N-CSRS 1 a_ohtaxexemptincome.htm PUTNAM OHIO TAX EXEMPT INCOME FUND a_ohtaxexemptincome.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES



Investment Company Act file number: (811-04528)
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:         Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036
Registrant's telephone number, including area code: (617) 292-1000
Date of fiscal year end: May 31, 2018
Date of reporting period: June 1, 2017 — November 30, 2017



Item 1. Report to Stockholders:

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



Putnam Ohio
Tax Exempt
Income Fund

Semiannual report
11 | 30 | 17

 

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


Message from the Trustees

January 8, 2018

Dear Fellow Shareholder:

Investor sentiment remained positive through most of 2017, helping to keep financial markets on a steady course. While bond market performance was a bit uneven, global stock markets generally made solid advances with low volatility. However, we enter the new year mindful of a number of risks that could disrupt the positive momentum.

Although no one can predict the direction of the markets in the months ahead, Putnam’s experienced investment professionals actively seek to position their fund portfolios for all types of conditions. They take a research-intensive approach to investing that includes risk management strategies designed to serve investors through changing markets.

In all environments, we believe investors should remain focused on time-tested strategies: maintain a well-diversified portfolio, think about long-term goals, and speak regularly with your financial advisor. In the following pages, you will find an overview of your fund’s performance for the reporting period as well as an outlook for the coming months.

Thank you for investing with Putnam.




Municipal bonds finance important public projects, such as schools, roads, and hospitals. The bonds are backed by either the issuing city, town, or other government entity or by revenues collected from usage fees.

However, unlike U.S. Treasuries or corporate bonds, the interest paid on municipal bonds is generally free from federal income taxes. Moreover, Ohio residents generally pay no state income taxes on distributions paid from municipal bonds issued in the Buckeye State. That can make municipal bonds particularly attractive to investors subject to higher personal income tax rates.


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Source: Putnam, as of 11/30/17. Past performance is no guarantee of future results. Yields for U.S. Treasuries, investment-grade corporates, and municipal bonds are represented by the average “yield to worst” — a calculation of the lowest possible yield generated without defaulting — of the Bloomberg Barclays U.S. Treasury Index, the Bloomberg Barclays U.S. Credit Index, and the Bloomberg Barclays Municipal Bond Index, respectively. You cannot invest directly in an index. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is greater for longer-term bonds, and credit risk is greater for below-investment-grade bonds. Income from municipal bonds may be subject to the alternative minimum tax. Taxable equivalent yield and annual after-tax income are based on a 43.40% federal income tax rate, which reflects the American Taxpayer Relief Act of 2012 and includes the 3.80% Medicare surtax. Tax rates are as of November 30, 2017, and do not reflect the recent changes to the Tax Cuts and Jobs Act of 2017.


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

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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 4.00%; had they, returns would have been lower. See below and pages 10–12 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.

* Returns for the six-month period are not annualized, but cumulative.


This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 11/30/17. See above and pages 10–12 for additional fund performance information. Index descriptions can be found on pages 14–15.

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

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

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

Initially, municipal bonds enjoyed solid performance. On June 14, 2017, the Federal Reserve announced its second interest-rate hike of 2017. In its assessment of inflation, however, the Fed revised its expectations downward, adding that it believed inflation would “remain somewhat below 2% in the near term.” Municipal bonds, along with other rate-sensitive investments, rallied following these more dovish statements.

The broad market rally during the spring transitioned into a more nuanced municipal market during the summer and fall months, with long-maturity and lower-quality municipal bonds outperforming shorter-maturity and higher-quality municipal bonds. Further signs of economic improvement increased the likelihood that the Fed might need to act more aggressively. In September 2017, Fed chair Janet Yellen’s comments at the Fed’s policy meeting were somewhat more hawkish, although the Fed left interest rates unchanged. The central bank signaled that, despite recent low levels of inflation, it expected one more rate increase by year-end and envisioned three

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Allocations are shown as a percentage of the fund’s net assets as of 11/30/17. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the information in the portfolio schedule notes included in the financial statements due to the inclusion of derivative securities, any interest accruals, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time.


Credit qualities are shown as a percentage of the fund’s net assets as of 11/30/17. A bond rated BBB or higher (SP-3 or higher, for short-term debt) is considered investment grade. This chart reflects the highest security rating provided by one or more of Standard & Poor’s, Moody’s, and Fitch. Ratings may vary over time.

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

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more increases in 2018. The Fed also reaffirmed its commitment to begin reducing its balance sheet on October 2017, which included over $4 trillion in U.S. Treasury bonds and mortgage-backed securities that it purchased in the years following the 2008 financial crisis.

The Fed once again maintained its target range of 1% to 1.25% for the federal funds rate at its October 2017 meeting. The central bank acknowledged that U.S. economic growth remained solid despite hurricane-related disruptions, and the labor market continued to strengthen. As widely expected, the Fed announced a rate hike of a quarter percentage point at its December 2017 meeting, after the close of the reporting period.

With interest rates rising across the municipal bond yield curve, municipal bonds, along with U.S. Treasuries and the broader U.S. fixed-income markets, turned in relatively flat performance. (Bond prices fall as rates rise.) Securities with longer maturities held up better than securities with shorter- and intermediate-term maturities.

Were supply/demand dynamics supportive of municipal bond prices?

Favorable supply/demand dynamics created a tailwind for the asset class, helping to offset the price-dampening pressures from rates trending higher. The pace of new issuance was generally light, especially during the third quarter of 2017. As such, demand outpaced supply — contributing to rising prices and a narrowing of credit spreads of lower investment-grade as well as high-yield municipal bonds. [Credit spreads reflect the difference in yield between higher- and lower-quality municipal bonds.] Viewed in a longer-term context, spreads were at or close to the narrowest point since the beginning of the credit crisis during much of the period. That said, overall credit fundamentals remained stable, supply/demand dynamics were favorable, and defaults remain low and isolated. Given the favorable economic climate, lower-investment-grade and high-yielding non-investment-grade municipal bonds outperformed higher-quality municipal bonds given investor preferences for higher risk strategies.


How did the fund perform?

For the six months ended November 30, 2017, the fund outperformed its benchmark, the Bloomberg Barclays Municipal Bond Index, and the average return of its Lipper peer group, Ohio Municipal Debt Funds.

What was your investment approach in this environment?

During the period, the municipal bond yield curve flattened, in line with our expectation. Given our outlook for interest rates trending higher, we employed a barbell approach to structuring the portfolio — overweighting short-term bonds, underweighting intermediate-term bonds with maturities of 5 to 12 years, and overweighting longer-term bonds with maturities of greater than 12 to 20 years. Duration positioning, which measures the portfolio’s sensitivity to interest rates, was generally neutral. From a credit-quality standpoint, we maintained overweight exposure to lower-rated investment-grade municipal bonds relative to higher-quality investment-grade and high-yielding, non-investment-grade municipal bonds. From a sector positioning perspective, we placed greater focus on higher education, continuing-care retirement community, and transportation bonds relative to the fund’s Lipper group. These strategies helped fund performance.

Additionally, we maintained an underweight position in Puerto Rico-based issuers relative to the fund’s Lipper peers. This underweight

Ohio Tax Exempt Income Fund 7 

 


exposure added to performance during the period. Puerto Rico was devastated by the recent hurricanes, which made its economic and financial situation even more difficult and could further challenge the debt restructuring process, in our view.

What is your outlook as we look into 2018?

We expect that moderate, trend-like economic growth will facilitate the continued gradual normalization of short-term interest rates. From a fiscal policy perspective, the market appears to be focused on how much stimulus might come from Washington, and how those initiatives may affect the pulse of the U.S. economy. Should additional stimulus augment U.S. growth, we believe the Fed might be inclined to increase rates a little faster, or conversely, more slowly if fiscal policy proves less stimulative.

Just after period-end, the Republican House and Senate versions of a tax reform plan were sent into a reconciliation process with the goal of many of the proposed changes going into effect on January 1, 2018. President Trump signed the legislation in late December. While the Tax Cuts and Jobs Act included tax cuts for individuals and corporations, the elimination of certain taxes, and changes to some popular tax deductions, it left the municipal bond tax exemption intact. We do not believe the changes in tax rates will materially affect demand for municipal bonds from individuals. Overall, the tax bill appears constructive for the municipal bond market, in our view.

Looking ahead, we will be closely monitoring the debt ceiling debate; a budget resolution for the next fiscal year; and the confirmation of President Trump’s nomination of Jerome Powell as the next Federal Reserve chair, as Janet Yellen’s current term is due to expire in February 2018. As always, we will continue to rely on in-depth research and our experienced market insights to evaluate new and existing holdings for attractive income and return potential.

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


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

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

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

Ohio Tax Exempt Income Fund 9 

 


Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended November 30, 2017, 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 11/30/17

  Annual                 
  average    Annual    Annual    Annual     
  (life of fund)  10 years  average  5 years  average  3 years  average  1 year  6 months 
Class A (10/23/89)                   
Before sales charge  4.93%  41.87%  3.56%  9.36%  1.81%  6.94%  2.26%  4.21%  0.51% 
After sales charge  4.78  36.19  3.14  4.98  0.98  2.67  0.88  0.04  –3.51 
Class B (7/15/93)                   
Before CDSC  4.70  34.92  3.04  5.88  1.15  4.84  1.59  3.44  0.08 
After CDSC  4.70  34.92  3.04  4.01  0.79  1.91  0.63  –1.56  –4.87 
Class C (10/3/06)                   
Before CDSC  4.13  31.38  2.77  5.20  1.02  4.48  1.47  3.40  0.12 
After CDSC  4.13  31.38  2.77  5.20  1.02  4.48  1.47  2.40  –0.87 
Class M (4/3/95)                   
Before sales charge  4.60  37.87  3.26  7.86  1.52  5.94  1.94  3.92  0.37 
After sales charge  4.48  33.39  2.92  4.35  0.86  2.50  0.83  0.54  –2.89 
Class Y (1/2/08)                   
Net asset value  5.02  45.17  3.80  10.59  2.03  7.66  2.49  4.44  0.63 

 

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

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

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

10 Ohio Tax Exempt Income Fund 

 


Comparative index returns For periods ended 11/30/17

  Annual                 
  average    Annual    Annual    Annual     
  (life of fund)  10 years  average  5 years  average  3 years  average  1 year  6 months 
Bloomberg Barclays                   
Municipal Bond Index  5.79%  53.47%  4.38%  13.42%  2.55%  8.61%  2.79%  5.58%  0.40% 
Lipper Ohio                   
Municipal Debt Funds  5.23  38.39  3.28  9.03  1.74  6.52  2.12  3.55  –0.27 
category average*                   

 

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 11/30/17, there were 36, 36, 34, 31, 26, and 6 funds, respectively, in this Lipper category.

Fund price and distribution information For the six-month period ended 11/30/17

Distributions  Class A  Class B  Class C  Class M Class Y 
Number  6  6  6  6 6 
Income1  $0.125974  $0.097324  $0.090918  $0.113493  $0.136072 
Capital gains2  —  —  —  — — 
Total  $0.125974  $0.097324  $0.090918  $0.113493  $0.136072 
  Before  After  Net  Net  Before  After  Net 
  sales  sales  asset  asset  sales  sales  asset 
Share value  charge  charge  value  value  charge  charge  value 
5/31/17  $9.02  $9.40  $9.01  $9.02  $9.02  $9.32  $9.03 
11/30/17  8.94  9.31  8.92  8.94  8.94  9.24  8.95 
  Before  After  Net  Net  Before  After  Net 
Current rate  sales  sales  asset  asset  sales  sales  asset 
(end of period)  charge  charge  value  value  charge  charge  value 
Current dividend rate3  2.84%  2.72%  2.21%  2.05%  2.56%  2.47%  3.06% 
Taxable equivalent4  5.28  5.06  4.11  3.81  4.76  4.59  5.69 
Current 30-day               
SEC yield5  N/A  1.55  0.99  0.84  N/A  1.30  1.84 
Taxable equivalent4  N/A  2.88  1.84  1.56  N/A  2.42  3.42 
 
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.

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

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

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

4 Assumes maximum 46.23% federal and state combined tax rate for 2017. Results for investors subject to lower tax rates would not be as advantageous. Tax rates are as of November 30, 2017, and do not reflect the recent changes to the Tax Cuts and Jobs Act of 2017.

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

Ohio Tax Exempt Income Fund 11 

 


Fund performance as of most recent calendar quarter Total return for periods ended 12/31/17

  Annual                 
  average    Annual    Annual    Annual     
  (life of fund)  10 years  average  5 years  average  3 years  average  1 year  6 months 
Class A (10/23/89)                   
Before sales charge  4.95%  42.81%  3.63%  11.56%  2.21%  7.13%  2.32%  4.31%  1.73% 
After sales charge  4.80  37.10  3.21  7.10  1.38  2.84  0.94  0.14  –2.34 
Class B (7/15/93)                   
Before CDSC  4.72  35.82  3.11  8.02  1.55  5.02  1.65  3.55  1.30 
After CDSC  4.72  35.82  3.11  6.11  1.19  2.09  0.69  –1.45  –3.70 
Class C (10/3/06)                   
Before CDSC  4.15  32.26  2.84  7.32  1.42  4.66  1.53  3.51  1.34 
After CDSC  4.15  32.26  2.84  7.32  1.42  4.66  1.53  2.51  0.34 
Class M (4/3/95)                   
Before sales charge  4.62  38.79  3.33  10.04  1.93  6.24  2.04  4.03  1.48 
After sales charge  4.50  34.28  2.99  6.46  1.26  2.79  0.92  0.65  –1.82 
Class Y (1/2/08)                   
Net asset value  5.04  46.16  3.87  12.93  2.46  7.84  2.55  4.54  1.84 

 

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

Your fund’s expenses

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

Expense ratios

  Class A  Class B  Class C  Class M  Class Y 
Total annual operating expenses for the fiscal           
year ended 5/31/17  0.83%  1.46%  1.61%  1.11%  0.61% 
Annualized expense ratio for the six-month           
period ended 11/30/17  0.83%  1.46%  1.61%  1.11%  0.61% 

 

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.

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Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 6/1/17 to 11/30/17. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

  Class A  Class B  Class C  Class M  Class Y 
Expenses paid per $1,000*†  $4.17  $7.32  $8.08  $5.58  $3.07 
Ending value (after expenses)  $1,005.10  $1,000.80  $1,001.20  $1,003.70  $1,006.30 

 

* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 11/30/17. The expense ratio may differ for each share class.

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

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 11/30/17, use the following calculation method. To find the value of your investment on 6/1/17, 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*†  $4.20  $7.38  $8.14  $5.62  $3.09 
Ending value (after expenses)  $1,020.91  $1,017.75  $1,017.00  $1,019.50  $1,022.01 

 

* 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 11/30/17. The expense ratio may differ for each share class.

† Expenses are calculated by multiplying the expense ratio by the average account value for the 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.

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Terms and definitions

Important terms

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

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

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

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

Share classes

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

Class B shares are closed to new investments and are only available by exchange from another Putnam fund or through dividend and/or capital gains reinvestment. They are not subject to an initial sales charge and may be subject to a CDSC.

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

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

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

Fixed-income terms

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

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

Comparative indexes

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

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

ICE BofAML 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.

ICE Data Indices, LLC (“ICE BofAML”), used with permission. ICE BofAML permits use of the ICE BofAML indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofAML indices or any data included in, related to, or derived therefrom; assumes no liability in connection with the use of the foregoing; and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.

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

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

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, 2017, 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 Form N-Q on the SEC’s website at www.sec.gov. In addition, the fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s website or the operation of the Public Reference Room.

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of November 30, 2017, Putnam employees had approximately $524,000,000 and the Trustees had approximately $91,000,000 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 15 

 


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, LLC (“Putnam Management”) and the sub-management contract with respect to your fund between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”). The Board, 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 discussed with representatives of Putnam Management the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review, identifying 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 and its affiliates 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 2017, 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 2017, the Contract Committee met in executive session to discuss and consider its recommendations with respect to the continuance of the contracts. At the Trustees’ June 2017 meeting, the Contract Committee met in executive session with the other Independent Trustees to review a summary of the key financial, performance and other 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 recommendations. The Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management and sub-management contracts, effective July 1, 2017. (Because PIL is an affiliate of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL, the Trustees have not attempted to evaluate 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, the costs incurred by Putnam Management in providing services to the fund, and the continued application of certain reductions and waivers noted below; and

• That the fee schedule in effect for your fund represented an appropriate sharing between 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 funds’ current fee arrangements under the

16 Ohio Tax Exempt Income Fund 

 


management contracts were first implemented at the beginning of 2010 following extensive review by the Contract Committee and discussions with representatives of Putnam Management, as well as approval by shareholders.

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 fund shareholders. (In a few instances, funds have implemented so-called “all-in” management fees covering substantially all routine fund operating costs.)

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 strategy, 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 indicate that changes to the management fee structure for your fund would be appropriate at this time.

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 rates 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 support the effort to have fund expenses meet competitive standards, the Trustees and Putnam Management have implemented certain expense limitations that were in effect during your fund’s fiscal year ending in 2016. These expense limitations were: (i) a contractual expense limitation applicable to specified retail open-end funds, including your fund, of 25 basis points (until September 1, 2016, this limitation was 32 basis points) on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to specified open-end funds, including your fund, of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses). These expense limitations attempt to maintain competitive expense levels for the funds. Most funds, including your fund, had sufficiently low expenses that these expense limitations were not operative during their fiscal years ending in 2016. Putnam Management has agreed to maintain these expense limitations until at least September 30, 2018. Putnam Management’s support for these expense limitation arrangements 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 Broadridge Financial Solutions, Inc. (“Broadridge”). 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 third quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2016. The first quintile represents the least expensive funds and the fifth quintile the most expensive funds. The fee and expense data reported by Broadridge as of December 31, 2016 reflected the most recent fiscal year-end data available in Broadridge’s database at that time.

In connection with their review of fund management fees and total expenses, 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.

Ohio Tax Exempt Income Fund 17 

 


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 between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the Putnam funds at that time.

The information examined by the Trustees in connection with their annual contract review for the Putnam funds included information regarding fees charged by Putnam Management and its affiliates to institutional clients, including defined benefit pension and profit-sharing plans, charities, college endowments, foundations, sub-advised third-party mutual funds, state, local and non-U.S. government entities, and corporations. This information included, in cases where an institutional product’s investment strategy corresponds with a fund’s strategy, comparisons of those fees with fees charged to the Putnam funds, as well as an assessment of the differences in the services provided to these different types of clients as compared to the services provided to the Putnam Funds. The Trustees observed that the differences in fee rates between these clients and the Putnam 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, among other things, 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 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 other 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 Officers and other senior members of Putnam Management’s Investment Division throughout the year. In addition, in response to a request from the Independent Trustees, Putnam Management provided the Trustees with in-depth presentations regarding each of the equity and fixed income investment teams, including the operation of the teams and their investment approaches. 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 2016 was a challenging year for the performance of the Putnam funds, with generally disappointing results for the international and global equity funds and taxable fixed income funds, mixed results for small-cap equity, Spectrum, global asset allocation, equity research and tax exempt fixed income funds, but generally strong results for U.S. equity funds. The Trustees noted, however, that they were encouraged by the positive performance trend since mid-year 2016 across most Putnam Funds. In particular, from May 1, 2016 through April 30, 2017, 51% of Putnam Fund assets were in the top quartile and 87% were above the median of the Putnam Funds’ competitive industry rankings. They noted that the longer-term performance of the Putnam funds generally continued to be strong, exemplified by the fact that the Putnam funds were ranked by the Barron’s/Lipper Fund Families survey as the 5th-best performing mutual fund complex out of 54 complexes for the five-year period ended December 31, 2016. In addition, while the survey ranked the Putnam Funds 52nd out of 61 mutual fund complexes for the one-year period ended 2016, the Putnam Funds have ranked 1st or 2nd in the survey for the one-year period three times since 2009 (most recently in 2013). They also noted, however, the disappointing investment performance of some funds for periods ended December 31, 2016 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

18 Ohio Tax Exempt Income Fund 

 


their intention to continue to monitor closely the performance of those funds, including the effectiveness of any efforts Putnam Management has undertaken to address underperformance and whether additional actions to address areas of underperformance are warranted.

For purposes of the Trustees’ evaluation of the Putnam Funds’ investment performance, the Trustees generally focus on a competitive industry ranking of each fund’s total net return over a one-year, three-year and five-year period. For a number of Putnam funds with relatively unique investment mandates for which Putnam Management informed the Trustees that meaningful competitive performance rankings are not considered to be available, the Trustees evaluated performance based on their total gross and net returns and, in most cases, comparisons of those returns with the returns of selected investment benchmarks. 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. (“Lipper”) peer group (Lipper Ohio Municipal Debt Funds) for the one-year, three-year and five-year periods ended December 31, 2016 (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  3rd 

 

Over the one-year, three-year and five-year periods ended December 31, 2016, there were 34, 33 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.)

The Trustees also considered Putnam Management’s continued efforts to support fund performance through initiatives including structuring compensation for portfolio managers and research analysts to enhance accountability for fund performance, emphasizing accountability in the portfolio management process, and affirming its commitment to a fundamental-driven approach to investing. The Trustees noted further that Putnam Management continued to strengthen its fundamental research capabilities by adding new investment personnel.

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 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 predominantly to acquire brokerage and research services (including third-party research and market data) 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, including any developments with respect to the European Union’s updated Markets in Financial Instruments Directive and its potential impact on PIL’s use of client commissions to obtain investment research. The Trustees 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 fair and 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. Furthermore, the Trustees were of the view that the services provided were required for the operation of the funds, and that they were of a quality at least equal to those provided by other providers.

Ohio Tax Exempt Income Fund 19 

 


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.

20 Ohio Tax Exempt Income Fund 

 


The fund’s portfolio 11/30/17 (Unaudited)

Key to holding’s abbreviations

AGC Assured Guaranty Corp.  GNMA Coll. Government National Mortgage 
AGM Assured Guaranty Municipal Corporation  Association Collateralized 
AMBAC AMBAC Indemnity Corporation  NATL National Public Finance Guarantee Corp. 
COP Certificates of Participation  U.S. Govt. Coll. U.S. Government Collateralized 
FHLMC Coll. Federal Home Loan Mortgage  VRDN Variable Rate Demand Notes, which are floating- 
Corporation Collateralized  rate securities with long-term maturities that carry 
FNMA Coll. Federal National Mortgage  coupons that reset and are payable upon demand 
Association Collateralized  either daily, weekly or monthly. The rate shown is the 
FRB Floating Rate Bonds: the rate shown is the current  current interest rate at the close of the reporting 
interest rate at the close of the reporting period. Rates  period. Rates are set by remarketing agents and may 
may be subject to a cap or floor. For certain securities,  take into consideration market supply and demand, 
the rate may represent a fixed rate currently in place  credit quality and the current SIFMA Municipal Swap 
at the close of the reporting period.  Index rate, which was 0.97% as of the close of the 
G.O. Bonds General Obligation Bonds  reporting period. 

 

MUNICIPAL BONDS AND NOTES (97.6%)*  Rating**  Principal amount  Value 
California (0.3%)       
CA State Poll. Control Fin. Auth. Solid Waste Disp.       
144A Mandatory Put Bonds (2/1/18) (Republic Svcs.,       
Inc.), Ser. A, 1.22%, 8/1/23  A–2  $350,000  $349,955 
      349,955 
Guam (0.5%)       
Territory of GU, Govt. Ltd. Oblig. Rev. Bonds (Section       
30), Ser. A, 5.75%, 12/1/34 (Prerefunded 12/1/19)  BBB+  250,000  270,258 
Territory of GU, Govt. Wtr. Wks. Auth. Wtr. & Waste       
Wtr. Syst. Rev. Bonds, U.S. Govt. Coll., 5.625%,       
7/1/40 (Prerefunded 7/1/20)  A–  350,000  383,124 
      653,382 
Ohio (93.6%)       
Akron, G.O. Bonds, AGM, 5.00%, 12/1/25       
(Prerefunded 12/1/17)  AA  1,005,000  1,005,000 
Allen Cnty., Hosp. Fac. Rev. Bonds (Catholic Hlth.       
Care), Ser. A, 5.25%, 6/1/38  A+  1,000,000  1,071,540 
American Muni. Pwr., Inc. Rev. Bonds       
(Prairie State Energy Campus), Ser. A, AGC, U.S.       
Govt. Coll., 5.75%, 2/15/39 (Prerefunded 2/15/19)  AA  1,500,000  1,574,220 
Ser. A, 5.25%, 2/15/33  A1  250,000  280,615 
(Greenup Hydroelectric Pwr. Plant), Ser. A,       
5.00%, 2/15/41  A1  1,000,000  1,134,240 
(Hydroelectric Pwr. Plant), Ser. A, 5.00%, 2/15/41  A2  830,000  938,215 
(Prairie State Energy Campus), 5.00%, 2/15/38  A1  90,000  90,662 
(Meldahl Hydroelectric (Green Bond)), Ser. A,       
5.00%, 2/15/30  A  150,000  173,066 
(Meldahl Hydroelectric Fac. (Green Bond)), Ser. A,       
5.00%, 2/15/27  A  250,000  293,223 
Bluffton, Hosp. Fac. Rev. Bonds (Blanchard Valley       
Hlth. Syst.), 5.00%, 12/1/31  A2  650,000  752,141 
Bowling Green State U. Rev. Bonds, Ser. A,       
5.00%, 6/1/42  A1  1,000,000  1,141,180 

 

Ohio Tax Exempt Income Fund 21 

 


MUNICIPAL BONDS AND NOTES (97.6%)* cont.  Rating**  Principal amount  Value 
Ohio cont.       
Brookfield, Local School Dist. G.O. Bonds (School       
Fac. Impt.), AGM, U.S. Govt. Coll., 5.00%, 1/15/26       
(Prerefunded 1/15/18)  Aa2  $1,000,000  $1,004,260 
Buckeye, Tobacco Settlement Fin. Auth. Rev. Bonds,       
Ser. A-2, 5.75%, 6/1/34  B–  1,500,000  1,406,250 
Butler Cnty., Hosp. Fac. Rev. Bonds (Cincinnati       
Children’s Hosp. Med. Ctr.), Ser. X, 5.00%, 5/15/29  Aa2  1,000,000  1,219,260 
Carlisle, Local School Dist. G.O. Bonds       
(School Impt.)       
5.00%, 12/1/47  AA  500,000  568,805 
5.00%, 12/1/42  AA  350,000  400,187 
5.00%, 12/1/37  AA  100,000  114,920 
Centerville, Hlth. Care Rev. Bonds (Graceworks       
Lutheran Svcs.), 5.25%, 11/1/50  BB+/P  500,000  529,280 
Cincinnati, G.O. Bonds, Ser. D, 4.00%, 12/1/32  Aa2  500,000  537,910 
Cincinnati, Econ. Dev. Rev. Bonds (Keystone Parke       
Phase III), Ser. B, 5.00%, 11/1/40  Aa3  500,000  568,245 
Cleveland, G.O. Bonds, Ser. A, AGC, U.S. Govt. Coll.,       
5.00%, 12/1/29 (Prerefunded 12/1/17)  AA+  2,000,000  2,000,000 
Cleveland, Income Tax Rev. Bonds       
(Impt. Pk. & Recreational), 5.00%, 10/1/33  AA+  615,000  726,432 
(Bridges & Roadways), Ser. B, AGC, U.S. Govt. Coll.,       
5.00%, 10/1/29 (Prerefunded 4/1/18)  AA+  1,000,000  1,012,070 
(Impt. Bridges), 4.00%, 10/1/29  AA+  300,000  332,358 
(Impt. Bridges), 4.00%, 10/1/28  AA+  400,000  446,796 
Cleveland, Pkg. Fac. Rev. Bonds, AGM       
5.25%, 9/15/22  AA  1,630,000  1,844,867 
5.25%, 9/15/22 (Escrowed to maturity)  AA  770,000  889,997 
Cleveland, Pub. Pwr. Syst. Rev. Bonds, Ser. B-1,       
NATL, zero %, 11/15/25  A  3,000,000  2,405,190 
Cleveland, State U. Rev. Bonds, 5.00%, 6/1/37  A1  1,500,000  1,644,015 
Cleveland, Urban Renewal Increment Rev. Bonds       
(Rock & Roll Hall of Fame), 6.75%, 3/15/18  B/P  195,000  195,827 
Cleveland, Wtr. Rev. Bonds, Ser. X, 5.00%, 1/1/42  Aa1  1,000,000  1,099,120 
Cleveland, Wtr. Poll. Control Rev. Bonds       
(Green Bonds)       
5.00%, 11/15/41  Aa3  500,000  574,045 
5.00%, 11/15/36  Aa3  435,000  502,086 
Cleveland-Cuyahoga Cnty., Rev. Bonds (Euclid Ave.       
Dev., Corp.), 5.00%, 8/1/39  A2  1,000,000  1,118,580 
Columbus, Swr. Rev. Bonds, 5.00%, 6/1/32  Aa1  1,000,000  1,191,890 
Columbus, Swr. VRDN, Ser. B, 0.75%, 6/1/32  VMIG1  1,430,000  1,430,000 
Cuyahoga Cmnty., College Dist. Rev. Bonds, Ser. D,       
5.00%, 8/1/32  Aa2  750,000  835,785 
Cuyahoga Cnty., COP (Convention Hotel),       
5.00%, 12/1/27  AA–  1,250,000  1,424,938 
Cuyahoga, Rev. Bonds (Sports Fac. Impt.)       
5.00%, 12/1/27  AA–  250,000  284,280 
5.00%, 12/1/25  AA–  100,000  114,851 
Dayton, City School Dist. G.O. Bonds,       
5.00%, 11/1/23  Aa2  750,000  868,890 

 

22 Ohio Tax Exempt Income Fund 

 


MUNICIPAL BONDS AND NOTES (97.6%)* cont.  Rating**  Principal amount  Value 
Ohio cont.       
Fairview Park City School Dist. G.O. Bonds,       
5.00%, 12/1/42  Aa2  $1,905,000  $2,121,065 
Franklin Cnty., Hlth. Care Fac. Rev. Bonds       
(OH Presbyterian Retirement Svcs. (OPRS)       
Cmntys. Oblig. Group), Ser. A, 5.625%, 7/1/26  BBB–  1,100,000  1,171,291 
5.00%, 11/15/44  BBB+/F  1,000,000  1,063,230 
Franklin Cnty., Hosp. Fac. Rev. Bonds (Nationwide       
Children’s Hosp.), Ser. A       
4.00%, 11/1/39  Aa2  500,000  521,195 
4.00%, 11/1/38  Aa2  300,000  313,227 
Gallia Cnty., Local School Impt. Dist. G.O. Bonds,       
5.00%, 11/1/27  Aa2  815,000  952,531 
Greene Cnty., Hosp. Facs. Rev. Bonds (Kettering       
Hlth. Network), 5.50%, 4/1/39  A+  1,000,000  1,049,280 
Hamilton Cnty., Hlth. Care Rev. Bonds (Life Enriching       
Cmnty.), 5.00%, 1/1/46  BBB–/F  500,000  539,455 
Hamilton Cnty., Hosp. Fac. Rev. Bonds (TriHealth,       
Inc.), Ser. A, 5.00%, 8/15/36  A+  750,000  853,838 
Hamilton Cnty., Sales Tax Rev. Bonds       
Ser. A, 5.00%, 12/1/27  AA–  100,000  122,976 
Ser. B, AMBAC, zero %, 12/1/24  A1  3,000,000  2,509,470 
Ser. B, AMBAC, zero %, 12/1/22  A1  500,000  448,270 
Huber Heights City School Dist. G.O. Bonds (School       
Impt.), 5.00%, 12/1/31  Aa2  1,000,000  1,157,330 
Huran Cnty., Human Svcs. G.O. Bonds, NATL,       
6.55%, 12/1/20  Aa3  820,000  869,733 
JobsOhio Beverage Syst. Rev. Bonds (Statewide Sr.       
Lien Liquor Profits), Ser. A, 5.00%, 1/1/38  AA  700,000  771,323 
Kent State U. Rev. Bonds (Gen. Receipts),       
5.00%, 5/1/30  Aa3  1,000,000  1,181,020 
Lake Cnty., Hosp. Fac. Rev. Bonds (Lake Hosp. Syst.,       
Inc.), Ser. C       
6.00%, 8/15/43  A3  180,000  185,180 
U.S. Govt. Coll., 6.00%, 8/15/43       
(Prerefunded 8/15/18)  AAA/P  935,000  965,051 
Lakewood, City School Dist. G.O. Bonds, NATL,       
zero %, 12/1/17  Aa2  1,190,000  1,190,000 
Lancaster, City Fac. Construction & Impt. School       
Dist. G.O. Bonds, 5.00%, 10/1/37  AA  1,000,000  1,114,860 
Lorain Cnty., Hosp. Rev. Bonds (Catholic Hlth.       
Partners), Ser. H, AGC, 5.00%, 2/1/29  AA  2,000,000  2,033,980 
Lorain Cnty., Port Auth. Econ. Dev. Facs. Rev. Bonds       
(Kendal at Oberlin), 5.00%, 11/15/30  A–  750,000  828,555 
Lucas Cnty., Hlth. Care Fac. Rev. Bonds       
(Lutheran Homes), Ser. A, 7.00%, 11/1/45       
(Prerefunded 11/1/20)  BB+/P  700,000  802,032 
(Sunset Retirement Cmntys.), 5.50%, 8/15/30  A–/F  650,000  715,046 
Miami U. Rev. Bonds, 5.00%, 9/1/41  Aa3  500,000  576,370 
Middleburg Heights, Hosp. Rev. Bonds (Southwest       
Gen. Hlth. Ctr.), 5.00%, 8/1/47  A2  1,200,000  1,320,336 
Milford, Exempt Village School Dist. G.O. Bonds,       
5.00%, 12/1/19  Aa2  200,000  213,034 

 

Ohio Tax Exempt Income Fund 23 

 


MUNICIPAL BONDS AND NOTES (97.6%)* cont.  Rating**  Principal amount  Value 
Ohio cont.       
Montgomery Cnty., Rev. Bonds (Catholic Hlth.       
Initiatives), Ser. D, 6.25%, 10/1/33  Baa1  $1,000,000  $1,036,420 
Mount Healthy City School Dist. G.O. Bonds,       
5.00%, 12/1/21  Aa2  500,000  557,270 
Napoleon, City Fac. Construction & Impt. School       
Dist. G.O. Bonds, 5.00%, 12/1/36  Aa3  500,000  549,450 
New Albany, Plain Local School Dist. G.O. Bonds       
(School Impt.), 4.00%, 12/1/29  Aa1  1,410,000  1,524,506 
North Royalton, City School Dist. G.O. Bonds       
(School Impt.), 5.00%, 12/1/47  Aa2  3,000,000  3,438,870 
OH Hsg. Fin. Agcy. Rev. Bonds (Single Fam. Mtge.),       
Ser. 1, GNMA Coll., FNMA Coll., FHLMC Coll.,       
5.00%, 11/1/28  Aaa  220,000  228,109 
OH State G.O. Bonds (Hwy.), Ser. S, 5.00%, 5/1/31  AAA  150,000  178,778 
OH State Rev. Bonds       
(Regl. Swr. Dist.), 5.00%, 11/15/49  Aa1  1,250,000  1,412,400 
(Northeast OH Regl. Swr. Dist.), 5.00%, 11/15/44  Aa1  1,250,000  1,431,838 
Ser. A, U.S. Govt. Coll., 5.00%, 10/1/22       
(Prerefunded 4/1/18)  AAA/P  3,090,000  3,126,771 
OH State Air Quality Dev. Auth. FRB (Columbus       
Southern Pwr. Co.), Ser. B, 5.80%, 12/1/38  A2  1,000,000  1,066,140 
OH State Higher Edl. Fac. Rev. Bonds       
(Case Western Reserve U.), 6.25%, 10/1/18  AA–  1,000,000  1,039,790 
(U. of Dayton), Ser. A, 5.625%, 12/1/41  A+  1,200,000  1,326,816 
(U. of Dayton), 5.50%, 12/1/36  A+  1,000,000  1,037,610 
OH State Higher Edl. Fac. Comm. Rev. Bonds       
(Summa Hlth. Syst.), 5.75%, 11/15/40  Baa2  370,000  397,728 
(Summa Hlth. Syst.), U.S. Govt. Coll., 5.75%,       
11/15/40 (Prerefunded 5/15/20)  Baa2  630,000  691,696 
(Kenyon College), 5.00%, 7/1/44  A  1,305,000  1,388,533 
(Case Western Reserve U.), 5.00%, 12/1/40  AA–  1,000,000  1,143,040 
(Xavier U.), 5.00%, 5/1/40  A3  750,000  792,458 
(Oberlin Coll.), 5.00%, 10/1/31  AA  650,000  740,961 
(U. of Dayton), Ser. A, 5.00%, 12/1/24  A+  285,000  333,233 
OH State Hosp. Rev. Bonds (U. Hosp. Hlth. Syst.),       
Ser. A, 5.00%, 1/15/41  A2  1,000,000  1,116,340 
OH State Hosp. Fac. Rev. Bonds (Cleveland Clinic       
Hlth. Syst.), Ser. A       
5.00%, 1/1/33  Aa2  530,000  631,734 
5.00%, 1/1/31  Aa2  720,000  865,915 
4.00%, 1/1/34  Aa2  1,250,000  1,341,175 
OH State Private Activity Rev. Bonds (Portsmouth       
Bypass Gateway Group, LLC), AGM, 5.00%, 12/31/39  AA  750,000  837,458 
OH State Solid Waste Mandatory Put Bonds       
(12/1/17) (Republic Svcs., Inc.), 1.25%, 11/1/35  A–2  1,000,000  1,000,000 
OH State Special Oblig. Cap. Fac. Lease       
Appropriation Rev. Bonds, Ser. C, 5.00%, 12/1/28  Aa2  500,000  605,025 
OH State Tpk. Comm. Rev. Bonds       
(Infrastructure), Ser. A-1, 5.25%, 2/15/32  A1  350,000  402,885 
5.00%, 2/15/48  A1  1,250,000  1,370,063 

 

24 Ohio Tax Exempt Income Fund 

 


MUNICIPAL BONDS AND NOTES (97.6%)* cont.  Rating**  Principal amount  Value 
Ohio cont.       
OH State U. Rev. Bonds       
Ser. A, 5.00%, 12/1/39  Aa1  $1,000,000  $1,161,540 
(Gen. Receipts Special Purpose), Ser. A,       
5.00%, 6/1/38  Aa2  1,000,000  1,126,990 
OH State Wtr. Dev. Auth. Rev. Bonds       
Ser. A, 5.00%, 12/1/35  Aaa  1,000,000  1,175,150 
Ser. B, 5.00%, 12/1/35  Aaa  1,000,000  1,184,280 
Ser. A, 5.00%, 12/1/34  Aaa  750,000  885,735 
OH U. Gen. Recipients Athens Rev. Bonds       
5.00%, 12/1/43  Aa3  1,035,000  1,135,830 
5.00%, 12/1/42  Aa3  500,000  545,240 
Ohio State Adult Correctional Cap. Fac. Rev. Bonds       
(Lease Appropriation-Adult Correctional Bldg.       
Fund), Ser. A, 5.00%, 10/1/35  Aa2  1,000,000  1,184,960 
Penta Career Ctr. COP, 5.00%, 4/1/20  Aa3  1,500,000  1,600,635 
Princeton, City School Dist. G.O. Bonds,       
5.00%, 12/1/36  AA  500,000  570,770 
Rickenbacker, Port Auth. Rev. Bonds (OASBO       
Expanded Asset Pooled), Ser. A, 5.375%, 1/1/32  A2  1,435,000  1,632,456 
Scioto Cnty., Hosp. Rev. Bonds (Southern       
OH Med. Ctr.)       
5.00%, 2/15/34  A2  1,025,000  1,160,433 
5.00%, 2/15/32  A2  865,000  988,003 
Summit Cnty., G.O. Bonds, 4.00%, 12/1/31  Aa1  750,000  811,740 
Toledo, Wtr. Wks. Syst. Rev. Bonds       
5.00%, 11/15/36  Aa3  500,000  583,075 
5.00%, 11/15/28  Aa3  250,000  301,160 
Toledo-Lucas Cnty., Port Auth. Rev. Bonds (CSX       
Transn, Inc.), 6.45%, 12/15/21  Baa1  1,900,000  2,209,016 
U. of Akron Rev. Bonds, Ser. A       
5.00%, 1/1/31  A1  500,000  576,735 
5.00%, 1/1/28  A1  1,000,000  1,150,410 
U. of Cincinnati Rev. Bonds       
Ser. C, 5.00%, 6/1/46  Aa3  500,000  571,250 
Ser. F, 5.00%, 6/1/34  Aa3  1,000,000  1,081,850 
Ser. A, 5.00%, 6/1/31  Aa3  500,000  561,840 
Ser. A, 5.00%, 6/1/30  Aa3  1,000,000  1,125,050 
Warren Cnty., Hlth. Care Fac. Rev. Bonds (Otterbein       
Homes Oblig. Group)       
Ser. A, 5.75%, 7/1/33  A  500,000  583,780 
5.00%, 7/1/39  A  1,000,000  1,104,700 
Westerville, G.O. Bonds       
AMBAC, 5.00%, 12/1/26 (Prerefunded 12/1/17)  Aaa  105,000  105,000 
AMBAC, U.S. Govt. Coll., 5.00%, 12/1/26       
(Prerefunded 12/1/17)  Aaa  1,215,000  1,215,000 
Westlake, Rev. Bonds (American Greetings-Crocker       
Park Pub. Impt.), 5.00%, 12/1/33  Aa1  1,000,000  1,174,160 
Willoughby-Eastlake, City School Dist. G.O. Bonds       
(School Impt.), 5.00%, 12/1/46  Aa3  1,000,000  1,142,710 

 

Ohio Tax Exempt Income Fund 25 

 


MUNICIPAL BONDS AND NOTES (97.6%)* cont.  Rating**  Principal amount  Value 
Ohio cont.       
Youngstown State U. Rev. Bonds       
AGC, U.S. Govt. Coll., 5.25%, 12/15/29       
(Prerefunded 6/15/19)  AA  $500,000  $527,795 
5.00%, 12/15/25  A+  500,000  550,705 
      122,675,924 
Puerto Rico (0.4%)       
Children’s Trust Fund Tobacco Settlement (The)       
Rev. Bonds, 5.375%, 5/15/33  Ba1  280,000  273,935 
Cmnwlth. of PR, Sales Tax Fin. Corp. Rev. Bonds,       
Ser. A, NATL, zero %, 8/1/43  A  1,000,000  202,350 
      476,285 
Washington (2.0%)       
Grant Cnty., Pub. Util. Dist. No. 2 Mandatory Put       
Bonds (12/2/20) (Elec. Syst.), 2.00%, 1/1/44  AA  2,600,000  2,604,804 
      2,604,804 
Wisconsin (0.8%)       
Pub. Fin. Auth. Solid Waste Disp. Mandatory       
Put Bonds (2/1/18) (Waste Mgt., Inc.), Ser. A-2,       
1.25%, 10/1/25  A–2  1,000,000  999,510 
      999,510 
 
TOTAL INVESTMENTS       
Total investments (cost $123,255,743)      $127,759,860 

 

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, 2017 through November 30, 2017 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter.

* Percentages indicated are based on net assets of $130,926,423.

** The Moody’s, Standard & Poor’s or Fitch ratings indicated are believed to be the most recent ratings available at the close of the reporting period for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to these securities at the close of the reporting period. Securities rated by Fitch are indicated by “/F.” Securities rated by Putnam are indicated by “/P.” The Putnam rating categories are comparable to the Standard & Poor’s classifications. If a security is insured, it will usually be rated by the ratings organizations based on the financial strength of the insurer. For further details regarding security ratings, please see the Statement of Additional Information.

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

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

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

The dates shown on debt obligations are the original maturity dates.

26 Ohio Tax Exempt Income Fund 

 


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

Education  17.7% 
Local debt  17.5 
Health care  16.9 
Utilities  15.9 
Prerefunded  11.9 

 

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  $—­  $127,759,860  $—­ 
Totals by level  $—­  $127,759,860  $—­ 

 

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

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

Ohio Tax Exempt Income Fund 27 

 


Statement of assets and liabilities 11/30/17 (Unaudited)

ASSETS   
Investment in securities, at value,(Note 1):   
Unaffiliated issuers (identified cost $123,255,743)  $127,759,860 
Cash  2,050,980 
Interest and other receivables  1,862,578 
Receivable for shares of the fund sold  32,211 
Receivable for investments sold  1,383,358 
Prepaid assets  9,027 
Total assets  133,098,014 
 
LIABILITIES   
Payable for investments purchased  1,750,939 
Payable for shares of the fund repurchased  154,079 
Payable for compensation of Manager (Note 2)  46,428 
Payable for custodian fees (Note 2)  1,787 
Payable for investor servicing fees (Note 2)  15,986 
Payable for Trustee compensation and expenses (Note 2)  79,281 
Payable for administrative services (Note 2)  537 
Payable for distribution fees (Note 2)  48,828 
Distributions payable to shareholders  30,496 
Other accrued expenses  43,230 
Total liabilities  2,171,591 
 
Net assets  $130,926,423 
 
REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $127,987,445 
Undistributed net investment income (Note 1)  57,185 
Accumulated net realized loss on investments (Note 1)  (1,622,324) 
Net unrealized appreciation of investments  4,504,117 
Total — Representing net assets applicable to capital shares outstanding  $130,926,423 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share   
($105,515,944 divided by 11,808,101 shares)  $8.94 
Offering price per class A share (100/96.00 of $8.94)*  $9.31 
Net asset value and offering price per class B share ($1,318,624 divided by 147,760 shares)**  $8.92 
Net asset value and offering price per class C share ($10,133,038 divided by 1,133,911 shares)**  $8.94 
Net asset value and redemption price per class M share ($585,858 divided by 65,539 shares)  $8.94 
Offering price per class M share (100/96.75 of $8.94)†  $9.24 
Net asset value, offering price and redemption price per class Y share   
($13,372,959 divided by 1,494,946 shares)  $8.95 

 

* 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.

28 Ohio Tax Exempt Income Fund 

 


Statement of operations Six months ended 11/30/17 (Unaudited)

INVESTMENT INCOME   
Interest income  $2,417,888 
Total investment income  2,417,888 
 
EXPENSES   
Compensation of Manager (Note 2)  289,224 
Investor servicing fees (Note 2)  48,466 
Custodian fees (Note 2)  3,637 
Trustee compensation and expenses (Note 2)  1,519 
Distribution fees (Note 2)  180,910 
Administrative services (Note 2)  1,712 
Auditing and tax fees  29,930 
Other  31,482 
Total expenses  586,880 
Expense reduction (Note 2)  (3,887) 
Net expenses  582,993 
 
Net investment income  1,834,895 
 
Net realized gain on securities from unaffiliated issuers (Notes 1 and 3)  862,891 
Net unrealized depreciation of securities in unaffiliated issuers during the period  (2,115,593) 
Net loss on investments  (1,252,702) 
 
Net increase in net assets resulting from operations  $582,193 

 

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

 

Ohio Tax Exempt Income Fund 29 

 


Statement of changes in net assets

DECREASE IN NET ASSETS  Six months ended 11/30/17*  Year ended 5/31/17 
Operations     
Net investment income  $1,834,895  $3,874,045 
Net realized gain on investments  862,891  493,940 
Net unrealized depreciation of investments  (2,115,593)  (4,052,394) 
Net increase in net assets resulting from operations  582,193  315,591 
Distributions to shareholders (Note 1):     
From ordinary income     
Taxable net investment income     
Class A  —  (49,443) 
Class B  —  (630) 
Class C  —  (4,597) 
Class M  —  (214) 
Class Y  —  (5,163) 
From tax-exempt net investment income     
Class A  (1,493,860)  (3,160,812) 
Class B  (14,823)  (32,970) 
Class C  (108,306)  (221,517) 
Class M  (6,918)  (13,252) 
Class Y  (204,091)  (372,851) 
Decrease from capital share transactions (Note 4)  (3,120,157)  (7,099,154) 
Total decrease in net assets  (4,365,962)  (10,645,012) 
 
NET ASSETS     
Beginning of period  135,292,385  145,937,397 
End of period (including undistributed net investment     
income of $57,185 and $50,288, respectively)  $130,926,423  $135,292,385 

 

* Unaudited.

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

30 Ohio Tax Exempt Income Fund 

 


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Ohio Tax Exempt Income Fund 31 

 


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

  INVESTMENT OPERATIONS LESS DISTRIBUTIONS RATIOS AND SUPPLEMENTAL DATA
                      Ratio   
      Net realized                of net investment   
  Net asset value,    and unrealized  Total from  From      Total return  Net assets,  Ratio of expenses  income (loss)   
  beginning  Net investment  gain (loss)  investment  net investment  Total  Net asset value,  at net asset value  end of period  to average  to average  Portfolio 
Period ended­  of period­  income (loss)  on investments­  operations­  income­  distributions  end of period­  (%)a  (in thousands)  net assets (%)b  net assets (%)  turnover (%) 
Class A­                         
November 30, 2017**   $9.02­  .13­  (.08)  .05­  (.13)  (.13)  $8.94­  .51*  $105,516­  .42*  1.41*  15* 
May 31, 2017­  9.24­  .25­  (.22)  .03­  (.25)  (.25)  9.02­  .39­  108,906­  .83­  2.81­  15­ 
May 31, 2016­  9.07­  .29­  .16­  .45­  (.28)  (.28)  9.24­  5.10­  120,182­  .82­c  3.11­c  11­ 
May 31, 2015­  9.12­  .30­  (.05)  .25­  (.30)  (.30)  9.07­  2.74­  117,935­  .80­  3.28­  16­ 
May 31, 2014­  9.31­  .31­  (.19)  .12­  (.31)  (.31)  9.12­  1.40­  123,335­  .81­  3.48­  9­ 
May 31, 2013­  9.35­  .32­  (.05)  .27­  (.31)  (.31)  9.31­  2.96­  138,049­  .80­  3.36­  10­ 
Class B­                         
November 30, 2017**   $9.01­  .10­  (.09)  .01­  (.10)  (.10)  $8.92­  .08*  $1,319­  .73*  1.09*  15* 
May 31, 2017­  9.22­  .20­  (.21)  (.01)  (.20)  (.20)  9.01­  (.13)  1,484­  1.46­  2.18­  15­ 
May 31, 2016­  9.06­  .23­  .16­  .39­  (.23)  (.23)  9.22­  4.33­  1,530­  1.44­c  2.49­c  11­ 
May 31, 2015­  9.11­  .24­  (.05)  .19­  (.24)  (.24)  9.06­  2.11­  1,791­  1.42­  2.66­  16­ 
May 31, 2014­  9.30­  .25­  (.19)  .06­  (.25)  (.25)  9.11­  .78­  1,807­  1.43­  2.86­  9­ 
May 31, 2013­  9.33­  .26­  (.03)  .23­  (.26)  (.26)  9.30­  2.43­  2,179­  1.42­  2.73­  10­ 
Class C­                         
November 30, 2017**   $9.02­  .09­  (.08)  .01­  (.09)  (.09)  $8.94­  .12*  $10,133­  .81*  1.01*  15* 
May 31, 2017­  9.24­  .18­  (.22)  (.04)  (.18)  (.18)  9.02­  (.39)  11,007­  1.61­  2.03­  15­ 
May 31, 2016­  9.07­  .21­  .17­  .38­  (.21)  (.21)  9.24­  4.28­  11,138­  1.59­c  2.34­c  11­ 
May 31, 2015­  9.12­  .23­  (.05)  .18­  (.23)  (.23)  9.07­  1.95­  10,798­  1.57­  2.51­  16­ 
May 31, 2014­  9.31­  .24­  (.19)  .05­  (.24)  (.24)  9.12­  .62­  10,681­  1.58­  2.71­  9­ 
May 31, 2013­  9.35­  .24­  (.04)  .20­  (.24)  (.24)  9.31­  2.17­  14,421­  1.57­  2.59­  10­ 
Class M­                         
November 30, 2017**   $9.02­  .11­  (.08)  .03­  (.11)  (.11)  $8.94­  .37*  $586­  .56*  1.27*  15* 
May 31, 2017­  9.24­  .23­  (.22)  .01­  (.23)  (.23)  9.02­  .11­  567­  1.11­  2.53­  15­ 
May 31, 2016­  9.08­  .26­  .16­  .42­  (.26)  (.26)  9.24­  4.69­  520­  1.09­c  2.84­c  11­ 
May 31, 2015­  9.12­  .27­  (.04)  .23­  (.27)  (.27)  9.08­  2.57­  546­  1.07­  3.01­  16­ 
May 31, 2014­  9.31­  .29­  (.20)  .09­  (.28)  (.28)  9.12­  1.13­  498­  1.08­  3.21­  9­ 
May 31, 2013­  9.35­  .29­  (.04)  .25­  (.29)  (.29)  9.31­  2.68­  586­  1.07­  3.08­  10­ 
Class Y­                         
November 30, 2017**   $9.03­  .14­  (.08)  .06­  (.14)  (.14)  $8.95­  .63*  $13,373­  .31*  1.52*  15* 
May 31, 2017­  9.24­  .27­  (.21)  .06­  (.27)  (.27)  9.03­  .72­  13,328­  .61­  3.03­  15­ 
May 31, 2016­  9.08­  .31­  .15­  .46­  (.30)  (.30)  9.24­  5.22­  12,568­  .59­c  3.34­c  11­ 
May 31, 2015­  9.12­  .32­  (.04)  .28­  (.32)  (.32)  9.08­  3.08­  12,031­  .57­  3.52­  16­ 
May 31, 2014­  9.32­  .33­  (.20)  .13­  (.33)  (.33)  9.12­  1.52­  5,519­  .58­  3.71­  9­ 
May 31, 2013­  9.35­  .34­  (.03)  .31­  (.34)  (.34)  9.32­  3.30­  7,738­  .57­  3.59­  10­ 

 

* 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, if any (Note 2). Also excludes acquired fund fees and expenses, if any.

c Reflects a voluntary waiver of certain fund expenses in effect during the period. As a result of such waivers, the expenses of each class reflect a reduction of less than 0.01% as a percentage of average net assets.

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

32 Ohio Tax Exempt Income Fund  Ohio Tax Exempt Income Fund 33 

 


Notes to financial statements 11/30/17 (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, 2017 through November 30, 2017.

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 goal 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 (i.e., three years or longer). Under normal circumstances, Putnam Management invests at least 80% of the fund’s net assets in tax-exempt investments. Tax-exempt investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and the applicable state’s income tax. Interest income from private activity bonds may be subject to federal AMT for individuals. These investments are not included for the purpose of complying with the 80% investment policy. This investment policy cannot be changed without the approval of the fund’s shareholders. Putnam Management may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

The fund offers class A, class B, class C, class M and class Y shares. The fund registered class T shares in February 2017, however, as of the date of this report, class T shares had not commenced operations and are not available for purchase. Purchases of class B shares are closed to new and existing investors except by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. Class A and class M shares are sold with a maximum front-end sales charge of 4.00% and 3.25%, respectively. Class A shares generally are not subject to a contingent deferred sales charge, and class M and class Y shares are not subject to a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, are not subject to a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares are subject to a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. The expenses for class A, class B, class C, and class M shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, and class M shares, but do not bear a distribution fee. Class Y shares are not available to all investors.

In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.

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

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

Note 1: Significant accounting policies

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

34 Ohio Tax Exempt Income Fund 

 


Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. In addition, the Trustees declare separate dividends on each class of shares.

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

Tax-exempt bonds and notes are generally valued on the basis of valuations provided by an independent pricing service approved by the Trustees. Such services use information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. These securities will generally be categorized as Level 2.

Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.

Interest income is recorded on the accrual basis. All premiums/discounts are amortized/accreted on a yield-to-maturity basis. The premium in excess of the call price, if any, is amortized to the call date; thereafter, any remaining premium is amortized to maturity.

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

Lines of credit The fund participates, along with other Putnam funds, in a $317.5 million unsecured committed line of credit and a $235.5 million unsecured uncommitted line of credit, both provided by State Street. Borrowings may be made for temporary or emergency purposes, including the funding of shareholder redemption requests and trade settlements. Interest is charged to the fund based on the fund’s borrowing at a rate equal to 1.25% plus the higher of (1) the Federal Funds rate and (2) the overnight LIBOR for the committed line of credit and the Federal Funds rate plus 1.30% for the uncommitted line of credit. A closing fee equal to 0.04% of the committed line of credit plus a $25,000 flat fee and 0.04% of the uncommitted line of credit has been paid by the participating funds. In addition, a commitment fee of 0.21% per annum on any unutilized portion of 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.

Ohio Tax Exempt Income Fund 35 

 


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, 2017, the fund had a capital loss carryover of $2,485,083 available to the extent allowed by the Code to offset future net capital gain, if any. For any carryover, the amount of the carryover and that carryover’s expiration date is:

  Loss carryover  
Short-term  Long-term  Total  Expiration 
$788,831  $1,384,882  $2,173,713  * 
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 $123,255,876, resulting in gross unrealized appreciation and depreciation of $4,914,723 and $410,739, respectively, or net unrealized appreciation of $4,503,984.

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

0.590%  of the first $5 billion,  0.390%  of the next $50 billion, 
0.540%  of the next $5 billion,  0.370%  of the next $50 billion, 
0.490%  of the next $10 billion,  0.360%  of the next $100 billion and 
0.440%  of the next $10 billion,  0.355%  of any excess thereafter. 

 

For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.217% of the fund’s average net assets.

Putnam Management has contractually agreed, through September 30, 2018, to waive fees or reimburse the fund’s expenses to the extent necessary to limit the cumulative expenses of the fund, exclusive of brokerage, interest, taxes, investment-related expenses, extraordinary expenses, acquired fund fees and expenses and payments under the fund’s investor servicing contract, investment management contract and distribution plans, on a fiscal year-to-date basis to an annual rate of 0.20% of the fund’s average net assets over such fiscal year-to-date period. During the reporting period, the fund’s expenses were not reduced as a result of this limit.

36 Ohio Tax Exempt Income Fund 

 


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

The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.

Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.

Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. received fees for investor servicing for class A, class B, class C, class M and class Y shares that included (1) a per account fee for each direct and underlying non-defined contribution account (“retail account”) of the fund; (2) a specified rate of the fund’s assets attributable to defined contribution plan accounts; and (3) a specified rate based on the average net assets in retail accounts. Putnam Investor Services, Inc. has agreed that the aggregate investor servicing fees for each fund’s retail and defined contribution accounts for these share classes will not exceed an annual rate of 0.25% of the fund’s average assets attributable to such accounts.

During the reporting period, the expenses for each class of shares related to investor servicing fees were as follows:

Class A  $38,927  Class M  200 
Class B  500  Class Y  4,928 
Class C  3,911  Total  $48,466 

 

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 $3,887 under the expense offset arrangements.

Each Independent Trustee of the fund receives an annual Trustee fee, of which $96, 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 the following share classes pursuant to Rule 12b–1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management Limited Partnership, an indirect wholly-owned subsidiary of Putnam Investments, LLC, for services provided and expenses incurred in distributing shares of the fund. The Plans provide payments by the fund to Putnam Retail Management Limited Partnership at an annual rate of up to the following amounts (“Maximum %”) of the average net assets attributable to each class. The Trustees have approved payment by the fund at the following annual rate (“Approved %”) of the average net assets attributable to each class. During the reporting period, the class-specific expenses related to distribution fees were as follows:

Ohio Tax Exempt Income Fund 37 

 


  Maximum %  Approved %  Amount 
Class A  0.35%  *  $119,889 
Class B  1.00%  0.85%  5,840 
Class C  1.00%  1.00%  53,803 
Class M  1.00%  0.50%  1,378 
Total      $180,910 

 

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

For the reporting period, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $3,674 and $106 from the sale of class A and class M shares, respectively, and received $724 and $43 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.

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

Note 3: Purchases and sales of securities

During the reporting period, the cost of purchases and proceeds from sales, excluding short-term investments, were as follows:

  Cost of purchases  Proceeds from sales 
Investments in securities (Long-term)  $21,486,883  $19,245,151 
U.S. government securities (Long-term)  —  — 
Total  $21,486,883  $19,245,151 

 

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

Note 4: Capital shares

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

  SIX MONTHS ENDED 11/30/17  YEAR ENDED 5/31/17 
Class A  Shares  Amount  Shares  Amount 
Shares sold  380,388  $3,417,616  974,724  $8,887,287 
Shares issued in connection with         
reinvestment of distributions  148,776  1,336,711  316,499  2,867,735 
  529,164  4,754,327  1,291,223  11,755,022 
Shares repurchased  (793,381)  (7,141,402)  (2,232,100)  (20,093,116) 
Net decrease  (264,217)  $(2,387,075)  (940,877)  $(8,338,094) 

 

38 Ohio Tax Exempt Income Fund 

 


  SIX MONTHS ENDED 11/30/17  YEAR ENDED 5/31/17 
Class B  Shares  Amount  Shares  Amount 
Shares sold  15  $133  27,496  $249,340 
Shares issued in connection with         
reinvestment of distributions  1,633  14,644  3,540  32,020 
  1,648  14,777  31,036  281,360 
Shares repurchased  (18,641)  (167,741)  (32,128)  (288,195) 
Net decrease  (16,993)  $(152,964)  (1,092)  $(6,835) 
 
  SIX MONTHS ENDED 11/30/17  YEAR ENDED 5/31/17 
Class C  Shares  Amount  Shares  Amount 
Shares sold  49,491  $445,683  185,411  $1,693,651 
Shares issued in connection with         
reinvestment of distributions  11,114  99,858  22,539  204,103 
  60,605  545,541  207,950  1,897,754 
Shares repurchased  (146,747)  (1,321,095)  (193,819)  (1,745,988) 
Net increase (decrease)  (86,142)  $(775,554)  14,131  $151,766 
 
  SIX MONTHS ENDED 11/30/17  YEAR ENDED 5/31/17 
Class M  Shares  Amount  Shares  Amount 
Shares sold  5,603  $50,371  7,365  $66,184 
Shares issued in connection with         
reinvestment of distributions  646  5,805  1,256  11,372 
  6,249  56,176  8,621  77,556 
Shares repurchased  (3,537)  (31,966)  (2,111)  (19,317) 
Net increase  2,712  $24,210  6,510  $58,239 
 
  SIX MONTHS ENDED 11/30/17  YEAR ENDED 5/31/17 
Class Y  Shares  Amount  Shares  Amount 
Shares sold  155,596  $1,401,894  398,863  $3,583,642 
Shares issued in connection with         
reinvestment of distributions  20,188  181,522  29,307  265,533 
  175,784  1,583,416  428,170  3,849,175 
Shares repurchased  (156,719)  (1,412,190)  (311,840)  (2,813,405) 
Net increase  19,065  $171,226  116,330  $1,035,770 

 

Note 5: Market, credit and other risks

In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. The fund focuses a majority of its investments in the state of Ohio and may be affected by economic and political developments in that state.

Ohio Tax Exempt Income Fund 39 

 


Putnam family of funds

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

Blend  Value 
Capital Opportunities Fund  Convertible Securities Fund 
Capital Spectrum Fund  Equity Income Fund 
Emerging Markets Equity Fund  International Value Fund 
Equity Spectrum Fund  Multi-Cap Value Fund 
Europe Equity Fund  Small Cap Value Fund 
Global Equity Fund 
International Capital Opportunities Fund  Income 
International Equity Fund  American Government Income Fund 
Investors Fund  Diversified Income Trust 
Low Volatility Equity Fund  Emerging Markets Income Fund 
Multi-Cap Core Fund  Floating Rate Income Fund 
Research Fund  Global Income Trust 
Government Money Market Fund* 
Global Sector  High Yield Fund 
Global Consumer Fund  Income Fund 
Global Financials Fund  Money Market Fund† 
Global Health Care Fund  Short Duration Income Fund 
Global Industrials Fund  U.S. Government Income Trust 
Global Natural Resources Fund 
Global Sector Fund  Tax-free Income 
Global Technology Fund  AMT-Free Municipal Fund 
Global Telecommunications Fund  Intermediate-Term Municipal Income Fund 
Global Utilities Fund  Short-Term Municipal Income Fund 
Tax Exempt Income Fund 
Growth  Tax-Free High Yield Fund 
Growth Opportunities Fund 
International Growth Fund  State tax-free income funds‡: 
Multi-Cap Growth Fund  California, Massachusetts, Minnesota, 
Small Cap Growth Fund  New Jersey, New York, Ohio, and Pennsylvania. 

 

40 Ohio Tax Exempt Income Fund 

 


Absolute Return  Asset Allocation 
Absolute Return 100 Fund®  George Putnam Balanced Fund 
Absolute Return 300 Fund® 
Absolute Return 500 Fund®  Dynamic Asset Allocation Balanced Fund 
Absolute Return 700 Fund®  Dynamic Asset Allocation Conservative Fund 
Dynamic Asset Allocation Growth Fund 
Putnam PanAgora**  Dynamic Risk Allocation Fund 
Putnam PanAgora Managed Futures Strategy 
Putnam PanAgora Market Neutral Fund  Retirement Income Fund Lifestyle 1 
Putnam PanAgora Risk Parity Fund 
RetirementReady® 2060 Fund 
  RetirementReady® 2055 Fund 
  RetirementReady® 2050 Fund 
  RetirementReady® 2045 Fund 
  RetirementReady® 2040 Fund 
  RetirementReady® 2035 Fund 
  RetirementReady® 2030 Fund 
  RetirementReady® 2025 Fund 
  RetirementReady® 2020 Fund 

 

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

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

‡ Not available in all states.

** Sub-advised by PanAgora Asset Management.

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

Ohio Tax Exempt Income Fund 41 

 


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.

42 Ohio Tax Exempt Income Fund 

 


Putnam’s commitment to confidentiality

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

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

Within the Putnam organization, your information is shared with those who need it to service your account or provide you with information about other Putnam products or services. Under certain circumstances, we must also share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. It is also our policy to share account information with your financial advisor, if you've provided us with information about your advisor and that person is listed on your Putnam account.

If you would like clarification about our confidentiality policies or have any questions or concerns, please don't hesitate to contact us at 1-800-225-1581, Monday through Friday, 8:00 a.m. to 8:00 p.m. Eastern Time.

Ohio Tax Exempt Income Fund 43 

 


Fund information

Founded over 80 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  Michael J. Higgins 
Putnam Investment  Jameson A. Baxter, Chair  Vice President, Treasurer, 
Management, LLC  Kenneth R. Leibler, Vice Chair  and Clerk 
One Post Office Square  Liaquat Ahamed   
Boston, MA 02109  Ravi Akhoury  Janet C. Smith 
  Barbara M. Baumann  Vice President, 
Investment Sub-Advisor  Katinka Domotorffy  Principal Financial Officer, 
Putnam Investments Limited  Catharine Bond Hill  Principal Accounting Officer, 
16 St James’s Street  Paul L. Joskow  and Assistant Treasurer 
London, England SW1A 1ER  Robert E. Patterson 
George Putnam, III  Susan G. Malloy 
Marketing Services  Robert L. Reynolds  Vice President and 
Putnam Retail Management  Manoj P. Singh  Assistant Treasurer 
One Post Office Square   
Boston, MA 02109  Officers  Mark C. Trenchard 
Robert L. Reynolds  Vice President and 
Custodian  President  BSA Compliance Officer 
State Street Bank   
and Trust Company  Jonathan S. Horwitz  Nancy E. Florek 
Executive Vice President,  Vice President, Director of 
Legal Counsel  Principal Executive Officer,  Proxy Voting and Corporate 
Ropes & Gray LLP  and Compliance Liaison  Governance, Assistant Clerk, 
  and Assistant Treasurer 
  Robert T. Burns   
  Vice President and  Denere P. Poulack 
  Chief Legal Officer  Assistant Vice President, Assistant 
  Clerk, and Assistant Treasurer 
  James F. Clark   
  Vice President and   
  Chief Compliance 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.

 

44 Ohio Tax Exempt Income Fund 

 




Item 2. Code of Ethics:
Not applicable

Item 3. Audit Committee Financial Expert:
Not applicable

Item 4. Principal Accountant Fees and Services:
Not applicable

Item 5. Audit Committee of Listed Registrants
Not applicable

Item 6. Schedule of Investments:
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:
Not applicable

Item 8. Portfolio Managers of Closed-End Investment Companies
Not Applicable

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:
Not applicable

Item 10. Submission of Matters to a Vote of Security Holders:
Not applicable

Item 11. Controls and Procedures:
(a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.
(b) Changes in internal control over financial reporting: Not applicable
Item 12. Exhibits:
(a)(1) 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.

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

Putnam Ohio Tax Exempt Income Fund
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer

Date: January 25, 2018
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.

By (Signature and Title):
/s/ Jonathan S. Horwitz
Jonathan S. Horwitz
Principal Executive Officer

Date: January 25, 2018
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer

Date: January 25, 2018