGREGATE
OF CONTRACTS FACE VALUE
- ---------------------------------------------------------
<S> <C> <C>
Contracts open
at beginning of year 100 $ 11,115,420
- ---------------------------------------------------------
Contracts opened 1,988 213,943,637
- ---------------------------------------------------------
Contracts closed (1,988) (214,802,807)
- ---------------------------------------------------------
OPEN AT END
OF YEAR 100 $ 10,256,250
- ---------------------------------------------------------
</TABLE>
NOTE 4
CAPITAL SHARES
At June 30, 1994, there was an unlimited number of shares of beneficial
interest authorized, divided into two classes, class A and class B capital
shares. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1994
CLASS A SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Shares sold 7,628,566 $ 71,929,859
- -------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 883,895 8,253,240
- -------------------------------------------------------------------
8,512,461 80,183,099
Shares
repurchased (6,175,278) (57,536,138)
- -------------------------------------------------------------------
Net increase 2,337,183 $ 22,646,961
- -------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1993
CLASS A SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Shares sold 10,345,170 $ 95,952,663
- -------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 756,894 7,021,103
- -------------------------------------------------------------------
11,102,064 102,973,766
Shares
repurchased (3,512,971) (32,555,901)
- ---------------------------------------------------------------------
Net increase 7,589,093 $ 70,417,865
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1994
CLASS B SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Shares sold 2,854,067 $26,806,006
- -------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 82,909 770,376
- -------------------------------------------------------------------
2,936,976 27,576,382
Shares
repurchased (599,788) (5,559,411)
- -------------------------------------------------------------------
Net increase 2,337,188 $22,016,971
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
JANUARY 4, 1993
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1994
CLASS B SHARES AMOUNT
- -------------------------------------------------------------------
<S> <C> <C>
Shares sold 1,899,662 $17,827,168
Shares issued in
connection with
reinvestment of
distributions 7,835 74,081
- -------------------------------------------------------------------
1,907,497 17,901,249
Shares
repurchased (30,664) (288,624)
- -------------------------------------------------------------------
Net increase 1,876,833 $17,612,625
- -------------------------------------------------------------------
</TABLE>
NOTE 5
RECLASSIFICATION OF CAPITAL ACCOUNTS
Effective July 1, 1993, Putnam Florida Tax Exempt Income Fund adopted the
provisions of Statement of Position (SOP) 93-2 "Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
Distributions, by Investment Companies." The purpose of this SOP is to report
the accumulated net investment income (loss) and accumulated net realized gain
(loss) accounts in such a manner as to approximate amounts available for future
distributions (or to offset future realized capital gains) and to achieve
uniformity in the presentation of distributions by investment companies.
As a result of the SOP, the Fund has reclassified $25,592 to increase
undistributed net investment income and decrease additional paid in capital by
the same amount. These adjustments represent the cumulative amounts necessary
to report these balances through June 30, 1993. These reclassifications which
have no impact on the total net asset value of the fund are primarily
attributable to organization expenses, which are treated differently in the
computation of distributable income and capital gains under federal income tax
rules and regulations versus generally accepted accounting principles.
28
<PAGE> 29
FEDERAL TAX INFORMATION
The fund has designated all income dividends paid during the fiscal year as
exempt interest dividends. Thus, 100% of these distributions are exempt from
federal income tax. The Fund also paid long-term capital gains distribution of
$0.013 and $0.013 per share and short-term capital gains of $0.093 and $0.093
on December 27, 1993 on class A and class B shares, respectively. This amount
was previously reported to you on Form 1099 in January 1994. Any additional
capital gains paid subsequent to June 30, 1994 will be reported to you on the
Form 1099 you will receive in January 1995.
29
<PAGE> 30
OUR COMMITMENT TO QUALITY SERVICE
- - CHOOSE AWARD-WINNING SERVICE.
Putnam Investor Services has won the DALBAR Quality Tested Service Seal every
year since the award s 1990 inception. DALBAR, an independent research firm,
ran more than 10,000 tests of 38 shareholder service components. In every
category, Putnam outperformed the industry standard.
- - HELP YOUR INVESTMENT GROW.
Set up a systematic program for investing with as little as $25 a month from a
Putnam money market fund or from your checking or savings account.*
- - SWITCH FUNDS EASILY.
You can move money from one account to another with the same class of shares
without a service charge. (This privilege is subject to change or termination.)
- - ACCESS YOUR MONEY QUICKLY.
You can get checks sent regularly or redeem shares any business day at the
then-current net asset value, which may be more or less than their original
cost.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a helpful
Putnam representative.
- - To make an additional investment in this or any other Putnam fund, contact
your financial advisor or call our toll-free number: 1-800-225-1581.
*Regular investing, of course, does not guarantee a profit or protect against a
loss in a declining market.
30
<PAGE> 31
FUND INFORMATION
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C.Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
James E. Erickson
Vice President
Richard Wyke
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Florida 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.
31
<PAGE> 32
(PUTNAM INVESTMENTS LOGO)
THE PUTNAM FUNDS
One Post Office Square
Boston, Massachusetts 02109
- --------------------------
Bulk Rate
U.S. Postage
PAID
Boston, MA
Permit No. 53749
- --------------------------
037/365-13356
