-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QbnsPkCjDuWah14jwIgokv246n0dAjSK8e1fu/vRI8OX6FdwFleFhGJSj2+woaxL zfxCFNtBAwk8ySBXaMZe3g== 0000928816-04-000606.txt : 20040728 0000928816-04-000606.hdr.sgml : 20040728 20040727165226 ACCESSION NUMBER: 0000928816-04-000606 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040531 FILED AS OF DATE: 20040727 EFFECTIVENESS DATE: 20040727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM NEW YORK TAX EXEMPT INCOME TRUST CENTRAL INDEX KEY: 0000719712 IRS NUMBER: 042794490 STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03741 FILM NUMBER: 04933821 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM NEW YORK TAX EXEMPT INCOME FUND DATE OF NAME CHANGE: 19920703 N-CSR 1 pny1.txt PUTNAM NEW YORK TAX EXEMPT INCOME FUND Putnam New York Tax Exempt Income Fund Item 1. Report to Stockholders: - ------------------------------- 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 5-31-04 [GRAPHIC OMITTED: BASEBALL] [SCALE LOGO OMITTED] From the Trustees [GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III] John A. Hill and George Putnam, III Dear Fellow Shareholder: Over the past several months, Putnam has introduced a number of voluntary reforms. We would like to call your attention to two of them that are now being included in these reports to provide shareholders with more useful information about their investments. Following the performance tables in the Performance Summary, you will find new expense and risk comparison information for your fund. The expense comparison information enables you to estimate the amount you have actually paid for ongoing expenses such as management fees and distribution (or 12b-1) fees and to compare these expenses with the average expenses of funds in your fund's Lipper peer group. The risk comparison shows your fund's risk relative to similar funds as tracked by Morningstar, an independent fund-rating company. We believe the expense and risk information can function as a valuable tool for you and your financial advisor to use when making decisions about your financial program. These enhancements to our reports are part of the additional disclosure we are committed to providing to shareholders. Despite strong performance from investments in airline-related industrial development bonds and other lower-rated, economically sensitive municipal bonds, Putnam New York Tax Exempt Income Fund delivered slightly negative returns for the six months ended May 31, 2004. The fund's results at net asset value fell shy of results for the Lehman Municipal Bond Index but were slightly ahead of the average for its Lipper category. You will find the details on the facing page. As always, we appreciate your support of Putnam Investments. Respectfully yours, /S/ JOHN A. HILL /S/ GEORGE PUTNAM, III John A. Hill George Putnam, III Chairman of the Trustees President of the Funds July 21, 2004 Report from Fund Management Fund highlights * Putnam New York Tax Exempt Income Fund's class A shares posted a total return of -0.67% at net asset value (NAV) and -5.43% at public offering price (POP) for the six months ended May 31, 2004. * Due to differences in portfolio quality and composition, the fund's NAV performance fell somewhat short of the Lehman Municipal Bond Index, a nationally diversified benchmark, which returned -0.22% for the six-month period. * The fund's results at NAV were slightly ahead of the -0.75% average return for its Lipper category, New York Municipal Debt Funds, for the same period. * See the Performance Summary beginning on page 7 for complete fund performance, comparative performance, and Lipper data. Performance commentary Although municipal bond prices experienced little overall change during the six months ended May 31, 2004, the intervening months proved to be quite eventful for bond investors. During the early months of the reporting period, interest rates remained low while investors waited for evidence that the U.S. economy was recovering. By spring, however, interest rates climbed in response to robust reports of economic growth, and municipal bond prices fell sharply. These two contrasting three-month periods, in effect, netted each other out, producing basically flat performance at NAV for the reporting period. This helps explain why the fund's results at NAV lagged its nationally diversified benchmark but edged slightly ahead of the average for its Lipper peer group. The fund's investments in lower-rated, airline-related industrial development bonds (IDBs), which responded favorably to the stronger economic growth, and the various higher-yielding bonds in its portfolio performed well. FUND PROFILE Putnam New York Tax Exempt Income Fund seeks to provide as high a level of current income free from federal, New York state, and New York City personal income taxes as we believe to be consistent with the preservation of capital. It may be suitable for New York investors seeking tax-free income through a diversified portfolio of municipal bonds primarily issued in New York. Market overview Municipal bond yields -- which move in the opposite direction of their prices -- were volatile between December 1, 2003, and May 31, 2004. Yields trended downward for much of the period but corrected sharply in late March and April in response to stronger economic data. At the end of the period, yields on 10-year AAA-rated municipal bonds were slightly higher than they had been at the beginning of the period. The ratio of municipal bond yields to Treasury yields fell to about 80% in December, which means the difference between the yields of 10-year municipal bonds and 10-year Treasuries increased. The ratio edged up to about 85% by the end of the fiscal period. Overall, the yield curve, which shows the differences in yields over a range of bond maturities, flattened somewhat, and credit spreads, which show the difference in yields between higher- and lower-rated bonds, generally narrowed. The economy improved on nearly all fronts, including job growth. The Federal Reserve Board held the federal funds rate steady at 1%, but hinted at a potential rate hike in the near future. Municipal bond issuance was very strong as states and municipalities sought to address budget shortfalls that resulted from decreased tax revenues. In May, California issued the first portion of its recently approved $15 billion bond issue to help alleviate the state's budget crisis. Although ongoing tobacco litigation continued to make headlines, the municipal bond market largely discounted the news. Airline-related IDBs turned in mixed results as a period of strength was followed by weakening toward period-end. In our opinion, the combination of higher fuel costs and competition from low-cost carriers makes the prospects for major airlines less certain. - ------------------------------------------------------------------------------- MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 5/31/04 - ------------------------------------------------------------------------------- Bonds - ------------------------------------------------------------------------------- Lehman Municipal Bond Index (tax-exempt bonds) -0.22% - ------------------------------------------------------------------------------- Lehman Aggregate Bond Index (broad bond market) 0.60% - ------------------------------------------------------------------------------- Lehman Intermediate Government Bond Index (intermediate-maturity U.S. government bonds) 0.38% - ------------------------------------------------------------------------------- JP Morgan Global High Yield Index (global high-yield corporate bonds) 3.29% - ------------------------------------------------------------------------------- Equities - ------------------------------------------------------------------------------- S&P 500 Index (broad stock market) 6.79% - ------------------------------------------------------------------------------- Russell 2000 Index (stocks of small and midsize companies) 4.53% - ------------------------------------------------------------------------------- MSCI EAFE Index (international stocks) 10.32% - ------------------------------------------------------------------------------- These indexes provide an overview of performance in different market sectors for the six months ended 5/31/04. - ------------------------------------------------------------------------------- Strategy overview In an increasingly strong economy, it appears likely that interest rates will rise further. Consequently, we shortened the fund's duration (a measure of a fund's sensitivity to changes in interest rates) relative to its peer group during the period. We took the opportunity afforded by strong demand for higher-yielding municipal bonds to sell into strength where appropriate. We also continued to diversify the portfolio by adding selectively to the fund's lower-quality holdings. These below-investment-grade, higher-yielding bonds are not a component of the fund's benchmark, but we believe that careful selection among them can continue to provide the fund with attractive opportunities for income. In our view, the backdrop for the tobacco industry remains fundamentally positive; however, your fund is underweighted in tobacco settlement bonds sold by New York issuers because they are trading at high levels in comparison with those of national issuers. Although we like the sector, we do not see value in these bonds at the present time. As certain airline-related IDBs continued to rebound during the period, we took the opportunity to sell the fund's holdings into this strength. As noted previously, our outlook for the major airlines is not favorable at this time. [GRAPHIC OMITTED: horizontal bar chart TOP SECTOR WEIGHTINGS COMPARED] TOP SECTOR WEIGHTINGS COMPARED as of 11/30/03 as of 5/31/04 Education 12.8% 13.7% Utilities and power 13.2% 13.4% Transportation 11.3% 9.2% Water and sewer 9.4% 8.6% Health care 8.6% 7.6% Footnote reads: This chart shows how the fund's top weightings have changed over the last six months. Weightings are shown as a percentage of net assets. Holdings will vary over time. How fund holdings affected performance Airline-related industrial development bonds had a significant positive impact on performance for the semiannual period, although these issues gave up some of their strong gains in the final months of the period. IDBs are municipal bonds that are backed only by the credit of the company benefiting from the financing, not by the issuing municipality. During the summer of 2003, the airline industry continued to feel the effects of declining air traffic, high fixed costs, and high-profile bankruptcies. However, as geopolitical tensions eased and the global economy began to show signs of increased growth, investors became more optimistic about prospects for airline-industry fundamentals. This led to a sharp rise in the price of airline-backed IDBs as many of these bonds recovered from distressed price levels. The fund held IDBs backed by American Airlines and British Airways. We took advantage of price appreciation in this sector to selectively trim the fund's exposure to American Airlines. Since these bonds had been in the portfolio for some time, the sale did not result in a profit based on the acquisition cost, but the fund was able to sell on strength rather than in distress. Credit spreads -- the difference in yield between higher- and lower-rated bonds -- narrowed during the six months ended May 31, reflecting investors' rising confidence in the economy and fiscal health of lower-rated issuers. We have been diversifying holdings in this sector, adding to the fund's credit diversity and sector exposures. The fund's investments in the Huntington New York Housing Authority bonds for Gurwin Jewish Senior Residences and New York City Industrial Development Agency bonds issued for Visy Paper contributed positively to performance. [GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW] CREDIT QUALITY OVERVIEW Aaa/AAA (49.0%) Aa/AA (21.0%) A (12.0%) Baa/BBB (7.6%) Ba/BB (4.1%) B (2.0%) Caa (0.2%) VMIG1 (4.1%) Footnote reads: As a percentage of market value as of 5/31/04. A bond rated Baa/BBB or higher is considered investment grade. The chart reflects Moody's and Standard & Poor's ratings; percentages may include unrated bonds considered by Putnam Management to be of comparable quality. Ratings will vary over time. A bond issued by the New York City Industrial Development Agency to provide funds for Brooklyn Polytechnic University was a detractor from performance, due to declining enrollment at the university and an ensuing credit downgrade to Ba2 by Moody's in January 2004. We reduced the fund's exposure to this issue, as we do not expect a recovery in the near term. Another portfolio holding within the education sector issued by Otsego County Industrial Development Agency for Hartwick College detracted from results as declining applications and matriculation triggered operating losses. We eliminated the fund's position in this issue during the period. The fund's investment in bonds issued by Westchester County Health Care Corp. also dampened results for the reporting period. We sold the bonds while they were still rated investment grade but not before the market's perception of their increasing risk took some toll on their price. Since the sale, these bonds have fallen to non-investment-grade status due to sharply deteriorating financial performance of the hospital and Westchester County's unwillingness to extend credit support to the hospital. 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 fund's management team The fund is managed by the Putnam Tax Exempt Fixed-Income Team. The members of the team are David Hamlin (Portfolio Leader), Paul Drury (Portfolio Member), Susan McCormack (Portfolio Member), James St. John (Portfolio Member), and Kevin Cronin. 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. Early in 2004, lingering unemployment had been an anomaly in an otherwise robust economic recovery. However, in early April, employment data at last showed marked improvement in job creation. We believe the underlying strength in the economy will foster higher interest rates in the future. In keeping with our views, the fund's duration is now relatively short in order to keep the portfolio defensively positioned. We expect that the credit quality of general obligation municipal bonds will improve gradually as the economy improves and tax revenues increase. Although yield spreads between high- and low-quality municipal bonds have narrowed somewhat, we believe they remain attractive and could narrow further. As a result, we believe credit risk is worth taking in moderate amounts, while we continue to seek diversification by sector and issuer. We will closely monitor market conditions as we pursue a high level of tax-free income and seek to manage the fund's risk exposure. 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. Tax-free funds may not be suitable for IRAs and other non-taxable accounts. Performance summary This section shows your fund's performance during the first half of its fiscal year, which ended May 31, 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.
- ----------------------------------------------------------------------------------------------------------------- TOTAL RETURN FOR PERIODS ENDED 5/31/04 - ----------------------------------------------------------------------------------------------------------------- Class A Class B Class C Class M (inception dates) (9/2/83) (1/4/93) (7/26/99) (4/10/95) - ----------------------------------------------------------------------------------------------------------------- NAV POP NAV CDSC NAV CDSC NAV POP - ----------------------------------------------------------------------------------------------------------------- 6 months -0.67% -5.43% -1.01% -5.87% -1.18% -2.15% -0.93% -4.15% - ----------------------------------------------------------------------------------------------------------------- 1 year -0.26 -5.05 -0.92 -5.68 -1.18 -2.13 -0.66 -3.93 - ----------------------------------------------------------------------------------------------------------------- 5 years 26.73 20.67 22.67 20.69 21.16 21.16 24.83 20.82 Annual average 4.85 3.83 4.17 3.83 3.91 3.91 4.54 3.86 - ----------------------------------------------------------------------------------------------------------------- 10 years 68.40 60.36 57.78 57.78 54.70 54.70 63.01 57.63 Annual average 5.35 4.84 4.67 4.67 4.46 4.46 5.01 4.66 - ----------------------------------------------------------------------------------------------------------------- Annual average (life of fund) 7.83 7.57 7.00 7.00 6.94 6.94 7.39 7.22 - -----------------------------------------------------------------------------------------------------------------
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 4.75% and 3.25%, respectively (which for class A shares does not reflect a reduction in sales charges that went into effect on January 28, 2004; if this reduction had been in place for all periods indicated, returns would have been higher). 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. Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Performance for class B, C, 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. A 2% short-term trading fee will be applied to shares exchanged or sold within 5 days of purchase. For a portion of the period, the fund had limited expenses, without which returns would have been lower. - ------------------------------------------------------------------------- COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 5/31/04 - ------------------------------------------------------------------------- Lipper New York Lehman Municipal Municipal Debt Funds Bond Index category average* - ------------------------------------------------------------------------- 6 months -0.22% -0.75% - ------------------------------------------------------------------------- 1 year -0.03 -0.59 - ------------------------------------------------------------------------- 5 years 30.64 24.14 Annual average 5.49 4.41 - ------------------------------------------------------------------------- 10 years 84.79 70.44 Annual average 6.33 5.47 - ------------------------------------------------------------------------- Annual average (life of fund) 8.30 7.60 - ------------------------------------------------------------------------- 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 5/31/04, there were 108, 106, 84, and 46 funds, respectively, in this Lipper category.
- ---------------------------------------------------------------------------------------------------------------------------------- PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 5/31/04 - ---------------------------------------------------------------------------------------------------------------------------------- Class A Class B Class C Class M - ---------------------------------------------------------------------------------------------------------------------------------- Distributions (number) 6 6 6 6 - ---------------------------------------------------------------------------------------------------------------------------------- Income 1 $0.182751 $0.153336 $0.146799 $0.169391 - ---------------------------------------------------------------------------------------------------------------------------------- Capital gains 1 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Total $0.182751 $0.153336 $0.146799 $0.169391 - ---------------------------------------------------------------------------------------------------------------------------------- Share value: NAV POP NAV NAV NAV POP - ---------------------------------------------------------------------------------------------------------------------------------- 11/30/03 $8.93 $9.38 $8.91 $8.93 $8.94 $9.24 - ---------------------------------------------------------------------------------------------------------------------------------- 5/31/04 8.69 9.10* 8.67 8.68 8.69 8.98 - ---------------------------------------------------------------------------------------------------------------------------------- Current return (end of period) - ---------------------------------------------------------------------------------------------------------------------------------- Current dividend rate 2 4.22% 4.03% 3.58% 3.43% 3.92% 3.80% - ---------------------------------------------------------------------------------------------------------------------------------- Taxable equivalent 3(a) 7.03 6.72 5.97 5.72 6.53 6.33 - ---------------------------------------------------------------------------------------------------------------------------------- Taxable equivalent 3(b) 7.39 7.06 6.27 6.01 6.87 6.65 - ---------------------------------------------------------------------------------------------------------------------------------- Current 30-day SEC yield (with expense limitation) 4 3.25 3.11 2.61 2.46 2.96 2.86 - ---------------------------------------------------------------------------------------------------------------------------------- Taxable equivalent 3(a), 4 5.42 5.18 4.35 4.10 4.93 4.77 - ---------------------------------------------------------------------------------------------------------------------------------- Taxable equivalent 3(b), 4 5.69 5.45 4.57 4.31 5.18 5.01 - ---------------------------------------------------------------------------------------------------------------------------------- Current 30-day SEC yield (without expense limitation) 3.24 3.09 2.59 2.45 2.94 2.84 - ----------------------------------------------------------------------------------------------------------------------------------
* Reflects a reduction in sales charge which took effect on January 28, 2004. 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 (a) maximum 40.01% combined federal income tax and New York state 2004 personal income tax rates or (b) maximum 42.90% combined federal, New York state, and New York City 2004 tax rates. Results for investors subject to lower tax rates would not be as advantageous. 4 For a portion of the period, this fund had limited expenses, without which returns would have been lower. Based only on investment income, calculated using SEC guidelines.
- ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN FOR PERIODS ENDED 6/30/04 (MOST RECENT CALENDAR QUARTER) - ---------------------------------------------------------------------------------------------------------------------------------- Class A Class B Class C Class M (inception dates) (9/2/83) (1/4/93) (7/26/99) (4/10/95) - ---------------------------------------------------------------------------------------------------------------------------------- NAV POP NAV CDSC NAV CDSC NAV POP - ---------------------------------------------------------------------------------------------------------------------------------- 6 months -1.13% -5.85% -1.35% -6.20% -1.52% -2.49% -1.28% -4.46% - ---------------------------------------------------------------------------------------------------------------------------------- 1 year 0.40 -4.37 -0.26 -5.05 -0.42 -1.38 0.11 -3.21 - ---------------------------------------------------------------------------------------------------------------------------------- 5 years 29.44 23.25 25.44 23.44 23.97 23.97 27.66 23.46 Annual average 5.30 4.27 4.64 4.30 4.39 4.39 5.01 4.31 - ---------------------------------------------------------------------------------------------------------------------------------- 10 years 69.92 61.90 59.38 59.38 56.29 56.29 64.57 59.28 Annual average 5.44 4.94 4.77 4.77 4.57 4.57 5.11 4.76 - ---------------------------------------------------------------------------------------------------------------------------------- Annual average (life of fund) 7.81 7.56 6.99 6.99 6.93 6.93 7.38 7.21 - ----------------------------------------------------------------------------------------------------------------------------------
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 may 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 New York Tax Exempt Income Fund from December 1, 2003, to May 31, 2004. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses. EXPENSES AND VALUE OF A $1,000 INVESTMENT assuming actual returns for the 6 months ended 5/31/04 - ----------------------------------------------------------------------------- Class A Class B Class C Class M - ----------------------------------------------------------------------------- Expenses paid per $1,000* $4 $7 $8 $6 - ----------------------------------------------------------------------------- Ending value (after expenses) $993 $990 $988 $991 - ----------------------------------------------------------------------------- * 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 5/31/04. 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 May 31, 2004, use the calculation method below. To find the value of your investment on December 1, 2003, go to www.putnaminvestments.com and log on to your account. Click on the "Transaction History" tab in your Daily Statement and enter 12/01/2003 in both the "from" and "to" fields. Alternatively, call Putnam at 1-800-225-1581. - ----------------------------------------------------------------------------- HOW TO CALCULATE THE EXPENSES YOU PAID - ----------------------------------------------------------------------------- Total Value of your Expenses paid expenses investment on 12/1/03 [DIV] $1,000 X per $1,000 = paid - ----------------------------------------------------------------------------- Example Based on a $10,000 investment in class A shares of your fund. - ----------------------------------------------------------------------------- $10,000 [DIV] $1,000 X $4 (see table above) = $40 - ----------------------------------------------------------------------------- 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. - ------------------------------------------------------------------------------ EXPENSES AND VALUE OF A $1,000 INVESTMENT assuming a hypothetical 5% annualized return for the 6 months ended 5/31/04 - ------------------------------------------------------------------------------ Class A Class B Class C Class M - ------------------------------------------------------------------------------ Expenses paid per $1,000* $4 $7 $8 $6 - ------------------------------------------------------------------------------ Ending value (after expenses) $1,021 $1,018 $1,017 $1,019 - ------------------------------------------------------------------------------ * 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 5/31/04. 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. - ---------------------------------------------------------------------------- EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA - ---------------------------------------------------------------------------- Class A Class B Class C Class M - ---------------------------------------------------------------------------- Your fund's annualized expense ratio 0.82% 1.47% 1.62% 1.12% - ---------------------------------------------------------------------------- Average annualized expense ratio for Lipper peer group+ 0.82% 1.47% 1.62% 1.12% - ---------------------------------------------------------------------------- + For class A shares, expenses shown represent the average of the expenses of front-end load funds viewed by Lipper as having the same investment classification or objective as the fund, calculated in accordance with Lipper's standard reporting methodology for comparing expenses within a given universe. All Lipper data is for the most recent fiscal periods available as of 3/31/04. For class B, C and M shares, Putnam has adjusted the Lipper total expense average to reflect higher 12b-1 fees incurred by these classes 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. 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 0.25 Municipal bond fund average 0.22 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 6/30/04. 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. The NAV is calculated by dividing the net value of all the fund's assets by the number of outstanding shares. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the 4.75% maximum sales charge for class A shares (since reduced to 4.50%) 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 C shares are not subject to an initial sales charge and are subject to a contingent deferred sales charge only if the shares are redeemed during the first year. 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. Putnam is committed to managing our mutual funds in the best interests of our shareholders. Our proxy voting guidelines and policies are available on the Putnam Individual Investor Web site, www.putnaminvestments.com, by calling Putnam's Shareholder Services at 1-800-225-1581, or on the SEC's Web site, www.sec.gov. 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 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 May 31, 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 G.O. Bonds General Obligation Bonds IFB Inverse Floating Rate Bonds MBIA MBIA Insurance Company U.S. Govt. Coll. U.S. Government Collateralized VRDN Variable Rate Demand Notes Municipal bonds and notes (96.1%) (a) Principal amount Rating (RAT) Value New York (86.8%) - ------------------------------------------------------------------------------- Albany, Indl. Dev. Agcy. Civic Fac. Rev. Bonds $1,460,000 (Albany Med. Ctr.), 6s, 5/1/29 BBB-/P $1,355,975 2,750,000 (Charitable Leadership), Ser. A , 6s, 7/1/19 Baa3 2,884,063 3,400,000 Battery Park, City Auth. Rev. Bonds, Ser. A, AMBAC, 5 1/2s, 11/1/16 Aaa 3,731,500 2,000,000 Chautauqua Cnty., Indl. Dev. Agcy. Rev. Bonds (Women's Christian Assn.), Ser. A, 6.4s, 11/15/29 B+/P 1,850,000 800,000 Chemung Cnty., Indl. Dev. Agcy. Civic Fac. Rev. Bonds (Arnot Ogden Med. Ctr.), 5s, 11/1/34 A3 751,000 13,500,000 Dutchess Cnty., Indl. Dev. Agcy. Civic Fac. Rev. Bonds (Bard College), 5 3/4s, 8/1/30 A3 14,107,500 16,000,000 Dutchess Cnty., Indl. Dev. Agcy. Rev. Bonds (Vassar College), 5.35s, 9/1/40 Aa2 16,200,000 Erie Cnty., G.O. Bonds 2,470,000 Ser. C, AMBAC, 5 1/2s, 7/1/29 Aaa 2,547,188 4,160,000 Ser. B, AMBAC, 5 3/8s, 7/1/20 Aaa 4,414,800 2,250,000 Essex Cnty., Indl. Dev. Agcy. Rev. Bonds (Intl. Paper Co.), Ser. A, 6.15s, 4/1/21 Baa2 2,295,000 2,650,000 Geneva, Indl. Dev. Agcy. Rev. Bonds (Hobart & William Smith Project), Ser. A, 5 3/8s, 2/1/33 A 2,663,250 2,200,000 Hempstead, Indl. Dev. Agcy. Civic Fac. Rev. Bonds (Hofstra U.), 5 1/4s, 7/1/16 A 2,279,750 1,250,000 Huntington, Hsg. Auth. Sr. Hsg. Fac. Rev. Bonds (Gurwin Jewish Sr. Residence), Ser. A, 6s, 5/1/29 B+/P 1,139,063 1,360,000 Lockport, Hsg. Dev. Corp. Rev. Bonds (Urban Pk.Towers), Ser. A, 6s, 10/1/18 Baa2 1,383,800 28,350,000 Long Island, Pwr. Auth. VRDN, Ser. 2, 1.07s, 5/1/33 VMIG1 28,350,000 Long Island, Pwr. Auth. NY Elec. Syst. IFB 16,250,000 9.479s, 12/1/24 (acquired 5/19/98, cost $17,663,750) (RES) BBB+/P 17,489,063 5,000,000 MBIA, 8.87s, 4/1/12 (acquired 11/3/98, cost $5,422,100) (RES) AAA 5,700,000 5,000,000 Long Island, Pwr. Auth. NY Elec. Syst. Rev. Bonds, Ser. A, 5 1/8s, 9/1/29 A- 4,850,000 2,700,000 Long Island, Pwr. Auth. NY Elec. Syst. VRDN, Ser. 2, 1.06s, 5/1/33 VMIG1 2,700,000 4,090,000 Madison Cnty., Indl. Dev. Agcy. Rev. Bonds (Colgate U.), Ser. A, 5s, 7/1/23 Aa3 4,120,675 5,550,000 Metro. Trans. Auth. Commuter Fac. Rev. Bonds, Ser. A, U.S. Govt. Coll., 6s, 7/1/24 AAA 6,299,250 7,000,000 Metro. Trans. Auth. Fac. IFB, FGIC, 10.432s, 10/1/17 (acquired 2/11/00, cost $6,684,500) (RES) AAA/P 8,890,000 Metro. Trans. Auth. Fac. Rev. Bonds 15,400,000 Ser. A, MBIA, 6 1/4s, 4/1/14 Aaa 18,268,250 4,245,000 Ser. A, MBIA, 6 1/4s, 4/1/13 Aaa 5,014,406 2,500,000 (Dedicated Tax Fund), Ser. A, MBIA, 6 1/4s, 4/1/11 Aaa 2,918,750 11,020,000 (Trans. Fac.), Ser. A, 6s, 7/1/24 AAA 12,507,700 14,000,000 (Dedicated Tax Fund), Ser. A, FGIC, 4 3/4s, 4/1/28 Aaa 14,857,500 Metro. Trans. Auth. Rev. Bonds 13,000,000 Ser. A, AMBAC, 5 1/2s, 11/15/19 Aaa 14,088,750 1,500,000 Ser. A, FGIC, 5 1/2s, 11/15/19 Aaa 1,661,250 Metro. Trans. Auth. Svc. Contract Rev. Bonds 3,230,000 (Trans. Fac.), Ser. 3, U.S. Govt. Coll., 7 3/8s, 7/1/08 AAA 3,577,225 15,820,000 (Trans. Fac.), Ser. O, U.S. Govt. Coll., 5 3/4s, 7/1/13 AAA 17,718,400 12,500,000 (Commuter Fac.), Ser. O, U.S. Govt. Coll., 5 1/2s, 7/1/17 AAA 13,921,875 24,345,000 (Trans. Fac.), Ser. O, U.S. Govt. Coll., 5 1/2s, 7/1/17 AAA 27,114,244 1,000,000 Mount Vernon, Indl. Dev. Agcy. Fac. Rev. Bonds (Wartburg Senior Hsg., Inc.-Meadowview), 6.2s, 6/1/29 B+/P 922,500 Nassau Cnty., G.O. Bonds 1,125,000 Ser. E, FSA, 6s, 3/1/20 Aaa 1,282,500 2,790,000 Ser. E, FSA, 6s, 3/1/19 Aaa 3,180,600 2,735,000 Ser. E, FSA, 6s, 3/1/18 Aaa 3,117,900 3,465,000 Ser. E, FSA, 6s, 3/1/16 Aaa 3,950,100 1,000,000 Ser. A, FGIC, 6s, 7/1/13 Aaa 1,148,750 2,300,000 Ser. A, FGIC, 6s, 7/1/11 Aaa 2,627,750 2,580,000 Ser. E, FSA, 5.9s, 3/1/15 Aaa 2,928,300 Nassau Cnty., Indl. Dev. Agcy. Rev. Bonds (North Shore Hlth. Syst.) 410,000 Ser. A, 6 1/4s, 11/1/21 A3 432,038 1,270,000 Ser. B, 5 7/8s, 11/1/11 A3 1,376,363 825,000 Ser. D, 5 5/8s, 11/1/09 A3 884,813 1,615,000 Ser. D, 4 7/8s, 11/1/05 A3 1,673,544 3,000,000 Niagara Cnty., Indl. Dev. Agcy. Rev. Bonds, Ser. D, 5.55s, 11/15/24 Baa1 3,063,750 6,000,000 Niagara Falls, City School Dist. COP, 5 7/8s, 6/15/19 Baa3 6,127,500 NY City, G.O. Bonds 7,265,000 Ser. B, 8 1/4s, 6/1/05 A2 7,735,263 5,360,000 Ser. B, U.S. Govt. Coll., 8 1/4s, 6/1/05 (Prerefunded) AAA/P 5,711,938 45,000 Ser. F, 7.6s, 2/1/05 A2 45,185 18,675,000 Ser. B, MBIA, 6 1/2s, 8/15/11 Aaa 21,919,781 21,495,000 Ser. D, MBIA, 6 1/2s, 11/1/10 Aaa 25,068,544 945,000 Ser. I, U.S. Govt. Coll., 6 1/4s, 4/15/27 Aaa 1,053,675 1,845,000 Ser. I, U.S. Govt. Coll., 6 1/4s, 4/15/17 Aaa 2,057,175 2,000,000 Ser. I, 5 7/8s, 3/15/14 A2 2,162,500 23,525,000 Ser. B, 5 1/2s, 12/1/11 A2 25,701,063 3,000,000 Ser. C, 5 1/4s, 8/1/11 A2 3,221,250 50,000 NY City, IFB, AMBAC, 10.67s, 9/1/11 Aaa 50,647 7,000,000 NY City, City Transitional Fin. Auth. IFB, 10.672s, 11/15/29 (acquired 2/4/00, cost $6,788,320) (RES) AA/P 9,135,000 NY City, City Transitional Fin. Auth. Rev. Bonds 6,500,000 Ser. A, 5 3/4s, 8/15/24 AA+ 7,369,375 2,000,000 AMBAC, 5 1/4s, 8/1/15 Aaa 2,142,500 2,500,000 Ser. C, FSA, 5 1/4s, 8/1/12 Aaa 2,753,125 3,600,000 Ser. B, 5 1/4s, 11/15/05 AA+ 3,771,000 80,000 Ser. C, U.S. Govt. Coll., 5s, 5/1/26 AA+ 86,900 NY City, Indl. Dev. Agcy. Civic Fac. Rev. Bonds 7,330,000 (Parking Corp.), 8 1/2s, 12/30/22 B-/P 6,120,550 3,295,000 (Staten Island U. Hosp.), Ser. A, 6 3/8s, 7/1/31 Baa3 3,023,163 13,825,000 (Brooklyn Polytech. U. Project J), 6 1/8s, 11/1/30 BB+ 11,733,969 7,000,000 (Horace Mann School), MBIA, 5s, 7/1/28 Aaa 6,938,750 NY City, Indl. Dev. Agcy. Rev. Bonds 7,300,000 (Visy Paper, Inc.), 7.95s, 1/1/28 B+/P 7,628,500 2,100,000 (British Airways), 7 5/8s, 12/1/32 BB+ 2,047,500 5,000,000 (Brooklyn Navy Yard Cogen. Partners), 6.2s, 10/1/22 BBB- 4,887,500 1,440,000 (Brooklyn Navy Yard Cogen. Partners), 5.65s, 10/1/28 BBB- 1,296,000 2,000,000 (Empowerment Zone-Harlem Mall), 5 1/8s, 12/30/23 Baa1 1,877,500 NY City, Indl. Dev. Agcy. Special Arpt. Fac. Rev. Bonds (Airis JFK I, LLC) 9,500,000 Ser. A, 6s, 7/1/27 Baa3 9,250,625 9,000,000 Ser. A, 5 1/2s, 7/1/28 Baa3 8,505,000 NY City, Indl. Dev. Agcy. Special Fac. Rev. Bonds 3,000,000 (American Airlines, Inc.), 6.9s, 8/1/24 Caa2 2,058,750 14,465,000 (Terminal One Group Assn.), 6 1/8s, 1/1/24 A3 14,771,803 5,150,000 (British Airways), 5 1/4s, 12/1/32 BB+ 3,720,875 5,000,000 NY City, Metro. Trans. Auth. Rev. Bonds, Ser. A, AMBAC, 5 1/4s, 1/1/29 Aaa 5,062,500 NY City, Muni. Assistance Corp. Rev. Bonds 5,150,000 Ser. E, 6s, 7/1/04 Aa1 5,169,364 10,000,000 Ser. P, 5s, 7/1/08 Aa1 10,775,000 4,550,000 Ser. O, 5s, 7/1/05 Aa1 4,717,076 NY City, Muni. Wtr. & Swr. Fin. Auth. IFB 200,000 13.661s, 6/15/11 (acquired 8/9/91, cost $207,493) (RES) Aaa 286,750 5,000,000 MBIA, 9.37s, 6/15/13 Aaa 5,113,050 NY City, Muni. Wtr. & Swr. Fin. Auth. Rev. Bonds 25,600,000 AMBAC, 7 1/2s, 6/15/11 Aaa 31,424,000 17,500,000 MBIA, 5.2s, 6/15/08 Aaa 17,696,875 16,700,000 NY City, Muni. Wtr. & Swr. Fin. Auth. VRDN, Ser. A, FGIC, 1.08s, 6/15/25 VMIG1 16,700,000 NY City, State Dorm. Auth. Lease Rev. Bonds 5,600,000 (Court Fac.), 6s, 5/15/39 A 5,943,000 3,000,000 (Westchester Cnty.), 5 1/4s, 8/1/18 Aa1 3,187,500 NY Cntys., Tobacco Trust III Rev. Bonds 1,000,000 6s, 6/1/43 Baa2 863,750 3,500,000 (Tobacco Settlement), 5 3/4s, 6/1/33 Baa2 3,049,375 6,000,000 NY Cntys., Trust II Rev. Bonds (Tobacco Settlement), 5 3/4s, 6/1/43 BBB 5,002,500 13,250,000 NY State Dorm. Auth. IFB, MBIA, 8.161s, 1/1/09 (acquired 10/22/97, cost $15,237,500) (RES) AAA/P 16,893,750 NY State Dorm. Auth. Rev. Bonds 5,000,000 (State U. Edl. Fac.), Ser. A, 7 1/2s, 5/15/13 AA- 6,243,750 18,800,000 (City U. Syst.), Ser. C, 7 1/2s, 7/1/10 A3 21,526,000 2,500,000 (Mount Sinai Hlth.), Ser. A, 6.6s, 7/1/26 Ba1 2,471,875 3,000,000 (Mount Sinai Hlth.), Ser. A, 6 1/2s, 7/1/25 Ba1 3,000,000 1,000,000 (Mount Sinai Hlth.), Ser. C, 6s, 7/1/26 Ba1 976,250 8,950,000 (State U. Edl. Fac.), Ser. A, FSA, 5 7/8s, 5/15/17 Aaa 10,303,688 11,200,000 (State U. Edl. Fac.), Ser. A, 5 7/8s, 5/15/11 AA- 12,614,000 5,250,000 (Winthrop Nassau U.), 5 3/4s, 7/1/28 Baa1 5,348,438 6,000,000 (NY Dept. of Ed.), Ser. A , MBIA, 5 3/4s, 7/1/20 Aaa 6,787,500 1,340,000 (Schools PG - Issue 2), Ser. E, AMBAC, 5 3/4s, 7/1/19 Aaa 1,474,000 35,385,000 (U. Syst. Construction), Ser. A, 5 3/4s, 7/1/18 AA- 39,144,643 1,905,000 (Lenox Hill Hosp.), 5 3/4s, 7/1/13 A3 2,066,925 10,000,000 (Columbia U.), Ser. A, 5 3/4s, 7/1/10 Aaa 11,287,500 2,650,000 (City U. Syst.), Ser. A, FGIC, 5 3/4s, 7/1/09 Aaa 2,924,938 1,310,000 (Mental Hlth. Svcs. Fac.), Ser. B, MBIA, 5 3/4s, 7/1/09 Aaa 1,467,200 15,600,000 (U. Syst. Construction), Ser. A, 5 5/8s, 7/1/16 AA- 17,238,000 8,500,000 (NYU), Ser. 1, AMBAC, 5 1/2s, 7/1/40 Aaa 9,222,500 2,000,000 (North Shore Long Island Jewish Group), 5 1/2s, 5/1/33 A3 2,000,000 3,500,000 (NYU), Ser. 1, AMBAC, 5 1/2s, 7/1/31 Aaa 3,766,875 2,750,000 (Winthrop Nassau U.), 5 1/2s, 7/1/23 Baa1 2,753,438 17,810,000 (Mental Hlth. Svcs.), Ser. D, FSA, 5 1/4s, 8/15/30 (prerefunded) Aaa 19,724,575 2,150,000 (Mental Hlth. Svcs.), Ser. D, FSA, 5 1/4s, 8/15/30 Aaa 2,158,063 750,000 (NY Methodist Hosp.), 5 1/4s, 7/1/18 A3 768,750 NY State Dorm. Auth. Rev. Bonds 1,865,000 (NY Methodist Hosp.), 5 1/4s, 7/1/17 A3 1,923,281 3,465,000 (School Dist. Fin. Project), Ser. A, MBIA, 5 1/4s, 10/1/11 Aaa 3,815,831 10,000,000 (Memorial Sloan-Kettering Ctr.), Ser. 1, 5s, 7/1/34 Aa2 9,787,500 3,000,000 (Yeshiva U.), AMBAC, 5s, 7/1/30 Aaa 2,970,000 3,000,000 (U. of Rochester), Ser. A, MBIA, 5s, 7/1/27 Aaa 2,958,750 2,700,000 (Yeshiva U.), AMBAC, 5s, 7/1/26 Aaa 2,689,875 2,000,000 (Columbia U.), Ser. B, 5s, 7/1/24 Aaa 2,025,000 2,000,000 (Columbia U.), Ser. B, 5s, 7/1/23 Aaa 2,032,500 7,500,000 (Columbia U.), 5s, 7/1/22 Aaa 7,621,875 3,000,000 (Columbia U.), Ser. B, 5s, 7/1/22 Aaa 3,063,750 2,000,000 (Columbia U.), Ser. B, 5s, 7/1/21 Aaa 2,052,500 1,700,000 Ser. A, MBIA, 5s, 3/15/19 AAA 1,740,375 2,505,000 (Lutheran Med.), MBIA, 5s, 8/1/12 Aaa 2,696,006 1,130,000 (Lenox Hill Hosp. Oblig. Group), 5s, 7/1/07 A3 1,196,388 10,000,000 (Colgate U.), MBIA, 4 3/4s, 7/1/28 Aaa 9,500,000 725,000 (State U. Edl. Fac.), Ser. B, zero %, 5/15/09 AA- 604,469 NY State Energy Research & Dev. Auth. Gas Fac. IFB (Brooklyn Union Gas Co.) 2,000,000 Ser. B, 12.231s, 7/1/26 A+ 2,357,500 3,500,000 11.346s, 4/1/20 A+ 4,178,125 20,000,000 NY State Energy Research & Dev. Auth. Gas Fac. Rev. Bonds (Brooklyn Union Gas), 6.952s, 7/1/26 A+ 21,775,000 NY State Energy Research & Dev. Auth. Poll. Control Rev. Bonds 11,750,000 (Niagara Mohawk Pwr. Corp.), Ser. A, FGIC, 7.2s, 7/1/29 Aaa 12,037,288 7,000,000 (Lilco), Ser. B, 5.15s, 3/1/16 A1 7,087,500 9,640,000 NY State Env. Fac. Corp. Rev. Bonds (NY City Wtr.), Ser. K, 5 1/2s, 6/15/14 Aaa 10,820,900 NY State Env. Fac. Corp. Poll. Control Rev. Bonds 3,425,000 (State Wtr. Revolving Fund), Ser. B, 6.65s, 9/15/13 Aaa 3,472,745 1,735,000 (State Wtr. Revolving Fund), Ser. A, 6.55s, 9/15/10 Aaa 1,746,833 270,000 5 7/8s, 6/15/14 Aaa 276,413 1,740,000 5 7/8s, 6/15/14 (Prerefunded) Aaa 1,777,567 710,000 Ser. A, 5 7/8s, 6/15/14 Aaa 725,329 5,620,000 NY State Hsg. Fin. Agcy. Rev. Bonds (Multi-Fam. Hsg. Insd. Mtge. Program), Ser. A, FHA Insd., 7s, 8/15/22 Aaa 5,629,104 NY State Hwy. & Bridge Auth. Rev. Bonds 1,000,000 Ser. A, FSA, 6s, 4/1/16 Aaa 1,150,000 2,000,000 Ser. A, FSA, 5.8s, 4/1/18 Aaa 2,207,500 2,000,000 Ser. A, FSA, 5 3/4s, 4/1/17 Aaa 2,200,000 11,740,000 Ser. B, MBIA, 5s, 4/1/05 Aaa 12,084,452 12,325,000 NY State Med. Care Fac. Fin. Agcy. Rev. Bonds (NY Hosp.), Ser. A, AMBAC, 6 1/2s, 8/15/29 Aaa 13,012,365 NY State Pwr. Auth. Rev. Bonds 4,250,000 5s, 11/15/20 Aa2 4,361,563 31,135,000 5s, 11/15/06 Aa2 33,197,694 NY State Thruway Auth. Rev. Bonds, Ser. A, MBIA 4,300,000 5 1/4s, 4/1/22 Aaa 4,455,875 3,000,000 5 1/4s, 4/1/12 Aaa 3,303,750 2,000,000 (Gen. Hwy. & Bridge Trust Fund), Ser. A, MBIA, 5s, 4/1/21 Aaa 2,047,500 NY State Urban Dev. Corp. Rev. Bonds 5,830,000 (Correctional Fac.), Ser. 7, 5.7s, 1/1/16 AA- 6,413,000 1,685,000 (Clarkson Ctr.), 5 1/2s, 1/1/20 AA- 1,821,906 4,000,000 (Personal Income Tax), Ser. C-1, FGIC, 5 1/2s, 3/15/19 Aaa 4,325,000 3,345,000 (Clarkson Ctr.), 5 1/2s, 1/1/15 AA- 3,662,775 2,000,000 (Syracuse U. ), 5 1/2s, 1/1/15 AA- 2,190,000 7,710,000 (Correctional Fac.), Ser. A, 5 1/2s, 1/1/09 AA- 8,384,625 355,000 (Correctional Fac.), Ser. A, 5s, 1/1/28 AA- 387,838 1,000,000 Oneida Cnty., Indl. Dev. Agcy. Rev. Bonds (St. Elizabeth Med.), Ser. A, 5 7/8s, 12/1/29 BB-/P 860,000 1,000,000 Onondaga Cnty., Indl. Dev. Agcy. Rev. Bonds (Solvay Paperboard, LLC), 7s, 11/1/30 (acquired 12/9/98, cost $1,000,000) (RES) BB-/P 1,037,500 Orange Cnty., Indl. Dev. Agcy. Rev. Bonds (Arden Hill Care Ctr. Newburgh), Ser. C 3,200,000 7s, 8/1/31 BB-/P 3,124,000 2,300,000 7s, 8/1/21 BB-/P 2,282,750 Port Auth. NY & NJ Rev. Bonds 3,900,000 (Kennedy Intl. Arpt. - 5th Installment), 6 3/4s, 10/1/19 BB+/P 3,948,750 1,000,000 (Kennedy Intl. Arpt. - 4th Installment), 6 3/4s, 10/1/11 BB+/P 1,030,000 7,750,000 St. Lawrence Cnty., Indl. Dev. Rev. Bonds (St. Lawrence U.), Ser. A, MBIA, 5s, 7/1/28 Aaa 7,633,750 Suffolk Cnty., Indl. Dev. Agcy. Civic Fac. Rev. Bonds 500,000 (Southampton Hosp. Assn.), Ser. B, 7 5/8s, 1/1/30 B-/P 493,750 500,000 (Southampton Hosp. Assn.), Ser. A, 7 1/4s, 1/1/30 B-/P 473,125 2,200,000 (Huntington Hosp.), Ser. B, 5 7/8s, 11/1/32 Baa1 2,224,750 Suffolk Cnty., Indl. Dev. Agcy. Cont. Care Retirement Rev. Bonds (Jefferson's Ferry) 4,000,000 Ser. A, 7.2s, 11/1/19 BB-/P 4,170,000 4,000,000 Ser. A, 7 1/4s, 11/1/28 BB-/P 4,135,000 Suffolk Cnty., Indl. Dev. Agcy. Rev. Bonds 6,200,000 (Peconic Landing), Ser. A, 8s, 10/1/30 B+/P 6,254,250 2,250,000 (Peconic Landing), Ser. B, 7s, 10/1/30 B+/P 2,247,188 2,000,000 (Nissequogue Cogen. Partners Fac.), 5 1/2s, 1/1/23 BB+/P 1,832,500 4,220,000 Suffolk Cnty., Judicial Fac. Agcy. Rev. Bonds (John P. Cohalan Complex), AMBAC, 5s, 4/15/16 Aaa 4,404,625 Syracuse, Indl. Dev. Agcy. Rev. Bonds (1st Mtge. - Jewish Home), Ser. A 2,800,000 7 3/8s, 3/1/31 BB-/P 2,859,500 800,000 7 3/8s, 3/1/21 BB-/P 821,000 4,250,000 Tobacco Settlement Rev. Bonds (Asset Backed Bonds), Ser. 1, 5 3/4s, 7/15/32 BBB 3,745,313 34,280,000 Triborough Bridge & Tunnel Auth. Gen. Purpose Rev. Bonds (Convention Ctr.), Ser. E, 7 1/4s, 1/1/10 AA- 38,693,550 10,360,000 Triborough Bridge & Tunnel Auth. IFB, 9.603s, 1/1/12 (acquired 10/24/97, cost $11,292,564) (RES) AA-/P 12,341,350 Triborough Bridge & Tunnel Auth. Rev. Bonds 14,000,000 (Convention Ctr.), Ser. E, 6s, 1/1/11 AA- 15,820,000 5,000,000 MBIA, 5 1/2s, 11/15/20 Aaa 5,518,750 5,050,000 AMBAC, 5 1/4s, 11/15/16 Aaa 5,510,813 4,000,000 FGIC, 5 1/4s, 1/1/14 Aaa 4,285,000 4,005,000 Yonkers, Indl. Dev. Agcy. Civic Fac. Rev. Bonds (St. John's Riverside Hosp.), Ser. A, 7 1/8s, 7/1/31 BB 4,025,025 -------------- 1,194,905,925 Puerto Rico (9.3%) - ------------------------------------------------------------------------------- 9,250,000 Children's Trust Fund Tobacco Settlement Rev. Bonds, 5 1/2s, 5/15/39 BBB 7,492,500 Cmnwlth. of PR, G.O. Bonds 3,915,000 FSA, 6 1/2s, 7/1/13 Aaa 4,673,531 4,750,000 (Pub. Impt.), MBIA, 5 1/4s, 7/1/18 AAA 5,183,438 Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds 5,000,000 Ser. B, 6s, 7/1/26 A 5,287,650 2,275,000 Ser. B, MBIA, 5 7/8s, 7/1/35 AAA/P 2,493,969 3,000,000 Ser. AA, MBIA, 5 1/2s, 7/1/19 Aaa 3,345,000 7,035,000 Ser. AA, MBIA, 5 1/2s, 7/1/18 Aaa 7,852,819 7,000,000 Cmnwlth. of PR, Hwy. & Trans. Auth. VRDN, Ser. A, AMBAC, 1.06s, 7/1/28 VMIG1 7,000,000 PR Elec. Pwr. Auth. Rev. Bonds 20,000,000 (PA 205), 6.98s, 7/1/07 AAA/P 22,575,000 10,000,000 Ser. LL, MBIA, 5 1/2s, 7/1/17 Aaa 11,150,000 10,000,000 Ser. AA, MBIA, 5 3/8s, 7/1/27 Aaa 10,325,000 3,500,000 MBIA, 5s, 7/1/19 Aaa 3,710,000 6,000,000 PR Indl. Tourist Edl. Med. & Env. Control Fac. Rev. Bonds (Cogen. Fac.-AES), 6 5/8s, 6/1/26 Baa3 6,202,500 22,000,000 PR Infrastructure Fin. Auth. Special Rev. Bonds, Ser. A, 5 1/2s, 10/1/40 Aaa 23,155,000 7,000,000 U. of PR Rev. Bonds, Ser. O, MBIA, 5 3/8s, 6/1/30 Aaa 7,244,720 -------------- 127,691,127 - ------------------------------------------------------------------------------- Total Investments (cost $1,242,065,787) $1,322,597,052 - ------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $1,375,980,708. (RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at May 31, 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 May 31, 2004. Securities rated by Putnam are indicated by "/P". (RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities held at May 31, 2004 was $71,773,413 or 5.2% of net assets. The rates shown on VRDN are the current interest rates at May 31, 2004. The rates shown on IFB, which are securities paying interest rates that vary inversely to changes in the market interest rates, are the current interest rates at May 31, 2004. The fund had the following industry group concentrations greater than 10% at May 31, 2004 (as a percentage of net assets): Education 13.7% Utilities and power 13.4 The fund had the following insurance concentrations greater than 10% at May 31, 2004 (as a percentage of net assets): MBIA 17.5% The accompanying notes are an integral part of these financial statements. Statement of assets and liabilities May 31, 2004 (Unaudited) Assets - ------------------------------------------------------------------------------- Investments in securities, at value (identified cost $1,242,065,787) (Note 1) $1,322,597,052 - ------------------------------------------------------------------------------- Cash 16,376,490 - ------------------------------------------------------------------------------- Interest and other receivables 23,817,345 - ------------------------------------------------------------------------------- Receivable for shares of the fund sold 447,212 - ------------------------------------------------------------------------------- Receivable for securities sold 18,791,404 - ------------------------------------------------------------------------------- Total assets 1,382,029,503 Liabilities - ------------------------------------------------------------------------------- Distributions payable to shareholders 2,189,543 - ------------------------------------------------------------------------------- Payable for shares of the fund repurchased 1,139,741 - ------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 1,695,883 - ------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 244,440 - ------------------------------------------------------------------------------- Payable for Trustee compensation and expenses (Note 2) 152,670 - ------------------------------------------------------------------------------- Payable for administrative services (Note 2) 2,183 - ------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 523,532 - ------------------------------------------------------------------------------- Other accrued expenses 100,803 - ------------------------------------------------------------------------------- Total liabilities 6,048,795 - ------------------------------------------------------------------------------- Net assets $1,375,980,708 Represented by - ------------------------------------------------------------------------------- Paid-in capital (Notes 1 and 4) $1,313,505,558 - ------------------------------------------------------------------------------- Undistributed net investment income (Note 1) 1,890,413 - ------------------------------------------------------------------------------- Accumulated net realized loss on investments (Note 1) (19,946,528) - ------------------------------------------------------------------------------- Net unrealized appreciation of investments 80,531,265 - ------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $1,375,980,708 - ------------------------------------------------------------------------------- Computation of net asset value and offering price - ------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($1,235,921,017 divided by 142,299,155 shares) $8.69 - ------------------------------------------------------------------------------- Offering price per class A share (100/95.50 of $8.69)* $9.10 - ------------------------------------------------------------------------------- Net asset value and offering price per class B share ($127,246,249 divided by 14,674,452 shares)** $8.67 - ------------------------------------------------------------------------------- Net asset value and offering price per class C share ($9,528,801 divided by 1,097,380 shares)** $8.68 - ------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($3,284,641 divided by 377,939 shares) $8.69 - ------------------------------------------------------------------------------- Offering price per class M share (100/96.75 of $8.69)*** $8.98 - ------------------------------------------------------------------------------- * 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 May 31, 2004 (Unaudited) Interest income: $36,421,143 - ------------------------------------------------------------------------------- Expenses: - ------------------------------------------------------------------------------- Compensation of Manager (Note 2) 3,651,466 - ------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 829,233 - ------------------------------------------------------------------------------- Trustee compensation and expenses (Note 2) 22,809 - ------------------------------------------------------------------------------- Administrative services (Note 2) 12,499 - ------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 1,299,830 - ------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 620,099 - ------------------------------------------------------------------------------- Distribution fees -- Class C (Note 2) 51,817 - ------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 9,070 - ------------------------------------------------------------------------------- Other 189,904 - ------------------------------------------------------------------------------- Non-recurring costs (Note 5) 23,657 - ------------------------------------------------------------------------------- Costs assumed by Manager (Note 5) (23,657) - ------------------------------------------------------------------------------- Fees waived and reimbursed by Manager (Note 2) (151,300) - ------------------------------------------------------------------------------- Total expenses 6,535,427 - ------------------------------------------------------------------------------- Expense reduction (Note 2) (47,501) - ------------------------------------------------------------------------------- Net expenses 6,487,926 - ------------------------------------------------------------------------------- Net investment income 29,933,217 - ------------------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 2,688,678 - ------------------------------------------------------------------------------- Net unrealized depreciation of investments during the period (42,218,365) - ------------------------------------------------------------------------------- Net loss on investments (39,529,687) - ------------------------------------------------------------------------------- Net decrease in net assets resulting from operations $(9,596,470) - ------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. Statement of changes in net assets Six months ended Year ended May 31 November 30 Increase (decrease) in net assets 2004* 2003 - ------------------------------------------------------------------------------- Operations: - ------------------------------------------------------------------------------- Net investment income $29,933,217 $59,792,371 - ------------------------------------------------------------------------------- Net realized gain on investments 2,688,678 7,015,857 - ------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investments (42,218,365) 19,462,367 - ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (9,596,470) 86,270,595 - ------------------------------------------------------------------------------- Distributions to shareholders: (Note 1) - ------------------------------------------------------------------------------- From tax-exempt income Class A (26,311,811) (57,217,245) - ------------------------------------------------------------------------------- Class B (2,487,772) (4,439,474) - ------------------------------------------------------------------------------- Class C (169,011) (249,666) - ------------------------------------------------------------------------------- Class M (68,293) (93,421) - ------------------------------------------------------------------------------- From ordinary income Class A (245,020) (245,076) - ------------------------------------------------------------------------------- Class B (21,572) (21,561) - ------------------------------------------------------------------------------- Class C (1,390) (1,373) - ------------------------------------------------------------------------------- Class M (457) (462) - ------------------------------------------------------------------------------- From net realized long-term gain on investments Class A -- (10,790,681) - ------------------------------------------------------------------------------- Class B -- (971,353) - ------------------------------------------------------------------------------- Class C -- (52,685) - ------------------------------------------------------------------------------- Class M -- (18,043) - ------------------------------------------------------------------------------- From net realized short-term gain on investments Class A -- (1,906,145) - ------------------------------------------------------------------------------- Class B -- (167,699) - ------------------------------------------------------------------------------- Class C -- (10,676) - ------------------------------------------------------------------------------- Class M -- (3,591) - ------------------------------------------------------------------------------- Increase (decrease) from capital share transactions (Notes 4 and 5) (94,919,276) 49,700,584 - ------------------------------------------------------------------------------- Total increase (decrease) in net assets (133,821,072) 59,782,028 Net assets - ------------------------------------------------------------------------------- Beginning of period 1,509,801,780 1,450,019,752 - ------------------------------------------------------------------------------- End of period (including undistributed net investment income of $1,890,413 and $1,262,522, respectively) $1,375,980,708 $1,509,801,780 - ------------------------------------------------------------------------------- * 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 May 31 Per-share (Unaudited) Year ended November 30 operating performance 2004 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $8.93 $8.87 $8.79 $8.52 $8.32 $9.05 - --------------------------------------------------------------------------------------------------------------------------------- Investment operations: - --------------------------------------------------------------------------------------------------------------------------------- Net investment income .19 (c) .38 .40 .42 .45 .44 - --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (.25) .16 .07 .27 .20 (.65) - --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.06) .54 .47 .69 .65 (.21) - --------------------------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------------------------- From net investment income (.18) (.39) (.39) (.42) (.45) (.44) - --------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- (.09) -- -- -- (.08) - --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.18) (.48) (.39) (.42) (.45) (.52) - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.69 $8.93 $8.87 $8.79 $8.52 $8.32 - --------------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) (.67)* 6.25 5.44 8.24 8.07 (2.42) - --------------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $1,235,921 $1,336,936 $1,322,541 $1,362,488 $1,276,566 $1,374,040 - --------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .41* (c) .82 .82 .81 .82 .83 - --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 2.09* (c) 4.23 4.50 4.80 5.40 5.02 - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 1.37* 8.08 (d) 17.90 18.63 14.86 13.24 - ---------------------------------------------------------------------------------------------------------------------------------
* 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 expense limitation in effect during the period. As a result of such limitation, expenses of the fund for the period ended May 31, 2004 reflect a reduction of 0.01% based on average net assets for class A shares (Note 2). (d) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam New York Tax Exempt Opportunities Fund. 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 May 31 Per-share (Unaudited) Year ended November 30 operating performance 2004 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $8.91 $8.85 $8.77 $8.51 $8.31 $9.04 - --------------------------------------------------------------------------------------------------------------------------------- Investment operations: - --------------------------------------------------------------------------------------------------------------------------------- Net investment income .16 (c) .32 .34 .37 .39 .38 - --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (.25) .17 .07 .25 .20 (.65) - --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.09) .49 .41 .62 .59 (.27) - --------------------------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------------------------- From net investment income (.15) (.34) (.33) (.36) (.39) (.38) - --------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- (.09) -- -- -- (.08) - --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.15) (.43) (.33) (.36) (.39) (.46) - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.67 $8.91 $8.85 $8.77 $8.51 $8.31 - --------------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) (1.01)* 5.57 4.75 7.41 7.37 (3.06) - --------------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $127,246 $158,081 $119,251 $117,722 $163,839 $195,618 - --------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .74* (c) 1.47 1.47 1.46 1.47 1.48 - --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 1.76* (c) 3.59 3.84 4.18 4.75 4.37 - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 1.37* 8.08 (d) 17.90 18.63 14.86 13.24 - ---------------------------------------------------------------------------------------------------------------------------------
* 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 expense limitation in effect during the period. As a result of such limitation, expenses of the fund for the period ended May 31, 2004 reflect a reduction of 0.01% based on average net assets for class B shares (Note 2). (d) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam New York Tax Exempt Opportunities Fund. The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period) CLASS C - --------------------------------------------------------------------------------------------------------------------------------- For the Six months period ended July 26, May 31 1999+ to Per-share (Unaudited) Year ended November 30 Nov. 30 operating performance 2004 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $8.93 $8.86 $8.79 $8.53 $8.32 $8.61 - --------------------------------------------------------------------------------------------------------------------------------- Investment operations: - --------------------------------------------------------------------------------------------------------------------------------- Net investment income .15 (c) .31 .33 .35 .38 .13 - --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (.25) .17 .06 .26 .21 (.29) - --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.10) .48 .39 .61 .59 (.16) - --------------------------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------------------------- From net investment income (.15) (.32) (.32) (.35) (.38) (.13) - --------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- (.09) -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.15) (.41) (.32) (.35) (.38) (.13) - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.68 $8.93 $8.86 $8.79 $8.53 $8.32 - --------------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) (1.18)* 5.54 4.48 7.25 7.33 (1.87)* - --------------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $9,529 $10,909 $5,885 $5,145 $574 $356 - --------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .81* (c) 1.62 1.62 1.61 1.62 .58* - --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 1.69* (c) 3.43 3.69 3.93 4.57 1.59* - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 1.37* 8.08 (d) 17.90 18.63 14.86 13.24 - ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations. * 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 expense limitation in effect during the period. As a result of such limitation, expenses of the fund for the period ended May 31, 2004 reflect a reduction of 0.01% based on average net assets for class C shares (Note 2). (d) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam New York Tax Exempt Opportunities Fund. 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 May 31 Per-share (Unaudited) Year ended November 30 operating performance 2004 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $8.94 $8.87 $8.79 $8.53 $8.33 $9.05 - --------------------------------------------------------------------------------------------------------------------------------- Investment operations: - --------------------------------------------------------------------------------------------------------------------------------- Net investment income .17 (c) .35 .37 .40 .42 .41 - --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (.25) .18 .07 .26 .20 (.64) - --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.08) .53 .44 .66 .62 (.23) - --------------------------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------------------------- From net investment income (.17) (.37) (.36) (.40) (.42) (.41) - --------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- (.09) -- -- -- (.08) - --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.17) (.46) (.36) (.40) (.42) (.49) - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.69 $8.94 $8.87 $8.79 $8.53 $8.33 - --------------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) (.93)* 6.06 5.12 7.78 7.74 (2.60) - --------------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $3,285 $3,876 $2,343 $1,793 $1,531 $1,837 - --------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .56* (c) 1.12 1.12 1.11 1.12 1.13 - --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 1.94* (c) 3.94 4.17 4.51 5.11 4.72 - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 1.37* 8.08 (d) 17.90 18.63 14.86 13.24 - ---------------------------------------------------------------------------------------------------------------------------------
* 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 expense limitation in effect during the period. As a result of such limitation, expenses of the fund for the period ended May 31, 2004 reflect a reduction of 0.01% based on average net assets for class M shares (Note 2). (d) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam New York Tax Exempt Opportunities Fund. The accompanying notes are an integral part of these financial statements. Notes to financial statements May 31, 2004 (Unaudited) Note 1 Significant accounting policies Putnam New York Tax Exempt Income Fund (the "fund") 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 New York state and City 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 longer-term New York tax-exempt securities. The fund may be affected by economic and political developments in the state of New York. The fund offers class A, class B, class C and class M shares. Class A shares are sold with a maximum front-end sales charge of 4.50%. Prior to January 28, 2004, the maximum front-end sales charge for class A shares was 4.75%. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge but pay a higher ongoing distribution fee than class A and class M shares but lower than class C shares, and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class C shares have a higher ongoing distribution fee than class A, class B and class M shares, do not pay a front-end sales charge but have a one-year 1.00% contingent deferred sales charge and do not convert to Class A shares. 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 shares but lower than class B and class C 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. Expenses of the fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the distribution fees applicable to such class). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund, if the fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with 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, including restricted securities, 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) Federal taxes It is the policy of the fund to distribute all of its income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986 (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 November 30, 2003, the fund had a capital loss carryover of $3,848,009 available to the extent allowed by the Code to offset future net capital gain, if any. This capital loss carryover was acquired as a result of the November 21, 2003 acquisition of Putnam New York Tax Exempt Opportunities Fund and is subject to limitations imposed by the Code. The amount of the carryover and the expiration dates are: Loss Carryover Expiration - ---------------------------------- $2,816,598 November 30, 2007 94,422 November 30, 2008 276,677 November 30, 2009 660,312 November 30, 2010 The aggregate identified cost on a tax basis is $1,243,166,470, resulting in gross unrealized appreciation and depreciation of $91,185,257 and $11,754,675, respectively, or net unrealized appreciation of $79,430,582. D) 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 annual rate equal to the lesser of (i) 0.50% of the average net assets of the fund or (ii) the following annual rates: 0.60% of the first $500 million of average net assets, 0.50% of the next $500 million, 0.45% of the next $500 million, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355% of the next $5 billion, 0.34% of the next $5 billion and 0.33% thereafter. Effective January 28, 2004, Putnam Management has agreed to limit its compensation (and, to the extent necessary, bear other expenses) through December 31, 2004, to the extent that the fund's net expenses as a percentage of average net assets exceed the average expense ratio for the fund's Lipper peer group of front-end load funds. 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 May 31, 2004, the fund paid PFTC $710,568 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 May 31, 2004, the fund's expenses were reduced by $47,501 under these arrangements. Each independent Trustee of the fund receives an annual Trustee fee, of which $1,947, 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 fund has adopted distribution plans (the "Plans") with respect to its class A, class B, class C 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 an annual rate of up to 0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C and class M shares, respectively. The Trustees have approved payment by the fund at the annual rates of 0.20%, 0.85%, 1.00% and 0.50% of the average net assets attributable to class A, class B, class C and class M shares, respectively. For the six months ended May 31, 2004, Putnam Retail Management, acting as underwriter, received net commissions of $6,736 and $28 from the sale of class A and class M shares, respectively, and received $120,099 and $575 in contingent deferred sales charges from redemptions of class B and class C shares, respectively. 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 May 31, 2004, Putnam Retail Management, acting as underwriter, received $162 on class A redemptions. Note 3 Purchases and sales of securities During the six months ended May 31, 2004, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $18,171,315 and $133,044,418, respectively. There were no purchases or sales of U.S. government securities. Note 4 Capital shares At May 31, 2004, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended May 31, 2004 - ---------------------------------------------------------------- Class A Shares Amount - ---------------------------------------------------------------- Shares sold 3,163,968 $28,254,513 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,911,817 17,027,571 - ---------------------------------------------------------------- 5,075,785 45,282,084 Shares repurchased (12,501,760) (111,384,298) - ---------------------------------------------------------------- Net decrease (7,425,975) $(66,102,214) - ---------------------------------------------------------------- Year ended November 30, 2003 - ---------------------------------------------------------------- Class A Shares Amount - ---------------------------------------------------------------- Shares sold 5,241,341 $46,852,406 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 5,117,025 45,737,617 - ---------------------------------------------------------------- Shares issued in connection with the merger of Putnam New York Tax Exempt Opportunities Fund 14,358,340 128,503,277 - ---------------------------------------------------------------- 24,716,706 221,093,300 Shares repurchased (24,177,690) (215,970,529) - ---------------------------------------------------------------- Net increase 539,016 $5,122,771 - ---------------------------------------------------------------- Six months ended May 31, 2004 - ---------------------------------------------------------------- Class B Shares Amount - ---------------------------------------------------------------- Shares sold 260,012 $2,323,205 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 188,253 1,674,670 - ---------------------------------------------------------------- 448,265 3,997,875 Shares repurchased (3,507,807) (31,211,653) - ---------------------------------------------------------------- Net decrease (3,059,542) $(27,213,778) - ---------------------------------------------------------------- Year ended November 30, 2003 - ---------------------------------------------------------------- Class B Shares Amount - ---------------------------------------------------------------- Shares sold 1,423,059 $12,706,895 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 441,596 3,941,100 - ---------------------------------------------------------------- Shares issued in connection with the merger of Putnam New York Tax Exempt Opportunities Fund 5,979,191 53,429,074 - ---------------------------------------------------------------- 7,843,846 70,077,069 Shares repurchased (3,590,457) (32,030,071) - ---------------------------------------------------------------- Net increase 4,253,389 $38,046,998 - ---------------------------------------------------------------- Six months ended May 31, 2004 - ---------------------------------------------------------------- Class C Shares Amount - ---------------------------------------------------------------- Shares sold 78,750 $707,040 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 14,056 125,198 - ---------------------------------------------------------------- 92,806 832,238 Shares repurchased (217,331) (1,938,655) - ---------------------------------------------------------------- Net decrease (124,525) $(1,106,417) - ---------------------------------------------------------------- Year ended November 30, 2003 - ---------------------------------------------------------------- Class C Shares Amount - ---------------------------------------------------------------- Shares sold 415,490 $3,723,182 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 25,080 224,188 - ---------------------------------------------------------------- Shares issued in connection with the merger of Putnam New York Tax Exempt Opportunities Fund 423,630 3,792,208 - ---------------------------------------------------------------- 864,200 7,739,578 Shares repurchased (306,174) (2,730,493) - ---------------------------------------------------------------- Net increase 558,026 $5,009,085 - ---------------------------------------------------------------- Six months ended May 31, 2004 - ---------------------------------------------------------------- Class M Shares Amount - ---------------------------------------------------------------- Shares sold 1,247 $19,095 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 5,998 45,550 - ---------------------------------------------------------------- 7,245 64,645 Shares repurchased (62,918) (561,512) - ---------------------------------------------------------------- Net decrease (55,673) $(496,867) - ---------------------------------------------------------------- Year ended November 30, 2003 - ---------------------------------------------------------------- Class M Shares Amount - ---------------------------------------------------------------- Shares sold 100,659 $897,631 - ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 10,503 93,967 - ---------------------------------------------------------------- Shares issued in connection with the merger of Putnam New York Tax Exempt Opportunities Fund 182,073 1,631,404 - ---------------------------------------------------------------- 293,235 2,623,002 Shares repurchased (123,841) (1,101,272) - ---------------------------------------------------------------- Net increase 169,394 $1,521,730 - ---------------------------------------------------------------- Note 5 Acquisition of Putnam New York Tax Exempt Opportunities Fund On November 21, 2003, the fund issued 14,358,340, 5,979,191, 423,630 and 182,073 of class A, class B, class C and class M shares, respectively, in exchange for 14,235,381, 5,921,665, 419,127 and 180,937 of class A, class B, class C and class M shares of Putnam New York Tax Exempt Opportunities Fund to acquire that fund's net assets in a tax-free exchange approved by the shareholders. The net assets of the fund and Putnam New York Tax Exempt Opportunities Fund on November 21, 2003 were $1,333,168,581 and $187,355,963, respectively. On November 21, 2003, Putnam New York Tax Exempt Opportunities Fund had unrealized appreciation of $8,039,251. The aggregate net assets of the fund immediately following the acquisition were $1,520,524,544. Note 6 Regulatory matters and litigation On April 8, 2004, Putnam Management entered into agreements with the Securities and Exchange Commission 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. For the period ended May 31, 2004, Putnam Management has assumed $23,657 of legal, shareholder servicing and communication, audit, and Trustee fees incurred by the fund in connection with these matters. Review of these matters by counsel for Putnam Management and by separate independent counsel for the Putnam funds and their independent Trustees is continuing. The fund may experience increased redemptions as a result of these matters, which could result in increased transaction costs and operating expenses. Putnam puts your interests first In January, Putnam announced a number of voluntary initiatives designed to reduce fund expenses, provide investors with more useful information, and help safeguard the interests of all Putnam investors. For details, visit www.putnaminvestments.com. Cost-cutting initiatives Reduced sales charges Effective immediately, the maximum sales charge for class A shares has been reduced to 5.25% for equity funds (formerly 5.75%) and 4.50% for most income funds (formerly 4.75%).* Lower class B purchase limit To help ensure that investors are in the most cost-effective share class, the maximum amount that can be invested in class B shares has been reduced to $100,000. (Larger trades or accumulated amounts will be directed to class A shares.) Ongoing expenses will be limited During calendar 2004, total ongoing expenses, including management fees for all funds, will be maintained at or below the average of each fund's industry peers in its Lipper load-fund universe. information, please see the Statement of Additional information. Additional measures are being taken to reduce expenses for shareholders in the six global and international funds that had short-term trading issues. Improved disclosure Putnam fund prospectuses and shareholder reports are being revised to disclose additional information that will help shareholders compare funds and weigh their costs and risks along with their potential benefits. Shareholders will find easy-to-understand information about fund expense ratios, portfolio manager compensation, risk comparisons, brokerage commissions, and employee and trustee ownership of Putnam funds. Disclosure of breakpoint discounts is also being enhanced to alert investors to potential cost savings. Protecting investors' interests New short-term trading fee introduced To discourage short-term trading, which can interfere with a fund's long-term strategy, a 2% short-term trading fee will be imposed on any Putnam fund shares redeemed or exchanged within five calendar days of purchase. * The maximum sales charge for class A shares of Putnam U.S. Intermediate Government Income Fund remains 3.25%. 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 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 W. Nicholas Thorndike 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 Patricia C. Flaherty Senior Vice President Steven D. Krichmar Vice President and Principal Financial Officer Michael T. Healy Assistant Treasurer and Principal Accounting Officer Beth S. Mazor Vice President Daniel T. Gallagher Vice President and Legal and Compliance Liaison Officer 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 Judith Cohen Clerk and Assistant Treasurer This report is for the information of shareholders of Putnam New York 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. SA051-215040 030/345/681 7/04 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 Items 5-6. [Reserved] - --------------------- Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End - ------------------------------------------------------------------------- Management Investment Companies: Not applicable -------------------------------- Item 8. [Reserved] - ------------------ 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. Although such officers reached the conclusion expressed in the preceding paragraph, they are aware of matters that raise concerns with respect to controls, each of which arose in connection with the administration of 401(k) plans by Putnam Fiduciary Trust Company. The first matter, which occurred in early 2001, involved the willful circumvention of controls by certain Putnam employees in connection with the correction of operational errors with respect to a 401(k) client's investment in certain Putnam Funds, which led to losses in five Putnam Funds (not including the registrant). Such officers became aware of this matter in February 2004. The second matter, which occurred in 2002, involved the willful circumvention by certain Putnam employees of policies and procedures in connection with the payment of Putnam corporate expenses. Such officers did not learn that this matter involved a Putnam Fund until January 2004. Putnam has made restitution to the affected Funds, implemented a number of personnel changes, including senior personnel, begun to implement changes in procedures to address these items and informed the SEC, the Funds' Trustees and independent auditors. An internal investigation and review of procedures and controls are currently ongoing. In reaching the conclusion expressed herein, the registrant's principal executive officer and principal financial officer considered a number of factors, including the nature of the matters described above, when the matters occurred, the individuals involved, personnel changes that have occurred since these matters occurred, the results to date of the current ongoing investigation and the overall quality of controls at Putnam at this time. (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: July 27, 2004 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: July 27, 2004 By (Signature and Title): /s/Steven D. Krichmar --------------------------- Steven D. Krichmar Principal Financial Officer Date: July 27, 2004 EX-99.CERT 2 exnn2.txt EX-99.CERT Certifications - -------------- I, Charles E. Porter, a principal executive officer of the funds listed on Attachment A, certify that: 1. I have reviewed each report on Form N-CSR of the funds listed on Attachment A: 2. Based on my knowledge, each report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by each report; 3. Based on my knowledge, the financial statements, and other financial information included in each report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in each report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act) for the registrants and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which each report are being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report (the "Evaluation Date") based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed to each registrant's auditors and the audit committee of each registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect each registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in each registrant's internal controls. /s/Charles E. Porter Date: July 23, 2004 - ---------------------- ------------------- Charles E. Porter, Principal Executive Officer Certifications - -------------- I, Steven D. Krichmar, the principal financial officer of the funds listed on Attachment A, certify that: 1. I have reviewed each report on Form N-CSR of the funds listed on Attachment A: 2. Based on my knowledge, each report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by each report; 3. Based on my knowledge, the financial statements, and other financial information included in each report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in each report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act) for the registrants and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which each report are being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report (the "Evaluation Date") based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed to each registrant's auditors and the audit committee of each registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect each registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in each registrant's internal controls. /s/Steven D. Krichmar Date: July 23, 2004 - ---------------------- ------------------- Steven D. Krichmar, Principal Financial Officer Attachment A - ------------ Period(s) ended May 31, 2004 012 Putnam Equity Income Fund 019 Putnam New Jersey Tax Exempt Income Fund 030 Putnam New York Tax Exempt Income Fund 037 Putnam Florida Tax Exempt Income Fund 047 Putnam Pennsylvania Tax Exempt Income Fund 058 Putnam Investment Grade Municipal Trust 060 Putnam High Yield Advantage Fund 168 Putnam Tax-Free Health Care Fund 398 Putnam Intermediate U.S. Government Income Fund 433 Putnam Capital Appreciation Fund 590 Putnam Managed High Yield Trust 845 Putnam Massachusetts Tax Exempt Income Fund 846 Putnam Michigan Tax Exempt Income Fund 847 Putnam Minnesota Tax Exempt Income Fund 848 Putnam Ohio Tax Exempt Income Fund 855 Putnam Arizona Tax Exempt Income Fund 949 Putnam Classic Equity Fund EX-99.906 CERT 3 exxnos3.txt EX-99.906 CERT Section 906 Certifications - --------------------------- I, Charles E. Porter, a principal executive officer of the Funds listed on Attachment A, certify that, to my knowledge: 1. The form N-CSR of the Funds listed on Attachment A for the period ended May 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR of the Funds listed on Attachment A for the period ended May 31, 2004 fairly presents, in all material respects, the financial condition and results of operations of the Funds listed on Attachment A. /s/Charles E. Porter Date: July 23, 2004 - ---------------------- ------------------- Charles E. Porter, Principal Executive Officer Section 906 Certifications - --------------------------- I, Steven D. Krichmar, the principal financial officer of the Funds listed on Attachment A, certify that, to my knowledge: 1. The form N-CSR of the Funds listed on Attachment A for the period ended May 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR of the Funds listed on Attachment A for the period ended May 31, 2004 fairly presents, in all material respects, the financial condition and results of operations of the Funds listed on Attachment A. /s/Steven D. Krichmar Date: July 23, 2004 - ---------------------- ------------------- Steven D. Krichmar, Principal Financial Officer Attachment A - ------------ Period(s) ended May 31, 2004 012 Putnam Equity Income Fund 019 Putnam New Jersey Tax Exempt Income Fund 030 Putnam New York Tax Exempt Income Fund 037 Putnam Florida Tax Exempt Income Fund 047 Putnam Pennsylvania Tax Exempt Income Fund 058 Putnam Investment Grade Municipal Trust 060 Putnam High Yield Advantage Fund 168 Putnam Tax-Free Health Care Fund 398 Putnam Intermediate U.S. Government Income Fund 433 Putnam Capital Appreciation Fund 590 Putnam Managed High Yield Trust 845 Putnam Massachusetts Tax Exempt Income Fund 846 Putnam Michigan Tax Exempt Income Fund 847 Putnam Minnesota Tax Exempt Income Fund 848 Putnam Ohio Tax Exempt Income Fund 855 Putnam Arizona Tax Exempt Income Fund 949 Putnam Classic Equity Fund -----END PRIVACY-ENHANCED MESSAGE-----