Putnam
Florida
Tax Exempt
Income Fund
ANNUAL REPORT
May 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Thirty-year munis rated AAA (the highest credit-quality rating)
recently yielded 5.9% -- or about 85% of the yield of a comparable Treasury
bond. By contrast, ten-year, triple-A munis offer only 75% of the yield of
a comparable Treasury -- still a bargain for people in the 28% tax-bracket
or higher."
-- Kiplinger's Personal Finance Magazine, June 1997
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
14 Portfolio holdings
18 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Putnam Florida Tax Exempt Income Fund began fiscal 1997 on a hopeful, yet
cautious note in June 1996 after a somewhat tumultuous year for the
municipal bond market. The hope was warranted, as the market rallied in
the fall. The caution was justified, for the rally ended abruptly in
late winter, cut short by investor worries that inflation and interest rates
would both rise in the wake of an economy still growing too fast.
From the vantage point of the fiscal year's close on May 31, 1997, we can see
that the volatility, while somewhat nerve-racking for many investors, was
unusually low. By spring, even the Federal Reserve Board's increase in the
federal funds rate in late March, the source of considerable earlier anxiety,
caused little stir.
It is in these contexts that Fund Manager Leslie Burke discusses your fund's
performance for the year just past and her view of its prospects for the year
ahead. Her report begins on the following page.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
July 16, 1997
Report from the Fund Manager
Leslie J. Burke
Uncertainty about the true state of the economy permeated the financial
markets over the 12 months ended May 31, 1997. Each report of the nation's
leading economic indicators triggered waves of speculation about inflation and
the direction of interest rates. Fixed-income securities, for the most part,
seesawed between bouts of strength and spells of weakness and the yield on the
benchmark 30-year Treasury bond danced through the watershed 7% mark on more
than one occasion.
Overall, however, municipal bonds fared well and traded in a narrow range
while outperforming comparable Treasury securities for much of the period.
Strong demand from nontraditional sources and insurance companies, and the
absence of flat-tax concerns did much to support municipal bond prices. Putnam
Florida Tax Exempt Income Fund also held its own, weathering the market's
erratic movements and producing attractive total returns of 8.12%, 7.42%, and
7.80% for class A, class B, and class M shares, respectively, at net asset
value. Returns were 3.03%, 2.42%, and 4.28%, respectively, after accounting
for the maximum sales charge. More complete performance information can be
found on pages 8 through 10 of this report.
* ACTIVE DURATION MANAGEMENT MADE VALUABLE CONTRIBUTION TO PERFORMANCE
To most investors, duration is an abstract term that can sometimes cause more
confusion than clarification. Simply put, it is a mathematical measure derived
from a complex calculation of the fund's holdings, involving principal and
coupon. It is used to indicate how much the prices of portfolio holdings are
likely to move up or down with each percentage-point shift in interest rates.
Typically, longer durations can help provide greater capital appreciation when
interest rates decline, while shorter durations can help preserve portfolio
value when interest rates rise. By carefully monitoring and adjusting the
fund's duration profile, we are better able to manage the fund's interest-rate
risk.
When interest rates declined this past fall, the fixed-income market rallied.
Because of its longer duration, your fund was well positioned to participate
in the resulting price appreciation. To achieve this result, we had aligned
the fund's holdings at opposite ends of the yield curve, clustering assets in
both short-term and long-term securities in a positioning strategy known as
"barbelling." Coming into the new calendar year, investor uncertainty led us
to shift toward a more neutral posture to await for some discernible signs as
to the economy's direction. In this sense, "neutral" means the fund's duration
was neither longer nor shorter than its competitive benchmark.
Anticipating action by the Federal Reserve Board to raise interest rates this
spring, we then moved to shorten duration and become more defensive. This, in
turn, helped buoy the fund's net asset value when the market, fearing rising
inflation and a resulting uptick in interest rates, became choppy. The fact
that the Fed did not raise rates at its May meeting leads us to believe that
further rate increases could occur in the near future. Therefore, we plan to
maintain a defensive shorter duration profile by focusing on the intermediate
segment of the yield curve, looking for opportunities in longer-term
intermediate bonds, those in the 10- to 15-year range. Completing this
"bulleted" focus is a gradual process, since it takes time to find and acquire
the bonds that meet our stringent investment criteria.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Hospitals/health care 24.7%
Utilities 12.7%
Transportation 9.7%
Education 9.0%
Housing 6.6%
Footnote reads:
*Based on net assets as of 5/31/97. Holdings will vary over time.
* PREMIUM-COUPON BONDS TAKE CENTER STAGE
In order to build in some price stability to the portfolio, we have also
shifted our focus since the fiscal midyear from discount bonds -- those
selling at prices below par value -- to premium bonds. Premium bonds sell at
prices above par value and tend to carry coupons higher than current market
rates. Their high income stream helps provide a temporary floor to their
prices when rates rise and prices decline, as the income represents a
significant portion of the bonds' return.
The new-issue supply of municipal bonds in Florida has been somewhat low. In
order to find bonds in the desired segment of the yield curve that offer
premium coupons, we have pursued opportunities in state debt, as well as local
debt. We have also turned our sights on Puerto Rico. As you may know, by
prospectus the fund is allowed to invest selectively in bonds issued by
municipalities in Puerto Rico -- a diversification benefit that has helped us
enhance the fund's call protection and price stability. In contrast to
Florida, supply has been strong in Puerto Rico and many issues that have
recently come to market are noncallable -- that is, they can never be called
away by the issuer. By being early entrants when the new bonds were issued, we
were able to purchase a significant amount at prices lower than what we
normally would have had to pay for Florida premium coupon bonds.
* BROAD DIVERSIFICATION INTACT ALTHOUGH SOME AREAS PROVE MORE INTERESTING THAN
OTHERS
Your fund remains well diversified by industry, with holdings in more than 20
sectors. Hospitals, utilities, and political subdivisions (general obligation
issues) remain among the main areas of emphasis although we have been looking
more toward infrastructure financing, cogeneration, and water and sewer
projects for select yield and appreciation opportunities. Florida State
Mid-Bay Bridge Authority revenue bonds are an example of an infrastructure
holding that delivered strong performance throughout the fiscal year.
[GRAPHIC OMITTED pie chart PORTFOLIO QUALITY OVERVIEW]
Aaa 61.3%
Aa 10.3%
A 8.6%
Baa 16.4%
Ba 1.6%
B 1.8%
Footnote reads:
*As a percentage of market value as of 5/31/97. 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.
* OUTLOOK: THE ROAD MIGHT BE BUMPY
The economy currently seems to be holding its own in the delicate balance
between growth and inflation. However, with seven years of expansion under its
belt, it would be a stretch to expect above-trend growth to continue without
eventually manifesting significant inflation. If history is any indication, we
believe the Fed will most likely raise rates sooner rather than later to keep
inflation in check. Until then, the market may experience some choppiness.
Maintaining our defensive orientation, therefore, seems the best course of
action and should help lend support to the fund's net asset value if
volatility occurs.
We believe the broad outlook for Florida municipal debt and your fund remains
bright, despite the downgrading of Miami general obligation bonds to below
investment-grade status because of the city's fiscal difficulties. The fund
does not hold any Miami general obligation bonds and we have monitored the
crisis closely to make sure it had little effect on portfolio holdings. The
tremendous amount of travel and tourism -- one byproduct of the nation's
economic strength -- is driving local economic growth, benefiting many
municipalities across the state. As a result, the creditworthiness of Florida
issuers, for the most part, has never been better. Our optimism in this regard
has not changed.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 5/31/97, there is no guarantee the fund will continue to hold
these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
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.
TOTAL RETURN FOR PERIODS ENDED 5/31/97
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 8.12% 3.03% 7.42% 2.42% 7.80% 4.28%
- ------------------------------------------------------------------------------
5 years 37.19 30.63 32.15 30.15 35.05 30.73
Annual average 6.53 5.49 5.73 5.41 6.19 5.51
- ------------------------------------------------------------------------------
Life of fund 63.97 56.24 55.68 55.68 59.97 54.77
Annual average 7.58 6.81 6.76 6.76 7.19 6.66
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 5/31/97
Lehman Bros.
Municipal Consumer
Bond Index Price Index
- ------------------------------------------------------------------------------
1 year 8.29% 2.23%
- ------------------------------------------------------------------------------
5 years 41.80 14.60
Annual average 7.24 2.76
- ------------------------------------------------------------------------------
Life of fund 69.92 21.66
Annual average 8.17 2.95
- ------------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 4.75% for class A shares and 3.25% for class M shares.
One- and five-year returns for class B shares reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declining to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class B and class M for periods prior to their inception are
derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and, in the case of class B and class M shares,
the higher operating costs applicable to such shares. All returns assume
reinvestment of distributions at NAV and represent past performance; they
do not guarantee future results. Investment return and net asset value
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Returns shown for class A shares
have not been adjusted to reflect payments under the class A distribution
plan prior to its implementation.
[GRAPHIC OMITTED worm chart GROWTH OF A $10,000 INVESTMENT]
Cumulative total return of a $10,000 investment since 8/24/90
plot points:
Lehman Bros.
Fund's Class A Municipal Bond Consumer
shares at POP Index Price Index
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 15005 11565
5/31/96 14451 15690 11900
5/31/97 15624 16992 12166
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B shares would have been
valued at $15,568 and no contingent deferred sales charge would apply. A
$10,000 investment in the fund's class M shares would have been valued at
$15,997 ($15,477 at public offering price). See first page of performance
section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 5/31/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 12 12 12
- ------------------------------------------------------------------------------
Income $0.478380 $0.419035 $0.450478
- ------------------------------------------------------------------------------
Capital gains1 -- -- --
- ------------------------------------------------------------------------------
Total $0.478380 $0.419035 $0.450478
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
5/31/96 $8.91 $9.35 $8.91 $8.91 $9.21
- ------------------------------------------------------------------------------
5/31/97 9.14 9.60 9.14 9.14 9.45
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate2 5.33% 5.07% 4.68% 5.03% 4.87%
- ------------------------------------------------------------------------------
Taxable equivalent3 8.82 8.39 7.75 8.33 8.06
- ------------------------------------------------------------------------------
Current 30-day SEC yield4 5.00 4.76 4.35 4.70 4.54
- ------------------------------------------------------------------------------
Taxable equivalent3 8.28 7.88 7.20 7.78 7.52
- ------------------------------------------------------------------------------
1 Capital gains, if any, are taxable for federal and, in most cases, state
tax purposes. For some investors, investment income may also be subject to
the federal alternative minimum tax. Investment income may be subject to
state and local taxes.
2 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
3 Assumes maximum Federal tax rate of 39.6%. Results for investors subject
to lower tax rates would not be as advantageous.
4 Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 6/30/97
(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 7.98% 2.82% 7.29% 2.29% 7.54% 4.07%
- ------------------------------------------------------------------------------
5 years 36.14 29.71 31.24 29.24 33.87 29.49
Annual average 6.36 5.34 5.59 5.26 6.01 5.30
- ------------------------------------------------------------------------------
Life of fund 65.57 57.77 57.14 57.14 61.33 56.09
Annual average 7.64 6.88 6.82 6.82 7.23 6.72
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. 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. Please see the first
page of performance section for the method of performance calculation.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales 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 assumes reinvestment of all
distributions and interest payments and does not take in account brokerage
fees or taxes. Securities in the fund do not match those in the index and
performance of the fund will differ. It is not possible to invest directly
in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
WELCOME TO
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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,
1997, 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, 1997
by correspondence with the custodian and the application of alternative
auditing procedures where investments purchased were not yet received by
the custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
July 15, 1997
Portfolio of investments owned
May 31, 1997
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
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
MBIA -- Municipal Bond Investors Assurance Corporation
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (97.7%) *
PRINCIPAL AMOUNT RATINGS** VALUE
Florida (77.8%)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Brevard Cnty., Hlth. Fac. Fin. Auth. Rev. Bonds
(Courtenay Springs Village)
$2,000,000 7 3/4s, 11/15/17 BB/P $ 2,117,500
2,345,000 7 1/2s, 11/15/09 BB/P 2,488,631
Broward Cnty., Edl. Fac. Auth. Rev. Bonds
(Nova U. Dorm)
2,500,000 Ser. A, 7 1/2s, 4/1/17 Aaa 2,800,000
495,000 Ser. A, 7 1/4s, 4/1/01 Aaa 542,025
1,000,000 Broward Cnty., Hlth. Fac. Auth. Rev. Bonds
(Broward Cnty. Nursing Home), 7 1/2s, 8/15/20 Aa 1,080,000
Broward Cnty., Resource Recvy. Rev. Bonds
6,585,000 (SES Broward Cnty. LP South), 7.95s, 12/1/08 A 7,177,650
1,290,000 (Waste-Energy LP North), 7.95s, 12/1/08 A 1,406,100
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 1,959,375
1,500,000 Coral Springs Impt. Dist. Wtr. & Swr. Rev. Bonds,
MBIA, 8 1/4s, 6/1/14 Aaa 1,589,760
Dade Cnty., Rev. Bonds
1,400,000 (Seaport), MBIA, 6 1/2s, 10/1/09 Aaa 1,575,000
2,500,000 Dade Cnty., Seaport G.O. Bonds, AMBAC, 6 1/4s,
10/1/21 # Aaa 2,693,750
6,470,000 Dade Cnty., School Dist. G.O. Bonds, MBIA, 6 1/2s,
2/15/07 Aaa 7,189,788
1,690,000 Dade Cnty., Single Fam. Hsg. Fin. Auth. Mtge. Rev.
Bonds, Ser. B, GNMA Coll., 8 3/4s, 7/1/17 AA 1,725,304
5,500,000 Escambia Cnty., Poll. Control Rev. Bonds
(Champion Intl. Corp.), 6.9s, 8/1/22 Baa 5,878,125
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 2,352,513
3,750,000 First FL Govt. Fin. Comm. Rev. Bonds, AMBAC,
6s, 7/1/09 Aaa 4,059,375
FL Hsg. Fin. Agcy. Rev. Bonds, GNMA Coll.
535,000 (Home Ownership Dev. Program), Ser. G-1,
7.9s, 3/1/22 Aaa 563,756
4,475,000 Ser. 1-B, 7.1s, 1/1/17 AAA 4,619,856
10,000,000 FL State Board of Ed. G.O. Bonds, 6.4s, 6/1/19 Aa 10,612,500
FL State Mid-Bay Bridge Auth. Rev. Bonds, Ser. A
1,500,000 8s, 10/1/06 BBB/P 1,668,750
2,180,000 7 1/2s, 10/1/17 BBB/P 2,384,375
3,540,000 6.1s, 10/1/22 BBB/P 3,562,125
2,000,000 FL State Muni. Pwr. Agcy. IFB, AMBAC,7.956s,
10/1/20 (acquired 7/10/92, cost $2,101,200)
[DBL. DAGGER] Aaa 2,400,000
2,500,000 Gulf Breeze, Local Govt. Rev. Bonds, Ser. E, FGIC,
7 3/4s, 12/1/15 Aaa 2,746,875
Hillsborough Cnty., Indl. Dev. Auth. Poll. Control
Rev. Bonds (Tampa Elec. Co.)
2,500,000 Ser. 91, 7 7/8s, 8/1/21 Aa 2,853,125
3,645,000 6 1/4s, 12/1/34 Aa 3,868,250
2,400,000 Hillsborough Cnty., Util. Rev. Bonds, Ser. A, FSA,
6 1/2s, 8/1/16 Aaa 2,547,000
Jacksonville, Hlth. Fac. Auth. Indl. Dev. Rev. Bonds
(Cypress Village)
1,350,000 7s, 12/1/22 Baa 1,415,813
3,650,000 7s, 12/1/14 Baa 3,850,750
960,000 Jacksonville, Hlth. Fac. Auth. Rev. Bonds (Mental
Hlth. Ctr.), 9 1/8s, 10/15/19 A 990,000
5,000,000 Lakeland, Elec. & Wtr. Rev. Bonds, Ser. B, FGIC, 6s,
10/1/10 Aaa 5,406,250
Largo, Sun Coast Hlth. Syst. Rev. Bonds
5,805,000 6.3s, 3/1/20 BBB/P 5,587,313
1,165,000 6.2s, 3/1/13 BBB/P 1,128,594
Lee Cnty., Board of Directors Hosp. IFB, MBIA
4,000,000 9.265s, 4/1/20 Aaa 4,470,000
5,000,000 (Lee Memorial Hosp.), 8.411s, 3/26/20 Aaa 5,537,500
Leesburg Hosp. Rev. Bonds (Leesburg Regl. Med. Ctr.),
1,000,000 Ser. 91-A, 7 1/2s, 7/1/21 AAA/P 1,143,750
2,065,000 6 1/8s, 7/1/18 A 2,101,138
2,500,000 Martin Cnty., Indl. Dev. Auth. Rev. Bonds (Indiantown
Cogeneration), Ser. B, 8.05s, 12/15/25 Baa 2,837,500
10,000,000 Martin Cnty., Poll. Control Rev. Bonds
(FL Pwr. & Lt. Co.), MBIA, 7.3s, 7/1/20 Aaa 10,900,000
4,000,000 Orange Cnty., Hlth. Fac. Auth. IFB, 9.583s, 10/1/14
(acquired 4/19/95, cost $5,273,120) [DBL. DAGGER] B/P 5,320,000
3,000,000 Orange Cnty., Hlth. Fac. Auth. Rev. Bonds
(Orlando Regl. Hlthcare), MBIA, 6 1/4s, 10/1/18 Aaa 3,285,000
1,430,000 Orange Cnty., Hsg. Fin. Auth. Mtge. Rev. Bonds,
Ser. E, GNMA Coll., 7.9s, 10/1/22 Aaa 1,515,800
3,950,000 Orlando, Util. Comm. Wtr. & Elec. Rev. Bonds,
Ser. D, 6 3/4s, 10/1/17 Aa 4,577,063
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 2,155,680
2,000,000 Palm Beach Cnty., Arpt. Syst. Rev. Bonds, MBIA,
7 3/4s, 10/1/10 Aaa 2,260,000
7,000,000 Palm Beach Cnty., School Board COP, Ser. A,
AMBAC, 6 3/8s, 8/1/15 Aaa 7,455,000
Palm Beach Cnty., Hlth. Fac. Auth. Rev. Bonds
(JFK Med. Ctr. Inc.)
3,975,000 Prerefunded, 8 7/8s, 12/1/18 AAA/P 4,317,844
1,700,000 8 7/8s, 12/1/18 AAA/P 1,846,625
4,000,000 FSA, 5 3/4s, 12/1/14 Aaa 4,295,000
215,000 Palm Beach Cnty., Single Fam. Hsg. Fin. Auth. Mtge.
Rev. Bonds, Ser. A, GNMA Coll., 7.2s, 10/1/24 Aaa 227,631
2,150,000 Palm Beach Cnty., Solid Waste Auth. Rev. Bonds,
Ser. A, AMBAC, 6s, 10/1/10 Aaa 2,313,938
5,000,000 Pinellas Cnty., Poll. Control Rev. Bonds (FL Pwr. Corp.),
7.2s, 12/1/14 Aa 5,443,750
2,000,000 Polk Cnty., School Board COP, FSA, 4 7/8s, 1/1/18 Aaa 1,802,500
Port Everglades, Auth. Rev. Bonds
5,000,000 (FL Port Impt.), 7 1/8s, 11/1/16 Aaa 5,868,750
5,000,000 Ser. A, 5s, 9/1/16 BBB 4,487,500
8,000,000 Reedy Creek, Impt. Dist. G.O. Bonds, Ser. C,
AMBAC, 4 3/4s, 6/1/15 Aaa 7,290,000
2,935,000 Sanibel, Swr. Util. Rev. Bonds, 7 1/2s, 8/1/21 AAA/P 3,309,213
2,390,000 Santa Rosa Cnty., Hlth. Fac. Auth. Rev. Bonds
(Gulf Breeze Hosp. Inc.), Ser. A, 6.2s, 10/1/14 BBB 2,410,913
2,675,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds,
Ser. A-1, FSA, 7.05s, 1/1/30 Aaa 2,812,094
2,250,000 South Broward, Hosp. Dist. IFB, Ser. C, AMBAC,
8.882s, 5/13/21 Aaa 2,649,375
7,800,000 St. Petersburg, Hlth. Fac. Auth. Rev. Bonds
(Allegany Hlth.), Ser. A, MBIA, 7s, 12/1/15 Aaa 8,580,000
4,860,000 Sumter Cnty., School Dist. Rev. Bonds (Multi Dist.
Loan Program), FSA, 7.15s, 11/1/15 Aaa 5,850,225
6,000,000 Tampa, Rev. Bonds (Allegany Hlth. Syst. St. Joseph),
MBIA, 6 1/2s, 12/1/23 Aaa 6,570,000
Tampa, Util. Tax Rev. Bonds, AMBAC
1,950,000 zero %, 10/1/21 Aaa 489,938
2,625,000 zero %, 4/1/21 Aaa 675,938
5,800,000 zero %, 10/1/17 Aaa 1,841,500
1,800,000 Volusia Cnty., Hlth. Fac. Auth. Rev. Bonds
(Memorial Hlth. Syst.), 8 1/8s, 6/1/08 AAA/P 2,016,000
--------------
232,972,643
Georgia (1.4%)
- ------------------------------------------------------------------------------------------------------------
4,000,000 Columbus, Med. Ctr. Hosp. IFB, MBIA, 8.495s, 8/1/10 Aaa 4,438,960
Puerto Rico (15.5%)
- ------------------------------------------------------------------------------------------------------------
1,500,000 Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds,
Ser. A, 7 7/8s, 7/1/17 AAA 1,590,390
3,000,000 Cmnwlth. of PR, G.O. Bonds, MBIA, 6.45s, 7/1/17 Aaa 3,213,750
Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
1,000,000 Ser. T, 6 5/8s, 7/1/18 A 1,108,750
4,280,000 Ser. Z, MBIA, 6 1/4s, 7/1/15 Aaa 4,750,800
3,500,000 MBIA, 6 1/4s, 7/1/09 Aaa 3,893,750
1,000,000 Cmnwlth. of PR, Impt. G.O. Bonds, 7.7s, 7/1/20 AAA 1,113,750
4,000,000 Cmnwlth. of PR, Pub. Bldg. Auth. Ed. & Hlth. Fac.
Stepped-Coupon Rev. Bonds, 4.8s,
(5.7s, 7/1/98), 7/1/16 ++ A 3,855,000
PR Elec. Pwr. Auth. Rev. Bonds
5,900,000 Ser. S, 7s, 7/1/07 A/P 6,681,750
4,750,000 6 3/8s, 7/1/24 A/P 5,046,875
3,000,000 Ser. BB, MBIA, 6 1/4s, 7/1/10 Aaa 3,311,250
2,500,000 Ser. AA, MBIA, 5 3/8s, 7/1/27 Aaa 2,428,125
3,800,000 PR Indl. Tourist Edl. Med. & Environ. Control Fac.
Fin. Auth. Hosp. Rev. Bonds (Auxilio Muto
Obligation Group), Ser. A, MBIA, 6 1/4s, 7/1/16 Aaa 4,028,000
5,000,000 PR Muni. Fin. Agcy. Rev. Bonds, Ser. A, FSA, 6s, 7/1/12 Aaa 5,400,000
--------------
46,422,190
Texas (3.0%)
- ------------------------------------------------------------------------------------------------------------
8,250,000 Dallas-Fort Worth, Intl. Arpt. Fac. Impt. Corp. Rev.
Bonds (American Airlines, Inc.), 7 1/2s, 11/1/25 Baa 8,837,813
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $282,424,749) *** $ 292,671,606
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $299,476,291.
** The Moody's or Standard & Poor's ratings indicated are
believed to be the most recent ratings available at May 31, 1997 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, 1997. Securities rated by Putnam are indicated by
"/P" and are not publicly rated. Ratings are not covered by the Report
of independent accountants.
*** The aggregate identified cost on a tax basis is $282,441,785,
resulting in gross unrealized appreciation and depreciation of
$11,518,057 and $1,288,236, respectively, or net unrealized appreciation
of $10,229,821.
[2 DAGGERS] The interest rate and date shown parenthetically represent
the new interest rate to be paid and the date the fund will begin
receiving interest at this rate.
[DBL DAGGER] Restricted, excluding 144A securities, as to public resale.
The total market value of restricted securities held at May 31, 1997 was
$7,720,000 or 2.6% of net assets.
# A portion of this security was pledged and segregated with
the custodian to cover margin requirements for futures contracts at
May 31, 1997.
The rates shown on IFB are securities paying interest rates that
vary inversely to changes in the market interest rates at May 31, 1997.
The fund had the following industry group concentrations greater
than 10% at May 31, 1997
(as a percentage of net assets):
Hospitals/health care 24.7%
Utilities 12.7
The fund had the following insurance concentration greater than
10% at May 31, 1997 (as a percentage of net assets):
MBIA 21.1%
AMBAC 12.6
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Futures Contracts Outstanding at May 31, 1997
Aggregate
Total Face Expiration Unrealized
Value Value Date Appreciation
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
U.S. Treasury Notes
(Long) $5,351,563 $5,320,188 Sep-97 $31,375
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
May 31, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $282,424,749) (Note 1) $292,671,606
- ---------------------------------------------------------------------------------------------------
Interest receivable 5,915,290
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 818,155
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 6,018,822
- ---------------------------------------------------------------------------------------------------
Receivable for variation margin 26,563
- ---------------------------------------------------------------------------------------------------
Total assets 305,450,436
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 130,417
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 423,805
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 4,485,248
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 271,799
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 448,612
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 37,640
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 6,008
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 594
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 122,330
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 47,692
- ---------------------------------------------------------------------------------------------------
Total liabilities 5,974,145
- ---------------------------------------------------------------------------------------------------
Net assets $299,476,291
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $294,123,963
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (226,298)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (4,699,606)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 10,278,232
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $299,476,291
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value per share and redemption price per class A share
($239,195,606 divided by 26,158,247 shares) $9.14
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.14)* $9.60
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($58,926,166 divided by 6,446,053 shares)+ $9.14
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,354,519 divided by 148,246 shares) $9.14
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.14)** $9.45
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $25,000. On sales of $25,000 or more and on group sales
the offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
** On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales
the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended May 31, 1997
<S> <C>
Tax exempt interest income: $18,595,628
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,811,365
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 294,557
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 17,171
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 8,537
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 489,135
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 473,547
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 5,765
- --------------------------------------------------------------------------------------------------
Reports to shareholders 23,162
- --------------------------------------------------------------------------------------------------
Registration fees 195
- --------------------------------------------------------------------------------------------------
Auditing 29,070
- --------------------------------------------------------------------------------------------------
Legal 33,987
- --------------------------------------------------------------------------------------------------
Postage 32,621
- --------------------------------------------------------------------------------------------------
Other 29,393
- --------------------------------------------------------------------------------------------------
Total expenses 3,248,505
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (215,346)
- --------------------------------------------------------------------------------------------------
Net expenses 3,033,159
- --------------------------------------------------------------------------------------------------
Net investment income 15,562,469
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (1,982,062)
- --------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 2,073,447
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the year 7,590,957
- --------------------------------------------------------------------------------------------------
Net gain on investments 7,682,342
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $23,244,811
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended May 31
--------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 15,562,469 $ 16,125,073
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 91,385 4,016,288
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments 7,590,957 (11,218,657)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 23,244,811 8,922,704
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (12,917,911) (13,857,960)
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,576,154) (2,288,453)
- ----------------------------------------------------------------------------------------------------------------------
Class M (57,331) (21,671)
- ----------------------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (9,664,296) (7,198,507)
- ----------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (1,970,881) (14,443,887)
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 301,447,172 315,891,059
- ----------------------------------------------------------------------------------------------------------------------
End of year (including distributions in excess
of net investment income of $226,298
and $281,809, respectively) $299,476,291 $301,447,172
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- -------------------------------------------------------------------------------------------------------------------------
For the
eleven months
Per-share ended
operating performance Year ended May 31 May 31 Year ended June 30
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995++ 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.91 $9.12 $8.77 $9.53 $9.08
- -------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------
Net investment income .48 .48 .46 .50 .56(a)
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .23 (.21) .35 (.65) .53
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .71 .27 .81 (.15) 1.09
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------
From net
investment income (.48) (.48) (.45) (.50) (.56)
- -------------------------------------------------------------------------------------------------------------------------
In excess of
net investment income -- -- (.01) -- --
- -------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.09) (.08)
- -------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- (.02) --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.48) (.48) (.46) (.61) (.64)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.14 $8.91 $9.12 $8.77 $9.53
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 8.12 3.04 9.58* (1.79) 12.44
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $239,196 $247,920 $271,309 $276,245 $278,039
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .96 .95 .83* .91 .77(a)
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.28 5.31 5.24* 5.38 5.94(a)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.30 81.99 61.46* 64.83 106.69
- -------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year advanced from June 30 to May 31.
(a) Reflects an expense limitation in effect during the period. (See Note 2).
As a result of these limitations, expenses for the fund reflect a reduction
of less than $0.01 per share for the period ended June 30, 1993.
(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 and thereafter, includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts.
(Note 2).
(d) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------
For the
eleven months For the period
Per-share ended Year ended Jan. 4, 1993+
operating performance Year ended May 31 May 31 June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------
1997 1996 1995++ 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.91 $9.12 $8.76 $9.53 $9.17
- ------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------
Net investment income .42 .42 .40 .44 .21
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .23 (.21) .36 (.66) .36
- ------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .65 .21 .76 (.22) .57
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------
From net
investment income (.42) (.42) (.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 (.42) (.42) (.40) (.55) (.21)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.14 $8.91 $9.12 $8.76 $9.53
- ------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 7.42 2.37 9.06* (2.55) 12.84*
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $58,926 $52,541 $44,581 $36,930 $17,881
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.61 1.60 1.42* 1.51 .78(a)*
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.62 4.64 4.62* 4.74 2.21(a)*
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.30 81.99 61.46* 64.83 106.69
- ------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year advanced from June 30 to May 31.
(a) Reflects an expense limitation in effect during the period. (See Note 2).
As a result of these limitations, expenses for the fund reflect a reduction
of less than $0.01 per share for the period ended June 30, 1993.
(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 and thereafter, includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts.
(Note 2).
(d) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------
For the period
Per-share May 1, 1995+
operating performance Year ended May 31 to May 31
- ------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $8.91 $9.12 $8.87
- ------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------
Net investment income .45 .46 .04(d)
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .23 (.21) .25
- ------------------------------------------------------------------------------------------------------------------
Total from
investment operations .68 .25 .29
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------
From net
investment income (.45) (.46) (.04)
- ------------------------------------------------------------------------------------------------------------------
In excess of
net investment income -- -- --
- ------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- --
- ------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.45) (.46) (.04)
- ------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.14 $8.91 $9.12
- ------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 7.80 2.76 3.28*
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,355 $986 $1
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.26 1.23 .10*
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.97 4.82 .45*
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.30 81.99 61.46*
- ------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year advanced from June 30 to May 31.
(a) Reflects an expense limitation in effect during the period. (See Note 2).
As a result of these limitations, expenses for the fund reflect a reduction
of less than $0.01 per share for the period ended June 30, 1993.
(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 and thereafter, includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts.
(Note 2).
(d) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
Notes to financial statements
May 31, 1997
Note 1
Significant accounting policies
Putnam Florida Tax Exempt Income Fund (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The fund seeks as high a level of current
income exempt from federal income tax 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 securities exempt from the Florida
intangibles tax.
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.
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, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
At May 31, 1997, the fund had a capital loss carryover of approximately
$4,240,000 available to offset future 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
4,000 May 31, 2005
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 capital loss
carryover, organization expenses, realized and unrealized gains and losses on
certain futures contracts, and market discount. 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, 1997, the fund reclassified $44,438
to decrease distributions in excess of net investment income and $92
to increase paid-in-capital, with an increase to accumulated net realized
loss on investments of $44,530. The calculation of net investment income
per share in the financial highlights table excludes these adjustments.
F) Amortization of bond premium and accretion of bond discount Any premium
resulting from the purchase of securities in excess of maturity value is
amortized on a yield-to-maturity basis. Discounts on original issue discount
and zero coupon bonds are accreted according to the effective yield method.
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 and 0.40% of the next $5 billion, 0.375% of the
next $5 billion, 0.355% of the next $5 billion, 0.34% of the next $5 billion
and 0.33% of any excess thereafter. Prior to September 20, 1996, any amount
over $1.5 billion was based on 0.40%.
As part of the custodian contract between the subcustodian bank and PFTC, the
subcustodian bank has a lien on the securities of the fund to the extent
permitted by the fund's investment restrictions to cover any advances made by
the subcustodian bank for the settlement of securities purchased by the fund.
At May 31, 1997, the payable to the subcustodian bank represents the amount
due for cash advance for the settlement of a security purchased.
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.
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, 1997, fund expenses were reduced by $215,346 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.
Trustees of the fund receive an annual Trustees fee of $490 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 in the fund and are invested
in certain Putnam funds until distribution in accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
compensation of Trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees 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, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $29,435 and $214 from the sale of
class A and class M shares, respectively and $127,203 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, 1997, Putnam Mutual Funds Corp., acting as underwriter received
no monies on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended May 31, 1997, purchases and sales of investment
securities other than short-term investments aggregated $205,167,733 and
$214,878,186, 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, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
May 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 3,879,747 $ 35,312,318
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 595,857 5,405,323
- ------------------------------------------------------------
4,475,604 40,717,641
Shares
repurchased (6,130,755) (55,729,844)
- ------------------------------------------------------------
Net decrease (1,655,151) $(15,012,203)
- ------------------------------------------------------------
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)
- ------------------------------------------------------------
Year ended
May 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 1,699,146 $ 15,466,164
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 106,689 967,752
- ------------------------------------------------------------
1,805,835 16,433,916
Shares
repurchased (1,256,224) (11,427,586)
- ------------------------------------------------------------
Net increase 549,611 $ 5,006,330
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Year ended
May 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 45,965 $ 418,151
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,650 33,109
- ------------------------------------------------------------
49,615 451,260
Shares
repurchased (12,086) (109,683)
- ------------------------------------------------------------
Net increase 37,529 $ 341,577
- ------------------------------------------------------------
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
(Unuadited)
The fund has designated 99.36% 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 1998 will show the tax status of all
distributions paid to your account in calendar 1997
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund *
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC & Emerging Growth Fund [DBL. DAGGER]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
MOST CONSERVATIVE INVESTMENTS **
Putnam money market funds: ++
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts [2 DBL. DAGGERS]
* Formerly Natural Resources Fund
+ Formerly Overseas Growth Fund
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** Relative to above.
++ An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to maintain a
price of $1.00 per share, although there is no assurance that this price
will be maintained in the future.
[2 DBL. DAGGERS] Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be insured
up to certain limits by federal/state agencies.
Savings accounts may also be insured up to certain limits.
Please call your financial advisor or Putnam at 1-800-225-1581
to obtain a prospectus for any Putnam fund. It contains
more complete information, including charges and expenses.
Please read it carefully before you invest or send money.
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
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
William J. Curtin
Vice President
Jerome J. Jacobs
Vice President
Leslie J. Burke
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. You can also learn more
at Putnam Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution; are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other agency;
and involve risk, including the possible loss of principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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34401-037/365/453 7/97
