
	---------------

	It is proposed that this filing will become effective
	(check appropriate box)
----
/ /	immediately upon filing pursuant to paragraph (b)
----
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<R>
/ X /	on September 30, 2010 pursuant to paragraph (b)
</R>
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/ /	60 days after filing pursuant to paragraph (a)(1)
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/ /	on (date) pursuant to paragraph (a)(1)
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/ /	75 days after filing pursuant to paragraph (a)(2)
----
----
/ /	on (date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
----
/ /	this post-effective amendment designates a new
----	effective date for a previously filed post-effective amendment.


	--------------
	BETH S. MAZOR, Vice President
	PUTNAM ARIZONA TAX EXEMPT INCOME FUND
	PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND
	PUTNAM MICHIGAN TAX EXEMPT INCOME FUND
	PUTNAM MINNESOTA TAX EXEMPT INCOME FUND
	PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND
	PUTNAM OHIO TAX EXEMPT INCOME FUND
	PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND
	One Post Office Square
	Boston, Massachusetts 02109
	(Name and address of agent for service)
	---------------
	Copy to:
	JOHN W. GERSTMAYR, Esquire
	ROPES & GRAY LLP
	One International Place
	Boston, Massachusetts 02110
	----------------------

<R>
FUND SYMBOLS	CLASS A	CLASS B	CLASS C	CLASS M	CLASS Y
Arizona Tax Exempt Income	PTAZX	PAZBX	PAZCX	Pending	PAZYX
Massachusetts Tax Exempt Income	PXMAX	PMABX	PMMCX	Pending	PMAYX
Michigan Tax Exempt Income	PXMIX	PMEBX	PMGCX	Pending	PMIYX
Minnesota Tax Exempt Income	PXMNX	PMTBX	PMOCX	Pending	PMNYX
New Jersey Tax Exempt Income	PTNJX	PNJBX	PNJCX	Pending	PNJYX
Ohio Tax Exempt Income	PXOHX	POXBX	POOCX	Pending	POTYX
Pennsylvania Tax Exempt Income	PTEPX	PPNBX	PPMCX	Pending	PPTYX

</R>

Putnam
Tax Exempt Income
Funds	Putnam Arizona Tax Exempt Income Fund
	Putnam Massachusetts Tax Exempt Income Fund
	Putnam Michigan Tax Exempt Income Fund
	Putnam Minnesota Tax Exempt Income Fund
<R>	Putnam New Jersey Tax Exempt Income Fund
Prospectus	Putnam Ohio Tax Exempt Income Fund
9 \|30 \|10	Putnam Pennsylvania Tax Exempt Income Fund


Fund summaries	2
What are each fund’s main investment strategies and related risks?	29
Who oversees and manages the funds?	34
How do the funds price their shares?	36
How do I buy fund shares?	36
How do I sell or exchange fund shares?	43
Policy on excessive short-term trading	45
Distribution plans and payments to dealers	47
Fund distributions and taxes	50
Financial highlights	52


Investment Category: Tax Exempt	These securities have not been approved
	or disapproved by the Securities and
This prospectus explains what	Exchange Commission nor has the
you should know about this	Commission passed upon the accuracy
mutual fund before you invest.	or adequacy of this prospectus. Any
Please read it carefully.	statement to the contrary is a crime.
</R>

Fund summaries

<R>

Putnam Arizona Tax Exempt Income Fund

Goal

Putnam Arizona Tax Exempt Income Fund seeks as high a level of current income exempt from federal income tax and Arizona personal income tax as we believe to be consistent with preservation of capital.

Fees and expenses

The following table describes the fees and expenses you may pay if you buy and hold shares of the fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in class A shares or $50,000 in class M shares of Putnam funds. More information about these and other discounts is available from your financial advisor and in How do I buy fund shares beginning on page 36 of the fund’s prospectus and in How to buy shares beginning on page II-1 of the fund’s statement of additional information (SAI).

Shareholder fees (fees paid directly from your investment)


		Maximum deferred sales charge
	Maximum sales charge (load)	(load) (as a percentage of original
	imposed on purchases (as a	purchase price or redemption
Share class	percentage of offering price)	proceeds, whichever is lower)
Class A	4.00%	NONE*
Class B	NONE	5.00%**
Class C	NONE	1.00%
Class M	3.25%	NONE
Class Y	NONE	NONE

Annual fund operating expenses
(expenses you pay each year as a percentage of the value of your investment)***


		Distribution		Total annual
	Management	and service	Other	fund operating
Share class	fees	(12b-1) fees	expenses	expenses
Class A	0.45%	0.22%†	0.19%	0.86%
Class B	0.45%	0.85%	0.19%	1.49%
Class C	0.45%	1.00%	0.19%	1.64%
Class M	0.45%	0.50%	0.19%	1.14%
Class Y	0.45%	N/A	0.19%	0.64%


2	Prospectus

* A deferred sales charge of 1.00% on class A shares may be imposed on certain redemptions of shares bought without an initial sales charge.

** This charge is phased out over six years.

*** Restated to reflect projected expenses under a new management contract effective 1/1/2010 and a new expense arrangement, which gives effect to changes in the allocation of certain expenses among the Putnam funds.

† Represents a blended rate.

Example

The following hypothetical example is intended to help you compare the cost of investing in the fund with the cost of investing in other funds. It assumes that you invest $10,000 in the fund for the time periods indicated and then, except as indicated, redeem all your shares at the end of those periods. It assumes a 5% return on your investment each year and that the fund’s operating expenses remain the same. Your actual costs may be higher or lower.


Share class	1 year	3 years	5 years	10 years
Class A	$484	$663	$858	$1,418
Class B	$652	$771	$1,013	$1,609
Class B (no redemption)	$152	$471	$813	$1,609
Class C	$267	$517	$892	$1,944
Class C (no redemption)	$167	$517	$892	$1,944
Class M	$437	$675	$932	$1,666
Class Y	$65	$205	$357	$798

Portfolio turnover

The fund pays transaction-related costs when it buys and sells securities (or “turns over” its portfolio). A higher turnover rate may indicate higher transaction costs and may result in higher taxes when the fund’s shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or the above example, affect fund performance. The fund’s turnover rate in the most recent fiscal year was 18%.

Investments, risks, and performance

Investments

We invest mainly in bonds that pay interest that is exempt from federal income tax and Arizona personal income tax (but that may be subject to federal alternative minimum tax (AMT)), are investment-grade in quality, and have intermediate- to long-term maturities (three years or longer). We may consider, among other things, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.


Prospectus	3

Risks

It is important to understand that you can lose money by investing in the fund.

The prices of bonds in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including both general financial market conditions and factors related to a specific issuer. This risk includes interest rate risk, which means the prices of the fund’s investments are likely to fall if interest rates rise. Bond investments are also subject to credit risk, which is the risk that the issuers of the fund’s investments may default on payment of interest or principal. Interest rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. The fund may invest significantly in particular segments of the tax-exempt debt market, making it more vulnerable to fluctuations in the values of the securities it holds than a fund that invests more broadly. Investments in a single state carry risks of vulnerability to common economic forces and other factors affecting the state’s tax-exempt investments, which may result in greater losses and volatility. Interest the fund receives might be taxable.

The fund may not achieve its goal, and it is not intended to be a complete investment program. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Performance

The performance information below gives some indication of the risks associated with an investment in the fund by showing the fund’s performance year to year and over time. The bar chart does not reflect the impact of sales charges. If it did, performance would be lower. Please remember that past performance is not necessarily an indication of future results. Monthly performance figures for the fund are available at putnam.com.


4	Prospectus

Average annual total returns after sales charges
(for periods ending 12/31/09)


Share class	1 year	5 years	10 years
Class A before taxes	10.98%	2.76%	4.53%
Class A after taxes on distributions	10.98%	2.71%	4.50%
Class A after taxes on distributions and
sale of fund shares	8.77%	2.93%	4.52%
Class B before taxes	9.98%	2.60%	4.29%
Class C before taxes	13.78%	2.83%	4.16%
Class M before taxes	11.70%	2.65%	4.32%
Class Y before taxes	15.95%	3.70%	5.01%
Barclays Capital Municipal Bond Index
(no deduction for fees, expenses or taxes)	12.91%	4.32%	5.75%

After-tax returns reflect the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns are shown for class A shares only and will vary for other classes. These after-tax returns do not apply if you hold your fund shares through a 401(k) plan, an IRA, or another tax-advantaged arrangement.

Class B share performance does not assume conversion to class A shares.

Your fund’s management

Investment advisor

Putnam Investment Management, LLC

Portfolio managers

Thalia Meehan, Portfolio Manager, portfolio manager of the fund since 2006

Paul Drury, Portfolio Manager, portfolio manager of the fund since 2002

Susan McCormack, Portfolio Manager, portfolio manager of the fund since 1999

For important information about the purchase and sale of fund shares, tax information, and financial intermediary compensation, please turn to Important additional information about all funds beginning on page 28.

Putnam Massachusetts Tax Exempt Income Fund

Goal

Putnam Massachusetts Tax Exempt Income Fund seeks as high a level of current income exempt from federal income tax and Massachusetts personal income tax as we believe to be consistent with preservation of capital.


Prospectus	5

Fees and expenses

Shareholder fees (fees paid directly from your investment)


		Maximum deferred sales charge
	Maximum sales charge (load)	(load) (as a percentage of original
	imposed on purchases(as a	purchase price or redemption
Share class	percentage of offering price)	proceeds, whichever is lower)
Class A	4.00%	NONE*
Class B	NONE	5.00%**
Class C	NONE	1.00%
Class M	3.25%	NONE
Class Y	NONE	NONE

Annual fund operating expenses
(expenses you pay each year as a percentage of the value of your investment)***


		Distribution		Total annual
	Management	and service	Other	fund operating
Share class	fees	(12b-1) fees	expenses	expenses
Class A	0.45%	0.22%†	0.11%	0.78%
Class B	0.45%	0.85%	0.11%	1.41%
Class C	0.45%	1.00%	0.11%	1.56%
Class M	0.45%	0.50%	0.11%	1.06%
Class Y	0.45%	N/A	0.11%	0.56%

* A deferred sales charge of 1.00% on class A shares may be imposed on certain redemptions of shares bought without an initial sales charge.

** This charge is phased out over six years.

*** Restated to reflect projected expenses under a new management contract effective 1/1/2010.

† Represents a blended rate.

Example


6	Prospectus


Share class	1 year	3 years	5 years	10 years
Class A	$476	$639	$816	$1,327
Class B	$644	$746	$971	$1,519
Class B (no redemption)	$144	$446	$771	$1,519
Class C	$259	$493	$850	$1,856
Class C (no redemption)	$159	$493	$850	$1,856
Class M	$430	$651	$891	$1,577
Class Y	$57	$179	$313	$701

Portfolio turnover

Investments, risks, and performance

Investments

We invest mainly in bonds that pay interest that is exempt from federal income tax and Massachusetts personal income tax (but that may be subject to federal alternative minimum tax (AMT)), are investment-grade in quality, and have intermediate- to long-term maturities (three years or longer). We may consider, among other things, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Risks

It is important to understand that you can lose money by investing in the fund.


Prospectus	7

of vulnerability to common economic forces and other factors affecting the state’s tax-exempt investments, which may result in greater losses and volatility. Interest the fund receives might be taxable.

Performance

Average annual total returns after sales charges
(for periods ending 12/31/09)


Share class	1 year	5 years	10 years
Class A before taxes	11.27%	3.13%	4.88%
Class A after taxes on distributions	11.23%	3.05%	4.83%
Class A after taxes on distributions and
sale of fund shares	8.87%	3.22%	4.81%
Class B before taxes	10.08%	2.97%	4.64%
Class C before taxes	13.97%	3.18%	4.49%
Class M before taxes	11.89%	3.03%	4.66%
Class Y before taxes	16.17%	4.12%	5.38%
Barclays Capital Municipal Bond Index
(no deduction for fees, expenses or taxes)	12.91%	4.32%	5.75%


8	Prospectus

Class B share performance does not assume conversion to class A shares.

Your fund’s management

Investment advisor

Putnam Investment Management, LLC

Portfolio managers

Thalia Meehan, Portfolio Manager, portfolio manager of the fund since 2006

Paul Drury, Portfolio Manager, portfolio manager of the fund since 2002

Susan McCormack, Portfolio Manager, portfolio manager of the fund since 2002

Putnam Michigan Tax Exempt Income Fund

Goal

Putnam Michigan Tax Exempt Income Fund seeks as high a level of current income exempt from federal income tax and Michigan personal income tax as we believe to be consistent with preservation of capital.

Fees and expenses


Prospectus	9

Shareholder fees (fees paid directly from your investment)


		Maximum deferred sales charge
	Maximum sales charge (load)	(load) (as a percentage of original
	imposed on purchases (as a	purchase price or redemption
Share class	percentage of offering price)	proceeds, whichever is lower)
Class A	4.00%	NONE*
Class B	NONE	5.00%**
Class C	NONE	1.00%
Class M	3.25%	NONE
Class Y	NONE	NONE

Annual fund operating expenses

(expenses you pay each year as a percentage of the value of your investment)***

		Distribution		Total annual
	Management	and service	Other	fund operating
Share class	fees	(12b-1) fees	expenses	expenses
Class A	0.45%	0.22%†	0.17%	0.84%
Class B	0.45%	0.85%	0.17%	1.47%
Class C	0.45%	1.00%	0.17%	1.62%
Class M	0.45%	0.50%	0.17%	1.12%
Class Y	0.45%	N/A	0.17%	0.62%

* A deferred sales charge of 1.00% on class A shares may be imposed on certain redemptions of shares bought without an initial sales charge.

** This charge is phased out over six years.

† Represents a blended rate.

Example


10	Prospectus


Share class	1 year	3 years	5 years	10 years
Class A	$482	$657	$847	$1,396
Class B	$650	$765	$1,003	$1,587
Class B (no redemption)	$150	$465	$803	$1,587
Class C	$265	$511	$881	$1,922
Class C (no redemption)	$165	$511	$881	$1,922
Class M	$435	$669	$922	$1,644
Class Y	$63	$199	$346	$774

Portfolio turnover

Investments, risks, and performance

Investments

We invest mainly in bonds that pay interest that is exempt from federal income tax and Michigan personal income tax (but that may be subject to federal alternative minimum tax (AMT)), are investment-grade in quality, and have intermediate- to long-term maturities (three years or longer). We may consider, among other things, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Risks

It is important to understand that you can lose money by investing in the fund.


Prospectus	11

Performance

Average annual total returns after sales charges
(for periods ending 12/31/09)


Share class	1 year	5 years	10 years
Class A before taxes	9.05%	2.75%	4.43%
Class A after taxes on distributions	9.05%	2.75%	4.42%
Class A after taxes on distributions and
sale of fund shares	7.40%	2.90%	4.41%
Class B before taxes	7.72%	2.58%	4.17%
Class C before taxes	11.69%	2.83%	4.06%
Class M before taxes	9.64%	2.62%	4.20%
Class Y before taxes	13.82%	3.70%	4.90%
Barclays Capital Municipal Bond Index
(no deduction for fees, expenses or taxes)	12.91%	4.32%	5.75%

Class B share performance does not assume conversion to class A shares.


12	Prospectus

Your fund’s management

Investment advisor

Putnam Investment Management, LLC

Portfolio managers

Putnam Minnesota Tax Exempt Income Fund

Goal

Putnam Minnesota Tax Exempt Income Fund seeks as high a level of current income exempt from federal income tax and Minnesota personal income tax as we believe to be consistent with preservation of capital.

Fees and expenses

Shareholder fees (fees paid directly from your investment)


		Maximum deferred sales charge
	Maximum sales charge (load)	(load) (as a percentage of original
	imposed on purchases (as a	purchase price or redemption
Share class	percentage of offering price)	proceeds, whichever is lower)
Class A	4.00%	NONE*
Class B	NONE	5.00%**
Class C	NONE	1.00%
Class M	3.25%	NONE
Class Y	NONE	NONE


Prospectus	13

Annual fund operating expenses
(expenses you pay each year as a percentage of the value of your investment)***


		Distribution		Total annual
	Management	and service	Other	fund operating
Share class	fees	(12b-1) fees	expenses	expenses
Class A	0.45%	0.23%†	0.17%	0.85%
Class B	0.45%	0.85%	0.17%	1.47%
Class C	0.45%	1.00%	0.17%	1.62%
Class M	0.45%	0.50%	0.17%	1.12%
Class Y	0.45%	N/A	0.17%	0.62%

* A deferred sales charge of 1.00% on class A shares may be imposed on certain redemptions of shares bought without an initial sales charge.

** This charge is phased out over six years.

† Represents a blended rate.

Example


Share class	1 year	3 years	5 years	10 years
Class A	$483	$660	$852	$1,407
Class B	$650	$765	$1,003	$1,589
Class B (no redemption)	$150	$465	$803	$1,589
Class C	$265	$511	$881	$1,922
Class C (no redemption)	$165	$511	$881	$1,922
Class M	$435	$669	$922	$1,644
Class Y	$63	$199	$346	$774

Portfolio turnover


14	Prospectus

Investments, risks, and performance

Investments

We invest mainly in bonds that pay interest that is exempt from federal income tax and Minnesota personal income tax (but that may be subject to federal alternative minimum tax (AMT)), are investment-grade in quality, and have intermediate- to long-term maturities (three years or longer). We may consider, among other things, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Risks

It is important to understand that you can lose money by investing in the fund.

Performance


Prospectus	15

Average annual total returns after sales charges

(for periods ending 12/31/09)


Share class	1 year	5 years	10 years
Class A before taxes	10.59%	2.75%	4.53%
Class A after taxes on distributions	10.58%	2.75%	4.53%
Class A after taxes on distributions and
sale of fund shares	8.33%	2.90%	4.50%
Class B before taxes	9.43%	2.58%	4.27%
Class C before taxes	13.39%	2.81%	4.17%
Class M before taxes	11.22%	2.61%	4.30%
Class Y before taxes	15.63%	3.71%	5.02%
Barclays Capital Municipal Bond Index
(no deduction for fees, expenses or taxes)	12.91%	4.32%	5.75%

Class B share performance does not assume conversion to class A shares.

Your fund’s management

Investment advisor

Putnam Investment Management, LLC

Portfolio managers

Thalia Meehan, Portfolio Manager, portfolio manager of the fund since 2006

Paul Drury, Portfolio Manager, portfolio manager of the fund since 2002

Susan McCormack, Portfolio Manager, portfolio manager of the fund since 1999


16	Prospectus

Putnam New Jersey Tax Exempt Income Fund

Goal

Putnam New Jersey Tax Exempt Income Fund seeks as high a level of current income exempt from federal income tax and New Jersey personal income tax as we believe to be consistent with preservation of capital.

Fees and expenses

Shareholder fees (fees paid directly from your investment)


		Maximum deferred sales charge
	Maximum sales charge (load)	(load) (as a percentage of original
	imposed on purchases (as a	purchase price or redemption
Share class	percentage of offering price)	proceeds, whichever is lower)
Class A	4.00%	NONE*
Class B	NONE	5.00%**
Class C	NONE	1.00%
Class M	3.25%	NONE
Class Y	NONE	NONE

Annual fund operating expenses
(expenses you pay each year as a percentage of the value of your investment)***


		Distribution		Total annual
	Management	and service	Other	fund operating
Share class	fees	(12b-1) fees	expenses	expenses
Class A	0.45%	0.23%†	0.11%	0.79%
Class B	0.45%	0.85%	0.11%	1.41%
Class C	0.45%	1.00%	0.11%	1.56%
Class M	0.45%	0.50%	0.11%	1.06%
Class Y	0.45%	N/A	0.11%	0.56%

* A deferred sales charge of 1.00% on class A shares may be imposed on certain redemptions of shares bought without an initial sales charge.

** This charge is phased out over six years.

† Represents a blended rate.


Prospectus	17

Example


Share class	1 year	3 years	5 years	10 years
Class A	$477	$642	$821	$1,339
Class B	$644	$746	$971	$1,522
Class B (no redemption)	$144	$446	$771	$1,522
Class C	$259	$493	$850	$1,856
Class C (no redemption)	$159	$493	$850	$1,856
Class M	$430	$651	$891	$1,577
Class Y	$57	$179	$313	$701

Portfolio turnover

Investments, risks, and performance

Investments

We invest mainly in bonds that pay interest that is exempt from federal income tax and New Jersey personal income tax (but that may be subject to federal alternative minimum tax (AMT)), are investment-grade in quality, and have intermediate- to long-term maturities (three years or longer). We may consider, among other things, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Risks

It is important to understand that you can lose money by investing in the fund.


18	Prospectus

rates rise. Bond investments are also subject to credit risk, which is the risk that the issuers of the fund’s investments may default on payment of interest or principal. Interest rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. The fund may invest significantly in particular segments of the tax-exempt debt market, making it more vulnerable to fluctuations in the values of the securities it holds than a fund that invests more broadly. Investments in a single state carry risks of vulnerability to common economic forces and other factors affecting the state’s tax-exempt investments, which may result in greater losses and volatility. Interest the fund receives might be taxable.

Average annual total returns after sales charges
(for periods ending 12/31/09)


Share class	1 year	5 years	10 years
Class A before taxes	10.34%	3.25%	4.69%
Class A after taxes on distributions	10.33%	3.25%	4.69%
Class A after taxes on distributions and
sale of fund shares	8.25%	3.34%	4.64%
Class B before taxes	9.14%	3.08%	4.44%
Class C before taxes	12.91%	3.32%	4.33%
Class M before taxes	10.96%	3.14%	4.46%
Class Y before taxes	15.25%	4.22%	5.18%
Barclays Capital Municipal Bond Index
(no deduction for fees, expenses or taxes)	12.91%	4.32%	5.75%

Class B share performance does not assume conversion to class A shares.

Your fund’s management

Investment advisor

Putnam Investment Management, LLC

Putnam Ohio Tax Exempt Income Fund

Goal

Putnam Ohio Tax Exempt Income Fund seeks as high a level of current income exempt from federal income tax and Ohio personal income tax as we believe to be consistent with preservation of capital.


20	Prospectus

Fees and expenses

Shareholder fees (fees paid directly from your investment)


		Maximum deferred sales charge
	Maximum sales charge (load)	(load) (as a percentage of original
	imposed on purchases (as a	purchase price or redemption
Share class	percentage of offering price)	proceeds, whichever is lower)
Class A	4.00%	NONE*
Class B	NONE	5.00%**
Class C	NONE	1.00%
Class M	3.25%	NONE
Class Y	NONE	NONE

Annual fund operating expenses
(expenses you pay each year as a percentage of the value of your investment)***


		Distribution		Total annual
	Management	and service	Other	fund operating
Share class	fees	(12b-1) fees	expenses	expenses
Class A	0.45%	0.23%†	0.13%	0.81%
Class B	0.45%	0.85%	0.13%	1.43%
Class C	0.45%	1.00%	0.13%	1.58%
Class M	0.45%	0.50%	0.13%	1.08%
Class Y	0.45%	N/A	0.13%	0.58%

</R>

* A deferred sales charge of 1.00% on class A shares may be imposed on certain redemptions of shares bought without an initial sales charge.

<R>

** This charge is phased out over six years.

</R>

† Represents a blended rate.

<R>

Example


Prospectus	21

5% return on your investment each year and that the fund’s operating expenses remain the same. Your actual costs may be higher or lower.


Share class	1 year	3 years	5 years	10 years
Class A	$479	$648	$832	$1,362
Class B	$646	$752	$982	$1,544
Class B (no redemption)	$146	$452	$782	$1,544
Class C	$261	$499	$860	$1,878
Class C (no redemption)	$161	$499	$860	$1,878
Class M	$432	$657	$901	$1,599
Class Y	$59	$186	$324	$726

Portfolio turnover

Investments, risks, and performance

Investments

We invest mainly in bonds that pay interest that is exempt from federal income tax and Ohio personal income tax (but that may be subject to federal alternative minimum tax (AMT)), are investment-grade in quality, and have intermediate-to long-term maturities (three years or longer). We may consider, among other things, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Risks

It is important to understand that you can lose money by investing in the fund.


22	Prospectus

Performance

Average annual total returns after sales charges
(for periods ending 12/31/09)


Share class	1 year	5 years	10 years
Class A before taxes	8.69%	2.83%	4.61%
Class A after taxes on distributions	8.68%	2.82%	4.61%
Class A after taxes on distributions and
sale of fund shares	7.17%	2.98%	4.57%
Class B before taxes	7.41%	2.65%	4.36%
Class C before taxes	11.27%	2.88%	4.25%
Class M before taxes	9.26%	2.69%	4.40%
Class Y before taxes	13.50%	3.77%	5.10%
Barclays Capital Municipal Bond Index
(no deduction for fees, expenses or taxes)	12.91%	4.32%	5.75%


Prospectus	23

Class B share performance does not assume conversion to class A shares.

Your fund’s management

Investment advisor

Putnam Investment Management, LLC

Putnam Pennsylvania Tax Exempt Income Fund

Goal

Putnam Pennsylvania Tax Exempt Income Fund seeks as high a level of current income exempt from federal income tax and Pennsylvania personal income tax as we believe to be consistent with preservation of capital.

Fees and expenses


24	Prospectus

Shareholder fees (fees paid directly from your investment)


		Maximum deferred sales charge
	Maximum sales charge (load)	(load) (as a percentage of original
	imposed on purchases (as a	purchase price or redemption
Share class	percentage of offering price)	proceeds, whichever is lower)
Class A	4.00%	NONE*
Class B	NONE	5.00%**
Class C	NONE	1.00%
Class M	3.25%	NONE
Class Y	NONE	NONE

Annual fund operating expenses
(expenses you pay each year as a percentage of the value of your investment)***


		Distribution		Total annual
	Management	and service	Other	fund operating
Share class	fees	(12b-1) fees	expenses	expenses
Class A	0.45%	0.23%†	0.12%	0.80%
Class B	0.45%	0.85%	0.12%	1.42%
Class C	0.45%	1.00%	0.12%	1.57%
Class M	0.45%	0.50%	0.12%	1.07%
Class Y	0.45%	N/A	0.12%	0.57%

* A deferred sales charge of 1.00% on class A shares may be imposed on certain redemptions of shares bought without an initial sales charge.

** This charge is phased out over six years.

† Represents a blended rate.

Example


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Share class	1 year	3 years	5 years	10 years
Class A	$478	$645	$826	$1,350
Class B	$645	$749	$976	$1,533
Class B (no redemption)	$145	$449	$776	$1,533
Class C	$260	$496	$855	$1,867
Class C (no redemption)	$160	$496	$855	$1,867
Class M	$431	$654	$896	$1,588
Class Y	$58	$183	$318	$714

Portfolio turnover

Investments, risks, and performance

Investments

We invest mainly in bonds that pay interest that is exempt from federal income tax and Pennsylvania personal income tax (but that may be subject to federal alternative minimum tax (AMT)), are investment-grade in quality, and have intermediate- to long-term maturities (three years or longer). We may consider, among other things, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Risks

It is important to understand that you can lose money by investing in the fund.


26	Prospectus

state’s tax-exempt investments, which may result in greater losses and volatility. Interest the fund receives might be taxable.

Performance

Average annual total returns after sales charges
(for periods ending 12/31/09)


Share class	1 year	5 years	10 years
Class A before taxes	10.29%	2.78%	4.71%
Class A after taxes on distributions	10.27%	2.77%	4.70%
Class A after taxes on distributions and
sale of fund shares	8.20%	2.93%	4.67%
Class B before taxes	9.16%	2.61%	4.45%
Class C before taxes	13.11%	2.85%	4.34%
Class M before taxes	11.03%	2.67%	4.49%
Class Y before taxes	15.26%	3.74%	5.19%
Barclays Capital Municipal Bond Index
(no deduction for fees, expenses or taxes)	12.91%	4.32%	5.75%


Prospectus	27

Class B share performance does not assume conversion to class A shares.

Your fund’s management

Investment advisor
Putnam Investment Management, LLC

Important additional information about all funds

Purchase and sale of fund shares

You can open an account, purchase and/or sell fund shares, or exchange them for shares of another Putnam fund by contacting your financial advisor or by calling Putnam Investor Services at 1-800-225-1581.

When opening an account, you must complete and mail a Putnam account application, along with a check made payable to the fund, to: Putnam Investor Services, P.O. Box 8383, Boston, MA 02266-8383. The minimum initial investment of $500 is currently waived, although Putnam reserves the right to reject initial investments under $500 at its discretion. There is no minimum for subsequent investments.

You can sell your shares back to the fund or exchange them for shares of another Putnam fund any day the New York Stock Exchange is open. Shares may be sold or exchanged by mail, by phone, or online at putnam.com. Some restrictions may apply.

Tax information

The fund intends to distribute income that is exempt from federal income tax and personal income tax of the state identified in the fund’s name, but distributions will be subject to federal income tax to the extent attributable to other income, including income earned by the fund on investments in taxable securities or capital gain realized on the disposition of its investments.


28	Prospectus

Financial intermediary compensation

If you purchase the fund through a broker/dealer or other financial intermediary (such as a bank or financial advisor), the fund and its related companies may pay that intermediary for the sale of fund shares and related services. Please bear in mind that these payments may create a conflict of interest by influencing the broker/dealer or other intermediary to recommend the fund over another investment. Ask your advisor or visit your advisor’s Web site for more information.

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What are each fund’s main investment strategies
and related risks?

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This section contains greater detail on each fund’s main investment strategies and the related risks you would face as a fund shareholder. It is important to keep in mind that risk and reward generally go hand in hand; the higher the potential reward, the greater the risk. As mentioned in the fund summaries, we pursue each fund’s goal by investing mainly in tax-exempt investments. Under normal circumstances, we invest at least 80% of a fund’s net assets in tax-exempt securities. This investment policy cannot be changed without the approval of a fund’s shareholders. Certain states may impose additional requirements on the composition of a fund’s portfolio in order for distributions from that fund to be exempt from state taxes.

• Tax-exempt investments. These investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or government entities. These investments are issued to raise money for public purposes, such as loans for the construction of housing, schools or hospitals, or to provide temporary financing in anticipation of the receipt of taxes and other revenue. They also include private activity obligations of public authorities to finance privately owned or operated facilities. Changes in law or adverse determinations by the Internal Revenue Service or a state tax authority could make the income from some of these obligations taxable. Investments in securities of issuers located outside the applicable state may be applied toward meeting a requirement to invest in a tax-exempt investment if the security pays interest that is exempt from federal income tax and the applicable state’s income tax.

Interest income from private activity bonds, a type of tax-exempt bond, may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of fund shareholders, we cannot include these investments for the purpose of complying with the 80% investment policies described above. Corporate shareholders will be required to include all exempt


Prospectus	29

interest dividends in determining their federal AMT. For more information, including possible state, local and other taxes, contact your tax advisor.

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• General obligations. These are backed by the issuer’s authority to levy taxes and are considered an obligation of the issuer. They are payable from the issuer’s general unrestricted revenues, although payment may depend upon government appropriation or aid from other governments. These investments may be vulnerable to legal limits on a government’s power to raise revenue or increase taxes, as well as economic or other developments that can reduce revenues.

• Special revenue obligations. These are payable from revenue earned by a particular project or other revenue source. They include private activity bonds such as industrial development bonds, which are paid only from the revenues of the private owners or operators of the facilities. Investors can look only to the revenue generated by the project or the private company operating the project rather than the credit of the state or local government authority issuing the bonds. Special revenue obligations are typically subject to greater credit risk than general obligations because of the relatively limited source of revenue.

• Interest rate risk. The values of bonds and other debt instruments usually rise and fall in response to changes in interest rates. Declining interest rates generally increase the value of existing debt instruments, and rising interest rates generally decrease the value of existing debt instruments. Changes in a debt instrument’s value usually will not affect the amount of interest income paid to a fund, but will affect the value of a fund’s shares. Interest rate risk is generally greater for investments with longer maturities.

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In evaluating the potential performance of an investment in a fund, investors may find it useful to compare the fund’s current dividend rate with its “yield,” which is computed on a yield-to-maturity basis in accordance with SEC regulations and which reflects amortization of market premiums.

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Some investments give the issuer the option to call or redeem an investment before its maturity date. If an issuer calls or redeems an investment during a time of declining interest rates, we might have to reinvest the proceeds in an investment offering a lower yield, and therefore a fund might not benefit from any increase in value as a result of declining interest rates.

• Credit risk. Investors normally expect to be compensated in proportion to the risk they are assuming. Thus, debt of issuers with poor credit prospects usually offers higher yields than debt of issuers with more secure credit. Higher-rated investments generally have lower credit risk.


30	Prospectus

We invest mostly in investment-grade debt investments. These are rated at least BBB or its equivalent at the time of purchase by a nationally recognized securities rating agency, or are unrated investments that we believe are of comparable quality. We may invest up to 25% of a fund’s total assets in non-investment-grade investments. However, we will not invest in investments that are rated lower than BB or its equivalent by each agency rating the investment, or are unrated securities we believe are of comparable quality. We will not necessarily sell an investment if its rating is reduced after we buy it.

Investments rated below BBB or its equivalent are below investment-grade (sometimes referred to as “junk bonds”). This rating reflects a greater possibility that the issuers may be unable to make timely payments of interest and principal and thus default. If this happens, or is perceived as likely to happen, the values of those investments will usually be more volatile and are likely to fall. A default or expected default could also make it difficult for us to sell the investments at prices approximating the values we had previously placed on them. Tax-exempt debt, particularly lower-rated tax-exempt debt, usually has a more limited market than taxable debt, which may at times make it difficult for us to buy or sell certain debt instruments or to establish their fair value. Credit risk is generally greater for investments that are issued at less than their face value and that are required to make interest payments only at maturity rather than at intervals during the life of the investment.

We may buy investments that are insured as to the payment of principal and interest in the event the issuer defaults. Any reduction in the claims-paying ability of one of the few insurers that provide this insurance may adversely affect the value of insured investments and, consequently, the value of a fund’s shares.

• Focus of investments. We may make significant investments in a segment of the tax-exempt debt market, such as tobacco settlement bonds or revenue bonds for health care facilities, housing or airports. These investments may cause the value of a fund’s shares to change more than the values of shares of funds that invest in a greater variety of investments. Certain events may adversely affect all investments within a particular market segment.

Examples include legislation or court decisions, concerns about pending legislation or court decisions, or lower demand for the services or products provided by a particular market segment.

Investing mostly in tax-exempt investments of a single state makes a fund more vulnerable to that state’s economy and to factors affecting tax-exempt issuers in that state than would be true for a more geographically diversified fund. These risks include:

– the inability or perceived inability of a government authority to collect sufficient tax or other revenues to meet its payment obligations,

– the introduction of constitutional or statutory limits on a tax-exempt issuer’s ability to raise revenues or increase taxes, and

– economic or demographic factors that may cause a decrease in tax or other revenues for a government authority or for private operators of publicly financed facilities.

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In addition, because of the relatively small number of issuers of tax-exempt securities, we will probably invest a higher percentage of assets in a single issuer. We may, therefore, be more exposed to the risk of loss due to investing in relatively few issuers than a fund that invests more broadly.

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At times, the funds and other accounts that we and our affiliates manage may own all or most of the debt of a particular issuer. This concentration of ownership may make it more difficult to sell, or to determine the fair value of, these investments.

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• Derivatives. We may engage in a variety of transactions involving derivatives, such as futures, options, swap contracts and inverse floaters. Derivatives are financial instruments whose value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments or indexes. We may make use of “short” derivatives positions, the values of which move in the opposite direction from the price of the underlying investment, pool of investments, or index. We may use derivatives both for hedging and non-hedging purposes, such as to modify the behavior of an investment so it responds differently than it would otherwise to changes in a particular interest rate. For example, derivatives may increase or decrease an investment’s exposure to long- or short-term interest rates or cause the value of an investment to move in the opposite direction from prevailing short-term or long-term interest rates. We may also use derivatives as a substitute for a direct investment in the securities of one or more issuers. However, we may also choose not to use derivatives, based on our evaluation of market conditions or the availability of suitable derivatives. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment.

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Derivatives involve special risks and may result in losses. The successful use of derivatives depends on our ability to manage these sophisticated instruments. Some derivatives are “leveraged,” which means that they provide a fund with investment exposure greater than the value of a fund’s investment in the derivatives. As a result, these derivatives may magnify or otherwise increase investment losses to a fund. The risk of loss from certain short derivative


32	Prospectus

positions is theoretically unlimited. The prices of derivatives may move in unexpected ways due to the use of leverage or other factors, especially in unusual market conditions, and may result in increased volatility.

Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the fund’s derivatives positions at any time. In fact, many over-the-counter instruments (investments not traded on an exchange) will not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivatives transaction will not meet its obligations. For further information about the risks of derivatives, see the SAI.

• Other investments. In addition to the main investment strategies described above, we may also make other types of investments, which may produce taxable income and be subject to other risks, as described in the SAI.

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• Alternative strategies. At times we may judge that market conditions make pursuing a fund’s usual investment strategies inconsistent with the best interests of its shareholders. We then may temporarily invest some or all of each fund’s assets using alternative strategies that are mainly designed to limit losses, including investing in taxable obligations. However, we may choose not to use these strategies for a variety of reasons, even in very volatile market conditions. These strategies may cause a fund to miss out on investment opportunities, and may prevent a fund from achieving its goal.

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• Changes in policies. The Trustees may change a fund’s goal, investment strategies and other policies without shareholder approval, except as otherwise indicated.

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• Portfolio turnover rate. A fund’s portfolio turnover rate measures how frequently the fund buys and sells investments. A portfolio turnover rate of 100%, for example, would mean that a fund sold and replaced securities valued at 100% of the fund’s assets within a one-year period. From time to time the funds may engage in frequent trading. Funds with high turnover may be more likely to realize capital gains that must be distributed to shareholders as taxable income. High turnover may also cause a fund to pay more brokerage commissions and other transaction costs, which may detract from performance. A fund’s portfolio turnover rate and the amount of brokerage commissions it pays will vary over time based on market conditions.

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• Portfolio holdings. The SAI includes a description of each fund’s policies with respect to the disclosure of its portfolio holdings. For more specific information on a fund’s portfolio, you may visit the Putnam Investments website, putnam.com/individual, where each fund’s top 10 holdings and related portfolio information may be viewed monthly beginning approximately 15 days after the end of each month, and full portfolio holdings may be


Prospectus	33

viewed beginning on the last business day of the month after the end of each calendar quarter. This information will remain available on the website until a fund files a Form N-CSR or N-Q with the Securities and Exchange Commission (SEC) for the period that includes the date of the information, after which such information can be found on the SEC’s website at http://www.sec.gov.

Who oversees and manages the funds?

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The fund’s trustees

As a shareholder of a mutual fund, you have certain rights and protections, including representation by a Board of Trustees. The Putnam Funds’ Board of Trustees oversees the general conduct of the funds’ business and represents the interests of the Putnam fund shareholders. The Putnam Funds’ Board of Trustees includes Trustees who are elected by shareholder vote at least once every five years and at least 75% of whom are independent (not an officer of the fund or affiliated with Putnam Investment Management, LLC (Putnam Management)).

The Trustees periodically review each fund’s investment performance and the quality of other services such as administration, custody, and investor services. At least annually, the Trustees review the fees paid to Putnam Management and its affiliates for providing or overseeing these services, as well as the overall level of each fund’s operating expenses. In carrying out their responsibilities, the Trustees are assisted by an administrative staff, auditors and legal counsel that are selected by the Trustees and are independent of Putnam Management and its affiliates.

Contacting the fund’s Trustees

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Address correspondence to:
The Putnam Funds Trustees
One Post Office Square
Boston, MA 02109

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The fund’s investment manager

The Trustees have retained Putnam Management, which has managed mutual funds since 1937, to be each fund’s investment manager, responsible for making investment decisions for each fund and managing each fund’s other affairs and business. The basis for the Trustees’ approval of each fund’s management contract and the sub-management contract described below is discussed in each fund’s semiannual report to shareholders dated November 30, 2009.


34	Prospectus

Under a new management contract approved by shareholders and effective January 1, 2010, each fund pays a monthly fee to Putnam Management at an annual rate (as a percentage of the fund’s average net assets for the month) that varies based on the average of all of the determinations of the aggregate net assets of all open-end funds sponsored by Putnam Management (excluding Putnam Global Sector Fund, Putnam RetirementReady® Funds and Putnam Money Market Liquidity Fund), as determined at the close of each business day during the month. Under each fund’s prior management contract, each fund paid a quarterly management fee at a rate based solely on the average net assets of the fund, as determined at the close of each business day during the quarter.

Based on each fund’s current management contract and each fund’s prior management contract, the funds paid Putnam Management management fees (after any applicable waivers) for each fund’s last fiscal year at the following rates (reflected as a percentage of average net assets).


	Management fees (after applicable waivers)
The Arizona Fund	0.41%
The Massachusetts Fund	0.46%
The Michigan Fund	0.45%
The Minnesota Fund	0.45%
The New Jersey Fund	0.45%
The Ohio Fund	0.44%
The Pennsylvania Fund	0.45%

Putnam Management’s address is One Post Office Square, Boston, MA 02109.

Putnam Management has retained its affiliate Putnam Investments Limited (PIL) to make investment decisions for such fund assets as may be designated from time to time for its management by Putnam Management. Putnam Management (and not the funds) will pay a quarterly sub-management fee to PIL for its services at the annual rate of 0.40% of the average aggregate net asset value of any fund assets managed by PIL. PIL, which provides a full range of international investment advisory services to institutional clients, is located at Cassini House, 57–59 St James’s Street, London, England, SW1A 1LD.

Pursuant to this arrangement, Putnam investment professionals who are based in foreign jurisdictions may serve as portfolio managers of the funds or provide other investment services, consistent with local regulations.

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• Portfolio managers. The officers of Putnam Management identified below are primarily responsible for the day-to-day management of each fund’s portfolio.


Prospectus	35


Portfolio Managers	Joined fund	Employer	Positions over past five years

Thalia Meehan	2006	Putnam Management	Team Leader, Tax Exempt
		1989 – Present	Fixed Income Team
			Previously, Director Tax
			Exempt Research

Paul Drury	2002	Putnam Management	Portfolio Manager
		1989 – Present

Susan McCormack	1999*	Putnam Management	Portfolio Manager
		1994 – Present

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* Portfolio manager of The Massachusetts Fund since 2002

The SAI provides information about these individuals’ compensation, other accounts managed by these individuals and these individuals’ ownership of securities in each fund.

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How do the funds price their shares?

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The price of a fund’s shares is based on its net asset value (NAV). The NAV per share of each class equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares. Shares are only valued as of the close of regular trading on the New York Stock Exchange (NYSE) each day the exchange is open.

Each fund values its investments for which market quotations are readily available at market value. It values all other investments and assets at their fair value, which may differ from recent market prices.

Each fund’s tax-exempt investments are generally valued at fair value on the basis of valuations provided by an independent pricing service approved by the fund’s Trustees. Such services determine valuations for normal institutional-size trading units of such securities using information with respect to transactions in the bond being valued, quotations from bond dealers, market transactions in comparable securities, and various relationships, generally recognized by institutional traders, between securities. To the extent a pricing service is unable to value a security or provides a valuation which Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management.

How do I buy fund shares?

Opening an account

You can open a fund account and purchase class A, B, C, and M shares by contacting your financial representative or Putnam Investor Services at 1-800-225-1581 and obtaining a Putnam account application. The completed application, along with a check made payable to the fund, must then be returned to Putnam Investor Services at the following address:


36	Prospectus

Putnam Investor Services
P.O. Box 8383
Boston, MA 02266-8383

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You can open a fund account with as little as $500. The minimum investment is waived if you make regular investments weekly, semi-monthly or monthly through automatic deductions from your bank checking or savings account. Although Putnam is currently waiving the minimum, it reserves the right to reject initial investments under the minimum at its discretion.

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Each fund sells its shares at the offering price, which is the NAV plus any applicable sales charge (class A and class M shares only). Your financial representative or Putnam Investor Services generally must receive your completed buy order before the close of regular trading on the NYSE for your shares to be bought at that day’s offering price.

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Mutual funds must obtain and verify information that identifies investors opening new accounts. If a fund is unable to collect the required information, Putnam Investor Services may not be able to open your fund account. Investors must provide their full name, residential or business address, Social Security or tax identification number, and date of birth. Entities, such as trusts, estates, corporations and partnerships, must also provide other identifying information. Putnam Investor Services may share identifying information with third parties for the purpose of verification. If Putnam Investor Services cannot verify identifying information after opening your account, the fund reserves the right to close your account.

Also, each fund may periodically close to new purchases of shares or refuse any order to buy shares if the fund determines that doing so would be in the best interests of the fund and its shareholders.

While the funds no longer issue certificates for fund shares, previously issued share certificates remain valid.

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Purchasing additional shares

Once you have an existing account, you can make additional investments at any time in any amount in the following ways:

• Through a financial representative. Your representative will be responsible for furnishing all necessary documents to Putnam Investor Services and may charge you for his or her services.

• Through Putnam’s Systematic Investing Program. You can make regular investments weekly, semi-monthly or monthly through automatic deductions from your bank checking or savings account.


Prospectus	37

• Via the Internet or phone. If you have an existing Putnam fund account and you have completed and returned an Electronic Investment Authorization Form, you can buy additional shares online at putnam.com or by calling Putnam Investor Services at 1-800-225-1581.

• By mail. You may also request a book of investment stubs for your account. Complete an investment stub and write a check for the amount you wish to invest, payable to the fund. Return the check and investment stub to Putnam Investor Services.

• By wire transfer. You may buy fund shares by bank wire transfer of same-day funds. Please call Putnam Investor Services at 1-800-225-1581 for wiring instructions. Any commercial bank can transfer same-day funds by wire. A fund will normally accept wired funds for investment on the day received if they are received by the fund’s designated bank before the close of regular trading on the NYSE. Your bank may charge you for wiring same-day funds.

Although the funds’ designated bank does not currently charge you for receiving same-day funds, it reserves the right to charge for this service. You cannot buy shares for tax-qualified retirement plans by wire transfer.

This prospectus offers you four classes of fund shares: A, B, C and M. Certain investors described below may also choose class Y shares. Each share class represents investments in the same portfolio of securities, but each class has its own sales charge and expense structure, allowing you and your financial representative to choose the class that best suits your investment needs. When you purchase shares of a fund, you must choose a share class. Deciding which share class best suits your situation depends on a number of factors that you should discuss with your financial representative, including:

• How long you expect to hold your investment. Class B shares charge a contingent deferred sales charge (CDSC) on redemptions that is phased out over the first six years; class C shares charge a CDSC on redemptions in the first year.

• How much you intend to invest. While investments of less than $100,000 can be made in any share class, classes A and M offer sales charge discounts starting at $100,000 and $50,000, respectively.

• Total expenses associated with each share class. As shown in the section entitled Fund summaries — Fees and expenses, each share class offers a different combination of up-front and ongoing expenses. Generally, the lower the up-front sales charge, the greater the ongoing expenses.

Here is a summary of the differences among the classes of shares

Class A shares

• Initial sales charge of up to 4.00%

• Lower sales charges available for investments of $100,000 or more

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• No deferred sales charge (except that a deferred sales charge of 1.00% may be imposed on certain redemptions of shares bought without an initial sales charge)

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• Lower annual expenses, and higher dividends, than class B, C or M shares because of lower 12b-1 fees.

Class B shares

• No initial sales charge; your entire investment goes to work immediately

• Deferred sales charge of up to 5.00% if shares are sold within six years of purchase

• Higher annual expenses, and lower dividends, than class A or M shares because of higher 12b-1 fees

• Convert automatically to class A shares after eight years, thereby reducing the future 12b-1 fees

• Orders for class B shares of one or more Putnam funds will be refused when the total value of the purchase, plus existing account balances that are eligible to be linked under a right of accumulation for purchases of class A shares (as described below), is $100,000 or more. Investors considering cumulative purchases of $100,000 or more should consider whether class A shares would be more advantageous and consult their financial representative.

Class C shares

• No initial sales charge; your entire investment goes to work immediately

• Deferred sales charge of 1.00% if shares are sold within one year of purchase

• Higher annual expenses, and lower dividends, than class A, B or M shares because of higher 12b-1 fees

• No conversion to class A shares, so future 12b-1 fees do not decline over time

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• Orders for class C shares of one or more Putnam funds will be refused when the total value of the purchase, plus existing account balances that are eligible to be linked under a right of accumulation for purchases of class A shares (as described below), is $500,000 or more. Investors considering cumulative purchases of $500,000 or more should consider whether class A shares would be more advantageous and consult their financial representative.

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Prospectus	39

Class M shares

• Initial sales charge of up to 3.25%

• Lower sales charges available for investments of $50,000 or more

• No deferred sales charge

• Lower annual expenses, and higher dividends, than class B or C shares because of lower 12b-1 fees

• Higher annual expenses, and lower dividends, than class A shares because of higher 12b-1 fees

• No conversion to class A shares, so future 12b-1 fees do not decline over time

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• Orders for class M shares of one or more Putnam funds will be refused when the total value of the purchase, plus existing account balances that are eligible to be linked under a right of accumulation for purchases of class M shares (as described below), is $500,000 or more. Investors considering cumulative purchases of $500,000 or more should consider whether class A shares would be more advantageous and consult their financial representative.

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Class Y shares (available only to investors listed below)

The following investors may purchase class Y shares if approved by Putnam:

• bank trust departments and trust companies that have entered into agreements with Putnam and offer institutional share class pricing to their clients;

• college savings plans that qualify for tax-exempt treatment under Section 529 of the Internal Revenue Code;

• other Putnam funds and Putnam investment products;

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• investors purchasing shares through an asset-based fee program which regularly offers institutional share classes and which is sponsored by a registered broker-dealer or other financial institution that has entered into an agreement with Putnam;

• clients of a financial representative who are charged a fee for consulting or similar services;

• corporations, endowments, and foundations that have entered into an arrangement with Putnam; and

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• fee-paying clients of a registered investment advisor (RIA) who initially invests for clients an aggregate of at least $100,000 in Putnam funds through a fund “supermarket” or other mutual fund trading platform sponsored by a broker-dealer or trust company of which the RIA is not an affiliated or associated person and which has entered into an agreement with Putnam.


40	Prospectus

Trust companies or bank trust departments that purchased class Y shares for trust accounts may transfer them to the beneficiaries of the trust accounts, who may continue to hold them or exchange them for class Y shares of other Putnam funds.

• No initial sales charge; your entire investment goes to work immediately

• No deferred sales charge

• Lower annual expenses, and higher dividends, than class A, B, C or M shares because of no 12b-1 fees.


Initial sales charges for class A and M shares
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	Class A sales charge as		Class M sales charge as
	*a percentage of:**		*a percentage of:**
Amount of purchase at offering	Net amount	Offering	Net amount	Offering
price ($)	invested	price**	invested	price**
Under 50,000	4.17%	4.00%	3.36%	3.25%
50,000 but under 100,000	4.17	4.00	2.30	2.25
100,000 but under 250,000	3.36	3.25	1.27	1.25
250,000 but under 500,000	2.56	2.50	1.01	1.00
500,000 and above	NONE	NONE	NONE	NONE

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* Because of rounding in the calculation of offering price and the number of shares purchased, actual sales charges you pay may be more or less than these percentages.

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**Offering price includes sales charge.

Reducing your class A or class M sales charge

Each fund offers two principal ways for you to qualify for discounts on initial sales charges on class A and class M shares, often referred to as “breakpoint discounts:”

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• Right of accumulation. You can add the amount of your current purchases of class A or class M shares of a fund and other Putnam funds to the value of your existing accounts in the fund and other Putnam funds. Individuals can also include purchases by, and accounts owned by, their spouse and minor children, including accounts established through different financial representatives. For your current purchases, you will pay the initial sales charge applicable to the total value of the linked accounts and purchases, which may be lower than the sales charge otherwise applicable to each of your current purchases. Shares of Putnam money market funds, other than money market fund shares acquired by exchange from other Putnam funds, are not included for purposes of the right of accumulation.

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To calculate the total value of your existing accounts and any linked accounts, the fund will use the higher of (a) the current maximum public offering price of those shares or (b) if you purchased the shares after December 31, 2007, the


Prospectus	41

initial value of the total purchases, or, if you held the shares on December 31, 2007, the market value at maximum public offering price on that date, in either case, less the market value on the applicable redemption date of any of those shares that you have redeemed.

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• Statement of intention. A statement of intention is a document in which you agree to make purchases of class A or class M shares in a specified amount within a period of 13 months. For each purchase you make under the statement of intention, you will pay the initial sales charge applicable to the total amount you have agreed to purchase. While a statement of intention is not a binding obligation on you, if you do not purchase the full amount of shares within 13 months, the fund will redeem shares from your account in an amount equal to the difference between the higher initial sales charge you would have paid in the absence of the statement of intention and the initial sales charge you actually paid.

Account types that may be linked with each other to obtain breakpoint discounts using the methods described above include:

• Individual accounts

• Joint accounts

• Accounts established as part of a retirement plan and IRA accounts (some restrictions may apply)

• Shares of Putnam funds owned through accounts in the name of your dealer or other financial intermediary (with documentation identifying beneficial ownership of shares)

• Accounts held as part of a Section 529 college savings plan managed by Putnam Management (some restrictions may apply)

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In order to obtain a breakpoint discount, you should inform your financial representative at the time you purchase shares of the existence of other accounts or purchases that are eligible to be linked for the purpose of calculating the initial sales charge. A fund or your financial representative may ask you for records or other information about other shares held in your accounts and linked accounts, including accounts opened with a different financial representative. Restrictions may apply to certain accounts and transactions. Further details about breakpoint discounts can be found on Putnam Investments’ website at putnam.com/individual by selecting Investment Choices, then Mutual Funds, then Pricing policies, and in the SAI.

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• Additional reductions and waivers of sales charges. In addition to the breakpoint discount methods described above, sales charges may be reduced or waived under certain circumstances and for certain categories of investors. For instance, an employer-sponsored retirement plan is eligible to purchase class A


42	Prospectus

shares without sales charges if its plan administrator or dealer of record has entered into an agreement with Putnam Retail Management or it invests at least $1 million in class A shares of a fund or other Putnam funds. Information about reductions and waivers of sales charges, including deferred sales charges, is included in the SAI. You may consult your financial representative or Putnam Retail Management for assistance.

How do I sell or exchange fund shares?

You can sell your shares back to the appropriate fund or exchange them for shares of another Putnam fund any day the NYSE is open, either through your financial representative or directly to the fund. Payment for redemption may be delayed until the fund collects the purchase price of shares, which may be up to 10 calendar days after the purchase date.

Regarding exchanges, not all Putnam funds offer all classes of shares or may be open to new investors. If you exchange shares otherwise subject to a deferred sales charge, the transaction will not be subject to the deferred sales charge. When you redeem the shares acquired through the exchange, however, the redemption may be subject to the deferred sales charge, depending upon when you originally purchased the shares. The deferred sales charge will be computed using the schedule of any fund into or from which you have exchanged your shares that would result in your paying the highest deferred sales charge applicable to your class of shares. For purposes of computing the deferred sales charge, the length of time you have owned your shares will be measured from the date of original purchase and will not be affected by any subsequent exchanges among funds.

• Selling or exchanging shares through your financial representative. Your representative must receive your request in proper form before the close of regular trading on the NYSE for you to receive that day’s NAV, less any applicable deferred sales charge and short-term trading fee. Your representative will be responsible for furnishing all necessary documents to Putnam Investor Services on a timely basis and may charge you for his or her services.

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• Selling or exchanging shares directly with the funds. Putnam Investor Services must receive your request in proper form before the close of regular trading on the NYSE in order to receive that day’s NAV, less any applicable deferred sales charge.

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• By mail. Send a letter of instruction signed by all registered owners or their legal representatives to Putnam Investor Services. If you have certificates for the shares you want to sell or exchange, you must return them unendorsed with your letter of instruction.


Prospectus	43

• By telephone. You may use Putnam’s telephone redemption privilege to redeem shares valued at less than $100,000 unless you have notified Putnam Investor Services of an address change within the preceding 15 days, in which case other requirements may apply. Unless you indicate otherwise on the account application, Putnam Investor Services will be authorized to accept redemption instructions received by telephone. A telephone exchange privilege is currently available for amounts up to $500,000. Sale or exchange of shares by telephone is not permitted if there are certificates for your shares. The telephone redemption and exchange privileges may be modified or terminated without notice.

• Via the Internet. You may also exchange shares via the Internet at putnam.com/individual.

• Additional requirements. In certain situations, for example, if you sell shares with a value of $100,000 or more, the signatures of all registered owners or their legal representatives must be guaranteed by a bank, broker-dealer or certain other financial institutions. In addition, Putnam Investor Services usually requires additional documents for the sale of shares by a corporation, partnership, agent or fiduciary, or surviving joint owner. For more information concerning Putnam’s signature guarantee and documentation requirements, contact Putnam Investor Services.

Each fund also reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. The fund into which you would like to exchange may also reject your exchange. These actions may apply to all shareholders or only to those shareholders whose exchanges Putnam Management determines are likely to have a negative effect on the fund or other Putnam funds. Consult Putnam Investor Services before requesting an exchange. Ask your financial representative or Putnam Investor Services for prospectuses of other Putnam funds. Some Putnam funds are not available in all states.

If you sell (redeem) class B shares within six years of purchase, you will generally pay a deferred sales charge according to the following schedule:

A deferred sales charge of 1.00% will apply to class C shares if redeemed within one year of purchase. Unless otherwise agreed with Putnam Retail Management, class A shares that are part of a purchase of $500,000 or more (other than by a qualified retirement plan) will be subject to a 1.00% deferred sales charge if redeemed within nine months of purchase.

Deferred sales charges will be based on the lower of the shares’ cost and current NAV. Shares not subject to any charge will be redeemed first, followed by shares held longest. You may sell shares acquired by reinvestment of distributions without a charge at any time.

• Payment information. A fund generally sends you payment for your shares the business day after your request is received. Under unusual circumstances, a fund may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities law. You will not receive interest on uncashed redemption checks.

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• Redemption by a fund. If you own fewer shares than the minimum set by the Trustees (presently 20 shares), a fund may redeem your shares without your permission and send you the proceeds after providing you with at least 60 days’ notice to attain the minimum. To the extent permitted by applicable law, a fund may also redeem shares if you own more than a maximum amount set by the Trustees. There is presently no maximum, but the Trustees could set a maximum that would apply to both present and future shareholders.

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Policy on excessive short-term trading

• Risks of excessive short-term trading. Excessive short-term trading activity may reduce each fund’s performance and harm all fund shareholders by interfering with portfolio management, increasing a fund’s expenses and diluting a fund’s net asset value. Depending on the size and frequency of short-term trades in a fund’s shares, a fund may experience increased cash volatility, which could require a fund to maintain undesirably large cash positions or buy or sell portfolio securities it would not have bought or sold otherwise. The need to execute additional portfolio transactions due to these cash flows may also increase a fund’s brokerage and administrative costs and may increase the taxable distributions received from the fund.

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Because the funds invest in securities that may trade infrequently or may be more difficult to value, such as lower-rated bonds, they may be susceptible to trading by short-term traders who seek to exploit perceived price inefficiencies in a fund’s investments. In addition, the market for lower-rated bonds may at times show “market momentum,” in which positive or negative performance may continue from one day to the next for reasons unrelated to the fundamentals of the issuer. Short-term traders may seek to capture this momentum by trading frequently in a fund’s shares, which will reduce a fund’s performance and may dilute the interests of other shareholders. Because lower-rated debt may be less liquid than higher-rated debt, a fund may also be unable to buy or sell these securities at desirable prices when the need arises (for example, in response to volatile cash flows caused by short-term trading). Similar risks


Prospectus	45

may apply if a fund holds other types of less liquid securities, such as stock of smaller issuers.

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• Fund policies. In order to protect the interests of long-term shareholders of each fund, Putnam Management and each fund’s Trustees have adopted policies and procedures intended to discourage excessive short-term trading. Each fund seeks to discourage excessive short-term trading by using fair value pricing procedures to value investments under some circumstances. In addition, Putnam Management monitors activity in those shareholder accounts about which it possesses the necessary information in order to detect excessive short-term trading patterns and takes steps to deter excessive short-term traders.

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• Account monitoring. Putnam Management’s Compliance Department currently uses multiple reporting tools to monitor activity in retail customer accounts for which Putnam Investor Services maintains records. This review is based on each fund’s internal parameters for detecting excessive short-term trading, which consider the number of “round trip” transactions above a specified dollar amount within a specified period of time. These parameters may change from time to time. If a monitored account engages in short-term trading that Putnam Management or each fund considers to be excessive or inappropriate, Putnam Management will issue the investor and his or her financial intermediary, if any, a written warning. Continued excessive short-term trading activity by an investor or intermediary that has received a warning may lead to the termination of the exchange privilege. Each fund also reserves the right to terminate the exchange privilege without a warning. In addition, Putnam Management will also communicate instances of excessive short-term trading to the compliance staff of an investor’s broker, if one is identified.

• Account restrictions. In addition to enforcing these exchange parameters, Putnam Management and each fund reserve the right to reject or restrict purchases or exchanges for any reason. Putnam Management or a fund may determine that an investor’s trading activity is excessive or otherwise potentially harmful based on various factors, including an investor’s or financial intermediary’s trading history in each fund, other Putnam funds or other investment products, and may aggregate activity in multiple accounts under common ownership or control. If a fund identifies an investor or intermediary as a potential excessive trader, it may, among other things, require further trades to be submitted by mail rather than by phone or over the Internet, impose limitations on the amount, number, or frequency of future purchases or exchanges, or temporarily or permanently bar the investor or intermediary from investing in the fund or other Putnam funds. Each fund


46	Prospectus

may take these steps in its discretion even if the investor’s activity may not have been detected by the fund’s current monitoring parameters.

• Limitations on the funds’ policies. There is no guarantee that a fund will be able to detect excessive short-term trading in all accounts. For example, Putnam Management currently does not have access to sufficient information to identify each investor’s trading history, and in certain circumstances there are operational or technological constraints on its ability to enforce a fund’s policies. In addition, even when Putnam Management has sufficient information, its detection methods may not capture all excessive short-term trading.

In particular, many purchase, redemption and exchange orders are received from financial intermediaries that hold omnibus accounts with each fund. Omnibus accounts, in which shares are held in the name of an intermediary on behalf of multiple beneficial owners, are a common form of holding shares among retirement plans and financial intermediaries such as brokers, advisers and third-party administrators. The funds are generally not able to identify trading by a particular beneficial owner within an omnibus account, which makes it difficult or impossible to determine if a particular shareholder is engaging in excessive short-term trading. Putnam Management monitors aggregate cash flows in omnibus accounts on an ongoing basis. If high cash flows or other information indicate that excessive short-term trading may be taking place, Putnam Management will contact the financial intermediary, plan sponsor or recordkeeper that maintains accounts for the underlying beneficial owner and attempt to identify and remedy any excessive trading. However, each fund’s ability to monitor and deter excessive short-term traders in omnibus accounts ultimately depends on the capabilities and cooperation of these third-party financial firms. A financial intermediary or plan sponsor may impose different or additional limits on short-term trading.

Putnam funds are distributed primarily through dealers (including any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator, and any other institution having a selling, services, or any similar agreement with Putnam Retail Management or one of its affiliates). In order to pay for the marketing of fund shares and services provided to shareholders, each fund has adopted distribution and service (12b-1) plans, which increase the annual operating expenses you pay each year in certain share classes, as shown in the table of annual fund operating expenses in the section Fund summaries — Fees and expenses. Putnam Retail Management and its affiliates also make additional payments to dealers that do not increase your fund expenses, as described below.

• Distribution and service (12b-1) plans. Each fund’s 12b-1 plans provide for payments at annual rates (based on average net assets) of up to 0.35% on class A shares and 1.00% on class B, class C and class M shares. The Trustees currently limit payments on class A, class B and class M shares to 0.25%, 0.85% and 0.50% of average net assets, respectively. For class A shares, the annual payment rate will equal the weighted average of (i) 0.20% of the net assets of the fund attributable to class A shares purchased and paid for prior to April 1, 2005 and (ii) 0.25% of all other net assets of the fund attributable to class A shares. Because these fees are paid out of a fund’s assets on an ongoing basis, they will increase the cost of your investment. The higher fees for class B, class C and class M shares may cost you more over time than paying the initial sales charge for class A shares. Because class M shares, unlike class B shares, do not convert to class A shares, class M shares may cost you more over time than class B shares. Class Y shares, for shareholders who are eligible to purchase them, will be less expensive than other classes of shares because they do not bear sales charges or 12b-1 fees.

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• Payments to dealers. If you purchase your shares through a dealer, your dealer generally receives payments from Putnam Retail Management representing some or all of the sales charges and distribution and service (12b-1) fees, if any, shown in the tables under the heading Fund summaries — Fees and expenses at the front of this prospectus.

Putnam Retail Management and its affiliates also pay additional compensation to selected dealers in recognition of their marketing support and/or program servicing (each of which is described in more detail below). These payments may create an incentive for a dealer firm or its representatives to recommend or offer shares of the funds or other Putnam funds to its customers. These additional payments are made by Putnam Retail Management and its affiliates and do not increase the amount paid by you or a fund as shown under the heading Fund summaries — Fees and expenses.

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The additional payments to dealers by Putnam Retail Management and its affiliates are generally based on one or more of the following factors: average net assets of a fund attributable to that dealer, sales or net sales of a fund attributable to that dealer, or reimbursement of ticket charges (fees that a dealer firm charges its representatives for effecting transactions in fund shares), or on the basis of a negotiated lump sum payment for services provided.

Marketing support payments, which are generally available to most dealers engaging in significant sales of Putnam fund shares, are not expected, with certain limited exceptions, to exceed 0.085% of the average assets of Putnam’s retail mutual funds attributable to that dealer on an annual basis. These


48	Prospectus

payments are made for marketing support services provided by the dealers, including business planning assistance, educating dealer personnel about the Putnam funds and shareholder financial planning needs, placement on the dealer’s preferred or recommended fund company list, and access to sales meetings, sales representatives and management representatives of the dealer.

Program servicing payments, which are paid in some instances to dealers in connection with investments in the fund by retirement plans and other investment programs, are not expected, with certain limited exceptions, to exceed 0.20% of the total assets in the program on an annual basis. These payments are made for program services provided by the dealer, including participant recordkeeping, reporting, or transaction processing, as well as services rendered in connection with fund/investment selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services.

• Other payments. Putnam Retail Management and its affiliates may make other payments (including payments in connection with educational seminars or conferences) or allow other promotional incentives to dealers to the extent permitted by SEC and NASD (as adopted by FINRA) rules and by other applicable laws and regulations. Certain dealers also receive additional payments from a fund’s transfer agent in recognition of subaccounting or other services they provide to shareholders or plan participants who invest in a fund or other Putnam funds through their retirement plan. These payments are not expected, with certain exceptions for affiliated and unaffiliated entities noted in the SAI, to exceed 0.13% of the total assets of such shareholders or plan participants in a fund or other Putnam funds on an annual basis. See the discussion in the SAI under the heading Management — Investor Servicing Agent for more details.

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You can find a list of all dealers to which Putnam made marketing support and/or program servicing payments in 2009 in the SAI, which is on file with the SEC and is also available on Putnam’s website at putnam.com. You can also find other details in the SAI about the payments made by Putnam Retail Management and its affiliates and the services provided by your dealer. Your dealer may charge you fees or commissions in addition to those disclosed in this prospectus. You can also ask your dealer about any payments it receives from Putnam Retail Management and its affiliates and any services your dealer provides, as well as about fees and/or commissions it charges.

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Prospectus	49

Fund distributions and taxes

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Each fund declares a distribution daily of all its net income. Each fund normally distributes any net investment income monthly and any net realized capital gains annually. You may choose to reinvest distributions from net investment income, capital gains or both in additional shares of the fund or other Putnam funds, or you may receive them in cash in the form of a check or an electronic deposit to your bank account. If you do not select an option when you open your account, all distributions will be reinvested. If you choose to receive distributions in cash, but correspondence from a fund or Putnam Investor Services is returned as “undeliverable,” the distribution option on your account may be converted to reinvest future distributions in the fund. You will not receive interest on uncashed distribution checks.

Fund distributions that are properly designated as “exempt-interest dividends” are generally not subject to federal income taxation. In addition, such distributions derived from interest on (i) tax-exempt investments and (ii) obligations of the United States and its possessions, with respect to the relevant state, will be exempt from the personal income tax (if any) of that state. Distributions derived from other sources generally will be taxable to you as ordinary income or as long-term capital gain, whether paid in cash or reinvested in additional shares. If you receive social security or railroad retirement benefits, you should consult your tax advisor to determine what effect, if any, an investment in a fund may have on the federal taxation of your benefits. In addition, an investment in a fund may result in liability for federal AMT, both for individual and corporate shareholders.

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In order for any portion of a fund’s distributions to be exempt from the personal income tax of the relevant state, the fund and its investments must meet certain requirements that vary according to the relevant state. A fund or its investments may fail to meet the relevant state’s requirements for a variety of reasons, which may increase the amount of taxes payable by shareholders. In addition, a fund’s distributions may be subject to other state or local taxes, such as a state’s AMT. Please refer to the SAI for further information concerning the taxation of fund distributions by the relevant state.

Each fund may at times buy tax-exempt investments at a discount from the price at which they were originally issued, especially during periods of rising interest rates. For federal income tax purposes, some or all of this market discount will be included in the fund’s ordinary income and will be taxable to you as such when it is distributed.


50	Prospectus

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For federal income tax purposes, distributions of net investment income other than “exempt-interest dividends” are generally taxable to you as ordinary income. Generally, gains realized by a fund on the sale or exchange of investments are taxable to you, even though the income from such investments generally is tax-exempt. Taxes on distributions of capital gains are determined by how long a fund owned the investments that generated them, rather than by how long you have owned your shares. Properly designated distributions of gains from investments that a fund owned for more than one year are generally taxable to you as long-term capital gains. Distributions of gains from investments that a fund owned for one year or less and gains on the sale of bonds characterized as market discount are generally taxable to you as ordinary income. Distributions are taxable in this manner whether you receive them in cash or reinvest them in additional shares of the fund or other Putnam funds.

Unless you are investing through a tax-advantaged retirement account (such as an IRA), you should consider avoiding a purchase of fund shares shortly before a fund makes a distribution, because doing so may cost you money in taxes. Distributions are taxable to you even if they are paid from income or gains earned by the funds before your investment (and thus were included in the price you paid). Contact your financial representative or Putnam to find out the distribution schedule for your fund.

A fund’s investments in discount and certain other debt obligations may cause the fund to recognize taxable income in excess of the cash generated by such obligations. Thus, a fund could be required at times to liquidate other investments in order to satisfy its distribution requirements.

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A fund’s use of derivatives, if any, may affect the amount, timing and character of distributions to shareholders and, therefore, may increase the amount of taxes payable by shareholders.

Any gain resulting from the sale or exchange of your shares generally also will be subject to tax.

The above is a general summary of the tax implications of investing in a fund. Please refer to the SAI for further details. You should consult your tax advisor for more information on your own tax situation, including possible foreign, state and local taxes.


Prospectus	51

The financial highlights tables are intended to help you understand a fund’s recent financial performance. Certain information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned or lost on an investment in the fund, assuming reinvestment of all dividends and distributions. This information has been derived from each fund’s financial statements, which for the Massachusetts, Michigan, Minnesota, New Jersey, Ohio and Pennsylvania funds have been audited by PricewaterhouseCoopers LLP, and which for the Arizona fund have been audited by KPMG LLP. Their reports and each fund’s financial statements are included in the respective fund’s annual report to shareholders, which is available upon request.

Financial highlights (For a common share outstanding throughout the period)

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Putnam Arizona Tax Exempt Income Fund


INVESTMENT OPERATIONS:					LESS DISTRIBUTIONS:						RATIOS AND SUPPLEMENTAL DATA:

												Ratio	Ratio of net
	Net asset		Net realized									of expenses	investment
	value,		and unrealized	Total from	From net	From net			Net asset	Total return	Net assets,	to average	income (loss)
	beginning	Net investment	gain (loss) on	investment	investment	realized gain	Total	Redemption	value, end	at net asset	end of period	net assets	to average	Portfolio
Period ended	of period	income (loss)	investments	operations	income	on investments	distributions	fees	of period	value (%)^a	(in thousands)	(%)^b,c	net assets (%)^b	turnover (%)

Class A
May 31, 2010	$8.67	.38	.39	.77	(.38)	—	(.38)	— ^d	$9.06	9.08	$62,236	.84	4.27	18.35
May 31, 2009	8.94	.38	(.24)	.14	(.39)	(.02)	(.41)	— ^d	8.67	1.76	65,117	.69	4.49	25.74
May 31, 2008	9.09	.37	(.09)	.28	(.38)	(.05)	(.43)	— ^d	8.94	3.17	75,318	.78	4.15	42.04
May 31, 2007	9.11	.37	(.02)	.35	(.37)	— ^d	(.37)	—	9.09	3.94	74,898	.81	4.07	21.24
May 31, 2006	9.39	.36	(.23)	.13	(.36)	(.05)	(.41)	—	9.11	1.33	79,552	.82	3.86	14.98

Class B
May 31, 2010	$8.67	.32	.38	.70	(.32)	—	(.32)	— ^d	$9.05	8.27	$2,152	1.48	3.62	18.35
May 31, 2009	8.93	.33	(.24)	.09	(.33)	(.02)	(.35)	— ^d	8.67	1.23	3,937	1.33	3.84	25.74
May 31, 2008	9.08	.31	(.09)	.22	(.32)	(.05)	(.37)	— ^d	8.93	2.51	5,224	1.42	3.50	42.04
May 31, 2007	9.10	.31	(.02)	.29	(.31)	— ^d	(.31)	—	9.08	3.28	7,867	1.45	3.42	21.24
May 31, 2006	9.38	.30	(.23)	.07	(.30)	(.05)	(.35)	—	9.10	.68	10,869	1.47	3.20	14.98

Class C
May 31, 2010	$8.68	.31	.38	.69	(.31)	—	(.31)	— ^d	$9.06	8.10	$1,656	1.63	3.49	18.35
May 31, 2009	8.94	.31	(.23)	.08	(.32)	(.02)	(.34)	— ^d	8.68	1.08	1,085	1.48	3.72	25.74
May 31, 2008	9.09	.30	(.10)	.20	(.30)	(.05)	(.35)	— ^d	8.94	2.33	1,005	1.57	3.40	42.04
May 31, 2007 †	9.21	.20	(.12)	.08	(.20)	— ^d	(.20)	—	9.09	.92 *	50	1.06 *	2.17 *	21.24

Class M
May 31, 2010	$8.69	.35	.40	.75	(.36)	—	(.36)	— ^d	$9.08	8.77	$1,199	1.13	3.98	18.35
May 31, 2009	8.95	.36	(.24)	.12	(.36)	(.02)	(.38)	— ^d	8.69	1.58	1,151	.98	4.21	25.74
May 31, 2008	9.11	.35	(.11)	.24	(.35)	(.05)	(.40)	— ^d	8.95	2.76	1,148	1.07	3.85	42.04
May 31, 2007	9.12	.35	(.01)	.34	(.35)	— ^d	(.35)	—	9.11	3.76	1,313	1.10	3.78	21.24
May 31, 2006	9.40	.33	(.23)	.10	(.33)	(.05)	(.38)	—	9.12	1.03	1,300	1.12	3.56	14.98

Class Y
May 31, 2010	$8.68	.40	.38	.78	(.40)	—	(.40)	— ^d	$9.06	9.20	$1,267	.63	4.51	18.35
May 31, 2009	8.94	.40	(.24)	.16	(.40)	(.02)	(.42)	— ^d	8.68	2.10	93	.48	4.78	25.74
May 31, 2008 ††	8.99	.16	(.04)	.12	(.17)	—	(.17)	—	8.94	1.32 *	91	.24 *	1.84 *	42.04

* Not annualized.

† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

†† For the period January 2, 2008 (commencement of operations) to May 31, 2008.
^aTotal return assumes dividend reinvestment and does not reflect the effect of sales charges.
^bReflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts:


	5/31/10	5/31/09	5/31/08	5/31/07	5/31/06

Class A	0.07%	0.28%	0.17%	0.15%	0.09%

Class B	0.07	0.28	0.17	0.15	0.09

Class C	0.07	0.28	0.17	0.11	N/A

Class M	0.07	0.28	0.17	0.15	0.09

Class Y	0.07	0.28	0.09	N/A	N/A

^cIncludes amounts paid through expense offset arrangements.

^dAmount represents less than $0.01 per share.


54	Prospectus	Prospectus	55

Financial highlights (For a common share outstanding throughout the period)

Putnam Massachusetts Tax Exempt Income Fund

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio

Ratio of net

Net asset

Net realized

of expenses

investment

value,

and unrealized

Total from

From net

Total return

Net assets,

to average

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

realized gain

Total

Redemption

Net asset value,

at net asset

end of period

net assets

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

income

on investments

distributions

fees

end of period

value (%)^a

(in thousands)

(%)^b

net assets (%)

turnover (%)

Class A

May 31, 2010

$9.02

.39

.52

.91

(.39)

—

(.39)

— ^c

$9.54

10.34

$253,970

.80 ^d

4.20 ^d

11.61

May 31, 2009

9.32

.38

(.25)

.13

(.38)

(.05)

(.43)

— ^c

9.02

1.60

232,506

.86

4.28

16.98

May 31, 2008

9.36

.38

— ^c

.38

(.38)

(.04)

(.42)

— ^c

9.32

4.17

241,158

.84

4.12

33.97

May 31, 2007

9.34

.38

.01

.39

(.37)

— ^c

(.37)

— ^c

9.36

4.29

241,481

.85

4.01

15.47

May 31, 2006

9.63

.37

(.21)

.16

(.37)

(.08)

(.45)

— ^c

9.34

1.67

257,523

.83

3.88

7.07

Class B

May 31, 2010

$9.02

.33

.51

.84

(.33)

—

(.33)

— ^c

$9.53

9.53

$9,554

1.43 ^d

3.56 ^d

11.61

May 31, 2009

9.31

.32

(.23)

.09

(.33)

(.05)

(.38)

— ^c

9.02

1.07

17,194

1.49

3.63

16.98

May 31, 2008

9.36

.32

(.01)

.31

(.32)

(.04)

(.36)

— ^c

9.31

3.39

28,157

1.48

3.47

33.97

May 31, 2007

9.34

.32

.01

.33

(.31)

— ^c

(.31)

— ^c

9.36

3.64

37,808

1.49

3.37

15.47

May 31, 2006

9.63

.31

(.21)

.10

(.31)

(.08)

(.39)

— ^c

9.34

1.01

52,012

1.48

3.22

7.07

Class C

May 31, 2010

$9.03

.32

.52

.84

(.32)

—

(.32)

— ^c

$9.55

9.45

$22,367

1.58 ^d

3.43 ^d

11.61

May 31, 2009

9.33

.31

(.24)

.07

(.32)

(.05)

(.37)

— ^c

9.03

.82

11,422

1.64

3.52

16.98

May 31, 2008

9.37

.31

— ^c

.31

(.31)

(.04)

(.35)

— ^c

9.33

3.36

7,332

1.63

3.34

33.97

May 31, 2007

9.35

.30

.02

.32

(.30)

— ^c

(.30)

— ^c

9.37

3.47

3,824

1.64

3.23

15.47

May 31, 2006

9.64

.29

(.21)

.08

(.29)

(.08)

(.37)

— ^c

9.35

.83

3,643

1.63

3.11

7.07

Class M

May 31, 2010

$9.02

.36

.53

.89

(.37)

—

(.37)

— ^c

$9.54

10.01

$3,955

1.08 ^d

3.92 ^d

11.61

May 31, 2009

9.32

.36

(.25)

.11

(.36)

(.05)

(.41)

— ^c

9.02

1.32

3,555

1.14

3.99

16.98

May 31, 2008

9.36

.36

(.01)

.35

(.35)

(.04)

(.39)

— ^c

9.32

3.86

4,211

1.13

3.83

33.97

May 31, 2007

9.34

.35

.02

.37

(.35)

— ^c

(.35)

— ^c

9.36

4.00

4,614

1.14

3.72

15.47

May 31, 2006

9.63

.34

(.21)

.13

(.34)

(.08)

(.42)

— ^c

9.34

1.37

4,748

1.13

3.58

7.07

Class Y

May 31, 2010

$9.04

.41

.52

.93

(.41)

—

(.41)

— ^c

$9.56

10.57

$11,662

.58 ^d

4.43 ^d

11.61

May 31, 2009

9.33

.40

(.24)

.16

(.40)

(.05)

(.45)

— ^c

9.04

1.97

9,056

.64

4.54

16.98

May 31, 2008 ††

9.34

.17

(.01)

.16

(.17)

—

(.17)

—

9.33

1.72 *

2,218

.26 *

1.79 *

33.97

* Not annualized.

†† For the period January 2, 2008 (commencement of operations) to May 31, 2008.

^aTotal return assumes dividend reinvestment and does not reflect the effect of sales charges.

^bIncludes amounts paid through expense offset arrangements.

^cAmount represents less than $0.01 per share.

^dReflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of 0.02% of average net assets for the period ended May 31, 2010.


56	Prospectus	Prospectus	57

Financial highlights (For a common share outstanding throughout the period)

Putnam Michigan Tax Exempt Income Fund

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Net asset

Net realized

Ratio

investment

value,

and unrealized

Total from

From net

Total return

Net assets,

of expenses

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

Total

Redemption

Net asset value,

at net asset

end of period

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

income

distributions

fees

end of period

value (%)^a

(in thousands)

net assets (%)^b

net assets (%)

turnover (%)

Class A

May 31, 2010

$8.69

.36

.33

.69

(.36)

(.36)

— ^d

$9.02

8.14

$79,335

.87 ^c

4.10 ^c

17.59

May 31, 2009

8.89

.35

(.19)

.16

(.36)

(.36)

— ^d

8.69

2.02

81,898

.89 ^c

4.15 ^c

11.01

May 31, 2008

8.92

.34

(.02)

.32

(.35)

(.35)

— ^d

8.89

3.66

90,988

.90 ^c

3.87 ^c

43.97

May 31, 2007

8.91

.34

.01

.35

(.34)

(.34)

— ^d

8.92

3.95

96,796

.91 ^c

3.72 ^c

16.28

May 31, 2006

9.11

.33

(.20)

.13

(.33)

(.33)

— ^d

8.91

1.52

103,128

.91

3.71

16.67

Class B

May 31, 2010

$8.68

.31

.33

.64

(.31)

(.31)

— ^d

$9.01

7.46

$2,449

1.50 ^c

3.45 ^c

17.59

May 31, 2009

8.88

.30

(.19)

.11

(.31)

(.31)

— ^d

8.68

1.36

5,188

1.53 ^c

3.48 ^c

11.01

May 31, 2008

8.91

.29

(.03)

.26

(.29)

(.29)

— ^d

8.88

2.99

9,911

1.54 ^c

3.22 ^c

43.97

May 31, 2007

8.90

.28

.01

.29

(.28)

(.28)

— ^d

8.91

3.30

13,054

1.55 ^c

3.08 ^c

16.28

May 31, 2006

9.10

.28

(.20)

.08

(.28)

(.28)

— ^d

8.90

.85

19,558

1.56

3.05

16.67

Class C

May 31, 2010

$8.68

.29

.33

.62

(.29)

(.29)

— ^d

$9.01

7.32

$446

1.65 ^c

3.35 ^c

17.59

May 31, 2009

8.89

.28

(.20)

.08

(.29)

(.29)

— ^d

8.68

1.09

256

1.68 ^c

3.32 ^c

11.01

May 31, 2008

8.91

.27

(.01)

.26

(.28)

(.28)

— ^d

8.89

2.95

126

1.69 ^c

3.10 ^c

43.97

May 31, 2007 †

9.00

.18

(.09)

.09

(.18)

(.18)

—

8.91

.97 *

1.13 *^c

1.93 *^c

16.28

Class M

May 31, 2010

$8.69

.34

.33

.67

(.34)

(.34)

— ^d

$9.02

7.83

$678

1.15 ^c

3.82 ^c

17.59

May 31, 2009

8.90

.33

(.20)

.13

(.34)

(.34)

— ^d

8.69

1.62

663

1.18 ^c

3.84 ^c

11.01

May 31, 2008

8.92

.32

(.02)

.30

(.32)

(.32)

— ^d

8.90

3.46

1,210

1.19 ^c

3.58 ^c

43.97

May 31, 2007

8.91

.31

.01

.32

(.31)

(.31)

— ^d

8.92

3.65

1,155

1.20 ^c

3.43 ^c

16.28

May 31, 2006

9.11

.31

(.20)

.11

(.31)

(.31)

— ^d

8.91

1.22

1,223

1.21

3.41

16.67

Class Y

May 31, 2010

$8.69

.38

.33

.71

(.38)

(.38)

— ^d

$9.02

8.39

$159

.65 ^c

4.32 ^c

17.59

May 31, 2009

8.90

.37

(.20)

.17

(.38)

(.38)

— ^d

8.69

2.10

.68 ^c

4.36 ^c

11.01

May 31, 2008 ††

8.94

.15

(.03)

.12

(.16)

(.16)

—

8.90

1.32 *

101

.28 *^c

1.71 *^c

43.97

* Not annualized.

† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

†† For the period January 2, 2008 (commencement of operations) to May 31, 2008.

a Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

b Includes amounts paid through expense offset arrangements.

^cReflects an involuntary contractual expense limitation in effect during the period. As a result of the such limitation, the expenses of each class, as a percentage of its average net assets, reflect a reduction of the following amounts:


	5/31/10	5/31/09	5/31/08	5/31/07

Class A	0.03%	0.07%	0.04%	0.03%

Class B	0.03	0.07	0.04	0.03

Class C	0.03	0.07	0.04	0.03

Class M	0.03	0.07	0.04	0.03

Class Y	0.03	0.07	0.03	N/A

^dAmount represents less than $0.01 per share.


58	Prospectus	Prospectus	59

Financial highlights (For a common share outstanding throughout the period)

Putnam Minnesota Tax Exempt Income Fund

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Net asset

Net realized

Ratio

investment

value,

and unrealized

Total from

From net

Total return

Net assets,

of expenses

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

Total

Redemption

Net asset value,

at net asset

end of period

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

income

distributions

fees

end of period

value (%)^a

(in thousands)

net assets (%)^b,c

net assets (%)^b

turnover (%)

Class A

May 31, 2010

$8.70

.34

.35

.69

(.34)

(.34)

—

$9.05

8.12

$82,937

.86

3.84

20.57

May 31, 2009

8.82

.34

(.12)

.22

(.34)

(.34)

— ^d

8.70

2.73

79,859

.90

4.05

17.28

May 31, 2008

8.89

.34

(.07)

.27

(.34)

(.34)

— ^d

8.82

3.12

89,479

.88

3.89

32.34

May 31, 2007

8.90

.35

(.01)

.34

(.35)

(.35)

—

8.89

3.86

90,982

.89

3.92

27.52

May 31, 2006

9.11

.35

(.21)

.14

(.35)

(.35)

—

8.90

1.52

91,342

.88

3.85

7.68

Class B

May 31, 2010

$8.67

.28

.36

.64

(.29)

(.29)

—

$9.02

7.45

$4,189

1.49

3.21

20.57

May 31, 2009

8.80

.29

(.13)

.16

(.29)

(.29)

— ^d

8.67

1.96

6,874

1.53

3.41

17.28

May 31, 2008

8.87

.29

(.07)

.22

(.29)

(.29)

— ^d

8.80

2.46

9,863

1.52

3.25

32.34

May 31, 2007

8.88

.29

(.01)

.28

(.29)

(.29)

—

8.87

3.17

13,299

1.53

3.28

27.52

May 31, 2006

9.09

.29

(.21)

.08

(.29)

(.29)

—

8.88

.87

20,121

1.53

3.19

7.68

Class C

May 31, 2010

$8.68

.27

.35

.62

(.27)

(.27)

—

$9.03

7.31

$5,350

1.64

3.06

20.57

May 31, 2009

8.80

.28

(.12)

.16

(.28)

(.28)

— ^d

8.68

1.91

2,826

1.68

3.33

17.28

May 31, 2008

8.87

.27

(.07)

.20

(.27)

(.27)

— ^d

8.80

2.36

789

1.67

3.10

32.34

May 31, 2007 †

8.98

.19

(.12)

.07

(.18)

(.18)

—

8.87

.84 *

709

1.11 *

2.03 *

27.52

Class M

May 31, 2010

$8.69

.32

.35

.67

(.32)

(.32)

—

$9.04

7.82

$665

1.14

3.56

20.57

May 31, 2009

8.82

.32

(.13)

.19

(.32)

(.32)

— ^d

8.69

2.33

612

1.18

3.77

17.28

May 31, 2008

8.89

.32

(.07)

.25

(.32)

(.32)

— ^d

8.82

2.82

638

1.17

3.60

32.34

May 31, 2007

8.90

.33

(.02)

.31

(.32)

(.32)

—

8.89

3.55

683

1.18

3.62

27.52

May 31, 2006

9.11

.32

(.21)

.11

(.32)

(.32)

—

8.90

1.21

888

1.18

3.56

7.68

Class Y

May 31, 2010

$8.70

.36

.37

.73

(.37)

(.37)

—

$9.06

8.49

$281

.64

4.09

20.57

May 31, 2009

8.83

.36

(.13)

.23

(.36)

(.36)

— ^d

8.70

2.82

.68

4.36

17.28

May 31, 2008 ††

8.87

.15

(.04)

.11

(.15)

(.15)

— ^d

8.83

1.26 *

.28 *

1.68 *

32.34

* Not annualized.

† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

†† For the period January 2, 2008 (commencement of operations) to May 31, 2008.

^aTotal return assumes dividend reinvestment and does not reflect the effect of sales charges.

^bReflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts:


	5/31/10	5/31/09	5/31/08	5/31/07	5/31/06

Class A	0.03%	0.08%	0.08%	0.08%	0.05%

Class B	0.03	0.08	0.08	0.08	0.05

Class C	0.03	0.08	0.08	0.06	N/A

Class M	0.03	0.08	0.08	0.08	0.05

Class Y	0.03	0.08	0.05	N/A	N/A

^cIncludes amounts paid through expense offset arrangements.

^dAmount represents less than $0.01 per share.


60	Prospectus	Prospectus	61

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Net asset

Net realized

Ratio

investment

value,

and unrealized

Total from

From net

Total return

Net assets,

of expenses

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

Total

Redemption

Net asset value,

at net asset

end of period

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

income

distributions

fees

end of period

value (%)^a

(in thousands)

net assets (%)^b

net assets (%)

turnover (%)

Class A

May 31, 2010

$8.92

.37

.45

.82

(.38)

(.38)

— ^d

$9.36

9.34

$205,848

.81 ^c

4.10 ^c

9.45

May 31, 2009

9.10

.37

(.17)

.20

(.38)

(.38)

— ^d

8.92

2.36

174,980

.87 ^c

4.22 ^c

11.64

May 31, 2008

9.15

.37

(.04)

.33

(.38)

(.38)

— ^d

9.10

3.65

168,268

.86 ^c

4.07 ^c

27.19

May 31, 2007

9.11

.37

.04

.41

(.37)

(.37)

—

9.15

4.55

159,485

.89 ^c

3.97 ^c

13.89

May 31, 2006

9.32

.37

(.23)

.14

(.35)

(.35)

—

9.11

1.59

157,636

.86

4.00

4.69

Class B

May 31, 2010

$8.91

.32

.44

.76

(.32)

(.32)

— ^d

$9.35

8.65

$12,484

1.44 ^c

3.47 ^c

9.45

May 31, 2009

9.09

.31

(.17)

.14

(.32)

(.32)

— ^d

8.91

1.70

21,044

1.50 ^c

3.58 ^c

11.64

May 31, 2008

9.14

.31

(.04)

.27

(.32)

(.32)

— ^d

9.09

2.99

28,590

1.50 ^c

3.43 ^c

27.19

May 31, 2007

9.10

.31

.04

.35

(.31)

(.31)

—

9.14

3.88

36,076

1.53 ^c

3.33 ^c

13.89

May 31, 2006

9.32

.31

(.24)

.07

(.29)

(.29)

—

9.10

.83

49,019

1.51

3.33

4.69

Class C

May 31, 2010

$8.93

.30

.44

.74

(.30)

(.30)

— ^d

$9.37

8.45

$26,594

1.59 ^c

3.32 ^c

9.45

May 31, 2009

9.10

.30

(.16)

.14

(.31)

(.31)

— ^d

8.93

1.66

11,637

1.65 ^c

3.47 ^c

11.64

May 31, 2008

9.14

.30

(.04)

.26

(.30)

(.30)

— ^d

9.10

2.93

4,704

1.65 ^c

3.31 ^c

27.19

May 31, 2007 †

9.26

.20

(.12)

.08

(.20)

(.20)

—

9.14

.87 *

301

1.11 *^c

2.08 *^c

13.89

Class M

May 31, 2010

$8.92

.35

.44

.79

(.35)

(.35)

— ^d

$9.36

9.01

$3,928

1.09 ^c

3.83 ^c

9.45

May 31, 2009

9.10

.34

(.17)

.17

(.35)

(.35)

— ^d

8.92

2.06

2,058

1.15 ^c

3.95 ^c

11.64

May 31, 2008

9.15

.34

(.04)

.30

(.35)

(.35)

— ^d

9.10

3.38

1,536

1.15 ^c

3.78 ^c

27.19

May 31, 2007

9.11

.34

.04

.38

(.34)

(.34)

—

9.15

4.25

1,586

1.18 ^c

3.68 ^c

13.89

May 31, 2006

9.32

.34

(.22)

.12

(.33)

(.33)

—

9.11

1.28

1,678

1.16

3.71

4.69

Class Y

May 31, 2010

$8.93

.40

.45

.85

(.40)

(.40)

— ^d

$9.38

9.66

$9,576

.59 ^c

4.33 ^c

9.45

May 31, 2009

9.10

.39

(.17)

.22

(.39)

(.39)

— ^d

8.93

2.67

1,915

.65 ^c

4.47 ^c

11.64

May 31, 2008 ††

9.15

.16

(.04)

.12

(.17)

(.17)

—

9.10

1.28 *

429

.27 *^c

1.79 *^c

27.19

† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

Financial highlights (For a common share outstanding throughout the period)

Putnam Ohio Tax Exempt Income Fund

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Net asset

Net realized

Ratio

investment

value,

and unrealized

Total from

From net

Total return

Net assets,

of expenses

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

Total

Redemption

Net asset value,

at net asset

end of period

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

income

distributions

fees

end of period

value (%) ^a

(in thousands)

net assets (%) ^b,c

net assets (%) ^b

turnover (%)

Class A

May 31, 2010

$8.79

.37

.26

.63

(.37)

(.37)

—

$9.05

7.29

$147,041

.82

4.15

8.91

May 31, 2009

8.93

.36

(.13)

.23

(.37)

(.37)

— ^d

8.79

2.84

142,288

.84

4.32

19.58

May 31, 2008

8.98

.36

(.04)

.32

(.37)

(.37)

— ^d

8.93

3.62

142,524

.88

4.06

36.24

May 31, 2007

8.97

.36

.01

.37

(.36)

(.36)

— ^d

8.98

4.16

139,448

.89

3.91

15.46

May 31, 2006

9.22

.35

(.25)

.10

(.35)

(.35)

—

8.97

1.13

148,135

.89

3.87

5.77

Class B

May 31, 2010

$8.78

.31

.26

.57

(.31)

(.31)

—

$9.04

6.61

$3,454

1.45

3.51

8.91

May 31, 2009

8.93

.31

(.14)

.17

(.32)

(.32)

— ^d

8.78

2.06

6,387

1.48

3.67

19.58

May 31, 2008

8.97

.31

(.04)

.27

(.31)

(.31)

— ^d

8.93

3.07

9,189

1.52

3.41

36.24

May 31, 2007

8.96

.30

.01

.31

(.30)

(.30)

— ^d

8.97

3.47

12,931

1.53

3.27

15.46

May 31, 2006

9.21

.29

(.25)

.04

(.29)

(.29)

—

8.96

.47

19,643

1.54

3.22

5.77

Class C

May 31, 2010

$8.79

.30

.26

.56

(.30)

(.30)

—

$9.05

6.44

$8,716

1.60

3.37

8.91

May 31, 2009

8.93

.30

(.13)

.17

(.31)

(.31)

— ^d

8.79

2.01

4,985

1.63

3.55

19.58

May 31, 2008

8.97

.29

(.04)

.25

(.29)

(.29)

— ^d

8.93

2.89

3,088

1.67

3.27

36.24

May 31, 2007 †

9.09

.19

(.12)

.07

(.19)

(.19)

—

8.97

.80 *

332

1.11 *

2.04 *

15.46

Class M

May 31, 2010

$8.80

.34

.27

.61

(.35)

(.35)

—

$9.06

6.99

$999

1.10

3.87

8.91

May 31, 2009

8.94

.34

(.13)

.21

(.35)

(.35)

— ^d

8.80

2.56

1,085

1.13

4.03

19.58

May 31, 2008

8.98

.34

(.04)

.30

(.34)

(.34)

— ^d

8.94

3.45

986

1.17

3.77

36.24

May 31, 2007

8.98

.33

— ^d

.33

(.33)

(.33)

— ^d

8.98

3.73

1,157

1.18

3.63

15.46

May 31, 2006

9.23

.33

(.26)

.07

(.32)

(.32)

—

8.98

.83

1,347

1.19

3.58

5.77

Class Y

May 31, 2010

$8.79

.39

.27

.66

(.39)

(.39)

—

$9.06

7.65

$2,334

.60

4.39

8.91

May 31, 2009

8.93

.38

(.13)

.25

(.39)

(.39)

— ^d

8.79

3.04

234

.63

4.63

19.58

May 31, 2008 ††

9.00

.16

(.07)

.09

(.16)

(.16)

—

8.93

1.03 *

.28 *

1.78 *

36.24

* Not annualized.

† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

†† For the period January 2, 2008 (commencement of operations) to May 31, 2008.

a Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

^bReflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts:


	Percentage of
	average net assets

May 31, 2010	0.03%

May 31, 2009	0.06

May 31, 2008	0.01

May 31, 2007	0.01

May 31, 2006	0.01

^cIncludes amounts paid through expense offset arrangements.

^dAmount represents less than $0.01 per share.


64	Prospectus	Prospectus	65

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Net asset

Net realized

Ratio

investment

value,

and unrealized

Total from

From net

Total return

Net assets,

of expenses

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

Total

Redemption

Net asset value,

at net asset

end of period

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

income

distributions

fees

end of period

value (%)^a

(in thousands)

net assets (%)^b

net assets (%)

turnover (%)

Class A

May 31, 2010

$8.73

.37

.74

(.37)

(.37)

— ^c

$9.10

8.61

$171,708

.82 ^d

4.10 ^d

7.50

May 31, 2009

9.00

.36

(.27)

.09

(.36)

(.36)

—

8.73

1.23

147,104

.88 ^d

4.15 ^d

18.19

May 31, 2008

9.03

.36

(.03)

.33

(.36)

(.36)

—

9.00

3.69

143,667

.89 ^d

3.97 ^d

29.14

May 31, 2007

9.01

.35

.02

.37

(.35)

(.35)

—

9.03

4.15

137,594

.91 ^d

3.84 ^d

15.00

May 31, 2006

9.22

.35

(.22)

.13

(.34)

(.34)

— ^c

9.01

1.49

143,442

.87

3.81

7.51

Class B

May 31, 2010

$8.72

.31

.37

.68

(.31)

(.31)

— ^c

$9.09

7.94

$11,283

1.45 ^d

3.47 ^d

7.50

May 31, 2009

8.99

.31

(.27)

.04

(.31)

(.31)

—

8.72

.59

13,175

1.51 ^d

3.51 ^d

18.19

May 31, 2008

9.02

.30

(.03)

.27

(.30)

(.30)

—

8.99

3.02

17,776

1.53 ^d

3.32 ^d

29.14

May 31, 2007

9.00

.29

.02

.31

(.29)

(.29)

—

9.02

3.49

22,889

1.55 ^d

3.19 ^d

15.00

May 31, 2006

9.21

.29

(.21)

.08

(.29)

(.29)

— ^c

9.00

.84

30,224

1.52

3.15

7.51

Class C

May 31, 2010

$8.73

.30

.37

.67

(.30)

(.30)

— ^c

$9.10

7.77

$20,917

1.60 ^d

3.33 ^d

7.50

May 31, 2009

9.00

.29

(.26)

.03

(.30)

(.30)

—

8.73

.45

7,574

1.66 ^d

3.41 ^d

18.19

May 31, 2008

9.02

.29

(.03)

.26

(.28)

(.28)

—

9.00

3.01

2,049

1.68 ^d

3.20 ^d

29.14

May 31, 2007 †

9.12

.19

(.10)

.09

(.19)

(.19)

—

9.02

.92 *

340

1.12 *^d

2.06 *^d

15.00

Class M

May 31, 2010

$8.73

.34

.38

.72

(.34)

(.34)

— ^c

$9.11

8.42

$4,133

1.10 ^d

3.83 ^d

7.50

May 31, 2009

9.01

.34

(.28)

.06

(.34)

(.34)

—

8.73

.82

2,291

1.16 ^d

3.87 ^d

18.19

May 31, 2008

9.03

.33

(.02)

.31

(.33)

(.33)

—

9.01

3.50

2,257

1.18 ^d

3.67 ^d

29.14

May 31, 2007

9.02

.32

.01

.33

(.32)

(.32)

—

9.03

3.73

2,350

1.20 ^d

3.55 ^d

15.00

May 31, 2006

9.23

.32

(.21)

.11

(.32)

(.32)

— ^c

9.02

1.21

2,274

1.17

3.51

7.51

Class Y

May 31, 2010

$8.73

.39

.38

.77

(.39)

(.39)

— ^c

$9.11

9.01

$2,290

.60 ^d

4.34 ^d

7.50

May 31, 2009

9.00

.38

(.27)

.11

(.38)

(.38)

—

8.73

1.46

174

.66 ^d

4.46 ^d

18.19

May 31, 2008 ††

9.03

.16

(.03)

.13

(.16)

(.16)

—

9.00

1.44 *

.28 *^d

1.75 *^d

29.14

† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

For more information about
Putnam Arizona Tax Exempt Income Fund,
Putnam Massachusetts Tax Exempt Income Fund,
Putnam Michigan Tax Exempt Income Fund,
Putnam Minnesota Tax Exempt Income Fund,
Putnam New Jersey Tax Exempt Income Fund,
Putnam Ohio Tax Exempt Income Fund and
Putnam Pennsylvania Tax Exempt Income Fund

<R>

Each fund’s SAI and annual and semi-annual reports to shareholders include additional information about the fund. The SAI is incorporated by reference into this prospectus, which means it is part of this prospectus for legal purposes. Each fund’s annual report discusses the market conditions and investment strategies that significantly affected each fund’s performance during its last fiscal year. You may get free copies of these materials, request other information about any Putnam fund, or make shareholder inquiries, by contacting your financial representative, by visiting Putnam’s website at putnam.com/individual, or by calling Putnam toll-free at 1-800-225-1581.

You may review and copy information about a fund, including its SAI, at the Securities and Exchange Commission’s Public Reference Room in Washington, D.C. You may call the Commission at 1-202-551-8090 for information about the operation of the Public Reference Room. You may also access reports and other information about each fund on the EDGAR Database on the Commission’s website at http://www.sec.gov. You may get copies of this information, with payment of a duplication fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the Commission’s Public Reference Section, Washington, D.C. 20549-1520. You may need to refer to the fund’s file number.

</R>

Putnam Investments
One Post Office Square
Boston, MA 02109
1-800-225-1581

Address correspondence to
Putnam Investor Services
P.O. Box 8383
Boston, MA 02266-8383

putnam.com

<R>


File Nos.:
Arizona Fund 811-06258	Minnesota Fund 811-04527	Pennsylvania Fund 811-05802
Massachusetts Fund 811-04518	New Jersey Fund 811-05977
Michigan Fund 811-04529	Ohio Fund 811-04528	SP047 263490 9/10

</R>


<R>
FUND SYMBOLS	CLASS A	CLASS B	CLASS C	CLASS M	CLASS Y
Putnam Arizona Tax Exempt Income Fund	PTAZX	PAZBX	PAZCX	Pending	PAZYX
Putnam Massachusetts Tax Exempt Income Fund	PXMAX	PMABX	PMMCX	Pending	PMAYX
Putnam Michigan Tax Exempt Income Fund	PXMIX	PMEBX	PMGCX	Pending	PMIYX
Putnam Minnesota Tax Exempt Income Fund	PXMNX	PMTBX	PMOCX	Pending	PMNYX
Putnam New Jersey Tax Exempt Income Fund	PTNJX	PNJBX	PNJCX	Pending	PNJYX
Putnam Ohio Tax Exempt Income Fund	PXOHX	POXBX	POOCX	Pending	POTYX
Putnam Pennsylvania Tax Exempt Income Fund	PTEPX	PPNBX	PPNCX	Pending	PPTYX
</R>

Putnam Arizona Tax Exempt Income Fund

Putnam Massachusetts Tax Exempt Income Fund

Putnam Michigan Tax Exempt Income Fund

Putnam Minnesota Tax Exempt Income Fund

Putnam New Jersey Tax Exempt Income Fund

Putnam Ohio Tax Exempt Income Fund

Putnam Pennsylvania Tax Exempt Income Fund

FORM N-1A

PART B

STATEMENT OF ADDITIONAL INFORMATION (SAI)
<R>
September 30, 2010

This SAI is not a prospectus. If a fund has more than one form of current prospectus, each reference to the prospectus in this SAI includes all of the fund's prospectuses, unless otherwise noted. The SAI should be read together with the applicable prospectus. For a free copy of the funds’ annual reports or a prospectus dated 9/30/10, as revised from time to time, call Putnam Investor Services at 1-800-225-1581, visit Putnam's website at putnam.com or write Putnam Investor Services, P.O. Box 8383, Boston, MA 02266-8383.

</R>


	I-1	sai_4, sai_57, sai_60,

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SAI

PART I

FUND ORGANIZATION AND CLASSIFICATION

Each fund is a separate Massachusetts business trust. Putnam Arizona Tax Exempt Income Fund was organized on November 9, 1990. Each of Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund and Putnam Ohio Tax Exempt Income Fund was organized on July 14, 1989. Putnam New Jersey Tax Exempt Income Fund was organized on November 17, 1989. Putnam Pennsylvania Tax Exempt Income Fund was organized on April 20, 1989. A copy of each fund's Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of The Commonwealth of Massachusetts.

Each fund is an open-end management investment company with an unlimited number of authorized shares of beneficial interest. The Trustees may, without shareholder approval, create two or more series of shares representing separate investment portfolios. Any such series of shares may be divided without shareholder approval into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees determine. Each fund offers classes of shares with different sales charges and expenses.

<R>

Each share has one vote, with fractional shares voting proportionally. Shares of all classes will vote together as a single class except when otherwise required by law or as determined by the Trustees. Shares are freely transferable, are entitled to dividends as declared by the Trustees, and, if the fund were liquidated, would receive the net assets of the fund.

Each fund may suspend the sale of shares at any time and may refuse any order to purchase shares. Although each fund is not required to hold annual meetings of its shareholders, shareholders holding at least 10% of the outstanding shares entitled to vote have the right to call a meeting to elect or remove Trustees, or to take other actions as provided in the Agreement and Declaration of Trust. Each fund has voluntarily undertaken to hold a shareholder meeting at least every five years.

The Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds are "diversified" investment companies under the Investment Company Act of 1940, and the Arizona and New Jersey funds are "non-diversified" investment companies under the Investment Company Act of 1940. This means that with respect to 75% of the total assets of the Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds and with respect to 50% of the total assets of the Arizona and New Jersey funds, each fund may not invest


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		2010/09

more than 5% of its total assets in the securities of any one issuer (except U.S. government securities and securities issued by other investment companies). The remaining 25% of the Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds' total assets and the remaining 50% of the Arizona and New Jersey funds' total assets are not subject to this restriction. However, for the Arizona and New Jersey funds, to comply with provisions of the Internal Revenue Code providing favorable tax treatment, each fund will not, at the end of each quarter of the fund’s taxable year, invest more than 25% of the value of the fund’s total assets (x) in the securities (other than those of the U.S. Government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related trades or businesses, or (y) in the securities of one or more qualified publicly traded partnerships. (See “Taxes” in Part II of this SAI for more information.) To the extent a fund invests a significant portion of its assets in the securities of a particular issuer, it will be subject to an increased risk of loss if the market value of such issuer's securities declines.

</R>

INVESTMENT RESTRICTIONS

As fundamental investment restrictions, which may not be changed without a vote of a majority of the outstanding voting securities, each fund may not and will not:

<R>

(1) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at the time the borrowing is made.

</R>

(2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws.

(3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities which represent interests in real estate, and it may acquire and dispose of real estate or interests in real estate acquired through the exercise of its rights as a holder of debt obligations secured by real estate or interests therein.

(4) Purchase or sell commodities or commodity contracts, except that the fund may purchase and sell financial futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities.


	I-4	sai_4, sai_57, sai_60,

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<R>

(5) Make loans, except by purchase of debt obligations in which the fund may invest consistent with its investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.

</R>

(6)(a) (Arizona and New Jersey funds only). With respect to 50% of its total assets, invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities or to securities issued by other investment companies.

(6)(b) (Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds only). With respect to 75% of its total assets, invest in the securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities or to securities issued by other investment companies.

(7)(a) (Arizona and New Jersey funds only). With respect to 50% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer.

(7)(b) (Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds only). With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer.

(8) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of non-governmental issuers) if, as a result of such purchase, more than 25% of the fund's total assets would be invested in any one industry.

(9) Issue any class of securities which is senior to the fund's shares of beneficial interest, except for permitted borrowings.

The Investment Company Act of 1940 provides that a "vote of a majority of the outstanding voting securities" of a fund means the affirmative vote of the lesser of (1) more than 50% of the outstanding fund shares, or (2) 67% or more of the shares present at a meeting if more than 50% of the outstanding fund shares are represented at the meeting in person or by proxy.

The following non-fundamental investment policies may be changed by the Trustees without shareholder approval:


	I-5	sai_4, sai_57, sai_60,

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		2010/09

(1) Each fund will not invest in (a) securities which are not readily marketable, (b) securities restricted as to resale (excluding securities determined by the Trustees (or the person designated by the Trustees to make such determinations) to be readily marketable), and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 15% of the fund's net assets (taken at current value) would be invested in securities described in (a), (b) and (c) above.

All percentage limitations on investments (other than pursuant to non-fundamental restriction (1)) will apply at the time of the making of an investment and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment.

CHARGES AND EXPENSES

Management fees

<R>

Under a management contract effective January 1, 2010, each fund pays a monthly fee to Putnam Investment Management, LLC (Putnam Management), the fund’s investment manager, at an annual rate (as a percentage of the fund’s average net assets for the month) that varies based on the average of all of the determinations of the aggregate net assets of all open-end funds sponsored by Putnam Management (excluding the net assets of such funds investing in, or invested in by, other such funds, such as Putnam Global Sector Fund, Putnam RetirementReady® Funds and Putnam Money Market Liquidity Fund, to the extent necessary to avoid “double-counting” of such net assets) (“Total Open-End Mutual Fund Average Net Assets”), as determined at the close of each business day during the month, as set forth below:

0.590% of the first $5 billion of Total Open-End Mutual Fund Average Net Assets;
0.540% of the next $5 billion of Total Open-End Mutual Fund Average Net Assets;
0.490% of the next $10 billion of Total Open-End Mutual Fund Average Net Assets;
0.440% of the next $10 billion of Total Open-End Mutual Fund Average Net Assets;
0.390% of the next $50 billion of Total Open-End Mutual Fund Average Net Assets;
0.370% of the next $50 billion of Total Open-End Mutual Fund Average Net Assets;
0.360% of the next $100 billion of Total Open-End Mutual Fund Average Net Assets;
0.355% of any excess thereafter.

Under each fund’s prior management contract dated August 3, 2007, each fund paid a quarterly fee to Putnam Management based on the average net assets of that fund, as determined at the close of each business day during the quarter, at the annual rate equal to the lesser of (i) 0.50% of the average net asset value of the fund or (ii) 0.60% of the first $500 million, 0.50% of the next $500 million, 0.45% of the next $500 million, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355% of the next $5 billion, 0.34% of the next $5 billion and 0.33% of any excess over $21.5 billion of average net assets.


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		sai_61, sai_66,

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</R>

For the past three fiscal years, pursuant to its management contract, each fund incurred the following fees:


				Amount
				management fee
			Amount of	would have
		Management	management	been without
Fund name	Fiscal year	fee paid	fee waived	waivers
<R>
THE ARIZONA FUND	2010	$284,782	$46,680	$331,462
	2009	$158,981	$209,634	$368,615
</R>
	2008	$273,046	$142,948	$415,994
<R>
THE MASSACHUSETTS
FUND	2010	$1,313,294	$57,541	$1,370,835
	2009	$1,358,001	$0	$0
</R>
	2008	$1,398,196	$0	$0
<R>
THE MICHIGAN FUND	2010	$379,214	$24,487	$403,701
	2009	$397,082	$66,300	$463,382
</R>
	2008	$483,065	$44,262	$527,327
<R>
THE MINNESOTA FUND	2010	$406,496	$25,111	$431,607
	2009	$383,710	$77,894	$461,604
</R>
	2008	$426,313	$84,272	$510,585
<R>
THE NEW JERSEY FUND	2010	$1,078,447	$50,714	$1,129,161
	2009	$978,909	$25,505	$1,004,414
</R>
	2008	$966,006	$12,541	$978,547
<R>
THE OHIO FUND	2010	$693,608	$51,218	$744,826
	2009	$666,699	$91,685	$758,384
</R>
	2008	$731,501	$21,686	$753,187
<R>


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		sai_61, sai_66,

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		2010/09


THE PENNSYLVANIA
FUND	2010	$869,424	$40,004	$909,428
	2009	$765,441	$38,730	$804,171
</R>
	2008	$778,342	$23,120	$801,462

<R>

For all funds, the amount of management fee waived for the most recent fiscal year resulted from arrangements set forth in “Lipper category expense limitation” under “Management – The Management Contract” in Part II of this SAI and, in the case of all funds except the Massachusetts fund, in "Fund-specific expense limitation” below.

Fund-specific expense limitation. Effective August 1, 2009 through July 31, 2010, Putnam Management and the Board of Trustees of the funds agreed to replace the Lipper category expense limitation applicable to all funds and the Custom Lipper expense limitation applicable to certain funds with a new expense limitation arrangement under which Putnam Management waived management fees of each fund to the extent that the management fee would otherwise exceed 0.452% of the fund’s average net assets. Please see “Management – The Management Contract” in Part II of this SAI for a description of other expense limitations that may apply to the funds.

</R>

Brokerage commissions

The following table shows brokerage commissions paid during the fiscal years indicated:


	Fiscal	Brokerage
Fund name	year	commissions
<R>
THE ARIZONA FUND	2010	$0
	2009	$186
</R>
	2008	$273
<R>
THE MASSACHUSETTS FUND	2010	$0
	2009	$522
</R>
	2008	$743
<R>


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		sai_75, sai_78

		2010/09


		Portion of total
		reimbursement for
	Total	compensation and
Fund name	reimbursement	contributions
<R>
THE ARIZONA FUND	$4,191	$3,602
THE MASSACHUSETTS FUND	$14,267	$12,262
THE MICHIGAN FUND	$4,861	$4,178
THE MINNESOTA FUND	$5,156	$4,431
THE NEW JERSEY FUND	$12,016	$10,327
THE OHIO FUND	$8,184	$7,034
THE PENNSYLVANIA FUND	$9,915	$8,503
</R>

Trustee responsibilities and fees

The Trustees are responsible for generally overseeing the conduct of fund business. Subject to such policies as the Trustees may determine, Putnam Management furnishes a continuing investment program for each fund and makes investment decisions on its behalf. Subject to the control of the Trustees, Putnam Management also manages each fund's other affairs and business.

<R>

The table below shows the value of each Trustee's holdings in each fund and in all of the Putnam Funds as of December 31, 2009.


	Dollar range of Putnam	Dollar range of	Dollar range of Putnam
Name of Trustee	Arizona Tax Exempt	Putnam	Michigan Tax Exempt
	Income Fund shares	Massachusetts Tax	Income Fund shares
	owned	Exempt Income Fund	owned
		shares owned
Ravi Akhoury	$1-$10,000	$1-$10,000	$1-$10,000
*Barbara M. Baumann	N/A	N/A	N/A
Jameson A. Baxter	$1-$10,000	$1-$10,000	$1-$10,000
Charles B. Curtis	$1-$10,000	$1-$10,000	$1-$10,000
Robert J. Darretta	$1-$10,000	$1-$10,000	$1-$10,000
Myra R. Drucker	$1-$10,000	$1-$10,000	$1-$10,000
John A. Hill	$1-$10,000	$1-$10,000	$1-$10,000
Paul L. Joskow	$1-$10,000	$1-$10,000	$1-$10,000
Kenneth R. Leibler	$1-$10,000	$1-$10,000	$1-$10,000
Robert E. Patterson	$1-$10,000	$1-$10,000	$1-$10,000
George Putnam, III	$10,001-$50,000	$50,001-$100,000	$10,001-$50,000
**W. Thomas Stephens	$1-$10,000	$1-$10,000	$1-$10,000
Richard B. Worley	$1-$10,000	$1-$10,000	$1-$10,000

***Robert L. Reynolds	$1-$10,000	$1-$10,000	$1-$10,000


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		2010/09


	Dollar range of	Dollar range of	Dollar range of	Dollar range of
Name of Trustee	Putnam	Putnam New	Putnam Ohio	Putnam
	Minnesota Tax	Jersey Tax	Tax Exempt	Pennsylvania
	Exempt	Income Exempt	Income Fund	Tax Exempt
	Fund shares	Income Fund	shares owned	Income Fund
	owned	shares owned		shares owned
Ravi Akhoury	$1-$10,000	$1-$10,000	$1-$10,000	$1-$10,000
*Barbara M. Baumann	N/A	N/A	N/A	N/A
Jameson A. Baxter	$1-$10,000	$1-$10,000	$1-$10,000	$1-$10,000
Charles B. Curtis	$1-$10,000	$1-$10,000	$1-$10,000	$1-$10,000
Robert J. Darretta	$1-$10,000	$1-$10,000	$1-$10,000	$1-$10,000
Myra R. Drucker	$1-$10,000	$1-$10,000	$1-$10,000	$1-$10,000
John A. Hill	$1-$10,000	$1-$10,000	$1-$10,000	$1-$10,000
Paul L. Joskow	$1-$10,000	$1-$10,000	$1-$10,000	$1-$10,000
Kenneth R. Leibler	$1-$10,000	$1-$10,000	$1-$10,000	$1-$10,000
Robert E. Patterson	$1-$10,000	$1-$10,000	$1-$10,000	$1-$10,000
George Putnam, III	$10,001-$50,000	$10,001-	$10,001-	$10,001-
		$50,000	$50,000	$50,000
**W. Thomas	$1-$10,000	$1-$10,000
Stephens			$1-$10,000	$1-$10,000
Richard B. Worley	$1-$10,000	$1-$10,000	$1-$10,000	$1-$10,000

***Robert L.	$1-$10,000	$1-$10,000
Reynolds			$1-$10,000	$1-$10,000


	Aggregate dollar range of shares held in all of
Name of Trustee	the Putnam funds overseen by Trustee

Ravi Akhoury	over $100,000
*Barbara M. Baumann	N/A
Jameson A. Baxter	over $100,000
Charles B. Curtis	over $100,000
Robert J. Darretta	over $100,000
Myra R. Drucker	over $100,000
John A. Hill	over $100,000
Paul L. Joskow	over $100,000
Kenneth R. Leibler	over $100,000
Robert E. Patterson	over $100,000
George Putnam, III	over $100,000
**W. Thomas Stephens	over $100,000
Richard B. Worley	over $100,000

***Robert L. Reynolds	over $100,000

* Ms. Baumann was elected to the Board of Trustees after December 31, 2009.

</R>

** Mr. Stephens, who retired from the Board of Trustees on March 31, 2008, was reelected to the Board of Trustees on May 14, 2009.


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<R>

*** Trustee who is an "interested person" (as defined in the Investment Company Act of 1940) of the funds, Putnam Management and/or Putnam Retail Management. Mr. Reynolds is deemed an "interested person" by virtue of his positions as an officer of the funds, Putnam Management and/or Putnam Retail Management. Mr. Reynolds is the President and Chief Executive Officer of Putnam Investments, LLC and President of your fund and each of the other Putnam funds. None of the other Trustees is an "interested person."

Each independent Trustee of the funds receives an annual retainer fee and an additional fee for each Trustees meeting attended. Independent Trustees also are reimbursed for expenses they incur relating to their services as Trustees. All of the current independent Trustees of the funds are Trustees of all the Putnam funds and receive fees for their services.

The Trustees periodically review their fees to ensure that such fees continue to be appropriate in light of their responsibilities as well as in relation to fees paid to trustees of other mutual fund complexes. The Board Policy and Nominating Committee, which consists solely of independent Trustees of the funds, estimates that committee and Trustee meeting time, together with the appropriate preparation, requires the equivalent of at least three business days per Trustee meeting. The standing committees of the Board of Trustees, and the number of times each committee met, during your fund's most recently completed fiscal year are shown in the table below:

</R>


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Audit and Compliance Committee	12
<R>
Board Policy and Nominating Committee	9
Brokerage Committee	9
**Communications, Service and Marketing Committee	4
Contract Committee	16
</R>
Distributions Committee	11
Executive Committee	1
<R>
Investment Oversight Committees
Investment Oversight Committee A	10
Investment Oversight Committee B	10
**Investment Oversight Committee C	10
**Investment Oversight Committee D	10
*Investment Oversight Committee E	10
**Investment Oversight Coordinating Committee	6
Pricing Committee	9

*This committee was formed in May 2009.

** As of July 1, 2010, the committee structure changed, and the Communications, Service and Marketing Committee, Investment Oversight Coordinating Committee, and Investment Oversight Committees C, D and E were discontinued.

The following tables show the year each Trustee was first elected a Trustee of the Putnam funds, the fees paid to each Trustee by each fund for fiscal 2010, and the fees paid to each Trustee by all of the Putnam funds during calendar year 2009:

</R>


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COMPENSATION TABLES



Putnam Arizona Tax Exempt Income Fund


		Pension or
		retirement	Estimated
		benefits	annual	Total
	Aggregate	accrued as	benefits from	compensation
	compensation	part of	all Putnam	from all
	from the	fund	funds upon	Putnam
Trustees/Year	fund	expenses	retirement(1)	funds(2)
<R>
Ravi Akhoury/2009(3)	$432	N/A	N/A	$259,167
Barbara M. Baumann (4)	N/A	N/A	N/A	N/A
Jameson A. Baxter/1994(5)	$467	$61	$110,500	$295,000
Charles B. Curtis/2001	$457	$44	$113,900	$285,000
Robert J. Darretta/2007	$437	N/A	N/A	$290,000
Myra R. Drucker/2004(5)	$467	N/A	N/A	$295,000
John A. Hill/1985(5)(6)	$517	$102	$161,700	$374,376
Paul L. Joskow/1997(5)	$467	$40	$113,400	$295,000
Elizabeth T.
Kennan/1992(5)(7)	$467	$83	$108,000	$295,000
Kenneth R. Leibler/2006	$467	N/A	N/A	$295,000
Robert E. Patterson/1984	$467	$57	$106,500	$295,000
George Putnam, III/1984	$467	$50	$130,300	$295,000
W. Thomas
Stephens/1997(8)	$377	$68	$107,100	$139,167
Richard B. Worley/2004	$457	N/A	N/A	$285,000

Charles E. Haldeman,
Jr./2004(9)	N/A	N/A	N/A	N/A
Robert L. Reynolds/2008	N/A	N/A	N/A	N/A
</R>


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Putnam Massachusetts Tax Exempt Income Fund


		Pension or
		retirement	Estimated
		benefits	annual	Total
	Aggregate	accrued as	benefits from	compensation
	compensation	part of	all Putnam	from all
	from the	fund	funds upon	Putnam
Trustees/Year	fund	expenses	retirement(1)	funds(2)
<R>
Ravi Akhoury/2009(3)	$1,366	N/A	N/A	$259,167
Barbara M. Baumann (4)	N/A	N/A	N/A	N/A
Jameson A. Baxter/1994(5)	$1,427	$188	$110,500	$295,000
Charles B. Curtis/2001	$1,383	$134	$113,900	$285,000
Robert J. Darretta/2007	$1,389	N/A	N/A	$290,000
Myra R. Drucker/2004(5)	$1,427	N/A	N/A	$295,000
John A. Hill/1985(5)(6)	$1,631	$317	$161,700	$374,376
Paul L. Joskow/1997(5)	$1,427	$124	$113,400	$295,000
Elizabeth T.
Kennan/1992(5)(7)	$1,427	$256	$108,000	$295,000
Kenneth R. Leibler/2006	$1,427	N/A	N/A	$295,000
Robert E. Patterson/1984	$1,427	$177	$106,500	$295,000
George Putnam, III/1984	$1,427	$157	$130,300	$295,000
W. Thomas
Stephens/1997(8)	$1,229	$190	$107,100	$139,167
Richard B. Worley/2004	$1,383	N/A	N/A	$285,000

Charles E. Haldeman,
Jr./2004(9)	N/A	N/A	N/A	N/A
Robert L. Reynolds/2008	N/A	N/A	N/A	N/A
</R>


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Putnam Michigan Tax Exempt Income Fund


		Pension or
		retirement	Estimated
		benefits	annual	Total
	Aggregate	accrued as	benefits from	compensation
	compensation	part of	all Putnam	from all
	from the	fund	funds upon	Putnam
Trustees/Year	fund	expenses	retirement(1)	funds(2)
<R>
Ravi Akhoury/2009(3)	$498	N/A	N/A	$259,167
Barbara M. Baumann (4)	N/A	N/A	N/A	N/A
Jameson A. Baxter/1994(5)	$535	$70	$110,500	$295,000
Charles B. Curtis/2001	$522	$50	$113,900	$285,000
Robert J. Darretta/2007	$505	N/A	N/A	$290,000
Myra R. Drucker/2004(5)	$535	N/A	N/A	$295,000
John A. Hill/1985(5)(6)	$595	$117	$161,700	$374,376
Paul L. Joskow/1997(5)	$535	$46	$113,400	$295,000
Elizabeth T.
Kennan/1992(5)(7)	$535	$96	$108,000	$295,000
Kenneth R. Leibler/2006	$535	N/A	N/A	$295,000
Robert E. Patterson/1984	$535	$65	$106,500	$295,000
George Putnam, III/1984	$535	$58	$130,300	$295,000
W. Thomas
Stephens/1997(8)	$437	$76	$107,100	$139,167
Richard B. Worley/2004	$522	N/A	N/A	$285,000

Charles E. Haldeman,
Jr./2004(9)	N/A	N/A	N/A	N/A
Robert L. Reynolds/2008	N/A	N/A	N/A	N/A
</R>


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Putnam Minnesota Tax Exempt Income Fund


		Pension or
		retirement	Estimated
		benefits	annual	Total
	Aggregate	accrued as	benefits from	compensation
	compensation	part of	all Putnam	from all
	from the	fund	funds upon	Putnam
Trustees/Year	fund	expenses	retirement(1)	funds(2)
<R>
Ravi Akhoury/2009(3)	$521	N/A	N/A	$259,167
Barbara M. Baumann (4)	N/A	N/A	N/A	N/A
Jameson A. Baxter/1994(5)	$558	$73	$110,500	$295,000
Charles B. Curtis/2001	$545	$52	$113,900	$285,000
Robert J. Darretta/2007	$528	N/A	N/A	$290,000
Myra R. Drucker/2004(5)	$558	N/A	N/A	$295,000
John A. Hill/1985(5)(6)	$623	$123	$161,700	$374,376
Paul L. Joskow/1997(5)	$558	$48	$113,400	$295,000
Elizabeth T.
Kennan/1992(5)(7)	$558	$100	$108,000	$295,000
Kenneth R. Leibler/2006	$558	N/A	N/A	$295,000
Robert E. Patterson/1984	$558	$68	$106,500	$295,000
George Putnam, III/1984	$558	$60	$130,300	$295,000
W. Thomas
Stephens/1997(8)	$458	$79	$107,100	$139,167
Richard B. Worley/2004	$545	N/A	N/A	$285,000

Charles E. Haldeman,
Jr./2004(9)	N/A	N/A	N/A	N/A
Robert L. Reynolds/2008	N/A	N/A	N/A	N/A
</R>


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Putnam New Jersey Tax Exempt Income Fund


		Pension or
		retirement	Estimated
		benefits	annual	Total
	Aggregate	accrued as	benefits from	compensation
	compensation	part of	all Putnam	from all
	from the	fund	funds upon	Putnam
Trustees/Year	fund	expenses	retirement(1)	funds(2)
<R>
Ravi Akhoury/2009(3)	$1,148	N/A	N/A	$259,167
Barbara M. Baumann (4)	N/A	N/A	N/A	N/A
Jameson A. Baxter/1994(5)	$1,203	$157	$110,500	$295,000
Charles B. Curtis/2001	$1,165	$112	$113,900	$285,000
Robert J. Darretta/2007	$1,167	N/A	N/A	$290,000
Myra R. Drucker/2004(5)	$1,203	N/A	N/A	$295,000
John A. Hill/1985(5)(6)	$1,370	$265	$161,700	$374,376
Paul L. Joskow/1997(5)	$1,203	$104	$113,400	$295,000
Elizabeth T.
Kennan/1992(5)(7)	$1,203	$214	$108,000	$295,000
Kenneth R. Leibler/2006	$1,203	N/A	N/A	$295,000
Robert E. Patterson/1984	$1,203	$148	$106,500	$295,000
George Putnam, III/1984	$1,203	$131	$130,300	$295,000
W. Thomas
Stephens/1997(8)	$1,034	$159	$107,100	$139,167
Richard B. Worley/2004	$1,165	N/A	N/A	$285,000

Charles E. Haldeman,
Jr./2004(9)	N/A	N/A	N/A	N/A
Robert L. Reynolds/2008	N/A	N/A	N/A	N/A
</R>


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Putnam Ohio Tax Exempt Income Fund


		Pension or
		retirement	Estimated
		benefits	annual	Total
	Aggregate	accrued as	benefits from	compensation
	compensation	part of	all Putnam	from all
	from the	fund	funds upon	Putnam
Trustees/Year	fund	expenses	retirement(1)	funds(2)
<R>
Ravi Akhoury/2009(3)	$805	N/A	N/A	$259,167
Barbara M. Baumann (4)	N/A	N/A	N/A	N/A
Jameson A. Baxter/1994(5)	$850	$112	$110,500	$295,000
Charles B. Curtis/2001	$826	$80	$113,900	$285,000
Robert J. Darretta/2007	$817	N/A	N/A	$290,000
Myra R. Drucker/2004(5)	$850	N/A	N/A	$295,000
John A. Hill/1985(5)(6)	$961	$188	$161,700	$374,376
Paul L. Joskow/1997(5)	$850	$74	$113,400	$295,000
Elizabeth T.
Kennan/1992(5)(7)	$850	$153	$108,000	$295,000
Kenneth R. Leibler/2006	$850	N/A	N/A	$295,000
Robert E. Patterson/1984	$850	$105	$106,500	$295,000
George Putnam, III/1984	$850	$93	$130,300	$295,000
W. Thomas
Stephens/1997(8)	$717	$117	$107,100	$139,167
Richard B. Worley/2004	$826	N/A	N/A	$285,000

Charles E. Haldeman,
Jr./2004(9)	N/A	N/A	N/A	N/A
Robert L. Reynolds/2008	N/A	N/A	N/A	N/A
</R>


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Putnam Pennsylvania Tax Exempt Income Fund


		Pension or
		retirement	Estimated
		benefits	annual	Total
	Aggregate	accrued as	benefits from	compensation
	compensation	part of	all Putnam	from all
	from the	fund	funds upon	Putnam
Trustees/Year	fund	expenses	retirement(1)	funds(2)
<R>
Ravi Akhoury/2009(3)	$949	N/A	N/A	$259,167
Barbara M. Baumann (4)	N/A	N/A	N/A	N/A
Jameson A. Baxter/1994(5)	$998	$130	$110,500	$295,000
Charles B. Curtis/2001	$969	$93	$113,900	$285,000
Robert J. Darretta/2007	$964	N/A	N/A	$290,000
Myra R. Drucker/2004(5)	$998	N/A	N/A	$295,000
John A. Hill/1985(5)(6)	$1,133	$220	$161,700	$374,376
Paul L. Joskow/1997(5)	$998	$86	$113,400	$295,000
Elizabeth T.
Kennan/1992(5)(7)	$998	$178	$108,000	$295,000
Kenneth R. Leibler/2006	$998	N/A	N/A	$295,000
Robert E. Patterson/1984	$998	$122	$106,500	$295,000
George Putnam, III/1984	$998	$109	$130,300	$295,000
W. Thomas
Stephens/1997(8)	$852	$133	$107,100	$139,167
Richard B. Worley/2004	$969	N/A	N/A	$285,000

Charles E. Haldeman,
Jr./2004(9)	N/A	N/A	N/A	N/A
Robert L. Reynolds/2008	N/A	N/A	N/A	N/A
</R>

(1) Estimated benefits for each Trustee are based on Trustee fee rates for calendar years 2003, 2004 and 2005.

<R>

(2) As of December 31, 2009, there were 104 funds in the Putnam family.

(3) Mr. Akhoury was elected to the Board of Trustees of the Putnam funds on February 12, 2009.

(4) Ms. Baumann was elected to the Board of Trustees of the Putnam funds on July 1, 2010.


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(5) Certain Trustees are also owed compensation deferred pursuant to a Trustee Compensation Deferral Plan. As of May 31, 2010, the total amounts of deferred compensation payable by the fund, including income earned on such amounts, to these Trustees were:


Fund name	Ms. Baxter	Ms. Drucker	Mr. Hill	Dr. Joskow	Dr. Kennan

The Arizona	$2,293	$710	$8,190	$2,038	$267
Fund

The	$2,656	$822	$9,487	$2,360	$309
Massachusetts
Fund

The Michigan	$2,300	$712	$8,217	$2,044	$268
Fund

The	$2,286	$708	$8,167	$2,032	$266
Minnesota
Fund

The New	$2,458	$761	$8,782	$2,185	$286
Jersey Fund

The Ohio	$2,371	$734	$8,471	$2,108	$276
Fund

The	$2,399	$743	$8,570	$2,132	$279
Pennsylvania
Fund

(6) Includes additional compensation to Mr. Hill for service as Chairman of the Trustees of the Putnam funds.

(7) Dr. Kennan retired from the Board of Trustees of the Putnam funds on June 30, 2010.

(8) Mr. Stephens, who retired from the Board of Trustees of the Putnam funds on March 31, 2008, was re-elected to the Board of Trustees on May 14, 2009. Upon his retirement, Mr. Stephens became entitled to receive annual retirement benefit payments from the funds commencing on January 15, 2009. In connection with his re-election to the Board of Trustees, Mr. Stephens has agreed to suspend the balance of his retirement benefit payments for the duration of his service as a Trustee.

(9) Mr. Haldeman retired from the Board of Trustees of the Putnam funds on June 30, 2009.

</R>


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		2010/09

Under a Retirement Plan for Trustees of the Putnam funds (the Plan), each Trustee who retires with at least five years of service as a Trustee of the funds is entitled to receive an annual retirement benefit equal to one-half of the average annual attendance and retainer fees paid to such Trustee for calendar years 2003, 2004 and 2005. This retirement benefit is payable during a Trustee's lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. A death benefit, also available under the Plan, ensures that the Trustee and his or her beneficiaries will receive benefit payments for the lesser of an aggregate period of (i) ten years or (ii) such Trustee's total years of service.

The Plan Administrator (currently the Board Policy and Nominating Committee) may terminate or amend the Plan at any time, but no termination or amendment will result in a reduction in the amount of benefits (i) currently being paid to a Trustee at the time of such termination or amendment, or (ii) to which a current Trustee would have been entitled had he or she retired immediately prior to such termination or amendment. The Trustees have terminated the Plan with respect to any Trustee first elected to the board after 2003.

For additional information concerning the Trustees, see "Management" in Part II of this SAI.

Share ownership

<R>

At August 31, 2010, the officers and Trustees of each fund as a group owned less than 1% of the outstanding shares of each class of the fund, and, except as noted below, no person owned of record or to the knowledge of the fund beneficially 5% or more of any class of shares of the fund.

</R>


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		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

<R>


The Arizona Fund	A	EDWARD D JONES & CO
		ATTN: MUTUAL FUND SHAREHOLDER
		ACCOUNTING
		201 PROGRESS PKWY
		MARYLAND HTS MO 63043-3009	13.44%

	A	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	7.45%

	A	MORGAN STANLEY SMITH BARNEY
		HARBORSIDE FINANCIAL CENTER
		PLAZA 2, 3RD FLOOR
		JERSEY CITY NJ 07311	5.21%

	A	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	9.28%

	A	WELLS FARGO INVESTMENTS LLC
		FBO CUSTOMER ACCOUNTS
		ATTN MUTUAL FUND OPERATIONS
		625 MARQUETTE AVE FL 13
		MINNEAPOLIS MN 55402-2323	6.66%

	B	EDWARD D JONES & CO
		ATTN: MUTUAL FUND SHAREHOLDER
		ACCOUNTING
		201 PROGRESS PKWY
		MARYLAND HTS MO 63043-3009	6.51%

	B	GEORGE MIGLIORISI &
		ANN MIGLIORISI JTWROS
		13034 W PINNACLE VISTA DR
		PEORIA AZ 85383-7606	6.66%

	B	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	8.44%

	B	NFS LLC FBO
		HENRY W DREXEL & MARJORY M DREXE
		LINDA PROPER, PAMELA CASTER TTEE
		520 S HIGLEY RD UNIT 141
		MESA AZ 85206-2274	6.49%

	B	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	13.74%


	I-23	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

	B	WELLS FARGO INVESTMENTS LLC
		FBO CUSTOMER ACCOUNTS
		ATTN MUTUAL FUND OPERATIONS
		625 MARQUETTE AVE FL 13
		MINNEAPOLIS MN 55402-2323	5.72%

	C	MESIROW FINANCIAL INC
		A/C 6950-0424
		RAYMOND KULTALA &
		350 NORTH CLARK STREET
		CHICAGO IL 60654-4712	9.11%

	C	MLPF&S FOR THE SOLE BENEFIT OF IT'S
		CUSTOMERS
		ATTN FUND ADMINISTRATION
		4800 DEERLAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	30.72%

	C	NFS LLC FBO
		THE YOUNG FAMILY TRUST
		WILLIAM NORMAN YOUNG
		U/A 05/19/2005
		3741 VEGA DR	11.65%

	C	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	17.58%

	C	WELLS FARGO INVESTMENTS LLC
		FBO CUSTOMER ACCOUNTS
		ATTN MUTUAL FUND OPERATIONS
		625 MARQUETTE AVE FL 13
		MINNEAPOLIS MN 55402-2323	13.24%

	M	EDWARD D JONES & CO
		ATTN: MUTUAL FUND SHAREHOLDER
		ACCOUNTING
201 PROGRESS PKWY
		MARYLAND HTS MO 63043-3009	12.42%

	M	LPL FINANCIAL SERVICES
		A/C 1663-3001
		9785 TOWNE CENTRE DRIVE
		SAN DIEGO CA 92121-1968	17.27%

	M	LPL FINANCIAL SERVICES
		A/C 7742-5532
		9785 TOWNE CENTRE DRIVE
		SAN DIEGO CA 92121-1968	9.38%

	M	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	29.88%

	M	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	8.45%


	I-24	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

	M	ROBERT W. BAIRD & CO INC
		A/C 2143-3811
		777 E WISCONSIN AVE
		MILWAUKEE WI 53202-5300	7.76%

	Y	CITIGROUP GLOBAL MARKETS INC
		00109801250
		ATTN CINDY TEMPESTA 7TH FLOOR
		333 W 34TH ST
		NEW YORK NY 10001-2402	33.12%

	Y	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	43.65%

	Y	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	6.92%

	Y	WELLS FARGO INVESTMENTS LLC
		FBO CUSTOMER ACCOUNTS
		ATTN MUTUAL FUND OPERATIONS
		625 MARQUETTE AVE FL 13
		MINNEAPOLIS MN 55402-2323	11.83%

The Massachusetts Fund	A	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	5.18%

	A	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	7.04%

	B	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	12.43%

	B	MORGAN STANLEY SMITH BARNEY
		HARBORSIDE FINANCIAL CENTER
		PLAZA 2, 3RD FLOOR
		JERSEY CITY NJ 07311	5.79%

	B	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	9.71%

	C	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	5.31%


	I-25	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

	M	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	7.26%

	M	NFS LLC FEBO
		ANDREA MATOES
		238 PLYMOUTH AVE
		E WAREHAM MA 02538-1185	8.86%

	M	SEI PRIVATE TRUST COMPANY
		FBO: MELLON BANK ID 225
		1 FREEDOM VALLEY DR
		OAKS PA 19456-9989	19.60%

	M	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	14.64%

	Y	CHARLES SCHWAB & CO INC
		CLEARING ACCOUNT
		FOR THE EXCLUSIVE BENEFIT OF
		THEIR CUSTOMERS
		101 MONTGOMERY ST
		SAN FRANCISCO CA 94104-4151	5.44%

	Y	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	11.36%

The Michigan Fund	A	EDWARD D JONES & CO
		ATTN: MUTUAL FUND SHAREHOLDER
		ACCOUNTING
		201 PROGRESS PKWY
		MARYLAND HTS MO 63043-3009	13.61%

	A	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	5.14%

	A	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	6.49%

	B	EDWARD D JONES & CO
		ATTN: MUTUAL FUND SHAREHOLDER
		ACCOUNTING
		201 PROGRESS PKWY
		MARYLAND HTS MO 63043-3009	9.46%

	B	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3	27.21%


	I-26	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

		JACKSONVILLE FL 32246-6484

	B	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	7.39%

	C	AMERICAN ENTERPRISE INVESTMENT
		SVCS
		FBO 451677311
		P O BOX 9446
		MINNEAPOLIS MN 55474-0001	5.90%

	C	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	10.65%

	C	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	8.24%

	C	PRIMEVEST FINANCIAL SERVICES FBO
		CHARLES AUSTIN ALEVER
		12528693
		400 FIRST STREET SO SUITE 300
		PO BOX 283
		SAINT CLOUD MN 56302-0283	7.71%

	C	RAYMOND JAMES & ASSOC INC
		FBO LOIS L ANDERSON TTEE
		U/A DTD FEB 15 1980
		LOIS L ANDERSON REV TRUST
		4329 N STURM RD
		CASEVILLE MI 48725-9636	22.62%

	C	RAYMOND JAMES & ASSOC INC
		FBO VIRGINIA M WEBER TTEE
		U/A DTD MAY 8, 2006
		VIRGINIA M WEBER TRUST
		5446 MAXINE CT
		BAY CITY MI 48706-9743	5.49%

	M	ADRIAN VEREEKE
		8144 LAKE WOOD DR
		PORTAGE MI 49002-5564	5.45%

	M	FRANK R FARKAS
		840 DUCEY AVE
		MUSKEGON MI 49442-2102	35.38%

	M	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	54.88%

	Y	FIRST CLEARING LLC
		A/C 4570-5208
		ELSIE L MILLER TTEE	25.24%


	I-27	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

		ELSIE L MILLER TRUST U/A
		1400 N DRAKE RD APT 184
		KALAMAZOO MI 49006-1971

	Y	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	16.61%

	Y	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	16.07%

	Y	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	11.57%

	Y	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	5.75%

	Y	PRIMEVEST FINANCIAL SERVICES FBO
		DALE R SPRIK
		74602027
		400 FIRST STREET SO SUITE 300
		PO BOX 283
		SAINT CLOUD MN 56302-0283	16.02%

	Y	PUTNAM LLC
		ONE POST OFFICE SQUARE
		BOSTON, MA 02109	7.10%

The Minnesota Fund	A	EDWARD D JONES & CO
		ATTN: MUTUAL FUND SHAREHOLDER
		ACCOUNTING
		201 PROGRESS PKWY
		MARYLAND HTS MO 63043-3009	18.11%

	B	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	5.06%

	B	WELLS FARGO INVESTMENTS LLC
		FBO CUSTOMER ACCOUNTS
		ATTN MUTUAL FUND OPERATIONS
		625 MARQUETTE AVE FL 13
		MINNEAPOLIS MN 55402-2323	9.20%

	C	WELLS FARGO INVESTMENTS LLC
		FBO CUSTOMER ACCOUNTS
		ATTN MUTUAL FUND OPERATIONS
		625 MARQUETTE AVE FL 13
		MINNEAPOLIS MN 55402-2323	7.35%

	M	BARBARA J GREENHALGH
		2224 E 36TH ST
		MINNEAPOLIS MN 55407-3015	6.11%

	M	GERTRUDE L PALUBICKI TOD
		ANN L P GUSTIN
		SUBJECT TO STA TOD RULES	9.46%


	I-28	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

		576 E 2ND ST
		WINONA MN 55987-4217

	M	JAMES T BIESANZ JR
		270 W BROADWAY ST
		WINONA MN 55987-5224	7.06%

	M	NFS LLC FEBO
		MERCHANTS BANK NA
		PO BOX 248
		WINONA MN 55987-0248	7.04%

	M	SCOTT K BIESANZ TTEE
		SCOTT K BIESANZ REV TRUST
		U/A DTD 01/12/2005
		724 WASHINGTON ST
		WINONA MN 55987-3350	7.06%

	M	STEVEN T BIESANZ
		11 KNOLLWOOD LN
		WINONA MN 55987-4082	7.06%

	M	STIFEL NICOLAUS & CO INC
		A/C 1320-4946
		RICHARD E & CHARLOTTE A WUTTKE
		CHARLOTTE A WUTTKE, BRUCE WUTT
		501 NORTH BROADWAY
		ST LOUIS MO 63102-2131	12.91%

	Y	CITIGROUP GLOBAL MARKETS INC
		00109801250
		ATTN CINDY TEMPESTA 7TH FLOOR
		333 W 34TH ST
		NEW YORK NY 10001-2402	5.17%

	Y	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	47.04%

	Y	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	16.38%

	Y	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	10.24%

	Y	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	6.85%

	Y	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	5.83%

The New Jersey Fund	A	CITIGROUP GLOBAL MARKETS INC
		00109801250
		ATTN CINDY TEMPESTA 7TH FLOOR
		333 W 34TH ST
		NEW YORK NY 10001-2402	5.21%


	I-29	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

	A	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	15.57%

	B	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	5.45%

	B	NANCY L COSTA &
		KENNETH S COSTA JTWROS
		8 JOHN STEVENS RD
		WHITE HSE STA NJ 08889-3338	5.74%

	B	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	26.68%

	C	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	40.71%

	M	FRANCIS X MURPHY
		36 HAWTHORNE PL APT 2B
		MONTCLAIR NJ 07042-3272	12.61%

	M	MARIE C FRANKLIN
		683 RT 579
		PITTSTOWN NJ 08867	18.31%

	M	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	45.45%

	M	YESHWANT & SHAILA Y KARANDIKAR
		TRUSTEES U/A DTD 07/3/2001
		KARANDIKAR FAMILY TRUST
		203 SHERWOOD CT
		SOMERSET NJ 08873-6029	5.42%

	Y	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	18.50%

	Y	NFS LLC FBO
		CHITRANJAN S RANAWAT
		3 BUCKINGHAM DR
		ALPINE NJ 07620	7.49%

	Y	NFS LLC FBO
		MARK GRUENBAUM	7.12%


	I-30	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

		LINDA W GRUENBAUM
		697 RUTLAND AVE
		TEANECK NJ 07666-2208

	Y	NFS LLC FBO
		SARIKA SHARMA
		28 LAURIE DR
		ENGLEWD CLFS NJ 07632-2222	5.68%

	Y	NFS LLC FBO
		MICHAEL B HARRIS
		FREIDA G HARRIS
		233 MAPLE ST
		ENGLEWOOD NJ 07631-3703	5.65%

	Y	RAYMOND JAMES & ASSOC INC
		FBO PAUL P POMPA JR
		12 KENSINGTON CT
		WARREN NJ 07059-5057	20.08%

The Ohio Fund	A	EDWARD D JONES & CO
		ATTN: MUTUAL FUND SHAREHOLDER
		ACCOUNTING
		201 PROGRESS PKWY
		MARYLAND HTS MO 63043-3009	10.89%

	A	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	11.65%

	B	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	10.32%

	C	EDWARD D JONES & CO
		ATTN: MUTUAL FUND SHAREHOLDER
		ACCOUNTING
		201 PROGRESS PKWY
		MARYLAND HTS MO 63043-3009	8.20%

	C	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	12.84%

	C	MORGAN STANLEY SMITH BARNEY
		HARBORSIDE FINANCIAL CENTER
		PLAZA 2, 3RD FLOOR
		JERSEY CITY NJ 07311	19.09%

	M	CITIGROUP GLOBAL MARKETS INC
		00109801250
		ATTN CINDY TEMPESTA 7TH FLOOR
		333 W 34TH ST
		NEW YORK NY 10001-2402	10.74%


	I-31	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

	M	EDWARD D JONES & CO
		ATTN: MUTUAL FUND SHAREHOLDER
		ACCOUNTING
		201 PROGRESS PKWY
		MARYLAND HTS MO 63043-3009	7.33%

	M	LPL FINANCIAL
		A/C 4654-1497
		9785 TOWNE CENTRE DR
		SAN DIEGO CA 92121-1968	55.88%

	Y	CITIGROUP GLOBAL MARKETS INC
		00109801250
		ATTN CINDY TEMPESTA 7TH FLOOR
		333 W 34TH ST
		NEW YORK NY 10001-2402	21.94%

	Y	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	48.22%

	Y	SEI PRIVATE TRUST COMPANY
		C/O FIRST MERIT ID682
		ATTN MUTUAL FUND ADMIN
		1 FREEDOM VALLEY DR
		OAKS PA 19456-9989	22.11%

The Pennsylvania Fund	A	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	11.85%

	B	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	13.67%

	C	WELLS FARGO ADVISORS
		SPECIAL CUSTODY ACCT FOR THE
		EXCLUSIVE BENEFIT OF CUSTOMER
		2801 MARKET ST
		SAINT LOUIS MO 63103-2523	11.68%

	M	JOHN J HANDLEY &
		JOYCE A HANDLEY TEN IN COMM
		495 LAKE LOUISE RD
		DALLAS PA 18612-6063	22.01%

	M	MICHAEL F IANNELLI &
		NANETTE F IANNELLI JTWROS
		413 COLLEGE AVE
		WEST CHESTER PA 19382-3555	6.23%

v	Y	CITIGROUP GLOBAL MARKETS INC
		00109801250
		ATTN CINDY TEMPESTA 7TH FLOOR	7.30%


	I-32	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Shareholder name	Percentage
Fund name	Class	and address	owned (%)

		333 W 34TH ST
		NEW YORK NY 10001-2402

	Y	LPL FINANCIAL
		FBO: CUSTOMER ACCOUNTS
		ATTN: MUTUAL FUND OPERATIONS
		PO BOX 509046
		SAN DIEGO CA 92150-9046	12.88%

	Y	MLPF&S FOR THE SOLE BENEFIT OF
		ITS CUSTOMERS
		ATTN FUND ADMINISTRATION
		4800 DEER LAKE DR E FL 3
		JACKSONVILLE FL 32246-6484	8.23%

	Y	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	12.10%

	Y	PERSHING LLC
		PO BOX 2052
		JERSEY CITY NJ 07303-2052	5.90%

</R>

Distribution fees

<R>

During fiscal 2010, the funds paid the following 12b-1 fees to Putnam Retail Management:

</R>


Fund name	Class A	Class B	Class C	Class M
<R>
THE ARIZONA FUND	$133,857	$24,919	$14,294	$5,868
THE MASSACHUSETTS
FUND	$530,974	$111,286	$172,270	$18,781
THE MICHIGAN FUND	$174,551	$28,593	$3,615	$3,372
THE MINNESOTA FUND	$177,586	$47,672	$40,522	$3,192
THE NEW JERSEY FUND	$431,012	$141,059	$202,637	$15,606
THE OHIO FUND	$314,362	$40,677	$66,801	$5,045
THE PENNSYLVANIA FUND	$356,253	$100,786	$152,346	$15,322
</R>

Class A sales charges and contingent deferred sales charges

Putnam Retail Management received sales charges with respect to class A shares in the following amounts during the periods indicated:


	I-33	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


<R>
			Sales charges
			retained by Putnam
		Total front-	Retail Management	Contingent
	Fiscal	end sales	after dealer	deferred
Fund name	year	charges	concessions	sales charges
THE ARIZONA FUND	2010	$59,973	$8,453	$0
	2009	$56,653	$8,482	$3
	2008	$56,679	$6,298	$0
THE MASSACHUSETTS
FUND	2010	$333,153	$50,683	$29,156
	2009	$216,323	$31,475	$13,112
	2008	$327,307	$46,026	$0
THE MICHIGAN FUND	2010	$76,399	$10,531	$807
	2009	$51,220	$8,108	$1,734
	2008	$78,592	$8,848	$0
THE MINNESOTA
FUND	2010	$76,017	$10,827	$4,286
	2009	$106,216	$15,305	$0
	2008	$101,461	$10,175	$0
THE NEW JERSEY
FUND	2010	$457,355	$66,597	$18,625
	2009	$350,242	$55,764	$3,000
	2008	$322,134	$42,134	$10,000
THE OHIO FUND	2010	$128,959	$17,721	$0
	2009	$187,222	$26,390	$22,922
	2008	$156,012	$23,314	$58
THE PENNSYLVANIA
FUND	2010	$647,726	$93,170	$1,000
	2009	$420,123	$64,851	$2,307
	2008	$327,461	$39,802	$1,000
</R>

Class B contingent deferred sales charges

Putnam Retail Management received contingent deferred sales charges upon redemptions of class B shares in the following amounts during the periods indicated:

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Investor servicing fees

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During the 2010 fiscal year, each fund incurred the following fees for investor servicing provided by Putnam Investor Services, Inc.:

</R>


Fund name	Investor servicing fees
<R>
Putnam Arizona Tax Exempt Income Fund	$38,142
Putnam Massachusetts Tax Exempt Income Fund	$158,231
Putnam Michigan Tax Exempt Income Fund	$46,474
Putnam Minnesota Tax Exempt Income Fund	$49,629
Putnam New Jersey Tax Exempt Income Fund	$130,460
Putnam Ohio Tax Exempt Income Fund	$85,927
Putnam Pennsylvania Tax Exempt Income Fund	$104,986
</R>

PORTFOLIO MANAGERS

Other accounts managed

The following tables show the number and approximate assets of other investment accounts (or portions of investment accounts) that the funds’ portfolio managers managed as of the funds’ most recent fiscal year-end. The other accounts may include accounts for which an individual was not designated as a portfolio manager. Unless noted, none of the other accounts pays a fee based on the account's performance.


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The Arizona Fund
<R>

					Other accounts
					(including separate
					accounts, managed
					account programs and
	Other SEC-registered		Other accounts that		single-sponsor defined
Portfolio	open-end and closed-end		pool assets from more		contribution plan
managers	funds		than one client		offerings)

</R>

	Number		Number		Number
	of		of		of
	accounts	Assets	accounts	Assets	accounts	Assets

<R>

Thalia Meehan	13	$7,838,500,000	0	0	2	$117,000,000

Paul Drury	13	$7,838,500,000	0	0	1	$116,100,000

Susan McCormack	13	$7,838,500,000	0	0	2	$118,200,000

</R>


The Massachusetts Fund
<R>

					Other accounts
					(including separate
					accounts, managed
					account programs and
	Other SEC-registered		Other accounts that		single-sponsor defined
Portfolio	open-end and closed-end		pool assets from more		contribution plan
managers	funds		than one client		offerings)

</R>

	Number		Number		Number
	of		of		of
	accounts	Assets	accounts	Assets	accounts	Assets

<R>

Thalia Meehan	13	$7,605,200,000	0	0	2	$117,000,000

Paul Drury	13	$7,605,200,000	0	0	1	$116,100,000

Susan McCormack	13	$7,605,200,000	0	0	2	$118,200,000

</R>


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The Michigan Fund
<R>

					Other accounts
					(including separate
					accounts, managed
					account programs and
	Other SEC-registered		Other accounts that		single-sponsor defined
Portfolio	open-end and closed-end		pool assets from more		contribution plan
managers	funds		than one client		offerings)

</R>

	Number		Number		Number
	of		of		of
	accounts	Assets	accounts	Assets	accounts	Assets

<R>

Thalia Meehan	13	$7,824,000,000	0	0	2	$117,000,000

Paul Drury	13	$7,824,000,000	0	0	1	$116,100,000

Susan McCormack	13	$7,824,000,000	0	0	2	$118,200,000

</R>


The Minnesota Fund
<R>

					Other accounts
					(including separate
					accounts, managed
					account programs and
	Other SEC-registered		Other accounts that		single-sponsor defined
Portfolio	open-end and closed-end		pool assets from more		contribution plan
managers	funds		than one client		offerings)

</R>

	Number		Number		Number
	of		of		of
	accounts	Assets	accounts	Assets	accounts	Assets

<R>

Thalia Meehan	13	$7,813,600,000	0	0	2	$117,000,000

Paul Drury	13	$7,813,600,000	0	0	1	$116,100,000

Susan McCormack	13	$7,813,600,000	0	0	2	$118,200,000

</R>


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The New Jersey Fund
<R>

					Other accounts
					(including separate
					accounts, managed
					account programs and
	Other SEC-registered		Other accounts that		single-sponsor defined
Portfolio	open-end and closed-end		pool assets from more		contribution plan
managers	funds		than one client		offerings)

</R>

	Number		Number		Number
	of		of		of
	accounts	Assets	accounts	Assets	accounts	Assets

<R>

Thalia Meehan	13	$7,648,800,000	0	0	2	$117,000,000

Paul Drury	13	$7,648,800,000	0	0	1	$116,100,000

Susan McCormack	13	$7,648,800,000	0	0	2	$118,200,000

</R>


The Ohio Fund
<R>

					Other accounts
					(including separate
					accounts, managed
					account programs and
	Other SEC-registered		Other accounts that		single-sponsor defined
Portfolio	open-end and closed-end		pool assets from more		contribution plan
managers	funds		than one client		offerings)

</R>

	Number		Number		Number
	of		of		of
	accounts	Assets	accounts	Assets	accounts	Assets

<R>

Thalia Meehan	13	$7,744,400,000	0	0	2	$117,000,000

Paul Drury	13	$7,744,400,000	0	0	1	$116,100,000

Susan McCormack	13	$7,744,400,000	0	0	2	$118,200,000

</R>


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The Pennsylvania Fund
<R>

					Other accounts
					(including separate
					accounts, managed
					account programs and
	Other SEC-registered		Other accounts that		single-sponsor defined
Portfolio	open-end and closed-end		pool assets from more		contribution plan
managers	funds		than one client		offerings)

</R>

	Number		Number		Number
	of		of		of
	accounts	Assets	accounts	Assets	accounts	Assets

<R>

Thalia Meehan	13	$7,696,500,000	0	0	2	$117,000,000

Paul Drury	13	$7,696,500,000	0	0	1	$116,100,000

Susan McCormack	13	$7,696,500,000	0	0	2	$118,200,000

</R>

See "Management - Portfolio Transactions - Potential conflicts of interest in managing multiple accounts" in Part II of this SAI for information on how Putnam Management addresses potential conflicts of interest resulting from an individual's management of more than one account.

Compensation of portfolio managers

<R>

Putnam’s goal for our products and investors is to deliver top quartile or better performance over a rolling 3-year period versus peers on a pre-tax basis. For these funds, the peer group Putnam compares fund performance against is the Lipper Municipal Debt Fund Category. Each portfolio manager is assigned an industry competitive incentive compensation target for achieving this goal. The target is based in part on the type and amount of assets the individual manages. The target increases or decreases depending on whether the portfolio manager’s performance is higher or lower than the top quartile, subject to a maximum increase of 50%, for a portfolio manager who outperforms at least 90% of his or her peer group, and a maximum decrease of 100%, for a portfolio manager who outperforms less than 25% of his or her peer group. For example, the target of a portfolio manager who outperforms 50% of his or her peer group would decrease 50%. Investment performance of a portfolio manager is asset-weighted across the products he or she manages. The period over which performance is measured is the lesser of three years or the length of time which the portfolio manager has managed the fund.

</R>


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Actual incentive compensation may be greater or less than a portfolio manager’s target, as it takes into consideration team/group performance, qualitative performance factors and other considerations in Putnam's discretion. Incentive compensation includes a cash bonus and may also include grants of restricted stock or options. In addition to incentive compensation, portfolio managers receive fixed annual salaries typically based on level of responsibility and experience.

Ownership of securities

The dollar range of shares of each fund owned by the portfolio managers at the end of each fund’s last fiscal year, including investments by immediate family members and amounts invested through retirement and deferred compensation plans, were as follows:


Fund	Portfolio Managers	Dollar range of shares owned

The Arizona Fund	Thalia Meehan	$0

	Paul Drury	$0

<R>

</R>

	Susan McCormack	$0

<R>

The Massachusetts Fund	Thalia Meehan	$100,000-$500,000

</R>

	Paul Drury	$1-$10,000

<R>

</R>

	Susan McCormack	$1-$10,000

The Michigan Fund	Thalia Meehan	$0

	Paul Drury	$0

<R>

</R>

	Susan McCormack	$0

The Minnesota Fund	Thalia Meehan	$0

	Paul Drury	$0

<R>

</R>

	Susan McCormack	$0

The New Jersey Fund	Thalia Meehan	$0

	Paul Drury	$0

<R>

	Susan McCormack	$0

The Ohio Fund	Thalia Meehan	$0

	Paul Drury	$0


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</R>

	Susan McCormack	$0

<R>

The Pennsylvania Fund	Thalia Meehan	$0

</R>

	Paul Drury	$0

<R>

</R>

	Susan McCormack	$0

<R>
</R>

STATE TAXES

The prospectus describes generally the tax treatment of distributions by the funds. This section of the SAI and the section entitled "Taxes" in Part II of this SAI include additional information concerning certain state and federal tax consequences of an investment in a fund.

This additional information is based on state laws, judicial decisions and other administrative materials interpreting state law, all of which are subject to changes that may or may not be retroactive. Prospective investors should be aware that an investment in a state tax-exempt fund may not be suitable for persons who do not otherwise receive income subject to income taxes of such state. You should consult your tax advisor to see how investing in a Fund will affect your own tax situation.

From time to time legislation may be introduced or litigation may arise that would change the tax treatment of exempt-interest dividends. Such litigation or legislation may have the effect of raising the state or other taxes payable by shareholders on such dividends. Shareholders should consult their tax advisers for the current law on exempt-interest dividends.

Arizona. It is the published position of the Arizona Department of Revenue that distributions by a regulated investment company are exempt from Arizona state income tax to the extent such distributions are derived from interest on obligations the interest on which is exempt from Arizona state income tax. As long as the Arizona fund qualifies as a regulated investment company, to the extent distributions by the Arizona fund are derived from interest income with respect to U.S. Treasury securities or, to the extent as described below, tax-exempt securities issued by Arizona state or local governmental issuers, such distributions will be exempt from Arizona state personal income tax. In addition, it is the published position of the Arizona Department of Revenue that distributions by a regulated investment company derived from certain other governmental obligations as to which federal law specifically precludes state taxation of interest


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received by a direct investor in such obligations are exempt from Arizona personal state income tax.

Some tax-exempt securities of Arizona issuers have a direct income tax exemption under Arizona law, independent of federal tax treatment. However, in most cases, interest with respect to tax-exempt securities of Arizona issuers is exempt from Arizona state income tax only so long as that interest is excluded from gross income for federal income tax purposes. Therefore, if interest with respect to tax-exempt securities of Arizona issuers held by the Arizona fund ceases to be exempt from federal income tax (or is retroactively determined not to be exempt under federal law), then, unless that obligation has an independent statutory tax exemption under Arizona law, distributions by the Arizona fund derived from interest on that obligation will cease to be exempt from Arizona state personal income tax (and, if interest on the obligation is determined to be taxable under federal law retroactive to any date, those distributions may be considered not to have been exempt from Arizona state income taxes from that date).

For Arizona personal income tax purposes, distributions by the Arizona fund, other than distributions exempt from Arizona state personal income tax, will be taxable as ordinary income, whether paid in cash or reinvested in additional shares. Under current Arizona income tax law, distributions of net capital gains earned by the Arizona fund are not exempt from taxation and are taxed at ordinary income tax rates.

Massachusetts. Distributions received from the Massachusetts fund are exempt from Massachusetts personal income tax to the extent that they are derived from interest on tax-exempt securities of Massachusetts issuers or obligations issued by or on behalf of the United States government and are properly designated as such. The Massachusetts fund has obtained a tax ruling which recognizes for Massachusetts personal income tax purposes the tax-exempt character of gains realized by the fund on the sale of certain tax-exempt securities of Massachusetts issuers when those gains are distributed to shareholders and properly designated as such.

Distributions from investment income and capital gains, including exempt-interest dividends, are not exempt, however, from Massachusetts corporate excise tax.


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<R>

Michigan. Distributions received from the Michigan fund are exempt from Michigan personal income tax to the extent they are exempt-interest dividends derived from interest on tax-exempt securities. For Michigan personal income tax, fund distributions attributable to any source other than interest on Michigan tax-exempt securities or tax exempt obligations of the United States will be fully taxable, and for purposes of Michigan personal income tax and the business income tax component of the Michigan business tax (discussed below), such distributions will be fully included in the tax base upon which the gross receipts component of the business tax is computed. Fund distributions may be subject to the uniform city income tax imposed by certain Michigan cities.

</R>

Exempt-interest dividends, if received in connection with a shareholder's business activity, will in general be subject to the new Michigan Business Tax ("MBT") which applies to all business activity occurring after December 31, 2007. However, individuals, estates, partnerships or trusts organized exclusively for estate or gift planning purposes, that derive income solely in connection with personal investment activity, and not in the course of a regular trade or business, will not be subject to the MBT. The MBT replaced the former Michigan Single Business Tax as the primary tax on business activity in Michigan.

Under the MBT, there are two primary taxes on business activity, a business income tax and a modified gross receipts tax. In addition, the MBT provides for two alternative taxes in lieu of the business income tax and the modified gross receipts taxes applicable to insurance companies and financial institutions. The following general discussion does not describe the MBT as applicable to such businesses and taxpayers engaged in such activities should consult with their own tax advisors.

The first component of the MBT is a tax at the rate of 4.95% on the "business income tax base" of every taxpayer with business activity in Michigan. The term "business income tax base" is defined to mean a taxpayer's business income, subject to certain enumerated adjustments. "Business income" means that part of an applicable taxpayer's federal taxable income derived from business activity. Under Section 201(2)(b) of the MBT, all interest income and dividends received from obligations issued by states other than Michigan are added back to the Michigan business income tax base. Accordingly, the business income tax component of the MBT should continue to exclude Michigan obligations which are federally tax-exempt by virtue of the fact that the tax base is determined by direct reference to federal taxable income.


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The second component of the MBT is a tax at the rate of 0.8% on the "modified gross receipts tax base" of every taxpayer with nexus in Michigan. The term "modified gross receipts tax base" is defined to mean "a taxpayer's gross receipts less purchases from other firms before apportionment under the MBT". "Gross receipts" is defined by the MBT as "the entire amount received by the taxpayer from any activity whether in intrastate, interstate, or foreign commerce carried on for direct or indirect gain, benefit, or advantage to the taxpayer or others". Although the MBT expressly excepts income derived from certain sources, there is no MBT exception applicable to interest income or dividends received from federally tax exempt obligations or on obligations of the State of Michigan or its agencies or instrumentalities. Therefore, interest income and dividends paid on Michigan obligations issued under a Michigan statute that does not expressly address the Michigan tax treatment of such obligations*, will be subject to the modified gross receipts tax component of the MBT for taxpayers with nexus to Michigan.

The business income and modified gross receipts taxes calculated above are increased by an additional surcharge in varying percentages for specified time periods, which surcharges may be adjusted in the future based on the level of Michigan personal income growth defined by the bureau of economic analysis of the United States Department of Commerce or its successor.

<R>

* Certain Michigan obligations are issued under a specific enabling statute which expressly provides for exemption of the subject obligations from Michigan taxation. Such obligations should remain exempt from the gross receipts component of the MBT notwithstanding that the MBT's enactment may be more recent than a specific enabling statute under Michigan court decisions that hold that in such circumstances the more specific statute addressing Michigan tax treatment should control. See, e.g., Bauer v. Department of Treasury, 203 Mich. App. 97 (1994).

</R>

Minnesota. In 1995, Minnesota enacted a statement of intent that interest on obligations of Minnesota and its political subdivisions and Indian tribes be included in net income of individuals, estates and trusts for Minnesota income tax purposes if it is judicially determined that Minnesota’s exemption of such interest and taxation of interest on obligations of other states and their political subdivisions and Indian tribes unlawfully discriminates against interstate commerce. See Minn. Stat. § 289A.50, subd. 10. This provision applies to taxable years that begin during or after the calendar year in which any such determination becomes final.

On May 19, 2008, the U.S. Supreme Court decided the case of Department of Revenue of Kentucky v. Davis, in which a taxpayer had challenged Kentucky’s scheme of taxation that exempted from taxation interest on the bonds of Kentucky and its political subdivisions while taxing interest on the bonds of other states and their political subdivisions. The Supreme Court held that Kentucky’s taxing scheme did not violate the


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Commerce Clause. This decision, however, dealt with bonds that financed governmental projects, and the Court noted that the case did not present any question concerning the treatment of “private activity bonds” issued by states and their political subdivisions to finance projects for private entities. (The Court’s opinion also did not address the issue of discriminatory treatment of Indian tribal bonds.) The Court’s opinion left open the possibility that another party could challenge a state’s discriminatory treatment of the interest on private activity bonds.

The management of the Funds is not aware of any pending litigation involving private activity bonds. Nevertheless, a court in the future could hold that a state’s discriminatory treatment of private activity bonds violates the Commerce Clause, and in that case the 1995 Minnesota statute could take effect and interest on certain Minnesota obligations held by the Minnesota Tax Exempt Income Fund would become taxable in Minnesota.

That percentage of interest on indebtedness incurred or continued to purchase or carry shares of an investment company paying exempt-interest dividends, such as the Minnesota Fund, that is equal to the percentage of the Fund’s distributions from investment income and short-term capital gains that is exempt from federal income tax, will not be deductible by the investor for Minnesota personal income tax purposes.

New Jersey. The New Jersey fund intends to be a Qualified Investment Fund under the laws of New Jersey, except when investing for defensive purposes under certain circumstances. As long as the New Jersey fund is a Qualified Investment Fund, to the extent its distributions are derived from interest or net gains on Tax-Exempt Obligations, such distributions will be exempt from New Jersey Gross Income Tax, and gains resulting from the redemption or sale of shares of the New Jersey fund will also be exempt from New Jersey Gross Income Tax.

Under New Jersey law, the fund will be a "Qualified Investment Fund" for the calendar year if it both (i) has no investments other than Interest-Bearing Obligations, Cash, and Certain Financial Instruments, and (ii) at the end of each calendar quarter, has not less than 80 percent of the aggregate principal amount of all its investments, excluding Cash and Certain Financial Instruments, invested in Tax-Exempt Obligations. For this purpose, "Interest-Bearing Obligations" includes obligations issued at a discount and "Cash" includes cash items and receivables. "Certain Financial Instruments" means financial options, futures, forward contracts, and other similar financial instruments related to interest-bearing obligations, obligations issued at a discount, or bond indices related thereto.

“Tax-Exempt Obligations" means obligations the income of which is exempt from the New Jersey Gross Income Tax under New Jersey or federal law; these generally include both (a) obligations issued by or on behalf of New Jersey or any county, municipality, school (or other) district, agency, authority, commission, instrumentality, public corporation (including one created or existing pursuant to an agreement, or compact with


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New Jersey and any other state), body corporate and politic, or political subdivision of the State of New Jersey, and (b) obligations issued by or on behalf of the United States Government or the territories of Puerto Rico, Guam, or the Virgin Islands.

Distributions by the fund derived from income or net gains on investments other than Tax-Exempt Obligations, whether paid in cash or reinvested in additional shares, will be taxable as ordinary income under the New Jersey Gross Income Tax. In addition, if the fund is below the 80% requirement at the end of the calendar quarter for any reason, then for the entire calendar year all distributions derived from interest or gains, whether or not attributable to Tax-Exempt Obligations, and all gains resulting from the redemption or sale of shares will be taxable under the New Jersey Gross Income Tax.

The New Jersey Gross Income Tax is not applicable to corporations. For all corporations subject to the New Jersey Corporation Business Tax, distributions derived from interest or net gains on Tax-Exempt Obligations as well as gains on the redemption or sale of shares are included in the net income tax base for purposes of computing the Corporation Business Tax. Also, to the extent any distributions or gains on redemption or sale are considered to be a New Jersey gross receipt (that is, generally, a business receipt sourced to New Jersey), such distributions or gains may be included in a corporate shareholder's gross receipts base for computing the Alternative Minimum Assessment component of the Corporation Business Tax.

The New Jersey fund will notify shareholders by February 15 of each calendar year as to the amounts of dividends and distributions made with respect to the preceding calendar year that are exempt from federal income taxes and the New Jersey Gross Income Tax and the amounts, if any, which are subject to such taxes. The New Jersey fund will also make appropriate certification of its status to New Jersey tax authorities by that date.

<R>

Ohio. Distributions received from the Ohio fund are exempt from Ohio personal income tax, Ohio commercial activity tax and school district income taxes in Ohio and will be excluded from the net income base of the Ohio corporation franchise tax to the extent they are properly attributable to interest on obligations issued by the State of Ohio, its political subdivisions, or its agencies or instrumentalities ("Ohio Obligations"), provided that the Ohio fund continues to qualify as a regulated investment company for federal income tax purposes and that at all times at least 50% of the value of the total assets of the fund consists of Ohio Obligations or similar obligations of other states or their subdivisions. It is assumed for purposes of this discussion of Ohio taxation that these requirements are satisfied. In addition to the foregoing basis for exclusion, distributions received from the Ohio fund are excluded from the net income base of the Ohio corporation franchise tax to the extent that they represent exempt-interest dividends for federal income tax purposes. The Ohio fund's shares will be included in a shareholder's tax base for purposes of computing the Ohio corporation franchise tax on the net worth basis.


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Distributions of capital gain received from the Ohio fund will be exempt from Ohio personal income tax, Ohio commercial activity tax and school district income taxes in Ohio and will be excluded from the net income base of the Ohio corporation franchise tax, in each case to the extent that such distributions are properly attributable to profit made on the sale, exchange or other disposition by the Ohio fund of Ohio Obligations.

Distributions properly attributable to interest on obligations of the United States or of any authority, commission, or instrumentality of the United States or obligations of Puerto Rico, the Virgin Islands, or Guam or their authorities or instrumentalities the interest on which is exempt from state income taxes under the laws of the United States ("Possessions Obligations") will be exempt from Ohio personal income tax, Ohio commercial activity tax and school district income taxes in Ohio, and, provided, in the case of Possessions Obligations, such interest is excluded from gross income for federal income tax purposes, are excluded from the net income base of the Ohio corporation franchise tax.

All distributions received from the Ohio fund are exempt from joint economic development district and municipal income taxes in Ohio.

</R>

Pennsylvania. Distributions of exempt-interest dividends paid by the Pennsylvania fund will not be subject to the Pennsylvania personal income tax or (in the case of residents of the City of Philadelphia) the Philadelphia school district investment net income tax to the extent that the distributions are properly attributable to interest on (i) obligations issued by the State of Pennsylvania, its political subdivisions, or its agencies or instrumentalities ("Pennsylvania Obligations"), (ii) direct obligations of the United States or of any authority, commission, or instrumentality of the United States, or (iii) qualifying obligations of certain United States territories or possessions the interest on which is exempt from state income taxes under the laws of the United States (“Possessions Obligations”). Distributions by the Pennsylvania fund that are attributable to other sources (including indirect obligations of the United States such as Ginnie Maes, Fannie Maes, etc.) are generally not exempt and are subject to the Pennsylvania personal income tax and (in the case of residents of Philadelphia) to the Philadelphia School District investment net income tax whether paid in cash or reinvested in additional shares. In addition, distributions designated as capital gain dividends for federal income tax purposes will also generally be exempt from the Philadelphia School District investment net income tax.


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To the extent that exempt-interest dividends from Pennsylvania Obligations are excluded from taxable income for federal income tax purposes (determined before net operating loss carryovers and special deductions), they will not be subject to the Pennsylvania corporate net income tax. In addition, a deduction from Pennsylvania taxable income (for purposes of the corporate net income tax) is permitted for the amount of distributions paid by the Pennsylvania fund attributable to interest in qualifying tax-exempt obligations of the United States and Possessions Obligations to the extent included in federal taxable income, but such a deduction is reduced by any interest on indebtedness incurred to carry such obligations and other expenses incurred in the production of such interest income (including expenses deducted on the federal income tax return that would not have been allowed under the Internal Revenue Code if the interest were exempt from federal income tax). Distributions by the Pennsylvania fund that are attributable to other sources (including indirect obligations of the United States such as Ginnie Maes, Fannie Maes, etc.) are generally not exempt and are subject to the corporate net income tax. An investment in the Pennsylvania fund by a corporate shareholder will qualify as an exempt asset for purposes of the single asset apportionment fraction available in computing the Pennsylvania capital stock/foreign franchise tax to the extent that the portfolio securities of the Pennsylvania fund comprise investments in Pennsylvania and/or United States Government securities that would be exempt assets if owned directly by the corporation.


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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS

<R>

For the Massachusetts, Michigan, Minnesota, New Jersey, Ohio and Pennsylvania funds, PricewaterhouseCoopers LLP, 125 High Street, Boston, Massachusetts 02110, is the independent registered public accounting firm, providing audit services, tax return review and other tax consulting services and assistance and consultation in connection with the review of various Securities and Exchange Commission filings. KPMG LLP, Two Financial Center, 60 South Street, Boston, MA 02111, is the independent registered public accounting firm for the Arizona fund. The Reports of Independent Registered Public Accounting Firm, financial statements and financial highlights included in each fund's Annual Report for the fiscal year ended May 31, 2010, filed electronically on the following dates, are included in Appendix B to this SAI.

</R>


Fund	File No.	Date filed with SEC
<R>
The Arizona Fund	811-06258	July 29, 2010
The Massachusetts Fund	811-04518	July 29, 2010
The Michigan Fund	811-04529	July 29, 2010
The Minnesota Fund	811-04527	July 29, 2010
The New Jersey Fund	811-05977	July 29, 2010
The Ohio Fund	811-04528	July 29, 2010
The Pennsylvania Fund	811-05802	July 29, 2010

The financial highlights included in the prospectus and this SAI and the financial statements incorporated by reference into the prospectus and included in Appendix B to this SAI have been so included and incorporated in reliance upon the reports of the independent registered public accounting firms, given on their authority as experts in auditing and accounting.

</R>


	I-52	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09

THE PUTNAM FUNDS

STATEMENT OF ADDITIONAL INFORMATION (“SAI”)

PART II

HOW TO BUY SHARES

Each prospectus describes briefly how investors may buy shares of the fund and identifies the share classes offered by that prospectus. Because of different sales charges and expenses, the investment performance of the classes will vary. This section of the SAI contains more information on how to buy shares. For more information, including your eligibility to purchase certain classes of shares, contact your investment dealer or Putnam Investor Services at 1-800-225-1581. Investors who purchase shares at net asset value through employer-sponsored defined contribution plans should also consult their employer for information about the extent to which the matters described in this section and in the sections that follow apply to them.

General Information

The fund is currently making a continuous offering of its shares. The fund receives the entire net asset value of shares sold. The fund will accept unconditional orders for shares to be executed at the public offering price based on the net asset value per share next determined after the order is placed. In the case of class A shares and class M shares, the public offering price is the net asset value plus the applicable sales charge, if any. (The public offering price is thus calculable by dividing the net asset value by 100% minus the sales charge, expressed as a percentage.) No sales charge is included in the public offering price of other classes of shares. In the case of orders for purchase of shares placed through dealers, the public offering price will be based on the net asset value determined on the day the order is placed, but only if the dealer or a registered transfer agent or registered clearing agent receives the order, together with all required identifying information, before the close of regular trading on the New York Stock Exchange (the “Exchange”). If the dealer or registered transfer agent or registered clearing agent receives the order after the close of the Exchange, the price will be based on the net asset value next determined. If funds for the purchase of shares are sent directly to Putnam Investor Services, they will be invested at the public offering price based on the net asset value next determined after all required identifying information has been collected. Payment for shares of the fund must be in U.S. dollars; if made by check, the check must be drawn on a U.S. bank.

Initial purchases are subject to the minimums stated in the prospectus, except that (i) individual investments under certain employee benefit plans or Tax Qualified Retirement Plans may be lower, and (ii) the minimum investment is waived for investors participating in systematic investment plans or military allotment plans. Information about these plans is available from investment dealers or Putnam Investor Services. Currently Putnam is waiving the minimum for all initial purchases, but reserves the right to reject initial purchases under the minimum in the future, except as noted in the first sentence of this paragraph.

Systematic investment plan. As a convenience to investors, shares may be purchased through a systematic investment plan. Pre-authorized monthly, semi-monthly, or weekly bank drafts for a fixed amount ($200,000 or less) are used to purchase fund shares at the applicable public offering price next determined after Putnam Retail Management Limited Partnership (“Putnam Retail Management”) receives the proceeds from the draft. A shareholder may choose any date or dates in the month for these drafts, but if the date falls on a weekend or holiday, the draft will be processed on the next business day. Further information and application forms are available from the investment dealers or from Putnam Retail Management.


September 28, 2010	II-1

Reinvestment of distributions. Distributions to be reinvested are reinvested without a sales charge in shares of the same class as of the ex-dividend date using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. Dividends for Putnam money market funds are credited to a shareholder's account on the payment date. Distributions for all other funds that declare a distribution daily are reinvested without a sales charge as of the last day of the period for which distributions are paid using the net asset value determined on that date, and are credited to a shareholder's account on the payment date.

Purchasing shares with securities (“in-kind” purchases). In addition to cash, the fund will consider accepting securities as payment for fund shares at the applicable net asset value. Generally, the fund will only consider accepting securities to increase its holdings in a portfolio security, or if Putnam Investment Management, LLC (“Putnam Management”) determines that the offered securities are a suitable investment for the fund and in a sufficient amount for efficient management.

While no minimum has been established, it is expected that the fund would not accept securities with a value of less than $100,000 per issue as payment for shares. The fund may reject in whole or in part any or all offers to pay for purchases of fund shares with securities, may require partial payment in cash for such purchases to provide funds for applicable sales charges, and may discontinue accepting securities as payment for fund shares at any time without notice. The fund will value accepted securities in the manner described in the section "Determination of Net Asset Value" for valuing shares of the fund. The fund will only accept securities that are delivered in proper form. The fund will not accept certain securities, for example, options or restricted securities, as payment for shares. The acceptance of securities by certain funds in exchange for fund shares is subject to additional requirements. For federal income tax purposes, a purchase of fund shares with securities will be treated as a sale or exchange of such securities on which the investor will generally realize a taxable gain or loss. The processing of a purchase of fund shares with securities involves certain delays while the fund considers the suitability of such securities and while other requirements are satisfied. For information regarding procedures for payment in securities, contact Putnam Retail Management. Investors should not send securities to the fund except when authorized to do so and in accordance with specific instructions received from Putnam Retail Management.

Sales Charges and Other Share Class Features—Retail Investors

This section describes certain key features of share classes offered to retail investors and retirement plans that do not purchase shares at net asset value. Much of this information addresses the sales charges, including initial sales charges and contingent deferred sales charges (“CDSCs”) imposed on the different share classes and various commission payments made by Putnam to dealers and other financial intermediaries facilitating shareholders’ investments. This information supplements the descriptions of these share classes and payments included in the prospectus.

Initial sales charges, dealer commissions and CDSCs on shares sold outside the United States may differ from those applied to U.S. sales.

Initial sales charges for class A and class M shares. The public offering price of class A and class M shares is the net asset value plus a sales charge that varies depending on the size of your purchase (calculable as described above). The fund receives the net asset value. The tables below indicate the sales charges applicable to purchases of class A and class M shares of the funds by style category. The variations in sales charges reflect the varying efforts required to sell shares to different categories of purchasers.

The sales charge is allocated between your investment dealer and Putnam Retail Management as shown in the tables below, except when Putnam Retail Management, in its discretion, allocates the entire amount to your investment dealer.


September 28, 2010	II-2

The underwriter's commission, or dealer reallowance, is the sales charge shown in the prospectus less any applicable dealer discount. Putnam Retail Management will give dealers ten days' notice of any changes in the dealer discount. Putnam Retail Management retains the entire sales charge on any retail sales made by it.

For purchases of class A shares by retail investors that qualify for the highest sales charge breakpoint described in the prospectus, Putnam Retail Management pays commissions on sales during the one-year period beginning with the date of the initial purchase qualifying for that breakpoint. Each subsequent one-year measuring period for these purposes begins with the first qualifying purchase following the end of the prior period. These commissions are paid at the rate of 1.00% of the amount of qualifying purchases up to $4 million, 0.50% of the next $46 million of qualifying purchases and 0.25% of qualifying purchases thereafter.

For Growth Funds, Blend Funds, Value Funds, Asset Allocation Funds, Global Sector Funds and RetirementReady^®Funds only:


<R>
	CLASS A		CLASS M
		Amount of sales		Amount of sales
		charge		charge
		reallowed to		reallowed to
	Sales charge as	dealers as a	Sales charge as	dealers as a
Amount of transaction at	a percentage of	percentage of	a percentage of	percentage of
offering price ($)	offering price	offering price	offering price	offering price

Under 50,000	5.75%	5.00%	3.50%	3.00%
50,000 but under 100,000	4.50	3.75	2.50	2.00
100,000 but under 250,000	3.50	2.75	1.50	1.00
250,000 but under 500,000	2.50	2.00	1.00	1.00
500,000 but under 1,000,000	2.00	1.75	1.00	1.00
1,000,000 and above	NONE	NONE	N/A*	N/A*
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For Putnam Absolute Return 500 Fund and Putnam Absolute Return 700 Fund only:


<R>
	CLASS A		CLASS M
		Amount of sales		Amount of sales
		charge		charge
		reallowed to		reallowed to
	Sales charge as	dealers as a	Sales charge as	dealers as a
Amount of transaction at	a percentage of	percentage of	a percentage of	percentage of
offering price ($)	offering price	offering price	offering price	offering price

Under 50,000	5.75%	5.00%	3.50%	3.00%
50,000 but under 100,000	4.50	3.75	2.50	2.00
100,000 but under 250,000	3.50	2.75	1.50	1.00
250,000 but under 500,000	2.50	2.00	1.00	1.00
500,000 and above	NONE	NONE	N/A**	N/A**
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September 28, 2010	II-3

For Taxable and Tax-Free Income Funds only (except for Money Market Funds and Putnam Floating Rate Income Fund):


<R>
	CLASS A		CLASS M
		Amount of sales		Amount of sales
		charge		charge
		reallowed to		reallowed to
	Sales charge as	dealers as a	Sales charge as	dealers as a
Amount of transaction at	a percentage of	percentage of	a percentage of	percentage of
offering price ($)	offering price	offering price	offering price	offering price

Under 50,000	4.00%	3.50%	3.25%	3.00%
50,000 but under 100,000	4.00	3.50	2.25	2.00
100,000 but under 250,000	3.25	2.75	1.25	1.00
250,000 but under 500,000	2.50	2.00	1.00	1.00
500,000 and above	NONE	NONE	N/A**	N/A**
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For Putnam Floating Rate Income Fund, Putnam Absolute Return 100 Fund and Putnam Absolute Return 300 Fund only:


<R>
	CLASS A		CLASS M
		Amount of sales		Amount of sales
		charge		charge
		reallowed to		reallowed to
	Sales charge as	dealers as a	Sales charge as	dealers as a
Amount of transaction at	a percentage of	percentage of	a percentage of	percentage of
offering price ($)	offering price	offering price	offering price	offering price

Under 500,000	1.00%	1.00%	0.75%	0.75%
500,000 and above	NONE	NONE	N/A**	N/A**
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*The funds will not accept purchase orders for class M shares (other than by qualified employee-benefit plans) where the total of the current purchase, plus existing account balances that are eligible to be linked under a right of accumulation (as described below) is $1 million or more.

**The funds will not accept purchase orders for class M shares (other than by qualified employee-benefit plans) where the total of the current purchase, plus existing account balances that are eligible to be linked under a right of accumulation (as described below) is $500,000 or more.

Purchases of $500,000 or more of class A shares. (For Taxable and Tax-Free Income Funds and Absolute Return Funds only) Purchases of class A shares of one or more Putnam funds of $500,000 or more are not subject to an initial sales charge, but shares purchased by investors other than qualified benefit plans are subject to a CDSC of 1.00% if redeemed before the first day of the month in which the nine-month anniversary of that purchase falls. The conditions above will apply unless the dealer of record has, with Putnam Retail Management’s approval, (i) waived its commission or (ii) agreed to refund its commission to Putnam Retail Management if a CDSC would otherwise apply.


September 28, 2010	II-4

Subject to the exceptions stated in the preceding paragraph, a deferred sales charge of 1.00% will apply to class A shares and class T shares of Putnam Money Market Fund and Putnam Tax Exempt Money Market Fund that are obtained by exchanging shares from another Putnam fund that were originally purchased without an initial sales charge (if such original purchase was made at net asset value because it was in an amount equal to $500,000 or more), if the shares are redeemed before the first day of the month in which the nine-month anniversary of the original purchase falls.

The CDSC assessed on redemptions of fewer than all of an investor's class A shares (or, for Putnam Money Market Fund, class T shares) subject to a CDSC will be based on the amount of the redemption minus the amount of any appreciation on the investor's CDSC-subject shares since the purchase of such shares. The CDSC assessed on full redemptions of CDSC-subject shares will be based on the lower of the shares' cost and current NAV. Putnam Retail Management will retain any CDSC imposed on redemptions of such shares to compensate it for the up-front commissions paid to financial intermediaries for such share sales.

Purchases of $1,000,000 or more of class A shares. (For Growth Funds, Blend Funds, Value Funds, Asset Allocation Funds, Global Sector Funds and RetirementReady^®Funds only) Purchases of class A shares of one or more Putnam funds of $1 million or more are not subject to an initial sales charge, but shares purchased by investors other than qualified benefit plans are subject to a CDSC of 1.00% if redeemed before the first day of the month in which the nine-month anniversary of that purchase falls. The conditions above will apply unless the dealer of record has, with Putnam Retail Management’s approval, (i) waived its commission or (ii) agreed to refund its commission to Putnam Retail Management if a CDSC would otherwise apply.

Subject to the exceptions stated in the preceding paragraph, a deferred sales charge of 1.00% will apply to class A shares and class T shares of Putnam Money Market Fund and Putnam Tax Exempt Money Market Fund that are obtained by exchanging shares from another Putnam fund that were originally purchased without an initial sales charge (if such original purchase was made at net asset value because it was in an amount equal to $1 million or more), if the shares are redeemed before the first day of the month in which the nine-month anniversary of the original purchase falls.

Purchases of class A shares for rollover IRAs. Purchases of class A shares for a Putnam Rollover IRA or a rollover IRA of a Putnam affiliate, from a retirement plan for which an affiliate of Putnam Management or a business partner of such affiliate is the administrator, including subsequent contributions, are not subject to an initial sales charge or CDSC. Putnam Retail Management may pay commissions or finders’ fees of up to 1.00% of the proceeds for such Putnam Rollover IRA purchases to the dealer of record or other third party.

Contingent sales charges for class M shares (rollover IRAs). Purchases of class M shares for a Putnam Rollover IRA with proceeds in any amount from a retirement plan for which an affiliate of Putnam Management or a business partner of such affiliate is the administrator are not subject to an initial sales charge but may be subject to a CDSC on shares redeemed within one year of purchase at the rates set forth below, which are equal to commissions Putnam Retail Management pays to the dealer of record at the time of the sale of class M shares. These purchases will not be subject to a CDSC if the dealer of record has, with Putnam Retail Management’s approval, waived its commission or agreed to refund its commission to Putnam Retail Management if a CDSC would otherwise apply.


September 28, 2010	II-5

<R>


	Class M CDSC and dealer commission
All growth, blend, value, global sector and asset allocation
funds, Putnam Absolute Return 500 Fund and Putnam	0.65%
Absolute Return 700 Fund:
All income funds (except Putnam Floating Rate Income	0.40%
Fund and Putnam Money Market Fund):
Putnam Absolute Return 100 Fund, Putnam Absolute	0.30%
Return 300 Fund and Putnam Floating Rate Income Fund
Putnam Money Market Fund	0.15%
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Commission payments and CDSCs for class B and class C shares. Except in the case of Putnam Money Market Fund and as noted below, Putnam Retail Management will pay a 4% commission on sales of class B shares of the fund only to those financial intermediaries who have entered into service agreements with Putnam Retail Management. For tax-exempt funds, this commission includes a 0.20% pre-paid service fee (except for Putnam Tax-Free High Yield Fund and Putnam AMT-Free Municipal Fund, each of which has a 0.25% pre-paid service fee). For Putnam Floating Rate Income Fund, Putnam Absolute Return 100 Fund and Putnam Absolute Return 300 Fund, Putnam Retail Management will pay a 1.00% commission to financial intermediaries selling class B shares of the fund.

Except in the case of Putnam Money Market Fund, Putnam Retail Management pays financial intermediaries a 1.00% commission on sales of class C shares of a fund.

Putnam Retail Management will retain any CDSC imposed on redemptions of class B and class C shares to compensate it for the cost of paying the up-front commissions paid to financial intermediaries for class B or class C share sales. Purchases of class C shares may be made without a CDSC if the dealer of record has, with Putnam Retail Management’s approval, waived its commission or agreed to refund its commission to Putnam Retail Management.

Conversion of class B shares into class A shares. Class B shares will automatically convert to class A shares on or around the end of the month eight years after the purchase date (for Putnam Small Cap Value Fund, on or around the end of the month six years after the purchase date; for Putnam Small Cap Growth Fund, on or around the end of the month five years after the purchase date; and for Mid Cap Value Fund, on or around the end of the month five and one half years after the purchase date). Class B shares acquired by exchanging class B shares of another Putnam fund will convert to class A shares based on the time of the initial purchase. The conversion period of the acquired fund will apply, unless the initial fund’s CDSC schedule is higher than that of the acquired fund. In that case, the conversion period and CDSC schedule of the initial fund will apply. Class B shares acquired through reinvestment of distributions will convert to class A shares based on the date of the initial purchase to which such shares relate. For this purpose, class B shares acquired through reinvestment of distributions will be attributed to particular purchases of class B shares in accordance with such procedures as the Trustees may determine from time to time. The conversion of class B shares to class A shares is subject to the condition that such conversions will not constitute taxable events for Federal tax purposes. Shareholders should consult with their tax advisers regarding the state and local tax consequences of the conversion of class B shares to class A shares, or any other exchange or conversion of shares. Average annual total return performance information for class B shares shown in the fund's prospectus does not assume conversion to class A shares.


September 28, 2010	II-6

Sales without sales charges, contingent deferred sales charges or short-term trading fees

The fund may sell shares without a sales charge or CDSC to the following categories of investors:

(i) current and former Trustees of the fund, their family members, business and personal associates; current and former employees of Putnam Management and certain current and former corporate affiliates, their family members, business and personal associates; employee benefit plans for the foregoing; and partnerships, trusts or other entities in which any of the foregoing has a substantial interest;

(ii) employer-sponsored retirement plans, for the repurchase of shares in connection with repayment of plan loans made to plan participants (if the sum loaned was obtained by redeeming shares of a Putnam fund sold with a sales charge) (not applicable to tax-exempt funds);

(iii) clients of administrators or other service providers of tax-qualified employer-sponsored retirement plans which have entered into agreements with Putnam Retail Management (not applicable to tax-exempt funds);

(iv) registered representatives and other employees of broker-dealers having sales agreements with Putnam Retail Management; employees of financial institutions having sales agreements with Putnam Retail Management or otherwise having an arrangement with any such broker-dealer or financial institution with respect to sales of fund shares; and their immediate family members (spouses and children under age 21, including step-children and adopted children);

(v) investors meeting certain requirements who sold shares of certain Putnam closed-end funds pursuant to a tender offer by such closed-end fund;

(vi) a trust department of any financial institution purchasing shares of the fund in its capacity as trustee of any trust (other than a tax-qualified retirement plan trust), through an arrangement approved by Putnam Retail Management, if the value of the shares of the fund and other Putnam funds purchased or held by all such trusts exceeds $1 million in the aggregate;

(vii) "wrap accounts" maintained for clients of broker-dealers, financial institutions or financial intermediaries who have entered into agreements with Putnam Retail Management with respect to such accounts;

(viii) college savings plans that qualify for tax-exempt treatment under section 529 of the Internal Revenue Code of 1986, as amended (the “Code”); and

(ix) investors who invest liquidation proceeds from Putnam closed-end funds.

In the case of paragraph (i) above, the availability of shares at NAV has been determined to be appropriate because involvement by Putnam Retail Management and other brokers in purchases by these investors is typically minimal.

In addition to the categories enumerated above, in connection with settlements reached between certain firms and the Financial Industry Regulating Authority (“FINRA”) and/or Securities and Exchange Commission (the “SEC”) regarding sales of class B and class C shares in excess of certain dollar thresholds, the fund will permit shareholders who are clients of these firms (and applicable affiliates of such firms) to redeem class B and class C shares of the fund and concurrently purchase class A shares (in an amount to be determined by the dealer of record and Putnam Retail Management in accordance with the terms of the applicable settlement) without paying an initial sales charge.


September 28, 2010	II-7

The fund may issue its shares at net asset value without an initial sales charge or a CDSC in connection with the acquisition of substantially all of the securities owned by other investment companies or personal holding companies. The CDSC will be waived on redemptions to pay premiums for insurance under Putnam’s insured investor program.

Application of CDSC to Systematic Withdrawal Plans (“SWP”). Investors who set up a SWP for a share account (see "INVESTOR SERVICES — Plans Available to Shareholders -- Systematic Withdrawal Plan") may withdraw through the SWP up to 12% of the net asset value of the account (calculated as set forth below) each year without incurring any CDSC. Shares not subject to a CDSC (such as shares representing reinvestment of distributions) will be redeemed first and will count toward the 12% limitation. If there are insufficient shares not subject to a CDSC, shares subject to the lowest CDSC liability will be redeemed next until the 12% limit is reached. The 12% figure is calculated on a pro rata basis at the time of the first payment made pursuant to an SWP and recalculated thereafter on a pro rata basis at the time of each SWP payment. Therefore, shareholders who have chosen an SWP based on a percentage of the net asset value of their account of up to 12% will be able to receive SWP payments without incurring a CDSC. However, shareholders who have chosen a specific dollar amount (for example, $100 per month from the fund that pays income distributions monthly) for their periodic SWP payment should be aware that the amount of that payment not subject to a CDSC may vary over time depending on the net asset value of their account. For example, if the net asset value of the account is $10,000 at the time of payment, the shareholder will receive $100 free of the CDSC (12% of $10,000 divided by 12 monthly payments). However, if at the time of the next payment the net asset value of the account has fallen to $9,400, the shareholder will receive $94 free of any CDSC (12% of $9,400 divided by 12 monthly payments) and $6 subject to the lowest applicable CDSC. This SWP privilege may be revised or terminated at any time.

Other exceptions to application of CDSC. No CDSC is imposed on the redemption of shares of any class subject to a CDSC to the extent that the shares redeemed (i) are no longer subject to the holding period therefor, (ii) resulted from reinvestment of distributions, or (iii) were exchanged for shares of another Putnam fund, provided that the shares acquired in such exchange or subsequent exchanges (including shares of a Putnam money market fund) will continue to remain subject to the CDSC, if applicable, until the applicable holding period expires. In determining whether the CDSC applies to each redemption, shares not subject to a CDSC are redeemed first.

The fund will waive any CDSC on redemptions, in the case of individual, joint or Uniform Transfers to Minors Act accounts, in the event of death or post-purchase disability of a shareholder, for the purpose of paying benefits pursuant to tax-qualified retirement plans ("Benefit Payments"), or, in the case of living trust accounts, in the event of the death or post-purchase disability of the settlor of the trust. Benefit Payments currently include, without limitation, (1) distributions from an IRA due to death or post-purchase disability, (2) a return of excess contributions to an IRA or 401(k) plan, and (3) distributions from retirement plans qualified under Section 401(a) of the Code or from a 403(b) plan due to death, disability, retirement or separation from service. These waivers may be changed at any time.

Exceptions to application of short-term trading fee. In addition to the exceptions noted in the fund’s prospectus, the short-term trading fee will not apply to automatic rebalancing arrangements entered into by Putnam Retail Management and dealers and also will not be imposed in cases of shareholder death or post-purchase disability or other circumstances in which a CDSC would be waived as stated above under “Other exceptions to application of CDSC.” In addition, the short-term trading fee will not apply to shares sold or exchanged by a Putnam fund-of-funds or a Section 529 college savings plan.


September 28, 2010	II-8

Ways to Reduce Initial Sales Charges—Class A and M Shares

There are several ways in which an investor may obtain reduced sales charges on purchases of class A shares and class M shares. The variations in sales charges reflect the varying efforts required to sell shares to separate categories of purchasers. These provisions may be altered or discontinued at any time.

Right of accumulation. A purchaser of class A shares or class M shares may qualify for a right of accumulation discount by combining all current purchases by such person with the value of certain other shares of any class of Putnam funds already owned. The applicable sales charge is based on the total of:

(i) the investor's current purchase(s); and

(ii) the higher of (x) the maximum public offering price (at the close of business on the previous day) or (y) the initial value of total purchases (less the value of shares redeemed on the applicable redemption date) of:

(a) all shares held in accounts registered to the investor and other accounts eligible to be linked to the investor’s accounts (as described below) in all of the Putnam funds (except closed-end and money market funds, unless acquired as described in (b) below); and

(b) any shares of money market funds acquired by exchange from other Putnam funds.

For shares held on December 31, 2007, the initial value will be the value of those shares at the maximum public offering price on that date.

The following persons may qualify for a right of accumulation discount:

(i) an individual, or a "company" as defined in Section 2(a)(8) of the Investment Company Act of 1940, as amended (the “1940 Act”) (which includes corporations which are corporate affiliates of each other);

(ii) an individual, his or her spouse and their children under age 21, purchasing for his, her or their own account;

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(iii) a trustee or other fiduciary purchasing for a single trust estate or single fiduciary account (including a pension, profit-sharing, or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Code and Simplified Employer Pension Plans (SEPs) created pursuant to Section 408(k) of the Code);

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(iv) tax-exempt organizations qualifying under Section 501(c)(3) of the Code, (not including tax-exempt organizations qualifying under Section 403(b)(7) (a "403(b) plan") of the Code; and

(v) employee benefit plans of a single employer or of affiliated employers, other than 403(b) plans.

A combined purchase currently may also include shares of any class of other continuously offered Putnam funds (other than money market funds) purchased at the same time, if the dealer places the order for such shares directly with Putnam Retail Management.

For individual investors, Putnam Investor Services automatically links accounts the registrations of which are under the same last name and address. Account types eligible to be linked for the purpose of qualifying for a right of accumulation discount include the following (in each case as registered to the investor, his or her spouse and his or her children under the age of 21):


September 28, 2010	II-9

(i) individual accounts;

(ii) joint accounts;

(iii) accounts established as part of a plan established pursuant to Section 403(b) of the Code (“403(b) plans”) or an IRA other than a Simple IRA, SARSEP or SEP IRA;

(iv) shares owned through accounts in the name of the investor’s (or spouse’s or minor child’s) dealer or other financial intermediary (with documentation identifying to the satisfaction of Putnam Investor Services the beneficial ownership of such shares); and

(v) accounts established as part of a Section 529 college savings plan managed by Putnam Management.

Shares owned by a plan participant as part of an employee benefit plan of a single employer or of affiliated employers (other than 403(b) plans) or a single fiduciary account opened by a trustee or other fiduciary (including a pension, profit-sharing, or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Code) are not eligible for linking to other accounts attributable to such person to qualify for the right of accumulation discount, although all current purchases made by each such plan may be combined with existing aggregate balances of such plan in Putnam funds for purposes of determining the sales charge applicable to shares purchased at such time by the plan.

To obtain the right of accumulation discount on a purchase through an investment dealer, when each purchase is made the investor or dealer must provide Putnam Retail Management with sufficient information to verify that the purchase qualifies for the privilege or discount. The shareholder must furnish this information to Putnam Investor Services when making direct cash investments. Sales charge discounts under a right of accumulation apply only to current purchases. No credit for right of accumulation purposes is given for any higher sales charge paid with respect to previous purchases for the investor’s account or any linked accounts.

Statement of Intention. Investors may also obtain the reduced sales charges for class A shares or class M shares shown in the prospectus for investments of a particular amount by means of a written Statement of Intention (also referred to as a Letter of Intention), which expresses the investor's intention to invest that amount (including certain "credits," as described below) within a period of 13 months in shares of any class of the fund or any other continuously offered Putnam fund (excluding money market funds), including through an account established as part of a Section 529 college savings plan managed by Putnam Management. Each purchase of class A shares or class M shares under a Statement of Intention will be made at the lesser of (i) the public offering price applicable at the time of such purchase and (ii) the public offering price applicable on the date the Statement of Intention is executed to a single transaction of the total dollar amount indicated in the Statement of Intention.

An investor may receive a credit toward the amount indicated in the Statement of Intention equal to the maximum public offering price as of the close of business on the previous day of all shares he or she owns, or which are eligible to be linked for purposes of the right of accumulation described above, on the date of the Statement of Intention which are eligible for purchase under a Statement of Intention (plus any shares of money market funds acquired by exchange of such eligible shares). Investors do not receive credit for shares purchased by the reinvestment of distributions. Investors qualifying for the "combined purchase privilege" (see above) may purchase shares under a single Statement of Intention.

The Statement of Intention is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Statement of Intention is 5% of such amount, and must be invested immediately. Class A shares or class M shares purchased with the first 5% of such amount will be held in escrow to secure payment of the higher sales charge applicable to the shares actually purchased if the full amount indicated is not purchased. When the full amount indicated has been purchased, the escrow will be released. If an investor desires to redeem escrowed shares before the full amount has been purchased, the shares will be released from escrow only if the investor pays the sales charge that, without regard to the Statement of Intention, would apply to the total investment made to date.


September 28, 2010	II-10

If an investor purchases more than the dollar amount indicated on the Statement of Intention and qualifies for a further reduced sales charge, the sales charge will be adjusted for the entire amount purchased at the end of the 13-month period, upon recovery from the investor's dealer of its portion of the sales charge adjustment. Once received from the dealer, which may take a period of time or may never occur, the sales charge adjustment will be used to purchase additional shares at the then current offering price applicable to the actual amount of the aggregate purchases. These additional shares will not be considered as part of the total investment for the purpose of determining the applicable sales charge pursuant to the Statement of Intention. No sales charge adjustment will be made unless and until the investor's dealer returns any excess commissions previously received.

If an investor purchases less than the dollar amount indicated on the Statement of Intention within the 13-month period, the sales charge will be adjusted upward for the entire amount purchased at the end of the 13-month period. This adjustment will be made by redeeming shares from the account to cover the additional sales charge, the proceeds of which will be paid to the investor's dealer and Putnam Retail Management. Putnam Retail Management will make a corresponding downward adjustment to the amount of the reallowance payable to the dealer with respect to purchases made prior to the investor’s failure to fulfill the conditions of the Statement of Intention. If the account exceeds an amount that would otherwise qualify for a reduced sales charge, that reduced sales charge will be applied. Adjustments to sales charges and dealer reallowances will not be made in the case of the shareholder’s death prior to the expiration of the 13-month period.

Statements of Intention are not available for certain employee benefit plans.

Statement of Intention forms may be obtained from Putnam Retail Management or from investment dealers. In addition, shareholders may complete the applicable portion of the fund’s standard account application. Interested investors should read the Statement of Intention carefully.

Commissions on Sales to Employee Benefit Plans

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Purchases of class A and class R shares. On sales of class A shares at net asset value to certain qualified benefit plans and health reimbursement accounts and sales of class R shares, Putnam Retail Management may, at its discretion, pay commissions to the dealer of record on net monthly purchases up to the following rates: 1.00% of the first $1 million, 0.75% of the next $1 million and 0.50% thereafter.

For commission payments made by Putnam Retail Management to dealers and other financial intermediaries with respect to other classes of shares offered to employee benefit plans and other tax-favored plan investors, see the corresponding sub-heading under “—Sales Charges and Other Share Class Features—Retail Investors.”

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DISTRIBUTION PLANS

If the fund or a class of shares of the fund has adopted a distribution (12b-1) plan, the prospectus describes the principal features of the plan. This SAI contains additional information which may be of interest to investors.


September 28, 2010	II-11

Continuance of a plan is subject to annual approval by a vote of the Trustees, including a majority of the Trustees who are not interested persons of the fund and who have no direct or indirect interest in the plan or related arrangements (the "Qualified Trustees"), cast in person at a meeting called for that purpose. All material amendments to a plan must be likewise approved by the Trustees and the Qualified Trustees. No plan may be amended in order to increase materially the costs which the fund may bear for distribution pursuant to such plan without also being approved by a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be. A plan terminates automatically in the event of its assignment and may be terminated without penalty, at any time, by a vote of a majority of the Qualified Trustees or by a vote of a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be.

The fund makes payments under each plan to Putnam Retail Management to compensate Putnam Retail Management for services provided and expenses incurred by it for purposes of promoting the sale of the relevant class of shares, reducing redemptions of shares or maintaining or improving services provided to shareholders by Putnam Retail Management and investment dealers.

Putnam Retail Management compensates qualifying dealers (including, for this purpose, certain financial institutions) for sales of shares and the maintenance of shareholder accounts.

Putnam Retail Management may suspend or modify its payments to dealers. The payments are also subject to the continuation of the relevant distribution plan, the terms of the service agreements between the dealers and Putnam Retail Management and any applicable limits imposed by FINRA.

Financial institutions receiving payments from Putnam Retail Management as described above may be required to comply with various state and federal regulatory requirements, including among others those regulating the activities of securities brokers or dealers.

Except as otherwise agreed between Putnam Retail Management and a dealer, for purposes of determining the amounts payable to dealers for shareholder accounts for which such dealers are designated as the dealer of record, "average net asset value" means the product of (i) the average daily share balance in such account(s) and (ii) the average daily net asset value of the relevant class of shares over the quarter.

Class A shares:

Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at up to the annual rates set forth below (as a percentage of the average net asset value of class A shares for which such dealers are designated the dealer of record) except as described below. No payments are made during the first year after purchase on shares purchased at net asset value by shareholders that invest at least $1 million, unless the dealer of record has waived the sales commission, or, in the case of dealers of record for a qualified benefit plan investing at least $1 million, where such dealer has agreed to a reduced sales commission.


September 28, 2010	II-12

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Rate*	Fund

0.25%	All funds currently making payments under a class A
	distribution plan, except for those listed below

0.20% for shares purchased before 3/21/05;	Putnam Tax-Free High Yield Fund
0.25% for shares purchased on or after 3/21/05**

0.20% for shares purchased before 4/1/05;	Putnam AMT-Free Municipal Fund
0.25% for shares purchased on or after 4/1/05

0.20% for shares purchased on or before 12/31/89;	Putnam Convertible Income-Growth Trust
0.25% for shares purchased after 12/31/89	The George Putnam Fund of Boston
	Putnam Global Equity Fund
	Putnam Global Natural Resources Fund
	Putnam Global Health Care Fund
	The Putnam Fund for Growth and Income
	Putnam Investors Fund
	Putnam Vista Fund
	Putnam Voyager Fund

0.20% for shares purchased on or before 3/31/90;	Putnam High Yield Trust
0.25% for shares purchased after 3/31/90	Putnam U.S. Government Income Trust

0.20% for shares purchased on or before 1/1/90;	Putnam Equity Income Fund
0.25% for shares purchased after 1/1/90

0.20% for shares purchased on or before 3/31/91;	Putnam Income Fund
0.25% for shares purchased after 3/31/91;

0.15% for shares purchased on or before 3/6/92;	Putnam Michigan Tax Exempt Income Fund
0.20% for shares purchased after 3/6/92 but before	Putnam Minnesota Tax Exempt Income Fund
4/1/05;	Putnam Ohio Tax Exempt Income Fund
0.25% for shares purchased on or after 4/1/05

0.15% for shares purchased on or before 5/11/92;	Putnam Massachusetts Tax Exempt Income Fund
0.20% for shares purchased after 5/11/92 but before
4/1/05;
0.25% for shares purchased on or after 4/1/05

0.15% for shares purchased on or before 12/31/92;	Putnam California Tax Exempt Income Fund
0.20% for shares purchased after 12/31/92 but	Putnam New Jersey Tax Exempt Income Fund
before 4/1/05;	Putnam New York Tax Exempt Income Fund
0.25% for shares purchased on or after 4/1/05	Putnam Tax Exempt Income Fund

0.15% for shares purchased on or before 3/5/93;	Putnam Arizona Tax Exempt Income Fund
0.20% for shares purchased after 3/5/93 but before
4/1/05;
0.25% for shares purchased on or after 4/1/05

0.15% for shares purchased on or before 7/8/93;	Putnam Pennsylvania Tax Exempt Income Fund
0.20% for shares purchased after 7/8/93 but before
4/1/05;
0.25% for shares purchased on or after 4/1/05

0.00%	Putnam Money Market Fund
	Putnam Tax Exempt Money Market Fund
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September 28, 2010	II-13

*For purposes of this table, shares are deemed to be purchased on date of settlement (i.e., once purchased and paid for). Shares issued in connection with dividend reinvestments are considered to be purchased on the date of their issuance, not the issuance of the original shares.

**Shares of Putnam Tax-Free High Yield Fund issued in connection with the merger of Putnam Municipal Income Fund into that fund pay a commission at the annual rate of 0.20% or 0.25%, based on the date of the original purchase of the shareholder’s corresponding shares of Putnam Municipal Income Fund, as set forth below: 0.20% for shares purchased on or before 5/7/92; 0.25% for shares purchased after 5/7/92.

Class B shares:


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Rate	Fund

0.25%	All funds currently making payments under a class B
	distribution plan, except for those listed below

0.25%, except that the first year's service fees of	Putnam AMT-Free Municipal Fund
0.25% are prepaid at time of sale	Putnam Tax-Free High Yield Fund

0.20%, except that the first year’s service fees of	Putnam Arizona Tax Exempt Income Fund
0.20% are prepaid at time of sale	Putnam California Tax Exempt Income Fund
	Putnam Massachusetts Tax Exempt Income Fund
	Putnam Michigan Tax Exempt Income Fund
	Putnam Minnesota Tax Exempt Income Fund
	Putnam New Jersey Tax Exempt Income Fund
	Putnam New York Tax Exempt Income Fund
	Putnam Ohio Tax Exempt Income Fund
	Putnam Pennsylvania Tax Exempt Income Fund
	Putnam Tax Exempt Income Fund

0.00%	Putnam Money Market Fund

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Class C shares:

Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class C shares for which such dealers are designated the dealer of record). No payments are made during the first year after purchase unless the shareholder has made arrangements with Putnam Retail Management and the dealer of record has waived the sales commission.


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Rate	Fund

1.00%	All funds currently making payments under a class C
	distribution plan, except the fund listed below

0.50%	Putnam Money Market Fund

</R>


September 28, 2010	II-14

Different rates may apply to shares sold outside the United States.

Class M shares:

Putnam Retail Management makes quarterly (or in certain cases monthly) payments to dealers at the annual rates set forth below (as a percentage of the average net asset value of class M shares for which such dealers are designated the dealer of record), except as follows. No payments are made during the first year after purchase on shares purchased at net asset value for Putnam Rollover IRAs, unless the dealer of record has waived the sales commission.


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Rate	Fund

0.65%	All growth, blend, value, global sector and asset
	allocation funds currently making payments under a
	class M distribution plan, and Putnam Absolute
	Return 500 Fund and Putnam Absolute Return 700
	Fund.

0.40%	All income funds currently making payments under a
	class M distribution plan (except for Putnam Floating
	Rate Income Fund and Putnam Money Market Fund)

0.30%	Putnam Absolute Return 100 Fund, Putnam Absolute
	Return 300 Fund and Putnam Floating Rate Income
	Fund

0.15%	Putnam Money Market Fund

</R>

Putnam Retail Management’s payments to dealers for plans investing in class M shares for which such dealers are designated the dealer of record may equal up to the annual rate of 0.75% of the average net asset value of such class M shares for Putnam Absolute Return 500 Fund and Putnam Absolute Return 700 Fund as well as all growth, blend, value, global sector and asset allocation funds currently making payments under a class M distribution plan and up to the annual rate of 0.50% of the average net asset value of such class M shares for all income funds currently making payments under a class M distribution plan (except for Putnam Floating Rate Income Fund, Putnam Absolute Return 100 Fund and Putnam Absolute Return 300 Fund and Putnam Money Market Fund).

Different rates may apply to shares sold outside the United States.

Class R shares:


September 28, 2010	II-15

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Rate	Fund

0.50%	All funds currently making payments under a class R
	distribution plan

</R>

A portion of the class R distribution fee payable to dealers may be paid to third parties who provide services to plans investing in class R shares and participants in such plans.

Class T shares:


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Rate	Fund

0.25%	Putnam Money Market Fund

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Additional Dealer Payments

As described earlier in this section, dealers may receive different commissions, sales charge reallowances and other payments with respect to sales of different classes of shares of the funds. These payments may include servicing payments to retirement plan administrators and other institutions up to the same levels as described above. For purposes of this section the term “dealer” includes any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator and any other institution having a selling, services, or any similar agreement with Putnam Retail Management or one of its affiliates.

Putnam Retail Management and its affiliates pay additional compensation to selected dealers under the categories described below. These categories are not mutually exclusive, and a single dealer may receive payments under all categories. These payments may create an incentive for a dealer firm or its representatives to recommend or offer shares of the fund or other Putnam funds to its customers. These additional payments are made pursuant to agreements with dealers and do not change the price paid by investors for the purchase of a share or the amount a fund will receive as proceeds from such sales or the distribution (12b-1) fees and the expenses paid by the fund as shown under the heading “Fees and Expenses” in the prospectus.

Marketing Support Payments. Putnam Retail Management and its affiliates will make payments to certain dealers for marketing support services, including business planning assistance, educating dealer personnel about the Putnam funds and shareholder financial planning needs, placement on the dealer’s preferred or recommended fund company list, and access to sales meetings, sales representatives and management representatives of the dealer. These payments are generally based on one or more of the following factors: average net assets of Putnam’s retail mutual funds attributable to that dealer, gross or net sales of Putnam’s retail mutual funds attributable to that dealer, reimbursement of ticket charges (fees that a dealer firm charges its representatives for effecting transactions in fund shares) or a negotiated lump sum payment for services rendered.

Putnam Retail Management and its affiliates compensate dealers differently depending upon, among other factors, the level and/or type of marketing support provided by the dealer. In addition, payments typically apply to retail sales and assets, but may not, in certain situations, apply to other specific types of sales or assets, such as to retirement plans or fee-based advisory programs.


September 28, 2010	II-16

Marketing support payments to any one dealer are not expected, with certain limited exceptions, to exceed 0.085% of the average assets of Putnam’s retail mutual funds attributable to that dealer on an annual basis.

The following dealers (and such dealers’ respective affiliates) received marketing support payments from Putnam Retail Management and its affiliates during the calendar year ended December 31, 2009:


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Advantage Capital Corporation	Morgan Stanley & Co. Incorporated

American General Securities Incorporated	Multi-Financial Securities Corporation

American Portfolios Financial Services, Inc.	Mutual Service Corporation

Ameriprise Financial Services, Inc.	National Planning Corporation

Associated Securities Corporation	New England Securities Corporation

AXA Advisors, LLC	NEXT Financial Group, Inc.

Banc of America Investment Services, Inc.	NFP Securities, Inc.

BancWest Investment Services, Inc.	Northwestern Mutual Investment Services, LLC

Cadaret, Grant & Co. Inc.	NRP Financial, Inc.

Cambridge Investment Research, Inc.	Oppenheimer & Co. Inc.

CCO Investment Services Corp.	People’s Securities

Chase Investment Services Corp.	PFS Investments, Inc.

Citigroup Global Markets, Inc	PNC Investments, LLC

Commonwealth Equity Services	Prime Vest Financial Services, Inc.

CUNA Brokerage Services, Inc.	Raymond James & Associates, Inc.

CUSO Financial Services, L.P.	Raymond James Financial Services, Inc.

Edward D. Jones & Co.	RBC Capital Markets Corporation

Financial Network Investment Corporation	Robert W. Baird & Co. Incorporated

FSC Securities Corporation	Royal Alliance Associates

Genworth Financial Securities Corp.	Sagepoint Financial, Inc.

HD Vest Investment Securities, Inc.	Securities America Financial Corporation, Inc.

ING Financial Partners	Signator Investors, Inc.

INVEST Financial Corporation	SII Investments

Investment Centers of America, Inc.	SunTrust Investment Services, Inc.

J.P. Morgan Securities Inc.	Tower Square Securities, Inc.

Janney Montgomery Scott LLC	U.S. Bancorp Investments, Inc.

Key Investment Services	UBS Financial Services Inc.

Lincoln Financial Advisors Corp.	UVEST Financial Services, Inc.

Lincoln Financial Securities Corporation	Walnut Street Securities, Inc.

Lincoln Investment Planning, Inc.	WaMu Investments, Inc.

LPL Financial Corporation	Waterstone Financial Group Inc.

MMC Securities Corp.	Wells Fargo Advisors, LLC

M&T Securities, Inc.	Wells Fargo Investments, LLC

Merrill Lynch, Pierce, Fenner & Smith, Inc.	Woodbury Financial Services, Inc.

MetLife Securities, Inc.

</R>

Additional dealers may receive marketing support payments in 2010 and in future years. Any additions, modifications or deletions to the list of dealers identified above that have occurred since December 31, 2009 are not reflected. You can ask your dealer about any payments it receives from Putnam Retail Management and its affiliates.


September 28, 2010	II-17

Program Servicing Payments. Putnam Retail Management and its affiliates will also make payments to certain dealers that sell Putnam fund shares through retirement plans and other investment programs to compensate dealers for a variety of services they provide to such programs. A dealer may perform program services itself or may arrange with a third party to perform program services. In addition to participant recordkeeping, reporting, or transaction processing, program services may include services rendered in connection with fund/investment selection and monitoring, employee enrollment and education, plan balance rollover or separation, or other similar services. Payments by Putnam Retail Management and its affiliates for program servicing support to any one dealer are not expected, with certain limited exceptions, to exceed 0.20% of the total assets in the program on an annual basis. In addition, Putnam Retail Management and its affiliates will make one-time or annual payments to selected dealers receiving program servicing payments in reimbursement of printing costs for literature for participants, account maintenance fees or fees for establishment of Putnam funds on the dealer’s system. The amounts of these payments may, but will not normally (except in cases where the aggregate assets in the program are small), cause the aggregate amount of the program servicing payments to such dealer on an annual basis to exceed the amounts set forth above.

The following dealers (and such dealers’ respective affiliates) received program servicing payments from Putnam Retail Management and its affiliates during the calendar year ended December 31, 2009:


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ADP Broker-Dealer, Inc.	MidAtlantic Capital Corporation

Ascensus, Inc.	Milliman, Inc.

Benefit Plans Administrators	MSCS Financial Services, LLC

Charles Schwab & Co., Inc.	National Financial Services LLC

Charles Schwab Trust Company	Nationwide Investment Services Corporation

CompuSys/Erisa Group	Nationwide Life Insurance Company

Correll Co.	Newport Retirement Services, Inc.

CPI Qualified Plan Consultants, Inc.	NYLIFE Distributors LLC

DailyAccess Corporation	Paychex Securities Corporation

Dyatech, LLC	Pershing LLC

ExpertPlan, Inc.	Plan Administrators, Inc.

FASCore, LLC	The Princeton Retirement Group, Inc.

Fidelity Investments Institutional Operations Company, Inc.	Principal Life Insurance Co.

Genworth Life and Annuity Insurance Co.	Prudential Investment Management Services LLC

Great-West Life & Annuity Insurance Co.	Prudential Investments LLC

GWFS Equities, Inc.	Reliance Trust Company

Hartford Life Insurance Co.	Standard Retirement Services, Inc.

Hartford Securities Distribution Company, Inc.	SunTrust Bank

July Business Services	TD AMERITRADE Trust Company

Leggette & Company, Inc.	The Prudential Insurance Company of America

ML Life Insurance Company of New York	Union Bank of California, N.A.

Massachusetts Mutual Life Insurance Co.	VALIC Retirement Services Company

McLeod Administrative Services Inc.	Wachovia Bank, N.A.

Mercer HR Services LLC	Wells Fargo Bank, N.A.

Merrill Lynch Life Insurance Company	Wilmington Trust Company

Merrill Lynch, Pierce, Fenner & Smith, Inc.	Wilmington Trust Retirement & Institutional Services Co.

</R>

Additional dealers may receive program servicing payments in 2010 and in future years. Any additions, modifications or deletions to the list of dealers identified above that have occurred since December 31, 2009 are not reflected. You can ask your dealer about any payments it receives from Putnam Retail Management and its affiliates.


September 28, 2010	II-18

Other Payments. From time to time, Putnam Retail Management, at its expense, may provide additional compensation to dealers which sell or arrange for the sale of shares of the fund to the extent not prohibited by laws or the rules of any self-regulatory agency, such as FINRA. Such compensation provided by Putnam Retail Management may include financial assistance to dealers that enable Putnam Retail Management to participate in and/or present at dealer-sponsored conferences or seminars, sales or training programs for invited registered representatives and other dealer employees, dealer entertainment, and other dealer-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, retention and due diligence trips. Putnam Retail Management makes payments for entertainment events it deems appropriate, subject to Putnam Retail Management’s internal guidelines and applicable law. These payments may vary upon the nature of the event.

Certain dealers also receive payments from the funds’ transfer agent in recognition of sub-accounting or other services they provide to shareholders or plan participants who invest in the fund or other Putnam funds through their retirement plan. These payments are not expected, with certain exceptions both for affiliated and unaffiliated entities noted in the discussion under the heading “MANAGEMENT – Investor Servicing Agent,” to exceed 0.13% of the total assets of such shareholders or plan participants in the fund or other Putnam funds on an annual basis. See the discussion under the heading “MANAGEMENT – Investor Servicing Agent” for more details.

You can ask your dealer for information about payments it receives from Putnam Retail Management or its affiliates and the services it provides for those payments.

In addition to payments to dealers described above, Putnam Investor Services or Putnam Retail Management may, at the direction of a retirement plan’s sponsor, reimburse or pay direct expenses of the plan that would otherwise be payable by the plan. Putnam Investor Services also, at its expense, may make payments to financial intermediaries for introducing to Putnam Investor Services, and/or assisting Putnam Investor Services in the provision of services to, certain retirement plans administered by Putnam Investor Services. Such payments to any one financial intermediary are not expected to exceed an annual rate of 0.05% of a plan’s average net assets.

MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS

As noted in the prospectus, in addition to the main investment strategies and the principal risks described in the prospectus, the fund may employ other investment practices and may be subject to other risks, which are described below. Because the following is a combined description of investment strategies of all of the Putnam funds, certain matters described herein may not apply to your fund. Unless a strategy or policy described below is specifically prohibited or limited by the investment restrictions discussed in the fund’s prospectus or in this SAI, or by applicable law, the fund may engage in each of the practices described below without limit. This section contains information on the investments and investment practices listed below. With respect to funds for which Putnam Investments Limited (“PIL”) and/or The Putnam Advisory Company, LLC (“PAC”) serves as sub-investment manager (as described in the fund’s prospectus), references to Putnam Management in this section include PIL and/or PAC, as appropriate.


September 28, 2010	II-19

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Alternative Investment Strategies	Money Market Instruments

Bank Loans	Mortgage-backed and Asset-backed Securities

Borrowing and Other Forms of Leverage	Options on Securities

Derivatives	Preferred Stocks and Convertible Securities

Exchange-Traded Notes	Private Placements and Restricted Securities

Floating Rate and Variable Rate Demand Notes	Real Estate Investment Trusts (REITs)

Foreign Currency Transactions	Redeemable Securities

Foreign Investments and Related Risks	Repurchase Agreements

Forward Commitments and Dollar Rolls	Securities Loans

Futures Contracts and Related Options	Securities of Other Investment Companies

Hybrid Instruments	Short-term Trading

Industry and Sector Groups	Special Purpose Acquisition Companies

Inflation-Protected Securities	Structured Investments

Initial Public Offerings (IPOs)	Swap Agreements

Interfund Borrowing and Lending	Tax-exempt Securities

Inverse Floaters	Warrants

Lower-rated Securities	Zero-coupon and Payment-in-kind Bonds

</R>

Alternative Investment Strategies

Under normal market conditions, the fund seeks to remain fully invested and to minimize its cash holdings. However, at times, Putnam Management may judge that market conditions may make pursuing a fund's investment strategies inconsistent with the best interests of its shareholders. Putnam Management then may temporarily use alternative strategies that are mainly designed to limit the fund's losses. In implementing these strategies, the fund may invest primarily in, among other things, debt securities, preferred stocks, U.S. Government and agency obligations, cash or money market instruments (including, to the extent permitted by law or applicable exemptive relief, money market funds), or any other securities Putnam Management considers consistent with such defensive strategies.

Bank Loans

The fund may invest in bank loans. By purchasing a loan, the fund acquires some or all of the interest of a bank or other lending institution in a loan to a particular borrower. The fund may act as part of a lending syndicate, and in such cases would be purchasing a “participation” in the loan. The fund may also purchase loans by assignment from another lender. Many loans are secured by the assets of the borrower, and most impose restrictive covenants which must be met by the borrower. These loans are typically made by a syndicate of banks, represented by an agent bank which has negotiated and structured the loan and which is responsible generally for collecting interest, principal, and other amounts from the borrower on its own behalf and on behalf of the other lending institutions in the syndicate, and for enforcing its and their other rights against the borrower. Each of the lending institutions, including the agent bank, lends to the borrower a portion of the total amount of the loan, and retains the corresponding interest in the loan.

The fund’s ability to receive payments of principal and interest and other amounts in connection with loan participations held by it will depend primarily on the financial condition of the borrower (and, in some cases, the lending institution from which it purchases the loan). The value of collateral, if any, securing a loan can decline, or may be insufficient to meet the borrower’s obligations or difficult to liquidate. In addition, the fund’s access to collateral may be limited by bankruptcy or other insolvency laws. The failure by the fund to receive scheduled interest or principal payments on a loan would adversely affect the income of the fund and would likely reduce the value of its assets, which would be reflected in a reduction in the fund's net asset value. Banks and other lending institutions generally perform a credit analysis of the borrower before originating a


September 28, 2010	II-20

loan or participating in a lending syndicate. In selecting the loans in which the fund will invest, however, Putnam Management will not rely solely on that credit analysis, but will perform its own investment analysis of the borrowers. Putnam Management's analysis may include consideration of the borrower's financial strength and managerial experience, debt coverage, additional borrowing requirements or debt maturity schedules, changing financial conditions, and responsiveness to changes in business conditions and interest rates. Putnam Management will generally not have access to non-public information to which other investors in syndicated loans may have access. Because loans in which the fund may invest are not generally rated by independent credit rating agencies, a decision by the fund to invest in a particular loan will depend almost exclusively on Putnam Management's, and the original lending institution's, credit analysis of the borrower. Investments in loans may be of any quality, including “distressed” loans, and will be subject to the fund’s credit quality policy. The loans in which the fund may invest include those that pay fixed rates of interest and those that pay floating rates – i.e., rates that adjust periodically based on a known lending rate, such as a bank’s prime rate.

Loans may be structured in different forms, including novations, assignments and participating interests. In a novation, the fund assumes all of the rights of a lending institution in a loan, including the right to receive payments of principal and interest and other amounts directly from the borrower and to enforce its rights as a lender directly against the borrower. The fund assumes the position of a co-lender with other syndicate members. As an alternative, the fund may purchase an assignment of a portion of a lender's interest in a loan. In this case, the fund may be required generally to rely upon the assigning bank to demand payment and enforce its rights against the borrower, but would otherwise be entitled to all of such bank's rights in the loan. The fund may also purchase a participating interest in a portion of the rights of a lending institution in a loan. In such case, it will be entitled to receive payments of principal, interest and premium, if any, but will not generally be entitled to enforce its rights directly against the agent bank or the borrower, and must rely for that purpose on the lending institution. The fund may also acquire a loan interest directly by acting as a member of the original lending syndicate.

The fund will in many cases be required to rely upon the lending institution from which it purchases the loan to collect and pass on to the fund such payments and to enforce the fund's rights under the loan. As a result, an insolvency, bankruptcy or reorganization of the lending institution may delay or prevent the fund from receiving principal, interest and other amounts with respect to the underlying loan. When the fund is required to rely upon a lending institution to pay to the fund principal, interest and other amounts received by it, Putnam Management will also evaluate the creditworthiness of the lending institution.

The borrower of a loan in which the fund holds an interest may, either at its own election or pursuant to terms of the loan documentation, prepay amounts of the loan from time to time. There is no assurance that the fund will be able to reinvest the proceeds of any loan prepayment at the same interest rate or on the same terms as those of the original loan.

Corporate loans in which the fund may invest are generally made to finance internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other corporate activities. A significant portion of the corporate loans purchased by the fund may represent interests in loans made to finance highly leveraged corporate acquisitions, known as "leveraged buy-out" transactions, leveraged recapitalization loans and other types of acquisition financing. The highly leveraged capital structure of the borrowers in such transactions may make such loans especially vulnerable to adverse changes in economic or market conditions. In addition, loans generally are subject to restrictions on transfer, and only limited opportunities may exist to sell such participations in secondary markets. As a result, the fund may be unable to sell loans at a time when it may otherwise be desirable to do so or may be able to sell them only at a price that is less than their fair market value. The fund may hold investments in loans for a very short period of time when opportunities to resell the investments that Putnam Management believes are attractive arise.


September 28, 2010	II-21

Certain of the loans acquired by the fund may involve revolving credit facilities under which a borrower may from time to time borrow and repay amounts up to the maximum amount of the facility. In such cases, the fund would have an obligation to advance its portion of such additional borrowings upon the terms specified in the loan participation. To the extent that the fund is committed to make additional loans under such a participation, it will at all times set aside on its books liquid assets in an amount sufficient to meet such commitments. Certain of the loan participations acquired by the fund may also involve loans made in foreign (i.e., non-U.S.) currencies. The fund's investment in such participations would involve the risks of currency fluctuations described above with respect to investments in the foreign securities.

With respect to its management of investments in bank loans, Putnam Management will normally seek to avoid receiving material, non-public information (“Confidential Information”) about the issuers of bank loans being considered for acquisition by the fund or held in the fund’s portfolio. In many instances, borrowers may offer to furnish Confidential Information to prospective investors, and to holders, of the issuer’s loans. Putnam Management’s decision not to receive Confidential Information may place Putnam Management at a disadvantage relative to other investors in loans (which could have an adverse effect on the price the fund pays or receives when buying or selling loans). Also, in instances where holders of loans are asked to grant amendments, waivers or consent, Putnam Management’s ability to assess their significance or desirability may be adversely affected. For these and other reasons, it is possible that Putnam Management’s decision not to receive Confidential Information under normal circumstances could adversely affect the fund’s investment performance.

Notwithstanding its intention generally not to receive material, non-public information with respect to its management of investments in loans, Putnam Management may from time to time come into possession of material, non-public information about the issuers of loans that may be held in the fund’s portfolio. Possession of such information may in some instances occur despite Putnam Management’s efforts to avoid such possession, but in other instances Putnam Management may choose to receive such information (for example, in connection with participation in a creditors’ committee with respect to a financially distressed issuer). As, and to the extent, required by applicable law, Putnam Management's ability to trade in these loans for the account of the fund could potentially be limited by its possession of such information. Such limitations on Putnam Management's ability to trade could have an adverse effect on the fund by, for example, preventing the fund from selling a loan that is experiencing a material decline in value. In some instances, these trading restrictions could continue in effect for a substantial period of time.

In some instances, other accounts managed by Putnam Management or an affiliate may hold other securities issued by borrowers whose loans may be held in the fund’s portfolio. These other securities may include, for example, debt securities that are subordinate to the loans held in the fund’s portfolio, convertible debt or common or preferred equity securities. In certain circumstances, such as if the credit quality of the issuer deteriorates, the interests of holders of these other securities may conflict with the interests of the holders of the issuer’s loans. In such cases, Putnam Management may owe conflicting fiduciary duties to the fund and other client accounts. Putnam Management will endeavor to carry out its obligations to all of its clients to the fullest extent possible, recognizing that in some cases certain clients may achieve a lower economic return, as a result of these conflicting client interests, than if Putnam Management's client accounts collectively held only a single category of the issuer’s securities.

Borrowing and Other Forms of Leverage

The fund may borrow money to the extent permitted by its investment policies and restrictions and applicable law. When the fund borrows money or otherwise leverages its portfolio, the value of an investment in the fund will be more volatile and other investment risks will tend to be compounded. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the fund’s holdings. In addition to borrowing money from banks, the fund may engage in certain other investment transactions that may be viewed as forms of financial leverage – for example, using dollar rolls, investing collateral from loans of portfolio securities, entering into when-issued, delayed-delivery or forward commitment transactions or using derivatives such as


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swaps, futures, forwards, and options. Because the fund either (1) sets aside cash (or other assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees) on its books in respect of such transactions during the period in which the transactions are open or (2) otherwise “covers” its obligations under the transactions, such as by holding offsetting investments, the fund does not consider these transactions to be borrowings for purposes of its investment restrictions or “senior securities” for purposes of the 1940 Act. In some cases (e.g., with respect to futures and forwards that are contractually required to “cash-settle”), the fund is permitted under relevant guidance from the SEC or SEC staff to set aside assets with respect to an investment transaction in the amount of its net (marked-to-market) obligations thereunder, rather than the full notional amount of the transaction. By setting aside assets equal only to its net obligations, the fund will have the ability to employ leverage to a greater extent than if it set aside assets equal to the notional amount of the transaction, which may increase the risk associated with such investments.

Each Putnam fund (other than Putnam RetirementReady Funds, Putnam Global Sector Fund and Putnam Money Market Liquidity Fund) participates in committed and uncommitted lines of credit with State Street Bank and Trust Company. These lines of credit are intended to provide a temporary source of cash in extraordinary or emergency circumstances, such as unexpected shareholder redemption requests. The fund may pay a commitment or other fee to maintain a line of credit, in addition to the stated interest rate.

Derivatives

Certain of the instruments in which the fund may invest, such as futures contracts, options, hybrid instruments, forward contracts, swap agreements and structured investments, are considered to be "derivatives." Derivatives are financial instruments whose value depends upon, or is derived from, the value or other attributes of an underlying asset, such as a security or an index. Further information about these instruments and the risks involved in their use is included elsewhere in the prospectus and in this SAI. The fund’s use of derivatives may cause the fund to recognize higher amounts of short-term capital gains, which are generally taxed to shareholders at ordinary income tax rates. Investments in derivatives may be applied toward meeting a requirement to invest in a particular kind of investment if the derivatives have economic characteristics similar to that investment. The fund’s use of certain derivatives may in some cases involve forms of financial leverage, which involves risk and may increase the volatility of the fund’s net asset value. See “—Borrowing.” In its use of derivatives, the fund may take both long positions (the values of which move in the same direction as the prices of the underlying investments, pools of investments, indexes or currencies), and short positions (the values of which move in the opposite direction from the prices of the underlying investments, pools of investments indexes or currencies).

Short positions may involve greater risks than long positions, as the risk of loss may be theoretically unlimited (unlike a long position, in which the risk of loss may be limited to the amount invested). The fund may use derivatives that combine “long” and “short” positions in order to capture the difference between underlying investments, pools of investments, indices or currencies.

Exchange Traded Notes

The fund may invest in exchange traded notes (“ETNs”). ETNs are typically senior, unsecured, unsubordinated debt securities whose returns are linked to the performance of a particular market index less applicable fees and expenses. ETNs are listed on an exchange and traded in the secondary market. The fund may hold the ETN until maturity, at which time the issuer is obligated to pay a return linked to the performance of the relevant market index. ETNs do not make periodic interest payments and principal is not protected.

The market value of an ETN may be influenced by, among other things, time to maturity, level of supply and demand of the ETN, volatility and lack of liquidity in the underlying assets, changes in the applicable interest rates, the current performance of the market index to which the ETN is linked, and the credit rating of the ETN issuer. The market value of an ETN may differ from the performance of the applicable market index and there may be times when an ETN trades at a premium or discount. This difference in price may be due to the fact


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that the supply and demand in the market for ETNs at any point in time is not always identical to the supply and demand in the market for the securities underlying the market index that the ETN seeks to track. A change in the issuer’s credit rating may also impact the value of an ETN despite the underlying market index remaining unchanged. ETNs are also subject to tax risk. No assurance can be given that the Internal Revenue Service (the “IRS”) will accept, or a court will uphold, how the fund characterizes and treats ETNs for tax purposes.

An ETN that is tied to a specific market index may not be able to replicate and maintain exactly the composition and relative weighting of securities, commodities or other components in the applicable market index. ETNs also incur certain expenses not incurred by their applicable market index, and the fund would bear a proportionate share of any fees and expenses borne by the ETN in which it invests.

The fund’s decision to sell its ETN holdings may be limited by the availability of a secondary market. In addition, although an ETN may be listed on an exchange, the issuer may not be required to maintain the listing and there can be no assurance that a secondary market will exist for an ETN. Some ETNs that use leverage in an effort to amplify the returns of an underlying market index can, at times, be relatively illiquid and may therefore be difficult to purchase or sell at a fair price. Leveraged ETNs may offer the potential for greater return, but the potential for loss and speed at which losses can be realized also are greater.

ETNs are generally similar to structured investments and hybrid instruments. For discussion of these investments and the risks generally associated with them, see “Hybrid Instruments” and “Structured Investments” in this SAI.

Floating Rate and Variable Rate Demand Notes

The fund may purchase taxable or tax-exempt floating rate and variable rate demand notes for short-term cash management or other investment purposes. Floating rate and variable rate demand notes and bonds may have a stated maturity in excess of one year, but may have features that permit a holder to demand payment of principal plus accrued interest upon a specified number of days notice. Frequently, such obligations are secured by letters of credit or other credit support arrangements provided by banks. The issuer has a corresponding right, after a given period, to prepay in its discretion the outstanding principal of the obligation plus accrued interest upon a specific number of days notice to the holders. The interest rate of a floating rate instrument may be based on a known lending rate, such as a bank's prime rate, and is reset whenever such rate is adjusted. The interest rate on a variable rate demand note is reset at specified intervals at a market rate.

Foreign Currency Transactions

To manage its exposure to foreign currencies, the fund may engage in foreign currency exchange transactions, including purchasing and selling foreign currency, foreign currency options, foreign currency forward contracts and foreign currency futures contracts and related options. In addition, the fund may engage in these transactions for the purpose of increasing its return. Foreign currency transactions involve costs, and, if unsuccessful, may reduce the fund’s return.

Generally, the fund may engage in both "transaction hedging" and "position hedging." The fund may also engage in foreign currency transactions for non-hedging purposes, subject to applicable law. When it engages in transaction hedging, the fund enters into foreign currency transactions with respect to specific receivables or payables, generally arising in connection with the purchase or sale of portfolio securities. The fund will engage in transaction hedging when it desires to "lock in" the U.S. dollar price of a security it has agreed to purchase or sell, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. By transaction hedging the fund will attempt to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is earned, and the date on which such payments are made or received. The fund may also engage in position


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hedging to protect against a decline in the value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of the currency in which securities the fund intends to buy are denominated or quoted).

The fund may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency or for other hedging or non-hedging purposes. If conditions warrant, for hedging or non-hedging purposes, the fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and purchase and sell foreign currency futures contracts. The fund may also purchase or sell exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies.

A foreign currency futures contract is a standardized exchange-traded contract for the future delivery of a specified amount of a foreign currency at a price set at the time of the contract. Foreign currency futures contracts traded in the United States are designed by and traded on exchanges regulated by the Commodity Futures Trading Commission (the "CFTC"), such as the New York Mercantile Exchange, and have margin requirements.

A foreign currency forward contract is a negotiated agreement to exchange currency at a future time, which may be any fixed number of days from the date of the contract as agreed by the parties, at a price set at the time of the contract. The contract price may be higher or lower than the current spot rate. In the case of a cancelable forward contract, the holder has the unilateral right to cancel the contract at maturity by paying a specified fee. Forward foreign currency exchange contracts differ from foreign currency futures contracts in certain respects. For example, the maturity date of a forward contract may be any fixed number of days from the date of the contract agreed upon by the parties, rather than a predetermined date in a given month. Forward contracts may be in any amount agreed upon by the parties rather than predetermined amounts. In addition, forward contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers, so that no intermediary is required. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades.

At the maturity of a forward or futures contract, the fund either may accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract. Closing transactions with respect to futures contracts may be effected only on a commodities exchange or board of trade which provides a secondary market in such contracts; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts.

Although the fund intends to purchase or sell foreign currency futures contracts only on exchanges or boards of trade where there appears to be an active secondary market, there is no assurance that a secondary market on an exchange or board of trade will exist for any particular contract or at any particular time. In such event, it may not be possible to close a futures position and, in the event of adverse price movements, the fund would continue to be required to make daily cash payments of variation margin.

It is impossible to forecast with precision the market value of portfolio securities at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary for the fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency the fund is obligated to deliver and a decision is made to sell the security or securities and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities if the market value of such security or securities exceeds the amount of foreign currency the fund is obligated to deliver.


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As noted above, the fund may purchase or sell exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives the fund the right to assume a short position in the futures contract until the expiration of the option. A put option on a currency gives the fund the right to sell the currency at an exercise price until the expiration of the option. A call option on a futures contract gives the fund the right to assume a long position in the futures contract until the expiration of the option. A call option on a currency gives the fund the right to purchase the currency at the exercise price until the expiration of the option.

Foreign currency options are traded primarily in the over-the-counter market, although options on foreign currencies are also listed on several exchanges. Options are traded not only on the currencies of individual nations, but also on the euro, the joint currency of most countries in the European Union.

The fund will only purchase or write foreign currency options when Putnam Management believes that a liquid secondary market exists for such options. There can be no assurance that a liquid secondary market will exist for a particular option at any specific time. Options on foreign currencies may be affected by all of those factors which influence foreign exchange rates and investments generally.

The fund's currency hedging transactions may call for the delivery of one foreign currency in exchange for another foreign currency and may at times not involve currencies in which its portfolio securities are then denominated. Putnam Management will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the fund. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge.

Transaction and position hedging do not eliminate fluctuations in the underlying prices of the securities that the fund owns or intends to purchase or sell. They simply establish a rate of exchange which one can achieve at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they involve costs to the fund and tend to limit any potential gain which might result from the increase in value of such currency.

The fund may also engage in non-hedging currency transactions. For example, Putnam Management may believe that exposure to a currency is in the fund's best interest but that securities denominated in that currency are unattractive. In this situation, the fund may purchase a currency forward contract or option in order to increase its exposure to the currency. In accordance with SEC regulations, the fund will set aside liquid assets on its books to cover forward contracts used for non-hedging purposes.

In addition, the fund may seek to increase its current return or to offset some of the costs of hedging against fluctuations in current exchange rates by writing covered call options and covered put options on foreign currencies. The fund receives a premium from writing a call or put option, which increases the fund's current return if the option expires unexercised or is closed out at a net profit. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written.

The value of any currency, including U.S. dollars and foreign currencies, may be affected by complex political and economic factors applicable to the issuing country. In addition, the exchange rates of foreign currencies (and therefore the values of foreign currency options, forward contracts and futures contracts) may be affected significantly, fixed, or supported directly or indirectly by U.S. and foreign government actions. Government intervention may increase risks involved in purchasing or selling foreign currency options, forward contracts and futures contracts, since exchange rates may not be free to fluctuate in response to other market forces.


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The value of a foreign currency option, forward contract or futures contract reflects the value of an exchange rate, which in turn reflects relative values of two currencies -- the U.S. dollar and the foreign currency in question. Although foreign exchange dealers do not charge a fee for currency conversion, they do realize a profit based on the difference (the "spread") between prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the fund at one rate, while offering a lesser rate of exchange should the fund desire to resell that currency to the dealer. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be involved in the exercise of foreign currency options, forward contracts and futures contracts, investors may be disadvantaged by having to deal in an odd-lot market for the underlying foreign currencies in connection with options at prices that are less favorable than for round lots. Foreign governmental restrictions or taxes could result in adverse changes in the cost of acquiring or disposing of foreign currencies.

There is no systematic reporting of last sale information for foreign currencies and there is no regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Available quotation information is generally representative of very large round-lot transactions in the interbank market and thus may not reflect exchange rates for smaller odd-lot transactions (less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that options markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that cannot be reflected in the options markets.

The decision as to whether and to what extent the fund will engage in foreign currency exchange transactions will depend on a number of factors, including prevailing market conditions, the composition of the fund's portfolio and the availability of suitable transactions. Accordingly, there can be no assurance that the fund will engage in foreign currency exchange transactions at any given time or from time to time.

Foreign Investments and Related Risks

Foreign securities are normally denominated and traded in foreign currencies. As a result, the value of the fund's foreign investments and the value of its shares may be affected favorably or unfavorably by changes in currency exchange rates relative to the U.S. dollar. In addition, the fund is required to compute and distribute its income in U.S. dollars. Therefore, if the exchange rate for a foreign currency declines after a fund's income has been earned and translated into U.S. dollars (but before payment), the fund could be required to liquidate portfolio securities to make such distributions. Similarly, if an exchange rate declines between the time a fund incurs expenses in U.S. dollars and the time such expenses are paid, the amount of such currency required to be converted into U.S. dollars in order to pay such expenses in U.S. dollars will be greater than the equivalent amount in any such currency of such expenses at the time they were incurred.

There may be less information publicly available about a foreign issuer than about a U.S. issuer, and foreign issuers may not be subject to accounting, auditing and financial reporting standards and practices comparable to those in the United States. In addition, there may be less (or less effective) regulation of exchanges, brokers and listed companies in some foreign countries. The securities of some foreign issuers are less liquid and at times more volatile than securities of comparable U.S. issuers. Foreign brokerage commissions, custodial expenses and other fees are also generally higher than in the United States.

Foreign settlement procedures and trade regulations may be more complex and involve certain risks (such as delay in payment or delivery of securities or in the recovery of the fund's assets held abroad) and expenses not present in the settlement of investments in U.S. markets. For example, settlement of transactions involving foreign securities or foreign currencies (see below) may occur within a foreign country, and the fund may accept or make delivery of the underlying securities or currency in conformity with any applicable U.S. or foreign restrictions or regulations, and may pay fees, taxes or charges associated with such delivery. Such investments may also involve the risk that an entity involved in the settlement may not meet its obligations.


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In addition, foreign securities may be subject to the risk of nationalization or expropriation of assets, imposition of currency exchange controls, foreign withholding taxes or restrictions on the repatriation of foreign currency, confiscatory taxation, political, social or financial instability and diplomatic developments which could affect the value of the fund's investments in certain foreign countries. Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to foreign withholding taxes, and special U.S. tax considerations may apply.

Note on MSCI Indices. Morgan Stanley Capital International (MSCI) publishes two versions of its indices reflecting the reinvestment of dividends using two different methodologies: gross dividends and net dividends. While both versions reflect reinvested dividends, they differ with respect to the manner in which taxes associated with dividend payments are treated. In calculating the net dividends version, MSCI incorporates reinvested dividends applying the withholding tax rate applicable to foreign non-resident institutional investors that do not benefit from double taxation treaties. Putnam Management believes that the net dividends version of MSCI indices better reflects the returns U.S. investors might expect were they to invest directly in the component securities of an MSCI index.

Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries. The laws of some foreign countries may limit the fund's ability to invest in securities of certain issuers organized under the laws of those foreign countries.

The risks described above, including the risks of nationalization or expropriation of assets, typically are increased in connection with investments in developing countries, also known as "emerging markets." For example, political and economic structures in these countries may be in their infancy and developing rapidly, and such countries may lack the social, political and economic stability characteristic of more developed countries. Certain of these countries have in the past failed to recognize private property rights and have at times nationalized and expropriated the assets of private companies. High rates of inflation or currency devaluations may adversely affect the economies and securities markets of such countries. Investments in emerging markets may be considered speculative.

The currencies of certain emerging market countries have experienced devaluations relative to the U.S. dollar, and future devaluations may adversely affect the value of assets denominated in such currencies. Many emerging market countries have experienced substantial, and in some periods extremely high, rates of inflation or deflation for many years, and future inflation may adversely affect the economies and securities markets of such countries.

In addition, unanticipated political or social developments may affect the value of investments in emerging markets and the availability of additional investments in these markets. The small size, limited trading volume and relative inexperience of the securities markets in these countries may make investments in securities traded in emerging markets illiquid and more volatile than investments in securities traded in more developed countries, and the fund may be required to establish special custodial or other arrangements before making investments in securities traded in emerging markets. There may be little financial or accounting information available with respect to issuers of emerging market securities, and it may be difficult as a result to assess the value or prospects of an investment in such securities.


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American Depository Receipts (“ADRs”) as well as other “hybrid” forms of ADRs, including European Depository Receipts (“EDRs”) and Global Depository Receipts (“GDRs”), are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the United States or elsewhere. The underlying shares are held in trust by a custodian bank or similar financial institution in the issuer’s home country. The depository bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. ADRs are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, ADRs continue to be subject to many of the risks associated with investing in foreign securities.

Certain of the foregoing risks may also apply to some extent to securities of U.S. issuers that are denominated in foreign currencies or that are traded in foreign markets, or securities of U.S. issuers having significant foreign operations.

Forward Commitments and Dollar Rolls

The fund may enter into contracts to purchase securities for a fixed price at a future date beyond customary settlement time ("forward commitments") if the fund sets aside on its books liquid assets in an amount sufficient to meet the purchase price, or if the fund enters into offsetting contracts for the forward sale of other securities it owns. In the case of to-be-announced ("TBA") purchase commitments, the unit price and the estimated principal amount are established when the fund enters into a contract, with the actual principal amount being within a specified range of the estimate. Forward commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund's other assets. Where such purchases are made through dealers, the fund relies on the dealer to consummate the sale. The dealer's failure to do so may result in the loss to the fund of an advantageous yield or price. Although the fund will generally enter into forward commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so. The fund may realize short-term profits or losses upon the sale of forward commitments.

The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as "cover" for the transaction. Unsettled TBA sale commitments are valued at current market value of the underlying securities. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss on the commitment without regard to any unrealized gain or loss on the underlying security. If the fund delivers securities under the commitment, the fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into.

The fund may enter into dollar roll transactions (generally using TBAs) in which it sells a fixed income security for delivery in the current month and simultaneously contracts to purchase similar securities (for example, same type, coupon and maturity) at an agreed upon future time. By engaging in a dollar roll transaction, the fund foregoes principal and interest paid on the security that is sold, but receives the difference between the current sales price and the forward price for the future purchase. The fund would also be able to earn interest on the proceeds of the sale before they are reinvested. The fund accounts for dollar rolls as purchases and sales. Because cash (or other assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees) in the amount of the fund’s commitment under a dollar roll is set aside on the fund’s books, the fund does not consider these transactions to be borrowings for purposes of its investment restrictions.


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The obligation to purchase securities on a specified future date involves the risk that the market value of the securities that the fund is obligated to purchase may decline below the purchase price. In addition, in the event the other party to the transaction files for bankruptcy, becomes insolvent or defaults on its obligation, the fund may be adversely affected.

Futures Contracts and Related Options

Subject to applicable law, the fund may invest without limit in futures contracts and related options for hedging and non-hedging purposes, such as to manage the effective duration of the fund's portfolio or as a substitute for direct investment. A financial futures contract sale creates an obligation by the seller to deliver the type of financial instrument called for in the contract in a specified delivery month for a stated price. A financial futures contract purchase creates an obligation by the purchaser to take delivery of the type of financial instrument called for in the contract in a specified delivery month at a stated price. The specific instruments delivered or taken, respectively, at settlement date are not determined until on or near that date. The determination is made in accordance with the rules of the exchange on which the futures contract sale or purchase was made. Futures contracts are traded in the United States only on commodity exchanges or boards of trade -- known as "contract markets" -- approved for such trading by the CFTC, and must be executed through a futures commission merchant or brokerage firm which is a member of the relevant contract market. Examples of futures contracts that the fund may use (which may include single-security futures) include, without limitation, U.S. Treasury security futures, index futures, corporate or municipal bond futures, Government National Mortgage Association certificate futures, interest rate swap futures, and Eurodollar futures. In addition, as described elsewhere in this SAI, the fund may use foreign currency futures.

Although futures contracts (other than index futures and futures based on the volatility or variance experienced by an index) by their terms call for actual delivery or acceptance of commodities or securities, in most cases the contracts are closed out before the settlement date without the making or taking of delivery. Index futures and futures based on the volatility or variance experienced by an index do not call for actual delivery or acceptance of commodities or securities, but instead require cash settlement of the futures contract on the settlement date specified in the contract. Such contracts may also be closed out before the settlement date. Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity with the same delivery date. If the price of the initial sale of the futures contract exceeds the price of the offsetting purchase, the seller is paid the difference and realizes a gain. Conversely, if the price of the offsetting purchase exceeds the price of the initial sale, the seller realizes a loss. If the fund is unable to enter into a closing transaction, the amount of the fund's potential loss is unlimited. The closing out of a futures contract purchase is effected by the purchaser's entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the purchaser realizes a gain, and if the purchase price exceeds the offsetting sale price, he realizes a loss.

Unlike when the fund purchases or sells a security, no price is paid or received by the fund upon the purchase or sale of a futures contract. Instead, upon entering into a contract, the fund is required to deliver to the futures broker an amount of liquid assets. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds to finance the transactions. Rather, initial margin is similar to a performance bond or good faith deposit which is returned to the fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Futures contracts also involve brokerage costs.


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Subsequent payments, called "variation margin" or "maintenance margin," to and from the broker are made on a daily basis as the price of the underlying security or commodity fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as "marking to the market." For example, when the fund has purchased a futures contract on a security and the price of the underlying security has risen, that position will have increased in value and the fund will receive from the broker a variation margin payment based on that increase in value. Conversely, when the fund has purchased a security futures contract and the price of the underlying security has declined, the position would be less valuable and the fund would be required to make a variation margin payment to the broker.

The fund may elect to close some or all of its futures positions at any time prior to their expiration in order to reduce or eliminate a position then currently held by the fund. The fund may close its positions by taking opposite positions which will operate to terminate the fund's position in the futures contracts. Final determinations of variation margin are then made, additional cash is required to be paid by or released to the fund, and the fund realizes a loss or a gain. Such closing transactions involve additional commission costs.

The fund does not intend to purchase or sell futures or related options for other than hedging purposes, if, as a result, the sum of the initial margin deposits on the fund's existing futures and related options positions and premiums paid for outstanding options on futures contracts would exceed 5% of the fund's net assets.

The fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act (the "CEA"), and therefore, is not subject to registration or regulation as a pool operator under the CEA.

Index futures. An index futures contract is a contract to buy or sell units of an index at a specified future date at a price agreed upon when the contract is made. Entering into a contract to buy units of an index is commonly referred to as buying or purchasing a contract or holding a long position in the index. Entering into a contract to sell units of an index is commonly referred to as selling a contract or holding a short position. A unit is the current value of the index. The fund may enter into stock index futures contracts, debt index futures contracts, or other index futures contracts appropriate to its objective(s). The fund may also purchase and sell options on index futures contracts.

For example, the Standard & Poor's 500 Composite Stock Price Index ("S&P 500") is composed of 500 selected U.S. common stocks. The S&P 500 assigns relative weightings to the common stocks included in the Index, and the value fluctuates with changes in the market values of those common stocks. In the case of the S&P 500, contracts are currently to buy or sell 250 units. Thus, if the value of the S&P 500 were $150, one contract would be worth $37,500 (250 units x $150). The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. For example, if the fund enters into a futures contract to buy 250 units of the S&P 500 at a specified future date at a contract price of $150 and the S&P 500 is at $154 on that future date, the fund will gain $1,000 (250 units x gain of $4). If the fund enters into a futures contract to sell 250 units of the stock index at a specified future date at a contract price of $150 and the S&P 500 is at $152 on that future date, the fund will lose $500 (250 units x loss of $2).

Options on futures contracts. The fund may purchase and write call and put options on futures contracts it may buy or sell and enter into closing transactions with respect to such options to terminate existing positions. In return for the premium paid, options on futures contracts give the purchaser the right to assume a position in a futures contract at the specified option exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account which represents the amount by which the market price of the futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the future. If an option is exercised on the last trading day prior to its expiration date, the settlement will be made entirely in cash equal to the


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difference between the exercise price of the option and the closing level of the underlying asset on which the future is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid.

The fund may use options on futures contracts in lieu of writing or buying options directly on the underlying securities or indices or purchasing and selling the underlying futures contracts. For example, to hedge against a possible decrease in the value of its portfolio securities, the fund may purchase put options or write call options on futures contracts rather than selling futures contracts. Similarly, the fund may purchase call options or write put options on futures contracts as a substitute for the purchase of futures contracts to hedge against a possible increase in the price of securities which the fund expects to purchase. Such options generally operate in the same manner, and involve the same risks, as options purchased or written directly on the underlying investments. In addition, the fund will be required to deposit initial margin and maintenance margin with respect to put and call options on futures contracts written by it pursuant to brokers' requirements similar to those described above in connection with the discussion of futures contracts. The writing of an option on a futures contract involves risks similar to those relating to the sale of futures contracts.

Compared to the purchase or sale of futures contracts, the purchase of call or put options on futures contracts generally involves less potential risk to the fund because the maximum amount at risk is the premium paid for the options (plus transaction costs). However, there may be circumstances when the purchase of a call or put option on a futures contract would result in a loss to the fund when the purchase or sale of a futures contract would not, such as when there is no movement in the prices of the hedged investments.

As an alternative to purchasing call and put options on index futures, the fund may purchase and sell call and put options on the underlying indices themselves. Such options would be used in a manner identical to the use of options on index futures.

Risks of transactions in futures contracts and related options. Successful use of futures contracts by the fund is subject to Putnam Management's ability to predict movements in various factors affecting securities markets, including interest rates and market movements, and, in the case of index futures and futures based on the volatility or variance experienced by an index, Putnam Management’s ability to predict the future level of the index or the future volatility or variance experienced by an index. For example, it is possible that, where the fund has sold futures to hedge its portfolio against a decline in the market, the index on which the futures are written may advance and the value of securities held in the fund's portfolio may decline. If this occurred, the fund would lose money on the futures and also experience a decline in value in its portfolio securities. It is also possible that, if the fund has hedged against the possibility of a decline in the market adversely affecting securities held in its portfolio and securities prices increase instead, the fund will lose part or all of the benefit of the increased value of those securities it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements at a time when it is disadvantageous to do so.

The use of options and futures strategies also involves the risk of imperfect correlation among movements in the prices of the securities or other assets underlying the futures and options purchased and sold by the fund, of the options and futures contracts themselves, and, in the case of hedging transactions, of the securities which are the subject of a hedge. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the futures used by the fund and the portion of the portfolio being hedged, the prices of futures may not correlate perfectly with movements in the underlying asset due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the underlying asset and futures markets. Second, margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the securities market does. Increased participation by speculators in the futures market may also cause temporary price distortions. Due to the possibility of price distortions in the futures market and also because of the


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imperfect correlation between movements in the underlying asset and movements in the prices of related futures, even a correct forecast of general market trends by Putnam Management may still not result in a profitable position.

There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain market clearing facilities inadequate, and thereby result in the institution by exchanges of special procedures which may interfere with the timely execution of customer orders.

To reduce or eliminate a position held by the fund, the fund may seek to close out such position. The ability to establish and close out positions will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop or continue to exist for a particular futures contract or option. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain contracts or options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of contracts or options, or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of contracts or options (or a particular class or series of contracts or options), in which event the secondary market on that exchange for such contracts or options (or in the class or series of contracts or options) would cease to exist, although outstanding contracts or options on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.

Hybrid Instruments

These instruments are generally considered derivatives and include indexed or structured securities, and combine the elements of futures contracts or options with those of debt, preferred equity or a depository instrument. A hybrid instrument may be a debt security, preferred stock, warrant, convertible security, certificate of deposit or other evidence of indebtedness on which a portion of or all interest payments, and/or the principal or stated amount payable at maturity, redemption or retirement, is determined by reference to prices, changes in prices, or differences between prices, of securities, currencies, intangibles, goods, articles or commodities (collectively, “underlying assets”), or by another objective index, economic factor or other measure, including interest rates, currency exchange rates, or commodities or securities indices (collectively, “benchmarks”). Hybrid instruments may take a number of forms, including, but not limited to, debt instruments with interest or principal payments or redemption terms determined by reference to the value of an index at a future time, preferred stock with dividend rates determined by reference to the value of a currency, or convertible securities with the conversion terms related to a particular commodity.

The risks of investing in hybrid instruments reflect a combination of the risks of investing in securities, options, futures and currencies. An investment in a hybrid instrument may entail significant risks that are not associated with a similar investment in a traditional debt instrument that has a fixed principal amount, is denominated in U.S. dollars or bears interest either at a fixed rate or a floating rate determined by reference to a common, nationally published benchmark. The risks of a particular hybrid instrument will depend upon the terms of the instrument, but may include the possibility of significant changes in the benchmark(s) or the prices of the underlying assets to which the instrument is linked. Such risks generally depend upon factors unrelated to the operations or credit quality of the issuer of the hybrid instrument, which may not be foreseen by the purchaser, such as economic and political events, the supply and demand of the underlying assets and interest rate movements. Hybrid instruments may be highly volatile and their use by the fund may not be successful.


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Hybrid instruments may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Alternatively, hybrid instruments may bear interest at above market rates but bear an increased risk of principal loss (or gain). The latter scenario may result if “leverage” is used to structure the hybrid instrument. Leverage risk occurs when the hybrid instrument is structured so that a given change in a benchmark or underlying asset is multiplied to produce a greater value change in the hybrid instrument, thereby magnifying the risk of loss as well as the potential for gain.

Hybrid instruments can be an efficient means of creating exposure to a particular market, or segment of a market, with the objective of enhancing total return. For example, a fund may wish to take advantage of expected declines in interest rates in several European countries, but avoid the transaction costs associated with buying and currency-hedging the foreign bond positions. One solution would be to purchase a U.S. dollar-denominated hybrid instrument whose redemption price is linked to the average three year interest rate in a designated group of countries. The redemption price formula would provide for payoffs of less than par if rates were above the specified level. Furthermore, a fund could limit the downside risk of the security by establishing a minimum redemption price so that the principal paid at maturity could not be below a predetermined minimum level if interest rates were to rise significantly. The purpose of this arrangement, known as a structured security with an embedded put option, would be to give the fund the desired European bond exposure while avoiding currency risk, limiting downside market risk, and lowering transaction costs. Of course, there is no guarantee that the strategy will be successful and the fund could lose money if, for example, interest rates do not move as anticipated or credit problems develop with the issuer of the hybrid instrument.

Hybrid instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending on the structure of the particular hybrid instrument, changes in a benchmark may be magnified by the terms of the hybrid instrument and have an even more dramatic and substantial effect upon the value of the hybrid instrument. Also, the prices of the hybrid instrument and the benchmark or underlying asset may not move in the same direction or at the same time.

Hybrid instruments may also carry liquidity risk since the instruments are often “customized” to meet the portfolio needs of a particular investor, and therefore, the number of investors that are willing and able to buy such instruments in the secondary market may be smaller than that for more traditional debt securities. Under certain conditions, the redemption value of such an investment could be zero. In addition, because the purchase and sale of hybrid investments could take place in an over-the-counter market without the guarantee of a central clearing organization, or in a transaction between the fund and the issuer of the hybrid instrument, the creditworthiness of the counterparty of the issuer of the hybrid instrument would be an additional risk factor the fund would have to consider and monitor. In addition, uncertainty regarding the tax treatment of hybrid instruments may reduce demand for such instruments. Hybrid instruments also may not be subject to regulation by the CFTC, which generally regulates the trading of commodity futures by U.S. persons, the SEC, which regulates the offer and sale of securities by and to U.S. persons, or any other governmental regulatory authority.

Industry and Sector Groups

Putnam Management uses a customized set of industry and sector groups for classifying securities ("Putnam Industry Codes"). The Putnam Industry Codes are based on an expanded Standard & Poor’s industry classification model, modified to be more representative of global investing and more applicable to both large and small capitalization securities. For presentation purposes, the fund may apply the Putnam Industry Codes differently in reporting industry groups in the fund’s shareholder reports or other communications.

Inflation-Protected Securities


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The fund may invest in U.S. Treasury Inflation Protected Securities (“U.S. TIPS”), which are fixed income securities issued by the U.S. Department of Treasury, the principal amounts of which are adjusted daily based upon changes in the rate of inflation. The fund may also invest in other inflation-protected securities issued by non-U.S. governments or by private issuers. U.S. TIPS pay interest on a semi-annual basis, equal to a fixed percentage of the inflation-adjusted principal amount. The interest rate on these bonds is fixed at issuance, but over the life of the bond this interest may be paid on an increasing or decreasing principal value that has been adjusted for inflation.

Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed for U.S. TIPS, even during a period of deflation. However, because the principal amount of U.S. TIPS would be adjusted downward during a period of deflation, the fund will be subject to deflation risk with respect to its investments in these securities. In addition, the current market value of the bonds is not guaranteed, and will fluctuate. If the fund purchases U.S. TIPS in the secondary market whose principal values have been adjusted upward due to inflation since issuance, the fund may experience a loss if there is a subsequent period of deflation. The fund may also invest in other inflation-related bonds which may or may not provide a guarantee of principal. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal amount.

The periodic adjustment of U.S. TIPS is currently tied to the CPI-U, which is calculated by the U.S. Department of Treasury. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. Inflation-protected bonds issued by a non-U.S. government are generally adjusted to reflect a comparable inflation index, calculated by that government. There can no assurance that the CPI-U or any non-U.S. inflation index will accurately measure the real rate of inflation in the prices of goods and services. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure. In addition, there can be no assurance that the rate of inflation in a non-U.S. country will be correlated to the rate of inflation in the United States.

In general, the value of inflation-protected bonds is expected to fluctuate in response to changes in real interest rates, which are in turn tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation-protected bonds. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-protected bonds. If inflation is lower than expected during the period the fund holds the security, the fund may earn less on the security than on a conventional bond. Any increase in principal value is taxable in the year the increase occurs, even though holders do not receive cash representing the increase at that time. As a result, when the fund invests in inflation-protected securities, it could be required at times to liquidate other investments, including when it is not advantageous to do so, in order to satisfy its distribution requirements as a regulated investment company and to eliminate any fund-level income tax liability under the Internal Revenue Code.

The U.S. Treasury began issuing inflation-protected bonds in 1997. Certain non-U.S. governments, such as the United Kingdom, Canada and Australia, have a longer history of issuing inflation-protected bonds, and there may be a more liquid market in certain of these countries for these securities.

Initial Public Offerings

The fund may purchase debt or equity securities in initial public offerings (“IPOs”). These securities, which are often issued by unseasoned companies, may be subject to many of the same risks of investing in companies with smaller market capitalizations. Securities issued in IPOs have no trading history, and information about the companies may be available for very limited periods. Securities issued in an IPO frequently are very volatile in price, and the fund may hold securities purchased in an IPO for a very short period of time. As a result, the fund’s investments in IPOs may increase portfolio turnover, which increases brokerage and administrative costs and may result in taxable distributions to shareholders.


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At any particular time or from time to time the fund may not be able to invest in securities issued in IPOs, or invest to the extent desired because, for example, only a small portion (if any) of the securities being offered in an IPO may be made available to the fund. In addition, under certain market conditions a relatively small number of companies may issue securities in IPOs. Similarly, as the number of Putnam funds to which IPO securities are allocated increases, the number of securities issued to any one fund may decrease. The investment performance of the fund during periods when it is unable to invest significantly or at all in IPOs may be lower than during periods when the fund is able to do so. In addition, as the fund increases in size, the impact of IPOs on the fund’s performance will generally decrease.

Interfund Borrowing and Lending

To satisfy redemption requests or to cover unanticipated cash shortfalls, the fund has entered into a Master Interfund Lending Agreement by and among each Putnam fund and Putnam Management (the “Interfund Lending Agreement”) under which the fund would lend or borrow money for temporary purposes directly to or from another Putnam fund (an “Interfund Loan”), subject to meeting the conditions of an SEC exemptive order granted to the fund permitting such Interfund Loans. All Interfund Loans would consist only of uninvested cash reserves that the lending fund otherwise would invest in short-term repurchase agreements or other short-term instruments. At this time, Putnam Money Market Liquidity Fund is the only Putnam fund expected to make its uninvested cash reserves available for Interfund Loans.

If the fund has outstanding borrowings, any Interfund Loans to the fund (a) would be at an interest rate equal to or lower than that of any outstanding bank loan, (b) would be secured at least on an equal priority basis with at least an equivalent percentage of collateral to loan value as any outstanding bank loan that requires collateral, and (c) would have a maturity no longer than any outstanding bank loan (and in any event not over seven days). In addition, if an event of default were to occur under any agreement evidencing an outstanding bank loan to the fund, the event of default would automatically (without need for action or notice by the lending fund) constitute an immediate event of default under the Interfund Lending Agreement entitling the lending fund to call the Interfund Loan (and exercise all rights with respect to any collateral) and such a call would be deemed made if the lending bank exercises its right to call its loan under its agreement with the borrowing fund.

The fund may make an unsecured borrowing under the Interfund Lending Agreement if its outstanding borrowings from all sources immediately after the interfund borrowing total 10% or less of its total assets; provided, that if the fund has a secured loan outstanding from any other lender, including but not limited to another Putnam fund, the fund’s Interfund Loan would be secured on at least an equal priority basis with at least an equivalent percentage of collateral to loan value as any outstanding loan secured by collateral. If the fund’s total outstanding borrowings immediately after an interfund borrowing would be greater than 10% of its total assets, the fund may borrow through the credit facility on a secured basis only. All secured Interfund Loans would be secured by the pledge of segregated collateral with a market value equal to at least 102% of the outstanding principal value of the Interfund Loan. The fund may not borrow from any source if its total outstanding borrowings immediately after the borrowing would exceed the limits imposed by Section 18 of the 1940 Act or the fund’s fundamental investment restrictions.

The fund may not lend to another Putnam fund under the Interfund Lending Agreement if the Interfund Loan would cause its aggregate outstanding Interfund Loans to exceed 15% of the fund’s current net assets at the time of the Interfund Loan. The fund’s Interfund Loans to any one fund may not exceed 5% of the lending fund’s net assets. The duration of Interfund Loans would be limited to the time required to receive payment for securities sold, but in no event may the duration exceed seven days. Interfund Loans effected within seven days of each other would be treated as separate loan transactions for purposes of this condition. Each Interfund Loan may be called on one business day’s notice by a lending fund and may be repaid on any day by a borrowing fund.


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The limitations detailed above and the other conditions of the SEC exemptive order permitting interfund lending are designed to minimize the risks associated with interfund lending for both the lending fund and the borrowing fund. However, no borrowing or lending activity is without risk. If the fund borrows money from another fund, there is a risk that the Interfund Loan could be called on one day’s notice or not renewed, in which case the fund may have to borrow from a bank at higher rates if an Interfund Loan were not available from another fund. A delay in repayment to a lending fund could result in a lost opportunity or additional lending costs, and interfund loans are subject to the risk that the borrowing fund could be unable to repay the loan when due.

Inverse Floaters

These securities have variable interest rates that typically move in the opposite direction from movements in prevailing short-term interest rate levels – rising when prevailing short-term interest rate fall, and vice versa. The prices of inverse floaters can be considerably more volatile than the prices of bonds with comparable maturities. The fund currently does not intend to invest more than 15% of its assets in inverse floating obligations.

Lower-rated Securities

The fund may invest in lower-rated fixed-income securities (commonly known as "junk bonds"). The lower ratings reflect a greater possibility that adverse changes in the financial condition of the issuer or in general economic conditions, or both, or an unanticipated rise in interest rates, may impair the ability of the issuer to make payments of interest and principal. The inability (or perceived inability) of issuers to make timely payment of interest and principal would likely make the values of securities held by the fund more volatile and could limit the fund's ability to sell its securities at prices approximating the values the fund had placed on such securities. In the absence of a liquid trading market for securities held by it, the fund at times may be unable to establish the fair value of such securities.

Securities ratings are based largely on the issuer's historical financial condition and the rating agencies' analysis at the time of rating. Consequently, the rating assigned to any particular security is not necessarily a reflection of the issuer's current financial condition, which may be better or worse than the rating would indicate. In addition, the rating assigned to a security by Moody's Investors Service, Inc. or Standard & Poor's (or by any other nationally recognized securities rating agency) does not reflect an assessment of the volatility of the security's market value or the liquidity of an investment in the security. See "SECURITIES RATINGS."

Like those of other fixed-income securities, the values of lower-rated securities fluctuate in response to changes in interest rates. A decrease in interest rates will generally result in an increase in the value of the fund's fixed-income assets. Conversely, during periods of rising interest rates, the value of the fund's fixed-income assets will generally decline. The values of lower-rated securities may often be affected to a greater extent by changes in general economic conditions and business conditions affecting the issuers of such securities and their industries. Negative publicity or investor perceptions may also adversely affect the values of lower-rated securities. Changes by nationally recognized securities rating agencies in their ratings of any fixed-income security and changes in the ability of an issuer to make payments of interest and principal may also affect the value of these investments. Changes in the value of portfolio securities generally will not affect income derived from these securities, but will affect the fund's net asset value. The fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Putnam Management will monitor the investment to determine whether its retention will assist in meeting the fund's investment objective(s).


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Issuers of lower-rated securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. Such issuers may not have more traditional methods of financing available to them and may be unable to repay outstanding obligations at maturity by refinancing. The risk of loss due to default in payment of interest or repayment of principal by such issuers is significantly greater because such securities frequently are unsecured and subordinated to the prior payment of senior indebtedness.

At times, a substantial portion of the fund's assets may be invested in an issue of which the fund, by itself or together with other funds and accounts managed by Putnam Management or its affiliates, holds all or a major portion. Although Putnam Management generally considers such securities to be liquid because of the availability of an institutional market for such securities, it is possible that, under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell these securities when Putnam Management believes it advisable to do so or may be able to sell the securities only at prices lower than if they were more widely held. Under these circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value. In order to enforce its rights in the event of a default, the fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on such securities. This could increase the fund's operating expenses and adversely affect the fund's net asset value. In the case of tax-exempt funds, any income derived from the fund's ownership or operation of such assets would not be tax-exempt. The ability of a holder of a tax-exempt security to enforce the terms of that security in a bankruptcy proceeding may be more limited than would be the case with respect to securities of private issuers. In addition, the fund's intention to qualify as a "regulated investment company" under the Internal Revenue Code may limit the extent to which the fund may exercise its rights by taking possession of such assets.

To the extent the fund invests in securities in the lower rating categories, the achievement of the fund's goals is more dependent on Putnam Management's investment analysis than would be the case if the fund were investing in securities in the higher rating categories.

Money Market Instruments

Money market instruments, or short-term debt instruments, consist of obligations such as commercial paper, bank obligations (i.e., certificates of deposit and bankers’ acceptances), repurchase agreements and various government obligations, such as Treasury bills. These instruments have a remaining maturity of one year or less and are generally of high credit quality. Money market instruments may be structured to be, or may employ a trust or other form so that they are, eligible investments for money market funds. For example, put features can be used to modify the maturity of a security or interest rate adjustment features can be used to enhance price stability. If a structure fails to function as intended, adverse tax or investment consequences may result. Neither the Internal Revenue Service (IRS) nor any other regulatory authority has ruled definitively on certain legal issues presented by certain structured securities. Future tax or other regulatory determinations could adversely affect the value, liquidity, or tax treatment of the income received from these securities or the nature and timing of distributions made by the funds.

Commercial paper is a money market instrument issued by banks or companies to raise money for short-term purposes. Unlike some other debt obligations, commercial paper is typically unsecured. Commercial paper may be issued as an asset-backed security (that is, backed by a pool of assets representing the obligations of a number of different issuers), in which case certain of the risks discussed in “Mortgage-backed and Asset-backed securities” would apply. Commercial paper is traded primarily among institutions.

Putnam Money Market Fund and Putnam Tax Exempt Money Market Fund may invest in bankers’ acceptances issued by banks with deposits in excess of $2 billion (or the foreign currency equivalent) at the close of the last calendar year. If the Trustees change this minimum deposit requirement, shareholders would be notified. Other Putnam funds may invest in bankers’ acceptances without regard to this requirement.


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In accordance with rules issued by the SEC, the fund may from time to time invest all or a portion of its cash balances in money market and/or short-term bond funds advised by Putnam Management. In connection with such investments, Putnam Management may waive a portion of the advisory fees otherwise payable by the fund. See “Charges and expenses” in Part I of this SAI for the amount, if any, waived by Putnam Management in connection with such investments.

Mortgage-backed and Asset-backed Securities

Mortgage-backed securities, including collateralized mortgage obligations ("CMOs") and certain stripped mortgage-backed securities, represent a participation in, or are secured by, mortgage loans. Asset-backed securities are structured like mortgage-backed securities, but instead of mortgage loans or interests in mortgage loans, the underlying assets may include such items as motor vehicle installment sales or installment loan contracts, leases of various types of real and personal property and receivables from credit card agreements.

Mortgage-backed securities have yield and maturity characteristics corresponding to the underlying assets. Unlike traditional debt securities, which may pay a fixed rate of interest until maturity, when the entire principal amount comes due, payments on certain mortgage-backed securities include both interest and a partial repayment of principal. Besides the scheduled repayment of principal, repayments of principal may result from the voluntary prepayment, refinancing or foreclosure of the underlying mortgage loans. If property owners make unscheduled prepayments of their mortgage loans, these prepayments will result in early payment of the applicable mortgage-backed securities. In that event the fund may be unable to invest the proceeds from the early payment of the mortgage-backed securities in an investment that provides as high a yield as the mortgage-backed securities. Consequently, early payment associated with mortgage-backed securities may cause these securities to experience significantly greater price and yield volatility than that experienced by traditional fixed-income securities. The occurrence of mortgage prepayments is affected by factors including the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. During periods of falling interest rates, the rate of mortgage prepayments tends to increase, thereby tending to decrease the life of mortgage-backed securities. During periods of rising interest rates, the rate of mortgage prepayments usually decreases, thereby tending to increase the life of mortgage-backed securities. If the life of a mortgage-backed security is inaccurately predicted, the fund may not be able to realize the rate of return it expected.

Adjustable rate mortgage securities (“ARMs”), like traditional mortgage-backed securities, are interests in pools of mortgage loans that provide investors with payments consisting of both principal and interest as mortgage loans in the underlying mortgage pool are paid off by the borrowers. Unlike fixed-rate mortgage-backed securities, ARMs are collateralized by or represent interests in mortgage loans with variable rates of interest. These interest rates are reset at periodic intervals, usually by reference to an interest rate index or market interest rate. Although the rate adjustment feature may act as a buffer to reduce sharp changes in the value of adjustable rate securities, these securities are still subject to changes in value based on, among other things, changes in market interest rates or changes in the issuer’s creditworthiness. Because the interest rates are reset only periodically, changes in the interest rate on ARMs may lag changes in prevailing market interest rates. Also, some ARMs (or the underlying mortgages) are subject to caps or floors that limit the maximum change in the interest rate during a specified period or over the life of the security. As a result, changes in the interest rate on an ARM may not fully reflect changes in prevailing market interest rates during certain periods. The fund may also invest in “hybrid” ARMs, whose underlying mortgages combine fixed-rate and adjustable rate features.


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Mortgage-backed and asset-backed securities are less effective than other types of securities as a means of "locking in" attractive long-term interest rates. One reason is the need to reinvest prepayments of principal; another is the possibility of significant unscheduled prepayments resulting from declines in interest rates. These prepayments would have to be reinvested at lower rates. The automatic interest rate adjustment feature of mortgages underlying ARMs likewise reduces the ability to lock-in attractive rates. As a result, mortgage-backed and asset-backed securities may have less potential for capital appreciation during periods of declining interest rates than other securities of comparable maturities, although they may have a similar risk of decline in market value during periods of rising interest rates. Prepayments may also significantly shorten the effective maturities of these securities, especially during periods of declining interest rates. Conversely, during periods of rising interest rates, a reduction in prepayments may increase the effective maturities of these securities, subjecting them to a greater risk of decline in market value in response to rising interest rates than traditional debt securities, and, therefore, potentially increasing the volatility of the fund.

At times, some mortgage-backed and asset-backed securities will have higher than market interest rates and therefore will be purchased at a premium above their par value. Prepayments may cause losses on securities purchased at a premium.

CMOs may be issued by a U.S. government agency or instrumentality or by a private issuer. Although payment of the principal of, and interest on, the underlying collateral securing privately issued CMOs may be guaranteed by the U.S. government or its agencies or instrumentalities, these CMOs represent obligations solely of the private issuer and are not insured or guaranteed by the U.S. government, its agencies or instrumentalities or any other person or entity.

Prepayments could cause early retirement of CMOs. CMOs are designed to reduce the risk of prepayment for investors by issuing multiple classes of securities, each having different maturities, interest rates and payment schedules, and with the principal and interest on the underlying mortgages allocated among the several classes in various ways. Payment of interest or principal on some classes or series of CMOs may be subject to contingencies or some classes or series may bear some or all of the risk of default on the underlying mortgages. CMOs of different classes or series are generally retired in sequence as the underlying mortgage loans in the mortgage pool are repaid. If enough mortgages are repaid ahead of schedule, the classes or series of a CMO with the earliest maturities generally will be retired prior to their maturities. Thus, the early retirement of particular classes or series of a CMO would have the same effect as the prepayment of mortgages underlying other mortgage-backed securities. Conversely, slower than anticipated prepayments can extend the effective maturities of CMOs, subjecting them to a greater risk of decline in market value in response to rising interest rates than traditional debt securities, and, therefore, potentially increasing their volatility.

Prepayments could result in losses on stripped mortgage-backed securities. Stripped mortgage-backed securities are usually structured with two classes that receive different portions of the interest and principal distributions on a pool of mortgage loans. The yield to maturity on an interest only or “IO” class of stripped mortgage-backed securities is extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the underlying assets. A rapid rate of principal prepayments may have a measurable adverse effect on the fund's yield to maturity to the extent it invests in IOs. If the assets underlying the IO experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal only or “POs” tend to increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The secondary market for stripped mortgage-backed securities may be more volatile and less liquid than that for other mortgage-backed securities, potentially limiting the fund's ability to buy or sell those securities at any particular time. The fund currently does not intend to invest more than 35% of its assets in IOs and POs under normal market conditions.


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The risks associated with other asset-backed securities (including in particular the risks of issuer default and of early prepayment) are generally similar to those described above for CMOs. In addition, because asset-backed securities generally do not have the benefit of a security interest in the underlying assets that is comparable to a mortgage, asset-backed securities present certain additional risks that are not present with mortgage-backed securities. The ability of an issuer of asset-backed securities to enforce its security interest in the underlying assets may be limited. For example, revolving credit receivables are generally unsecured and the debtors on such receivables are entitled to the protection of a number of state and federal consumer credit laws, many of which give debtors the right to set-off certain amounts owed, thereby reducing the balance due. Automobile receivables generally are secured, but by automobiles, rather than by real property.

Asset-backed securities may be collateralized by the fees earned by service providers. The value of asset-backed securities may be substantially dependent on the servicing of the underlying asset and are therefore subject to risks associated with negligence by, or defalcation of, their servicers. In certain circumstances, the mishandling of related documentation may also affect the rights of the security holders in and to the underlying collateral. The insolvency of entities that generate receivables or that utilize the assets may result in added costs and delays in addition to losses associated with a decline in the value of the underlying assets.

Options on Securities

Writing covered options. The fund may write covered call options and covered put options on optionable securities held in its portfolio or that it has an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees, in such amount as are set aside on the fund’s books), when in the opinion of Putnam Management such transactions are consistent with the fund's investment objective(s) and policies. Call options written by the fund give the purchaser the right to buy the underlying securities from the fund at a stated exercise price; put options give the purchaser the right to sell the underlying securities to the fund at a stated price.

The fund may write only covered options, which means that, so long as the fund is obligated as the writer of a call option, it will own the underlying securities subject to the option (or comparable securities satisfying the cover requirements of securities exchanges) or have an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees, in such amount as are set aside on the fund’s books). In the case of put options, the fund will set aside on its books assets determined to be liquid by Putnam Management in accordance with procedures established by the Trustees and equal in value to the price to be paid if the option is exercised. In addition, the fund will be considered to have covered a put or call option if and to the extent that it holds an option that offsets some or all of the risk of the option it has written. The fund may write combinations of covered puts and calls on the same underlying security.

The fund will receive a premium from writing a put or call option, which increases the fund's return in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, if the fund holds the security, the fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. If the fund does not hold the underlying security, the fund bears the risk that, if the market price exceeds the option strike price, the fund will suffer a loss equal to the difference at the time of exercise. By writing a put option, the fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value.


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The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. The fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. If the fund writes a call option but does not own the underlying security, and when it writes a put option, the fund may be required to deposit cash or securities with its broker as "margin," or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations.

Purchasing put options. The fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. The fund may also purchase put options for other investment purposes, including to take a short position in the security underlying the put option.

Purchasing call options. The fund may purchase call options to hedge against an increase in the price of securities that the fund wants ultimately to buy. Such hedge protection is provided during the life of the call option since the fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. The fund may also purchase call options for other investment purposes.

Risk factors in options transactions. The successful use of the fund's options strategies depends on the ability of Putnam Management to forecast correctly interest rate and market movements. For example, if the fund were to write a call option based on Putnam Management's expectation that the price of the underlying security would fall, but the price were to rise instead, the fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the fund were to write a put option based on Putnam Management's expectation that the price of the underlying security would rise, but the price were to fall instead, the fund could be required to purchase the security upon exercise at a price higher than the current market price.

When the fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the fund will lose part or all of its investment in the option. This contrasts with an investment by the fund in the underlying security, since the fund will not realize a loss if the security's price does not change.

The effective use of options also depends on the fund's ability to terminate option positions at times when Putnam Management deems it desirable to do so. There is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events -- such as volume in excess of trading or clearing capability -- were to interrupt its normal operations.


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A market may at times find it necessary to impose restrictions on particular types of options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the fund, as option writer, would remain obligated under the option until expiration or exercise.

Disruptions in the markets for the securities underlying options purchased or sold by the fund could result in losses on the options. For example, if a fund is unable to purchase a security underlying a put option it had purchased, the fund may be unable to exercise the put option. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options. The fund, as holder of such a put option, could lose its entire investment if it is unable to exercise the put option prior to its expiration.

Foreign-traded options are subject to many of the same risks presented by internationally-traded securities. In addition, because of time differences between the United States and various foreign countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States.

Over-the-counter ("OTC") options purchased by the fund and assets held to cover OTC options written by the fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the fund's ability to invest in illiquid securities. The fund may use both European-style options, which are only exercisable immediately prior to their expiration, and American-style options, which are exercisable at any time prior to the expiration date.

In addition to options on securities and futures, the fund may also enter into options on futures, swaps, or other instruments as described elsewhere in this SAI.

Preferred Stocks and Convertible Securities

The fund may invest in preferred stocks or convertible securities. A preferred stock generally pays dividends at a specified rate and has preference over common stock in the payment of dividends and the liquidation of an issuer's assets but is junior to the debt securities of the issuer in those same respects. The market prices of preferred stocks are subject to changes in interest rates and are more sensitive to changes in an issuer's creditworthiness than are the prices of debt securities. Shareholders of preferred stock may suffer a loss of value if dividends are not paid. Under ordinary circumstances, preferred stock does not carry voting rights. In addition, many preferred stocks may be called or redeemed prior to their maturity by the issuer under certain conditions.

Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into or exchanged for, at a specific price or formula within a particular period of time, a prescribed amount of common stock or other equity securities of the same or a different issuer. Convertible securities entitle the holder to receive interest paid or accrued on debt or dividends paid or accrued on preferred stock until the security matures or is redeemed, converted or exchanged.


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The market value of a convertible security is a function of its "investment value" and its "conversion value." A security's "investment value" represents the value of the security without its conversion feature (i.e., a nonconvertible fixed income security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value is dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. A security's "conversion value" is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current price of the underlying security.

If the conversion value of a convertible security is significantly below its investment value, the convertible security will trade like nonconvertible debt or preferred stock and its market value will not be influenced greatly by fluctuations in the market price of the underlying security. Conversely, if the conversion value of a convertible security is near or above its investment value, the market value of the convertible security will be more heavily influenced by fluctuations in the market price of the underlying security. Convertible securities generally have less potential for gain than common stocks.

The fund's investments in convertible securities may at times include securities that have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities at a specified date and a specified conversion ratio, or that are convertible at the option of the issuer. Because conversion of the security is not at the option of the holder, the fund may be required to convert the security into the underlying common stock even at times when the value of the underlying common stock or other equity security has declined substantially.

The fund's investments in preferred stocks and convertible securities, particularly securities that are convertible into securities of an issuer other than the issuer of the convertible security, may be illiquid. The fund may not be able to dispose of such securities in a timely fashion or for a fair price, which could result in losses to the fund.

Private Placements and Restricted Securities

The fund may invest in securities that are purchased in private placements and, accordingly, are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell such securities when Putnam Management believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. At times, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value.

While such private placements may offer attractive opportunities for investment not otherwise available on the open market, the securities so purchased are often "restricted securities," i.e., securities which cannot be sold to the public without registration under the Securities Act of 1933 (the “Securities Act”) or the availability of an exemption from registration (such as Rules 144 or 144A), or which are "not readily marketable" because they are subject to other legal or contractual delays in or restrictions on resale.

The absence of a trading market can make it difficult to ascertain a market value for illiquid investments. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the fund to sell them promptly at an acceptable price. The fund may have to bear the extra expense of registering such securities for resale and the risk of substantial delay in effecting such registration. In addition, market quotations are less readily available. The judgment of Putnam Management may at times play a greater role in valuing these securities than in the case of publicly traded securities.


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Generally speaking, restricted securities may be sold only to qualified institutional buyers, or in a privately negotiated transaction to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration, or in a public offering for which a registration statement is in effect under the Securities Act. The fund may be deemed to be an "underwriter" for purposes of the Securities Act when selling restricted securities to the public, and in such event the fund may be liable to purchasers of such securities if the registration statement prepared by the issuer, or the prospectus forming a part of it, is materially inaccurate or misleading. The SEC Staff currently takes the view that any delegation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the funds) must be pursuant to written procedures established by the Trustees and the Trustees have delegated such authority to Putnam Management.

Real Estate Investment Trusts (REITs)

The fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in either real estate or real estate related loans. Like regulated investment companies such as the fund, REITs are not taxed on income distributed to shareholders provided that they comply with certain requirements under the Internal Revenue Code. The fund will indirectly bear its proportionate share of any expenses paid by REITs in which it invests in addition to the fund’s own expenses.

REITs involve certain unique risks in addition to those risks associated with investing in the real estate industry in general (such as possible declines in the value of real estate, lack of availability of mortgage funds, or extended vacancies of property). REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the risk of borrower default. REITs, and mortgage REITs in particular, are also subject to interest rate risk. REITs are dependent upon their operators’ management skills, are generally not diversified (except to the extent the Internal Revenue Code requires), and are subject to heavy cash flow dependency and the risk of default by borrowers. REITs are also subject to the possibility of failing to qualify for tax-free pass-through of income under the Code or failing to maintain their exemptions from registration under the 1940 Act. REITs may have limited financial resources, may trade less frequently and in a limited volume, and may be subject to more abrupt or erratic price movements than more widely held securities.

The fund's investment in a REIT may require the fund to accrue and distribute income not yet received or may result in the fund making distributions that constitute a return of capital to fund shareholders for federal income tax purposes. In addition, distributions by a fund from REITs will not qualify for the corporate dividends-received deduction, or, generally, for treatment as qualified dividend income.

Redeemable Securities

Certain securities held by the fund may permit the issuer at its option to "call" or redeem its securities. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed.

Repurchase Agreements

The fund, unless it is a money market fund, may enter into repurchase agreements amounting to not more than 25% of its total assets, except that this 25% limitation does not apply to repurchase agreements entered into in connection with short sales. Money market funds may invest without limit in repurchase agreements. A repurchase agreement is a contract under which the fund, the buyer under the contract, acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller (or repurchase agreement counterparty) to repurchase, and the fund to resell, such security at a fixed time and price


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(representing the fund's cost plus interest (or, for repurchase agreements with respect to securities to be sold short, the cost of “borrowing” the security)). It is the fund's present intention to enter into repurchase agreements only with banks and registered broker-dealers. The fund may enter into repurchase agreements, including with respect to securities it wishes to sell short. See “Short Sales” in this SAI. Certain of the repurchase agreements related to securities sold short may provide that, at the option of the fund, settlement may be made by delivery of cash equal to the difference between (a) the sum of (i) the market value of the securities sold short at the time the repurchase agreement is closed out and (ii) transaction costs associated with the acquisition in the market by the repurchase agreement counterparty of the securities sold short and (b) the repurchase price specified in the repurchase agreement.

The fund may be exposed to the credit risk of the repurchase agreement counterparty (or seller) in the event that the counterparty is unable to close out the repurchase agreement in accordance with its terms. If the seller defaults, the fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate.

Pursuant to an exemptive order issued by the SEC, the fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments.

Securities Loans

The fund may make secured loans of its portfolio securities, on either a short-term or long-term basis, amounting to not more than 25% of its total assets, thereby realizing additional income. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. If a borrower defaults, the value of the collateral may decline before the fund can dispose of it. As a matter of policy, securities loans are made to broker-dealers pursuant to agreements requiring that the loans be continuously secured by collateral consisting of cash or short-term debt obligations at least equal at all times to the value of the securities on loan, "marked-to-market" daily. The borrower pays to the fund an amount equal to any dividends or interest received on securities lent. The fund retains all or a portion of the interest received on investment of the cash collateral or receives a fee from the borrower. Although voting rights, or rights to consent, with respect to the loaned securities may pass to the borrower, the fund retains the right to call the loans at any time on reasonable notice, and it will do so to enable the fund to exercise voting rights on any matters materially affecting the investment. The fund may also call such loans in order to sell the securities. The fund may pay fees in connection with arranging loans of its portfolio securities.

Securities of Other Investment Companies

Securities of other investment companies, including shares of open- and closed-end investment companies and unit investment trusts (which may include exchange-traded funds (“ETFs”)), represent interests in collective investment portfolios that, in turn, invest directly in underlying instruments. The fund may invest in other investment companies when it has more uninvested cash than Putnam Management believes is advisable, when it receives cash collateral from securities lending arrangements, when there is a shortage of direct investments available, or when Putnam Management believes that investment companies offer attractive values.


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Investment companies may be structured to perform in a similar fashion to a broad-based securities index or may focus on a particular strategy or class of assets. ETFs typically seek to track the performance or dividend yield of specific indexes or companies in related industries. These indexes may be broad-based, sector-based or international. Investing in investment companies involves substantially the same risks as investing directly in the underlying instruments, but also involves expenses at the investment company-level, such as portfolio management fees and operating expenses. These expenses are in addition to the fees and expenses of the fund itself, which may lead to duplication of expenses while the fund owns another investment company’s shares. In addition, investing in investment companies involves the risk that they will not perform in exactly the same fashion, or in response to the same factors, as the underlying instruments or index. To the extent the fund invests in other investment companies that are professionally managed, its performance will also depend on the investment and research abilities of investment managers other than Putnam Management.

Open-end investment companies typically offer their shares continuously at net asset value plus any applicable sales charge and stand ready to redeem shares upon shareholder request. The shares of certain other types of investment companies, such as ETFs and closed-end investment companies, typically trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. In the case of closed-end investment companies, the number of shares is typically fixed. The securities of closed-end investment companies and ETFs carry the risk that the price the fund pays or receives may be higher or lower than the investment company’s net asset value. ETFs and closed-end investment companies are also subject to certain additional risks, including the risks of illiquidity and of possible trading halts due to market conditions or other reasons, based on the policies of the relevant exchange. The shares of investment companies, particularly closed-end investment companies, may also be leveraged, which would increase the volatility of the fund’s net asset value.

The extent to which the fund can invest in securities of other investment companies, including ETFs, is generally limited by federal securities laws.

Short Sales

The fund may engage in short sales of securities either as a hedge against potential declines in value of a portfolio security or to realize appreciation when a security that the fund does not own declines in value. Short sales are transactions in which the fund sells a security it does not own to a third party by borrowing the security in anticipation of purchasing the same security at the market price on a later date to close out the short position. The fund may also engage in short sales by entering into a repurchase agreement with respect to the security it wishes to sell short. See “– Repurchase Agreements” in this SAI. The fund will incur a gain if the price of the security declines between the date of the short sale and the date on which the fund replaces the borrowed security (or closes out the related repurchase agreement); and the fund will incur a loss if the price of the security increases between those dates. Such a loss is theoretically unlimited since the potential increase in the market price of the security sold short is not limited. Until the security is replaced, the fund must pay the lender (or repurchase agreement counterparty) any dividends or interest that accrues during the period of the loan (or repurchase agreement). To borrow (or enter into a repurchase agreement with respect to) the security, the fund also may be required to pay a premium, which would increase the cost of the security sold. The fund’s successful use of short sales is subject to Putnam Management’s ability to accurately predict movements in the market price of the security sold short. Short selling may involve financial leverage because the fund is exposed both to changes in the market price of the security sold short and to changes in the value of securities purchased with the proceeds of the short sale, effectively leveraging its assets. Under adverse market conditions, a fund may have difficulty purchasing securities to meet its short sale delivery obligations, and may be required to close out its short position at a time when the fund would not choose to do so, and may therefore have to sell portfolio securities to raise the capital necessary to meet its short sale obligations at a time when fundamental investment considerations may not favor such sales. While the fund has an open short position, it will segregate, by appropriate notation on its books or the books of its custodian, cash or liquid assets at least equal in value to the market value of the securities sold short. The segregated amount will be “marked-to-market” daily. Because of this segregation, the fund does not consider these transactions to be “senior


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securities” for purposes of the 1940 Act. In connection with short sale transactions, the fund may be required to pledge certain additional assets for the benefit of the securities lender (or repurchase agreement counterparty) and the fund may, while such assets remain pledged, be limited in its ability to invest those assets in accordance with the fund’s investment strategies.

Certain of the repurchase agreements related to securities sold short may provide that, at the option of the fund, in lieu of delivering the securities sold short, settlement may be made by delivery of cash equal to the difference between (a) the sum of (i) the market value of the securities sold short at the time the repurchase agreement is closed out and (ii) transaction costs associated with the acquisition in the market by the repurchase agreement counterparty of the securities sold short and (b) the repurchase price specified in the repurchase agreement. Because that cash amount represents the fund’s maximum loss in the event of the insolvency of the counterparty, the fund will, except where the local market practice for foreign securities to be sold short requires payment prior to delivery of such securities, treat such amount, rather than the full notional amount of the repurchase agreement, as its “investment” in securities of the counterparty for purposes of all applicable investment restrictions, including its fundamental policy with respect to diversification.

Short-term Trading

In seeking the fund's objective(s), Putnam Management will buy or sell portfolio securities whenever Putnam Management believes it appropriate to do so. From time to time the fund will buy securities intending to seek short-term trading profits. A change in the securities held by the fund is known as "portfolio turnover" and generally involves some expense to the fund. This expense may include brokerage commissions or dealer markups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. If sales of portfolio securities cause the fund to realize net short-term capital gains, such gains will be taxable as ordinary income. As a result of the fund's investment policies, under certain market conditions the fund's portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly average of the value of portfolio securities -- excluding securities whose maturities at acquisition were one year or less. The fund's portfolio turnover rate is not a limiting factor when Putnam Management considers a change in the fund's portfolio.

Special Purpose Acquisition Companies

The fund may invest in stock, warrants, and other securities of special purpose acquisition companies (“SPACs”) or similar special purpose entities that pool funds to seek potential acquisition opportunities. Unless and until an acquisition is completed, a SPAC generally invests its assets (less a portion retained to cover expenses) in U.S. Government securities, money market securities and cash; if an acquisition that meets the requirements for the SPAC is not completed within a pre-established period of time, the invested funds are returned to the entity’s shareholders. Because SPACs and similar entities are in essence blank check companies without an operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the entity’s management to identify and complete a profitable acquisition. Some SPACs may pursue acquisitions only within certain industries or regions, which may increase the volatility of their prices. In addition, these securities, which are typically traded in the over-the-counter market, may be considered illiquid and/or be subject to restrictions on resale.

Structured investments

A structured investment is a security having a return tied to an underlying index or other security or asset class. Structured investments generally are individually negotiated agreements and may be traded over-the-counter. Structured investments are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, or specified instruments (such as commercial bank loans) and the issuance by that entity or one or more classes of securities (“structured securities”) backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly


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issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class of structured securities that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there currently is no active trading market for structured securities. Investments in government and government-related and restructured debt instruments are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt and requests to extend additional loan amounts.

Swap Agreements

The fund may enter into swap agreements and other types of over-the-counter transactions such as caps, floors and collars with broker-dealers or other financial institutions for hedging or investment purposes. A swap involves the exchange by the fund with another party of their respective commitments to pay or receive cash flows, e.g., an exchange of floating rate payments for fixed-rate payments. The purchase of a cap entitles the purchaser, to the extent that a specified index or other underlying financial measure exceeds a predetermined value on a predetermined date or dates, to receive payments on a notional principal amount from the party selling the cap. The purchase of a floor entitles the purchaser, to the extent that a specified index or other underlying financial measure falls or other underlying measure below a predetermined value on a predetermined date or dates, to receive payments on a notional principal amount from the party selling the floor. A collar combines elements of a cap and a floor.

Swap agreements and similar transactions can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. Depending on their structures, swap agreements may increase or decrease the fund's exposure to long-or short-term interest rates (in the United States or abroad), foreign currency values, mortgage securities, mortgage rates, corporate borrowing rates, or other factors such as security prices, inflation rates or the volatility of an index or one or more securities. For example, if the fund agrees to exchange payments in U.S. dollars for payments in a non-U.S. currency, the swap agreement would tend to decrease the fund's exposure to U.S. interest rates and increase its exposure to that non-U.S. currency and interest rates. The fund may also engage in total return swaps, in which payments made by the fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity or fixed-income security, a combination of such securities, or an index). The value of the fund's swap positions would increase or decrease depending on the changes in value of the underlying rates, currency values, volatility or other indices or measures. Caps and floors have an effect similar to buying or writing options. Depending on how they are used, swap agreements may increase or decrease the overall volatility of a fund’s investments and its share price. The fund's ability to engage in certain swap transactions may be limited by tax considerations.

The fund’s ability to realize a profit from such transactions will depend on the ability of the financial institutions with which it enters into the transactions to meet their obligations to the fund. If a counterparty's creditworthiness declines, the value of the agreement would be likely to decline, potentially resulting in losses. If a default occurs by the other party to such transaction, the fund will have contractual remedies pursuant to the agreements related to the transaction, which may be limited by applicable law in the case of a counterparty's insolvency. Under certain circumstances, suitable transactions may not be available to the fund, or the fund may be unable to close out its position under such transactions at the same time, or at the same price, as if it had purchased comparable publicly traded securities.


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The fund may also enter into options on swap agreements ("swaptions"). A swaption is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. The fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. Swaptions are generally subject to the same risks involved in the fund’s use of options. See “—Options on Securities.”

A credit default swap is an agreement between the fund and a counterparty that enables the fund to buy or sell protection against a credit event related to a particular issuer. One party, acting as a “protection buyer,” makes periodic payments to the other party, a “protection seller,” in exchange for a promise by the protection seller to make a payment to the protection buyer if a negative credit event (such as a delinquent payment or default) occurs with respect to a referenced bond or group of bonds. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors (for example, the Nth default within a basket, or defaults by a particular combination of issuers within the basket, may trigger a payment obligation). The fund may enter into credit default swap contracts for investment purposes. As a credit protection seller in a credit default swap contract, the fund would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty in the event of a default by a third party, such as a U.S. or non-U.S. corporate issuer, on the debt obligation. In return for its obligation, the fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the fund would keep the stream of payments and would have no payment obligations. As the seller, the fund would be subject to investment exposure on the notional amount of the swap.

The fund may also purchase credit default swap contracts in order to hedge against the risk of default of the debt of a particular issuer or basket of issuers or profit from changes in the creditworthiness of the particular issuer(s) (also known as “buying credit protection”). In these cases, the fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment may expire worthless and would only generate income in the event of an actual default by the issuer(s) of the underlying obligation(s) (or, as applicable, a credit downgrade or other indication of financial instability). It would also involve the risk that the seller may fail to satisfy its payment obligations to the fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce the fund’s return.

Tax-exempt Securities

General description. As used in this SAI, the term "Tax-exempt Securities" includes debt obligations issued by a state, its political subdivisions (for example, counties, cities, towns, villages, districts and authorities) and their agencies, instrumentalities or other governmental units, the interest from which is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) the corresponding state’s personal income tax. Such obligations are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which Tax-exempt Securities may be issued include the refunding of outstanding obligations or the payment of general operating expenses.

Short-term Tax-exempt Securities are generally issued by state and local governments and public authorities as interim financing in anticipation of tax collections, revenue receipts or bond sales to finance such public purposes.


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In addition, certain types of "private activity" bonds may be issued by public authorities to finance projects such as privately operated housing facilities; certain local facilities for supplying water, gas or electricity; sewage or solid waste disposal facilities; student loans; or public or private institutions for the construction of educational, hospital, housing and other facilities. Such obligations are included within the term Tax-exempt Securities if the interest paid thereon is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) state personal income tax (such interest may, however, be subject to federal alternative minimum tax). Other types of private activity bonds, the proceeds of which are used for the construction, repair or improvement of, or to obtain equipment for, privately operated industrial or commercial facilities, may also constitute Tax-exempt Securities, although the current federal tax laws place substantial limitations on the size of such issues.

Tax-exempt Securities share many of the structural features and risks of other bonds, as described elsewhere in this SAI. For example, the fund may purchase callable Tax-exempt Securities, zero-coupon Tax-exempt Securities, or “stripped” Tax-exempt Securities, which entail additional risks. The fund may also purchase structured or asset-backed Tax-exempt Securities, such as the securities (including preferred stock) of special purpose entities that hold interests in the Tax-exempt Securities of one or more issuers and issue “tranched” securities that are entitled to receive payments based on the cash flows from those underlying securities. See “—Redeemable securities,” “—Zero-coupon and Payment-in-kind Bonds,” “—Structured investments,” and “—Mortgage-backed and Asset-backed Securities” in this SAI. Structured Tax-exempt Securities may involve increased risk that the interest received by the fund may not be exempt from federal or state income tax, or that such interest may result in liability for the alternative minimum tax for shareholders of the fund. For example, in certain cases, the issuers of certain securities held by a special purpose entity may not have received an unqualified opinion of bond counsel that the interest from the securities will be exempt from federal income tax and (if applicable) the corresponding state’s personal income tax.

The amount of information about the financial condition of an issuer of tax-exempt Securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. As a result, the achievement of the fund's goals is more dependent on Putnam Management's investment analysis than would be the case if the fund were investing in securities of better-known issuers.

Escrow-secured or pre-refunded bonds. These securities are created when an issuer uses the proceeds from a new bond issue to buy high grade, interest-bearing debt securities, generally direct obligations of the U.S. government, in order to redeem (or “pre-refund”), before maturity, an outstanding bond issue that is not immediately callable. These securities are then deposited in an irrevocable escrow account held by a trustee bank to secure all future payments of principal and interest on the pre-refunded bond until that bond’s call date. Pre-refunded bonds often receive an ‘AAA’ or equivalent rating. Because pre-refunded bonds still bear the same interest rate, and have a very high credit quality, their price may increase. However, as the original bond approaches its call date, the bond's price will fall to its call price.

Residual interest bonds. The fund may invest in residual interest bonds, which are created by depositing municipal securities in a trust and dividing the income stream of an underlying municipal bond in two parts, one, a variable rate security and the other, a residual interest bond. The interest rate for the variable rate security is determined by an index or a periodic auction process, while the residual interest bond holder receives the balance of the income from the underlying municipal bond less an auction fee. The market prices of residual interest bonds may be highly sensitive to changes in market rates and may decrease significantly when market rates increase.


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Tobacco Settlement Revenue Bonds. The fund may invest in tobacco settlement revenue bonds, which are secured by an issuing state’s proportionate share of payments under the Master Settlement Agreement (“MSA”). The MSA is an agreement that was reached out of court in November 1998 between 46 states and six U.S. jurisdictions and tobacco manufacturers representing an overwhelming majority of U.S. market share. The MSA provides for annual payments by the manufacturers to the states and jurisdictions in perpetuity in exchange for releasing all claims against the manufacturers and a pledge of no further litigation. The MSA established a base payment schedule and a formula for adjusting payments each year. Tobacco manufacturers pay into a master escrow trust based on their market share, and each state receives a fixed percentage of the payment as set forth in the MSA. Within some states, certain localities may in turn be allocated a specific portion of the state’s MSA payment pursuant to an arrangement with the state.

A number of state and local governments have securitized the future flow of payments under the MSA by selling bonds pursuant to indentures, some through distinct governmental entities created for such purpose. The bonds are backed by the future revenue flow that is used for principal and interest payments on the bonds. Annual payments on the bonds, and thus risk to the fund, are dependent on the receipt of future settlement payments by the state or its instrumentality. The actual amount of future settlement payments may vary based on, among other things, annual domestic cigarette shipments, inflation, the financial capability of participating tobacco companies, and certain offsets for disputed payments. Payments made by tobacco manufacturers could be reduced if cigarette shipments continue to decline below the base levels used in establishing manufacturers’ payment obligations under the MSA. Demand for cigarettes in the U.S. could continue to decline based on many factors, including, without limitation, anti-smoking campaigns, tax increases, price increases implemented to recoup the cost of payments by tobacco companies under the MSA, reduced ability to advertise, enforcement of laws prohibiting sales to minors, elimination of certain sales venues such as vending machines, and the spread of local ordinances restricting smoking in public places.

Because tobacco settlement bonds are backed by payments from the tobacco manufacturers, and generally not by the credit of the state or local government issuing the bonds, their creditworthiness depends on the ability of tobacco manufacturers to meet their obligations. The bankruptcy of an MSA-participating manufacturer could cause delays or reductions in bond payments, which would affect the fund’s net asset value. Under the MSA, a market share loss by MSA-participating tobacco manufacturers to non-MSA participating manufacturers would also cause a downward adjustment in the payment amounts under some circumstances.

The MSA and tobacco manufacturers have been and continue to be subject to various legal claims, including, among others, claims that the MSA violates federal antitrust law. In addition, the United States Department of Justice has alleged in a civil lawsuit that the major tobacco companies defrauded and misled the American public about the health risks associated with smoking cigarettes. An adverse outcome to this lawsuit or to any other litigation matters or regulatory actions relating to the MSA or affecting tobacco manufacturers could adversely affect the payment streams associated with the MSA or cause delays or reductions in bond payments by tobacco manufacturers.

In addition to the risks described above, tobacco settlement revenue bonds are subject to other risks described in this SAI, including the risks of asset-backed securities discussed under “Mortgage-backed and Asset-backed Securities.”

Participation interests (Money Market Funds only). The money market funds may invest in Tax-exempt securities either by purchasing them directly or by purchasing certificates of accrual or similar instruments evidencing direct ownership of interest payments or principal payments, or both, on Tax-exempt securities, provided that, in the opinion of counsel, any discount accruing on a certificate or instrument that is purchased at a yield not greater than the coupon rate of interest on the related Tax-exempt securities will be exempt from federal income tax to the same extent as interest on the Tax-exempt securities. The money market funds may also invest in Tax-exempt securities by purchasing from banks participation interests in all or part of specific holdings of Tax-exempt securities. These participations may be backed in whole or in part by an irrevocable letter of credit or guarantee of the selling bank. The selling bank may receive a fee from the money market


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funds in connection with the arrangement. The money market funds will not purchase such participation interests unless it receives an opinion of counsel or a ruling of the IRS that interest earned by it on Tax-exempt securities in which it holds such participation interests is exempt from federal income tax. No money market fund expects to invest more than 5% of its assets in participation interests.

Stand-by commitments. When the fund purchases Tax-exempt securities, it has the authority to acquire stand-by commitments from banks and broker-dealers with respect to those Tax-exempt securities. A stand-by commitment may be considered a security independent of the Tax-exempt security to which it relates. The amount payable by a bank or dealer during the time a stand-by commitment is exercisable, absent unusual circumstances, would be substantially the same as the market value of the underlying Tax-exempt security to a third party at any time. The fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. The fund does not expect to assign any value to stand-by commitments.

Yields. The yields on Tax-exempt securities depend on a variety of factors, including general money market conditions, effective marginal tax rates, the financial condition of the issuer, general conditions of the Tax-exempt security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of nationally recognized securities rating agencies represent their opinions as to the credit quality of the Tax-exempt securities which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, Tax-exempt securities with the same maturity and interest rate but with different ratings may have the same yield. Yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates and may be due to such factors as changes in the overall demand or supply of various types of Tax-exempt securities or changes in the investment objectives of investors. Subsequent to purchase by the fund, an issue of Tax-exempt securities or other investments may cease to be rated, or its rating may be reduced below the minimum rating required for purchase by the fund. Neither event will require the elimination of an investment from the fund's portfolio, but Putnam Management will consider such an event in its determination of whether the fund should continue to hold an investment in its portfolio.

"Moral obligation" bonds. The fund may invest in so-called “moral obligation” bonds, where repayment of the bond is backed by a moral (but not legally binding) commitment of an entity other than the issuer, such as a state legislature, to pay. Such a commitment may be in addition to the legal commitment of the issuer to repay the bond or may represent the only payment obligation with respect to the bond (where, for example, no amount has yet been specifically appropriated to pay the bond. See “—Municipal leases” below.)

Municipal leases. The fund may acquire participations in lease obligations or installment purchase contract obligations (collectively, “lease obligations”) of municipal authorities or entities. Lease obligations do not constitute general obligations of the municipality for which the municipality’s taxing power is pledged. Certain of these lease obligations contain “non-appropriation” clauses, which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In the case of a “non-appropriation” lease, the fund’s ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, and in any event, foreclosure of that property might prove difficult.

Additional risks. Securities in which the fund may invest, including Tax-exempt securities, are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code (including special provisions related to municipalities and other public entities), and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, the power, ability or willingness of issuers to meet their obligations for the payment of interest and principal on their Tax-exempt securities may be materially affected.


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From time to time, legislation may be introduced or litigation may arise that may restrict or eliminate the federal income tax exemption for interest on debt obligations issued by states and their political subdivisions. Federal tax laws limit the types and amounts of tax-exempt bonds issuable for certain purposes, especially industrial development bonds and private activity bonds. Such limits may affect the future supply and yields of these types of Tax-exempt securities. Further proposals limiting the issuance of Tax-exempt securities may well be introduced in the future. If it appeared that the availability of Tax-exempt securities for investment by the fund and the value of the fund's portfolio could be materially affected by such changes in law, the Trustees of the fund would reevaluate its investment objective and policies and consider changes in the structure of the fund or its dissolution. Shareholders should consult their tax advisers for the current law on tax-exempt bonds and securities.

Warrants

The fund may invest in warrants, which are instruments that give the fund the right to purchase certain securities from an issuer at a specific price (the “strike price”) for a limited period of time. The strike price of warrants typically is much lower than the current market price of the underlying securities, yet they are subject to similar price fluctuations. As a result, warrants may be more volatile investments than the underlying securities and may offer greater potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to dividends or voting rights with respect to the underlying securities and do not represent any rights in the assets of the issuing company. Also, the value of the warrant does not necessarily change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to the expiration date. These factors can make warrants more speculative than other types of investments.

In addition to warrants on securities, the fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If the fund were not to exercise an index warrant prior to its expiration, then the fund would lose the amount of the purchase price paid by it for the warrant.

The fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the fund's ability to exercise the warrants at such time, or in such quantities, as the fund would otherwise wish to do.

Zero-coupon and Payment-in-kind Bonds

The fund may invest without limit in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in-kind bonds do not pay


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current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. The fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders even though such bonds do not pay current interest in cash. Thus, it may be necessary at times for the fund to liquidate other investments in order to satisfy its distribution requirements under the Internal Revenue Code.

TAXES

The following discussion of U.S. federal income tax consequences is based on the Code, existing U.S. Treasury regulations, and other applicable authority, as of the date of this SAI. These authorities are subject to change by legislative or administrative action, possibly with retroactive effect. The following discussion is only a summary of some of the important U.S. federal tax considerations generally applicable to investments in the fund. There may be other tax considerations applicable to particular shareholders. Shareholders should consult their own tax advisors regarding their particular situation and the possible application of foreign, state and local tax laws.

Taxation of the fund. The fund intends to qualify each year as a regulated investment company under Subchapter M of the Code. In order to qualify for the special tax treatment accorded regulated investment companies and their shareholders, the fund must, among other things:

(a) derive at least 90% of its gross income for each taxable year from (i) dividends, interest, payments with respect to certain securities loans, and gains from the sale of stock, securities or foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and (ii) net income from interests in “qualified publicly traded partnerships” (as defined below);

(b) diversify its holdings so that, at the end of each quarter of the fund’s taxable year, (i) at least 50% of the market value of the fund’s total assets is represented by cash and cash items, U.S. Government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the fund’s total assets and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the fund’s total assets is invested (x) in the securities (other than those of the U.S. Government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related trades or businesses, or (y) in the securities of one or more qualified publicly traded partnerships (as defined below); and

(c) distribute with respect to each taxable year at least 90% of the sum of its investment company taxable income (as that term is defined in the Code without regard to the deduction for dividends paid—generally, taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses) and net tax-exempt interest income, for such year.


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In general, for purposes of the 90% gross income requirement described in paragraph (a) above, income derived from a partnership will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership which would be qualifying income if realized by the regulated investment company. However, 100% of the net income of a regulated investment company derived from an interest in a “qualified publicly traded partnership” (generally defined as a partnership (i) interests in which are traded on an established securities market or readily tradable on a secondary market or the substantial equivalent thereof, (ii) that derives at least 90% of its income from the passive income sources described in Code section 7704(d), and (iii) that derives less than 90% of its income from the qualifying income described in paragraph (a) above) will be treated as qualifying income. In addition, although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated investment company with respect to items attributable to an interest in a qualified publicly traded partnership.

For purposes of the diversification test in paragraph (b) above, identification of the issuer (or, in some cases, issuers) of a particular fund investment will depend on the terms and conditions of that investment. In some cases, identification of the issuer (or issuers) is uncertain under current law, and an adverse determination or future guidance by the Internal Revenue Service (“IRS”) with respect to issuer identification for a particular type of investment may adversely affect the fund’s ability to meet the diversification test in (b) above. Also, for the purposes of the diversification test in paragraph (b) above, the term “outstanding voting securities of such issuer” will include the equity securities of a qualified publicly traded partnership.

If the fund qualifies as a regulated investment company that is accorded special tax treatment, the fund will not be subject to federal income tax on income distributed in a timely manner to its shareholders in the form of dividends (including Capital Gain Dividends, as defined below).

If the fund were to fail to qualify as a regulated investment company accorded special tax treatment in any taxable year, the fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. Some portions of such distributions may be eligible for the dividends received deduction in the case of corporate shareholders. In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment.

The fund intends to distribute at least annually to its shareholders all or substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction) and may distribute its net capital gain. Investment company taxable income (which is retained by the fund) will be subject to tax at regular corporate rates. The fund may also retain for investment its net capital gain. If the fund retains any net capital gain, it will be subject to tax at regular corporate rates on the amount retained, but may designate the retained amount as undistributed capital gains in a notice to its shareholders who (i) will be required to include in income for federal income tax purposes, as long-term capital gain, their shares of such undistributed amount, and (ii) will be entitled to credit their proportionate shares of the tax paid by the fund on such undistributed amount against their federal income tax liabilities, if any, and to claim refunds on a properly-filed U.S. tax return to the extent the credit exceeds such liabilities. For federal income tax purposes, the tax basis of shares owned by a shareholder of the fund will be increased by an amount equal under current law to the difference between the amount of undistributed capital gains included in the shareholder’s gross income and the tax deemed paid by the shareholder under clause (ii) of the preceding sentence.


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Properly designated distributions of net capital gains are the excess of net gains from the sale of capital assets held by the fund for more than one year over net losses from the sale of capital assets held for not more than one year (“Capital Gain Dividends”). In determining its net capital gain for Capital Gain Dividend purposes, a regulated investment company generally must treat any net capital loss or any net long-term capital loss incurred after October 31 as if it had been incurred in the succeeding year. Treasury regulations permit a regulated investment company, in determining its taxable income, to elect to treat all or part of any net capital loss, any net long-term capital loss or any foreign currency loss incurred after October 31 as if it had been incurred in the succeeding year.

If the fund fails to distribute in a calendar year at least an amount equal to the sum of 98% of its ordinary income for such year and 98% of its capital gain net income for the one-year period ending October 31 of such year, plus any retained amount from the prior year, the fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. For these purposes, the fund will be treated as having distributed any amount on which it has been subject to corporate income tax in the taxable year ending within the calendar year. A dividend paid to shareholders in January of a year generally is deemed to have been paid by the fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax, although there can be no assurance that it will be able to do so.

The fund distributes its net investment income and capital gains to shareholders as dividends annually to the extent required to qualify as a regulated investment company under the Code and generally to avoid federal income or excise tax. Under current law, the fund may treat the portion of redemption proceeds paid to redeeming shareholders that represents the redeeming shareholders’ portion of the undistributed investment company taxable income and capital gain of the fund as a distribution of investment company taxable income and net capital gain on the fund’s tax return. This practice, which involves the use of equalization accounting, will have the effect of reducing the amount of income and gains that the fund is required to distribute as dividends to shareholders in order for the fund to avoid federal income tax and excise tax. This practice may also reduce the amount of distributions required to be made to non-redeeming shareholders and the amount of any undistributed income will be reflected in the value of the shares of the fund; the total return on a shareholder’s investment will not be reduced as a result of the distribution policy. Investors who purchase shares shortly before the record date of a distribution will pay the full price for the shares and then receive some portion of the price back as a taxable distribution.

Fund distributions. Distributions from the fund (other than exempt-interest dividends, as discussed below) will be taxable to shareholders as ordinary income to the extent derived from the fund’s investment income and net short-term capital gains. Distributions are taxable to shareholders even if they are paid from income or gains earned by the fund before a shareholder’s investment (and thus were included in the price the shareholder paid). Distributions are taxable whether shareholders receive them in cash or reinvest them in additional shares of the fund or other Putnam funds. Capital Gain Dividends will be taxable to shareholders as such, regardless of how long a shareholder has held the shares in the fund.

If a fund invests all of its assets in shares of underlying funds, its distributable income and gains will normally consist entirely of distributions from underlying funds and gains and losses on the disposition of shares of underlying funds. To the extent that an underlying fund realizes net losses on its investments for a given taxable year, the fund will not be able to recognize its share of those losses (so as to offset distributions of net income or capital gains from other underlying funds) until it disposes of shares of the underlying fund or those losses reduce distributions required to be made by the underlying fund. Moreover, even when the fund does make such a disposition, a portion of its loss may be recognized as a long-term capital loss, which will not be treated as favorably for federal income tax purposes as a short-term capital loss or an ordinary deduction. In particular, the fund will not be able to offset any capital losses from its dispositions of underlying fund shares against its ordinary income (including distributions of any net short-term capital gains realized by an underlying fund). As a result of the foregoing rules, and certain other special rules, the amounts of net


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investment income and net capital gains that the fund will be required to distribute to shareholders may be greater than such amounts would have been had the fund invested directly in the securities held by the underlying funds, rather than investing in shares of the underlying funds. For similar reasons, the character of distributions from a fund (e.g., long-term capital gain, exempt interest, eligibility for dividends-received deduction, etc.) will not necessarily be the same as it would have been had the fund invested directly in the securities held by the underlying funds. In addition, in certain circumstances, the "wash sale" rules under Section 1091 of the Code may apply to a fund's sales of underlying fund shares that have generated losses. A wash sale occurs if shares of an underlying fund are sold by the fund at a loss and the fund acquires additional shares of that same underlying fund 30 days before or after the date of the sale. The wash-sale rules could defer losses in the fund's hands on sales of underlying fund shares (to the extent such sales are wash sales) for extended (and, in certain cases, potentially indefinite) periods of time. In addition to the wash-sale rules, certain related-party transaction rules may cause any losses generated by the fund on the sale of an underlying fund's shares to be deferred (or, in some cases, permanently disallowed) if the fund and the underlying fund are part of the same "controlled group" (as defined in Section 267(f) of the Code) at the time the loss is recognized. For instance, for these purposes, the fund and an underlying fund will be part of the same controlled group if the fund owns more than 50% of the total outstanding voting securities of the underlying fund.

For taxable years beginning before January 1, 2011, “qualified dividend income” received by an individual will be taxed at the rates applicable to long-term capital gain. It is currently unclear whether Congress will extend this preferential treatment of qualified dividend income for tax years beginning on or after January 1, 2011. In order for some portion of the dividends received by a fund shareholder to be qualified dividend income, the fund must meet holding period and other requirements with respect to some portion of the dividend-paying stocks in its portfolio and the shareholder must meet holding period and other requirements with respect to the fund’s shares. A dividend will not be treated as qualified dividend income (at either the fund or shareholder level) (1) if the dividend is received with respect to any share of stock held for fewer than 61 days during the 121-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividend (or, on the case of certain preferred stock, 91 days during the 181-day period beginning 90 days before such date), (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, (3) if the recipient elects to have the dividend income treated as investment interest, or (4) if the dividend is received from a foreign corporation that is (a) not eligible for the benefits of a comprehensive income tax treaty with the United States (with the exception of dividends paid on stock of such a foreign corporation readily tradable on an established securities market in the United States) or (b) treated as a passive foreign investment company. The fund generally expects to designate eligible dividends as qualified dividend income.

In general, distributions of investment income designated by a fund as derived from qualified dividend income will be treated as qualified dividend income by a shareholder taxed as an individual provided the shareholder meets the holding period and other requirements described above with respect to such fund’s shares. In any event, if the aggregate qualified dividends received by a fund during any taxable year are 95% or more of its gross income, then 100% of the fund’s dividends (other than properly designated Capital Gain Dividends) will be eligible to be treated as qualified dividend income. For this purpose, the only gain included in the term “gross income” is the excess of net short-term capital gain over net long-term capital loss.

In general, fixed-income and money market funds receive interest, rather than dividends, from their portfolio securities. As a result, it is not currently expected that any significant portion of such funds’ distributions to shareholders will be derived from qualified dividend income.

If a fund receives dividends from an underlying fund that qualifies as a regulated investment company, and the underlying fund designates such dividends as “qualified dividend income,” then the fund may, in turn, designate a portion of its distributions as “qualified dividend income” as well, provided the fund meets the holding period and other requirements with respect to shares of the underlying fund.


September 28, 2010	II-58

Long-term capital gain rates applicable to individuals have been temporarily reduced—in general, to 15% with lower rates applying to taxpayers in the 10% and 15% rate brackets—for taxable years beginning before January 1, 2011. It is currently unclear whether Congress will extend these lower rates for tax years beginning on or after January 1, 2011.

Exempt-interest dividends. The fund will be qualified to pay exempt-interest dividends to its shareholders only if, at the close of each quarter of the fund’s taxable year, at least 50% of the total value of the fund’s assets consists of obligations the interest on which is exempt from federal income tax. Distributions that the fund properly designates as exempt-interest dividends are treated as interest excludable from shareholders’ gross income for federal income tax purposes but may be taxable for federal alternative minimum tax (“AMT”) purposes and for state and local purposes. If the fund intends to qualify to pay exempt-interest dividends, the fund may be limited in its ability to enter into taxable transactions involving forward commitments, repurchase agreements, financial futures and options contracts on financial futures, tax-exempt bond indices and other assets.

Part or all of the interest on indebtedness, if any, incurred or continued by a shareholder to purchase or carry shares of the fund paying exempt-interest dividends is not deductible. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness, multiplied by the percentage of the fund’s total distributions (not including distributions from net long-term capital gains) paid to the shareholder that are exempt-interest dividends. Under rules used by the IRS to determine when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares.

In general, exempt-interest dividends, if any, attributable to interest received on certain private activity obligations and certain industrial development bonds will not be tax-exempt to any shareholders who are “substantial users” of the facilities financed by such obligations or bonds or who are “related persons” of such substantial users.

A fund that is qualified to pay exempt-interest dividends will inform investors within 60 days of the fund’s fiscal year-end of the percentage of its income distributions designated as tax-exempt. The percentage is applied uniformly to all distributions made during the year. The percentage of income designated as tax-exempt for any particular distribution may be substantially different from the percentage of the fund’s income that was tax-exempt during the period covered by the distribution.

Exempt-interest dividends may be taxable for purposes of the federal AMT. For individual shareholders, exempt-interest dividends that are derived from interest on private activity bonds that are issued after August 7, 1986 (other than a “qualified 501(c)(3) bond,” as such term is defined in the Code) generally must be included in an individual’s tax base for purposes of calculating the shareholder’s liability for federal AMT. Corporate shareholders will be required to include all exempt-interest dividends in determining their federal AMT. The AMT calculation for corporations is based, in part, on a corporation’s earnings and profits for the year. A corporation must include all exempt-interest dividends in calculating its earnings and profits for the year.

Putnam AMT-Free Municipal Fund intends to distribute exempt-interest dividends that will not be taxable for federal AMT purposes for individuals. It intends to make such distributions by investing in tax exempt securities other than private activity bonds that are issued after August 7, 1986 (other than “qualified 501(c)(3) bonds,” as such term is defined in the Code). Because corporate shareholders are required to include all exempt-interest dividends in determining their federal AMT, exempt-interest dividends distributed by Putnam AMT-Free Municipal Fund will be taxable for purposes of the federal AMT.


September 28, 2010	II-59

Derivative transactions. If the fund engages in derivative transactions, including transactions in options, futures contracts, straddles, and other similar transactions, including for hedging purposes, it will be subject to special tax rules (including constructive sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund’s securities, convert long-term capital gains into short-term capital gains or convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund may make any applicable elections pertaining to such transactions consistent with the interests of the fund.

Certain of the fund’s derivative activities (including its transactions, if any, in foreign currencies or foreign currency-denominated instruments) are likely to produce a difference between its book income and its taxable income. If the fund’s book income exceeds its taxable income, the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the fund’s remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter as a return of capital to the extent of the recipient’s basis in the shares, and (iii) thereafter as gain from the sale or exchange of a capital asset. If the fund’s book income is less than its taxable income (or, for tax-exempt funds, the sum of its net tax-exempt and taxable income), the fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment and to eliminate fund-level income tax.

In general, 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the CFTC is treated as short-term gain or loss, and 60% is treated as long-term gain or loss.

Investments in REITs. If the fund invests in equity securities of real estate investment trusts ("REITs"), such investments in REIT equity securities may require the fund to accrue and distribute income not yet received. In order to generate sufficient cash to make the requisite distributions, the fund may be required to sell securities in its portfolio that it otherwise would have continued to hold. The fund's investment in REIT equity securities may at other times result in the fund's receipt of cash in excess of the REIT's earnings. If the fund distributes such amounts, such distribution could constitute a return of capital to the fund shareholders for federal income tax purposes. Dividends received by a fund from a REIT generally will not constitute qualified dividend income.

The fund may invest in REITs, including REITs that hold residual interests in real estate mortgage investment conduits ("REMICs"), REITs that are themselves taxable mortgage pools ("TMPs") or REITs that invest in TMPs. Under a notice recently issued by the IRS and Treasury regulations that have not yet been issued, but may apply retroactively, a portion of a fund's income from a REIT that is attributable to the REIT's residual interest in a REMIC or TMP (referred to in the Code as an "excess inclusion") will be subject to federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a regulated investment company, such as the fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC or TMP residual interest directly.

In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income ("UBTI") to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a non-U.S. shareholder, will not qualify for any reduction in U.S. federal withholding tax. Any investment in residual interests of a Collateralized Mortgage Obligation (a “CMO”) that has elected to be treated as a REMIC can create complex tax problems, especially if the fund has state or local governments or other tax-exempt organizations as shareholders. Under current law, a fund serves to block UBTI from being realized by its tax-exempt shareholders. Notwithstanding the foregoing, a tax-exempt shareholder will recognize UBTI by virtue of its investment in the fund if shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code


September 28, 2010	II-60

Section 514(b). Furthermore, a tax-exempt shareholder may recognize UBTI if the fund recognizes “excess inclusion income” derived from direct or indirect investments in REMIC residual interests or TMPs if the amount of such income recognized by the fund exceeds the fund's investment company taxable income (after taking into account deductions for dividends paid by the fund).

Under legislation enacted in December 2006, a charitable remainder trust ("CRT"), as defined in Section 664 of the Code, that realizes UBTI for a taxable year must pay an excise tax annually of an amount equal to such UBTI. Under IRS guidance issued in October 2006, a CRT will not recognize UBTI solely as a result of investing in a fund that recognizes “excess inclusion income.” Rather, if at any time during any taxable year a CRT (or one of certain other tax-exempt shareholders, such as the United States, a state or political subdivision, or an agency or instrumentality thereof, and certain energy cooperatives) is a record holder of a share in a fund that recognizes “excess inclusion income,” then the fund will be subject to a tax on that portion of its “excess inclusion income” for the taxable year that is allocable to such shareholders at the highest federal corporate income tax rate. The extent to which this IRS guidance remains applicable in light of the December 2006 legislation is unclear. To the extent permitted under the 1940 Act, the fund may elect to specially allocate any such tax to the applicable CRT, or other shareholder, and thus reduce such shareholder’s distributions for the year by the amount of the tax that relates to such shareholder’s interest in the fund. CRTs are urged to consult their tax advisors concerning the consequences of investing in the fund.

Return of capital distributions. If the fund makes a distribution to you in excess of its current and accumulated “earnings and profits” in any taxable year, the excess distribution will be treated as a return of capital to the extent of your tax basis in your shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces your tax basis in your shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by you of your shares.

Dividends and distributions on the fund’s shares are generally subject to federal income tax as described herein to the extent they do not exceed the fund’s realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder’s investment. Such distributions are likely to occur in respect of shares purchased at a time when the fund’s net asset value reflects gains that are either unrealized, or realized but not distributed. Such realized income and gains may be required to be distributed even when the fund’s net asset value also reflects unrealized losses. Distributions are taxable to a shareholder even if they are paid from income or gains earned by the fund prior to the shareholder’s investment (and thus included in the price paid by the shareholder).

Securities issued or purchased at a discount. The fund’s investment in securities issued at a discount and certain other obligations will (and investments in securities purchased at a discount may) require the fund to accrue and distribute income not yet received. In order to generate sufficient cash to make the requisite distributions, the fund may be required to sell securities in its portfolio that it otherwise would have continued to hold.

Some debt obligations with a fixed maturity date of more than one year from the date of issuance that are acquired by the fund in the secondary market may be treated as having market discount. Generally, any gain recognized on the disposition of, and any partial payment of principal on, a debt security having market discount is treated as ordinary income to the extent the gain, or principal payment, does not exceed the “accrued market discount” on such debt security. Market discount generally accrues in equal daily installments. The fund may make one or more of the elections applicable to debt obligations having market discount, which could affect the character and timing of recognition of income.

Some debt obligations with a fixed maturity date of one year or less from the date of issuance that are acquired by the fund may be treated as having acquisition discount or original issue discount ("OID"). Generally, the fund will be required to include the acquisition discount or OID in income over the term of the debt security, even though payment of that amount is not received until a later time, usually when the debt security matures.


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The fund may make one or more of the elections applicable to debt obligations having acquisition discount or OID, which could affect the character and timing of recognition of income.

If the fund holds the foregoing kinds of securities, it may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest the fund actually received. Such distributions may be made from the cash assets of the fund or by liquidation of portfolio securities, if necessary. The fund may realize gains or losses from such liquidations. In the event the fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution than they would in the absence of such transactions.

Higher-Risk Securities. The fund may invest to a significant extent in debt obligations that are in the lowest rating categories or are unrated, including debt obligations of issuers not currently paying interest or who are in default. Investments in debt obligations that are at risk of or in default present special tax issues for the fund. Tax rules are not entirely clear about issues such as whether the fund should recognize market discount on a debt obligation and, if so, the amount of market discount the fund should recognize, when the fund may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless securities and how payments received on obligations in default should be allocated between principal and income. These and other related issues will be addressed by the fund when, as and if it invests in such securities, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.

Capital loss carryover. Distributions from capital gains are generally made after applying any available capital loss carryovers. The amounts and expiration dates of any capital loss carryovers available to the fund are shown in Note 1 (Federal income taxes) to the financial statements included in Part I of this SAI or incorporated by reference into this SAI.

Foreign Taxes. If more than 50% of the fund’s assets at year end consists of the securities of foreign corporations, the fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries in respect of foreign securities the fund has held for at least the minimum period specified in the Code. In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholder’s ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the amount of such taxes. In particular, shareholders must hold their fund shares (without protection from risk of loss) on the ex-dividend date and for at least 15 additional days during the 30-day period surrounding the ex-dividend date to be eligible to claim a foreign tax credit with respect to a given dividend. Shareholders who do not itemize on their federal income tax returns may claim a credit (but no deduction) for such foreign taxes.

Under current law, a fund cannot pass through to shareholders foreign tax credits borne in respect of foreign securities income earned by underlying funds. In general, a fund may elect to pass through to its shareholders foreign income taxes it pays only in the case where it directly holds more than 50% of its assets in foreign stock and securities at the close of its taxable year. Foreign securities held indirectly through an underlying fund do not contribute to this 50% threshold.


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Passive Foreign Investment Companies. Investment by the fund in “passive foreign investment companies” (“PFICs”) could subject the fund to a U.S. federal income tax (including interest charges) on distributions received from the company or on the proceeds from the sale of its investment in such a company. This tax cannot be eliminated by making distributions to fund shareholders; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a “qualified electing fund.” The QEF and mark-to-market elections may have the effect of accelerating the recognition of income (without the receipt of cash) and increasing the amount required to be distributed by the fund to avoid taxation. Making either of these elections therefore may require the fund to liquidate other investments to meet its distribution requirement, which may also accelerate the recognition of gain and affect the fund’s total return. Dividends paid by PFICs will not be eligible to be treated as “qualified dividend income.”

A “passive foreign investment company” is any foreign corporation: (i) 75 percent or more of the income of which for the taxable year is passive income, or (ii) the average percentage of the assets of which (generally by value, but by adjusted tax basis in certain cases) that produce or are held for the production of passive income is at least 50 percent. Generally, passive income for this purpose means dividends, interest (including income equivalent to interest), royalties, rents, annuities, the excess of gains over losses from certain property transactions and commodities transactions, and foreign currency gains. Passive income for this purpose does not include rents and royalties received by the foreign corporation from active business and certain income received from related persons.

Foreign currency-denominated securities and related hedging transactions. The fund’s transactions in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned.

Sale or redemption of shares. The sale, exchange or redemption of fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise the gain or loss on the sale, exchange or redemption of fund shares will be treated as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss will be disallowed for federal income tax purposes to the extent of any exempt-interest dividends received on such shares. In addition, any loss (not already disallowed as provided in the preceding sentence) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any Capital Gain Dividends received by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of fund shares will be disallowed if other shares of the same fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

Depending on a fund’s percentage ownership in an underlying fund both before and after a redemption of underlying fund shares, the fund’s redemption of shares of such underlying fund may cause the fund to be treated as receiving a dividend treated as qualified dividend income, if applicable, or otherwise taxable as ordinary income on the full amount of the distribution instead of receiving capital gain income on the shares of the underlying fund. This would be the case where the fund holds a significant interest in an underlying fund and redeems only a small portion of such interest.

Shares purchased through tax-qualified plans. Special tax rules apply to investments though defined contribution plans and other tax-qualified plans. Shareholders should consult their tax advisors to determine the suitability of shares of a fund as an investment through such plans and the precise effect of an investment on their particular tax situation.


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Backup withholding. The fund generally is required to withhold and remit to the U.S. Treasury a percentage of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the fund with a correct taxpayer identification number (TIN), who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is not subject to such withholding. The backup withholding rules may also apply to distributions that are properly designated as exempt-interest dividends. The back-up withholding tax rate is 28% for amounts paid through 2010. This rate will expire and the back-up withholding rate will be 31% for amounts paid after December 31, 2010, unless Congress enacts tax legislation providing otherwise. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder’s U.S. federal income tax liability, provided the appropriate information is furnished to the IRS.

In order for a foreign investor to qualify for exemption from the back-up withholding tax rates and for reduced withholding tax rates under income tax treaties, the foreign investor must comply with special certification and filing requirements. Foreign investors in a fund should consult their tax advisors in this regard.

Tax shelter reporting regulations. Under U.S. Treasury regulations, if a shareholder realizes a loss on disposition of fund shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.

Non-U.S. Shareholders. In general, dividends (other than Capital Gain Dividends or exempt-interest dividends) paid by the fund to a shareholder that is not a “U.S. person” within the meaning of the Code (a “foreign person”) are subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate) even if they are funded by income or gains (such as portfolio interest, short-term capital gains, or foreign-source dividend and interest income) that, if paid to a foreign person directly, would not be subject to withholding. However, effective for taxable years of the fund beginning before January 1, 2010, the fund will not be required to withhold any amounts (i) with respect to distributions (other than distributions to a foreign person (w) that did not provide a satisfactory statement that the beneficial owner was not a U.S. person, (x) to the extent that the dividend was attributable to certain interest on an obligation if the foreign person was the issuer or was a 10% shareholder of the issuer, (y) that was within certain foreign countries that have inadequate information exchange with the United States, or (z) to the extent the dividend was attributable to interest paid by a person that was a related person of the foreign person and the foreign person was a controlled foreign corporation) from U.S.-source interest income that were not subject to U.S. federal income tax if earned directly by an individual foreign person, to the extent such distributions were properly designated by the fund (an “interest-related dividend”), and (ii) with respect to distributions (other than (a) distributions to an individual foreign person who is present in the United States for a period or periods aggregating 183 days or more during the year of the distribution and (b) distributions subject to special rules regarding the disposition of U.S. real property interests) of net short-term capital gains in excess of net long-term capital losses, to the extent such distributions were properly designated by the fund (a “short-term capital gain dividend”). The fund generally expects to make designations of interest-related and/or short-term capital gain dividends with respect to its eligible dividends and/or treat such dividends, in whole or in part, as ineligible for these exemptions from withholding. Pending legislation proposes to extend the exemption from withholding for interest-related dividends and short-term capital gain dividends for one additional year, i.e., for dividends with respect to taxable years beginning on or after January 1, 2010 but before January 1, 2011. As of the date of this Statement of Additional Information, it is unclear whether such legislation will be enacted and , if enacted, what the terms of the extension will be.


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The fact that a fund achieves its investment objectives by investing in underlying funds will generally not adversely affect the fund’s ability to pass on to foreign shareholders the full benefit of the interest-related dividends and short-term capital gain dividends that it receives from its underlying investments in the funds, except possibly to the extent that (1) interest-related dividends received by the fund are offset by deductions allocable to the fund’s qualified interest income or (2) short-term capital gain dividends received by the fund are offset by the fund’s net short- or long-term capital losses, in which case the amount of a distribution from the fund to a foreign shareholder that is properly designated as either an interest-related dividend or a short-term capital gain dividend, respectively, may be less than the amount that such shareholder would have received had they invested directly in the underlying funds. If a beneficial holder who is a foreign person has a trade or business in the United States, and the dividends are effectively connected with the conduct by the beneficial holder of a trade or business in the United States, the dividend will be subject to U.S. federal net income taxation at regular income tax rates.

Under U.S. federal tax law, a beneficial holder of shares who is a foreign person is not, in general, subject to U.S. federal income tax on gains (and is not allowed a deduction for losses) realized on the sale of shares of the fund or on Capital Gain Dividends unless (i) such gain or Capital Gain Dividend is effectively connected with the conduct of a trade or business carried on by such holder within the United States or (ii) in the case of an individual holder, the holder is present in the United States for a period or periods aggregating 183 days or more during the year of the sale or Capital Gain Dividend and certain other conditions are met.

General Considerations. The federal income tax discussion set forth above is for general information only. Prospective investors should consult their tax advisers regarding the specific federal tax consequences of purchasing, holding, and disposing of shares of the fund, as well as the effects of state, local and foreign tax law and any proposed tax law changes.

MANAGEMENT

Trustees


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Name, Address¹, Year of	Principal	Other Directorships Held by Trustee
Birth, Position(s) Held with	Occupation(s) During
Fund and Length of Service	Past 5 Years
as a Putnam Fund Trustee²

Ravi Akhoury (Born 1947),	Advisor to New York	Director of Jacob Ballas Capital India (a non-
Trustee since 2009	Life. Served as	banking finance company focused on private equity
	Chairman and CEO of	advisory services) and a member of its
	MacKay Shields (a	Compensation Committee. Mr. Akhoury is also a
	multi-product	Trustee of the Rubin Museum, serving on the
	investment management	Investment Committee, and of American India
	firm with AUM over $40	Foundation. Mr. Akhoury is a former Vice President
	billion) from 1992 to	and Investment Policy Committee member of
	2007.	Fischer, Francis, Trees and Watts (a fixed-income
		portfolio management firm). He previously served
		on the board of Bharti Telecom (an Indian telecom
		company) and was a member of its Audit and
		Compensation Committees. Mr. Akhoury served as
		Chairman and CEO of Mackay Shields (a multi-
		product investment firm) from 1992 to 2007. He also
		served on the Board of Thompson Press (a
		publishing company) and was a member of its Audit
		Committee. Mr. Akhoury graduated from the Indian


September 28, 2010	II-65


Name, Address¹, Year of	Principal	Other Directorships Held by Trustee
Birth, Position(s) Held with	Occupation(s) During
Fund and Length of Service	Past 5 Years
as a Putnam Fund Trustee²

		Institute of Technology with a BS in Engineering
		and obtained an MS in Quantitative Methods from
		SUNY at Stony Brook.

Barbara M. Baumann (Born	President of Cross Creek	Director of SM Energy Company (a publicly held
1955), Trustee since 2010	Energy Corporation, a	U.S. exploration and production company),
	strategic consultant to	UniSource Energy Corporation (a publicly held
	domestic energy firms	electric utility in Arizona), and Cody Resources
	and direct investor in	Management, LLP (a privately held energy,
	energy assets.	ranching and commercial real estate company). She
		is a Trustee of Mount Holyoke College and Co-
		Chair of the Board’s Finance Committee. She is a
		former Chair of the Board, and a current Board
		member, of Girls Inc. of Metro Denver, and serves
		on the Finance Committee of The Children’s
		Hospital of Denver. Prior to 2003, Ms. Baumann
		was Executive Vice President of Associated Energy
		Managers, LLC, a domestic private equity firm.
		From 1981 until 2000 she held a variety of financial
		and operational management positions with the
		global energy company Amoco Corporation and its
		successor, BP, most recently serving as Commercial
		Operations Manager of its Western Business Unit.

Jameson A. Baxter (Born	President of Baxter	Director of ASHTA Chemicals Inc. and Chairman of
1943), Trustee since 1994 and	Associates, Inc., a	the Mutual Fund Directors Forum. Until 2007, Ms.
Vice Chairman since 2005	private investment firm.	Baxter was a Director of Banta Corporation (a
		printing and supply chain management company),
		Ryerson, Inc. (a metals service company) and
		Advocate Health Care. She has also served as a
		director on a number of other boards including
		BoardSource (formerly the National Center for
		Nonprofit Boards), Intermatic Corporation (a
		manufacturer of energy control products) and MB
		Financial. She is Chairman Emeritus of the Board
		of Trustees, Mount Holyoke College.

Charles B. Curtis (Born	President Emeritus,	Member of the Council on Foreign Relations and the
1940), Trustee since 2001	Nuclear Threat Initiative	National Petroleum Council. Mr. Curtis also serves
	(a private foundation	as a Director of Edison International and Southern
	dealing with national	California Edison. Until 2006, Mr. Curtis served as
	security issues) and	a member of the Trustee Advisory Council of the
	serves as Senior Advisor	Applied Physics Laboratory, Johns Hopkins
	to the United Nations	University. Mr. Curtis is an attorney with over 15
	Foundation and as	years in private practice and 19 years in various
	Senior Advisor to the	positions in public service, including service at the
	Center for Strategic and	Department of Treasury, the U.S. House of
	International Studies.	Representatives, the Securities and Exchange
	Previously, President	Commission, the Federal Energy Regulatory
	and Chief Operating	Commission and the Department of Energy.
	Officer, Nuclear Threat
	Initiative.


September 28, 2010	II-66


Name, Address¹, Year of	Principal	Other Directorships Held by Trustee
Birth, Position(s) Held with	Occupation(s) During
Fund and Length of Service	Past 5 Years
as a Putnam Fund Trustee²

Robert J. Darretta (Born	Mr. Darretta serves as a	Currently a director of UnitedHealth Group. Until
1946), Trustee since 2007	director of the United	April, 2007, Mr. Darretta was Vice Chairman of the
	Health Group and as the	Board of Directors of Johnson & Johnson (a
	Health Care Industry	diversified health care conglomerate).
	Advisor to Permira, a
	global private equity
	firm. Prior to 2007, Mr.
	Darretta was the Chief
	Financial Officer of
	Johnson & Johnson.

Myra R. Drucker (Born	Ms. Drucker is Vice Chair of the	Ms. Drucker is an ex-officio member of the New York Stock Exchange
1948), Trustee since 2004	Board of Trustees of Sarah	Pension Managers Advisory Committee, having served as Chair for seven
	Lawrence College, and a member	years. She serves as an advisor to the Employee Benefits Investment
	of the Investment Committee of the	Committee of The Boeing Company (an aerospace firm). From November
	Kresge Foundation (a charitable	2001 until August 2004, Ms. Drucker was Managing Director and a
	trust). She is also a member of the	member of the Board of Directors of General Motors Asset Management
	Board of Directors of Grantham,	and Chief Investment Officer of General Motors Trust Bank. From
	Mayo, Van Otterloo and Co., LLC	December 1992 to November 2001, Ms. Drucker served as Chief
	(an investment management firm).	Investment Officer of Xerox Corporation (a document company). Prior to
	Ms. Drucker retired in 2009 as	December 1992, Ms. Drucker was Staff Vice President and Director of
	Chair of the Board of Trustees of	Trust Investments for International Paper (a paper and packaging
	Commonfund (a not-for-profit firm	company). Ms. Drucker received a B.A. degree from Sarah Lawrence
	managing assets for educational	College and pursued graduate studies in economics, statistics and portfolio
	endowments & foundations).	theory at Temple University.
	Before August, 2010, Ms. Drucker
	was a member of the Board of
	Directors of Interactive Data
	Corporation (a provider of financial
	market data and analytics to
	financial institutions and investors).

John A. Hill (Born 1942),	Vice Chairman, First	Director of Devon Energy Corporation and various
Trustee since 1985 and	Reserve Corporation (a	private companies controlled by First Reserve
Chairman since 2000	private equity buyout	Corporation. He is also Chairman of The Board of
	firm that specializes in	Trustees of Sarah Lawrence College and a member
	energy investments in	of the Advisory Board of the Millstein Center for
	the diversified world-	Corporate Governance and Performance at the Yale
	wide energy industry).	School of Management.

Paul L. Joskow (Born 1947),	President of the Alfred	Trustee of Yale University; a Director of
Trustee since 1997	P. Sloan Foundation (a	TransCanada Corporation (an energy company
	philanthropic institution	focused on natural gas transmission and power
	focused primarily on	services) and of Exelon Corporation (an energy
	research and education	company focused on power services); and a Member
	on issues related to	of the Board of Overseers of the Boston Symphony
	science, technology and	Orchestra. Prior to August 2007, he served as a
	economic performance).	Director of National Grid (a U.K.-based holding


September 28, 2010	II-67


Name, Address¹, Year of	Principal	Other Directorships Held by Trustee
Birth, Position(s) Held with	Occupation(s) During
Fund and Length of Service	Past 5 Years
as a Putnam Fund Trustee²

	He is currently on leave	company with interests in electric and gas
	from his position as the	transmission and distribution and
	Elizabeth and James	telecommunications infrastructure). Prior to July,
	Killian Professor of	2006, he served as President of the Yale University
	Economics and	Council. Prior to February 2005, he served on the
	Management at the	board of the Whitehead Institute for Biomedical
	Massachusetts Institute	Research (a non-profit research institution). Prior to
	of Technology (“MIT”).	February 2002, he was a Director of State Farm
	Prior to 2007, he was the	Indemnity Company (an automobile insurance
	Director of the Center	company), and prior to March 2000, he was a
	for Energy and	Director of New England Electric System (a public
	Environmental Policy	utility holding company).
	Research at MIT.

Kenneth R. Leibler (Born	A founder and former	Prior to December 2006, Mr. Leibler served as a
1949), Trustee since 2006	Chairman of the Boston	Director of the Optimum Funds Group. Prior to
	Options Exchange, an	October 2006, he served as a Director of ISO New
	electronic market place	England, the organization responsible for the
	for the trading of listed	operation of the electric generation system in the
	derivatives securities,	New England states. Prior to 2000, he was a Director
	and director of Ruder	of the Investment Company Institute in Washington,
	Finn Group, a global	D.C. Prior to January, 2005 Mr. Leibler served as
	communications and	Chairman and Chief Executive Officer of the Boston
	advertising firm. He	Stock Exchange. Prior to January 2000, he served as
	currently serves as Vice	President and Chief Executive Officer of Liberty
	Chairman of the Board	Financial Companies, a publicly traded diversified
	of Trustees of Beth	asset management organization. Prior to June 1990,
	Israel Deaconess	he served as President and Chief Operating Officer
	Hospital in Boston and	of the American Stock Exchange (AMEX). Prior to
	as a Director of	serving as AMEX President, he held the position of
	Northeast Utilities,	Chief Financial Officer, and headed its management
	which operates New	and marketing operations.
	England’s largest energy
	delivery system.

Robert E. Patterson (Born	Senior Partner of Cabot	Mr. Patterson is past Chair and served as a Trustee
1945), Trustee since 1984	Properties, L.P. and	of the Joslin Diabetes Center. Prior to December
	Co-Chairman of Cabot	2001 and June 2003, Mr. Patterson served as a
	Properties, Inc. (a	Trustee of Cabot Industrial Trust and the Sea
	private equity firm	Education Association, respectively.
	investing in commercial
	real estate). Prior to
	December 2001, he was
	President of Cabot
	Industrial Trust (a
	publicly traded real
	estate investment trust).

George Putnam, III (Born	Chairman of New	Director of The Boston Family Office, LLC (a
1951), Trustee since 1984	Generation Research,	registered investment advisor), a Trustee of St.
	Inc. (a publisher of	Mark’s School, a Trustee of Epiphany School and a
	financial advisory and	Trustee of the Marine Biological Laboratory. Until


September 28, 2010	II-68


Name, Address¹, Year of	Principal	Other Directorships Held by Trustee
Birth, Position(s) Held with	Occupation(s) During
Fund and Length of Service	Past 5 Years
as a Putnam Fund Trustee²

	other research services)	2006, Mr. Putnam was a Trustee of Shore Country
	and President of New	Day School. Until 2002, he was a Trustee of the Sea
	Generation Advisors,	Education Association.
	LLC (a registered
	investment adviser to
	private funds), which are
	firms he founded in
	1986. Prior to June 2007,
	Mr. Putnam was
	President of the Putnam
	Funds.

W. Thomas Stephens (Born	Prior to 2009, Mr.	Director of TransCanadaPipelines Ltd (an energy
1942), Trustee from 1997-	Stephens was Chairman	infrastructure company). From 1997 to 2008, Mr.
2008, and since 2009	and Chief Executive	Stephens served as a Trustee on the Board of the
	Officer of Boise	Putnam Funds, which he rejoined as a Trustee in
	Cascade, LLC (a paper,	2009. Until 2004, Mr. Stephens was a Director of
	forest product and	Xcel Energy Incorporated (a public utility
	timberland assets	company), Qwest Communications and Norske
	company).	Canada, Inc. (a paper manufacturer). Until 2003,
		Mr. Stephens was a Director of Mail-Well, Inc. (a
		diversified printing company). Prior to July 2001,
		Mr. Stephens was Chairman of Mail-Well.

Richard B. Worley (Born	Managing Partner of	Serves as a Trustee of the University of
1945), Trustee since 2004	Permit Capital LLC (an	Pennsylvania Medical Center, the Robert Wood
	investment management	Johnson Foundation (a philanthropic organization
	firm). Prior to 2002, he	devoted to healthcare issues) and the National
	served as Chief Strategic	Constitution Center. Mr. Worley is also a Director
	Officer of Morgan	of the Colonial Williamsburg Foundation (a
	Stanley Investment	historical preservation organization) and serves as
	Management. He	Chairman of the Philadelphia Orchestra Association.
	previously served as	He serves on the investment committees of Mount
	President, Chief	Holyoke College and World Wildlife Fund (a
	Executive Officer and	wildlife conservation organization). Mr. Worley is
	Chief Investment Officer	also an Independent Director of Neuberger Berman,
	of Morgan Stanley Dean	an investment management firm.
	Witter Investment
	Management and as a
	Managing Director of
	Morgan Stanley (a
	financial services firm).


Interested Trustees

*Robert L. Reynolds (Born	President and Chief	Director of several not-for-profit boards, including
1952), Trustee since 2008	Executive Officer of	West Virginia University Foundation, the Concord
	Putnam Investments.	Museum, Dana-Farber Cancer Institute, Lahey
	Member of Putnam	Clinic, and the Initiative for a Competitive Inner
	Investments’ Executive	City, in Boston. He is a member of the Chief
	Board of Directors.	Executives Club of Boston, the National
	Prior to joining Putnam	Innovation Initiative, and the Council on


September 28, 2010	II-69


Name, Address¹, Year of	Principal	Other Directorships Held by Trustee
Birth, Position(s) Held with	Occupation(s) During
Fund and Length of Service	Past 5 Years
as a Putnam Fund Trustee²

	Investments in 2008, Mr.	Competitiveness, and he is a former President of the
	Reynolds was Vice	Commercial Club of Boston. Prior to 2008, he
	Chairman and Chief	served as a Director of FMR Corporation, Fidelity
	Operating Officer of	Investments Insurance Ltd., Fidelity Investments
	Fidelity Investments	Canada Ltd., and Fidelity Management Trust
	from 2000 to 2007.	Company and as a Trustee of the Fidelity Family of
		Funds.

</R>

¹The address of each Trustee is One Post Office Square, Boston, MA 02109. As of December 31, 2009, there were 104 Putnam Funds.

²Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 72, death or removal.

*Trustee who is an “interested person” (as defined in the Investment Company Act of 1940, as amended) of the fund, Putnam Management and/or Putnam Retail Management. Mr. Reynolds is deemed an “interested person” by virtue of his positions as an officer of the fund, Putnam Management and/or Putnam Retail Management. Mr. Reynolds is the President and Chief Executive Officer of Putnam Investments, LLC and President of your fund and each of the other Putnam funds.

Trustee Qualifications

Each of the fund’s Trustees, with the exception of Ms. Baumann, was most recently elected by shareholders of the fund during 2009, although most of the Trustees have served on the board for many years. Ms. Baumann was elected to the Board of Trustees by the Independent Trustees effective July 1, 2010. The Board Policy and Nominating Committee is responsible for recommending proposed nominees for election to the full Board of Trustees for its approval. As part of its deliberative process, the Committee considers the experience, qualifications, attributes and skills that it determines would benefit the Putnam funds at the time.

In recommending the election of the current board members as Trustees, the Committee generally considered the educational, business and professional experience of each Trustee in determining his or her qualifications to serve as a Trustee of the fund, including the Trustee's record of service as a director or trustee of public and private organizations. (This included, but was not limited to, consideration of the specific experience noted in the preceding table.) In the case of most members of the board, the Committee considered his or her previous service as a member of the Board of Trustees of the Putnam funds, which demonstrated a high level of diligence and commitment to the interests of fund shareholders and an ability to work effectively and collegially with other members of the board.

The Committee also considered, among other factors, the particular attributes described below with respect to the various individual Trustees and considered the attributes as indicative of the person’s ability to deal effectively with the types of financial, regulatory, and/or investment matters that typically arise in the course of a Trustee’s work:

Ravi Akhoury -- Mr. Akhoury's experience as chief investment officer and chief executive officer of a major investment management organization.

Barbara M. Baumann -- Ms. Baumann’s experience in the energy industry as a consultant, an investor, and in both financial and operational management positions at a global energy company, and her service as a director of two NYSE companies.


September 28, 2010	II-70

Jameson A. Baxter -- Ms. Baxter's experience in corporate finance acquired in the course of her career at a major investment bank, her experience as a director and audit committee chair of two NYSE companies and her role as a founding board member of the Mutual Fund Directors Forum.

Charles B. Curtis -- Mr. Curtis' experience in public and regulatory policy matters relating to energy and finance acquired in the course of his service in various senior positions in government and on numerous boards of public and private organizations.

Robert J. Darretta -- Mr. Darretta's experience as the Chief Financial Officer and Vice Chairman of the Board of a major NYSE health products company.

Myra R. Drucker -- Ms. Drucker's experience as investment officer for major retirement plans, which included selection and oversight of unaffiliated investment managers and oversight of accounting and custody operations, and her prior service as a member of the NYSE Corporate Accountability and Listing Standards Committee.

John A. Hill -- Mr. Hill's experience as founder and chairman of a major open-end mutual fund and as a founder and lead managing partner of one of the largest private equity firms in the U.S.

Paul L. Joskow -- Dr. Joskow's education and experience as a professional economist familiar with financial economics and related issues and his service on multiple for-profit boards.

Kenneth R. Leibler -- Mr. Leibler's extensive experience in the financial services industry, including as CEO of a major asset management organization, and his service as a director of various public and private companies.

Robert E. Patterson -- Mr. Patterson’s training and experience as an attorney and his experience as president of a NYSE company.

George Putnam, III -- Mr. Putnam’s training and experience as an attorney, his experience as the founder and chief executive officer of an investment management firm and his experience as an author of various publications on the subject of investments.

W. Thomas Stephens -- Mr. Stephens' extensive business experience, including his service as Chief Executive Officer of four public companies, as non-executive chairman of two public companies and as a director of numerous other public companies.

Richard B. Worley -- Mr. Worley's experience as a president, chief investment officer and chief executive officer of a major investment management firm.

<R>

Interested Trustee

Robert L. Reynolds -- Mr. Reynolds’ extensive experience as a senior executive of one of the largest mutual fund organizations in the U.S. and his current role as the Chief Executive Officer of Putnam Investments.

</R>

Officers


September 28, 2010	II-71

In addition to Robert L. Reynolds, the fund’s President, the other officers of the fund are shown below. All of the officers of your fund are employees of Putnam Management or its affiliates or are members of the Trustees’ independent administrative staff.


<R>

Name, Address¹, Year of	Length of Service with	Principal Occupation(s) During Past 5 Years and
Birth, Position(s) Held with	the Putnam Funds²	Position(s) with Fund’s Investment Adviser and
Fund		Distributor³

Jonathan S. Horwitz⁴	Since 2004	Senior Vice President and Treasurer, The Putnam
(Born 1955), Executive Vice		Funds.
President, Principal Executive
Officer, Treasurer and
Compliance Liaison

Steven D. Krichmar	Since 2002	Senior Managing Director, Putnam Investments and
(Born 1958), Vice President		Putnam Management.
and Principal Financial Officer

Janet C. Smith	Since 2007	Managing Director, Putnam Investments and
(Born 1965), Vice President,		Putnam Management.
Assistant Treasurer and
Principal Accounting Officer

Beth S. Mazor	Since 2002	Managing Director, Putnam Investments and
(Born 1958), Vice President		Putnam Management.

Robert R. Leveille	Since 2007	Managing Director, Putnam Investments, Putnam
(Born 1969), Vice President		Management and Putnam Retail Management
and Chief Compliance Officer

Mark C. Trenchard	Since 2002	Managing Director, Putnam Investments, Putnam
(Born 1962), Vice President		Retail Management.
and BSA Compliance Officer

Francis J. McNamara, III	Since 2004	Senior Managing Director, Putnam Investments and
(Born 1955), Vice President		Putnam Management.
and Chief Legal Officer

James P. Pappas	Since 2004	Managing Director, Putnam Investments and
(Born 1953), Vice President		Putnam Management.

Judith Cohen⁴	Since 1993	Vice President, Clerk and Assistant Treasurer, The
(Born 1945), Vice President,		Putnam Funds.
Clerk and Assistant Treasurer

Michael Higgins	Since 2010	Manager of Finance, Dunkin’ Brands (2008-2010);
(Born 1976), Vice President		Senior Financial Analyst, Old Mutual Asset
		Management (2007-2008); Senior Financial Analyst,
		Putnam Investments (1999-2007).

Nancy E. Florek⁴	Since 2000	Vice President, Assistant Clerk, Assistant Treasurer
(Born 1957), Vice President,		and Proxy Manager, The Putnam Funds.
Assistant Clerk, Assistant
Treasurer and Proxy Manager

Susan G. Malloy	Since 2007	Managing Director, Putnam Management.
(Born 1957),Vice President
and Assistant Treasurer

</R>

¹The address of each Officer is One Post Office Square, Boston, MA 02109.

²Each officer serves for an indefinite term, until his or her resignation, retirement, death or removal.

³Prior positions and/or officer appointments with the fund or the fund’s investment adviser and distributor have been omitted.

⁴Officers of the fund who are members of the Trustees’ independent administrative staff. Compensation for these individuals is fixed by the Trustees and reimbursed to Putnam Management.


September 28, 2010	II-72

Except as stated above, the principal occupations of the officers and Trustees for the last five years have been with the employers as shown above, although in some cases they have held different positions with such employers.

Leadership Structure and Standing Committees of the Board of Trustees

For details regarding the number of times the standing committees of the Board of Trustees met during a fund's last fiscal year, see "Trustee responsibilities and fees" in Part I of this SAI.

Board Leadership Structure. Currently, 13 of the 14 Trustees of your fund are Independent Trustees, meaning that they are not considered "interested persons" of your fund or its investment manager. These Independent Trustees must vote separately to approve all financial arrangements and other agreements with your fund’s investment manager and other affiliated parties. The role of the Independent Trustees has been characterized as that of a “watchdog” charged with oversight to protect shareholders’ interests against overreaching and abuse by those who are in a position to control or influence a fund. Your fund’s Independent Trustees meet regularly as a group in executive session. Independent Trustees currently serve as chair and vice-chair of the Board.

Taking into account the number, the diversity and the complexity of the funds overseen by the Board and the aggregate amount of assets under management, your fund’s Trustees have determined that the efficient conduct of the Board's affairs makes it desirable to delegate responsibility for certain specific matters to committees of the Board. Certain committees (the Executive Committee, Distributions Committee, and Audit and Compliance Committee) are authorized to act for the Trustees as specified in their charters. The other committees review and evaluate matters specified in their charters and make recommendations to the Trustees as they deem appropriate. Each committee may utilize the resources of your fund’s independent staff, counsel and auditors as well as other experts. The committees meet as often as necessary, either in conjunction with regular meetings of the Trustees or otherwise. The membership and chair of each committee are appointed by the Trustees upon recommendation of the Board Policy and Nominating Committee. Each Committee is chaired by an Independent Trustee and, except as noted below, the membership and chairs of each committee consist exclusively of Independent Trustees.

The Trustees have determined that this committee structure also allows the Board to focus more effectively on the oversight of risk as part of its broader oversight of the fund's affairs. While risk management is the primary responsibility of the fund's investment manager, the Trustees regularly receive reports regarding investment risks and compliance risks. The Board's committee structure allows separate committees to focus on different aspects of these risks and their potential impact on some or all of the funds and to discuss with the fund's investment manager how it monitors and controls such risks.

Audit and Compliance Committee. The Audit and Compliance Committee provides oversight on matters relating to the preparation of the funds’ financial statements, compliance matters, internal audit functions, and Codes of Ethics issues. This oversight is discharged by regularly meeting with management and the funds’ independent auditors and keeping current on industry developments. Duties of this Committee also include the review and evaluation of all matters and relationships pertaining to the funds’ independent auditors, including their independence. The members of the Committee include only Trustees who are not “interested persons” of the funds or Putnam Management. Each member of the Committee also is “independent,” as that term is interpreted for purposes of Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the listing standards of the New York Stock Exchange. The Board of Trustees has adopted a written charter for the Committee. The Committee currently consists of Messrs. Patterson (Chairperson), Darretta, Hill and Leibler, and Mses. Baumann and Drucker.


September 28, 2010	II-73

Board Policy and Nominating Committee. The Board Policy and Nominating Committee reviews matters pertaining to the operations of the Board of Trustees and its Committees, the compensation of the Trustees and their staff, and the conduct of legal affairs for the funds. The Committee evaluates and recommends all candidates for election as Trustees and recommends the appointment of members and chairs of each board committee. The Committee will consider nominees for Trustee recommended by shareholders of a fund provided that such recommendations are submitted by the date disclosed in the fund’s proxy statement and otherwise comply with applicable securities laws, including Rule 14a-8 under the Exchange Act. The Committee also reviews policy matters affecting the operation of the Board and its independent staff. In addition, the Committee oversees the voting of proxies associated with portfolio investments of the funds with the goal of ensuring that these proxies are voted in the best interest of the funds’ shareholders. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee generally believes that the Board benefits from diversity of background, experience and views among its members, and considers this as a factor in evaluating the composition of the Board, but has not adopted any specific policy in this regard. The Committee is composed entirely of Trustees who are not “interested persons” of the funds or Putnam Management and currently consists of Messrs. Hill (Chairperson), Patterson, Putnam and Worley, and Ms. Baxter.

Brokerage Committee. The Brokerage Committee reviews the funds' policies regarding the execution of portfolio trades and Putnam Management's practices and procedures relating to the implementation of those policies. The Committee reviews periodic reports on the cost and quality of execution of portfolio transactions and the extent to which brokerage commissions have been used (i) by Putnam Management to obtain brokerage and research services generally useful to it in managing the portfolios of the funds and of its other clients, and (ii) by the funds to pay for certain fund expenses. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee currently consists of Dr. Joskow (Chairperson), Ms. Baxter, and Messrs. Akhoury, Curtis, Putnam, Stephens and Worley.

Contract Committee. The Contract Committee reviews and evaluates at least annually all arrangements pertaining to (i) the engagement of Putnam Management and its affiliates to provide services to the funds, (ii) the expenditure of the funds' assets for distribution purposes pursuant to Distribution Plans of the funds, and (iii) the engagement of other persons to provide material services to the funds, including in particular those instances where the cost of services is shared between the funds and Putnam Management and its affiliates or where Putnam Management or its affiliates have a material interest. The Committee also reviews the proposed organization of new fund products, proposed structural changes to existing funds and matters relating to closed-end funds. The Committee reports and makes recommendations to the Trustees regarding these matters. The Committee currently consists of Ms. Baxter (Chairperson), Dr. Joskow, and Messrs. Akhoury, Curtis, Putnam, Stephens and Worley.

Distributions Committee. The Distributions Committee oversees all dividends and distributions by the funds. The Committee makes recommendations to the Trustees of the funds regarding the amount and timing of distributions paid by the funds, and determines such matters when the Trustees are not in session. The Committee also oversees the policies and procedures pursuant to which Putnam Management prepares recommendations for distributions, and meets regularly with representatives of Putnam Management to review the implementation of these policies and procedures. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee currently consists of Ms. Drucker (Chairperson), Ms. Baumann, and Messrs. Darretta, Hill, Leibler and Patterson.

Executive Committee. The functions of the Executive Committee are twofold. The first is to ensure that the funds’ business may be conducted at times when it is not feasible to convene a meeting of the Trustees or for the Trustees to act by written consent. The Committee may exercise any or all of the power and authority of the Trustees when the Trustees are not in session. The second is to establish annual and ongoing goals, objectives and priorities for the Board of Trustees and to ensure coordination of all efforts between the Trustees and Putnam Management on behalf of the shareholders of the funds. The Committee currently consists of Messrs. Hill (Chairperson), Patterson, Putnam and Worley, and Ms. Baxter.


September 28, 2010	II-74

Investment Oversight Committees. The Investment Oversight Committees regularly meet with investment personnel of Putnam Management to review the investment performance and strategies of the funds in light of their stated investment objectives and policies. The Committees seek to identify any compliance issues that are unique to the applicable categories of funds and work with the appropriate Board committees to ensure that any such issues are properly addressed. Investment Oversight Committee A currently consists of Messrs. Putnam (Chairperson), Akhoury, Darretta, Hill, Patterson and Reynolds, and Mses. Baxter and Drucker. Investment Oversight Committee B currently consists of Messrs. Worley (Chairperson), Curtis, Leibler and Stephens, Dr. Joskow, and Ms. Baumann.

Pricing Committee. The Pricing Committee oversees the valuation of assets of the Putnam funds and reviews the funds’ policies and procedures for achieving accurate and timely pricing of fund shares. The Committee also oversees implementation of these policies, including fair value determinations of individual securities made by Putnam Management or other designated agents of the funds. The Committee also oversees compliance by money market funds with Rule 2a-7 and the correction of occasional pricing errors. The Committee also reviews matters related to the liquidity of portfolio holdings. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee currently consists of Messrs. Leibler (Chairperson), Darretta, Hill and Patterson, and Mses. Baumann and Drucker.

Indemnification of Trustees

The Agreement and Declaration of Trust of the fund provides that the fund will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the fund, except if it is determined in the manner specified in the Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the fund or that such indemnification would relieve any officer or Trustee of any liability to the fund or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. The fund, at its expense, provides liability insurance for the benefit of its Trustees and officers.

For details of Trustees’ fees paid by the fund and information concerning retirement guidelines for the Trustees, see “Charges and expenses” in Part I of this SAI.

Putnam Management and its affiliates

Putnam Management is one of America’s oldest and largest money management firms. Putnam Management’s staff of experienced portfolio managers and research analysts selects securities and constantly supervises the fund’s portfolio. By pooling an investor’s money with that of other investors, a greater variety of securities can be purchased than would be the case individually; the resulting diversification helps reduce investment risk. Putnam Management has been managing mutual funds since 1937.

Putnam Management is a subsidiary of Putnam Investments, of which a majority is owned through a series of subsidiaries by Great-West Lifeco Inc., which is a financial services holding company with operations in Canada, the United States and Europe and is a member of the Power Financial Corporation group of companies. Power Financial Corporation, a global company with interests in the financial services industry, is a subsidiary of Power Corporation of Canada, a financial, industrial, and communications holding company, of which the Honorable Paul Desmarais, Sr., through a group of private holding companies which he controls, has voting control.

Trustees and officers of the fund who are also officers of Putnam Management or its affiliates or who are stockholders of Putnam Investments or its parent companies will benefit from the advisory fees, sales commissions, distribution fees and transfer agency fees paid or allowed by the fund.


September 28, 2010	II-75

Matters relating to the Board of Directors

Uncontested Election of Directors

The funds’ proxies will be voted for the election of a company’s nominees for the board of directors, except as follows:

►The funds will withhold votes from the entire board of directors if

• the board does not have a majority of independent directors,

• the board has not established independent nominating, audit, and compensation committees,

• the board has more than 19 members or fewer than five members, absent special circumstances,

• the board has not acted to implement a policy requested in a shareholder proposal that received the support of a majority of the shares of the company cast at its previous two annual meetings, or

• the board has adopted or renewed a shareholder rights plan (commonly referred to as a “poison pill”) without shareholder approval during the current or prior calendar year.

The funds will on a case-by-case basis withhold votes from the entire board of directors, or from particular directors as may be appropriate, if the board has approved compensation arrangements for one or more company executives that the funds determine are unreasonably excessive relative to the company’s performance or has otherwise failed to observe good corporate governance practices.

► The funds will withhold votes from any nominee for director:

• who is considered an independent director by the company and who has received compensation within the last three years from the company other than for service as a director (e.g., investment banking, consulting, legal, or financial advisory fees),

• who attends less than 75% of board and committee meetings without valid reasons for the absences (e.g., illness, personal emergency, etc.),

• of a public company (Company A) who is employed as a senior executive of another company (Company B), if a director of Company B serves as a senior executive of Company A (commonly referred to as an “interlocking directorate”), or

• who serves on more than five unaffiliated public company boards (for the purpose of this guideline, boards of affiliated registered investment companies will count as one board).

Commentary:


September 28, 2010	II-101

Board independence: Unless otherwise indicated, for the purposes of determining whether a board has a majority of independent directors and independent nominating, audit, and compensation committees, an “independent director” is a director who (1) meets all requirements to serve as an independent director of a company under the NYSE Corporate Governance Rules (e.g., no material business relationships with the company and no present or recent employment relationship with the company including employment of an immediate family member as an executive officer), and (2) has not within the last three years accepted directly or indirectly any consulting, advisory, or other compensatory fee from the company other than in his or her capacity as a member of the board of directors or any board committee. The funds’ Trustees believe that the recent (i.e., within the last three years) receipt of any amount of compensation for services other than service as a director raises significant independence issues.

Board size: The funds’ Trustees believe that the size of the board of directors can have a direct impact on the ability of the board to govern effectively. Boards that have too many members can be unwieldy and ultimately inhibit their ability to oversee management performance. Boards that have too few members can stifle innovation and lead to excessive influence by management.

Time commitment: Being a director of a company requires a significant time commitment to adequately prepare for and attend the company’s board and committee meetings. Directors must be able to commit the time and attention necessary to perform their fiduciary duties in proper fashion, particularly in times of crisis. The funds’ Trustees are concerned about over-committed directors. In some cases, directors may serve on too many boards to make a meaningful contribution. This may be particularly true for senior executives of public companies (or other directors with substantially full-time employment) who serve on more than a few outside boards. The funds may withhold votes from such directors on a case-by-case basis where it appears that they may be unable to discharge their duties properly because of excessive commitments.

Interlocking directorships: The funds’ Trustees believe that interlocking directorships are inconsistent with the degree of independence required for outside directors of public companies.

Corporate governance practices: Board independence depends not only on its members’ individual relationships, but also on the board’s overall attitude toward management. Independent boards are committed to good corporate governance practices and, by providing objective independent judgment, enhancing shareholder value. The funds may withhold votes on a case-by-case basis from some or all directors who, through their lack of independence or otherwise, have failed to observe good corporate governance practices or, through specific corporate action, have demonstrated a disregard for the interests of shareholders. Such instances may include cases where a board of directors has approved compensation arrangements for one or more members of management that, in the judgment of the funds’ Trustees, are excessive by reasonable corporate standards relative to the company’s record of performance.

Contested Elections of Directors

► The funds will vote on a case-by-case basis in contested elections of directors.

Classified Boards

► The funds will vote against proposals to classify a board, absent special circumstances indicating that shareholder interests would be better served by this structure.

Commentary: Under a typical classified board structure, the directors are divided into three classes, with each class serving a three-year term. The classified board structure results in directors serving staggered terms, with usually only a third of the directors up for re-election at any given annual meeting. The funds’ Trustees generally believe that it is appropriate for directors to stand for election each year, but recognize that, in special circumstances, shareholder interests may be better served under a classified board structure.


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Other Board-Related Proposals

The funds will generally vote for proposals that have been approved by a majority independent board, and on a case-by-case basis on proposals that have been approved by a board that fails to meet the guidelines’ basic independence standards (i.e., majority of independent directors and independent nominating, audit, and compensation committees).

Executive Compensation

The funds generally favor compensation programs that relate executive compensation to a company’s long-term performance. The funds will vote on a case-by-case basis on board-approved proposals relating to executive compensation, except as follows:

► Except where the funds are otherwise withholding votes for the entire board of directors, the funds will vote for stock option and restricted stock plans that will result in an average annual dilution of 1.67% or less (based on the disclosed term of the plan and including all equity-based plans).

► The funds will vote against stock option and restricted stock plans that will result in an average annual dilution of greater than 1.67% (based on the disclosed term of the plan and including all equity-based plans).

► The funds will vote against any stock option or restricted stock plan where the company’s actual grants of stock options and restricted stock under all equity-based compensation plans during the prior three (3) fiscal years have resulted in an average annual dilution of greater than 1.67%.

► The funds will vote against stock option plans that permit the replacing or repricing of underwater options (and against any proposal to authorize a replacement or repricing of underwater options).

► The funds will vote against stock option plans that permit issuance of options with an exercise price below the stock’s current market price.

► Except where the funds are otherwise withholding votes for the entire board of directors, the funds will vote for an employee stock purchase plan that has the following features: (1) the shares purchased under the plan are acquired for no less than 85% of their market value; (2) the offering period under the plan is 27 months or less; and (3) dilution is 10% or less.

► The funds will vote for proposals to approve a company’s executive compensation program (i.e., “say on pay” proposals in which the company’s board proposes that shareholders indicate their support for the company’s compensation philosophy, policies, and practices), except that the funds will vote on a case-by-case basis if the company is assigned to the lowest category, through independent third party benchmarking performed by the funds’ proxy voting service, for the correlation of the company’s executive compensation program with its performance.

► The funds will vote for bonus plans under which payments are treated as performance-based compensation that is deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended, except that the funds will vote on a case-by-case basis if any of the following circumstances exist:

the award pool or amount per employee under the plan is unlimited, or

the plan’s performance criteria is undisclosed, or


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the company is assigned to the lowest category, through independent third party benchmarking performed by the funds’ proxy voting service, for the correlation of the company’s executive compensation program with its performance.

Commentary: Companies should have compensation programs that are reasonable and that align shareholder and management interests over the longer term. Further, disclosure of compensation programs should provide absolute transparency to shareholders regarding the sources and amounts of, and the factors influencing, executive compensation. Appropriately designed equity-based compensation plans can be an effective way to align the interests of long-term shareholders with the interests of management. However, the funds may vote against these or other executive compensation proposals on a case-by-case basis where compensation is excessive by reasonable corporate standards, where a company fails to provide transparent disclosure of executive compensation, or, in some instances, where independent third-party benchmarking indicates that compensation is inadequately correlated with performance, relative to peer companies. (Examples of excessive executive compensation may include, but are not limited to, equity incentive plans that exceed the dilution criteria noted above, excessive perquisites, performance-based compensation programs that do not properly correlate reward and performance, “golden parachutes” or other severance arrangements that present conflicts between management’s interests and the interests of shareholders, and “golden coffins” or unearned death benefits.) In voting on a proposal relating to executive compensation, the funds will consider whether the proposal has been approved by an independent compensation committee of the board.

Capitalization

Many proxy proposals involve changes in a company’s capitalization, including the authorization of additional stock, the issuance of stock, the repurchase of outstanding stock, or the approval of a stock split. The management of a company’s capital structure involves a number of important issues, including cash flow, financing needs, and market conditions that are unique to the circumstances of the company. As a result, the funds will vote on a case-by-case basis on board-approved proposals involving changes to a company’s capitalization, except that where the funds are not otherwise withholding votes from the entire board of directors:

► The funds will vote for proposals relating to the authorization and issuance of additional common stock (except where such proposals relate to a specific transaction).

► The funds will vote for proposals to effect stock splits (excluding reverse stock splits).

► The funds will vote for proposals authorizing share repurchase programs.

Commentary: A company may decide to authorize additional shares of common stock for reasons relating to executive compensation or for routine business purposes. For the most part, these decisions are best left to the board of directors and senior management. The funds will vote on a case-by-case basis, however, on other proposals to change a company’s capitalization, including the authorization of common stock with special voting rights, the authorization or issuance of common stock in connection with a specific transaction (e.g., an acquisition, merger or reorganization), or the authorization or issuance of preferred stock. Actions such as these involve a number of considerations that may affect a shareholder’s investment and that warrant a case-by-case determination.

Acquisitions, Mergers, Reincorporations, Reorganizations and Other Transactions

Shareholders may be confronted with a number of different types of transactions, including acquisitions, mergers, reorganizations involving business combinations, liquidations, and the sale of all or substantially all of a company’s assets, which may require their consent. Voting on such proposals involves considerations


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unique to each transaction. As a result, the funds will vote on a case-by-case basis on board-approved proposals to effect these types of transactions, except as follows:

Commentary: A company may reincorporate into another state through a merger or reorganization by setting up a “shell” company in a different state and then merging the company into the new company. While reincorporation into states with extensive and established corporate laws – notably Delaware – provides companies and shareholders with a more well-defined legal framework, shareholders must carefully consider the reasons for a reincorporation into another jurisdiction, including especially an offshore jurisdiction.

Some proxy proposals involve efforts by management to make it more difficult for an outside party to take control of the company without the approval of the company’s board of directors. These include the adoption of a shareholder rights plan, requiring supermajority voting on particular issues, the adoption of fair price provisions, the issuance of blank check preferred stock, and the creation of a separate class of stock with disparate voting rights. Such proposals may adversely affect shareholder rights, lead to management entrenchment, or create conflicts of interest. As a result, the funds will vote against board-approved proposals to adopt such anti-takeover measures, except as follows:

Commentary: The funds’ Trustees recognize that poison pills and fair price provisions may enhance or protect shareholder value under certain circumstances. For instance, where a company has incurred significant operating losses, a shareholder rights plan may be appropriately tailored to protect shareholder value by preserving a company’s net operating losses. Thus, the funds will consider proposals to approve such matters on a case-by-case basis.

Many proxies involve approval of routine business matters, such as changing a company’s name, ratifying the appointment of auditors, and procedural matters relating to the shareholder meeting. For the most part, these routine matters do not materially affect shareholder interests and are best left to the board of directors and senior management of the company. The funds will vote for board-approved proposals approving such matters, except as follows:

► The funds will vote against authorization to transact other unidentified, substantive business at the meeting.

► The funds will vote on a case-by-case basis on other business matters where the funds are otherwise withholding votes for the entire board of directors.

Commentary: Charter and bylaw amendments and the transaction of other unidentified, substantive business at a shareholder meeting may directly affect shareholder rights and have a significant impact on shareholder value. As a result, the funds do not view these items as routine business matters. Putnam Management’s investment professionals and the funds’ proxy voting service may also bring to the Proxy Manager’s attention company-specific items that they believe to be non-routine and warranting special consideration. Under these circumstances, the funds will vote on a case-by-case basis.

The fund’s proxy voting service may identify circumstances that call into question an audit firm’s independence or the integrity of an audit. These circumstances may include recent material restatements of financials, unusual audit fees, egregious contractual relationships, and aggressive accounting policies. The funds will consider proposals to ratify the selection of auditors in these circumstances on a case-by-case basis. In all other cases, given the existence of rules that enhance the independence of audit committees and auditors by, for example, prohibiting auditors from performing a range of non-audit services for audit clients, the funds will vote for the ratification of independent auditors.

II. SHAREHOLDER PROPOSALS

SEC regulations permit shareholders to submit proposals for inclusion in a company’s proxy statement. These proposals generally seek to change some aspect of the company’s corporate governance structure or to change some aspect of its business operations. The funds generally will vote in accordance with the recommendation of the company’s board of directors on all shareholder proposals, except as follows:

► The funds will vote for shareholder proposals asking that director nominees receive support from holders of a majority of votes cast or a majority of shares outstanding in order to be (re)elected.

► The funds will vote for shareholder proposals to declassify a board, absent special circumstances which would indicate that shareholder interests are better served by a classified board structure.

► The funds will vote for shareholder proposals to require shareholder approval of shareholder rights plans.

► The funds will vote for shareholder proposals requiring companies to make cash payments under management severance agreements only if both of the following conditions are met:

• the company undergoes a change in control, and

• the change in control results in the termination of employment for the person receiving the severance payment.

► The funds will vote on a case-by-case basis on shareholder proposals requiring companies to accelerate vesting of equity awards under management severance agreements only if both of the following conditions are met:

• the company undergoes a change in control, and

• the change in control results in the termination of employment for the person receiving the severance payment.

► The funds will vote on a case-by-case basis on shareholder proposals to limit a company’s ability to make excise tax gross-up payments under management severance agreements.


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► The funds will vote on a case-by-case basis on shareholder proposals requesting that the board adopt a policy to recoup, in the event of a significant restatement of financial results or significant extraordinary write-off, to the fullest extent practicable, for the benefit of the company, all performance-based bonuses or awards that were paid to senior executives based on the company having met or exceeded specific performance targets to the extent that the specific performance targets were not, in fact, met.

► The funds will vote for shareholder proposals requiring a company to report on its executive retirement benefits (e.g., deferred compensation, split-dollar life insurance, SERPs and pension benefits).

► The funds will vote for shareholder proposals requiring a company to disclose its relationships with executive compensation consultants (e.g., whether the company, the board or the compensation committee retained the consultant, the types of services provided by the consultant over the past five years, and a list of the consultant’s clients on which any of the company’s executives serve as a director).

► The funds will vote for shareholder proposals that are consistent with the funds’ proxy voting guidelines for board-approved proposals.

► The funds will vote on a case-by-case basis on other shareholder proposals where the funds are otherwise withholding votes for the entire board of directors.

Commentary: In light of the substantial reforms in corporate governance that are currently underway, the funds’ Trustees believe that effective corporate reforms should be promoted by holding boards of directors – and in particular their independent directors – accountable for their actions, rather than by imposing additional legal restrictions on board governance through piecemeal proposals. Generally speaking, shareholder proposals relating to business operations are often motivated primarily by political or social concerns, rather than the interests of shareholders as investors in an economic enterprise. As stated above, the funds’ Trustees believe that boards of directors and management are responsible for ensuring that their businesses are operating in accordance with high legal and ethical standards and should be held accountable for resulting corporate behavior. Accordingly, the funds will generally support the recommendations of boards that meet the basic independence and governance standards established in these guidelines. Where boards fail to meet these standards, the funds will generally evaluate shareholder proposals on a case-by-case basis.

However, the funds generally support shareholder proposals to implement majority voting for directors, observing that majority voting is an emerging standard intended to encourage directors to be attentive to shareholders’ interests. The funds also generally support shareholder proposals to declassify a board or to require shareholder approval of shareholder rights plans. The funds’ Trustees believe that these shareholder proposals further the goals of reducing management entrenchment and conflicts of interest, and aligning management’s interests with shareholders’ interests in evaluating proposed acquisitions of the company. The Trustees also believe that shareholder proposals to limit severance payments may further these goals in some instances. In general, the funds favor arrangements in which severance payments are made to an executive only when there is a change in control and the executive loses his or her job as a result. Arrangements in which an executive receives a payment upon a change of control even if the executive retains employment introduce potential conflicts of interest and may distract management focus from the long term success of the company.

In evaluating shareholder proposals that address severance payments, the funds distinguish between cash and equity payments. The funds generally do not favor cash payments to executives upon a change in control transaction if the executive retains employment. However, the funds recognize that accelerated vesting of equity incentives, even without termination of employment, may help to align management and shareholder interests in some instances, and will evaluate shareholder proposals addressing accelerated vesting of equity incentive payments on a case-by-case basis.


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When severance payments exceed a certain amount based on the executive’s previous compensation, the payments may be subject to an excise tax. Some compensation arrangements provide for full excise tax gross-ups, which means that the company pays the executive sufficient additional amounts to cover the cost of the excise tax. The funds are concerned that the benefits of providing full excise tax gross-ups to executives may be outweighed by the cost to the company of the gross-up payments. Accordingly, the funds will vote on a case-by-case basis on shareholder proposals to curtail excise tax gross-up payments. The funds generally favor arrangements in which severance payments do not trigger an excise tax or in which the company’s obligations with respect to gross-up payments are limited in a reasonable manner.

The funds’ Trustees believe that performance-based compensation can be an effective tool for aligning management and shareholder interests. However, to fulfill its purpose, performance compensation should only be paid to executives if the performance targets are actually met. A significant restatement of financial results or a significant extraordinary write-off may reveal that executives who were previously paid performance compensation did not actually deliver the required business performance to earn that compensation. In these circumstances, it may be appropriate for the company to recoup this performance compensation. The funds will consider on a case-by-case basis shareholder proposals requesting that the board adopt a policy to recoup, in the event of a significant restatement of financial results or significant extraordinary write-off, performance-based bonuses or awards paid to senior executives based on the company having met or exceeded specific performance targets to the extent that the specific performance targets were not, in fact, met. The funds do not believe that such a policy should necessarily disadvantage a company in recruiting executives, as executives should understand that they are only entitled to performance compensation based on the actual performance they deliver.

The funds’ Trustees will also consider whether a company’s severance payment and performance-based compensation arrangements, taking all of the pertinent circumstances into account, constitute excessive compensation or otherwise reflect poorly on the corporate governance practices of the company. In addition, as the Trustees evaluate these matters, they will be mindful of evolving practices and legislation relevant to executive compensation and corporate governance.

The funds’ Trustees also believe that shareholder proposals that are intended to increase transparency, particularly with respect to executive compensation, without establishing rigid restrictions upon a company’s ability to attract and motivate talented executives, are generally beneficial to sound corporate governance without imposing undue burdens. The funds will generally support shareholder proposals calling for reasonable disclosure.

III. VOTING SHARES OF NON-U.S. ISSUERS

Many of the Putnam funds invest on a global basis, and, as a result, they may hold, and have an opportunity to vote, shares in non-U.S. issuers – i.e., issuers that are incorporated under the laws of foreign jurisdictions and whose shares are not listed on a U.S. securities exchange or the NASDAQ stock market.

In many non-U.S. markets, shareholders who vote proxies of a non-U.S. issuer are not able to trade in that company’s stock on or around the shareholder meeting date. This practice is known as “share blocking.” In countries where share blocking is practiced, the funds will vote proxies only with direction from Putnam Management’s investment professionals.

In addition, some non-U.S. markets require that a company’s shares be re-registered out of the name of the local custodian or nominee into the name of the shareholder for the shareholder to be able to vote at the meeting. This practice is known as “share re-registration.” As a result, shareholders, including the funds, are not able to trade in that company’s stock until the shares are re-registered back in the name of the local custodian or nominee following the meeting. In countries where share re-registration is practiced, the funds will generally not vote proxies.


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Protection for shareholders of non-U.S. issuers may vary significantly from jurisdiction to jurisdiction. Laws governing non-U.S. issuers may, in some cases, provide substantially less protection for shareholders than do U.S. laws. As a result, the guidelines applicable to U.S. issuers, which are premised on the existence of a sound corporate governance and disclosure framework, may not be appropriate under some circumstances for non-U.S. issuers. However, the funds will vote proxies of non-U.S. issuers in accordance with the guidelines applicable to U.S. issuers, except as follows:

Uncontested Election of Directors

Germany

► For companies subject to “co-determination,” the funds will vote on a case by-case basis for the election of nominees to the supervisory board.

► The funds will withhold votes for the election of a former member of the company’s managerial board to chair of the supervisory board.

Commentary: German corporate governance is characterized by a two-tier board system—a managerial board composed of the company’s executive officers, and a supervisory board. The supervisory board appoints the members of the managerial board. Shareholders elect members of the supervisory board, except that in the case of companies with more than 2,000 employees, company employees are allowed to elect half of the supervisory board members. This “co-determination” practice may increase the chances that the supervisory board of a large German company does not contain a majority of independent members. In this situation, under the Fund’s proxy voting guidelines applicable to U.S. issuers, the funds would vote against all nominees. However, in the case of companies subject to “co-determination,” the Funds will vote for supervisory board members on a case-by-case basis, so that the funds can support independent nominees.

Consistent with the funds’ belief that the interests of shareholders are best protected by boards with strong, independent leadership, the funds will withhold votes for the election of former chairs of the managerial board to chair of the supervisory board.

Japan

► For companies that have established a U.S.-style corporate governance structure, the funds will withhold votes from the entire board of directors if

• the board does not have a majority of outside directors,

• the board has not established nominating and compensation committees composed of a majority of outside directors, or

• the board has not established an audit committee composed of a majority of independent directors.

► The funds will withhold votes for the appointment of members of a company’s board of statutory auditors if a majority of the members of the board of statutory auditors is not independent.

Commentary:

Board structure: Recent amendments to the Japanese Commercial Code give companies the option to adopt a U.S.-style corporate governance structure (i.e., a board of directors and audit, nominating, and compensation committees). The funds will vote for proposals to amend a company’s articles of incorporation to adopt the U.S.-style corporate structure.


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Definition of outside director and independent director: Corporate governance principles in Japan focus on the distinction between outside directors and independent directors. Under these principles, an outside director is a director who is not and has never been a director, executive, or employee of the company or its parent company, subsidiaries or affiliates. An outside director is “independent” if that person can make decisions completely independent from the managers of the company, its parent, subsidiaries, or affiliates and does not have a material relationship with the company (i.e., major client, trading partner, or other business relationship; familial relationship with current director or executive; etc.). The guidelines have incorporated these definitions in applying the board independence standards above.

Korea

► The funds will withhold votes from the entire board of directors if

• the board does not have a majority of outside directors,

• the board has not established a nominating committee composed of at least a majority of outside directors, or

• the board has not established an audit committee composed of at least three members and in which at least two-thirds of its members are outside directors.

Commentary: For purposes of these guidelines, an “outside director” is a director that is independent from the management or controlling shareholders of the company, and holds no interests that might impair performing his or her duties impartially from the company, management or controlling shareholder. In determining whether a director is an outside director, the funds will also apply the standards included in Article 415-2(2) of the Korean Commercial Code (i.e., no employment relationship with the company for a period of two years before serving on the committee, no director or employment relationship with the company’s largest shareholder, etc.) and may consider other business relationships that would affect the independence of an outside director.

Russia

► The funds will vote on a case-by-case basis for the election of nominees to the board of directors.

Commentary: In Russia, director elections are typically handled through a cumulative voting process. Cumulative voting allows shareholders to cast all of their votes for a single nominee for the board of directors, or to allocate their votes among nominees in any other way. In contrast, in “regular” voting, shareholders may not give more than one vote per share to any single nominee. Cumulative voting can help to strengthen the ability of minority shareholders to elect a director.

In Russia, as in some other emerging markets, standards of corporate governance are usually behind those in developed markets. Rather than vote against the entire board of directors, as the funds generally would in the case of a company whose board fails to meet the funds’ standards for independence, the funds may, on a case by case basis, cast all of their votes for one or more independent director nominees. The funds believe that it is important to increase the number of independent directors on the boards of Russian companies to mitigate the risks associated with dominant shareholders.

United Kingdom

► The funds will withhold votes from the entire board of directors if

• the board does not have at least a majority of independent non-executive directors,


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• the board has not established a nomination committee composed of a majority of independent non-executive directors, or

• the board has not established compensation and audit committees composed of (1) at least three directors (in the case of smaller companies, two directors) and (2) solely independent non-executive directors.

► The funds will withhold votes from any nominee for director who is considered an independent director by the company and who has received compensation within the last three years from the company other than for service as a director, such as investment banking, consulting, legal, or financial advisory fees.

► The funds will vote for proposals to amend a company’s articles of association to authorize boards to approve situations that might be interpreted to present potential conflicts of interest affecting a director.

Commentary:

Application of guidelines: Although the United Kingdom’s Combined Code on Corporate Governance (“Combined Code”) has adopted the “comply and explain” approach to corporate governance, the funds’ Trustees believe that the guidelines discussed above with respect to board independence standards are integral to the protection of investors in U.K. companies. As a result, these guidelines will generally be applied in a prescriptive manner.

Definition of independence: For the purposes of these guidelines, a non-executive director shall be considered independent if the director meets the independence standards in section A.3.1 of the Combined Code (i.e., no material business or employment relationships with the company, no remuneration from the company for non-board services, no close family ties with senior employees or directors of the company, etc.), except that the funds do not view service on the board for more than nine years as affecting a director’s independence.

Smaller companies: A smaller company is one that is below the FTSE 350 throughout the year immediately prior to the reporting year.

Conflicts of interest: The Companies Act 2006 requires a director to avoid a situation in which he or she has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company. This broadly written requirement could be construed to prevent a director from becoming a trustee or director of another organization. Provided there are reasonable safeguards, such as the exclusion of the relevant director from deliberations, the funds believe that the board may approve this type of potential conflict of interest in its discretion.

Corporate Governance

► The funds will vote for shareholder proposals calling for a majority of a company’s directors to be independent of management.

► The funds will vote for shareholder proposals seeking to increase the independence of board nominating, audit, and compensation committees.

► The funds will vote for shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated.


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Compensation

► The funds will vote for proposals to approve annual directors’ fees, except that the funds will consider these proposals on a case-by -case basis in each case in which the funds’ proxy voting service has recommended a vote against such a proposal.

► The funds will vote for non-binding proposals to approve remuneration reports, except that the funds will vote against proposals to approve remuneration reports that indicate that awards under a long-term incentive plan are not linked to performance targets.

Commentary: Since proposals relating to directors’ fees for non-U.S. issuers generally address relatively modest fees paid to non-executive directors, the funds generally support these proposals, provided that the fees are consistent with directors’ fees paid by the company’s peers and do not otherwise appear unwarranted. Consistent with the approach taken for U.S. issuers, the funds generally favor compensation programs that relate executive compensation to a company’s long-term performance and will support non-binding remuneration reports unless such a correlation is not made.

Capitalization

► The funds will vote for proposals

• to issue additional common stock representing up to 20% of the company’s outstanding common stock, where shareholders do not have preemptive rights, or

• to issue additional common stock representing up to 100% of the company’s outstanding common stock, where shareholders do have preemptive rights.

► The funds will vote for proposals to authorize share repurchase programs that are recommended for approval by the funds’ proxy voting service; otherwise, the funds will vote against such proposals.

Other Business Matters

► The funds will vote for proposals permitting companies to deliver reports and other materials electronically (e.g., via website posting).

► The funds will vote for proposals permitting companies to issue regulatory reports in English.

► The funds will vote against proposals to shorten shareholder meeting notice periods to fourteen days.

Commentary: Under Directive 2007/36/EC of the European Parliament and the Council of the European Union, companies have the option to request shareholder approval to set the notice period for special meetings at 14 days provided that certain electronic voting and communication requirements are met. The funds believe that the 14 day notice period is too short to provide overseas shareholders with sufficient time to analyze proposals and to participate meaningfully at special meetings and, as a result, have determined to vote against such proposals.

Germany

► The funds will vote in accordance with the recommendation of the company’s board of directors on shareholder countermotions added to a company’s meeting agenda, unless the countermotion is directly addressed by one of the funds’ other guidelines.


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Proxy voting procedures of the Putnam funds

The proxy voting procedures below explain the role of the funds’ Trustees, the proxy voting service and the Proxy Manager, as well as how the process will work when a proxy question needs to be handled on a case-by-case basis, or when there may be a conflict of interest.

The role of the funds’ Trustees

The Trustees of the Putnam funds exercise control of the voting of proxies through their Board Policy and Nominating Committee, which is composed entirely of independent Trustees. The Board Policy and Nominating Committee oversees the proxy voting process and participates, as needed, in the resolution of issues that need to be handled on a case-by-case basis. The Committee annually reviews and recommends, for Trustee approval, guidelines governing the funds’ proxy votes, including how the funds vote on specific proposals and which matters are to be considered on a case-by-case basis. The Trustees are assisted in this process by their independent administrative staff (“Office of the Trustees”), independent legal counsel, and an independent proxy voting service. The Trustees also receive assistance from Putnam Investment Management, LLC (“Putnam Management”), the funds’ investment advisor, on matters involving investment judgments. In all cases, the ultimate decision on voting proxies rests with the Trustees, acting as fiduciaries on behalf of the shareholders of the funds.

The role of the proxy voting service

The funds have engaged an independent proxy voting service to assist in the voting of proxies. The proxy voting service is responsible for coordinating with the funds’ custodians to ensure that all proxy materials received by the custodians relating to the funds’ portfolio securities are processed in a timely fashion. To the extent applicable, the proxy voting service votes all proxies in accordance with the proxy voting guidelines established by the Trustees. The proxy voting service will refer proxy questions to the Proxy Manager (described below) for instructions under circumstances where: (1) the application of the proxy voting guidelines is unclear; (2) a particular proxy question is not covered by the guidelines; or (3) the guidelines call for specific instructions on a case-by-case basis. The proxy voting service is also requested to call to the Proxy Manager’s attention specific proxy questions that, while governed by a guideline, appear to involve unusual or controversial issues. The funds also utilize research services relating to proxy questions provided by the proxy voting service and by other firms.

The role of the Proxy Manager

Each year, a member of the Office of the Trustees is appointed Proxy Manager to assist in the coordination and voting of the funds’ proxies. The Proxy Manager will deal directly with the proxy voting service and, in the case of proxy questions referred by the proxy voting service, will solicit voting recommendations and instructions from the Office of the Trustees, the Chair of the Board Policy and Nominating Committee, and Putnam Management’s investment professionals, as appropriate. The Proxy Manager is responsible for ensuring that these questions and referrals are responded to in a timely fashion and for transmitting appropriate voting instructions to the proxy voting service.

Voting procedures for referral items

As discussed above, the proxy voting service will refer proxy questions to the Proxy Manager under certain circumstances. When the application of the proxy voting guidelines is unclear or a particular proxy question is not covered by the guidelines (and does not involve investment considerations), the Proxy Manager will assist in interpreting the guidelines and, as appropriate, consult with one or more senior staff members of the Office of the Trustees and the Chair of the Board Policy and Nominating Committee on how the funds’ shares will be voted.


September 28, 2010	II-114

For proxy questions that require a case-by-case analysis pursuant to the guidelines or that are not covered by the guidelines but involve investment considerations, the Proxy Manager will refer such questions, through an electronic request form, to Putnam Management’s investment professionals for a voting recommendation. Such referrals will be made in cooperation with the person or persons designated by Putnam Management’s Legal and Compliance Department to assist in processing such referral items. In connection with each such referral item, the Legal and Compliance Department will conduct a conflicts of interest review, as described below under “Conflicts of interest,” and provide electronically a conflicts of interest report (the “Conflicts Report”) to the Proxy Manager describing the results of such review. After receiving a referral item from the Proxy Manager, Putnam Management’s investment professionals will provide a recommendation electronically to the Proxy Manager and the person or persons designated by the Legal and Compliance Department to assist in processing referral items. Such recommendation will set forth (1) how the proxies should be voted; (2) the basis and rationale for such recommendation; and (3) any contacts the investment professionals have had with respect to the referral item with non-investment personnel of Putnam Management or with outside parties (except for routine communications from proxy solicitors). The Proxy Manager will then review the investment professionals’ recommendation and the Conflicts Report with one or more senior staff members of the Office of the Trustees in determining how to vote the funds’ proxies. The Proxy Manager will maintain a record of all proxy questions that have been referred to Putnam Management’s investment professionals, the voting recommendation, and the Conflicts Report.

In some situations, the Proxy Manager and/or one or more senior staff members of the Office of the Trustees may determine that a particular proxy question raises policy issues requiring consultation with the Chair of the Board Policy and Nominating Committee, who, in turn, may decide to bring the particular proxy question to the Committee or the full Board of Trustees for consideration.

Conflicts of interest

Occasions may arise where a person or organization involved in the proxy voting process may have a conflict of interest. A conflict of interest may exist, for example, if Putnam Management has a business relationship with (or is actively soliciting business from) either the company soliciting the proxy or a third party that has a material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote. Any individual with knowledge of a personal conflict of interest (e.g., familial relationship with company management) relating to a particular referral item shall disclose that conflict to the Proxy Manager and the Legal and Compliance Department and otherwise remove himself or herself from the proxy voting process. The Legal and Compliance Department will review each item referred to Putnam Management’s investment professionals to determine if a conflict of interest exists and will provide the Proxy Manager with a Conflicts Report for each referral item that (1) describes any conflict of interest; (2) discusses the procedures used to address such conflict of interest; and (3) discloses any contacts from parties outside Putnam Management (other than routine communications from proxy solicitors) with respect to the referral item not otherwise reported in an investment professional’s recommendation. The Conflicts Report will also include written confirmation that any recommendation from an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

As adopted March 11, 2005 and revised June 12, 2009.


September 28, 2010	II-115

Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
Putnam Arizona Tax Exempt Income Fund

We have audited the accompanying statement of assets and liabilities of Putnam Arizona Tax Exempt Income Fund (the fund), including the fund’s portfolio, as of May 31, 2010, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years or periods in the period then ended. These financial statements and financial highlights are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2010, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Putnam Arizona Tax Exempt Income Fund as of May 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years or periods in the period then ended, in conformity with U.S. generally accepted accounting principles.

Boston, Massachusetts
July 12, 2010

The fund’s portfolio 5/31/10


Key to holding’s abbreviations
AGM Assured Guaranty Municipal Corporation	FNMA Coll. Federal National Mortgage
AGO Assured Guaranty, Ltd.	Association Collateralized
AMBAC AMBAC Indemnity Corporation	G.O. Bonds General Obligation Bonds
Cmnwlth. of PR Gtd. Commonwealth of Puerto	GNMA Coll. Government National Mortgage
Rico Guaranteed	Association Collateralized
COP Certificates of Participation	NATL National Public Finance Guarantee Corp.
FGIC Financial Guaranty Insurance Company	U.S. Govt. Coll. U.S. Government Collateralized
FHA Insd. Federal Housing Administration Insured	VRDN Variable Rate Demand Notes
FHLMC Coll. Federal Home Loan Mortgage
Corporation Collateralized


MUNICIPAL BONDS AND NOTES (95.6%)*	Rating**	Principal amount	Value

Arizona (82.8%)
Apache Cnty., Indl. Dev. Auth. Poll. Control Rev.
Bonds (Tucson Elec. Pwr. Co.), Ser. A, 5.85s,
3/1/28	Baa3	$500,000	$501,360

AZ Agricultural Impt. & Pwr. Dist. Elec. Syst.
Rev. Bonds (Salt River), Ser. A, 5s, 1/1/27	Aa1	1,000,000	1,085,880

AZ Game & Fish Dept. and Comm. Rev. Bonds (AGF
Administration Bldg.), 5s, 7/1/21	A2	700,000	735,105

AZ Hlth. Fac. Auth. Rev. Bonds
(Banner Hlth.), Ser. D, 5 1/2s, 1/1/38	A+	1,750,000	1,799,000
(Catholic Hlth. Care West), Ser. D, 5s, 7/1/28	A2	1,000,000	998,780

AZ Hlth. Fac. Auth. VRDN (Catholic West), Ser. F,
0.27s, 7/1/35	VMIG1	400,000	400,000

AZ Hlth. Fac. Auth. Hlth. Care Ed. Rev. Bonds
(Kirksville College), 5 1/8s, 1/1/30	A–	750,000	747,675

AZ School Fac. Board COP
5 3/4s, 9/1/22	Aa3	1,000,000	1,109,200
5 1/8s, 9/1/21	Aa3	190,000	203,359

AZ State COP, Ser. A, AGM, 5s, 10/1/29	AAA	500,000	515,765

AZ State U. Nanotechnology LLC Lease Rev. Bonds
(Nanotechnology, LLC), Ser. A, AGO, 5s, 3/1/34	AAA	1,000,000	1,021,240

AZ State U. Syst. Rev. Bonds, Ser. 08-C,
6s, 7/1/26	AA	100,000	115,026

AZ Tourism & Sports Auth. Tax Rev. Bonds
(Multi-Purpose Stadium Fac.) Ser. A, NATL
5s, 7/1/31	A1	1,000,000	983,330
5s, 7/1/25	A1	825,000	831,988

Casa Grande, Indl. Dev. Auth. Rev. Bonds (Casa
Grande Regl. Med. Ctr.), Ser. A, 7 1/4s, 12/1/19	B+/P	150,000	151,203

Chandler, Wtr. & Swr. Rev. Bonds, FGIC, NATL,
8s, 7/1/14	Aa1	2,150,000	2,690,080

Cochise Cnty., Indl. Dev. Auth. Rev. Bonds
(Sierra Vista Regl. Hlth. Ctr.), Ser. A, 6.2s, 12/1/21	BBB+/P	440,000	466,369

Gila Cnty., Unified School Dist. G.O. Bonds (No.
10 Payson 2006 School Impt.), Ser. A, AMBAC,
5 1/4s, 7/1/27	Aa3	1,000,000	1,076,360


MUNICIPAL BONDS AND NOTES (95.6%)* cont.	Rating**	Principal amount	Value

Arizona cont.
Glendale, Indl. Dev. Auth. Rev. Bonds
(Midwestern U.), 5 1/8s, 5/15/40	A–	$1,250,000	$1,237,688
(John C. Lincoln Hlth.), 5s, 12/1/42	BBB	500,000	451,200

Glendale, Pub. Fac. Corp. Rev. Bonds (Western
Loop 101), Ser. A, 7s, 7/1/28	AA	1,000,000	1,105,710

Maricopa Cnty. & Phoenix, Indl. Dev. Auth. Mtge.
Rev. Bonds (Single Fam.), Ser. A-2, GNMA Coll.,
FNMA Coll., FHLMC Coll., 5.8s, 7/1/40	Aaa	470,000	477,844

Maricopa Cnty., Indl. Dev. Auth. Hlth. Fac. Rev.
Bonds (Catholic Hlth. Care West), Ser. A, 6s, 7/1/39	A2	1,500,000	1,595,925

Maricopa Cnty., Indl. Dev. Auth. Hosp. Fac. Rev.
Bonds (Samaritan Hlth. Svcs.), Ser. A, NATL,
U.S. Govt. Coll., 7s, 12/1/16 (Prerefunded)	A	2,250,000	2,745,651

Maricopa Cnty., Indl. Dev. Auth. Solid Waste
Disp. Mandatory Put Bonds (Waste Mgt., Inc.),
7s, 12/1/10	BBB	200,000	205,692

Maricopa Cnty., Poll. Control Rev. Bonds
(El Paso Elec. Co.), Ser. A, 7 1/4s, 2/1/40	Baa2	1,300,000	1,487,720
(Public Service Co. of NM), Ser. A, 6.3s, 12/1/26	Baa3	1,000,000	1,000,990
(Southern CA Edl. Co.), Ser. A, 5s, 6/1/35	A1	500,000	500,390

Maricopa Cnty., Unified School Dist. G.O. Bonds
(No. 60 Higley School Impt.), Ser. C, 5s, 7/1/27	Aa3	1,000,000	1,055,690

McAllister, Academic Village Rev. Bonds (AZ State
U. Hassayampa), 5 1/4s, 7/1/26	AA–	1,000,000	1,059,320

Mohave Cnty., COP (Mohave Administration Bldg.),
AMBAC, 5 1/4s, 7/1/19	A/P	2,000,000	2,074,080

Navajo Cnty., Poll. Control Corp. Mandatory Put
Bonds, Ser. E, 5 3/4s, 6/1/16	Baa2	800,000	857,232

Phoenix & Pima Cnty., Indl. Dev. Auth. Rev. Bonds
(Single Fam.), Ser. 4, GNMA Coll., FNMA Coll.,
FHLMC Coll., 5.8s, 12/1/39	Aaa	485,000	505,108

Phoenix, G.O. Bonds, Ser. B, 5s, 7/1/27	AAA	1,500,000	1,570,470

Phoenix, Civic Impt. Corp. Arpt. Rev. Bonds (Sr.
Lien), Ser. B, FGIC, NATL, 5 3/4s, 7/1/19	Aa3	1,000,000	1,029,490

Phoenix, Civic Impt. Corp. Dist. Rev. Bonds
(Civic Plaza), Ser. B, FGIC, NATL
zero %, 7/1/43	AA	1,000,000	897,370
zero %, 7/1/32	AA	1,000,000	918,120

Phoenix, Civic Impt. Corp. Waste Wtr. Syst. Rev.
Bonds, 5 1/2s, 7/1/24	AAA	500,000	565,315

Phoenix, Hsg. Mtge. Fin. Corp. Rev. Bonds
(Section 8 Assistances), Ser. A, NATL, FHA
Insd., 6.9s, 1/1/23	A	940,000	941,109

Phoenix, Indl. Dev. Auth. Ed. Rev. Bonds (Career
Success Schools), 7 1/8s, 1/1/45	BBB–	200,000	199,856

Pima Cnty., Indl. Dev. Auth. Rev. Bonds
(Tucson Elec. Pwr. Co.), 5 3/4s, 9/1/29	Baa3	1,200,000	1,215,924
(Horizon Cmnty. Learning Ctr.), 5 1/4s, 6/1/35	BBB	200,000	168,662
(Metro Police Fac.), Ser. A, 5 1/4s, 7/1/31	Aa2	500,000	518,990
(Horizon Cmnty. Learning Ctr.), 5.05s, 6/1/25	BBB	125,000	109,541

Pinal Cnty., COP, 5s, 12/1/26	A	1,000,000	1,005,190


MUNICIPAL BONDS AND NOTES (95.6%)* cont.	Rating**	Principal amount	Value

Arizona cont.
Pinal Cnty., Elec. Syst. Rev. Bonds (Dist. No.
4), 6s, 12/1/38	BBB	$500,000	$507,970

Queen Creek, Special Assmt. Bonds (Impt. Dist.
No. 001), 5s, 1/1/17	A3	500,000	500,395

Rio Nuevo, Multi-Purpose Fac. Dist. Rev. Bonds,
AGO, 6s, 7/15/19	AAA	1,000,000	1,138,150

Salt Verde, Fin. Corp. Gas Rev. Bonds, 5s, 12/1/37	A	750,000	665,775

Scottsdale, Indl. Dev. Auth. Hosp. Rev. Bonds
(Scottsdale Hlth. Care), Ser. A, 5 1/4s, 9/1/30	A3	1,500,000	1,492,470

Snowflake, Excise Tax Rev. Bonds, 5s, 7/1/18	A	960,000	992,006

South Campus Group, LLC Student Hsg. Rev. Bonds
(AZ State U. South Campus), NATL
5 5/8s, 9/1/28	A	1,250,000	1,290,013
5 5/8s, 9/1/23	A	1,065,000	1,111,498

Tempe, Indl. Dev. Auth. Lease Rev. Bonds
(ASU Foundation), AMBAC, 5s, 7/1/28	A/P	2,215,000	2,229,973

Tempe, Indl. Dev. Auth. Sr. Living Rev. Bonds
(Friendship Village), Ser. A, 5 3/8s, 12/1/13	BB–/P	157,000	154,348

Tucson & Pima Cnty., Indl. Dev. Auth. Rev. Bonds
(Single Fam. Mtge.)
Ser. 1A, GNMA Coll., 5 1/2s, 1/1/35	AA+	915,000	927,206
Ser. B, GNMA Coll., FNMA Coll., FHLMC Coll.,
5.35s, 6/1/47	Aaa	700,000	722,708

U. Medical Ctr. Corp. AZ Hosp. Rev. Bonds
6 1/2s, 7/1/39	Baa1	500,000	540,895
6 1/4s, 7/1/29	Baa1	500,000	543,615

U. of AZ Board Regents Syst. Rev. Bonds, Ser. A,
5s, 6/1/35	Aa2	500,000	520,575

Vistancia, Cmnty. Fac. Dist. G.O. Bonds, 4.4s, 7/15/21	A1	1,100,000	1,024,595

Yavapai Cnty., Indl. Dev. Auth. Rev. Bonds
(Yavapai Regl. Med. Ctr.), Ser. A, 6s, 8/1/33	Baa2	1,000,000	1,011,930

Yavapai Cnty., Indl. Dev. Auth. Solid Waste Disp.
Rev. Bonds (Waste Mgmt., Inc.), Ser. A-1,
4.9s, 3/1/28	BBB	500,000	477,695

			56,783,814
Guam (1.6%)
Territory of GU, Econ. Dev. & Comm. Auth. Rev.
Bonds (Tobacco Settlement), 5 5/8s, 6/1/47	BBB+/F	965,000	844,867

Territory of GU, Govt. Ltd. Oblig. Rev. Bonds
(Section 30), Ser. A, 5 3/4s, 12/1/34	BBB–	250,000	260,010

			1,104,877
Puerto Rico (9.7%)
Children’s Trust Fund Tobacco Settlement Rev.
Bonds, 5 1/2s, 5/15/39	BBB	100,000	87,026

Cmnwlth. of PR, G.O. Bonds, Ser. A, 5 1/4s, 7/1/22	A3	500,000	519,460

Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds,
Ser. A
6s, 7/1/44	Baa1	1,250,000	1,312,688
6s, 7/1/38	Baa1	675,000	713,860


MUNICIPAL BONDS AND NOTES (95.6%)* cont.	Rating**	Principal amount	Value

Puerto Rico cont.
Cmnwlth. of PR, Indl. Tourist Edl. Med. & Env.
Control Fac. Rev. Bonds (Cogen. Fac.-AES),
6 5/8s, 6/1/26	Baa3	$1,000,000	$1,009,260

Cmnwlth. of PR, Pub. Bldg. Auth. Rev. Bonds
(Govt. Fac.)
Ser. P, Cmnwlth. of PR Gtd., 6s, 7/1/20	A3	1,500,000	1,675,575
Ser. I, Cmnwlth. of PR Gtd., 5 1/4s, 7/1/29	A3	225,000	228,119

Cmnwlth. of PR, Sales Tax Fin. Corp. Rev. Bonds,
Ser. A
NATL, zero %, 8/1/43	Aa3	1,500,000	196,770
zero %, 8/1/31	A+	3,250,000	903,858

			6,646,616
Virgin Islands (1.5%)
VI Pub. Fin. Auth. Rev. Bonds
Ser. A, 6s, 10/1/39	Baa3	150,000	158,427
Ser. A-1, 5s, 10/1/39	Baa2	175,000	171,556
(Hovensa Refinery Fac.), 4.7s, 7/1/22	Baa3	400,000	368,028

VI Tobacco Settlement Fin. Corp. Rev. Bonds, 5s,
5/15/31	Baa3	345,000	296,797

			994,808


TOTAL INVESTMENTS

Total investments (cost $62,377,012)			$65,530,115

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from June 1, 2009 through May 31, 2010 (the reporting period).

* Percentages indicated are based on net assets of $68,510,591.

** The Moody’s, Standard & Poor’s or Fitch ratings indicated are believed to be the most recent ratings available at the close of the reporting period 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 the close of the reporting period. Securities rated by Putnam are indicated by “/P.” Securities rated by Fitch are indicated by “/F.” The rating of an insured security represents what is believed to be the most recent rating of the insurer’s claims-paying ability available at the close of the reporting period and does not reflect any subsequent changes. Ratings are not covered by the Report of Independent Registered Public Accounting Firm. Security ratings are defined in the Statement of Additional Information.

The rates shown on Mandatory Put Bonds and VRDN are the current interest rates at the close of the reporting period.

The dates shown on Mandatory Put Bonds are the next mandatory put dates.

The dates shown on debt obligations other than Mandatory Put Bonds are the original maturity dates.

The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


Utilities	19.6%
Local government	15.0
Education	14.3
Health care	14.0

The fund had the following insurance concentration greater than 10% at the close of the reporting period (as a percentage of net assets):


NATL	19.9%

Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures (ASC 820) establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:

Level 1 — Valuations based on quoted prices for identical securities in active markets.

Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:


		Valuation inputs

Investments in securities:	Level 1	Level 2	Level 3

Municipal bonds and notes	$—	$65,530,115	$—

Totals by level	$—	$65,530,115	$—

The accompanying notes are an integral part of these financial statements.


Statement of assets and liabilities 5/31/10


ASSETS

Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $62,377,012)	$65,530,115

Cash	1,912,640

Interest and other receivables	1,331,872

Receivable for shares of the fund sold	126,420

Receivable for investments sold	5,000

Total assets	68,906,047


LIABILITIES

Distributions payable to shareholders	90,325

Payable for shares of the fund repurchased	127,364

Payable for compensation of Manager (Note 2)	25,813

Payable for investor servicing fees (Note 2)	3,014

Payable for custodian fees (Note 2)	1,804

Payable for Trustee compensation and expenses (Note 2)	56,958

Payable for administrative services (Note 2)	223

Payable for distribution fees (Note 2)	25,631

Payable for auditing	43,500

Other accrued expenses	20,824

Total liabilities	395,456

Net assets	$68,510,591

REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$66,673,291

Distributions in excess of net investment income (Note 1)	(82,474)

Accumulated net realized loss on investments (Note 1)	(1,233,329)

Net unrealized appreciation of investments	3,153,103

Total — Representing net assets applicable to capital shares outstanding	$68,510,591

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share ($62,236,338 divided by 6,868,826 shares)	$9.06

Offering price per class A share (100/96.00 of $9.06)*	$9.44

Net asset value and offering price per class B share ($2,151,733 divided by 237,761 shares)**	$9.05

Net asset value and offering price per class C share ($1,656,440 divided by 182,734 shares)**	$9.06

Net asset value and redemption price per class M share ($1,198,893 divided by 132,094 shares)	$9.08

Offering price per class M share (100/96.75 of $9.08)***	$9.39

Net asset value, offering price and redemption price per class Y share
($1,267,187 divided by 139,813 shares)	$9.06

* On single retail sales of less than $100,000. On sales of $100,000 or more 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 the offering price is reduced.

The accompanying notes are an integral part of these financial statements.


Statement of changes in net assets


DECREASE IN NET ASSETS	Year ended 5/31/10	Year ended 5/31/09

Operations:
Net investment income	$2,936,275	$3,271,780

Net realized loss on investments	(219,847)	(630,498)

Net unrealized appreciation (depreciation) of investments	3,243,072	(1,993,090)

Net increase in net assets resulting from operations	5,959,500	648,192

Distributions to shareholders (Note 1):
From ordinary income
Taxable net investment income

Class A	(9,848)	(8,496)

Class B	(452)	(557)

Class C	(223)	(129)

Class M	(184)	(146)

Class Y	(200)	(22)

From tax-exempt net investment income
Class A	(2,693,238)	(3,038,790)

Class B	(107,518)	(171,927)

Class C	(49,515)	(36,923)

Class M	(46,884)	(47,060)

Class Y	(51,048)	(7,409)

From net realized long-term gain on investments
Class A	—	(146,751)

Class B	—	(9,642)

Class C	—	(2,226)

Class M	—	(2,516)

Class Y	—	(378)

Redemption fees (Note 1)	1	10

Decrease from capital share transactions (Note 4)	(5,872,875)	(8,578,358)

Total decrease in net assets	(2,872,484)	(11,403,128)

NET ASSETS

Beginning of year	71,383,075	82,786,203

End of year (including distributions in excess of net investment
income of $82,474 and $51,183, respectively)	$68,510,591	$71,383,075

The accompanying notes are an integral part of these financial statements.

Financial highlights (For a common share outstanding throughout the period)


INVESTMENT OPERATIONS:					LESS DISTRIBUTIONS:						RATIOS AND SUPPLEMENTAL DATA:

												Ratio	Ratio of net
			Net realized			From						of expenses	investment
	Net asset value,		and unrealized	Total from	From net	net realized			Net asset	Total return	Net assets,	to average	income (loss)
	beginning	Net investment	gain (loss) on	investment	investment	gain on	Total	Redemption	value, end	at net asset	end of period	net assets	to average	Portfolio
Period ended	of period	income (loss)	investments	operations	income	investments	distributions	fees	of period	value (%) ^a	(in thousands)	(%) ^b,c	net assets (%) ^b	turnover (%)

Class A
May 31, 2010	$8.67	.38	.39	.77	(.38)	—	(.38)	— ^d	$9.06	9.08	$62,236	.84	4.27	18.35
May 31, 2009	8.94	.38	(.24)	.14	(.39)	(.02)	(.41)	— ^d	8.67	1.76	65,117	.69	4.49	25.74
May 31, 2008	9.09	.37	(.09)	.28	(.38)	(.05)	(.43)	— ^d	8.94	3.17	75,318	.78	4.15	42.04
May 31, 2007	9.11	.37	(.02)	.35	(.37)	— ^d	(.37)	—	9.09	3.94	74,898	.81	4.07	21.24
May 31, 2006	9.39	.36	(.23)	.13	(.36)	(.05)	(.41)	—	9.11	1.33	79,552	.82	3.86	14.98

Class B
May 31, 2010	$8.67	.32	.38	.70	(.32)	—	(.32)	— ^d	$9.05	8.27	$2,152	1.48	3.62	18.35
May 31, 2009	8.93	.33	(.24)	.09	(.33)	(.02)	(.35)	— ^d	8.67	1.23	3,937	1.33	3.84	25.74
May 31, 2008	9.08	.31	(.09)	.22	(.32)	(.05)	(.37)	— ^d	8.93	2.51	5,224	1.42	3.50	42.04
May 31, 2007	9.10	.31	(.02)	.29	(.31)	— ^d	(.31)	—	9.08	3.28	7,867	1.45	3.42	21.24
May 31, 2006	9.38	.30	(.23)	.07	(.30)	(.05)	(.35)	—	9.10	.68	10,869	1.47	3.20	14.98

Class C
May 31, 2010	$8.68	.31	.38	.69	(.31)	—	(.31)	— ^d	$9.06	8.10	$1,656	1.63	3.49	18.35
May 31, 2009	8.94	.31	(.23)	.08	(.32)	(.02)	(.34)	— ^d	8.68	1.08	1,085	1.48	3.72	25.74
May 31, 2008	9.09	.30	(.10)	.20	(.30)	(.05)	(.35)	— ^d	8.94	2.33	1,005	1.57	3.40	42.04
May 31, 2007 ^†	9.21	.20	(.12)	.08	(.20)	— ^d	(.20)	—	9.09	.92 *	50	1.06 *	2.17 *	21.24

Class M
May 31, 2010	$8.69	.35	.40	.75	(.36)	—	(.36)	— ^d	$9.08	8.77	$1,199	1.13	3.98	18.35
May 31, 2009	8.95	.36	(.24)	.12	(.36)	(.02)	(.38)	— ^d	8.69	1.58	1,151	.98	4.21	25.74
May 31, 2008	9.11	.35	(.11)	.24	(.35)	(.05)	(.40)	— ^d	8.95	2.76	1,148	1.07	3.85	42.04
May 31, 2007	9.12	.35	(.01)	.34	(.35)	— ^d	(.35)	—	9.11	3.76	1,313	1.10	3.78	21.24
May 31, 2006	9.40	.33	(.23)	.10	(.33)	(.05)	(.38)	—	9.12	1.03	1,300	1.12	3.56	14.98

Class Y
May 31, 2010	$8.68	.40	.38	.78	(.40)	—	(.40)	— ^d	$9.06	9.20	$1,267	.63	4.51	18.35
May 31, 2009	8.94	.40	(.24)	.16	(.40)	(.02)	(.42)	— ^d	8.68	2.10	93	.48	4.78	25.74
May 31, 2008 ^††	8.99	.16	(.04)	.12	(.17)	—	(.17)	—	8.94	1.32 *	91	.24 *	1.84 *	42.04

See notes to financial highlights at the end of this section.

The accompanying notes are an integral part of these financial statements.


28	29

^† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

^†^† For the period January 2, 2008 (commencement of operations) to May 31, 2008.

^a Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

^b Reflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts (Note 2):

Notes to financial statements 5/31/10

Note 1: Significant accounting policies

Putnam Arizona Tax Exempt Income Fund (the fund), is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The investment objective of the fund is to seek as high a level of current income exempt from federal income tax and Arizona personal income tax as Putnam Investment Management, LLC (Putnam Management), the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC, believes is consistent with preservation of capital by investing in a portfolio primarily consisting of investment-grade tax-exempt securities issued in the state of Arizona with intermediate- to long-term maturities. The fund may be affected by economic and political developments in the state of Arizona.

The fund offers class A, class B, class C, class M, and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 4.00% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. The expenses for class A, class B, class C and class M shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C and class M shares, but do not bear a distribution fee. Class Y shares are generally only available to corporate and institutional clients and clients in other approved programs.

A 1.00% redemption fee may apply on any shares that are redeemed (either by selling or exchanging into another fund) within 7 days of purchase. The redemption fee is accounted for as an addition to paid-in-capital.

Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.

In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.

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 period from June 1, 2009 through May 31, 2010 (the reporting period). Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.

A) Security valuation Tax-exempt bonds and notes are generally valued 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. These securities will generally be categorized as Level 2.

Certain investments, including certain restricted and illiquid securities and derivatives are also valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

B) Security transactions and related investment income Security transactions are recorded on the trade date (the 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 of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code. The fund is subject to the provisions of Accounting Standards Codification ASC 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have any unrecognized tax benefits in the accompanying financial statements. 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. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

At May 31, 2010, the fund had a capital loss carryover of $962,414 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:


Loss Carryover		Expiration

$359,383		May 31, 2017

603,031		May 31, 2018

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer to its fiscal year ending May 31, 2011 $86,117 of losses recognized during the period November 1, 2009 to May 31, 2010.

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. These differences include temporary and/or permanent differences of post-October loss deferrals, dividends payable and straddle loss deferrals. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the reporting period ended, the fund reclassified $8,456 to increase distributions in excess of net investment income and $8,456 to decrease accumulated net realized losses.

The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:


Unrealized appreciation	$3,544,228
Unrealized depreciation	(391,125)

Net unrealized appreciation	3,153,103
Undistributed tax-exempt income	6,672
Undistributed ordinary income	1,179
Capital loss carryforward	(962,414)
Post-October loss	(86,117)
Cost for federal income tax purposes	$62,377,012

Note 2: Management fee, administrative services and other transactions

Effective January 1, 2010, the fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows: 0.59% of the first $5 billion, 0.54% of the next $5 billion, 0.49% of the next $10 billion, 0.44% of the next $10 billion, 0.39% of the next $50 billion, 0.37% of the next $50 billion, 0.36% of the next $100 billion, and 0.355% thereafter.

Prior to January 1, 2010, the fund paid Putnam Management for management and investment advisory services quarterly based on the average net assets of the fund. Such fee was based on the lessor of (i) an annual rate of 0.50% of the average net assets of the fund or (ii) the following annual rates expressed as a percentage of the fund’s average net assets: 0.60% of the first $500 million, 0.50% of the next $500 million, 0.45% of the next $500 million, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355% of the next $5 billion, 0.34% of the next $5 billion and 0.33% thereafter.

Putnam Management had agreed to waive fees and reimburse expenses of the fund through July 31, 2009 to the extent necessary to ensure that the fund’s expenses did not exceed the simple average of the expenses of all front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund. The expense reimbursement was based on a comparison of the fund’s expenses with the average annualized operating expenses of the funds in its Lipper peer group for each calendar quarter during the fund’s last fiscal year, excluding 12b-1 fees and without giving effect to any expense offset and brokerage/service arrangements that may reduce fund expenses.

Putnam Management had further agreed to waive fees and reimburse expenses of the fund for the period from July 1, 2008 through July 31, 2009 to the extent necessary to ensure that the fund’s expenses did not exceed the simple average of the expenses of a custom group of competitive funds selected by Lipper Inc. based on the size of the fund. The expense reimbursement was based on a comparison of the fund’s total expenses with the average operating expenses of the funds in this Lipper custom peer group for their respective 2007 fiscal years, excluding 12b-1 fees and after adjustment for certain expense offset and brokerage/service arrangements that reduced expenses of the fund.

During the reporting period, the fund’s expenses were reduced by $32,609 as a result of the lower of the limits specified above.

Effective August 1, 2009 through June 30, 2011, Putnam Management has also contractually agreed to reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis (or from August 1, 2009 through the fund’s next fiscal year end, as applicable), to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period (or since August 1, 2009, as applicable). During the reporting period, the fund’s expenses were not reduced as a result of this limit.

Putnam Management has also contractually agreed, from August 1, 2009 through July 31, 2010, to limit the management fee for the fund to an annual rate of 0.452% of the fund’s average net assets. During the reporting period, the fund’s expenses were reduced by $14,071 as a result of this limit.

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 State Street Bank and Trust Company (State Street). Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.

Putnam Investor Services, Inc., an affiliate of Putnam Management, provided investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing, subject to certain limitations, based on the fund’s retail asset level, the number of shareholder accounts in the fund and the level of defined contribution plan assets in the fund. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations.

The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $2,574 under the expense offset arrangements.

Each independent Trustee of the fund receives an annual Trustee fee, of which $48, 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 and industry seminars and for certain compliance-related matters. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

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 and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.

The fund has adopted distribution plans (the Plans) with respect to its class A, class B, 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 Limited Partnership, a wholly-owned subsidiary of Putnam Investments, 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 Limited Partnership 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 rate of 0.85%, 1.00% and 0.50% of the average net assets for class B, class C and class M shares, respectively. For class A shares, the annual payment rate will equal the weighted average of (i) 0.20% on the net assets of the fund attributable to class A shares purchased and paid for prior to April 1, 2005 and (ii) 0.25% on all other net assets of the fund attributable to class A shares.

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $8,453 and no monies from the sale of class A and class M shares, respectively, and received $1,094 and $73 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. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A redemptions.

Note 3: Purchases and sales of securities

During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $12,266,592 and $18,049,181, respectively. There were no purchases or proceeds from sales of U.S. government securities.

Note 4: Capital shares

At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


	Year ended 5/31/10		Year ended 5/31/09

Class A	Shares	Amount	Shares	Amount

Shares sold	538,171	$4,796,675	619,246	$5,264,408

Shares issued in connection with
reinvestment of distributions	199,580	1,774,013	242,908	2,042,824

	737,751	6,570,688	862,154	7,307,232

Shares repurchased	(1,375,530)	(12,147,361)	(1,784,850)	(14,933,587)

Net decrease	(637,779)	$(5,576,673)	(922,696)	$(7,626,355)


	Year ended 5/31/10		Year ended 5/31/09

Class B	Shares	Amount	Shares	Amount

Shares sold	17,972	$159,923	15,725	$131,732

Shares issued in connection with
reinvestment of distributions	6,788	60,211	10,407	87,481

	24,760	220,134	26,132	219,213

Shares repurchased	(241,264)	(2,127,066)	(157,184)	(1,313,132)

Net decrease	(216,504)	$(1,906,932)	(131,052)	$(1,093,919)


	Year ended 5/31/10		Year ended 5/31/09

Class C	Shares	Amount	Shares	Amount

Shares sold	78,059	$687,169	35,246	$302,492

Shares issued in connection with
reinvestment of distributions	3,078	27,414	2,427	20,381

	81,137	714,583	37,673	322,873

Shares repurchased	(23,468)	(211,880)	(25,046)	(217,763)

Net increase	57,669	$502,703	12,627	$105,110


	Year ended 5/31/10		Year ended 5/31/09

Class M	Shares	Amount	Shares	Amount

Shares sold	—	$—	5,576	$46,109

Shares issued in connection with
reinvestment of distributions	3,590	31,976	4,105	34,534

	3,590	31,976	9,681	80,643

Shares repurchased	(4,001)	(35,770)	(5,457)	(46,849)

Net increase (decrease)	(411)	$(3,794)	4,224	$33,794


	Year ended 5/31/10		Year ended 5/31/09

Class Y	Shares	Amount	Shares	Amount

Shares sold	160,796	$1,396,437	47,310	$393,644

Shares issued in connection with
reinvestment of distributions	1,170	10,441	932	7,809

	161,966	1,406,878	48,242	401,453

Shares repurchased	(32,894)	(295,057)	(47,656)	(398,441)

Net increase	129,072	$1,111,821	586	$3,012

At the close of the reporting period, Putnam Investments, LLC owned 1,246 class Y shares of the fund (0.89% of class Y shares outstanding), valued at $11,289.

Note 5: Regulatory matters and litigation

In late 2003 and 2004, Putnam Management settled charges brought by the Securities and Exchange Commission (the SEC) and the Massachusetts Securities Division in connection with excessive short-term trading in Putnam funds. Distribution of payments from Putnam Management to certain open-end Putnam funds and their shareholders is expected to be completed in the next several months. These allegations and related matters have served as the general basis for certain lawsuits, including purported class action lawsuits against Putnam Management and, in a limited number of cases, some Putnam funds. Putnam Management believes that these lawsuits will have no material adverse effect on the funds or on Putnam Management’s ability to provide investment management services. In addition, Putnam Management has agreed to bear any costs incurred by the Putnam funds as a result of these matters.

Note 6: Market and credit risk

In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default.

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam Massachusetts Tax Exempt Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam Massachusetts Tax Exempt Income Fund (the “fund”) at May 31, 2010, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at May 31, 2010 by correspondence with the custodian provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
July 12, 2010

The fund’s portfolio 5/31/10


Key to abbreviations
AGM Assured Guaranty Municipal Corporation	G.O. Bonds General Obligation Bonds
AGO Assured Guaranty, Ltd.	GNMA Coll. Government National Mortgage
AMBAC AMBAC Indemnity Corporation	Association Collateralized
Cmnwlth. of PR Gtd. Commonwealth of	IFB Inverse Floating Rate Bonds
Puerto Rico Guaranteed	NATL National Public Finance Guarantee Corp.
FGIC Financial Guaranty Insurance Company	SGI Syncora Guarantee, Inc.
FRB Floating Rate Bonds	VRDN Variable Rate Demand Notes


MUNICIPAL BONDS AND NOTES (98.3%)*	Rating**	Principal amount	Value

Guam (0.9%)
Territory of GU, Econ. Dev. & Comm. Auth. Rev.
Bonds (Tobacco Settlement), 5 1/4s, 6/1/32	BBB+/F	$1,940,000	$1,779,058

Territory of Guam Rev. Bonds, Ser. A,
5 3/8s, 12/1/24	BBB–	1,000,000	1,056,710

			2,835,768
Massachusetts (88.3%)
Boston, Indl. Dev. Fin. Auth. Rev. Bonds
(Springhouse, Inc.), 6s, 7/1/28	BB–/P	2,150,000	1,970,346

Boston, Indl. Dev. Fin. Auth. Swr. Fac. Rev. Bonds
(Harbor Elec. Energy Co.), 7 3/8s, 5/15/15	Aa3	3,225,000	3,229,870

Boston, Wtr. & Swr. Comm. Rev. Bonds, Ser. A,
5 3/4s, 11/1/13	Aa1	5,215,000	5,648,054

Framingham, Hsg. Auth. Rev. Bonds (Beaver Terrace),
Ser. A, GNMA Coll., 6.35s, 2/20/32	AA+	2,100,000	2,210,586

Lowell, G.O. Bonds, Ser. A, SGI, 5s, 9/15/22	Aa2	1,750,000	1,900,938

MA Bay Trans. Auth. Sales Tax Rev. Bonds
Ser. C, 5 1/2s, 7/1/16	AAA	2,975,000	3,523,174
Ser. A, 5s, 7/1/31	AAA	2,500,000	2,826,825

MA Dev. Fin. Agcy. Sr. Living Fac. Rev. Bonds
(Groves-Lincoln), Ser. A, 7 7/8s, 6/1/44	BB–/P	1,650,000	1,719,482

MA Edl. Fin. Auth. Rev. Bonds, Ser. B, 5.7s, 1/1/31	AA	2,500,000	2,527,450

MA State G.O. Bonds
Ser. C, AMBAC, 5s, 8/1/37	Aa1	2,000,000	2,111,880
(Construction Loan), Ser. A, 5s, 8/1/27	Aa1	2,000,000	2,183,080

MA State Rev. Bonds (Single Fam.), Ser. 134,
5.45s, 12/1/28	Aa2	600,000	615,228

MA State College Bldg. Auth. Rev. Bonds
Ser. B, NATL, 7s, 5/1/16	Aa1	1,340,000	1,676,099
Ser. B, SGI, 5 1/2s, 5/1/28	Aa2	4,000,000	4,727,160
Ser. A, AGO, 5s, 5/1/28	AAA	2,270,000	2,448,104

MA State Dept. Trans. Rev. Bonds (Metro Hwy. Syst.),
Ser. B
5s, 1/1/37	A3	2,250,000	2,285,865
5s, 1/1/32	A3	1,840,000	1,876,414

MA State Dev. Fin. Agcy. Rev. Bonds
(Sabis Intl.), Ser. A, 8s, 4/15/39	BBB	575,000	642,011
(Lasell College), 6 3/4s, 7/1/31	BB+/P	60,000	59,939


MUNICIPAL BONDS AND NOTES (98.3%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.
MA State Dev. Fin. Agcy. Rev. Bonds
(Lasell College), 6 3/4s, 7/1/31 (Prerefunded)	AAA/P	$1,305,000	$1,414,176
(MA Biomedical Research), Ser. C, 6 1/8s, 8/1/12	Aa3	1,950,000	1,982,585
(Linden Ponds, Inc. Fac.), Ser. A, 5 3/4s, 11/15/42	BB/P	1,900,000	1,327,986
(WGBH Edl. Foundation), Ser. A, AMBAC,
5 3/4s, 1/1/42	A–/P	5,000,000	5,487,350
(Linden Ponds, Inc.), Ser. A, 5 3/4s, 11/15/35	BB/P	600,000	433,026
(Boston Biomedical Research), 5 3/4s, 2/1/29	Baa3	1,750,000	1,619,783
(Hampshire College), 5.7s, 10/1/34	Baa2	1,315,000	1,321,378
(Hampshire College), 5 5/8s, 10/1/24	Baa2	1,000,000	1,031,430
(New England Conservatory of Music),
5 1/4s, 7/1/38	Baa1	3,000,000	2,918,310
(Simmons College), Ser. H, SGI, 5 1/4s, 10/1/33	Baa1	1,000,000	991,950
(Wheelock College), Ser. C, 5 1/4s, 10/1/29	BBB	1,100,000	1,099,912
(Carleton-Willard Village), 5 1/4s, 12/1/25	A–	700,000	705,726
(Middlesex School), 5 1/8s, 9/1/23	A1	1,000,000	1,032,930
(Boston College), Ser. P, 5s, 7/1/38	Aa3	2,000,000	2,080,880
(MA College Pharmacy Allied), Ser. E, AGO,
5s, 7/1/31	AAA	2,000,000	2,052,660
(Boston U.), Ser. V-1, 5s, 10/1/29	A2	2,000,000	2,097,120
(Boston College), Ser. Q-1, 5s, 7/1/29	Aa3	1,050,000	1,130,063
(Mount Holyoke College), 5s, 7/1/28	Aa3	3,000,000	3,228,840
(Holy Cross College), Ser. B, 5s, 9/1/25	Aa3	1,500,000	1,637,385
(First Mtge. — Orchard Cove), 5s, 10/1/19	BB+/P	550,000	499,730
(First Mtge. — Orchard Cove), 5s, 10/1/18	BB+/P	515,000	476,488
(WGBH Edl. Foundation), Ser. B, AGO,
zero %, 1/1/29	AAA	2,000,000	821,080
(WGBH Edl. Foundation), Ser. B, AGO,
zero %, 1/1/28	AAA	2,000,000	871,800

MA State Dev. Fin. Agcy. VRDN (Boston U.),
Ser. U-6A, 0.26s, 10/1/42	VMIG1	200,000	200,000

MA State Dev. Fin. Agcy. Higher Ed. Rev. Bonds
(Emerson College), Ser. A, 5s, 1/1/19	A–	1,200,000	1,265,220

MA State Dev. Fin. Agcy. Solid Waste Disp. FRB
(Dominion Energy Brayton), 5s, 2/1/36	A–	1,000,000	921,300

MA State Dev. Fin. Agcy. Solid Waste Disp.
Mandatory Put Bonds (Dominion Energy Brayton),
Ser. 1, 5 3/4s, 5/1/19	A–	950,000	1,015,474

MA State Edl. Fin. Auth. Rev. Bonds, Ser. E, AMBAC,
5s, 1/1/13	AA	3,625,000	3,629,858

MA State Hlth. & Edl. Fac. Auth. IFB, NATL,
9.984s, 7/1/18	A	9,000,000	9,004,230

MA State Hlth. & Edl. Fac. Auth. Rev. Bonds
(Quincy Med. Ctr.), Ser. A, 6 1/2s, 1/15/38	BB–/P	1,000,000	887,170
(UMass Memorial), Ser. C, 6 1/2s, 7/1/21	Baa1	3,125,000	3,175,406
(Berkshire Hlth. Syst.), Ser. E, 6 1/4s, 10/1/31	BBB+	1,300,000	1,322,451
(Harvard U.), Ser. N, 6 1/4s, 4/1/20	Aaa	5,000,000	6,423,200
(Hlth. Care Syst.-Covenant Hlth.), 6s, 7/1/31	A/F	2,370,000	2,417,590
(Partners Hlth. Care Syst.), Ser. C, 6s, 7/1/15	Aa2	2,100,000	2,199,456
(Suffolk U.), Ser. A, 5 3/4s, 7/1/39	Baa2	3,000,000	3,050,730
(Baystate Med. Ctr.), Ser. I, 5 3/4s, 7/1/36	A+	2,000,000	2,130,820


MUNICIPAL BONDS AND NOTES (98.3%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.
MA State Hlth. & Edl. Fac. Auth. Rev. Bonds
(Partners Hlth. Care Syst.), Ser. C, 5 3/4s, 7/1/32	Aa2	$150,000	$153,105
(Baystate Med. Ctr.), Ser. F, 5.7s, 7/1/27	A+	1,000,000	1,019,340
(Springfield College), 5 5/8s, 10/15/40	Baa1	2,000,000	2,022,340
(Caritas Christian Oblig. Group), Ser. A,
5 5/8s, 7/1/20	Baa2	1,995,000	1,997,873
(Harvard U.), Ser. A, 5 1/2s, 11/15/36	Aaa	2,185,000	2,479,997
(Cape Cod Hlth. Care), Ser. B, 5.45s, 11/15/23	BBB	2,600,000	2,518,074
(Milton Hosp.), Ser. D, 5 3/8s, 7/1/35	BB–	2,065,000	1,406,265
(Jordan Hosp.), Ser. D, 5 3/8s, 10/1/28	BB–	3,000,000	2,572,410
(Care Group), Ser. B-1, NATL, 5 3/8s, 2/1/27	A	1,030,000	1,045,893
(Care Group), Ser. B-2, NATL, 5 3/8s, 2/1/27	A	1,000,000	1,015,430
(Boston College), Ser. K, 5 3/8s, 6/1/14	Aa3	4,250,000	4,794,553
(Lesley U.), Ser. A, AGO, 5 1/4s, 7/1/39	AAA	1,000,000	1,057,640
(Lahey Clinic Med. Ctr.), Ser. D, 5 1/4s, 8/15/28	A+	3,000,000	3,042,840
(Dana-Farber Cancer Inst.), Ser. K, 5 1/4s, 12/1/27	A1	2,500,000	2,700,750
(MA Inst. of Tech.), Ser. I-1, 5.2s, 1/1/28	Aaa	10,000,000	12,070,400
(Care Group), Ser. E-1, 5 1/8s, 7/1/38	A3	1,000,000	956,260
(Fisher College), Ser. A, 5 1/8s, 4/1/37	BBB–	755,000	614,948
(Wheaton Coll.), Ser. F, 5s, 1/1/41	A2	3,000,000	2,990,550
(Partners Hlth. Care Syst.), Ser. J-1, 5s, 7/1/39	Aa2	1,500,000	1,527,330
(Southcoast Hlth. Oblig.), Ser. D, 5s, 7/1/39	A2	1,500,000	1,472,865
(Harvard U.), Ser. B, 5s, 10/1/38	Aaa	500,000	533,095
(MA Inst. of Tech.), Ser. A, 5s, 7/1/38	Aaa	2,250,000	2,393,145
(Berklee College of Music), Ser. A, 5s, 10/1/37	A+	1,750,000	1,771,298
(Milford Regl. Med.), Ser. E, 5s, 7/15/37	Baa3	850,000	711,977
(Sterling & Francine Clark), Ser. A, 5s, 7/1/36	Aa2	1,000,000	1,046,310
(Harvard U.), 5s, 7/15/35	Aaa	2,750,000	2,883,760
(Milford Regl. Med.), Ser. E, 5s, 7/15/32	Baa3	1,175,000	1,002,663
(Care Group), Ser. E-1, 5s, 7/1/28	A3	1,730,000	1,694,345
(Northeastern U.), Ser. R, 5s, 10/1/26	A2	1,165,000	1,223,168
(Worcester City Campus Corp.), Ser. E, FGIC,
NATL, 5s, 10/1/26	A+	2,000,000	2,082,340
(Milford Regl. Med.), Ser. E, 5s, 7/15/22	Baa3	1,800,000	1,710,360
(Fisher College), Ser. A, 5s, 4/1/22	BBB–	1,110,000	1,014,207

MA State Hlth. & Edl. Fac. Auth. VRDN
(Museum of Fine Arts), Ser. A2, 0.28s, 12/1/37	VMIG1	2,500,000	2,500,000
(Harvard U.), Ser. R, 0.23s, 11/1/49	VMIG1	3,800,000	3,800,000

MA State Hsg. Fin. Agcy. FRB (Single Fam. Hsg.),
Ser. 126, 4.7s, 6/1/38	Aa2	2,000,000	1,839,580

MA State Hsg. Fin. Agcy. Rev. Bonds
(Single Fam.), Ser. 139, 5 1/8s, 12/1/28	Aa2	1,000,000	1,023,360
(Single Fam. Mtge.), Ser. 86, 5.1s, 12/1/21	Aa2	135,000	135,221
Ser. D, 5.05s, 6/1/40	Aa3	1,750,000	1,786,785

MA State Indl. Fin. Agcy. Rev. Bonds
(1st Mtge. Stone Institute & Newton Home),
7.9s, 1/1/24	B–/P	1,500,000	1,476,615
(American Hingham, Wtr. Treatment),
6 3/4s, 12/1/25	BBB+/P	4,520,000	4,447,635
(1st Mtge. Berkshire Retirement), Ser. A,
6 5/8s, 7/1/16	BBB	3,340,000	3,350,888


MUNICIPAL BONDS AND NOTES (98.3%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.
MA State Port Auth. Rev. Bonds
Ser. A, NATL, 5s, 7/1/33	Aa3	$2,400,000	$2,461,776
Ser. C, AGM, 5s, 7/1/27	AAA	5,000,000	5,128,600
Ser. A, AMBAC, 5s, 7/1/26	Aa3	3,000,000	3,222,060

MA State Port Auth. Special Fac. Rev. Bonds
(BOSFUEL), FGIC, NATL, 5s, 7/1/27	A	2,500,000	2,502,850

MA State School Bldg. Auth. Dedicated Sales Tax
Rev. Bonds, Ser. A, AGM
5s, 8/15/26	AAA	6,000,000	6,504,360
5s, 8/15/23	AAA	5,000,000	5,483,000
5s, 8/15/20	AAA	1,500,000	1,660,890
5s, 8/15/17	AAA	2,000,000	2,261,080

MA State Wtr. Poll. Abatement Trust Rev. Bonds
Ser. 5, 5 3/8s, 8/1/27	Aaa	4,490,000	4,517,973
Ser. 14, 5s, 8/1/32	Aaa	4,000,000	4,368,240
Ser. 13, 5s, 8/1/26	Aaa	1,000,000	1,098,230

MA State Wtr. Resource Auth. Rev. Bonds
Ser. A, 6 1/2s, 7/15/19 (Prerefunded)	Aa1	5,500,000	6,697,955
Ser. A, NATL, 5s, 8/1/29	Aa1	4,000,000	4,212,840
Ser. A, NATL, 5s, 8/1/29	Aa1	3,225,000	3,478,066
Ser. A, NATL, 5s, 8/1/27	Aa1	1,500,000	1,628,490
Ser. B, AMBAC, 5s, 8/1/26	Aa1	2,000,000	2,190,460

Milford, G.O. Bonds, AGM, 5 1/8s, 12/15/24	Aa2	2,475,000	2,734,108

Norwell, G.O. Bonds, AMBAC, 5s, 2/15/25	AAA	1,000,000	1,051,500

U. MA Bldg. Auth. Rev. Bonds, Ser. 04-1, AMBAC
5 3/8s, 11/1/16	A+	210,000	235,437
5 3/8s, 11/1/16 (Prerefunded)	A+	790,000	922,388

			266,333,916
Puerto Rico (8.9%)
Children’s Trust Fund Tobacco Settlement
Rev. Bonds
5 1/2s, 5/15/39	BBB	1,800,000	1,566,468
5 3/8s, 5/15/33	BBB	2,035,000	2,044,829

Cmnwlth. of PR, G.O. Bonds, Ser. A, 5 1/4s, 7/1/26	A3	1,620,000	1,658,831

Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds,
Ser. A
6s, 7/1/44	Baa1	4,250,000	4,463,138
6s, 7/1/38	Baa1	1,250,000	1,321,963

Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds
Ser. TT, 5s, 7/1/27	A3	1,350,000	1,365,188
Ser. SS, NATL, 5s, 7/1/15	A	1,610,000	1,776,538

Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
Ser. L, AMBAC, 5 1/4s, 7/1/38	A3	3,250,000	3,216,883
Ser. K, 5s, 7/1/30	A3	1,500,000	1,496,175
Ser. I, FGIC, 5s, 7/1/25	A3	3,000,000	3,034,042

Cmnwlth. of PR, Pub. Bldg. Auth. Mandatory Put
Bonds (Govt. Fac.), Ser. M-2, 5 3/4s, 7/1/17	A3	1,500,000	1,630,500


MUNICIPAL BONDS AND NOTES (98.3%)* cont.	Rating**	Principal amount	Value

Puerto Rico cont.
Cmnwlth. of PR, Pub. Bldg. Auth. Rev. Bonds (Govt.
Fac.), Ser. I, Cmnwlth. of PR Gtd., 5 1/4s, 7/1/29	A3	$685,000	$694,494

Cmnwlth. of PR, Sales Tax Fin. Corp. Rev. Bonds,
Ser. A, 6s, 8/1/42	A1	2,250,000	2,451,555

			26,720,604
Virgin Islands (0.2%)
VI Pub. Fin. Auth. Rev. Bonds, Ser. A, 6s, 10/1/39	Baa3	600,000	633,708

			633,708


TOTAL INVESTMENTS

Total investments (cost $281,385,772)			$296,523,996

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from June 1, 2009 through May 31, 2010 (the reporting period).

* Percentages indicated are based on net assets of $301,506,595.

The rates shown on FRB, Mandatory Put Bonds and VRDN are the current interest rates at the close of the reporting period.

The dates shown on Mandatory Put Bonds are the next mandatory put dates.

The dates shown on debt obligations other than Mandatory Put Bonds are the original maturity dates.

IFB are securities that pay interest rates that vary inversely to changes in the market interest rates. As interest rates rise, inverse floaters produce less current income. The interest rates shown are the current interest rates at the close of the reporting period.

The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


Education	27.6%
Health care	19.8
Utilities	15.2

The fund had the following insurance concentration greater than 10% at the close of the reporting period (as a percentage of net assets):


NATL	10.2%

Accounting Standards Codification ASC 820 Fair Value Measurements and Disclosures (ASC 820) establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:

Level 1 — Valuations based on quoted prices for identical securities in active markets.

Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:


		Valuation inputs

Investments in securities:	Level 1	Level 2	Level 3

Municipal bonds and notes	$—	$296,523,996	$—

Totals by level	$—	$296,523,996	$—

The accompanying notes are an integral part of these financial statements.


Statement of assets and liabilities 5/31/10


ASSETS

Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $281,385,772)	$296,523,996

Cash	13,186

Interest and other receivables	4,969,896

Receivable for shares of the fund sold	572,636

Receivable for investments sold	615,000

Total assets	302,694,714


LIABILITIES

Distributions payable to shareholders	432,811

Payable for shares of the fund repurchased	410,041

Payable for compensation of Manager (Note 2)	112,818

Payable for investor servicing fees (Note 2)	13,201

Payable for custodian fees (Note 2)	4,323

Payable for Trustee compensation and expenses (Note 2)	66,129

Payable for administrative services (Note 2)	969

Payable for distribution fees (Note 2)	119,591

Other accrued expenses	28,236

Total liabilities	1,188,119

Net assets	$301,506,595

REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$285,792,077

Undistributed net investment income (Note 1)	48,353

Accumulated net realized gain on investments (Note 1)	527,941

Net unrealized appreciation of investments	15,138,224

Total — Representing net assets applicable to capital shares outstanding	$301,506,595


COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share ($253,969,528 divided by 26,626,783 shares)	$9.54

Offering price per class A share (100/96.00 of $9.54)*	$9.94

Net asset value and offering price per class B share ($9,553,800 divided by 1,002,777 shares)**	$9.53

Net asset value and offering price per class C share ($22,366,580 divided by 2,341,819 shares)**	$9.55

Net asset value and redemption price per class M share ($3,954,799 divided by 414,661 shares)	$9.54

Offering price per class M share (100/96.75 of $9.54)***	$9.86

Net asset value, offering price and redemption price per class Y share
($11,661,888 divided by 1,220,169 shares)	$9.56

* On single retail sales of less than $100,000. On sales of $100,000 or more 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 the offering price is reduced.

The accompanying notes are an integral part of these financial statements.


Statement of changes in net assets


INCREASE (DECREASE) IN NET ASSETS	Year ended 5/31/10	Year ended 5/31/09

Operations:
Net investment income	$11,896,496	$11,428,321

Net realized gain on investments	1,177,006	291,331

Net unrealized appreciation (depreciation) of investments	14,782,505	(8,664,397)

Net increase in net assets resulting from operations	27,856,007	3,055,255

Distributions to shareholders (Note 1):
From ordinary income
Taxable net investment income

Class A	(215,957)	(117,080)

Class B	(11,112)	(10,642)

Class C	(16,386)	(5,003)

Class M	(3,479)	(1,898)

Class Y	(12,288)	(3,744)

Net realized short-term gain on investments

Class A	—	(275,412)

Class B	—	(25,040)

Class C	—	(11,660)

Class M	—	(4,463)

Class Y	—	(8,928)

From tax-exempt net investment income
Class A	(10,057,137)	(9,888,496)

Class B	(461,166)	(786,774)

Class C	(573,867)	(318,694)

Class M	(145,277)	(150,388)

Class Y	(483,251)	(277,293)

From net realized long-term gain on investments
Class A	—	(887,442)

Class B	—	(80,682)

Class C	—	(37,570)

Class M	—	(14,380)

Class Y	—	(28,766)

Redemption fees (Note 1)	484	544

Increase from capital share transactions (Note 4)	11,896,846	535,821

Total increase (decrease) in net assets	27,773,417	(9,342,735)


NET ASSETS

Beginning of year	273,733,178	283,075,913

End of year (including undistributed net investment
income of $48,353 and $297,527, respectively)	$301,506,595	$273,733,178

The accompanying notes are an integral part of these financial statements.

Financial highlights (For a common share outstanding throughout the period)

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Net realized

Ratio

investment

Net asset value,

and unrealized

Total from

From net

Net asset

Total return

Net assets,

of expenses

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

realized gain

Total

Redemption

value, end of

at net asset

end of period

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

income

on investments

distributions

fees

period

value (%) ^a

(in thousands)

net assets (%) ^b

net assets (%)

turnover (%)

Class A

May 31, 2010

$9.02

.39

.52

.91

(.39)

—

(.39)

— ^c

$9.54

10.34

$253,970

.80 ^d

4.20 ^d

11.61

May 31, 2009

9.32

.38

(.25)

.13

(.38)

(.05)

(.43)

— ^c

9.02

1.60

232,506

.86

4.28

16.98

May 31, 2008

9.36

.38

— ^c

.38

(.38)

(.04)

(.42)

— ^c

9.32

4.17

241,158

.84

4.12

33.97

May 31, 2007

9.34

.38

.01

.39

(.37)

— ^c

(.37)

— ^c

9.36

4.29

241,481

.85

4.01

15.47

May 31, 2006

9.63

.37

(.21)

.16

(.37)

(.08)

(.45)

— ^c

9.34

1.67

257,523

.83

3.88

7.07

Class B

May 31, 2010

$9.02

.33

.51

.84

(.33)

—

(.33)

— ^c

$9.53

9.53

$9,554

1.43 ^d

3.56 ^d

11.61

May 31, 2009

9.31

.32

(.23)

.09

(.33)

(.05)

(.38)

— ^c

9.02

1.07

17,194

1.49

3.63

16.98

May 31, 2008

9.36

.32

(.01)

.31

(.32)

(.04)

(.36)

— ^c

9.31

3.39

28,157

1.48

3.47

33.97

May 31, 2007

9.34

.32

.01

.33

(.31)

— ^c

(.31)

— ^c

9.36

3.64

37,808

1.49

3.37

15.47

May 31, 2006

9.63

.31

(.21)

.10

(.31)

(.08)

(.39)

— ^c

9.34

1.01

52,012

1.48

3.22

7.07

Class C

May 31, 2010

$9.03

.32

.52

.84

(.32)

—

(.32)

— ^c

$9.55

9.45

$22,367

1.58 ^d

3.43 ^d

11.61

May 31, 2009

9.33

.31

(.24)

.07

(.32)

(.05)

(.37)

— ^c

9.03

.82

11,422

1.64

3.52

16.98

May 31, 2008

9.37

.31

— ^c

.31

(.31)

(.04)

(.35)

— ^c

9.33

3.36

7,332

1.63

3.34

33.97

May 31, 2007

9.35

.30

.02

.32

(.30)

— ^c

(.30)

— ^c

9.37

3.47

3,824

1.64

3.23

15.47

May 31, 2006

9.64

.29

(.21)

.08

(.29)

(.08)

(.37)

— ^c

9.35

.83

3,643

1.63

3.11

7.07

Class M

May 31, 2010

$9.02

.36

.53

.89

(.37)

—

(.37)

— ^c

$9.54

10.01

$3,955

1.08 ^d

3.92 ^d

11.61

May 31, 2009

9.32

.36

(.25)

.11

(.36)

(.05)

(.41)

— ^c

9.02

1.32

3,555

1.14

3.99

16.98

May 31, 2008

9.36

.36

(.01)

.35

(.35)

(.04)

(.39)

— ^c

9.32

3.86

4,211

1.13

3.83

33.97

May 31, 2007

9.34

.35

.02

.37

(.35)

— ^c

(.35)

— ^c

9.36

4.00

4,614

1.14

3.72

15.47

May 31, 2006

9.63

.34

(.21)

.13

(.34)

(.08)

(.42)

— ^c

9.34

1.37

4,748

1.13

3.58

7.07

Class Y

May 31, 2010

$9.04

.41

.52

.93

(.41)

—

(.41)

— ^c

$9.56

10.57

$11,662

.58 ^d

4.43 ^d

11.61

May 31, 2009

9.33

.40

(.24)

.16

(.40)

(.05)

(.45)

— ^c

9.04

1.97

9,056

.64

4.54

16.98

May 31, 2008 ^††

9.34

.17

(.01)

.16

(.17)

—

(.17)

—

9.33

1.72 *

2,218

.26 *

1.79 *

33.97

* Not annualized.

^††For the period January 2, 2008 (commencement of operations) to May 31, 2008.

^aTotal return assumes dividend reinvestment and does not reflect the effect of sales charges.

^bIncludes amounts paid through expense offset arrangements (Note 2).

^cAmount represents less than $0.01 per share.

^dReflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of 0.02% of average net assets for the period ended May 31, 2010 (Note 2).

The accompanying notes are an integral part of these financial statements.


28	29

Notes to financial statements 5/31/10

Note 1: Significant accounting policies

Putnam Massachusetts Tax Exempt Income Fund (the fund) is a Massachusetts business trust, which 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 Massachusetts personal income tax as Putnam Investment Management, LLC (Putnam Management), the fund’s manager, a wholly-owned subsidiary of Putnam Investments, LLC, believes is consistent with preservation of capital by investing in a portfolio primarily consisting of investment grade tax-exempt securities issued in the state of Massachusetts with intermediate- to long-term maturities. The fund may be affected by economic and political developments in the state of Massachusetts.

The fund offers class A, class B, class C, class M and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 4.00% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. The expenses for class A, class B, class C, and class M shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, and class M shares, but do not bear a distribution fee. Class Y shares are generally only available to corporate and institutional clients and clients in other approved programs.

Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

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. These differences include temporary and/or permanent differences of dividends payable, straddle loss deferrals, and market discount. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the reporting period ended, the fund reclassified $165,750 to decrease undistributed net investment income with an increase to accumulated net realized gain of $165,750.

The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:


Unrealized appreciation	$16,678,204
Unrealized depreciation	(1,539,980)

Net unrealized appreciation	15,138,224
Undistributed tax-exempt income	475,491
Undistributed ordinary income	5,673
Undistributed long-term gain	633,311
Cost for federal income tax purposes	$281,385,772

Note 2: Management fee, administrative services and other transactions

Prior to January 1, 2010, the fund paid Putnam Management for management and investment advisory services quarterly based on the average net assets of the fund. Such fee was based on the lesser of (i) an annual rate of 0.50% of average net assets of the fund or (ii) the following annual rates expressed as a percentage of the fund’s average net assets: 0.60% of the first $500 million, 0.50% of the next $500 million, 0.45% of the next $500 million, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355% of the next $5 billion, 0.34% of the next $5 billion and 0.33% thereafter.

Putnam Management had agreed to waive fees and reimburse expenses of the fund through July 31, 2009 to the extent necessary to ensure that the fund’s expenses did not exceed the simple average of the expenses of all front-end load funds viewed by Lipper, Inc. as having the same investment classification or objective as the fund. The expense reimbursement was based on a comparison of the fund’s expenses with the average annualized operating expenses of the funds in its Lipper peer group for each calendar quarter during the fund’s last fiscal year, excluding

12b-1 fees and without giving effect to any expense offset and brokerage/service arrangements that may reduce fund expenses. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

Effective August 1, 2009 through June 30, 2011, Putnam Management has contractually agreed to reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis (or from August 1, 2009 through the fund’s next fiscal year end, as applicable), to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period (or since August 1, 2009, as applicable). During the reporting period, the fund’s expenses were not reduced as a result of this limit.

Each independent Trustee of the fund receives an annual Trustee fee, of which $207, 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 and industry seminars and for certain compliance-related matters. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $50,683 and $28 from the sale of class A and class M shares, respectively, and received $3,458 and $3,472 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. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received $29,156 on class A share redemptions.

Note 3: Purchases and sales of securities

During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $44,513,634 and $32,038,815, respectively. There were no purchases or proceeds from sales of U.S. government securities.

Note 4: Capital shares

At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


	Year ended 5/31/10		Year ended 5/31/09

Class A	Shares	Amount	Shares	Amount

Shares sold	3,300,739	$30,729,611	3,946,943	$35,351,308

Shares issued in connection with
reinvestment of distributions	717,844	6,690,323	829,818	7,284,587

	4,018,583	37,419,934	4,776,761	42,635,895

Shares repurchased	(3,156,904)	(29,347,991)	(4,888,529)	(42,761,106)

Net increase (decrease)	861,679	$8,071,943	(111,768)	$(125,211)


	Year ended 5/31/10		Year ended 5/31/09

Class B	Shares	Amount	Shares	Amount

Shares sold	63,507	$593,793	80,825	$718,659

Shares issued in connection with
reinvestment of distributions	30,731	285,126	62,998	552,952

	94,238	878,919	143,823	1,271,611

Shares repurchased	(998,721)	(9,274,498)	(1,260,719)	(11,204,586)

Net decrease	(904,483)	$(8,395,579)	(1,116,896)	$(9,932,975)


	Year ended 5/31/10		Year ended 5/31/09

Class C	Shares	Amount	Shares	Amount

Shares sold	1,163,077	$10,822,876	539,724	$4,849,998

Shares issued in connection with
reinvestment of distributions	48,890	457,316	36,976	324,187

	1,211,967	11,280,192	576,700	5,174,185

Shares repurchased	(134,420)	(1,258,328)	(98,566)	(866,905)

Net increase	1,077,547	$10,021,864	478,134	$4,307,280


	Year ended 5/31/10		Year ended 5/31/09

Class M	Shares	Amount	Shares	Amount

Shares sold	94,909	$881,979	2,779	$24,872

Shares issued in connection with
reinvestment of distributions	6,272	58,468	7,449	65,407

	101,181	940,447	10,228	90,279

Shares repurchased	(80,446)	(753,494)	(68,165)	(598,019)

Net increase (decrease)	20,735	$186,953	(57,937)	$(507,740)


	Year ended 5/31/10		Year ended 5/31/09

Class Y	Shares	Amount	Shares	Amount

Shares sold	935,049	$8,743,249	860,581	$7,611,275

Shares issued in connection with
reinvestment of distributions	8,454	79,102	6,108	53,411

	943,503	8,822,351	866,689	7,664,686

Shares repurchased	(725,079)	(6,810,686)	(102,760)	(870,219)

Net increase	218,424	$2,011,665	763,929	$6,794,467

Note 5: Regulatory matters and litigation

Note 6: Market and credit risk

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam Michigan Tax Exempt Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam Michigan Tax Exempt Income Fund (the “fund”) at May 31, 2010, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at May 31, 2010 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
July 9, 2010

The fund’s portfolio 5/31/10


Key to holding’s abbreviations
AGM Assured Guaranty Municipal Corporation	G.O. Bonds General Obligation Bonds
AGO Assured Guaranty, Ltd.	NATL National Public Finance Guarantee Corp.
AMBAC AMBAC Indemnity Corporation	Q-SBLF Qualified School Board Loan Fund
Cmnwlth. of PR Gtd. Commonwealth of	U.S. Govt. Coll. U.S. Government Collateralized
Puerto Rico Guaranteed	VRDN Variable Rate Demand Notes
FGIC Financial Guaranty Insurance Company


MUNICIPAL BONDS AND NOTES (98.7%)*	Rating**	Principal amount	Value

Guam (1.0%)
Territory of GU, Govt. Ltd. Oblig. Rev. Bonds
(Section 30), Ser. A, 5 3/4s, 12/1/34	BBB–	$750,000	$780,030

			780,030
Michigan (83.6%)
Advanced Tech. Academy Pub. School Rev. Bonds,
6s, 11/1/28	BBB–	250,000	217,353

Central MI U. Rev. Bonds, 5s, 10/1/26	Aa3	725,000	759,075

Charles Stewart Mott G.O. Bonds (Cmnty. College
Fac.), NATL, 5s, 5/1/19	Aa3	1,425,000	1,531,291

Detroit, G.O. Bonds (Cap. Impt.), Ser. A-1,
5s, 4/1/15	BB	250,000	237,125

Detroit, Downtown Dev. Auth. Tax Increment Rev.
Bonds (Dev. Area No. 1), Ser. A, NATL,
4 3/4s,7/1/25	A	1,500,000	1,293,600

Detroit, Swr. Disp. Rev. Bonds
Ser. B, AGM, 7 1/2s, 7/1/33	AAA	1,000,000	1,190,250
(Second Lien), Ser. B, NATL, FGIC, 5s, 7/1/36	A1	1,075,000	1,065,669

Detroit, Wtr. Supply Syst. Rev. Bonds, Ser. B,
AGM, 6 1/4s, 7/1/36	AAA	1,300,000	1,406,509

Detroit/Wayne Cnty., Stad. Auth. Rev. Bonds,
FGIC, NATL, 5 1/4s, 2/1/27	A2	3,065,000	3,064,602

Ecorse, Pub. School Dist. G.O. Bonds, AGM,
Q-SBLF, 5s, 5/1/12	AAA	650,000	700,375

Fenton, Area Pub. Schools G.O. Bonds (School
Bldg. & Site), NATL, Q-SBLF, 5s, 5/1/23	Aa2	1,950,000	2,088,782

Flat Rock, Cmnty. School Dist. G.O. Bonds (School
Bldg. & Site), AGM, Q-SBLF, 5s, 5/1/22	AAA	1,425,000	1,559,192

Flint, Hosp. Bldg. Auth. Rev. Bonds (Hurley Med.
Ctr.), 7 1/2s, 7/1/39	Ba1	300,000	303,351

Garden City, Hosp. Fin. Auth. Rev. Bonds (Garden
City Hosp.), Ser. A, 5 3/4s, 9/1/17	Ba1	360,000	346,763

Gibraltar, School Dist. G.O. Bonds (School Bldg.
& Site), NATL, FGIC, Q-SBLF, 5s, 5/1/21	Aa2	2,000,000	2,096,780

Grand Rapids, Rev. Bonds (San. Swr. Sys.), NATL,
5s, 1/1/20	Aa1	500,000	540,640

Grand Valley, Rev. Bonds (MI State U.), 5 3/4s,
12/1/34	A+	500,000	532,545

Harper Creek, Cmnty. School Dist. G.O. Bonds,
Q-SBLF, 5 1/8s, 5/1/31 (Prerefunded)	AA–	1,030,000	1,074,403


MUNICIPAL BONDS AND NOTES (98.7%)* cont.	Rating**	Principal amount	Value

Michigan cont.
Kalamazoo, Hosp. Fin. Auth. Fac. Rev. Bonds
FGIC, 5.244s, 6/1/11 (Prerefunded)	Aaa	$1,400,000	$1,412,586
(Bronson Hosp.), Ser. A, AGM, 5s, 5/15/26	AAA	2,000,000	2,010,360

Marysville, Pub. School Dist. G.O. Bonds (School
Bldg. & Site), AGM, Q-SBLF, 5s, 5/1/21	AAA	1,640,000	1,769,954

MI Higher Ed. Fac. Auth. Rev. Bonds
(Ltd. Oblig.- Hope College), Ser. A, 5.55s, 4/1/24	BBB+	1,000,000	1,007,510
(Alma College), 5 1/4s, 6/1/33	A3	1,000,000	1,015,650
(Kalamazoo College), 5s, 12/1/33	A1	1,000,000	1,014,350
(Kalamazoo College), 5s, 12/1/20	A1	250,000	253,803

MI Higher Ed. Fac. Auth. VRDN (U. of Detroit),
0.3s, 11/1/36	VMIG1	1,790,000	1,790,000

MI Muni. Board Auth. Rev. Bonds (Downtown),
Ser. A, 5s, 5/1/22	Aa2	500,000	532,905

MI State Bldg. Auth. Rev. Bonds
Ser. I, 6s, 10/15/38	Aa3	2,000,000	2,180,900
Ser. I, 5s, 10/15/24	Aa3	125,000	129,426
Ser. I, 5s, 10/15/24 (Prerefunded)	A+	5,000	5,310
(Fac. Program), Ser. I, 4 3/4s, 10/15/25	Aa3	1,055,000	1,054,989
FGIC, NATL, zero %, 10/15/22	A1	3,000,000	1,547,310
FGIC, NATL, zero %, 10/15/17	A1	1,000,000	719,970

MI State Comprehensive Trans. Rev. Bonds,
Ser. B, AGM
5 1/4s, 5/15/11	AAA	200,000	209,208
5 1/4s, 5/15/11 (Prerefunded)	AAA	1,275,000	1,334,453

MI State Hosp. Fin. Auth. Rev. Bonds
Ser. A, 6 1/8s, 6/1/39	A1	1,000,000	1,074,700
(Holland Cmnty. Hosp.), Ser. A, FGIC,
5 3/4s, 1/1/21	A+	1,000,000	1,040,170
(Sparrow Hosp.), 5 1/2s, 11/15/21 (Prerefunded)	A1	655,000	704,767
(Henry Ford Hlth. Syst.), Ser. A, 5 1/4s, 11/15/46	A1	1,500,000	1,386,030
(Sparrow Hosp.), 5s, 11/15/31	A1	1,000,000	960,560
(Ascension Hlth.), Ser. B, 5s, 11/15/25	Aa1	1,000,000	1,050,700
(Sparrow Hosp.), 5s, 11/15/23	A1	835,000	839,618

MI State Hsg. Dev. Auth. Rev. Bonds, Ser. A,
5 1/2s, 12/1/28	AA+	750,000	771,045

MI State Strategic Fund Mandatory Put Bonds
(Dow Chemical), Ser. A-1, 6 3/4s, 6/2/14	BBB-	200,000	221,454

MI State Strategic Fund Rev. Bonds (MI House
of Representatives Fac.), Ser. A, AGO,
5 1/4s, 10/15/21	AAA	2,500,000	2,707,300

MI State Strategic Fund, Ltd. Mandatory Put Bonds
(Dow Chemical), 5 1/2s, 6/1/13	Baa3	635,000	671,176
(Detroit Edison Co.), AMBAC, 4.85s, 9/1/11	Baa1	1,000,000	1,037,590

MI State Strategic Fund, Ltd. Rev. Bonds
(Detroit Edison Co.), AMBAC, 7s, 5/1/21	A2	1,500,000	1,840,860
(Worthington Armstrong Venture), U.S. Govt.
Coll., 5 3/4s, 10/1/22 (Prerefunded)	AAA/P	3,000,000	3,497,250

MI State Strategic Fund, Ltd. VRDN
(Detroit Symphony), Ser. B, 0.3s, 6/1/31	A–1	700,000	700,000

MI State U. Rev. Bonds, Ser. C, 5s, 8/15/18	Aa1	1,000,000	1,152,240


MUNICIPAL BONDS AND NOTES (98.7%)* cont.	Rating**	Principal amount	Value

Michigan cont.
MI Tobacco Settlement Fin. Auth. Rev. Bonds,
Ser. A
6s, 6/1/48	BBB	$1,000,000	$746,160
6s, 6/1/34	BBB	1,250,000	1,058,550

Monroe Cnty., Hosp. Fin. Auth. Rev. Bonds (Mercy
Memorial Hosp. Corp.), 5 3/8s, 6/1/26	Baa3	500,000	450,545

Northern Michigan U. Rev. Bonds, Ser. A, AGM,
5s, 12/1/26	AAA	1,000,000	1,080,630

Pontiac, Tax Increment Fin. Auth. Rev. Bonds,
6 3/8s, 6/1/31 (Prerefunded)	B/F	750,000	839,468

Roseville, School Dist. G.O. Bonds (School Bldg.
& Site), AGM, Q-SBLF, 5s, 5/1/21	AAA	1,500,000	1,605,930

Royal Oak, Hosp. Fin. Auth. Rev. Bonds (William
Beaumont Hosp.), Ser. M, NATL, 5 1/4s, 11/15/35	A1	1,000,000	931,030

Van Buren Twp., Local Dev. Fin. Auth. G.O. Bonds,
FGIC, NATL, zero %, 4/1/26	A	690,000	276,159

Wayne Charter Cnty., G.O. Bonds (Bldg. Impt.),
Ser. A, 6 3/4s, 11/1/39	A2	500,000	525,735

Wayne Cnty., Arpt. Auth. Rev. Bonds (Detroit
Metro. Arpt.), FGIC, NATL, 5s, 12/1/25	A	1,000,000	916,340

Wayne St. U. Rev. Bonds, AGM, 5s, 11/15/25	AAA	2,000,000	2,108,420

Western MI U. Rev. Bonds, AMBAC, 5s, 7/15/10	A1	1,120,000	1,125,734

Whitmore Lake, Pub. School Dist. G.O. Bonds,
FGIC, Q-SBLF, 5s, 5/1/28 (Prerefunded)	AA–	125,000	139,043

			69,456,193
Puerto Rico (13.1%)
Cmnwlth. of PR, G.O. Bonds
Ser. A, FGIC, 5 1/2s, 7/1/21	A3	500,000	535,110
(Pub. Impt.), Ser. A, 5 1/4s, 7/1/30	A3	210,000	212,495
(Pub. Impt.), Ser. A, 5 1/4s, 7/1/30 (Prerefunded)	AAA	340,000	404,437
Ser. A, 5 1/4s, 7/1/26	A3	500,000	511,985

Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds,
Ser. A
6s, 7/1/44	Baa1	1,350,000	1,417,703
6s, 7/1/38	Baa1	1,500,000	1,586,351

Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds,
Ser. K, 5s, 7/1/30	A3	500,000	498,725

Cmnwlth. of PR, Indl. Tourist Edl. Med. & Env.
Control Fac. Rev. Bonds (Cogen. Fac.-AES),
6 5/8s, 6/1/26	Baa3	1,400,000	1,412,964

Cmnwlth. of PR, Infrastructure Fin. Auth. Special
Oblig. Bonds, Ser. A, U.S. Govt. Coll., 5 3/8s,
10/1/24 (Prerefunded)	Aaa	500,000	513,370

Cmnwlth. of PR, Infrastructure Fin. Auth. Special
Tax Bonds, Ser. C, FGIC, 5 1/2s, 7/1/19	A3	1,000,000	1,082,330

Cmnwlth. of PR, Pub. Bldg. Auth. Rev. Bonds
(Govt. Fac.), Ser. M-3, NATL, Cmnwlth. of PR
Gtd., 6s, 7/1/28	A	500,000	531,165
Ser. Q, Cmnwlth. of PR Gtd., 5 5/8s, 7/1/39	A3	1,000,000	1,010,210

Cmnwlth. of PR, Sales Tax Fin. Corp. Rev. Bonds,
Ser. A, zero %, 8/1/31	A+	4,250,000	1,181,968

			$10,898,813


MUNICIPAL BONDS AND NOTES (98.7%)* cont.	Rating**	Principal amount	Value

Virgin Islands (1.0%)
VI Pub. Fin. Auth. Rev. Bonds
Ser. A, 6s, 10/1/39	Baa3	$380,000	$401,348
(Hovensa Refinery Fac.), 4.7s, 7/1/22	Baa3	450,000	414,032

			815,380


TOTAL INVESTMENTS

Total investments (cost $79,246,494)			$81,950,416

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from June 1, 2009 through May 31, 2010 (the reporting period).

* Percentages indicated are based on net assets of $83,066,876.

The rates shown on Mandatory Put Bonds and VRDN are the current interest rates at the close of the reporting period.

The dates shown on Mandatory Put Bonds are the next mandatory put dates.

The dates shown on debt obligations other than Mandatory Put Bonds are the original maturity dates.

The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


State government	25.2%
Education	16.4
Utilities	13.8
Health care	12.5
Prerefunded	11.9

The fund had the following insurance concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


NATL	20.0%
FGIC	16.7
AGM	16.2
Q-SBLF	13.3

Level 1 — Valuations based on quoted prices for identical securities in active markets.

Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:


		Valuation inputs

Investments in securities:	Level 1	Level 2	Level 3

Municipal bonds and notes	$—	$81,950,416	$—

Totals by level	$—	$81,950,416	$—

The accompanying notes are an integral part of these financial statements.


Statement of assets and liabilities 5/31/10


ASSETS

Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $79,246,494)	$81,950,416

Cash	140,784

Interest and other receivables	1,028,760

Receivable for shares of the fund sold	58,848

Receivable for investments sold	175,000

Total assets	83,353,808

LIABILITIES

Distributions payable to shareholders	114,182

Payable for shares of the fund repurchased	25,747

Payable for compensation of Manager (Note 2)	31,269

Payable for investor servicing fees (Note 2)	3,649

Payable for custodian fees (Note 2)	2,581

Payable for Trustee compensation and expenses (Note 2)	57,790

Payable for administrative services (Note 2)	269

Payable for distribution fees (Note 2)	31,581

Payable reports to shareholders	15,211

Other accrued expenses	4,653

Total liabilities	286,932

Net assets	$83,066,876

REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$81,745,282

Distributions in excess of net investment income (Note 1)	(112,957)

Accumulated net realized loss on investments (Note 1)	(1,269,371)

Net unrealized appreciation of investments	2,703,922

Total — Representing net assets applicable to capital shares outstanding	$83,066,876

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share ($79,335,171 divided by 8,797,424 shares)	$9.02

Offering price per class A share (100/96.00 of $9.02)*	$9.40

Net asset value and offering price per class B share ($2,448,968 divided by 271,769 shares)**	$9.01

Net asset value and offering price per class C share ($446,440 divided by 49,531 shares)**	$9.01

Net asset value and redemption price per class M share ($677,704 divided by 75,136 shares)	$9.02

Offering price per class M share (100/96.75 of $9.02)***	$9.32

Net asset value, offering price and redemption price per class Y share
($158,593 divided by 17,577 shares)	$9.02

* On single retail sales of less than $100,000. On sales of $100,000 or more 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 the offering price is reduced.

The accompanying notes are an integral part of these financial statements.


Statement of changes in net assets

DECREASE IN NET ASSETS	Year ended 5/31/10	Year ended 5/31/09

Operations:
Net investment income	$3,446,341	$3,794,016

Net realized loss on investments	(110,469)	(53,104)

Net unrealized appreciation (depreciation) of investments	3,318,739	(2,821,020)

Net increase in net assets resulting from operations	6,654,611	919,892

Distributions to shareholders (Note 1):
From ordinary income
Taxable net investment income

Class A	(8,041)	(26,140)

Class B	(315)	(2,137)

Class C	(43)	(50)

Class M	(67)	(287)

Class Y	(16)	(29)

From tax-exempt net investment income
Class A	(3,287,354)	(3,554,362)

Class B	(116,983)	(261,024)

Class C	(11,965)	(8,299)

Class M	(25,763)	(37,728)

Class Y	(6,328)	(4,115)

Redemption fees (Note 1)	48	4

Decrease from capital share transactions (Note 4)	(8,230,924)	(11,261,690)

Total decrease in net assets	(5,033,140)	(14,235,965)

NET ASSETS

Beginning of year	88,100,016	102,335,981

End of year (including distributions in excess of net investment
income of $112,957 and $91,650, respectively)	$83,066,876	$88,100,016

The accompanying notes are an integral part of these financial statements.

Financial highlights (For a common share outstanding throughout the period)

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Net realized

Ratio

investment

Net asset value,

and unrealized

Total from

From net

Net asset

Total return

Net assets,

of expenses

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

Total

Redemption

value, end

at net asset

end of period

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

income

distributions

fees

of period

value (%) ^a

(in thousands)

net assets (%) ^b

net assets (%)

turnover (%)

Class A

May 31, 2010

$8.69

.36

.33

.69

(.36)

(.36)

— ^d

$9.02

8.14

$79,335

.87 ^c

4.10 ^c

17.59

May 31, 2009

8.89

.35

(.19)

.16

(.36)

(.36)

— ^d

8.69

2.02

81,898

.89 ^c

4.15 ^c

11.01

May 31, 2008

8.92

.34

(.02)

.32

(.35)

(.35)

— ^d

8.89

3.66

90,988

.90 ^c

3.87 ^c

43.97

May 31, 2007

8.91

.34

.01

.35

(.34)

(.34)

— ^d

8.92

3.95

96,796

.91 ^c

3.72 ^c

16.28

May 31, 2006

9.11

.33

(.20)

.13

(.33)

(.33)

— ^d

8.91

1.52

103,128

.91

3.71

16.67

Class B

May 31, 2010

$8.68

.31

.33

.64

(.31)

(.31)

— ^d

$9.01

7.46

$2,449

1.50 ^c

3.45 ^c

17.59

May 31, 2009

8.88

.30

(.19)

.11

(.31)

(.31)

— ^d

8.68

1.36

5,188

1.53 ^c

3.48 ^c

11.01

May 31, 2008

8.91

.29

(.03)

.26

(.29)

(.29)

— ^d

8.88

2.99

9,911

1.54 ^c

3.22 ^c

43.97

May 31, 2007

8.90

.28

.01

.29

(.28)

(.28)

— ^d

8.91

3.30

13,054

1.55 ^c

3.08 ^c

16.28

May 31, 2006

9.10

.28

(.20)

.08

(.28)

(.28)

— ^d

8.90

.85

19,558

1.56

3.05

16.67

Class C

May 31, 2010

$8.68

.29

.33

.62

(.29)

(.29)

— ^d

$9.01

7.32

$446

1.65 ^c

3.35 ^c

17.59

May 31, 2009

8.89

.28

(.20)

.08

(.29)

(.29)

— ^d

8.68

1.09

256

1.68 ^c

3.32 ^c

11.01

May 31, 2008

8.91

.27

(.01)

.26

(.28)

(.28)

— ^d

8.89

2.95

126

1.69 ^c

3.10 ^c

43.97

May 31, 2007 †

9.00

.18

(.09)

.09

(.18)

(.18)

—

8.91

.97 *

1.13 *^c

1.93 *^c

16.28

Class M

May 31, 2010

$8.69

.34

.33

.67

(.34)

(.34)

— ^d

$9.02

7.83

$678

1.15 ^c

3.82 ^c

17.59

May 31, 2009

8.90

.33

(.20)

.13

(.34)

(.34)

— ^d

8.69

1.62

663

1.18 ^c

3.84 ^c

11.01

May 31, 2008

8.92

.32

(.02)

.30

(.32)

(.32)

— ^d

8.90

3.46

1,210

1.19 ^c

3.58 ^c

43.97

May 31, 2007

8.91

.31

.01

.32

(.31)

(.31)

— ^d

8.92

3.65

1,155

1.20 ^c

3.43 ^c

16.28

May 31, 2006

9.11

.31

(.20)

.11

(.31)

(.31)

— ^d

8.91

1.22

1,223

1.21

3.41

16.67

Class Y

May 31, 2010

$8.69

.38

.33

.71

(.38)

(.38)

— ^d

$9.02

8.39

$159

.65 ^c

4.32 ^c

17.59

May 31, 2009

8.90

.37

(.20)

.17

(.38)

(.38)

— ^d

8.69

2.10

.68 ^c

4.36 ^c

11.01

May 31, 2008 ††

8.94

.15

(.03)

.12

(.16)

(.16)

—

8.90

1.32 *

101

.28 *^c

1.71 *^c

43.97

See notes to financial highlights at the end of this section.

The accompanying notes are an integral part of these financial statements.


28	29

Financial highlights (Continued)

* Not annualized.

^† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

^†^† For the period January 2, 2008 (commencement of operations) to May 31, 2008.

^aTotal return assumes dividend reinvestment and does not reflect the effect of sales charges.

^bIncludes amounts paid through expense offset arrangements (Note 2).

^cReflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class, as a percentage of its average net assets, reflect a reduction of the following amounts (Note 2):


	5/31/10	5/31/09	5/31/08	5/31/07

Class A	0.03%	0.07%	0.04%	0.03%

Class B	0.03	0.07	0.04	0.03

Class C	0.03	0.07	0.04	0.03

Class M	0.03	0.07	0.04	0.03

Class Y	0.03	0.07	0.03	—

^dAmount represents less than $0.01 per share.

The accompanying notes are an integral part of these financial statements.

Notes to financial statements 5/31/10

Note 1: Significant accounting policies

Putnam Michigan Tax Exempt Income Fund (the fund), is a Massachusetts business trust, which 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 Michigan personal income tax as Putnam Investment Management, LLC (Putnam Management), the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC, believes is consistent with preservation of capital by investing primarily in a portfolio of investment grade Michigan tax-exempt securities with intermediate- to long-term maturities. The fund may be affected by economic and political developments in the state of Michigan.

At May 31, 2010, the fund had a capital loss carryover of $815,314 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:


Loss Carryover	Expiration

$217,146	May 31, 2012

444,674	May 31, 2015

153,494	May 31, 2018

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer to its fiscal year ending May 31, 2011 $391,949 of losses recognized during the period November 1, 2009 to May 31, 2010.

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. These differences include temporary and/or permanent differences of post-October loss deferrals, dividends payable and straddle loss deferrals. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the reporting period ended, the fund reclassified $10,773 to increase distributions in excess of net investment income, with a decrease to accumulated net realized loss of $10,773.

The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:


Unrealized appreciation	$3,669,013
Unrealized depreciation	(965,091)

Net unrealized appreciation	2,703,922
Undistributed Tax-Exempt Income	1,225
Capital loss carryforward	(815,314)
Post-October loss	(391,949)
Cost for federal income tax purposes	$79,246,494

Note 2: Management fee, administrative services and other transactions

Putnam Management had agreed to waive fees and reimburse expenses of the fund through July 31, 2009 to the extent necessary to ensure that the fund’s expenses did not exceed the simple average of the expenses of all front-end load funds viewed by Lipper, Inc. as having the same investment classification or objective as the fund. The expense reimbursement was based on a comparison of the fund’s expenses with the average annualized operating expenses of the funds in its Lipper peer group for each calendar quarter during the fund’s last fiscal year, excluding 12b-1 fees and without giving effect to any expense offset and brokerage/service arrangements that may reduce fund expenses.

Putnam Management had further agreed to waive fees and reimburse expenses of the fund for the period from July 1, 2008 through July 31, 2009 to the extent necessary to ensure that the fund’s expenses did not exceed the simple average of the expenses of a custom group of competitive funds selected by Lipper, Inc. based on the size of the fund. The expense reimbursement was based on a comparison of the fund’s total expenses with the average operating expenses of the funds in this Lipper custom peer group for their respective 2007 fiscal years, excluding 12b-1 fees and after adjustment for certain expense offset and brokerage/service arrangements that reduced expenses of the fund.

During the reporting period, the fund’s expenses were reduced by $7,213 as a result of the lower of the limits specified above.

Each independent Trustee of the fund receives an annual Trustee fee, of which $58, 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 and industry seminars and for certain compliance-related matters. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $10,531 and $2 from the sale of class A and class M shares, respectively, and received $1,067 and $389 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

Note 3: Purchases and sales of securities

During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $14,277,850 and $22,383,487, respectively. There were no purchases or proceeds from sales of U.S. government securities.

Note 4: Capital shares

At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


	Year ended 5/31/10		Year ended 5/31/09

Class A	Shares	Amount	Shares	Amount

Shares sold	680,632	$6,014,489	835,201	$7,101,262

Shares issued in connection with
reinvestment of distributions	255,276	2,261,607	289,623	2,450,319

	935,908	8,276,096	1,124,824	9,551,581

Shares repurchased	(1,566,816)	(13,874,901)	(1,928,372)	(16,149,314)

Net decrease	(630,908)	$(5,598,805)	(803,548)	$(6,597,733)


	Year ended 5/31/10		Year ended 5/31/09

Class B	Shares	Amount	Shares	Amount

Shares sold	30,050	$266,679	18,674	$158,769

Shares issued in connection with
reinvestment of distributions	8,240	72,682	22,788	192,777

	38,290	339,361	41,462	351,546

Shares repurchased	(364,320)	(3,192,677)	(559,345)	(4,667,657)

Net decrease	(326,030)	$(2,853,316)	(517,883)	$(4,316,111)


	Year ended 5/31/10		Year ended 5/31/09

Class C	Shares	Amount	Shares	Amount

Shares sold	46,991	$416,541	50,828	$444,248

Shares issued in connection with
reinvestment of distributions	1,246	11,057	795	6,761

	48,237	427,598	51,623	451,009

Shares repurchased	(28,143)	(250,695)	(36,332)	(302,868)

Net increase	20,094	$176,903	15,291	$148,141


	Year ended 5/31/10		Year ended 5/31/09

Class M	Shares	Amount	Shares	Amount

Shares sold	1,960	$16,991	3,720	$30,888

Shares issued in connection with
reinvestment of distributions	1,476	13,078	1,817	15,395

	3,436	30,069	5,537	46,283

Shares repurchased	(4,568)	(40,557)	(65,274)	(539,185)

Net decrease	(1,132)	$(10,488)	(59,737)	$(492,902)


	Year ended 5/31/10		Year ended 5/31/09

Class Y	Shares	Amount	Shares	Amount

Shares sold	17,351	$151,900	442	$3,499

Shares issued in connection with
reinvestment of distributions	411	3,634	488	4,131

	17,762	155,534	930	7,630

Shares repurchased	(11,288)	(100,752)	(1,224)	(10,715)

Net increase (decrease)	6,474	$54,782	(294)	$(3,085)

At the close of the reporting period, Putnam Investments, LLC owned 1,243 class Y shares of the fund (7.1% of class Y shares outstanding), valued at $11,212.

Note 5: Regulatory matters and litigation

Note 6: Market and credit risk

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam Minnesota Tax Exempt Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam Minnesota Tax Exempt Income Fund (the “fund”) at May 31, 2010, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at May 31, 2010 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
July 13, 2010


The fund’s portfolio 5/31/10

Key to holding’s abbreviations
AGM Assured Guaranty Municipal Corporation	G.O. Bonds General Obligation Bonds
AGO Assured Guaranty, Ltd.	GNMA Coll. Government National Mortgage
AMBAC AMBAC Indemnity Corporation	Association Collateralized
COP Certificates of Participation	NATL National Public Finance Guarantee Corp.
FGIC Financial Guaranty Insurance Company	VRDN Variable Rate Demand Notes


MUNICIPAL BONDS AND NOTES (98.7%)*	Rating**	Principal amount	Value

California (0.5%)
CA State G.O. Bonds, 5.6s, 3/1/36	A1	$500,000	$519,745

			519,745
Minnesota (96.2%)
Anoka Cnty., G.O. Bonds, Ser. A
5s, 2/1/24	Aa1	620,000	683,748
5s, 2/1/24	AAA	470,000	521,893

Arden Hills, Hsg. & Hlth. Care Facs. VRDN
(Presbyterian Homes), Ser. A, 0.30s, 9/1/29	A–1+	2,180,000	2,180,000

Becker, Poll. Control Rev. Bonds (Northern States
Pwr.), Ser. A, 8 1/2s, 3/1/19	A1	1,000,000	1,152,230

Big Lake, G.O. Bonds (Indpt. School Dist. No.
728), Ser. C, AGM, 5s, 2/1/21	Aa2	1,560,000	1,580,514

Brainerd, G.O. Bonds
(Indpt. School Dist. No. 181), Ser. A, FGIC,
NATL, 5s, 2/1/20 (Prerefunded)	Aa2	1,000,000	1,081,480
(Indpt. School Dist. No. 181), Ser. A, 4s, 2/1/21	AAA	500,000	538,270

Burnsville, G.O. Bonds (Indpt. School Dist. No.
191), Ser. A, 5s, 2/1/25	Aa2	865,000	950,886

Cohasset, Poll. Control Rev. Bonds
(Allete, Inc.), 4.95s, 7/1/22	A2	1,000,000	1,010,250

Dakota Cnty., Cmnty. Dev. Agcy. Governmental Hsg.
Dev. G.O. Bonds (Sr. Hsg. Fac.), 5s, 1/1/21	Aaa	1,000,000	1,034,960

Douglas Cnty., Gross Hlth. Care Fac. Rev. Bonds
(Douglas Cnty. Hosp.), Ser. A, 6 1/4s, 7/1/38	BBB–	1,250,000	1,306,850

Duluth, Econ. Dev. Auth. Hlth. Care Fac. Rev. Bonds
(BSM Properties, Inc.), Ser. A, 5 7/8s, 12/1/28	B+/P	75,000	64,860

East Grand Forks, Poll. Rev. Bonds (American
Crystal Sugar), Ser. A, 6s, 4/1/18	BBB+	750,000	738,623

Farmington, G.O. Bonds (Indpt. School Dist. No.
192), Ser. B, AGM, 5s, 2/1/19	Aa2	1,080,000	1,197,580

Hennepin Cnty., Sales Tax Rev. Bonds
(Ball Park), Ser. B, 5s, 12/15/26	AA+	3,855,000	4,173,920
4 3/4s, 12/15/29	Aaa	500,000	531,195

Intl. Falls, Poll. Control Rev. Bonds (Boise
Cascade Corp.), 5.65s, 12/1/22	B	350,000	275,030

Maple Grove, G.O. Bonds, Ser. A, 5s, 2/1/22	Aaa	2,575,000	2,864,018

Maple Grove, Hlth. Care Syst. Rev. Bonds (Maple
Grove Hosp. Corp.), 5 1/4s, 5/1/37	A3	1,500,000	1,478,655

Martin Cnty., Hosp. Rev. Bonds (Fairmont Cmnty.
Hosp. Assn.), 6 5/8s, 9/1/22	BBB–/P	1,250,000	1,258,338


MUNICIPAL BONDS AND NOTES (98.7%)* cont.	Rating**	Principal amount	Value

Minnesota cont.
Minneapolis & St. Paul, Hsg. & Redev. Auth. Hlth.
Care Syst. Rev. Bonds (Children’s Hlth. Care Fac.),
Ser. A, 5 1/4s, 8/15/35	A+	$500,000	$511,460

Minneapolis & St. Paul, Metro. Arpt. Comm.
Rev. Bonds
Ser. A, NATL, 5s, 1/1/28	A	1,160,000	1,178,722
Ser. B, 5s, 1/1/22	AA–	1,250,000	1,297,638
Ser. A, NATL, 5s, 1/1/21	A	1,500,000	1,551,960

Minneapolis, Multi-Fam. Rev. Bonds (East Bank),
GNMA Coll., 5 3/4s, 10/20/42	Aaa	700,000	715,197

Minnetonka, COP (Indpt. School Dist. No. 276),
Ser. E, 5s, 3/1/29	Aa1	350,000	366,639

Minnetonka, G.O. Bonds (Indpt. School Dist. No. 276)
Ser. E, 5s, 2/1/28	AAA	1,500,000	1,643,655
Ser. B, AGM, zero %, 2/1/23	Aaa	3,600,000	2,064,276

MN Agricultural & Econ. Dev. Board Rev. Bonds
(Evangelical Lutheran Good Samaritan Society),
6 5/8s, 8/1/25	A3	795,000	812,681
(Hlth. Care Syst.), Ser. A, NATL, 5 1/2s, 11/15/17	A2	610,000	611,068
(Hlth. Care), Ser. C-1, AGO, 5s, 2/15/30	AAA	1,000,000	1,014,520

MN State G.O. Bonds
5s, 8/1/24	AAA	1,500,000	1,615,860
Ser. A, 5s, 12/1/18	AAA	1,000,000	1,181,870

MN State Higher Ed. Fac. Auth. Rev. Bonds
(U. of St. Thomas), Ser. 6-W, 6s, 10/1/30	A2	1,500,000	1,628,610
(Bethel U.), Ser. 6-R, 5 1/2s, 5/1/37	BBB–/P	1,000,000	931,070
(The College of St. Catherine), Ser. 5-N1,
5 3/8s, 10/1/32	Baa1	500,000	490,090
(U. St. Thomas), Ser. 6-X, 5 1/4s, 4/1/39	A2	500,000	516,460
(College of St. Benedict), Ser. 5-W,
5 1/4s, 3/1/24	Baa1	250,000	252,905
(U. of St. Thomas), Ser. 7-A, 5s, 10/1/39	A2	500,000	511,950
(St. Olaf College), Ser. 6-0, 5s, 10/1/20	A2	1,000,000	1,079,720
(The College of St. Catherine), Ser. 5-N1,
5s, 10/1/18	Baa1	500,000	514,230
(St. John’s U.), Ser. 6-G, 5s, 10/1/15	A2	1,525,000	1,709,983
(St. John’s U.), Ser. 6-U, 4 3/4s, 10/1/33	A2	500,000	500,310

MN State Hsg. Fin. Agcy. Rev. Bonds
(Res. Hsg. Fin.), Ser. M, 5 3/4s, 1/1/37	Aa1	1,700,000	1,798,056
(Res. Hsg. Fin.), Ser. E, 5.1s, 1/1/40	Aa1	1,000,000	1,017,410
(Res. Hsg.), Ser. H, 5s, 1/1/36	Aa1	515,000	513,455
(Res. Hsg. Fin.), Ser. B, 4.9s, 7/1/37	Aa1	2,000,000	1,938,680
(Res. Hsg. Fin.), Ser. L, 4.9s, 7/1/22	Aa1	1,995,000	2,077,733
(Res. Hsg.), Ser. H, 4 3/8s, 1/1/14	Aa1	360,000	372,337

MN State Muni. Pwr. Agcy. Elec. Rev. Bonds
5 1/4s, 10/1/27	A3	1,000,000	1,063,630
5s, 10/1/30	A3	500,000	514,320

Monticello-Big Lake Cmnty., Hosp. Dist. Gross
Rev. Bonds (Hlth. Care Fac.), Ser. A, 4.8s, 12/1/18	BBB/P	500,000	512,040


MUNICIPAL BONDS AND NOTES (98.7%)* cont.	Rating**	Principal amount	Value

Minnesota cont.
North Oaks, Sr. Hsg. Rev. Bonds (Presbyterian
Homes North Oaks)
6 1/2s, 10/1/47	BB/P	$500,000	$503,005
6 1/8s, 10/1/39	BB/P	315,000	310,536

Northern MN Muni. Pwr. Agcy. Elec. Syst. Rev.
Bonds, Ser. A, AGO, 5s, 1/1/21	AAA	1,000,000	1,083,130

Northfield, Hosp. Rev. Bonds
Ser. C, 6s, 11/1/31 (Prerefunded)	AAA/P	1,000,000	1,072,080
5 3/8s, 11/1/26	BBB–	750,000	750,968
5 1/4s, 11/1/21	BBB–	500,000	508,955

Olmsted Cnty., Hlth. Care Fac. Rev. Bonds
(Olmsted Med. Ctr.), 5.55s, 7/1/19	BBB–/F	800,000	802,008

Ramsey Cnty., Hsg. & Redev. Auth. Multi-Fam. Rev.
Bonds (Hanover Townhouses), 6s, 7/1/31	Aa1	1,150,000	1,160,546

Rochester, Hlth. Care Fac. Rev. Bonds (Mayo Clinic)
Ser. D, 5s, 11/15/38	Aa2	500,000	517,430
Ser. E, 5s, 11/15/38	Aa2	750,000	776,265

Rocori Area Schools, G.O. Bonds (Indpt. School
Dist. No. 750), Ser. B, 5s, 2/1/28	AAA	525,000	571,100

Roseville, G.O. Bonds (Indpt. School Dist. No.
623), Ser. A, AGM, 5s, 2/1/25	Aa2	2,000,000	2,020,260

Sartell, Env. Impt. Rev. Bonds, Ser. A, 5.2s, 6/1/27	BBB	500,000	499,440

Sauk Rapids, G.O. Bonds (Indpt. School Dist. No.
047), Ser. B, AGM, zero %, 2/1/11	Aa2	1,000,000	991,540

Southern MN Muni. Pwr. Agcy. Syst. Rev. Bonds,
Ser. A
5 1/4s, 1/1/30	A+	750,000	803,970
NATL, zero %, 1/1/24	A2	2,000,000	1,112,040

St. Cloud, Hlth. Care Rev. Bonds (Centracare
Hlth. Syst.), AGO, 5 3/8s, 5/1/31	Aa3	1,000,000	1,053,100

St. Louis Park, Hlth. Care Fac. Rev. Bonds
(Nicollet Hlth. Svcs.)
5 3/4s, 7/1/39	A	1,000,000	992,960
Ser. C, 5 3/4s, 7/1/30	A	1,000,000	1,015,430

St. Paul, Hsg. & Redev. Auth. Rev. Bonds (Rossy &
Richard Shaller), Ser. A, 5.05s, 10/1/27	BB-/P	550,000	466,235

St. Paul, Hsg. & Redev. Auth. Hlth. Care Rev. Bonds
(Gillette Children’s Specialty), 5s, 2/1/29	A–	1,000,000	982,080
(Allina Hlth. Syst.), Ser. A, NATL, 5s, 11/15/19	A1	1,000,000	1,072,510

St. Paul, Hsg. & Redev. Auth. Hlth. Care Fac.
Rev. Bonds
(Regions Hosp.), 5.3s, 5/15/28	Baa1	1,515,000	1,484,049
(HealthPartners Oblig. Group), 5 1/4s, 5/15/36	Baa1	450,000	426,218

St. Paul, Hsg. & Redev. Auth. Hosp. Rev.
Bonds (Healtheast)
6s, 11/15/35	Ba1	500,000	471,435
Ser. B, 5.85s, 11/1/17	Ba1	750,000	752,055

St. Paul, Port Auth. Rev. Bonds (Brownfields
Redev.), Ser. 2, 4 1/2s, 3/1/27	AA+	1,305,000	1,354,890


MUNICIPAL BONDS AND NOTES (98.7%)* cont.	Rating**	Principal amount	Value

Minnesota cont.
St. Paul, Port Auth. Lease Rev. Bonds (Regions
Hosp. Pkg. Ramp), Ser. 1, 5s, 8/1/36	BBB/P	$750,000	$598,230

U. of MN Rev. Bonds
Ser. A, 5 3/4s, 7/1/17 (Prerefunded)	AA	2,160,000	2,603,426
Ser. A, 5 1/2s, 7/1/21 (Prerefunded)	AA	1,000,000	1,198,660
Ser. A, 5 1/4s, 4/1/29	Aa1	500,000	554,310
Ser. C, 5s, 12/1/21	Aa1	500,000	569,860
Ser. C, 4s, 2/1/16	Aa2	450,000	493,133

U. of MN VRDN, Ser. C, 0.30s, 12/1/36	VMIG1	1,000,000	1,000,000

Western MN Muni. Pwr. Agcy. Rev. Bonds, Ser. A,
AMBAC, 5 1/2s, 1/1/16	A2	565,000	571,356

Winona, Hlth. Care Fac. Rev. Bonds (Winona Hlth.
Oblig. Group)
Ser. A, 6s, 7/1/34	BBB–	250,000	249,985
5s, 7/1/16	BBB–	425,000	429,641
5s, 7/1/15	BBB–	450,000	459,279
5s, 7/1/14	BBB–	425,000	436,165

			89,850,115
Ohio (1.1%)
Buckeye, Tobacco Settlement Fin. Auth. Rev.
Bonds, Ser. A-2, 5 3/4s, 6/1/34	BBB	1,300,000	995,657

			995,657
Puerto Rico (0.9%)
Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds
Ser. XX, 5 1/4s, 7/1/40	A3	300,000	302,793
Ser. ZZ, 5 1/4s, 7/1/26	A3	500,000	524,310

			827,103


TOTAL INVESTMENTS

Total investments (cost $88,631,751)			$92,192,620

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from June 1, 2009 through May 31, 2010 (the reporting period).

* Percentages indicated are based on net assets of $93,421,840.

The rates shown on VRDN are the current interest rates at the close of the reporting period.

The dates shown on debt obligations are the original maturity dates.

The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


Health care	25.9%
Local government	18.2
Education	11.5

Level 1 — Valuations based on quoted prices for identical securities in active markets.

Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:


		Valuation inputs

Investments in securities:	Level 1	Level 2	Level 3

Municipal bonds and notes	$—	$92,192,620	$—

Totals by level	$—	$92,192,620	$—

The accompanying notes are an integral part of these financial statements.

Statement of assets and liabilities 5/31/10


ASSETS

Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $88,631,751)	$92,192,620

Cash	157,881

Interest and other receivables	1,331,496

Receivable for shares of the fund sold	111,460

Total assets	93,793,457


LIABILITIES

Distributions payable to shareholders	82,129

Payable for shares of the fund repurchased	130,622

Payable for compensation of Manager (Note 2)	35,077

Payable for investor servicing fees (Note 2)	4,087

Payable for custodian fees (Note 2)	2,887

Payable for Trustee compensation and expenses (Note 2)	57,546

Payable for administrative services (Note 2)	301

Payable for distribution fees (Note 2)	38,646

Other accrued expenses	20,322

Total liabilities	371,617

Net assets	$93,421,840


REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$90,493,360

Undistributed net investment income (Note 1)	24,255

Accumulated net realized loss on investments (Note 1)	(656,644)

Net unrealized appreciation of investments	3,560,869

Total — Representing net assets applicable to capital shares outstanding	$93,421,840


COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share ($82,937,203 divided by 9,165,896 shares)	$9.05

Offering price per class A share (100/96.00 of $9.05)*	$9.43

Net asset value and offering price per class B share ($4,188,916 divided by 464,152 shares)**	$9.02

Net asset value and offering price per class C share ($5,349,757 divided by 592,213 shares)**	$9.03

Net asset value and redemption price per class M share ($664,606 divided by 73,505 shares)	$9.04

Offering price per class M share (100/96.75 of $9.04)***	$9.34

Net asset value, offering price and redemption price per class Y share
($281,358 divided by 31,070 shares)	$9.06

* On single retail sales of less than $100,000. On sales of $100,000 or more 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 the offering price is reduced.

The accompanying notes are an integral part of these financial statements.

Statement of changes in net assets


INCREASE (DECREASE) IN NET ASSETS	Year ended 5/31/10	Year ended 5/31/09

Operations:
Net investment income	$3,411,898	$3,674,557

Net realized gain (loss) on investments	303,196	(460,449)

Net unrealized appreciation (depreciation) of investments	3,309,053	(1,580,893)

Net increase in net assets resulting from operations	7,024,147	1,633,215

Distributions to shareholders (Note 1):
From ordinary income
Taxable net investment income

Class A	(23,867)	(13,990)

Class B	(1,754)	(1,452)

Class C	(1,218)	(319)

Class M	(193)	(108)

Class Y	(182)	(7)

From tax-exempt net investment income
Class A	(3,072,974)	(3,290,713)

Class B	(181,206)	(279,414)

Class C	(122,460)	(55,379)

Class M	(22,757)	(22,998)

Class Y	(16,379)	(1,406)

Redemption fees (Note 1)	—	475

Decrease from capital share transactions (Note 4)	(395,236)	(8,518,788)

Total increase (decrease) in net assets	3,185,921	(10,550,884)


NET ASSETS

Beginning of year	90,235,919	100,786,803

End of year (including undistributed net investment income of
$24,255 and $4,351, respectively)	$93,421,840	$90,235,919

The accompanying notes are an integral part of these financial statements.

Financial highlights (For a common share outstanding throughout the period)

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio

Ratio of net

Net realized

of expenses

investment

Net asset value,

and unrealized

Total from

From net

Net asset

Total return

Net assets,

to average

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

Redemption

value, end of

at net asset

end of period

net assets

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

income

Total distributions

fees

period

value (%) ^a

(in thousands)

(%) ^b,c

net assets (%) ^b

turnover (%)

Class A

May 31, 2010

$8.70

.34

.35

.69

(.34)

(.34)

—

$9.05

8.12

$82,937

.86

3.84

20.57

May 31, 2009

8.82

.34

(.12)

.22

(.34)

(.34)

— ^d

8.70

2.73

79,859

.90

4.05

17.28

May 31, 2008

8.89

.34

(.07)

.27

(.34)

(.34)

— ^d

8.82

3.12

89,479

.88

3.89

32.34

May 31, 2007

8.90

.35

(.01)

.34

(.35)

(.35)

—

8.89

3.86

90,982

.89

3.92

27.52

May 31, 2006

9.11

.35

(.21)

.14

(.35)

(.35)

—

8.90

1.52

91,342

.88

3.85

7.68

Class B

May 31, 2010

$8.67

.28

.36

.64

(.29)

(.29)

—

$9.02

7.45

$4,189

1.49

3.21

20.57

May 31, 2009

8.80

.29

(.13)

.16

(.29)

(.29)

— ^d

8.67

1.96

6,874

1.53

3.41

17.28

May 31, 2008

8.87

.29

(.07)

.22

(.29)

(.29)

— ^d

8.80

2.46

9,863

1.52

3.25

32.34

May 31, 2007

8.88

.29

(.01)

.28

(.29)

(.29)

—

8.87

3.17

13,299

1.53

3.28

27.52

May 31, 2006

9.09

.29

(.21)

.08

(.29)

(.29)

—

8.88

.87

20,121

1.53

3.19

7.68

Class C

May 31, 2010

$8.68

.27

.35

.62

(.27)

(.27)

—

$9.03

7.31

$5,350

1.64

3.06

20.57

May 31, 2009

8.80

.28

(.12)

.16

(.28)

(.28)

— ^d

8.68

1.91

2,826

1.68

3.33

17.28

May 31, 2008

8.87

.27

(.07)

.20

(.27)

(.27)

— ^d

8.80

2.36

789

1.67

3.10

32.34

May 31, 2007 †

8.98

.19

(.12)

.07

(.18)

(.18)

—

8.87

.84 *

709

1.11 *

2.03 *

27.52

Class M

May 31, 2010

$8.69

.32

.35

.67

(.32)

(.32)

—

$9.04

7.82

$665

1.14

3.56

20.57

May 31, 2009

8.82

.32

(.13)

.19

(.32)

(.32)

— ^d

8.69

2.33

612

1.18

3.77

17.28

May 31, 2008

8.89

.32

(.07)

.25

(.32)

(.32)

— ^d

8.82

2.82

638

1.17

3.60

32.34

May 31, 2007

8.90

.33

(.02)

.31

(.32)

(.32)

—

8.89

3.55

683

1.18

3.62

27.52

May 31, 2006

9.11

.32

(.21)

.11

(.32)

(.32)

—

8.90

1.21

888

1.18

3.56

7.68

Class Y

May 31, 2010

$8.70

.36

.37

.73

(.37)

(.37)

—

$9.06

8.49

$281

.64

4.09

20.57

May 31, 2009

8.83

.36

(.13)

.23

(.36)

(.36)

— ^d

8.70

2.82

.68

4.36

17.28

May 31, 2008 ††

8.87

.15

(.04)

.11

(.15)

(.15)

— ^d

8.83

1.26 *

.28 *

1.68 *

32.34

See notes to financial highlights at the end of this section.

The accompanying notes are an integral part of these financial statements.


28	29

Financial highlights (Continued)

* Not annualized.

^† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

^†^† For the period January 2, 2008 (commencement of operations) to May 31, 2008.

^aTotal return assumes dividend reinvestment and does not reflect the effect of sales charges.


	5/31/10	5/31/09	5/31/08	5/31/07	5/31/06

Class A	0.03%	0.08%	0.08%	0.08%	0.05%

Class B	0.03	0.08	0.08	0.08	0.05

Class C	0.03	0.08	0.08	0.06	N/A

Class M	0.03	0.08	0.08	0.08	0.05

Class Y	0.03	0.08	0.05	N/A	N/A

^cIncludes amounts paid through expense offset arrangements (Note 2).

^dAmount represents less than $0.01 per share.

The accompanying notes are an integral part of these financial statements.

Notes to financial statements 5/31/10

Note 1: Significant accounting policies

Putnam Minnesota Tax Exempt Income Fund (the fund), is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The investment objective of the fund is to seek as high a level of current income exempt from federal income tax and Minnesota personal income tax as Putnam Investment Management, LLC (Putnam Management), the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC, believes is consistent with preservation of capital by investing in a portfolio primarily consisting of investment-grade tax-exempt securities issued in the state of Minnesota with intermediate- to long-term maturities. The fund may be affected by economic and political developments in the state of Minnesota.

At May 31, 2010, the fund had a capital loss carryover of $203,789 available to the extent allowed by the Code to offset future net capital gain, if any. This capital loss carryover will expire on May 31, 2017.

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer to its fiscal year ending May 31, 2011 $70,485 of losses recognized during the period November 1, 2009 to May 31, 2010.

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. These differences include temporary and/or permanent differences of losses on wash sale transactions, post-October loss deferrals, the expiration of a capital loss carryover, dividends payable, market discount and straddle loss deferrals. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the reporting period ended, the fund reclassified $50,996 to decrease distributions in excess of net investment income and $205,592 to decrease paid-in-capital, with a decrease to accumulated net realized losses of $154,596.

The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:


Unrealized appreciation	$3,820,998
Unrealized depreciation	(385,583)

Net unrealized appreciation	3,435,415
Undistributed tax-exempt income	48,713
Undistributed ordinary income	57,672
Capital loss carryforward	(203,789)
Post-October loss	(70,485)
Cost for federal income tax purposes	$88,757,205

Note 2: Management fee, administrative services and other transactions

Effective January 1, 2010, the fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows: 0.590% of the first $5 billion, 0.540% of the next $5 billion, 0.490% of the next $10 billion, 0.440% of the next $10 billion, 0.390% of the next $50 billion, 0.370% of the next $50 billion, 0.360% of the next $100 billion and 0.355% thereafter.

Prior to January 1, 2010, the fund paid Putnam Management for management and investment advisory services quarterly based on the average net assets of the fund. Such fee was based on the lesser of (i) an annual rate of 0.50% of the average net assets of the fund or (ii) the following annual rates expressed as a percentage of the fund’s average net assets: 0.60% of the first $500 million, 0.50% of the next $500 million, 0.45% of the next $500 million, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355% of the next $5 billion, 0.34% of the next $5 billion and 0.33% thereafter.

Each independent Trustee of the fund receives an annual Trustee fee, of which $64, 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 and industry seminars and for certain compliance-related matters. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

average of (i) 0.20% on the net assets of the fund attributable to class A shares purchased and paid for prior to April 1, 2005 and (ii) 0.25% on all other net assets of the fund attributable to class A shares.

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $10,827 and $24 from the sale of class A and class M shares, respectively, and received $4,083 and $102 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

Note 3: Purchases and sales of securities

During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $17,900,681 and $18,639,081, respectively. There were no purchases or proceeds from sales of U.S. government securities.

Note 4: Capital shares

At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


	Year ended 5/31/10		Year ended 5/31/09

Class A	Shares	Amount	Shares	Amount

Shares sold	999,375	$8,918,723	1,110,290	$9,352,801

Shares issued in connection with
reinvestment of distributions	261,262	2,326,463	297,436	2,507,545

	1,260,637	11,245,186	1,407,726	11,860,346

Shares repurchased	(1,276,657)	(11,334,883)	(2,366,794)	(19,650,690)

Net decrease	(16,020)	$(89,697)	(959,068)	$(7,790,344)


	Year ended 5/31/10		Year ended 5/31/09

Class B	Shares	Amount	Shares	Amount

Shares sold	27,088	$242,064	70,064	$595,543

Shares issued in connection with
reinvestment of distributions	13,753	121,952	22,931	192,583

	40,841	364,016	92,995	788,126

Shares repurchased	(369,075)	(3,276,720)	(421,457)	(3,536,914)

Net decrease	(328,234)	$(2,912,704)	(328,462)	$(2,748,788)


	Year ended 5/31/10		Year ended 5/31/09

Class C	Shares	Amount	Shares	Amount

Shares sold	446,257	$3,986,841	273,090	$2,301,121

Shares issued in connection with
reinvestment of distributions	8,351	74,487	4,054	34,089

	454,608	4,061,328	277,144	2,335,210

Shares repurchased	(187,910)	(1,682,115)	(41,270)	(344,752)

Net increase	266,698	$2,379,213	235,874	$1,990,458


	Year ended 5/31/10		Year ended 5/31/09

Class M	Shares	Amount	Shares	Amount

Shares sold	1,730	$15,421	2,304	$19,377

Shares issued in connection with
reinvestment of distributions	2,523	22,450	2,629	22,152

	4,253	37,871	4,933	41,529

Shares repurchased	(1,207)	(10,774)	(6,802)	(58,795)

Net increase (decrease)	3,046	$27,097	(1,869)	$(17,266)


	Year ended 5/31/10		Year ended 5/31/09

Class Y	Shares	Amount	Shares	Amount

Shares sold	66,969	$589,385	5,301	$45,739

Shares issued in connection with
reinvestment of distributions	400	3,548	168	1,413

	67,369	592,933	5,469	47,152

Shares repurchased	(43,765)	(392,078)	—	—

Net increase	23,604	$200,855	5,469	$47,152

At the close of the reporting period, Putnam Investments, LLC owned 1,246 class Y shares of the fund (4.01% of class Y shares outstanding), valued at $11,289.

Note 5: Regulatory matters and litigation

Note 6: Market and credit risk

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam New Jersey Tax Exempt Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam New Jersey Tax Exempt Income Fund (the “fund”) at May 31, 2010, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at May 31, 2010 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
July 13, 2010


The fund’s portfolio 5/31/10

Key to abbreviations

AGM Assured Guaranty Municipal Corporation	FNMA Coll. Federal National Mortgage
AGO Assured Guaranty, Ltd.	Association Collateralized
AMBAC AMBAC Indemnity Corporation	G.O. Bonds General Obligation Bonds
Cmnwlth. of PR Gtd. Commonwealth of	GNMA Coll. Government National Mortgage
Puerto Rico Guaranteed	Association Collateralized
COP Certificates of Participation	NATL National Public Finance Guarantee Corp.
FGIC Financial Guaranty Insurance Company	Radian Insd. Radian Group Insured
FHA Insd. Federal Housing Administration Insured	U.S. Govt. Coll. U.S. Government Collateralized
FHLMC Coll. Federal Home Loan Mortgage	VRDN Variable Rate Demand Notes
Corporation Collateralized


MUNICIPAL BONDS AND NOTES (98.0%)*	Rating**	Principal amount	Value

Guam (0.4%)
Territory of GU, Govt. Ltd. Oblig. Rev. Bonds
(Section 30), Ser. A, 5 3/4s, 12/1/34	BBB–	$1,000,000	$1,040,040

			1,040,040
New Jersey (79.8%)
Bayonne, G.O. Bonds (School Bldg.), AGM,
5s, 7/15/25	Aa2	2,009,000	2,098,200

Burlington Cnty., Bridge Comm. Econ. Dev. Rev.
Bonds (The Evergreens), 5 5/8s, 1/1/38	BB+/P	1,450,000	1,240,736

Camden Cnty., Impt. Auth. VRDN (Harvest Village),
Ser. A, 0.29s, 7/1/29	A–1+	1,245,000	1,245,000

Casino Reinvestment Dev. Auth. Rev. Bonds, Ser. A,
NATL, 5 1/4s, 6/1/21	A	5,405,000	5,516,667

Cumberland Cnty., Impt. Auth. Solid Waste Syst.
Rev. Bonds, Ser. A, 5s, 1/1/30	Baa1	2,350,000	2,358,037

Essex Cnty., Impt. Auth. Rev. Bonds
NATL, 5 1/2s, 10/1/30	Aa2	1,290,000	1,481,165
Ser. 06, AMBAC, 5 1/4s, 12/15/20	Aa2	1,000,000	1,153,050
AMBAC, 5s, 12/15/23	Aa2	2,000,000	2,149,140

Freehold, Regl. High School Dist. G.O. Bonds, FGIC,
NATL, 5s, 3/1/19	AA	1,500,000	1,756,860

Garden State Preservation Trust Rev. Bonds
(Open Space & Farmland 2005), Ser. A, AGM,
5 3/4s, 11/1/28	AAA	2,000,000	2,486,540
Ser. B, AGM, zero %, 11/1/24	AAA	6,000,000	3,164,040

Gloucester Cnty., Impt. Auth. Rev. Bonds
5s, 4/1/28	AA+	2,310,000	2,525,500
5s, 4/1/23	AA+	500,000	560,760

Hillsborough Twp., School Dist. G.O. Bonds, AGM,
5 3/8s, 10/1/21	AAA	1,720,000	2,082,146

Jersey City, Swr. Auth. Rev. Bonds, AMBAC,
6 1/4s, 1/1/14	BBB/P	1,700,000	1,839,757


MUNICIPAL BONDS AND NOTES (98.0%)* cont.	Rating**	Principal amount	Value

New Jersey cont.
Middlesex Cnty., Impt. Auth. Lease Rev. Bonds
(Perth Amboy Muni. Complex), FGIC, NATL,
5s, 3/15/31	AA/P	$1,500,000	$1,399,800
(North Brunswick Twp.), Ser. A, FGIC, NATL,
5s, 10/1/20	Aa2	1,000,000	1,045,980

Middlesex Cnty., Util. Auth. Swr. Rev. Bonds, Ser. A,
NATL, 6 1/4s, 8/15/10	A	345,000	348,177

Middletown, Township Board of Ed. G.O. Bonds,
5s, 8/1/27	AA	1,500,000	1,651,815

Millburn Twp., Board of Ed. G.O. Bonds,
5.35s, 7/15/17	Aa1	1,150,000	1,372,353

Monroe Twp., Muni. Util. Auth. Middlesex Cnty.,
Rev. Bonds, FGIC, 5 1/8s, 2/1/17	Aa1	505,000	512,787

New Brunswick Pkg. Auth. Rev. Bonds, Ser. A,
NATL, 5s, 9/1/24	A1	1,225,000	1,288,651

Newark, Hsg. Auth. Rev. Bonds (Port Auth. Newark
Marine Term.), NATL, 5 1/4s, 1/1/22 (Prerefunded)	AA–	2,260,000	2,573,620

NJ Econ. Dev. Auth. Rev. Bonds
(Cedar Crest Village, Inc.), Ser. A, U.S. Govt. Coll.,
7 1/4s, 11/15/31 (Prerefunded)	AAA/F	1,000,000	1,106,550
(Newark Arpt. Marriott Hotel), 7s, 10/1/14	Ba1	1,300,000	1,302,600
(First Mtge. Presbyterian Home), Ser. A,
6 3/8s, 11/1/31	BB/P	1,500,000	1,285,980
(Burlington Coat Factory), 6 1/8s, 9/1/10	A1	360,000	360,108
(Cranes Mill), Ser. A, 6s, 7/1/38	BBB–/F	750,000	689,213
(Franciscan Oaks), 5 3/4s, 10/1/23	BB/P	1,755,000	1,620,988
(Cigarette Tax), 5 1/2s, 6/15/24	Baa2	2,950,000	2,927,167
(School Fac. Construction), Ser. AA,
5 1/4s, 12/15/33	Aa3	1,500,000	1,603,395
(School Fac. Construction), Ser. Y, 5s, 9/1/33	Aa3	500,000	521,575
Ser. U, AGM, 5s, 9/1/32	AAA	1,000,000	1,053,290
(School Fac. Construction), Ser. P, 5s, 9/1/30	Aa3	2,040,000	2,112,094
(Motor Vehicle), Ser. A, NATL, 5s, 7/1/27	A	1,000,000	1,010,980
(School Fac. Construction), Ser. L, AGM, 5s, 3/1/24	AAA	400,000	422,772
(School Fac. Construction), Ser. L, AGM, 5s, 3/1/23	AAA	2,545,000	2,685,357

NJ Econ. Dev. Auth. Retirement Cmnty. Rev. Bonds
(Seabrook Village, Inc.), 5 1/4s, 11/15/36	BB–/P	200,000	166,210

NJ Econ. Dev. Auth. School VRDN, Ser. R-1,
0.24s, 9/1/31	VMIG1	1,460,000	1,460,000

NJ Econ. Dev. Auth. Solid Waste Mandatory Put
Bonds (Disp. Waste Mgt.), 5.3s, 6/1/14	BBB	1,500,000	1,614,900

NJ Econ. Dev. Auth. Wtr. Fac. Rev. Bonds
(American Wtr. Co.), Ser. A, 5.7s, 10/1/39	A2	3,500,000	3,545,150

NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds
(Gen. Hosp. Ctr.-Passaic Inc.), AGM, U.S. Govt. Coll.,
6 3/4s, 7/1/19 (Prerefunded)	AAA	5,000,000	6,251,150
(St. Joseph Hlth. Care Syst.), 6 5/8s, 7/1/38	BBB–	1,000,000	1,029,180
(Atlantic City Med.), 6 1/4s, 7/1/17	A1	560,000	586,342
(Atlantic City Med.), 6 1/4s, 7/1/17 (Prerefunded)	A+	440,000	490,477
(Chilton Memorial Hosp.), 5 3/4s, 7/1/39	Baa1	2,000,000	2,009,300
(St. Peter’s U. Hosp.), 5 3/4s, 7/1/37	Baa2	3,510,000	3,552,752


MUNICIPAL BONDS AND NOTES (98.0%)* cont.	Rating**	Principal amount	Value

New Jersey cont.
NJ Hlth. Care Fac. Fin. Auth. Rev. Bonds
(United Methodist Homes), Ser. A, 5 3/4s, 7/1/29	BB+	$1,750,000	$1,603,998
(Atlantic City Med.), 5 3/4s, 7/1/25	A1	975,000	1,000,438
(Children’s Specialized Hosp.), Ser. A,
5 1/2s, 7/1/36	Baa3	600,000	576,702
(Children’s Specialized Hosp.), Ser. A,
5 1/2s, 7/1/30	Baa3	900,000	882,810
(Hackensack U. Med. Ctr.), AGO, 5 1/4s, 1/1/31	Aa3	1,000,000	1,037,270
(Hunterdon Med. Ctr.), Ser. A, 5 1/4s, 7/1/25	A–	700,000	709,044
(Englewood Hosp.), NATL, FHA Insd.,
5 1/4s, 2/1/16	A	1,615,000	1,674,965
(Hackensack U. Med. Ctr.), 5 1/8s, 1/1/21	Baa1	1,425,000	1,468,676
(Hlth. Care Fac. Good Shepherd), Radian Insd.,
5.1s, 7/1/21	BB+/P	1,010,000	903,930
(South Jersey Hosp.), 5s, 7/1/46	A2	3,055,000	2,931,822
(Hunterdon Med. Ctr.), Ser. B, 5s, 7/1/36	A–	1,710,000	1,621,696
(Englewood Hosp.), NATL, FHA Insd., 5s, 8/1/31	A	1,250,000	1,250,675
(Hosp. Asset Transformation), Ser. A, 5s, 10/1/28	Aa3	1,000,000	1,034,350
(AHS Hosp. Corp.), Ser. A, 5s, 7/1/27	A1	935,000	959,965
(Hunterdon Med. Ctr.), Ser. B, 5s, 7/1/26	A–	510,000	501,682
(South Jersey Hosp.), 5s, 7/1/26	A2	1,500,000	1,511,670
(Atlanticare Regl. Med. Ctr.), 5s, 7/1/24	A1	1,555,000	1,614,028
(Children’s Specialized Hosp.), Ser. A, 5s, 7/1/24	Baa3	400,000	387,412
(Atlanticare Regl. Med. Ctr.), 5s, 7/1/23	A1	1,500,000	1,561,575
(Children’s Specialized Hosp.), Ser. A, 5s, 7/1/18	Baa3	1,000,000	1,011,570
(Catholic Hlth. East), 5s, 11/15/15	A1	1,250,000	1,371,525

NJ Hlth. Care Fac. Fin. Auth. VRDN
(AHS Hospital Corp.), Ser. B, 0.26s, 7/1/36	VMIG1	3,000,000	3,000,000
Ser. A, 0.26s, 7/1/31	VMIG1	3,000,000	3,000,000
(Virtua Hlth.), Ser. B, 1/4s, 7/1/43	A–1+	2,215,000	2,215,000

NJ State COP (Equip. Lease Purchase), Ser. A,
5 1/4s, 6/15/29	Aa3	250,000	266,848

NJ State G.O. Bonds
FGIC, NATL, 6s, 2/15/11	Aa2	665,000	691,387
5s, 6/1/27	Aa2	1,500,000	1,625,940
5s, 6/1/20	Aa2	2,000,000	2,291,220

NJ State Rev. Bonds (Trans. Syst.), Ser. C, AMBAC,
zero %, 12/15/24	AA–	2,400,000	1,141,368

NJ State Edl. Fac. Auth. Rev. Bonds
(U. of Med. and Dentistry), Ser. B, 7 1/2s, 12/1/32	Baa1	500,000	576,730
(Georgian Court College), Ser. C, U.S. Govt. Coll.,
6 1/2s, 7/1/33 (Prerefunded)	AAA	1,250,000	1,450,400
(Seton Hall U.), Ser. E, 6 1/4s, 7/1/37	A	750,000	858,323
(Fairleigh Dickinson), Ser. C, 6s, 7/1/20	BBB–/F	1,000,000	1,054,130
(Kean U.), Ser. A, 5 1/2s, 9/1/36	A2	1,635,000	1,754,862
(Fairleigh Dickinson), Ser. C, 5 1/2s, 7/1/23	BBB–/F	1,000,000	1,027,470
(Richard Stockton College), Ser. A, 5 3/8s, 7/1/38	A2	500,000	523,815
(Montclair State U.), Ser. J, 5 1/4s, 7/1/38	A1	500,000	518,970
(Georgian Court U.), Ser. D, 5 1/4s, 7/1/27	Baa1	1,575,000	1,616,092
(NJ City U.), Ser. E, AGO, 5s, 7/1/28	Aa3	1,000,000	1,048,010


MUNICIPAL BONDS AND NOTES (98.0%)* cont.	Rating**	Principal amount	Value

New Jersey cont.
NJ State Edl. Fac. Auth. Rev. Bonds
(Ramapo College of NJ), Ser. E, FGIC, 5s,
7/1/28 (Prerefunded)	A2	$3,590,000	$4,098,954
(William Paterson U.), Ser. C, AGO, 5s, 7/1/28	Aa3	2,000,000	2,133,980
(Georgian Court U.), Ser. D, 5s, 7/1/27	Baa1	1,000,000	1,011,250
(College of NJ), Ser. D, AGM, 5s, 7/1/26	AAA	1,000,000	1,074,130
(College of NJ), Ser. D, AGM, 5s, 7/1/25	AAA	1,500,000	1,616,580
(Kean U.), Ser. A, 5s, 9/1/24	A2	1,500,000	1,594,605
(William Patterson U.), Ser. A, FGIC, 5s, 7/1/22	A1	1,110,000	1,162,414
(Rowan U.), Ser. C, NATL, 5s, 7/1/21 (Prerefunded)	A+	1,565,000	1,783,521
(Higher Ed. Cap. Impt. Fund), Ser. A, AGM,
5s, 9/1/17	AAA	4,315,000	4,712,109

NJ State Higher Ed. Assistance Auth. Rev. Bonds
(Student Loan), Ser. A
5 5/8s, 6/1/30	AA	1,750,000	1,857,083
5s, 6/1/18	AA	2,000,000	2,182,860

NJ State Hsg. & Mtge. Fin. Agcy. Rev. Bonds
Ser. AA, 6 3/8s, 10/1/28	Aa2	980,000	1,068,004
Ser. E1, AGM, 5.7s, 5/1/20	AAA	410,000	410,951

NJ State Tpk. Auth. Rev. Bonds
Ser. C, NATL, 6 1/2s, 1/1/16 (Prerefunded)	A+	4,000,000	4,635,680
Ser. E, 5 1/4s, 1/1/40	A+	2,000,000	2,115,900
Ser. A, AMBAC, 5s, 1/1/30	A+	3,000,000	3,082,470
Ser. A, AGM, 5s, 1/1/20	AAA	4,000,000	4,291,920

NJ State Trans. Trust Fund Auth. Rev. Bonds
(Trans. Syst.), Ser. A
5 7/8s, 12/15/38	Aa3	1,350,000	1,523,124
AMBAC, 5s, 12/15/27	Aa3	2,475,000	2,641,221
zero %, 12/15/33	AA–	5,100,000	1,365,015

North Bergen Twp., Muni. Util. Auth. Swr. Rev.
Bonds, NATL
zero %, 12/15/27	A2	1,005,000	392,161
zero %, 12/15/26	A2	1,000,000	416,390

Northern Burlington Cnty., Regl. School Dist. G.O.
Bonds, FGIC, NATL, 5 1/4s, 4/1/17	Aa2	1,130,000	1,300,924

Ocean City, Util. Auth. Waste Wtr. Rev. Bonds,
NATL, 5 1/4s, 1/1/22	Aaa	2,000,000	2,404,780

Rutgers State U. COP, AMBAC, 5s, 1/1/24	Aa2	1,800,000	1,900,548

Rutgers State U. Rev. Bonds
Ser. A, 6.4s, 5/1/13	Aa2	2,455,000	2,693,110
Ser. F, 5s, 5/1/30	Aa2	1,000,000	1,078,190
Ser. E, FGIC, NATL, 5s, 5/1/25	Aa2	1,330,000	1,416,809

Salem Cnty., Poll. Control Fin. Auth. Rev. Bonds,
Ser. A, 5 3/4s, 4/1/31	Baa1	1,250,000	1,263,975

South Jersey Port. Corp. Rev. Bonds, 5.2s, 1/1/23	A	1,250,000	1,254,513

Stony Brook, Regl. Swr. Rev. Bonds, Ser. B,
5.45s, 12/1/12	Aa1	630,000	671,202

Sussex Cnty., Muni. Util. Auth. (Waste Wtr. Facs.),
Ser. B, AGM, zero %, 12/1/30	AAA	1,500,000	582,390


MUNICIPAL BONDS AND NOTES (98.0%)* cont.	Rating**	Principal amount	Value

New Jersey cont.
Tobacco Settlement Fin. Corp. Rev. Bonds
6 3/8s, 6/1/32 (Prerefunded)	Aaa	$1,500,000	$1,705,350
6s, 6/1/37 (Prerefunded)	Aaa	4,500,000	4,973,445
Ser. 1A, 5s, 6/1/41	BBB	2,000,000	1,380,040
Ser. 1A, 5s, 6/1/29	BBB	1,000,000	844,440
Ser. 1A, 4 5/8s, 6/1/26	BBB	2,500,000	2,124,425
Ser. 1A, 4 1/2s, 6/1/23	BBB	1,265,000	1,185,507

U. of Medicine & Dentistry Rev. Bonds, Ser. E, NATL,
6 1/2s, 12/1/12 (Prerefunded)	A	2,550,000	2,752,623

			206,237,272
New York (3.6%)
NY City, G.O. Bonds, Ser. C, 5s, 8/1/24	Aa2	2,445,000	2,674,048

Port Auth. NY & NJ Rev. Bonds, Ser. 93rd,
6 1/8s, 6/1/94	Aa2	5,000,000	5,981,300

Port Auth. NY & NJ Special Oblig. Rev. Bonds
(Kennedy Intl. Arpt. — 5th Installment),
6 3/4s, 10/1/19	BB+/P	600,000	531,438

			9,186,786
Pennsylvania (2.9%)
Delaware River Port Auth. Rev. Bonds (Port Dist.),
Ser. B, AGM, 5 5/8s, 1/1/26	AAA	7,490,000	7,512,770

			7,512,770
Puerto Rico (10.6%)
Cmnwlth. of PR, G.O. Bonds
Ser. A, FGIC, 5 1/2s, 7/1/21	A3	1,490,000	1,594,628
(Pub. Impt.), Ser. A, NATL, 5 1/2s, 7/1/20	A	2,500,000	2,696,475

Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds,
Ser. A
6s, 7/1/44	Baa1	3,300,000	3,465,491
6s, 7/1/38	Baa1	4,500,000	4,759,065

Cmnwlth. of PR, Hsg. Fin. Corp. Rev. Bonds, Ser. B,
GNMA Coll., FNMA Coll., FHLMC Coll., 4.45s, 6/1/27	Aaa	35,000	35,000

Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
Ser. N, 5 1/2s, 7/1/25	A3	1,000,000	1,064,490
Ser. X, 5 1/2s, 7/1/13	A2	380,000	399,832
Ser. K, 5s, 7/1/30	A3	500,000	498,725

Cmnwlth. of PR, Indl. Tourist Edl. Med. & Env.
Control Fac. Rev. Bonds (Cogen. Fac.-AES),
6 5/8s, 6/1/26	Baa3	1,000,000	1,009,260

Cmnwlth. of PR, Infrastructure Fin. Auth. Special
Tax Bonds, Ser. C, AMBAC, 5 1/2s, 7/1/25	A3	1,025,000	1,068,819

Cmnwlth. of PR, Muni. Fin. Agcy. G.O. Bonds, Ser. A,
5 1/4s, 8/1/24	A3	1,250,000	1,273,650

Cmnwlth. of PR, Pub. Bldg. Auth. Rev. Bonds
Ser. Q, Cmnwlth. of PR Gtd., 5 5/8s, 7/1/39	A3	1,000,000	1,010,210
(Govt. Fac.), Ser. I, Cmnwlth. of PR Gtd.,
5 1/4s, 7/1/29	A3	570,000	577,900

Cmnwlth. of PR, Pub. Fin. Corp. Mandatory Put Bonds
(Comnwlth. Appropriation), Ser. A, 5 3/4s, 2/1/12	Baa1	1,000,000	1,042,040


MUNICIPAL BONDS AND NOTES (98.0%)* cont.	Rating**	Principal amount	Value

Puerto Rico cont.
Cmnwlth. of PR, Sales Tax Fin. Corp. Rev. Bonds,
Ser. A, 6s, 8/1/42	A1	$5,000,000	$5,447,900

U. of PR Rev. Bonds, Ser. P, 5s, 6/1/24	Baa1	1,500,000	1,513,125

			27,456,610
Virgin Islands (0.7%)
VI Pub. Fin. Auth. Rev. Bonds
Ser. A, 6s, 10/1/39	Baa3	450,000	475,281
(Hovensa Refinery Fac.), 5 7/8s, 7/1/22	Baa3	750,000	756,848
Ser. A-1, 5s, 10/1/39	Baa2	525,000	514,668

			1,746,797


TOTAL INVESTMENTS

Total investments (cost $238,412,745)			$253,180,275

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from June 1, 2009 through May 31, 2010 (the reporting period).

* Percentages indicated are based on net assets of $258,430,081.

The rates shown on Mandatory Put Bonds and VRDN are the current interest rates at the close of the reporting period.

The dates shown on Mandatory Put Bonds are the next mandatory put dates.

The dates shown on debt obligations other than Mandatory Put Bonds are the original maturity dates.

The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


Health care	17.0%
State government	16.3
Prerefunded	12.3
Transportation	10.1

The fund had the following insurance concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


AGM	15.7%
NATL	14.6

Level 1 — Valuations based on quoted prices for identical securities in active markets.

Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:


		Valuation inputs

Investments in securities:	Level 1	Level 2	Level 3

Municipal bonds and notes	$—	$253,180,275	$—

Totals by level	$—	$253,180,275	$—

The accompanying notes are an integral part of these financial statements.

Statement of assets and liabilities 5/31/10


ASSETS

Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $238,412,745)	$253,180,275

Cash	64,289

Interest and other receivables	4,576,719

Receivable for shares of the fund sold	2,937,873

Receivable for investments sold	195,008

Total assets	260,954,164


LIABILITIES

Distributions payable to shareholders	318,652

Payable for investments purchased	1,639,890

Payable for shares of the fund repurchased	256,619

Payable for compensation of Manager (Note 2)	95,608

Payable for investor servicing fees (Note 2)	11,203

Payable for custodian fees (Note 2)	3,051

Payable for Trustee compensation and expenses (Note 2)	62,209

Payable for administrative services (Note 2)	817

Payable for distribution fees (Note 2)	108,783

Other accrued expenses	27,251

Total liabilities	2,524,083

Net assets	$258,430,081


REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$244,590,919

Undistributed net investment income (Note 1)	411,451

Accumulated net realized loss on investments (Note 1)	(1,339,819)

Net unrealized appreciation of investments	14,767,530

Total — Representing net assets applicable to capital shares outstanding	$258,430,081


COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share ($205,848,270 divided by 21,983,314 shares)	$9.36

Offering price per class A share (100/96.00 of $9.36)*	$9.75

Net asset value and offering price per class B share ($12,483,816 divided by 1,334,553 shares)**	$9.35

Net asset value and offering price per class C share ($26,593,762 divided by 2,837,748 shares)**	$9.37

Net asset value and redemption price per class M share ($3,928,292 divided by 419,478 shares)	$9.36

Offering price per class M share (100/96.75 of $9.36)***	$9.67

Net asset value, offering price and redemption price per class Y share
($9,575,941 divided by 1,021,167 shares)	$9.38

* On single retail sales of less than $100,000. On sales of $100,000 or more 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 the offering price is reduced.

The accompanying notes are an integral part of these financial statements.

Statement of changes in net assets


INCREASE IN NET ASSETS	Year ended 5/31/10	Year ended 5/31/09

Operations:
Net investment income	$9,463,911	$8,276,079

Net realized gain (loss) on investments	(826,065)	386,503

Net unrealized appreciation (depreciation) of investments	12,157,945	(4,275,788)

Net increase in net assets resulting from operations	20,795,791	4,386,794

Distributions to shareholders (Note 1):
From ordinary income
Taxable net investment income

Class A	(19,109)	(28,380)

Class B	(1,562)	(4,044)

Class C	(2,054)	(1,443)

Class M	(325)	(253)

Class Y	(526)	(203)

From tax-exempt net investment income
Class A	(7,840,211)	(7,109,762)

Class B	(575,901)	(887,146)

Class C	(660,354)	(274,410)

Class M	(117,495)	(65,214)

Class Y	(213,336)	(52,570)

Redemption fees (Note 1)	81	222

Increase from capital share transactions (Note 4)	35,430,959	12,143,714

Total increase in net assets	46,795,958	8,107,305


NET ASSETS

Beginning of year	211,634,123	203,526,818

End of year (including undistributed net investment
income of $411,451 and $461,206, respectively)	$258,430,081	$211,634,123

The accompanying notes are an integral part of these financial statements.

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Net realized

Ratio of

investment

Net asset value,

and unrealized

Total from

Net asset

Total return

Net assets,

expenses to

income (loss)

beginning

Net investment

gain (loss) on

investment

From net

Total

Redemption

value, end

at net asset

end of period

average net

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

investment income

distributions

fees

of period

value (%) ^a

(in thousands)

assets (%) ^b

net assets (%)

turnover (%)

Class A

May 31, 2010

$8.92

.37

.45

.82

(.38)

(.38)

— ^d

$9.36

9.34

$205,848

.81 ^c

4.10 ^c

9.45

May 31, 2009

9.10

.37

(.17)

.20

(.38)

(.38)

— ^d

8.92

2.36

174,980

.87 ^c

4.22 ^c

11.64

May 31, 2008

9.15

.37

(.04)

.33

(.38)

(.38)

— ^d

9.10

3.65

168,268

.86 ^c

4.07 ^c

27.19

May 31, 2007

9.11

.37

.04

.41

(.37)

(.37)

—

9.15

4.55

159,485

.89 ^c

3.97 ^c

13.89

May 31, 2006

9.32

.37

(.23)

.14

(.35)

(.35)

—

9.11

1.59

157,636

.86

4.00

4.69

Class B

May 31, 2010

$8.91

.32

.44

.76

(.32)

(.32)

— ^d

$9.35

8.65

$12,484

1.44 ^c

3.47 ^c

9.45

May 31, 2009

9.09

.31

(.17)

.14

(.32)

(.32)

— ^d

8.91

1.70

21,044

1.50 ^c

3.58 ^c

11.64

May 31, 2008

9.14

.31

(.04)

.27

(.32)

(.32)

— ^d

9.09

2.99

28,590

1.50 ^c

3.43 ^c

27.19

May 31, 2007

9.10

.31

.04

.35

(.31)

(.31)

—

9.14

3.88

36,076

1.53 ^c

3.33 ^c

13.89

May 31, 2006

9.32

.31

(.24)

.07

(.29)

(.29)

—

9.10

.83

49,019

1.51

3.33

4.69

Class C

May 31, 2010

$8.93

.30

.44

.74

(.30)

(.30)

— ^d

$9.37

8.45

$26,594

1.59 ^c

3.32 ^c

9.45

May 31, 2009

9.10

.30

(.16)

.14

(.31)

(.31)

— ^d

8.93

1.66

11,637

1.65 ^c

3.47 ^c

11.64

May 31, 2008

9.14

.30

(.04)

.26

(.30)

(.30)

— ^d

9.10

2.93

4,704

1.65 ^c

3.31 ^c

27.19

May 31, 2007 †

9.26

.20

(.12)

.08

(.20)

(.20)

—

9.14

.87 *

301

1.11 *^c

2.08 *^c

13.89

Class M

May 31, 2010

$8.92

.35

.44

.79

(.35)

(.35)

— ^d

$9.36

9.01

$3,928

1.09 ^c

3.83 ^c

9.45

May 31, 2009

9.10

.34

(.17)

.17

(.35)

(.35)

— ^d

8.92

2.06

2,058

1.15 ^c

3.95 ^c

11.64

May 31, 2008

9.15

.34

(.04)

.30

(.35)

(.35)

— ^d

9.10

3.38

1,536

1.15 ^c

3.78 ^c

27.19

May 31, 2007

9.11

.34

.04

.38

(.34)

(.34)

—

9.15

4.25

1,586

1.18 ^c

3.68 ^c

13.89

May 31, 2006

9.32

.34

(.22)

.12

(.33)

(.33)

—

9.11

1.28

1,678

1.16

3.71

4.69

Class Y

May 31, 2010

$8.93

.40

.45

.85

(.40)

(.40)

— ^d

$9.38

9.66

$9,576

.59 ^c

4.33 ^c

9.45

May 31, 2009

9.10

.39

(.17)

.22

(.39)

(.39)

— ^d

8.93

2.67

1,915

.65 ^c

4.47 ^c

11.64

May 31, 2008 ††

9.15

.16

(.04)

.12

(.17)

(.17)

—

9.10

1.28 *

429

.27 *^c

1.79 *^c

27.19

† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

†† For the period January 2, 2008 (commencement of operations) to May 31, 2008.

Notes to financial statements 5/31/10

Note 1: Significant accounting policies

Putnam New Jersey Tax Exempt Income Fund (the fund), is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The fund seeks as high a level of current income exempt from federal income tax and New Jersey personal income tax as Putnam Investment Management, LLC (Putnam Management), the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC, believes is consistent with preservation of capital by investing primarily in a portfolio of investment-grade New Jersey tax-exempt securities with intermediate to long-term maturities. The fund may be affected by economic and political developments in the state of New Jersey.

At May 31, 2010, the fund had a capital loss carryover of $371,130 available to the extent allowed by the Code to offset future net capital gain, if any. This capital loss carryover will expire on May 31, 2018.

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer to its fiscal year ending May 31, 2011 $551,218 of losses recognized during the period November 1, 2009 to May 31, 2010.

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. These differences include temporary and/or permanent differences of post-October loss deferrals, dividends payable and straddle loss deferrals. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the reporting period ended, the fund reclassified $82,793 to decrease undistributed net investment income, with a decrease to accumulated net realized loss of $82,793.

The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:


Unrealized appreciation	$15,905,326
Unrealized depreciation	(1,137,796)

Net unrealized appreciation	14,767,530
Undistributed Tax-Exempt Income	726,769
Undistributed ordinary income	3,334
Capital loss carryforward	(371,130)
Post-October loss	(551,218)
Cost for federal income tax purposes	$238,412,745

Note 2: Management fee, administrative services and other transactions

Putnam Management had agreed to waive fees and reimburse expenses of the fund through July 31, 2009 to the extent necessary to ensure that the fund’s expenses did not exceed the simple average of the expenses of all front-end load funds viewed by Lipper, Inc. as having the same investment classification or objective as the fund. The expense reimbursement was based on a comparison of the fund’s expenses with the average annualized operating expenses of the funds in its Lipper peer group for each calendar quarter during the fund’s last fiscal year, excluding 12b-1 fees and without giving effect to any expense offset and brokerage/service arrangements that may reduce fund expenses.

Putnam Management had further agreed to waive fees and reimburse expenses of the fund for the period from July 1, 2008 through July 31, 2009 to the extent necessary to ensure that the fund’s expenses did not exceed the simple average of the expenses of a custom group of competitive funds selected by Lipper, Inc. based on the size of the fund. The expense reimbursement was based on a comparison of the fund’s total expenses with the average operating expenses of the funds in this Lipper custom peer group for their respective 2007 fiscal years, excluding 12b-1 fees and after adjustment for certain expense offset and brokerage/service arrangements that reduced expenses of the fund.

During the reporting period, the fund’s expenses were reduced by $3,311 as a result of the lower of the limits specified above.

Each independent Trustee of the fund receives an annual Trustee fee, of which $175, 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 and industry seminars and for certain compliance-related matters. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $66,597 and $4,340 from the sale of class A and class M shares, respectively, and received $11,318 and $5,729 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

Note 3: Purchases and sales of securities

During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $50,786,552 and $21,242,595, respectively. There were no purchases or proceeds from sales of U.S. government securities.

Note 4: Capital shares

At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


	Year ended 5/31/10		Year ended 5/31/09

Class A	Shares	Amount	Shares	Amount

Shares sold	5,086,869	$46,676,633	3,833,750	$33,484,326

Shares issued in connection with
reinvestment of distributions	533,496	4,905,574	524,107	4,554,956

	5,620,365	51,582,207	4,357,857	38,039,282

Shares repurchased	(3,251,173)	(29,901,139)	(3,240,786)	(27,986,808)

Net increase	2,369,192	$21,681,068	1,117,071	$10,052,474


	Year ended 5/31/10		Year ended 5/31/09

Class B	Shares	Amount	Shares	Amount

Shares sold	138,128	$1,256,616	195,572	$1,723,819

Shares issued in connection with
reinvestment of distributions	44,710	409,642	67,983	590,440

	182,838	1,666,258	263,555	2,314,259

Shares repurchased	(1,209,644)	(11,067,134)	(1,048,028)	(9,072,671)

Net decrease	(1,026,806)	$(9,400,876)	(784,473)	$(6,758,412)


	Year ended 5/31/10		Year ended 5/31/09

Class C	Shares	Amount	Shares	Amount

Shares sold	1,740,224	$15,889,356	958,730	$8,325,857

Shares issued in connection with
reinvestment of distributions	55,355	510,580	23,858	207,226

	1,795,579	16,399,936	982,588	8,533,083

Shares repurchased	(261,610)	(2,410,842)	(195,867)	(1,696,391)

Net increase	1,533,969	$13,989,094	786,721	$6,836,692


	Year ended 5/31/10		Year ended 5/31/09

Class M	Shares	Amount	Shares	Amount

Shares sold	189,096	$1,734,329	65,264	$568,104

Shares issued in connection with
reinvestment of distributions	10,703	98,686	6,347	55,187

	199,799	1,833,015	71,611	623,291

Shares repurchased	(10,991)	(100,496)	(9,818)	(83,764)

Net increase	188,808	$1,732,519	61,793	$539,527


	Year ended 5/31/10		Year ended 5/31/09

Class Y	Shares	Amount	Shares	Amount

Shares sold	928,771	$8,551,071	165,020	$1,453,954

Shares issued in connection with
reinvestment of distributions	19,125	176,668	6,020	52,361

	947,896	8,727,739	171,040	1,506,315

Shares repurchased	(141,162)	(1,298,585)	(3,708)	(32,882)

Net increase	806,734	$7,429,154	167,332	$1,473,433

Note 5: Regulatory matters and litigation

Note 6: Market and credit risk

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam Ohio Tax Exempt Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam Ohio Tax Exempt Income Fund (the “fund”) at May 31, 2010, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at May 31, 2010 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
July 12, 2010


The fund’s portfolio 5/31/10

Key to holding’s abbreviations

AGM Assured Guaranty Municipal Corporation	FNMA Coll. Federal National Mortgage
AGO Assured Guaranty, Ltd.	Association Collateralized
AMBAC AMBAC Indemnity Corporation	FRB Floating Rate Bonds
Cmnwlth. of PR Gtd. Commonwealth of Puerto	G.O. Bonds General Obligation Bonds
Rico Guaranteed	GNMA Coll. Government National Mortgage
COP Certificates of Participation	Association Collateralized
FGIC Financial Guaranty Insurance Company	NATL National Public Finance Guarantee Corp.
FHA Insd. Federal Housing Administration Insured	SGI Syncora Guarantee, Inc.
FHLMC Coll. Federal Home Loan Mortgage	U.S. Govt. Coll. U.S. Government Collateralized
Corporation Collateralized	VRDN Variable Rate Demand Notes


MUNICIPAL BONDS AND NOTES (98.9%)*	Rating**	Principal amount	Value

Guam (0.3%)
Territory of GU, Govt. Ltd. Oblig. Rev. Bonds
(Section 30), Ser. A, 5 3/4s, 12/1/34	BBB–	$500,000	$520,020

			520,020
Ohio (89.1%)
Akron, G.O. Bonds, AGM, 5s, 12/1/25	AAA	1,005,000	1,081,651

Akron, Wtr. Wks. Rev. Bonds, NATL
6s, 12/1/12	A	875,000	935,839
5 1/4s, 12/1/17	Baa1	1,285,000	1,309,929

Allen Cnty., Hosp. Fac. Rev. Bonds (Catholic
Hlth. Care), Ser. A, 5 1/4s, 6/1/38	AA–	1,000,000	1,012,410

Allen Cnty., Hosp. Fac. VRDN (Catholic Hlth.
Care), Ser. B, 0.25s, 10/1/31	VMIG1	1,349,000	1,349,000

American Muni. Pwr. — Ohio, Inc. Rev. Bonds
(Prairie State Energy Campus), Ser. A
AGO, 5 3/4s, 2/15/39	AAA	1,500,000	1,635,900
5s, 2/15/38	A1	1,500,000	1,548,255

Anthony Wayne Local School Dist. G.O. Bonds
(School Fac. Construction & Impt.), AGM,
5 1/2s, 12/1/19	AAA	1,565,000	1,626,661

Barberton, City School Dist. G.O. Bonds (School
Impt.), 5 1/4s, 12/1/28	AA	1,390,000	1,515,823

Brookfield, Local School Dist. G.O. Bonds (School
Fac. Impt.), AGM, 5s, 1/15/26	AAA	1,000,000	1,095,990

Buckeye, Tobacco Settlement Fin. Auth. Rev. Bonds
Ser. A-2, 5 3/4s, 6/1/34	BBB	3,750,000	2,872,088
Ser. A-2, 5 3/8s, 6/1/24	BBB	690,000	631,212
Ser. A-3, stepped coupon zero % (6.25%s,
12/1/12), 2037 ††	BBB	1,200,000	844,236

Canal Winchester, Local School Dist. G.O. Bonds,
NATL, zero %, 12/1/33	A3	1,180,000	345,256

Cincinnati, City School Dist. COP (School Impt.),
AGM, 5s, 12/15/28	AAA	2,500,000	2,638,050

Cleveland, G.O. Bonds, Ser. A
AGO, 5s, 12/1/29	AAA	2,000,000	2,098,580
FGIC, NATL, 4 3/4s, 11/15/26	AA	1,790,000	1,846,600


MUNICIPAL BONDS AND NOTES (98.9%)* cont.	Rating**	Principal amount	Value

Ohio cont.
Cleveland, Arpt. Syst. FRB, Ser. C, AGM, 5s, 1/1/23	AAA	$1,500,000	$1,565,670

Cleveland, Income Tax Rev. Bonds (Bridges &
Roadways), Ser. B, AGO, 5s, 10/1/29	AAA	1,000,000	1,056,260

Cleveland, Muni. School Dist. G.O. Bonds, AGM,
5s, 12/1/27	AAA	1,375,000	1,430,963

Cleveland, Parking Fac. Rev. Bonds, AGM, 5 1/4s,
9/15/22	AAA	2,400,000	2,554,272

Cleveland, Pub. Pwr. Syst. Rev. Bonds, Ser. B-1,
NATL, zero %, 11/15/25	A	3,000,000	1,373,730

Cleveland, Urban Renewal Increment Rev. Bonds
(Rock & Roll Hall of Fame), 6 3/4s, 3/15/18	B+/P	1,150,000	1,153,807

Columbus, City School Dist. G.O. Bonds, AGM,
zero %, 12/1/27	AAA	1,895,000	833,554

Cuyahoga Cmnty., College Dist. Rev. Bonds, Ser. C
5 1/4s, 2/1/29	Aa2	995,000	1,073,108
5s, 8/1/25	Aa2	1,500,000	1,616,655

Dublin, G.O. Bonds, Ser. B, 6.4s, 12/1/14	Aaa	1,300,000	1,445,834

Elyria, OH City School Dist. G.O. Bonds
(Classroom Fac. & School Impt.), SGI, 5s, 12/1/35	A1	500,000	502,340

Erie Cnty., OH Hosp. Fac. Rev. Bonds (Firelands
Regl. Med. Ctr.), 5 5/8s, 8/15/32	A–	1,500,000	1,455,480

Field, Local School Dist. G.O. Bonds (School Fac.
Construction & Impt.), AMBAC, 5s, 12/1/22	A–/P	1,170,000	1,202,222

Franklin Cnty., Rev. Bonds (OCLC Online Computer
Library Ctr.), 5s, 4/15/13	A	2,610,000	2,808,099

Franklin Cnty., Dev. Rev. Bonds (American
Chemical Society), 5.8s, 10/1/14	A+	2,000,000	2,016,900

Franklin Cnty., Econ. Dev. Rev. Bonds (Capitol
South Cmnty. Urban), 5 3/4s, 6/1/11
(Prerefunded)	A/P	1,000,000	1,000,090

Franklin Cnty., Hlth. Care Fac. Rev. Bonds (OH
Presbyterian Svcs.), U.S. Govt. Coll., 7 1/8s,
7/1/29 (Prerefunded)	AAA/P	2,000,000	2,155,520

Greene Cnty., Hosp. Facs. Rev. Bonds (Kettering
Hlth. Network), 5 1/2s, 4/1/39	A2	1,000,000	1,024,120

Hamilton Cnty., Rev. Bonds, Ser. B, AMBAC,
zero %, 12/1/22	A2	500,000	279,140

Hamilton Cnty., Econ. Dev. Rev. Bonds (King
Highland Cmnty. Urban), Ser. A, NATL, 5s, 6/1/22	A2	1,745,000	1,865,963

Hamilton Cnty., Sales Tax Rev. Bonds, Ser. B,
AMBAC, zero %, 12/1/24	A2	3,000,000	1,485,180

Hamilton Cnty., Swr. Syst. Rev. Rev. Bonds
(Metro. Swr. Dist.), Ser. A, NATL, 5s, 12/1/28	AA+	1,500,000	1,591,215

Hamilton, City School Dist. G.O. Bonds (School
Impt.), AGM, 5s, 12/1/26	AAA	3,000,000	3,228,840

Huran Cnty., Human Svcs. Rev. Bonds, NATL, 6.55s,
12/1/20	Aa3	1,800,000	2,164,068

Kings, Local School Dist. G.O. Bonds (School
Impt.), NATL, 5s, 12/1/27	AA	750,000	800,153

Lake Cnty., Hosp. Fac. Rev. Bonds (Lake Hosp.
Syst.), Ser. C, 6s, 8/15/43	Baa1	1,115,000	1,137,490


MUNICIPAL BONDS AND NOTES (98.9%)* cont.	Rating**	Principal amount	Value

Ohio cont.
Lakewood, City School Dist. G.O. Bonds
FGIC, NATL, zero %, 12/1/17	Aa3	$1,190,000	$914,146
AGM, zero %, 12/1/16	AAA	1,250,000	1,025,600

Lakota, School Dist. Rev. Bonds, AMBAC,
7s, 12/1/10	Aaa	1,000,000	1,029,820

Lorain Cnty., Elderly Hsg. Corp. Multi-Fam. Rev.
Bonds (Harr Plaza & Intl.), Ser. A, 6 3/8s, 7/15/19	BBB	1,095,000	1,107,352

Lorain Cnty., Hosp. Rev. Bonds (Catholic),
Ser. H, AGO, 5s, 2/1/29	AAA	2,000,000	2,026,100

Lucas Cnty., G.O. Bonds, 5s, 10/1/40 ∆	Aa2	1,000,000	1,032,940

Miami Cnty., Hosp. Fac. Rev. Bonds (Upper Valley
Med. Ctr.), 5 1/4s, 5/15/17	A3	1,250,000	1,331,975

Midview, School Dist. COP (School Bldg. Fac.),
5 1/4s, 11/1/17	A1	2,535,000	2,627,528

Montgomery Cnty., Rev. Bonds (Catholic Hlth.
Initiatives), Ser. D, 6 1/4s, 10/1/33	Aa2	1,000,000	1,106,450

Montgomery Cnty., VRDN (Miami Valley Hosp.),
Ser. B, 0.33s, 11/15/24	VMIG1	2,300,000	2,300,000

Mount Healthy, City School Dist. G.O. Bonds
(School Impt.), AGM, 5 1/4s, 12/1/22	Aa3	1,105,000	1,242,108

OH Hsg. Fin. Agcy. Rev. Bonds
Ser. B, GNMA Coll., 5s, 3/1/34	Aaa	555,000	560,911
(Res. Mtge.), Ser. C, GNMA Coll., FNMA Coll.,
4.1s, 3/1/15	Aaa	420,000	421,058

OH Hsg. Fin. Agcy. Single Fam. Mtge. Rev. Bonds,
Ser. 85-A, FGIC, FHA Insd., zero %, 1/15/15	AAA/P	15,000	9,455

OH State Rev. Bonds
Ser. A, 5s, 10/1/22	Aa3	3,090,000	3,336,706
(Revitalization), Ser. A, AMBAC, 5s, 4/1/19	Aa3	1,750,000	1,892,013

OH State Air Quality Dev. Auth. FRB (Columbus
Southern Pwr. Co.), Ser. B, 5.8s, 12/1/38	A3	500,000	525,315

OH State Air Quality Dev. Auth. Mandatory Put
Bonds (OH Pwr.), 7 1/8s, 6/1/10	Baa1	500,000	500,000

OH State Air Quality Dev. Auth. Rev. Bonds
(Valley Elec. Corp.), Ser. E, 5 5/8s, 10/1/19	Baa3	500,000	527,610

OH State Env. Impt. Rev. Bonds (USX Corp.),
5 5/8s, 5/1/29	Baa1	750,000	754,020

OH State Higher Edl. Fac. Rev. Bonds
(Case Western Reserve U.), 6 1/4s, 10/1/18	AA–	1,000,000	1,209,980
(Case Western Reserve U.), 6s, 10/1/14	AA–	1,000,000	1,158,700
(U. of Dayton), 5 1/2s, 12/1/36	A2	1,000,000	1,051,920
(Oberlin College), 5 1/8s, 10/1/24	Aa2	1,500,000	1,583,595

OH State Higher Edl. Fac. VRDN (Case Western
Reserve), Ser. B-2, 0.2s, 12/1/44	VMIG1	1,800,000	1,800,000

OH State Higher Edl. Fac. Comm. Rev. Bonds
(Summa Hlth. Syst. — 2010), 5 3/4s, 11/15/40	Baa1	1,000,000	991,440
(Kenyon College), 5s, 7/1/44	A1	2,000,000	2,012,520
(Xavier U.), 5s, 5/1/40	A3	750,000	755,798


MUNICIPAL BONDS AND NOTES (98.9%)* cont.	Rating**	Principal amount	Value

Ohio cont.
OH State Higher Edl. Fac. Commn. Rev. Bonds
(U. Hosp. Hlth. Syst.), Ser. 09-A, 6 3/4s, 1/15/39	A2	$2,000,000	$2,140,020
(John Carroll U.), 5 1/2s, 11/15/18	A2	335,000	358,500
(John Carroll U.), 5 1/2s, 11/15/17	A2	420,000	448,333
(Oberlin College), 5s, 10/1/33	Aa2	1,000,000	1,023,920
(Northern U.), 4 3/4s, 5/1/19	A3	2,500,000	2,501,800

OH State Hsg. Fin. Agcy. Rev. Bonds (Res. Mtge.)
Ser. F, GNMA Coll., FNMA Coll., FHLMC Coll.,
5.45s, 9/1/33	Aaa	1,660,000	1,730,915
Ser. L, GNMA Coll., FNMA Coll., 4 3/4s, 3/1/37	Aaa	1,150,000	1,089,913

OH State Poll. Control Rev. Bonds (Standard
Oil Co.), 6 3/4s, 12/1/15	Aa2	3,350,000	4,090,149

OH State U. Rev. Bonds, Ser. A
5 1/8s, 12/1/31	Aa1	1,000,000	1,032,930
5s, 12/1/27	Aa1	1,000,000	1,086,420

OH State Wtr. Dev. Auth. Poll. Control Rev. Bonds
(Wtr. Quality)
Ser. A, 5s, 6/1/30	Aaa	1,000,000	1,089,070
Ser. B, zero %, 12/1/14	Aaa	1,000,000	897,530

OH State Wtr. Dev. Auth. Poll. Control Fac.
Mandatory Put Bonds (First Energy Generation),
Ser. C, 7 1/4s, 11/1/12	Baa2	500,000	553,610

OH U. Gen. Recipients Athens Rev. Bonds, NATL,
5s, 12/1/25	Aa3	2,265,000	2,339,405

Powell, G.O. Bonds, FGIC, NATL, 5 1/2s, 12/1/25	Aa1	1,500,000	1,551,465

Rickenbacker, Port Auth. Rev. Bonds (OASBO
Expanded Asset Pooled), Ser. A, 5 3/8s, 1/1/32	A2	2,165,000	2,239,389

River Valley, Local School Dist. G.O. Bonds
(School Fac. Construction & Impt.), AGM,
5 1/4s, 11/1/23	Aa2	300,000	361,164

Scioto Cnty., Hosp. Rev. Bonds (Southern Med.
Ctr.), 5 1/2s, 2/15/28	A2	2,250,000	2,303,663

South Western City, School Dist. G.O. Bonds
(Franklin & Pickway Cnty.), AGM, 4 3/4s, 12/1/23	AAA	2,000,000	2,132,140

Summit Cnty., G.O. Bonds, Ser. R, FGIC, NATL,
5 1/2s, 12/1/18	Aa1	500,000	591,470

Sylvania, City School Dist. G.O. Bonds (School
Impt.), AGO, 5s, 12/1/27	AAA	1,500,000	1,587,915

Tallmadge, City School Dist. G.O. Bonds (School
Fac.), AGM, 5s, 12/1/26	AAA	1,410,000	1,496,856

Toledo, G.O. Bonds (Macys), Ser. A, NATL,
6.35s, 12/1/25	A2	1,500,000	1,504,230

Toledo, Swr. Syst. Mtge. Rev. Bonds, AMBAC,
6.2s, 11/15/12	A/P	1,855,000	2,071,553

Toledo, Wtr. Wks. Mtge. Rev. Bonds, AMBAC,
6.2s, 11/15/12	A/P	750,000	786,413

Toledo-Lucas Cnty., Port Auth. Rev. Bonds (CSX
Transn, Inc.), 6.45s, 12/15/21	Baa3	1,900,000	2,140,996

Twin Valley, Cmnty. Local School Dist. Rev.
Bonds, FGIC, NATL, 7.05s, 12/1/11	A1	545,000	569,558


MUNICIPAL BONDS AND NOTES (98.9%)* cont.	Rating**	Principal amount	Value

Ohio cont.
U. of Cincinnati COP (Jefferson Ave. Residence
Hall), NATL, 5 1/8s, 6/1/28	A2	$1,000,000	$1,002,240

Westerville, G.O. Bonds, AMBAC, 5s, 12/1/26	Aaa	1,320,000	1,436,820

Woodridge, School Dist. Rev. Bonds, AMBAC,
6.8s, 12/1/14	A/P	2,270,000	2,548,938

Youngstown State U. Rev. Bonds, AGO,
5 1/4s, 12/15/29	AAA	500,000	537,175

Zanesville, Hsg. Dev. Corp. Mtge. Rev. Bonds,
U.S. Govt. Coll.
7 3/8s, 10/1/21 (Prerefunded)	AAA/P	220,000	285,580
7 3/8s, 10/1/20 (Prerefunded)	AAA/P	205,000	266,108
7 3/8s, 10/1/19 (Prerefunded)	AAA/P	185,000	240,147
7 3/8s, 10/1/18 (Prerefunded)	AAA/P	180,000	233,656
7 3/8s, 10/1/17 (Prerefunded)	AAA/P	160,000	207,694
7 3/8s, 10/1/16 (Prerefunded)	AAA/P	155,000	201,204

			144,722,102
Puerto Rico (9.1%)
Children’s Trust Fund Tobacco Settlement Rev.
Bonds, 5 3/8s, 5/15/33	BBB	505,000	507,439

Cmnwlth. of PR, G.O. Bonds, Ser. A, 5 1/4s, 7/1/22	A3	1,000,000	1,038,920

Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds,
Ser. A
6s, 7/1/44	Baa1	1,000,000	1,050,150
6s, 7/1/38	Baa1	3,350,000	3,542,860

Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds
Ser. XX, 5 1/4s, 7/1/40	A3	750,000	756,983
Ser. ZZ, 5 1/4s, 7/1/26	A3	1,000,000	1,048,620

Cmnwlth. of PR, Hsg. Fin. Corp. Rev. Bonds,
Ser. B, GNMA Coll., FNMA Coll., FHLMC Coll.,
4.45s, 6/1/27	Aaa	45,000	45,000

Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
Ser. N, 5 1/2s, 7/1/25	A3	1,750,000	1,862,858
Ser. W, 5 1/2s, 7/1/15	A2	1,000,000	1,097,150
Ser. G, 5s, 7/1/33	A3	100,000	98,916
Ser. G, 5s, 7/1/33 (Prerefunded)	Aaa	195,000	219,340
Ser. K, 5s, 7/1/13	A3	500,000	530,540

Cmnwlth. of PR, Indl. Tourist Edl. Med. & Env.
Control Fac. Rev. Bonds (Cogen. Fac.-AES),
6 5/8s, 6/1/26	Baa3	1,000,000	1,009,260

Cmnwlth. of PR, Infrastructure Fin. Auth. Special
Tax Bonds, Ser. C, FGIC, 5 1/2s, 7/1/19	A3	1,000,000	1,082,330

Cmnwlth. of PR, Pub. Bldg. Auth. Rev. Bonds
(Govt. Fac.), Ser. M-3, NATL, Cmnwlth. of PR
Gtd., 6s, 7/1/28	A	500,000	531,165

Cmnwlth. of PR, Sales Tax Fin. Corp. Rev. Bonds,
Ser. A, NATL, zero %, 8/1/43	Aa3	3,000,000	393,533

			14,815,064
Virgin Islands (0.4%)
VI Pub. Fin. Auth. Rev. Bonds
Ser. A, 6s, 10/1/39	Baa3	300,000	316,854
Ser. A-1, 5s, 10/1/39	Baa2	375,000	367,620

			684,474

TOTAL INVESTMENTS

Total investments (cost $153,219,191)			$160,741,660

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from June 1, 2009 through May 31, 2010 (the reporting period).

* Percentages indicated are based on net assets of $162,543,445.

** The Moody’s, Standard & Poor’s or Fitch ratings indicated are believed to be the most recent ratings available at the close of the reporting period 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 the close of the reporting period. Securities rated by Putnam are indicated by “/P.” The rating of an insured security represents what is believed to be the most recent rating of the insurer’s claims-paying ability available at the close of the reporting period and does not reflect any subsequent changes. Ratings are not covered by the Report of Independent Registered Public Accounting Firm. Security ratings are defined in the Statement of Additional Information.

†† The interest rate and date shown parenthetically represent the new interest rate to be paid and the date the fund will begin accruing interest at this rate.

∆ Forward commitments, in part or in entirety (Note 1).

At the close of the reporting period, liquid assets totaling $1,032,870 have been segregated to cover forward commitments.

The rates shown on FRB, Mandatory Put Bonds and VRDN are the current interest rates at the close of the reporting period.

The dates shown on Mandatory Put Bonds are the next mandatory put dates.

The dates shown on debt obligations other than Mandatory Put Bonds are the original maturity dates.

The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


Local government	28.0%
Education	15.6
Utilities	13.4
Health care	11.2

The fund had the following insurance concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


AGM	13.7%
NATL	13.3

Level 1 — Valuations based on quoted prices for identical securities in active markets.

Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:


		Valuation inputs

Investments in securities:	Level 1	Level 2	Level 3

Municipal bonds and notes	$—	$160,741,660	$—

Totals by level	$—	$160,741,660	$—

The accompanying notes are an integral part of these financial statements.

Statement of assets and liabilities 5/31/10


ASSETS

Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $153,219,191)	$160,741,660

Cash		464,036

Interest and other receivables		2,696,053

Receivable for shares of the fund sold		752,398

Receivable for investments sold		5,000

Total assets	164,659,147


LIABILITIES

Distributions payable to shareholders		216,124

Payable for purchases of delayed delivery securities (Note 1)		1,032,870

Payable for shares of the fund repurchased		648,252

Payable for compensation of Manager (Note 2)		60,921

Payable for investor servicing fees (Note 2)		7,115

Payable for custodian fees (Note 2)		3,035

Payable for Trustee compensation and expenses (Note 2)		59,929

Payable for administrative services (Note 2)		523

Payable for distribution fees (Note 2)		64,319

Other accrued expenses		22,614

Total liabilities		2,115,702

Net assets	$162,543,445


REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$156,103,195

Distributions in excess of net investment income (Note 1)		(171,020)

Accumulated net realized loss on investments (Note 1)		(911,199)

Net unrealized appreciation of investments		7,522,469

Total — Representing net assets applicable to capital shares outstanding	$162,543,445


COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share ($147,040,580 divided by 16,241,334 shares)		$9.05

Offering price per class A share (100/96.00 of $9.05)*		$9.43

Net asset value and offering price per class B share ($3,454,203 divided by 381,900 shares)**		$9.04

Net asset value and offering price per class C share ($8,716,318 divided by 962,685 shares)**		$9.05

Net asset value and redemption price per class M share ($998,552 divided by 110,187 shares)		$9.06

Offering price per class M share (100/96.75 of $9.06)***		$9.36

Net asset value, offering price and redemption price per class Y share
($2,333,792 divided by 257,577 shares)		$9.06

* On single retail sales of less than $100,000. On sales of $100,000 or more 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 the offering price is reduced.

The accompanying notes are an integral part of these financial statements.

Statement of changes in net assets


INCREASE (DECREASE) IN NET ASSETS	Year ended 5/31/10	Year ended 5/31/09

Operations:
Net investment income	$6,401,484	$6,464,765

Net realized loss on investments	(183,196)	(486,452)

Net unrealized appreciation (depreciation) of investments	4,668,873	(2,415,827)

Net increase in net assets resulting from operations	10,887,161	3,562,486

Distributions to shareholders (Note 1):
From ordinary income
Taxable net investment income

Class A	(30,100)	(57,343)

Class B	(974)	(2,881)

Class C	(1,445)	(1,834)

Class M	(206)	(435)

Class Y	(355)	(70)

From tax-exempt net investment income
Class A	(5,829,752)	(5,991,783)

Class B	(166,833)	(270,200)

Class C	(219,329)	(146,697)

Class M	(38,509)	(39,705)

Class Y	(65,149)	(4,661)

Redemption fees (Note 1)	—	765

Increase from capital share transactions (Note 4)	3,030,448	2,133,932

Total increase (decrease) in net assets	7,564,957	(818,426)


NET ASSETS

Beginning of year	154,978,488	155,796,914

End of year (including distributions in excess of net investment income
of $171,020 and $126,346, respectively)	$162,543,445	$154,978,488

The accompanying notes are an integral part of these financial statements.

Financial highlights (For a common share outstanding throughout the period)

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Net realized

Ratio of

investment

Net asset value,

and unrealized

Total from

From net

Net asset

Total return

Net assets,

expenses to

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

Total

Redemption

value, end

at net asset

end of period

average net

to average

Portfolio

Period ended

ofperiod

income (loss)

investments

operations

income

distributions

fees

of period

value (%) ^a

(in thousands)

assets (%) ^b,c

net assets (%) ^b

turnover (%)

Class A

May 31, 2010

$8.79

.37

.26

.63

(.37)

(.37)

—

$9.05

7.29

$147,041

.82

4.15

8.91

May 31, 2009

8.93

.36

(.13)

.23

(.37)

(.37)

— ^d

8.79

2.84

142,288

.84

4.32

19.58

May 31, 2008

8.98

.36

(.04)

.32

(.37)

(.37)

— ^d

8.93

3.62

142,524

.88

4.06

36.24

May 31, 2007

8.97

.36

.01

.37

(.36)

(.36)

— ^d

8.98

4.16

139,448

.89

3.91

15.46

May 31, 2006

9.22

.35

(.25)

.10

(.35)

(.35)

—

8.97

1.13

148,135

.89

3.87

5.77

Class B

May 31, 2010

$8.78

.31

.26

.57

(.31)

(.31)

—

$9.04

6.61

$3,454

1.45

3.51

8.91

May 31, 2009

8.93

.31

(.14)

.17

(.32)

(.32)

— ^d

8.78

2.06

6,387

1.48

3.67

19.58

May 31, 2008

8.97

.31

(.04)

.27

(.31)

(.31)

— ^d

8.93

3.07

9,189

1.52

3.41

36.24

May 31, 2007

8.96

.30

.01

.31

(.30)

(.30)

— ^d

8.97

3.47

12,931

1.53

3.27

15.46

May 31, 2006

9.21

.29

(.25)

.04

(.29)

(.29)

—

8.96

.47

19,643

1.54

3.22

5.77

Class C

May 31, 2010

$8.79

.30

.26

.56

(.30)

(.30)

—

$9.05

6.44

$8,716

1.60

3.37

8.91

May 31, 2009

8.93

.30

(.13)

.17

(.31)

(.31)

— ^d

8.79

2.01

4,985

1.63

3.55

19.58

May 31, 2008

8.97

.29

(.04)

.25

(.29)

(.29)

— ^d

8.93

2.89

3,088

1.67

3.27

36.24

May 31, 2007 †

9.09

.19

(.12)

.07

(.19)

(.19)

—

8.97

.80 *

332

1.11 *

2.04 *

15.46

Class M

May 31, 2010

$8.80

.34

.27

.61

(.35)

(.35)

—

$9.06

6.99

$999

1.10

3.87

8.91

May 31, 2009

8.94

.34

(.13)

.21

(.35)

(.35)

— ^d

8.80

2.56

1,085

1.13

4.03

19.58

May 31, 2008

8.98

.34

(.04)

.30

(.34)

(.34)

— ^d

8.94

3.45

986

1.17

3.77

36.24

May 31, 2007

8.98

.33

— ^d

.33

(.33)

(.33)

— ^d

8.98

3.73

1,157

1.18

3.63

15.46

May 31, 2006

9.23

.33

(.26)

.07

(.32)

(.32)

—

8.98

.83

1,347

1.19

3.58

5.77

Class Y

May 31, 2010

$8.79

.39

.27

.66

(.39)

(.39)

—

$9.06

7.65

$2,334

.60

4.39

8.91

May 31, 2009

8.93

.38

(.13)

.25

(.39)

(.39)

— ^d

8.79

3.04

234

.63

4.63

19.58

May 31, 2008 ††

9.00

.16

(.07)

.09

(.16)

(.16)

—

8.93

1.03 *

.28 *

1.78 *

36.24

* Not annualized.

† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

†† For the period January 2, 2008 (commencement of operations) to May 31, 2008.

^aTotal return assumes dividend reinvestment and does not reflect the effect of sales charges.

^bReflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts (Note 2):


	Percentage of
	average net assets

May 31, 2010	0.03%

May 31, 2009	0.06

May 31, 2008	0.01

May 31, 2007	0.01

May 31, 2006	0.01

^cIncludes amounts paid through expense offset arrangements (Note 2).

^dAmount represents less than $0.01 per share.

The accompanying notes are an integral part of these financial statements.


28	29

Notes to financial statements 5/31/10

Note 1: Significant accounting policies

Putnam Ohio Tax Exempt Income Fund (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The investment objective of the fund is to seek as high a level of current income exempt from federal income tax and Ohio personal income tax as Putnam Investment Management, LLC (Putnam Management), the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC, believes is consistent with preservation of capital by investing in a portfolio primarily consisting of investment-grade tax-exempt securities issued in the state of Ohio with intermediate- to long-term maturities. The fund may be affected by economic and political developments in the state of Ohio.

The fund offers class A, class B, class C, class M and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 4.00% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. The expenses for class A, class B, class C, and class M shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, and class M shares, but do not bear a distribution fee. Class Y shares are generally only available to corporate and institutional clients and clients in other approved programs.

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. Securities purchased or sold on a forward commitment or delayed delivery basis may be settled a month or more after the trade date; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract. 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.

At May 31, 2010, the fund had a capital loss carryover of $510,940 available to the extent allowed by the Code to offset future net capital gain, if any. The amount of the carryover and the expiration dates are:


Loss Carryover	Expiration

$413,222	May 31, 2017

97,718	May 31, 2018

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer to its fiscal year ending May 31, 2011 $291,778 of losses recognized during the period November 1, 2009 to May 31, 2010.

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. These differences include temporary and/or permanent differences of post-October loss deferrals, the expiration of a capital loss carryover, dividends payable, market discount and straddle loss deferrals. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the reporting period ended, the fund reclassified $93,506 to increase distributions in excess of net investment income and $360,248 to decrease paid-in-capital, with a decrease to accumulated net realized losses of $453,754.

The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:


Unrealized appreciation	$8,629,429
Unrealized depreciation	(1,106,960)

Net unrealized appreciation	7,522,469
Undistributed tax-exempt income	37,146
Undistributed ordinary income	7,958
Capital loss carryforward	(510,940)
Post-October loss	(291,778)
Cost for federal income tax purposes	$153,219,191

Note 2: Management fee, administrative services and other transactions

Putnam Management. Such annual rates may vary as follows: 0.59% of the first $5 billion, 0.54% of the next $5 billion, 0.49% of the next $10 billion, 0.44% of the next $10 billion, 0.39% of the next $50 billion, 0.37% of the next $50 billion, 0.36% of the next $100 billion and 0.355% any excess thereafter.

Prior to January 1, 2010, the fund paid Putnam Management for management and investment advisory services quarterly based on the average net assets of the fund. Such fee was based on the lesser of (i) an annual rate of 0.50% of the average net assets of the fund or (ii) the following annual rates expressed as a percentage of the fund’s average net assets: 0.60% of the first $500 million, 0.50% of the next $500 million, 0.45% of the next $500 million, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355% of the next $5 billion, 0.34% of the next $5 billion and 0.33% thereafter.

Each independent Trustee of the fund receives an annual Trustee fee, of which $112, 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 and industry seminars and for certain compliance-related matters. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $17,721 and $131 from the sale of class A and class M shares, respectively, and received $2,689 and $766 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

Note 3: Purchases and sales of securities

During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $16,759,807 and $13,362,934, respectively. There were no purchases or proceeds from sales of U.S. government securities.

Note 4: Capital shares

At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


	Year ended 5/31/10		Year ended 5/31/09

Class A	Shares	Amount	Shares	Amount

Shares sold	2,061,958	$18,508,387	3,118,855	$26,658,352

Shares issued in connection with
reinvestment of distributions	469,724	4,200,949	496,002	4,234,566

	2,531,682	22,709,336	3,614,857	30,892,918

Shares repurchased	(2,481,491)	(22,055,546)	(3,375,148)	(28,460,691)

Net increase	50,191	$653,790	239,709	$2,432,227


	Year ended 5/31/10		Year ended 5/31/09

Class B	Shares	Amount	Shares	Amount

Shares sold	25,201	$226,637	46,617	$400,610

Shares issued in connection with
reinvestment of distributions	13,949	124,454	22,557	192,540

	39,150	351,091	69,174	593,150

Shares repurchased	(384,720)	(3,437,921)	(371,169)	(3,150,709)

Net decrease	(345,570)	$(3,086,830)	(301,995)	$(2,557,559)


	Year ended 5/31/10		Year ended 5/31/09

Class C	Shares	Amount	Shares	Amount

Shares sold	512,835	$4,584,442	351,214	$3,042,664

Shares issued in connection with
reinvestment of distributions	14,368	128,673	9,601	81,880

	527,203	4,713,115	360,815	3,124,544

Shares repurchased	(131,811)	(1,176,726)	(139,313)	(1,187,804)

Net increase	395,392	$3,536,389	221,502	$1,936,740


	Year ended 5/31/10		Year ended 5/31/09

Class M	Shares	Amount	Shares	Amount

Shares sold	6,102	$53,516	20,201	$168,538

Shares issued in connection with
reinvestment of distributions	3,807	34,072	3,840	32,823

	9,909	87,588	24,041	201,361

Shares repurchased	(23,063)	(206,422)	(10,949)	(93,784)

Net increase (decrease)	(13,154)	$(118,834)	13,092	$107,577


	Year ended 5/31/10		Year ended 5/31/09

Class Y	Shares	Amount	Shares	Amount

Shares sold	305,907	$2,713,914	28,476	$240,630

Shares issued in connection with
reinvestment of distributions	1,257	11,187	490	4,172

	307,164	2,725,101	28,966	244,802

Shares repurchased	(76,179)	(679,168)	(3,505)	(29,855)

Net increase	230,985	$2,045,933	25,461	$214,947

At the close of the reporting period, Putnam Investments, LLC owned 1,236 class Y shares of the fund (0.5% of classY shares outstanding), valued at $11,198.

Note 5: Regulatory matters and litigation

Note 6: Market and credit risk

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam Pennsylvania Tax Exempt Income Fund:

In our opinion, the accompanying statement of assets and liabilities, including the portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam Pennsylvania Tax Exempt Income Fund (the “fund”) at May 31, 2010, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at May 31, 2010 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
July 9, 2010

The fund’s portfolio 5/31/10


Key to holding’s abbreviations
AGM Assured Guaranty Municipal Corporation	FNMA Coll. Federal National Mortgage Association
AGO Assured Guaranty, Ltd.	Collateralized
AMBAC AMBAC Indemnity Corporation	G.O. Bonds General Obligation Bonds
CIFG CIFG Assurance North America, Inc.	GNMA Coll. Government National Mortgage
Cmnwlth. of PR Gtd. Commonwealth of Puerto Rico	Association Collateralized
Guaranteed	NATL National Public Finance Guarantee Corp.
FGIC Financial Guaranty Insurance Company	Radian Insd. Radian Group Insured
FHLMC Coll. Federal Home Loan Mortgage	SGI Syncora Guarantee, Inc.
Corporation Collateralized	VRDN Variable Rate Demand Notes


MUNICIPAL BONDS AND NOTES (99.2%)*	Rating**	Principal amount	Value

Guam (0.9%)
Territory of GU, Econ. Dev. & Comm. Auth. Rev.
Bonds (Tobacco Settlement), 5 1/4s, 6/1/32	BBB+/F	$1,015,000	$930,796

Territory of GU, Govt. Ltd. Oblig. Rev. Bonds
(Section 30), Ser. A, 5 3/4s, 12/1/34	BBB–	1,000,000	1,040,040

			1,970,836
Pennsylvania (86.9%)
Allegheny Cnty., Higher Ed. Bldg. Auth. Rev. Bonds
(Robert Morris U.), Ser. A, 6s, 10/15/38	Baa3	945,000	958,561
(Duquesne U.), 5s, 3/1/33	A2	1,000,000	1,015,970

Allegheny Cnty., Hosp. Dev. Auth. Rev. Bonds
(U. of Pittsburgh Med.), 5 5/8s, 8/15/39	Aa3	2,000,000	2,088,120
(Hlth. Syst.-West PA), Ser. A, 5 3/8s, 11/15/40	BB	1,095,000	866,342
(Children’s Hosp.), NATL, 5 3/8s, 7/1/17
(Prerefunded)	A	2,450,000	2,731,040

Allegheny Cnty., Indl. Dev. Auth. Rev. Bonds
(Env. Impt. — USX Corp.), 6 7/8s, 5/1/30	Ba2	600,000	643,986

Allegheny Cnty., Redev. Auth. Tax Increment Rev.
Bonds (Waterfront), Ser. B, 6.4s, 12/15/18
(Prerefunded)	A/F	1,200,000	1,249,764

Allegheny Cnty., Sanitation Auth. Swr. Rev. Bonds
NATL, 5 1/2s, 12/1/30	A1	305,000	309,862
NATL, 5 1/2s, 12/1/30 (Prerefunded)	A	1,695,000	1,749,138
FGIC, NATL, 5s, 12/1/37	A	1,000,000	1,011,170

Beaver Cnty., Indl. Dev. Auth. Poll. Control VRDN
(First Energy Generation), 0.31s, 4/1/41	VMIG1	1,000,000	1,000,000

Berks Cnty., Muni. Auth. Rev. Bonds
(Reading Hosp. & Med. Ctr.), Ser. A-3,
5 1/2s, 11/1/31	AA	2,000,000	2,131,440
(Albright College), 5 3/8s, 10/1/28	Ba1	735,000	597,651

Bethel Park, School Dist. G.O. Bonds, 5.1s, 8/1/33	Aa2	1,000,000	1,046,870

Bucks Cnty., Cmnty. College Auth. Rev. Bonds
(College Bldg.), 5s, 6/15/28	Aaa	1,000,000	1,077,370

Bucks Cnty., Indl. Dev. Auth. Rev. Bonds
(Pennswood Village), 6s, 10/1/34 (Prerefunded)	AAA/P	1,000,000	1,120,060
AMBAC, 5 1/2s, 9/15/17	AA–/P	1,000,000	1,035,940


MUNICIPAL BONDS AND NOTES (99.2%)* cont.	Rating**	Principal amount	Value

Pennsylvania cont.
Bucks Cnty., Indl. Dev. Auth. Retirement Cmnty.
Rev. Bonds (Ann’s Choice, Inc.), Ser. A,
5.4s, 1/1/15	BB/P	$240,000	$237,787

Bucks Cnty., Indl. Dev. Auth. Solid Waste
Mandatory Put Bonds (Waste Management, Inc.),
2 7/8s, 2/1/13	BBB	1,000,000	986,220

Burrell, PA School Dist. G.O. Bonds, Ser. A, AGM,
5s, 7/15/25	Aa3	1,000,000	1,057,550

Butler, Area School Dist. G.O. Bonds,
5 1/4s, 10/1/26	A	1,500,000	1,617,285

Catasauqua, Area School Dist. G.O. Bonds, AGM,
5s, 2/15/26	AAA	1,000,000	1,054,630

Chester Cnty., Hlth. & Ed. Fac. Auth. Rev. Bonds
(Jenners Pond, Inc.), 7 5/8s, 7/1/34
(Prerefunded)	AAA/P	500,000	576,830

Chester Cnty., Indl. Dev. Auth. VRDN
(Archdiocese Philadelphia), 0.25s, 7/1/31	VMIG1	2,550,000	2,550,000

Crawford Cnty., Indl. Dev. Auth. Rev. Bonds
(Allegheny College), Ser. A, 6s, 11/1/31	A3	1,000,000	1,057,150

Cumberland Cnty., Muni. Auth. Rev. Bonds
(Presbyterian Homes Oblig.), Ser. A, 5.45s, 1/1/21	BBB+	335,000	337,623
(Presbyterian Homes Oblig.), Ser. A, 5.15s, 1/1/18	BBB+	730,000	745,111
(Diakon Lutheran Ministries), 5s, 1/1/36	BBB+/F	1,860,000	1,583,641
(Diakon Lutheran Ministries), 5s, 1/1/27	BBB+/F	750,000	692,625

Dauphin Cnty., Gen. Auth. Hlth. Syst. Rev. Bonds
(Pinnacle Hlth. Syst.), Ser. A, 6s, 6/1/29	A2	1,500,000	1,586,445

Dauphin Cnty., Indl. Dev. Auth. Wtr. Rev. Bonds
(Dauphin Cons. Wtr. Supply), Ser. A,
6.9s, 6/1/24	Baa1	1,000,000	1,167,530

Delaware Cnty., College Auth. Rev. Bonds
(Haverford College), 5 3/4s, 11/15/25	Aa2	1,000,000	1,023,090

Delaware Cnty., Indl. Dev. Auth. Resource Recvy.
Rev. Bonds, Ser. A, 6.1s, 7/1/13	Ba1	1,045,000	1,047,989

Delaware River Joint Toll Bridge Comm. Rev. Bonds
5 1/4s, 7/1/20 (Prerefunded)	A2	1,130,000	1,275,928
Ser. A, NATL, 5s, 7/1/27	A2	1,000,000	1,043,530

Delaware Valley, Regl. Fin. Auth. Rev. Bonds,
Ser. B, AMBAC, 5.7s, 7/1/27	A2	3,030,000	3,348,998

Downingtown, Area School Dist. G.O. Bonds,
Ser. AA, 5s, 11/1/28	Aa1	1,875,000	2,051,100

East Stroudsburg, Area School Dist. G.O. Bonds,
AGM, 5s, 9/1/27	Aa3	1,500,000	1,614,480

Economy, Muni. Auth. Swr. Rev. Bonds, AGM, 5s,
12/15/28	AAA	2,665,000	2,774,452

Erie Cnty., Indl. Dev. Poll. Control Rev. Bonds
(Intl. Paper), Ser. A, 5.3s, 4/1/12	BBB	500,000	528,715

Erie, Higher Ed. Bldg. Auth. Rev. Bonds
(Mercyhurst College), 5.35s, 3/15/28	BBB	1,000,000	1,034,390

Erie-Western PA Port Auth. Rev. Bonds,
6 1/4s, 6/15/10	BB+/F	145,000	145,048


MUNICIPAL BONDS AND NOTES (99.2%)* cont.	Rating**	Principal amount	Value

Pennsylvania cont.
Exeter Twp., School Dist. G.O. Bonds, FGIC, NATL,
5s, 5/15/23	Aa2	$1,000,000	$1,040,410

Geisinger, Auth. Hlth. Syst. VRDN (Geisinger
Hlth. Syst.), Ser. C, 0.27s, 6/1/39	VMIG1	1,600,000	1,600,000

Geisinger, PA Auth. Hlth. Syst. VRDN (Geisinger
Hlth. Syst.), 0.26s, 11/15/32	VMIG1	900,000	900,000

Harrisburg, Wtr. Auth. Rev. Bonds, 5 1/8s, 7/15/28	A1	1,000,000	988,900

Lancaster Cnty., Hosp. Auth. Rev. Bonds
(Gen. Hosp.), 5 1/2s, 3/15/26 (Prerefunded)	AAA/P	1,500,000	1,700,265
(Lancaster Gen. Hosp.), Ser. A, 5s, 3/15/26	Aa3	1,000,000	1,043,730

Lancaster, Higher Ed. Auth. College Rev. Bonds
(Franklin & Marshall College), 5s, 4/15/29	A1	1,000,000	1,033,430

Langhorne Manor Boro., Higher Edl. & Hlth. Auth.
Rev. Bonds (Woods Svcs.), Radian Insd.,
5.1s, 11/15/21	A–	1,285,000	1,249,149

Latrobe, Indl. Dev. Auth. Rev. Bonds (St. Vincent
College), 5.7s, 5/1/31	Baa1	1,500,000	1,503,885

Lehigh Cnty., Gen. Purpose Auth. Rev. Bonds
(Lehigh Valley Hosp. Hlth. Network)
Ser. A, 5 1/4s, 7/1/32	A1	2,750,000	2,779,150
AGM, 5 1/4s, 7/1/16	Aa3	1,950,000	2,019,888

Lehigh Cnty., Gen. Purpose Hosp. Rev. Bonds
(Lehigh Valley Hlth. Network), Ser. A, AGM,
5s, 7/1/25	AAA	1,360,000	1,385,282

Luzerne Cnty., Indl. Dev. Auth. Wtr. Fac. Rev.
Bonds (American Wtr. Co.), 5 1/2s, 12/1/39	A2	1,250,000	1,288,200

Lycoming Cnty., Auth. Hlth. Syst. Rev. Bonds
(Susquehanna Hlth. Syst.), Ser. A,
5 3/4s, 7/1/39	BBB+	2,000,000	2,035,260

McKeesport, Muni. Auth. Swr. Rev. Bonds,
5 3/4s, 12/15/39	BBB+	1,750,000	1,784,685

Monroe Cnty., Hosp. Auth. Rev. Bonds (Pocono Med.
Ctr.), 5 1/8s, 1/1/37	A–	1,000,000	949,230

Montgomery Cnty., Higher Ed. & Hlth. Auth. Rev.
Bonds (Arcadia U.), 5 5/8s, 4/1/40	BBB+	1,000,000	1,015,380

Montgomery Cnty., Indl. Dev. Auth. Rev. Bonds
(Montenay Resource Recvy.), Ser. A, NATL,
5 1/4s, 11/1/14	A2	2,145,000	2,312,589

Montgomery Cnty., Indl. Dev. Auth. Retirement
Cmnty. (Acts Retirement-Life Cmnty.), Ser. A-1,
6 1/4s, 11/15/29	BBB+	1,125,000	1,175,535

Montgomery Cnty., Indl. Dev. Auth. Wtr. Fac. Rev.
Bonds (Aqua PA, Inc.), Ser. A, 5 1/4s, 7/1/42	AA–	1,250,000	1,268,013

Nazareth, Area School Dist. G.O. Bonds, Ser. A,
AGM, 5s, 2/15/28 (Prerefunded)	Aa3	1,525,000	1,757,578

New Morgan, Indl. Dev. Auth. Solid Waste Disp.
Rev. Bonds (New Morgan Landfill Co., Inc.),
6 1/2s, 4/1/19	BBB	450,000	451,413

New Wilmington, Muni. Auth. Rev. Bonds
(Westminster College), Ser. GG4, Radian Insd.,
5 1/8s, 5/1/33	A/P	1,000,000	905,580


MUNICIPAL BONDS AND NOTES (99.2%)* cont.	Rating**	Principal amount	Value

Pennsylvania cont.
Northampton Cnty., Gen. Purpose Auth. Rev. Bonds
(Lehigh U.), 5 1/2s, 11/15/33	Aa2	$1,500,000	$1,665,465

Northampton Cnty., Hosp. Auth. Rev. Bonds
(St. Luke’s Hosp. — Bethlehem)
Ser. A, 5 1/2s, 8/15/40	A3	1,000,000	995,530
Ser. A, 5 1/2s, 8/15/35	A3	2,000,000	2,001,120

Northeastern York, School Dist. G.O. Bonds, SGI,
5s, 3/1/21	A+	1,035,000	1,115,337

PA Rev. Bonds (Philadelphia Biosolids Fac.),
6 1/4s, 1/1/32	BBB+/F	500,000	532,970

PA Cmnwlth. Fin. Auth. Rev. Bonds, Ser. B, AGO,
5s, 6/1/31	AAA	1,500,000	1,585,665

PA Econ. Dev. Fin. Auth. Rev. Bonds (Amtrak),
Ser. A , 6 1/4s, 11/1/31	A1	1,000,000	1,016,270

PA Econ. Dev. Fin. Auth. Exempt Fac. Rev. Bonds
(Allegheny Energy Supply Co.), 7s, 7/15/39	Baa3	2,000,000	2,230,900

PA Econ. Dev. Fin. Auth. Solid Waste Disp. Rev.
Bonds (Procter & Gamble Paper), 5 3/8s, 3/1/31	AA–	1,000,000	1,049,320

PA Econ. Dev. Fin. Auth. Wtr. Fac. Rev. Bonds
(American Wtr. Co.), 6.2s, 4/1/39	A2	1,100,000	1,172,974

PA Fin., Auth. Rev. Bonds (Penn Hills), Ser. B,
AMBAC, zero %, 12/1/27	A/P	1,000,000	405,270

PA Hsg. Fin. Agcy. Rev. Bonds
Ser. 103C, 5.2s, 10/1/28	AA+	825,000	852,332
(Single Fam. Mtge.), Ser. 108B, 4 3/4s, 10/1/28	AA+	2,000,000	2,003,020

PA State G.O. Bonds, Ser. 2, 5s, 4/15/21	Aa1	2,000,000	2,290,880

PA State Higher Edl. Fac. Auth. Rev. Bonds
(Edinboro U. Foundation), 6s, 7/1/43	Baa3	600,000	601,764
(Edinboro U.), 5 7/8s, 7/1/38	Baa3	1,000,000	992,470
(Drexel U.), 5 1/2s, 5/1/12	A+	1,000,000	1,073,490
(Widener U.), 5.4s, 7/15/36	BBB+	1,000,000	1,005,620
(Widener U.), 5 1/4s, 7/15/24	BBB+	1,000,000	1,009,660
(Assn. Indpt. Colleges & U. — Gwynedd Mercy),
Ser. GG5, Radian Insd., 5 1/8s, 5/1/32	BBB–	1,020,000	913,063
(Thomas Jefferson U.), 5s, 3/1/40	AA–	1,000,000	1,027,890
(Philadelphia U.), 5s, 6/1/30	Baa2	200,000	184,768
(U. of PA), Ser. B, 5s, 9/1/25	AA+	1,150,000	1,283,251
(Assn. Indpt. Colleges U. Fin.), FGIC, NATL,
5s, 11/1/24	A	1,250,000	1,291,600
(Philadelphia U.), 5s, 6/1/22	Baa2	330,000	329,409

PA State Indl. Dev. Auth. Rev. Bonds,
5 1/2s, 7/1/23	A1	2,000,000	2,172,200

PA State Pub. School Bldg. Auth. Rev. Bonds
(Philadelphia School Dist.), AGM, 5 1/4s,
6/1/25 (Prerefunded)	AAA	3,000,000	3,377,100
(Richland School Dist.), FGIC, 5s,
11/15/29 (Prerefunded)	A	5,000,000	5,718,100
(Career Inst. of Tech.), FGIC, NATL, 5s, 11/15/28	Aa3	1,000,000	1,034,950
(Delaware Cnty. Cmnty. College), AGM, 5s, 10/1/27	Aa3	1,250,000	1,334,100
(Northampton Cnty.), Ser. B, AMBAC, 5s, 9/1/24	A/P	3,280,000	3,365,444
(School Dist. Philadelphia), Ser. B, AGM,
4 3/4s, 6/1/30	AAA	2,000,000	2,012,200


MUNICIPAL BONDS AND NOTES (99.2%)* cont.	Rating**	Principal amount	Value

Pennsylvania cont.
PA State Tpk. Comm. Rev. Bonds
Ser. A, AMBAC, 5s, 12/1/34	Aa3	$2,055,000	$2,104,772
Ser. B, 5s, 12/1/22	Aa3	2,075,000	2,301,590

PA State Tpk. Comm. VRDN (Multi-Modal), Ser. A-1,
0.3s, 12/1/22	VMIG1	1,000,000	1,000,000

PA State Tpk. Comm. Oil Franchise Tax Rev. Bonds
(2003 PA Tpk.), Ser. C, NATL, 5s, 12/1/28	AA	1,290,000	1,365,929
Ser. C, zero %, 12/1/38	AA	4,000,000	813,120

PA State U. Rev. Bonds
5s, 3/1/35	Aa1	1,000,000	1,066,670
5s, 9/1/29	Aa1	1,400,000	1,482,530

Pennsbury, School Dist. G.O. Bonds, AGM,
5s, 8/1/25	Aa2	2,000,000	2,096,960

Philadelphia, G.O. Bonds
Ser. B, AGO, 7 1/8s, 7/15/38	AAA	500,000	581,065
Ser. A, AGM, 5 1/4s, 12/15/26	AAA	1,250,000	1,334,975
CIFG, 5s, 8/1/23	A1	1,980,000	1,996,573

Philadelphia, Auth. for Indl. Dev. Rev. Bonds
(Master Charter School), 6s, 8/1/35	BBB+	500,000	505,635
Ser. B, AGM, 5 1/4s, 10/1/11 (Prerefunded)	AAA	1,690,000	1,798,650

Philadelphia, Gas Wks. Rev. Bonds, Ser. A-1, AGM,
5s, 9/1/26	AAA	2,000,000	2,062,260

Philadelphia, Hosp. & Higher Ed. Fac. Auth.
Rev. Bonds
(Graduate Hlth. Syst. Oblig. Group), 7 1/4s,
7/1/18 (In default) †	D/P	2,409,932	723
(Graduate Hlth. Syst. Oblig. Group), 6 5/8s,
7/1/21 (In default) †	D/P	712,148	214
(Jeanes Hlth. Syst.), 6.6s, 7/1/10 (Prerefunded)	Aaa	308,554	310,075
(Cmnty. College of Philadelphia), AMBAC, 5 1/2s,
5/1/18 (Prerefunded)	AAA/P	1,585,000	1,692,796

Philadelphia, Hosp. & Higher Ed. Fac. Auth. VRDN
(Children’s Hosp. of Philadelphia)
Ser. C, 0.23s, 7/1/32	VMIG1	500,000	500,000
Ser. A, 0.28s, 7/1/31	VMIG1	1,000,000	1,000,000

Philadelphia, School Dist. G.O. Bonds
Ser. B, FGIC, 5 5/8s, 8/1/21 (Prerefunded)	Aa2	3,000,000	3,314,280
Ser. A, AMBAC, 5s, 8/1/22	Aa2	1,000,000	1,044,270

Pocono Mountain, School Dist. G.O. Bonds, Ser. C,
AGM, 5s, 9/1/34	Aa3	2,000,000	2,057,480

Reading, G.O. Bonds, AGM, 5s, 11/1/29	Aa3	2,000,000	2,029,920

Sayre, Hlth. Care Fac. Auth. Rev. Bonds (Guthrie
Hlth.), Ser. A
5 7/8s, 12/1/31	A+	1,885,000	1,926,772
5 7/8s, 12/1/31 (Prerefunded)	A+	1,935,000	2,107,331

Scranton, G.O. Bonds, Ser. C, 7.1s, 9/1/31
(Prerefunded)	AAA/P	1,500,000	1,621,860

Snyder Cnty., Higher Ed. Auth. Rev. Bonds
(Susquehanna U.), 5s, 1/1/38	A2	1,000,000	1,018,590


MUNICIPAL BONDS AND NOTES (99.2%)* cont.	Rating**	Principal amount	Value

Pennsylvania cont.
Susquehanna, Area Regl. Arpt. Syst. Auth. Rev.
Bonds, Ser. A, 6 1/2s, 1/1/38	Baa3	$575,000	$573,499

U. of Pittsburgh of the Cmnwlth. Sys. of Higher
Ed. Rev. Bonds (Cap.), Ser. B, 5s, 9/15/28	Aa1	1,600,000	1,738,416

Upper Moreland Twp., School Dist. G.O. Bonds,
AGO, 5s, 9/1/28	Aa2	1,635,000	1,746,393

Washington Cnty., Hosp. Auth. Rev. Bonds
(Monongah Ela Vy Hosp.), 6 1/4s, 6/1/22	A3	1,250,000	1,294,488
(WA Hosp.), AMBAC, 5 1/2s, 7/1/17	Baa2	1,200,000	1,259,400

Washington Cnty., Indl. Dev. Auth. Hlth. Care
Fac. Rev. Bonds (First Mtge. AHF/Central),
8 1/2s, 1/1/29	B/P	269,000	269,912

West Cornwall, Tpk. Muni. Auth. Rev. Bonds
(Elizabethtown College), 6s, 12/15/27
(Prerefunded)	BBB+	1,500,000	1,623,435

West Mifflin, Area School Dist. G.O. Bonds, AGM,
5 1/8s, 4/1/31	AAA	1,500,000	1,602,000

West Shore, Area Hosp. Auth. Rev. Bonds (Holy
Spirit Hosp.), 6 1/4s, 1/1/32	BBB	500,000	502,420

Wilkes-Barre, Fin. Auth. (Wilkes U.), 5s, 3/1/22	BBB	625,000	628,863

York Cnty., Indl. Dev. Auth. Rev. Bonds (PSEG
Power, LLC), Ser. A, 5 1/2s, 9/1/20	Baa1	750,000	774,953

			182,751,934
Puerto Rico (10.9%)
Children’s Trust Fund Tobacco Settlement
Rev. Bonds
5 1/2s, 5/15/39	BBB	1,760,000	1,531,658
5 3/8s, 5/15/33	BBB	1,450,000	1,457,004

Cmnwlth. of PR, G.O. Bonds
(Pub. Impt.), NATL, 5 3/4s, 7/1/26 (Prerefunded)	A	2,500,000	2,509,950
Ser. A, FGIC, 5 1/2s, 7/1/21	A3	1,000,000	1,070,220
Ser. A, 5 1/4s, 7/1/34	A3	1,250,000	1,241,500

Cmnwlth. of PR, Aqueduct & Swr. Auth. Rev. Bonds,
Ser. A, 6s, 7/1/44	Baa1	2,250,000	2,362,838

Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds
Ser. WW, 5s, 7/1/28	A3	500,000	503,615
Ser. TT, 5s, 7/1/27	A3	650,000	657,313

Cmnwlth. of PR, Govt. Dev. Bank Rev. Bonds,
Ser. B, 5s, 12/1/15	A3	750,000	805,793

Cmnwlth. of PR, Hsg. Fin. Corp. Rev. Bonds,
Ser. B, GNMA Coll., FNMA Coll., FHLMC Coll.,
4.45s, 6/1/27	Aaa	80,000	80,000

Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds
Ser. N, 5 1/2s, 7/1/25	A3	2,000,000	2,128,980
Ser. AA, NATL, 5 1/2s, 7/1/18	A2	1,500,000	1,633,425

Cmnwlth. of PR, Indl. Tourist Edl. Med. & Env.
Control Fac. Rev. Bonds (Cogen. Fac.-AES),
6 5/8s, 6/1/26	Baa3	1,500,000	1,513,890


MUNICIPAL BONDS AND NOTES (99.2%)* cont.	Rating**	Principal amount	Value

Puerto Rico cont.
Cmnwlth. of PR, Pub. Bldg. Auth. Rev. Bonds
Ser. Q, Cmnwlth. of PR Gtd., 5 5/8s, 7/1/39	A3	$1,000,000	$1,010,210
(Govt. Fac.), Ser. I, Cmnwlth. of PR Gtd.,
5 1/4s, 7/1/29	A3	685,000	694,494

Cmnwlth. of PR, Sales Tax Fin. Corp. Rev. Bonds,
Ser. A
6s, 8/1/42	A1	3,250,000	3,541,135
NATL, zero %, 8/1/43	Aa3	1,000,000	131,180

			22,873,205
Virgin Islands (0.5%)
VI Pub. Fin. Auth. Rev. Bonds
Ser. A, 6s, 10/1/39	Baa3	400,000	422,472
Ser. A-1, 5s, 10/1/39	Baa2	600,000	588,185

			1,010,657


TOTAL INVESTMENTS

Total investments (cost $202,032,280)			$208,606,632

Notes to the fund’s portfolio

Unless noted otherwise, the notes to the fund’s portfolio are for the close of the fund’s reporting period, which ran from June 1, 2009 through May 31, 2010 (the reporting period).

* Percentages indicated are based on net assets of $210,332,225.

† Non-income-producing security.

The rates shown on Mandatory Put Bonds and VRDN are the current interest rates at the close of the reporting period.

The dates shown on Mandatory Put Bonds are the next mandatory put dates.

The dates shown on debt obligations other than Mandatory Put Bonds are the original maturity dates.

The fund had the following sector concentrations greater than 10% at the close of the reporting period (as a percentage of net assets):


Prerefunded	17.2%
Local government	16.8
Health care	16.1
Education	14.4
Utilities	10.9

The fund had the following insurance concentration greater than 10% at the close of the reporting period (as a percentage of net assets):


AGM	14.9%

Level 1 — Valuations based on quoted prices for identical securities in active markets.

Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the fair value measurement.

The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:


		Valuation inputs

Investments in securities:	Level 1	Level 2	Level 3

Municipal bonds and notes	$—	$208,606,632	$—

Totals by level	$—	$208,606,632	$—

The accompanying notes are an integral part of these financial statements.

Statement of assets and liabilities 5/31/10


ASSETS

Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $202,032,280)	$208,606,632

Cash	179,570

Interest and other receivables	3,158,162

Receivable for shares of the fund sold	477,970

Receivable for investments sold	155,011

Total assets	212,577,345


LIABILITIES

Distributions payable to shareholders	271,842

Payable for investments purchased	1,642,971

Payable for shares of the fund repurchased	61,305

Payable for compensation of Manager (Note 2)	78,610

Payable for investor servicing fees (Note 2)	9,162

Payable for custodian fees (Note 2)	2,730

Payable for Trustee compensation and expenses (Note 2)	60,719

Payable for administrative services (Note 2)	670

Payable for distribution fees (Note 2)	90,877

Other accrued expenses	26,234

Total liabilities	2,245,120

Net assets	$210,332,225


REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$205,989,132

Distributions in excess of net investment income (Note 1)	(183,344)

Accumulated net realized loss on investments (Note 1)	(2,047,915)

Net unrealized appreciation of investments	6,574,352

Total — Representing net assets applicable to capital shares outstanding	$210,332,225


COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share ($171,708,168 divided by 18,863,775 shares)	$9.10

Offering price per class A share (100/96.00 of $9.10)*	$9.48

Net asset value and offering price per class B share ($11,283,409 divided by 1,240,966 shares)**	$9.09

Net asset value and offering price per class C share ($20,917,204 divided by 2,297,440 shares)**	$9.10

Net asset value and redemption price per class M share ($4,133,177 divided by 453,736 shares)	$9.11

Offering price per class M share (100/96.75 of $9.11)***	$9.42

Net asset value, offering price and redemption price per class Y share
($2,290,267 divided by 251,323 shares)	$9.11

* On single retail sales of less than $100,000. On sales of $100,000 or more 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 the offering price is reduced.

The accompanying notes are an integral part of these financial statements.

Statement of changes in net assets


INCREASE IN NET ASSETS	Year ended 5/31/10	Year ended 5/31/09

Operations:
Net investment income	$7,641,819	$6,550,697

Net realized loss on investments	(482,304)	(756,196)

Net unrealized appreciation (depreciation) of investments	8,476,150	(4,352,436)

Net increase in net assets resulting from operations	15,635,665	1,442,065

Distributions to shareholders (Note 1):
From ordinary income
Taxable net investment income

Class A	(86,753)	(70,430)

Class B	(6,355)	(7,536)

Class C	(9,160)	(2,301)

Class M	(1,719)	(1,135)

Class Y	(1,012)	(90)

From tax-exempt net investment income
Class A	(6,477,703)	(5,846,885)

Class B	(408,198)	(539,484)

Class C	(494,455)	(147,640)

Class M	(115,732)	(87,521)

Class Y	(72,709)	(6,002)

Redemption fees (Note 1)	766	—

Increase from capital share transactions (Note 4)	32,051,006	9,826,250

Total increase in net assets	40,013,641	4,559,291


NET ASSETS

Beginning of year	170,318,584	165,759,293

End of year (including distributions in excess of net investment
income of $183,344 and $67,640, respectively)	$210,332,225	$170,318,584

The accompanying notes are an integral part of these financial statements.

Financial highlights (For a common share outstanding throughout the period)

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio of net

Net realized

Ratio

investment

Net asset value,

and unrealized

Total from

From net

Net asset

Total return

Net assets,

of expenses

income (loss)

beginning

Net investment

gain (loss) on

investment

investment

Total

Redemption

value, end

at net asset

end of period

to average

Portfolio

Period ended

of period

income (loss)

investments

operations

income

distributions

fees

of period

value (%) ^a

(in thousands)

net assets (%) ^b

net assets (%)

turnover (%)

Class A

May 31, 2010

$8.73

.37

.74

(.37)

(.37)

— ^c

$9.10

8.61

$171,708

.82 ^d

4.10 ^d

7.50

May 31, 2009

9.00

.36

(.27)

.09

(.36)

(.36)

—

8.73

1.23

147,104

.88 ^d

4.15 ^d

18.19

May 31, 2008

9.03

.36

(.03)

.33

(.36)

(.36)

—

9.00

3.69

143,667

.89 ^d

3.97 ^d

29.14

May 31, 2007

9.01

.35

.02

.37

(.35)

(.35)

—

9.03

4.15

137,594

.91 ^d

3.84 ^d

15.00

May 31, 2006

9.22

.35

(.22)

.13

(.34)

(.34)

— ^c

9.01

1.49

143,442

.87

3.81

7.51

Class B

May 31, 2010

$8.72

.31

.37

.68

(.31)

(.31)

— ^c

$9.09

7.94

$11,283

1.45 ^d

3.47 ^d

7.50

May 31, 2009

8.99

.31

(.27)

.04

(.31)

(.31)

—

8.72

.59

13,175

1.51 ^d

3.51 ^d

18.19

May 31, 2008

9.02

.30

(.03)

.27

(.30)

(.30)

—

8.99

3.02

17,776

1.53 ^d

3.32 ^d

29.14

May 31, 2007

9.00

.29

.02

.31

(.29)

(.29)

—

9.02

3.49

22,889

1.55 ^d

3.19 ^d

15.00

May 31, 2006

9.21

.29

(.21)

.08

(.29)

(.29)

— ^c

9.00

.84

30,224

1.52

3.15

7.51

Class C

May 31, 2010

$8.73

.30

.37

.67

(.30)

(.30)

— ^c

$9.10

7.77

$20,917

1.60 ^d

3.33 ^d

7.50

May 31, 2009

9.00

.29

(.26)

.03

(.30)

(.30)

—

8.73

.45

7,574

1.66 ^d

3.41 ^d

18.19

May 31, 2008

9.02

.29

(.03)

.26

(.28)

(.28)

—

9.00

3.01

2,049

1.68 ^d

3.20 ^d

29.14

May 31, 2007 †

9.12

.19

(.10)

.09

(.19)

(.19)

—

9.02

.92 *

340

1.12 *^d

2.06 *^d

15.00

Class M

May 31, 2010

$8.73

.34

.38

.72

(.34)

(.34)

— ^c

$9.11

8.42

$4,133

1.10 ^d

3.83 ^d

7.50

May 31, 2009

9.01

.34

(.28)

.06

(.34)

(.34)

—

8.73

.82

2,291

1.16 ^d

3.87 ^d

18.19

May 31, 2008

9.03

.33

(.02)

.31

(.33)

(.33)

—

9.01

3.50

2,257

1.18 ^d

3.67 ^d

29.14

May 31, 2007

9.02

.32

.01

.33

(.32)

(.32)

—

9.03

3.73

2,350

1.20 ^d

3.55 ^d

15.00

May 31, 2006

9.23

.32

(.21)

.11

(.32)

(.32)

— ^c

9.02

1.21

2,274

1.17

3.51

7.51

Class Y

May 31, 2010

$8.73

.39

.38

.77

(.39)

(.39)

— ^c

$9.11

9.01

$2,290

.60 ^d

4.34 ^d

7.50

May 31, 2009

9.00

.38

(.27)

.11

(.38)

(.38)

—

8.73

1.46

174

.66 ^d

4.46 ^d

18.19

May 31, 2008 ††

9.03

.16

(.03)

.13

(.16)

(.16)

—

9.00

1.44 *

.28 *^d

1.75 *^d

29.14

* Not annualized.

† For the period October 3, 2006 (commencement of operations) to May 31, 2007.

†† For the period January 2, 2008 (commencement of operations) to May 31, 2008.

^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 Amount represents less than $0.01 per share.

^dReflects an involuntary contractual expense limitation in effect during the period. As a result of such limitation, the expenses of each class reflect a reduction of the following amounts (Note 2):


	Percentage of
	average net assets

May 31, 2010	0.02%

May 31, 2009	0.02

May 31, 2008	0.01

May 31, 2007	<0.01

The accompanying notes are an integral part of these financial statements.


30	31

Notes to financial statements 5/31/10

Note 1: Significant accounting policies

Putnam Pennsylvania Tax Exempt Income Fund (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The investment objective of the fund is to seek as high a level of current income exempt from federal income tax and Pennsylvania personal income tax as Putnam Investment Management, LLC (Putnam Management), the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC, believes is consistent with preservation of capital by investing in a portfolio primarily consisting of investment-grade tax-exempt securities issued in the state of Pennsylvania with intermediate- to long-term maturities. The fund may be affected by economic and political developments in the state of Pennsylvania.

At May 31, 2010, the fund had a capital loss carryover of $1,462,606 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:


Loss Carryover		Expiration

$290,574		May 31, 2012

761,850		May 31, 2017

410,182		May 31, 2018

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer to its fiscal year ending May 31, 2011 $274,409 of losses recognized during the period November 1, 2009 to May 31, 2010.

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. These differences include temporary and/or permanent differences of post-October loss deferrals, dividends payable, defaulted bond interest and straddle loss deferrals. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the reporting period ended, the fund reclassified $83,727 to increase distributions in excess of net investment income and $1 to increase paid-in-capital, with a decrease to accumulated net realized losses of $83,726.

The tax basis components of distributable earnings and the federal tax cost as of the close of the reporting period were as follows:


Unrealized appreciation	$10,453,223
Unrealized depreciation	(3,878,871)

Net unrealized appreciation	6,574,352
Undistributed tax-exempt income	662,911
Undistributed ordinary income	131
Capital loss carryforward	(1,462,606)
Post-October loss	(274,409)
Cost for federal income tax purposes	$202,032,280

Note 2: Management fee, administrative services and other transactions

$10 billion, 0.44% of the next $10 billion, 0.39% of the next $50 billion, 0.37% of the next $50 billion, 0.36% of the next $100 billion and 0.355% any excess thereafter.

Prior to January 1, 2010, the fund paid Putnam Management for management and investment advisory services quarterly based on the average net assets of the fund. Such fee was based on the lesser of (i) an annual rate of 0.50% of the average net assets of the fund or (ii) the following annual rates expressed as a percentage of the fund’s average net assets: 0.60% of the first $500 million, 0.50% of the next $500 million, 0.45% of the next $500 million, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355% of the next $5 billion, 0.34% of the next $5 billion and 0.33% thereafter.

Each independent Trustee of the fund receives an annual Trustee fee, of which $143, 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 and industry seminars and for certain compliance-related matters. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $93,170 and $3,342 from the sale of class A and class M shares, respectively, and received $7,823 and $3,132 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

Note 3: Purchases and sales of securities

During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $45,897,479 and $13,634,858, respectively. There were no purchases or proceeds from sales of U.S. government securities.

Note 4: Capital shares

At the close of the reporting period, there was an unlimited number of shares of beneficial interest authorized.

Transactions in capital shares were as follows:


	Year ended 5/31/10		Year ended 5/31/09

Class A	Shares	Amount	Shares	Amount

Shares sold	4,368,632	$39,087,642	3,112,174	$26,746,845

Shares issued in connection with
reinvestment of distributions	473,931	4,245,094	441,411	3,763,471

	4,842,563	43,332,736	3,553,585	30,510,316

Shares repurchased	(2,835,373)	(25,387,745)	(2,652,813)	(22,508,120)

Net increase	2,007,190	$17,944,991	900,772	$8,002,196


	Year ended 5/31/10		Year ended 5/31/09

Class B	Shares	Amount	Shares	Amount

Shares sold	248,867	$2,230,899	159,856	$1,379,692

Shares issued in connection with
reinvestment of distributions	28,794	257,340	38,802	330,435

	277,661	2,488,239	198,658	1,710,127

Shares repurchased	(547,984)	(4,886,121)	(663,619)	(5,629,878)

Net decrease	(270,323)	$(2,397,882)	(464,961)	$(3,919,751)


	Year ended 5/31/10		Year ended 5/31/09

Class C	Shares	Amount	Shares	Amount

Shares sold	1,481,024	$13,207,518	665,005	$5,671,651

Shares issued in connection with
reinvestment of distributions	39,052	350,674	12,353	104,924

	1,520,076	13,558,192	677,358	5,776,575

Shares repurchased	(90,685)	(812,678)	(37,069)	(305,198)

Net increase	1,429,391	$12,745,514	640,289	$5,471,377


	Year ended 5/31/10		Year ended 5/31/09

Class M	Shares	Amount	Shares	Amount

Shares sold	187,046	$1,685,902	14,571	$124,724

Shares issued in connection with
reinvestment of distributions	10,661	95,695	8,603	73,349

	197,707	1,781,597	23,174	198,073

Shares repurchased	(6,333)	(57,262)	(11,278)	(90,747)

Net increase	191,374	$1,724,335	11,896	$107,326


	Year ended 5/31/10		Year ended 5/31/09

Class Y	Shares	Amount	Shares	Amount

Shares sold	333,351	$2,953,276	36,165	$310,525

Shares issued in connection with
reinvestment of distributions	6,646	59,897	722	6,092

	339,997	3,013,173	36,887	316,617

Shares repurchased	(108,586)	(979,125)	(18,102)	(151,515)

Net increase	231,411	$2,034,048	18,785	$165,102

Note 5: Regulatory matters and litigation

Note 6: Market and credit risk

PUTNAM ARIZONA TAX EXEMPT INCOME FUND

PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND

PUTNAM MICHIGAN TAX EXEMPT INCOME FUND

PUTNAM MINNESOTA TAX EXEMPT INCOME FUND

PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND

PUTNAM OHIO TAX EXEMPT INCOME FUND

PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND

<R>

(collectively the "Funds")

</R>

FORM N-1A

PART C

OTHER INFORMATION

<R>

Item 28. Exhibits

</R>

(a) Agreement and Declaration of Trust for Arizona fund dated November 9, 1990 -- Incorporated by reference to the Arizona fund's Initial Registration Statement filed November 27, 1990.

Agreements and Declarations of Trust, as amended September 15, 1995 for Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 15 to the respective fund's Registration Statement filed September 29, 1995.

Agreement and Declaration of Trust for New Jersey fund dated November 17, 1989 -- Incorporated by reference to the New Jersey fund's Initial Registration Statement filed December 14, 1989.

Agreement and Declaration of Trust dated April 20, 1989 for Pennsylvania fund -- Incorporated by reference to the Pennsylvania fund's Initial Registration Statement filed April 24, 1989.

(b) By-Laws, as amended through July 21, 2000 for Arizona fund and New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 12 to the respective fund's Registration Statement filed September 29, 2000.

By-Laws, as amended through July 21, 2000 for Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund -- Incorporated by

C-1

reference to Post-Effective Amendment No. 21 to the respective fund’s Registration Statement filed September 29, 2000.

By-Laws, as amended through July 21, 2000 for Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 14 to the Pennsylvania fund's Registration Statement filed September 29, 2000.

(c)(1) Portions of Agreement and Declaration of Trust relating to Shareholders’ Rights for Arizona fund and New Jersey fund -- Incorporated by reference to Post- Effective Amendment No. 4 to the respective fund's Registration Statement filed October 29, 1993.

Portions of Agreement and Declaration of Trust relating to Shareholders’ rights for Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 6 to the Pennsylvania fund's Registration Statement filed July 1, 1994.

Portions of Agreements and Declarations of Trust relating to Shareholders’ rights for Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 13 to the respective fund's Registration Statement filed August 2, 1993.

(c)(2) Portions of Bylaws relating to Shareholders’ rights for Arizona fund and New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 5 to the respective fund's Registration Statement filed December 27, 1994.

Portions of Bylaws relating to Shareholders’ rights for Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 6 to the Pennsylvania fund's Registration Statement filed July 1, 1994.

Portions of Bylaws relating to Shareholders’ rights for Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 14 to the respective fund's Registration Statement filed September 29, 1994.

<R>

(d)(1) Management Contracts with Putnam Investment Management, LLC dated January 1, 2010 for the Funds.

C-2

(e)(1) Distributor's Contracts with Putnam Retail Management Limited Partnership dated August 3, 2007 for the Arizona and New Jersey funds - Incorporated by reference to Post-Effective Amendment No. 19 to the respective fund's Registration Statement filed September 28, 2007.

Distributor's Contracts with Putnam Retail Management Limited Partnership dated August 3, 2007 for the Massachusetts, Michigan, Minnesota and Ohio funds - Incorporated by reference to Post-Effective Amendment No. 28 to the respective fund's Registration Statement filed September 28, 2007.

Distributor's Contracts with Putnam Retail Management Limited Partnership dated August 3, 2007 for the Pennsylvania fund - Incorporated by reference to Post-Effective Amendment No. 21 to the fund's Registration Statement filed September 28, 2007.

<R>

(e)(2) Form of Dealer Sales Contract dated January 2010.

(e)(3) Form of Financial Institution Sales Contract dated January 2010.

</R>

(f) Trustee Retirement Plan dated October 4, 1996, as amended July 21, 2000 for the Arizona and New Jersey funds -- Incorporated by reference to Post-Effective Amendment No. 17 to the respective fund's Registration Statement filed September 28, 2005.

Trustee Retirement Plan dated October 4, 1996, as amended July 21, 2000 for the Massachusetts, Michigan, Minnesota and Ohio funds -- Incorporated by reference to Post-Effective Amendment No. 26 to the respective fund's Registration Statement filed September 28, 2005.

Trustee Retirement Plan dated October 4, 1996, as amended July 21, 2000 for the Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 19 to the fund's Registration Statement filed September 28, 2005.

<R>

(g) Master Custodian Agreement with State Street Bank and Trust Company dated January 1, 2007; schedule dated August 13, 2010 for the Funds.

(h)(1) Amended and Restated Investor Servicing Agreement with Putnam Investment Management LLC and Putnam Investor Services, Inc. dated January 1, 2009; schedule dated May 14, 2010 for the Funds.

C-4

</R>

(h)(2) Letter of Indemnity with Putnam Investment Management dated December 18, 2003 for Arizona fund and New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 16 to the respective fund's Registration Statement filed September 28, 2004.

Letter of Indemnity with Putnam Investment Management dated December 18, 2003 for Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 25 to the respective fund’s Registration Statement filed September 28, 2004.

Letter of Indemnity with Putnam Investment Management dated December 18, 2003 for Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 18 to the Pennsylvania fund's Registration Statement filed September 28, 2004.

(h)(3) Liability Insurance Allocation Agreement dated December 18, 2003 for Arizona fund and New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 16 to the respective fund's Registration Statement filed September 28, 2004.

Liability Insurance Allocation Agreement dated December 18, 2003 for Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 25 to the respective fund’s Registration Statement filed September 28, 2004.

Liability Insurance Allocation Agreement dated December 18, 2003 for Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 18 to the Pennsylvania fund's Registration Statement filed September 28, 2004.

<R>

(h)(4) Master Sub-Accounting Services Agreement between Putnam Investment Management, LLC and State Street Bank and Trust Company dated January 1, 2007; August 13, 2010 for the Funds.

(h)(5) Master Interfund Lending Agreement with the Trusts party thereto and Putnam Investment Management, LLC dated July 16, 2010.

(h)(6) Committed Line of Credit Agreement with State Street Bank and Trust Company dated July 6, 2010.

C-5

(h)(7) Uncommitted Line of Credit Agreement with State Street Bank and Trust Company dated July 6, 2010.

</R>

(i) Opinion of Ropes & Gray LLP, including consent for Arizona fund -- Incorporated by reference to Post Effective Amendment No. 7 to the Arizona fund's Registration Statement filed September 26, 1996.

Opinion of Ropes & Gray LLP, including consent for New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 6 to the New Jersey fund's Registration Statement filed September 29, 1995.

Opinion of Ropes & Gray LLP, including consent for Pennsylvania fund -- Incorporated by reference to Pre-Effective Amendment No. 1 to the Pennsylvania fund's Registration Statement filed July 1, 1989.

Opinions of Ropes & Gray LLP, including consents for Massachusetts fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 10 to the respective fund's Registration Statement filed August 2, 1991.

Opinions of Ropes & Gray LLP, including consents for Michigan fund and Minnesota fund -- Incorporated by reference to the respective fund's Initial Registration Statement filed September 24, 1986 and September 23, 1986, respectively.

<R>

(j)(1) Consent of Independent Registered Public Accounting Firm for Massachusetts fund, Michigan fund, Minnesota fund, New Jersey fund, Ohio fund and Pennsylvania fund - PWC.

(j)(2) Consent of Independent Registered Public Accounting Firm for the Arizona fund - KPMG.

</R>

(k) Not applicable.

(l) Investment Letters from Putnam Investments, LLC to Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund for Class M shares -- Incorporated by reference to Post-Effective Amendment No. 15 to the respective fund's Registration Statement filed September 15, 1995.

Investment Letters from Putnam Investments, LLC to New Jersey fund for Class M shares -- Incorporated by reference to Post-Effective Amendment

C-6

No. 6 to the New Jersey fund's Registration Statement filed September 29, 1995.

Investment Letter from Putnam Investments, LLC to Arizona fund for Class B shares -- Incorporated by reference to Post-Effective Amendment No. 4 to the Arizona fund's Registration Statement filed October 29, 1993.

Investment Letter from Putnam Investments, LLC to Pennsylvania fund for Class A shares -- Incorporated by reference to Pre-Effective Amendment No. 1 to the Pennsylvania fund's Registration Statement filed July 1, 1989.

(m)(1) Class A Distribution Plan and Agreement dated March 5, 1992, as amended July 15, 1993 for Arizona fund -- Incorporated by reference to Post-Effective Amendment No. 4 to the Arizona fund's Registration Statement filed October 29, 1993.

Class A Distribution Plan and Agreement dated July 9, 1993, as amended July 15, 1993 for Massachusetts fund -- Incorporated by reference to Post-Effective Amendment No. 13 to the Massachusetts fund's Registration Statement filed August 2, 1993.

Class A Distribution Plans and Agreements dated May 7, 1992, as amended July 15, 1993 for Michigan fund, Minnesota fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 13 to the respective fund's Registration Statement filed August 2, 1993.

Class A Distribution Plan and Agreement dated September 10, 1992, as amended January 1, 1993 for New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 4 to the New Jersey fund's Registration Statement filed October 29, 1993.

Class A Distribution Plan and Agreement dated July 8, 1993 for Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 6 to the Pennsylvania fund's Registration Statement filed July 1, 1994.

(m)(2) Class B Distribution Plan and Agreement dated July 15, 1993 for Arizona fund -- Incorporated by reference to Post-Effective Amendment No. 4 to the Arizona fund's Registration Statement filed October 29, 1993.

Class B Distribution Plan and Agreement dated January 1, 1993 for New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 4 to the New Jersey fund's Registration Statement filed October 29, 1993.

C-7

Class B Distribution Plans and Agreements dated July 14, 1993 for Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 13 to the respective fund's Registration Statement filed August 2, 1993.

(m)(3) Class C Distribution Plan and Agreement dated July 16, 1999 for Massachusetts fund -- Incorporated by reference to Post-Effective Amendment No. 24 to the Massachusetts fund's Registration Statement filed September 30, 2003.

Class C Distribution Plans and Agreements dated September 2006 for the Arizona fund and the New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 18 to the respective fund's Registration Statement filed September 28, 2006.

Class C Distribution Plans and Agreements dated September 2006 for the Michigan fund, the Minnesota fund and the Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 27 to the respective fund's Registration Statement filed December 28, 2006.

Class C Distribution Plan and Agreement dated September 2006 for the Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 20 to the fund's Registration Statement filed September 28, 2006.

(m)(4) Class M Distribution Plan and Agreement dated June 30, 1995 for Arizona fund -- Incorporated by reference to Post-Effective Amendment No. 6 to the Arizona fund's Registration Statement filed September 26, 1996.

Class M Distribution Plan and Agreement dated April 28, 1995 for New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 6 to the New Jersey fund's Registration Statement filed September 29, 1995.

Class M Distribution Plans and Agreements dated March 31, 1995 for Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 15 to the respective fund’s Registration Statement filed September 29, 1995.

Class M Distribution Plan and Agreement dated June 30, 1995 for Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 9 to the Pennsylvania fund’s Registration Statement filed September 26, 1996.

C-9

(m)(5) Form of Dealer Service Agreement for Arizona fund -- Incorporated by reference to Post-Effective Amendment No. 5 to the Arizona fund's Registration Statement filed December 27, 1994.

Form of Dealer Service Agreement for New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 3 to the New Jersey fund's Registration Statement.

Form of Dealer Service Agreement for Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 7 to the Pennsylvania fund's Registration Statement filed July 20, 1995.

Form of Dealer Service Agreement for Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 13 to the respective fund's Registration Statement filed August 2, 1993.

(m)(6) Form of Financial Institution Service Agreement for Arizona fund -- Incorporated by reference to Post-Effective Amendment No. 5 to the Arizona fund's Registration Statement filed December 27, 1994.

Form of Financial Institution Service Agreement for New Jersey fund -- Incorporated by reference to Post-Effective Amendment No. 3 to the New Jersey fund's Registration Statement.

Form of Financial Institution Service Agreement for Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 7 to the Pennsylvania fund’s Registration Statement filed June 20, 1995.

Form of Financial Institution Service Agreement for Massachusetts fund, Michigan fund, Minnesota fund and Ohio fund -- Incorporated by reference to Post-Effective Amendment No. 13 to the respective fund's Registration Statement filed August 2, 1993.

<R>

(n) Rule 18f-3 Plan dated April 2009 for the Arizona and New Jersey funds -- Incorporated by reference to Post-Effective Amendment No. 21 to the respective fund's Registration Statement filed September 25, 2009.

Rule 18f-3 Plan dated April 2009 for the Massachusetts, Michigan, Minnesota and Ohio funds -- Incorporated by reference to Post-Effective Amendment No. 30 to the respective fund's Registration Statement filed September 25, 2009.

C-10

Rule 18f-3 Plan dated April 2009 for the Pennsylvania fund -- Incorporated by reference to Post-Effective Amendment No. 23 to the fund's Registration Statement filed September 25, 2009.

(p)(1) The Putnam Funds Code of Ethics dated September 11, 2009.

(p)(2) Putnam Investments Code of Ethics dated June 2010.

Item 29. Persons Controlled by or under Common Control with Registrants

</R>

None.

<R>

Item 30. Indemnification

</R>

The information required by this item is incorporated by reference to each Registrant's initial Registration Statement on Form N-1A under the Investment Company Act of 1940 (File Nos. 811-06258, 811-04518, 811-04529, 811-04527, 811-05977, 811-04528 and 811-05802 for the Arizona, Massachusetts, Michigan, Minnesota, New Jersey, Ohio and Pennsylvania funds, respectively).

C-11

<R>

Item 31. Business and Other Connections of the Investment Adviser

Except as set forth below, the directors and officers of each of Putnam Investment Management, LLC, the Registrant’s investment adviser (the “Investment Adviser”), Putnam Investments Limited, investment sub-manager to certain Putnam funds (the “Sub-Manager”), and The Putnam Advisory Company, LLC, investment sub-adviser to certain Putnam funds, have been engaged during the past two fiscal years in no business, profession, vocation or employment of a substantial nature other than as directors or officers of the Investment Adviser, Sub-Manager, or certain of the Investment Adviser’s corporate affiliates. Certain officers of the Investment Adviser serve as officers of some or all of the Putnam funds. The address of the Investment Adviser, its corporate affiliates other than the Sub-Manager, and the Putnam funds is One Post Office Square, Boston, Massachusetts 02109. The address of the Sub-Manager is Cassini House, 57-59 St James’s Street, London, England, SW1A 1LD.


Name and Title	Non-Putnam business, profession, vocation or
	employment
Robert D. Ewing	Prior to November 2008, Co-Head
Managing Director	River Source Investments,
Putnam Investment Management, LLC	125 High Street, Boston, MA 02110
Nick C. Thakore	Prior to November 2008, Co-Head
Managing Director	River Source Investments,
Putnam Investment Management, LLC	125 High Street, Boston, MA 02110
Nicolas A. Brunetti	Prior to November 2008, Director
Senior Vice President	Citigroup
Putnam Investment Management, LLC	301 Tresser Blvd., Stamford, CT 06901
Daniel C. Farrell	Prior to November 2008, VP Equity Trading
Managing Director	River Source Investments,
Putnam Investment Management, LLC	125 High Street, Boston, MA 02110
Clare Richer	Prior to December 2008, Executive Vice President
Senior Managing Director	Fidelity Investments,
Putnam Investment Management, LLC	82 Devonshire St., Boston, MA 02109
Steven W. Curbow	Prior to December 2008, Senior Vice President Director
Senior Vice President	of Research, Independence Investments,
Putnam Investment Management, LLC	160 Federal Street, Boston, MA 02110
David Glancy	Prior to January 2009, Managing Partner,
Managing Director	Andover Capital Advisors,
Putnam Investment Management, LLC	300 Brickstone Sq., Andover, MA 01810
Michael J. Maguire	Prior to January 2009, Senior Analyst,
Senior Vice President	FTN Midwest Securities
Putnam Investment Management, LLC	99 Summer St., Boston, MA 02110
Lucas M. Klein	Prior to January 2009, VP Equity Analyst,
Senior Vice President	River Source Investments,
Putnam Investment Management, LLC	125 High Street, Boston, MA 02110

C-12


George Gianarikas	Prior to January 2009, Global Industry Analyst,
Senior Vice President	Wellington Management,
Putnam Investment Management, LLC	75 State Street, Boston, MA 02109
Shobha S. Frey	Prior to January 2009, Managing Director Hedge Fund,
Senior Vice President	K Capital Partners,
Putnam Investment Management, LLC	75 Park Plaza, Boston, MA 02116
Richard E. Bodzy	Prior to February 2009, Industrials Analyst,
Assistant Vice President	River Source Investments,
Putnam Investment Management, LLC	125 High Street, Boston, MA 02110
Ami Y. Joseph	Prior to February 2009, Equity Research Analyst,
Vice President	Fidelity Investments,
Putnam Investment Management, LLC	245 Summer St., Boston, MA 02110
Vinay H. Shah	Prior to February 2009, VP Senior Tech Analyst
Senior Managing Director	River Source Investments,
Putnam Investment Management, LLC	125 High Street, Boston, MA 02110
Walter C. Donovan	Prior to May 2009, President, Investment Processing,
Senior Managing Director	Equiserve,
Putnam Investment Management, LLC	50 Royall St., Canton, MA 02021
Ferat Ongoren	Prior to June 2009, Director, Industrials Sector,
Senior Vice President	CITI Equities Trading
Putnam Investment Management, LLC	New York, NewYork
Karan S. Sodhi	Prior to June 2010, Equity Analyst,
Senior Vice President	Stark Investments,
Putnam Investment Management, LLC	2 International Place, Boston, MA 02110

Item 32. Principal Underwriter

(a) Putnam Retail Management Limited Partnership is the principal underwriter for each of the following investment companies, including the Registrant:

George Putnam Balanced Fund, Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income Fund, Putnam Asset Allocation Funds, Putnam California Tax Exempt Income Fund, Putnam Convertible Securities Fund, Putnam Diversified Income Trust, Putnam Equity Income Fund, Putnam Europe Equity Fund, Putnam Funds Trust, The Putnam Fund for Growth and Income, Putnam Global Equity Fund, Putnam Global Income Trust, Putnam Global Natural Resources Fund, Putnam Global Health Care Fund, Putnam Global Utilities Fund, Putnam High Yield Advantage Fund, Putnam High Yield Trust, Putnam Income Fund, Putnam International Equity Fund, Putnam Investment Funds, Putnam Investors Fund, Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam Money Market Fund, Putnam Multi-Cap Growth Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam New York Tax Exempt Income Fund, Putnam Ohio Tax Exempt Income Fund, Putnam Pennsylvania Tax Exempt Income Fund, Putnam RetirementReady® Funds, Putnam Tax Exempt Income Fund, Putnam Tax Exempt

C-13

(b) The directors and officers of the Registrant's principal underwriter are listed below. Except as noted below, no officer of the Registrant’s principal underwriter is an officer of the Registrant.

</R>

The principal business address of each person listed below is One Post Office Square, Boston, MA 02109.


Name	Position and Office with the Underwriter

Aaron III Jefferson F.	Senior Vice President

Ahearn Paul D.	Vice President

Amisano Paulette Cusick	Vice President

<R>
Asci Susan J.	Vice President

Ashibe Sumie	Assistant Vice President
</R>

Babcock III Warren W.	Senior Vice President

Balfour Renee	Assistant Vice President

Barnett William E.	Senior Vice President

<R>
</R>

Bartony Paul A.	Senior Vice President

Black Robert W.	Vice President

Boornazian Aram R.	Assistant Vice President

Borden Richard S.	Senior Vice President

<R>
Browne John C.	Assistant Vice President

Bruce Scott W.	Senior Vice President
</R>

Bumpus James F.	Managing Director

Bunker Christopher M.	Senior Vice President

Burke Brian M.	Vice President

Burns Robert T.	Managing Director

Cahill Daniel J.	Assistant Vice President

<R>
</R>

Campbell Christopher F.	Vice President

Capece John P.	Vice President

<R>
</R>

Card Victoria R.	Vice President

Carney Jeffrey R.	Senior Managing Director

Casey David M.	Senior Vice President

Cass William D.	Senior Vice President

Chapman Frederick	Senior Vice President

Clark James F.	Senior Vice President

Colman Donald M.	Senior Vice President

C-15


Coneeny Mark L.	Managing Director

Connolly William T.	Senior Managing Director

Cooley Jonathan A.	Senior Vice President

Corbett Dennis T.	Senior Vice President

<R>
</R>

Craig Casey R.	Vice President

Crilly Lindsay T.	Vice President

Cristo Chad H.	Managing Director

<R>
Curran Kevin M.	Assistant Vice President
</R>

Curtin Brian	Senior Vice President

Daley Eric Hugh	Senior Vice President

Daly Elizabeth Paul	Vice President

<R>
Davidian Raymond A.	Vice President
</R>

DeAngelis Adam	Senior Vice President

<R>
Deaver Marvin L.	Vice President
</R>

DeGregorio Jr. Richard A.	Vice President

Demery Thomas R.	Vice President

Dewey Jr. Paul S.	Managing Director

DiBuono Jeffrey P.	Vice President

DiPietro Daniel S.	Assistant Vice President

Donadio Joyce M.	Senior Vice President

<R>
Doucet Christopher C.	Senior Vice President
</R>

Druker Linda A.	Assistant Vice President

Duffy Anne Marie	Vice President

<R>
Dumas Alan J.	Vice President

Durkan Anthony	Assistant Vice President
</R>

Economou Stefan G.	Vice President

Eidelberg Kathleen E.	Vice President

<R>
Elderkin Justin	Vice President
</R>

Evans Adam Christopher	Senior Vice President

<R>
Fall Stephanie L.	Assistant Vice President
</R>

C-16


<R>
</R>

Marzelli Kristine	Assistant Vice President

Mattucci John T.	Senior Vice President

McCarthy Anne B.	Vice President

McCloy Andrew P.	Vice President

McCollough Martha J.	Assistant Vice President

McDaries Jane S.	Assistant Vice President

McDermott Robert J.	Senior Vice President

<R>
McKeehan John B.	Vice President
</R>

McKenna Mark J.	Managing Director

<R>
McNamara Daniel	Assistant Vice President
</R>

Mehta Ashok	Senior Vice President

Miller Daniel R.	Vice President

<R>
Miller Geffrey	Vice President
</R>

Minsk Judith	Senior Vice President

Molesky Kevin P.	Senior Vice President

Morais Joseph	Vice President

Murphy III Edmund F.	Managing Director

Nakamura Denise-Marie	Senior Vice President

<R>
Nguyen David R.	Vice President
</R>

Nichols Leslie G.	Vice President

Nickodemus John P.	Managing Director

Norcross George H.	Senior Vice President

O'Connell Jr. Paul P.	Senior Vice President

O'Connor Brian P.	Senior Vice President

<R>
O'Neill Robert W.	Managing Director

Otsuka Haruo	Vice President

Papay Jennifer A.	Vice President
</R>

Perkins Erin M.	Senior Vice President

Petitti Joseph P.	Senior Vice President

Pheeney Bradford S.	Vice President

Pheeney Douglas K.	Vice President

Pike John R.	Managing Director

Powers Michele M.	Assistant Vice President

Pulkrabek Scott M.	Senior Vice President

C-19


<R>
Purtell Stephanie B.	Vice President
</R>

Puzzangara John C.	Senior Vice President

<R>
</R>

Quinn Kyle C.	Vice President

Reid Sandra L.	Senior Vice President

Riccardella Paul A.	Vice President

Ritter Jesse D.	Vice President

Rodammer Kris	Senior Vice President

Saunders Catherine A.	Managing Director

Scanlon Sharon Rose	Senior Vice President

<R>
Seward Mary E.	Assistant Vice President

Shimokawa Ryuichi	Senior Vice President
</R>

Short Jr. Harold P.	Managing Director

Signorello Stephen	Assistant Vice President

<R>
Sipple Scott C.	Managing Director
</R>

Skomial Victoria S.	Assistant Vice President

Sloane Melissa A.	Vice President

Snyder Scott Joseph	Assistant Vice President

Spence David L.	Vice President

Spigelmeyer III Carl M.	Senior Vice President

Steingarten Brie A.E.	Vice President

<R>
Stern Derek A.	Vice President
</R>

Stuart James F.	Senior Vice President

Sullivan Brian L.	Senior Vice President

Sullivan Daniel John	Vice President

Sullivan Elaine M.	Managing Director

Taber Rene B.	Senior Vice President

<R>
Tamura Annika I.	Vice President
</R>

Tate Stephen J.	Senior Vice President

<R>
</R>

Tolmie Ryan J.	Assistant Vice President

<R>
Trenchard Mark C.	Managing Director

Tsuruoka Kei	Vice President
</R>

C-20


Tucker Jason A.	Managing Director

<R>
</R>

Valentin-Hess Carmen	Vice President

Wallace Stephen	Senior Vice President

Watson Stefanie H.	Vice President

<R>
Weylman William K.	Vice President

Whitman Peter T.	Senior Vice President
</R>

Wilde Michael R.	Vice President

Williams Brie P.	Senior Vice President

Wolff Meredith M.	Senior Vice President

<R>
Wright Jr. Edmund F.	Senior Vice President

Yamamoto Kayo	Vice President
</R>

Zannino David J.	Vice President

<R>
Zechello Steven R.	Senior Vice President

*Mr. Leveille is Vice President and Chief Compliance Officer of the Registrant.

Item 33. Location of Accounts and Records

Persons maintaining physical possession of accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are the Registrants' Clerk, Judith Cohen; the Registrants' investment adviser, Putnam Investment Management, LLC (PIM); the Registrants’ principal underwriter, Putnam Retail Management Limited Partnership (PRM); the Registrants' custodian, State Street Bank and Trust Company (which, in addition to its duties as custodian, also provides certain administrative, pricing and bookkeeping services); and the Registrants’ transfer and dividend disbursing agent, Putnam Investor Services, Inc. The address of the Clerk, PIM, PRM and Putnam Investor Services, Inc. is One Post Office Square, Boston, Massachusetts 02109. State Street Bank and Trust Company is located at 225 Franklin Street, Boston, Massachusetts 02110 and 2 Avenue de Lafayette, Boston, Massachusetts 02111.

Item 34. Management Services

</R>

None.

C-21

POWER OF ATTORNEY

<R>

I, the undersigned Officer of each of the funds listed on Schedule A hereto, hereby severally constitute and appoint John Hill, George Putnam III, Jonathan S. Horwitz, John W. Gerstmayr and Bryan Chegwidden, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statements on Form N-1A of each of the funds listed on Schedule A hereto and any and all amendments (including post-effective amendments) to said Registration Statements and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof.

</R>


WITNESS my hand and seal on the date set forth below.

Signature	Title	Date

<R>
/s/ Jonathan S. Horwitz
--------------------------------------	Executive Vice President,	January 8, 2010
Jonathan S. Horwitz	Treasurer, Principal
	Executive Officer and
	Compliance Liaison

C-23


As filed with the Securities and Exchange Commission on
<R>
September 28, 2010
</R>



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A

		----
	REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933	/ X /
		----
		----
	Pre-Effective Amendment No.	/ /
		----
		----
<R>
	Post-Effective Amendment No. 22	/ X /
</R>
	and	----
		----
	REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY	/ X /
	ACT OF 1940	----
		----
<R>
	Amendment No. 24	/ X /
</R>
	(Check appropriate box or boxes)	----
---------------

PUTNAM ARIZONA TAX EXEMPT INCOME FUND
(Registration No. 33- 37992; 811-06258)

PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND
(Registration No. 33-32550; 811-05977)

(Exact name of registrants as specified in charter)


<R>
</R>

Table of Contents




PART I


FUND ORGANIZATION AND CLASSIFICATION	I-3
INVESTMENT RESTRICTIONS	I-4
CHARGES AND EXPENSES	I-6
<R>
PORTFOLIO MANAGERS	I-38
STATE TAXES	I-44
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS AND FINANCIAL	I-52
STATEMENTS
</R>



PART II


HOW TO BUY SHARES	II-1
<R>
DISTRIBUTION PLANS	II-11
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS	II-19
TAXES	II-53
MANAGEMENT	II-63
DETERMINATION OF NET ASSET VALUE	II-82
INVESTOR SERVICES	II-84
SIGNATURE GUARANTEES	II-87
REDEMPTIONS	II-88
SHAREHOLDER LIABILITY	II-88
DISCLOSURE OF PORTFOLIO INFORMATION	II-88
PROXY VOTING GUIDELINES AND PROCEDURES	II-90
SECURITIES RATINGS	II-90
CLAIMS - PAYING ABILITY RATINGS	II-94
APPENDIX A- PROXY VOTING GUIDELINES OF THE PUTNAM FUNDS	II-98
APPENDIX B - FINANCIAL STATEMENTS	II-114
</R>


	I-35	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


		Contingent
	Fiscal	deferred sales
Fund name	year	charges
THE ARIZONA FUND	2010	$73
	2009	$121
	2008	$0
THE MASSACHUSETTS
FUND	2010	$3,472
	2009	$3,939
	2008	$778
THE MICHIGAN FUND	2010	$389
	2009	$450
	2008	$0
THE MINNESOTA FUND	2010	$102
	2009	$1,310
	2008	$0
THE NEW JERSEY FUND	2010	$5,729
	2009	$3,018
	2008	$0
THE OHIO FUND	2010	$766
	2009	$3,655
	2008	$0
THE PENNSYLVANIA
FUND	2010	$3,132
	2009	$573
	2008	$359
</R>


	I-36	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


			Sales
			charges
			retained by
			Putnam
			Retail
		Total front-	Management
	Fiscal	end sales	after dealer
Fund name	year	charges	concessions
THE ARIZONA
FUND	2010	$0	$0
	2009	$325	$25
	2008	$10	$1
THE
MASSACHUSETTS
FUND	2010	$1,824	$28
	2009	$70	$6
	2008	$239	$19
THE MICHIGAN
FUND	2010	$32	$2
	2009	$18	$2
	2008	$60	$6
THE MINNESOTA
FUND	2010	$316	$24
	2009	$471	$34
	2008	$266	$26
THE NEW JERSEY
FUND	2010	$34,003	$4,340
	2009	$7,203	$413
	2008	$511	$55
THE OHIO FUND	2010	$727	$131
	2009	$1,194	$147
	2008	$167	$18
THE
PENNSYLVANIA
FUND	2010	$28,053	$3,342
	2009	$1,184	$117
	2008	$4,132	$609
</R>


	I-37	sai_4, sai_57, sai_60,

		sai_61, sai_66,

		sai_75, sai_78

		2010/09


<R>

Information(1)	Frequency of Disclosure	Date of Web Posting

Full Portfolio Holdings	Quarterly	Last business day of the month
		following the end of each
		calendar quarter(2)

Top 10 Portfolio Holdings and	Monthly	Approximately 15 days after the
other portfolio statistics		end of each month

</R>


Statement of operations Year ended 5/31/10

INTEREST INCOME	$3,547,699

EXPENSES

Compensation of Manager (Note 2)	331,462

Investor servicing fees (Note 2)	38,142

Custodian fees (Note 2)	7,480

Trustee compensation and expenses (Note 2)	7,825

Administrative services (Note 2)	4,191

Distribution fees — Class A (Note 2)	133,857

Distribution fees — Class B (Note 2)	24,919

Distribution fees — Class C (Note 2)	14,294

Distribution fees — Class M (Note 2)	5,868

Auditing	45,401

Other	47,239

Fees waived and reimbursed by Manager (Note 2)	(46,680)

Total expenses	613,998

Expense reduction (Note 2)	(2,574)

Net expenses	611,424

Net investment income	2,936,275

Net realized loss on investments (Notes 1 and 3)	(219,847)

Net unrealized appreciation of investments during the year	3,243,072

Net gain on investments	3,023,225

Net increase in net assets resulting from operations	$5,959,500


Statement of operations Year ended 5/31/10


INTEREST INCOME	$14,405,169

EXPENSES

Compensation of Manager (Note 2)	$1,370,835

Investor servicing fees (Note 2)	158,231

Custodian fees (Note 2)	11,789

Trustee compensation and expenses (Note 2)	23,849

Administrative services (Note 2)	14,267

Distribution fees — Class A (Note 2)	530,974

Distribution fees — Class B (Note 2)	111,286

Distribution fees — Class C (Note 2)	172,270

Distribution fees — Class M (Note 2)	18,781

Other	156,892

Fees waived and reimbursed by Manager (Note 2)	(57,541)

Total expenses	2,511,633

Expense reduction (Note 2)	(2,960)

Net expenses	2,508,673

Net investment income	11,896,496

Net realized gain on investments (Notes 1 and 3)	1,177,006

Net unrealized appreciation of investments during the year	14,782,505

Net gain on investments	15,959,511

Net increase in net assets resulting from operations	$27,856,007


Statement of operations Year ended 5/31/10

INTEREST INCOME	$4,206,798

EXPENSES

Compensation of Manager (Note 2)	$403,701

Investor servicing fees (Note 2)	46,474

Custodian fees (Note 2)	7,007

Trustee compensation and expenses (Note 2)	8,960

Administrative services (Note 2)	4,861

Distribution fees — Class A (Note 2)	174,551

Distribution fees — Class B (Note 2)	28,593

Distribution fees — Class C (Note 2)	3,615

Distribution fees — Class M (Note 2)	3,372

Auditing	50,027

Other	54,603

Fees waived and reimbursed by Manager (Note 2)	(24,487)

Total expenses	761,277

Expense reduction (Note 2)	(820)

Net expenses	760,457

Net investment income	3,446,341

Net realized loss on investments (Notes 1 and 3)	(110,469)

Net unrealized appreciation of investments during the year	3,318,739

Net gain on investments	3,208,270

Net increase in net assets resulting from operations	$6,654,611


INTEREST INCOME	$4,263,564


EXPENSES

Compensation of Manager (Note 2)	431,607

Investor servicing fees (Note 2)	49,629

Custodian fees (Note 2)	7,385

Trustee compensation and expenses (Note 2)	9,351

Administrative services (Note 2)	5,156

Distribution fees — Class A (Note 2)	177,586

Distribution fees — Class B (Note 2)	47,672

Distribution fees — Class C (Note 2)	40,522

Distribution fees — Class M (Note 2)	3,192

Auditing	52,003

Other	53,438

Fees waived and reimbursed by Manager (Note 2)	(25,111)

Total expenses	852,430

Expense reduction (Note 2)	(764)

Net expenses	851,666

Net investment income	3,411,898


Net realized gain on investments (Notes 1 and 3)	303,196

Net unrealized appreciation of investments during the year	3,309,053

Net gain on investments	3,612,249

Net increase in net assets resulting from operations	$7,024,147


INTEREST INCOME	$11,652,474


EXPENSES

Compensation of Manager (Note 2)	$1,129,161

Investor servicing fees (Note 2)	130,460

Custodian fees (Note 2)	9,179

Trustee compensation and expenses (Note 2)	20,075

Administrative services (Note 2)	12,016

Distribution fees — Class A (Note 2)	431,012

Distribution fees — Class B (Note 2)	141,059

Distribution fees — Class C (Note 2)	202,637

Distribution fees — Class M (Note 2)	15,606

Other	150,527

Fees waived and reimbursed by Manager (Note 2)	(50,714)

Total expenses	2,191,018

Expense reduction (Note 2)	(2,455)

Net expenses	2,188,563

Net investment income	9,463,911


Net realized loss on investments (Notes 1 and 3)	(826,065)

Net unrealized appreciation of investments during the year	12,157,945

Net gain on investments	11,331,880

Net increase in net assets resulting from operations	$20,795,791


INTEREST INCOME	$7,760,775


EXPENSES

Compensation of Manager (Note 2)	744,826

Investor servicing fees (Note 2)	85,927

Custodian fees (Note 2)	7,996

Trustee compensation and expenses (Note 2)	14,217

Administrative services (Note 2)	8,184

Distribution fees — Class A (Note 2)	314,362

Distribution fees — Class B (Note 2)	40,677

Distribution fees — Class C (Note 2)	66,801

Distribution fees — Class M (Note 2)	5,045

Other	123,691

Fees waived and reimbursed by Manager (Note 2)	(51,218)

Total expenses	1,360,508

Expense reduction (Note 2)	(1,217)

Net expenses	1,359,291

Net investment income	6,401,484


Net realized loss on investments (Notes 1 and 3)	(183,196)

Net unrealized appreciation of investments during the year	4,668,873

Net gain on investments	4,485,677

Net increase in net assets resulting from operations	$10,887,161


INTEREST INCOME	$9,409,625


EXPENSES

Compensation of Manager (Note 2)	$909,428

Investor servicing fees (Note 2)	104,986

Custodian fees (Note 2)	8,843

Trustee compensation and expenses (Note 2)	16,665

Administrative services (Note 2)	9,915

Distribution fees — Class A (Note 2)	356,253

Distribution fees — Class B (Note 2)	100,786

Distribution fees — Class C (Note 2)	152,346

Distribution fees — Class M (Note 2)	15,322

Other	135,411

Fees waived and reimbursed by Manager (Note 2)	(40,004)

Total expenses	1,769,951

Expense reduction (Note 2)	(2,145)

Net expenses	1,767,806

Net investment income	7,641,819


Net realized loss on investments (Notes 1 and 3)	(482,304)

Net unrealized appreciation of investments during the year	8,476,150

Net gain on investments	7,993,846

Net increase in net assets resulting from operations	$15,635,665


Favaloro Beth A.	Managing Director

<R>
Ferrelli F. Peter	Managing Director
</R>

Filmore Benjamin R.	Senior Vice President

Fleming Pamela B.	Vice President

Fleming Robert A.	Vice President

<R>
</R>

Forcione Carlo N.	Vice President

Foster Laura G.	Senior Vice President

Gentile Donald A.	Vice President

<R>
Gentile Lauren K.	Assistant Vice President
</R>

Geraigery Mark F.	Assistant Vice President

<R>
Glickman David S.	Senior Vice President

Goyer Michael J.	Vice President
</R>

Greeley Jr. Robert E.	Vice President

Greenwood Julie M.	Senior Vice President

Halloran James E.	Senior Vice President

<R>
</R>

Hancock Nancy E.	Vice President

<R>
Harrington Terese A.	Assistant Vice President
</R>

Hartigan Maureen A.	Senior Vice President

Hayes Alexander D.	Vice President

<R>
</R>

Homer Edward M.	Assistant Vice President

<R>
Horkan Lisa M.	Senior Vice President
</R>

Hoyt Paula J.	Senior Vice President

Hughes Rosemary A.	Vice President

<R>
Inoue Hitoshi	Senior Vice President
</R>

Iskandar Anthony Michael	Vice President

<R>
Jurkiewicz Gregg M.	Vice President


Kagami Masao	Senior Vice President
</R>

Kapinos Peter J.	Senior Vice President

Kay Karen R.	Managing Director

Kealty Joseph M.	Vice President

<R>
</R>

Kelley Brian J.	Managing Director

Kelly A. Siobhan	Senior Vice President

Kennedy Daniel J.	Senior Vice President

Kersten Charles N.	Senior Vice President

Kinsman Anne M.	Senior Vice President

<R>
Kircher Richard T.	Vice President
</R>

Kotsiras Steven	Senior Vice President

<R>
</R>

Lacour Jayme J.	Vice President

<R>
Lange Christine L.	Senior Vice President
</R>

Leahy Jon F.	Vice President

Lecce Vincent L.	Vice President

<R>
Leeson John B.	Vice President
</R>

Leveille Robert R. *	Managing Director

Levy Norman S.	Senior Vice President

Lewis Benjamin Herbert	Managing Director

Lieberman Samuel L.	Senior Vice President

Link Christopher H.	Senior Vice President

<R>
Loehning III William F.	Vice President
</R>

Lohmeier Andrew	Senior Vice President

<R>
Lopez Christopher D.	Vice President
</R>

Maher James M.	Vice President

<R>
Maher Stephen B.	Vice President
</R>

Mahoney Julie M.	Senior Vice President

Martin David M.	Senior Vice President


Signature	Title
<R>
John A. Hill**	Chairman of the Board and Trustee

Jameson A. Baxter**	Vice Chairman of the Board and Trustee

Robert L. Reynolds**	President and Trustee


Jonathan S. Horwitz*	Executive Vice President, Treasurer,
	Principal Executive Officer and Compliance Liaison

Steven D. Krichmar**	Vice President and Principal Financial Officer

Janet C. Smith**	Vice President, Assistant Treasurer and Principal
	Accounting Officer

Ravi Akhoury**	Trustee

Barbara M. Baumann*	Trustee

Charles B. Curtis**	Trustee

Robert J. Darretta**	Trustee

Myra R. Drucker**	Trustee

Paul L. Joskow**	Trustee

Elizabeth T. Kennan**	Trustee

Kenneth R. Leibler**	Trustee

Robert E. Patterson**	Trustee

George Putnam, III**	Trustee

W. Thomas Stephens**	Trustee

Richard B. Worley**	Trustee

	By:	/s/ Jonathan S. Horwitz, as Attorney-in-Fact
		September 28, 2010
</R>