Putnam
Ohio
Tax Exempt
Income Fund
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-04
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
During the past several months, Putnam has introduced a number of
reforms for the benefit of shareholders, including increasing the amount
of disclosure for our funds. For example, in the spring of 2004 we began
showing expense and risk comparisons in shareholder reports. We are now
including in this report portfolio turnover information for your fund,
which explains how the rate at which a fund buys and sells portfolio
securities might affect its return and its taxable distributions to
shareholders. We are also including additional disclosure about your
fund's management team. Following the Outlook for Your Fund, we list any
changes in your fund's Portfolio Leader and Portfolio Members during the
prior year period, as well as the current Portfolio Leader's and
Portfolio Members' other fund management responsibilities at Putnam. We
also show how much these individuals have invested in the fund (in
dollar ranges). Furthermore, fund ownership (in dollar ranges) is now
being shown for the members of Putnam's Executive Board.
We are also pleased to announce that three new Trustees have joined your
fund's Board of Trustees. Nominated by your fund's independent Trustees,
these individuals have had outstanding careers as leaders in the investment
management industry. Myra R. Drucker is a Vice Chair of the Board of
Trustees of Sarah Lawrence College and serves as Chair of the New York
Stock Exchange (NYSE) Pension Managers Advisory Committee and as a Trustee
of Commonfund, a not-for-profit asset management firm. Richard B. Worley is
Managing Partner of Permit Capital LLC, an investment management firm. Both
Ms. Drucker and Mr. Worley are independent Trustees (i.e., Trustees who are
not "interested persons" of your fund or its investment advisor). Charles
E. Haldeman, Jr., the third new Trustee, is President and Chief Executive
Officer of Putnam Investments.
During the period covered by the following report, Putnam Ohio Tax Exempt
Income Fund delivered respectable results. In the following pages, the fund
managers discuss fund performance, strategy, and their outlook for the
remainder of fiscal 2005.
We thank you for your support of the Putnam funds throughout 2004 and
wish you all the best in 2005.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
January 19, 2005
Report from Fund Management
Fund highlights
* For the six months ended November 30, 2004, Putnam Ohio Tax Exempt
Income Fund class A shares returned 3.77% without sales charges and
-0.93% with maximum sales charges reflected.
* The fund's benchmark, the Lehman Municipal Bond Index, returned 4.29%.
* The average return for the fund's Lipper category, Ohio Municipal Debt
Funds, was 3.82%.
* See the Performance Summary beginning on page 10 for additional fund
performance, comparative performance, and Lipper data.
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TOTAL RETURN FOR
PERIODS ENDED 11/30/04
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Class A
(inception 10/23/89) NAV POP
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6 months 3.77% -0.93%
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1 year 3.21 -1.48
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5 years 33.40 27.43
Annual average 5.93 4.97
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10 years 80.76 72.58
Annual average 6.10 5.61
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Annual average
(life of fund) 6.11 5.79
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Data is historical. Past performance does not guarantee future results.
More recent returns may be less or more than those shown. Investment
return and principal value will fluctuate and you may have a gain or a
loss when you sell your shares. Performance assumes reinvestment of
distributions and does not account for taxes. Returns at NAV do not
reflect a sales charge of 4.50%. For the most recent month-end
performance, visit www.putnaminvestments.com. For a portion of the
period, this fund limited expenses, without which returns would have
been lower. A 2% short-term trading fee may be applied to shares
exchanged or sold within 5 days of purchase.
Performance commentary
Although primarily an investment-grade fund, your fund benefited from
its investments in lower-quality bonds, which outperformed
higher-quality issues over the first half of its 2005 fiscal year.
However, the fund's returns lagged those of its benchmark index, which
is nationally diversified and reflected the greater strength of other
state bonds markets such as California's. The fund's performance at net
asset value (NAV) was in line with the average of its Lipper peer group.
While interest rates on short-term securities did rise in concert with
Federal Reserve Board (Fed) rate hikes, long-term, higher-yielding bonds
experienced declines in interest rates and increases in prices. The
fund's shorter relative duration meant it did not fully benefit from
these developments during this period.
FUND PROFILE
Putnam Ohio Tax Exempt Income Fund seeks to provide as high a level of
current income free from federal and state of Ohio personal income
taxes, as we believe to be consistent with the preservation of capital.
It may be suitable for Ohio investors seeking tax-free income through a
diversified portfolio of municipal bonds primarily issued in Ohio.
Market overview
Over the past six months, most municipal yields fell and bond prices,
which move in the opposite direction of yields, rose. Early 2004 was
marked by rising yields, as bond market investors were anticipating that
the Fed would need to raise short-term interest rates. Interestingly,
when the Fed announced what had been a widely anticipated 25-basis-point
(one quarter of a percentage point) increase at its June 30 meeting, the
bond market changed course. Yields of bonds with maturities greater than
two years trended downward. At the same time, yields rose for bonds with
very short maturities (two years and shorter). This resulted in a
flattening of the yield curve -- that is, shorter- and longer-term
interest rates began to converge.
Among uninsured bonds and bonds rated A and below, yield spreads
generally tightened and bond prices rose. These higher-yielding
securities continued to provide attractive income streams that also
contributed to the fund's total return. Municipal bonds issued by the
State of California were generally strong performers, as the economy
improved and rating agencies upgraded the state's credit rating. Yields
on tobacco settlement bonds varied with the results of ongoing legal
battles, but declined overall for the period, and their prices rose,
accordingly. Airline-related industrial development bonds (IDBs)
performed poorly, in general, as the industry continued to face
financial difficulties that were made worse by record high oil prices.
New York City general obligation bonds rose in price over the past six
months, reflecting a dearth of new issuance as well as investors'
confidence in improving economic prospects for the city.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 11/30/04
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Bonds
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Lehman Municipal Bond Index (tax-exempt bonds) 4.29%
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Lehman Aggregate Bond Index (broad bond market) 3.82%
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Lehman Intermediate Government Bond Index
(intermediate-maturity U.S. government bonds) 2.19%
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JP Morgan Global High Yield Index (global high-yield
corporate bonds) 9.02%
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Equities
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S&P 500 Index (broad stock market) 5.68%
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Russell 2000 Index (stocks of small and midsize companies) 12.18%
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MSCI EAFE Index (international stocks) 12.58%
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These indexes provide an overview of performance in different market
sectors for the six months ended 11/30/04.
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Strategy overview
Because we believe that interest rates will rise, we are positioning the
portfolio more defensively. This involves shortening the fund's
duration, which means reducing its sensitivity to changes in interest
rates. Because we believe the yield curve will continue to flatten, we
have concentrated our bond sales in shorter and intermediate maturities,
which we believe will underperform. We also used interest rate swaps to
manage the fund's duration. Meanwhile, we continued to trim the fund's
positions in uninsured bonds and bonds rated A and below, which have
performed strongly. The fund maintained an overweight position in
tobacco settlement bonds relative to its benchmark. We closely monitored
developments in this sector and modestly reduced the fund's overweight
relative to its benchmark during the period. The fund had less exposure
to airline-related IDBs during the period than did its peers, a positive
amid continued difficulty in this sector. We trimmed the fund's exposure
to this sector during the period, because we believe the airline
industry still faces significant challenges over the near term.
In previous fiscal years, the fund emphasized non-callable bonds --
bonds that the issuer is not permitted to redeem (or call) before the
maturity date. These issues performed well as rates fell through March
2004, but during the spring we began to moderate this position, selling
non-callable bonds and purchasing longer callable issues. We believe
these callable bonds may perform better than non-callable bonds if
interest rates rise and the yield curve flattens further.
[GRAPHIC OMITTED: horizontal bar chart THE FUND'S MATURITY AND DURATION
COMPARED]
THE FUND'S MATURITY AND DURATION COMPARED
5/31/04 11/30/04
Average effective
maturity in years 7.7 6.9
Duration in years 5.6 5.2
Footnotes read:
This chart compares changes in the fund's duration (a measure of its
sensitivity to interest-rate changes) and its average effective maturity
(a weighted average of the holdings' maturities).
Average effective maturity also takes into account put and call
features, where applicable, and reflects prepayments for mortgage-backed
securities.
How fund holdings affected performance
Improving credit markets increased demand for, and improved the
performance of, lower-rated bonds -- those rated BBB or below. The fund
was helped by its investment in tobacco settlement bonds, which are
secured by the income stream from tobacco companies' settlement
obligations to the states and generally offer higher yields than bonds
of comparable quality. This income could be jeopardized as a result of
multibillion-dollar judgments against the tobacco companies, and prices
in this sector have shifted as concerns about litigation overshadowed
optimism. Our analyst believes that, despite several highly visible
lawsuits against the tobacco industry, litigation risk is receding.
During this period, the fund profited from its holding in Children's
Trust Fund of Puerto Rico settlement revenue bonds. (Income from Puerto
Rico bonds is tax exempt in all 50 states.)
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW
Aaa (51.9%)
Aa (15.2%)
A (15.5%)
Baa (12.3%)
Ba (0.9%)
Caa (0.2%)
VMIG1 (4.0%)
Footnote reads:
As a percentage of market value as of 11/30/04. A bond rated Baa or
higher is considered investment grade. The chart reflects Moody's
ratings; percentages may include bonds not rated by Moody's but
considered by Putnam Management to be of comparable quality. Ratings
will vary over time.
High-yielding industrial development bonds have also benefited from
increased investor demand and, in addition, have been buoyed by the
improvement in economic activity during the period. IDBs are issued by
municipalities but backed by the credit of the company benefiting from the
financing. Investor perceptions about the backing company's health, or that
of its industry group, affect the prices of these bonds rather than the
rating of the municipality issuing them. For example, IDBs issued by
Toledo-Lucas County for CSX Transportation rose in value during the period,
benefiting from increased demand for rail freight services. This railroad
subsidiary of CSX Corporation provides rail freight transportation
throughout 23 states and two Canadian provinces. Finally, bonds issued for
the Ohio State Water Bay Shore Power Project rose in price, benefiting from
improving conditions in the electric power sector. Electric utilities across
the country have been closing, selling, or otherwise deemphasizing their
diversification efforts and focusing on their regulated operations. This
"back to basics" trend has been favorably received by investors and
contributed to higher prices for bonds in the tax-exempt power sector.
As noted earlier, the fund's performance was hampered by our decision to
lower the fund's interest-rate sensitivity by maintaining a relatively
short portfolio duration. This move was prompted by our expectation that
interest rates would rise, depressing bond prices. However, the effects
of the Fed's rate hikes were felt primarily on the short end of the
yield curve, while the positive economic climate encouraged yield-hungry
investors to bid up prices on long-term, higher-yielding bonds such as
those in the fund's portfolio. Although our strategy reduced the fund's
participation as longer-term bonds rallied, we continue to believe
caution is well advised.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary in
the future.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
Judging from the flattened yield curve, the bond market appears to have
largely shrugged off the recent Fed rate hikes. However, we believe that
interest rates all along the yield curve are more likely to rise than
fall. The Fed has raised the discount rate four times in 25-basis-point
increments since June 2004, bringing it to two percent at the end of the
period. We believe the Fed will continue to raise short-term rates
incrementally through mid-2005, actions that are likely to cause rising
yields among bonds with shorter maturities. We believe this also
suggests further flattening of the yield curve. The fund is positioned
defensively in terms of duration, and we will continue to monitor and
adjust the fund's duration as it seems appropriate. We believe inflation
will remain low, despite the threat posed by high oil prices. We also
anticipate that the rate of GDP growth will slow during the next two
quarters, as the effects of the Fed's tightening policy are felt.
In general, these signs indicate that we are headed into a potentially
more challenging environment for bond investing. Our task will be to
continue to search for the most attractive opportunities among
tax-exempt securities and to balance the pursuit of attractive current
income with prudent risk management.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. This fund
concentrates its investments in one state and involves more risk than a
fund that invests more broadly. Capital gains, if any, are taxable for
federal and, in most cases, state purposes. For some investors,
investment income may be subject to the federal alternative minimum tax.
Income from federally exempt funds may be subject to state and local
taxes. Mutual funds that invest in bonds are subject to certain risks,
including interest-rate risk, credit risk, and inflation risk. As
interest rates rise, the prices of bonds fall. Long-term bonds are more
exposed to interest-rate risk than short-term bonds. Unlike bonds, bond
funds have ongoing fees and expenses. Tax-free funds may not be suitable
for IRAs and other non-taxable accounts.
Your fund's management
Your fund is managed by the members of the Putnam Tax Exempt
Fixed-Income Team. David Hamlin is the Portfolio Leader, and Paul Drury,
Susan McCormack, and James St. John are Portfolio Members of your fund.
The Portfolio Leader and Portfolio Members coordinate the team's
management of the fund.
For a complete listing of the members of the Putnam Tax Exempt
Fixed-Income Team, including those who are not Portfolio Leaders or
Portfolio Members of your fund, visit Putnam's Individual Investor Web
site at www.putnaminvestments.com.
Fund ownership
The table below shows how much the fund's current Portfolio Leader and
Portfolio Members have invested in the fund (in dollar ranges).
Information shown is for the current and prior year ended November 30.
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FUND PORTFOLIO LEADER AND PORTFOLIO MEMBERS
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$1 - $10,001 - $50,001 - $100,001 - $500,001 - $1,000,001
Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over
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David Hamlin 2004 *
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Portfolio Leader 2003 *
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Paul Drury 2004 *
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Portfolio Member 2003 *
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Susan McCormack 2004 *
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Portfolio Member 2003 *
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James St. John 2004 *
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Portfolio Member 2003 *
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Other funds managed by the Portfolio Leader and Portfolio Members
David Hamlin is the Portfolio Leader and Paul Drury, Susan McCormack,
and James St. John are Portfolio Members for Putnam's tax-exempt funds
for the following states: Arizona, California, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, New York, and Pennsylvania. The same
group also manages Putnam AMT-Free Insured Municipal Fund*, Putnam
California Investment Grade Municipal Trust, Putnam High Yield Municipal
Trust, Putnam Investment Grade Municipal Trust, Putnam Managed Municipal
Income Trust, Putnam Municipal Bond Fund, Putnam Municipal Income Fund,
Putnam Municipal Opportunities Trust, Putnam New York Investment Grade
Municipal Trust, Putnam Tax Exempt Income Fund, Putnam Tax-Free Health
Care Fund, and Putnam Tax-Free High Yield Fund.
David Hamlin, Paul Drury, Susan McCormack, and James St. John may also
manage other accounts advised by Putnam Management or an affiliate.
Changes in your fund's Portfolio Leader and Portfolio Members
During the year ended November 30, 2004, Portfolio Member Richard Wyke
left your fund's management team.
* Formerly Putnam Tax-Free Insured Fund.
Fund ownership
The table below shows how much the members of Putnam's Executive Board
have invested in the fund (in dollar ranges). Information shown is for
the current and prior year ended December 31.
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PUTNAM EXECUTIVE BOARD
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$1 - $10,001 - $50,001 - $100,001
Year $0 $10,000 $50,000 $100,000 $500,000
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Philippe Bibi 2004 *
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Chief Technology Officer 2003 *
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John Boneparth 2004 *
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Head of Global Institutional Mgmt 2003 *
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Kevin Cronin 2004 *
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Deputy Head of Investments N/A
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Charles Haldeman, Jr. 2004 *
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President and CEO 2003 *
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Amrit Kanwal 2004 *
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Chief Financial Officer N/A
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Steven Krichmar 2004 *
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Chief of Operations N/A
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Francis McNamara, III 2004 *
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General Counsel N/A
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Richard Monaghan 2004 *
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Head of Retail Management 2003 *
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Stephen Oristaglio 2004 *
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Head of Investments 2003 *
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Richard Robie, III 2004 *
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Chief Administrative Officer N/A
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N/A indicates the individual was not a member of Putnam's Executive Board as of 12/31/03.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended November 30, 2004. In accordance with
regulatory requirements, we also include performance for the most
current calendar quarter-end. Performance should always be considered in
light of a fund's investment strategy. Data represents past performance.
Past performance does not guarantee future results. More recent returns
may be less or more than those shown. Investment return and principal
value will fluctuate and you may have a gain or a loss when you sell
your shares. For the most recent month-end performance, please visit
www.putnaminvestments.com.
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TOTAL RETURN FOR PERIODS ENDED 11/30/04
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Class A Class B Class M
(inception dates) (10/23/89) (7/15/93) (4/3/95)
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NAV POP NAV CDSC NAV POP
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6 months 3.77% -0.93% 3.43% -1.57% 3.72% 0.32%
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1 year 3.21 -1.48 2.53 -2.44 2.89 -0.53
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5 years 33.40 27.43 29.15 27.15 31.58 27.22
Annual average 5.93 4.97 5.25 4.92 5.64 4.93
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10 years 80.76 72.58 69.27 69.27 75.57 69.82
Annual average 6.10 5.61 5.40 5.40 5.79 5.44
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Annual average
(life of fund) 6.11 5.79 5.36 5.36 5.75 5.52
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Performance assumes reinvestment of distributions and does not account for
taxes. Returns at public offering price (POP) for class A and M shares
reflect a sales charge of 4.50% and 3.25%, respectively. Class B share
returns reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declining to 1% in the sixth year, and is
eliminated thereafter. Performance for class B and M shares before their
inception is derived from the historical performance of class A shares,
adjusted for the applicable sales charge (or CDSC) and higher operating
expenses for such shares.
For a portion of the period, this fund limited expenses, without which
returns would have been lower.
A 2% short-term trading fee may be applied to shares exchanged or sold
within 5 days of purchase.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/04
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Lehman Lipper Ohio
Municipal Municipal Debt Funds
Bond Index category average*
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6 months 4.29% 3.82%
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1 year 4.07 3.04
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5 years 38.84 32.00
Annual average 6.78 5.70
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10 years 99.68 82.25
Annual average 7.16 6.17
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Annual average
(life of fund) 7.05 6.33
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Index and Lipper results should be compared to fund performance at
net asset value.
* Over the 6-month and 1-, 5-, and 10-year periods ended 11/30/04,
there were 43, 42, 37, and 27 funds, respectively, in this Lipper
category.
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PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 11/30/04
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Class A Class B Class M
Distributions (number) 6 6 6
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Income 1 $0.173279 $0.143603 $0.159793
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Capital gains 1 -- -- --
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Total $0.173279 $0.143603 $0.159793
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Share value: NAV POP NAV NAV POP
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5/31/04 $8.94 $9.36 $8.93 $8.94 $9.24
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11/30/04 9.10 9.53 9.09 9.11 9.42
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Current return (end of period)
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Current dividend rate 2 3.84% 3.66% 3.18% 3.54% 3.42%
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Taxable equivalent 3 6.39 6.09 5.29 5.89 5.69
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Current 30-day SEC yield
(with expense limitation) 4,5 2.93 2.80 2.28 2.63 2.55
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Taxable equivalent 3 4.87 4.66 3.79 4.37 4.24
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Current 30-day SEC yield
(without expense limitation) 4 2.89 2.76 2.24 2.59 2.50
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1 Capital gains, if any, are taxable for federal and, in most cases,
state purposes. For some investors, investment income may be subject to
the federal alternative minimum tax. Income from federally exempt funds
may be subject to state and local taxes.
2 Most recent distribution, excluding capital gains, annualized and
divided by NAV or POP at end of period.
3 Assumes maximum 39.88% federal and state combined tax rate for 2004.
Results for investors subject to lower tax rates would not be
advantageous.
4 Based only on investment income, calculated using SEC guidelines.
5 For a portion of the period, this fund limited expenses, without which
yields would have been lower.
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TOTAL RETURN FOR PERIODS ENDED 12/31/04 (MOST RECENT CALENDAR QUARTER)
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Class A Class B Class M
(inception dates) (10/23/89) (7/15/93) (4/3/95)
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NAV POP NAV CDSC NAV POP
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6 months 4.81% 0.07% 4.35% -0.65% 4.65% 1.22%
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1 year 3.62 -1.06 2.94 -2.05 3.41 -0.03
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5 years 36.56 30.54 32.23 30.23 34.70 30.33
Annual average 6.43 5.47 5.75 5.42 6.14 5.44
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10 years 78.70 70.73 67.54 67.54 73.53 67.90
Annual average 5.98 5.50 5.30 5.30 5.67 5.32
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Annual average
(life of fund) 6.16 5.84 5.41 5.41 5.80 5.57
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Understanding your
fund's expenses
As a mutual fund investor, you pay ongoing expenses, such as management
fees, distribution fees (12b-1 fees), and other expenses. In the most recent
six-month period, your fund limited these expenses; had it not done so,
expenses would have been higher. Using the information below, you can
estimate how these expenses affect your investment and compare them with the
expenses of other funds. You may also pay one-time transaction expenses,
including sales charges (loads) and redemption fees, which are not shown in
this section and would have resulted in higher total expenses. For more
information, see your fund's prospectus or talk to your financial advisor.
Review your fund's expenses
The table below shows the expenses you would have paid on a $1,000
investment in Putnam Ohio Tax Exempt Income Fund from June 1, 2004, to
November 30, 2004. It also shows how much a $1,000 investment would be worth
at the close of the period, assuming actual returns and expenses.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 11/30/04
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Class A Class B Class M
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Expenses paid per $1,000* $4.55 $7.85 $6.08
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Ending value (after expenses) $1,037.70 $1,034.30 $1,037.20
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* Expenses for each share class are calculated using the fund's
annualized expense ratio for each class, which represents the ongoing
expenses as a percentage of net assets for the six months ended
11/30/04. The expense ratio may differ for each share class (see the
table at the bottom of the next page). Expenses are calculated by
multiplying the expense ratio by the average account value for the
period; then multiplying the result by the number of days in the period;
and then dividing that result by the number of days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended November
30, 2004, use the calculation method below. To find the value of your
investment on June 1, 2004, go to www.putnaminvestments.com and log on to
your account. Click on the "Transaction History" tab in your Daily Statement
and enter 06/01/2004 in both the "from" and "to" fields. Alternatively, call
Putnam at 1-800-225-1581.
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HOW TO CALCULATE THE EXPENSES YOU PAID
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Total
Value of your Expenses paid expenses
investment on 6/1/04 [DIV] $1,000 X per $1,000 = paid
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Example Based on a $10,000 investment in class A shares of your fund.
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$10,000 [DIV] $1,000 X $4.55 (see table above) = $45.50
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Comparing your fund's expenses with those of other funds
Using the SEC's method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to
help investors assess fund expenses. Per these guidelines, the table below
shows your fund's expenses based on a $1,000 investment, assuming a
hypothetical 5% annualized return. You can use this information to compare
the ongoing expenses (but not transaction expenses or total costs) of
investing in the fund with those of other funds. All mutual fund shareholder
reports will provide this information to help you make this comparison.
Please note that you cannot use this information to estimate your actual
ending account balance and expenses paid during the period.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 11/30/04
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Class A Class B Class M
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Expenses paid per $1,000* $4.51 $7.79 $6.02
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Ending value (after expenses) $1,020.61 $1,017.35 $1,019.10
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* Expenses for each share class are calculated using the fund's annualized
expense ratio for each class, which represents the ongoing expenses as a
percentage of net assets for the six months ended 11/30/04. The expense
ratio may differ for each share class (see the table at the bottom of this
page). Expenses are calculated by multiplying the expense ratio by the
average account value for the period; then multiplying the result by the
number of days in the period; and then dividing that result by the number of
days in the year.
Using industry averages to compare expenses
You can also compare your fund's expenses with industry averages, as
determined by Lipper, an independent fund-rating agency that ranks funds
relative to others that Lipper considers to have similar investment styles
or objectives. The expense ratio for each share class shown below indicates
how much of your fund's net assets have been used to pay ongoing expenses
during the period.
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EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA
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Class A Class B Class M
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Your fund's annualized
expense ratio 0.89% 1.54% 1.19%
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Average annualized expense
ratio for Lipper peer
group+ 0.91% 1.56% 1.21%
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+ Average of the expenses of front-end load funds viewed by Lipper as having
the same investment classification or objective as the fund, as of 9/30/04,
calculated in accordance with Lipper's standard reporting methodology for
comparing expenses within a given universe (excluding 12b-1 fees and without
giving effect to any expense offset and brokerage service arrangements that
may reduce fund expenses). To facilitate comparison, Putnam has adjusted
this average to reflect the 12b-1 fees carried by each class of shares. The
peer group may include funds that are significantly larger or smaller than
the fund, which may limit the comparability of the fund's expenses to the
Lipper average.
Understanding your fund's
portfolio turnover
Putnam funds are actively managed by teams of experts who buy and sell
securities based on intensive analysis of companies, industries, economies,
and markets. Portfolio turnover is a measure of how often a fund's managers
buy and sell securities for your fund. A portfolio turnover of 100%, for
example, means that the managers sold and replaced securities valued at 100%
of a fund's assets within a one-year period. Funds with high turnover may be
more likely to generate capital gains and dividends that must be distributed
to shareholders as taxable income. High turnover may also cause a fund to
pay more brokerage commissions and other transaction costs, which may
detract from performance.
Funds that invest in bonds may have higher turnover than funds that invest
only in stocks. Short-term bond funds tend to have higher turnover than
longer-term bond funds, because shorter-term bonds will mature or be sold
more frequently than longer-term bonds. You can use the table below to
compare your fund's turnover with the average turnover for funds in its
Lipper category.
- -----------------------------------------------------------------------------
TURNOVER COMPARISONS
percentage of holdings that change every year
- -----------------------------------------------------------------------------
2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------
Putnam Ohio Tax Exempt
Income Fund 17% 26% 17% 12% 11%
- -----------------------------------------------------------------------------
Lipper Ohio Municipal Debt
Funds category
average 20% 32% 25% 24% 46%
- -----------------------------------------------------------------------------
Turnover data for the fund is calculated based on the fund's fiscal-year
period, which ends on May 31. Turnover data for the fund's Lipper category
is calculated based on the average of the turnover of each fund in the
category for its fiscal year ended during the indicated calendar year.
Fiscal years vary across funds in the Lipper category, which may limit the
comparability of the fund's portfolio turnover rate to the Lipper category.
Comparative data for 2004 is based on information available as of 9/30/04.
Risk comparison
As part of new initiatives to enhance disclosure, we are including a risk
comparison to help you understand how your fund compares with other funds.
The comparison utilizes a risk measure developed by Morningstar, an
independent fund-rating agency. This risk measure is referred to as the
fund's Overall Morningstar Risk.
[GRAPHIC OMITTED: chart MORNINGSTAR [REGISTRATION MARK] RISK]
MORNINGSTAR [REGISTRATION MARK] RISK
Fund's Overall
Morningstar Risk 0.18
Municipal
fund average 0.21
0% INCREASING RISK 100%
Your fund's Overall Morningstar Risk is shown alongside that of the average
fund in its broad asset class, as determined by Morningstar. The risk bar
broadens the comparison by translating the fund's Overall Morningstar Risk
into a percentile, which is based on the fund's ranking among all funds
rated by Morningstar as of December 31, 2004. A higher Overall Morningstar
Risk generally indicates that a fund's monthly returns have varied more
widely.
Morningstar determines a fund's Overall Morningstar Risk by assessing
variations in the fund's monthly returns -- with an emphasis on downside
variations -- over 3-, 5-, and 10-year periods, if available. Those measures
are weighted and averaged to produce the fund's Overall Morningstar Risk.
The information shown is provided for the fund's class A shares only;
information for other classes may vary. Overall Morningstar Risk is based on
historical data and does not indicate future results. Morningstar does not
purport to measure the risk associated with a current investment in a fund,
either on an absolute basis or on a relative basis. Low Overall Morningstar
Risk does not mean that you cannot lose money on an investment in a fund.
Copyright 2004 Morningstar, Inc. All Rights Reserved. The information
contained herein (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted to
be accurate, complete, or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information.
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.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. NAV
is calculated by dividing the net assets of each class of shares by the
number of outstanding shares in the class.
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 4.50% 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 class B 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.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without 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 (except on certain
redemptions of shares bought without an initial sales charge).
Comparative indexes
JP Morgan Global High Yield Index is an unmanaged index used to mirror
the investable universe of the U.S. dollar global high-yield corporate
debt market of both developed and emerging markets.
Lehman Aggregate Bond Index is an unmanaged index used as a general
measure of U.S. fixed-income securities.
Lehman Intermediate Government Bond Index is an unmanaged index of
government bonds with maturities between 1 and 10 years.
Lehman Municipal Bond Index is an unmanaged index of long-term
fixed-rate investment-grade tax-exempt bonds.
Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged
index of international stocks from Europe, Australasia, and the Far
East.
Russell 2000 Index is an unmanaged index of common stocks that generally
measure performance of small to midsize companies within the Russell
3000 Index.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. The Putnam funds' proxy voting guidelines and
procedures, as well as information regarding how your fund voted proxies
relating to portfolio securities during the 12-month period ended June
30, 2004, are available on the Putnam Individual Investor Web site,
www.putnaminvestments.com/individual, and on the SEC's Web site,
www.sec.gov. If you have questions about finding forms on the SEC's Web
site, you may call the SEC at 1-800-SEC-0330. You may also obtain the
Putnam funds' proxy voting guidelines and procedures at no charge by
calling Putnam's Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
For periods ending on or after July 9, 2004, the fund will file a
complete schedule of its portfolio holdings with the SEC for the first
and third quarters of each fiscal year on Form N-Q. Shareholders may
obtain the fund's Forms N-Q on the SEC's Web site at www.sec.gov. In
addition, the fund's Forms N-Q may be reviewed and copied at the SEC's
public reference room in Washington, D.C. You may call the SEC at
1-800-SEC-0330 for information about the SEC's Web site or the operation
of the public reference room.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
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 are determined. All investment and noninvestment 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.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or loss
the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal period.
Statement of changes in net assets shows how the fund's net assets were
affected by the fund's net investment gain or loss, 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 sources
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-end
funds, a separate table is provided for each share class.
The fund's portfolio
November 30, 2004 (Unaudited)
Key to Abbreviations
- -------------------------------------------------------------------------------
AMBAC AMBAC Indemnity Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance Company
FHA Insd. Federal Housing Administration Insured
FSA Financial Security Assurance
GNMA Coll. Government National Mortgage Association Collateralized
G.O. Bonds General Obligation Bonds
IFB Inverse Floating Rate Bonds
MBIA MBIA Insurance Company
VRDN Variable Rate Demand Notes
Municipal bonds and notes (98.1%) (a)
Principal amount Rating (RAT) Value
Ohio (93.4%)
- -------------------------------------------------------------------------------
Akron, Wtr. Wks. Rev. Bonds, MBIA
$875,000 6s, 12/1/12 Aaa $1,021,746
1,285,000 5 1/4s, 12/1/17 Aaa 1,402,243
1,375,000 Allen Cnty., G.O. Bonds, AMBAC, 5s,
12/1/06 Aaa 1,448,343
1,565,000 Anthony Wayne Local School Dist.
G.O. Bonds (School Fac. Construction
& Impt.), FSA, 5 1/2s, 12/1/19 Aaa 1,732,126
1,500,000 Brecksville-Broadview Heights, City
School Dist. G.O. Bonds, FGIC,
6 1/2s, 12/1/16 Aaa 1,644,885
1,500,000 Brookville, Local School Dist. G.O.
Bonds, FSA, 5s, 12/1/26 Aaa 1,539,345
1,000,000 Butler Cnty., G.O. Bonds, MBIA,
5 1/4s, 12/1/20 Aaa 1,088,920
3,000,000 Cincinnati, City School Dist. G.O.
Bonds (Classroom Fac. Construction &
Impt.), FSA, 5s, 12/1/06 Aaa 3,160,020
500,000 Cleveland, G.O. Bonds, FGIC, 5 1/4s,
8/1/23 Aaa 534,765
400,000 Cleveland, Arpt. Rev. Bonds
(Continental Airlines, Inc.), 5.7s,
12/1/19 B- 306,052
3,000,000 Cleveland, State U. Rev. Bonds,
FGIC, 5s, 6/1/29 AAA 3,045,300
1,150,000 Cleveland, Urban Renewal Increment
Rev. Bonds (Rock & Roll Hall of
Fame), 6 3/4s, 3/15/18 BBB-/P 1,154,313
500,000 Cleveland-Cuyahoga Cnty., Port.
Auth. Rev. Bonds (Rock & Roll Hall
of Fame), FSA, 3.6s, 12/1/14 Aaa 500,560
1,500,000 Cuyahoga Cnty., G.O. Bonds, 5s,
12/1/18 Aa1 1,576,800
1,500,000 Cuyahoga Cnty., Rev. Bonds, Ser. A,
6s, 1/1/32 Aa3 1,615,440
3,000,000 Cuyahoga Cnty., Hosp. VRDN (U.
Hosp.), 1.64s, 1/1/16 VMIG1 3,000,000
1,645,000 Cuyahoga Falls, G.O. Bonds, MBIA,
5s, 12/1/24 Aaa 1,700,272
1,160,000 Delaware City, School Dist. G.O.
Bonds, MBIA, 5s, 12/1/20 AAA 1,234,136
1,000,000 Delaware Cnty., Cap. Fac. G.O.
Bonds, 6 1/4s, 12/1/16 AA+ 1,178,830
1,300,000 Dublin, G.O. Bonds, Ser. B, 6.4s,
12/1/14 Aaa 1,545,960
1,500,000 Erie Cnty., Ohio Hosp. Fac.
Rev. Bonds (Firelands Regl. Med.
Ctr.), 5 5/8s, 8/15/32 A2 1,531,395
Franklin Cnty., G.O. Bonds
2,170,000 5 3/8s, 12/1/20 Aaa 2,368,447
2,955,000 5s, 6/1/07 Aaa 3,145,863
2,610,000 Franklin Cnty., Rev. Bonds (OCLC
Online Computer Library Ctr.), 5s,
4/15/13 A 2,769,132
2,000,000 Franklin Cnty., Dev. Rev. Bonds
(American Chemical Society), 5.8s,
10/1/14 A 2,188,700
1,000,000 Franklin Cnty., Econ. Dev.
Rev. Bonds (Capitol South Cmnty.
Urban), 5 3/4s, 6/1/11 BBB-/P 1,063,930
2,000,000 Franklin Cnty., Hlth. Care Fac.
Rev. Bonds (OH Presbyterian Svcs.),
7 1/8s, 7/1/29 BBB 2,165,920
1,350,000 Greater Cleveland Regl. Trans. Auth.
G.O. Bonds (Cap. Impt.), MBIA, 5s,
12/1/24 Aaa 1,402,745
1,380,000 Greene Cnty., Swr. Syst.
Rev. Bonds (Governmental
Enterprise), AMBAC, 5 5/8s, 12/1/13 Aaa 1,539,818
2,000,000 Hamilton, City School Dist. G.O.
Bonds, Ser. A, 5 1/2s, 12/1/24 AA 2,144,440
3,000,000 Hillard, School Dist. G.O. Bonds
(School Impts.), FGIC, 5 3/4s,
12/1/24 Aaa 3,338,310
1,800,000 Huran Cnty., Human Svcs. Rev. Bonds,
MBIA, 6.55s, 12/1/20 Aaa 2,272,140
1,500,000 Kent, School Dist. G.O. Bonds, FGIC,
5 3/4s, 12/1/21 Aaa 1,642,320
281,074 Lake Cnty., Indl. Dev. Rev. Bonds
(Madison Inn Hlth. Ctr.), FHA Insd.,
12s, 5/1/14 A-/P 282,887
1,000,000 Lake Ohio, School Dist. G.O. Bonds,
FGIC, 5 3/4s, 12/1/21 Aaa 1,123,590
1,000,000 Lakota, School Dist. Rev. Bonds,
AMBAC, 7s, 12/1/10 Aaa 1,197,340
1,840,000 Lorain Cnty., Elderly Hsg. Corp.
Multi-Fam. Rev. Bonds (Harr Plaza &
Intl.), Ser. A, 6 3/8s, 7/15/19 A 1,854,370
Lorain Cnty., Hosp. Rev. Bonds
5,325,000 (EMH Regl. Med. Ctr.), AMBAC,
7 3/4s, 11/1/13 Aaa 5,677,728
750,000 (Catholic Hlth. Care Refurbish &
Impt.), Ser. A, 5 1/4s, 10/1/33 AA- 755,213
1,620,000 Madeira, City School Dist. G.O.
Bonds (School Impt.), MBIA, 5s,
12/1/26 Aaa 1,666,219
1,000,000 Marysville, Exempt Village School
Dist. G.O. Bonds, MBIA, 5 1/8s,
12/1/23 Aaa 1,094,040
2,500,000 Mason, City School Dist. G.O. Bonds,
5.3s, 12/1/17 Aa2 2,711,225
1,205,000 Massillon, Rev. Bonds (Lincoln Ctr.
Phase II), AMBAC, 6.95s, 12/1/10 Aaa 1,286,446
2,700,000 Miami Cnty., Hosp. Fac. Rev. Bonds
(Upper Valley Med. Ctr.), Ser. A,
6 3/8s, 5/15/26 Baa1 2,757,942
Middletown, City School Dist. G.O.
Bonds (School Impt.), FGIC
1,285,000 5s, 12/1/25 Aaa 1,324,424
1,080,000 5s, 12/1/24 Aaa 1,118,772
1,545,000 5s, 12/1/23 Aaa 1,603,942
1,000,000 4 3/4s, 12/1/22 Aaa 1,021,290
1,500,000 4 3/4s, 12/1/21 Aaa 1,538,640
1,265,000 Midview, School Dist. COP (School
Bldg. Fac.), 5 1/4s, 11/1/17 A 1,355,473
1,000,000 Montgomery Cnty., Rev. Bonds
(Catholic Hlth. Initiatives),
Ser. A, 5s, 5/1/32 Aa2 999,960
Montgomery Cnty., Hlth. Syst.
Rev. Bonds, Ser. B-1
1,720,000 8.1s, 7/1/18 (Prerefunded) Aaa 1,906,844
185,000 8.1s, 7/1/18 AAA 201,130
Montgomery Cnty., Hosp. Rev. Bonds
1,500,000 (Kettering Med. Ctr.), 6 3/4s,
4/1/22 A3 1,618,980
580,000 (Grandview Hosp. & Med Ctr.), 5.6s,
12/1/11 BBB+ 640,732
835,000 Northwestern, School Dist.
Rev. Bonds (Wayne & Ashland Cntys.
School Impt.), FGIC, 7.2s, 12/1/10 Aaa 1,008,789
OH Hsg. Fin. Agcy. Rev. Bonds
1,950,000 Ser. B, GNMA Coll., 5s, 3/1/34 Aaa 2,056,431
1,025,000 (Residential Dev.), Ser. A, GNMA
Coll., 4.6s, 9/1/28 Aaa 1,042,948
400,000 OH Hsg. Fin. Agcy. Single Fam. Mtge.
IFB, Ser. G, GNMA Coll., 7.14s,
3/2/23 Aaa 416,168
15,000 OH Hsg. Fin. Agcy. Single Fam. Mtge.
Rev. Bonds, Ser. 85-A, FGIC, zero %,
1/15/15 Aaa 5,525
1,500,000 OH State Air Quality Dev. Auth.
Rev. Bonds (Poll. Control), Ser. A,
5.95s, 5/15/29 Baa1 1,504,050
4,300,000 OH State Air Quality Dev. Auth.
VRDN (Columbus Southern), Ser. C,
1.69s, 12/1/38 VMIG1 4,300,000
1,500,000 OH State Bldg. Auth. Rev. Bonds
(Administration Bldg.), Ser. A, 5s,
10/1/18 AAA 1,653,945
430,000 OH State Econ. Dev. Rev. Bonds
(Superior Forge & Steel Corp.), Ser.
3, 7 5/8s, 6/1/11 AA- 431,350
1,000,000 OH State Env. Impt. Rev. Bonds (USX
Corp.), 5 5/8s, 5/1/29 Baa1 1,016,870
OH State Higher Ed. Fac. Comm.
Rev. Bonds (John Carroll U.)
335,000 5 1/2s, 11/15/18 A2 373,820
420,000 5 1/2s, 11/15/17 A2 465,994
300,000 3 1/2s, 11/15/08 A2 306,783
500,000 3s, 11/15/07 A2 502,810
3,000,000 OH State Higher Edl. Fac. Mandatory
Put Bonds (Kenyon College), 5.05s,
7/1/16 A2 3,122,760
OH State Higher Edl. Fac. Rev. Bonds
4,000,000 (Case Western Reserve U.), 6 1/4s,
10/1/18 AA- 4,876,800
1,000,000 (Case Western Reserve U.), 6s,
10/1/14 AA- 1,176,270
2,270,000 (Denison U.), 5 1/8s, 11/1/21 AA 2,417,868
1,500,000 (Oberlin College), 5.12s, 10/1/24 AA 1,577,625
1,000,000 (Oberlin College), 5s, 10/1/33 AA 1,008,460
3,000,000 (Northern U.), 4 3/4s, 5/1/19 A2 3,063,000
OH State Poll. Control Rev. Bonds
3,350,000 (Standard Oil Co.), 6 3/4s, 12/1/15 AA+ 4,159,662
1,000,000 (General Motors Corp.), 5 5/8s,
3/1/15 Baa2 1,063,570
1,500,000 OH State Solid Waste Mandatory Put
Bonds, 4.85s, 11/1/07 BBB 1,558,485
600,000 OH State Solid Waste Rev. Bonds
(General Motors Corp.), 6.3s,
12/1/32 Baa2 625,488
1,000,000 OH State U. Rev. Bonds, Ser. A,
5 1/8s, 12/1/31 Aa2 1,026,710
500,000 OH State Wtr. Dev. Auth. Poll.
Control Fac. Mandatory Put Bonds (OH
Edison Co.), Ser. A, 2 1/4s, 6/1/05 Baa1 499,240
OH State Wtr. Dev. Auth. Solid Waste
Disp. Rev. Bonds
2,700,000 (North Star Broken Hill Steel),
6.45s, 9/1/20 A+ 2,824,848
1,700,000 (Bay Shore Power Co.), Ser. A,
5 7/8s, 9/1/20 BB+/P 1,690,327
2,265,000 OH U. Gen. Recipients Athens
Rev. Bonds, MBIA, 5s, 12/1/25 Aaa 2,337,571
1,500,000 Powell, G.O. Bonds, FGIC, 5 1/2s,
12/1/25 Aaa 1,622,790
2,165,000 Rickenbacker, Port Auth. Rev. Bonds
(OASBO Expanded Asset Pooled),
Ser. A, 5 3/8s, 1/1/32 A2 2,225,988
300,000 River Valley, Local School Dist.
G.O. Bonds (School Fac. Construction
& Impt.), FSA, 5 1/4s, 11/1/23 Aaa 332,904
2,455,000 Rocky River, G.O. Bonds, AMBAC, 5s,
12/1/24 Aaa 2,550,917
Sandusky Cnty., Hosp. Fac.
Rev. Bonds (Memorial Hosp.)
830,000 5.15s, 1/1/10 BBB- 835,121
500,000 5.15s, 1/1/08 BBB- 504,080
685,000 5.05s, 1/1/07 BBB- 684,171
1,500,000 Toledo, G.O. Bonds (Macys), Ser. A,
MBIA, 6.35s, 12/1/25 Aaa 1,644,420
2,925,000 Toledo, Swr. Syst. Mtge. Rev. Bonds,
AMBAC, 6.2s, 11/15/12 Aaa 3,453,314
1,175,000 Toledo, Wtr. Wks. Mtge. Rev. Bonds,
AMBAC, 6.2s, 11/15/12 Aaa 1,387,229
2,200,000 Toledo-Lucas Cnty., Port Auth.
Rev. Bonds (CSX Transn, Inc.),
6.45s, 12/15/21 Baa2 2,519,000
1,100,000 Tuscarawas Cnty., Hosp. Fac.
Rev. Bonds (Union Hosp.), Ser. A,
6 1/2s, 10/1/21 Baa1 1,114,729
1,000,000 Twin Valley, Cmnty. Local School
Dist. Rev. Bonds, FGIC, 7.05s,
12/1/11 Aaa 1,218,560
1,000,000 U. of Cincinnati COP (Jefferson Ave.
Residence Hall), MBIA, 5 1/8s,
6/1/28 Aaa 1,024,600
U. of Cincinnati Rev. Bonds, Ser. D,
AMBAC
2,000,000 5s, 6/1/24 Aaa 2,075,000
1,275,000 5s, 6/1/23 Aaa 1,330,832
Westerville, City School Dist.
Rev. Bonds (School Impt.)
1,610,000 6 1/4s, 12/1/09 Aa3 1,848,602
1,590,000 6 1/4s, 12/1/08 Aa3 1,795,937
3,000,000 Woodridge, School Dist. Rev. Bonds,
AMBAC, 6.8s, 12/1/14 Aaa 3,585,060
Zanesville, Hsg. Dev. Corp. Mtge.
Rev. Bonds, FHA Insd.
220,000 7 3/8s, 10/1/21 AAA/P 291,117
205,000 7 3/8s, 10/1/20 AAA/P 271,268
185,000 7 3/8s, 10/1/19 AAA/P 244,803
180,000 7 3/8s, 10/1/18 AAA/P 238,187
160,000 7 3/8s, 10/1/17 AAA/P 211,722
155,000 7 3/8s, 10/1/16 AAA/P 205,105
--------------
173,070,026
Puerto Rico (4.2%)
- -------------------------------------------------------------------------------
385,000 Children's Trust Fund Tobacco
Settlement Rev. Bonds, 5 3/8s,
5/15/33 BBB 359,282
3,000,000 Cmnwlth. of PR, Muni. Fin. Agcy.
G.O. Bonds, Ser. A, FSA, 5 7/8s,
8/1/14 Aaa 3,395,754
2,500,000 Cmnwlth. of PR, Muni. Fin. Agcy.
Rev. Bonds, Ser. A, FSA, 6s, 7/1/11 Aaa 2,912,175
1,000,000 PR Indl. Tourist Edl. Med. & Env.
Control Fac. Rev. Bonds (Cogen.
Fac.-AES), 6 5/8s, 6/1/26 Baa3 1,078,860
--------------
7,746,071
Virgin Island (0.5%)
- -------------------------------------------------------------------------------
1,015,000 Tobacco Settlement Fin. Corp.
Rev. Bonds, 5s, 5/15/21 Baa3 954,009
- -------------------------------------------------------------------------------
Total Investments
(cost $171,686,481) $181,770,106
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $185,237,504.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be
the most recent ratings available at November 30, 2004 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, 2004. Securities rated by Putnam are indicated by "/P".
Security ratings are defined in the Statement of Additional Information.
The rates shown on VRDNs and Mandatory Put Bonds are the current
interest rates at November 30, 2004.
The dates shown on Mandatory Put Bonds are the next mandatory put dates.
The rates shown on IFB's, which are securities paying interest rates
that vary inversely to changes in the market interest rates, are the
current interest rates at November 30, 2004.
The fund had the following industry group concentrations greater than
10% at November 30, 2004 (as a percentage of net assets):
Education 17.0%
Health care 13.2
The fund had the following insurance concentrations greater than 10% at
November 30, 2004 (as a percentage of net assets):
AMBAC 13.8%
FGIC 11.8
Interest rate swap contracts outstanding at November 30, 2004
(Unaudited)
Notional Termination Unrealized
amount date appreciation
- ------------------------------------------------------------------------------
Agreement with JP Morgan Chase
Bank dated November 4, 2004 to
receive quarterly the notional
amount multiplied by 2.946% and
pay quarterly the notional amount
multiplied by the Bond Market
Association Municipal Swap Index. $4,000,000 2/8/14 $47,827
Agreement with JP Morgan Chase
Bank dated September 24, 2004 to
pay quarterly the notional amount
multiplied by 3.513% and receive
quarterly the notional amount
multiplied by the Bond Market
Association Municipal Swap Index. 2,500,000 12/29/14 40,796
- ------------------------------------------------------------------------------
$88,623
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities
November 30, 2004 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investments in securities, at value (identified cost
$171,686,481) (Note 1) $181,770,106
- -------------------------------------------------------------------------------
Cash 971,070
- -------------------------------------------------------------------------------
Interest and other receivables 3,233,949
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 15,690
- -------------------------------------------------------------------------------
Receivable for securities sold 25,000
- -------------------------------------------------------------------------------
Receivable for open swap contracts (Note 1) 88,623
- -------------------------------------------------------------------------------
Total assets 186,104,438
Liabilities
- -------------------------------------------------------------------------------
Distributions payable to shareholders 392,505
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 27,153
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 232,639
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 47,070
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 31,726
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,447
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 73,544
- -------------------------------------------------------------------------------
Other accrued expenses 60,850
- -------------------------------------------------------------------------------
Total liabilities 866,934
- -------------------------------------------------------------------------------
Net assets $185,237,504
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) $178,230,771
- -------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 26,186
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (3,191,701)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments 10,172,248
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $185,237,504
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($153,663,580 divided by 16,884,264 shares) $9.10
- -------------------------------------------------------------------------------
Offering price per class A share (100/95.50 of $9.10)* $9.53
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($30,705,870 divided by 3,377,106 shares)** $9.09
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($868,054 divided by 95,324 shares) $9.11
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $9.11)*** $9.42
- -------------------------------------------------------------------------------
* On single retail sales of less than $25,000. On sales of $25,000 or
more and on group sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
*** On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales, the offering price is reduced.
The accompanying notes are an integral part of these financial
statements.
Statement of operations
Six months ended November 30, 2004 (Unaudited)
Interest income: $4,452,024
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 467,956
- -------------------------------------------------------------------------------
Investor servicing fees (Note 2) 91,342
- -------------------------------------------------------------------------------
Custodian fees (Note 2) 41,247
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 6,414
- -------------------------------------------------------------------------------
Administrative services (Note 2) 4,323
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 153,992
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 136,202
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 2,185
- -------------------------------------------------------------------------------
Other 66,150
- -------------------------------------------------------------------------------
Non-recurring costs (Notes 2 and 5) 3,039
- -------------------------------------------------------------------------------
Costs assumed by Manager (Notes 2 and 5) (3,039)
- -------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (26,549)
- -------------------------------------------------------------------------------
Total expenses 943,262
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (12,508)
- -------------------------------------------------------------------------------
Net expenses 930,754
- -------------------------------------------------------------------------------
Net investment income 3,521,270
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 263,882
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and swap
contracts during the period 3,069,482
- -------------------------------------------------------------------------------
Net gain on investments 3,333,364
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $6,854,634
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of changes in net assets
Six months ended Year ended
November 30 May 31
Decrease in net assets 2004* 2004
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $3,521,270 $7,681,711
- -------------------------------------------------------------------------------
Net realized gain on investments 263,882 2,540,659
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments 3,069,482 (11,467,716)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 6,854,634 (1,245,346)
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From tax-exempt income
Class A (2,937,775) (6,297,383)
- -------------------------------------------------------------------------------
Class B (507,645) (1,181,406)
- -------------------------------------------------------------------------------
Class M (15,362) (104,943)
- -------------------------------------------------------------------------------
From ordinary income
Class A -- (116,925)
- -------------------------------------------------------------------------------
Class B -- (26,392)
- -------------------------------------------------------------------------------
Class M -- (2,249)
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (5,762,543) (34,241,979)
- -------------------------------------------------------------------------------
Total decrease in net assets (2,368,691) (43,216,623)
Net assets
- -------------------------------------------------------------------------------
Beginning of period 187,606,195 230,822,818
- -------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $26,186 and
distributions in excess of net investment
income of $34,302, respectively) $185,237,504 $187,606,195
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- -------------------------------------------------------------------------------------------------------------------------------
Six months
ended
November 30
Per-share (Unaudited) Year ended May 31
operating performance 2004 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $8.94 $9.33 $8.87 $8.77 $8.29 $8.99
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income .18 (c) .34 (c) .36 .42 .44 .45 (c)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .15 (.38) .46 .10 .47 (.70)
- -------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .33 (.04) .82 .52 .91 (.25)
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.17) (.35) (.36) (.42) (.43) (.45)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.17) (.35) (.36) (.42) (.43) (.45)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.10 $8.94 $9.33 $8.87 $8.77 $8.29
- -------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.77* (.49) 9.48 5.98 11.22 (2.72)
- -------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $153,664 $153,317 $183,383 $167,223 $153,806 $149,434
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .45*(c) .89 (c) .88 .91 .88 .87 (c)
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.94*(c) 3.75 (c) 3.94 4.70 5.03 5.24 (c)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 7.56* 17.43 25.66 17.26 11.88 10.84
- -------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(b) Includes amounts paid through expense offset arrangements. (Note 2)
(c) Reflects an involuntary expense limitation in effect during the
period. As a result of such limitation, expenses of the fund for the
periods ended November 30, 2004, May 31, 2004 and May 31, 2000 reflect a
reduction of 0.01%, 0.01%, and 0.01%, respectively, based on average net
assets for class A shares (Note 2).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS B
- -------------------------------------------------------------------------------------------------------------------------------
Six months
ended
November 30
Per-share (Unaudited) Year ended May 31
operating performance 2004 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $8.93 $9.32 $8.86 $8.76 $8.28 $8.98
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income .15 (c) .28 (c) .30 .36 .38 .39 (c)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .15 (.38) .47 .10 .48 (.69)
- -------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .30 (.10) .77 .46 .86 (.30)
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.14) (.29) (.31) (.36) (.38) (.40)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.14) (.29) (.31) (.36) (.38) (.40)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.09 $8.93 $9.32 $8.86 $8.76 $8.28
- -------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.43* (1.15) 8.78 5.30 10.51 (3.37)
- -------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $30,706 $33,382 $43,983 $43,696 $51,687 $48,424
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .77*(c) 1.54 (c) 1.53 1.56 1.53 1.52 (c)
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.62*(c) 3.10 (c) 3.30 4.05 4.38 4.59 (c)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 7.56* 17.43 25.66 17.26 11.88 10.84
- -------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(b) Includes amounts paid through expense offset arrangements. (Note 2)
(c) Reflects an involuntary expense limitation in effect during the
period. As a result of such limitation, expenses of the fund for the
periods ended November 30, 2004, May 31, 2004 and May 31, 2000 reflect a
reduction of 0.01%, 0.01%, and 0.01%, respectively, based on average net
assets for class B shares (Note 2).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS M
- -------------------------------------------------------------------------------------------------------------------------------
Six months
ended
November 30
Per-share (Unaudited) Year ended May 31
operating performance 2004 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $8.94 $9.33 $8.88 $8.77 $8.29 $8.99
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income .16 (c) .32 (c) .33 .39 .41 .42 (c)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .17 (.39) .46 .11 .48 (.69)
- -------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .33 (.07) .79 .50 .89 (.27)
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.16) (.32) (.34) (.39) (.41) (.43)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.16) (.32) (.34) (.39) (.41) (.43)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.11 $8.94 $9.33 $8.88 $8.77 $8.29
- -------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.72* (.80) 9.03 5.78 10.88 (3.02)
- -------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $868 $907 $3,457 $2,988 $1,932 $1,626
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .60*(c) 1.19 (c) 1.18 1.21 1.18 1.17 (c)
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment inco
to average net assets (%) 1.79*(c) 3.41 (c) 3.64 4.39 4.73 4.94 (c)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 7.56* 17.43 25.66 17.26 11.88 10.84
- -------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(b) Includes amounts paid through expense offset arrangements. (Note 2)
(c) Reflects an involuntary expense limitation in effect during the
period. As a result of such limitation, expenses of the fund for the
periods ended November 30, 2004, May 31, 2004 and May 31, 2000 reflect a
reduction of 0.01%, 0.01%, and 0.01%, respectively, based on average net
assets for class M shares (Note 2).
The accompanying notes are an integral part of these financial
statements.
Notes to financial statements
November 30, 2004 (Unaudited)
Note 1
Significant accounting policies
Putnam Ohio Tax Exempt Income Fund (the "fund"), a Massachusetts
business trust, is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company.
The fund seeks as high a level of current income exempt from federal
income tax and Ohio personal income tax as Putnam Investment Management,
LLC ("Putnam Management"), the fund's Manager, an indirect wholly-owned
subsidiary of Putnam, LLC, believes is consistent with preservation of
capital by investing primarily in a portfolio of investment-grade Ohio
tax-exempt securities with intermediate to long-term maturities. The
fund may be affected by economic and political developments in the state
of Ohio.
The fund offers class A, class B and class M shares. Class A shares are
sold with a maximum front-end sales charge of 4.50%. 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 higher than class A but lower than
class B shares.
Effective April 19, 2004 (May 3, 2004 for defined contribution plans
administered by Putnam), a 2.00% redemption fee may apply to any shares
that are redeemed (either by selling or exchanging into another fund)
within 5 days of purchase. The redemption fee is accounted for as an
addition to paid-in-capital.
Investment income, realized and unrealized gains and losses and expenses
of the fund are borne pro-rata based on the relative net assets of each
class to the total net assets of the fund, except that each class bears
expenses unique to that class (including the distribution fees
applicable to such classes). 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 accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in the financial
statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results could
differ from those estimates.
A) Security valuation Tax-exempt bonds and notes are valued at fair
value on the basis of valuations provided by an independent pricing
service, approved by the Trustees. Such services use information with
respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Other investments are valued at fair
value following procedures approved by the Trustees. Such valuations and
procedures are reviewed periodically by the Trustees.
B) Security transactions and related investment income Security
transactions are recorded on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. All premiums/discounts
are amortized/accreted on a yield-to-maturity basis. The premium in
excess of the call price, if any, is amortized to the call date;
thereafter, any remaining premium is amortized to maturity.
C) Interest rate swap contracts The fund may enter into interest rate
swap contracts, which are arrangements between two parties to exchange
cash flows based on a notional principal amount, to manage the fund's
exposure to interest rates. Interest rate swap contracts are marked to
market daily based upon quotations from market makers and the change, if
any, is recorded as unrealized gain or loss. Payments received or made
are recorded as realized gains or loss. The fund could be exposed to
credit or market risk due to unfavorable changes in the fluctuation of
interest rates or if the counterparty defaults on its obligation to
perform. Risk of loss may exceed amounts recognized on the statement of
assets and liabilities. Interest rate swap contracts outstanding at
period end, if any, are listed after the fund's portfolio.
D) Federal taxes It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code of 1986 (the "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 Code, 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, 2004, the fund had a capital loss carryover of $2,427,028
available to the extent allowed by the Code to offset future net capital
gain, if any. The amount of the carryover and the expiration dates are:
Loss Carryover Expiration
- --------------------------------
$2,066,783 May 31, 2009
360,245 May 31, 2010
The aggregate identified cost on a tax basis is $171,686,481, resulting
in gross unrealized appreciation and depreciation of $10,711,888 and
$628,263, respectively, or net unrealized appreciation of $10,083,625.
E) Distributions to shareholders Income dividends are recorded daily by
the fund and are paid monthly. Distributions from capital gains, 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.
Note 2
Management fee, administrative
services and other transactions
Putnam Management is paid for management and investment advisory
services quarterly based on the average net assets of the fund. Such fee
is based on the lesser of (i) an annual rate of 0.50% of the average net
assets of the fund or (ii) the following annual rates expressed as a
percentage of the fund's average net assets: 0.60% of the first $500
million, 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
then next $5 billion, 0.34% of the next $5 billion and 0.33% thereafter.
Effective January 28, 2004, Putnam Management has agreed to waive fees
and reimburse expenses of the fund through May 31, 2005, to the extent
necessary to ensure that the fund's expenses do not exceed the average
expenses of the front-end load funds viewed by Lipper Inc. as having the
same investment classification or objective as the fund. The expense
reimbursement is based on a comparison of the fund's expenses with the
average annualized operating expenses of the funds in its Lipper peer
group for each calendar quarter during the fund's last fiscal year,
excluding 12b-1 fees and without giving effect to any expense offset and
brokerage service arrangements that may reduce fund expenses. For the
period ended November 30, 2004, Putnam Management waived $26,549 of its
management fee from the fund.
For the period ended November 30, 2004, Putnam Management has assumed
$3,039 of legal, shareholder servicing and communication, audit and
Trustee fees incurred by the fund in connection with certain legal and
regulatory matters (including those described in Note 5).
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, LLC. Putnam
Investor Services, a division of PFTC, provides investor servicing agent
functions to the fund. During the six months ended November 30, 2004,
the fund paid PFTC $128,746 for these services.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. For the six months ended November 30,
2004, the fund's expenses were reduced by $12,508 under these
arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $653, as a quarterly retainer, has been allocated to the fund, and
an additional fee for each Trustees meeting attended. 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
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 a 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 Trustee compensation and expenses in the
statement of operations. Accrued pension liability is included in
Payable for Trustee compensation and expenses in the statement of assets
and liabilities. The Trustees have terminated the Pension Plan with
respect to any Trustee first elected after 2003.
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 Retail Management, a wholly-owned subsidiary of
Putnam, LLC and Putnam Retail Management GP, Inc., for services provided
and expenses incurred in distributing shares of the fund. The Plans
provide for payments by the fund to Putnam Retail Management at annual
rates of up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees have approved payment by the fund at the annual rates 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, 2004, Putnam Retail Management,
acting as underwriter, received net commissions of $284 and $63 from the
sale of class A and class M shares, respectively and $20,795 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1.00% 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, 2004, Putnam Retail Management, acting as underwriter,
received $491 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended November 30, 2004, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $13,519,847 and $19,563,690, respectively. There
were no purchases or sales of U.S. government securities.
Note 4
Capital shares
At November 30, 2004, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares
were as follows:
Six months ended November 30, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 498,736 $4,532,265
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 226,216 2,053,005
- ----------------------------------------------------------------
724,952 6,585,270
Shares repurchased (995,925) (9,018,832)
- ----------------------------------------------------------------
Net decrease (270,973) $(2,433,562)
- ----------------------------------------------------------------
Year ended May 31, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 1,645,450 $15,042,154
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 486,137 4,446,177
- ----------------------------------------------------------------
2,131,587 19,488,331
Shares repurchased (4,635,746) (42,357,174)
- ----------------------------------------------------------------
Net decrease (2,504,159) $(22,868,843)
- ----------------------------------------------------------------
Six months ended November 30, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 57,908 $527,276
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 35,813 324,639
- ----------------------------------------------------------------
93,721 851,915
Shares repurchased (455,279) (4,126,598)
- ----------------------------------------------------------------
Net decrease (361,558) $(3,274,683)
- ----------------------------------------------------------------
Year ended May 31, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 245,406 $2,243,629
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 82,562 754,448
- ----------------------------------------------------------------
327,968 2,998,077
Shares repurchased (1,308,759) (11,926,802)
- ----------------------------------------------------------------
Net decrease (980,791) $(8,928,725)
- ----------------------------------------------------------------
Six months ended November 30, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 2,721 $24,610
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1,244 11,301
- ----------------------------------------------------------------
3,965 35,911
Shares repurchased (10,085) (90,209)
- ----------------------------------------------------------------
Net decrease (6,120) $(54,298)
- ----------------------------------------------------------------
Year ended May 31, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 86,521 $800,486
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 11,010 101,012
- ----------------------------------------------------------------
97,531 901,498
Shares repurchased (366,495) (3,345,909)
- ----------------------------------------------------------------
Net decrease (268,964) $(2,444,411)
- ----------------------------------------------------------------
Note 5
Regulatory matters and litigation
On April 8, 2004, Putnam Management entered into agreements with the
Securities and Exchange Commission ("SEC") and the Massachusetts Securities
Division representing a final settlement of all charges brought against
Putnam Management by those agencies on October 28, 2003 in connection with
excessive short-term trading by Putnam employees and, in the case of the
charges brought by the Massachusetts Securities Division, by participants in
some Putnam-administered 401(k) plans. The settlement with the SEC requires
Putnam Management to pay $5 million in disgorgement plus a civil monetary
penalty of $50 million, and the settlement with the Massachusetts Securities
Division requires Putnam Management to pay $5 million in restitution and an
administrative fine of $50 million. The settlements also leave intact the
process established under an earlier partial settlement with the SEC under
which Putnam Management agreed to pay the amount of restitution determined
by an independent consultant, which may exceed the disgorgement and
restitution amounts specified above, pursuant to a plan to be developed by
the independent consultant.
Putnam Management, and not the investors in any Putnam fund, will bear all
costs, including restitution, civil penalties and associated legal fees
stemming from both of these proceedings. The SEC's and Massachusetts
Securities Division's allegations and related matters also serve as the
general basis for numerous lawsuits, including purported class action
lawsuits filed against Putnam Management and certain related parties,
including certain Putnam funds. Putnam Management has agreed to bear any
costs incurred by Putnam funds in connection with these lawsuits. Based on
currently available information, Putnam Management believes that the
likelihood that the pending private lawsuits and purported class action
lawsuits will have a material adverse financial impact on the fund is
remote, and the pending actions are not likely to materially affect its
ability to provide investment management services to its clients, including
the Putnam funds.
The fund may experience increased redemptions as a result of these matters,
which could result in increased transaction costs and operating expenses.
Results of November 11, 2004 shareholder meeting
(Unaudited)
A special meeting of shareholders of the fund was held on November 11, 2004.
At the meeting, each of the nominees for Trustees was elected, as follows:
Votes Votes
for withheld
- -----------------------------------------------------------------------
Jameson A. Baxter 12,529,121 466,091
Charles B. Curtis 12,534,472 460,740
Myra R. Drucker 12,521,368 473,844
Charles E. Haldeman, Jr. 12,532,911 462,301
John A. Hill 12,522,552 472,660
Ronald J. Jackson 12,540,710 454,502
Paul L. Joskow 12,540,710 454,502
Elizabeth T. Kennan 12,525,646 469,566
John H. Mullin, III 12,532,829 462,383
Robert E. Patterson 12,527,177 468,035
George Putnam, III 12,537,797 457,415
A.J.C. Smith 12,524,156 471,056
W. Thomas Stephens 12,537,576 457,636
Richard B. Worley 12,531,869 463,343
A proposal to amend the fund's fundamental investment restriction with
respect to borrowing to allow the fund the investment flexibility permitted
by the Investment Company Act was approved as follows:
Votes Votes
for against Abstentions
- -----------------------------------------------------------------------
8,989,267 657,194 3,348,751
A proposal to amend the fund's fundamental investment restriction with
respect to making loans to enhance the fund's ability to participate in an
interfund borrowing and lending program was approved as follows:
Votes Votes
for against Abstentions
- -----------------------------------------------------------------------
8,934,798 611,604 3,448,810
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments to enhance the fund's ability to
invest in registered investment companies such as Putnam Prime Money Market
Fund was approved as follows:
Votes Votes
for against Abstentions
- -----------------------------------------------------------------------
9,265,065 446,822 3,283,325
A proposal to amend the fund's Agreement and Declaration of Trust to permit
the fund to satisfy redemption requests other than in cash was adjourned.*
* Since sufficient votes in favor of this proposal were not received as of
November 11, 2004, the shareholder meeting with respect to this proposal has
been adjourned until no later than January 10, 2005 to permit further
solicitation in the Trustees' discretion.
All tabulations are rounded to nearest whole number.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary
Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Myra R. Drucker
Charles E. Haldeman, Jr.
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin, III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
Richard B. Worley
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President,
Associate Treasurer and
Principal Executive Officer
Jonathan S. Horwitz
Senior Vice President
and Treasurer
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Daniel T. Gallagher
Vice President and Legal and
Compliance Liaison Officer
Beth S. Mazor
Vice President
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and
BSA Compliance Officer
Francis J. McNamara, III
Vice President and
Chief Legal Officer
Charles A. Ruys de Perez
Vice President and Chief
Compliance Officer
Judith Cohen
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Ohio Tax Exempt
Income Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, the most recent copy of Putnam's
Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary. For
more recent performance, please visit www.putnaminvestments.com. Investors
should carefully consider the investment objective, risks, charges, and
expenses of a fund, which are described in its prospectus. For this and
other information or to request a prospectus, call 1-800-225-1581 toll free.
Please read the prospectus carefully before investing. The fund's Statement
of Additional Information contains additional information about the fund's
Trustees and is available without charge upon request by calling
1-800-225-1581.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Call 1-800-225-1581 or visit our Web site
www.putnaminvestments.com.
SA053-216549 1/05
Not FDIC Insured May Lose Value No Bank Guarantee
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Item 5. Audit Committee: Not applicable
- -------------------------
Item 6. Schedule of Investments: Not applicable
- --------------------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. Purchases of Equity Securities by Closed-End Management Investment
- --------------------------------------------------------------------------
Companies and Affiliated Purchasers: Not applicable
------------------------------------
Item 9. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
- ---------------------------------
(a) The registrant's principal executive officer and principal
financial officer have concluded, based on their evaluation of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as of a date within 90 days of
the filing date of this report on Form N-CSR, that the design and
operation of such procedures are generally effective to provide
reasonable assurance that information required to be disclosed by
the investment company in the reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Commission's rules and forms.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
- ------------------
(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: January 28, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: January 28, 2005
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: January 28, 2005