Putnam
Florida
Tax Exempt
Income Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
5-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Because of their limited attractiveness to non-U.S. investors, municipal
bonds did not experience the turbulence endured by taxable bonds,
especially U.S. Treasury issues, in the wake of global investors' flight
to quality last fall. For U.S. investors, however, municipals have
provided unusually handsome current income both in real terms, thanks to
low inflation, and relative to after-tax returns on taxable securities,
especially for higher-bracket taxpayers.
Putnam Florida Tax Exempt Income Fund's management has been focusing on
generating maximum current income without undue risk to principal,
primarily through careful selection of portfolio holdings and strategies
aimed at risk reduction. Management is also cautiously seeking out bonds
with longer maturities and is currently focusing on noncallable bonds,
both moves designed to lock in attractive current returns.
I am pleased to announce the appointment of David E. Hamlin as your fund's
new manager. Before joining Putnam in 1998 as a senior portfolio manager,
he was with Vanguard Group, Provident Institutional Management Corp., and
Provident Bank. He has 17 years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
July 21, 1999
Report from the Fund Manager
David E. Hamlin
The municipal bond universe encountered many conflicting forces during the
year ended May 31, 1999. Falling and rising interest rates, tightening and
widening credit spreads, and dwindling supply in the face of steady demand
were just a few of the trends characterizing the period. With so many
complex market factors at play, maintaining a relatively stable price over
this period was a major challenge, but one that we feel has been
successfully met.
Total return for 12 months ended 5/31/99
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- -------------------------------------------------------------
3.20% -1.69% 2.56% -2.37% 2.88% -0.49%
- -------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 6.
* CAUTIOUS STANCE MUTES IMPACT OF RISING RATES
Bond market headlines currently belong to U.S. Treasuries, with the
long-term bond moving up to just about 6% as this report was being
written. This is the highest level for these bonds since spring of 1998.
Long-term municipal bond yields have risen too but not as dramatically,
illustrating the resistance of the municipal market to a rise in interest
rates. On June 2, 1999, the 30-year municipal bond yielded 5.375% -- 89.5%
of the Treasury yield -- which is clearly still an attractive ratio.
As interest rates have moved up, Putnam's municipal bond funds have
performed well, primarily due to our focus on the higher-yield sectors
(which outperformed the higher-grade sectors) and our overall cautious
stance toward interest rates during the year. We cannot predict when
interest rates will reach their peak, but we do believe that this is a
good time to begin incrementally lengthening maturities in the funds and
locking in higher rates.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Hospitals/
health care 24.8%
Utilities 18.1%
Transportation 16.7%
Education 11.9%
Housing 4.9%
Footnote reads:
*Based on net assets as of 5/31/99. Holdings will vary over time.
Concerns are gradually beginning to surface about the effects of Y2K and
Medicare reform proposals on certain sectors of the municipal bond market.
Such concerns are one reason why we have always considered security
selection and credit analysis crucial as a fundamental investment strategy
of the fund. Opportunity comes from choosing bonds correctly, not from
overall sector performance. Security and credit research have become even
more important when we invest in bonds that carry ratings below investment
grade. These are the bonds that can add tremendously to a fund's income
level, but they also mean taking on greater credit risk and require the
most meticulous research efforts.
One strategy we have used to maintain the relative stability of your
fund's net asset value involves an emphasis on discount and premium bonds.
Discount bonds trade below par value, which makes the purchase price of
these securities less than the value of the bond's face amount. Conversely
premium bonds trade above par, making the purchase price of these
securities more than the value of the bond's face amount. We have tried to
steer clear of bonds that are trading close to par. Once a bond's price
hovers around par, the bond starts to trade to its 10-year call date
rather than to its longer maturity date. Since investors assume the issuer
will call the bond and retire the debt, the bond's price fluctuates
dramatically. This is especially prevalent during periods of relatively
low interest rates as we have seen recently.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
Aa/AA -- 12.1%
A -- 3.5%
Baa/BBB -- 18.7%
Ba/BB -- 1.7%
B -- 0.3%
Aaa/AAA -- 63.7%
Footnote reads:
* Based on a percentage of market value as of 5/31/99. A bond rated Baa or
higher is considered investment grade. Percentages may include unrated
bonds considered by Putnam Management to be of comparable quality. Ratings
will vary over time.
* AMID TIGHT SUPPLY, GUAM AND PUERTO RICO BONDS PROVIDE DIVERSIFICATION
The level of new bond issuance dropped significantly in Florida this year,
mirroring a similar trend on the national level. From January through the
end of May, the supply of Florida municipal bonds declined more than 15%.
Given the heady pace of municipal bond offerings in 1998, it's likely that
many issuers have already addressed funding needs and that the supply will
consequently remain low for some time. The recent uptick in interest rates
is also responsible for a reduction in new offerings thus far in 1999.
Given the scarcity of new bonds coming to market, many investors are
holding on to their bonds, since there are few opportunities to replace
them. On the demand side, cash flow to municipal bonds has increased -- a
by-product of a volatile stock market and investors' need to rebalance
their portfolios. The ensuing supply/demand relationship is positive for
municipal bond prices and strengthens their resistance to rising interest
rates.
"Examine your needs for municipal bonds now. If you can use more, market
conditions are very favorable now. Technical factors built into the market
may make today's yields and spreads look very attractive in the future."
- -- "Munis Are Back," Northwestern Financial Review, March 20, 1999
A closer look at municipal credit ratings
Rating agencies such as Moody's Investors Service and Standard & Poor's Corp.
assign ratings to municipal issuers based on an in-depth analysis of the
issuer's financial condition and management, economic and debt
characteristics, and the specific revenue sources securing the bond. The
highest ratings are Aaa (Moody's) and AAA (Standard & Poor's). Bonds rated
in the Baa/BBB category or higher (A and Aa/AA) are considered to be
investment grade. Securities in the Ba/BB group and below are considered to
be below investment grade or high yield. If you look at "The fund's portfolio"
in the back of this report, you will see ratings next to each issuer's name.
The pie chart on page 3 summarizes this listing to give you a sense of the
portfolio's overall quality.
Sometimes smaller bonds are not rated because the cost of obtaining a rating
is not justifiable. Unrated bonds can still offer attractive investment
opportunities and may end up in your fund's portfolio. In such case, Putnam's
analysts perform their own ratings and the bonds are identified in the
portfolio listing by a /P rating.
During the period, we invested in Guam and Puerto Rico general obligation
bonds, adding valuable diversification and attractive total return
potential to the portfolio. Income from securities issued in U.S.
territories and commonwealths is tax free to U.S. investors. These
holdings have appreciated in response to growing demand.
* THREE SECTORS OFFER ATTRACTIVE OPPORTUNITIES
Within the Florida municipal market, we found attractive opportunities in
the health-care, transportation, and utility sectors. Cyprus Cove in Fort
Myers and Shell Point on Sanibel Island are two retirement communities
delivering high-quality health care to an aging population. Changing
demographics point to a bright future for both communities. Their bonds
carry coupons of 6 3/8% and 5 1/2%, respectively.
The utility industry is changing rapidly in response to deregulation and
increased competition, and change usually signals opportunity. Among
utility bonds, we prefer those issued by investor-owned companies, which
are for-profit entities and thus better equipped to compete in a
market-driven environment. Holdings in this sector are rated AAA, AA, or
insured. Florida Power and Light is one example.
The healthy economy, high passenger demand, and relatively low petroleum
prices continue to support strong performance for the airline-backed
industrial development bonds. Airlines are posting record profits and are
in the best fiscal shape of the decade. Current holdings include bonds
backed by American Airlines and Delta Airlines. While these holdings,
along with others discussed in this report, were viewed favorably during
the period, all holdings are subject to review in accordance with the
fund's investment strategy and may vary in the future.
* DESPITE RATE UPTICK, INFLATION REMAINS LOW
With indications that inflation may be starting to rise, the consumer
price index is moving toward an annualized core inflation rate of
approximately 2%. Since inflation in 1998 was practically nonexistent, a
move to 2% may seem tremendous but is actually well below what has been
considered average. And despite some signs of returning inflation, we
still live predominately in a deflationary world, one in which many prices
are falling. Just look at online stock trading prices and the discounts
available from online bookstores for evidence of deflation.
In the coming months, we expect that economic and market stability will be
more the rule than the exception. If rates continue to climb gradually as
we expect, the fund's multi-pronged investment strategy should continue to
yield positive results in the coming fiscal year.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 5/31/99, 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 income tax consistent with preservation of capital.
TOTAL RETURN FOR PERIODS ENDED 5/31/99
Class A Class B Class M
(inception dates) (8/24/90) (1/4/93) (5/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 3.20% -1.69% 2.56% -2.37% 2.88% -0.49%
- ------------------------------------------------------------------------
5 years 36.65 30.16 32.30 30.30 34.54 30.13
Annual average 6.44 5.41 5.76 5.44 6.11 5.41
- ------------------------------------------------------------------------
Life of fund 84.12 75.45 72.59 72.59 78.35 72.55
Annual average 7.21 6.62 6.42 6.42 6.82 6.42
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 5/31/99
Lehman Bros. Municipal Consumer
Bond Index price index
- ------------------------------------------------------------------------
1 year 4.67% 2.09%
- ------------------------------------------------------------------------
5 years 41.51 12.68
Annual average 7.19 2.42
- ------------------------------------------------------------------------
Life of fund 94.56 26.29
Annual average 7.91 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-year, 5-year 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.
[GRAPHIC OMMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 8/24/90
Fund's class A Lehman Bros. Municipal Consumer price
Date shares at POP Bond Index index
8/24/90 9,525 10,000 10,000
5/31/91 10,302 10,912 10,304
5/31/92 11,384 11,983 10,616
5/31/93 12,828 13,417 10,957
5/31/94 12,834 13,748 11,208
5/31/95 14,018 15,005 11,565
5/31/96 14,445 15,690 11,900
5/31/97 15,618 16,992 12,166
5/31/98 16,994 18,587 12,371
5/31/99 $17,545 $19,456 $12,629
Footnote reads:
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B shares would have
been valued at $17,259 and no contingent deferred sales charges would
apply; a $10,000 investment in the fund's class M shares would have been
valued at $17,835 ($17,255 at public offering price).
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 5/31/99
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 12 12 12
- ------------------------------------------------------------------------------
Income $0.449457 $0.390046 $0.420233
- ------------------------------------------------------------------------------
Capital gains1 -- -- --
- ------------------------------------------------------------------------------
Total $0.449457 $0.390046 $0.420233
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
5/31/98 $9.45 $9.92 $9.45 $9.44 $9.76
- ------------------------------------------------------------------------------
5/31/99 9.30 9.76 9.30 9.29 9.60
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate2 5.06% 4.82% 4.46% 4.78% 4.62%
- ------------------------------------------------------------------------------
Taxable equivalent3 8.37 7.98 7.38 7.91 7.65
- ------------------------------------------------------------------------------
Current 30-day SEC yield4 3.78 3.60 3.09 3.46 3.35
- ------------------------------------------------------------------------------
Taxable equivalent3 6.26 5.96 5.12 5.73 5.55
- ------------------------------------------------------------------------------
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 6/30/99 (most recent calendar quarter)
Class A Class B Class M
(inception dates) (8/24/90) (1/4/93) (5/1/95)
NAV POP NAV CDSC NAV POP
- ----------------------------------------------------------------------------
1 year 1.33% -3.48% 0.82% -4.03% 1.14% -2.18%
- ----------------------------------------------------------------------------
5 years 34.87 28.42 30.74 28.74 32.89 28.51
Annual average 6.17 5.13 5.51 5.18 5.85 5.14
- ----------------------------------------------------------------------------
Life of fund 81.12 72.59 69.72 69.72 75.61 69.90
Annual average 6.94 6.36 6.16 6.16 6.57 6.17
- ----------------------------------------------------------------------------
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. See first
page of performance summary for method of performance calculation.
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales 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.
A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as of
the last day of the reporting period. Holdings are organized by asset type
and industry sector, country, or state to show areas of concentration and
diversification.
Statement of assets and liabilities shows how the fund's net assets and share
price is determined. All investment and non-investment assets are added
together. Any unpaid expenses and other liabilities are subtracted from this
total. The result is divided by the number of shares to determine the net
asset value per share, which is calculated separately for each class of
shares. (For funds with preferred shares, the amount subtracted from total
assets includes the net assets allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for the
reporting period. This is determined by adding up all the fund's earnings --
from dividends and interest income -- and subtracting its operating expenses.
This statement also lists any net gain or loss the fund realized on the sales
of its holdings and -- for holdings that remain in the portfolio -- any change
in unrealized gains or losses over the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of the
fund's shares. It lists distributions and their sources (net investment income
or realized capital gains) over the current reporting period and the most
recent fiscal year-end. The distributions listed here may not match the
amounts listed in the Statement of Operations because the distributions are
determined on a tax basis and may be paid in a different period from the one
in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also includes
the current reporting period. For open-ended funds, a separate table is
provided for each share class.
Report of independent accountants
For the fiscal year ended May 31, 1999
To the Trustees and Shareholders of
Putnam Florida Tax Exempt Income Fund
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio (except for bond ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial
position of Putnam Florida Tax Exempt Income Fund (the "fund") at May 31,
1999, and the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of investments owned at May 31,
1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 12, 1999
<TABLE>
<CAPTION>
The fund's portfolio
May 31, 1999
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
MUNICIPAL BONDS AND NOTES (98.9%) (a)
PRINCIPAL AMOUNT RATING (RAT) VALUE
<S> <C> <C> <C>
California (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
$ 5,195,000 San Francisco, City & Cnty. Arpt. Rev. Bonds,
FSA, 4 3/4s, 5/1/29 Aaa $ 4,805,375
Florida (78.2%)
- --------------------------------------------------------------------------------------------------------------------------
Brevard Cnty., Health Fac. Auth. Rev. Bonds
(Courtenay Springs)
2,000,000 7 3/4s, 11/15/17 AAA/P 2,380,000
2,345,000 7 1/2s, 11/15/09 AAA/P 2,761,238
Broward Cnty., Edl. Fac. Auth. Rev. Bonds
(Nova U. Dorm), Ser. A
2,500,000 7 1/2s, 4/1/17 AAA/P 2,709,375
270,000 7 1/4s, 4/1/01 AAA/P 286,538
4,980,000 Broward Cnty., FL Arpt.,AMBAC, 5 1/8s, 10/1/16 Aaa 4,992,450
1,000,000 Broward Cnty., Hlth. Fac. Auth. Rev. Bonds
(Broward Cnty. Nursing Home), 7 1/2s, 8/15/20 Aa3 1,075,000
Broward Cnty., Resource Recvy. Rev. Bonds
6,000,000 (SES Broward Cnty. LP South), 7.95s, 12/1/08 A- 6,287,700
1,175,000 (Waste-Energy LP North), 7.95s, 12/1/08 A- 1,231,341
1,400,000 Clay Cnty., Multi-Fam. Hsg. Fin. Auth. Rev. Bonds
(Oak Forest), Ser. A, GNMA Coll., 7.4s, 12/1/25 AAA 1,459,500
1,875,000 Clay Cnty., Single Fam. Hsg. Fin. Auth. Rev. Bonds,
Ser. A, GNMA Coll., 7.45s, 9/1/23 Aa1 1,950,000
1,400,000 Dade Cnty., Rev. Bonds (Seaport), MBIA,
6 1/2s, 10/1/09 Aaa 1,615,250
2,500,000 Dade Cnty., Seaport G.O. Bonds, AMBAC,
6 1/4s, 10/1/21 (SEG) Aaa 2,662,500
8,000,000 Dade Cnty., Professional Sports Franchise Fac.
Tax Rev. Bonds, MBIA, 4 3/4s, 10/1/30 Aaa 7,320,000
5,500,000 Escambia Cnty., Poll. Control Rev. Bonds
(Champion Intl. Corp.), 6.9s, 8/1/22 Baa1 5,974,375
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 2,375,863
3,750,000 First FL Govt. Fin. Comm. Rev. Bonds, AMBAC,
6s, 7/1/09 Aaa 4,190,625
6,745,000 FL State Board of Fin. Rev. Bonds, FSA, 8 1/4s,
7/1/13 (acquired 9/2/98, cost $8,719,396) (RES) AAA/P 8,355,369
355,000 FL Hsg. Fin. Agcy. Rev. Bonds (Home Ownership
Dev. Program), Ser. G-1, GNMA Coll.,
7.9s, 3/1/22 Aaa 370,531
FL State Board of Ed. G.O. Bonds
9,000,000 4 3/4s, 6/1/28 AA+ 8,246,250
7,000,000 6.4s, 6/1/19 AA+ 7,525,000
FL State Mid-Bay Bridge Auth. Rev. Bonds, Ser. A
1,500,000 8s, 10/1/06 BBB/P 1,668,750
2,180,000 7 1/2s, 10/1/17 BBB/P 2,400,725
3,540,000 6.1s, 10/1/22 BBB/P 3,646,200
2,000,000 FL State Muni. Pwr. Agcy. IFB, AMBAC, 9.39s,
10/1/20 (acquired 7/10/92, cost $2,101,200) (RES) Aaa 2,405,000
2,500,000 Gulf Breeze, Local Govt. Rev. Bonds, Ser. E,
FGIC, 7 3/4s, 12/1/15 Aaa 2,599,125
Hillsborough Cnty., Indl. Dev. Auth. Poll. Control
Rev. Bonds (Tampa Elec. Co.)
2,500,000 Ser. 91, 7 7/8s, 8/1/21 AA 2,784,375
3,645,000 6 1/4s, 12/1/34 AA 4,004,944
2,400,000 Hillsborough Cnty., Util. Rev. Bonds, Ser. A, FSA,
6 1/2s, 8/1/16 Aaa 2,571,000
Jacksonville, Hlth. Fac. Auth. Indl. Dev. Rev. Bonds
(Cypress Village)
1,350,000 7s, 12/1/22 Baa1 1,464,750
3,650,000 7s, 12/1/14 Baa1 3,964,813
940,000 Jacksonville, Hlth. Fac. Auth. Rev. Bonds
(Mental Hlth. Ctr.), 9 1/8s, 10/15/19 B/P 958,556
Lee Cnty., Board of Directors Hosp. IFB, MBIA
5,000,000 (Lee Memorial Hosp.), MBIA, 8.867s, 3/26/20 Aaa 5,762,500
4,000,000 9.823s, 4/1/20 Aaa 4,560,000
Lee Cnty., Indl. Dev. Auth. Hlth. Care Facs. Rev. Bonds
4,000,000 (Shell Point Village), Ser. A, 5 1/2s, 11/15/29 BBB- 3,855,000
5,250,000 (Cypress Cove Hlth. Pk.), Ser. A, 6 3/8s, 10/1/25 BB/P 5,440,313
Leesburg, Hosp. Rev. Bonds
(Leesburg Regl. Med. Ctr.)
1,000,000 Ser. 91-A, 7 1/2s, 7/1/21 A- 1,121,250
2,065,000 6 1/8s, 7/1/18 A3 2,183,738
10,000,000 Martin Cnty., Poll. Control Rev. Bonds
(FL Pwr. & Lt. Co.), MBIA, 7.3s, 7/1/20 Aaa 10,568,796
2,750,000 Martin Cnty., Indl. Dev. Auth. Rev. Bonds
(Indian Cogeneration), Ser. A, 7 7/8s, 12/15/25 Baa3 2,873,750
5,000,000 Orange Cnty., School Board COP, Ser. 85, MBIA,
FRB, 6.97s, 8/1/22 (acquired 12/21/98,
cost $5,344,900) (RES) Aaa 5,106,250
4,000,000 Orange Cnty., Hlth. Fac. Auth. IFB, 9.512s,
10/1/14 (acquired 4/19/95, cost $5,273,120) (RES) BBB+/P 5,760,000
5,000,000 Orange Cnty., Hlth. Fac. Auth. Rev. Bonds
(Orlando Regl. Hlthcare), MBIA, 6 1/4s, 10/1/18 Aaa 5,681,250
1,015,000 Orange Cnty., Hsg. Fin. Auth. Mtge. Rev. Bonds,
Ser. E, GNMA Coll., 7.9s, 10/1/22 Aaa 1,051,347
5,950,000 Orlando, Util. Comm. Wtr. & Elec. Rev. Bonds,
Ser. D, 6 3/4s, 10/1/17 Aa2 7,053,368
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 2,116,518
2,000,000 Palm Beach Cnty., Arpt. Syst. Rev. Bonds, MBIA,
7 3/4s, 10/1/10 Aaa 2,192,500
7,000,000 Palm Beach Cnty., School Board COP, Ser. A,
AMBAC, 6 3/8s, 8/1/15 Aaa 7,787,500
200,000 Palm Beach Cnty., Single Fam. Hsg. Fin. Auth.
Mtge. Rev. Bonds, Ser. A, GNMA Coll.,
7.2s, 10/1/24 Aaa 210,750
5,000,000 Pinellas Cnty., Poll. Control Rev. Bonds
(FL Pwr. Corp.), 7.2s, 12/1/14 Aa3 5,375,000
Port Everglades, Auth. Rev. Bonds
5,000,000 (FL Port Impt.), 7 1/8s, 11/1/16 Aaa 6,131,250
5,000,000 Ser. A, 5s, 9/1/16 BBB 5,005,700
2,935,000 Sanibel, Swr. Util. Rev. Bonds, 7 1/2s, 8/1/21 AAA/P 3,213,825
2,390,000 Santa Rosa Cnty., Hlth. Fac. Auth. Rev. Bonds
(Gulf Breeze Hosp. Inc.), Ser. A, 6.2s, 10/1/14 BBB+ 2,485,600
Sarasota Cnty., Pub. Hosp. Board Rev. Bonds
(Sarasota Memorial Hosp.), Ser. B, MBIA
2,000,000 5 1/4s, 7/1/16 Aaa 2,047,500
2,000,000 5 1/4s, 7/1/15 Aaa 2,062,500
2,000,000 Sarasota Cnty., Pub. Hosp. Rev. Bonds
(Sarasota Memorial Hosp.), Ser. B, MBIA,
5 1/4s, 7/1/14 Aaa 2,082,500
2,675,000 SCA Tax Exempt Trust Multi-Fam. Mtge. Rev. Bonds,
Ser. A-1, FSA, 7.05s, 1/1/30 Aaa 2,878,969
2,250,000 South Broward, Hosp. Dist. IFB, Ser. C, AMBAC,
8.248s, 5/13/21 Aaa 2,573,438
7,800,000 St. Petersburg, Hlth. Fac. Auth. Rev. Bonds
(Allegany Hlth.), Ser. A, MBIA, 7s, 12/1/15 Aaa 8,541,000
4,860,000 Sumter Cnty., School Dist. Rev. Bonds
(Multi Dist. Loan Program), FSA, 7.15s, 11/1/15 Aaa 6,044,625
2,395,000 Tallahassee, Energy Syst. Rev. Bonds, Ser. A,
5 1/4s, 10/1/12 Aaa 2,505,769
6,000,000 Tampa Rev. Bonds (Allegany Hlth. Syst. St. Joseph),
MBIA, 6 1/2s, 12/1/23 Aaa 6,795,000
4,500,000 Tampa, Hlth. Sys. Rev. Bonds (Catholic Hlth.),
Ser. A, 4 3/4s, 11/15/28 Aaa 4,128,750
Tampa, Util. Tax Rev. Bonds, AMBAC
1,950,000 zero %, 10/1/21 Aaa 599,625
2,625,000 zero %, 4/1/21 Aaa 830,156
5,800,000 zero %, 10/1/17 Aaa 2,247,500
1,800,000 Volusia Cnty., Hlth. Fac. Auth. Rev. Bonds
(Memorial Hlth. Syst.), 8 1/8s, 6/1/08 BBB+ 1,919,484
5,000,000 Winter Haven, Util. Sys. Rev. Bonds, MBIA,
4 3/4s, 10/1/28 Aaa 4,618,750
--------------
247,648,914
Guam (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
1,500,000 Guam, Pwr. Auth. Rev. Bonds, Ser. A, 5 1/8s, 10/1/29 BBB 1,443,750
Illinois (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
10,000,000 Chicago, O'Hare Intl. Arpt. Special Fac. Rev. Bonds
(American Airlines, Inc.), Ser. A, 7 7/8s, 11/1/25 Baa1 10,650,000
Puerto Rico (15.4%)
- --------------------------------------------------------------------------------------------------------------------------
3,000,000 Cmnwlth. of PR, G.O. Bonds, MBIA, 6.45s, 7/1/17 Aaa 3,371,250
1,000,000 Cmnwlth. of PR, Impt. G.O. Bonds, 7.7s, 7/1/20 AAA 1,067,370
8,000,000 Cmnwlth. of PR, Pub. Impt. G.O. Bonds, FSA,
5 1/2s, 7/1/13 AAA 8,650,000
5,900,000 Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds,
Ser. S, MBIA, 7s, 7/1/07 Aaa 6,962,000
Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
1,000,000 Ser. T, 6 5/8s, 7/1/18 Aaa 1,096,250
5,280,000 Ser. Z, MBIA, 6 1/4s, 7/1/15 Aaa 6,078,600
PR Elec. Pwr. Auth. Rev. Bonds
4,430,000 Ser. W, MBIA, 7s, 7/1/07 Aaa 5,227,400
4,750,000 Ser. T, 6 3/8s, 7/1/24 Baa1 5,320,000
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 4,194,250
5,950,000 PR Muni. Fin. Agcy. Rev. Bonds, Ser. A, FSA,
6s, 7/1/12 Aaa 6,708,625
--------------
48,675,745
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $301,340,607) (b) $ 313,223,784
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $316,637,645.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
May 31, 1999 for the securities listed. Ratings are generally ascribed to securities at the time of issuance.
While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings
do not necessarily represent what the agencies would ascribe to these securities at May 31, 1999. Securities rated by
Putnam are indicated by "/P" and are not publicly rated. Ratings are not covered by the Report of independent
accountants.
(b) The aggregate identified cost on a tax basis is $301,482,585, resulting in gross unrealized appreciation and
depreciation of $14,429,738 and $2,688,539, respectively, or net unrealized appreciation of $11,741,199.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held at
May 31, 1999 was $21,626,619 or 6.8% of net assets.
(SEG) A portion of this security was pledged and segregated with the custodian to cover margin requirements for futures
contracts at May 31, 1999.
The rates shown on IFB and Floating Rate Bonds (FRB) are the current interest rates shown at May 31, 1999, which are
subject to change based on the terms of the security.
The fund had the following industry group concentrations greater than 10% at May 31, 1999 (as a percentage of net
assets):
Hospitals/health care 24.8%
Utilities 18.1
Transportation 16.7
Education 11.9
The fund had the following insurance concentrations greater than 10% at May 31, 1999 (as a percentage of net
assets):
MBIA 31.3%
FSA 10.7
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at May 31, 1999
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
- -------------------------------------------------------------------------------
Municipal Bond
Index (Long) $5,300,625 $5,324,126 Sep-99 $(23,501)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
May 31, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $301,340,607) (Note 1) $313,223,784
- -----------------------------------------------------------------------------------------------
Cash 215,748
- -----------------------------------------------------------------------------------------------
Interest receivables 5,930,353
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 354,337
- -----------------------------------------------------------------------------------------------
Receivable for variation margin 12,375
- -----------------------------------------------------------------------------------------------
Total assets 319,736,597
Liabilities
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 461,685
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 1,456,343
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 466,940
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 481,213
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 37,561
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 9,529
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 265
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 139,930
- -----------------------------------------------------------------------------------------------
Other accrued expenses 45,486
- -----------------------------------------------------------------------------------------------
Total liabilities 3,098,952
- -----------------------------------------------------------------------------------------------
Net assets $316,637,645
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $306,664,726
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 57,758
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (1,944,515)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 11,859,676
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $316,637,645
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($233,454,193 divided by 25,104,641 shares) $9.30
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $9.30)* $9.76
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($81,875,647 divided by 8,806,974 shares)+ $9.30
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,307,805 divided by 140,703 shares) $9.29
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.29)** $9.60
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $25,000. On sales of $25,000 or more and on group
sales, the offering price is reduced.
** On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended May 31, 1999
<S> <C>
Tax exempt interest income: $18,585,077
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,908,857
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 424,849
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 9,149
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 5,418
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 478,860
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 661,320
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 8,248
- -----------------------------------------------------------------------------------------------
Reports to shareholders 18,415
- -----------------------------------------------------------------------------------------------
Registration fees 176
- -----------------------------------------------------------------------------------------------
Auditing 30,257
- -----------------------------------------------------------------------------------------------
Legal 7,684
- -----------------------------------------------------------------------------------------------
Postage 22,554
- -----------------------------------------------------------------------------------------------
Other 55,780
- -----------------------------------------------------------------------------------------------
Total expenses 3,631,567
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (81,179)
- -----------------------------------------------------------------------------------------------
Net expenses 3,550,388
- -----------------------------------------------------------------------------------------------
Net investment income 15,034,689
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,109,619
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (736,306)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures contracts during the year (5,962,276)
- -----------------------------------------------------------------------------------------------
Net loss on investments (5,588,963)
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 9,445,726
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended May 31
-------------------------------
1999 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 15,034,689 $ 14,989,743
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 373,313 2,454,944
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (5,962,276) 7,543,720
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 9,445,726 24,988,407
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (11,373,102) (12,164,829)
- ---------------------------------------------------------------------------------------------------------------
Class B (3,223,202) (2,908,782)
- ---------------------------------------------------------------------------------------------------------------
Class M (67,118) (70,449)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 10,776,187 1,758,516
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 5,558,491 11,602,863
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 311,079,154 299,476,291
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income and distribution in excess of net income of
$57,758 and $309,395, respectively) $316,637,645 $311,079,154
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
For the
eleven months
Per-share ended Year ended
operating performance Year ended May 31 May 31 June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 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 .46 .47 .48 .48 .46 .50
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.16) .32 .23 (.21) .35 (.65)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .30 .79 .71 .27 .81 (.15)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.45) (.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 (.45) (.48) (.48) (.48) (.46) (.61)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.30 $9.45 $9.14 $8.91 $9.12 $8.77
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.20 8.80 8.12 3.04 9.58* (1.79)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $233,454 $237,910 $239,196 $247,920 $271,309 $276,245
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .98 .96 .96 .95 .83* .91
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.87 5.06 5.28 5.31 5.24* 5.38
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 32.08 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 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
- ------------------------------------------------------------------------------------------------------------------------------------
For the
eleven months
Per-share ended Year ended
operating performance Year ended May 31 May 31 June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 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 .40 .42 .42 .42 .40 .44
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.16) .31 .23 (.21) .36 (.66)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .24 .73 .65 .21 .76 (.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.39) (.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 (.39) (.42) (.42) (.42) (.40) (.55)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.30 $9.45 $9.14 $8.91 $9.12 $8.76
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 2.56 8.10 7.42 2.37 9.06* (2.55)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $81,876 $71,925 $58,926 $52,541 $44,581 $36,930
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.63 1.61 1.61 1.60 1.42* 1.51
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.23 4.40 4.62 4.64 4.62* 4.74
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 32.08 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 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
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share May 1, 1995+
operating performance Year ended May 31 to May 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 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 .43 .45 .45 .46 .04(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.16) .30 .23 (.21) .25
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .27 .75 .68 .25 .29
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.42) (.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 (.42) (.45) (.45) (.46) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.29 $9.44 $9.14 $8.91 $9.12
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 2.88 8.36 7.80 2.76 3.28*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,308 $1,244 $1,355 $986 $1
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.28 1.26 1.26 1.23 .10*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.60 4.74 4.97 4.82 .45*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 32.08 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 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
May 31, 1999
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 year ended May
31, 1999, 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, 1999, the fund had a capital loss carryover of approximately
$1,133,000 available to offset future capital gains, if any. The amount of
the carryover and the expiration dates are:
Loss Carryover Expiration
- -------------- ------------
$221,000 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. These differences include temporary and
permanent differences of losses on wash sale transactions, dividends
payable, straddle loss deferrals and unrealized gains and losses on
certain futures contracts. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. For
the year ended May 31, 1999, the fund reclassified $4,114 to decrease
undistributed net investment income and $4,114 to increase
paid-in-capital. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
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. On June 4, 1999, the Trustees approved a management fee
schedule to become effective July 1, 1999, based upon the lesser of (i) an
annual rate of 0.50% of the average net asset value of the fund or (ii)
the initial tiers mentioned above.
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 year ended May 31, 1999, fund expenses were reduced by $81,179
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 $390 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 year ended May 31, 1999, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $50,272 and $437 from the sale of
class A and class M shares, respectively, and $143,456 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 year ended May 31, 1999, Putnam
Mutual Funds Corp., acting as underwriter received $18,386 on class A
redemptions.
Note 3
Purchase and sales of securities
During the year ended May 31, 1999, purchases and sales of investment
securities other than short-term investments aggregated $111,164,041 and
$100,007,998, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost
basis.
Note 4
Capital shares
At May 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended May 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,753,569 $35,542,486
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 510,916 4,832,920
- -----------------------------------------------------------------------------
4,264,485 40,375,406
Shares
repurchased (4,336,973) (41,013,184)
- -----------------------------------------------------------------------------
Net decrease (72,488) $ (637,778)
- -----------------------------------------------------------------------------
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)
- -----------------------------------------------------------------------------
Year ended May 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,464,112 $23,332,610
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 131,904 1,247,346
- -----------------------------------------------------------------------------
2,596,016 24,579,956
Shares
repurchased (1,403,040) (13,260,558)
- -----------------------------------------------------------------------------
Net increase 1,192,976 $11,319,398
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Year ended May 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 238,390 $2,253,605
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,326 31,680
- -----------------------------------------------------------------------------
241,716 2,285,285
Shares
repurchased (232,788) (2,190,718)
- -----------------------------------------------------------------------------
Net increase 8,928 $ 94,567
- -----------------------------------------------------------------------------
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)
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
The fund has designated 100% of dividends paid from net investment income
during the fiscal year as tax exempt for Federal income tax purposes.
The Form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
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
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
David E. Hamlin
Vice President and Fund Manager
Richard A. Monaghan
Vice President
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' Web site: 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
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
AN046-53213 037/365/453 7/99
