Putnam
Florida
Tax Exempt
Income
Fund
ANNUAL REPORT
May 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "When the yield on the 30-year Treasury bond spiked to around 6.8% --
after ending last year at a two-year low of 5.9% -- bond investors had a
right to feel panicky. . . . Despite the frightening sell-off, this may
be a good time to hold or even increase your positions in bonds."
Kiplinger Personal Finance Magazine, May 1996
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
16 Portfolio holdings
21 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
One of the fascinating things about market watching is that you can
never tell what's going to trigger a defining event. Often what seems
like a defining event one moment is history the next. Who would have
guessed, for example, that a flat-tax proposal would swirl out of the
presidential primary election campaign to douse the municipal bond
market, only to blow away just as the rest of the bond market was
stumbling on statistics suggesting that inflation might flare up?
These were some of the challenges facing Fund Manager Richard Wyke
during Putnam Florida Tax Exempt Income Fund's fiscal year, which ended
on May 31, 1996. Rick handled them with his usual aplomb as the results
on the following pages reveal.
Besides having the luxury of leaving the day-to-day details to Rick,
shareholders with a long-term investment perspective have the added
advantage of being able to let such events run their course without
undue concern.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
July 17, 1996
Report from the Fund Manager
Richard P. Wyke
A glance at interest rates at the beginning and end of Putnam Florida
Tax Exempt Income Fund's fiscal year, the 12 months ended May 31, 1996,
might suggest that very little had changed in the financial markets over
the course of the year. In fact, nothing could be further from the
truth. The first nine months of your fund's fiscal year were
characterized by falling interest rates, with the most pronounced
decline taking place in the last three months of 1995.
With interest rates approaching 6% in the closing days of December, the
result of two short-term interest cuts by the Federal Reserve Board,
your fund finished calendar 1995 with a total return of 17.35% for class
A shares at net asset value (11.79% at public offering price). By early
March, however, evidence of rapid employment growth fueled fears of
inflation and a possible end to the Federal Reserve's program of
lowering short-term interest rates.
These developments brought the 10-month bond market rally to a sudden
halt. The performance of the fund, like that of most other fixed-income
investments, suffered in the wake of ongoing signs of a stronger
economy. However, despite the significant headway made early in the
period, your fund's class A share return of 3.04% at net asset value
(NAV) for the 12 months ended May 31, 1996, came in somewhat below the
3.29% average for the Florida municipal bond funds tracked by Lipper
Analytical Services over this period. The return for class A shares at
public offering price POP was -1.80%; returns for class B and class M
shares at NAV and POP, which can be found on pages 8 and 9, show a
similar pattern.
* MUNICIPALS SHOW FAVORABLE RELATIVE PERFORMANCE
During the final weeks of the fiscal year, bond prices had recovered
somewhat as further economic news indicated a more moderate growth pace.
The rally proved short-lived, however; comments from several Federal
Reserve officials hinting at the prospect of higher short-term interest
rates over the next few months unnerved the market shortly after
Memorial Day.
While this environment has been a difficult one for most fixed-income
securities, prices of tax-exempt bonds have fared better than those of
taxables since the beginning of this year. In fact, since last December,
municipal yields have fallen from approximately 89% of comparable
Treasury bonds to 83% as of late May.
The main reason for this outperformance is the apparent reduced
likelihood of a flat tax, which could jeopardize the tax advantages
enjoyed by municipals. Although we expect broader tax reform to become a
prominent campaign issue as the presidential election gets under way,
enactment of a flat tax appears to be off the table for the time being.
In our judgment, this development removes a large obstacle from the
municipal market, providing the potential for continued improvement
relative to taxable bonds.
Perhaps the brightest spot for municipals in the near term is the
possibility of a significant inflow of cash. In June and July, investors
are expected to receive over $60 billion from municipal bond calls,
maturities, and interest payments. Should even a portion of this cash
re-enter the municipal market, we suspect prices could react quite
favorably.
* SECTOR ALLOCATION HELD STEADY; BULLETED STRATEGY SOFTENS IMPACT OF
RATE REVERSAL
The areas of the municipal bond market in which your fund invests have
changed very little since the beginning of the fiscal year. A lack of
change in sector allocation, however, should not be confused with a lack
of change in the bonds held in the portfolio. In the daily management of
the fund, we continually search for municipal bonds that offer the right
balance of credit quality, yield, and relative price stability. This
entails a constant re-evaluation of current portfolio holdings vis-a-vis
those offered in the marketplace. Under the right circumstances, we may
buy or sell bonds in order to take advantage of differences in such
factors as coupon rates, maturity, and marketability.
[GRAPHIC OMITTED: horizonal bar chart TOP INDUSTRY SECTORS*]
Hospitals/health care 20.9%
Education 14.4%
Utilities 13.5%
Transportation 12.4%
Water and sewerage 7.5%
Footnote reads:
*Based on net assets as of 5/31/96. Holdings will vary over time.
Just after the fiscal midyear, we reduced our position in prerefunded
bonds. These bonds typically carry lower yields and tend to have shorter
maturities than other bonds farther out the yield curve. Through their
sale, we were able to shift approximately 10% of the portfolio's assets
into bonds that fell into the middle of the yield curve. This represents
a change from a more diversified maturity structure to what is known as
a bulleted strategy.
Besides achieving a yield boost, these intermediate bonds, which have a
6- to 10-year maturity horizon, have historically provided attractive
income with greater relative price stability than long-term bonds. The
benefits of our bulleted strategy became apparent this spring, when
rates suddenly reversed direction. When the yield curve steepened, the
portfolio was able to retain more of its value than otherwise would have
been the case. That's because less volatile, shorter-maturity bonds
generally retain more of their value in a rising interest rate market
than more volatile longer-maturity bonds.
* SECTORS POISED FOR FUTURE APPRECIATION
Health-care investments, which constituted approximately 21% of the
portfolio at the fiscal year's end, have made a particularly strong
contribution to the fund's performance during the past 12 months. This
relatively heavy weighting stems from our perception that on credit-by-
credit and market-by-market bases, hospitals continue to offer some of
the best values in Florida's municipal market.
We believe the full potential of the resource-recovery and cogeneration
sectors has yet to be realized. Like any other new industry, these
sectors represent a certain degree of risk for investors. However,
intensive scrutiny of bond issuers' credit quality, funding sources, and
prospects has guided the fund's investment process. These businesses,
which are devoted to recycling and converting trash into fuel, should
become more valuable as the nation becomes more environmentally
conscious. As they gain broader acceptability, it's likely they will
receive higher credit ratings. Resource-recovery projects in Martin
County and the Palm Beach area, for example, show particular promise as
investments.
[GRAPHIC OMITTED: pie chart PORTFOLIO QUALITY OVERVIEW*]
A 9.0%
Aa 7.1%
Aaa 60.3%
Ba 4.4%
Baa 18.2%
VMIG1 1.0%
Footnote reads:
*As a percentage of market value as of 5/31/96. A bond rated Baa or
higher is considered investment grade. All ratings reflect Moody's
descriptions, unless noted otherwise; percentages may include unrated
bonds considered by Putnam Management to be of comparable quality.
Ratings will vary over time.
* GUARDED APPROACH NECESSARY
Crosscurrents in economic data have made it difficult to gauge the
underlying strength of the economy and the real risk of inflation. While
this is fostering uncertainty about the future direction of interest
rates, we believe the Federal Reserve will continue its present monetary
policy until there is compelling evidence to suggest the economy is
overheating.
There is no doubt that the steadily growing economy presents a
challenging environment for fixed-income investing, however, and clearly
requires a more cautious strategy. Careful attention to bond structure
and emphasis on larger well-known issuers will play an important role in
enhancing the price stability and liquidity of your fund as it moves
into its new fiscal period.
On a cheerier note, the summer months have historically been friendly to
municipal bonds, as cash from interest payments and bond calls is
frequently reinvested in the tax-exempt market. New-issue supply over
the next few months is not expected to keep pace with this year's
potential demand, creating the opportunity for a favorable supply/demand
imbalance. Sustained interest from nontraditional buyers, including
banks and insurance companies, could provide further support. In
addition, as the risk of a flat tax diminishes, municipal returns could
continue to outpace those of taxables throughout the course of the year.
The views here are exclusively those of Putnam Management. They are not
meant as investment advice. Although the described holdings were viewed
favorably as of 5/31/96, there is no guarantee the fund will continue to
hold these securities in the future.
Performance summary
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 tax
consistent with preservation of capital, by investing in securities
exempt from the Florida intangibles tax.
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 in 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.
TOTAL RETURN FOR PERIODS ENDED 5/31/96
Class A Class B Class M
(inception date) (8/24/90) (1/4/93) (5/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 3.04% -1.80% 2.37% -2.52% 2.76% -0.62%
- ------------------------------------------------------------------------
5 years 40.19 33.60 -- -- -- --
Annual average 6.99 5.96 -- -- -- --
- ------------------------------------------------------------------------
Life of class 51.65 44.51 15.62 12.71 6.12 2.65
Annual average 7.48 6.59 4.35 3.57 5.60 2.43
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Class A share
performance data do not take into account distribution fees prior to
implementation of the class A distribution plan in 1993. They do not
take into account any adjustment for taxes payable on reinvested
distributions. Investment returns and net asset value will fluctuate so
that an investor's shares, when sold, may be worth more or less than
their original cost. POP assumes 4.75% maximum sales charge for class A
shares and 3.25% for class M shares. CDSC for class B shares assumes
applicable contingent deferred sales charge with the maximum being 5%.
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 5/31/96
Lehman Bros.
Municipal Consumer
Bond Index Price Index
- ------------------------------------------------------------------------
1 year 4.57 2.89
- ------------------------------------------------------------------------
5 years 41.06 15.49
Annual average 7.12 2.92
- ------------------------------------------------------------------------
Life of class A 53.92 19.00
Annual average 7.79 3.07
- ------------------------------------------------------------------------
Life of class B 20.86 10.36
Annual average 5.71 2.92
- ------------------------------------------------------------------------
Life of class M 7.91 3.09
Annual average 7.25 2.84
- ------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 6/30/96
(most recent calendar quarter)
Class A Class B Class M
(inception date) (8/24/90) (1/4/93) (5/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 5.55% 0.49% 4.87% -0.13% 5.25% 1.84%
- ------------------------------------------------------------------------
5 years 41.72 35.00 -- -- -- --
Annual average 7.22 6.19 -- -- -- --
- ------------------------------------------------------------------------
Life of class 53.12 45.91 16.70 13.77 7.13 3.63
Annual average 7.56 6.67 4.52 3.76 6.06 3.10
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. 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.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,00 INVESTMENT]
Cumulative total return pf a $10,00 investment since 8/24/90
(plot points for 10-year total return mountain chart)
Date/year Fund at POP Lehman Bros. Muni Bond Index CPI
8/24/90 9525 10000 10000
5/31/91 10307 10912 10304
5/31/92 11389 11983 10616
5/31/93 12834 13417 10957
5/31/94 12839 13748 11208
5/31/95 14024 14720 11565
5/31/96 14451 15392 11900
Footnote reads:
Past performance is no assurance of future results. A $10,000 investment
in the fund's class B shares at inception on 1/4/93 would have been
valued at $11,562 on 5/31/96 ($11,271 with a redemption at the end of
the period). A $10,000 investment in the fund's class M shares at
inception on 5/1/95 would have been valued at $10,612 at net asset value
on 5/31/96 ($10,265 at public offering price).
PRICE AND DISTRIBUTION INFORMATION
12 months ended 5/31/96
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 12 12 12
- ------------------------------------------------------------------------
Income $0.484843 $0.424823 $0.459100
- ------------------------------------------------------------------------
Capital gains1 -- -- --
- ------------------------------------------------------------------------
Total $0.484843 $0.424823 $0.459100
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
5/31/95 $9.12 $9.57 $9.12 $9.12 $9.43
- ------------------------------------------------------------------------
5/31/96 8.91 9.35 8.91 8.91 9.21
- ------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------
Current dividend rate2 5.38% 5.13% 4.73% 5.08% 4.91%
- ------------------------------------------------------------------------
Taxable equivalent3 8.91 8.49 7.83 8.41 8.13
- ------------------------------------------------------------------------
Current 30-day SEC yield4 5.24 4.99 4.58 4.93 4.77
- ------------------------------------------------------------------------
Taxable equivalent3 8.68 8.26 7.58 8.16 7.90
- ------------------------------------------------------------------------
1Capital gains, if any, are taxable for federal and, in most cases,
state tax purposes. For some investors, investment income may also be
subject to the federal alternative minimum tax. Investment income may be
subject to state and local taxes.
2Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
3Assumes maximum federal tax rate of 39.60%. Results for investors
subject to lower tax rates would not be as advantageous.
4Based on investment income, calculated using SEC guidelines.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
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 maximum 4.75% sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
COMPARATIVE BENCHMARKS
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the
municipal bond market. The index does not take into account brokerage
commissions or other costs, may include bonds different from those in
the fund, and may pose different risks than the fund. It is not possible
to invest directly in an index.
Consumer Price Index (CPI ) is a commonly used measure of inflation; it
does not represent an investment return.
A Putnam perspective on risk and reward
You've probably been told how important it is to understand the
relationship between an investment's potential rewards and its
accompanying risks. Given the cautionary nature of such
instructions, it may take most investors a while to realize that risk
has a positive side.
Every risk signals a potential reward. Selecting only those investments
that offer the greatest degree of security generally leads to only
modest rewards. Furthermore, even insured or guaranteed investments may
be subject to changes in their rates of return or, in some cases, in
their principal values. Experienced investors know that no investment is
truly risk free and are therefore willing to take on some measure of
risk in order to increase their potential gains.
The greater the risk, the greater the potential reward. Accepting an
appropriate level of investment risk can give you a better chance of
outpacing inflation over time and seeking to maximize your investment's
return. How much risk? Your financial advisor's feedback and your time
horizon can make all the difference in determining how much risk is
compatible with your investment goals and your peace of mind.
* FITTING YOUR FUND SELECTION TO YOUR
RISK TOLERANCE
How do you find the right balance between investment risks and their
potential rewards? It's helpful to understand the types of risks that
can apply to different types of investments, and to look at your own
portfolio with this perspective.
For short-term goals, your first priority may be managing market risk.
Longer-term investors may be more concerned with inflation risk. And all
income-oriented investors should consider interest-rate, credit, and
prepayment risks carefully. Within each of Putnam's four investment
categories, you can select funds with differing levels of risk and
reward potential to customize your portfolio.
This list covers only the most general types of risks; however, each
investment will also have its own specific risks. You will find a more
detailed discussion of these risk considerations in each fund's
prospectus.
* A RUNDOWN OF RISK TYPES
MARKET RISK Most important for stock funds, but relevant to all funds,
this is a measure of how sensitive a fund's holdings are to changes in
general market conditions. Remember, though, that securities that lose
value quickly in market declines may also show the strongest gains in
more favorable environments.
INTEREST-RATE RISK Since bond prices fall as interest rates rise, this
type of risk is a particular concern for fixed-income inves-
tors. However, interest-rate increases can also have a substantial
negative effect on the stock market.
INFLATION RISK If your investments cannot keep pace with inflation, your
money will begin to lose its purchasing power. Stock investments are
generally considered among the best ways of addressing inflation risk
over the long term.
CREDIT AND PREPAYMENT RISK Credit risk is the concern that the
security's issuer will not be able to meet its payment, while prepayment
risk involves the premature payoff of a loan, with a resulting loss of
interest income. Professional management and in-depth research are
invaluable in managing both these risks.
LIQUIDITY RISK Not all investments can be readily converted into cash at
their perceived market values. Liquidity risk can affect the price of
securities held in the fund's portfolio and, thus, the fund's share
prices.
Report of independent accountants
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 May 31, 1996, 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 May 31, 1996 by correspondence with
the custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
July 17, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
May 31, 1996
Key to Abbreviations
AMBAC - AMBAC Indemnity Corporation
CGIC - Capital Guaranty Insurance Corporation
CLI Insd. - College Construction Loan Insurance Association
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Company
FSA - Financial Security Assurance
GNMA Coll. - Government National Mortgage Association Collateralized
G.O. Bonds - General Obligation Bonds
IFB - Inverse Floating Rate Bonds
LOC - Letter of Credit
MBIA - Municipal Bond Investors Assurance Corporation
PSFG - Permanent School Fund Guarantee
MUNICIPAL BONDS AND NOTES (99.4%)*
PRINCIPAL AMOUNT RATINGS** VALUE
California (3.1%)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$3,000,000 California State, G.O. Bonds, 7s, 8/01/05 A $ 3,367,500
3,355,000 Contra Costa, CA Transit Auth. Rev Bonds Ser. A, FGIC, 6s, 3/1/07 AAA 3,539,525
2,250,000 Northern, CA Transmission Rev. Bonds (Oregon Transmission Project),
Ser. A, MBIA, 6 1/2s, 5/1/16 AAA 2,359,688
------------
9,266,713
Florida (80.2%)
- --------------------------------------------------------------------------------------------------------------------------------
Brevard Cnty., Hlth. Fac. Fin. Auth. Rev. Bonds
(Courtenay Springs Village)
2,000,000 7 3/4s, 11/15/17 BB/P 2,085,000
2,345,000 7 1/2s, 11/15/09 BB/P 2,421,213
Broward Cnty. Resource Recvy. Rev. Bonds
6,835,000 (SES Broward Cnty. LP South Project), 7.95s, 12/1/08 A 7,509,956
1,340,000 (Waste-Energy LP North Project), 7.95s, 12/1/08 A 1,472,325
Broward Cnty., Edl. Fac. Auth. Rev. Bonds
(Nova U. Dorm Project), Ser. A,
2,500,000 7 1/2s, 4/1/17 BBB 2,834,375
605,000 7 1/4s, 4/1/01 BBB 669,281
2,500,000 Broward Cnty., Edl. Fac. Rev. Bonds
(Nova S.E. Univ. Project), CLI Insd., 6s, 4/1/10 AAA 2,515,625
1,000,000 Broward Cnty., Hlth. Fac. Auth. Rev. Bonds
(Broward Cnty. Nursing Home), 7 1/2s, 8/15/20
(Allied Irish Banks PLC LOC) A 1,071,250
1,400,000 Clay Cnty., Multi-Fam. Hsg. Fin. Auth. Rev. Bonds
(Oak Forest), Ser. A, GNMA Coll., 7.4s, 12/1/25 AAA 1,475,250
1,875,000 Clay Cnty., Single Fam. Hsg. Fin. Auth. Rev. Bonds,
Ser. A, GNMA Coll., 7.45s, 9/1/23 AAA 1,950,000
13,490,000 Collier Cnty., School Board COP, FSA, 5s, 2/15/16 AAA 11,904,925
1,500,000 Coral Springs Impt. Dist. Wtr. & Swr. Rev. Bonds,
MBIA, 8 1/4s, 6/1/14 AAA 1,642,500
2,450,000 Correctional Facility, South Bay COP, MBIA, 5s, 8/1/17 AAA 2,165,188
2,800,000 Dade Cnty., Adjustable Rate Rev. Bonds, 3.8s,
9/1/20 (Barnett Bank of South Florida LOC) VMIG1 2,800,000
2,500,000 Dade Cnty., Seaport G.O. Bonds, AMBAC, 6 1/4s, 10/1/21# AAA 2,706,250
1,690,000 Dade Cnty., Single Fam. Hsg. Fin. Auth. Mtge. Rev. Bonds,
Ser. B, GNMA Coll., 8 3/4s, 7/1/17 AAA 1,745,263
2,335,000 Escambia Cnty., Single Fam. Hsg. Fin. Auth. Mtge. Rev. Bonds
(Multi-Cnty. Program), Ser. A, GNMA Coll., 7.15s, 10/1/24 AAA 2,349,594
2,000,000 Escambia Cnty., Ctl. Rev. Bonds, 6.9s, 8/1/22 Baa 2,090,000
3,750,000 First FL Gov't Fing. Commn. Rev. Bonds, AMBAC, 6s, 7/1/09 AAA 3,918,750
FL Hsg. Fin. Agcy. Rev. Bonds (Home Ownership Dev. Program)
635,000 Ser. G-1, GNMA Coll., 7.9s, 3/1/22 AAA 669,925
4,605,000 Ser. 1-B, GNMA Coll., 7.1s, 1/1/17 AAA 4,766,175
3,000,000 FL State Board of Ed. G.O. Bonds, 6.4s, 6/1/19 AA 3,135,000
4,500,000 FL State Board of Ed. Rev. Bonds (Cap. Outlay
Pub. Ed.), Ser. D, 5 1/8s, 6/1/18 AA 4,038,750
7,500,000 FL State Deposit National Resources Rev. Bonds,
AMBAC, 5 3/4s, 7/1/10 AAA 7,575,000
FL State Mid-Bay Bridge Auth. Rev. Bonds, Ser. A
1,500,000 8s, 10/1/06 BBB/P 1,670,625
2,180,000 7 1/2s, 10/1/17 BB/P 2,378,925
2,140,000 6.1s, 10/1/22 BBB/P 2,065,100
2,000,000 FL State Muni. Pwr. Agcy. IFB, AMBAC, 8.538s,
10/1/20 (acquired 7/10/92, cost $2,101,200)(double dagger) AAA 2,392,500
5,000,000 FL State Tpk. Auth. Rev. Bonds, Ser. A, FGIC, 5s, 7/1/19 AAA 4,406,250
Gainsville FL Utilitiy Rev. Bonds, Ser. A
2,000,000 5s, 10/1/16 AA 1,760,000
1,500,000 5s, 10/1/15 AA 1,325,625
2,500,000 Gulf Breeze, Local Gov't Rev. Bonds, Ser. E, FGIC, 7 3/4s, 12/1/15 AAA 2,781,250
Hillsborough Cnty., Indl. Dev. Auth. Poll. Control
Rev. Bonds (Tampa Elec. Co. Project)
2,500,000 Ser. 91, 7 7/8s, 8/1/21 AA 2,856,250
3,645,000 6 1/4s, 12/1/34 AA 3,699,675
2,400,000 Hillsborough Cnty., Util. Rev. Bonds, Ser. A, FSA, 6 1/2s, 8/1/16 AAA 2,520,000
5,000,000 Jacksonville, Elec. Auth. Rev. Bonds (Johns River Park System),
Ser. II, 5 1/4s, 10/1/20 AA 4,500,000
Jacksonville, Hlth. Fac. Auth. Indl. Dev. Rev. Bonds
(Cypress Village Project)
1,350,000 7s, 12/1/22 Baa 1,355,063
3,650,000 7s, 12/1/14 Baa 3,691,063
970,000 Jacksonville, Hlth. Fac. Auth. Rev. Bonds (Mental Hlth. Ctr.),
9 1/8s, 10/15/19 Baa 1,000,313
3,000,000 Lake Cnty. Res. Rcvy. Ind. Dev. Rev. Bonds (Rcvy. Group),
Ser. A, 5.85s, 10/1/09 Baa 2,816,250
Largo Sun Coast Hlth. Syst. Rev. Bonds
2,000,000 6.3s, 3/1/20 BBB 1,762,500
1,000,000 6.2s, 3/1/13 BBB 897,500
Lee Cnty., School Board COP, Ser. A, FSA
1,500,000 5s, 8/1/09 AAA 1,408,125
1,500,000 5s, 8/1/10 AAA 1,389,375
Lee Cnty., Board of Directors Hosp. IFB, MBIA
4,000,000 9.215s, 4/1/20 AAA 4,365,000
5,000,000 (Lee Memorial Hosp.), 8.713s, 3/26/20 AAA 5,231,250
3,625,000 Lee Cnty., COP (Master Lease Project), MBIA, 5s, 10/1/10 AAA 3,353,125
Leesburg Hosp. Rev. Bonds (Leesburg Regl. Med. Ctr. Project)
1,000,000 Ser. 91-A, 7 1/2s, 7/1/21 AAA 1,152,500
2,065,000 6 1/8s, 7/1/18 A 1,992,725
1,750,000 Ser. B, 5.7s, 7/1/18 A 1,601,250
2,500,000 Martin Cnty., Indl. Dev. Auth. Rev. Bonds
(Indiantown Cogeneration Project B), 8.05s, 12/15/25 Baa 2,809,375
4,000,000 'Orange Cnty., Hlth. Fac. Auth. IFB, MBIA 9.950s, 10/1/14
(acquired 4/19/95, cost $5,273,120)(double dagger) AAA 5,060,000
10,000 Orange Cnty., Hlth. Fac. Auth. Rev. Bonds (Pooled Hospital Loan)
Ser. A, FGIC, 7 7/8s, 12/1/25 AAA 10,500
1,605,000 Orange Cnty., Hsg. Fin. Auth. Mtge. Rev. Bonds, Ser. E, GNMA Coll.,
7.9s, 10/1/22 AAA 1,661,175
1,996,000 Osceola Cnty., Indl. Dev. Auth. Rev. Bonds
(Cmnty. Provider Pooled Loan Program), Ser. A, FSA, 7 3/4s, 7/1/10 AAA 2,108,275
2,000,000 Palm Beach Cnty., Arpt. Syst. Rev. Bonds, MBIA, 7 3/4s, 10/1/10 AAA 2,285,000
7,000,000 Palm Beach Cnty., School Board COP, Ser. A, AMBAC, 6 3/8s, 8/1/15 AAA 7,297,500
Palm Beach Cnty., Solid Waste Indl. Dev. Rev. Bonds
2,000,000 (Okeelanta Pwr. & Lt. Project), Ser. A, 6.85s, 2/15/21 BB/P 1,925,000
1,500,000 (Osceola Pwr. Ltd.), Ser. A, 6.95s, 1/1/22 BB/P 1,451,250
3,000,000 (Osceola Pwr. Ltd. Partnership), Ser. A, 6.85s, 1/1/14 BB/P 2,932,500
Palm Beach Cnty., Hlth. Fac. Auth. Rev. Bonds
(JFK Med. Ctr. Inc. Project)
3,975,000 Prerefunded 8 7/8s, 12/1/18 AAA 4,471,875
1,770,000 8 7/8s, 12/1/18 AAA/P 1,993,463
4,000,000 FSA, 5 3/4s, 12/1/14 AAA 4,265,000
215,000 Palm Beach Cnty., Single Fam. Hsg. Fin. Auth. Mtge. Rev. Bonds,
Ser. A, GNMA Coll., 7.2s, 10/1/24 AAA 226,288
5,000,000 Pinellas, Cnty. Poll. Control Rev. Bonds (FL Pwr. Corp.),
7.2s, 12/1/14 A 5,418,750
2,000,000 Polk, Cnty. School Board COP, FSA, 4 7/8s, 1/1/18 AAA 1,722,500
Port Everglades, Auth. Port. Impt. Rev. Bonds
5,000,000 7 1/8s, 11/1/16 AAA 5,850,000
5,000,000 Ser. A, 5s, 9/1/16 BBB 4,187,500
8,000,000 Reedy Creek, Impt. Dist. Rev. Bonds, Ser. C, AMBAC, 4 3/4s, 6/1/15 AAA 6,930,000
2,935,000 Sanibel Swr. Util. Rev. Bonds, 7 1/2s, 8/1/21 AAA/P 3,345,900
2,390,000 Santa Rosa Cnty., Hlth. Fac. Auth. Rev. Bonds
(Gulf Breeze Hosp. Inc.), Ser. A, 6.2s, 10/1/14 BBB 2,312,325
2,675,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds,
Ser. A-1, FSA, 7.05s, 1/1/30 AAA 2,778,656
2,250,000 South Broward, Hosp. Dist. IFB, Ser. C, AMBAC, 9.237s, 5/13/21 AAA 2,688,750
3,905,000 St. Lucie Cnty., Util. Syst. Rev. Bonds, FGIC, 5 1/2s, 10/1/16 AAA 3,743,919
7,800,000 St. Petersburg, Hlth. Fac. Auth. Rev. Bonds (Allegany Hlth.),
Ser. A, MBIA, 7s, 12/1/15 AAA 8,589,750
4,860,000 Sumter Cnty. School Dist. Rev. Bonds (Multi Dist. Loan Program),
CGIC, 7.15s, 11/1/15 AAA 5,649,750
Tampa Rev. Bonds
6,000,000 (Allegheny Hlth. Syst. St. Joseph), MBIA, 6 1/2s, 12/1/23 AAA 6,465,000
2,000,000 (Water & Sewer), FGIC, 5 1/8s, 10/1/17 AAA 1,792,500
1,800,000 Volusia Cnty., Hlth. Fac. Auth. Rev. Bonds
(Hosp.-Facs Memorial Hlth. Syst. Project), 8 1/8s, 6/1/08 AAA/P 2,052,000
------------
241,908,335
Indiana (1.7%)
- --------------------------------------------------------------------------------------------------------------------------------
5,000,000 Indianapolis Indl. Arpt. Auth. Special Fac. Rev. Bonds
(Federal Express Corp. Project), 7.1s, 1/15/17 Baa 5,193,750
Missouri (0.9%)
- --------------------------------------------------------------------------------------------------------------------------------
2,500,000 Siketston, MO. Elec. Rev. Bonds. MBIA, 6s, 6/1/13 AAA 2,584,370
New York (2.2%)
- --------------------------------------------------------------------------------------------------------------------------------
6,910,000 NY City, G.O. Bonds, Ser. I, 5 3/4s, 3/15/09 Baa 6,521,313
Pennsylvania (1.4%)
- --------------------------------------------------------------------------------------------------------------------------------
4,520,000 Penn St. G.O. Bonds, FGIC, 5 3/8s, 5/15/14 ## AAA 4,271,400
Puerto Rico (8.5%)
- --------------------------------------------------------------------------------------------------------------------------------
1,500,000 Cmnwlth of PR, Aqueduct & Swr. Auth. Rev. Bonds,
Ser. A, 7 7/8s, 7/1/17 Baa 1,636,875
1,000,000 Cmnwlth. of PR, Impt. G.O. Bonds, 7.7s, 7/1/20 AAA 1,130,000
1,000,000 Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds,
Ser. T, 6 5/8s, 7/1/18 Baa 1,101,250
3,000,000 Cmnwlth. of PR, G.O. Bonds, MBIA, 6.45s, 7/1/17 AAA 3,150,000
PR Elec. Pwr. Auth. Rev. Bonds,
4,500,000 7s, 7/1/07 Baa 5,062,500
4,750,000 6 3/8s, 7/1/24 Baa 4,839,063
5,000,000 PR Hwy & Trans Auth. Rev. Bonds, 5 1/2s, 7/1/18 A 4,643,750
3,800,000 PR Indl. Tourist Edl. Med. & Environ. Control Facs.
Fing. Auth. Hosp. Rev. Bonds Ser. A, MBIA, 6 1/4s, 7/1/16 AAA 3,918,750
------------
25,482,188
Texas (1.4%)
- --------------------------------------------------------------------------------------------------------------------------------
5,000,000 El Paso, TX School District G.O. Bonds, PSFG, 4 1/2s, 8/15/11 AAA 4,387,500
- --------------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $297,004,845) *** $299,615,569
- --------------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $301,447,172.
** The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
May 31, 1996 for the securities listed. Ratings are generally ascribed to securities at the time of issuance.
While the agencies may from time to time revise such ratings, they undertake no obligation to do so,
and the ratings do not necessarily represent what the agencies would ascribe to these securities at
May 31, 1996. Securities rated by Putnam are indicated by "/P" and are not puclicly rated. Ratings are
not covered by the Report of independent accountants.
(double dagger) Restricted as to public resale. The total market value of restricted securities held at May 31, 1996 was
$7,452,500 or 2.5% of net assets.
# A portion of this security was pledged and segregated with the custodian to cover margin requirements for
futures contract at May 31, 1996. The market value of the segregated security with the custodian for
transactions on futures contracts is $584,550 or less than 1.0% of net assets.
## When-issued securities, (Note 1).
*** The aggregate identified cost for federal income tax purposes is $297,021,881, resulting in gross unrealized
appreciation and depreciation of $8,701,744 and $6,108,056, respectively, or net unrealized appreciation
of $2,593,688.
The fund had the following insurance concentrations greater than 10% of net assets at May 31, 1996:
MBIA 15.2%
AMBAC 11.1
The fund had the following industry group concentrations greater than 10% of net assets at May 31, 1996:
Hospitals/healthcare 20.9%
Education 14.4
Utilities 13.5
Transportation 12.4
The rates shown on Inverse Floating Rate Bonds (IFB), which are securities paying interest rates that vary
inversely to changes in the market interest rates, are the current interest rates and Adjustable Rate Rev.
Bonds,at May 31, 1996
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Futures Contracts Outstanding at May 31,1996
(Aggregate Face Value $24,852,301)
Total Aggregate Expiration Unrealized
Value Face Value Date appreciation/
(depreciation)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UST Bonds (Short) $8,861,125 $8,904,801 Jun-96 $43,676
UST Bonds (Short) 9,462,750 9,460,000 Sep-96 (2,750)
UST Bonds (Short) 6,451,875 6,487,500 Sep-96 35,625
- --------------------------------------------------------------------------------------------------------------------------------
$76,551
- --------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
May 31, 1996
Assets
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (identified cost $297,004,845) (Note 1) $299,615,569
- ---------------------------------------------------------------------------------------------------------------------------------
Cash 268,242
- ---------------------------------------------------------------------------------------------------------------------------------
Interest receivable 6,196,159
- ---------------------------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,306,165
- ---------------------------------------------------------------------------------------------------------------------------------
Receivable for securities sold 20,000
- ---------------------------------------------------------------------------------------------------------------------------------
Receivable for variation margin 112,313
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 307,518,448
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions payable to shareholders 391,715
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 4,339,454
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 674,558
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 461,715
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 31,668
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 227
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,313
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 122,110
- ---------------------------------------------------------------------------------------------------------------------------------
Other accrued expenses 48,516
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,071,276
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets $301,447,172
Represented by
- ---------------------------------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $303,788,167
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (281,809)
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (4,746,461)
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 2,687,275
- ---------------------------------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $301,447,172
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share ($247,919,860 divided by 27,813,398 shares) $8.91
- ---------------------------------------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $8.91) * $9.35
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share ($52,541,030 divided by 5,896,442 shares) *** $8.91
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share ($986,282 divided by 110,717 shares) $8.91
- ---------------------------------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $8.91) ** $9.21
- ---------------------------------------------------------------------------------------------------------------------------------
*On single retail sales of less than $25,000. On sales of $25,000
or more and on group sales the offering price is reduced.
**On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales the offering price is reduced.
***Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended May 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Tax exempt interest income: $19,090,926
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses:
- ---------------------------------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,860,534
- ---------------------------------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 312,233
- ---------------------------------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 12,755
- ---------------------------------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 8,123
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 521,621
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 419,027
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 2,219
- ---------------------------------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 8,752
- ---------------------------------------------------------------------------------------------------------------------------------
Reports to shareholders 19,364
- ---------------------------------------------------------------------------------------------------------------------------------
Auditing 36,489
- ---------------------------------------------------------------------------------------------------------------------------------
Legal 16,224
- ---------------------------------------------------------------------------------------------------------------------------------
Postage 25,721
- ---------------------------------------------------------------------------------------------------------------------------------
Other 14,358
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses 3,257,420
- ---------------------------------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (291,567)
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses 2,965,853
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 16,125,073
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 3,874,105
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1 and 3) 142,183
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and futures contracts during the year (11,218,657)
- ---------------------------------------------------------------------------------------------------------------------------------
Net loss on investments (7,202,369)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $8,922,704
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
- ---------------------------------------------------------------------------------------------------------------------------------
Year Eleven months
ended ended
May 31 May 31
1996 1995
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income $16,125,073 $15,802,907
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 4,016,288 (5,408,850)
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments (11,218,657) 17,688,731
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 8,922,704 28,082,788
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income:
Class A (13,857,960) (13,660,959)
- ---------------------------------------------------------------------------------------------------------------------------------
Class B (2,288,453) (1,811,006)
- ---------------------------------------------------------------------------------------------------------------------------------
Class M (21,671) --
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income:
Class A -- (322,301)
- ---------------------------------------------------------------------------------------------------------------------------------
Class B -- (42,727)
- ---------------------------------------------------------------------------------------------------------------------------------
Class M -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (7,198,507) (9,529,703)
- ---------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (14,443,887) 2,716,092
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Beginning of period 315,891,059 313,174,967
- ---------------------------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $281,809 and $365,028, respectively) $301,447,172 $315,891,059
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the Period
May 1, 1995
(commencement
Year ended of operations) Year ended
May 31 to May 31 May 31
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995+ 1996
- ---------------------------------------------------------------------------------------------------------------------------------
Class M
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.12 $8.87 $9.12
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .46 .04 .42
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.21) .25 (.21)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .25 .29 .21
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.46) (.04) (.42)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.46) (.04) (.42)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.91 $9.12 $8.91
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 2.76 3.28 (d) 2.37
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $986 $1 $52,541
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.23 .10 (d) 1.60
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 4.82 .45 (d) 4.64
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 81.99 61.46 (d) 81.99
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
For the January 4, 1993
eleven months (commencement
ended Year ended of operations)
May 31 June 30 to June 30
- ---------------------------------------------------------------------------------------------------------------------------------
1995* 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
Class B
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.76 $9.53 $9.17
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .40 .44 .21
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .36 (.66) .36
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .76 (.22) .57
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.39) (.44) (.21)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income (.01) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.09) --
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- (.02) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.40) (.55) (.21)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.12 $8.76 $9.53
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 9.06 (d) (2.55) 12.84 (d)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $44,581 $36,930 $17,881
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.42 (d) 1.51 .78 (d)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 4.62 (d) 4.74 2.21 (d)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 61.46 (d) 64.83 106.69
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
For the
eleven months
Year ended ended
May 31 May 31 Year ended June 30
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995* 1994
- ---------------------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.12 $8.77 $9.53
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .48 .46 .50
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.21) .35 (.65)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .27 .81 (.15)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.48) (.45) (.50)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- -- (.09)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- -- (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.48) (.46) (.61)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.91 $9.12 $8.77
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 3.04 9.58 (d) (1.79)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $247,920 $271,309 $276,245
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .95 .83 (d) .91
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 5.31 5.24 (d) 5.38
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 81.99 61.46 (d) 64.83
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
Year ended June 30
- --------------------------------------------------------------------------------------------------------------
1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.08 $8.65
- --------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------
Net investment income .56 (a) .60 (a)
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .53 .45
- --------------------------------------------------------------------------------------------------------------
Total from investment operations 1.09 1.05
- --------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------
From net investment income (.56) (.60)
- --------------------------------------------------------------------------------------------------------------
In excess of net investment income -- --
- --------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.08) (.02)
- --------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.64) (.62)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.53 $9.08
- --------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 12.44 12.57
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $278,039 $195,963
- --------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .77 (a) .60 (a)
- --------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 5.94 (a) 6.73 (a)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 106.69 72.73
- --------------------------------------------------------------------------------------------------------------
* The fiscal year advanced from June 30 to May 31.
+ Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during
the period.
(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 reflects a reduction of $0.02 per share.
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) The ratio of expenses to average net assets for the year ended May 31, 1996
include amounts paid through expense offset arrangements. Prior period ratios
exclude these amounts. (See Note 2)
(d) Not annualized.
</TABLE>
Notes to financial statements
May 31, 1996
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, 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 Florida tax-exempt securities.
The fund offers class A, class B and class M shares. Class A shares are
sold with a maximum front-end sales charge of 4.75%. Class B shares,
which convert to class A shares after approximately eight years, do not
pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class
M shares are sold with a maximum front-end sales charge of 3.25% and
pay an ongoing distribution fee that is lower than class B shares and
higher than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
A) Security valuation Tax exempt bonds and notes are stated on the basis
of valuations provided by a pricing service, approved by the Trustees,
which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and
various relationships between securities in determining value. 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.
Securities purchased or sold on a when-issued or delay delivery basis
may be settled a month or more after the trade date; interest income is
not accrued until settlement date. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty
does not perform under the contract.
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.
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) 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 on securities held and for excise tax on income and capital
gains.
At May 31, 1996, the fund had a capital loss carryover of approximately
$4,236,000 available to offset future net capital gains, if any. The
amount of the carryover and the expiration dates are:
Loss Carryover Expiration
------------------ ----------------------
$ 218,000 May 31, 2002
3,111,000 May 31, 2003
907,000 May 31, 2004
E) Distributions to shareholders Income dividends are recorded daily by
the fund and are distributed monthly. Capital gain distributions, if
any, are recorded on the ex-dividend date and paid at least annually.
The amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles.
These differences include treatment of dividends payable, realized and
unrealized gains and losses on certain futures contracts, market
discount and capital loss carryovers. 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 May 31, 1996, the fund reclassified
$126,230 to decrease distributions in excess of net investment income
and $9,180 to decrease paid-in-capital, with an increase to accumulated
net realized losses of $117,050. The calculation of net investment
income per share in the financial highlights table excludes these
adjustments.
F) 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. Discounts on original issue discount bonds are
accreted according to the effective yield method.
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 shares were $75,474. These expenses were being amortized
on projected net asset levels over a five-year period.
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,
subject to reduction in any year by the amount of certain brokerage
commissions and fees (less expenses) received by affiliates of Putnam
Management on the fund's portfolio transactions.
The fund reimburses Putnam Management 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.
Trustees of the fund receive an annual Trustees fee of $760 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "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 Plan.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the year ended May 31, 1996, fund expenses were reduced by $291,567
under expense offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized
in connection with the expense offset arrangements in an income
producing asset if it had not entered into such arrangements.
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 at an annual rate of 0.20%, 0.85% and 0.50% of the average
net assets attributable to class A, class B and class M shares,
respectively.
For the year ended May 31, 1996, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $45,457 and $502 from the sale
of class A and class M shares, respectively and $131,967 in contingent
deferred sales charges from redemptions of class B shares. A deferred
sales charge of up to 1% is assessed on certain redemptions of class A
shares. For the year ended May 31, 1996, Putnam Mutual Funds Corp.,
acting as underwriter received $8,800 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended May 31, 1996, purchases and sales of investment
securities other than short-term investments aggregated $247,217,732 and
$247,488,957, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At May 31, 1996, there was an unlimited number of shares of beneficial
interest authorized. Class M shares became effective on May 1, 1995 and
113 shares were sold to Putnam Investments, Inc. for $1,003 for the
period May 1, 1995 through May 31, 1995. Transactions in capital shares
were as follows:
Year ended
May 31, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 4,006,206 $36,822,972
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 652,398 5,934,307
- ----------------------------------------------------
4,658,604 42,757,279
Shares
repurchased (6,598,927) (60,191,515)
- ----------------------------------------------------
Net decrease (1,940,323) $(17,434,236)
- ----------------------------------------------------
Eleven months ended
May 31, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 5,779,235 $49,373,332
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 687,442 5,977,266
- ----------------------------------------------------
6,466,677 55,350,598
Shares
repurchased (8,212,455) (70,755,752)
- ----------------------------------------------------
Net decrease (1,745,778) $(15,405,154)
- ----------------------------------------------------
Year ended
May 31, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 1,874,095 $17,158,170
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 95,475 868,283
- ----------------------------------------------------
1,969,570 18,026,453
Shares
repurchased (963,430) (8,813,940)
- ----------------------------------------------------
Net increase 1,006,140 $9,212,513
- ----------------------------------------------------
Eleven months ended
May 31, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 1,642,091 $14,208,252
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 82,121 714,840
- ----------------------------------------------------
1,724,212 14,923,092
Shares
repurchased (1,047,931) (9,048,644)
- ----------------------------------------------------
Net increase 676,281 $5,874,448
- ----------------------------------------------------
Year ended
May 31, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 116,164 $1,074,575
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,563 14,255
- ----------------------------------------------------
117,727 1,088,830
Shares
repurchased (7,123) (65,614)
- ----------------------------------------------------
Net increase 110,604 $1,023,216
- ----------------------------------------------------
Federal tax information
(Unaudited)
The fund has designated 100% of dividends paid from net investment
income during the fiscal year as tax exempt for Federal income tax
purposes.
The Form 1099 you receive in January 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
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 F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
James E. Erickson
Vice President
Richard P. Wyke
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
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. For more information, or to request a prospectus, call toll
free: 1-800-225-1581.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- -------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- -------------
25870 7/96
