a_ohtaxexemptincome.htm

Putnam Ohio
Tax Exempt
Income Fund

Semiannual report
11 | 30 | 13


Message from the Trustees	1

About the fund	2

Performance snapshot	4

Interview with your fund’s portfolio manager	5

Your fund’s performance	11

Your fund’s expenses	14

Terms and definitions	16

Other information for shareholders	17

Trustee approval of management contract	18

Financial statements	24

Consider these risks before investing: 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. Bond prices may fall or fail to rise over time for several reasons, including general financial market conditions and factors related to a specific issuer or industry. You can lose money by investing in the fund.

Message from the Trustees

Dear Fellow Shareholder:

Now that 2013 has drawn to a close, a sigh of relief may be in order. The performance of financial markets in the United States and around the world has been better than many had anticipated at the start of the year, despite challenges such as fiscal woes, political wrangling, and geopolitical conflicts.

It appears that most developed economies are in recovery. The U.S. unemployment picture is improving, and economic growth has remained positive. Europe emerged from a multi-year recession in 2013, with growth in the 17-nation eurozone turning positive for the past two calendar quarters. The Japanese government’s aggressive stimulus policies have fostered growth, while China appears to have avoided a major slowdown.

Headwinds remain, however. The positive economic news makes it more likely that the Federal Reserve will taper its $85-billion-a-month bond-buying stimulus program. The end of this unprecedented initiative may test the stability of the recovery. Meanwhile, Washington lawmakers continue to assert different visions for the long-term federal budget, and may again resort to using the debt ceiling as a political instrument, which may unsettle markets.

With uncertainties still ahead, innovative and alternative investment ideas and approaches can be quite helpful to investors. In seeking returns for our shareholders, Putnam’s investment professionals employ fundamental research, active investing, and risk management strategies, and our diverse set of products is designed to address a wide range of financial goals.

It is also important to rely on the advice of your financial advisor, who can help guide you toward your investment goals, based on your time horizon and tolerance for risk.

We would like to welcome new shareholders of the fund and to thank you for investing with Putnam. We would also like to extend our thanks to Elizabeth Kennan, who has retired from the Board of Trustees, for her 20 years of dedicated service.

Interview with your fund’s portfolio manager

How did municipal bonds perform for the six months ended November 30, 2013?

Municipal bonds faced challenges on several fronts, but eventually experienced some relief in the fall of 2013. During the early months of the period, improving U.S. economic data raised concerns that the Federal Reserve would pare back its stimulative bond-buying program, known as quantitative easing [QE]. Consequently, interest rates rose and yield curves steepened across the fixed-income universe, despite the Fed’s efforts to reassure investors that it needed to see “real and sustainable” progress in job gains before drawing down QE. Since bond prices tend to move in the opposite direction of rates, the rise in rates hurt the performance of tax-exempt municipal securities.

Technical pressures — that is, supply-and-demand dynamics — also created a headwind. Faced with the prospect of higher interest rates, many retail investors sold their municipal bond investments. In addition, Detroit’s bankruptcy and Puerto Rico’s debt challenges added to investor fears. By September, however, the technical backdrop improved somewhat, contributing to the first positive month of performance for tax-free securities since April. Municipal bond prices rallied as demand from value-conscious retail and non-traditional, or so-called “crossover,” buyers picked up, and outflows

This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 11/30/13. See pages 4 and 11–13 for additional fund performance information. Index descriptions can be found on pages 16–17.


Ohio Tax Exempt Income Fund	5

from municipal bond funds slowed. In addition, a significant reduction in refunding activity took place across the municipal bond market given the higher rate environment. This combination of diminished supply and somewhat improved demand was beneficial for municipal bond prices for the remainder of the period.

Seeing a more uneven economic climate than it had expected, as well as the fiscal and political discord in Washington, the Fed at its mid-September meeting held off setting a timetable for scaling back QE, keeping bond purchases unchanged. Following this surprise decision, municipal bonds generally rallied and interest rates declined somewhat. The markets saw more relief in October, as lawmakers agreed to extend the U.S. borrowing authority, avoiding a possible debt default. Municipals outperformed Treasuries during October, as investors appeared to recognize the asset class’s relative value. Finally, to close the period, November brought somewhat muted municipal bond performance. Against this multi-dimensional backdrop, Putnam Ohio Tax Exempt Income Fund underperformed its benchmark, the Barclays Municipal Bond Index, but outperformed the average return of its Lipper peer group.

How are you managing the risk posed by higher interest rates?

We expect continued pressure on interest rates and yield spreads as investors adjust their expectations about Fed policy. However, we believe it is unlikely that rates are going to suddenly spike as they did in the spring

Allocations are shown as a percentage of the fund’s net assets as of 11/30/13. 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, and the use of different classifications of securities for presentation purposes. Holdings and allocations may vary over time.


6	Ohio Tax Exempt Income Fund

of 2013. If yields rise more than economic fundamentals seem to warrant, we may view it as an opportunity to add what we believe are attractively valued securities to the fund. To prepare for this possibility, we slightly increased our cash level in the portfolio during the period. The fund also had a slightly shorter duration, or interest-rate sensitivity, than did its Lipper peer group. We also used derivatives in the form of total-return swaps to manage the fund’s interest-rate risk in the rising rate environment.

Periods of high volatility, although unpleasant for investors, may offer attractive buying opportunities. Tax-exempt yields, in our opinion, are more attractive now given this past summer’s sell-off. In fact, we have not seen yields at this level since 2011. We believe our fundamental research will help to unlock these opportunities and provide return potential. The municipal bond market is exceptionally diverse, comprising small issuers, complex instruments, and an array of market participants with varying return objectives. We believe this market dynamic may present inefficiencies that could result in attractive investment opportunities.

Credit qualities are shown as a percentage of the fund’s net assets as of 11/30/13. A bond rated Baa or higher (MIG3/VMIG3 or higher, for short-term debt) is considered investment grade. The chart reflects Moody’s ratings; percentages may include bonds or derivatives not rated by Moody’s but rated by Standard & Poor’s (S&P) or, if unrated by S&P, by Fitch ratings, and then included in the closest equivalent Moody’s rating. Ratings may vary over time.

Credit quality includes bonds and represents only the fixed-income portion of the portfolio. 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. The fund itself has not been rated by an independent rating agency.


Ohio Tax Exempt Income Fund	7

Is the default rate in the municipal bond market still low by historic standards?

Yes. For calendar year 2012, bankruptcy filings represented approximately 0.12% of the $3.7 trillion municipal bond market, and they remained near this level during 2013 as well. Furthermore, we do not believe that the default rate will increase meaningfully in the near future.

In our opinion, the significance of defaults and downgrades is the headline risk that emerges from occasional isolated incidents of insolvency. For example, Puerto Rico, a self-governing American territory, was downgraded by Standard & Poor’s this past spring and by Moody’s in 2012. Puerto Rico’s debt is widely held because of its large issuance and exemption from federal and local taxes, and the considerable negative coverage of its strained economy led to a heavy sell-off. Throughout 2013, Puerto Rico’s government has taken measures in an attempt to mend its credit profile, most notably by introducing proposals for pension reform and raising tax revenues. Despite these reforms, we believe Puerto Rico’s credit is likely to remain pressured due to its struggling economy.

Also, the city of Detroit filed for Chapter 9 bankruptcy in July. Although Detroit’s filing, the largest Chapter 9 filing in history, was a large headline event, we continue to believe that Chapter 9 filings remain isolated and don’t expect a large impact on the broader municipal bond market. At the same time, we continue to monitor the legal proceedings because they have the potential to set new precedents that can influence the market.

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, and the use of different classifications of securities for presentation purposes. Holdings and allocations may vary over time.


8	Ohio Tax Exempt Income Fund

What are credit conditions like at the state level?

Given improvements in state budget forecasts, ratings agency Moody’s, after five years of negative ratings, revised its outlook for U.S. states in August to “stable.” Credit quality at the state level remains quite high, with 30 of the 50 states holding either an Aaa or Aa1 rating, the two highest possible ratings. On balance, our outlook is for continued stabilization of states’ economies, given the improvement in employment, economic growth, and consumer confidence data — all of which have contributed to rising tax collections.

How did you position the portfolio during the period?

We identified what we considered to be improving fundamentals and still-attractive spreads in the market and sought to benefit from them. Revenue credits, which are typically issued by state and local governments to finance a specific revenue-generating project, have been an overweight position in the fund. We have also maintained an overweight exposure relative to the benchmark to municipal bonds rated Baa. While we believed that the budget challenges faced by many municipalities were significant, we were confident that conditions would improve as long as the broader economy did not stall.

Our overweight position in essential service revenue bonds was offset by the fund’s underweight positioning in local G.O. [general obligation] bonds — securities issued at the city or county level. As the federal government looks to reduce transfer payments to the states, we believe that these types of bonds are at risk for downgrades or other headline-driven price volatility. In terms of sectors, relative to the fund’s Lipper universe, we favored transportation-related, higher education, utility, and health-care bonds.

Overall, this credit positioning helped the fund’s performance, but the fund’s exposure to Puerto Rico bonds was a detractor during the period. The fund’s shorter-duration interest-rate positioning benefited returns as interest rates moved higher.

What is your near-term outlook for the municipal bond market?

The past six months proved to be a volatile time for municipal bonds, and we believe market conditions remain less than robust. However, we continue to believe that municipal bonds should be part of a diversi-fied portfolio for long-term investors seeking tax-free income.

In our view, technical factors in the market are the big wild card. Tax-exempt municipal fund outflows have put downward pressure on prices. Although we have seen some institutional crossover buyers come into the market to help support prices, we think it is unlikely that we will see volatility subside until outflows and rate volatility diminish. As I mentioned previously, the overall fundamental credit outlook of municipal bonds appears solid, in our opinion. With regard to tax policy, many issues remain unresolved, including the debt ceiling and the potential for broader tax reform — both of which could affect the value of municipal bonds.

We expect to continue to position the portfolio for modest upticks in the overall interest-rate environment, avoiding the more interest-rate-sensitive sectors of the municipal bond market to make the most of less-than-favorable market conditions. Our efforts remain focused on the pursuit of steady income, minimizing volatility, and a competitive total return for the fund.

Thank you, Thalia, for bringing us up to date.


Ohio Tax Exempt Income Fund	9

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

Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.

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

In addition to Thalia, your fund’s portfolio managers are Paul M. Drury, CFA, and Susan A. McCormack, CFA.

IN THE NEWS

The U.S. unemployment rate has been on a steady decline as of late, recently dipping to 7% for the first time in five years. In what was the first full assessment of the nation’s jobs picture since the 16-day partial government shutdown in early October, the lower unemployment rate is a clear indicator that the U.S. economy has measurably improved since the 2008 financial crisis that rattled markets and economies worldwide. The unemployment rate peaked at 10% in October 2009, according to the Labor Department. The improving job situation also means that the Federal Reserve may be more inclined to begin winding down its $85-billion-a-month asset purchase program in the near future. The Fed’s stimulus efforts have helped keep interest rates low with the goal of fostering economic growth and lowering unemployment. The central bank has stated that it would start tapering its quantitative-easing program when it sees “real and sustainable” progress in job gains.


10	Ohio Tax Exempt Income Fund

Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended November 30, 2013, the end of the first half of its current 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 11/30/13


	Class A		Class B		Class C		Class M		Class Y
(inception dates)	(10/23/89)		(7/15/93)		(10/3/06)		(4/3/95)		(1/2/08)

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

Annual average
(life of fund)	5.18%	5.00%	4.91%	4.91%	4.38%	4.38%	4.84%	4.69%	5.24%

10 years	42.23	36.54	35.12	35.12	31.79	31.79	38.11	33.62	44.26
Annual average	3.59	3.16	3.06	3.06	2.80	2.80	3.28	2.94	3.73

5 years	29.74	24.55	25.75	23.75	24.95	24.95	28.00	23.84	31.33
Annual average	5.35	4.49	4.69	4.35	4.56	4.56	5.06	4.37	5.60

3 years	10.57	6.15	8.41	5.44	7.91	7.91	9.54	5.98	11.31
Annual average	3.41	2.01	2.73	1.78	2.57	2.57	3.08	1.95	3.64

1 year	–4.58	–8.40	–5.18	–9.79	–5.32	–6.24	–4.84	–7.94	–4.36

6 months	–3.60	–7.46	–3.91	–8.64	–3.97	–4.92	–3.73	–6.86	–3.49

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 8 years.


Ohio Tax Exempt Income Fund	11

Fund price and distribution information For the six-month period ended 11/30/13


Distributions	Class A		Class B	Class C	Class M		Class Y

Number	6		6	6	6		6

Income ¹	$0.154193		$0.126508	$0.119878	$0.142089		$0.164221

Capital gains ²		—	—	—	—		—

Total	$0.154193		$0.126508	$0.119878	$0.142089		$0.164221

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

5/31/13	$9.31	$9.70	$9.30	$9.31	$9.31	$9.62	$9.32

11/30/13	8.82	9.19	8.81	8.82	8.82	9.12	8.83

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

Current dividend rate ³	3.49%	3.35%	2.88%	2.74%	3.22%	3.11%	3.70%

Taxable equivalent ⁴	6.55	6.29	5.41	5.15	6.05	5.84	6.95

Current 30-day SEC yield ⁵	N/A	2.57	2.06	1.91	N/A	2.33	2.90

Taxable equivalent ⁴	N/A	4.83	3.87	3.59	N/A	4.38	5.45

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 46.75% federal and state combined tax rate for 2013. 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	Ohio Tax Exempt Income Fund

Comparative index returns For periods ended 11/30/13


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

Annual average (life of fund)	6.07%	5.26%

10 years	53.85	39.71
Annual average	4.40	3.39

5 years	35.44	30.00
Annual average	6.26	5.36

3 years	13.24	10.27
Annual average	4.23	3.31

1 year	–3.51	–5.48

6 months	–2.45	–3.99

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

* Over the 6-month, 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 11/30/13, there were 35, 33, 32, 31, 23, and 7 funds, respectively, in this Lipper category.

Fund performance as of most recent calendar quarter
Total return for periods ended 12/31/13


	Class A		Class B		Class C		Class M		Class Y
(inception dates)	(10/23/89)		(7/15/93)		(10/3/06)		(4/3/95)		(1/2/08)

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

Annual average
(life of fund)	5.15%	4.97%	4.88%	4.88%	4.35%	4.35%	4.81%	4.67%	5.21%

10 years	40.70	35.08	33.68	33.68	30.37	30.37	36.93	32.48	42.74
Annual average	3.47	3.05	2.95	2.95	2.69	2.69	3.19	2.85	3.62

5 years	28.38	23.25	24.43	22.43	23.49	23.49	26.80	22.68	29.96
Annual average	5.12	4.27	4.47	4.23	4.31	4.31	4.86	4.17	5.38

3 years	12.54	8.04	10.46	7.46	9.95	9.95	11.61	7.98	13.29
Annual average	4.02	2.61	3.37	2.34	3.21	3.21	3.73	2.59	4.25

1 year	–3.78	–7.63	–4.39	–9.04	–4.52	–5.45	–3.94	–7.06	–3.46

6 months	–3.86	–7.70	–4.21	–8.92	–4.29	–5.24	–3.90	–7.03	–3.72

See the discussion following the Fund performance table on page 11 for information about the calculation of fund performance.


Ohio Tax Exempt Income Fund	13

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 5/31/13	0.80%	1.42%	1.57%	1.07%	0.57%

Annualized expense ratio for the six-month
period ended 11/30/13	0.81%	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.

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in the fund from June 1, 2013, to November 30, 2013. 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*†	$3.99	$7.03	$7.76	$5.31	$2.86

Ending value (after expenses)	$964.00	$960.90	$960.30	$962.70	$965.10

* 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 11/30/13. 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.


14	Ohio Tax Exempt Income Fund

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended November 30, 2013, use the following calculation method. To find the value of your investment on June 1, 2013, 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*†	$4.10	$7.23	$7.99	$5.47	$2.94

Ending value (after expenses)	$1,021.01	$1,017.90	$1,017.15	$1,019.65	$1,022.16

† 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.


Ohio Tax Exempt Income Fund	15

Terms and definitions

Important terms

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

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

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

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

Share classes

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

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

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

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

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

Fixed-income terms

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

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

Comparative indexes

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

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

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

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

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


16	Ohio Tax Exempt Income Fund

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

Important notice regarding delivery of shareholder documents

In accordance with Securities and Exchange Commission (SEC) regulations, Putnam sends a single copy of annual and semiannual shareholder reports, prospectuses, and proxy statements to Putnam shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call Putnam at 1-800-225-1581, and Putnam will begin sending individual copies within 30 days.

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, 2013, are available in the Individual Investors section of putnam.com, and on the SEC’s 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 Forms N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s 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 November 30, 2013, Putnam employees had approximately $427,000,000 and the Trustees had approximately $106,000,000 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.


Ohio Tax Exempt Income Fund	17

Trustee approval of management contract

General conclusions

The Board of Trustees of the Putnam funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Investment Management (“Putnam Management”) and the sub-management contract with respect to your fund between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”). The Board of Trustees, with the assistance of its Contract Committee, requests and evaluates all information it deems reasonably necessary under the circumstances in connection with its annual contract review. The Contract Committee consists solely of Trustees who are not “interested persons” (as this term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the Putnam funds (“Independent Trustees”).

At the outset of the review process, members of the Board’s independent staff and independent legal counsel met with representatives of Putnam Management to review the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review and to discuss possible changes in these materials that might be necessary or desirable for the coming year. Following these discussions and in consultation with the Contract Committee, the Independent Trustees’ independent legal counsel requested that Putnam Management furnish specified information, together with any additional information that Putnam Management considered relevant, to the Contract Committee. Over the course of several months ending in June 2013, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided. Throughout this process, the Contract Committee was assisted by the members of the Board’s independent staff and by independent legal counsel for the Putnam funds and the Independent Trustees.

In May 2013, the Contract Committee met in executive session to discuss and consider its preliminary recommendations with respect to the continuance of the contracts. At the Trustees’ June 20, 2013 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial data that the Contract Committee considered in the course of its review. The Contract Committee then presented its written report, which summarized the key factors that the Committee had considered and set forth its final recommendations. The Contract Committee then recommended, and the Independent Trustees approved, the continuance of your fund’s management and sub-management contracts, effective July 1, 2013, subject to certain changes in the sub-management contract noted below. (Because PIL is an affiliate of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL, the Trustees have not evaluated PIL as a separate entity, and all subsequent references to Putnam Management below should be deemed to include reference to PIL as necessary or appropriate in the context.)

The Independent Trustees’ approval was based on the following conclusions:

• That the fee schedule in effect for your fund represented reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds, and the costs incurred by Putnam Management in providing services to the fund, and

• That the fee schedule represented an appropriate sharing between fund


18	Ohio Tax Exempt Income Fund

shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels.

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the management arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that some aspects of the arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of fee arrangements in previous years. For example, with some minor exceptions, the current fee arrangements in the management contracts for the Putnam funds were implemented at the beginning of 2010 following extensive review and discussion by the Trustees, as well as approval by shareholders.

As noted above, the Trustees considered administrative revisions to your fund’s sub-management contract. Putnam Management recommended that the sub-management contract be revised to reduce the sub-management fee that Putnam Management pays to PIL with respect to the portion of the portfolios of certain funds, but not your fund, that may be allocated to PIL from time to time. The Independent Trustees’ approval of this recommendation was based on their conclusion that these changes would have no practical effect on Putnam Management’s continued responsibility for the management of these funds or the costs borne by fund shareholders and would not result in any reduction in the nature and quality of services provided to the funds.

Management fee schedules and total expenses

The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints. The Trustees also reviewed the total expenses of each Putnam fund, recognizing that in most cases management fees represented the major, but not the sole, determinant of total costs to shareholders.

In reviewing fees and expenses, the Trustees generally focus their attention on material changes in circumstances — for example, changes in assets under management, changes in a fund’s investment style, changes in Putnam Management’s operating costs or profitability, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not warrant changes to the management fee structure of your fund.

Under its management contract, your fund has the benefit of breakpoints in its management fee schedule that provide shareholders with economies of scale in the form of reduced fee levels as assets under management in the Putnam family of funds increase. The Trustees concluded that the fee schedule in effect for your fund represented an appropriate sharing of economies of scale between fund shareholders and Putnam Management.

As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. In order to ensure that expenses of the Putnam funds continue to meet competitive standards, the Trustees and Putnam Management have implemented certain expense limitations. These expense limitations were: (i) a contractual expense limitation applicable to all retail open-end funds of 32 basis points on investor servicing fees and expenses and


Ohio Tax Exempt Income Fund	19

(ii) a contractual expense limitation applicable to all open-end funds of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, investor servicing fees, distribution fees, investment-related expenses, interest, taxes, brokerage commissions, extraordinary expenses and acquired fund fees and expenses). These expense limitations serve in particular to maintain competitive expense levels for funds with large numbers of small shareholder accounts and funds with relatively small net assets. Most funds, including your fund, had sufficiently low expenses that these expense limitations did not apply. Putnam Management’s support for these expense limitations was an important factor in the Trustees’ decision to approve the continuance of your fund’s management and sub-management contracts.

The Trustees reviewed comparative fee and expense information for a custom group of competitive funds selected by Lipper Inc. This comparative information included your fund’s percentile ranking for effective management fees and total expenses (excluding any applicable 12b-1 fee), which provides a general indication of your fund’s relative standing. In the custom peer group, your fund ranked in the first quintile in effective management fees (determined for your fund and the other funds in the custom peer group based on fund asset size and the applicable contractual management fee schedule) and in the second quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2012 (the first quintile representing the least expensive funds and the fifth quintile the most expensive funds). The fee and expense data reported by Lipper as of December 31, 2012 reflected the most recent fiscal year-end data available in Lipper’s database at that time.

In connection with their review of the management fees and total expenses of the Putnam funds, the Trustees also reviewed the costs of the services provided and the profits realized by Putnam Management and its affiliates from their contractual relationships with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management, investor servicing and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of Putnam Management’s revenues, expenses and profitability, allocated on a fund-by-fund basis, with respect to the funds’ management, distribution, and investor servicing contracts. For each fund, the analysis presented information about revenues, expenses and profitability for each of the agreements separately and for the agreements taken together on a combined basis. The Trustees concluded that, at current asset levels, the fee schedules in place represented reasonable compensation for the services being provided and represented an appropriate sharing of such economies of scale as may exist in the management of the Putnam funds at that time.

The information examined by the Trustees as part of their annual contract review for the Putnam funds has included for many years information regarding fees charged by Putnam Management and its affiliates to institutional clients such as defined benefit pension plans, college endowments, and the like. This information included comparisons of those fees with fees charged to the funds, as well as an assessment of the differences in the services provided to these different types of clients. The Trustees observed that the differences in fee rates between institutional clients and mutual funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients may reflect historical competitive forces operating in separate markets. The Trustees considered the fact that in many cases fee rates across different asset classes are higher on average


20	Ohio Tax Exempt Income Fund

for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to its institutional clients. The Trustees did not rely on these comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of the Putnam funds’ investment process and performance by the work of the investment oversight committees of the Trustees, which meet on a regular basis with the funds’ portfolio teams and with the Chief Investment Officer and other senior members of Putnam Management’s Investment Division throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — based on the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to them, and in general Putnam Management’s ability to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.

The Trustees considered that 2012 was a year of strong competitive performance for many of the Putnam funds, with only a relatively small number of exceptions. They noted that this strong performance was exemplified by the fact that the Putnam funds were recognized by Barron’s as the best performing mutual fund complex for 2012 — the second time in four years that Putnam Management has achieved this distinction for the Putnam funds. They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2012 and considered information provided by Putnam Management regarding the factors contributing to the underperformance and actions being taken to improve the performance of these particular funds. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these efforts and to evaluate whether additional actions to address areas of underperformance are warranted.

For purposes of evaluating investment performance, the Trustees generally focus on competitive industry rankings for the one-year, three-year, and five-year periods. For a number of Putnam funds with relatively unique investment mandates, the Trustees evaluated performance based on comparisons of their total returns with the returns of selected investment benchmarks or targeted returns. In the case of your fund, the Trustees considered that its class A share cumulative total return performance at net asset value was in the following quartiles of its Lipper Inc. peer group (Lipper Ohio Municipal Debt Funds) for the one-year, three-year and five-year periods ended December 31, 2012 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds):


One-year period	3rd

Three-year period	3rd

Five-year period	2nd

Over the one-year, three-year and five-year periods ended December 31, 2012, there were 36, 34 and 31 funds, respectively, in your fund’s Lipper peer group. (When considering performance information, shareholders should be mindful that past performance is not a guarantee of future results.)

Brokerage and soft-dollar allocations; investor servicing

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under


Ohio Tax Exempt Income Fund	21

the management contract with your fund. These include benefits related to brokerage allocation and the use of soft dollars, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that are expected to be useful to Putnam Management in managing the assets of the fund and of other clients. Subject to policies established by the Trustees, soft dollars generated by these means are used primarily to acquire brokerage and research services that enhance Putnam Management’s investment capabilities and supplement Putnam Management’s internal research efforts. However, the Trustees noted that a portion of available soft dollars continues to be used to pay fund expenses. The Trustees indicated their continued intent to monitor regulatory and industry developments in this area with the assistance of their Brokerage Committee and also indicated their continued intent to monitor the allocation of the Putnam funds’ brokerage in order to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.

Putnam Management may also receive benefits from payments that the funds make to Putnam Management’s affiliates for investor or distribution services. In conjunction with the annual review of your fund’s management and sub-management contracts, the Trustees reviewed your fund’s investor servicing agreement with Putnam Investor Services, Inc. (“PSERV”) and its distributor’s contracts and distribution plans with Putnam Retail Management Limited Partnership (“PRM”), both of which are affiliates of Putnam Management. The Trustees concluded that the fees payable by the funds to PSERV and PRM, as applicable, for such services are reasonable in relation to the nature and quality of such services, the fees paid by competitive funds, and the costs incurred by PSERV and PRM, as applicable, in providing such services.

Consideration of your fund’s interim management contract and the continuance of the fund’s sub-management contract

Following the Trustees’ approval of the continuance of your fund’s management and sub-management contracts, on October 8, 2013, The Honourable Paul G. Desmarais passed away. Mr. Desmarais, both directly and through holding companies, controlled a majority of the voting shares of Power Corporation of Canada, the ultimate parent company of Putnam Management. Upon his death, Mr. Desmarais’ voting control of shares of Power Corporation of Canada was transferred to The Desmarais Family Residuary Trust (the “Transfer”). As a technical matter, the Transfer may have constituted an “assignment” within the meaning of the Investment Company Act of 1940, causing the fund’s existing management and sub-management contracts to terminate automatically. On October 18, 2013, the Trustees approved your fund’s interim management contract and the continuance of your fund’s sub-management contract to address this possibility and to avoid disruption of investment advisory and other services provided to your fund. At a subsequent meeting on November 22, 2013, the Trustees, including all of the Independent Trustees, approved new definitive management contracts between the Putnam funds and Putnam Management and determined to recommend their approval to the shareholders of the Putnam funds at a shareholder meeting called for February 27, 2014. Further information regarding the proposed new management contract is included in a proxy statement filed with the SEC on December 20, 2013. The proxy statement was mailed to shareholders of record beginning on or about December 23, 2013.

In considering whether to approve your fund’s interim management contract and new definitive management contract and the


22	Ohio Tax Exempt Income Fund

continuance of your fund’s sub-management contract, the Trustees took into account that they had most recently approved the annual continuation of the fund’s previous management and sub-management contracts at their meeting in June 2013, as described above. The Trustees considered that the terms of the interim management contract and new definitive management contract were identical to the previous management contract, except for the effective dates and initial terms and for certain non-substantive changes. They also considered that the sub-management contract was identical to the previous sub-management contract, except for the effective dates and initial terms. Because the proposed contracts were substantially identical to the previous versions of these contracts approved by the Trustees at their June 2013 meeting, the Trustees relied to a considerable extent on their prior approval of these contracts. In addition, the Trustees considered a number other factors relating to the Transfer, including, but not limited to, the following:

• Information about the operations of The Desmarais Family Residuary Trust, including that Paul Desmarais, Jr. and André Desmarais, Mr. Desmarais’ sons, were expected to exercise, jointly, voting control over the Power Corporation of Canada shares controlled by The Desmarais Family Residuary Trust.

• That Paul Desmarais, Jr. and André Desmarais had been playing active managerial roles at Power Corporation of Canada, with responsibility for the oversight of Power Corporation of Canada’s subsidiaries, including Putnam Investments, since Power Corporation of Canada had acquired Putnam Investments in 2007, including serving as Directors of Putnam Investments, and that the Transfer would not affect their responsibilities as officers of Power Corporation of Canada.

• The intention expressed by representatives of Power Corporation of Canada and its subsidiaries, Power Financial Corporation and Great-West Lifeco, that there would be no change to the operations or management of Putnam Investments, to Putnam Management’s management of the funds or to investment, advisory and other services provided to the funds by Putnam Management and its affiliates as a result of the Transfer.

• Putnam Management’s assurances that, following the Transfer, Putnam Management would continue to provide the same level of services to each fund and that the Transfer will not have an adverse impact on the ability of Putnam Management and its affiliates to continue to provide high quality investment advisory and other services to the funds.

• Putnam Management’s assurances that there are no current plans to make any changes to the operations of the funds, existing management fees, expense limitations, distribution arrangements, or the quality of any services provided to the funds or their shareholders, as a result of the Transfer.

• The benefits that the funds have received and may potentially receive as a result of Putnam Management being a member of the Power Corporation of Canada group of companies, which promotes the stability of the Putnam organization.


Ohio Tax Exempt Income Fund	23

Financial statements

A guide to financial statements

These sections of the report, as well as the accompanying Notes, constitute the fund’s financial statements.

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

Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and 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 period.

Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year.

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.


24	Ohio Tax Exempt Income Fund

The fund’s portfolio 11/30/13 (Unaudited)


Key to holding’s abbreviations
AGM Assured Guaranty Municipal Corporation	G.O. Bonds General Obligation Bonds
AGO Assured Guaranty, Ltd.	GNMA Coll. Government National Mortgage
AMBAC AMBAC Indemnity Corporation	Association Collateralized
COP Certificates of Participation	NATL National Public Finance Guarantee Corp.
FGIC Financial Guaranty Insurance Company	SGI Syncora Guarantee, Inc.
FHA Insd. Federal Housing Administration Insured	U.S. Govt. Coll. U.S. Government Collateralized
FHLMC Coll. Federal Home Loan Mortgage	VRDN Variable Rate Demand Notes, which are
Corporation Collateralized	floating-rate securities with long-term maturities
FNMA Coll. Federal National Mortgage	that carry coupons that reset and are payable upon
Association Collateralized	demand either daily, weekly or monthly. The rate
FRB Floating Rate Bonds: the rate shown is	shown is the current interest rate at the close of the
the current interest rate at the close of the	reporting period.
reporting period


MUNICIPAL BONDS AND NOTES (97.2%)*	Rating**	Principal amount	Value

Guam (0.8%)
Territory of GU, Govt. Ltd. Oblig. Rev. Bonds
(Section 30), Ser. A, 5 3/4s, 12/1/34	BBB+	$500,000	$516,335

Territory of GU, Govt. Wtr. Wks. Auth. Wtr. &
Waste Wtr. Syst. Rev. Bonds, 5 5/8s, 7/1/40	Ba1	350,000	349,265

Territory of GU, Pwr. Auth. Rev. Bonds, Ser. A,
5 1/2s, 10/1/40	BBB	250,000	250,965

			1,116,565
Ohio (93.4%)
Akron, G.O. Bonds, AGM, 5s, 12/1/25	Aa3	1,005,000	1,083,219

Allen Cnty., Hosp. Fac. Rev. Bonds (Catholic Hlth.
Care), Ser. A, 5 1/4s, 6/1/38	AA–	1,000,000	1,015,370

American Muni. Pwr. — Ohio, Inc. Rev. Bonds
(Prairie State Energy Campus), Ser. A
AGO, 5 3/4s, 2/15/39	AA–	1,500,000	1,590,195
5s, 2/15/38	A1	1,500,000	1,524,285

Barberton, City School Dist. G.O. Bonds (School
Impt.), 5 1/4s, 12/1/28	AA	1,390,000	1,487,912

Brookfield, Local School Dist. G.O. Bonds (School
Fac. Impt.), AGM, 5s, 1/15/26	Aa2	1,000,000	1,067,640

Buckeye, Tobacco Settlement Fin. Auth. Rev.
Bonds, Ser. A-2
5 3/4s, 6/1/34	B3	2,000,000	1,509,540
5 3/8s, 6/1/24	B3	690,000	594,256

Cincinnati, G.O. Bonds, Ser. D, 4s, 12/1/32	AA+	1,000,000	968,910

Cincinnati, City School Dist. COP (School Impt.),
AGM, 5s, 12/15/28	Aa3	2,500,000	2,649,750

Cleveland, G.O. Bonds, Ser. A
AGO, 5s, 12/1/29	AA	2,000,000	2,099,800
NATL, 4 3/4s, 11/15/26	AA	1,790,000	1,877,459

Cleveland, Arpt. Syst. Rev. Bonds, Ser. C,
AGM, 5s, 1/1/23	AA–	1,500,000	1,619,550


Ohio Tax Exempt Income Fund	25


MUNICIPAL BONDS AND NOTES (97.2%)* cont.	Rating**	Principal amount	Value

Ohio cont.
Cleveland, Income Tax Rev. Bonds (Bridges &
Roadways), Ser. B, AGO, 5s, 10/1/29	AA	$1,000,000	$1,046,580

Cleveland, Pkg. Fac. Rev. Bonds, AGM
5 1/4s, 9/15/22	AA–	1,630,000	1,825,633
5 1/4s, 9/15/22 (Escrowed to maturity)	AA–	770,000	934,626

Cleveland, Pub. Pwr. Syst. Rev. Bonds, Ser. B-1,
NATL, zero %, 11/15/25	A2	3,000,000	1,704,180

Cleveland, State U. Rev. Bonds, 5s, 6/1/37	A1	1,500,000	1,530,690

Cleveland, Urban Renewal Increment Rev. Bonds
(Rock & Roll Hall of Fame), 6 3/4s, 3/15/18	B/P	870,000	873,184

Cleveland, Wtr. Rev. Bonds (2nd Lien)
Ser. X, 5s, 1/1/42	Aa1	1,000,000	1,040,370
Ser. A, 5s, 1/1/26	Aa2	500,000	551,240

Columbus G.O. Bonds, Ser. A, 5s, 2/15/25	Aaa	1,500,000	1,723,140

Columbus, Swr. Rev. Bonds, Ser. A,
4 1/2s, 6/1/29	Aa1	1,110,000	1,150,593

Columbus, Swr. VRDN, Ser. B, 0.03s, 6/1/32	VMIG1	1,430,000	1,430,000

Cuyahoga Cmnty., College Dist. Rev. Bonds
Ser. C, 5 1/4s, 2/1/29	Aa2	995,000	1,081,475
Ser. D, 5s, 8/1/32	Aa2	750,000	785,370
Ser. C, 5s, 8/1/25	Aa2	1,500,000	1,641,000

Cuyahoga Cnty. G.O. Bonds (Cap. Impt.), Ser. A,
4s, 12/1/27	Aa1	1,000,000	1,017,710

Dublin, G.O. Bonds, Ser. B, 6.4s, 12/1/14	Aaa	290,000	298,103

Elyria, OH City School Dist. G.O. Bonds
(Classroom Fac. & School Impt.), SGI, 5s, 12/1/35	A1	500,000	512,210

Erie Cnty., OH Hosp. Fac. Rev. Bonds (Firelands
Regl. Med. Ctr.), Ser. A, 5 1/4s, 8/15/46	A–	590,000	571,155

Field, Local School Dist. G.O. Bonds (School Facs.
Construction & Impt.), AMBAC
5s, 12/1/22	BBB+/P	650,000	658,847
5s, 12/1/22 (Prerefunded 6/1/15)	BBB+/P	520,000	555,942

Franklin Cnty., Hlth. Care Fac. Rev. Bonds
(Presbyterian Svcs.), Ser. A, 5 5/8s, 7/1/26	BBB–	1,100,000	1,131,867

Greene Cnty., Hosp. Facs. Rev. Bonds (Kettering
Hlth. Network), 5 1/2s, 4/1/39	A	1,000,000	1,024,920

Hamilton Cnty., Econ. Dev. Rev. Bonds (King
Highland Cmnty. Urban), Ser. A, NATL, 5s, 6/1/22	A1	1,745,000	1,863,276

Hamilton Cnty., Hlth. Care Rev. Bonds
(Life Enriching Cmntys.)
6 5/8s, 1/1/46	BBB	590,000	628,439
5s, 1/1/32	BBB	370,000	359,270

Hamilton Cnty., Sales Tax Rev. Bonds,
Ser. B, AMBAC
zero %, 12/1/24	A2	3,000,000	1,877,430
zero %, 12/1/22	A2	500,000	346,815

Hamilton Cnty., Swr. Syst. Rev. Rev. Bonds (Metro.
Swr. Dist.), Ser. A, NATL, 5s, 12/1/28	AA+	1,500,000	1,612,380

Hamilton, City School Dist. G.O. Bonds (School
Impt.), AGM, 5s, 12/1/26	AA–	2,000,000	2,108,560


26	Ohio Tax Exempt Income Fund


MUNICIPAL BONDS AND NOTES (97.2%)* cont.	Rating**	Principal amount	Value

Ohio cont.
Huran Cnty., Human Svcs. G.O. Bonds, NATL,
6.55s, 12/1/20	Aa3	$1,800,000	$2,116,170

JobsOhio Beverage Syst. Rev. Bonds (Statewide
Sr. Lien Liquor Profits), Ser. A, 5s, 1/1/38	AA	700,000	716,905

Lake Cnty., Hosp. Fac. Rev. Bonds (Lake Hosp.
Syst.), Ser. C, 6s, 8/15/43	A3	1,115,000	1,160,124

Lakewood, City School Dist. G.O. Bonds
NATL, zero %, 12/1/17	Aa2	1,190,000	1,106,545
AGM, zero %, 12/1/16	Aa2	1,250,000	1,213,975

Lancaster, City Fac. Construction & Impt. School
Dist. G.O. Bonds, 5s, 10/1/37	AA	1,000,000	1,038,240

Lorain Cnty., Hosp. Rev. Bonds (Catholic), Ser. H,
AGO, 5s, 2/1/29	AA–	2,000,000	2,054,380

Lorain Cnty., Port Auth. Econ. Dev. Facs. Rev.
Bonds (Kendal at Oberlin), 5s, 11/15/30	A–	750,000	767,093

Lorain Cnty., Port Auth. Recovery Zone Fac. Rev.
Bonds (U.S. Steel Corp.), 6 3/4s, 12/1/40	BB–	500,000	489,075

Lucas Cnty., Hlth. Care Rev. Bonds (Lutheran
Homes), Ser. A, 7s, 11/1/45	BB+	700,000	730,233

Lucas Cnty., Hlth. Care Fac. Rev. Bonds (Sunset
Retirement Cmntys.), 5 1/2s, 8/15/30	A–/F	650,000	667,492

Miami Cnty., Hosp. Fac. Rev. Bonds (Upper Valley
Med. Ctr.), 5 1/4s, 5/15/17	A2	1,250,000	1,349,963

Montgomery Cnty., Rev. Bonds (Catholic Hlth.
Initiatives), Ser. D, 6 1/4s, 10/1/33	A1	1,000,000	1,130,530

Montgomery Cnty., VRDN (Miami Valley Hosp.),
Ser. C, 0.05s, 11/15/39	Aa3	1,100,000	1,100,000

Mount Healthy, City School Dist. G.O. Bonds
(School Impt.), AGM, 5 1/4s, 12/1/22	A1	1,105,000	1,216,561

Napoleon, City Facs. Construction & Impt. School
Dist. G.O. Bonds, 5s, 12/1/36	Aa3	500,000	512,515

New Albany, Plain Local School Dist. G.O. Bonds
(School Impt.), 4s, 12/1/29	Aa1	1,410,000	1,403,401

OH Hsg. Fin. Agcy. Rev. Bonds (Single Fam.
Mtge.), Ser. 1, 5s, 11/1/28	Aaa	830,000	874,604

OH Hsg. Fin. Agcy. Single Fam. Mtge. Rev. Bonds,
Ser. 85-A, FGIC, FHA Insd., U.S. Gov’t Coll., zero %,
1/15/15 (Escrowed to maturity)	AAA/P	5,000	4,607

OH State G.O. Bonds
(Hwy. Cap. Impts.), Ser. Q, 5s, 5/1/27	AAA	1,500,000	1,669,560
(Infrastructure Impt.), Ser. B, 5s, 8/1/23	Aa1	1,250,000	1,474,313
(Common Schools), Ser. A, 4s, 9/15/16	Aa1	1,000,000	1,095,060

OH State Rev. Bonds
Ser. A, U.S. Govt. Coll., 5s, 10/1/22
(Prerefunded 4/1/18)	AA–	3,090,000	3,620,460
(Revitalization), Ser. A, AMBAC, U.S. Govt. Coll.,
5s, 4/1/19 (Prerefunded 4/1/16)	AA–	1,750,000	1,936,095

OH State Air Quality Dev. Auth. FRB (Columbus
Southern Pwr. Co.), Ser. B, 5.8s, 12/1/38	Baa1	1,000,000	1,034,700


Ohio Tax Exempt Income Fund	27


MUNICIPAL BONDS AND NOTES (97.2%)* cont.	Rating**	Principal amount	Value

Ohio cont.
OH State Air Quality Dev. Auth. Rev. Bonds
(Buckeye Pwr. Recvy. Zone Fac.), 6s, 12/1/40	A2	$1,000,000	$1,039,860
(Valley Elec. Corp.), Ser. E, 5 5/8s, 10/1/19	Baa3	500,000	545,885

OH State Higher Ed. Fac. Comm. Rev. Bonds
(Oberlin Coll.), 5s, 10/1/31	Aa2	650,000	693,089

OH State Higher Edl. Fac. Rev. Bonds
(Case Western Reserve U.), 6 1/4s, 10/1/18	AA–	1,000,000	1,216,100
(Case Western Reserve U.), 6s, 10/1/14	AA–	1,000,000	1,046,760
(U. of Dayton), Ser. A, 5 5/8s, 12/1/41	A2	1,200,000	1,263,300
(U. of Dayton), 5 1/2s, 12/1/36	A2	1,000,000	1,053,850

OH State Higher Edl. Fac. VRDN (Case Western
Reserve), Ser. B-2, 0.05s, 12/1/44	VMIG1	900,000	900,000

OH State Higher Edl. Fac. Comm. Rev. Bonds
(U. Hosp. Hlth. Syst.), Ser. 09-A, 6 3/4s,
1/15/39 (Prerefunded 1/15/15)	A2	2,000,000	2,144,500
(Summa Hlth. Syst. — 2010), 5 3/4s, 11/15/40	Baa1	1,000,000	1,027,020
(Kenyon College), 5s, 7/1/44	A1	2,000,000	2,003,260
(Xavier U.), 5s, 5/1/40	A3	750,000	753,638
(Cleveland Clinic Hlth.), 5s, 1/1/31	Aa2	1,500,000	1,568,865

OH State Higher Edl. Fac. Comm. VRDN
(Cleveland Clinic Foundation), Ser. B-4,
0.04s, 1/1/43	VMIG1	1,710,000	1,710,000

OH State Hsg. Fin. Agcy. Rev. Bonds (Res. Mtge.),
Ser. F, GNMA Coll., FNMA Coll., FHLMC Coll.,
5.45s, 9/1/33	Aaa	255,000	257,825

OH State Poll. Control Rev. Bonds (Standard Oil
Co.), 6 3/4s, 12/1/15	A2	1,700,000	1,807,423

OH State Tpk. Comm. Rev. Bonds (Infrastructure),
Ser. A-1, 5 1/4s, 2/15/32	A1	350,000	373,646

OH State U. Rev. Bonds (Gen. Receipts Special
Purpose), Ser. A, 5s, 6/1/38	Aa2	1,000,000	1,044,560

OH State Wtr. Dev. Auth. Poll. Control Rev. Bonds
(Loan Fund Wtr. Quality), Ser. B-1, 5s, 12/1/17	Aaa	1,500,000	1,743,165

OH U. Gen. Recipients Athens Rev. Bonds
5s, 12/1/42	Aa3	500,000	509,000
NATL, U.S. Govt. Coll., 5s, 12/1/25
(Prerefunded 6/1/14)	Aa3	2,265,000	2,318,975

Penta Career Ctr. COP, 5s, 4/1/20	Aa3	1,500,000	1,685,385

Rickenbacker, Port Auth. Rev. Bonds (OASBO
Expanded Asset Pooled), Ser. A, 5 3/8s, 1/1/32	A1	2,060,000	2,030,645

River Valley, Local School Dist. G.O. Bonds (School
Fac. Construction & Impt.), AGM, 5 1/4s, 11/1/23	Aa2	300,000	350,472

Scioto Cnty., Hosp. Rev. Bonds (Southern Med.
Ctr.), 5 1/2s, 2/15/28	A2	2,250,000	2,371,950

South Western City, School Dist. G.O. Bonds
(Franklin & Pickway Cnty.), AGM, 4 3/4s, 12/1/23	Aa2	2,000,000	2,143,880

Steubenville Hosp. Rev. Bonds (Trinity Hlth. Syst.),
5s, 10/1/30	A3	500,000	473,275

Sylvania, City School Dist. G.O. Bonds (School
Impt.), AGO, 5s, 12/1/27	Aa3	1,500,000	1,608,015


28	Ohio Tax Exempt Income Fund


MUNICIPAL BONDS AND NOTES (97.2%)* cont.	Rating**	Principal amount	Value

Ohio cont.
Tallmadge, City School Dist. G.O. Bonds (School
Fac.), AGM, 5s, 12/1/26 (Prerefunded 6/1/15)	AA–	$1,410,000	$1,508,559

Toledo-Lucas Cnty., Port Auth. Rev. Bonds (CSX
Transn, Inc.), 6.45s, 12/15/21	Baa2	1,900,000	2,247,073

U. of Cincinnati Rev. Bonds
Ser. F, 5s, 6/1/34	Aa3	1,500,000	1,569,270
Ser. A, 5s, 6/1/31	Aa3	500,000	527,225
Ser. A, 5s, 6/1/30	Aa3	1,000,000	1,061,780

Warren Cnty., Hlth. Care Fac. Rev. Bonds
(Otterbein Homes Oblig. Group), Ser. A,
5 3/4s, 7/1/33	A	500,000	515,190

Westerville, G.O. Bonds, AMBAC, 5s, 12/1/26	Aaa	1,320,000	1,422,221

Woodridge, School Dist. G.O. Bonds, AMBAC,
6.8s, 12/1/14	Aa2	510,000	525,361

Youngstown State U. Rev. Bonds
AGO, 5 1/4s, 12/15/29	AA–	500,000	528,950
5s, 12/15/25	A1	500,000	541,690

Zanesville, Hsg. Dev. Corp. Mtge. Rev. Bonds, U.S.
Govt. Coll.
7 3/8s, 10/1/21 (Escrowed to maturity)	AAA/P	220,000	255,196
7 3/8s, 10/1/20 (Escrowed to maturity)	AAA/P	205,000	237,796
7 3/8s, 10/1/19 (Escrowed to maturity)	AAA/P	185,000	214,596
7 3/8s, 10/1/18 (Escrowed to maturity)	AAA/P	180,000	208,796
7 3/8s, 10/1/17 (Escrowed to maturity)	AAA/P	160,000	185,597
7 3/8s, 10/1/16 (Escrowed to maturity)	AAA/P	155,000	179,797

			128,868,932
Puerto Rico (2.3%)
Children’s Trust Fund Tobacco Settlement (The)
Rev. Bonds, 5 3/8s, 5/15/33	BBB	410,000	383,481

Cmnwlth. of PR, G.O. Bonds, Ser. A,
5 1/4s, 7/1/22	Baa3	1,000,000	773,100

Cmnwlth. of PR, Elec. Pwr. Auth. Rev. Bonds,
Ser. ZZ, 5 1/4s, 7/1/26	BBB	1,000,000	738,040

Cmnwlth. of PR, Sales Tax Fin. Corp. Rev. Bonds
Ser. C, 5 1/4s, 8/1/41	A+	1,120,000	824,656
Ser. A, NATL, zero %, 8/1/43	AA–	3,000,000	408,150

			3,127,427
Virgin Islands (0.7%)
VI Pub. Fin. Auth. Rev. Bonds
Ser. A, 6s, 10/1/39	Baa3	300,000	302,754
Ser. A-1, 5s, 10/1/39	Baa2	375,000	359,753
Ser. A, 5s, 10/1/25	Baa2	350,000	368,141

			1,030,648

TOTAL INVESTMENTS

Total investments (cost $130,421,256)			$134,143,572


Ohio Tax Exempt Income Fund	29

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, 2013 through November 30, 2013 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures and references to “OTC”, if any, represent over-the-counter.

* Percentages indicated are based on net assets of $138,000,674.

** The Moody’s, Standard & Poor’s or Fitch ratings indicated are believed to be the most recent ratings available at the close of the reporting period for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to these securities at the close of the reporting period. Securities rated by Putnam are indicated by “/P.” Securities rated by Fitch are indicated by “/F.” The rating of an insured security represents what is believed to be the most recent rating of the insurer’s claims-paying ability available at the close of the reporting period, if higher than the rating of the direct issuer of the bond, and does not reflect any subsequent changes. Security ratings are defined in the Statement of Additional Information.

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):


Local debt	25.1%
Health care	15.5
Education	15.1
Utilities	11.8
Prerefunded	10.4

The fund had the following insurance concentration greater than 10% at the close of the reporting period (as a percentage of net assets):


AGM	12.8%

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	$—	$134,143,572	$—

Totals by level	$—	$134,143,572	$—

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


30	Ohio Tax Exempt Income Fund

Statement of assets and liabilities 11/30/13 (Unaudited)


ASSETS

Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $130,421,256)	$134,143,572

Cash	1,264,772

Interest and other receivables	2,294,994

Receivable for shares of the fund sold	64,595

Receivable for investments sold	836,226

Total assets	138,604,159

LIABILITIES

Payable for shares of the fund repurchased	296,009

Payable for compensation of Manager (Note 2)	49,599

Payable for custodian fees (Note 2)	2,967

Payable for investor servicing fees (Note 2)	11,694

Payable for Trustee compensation and expenses (Note 2)	74,545

Payable for administrative services (Note 2)	266

Payable for distribution fees (Note 2)	56,430

Distributions payable to shareholders	71,554

Other accrued expenses	40,421

Total liabilities	603,485

Net assets	$138,000,674


REPRESENTED BY

Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)	$136,951,006

Distributions in excess of net investment income (Note 1)	(32,648)

Accumulated net realized loss on investments (Note 1)	(2,640,000)

Net unrealized appreciation of investments	3,722,316

Total — Representing net assets applicable to capital shares outstanding	$138,000,674

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE

Net asset value and redemption price per class A share
($118,911,678 divided by 13,478,781 shares)	$8.82

Offering price per class A share (100/96.00 of $8.82)*	$9.19

Net asset value and offering price per class B share ($1,826,135 divided by 207,230 shares)**	$8.81

Net asset value and offering price per class C share ($11,490,932 divided by 1,302,487 shares)**	$8.82

Net asset value and redemption price per class M share ($448,435 divided by 50,816 shares)	$8.82

Offering price per class M share (100/96.75 of $8.82)†	$9.12

Net asset value, offering price and redemption price per class Y share
($5,323,494 divided by 602,929 shares)	$8.83

* 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.


Ohio Tax Exempt Income Fund	31

Statement of operations Six months ended 11/30/13 (Unaudited)


INTEREST INCOME	$3,167,969

EXPENSES

Compensation of Manager (Note 2)	322,940

Investor servicing fees (Note 2)	36,229

Custodian fees (Note 2)	3,708

Trustee compensation and expenses (Note 2)	5,703

Distribution fees (Note 2)	214,941

Administrative services (Note 2)	1,600

Other	58,668

Total expenses	643,789

Expense reduction (Note 2)	(220)

Net expenses	643,569

Net investment income	2,524,400


Net realized loss on investments (Notes 1 and 3)	(1,135,001)

Net realized loss on swap contracts (Note 1)	(274,003)

Net realized loss on futures contracts (Note 1)	(8,879)

Net unrealized depreciation of investments during the period	(6,944,300)

Net loss on investments	(8,362,183)

Net decrease in net assets resulting from operations	$(5,837,783)

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


32	Ohio Tax Exempt Income Fund

Statement of changes in net assets


INCREASE (DECREASE) IN NET ASSETS	Six months ended 11/30/13*	Year ended 5/31/13

Operations:
Net investment income	$2,524,400	$5,358,908

Net realized gain (loss) on investments	(1,417,883)	271,401

Net unrealized depreciation of investments	(6,944,300)	(1,000,608)

Net increase (decrease) in net assets resulting
from operations	(5,837,783)	4,629,701

Distributions to shareholders (Note 1):
From ordinary income
Taxable net investment income
Class A	—	(20,566)

Class B	—	(257)

Class C	—	(1,781)

Class M	—	(74)

Class Y	—	(1,006)

From tax-exempt net investment income
Class A	(2,188,757)	(4,628,296)

Class B	(27,829)	(54,870)

Class C	(170,530)	(350,900)

Class M	(8,373)	(14,739)

Class Y	(120,084)	(250,514)

Increase (decrease) from capital share transactions (Note 4)	(16,619,065)	7,828,529

Total increase (decrease) in net assets	(24,972,421)	7,135,227

NET ASSETS

Beginning of period	162,973,095	155,837,868

End of period (including distributions in excess of net
investment income of $32,648 and $41,475, respectively)	$138,000,674	$162,973,095

* Unaudited

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


Ohio Tax Exempt Income Fund	33

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

INVESTMENT OPERATIONS:

LESS DISTRIBUTIONS:

RATIOS AND SUPPLEMENTAL DATA:

Ratio

Net realized

of expenses

of net investment

Net asset value,

and unrealized

Total from

From

Total return

Net assets,

to average

income (loss)

Portfolio

beginning

Net investment

gain (loss)

investment

net investment

Total

Redemption

Non-recurring

Net asset value,

at net asset

end of period

net assets

to average

turnover

Period ended

of period

income (loss)

on investments

operations

income

distributions

fees

reimbursements

end of period

value (%) ^a

(in thousands)

(%) ^b

net assets (%)

(%)

Class A

November 30, 2013**

$9.31

.15

(.49)

(.34)

(.15)

(.15)

—

$8.82

(3.60) *

$118,912

.41 *

1.75 *

2 *

May 31, 2013

9.35

.32

(.05)

.27

(.31)

(.31)

—

9.31

2.96

138,049

.80

3.36

May 31, 2012

8.84

.34

.51

.85

(.34)

(.34)

— ^c

— ^c,d

9.35

9.81

135,448

.80

3.79

May 31, 2011

9.05

.36

(.21)

.15

(.36)

(.36)

—

— ^c,e

8.84

1.74

132,617

.79

4.14

May 31, 2010

8.79

.37

.26

.63

(.37)

(.37)

— ^c

—

9.05

7.29

147,041

.82 ^f

4.15 ^f

May 31, 2009

8.93

.36

(.13)

.23

(.37)

(.37)

— ^c

—

8.79

2.84

142,288

.84 ^f

4.32 ^f

Class B

November 30, 2013**

$9.30

.13

(.49)

(.36)

(.13)

(.13)

—

$8.81

(3.91) *

$1,826

.72 *

1.44 *

2 *

May 31, 2013

9.33

.26

(.03)

.23

(.26)

(.26)

—

9.30

2.43

2,179

1.42

2.73

May 31, 2012

8.83

.29

.50

.79

(.29)

(.29)

— ^c

— ^c,d

9.33

9.01

1,676

1.43

3.16

May 31, 2011

9.04

.31

(.21)

.10

(.31)

(.31)

—

— ^c,e

8.83

1.10

1,852

1.42

3.49

May 31, 2010

8.78

.31

.26

.57

(.31)

(.31)

— ^c

—

9.04

6.61

3,454

1.45 ^f

3.51 ^f

May 31, 2009

8.93

.31

(.14)

.17

(.32)

(.32)

— ^c

—

8.78

2.06

6,387

1.48 ^f

3.67 ^f

Class C

November 30, 2013**

$9.31

.12

(.49)

(.37)

(.12)

(.12)

—

$8.82

(3.97) *

$11,491

.79 *

1.36 *

2 *

May 31, 2013

9.35

.24

(.04)

.20

(.24)

(.24)

—

9.31

2.17

14,421

1.57

2.59

May 31, 2012

8.84

.27

.51

.78

(.27)

(.27)

— ^c

— ^c,d

9.35

9.00

11,574

1.58

3.00

May 31, 2011

9.05

.30

(.22)

.08

(.29)

(.29)

—

— ^c,e

8.84

.97

8,487

1.57

3.36

May 31, 2010

8.79

.30

.26

.56

(.30)

(.30)

— ^c

—

9.05

6.44

8,716

1.60 ^f

3.37 ^f

May 31, 2009

8.93

.30

(.13)

.17

(.31)

(.31)

— ^c

—

8.79

2.01

4,985

1.63 ^f

3.55 ^f

Class M

November 30, 2013**

$9.31

.14

(.49)

(.35)

(.14)

(.14)

—

$8.82

(3.73) *

$448

.54 *

1.61 *

2 *

May 31, 2013

9.35

.29

(.04)

.25

(.29)

(.29)

—

9.31

2.68

586

1.07

3.08

May 31, 2012

8.84

.32

.51

.83

(.32)

(.32)

— ^c

— ^c,d

9.35

9.50

490

1.08

3.47

May 31, 2011

9.06

.34

(.22)

.12

(.34)

(.34)

—

— ^c,e

8.84

1.35

852

1.07

3.85

May 31, 2010

8.80

.34

.27

.61

(.35)

(.35)

— ^c

—

9.06

6.99

999

1.10 ^f

3.87 ^f

May 31, 2009

8.94

.34

(.13)

.21

(.35)

(.35)

— ^c

—

8.80

2.56

1,085

1.13 ^f

4.03 ^f

Class Y

November 30, 2013**

$9.32

.16

(.49)

(.33)

(.16)

(.16)

—

$8.83

(3.49) *

$5,323

.29 *

1.86 *

2 *

May 31, 2013

9.35

.34

(.03)

.31

(.34)

(.34)

—

9.32

3.30

7,738

.57

3.59

May 31, 2012

8.84

.36

.51

.87

(.36)

(.36)

— ^c

— ^c,d

9.35

10.07

6,650

.58

3.98

May 31, 2011

9.06

.38

(.22)

.16

(.38)

(.38)

—

— ^c,e

8.84

1.87

3,650

.57

4.38

May 31, 2010

8.79

.39

.27

.66

(.39)

(.39)

— ^c

—

9.06

7.65

2,334

.60 ^f

4.39 ^f

May 31, 2009

8.93

.38

(.13)

.25

(.39)

(.39)

— ^c

—

8.79

3.04

234

.63 ^f

4.63 ^f

See notes to financial highlights at the end of this section.

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


34	Ohio Tax Exempt Income Fund	Ohio Tax Exempt Income Fund	35

Financial highlights (Continued)

* Not annualized.

** Unaudited.

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

^b Includes amounts paid through expense offset arrangements (Note 2).

^c Amount represents less than $0.01 per share.

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

^e Reflects a non-recurring reimbursement related to short-term trading related lawsuits, which amounted to less than $0.01 per share outstanding on May 11, 2011.

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


	Percentage of
	average net assets

May 31, 2010	0.03%

May 31, 2009	0.06

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


36	Ohio Tax Exempt Income Fund

Notes to financial statements 11/30/13 (Unaudited)

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, 2013 through November 30, 2013.

Putnam Ohio Tax Exempt Income Fund (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The investment objective of the fund is to seek as high a level of current income exempt from federal income tax and Ohio personal income tax as Putnam 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 Ohio personal income tax (but that may be subject to federal alternative minimum tax (AMT)), are investment-grade in quality, and have intermediate- to long-term maturities (three years or longer). Putnam Management may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

The fund offers class A, class B, class C, class M and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 4.00% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. The expenses for class A, class B, class C and class M shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C and class M shares, but do not bear a distribution fee. Class Y shares are 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.

Note 1: Significant accounting policies

The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.

Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. 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 Tax-exempt bonds and notes are generally valued on the basis of valuations provided by an independent pricing service approved by the Trustees. Such services use information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. These securities will generally be categorized as Level 2.

Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs. The fair value of securities is generally determined


Ohio Tax Exempt Income Fund	37

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.

Futures contracts The fund uses futures contracts to gain exposure to interest rates.

The potential risk to the fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. Risks may exceed amounts recognized on the Statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.

Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.”

Futures contracts outstanding at period end, if any, are listed after the fund’s portfolio.

Total return swap contracts The fund entered into OTC total return swap contracts, which are arrangements to exchange a market linked return for a periodic payment, both based on a notional principal amount, to manage interest rate risk.

To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. OTC total return swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as an unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain OTC total return swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. The fund’s maximum risk of loss from counterparty risk is the fair value of the contract. This risk may be mitigated by having a master netting arrangement between the fund and the counterparty. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.

OTC total return swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.

Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the fund is held in a segregated account by the fund’s custodian and with respect to those amounts which can be sold or repledged, are presented in the fund’s portfolio.

Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.

Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence,


38	Ohio Tax Exempt Income Fund

the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.

At the close of the reporting period, the fund did not have a net liability position on open derivative contracts subject to the Master Agreements.

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.

Line of credit The fund participates, along with other Putnam funds, in a $315 million unsecured committed line of credit and a $185 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 Federal Funds rate 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 0.02% of the committed line of credit and $50,000 for the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.11% per annum on any unutilized portion of the committed line of credit is allocated to the participating funds based on their relative net assets and paid quarterly. During the reporting period, the fund had no borrowings against these arrangements.

Federal taxes It is the policy of the fund to distribute all of its income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.

The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

At May 31, 2013, the fund had a capital loss carryover of $1,158,348 available to the extent allowed by the Code to offset future net capital gain, if any. The amounts of the carryovers and the expiration dates are:


Loss carryover

Short-term	Long-term	Total	Expiration

$259,820	$173,936	$433,756	*

413,222	N/A	413,222	May 31, 2017

97,718	N/A	97,718	May 31, 2018

213,652	N/A	213,652	May 31, 2019

* Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.

The aggregate identified cost on a tax basis is $130,383,880, resulting in gross unrealized appreciation and depreciation of $6,446,809 and $2,687,117, respectively, or net unrealized appreciation of $3,759,692.

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. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are


Ohio Tax Exempt Income Fund	39

completed after the end of the fund’s fiscal year. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations.

Note 2: Management fee, administrative services and other transactions

The fund pays Putnam Management a management fee (based on the fund’s average net assets and computed and paid monthly) at annual rates that may vary based on the average of the aggregate net assets of most open-end funds, as defined in the fund’s management contract, sponsored by Putnam Management. Such annual rates may vary as follows:


0.590%	of the first $5 billion,	0.390%	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.

Following the death on October 8, 2013 of The Honourable Paul G. Desmarais, who controlled directly and indirectly a majority of the voting shares of Power Corporation of Canada, the ultimate parent company of Putnam Management, the Trustees of the fund approved an interim management contract with Putnam Management Consistent with Rule 15a–4 under the Investment Company Act of 1940, the interim management contract will remain in effect until the earlier to occur of (i) approval by the fund’s shareholders of a new management contract and (ii) March 7, 2014. Except with respect to termination, the substantive terms of the interim management contract, including terms relating to fees payable to Putnam Management, are identical to the terms of the fund’s previous management contract with Putnam Management. The Trustees of the fund also approved the continuance, effective October 8, 2013, of the sub-management contract between Putnam Management and Putnam Investments Limited (PIL) described below, for a term no longer than March 7, 2014. The Trustees of the fund have called a shareholder meeting for February 27, 2014, at which shareholders of the fund will consider approval of a proposed new management contract between the fund and Putnam Management. The substantive terms of the proposed new management contract, including terms relating to fees, are identical to the terms of the fund’s previous management contract. Further information regarding the proposed new management contract is included in a proxy statement filed with the SEC on December 20, 2013. The proxy statement was mailed to shareholders of record beginning on or about December 23, 2013.

Putnam Management has contractually agreed, through June 30, 2014, 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. This expense limitation remains in place under the interim management contract described above. 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. Putnam Management pays 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 based on the fund’s retail asset level, the number of shareholder accounts in the fund and the level of defined contribution plan assets in the fund.


40	Ohio Tax Exempt Income Fund

Investor servicing fees will not exceed an annual rate of 0.32% of the fund’s average net assets. During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:


Class A	$30,933	Class M	128

Class B	479	Class Y	1,592

Class C	3,097	Total	$36,229

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 $220 under the expense offset arrangements.

Each independent Trustee of the fund receives an annual Trustee fee, of which $99, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.

The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.

The fund has adopted an unfunded noncontributory defined benefit pension plan (the Pension Plan) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.

The fund has adopted distribution plans (the Plans) with respect to its class A, class B, class C and class M shares pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to 0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C and class M shares, respectively. The Trustees have approved payment by the fund at the annual rate of 0.85%, 1.00% and 0.50% of the average net assets for class B, class C and class M shares, respectively. For class A shares, the annual payment rate will equal the weighted average of (i) 0.20% on the net assets of the fund attributable to class A shares purchased and paid for prior to April 1, 2005 and (ii) 0.25% on all other net assets of the fund attributable to class A shares. During the reporting period, the class specific expenses related to distribution fees were as follows:


Class A	$142,298	Class M	1,303

Class B	8,288	Total	$214,941

Class C	63,052

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $4,791 and $5 from the sale of class A and class M shares, respectively, and received $91 and $191 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares. For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received no monies on class A redemptions.

Note 3: Purchases and sales of securities

During the reporting period, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $2,395,621 and $15,783,424, respectively. There were no purchases or proceeds from sales of long-term U.S. government securities.


Ohio Tax Exempt Income Fund	41

Note 4: Capital shares

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


	Six months ended 11/30/13		Year ended 5/31/13

Class A	Shares	Amount	Shares	Amount

Shares sold	391,522	$3,490,145	2,635,755	$24,838,558

Shares issued in connection with
reinvestment of distributions	211,917	1,878,363	419,441	3,949,187

	603,439	5,368,508	3,055,196	28,787,745

Shares repurchased	(1,954,236)	(17,440,505)	(2,719,214)	(25,630,570)

Net increase (decrease)	(1,350,797)	$(12,071,997)	335,982	$3,157,175


	Six months ended 11/30/13		Year ended 5/31/13

Class B	Shares	Amount	Shares	Amount

Shares sold	5,266	$47,021	81,000	$762,230

Shares issued in connection with
reinvestment of distributions	2,835	25,107	5,356	50,374

	8,101	72,128	86,356	812,604

Shares repurchased	(35,253)	(314,034)	(31,567)	(297,345)

Net increase (decrease)	(27,152)	$(241,906)	54,789	$515,259


	Six months ended 11/30/13		Year ended 5/31/13

Class C	Shares	Amount	Shares	Amount

Shares sold	49,701	$446,903	505,212	$4,760,408

Shares issued in connection with
reinvestment of distributions	17,031	150,984	33,413	314,608

	66,732	597,887	538,625	5,075,016

Shares repurchased	(313,363)	(2,791,046)	(228,030)	(2,148,884)

Net increase (decrease)	(246,631)	$(2,193,159)	310,595	$2,926,132


	Six months ended 11/30/13		Year ended 5/31/13

Class M	Shares	Amount	Shares	Amount

Shares sold	233	$2,067	25,137	$236,532

Shares issued in connection with
reinvestment of distributions	757	6,718	1,138	10,709

	990	8,785	26,275	247,241

Shares repurchased	(13,121)	(115,891)	(15,723)	(148,336)

Net increase (decrease)	(12,131)	$(107,106)	10,552	$98,905


	Six months ended 11/30/13		Year ended 5/31/13

Class Y	Shares	Amount	Shares	Amount

Shares sold	53,184	$478,548	336,157	$3,167,625

Shares issued in connection with
reinvestment of distributions	6,086	54,024	13,586	128,036

	59,270	532,572	349,743	3,295,661

Shares repurchased	(286,923)	(2,537,469)	(230,152)	(2,164,603)

Net increase (decrease)	(227,653)	$(2,004,897)	119,591	$1,131,058


42	Ohio Tax Exempt Income Fund

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 concentrates a majority of its investments in the state of Ohio and may be affected by economic and political developments in that state.

Note 6: Summary of derivative activity

The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was as follows based on an average of the holdings at the end of each fiscal quarter:


Futures contracts (number of contracts)	—*

OTC total return swap contracts (notional)	$770,000

* For the reporting period, the transactions were minimal.

As of the close of the reporting period, the fund did not hold any derivative instruments.

The following is a summary of realized gains or losses of derivative instruments on the Statement of operations for the reporting period (see Note 1) (there were no unrealized gains or losses on derivative instruments):

Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments


Derivatives not accounted for as hedging
instruments under ASC 815	Futures	Swaps	Total

Interest rate contracts	$(8,879)	$(274,003)	$(282,882)

Total	$(8,879)	$(274,003)	$(282,882)


Ohio Tax Exempt Income Fund	43

Services for shareholders

Investor services

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

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

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

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

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

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

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

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

For more information

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

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


44	Ohio Tax Exempt Income Fund

Fund information

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


Investment Manager	Trustees	Robert R. Leveille
Putnam Investment	Jameson A. Baxter, Chair	Vice President and
Management, LLC	Liaquat Ahamed	Chief Compliance Officer
One Post Office Square	Ravi Akhoury
Boston, MA 02109	Barbara M. Baumann	Michael J. Higgins
	Charles B. Curtis	Vice President, Treasurer,
Investment Sub-Manager	Robert J. Darretta	and Clerk
Putnam Investments Limited	Katinka Domotorffy
57–59 St James’s Street	John A. Hill	Janet C. Smith
London, England SW1A 1LD	Paul L. Joskow	Vice President,
	Kenneth R. Leibler	Principal Accounting Officer,
Marketing Services	Robert E. Patterson	and Assistant Treasurer
Putnam Retail Management	George Putnam, III
One Post Office Square	Robert L. Reynolds	Susan G. Malloy
Boston, MA 02109	W. Thomas Stephens	Vice President and
		Assistant Treasurer
Custodian	Officers
State Street Bank	Robert L. Reynolds	James P. Pappas
and Trust Company	President	Vice President

Legal Counsel	Jonathan S. Horwitz	Mark C. Trenchard
Ropes & Gray LLP	Executive Vice President,	Vice President and
	Principal Executive Officer, and	BSA Compliance Officer
	Compliance Liaison
		Nancy E. Florek
	Steven D. Krichmar	Vice President, Director of
	Vice President and	Proxy Voting and Corporate
	Principal Financial Officer	Governance, Assistant Clerk,
		and Associate Treasurer
	Robert T. Burns
	Vice President and
	Chief Legal Officer

This report is for the information of shareholders of Putnam Ohio Tax Exempt Income Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit 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.


	CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES


	Exact name of registrant as specified in charter:	Putnam Ohio 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:	John W. Gerstmayr, Esq. Ropes & Gray LLP 800 Boylston Street Boston, Massachusetts 02199-3600


	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 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


	UNITED STATES SECURITIES AND EXCHANGE COMMISSION


	FORM N-CSR


	Item 1. Report to Stockholders:


	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)(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.


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


	Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


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


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