a_mataxexemptincome.htm

Putnam Massachusetts
Tax Exempt
Income Fund

Annual report
5 | 31 | 16


Message from the Trustees	1

About the fund	2

Performance snapshot	4

Interview with your fund’s portfolio manager	5

Your fund’s performance	10

Your fund’s expenses	13

Terms and definitions	15

Other information for shareholders	16

Important notice regarding Putnam’s privacy policy	17

Financial statements	18

Federal tax information	38

About the Trustees	39

Officers	41

Consider these risks before investing: Bond prices may fall or fail to rise over time for several reasons, including general financial market conditions, changing market perceptions of the risk of default, changes in government intervention, and factors related to a specific issuer or industry. These factors may also lead to periods of high volatility and reduced liquidity in the bond markets. Single-state investments are at risk of common economic forces and other factors affecting a state’s tax-exempt investments. This may result in greater losses and volatility. Capital gains, if any, are taxed at the federal and, in most cases, state levels. For some investors, investment income may be subject to the federal alternative minimum tax. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is greater for longer-term bonds, and credit risk is greater for below-investment-grade bonds. Unlike bonds, funds that invest in bonds have fees and expenses. Tax-exempt bonds may be issued under the Internal Revenue Code only by limited types of issuers for limited types of projects. As a result, the fund’s investments may be focused in certain market segments and be more vulnerable to fluctuations in the values of the securities it holds than a more broadly invested fund. Interest the fund receives might be taxable. You can lose money by investing in the fund.

Message from the Trustees

Dear Fellow Shareholder:

At the midpoint of the 2016 calendar year, the U.S. stock and bond markets have had their share of ups and downs, even as the economy has pulled through some areas of weakness and concerns over slowing growth abroad.

Looking across the broader economic landscape, conditions in the United States appear to be better than elsewhere. Despite a multiyear U.S. bull market and economic recovery, we believe the risk of an imminent recession is low. Consumer spending and housing data remain strong, and while oil prices have rebounded, gas at the pump is substantially less expensive than it was a year ago. Overseas, by contrast, from Europe to Japan and China, we believe multiple headwinds remain.

In every market environment, Putnam’s portfolio managers are employing active, risk-conscious investment strategies backed by support from teams of equity and fixed-income research analysts. In the following pages, you will find an overview of your fund’s performance for the reporting period ended May 31, 2016, as well as an outlook for the financial markets in the coming months.

As always, we believe it is important to regularly consult with your financial advisor, who can help ensure that your portfolio is aligned with your individual goals, risk tolerance, and investing time horizon.

Thank you for investing with Putnam.

Interview with your fund’s portfolio manager

Fixed-income securities held up well during the volatile 12-month reporting period ended May 31, 2016. Was the market environment favorable for municipal bonds?

Amid heightened market uncertainty surrounding U.S. central bank policy, low commodity prices, and China’s economic slowdown, municipal bonds enjoyed solid absolute and relative performance during the reporting period. With 11 consecutive monthly gains during the 12-month reporting period, the Barclays Municipal Bond Index outperformed the broad U.S. fixed-income market, as defined by the Barclays U.S. Aggregate Bond Index, as well as a wide variety of U.S. and international stock indexes.

After the Federal Reserve took the widely expected first step on the path of gradual normalization of interest rates in December 2015, investors began pricing in additional rate increases in 2016. However, a deep slide in oil prices early in 2016 fueled worries of slowing economic growth globally and raised questions about the central bank’s interest-rate policy. In this environment, municipal bonds benefited from investors’ preference for higher-quality, lower-risk investments in response to financial market volatility, slower growth, and an increasingly dovish Fed. January 2016 was an especially favorable month for the asset class, when the Barclays Municipal Bond Index rose 1.19%. During the final months of the

This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 5/31/16. See pages 4 and 10–13 for additional fund performance information. Index descriptions can be found on page 15.


Massachusetts Tax Exempt Income Fund	5

reporting period, diminished expectations for near-term rate hikes and increased expectations for a more gradual pace of future hikes helped to support municipal bond prices.

Heightened investor interest in municipal bonds as an asset class was noteworthy during the reporting period. For the first five months of 2016, new-issue supply fell while demand rose, as measured by mutual fund inflows. Municipal bond mutual funds saw over $26 billion in new assets, which was the largest level of inflows over the past 25 years for the January to May time frame. Demand for municipal bonds has been dominated by households, which comprised about 70% of municipal bond investors at the end of 2015, according to Fed estimates. Meanwhile, from a demand standpoint, the biggest change that we have seen over the past several years has come in the bank channel, whose share of municipal bond assets has doubled since 2008. As such, we think demand for municipal bonds has moved beyond the traditional base of tax-sensitive investors to include investors who are drawn to the high-quality, relatively low-volatility income potential of these investments.

How did Putnam Massachusetts Tax Exempt Income Fund perform against this backdrop?

Thanks in large part to a patient Fed, the reporting period proved to be a friendly environment for interest-rate-sensitive securities. U.S. Treasury rates fell and prices rose during the reporting period, and municipal bonds followed suit. For the 12-month period ended May 31, 2016, the fund delivered positive absolute performance but underperformed its benchmark, the Barclays Municipal Bond Index, and the average return of its Lipper peer group.

Allocations are shown as a percentage of the fund’s net assets as of 5/31/16. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the information in the portfolio schedule notes included in the financial statements due to the inclusion of derivative securities, any interest accruals, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.


6	Massachusetts Tax Exempt Income Fund

With the Fed beginning the process of normalizing interest rates, what was your investment approach during the reporting period?

Many of the same investment themes remained in place going into 2016 — namely, duration positioning, or interest-rate sensitivity, that is slightly below the median of the fund’s Lipper peer group; an overweight exposure, relative to the benchmark, to municipal bonds rated BBB; a preference for higher-education, single-family housing revenue, and essential service utilities bonds relative to the fund’s Lipper group; and an underweight position, relative to the fund’s peers, to Puerto Rico issuers. However, at the beginning of 2016, in response to market volatility, marginal growth, and a dovish Fed, we extended the portfolio’s duration by a modest amount, becoming slightly less defensive.

We do not expect municipal credit spreads [the difference in yield between higher- and lower-quality municipal bonds] to widen by a large margin in the near term, nor do we believe that spreads will tighten much, as spreads remained close to their lowest point since the onset of the credit crisis. In our opinion, downside risks include flows to municipal bonds turning decidedly negative or interest rates spiking higher. At the end of the reporting period, we maintained a slightly shorter-duration position and a somewhat higher cash allocation in the portfolio relative to the fund’s Lipper peers.

Credit qualities are shown as a percentage of the fund’s net assets as of 5/31/16. A bond rated BBB or higher (SP-3 or higher, for short-term debt) is considered investment grade. This chart reflects the highest security rating provided by one or more of Standard & Poor’s, Moody’s, and Fitch. Ratings may vary over time.

Cash and net other assets, if any, represent the market value weights of cash, derivatives, and short-term securities in the portfolio. The fund itself has not been rated by an independent rating agency.


Massachusetts Tax Exempt Income Fund	7

How would you characterize the health of the municipal bond market at period-end?

Overall, we believe municipal credit fundamentals have been sound and the default rate remained low — just 0.15% through May 2016, according to BofA Merrill Lynch —a fraction of the $3.7 trillion municipal bond market. Credit-rating upgrades of issuers have exceeded downgrades due to economic and financial stabilization across most public finance sectors. At the local level, property values have improved, contributing to modest increases in tax receipts.

We are closely following a handful of states and municipalities grappling with budget challenges posed by unfunded pension liabilities and health-care costs. However, while these various issuers, as well as Puerto Rico, are facing long-term headwinds, such as pensions, we believe investors have shown a willingness to isolate these situations from the overall municipal market.

What is your outlook for interest rates and Fed monetary policy?

During the reporting period, the Fed’s monetary policy continued to be influenced by U.S. data releases and global macroeconomic factors. At its March 2016 meeting, the central bank reduced its rate-hike forecast for the remainder of the year to two hikes from the four that policymakers had anticipated at their December 2015 meeting. The Fed left its benchmark rate unchanged at its April and May meetings. Just following the close of the reporting period, soft economic data, including the weakest U.S. payroll data in almost six years, diminished expectations that the Fed would raise interest rates in the next few months. Additionally, the World Bank lowered its outlook for global growth

This chart shows how the fund’s top weightings have changed over the past six months. Allocations are shown as a percentage of the fund’s net assets. Current period summary information may differ from the information in the portfolio schedule notes included in the financial statements due to the inclusion of derivative securities, any interest accruals, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.


8	Massachusetts Tax Exempt Income Fund

as corporate spending fell in developed economies, including the United States. We believe the economic outlook for China and the November U.S. presidential election also have the potential to add to market uncertainty and to influence the willingness of investors to take on investment risk.

Given the Fed’s assessment that an accommodative policy was appropriate given global risk factors, we saw the bull market in bonds continue during the reporting period. Municipal bonds were beneficiaries of this trend, with many investors drawn to the relative stability and income potential of municipal bonds as a refuge from global macroeconomic volatility. This phenomenon became even more apparent during the sharp selloff in higher-risk assets following the United Kingdom’s surprise vote to leave the European Union. We continue to believe that municipal bonds are a compelling long-term investment strategy for income-oriented investors.

Thank you, Thalia, for your time and insights today.

The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.

Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk. Statements in the Q&A concerning the fund’s performance or portfolio composition relative to those of the fund’s Lipper peer group may reference information produced by Lipper Inc. or through a third party.

Portfolio Manager Thalia Meehan holds a B.A. from Williams College. She joined Putnam in 1989 and has been in the investment industry since 1983.

In addition to Thalia, your fund’s portfolio manager is Paul M. Drury, CFA.

IN THE NEWS

At the gas pump this summer, it may feel a little like 2004. That’s because gas prices are expected to be at their lowest levels in 12 years, according to a recent forecast by the U.S. Energy Information Administration (EIA). The EIA expects gas to average $2.27 per gallon nationwide for the 2016 summer driving season, which runs from April through September. Although the price of West Texas Intermediate crude oil has remained above its 12-year low of $26.14 a barrel, which it hit in February of this year, the EIA forecast says the per-gallon price of gasoline this summer will be down 36 cents, or 13%, from the summer of 2015. Gas prices often rise in the summer due to a combination of increased demand and a more expensive blend of gasoline used to help reduce pollution. But if crude prices stay low, one would expect gas prices to follow suit. And with the price of gas so low, you can also expect that more people will be hitting the highways.


Massachusetts Tax Exempt Income Fund	9

Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended May 31, 2016, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance information as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class Y shares are not available to all investors. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.

Fund performance Total return for periods ended 5/31/16


	Class A		Class B		Class C		Class M		Class Y
(inception dates)	(10/23/89)		(7/15/93)		(8/19/03)		(5/12/95)		(1/2/08)

	Before	After					Before	After	Net
	sales	sales	Before	After;	Before	After	sales	sales	asset
	charge	charge	CDSC	CDSC	CDSC	CDSC	charge	charge	value


Annual average
(life of fund)	5.74%	5.58%	5.49%	5.49%	4.90%	4.90%	5.40%	5.27%	5.82%

10 years	56.37	50.11	48.52	48.52	44.57	44.57	52.07	47.12	59.58
Annual average	4.57	4.15	4.03	4.03	3.75	3.75	4.28	3.94	4.78

5 years	25.88	20.85	21.93	19.93	20.93	20.93	24.18	20.14	27.25
Annual average	4.71	3.86	4.04	3.70	3.87	3.87	4.43	3.74	4.94

3 years	9.44	5.06	7.31	4.35	6.80	6.80	8.55	5.02	10.16
Annual average	3.05	1.66	2.38	1.43	2.22	2.22	2.77	1.65	3.28

1 year	4.74	0.55	3.99	–1.01	3.81	2.81	4.45	1.06	4.86

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 4.00% and 3.25% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class Y shares have no initial sales charge or CDSC. Performance for class B, C, M, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares, except for class Y shares, for which 12b-1 fees are not applicable.

For a portion of the periods, the fund had expense limitations, without which returns would have been lower.

Class B share performance reflects conversion to class A shares after eight years.

10 Massachusetts Tax Exempt Income Fund

Comparative index returns For periods ended 5/31/16


		Lipper Massachusetts
	Barclays Municipal	Municipal Debt Funds
	Bond Index	category average*

Annual average (life of fund)	6.05%	5.61%

10 years	61.74	50.04
Annual average	4.93	4.13

5 years	28.07	26.06
Annual average	5.07	4.73

3 years	12.57	9.39
Annual average	4.03	3.03

1 year	5.87	4.93

Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.

* Over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 5/31/16, there were 39, 38, 35, 29, and 9 funds, respectively, in this Lipper category.

Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would have been valued at $14,852 and $14,457, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,675 after sales charge) would have been valued at $14,712. A $10,000 investment in the fund’s class Y shares would have been valued at $15,958.


Massachusetts Tax Exempt Income Fund	11

Fund price and distribution information For the 12-month period ended 5/31/16


Distributions	Class A		Class B	Class C	Class M		Class Y

Number	12		12	12	12		12

Income ¹	$0.291422		$0.230451	$0.215554	$0.264632		$0.313537

Capital gains ²	—		—	—	—		—

Total	$0.291422		$0.230451	$0.215554	$0.264632		$0.313537

	Before	After	Net	Net	Before	After	Net
	sales	sales	asset	asset	sales	sales	asset
Share value	charge	charge	value	value	charge	charge	value

5/31/15	$9.69	$10.09	$9.68	$9.71	$9.69	$10.02	$9.72

5/31/16	9.85	10.26	9.83	9.86	9.85	10.18	9.87

	Before	After	Net	Net	Before	After	Net
	sales	sales	asset	asset	sales	sales	asset
Current rate (end of period)	charge	charge	value	value	charge	charge	value

Current dividend rate ³	2.84%	2.72%	2.22%	2.06%	2.56%	2.48%	3.06%

Taxable equivalent ⁴	5.29	5.06	4.13	3.84	4.77	4.62	5.70

Current 30-day SEC yield ⁵	N/A	1.07	0.50	0.35	N/A	0.81	1.34

Taxable equivalent ⁴	N/A	1.99	0.93	0.65	N/A	1.51	2.49

The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (4.00% for class A shares and 3.25% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.

¹For some investors, investment income may be subject to the federal alternative minimum tax.

²Capital gains, if any, are taxable for federal and, in most cases, state purposes.

3 Most recent distribution, including any return of capital and excluding capital gains, annualized and divided by share price before or after sales charge at period-end.

⁴Assumes maximum 46.29% federal and state combined tax rate for 2016. Results for investors subject to lower tax rates would not be as advantageous.

⁵Based only on investment income and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.

12 Massachusetts Tax Exempt Income Fund

Fund performance as of most recent calendar quarter
Total return for periods ended 6/30/16


	Class A		Class B		Class C		Class M		Class Y
(inception dates)	(10/23/89)		(7/15/93)		(8/19/03)		(5/12/95)		(1/2/08)

	Before	After					Before	After	Net
	sales	sales	Before	After	Before	After	sales	sales	asset
	charge	charge	CDSC	CDSC	CDSC	CDSC	charge	charge	value


Annual average
(life of fund)	5.78%	5.62%	5.54%	5.54%	4.96%	4.96%	5.45%	5.32%	5.87%

10 years	59.31	52.94	51.48	51.48	47.60	47.60	54.93	49.90	62.78
Annual average	4.77	4.34	4.24	4.24	3.97	3.97	4.48	4.13	4.99

5 years	27.40	22.31	23.53	21.53	22.65	22.65	25.68	21.59	28.91
Annual average	4.96	4.11	4.32	3.98	4.17	4.17	4.68	3.99	5.21

3 years	15.39	10.78	13.27	10.27	12.71	12.71	14.45	10.73	16.13
Annual average	4.89	3.47	4.24	3.31	4.07	4.07	4.60	3.46	5.11

1 year	6.85	2.57	6.30	1.30	6.12	5.12	6.55	3.09	7.18

See the discussion following the fund performance table on page 10 for information about the calculation of fund performance.

Your fund’s expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund’s expenses were limited; had expenses not been limited, they would have been higher. Using the following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.

Expense ratios


	Class A	Class B	Class C	Class M	Class Y

Total annual operating expenses for the fiscal
year ended 5/31/15	0.77%	1.39%	1.54%	1.04%	0.54%

Annualized expense ratio for the six-month
period ended 5/31/16*	0.80%	1.42%	1.57%	1.07%	0.57%

Fiscal-year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.

Expenses are shown as a percentage of average net assets.

* Expense ratios for each class are for the fund’s most recent fiscal half year. As a result of this, ratios may differ from expense ratios based on one-year data in the financial highlights.

Massachusetts Tax Exempt Income Fund 13

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 12/1/15 to 5/31/16. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.


	Class A	Class B	Class C	Class M	Class Y

Expenses paid per $1,000*†	$4.06	$7.19	$7.95	$5.43	$2.89

Ending value (after expenses)	$1,030.30	$1,026.00	$1,025.20	$1,028.80	$1,030.30

* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 5/31/16. The expense ratio may differ for each share class.

† Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 5/31/16, use the following calculation method. To find the value of your investment on 12/1/15, call Putnam at 1-800-225-1581.

Compare expenses using the SEC’s method

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return . You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.


	Class A	Class B	Class C	Class M	Class Y

Expenses paid per $1,000*†	$4.04	$7.16	$7.92	$5.40	$2.88

Ending value (after expenses)	$1,021.00	$1,017.90	$1,017.15	$1,019.65	$1,022.15

† Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period; and then dividing that result by the number of days in the year.

14 Massachusetts Tax Exempt Income Fund

Terms and definitions

Important terms

Total return shows how the value of the fund’s shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund.

Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions, and are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.

After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 4.00% maximum sales charge for class A shares and 3.25% for class M shares.

Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines over time from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.

Share classes

Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class B shares are not subject to an initial sales charge and may be subject to a CDSC.

Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.

Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC.

Class Y shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.

Fixed-income terms

Current rate is the annual rate of return earned from dividends or interest of an investment. Current rate is expressed as a percentage of the price of a security, fund share, or principal investment.

Yield curve is a graph that plots the yields of bonds with equal credit quality against their differing maturity dates, ranging from shortest to longest. It is used as a benchmark for other debt, such as mortgage or bank lending rates.

Comparative indexes

Barclays Municipal Bond Index is an unmanaged index of long-term fixed-rate investment-grade tax-exempt bonds.

Barclays U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.

BofA Merrill Lynch U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.

S&P 500 Index is an unmanaged index of common stock performance.

Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.

Lipper is a third-party industry-ranking entity that ranks mutual funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category averages reflect performance trends for funds within a category.

Massachusetts Tax Exempt Income Fund 15

Other information for shareholders

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2015, are available in the Individual Investors section of putnam.com, and on the Securities and Exchange Commission (SEC) website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Form N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the Public Reference Room.

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of May 31, 2016, Putnam employees had approximately $484,000,000 and the Trustees had approximately $128,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.

16 Massachusetts Tax Exempt Income Fund

Important notice regarding Putnam’s privacy policy

In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ names, addresses, Social Security numbers, and dates of birth. Using this information, we are able to maintain accurate records of accounts and transactions.

It is our policy to protect the confidentiality of our shareholder information, whether or not a shareholder currently owns shares of our funds. In particular, it is our policy not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use.

Under certain circumstances, we must share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. Finally, it is our policy to share account information with your financial representative, if you’ve listed one on your Putnam account.

Massachusetts Tax Exempt Income Fund 17

Financial statements

These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, constitute the fund’s financial statements.

The fund’s portfolio lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type/and industry sector, country, or state to show areas of concentration and/diversification.

Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)

Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal year.

Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were/earned.

Financial highlights provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlights table also includes the current reporting period.

18 Massachusetts Tax Exempt Income Fund

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, 2016, 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, 2016 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
July 15, 2016

Massachusetts Tax Exempt Income Fund 19

The fund’s portfolio 5/31/16

Key to holding’s abbreviations


AGC Assured Guaranty Corp.	NATL National Public Finance Guarantee Corp.
AGM Assured Guaranty Municipal Corporation	SGI Syncora Guarantee, Inc.
AMBAC AMBAC Indemnity Corporation	U.S. Govt. Coll. U.S. Government Collateralized
FGIC Financial Guaranty Insurance Company	VRDN Variable Rate Demand Notes, which are
FRB Floating Rate Bonds: the rate shown	floating-rate securities with long-term maturities
is the current interest rate at the close of the	that carry coupons that reset and are payable upon
reporting period	demand either daily, weekly or monthly. The rate
G.O. Bonds General Obligation Bonds	shown is the current interest rate at the close of the
	reporting period.


MUNICIPAL BONDS AND NOTES (98.6%)*	Rating**	Principal amount	Value

California (0.8%)
CA State G.O. Bonds, 5s, 2/1/38	Aa3	$1,500,000	$1,774,170

CA State Poll. Control Fin. Auth. Solid Waste Disp.
144A Mandatory Put Bonds (8/1/16) (Republic
Svcs., Inc.), Ser. A, 0.9s, 8/1/23	A–2	900,000	899,928

2,674,098
Guam (1.4%)
Territory of GU, Rev. Bonds, Ser. A,
5 3/8s, 12/1/24	BBB+	1,000,000	1,121,090

Territory of GU, Bus. Privilege Tax Rev. Bonds,
Ser. A, 5s, 1/1/31	A	1,650,000	1,863,032

Territory of GU, Govt. Wtr. Wks. Auth. Wtr. &
Waste Wtr. Syst. Rev. Bonds, 5 5/8s, 7/1/40	A–	600,000	674,184

Territory of GU, Pwr. Auth. Rev. Bonds, Ser. A
5 1/2s, 10/1/40	Baa2	500,000	560,245
5s, 10/1/34	Baa2	200,000	225,778

4,444,329
Indiana (0.1%)
IN State Fin. Auth. Econ. Dev. Mandatory Put
Bonds (6/1/16) (Republic Svcs., Inc.), Ser. A,
0.8s, 5/1/34	BBB+	300,000	300,000

300,000
Massachusetts (94.2%)
Hampden & Wilbraham, Regl. School Dist. G.O.
Bonds, 5s, 2/15/41	Aa3	2,000,000	2,270,700

Holyoke, G.O. Bonds, 5s, 9/1/29	Aa2	770,000	923,453

Lowell, G.O. Bonds, Ser. A, SGI, 5s, 9/15/22
(Prerefunded 9/15/16)	Aa2	1,750,000	1,772,453

MA Bay Trans. Auth. Sales Tax Rev. Bonds
Ser. C, 5 1/2s, 7/1/24	AA+	1,500,000	1,944,255
Ser. C, 5 1/2s, 7/1/16	AA+	2,855,000	2,866,877
Ser. C, 5 1/4s, 7/1/23	AA+	1,335,000	1,681,192
Ser. A, 5 1/4s, 7/1/21	AA+	2,000,000	2,404,400
Ser. A, 5s, 7/1/31	AA+	3,390,000	4,479,241

MA State G.O. Bonds
Ser. A, 5s, 3/1/46	Aa1	1,000,000	1,185,050
Ser. A, 5s, 3/1/41	Aa1	1,000,000	1,189,720
Ser. C, AMBAC, 5s, 8/1/37
(Prerefunded 8/1/17)	Aa1	2,000,000	2,100,460

20 Massachusetts Tax Exempt Income Fund


MUNICIPAL BONDS AND NOTES (98.6%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.
MA State G.O. Bonds
(Construction Loan), Ser. A, 5s, 8/1/27
(Prerefunded 8/1/18)	Aa1	$2,000,000	$2,176,440
Ser. D, 5s, 10/1/26	Aa1	2,000,000	2,377,420
Ser. A, 5s, 5/1/23	Aa1	3,000,000	3,706,800
Ser. A, 5s, 5/1/22	Aa1	2,500,000	3,024,625

MA State Rev. Bonds, 5s, 6/15/22	AAA	2,000,000	2,435,840

MA State VRDN (Construction Loan), Ser. A,
0.32s, 3/1/26	VMIG1	2,500,000	2,500,000

MA State Clean Energy Cooperative Corp. Rev.
Bonds (Muni. Ltg. Plant Coop.)
5s, 7/1/32	A1	1,000,000	1,186,180
5s, 7/1/28	A1	1,500,000	1,797,780

MA State College Bldg. Auth. Rev. Bonds
Ser. B, SGI, 5 1/2s, 5/1/28	Aa2	3,000,000	3,763,050
Ser. B, 5s, 5/1/43	Aa2	3,100,000	3,574,889
(Green Bond), 5s, 5/1/39	Aa2	1,500,000	1,766,445
Ser. B, 5s, 5/1/37	Aa2	1,500,000	1,764,315
Ser. A, 5s, 5/1/36	Aa2	2,850,000	3,350,460
Ser. A, AGC, 5s, 5/1/28 (Prerefunded 5/1/18)	Aa2	2,270,000	2,450,896

MA State Dept. Trans. Rev. Bonds (Metro Hwy.
Syst.), Ser. B
5s, 1/1/37	A+	2,250,000	2,502,495
5s, 1/1/32	A+	2,775,000	3,117,241

MA State Dev. Fin. Agcy. Rev. Bonds
(Sabis Intl.), Ser. A, 8s, 4/15/39
(Prerefunded 10/15/19)	BBB	775,000	953,273
(Tufts Med. Ctr.), Ser. I, 7 1/4s, 1/1/32	BBB	2,000,000	2,405,580
(Linden Ponds, Inc. Fac.), Ser. A-1,
6 1/4s, 11/15/46	B–/P	547,179	551,277
(Loomis Cmntys.), Ser. A, 6s, 1/1/33	BBB–	300,000	338,364
(WGBH Edl. Foundation), Ser. A, AMBAC,
5 3/4s, 1/1/42	A+	5,000,000	6,680,350
(Milford Regl. Med. Ctr.), Ser. F, 5 5/8s, 7/15/36	Baa3	500,000	552,475
(Linden Ponds, Inc. Fac.), Ser. A-2,
5 1/2s, 11/15/46	B–/P	94,100	86,374
(Emerson College), Ser. A, 5 1/2s, 1/1/30	Baa1	900,000	1,014,534
(Berklee College of Music), 5 1/4s, 10/1/41	A2	1,500,000	1,770,945
(New England Conservatory
of Music), U.S. Govt. Coll., 5 1/4s, 7/1/38
(Prerefunded 7/1/18)	AAA/P	3,000,000	3,270,600
(Simmons College), Ser. H, SGI, 5 1/4s, 10/1/33	Baa1	2,000,000	2,440,040
(Lesley U.), Ser. B-1, AGM, 5 1/4s, 7/1/33	AA	2,000,000	2,350,360
(Wheelock College), Ser. C, 5 1/4s, 10/1/29	BBB	2,400,000	2,479,512
(Carleton-Willard Village), 5 1/4s, 12/1/25	A–	700,000	778,421
(Suffolk U.), 5 1/8s, 7/1/40	Baa2	1,500,000	1,638,930
(Partners Healthcare Syst.), Ser. Q, 5s, 7/1/41	Aa3	2,000,000	2,387,860
(South Shore Hosp., Inc.), Ser. I, 5s, 7/1/41	A–	2,500,000	2,908,375
(Dexter Southfield), 5s, 5/1/41	BBB+	2,000,000	2,270,500

Massachusetts Tax Exempt Income Fund 21


MUNICIPAL BONDS AND NOTES (98.6%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.
MA State Dev. Fin. Agcy. Rev. Bonds
(Bentley U.), 5s, 7/1/40	A3	$1,250,000	$1,485,163
(Emerson College), Ser. A, 5s, 1/1/40	Baa1	3,400,000	3,687,912
(Brandeis U.), Ser. N, 5s, 10/1/39	A1	450,000	485,136
(Franklin W. Olin College), Ser. E, 5s, 11/1/38	A+	1,000,000	1,172,580
(Tufts U.), Ser. Q, 5s, 8/15/38	Aa2	500,000	606,265
(Boston College), Ser. P, 5s, 7/1/38	Aa3	2,000,000	2,079,580
(CareGroup), Ser. H-1, 5s, 7/1/24	A3	3,000,000	3,688,290
(CareGroup), Ser. I, 5s, 7/1/38	A3	935,000	1,097,821
(CareGroup), Ser. I, 5s, 7/1/37	A3	500,000	587,830
(Lowell Gen. Hosp.), Ser. G, 5s, 7/1/37	BBB	1,630,000	1,829,822
(MCPHS U.), Ser. H, 5s, 7/1/37	AA	450,000	536,819
(Brandeis U.), Ser. 0-1, 5s, 10/1/35	A1	1,000,000	1,108,360
(Baystate Med. Oblig. Group), Ser. N, 5s, 7/1/34	A+	1,000,000	1,158,040
(Intl. Charter School), 5s, 4/15/33	BBB	750,000	842,385
(MCPHS U.), Ser. H, 5s, 7/1/32	AA	300,000	359,490
(Northeastern U.), 5s, 10/1/31	A2	500,000	587,750
(Berkshire Retirement Cmnty.
of Lenox), 5s, 7/1/31	A–/F	1,000,000	1,176,130
(MA College Pharmacy Allied), Ser. E, AGC, 5s,
7/1/31 (Prerefunded 7/1/17)	AA	2,000,000	2,093,280
(Partners Hlth. Care Syst.), Ser. L, 5s, 7/1/31	Aa3	4,495,000	5,166,418
(Boston U.), Ser. V-1, 5s, 10/1/29	A1	2,000,000	2,231,200
(Boston College), Ser. Q-1, 5s, 7/1/29	Aa3	1,050,000	1,170,540
(Mount Holyoke College), 5s, 7/1/28	Aa3	3,000,000	3,240,300
(Dexter Southfield), 5s, 5/1/26	BBB+	740,000	877,203
(College of the Holy Cross), Ser. B, 5s, 9/1/25	Aa3	1,020,000	1,110,790
(College of the Holy Cross), Ser. B, 5s, 9/1/25
(Prerefunded 9/1/18)	AAA/P	480,000	523,848
(MA College of Pharmacy & Allied Hlth.
Science), Ser. F, 5s, 7/1/25	AA	650,000	783,322
(Babson College), Ser. A, 5s, 10/1/24	A2	250,000	309,210
(Lahey Clinic Oblig. Group), Ser. F, 5s, 8/15/24	A+	250,000	306,455
(Babson College), Ser. A, 5s, 10/1/23	A2	300,000	365,850
(MA College of Pharmacy & Allied Hlth.
Science), Ser. F, 5s, 7/1/23	AA	125,000	151,469
(First Mtge. — Orchard Cove), 5s, 10/1/19	BB/P	550,000	565,422
(First Mtge. — Orchard Cove), 5s, 10/1/18	BB/P	515,000	529,853
(Linden Ponds, Inc. Fac.), Ser. B,
zero %, 11/15/56	B–/P	468,041	3,496
(WGBH Edl. Foundation), Ser. B, AGC,
zero %, 1/1/29	AA	2,000,000	1,446,980
(WGBH Edl. Foundation), Ser. B, AGC,
zero %, 1/1/28	AA	2,000,000	1,494,920

22 Massachusetts Tax Exempt Income Fund


MUNICIPAL BONDS AND NOTES (98.6%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.
MA State Dev. Fin. Agcy. Solid Waste Disp. FRB
(Dominion Energy Brayton Point)
Ser. 1, U.S. Govt. Coll., 5 3/4s, 12/1/42
(Prerefunded 5/1/19)	Baa2	$1,700,000	$1,931,625
U.S. Govt. Coll., 5s, 2/1/36
(Prerefunded 8/1/16)	Baa2	1,000,000	1,007,050

MA State Edl. Fin. Auth. Rev. Bonds
Ser. B, 5.7s, 1/1/31	AA	1,200,000	1,296,000
Ser. J, 5 5/8s, 7/1/28	AA	720,000	806,587
(Ed. Loan — Issue 1), 5s, 1/1/27	AA	2,750,000	3,107,665
(Ed. Loan — Issue 1), 4 3/8s, 1/1/32	AA	1,225,000	1,301,942

MA State Hlth. & Edl. Fac. Auth. Rev. Bonds
(Harvard U.), Ser. N, 6 1/4s, 4/1/20	Aaa	3,000,000	3,591,240
(Suffolk U.), Ser. A, U.S. Govt. Coll., 5 3/4s,
7/1/39 (Prerefunded 7/1/19)	Baa2	3,000,000	3,371,430
(Springfield College), 5 5/8s, 10/15/40	Baa1	2,000,000	2,211,460
(Harvard U.), Ser. A, 5 1/2s, 11/15/36	Aaa	2,185,000	2,430,834
(Care Group), Ser. B-1, NATL, 5 3/8s, 2/1/27
(Prerefunded 8/1/18)	AA–	1,030,000	1,130,281
(Lesley U.), Ser. A, AGC, 5 1/4s, 7/1/39	AA	1,000,000	1,102,830
(Winchester Hosp.), 5 1/4s, 7/1/38	A	2,225,000	2,501,212
(Lahey Clinic Med. Ctr.), Ser. D, 5 1/4s, 8/15/28
(Prerefunded 8/15/17)	A+	3,000,000	3,164,670
(Dana-Farber Cancer Inst.), Ser. K,
5 1/4s, 12/1/27	A1	1,500,000	1,664,520
(MA Inst. of Tech.), Ser. I-1, 5.2s, 1/1/28	Aaa	5,000,000	6,695,200
(Care Group), Ser. E-1, 5 1/8s, 7/1/38
(Prerefunded 7/1/18)	A3	1,000,000	1,087,640
(Fisher College), Ser. A, 5 1/8s, 4/1/37	BBB	755,000	774,819
(Lowell Gen. Hosp.), Ser. C, 5 1/8s, 7/1/35	BBB	725,000	790,685
(Wheaton Coll.), Ser. F, 5s, 1/1/41	A3	2,000,000	2,198,860
(Partners Hlth. Care Syst.), Ser. J-1, 5s, 7/1/39	Aa3	1,500,000	1,660,665
(Southcoast Hlth. Oblig.), Ser. D, 5s, 7/1/39	A3	1,500,000	1,611,780
(Harvard U.), Ser. B, 5s, 10/1/38	Aaa	500,000	527,810
(MA Inst. of Tech.), Ser. A, 5s, 7/1/38
(Prerefunded 7/1/17)	Aaa	2,250,000	2,356,178
(Berklee College of Music), Ser. A, 5s, 10/1/37	A2	2,750,000	2,880,488
(Milford Regl. Med.), Ser. E, 5s, 7/15/37	Baa3	850,000	872,194
(Northeastern U.), Ser. A, 5s, 10/1/35	A2	300,000	338,856
(Northeastern U.), Ser. T-1, 5s, 10/1/30	A2	1,000,000	1,175,500
(Northeastern U.), Ser. T-2, 5s, 10/1/30	A2	2,000,000	2,351,000
(Care Group), Ser. E-1, 5s, 7/1/28
(Prerefunded 7/1/18)	A3	1,730,000	1,877,171
(Northeastern U.), Ser. R, 5s, 10/1/26	A2	1,165,000	1,278,751
(Worcester City Campus Corp.), Ser. E, FGIC,
NATL, 5s, 10/1/26 (Prerefunded 10/1/16)	AA–	2,000,000	2,029,360
(Milford Regl. Med.), Ser. E, 5s, 7/15/22	Baa3	1,800,000	1,866,060
(Fisher College), Ser. A, 5s, 4/1/22	BBB	1,110,000	1,144,998

Massachusetts Tax Exempt Income Fund 23


MUNICIPAL BONDS AND NOTES (98.6%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.
MA State Hlth. & Edl. Fac. Auth. VRDN
(Baystate Med. Ctr.), Ser. J-2, 0.33s, 7/1/44	VMIG1	$800,000	$800,000
(Tufts U.), Ser. N-2, 0.33s, 8/15/34	VMIG1	2,200,000	2,200,000
(Harvard U.), Ser. R, 1/4s, 11/1/49	VMIG1	2,300,000	2,300,000

MA State Hsg. Fin. Agcy. FRB (Single Fam. Hsg.),
Ser. 126, 4.7s, 6/1/38	Aa2	845,000	845,000

MA State Hsg. Fin. Agcy. Rev. Bonds
Ser. C, 5.35s, 12/1/42	Aa3	1,500,000	1,616,520
Ser. A, 5.1s, 12/1/30	Aa3	1,475,000	1,587,926
Ser. D, 5.05s, 6/1/40	Aa3	1,550,000	1,618,185
Ser. 157, 4.35s, 12/1/27	Aa2	90,000	95,270
Ser. 171, 4s, 12/1/44	Aa2	685,000	741,321
Ser. SF-169, 4s, 12/1/44	Aa2	1,615,000	1,743,360
Ser. 160, 3 3/4s, 6/1/34	Aa2	455,000	468,395
(Single Fam.), Ser. 178, 3 1/2s, 6/1/42	Aa2	1,445,000	1,542,538
Ser. A, 3 1/2s, 12/1/31	Aa3	2,000,000	2,077,180
Ser. A, 3 1/4s, 12/1/27	Aa3	1,870,000	1,947,886

MA State Port Auth. Rev. Bonds
Ser. A, 5s, 7/1/34	Aa2	3,500,000	4,000,675
Ser. A, 5s, 7/1/33	Aa2	775,000	942,702
Ser. A, 5s, 7/1/32	Aa2	755,000	922,519
Ser. C, AGM, 5s, 7/1/27	Aa2	5,000,000	5,223,200

MA State Port Auth. Special Fac. Rev. Bonds
(Conrac), Ser. A, 5 1/8s, 7/1/41	A	1,765,000	1,991,803
(BOSFUEL), FGIC, NATL, 5s, 7/1/27	AA–	2,500,000	2,596,450

MA State School Bldg. Auth. Dedicated Sales Tax
Rev. Bonds, Ser. A, 5s, 11/15/42	AA+	2,000,000	2,411,020

MA State School Bldg. Auth. Sales Tax Rev. Bonds
Ser. A, 5s, 5/15/43	AA+	915,000	1,076,690
Ser. B, 5s, 10/15/41	AA+	3,500,000	4,058,775
Ser. B, 5s, 10/15/35	AA+	1,000,000	1,170,800

MA State Trans. Fund Rev. Bonds
(Rail Enhancement Program), Ser. A, 5s, 6/1/45	Aaa	3,000,000	3,622,260
(Accelerated Bridge Program),
Ser. A, 5s, 6/1/44	Aaa	4,000,000	4,768,480
(Accelerated Bridge Program), 5s, 6/1/43	Aaa	2,100,000	2,425,038

MA State Wtr. Poll. Abatement Trust Rev. Bonds
Ser. 14, 5s, 8/1/32	Aaa	4,000,000	4,464,760
Ser. 13, 5s, 8/1/26 (Prerefunded 8/1/17)	Aaa	1,000,000	1,050,830

MA State Wtr. Resource Auth. Rev. Bonds
Ser. A, 6 1/2s, 7/15/19 (Escrowed to maturity)	Aa1	3,175,000	3,396,456
Ser. C, 5 1/4s, 8/1/42	Aa1	3,500,000	4,109,490
(Green Bond), Ser. C, 5s, 8/1/40	Aa1	3,000,000	3,636,210
Ser. A, NATL, 5s, 8/1/29	Aa1	3,025,000	3,167,901
Ser. A, U.S. Govt. Coll., NATL, 5s, 8/1/29
(Prerefunded 8/1/17)	Aa1	200,000	210,046
Ser. B, AMBAC, 5s, 8/1/26	Aa1	2,000,000	2,195,020

24 Massachusetts Tax Exempt Income Fund


MUNICIPAL BONDS AND NOTES (98.6%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.
Metro. Boston, Trans. Pkg. Corp. Rev. Bonds,
5 1/4s, 7/1/36	A1	$1,500,000	$1,752,405

Milford, G.O. Bonds, AGM, 5 1/8s, 12/15/24	Aa2	2,475,000	2,640,949

North Reading, G.O. Bonds, 5s, 5/15/35	Aa2	3,750,000	4,438,125

U. of MA Bldg. Auth. Rev. Bonds, Ser. 2,
5s, 11/1/39	Aa2	2,500,000	2,927,800

Worcester, G.O. Bonds (Muni. Purpose Loan),
4s, 11/1/23	Aa3	3,050,000	3,383,884

300,355,606
Ohio (0.4%)
OH State Air Quality Dev. Auth., Poll. Control
Mandatory Put Bonds (5/1/20) (FirstEnergy
Nuclear), Ser. C, 3.95s, 11/1/32	Baa3	300,000	305,766

Warren Cnty., Hlth. Care Fac. Rev. Bonds
(Otterbein Homes Oblig. Group), 5s, 7/1/32	A	750,000	871,470

1,177,236
Puerto Rico (0.7%)
Children’s Trust Fund Tobacco Settlement
(The) Rev. Bonds
5 1/2s, 5/15/39	Ba1	1,200,000	1,206,516
5 3/8s, 5/15/33	Ba1	725,000	728,937

Cmnwlth. of PR, G.O. Bonds, Ser. A,
5 1/8s, 7/1/37	Caa3	500,000	306,875

2,242,328
Texas (0.5%)
Dallas, Area Rapid Transit Sales Tax Rev. Bonds,
Ser. A, 5s, 12/1/41	AA+	1,500,000	1,803,960


Virgin Islands (0.5%)			1,803,960
VI Pub. Fin. Auth. Rev. Bonds, Ser. A
6s, 10/1/39	Baa3	600,000	666,936
5s, 10/1/25	Baa2	850,000	945,850

			1,612,786

TOTAL INVESTMENTS

Total investments (cost $289,198,926)			$314,610,343

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, 2015 through May 31, 2016 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures and references to “OTC”, if any, represent over-the-counter.

* Percentages indicated are based on net assets of $318,956,679.

** 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 Fitch are indicated by “/F.” Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications. If a security is insured, it will usually be rated by the ratings organizations based on the financial strength of the insurer. Ratings are not covered by the Report of Independent Registered Public Accounting Firm. For further details regarding security ratings, please see the Statement of Additional Information.

Massachusetts Tax Exempt Income Fund 25

144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

On Mandatory Put Bonds, the rates shown are the current interest rates at the close of the reporting period and the dates shown represent the next mandatory put dates.

The dates shown parenthetically on prerefunded bonds represent the next prerefunding dates. 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):


Education	27.4%
Health care	12.2
Prerefunded	11.9
Tax bonds	11.2

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	$—	$314,610,343	$—

Totals by level	$—	$314,610,343	$—

During the reporting period, transfers within the fair value hierarchy, if any, did not represent, in the aggregate, more than 1% of the fund’s net assets measured as of the end of the period. Transfers are accounted for using the end of period pricing valuation method.

The accompanying notes are an integral part of these financial statements.

26 Massachusetts Tax Exempt Income Fund

Statement of assets and liabilities 5/31/16


ASSETS

Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $289,198,926)	$314,610,343

Cash	520,843

Interest and other receivables	4,261,527

Receivable for shares of the fund sold	810,945

Prepaid assets	2,771

Total assets	320,206,429

LIABILITIES

Payable for shares of the fund repurchased	641,187

Payable for compensation of Manager (Note 2)	117,863

Payable for custodian fees (Note 2)	5,017

Payable for investor servicing fees (Note 2)	35,469

Payable for Trustee compensation and expenses (Note 2)	103,854

Payable for administrative services (Note 2)	1,194

Payable for distribution fees (Note 2)	120,027

Payable for auditing and tax fees	70,011

Distributions payable to shareholders	128,603

Other accrued expenses	26,525

Total liabilities	1,249,750

Net assets	$318,956,679


REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$301,709,001

Undistributed net investment income (Note 1)	423,032

Accumulated net realized loss on investments (Note 1)	(8,586,771)

Net unrealized appreciation of investments	25,411,417

Total — Representing net assets applicable to capital shares outstanding	$318,956,679

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share
($241,808,448 divided by 24,557,915 shares)	$9.85

Offering price per class A share (100/96.00 of $9.85)*	$10.26

Net asset value and offering price per class B share ($2,728,387 divided by 277,457 shares)**	$9.83

Net asset value and offering price per class C share ($29,323,573 divided by 2,972,493 shares)**	$9.86

Net asset value and redemption price per class M share ($2,552,706 divided by 259,257 shares)	$9.85

Offering price per class M share (100/96.75 of $9.85)†	$10.18

Net asset value, offering price and redemption price per class Y share
($42,543,565 divided by 4,308,870 shares)	$9.87

* 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.

Massachusetts Tax Exempt Income Fund 27

Statement of changes in net assets


INCREASE (DECREASE) IN NET ASSETS	Year ended 5/31/16	Year ended 5/31/15

Operations:
Net investment income	$9,183,734	$9,990,191

Net realized loss on investments	(935,125)	(2,650,789)

Net unrealized appreciation of investments	5,863,790	2,516,957

Net increase in net assets resulting from operations	14,112,399	9,856,359

Distributions to shareholders (Note 1):
From ordinary income
Taxable net investment income

Class A	—	(134,970)

Class B	—	(1,868)

Class C	—	(17,064)

Class M	—	(1,477)

Class Y	—	(15,121)

From tax-exempt net investment income
Class A	(7,190,345)	(8,061,522)

Class B	(67,955)	(87,884)

Class C	(642,818)	(757,791)

Class M	(71,911)	(85,131)

Class Y	(1,139,850)	(918,350)

Increase (decrease) from capital share transactions (Note 4)	4,477,392	(5,284,183)

Total increase (decrease) in net assets	9,476,912	(5,509,002)

NET ASSETS

Beginning of year	309,479,767	314,988,769

End of year (including undistributed net investment income
of $423,032 and $265,121, respectively)	$318,956,679	$309,479,767

The accompanying notes are an integral part of these financial statements.

Massachusetts Tax Exempt Income Fund 29

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


INVESTMENT OPERATIONS:					LESS DISTRIBUTIONS:						RATIOS AND SUPPLEMENTAL DATA:

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

Class A
May 31, 2016	$9.69	.29	.16	.45	(.29)	—	(.29)	—	$9.85	4.74	$241,808	.79 ^d	3.00 ^d	15
May 31, 2015	9.70	.32	(.01)	.31	(.32)	—	(.32)	—	9.69	3.24	241,438	.77	3.27	8
May 31, 2014	9.95	.32	(.22)	.10	(.32)	(.03)	(.35)	—	9.70	1.20	254,368	.77	3.41	8
May 31, 2013	10.04	.31	(.07)	.24	(.32)	(.01)	(.33)	—	9.95	2.36	338,606	.77	3.06	8
May 31, 2012	9.31	.37	.76	1.13	(.38)	(.02)	(.40)	— ^c,e	10.04	12.38	290,077	.77	3.84	6

Class B
May 31, 2016	$9.68	.23	.15	.38	(.23)	—	(.23)	—	$9.83	3.99	$2,728	1.41 ^d	2.38 ^d	15
May 31, 2015	9.69	.26	(.01)	.25	(.26)	—	(.26)	—	9.68	2.61	3,306	1.39	2.65	8
May 31, 2014	9.94	.27	(.23)	.04	(.26)	(.03)	(.29)	—	9.69	.58	3,347	1.39	2.79	8
May 31, 2013	10.03	.24	(.07)	.17	(.25)	(.01)	(.26)	—	9.94	1.73	4,314	1.39	2.44	8
May 31, 2012	9.30	.31	.76	1.07	(.32)	(.02)	(.34)	— ^c,e	10.03	11.68	3,737	1.40	3.22	6

Class C
May 31, 2016	$9.71	.22	.15	.37	(.22)	—	(.22)	—	$9.86	3.81	$29,324	1.56 ^d	2.23 ^d	15
May 31, 2015	9.72	.24	— ^c	.24	(.25)	—	(.25)	—	9.71	2.44	30,361	1.54	2.50	8
May 31, 2014	9.97	.25	(.22)	.03	(.25)	(.03)	(.28)	—	9.72	.42	31,066	1.54	2.64	8
May 31, 2013	10.05	.23	(.06)	.17	(.24)	(.01)	(.25)	—	9.97	1.67	46,310	1.54	2.29	8
May 31, 2012	9.33	.30	.75	1.05	(.31)	(.02)	(.33)	— ^c,e	10.05	11.37	37,098	1.55	3.05	6

Class M
May 31, 2016	$9.69	.27	.15	.42	(.26)	—	(.26)	—	$9.85	4.45	$2,553	1.06 ^d	2.73 ^d	15
May 31, 2015	9.70	.29	— ^c	.29	(.30)	—	(.30)	—	9.69	2.96	2,649	1.04	3.00	8
May 31, 2014	9.95	.30	(.23)	.07	(.29)	(.03)	(.32)	—	9.70	.93	3,102	1.04	3.14	8
May 31, 2013	10.04	.28	(.07)	.21	(.29)	(.01)	(.30)	—	9.95	2.08	4,033	1.04	2.79	8
May 31, 2012	9.31	.35	.75	1.10	(.35)	(.02)	(.37)	— ^c,e	10.04	12.05	4,200	1.05	3.56	6

Class Y
May 31, 2016	$9.72	.32	.14	.46	(.31)	—	(.31)	—	$9.87	4.86	$42,544	.56 ^d	3.22 ^d	15
May 31, 2015	9.72	.34	— ^c	.34	(.34)	—	(.34)	—	9.72	3.57	31,727	.54	3.51	8
May 31, 2014	9.97	.35	(.23)	.12	(.34)	(.03)	(.37)	—	9.72	1.43	23,107	.54	3.63	8
May 31, 2013	10.06	.33	(.07)	.26	(.34)	(.01)	(.35)	—	9.97	2.59	33,227	.54	3.28	8
May 31, 2012	9.33	.39	.76	1.15	(.40)	(.02)	(.42)	— ^c,e	10.06	12.59	22,254	.55	4.05	6

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

^bIncludes amounts paid through expense offset and/or brokerage service arrangements, if any (Note 2). Also excludes acquired fund fees and expenses, if any.

^cAmount represents less than $0.01 per share.

^dReflects a voluntary waiver of certain fund expenses in effect during the period. As a result of such waiver, the expenses of each class reflect a reduction of less than 0.01% as a percentage of average net assets (Note 2).

^eReflects a non-recurring reimbursement related to restitution amounts in connection with a distribution plan approved by the Securities and Exchange Commission (SEC), which amounted to less than $0.01 per share outstanding on July 21, 2011.

The accompanying notes are an integral part of these financial statements.


30 Massachusetts Tax Exempt Income Fund	Massachusetts Tax Exempt Income Fund 31

Notes to financial statements 5/31/16

Within the following Notes to financial statements, references to “State Street” represent State Street Bank and Trust Company, references to “the SEC” represent the Securities and Exchange Commission, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter. Unless otherwise noted, the “reporting period” represents the period from June 1, 2015 through May 31, 2016.

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 goal of the fund is to seek as high a level of current income exempt from federal income tax and Massachusetts personal income tax as Putnam Management believes is consistent with preservation of capital. The fund invests 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). Under normal circumstances, Putnam Management invests at least 80% of the fund’s net assets in tax-exempt investments. This investment policy cannot be changed without the approval of the fund’s shareholders. Putnam Management may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

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. Class A shares generally are not subject to a contingent deferred sales charge and class M and class Y shares are not subject to 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 not available to all investors.

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 fund has entered into contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.

Under the fund’s Declaration of Trust, any claims asserted against or on behalf of the Putnam Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.

Note 1: Significant accounting policies

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. 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.

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.

32 Massachusetts Tax Exempt Income Fund

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.

Security valuation Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.

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. To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. 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, recovery rates, sales and other multiples and resale restrictions. 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.

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.

Interfund lending The fund, along with other Putnam funds, may participate in an interfund lending program pursuant to an exemptive order issued by the SEC. This program allows the fund to borrow from other Putnam funds that permit such transactions. Interfund lending transactions are subject to each fund’s investment policies and borrowing and lending limits. Interest earned or paid on the interfund lending transaction will be based on the average of certain current market rates. During the reporting period, the fund did not utilize the program.

Lines of credit The fund participates, along with other Putnam funds, in a $392.5 million syndicated unsecured committed line of credit provided by State Street ($292.5 million) and Northern Trust Company ($100 million) and a $235.5 million unsecured uncommitted line of credit provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to the higher of (1) the Federal Funds rate and (2) the overnight LIBOR plus 1.25% for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.16% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.

Federal taxes It is the policy of the fund to distribute all of its income within the prescribed time period 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 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 a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or

Massachusetts Tax Exempt Income Fund 33

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.

Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either short-term or long-term capital losses. At May 31, 2016, the fund had the following capital loss carryovers available, to the extent allowed by the Code, to offset future net capital gain, if any:


	Loss carryover

Short-term	Long-term	Total

$2,617,419	$5,065,750	$7,683,169

Pursuant to federal income tax regulations applicable to regulated investment companies, the fund has elected to defer certain capital losses of $954,582 recognized during the period from November 1, 2015 to May 31, 2016 to its fiscal year ending May 31, 2017.

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 from late year 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. At the close of the reporting period, the fund reclassified $87,056 to increase undistributed net investment income and $87,056 to increase accumulated net realized loss.

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	$25,943,446
Unrealized depreciation	(463,271)

Net unrealized appreciation	25,480,175
Undistributed ordinary income	121,606
Undistributed tax exempt income	430,030
Capital loss carryforward	(7,683,169)
Post-October capital loss deferral	(954,582)
Cost for federal income tax purposes	$289,130,168

Note 2: Management fee, administrative services and other transactions

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 all open-end funds, sponsored by Putnam Management (excluding net assets of funds that are invested in, or that are invested in by, other Putnam funds to the extent necessary to avoid “double counting” of those assets). Such annual rates may vary as follows:


0.590%	of the first $5 billion,	0.390%	of the next $50 billion,

0.540%	of the next $5 billion,	0.370%	of the next $50 billion,

0.490%	of the next $10 billion,	0.360%	of the next $100 billion and

0.440%	of the next $10 billion,	0.355%	of any excess thereafter.

For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.432% of the fund’s average net assets.

Putnam Management has contractually agreed, through September 30, 2017, to waive fees or 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, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

34 Massachusetts Tax Exempt Income Fund

Putnam Management may from time to time voluntarily undertake to waive fees and/or reimburse certain fund expenses. Any such waiver or reimbursement would be voluntary and may be modified or discontinued by Putnam Management at any time without notice. For the reporting period, Putnam Management voluntarily waived $3,656.

Putnam Investments Limited (PIL), an affiliate of Putnam Management, is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.40% of the average net assets of the portion of the fund managed by PIL.

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. 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, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing that included (1) a per account fee for each direct and underlying non-defined contribution account (“retail account”) of the fund and each of the other funds in its specified category, which was totaled and then allocated to each fund in the category based on its average daily net assets; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts will not exceed an annual rate of 0.320% of the fund’s average assets attributable to such accounts. During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:


Class A	$164,237	Class M	1,808

Class B	1,954	Class Y	24,331

Class C	19,871	Total	$212,201

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 $337 under the expense offset arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $234, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. 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, an indirect wholly-owned subsidiary of Putnam Investments, LLC, 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

Massachusetts Tax Exempt Income Fund 35

April 1, 2005 and (ii) 0.25% on all other net assets of the fund attributable to class A shares. During the reporting period, the class specific expenses related to distribution fees were as follows:


Class A	$546,731	Class M	13,310

Class B	24,443	Total	$877,053

Class C	292,569

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $8,886 and $4 from the sale of class A and class M shares, respectively, and received $5,956 and $48 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, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:


	Cost of purchases	Proceeds from sales

Investments in securities (Long-term)	$57,513,764	$44,598,193

U.S. government securities (Long-term)	—	—

Total	$57,513,764	$44,598,193

The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.

Note 4: Capital shares

At the close of the reporting period, there were an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:


	Year ended 5/31/16		Year ended 5/31/15

Class A	Shares	Amount	Shares	Amount

Shares sold	2,297,242	$22,326,956	2,368,353	$23,105,233

Shares issued in connection with
reinvestment of distributions	622,816	6,061,473	697,480	6,817,859

	2,920,058	28,388,429	3,065,833	29,923,092

Shares repurchased	(3,274,718)	(31,874,469)	(4,382,224)	(42,740,487)

Net decrease	(354,660)	$(3,486,040)	(1,316,391)	$(12,817,395)


	Year ended 5/31/16		Year ended 5/31/15

Class B	Shares	Amount	Shares	Amount

Shares sold	18,433	$180,194	46,495	$453,714

Shares issued in connection with
reinvestment of distributions	6,453	62,681	8,319	81,236

	24,886	242,875	54,814	534,950

Shares repurchased	(88,967)	(859,646)	(58,773)	(573,505)

Net decrease	(64,081)	$(616,771)	(3,959)	$(38,555)

36 Massachusetts Tax Exempt Income Fund


	Year ended 5/31/16		Year ended 5/31/15

Class C	Shares	Amount	Shares	Amount

Shares sold	311,552	$3,047,005	320,962	$3,144,891

Shares issued in connection with
reinvestment of distributions	47,098	459,099	56,290	551,253

	358,650	3,506,104	377,252	3,696,144

Shares repurchased	(513,163)	(5,000,286)	(447,906)	(4,386,382)

Net decrease	(154,513)	$(1,494,182)	(70,654)	$(690,238)


	Year ended 5/31/16		Year ended 5/31/15

Class M	Shares	Amount	Shares	Amount

Shares sold	191	$1,860	4,544	$44,167

Shares issued in connection with
reinvestment of distributions	4,045	39,359	5,084	49,668

	4,236	41,219	9,628	93,835

Shares repurchased	(18,301)	(179,972)	(56,171)	(549,561)

Net decrease	(14,065)	$(138,753)	(46,543)	$(455,726)


	Year ended 5/31/16		Year ended 5/31/15

Class Y	Shares	Amount	Shares	Amount

Shares sold	1,506,967	$14,735,535	1,309,311	$12,831,416

Shares issued in connection with
reinvestment of distributions	97,711	954,055	80,458	788,758

	1,604,678	15,689,590	1,389,769	13,620,174

Shares repurchased	(560,878)	(5,476,452)	(501,448)	(4,902,443)

Net increase	1,043,800	$10,213,138	888,321	$8,717,731

Note 5: Market, credit and other risks

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. The fund focuses a majority of its investments in the Commonwealth of Massachusetts and may be affected by economic and political developments in that Commonwealth.

Massachusetts Tax Exempt Income Fund 37

Officers

In addition to Robert L. Reynolds, the other officers of the fund are shown below:


Jonathan S. Horwitz (Born 1955)	Janet C. Smith (Born 1965)
Executive Vice President, Principal Executive	Vice President, Principal Accounting Officer,
Officer, and Compliance Liaison	and Assistant Treasurer
Since 2004	Since 2007
	Director of Fund Administration Services,
Steven D. Krichmar (Born 1958)	Putnam Investments and Putnam Management
Vice President and Principal Financial Officer
Since 2002	Susan G. Malloy (Born 1957)
Chief of Operations, Putnam Investments and	Vice President and Assistant Treasurer
Putnam Management	Since 2007
	Director of Accounting & Control Services,
Robert T. Burns (Born 1961)	Putnam Investments and Putnam Management
Vice President and Chief Legal Officer
Since 2011	James P. Pappas (Born 1953)
General Counsel, Putnam Investments, Putnam	Vice President
Management, and Putnam Retail Management	Since 2004
	Director of Trustee Relations,
James F. Clark (Born 1974)	Putnam Investments and Putnam Management
Chief Compliance Officer
Since 2016	Mark C. Trenchard (Born 1962)
Chief Compliance Officer, Putnam Investments	Vice President and BSA Compliance Officer
and Putnam Management	Since 2002
	Director of Operational Compliance,
Michael J. Higgins (Born 1976)	Putnam Investments and Putnam
Vice President, Treasurer, and Clerk	Retail Management
Since 2010
Manager of Finance, Dunkin’ Brands (2008–	Nancy E. Florek (Born 1957)
2010); Senior Financial Analyst, Old Mutual Asset	Vice President, Director of Proxy Voting
Management (2007–2008); Senior Financial	and Corporate Governance, Assistant Clerk,
Analyst, Putnam Investments (1999–2007)	and Associate Treasurer
	Since 2000

The principal occupations of the officers for the past five years have been with the employers as shown above, although in some cases they have held different positions with such employers. The address of each officer is One Post Office Square, Boston, MA 02109.

Massachusetts Tax Exempt Income Fund 41

Putnam family of funds

The following is a list of Putnam’s open-end mutual funds offered to the public. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, contact your financial advisor or call Putnam Investor Services at 1-800-225-1581. Please read the prospectus carefully before investing.


Growth	International Value Fund
Growth Opportunities Fund	Multi-Cap Value Fund
International Growth Fund	Small Cap Value Fund
Multi-Cap Growth Fund
Small Cap Growth Fund	Income
Voyager Fund	American Government Income Fund
	Diversified Income Trust
Blend	Emerging Markets Income Fund
Asia Pacific Equity Fund	Floating Rate Income Fund
Capital Opportunities Fund	Global Income Trust
Capital Spectrum Fund	Government Money Market Fund*
Emerging Markets Equity Fund	High Yield Advantage Fund
Equity Spectrum Fund	High Yield Trust
Europe Equity Fund	Income Fund
Global Equity Fund	Money Market Fund*
International Capital Opportunities Fund	Short Duration Income Fund
International Equity Fund	U.S. Government Income Trust
Investors Fund
Low Volatility Equity Fund	Tax-free Income
Multi-Cap Core Fund	AMT-Free Municipal Fund
Research Fund	Intermediate-Term Municipal Income Fund
Strategic Volatility Equity Fund	Short-Term Municipal Income Fund
	Tax Exempt Income Fund
Value	Tax-Free High Yield Fund
Convertible Securities Fund
Equity Income Fund	State tax-free income funds†:
Global Dividend Fund	Arizona, California, Massachusetts, Michigan,
The Putnam Fund for Growth and Income	Minnesota, New Jersey, New York, Ohio,
	and Pennsylvania.

42 Massachusetts Tax Exempt Income Fund


Absolute Return	Retirement Income Lifestyle Funds —
Absolute Return 100 Fund®	portfolios with managed allocations to
Absolute Return 300 Fund®	stocks, bonds, and money market
Absolute Return 500 Fund®	investments to generate retirement income.
Absolute Return 700 Fund®
	Retirement Income Fund Lifestyle 1
Global Sector	Retirement Income Fund Lifestyle 2
Global Consumer Fund	Retirement Income Fund Lifestyle 3
Global Energy Fund
Global Financials Fund	RetirementReady® Funds — portfolios with
Global Health Care Fund	adjusting allocations to stocks, bonds, and
Global Industrials Fund	money market instruments, becoming more
Global Natural Resources Fund	conservative over time.
Global Sector Fund
Global Technology Fund	RetirementReady® 2060 Fund
Global Telecommunications Fund	RetirementReady® 2055 Fund
Global Utilities Fund	RetirementReady® 2050 Fund
	RetirementReady® 2045 Fund
Asset Allocation	RetirementReady® 2040 Fund
George Putnam Balanced Fund	RetirementReady® 2035 Fund
	RetirementReady® 2030 Fund
Global Asset Allocation Funds — four	RetirementReady® 2025 Fund
investment portfolios that spread your	RetirementReady® 2020 Fund
money across a variety of stocks, bonds, and
money market instruments.

Dynamic Asset Allocation Balanced Fund
Dynamic Asset Allocation Conservative Fund
Dynamic Asset Allocation Growth Fund
Dynamic Risk Allocation Fund

* An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

† Not available in all states.

Check your account balances and the most recent month-end performance in the Individual Investors section at putnam.com.

Massachusetts Tax Exempt Income Fund 43

Services for shareholders

Investor services

Systematic investment plan Tell us how much you wish to invest regularly — weekly, semimonthly, or monthly — and the amount you choose will be transferred automatically from your checking or savings account. There’s no additional fee for this service, and you can suspend it at any time. This plan may be a great way to save for college expenses or to plan for your retirement.

Please note that regular investing does not guarantee a profit or protect against loss in a declining market. Before arranging a systematic investment plan, consider your financial ability to continue making purchases in periods when prices are low.

Systematic exchange You can make regular transfers from one Putnam fund to another Putnam fund. There are no additional fees for this service, and you can cancel or change your options at any time.

Dividends PLUS You can choose to have the dividend distributions from one of your Putnam funds automatically reinvested in another Putnam fund at no additional charge.

Free exchange privilege You can exchange money between Putnam funds free of charge, as long as they are the same class of shares. A signature guarantee is required if you are exchanging more than $500,000. The fund reserves the right to revise or terminate the exchange privilege.

Reinstatement privilege If you’ve sold Putnam shares or received a check for a dividend or capital gain, you may reinvest the proceeds with Putnam within 90 days of the transaction and they will be reinvested at the fund’s current net asset value — with no sales charge. However, reinstatement of class B shares may have special tax consequences. Ask your financial or tax representative for details.

Check-writing service You have ready access to many Putnam accounts. It’s as simple as writing a check, and there are no special fees or service charges. For more information about the check-writing service, call Putnam or visit our website.

Dollar cost averaging When you’re investing for long-term goals, it’s time, not timing, that counts. Investing on a systematic basis is a better strategy than trying to figure out when the markets will go up or down. This means investing the same amount of money regularly over a long period. This method of investing is called dollar cost averaging. When a fund’s share price declines, your investment dollars buy more shares at lower prices. When it increases, they buy fewer shares. Over time, you will pay a lower average price per share.

For more information

Visit the Individual Investors section at putnam.com A secure section of our website contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.

Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.

44 Massachusetts Tax Exempt Income Fund

Fund information

Founded over 75 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 funds across income, value, blend, growth, asset allocation, absolute return, and global sector categories.


Investment Manager	Trustees	Robert T. Burns
Putnam Investment	Jameson A. Baxter, Chair	Vice President and
Management, LLC	Liaquat Ahamed	Chief Legal Officer
One Post Office Square	Ravi Akhoury
Boston, MA 02109	Barbara M. Baumann	James F. Clark
	Robert J. Darretta	Chief Compliance Officer
Investment Sub-Manager	Katinka Domotorffy
Putnam Investments Limited	John A. Hill	Michael J. Higgins
57–59 St James’s Street	Paul L. Joskow	Vice President, Treasurer,
London, England SW1A 1LD	Kenneth R. Leibler	and Clerk
	Robert E. Patterson
Marketing Services	George Putnam, III	Janet C. Smith
Putnam Retail Management	Robert L. Reynolds	Vice President,
One Post Office Square	W. Thomas Stephens	Principal Accounting Officer,
Boston, MA 02109		and Assistant Treasurer
	Officers
Custodian	Robert L. Reynolds	Susan G. Malloy
State Street Bank	President	Vice President and
and Trust Company		Assistant Treasurer
	Jonathan S. Horwitz
Legal Counsel	Executive Vice President,	James P. Pappas
Ropes & Gray LLP	Principal Executive Officer, and	Vice President
	Compliance Liaison
Independent Registered		Mark C. Trenchard
Public Accounting Firm	Steven D. Krichmar	Vice President and
PricewaterhouseCoopers LLP	Vice President and	BSA Compliance Officer
	Principal Financial Officer
		Nancy E. Florek
		Vice President, Director of
		Proxy Voting and Corporate
		Governance, Assistant Clerk,
		and Associate Treasurer

This report is for the information of shareholders of Putnam Massachusetts Tax Exempt Income Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit putnam.com. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus or summary prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.


INTEREST INCOME	$11,816,947


EXPENSES

Compensation of Manager (Note 2)	$1,348,888

Investor servicing fees (Note 2)	212,201

Custodian fees (Note 2)	8,658

Trustee compensation and expenses (Note 2)	22,690

Distribution fees (Note 2)	877,053

Administrative services (Note 2)	8,449

Other	159,267

Fees waived and reimbursed by Manager (Note 2)	(3,656)

Total expenses	2,633,550

Expense reduction (Note 2)	(337)

Net expenses	2,633,213

Net investment income	9,183,734


Net realized loss on investments (Notes 1 and 3)	(935,125)

Net unrealized appreciation of investments during the year	5,863,790

Net gain on investments	4,928,665

Net increase in net assets resulting from operations	$14,112,399


Fiscal year ended	Audit Fees	Audit-Related Fees	Tax Fees	All Other Fees


May 31, 2016	$56,651	$ —	$11,832	$ —
May 31, 2015	$56,501	$ —	$11,576	$ —


Fiscal year ended	Audit-Related Fees	Tax Fees	All Other Fees	Total Non-Audit Fees


May 31, 2016	$ —	$630,436	$ —	$ —

May 31, 2015	$ —	$618,199	$ —	$ —


	CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES


	Exact name of registrant as specified in charter:	Putnam Massachusetts Tax Exempt Income Fund


	Address of principal executive offices:	One Post Office Square, Boston, Massachusetts 02109


	Name and address of agent for service:	Robert T. Burns, Vice President One Post Office Square Boston, Massachusetts 02109


	Copy to:	Bryan Chegwidden, Esq. Ropes & Gray LLP 1211 Avenue of the Americas New York, New York 10036


	Registrant's telephone number, including area code:	(617) 292-1000


	The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940:


	The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund's independent auditor:


	For the fiscal years ended May 31, 2016 and May 31, 2015, the fund's independent auditor billed aggregate non-audit fees in the amounts of $642,268 and $629,775 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.


	Audit Fees represent fees billed for the fund's last two fiscal years relating to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements.


	UNITED STATES SECURITIES AND EXCHANGE COMMISSION


	FORM N-CSR


	Item 1. Report to Stockholders:


	Audit-Related Fees represent fees billed in the fund's last two fiscal years for services traditionally performed by the fund's auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation.


	Tax Fees represent fees billed in the fund's last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities.


	Pre-Approval Policies of the Audit, Compliance and Distributions Committee. The Audit, Compliance and Distributions Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds' independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures.


	The registrant's schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.


	Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:


	Item 8. Portfolio Managers of Closed-End Investment Companies


	Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:


	Item 10. Submission of Matters to a Vote of Security Holders:


	(b) Changes in internal control over financial reporting: Not applicable


	(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith.


	(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.


	(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.


	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	/s/ Janet C. Smith Janet C. Smith Principal Accounting Officer


	/s/ Jonathan S. Horwitz Jonathan S. Horwitz Principal Executive Officer


	/s/ Steven D. Krichmar Steven D. Krichmar Principal Financial Officer