Putnam
Florida
Tax Exempt
Income Fund
SEMIANNUAL REPORT
November 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "I now believe that the next scarcity will be in municipal bonds
and that the dearth will last a decade or more. That means higher prices
and lower yields. It means buy your municipals now."
-- Marilyn Cohen, "Why Munis Are a Compelling Buy -- Now,"
Forbes, October 20, 1997
* "Florida's strong economy continues to provide a positive backdrop
for its municipal market, and new issuance has been fairly strong and
diversified among sectors. Although we remain cautious about credit
quality and call risk, we have taken advantage of strong supply and
relatively inexpensive security prices to become fully invested in the
market. Accordingly we believe the fund is now well positioned to benefit
handsomely once supply dwindles and demand resurges early next year."
-- Leslie J. Burke, manager
Putnam Florida Tax Exempt Income Fund
CONTENTS
4 Report from Putnam Management
10 Fund performance summary
14 Portfolio holdings
19 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The global flight to the relative safety of bonds in the aftermath of the
Southeast Asian currency crisis in late October provided a dramatic and
positive finale to the first half of Putnam Florida Tax Exempt Income Fund's
fiscal year. In the five months prior to that flare-up, the U.S. municipal
bond market had demonstrated solid, albeit tenuous, strength as many investors
cautiously set aside their lingering concerns about the economy, interest
rates, and renewed inflation.
Recognizing the fragility of the generally positive environment both prior to
and following the disruption in global markets, Fund Manager Leslie Burke had
pursued a defensive policy in managing the fund. As the year unfolded,
however, she concluded that a slightly more dynamic strategy was in order and
began adjusting the portfolio accordingly.
In the report that follows, Leslie provides the specifics of her strategic
shift as well as details about the fiscal year's first half. Then she offers
some insights into what she believes is in store for the rest of the period.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 21, 1998
Report from the Fund Manager
Leslie J. Burke
Putnam Florida Tax Exempt Income Fund delivered strong performance during the
first half of fiscal 1998, as active duration management, careful securities
selection, and well-chosen sector concentrations enabled the fund to continue
providing investors with a steady stream of current tax-exempt income. For the
six months ended November 30, 1997, the fund provided a total return of 5.47%
at net asset value for class A shares, outperforming the Lehman Brothers
Municipal Bond Index's return of 5.40%. (The fund's return at public offering
price was 0.41%.) Complete performance information, including results for
class B and class M shares, can be found on pages 10 and 11 of this report.
* MUNICIPAL MARKET FEELS EFFECTS OF OCTOBER CORRECTION
An atmosphere of low volatility and narrow trading ranges characterized
fixed-income markets for most of 1997. This lack of direction stemmed from an
ongoing tug of war between high economic growth (negative for the bond market)
and favorable low inflation news (positive for the bond market). The Pacific
Rim crisis and resulting correction in world equity markets that took place
during the final week of October changed all that. For a short time afterward,
the municipal market, normally somewhat removed from such events, became
caught up in the worldwide volatility. By the end of November, however, things
had begun to settle down and municipal bonds began benefiting from investors'
shift toward fixed-income investments.
Throughout most of the year, the low interest-rate environment encouraged a
spate of new issues and refundings. This overabundance of supply held back
municipal bond prices for a while until the October correction resulted in an
explosive rally for bonds. Since then, municipal bond yields have become
unusually attractive relative to taxable Treasuries, and we have been taking
full advantage of the resulting opportunities.
* DEFENSIVE POSITIONING TARGETS INCOME, LIMITS VOLATILITY
During the final six weeks of the period, much of the investment world
remained somewhat fixated on the financial difficulties of Southeast Asia.
Accordingly interest rates drifted lower, as investors concluded that the
Southeast Asian situation was having a deflationary effect on the U.S.
economy. This situation appears to preclude a near-term rise in inflation or
any immediate Federal Reserve Board action to lower interest rates.
We believe that interest rates will begin to rise sometime during 1998,
however, once investors refocus their attention on the economic strength and
tight labor conditions in the United States. To protect the portfolio's net
asset value in these somewhat unsettled market conditions -- and against the
potential for higher interest rates ahead -- we have continued to pursue a
moderately defensive investment strategy.
Duration management remains a key component of this strategy. Quite simply,
duration is a mathematical measure 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. Through careful monitoring and adjusting of the
fund's duration profile, we believe we are better able to manage its
interest-rate risk. A shorter duration typically can help preserve portfolio
value when interest rates rise, and in light of our anticipation of this
occurrence, the fund has maintained a relatively short duration during the
past six months.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Hospitals/health care 22.0%
Utilities 20.4%
Transportation 13.9%
Education 11.3%
Housing 6.1%
Footnote reads:
*Based on net assets as of 11/30/97. Holdings will vary over time.
Given the inverse relationship between a bond's yield and its price, it is no
surprise that just as yields on municipal bonds have become attractive
relative to taxable Treasury bonds, prices have also become alluring. In fact,
this situation reflects a seasonal municipal bond supply surge that has not
been met with equally strong demand.
The supply/demand imbalance should gradually correct itself as we move farther
into 1998, when an unusually high number of municipal bonds pay coupon income
and demand picks up. In anticipation of this shift, we have been taking
advantage of the current favorable prices to become fully invested in the
market. Because this move could extend the fund's duration farther out than we
deem prudent, we have balanced our municipal investments by selling Treasury
futures contracts, which has the effect of shortening duration. This strategy
has reduced the fund's duration to a position that is slightly shorter than
that of its competitive benchmark.
* PREMIUM-COUPON BONDS BOOST PERFORMANCE
In addition to shortening duration, we have continued our attempts to minimize
the portfolio's volatility by improving call risk within the fund and
concentrating on holdings that are less sensitive to interest-rate changes.
Thus we have maintained our focus on noncallable bonds or bonds with distant
call dates, intermediate-term municipal securities with maturities between 10
and 20 years, and premium-coupon bonds. Premium-coupon bonds sell at prices
above par value and tend to carry coupons higher than current market rates, as
opposed to discount bonds, which sell at prices below par value.
The high income of premium bonds helps provide a temporary floor to their
prices when rates rise and prices decline, since the income represents a
significant portion of the bonds' return. During the reporting period, the
strong economy continued to compress credit spreads between various sectors of
the municipal market, and higher-yielding, lower-rated bonds outperformed.
[GRAPHIC OMITTED: pie chart PORTFOLIO QUALITY OVERVIEW]
PORTFOLIO QUALITY OVERVIEW*
VMGI 0.3%
Aaa 59.4%
Aa 9.5%
A 4.0%
Baa 22.1%
Ba 2.4%
B 2.3%
Footnote reads:
*As a percentage of market value as of 11/30/97. 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.
Your fund's prospectus allows it to invest selectively in bonds issued by
municipalities outside Florida. By the end of the calendar year, however, in
order for the fund's shares to be exempt from Florida's intangibles tax, all
fund assets must be invested in Florida municipal securities, U.S. government
tax-exempt securities issued by certain U.S. territories and possessions, cash,
or cash instruments. We have utilized this provision during the semiannual
period in order to balance the portfolio's structure, particularly in our
pursuit of premium-coupon bonds.
We have often found appropriate investments in securities issued by
municipalities in Puerto Rico, many of which have helped us enhance the fund's
call protection and price stability. Elsewhere we have found suitable
opportunities in New York state-appropriated issues, which provided the fund
with solid income and price appreciation.
Another success story for premium-coupon bond holdings outside Florida was the
fund's position in bonds issued by Dallas-Fort Worth International Airport for
American Airlines. These bonds provided superior income that helped boost the
fund's dividend stream along with some capital appreciation as credit spread
compression and the airline industry's strength raised the bonds' value.
While these holdings, along with others discussed in this report, were viewed
favorably at the end of the fiscal period, all are subject to review and
adjustment in accordance with the fund's investment strategy and may vary in
the future.
* BROAD DIVERSIFICATION WITH CONCENTRATIONS IN HEALTH CARE, UTILITIES, LOCAL
GOs
Your fund remains broadly diversified by industry with holdings in more than
20 sectors. Hospitals, utilities, and general obligation bonds (GOs) of
political subdivisions remain among the top areas of emphasis, although
Florida's large number of for-profit hospital chains does limit somewhat the
availability of municipal paper in that sector. In fact, we have reduced the
fund's hospital holdings over the period by selling one of the larger
positions, bonds issued by Sun Coast Hospital. These holdings have delivered
strong performance so far, but our view is that unresolved insurance
reimbursement issues that have recently surfaced have made the bonds' future
performance less certain.
Along with local GOs, the fund's $7-million position in Palm Beach County
bonds recently generated significant appreciation for the fund when the bonds
were prerefunded in September. In a prerefunding, the issuer floats a second
bond to raise funds to pay off an older issue at the first call date. Proceeds
from the new bond are invested in top-quality instruments such as U.S.
Treasury securities. Because of the safety of principal represented by these
securities, the older prerefunded bond is generally perceived as having a
substantial improvement in its creditworthiness, and its rating is likely to
be upgraded. Upgrades, in turn, often presage higher prices. That is what
occurred in this case; each of the Palm Beach County bonds, in fact, gained
substantially in price following the prerefunding.
While hospitals, utilities, and political subdivisions remain the dominant
sectors represented in the portfolio, we continue to look toward
infrastructure financing, cogeneration, and water and sewer projects for
selected yield and appreciation opportunities. Florida State Mid-Bay Bridge
Authority revenue bonds, among the fund's top holdings, provide an example of
infrastructure securities. These bonds were added to the portfolio in 1993 as
higher-yielding securities, and their credit rating has risen to the point at
which they have recently become insurable. The credit upgrade has translated
into significant price appreciation, a bonus atop the strong income the bonds
are also providing.
* CONSTRUCTIVE, CAUTIOUS OUTLOOK
In line with the national trend, Florida's economy remains strong. A favorable
population migration pattern is driving growth in the building, service, and
tourism industries. This sound economic environment provides a favorable
backdrop for the state's municipal bond market. Nevertheless, we plan to
retain the fund's defensive posture because as time goes on, we still believe
that tight U.S. labor market conditions will exert moderate upward pressure on
interest rates.
Our focus on key strategies such as careful security selection and reducing
call risk and interest-rate sensitivity in the portfolio should serve the fund
well as it moves farther into 1998. At the same time, the fund's full
investment in the municipal market should position it to benefit once bond
supply drops and demand rises after January 1.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 11/30/97, 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 11/30/97
Class A Class B Class M
(inception date) (8/24/90) (1/4/93) (5/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 5.47% 0.41% 5.12% 0.12% 5.19% 1.74%
- ------------------------------------------------------------------------------
1 year 6.99 1.93 6.30 1.30 6.68 3.21
- ------------------------------------------------------------------------------
5 years 37.04 30.50 32.18 30.18 34.88 30.51
Annual average 6.50 5.47 5.74 5.42 6.17 5.47
- ------------------------------------------------------------------------------
Life of fund 72.92 64.78 63.65 63.65 68.27 62.80
Annual average 7.82 7.11 7.01 7.01 7.42 6.93
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/97
Lehman Bros.
Municipal Consumer
Bond Index Price Index
- ------------------------------------------------------------------------------
6 months 5.40% 0.87%
- ------------------------------------------------------------------------------
1 year 7.18 1.83
- ------------------------------------------------------------------------------
5 years 42.06 13.73
Annual average 7.27 2.61
- ------------------------------------------------------------------------------
Life of fund 79.10 22.72
Annual average 8.37 2.86
- ------------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 4.75% and 3.25%, respectively. Class B share returns for
the 1-, 5-, and 10-year (where available) and life-of-fund periods reflect
the applicable contingent deferred sales charge (CDSC), which is 5% in the
first year, declines to 1% in the sixth year, and is eliminated
thereafter. Returns shown for class B and class M shares for periods prior
to their inception are derived from the historical performance of class A
shares, adjusted to reflect both the initial sales charge or CDSC, if any,
currently applicable to each class and, in the case of class B and class M
shares, the higher operating expenses applicable to such shares. All
returns assume reinvestment of distributions at NAV and represent past
performance; they do not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 11/30/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------------
Income $0.245098 $0.214414 $0.230831
- ------------------------------------------------------------------------------
Capital gains1 -- -- --
- ------------------------------------------------------------------------------
Total $0.245098 $0.214414 $0.230831
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
5/31/97 $9.14 $9.60 $9.14 $9.14 $9.45
- ------------------------------------------------------------------------------
11/30/97 9.39 9.86 9.39 9.38 9.70
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate2 5.19% 4.94% 4.54% 4.89% 4.73%
- ------------------------------------------------------------------------------
Taxable equivalent3 8.59 8.18 7.52 8.10 7.83
- ------------------------------------------------------------------------------
Current 30-day SEC yield4 4.73 4.51 4.08 4.42 4.28
- ------------------------------------------------------------------------------
Taxable equivalent3 7.83 7.47 6.75 7.32 7.09
- ------------------------------------------------------------------------------
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 39.6% combined federal and state tax rate. Results for
investors subject to lower tax rates would not be as advantageous.
4 Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 12/31/97
(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
- ------------------------------------------------------------------------------
6 months 5.53% 0.51% 5.21% 0.21% 5.38% 1.95%
- ------------------------------------------------------------------------------
1 year 8.82 3.62 8.14 3.14 8.51 4.95
- ------------------------------------------------------------------------------
5 years 37.11 30.54 32.31 30.31 34.91 30.53
Annual average 6.52 5.47 5.76 5.44 6.17 5.47
- ------------------------------------------------------------------------------
Life of fund 74.93 66.69 65.49 65.49 70.20 64.67
Annual average 7.91 7.20 7.09 7.09 7.50 7.02
- ------------------------------------------------------------------------------
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. See first page of
performance section for performance calculation method.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 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 into account brokerage fees or
taxes. Securities in the fund do not match those in the index and
performance of the fund will differ. It is not possible to invest directly
in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund *
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. DAGGERS]
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
Global Growth and Income Fund
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 Total Return Fund
High Yield Trust +
Income Fund
Money Market 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 Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
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
* Formerly Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply. Contact Putnam
for details.
[DBL. DAGGERS] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** 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.
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.
Portfolio of investments owned
November 30, 1997 (Unaudited)
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
VRDN -- Variable Rate Demand Notes
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (97.7%) *
PRINCIPAL AMOUNT RATING ** VALUE
Florida (74.9%)
<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 $ 2,170,000
2,345,000 7 1/2s, 11/15/09 BB-/P 2,550,188
Broward Cnty., Edl. Fac. Auth. Rev. Bonds
(Nova U. Dorm), Ser. A
2,500,000 7 1/2s, 4/1/17 AAA/P 2,793,750
495,000 7 1/4s, 4/1/01 AAA/P 540,788
1,000,000 Broward Cnty., Hlth. Fac. Auth. Rev. Bonds
(Broward Cnty. Nursing Home), 7 1/2s, 8/15/20 AA3 1,101,250
Broward Cnty., Resource Recvy. Rev. Bonds
6,305,000 (SES Broward Cnty. LP South), 7.95s, 12/1/08 A 6,864,569
1,235,000 (Waste-Energy LP North), 7.95s, 12/1/08 A 1,344,606
1,400,000 Clay Cnty., Multi-Fam. Hsg. Fin. Auth. Rev. Bonds
(Oak Forest), Ser. A, GNMA Coll., 7.4s, 12/1/25 AAA 1,489,250
1,875,000 Clay Cnty., Single Fam. Hsg. Fin. Auth. Rev. Bonds,
Ser. A, GNMA Coll., 7.45s, 9/1/23 Aaa 1,985,156
1,500,000 Coral Springs Impt. Dist. Wtr. & Swr. Rev. Bonds,
MBIA, 8 1/4s, 6/1/14 Aaa 1,562,580
1,400,000 Dade Cnty., Rev. Bonds (Seaport), MBIA,
6 1/2s, 10/1/09 Aaa 1,638,000
2,500,000 Dade Cnty., Seaport G.O. Bonds, AMBAC,
6 1/4s, 10/1/21 # Aaa 2,700,000
6,470,000 Dade Cnty., School Dist. G.O. Bonds, MBIA,
6 1/2s, 2/15/07 Aaa 7,416,238
5,500,000 Escambia Cnty., Poll. Control Rev. Bonds
(Champion Intl. Corp.), 6.9s, 8/1/22 Baa1 6,118,750
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 2,390,456
3,750,000 First FL Govt. Fin. Comm. Rev. Bonds, AMBAC,
6s, 7/1/09 Aaa 4,185,938
FL Hsg. Fin. Agcy. Rev. Bonds
505,000 (Home Ownership Dev. Program), Ser. G-1,
GNMA Coll., 7.9s, 3/1/22 Aaa 540,350
4,390,000 Ser. 1-B, GNMA Coll., 7.1s, 1/1/17 AAA 4,494,833
7,000,000 FL State Board of Ed. G.O. Bonds, 6.4s, 6/1/19 Aa2 7,560,000
FL State Mid-Bay Bridge Auth. Rev. Bonds, Ser. A
1,500,000 8s, 10/1/06 BBB/P 1,674,375
2,180,000 7 1/2s, 10/1/17 BBB/P 2,398,000
3,540,000 6.1s, 10/1/22 BBB/P 3,637,350
2,000,000 FL State Muni. Pwr. Agcy. IFB, AMBAC, 8.56s,
10/1/20 (acquired 7/10/92, cost $2,101,200) [DBL. DAGGERS] Aaa 2,470,000
2,500,000 Gulf Breeze, Local Govt. Rev. Bonds, Ser. E, FGIC,
7 3/4s, 12/1/15 Aaa 2,712,500
Hillsborough Cnty., Indl. Dev. Auth. Poll. Control
Rev. Bonds (Tampa Elec. Co.)
2,500,000 Ser. 91, 7 7/8s, 8/1/21 Aa3 2,875,000
3,645,000 6 1/4s, 12/1/34 Aa3 4,014,056
2,400,000 Hillsborough Cnty., Util. Rev. Bonds, Ser. A, FSA,
6 1/2s, 8/1/16 Aaa 2,607,000
Jacksonville, Hlth. Fac. Auth. Indl. Dev. Rev. Bonds
(Cypress Village)
1,350,000 7s, 12/1/22 Baa1 1,488,375
3,650,000 7s, 12/1/14 Baa1 4,024,125
950,000 Jacksonville, Hlth. Fac. Auth. Rev. Bonds
(Mental Hlth. Ctr.), 9 1/8s, 10/15/19 B/P 978,852
5,000,000 Lakeland, Elec. & Wtr. Rev. Bonds, Ser. B, FGIC,
6s, 10/1/10 Aaa 5,606,250
Lee Cnty., Board of Directors Hosp. IFB, MBIA
4,000,000 9.266s, 4/1/20 Aaa 4,755,000
5,000,000 8.548s, 3/26/20 Aaa 5,781,250
2,250,000 Lee Cnty., Indl. Dev. Auth. Hlth. Care Facs.
Rev. Bonds (Cypress Cove Hlth. Pk.), Ser. A,
6 3/8s, 10/1/25 BB-/P 2,278,125
Leesburg, Hosp. Rev. Bonds (Leesburg Regl. Med. Ctr.)
1,000,000 Ser. 91-A, 7 1/2s, 7/1/21 A- 1,146,250
2,065,000 6 1/8s, 7/1/18 A3 2,170,831
Martin Cnty., Indl. Dev. Auth. Rev. Bonds
(Indiantown Cogeneration)
2,500,000 Ser. B, 8.05s, 12/15/25 Baa3 2,928,125
3,000,000 Ser. A, 7 7/8s, 12/15/25 Baa3 3,483,750
10,000,000 Martin Cnty., Poll. Control Rev. Bonds
(FL Pwr. & Lt. Co.), MBIA, 7.3s, 7/1/20 Aaa 10,937,500
4,000,000 Orange Cnty., Hlth. Fac. Auth. IFB, 9.857s, 10/1/14
(acquired 4/19/95, cost $5,273,120) [DBL. DAGGERS] B-/P 5,885,000
3,000,000 Orange Cnty., Hlth. Fac. Auth. Rev. Bonds
(Orlando Regl. Hlthcare), MBIA, 6 1/4s, 10/1/18 Aaa 3,405,000
1,360,000 Orange Cnty., Hsg. Fin. Auth. Mtge. Rev. Bonds,
Ser. E, GNMA Coll., 7.9s, 10/1/22 Aaa 1,445,000
400,000 Orange Cnty., Hsg. Fin. Auth. VRDN
(Sundown Assoc. II), Ser. B, 3.95s, 6/1/04 A1 400,000
5,950,000 Orlando, Util. Comm. Wtr. & Elec. Rev. Bonds,
Ser. D, 6 3/4s, 10/1/17 Aa2 7,184,625
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 2,163,165
2,000,000 Palm Beach Cnty., Arpt. Syst. Rev. Bonds, MBIA,
7 3/4s, 10/1/10 Aaa 2,265,000
7,000,000 Palm Beach Cnty., School Board COP, Ser. A,
AMBAC, 6 3/8s, 8/1/15 Aaa 7,822,500
Palm Beach Cnty., Hlth. Fac. Auth. Rev. Bonds
(JFK Med. Ctr. Inc.)
3,975,000 8 7/8s, 12/1/18 (Prerefunded) AAA/P 4,244,585
1,625,000 8 7/8s, 12/1/18 AAA/P 1,734,379
215,000 Palm Beach Cnty., Single Fam. Hsg. Fin. Auth. Mtge.
Rev. Bonds, Ser. A, GNMA Coll., 7.2s, 10/1/24 Aaa 231,394
2,150,000 Palm Beach Cnty., Solid Waste Auth. Rev. Bonds,
Ser. A, AMBAC, 6s, 10/1/10 Aaa 2,383,813
5,000,000 Pinellas Cnty., Poll. Control Rev. Bonds
(FL Pwr. Corp.), 7.2s, 12/1/14 Aa3 5,500,000
2,000,000 Polk Cnty. School Board COP, FSA, 4 7/8s, 1/1/18 Aaa 1,902,500
Port Everglades, Auth. Rev. Bonds
5,000,000 (FL Port Impt.), 7 1/8s, 11/1/16 Aaa 6,075,000
5,000,000 Ser. A, 5s, 9/1/16 BBB 4,687,500
4,050,000 Port State Lucie Util. Rev. Bonds, Ser. A, MBIA
5 1/8s, 9/1/27 Aaa 3,918,375
2,935,000 Sanibel, Swr. Util. Rev. Bonds, 7 1/2s, 8/1/21 Baa 3,305,544
2,390,000 Santa Rosa Cnty., Hlth. Fac. Auth. Rev. Bonds
(Gulf Breeze Hosp. Inc.), Ser. A, 6.2s, 10/1/14 BBB+ 2,491,575
2,675,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds,
Ser. A-1, FSA, 7.05s, 1/1/30 Aaa 2,902,375
2,250,000 South Broward, Hosp. Dist. IFB, Ser. C, AMBAC,
9.196s, 5/13/21 Aaa 2,688,750
7,800,000 St. Petersburg, Hlth. Fac. Auth. Rev. Bonds
(Allegany Hlth.), Ser. A, MBIA, 7s, 12/1/15 Aaa 8,677,500
4,860,000 Sumter Cnty., School Dist. Rev. Bonds
(Multi Dist. Loan Program), FSA, 7.15s, 11/1/15 Aaa 6,105,375
6,000,000 Tampa Rev. Bonds (Allegany Hlth. Syst. St. Joseph),
MBIA, 6 1/2s, 12/1/23 Aaa 6,750,000
Tampa, Util. Tax Rev. Bonds, AMBAC
1,950,000 zero %, 10/1/21 Aaa 550,875
2,625,000 zero %, 4/1/21 Aaa 761,250
5,800,000 zero %, 10/1/17 Aaa 2,059,000
1,800,000 Volusia Cnty., Hlth. Fac. Auth. Rev. Bonds
(Memorial Hlth. Syst.), 8 1/8s, 6/1/08 BBB+ 1,998,000
--------------
226,951,496
Georgia (1.5%)
- ------------------------------------------------------------------------------------------------------------
4,000,000 GA Med. Ctr. Hosp. Auth. IFB (Columbus Regl.
Hlth. Care Syst.), Ser. B, MBIA, 8.546s, 8/1/10 Aaa 4,700,000
Nevada (1.5%)
- ------------------------------------------------------------------------------------------------------------
4,000,000 Clark Cnty., Indl. Dev. Rev. Bonds
(Southwest Gas Corp.), Ser. B, 7 1/2s, 9/1/32 Baa2 4,455,000
Puerto Rico (16.8%)
- ------------------------------------------------------------------------------------------------------------
1,500,000 Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds,
Ser. A, 7 7/8s, 7/1/17 Baa1 1,565,205
3,000,000 Cmnwlth. of PR, G.O. Bonds, MBIA, 6.45s, 7/1/17 Aaa 3,300,000
Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
1,000,000 Ser. T, 6 5/8s, 7/1/18 Aaa 1,112,500
5,280,000 Ser. Z, MBIA, 6 1/4s, 7/1/15 Aaa 6,065,400
3,500,000 MBIA, 6 1/4s, 7/1/09 Aaa 4,003,125
1,000,000 Cmnwlth. of PR, Hwy. & Trans. Auth. VRDN, Ser. X,
3.65s, 7/1/99 VMIG1 1,000,000
1,000,000 Cmnwlth. of PR, Impt. G.O. Bonds, 7.7s, 7/1/20 AAA 1,106,250
PR Elec. Pwr. Auth. Rev. Bonds
5,900,000 Ser. S, 7s, 7/1/07 Baa1 6,939,870
4,750,000 6 3/8s, 7/1/24 Baa1 5,183,438
3,000,000 Ser. BB, MBIA, 6 1/4s, 7/1/10 Aaa 3,416,250
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 4,127,750
5,950,000 PR Muni. Fin. Agcy. Rev. Bonds, Ser. A, FSA, 6s, 7/1/12 Aaa 6,678,875
6,595,000 PR Pub. Bldg. Auth. Rev. Gtd. (Govt. Fac.), Ser. B,
5s, 7/1/27 Aaa 6,380,664
--------------
50,879,327
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 Baa2 9,002,813
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $278,949,792) *** $295,988,636
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $302,835,042.
** The Moody's or Standard & Poor's ratings indicated are
believed to be the most recent ratings available at November 30, 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 November 30, 1997. Securities rated by Putnam are
indicated by "/P" and are not publicly rated.
*** The aggregate identified cost on a tax basis is $278,966,828,
resulting in gross unrealized appreciation and depreciation of
$17,302,899 and $281,091, respectively, or net unrealized appreciation
of $17,021,808.
++++ Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at November 30, 1997
was $8,355,000 or 2.8% of net assets.
# A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at November
30, 1997.
The rates shown on IFB, which are securities paying interest rates that
vary inversely to changes in the market interest rates, and VRDN's are the
current interest rates at November 30, 1997.
The fund had the following industry group concentrations greater
than 10% at November 30, 1997 (as a percentage of net assets):
Health Care 22.0%
Utilities 20.4
Transportation 13.9
Education 11.3
The fund had the following insurance concentrations greater than
10% at November 30, 1997 (as a percentage of net assets):
MBIA 27.3%
<CAPTION>
- ----------------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1997 (Unaudited)
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Notes
20 yr. (Short) $17,639,750 $17,348,219 Dec-97 $(291,531)
Muni Index (Long) 23,844,844 23,631,594 Dec-97 213,250
- ----------------------------------------------------------------------------------------
$ (78,281)
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $278,949,792) (Note 1) $295,988,636
- ---------------------------------------------------------------------------------------------------
Cash 1,357,625
- ---------------------------------------------------------------------------------------------------
Interest receivable 5,891,161
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 540,592
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 410,000
- ---------------------------------------------------------------------------------------------------
Total assets 304,188,014
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for variation margin 7,781
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 417,232
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 267,308
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 447,819
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 36,306
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 7,519
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,099
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 124,782
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 43,126
- ---------------------------------------------------------------------------------------------------
Total liabilities 1,352,972
- ---------------------------------------------------------------------------------------------------
Net assets $302,835,042
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $289,511,625
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (362,583)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment (Note 1) (3,274,563)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 16,960,563
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $302,835,042
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($235,452,349 divided by 25,072,374 shares) $9.39
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.39)* $9.86
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($65,700,345 divided by 6,998,838 shares)+ $9.39
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,682,348 divided by 179,278 shares) $9.38
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.38)** $9.70
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $25,000. On sales of $25,000 or more and on group sales the
offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
** On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended November 30, 1997 (Unaudited)
<S> <C>
Tax exempt interest income: $ 9,103,229
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 899,946
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 159,207
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 5,029
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,836
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 236,009
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 265,440
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 3,820
- --------------------------------------------------------------------------------------------------
Reports to shareholders 15,980
- --------------------------------------------------------------------------------------------------
Auditing 14,777
- --------------------------------------------------------------------------------------------------
Legal 12,615
- --------------------------------------------------------------------------------------------------
Postage 10,988
- --------------------------------------------------------------------------------------------------
Other 1,910
- --------------------------------------------------------------------------------------------------
Total expenses 1,629,557
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (49,408)
- --------------------------------------------------------------------------------------------------
Net expenses 1,580,149
- --------------------------------------------------------------------------------------------------
Net investment income 7,523,080
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,030,800
- --------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 394,243
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the period 6,682,331
- --------------------------------------------------------------------------------------------------
Net gain on investments 8,107,374
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 15,630,454
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
November 30 May 31
1997* 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- --------------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------------
Net investment income $ 7,523,080 $ 15,562,469
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments 1,425,043 91,385
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 6,682,331 7,590,957
- --------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 15,630,454 23,244,811
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- --------------------------------------------------------------------------------------------------------
From net investment income
- --------------------------------------------------------------------------------------------------------
Class A (6,189,898) (12,917,911)
- --------------------------------------------------------------------------------------------------------
Class B (1,433,591) (2,576,154)
- --------------------------------------------------------------------------------------------------------
Class M (35,876) (57,331)
- --------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (4,612,338) (9,664,296)
- --------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 3,358,751 (1,970,881)
Net assets
- --------------------------------------------------------------------------------------------------------
Beginning of period 299,476,291 301,447,172
- --------------------------------------------------------------------------------------------------------
End of period (including distributions in excess of net
investment income of $362,583 and $226,298, respectively) $302,835,042 $299,476,291
- --------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months For the
ended eleven months
Per-share Nov. 30 ended
operating performance (Unaudited) Year ended May 31 May 31 Year ended June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995+ 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.14 $8.91 $9.12 $8.77 $9.53 $9.08
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .24(d) .48 .48 .46 .50 .56(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .26 .23 (.21) .35 (.65) .53
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .50 .71 .27 .81 (.15) 1.09
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.25) (.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 (.25) (.48) (.48) (.46) (.61) (.64)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.39 $9.14 $8.91 $9.12 $8.77 $9.53
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 5.47* 8.12 3.04 9.58* (1.79) 12.44
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $235,453 $239,196 $247,920 $271,309 $276,245 $278,039
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .48* .96 .95 .83* .91 .77(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.58* 5.28 5.31 5.24* 5.38 5.94(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 16.84* 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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months For the
ended eleven months For the period
Per-share Nov. 30 ended Year ended Jan. 4, 1993++
operating performance (Unaudited) Year ended May 31 May 31 June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995+ 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.14 $8.91 $9.12 $8.76 $9.53 $9.17
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .21 (d) .42 .42 .40 .44 .21
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .25 .23 (.21) .36 (.66) .36
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .46 .65 .21 .76 (.22) .57
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) (.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 (.21) (.42) (.42) (.40) (.55) (.21)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.39 $9.14 $8.91 $9.12 $8.76 $9.53
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 5.12* 7.42 2.37 9.06* (2.55) 12.84*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $65,700 $58,926 $52,541 $44,581 $36,930 $17,881
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .80* 1.61 1.60 1.42* 1.51 .78(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.26* 4.62 4.64 4.62* 4.74 2.21(a)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 16.84* 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
- -----------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share Nov. 30 May 1, 1995++
operating performance (Unaudited) Year ended May 31 to May 31
- -----------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.14 $8.91 $9.12 $8.87
- -----------------------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------------------
Net investment income .23(d) .45 .46 .04(d)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .24 .23 (.21) .25
- -----------------------------------------------------------------------------------------------------------------------
Total from
investment operations .47 .68 .25 .29
- -----------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.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 (.23) (.45) (.46) (.04)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.38 $9.14 $8.91 $9.12
- -----------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 5.19* 7.80 2.76 3.28*
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,682 $1,355 $986 $1
- -----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .63* 1.26 1.23 .10*
- -----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.43* 4.97 4.82 .45*
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 16.84* 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
November 30, 1997 (Unaudited)
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 ("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. When
the contract is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Realized gains and losses on purchased
options are included in realized gains and losses on investment securities.
Futures contracts are valued at the quoted daily settlement prices established
by the exchange on which they trade. Exchange traded options are valued at the
last sale price, or if no sales are reported, the last bid price for purchased
options and the last ask price for written options. Options traded
over-the-counter are valued using prices supplied by dealers.
D) Line of credit The fund has entered into a committed line of credit with
certain banks. This line of credit agreement includes restrictions that the
fund maintain an asset coverage ratio of at least 300% and borrowings must not
exceed prospectus limitations. For the six months ended November 30, 1997, the
fund had no borrowings against the line of credit.
E) Federal taxes It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is also
the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
At May 31, 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
F) 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. Reclassifications are made to the fund's capital
accounts to reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
G) Amortization of bond premium and accretion of bond discount Any premium
resulting from the purchase of securities in excess of maturity value is
amortized on a yield-to-maturity basis. Discounts on original issue discount
and zero coupon bonds are accreted according to the yield to maturity basis.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.60% of the first $500 million of
average net assets, 0.50% of the next $500 million, 0.45% of the next $500
million 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%
thereafter. Prior to September 20, 1996, any amount over $1.5 billion was
based on 0.40%.
The fund reimburses Putnam Management an allocated amount for the compensation
and related expenses of certain officers of the fund and their staff who
provide administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a division
of PFTC.
For the six months ended November 30, 1997, fund expenses were reduced by
$49,408 under expense offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these credits.
The fund could have invested a portion of the assets utilized in connection
with the expense offset arrangements in an income producing asset if it had
not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $430 has
been allocated to the fund, 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 has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
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 currently limit payment by the fund to an annual rate of 0.20%, 0.85%
and 0.50% of the average net assets attributable to class A, class B and class
M shares respectively.
For the six months ended November 30, 1997, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $20,059 and $491 from the sale of
class A and class M shares, respectively and $66,324 in contingent deferred
sales charges from redemptions of class B shares. A deferred sales charge of
up to 1% is assessed on certain redemptions of class A shares. For the six
months ended November 30, 1997, Putnam Mutual Funds Corp., acting as
underwriter received $2,465 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended November 30, 1997, purchases and sales of
investment securities other than short-term investments aggregated $79,004,638
and $83,396,467, 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 November 30, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
November 30, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 1,185,295 $11,042,837
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 270,610 2,525,407
- ------------------------------------------------------------
1,455,905 13,568,244
Shares
repurchased (2,541,778) (23,620,736)
- ------------------------------------------------------------
Net decrease (1,085,873) $(10,052,492)
- ------------------------------------------------------------
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)
- ------------------------------------------------------------
Six months ended
November 30, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 901,217 $8,400,539
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 60,745 566,733
- ------------------------------------------------------------
961,962 8,967,272
Shares
repurchased (409,177) (3,814,835)
- ------------------------------------------------------------
Net increase 552,785 $5,152,437
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Six months ended
November 30, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 29,509 $273,493
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,179 20,316
- ------------------------------------------------------------
31,688 293,809
Shares
repurchased (656) (6,092)
- ------------------------------------------------------------
Net increase 31,032 $287,717
- ------------------------------------------------------------
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
- ------------------------------------------------------------
WELCOME TO
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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
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William J. Curtin
Vice President
Jerome J. Jacobs
Vice President
Blake E. Anderson
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 the principal amount
invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
SA046 36887-279 1/98
