Putnam
Florida
Tax Exempt
Income Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-98
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Investors generally have ignored municipal bond funds over the past few
years. For the tax conscious, though, there's no better fixed-income
option. Right now, muni yields -- which are exempt from federal and most
state taxes -- are nearly as high as Treasury yields."
-- Morningstar Fund Investor, October 1998
* "Sooner or later, the dramatic upward shift in municipal bond yields
relative to Treasuries will attract investors' attention, a situation that
bodes well for Florida, particularly given the solid fundamentals of the
state and local economies."
-- Leslie J. Burke, manager
Putnam Florida Tax Exempt Income Fund
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
16 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The rush of foreign investors to the safety of U.S. Treasury bonds in
recent months has driven prices on these securities markedly higher.
Because of the inverse relationship of yields to prices, yields on 30-year
Treasuries have declined to virtually the same level as those on long-term
municipals. This near parity has made Florida tax-exempt bonds unusually
attractive for the state's tax-conscious investors.
During the first half of Putnam Florida Tax Exempt Income Fund's fiscal
1999, Fund Manager Leslie Burke focused closely on portfolio structure,
adjusting duration and credit quality in search of the highest current
income consistent with the fund's secondary emphasis on preservation of
capital.
In the following report from Leslie, you will find a detailed discussion
of this strategy and other aspects of the fund's performance during the
six months ended November 30, 1998. She also offers her views on prospects
for the remainder of fiscal 1999.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 20, 1999
Report from the Fund Manager
Leslie J. Burke
The municipal bond market played bridesmaid again during the six months
ended November 30, 1998. Volatile financial market conditions caused a
historic global flight to quality in which U.S. Treasury bills, notes, and
bonds became the most coveted of all fixed-income investments. Municipal
bonds, while attractive investments in their own right, produced somewhat
lackluster results in comparison. Putnam Florida Tax Exempt Income Fund
closed the semiannual period with a total return of 2.82% at net asset
value for class A shares and -2.06% at public offering price. For more
performance information, please refer to the summary that begins on page
8.
* TAXABLE-EQUIVALENT YIELDS REACH EXCEPTIONAL LEVELS
While municipal bonds could not compete with their taxable brethren on a
price appreciation basis, the yields they offered far outpaced Treasury
securities on a taxable-equivalent basis. Traditionally municipal bond
yields trade at ratios between 80% and 85% of comparable Treasury
securities. With the severe financial and economic difficulties of many
foreign nations throughout the past six months, that yield ratio soared,
ranging between 95% to 100%, making municipal securities exceptionally
attractive in comparison to Treasuries.
In light of this highly favorable yield relationship, your fund's current
income stream remains extremely appealing. At the maximum federal tax rate
of 39.6%, a taxable investment would have to produce a current return of
7.55% to match your fund's current dividend rate of 4.56% for class A
shares or 6.47% to match the class B shares' 3.91% rate. In today's
low-inflation, low interest-rate, and high-tax environment, we believe
these figures represent exceptional real rates of return. Please see page
9 for complete yield information.
* PORTFOLIO STRUCTURE GETS HEIGHTENED ATTENTION
The tumultuous investment atmosphere of the past several months presented
us with formidable challenges. Our task was difficult and complex at best.
We needed to manage the fund's interest-rate exposure, maintain the
portfolio's high credit quality, pursue a high level of current income in
a low interest-rate environment, and position the portfolio for the market
rebound that we believe will eventually occur. To accomplish all this, we
heightened our focus on the fund's portfolio structure.
First, we kept the portfolio duration relatively neutral. Duration is a
measure of a fund's sensitivity to interest-rate changes. A neutral
duration indicates that your fund's sensitivity to either rising or
declining rates did not differ significantly from that of its competitors
or the market average. We achieved this in a two-fold manner: because
municipal bond prices, particularly those of longer-term bonds, had become
so compelling, we shifted some assets from intermediate-term securities
that had performed well and purchased longer-term issues. Since this move
had the potential to lengthen the fund's duration more than we deemed
prudent, we balanced this strategy by selling Treasury futures contracts,
which helped shorten the portfolio's duration.
Given the unexpected magnitude of the stampede to Treasury securities,
however, our use of Treasury futures contracts hindered the portfolio's
performance potential. By period's end, we had scaled back our position
slightly to safeguard against more Treasury market rallies. But we did not
eliminate it, believing it still has merit given the uncertain direction
of the economy and interest rates.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Hospitals/health care 24.4%
Utilities 14.7%
Transportation 12.9%
Education 10.5%
Pollution control 4.4%
Footnote reads:
*Based on net assets as of 11/30/98. Holdings will vary over time.
To sustain credit quality without sacrificing yield, we continued to
anchor the fund's assets at the highest (Aaa) and the lowest (Baa) levels
of the investment-grade spectrum. We also actively sought insured discount
coupon bonds -- Aaa-rated bonds selling at prices below par. Traditionally
these bonds experience solid price appreciation potential in a rising
market. We believe once investors' fears dissipate and people begin to
recognize the value that exists in the municipal market, these bonds stand
to perform extremely well.
With an eye toward maintaining a substantial degree of call protection
while giving the fund price appreciation potential, we stepped up our
purchase of premium coupon bonds (those selling above par) that could not
be called away by the issuer before the maturity date. Should the market
move upward, the noncallable bonds we purchased over the period, such as
Tallahassee Energy, Orange County Health, and Sarasota Hospital, offer
much more performance potential than comparable callable bonds. While the
securities discussed in this report were viewed favorably at the end of
the period, all holdings are subject to review in accordance with the
fund's investment strategy and may vary in the future.
* PUERTO RICO, NEW YORK DEBT BOOST FUND RESULTS
Within the guidelines of the fund's investment parameters, we are able to
pursue a limited number of tax-exempt investment opportunities outside
Florida during the calendar year as long as these holdings are sold before
the calendar year's end. Over the period, we took advantage of several
such opportunities, which, in turn, greatly benefited the fund. Early in
the calendar year, a significant number of new issues came to market in
Puerto Rico and New York. Given the favorable supply/demand dynamics for
both Puerto Rico and New York debt and the highly attractive valuations of
these new issues, we took advantage of the supply bubble and made
significant purchases. As supply began to diminish over the summer, the
prices of these bonds rose and we sold them at a considerable profit.
Fortune was on our side concerning Puerto Rico because we sold the
appreciated bonds just before Hurricane Georges hit the island.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
Aa/AA -- 12.3%
A -- 4.1%
Baa/BBB -- 16.9%
Ba/BB -- 2.3%
B -- 2.2%
VMIG1/A-1 -- 1.1%
Aaa/AAA -- 61.1%
Footnote reads:
*Based on percentage of market value as of 11/30/98. A bond rated Baa or
higher is considered investment grade. Ratings reflect Moody's
descriptions and Standard & Poor's(R) descriptions; percentages may
include unrated bonds considered by Putnam Management to be of comparable
quality. Ratings will vary over time.
* STAGE SET FOR MUNICIPAL BOND RALLY
Without a doubt, recent international events, such as Russia's debt
defaults and Brazil's deepening fiscal woes, have put many investors on
alert. We are carefully monitoring the markets for any hint of renewed
turmoil but with years of investment experience under our belts, we
recognize a classic buying opportunity when we see it. The dramatic upward
shift in the yield ratio between Treasury securities and municipal issues
has created historically attractive prices in the municipal market. We
believe that sooner or later this will attract investors' attention,
particularly given the ongoing solid fundamentals of Florida's state and
local economies. Once this occurs, we are confident that your fund's
portfolio will be positioned to benefit.
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 11/30/98, 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 and state income tax consistent
with preservation of capital.
TOTAL RETURN FOR PERIODS ENDED 11/30/98
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 2.82% -2.06% 2.48% -2.52% 2.66% -0.71%
- ------------------------------------------------------------------------------
1 year 6.07 1.02 5.38 0.38 5.76 2.27
- ------------------------------------------------------------------------------
5 years 32.33 26.07 28.21 26.21 30.27 26.01
Annual average 5.76 4.74 5.10 4.77 5.43 4.73
- ------------------------------------------------------------------------------
Life of fund 83.43 74.79 72.46 72.46 77.96 72.18
Annual average 7.61 6.99 6.81 6.81 7.22 6.79
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/98
Lehman Bros.
Municipal Bond Consumer
Index Price Index
- ------------------------------------------------------------------------------
6 months 3.84% 0.74%
- ------------------------------------------------------------------------------
1 year 7.77 1.55
- ------------------------------------------------------------------------------
5 years 37.81 12.48
Annual average 6.63 2.38
- ------------------------------------------------------------------------------
Life of fund 93.01 24.62
Annual average 8.30 2.70
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 4.75 and 3.25%
respectively. Class B share returns for the 1-, 5-, and 10-year (where
available) and life-of-fund periods reflect the applicable contingent
deferred sales charge (CDSC), which is 5% in the first year, declines to
1% in the sixth year, and is eliminated thereafter. Returns shown for
class B and class M shares for periods prior to their inception are
derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares,
the higher operating expenses applicable to such shares. All returns
assume reinvestment of distributions at NAV. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 11/30/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------------
Income $0.223342 $0.192321 $0.208884
- ------------------------------------------------------------------------------
Capital gains1 -- -- --
- ------------------------------------------------------------------------------
Total $0.223342 $0.192321 $0.208884
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
5/31/98 $9.45 $9.92 $9.45 $9.44 $9.76
- ------------------------------------------------------------------------------
11/30/98 9.49 9.96 9.49 9.48 9.80
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate2 4.56% 4.35% 3.91% 4.26% 4.12%
- ------------------------------------------------------------------------------
Taxable equivalent3 7.55 7.20 6.47 7.05 6.82
- ------------------------------------------------------------------------------
Current 30-day SEC yield4 3.69 3.51 2.96 3.35 3.25
- ------------------------------------------------------------------------------
Taxable equivalent3 6.11 5.81 4.90 5.55 5.38
- ------------------------------------------------------------------------------
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% federal 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 12/31/98
(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 2.92% -1.96% 2.70% -2.31% 2.77% -0.61%
- ------------------------------------------------------------------------------
1 year 5.04 0.08 4.36 -0.64 4.73 1.30
- ------------------------------------------------------------------------------
5 years 29.71 23.60 25.67 23.67 27.63 23.50
Annual average 5.34 4.33 4.68 4.34 5.00 4.31
- ------------------------------------------------------------------------------
Life of fund 83.98 75.31 72.88 72.88 78.44 72.65
Annual average 7.57 6.95 6.78 6.78 7.18 6.76
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 4.75% maximum sales charge for class A
shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Lehman Brothers Municipal Bond Index is an unmanaged list of long-term
fixed-rate investment-grade tax-exempt bonds representative of the
municipal bond market. The index does not take into account brokerage
commissions or other costs, may include bonds different from those in the
fund, and may pose different risks than the fund. It is not possible to
invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities 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 [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
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
Global Governmental Income Trust
High Quality Bond Fund +
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic 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
LIFESTAGE SM 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 Putnam Diversified Income Trust II
+Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[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.
<TABLE>
<CAPTION>
Portfolio of investments owned
November 30, 1998 (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
MUNICIPAL BONDS AND NOTES (97.9%) (a)
PRINCIPAL AMOUNT RATINGS(RAT) VALUE
<S> <C>
Florida (79.0%)
- --------------------------------------------------------------------------------------------------------------------------
$ 5,000,000 Alliance Arpt. Auth. Inc. Rev. Bonds
(American Airlines Inc.), 7 1/2s, 12/01/29 Baa2 $ 5,362,500
Brevard Cnty., Health Fac. Auth. Rev. Bonds
(Courtenay Springs)
2,000,000 7 3/4s, 11/15/17 BB-/P 2,237,500
2,345,000 7 1/2s, 11/15/09 BB-/P 2,620,538
Broward Cnty., Elderly. Fac. Auth. Rev. Bonds
(Nova U. Dorm.), Ser. A
2,500,000 7 1/2s, 04/1/17 AAA/P 2,762,500
385,000 7 1/4s, 04/1/01 AAA/P 416,281
1,000,000 Broward Cnty., Hlth. Fac. Auth. Rev. Bonds (Broward
Cnty. Nursing Home), 7 1/2s, 08/15/20 Aa3 1,088,750
Broward Cnty., Resource Recvy. Rev. Bonds
6,000,000 (SES Broward Co. LP South) 7.95s, 12/1/08 A 6,381,660
1,175,000 (Waste Energy LP North) 7.95s, 12/1/08 A 1,249,742
1,875,000 Clay Cnty., Single Fam. Hsg. Fin. Auth. Rev. Bonds,
Ser. A, GNMA Coll., 7.45s, 9/1/23 Aa1 1,964,063
1,400,000 Clay Cnty., Multi-Fam. Hsg. Fin. Auth. Rev. Bonds,
Ser. A, GNMA Coll (Oak Forest) 7.4s, 12/1/25 AAA 1,470,000
Dade Cnty., Rev. Bonds
1,400,000 (Seaport), MBIA, 6 1/2s, 10/1/09 Aaa 1,701,000
6,510,000 Ser. B, AMBAC, 5s, 10/1/35 Aaa 6,518,138
2,500,000 Dade Cnty., G.O. Bonds (Seaport), AMBAC,
6 1/4s, 10/1/21(SEG) Aaa 2,700,000
8,000,000 Dade Cnty., Professional Sports Franchise Fac.
Tax Rev. Bonds, MBIA, 4 3/4s, 10/1/30 Aaa 7,710,000
2,335,000 Escambia Cnty., Single Fam. Hsg. Fin. Auth. Mtge.
Rev. Bonds (Multi Cnty.) Ser. A, GNMA Coll.,
7.15s, 10/1/24 Aaa 2,390,456
5,500,000 Escambia Cnty., Poll. Control Rev. Bonds
(Champion Intl. Corp.) 6.9s, 8/1/22 Baa1 5,974,375
3,750,000 First FL., Govt. Fin. Comm. Rev. Bonds AMBAC
6s, 7/1/09 Aaa 4,350,000
415,000 FL. Hsg. Fin. Agcy., Rev. Bonds (Home Ownership
Dev. Program), Ser. G-1,
GNMA Coll. 7.9s, 3/1/22 Aaa 436,788
2,000,000 FL. Hsg. Fin. Agcy., VRDN (Woodlands),
3.5s, 12/1/17 A-1+ 2,000,000
FL. St., Board of Ed. G.O. Bonds (Public Ed.)
7,000,000 6.4s, 6/1/19 AA+ 7,577,500
9,000,000 Ser. A, 4 3/4s, 6/1/28 AA+ 8,628,750
6,745,000 FL. St., Div. Board Fin. Dept. Rev. Bond .0939s,
07/1/23 (acquired 9/2/98, cost $8,700,698) (RES) AAA/P 8,819,088
FL. St., Mid-Bay Bridge Auth. Rev Bonds, Ser. A
1,500,000 8s, 10/1/06 BBB/P 1,687,500
2,180,000 7 1/2s, 10/1/17 BBB/P 2,425,250
3,540,000 6.05s, 10/1/22 BBB/P 3,725,850
2,000,000 FL. St. Muni. Pwr. Agcy. IFB, AMBAC, 9.39s, 10/1/20
(acquired 7/10/92, cost $2,101,200) (RES) Aaa 2,467,500
2,500,000 Gulf Breeze, Local Govt. Rev. Bonds, Ser. E, FGIC,
7 3/4s, 12/1/15 Aaa 2,647,450
Hillsborough Cnty., Indl. Dev. Auth. Poll. Control
Rev. Bonds (Tampa Elec. Co.)
2,500,000 Ser. 91, 7 7/8s, 8/1/21 AA 2,818,750
3,645,000 6 1/4s, 12/1/34 AA 4,041,394
2,400,000 Hillsborough Cnty., Util. Rev. Bonds, Ser. A, FSA,
6 1/2s, 8/1/16 Aaa 2,598,000
Jacksonville, Hlth. Fac. Auth. Indl. Dev. Rev. Bonds
(Cypress Village)
1,350,000 7s, 12/1/22 Baa1 1,486,688
3,650,000 7s, 12/1/14 Baa1 4,019,563
940,000 Jacksonville, Hlth. Fac. Auth. Rev. Bonds
(Mental Hlth. Ctr.), 9 1/8s, 10/15/19 B/P 963,509
Lee Cnty., Board of Directors Hosp. IFB, MBIA
4,000,000 9.823s, 4/1/20 Aaa 4,695,000
5,000,000 (Lee Memorial Hosp.), 8.867s, 3/26/20 Aaa 5,862,500
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 2,354,063
Leesburg, Hosp. Rev. Bonds (Leesburg Regl. Med. Ctr.),
1,000,000 Ser. 91-A,
7 1/2s, 7/1/21 A- 1,142,500
2,065,000 6 1/8s, 7/1/18 A- 2,191,481
2,300,000 Manatee Cnty. Poll. Ctrl. VRDN (FL. Pwr. &
Light Co.), 3.35s, 9/1/24 VMIG1 2,300,000
Martin Cnty., Indl. Dev. Auth. Rev. Bonds
(Indian Cogeneration)
2,500,000 Ser. B, 8.05s, 12/15/25 Baa3 2,900,000
3,000,000 Ser. A, 7 7/8s, 12/15/25 Baa3 3,453,750
10,000,000 Martin Cnty., Poll. Control Rev. Bonds (FL. Pwr. &
Lt. Co.), MBIA, 7.3s, 7/1/20 Aaa 10,712,500
4,000,000 Orange Cnty., Hlth. Fac. Auth. IFB, 9.512s,
10/1/14 (acquired 4/19/95, cost $5,273,120) (RES) B-/P 5,985,000
5,000,000 Orange Cnty., Hlth. Fac. Auth. Rev. Bonds
(Orlando Regl. Hlthcare), MBIA, 6 1/4s, 10/1/18 Aaa 5,875,000
1,135,000 Orange Cnty., Hsg. Fin. Auth. Mtge. Rev. Bonds,
Ser. E, GNMA Coll., 7.9s, 10/1/22 Aaa 1,186,143
5,950,000 Orlando, Util. Comm. Wtr. & Elec. Rev. Bonds,
Ser. D, 6 3/4s, 10/1/17 Aa2 7,259,000
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 2,148,195
2,000,000 Palm Beach Cnty., Arpt. Syst. Rev. Bonds, MBIA,
7 3/4s, 10/1/10 Aaa 2,240,000
7,000,000 Palm Beach Cnty., School Board COP, Ser. A,
AMBAC, 6 3/8s, 8/1/15 Aaa 7,927,500
205,000 Palm Beach Cnty., Single Fam. Hsg. Fin. Auth. Mtge.
Rev. Bonds, Ser. A, GNMA Coll., 7.2s, 10/1/24 Aaa 218,581
5,000,000 Pinellas Cnty., Poll. Control Rev. Bonds
(FL. Pwr. Corp.), 7.2s, 12/1/14 Aa3 5,456,250
Port Everglades, Auth. Rev. Bonds
5,000,000 (FL Port Impt.), 7 1/8s, 11/1/16 Aaa 6,312,500
5,000,000 Ser. A, 5s, 9/1/16 BBB 4,787,500
2,935,000 Sanibel, Swr. Util. Rev. Bonds, 7 1/2s, 8/1/21 AAA/P 3,272,525
2,390,000 Santa Rosa Cnty., Hlth. Fac. Auth. Rev. Bonds
(Gulf Breeze Hosp. Inc.), Ser. A, 6.2s, 10/1/14 BBB+ 2,521,450
Sarasota Cnty., Pub. Hosp. Rev. Bonds
(Sarasota Mem. Hosp.), Ser. B, MBIA,
2,000,000 5 1/4s, 7/1/14 Aaa 2,112,500
2,000,000 5 1/4s, 7/1/13 Aaa 2,120,000
2,000,000 5 1/4s, 7/1/12 Aaa 2,150,000
2,675,000 SCA Tax Exempt Trust Multi-Fam. Mtge.
Rev. Bonds, Ser. A-1, FSA, 7.05s, 1/1/30 Aaa 2,915,750
2,250,000 South Broward, Hosp. Dist. IFB, Ser. C, AMBAC,
8.248s, 5/13/21 Aaa 2,652,188
1,000,000 St. Lucie Cnty., Poll. Ctrl. VRDN (FL Pwr. & Lt. Co.),
3.35s, 1/1/26 VMIG1 1,000,000
7,800,000 St. Petersburg, Hlth. Fac. Auth. Rev. Bonds
(Allegany Hlth.), Ser. A, MBIA, 7s, 12/1/15 Aaa 8,687,250
4,860,000 Sumter Cnty., School Dist. Rev. Bonds
(Multi Dist. Loan Program), FSA, 7.15s, 11/1/15 Aaa 6,263,325
6,000,000 Tampa Rev. Bonds (Allegany Hlth. Syst. St. Joseph),
MBIA, 6 1/2s, 12/1/23 Aaa 6,922,500
4,500,000 Tampa, Hlth. Sys. Rev. Bonds (Catholic Hlth.),
Ser. A, 4 3/4s, 11/15/28 Aaa 4,365,000
Tampa, Util. Tax Rev. Bonds, AMBAC
1,950,000 zero % 10/1/21 Aaa 624,000
2,625,000 zero % 4/1/21 Aaa 859,688
5,800,000 zero % 10/1/17 Aaa 2,298,250
1,800,000 Volusia Cnty., Hlth. Fac. Auth. Rev. Bonds
(Memorial Hlth. Syst.), 8 1/8s, 6/1/08 BBB+ 1,955,250
5,000,000 Winter Haven, Util. Sys. Rev. Bonds, MBIA,
4 3/4s, 10/1/28 Aaa 4,825,000
--------------
253,793,222
Illinois (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
Chicago Ill., O 'Hare Intl. Arpt. Special Fac. Rev. Bonds
1,800,000 (United Airlines) Ser. B, 8.95s, 05/1/18 Baa2 1,991,250
5,000,000 (American Airlines Inc.) 7 7/8s, 11/1/25 Baa2 5,387,500
--------------
7,378,750
Puerto Rico (16.6%)
- --------------------------------------------------------------------------------------------------------------------------
5,900,000 Cmnwlth of PR, Elec. Pwr. Auth. Rev. Bonds, Ser. S,
MBIA, 7s, 7/1/07 Aaa 7,175,875
3,000,000 Cmnwlth. of PR, G.O. Bonds, MBIA, 6.45s, 7/1/17 Aaa 3,423,750
1,000,000 Cmnwlth. of PR, Impt. G.O. Bonds, 7.7s, 7/1/20 AAA 1,085,000
8,000,000 Cmnwlth. of PR, Pub. Impt. G.O. Bonds (Pub. Impt.),
FSA, 5 1/2s, 7/1/13 AAA 8,880,000
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 6,256,800
PR Elec. Pwr. Auth. Rev. Bonds
4,430,000 Ser. W, MBIA, 7s, 7/1/07 Aaa 5,387,988
4,750,000 Ser. T, 6 3/8s, 7/1/24 Baa1 5,409,063
3,000,000 Ser. BB, MBIA, 6 1/4s, 7/1/10 Aaa 3,543,750
3,800,000 PR Indl. Tourist Edl. Med. & Environ. Control Fac.
Fing. Auth. Hosp. Rev. Bonds (Auxilio Muto
Obligation Group), Ser. A, MBIA, 6 1/4s, 7/1/16 Aaa 4,260,750
5,950,000 PR Muni. Fin. Agcy. Rev. Bonds, Ser. A, FSA, 6s, 7/1/12 Aaa 6,901,995
--------------
53,437,471
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $295,590,233) (b) $ 314,609,443
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $321,355,508.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
November 30, 1998 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, 1998. Securities
rated by Putnam are indicated by "/P" and are not publicly rated.
(b) The aggregate identified cost on a tax basis is $295,590,233, resulting in gross unrealized appreciation and
depreciation of $19,657,481 and $638,271, respectively, or net unrealized appreciation of $19,019,210.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities
held at November 30, 1998 was $17,271,588 or 5.4% of net assets.
(SEG) A portion of this security was pledged and segregated with the custodian to cover margin requirements for
futures contracts at November 30, 1998.
The rates shown on IFB, which are securities paying interest rates that vary inversely to the market interest
rate and VRDN's are the current interest rates at November 30, 1998.
The fund had the following industry group concentrations greater than 10% at November 30, 1998 (as a
percentage of net assets):
Hospitals/health care 24.4%
Utilities 14.7
Transportation 12.9
Education 10.5
The fund had the following insurance concentrations greater than 10% at November 30, 1998 (as a percentage of
net assets):
MBIA 28.7%
- -------------------------------------------------------------------------------------
Futures Contracts Outstanding at November 30, 1998 (Unaudited)
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------
Municipal Bond Index (Long) $10,496,906 $10,450,338 Dec-98 $ 46,568
Municipal Bond Index (Short) 2,143,594 2,139,775 Mar-99 (3,819)
U.S. Treasury Bond 20 Yr (Short) 2,332,688 2,329,234 Mar-99 (3,454)
U.S. Treasury Bond (Short) 15,321,562 14,893,971 Dec-98 (427,591)
- --------------------------------------------------------------------------------------
$(388,296)
- --------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1998 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $295,590,233) (Note 1) $314,609,443
- -----------------------------------------------------------------------------------------------
Cash 1,731,847
- -----------------------------------------------------------------------------------------------
Interest receivables 5,653,271
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 430,323
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 365,000
- -----------------------------------------------------------------------------------------------
Total assets 322,789,884
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for variation margin 142,368
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 307,597
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 232,652
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 483,113
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 36,288
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 9,480
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,045
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 136,066
- -----------------------------------------------------------------------------------------------
Other accrued expenses 85,767
- -----------------------------------------------------------------------------------------------
Total liabilities 1,434,376
- -----------------------------------------------------------------------------------------------
Net assets $321,355,508
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $304,786,528
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (244,904)
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investment (Note 1) (1,817,030)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 18,630,914
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $321,355,508
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($240,300,248 divided by 25,316,615 shares) $9.49
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.49)* $9.96
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($79,233,208 divided by 8,349,602 shares)+ $9.49
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,822,052 divided by 192,126 shares) $9.48
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.48)** $9.80
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $25,000. On sales of $25,000 or more and on group
sales the offering price is reduced.
** On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales the offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended November 30, 1998 (Unaudited)
<S> <C>
Tax exempt interest income: $8,979,643
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 951,713
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 180,892
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 4,935
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,118
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 238,729
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 316,120
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 3,350
- -----------------------------------------------------------------------------------------------
Reports to shareholders 10,109
- -----------------------------------------------------------------------------------------------
Registration fees 75
- -----------------------------------------------------------------------------------------------
Auditing 14,384
- -----------------------------------------------------------------------------------------------
Legal 3,855
- -----------------------------------------------------------------------------------------------
Postage 11,843
- -----------------------------------------------------------------------------------------------
Other 34,498
- -----------------------------------------------------------------------------------------------
Total expenses 1,773,621
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (31,699)
- -----------------------------------------------------------------------------------------------
Net expenses 1,741,922
- -----------------------------------------------------------------------------------------------
Net investment income 7,237,721
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,111,431
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (610,633)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures contracts during the period 808,962
- -----------------------------------------------------------------------------------------------
Net gain on investments 1,309,760
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $8,547,481
- -----------------------------------------------------------------------------------------------
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
1998* 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 7,237,721 $ 14,989,743
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 500,798 2,454,944
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 808,962 7,543,720
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 8,547,481 24,988,407
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (5,610,227) (12,164,829)
- ---------------------------------------------------------------------------------------------------------------
Class B (1,533,625) (2,908,782)
- ---------------------------------------------------------------------------------------------------------------
Class M (29,378) (70,449)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 8,902,103 1,758,516
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 10,276,354 11,602,863
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 311,079,154 299,476,291
- ---------------------------------------------------------------------------------------------------------------
End of period (including distribution in excess of net
investment income of $244,904 and $309,395, respectively) $321,355,508 $311,079,154
- ---------------------------------------------------------------------------------------------------------------
* 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 November 30 ended Year ended
operating performance (Unaudited) Year ended May 31 May 31 June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995++ 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.45 $9.14 $8.91 $9.12 $8.77 $9.53
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .23 .47 .48 .48 .46 .50
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .03 .32 .23 (.21) .35 (.65)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .26 .79 .71 .27 .81 (.15)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.22) (.48) (.48) (.48) (.45) (.50)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of
net investment income -- -- -- -- (.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- -- (.09)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- -- (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.22) (.48) (.48) (.48) (.46) (.61)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.49 $9.45 $9.14 $8.91 $9.12 $8.77
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.82* 8.80 8.12 3.04 9.58* (1.79)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $240,300 $237,910 $239,196 $247,920 $271,309 $276,245
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .49* .96 .96 .95 .83* .91
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.38* 5.06 5.28 5.31 5.24* 5.38
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 18.88* 42.40 70.30 81.99 61.46* 64.83
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year advanced from June 30 to May 31.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended May 31, 1996 and thereafter, includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months For the
ended eleven months
Per-share November 30 ended Year ended
operating performance (Unaudited) Year ended May 31 May 31 June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995++ 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.45 $9.14 $8.91 $9.12 $8.76 $9.53
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .19 .42 .42 .42 .40 .44
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .04 .31 .23 (.21) .36 (.66)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .23 .73 .65 .21 .76 (.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.19) (.42) (.42) (.42) (.39) (.44)
- ------------------------------------------------------------------------------------------------------------------------------------
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 (.19) (.42) (.42) (.42) (.40) (.55)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.49 $9.45 $9.14 $8.91 $9.12 $8.76
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.48* 8.10 7.42 2.37 9.06* (2.55)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $79,233 $71,925 $58,926 $52,541 $44,581 $36,930
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .81* 1.61 1.61 1.60 1.42* 1.51
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.06* 4.40 4.62 4.64 4.62* 4.74
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 18.88* 42.40 70.30 81.99 61.46* 64.83
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year advanced from June 30 to May 31.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended May 31, 1996 and thereafter, includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share November 30 May 1, 1995+
operating performance (Unaudited) Year ended May 31 to May 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.44 $9.14 $8.91 $9.12 $8.87
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .21 .45 .45 .46 .04(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .04 .30 .23 (.21) .25
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .25 .75 .68 .25 .29
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) (.45) (.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 (.21) (.45) (.45) (.46) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.48 $9.44 $9.14 $8.91 $9.12
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.66* 8.36 7.80 2.76 3.28*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,822 $1,244 $1,355 $986 $1
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .64* 1.26 1.26 1.23 .10*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.24* 4.74 4.97 4.82 .45*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 18.88* 42.40 70.30 81.99 61.46*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
++ The fiscal year advanced from June 30 to May 31.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended May 31, 1996 and thereafter, includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts. (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
Notes to financial statements
November 30, 1998 (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, 1998, 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, 1998, the fund had a capital loss carryover of approximately
$1,318,000 available to offset future capital gains, if any. The amount of
the carryover and the expiration dates are:
Loss Carryover Expiration
---------------------- ----------------------
$406,000 May 31, 2003
908,000 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 zero coupon bonds and
original issue discount bonds are accreted according to the
yield-to-maturity basis.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.60% of the first $500
million of average net assets, 0.50% of the next $500 million, 0.45% of
the next $500 million, 0.40% of the next $5 billion, 0.375% of the next $5
billion, 0.355% of the next $5 billion, 0.34% of the next $5 billion and
0.33% thereafter.
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, 1998, fund expenses were reduced by
$31,699 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 $400 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 have approved payment by the fund to an annual
rate of 0.20%, 0.85% and 0.50% of the average net assets attributable to
class A, class B and class M shares respectively.
For the six months ended November 30, 1998, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $27,075 and $303 from
the sale of class A and class M shares, respectively and $75,252 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 that were purchased without an initial sales charge as part
of an investment of $1 million or more. For the six months ended November
30, 1998, Putnam Mutual Funds Corp., acting as underwriter received $2,802
on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended November 30, 1998, purchases and sales of
investment securities other than short-term investments aggregated
$58,153,651 and $58,252,268, 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, 1998, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
November 30, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,551,271 $14,706,463
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 253,597 2,403,568
- -----------------------------------------------------------------------------
1,804,868 17,110,031
Shares
repurchased (1,665,382) (15,774,599)
- -----------------------------------------------------------------------------
Net increase 139,486 $ 1,335,432
- -----------------------------------------------------------------------------
Year ended
May 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,987,044 $37,519,868
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 532,271 4,999,148
- -----------------------------------------------------------------------------
4,519,315 42,519,016
Shares
repurchased (5,500,433) (51,568,624)
- -----------------------------------------------------------------------------
Net decrease (981,118) $(9,049,608)
- -----------------------------------------------------------------------------
Six months ended
November 30, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,136,934 $10,789,191
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 63,234 599,169
- -----------------------------------------------------------------------------
1,200,168 11,388,360
Shares
repurchased (464,564) (4,391,712)
- -----------------------------------------------------------------------------
Net increase 735,604 $ 6,996,648
- -----------------------------------------------------------------------------
Year ended
May 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,136,909 $20,073,417
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 121,713 1,142,778
- -----------------------------------------------------------------------------
2,258,622 21,216,195
Shares
repurchased (1,090,677) (10,249,363)
- -----------------------------------------------------------------------------
Net increase 1,167,945 $10,966,832
- -----------------------------------------------------------------------------
Six months ended
November 30, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 70,725 $667,497
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,201 11,373
- -----------------------------------------------------------------------------
71,926 678,870
Shares
repurchased (11,575) (108,847)
- -----------------------------------------------------------------------------
Net increase 60,351 $570,023
- -----------------------------------------------------------------------------
Year ended
May 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 44,920 $ 418,892
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,571 33,470
- -----------------------------------------------------------------------------
48,491 452,362
Shares
repurchased (64,962) (611,070)
- -----------------------------------------------------------------------------
Net decrease (16,471) $(158,708)
- -----------------------------------------------------------------------------
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
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
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
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Jerome J. Jacobs
Vice President
Leslie J. Burke
Vice President and Fund Manager
John R. Verani
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
www.putnaminv.com
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
SA046/48668 037/365/453 1/99
