a_mataxexemptincome.htm

Health care

Putnam Massachusetts
Tax Exempt
Income Fund

Annual report
5 | 31 | 17


Message from the Trustees	1

About the fund	2

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	39

About the Trustees	40

Officers	42

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 in the financial markets, and factors related to a specific issuer. 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

July 13, 2017

Dear Fellow Shareholder:

An impressive level of investor optimism has helped to fuel financial markets through the first half of 2017, and global stock and bond markets have generally fared well. At the same time, however, a number of macroeconomic and political risks around the world could disrupt the positive momentum.

While calm markets are generally welcome, we believe investors should continue to remember time-tested strategies: maintain a well-diversified portfolio, keep a long-term view, and speak regularly with your financial advisor. In the following pages, you will find an overview of your fund’s performance for the reporting period as well as an outlook for the coming months.

We would like to take this opportunity to announce some changes to your fund’s Board of Trustees. First, we are pleased to welcome the arrival of Catharine Bond Hill and Manoj P. Singh, who bring extensive professional and directorship experience to their new roles as Putnam Trustees. In addition, we would like to extend our appreciation and best wishes to Robert J. Darretta, John A. Hill, and W. Thomas Stephens, who retired from the Board, effective June 30, 2017. We are grateful for their years of work on behalf of you and your fellow shareholders, and we wish them well in their future endeavors.

Thank you for investing with Putnam.

Source: Putnam, as of 5/31/17. Past performance is no guarantee of future results. Yields for U.S. Treasuries, investment-grade corporates, and municipal bonds are represented by the average “yield to worst” — a calculation of the lowest possible yield generated without defaulting — of the Bloomberg Barclays U.S. Treasury Index, the Bloomberg Barclays U.S. Credit Index, and the Bloomberg Barclays Municipal Bond Index, respectively. You cannot invest directly in an index. 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. Income from municipal bonds may be subject to the alternative minimum tax. Taxable equivalent yield and annual after-tax income are based on a 43.40% federal income tax rate. This rate reflects the American Taxpayer Relief Act of 2012 and includes the 3.80% Medicare surtax.

Source: Moody’s Investor Services, Annual U.S. Municipal Bond Defaults and Recoveries, 1970–2016 (June 2017).

Massachusetts Tax Exempt Income Fund 3

Paul holds a B.A. from Suffolk University. Paul has been in the investment industry since he joined Putnam in 1989.

In addition to Paul, your fund is managed by Garrett L. Hamilton, CFA. Garrett holds an M.S. in Investment Management from Boston University and a B.S. in International Business Administration from Southern New Hampshire University. He joined Putnam in 2016 and has been in the investment industry since 2006.

Paul, how was the market environment for municipal bonds during the reporting period?

Municipal bonds started the reporting period in solid fashion, benefiting from falling U.S. Treasury, municipal, and global interest rates and, in some cases, negative yields on non-U.S. sovereign bonds. Negative yields motivated many income-oriented investors to look beyond more traditional fixed-income investments.

During the fourth quarter of 2016, weaker supply/demand dynamics, higher interest rates, and President Trump’s pro-growth agenda weighed on municipal bond performance. From a demand perspective, mutual fund outflows, a measure of investor demand, increased following the presidential election. This was notable as fund flows were strongly positive for most of 2016. In our view, municipal bonds appeared to be pricing in President Trump’s economic stimulus agenda, which many economists believe could lead to improved growth in the United States, higher deficits, and possibly an uptick in inflation, as well as improving global growth. We believe the uncertainty around U.S. income tax policy changes for

Massachusetts Tax Exempt Income Fund 5

Allocations are shown as a percentage of the fund’s net assets as of 5/31/17. 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.

Credit qualities are shown as a percentage of the fund’s net assets as of 5/31/17. 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.

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individuals and corporations was an additional headwind for the asset class post-election. The spike in overall new issuance was due in part to the decision by many issuers to come to market with their municipal bond offerings ahead of the U.S. presidential election and a potential year-end interest-rate hike by the Federal Reserve, which occurred on December 14. As a result, 2016 proved to be a record-setting year for municipal bond issuance.

From January to May 2017, investor sentiment generally improved, especially for higher-yielding municipal bonds. The pace of new issuance was generally light, and demand slightly outpaced supply — contributing to rising prices and a narrowing of credit spreads of lower investment-grade as well as high-yield municipal bonds. [Credit spreads reflect the difference in yield between higher- and lower-quality municipal bonds.] Viewed in a longer-term context, the tighter spreads seemed relatively fair to us, especially considering that defaults among municipal issuers remained low and isolated.

With an unemployment rate below 4.5%, consumer and business confidence rising, and the U.S. economic backdrop improving, the Fed announced on June 14, 2017, its second interest-rate hike of 2017 and fourth since December 2015. In its assessment of inflation, the Fed revised its expectations downward, adding that it believed inflation would “remain somewhat below 2% in the near term.” Additionally, the Fed announced it will begin the process this year of reducing its $4.5 billion balance sheet, which the central bank increased by buying bonds and other securities to buttress the financial system during the housing crisis.

How did the fund perform?

For the 12 months ended May 31, 2017, the fund underperformed its benchmark index but outperformed its Lipper peer group average.

What was your investment approach in this environment?

Given the market backdrop, many of our investment themes remained in place. We maintained an overweight exposure to lower-investment-grade municipal bonds and placed greater focus on higher-education, essential service utilities, and general obligation bonds relative to the Lipper group. However, we moved to a somewhat less defensive duration posture during the period, thereby slightly increasing the fund’s interest-rate sensitivity. As such, the fund’s duration positioning remained slightly below the median of the Lipper peer group.

During the reporting period, we maintained an underweight position in Puerto Rico-based issuers relative to the fund’s Lipper peers, given Puerto Rico’s weak credit fundamentals, in our view. On May 3, 2017, the federal control board petitioned for court-supervised debt restructuring under Title III of the Puerto Rico Oversight, Management and Economic Stability Act [PROMESA]. While PROMESA is not a bailout from the federal government, it did provide a way for Puerto Rico to use a bankruptcy-like restructuring tool similar to Chapter 9.

The recent move by Puerto Rico represents the largest bankruptcy in the history of U.S. public finance, exceeding Detroit’s 2013 insolvency. Despite the resulting flurry of headlines, we had anticipated this outcome. The filing does not change our current view on Puerto Rico, which is to maintain an underweight position in these bonds. In our view, we are likely to see more headline risk as Congress works with the government of Puerto Rico to come up with a debt repayment plan that creditors can accept and that can help build a foundation for economic recovery in the coming years.

Massachusetts Tax Exempt Income Fund 7

What is your current assessment of the potential for tax reform, and how might you steer the fund given that possibility?

Just before the close of the reporting period, the Trump administration presented its tax plan. More details are needed to fully assess the impact of the proposal, and the final plan may be considerably different from the initial tax plan now winding through Congress. However, the proposed plan reduces the overall number of individual tax brackets to three, eliminates targeted tax breaks and special interest, and repeals the alternative minimum tax, among other things. The good news for tax-sensitive investors, in our view, is that the tax-exempt status of municipal bonds wasn’t addressed in the recently announced tax outline. Treasury Secretary Mnuchin recently stated, “Our preference is strongly to keep the interest deductibility of state and local bonds.” (May 25, 2017). Furthermore, we do not believe the currently proposed lowering of the highest personal income tax bracket from 39.6% to 35% will materially affect demand for municipal bonds.

The new administration has stated that tax reform remains a major policy goal. However, we have not seen major tax reform in over 30 years, and we believe it will continue to be difficult to achieve any such reform today given the competing demands on the current administration. As such, we believe it is too early to boldly position the fund. That said, we continue to closely monitor tax policy developments in Washington to see what form the final tax plan may take, and how it may shape the outlook for municipal bonds.

What are your thoughts about Fed policy for the balance of 2017?

We anticipate a continuation of slow, steady improvement in U.S. and global economic growth in the year ahead. The global growth environment continues to be positive, in our view, and we are encouraged by the breadth of the growth.

In our view, the market also appears to be focused on how much fiscal stimulus might come from the new administration, and how those initiatives will affect the pulse of the U.S.

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

Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended May 31, 2017, 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 5/31/17


	Annual
	average		Annual		Annual		Annual
	(life of fund)	10 years	average	5 years	average	3 years	average	1 year

Class A (10/23/89)
Before sales charge	5.55%	51.05%	4.21%	12.87%	2.45%	8.95%	2.90%	0.75%

After sales charge	5.40	45.00	3.79	8.35	1.62	4.60	1.51	–3.28

Class B (7/15/93)
Before CDSC	5.32	43.50	3.68	9.31	1.80	6.84	2.23	0.13

After CDSC	5.32	43.50	3.68	7.39	1.44	3.86	1.27	–4.77

Class C (8/19/03)
Before CDSC	4.73	39.81	3.41	8.67	1.68	6.43	2.10	0.08

After CDSC	4.73	39.81	3.41	8.67	1.68	6.43	2.10	–0.90

Class M (5/12/95)
Before sales charge	5.22	46.92	3.92	11.34	2.17	8.06	2.62	0.48

After sales charge	5.09	42.14	3.58	7.72	1.50	4.55	1.49	–2.79

Class Y (1/2/08)
Net asset value	5.64	54.49	4.45	14.12	2.68	9.67	3.12	0.98

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 5/31/17


	Annual
	average		Annual		Annual		Annual
	(life of fund)	10 years	average	5 years	average	3 years	average	1 year

Bloomberg Barclays
Municipal Bond Index	5.88%	56.52%	4.58%	17.69%	3.31%	10.83%	3.49%	1.46%

Lipper Massachusetts
Municipal Debt Funds	5.42	42.05	3.55	13.13	2.49	9.06	2.93	0.67
category average^*

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 5/31/17, there were 40, 39, 36, 32, 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 $14,350 and $13,981, 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 $14,214. A $10,000 investment in the fund’s class Y shares would have been valued at $15,449.

Massachusetts Tax Exempt Income Fund 11

Fund price and distribution information For the 12-month period ended 5/31/17


Distributions	Class A		Class B	Class C	Class M		Class Y

Number	12		12	12	12		12

Income¹	$0.281292		$0.220925	$0.205959	$0.254634		$0.303071

Capital gains²	—		—	—	—		—

Total	$0.281292		$0.220925	$0.205959	$0.254634		$0.303071

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

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

5/31/17	9.64	10.04	9.62	9.66	9.64	9.96	9.66

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

Current dividend rate³	2.85%	2.73%	2.24%	2.07%	2.57%	2.49%	3.06%

Taxable equivalent⁴	5.31	5.08	4.17	3.85	4.78	4.64	5.70

Current 30-day
SEC yield⁵	N/A	1.55	1.00	0.85	N/A	1.30	1.84

Taxable equivalent⁴	N/A	2.89	1.86	1.58	N/A	2.42	3.43

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.

³Most 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 2017. 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 6/30/17


	Annual
	average		Annual		Annual		Annual
	(life of fund)	10 years	average	5 years	average	3 years	average	1 year

Class A (10/23/89)
Before sales charge	5.53%	51.28%	4.23%	12.82%	2.44%	8.69%	2.82%	–1.15%

After sales charge	5.37	45.23	3.80	8.31	1.61	4.35	1.43	–5.11

Class B (7/15/93)
Before CDSC	5.29	43.57	3.68	9.37	1.81	6.69	2.18	–1.77

After CDSC	5.29	43.57	3.68	7.45	1.45	3.71	1.22	–6.57

Class C (8/19/03)
Before CDSC	4.70	40.03	3.42	8.51	1.65	6.18	2.02	–1.92

After CDSC	4.70	40.03	3.42	8.51	1.65	6.18	2.02	–2.88

Class M (5/12/95)
Before sales charge	5.19	47.15	3.94	11.29	2.16	7.80	2.54	–1.43

After sales charge	5.07	42.36	3.60	7.67	1.49	4.30	1.41	–4.63

Class Y (1/2/08)
Net asset value	5.62	54.93	4.48	14.07	2.67	9.52	3.08	–0.92

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. 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 5/31/16^*	0.78%	1.40%	1.55%	1.05%	0.55%

Annualized expense ratio for the six-month
period ended 5/31/17^†	0.80%	1.43%	1.58%	1.08%	0.58%

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.

^*Restated to reflect current fees resulting from a change to the fund’s investor servicing arrangements effective 9/1/16.

^†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 12/1/16 to 5/31/17. 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	$7.24	$8.00	$5.48	$2.94

Ending value (after expenses)	$1,035.80	$1,031.60	$1,031.70	$1,034.40	$1,035.80

^*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 5/31/17. 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 5/31/17, use the following calculation method. To find the value of your investment on 12/1/16, 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^*†	$4.03	$7.19	$7.95	$5.44	$2.92

Ending value (after expenses)	$1,020.94	$1,017.80	$1,017.05	$1,019.55	$1,022.04

^†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 closed to new investments and are only available by exchange from another Putnam fund or through dividend and/or capital gains reinvestment. They 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

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

Bloomberg 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.

Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofAML”), used with permission. BofAML permits use of the BofAML indices and related data on an “as is” basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the BofAML indices or any data

Massachusetts Tax Exempt Income Fund 15

included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.

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.

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, 2016, 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, 2017, Putnam employees had approximately $497,000,000 and the Trustees had approximately $140,000,000 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”) as of May 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, 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. Our procedures included confirmation of securities owned as of May 31, 2017 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
July 13, 2017

Massachusetts Tax Exempt Income Fund 19

The fund’s portfolio 5/31/17

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 floating-
FRB Floating Rate Bonds: the rate shown is the current	rate securities with long-term maturities that carry
interest rate at the close of the reporting period	coupons that reset and are payable upon demand
G.O. Bonds General Obligation Bonds	either daily, weekly or monthly. The rate shown is the
	current interest rate at the close of the reporting period.


MUNICIPAL BONDS AND NOTES (100.1%)*	Rating**	Principal amount	Value

California (0.6%)

CA State G.O. Bonds, 5.00%, 2/1/38	Aa3	$1,500,000	$1,702,515

			1,702,515

Guam (0.9%)

Territory of GU, Rev. Bonds, Ser. A, 5.375%, 12/1/24
(Prerefunded 12/1/19)	BBB+	1,000,000	1,107,020

Territory of GU, Govt. Wtr. Wks. Auth. Wtr. & Waste
Wtr. Syst. Rev. Bonds, 5.625%, 7/1/40	A–	600,000	644,418

Territory of GU, Pwr. Auth. Rev. Bonds, Ser. A

5.50%, 10/1/40	Baa2	500,000	531,080

5.00%, 10/1/34	Baa2	200,000	210,372

			2,492,890

Massachusetts (94.8%)

Hampden & Wilbraham, Regl. School Dist. G.O.
Bonds, 5.00%, 2/15/41	Aa3	2,000,000	2,221,640

Holyoke G.O. Bonds, 5.00%, 9/1/29	Aa2	770,000	905,281

MA Bay Trans. Auth. Sales Tax Rev. Bonds, Ser. A

5.25%, 7/1/21	AA+	2,000,000	2,325,300

5.00%, 7/1/31	AA+	3,390,000	4,325,199

MA State G.O. Bonds

Ser. A, 5.00%, 3/1/46	Aa1	1,000,000	1,139,480

Ser. A, 5.00%, 3/1/41	Aa1	1,000,000	1,143,450

Ser. I, 5.00%, 12/1/35	Aa1	3,000,000	3,582,510

Ser. B, 5.00%, 7/1/33	Aa1	2,000,000	2,398,180

(Construction Loan), Ser. A, 5.00%, 8/1/27
(Prerefunded 8/1/18)	Aa1	2,000,000	2,094,500

Ser. E, 4.00%, 4/1/46	Aa1	3,000,000	3,137,310

Ser. G, 4.00%, 9/1/42	Aa1	1,500,000	1,585,425

4.00%, 5/1/35	Aa1	3,000,000	3,151,230

MA State Rev. Bonds, 5.00%, 6/15/22	AAA	2,000,000	2,357,960

MA State VRDN (Construction Loan), Ser. A,
0.70%, 3/1/26	VMIG1	2,315,000	2,315,000

MA State Clean Energy Cooperative Corp. Rev.
Bonds (Muni. Ltg. Plant Coop.)

5.00%, 7/1/32	A1	1,000,000	1,155,860

5.00%, 7/1/28	A1	1,500,000	1,762,650

20 Massachusetts Tax Exempt Income Fund


MUNICIPAL BONDS AND NOTES (100.1%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.

MA State College Bldg. Auth. Rev. Bonds

Ser. B, SGI, 5.50%, 5/1/28	Aa2	$3,000,000	$3,700,500

Ser. B, 5.00%, 5/1/43	Aa2	3,100,000	3,496,862

(Green Bond), 5.00%, 5/1/39	Aa2	1,500,000	1,714,965

Ser. B, 5.00%, 5/1/37	Aa2	1,500,000	1,715,280

Ser. A, 5.00%, 5/1/36	Aa2	2,850,000	3,241,847

Ser. A, AGC, 5.00%, 5/1/28 (Prerefunded 5/1/18)	Aa2	2,270,000	2,354,580

MA State Dept. Trans. Rev. Bonds
(Metro Hwy. Syst.), Ser. B

5.00%, 1/1/37	A+	2,250,000	2,423,093

5.00%, 1/1/32	A+	2,775,000	3,010,348

MA State Dev. Fin. Agcy. Rev. Bonds

(Sabis Intl.), Ser. A, 8.00%, 4/15/39
(Prerefunded 10/15/19)	BBB	775,000	898,489

(Tufts Med. Ctr.), Ser. I, 7.25%, 1/1/32	BBB	2,000,000	2,359,460

(Linden Ponds, Inc. Fac.), Ser. A-1, 6.25%, 11/15/46	B–/P	547,179	565,564

(Loomis Cmntys.), Ser. A, 6.00%, 1/1/33	BBB–	300,000	336,372

(WGBH Edl. Foundation), Ser. A, AMBAC,
5.75%, 1/1/42	A+	5,000,000	6,745,239

(Suffolk U.), Ser. A, 5.75%, 7/1/39	Baa2	1,005,000	1,085,591

(Suffolk U.), Ser. A, U.S. Govt. Coll., 5.75%, 7/1/39
(Prerefunded 7/1/19)	AAA/P	1,995,000	2,190,151

(Milford Regl. Med. Ctr.), Ser. F, 5.625%, 7/15/36	Baa3	500,000	557,400

(Linden Ponds, Inc.), Ser. B, 5.50%, 11/15/56	B–/P	468,041	3,782

(Linden Ponds, Inc.), Ser. A-2, 5.50%, 11/15/46	B–/P	94,100	94,105

(Harvard U.), Ser. A, U.S. Govt. Coll., 5.50%,
11/15/36 (Prerefunded 11/15/18)	Aaa	1,650,000	1,759,907

(Harvard U.), Ser. A, U.S. Govt. Coll., 5.50%,
11/15/36 (Prerefunded 11/15/18)	AAA/P	535,000	570,636

(Emerson College), Ser. A, 5.50%, 1/1/30	BBB+	900,000	966,609

(Berklee College of Music), 5.25%, 10/1/41	A2	1,500,000	1,709,535

(New England Conservatory of Music), U.S. Govt.
Coll., 5.25%, 7/1/38 (Prerefunded 7/1/18)	AAA/P	3,000,000	3,136,290

(Simmons College), Ser. H, SGI, 5.25%, 10/1/33	Baa1	2,000,000	2,366,340

(Lesley U.), Ser. B-1, AGM, 5.25%, 7/1/33	AA	2,000,000	2,274,800

(Wheelock College), Ser. C, 5.25%, 10/1/29	BBB	1,400,000	1,413,664

(Carleton-Willard Village), 5.25%, 12/1/25	A–	700,000	751,429

(Suffolk U.), 5.125%, 7/1/40	Baa2	1,600,000	1,683,712

(Boston College), Ser. T, 5.00%, 7/1/42	Aa3	1,000,000	1,180,350

(UMass Boston Student Hsg.), 5.00%, 10/1/41	Baa3	1,000,000	1,095,880

(Partners Healthcare Syst.), Ser. Q, 5.00%, 7/1/41	Aa3	2,000,000	2,264,640

(South Shore Hosp., Inc.), Ser. I, 5.00%, 7/1/41	A–	2,500,000	2,795,450

(Dexter Southfield), 5.00%, 5/1/41	BBB+	2,000,000	2,207,020

(Bentley U.), 5.00%, 7/1/40	A3	1,250,000	1,414,363

(Emerson College), Ser. A, 5.00%, 1/1/40	BBB+	3,400,000	3,560,174

(Brandeis U.), Ser. N, 5.00%, 10/1/39	A1	450,000	469,931

(Franklin W. Olin College), Ser. E, 5.00%, 11/1/38	A+	1,000,000	1,126,910

(Tufts U.), Ser. Q, 5.00%, 8/15/38	Aa2	500,000	585,615

(UMass Memorial Hlth. Care Oblig. Group), Ser. K,
5.00%, 7/1/38	BBB+	1,000,000	1,110,780

Massachusetts Tax Exempt Income Fund 21


MUNICIPAL BONDS AND NOTES (100.1%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.

MA State Dev. Fin. Agcy. Rev. Bonds

(Wentworth Inst. Tech.), 5.00%, 10/1/37	Baa1	$655,000	$721,587

(Caregroup), Ser. I, 5.00%, 7/1/37	A3	500,000	569,950

(Lowell Gen. Hosp.), Ser. G, 5.00%, 7/1/37	BBB	1,630,000	1,743,334

(MCPHS U.), Ser. H, 5.00%, 7/1/37	AA	450,000	521,429

(Dana-Farber Cancer Inst.), Ser. N, 5.00%, 12/1/36	A1	1,100,000	1,278,728

(Caregroup), Ser. I, 5.00%, 7/1/36	A3	935,000	1,069,762

(Suffolk U.), 5.00%, 7/1/36	Baa2	600,000	671,364

(Brandeis U.), Ser. 0-1, 5.00%, 10/1/35	A1	1,000,000	1,077,900

(Boston Med. Ctr.), Ser. E, 5.00%, 7/1/35	Baa2	1,000,000	1,109,150

(Emmanuel College), Ser. A, 5.00%, 10/1/34	Baa2	1,075,000	1,197,744

(Baystate Med. Oblig. Group), Ser. N, 5.00%, 7/1/34	A+	1,000,000	1,126,570

(Suffolk U.), 5.00%, 7/1/34	Baa2	675,000	762,993

(Intl. Charter School), 5.00%, 4/15/33	BBB	750,000	822,383

(MCPHS U.), Ser. H, 5.00%, 7/1/32	AA	300,000	351,402

(Northeastern U.), 5.00%, 10/1/31	A2	500,000	574,270

(Berkshire Retirement Cmnty. of Lenox),
5.00%, 7/1/31	A/F	1,000,000	1,124,110

(Partners Hlth. Care Syst.), Ser. L, 5.00%, 7/1/31	Aa3	4,495,000	5,040,378

(Lesley U.), 5.00%, 7/1/30	A–	1,000,000	1,172,540

(Boston U.), Ser. V-1, 5.00%, 10/1/29
(Prerefunded 10/1/19)	A1	2,000,000	2,183,640

(Boston College), Ser. Q-1, 5.00%, 7/1/29	Aa3	1,050,000	1,131,858

(Mount Holyoke College), 5.00%, 7/1/28
(Prerefunded 7/1/18)	Aa3	3,000,000	3,128,310

(Dexter Southfield), 5.00%, 5/1/27	BBB+	500,000	576,365

(Dexter Southfield), 5.00%, 5/1/26	BBB+	740,000	858,703

(College of the Holy Cross), Ser. B, 5.00%, 9/1/25	Aa3	1,020,000	1,068,797

(College of the Holy Cross), Ser. B, 5.00%, 9/1/25
(Prerefunded 9/1/18)	AAA/P	480,000	504,245

(MA College of Pharmacy & Allied Hlth. Science),
Ser. F, 5.00%, 7/1/25	AA	650,000	767,897

(Babson College), Ser. A, 5.00%, 10/1/24	A2	250,000	302,358

(CareGroup), Ser. H-1, 5.00%, 7/1/24	A3	3,000,000	3,619,290

(Babson College), Ser. A, 5.00%, 10/1/23	A2	300,000	357,315

(MA College of Pharmacy & Allied Hlth. Science),
Ser. F, 5.00%, 7/1/23	AA	125,000	149,419

(First Mtge. — Orchard Cove), 5.00%, 10/1/19	BB/P	550,000	554,824

(First Mtge. — Orchard Cove), 5.00%, 10/1/18	BB/P	515,000	519,831

(Williams College), Ser. S, 4.00%, 7/1/46 ^##	Aa1	4,550,000	4,816,767

(WGBH Edl. Foundation), Ser. B, AGC,
zero %, 1/1/29	AA	2,000,000	1,388,260

(WGBH Edl. Foundation), Ser. B, AGC,
zero %, 1/1/28	AA	2,000,000	1,450,760

MA State Dev. Fin. Agcy. Solid Waste Disp. FRB
(Dominion Energy Brayton Point), Ser. 1, U.S. Govt.
Coll., 5.75%, 12/1/42 (Prerefunded 5/1/19)	Baa2	1,700,000	1,852,014

22 Massachusetts Tax Exempt Income Fund


MUNICIPAL BONDS AND NOTES (100.1%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.

MA State Edl. Fin. Auth. Rev. Bonds

Ser. B, 5.70%, 1/1/31	AA	$1,110,000	$1,168,186

Ser. J, 5.625%, 7/1/28	AA	635,000	693,845

(Ed. Loan — Issue 1), 5.00%, 1/1/27	AA	2,750,000	3,104,145

(Ed. Loan — Issue 1), 4.375%, 1/1/32	AA	1,130,000	1,176,149

MA State Hlth. & Edl. Fac. Auth. Rev. Bonds

(Harvard U.), Ser. N, 6.25%, 4/1/20	Aaa	3,000,000	3,438,960

(Care Group), Ser. B-1, NATL, 5.375%, 2/1/27
(Prerefunded 8/1/18)	AA–	1,030,000	1,083,097

(Lesley U.), Ser. A, AGC, 5.25%, 7/1/39
(Prerefunded 7/1/19)	AA	1,000,000	1,087,590

(Winchester Hosp.), 5.25%, 7/1/38	A	2,225,000	2,418,575

(Dana-Farber Cancer Inst.), Ser. K, 5.25%, 12/1/27	A1	1,500,000	1,594,215

(MA Inst. of Tech.), Ser. I-1, 5.20%, 1/1/28	Aaa	3,000,000	3,914,010

(Fisher College), Ser. A, 5.125%, 4/1/37	BBB	755,000	756,495

(Lowell Gen. Hosp.), Ser. C, 5.125%, 7/1/35	BBB	725,000	771,415

(Wheaton Coll.), Ser. F, 5.00%, 1/1/41	A3	2,000,000	2,147,060

(Southcoast Hlth. Oblig.), Ser. D, 5.00%, 7/1/39	A3	1,500,000	1,568,430

(Berklee College of Music), Ser. A, 5.00%, 10/1/37	A2	190,000	192,130

(Milford Regl. Med.), Ser. E, 5.00%, 7/15/37	Baa3	850,000	852,788

(Northeastern U.), Ser. A, 5.00%, 10/1/35	A2	300,000	330,510

(Northeastern U.), Ser. T-1, 5.00%, 10/1/30	A2	1,000,000	1,159,490

(Northeastern U.), Ser. T-2, 5.00%, 10/1/30	A2	2,000,000	2,318,980

(Care Group), Ser. E-1, 5.00%, 7/1/28
(Prerefunded 7/1/18)	A3	1,730,000	1,805,878

(Northeastern U.), Ser. R, 5.00%, 10/1/26	A2	1,165,000	1,222,877

(Fisher College), Ser. A, 5.00%, 4/1/22	BBB	1,110,000	1,112,742

MA State Hlth. & Edl. Fac. Auth. VRDN

(Baystate Med. Ctr.), Ser. J-2, 0.78%, 7/1/44	VMIG1	800,000	800,000

(Tufts U.), Ser. N-2, 0.75%, 8/15/34	VMIG1	2,200,000	2,200,000

(Harvard U.), Ser. R, 0.45%, 11/1/49	VMIG1	1,000,000	1,000,000

MA State Hsg. Fin. Agcy. Rev. Bonds

Ser. C, 5.35%, 12/1/42	Aa2	1,160,000	1,223,092

Ser. A, 5.10%, 12/1/30	Aa2	1,125,000	1,187,033

Ser. D, 5.05%, 6/1/40	Aa2	1,355,000	1,403,062

Ser. 171, 4.00%, 12/1/44	Aa1	580,000	622,746

Ser. SF-169, 4.00%, 12/1/44	Aa1	1,305,000	1,399,378

Ser. 160, 3.75%, 6/1/34	Aa1	340,000	345,216

(Single Fam.), Ser. 178, 3.50%, 6/1/42	Aa1	1,305,000	1,384,240

Ser. A, 3.50%, 12/1/31	Aa2	2,000,000	2,020,920

Ser. A, 3.25%, 12/1/27	Aa2	1,870,000	1,916,376

MA State Port Auth. Rev. Bonds

Ser. A, 5.00%, 7/1/35	Aa2	1,500,000	1,771,965

Ser. A, 5.00%, 7/1/34	Aa2	3,500,000	3,856,440

Ser. A, 5.00%, 7/1/33	Aa2	775,000	913,958

Ser. A, 5.00%, 7/1/32	Aa2	755,000	894,615

Ser. C, AGM, 5.00%, 7/1/27	Aa2	5,000,000	5,013,750

Massachusetts Tax Exempt Income Fund 23


MUNICIPAL BONDS AND NOTES (100.1%)* cont.	Rating**	Principal amount	Value

Massachusetts cont.

MA State Port Auth. Special Fac. Rev. Bonds

(Conrac), Ser. A, 5.125%, 7/1/41	A	$1,765,000	$1,949,054

(BOSFUEL), FGIC, NATL, 5.00%, 7/1/27	AA–	2,500,000	2,506,050

MA State School Bldg. Auth. Dedicated Sales Tax
Rev. Bonds, Ser. A, 5.00%, 11/15/42	AA+	2,000,000	2,322,300

MA State School Bldg. Auth. Sales Tax Rev. Bonds

Ser. A, 5.00%, 5/15/43	AA+	915,000	1,042,240

Ser. B, 5.00%, 10/15/41	AA+	2,000,000	2,269,040

Ser. C, 5.00%, 8/15/37	AA+	2,000,000	2,329,660

Ser. B, 5.00%, 10/15/35	AA+	1,000,000	1,142,200

MA State Trans. Fund Rev. Bonds

(Rail Enhancement Program), Ser. A, 5.00%, 6/1/45	AAA	3,000,000	3,469,530

(Accelerated Bridge Program), Ser. A,
5.00%, 6/1/44	AAA	2,000,000	2,300,800

(Accelerated Bridge Program), 5.00%, 6/1/43	AAA	2,100,000	2,360,127

(Rail Enhancement & Accelerated), 5.00%, 6/1/38	AAA	3,000,000	3,536,940

MA State Wtr. Poll. Abatement Trust Rev. Bonds,
Ser. 14, 5.00%, 8/1/32	Aaa	4,000,000	4,322,440

MA State Wtr. Resource Auth. Rev. Bonds

Ser. A, 6.50%, 7/15/19 (Escrowed to maturity)	Aa1	2,295,000	2,396,118

Ser. C, 5.25%, 8/1/42	Aa1	3,500,000	4,003,965

Ser. B, 5.00%, 8/1/40	Aa1	1,500,000	1,763,505

(Green Bond), Ser. C, 5.00%, 8/1/40	Aa1	3,000,000	3,527,010

Ser. A, NATL, 5.00%, 8/1/29	Aa1	3,025,000	3,044,663

Metro. Boston, Trans. Pkg. Corp. Rev. Bonds,
5.25%, 7/1/36	A1	1,500,000	1,698,510

Milford, G.O. Bonds, AGM, 5.125%, 12/15/24	Aa2	2,475,000	2,530,465

North Reading, G.O. Bonds, 5.00%, 5/15/35	Aa2	3,750,000	4,324,838

U. of MA Bldg. Auth. Rev. Bonds, Ser. 2,
5.00%, 11/1/39	Aa2	2,500,000	2,865,850

Worcester, G.O. Bonds (Muni. Purpose Loan),
4.00%, 11/1/23	Aa3	3,050,000	3,300,070

			273,580,618

Mississippi (0.9%)

MS State Bus. Fin. Commission Gulf Opportunity
Zone VRDN (Chevron USA, Inc.), Ser. E,
0.80%, 12/1/30	VMIG1	2,500,000	2,500,000

			2,500,000

Ohio (0.3%)

Warren Cnty., Hlth. Care Fac. Rev. Bonds (Otterbein
Homes Oblig. Group), 5.00%, 7/1/32	A	750,000	828,825

			828,825

Oklahoma (0.5%)

OK State Tpk. Auth. VRDN, Ser. F, 0.78%, 1/1/28	VMIG1	1,500,000	1,500,000

			1,500,000

Puerto Rico (0.6%)

Children’s Trust Fund Tobacco Settlement
(The) Rev. Bonds

5.50%, 5/15/39	Ba1	1,200,000	1,207,524

5.375%, 5/15/33	Ba1	635,000	637,121

			1,844,645

24 Massachusetts Tax Exempt Income Fund


MUNICIPAL BONDS AND NOTES (100.1%)* cont.	Rating**	Principal amount	Value

Texas (1.5%)

Harris Cnty., Cultural Ed. Fac. Fin. Corp. VRDN (The
Methodist Hosp.), Ser. C-1, 0.80%, 12/1/24	A-1+	$4,300,000	$4,300,000

			4,300,000

TOTAL INVESTMENTS

Total investments (cost $272,625,174)			$288,749,493

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, 2016 through May 31, 2017 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures, 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.

* Percentages indicated are based on net assets of $288,449,423.

^**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.

^##Forward commitment, in part or in entirety (Note 1).

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):

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	$—	$288,749,493		$—

Totals by level	$—	$288,749,493		$—

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.

Massachusetts Tax Exempt Income Fund 25

Statement of assets and liabilities 5/31/17


ASSETS

Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $272,625,174)	$288,749,493

Cash	798,494

Interest and other receivables	3,997,789

Receivable for shares of the fund sold	278,928

Receivable for investments sold	355,000

Receivable for custodian fees (Note 2)	4,272

Prepaid assets	21,021

Total assets	294,204,997

LIABILITIES

Payable for purchases of delayed delivery securities (Note 1)	4,757,207

Payable for shares of the fund repurchased	415,915

Payable for compensation of Manager (Note 2)	105,243

Payable for investor servicing fees (Note 2)	46,204

Payable for Trustee compensation and expenses (Note 2)	112,953

Payable for administrative services (Note 2)	1,103

Payable for distribution fees (Note 2)	99,173

Distributions payable to shareholders	124,876

Other accrued expenses	92,900

Total liabilities	5,755,574

Net assets	$288,449,423

REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$278,872,209

Undistributed net investment income (Note 1)	530,585

Accumulated net realized loss on investments (Note 1)	(7,077,690)

Net unrealized appreciation of investments	16,124,319

Total — Representing net assets applicable to capital shares outstanding	$288,449,423

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share
($201,200,651 divided by 20,879,414 shares)	$9.64

Offering price per class A share (100/96.00 of $9.64)^*	$10.04

Net asset value and offering price per class B share ($2,162,828 divided by 224,751 shares)^**	$9.62

Net asset value and offering price per class C share ($26,868,216 divided by 2,782,710 shares)^**	$9.66

Net asset value and redemption price per class M share ($2,452,458 divided by 254,494 shares)	$9.64

Offering price per class M share (100/96.75 of $9.64)^†	$9.96

Net asset value, offering price and redemption price per class Y share
($55,765,270 divided by 5,770,197 shares)	$9.66

^*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.

26 Massachusetts Tax Exempt Income Fund

Statement of changes in net assets


INCREASE (DECREASE) IN NET ASSETS	Year ended 5/31/17	Year ended 5/31/16

Operations

Net investment income	$8,722,412	$9,183,734

Net realized gain (loss) on investments	1,699,321	(935,125)

Net unrealized appreciation (depreciation) of investments	(9,287,098)	5,863,790

Net increase in net assets resulting from operations	1,134,635	14,112,399

Distributions to shareholders (Note 1):
From ordinary income
Taxable net investment income
Class A	(89,703)	—

Class B	(1,075)	—

Class C	(11,983)	—

Class M	(1,039)	—

Class Y	(19,985)	—

From tax-exempt net investment income
Class A	(6,379,584)	(7,190,345)

Class B	(56,096)	(67,955)

Class C	(603,933)	(642,818)

Class M	(64,541)	(71,911)

Class Y	(1,577,160)	(1,139,850)

Increase (decrease) from capital share transactions (Note 4)	(22,836,792)	4,477,392

Total increase (decrease) in net assets	(30,507,256)	9,476,912

NET ASSETS

Beginning of year	318,956,679	309,479,767

End of year (including undistributed net investment
income of $530,585 and $423,032, respectively)	$288,449,423	$318,956,679

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

28 Massachusetts Tax Exempt Income Fund

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


	INVESTMENT OPERATIONS				LESS DISTRIBUTIONS					RATIOS AND SUPPLEMENTAL DATA

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

Class A

May 31, 2017	$9.85	.28	(.21)	.07	(.28)	—	(.28)	$9.64	.75	$201,201	.79	2.87	19

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

Class B

May 31, 2017	$9.83	.22	(.21)	.01	(.22)	—	(.22)	$9.62	.13	$2,163	1.42	2.24	19

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

Class C

May 31, 2017	$9.86	.20	(.19)	.01	(.21)	—	(.21)	$9.66	.08	$26,868	1.57	2.10	19

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

Class M

May 31, 2017	$9.85	.25	(.21)	.04	(.25)	—	(.25)	$9.64	.48	$2,452	1.07	2.60	19

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

Class Y

May 31, 2017	$9.87	.30	(.21)	.09	(.30)	—	(.30)	$9.66	.98	$55,765	.57	3.09	19

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

^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.

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 5/31/17

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, 2016 through May 31, 2017.

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 (i.e., 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. Tax-exempt investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and the applicable state’s income tax. Interest income from private activity bonds may be subject to federal AMT for individuals. These investments are not included for the purpose of complying with the 80% investment policy. 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. The fund registered class T shares in February 2017, however, as of the date of this report, class T shares had not commenced operations and are not available for purchase. Effective April 1, 2017, purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. 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, are not subject to 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 are subject to 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

32 Massachusetts Tax Exempt Income Fund

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. 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.

Securities purchased or sold on a forward commitment or delayed delivery basis may be settled at a future date beyond customary settlement time; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the fair value of the underlying securities or if the counterparty does not perform under the contract.

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 $317.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both 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 plus a $25,000 flat fee and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.21% per annum on any unutilized portion of

Massachusetts Tax Exempt Income Fund 33

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 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, 2017, 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

$2,864,026	$4,251,369	$7,115,395

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 market discount. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. At the close of the reporting period, the fund reclassified $190,240 to increase undistributed net investment income and $190,240 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	$17,190,447

Unrealized depreciation	(1,028,422)

Net unrealized appreciation	16,162,025

Undistributed ordinary income	190,237

Undistributed tax-exempt income	465,225

Capital loss carryforward	(7,115,395)

Cost for federal income tax purposes	$272,587,468

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 mutual 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.

34 Massachusetts Tax Exempt Income Fund

For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.436% of the fund’s average net assets.

Putnam Management has contractually agreed, through September 30, 2018, 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.

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 for class A, class B, class C, class M and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (“retail account”) of the fund; (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, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.

Prior to September 1, 2016, Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class M and class Y shares that included (1) a per account fee for each 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. Prior to September 1, 2016, Putnam Investor Services, Inc. had agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes would 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	$143,653	Class M	1,604

Class B	1,611	Class Y	32,916

Class C	18,689	Total	$198,473

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 $20,443 under the expense offset arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $217, 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

Massachusetts Tax Exempt Income Fund 35

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 the following share classes 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 payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to the following amounts (“Maximum %”) of the average net assets attributable to each class. The Trustees have approved payment by the fund at the following annual rate (“Approved %”) of the average net assets attributable to each class. During the reporting period, the class-specific expenses related to distribution fees were as follows:


	Maximum %	Approved %	Amount

Class A	0.35%	*	$500,954

Class B	1.00%	0.85%	21,219

Class C	1.00%	1.00%	290,115

Class M	1.00%	0.50%	12,453

Total			$824,741

^*Equals the weighted average of (i) 0.20% on the net assets of the fund attributable to class A shares purchased and paid for prior to April 1, 2005 and (ii) 0.25% on all other net assets of the fund attributable to class A shares.

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $19,091 and $429 from the sale of class A and class M shares, respectively, and received $727 and $915 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)	$55,639,265	$78,960,027

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

Total	$55,639,265	$78,960,027

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 of long-term securities 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.

36 Massachusetts Tax Exempt Income Fund

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 5/31/17		YEAR ENDED 5/31/16
Class A	Shares	Amount	Shares	Amount

Shares sold	2,207,426	$21,475,889	2,297,242	$22,326,956

Shares issued in connection with
reinvestment of distributions	553,761	5,363,779	622,816	6,061,473

	2,761,187	26,839,668	2,920,058	28,388,429

Shares repurchased	(6,439,688)	(61,702,617)	(3,274,718)	(31,874,469)

Net decrease	(3,678,501)	$(34,862,949)	(354,660)	$(3,486,040)

	YEAR ENDED 5/31/17		YEAR ENDED 5/31/16
Class B	Shares	Amount	Shares	Amount

Shares sold	22,246	$213,076	18,433	$180,194

Shares issued in connection with
reinvestment of distributions	5,456	52,717	6,453	62,681

	27,702	265,793	24,886	242,875

Shares repurchased	(80,408)	(771,571)	(88,967)	(859,646)

Net decrease	(52,706)	$(505,778)	(64,081)	$(616,771)

	YEAR ENDED 5/31/17		YEAR ENDED 5/31/16
Class C	Shares	Amount	Shares	Amount

Shares sold	288,809	$2,846,505	311,552	$3,047,005

Shares issued in connection with
reinvestment of distributions	44,276	429,023	47,098	459,099

	333,085	3,275,528	358,650	3,506,104

Shares repurchased	(522,868)	(5,036,943)	(513,163)	(5,000,286)

Net decrease	(189,783)	$(1,761,415)	(154,513)	$(1,494,182)

	YEAR ENDED 5/31/17		YEAR ENDED 5/31/16
Class M	Shares	Amount	Shares	Amount

Shares sold	17,580	$166,392	191	$1,860

Shares issued in connection with
reinvestment of distributions	3,495	33,827	4,045	39,359

	21,075	200,219	4,236	41,219

Shares repurchased	(25,838)	(247,102)	(18,301)	(179,972)

Net decrease	(4,763)	$(46,883)	(14,065)	$(138,753)

	YEAR ENDED 5/31/17		YEAR ENDED 5/31/16
Class Y	Shares	Amount	Shares	Amount

Shares sold	3,331,294	$32,374,969	1,506,967	$14,735,535

Shares issued in connection with
reinvestment of distributions	136,139	1,319,864	97,711	954,055

	3,467,433	33,694,833	1,604,678	15,689,590

Shares repurchased	(2,006,106)	(19,354,600)	(560,878)	(5,476,452)

Net increase	1,461,327	$14,340,233	1,043,800	$10,213,138

Massachusetts Tax Exempt Income Fund 37

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.

Note 6: New pronouncements

In October 2016, the SEC adopted amendments to rules under the Investment Company Act of 1940 (“final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. The final rules amend Regulation S-X and require funds to provide standardized, enhanced derivative disclosure in fund financial statements in a format designed for individual investors. The amendments to Regulation S-X also update the disclosures for other investments and investments in and advances to affiliates and amend the rules regarding the general form and content of fund financial statements. The compliance date for the amendments to Regulation S-X is August 1, 2017. Putnam Management has evaluated the amendments and its adoption will have no effect on the fund’s net assets or results of operations.

38 Massachusetts Tax Exempt Income Fund

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 Officer,	Vice President, Principal Financial Officer, Principal
and Compliance Liaison	Accounting Officer, and Assistant Treasurer
Since 2004	Since 2007
	Director of Fund Administration Services,
Robert T. Burns (Born 1961)	Putnam Investments and Putnam Management
Vice President and Chief Legal Officer
Since 2011	Susan G. Malloy (Born 1957)
General Counsel, Putnam Investments,	Vice President and Assistant Treasurer
Putnam Management, and Putnam Retail Management	Since 2007
	Director of Accounting & Control Services,
James F. Clark (Born 1974)	Putnam Investments and Putnam Management
Vice President and 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, Putnam
Michael J. Higgins (Born 1976)	Investments and Putnam Retail Management
Vice President, Treasurer, and Clerk
Since 2010	Nancy E. Florek (Born 1957)
	Vice President, Director of Proxy Voting and Corporate
	Governance, Assistant Clerk, 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.

42 Massachusetts Tax Exempt Income Fund

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	Income
Growth Opportunities Fund	American Government Income Fund
International Growth Fund	Diversified Income Trust
Multi-Cap Growth Fund	Emerging Markets Income Fund
Small Cap Growth Fund	Floating Rate Income Fund
	Global Income Trust
Blend	Government Money Market Fund^*
Capital Opportunities Fund	High Yield Fund
Capital Spectrum Fund	Income Fund
Emerging Markets Equity Fund	Money Market Fund^†
Equity Spectrum Fund	Short Duration Income Fund
Europe Equity Fund	U.S. Government Income Trust
Global Equity Fund
International Capital Opportunities Fund	Tax-free Income
International Equity Fund	AMT-Free Municipal Fund
Investors Fund	Intermediate-Term Municipal Income Fund
Low Volatility Equity Fund	Short-Term Municipal Income Fund
Multi-Cap Core Fund	Tax Exempt Income Fund
Research Fund	Tax-Free High Yield Fund

Value	State tax-free income funds^‡:
Convertible Securities Fund	California, Massachusetts, Minnesota,
Equity Income Fund	New Jersey, New York, Ohio, and Pennsylvania.
International Value Fund
Multi-Cap Value Fund
Small Cap Value Fund

Massachusetts Tax Exempt Income Fund 43


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

Global Asset Allocation Funds — four
investment portfolios that spread your 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

^*You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.

^†You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.

^‡Not available in all states.

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

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


INVESTMENT INCOME

Interest income	$11,294,645

Total investment income	11,294,645

EXPENSES

Compensation of Manager (Note 2)	1,345,609

Investor servicing fees (Note 2)	198,473

Custodian fees (Note 2)	8,751

Trustee compensation and expenses (Note 2)	19,930

Distribution fees (Note 2)	824,741

Administrative services (Note 2)	8,947

Other	186,225

Total expenses	2,592,676

Expense reduction (Note 2)	(20,443)

Net expenses	2,572,233

Net investment income	8,722,412

Net realized gain on investments (Notes 1 and 3)	1,699,321

Net unrealized depreciation of investments during the year	(9,287,098)

Net loss on investments	(7,587,777)

Net increase in net assets resulting from operations	$1,134,635


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


May 31, 2017	$65,870	$ —	$12,187	$ —
May 31, 2016	$56,651	$ —	$11,832	$ —


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


May 31, 2017	$ —	$351,893	$ —	$ —

May 31, 2016	$ —	$630,436	$ —	$ —


	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, 2017 and May 31, 2016, the fund's independent auditor billed aggregate non-audit fees in the amounts of $364,080 and $642,268 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