-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, HDnicM2T/Z8yESTLMwwQJvhSpsPXJkQs9hUnM5kTf+KKfKGqH6S1Q2DWS4tPRwSY B5iBbonjQd05cOhZTPdhGg== 0000792288-94-000011.txt : 19941003 0000792288-94-000011.hdr.sgml : 19941003 ACCESSION NUMBER: 0000792288-94-000011 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19940930 EFFECTIVENESS DATE: 19940930 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II CENTRAL INDEX KEY: 0000792288 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 046626127 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-05416 FILM NUMBER: 94551045 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04518 FILM NUMBER: 94551046 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 617-292-14 MAIL ADDRESS: ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND /MA/ DATE OF NAME CHANGE: 19920609 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II CENTRAL INDEX KEY: 0000794611 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 046626130 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-08923 FILM NUMBER: 94551047 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04529 FILM NUMBER: 94551048 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 617-292-14 MAIL ADDRESS: STATE: MA ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM MICHIGAN TAX EXEMPT INCOME FUND DATE OF NAME CHANGE: 19920609 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II CENTRAL INDEX KEY: 0000794612 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 046626128 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-08916 FILM NUMBER: 94551049 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04527 FILM NUMBER: 94551050 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 MAIL ADDRESS: ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM MINNESOTA TAX EXEMPT INCOME FUND DATE OF NAME CHANGE: 19920609 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM OHIO TAX EXEMPT INCOME FUND II CENTRAL INDEX KEY: 0000794616 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 046626129 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-08924 FILM NUMBER: 94551051 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04528 FILM NUMBER: 94551052 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 617-292-14 MAIL ADDRESS: STATE: MA ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM OHIO TAX EXEMPT INCOME FUND DATE OF NAME CHANGE: 19920609 485BPOS 1 As filed with the Securities and Exchange Commission on September 29, 1994 - ----------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM N-1A ---- REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 14 / X / and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X / ACT OF 1940 ---- ---- Amendment No. 16 / X / (Check appropriate box or boxes) ---- --------------- PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II Registration No. 33-5416; 811-4518 (Exact name of registrant as specified in charter) ---- REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 14 / X / and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X / ACT OF 1940 ---- ---- Amendment No. 15 / X / (Check appropriate box or boxes) ---- --------------- PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II Registration No. 33-8923; 811-4529 PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II Registration No. 33-8916; 811-4527 PUTNAM OHIO TAX EXEMPT INCOME FUND II Registration No. 33-8924; 811-4528 (Exact name of registrant as specified in charter) One Post Office Square, Boston, Massachusetts 02109 (Address of principal executive offices) Registrants' Telephone Number, including Area Code (617) 292-1000 It is proposed that this filing will become effective (check appropriate box) ---- / / immediately upon filing pursuant to paragraph (b) - ---- ---- / X / on October 1, 1994 pursuant to paragraph (b) - ---- ---- / / 60 days after filing pursuant to paragraph (a) - ---- ---- / / on (date) pursuant to paragraph (a) of - ---- Rule 485 -------------- JOHN R. VERANI, Vice President PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II PUTNAM OHIO TAX EXEMPT INCOME FUND II One Post Office Square Boston, Massachusetts 02109 (Name and address of agent for service) --------------- Copy to: JOHN W. GERSTMAYR, Esquire ROPES & GRAY One International Place Boston, Massachusetts 02110 ---------------------- Each Registrant has registered an indefinite number or amount of securities under the Securities Act of 1933 pursuant to Rule 24f-2. Rule 24f-2 notices for Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II for the fiscal year ended May 31, 1994 were filed on July 28, 1994 . PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II PUTNAM OHIO TAX EXEMPT INCOME FUND II CROSS REFERENCE SHEET (as required by Rule 481(a)) PART A N-1A ITEM NO. LOCATION 1. Cover Page....................... Cover Page 2. Synopsis......................... Expenses summary 3. Condensed Financial Information.. Financial highlights; How performance is shown 4. General Description of Registrant........................ Objectives; How objectives are pursued; Organizatio n and history 5. Management of the Funds............ Expenses summary; How the Funds are managed; About Putnam Investments, Inc. 5a. Management's Discussion of Fund Performance................ (Contained in Annual Reports of Registrants) 6. Capital Stock and Other Securities........................ Cover Page; Organization and history; How distributions are made; tax information 7. Purchase of Securities Being Offered........................... How to buy shares; How to sell shares; How to exchange shares; How the Funds value their shares; Distribution Plans 8. Redemption or Repurchase.......... How to buy shares; How to sell shares; How to exchange shares; Organization and history 9. Pending Legal Proceedings......... Not Applicable PART B N-1A ITEM NO. LOCATION 10. Cover Page........................ Cover Page 11. Table of Contents................. Cover Page 12. General Information and History... Organization and history (Part A) 13. Investment Objectives and Policies.......................... How objectives are pursued (Part A); Investment Restrictions of the Funds; Miscellaneous Investment Practices 14. Management of the Registrant...... Management of the Funds (Trustees; Officers); Additional Officers of the Funds 15. Control Persons and Principal Holders of Securities............. Management of the Funds (Trustees ; Officers); Fund Charges and Expenses (Ownership of Fund Shares) 16. Investment Advisory and Other Services.......................... Management of the Funds (Trustees; Officers; The Management Contract; Principal Underwriter ; Investor Servicing Agent and Custodian) ; Fund Charges and Expenses; Distribution Plan; Independent Accountants and Financial Statements 17. Brokerage Allocation.............. Management of the Funds (Portfolio Transactions); Fund Charges and Expenses 18. Capital Stock and Other Securities........................ Organization and history (Part A); How distributions are made; tax information (Part A); Suspension of Redemptions 19. Purchase, Redemption and Pricing of Securities Being Offered....... How to buy shares (Part A); How to sell shares (Part A); How to exchange shares (Part A); How to Buy Shares; Determination of Net Asset Value; Suspension of Redemptions 20. Tax Status........................ How distributions are made; tax information (Part A); Taxes 21. Underwriters...................... Management of the Funds (Principal Underwriter); Fund Charges and Expenses 22. Calculation of Performance Data... How performance is shown (Part A); Investment Performance of the Funds; Standard Performance Measures 23. Financial Statements.............. Independent Accountants and Financial Statements PART C Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C of the Registration Statement. PROSPECTUS OCTOBER 1, 1994 PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II PUTNAM OHIO TAX EXEMPT INCOME FUND II CLASS A AND B SHARES INVESTMENT STRATEGY: TAX-ADVANTAGED This Prospectus explains concisely what you should know before investing in Class A or B shares of any of the Funds. Please read it carefully and keep it for future reference. You can find more detailed information about each Fund in the October 1, 1994 Statement of Additional Information, as amended from time to time. For a free copy of the Statement or other information , call Putnam Investor Services at 1-800-225-1581. The Statement has been filed with the Securities and Exchange Commission and is incorporated into this Prospectus by reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. BOSTON*LONDON*TOKYO ABOUT THE FUNDS Expenses summary ..........................................................3 Financial highlights ......................................................... .5 Objectives ......................................................... .10 How objectives are pursued ......................................................... .10 Risk factors .........................................................13 How performance is shown ......................................................... .20 How the Funds are managed ......................................................... .21 Organization and history 21 ABOUT YOUR INVESTMENT Alternative sales arrangements .........................................................23 How to buy shares ......................................................... 24 Distribution Plans ......................................................... 28 How to sell shares ......................................................... 30 How to exchange shares ......................................................... 31 How the Funds value their shares .........................................................32 How distributions are made; tax information 32 ABOUT PUTNAM INVESTMENTS, INC. 36 APPENDIX Tax-exempt security ratings. ..............................37 ABOUT THE FUNDS EXPENSES SUMMARY Expenses are one of several factors to consider when investing in each Fund. The following table summarizes your maximum transaction costs from investing in each Fund and expenses which a Fund incurred in its most recent fiscal year. The Examples show the cumulative expenses attributable to a hypothetical $1,000 investment in a Fund over specified periods. CLASS A CLASS B SHARES SHARES SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75% NONE* Deferred Sales Charge (as a 5.0% in the percentage of the lower first year, original purchase NONE** declining to, or price or redemption 1.0% in the proceeds) sixth year and eliminated thereafter
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets) Class A Shares Putnam Putnam Putnam Putnam Massachusetts Michigan Minnesota Ohio Tax Exempt Tax Exempt Tax Exempt Tax Exempt Income Income Income Income Fund II Fund II Fund II Fund II ------- ------- ------- ---------- Management Fees 0.60% 0.60% 0.60% 0.60% 12b-1 Fees 0.20% 0.20% 0.20% 0.20% Other Expenses 0.16% 0.19% 0.23% 0.19% Total Fund Operating Expenses 0.96% 0.99% 1.03% 0.99% /TABLE
Class B Shares Putnam Putnam Putnam Putnam Massachusetts Michigan Minnesota Ohio Tax Exempt Tax Exempt Tax Exempt Tax Exempt Income Income Income Income Fund II Fund II Fund II Fund II ------- ------- ------- ---------- Management Fees 0.60% 0.60% 0.60% 0.60% 12b-1 Fees 0.85% 0.85% 0.85% 0.85% Other Expenses 0.16% 0.19% 0.23% 0.19% Total Fund Operating Expenses 1.61% 1.64% 1.68% 1.64% /TABLE
The tables are provided to help you understand the expenses of investing in each Fund and your share of the operating expenses which that Fund incurs. The expense information for Class B shares shown in the table has been annualized, except for "Other expenses," which have been restated based on information for Class A shares. Actual management fees for Class B shares of the Massachusetts, Michigan, Minnesota and Ohio Funds were 0.52%, 0.52%, 0.51% and 0.51%, respectively; actual Class B 12b-1 fees for each Fund during the past fiscal year were 0.75%; actual "Other expenses for Class B shares of the Massachusetts, Michigan, Minnesota and Ohio Funds were 0.14%, 0.15%, 0.21% and 0.16%, respectively and actual total operating expenses for the Class B shares of the Massachusetts, Michigan, Minnesota and Ohio Funds were 1.41%, 1.42%, 1.47% and 1.42%, respectively. EXAMPLES Your investment of $1,000 would incur the following expenses, assuming 5% annual return and redemption at the end of each period: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Putnam Massachusetts Tax Exempt Income Fund II Class A $57 $77 $98 $160 Class B $66 $81 $108 $174** * Putnam Michigan Tax Exempt Income Fund II Class A $57 $78 $100 $163 Class B $67 $82 $109 $177** * Putnam Minnesota Tax Exempt Income Fund II Class A $58 $79 $102 $167 Class B $67 $83 $111 $181** * Putnam Ohio Tax Exempt Income Fund II Class A $57 $78 $100 $163 Class B $67 $82 $109 $177** *
Your investment of $1,000 would incur the following expenses, assuming 5% annual return but no redemption: 1 YEAR 3 YEARS 5 YEARS 10 YEARS Putnam Massachusetts Tax Exempt Income Fund II Class A $57 $77 $98 $160 Class B $16 $51 $88 $174*** Putnam Michigan Tax Exempt Income Fund II Class A $57 $78 $100 $163 Class B $17 $52 $89 $177*** Putnam Minnesota Tax Exempt Income Fund II Class A $58 $79 $102 $167 Class B $17 $53 $91 $181*** Putnam Ohio Tax Exempt Income Fund II Class A $57 $78 $100 $163 Class B $17 $52 $89 $177*** /TABLE The Examples do not represent past or future expense levels . Actual expenses may be greater or less than those shown. Federal regulations require the Examples to assume a 5% annual return, but actual annual return has varied. * Class B shares are sold without a front-end sales charge, but their 12b-1 fees may cause long-term shareholders to pay more than the economic equivalent of the maximum permitted front-end sales charge. ** A deferred sales charge of up to 1.00% is assessed on certain redemptions of Class A shares that were purchased without an initial sales charge as part of an investment of $1 million or more. See "How to buy shares--Class A shares." *** Reflects conversion of Class B shares to Class A shares (which pay lower ongoing expenses) approximately eight years after purchase. See "How to buy shares - - Class B shares - -Conversion of Class B shares." FINANCIAL HIGHLIGHTS The tables on the following pages present per share financial information for Class A and B shares of each Fund. This information has been audited and reported on by each Fund's independent accountants. The Report of Independent Accountants and financial statements included in each Fund's Annual Report to shareholders for the 1994 fiscal year are incorporated by reference into this Prospectus. Each Fund's Annual Report , which contains additional unaudited performance information, is made available without charge upon request. On March 9, 1992, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II acquired the net assets of Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund and Putnam Ohio Tax Exempt Income Fund, respectively. On May 11, 1992, Putnam Massachusetts Tax Exempt Income Fund II acquired the net assets of Putnam Massachusetts Tax Exempt Income Fund. The value of portfolio securities acquired as a result of the above acquisitions has been excluded from security purchases in determining the portfolio turnover of each Fund for the fiscal year ended May 31, 1992. Financial highlights* (For a share outstanding throughout the period)
FINANCIAL HIGHLIGHTS* (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) FOR THE PERIOD FOR THE PERIOD JULY 15, 1993 OCTOBER 23 (COMMENCEMENT (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED OF OPERATIONS) TO MAY 31 MAY 31 MAY 31 1994 1994 1993 1992 1991 1990 CLASS B CLASS A NET ASSET VALUE, BEGINNING OF PERIOD $9.71 $9.55 $9.02 $8.70 $8.50 $8.50 INVESTMENT OPERATIONS NET INVESTMENT INCOME .41 .55 .59 .61(A) .62(A) .35(A) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (.51) (.35) .54 .39 .20 -- TOTAL FROM INVESTMENT OPERATIONS (.10) 0.20 1.13 1.00 .82 .35 LESS DISTRIBUTIONS FROM: NET INVESTMENT INCOME (.41) (.55) (.59) (.61) (.62) (.35) NET REALIZED GAIN ON INVESTMENTS (.15) (.15) (.01) (.07) -- -- TOTAL DISTRIBUTIONS (.56) (.70) (.60) (.68) (.62) (.35) NET ASSET VALUE, END OF PERIOD $9.05 $9.05 $9.55 $9.02 $8.70 $8.50 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (B) (1.31)(C) 1.92 12.80 11.96 10.10 6.84(C) NET ASSETS, END OF PERIOD (IN THOUSANDS) $23,017 $244,519 $215,611 $149,011 $38,526 $18,249 RATIO OF EXPENSES TO AVERAGE NET ASSETS (%) 1.60(C) .96 .97 .88(A) .86(A) .80(A)(C) RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (%) 4.91(C) 5.69 6.24 6.82(A) 7.27(A) 6.97(A)(C) PORTFOLIO TURNOVER (%) 36.20 36.20 53.18 94.95(E) 123.29 83.26(D) * FINANCIAL HIGHLIGHTS FOR PERIODS ENDED THROUGH MAY 31, 1992 HAVE BEEN RESTATED TO CONFORM WITH REQUIREMENTS ISSUED BY THE SEC IN APRIL 1993. (A) REFLECTS A VOLUNTARY EXPENSE LIMITATION, AND, DURING THE PERIOD ENDED MAY 31, 1990, A VOLUNTARY ABSORPTION OF EXPENSES INCURRED BY THE FUND. AS A RESULT, NET INVESTMENT INCOME OF THE FUND FOR THE YEARS ENDED MAY 31, 1992, 1991 AND THE PERIOD ENDED MAY 31, 1990, REFLECT EXPENSE REDUCTIONS OF APPROXIMATELY $0.01, $0.02 AND $0.04 PER SHARE, RESPECTIVELY. (B) TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES. (C) ANNUALIZED (D) NOT ANNUALIZED. (E) PORTFOLIO TURNOVER EXCLUDES THE IMPACT FROM THE ACQUISITION OF PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND. /TABLE
FINANCIAL HIGHLIGHTS* (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) FOR THE PERIOD FOR THE PERIOD JULY 15, 1993 OCTOBER 23, 1989 (COMMENCEMENT OF (COMMENCEMENT OF OPERATIONS) TO OPERATIONS) TO MAY 31 YEAR ENDED MAY 31 MAY 31 1994 1994 1993 1992 1991 1990 CLASS B CLASS A NET ASSET VALUE, BEGINNING OF PERIOD $9.43 $9.30 $8.80 $8.51 $8.43 $8.50 INVESTMENT OPERATIONS: NET INVESTMENT INCOME .41 .52 .55 .56(A) .58(A) .33(A) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (.46) (.32) .52 .29 .08 (.07) TOTAL FROM INVESTMENT OPERATIONS (.05) .20 1.07 .85 .66 .26 LESS DISTRIBUTIONS FROM: NET INVESTMENT INCOME (.40) (.52) (.56) (.56) (.58) (.33) NET REALIZED GAIN ON INVESTMENTS -- (.03) (.01) -- -- -- IN EXCESS OF NET GAIN ON INVESTMENTS (.08) (.05) -- -- -- -- TOTAL DISTRIBUTIONS (.48) (.60) (.57) (.56) (.58) (.33) NET ASSET VALUE, END OF PERIOD $8.90 $8.90 $9.30 $8.80 $8.51 $8.43 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (B) (.77)(C) 2.03 12.38 10.25 8.13 5.20(C) NET ASSETS, END OF PERIOD (IN THOUSANDS) $10,251 $128,921 $113,074 $80,310 $19,893 $9,280 RATIO OF EXPENSES TO AVERAGE NET ASSETS (%) 1.61(C) .99 1.04 .95(A) .87(A) .75(A)(C) RATIO OF NET AVERAGE NET ASSETS (%) 4.83(C) 5.59 6.04 6.28(A) 6.78(A) 6.37(A)(C) PORTFOLIO TURNOVER (%) 41.77(D) 41.77 15.89 71.68(E) 16.21 10.72(D) * FINANCIAL HIGHLIGHTS FOR PERIODS ENDED THROUGH MAY 31, 1992 HAVE BEEN RECLASSIFIED AND DATA HAS BEEN PRESENTED TO CONFORM WITH REQUIREMENTS ISSUED BY THE SEC IN APRIL, 1993. (A) REFLECTS AN EXPENSE LIMITATION, AND, DURING THE PERIOD ENDED MAY 31, 1990, AN ABSORPTION OF EXPENSES INCURRED BY THE FUND. AS A RESULT, NET INVESTMENT INCOME OF THE FUND FOR THE YEARS ENDED MAY 31, 1992, AND 1991 AND THE PERIOD ENDED MAY 31, 1990 REFLECT EXPENSE REDUCTIONS OF APPROXIMATELY $0.01, $0.05, AND $0.05, RESPECTIVELY. (B) TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES. (C) ANNUALIZED. (D) NOT ANNUALIZED. (E) PORTFOLIO TURNOVER EXCLUDES THE IMPACT OF ASSETS RECEIVED FROM THE ACQUISITION OF PUTNAM MICHIGAN TAX EXEMPT INCOME FUND. /TABLE
FINANCIAL HIGHLIGHTS* (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) FOR THE PERIOD FOR THE PERIOD JULY 15, 1993 OCTOBER 23, 1989 (COMMENCEMENT OF (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED OPERATIONS) TO MAY 31 MAY 31 MAY 31 1994 1994 1993 1992 1991 1990 CLASS B CLASS A CLASS A NET ASSET VALUE, BEGINNING OF PERIOD $9.18 $9.06 $8.74 $8.56 $8.43 $8.50 INVESTMENT OPERATIONS: NET INVESTMENT INCOME .39 .51 .55 .55(A) .59(A) .34(A) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (.41) (.27) .33 .18 .13 (.07) TOTAL FROM INVESTMENT OPERATIONS (.02) .24 .88 .73 .72 $.27 LESS DISTRIBUTIONS FROM NET INVESTMENT INCOME (.39) (.51) (.56) (.55) (.59) (.34) TOTAL DISTRIBUTIONS (.39) (.51) (.56) (.55) (.59) (.34) NET ASSET VALUE, END OF PERIOD $8.77 $8.79 $9.06 $8.74 $8.56 $8.43 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (B) (.36)(C) 2.57 10.33 8.86 8.82 5.25(C) NET ASSETS, END OF PERIOD (IN THOUSANDS) $8,873 $95,587 $86,611 $59,914 $16,615 $7,363 RATIO OF EXPENSES TO AVERAGE NET ASSETS (%)1.68(C) 1.03 1.08 .91(A) .66(A) .27(A)(D) RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (%) 4.81(C) 5.60 6.12 6.34(A) 6.84(A) 4.09(A)(D) PORTFOLIO TURNOVER (%) 28.19(D) 28.19(D) 37.69 38.79(E) 14.85 98.54(D) * FINANCIAL HIGHLIGHTS FOR PERIODS ENDED THROUGH MAY 31, 1992 HAVE BEEN RECLASSIFIED AND DATA HAS BEEN PRESENTED TO CONFORM WITH THE REQUIREMENTS ISSUED BY THE SEC IN APRIL, 1993. (A) REFLECTS AN EXPENSE LIMITATION AND, DURING THE PERIOD ENDED MAY 31, 1990, AN ABSORPTION OF EXPENSES INCURRED BY THE FUND. AS A RESULT, NET INVESTMENT INCOME OF THE FUND FOR THE YEARS ENDED MAY 31, 1992, 1991 AND THE PERIOD ENDED MAY 31, 1990 REFLECT EXPENSE REDUCTIONS OF APPROXIMATELY $0.02, $0.07, AND $0.14 RESPECTIVELY. (B) TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES. (C) ANNUALIZED. (D) NOT ANNUALIZED. (E) PORTFOLIO TURNOVER EXCLUDES THE IMPACT OF ASSETS RECEIVED FROM THE ACQUISITION OF PUTNAM MINNESOTA TAX EXEMPT INCOME FUND. /TABLE
FINANCIAL HIGHLIGHTS* (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) FOR THE PERIOD FOR THE PERIOD JULY 15, 1993 OCTOBER 23, 1989 (COMMENCEMENT (COMMENCEMENT OF OPERATIONS) OF OPERATIONS) TO MAY 31 YEAR ENDED MAY 31 TO MAY 31 1994 1994 1993 1992 1991 1990 CLASS B CLASS A NET ASSET VALUE, BEGINNING OF PERIOD $9.37 $9.26 $8.78 $8.55 $8.40 $8.50 INVESTMENT OPERATIONS NET INVESTMENT INCOME .40 .53 .54 .57(A) .59(A) .35(A) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (.46) (.35) .48 .23 .14 (.10) TOTAL FROM INVESTMENT OPERATIONS (.06) .18 1.02 .80 .73 .25 LESS DISTRIBUTIONS FROM: NET INVESTMENT INCOME (.40) (.52) (.54) (.57) (.58) (.35) NET REALIZED GAIN ON INVESTMENTS (.12) (.12) -- -- -- -- TOTAL DISTRIBUTIONS (.52) (.64) (.54) (.57) (.58) (.35) NET ASSET VALUE, END OF PERIOD $8.79 $8.80 $9.26 $8.78 $8.55 $8.40 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (B) (1.70)(C) 1.88 11.94 9.65 9.09 4.94(C) NET ASSETS, END OF PERIOD (IN THOUSANDS) $17,959 $194,130 $177,879 $140,309 $21,136 $7,684 RATIO OF EXPENSES TO AVERAGE NET ASSETS (%) 1.61 (C) .99 1.04 .90(A) .87(A) .47(A)(D) RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS (%) 4.95 (C) 5.68 5.90 6.41(A) 6.83(A) 4.19(A)(D) PORTFOLIO TURNOVER (%) 44.45 (D) 44.45 21.57 15.20(E) 17.40 23.27(D) * FINANCIAL HIGHLIGHTS FOR PERIODS ENDED THROUGH MAY 31, 1992 HAVE BEEN RESTATED TO CONFORM WITH REQUIREMENTS ISSUED BY THE SEC IN APRIL, 1993. (A) REFLECTS AN EXPENSE LIMITATION, AND, DURING THE PERIOD ENDED MAY 31, 1990, AN ABSORPTION OF EXPENSES INCURRED BY THE FUND. AS A RESULT, NET INVESTMENT INCOME OF THE FUND FOR THE YEARS ENDED 1992, 1991, AND THE PERIOD ENDED MAY 31, 1990 REFLECT EXPENSE REDUCTIONS OF APPROXIMATELY $0.01, $0.05, AND $0.05 PER SHARE, RESPECTIVELY. (B)TOTAL INVESTMENT RETURN ASSUMES DIVIDEND REINVESTMENT AND DOES NOT REFLECT THE EFFECT OF SALES CHARGES. (C)ANNUALIZED. (D) NOT ANNUALIZED. (E)PORTFOLIO TURNOVER EXCLUDES THE IMPACT OF ASSETS RECEIVED FROM THE ACQUISITION OF PUTNAM OHIO TAX EXEMPT INCOME FUND. /TABLE OBJECTIVE EACH FUND SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX AND PERSONAL INCOME TAX OF ITS RESPECTIVE STATE AS PUTNAM MANAGEMENT BELIEVES IS CONSISTENT WITH PRESERVATION OF CAPITAL. None of the Funds is intended to be a complete investment program, and there is no assurance that any Fund will achieve its objective. HOW OBJECTIVES ARE PURSUED BASIC INVESTMENT STRATEGY EACH FUND SEEKS ITS OBJECTIVE BY INVESTING AT LEAST 80% OF ITS NET ASSETS IN STATE TAX EXEMPT SECURITIES (WHICH ARE DESCRIBED BELOW), EXCEPT WHEN INVESTING FOR DEFENSIVE PURPOSES DURING TIMES OF ADVERSE MARKET CONDITIONS. Under current law, to the extent distributions by a Fund are derived from interest on State Tax Exempt Securities and are designated as such (and, in the case of the Minnesota Fund, provided at least 95% of that Fund's total exempt-interest dividends are derived from interest obligations of the State of Minnesota and its agencies, instrumentalities and political subdivisions), they shall be exempt from federal income tax and personal income tax in the relevant state. Each Fund may also invest from time to time in securities exempt only from federal income tax and in taxable obligations described below under "Alternative investment strategies" to the extent permitted by its investment policies, or hold its assets in cash or money market instruments. Each Fund's investments will be limited to securities rated at the time of purchase not lower than the five highest grades assigned by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, Baa or Ba) and Standard & Poor's Corporation ("S & P") (AAA, AA, A, BBB or BB), or unrated securities which Putnam Management determines are of comparable quality. Securities rated Ba or BB are considered to have speculative elements, with large uncertainties or major risk exposures to adverse conditions. Putnam Management expects that each Fund will generally invest in State Tax Exempt Securities of longer maturities (10 years or more), but each Fund may invest in State Tax Exempt Securities having a broad range of maturities. During fiscal 1994 , 100% of each Fund's distributions were exempt from federal income tax and personal income tax of its respective state. INTEREST INCOME FROM CERTAIN TYPES OF STATE TAX EXEMPT SECURITIES MAY BE SUBJECT TO FEDERAL ALTERNATIVE MINIMUM TAX . It is a fundamental policy of each Fund to exclude these securities from the term "State Tax Exempt Securities" for purposes of determining compliance with the 80% test described above. More generally, corporations should also note that receipt of exempt-interest dividends from a Fund could cause them to be subject to, or increase their liability for federal alternative minimum tax. Each Fund may trade its portfolio investments seeking short-term profits. In pursuing its objective, a Fund may, to a limited extent, buy and sell financial futures contracts and related options and may enter into forward commitments and repurchase agreements. These incidental investment practices, which may produce taxable income or capital gains and involve special risks, are described below. At times Putnam Management may judge that conditions in the markets for State Tax Exempt Securities make pursuing a Fund's basic investment strategy inconsistent with the best interests of its shareholders. At such times Putnam Management may temporarily use alternative strategies, primarily designed to reduce fluctuations in the value of a Fund's assets. In implementing these "defensive" strategies, a Fund may invest in taxable obligations, including: obligations of the U.S. government, its agencies or instrumentalities; obligations issued by governmental issuers in other states, the interest on which would be exempt from federal income tax; other debt securities rated within the four highest grades by either Moody's or S & P ; commercial paper rated in the highest grade by either rating service (Prime-1 or A-1+, respectively); certificates of deposit and bankers' acceptances; repurchase agreements with respect to any of the foregoing investments; or any other securities that Putnam Management considers consistent with such defensive strategies. It is impossible to predict when, or for how long, a Fund will use such alternative strategies. STATE TAX EXEMPT SECURITIES "STATE TAX EXEMPT SECURITIES" ARE DEBT OBLIGATIONS ISSUED BY A STATE OR ITS POLITICAL SUBDIVISIONS OR THEIR AGENCIES OR INSTRUMENTALITIES OR OTHER GOVERNMENTAL UNITS, THE INTEREST WITH RESPECT TO WHICH, IN THE OPINION OF BOND COUNSEL, IS EXEMPT FROM FEDERAL INCOME TAX AND PERSONAL INCOME TAX OF THE STATE SPECIFIED IN THE FUND'S NAME. These securities are issued to obtain funds for various public purposes, such as the construction of public facilities, the payment of general operating expenses or the refunding of outstanding debts. They may also be issued to finance various private activities, including the lending of funds to public or private institutions for the construction of housing, educational or medical facilities , and may also include certain types of industrial development bonds , private activity bonds or notes issued by public authorities to finance privately owned or operated facilities or to fund short-term cash requirements. Short-term State Tax Exempt Securities may be issued as interim financing in anticipation of tax collections, revenue receipts or bond sales to finance various public purposes. State Tax Exempt Securities also include debt obligations issued by certain other governmental entities (including , for example, U.S. territories) if such debt obligations generate interest income which is exempt from federal income tax and the personal income tax of the appropriate state. THE TWO PRINCIPAL CLASSIFICATIONS OF STATE TAX EXEMPT SECURITIES ARE GENERAL OBLIGATION AND SPECIAL OBLIGATION (OR SPECIAL REVENUE OBLIGATION) SECURITIES. GENERAL OBLIGATION securities involve a pledge of the credit of an issuer possessing taxing power and are payable from the issuer's general unrestricted revenues. Their payment may depend on an appropriation by the issuer's legislative body. The characteristics and methods of enforcement of general obligation securities vary according to the law applicable to the particular issuer. SPECIAL OBLIGATION (or SPECIAL REVENUE OBLIGATION) securities are payable only from the revenues derived from a particular facility or class of facilities, or a specific revenue source, and generally are not payable from the unrestricted revenues of the issuer. Industrial development bonds and private activity bonds are in most cases special obligation securities, the credit quality of which is directly related to the private user of the facilities. A Fund may also invest in securities representing interests in State Tax Exempt Securities, known as "inverse floating obligations" or "residual interest bonds," which pay interest rates that vary inversely to changes in the interest rates of specified short-term tax exempt securities or an index of short-term tax exempt securities. The interest rates on inverse floating obligations or residual interest bonds will typically decline as short-term market interest rates increase and increase as short-term market rates decline. Such securities have the effect of providing a degree of investment leverage, since they will generally increase or decrease in value in response to changes in market interest rates at a rate which is a multiple (typically two) of the rate at which fixed-rate long-term tax exempt securities increase or decrease in response to such changes. As a result, the market values of inverse floating obligations and residual interest bonds will generally be more volatile than the market values of fixed-rate tax exempt securities. INVESTMENTS IN PREMIUM SECURITIES During a period of declining interest rates, many of each Fund's portfolio investments will likely bear coupon rates which are higher than current market rates, regardless of whether such securities were originally purchased at a premium. Such securities would generally carry market values greater than the principal amounts payable on maturity, which would be reflected in the net asset value of a Fund's shares. The values of such "premium" securities tend to approach the principal amount as they approach maturity (or call price in the case of securities approaching their first call date). As a result, an investor who purchases shares of a Fund during such periods would initially receive higher monthly distributions (derived from the higher coupon rates payable on that Fund's investment) than might be available from alternative investments bearing current market interest rates, but may face an increased risk of capital loss as these higher coupon securities approach maturity (or first call date). In evaluating the potential performance of an investment in a Fund, investors may find it useful to compare that Fund's current dividend rate with that Fund's "yield," which is computed on a yield-to-maturity basis in accordance with SEC regulations and which reflects amortization of market premiums. See "How performance is shown." RISK FACTORS EACH FUND MAY INVEST IN BOTH HIGHER-RATED AND LOWER-RATED STATE TAX EXEMPT SECURITIES. The values of lower-rated securities generally fluctuate more than those of higher-rated securities. In addition, the lower rating reflects a greater possibility that the financial condition of the issuer, or adverse changes in general economic conditions, or both, may impair the ability of the issuer to make payments of income and principal. In addition, under such circumstances the values of such securities may be more volatile, and the markets for such securities may be less liquid, than those for higher-rated securities, and a Fund may as a result find it more difficult to determine the fair value of such securities. A Fund will not purchase State Tax Exempt Securities rated both Ba by Moody's and BB by Standard & Poor's at the time of purchase, or, if unrated, determined to be of comparable quality if, as a result, more than 25% of the Fund's total assets would be invested in securities of that quality. The rating services' descriptions of the five highest grades of debt securities and other rating information are included in this Prospectus. A Fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase, although Putnam Management will monitor the investment to determine whether continued investment in the security will assist in meeting that Fund's investment objective. Putnam Management seeks to minimize the risks of investing in lower-rated securities through careful investment analysis. However, the amount of information about the financial condition of an issuer of State Tax Exempt Securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. When a Fund invests in State Tax Exempt Securities in the lower rating categories, the achievement of that Fund's goals is more dependent on Putnam Management's ability than would be the case if that Fund were investing in State Tax Exempt Securities in the higher rating categories. Investors should consider carefully their ability to assume the risks of owning shares of a mutual fund which may invest in securities in certain of the lower rating categories.
The tables below show the percentages of each Fund's assets invested during fiscal 1994 in securities assigned to the various rating categories by Moody's and S & P's and in unrated securities determined by Putnam Management to be of comparable quality: Putnam Putnam Putnam Putnam Massachusetts Michigan Minnesota Ohio Tax Exempt Tax Exempt Tax Exempt Tax Exempt Income Fund II Income Fund II Income Fund II Income Fund II ------------------------- -------------------------- ------------------------ ------------------------ Unrated Unrated Unrated Unrated Rated securities Rated securities Rated securities Rated securities securities of comparable securities of comparable securities of comparable securities of comparable as percentages quality, as as percentages quality, as as percentages quality, as as percentages quality, as of Fund's percentage of of Fund's percentage of of Fund's percentage of of Fund's percentage of Ratings assets Fund's assets assets Fund's assets assets Fund's assets assets Fund's assets - ------------------------------------------------------------------------------------------------------------------------ "AAA"/"Aaa" 35.81% - 45.28% - 25.84% - 47.54% - "AA"/"Aa" 6.69% - 3.67% - 20.53% - 10.89% - "A"/"A" 23.19% - 12.47% 3.08% 34.48% - 5.08% - "BBB"/"Baa" 15.28% 5.59% 19.54% 6.45% 9.72% 4.40% 20.32%9.35% "BB"/'Ba" - 14.44% 1.77% 7.20% - 5.03% 1.85% 4.97% "B"/"B" - - 0.54% - - - ------ ------ ------ ------ ------- ------ ------ ------ 80.97% 19.03% 83.27% 16.73% 90.57% 9.43% 85.68% 14.32% - ------------------------------------------------------------------------------------------------------------------------ For additional information concerning the risks associated with investments by the Funds in securities in the lower rating categories, see the Statement of Additional Information. /TABLE At times, a substantial portion of each Fund's assets may be invested in securities as to which that Fund, by itself or together with other funds and accounts managed by Putnam Management and its affiliates, holds a major portion or all of an issue of such State Tax Exempt Securities. Under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, a Fund could find it more difficult to sell such securities when Putnam Management believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. Under such circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing a Fund's net asset value. In order to enforce its rights in the event of a default under such securities, a Fund may be required to take possession of and manage assets securing the issuer's obligations on such securities, which may increase a Fund's operating expenses and adversely affect a Fund's net asset value. Any income derived from a Fund's ownership or operation of such assets would not be tax-exempt. Certain securities held by a Fund may permit the issuer at its option to "call," or redeem, its securities. If an issuer were to redeem securities held by a Fund during a time of declining interest rates, the Fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. Each Fund may invest in so-called "zero-coupon" bonds whose values are subject to greater fluctuation in response to changes in market interest rates than bonds which pay interest currently. Zero-coupon bonds are issued at a significant discount from face value and pay interest only at maturity rather than at intervals during the life of the security. Zero- coupon bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently. A Fund is required to accrue and distribute income from zero-coupon bonds on a current basis, even though it does not receive that income currently in cash. Thus a Fund may have to sell other investments to obtain cash needed to make income distributions. The secondary market for State Tax Exempt Securities is less liquid than that for taxable fixed-income securities, particularly in the lower rating categories. The ability of the Fund to buy and sell certain securities may be limited from time to time. FOR ADDITIONAL INFORMATION CONCERNING THE RISKS ASSOCIATED WITH INVESTMENT BY THE FUND IN SECURITIES IN THE LOWER RATING CATEGORIES, SEE THE STATEMENT OF ADDITIONAL INFORMATION. SINCE THE FUNDS INVEST PRIMARILY IN STATE TAX EXEMPT SECURITIES, THE VALUE OF EACH FUND'S SHARES MAY BE ESPECIALLY AFFECTED BY FACTORS PERTAINING TO THE ECONOMY OF ITS RELEVANT STATE AND OTHER FACTORS SPECIFICALLY AFFECTING THE ABILITY OF ISSUERS OF STATE TAX EXEMPT SECURITIES TO MEET THEIR OBLIGATIONS. As a result, the value of each Fund's shares may fluctuate more widely than the value of shares of a portfolio investing in securities relating to a number of different states. The ability of state, county or local governments to meet their obligations will depend primarily on the availability of tax and other revenues to those governments and on their fiscal conditions generally. The amounts of tax and other revenues available to governmental issuers of State Tax Exempt Securities may be affected from time to time by economic, political and demographic conditions that effect the particular state. In addition, constitutional or statutory restrictions may limit a government's power to raise revenues or increase taxes. The availability of federal, state and local aid to issuers of State Tax Exempt Securities may also affect their ability to meet their obligations. Payments of principal and interest on special obligation securities will depend on the economic condition of the facility or specific revenue source from whose revenues the payments will be made, which in turn could be affected by economic, political and demographic conditions in the particular state. Any reduction in the actual or perceived ability of an issuer of State Tax Exempt Securities to meet its obligations (including a reduction in the rating of its outstanding securities) would likely affect adversely the market value and marketability of its obligations and could affect adversely the values of other State Tax Exempt Securities as well. DIVERSIFICATION AND CONCENTRATION POLICIES Each Fund is a separate "diversified" investment company under the Investment Company Act of 1940. This means that with respect to 75% of its total assets, a Fund may not invest more than 5% of its total assets in the securities of any one issuer (except U.S. government securities). Thus a Fund may invest up to 25% of its total assets in the securities of any one issuer. Because of the relatively small number of issuers of State Tax Exempt Securities, a Fund is more likely to invest a higher percentage of its assets in the securities of a single issuer than it would an investment company which invests in voting securities. This practice involves an increased risk of loss to the Fund if the issuer is unable to make interest or principal payments or if the market value of such securities were to decline. NO FUND WILL NOT INVEST MORE THAN 25% OF ITS TOTAL ASSETS IN ANY ONE INDUSTRY. Governmental issuers of State Tax Exempt Securities are not considered part of any "industry." However, State Tax Exempt Securities backed only by the assets and revenues of nongovernmental users may for this purpose be deemed to be issued by such nongovernmental users, and the 25% limitation would apply to such obligations. Thus, no ore than 25% of a Fund's assets will be invested in obligations deemed to be issued by non-governmental users in any one industry and in taxable obligations of issuers in the same industry. It is nonetheless possible that a Fund may invest more than 25% of its assets in a broader segment of the market for State Tax Exempt Securities , such as revenue obligations of hospitals and other health care facilities, housing revenue obligations, or airport revenue obligations. This would be the case only if Putnam Management determined that the yields available from obligations in a particular segment of the market justified the additional risks associated with such concentration. Although such obligations could be supported by the credit of governmental users or by the credit of nongovernmental users engaged in a number of industries, economic, business, political and other developments generally affecting the revenues of such issuers (for example, proposed legislation or pending court decisions affecting the financing of such projects and market factors affecting the demand for their services or products) may have a general adverse effect on all State Tax Exempt Securities in such a market segment. Each Fund reserves the right to invest more than 25% of its assets in industrial development bonds and private activity securities. FINANCIAL FUTURES AND OPTIONS EACH FUND MAY PURCHASE AND SELL FINANCIAL FUTURES CONTRACTS FOR HEDGING PURPOSES. Futures contracts on a Municipal Bond Index are traded on the Chicago Board of Trade. This Index is intended to represent a numerical measure of market performance for long-term tax - exempt bonds. An "index future" is a contract to buy or sell units of a particular securities index at an agreed price on a specified future date. Depending on the change in value of the index between the time when a Fund enters into and terminates an index futures contract, that Fund realizes a gain or loss. A Fund may purchase and sell futures contracts on the Index (or any other tax exempt bond index approved for trading by the Commodity Futures Trading Commission) to hedge against general changes in market values of State Tax Exempt Securities which such Fund owns or expects to purchase. Each Fund may also purchase and sell put and call options on index futures or on the indices directly, in addition to or as an alternative to purchasing and selling index futures. Each Fund may also, for hedging purposes, purchase and sell futures contracts and related options with respect to U.S. Treasury securities, including U.S. Treasury bills, notes and bonds ("U.S. Government Securities") and options directly on U.S. Government Securities. THE USE OF FUTURES AND OPTIONS INVOLVES CERTAIN SPECIAL RISKS AND MAY RESULT IN REALIZATION OF TAXABLE INCOME OR CAPITAL GAINS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS AND MAY RESULT IN LOSSES. Certain risks arise because of the possibility of imperfect correlations between movements in the prices of financial futures and options and movements in the prices of the underlying bond index or U.S. Government Securities or of the Tax Exempt Securities which are the subject of the hedge. The successful use of futures and options further depends on Putnam Management's ability to forecast interest rate movements correctly. Other risks arise from a Fund's potential inability to close out its futures or related options positions, and there can be no assurance that a liquid secondary market will exist for any futures contract or option at a particular time. Certain provisions of the Internal Revenue Code and certain regulatory requirements may limit a Fund's ability to engage in futures and options transactions. A MORE DETAILED EXPLANATION OF FINANCIAL FUTURES AND OPTIONS TRANSACTIONS AND THE RISKS ASSOCIATED WITH THEM IS INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION. Portfolio turnover A change in the securities owned by a Fund is known as "portfolio turnover." Portfolio turnover generally involves some expense to a Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestment in other securities. Such transactions may result in realization of taxable capital gains. See "Distributions and taxes." To the extent short-term trading strategies are used, a Fund's portfolio turnover rate may be higher than that of other mutual funds. Each Fund's portfolio turnover rates for the life of that Fund are shown in the section "Financial highlights." OTHER INVESTMENT PRACTICES EACH FUND MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING INVESTMENT PRACTICES, SOME OF WHICH MAY RESULT IN REALIZATION OF TAXABLE INCOME OR CAPITAL GAINS AND EACH OF WHICH INVOLVES CERTAIN SPECIAL RISKS. The Statement of Additional Information contains more detailed information about these practices, including limitations designed to reduce these risks. REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS. Each Fund may enter into repurchase agreements on up to 25% of its assets. These transactions must be fully collateralized at all times. Each Fund may also purchase securities for future delivery, which may increase its overall investment exposure and involve a risk of loss if the value of the securities declines prior to the settlement date. These transactions involve some risk to a Fund if the other party should default on its obligation and that Fund is delayed or prevented from recovering the collateral or completing the transaction. LIMITING INVESTMENT RISK SPECIFIC INVESTMENT RESTRICTIONS HELP EACH FUND LIMIT INVESTMENT RISKS FOR ITS SHAREHOLDERS. THESE RESTRICTIONS PROHIBIT A FUND FROM investing more than: (a) 5% of its total assets in the securities of any one issuer (other than obligations of the U.S. government or its agencies or instrumentalities, and State Tax Exempt Securities);* (b) 5% of its net assets in securities of any issuers if the parties responsible for payment, together with any predecessors, have been in operation for less than three consecutive years (except obligations of the U.S. government, its agencies and instrumentalities and obligations backed by the faith, credit and taxing power of any person authorized to issue State Tax Exempt Securities); (c) 15% of its net assets in securities restricted as to resale, excluding restricted securities that have been determined by the Trustees of the Fund (or the person designated by them to make such determinations) to be readily marketable;* (d) 25% of its total assets in any one industry (other than State Tax Exempt Securities backed by governmental issuers and obligations of the U.S. government, its agencies or instrumentalities);* or (e) 15% of its net assets in securities that are not readily marketable, securities restricted as to resale (excluding securities determined by the Trustees of the Fund (or the person designated by the Fund's Trustees to make such determinations) to be readily marketable), and repurchase agreements maturing in more than seven days. Restrictions marked with an asterisk (*) above are summaries of fundamental policies. See the Statement of Additional Information for the full text of these policies and the Funds' other fundamental policies. Except for investment policies designated as fundamental in this Prospectus or the Statement , and the policy that under normal market conditions at least 80% of each Fund's net assets will be invested in State Tax Exempt Securities (other than securities which may be subject to federal alternative minimum tax), the investment policies described in this Prospectus and in the Statement are not fundamental policies. The Trustees may change any non-fundamental investment policies without shareholder approval. As a matter of policy, the Trustees would not materially change a Fund's investment objective without shareholder approval. HOW PERFORMANCE IS SHOWN EACH FUND'S INVESTMENT PERFORMANCE MAY FROM TIME TO TIME BE INCLUDED IN ADVERTISEMENTS ABOUT A FUND. "Yield" for each class of shares is calculated by dividing the annualized net investment income per share of such class during a recent 30- day period by the maximum public offering price per share of such class on the last day of that period. For this purpose, net investment income is calculated in accordance with SEC regulations and may differ from net investment income as determined for financial reporting purposes. SEC regulations require that net investment income be calculated on a "yield-to- maturity" basis, which has the effect of amortizing any premiums or discounts in the current market value of fixed-income securities. The current dividend rate is based on that Fund's net investment income as determined for financial statement purposes, which may not reflect amortization in the same manner. See "How objectives are pursued --Investments in premium securities." A Fund's yield reflects the deduction of the maximum initial sales charge in the case of Class A shares, but does not reflect the deduction of any contingent deferred sales charge in the case of Class B shares. "Tax-equivalent" yield for each class of shares shows the effect on performance of the tax-exempt status of distributions received from a Fund. It reflects the approximate yield that a taxable investment must earn for shareholders at stated income levels to produce an after-tax yield equivalent to a Fund's tax-exempt yield. "Total return" for the one-year period and the life of each Fund (or, for the life of a class, if shorter) through the most recent calendar quarter represents the average annual compounded rate of return on an investment of $1,000 in the Fund invested at the maximum public offering price (in the case of Class A shares) or reflecting the deduction of any applicable contingent deferred sales charge (in the case of Class B shares). Total return may also be presented for other periods or based on investment at reduced sales charge levels . Any quotation of investment performance not reflecting the maximum initial sales charge or contingent deferred sales charge would be reduced if such sales charge were used. ALL DATA IS BASED ON A FUND'S PAST INVESTMENT RESULTS AND DOES NOT PREDICT FUTURE PERFORMANCE. Investment performance, which will vary, is based on many factors, including market conditions, the composition of a Fund's portfolio, a Fund's operating expenses and whether you purchase Class A shares or Class B shares. Investment performance also often reflects the risks associated with a Fund's investment objective and policies. These factors should be considered when comparing a Fund's investment results to those of other mutual funds and other investment vehicles. Quotations of investment performance for any period when an expense limitation was in effect will be greater than if the limitation had not been in effect. Each Fund's performance may be compared to various indices. See the Statement of Additional Information. HOW THE FUNDS ARE MANAGED THE TRUSTEES OF EACH FUND ARE RESPONSIBLE FOR GENERALLY OVERSEEING THE CONDUCT OF THAT FUND'S BUSINESS. Subject to such policies as the Trustees of each Fund may determine, Putnam Management furnishes a continuing investment program for each Fund and makes investment decisions on its behalf. Subject to the control of the Trustees, Putnam Management also manages each Fund's other affairs and business. Triet Nguyen, Senior Vice President of Putnam Management and Vice President of Putnam Massachusetts Tax Exempt Income Fund II, and Howard K. Manning, Senior Vice President of Putnam Management and Vice President of Putnam Michigan Tax Exempt Income Fund II and Putnam Minnesota Tax Exempt Income Fund II and Thomas C. Goggins, Vice President of Putnam Management and Vice President of Putnam Ohio Tax Exempt Income Fund II, are primarily responsible for the day- to-day management of the indicated Fund's portfolio. Mr. Nguyen has had these responsibilities since 1989, Mr. Manning since June, 1993 and Mr. Goggins since August, 1993. Messrs. Nguyen and Manning have both been employed by Putnam Management since 1985 and 1986, respectively . Mr Goggins has been employed by Putnam Management since June , 1993. From 1989 to 1993, Mr. Goggins was a Portfolio Manager at Transamerica Investment Services, Inc. Each Fund pays all expenses not assumed by Putnam Management, including Trustees' fees, auditing, legal, custodial, investor servicing and shareholder reporting expenses and payments under its Distribution Plans (which are in turn allocated to the relevant class of shares). Each Fund also reimburses Putnam Management for the compensation and related expenses of certain officers of that Fund and their staff who provide administrative services to that Fund. The total reimbursement is determined annually by the Trustees. Putnam Management places all orders for purchases and sales of a Fund's securities. In selecting broker-dealers, Putnam Management may consider research and brokerage services furnished to it and its affiliates. Subject to seeking the most favorable price and execution available, Putnam Management may consider sales of shares of a Fund (and, if permitted by law, of the other Putnam funds) as a factor in the selection of broker-dealers. ORGANIZATION AND HISTORY Each Fund is a separate Massachusetts business trust (a "Trust"). Putnam Massachusetts Tax Exempt Income Fund II was organized on March 7, 1986. Each of Putnam Michigan Tax Exempt Income Fund II , Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II was organized on September 2, 1986. A copy of each Fund's Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of State of The Commonwealth of Massachusetts. Each Fund is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest. Shares of each Fund may, without shareholder approval, be divided into two or more series of such shares representing separate investment portfolios. Any such series of shares may be further divided, without shareholder approval, into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees determine. Each Fund's shares are currently divided into two classes. Each share has one vote, with fractional shares voting proportionally. Shares of each class will vote together as a single class except when required by law or as determined by the Trustees. Shares are freely transferable, are entitled to dividends as declared by the Trustees, and, if a Fund were liquidated, would receive the net assets of that Fund. A Fund may suspend the sale of shares at any time and may refuse any order to purchase shares. Although none of the Funds is required to hold annual meetings of its shareholders, shareholders holding at least 10% of the outstanding shares entitled to vote have the right to call a meeting to elect or remove Trustees , or to take other actions as provided in each Fund's Agreement and Declaration of Trust. Although each Fund is offering only its own shares in this Prospectus, it is possible that a Fund might become liable for any misstatement in the Prospectus about another Fund. The Trustees of each Fund have considered this factor in approving the use of a single prospectus. If you own fewer shares than a minimum amount set by the Trustees (presently 20 shares), a Fund may choose to redeem your shares and pay you for them. You will receive at least 30 days' written notice before a Fund redeems your shares, and you may purchase additional shares at any time to avoid a redemption. A Fund may also redeem shares if you own shares above a maximum amount set by the Trustees. There is presently no maximum, but the Trustees may establish one at any time, which could apply to both present and future shareholders. THE FUNDS' TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of the Putnam funds. Chairman and Director of Putnam Management and Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director, Marsh & McLennan Companies, Inc.; WILLIAM F. POUNDS, VICE CHAIRMAN. Professor of Management, Alfred P. Sloan School of Management, M.I.T.;JAMESON ADKINS BAXTER, President, Baxter Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American Management; JOHN A. HILL, Principal and Managing Director, First Reserve Corporation; ELIZABETH T. KENNAN, President, Mount Holyoke College; LAWRENCE J. LASSER,* Vice President of the Putnam funds. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Management. Director, Marsh & McLennan Companies, Inc.; ROBERT E. PATTERSON, Executive Vice President, Cabot Partners Limited Partnership; DONALD S. PERKINS, Director of various corporations, including AT&T, K mart Corporation and Time Warner Inc.; GEORGE PUTNAM, III,* President, New Generation Research, Inc.; A.J.C. SMITH,* Chairman, Chief Executive Officer and Director, Marsh & McLennan Companies, Inc.; and W. NICHOLAS THORNDIKE, Director of various corporations and charitable organizations, including Providence Journal Co. Also, Trustee and President, Massachusetts General Hospital, and Trustee of Eastern Utilities Associates. The Funds' Trustees are also Trustees of the other Putnam funds. Those marked with an asterisk (*) are "interested persons" of the Fund, Putnam Management or Putnam Mutual Funds. ABOUT YOUR INVESTMENT ALTERNATIVE SALES ARRANGEMENTS This Prospectus offers investors two classes of shares which bear sales charges in different forms and amounts and which bear different levels of expenses: CLASS A SHARES . An investor who purchases Class A shares pays a sales charge at the time of purchase. As a result, Class A shares are not subject to any charges when they are redeemed (except for sales at net asset value in excess of $1 million which are subject to a contingent deferred sales charge). Certain purchases of Class A shares qualify for reduced sales charges. Class A shares currently bear a 12b-1 fee at the annual rate of 0.20% of each Fund's average net assets attributable to Class A shares. See "How to buy shares - Class A shares." CLASS B SHARES . Class B shares are sold without an initial sales charge, but are subject to a contingent deferred sales charge of up to 5% if redeemed within six years. Class B shares also bear a higher 12b-1 fee than Class A shares, currently at the annual rate of 0.85% of each Fund's average net assets attributable to Class B shares. Class B shares will automatically convert into Class A shares, based on relative net asset values, approximately eight years after purchase. Class B shares provide an investor the benefit of putting all of the investor's dollars to work from the time the investment is made, but (until conversion) will have a higher expense ratio and pay lower dividends than Class A shares due to the higher 12b-1 fee. See "How to buy shares -Class B shares." WHICH ARRANGEMENT IS BETTER FOR YOU? The decision as to which class of shares provides a more suitable investment for an investor depends on a number of factors, including the amount and intended length of the investment. Investors making investments that qualify for reduced sales charges might consider Class A shares. Investors who prefer not to pay an initial sales charge might consider Class B shares. Orders for Class B shares for $250,000 or more will be treated as orders for Class A shares or declined. For more information about these sales arrangements, consult your investment dealer or Putnam Investor Services. Sales personnel may receive different compensation depending on which class of shares they sell. Shares may only be exchanged for shares of the same class of another Putnam fund. See "How to exchange shares". HOW TO BUY SHARES You can open a Fund account with as little as $500 and make additional investments at any time with as little as $50. You can buy Fund shares three ways - through most investment dealers, through Putnam Mutual Funds (at 1-800-225-1581), or through a systematic investment plan. If you do not have a dealer, Putnam Mutual Funds can refer you to one. BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS. Complete an order form and return it with a check payable to the Fund in which you are investing to Putnam Mutual Funds, which will act as your agent in purchasing shares through your designated investment dealer. BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular investments of $25 or more per month through automatic deductions from your bank checking account. Application forms are available from your investment dealer or through Putnam Investor Services. Shares are sold at the public offering price based on the net asset value next determined after Putnam Investor Services receives your order. In most cases, in order to receive that day's offering price, Putnam Investor Services must receive your order before the close of regular trading on the New York Stock Exchange. If you buy shares through your investment dealer, the dealer must receive your order before the close of regular trading on the New York Stock Exchange to receive that day's public offering price.
CLASS A SHARES The public offering price of Class A shares is the net asset value plus a sales charge. The Funds receive the net asset value. The sales charge varies depending on the size of your purchase and is allocated between your investment dealer and Putnam Mutual Funds. The current sales charges for each Fund are: SALES CHARGE AS A PERCENTAGE OF AMOUNT OF SALES ------------------ CHARGE REALLOWED NET TO DEALERS AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE OF AT OFFERING PRICE INVESTED PRICE OFFERING PRICE* - --------------------------------------------------------------------------------------------------------- Less than $ 25,000 4.99% 4.75% 4.50% $ 25,000 but less than 100,000 4.71 4.50 4.25 100,000 but less than 250,000 3.90 3.75 3.50 250,000 but less than 500,000 3.09 3.00 2.75 500,000 but less than 1,000,000 2.04 2.00 1.85 - ----------------------------------------------------------------------------------------------------- /TABLE *At the discretion of Putnam Mutual Funds, however, the entire sales charge may at times be reallowed to dealers. The Staff of the Securities and Exchange Commission has indicated that dealers who receive more than 90% of the sales charge may be considered underwriters. There is no initial sales charge on purchases of Class A shares of $1 million or more. However, a contingent deferred sales charge ("CDSC") of 1.00% or 0.50%, respectively, is imposed on redemptions of such shares within the first or second year after purchase, based on the lower of the shares' cost and current net asset value. Any shares acquired by reinvestment of distributions will be redeemed without a CDSC. In addition, shares purchased by certain investors investing $1 million or more that have made arrangements with Putnam Mutual Funds and whose dealer of record waived the commission described in the next paragraph are not subject to the CDSC. In determining whether a CDSC is payable, the Fund will first redeem shares not subject to any charge. Putnam Mutual Funds receives the entire amount of any CDSC you pay. See the Statement of Additional Information for more information about the CDSC. Except as stated below, Putnam Mutual Funds pays investment dealers of record commissions on sales of Class A shares of $1 million or more based on an investor's cumulative purchases during the one-year period beginning with the date of the initial purchase at net asset value and each subsequent one-year period beginning with the first purchase at net asset value following the end of the prior period . Such commissions are paid at the rate of 1.00% of the amount under $3 million, 0.50% of the next $47 million and 0.25% thereafter. On sales at net asset value to a participant-directed qualified retirement plan initially investing less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates (including a plan sponsored by an employer with more than 750 employees), Putnam Mutual Funds pays commissions on cumulative purchases during the life of the account at the rate of 1.00% of the amount under $3 million and 0.50% thereafter. On sales at net asset value to all other participant-directed qualified retirement plans, Putnam Mutual Funds pays commissions on the initial investment and on subsequent net quarterly sales at the rate of 0.15%. YOU MAY BE ELIGIBLE TO BUY CLASS A SHARES AT REDUCED SALES CHARGES. Consult your investment dealer or Putnam Mutual Funds for details about Putnam's Combined Purchase Privilege, Cumulative Quantity Discount, Statement of Intention, Group Sales Plan, Employee Benefit Plans and other plans. Descriptions are also included in the order form and in the Statement of Additional Information. Shares may also be sold at net asset value to certain categories of investors, and the CDSC may be waived under certain circumstances. See "How to buy shares -- General" below. CLASS B SHARES Class B shares are sold without an initial sales charge, although a CDSC will be imposed if you redeem shares within six years of purchase. The following types of shares may be redeemed without charge at any time: (i) shares acquired by reinvestment of distributions and (ii) shares otherwise exempt from the CDSC, as described in "How to buy shares-General" below. For other shares , the amount of the charge is determined as a percentage of the lesser of the current market value or the cost of the shares being redeemed. The amount of the CDSC will depend on the number of years since you invested and the dollar amount being redeemed, according to the following table: Contingent Deferred Sales Charge as a Percentage of Year Since Purchase Dollar Amount Payment Made Subject to Charge - ----------------------------------------------------------------- 0-1 5.0% 1-2 4.0% 2-3 3.0% 3-4 3.0% 4-5 2.0% 5-6 1.0% 6 and thereafter None In determining whether a CDSC is payable on any redemption, a Fund will first redeem shares not subject to any charge, and then shares held longest during the six-year period. For this purpose, the amount of any increase in a share's value above its initial purchase price is not used in determinig the CDSC. Thus, when a share that has appreciated in value is redeemed during the six-year period, a CDSC is assessed on its initial purchase price. For information on how sales charges are calculated if you exchange your shares, see "How to exchange shares." Putnam Mutual Funds receives the entire amount of any CDSC you pay. CONVERSION OF CLASS B SHARES. Class B shares will automatically convert into Class A shares at the end of the month eight years after the purchase date, except as noted below. Class B shares acquired by exchanging Class B shares of another Putnam Fund will convert into Class A shares based on the time of the initial purchase. Class B shares acquired through reinvestment of distributions will convert into Class A shares based on the date of the initial purchase to which such shares relate. For this purpose, Class B shares acquired through reinvestment of distributions will be attributed to particular purchases of Class B shares in accordance with such procedures as the Trustees may determine from time to time. The conversion of Class B shares to Class A shares is subject to the continuing availability of a ruling from the Internal Revenue Service or an opinion of counsel that such conversions will not constitute taxable events for Federal income tax purposes. There can be no assurance that such ruling or opinion will be available, and the conversion of Class B shares to Class A shares will not occur if such ruling or opinion is not available. In such event, Class B shares would continue to be subject to higher expenses than Class A shares for an indefinite period. GENERAL Each Fund may sell Class A and Class B shares at net asset value without an initial sales charge or CDSC to that Fund's current and retired Trustees (and their families), current and retired employees (and their families) of Putnam Management and affiliates, registered representatives and other employees (and their families) of broker-dealers having sales agreements with Putnam Mutual Funds, employees (and their families) of financial institutions having sales agreements with Putnam Mutual Funds (or otherwise having an arrangement with a broker-dealer or financial institution with respect to sales of Fund shares), financial institution trust departments investing an aggregate of $1 million or more in Putnam funds, clients of certain administrators of tax-qualified plans, employee benefit plans of companies with more than 750 employees, tax-qualified plans when proceeds from repayments of loans to participants are invested (or reinvested) in Putnam funds, "wrap accounts" for the benefit of clients of broker-dealers, financial institutions or financial planners adhering to certain standards established by Putnam Mutual Funds, and investors meeting certain requirements who sold shares of certain Putnam closed-end funds pursuant to a tender offer by the closed-end fund. In addition, a Fund may sell shares at net asset value without an initial sales charge or a CDSC in connection with the acquisition by a Fund of assets of an investment company or personal holding company, and the CDSC will be waived on redemptions of shares arising out of death or disability or in connection with certain withdrawals from IRA or other retirement plans. Up to 12% of the value of Class B shares subject to a Systematic Withdrawal Plan may also be redeemed each year without a CDSC. See the Statement of Additional Information. Shareholders of other Putnam funds may be entitled to exchange their shares for, or reinvest distributions from their funds in, shares of a Fund at net asset value. If you are considering redeeming or exchanging shares or transferring shares to another person shortly after purchase, you should pay for those shares with a certified check to avoid any delay in redemption, exchange or transfer. Otherwise a Fund may delay payment until the purchase price of those shares has been collected or, if you redeem by telephone, until 15 calendar days after the purchase date. To eliminate the need for safekeeping, a Fund will not issue certificates for your shares unless you request them. Putnam Mutual Funds may, at its expense, provide additional promotional incentives or payments to dealers that sell shares of the Putnam funds. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares or paid by dealers to their employees based on pre-established sales levels. Certain dealers may not sell all classes of shares. DISTRIBUTION PLANS CLASS A DISTRIBUTION PLANS. The Class A Plans provide for payments by the Funds to Putnam Mutual Funds at the annual rate of up to 0.35% of the Funds' average net assets attributable to Class A shares . The Trustees currently limit payments under the Class A Plans to the annual rate of 0.20% of such assets. Should the Trustees decide in the future to approve payments in excess of this amount, shareholders will be notified and this Prospectus will be revised. In order to compensate investment dealers (including, for this purpose, certain financial institutions) for services provided in connection with sales of Class A shares of the Funds and the maintenance of shareholder accounts, Putnam Mutual Funds makes quarterly payments to qualifying dealers based on the average net asset value of Class A shares of the Funds which are attributable to shareholders for whom the dealers are designated as the dealer of record. This calculation excludes until one year after purchase shares purchased at net asset value by shareholders investing $1 million or more and by participant-directed qualified retirement plans sponsored by employers with more than 750 employees ("NAV Shares"), except for shares owned by certain investors investing $1 million or more that have made arrangements with Putnam Mutual Funds and whose dealer of record waived the sales commission. Except as stated below, Putnam Mutual Funds makes such payments at the annual rate of 0.15% of the average net asset value of Class A shares outstanding as of March 9, 1992 (for the Michigan, Minnesota and Ohio Funds) and as of May 11, 1992 (for the Massachusetts Fund) and 0.20% of the average net asset value of Class A shares acquired after such dates (including Class A shares acquired through reinvestment of distributions.) For participant-directed qualified retirement plans initially investing less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates, Putnam Mutual Funds' payments to qualifying dealers on NAV Shares are 100% of the rate stated above if average plan assets in Putnam funds (excluding money market funds) during the quarter are less than $20 million, 60% of the stated rate if average plan assets are at least $20 million but less than $30 million, and 40% of the stated rate if average plan assets are $30 million or more. For all other participant-directed qualified retirement plans purchasing NAV Shares, Putnam Mutual Funds makes quarterly payments to qualifying dealers at the annual rate of 0.10% of the average net asset value of such shares. CLASS B DISTRIBUTION PLANS . The Class B Plans provide for payments by each Fund to Putnam Mutual Funds at the annual rate of up to 1.00% of each Fund's average net assets attributable to Class B shares . The Trustees currently limit payments under the Class B Plan to the annual rate of 0.85% of such assets. Should the Trustees decide in the future to approve payments in excess of this amount, shareholders will be notified and this Prospectus will be revised. Putnam Mutual Funds also receives the proceeds of any CDSC imposed on redemptions of Fund shares. Although Class B shares are sold without an initial sales charge, Putnam Mutual Funds pays a sales commission equal to 4.00% of the amount invested (including a prepaid service fee of 0.20% of the amount invested) to dealers who sell Class B shares. These commissions are not paid on exchanges from other Putnam funds and sales to investors exempt from the CDSC. In addition, in order to further compensate dealers (including, for this purpose, certain financial institutions) for services provided in connection with sales of Class B shares and the maintenance of shareholder accounts, Putnam Mutual Funds makes quarterly payments to qualifying dealers based on the average net asset value of Class B shares which are attributable to shareholders for whom the dealers are designated as the dealer of record, except for the first year's service fees, which are prepaid as described above. Putnam Mutual Funds makes such quarterly payments at an annual rate of 0.20% of the average net asset value of such shares. GENERAL. Payments under the Plans are intended to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of each of the Fund's Class A shares, including the payments to dealers mentioned above. Putnam Mutual Funds may suspend or modify such payments made to dealers described above, and such payments are subject to the continuation of each Fund's relevant Distribution Plan, the terms of Service Agreements between dealers and Putnam Mutual Funds, and any applicable limits imposed by the National Association of Securities Dealers, Inc. HOW TO SELL SHARES You can sell your shares to your Fund any day the New York Stock Exchange is open, either directly to the Fund or through your investment dealer. A Fund will only redeem shares for which it has received payment. SELLING SHARES DIRECTLY TO YOUR FUND. Send a signed letter of instruction or stock power form to Putnam Investor Services, along with any certificates that represent shares you want to sell. The price you will receive is the next net asset value calculated after your Fund receives your request in proper form, less any applicable CDSC. In order to receive that day's net asset value, Putnam Investor Services must receive your request before the close of regular trading on the New York Stock Exchange. If you sell shares of a Fund having a net asset value of $100,000 or more, the signatures of the registered owners or their legal representatives must be guaranteed by a bank, broker-dealer or certain other financial institutions. See the Statement of Additional Information for more information about where to obtain a signature guarantee. Stock power forms are available from your investment dealer, Putnam Investor Services and many commercial banks. If you want your redemption proceeds sent to an address other than your address as it appears on Putnam's records, a signature guarantee is required. Putnam Investor Services usually requires additional documentation for the sale of shares by a corporation, partnership, agent or fiduciary, or a surviving joint owner. Contact Putnam Investor Services for details. A FUND GENERALLY SENDS YOU PAYMENT FOR YOUR SHARES THE BUSINESS DAY AFTER YOUR REQUEST IS RECEIVED. Under unusual circumstances, a Fund may suspend redemptions , or postpone payment for more than seven days, as permitted by federal securities law. You may use Putnam's Telephone Redemption Privilege to redeem shares valued up to $100,000 from your account unless you have notified Putnam Investor Services of an address change within the preceding 15 days. Unless an investor indicates otherwise on the Account Application, Putnam Investor Services will be authorized to act upon redemption and transfer instructions received by telephone from a shareholder, or any person claiming to act as his or her representative, who can provide Putnam Investor Services with his or her account registration and address as it appears on Putnam Investor Services' records. Putnam Investor Services will employ these and other reasonable procedures to confirm that instructions communicated by telephone are genuine; if it fails to employ reasonable procedures, Putnam Investor Services may be liable for any losses due to unauthorized or fraudulent instructions. For information, consult Putnam Investor Services. During periods of unusual market changes and shareholder activity, you may experience delays in contacting Putnam Investor Services by telephone, in which case you may wish to submit a written redemption request as described above, or contact your investment dealer, as described below. The Telephone Redemption Privilege is not available if you were issued certificates for your shares which remain outstanding. The Telephone Redemption Privilege may be modified or terminated without notice. SELLING SHARES THROUGH YOUR INVESTMENT DEALER. Your dealer must receive your request before the close of regular trading on the New York Stock Exchange to receive that day's net asset value. Your dealer will be responsible for furnishing all necessary documentation to Putnam Investor Services, and may charge for its services. HOW TO EXCHANGE SHARES You can exchange your shares for shares of the same class of certain other Putnam funds at net asset value beginning 15 days after purchase. If you exchange shares subject to a CDSC , the transaction will not be subject to the CDSC. However, when you redeem the shares acquired through the exchange, the redemption may be subject to the CDSC, depending upon when you originally purchased the shares and using the schedule of any fund into or from which you have exchanged your shares that would result in your paying the highest CDSC applicable to your class of shares. For purposes of computing the CDSC, the length of time you have owned your shares will be measured from the date of original purchase and will not be affected by any exchange. To exchange your shares, simply complete an Exchange Authorization Form and send it to Putnam Investor Services. Exchange Authorization Forms are available by calling or writing Putnam Investor Services. For federal income tax purposes, an exchange is treated as a sale of shares and generally results in a capital gain or loss. A Telephone Exchange Privilege is currently available for amounts up to $500,000. Putnam Investor Services' procedures for telephonic transactions are described above under "How to sell shares." The Telephone Exchange Privilege is not available if you were issued certificates for shares which remain outstanding. Ask your investment dealer or Putnam Investor Services for prospectuses of other Putnam funds. Shares of certain Putnam funds are not available to residents of all states. The exchange privilege is not intended as a vehicle for short- term trading. Excessive exchange activity may interfere with portfolio management and have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where Putnam Management or the Trustees believe doing so would be in the best interests of a Fund, the Fund reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Shareholders would be notified of any such action to the extent required by law. Consult Putnam Investor Services before requesting an exchange. See the Statement of Additional Information to find out more about the exchange privilege. HOW THE FUNDS VALUE THEIR SHARES EACH FUND CALCULATES THE NET ASSET VALUE OF A SHARE OF EACH CLASS BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS LIABILITIES, BY THE NUMBER OF SHARES OUTSTANDING. SHARES ARE VALUED AS OF THE CLOSE OF REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE EACH DAY THE EXCHANGE IS OPEN. Tax-exempt securities (including State Tax Exempt Securities) are stated on the basis of valuations provided by a pricing service approved by the Trustees, which uses information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. Each Fund believes that reliable market quotations generally are not readily available for purposes of valuing its portfolio securities. As a result, it is likely that most of the valuations provided by such pricing service will be based upon fair value determined on the basis of the factors listed above. Non-tax-exempt securities for which market quotations are readily available are stated at market value. Short-term investments that will mature in 60 days or less are stated at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION EACH FUND DECLARES ALL OF ITS NET INTEREST INCOME AS A DISTRIBUTION ON EACH DAY IT IS OPEN FOR BUSINESS. Net interest income consists of interest accrued on portfolio investments of a Fund, less accrued expenses, computed in each case since the most recent determination of net asset value. Normally, a Fund pays distributions of net interest income monthly. A Fund will distribute at least annually all net realized capital gains, if any, after applying any available capital loss carryovers. A capital loss carryover is currently available for the Michigan, Minnesota and Ohio Funds . Distributions paid by a Fund with respect to Class A shares will generally be greater than those paid with respect to Class B shares because expenses attributable to Class B shares will generally be higher. You begin earning distributions on the business day that Putnam Mutual Funds receives payment for your shares. It is your responsibility to see that your dealer forwards payment promptly. YOU CAN CHOOSE FROM THREE DISTRIBUTION OPTIONS: (1) reinvest all distributions in additional shares of your Fund without a sales charge; (2) receive distributions from net interest income in cash while reinvesting net capital gains distributions, if any, in additional shares of your Fund without a sales charge; or (3) receive all distributions in cash. You can change your distribution option by notifying Putnam Investor Services in writing. If you do not select an option when you open your account, all distributions will be reinvested. All distributions not paid in cash will be reinvested in shares of the class on which the distribution is paid. You will receive a statement confirming reinvestment of distributions in additional Fund shares (or in shares of other Putnam funds for Dividends Plus accounts) promptly following the quarter in which the reinvestment occurs. If a check representing a Fund distribution is not cashed within a specified period, Putnam Investor Services will notify you that you have the option of requesting another check or reinvesting the distribution in your Fund or in another Putnam fund. If Putnam Investor Services does not receive your election, the distribution will be reinvested in that Fund. Similarly, if correspondence sent by a Fund or Putnam Investor Services is returned as "undeliverable," Fund distributions will automatically be reinvested in the Fund or in another Putnam fund. FEDERAL TAXES Each Fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements that are necessary for that Fund to be relieved of federal taxes on income and gains it distributes to shareholders. Each Fund will distribute substantially all of its ordinary income and capital gain net income on a current basis. Distributions designated by the Funds as "exempt-interest dividends" are not generally subject to federal income tax. However, if you receive Social Security or railroad retirement benefits, you should consult your tax adviser to determine what effect, if any, an investment in a Fund may have on the taxation of your benefits. In addition, an investment in a Fund may result in liability for federal alternative minimum tax and state and local taxes, both for individual and corporate shareholders. The Funds may at times purchase State Tax Exempt Securities at a discount from the price at which they were initially issued. For federal income tax purposes, some or all of the market discount will be included in the Funds' ordinary income and will be taxable as such to shareholders when it is distributed to them. Each Fund's distributions other than exempt-interest dividends will be taxable to you as ordinary income, except that any distributions of net long-term capital gains will be taxable to you as such, regardless of how long you have held your shares. Distributions will be taxable as described above whether received in cash or in shares through the reinvestment of distributions. Early in each year the Funds will notify you of the amount and tax status of distributions paid to you by that Fund for the preceding year. STATE TAXES GENERAL. Except as described below, to the extent not tax- exept under each state's income tax purposes (and Michigan intangibles and single business tax ) , your proportionate share of distributions from a Fund's net investment income and short-term capital gains, if any, will be taxable as ordinary income, whether you take them in cash or reinvest them in additional shares of that Fund (except that distributions reinvested in shares of the Michigan Fund are exempt from Michigan intangibles tax). MASSACHUSETTS. Distributions received from Putnam Massachusetts Tax Exempt Income Fund II are exempt from Massachusetts personal income tax to the extent that they are derived from interest on Massachusetts State Tax Exempt Securities and are designated as such. The Fund has obtained a tax ruling which recognizes for Massachusetts personal income tax purposes the tax exempt character of gains realized by the Fund on the sale of certain Massachusetts State Tax Exempt Securities when those gains are distributed to shareholders and designated as such. Distributions from investment income and capital gains, including exempt-interest dividends, may be subject to Massachusetts corporate excise tax. MICHIGAN. Distributions received from Putnam Michigan Tax Exempt Income Fund II are exempt from Michigan personal income tax and Michigan intangibles tax to the extent they are derived from interest on Michigan State Tax Exempt Securities, under the current position of the Michigan Department of Treasury. Such distributions, if received in connection with a shareholder's business activity, may, however, be subject to Michigan single business tax. See the Statement of Additional Information. For Michigan personal income tax, intangibles tax and single business tax purposes, Fund distributions attributable to any source other than interest on Michigan State Tax Exempt Securities will be fully taxable. Fund distributions may be subject to the uniform city income tax imposed by certain Michigan cities. MINNESOTA. Shareholders of Putnam Minnesota Tax Exempt Income Fund II who are individuals, estates or trusts will not be subject to Minnesota personal income tax on Fund distributions to the extent that such distributions qualify as exempt-interest dividends and represent interest income attributable to interest on Minnesota State Tax Exempt Securities, provided that at least 95% of the Fund's total exempt-interest dividends are derived from interest on obligations of the State of Minnesota and its agencies, instrumentalities and political subdivisions. Exempt-interest dividends attributable to interest on certain private activity bonds issued after August 7, 1986 will be included in Minnesota "alternative taxable income" of individuals, estates and trusts for purposes of computing Minnesota's alternative minimum tax. Losses of individuals, estates and trusts that are disallowed or treated as long-term losses under current federal law by reason of the shareholder's receipt of exempt-interest dividends or capital gain dividends, respectively, are treated similarly under Minnesota law, notwithstanding, in the case of exempt-interest dividends, that such dividends may not be fully excludible from Minnesota gross income. Fund distributions are not excluded in determining the Minnesota franchise tax on corporations measured by net income or the Minnesota alternative minimum tax on corporations. OHIO. Distributions received from Putnam Ohio Tax Exempt Income Fund II are exempt from Ohio personal income tax, Ohio school district income taxes and Ohio municipal income taxes to the extent they are derived from interest on obligations issued by the State of Ohio or its political subdivisions or authorities ("Ohio State Securities"), provided that the Fund continues to qualify as a regulated investment company for federal income tax purposes and that at all times at least 50% of the value of the total assets of the Fund consist of Ohio State Securities or similar obligations of other states or their subdivisions. It is assumed for purposes of this discussion of Ohio taxation that these requirements are satisfied. All distributions received from the Fund are excluded from the net income base of the Ohio corporation franchise tax to the extent that they are either exempt from federal income tax or derived from interest on Ohio State Securities, but the Fund's shares will be included in the computation of net worth for purposes of such tax. Distributions of capital gain with respect to shares of the Fund will be exempt from Ohio personal income tax, Ohio school district income taxes, and Ohio municipal income taxes, and will be excluded from the net income base of the Ohio corporation franchise tax, in each case to the extent that such distributions are attributable to profit made on the sale, exchange or other disposition by the Fund of Ohio State Securities. Distributions that are attributable to interest on obligations of the United States or of any authority, commission, or instrumentality of the United States ("Federal Securities") or obligations of Puerto Rico, the Virgin Islands, or Guam or their authorities or instrumentalities ("Territorial Securities") will be exempt from Ohio personal income tax, Ohio school district income taxes, and Ohio municipal income taxes, and are excluded from the net income base of the Ohio corporation franchise tax, in each case to the same extent that such interest would be so exempt or excluded if the obligations were held directly by the shareholders. GENERAL The foregoing is a summary of certain federal income tax consequences of investing in a Fund. You should consult your tax adviser to determine the precise effect of an investment in that Fund on your particular tax situation (including possible liability for alternative minimum tax and for state and local taxes). ABOUT PUTNAM INVESTMENTS, INC . PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937. Putnam Mutual Funds is the principal underwriter of each Fund and of other Putnam funds. Putnam Fiduciary Trust Company is each Fund's custodian. Putnam Investor Services, a division of Putnam Fiduciary Trust Company, is each Fund's investor servicing and transfer agent. Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust Company are subsidiaries of Putnam Investments, Inc., which is wholly-owned by Marsh & McLennan Companies, Inc., a publicly owned holding company whose principal businesses are international insurance and reinsurance brokerage, employee benefit consulting and investment management. APPENDIX TAX-EXEMPT SECURITY RATINGS The ratings services' descriptions of the tax-exempt securities in which the Funds will invest are: MOODY'S INVESTORS SERVICE, INC.: BONDS AAA -- Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. AA -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A -- Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. BAA -- Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. BA -- Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. Moody's ratings for state and municipal notes and other short- term loans are designated Moody's Investment Grade (MIG). This distinction is in recognition of the differences between short- term credit risk and long-term risk. Factors affecting the liquidity of the borrower are uppermost in importance in short- term borrowing, while various factors of the first importance in bond risk are of lesser importance in the short run. Loans bearing the MIG 1 designation are of the best quality, enjoying strong protection from established cash flows of funds for their servicing or from established and broad-based access to the market for refinancing, or both. Loans bearing the MIG 2 designation are of high quality, with margins of protection ample although not so large as in the preceding group. STANDARD & POOR'S CORPORATION: BONDS AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's to a debt obligation. Capacity to pay interest and repay principal is extremely strong. AA -- Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A -- Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than for debt in higher rated categories. BB -- Debt rated BB is regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. RATINGS OF CORPORATE OBLIGATIONS The Moody's corporate obligations ratings of Aaa, Aa, A and Baa and the Standard & Poor's corporate obligations ratings of AAA, AA, A and BBB do not differ materially from those set forth above for tax-exempt securities. RATINGS OF COMMERCIAL PAPER The commercial paper ratings of A-1+ by Standard & Poor's and Prime-1 by Moody's are the highest commercial paper ratings of the respective agencies. The issuer's earnings, quality of long- term debt, management and industry position are among the factors considered in assigning such ratings. PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II PUTNAM OHIO TAX EXEMPT INCOME FUND II One Post Office Square Boston, MA 02109 FUND INFORMATION INVESTMENT MANAGER: Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 INVESTOR SERVICING AGENT Putnam Investor Services Mailing address: P.O. Box 41203 Providence, RI 02940-1203 CUSTODIAN Putnam Fiduciary Trust Company One Post Office Square Boston, MA 02109 LEGAL COUNSEL Ropes & Gray One International Place Boston, MA 02110 INDEPENDENT ACCOUNTANTS Michigan and Ohio Funds Coopers & Lybrand L.L.P. One Post Office Square Boston, MA 02109 Massachusetts and Minnesota Funds Price Waterhouse LLP 160 Federal Street Boston, MA 02110 PUTNAMINVESTMENTS One Post Office Square Boston, Massachusetts 02109 Toll-free 1-800-225-1581 PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II PUTNAM MICHIGAN TAX EXEMPT IN COME FUND II PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II PUTNAM OHIO TAX EXEMPT INCOME FUND II FORM N-1A PART B STATEMENT OF ADDITIONAL INFOR MATION OCTOBER 1, 1994 This Statement of Additional Information is not a Prospectus and is only authorized for distribution when accompanied or preceded by the Prospectus of the Funds dated October 1, 1994, as revised from time to time . This Statement contains information which may be useful to investors but which is not included in the Prospectus. If a Fund has more than one form of current Prospectus, each reference to the Prospectus in this Statement shall include all of that Fund's Prospectuses, unless otherwise noted. The Statement should be read together with the applicable Prospectus. Investors may obtain a free copy of the applicable Prospectus from Putnam Investor Services, Mailing address: P.O. Box 41203, Providence, RI 02940-1203. Part I of this Statement contains specific information about each Fund. Part II includes information about the Funds and the other Putnam funds. TABLE OF CONTENTS PART I PAGE STATE TAX EXEMPT SECURITIES. . . . . . . . . . . . . . . . . . . . . . .I-3 INVESTMENT RESTRICTIONS OF THE FUNDS . . . . . . . . . . . . . . . . . .I-5 FUND CHARGES AND EXPENSES. . . . . . . . . . . . . . . . . . . . I- 8 INVESTMENT PERFORMANCE OF THE FUNDS. . . . . . . . . . . . . . . . . . I-16 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .I- 34 EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES . . . .I- 36 ADDITIONAL OFFICERS OF THE FUNDS . . . . . . . . . . . . . . . .I- 40 INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . .I- 40 PART II MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-22 MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . II- 27 DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . II- 36 HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . II- 38 DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . II- 49 INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . II- 50 SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . II- 56 SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-56 SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . II- 57 STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . II- 57 COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-58 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . II- 63 PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II PUTNAM OHIO TAX EXEMPT INCOME FUND II STATEMENT OF ADDITIONAL INFORMATION PART I STATE TAX EXEMPT SECURITIES GENERAL DESCRIPTION. As used in the Prospectus and in this Statement, the term "State Tax Exempt Securities" refers to debt obligations issued by a state and its political subdivisions (for example, counties, cities, towns, districts and authorities) and their agencies, instrumentalities or other governmental units, the interest from which is, in the opinion of bond counsel, exempt from both federal income tax and the personal income tax of the state specified in the Fund's name. Such obligations are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which State Tax Exempt Securities may be issued include the refunding of outstanding obligations or obtaining funds for general operating expenses. Short-term State Tax Exempt Securities are generally issued by State and local governments and public authorities as interim financing in anticipation of tax collection . In addition, certain types of "private activity" bonds may be issued by public authorities to finance such projects as privately operated housing facilities and certain local facilities for water supply, gas, electricity or sewage or solid waste disposal, student loans, or to obtain funds to lend to public or private institutions for the construction of facilities such as educational, hospital and housing facilities. Such obligations are included within the term State Tax Exempt Securities if the interest paid thereon is, in the opinion of bond counsel, exempt from federal income tax and the personal income tax of the state specified in the Fund's name , except that, for purposes of measuring compliance with each Fund's policy of investing at least 80% of its net assets in State Tax Exempt Securities, private activity bonds will not be treated as State Tax Exempt Securities if they could give rise to interest subject to federal alternative minimum tax in the hands of individuals . Other types of private activity bonds, the proceeds of which are used for the construction, repair or improvement of, or to purchase equipment for, privately operated industrial or commercial facilities, may constitute State Tax Exempt Securities, although the current federal tax laws place substantial limitations on the size of such issues. State Tax Exempt Securities also include short-term discount notes (tax- exempt commercial paper), which are promissory notes issued by municipalities to enhance their cash flows. YIELDS. The yields on State Tax Exempt Securities depend on a variety of factors, including general money market conditions, effective marginal tax rates, the financial condition of the issuer, general conditions of the State Tax Exempt Security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of Moody's and Standard & Poor's represent their opinions as to the quality of the State Tax Exempt Securities which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, State Tax Exempt Securities with the same maturity and interest rate but with different ratings may have the same yield. Yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates, due to such factors as changes in the overall demand or supply of various types of State Tax Exempt Securities or changes in the investment objectives of investors. Subsequent to purchase by a Fund, an issue of State Tax Exempt Securities or other investments may cease to be rated or its rating may be reduced below the minimum rating required for purchase by a Fund. Neither event will require the elimination of an investment from a Fund's portfolio, but Putnam Management will consider such an event in its determination of whether a Fund should continue to hold an investment in its portfolio. "MORAL OBLIGATION" BONDS. Each Fund does not currently intend to invest in so-called "moral obligation" bonds, where payment is backed by a moral commitment of an entity other than the issuer, unless the credit of the issuer itself, without regard to the "moral obligation", meets the investment criteria established for investments by a Fund. ADDITIONAL RISKS. Securities in which each Fund may invest, including State Tax Exempt Securities, are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code, and to laws, if any, which may be enacted by Congress or the appropriate state legislature extending the time for repayment of principal or payment of interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that as a result of litigation or other conditions the power or ability of issuers to meet their obligations for the payment of interest and repayment of principal on their State Tax Exempt Securities may be materially affected. From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating the federal income tax exemption for interest on debt obligations issued by states and their political subdivisions. Federal tax laws limit the types and amounts of tax-exempt bonds issuable for certain purposes, especially industrial development bonds and other types of so-called "private activity bonds." Such limits may affect the future supply and yields of these types of State Tax Exempt Securities. Further proposals limiting the issuance of tax-exempt bonds may well be introduced in the future. If it appeared that the availability of State Tax Exempt Securities for investment by a Fund and the value of that Fund's portfolio could be materially affected by such changes in law, the Trustees of that Fund would reevaluate its investment objective and policies and consider changes in the structure of that Fund or dissolution. ----------------- INVESTMENT RESTRICTIONS OF THE FUNDS AS FUNDAMENTAL INVESTMENT RESTRICTIONS, WHICH MAY NOT BE CHANGED WITHOUT A VOTE OF A MAJORITY OF THE OUTSTANDING VOTING SECURITIES, EACH FUND MAY NOT AND WILL NOT: (1) Borrow money in excess of 10% of the value (taken at the lower of cost or current value) of its total assets (not including the amount borrowed) at the time the borrowing is made, and then only from banks as a temporary measure to facilitate the meeting of redemption requests (not for leverage) which might otherwise require the untimely disposition of portfolio investments or for extraordinary or emergency purposes. Such borrowings will be repaid before any additional investments are purchased. (2) Pledge, hypothecate, mortgage or otherwise encumber its assets in excess of 15% of its total assets (taken at current value) in connection with borrowings permitted by restriction 1 above. (3) Purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities, and except that it may make margin payments in connection with options on financial futures contracts and on futures contracts. (4) Make short sales of securities or maintain a short sale position for the account of the Fund unless at all times when a short position is open it owns an equal amount of such securities or owns securities which, without payment of any further consideration, are convertible into or exchangeable for securities of the same issue as, and equal in amount to, the securities sold short. (5) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws. (6) Purchase or sell real estate, although it may purchase or sell securities which are secured by or represent interests in real estate. (7) Purchase or sell commodities or commodity contracts, except that the Fund may write and purchase options on financial futures contracts and buy and sell financial futures contracts. (8) Make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies, or by entering into repurchase agreements with respect to not more than 25% of its total assets (taken at current value). (9) Invest in securities of any issuer if, to the knowledge of the Fund, officers and Trustees of the Fund and officers and directors of Putnam Management who beneficially own more than 0.5% of the shares or securities of that issuer together own more than 5%. (10) Invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the Fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest and principal by the U.S. government, its agencies or instrumentalities or to State Tax Exempt Securities. (11) Acquire more than 10% of the voting securities of any issuer. (12) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities and State Tax Exempt Securities, except obligations backed only by the assets and revenues of nongovernmental issuers) if as a result of such purchase more than 25% of the Fund's total assets would be invested in any one industry. (13) Purchase securities restricted as to resale, if, as a result, such investments would exceed 15% of the value of the Fund's net assets, excluding restricted securities that have been determined by the Trustees of the Fund (or the person designated by them to make such determinations) to be readily marketable. (14) Buy or sell oil, gas or other mineral leases, rights or royalty contracts. (15) Make investments for the purpose of gaining control of a company's management. (16) Issue any class of securities which is senior to the Fund's shares of beneficial interest. IT IS CONTRARY TO EACH FUND'S PRESENT POLICY, WHICH MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL, TO: (1) Invest in (a) securities which at the time of such investment are not readily marketable, (b) securities restricted as to resale and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 15% of each Fund's net assets (taken at current value) would be invested in securities described in (a), (b) and (c) above. (2) Invest in warrants (other than warrants acquired by the Fund as part of a unit or attached to securities at the time of purchase). (3) Invest in securities of any issuer if the party responsible for payment, together with any predecessors, has been in operation for less than three consecutive years and, as a result of the investment, the aggregate of such investments would exceed 5% of the value of the Fund's net assets; provided, however, that this restriction shall not apply to any obligation of the United States or its agencies or instrumentalities, or to any obligation for the payment of which is pledged the faith, credit and taxing power of any person authorized to issue State Tax Exempt Securities. (4) Invest in the securities of other registered open-end investment companies, except as they may be acquired as part of a merger or consolidation or acquisition of assets. Although certain of the Funds' fundamental investment restrictions permit a Fund to borrow money to a limited extent, the Funds do not currently intend to do so and did not do so last year. --------------------- All percentage limitations on investments will apply at the time of the making of an investment and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment. The Investment Company Act of 1940 provides that a "vote of a majority of the outstanding voting securities" of each Fund means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of a Fund, or (2) 67% or more of the shares present at a meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy. -------------------- For purposes of the Funds' diversification policies, as described in the Prospectus, the issuer of a State Tax Exempt Security is determined on a case by case basis based generally on the nature and extent of the obligations of the entity or entities in question to make (or provide funds for) payment of interest and principal with respect to such State Tax Exempt Security. In this regard, any State Tax Exempt Security guaranteed or otherwise backed by full faith and credit of a governmental entity would generally be considered to represent separate securities issued by such guaranteeing entity and by the primary obligor. However, a guarantee of a State Tax Exempt Security shall not be deemed to be a security issued by the guarantor if the value of all State Tax Exempt Securities guaranteed by the guarantor and owned by the Fund is less than 10% of the value of the total assets of the Fund. State Tax Exempt Securities backed only by the assets and revenues of nongovernmental users will be deemed to be issued by such nongovernmental users. FUND CHARGES AND EXPENSES MANAGEMENT FEES Under each Fund's Management Contract dated July 11, 1991, a Fund pays a quarterly fee to Putnam Management based on the average net assets of that Fund, as determined at the close of each business day during the quarter, at an annual rate of 0.60% of the first $500 million of average net assets, 0.50% of the next $500 million, 0.45% of the next $500 million and 0.40% of any amount over $1.5 billion. For the 1992 , 1993 and 1994 fiscal years, pursuant to each Fund's Management Contract , the Funds incurred fees in the following amounts (which reflect reductions due to expense limitations in effect during certain periods):
1992 1993 1994 -------------------------------- ----------------------------- --------------------------------- MGMT. MGMT. MGMT. FEE REFLECTING A FEE REFLECTING A FEE REFLECTING A PAID REDUCTION OF PAID REDUCTION OF PAID REDUCTION OF ----- ------------ ----- ------------ ----- ------------ Massachusetts Tax Exempt $301,944 $44,320 $1,085,405 $0 $1,549,215 $0 Income Fund II Michigan Tax Exempt $176,355 $47,589 $573,363 $0 $782,934 $0 Income Fund II Minnesota Tax Exempt $107,298 $66,863 $432,104 $0 $589,840 $0 Income Fund II Ohio Tax Exempt Income Fund II $262,597 $55,579 $957,541 $0 $1,206,826 $0 /TABLE
BROKERAGE COMMISSIONS Most purchases and sales of portfolio investments are with underwriters of or dealers in State Tax Exempt Securities and other tax-exempt securities, acting as principal. Accordingly, the Funds do not ordinarily pay significant brokerage commissions. During fiscal 1992, 1993 and 1994 the Funds incurred brokerage commissions on agency transactions and underwriting commissions on underwritten transactions in the following amounts: BROKERAGE UNDERWRITING COMMISSIONS COMMISSIONS ON AGENCY TRANSACTIONS ON UNDERWRITTEN TRANSACTIONS ------------------------ ------------------------ 1992 1993 1994 1992 1993 1994 ---- ---- ---- ---- ---- ---- Massachusetts Tax Exempt $0 $0 $9,696 $73,500 $418,313 $958,344 Income Fund II Michigan Tax Exempt $0 $100 $0 $30,818 $121,500 $599,713 Income Fund II Minnesota Tax Exempt $0 $0 $1,095 $34,250 $81,625 $367,495 Income Fund II Ohio Tax Exempt $0 $0 $6,063 $20,400 $164,500$597,953 Income Fund II /TABLE In fiscal 1994 Putnam Management, on behalf of Putnam Massachusetts Tax Exempt Income Fund II, placed underwritten transactions having an approximate aggregate dollar value of $1,178,610,000 (0.93% of the Fund's underwritten transactions, on which approximately $9,000 of commissions were paid) with brokers and dealers to recognize research, statistical and quotation services Putnam Management considered to be particularly useful to it and its affiliates. In fiscal 1994 Putnam Management, on behalf of Putnam Michigan Tax Exempt Income Fund II, placed underwritten transactions having an approximate aggregate dollar value of $1,412,752,500 (1.88% of the Fund's underwritten transactions, on which approximately $11,250 of commissions were paid) with brokers and dealers to recognize research, statistical and quotation services Putnam Management considered to be particularly useful to it and its affiliates. In fiscal 1994 Putnam Management, on behalf of Putnam Minnesota Tax Exempt Income Fund II, placed underwritten transactions having an approximate aggregate dollar value of $972,500,000 (1.70% of the Fund's underwritten transactions, on which approximately $6,250 of commissions were paid) with brokers and dealers to recognize research, statistical and quotation services Putnam Management considered to be particularly useful to it and its affiliates. In fiscal 1994 Putnam Management, on behalf of Putnam Ohio Tax Exempt Income Fund II, placed underwritten transactions having an approximate aggregate dollar value of $4,497,033,900 (4.64% of the Fund's agency and underwritten transactions, on which approximately $28,031 of commissions were paid) with brokers and dealers to recognize research, statistical and quotation services Putnam Management considered to be particularly useful to it and its affiliates. ADMINISTRATIVE EXPENSE REIMBURSEMENT Each Fund reimbursed Putnam Management in the following amounts for administrative services in fiscal 1994 , including the following amounts for compensation of certain officers of that Fund and contributions to the Putnam Investments, Inc. Profit Sharing Retirement Plan for their benefit: ADMINISTRATIVE COMPENSATION SERVICES AND CONTRIBUTIONS -------------- ----------------- Massachusetts Tax Exempt Income Fund II $6,747 $6,425 Michigan Tax Exempt Income Fund II $5,817 $5,607 Minnesota Tax Exempt Income Fund II $5,637 $5,373 Ohio Tax Exempt Income Fund II $6,362 $6,074 TRUSTEE FEES Each Trustee of a Fund receives an annual fee and additional fee for each Trustees' meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. During fiscal 1994 the Funds incurred the following Trustees fees: AGGREGATE ANNUAL TRUSTEE TRUSTEE FEES FEE PAID IN 1994 ------------- ------------- Massachusetts Tax Exempt Income Fund II $780 $12,987 Michigan Tax Exempt Income Fund II $710 $11,388 Minnesota Tax Exempt Income Fund II $690 $8,493 Ohio Tax Exempt Income Fund II $1,090 $11,208 OWNERSHIP OF FUND SHARES At August 31, 1994 , the officers and Trustees of each Fund as a group owned less than 1% of the outstanding shares of either class of that Fund, and to the knowledge of each Fund no person owned of record or beneficially 5% or more of the shares of either class of that Fund except Merrill Lynch, Pierce, Fenner & Smith, Inc., P.O. Box 30561, New Brunswick, New Jersey, 08989-0561 owned 5.9% and 6.1%, respectively, of the Class A and Class B shares of the Massachusetts Fund, 5.2% of the Class B shares of the Minnesota Fund and 7.5% of the Class B shares of the Ohio Fund.
CLASS A SALES CHARGES, CONTINGENT DEFERRED SALES CHARGES AND 12B-1 FEES During fiscal 1992 , 1993 and 1994 , each Fund incurred the following fees to Putnam Mutual Funds in sales charges on sales of Class A shares of that Fund: SALES CHARGES RECEIVED SALES CHARGES BY PUTNAM MUTUAL AFTER DEALER FUNDS CONCESSIONS ------------------------------- ----------------------------------- 1992 1993 1994 1992 1993 1994 ---- ---- ---- ---- ---- ----- Massachusetts Tax Exempt Income Fund II $1,150,303$2,093,315 $1,740,049 $89,014 $155,124 $140,316 Michigan Tax Exempt Income Fund II $614,160 $1,116,865 $935,249 $65,848 $58,296 $65,629 Minnesota Tax Exempt Income Fund II $439,667 $1,030,088 $670,795 $49,444 $47,238 $41,915 Ohio Tax Exempt Income Fund II $789,447 $1,399,258 $1,129,631 $95,851 $68,352 $73,168
CONTINGENT DEFERRED SALES CHARGES RECEIVED BY PUTNAM MUTUAL FUNDS --------------------------------- 1992 1993 1994 Massachusetts Tax Exempt Income Fund II $0 $1,722 $10,092 Michigan Tax Exempt Income Fund II $0 $0 $0 Minnesota Tax Exempt Income Fund II $0 $0 $27 Ohio Tax Exempt Income Fund II $0 $0 $0 /TABLE During fiscal 1994 , the Massachusetts, Michigan, Minnesota and Ohio Funds incurred $490,082, $250,872, $189,269 and $383,968 , respectively, in 12b-1 fees to Putnam Mutual Funds pursuant to each Fund's Class A Distribution Plan. CLASS B CONTINGENT DEFERRED SALES CHARGES AND 12B-1 FEES During fiscal 1994, Putnam Mutual Funds received $34,720, $3,489, $4,372 and $9,032, respectively, in contingent deferred sales charges upon redemptions of Class B shares of the Massachusetts, Michigan, Minnesota and Ohio Funds, respectively. During fiscal 1994, the Massachusetts, Michigan, Minnesota and Ohio Funds incurred $103,211, $39,506, $28,571 and $72,223, respectively, in 12b-1 fees to Putnam Mutual Funds pursuant to each Fund's Class B Distribution Plan. INVESTOR SERVICING AND CUSTODY FEES AND EXPENSES During the 1994 fiscal year, each Fund incurred the following fees and out-of-pocket expenses for investor servicing and custody services provided by Putnam Fiduciary Trust Company : Massachusetts Tax Exempt Income Fund II $268,424 Michigan Tax Exempt Income Fund II $149,317 Minnesota Tax Exempt Income Fund II $122,455 Ohio Tax Exempt Income Fund II $258,199 INVESTMENT PERFORMANCE OF THE FUNDS STANDARD PERFORMANCE MEASURES Each Fund's tax-exempt yield for the thirty-day period ended May 31, 1994 for Class A shares was 5.38%, 5.44%, 5.10% and 4.73% for the Massachusetts, Michigan, Minnesota and Ohio Funds, respectively. A shareholder in a combined 46.85% federal/Massachusetts tax bracket would have to earn 10.12% from a taxable investment to produce an after-tax yield equal to the Massachusetts Fund's tax-exempt yield of 5.38% . A shareholder in a 42.38% combined federal/Michigan tax bracket would have to earn 9.44% from a taxable investment to produce an after-tax yield equal to the Michigan Fund's tax-exempt yield of 5.44% . A shareholder in a 44.73% combined federal/Minnesota tax bracket would have to earn 9.23% from a taxable investment to produce an after-tax yield equal to the Minnesota Fund's tax-exempt yield of 5.10% . A shareholder in a 44.13% combined federal/Ohio tax bracket would have to earn 8.47% from a taxable investment to produce an after-tax yield equal to the Ohio Fund's tax-exempt yield of 4.73% . Yield is calculated at the public offering price. The average annual total return for the Class A shares of the Massachusetts, Michigan, Minnesota and Ohio Funds for the one-year period ended May 31, 1994 was -2.97%, -2.78%, -2.28% and -2.95% , respectively, and for the life of each Fund (compounded annually) for Class A shares through May 31, 1994 was +7.68%, +6.62%, +6.18% and +6.53%, respectively. Each Fund's tax-exempt yield for the thirty-day period ended May 31, 1994 for Class B shares was 4.96%, 5.03%, 4.65% and 4.27% for the Massachusetts, Michigan, Minnesota and Ohio Funds, respectively. A shareholder in a 46.85% combined federal/Massachusetts tax bracket would have to earn 9.33% from a taxable investment to produce an after-tax yield equal to the Massachusetts Fund's tax-exempt yield of 4.96%. A shareholder in a 42.38% combined federal/Michigan tax bracket would have to earn 8.73% from a taxable investment to produce an after-tax yield equal to the Michigan Fund's tax-exempt yield of 5.03%. A shareholder in a 44.73% combined federal/Minnesota tax bracket would have to earn 8.41% from a taxable investment to produce an after-tax yield equal to the Minnesota Fund's tax-exempt yield of 4.65%. A shareholder in a 44.13% combined federal/Ohio tax bracket would have to earn 7.64% from a taxable investment to produce an after-tax yield equal to the Ohio Fund's tax-exempt yield of 4.27%. The cumulative total return for the Class B shares of the Massachusetts, Michigan, Minnesota and Ohio Funds for the life of each Fund's class beginning July 15, 1993 through May 31, 1994 was -5.81%, - -5.40%, -5.09% and -5.48%, respectively, adjusted to reflect deduction of the applicable contingent deferred sales charge of 5.00% and 4.00% . See "Standard Performance Measures" in Part II of this Statement for information on how each Fund's total return, tax- equivalent yield and tax-exempt yield are calculated. PERFORMANCE RATINGS For the 1994 fiscal year, the Class A shares of the Massachusetts Fund were ranked 12 of 27 Massachusetts municipal debt funds, the Class A shares of the Michigan Fund were ranked 11 of 22 Michigan municipal debt funds, the Class A shares of the Minnesota Fund were ranked 5 of 22 Minnesota municipal debt funds and the Class A shares of the Ohio Fund were ranked 20 of 31 Ohio municipal debt funds by Lipper Analytical Services, Inc. In addition, such Class A shares were ranked 265, 254, 125 and 284 , respectively, of 574 municipal single state funds by Weisenberger's Management Results. As of the end of the fiscal year, Class A shares of the Massachusetts Fund were given a 5-star rating (out of 5 stars) by Morningstar, Inc. and the Class A shares of the Michigan, Minnesota and Ohio Funds were each given a 4-star rating (out of 5 stars) by Morningstar, Inc. For the 1994 fiscal year, the Class B shares of the Funds were not ranked or rated. See "Comparison of Portfolio Performance" in Part II of this Statement for information about how these rankings and ratings are determined. OTHER PERFORMANCE INFORMATION The tables below show the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment in one share of each Fund during the life of that Fund. This was a period of fluctuating tax-exempt bond prices. The tables do not project the future performance of the Funds.
CLASS A SHARES PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II CUMULATIVE MAXIMUM NET ASSET DISTRIBUTIONS NET ASSET VALUES FISCAL OFFERING VALUE -------------------------------- AT YEAR-END YEAR PRICE AT ------------------- FROM FROM WITH ALL ENDED BEGINNING BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS MAY 31 OF YEAR OF YEAR YEAR INCOME GAINS REINVESTED - ------------------------------------------------------------------------------------------------ ------ 1990 (1) $8.92 $8.50 $8.50 $0.349 ----- $8.85 1991 8.92 8.50 8.70 0.624 ----- 9.75 1992 9.13 8.70 9.02 0.613 $0.070 10.91 1993 9.47 9.02 9.55 0.587 0.007 12.31 1994 10.03 9.55 9.05 0.549 0.151 12.55 ----- ------ Total distributions $2.722 $0.228 (1) Investment operations began October 23, 1989.
PERCENTAGE CHANGES DURING LIFE OF CLASS A SHARES PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II ---------------------------------------- MAXIMUM OFFERING NET ASSET VALUE LEHMAN BROTHERS PRICE TO NET TO NET MUNICIPAL CONSUMER FISCAL ASSET VALUE ASSET VALUE BOND INDEX PRICE INDEX YEAR --------------- -------------- ------------- ------------- ENDED CUMULA- CUMULA- CUMULA- CUMULA- MAY 31 ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE - --------------------------------------------------------------------------------------------------- --------------- 1990 (1) - -0.7% - +4.2% - +4.5% - +2.9% 1991 +4.9 +9.3 +10.1 +14.7 +10.1 +15.1 +5.0 +8.0 1992 +6.7 +22.4 +12.0 +28.4 +9.8 +26.4 +3.0 +11.2 1993 +7.5 +38.0 +12.8 +44.9 +12.0 +41.5 +3.2 +14.8 1994 -3.0 +40.7 +1.9 +47.6 +2.5 +45.0 +2.3 +17.4 (1) Investment operations began October 23, 1989. /TABLE
CLASS A SHARES PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II CUMULATIVE MAXIMUM NET ASSET DISTRIBUTIONS NET ASSET VALUES FISCAL OFFERING VALUE -------------------------------- AT YEAR-END YEAR PRICE AT ------------------- FROM FROM WITH ALL ENDED BEGINNING BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS MAY 31 OF YEAR OF YEAR YEAR INCOME GAINS REINVESTED - ----------------------------------------------------------------------------------------------------------------------- --- - -- 1990 (1) $8.92 $8.50 $8.43 $0.335 ----- $8.77 1991 8.85 8.43 8.51 0.578 ----- 9.48 1992 8.93 8.51 8.80 0.558 ----- 10.45 1993 9.24 8.80 9.30 0.556 $0.005 11.75 1994 9.76 9.30 8.90 0.519 0.079 11.99 ----- ----- Total distributions $2.546 $0.084 (1) Investment operations began October 23, 1989.
PERCENTAGE CHANGES DURING LIFE OF CLASS A SHARES PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II ---------------------------------------- MAXIMUM OFFERING NET ASSET VALUE LEHMAN BROTHERS PRICE TO NET TO NET MUNICIPAL CONSUMER FISCAL ASSET VALUE ASSET VALUE BOND INDEX PRICE INDEX YEAR ------------------- --------------------- --------------- --------------------- ENDED CUMULA- CUMULA- CUMULA- CUMULA- MAY 31 ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE - --------------------------------------------------------------------------------------------------- --------------- 1990 (1) - -1.7% - +3.2% - +4.5% - +2.9% 1991 +3.0 +6.3 +8.1 +11.6 +10.1 +15.1 +5.0 +8.0 1992 +5.1 +17.2 +10.3 +23.0 +9.8 +26.4 +3.0 +11.2 1993 +7.0 +31.7 +12.4 +38.2 +12.0 +41.5 +3.2 +14.8 1994 -2.8 +34.4 +2.0 +41.0 +2.5 +45.0 +2.3+17.4 (1) Investment operations began October 23, 1989. /TABLE
CLASS A SHARES PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II CUMULATIVE MAXIMUM NET ASSET DISTRIBUTIONS NET ASSET VALUES FISCAL OFFERING VALUE -------------------------------- AT YEAR-END YEAR PRICE AT ------------------- FROM FROM WITH ALL ENDED BEGINNING BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS MAY 31 OF YEAR OF YEAR YEAR INCOME GAINS REINVESTED - ----------------------------------------------------------------------------------------------------------------------- --- - --- 1990 (1) $8.92 $8.50 $8.43 $0.338 ----- $8.77 1991 8.85 8.43 8.56 0.586 ----- 9.55 1992 8.99 8.56 8.74 0.555 ----- 10.39 1993 9.18 8.74 9.06 0.557 ----- 11.46 1994 9.51 9.06 8.79 0.509 - ---- 11.76 ----- ----- Total distributions $2.545 (1) Investment operations began October 23, 1989.
PERCENTAGE CHANGES DURING LIFE OF CLASS A SHARES PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II ---------------------------------------- MAXIMUM OFFERING NET ASSET VALUE LEHMAN BROTHERS PRICE TO NET TO NET MUNICIPAL CONSUMER FISCAL ASSET VALUE ASSET VALUE BOND INDEX PRICE INDEX YEAR --------------- -------------- ------------- ------------- ENDED CUMULA- CUMULA- CUMULA- CUMULA- MAY 31 ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE - --------------------------------------------------------------------------------------------------- --------------- 1990 (1) - -1.7% - +3.2% - +4.5% - +2.9% 1991 +3.7% +7.0 +8.8 % +12.3 +10.1 % +15.1 +5.0 % +8.0 1992 +3.7 +16.5 +8.9 +22.3 +9.8 +26.4 +3.0 +11.2 1993 +5.0 +28.5 +10.3 +34.9 +12.0 +41.5 +3.2 +14.8 1994 -2.3 +31.8 +2.6 +38.3 +2.5 +45.0 +2.3+17.4 (1) Investment operations began October 23, 1989. /TABLE
CLASS A SHARES PUTNAM OHIO TAX EXEMPT INCOME FUND II CUMULATIVE MAXIMUM NET ASSET DISTRIBUTIONS NET ASSET VALUES FISCAL OFFERING VALUE -------------------------------- AT YEAR-END YEAR PRICE AT ------------------- FROM FROM WITH ALL ENDED BEGINNING BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS MAY 31 OF YEAR OF YEAR YEAR INCOME GAINS REINVESTED - ----------------------------------------------------------------------------------------------------------------------- --- - --- 1990 (1) $8.92 $8.50 $8.40 $0.350 ----- $8.75 1991 8.82 8.40 8.55 0.584 ----- 9.55 1992 8.98 8.55 8.78 0.570 ----- 10.47 1993 9.22 8.78 9.26 0.542 ----- 11.72 1994 9.72 9.26 8.80 0.523 $0.121 11.94 ------ ----- - Total distributions $2.569 $0.121 (1) Investment operations began October 23, 1989.
PERCENTAGE CHANGES DURING LIFE OF CLASS A SHARES PUTNAM OHIO TAX EXEMPT INCOME FUND II ---------------------------------------- MAXIMUM OFFERING NET ASSET VALUE LEHMAN BROTHERS PRICE TO NET TO NET MUNICIPAL CONSUMER FISCAL ASSET VALUE ASSET VALUE BOND INDEX PRICE INDEX YEAR --------------- -------------- ------------- ------------- ENDED CUMULA- CUMULA- CUMULA- CUMULA- MAY 31 ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE - --------------------------------------------------------------------------------------------------- --------------- 1990 (1) - -1.9% - +3.0% - +4.5% - +2.9% 1991 +3.9% +7.1 +9.1% +12.4 +10.1 % +15.1 +5.0 % +8.0 1992 +4.4 +17.4 +9.7 +23.2 +9.8 +26.4 +3.0 +11.2 1993 +6.6 +31.4 +11.9 +37.9 +12.0 +41.5 +3.2 +14.8 1994 -3.0 +33.9 +1.9 +40.5 +.2.5 +45.0+2.3 +17.4 (1) Investment operations began October 23, 1989.
CLASS B SHARES PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II CUMULATIVE NET ASSET DISTRIBUTIONS NET ASSET VALUE VALUE ------------------- AT YEAR-END FISCAL -------------------- FROM FROM WITH ALL YEAR BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS ENDED OF YEAR YEAR INCOME GAINS REINVESTED - ----------------------------------------------------------------------------------------- 5/31/94 (1) $9.71 $9.05 $0.415 $0.151 $9.60 (1) Class B shares were offered beginning July 15, 1993.
PERCENTAGE CHANGES DURING LIFE OF CLASS B SHARES PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II ----------------- LEHMAN BROTHERS NET ASSET VALUE MUNICIPAL TO NET BOND CONSUMER FISCAL ASSET VALUE INDEX PRICE INDEX YEAR CUMULA- CUMULA- CUMULA- ENDED ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE - ------------------------------------------------------------------------- 05/31/94 (1) ---- -1.1% ---- +0.8% ---- +2.2% (1) Class B shares were offered beginning July 15, 1993.
CLASS B SHARES PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II CUMULATIVE NET ASSET DISTRIBUTIONS NET ASSET VALUE VALUE ------------------- AT YEAR-END FISCAL -------------------- FROM FROM WITH ALL YEAR BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS ENDED OF YEAR YEAR INCOME GAINS REINVESTED - ----------------------------------------------------------------------------------------- 5/31/94 (1) $9.43 $8.90 $0.394 $0.079 $9.36 (1) Class B shares were offered beginning July 15, 1993.
PERCENTAGE CHANGES DURING LIFE OF CLASS B SHARES PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II ----------------- LEHMAN BROTHERS NET ASSET VALUE MUNICIPAL TO NET BOND CONSUMER FISCAL ASSET VALUE INDEX PRICE INDEX YEAR CUMULA- CUMULA- CUMULA- ENDED ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE - ---------------------------------------------------------------------------------------- 05/31/94 (1) ---- -0.7% ---- +0.8% ---- +2.2% (1) Class B shares were offered beginning July 15, 1993.
CLASS B SHARES PUTNAM MINNESOTA TAX EXEMPT INCOME FUNDS II CUMULATIVE NET ASSET DISTRIBUTIONS NET ASSET VALUE VALUE ------------------- AT YEAR-END FISCAL -------------------- FROM FROM WITH ALL YEAR BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS ENDED OF YEAR YEAR INCOME GAINS REINVESTED - ----------------------------------------------------------------------------------------- 5/31/94 (1) $9.18 $8.77 $0.388 ---- $9.15 (1) Class B shares were offered beginning July 15, 1993.
PERCENTAGE CHANGES DURING LIFE OF CLASS B SHARES PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II ----------------- LEHMAN BROTHERS NET ASSET VALUE MUNICIPAL TO NET BOND CONSUMER FISCAL ASSET VALUE INDEX PRICE INDEX YEAR CUMULA- CUMULA- CUMULA- ENDED ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE - ---------------------------------------------------------------------------------------- 05/31/94 (1) ---- -0.3% ---- +0.8% ----- +2.2% (1) Class B shares were offered beginning July 15, 1993.
CLASS B SHARES PUTNAM OHIO TAX EXEMPT INCOME FUNDS II CUMULATIVE NET ASSET DISTRIBUTIONS NET ASSET VALUE VALUE ------------------- AT YEAR-END FISCAL -------------------- FROM FROM WITH ALL YEAR BEGINNING END OF INVESTMENT CAPITAL DISTRIBUTIONS ENDED OF YEAR YEAR INCOME GAINS REINVESTED - -------------------------------------------------------------------------- 5/31/94 (1) $9.37 $8.79 $0.396 $0.121 $9.30 (1) Class B shares were offered beginning July 15, 1993.
PERCENTAGE CHANGES DURING LIFE OF CLASS B SHARES PUTNAM OHIO TAX EXEMPT INCOME FUND II ----------------- LEHMAN BROTHERS NET ASSET VALUE MUNICIPAL TO NET BOND CONSUMER FISCAL ASSET VALUE INDEX PRICE INDEX YEAR CUMULA- CUMULA- CUMULA- ENDED ANNUAL TIVE ANNUAL TIVE ANNUAL TIVE - -------------------------------------------------------------------------- 05/31/94 (1) ---- -0.8% ---- +0.8% ---- +2.2% (1) Class B shares were offered beginning July 15, 1993.
The tables are not adjusted for any payments under each Funds' Class A Distribution Plan prior to its implementation in fiscal 1992 or taxes on reinvested distributions. The total values for the Funds as of the end of each period reflect reinvestment of all distributions and all changes in net asset value. The Lehman Brothers Municipal Bond Index is an unmanaged list of approximately 20,000 investment-grade, fixed-rate tax- exempt bonds. The average quality of bonds held in the index may differ from the average quality of those bonds in which each Fund invests. The index does not include bonds in certain of the lower-rating classifications in which a Fund may invest. The performance figures for the index reflect changes of market prices and reinvestment of all interest payments. Because each Fund is a managed portfolio investing in State Tax Exempt Securities, the securities it owns will not match those in the index. The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics, is a commonly used measure of the rate of inflation. The index shows the average change in the cost of selected consumer goods and services and does not represent a return on an investment vehicle. TAXES The Prospectus describes generally the tax treatment of distributions by the Funds. This section of the Statement and the section entitled "Taxes" in Part II of this Statement include additional information concerning certain state and federal tax consequences of an investment in a Fund, respectively. STATE TAXATION. That percentage of interest on indebtedness incurred or continued to purchase or carry shares of an investment company paying exempt-interest dividends, such as a Fund, that is equal to the percentage of the Fund's distributions from investment income and short-term capital gains that is exempt from federal income tax , will not be deductible by the investor for Minnesota personal income tax or Michigan single business tax purposes. For Michigan personal income tax and Michigan intangibles tax purposes, such interest deduction is wholly disallowed. To the extent that distributions are derived from interest on Michigan State Tax Exempt Securities, such distributions will be exempt from Michigan personal income tax and the Michigan intangibles tax under the current position of the Michigan Department of Treasury. Such distributions, if received in connection with a shareholder's business activity, may alternatively be subject to the Michigan single business tax. For Michigan personal income tax, intangibles tax and single business tax purposes, exempt-interest dividends attributable to any investment other than Michigan State Tax Exempt Securities will be fully taxable as will dividends arising from any source other than exempt-interest irrespective of the investment to which any such dividend is attributable. More specifically, Michigan law provides an exemption from both the Michigan personal income tax and the Michigan single business tax with respect to interest paid to the owner of Michigan State Tax Exempt Securities, and a corresponding exemption is provided under the Michigan intangibles tax with respect to ownership of such bonds. The Michigan Department of Treasury, in a ruling letter dated December 19, 1986 and published in April, 1987, revised a previous administrative position that shareholders of an investment company other than a "unit investment trust" are to be treated as the owners of shares in the investment company and not as the owners of a proportionate share of the company's assets. This revised position was reaffirmed in a ruling published in March, 1989. The Michigan Fund is not a unit investment trust, and accordingly shareholders will now, in the view of the Michigan Department of Treasury, be treated as the owners of the Fund's assets including the Fund's Michigan State Tax Exempt Securities . The Department has not addressed the question of whether the distinction between ownership of tax-exempt obligations and mutual fund shares may be accorded significance in connection with application of the single business tax to investment company distributions representing interest on obligations which are exempt from federal income tax and Michigan tax.
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES The tables below show the effect of the tax status of Massachusetts, Michigan, Minnesota and Ohio Tax Exempt Securities on the effective yield received by their holders under the federal income tax and Massachusetts, Michigan, Minnesota or Ohio personal income tax laws , respectively, currently in effect for 1994. The tables give the approximate yield a taxable security must earn at various income levels to produce after-tax yields equivalent to those of the relevent State Tax Exempt Securities yielding from 5.0% to 8.0%. --------- -------------------------------------------------------------------------------------------------------- - - COMBINED MARGINAL MASSACHUSETTS TAXABLE INCOME* AND FEDERAL TAX-EXEMPT YIELD INCOME TAX--------------------------------------- ------------ SINGLE JOINT RATE** 5% 6% 7% 8% - --------------------------------------------------------------------------------------------------------- -------- EQUIVALENT TAXABLE YIELD 1994 $ 0 - 22,750 $ 0 - 38,000 25.20% 6.68% 8.02%9.36% 10.70% 22,751 - 55,10038,001 - 91,850 36.64 7.89 9.47 11.0512.63 55,101 - 115,000 ***91,851 - 140,000 *** 39.28 8.23 9.88 11.5313.18 115,001 - 250,000 ***140,001 - 250,000 *** 43.68 8.88 10.65 12.4314.20 over 250,000 *** over 250,000 *** 46.85 9.41 11.29 13.17 15.05 - ----------- --------------------------------------------------------------------------------------------------------- * This amount represents taxable income as defined in the Internal Revenue Code of 1986, as amended (the "Code"). It is assumed that taxable income as defined in the Code is the same as under the Massachusetts personal income tax law. However, Massachusetts taxable income may differ due to differences in exemptions, itemized deductions, and other items. ** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income currently in effect for 1994. For Massachusetts tax purposes, these rates reflect the 12% Massachusetts rate applied to non-Massachusetts bank interest. These rates include the effect of deducting state taxes on your federal return. *** The amount of taxable income in this bracket may be affected by the phase-out of personal exemptions and the limitation on itemized deductions , based on adjusted gross income, under the Code . /TABLE
- -------------------------------------------------------------------------------------------------------- ---------- COMBINED MARGINAL MICHIGAN AND FEDERAL TAX-EXEMPT YIELD TAXABLE INCOME* INCOME TAX ------------------------------------ SINGLE JOINT RATE** 5% 6% 7% 8% - -------------------------------------------------------------------------------------------------------- ---------- EQUIVALENT TAXABLE YIELD 1994 $ 0 - 22,750$0 - 38,000 18.91% 6.17% 7.40% 8.63% 9.87% 22,751 - 55,10038,001 - 91,850 31.31 7.28 8.74 10.1911.65 55,501 - 115,000 ***91,851 - 140,000 *** 34.17 7.60 9.11 10.6312.15 115,001 - 250,000 ***140,001 - 250,000 *** 38.94 8.19 9.83 11.4613.10 over 250,000 *** over 250,000 *** 42.38 8.68 10.41 12.15 13.88 - ----------- -------------------------------------------------------------------------------------------------------- * This amount represents taxable income as defined in the Internal Revenue Code of 1986, as amended (the "Code"). It is assumed that taxable income as defined in the Internal Revenue Code is the same as under the Michigan personal income tax law, however, Michigan taxable income may differ due to differences in exemptions, itemized deductions, and other items. ** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income currently in effect for 1994. These rates include the effect of deducting state taxes on your Federal return. *** The amount of taxable income in this bracket may be affected by the phase-out of personal exemptions and the limitation on itemized deductions , based on adjusted gross income, under the Code . /TABLE
- --------------------------------------------------------------------------------------------------------- --------- COMBINED MARGINAL MINNESOTA AND FEDERAL TAX-EXEMPT YIELD TAXABLE INCOME* INCOME TAX ------------------------------------- ---------------- SINGLE JOINT RATE** 5% 6% 7% 8% - --------------------------------------------------------------------------------------------------------- --------- EQUIVALENT TAXABLE YIELD 1994 $ 0 - 14,780 $0 - 21,600 20.10% 6.26% 7.51% 8.76% 10.01% 14,781 - 22,750 21,601 - 38,000 21.80 6.39 7.67 8.9510.23 22,751 - 48,550 38,001 - 85,830 33.76 7.55 9.06 10.5712.08 48,551 - 55,10085,831 - 91,850 34.12 7.59 9.11 10.6312.14 55,501 - 115,000 ***91,851 - 140,000 *** 36.87 7.92 9.50 11.0912.67 115,001 - 250,000 ***140,001 - 250,000 *** 41.44 8.54 10.25 11.9513.66 over 250,000 *** over 250,000 *** 44.73 9.05 10.86 12.67 14.48 - ----------- --------------------------------------------------------------------------------------------------------- * This amount represents taxable income as defined in the Internal Revenue Code of 1986, as amended (the "Code"). It is assumed that taxable income as defined in the Internal Revenue Code is the same as under the Minnesota personal income tax law. However, Minnesota taxable income may differ due to differences in exemptions, itemized deductions, and other items. ** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income currently in effect for 1994. These rates include the effect of deducting state taxes on your Federal return. *** The amount of taxable income in this bracket may be affected by the phase-out of personal exemptions and the limitation on itemized deductions , based on adjusted gross income, under the Code . /TABLE
- ----------- --------------------------------------------------------------------------------------------------------- COMBINED MARGINAL OHIO AND FEDERAL TAX-EXEMPT YIELD TAXABLE INCOME* INCOME TAX------------------------------------- -------------- SINGLE JOINT RATE** 5% 6% 7% 8% - -------------------------------------------------------------------------------------------------------- --------- EQUIVALENT TAXABLE YIELD 1994 $ 0 - 5,000 0 - 5,000 15.63% 5.93% 7.11% 8.30% 9.48% 5,001 - 10,000 5,001 - 10,000 16.26 5.97 7.17 8.36 9.55 10,001 - 15,000 10,001 - 15,000 17.53 6.06 7.28 8.49 9.70 15,001 - 20,000 15,001 - 20,000 18.16 6.11 7.33 8.55 9.77 20,001 - 22,750 20,001 - 38,000 18.79 6.16 7.39 8.62 9.85 22,751 - 40,000 38,001 - 40,000 31.21 7.27 8.72 10.18 11.63 40,001 - 55,100 40,001 - 80,000 31.74 7.33 8.79 10.26 11.72 80,001 - 91,850 32.28 7.38 8.86 10.34 11.81 55,501 - 80,000 34.59 7.64 9.17 10.70 12.23 80,001 - 100,000 91,851 - 100,000 35.10 7.70 9.25 10.7912.33 100,001 - 115,000 ***100,001 - 140,000 *** 35.76 7.78 9.34 10.90 12.45 115,001 - 200,000 ***140,001 - 200,000 *** 40.42 8.39 10.07 11.75 13.43 200,001 - 250,000 ***200,001 - 250,000 *** 40.80 8.45 10.14 11.82 13.51 over 250,000 *** over 250,000 *** 44.13 8.95 10.74 12.53 14.32 - ------ -------------------------------------------------------------------------------------------------------- * This amount represents taxable income as defined in the Internal Revenue Code of 1986 , as amended (the "Code") . It is assumed that taxable income as defined in the Code is the same as under the Ohio personal income tax law, however, Ohio taxable income may differ due to differences in exemptions, itemized deductions, and other items. ** For federal tax purposes, these combined rates reflect the applicable marginal rates on taxable income currently in effect for 1994 . These rates include the effect of deducting state taxes on your Federal return. *** The amount of taxable income in this bracket may be affected by the phase-out of personal exemptions and the limitation on itemized deductions , based on adjusted gross income, under the Code.
Of course, there is no assurance that the Funds will achieve any specific tax-exempt yield. While it is expected that each Fund will invest principally in obligations which pay interest exempt from federal income tax and personal income tax of its respective state, other income received by the Funds may be taxable. The tables do not take into account any federal alternative minimum taxes or state or local taxes payable on each Fund's distributions except for the personal income tax of its respective state (exclusive of the Minnesota alternative minimum tax). ADDITIONAL OFFICERS OF THE FUNDS In addition to the persons listed as officers of the Funds in Part II of this Statement, the following persons as noted below are also officers of the Funds. Officers of Putnam Management hold the same offices in Putnam Management's parent company, Putnam Investments, Inc. GARY N. COBURN, Vice President. Senior Managing Director of Putnam Management. Vice President of certain of the Putnam funds. JAMES E. ERICKSON, Vice President. Managing Director of Putnam Management. Vice President of certain of the Putnam funds. TRIET M. NGUYEN, Vice President (Massachusetts). Senior Vice President of Putnam Management. Vice President of certain of the Putnam funds. HOWARD K. MANNING , Vice President (Michigan and Minnesota) . Senior Vice President of Putnam Management. Vice President of certain of the Putnam funds. THOMAS C. GOGGINS, Vice President (Ohio). Vice President of Putnam Management. Vice President of certain of the Putnam funds. Prior to June, 1993, Mr. Goggins was a Portfolio Manager at Transamerica Investments Services, Inc. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS Coopers & Lybrand L.L.P. are the independent accountants of Putnam Michigan Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II and Price Waterhouse LLP are the independent accountants of Putnam Massachusetts Tax Exempt Income Fund II and Putnam Minnesota Tax Exempt Income Fund II, each providing audit services, tax return review services and assistance and consultation in connection with the review of various Securities and Exchange Commission filings. The Report of Independent Accountants and financial statements included in each Fund's Annual Report for the fiscal year ended May 31, 1994 , filed electronically on August 2, 1994 for the Massachusetts Fund (811-4518), and on August 10, 1994 for the Michigan Fund (811-4529) and the Minnesota Fund (811-4527) and on August 4, 1994 for the Ohio Fund (811-4528), are incorporated by reference into this Statement of Additional Information. Financial highlights of Putnam Massachusetts Tax Exempt Income Fund II and Putnam Minnesota Tax Exempt Income Fund II included in the Prospectus and the financial statements incorporated by reference into the Prospectus and Statement of Additional Information have been so included and incorporated in reliance upon the reports of Price Waterhouse LLP , independent accountants, given on the authority of said firm as experts in auditing and accounting. Financial highlights of Putnam Michigan Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II included in the Prospectus and the financial statements incorporated by reference into the Prospectus and Statement of Additional Information have been so included and incorporated in reliance upon the reports of Coopers & Lybrand L.L.P. , independent accountants, given on the authority of said firm as experts in auditing and accounting. TABLE OF CONTENTS MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-22 MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . .II-27 DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-36 HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-38 DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . .II-49 INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-50 SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-56 SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-56 SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-57 STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-57 COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-58 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-63 THE PUTNAM FUNDS STATEMENT OF ADDITIONAL INFORMATION PART II The following information applies generally to your Fund and to the other Putnam funds. In certain cases the discussion applies to some but not all of the funds or their shareholders, and you should refer to your Prospectus to determine whether the matter is applicable to you or your Fund. You will also be referred to Part I for certain information applicable to your particular Fund. Shareholders who purchase shares at net asset value through employer-sponsored defined contribution plans should also consult their employer for information about the extent to which the matters described below apply to them. MISCELLANEOUS INVESTMENT PRACTICES YOUR FUND'S PROSPECTUS STATES WHICH OF THE FOLLOWING INVESTMENT PRACTICES ARE AVAILABLE TO YOUR FUND. THE FACT THAT YOUR FUND IS AUTHORIZED TO ENGAGE IN A PARTICULAR PRACTICE DOES NOT NECESSARILY MEAN THAT IT WILL ACTUALLY DO SO. YOU SHOULD DISREGARD ANY PRACTICE DESCRIBED BELOW WHICH IS NOT MENTIONED IN THE PROSPECTUS. SHORT-TERM TRADING In seeking the Fund's objective, Putnam Management will buy or sell portfolio securities whenever Putnam Management believes it appropriate to do so. In deciding whether to sell a portfolio security, Putnam Management does not consider how long the Fund has owned the security. From time to time the Fund will buy securities intending to seek short-term trading profits. A change in the securities held by the Fund is known as "portfolio turnover" and generally involves some expense to the Fund. These expenses may include brokerage commissions or dealer mark-ups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. If sales of portfolio securities cause the Fund to realize net short-term capital gains, such gains will be taxable as ordinary income. As a result of the Fund's investment policies, under certain market conditions the Fund's portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly average of the value of portfolio securities -- excluding securities whose maturities at acquisition were one year or less. The Fund's portfolio turnover rate is not a limiting factor when Putnam Management considers a change in the Fund's portfolio. LOWER-RATED SECURITIES The Fund may invest in lower-rated fixed-income securities (commonly known as "junk bonds"), to the extent described in the Prospectus. The lower ratings of certain securities held by the Fund reflect a greater possibility that adverse changes in the financial condition of the issuer or in general economic conditions, or both, or an unanticipated rise in interest rates, may impair the ability of the issuer to make payments of interest and principal. The inability (or perceived inability) of issuers to make timely payment of interest and principal would likely make the values of securities held by the Fund more volatile and could limit the Fund's ability to sell its securities at prices approximating the values the Fund had placed on such securities. In the absence of a liquid trading market for securities held by it, the Fund may be unable at times to establish the fair value of such securities. The rating assigned to a security by Moody's Investors Service, Inc. or Standard & Poor's Corporation (or by any other nationally recognized securities rating organization) does not reflect an assessment of the volatility of the security's market value or the liquidity of an investment in the security. See the Prospectus or Part I of this Statement for a description of security ratings. Like those of other fixed-income securities, the values of lower-rated securities fluctuate in response to changes in interest rates. Thus, a decrease in interest rates will generally result in an increase in the value of the Fund's assets. Conversely, during periods of rising interest rates, the value of the Fund's assets will generally decline. In addition, the values of such securities are also affected by changes in general economic conditions and business conditions affecting the specific industries of their issuers. Changes by recognized rating services in their ratings of any fixed-income security and in the ability of an issuer to make payments of interest and principal may also affect the value of these investments. Changes in the value of portfolio securities generally will not affect cash income derived from such securities, but will affect the Fund's net asset value. The Fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase, although Putnam Management will monitor the investment to determine whether its retention will assist in meeting the Fund's investment objective. At times, a substantial portion of the Fund's assets may be invested in securities as to which the Fund, by itself or together with other funds and accounts managed by Putnam Management and its affiliates, holds a major portion or all of such securities. Although Putnam Management generally considers such securities to be liquid because of the availability of an institutional market for such securities, it is possible that, under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the Fund could find it more difficult to sell such securities when Putnam Management believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. Under such circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing the Fund's net asset value. In order to enforce its rights in the event of a default under such securities, the Fund may be required to take possession of and manage assets securing the issuer's obligations on such securities, which may increase the Fund's operating expenses and adversely affect the Fund's net asset value. In the case of tax-exempt funds, any income derived from the Fund's ownership or operation of such assets would not be tax-exempt. In addition, the Fund's intention to qualify as a "regulated investment company" under the Internal Revenue Code may limit the extent to which the Fund may exercise its rights by taking possession of such assets. Certain securities held by the Fund may permit the issuer at its option to "call", or redeem, its securities. If an issuer were to redeem securities held by the Fund during a time of declining interest rates, the Fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. If the Fund's Prospectus describes so-called "zero-coupon" bonds and "payment-in-kind" bonds as possible investments, the Fund may invest without limit in such bonds unless otherwise specified in the Prospectus. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon bonds do not pay current interest, their value is subject to greater fluctuation in response to changes in market interest rates than bonds which pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently. Even though such bonds do not pay current interest in cash, the Fund is nonetheless required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders. Thus, the Fund could be required at times to liquidate investments in order to satisfy its dividend requirements. The amount of information about the financial condition of an issuer of tax exempt securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. Therefore, to the extent the Fund invests in tax exempt securities in the lower rating categories, the achievement of the Fund's goals is more dependent on Putnam Management's investment analysis than would be the case if the Fund were investing in securities in the higher rating categories. INVESTMENTS IN MISCELLANEOUS FIXED INCOME SECURITIES Unless otherwise specified in the Prospectus or elsewhere in this Statement of Additional Information, if the Fund may invest in inverse floating obligations and premium securities, it may do so without limit. The Fund, however, currently does not intend to invest more than 15% of its assets in inverse floating obligations under normal market conditions. SECURITIES LOANS The Fund may make secured loans of its portfolio securities, on either a short-term or long-term basis, amounting to not more than 25% of its total assets, thereby realizing additional income. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. As a matter of policy, securities loans are made to broker-dealers pursuant to agreements requiring that loans be continuously secured by collateral consisting of cash or short-term debt obligations at least equal at all times to the value of the securities on loan, "marked-to-market" daily. The borrower pays to the Fund an amount equal to any dividends or interest received on securities lent. The Fund retains all or a portion of the interest received on investment of the cash collateral or receives a fee from the borrower. Although voting rights, or rights to consent, with respect to the loaned securities pass to the borrower, the Fund retains the right to call the loans at any time on reasonable notice, and it will do so to enable the Fund to exercise voting rights on any matters materially affecting the investment. The Fund may also call such loans in order to sell the securities. FORWARD COMMITMENTS The Fund may enter into contracts to purchase securities for a fixed price at a future date beyond customary settlement time ("forward commitments") if the Fund holds, and maintains until the settlement date in a segregated account, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or if the Fund enters into offsetting contracts for the forward sale of other securities it owns. In the case of to-be- announced ("TBA") purchase commitments, the unit price and the estimated principal amount are established when the Fund enters into a contract, with the actual principal amount being within a specified range of the estimate. Forward commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the Fund's other assets. Where such purchases are made through dealers, the Fund relies on the dealer to consummate the sale. The dealer's failure to do so may result in the loss to the Fund of an advantageous yield or price. Although the Fund will generally enter into forward commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the Fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so. The Fund may realize short-term profits or losses upon the sale of forward commitments. The Fund may enter into TBA sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as "cover" for the transaction. Unsettled TBA sale commitments are valued at current market value of the underlying securities. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Fund realizes a gain or loss on the commitment without regard to any unrealized gain or loss on the underlying security. If the Fund delivers securities under the commitment, the Fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements up to the limit specified in the Prospectus. A repurchase agreement is a contract under which the Fund acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). It is the Fund's present intention to enter into repurchase agreements only with commercial banks and registered broker-dealers and only with respect to obligations of the U.S. government or its agencies or instrumentalities. Repurchase agreements may also be viewed as loans made by the Fund which are collateralized by the securities subject to repurchase. Putnam Management will monitor such transactions to ensure that the value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including the interest factor. If the seller defaults, the Fund could realize a loss on the sale of the underlying security to the extent that the proceeds of sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the Fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate. Pursuant to an exemptive order issued by the Securities and Exchange Commission, the Fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. OPTIONS ON SECURITIES WRITING COVERED OPTIONS. The Fund may write covered call options and covered put options on optionable securities held in its portfolio, when in the opinion of Putnam Management such transactions are consistent with the Fund's investment objectives and policies. Call options written by the Fund give the purchaser the right to buy the underlying securities from the Fund at a stated exercise price; put options give the purchaser the right to sell the underlying securities to the Fund at a stated price. The Fund may write only covered options, which means that, so long as the Fund is obligated as the writer of a call option, it will own the underlying securities subject to the option (or comparable securities satisfying the cover requirements of securities exchanges). In the case of put options, the Fund will hold cash and/or high-grade short-term debt obligations equal to the price to be paid if the option is exercised. In addition, the Fund will be considered to have covered a put or call option if and to the extent that it holds an option that offsets some or all of the risk of the option it has written. The Fund may write combinations of covered puts and calls on the same underlying security. The Fund will receive a premium from writing a put or call option, which increases the Fund's return on the underlying security in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, the Fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. By writing a put option, the Fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value. The Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. The Fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. Because increases in the market price of a call option generally reflect increases in the market price of the security underlying the option, any loss resulting from a closing purchase transaction may be offset in whole or in part by unrealized appreciation of the underlying security owned by the Fund. If the Fund writes a call option but does not own the underlying security, and when it writes a put option, the Fund may be required to deposit cash or securities with its broker as "margin", or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the Fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations. PURCHASING PUT OPTIONS. The Fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the Fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the Fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. PURCHASING CALL OPTIONS. The Fund may purchase call options to hedge against an increase in the price of securities that the Fund wants ultimately to buy. Such hedge protection is provided during the life of the call option since the Fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. RISK FACTORS IN OPTIONS TRANSACTIONS The successful use of the Fund's options strategies depends on the ability of Putnam Management to forecast correctly interest rate and market movements. For example, if the Fund were to write a call option based on Putnam Management's expectation that the price of the underlying security would fall, but the price were to rise instead, the Fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the Fund were to write a put option based on Putnam Management's expectation that the price of the underlying security would rise, but the price were to fall instead, the Fund could be required to purchase the security upon exercise at a price higher than the current market price. When the Fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the Fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the Fund will lose part or all of its investment in the option. This contrasts with an investment by the Fund in the underlying security, since the Fund will not realize a loss if the security's price does not change. The effective use of options also depends on the Fund's ability to terminate option positions at times when Putnam Management deems it desirable to do so. There is no assurance that the Fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the Fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events -- such as volume in excess of trading or clearing capability -- were to interrupt its normal operations. A market may at times find it necessary to impose restrictions on particular types of options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the Fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the Fund, as option writer, would remain obligated under the option until expiration or exercise. Disruptions in the markets for the securities underlying options purchased or sold by the Fund could result in losses on the options. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the Fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the Fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options. The Fund, as holder of such a put option, could lose its entire investment if the prohibition remained in effect until the put option's expiration. Special risks are presented by internationally-traded options. Because of time differences between the United States and various foreign countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States. Over-the-counter ("OTC") options purchased by the Fund and assets held to cover OTC options written by the Fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the Fund's ability to invest in illiquid securities. FUTURES CONTRACTS AND RELATED OPTIONS Subject to applicable law, and unless otherwise specified in the Prospectus, the Fund may invest without limit in the types of futures contracts and related options identified in the Prospectus. A financial futures contract sale creates an obligation by the seller to deliver the type of financial instrument called for in the contract in a specified delivery month for a stated price. A financial futures contract purchase creates an obligation by the purchaser to take delivery of the type of financial instrument called for in the contract in a specified delivery month at a stated price. The specific instruments delivered or taken, respectively, at settlement date are not determined until on or near that date. The determination is made in accordance with the rules of the exchange on which the futures contract sale or purchase was made. Futures contracts are traded in the United States only on commodity exchanges or boards of trade -- known as "contract markets" -- approved for such trading by the Commodity Futures Trading Commission (the "CFTC"), and must be executed through a futures commission merchant or brokerage firm which is a member of the relevant contract market. Although futures contracts (other than index futures) by their terms call for actual delivery or acceptance of commodities or securities, in most cases the contracts are closed out before the settlement date without the making or taking of delivery. Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity with the same delivery date. If the price of the initial sale of the futures contract exceeds the price of the offsetting purchase, the seller is paid the difference and realizes a gain. Conversely, if the price of the offsetting purchase exceeds the price of the initial sale, the seller realizes a loss. Similarly, the closing out of a futures contract purchase is effected by the purchaser's entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the purchaser realizes a gain, and if the purchase price exceeds the offsetting sale price, he realizes a loss. In general 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the CFTC is treated as short-term gain or loss, and 60% is treated as long-term gain or loss. Unlike when the Fund purchases or sells a security, no price is paid or received by the Fund upon the purchase or sale of a futures contract. Upon entering into a contract, the Fund is required to deposit with its custodian in a segregated account in the name of the futures broker an amount of cash and/or U.S. Government Securities. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds to finance the transactions. Rather, initial margin is similar to a performance bond or good faith deposit which is returned to the Fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Futures contracts also involve brokerage costs. Subsequent payments, called "variation margin" or "maintenance margin", to and from the broker (or the custodian) are made on a daily basis as the price of the underlying security or commodity fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as "marking to the market." For example, when the Fund has purchased a futures contract on a security and the price of the underlying security has risen, that position will have increased in value and the Fund will receive from the broker a variation margin payment based on that increase in value. Conversely, when the Fund has purchased a security futures contract and the price of the underlying security has declined, the position would be less valuable and the Fund would be required to make a variation margin payment to the broker. The Fund may elect to close some or all of its futures positions at any time prior to their expiration in order to reduce or eliminate a hedge position then currently held by the Fund. The Fund may close its positions by taking opposite positions which will operate to terminate the Fund's position in the futures contracts. Final determinations of variation margin are then made, additional cash is required to be paid by or released to the Fund, and the Fund realizes a loss or a gain. Such closing transactions involve additional commission costs. OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put options on futures contracts it may buy or sell and enter into closing transactions with respect to such options to terminate existing positions. Options on future contracts give the purchaser the right in return for the premium paid to assume a position in a futures contract at the specified option exercise price at any time during the period of the option. The Fund may use options on futures contracts in lieu of writing or buying options directly on the underlying securities or purchasing and selling the underlying futures contracts. For example, to hedge against a possible decrease in the value of its portfolio securities, the Fund may purchase put options or write call options on futures contracts rather than selling futures contracts. Similarly, the Fund may purchase call options or write put options on futures contracts as a substitute for the purchase of futures contracts to hedge against a possible increase in the price of securities which the Fund expects to purchase. Such options generally operate in the same manner as options purchased or written directly on the underlying investments. As with options on securities, the holder or writer of an option may terminate his position by selling or purchasing an offsetting option. There is no guarantee that such closing transactions can be effected. The Fund will be required to deposit initial margin and maintenance margin with respect to put and call options on futures contracts written by it pursuant to brokers' requirements similar to those described above in connection with the discussion of futures contracts. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. Successful use of futures contracts by the Fund is subject to Putnam Management's ability to predict movements in the direction of interest rates and other factors affecting securities markets. For example, if the Fund has hedged against the possibility of decline in the values of its investments and the values of its investments increase instead, the Fund will lose part or all of the benefit of the increase through payments of daily maintenance margin. The Fund may have to sell investments at a time when it may be disadvantageous to do so in order to meet margin requirements. Compared to the purchase or sale of futures contracts, the purchase of call or put options on futures contracts involves less potential risk to the Fund because the maximum amount at risk is the premium paid for the options (plus transaction costs). However, there may be circumstances when the purchase of a call or put option on a futures contract would result in a loss to the Fund when the purchase or sale of a futures contract would not, such as when there is no movement in the prices of the hedged investments. The writing of an option on a futures contract involves risks similar to those risks relating to the sale of futures contracts. There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain market clearing facilities inadequate, and thereby result in the institution by exchanges of special procedures which may interfere with the timely execution of customer orders. To reduce or eliminate a hedge position held by the Fund, the Fund may seek to close out a position. The ability to establish and close out positions will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop or continue to exist for a particular futures contract or option. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain contracts or options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of contracts or options, or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of contracts or options (or a particular class or series of contracts or options), in which event the secondary market on that exchange for such contracts or options (or in the class or series of contracts or options) would cease to exist, although outstanding contracts or options on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS. If the Fund invests in tax-exempt securities issued by a governmental entity, the Fund may purchase and sell futures contracts and related options on U.S. Treasury securities when, in the opinion of Putnam Management, price movements in Treasury security futures and related options will correlate closely with price movements in the tax-exempt securities which are the subject of the hedge. U.S. Treasury security futures contracts require the seller to deliver, or the purchaser to take delivery of, the type of U.S. Treasury security called for in the contract at a specified date and price. Options on U.S. Treasury security futures contracts give the purchaser the right in return for the premium paid to assume a position in a U.S. Treasury security futures contract at the specified option exercise price at any time during the period of the option. Successful use of U.S. Treasury security futures contracts by the Fund is subject to Putnam Management's ability to predict movements in the direction of interest rates and other factors affecting markets for debt securities. For example, if the Fund has sold U.S. Treasury security futures contracts in order to hedge against the possibility of an increase in interest rates which would adversely affect tax-exempt securities held in its portfolio, and the prices of the Fund's tax-exempt securities increase instead as a result of a decline in interest rates, the Fund will lose part or all of the benefit of the increased value of its securities which it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the Fund has insufficient cash, it may have to sell securities to meet daily maintenance margin requirements at a time when it may be disadvantageous to do so. There is also a risk that price movements in U.S. Treasury security futures contracts and related options will not correlate closely with price movements in markets for tax-exempt securities. For example, if the Fund has hedged against a decline in the values of tax-exempt securities held by it by selling Treasury security futures and the values of Treasury securities subsequently increase while the values of its tax-exempt securities decrease, the Fund would incur losses on both the Treasury security futures contracts written by it and the tax-exempt securities held in its portfolio. Putnam Management will seek to reduce this risk by monitoring movements in markets for U.S. Treasury security futures and options and for tax-exempt securities closely. The Fund will only purchase or sell Treasury security futures or related options when, in the opinion of Putnam Management, price movements in Treasury security futures and related options will correlate closely with price movements in tax-exempt securities in which the Fund invests. INDEX FUTURES CONTRACTS. An index futures contract is a contract to buy or sell units of an index at a specified future date at a price agreed upon when the contract is made. Entering into a contract to buy units of an index is commonly referred to as buying or purchasing a contract or holding a long position in the index. Entering into a contract to sell units of an index is commonly referred to as selling a contract or holding a short position. A unit is the current value of the index. The Fund may enter into stock index futures contracts, debt index futures contracts, or other index futures contracts appropriate to its objective. The Fund may also purchase and sell options on index futures contracts. For example, the Standard & Poor's Composite 500 Stock Price Index ("S&P 500") is composed of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The S&P 500 assigns relative weightings to the common stocks included in the Index, and the value fluctuates with changes in the market values of those common stocks. In the case of the S&P 500, contracts are to buy or sell 500 units. Thus, if the value of the S&P 500 were $150, one contract would be worth $75,000 (500 units x $150). The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. For example, if the Fund enters into a futures contract to buy 500 units of the S&P 500 at a specified future date at a contract price of $150 and the S&P 500 is at $154 on that future date, the Fund will gain $2,000 (500 units x gain of $4). If the Fund enters into a futures contract to sell 500 units of the stock index at a specified future date at a contract price of $150 and the S&P 500 is at $152 on that future date, the Fund will lose $1,000 (500 units x loss of $2). There are several risks in connection with the use by the Fund of index futures as a hedging device. One risk arises because of the imperfect correlation between movements in the prices of the index futures and movements in the prices of securities which are the subject of the hedge. Putnam Management will, however, attempt to reduce this risk by buying or selling, to the extent possible, futures on indices the movements of which will, in its judgment, have a significant correlation with movements in the prices of the securities sought to be hedged. Successful use of index futures by the Fund for hedging purposes is also subject to Putnam Management's ability to predict movements in the direction of the market. It is possible that, where the Fund has sold futures to hedge its portfolio against a decline in the market, the index on which the futures are written may advance and the value of securities held in the Fund's portfolio may decline. If this occurred, the Fund would lose money on the futures and also experience a decline in value in its portfolio securities. It is also possible that, if the Fund has hedged against the possibility of a decline in the market adversely affecting securities held in its portfolio and securities prices increase instead, the Fund will lose part or all of the benefit of the increased value of those securities it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the Fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements at a time when it is disadvantageous to do so. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the index futures and the portion of the portfolio being hedged, the prices of index futures may not correlate perfectly with movements in the underlying index due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the index and futures markets. Second, margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the securities market does. Increased participation by speculators in the futures market may also cause temporary price distortions. Due to the possibility of price distortions in the futures market and also because of the imperfect correlation between movements in the index and movements in the prices of index futures, even a correct forecast of general market trends by Putnam Management may still not result in a successful hedging transaction over a short time period. OPTIONS ON STOCK INDEX FUTURES. Options on index futures are similar to options on securities except that options on index futures give the purchaser the right, in return for the premium paid, to assume a position in an index futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account which represents the amount by which the market price of the index futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the index future. If an option is exercised on the last trading day prior to its expiration date, the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing level of the index on which the future is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid. OPTIONS ON INDICES As an alternative to purchasing call and put options on index futures, the Fund may purchase and sell call and put options on the underlying indices themselves. Such options would be used in a manner identical to the use of options on index futures. INDEX WARRANTS The Fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If the Fund were not to exercise an index warrant prior to its expiration, then the Fund would lose the amount of the purchase price paid by it for the warrant. The Fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the Fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Although the Fund will normally invest only in exchange-listed warrants, index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the Fund's ability to exercise the warrants at such time, or in such quantities, as the Fund would otherwise wish to do. FOREIGN SECURITIES Under its current policy, which may be changed without shareholder approval, the Fund may invest up to the limit of its total assets specified in its Prospectus in securities principally traded in markets outside the United States. Eurodollar certificates of deposit are excluded for purposes of this limitation. Foreign investments can be affected favorably or unfavorably by changes in currency exchange rates and in exchange control regulations. There may be less publicly available information about a foreign company than about a U.S. company, and foreign companies may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those applicable to U.S. companies. Securities of some foreign companies are less liquid or more volatile than securities of U.S. companies, and foreign brokerage commissions and custodian fees are generally higher than in the United States. Investments in foreign securities can involve other risks different from those affecting U.S. investments, including local political or economic developments, expropriation or nationalization of assets and imposition of withholding taxes on dividend or interest payments. To hedge against possible variations in foreign exchange rates, the Fund may purchase and sell forward foreign currency contracts. These represent agreements to purchase or sell specified currencies at specified dates and prices. The Fund will only purchase and sell forward foreign currency contracts in amounts Putnam Management deems appropriate to hedge existing or anticipated portfolio positions and will not use such forward contracts for speculative purposes. Foreign securities, like other assets of the Fund, will be held by the Fund's custodian or by a subcustodian. FOREIGN CURRENCY TRANSACTIONS Unless otherwise specified in the Prospectus, the Fund may engage without limit in currency exchange transactions, as well as foreign currency forward and futures contracts, to protect against uncertainty in the level of future currency exchange rates. In addition, the Fund may write covered call and put options on foreign currencies for the purpose of increasing its current return. Generally, the Fund may engage in both "transaction hedging" and "position hedging". When it engages in transaction hedging, the Fund enters into foreign currency transactions with respect to specific receivables or payables, generally arising in connection with the purchase or sale of portfolio securities. The Fund will engage in transaction hedging when it desires to "lock in" the U.S. dollar price of a security it has agreed to purchase or sell, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. By transaction hedging the Fund will attempt to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is earned, and the date on which such payments are made or received. The Fund may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency. The Fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and purchase and sell foreign currency futures contracts. For transaction hedging purposes the Fund may also purchase exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives the Fund the right to assume a short position in the futures contract until the expiration of the option. A put option on a currency gives the Fund the right to sell the currency at an exercise price until the expiration of the option. A call option on a futures contract gives the Fund the right to assume a long position in the futures contract until the expiration of the option. A call option on a currency gives the Fund the right to purchase the currency at the exercise price until the expiration of the option. When it engages in position hedging, the Fund enters into foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which its portfolio securities are denominated (or an increase in the value of currency for securities which the Fund expects to purchase, when the Fund holds cash or short-term investments). In connection with position hedging, the Fund may purchase put or call options on foreign currency and on foreign currency futures contracts and buy or sell forward contracts and foreign currency futures contracts. The Fund may also purchase or sell foreign currency on a spot basis. The precise matching of the amounts of foreign currency exchange transactions and the value of the portfolio securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the dates the currency exchange transactions are entered into and the dates they mature. It is impossible to forecast with precision the market value of portfolio securities at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary for the Fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency the Fund is obligated to deliver and a decision is made to sell the security or securities and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities if the market value of such security or securities exceeds the amount of foreign currency the Fund is obligated to deliver. Transaction and position hedging do not eliminate fluctuations in the underlying prices of the securities which the Fund owns or intends to purchase or sell. They simply establish a rate of exchange which one can achieve at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they tend to limit any potential gain which might result from the increase in value of such currency. The Fund may seek to increase its current return or to offset some of the costs of hedging against fluctuations in current exchange rates by writing covered call options and covered put options on foreign currencies. The Fund receives a premium from writing a call or put option, which increases the Fund's current return if the option expires unexercised or is closed out at a net profit. The Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Fund's currency hedging transactions may call for the delivery of one foreign currency in exchange for another foreign currency and may at times not involve currencies in which its portfolio securities are then denominated. Putnam Management will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the Fund. Cross hedging transactions by the Fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge. CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract as agreed by the parties, at a price set at the time of the contract. In the case of a cancelable forward contract, the holder has the unilateral right to cancel the contract at maturity by paying a specified fee. The contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. A foreign currency futures contract is a standardized contract for the future delivery of a specified amount of a foreign currency at a future date at a price set at the time of the contract. Foreign currency futures contracts traded in the United States are designed by and traded on exchanges regulated by the CFTC, such as the New York Mercantile Exchange. Forward foreign currency exchange contracts differ from foreign currency futures contracts in certain respects. For example, the maturity date of a forward contract may be any fixed number of days from the date of the contract agreed upon by the parties, rather than a predetermined date in a given month. Forward contracts may be in any amounts agreed upon by the parties rather than predetermined amounts. Also, forward foreign exchange contracts are traded directly between currency traders so that no intermediary is required. A forward contract generally requires no margin or other deposit. At the maturity of a forward or futures contract, the Fund either may accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract. Closing transactions with respect to futures contracts are effected on a commodities exchange; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts. Positions in the foreign currency futures contracts may be closed out only on an exchange or board of trade which provides a secondary market in such contracts. Although the Fund intends to purchase or sell foreign currency futures contracts only on exchanges or boards of trade where there appears to be an active secondary market, there is no assurance that a secondary market on an exchange or board of trade will exist for any particular contract or at any particular time. In such event, it may not be possible to close a futures position and, in the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin. FOREIGN CURRENCY OPTIONS. In general, options on foreign currencies operate similarly to options on securities and are subject to many similar risks. Foreign currency options are traded primarily in the over-the-counter market, although options on foreign currencies have recently been listed on several exchanges. Options are traded not only on the currencies of individual nations, but also on the European Currency Unit ("ECU"). The ECU is composed of amounts of a number of currencies, and is the official medium of exchange of the European Community's European Monetary System. The Fund will only purchase or write foreign currency options when Putnam Management believes that a liquid secondary market exists for such options. There can be no assurance that a liquid secondary market will exist for a particular option at any specific time. Options on foreign currencies are affected by all of those factors which influence foreign exchange rates and investments generally. The value of any currency, including U.S. dollars and foreign currencies, may be affected by complex political and economic factors applicable to the issuing country. In addition, the exchange rates of foreign currencies (and therefore the values of foreign currency options) may be affected significantly, fixed, or supported directly or indirectly by U.S. and foreign government actions. Government intervention may increase risks involved in purchasing or selling foreign currency options, since exchange rates may not be free to fluctuate in response to other market forces. The value of a foreign currency option reflects the value of an exchange rate, which in turn reflects relative values of two currencies, the U.S. dollar and the foreign currency in question. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be involved in the exercise of foreign currency options, investors may be disadvantaged by having to deal in an odd lot market for the underlying foreign currencies in connection with options at prices that are less favorable than for round lots. Foreign governmental restrictions or taxes could result in adverse changes in the cost of acquiring or disposing of foreign currencies. There is no systematic reporting of last sale information for foreign currencies and there is no regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Available quotation information is generally representative of very large round-lot transactions in the interbank market and thus may not reflect exchange rates for smaller odd-lot transactions (less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that options markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that cannot be reflected in the options markets. SETTLEMENT PROCEDURES. Settlement procedures relating to the Fund's investments in foreign securities and to the Fund's foreign currency exchange transactions may be more complex than settlements with respect to investments in debt or equity securities of U.S. issuers, and may involve certain risks not present in the Fund's domestic investments. For example, settlement of transactions involving foreign securities or foreign currency may occur within a foreign country, and the Fund may be required to accept or make delivery of the underlying securities or currency in conformity with any applicable U.S. or foreign restrictions or regulations, and may be required to pay any fees, taxes or charges associated with such delivery. Such investments may also involve the risk that an entity involved in the settlement may not meet its obligations. FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not charge a fee for currency conversion, they do realize a profit based on the difference (the "spread") between prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at one rate, while offering a lesser rate of exchange should the Fund desire to resell that currency to the dealer. RESTRICTED SECURITIES The SEC Staff currently takes the view that any designation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the Funds) must be pursuant to written procedures established by the Trustees. It is the present intention of the Funds' Trustees that, if the Trustees decide to delegate such determinations to Putnam Management or another person, they would do so pursuant to written procedures, consistent with the Staff's position. Should the Staff modify its position in the future, the Trustees would consider what action would be appropriate in light of the Staff's position at that time. TAXES TAXATION OF THE FUND. The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In order so to qualify and to qualify for the special tax treatment accorded regulated investment companies and their shareholders, the Fund must, among other things: (a) Derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, and gains from the sale of stock, securities and foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies; (b) derive less than 30% of its gross income from the sale or other disposition of certain assets (including stock or securities and certain options, futures contracts, forward contracts and foreign currencies) held for less than three months; (c) distribute with respect to each taxable year at least 90% of the sum of its taxable net investment income, its net tax-exempt income, and the excess, if any, of net short-term capital gains over net long-term capital losses for such year; and (d) diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the market value of the Fund's assets is represented by cash and cash items, U.S. Government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the Fund's total assets and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities (other than those of the U.S. Government or other regulated investment companies) of any one issuer or of two or more issuers which the Fund controls and which are engaged in the same, similar, or related trades or businesses. If the Fund qualifies as a regulated investment company that is accorded special tax treatment, the Fund will not be subject to federal income tax on income paid to its shareholders in the form of dividends (including capital gain dividends). If the Fund failed to qualify as a regulated investment company accorded special tax treatment in any taxable year, the Fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. In addition, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment. If the Fund fails to distribute in a calendar year substantially all of its ordinary income for such year and substantially all of its capital gain net income for the one-year period ending October 31 (or later if the Fund is permitted so to elect and so elects), plus any retained amount from the prior year, the Fund will be subject to a 4% excise tax on the undistributed amounts. A dividend paid to shareholders by the Fund in January of a year generally is deemed to have been paid by the Fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The Fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax. EXEMPT-INTEREST DIVIDENDS. The Fund will be qualified to pay exempt-interest dividends to its shareholders only if, at the close of each quarter of the Fund's taxable year, at least 50% of the total value of the Fund's assets consists of obligations the interest on which is exempt from federal income tax. Distributions that the Fund properly designates as exempt- interest dividends are treated by shareholders as interest excludable from their gross income for federal income tax purposes but may be taxable for federal alternative minimum tax purposes and for state and local purposes. If the Fund intends to be qualified to pay exempt-interest dividends, the Fund may be limited in its ability to enter into taxable transactions involving forward commitments, repurchase agreements, financial futures, and options contracts on financial futures, tax-exempt bond indices, and other assets. Part or all of the interest on indebtedness, if any, incurred or continued by a shareholder to purchase or carry shares of a Fund paying exempt-interest dividends is not deductible. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness, multiplied by the percentage of the Fund's total distributions (not including distributions from net long-term capital gains) paid to the shareholder that are exempt-interest dividends. Under rules used by the Internal Revenue Service for determining when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares. In general, exempt-interest dividends, if any, attributable to interest received on certain private activity obligations and certain industrial development bonds will not be tax-exempt to any shareholders who are "substantial users" of the facilities financed by such obligations or bonds or who are "related persons" of such substantial users. A Fund which is qualified to pay exempt-interest dividends will inform investors within 60 days of the Fund's fiscal year-end of the percentage of its income distributions designated as tax-exempt. The percentage is applied uniformly to all distributions made during the year. The percentage of income designated as tax-exempt for any particular distribution may be substantially different from the percentage of the Fund's income that was tax-exempt during the period covered by the distribution. HEDGING TRANSACTIONS. If the Fund engages in transactions, including hedging transactions in options, futures contracts, and straddles, or other similar transactions, it will be subject to special tax rules (including mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the Fund, defer losses to the Fund, cause adjustments in the holding periods of the Fund's securities, or convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. The Fund will endeavor to make any available elections pertaining to such transactions in a manner believed to be in the best interests of the Fund. Under the 30% of gross income test described above (see "Taxation of the Fund"), the Fund will be restricted in selling assets held or considered under Code rules to have been held for less than three months, and in engaging in certain hedging transactions (including hedging transactions in options and futures) that in some circumstances could cause certain Fund assets to be treated as held for less than three months. Certain of the Fund's hedging activities (including its transactions, if any, in foreign currencies or foreign currency-denominated instruments) are likely to produce a difference between its book income and its taxable income. If the Fund's book income exceeds its taxable income, the distribution (if any) of such excess will be treated as a dividend to the extent of the Fund's remaining earnings and profits (including earnings and profits arising from tax-exempt income), and thereafter as a return of capital or as gain from the sale or exchange of a capital asset, as the case may be. If the Fund's book income is less than its taxable income, the Fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment. RETURN OF CAPITAL DISTRIBUTIONS. If the Fund makes a distribution to you in excess of its current and accumulated "earnings and profits" in any taxable year, the excess distribution will be treated as a return of capital to the extent of your tax basis in your shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces your tax basis in your shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by you of your shares. SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. The Fund's investment in securities issued at a discount and certain other obligations will (and investments in securities purchased at a discount may) require the Fund to accrue and distribute income not yet received. In order to generate sufficient cash to make the requisite distributions, the Fund may be required to sell securities in its portfolio that it otherwise would have continued to hold. CAPITAL LOSS CARRYOVER. The amounts and expiration dates of any capital loss carryovers available to the Fund are shown in Note 1 (Federal income taxes) to the financial statements included in Part I of this Statement or incorporated by reference into this Statement. FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED HEDGING TRANSACTIONS. The Fund's transactions in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options, futures contracts, and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. If more than 50% of the Fund's assets at year end consists of the debt and equity securities of foreign corporations, the Fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the Fund to foreign countries. In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholder's ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the Fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the amount of such taxes. Shareholders who do not itemize on their federal income tax returns may claim a credit (but no deduction) for such foreign taxes. Investment by the Fund in certain "passive foreign investment companies" could subject the Fund to a U.S. federal income tax or other charge on the proceeds from the sale of its investment in such a company; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a "qualified electing fund." SALE OR REDEMPTION OF SHARES. The sale, exchange or redemption of Fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months, and otherwise as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss will be disallowed for Federal income tax purposes to the extent of any exempt- interest dividends received on such shares. In addition, any loss (not already disallowed as provided in the preceding sentence) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gain distributions received by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of Fund shares will be disallowed if other Fund shares are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss. SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS. Special tax rules apply to investments though defined contribution plans and other tax-qualified plans. Shareholders should consult their tax adviser to determine the suitability of shares of a fund as an investment through such plans and the precise effect of an investment on their particular tax situation. BACKUP WITHHOLDING. The Fund generally is required to withhold and remit to the U.S. Treasury 31% of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the Fund with a correct taxpayer identification number (TIN), who has underreported dividends or interest income, or who fails to certify to the Fund that he or she is not subject to such withholding. Shareholders who fail to furnish their currect TIN are subject to a penalty of $50 for each such failure unless the failure is due to reasonable cause and not wilful neglect. An individual's taxpayer identification number is his or her social security number. MANAGEMENT OF THE FUND TRUSTEES *+GEORGE PUTNAM, Chairman and President. Chairman and Director of Putnam Management and Putnam Mutual Funds. Director, The Boston Company, Inc., Boston Safe Deposit and Trust Company, Freeport-McMoRan, Inc., General Mills, Inc., Houghton Mifflin Company, Marsh & McLennan Companies, Inc. and Rockefeller Group, Inc. +WILLIAM F. POUNDS, Vice Chairman. Professor of Management, Alfred P. Sloan School of Management, Massachusetts Institute of Technology. Director of EG&G, Inc., Fisher Price, Inc., IDEXX, M/A-COM, Inc., and Sun Company, Inc. JAMESON A. BAXTER, Trustee. President, Baxter Associates, Inc. (consultants to management). Director of Avondale Federal Savings Bank, ASHTA Chemicals, Inc. and Banta Corporation. Chairman of the Board of Trustees, Mount Holyoke College. +HANS H. ESTIN, Trustee. Vice Chairman, North American Management Corp. (a registered investment adviser). Director of The Boston Company, Inc. and Boston Safe Deposit and Trust Company. ELIZABETH T. KENNAN, Trustee. President of Mount Holyoke College. Director, the Kentucky Home Life Insurance Companies, NYNEX Corporation, Northeast Utilities and Talbots and Trustee of the University of Notre Dame. *LAWRENCE J. LASSER, Trustee and Vice President. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Investment Management, Inc. Director of Marsh & McLennan Companies, Inc. Vice President of the Putnam funds. JOHN A. HILL, Trustee. Chairman and Managing Director, First Reserve Corporation (a registered investment adviser). Director, Lantana Corporation, Maverick Tube Corporation, Snyder Oil Corporation and various First Reserve Funds. +ROBERT E. PATTERSON, Trustee. Executive Vice President, Cabot Partners Limited Partnership (a registered investment adviser). DONALD S. PERKINS, Trustee. Director of various corporations, including American Telephone & Telegraph Company, AON Corp., Cummins Engine Company, Inc., Illinois Power Company, Inland Steel Industries, Inc., K mart Corporation, LaSalle Street Fund, Inc., Springs Industries, Inc., TBG, Inc. and Time Warner Inc. *#GEORGE PUTNAM, III, Trustee. President, New Generation Research, Inc. (publisher of bankruptcy information). Director, World Environment Center. *A.J.C. SMITH, Trustee. Chairman, Chief Executive Officer and Director, Marsh & McLennan Companies, Inc. W. NICHOLAS THORNDIKE, Trustee. Director of various corporations and charitable organizations, including Courier Corporation and Providence Journal Co. Also, Trustee and President of Massachusetts General Hospital and Trustee of Bradley Real Estate Trust and Eastern Utilities Associates. OFFICERS CHARLES E. PORTER, Executive Vice President. Managing Director of Putnam Investments, Inc. and Putnam Investment Management, Inc. Executive Vice President of the Putnam funds. PATRICIA C. FLAHERTY, Senior Vice President. Senior Vice President of Putnam Investments, Inc. and Putnam Investment Management, Inc. WILLIAM N. SHIEBLER, Vice President. Director and Senior Managing Director of Putnam Investments, Inc. President, Chief Operating Officer and Director of Putnam Mutual Funds. Vice President of the Putnam funds. GORDON H. SILVER, Vice President. Senior Managing Director of Putnam Investments, Inc. and Putnam Investment Management, Inc. Director, Putnam Investments, Inc. and Putnam Investment Management, Inc. Vice President of the Putnam funds. JOHN R. VERANI, Vice President. Senior Vice President of Putnam Investments, Inc. and Putnam Investment Management, Inc. Vice President of the Putnam funds. PAUL M. O'NEIL, Vice President. Vice President of Putnam Investments, Inc. and Putnam Investment Management, Inc. Vice President of the Putnam funds. JOHN D. HUGHES, Vice President and Treasurer. Vice President and Treasurer of the Putnam funds. KATHERINE HOWARD, Assistant Vice President. Assistant Vice President of the Putnam funds. BEVERLY MARCUS, Clerk and Assistant Treasurer. Clerk and Assistant Treasurer of the Putnam funds. *Trustees who are "interested persons" (as defined in the Investment Company Act of 1940) of the Fund, Putnam Management or Putnam Mutual Funds. +Members of the Executive Committee of the Trustees. The Executive Committee meets between regular meetings of the Trustees as may be required to review investment matters and other affairs of the Fund and may exercise all of the powers of the Trustees. #George Putnam, III is the son of George Putnam. ----------------- Certain other officers of Putnam Management are officers of your Fund. SEE "ADDITIONAL OFFICERS OF THE FUND" IN PART I OF THIS STATEMENT. The mailing address of each of the officers and Trustees is One Post Office Square, Boston, Massachusetts 02109. Except as stated below, the principal occupations of the officers and Trustees for the last five years have been with the employers as shown above, although in some cases they have held different positions with such employers. Also, prior to January, 1992, Ms. Baxter was Vice President and Principal, Regency Group, Inc. and Consultant, The First Boston Corporation. Prior to May, 1991, Mr. Pounds was Senior Advisor to the Rockefeller Family and Associates, Chairman of Rockefeller Trust Company and Director of Rockefeller Group, Inc. Prior to November, 1990, Mr. Shiebler was President and Chief Operating Officer of the Intercapital Division of Dean Witter Reynolds, Inc., Vice President of the Dean Witter Funds and Director of Dean Witter Trust Company. Each Trustee of the Fund receives an annual fee and an additional fee for each Trustees' meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings and for special services rendered in that connection. All of the Trustees are Trustees of all the Putnam funds and each receives fees for his or her services. FOR DETAILS OF TRUSTEES' FEES PAID BY THE FUND, SEE "FUND CHARGES AND EXPENSES" IN PART I OF THIS STATEMENT. The Agreement and Declaration of Trust of the Fund provides that the Fund will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Fund, except if it is determined in the manner specified in the Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Fund or that such indemnification would relieve any officer or Trustee of any liability to the Fund or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. The Fund, at its expense, provides liability insurance for the benefit of its Trustees and officers. Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust Company are subsidiaries of Putnam Investments, Inc., a holding company which is in turn wholly owned by Marsh & McLennan Companies, Inc., a publicly owned holding company whose principal operating subsidiaries are international insurance and reinsurance brokers, investment managers and management consultants. Trustees and officers of the Fund who are also officers of Putnam Management or its affiliates or who are stockholders of Marsh & McLennan Companies, Inc. will benefit from the advisory fees, sales commissions, distribution fees (if any), custodian fees and transfer agency fees paid or allowed by the Fund. PUTNAM MANAGEMENT Putnam Management is one of America's oldest and largest money management firms. Putnam Management's staff of experienced portfolio managers and research analysts selects securities and constantly supervises the Fund's portfolio. By pooling an investor's money with that of other investors, a greater variety of securities can be purchased than would be the case individually; the resulting diversification helps reduce investment risk. Putnam Management has been managing mutual funds since 1937. Today, the firm serves as the investment manager for the funds in the Putnam Family, with over $65 billion in assets in over 4.0 million shareholder accounts at June 30, 1994. An affiliate, The Putnam Advisory Company, Inc., manages domestic and foreign institutional accounts and mutual funds, including the accounts of many Fortune 500 companies. Another affiliate, Putnam Fiduciary Trust Company, provides investment advice to institutional clients under its banking and fiduciary powers. At June 30, 1994, Putnam Management and its affiliates managed over $92 billion in assets, including nearly $52 billion in tax exempt securities and over $32 billion in retirement plan assets. THE MANAGEMENT CONTRACT Under a Management Contract between the Fund and Putnam Management, subject to such policies as the Trustees may determine, Putnam Management, at its expense, furnishes continuously an investment program for the Fund and makes investment decisions on behalf of the Fund. Subject to the control of the Trustees, Putnam Management also manages, supervises and conducts the other affairs and business of the Fund, furnishes office space and equipment, provides bookkeeping and clerical services (including determination of the Fund's net asset value, but excluding shareholder accounting services) and places all orders for the purchase and sale of the Fund's portfolio securities. Putnam Management may place Fund portfolio transactions with broker-dealers which furnish Putnam Management, without cost to it, certain research, statistical and quotation services of value to Putnam Management and its affiliates in advising the Fund and other clients. In so doing, Putnam Management may cause the Fund to pay greater brokerage commissions than it might otherwise pay. FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER THE MANAGEMENT CONTRACT, SEE "FUND CHARGES AND EXPENSES" IN PART I OF THIS STATEMENT. Putnam Management's compensation under the Management Contract may be reduced in any year if the Fund's expenses exceed the limits on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer or sale. The term "expenses" is defined in the statutes or regulations of such jurisdictions, and generally, excludes brokerage commissions, taxes, interest, extraordinary expenses and, if the Fund has a Distribution Plan, payments made under such Plan. The only such limitation as of the date of this Statement (applicable to any Fund registered for sale in California) was 2.5% of the first $30 million of average net assets, 2% of the next $70 million and 1.5% of any excess over $100 million. Under the Management Contract, Putnam Management may reduce its compensation to the extent that the Fund's expenses exceed such lower expense limitation as Putnam Management may, by notice to the Fund, declare to be effective. The expenses subject to this limitation are exclusive of brokerage commissions, interest, taxes, deferred organizational and extraordinary expenses and, if the Fund has a Distribution Plan, payments required under such Plan. THE TERMS OF ANY EXPENSE LIMITATION FROM TIME TO TIME IN EFFECT ARE DESCRIBED IN EITHER THE PROSPECTUS OR PART I OF THIS STATEMENT. In addition to the fee paid to Putnam Management, the Fund reimburses Putnam Management for the compensation and related expenses of certain officers of the Fund and their assistants who provide certain administrative services for the Fund and the other funds in the Putnam Family, each of which bears an allocated share of the foregoing costs. The aggregate amount of all such payments and reimbursements is determined annually by the Trustees. THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S MOST RECENT FISCAL YEAR IS INCLUDED IN "FUND CHARGES AND EXPENSES" IN PART I OF THIS STATEMENT. Putnam Management pays all other salaries of officers of the Fund. The Fund pays all expenses not assumed by Putnam Management including, without limitation, auditing, legal, custodial, investor servicing and shareholder reporting expenses. The Fund pays the cost of typesetting for its Prospectuses and the cost of printing and mailing any Prospectuses sent to its shareholders. Putnam Mutual Funds pays the cost of printing and distributing all other Prospectuses. The Management Contract provides that Putnam Management shall not be subject to any liability to the Fund or to any shareholder of the Fund for any act or omission in the course of or connected with rendering services to the Fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of Putnam Management. The Management Contract may be terminated without penalty by vote of the Trustees or the shareholders of the Fund, or by Putnam Management, on 30 days' written notice. It may be amended only by a vote of the shareholders of the Fund. The Management Contract also terminates without payment of any penalty in the event of its assignment. The Management Contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the Fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the Investment Company Act of 1940. PORTFOLIO TRANSACTIONS INVESTMENT DECISIONS. Investment decisions for the Fund and for the other investment advisory clients of Putnam Management and its affiliates are made with a view to achieving their respective investment objectives. Investment decisions are the product of many factors in addition to basic suitability for the particular client involved. Thus, a particular security may be bought or sold for certain clients even though it could have been bought or sold for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling the security. In some instances, one client may sell a particular security to another client. It also sometimes happens that two or more clients simultaneously purchase or sell the same security, in which event each day's transactions in such security are, insofar as possible, averaged as to price and allocated between such clients in a manner which in Putnam Management's opinion is equitable to each and in accordance with the amount being purchased or sold by each. There may be circumstances when purchases or sales of portfolio securities for one or more clients will have an adverse effect on other clients. BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by the Fund of negotiated brokerage commissions. Such commissions vary among different brokers. A particular broker may charge different commissions according to such factors as the difficulty and size of the transaction. Transactions in foreign investments often involve the payment of fixed brokerage commissions, which may be higher than those in the United States. There is generally no stated commission in the case of securities traded in the over-the-counter markets, but the price paid by the Fund usually includes an undisclosed dealer commission or mark-up. In underwritten offerings, the price paid by the Fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer. It is anticipated that most purchases and sales of securities by funds investing primarily in tax-exempt securities and certain other fixed-income securities will be with the issuer or with underwriters of or dealers in those securities, acting as principal. Accordingly, those funds would not ordinarily pay significant brokerage commissions with respect to securities transactions. SEE "FUND CHARGES AND EXPENSES" IN PART I OF THIS STATEMENT FOR INFORMATION CONCERNING COMMISSIONS PAID BY THE FUND. It has for many years been a common practice in the investment advisory business for advisers of investment companies and other institutional investors to receive brokerage and research services (as defined in the Securities Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that execute portfolio transactions for the clients of such advisers and from third parties with which such broker-dealers have arrangements. Consistent with this practice, Putnam Management receives brokerage and research services and other similar services from many broker-dealers with which Putnam Management places the Fund's portfolio transactions and from third parties with which these broker-dealers have arrangements. These services include such matters as general economic and market reviews, industry and company reviews, evaluations of investments, recommendations as to the purchase and sale of investments, newspapers, magazines, pricing services, quotation services, news services and personal computers utilized by Putnam Management's managers and analysts. Where the services referred to above are not used exclusively by Putnam Management for research purposes, Putnam Management, based upon its own allocations of expected use, bears that portion of the cost of these services which directly relates to their non-research use. Some of these services are of value to Putnam Management and its affiliates in advising various of their clients (including the Fund), although not all of these services are necessarily useful and of value in managing the Fund. The management fee paid by the Fund is not reduced because Putnam Management and its affiliates receive these services even though Putnam Management might otherwise be required to purchase some of these services for cash. Putnam Management places all orders for the purchase and sale of portfolio investments for the Fund and buys and sells investments for the Fund through a substantial number of brokers and dealers. In so doing, Putnam Management uses its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution, Putnam Management, having in mind the Fund's best interests, considers all factors it deems relevant, including, by way of illustration, price, the size of the transaction, the nature of the market for the security or other investment, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions. As permitted by Section 28(e) of the 1934 Act, and by the Management Contract, Putnam Management may cause the Fund to pay a broker-dealer which provides "brokerage and research services" (as defined in the 1934 Act) to Putnam Management an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the Fund on an agency basis in excess of the commission which another broker-dealer would have charged for effecting that transaction. Putnam Management's authority to cause the Fund to pay any such greater commissions is also subject to such policies as the Trustees may adopt from time to time. Putnam Management does not currently intend to cause the Fund to make such payments. It is the position of the staff of the Securities and Exchange Commission that Section 28(e) does not apply to the payment of such greater commissions in "principal" transactions. Accordingly Putnam Management will use its best effort to obtain the most favorable price and execution available with respect to such transactions, as described above. The Management Contract provides that commissions, fees, brokerage or similar payments received by Putnam Management or an affiliate in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees, shall be recaptured by the Fund through a reduction of the fee payable by the Fund under the Management Contract. Putnam Management seeks to recapture for the Fund soliciting dealer fees on the tender of the Fund's portfolio securities in tender or exchange offers. Any such fees which may be recaptured are likely to be minor in amount. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable price and execution available and such other policies as the Trustees may determine, Putnam Management may consider sales of shares of the Fund (and, if permitted by law, of the other Putnam funds) as a factor in the selection of broker-dealers to execute portfolio transactions for the Fund. PRINCIPAL UNDERWRITER Putnam Mutual Funds is the principal underwriter of shares of the Fund and the other continuously offered Putnam funds. Putnam Mutual Funds is not obligated to sell any specific amount of shares of the Fund and will purchase shares for resale only against orders for shares. SEE "FUND CHARGES AND EXPENSES" IN PART I OF THIS STATEMENT FOR INFORMATION ON SALES CHARGES AND OTHER PAYMENTS RECEIVED BY PUTNAM MUTUAL FUNDS. INVESTOR SERVICING AGENT AND CUSTODIAN Putnam Investor Services, a division of Putnam Fiduciary Trust Company ("PFTC"), is the Fund's investor servicing agent (transfer, plan and dividend disbursing agent), for which it receives fees which are paid monthly by the Fund as an expense of all its shareholders. The fee paid to Putnam Investor Services is determined by the Trustees taking into account the number of shareholder accounts and transactions. Putnam Investor Services has won the DALBAR Quality Tested Service Seal every year since the award's 1990 inception. Over 10,000 tests of 38 separate shareholders service components demonstrated that Putnam Investor Services exceeded the industry standard in all categories. PFTC is the custodian of the Fund's assets. In carrying out its duties under its custodian contract, PFTC may employ one or more subcustodians whose responsibilities will include safeguarding and controlling the Fund's cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on the Fund's investments. PFTC and any subcustodians employed by it have a lien on the securities of the Fund (to the extent permitted by the Fund's investment restrictions) to secure charges and any advances made by such subcustodians at the end of any day for the purpose of paying for securities purchased by the Fund. The Fund expects that such advances will exist only in unusual circumstances. Neither PFTC nor any subcustodian determines the investment policies of the Fund or decides which securities the Fund will buy or sell. PFTC pays the fees and other charges of any subcustodians employed by it. The Fund may from time to time pay custodial expenses in full or in part through the placement by Putnam Management of the Fund's portfolio transactions with the subcustodians or with a third- party broker having an agreement with the subcustodians. The Fund pays PFTC an annual fee based on the Fund's assets, securities transactions and securities holdings and reimburses PFTC for certain out-of-pocket expenses incurred by it or any subcustodian employed by it in performing custodial services. SEE "FUND CHARGES AND EXPENSES" IN PART I OF THIS STATEMENT FOR INFORMATION ON FEES AND REIMBURSEMENTS FOR INVESTOR SERVICING AND CUSTODY RECEIVED BY PFTC. THE FEES MAY BE REDUCED BY CREDITS ALLOWED BY PFTC. DETERMINATION OF NET ASSET VALUE The Fund determines the net asset value per share of each class of shares once each day the New York Stock Exchange (the "Exchange") is open. Currently, the Exchange is closed Saturdays, Sundays and the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July, Labor Day, Thanksgiving and Christmas. The Fund determines net asset value as of the close of regular trading on the Exchange, currently 4:00 p.m. However, equity options held by the Fund are priced as of the close of trading at 4:10 p.m., and futures contracts on U.S. Government securities and index options held by the Fund are priced as of their close of trading at 4:15 p.m. Securities for which market quotations are readily available are valued at prices which, in the opinion of the Trustees or Putnam Management, most nearly represent the market values of such securities. Currently, such prices are determined using the last reported sale price or, if no sales are reported (as in the case of some securities traded over-the-counter), the last reported bid price, except that certain U.S. Government securities are stated at the mean between the last reported bid and asked prices. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. Liabilities are deducted from the total, and the resulting amount is divided by the number of shares of the class outstanding. Reliable market quotations are not considered to be readily available for long-term corporate bonds and notes, certain preferred stocks, tax-exempt securities, and certain foreign securities. These investments are stated at fair value on the basis of valuations furnished by pricing services approved by the Trustees, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. If any securities held by the Fund are restricted as to resale, Putnam Management determines their fair value following procedures approved by the Trustees. The fair value of such securities is generally determined as the amount which the Fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the securities (including any registration expenses that might be borne by the Fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted securities of the same class, the size of the holding, the prices of any recent transactions or offers with respect to such securities and any available analysts' reports regarding the issuer. Generally, trading in certain securities (such as foreign securities) is substantially completed each day at various times prior to the close of the Exchange. The values of these securities used in determining the net asset value of the Fund's shares are computed as of such times. Also, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain securities (such as convertible bonds, U.S. Government securities, and tax-exempt securities) are determined based on market quotations collected earlier in the day at the latest practicable time prior to the close of the Exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the Exchange which will not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value following procedures approved by the Trustees. Money market funds generally value their portfolio securities at amortized cost according to Rule 2a-7 under the Investment Company Act of 1940. HOW TO BUY SHARES General The Prospectus contains a general description of how investors may buy shares of the Fund and states whether the Fund offers more than one class of shares. This Statement contains additional information which may be of interest to investors. Class A shares and Class M shares are sold with a sales charge payable at the time of purchase (except for Class A shares and Class M shares of money market funds). As used in this Statement and unless the context requires otherwise, the term "Class A shares" includes shares of Funds that offer only one class of shares. The Prospectus contains a table of applicable sales charges. For information about how to purchase Class A shares of a Putnam fund at net asset value through an employer's defined contribution plan, please consult your employer. Certain purchases of Class A shares and Class M shares may be exempt from a sales charge or, in the case of Class A shares, may be subject to a contingent deferred sales charge ("CDSC"). See "General-- Sales without sales charges or contingent deferred sales charges", "Additional Information About Class A and Class M Shares", and "Contingent Deferred Sales Charges--Class A shares". Class B shares and Class C shares are sold subject to a CDSC payable upon redemption within a specified period after purchase. The Prospectus contains a table of applicable CDSCs. Class Y shares, which are available only to employer-sponsored defined contribution plans initially investing at least $250 million in a combination of Putnam funds and other investments managed by Putnam Management or its affiliates, are not subject to sales charges or a CDSC. Certain purchase programs described below are not available to defined contribution plans. Consult your employer for information on how to purchase shares through your plan. The Fund is currently making a continuous offering of its shares. The Fund receives the entire net asset value of shares sold. The Fund will accept unconditional orders for shares to be executed at the public offering price based on the net asset value per share next determined after the order is placed. In the case of Class A shares and Class M shares, the public offering price is the net asset value plus the applicable sales charge, if any. No sales charge is included in the public offering price of other classes of shares. In the case of orders for purchase of shares placed through dealers, the public offering price will be based on the net asset value determined on the day the order is placed, but only if the dealer receives the order before the close of regular trading on the Exchange. If the dealer receives the order after the close of the Exchange, the price will be based on the net asset value next determined. If funds for the purchase of shares are sent directly to Putnam Investor Services, they will be invested at the public offering price based on the net asset value next determined after receipt. Payment for shares of the Fund must be in U.S. dollars; if made by check, the check must be drawn on a U.S. bank. Initial and subsequent purchases must satisfy the minimums stated in the Prospectus, except that (i) individual investments under certain employee benefit plans or Tax Qualified Retirement Plans may be lower, (ii) persons who are already shareholders may make additional purchases of $50 or more by sending funds directly to Putnam Investor Services (see "Your Investing Account" below), and (iii) for investors participating in systematic investment plans and military allotment plans, the initial and subsequent purchases must be $25 or more. Information about these plans is available from investment dealers or from Putnam Mutual Funds. As a convenience to investors, shares may be purchased through a systematic investment plan. Preauthorized monthly bank drafts for a fixed amount (at least $25) are used to purchase Fund shares at the applicable public offering price next determined after Putnam Mutual Funds receives the proceeds from the draft (normally the 20th of each month, or the next business day thereafter). Further information and application forms are available from investment dealers or from Putnam Mutual Funds. Except for Putnam funds that declare a distribution daily, distributions to be reinvested are reinvested without a sales charge in shares of the same class as of the ex-dividend date using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. Dividends for Putnam money market funds are credited to a shareholder's account on the payment date. Distributions for Putnam Tax-Free Income Trust and Putnam Corporate Asset Trust are reinvested without a sales charge as of the last day of the period for which distributions are paid using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. Distributions for all other Putnam funds that declare a distribution daily are reinvested without a sales charge as of the next day following the period for which distributions are paid using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. PAYMENT IN SECURITIES. In addition to cash, the Fund may accept securities as payment for Fund shares at the applicable net asset value. Generally, the Fund will only consider accepting securities to increase its holdings in a portfolio security, or if Putnam Management determines that the offered securities are a suitable investment for the Fund and in a sufficient amount for efficient management. While no minimum has been established, it is expected that the Fund would not accept securities with a value of less than $100,000 per issue as payment for shares. The Fund may reject in whole or in part any or all offers to pay for purchases of Fund shares with securities, may require partial payment in cash for such purchases to provide funds for applicable sales charges, and may discontinue accepting securities as payment for Fund shares at any time without notice. The Fund will value accepted securities in the manner described in the section "Determination of Net Asset Value" for valuing shares of the Fund. The Fund will only accept securities which are delivered in proper form. The Fund will not accept options or restricted securities as payment for shares. The acceptance of securities by certain Funds in exchange for Fund shares are subject to additional requirements. In the case of Putnam Capital Appreciation Fund, Putnam Europe Growth Fund, Putnam Overseas Growth Fund, Putnam Intermediate Tax Exempt Fund and Putnam Diversified Equity Trust, transactions involving the issuance of Fund shares for securities or assets other than cash will be limited to a bona-fide re- organization or statutory merger and to other acquisitions of portfolio securities that meet all the following conditions: (a) such securities meet the investment objectives and policies of the Fund; (b) such securities are acquired for investment and not for resale; (c) such securities are liquid securities which are not restricted as to transfer either by law or liquidity of market; and (d) such securities have a value which is readily ascertainable, as evidenced by a listing on the American Stock Exchange, the New York Stock Exchange or NASDAQ. In addition, Putnam Global Governmental Income Trust may accept only investment grade bonds with prices regularly stated in publications generally accepted by investors, such as the London Financial Times and the Association of International Bond Dealers manual, or securities listed on the New York or American Stock Exchanges or with NASDAQ, and Putnam Diversified Income Trust may accept only bonds with prices regularly stated in publications generally accepted by investors. For federal income tax purposes, a purchase of Fund shares with securities will be treated as a sale or exchange of such securities on which the investor will realize a taxable gain or loss. The processing of a purchase of Fund shares with securities involves certain delays while the Fund considers the suitability of such securities and while other requirements are satisfied. For information regarding procedures for payment in securities, contact Putnam Mutual Funds. Investors should not send securities to the Fund except when authorized to do so and in accordance with specific instructions received from Putnam Mutual Funds. SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED SALES CHARGES. The Fund may sell shares without a sales charge or CDSC to: (i) current and retired Trustees of the Fund; officers of the Fund; directors and current and retired U.S. full-time employees of Putnam Management, Putnam Mutual Funds, their parent corporations and certain corporate affiliates; family members of and employee benefit plans for the foregoing; and partnerships, trusts or other entities in which any of the foregoing has a substantial interest; (ii) employee benefit plans, for the repurchase of shares in connection with repayment of plan loans made to plan participants (if the sum loaned was obtained by redeeming shares of a Putnam fund sold with a sales charge) (not offered by tax-exempt funds); (iii) clients of administrators of tax-qualified employee benefit plans which have entered into agreements with Putnam Mutual Funds (not offered by tax-exempt funds); (iv) registered representatives and other employees of broker-dealers having sales agreements with Putnam Mutual Funds; employees of financial institutions having sales agreements with Putnam Mutual Funds or otherwise having an arrangement with any such broker-dealer or financial institution with respect to sales of Fund shares; and their spouses and children under age 21 (Putnam Mutual Funds is regarded as the dealer of record for all such accounts); (v) investors meeting certain requirements who sold shares of certain Putnam closed-end funds pursuant to a tender offer by such closed-end fund; (vi) a trust department of any financial institution purchasing shares of the Fund in its capacity as trustee of any trust, if the value of the shares of the Fund and other Putnam funds purchased or held by all such trusts exceeds $1 million in the aggregate; and (vii) "wrap accounts" maintained for clients of broker- dealers, financial institutions or financial planners who have entered into agreements with Putnam Mutual Funds with respect to such accounts. In addition, the Fund may issue its shares at net asset value in connection with the acquisition of substantially all of the securities owned by other investment companies or personal holding companies. PAYMENTS TO DEALERS. Putnam Mutual Funds may, at its expense, pay concessions in addition to the payments disclosed in the Prospectus to dealers which satisfy certain criteria established from time to time by Putnam Mutual Funds relating to increasing net sales of shares of the Putnam funds over prior periods, and certain other factors. ADDITIONAL INFORMATION ABOUT CLASS A AND CLASS M SHARES The underwriter's commission is the sales charge shown in the Prospectus less any applicable dealer discount. Putnam Mutual Funds will give dealers ten days' notice of any changes in the dealer discount. Putnam Mutual Funds retains the entire sales charge on any retail sales made by it. Putnam Mutual Funds offers several plans by which an investor may obtain reduced sales charges on purchases of Class A shares and Class M shares. The variations in sales charges reflect the varying efforts required to sell shares to separate categories of purchasers. These plans may be altered or discontinued at any time. COMBINED PURCHASE PRIVILEGE. The following persons may qualify for the sales charge reductions or eliminations shown in the Prospectus by combining into a single transaction the purchase of Class A shares or Class M shares with other purchases of any class of shares: (i) an individual, or a "company" as defined in Section 2(a)(8) of the Investment Company Act of 1940 (which includes corporations which are corporate affiliates of each other); (ii) an individual, his or her spouse and their children under twenty-one, purchasing for his, her or their own account; (iii) a trustee or other fiduciary purchasing for a single trust estate or single fiduciary account (including a pension, profit-sharing, or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Internal Revenue Code); (iv) tax-exempt organizations qualifying under Section 501(c)(3) of the Internal Revenue Code (not including 403(b) plans); and (v) employee benefit plans of a single employer or of affiliated employers, other than 403(b) plans. A combined purchase currently may also include shares of any class of other continuously offered Putnam funds (other than money market funds) purchased at the same time through a single investment dealer, if the dealer places the order for such shares directly with Putnam Mutual Funds. CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A purchaser of Class A shares or Class M shares may qualify for a cumulative quantity discount by combining a current purchase (or combined purchases as described above) with certain other shares of any class of Putnam funds already owned. The applicable sales charge is based on the total of: (i) the investor's current purchase; and (ii) the maximum public offering price (at the close of business on the previous day) of: (a) all shares held by the investor in all of the Putnam funds (except money market funds); and (b) any shares of money market funds acquired by exchange from other Putnam funds; and (iii) the maximum public offering price of all shares described in paragraph (ii) owned by another shareholder eligible to participate with the investor in a "combined purchase" (see above). To qualify for the combined purchase privilege or to obtain the cumulative quantity discount on a purchase through an investment dealer, when each purchase is made the investor or dealer must provide Putnam Mutual Funds with sufficient information to verify that the purchase qualifies for the privilege or discount. The shareholder must furnish this information to Putnam Investor Services when making direct cash investments. STATEMENT OF INTENTION. Investors may also obtain the reduced sales charges for Class A shares or Class M shares shown in the Prospectus for investments of a particular amount by means of a written Statement of Intention, which expresses the investor's intention to invest that amount (including certain "credits," as described below) within a period of 13 months in shares of any class of the Fund or any other continuously offered Putnam fund (excluding money market funds). Each purchase of Class A shares or Class M shares under a Statement of Intention will be made at the public offering price applicable at the time of such purchase to a single transaction of the total dollar amount indicated in the Statement. A Statement of Intention may include purchases of shares made not more than 90 days prior to the date that an investor signs a Statement; however, the 13-month period during which the Statement is in effect will begin on the date of the earliest purchase to be included. An investor may receive a credit toward the amount indicated in the Statement equal to the maximum public offering price as of the close of business on the previous day of all shares he or she owns on the date of the Statement which are eligible for purchase under a Statement (plus any shares of money market funds acquired by exchange of such eligible shares). Investors do not receive credit for shares purchased by the reinvestment of distributions. Investors qualifying for the "combined purchase privilege" (see above) may purchase shares under a single Statement of Intention. The Statement of Intention is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Statement of Intention is 5% of such amount, and must be invested immediately. Class A shares or Class M shares purchased with the first 5% of such amount will be held in escrow to secure payment of the higher sales charge applicable to the shares actually purchased if the full amount indicated is not purchased. When the full amount indicated has been purchased, the escrow will be released. If an investor desires to redeem escrowed shares before the full amount has been purchased, the shares will be released from escrow only if the investor pays the sales charge that, without regard to the Statement of Intention, would apply to the total investment made to date. To the extent that an investor purchases more than the dollar amount indicated on the Statement of Intention and qualifies for a further reduced sales charge, the sales charge will be adjusted for the entire amount purchased at the end of the 13-month period, upon recovery from the investor's dealer of its portion of the sales charge adjustment. Once received from the dealer, which may take a period of time or may never occur, the sales charge adjustment will be used to purchase additional shares at the then current offering price applicable to the actual amount of the aggregate purchases. These additional shares will not be considered as part of the total investment for the purpose of determining the applicable sales charge pursuant to the Statement of Intention. No sales charge adjustment will be made unless and until the investor's dealer returns any excess commissions previously received. To the extent that an investor purchases less than the dollar amount indicated on the Statement of Intention within the 13- month period, the sales charge will be adjusted upward for the entire amount purchased at the end of the 13-month period. This adjustment will be made by redeeming shares from the account to cover the additional sales charge, the proceeds of which will be paid to the investor's dealer and Putnam Mutual Funds in accordance with the Prospectus. If the account exceeds an amount that would otherwise qualify for a reduced sales charge, that reduced sales charge will be applied. Statements of Intention are not available for certain employee benefit plans. Statement of Intention forms may be obtained from Putnam Mutual Funds or from investment dealers. Interested investors should read the Statement of Intention carefully. REDUCED SALES CHARGE FOR GROUP PURCHASES OF CLASS A SHARES. Members of qualified groups may purchase Class A shares of the Fund at a group sales charge rate of 4.5% of the public offering price (4.71% of the net amount invested). The dealer discount on such sales is 3.75% of the offering price. To receive the group rate, group members must purchase Class A shares through a single investment dealer designated by the group. The designated dealer must transmit each member's initial purchase to Putnam Mutual Funds, together with payment and completed application forms. After the initial purchase, a member may send funds for the purchase of Class A shares directly to Putnam Investor Services. Purchases of Class A shares are made at the public offering price based on the net asset value next determined after Putnam Mutual Funds or Putnam Investor Services receives payment for the shares. The minimum investment requirements described above apply to purchases by any group member. Only Class A shares are included in calculating the purchased amount. Qualified groups include the employees of a corporation or a sole proprietorship, members and employees of a partnership or association, or other organized groups of persons (the members of which may include other qualified groups) provided that: (i) the group has at least 25 members of which at least 10 members participate in the initial purchase; (ii) the group has been in existence for at least six months; (iii) the group has some purpose in addition to the purchase of investment company shares at a reduced sales charge; (iv) the group's sole organizational nexus or connection is not that the members are credit card holders of a company, policy holders of an insurance company, customers of a bank or broker-dealer, clients of an investment adviser or security holders of a company; (v) the group agrees to provide its designated investment dealer access to the group's membership by means of written communication or direct presentation to the membership at a meeting on not less frequently than an annual basis; (vi) the group or its investment dealer will provide annual certification in form satisfactory to Putnam Investor Services that the group then has at least 25 members and that at least ten members participated in group purchases during the immediately preceding 12 calendar months; and (vii) the group or its investment dealer will provide periodic certification in form satisfactory to Putnam Investor Services as to the eligibility of the purchasing members of the group. Members of a qualified group include: (i) any group which meets the requirements stated above and which is a constituent member of a qualified group; (ii) any individual purchasing for his or her own account who is carried on the records of the group or on the records of any constituent member of the group as being a good standing employee, partner, member or person of like status of the group or constituent member; or (iii) any fiduciary purchasing shares for the account of a member of a qualified group or a member's beneficiary. For example, a qualified group could consist of a trade association which would have as its members individuals, sole proprietors, partnerships and corporations. The members of the group would then consist of the individuals, the sole proprietors and their employees, the members of the partnerships and their employees, and the corporations and their employees, as well as the trustees of employee benefit trusts acquiring Class A shares for the benefit of any of the foregoing. A member of a qualified group may, depending upon the value of Class A shares of the Fund owned or proposed to be purchased by the member, be entitled to purchase Class A shares of the Fund at non-group sales charge rates shown in the Prospectus which may be lower than the group sales charge rate, if the member qualifies as a person entitled to reduced non-group sales charges. Such a group member will be entitled to purchase at the lower rate if, at the time of purchase, the member or his or her investment dealer furnishes sufficient information for Putnam Mutual Funds or Putnam Investor Services to verify that the purchase qualifies for the lower rate. Interested groups should contact their investment dealer or Putnam Mutual Funds. The Fund reserves the right to revise the terms of or to suspend or discontinue group sales at any time. EMPLOYEE BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS. The term "employee benefit plan" means any plan or arrangement, whether or not tax-qualified, which provides for the purchase of Class A shares. The term "affiliated employer" means employers who are affiliated with each other within the meaning of Section 2(a)(3)(C) of the Investment Company Act of 1940. The term "individual account plan" means any employee benefit plan whereby (i) Class A shares are purchased through payroll deductions or otherwise by a fiduciary or other person for the account of participants who are employees (or their spouses) of an employer, or of affiliated employers, and (ii) a separate Investing Account is maintained in the name of such fiduciary or other person for the account of each participant in the plan. The table of sales charges in the Prospectus applies to sales to employee benefit plans, except that the Fund may sell Class A shares at net asset value to employee benefit plans, including individual account plans, of employers or of affiliated employers which have at least 750 employees to whom such plan is made available, in connection with a payroll deduction system of plan funding (or other system acceptable to Putnam Investor Services) by which contributions or account information for plan participation are transmitted to Putnam Investor Services by methods acceptable to Putnam Investor Services. The Fund may also sell Class A shares at net asset value to employee benefit plans of employers or of affiliated employers which have at least 750 employees, if such plans are qualified under Section 401 of the Internal Revenue Code. Additional information about employee benefit plans and individual account plans is available from investment dealers or from Putnam Mutual Funds. CONTINGENT DEFERRED SALES CHARGES CLASS A SHARES. Class A shares purchased at net asset value by shareholders investing $1 million or more, including purchases pursuant to any Combined Purchase Privilege, Right of Accumulation or Statement of Intention, are subject to a CDSC of 1.00% or 0.50%, respectively, if redeemed within the first or second year after purchase. The Class A CDSC is imposed on the lower of the cost and the current net asset value of the shares redeemed. The CDSC does not apply to shares sold without a sales charge through participant-directed qualified retirement plans and shares purchased by certain investors investing $1 million or more that have made arrangements with Putnam Mutual Funds and whose dealer of record waived the commission described in the next paragraph. Except as stated below, Putnam Mutual Funds pays investment dealers of record commissions on sales of Class A shares of $1 million or more based on an investor's cumulative purchases of such shares, including purchases pursuant to any Combined Purchase Privilege, Right of Accumulation or Statement of Intention, during the one-year period beginning with the date of the initial purchase at net asset value and each subsequent one- year period beginning with the first net asset value purchase following the end of the prior period. Such commissions are paid at the rate of 1.00% of the amount under $3 million, 0.50% of the next $47 million and 0.25% thereafter. On sales at net asset value to a participant-directed qualified retirement plan initially investing less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates (including a plan sponsored by an employer with more than 750 employees), Putnam Mutual Funds pays commissions on cumulative purchases during the life of the account at the rate of 1.00% of the amount under $3 million and 0.50% thereafter. On sales at net asset value to all other participant-directed qualified retirement plans, Putnam Mutual Funds pays commissions on the initial investment and on subsequent net quarterly sales (gross sales minus gross redemptions during the quarter) at the rate of 0.15%. Money market fund shares are excluded from all commission calculations, except for determining the amount initially invested by a participant-directed qualified retirement plan. Commissions on sales at net asset value to such plans are subject to Putnam Mutual Funds' right to reclaim such commissions if the shares are redeemed within two years. Different CDSC and commission rates may apply to shares purchased before April 1, 1994. CLASS B AND CLASS C SHARES. Investors who set up an Automatic Cash Withdrawal Plan (ACWP) for a Class B and Class C share account (see "Plans Available To Shareholders -- Automatic Cash Withdrawal Plan") may withdraw through the ACWP up to 12% of the net asset value of the account (calculated as set forth below) each year without incurring any CDSC. Shares not subject to a CDSC (such as shares representing reinvestment of distributions) will be redeemed first and will count toward the 12% limitation. If there are insufficient shares not subject to a CDSC, shares subject to the lowest CDSC liability will be redeemed next until the 12% limit is reached. The 12% figure is calculated on a pro rata basis at the time of the first payment made pursuant to a ACWP and recalculated thereafter on a pro rata basis at the time of each ACWP payment. Therefore, shareholders who have chosen a ACWP based on a percentage of the net asset value of their account of up to 12% will be able to receive ACWP payments without incurring a CDSC. However, shareholders who have chosen a specific dollar amount (for example, $100 per month from a fund that pays income distributions monthly) for their periodic ACWP payment should be aware that the amount of that payment not subject to a CDSC may vary over time depending on the net asset value of their account. For example, if the net asset value of the account is $10,000 at the time of payment, the shareholder will receive $100 free of the CDSC (12% of $10,000 divided by 12 monthly payments). However, if at the time of the next payment the net asset value of the account has fallen to $9,400, the shareholder will receive $94 free of any CDSC (12% of $9,400 divided by 12 monthly payments) and $6 subject to the lowest applicable CDSC. This ACWP privilege may be revised or terminated at any time. ALL SHARES. No CDSC is imposed on shares of any class subject to a CDSC ("CDSC Shares") to the extent that the CDSC Shares redeemed (i) are no longer subject to the holding period therefor, (ii) resulted from reinvestment of distributions on CDSC Shares, or (iii) were exchanged for shares of another Putnam fund, provided that the shares acquired in such exchange or subsequent exchanges (including shares of a Putnam money market fund) will continue to remain subject to the CDSC, if applicable, until the applicable holding period expires. In determining whether the CDSC applies to each redemption of CDSC Shares, CDSC Shares not subject to a CDSC are redeemed first. The Fund will waive any CDSC on redemptions, in the case of individual or Uniform Transfers to Minors Act accounts, in case of death or disability or for the purpose of paying benefits pursuant to tax-qualified retirement plans. Such payments currently include, without limitation, (1) distributions from an IRA due to death or disability, (2) a return of excess contributions to an IRA or 401(k) plan, and (3) distributions from retirement plans qualified under section 401(a) or section 403(b)(7) (a "403(b) plan") of the Internal Revenue Code of 1986, as amended (the "Code"), due to death, disability, retirement or separation from service. The Fund will also waive any CDSC in the case of the death of one joint tenant. These waivers may be changed at any time. Additional waivers may apply to IRA accounts opened prior to February 1, 1994. DISTRIBUTION PLAN If the Fund or a class of shares of the Fund has adopted a Distribution Plan, the Prospectus describes the principal features of the Plan. This Statement contains additional information which may be of interest to investors. Continuance of a Plan is subject to annual approval by a vote of the Trustees, including a majority of the Trustees who are not interested persons of the Fund and who have no direct or indirect interest in the Plan or related arrangements (the "Qualified Trustees"), cast in person at a meeting called for that purpose. All material amendments to a Plan must be likewise approved by the Trustees and the Qualified Trustees. No Plan may be amended in order to increase materially the costs which the Fund may bear for distribution pursuant to such Plan without also being approved by a majority of the outstanding voting securities of the Fund or the relevant class of the Fund, as the case may be. A Plan terminates automatically in the event of its assignment and may be terminated without penalty, at any time, by a vote of a majority of the Qualified Trustees or by a vote of a majority of the outstanding voting securities of the Fund or the relevant class of the Fund, as the case may be. If Plan payments are made to reimburse Putnam Mutual Funds for payments to dealers based on the average net asset value of Fund shares attributable to shareholders for whom the dealers are designated as the dealer of record, "average net asset value" attributable to a shareholder account means the product of (i) the Fund's average daily share balance of the account and (ii) the Fund's average daily net asset value per share (or the average daily net asset value per share of the class, if applicable). For administrative reasons, Putnam Mutual Funds may enter into agreements with certain dealers providing for the calculation of "average net asset value" on the basis of assets of the accounts of the dealer's customers on an established day in each quarter. Financial institutions receiving payments from Putnam Mutual Funds as described above may be required to comply with various state and federal regulatory requirements, including among others those regulating the activities of securities brokers or dealers. INVESTOR SERVICES SHAREHOLDER INFORMATION Each time shareholders buy or sell shares, they will receive a statement confirming the transaction and listing their current share balance. (Under certain investment plans, a statement may only be sent quarterly.) Shareholders will receive a statement confirming reinvestment of distributions in additional Fund shares (or in shares of other Putnam funds for Dividends Plus accounts) promptly following the quarter in which the reinvestment occurs. To help shareholders take full advantage of their Putnam investment, they will receive a Welcome Kit and a periodic publication covering many topics of interest to investors. The Fund also sends annual and semiannual reports that keep shareholders informed about its portfolio and performance, and year-end tax information to simplify their recordkeeping. Easy-to-read, free booklets on special subjects such as the Exchange Privilege and IRAs are available from Putnam Investor Services. Shareholders may call Putnam Investor Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m. and 7:00 p.m. Boston time for more information, including account balances. YOUR INVESTING ACCOUNT The following information provides more detail concerning the operation of a Putnam Investing Account. For further information or assistance, investors should consult Putnam Investor Services. Shareholders who purchase shares through a defined contribution plan should note that not all of the services or features described below may be available to them, and they should contact their employer for details. A shareholder may reinvest a recent cash distribution without a front-end sales charge or without the reinvested shares being subject to a CDSC, as the case may be, by delivering to Putnam Investor Services the uncashed distribution check, endorsed to the order of the Fund. Putnam Investor Services must receive the properly endorsed check within 30 days after the date of the check. Upon written notice to shareholders, the Fund may permit shareholders who receive cash distributions to reinvest amounts representing returns of capital without a sales charge or without being subject to the CDSC. The Investing Account also provides a way to accumulate shares of the Fund. In most cases, after an initial investment of $500, a shareholder may send checks to Putnam Investor Services for $50 or more, made payable to the Fund, to purchase additional shares at the applicable public offering price next determined after Putnam Investor Services receives the check. For Putnam Corporate Asset Trust, the minimum initial investment is $25,000 and the minimum subsequent investment is $5,000. Checks must be drawn on a U.S. bank and must be payable in U.S. dollars. Putnam Investor Services acts as the shareholder's agent whenever it receives instructions to carry out a transaction on the shareholder's account. Upon receipt of instructions that shares are to be purchased for a shareholder's account, shares will be purchased through the investment dealer designated by the shareholder. Shareholders may change investment dealers at any time by written notice to Putnam Investor Services, provided the new dealer has a sales agreement with Putnam Mutual Funds. Shares credited to an account are transferable upon written instructions in good order to Putnam Investor Services and may be sold to the Fund as described under "How to buy shares, sell shares and exchange shares" in the Prospectus. Money market funds and certain other funds will not issue share certificates. A shareholder may send any certificates which have been previously issued to Putnam Investor Services for safekeeping at no charge to the shareholder. Putnam Mutual Funds, at its expense, may provide certain additional reports and administrative material to qualifying institutional investors with fiduciary responsibilities to assist these investors in discharging their responsibilities. Institutions seeking further information about this service should contact Putnam Mutual Funds, which may modify or terminate this service at any time. Putnam Investor Services may make special services available to shareholders with investments exceeding $1,000,000. Contact Putnam Investor Services for details. The Fund pays Putnam Investor Services' fees for maintaining Investing Accounts. REINSTATEMENT PRIVILEGE CLASS A SHARES AND CLASS M SHARES An investor who has sold shares to the Fund may reinvest (within 90 days) the proceeds of such sale in shares of the Fund, or may be able to reinvest (within 90 days) the proceeds in shares of the other continuously offered Putnam funds (through the Exchange Privilege described in the Prospectus and below). Any such reinvestment would be at the net asset value of the shares of the fund(s) the investor selects, next determined after Putnam Mutual Funds receives a Reinstatement Authorization and will not be subject to any sales charge, including a CDSC. CLASS B SHARES AND CLASS C SHARES An investor who has sold Class B and Class C shares to the Fund may reinvest (within 90 days) the proceeds of such sale in Class B and Class C shares of the Fund, or may be able to reinvest (within 90 days) the proceeds in Class B and Class C shares of other Putnam funds (through the Exchange Privilege described in the Prospectus and below). Upon such reinvestment, the investor would receive Class B and Class C shares at the net asset value next determined after Putnam Mutual Funds receives a Reinstatement Authorization subject to the applicable CDSC calculated for this purpose using the date of the original purchase. ALL SHARES Exercise of the Reinstatement Privilege does not alter the federal income tax treatment of any capital gains realized on a sale of Fund shares, but to the extent that any shares are sold at a loss and the proceeds are reinvested in shares of the Fund, some or all of the loss may be disallowed as a deduction. Consult your tax adviser. Investors who desire to exercise this Privilege should contact their investment dealer or Putnam Investor Services. EXCHANGE PRIVILEGE Except as otherwise set forth in this section, by calling Putnam Investor Services, investors may exchange shares valued up to $500,000 between accounts with identical registrations, provided that no certificates are outstanding for such shares and no address change has been made within the preceding 15 days. During periods of unusual market changes and shareholder activity, shareholders may experience delays in contacting Putnam Investor Services by telephone to exercise the Telephone Exchange Privilege. Putnam Investor Services also makes exchanges promptly after receiving a properly completed Exchange Authorization Form and, if issued, share certificates. If the shareholder is a corporation, partnership, agent, or surviving joint owner, Putnam Investor Services will require additional documentation of a customary nature. Because an exchange of shares involves the redemption of Fund shares and reinvestment of the proceeds in shares of another Putnam fund, completion of an exchange may be delayed under unusual circumstances if the Fund were to suspend redemptions or postpone payment for the Fund shares being exchanged, in accordance with federal securities laws. Exchange Authorization Forms and prospectuses of the other Putnam funds are available from Putnam Mutual Funds or investment dealers having sales contracts with Putnam Mutual Funds. The prospectus of each fund describes its investment objective(s) and policies, and shareholders should obtain a prospectus and consider these objectives and policies carefully before requesting an exchange. Shares of certain Putnam funds are not available to residents of all states. The Fund reserves the right to change or suspend the Exchange Privilege at any time. Shareholders would be notified of any change or suspension. Additional information is available from Putnam Investor Services. Shares of the Fund must be held at least 15 days by the shareholder requesting an exchange. There is no holding period if the shareholder acquired the shares to be exchanged through reinvestment of distributions, transfer from another shareholder, prior exchange or certain employer-sponsored defined contribution plans. In all cases, the shares to be exchanged must be registered on the records of the Fund in the name of the shareholder requesting the exchange. Shareholders of other Putnam funds may also exchange their shares at net asset value for shares of the Fund, as set forth in the current prospectus of each fund. For federal income tax purposes, an exchange is a sale on which the investor generally will realize a capital gain or loss depending on whether the net asset value at the time of the exchange is more or less than the investor's basis. The Exchange Privilege may be revised or terminated at any time. Shareholders would be notified of any such change or suspension. DIVIDENDS PLUS Shareholders may invest the Fund's distributions of net investment income or distributions combining net investment income and short-term capital gains in shares of the same class of another continuously offered Putnam fund (the "receiving fund") using the net asset value per share of the receiving fund determined on the date the Fund's distribution is payable. No sales charge or CDSC will apply to the purchased shares unless the Fund is a money market fund. The prospectus of each fund describes its investment objective(s) and policies, and shareholders should obtain a prospectus and consider these objective(s) and policies carefully before investing their distributions in the receiving fund. Shares of certain Putnam funds are not available to residents of all states. The minimum account size requirement for the receiving fund will not apply if the current value of your account in this Fund is more than $5,000. Shareholders of other Putnam funds (except for money market funds, whose shareholders must pay a sales charge or become subject to a CDSC) may also use their distributions to purchase shares of the Fund at net asset value. For federal tax purposes, distributions from the Fund which are reinvested in another fund are treated as paid by the Fund to the shareholder and invested by the shareholder in the receiving fund and thus, to the extent comprised of taxable income and deemed paid to a taxable shareholder, are taxable. The Dividends PLUS program may be revised or terminated at any time. PLANS AVAILABLE TO SHAREHOLDERS The Plans described below are fully voluntary and may be terminated at any time without the imposition by the Fund or Putnam Investor Services of any penalty. All Plans provide for automatic reinvestment of all distributions in additional shares of the Fund at net asset value. The Fund, Putnam Mutual Funds or Putnam Investor Services may modify or cease offering these Plans at any time. AUTOMATIC CASH WITHDRAWAL PLAN. An investor who owns or buys shares of the Fund valued at $10,000 or more at the current public offering price may open a Withdrawal Plan and have a designated sum of money ($50 or more) paid monthly, quarterly, semi-annually or annually to the investor or another person. (Payments from the Fund can be combined with payments from other Putnam funds into a single check through a Designated Payment Plan.) Shares are deposited in a Plan account, and all distributions are reinvested in additional shares of the Fund at net asset value (except where the Plan is utilized in connection with a charitable remainder trust). Shares in a Plan account are then redeemed at net asset value to make each withdrawal payment. Payment will be made to any person the investor designates; however, if shares are registered in the name of a trustee or other fiduciary, payment will be made only to the fiduciary, except in the case of a profit-sharing or pension plan where payment will be made to a designee. As withdrawal payments may include a return of principal, they cannot be considered a guaranteed annuity or actual yield of income to the investor. The redemption of shares in connection with a Withdrawal Plan generally will result in a gain or loss for tax purposes. Some or all of the losses realized upon redemption may be disallowed pursuant to the so-called wash sale rules if shares of the same fund from which shares were redeemed are purchased (including through the reinvestment of fund distributions) within a period beginning 30 days before, and ending 30 days after, such redemption. In such a case, the basis of the replacement shares will be increased to reflect the disallowed loss. Continued withdrawals in excess of income will reduce and possibly exhaust invested principal, especially in the event of a market decline. The maintenance of a Withdrawal Plan concurrently with purchases of additional shares of the Fund would be disadvantageous to the investor because of the sales charge payable on such purchases. For this reason, the minimum investment accepted while a Withdrawal Plan is in effect is $1,000, and an investor may not maintain a Plan for the accumulation of shares of the Fund (other than through reinvestment of distributions) and a Withdrawal Plan at the same time. The cost of administering these Plans for the benefit of those shareholders participating in them is borne by the Fund as an expense of all shareholders. The Fund, Putnam Mutual Funds or Putnam Investor Services may terminate or change the terms of the Withdrawal Plan at any time. A Withdrawal Plan will be terminated if communications mailed to the shareholder are returned as undeliverable. Investors should consider carefully with their own financial advisers whether the Plan and the specified amounts to be withdrawn are appropriate in their circumstances. The Fund and Putnam Investor Services make no recommendations or representations in this regard. TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS. (NOT OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-EXEMPT SECURITIES.) Investors may purchase shares of the Fund through the following Tax Qualified Retirement Plans, available to qualified individuals or organizations: Standard and variable profit-sharing (including 401(k)) and money purchase pension plans; and Individual Retirement Account Plans (IRAs). Each of these Plans has been qualified as a prototype plan by the Internal Revenue Service. Putnam Investor Services will furnish services under each plan at a specified annual cost. Putnam Fiduciary Trust Company serves as trustee under each of these Plans. Forms and further information on these Plans are available from investment dealers or from Putnam Mutual Funds. In addition, specialized professional plan administration services are available on an optional basis; contact Putnam Defined Contribution Plan Services at 1-800-225-2465, extension 8600. A 403(b) Retirement Plan is available for employees of public school systems and organizations which meet the requirements of Section 501(c)(3) of the Internal Revenue Code. Forms and further information on the 403(b) Plan are also available from investment dealers or from Putnam Mutual Funds. Shares of the Fund may also be used in simplified employee pension (SEP) plans. For further information on the Putnam prototype SEP plan, contact an investment dealer or Putnam Mutual Funds. Consultation with a competent financial and tax adviser regarding these Plans and consideration of the suitability of Fund shares as an investment under the Employee Retirement Income Security Act of 1974, or otherwise, is recommended. SIGNATURE GUARANTEES Redemption requests for shares having a net asset value of $100,000 or more must be signed by the registered owners or their legal representatives and must be guaranteed by a bank, broker/dealer, municipal securities dealer or broker, government securities dealer or broker, credit union, national securities exchange, registered securities association, clearing agency, savings association or trust company, provided such institution is acceptable under and conforms with Putnam Fiduciary Trust Company's signature guarantee procedures. A copy of such procedures is available upon request. If you want your redemption proceeds sent to an address other than your address as it appears on Putnam's records, you must provide a signature guarantee. Putnam Investor Services usually requires additional documentation for the sale of shares by a corporation, partnership, agent or fiduciary, or a surviving joint owner. Contact Putnam Investor Services for details. SUSPENSION OF REDEMPTIONS The Fund may not suspend shareholders' right of redemption, or postpone payment for more than seven days, unless the New York Stock Exchange is closed for other than customary weekends or holidays, or if permitted by the rules of the Securities and Exchange Commission during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the Fund to dispose of its securities or to determine fairly the value of its net assets, or during any other period permitted by order of the Commission for protection of investors. SHAREHOLDER LIABILITY Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Fund. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the Fund and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the Fund or the Trustees. The Agreement and Declaration of Trust provides for indemnification out of Fund property for all loss and expense of any shareholder held personally liable for the obligations of the Fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund would be unable to meet its obligations. The likelihood of such circumstances is remote. STANDARD PERFORMANCE MEASURES Yield and total return data for the Fund may from time to time be presented in Part I of this Statement and in advertisements. In the case of funds with more than one class of shares, all performance information is calculated separately for each class. The data is calculated as follows. Total return for one-, five- and ten-year periods (or for such shorter periods as the Fund has been in operation or shares of the relevant class have been outstanding) is determined by calculating the actual dollar amount of investment return on a $1,000 investment in the Fund made at the beginning of the period, at the maximum public offering price for Class A shares and Class M shares and net asset value for other classes of shares, and then calculating the annual compounded rate of return which would produce that amount. Total return for a period of one year is equal to the actual return of the Fund during that period. Total return calculations assume deduction of the Fund's maximum sales charge or CDSC, if applicable, and reinvestment of all Fund distributions at net asset value on their respective reinvestment dates. The Fund's yield is presented for a specified thirty-day period (the "base period"). Yield is based on the amount determined by (i) calculating the aggregate amount of dividends and interest earned by the Fund during the base period less expenses accrued for that period, and (ii) dividing that amount by the product of (A) the average daily number of shares of the Fund outstanding during the base period and entitled to receive dividends and (B) the per share maximum public offering price for Class A shares or Class M shares, as appropriate and net asset value for other classes of shares on the last day of the base period. The result is annualized on a compounding basis to determine the yield. For this calculation, interest earned on debt obligations held by the Fund is generally calculated using the yield to maturity (or first expected call date) of such obligations based on their market values (or, in the case of receivables-backed securities such as GNMA's, based on cost). Dividends on equity securities are accrued daily at their stated dividend rates. If the Fund is a money market fund, yield is computed by determining the percentage net change, excluding capital changes, in the value of an investment in one share over the seven-day period for which yield is presented (the "base period"), and multiplying the net change by 365/7 (or approximately 52 weeks). Effective yield represents a compounding of the yield by adding 1 to the number representing the percentage change in value of the investment during the base period, raising that sum to a power equal to 365/7, and subtracting 1 from the result. If the Fund is a tax-exempt fund, the tax-equivalent yield during the base period may be presented for shareholders in one or more stated tax brackets. Tax-equivalent yield is calculated by adjusting the tax-exempt yield by a factor designed to show the approximate yield that a taxable investment would have to earn to produce an after-tax yield equal, for that shareholder, to the tax-exempt yield. The tax-equivalent yield will differ for shareholders in other tax brackets. At times, Putnam Management may reduce its compensation or assume expenses of the Fund in order to reduce the Fund's expenses. The per share amount of any such fee reduction or assumption of expenses during the Fund's past ten fiscal years (or for the life of the Fund, if shorter) is reflected in the table in the section entitled "Financial history" in the Prospectus. Any such fee reduction or assumption of expenses would increase the Fund's yield and total return during the period of the fee reduction or assumption of expenses. All data are based on past performance and do not predict future results. COMPARISON OF PORTFOLIO PERFORMANCE Independent statistical agencies measure the Fund's investment performance and publish comparative information showing how the Fund, and other investment companies, performed in specified time periods. Three agencies whose reports are commonly used for such comparisons are set forth below. From time to time, the Fund may distribute these comparisons to its shareholders or to potential investors. THE AGENCIES LISTED BELOW MEASURE PERFORMANCE BASED ON THEIR OWN CRITERIA RATHER THAN ON THE STANDARDIZED PERFORMANCE MEASURES DESCRIBED IN THE PRECEDING SECTION. LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly. The rankings are based on total return performance calculated by Lipper, reflecting generally changes in net asset value adjusted for reinvestment of capital gains and income dividends. They do not reflect deduction of any sales charges. Lipper rankings cover a variety of performance periods, for example year-to-date, 1-year, 5-year, and 10-year performance. Lipper classifies mutual funds by investment objective and asset category. MORNINGSTAR, INC. distributes mutual fund ratings twice a month. The ratings are divided into five groups: highest, above average, neutral, below average and lowest. They represent a fund's historical risk/reward ratio relative to other funds with similar objectives. The performance factor is a weighted-average assessment of the Fund's 3-year, 5-year, and 10-year total return performance (if available) reflecting deduction of expenses and sales charges. Performance is adjusted using quantitative techniques to reflect the risk profile of the fund. The ratings are derived from a purely quantitative system that does not utilize the subjective criteria customarily employed by rating agencies such as Standard & Poor's Corporation and Moody's Investor Service, Inc. CDA/WIESENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is distributed monthly. The rankings are based entirely on total return calculated by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-year. Mutual funds are ranked in general categories (e.g., international bond, international equity, municipal bond, and maximum capital gain). Weisenberger rankings do not reflect deduction of sales charges or fees. Independent publications may also evaluate the Fund's performance. Certain of those publications are listed below, at the request of Putnam Mutual Funds, which bears full responsibility for their use and the descriptions appearing below. From time to time the Fund may distribute evaluations by or excerpts from these publications to its shareholders or to potential investors. The following illustrates the types of information provided by these publications. BUSINESS WEEK publishes mutual fund rankings in its Investment Figures of the Week column. The rankings are based on 4-week and 52-week total return reflecting changes in net asset value and the reinvestment of all distributions. They do not reflect deduction of any sales charges. Funds are not categorized; they compete in a large universe of over 2000 funds. The source for rankings is data generated by Morningstar, Inc. INVESTOR'S BUSINESS DAILY publishes mutual fund rankings on a daily basis. The rankings are depicted as the top 25 funds in a given category. The categories are based loosely on the type of fund, e.g., growth funds, balanced funds, U.S. government funds, GNMA funds, growth and income funds, corporate bond funds, etc. Performance periods for sector equity funds can vary from 4 weeks to 39 weeks; performance periods for other fund groups vary from 1 year to 3 years. Total return performance reflects changes in net asset value and reinvestment of dividends and capital gains. The rankings are based strictly on total return. They do not reflect deduction of any sales charges. Performance grades are conferred from A+ to E. An A+ rating means that the fund has performed within the top 5% of a general universe of over 2000 funds; an A rating denotes the top 10%; an A- is given to the top 15%, etc. BARRON'S periodically publishes mutual fund rankings. The rankings are based on total return performance provided by Lipper Analytical Services. The Lipper total return data reflects changes in net asset value and reinvestment of distributions, but does not reflect deduction of any sales charges. The performance periods vary from short-term intervals (current quarter or year-to-date, for example) to long-term periods (five-year or ten-year performance, for example). Barron's classifies the funds using the Lipper mutual fund categories, such as Capital Appreciation Funds, Growth Funds, U.S. Government Funds, Equity Income Funds, Global Funds, etc. Occasionally, Barron's modifies the Lipper information by ranking the funds in asset classes. "Large funds" may be those with assets in excess of $25 million; "small funds" may be those with less than $25 million in assets. THE WALL STREET JOURNAL publishes its Mutual Fund Scorecard on a daily basis. Each Scorecard is a ranking of the top-15 funds in a given Lipper Analytical Services category. Lipper provides the rankings based on its total return data reflecting changes in net asset value and reinvestment of distributions and not reflecting any sales charges. The Scorecard portrays 4-week, year-to-date, one-year and 5-year performance; however, the ranking is based on the one-year results. The rankings for any given category appear approximately once per month. FORTUNE magazine periodically publishes mutual fund rankings that have been compiled for the magazine by Morningstar, Inc. Funds are placed in stock or bond fund categories (for example, aggressive growth stock funds, growth stock funds, small company stock funds, junk bond funds, Treasury bond funds, etc.), with the top-10 stock funds and the top-5 bond funds appearing in the rankings. The rankings are based on 3-year annualized total return reflecting changes in net asset value and reinvestment of distributions and not reflecting sales charges. Performance is adjusted using quantitative techniques to reflect the risk profile of the fund. MONEY magazine periodically publishes mutual fund rankings on a database of funds tracked for performance by Lipper Analytical Services. The funds are placed in 23 stock or bond fund categories and analyzed for five-year risk adjusted return. Total return reflects changes in net asset value and reinvestment of all dividends and capital gains distributions and does not reflect deduction of any sales charges. Grades are conferred (from A to E): the top 20% in each category receive an A, the next 20% a B, etc. To be ranked, a fund must be at least one year old, accept a minimum investment of $25,000 or less and have had assets of at least $25 million as of a given date. FINANCIAL WORLD publishes its monthly Independent Appraisals of Mutual Funds, a survey of approximately 1000 mutual funds. Funds are categorized as to type, e.g., balanced funds, corporate bond funds, global bond funds, growth and income funds, U.S. government bond funds, etc. To compete, funds must be over one year old, have over $1 million in assets, require a maximum of $10,000 initial investment, and should be available in at least 10 states in the United States. The funds receive a composite past performance rating, which weighs the intermediate- and long-term past performance of each fund versus its category, as well as taking into account its risk, reward to risk, and fees. An A+ rated fund is one of the best, while a D-rated fund is one of the worst. The source for Financial World rating is Schabacker investment management in Rockville, MD. FORBES magazine periodically publishes mutual fund ratings based on performance over at least two bull and bear market cycles. The funds are categorized by type, including stock and balanced funds, taxable bond funds, municipal bond funds, etc. Data sources include Lipper Analytical Services and CDA Investment Technologies. The ratings are based strictly on performance at net asset value over the given cycles. Funds performing in the top 5% receive an A+ rating; the top 15% receive an A rating; and so on until the bottom 5% receive an F rating. Each fund exhibits two ratings, one for performance in "up" markets and another for performance in "down" markets. KIPLINGER'S PERSONAL FINANCE MAGAZINE (formerly Changing Times), periodically publishes rankings of mutual funds based on one-, three- and five-year total return performance reflecting changes in net asset value and reinvestment of dividends and capital gains and not reflecting deduction of any sales charges. Funds are ranked by tenths: a rank of 1 means that a fund was among the highest 10% in total return for the period; a rank of 10 denotes the bottom 10%. Funds compete in categories of similar funds--aggressive growth funds, growth and income funds, sector funds, corporate bond funds, global governmental bond funds, mortgage-backed securities funds, etc. Kiplinger's also provides a risk-adjusted grade in both rising and falling markets. Funds are graded against others with the same objective. The average weekly total return over two years is calculated. Performance is adjusted using quantitative techniques to reflect the risk profile of the fund. U.S. NEWS AND WORLD REPORT periodically publishes mutual fund rankings based on an overall performance index (OPI) devised by Kanon Bloch Carre & Co., a Boston research firm. Over 2000 funds are tracked and divided into 10 equity, taxable bond and tax-free bond categories. Funds compete within the 10 groups and three broad categories. The OPI is a number from 0-100 that measures the relative performance of funds at least three years old over the last 1, 3, 5 and 10 years and the last six bear markets. Total return reflects changes in net asset value and the reinvestment of any dividends and capital gains distributions and does not reflect deduction of any sales charges. Results for the longer periods receive the most weight. THE 100 BEST MUTUAL FUNDS YOU CAN BUY (1992), authored by Gordon K. Williamson. The author's list of funds is divided into 12 equity and bond fund categories, and the 100 funds are determined by applying four criteria. First, equity funds whose current management teams have been in place for less than five years are eliminated. (The standard for bond funds is three years.) Second, the author excludes any fund that ranks in the bottom 20 percent of its category's risk level. Risk is determined by analyzing how many months over the past three years the fund has underperformed a bank CD or a U.S. Treasury bill. Third, a fund must have demonstrated strong results for current three-year and five-year performance. Fourth, the fund must either possess, in Mr. Williamson's judgment, "excellent" risk-adjusted return or "superior" return with low levels of risk. Each of the 100 funds is ranked in five categories: total return, risk/volatility, management, current income and expenses. The rankings follow a five-point system: zero designates "poor"; one point means "fair"; two points denote "good"; three points qualify as a "very good"; four points rank as "superior"; and five points mean "excellent." In addition, Putnam Mutual Funds may distribute to shareholders or prospective investors illustrations of the benefits of reinvesting tax-exempt or tax-deferred distributions over specified time periods, which may include comparisons to fully taxable distributions. These illustrations use hypothetical rates of tax-advantaged and taxable returns and are not intended to indicate the past or future performance of any fund. DEFINITIONS "Putnam Management" -- Putnam Investment Management, Inc., the Fund's investment manager. "Putnam Mutual Funds" -- Putnam Mutual Funds Corp., the Fund's principal underwriter. "Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company, Company" the Fund's custodian. "Putnam Investor Services" -- Putnam Investor Services, a division of Putnam Fiduciary Trust Company, the Fund's investor servicing agent. PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II PUTNAM OHIO TAX EXEMPT INCOME FUND II FORM N-1A PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) Index to Financial Statements and Supporting Schedule: (1) Financial Statements for Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II: Statement of assets and liabilities -- May 31, 1994 (a). Statement of operations -- year ended May 31, 1994 (a). Statement of changes in net assets -- years ended May 31, 1994 and May 31, 1993 (a). Financial highlights (a)(b). Notes to financial statements (a). (2) Supporting Schedules for Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II: Schedule I -- Portfolio of investments owned -- May 31, 1994(a) . Schedules II through IX omitted because the required matter is not present. (a) Incorporated by reference into Parts A and B. (b) Included in Part A. - ----------------------- (b) Exhibits: 1. Agreement and Declaration of Trust, as amended July 9, 1992 for Putnam Massachusetts Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 12 to the Registrant's Registration Statement. Agreement and Declaration of Trust, as amended May 7, 1992 for Michigan Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 12 to the Registrant's Registration Statement. Agreement and Declaration of Trust, as amended May 7, 1992 for Putnam Minnesota Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 12 to the Registrant's Registration Statement. Agreement and Declaration of Trust, as amended May 7, 1992 for Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 12 to the Registrant's Registration Statement. 2. By-Laws as amended through February 1, 1994 for Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II -- Exhibit 1. 3. Not applicable. 4a. Class A share certificate for Putnam Massachusetts Tax Exempt Income Fund II -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. Class A share certificate for Putnam Michigan Tax Exempt Income Fund II-- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. Class A share certificate for Putnam Minnesota Tax Exempt Income Fund II-- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. Class A share certificate for Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. 4b. Class B share certificate for Putnam Massachusetts Tax Exempt Income Fund II -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. Class B share certificate for Putnam Michigan Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. Class B share certificate for Putnam Minnesota Tax Exempt Income Fund II-- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. Class B share certificate for Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. 4c. Portions of Agreement and Declaration of Trust relating to shareholder rights for Putnam Massachusetts Tax Exempt Income Fund II-- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. Portions of Agreement and Declaration of Trust relating to shareholder rights for Putnam Michigan Tax Exempt Income Fund II-- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. Portions of Agreement and Declaration of Trust relating to shareholder rights for Putnam Minnesota Tax Exempt Income Fund II-- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. Portions of Agreement and Declaration of Trust relating to shareholder rights for Putnam Ohio Tax Exempt Income Fund II-- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. 4d. Portions of Bylaws relating to shareholder rights for Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II--Exhibit 2 . 5. Copy of Management Contract dated July 11, 1991 with respect to Putnam Massachusetts Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. Copy of Management Contract dated July 11, 1991 with respect to Putnam Michigan Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. Copy of Management Contract dated July 11, 1991 with respect to Putnam Minnesota Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. Copy of Management Contract dated July 11, 1991 with respect to Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. 6a. Copy of Distributor's Contract dated May 6, 1994 for Putnam Massachusetts Tax Exempt Income Fund II -- Exhibit 3 . Copy of Distributor's Contract dated May 6, 1994 for Putnam Michigan Tax Exempt Income Fund II -- Exhibit 4 . Copy of Distributor's Contract dated May 6, 1994 for Putnam Minnesota Tax Exempt Income Fund II -- Exhibit 5 . Copy of Distributor's Contract dated May 6, 1994 for Putnam Ohio Tax Exempt Income Fund II -- Exhibit 6. 6b. Copy of Specimen Dealer Sales Co Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II , Putnam Minnesota Tax Exempt Income Fund II , Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. 6c. Copy of Specimen Financial Institution Sales Contract for Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II , Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. 7. Not applicable. 8. Copy of Custodian Agreement dated May 3, 1991 as amended July 13, 1992 for Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II -- Exhibit 7. 9. Copy of Investor Servicing Agreement dated June 3, 1991 for Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrants' Registration Statement. 10. Opinion of Ropes & Gray, including consent for Putnam Massachusetts Tax Exempt Income Fund II -- Incorporated by reference to Post- Effective Amendment 10 to the Registrant's Registration Statement. Opinion of Ropes & Gray, including consent for Putnam Michigan Tax Exempt Income Fund II -- Incorporated by reference to the Registrant's Initial Registration Statement. Opinion of Ropes & Gray, including consent for Putnam Minnesota Tax Exempt Income Fund II-- Incorporated by reference to the Registrant's Initial Registration Statement. Opinion of Ropes & Gray, including consent for Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 10 to the Registrant's Registration Statement. 11. Not applicable. 12. Not applicable. 13. Investment Letter from Putnam Investments, Inc. to Putnam Massachusetts Tax Exempt Income Fund II for Class B shares -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. Investment Letter from Putnam Investments , Inc. to Putnam Michigan Tax Exempt Income Fund II for Class B shares -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. Investment Letter from Putnam Investments, Inc. to Putnam Minnesota Tax Exempt Income Fund II for Class B shares-- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. Investment Letter from Putnam Investments, Inc. to Putnam Ohio Tax Exempt Income Fund II for Class B shares -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. 14. Not applicable. 15a. Copy of Class A Distribution Plan dated July 9, 1992, as amended July 15, 1993 for Putnam Massachusetts Tax Exempt Income Fund II -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. Copy of Class A Distribution Plan dated May 7, 1992, as amended July 15, 1993 for Putnam Michigan Tax Exempt Income Fund II -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement . Copy of Class A Distribution Plan dated May 7, 1992, as amended July 15, 1993 for Putnam Minnesota Tax Exempt Income Fund II -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement . Copy of Class A Distribution Plan dated May 7, 1992, as amended July 15, 1993 for Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement. 15b. Copy of Class B Distribution Plan dated July 14, 1993 for Putnam Massachusetts Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. Copy of Class B Distribution Plan dated July 14, 1993 for Putnam Michigan Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. Copy of Class B Distribution Plan dated July 14, 1993 for Putnam Minnesota Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. to the Registrant's Registration Statement. Copy of Class B Distribution Plan dated July 14, 1993 for Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement. 15c. Specimen Dealer Service Agreement for Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post- Effective Amendment No. 13 to the Registrant's Registration Statement . 15d. Specimen Financial Institution Service Agreement for Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II, and Putnam Ohio Tax Exempt Income Fund II -- Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement . 16. Schedules for computation of performance quotations for Putnam Massachusetts Tax Exempt Income Fund II -- Exhibit 8 . Schedules for computation of performance quotations for Putnam Michigan Tax Exempt Income Fund II -- Exhibit 9 . Schedules for computation of performance quotations for Putnam Minnesota Tax Exempt Income Fund II -- Exhibit 10 . Schedules for computation of performance quotations for Putnam Ohio Tax Exempt Income Fund II -- Exhibit 11 . 17a. Financial Data Schedules for Class A shares for Putnam Massachusetts Tax Exempt Income Fund II -- Exhibit 12. Financial Data Schedules for Class A shares of Putnam Michigan Tax Exempt Income Fund II -- Exhibit 13. Financial Data Schedules for Class A shares of Putnam Minnesota Tax Exempt Income Fund II -- Exhibit 14. Financial Data Schedules for Class A shares of Putnam Ohio Tax Exempt Income Fund II -- Exhibit 15. 17b. Financial Data Schedules for Class B shares for Putnam Massachusetts Tax Exempt Income Fund II -- Exhibit 16. Financial Data Schedules for Class B shares of Putnam Michigan Tax Exempt Income Fund II -- Exhibit 17. Financial Data Schedules for Class B shares of Putnam Minnesota Tax Exempt Income Fund II -- Exhibit 18. Financial Data Schedules for Class B shares of Putnam Ohio Tax Exempt Income Fund II -- Exhibit 19. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANTS None. ITEM 26. NUMBER OF HOLDERS OF SECURITIES As of August 31, 1994 the number of shareholders of each Registrant's shares of beneficial interest were as follows: Putnam Massachusetts Tax Exempt Income Fund II Class A 6,651 Class B 1,058 Putnam Michigan Tax Exempt Income Fund II Class A 4,328 Class B 533 Putnam Minnesota Tax Exempt Income Fund II Class A 3,831 Class B 637 Putnam Ohio Tax Exempt Income Fund II Class A 6,444 Class B 833 ITEM 27. INDEMNIFICATION The information required by this item is incorporated by reference from each Registrant's initial Registration Statement on Form N-1A under the Investment Company Act of 1940 File No. 811-4518, 811-4529, 811-4527 and 811-4528 for the Massachusetts, Michigan, Minnesota and Ohio Funds, respectively. Item 28. Business and Other Connections of Investment Adviser Except as set forth below, the directors and officers of the Registrant's investment adviser have been engaged during the past two fiscal years in no business, vocation or employment of a substantial nature other than as directors or officers of the investment adviser or certain of its corporate affiliates. Certain officers of the investment adviser serve as officers of some or all of the Putnam funds. The address of the investment adviser, its corporate affiliates and the Putnam Funds is One Post Office Square, Boston, Massachusetts 02109. NAME NON-PUTNAM BUSINESS AND OTHER CONNECTIONS John V. Adduci Prior to July, 1993, Human Resources Assistant Vice President Manager, First Security Services, 80 Main St., Reading, MA 01867 Gail S. Attridge Prior to November, 1993, International Vice President Analyst, Keystone Custodian Funds, 200 Berkley Street, Boston, MA 02116 James E. Babcock Prior to June, 1994, Interest Assistant Vice President Supervisor, Salomon Brothers, Inc. 7 World Trade Center, New York, NY 10048 Prior to June, 1993, Audit Manager, Coopers & Lybrand, One Sylvan Way, Parsipanny, NJ 07054 Robert K. Baumbach Prior to August, 1994, Vice President Vice President and Analyst, Keystone Custodian funds, 200 Berkely St., Boston, MA 02110 Sharon A. Berka Prior to January, 1994, Vice Vice President President - Compensation Manager, BayBanks, Inc., 175 Federal Street, Boston, MA 02110 Edward P. Bousa Prior to October, 1992, Vice President Senior Vice President and Portfolio Manager, Fidelity Investments, 82 Devonshire St., Boston, MA 02109 Michael F. Bouscaren Prior to May, 1994, President and Senior Vice President Chairman of the Board of Directors at Salomon Series Funds, Inc. and a Director of Salomon Brothers Asset Management, 7 World Trade Center, New York, NY 10048 Brett Browchuk Prior to April, 1994, Managing Managing Director Director, Fidelity Investments, 82 Devonshire St., Boston, MA 02109 Carolyn S. Bunten Prior to July, 1993, Assistant Trader, Assistant Vice President Scudder Stevens & Clark, Inc., 175 Federal St., Boston, MA 02110 Andrea Burke Prior to August, 1994, Vice President Vice President and Portfolio Manager, Back Bay Advisors, 399 Boylston St., Boston, MA 02116 John M. Burton Prior to June, 1994, Manager -- Assistant Vice President Marketing Asset Management Pension Services, The Travelers, Inc., 1 Tower Square, Hartford, CT 06183 Patricia A. Carey Prior to May, 1993, Research Analyst, Assistant Vice President John Hancock Financial Services, 100 Clarendon St., Boston, MA 02116 Peter Carman Prior to August, 1993, Chief Senior Managing Director Investment Officer, Chairman, U.S. Equity Investment Policy Committee, Member of Board of Directors, Sanford C. Bernstein & Co., Inc., 767 Fifth Avenue, New York, NY 10153 Steven Cheshire Prior to January, 1994, Assistant Vice President Vice President, Wellington Management, 75 State Street, Boston, MA 02109 Anna Coppola Prior to May, 1993, Associate, Assistant Vice President Heidrick & Struggles, One Post Office Square, Boston, MA 02109 Kathleen Crews Prior to February, 1993, Assistant Assistant Vice President Vice President, Alliance Capital Management, L.P., 1345 Avenue of the Americas, New York, NY 10105 York, NY Kenneth L. Daly Prior to September, 1993, Vice Senior Vice President President, Fidelity Investments, 82 Devonshire St., Boston, MA 02109 John A. DeTore Prior to January, 1994, Director of Managing Director Quantitative Portfolio Management, Wellington Management, 75 State Street, Boston, Ma 02109 Michael G. Dolan Prior to February, 1994, Senior Assistant Vice President Financial Analyst, General Electric Company, 1000 Western Ave., Lynn, MA 01905 Joseph Eagleeye Prior to August, 1994, Associate, Assistant Vice President David Taussig & Associates, 424 University Ave., Sacremento, CA 95813 Richard B. England Prior to December, 1992, Investment Senior Vice President Officer, Aetna Equity Investors, 151 Farmington Avenue, Hartford, CT, 06156 Jonathan H. Francis Prior to March, 1993, President, Senior Vice President J.H. Francis & Co., N. Pheasant Lane, Westport, CT 06880 James F. Giblin Prior to April, 1993, Managing Senior Vice President Director, CIGNA Corp. Investments, Inc., 900 Cottage Grove Rd. Bloomfield, CT 06152 Thomas C. Goggins Prior to June, 1993, Portfolio Vice President Manager, Transamerica Investment Services, 1150 South Olive Street, Los Angeles, CA 90015 Mark D. Goodwin Prior to May, 1994, Manager, Audit & Assistant Vice President Operations Analysis, Mitre Corporation, 202 Burlington Rd., Bedford, MA 01730 Stephen Gorman Prior to July, 1994, Financial Assistant Vice President Analyst, Boston Harbor Trust Company, 100 Federal St., Boston, MA 02110 Daniel J. Grim Prior to May 1993, Consultant, Vice President Connie Lee, 2445 M Street N.W., Washington, D.C. 20037; Chief Operating Officer, Boardwalk, Inc., Minocqua, WI 54548 Billy P. Han Prior to December, 1992, Vice Vice President President, Scudder, Stevens & Clark, Inc., 160 Federal Street, Boston, MA 02110 Deborah R. Healy Prior to June, 1994, Senior Equity Senior Vice President Trader, Fidelity Management & Research Company, 82 Devonshire St., Boston, MA 02109 Lisa Heitman Prior to July, 1994, Securities Analyst, Lord, Abbett & Company, 767 Fifth Ave., New York, NY 10153 Michael F. Hotchkiss Prior to May, 1994, Vice President, Vice President Massachusetts Financial Services, 500 Boylston St., Boston, MA 02116 Walter Hunnewell, Jr. Prior to April, 1994, Managing Vice President Director, Veronis, Suhler & Associates, 350 Park Avenue, New York, NY 10022 Stephon A. Jackson Prior to December, 1992, nalyst, Assistant Vice President Arco Investment Management Co., 515 South Flower Street, Los Angeles, CA 91030 Jeffrey L. Knight Prior to March, 1993, Teacher, Vice President Greater Newburyport Educational Collaborative, Newburyport, MA 01950 Jeffrey J. Kobylarz Prior to May, 1993, Credit Analyst, Vice President Dean Witter Reynolds, Inc., Two World Trade Center, New York, NY 10048 D. William Kohli Prior to September, 1994, Executive Senior Vice President Vice President and Co-Director of Global Bond Managment; Prior to 1993, Portfolio Manager, Franklin Advisors/Templeton Investment Counsel, 777 Mariners Island Blvd., San Mateo, CA 94404 Karen R. Korn Prior to June, 1994, Vice President, Vice President Assistant to the President, Designs, Inc. 1244 Boylston St., Chestnut Hill, MA 02167 Prior to March, 1993, Vice President, Paine Webber, Inc., 265 Franklin St., Boston, MA 02110 Bruce M. Landers Prior to February, 1993, Manager, Assistant Vice President Purchasing, Vicor Coproration, 23 Frontage Road, Andover, MA 01810 Lawrence J. Lasser Director, Marsh & McLennan Companies, President, Director Inc., 1221 Avenue of the Americas, and Chief Executive New York, NY 10020 Officer Director, INROADS/Central New England, Inc., 99 Bedford St., Boston, MA 02111 John A. Libertine, Jr. Prior to December, 1992, Tax Manager, Assistant Vice President Coopers & Lybrand, One Post Office Square, Boston, MA 02109 Jeff Lindsay Prior to April, 1994, Vice President Vice President and Board Member, Strategic Portfolio Management, 900 Ashwood Parkway, Suite 290, Atlanta, GA 30338 Robert A. Madore Prior to October, 1992, Senior Vice Vice President President and Portfolio Manager, Fiduciary Captial Management, Inc. 51 Sherman Hill Rd., Woodbury, CT 06798 Frederick S. Marius Prior to September, 1992, Associate Assistant Vice President Attorney at Skadden Arps, One Associate Counsel Beacon St., Boston, MA 02109 Michael Martino Prior to January, 1994, Executive Senior Vice President Vice President and Chief Investment Officer until 1992; Senior Vice President and Portfolio Manager from 1990 to 1992, Back Bay Advisors, 399 Boylston St, Boston, MA 02116 Andrew S. Matteis Prior to March, 1993, Vice President, Vice President Fitch Investors Service, One State Street Plaza, New York, NY 10004 Susan McCormack Prior to May, 1994, Associate Vice President Investment Banker, Merrill Lynch & Co., 350 South Grand Ave., Suite 2830, Los Angeles, CA 90071 Michael J. Mufson Prior to June, 1993, Senior Equity Vice President Analyst, Stein Roe & Farnham, One South Wacker Drive, Chicago, Il 60606 Warren S. Naphtal Prior to January, 1994, Managing Senior Vice President Director, Continental Bank, 231 So. Lasalle St., Chicago, IL 60697 Jeffrey W. Netols Prior to February, 1993, Portfolio Senior Vice President Analyst, Associated Bank, 200 N. Adams, Greenbay, WI 54307 Patrick C. O'Donnell, Jr. Prior to May, 1994, President, Managing Director Exeter Research, Inc., 163 Water Street, Exeter, New Hampshire, 03833 Brian O'Keefe Prior to December, 1993, Vice Vice President President - Foreign Exchange Trader, Bank of Boston, 100 Federal Street, Boston, MA 02109 Pat G. Patel Prior to April, 1993, Regional Vice President Manager, Zacks Investment Research, 155 N. Wacker Drive, Chicago, IL 60606 Margaret Pietropaolo Prior to January, 1994, Data Base/ Assistant Vice President Production Analyst, Wellington Management, 75 State Street, Boston, MA 02109 George Putnam Chairman and Director, Putnam Mutual Chairman and Director Funds Corp. Director, The Boston Company, Inc., One Boston Place, Boston, MA 02108 Director, Boston Safe Deposit and Trust Company, One Boston Place, Boston, MA 02108 Director, Freeport-McMoRan, Inc., 200 Park Avenue, New York, NY 10166 Director, General Mills, Inc., 9200 Wayzata Boulevard, Minneapolis, MN 55440 Director, Houghton Mifflin Company, One Beacon Street, Boston, MA 02108 Director, Marsh & McLennan Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020 Director, Rockefeller Group, Inc., 1230 Avenue of the Americas, New York, NY 10020 Christopher A. Ray Prior to December, 1992, Vice Vice President President and Portfolio Manager at Scudder, Stevens & Clark, Inc., 160 Federal Street, Boston, MA 02110 Mark J. Siegel Prior to June, 1993, Vice President, Vice President Salomon Brothers International, Ltd., Victoria Plaza, 111 Buckingham Palace Road, London SW1W 0SB, England Joanne Soja Prior to June, 1993, Managing Senior Vice President Director/Portfolio Manager, Chancellor Capital Management, 153 East 53rd Street, New York, NY 10002 George W. Stairs Prior to July, 1994, Equity Research Vice President Analyst, ValueQuest Limited, Roundy's Hill, Marblehead, MA 01945 Hillary F. Till Prior to May, 1994, Fixed-Income Vice President Deritive Trader, Bank of Boston, 100 Federal Street, Boston, MA 02109 Prior to December, 1993, Equity Analyst, Harvard Management Company, 600 Atlantic St., Boston, MA 02109 Bonnie L. Troped Prior to May, 1993, Assistant Vice Vice President President/Director of Corporate Events, The Boston Company, One Boston Place, Boston, MA 02108 Elizabeth A. Underhill Prior to August, 1994, Vice President Vice President and Senior Equity Analyst, State Street Bank and Trust Company, 225 Franklin St., Boston, MA 02110 Charles C. Van Vleet Prior to August, 1994, Vice President Senior Vice President and Fixed-Income Manager, Alliance Capital Management, 1345 Avenue of the Americas, New York, NY 10105 Michael R. Weinstein Prior to March, 1994, Management Vice President Consultant, Arthur D. Little, Acorn Park, Cambridge, MA 02140 Item 29. Principal Underwriter (a) Putnam Mutual Funds Corp. is the principal underwriter for each of the following investment companies, including the Registrant: Putnam Adjustable Rate U.S. Government Fund, Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds, Putnam Balanced Government Fund, Putnam California Tax Exempt Income Trust, Putnam California Tax Exempt Money Market Fund, Putnam Capital Appreciation Fund, Putnam Capital Growth and Income Fund, Putnam Capital Manager Trust, Putnam Convertible Income-Growth Trust, Putnam Corporate Asset Trust, Putnam Diversified Equity Trust, Putnam Diversified Income Trust, Putnam Dividend Growth Fund, Putnam Equity Income Fund, Putnam Europe Growth Fund, Putnam Federal Income Trust, Putnam Florida Tax Exempt Income Fund, The George Putnam Fund of Boston, Putnam Global Governmental Income Trust, Putnam Global Growth Fund, Putnam Growth Fund, The Putnam Fund for Growth and Income, Putnam Health Sciences Trust, Putnam High Yield Trust, Putnam High Yield Advantage Fund, Putnam Income Fund, Putnam Intermediate Tax Exempt Income Fund, Putnam Investors Fund, Putnam Managed Income Trust, Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II, Putnam Money Market Fund, Putnam Municipal Income Fund, Putnam Natural Resources Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam New Opportunities Fund, Putnam New York Tax Exempt Income Fund, Putnam New York Tax Exempt Money Market Fund, Putnam New York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income Fund II, Putnam OTC Emerging Growth Fund, Putnam Overseas Growth Fund, Putnam Pennsylvania Tax Exempt Income Fund, Putnam Research Analyst Fund, Putnam Tax-Free Income Trust, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money Market Fund, Putnam U.S. Government Income Trust, Putnam Utilities Growth and Income Fund, Putnam Vista Fund, Putnam Voyager Fund (b) The directors and officers of the Registrant's principal underwriter are:
Positions and Offices Positions and Offices Name with Underwriter with Registrant John V. Adduci Assistant Vice President None Christopher S. Alpaugh Vice President None Paulette C. Amisano Vice President None Ronald J. Anwar Vice President None Karen M. Apatow Assistant Vice President None Steven E. Asher Senior Vice President None Georgette M. Bacca Vice President None Ira G. Baron Senior Vice President None John L. Bartlett Senior Vice President None Steven M. Beatty Vice President None Matthew F. Beaudry Vice President None Robert A. Benish Vice President None John J. Bent Vice President None Sharon A. Berka Vice President None James R. Besher Vice President None Suzanne J. Bessett Vice President None Maureen L. Boisvert Vice President None Keith R. Bouchard Vice President None Leslee R. Bresnahan Vice President None James D. Brockelman Senior Vice President None Scott C. Brown Vice President None Gail Buckner Senior Vice President None Robert W. Burke Senior Managing Director None Richard P. Busher Vice President None Ellen S. Callahan Assistant Vice President None William A. Campagna Senior Vice President None Charles A. Carey Assistant Vice President None Patricia A. Cartwright Assistant Vice President None Christopher D. Caton Assistant Vice President None Stephen J. Chaput Assisant Vice President None Daniel J. Church Vice President None James E. Clinton Assistant Vice President None Kathleen M. Collman Managing Director None Mark L. Coneeny Vice President None Donald A. Connelly Senior Vice President None Anna Coppola Assistant Vice President None F. Nicholas Corvinus Senior Vice President None Kenneth L. Daly Senior Vice President None Edward H. Dane Assistant Vice President None Nancy M. Days Assistant Vice President None Daniel J. Delianedis Vice President None J. Thomas Depres Senior Vice President None Michael G. Dolan Assistant Vice President None Scott M. Donaldson Vice President None Emily J. Durbin Assistant Vice President None David B. Edlin Senior Vice President None James M. English Senior Vice President None Vincent Esposito Senior Vice President None Mary K. Farrell Assistant Vice President None Susan H. Feldman Vice President None Michael J. Fetcher Assistant Vice President None Paul F. Fichera Senior Vice President None C. Nancy Fisher Senior Vice President None Mitchell B. Fishman Vice President None Joseph C. Fiumara Vice President None Patricia C. Flaherty Senior Vice President None Judy P. Frodigh Vice President None Samuel F. Gagliardi Vice President None Judy S. Gates Vice President None Richard W. Gauger Assistant Vice President None Joseph P. Gennaco Vice President None Steven E. Gibson Managing Director None Mark D. Goodwin Assistant Vice President None Robert Goodman Managing Director None Robert G. Greenly Vice President None Thomas W. Halloran Vice President None Marilyn M. Hausammann Senior Vice President None Howard W. Hawkins, III Vice President None Deanna R. Hayes-Castro Assistant Vice President None Paul P. Heffernan Vice President None Susan M. Heimanson Vice President None Bradley J. Hilsabeck Vice President None Bess J.M. Hochstein Vice President None Maureen A. Holmes Assistant Vice President None William J. Hurley Senior Vice President None Gregory E. Hyde Vice President None Dwight D. Jacobsen Senior Vice President None Douglas B. Jamieson Director and Senior Managing Director None Jay M. Johnson Vice President None Kevin M. Joyce Senior Vice President None John P. Keating Vice President None James J. Kilbane Vice President None Deborah H. Kirk Senior Vice President None Jill A. Koontz Assistant Vice President None Howard H. Kreutzberg Senior Vice President None Edward V. Lewandowski Senior Vice President None Edward V. Lewandowski, Jr. Vice President None Samuel L. Lieberman Vice President None Rufino R. Lomba Vice President None Maura A. Lockwood Assistant Vice President None Robert F. Lucey Senior Managing Director None Philip J. Lussier Managing Director None Ann Malatos Assistant Vice President None Renee L. Maloof Assistant Vice President None Frederick S. Marius Assistant Vice President None Karen E. Marotta Vice President None Jill Maserian Vice President None Kathleen M. McAnulty Assistant Vice President None Anne B. McCarthy Assistant Vice President None Mark J. McKenna Vice President None Marla J. McDougall Assistant Vice President None Walter S. McFarland Vice President None Greg J. McMillan Assistant Vice President None Robert E. McMurtrie Vice President None Claye A. Metelmann Assistant Vice President None J. Chris Meyer Senior Vice President None Douglas W. Miller Vice President None Ronald K. Mills Vice President None Mitchell L. Moret Vice President None Donald E. Mullen Vice President None Brendan R. Murray Vice President None Robert Nadherny Vice President None Alexander L. Nelson Managing Director None Jane M. Nickodemus Vice President None John P. Nickodemus Vice President None Michael C. Noonis Assistant Vice President None Peter A. Nyhus Vice President None Kristen P. O'Brien Vice President None Lorie C. O'Malley Senior Vice President None Kevin L. O'Shea Vice President None Philip G. Padgett, Jr. Vice President None Richard N. Pallan Senior Managing Director None Scott A. Papes Vice President None Cynthia O. Parr Vice President None John D. Pataccoli Vice President None Joseph Phoenix Vice President None Jeffrey E. Place Senior Vice President None Keith Plapinger Vice President None Douglas H. Powell Vice President None George Putnam Director Chairman & President Susannah Psomas Vice President None Robert B. Rowe Vice President None Kevin A. Rowell Senior Vice President None Thomas C. Rowley Vice President None Deborah A. Ryan Assistant Vice President None Charles Ruys de Perez Vice President None Catherine A. Saunders Senior Vice President None Robbin L. Saunders Assistant Vice President None Karl W. Saur Vice President None Christine A. Scordato Vice President None Joseph W. Scott Assistant Vice President None Kathleen G. Sharpless Senior Vice President None John F. Sharry Managing Director None John B. Shamburg Vice President None Vincent P. Sheehan Vice President None William N. Shiebler Director, Chief Executive Vice President Officer and President Daniel S. Shore Vice President None Mark J. Siebold Assistant Vice President None Gordon H. Silver Senior Managing Director Vice President Barry Sommers Vice President None Nicholas T. Stanojev Vice President None Brian L. Sullivan Vice President None Kevin J. Sullivan Vice President None Moira A. Sullivan Vice President None Janet C. Sweeney Vice President None Edward M. Syring, Jr. Vice President None James S. Tambone Senior Vice President None B. Iris Tanner Assistant Vice President None Louis Tasiopoulos Senior Vice President None David S. Taylor Vice President None John R. Telling Vice President None Richard B. Tibbetts Senior Vice President None Patrice M. Tirado Vice President None Janet E. Tosi Assistant Vice President None John C. Tredinnick Vice President None Bonnie L. Troped Vice President None Larry R. Unger Vice President None Douglas J. Vander Linde Vice President None John F. Wallin Senior Vice President None Edward F. Whalen Vice President None Robert J. Wheeler Senior Vice President None John B. White Vice President None Kirk E. Williamson Senior Vice President None Leigh T. Williamson Vice President None Benjamin Woloshin Vice President None William H. Woolverton Senior Vice President and Clerk None Timothy R. Young Vice President None SooHee L. Zebedee Assistant Vice President None
The principal business address of each person listed above is One Post Office Square, Boston, MA 02109, except for: Mr. Alpaugh, 5980 Richmond Highway, Alexandria, VA 22303 Mr. Anwar, 25-49 86th St. Jackson Heights, NY 11369 Mr. Baron, 31 Cala Moreya, Laguna Niguel, CA 92667 Mr. Bartlett, 7 Farifield St., Boston, MA 02116 Mr. Besher, 14000 Margaux, Town & Country, MO 63017 Ms. Besset, 1140 North LaSalle Blvd, Chicago, IL 60610 Mr. Bouchard, 18 Brice Rd., Annapolis, MD 21401 Mr. Brown, 221 East Mallord Drive, Boise, ID 83706 Ms. Buckner, 8338 Timber Trail, Pittsburgh, PA 15237 Mr. Busher, 12005 Ridge Knoll Drive, Fairfax, VA 22033 Mr. Campagna, 2179-D Lake Park Drive, Smyrna, GA 30080 Mr. Church, 4504 Sir Winston Place, Charlotte, NC 28211 Mr. Connelly, 4634 Mirada Way, Sarasota, FL 34238 Mr. Corvinus, 208 Water St., Newburyport, MA 01950 Mr. Deliandis, 206 Promontory Drive, Newport Beach, CA 92660 Mr. Edlin, 7 River Road, 305 Palmer Point, Cos Cob, CT 06807 Mr. English, 1184 Pintail Circle, Boulder, CO 80303 Mr. Goodman, 14 Clover Place, Cos Cob, CT 06807 Mr. Halloran, 978 W. Creek Lane, Westlake Village, CA 91362 Mr. Hyde, 3305 Sulky, Marietta, GA 30067 Mr. Jacobsen, 2744 Joyce Ridge Drive, Chesterfield, MO 63017 Mr. Johnson, 200 Clock Tower Place, Carmel, CA 93923 Mr. Keating, 5521 Greenville Avenue, Dallas, TX 75206 Ms. Kirk, 124 Rivermist Dr., Buffalo, NY 14202 Mr. Lewandowski, 805 Darrell Road, Hillsborough, CA 94010 Mr. Lewandowski, Jr., 2120 The Strand, Manhattan Beach, CA 90266 Mr. Lieberman, 200 Roy St., Seattle, WA 98199 Mr. McFarland, 8012 Dancing Fern Trail, Chattanooga, TN 37421 Mr. McMillan, 203 D. Zigler St., Zelienople, PA 16063 Mr. McMurtrie, 14529 Glastonbury, Detroit, MI 48223 Mr. Miller, 260 West 72nd St., New York, NY 10023 Mr. Moret, 4519 Lawn Avenue, Western Springs, IL 60558 Mr. Murray, 13 Ridge Court, Saratoga Springs, NY 12866 Mr. Nadherny, 9714 Marmount Drive, Seattle, WA 98117 Mr. and Mrs. Nickodemus, 1232 B Louden St., Cincinnati, OH 45202 Mr. Nyhus, 7203 Oak Pointe Curve, Bloomington, MN 55438 Mr. Padgett, Jr., 7709 Charleston Drive, Bethesda, MD 20817 Mr. Papes, 3102 Wood View Bridge Drive, Kansas City, KS 66103 Mr. Pataccoli, 125 41st Street, Manhattan Beach, Ca 90266 Mr. Phoenix, 1426 Asbury Avenue, Hubbard Woods, IL 60093 Mr. Place, 4211 Loch Highland Parkway, Roswell, GA 30075 Mr. Powell, 1508 Ruth Lane, Newport Beach, CA 92660 Mr. Rowe, 109 Shore Drive, Longwood, FL 32779 Mr. Rowell, 1508 Ruth Lane, Newport Beach, CA 92660 Mr. Rowley, 237 Peeke Avenue, Kirkwood, MO 63122 Ms. Saunders, 39939 Stevenson Common, Freemont, CA 94538 Mr. Shamburg, 10603 N. 100th Street, Scottsdale, AZ 85260 Mr. Sheehan, Parkway Center, 1150 Galapago, Denver, CO 80204 Mr. Shore, 2870 Pharr Court South, N.W., Atlanta, BA 30305 Mr. Sommers, 397 North Little Pour, New City, NY 10956 Mr. B. Sullivan, 777 Pinoake Road, Mt. Lebanon, PA 15243 Ms. M. Sullivan, 493 Zinfandel Lane, St. Helena, CA 94574 Ms. Sweeney, 8 Surf Street, Marblehead, MA 01945 Mr. Syring, 7540 Mandarian Dr., Boca Raton, FL 33433 Mr. Tambone, 10 Commercial Wharf, Boston, MA 02110 Mr. Tredinnick, 2995 Glenwood Drive, Boulder, CO 80301 Mr. Telling, 1995 Delaware Ave., Buffalo, NY 14216 Mr. Unger, 212 E. Broadway, New York, NY 10002 Mr. Vessels, 7 Riverview Drive, Norwalk, CT 06850 Mr. Williamson, 32 Kramer Place, Mandeville, LA 70448 Mr. White, 23 Wellington St., Arlington, MA 02174 Mr. Woloshin, 730 North Bundy Drive, Los Angeles, CA 90049 ITEM 30. LOCATION OF ACCOUNTS AND RECORDS Persons maintaining physical possession of accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are Registrants' Clerk, Beverly Marcus; Registrants' investment adviser, Putnam Investment Management, Inc.; Registrants' principal underwriter, Putnam Mutual Funds Corp.; Registrants' custodian, Putnam Fiduciary Trust Company ("PFTC"); and Registrant's transfer and dividend disbursing agent, Putnam Investor Services, a division of PFTC. The address of the Clerk, investment adviser, principal underwriter, and custodian and transfer and dividend disbursing agent is One Post Office Square, Boston, Massachusetts 02109. ITEM 31. MANAGEMENT SERVICES None. ITEM 32. UNDERTAKINGS (a) Each Registrant undertakes to furnish to each person to whom a prospectus of that Registrant is delivered a copy of that Registrant's latest annual report to shareholders, upon request and without charge. (b) Each Registrant hereby undertakes, if requested to do so by the holders of at least 10% of its outstanding shares, to call a meeting of shareholders for the purposes of voting upon the question of removal of a Trustee or Trustees and to assist in communications with other shareholders as required by Section 16(c) of the Investment Company Act of 1940. CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A (File No's 33-8923 and 33- 8924 for the Michigan and Ohio Funds, respectively) of our reports dated July 14, 1994 (for the Michigan Fund) and July 13, 1994 (for the Ohio Fund) on our audits of the financial statements and "Financial highlights" of Putnam Michigan Tax Exempt Income Fund II, and Putnam Ohio Tax Exempt Income Fund II, respectively, which reports are included in the Annual Reports for each Fund for the year ended May 31, 1994, which is incorporated by reference in the Registration Statement. We also consent to the references to our Firm under the caption "Independent Accountants and Financial Statements" in the Statement of Additional Information. Coopers & Lybrand L.L.P. Boston, Massachusetts September 28, 1994 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus and Statement of Additional Information constituting parts of this Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A (File Nos. 33-5416 and 33-8916 for the Massachusetts and Minnesota Funds, respectively) (the "Registration Statement") of our reports dated July 8, 1994 and July 9, 1994 , respectively, relating to the financial statements and financial highlights appearing in the May 31, 1994 Annual Reports of Putnam Massachusetts Tax Exempt Income Fund II and Putnam Minnesota Tax Exempt Income Fund II, respectively, which financial statements and financial highlights are also incorporated by reference into the Registration Statement . We also consent to the references to us under the heading "Independent Accountants and Financial Statements" in such Statement of Additional Information and under the heading "Financial highlights" in such Prospectus. Price Waterhouse LLP Boston, Massachusetts September 28, 1994 NOTICE A copy of each Agreement and Declaration of Trust of Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II are on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of each Registrant by an officer of each Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Registrants. POWER OF ATTORNEY I, the undersigned Trustee of Putnam Massachusetts Tax Exempt Income Fund II, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Massachusetts Tax Exempt Income Fund II and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Jameson A. Baxter JAMESON A. BAXTER Trustee January 17, 1994 POWER OF ATTORNEY I, the undersigned Trustee of Putnam Michigan Tax Exempt Income Fund II, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Michigan Tax Exempt Income Fund II and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Jameson A. Baxter JAMESON A. BAXTER Trustee January 17, 1994 POWER OF ATTORNEY I, the undersigned Trustee of Putnam Minnesota Tax Exempt Income Fund II, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Minnesota Tax Exempt Income Fund II and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Jameson A. Baxter JAMESON A. BAXTER Trustee January 17, 1994 POWER OF ATTORNEY I, the undersigned Trustee of Putnam Ohio Tax Exempt Income Fund II, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of Putnam Ohio Tax Exempt Income Fund II and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection thereunder, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. Signature Title Date /s/ Jameson A. Baxter JAMESON A. BAXTER Trustee January 17, 1994 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrants certify that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, and The Commonwealth of Massachusetts, on the 28th day of September, 1994 . PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II PUTNAM OHIO TAX EXEMPT INCOME FUND II By: Gordon H. Silver, Vice President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statements of Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II have been signed below by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE George Putnam President and Chairman of the Board; Principal Executive Officer; Trustee William F. Pounds Vice Chairman and Trustee John D. Hughes Vice President, Treasurer and Principal Financial Officer Paul G. Bucuvalas Assistant Treasurer and Principal Accounting Officer Jameson A. Baxter Trustee Hans H. Estin Trustee John A. Hill Trustee Elizabeth T. Kennan Trustee Lawrence J. Lasser Trustee Robert E. Patterson Trustee Donald S. Perkins Trustee George Putnam, III Trustee A.J.C. Smith Trustee W. Nicholas Thorndike Trustee By: Gordon H. Silver, as Attorney-in-Fact September 28, 1994 EX-99.B2 2 BYLAWS BYLAWS OF PUTNAM ADJUSTABLE RATE U.S. GOVERNMENT FUND, PUTNAM AMERICAN GOVERNMENT INCOME FUND, PUTNAM ARIZONA TAX EXEMPT INCOME FUND, PUTNAM ASIA PACIFIC GROWTH FUND, PUTNAM ASSET ALLOCATION FUNDS, PUTNAM BALANCED GOVERNMENT FUND, PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND, PUTNAM CONVERTIBLE INCOME-GROWTH TRUST, PUTNAM DAILY DIVIDEND TRUST, PUTNAM DIVERSIFIED INCOME TRUST, PUTNAM DIVIDEND GROWTH FUND, PUTNAM ENERGY-RESOURCES TRUST, PUTNAM EQUITY INCOME FUND, PUTNAM EUROPE GROWTH FUND, PUTNAM FLORIDA TAX EXEMPT INCOME FUND, THE GEORGE PUTNAM FUND OF BOSTON, PUTNAM GLOBAL GOVERNMENTAL INCOME TRUST, PUTNAM GLOBAL GROWTH FUND, PUTNAM HEALTH SCIENCES TRUST, PUTNAM HIGH YIELD TRUST, PUTNAM INCOME FUND, PUTNAM INVESTORS FUND, PUTNAM MANAGED INCOME TRUST, PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II, PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II, PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II, PUTNAM MUNICIPAL INCOME FUND, PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND, PUTNAM NEW OPPORTUNITIES FUND, PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND, PUTNAM NEW YORK TAX EXEMPT OPPORTUNITIES FUND, PUTNAM OHIO TAX EXEMPT INCOME FUND II, PUTNAM OTC EMERGING GROWTH FUND, PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND, PUTNAM RESEARCH ANALYSTS FUND, PUTNAM TAX EXEMPT INCOME FUND, PUTNAM TAX EXEMPT MONEY MARKET FUND, PUTNAM TAX-FREE INCOME TRUST, PUTNAM U.S. GOVERNMENT INCOME TRUST, PUTNAM UTILITIES GROWTH AND INCOME FUND, PUTNAM VISTA FUND, PUTNAM VOYAGER FUND (AS AMENDED THROUGH FEBRUARY 1, 1994), PUTNAM INTERMEDIATE TAX EXEMPT FUND (AS AMENDED THROUGH MARCH 7, 1994), PUTNAM CALIFORNIA TAX EXEMPT INCOME TRUST, PUTNAM NEW YORK TAX EXEMPT INCOME TRUST (AS AMENDED THROUGH APRIL 8, 1994), PUTNAM HIGH YIELD ADVANTAGE FUND, PUTNAM OVERSEAS GROWTH FUND (AS AMENDED THROUGH JUNE 1, 1994) AND PUTNAM FEDERAL INCOME TRUST (AS AMENDED THROUGH JUNE 6, 1994) ARTICLE 1 Agreement and Declaration of Trust and Principal Office 1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall be subject to the Agreement and Declaration of Trust, as from time to time in effect (the "Declaration of Trust"), of the Massachusetts business trust established by the Declaration of Trust (the "Trust"). 1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust shall be located in Boston, Massachusetts. ARTICLE 2 MEETINGS OF TRUSTEES 2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held without call or notice at such places and at such times as the Trustees may from time to time determine, provided that notice of the first regular meeting following any such determination shall be given to absent Trustees. 2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any time and at any place designated in the call of the meeting when called by the Chairman of the Trustees, the President or the Treasurer or by two or more Trustees, sufficient notice thereof being given to each Trustee by the Clerk or an Assistant Clerk or by the officer or the Trustees calling the meeting. 2.3 NOTICE OF SPECIAL MEETINGS. It shall be sufficient notice to a Trustee of a special meeting to send notice by mail at least forty-eight hours or by telegram at least twenty-four hours before the meeting addressed to the Trustee at his or her usual or last known business or residence address or to give notice to him or her in person or by telephone at least twenty-four hours before the meeting. Notice of a special meeting need not be given to any Trustee if a written waiver of notice, executed by him or her before or after the meeting, is filed with the records of the meeting, or to any Trustee who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him or her. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting. 2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees then in office shall constitute a quorum. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice. 2.5 NOTICE OF CERTAIN ACTIONS BY CONSENT. If in accordance with the provisions of the Declaration of Trust any action is taken by the Trustees by a written consent of less than all of the Trustees, then prompt notice of any such action shall be furnished to each Trustee who did not execute such written consent, provided that the effectiveness of such action shall not be impaired by any delay or failure to furnish such notice. ARTICLE 3 OFFICERS 3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a Chairman of the Trustees, a President, a Treasurer, a Clerk and such other officers, if any, as the Trustees from time to time may in their discretion elect. The Trust may also have such agents as the Trustees from time to time may in their discretion appoint. The Chairman of the Trustees and the President shall be a Trustee and may but need not be a shareholder; and any other officer may but need not be a Trustee or a shareholder. Any two or more offices may be held by the same person. A Trustee may but need not be a shareholder. 3.2 ELECTION. The Chairman of the Trustees, the President, the Treasurer and the Clerk shall be elected by the Trustees upon the occurrence of any vacancy in any such office. Other officers, if any, may be elected or appointed by the Trustees at any time. Vacancies in any such other office may be filled at any time. 3.3 TENURE. The Chairman of the Trustees, the President, the Treasurer and the Clerk shall hold office in each case until he or she dies, resigns, is removed or becomes disqualified. Each other officer shall hold office and each agent shall retain authority at the pleasure of the Trustees. 3.4 POWERS. Subject to the other provisions of these Bylaws, each officer shall have, in addition to the duties and powers herein and in the Declaration of Trust set forth, such duties and powers as are commonly incident to the office occupied by him or her as if the Trust were organized as a Massachusetts business corporation and such other duties and powers as the Trustees may from time to time designate. 3.5 CHAIRMAN; PRESIDENT. Unless the Trustees otherwise provide, the Chairman of the Trustees or, if there is none or in the absence of the Chairman of the Trustees, the President shall preside at all meetings of the shareholders and of the Trustees. Unless the Trustees otherwise provide, the President shall be the chief executive officer. 3.6 TREASURER. Unless the Trustees shall provide otherwise, the Treasurer shall be the chief financial and accounting officer of the Trust, and shall, subject to the provisions of the Declaration of Trust and to any arrangement made by the Trustees with a custodian, investment adviser or manager, or transfer, shareholder servicing or similar agent, be in charge of the valuable papers, books of account and accounting records of the Trust, and shall have such other duties and powers as may be designated from time to time by the Trustees or by the President. 3.7 CLERK. The Clerk shall record all proceedings of the shareholders and the Trustees in books to be kept therefor, which books or a copy thereof shall be kept at the principal office of the Trust. In the absence of the Clerk from any meeting of the shareholders or Trustees, an Assistant Clerk, or if there be none or if he or she is absent, a temporary Clerk chosen at such meeting shall record the proceedings thereof in the aforesaid books. 3.8 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any time by written instrument signed by him or her and delivered to the Chairman of the Trustees, the President or the Clerk or to a meeting of the Trustees. Such resignation shall be effective upon receipt unless specified to be effective at some other time. The Trustees may remove any officer elected by them with or without cause. Except to the extent expressly provided in a written agreement with the Trust, no Trustee or officer resigning and no officer removed shall have any right to any compensation for any period following his or her resignation or removal, or any right to damages on account of such removal. ARTICLE 4 COMMITTEES 4.1 QUORUM; VOTING. A majority of the members of any Committee of the Trustees shall constitute a quorum for the transaction of business, and any action of such a Committee may be taken at a meeting by a vote of a majority of the members present (a quorum being present) or evidenced by one or more writings signed by such a majority. Members of a Committee may participate in a meeting of such Committee by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting. ARTICLE 5 REPORTS 5.1 GENERAL. The Trustees and officers shall render reports at the time and in the manner required by the Declaration of Trust or any applicable law. Officers and Committees shall render such additional reports as they may deem desirable or as may from time to time be required by the Trustees. ARTICLE 6 FISCAL YEAR 6.1 GENERAL. Except as from time to time otherwise provided by the Trustees, the initial fiscal year of the Trust shall end on such date as is determined in advance or in arrears by the Treasurer, and subsequent fiscal years shall end on such date in subsequent years. ARTICLE 7 SEAL 7.1 GENERAL. The seal of the Trust shall consist of a flat-faced die with the word "Massachusetts", together with the name of the Trust and the year of its organization cut or engraved thereon but, unless otherwise required by the Trustees, the seal shall not be necessary to be placed on and its absence shall not impair the validity of, any document, instrument or other paper executed and delivered by or on behalf of the Trust. ARTICLE 8 EXECUTION OF PAPERS 8.1 GENERAL. Except as the Trustees may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, contracts, notes and other obligations made by the Trustees shall be signed by the President, the Vice Chairman, a Vice President or the Treasurer and need not bear the seal of the Trust. ARTICLE 9 ISSUANCE OF SHARES AND SHARE CERTIFICATES 9.1 SALE OF SHARES. Except as otherwise determined by the Trustees, the Trust will issue and sell for cash or securities from time to time, full and fractional shares of its shares of beneficial interest, such shares to be issued and sold at a price of not less than the par value per share, if any, and not less than the net asset value per share as from time to time determined in accordance with the Declaration of Trust and these Bylaws and, in the case of fractional shares, at a proportionate reduction in such price. In the case of shares sold for securities, such securities shall be valued in accordance with the provisions for determining the value of the assets of the Trust as stated in the Declaration of Trust and these Bylaws. The officers of the Trust are severally authorized to take all such actions as may be necessary or desirable to carry out this Section 9.1. 9.2 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the Trustees or the transfer agent may either issue receipts therefor or may keep accounts upon the books of the Trust for the record holders of such shares, who shall in either case be deemed, for all purposes hereunder, to be the holders of certificates for such shares as if they had accepted such certificates and shall be held to have expressly assented and agreed to the terms hereof. The Trustees may at any time authorize the issuance of share certificates. In that event, each shareholder shall be entitled to a certificate stating the number of shares of each class owned by him, in such form as shall be prescribed from time to time by the Trustees. Such certificate shall be signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer. Such signatures may be facsimile if the certificate is signed by a transfer agent or by a registrar. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall cease to be such officer before such certificate is issued, it may be issued by the Trust with the same effect as if he were such officer at the time of its issue. 9.3 LOSS OF CERTIFICATES. The transfer agent of the Trust, with the approval of any two officers of the Trust, is authorized to issue and countersign replacement certificates for the shares of the Trust which have been lost, stolen or destroyed upon (i) receipt of an affidavit or affidavits of loss or non-receipt and of an indemnity agreement executed by the registered holder or his legal representative and supported by an open penalty surety bond, said agreement and said bond in all cases to be in form and content satisfactory to and approved by the President or the Treasurer, or (ii) receipt of such other documents as may be approved by the Trustees. 9.4 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of shares transferred as collateral security shall be entitled to a new certificate if the instrument of transfer substantially describes the debt or duty that is intended to be secured thereby. Such new certificate shall express on its face that it is held as collateral security, and the name of the pledgor shall be stated thereon, who alone shall be liable as a shareholder and entitled to vote thereon. 9.5 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any time discontinue the issuance of share certificates and may, by written notice to each shareholder, require the surrender of share certificates to the Trust for cancellation. Such surrender and cancellation shall not affect the ownership of shares in the Trust. ARTICLE 10 PROVISIONS RELATING TO THE CONDUCT OF THE TRUST'S BUSINESS 10.1 CERTAIN DEFINITIONS. When used herein the following words shall have the following meanings: "Distributor" shall mean any one or more corporations, firms or associations which have distributor's or principal underwriter's contracts in effect with the Trust providing that redeemable shares issued by the Trust shall be offered and sold by such Distributor. "Manager" shall mean any corporation, firm or association which may at the time have an advisory or management contract with the Trust. 10.2 LIMITATIONS ON DEALINGS WITH OFFICERS OR TRUSTEES. The Trust will not lend any of its assets to the Distributor or Manager or to any officer or director of the Distributor or Manager or any officer or Trustee of the Trust, and shall not permit any officer or Trustee or any officer or director of the Distributor or Manager to deal for or on behalf of the Trust with himself or herself as principal or agent, or with any partnership, association or corporation in which he or she has a financial interest; provided that the foregoing provisions shall not prevent (a) officers and Trustees of the Trust or officers and directors of the Distributor or Manager from buying, holding or selling shares in the Trust or from being partners, officers or directors of or otherwise financially interested in the Distributor or the Manager; (b) purchases or sales of securities or other property if such transaction is permitted by or is exempt or exempted from the provisions of the Investment Company Act of 1940 or any Rule or Regulation thereunder and if such transaction does not involve any commission or profit to any security dealer who is, or one or more of whose partners, shareholders, officers or directors is, an officer or Trustee of the Trust or an officer or director of the Distributor or Manager; (c) employment of legal counsel, registrar, transfer agent, shareholder servicing agent, dividend disbursing agent or custodian who is, or has a partner, shareholder, officer or director who is, an officer or Trustee of the Trust or an officer or director of the Distributor or Manager; (d) sharing statistical, research, legal and management expenses and office hire and expenses with any other investment company in which an officer or Trustee of the Trust or an officer or director of the Distributor or Manager is an officer or director or otherwise financially interested. 10.3 SECURITIES AND CASH OF THE TRUST TO BE HELD BY CUSTODIAN SUBJECT TO CERTAIN TERMS AND CONDITIONS. (a) All securities and cash owned by the Trust shall be held by or deposited with one or more banks or trust companies having (according to its last published report) not less than $1,000,000 aggregate capital, surplus and undivided profits (any such bank or trust company being hereby designated as "Custodian"), provided such a Custodian can be found ready and willing to act; subject to such rules, regulations and orders, if any, as the Securities and Exchange Commission may adopt, the Trust may, or may permit any Custodian to, deposit all or any part of the securities owned by the Trust in a system for the central handling of securities pursuant to which all securities of any particular class or series of any issue deposited within the system may be transferred or pledged by bookkeeping entry, without physical delivery. The Custodian may appoint, subject to the approval of the Trustees, one or more subcustodians. (b) The Trust shall enter into a written contract with each Custodian regarding the powers, duties and compensation of such Custodian with respect to the cash and securities of the Trust held by such Custodian. Said contract and all amendments thereto shall be approved by the Trustees. (c) The Trust shall upon the resignation or inability to serve of any Custodian or upon change of any Custodian: (i) in case of such resignation or inability to serve, use its best efforts to obtain a successor Custodian; (ii) require that the cash and securities owned by the Trust be delivered directly to the successor Custodian; and (iii) in the event that no successor Custodian can be found, submit to the shareholders, before permitting delivery of the cash and securities owned by the Trust otherwise than to a successor Custodian, the question whether the Trust shall be liquidated or shall function without a Custodian. 10.4 REPORTS TO SHAREHOLDERS. The Trust shall send to each shareholder of record at least semi-annually a statement of the condition of the Trust and of the results of its operations, containing all information required by applicable laws or regulations. 10.5 DETERMINATION OF NET ASSET VALUE PER SHARE. Net asset value per share of each class or series of shares of the Trust shall mean: (i) the value of all the assets properly allocable to such class or series; (ii) less total liabilities properly allocable to such class or series; (iii) divided by the number of shares of such class or series outstanding, in each case at the time of each determination. Except as otherwise determined by the Trustees, the net asset value per share of each class or series shall be determined no less frequently than once daily, Monday through Friday, on days on which the New York Stock Exchange is open for trading, at such time or times that the Trustees set at least annually. In valuing the portfolio investments of any class or series of shares for the determination of the net asset value per share of such class or series, securities for which market quotations are readily available shall be valued at prices which, in the opinion of the Trustees or the person designated by the Trustees to make the determination, most nearly represent the market value of such securities, and other securities and assets shall be valued at their fair value as determined by or pursuant to the direction of the Trustees, which in the case of debt obligations, commercial paper and repurchase agreements may, but need not, be on the basis of yields for securities of comparable maturity, quality and type, or on the basis of amortized cost. Expenses and liabilities of the Trust shall be accrued each day. Liabilities may include such reserves for taxes, estimated accrued expenses and contingencies as the Trustees or their designates may in their sole discretion deem fair and reasonable under the circumstances. No accruals shall be made in respect of taxes on unrealized appreciation of securities owned unless the Trustees shall otherwise determine. ARTICLE 11 SHAREHOLDERS 11.1 MEETINGS. A meeting of the shareholders shall be called by the Clerk whenever ordered by the Trustees, the Chairman of the Trustees or requested in writing by the holder or holders of at least one-tenth of the outstanding shares entitled to vote at such meeting. If the Clerk, when so ordered or requested, refuses or neglects for more than two days to call such meeting, the Trustees, Chairman of the Trustees or the shareholders so requesting may, in the name of the Clerk, call the meeting by giving notice thereof in the manner required when notice is given by the Clerk. 11.2 ACCESS TO SHAREHOLDER LIST. Shareholders of record may apply to the Trustees for assistance in communicating with other shareholders for the purpose of calling a meeting in order to vote upon the question of removal of a Trustee. When ten or more shareholders of record who have been such for at least six months preceding the date of application and who hold in the aggregate shares having a net asset value of at least $25,000 so apply, the Trustees shall within five business days either: (i) afford to such applicants access to a list of names and addresses of all shareholders as recorded on the books of the Trust; or (ii) inform such applicants of the approximate number of shareholders of record and the approximate cost of mailing material to them, and, within a reasonable time thereafter, mail, at the applicants' expense, materials submitted by the applicants, to all such shareholders of record. The Trustees shall not be obligated to mail materials which they believe to be misleading or in violation of applicable law. 11.3 RECORD DATES. For the purpose of determining the shareholders of any class or series of shares of the Trust who are entitled to vote or act at any meeting or any adjournment thereof, or who are entitled to receive payment of any dividend or of any other distribution, the Trustees may from time to time fix a time, which shall be not more than 90 days before the date of any meeting of shareholders or more than 60 days before the date of payment of any dividend or of any other distribution, as the record date for determining the shareholders of such class or series having the right to notice of and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution, and in such case only shareholders of record on such record date shall have such right notwithstanding any transfer of shares on the books of the Trust after the record date; or without fixing such record date the Trustees may for any such purposes close the register or transfer books for all or part of such period. 11.4 PROXIES. The placing of a shareholder's name on a proxy pursuant to telephone or electronically transmitted instructions obtained pursuant to procedures reasonably designed to verify that such instructions have been authorized by such shareholder shall constitute execution of such proxy by or on behalf of such shareholder. ARTICLE 12 PREFERENCES, RIGHTS AND PRIVILEGES OF THE TRUST'S CLASSES OF SHARES 12.1 GENERAL. Each class of shares of the Trust or of a particular series of the Trust, as the case may be, will represent interests in the same portfolio of investments of the Trust (or that series) and be identical in all respects, except as set forth below: (a) each class of shares shall be charged with the expense of any Distribution Plan adopted by the Trust pursuant to Rule 12b-1 under the Investment Company Act of 1940 with respect to such class of shares, (b) each class of shares will be charged with any incremental shareholder servicing expense attributable solely to such class, as determined by the Trustees, (c) each class of shares shall be charged with any other expenses properly allocated to such class, as determined by the Trustees and approved by the Securities and Exchange Commission, (d) each class of shares shall vote as a separate class on matters which pertain to any Rule 12b-1 Distribution Plan pertaining to such class of shares, (e) each class of shares will have only such exchange privileges as may from time to time be described in the Trust's prospectus with respect to such class, (f) each class of shares shall bear such designation as may be approved from time to time by the Trustees and (g) reinvestments of distributions from the Trust paid with respect to the shares of a particular class will be paid in additional shares of such class. 12.2. CONVERSION OF CLASS B SHARES. Except as hereinafter provided with respect to shares acquired by exchange or reinvestment of distributions, Class B shares of the Trust will automatically convert into Class A shares of the Trust at the end of the month eight years after the month of purchase, or at such earlier time as the Trustees may in their sole discretion determine from time to time as to all Class B shares purchased on or before such date as the Trustees may specify. Class B shares acquired by exchange from Class B shares of another Putnam Fund will convert into Class A shares based on the date of the initial purchase of the Class B shares of such other Fund. Class B shares acquired through reinvestment of distributions will convert into Class A shares based on the date of the initial purchase of Class B shares to which such reinvestment shares relate. For this purpose, Class B shares acquired through reinvestment of distributions will be attributed to particular purchases of Class B shares in accordance with such procedures, which may include without limitation methods of proration or approximation, as the Trustees may in their sole discretion determine from time to time. ARTICLE 13 AMENDMENTS TO THE BYLAWS 13.1 GENERAL. These Bylaws may be amended or repealed, in whole or in part, by a majority of the Trustees then in office at any meeting of the Trustees, or by one or more writings signed by such a majority. NF-04F EX-99.B4 3 PORTIONS OF BYLAWS (PORTIONS OF BYLAWS OF PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II PUTNAM OHIO TAX EXEMPT INCOME FUND II RELATING TO SHAREHOLDERS' RIGHTS) ARTICLE 9 ISSUANCE OF SHARES AND SHARE CERTIFICATES 9.1 SALE OF SHARES. Except as otherwise determined by the Trustees, the Trust will issue and sell for cash or securities from time to time, full and fractional shares of its shares of beneficial interest, such shares to be issued and sold at a price of not less than the par value per share, if any, and not less than the net asset value per share as from time to time determined in accordance with the Declaration of Trust and these Bylaws and, in the case of fractional shares, at a proportionate reduction in such price. In the case of shares sold for securities, such securities shall be valued in accordance with the provisions for determining the value of the assets of the Trust as stated in the Declaration of Trust and these Bylaws. The officers of the Trust are severally authorized to take all such actions as may be necessary or desirable to carry out this Section 9.1. 9.2 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the Trustees or the transfer agent may either issue receipts therefor or may keep accounts upon the books of the Trust for the record holders of such shares, who shall in either case be deemed, for all purposes hereunder, to be the holders of certificates for such shares as if they had accepted such certificates and shall be held to have expressly assented and agreed to the terms hereof. The Trustees may at any time authorize the issuance of share certificates. In that event, each shareholder shall be entitled to a certificate stating the number of shares of each class owned by him, in such form as shall be prescribed from time to time by the Trustees. Such certificate shall be signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer. Such signatures may be facsimile if the certificate is signed by a transfer agent or by a registrar. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall cease to be such officer before such certificate is issued, it may be issued by the Trust with the same effect as if he were such officer at the time of its issue. 9.3 LOSS OF CERTIFICATES. The transfer agent of the Trust, with the approval of any two officers of the Trust, is authorized to issue and countersign replacement certificates for the shares of the Trust which have been lost, stolen or destroyed upon (i) receipt of an affidavit or affidavits of loss or non-receipt and of an indemnity agreement executed by the registered holder or his legal representative and supported by an open penalty surety bond, said agreement and said bond in all cases to be in form and content satisfactory to and approved by the President or the Treasurer, or (ii) receipt of such other documents as may be approved by the Trustees. 9.4 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of shares transferred as collateral security shall be entitled to a new certificate if the instrument of transfer substantially describes the debt or duty that is intended to be secured thereby. Such new certificate shall express on its face that it is held as collateral security, and the name of the pledgor shall be stated thereon, who alone shall be liable as a shareholder and entitled to vote thereon. 9.5 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any time discontinue the issuance of share certificates and may, by written notice to each shareholder, require the surrender of share certificates to the Trust for cancellation. Such surrender and cancellation shall not affect the ownership of shares in the Trust. ARTICLE 10 PROVISIONS RELATING TO THE CONDUCT OF THE TRUST'S BUSINESS 10.4 REPORTS TO SHAREHOLDERS. The Trust shall send to each shareholder of record at least semi-annually a statement of the condition of the Trust and of the results of its operations, containing all information required by applicable laws or regulations. ARTICLE 11 SHAREHOLDERS 11.1 MEETINGS. A meeting of the shareholders shall be called by the Clerk whenever ordered by the Trustees, the Chairman of the Trustees or requested in writing by the holder or holders of at least one-tenth of the outstanding shares entitled to vote at such meeting. If the Clerk, when so ordered or requested, refuses or neglects for more than two days to call such meeting, the Trustees, Chairman of the Trustees or the shareholders so requesting may, in the name of the Clerk, call the meeting by giving notice thereof in the manner required when notice is given by the Clerk. 11.2 ACCESS TO SHAREHOLDER LIST. Shareholders of record may apply to the Trustees for assistance in communicating with other shareholders for the purpose of calling a meeting in order to vote upon the question of removal of a Trustee. When ten or more shareholders of record who have been such for at least six months preceding the date of application and who hold in the aggregate shares having a net asset value of at least $25,000 so apply, the Trustees shall within five business days either: (i) afford to such applicants access to a list of names and addresses of all shareholders as recorded on the books of the Trust; or (ii) inform such applicants of the approximate number of shareholders of record and the approximate cost of mailing material to them, and, within a reasonable time thereafter, mail, at the applicants' expense, materials submitted by the applicants, to all such shareholders of record. The Trustees shall not be obligated to mail materials which they believe to be misleading or in violation of applicable law. 11.3 RECORD DATES. For the purpose of determining the shareholders of any class or series of shares of the Trust who are entitled to vote or act at any meeting or any adjournment thereof, or who are entitled to receive payment of any dividend or of any other distribution, the Trustees may from time to time fix a time, which shall be not more than 90 days before the date of any meeting of shareholders or more than 60 days before the date of payment of any dividend or of any other distribution, as the record date for determining the shareholders of such class or series having the right to notice of and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution, and in such case only shareholders of record on such record date shall have such right notwithstanding any transfer of shares on the books of the Trust after the record date; or without fixing such record date the Trustees may for any such purposes close the register or transfer books for all or part of such period. 11.4 PROXIES. The placing of a shareholder's name on a proxy pursuant to telephone or electronically transmitted instructions obtained pursuant to procedures reasonably designed to verify that such instructions have been authorized by such shareholder shall constitute execution of such proxy by or on behalf of such shareholder. ARTICLE 12 PREFERENCES, RIGHTS AND PRIVILEGES OF THE TRUST'S CLASSES OF SHARES 12.1 GENERAL. Each class of shares of the Trust or of a particular series of the Trust, as the case may be, will represent interests in the same portfolio of investments of the Trust (or that series) and be identical in all respects, except as set forth below: (a) each class of shares shall be charged with the expense of any Distribution Plan adopted by the Trust pursuant to Rule 12b-1 under the Investment Company Act of 1940 with respect to such class of shares, (b) each class of shares will be charged with any incremental shareholder servicing expense attributable solely to such class, as determined by the Trustees (c) each class of shares shall be charged with any other expenses properly allocated to such class, as determined by the Trustees and approved by the Securities and Exchange Commission, (d) each class of shares shall vote as a separate class on matters which pertain to any Rule 12b-1 Distribution Plan pertaining to such class of shares, (e) each class of shares will have only such exchange privileges as may from time to time be described in the Trust's prospectus with respect to such class, (f) each class of shares shall bear such designation as may be approved from time to time by the Trustees and (g) reinvestments of distributions from the Fund paid with respect to the shares of a particular class will be paid in additional shares of such class. 12.2. CONVERSION OF CLASS B SHARES. Except as hereinafter provided with respect to shares acquired by exchange or reinvestment of distributions, Class B shares of the Fund will automatically convert into Class A shares of the Fund at the end of the month eight years after the month of purchase, or at such earlier time as the Trustees may in their sole discretion determine from time to time as to all Class B shares purchased on or before such date as the Trustees may specify. Class B shares acquired by exchange from Class B shares of another Putnam Fund will convert into Class A shares based on the date of the initial purchase of the Class B shares of such other Fund. Class B shares acquired through reinvestment of distributions will convert into Class A shares based on the date of the initial purchase of Class B shares to which such reinvestment shares relate. For this purpose, Class B shares acquired through reinvestment of distributions will be attributed to particular purchases of Class B shares in accordance with such procedures, which may include without limitation methods of proration or approximation, as the Trustees may in their sole discretion determine from time to time. EX-99.B6 4 MASSACHUSETTS DISTRIBUTORS CONTRACT PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II DISTRIBUTOR'S CONTRACT Distributor's Contract dated May 6, 1994, by and between PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II, a Massachusetts business trust (the "Fund"), and PUTNAM MUTUAL FUNDS CORP., a Massachusetts corporation ("Putnam"). WHEREAS, the Fund and Putnam are desirous of entering into this agreement to provide for the distribution by Putnam of shares of the Fund; NOW, THEREFORE, in consideration of the mutual agreements contained in the Terms and Conditions of Distributor's Contract attached to and forming a part of this Contract (the "Terms and Conditions"), the Fund hereby appoints Putnam as a distributor of shares of the Fund, and Putnam hereby accepts such appointment, all as set forth in the Terms and Conditions. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually, and that the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II and PUTNAM MUTUAL FUNDS CORP. have each caused this Distributor's Contract to be signed in duplicate in its behalf, all as of the day and year first above written. PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II /s/ Charles E. Porter By: ----------------------------- Executive Vice President PUTNAM MUTUAL FUNDS CORP. /s/ William N. Shiebler By: ----------------------------- President TERMS AND CONDITIONS OF DISTRIBUTOR'S CONTRACT 1. RESERVATION OF RIGHT NOT TO SELL. The Fund reserves the right to refuse at any time or times to sell any of its shares of beneficial interest ("shares") hereunder for any reason deemed adequate by it. 2. PAYMENTS TO PUTNAM. In connection with the distribution of shares of the Fund, Putnam will be entitled to receive: (a) payments pursuant to any Distribution Plan and Agreement from time to time in effect between the Fund and Putnam with respect to the Fund or any particular class of shares of the Fund, (b) any contingent deferred sales charges applicable to the redemption of shares of the Fund or of any particular class of shares of the Fund, determined in the manner set forth in the then current Prospectus and Statement of Additional Information of the Fund and (c) subject to the provisions of Section 3 below, any front-end sales charges applicable to the sale of shares of the Fund or of any particular class of shares of the Fund, less any applicable dealer discount. 3. SALES OF SHARES TO PUTNAM AND SALES BY PUTNAM. Putnam will have the right, as principal, to sell shares of the Fund to investment dealers against orders therefor (a) at the public offering price (calculated as described below) less a discount determined by Putnam, which discount shall not exceed the amount of the sales charge referred to below, or (b) at net asset value. Upon receipt of an order to purchase Fund shares from an investment dealer with whom Putnam has a Sales Contract, Putnam will promptly purchase shares from the Fund to fill such order. The public offering price of a class of shares shall be the net asset value of such shares then in effect, plus any applicable front-end sales charge determined in the manner set forth in the then current Prospectus and Statement of Additional Information of the Fund or as permitted by the Investment Company Act of 1940, as amended, and the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. In no event shall the public offering price exceed 1000/915ths of such net asset value, and in no event shall any applicable sales charge exceed 8 1/2% of the public offering price. The net asset value of the shares shall be determined in the manner provided in the Agreement and Declaration of Trust of the Fund as then amended and when determined shall be applicable to transactions as provided for in the then current Prospectus and Statement of Additional Information of the Fund. Putnam will also have the right, as principal, to purchase shares from the Fund at their net asset value and to sell such shares to the public against orders therefor at the public offering price or at net asset value. Putnam will also have the right, as principal, to sell shares at their net asset value and not subject to a contingent deferred sales charge to such persons as may be approved by the Trustees of the Fund, all such sales to comply with the provisions of the Investment Company Act of 1940, as amended, and the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. Putnam will also have the right, as agent for the Fund, to sell shares at the public offering price or at net asset value to such persons and upon such conditions as the Trustees of the Fund may from time to time determine. On every sale the Fund shall receive the applicable net asset value of the shares. Putnam will reimburse the Fund for any increased issue tax paid on account of sales charges. Upon receipt of registration instructions in proper form and payment for shares, Putnam will transmit such instructions to the Fund or its agent for registration of the shares purchased. 4. SALES OF SHARES BY THE FUND. The Fund reserves the right to issue shares at any time directly to its shareholders as a stock dividend or stock split and to sell shares to its shareholders or to other persons approved by Putnam at not less than net asset value. 5. REPURCHASE OF SHARES. Putnam will act as agent for the Fund in connection with the repurchase of shares by the Fund upon the terms and conditions set forth in the then current Prospectus and Statement of Additional Information of the Fund. 6. BASIS OF PURCHASES AND SALES OF SHARES. Putnam will use its best efforts to place shares sold by it on an investment basis. Putnam does not agree to sell any specific number of shares. Shares will be sold by Putnam only against orders therefor. Putnam will not purchase shares from anyone other than the Fund except in accordance with Section 5, and will not take "long" or "short" positions in shares contrary to the Agreement and Declaration of Trust of the Fund. 7. RULES OF NASD, ETC. Putnam will conform to the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and the sale of securities laws of any jurisdiction in which it sells, directly or indirectly, any shares. Putnam also agrees to furnish to the Fund sufficient copies of any agreements or plans it intends to use in connection with any sales of shares in adequate time for the Fund to file and clear them with the proper authorities before they are put in use, and not to use them until so filed and cleared. 8. PUTNAM INDEPENDENT CONTRACTOR. Putnam shall be an independent contractor and neither Putnam nor any of its officers or employees as such is or shall be an employee of the Fund. Putnam is responsible for its own conduct and the employment, control and conduct of its agents and employees and for injury to such agents or employees or to others through its agents or employees. Putnam assumes full responsibility for its agents and employees under applicable statutes and agrees to pay all employer taxes thereunder. Putnam will maintain at its own expense insurance against public liability in such an amount as the Trustees of the Fund may from time to time reasonably request. 9. EXPENSES. Putnam will pay all expenses of qualifying shares of the Fund for sale under the so-called "Blue Sky" laws of any state (except expenses of any action by the Fund relating to its Agreement and Declaration of Trust or other matters in which the Fund has a direct concern), and expenses of preparing, printing and distributing advertising and sales literature (apart from expenses of registering shares under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and the preparation and printing of Prospectuses and Statements of Additional Information and reports as required by said Acts and the direct expenses of the issue of shares, except that Putnam will pay the cost of the preparation and printing of Prospectuses and Statements of Additional Information and shareholders' reports used by it and by others in the sale of Fund shares to the extent such cost is not paid by others). 10. INDEMNIFICATION OF FUND. Putnam agrees to indemnify and hold harmless the Fund and each person who has been, is, or may hereafter be a Trustee of the Fund against expenses reasonably incurred by any of them in connection with any claim or in connection with any action, suit or proceeding to which any of them may be a party, which arises out of or is alleged to arise out of any misrepresentation or omission to state a material fact, or out of any alleged misrepresentation or omission to state a material fact, on the part of Putnam or any agent or employee of Putnam or any other person for whose acts Putnam is responsible or is alleged to be responsible unless such misrepresentation or omission was made in reliance upon written information furnished by the Fund. Putnam also agrees likewise to indemnify and hold harmless the Fund and each such person in connection with any claim or in connection with any action, suit or proceeding which arises out of or is alleged to arise out of Putnam's (or an affiliate of Putnam's) failure to exercise reasonable care and diligence with respect to its services rendered in connection with investment, reinvestment, automatic withdrawal and other plans for shares. The term "expenses" includes amounts paid in satisfaction of judgments or in settlements which are made with Putnam's consent. The foregoing rights of indemnification shall be in addition to any other rights to which the Fund or a Trustee may be entitled as a matter of law. 11. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment. This Contract may be amended only if such amendment be approved either by action of the Trustees of the Fund or at a meeting of the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and by a majority of the Trustees of the Fund who are not interested persons of the Fund or of Putnam by vote cast in person at a meeting called for the purpose of voting on such approval. 12. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall take effect upon the date first above written and shall remain in full force and effect continuously (unless terminated automatically as set forth in Section 11) until terminated: (a) Either by the Fund or Putnam by not more than sixty (60) days' nor less than ten (10) days' written notice delivered or mailed by registered mail, postage prepaid, to the other party; or (b) If the continuance of this Contract after January 31, 1995 is not specifically approved at least annually by the Trustees of the Fund or the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and by a majority of the Trustees of the Fund who are not interested persons of the Fund or of Putnam by vote cast in person at a meeting called for the purpose of voting on such approval. Action by the Fund under (a) above may be taken either (i) by vote of its Trustees or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. The requirement under (b) above that continuance of this Contract be "specifically approved at least annually" shall be construed in a manner consistent with the Investment Company Act of 1940, as amended, and the Rules and Regulations thereunder. Termination of this Contract pursuant to this Section 12 shall be without the payment of any penalty. 13. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "interested person" and "assignment" shall have the meanings defined in the Investment Company Act of 1940, as amended, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act. S:\shared\discon1 EX-99.B6 5 MICHIGAN DISTRIBUTORS CONTRACT PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II DISTRIBUTOR'S CONTRACT Distributor's Contract dated May 6, 1994, by and between PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II, a Massachusetts business trust (the "Fund"), and PUTNAM MUTUAL FUNDS CORP., a Massachusetts corporation ("Putnam"). WHEREAS, the Fund and Putnam are desirous of entering into this agreement to provide for the distribution by Putnam of shares of the Fund; NOW, THEREFORE, in consideration of the mutual agreements contained in the Terms and Conditions of Distributor's Contract attached to and forming a part of this Contract (the "Terms and Conditions"), the Fund hereby appoints Putnam as a distributor of shares of the Fund, and Putnam hereby accepts such appointment, all as set forth in the Terms and Conditions. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually, and that the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II and PUTNAM MUTUAL FUNDS CORP. have each caused this Distributor's Contract to be signed in duplicate in its behalf, all as of the day and year first above written. PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II /s/ Charles E. Porter By: ----------------------------- Executive Vice President PUTNAM MUTUAL FUNDS CORP. /s/ William N. Shiebler By: ----------------------------- President TERMS AND CONDITIONS OF DISTRIBUTOR'S CONTRACT 1. RESERVATION OF RIGHT NOT TO SELL. The Fund reserves the right to refuse at any time or times to sell any of its shares of beneficial interest ("shares") hereunder for any reason deemed adequate by it. 2. PAYMENTS TO PUTNAM. In connection with the distribution of shares of the Fund, Putnam will be entitled to receive: (a) payments pursuant to any Distribution Plan and Agreement from time to time in effect between the Fund and Putnam with respect to the Fund or any particular class of shares of the Fund, (b) any contingent deferred sales charges applicable to the redemption of shares of the Fund or of any particular class of shares of the Fund, determined in the manner set forth in the then current Prospectus and Statement of Additional Information of the Fund and (c) subject to the provisions of Section 3 below, any front-end sales charges applicable to the sale of shares of the Fund or of any particular class of shares of the Fund, less any applicable dealer discount. 3. SALES OF SHARES TO PUTNAM AND SALES BY PUTNAM. Putnam will have the right, as principal, to sell shares of the Fund to investment dealers against orders therefor (a) at the public offering price (calculated as described below) less a discount determined by Putnam, which discount shall not exceed the amount of the sales charge referred to below, or (b) at net asset value. Upon receipt of an order to purchase Fund shares from an investment dealer with whom Putnam has a Sales Contract, Putnam will promptly purchase shares from the Fund to fill such order. The public offering price of a class of shares shall be the net asset value of such shares then in effect, plus any applicable front-end sales charge determined in the manner set forth in the then current Prospectus and Statement of Additional Information of the Fund or as permitted by the Investment Company Act of 1940, as amended, and the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. In no event shall the public offering price exceed 1000/915ths of such net asset value, and in no event shall any applicable sales charge exceed 8 1/2% of the public offering price. The net asset value of the shares shall be determined in the manner provided in the Agreement and Declaration of Trust of the Fund as then amended and when determined shall be applicable to transactions as provided for in the then current Prospectus and Statement of Additional Information of the Fund. Putnam will also have the right, as principal, to purchase shares from the Fund at their net asset value and to sell such shares to the public against orders therefor at the public offering price or at net asset value. Putnam will also have the right, as principal, to sell shares at their net asset value and not subject to a contingent deferred sales charge to such persons as may be approved by the Trustees of the Fund, all such sales to comply with the provisions of the Investment Company Act of 1940, as amended, and the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. Putnam will also have the right, as agent for the Fund, to sell shares at the public offering price or at net asset value to such persons and upon such conditions as the Trustees of the Fund may from time to time determine. On every sale the Fund shall receive the applicable net asset value of the shares. Putnam will reimburse the Fund for any increased issue tax paid on account of sales charges. Upon receipt of registration instructions in proper form and payment for shares, Putnam will transmit such instructions to the Fund or its agent for registration of the shares purchased. 4. SALES OF SHARES BY THE FUND. The Fund reserves the right to issue shares at any time directly to its shareholders as a stock dividend or stock split and to sell shares to its shareholders or to other persons approved by Putnam at not less than net asset value. 5. REPURCHASE OF SHARES. Putnam will act as agent for the Fund in connection with the repurchase of shares by the Fund upon the terms and conditions set forth in the then current Prospectus and Statement of Additional Information of the Fund. 6. BASIS OF PURCHASES AND SALES OF SHARES. Putnam will use its best efforts to place shares sold by it on an investment basis. Putnam does not agree to sell any specific number of shares. Shares will be sold by Putnam only against orders therefor. Putnam will not purchase shares from anyone other than the Fund except in accordance with Section 5, and will not take "long" or "short" positions in shares contrary to the Agreement and Declaration of Trust of the Fund. 7. RULES OF NASD, ETC. Putnam will conform to the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and the sale of securities laws of any jurisdiction in which it sells, directly or indirectly, any shares. Putnam also agrees to furnish to the Fund sufficient copies of any agreements or plans it intends to use in connection with any sales of shares in adequate time for the Fund to file and clear them with the proper authorities before they are put in use, and not to use them until so filed and cleared. 8. PUTNAM INDEPENDENT CONTRACTOR. Putnam shall be an independent contractor and neither Putnam nor any of its officers or employees as such is or shall be an employee of the Fund. Putnam is responsible for its own conduct and the employment, control and conduct of its agents and employees and for injury to such agents or employees or to others through its agents or employees. Putnam assumes full responsibility for its agents and employees under applicable statutes and agrees to pay all employer taxes thereunder. Putnam will maintain at its own expense insurance against public liability in such an amount as the Trustees of the Fund may from time to time reasonably request. 9. EXPENSES. Putnam will pay all expenses of qualifying shares of the Fund for sale under the so-called "Blue Sky" laws of any state (except expenses of any action by the Fund relating to its Agreement and Declaration of Trust or other matters in which the Fund has a direct concern), and expenses of preparing, printing and distributing advertising and sales literature (apart from expenses of registering shares under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and the preparation and printing of Prospectuses and Statements of Additional Information and reports as required by said Acts and the direct expenses of the issue of shares, except that Putnam will pay the cost of the preparation and printing of Prospectuses and Statements of Additional Information and shareholders' reports used by it and by others in the sale of Fund shares to the extent such cost is not paid by others). 10. INDEMNIFICATION OF FUND. Putnam agrees to indemnify and hold harmless the Fund and each person who has been, is, or may hereafter be a Trustee of the Fund against expenses reasonably incurred by any of them in connection with any claim or in connection with any action, suit or proceeding to which any of them may be a party, which arises out of or is alleged to arise out of any misrepresentation or omission to state a material fact, or out of any alleged misrepresentation or omission to state a material fact, on the part of Putnam or any agent or employee of Putnam or any other person for whose acts Putnam is responsible or is alleged to be responsible unless such misrepresentation or omission was made in reliance upon written information furnished by the Fund. Putnam also agrees likewise to indemnify and hold harmless the Fund and each such person in connection with any claim or in connection with any action, suit or proceeding which arises out of or is alleged to arise out of Putnam's (or an affiliate of Putnam's) failure to exercise reasonable care and diligence with respect to its services rendered in connection with investment, reinvestment, automatic withdrawal and other plans for shares. The term "expenses" includes amounts paid in satisfaction of judgments or in settlements which are made with Putnam's consent. The foregoing rights of indemnification shall be in addition to any other rights to which the Fund or a Trustee may be entitled as a matter of law. 11. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment. This Contract may be amended only if such amendment be approved either by action of the Trustees of the Fund or at a meeting of the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and by a majority of the Trustees of the Fund who are not interested persons of the Fund or of Putnam by vote cast in person at a meeting called for the purpose of voting on such approval. 12. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall take effect upon the date first above written and shall remain in full force and effect continuously (unless terminated automatically as set forth in Section 11) until terminated: (a) Either by the Fund or Putnam by not more than sixty (60) days' nor less than ten (10) days' written notice delivered or mailed by registered mail, postage prepaid, to the other party; or (b) If the continuance of this Contract after January 31, 1995 is not specifically approved at least annually by the Trustees of the Fund or the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and by a majority of the Trustees of the Fund who are not interested persons of the Fund or of Putnam by vote cast in person at a meeting called for the purpose of voting on such approval. Action by the Fund under (a) above may be taken either (i) by vote of its Trustees or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. The requirement under (b) above that continuance of this Contract be "specifically approved at least annually" shall be construed in a manner consistent with the Investment Company Act of 1940, as amended, and the Rules and Regulations thereunder. Termination of this Contract pursuant to this Section 12 shall be without the payment of any penalty. 13. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "interested person" and "assignment" shall have the meanings defined in the Investment Company Act of 1940, as amended, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act. EX-99.B6 6 MINNESOTA DISTRIBUTORS CONTRACT PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II DISTRIBUTOR'S CONTRACT Distributor's Contract dated May 6, 1994, by and between PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II, a Massachusetts business trust (the "Fund"), and PUTNAM MUTUAL FUNDS CORP., a Massachusetts corporation ("Putnam"). WHEREAS, the Fund and Putnam are desirous of entering into this agreement to provide for the distribution by Putnam of shares of the Fund; NOW, THEREFORE, in consideration of the mutual agreements contained in the Terms and Conditions of Distributor's Contract attached to and forming a part of this Contract (the "Terms and Conditions"), the Fund hereby appoints Putnam as a distributor of shares of the Fund, and Putnam hereby accepts such appointment, all as set forth in the Terms and Conditions. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually, and that the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II and PUTNAM MUTUAL FUNDS CORP. have each caused this Distributor's Contract to be signed in duplicate in its behalf, all as of the day and year first above written. PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II /s/ Charles E. Porter By: ----------------------------- Executive Vice President PUTNAM MUTUAL FUNDS CORP. /s/ William N. Shiebler By: ----------------------------- President TERMS AND CONDITIONS OF DISTRIBUTOR'S CONTRACT 1. RESERVATION OF RIGHT NOT TO SELL. The Fund reserves the right to refuse at any time or times to sell any of its shares of beneficial interest ("shares") hereunder for any reason deemed adequate by it. 2. PAYMENTS TO PUTNAM. In connection with the distribution of shares of the Fund, Putnam will be entitled to receive: (a) payments pursuant to any Distribution Plan and Agreement from time to time in effect between the Fund and Putnam with respect to the Fund or any particular class of shares of the Fund, (b) any contingent deferred sales charges applicable to the redemption of shares of the Fund or of any particular class of shares of the Fund, determined in the manner set forth in the then current Prospectus and Statement of Additional Information of the Fund and (c) subject to the provisions of Section 3 below, any front-end sales charges applicable to the sale of shares of the Fund or of any particular class of shares of the Fund, less any applicable dealer discount. 3. SALES OF SHARES TO PUTNAM AND SALES BY PUTNAM. Putnam will have the right, as principal, to sell shares of the Fund to investment dealers against orders therefor (a) at the public offering price (calculated as described below) less a discount determined by Putnam, which discount shall not exceed the amount of the sales charge referred to below, or (b) at net asset value. Upon receipt of an order to purchase Fund shares from an investment dealer with whom Putnam has a Sales Contract, Putnam will promptly purchase shares from the Fund to fill such order. The public offering price of a class of shares shall be the net asset value of such shares then in effect, plus any applicable front-end sales charge determined in the manner set forth in the then current Prospectus and Statement of Additional Information of the Fund or as permitted by the Investment Company Act of 1940, as amended, and the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. In no event shall the public offering price exceed 1000/915ths of such net asset value, and in no event shall any applicable sales charge exceed 8 1/2% of the public offering price. The net asset value of the shares shall be determined in the manner provided in the Agreement and Declaration of Trust of the Fund as then amended and when determined shall be applicable to transactions as provided for in the then current Prospectus and Statement of Additional Information of the Fund. Putnam will also have the right, as principal, to purchase shares from the Fund at their net asset value and to sell such shares to the public against orders therefor at the public offering price or at net asset value. Putnam will also have the right, as principal, to sell shares at their net asset value and not subject to a contingent deferred sales charge to such persons as may be approved by the Trustees of the Fund, all such sales to comply with the provisions of the Investment Company Act of 1940, as amended, and the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. Putnam will also have the right, as agent for the Fund, to sell shares at the public offering price or at net asset value to such persons and upon such conditions as the Trustees of the Fund may from time to time determine. On every sale the Fund shall receive the applicable net asset value of the shares. Putnam will reimburse the Fund for any increased issue tax paid on account of sales charges. Upon receipt of registration instructions in proper form and payment for shares, Putnam will transmit such instructions to the Fund or its agent for registration of the shares purchased. 4. SALES OF SHARES BY THE FUND. The Fund reserves the right to issue shares at any time directly to its shareholders as a stock dividend or stock split and to sell shares to its shareholders or to other persons approved by Putnam at not less than net asset value. 5. REPURCHASE OF SHARES. Putnam will act as agent for the Fund in connection with the repurchase of shares by the Fund upon the terms and conditions set forth in the then current Prospectus and Statement of Additional Information of the Fund. 6. BASIS OF PURCHASES AND SALES OF SHARES. Putnam will use its best efforts to place shares sold by it on an investment basis. Putnam does not agree to sell any specific number of shares. Shares will be sold by Putnam only against orders therefor. Putnam will not purchase shares from anyone other than the Fund except in accordance with Section 5, and will not take "long" or "short" positions in shares contrary to the Agreement and Declaration of Trust of the Fund. 7. RULES OF NASD, ETC. Putnam will conform to the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and the sale of securities laws of any jurisdiction in which it sells, directly or indirectly, any shares. Putnam also agrees to furnish to the Fund sufficient copies of any agreements or plans it intends to use in connection with any sales of shares in adequate time for the Fund to file and clear them with the proper authorities before they are put in use, and not to use them until so filed and cleared. 8. PUTNAM INDEPENDENT CONTRACTOR. Putnam shall be an independent contractor and neither Putnam nor any of its officers or employees as such is or shall be an employee of the Fund. Putnam is responsible for its own conduct and the employment, control and conduct of its agents and employees and for injury to such agents or employees or to others through its agents or employees. Putnam assumes full responsibility for its agents and employees under applicable statutes and agrees to pay all employer taxes thereunder. Putnam will maintain at its own expense insurance against public liability in such an amount as the Trustees of the Fund may from time to time reasonably request. 9. EXPENSES. Putnam will pay all expenses of qualifying shares of the Fund for sale under the so-called "Blue Sky" laws of any state (except expenses of any action by the Fund relating to its Agreement and Declaration of Trust or other matters in which the Fund has a direct concern), and expenses of preparing, printing and distributing advertising and sales literature (apart from expenses of registering shares under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and the preparation and printing of Prospectuses and Statements of Additional Information and reports as required by said Acts and the direct expenses of the issue of shares, except that Putnam will pay the cost of the preparation and printing of Prospectuses and Statements of Additional Information and shareholders' reports used by it and by others in the sale of Fund shares to the extent such cost is not paid by others). 10. INDEMNIFICATION OF FUND. Putnam agrees to indemnify and hold harmless the Fund and each person who has been, is, or may hereafter be a Trustee of the Fund against expenses reasonably incurred by any of them in connection with any claim or in connection with any action, suit or proceeding to which any of them may be a party, which arises out of or is alleged to arise out of any misrepresentation or omission to state a material fact, or out of any alleged misrepresentation or omission to state a material fact, on the part of Putnam or any agent or employee of Putnam or any other person for whose acts Putnam is responsible or is alleged to be responsible unless such misrepresentation or omission was made in reliance upon written information furnished by the Fund. Putnam also agrees likewise to indemnify and hold harmless the Fund and each such person in connection with any claim or in connection with any action, suit or proceeding which arises out of or is alleged to arise out of Putnam's (or an affiliate of Putnam's) failure to exercise reasonable care and diligence with respect to its services rendered in connection with investment, reinvestment, automatic withdrawal and other plans for shares. The term "expenses" includes amounts paid in satisfaction of judgments or in settlements which are made with Putnam's consent. The foregoing rights of indemnification shall be in addition to any other rights to which the Fund or a Trustee may be entitled as a matter of law. 11. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment. This Contract may be amended only if such amendment be approved either by action of the Trustees of the Fund or at a meeting of the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and by a majority of the Trustees of the Fund who are not interested persons of the Fund or of Putnam by vote cast in person at a meeting called for the purpose of voting on such approval. 12. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall take effect upon the date first above written and shall remain in full force and effect continuously (unless terminated automatically as set forth in Section 11) until terminated: (a) Either by the Fund or Putnam by not more than sixty (60) days' nor less than ten (10) days' written notice delivered or mailed by registered mail, postage prepaid, to the other party; or (b) If the continuance of this Contract after January 31, 1995 is not specifically approved at least annually by the Trustees of the Fund or the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and by a majority of the Trustees of the Fund who are not interested persons of the Fund or of Putnam by vote cast in person at a meeting called for the purpose of voting on such approval. Action by the Fund under (a) above may be taken either (i) by vote of its Trustees or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. The requirement under (b) above that continuance of this Contract be "specifically approved at least annually" shall be construed in a manner consistent with the Investment Company Act of 1940, as amended, and the Rules and Regulations thereunder. Termination of this Contract pursuant to this Section 12 shall be without the payment of any penalty. 13. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "interested person" and "assignment" shall have the meanings defined in the Investment Company Act of 1940, as amended, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act. EX-99.B6 7 OHIO DISTRIBUTORS CONTRACT PUTNAM OHIO TAX EXEMPT INCOME FUND II DISTRIBUTOR'S CONTRACT Distributor's Contract dated May 6, 1994, by and between PUTNAM OHIO TAX EXEMPT INCOME FUND II, a Massachusetts business trust (the "Fund"), and PUTNAM MUTUAL FUNDS CORP., a Massachusetts corporation ("Putnam"). WHEREAS, the Fund and Putnam are desirous of entering into this agreement to provide for the distribution by Putnam of shares of the Fund; NOW, THEREFORE, in consideration of the mutual agreements contained in the Terms and Conditions of Distributor's Contract attached to and forming a part of this Contract (the "Terms and Conditions"), the Fund hereby appoints Putnam as a distributor of shares of the Fund, and Putnam hereby accepts such appointment, all as set forth in the Terms and Conditions. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually, and that the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, PUTNAM OHIO TAX EXEMPT INCOME FUND II and PUTNAM MUTUAL FUNDS CORP. have each caused this Distributor's Contract to be signed in duplicate in its behalf, all as of the day and year first above written. PUTNAM OHIO TAX EXEMPT INCOME FUND II /s/ Charles E. Porter By: ----------------------------- Executive Vice President PUTNAM MUTUAL FUNDS CORP. /s/ William N. Shiebler By: ----------------------------- President TERMS AND CONDITIONS OF DISTRIBUTOR'S CONTRACT 1. RESERVATION OF RIGHT NOT TO SELL. The Fund reserves the right to refuse at any time or times to sell any of its shares of beneficial interest ("shares") hereunder for any reason deemed adequate by it. 2. PAYMENTS TO PUTNAM. In connection with the distribution of shares of the Fund, Putnam will be entitled to receive: (a) payments pursuant to any Distribution Plan and Agreement from time to time in effect between the Fund and Putnam with respect to the Fund or any particular class of shares of the Fund, (b) any contingent deferred sales charges applicable to the redemption of shares of the Fund or of any particular class of shares of the Fund, determined in the manner set forth in the then current Prospectus and Statement of Additional Information of the Fund and (c) subject to the provisions of Section 3 below, any front-end sales charges applicable to the sale of shares of the Fund or of any particular class of shares of the Fund, less any applicable dealer discount. 3. SALES OF SHARES TO PUTNAM AND SALES BY PUTNAM. Putnam will have the right, as principal, to sell shares of the Fund to investment dealers against orders therefor (a) at the public offering price (calculated as described below) less a discount determined by Putnam, which discount shall not exceed the amount of the sales charge referred to below, or (b) at net asset value. Upon receipt of an order to purchase Fund shares from an investment dealer with whom Putnam has a Sales Contract, Putnam will promptly purchase shares from the Fund to fill such order. The public offering price of a class of shares shall be the net asset value of such shares then in effect, plus any applicable front-end sales charge determined in the manner set forth in the then current Prospectus and Statement of Additional Information of the Fund or as permitted by the Investment Company Act of 1940, as amended, and the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. In no event shall the public offering price exceed 1000/915ths of such net asset value, and in no event shall any applicable sales charge exceed 8 1/2% of the public offering price. The net asset value of the shares shall be determined in the manner provided in the Agreement and Declaration of Trust of the Fund as then amended and when determined shall be applicable to transactions as provided for in the then current Prospectus and Statement of Additional Information of the Fund. Putnam will also have the right, as principal, to purchase shares from the Fund at their net asset value and to sell such shares to the public against orders therefor at the public offering price or at net asset value. Putnam will also have the right, as principal, to sell shares at their net asset value and not subject to a contingent deferred sales charge to such persons as may be approved by the Trustees of the Fund, all such sales to comply with the provisions of the Investment Company Act of 1940, as amended, and the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. Putnam will also have the right, as agent for the Fund, to sell shares at the public offering price or at net asset value to such persons and upon such conditions as the Trustees of the Fund may from time to time determine. On every sale the Fund shall receive the applicable net asset value of the shares. Putnam will reimburse the Fund for any increased issue tax paid on account of sales charges. Upon receipt of registration instructions in proper form and payment for shares, Putnam will transmit such instructions to the Fund or its agent for registration of the shares purchased. 4. SALES OF SHARES BY THE FUND. The Fund reserves the right to issue shares at any time directly to its shareholders as a stock dividend or stock split and to sell shares to its shareholders or to other persons approved by Putnam at not less than net asset value. 5. REPURCHASE OF SHARES. Putnam will act as agent for the Fund in connection with the repurchase of shares by the Fund upon the terms and conditions set forth in the then current Prospectus and Statement of Additional Information of the Fund. 6. BASIS OF PURCHASES AND SALES OF SHARES. Putnam will use its best efforts to place shares sold by it on an investment basis. Putnam does not agree to sell any specific number of shares. Shares will be sold by Putnam only against orders therefor. Putnam will not purchase shares from anyone other than the Fund except in accordance with Section 5, and will not take "long" or "short" positions in shares contrary to the Agreement and Declaration of Trust of the Fund. 7. RULES OF NASD, ETC. Putnam will conform to the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and the sale of securities laws of any jurisdiction in which it sells, directly or indirectly, any shares. Putnam also agrees to furnish to the Fund sufficient copies of any agreements or plans it intends to use in connection with any sales of shares in adequate time for the Fund to file and clear them with the proper authorities before they are put in use, and not to use them until so filed and cleared. 8. PUTNAM INDEPENDENT CONTRACTOR. Putnam shall be an independent contractor and neither Putnam nor any of its officers or employees as such is or shall be an employee of the Fund. Putnam is responsible for its own conduct and the employment, control and conduct of its agents and employees and for injury to such agents or employees or to others through its agents or employees. Putnam assumes full responsibility for its agents and employees under applicable statutes and agrees to pay all employer taxes thereunder. Putnam will maintain at its own expense insurance against public liability in such an amount as the Trustees of the Fund may from time to time reasonably request. 9. EXPENSES. Putnam will pay all expenses of qualifying shares of the Fund for sale under the so-called "Blue Sky" laws of any state (except expenses of any action by the Fund relating to its Agreement and Declaration of Trust or other matters in which the Fund has a direct concern), and expenses of preparing, printing and distributing advertising and sales literature (apart from expenses of registering shares under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and the preparation and printing of Prospectuses and Statements of Additional Information and reports as required by said Acts and the direct expenses of the issue of shares, except that Putnam will pay the cost of the preparation and printing of Prospectuses and Statements of Additional Information and shareholders' reports used by it and by others in the sale of Fund shares to the extent such cost is not paid by others). 10. INDEMNIFICATION OF FUND. Putnam agrees to indemnify and hold harmless the Fund and each person who has been, is, or may hereafter be a Trustee of the Fund against expenses reasonably incurred by any of them in connection with any claim or in connection with any action, suit or proceeding to which any of them may be a party, which arises out of or is alleged to arise out of any misrepresentation or omission to state a material fact, or out of any alleged misrepresentation or omission to state a material fact, on the part of Putnam or any agent or employee of Putnam or any other person for whose acts Putnam is responsible or is alleged to be responsible unless such misrepresentation or omission was made in reliance upon written information furnished by the Fund. Putnam also agrees likewise to indemnify and hold harmless the Fund and each such person in connection with any claim or in connection with any action, suit or proceeding which arises out of or is alleged to arise out of Putnam's (or an affiliate of Putnam's) failure to exercise reasonable care and diligence with respect to its services rendered in connection with investment, reinvestment, automatic withdrawal and other plans for shares. The term "expenses" includes amounts paid in satisfaction of judgments or in settlements which are made with Putnam's consent. The foregoing rights of indemnification shall be in addition to any other rights to which the Fund or a Trustee may be entitled as a matter of law. 11. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment. This Contract may be amended only if such amendment be approved either by action of the Trustees of the Fund or at a meeting of the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and by a majority of the Trustees of the Fund who are not interested persons of the Fund or of Putnam by vote cast in person at a meeting called for the purpose of voting on such approval. 12. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall take effect upon the date first above written and shall remain in full force and effect continuously (unless terminated automatically as set forth in Section 11) until terminated: (a) Either by the Fund or Putnam by not more than sixty (60) days' nor less than ten (10) days' written notice delivered or mailed by registered mail, postage prepaid, to the other party; or (b) If the continuance of this Contract after January 31, 1995 is not specifically approved at least annually by the Trustees of the Fund or the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and by a majority of the Trustees of the Fund who are not interested persons of the Fund or of Putnam by vote cast in person at a meeting called for the purpose of voting on such approval. Action by the Fund under (a) above may be taken either (i) by vote of its Trustees or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. The requirement under (b) above that continuance of this Contract be "specifically approved at least annually" shall be construed in a manner consistent with the Investment Company Act of 1940, as amended, and the Rules and Regulations thereunder. Termination of this Contract pursuant to this Section 12 shall be without the payment of any penalty. 13. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "interested person" and "assignment" shall have the meanings defined in the Investment Company Act of 1940, as amended, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act. EX-99.B8 8 CUSTODIAN CONTRACT CUSTODIAN AGREEMENT AGREEMENT made as of the 3rd day of May, 1991, as amended July 13, 1992, between each of the Putnam Funds listed in Schedule A, each of such Funds acting on its own behalf separately from all the other Funds and not jointly or jointly and severally with any of the other Funds (each of the Funds being hereinafter referred to as the "Fund"), and Putnam Fiduciary Trust Company (the "Custodian"). WHEREAS, the Custodian represents to the Fund that it is eligible to serve as a custodian for a management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and WHEREAS, the Fund wishes to appoint the Custodian as the Fund's custodian. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. APPOINTMENT OF CUSTODIAN. The Fund hereby employs and appoints the Custodian as custodian of its assets for the term and subject to the provisions of this Agreement. At the direction of the Custodian, the Fund agrees to deliver to the Sub-Custodians appointed pursuant to Section 2 below (the "Sub- Custodians") securities, funds and other property owned by it. The Custodian shall have no responsibility or liability for or on account of securities, funds or other property not so delivered to the Sub-Custodians. Upon request, the Fund shall deliver to the Custodian or to such Sub-Custodians as the Custodian may direct such proxies, powers of attorney or other instruments as may be reasonably necessary or desirable in connection with the performance by the Custodian or any Sub-Custodian of their respective obligations under this Agreement or any applicable Sub-Custodian Agreement. 2. APPOINTMENT OF SUB-CUSTODIANS. The Custodian may at any time and from time to time appoint, at its own cost and expense, as a Sub-Custodian for the Fund any bank or trust company which meets the requirements of the 1940 Act and the rules and regulations thereunder to act as a custodian, provided that the Fund shall have approved in writing any such bank or trust company and the Custodian gives prompt written notice to the Fund of any such appointment. The agreement between the Custodian and any Sub-Custodian shall be substantially in the form of the Sub- Custodian agreement attached hereto as Exhibit 1 (the "Sub- Custodian Agreement") unless otherwise approved by the Fund, provided, however, that the agreement between the Custodian and any Sub-Custodian appointed primarily for the purpose of holding foreign securities of the Fund shall be substantially in the form of the Sub-Custodian Agreement attached hereto as Exhibit 1(A) (the "Foreign Sub-Custodian Agreement"; the "Sub-Custodian Agreement" and the "Foreign Sub-Custodian Agreement" are herein referred to collectively and each individually as the "Sub- Custodian Agreement"). All Sub-Custodians shall be subject to the instructions of the Custodian and not the Fund. The Custodian may, at any time in its discretion, remove any bank or trust company which has been appointed as a Sub-Custodian but shall in such case promptly notify the Fund in writing of any such action. Securities, funds and other property of the Fund delivered pursuant to this Agreement shall be held exclusively by Sub-Custodians appointed pursuant to the provisions of this Section 2. The Sub-Custodians which the Fund has approved to date are set forth in Schedule B hereto. Schedule B shall be amended from time to time as Sub-Custodians are changed, added or deleted. The Fund shall be responsible for informing the Custodian sufficiently in advance of a proposed investment which is to be held at a location not listed on Schedule B, in order that there shall be sufficient time for the Custodian to put the appropriate arrangements in place with such Sub-Custodian pursuant to such Sub-Custodian Agreement. With respect to the securities, funds or other property held by a Sub-Custodian, the Custodian shall be liable to the Fund if and only to the extent that such Sub-Custodian is liable to the Custodian. The Custodian shall nevertheless be liable to the Fund for its own negligence in transmitting any instructions received by it from the Fund and for its own negligence in connection with the delivery of any securities, funds or other property of the Fund to any such Sub-Custodian. In the event that any Sub-Custodian appointed pursuant to the provisions of this Section 2 fails to perform any of its obligations under the terms and conditions of the applicable Sub- Custodian Agreement, the Custodian shall use its best efforts to cause such Sub-Custodian to perform such obligations. In the event that the Custodian is unable to cause such Sub-Custodian to perform fully its obligations thereunder, the Custodian shall forthwith terminate such Sub-Custodian and, if necessary or desirable, appoint another Sub-Custodian in accordance with the provisions of this Section 2. The Custodian may with the approval of the Fund commence any legal or equitable action which it believes is necessary or appropriate in connection with the failure by a Sub-Custodian to perform its obligations under the applicable Sub-Custodian Agreement. Provided the Custodian shall not have been negligent with respect to any such matter, such action shall be at the expense of the Fund. The Custodian shall keep the Fund fully informed regarding such action and the Fund may at any time upon notice to the Custodian elect to take responsibility for prosecuting such action. In such event the Fund shall have the right to enforce and shall be subrogated to the Custodian's rights against any such Sub-Custodian for loss or damage caused the Fund by such Sub-Custodian. At the written request of the Fund, the Custodian will terminate any Sub-Custodian appointed pursuant to the provisions of this Section 2 in accordance with the termination provisions of the applicable Sub-Custodian Agreement. The Custodian will not amend any Sub-Custodian Agreement in any material manner except upon the prior written approval of the Fund and shall in any case give prompt written notice to the Fund of any amendment to the Sub-Custodian Agreement. 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY SUB-CUSTODIANS. 3.1 HOLDING SECURITIES - The Custodian shall cause one or more Sub-Custodians to hold and, by book-entry or otherwise, identify as belonging to the Fund all non-cash property delivered to such Sub-Custodian. 3.2 DELIVERY OF SECURITIES - The Custodian shall cause Sub- Custodians holding securities of the Fund to release and deliver securities owned by the Fund held by the Sub-Custodian or in a Securities System account of the Sub-Custodian only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 3.2.1 Upon sale of such securities for the account of the Fund and receipt of payment therefor; PROVIDED, HOWEVER, that a Sub-Custodian may release and deliver securities prior to the receipt of payment therefor if (i) in the Sub-Custodian's judgment, (A) release and delivery prior to payment is required by the terms of the instrument evidencing the security or (B) release and delivery prior to payment is the prevailing method of settling securities transactions between institutional investors in the applicable market and (ii) release and delivery prior to payment is in accordance with generally accepted trade practice and with any applicable governmental regulations and the rules of Securities Systems or other securities depositories and clearing agencies in the applicable market. The Custodian agrees, upon request, to advise the Fund of all pending transactions in which release and delivery will be made prior to the receipt of payment therefor; 3.2.2 Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; 3.2.3 In the case of a sale effected through a Securities System, in accordance with the provisions of Section 3.12 hereof; 3.2.4 To the depository agent in connection with tender or other similar offers for portfolio securities of the Fund; provided that, in any such case, the cash or other consideration is thereafter to be delivered to the Sub-Custodian; 3.2.5 To the issuer thereof or its agent, when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Sub-Custodian; 3.2.6 To the issuer thereof, or its agent for transfer into the name of the Fund or into the name of any nominee or nominees of the Sub-Custodian or into the name or nominee name of any agent appointed pursuant to Section 3.11 or any other name permitted pursuant to Section 3.3; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Sub- Custodian; 3.2.7 Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Sub- Custodian's own negligence or willful misconduct; 3.2.8 For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Sub-Custodian; 3.2.9 In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Sub- Custodian; 3.2.10 For delivery in connection with any loans of securities made by the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities; except that in connection with any loan of securities held in a Securities System for which collateral is to credited to the Sub-Custodian's account in another Securities System, the Sub-Custodian will not be held liable or responsible for delivery of the securities prior to the receipt of such collateral. 3.2.11 For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Fund, but only against receipt of amounts borrowed; 3.2.12 Upon receipt of instructions from the transfer agent ("Transfer Agent") for the Fund, for delivery to such Transfer Agent or to the shareholders of the Fund in connection with distributions in kind, as may be described from time to time in the Fund's Declaration of Trust and currently effective registration statement, if any, in satisfaction of requests by Fund shareholders for repurchase or redemption; 3.2.13 For delivery to another Sub-Custodian of the Fund; and 3.2.14 For any other proper corporate purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Trustees or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Clerk or an Assistant Clerk, specifying the securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purposes to be proper corporate purposes, and naming the person or persons to whom delivery of such securities shall be made. 3.3 REGISTRATION OF SECURITIES. Securities of the Fund held by the Sub-Custodians hereunder (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Sub-Custodians or any 17f-5 Sub-Custodian or Foreign Depository (as each of those terms is defined in the Foreign Sub-Custodian Agreement, which nominee shall be assigned exclusively to the Fund, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 3.12. Notwithstanding the foregoing, a Sub-Custodian, agent, 17f-5 Sub-Custodian or Foreign Depository may hold securities of the Fund in a nominee name which is used for its other clients provided that such name is not used by the Sub- Custodian, agent, 17f-5 Sub-Custodian or Foreign Depository for its own securities and that securities of the Fund are, by book-entry or otherwise, at all times identified as belonging to the Fund and distinguished from other securities held for other clients using the same nominee name. In addition, and notwithstanding the foregoing, a Sub-Custodian or agent thereof or 17f-5 Sub-Custodian or Foreign Depository may hold securities of the Fund in its own name if such registration is the prevailing method in the applicable market by which custodians register securities of institutional clients and provided that securities of the Fund are, by book-entry or otherwise, at all times identified as belonging to the Fund and distinguished from other securities held for other clients or for the Sub-Custodian or agent thereof or 17f-5 Sub- Custodian or Foreign Depository. All securities accepted by a Sub-Custodian under the terms of a Sub-Custodian Agreement shall be in good delivery form. 3.4 BANK ACCOUNTS. The Custodian shall cause one or more Sub-Custodians to open and maintain a separate bank account or accounts in the name of the Fund or the Custodian, subject only to draft or order by the Sub-Custodian acting pursuant to the terms of a Sub-Custodian Contract or by the Custodian acting pursuant to this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Sub-Custodian for the Fund may be deposited by it to its credit as sub-custodian or to the Custodian's credit as custodian in the Banking Department of the Sub-Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall be approved by vote of a majority of the Trustees of the Fund. Such funds shall be deposited by the Sub-Custodian or the Custodian in its capacity as sub-custodian or custodian, respectively, and shall be withdrawable by the Sub-Custodian or the Custodian only in that capacity. The Sub-Custodian shall be liable for actual losses incurred by the Fund attributable to any failure on the part of the Sub-Custodian to report accurate cash availability information with respect to the Fund's or the Custodian's bank accounts maintained by the Sub-Custodian or any of its agents. 3.5 PAYMENTS FOR SHARES. The Custodian shall cause one or more Sub-Custodians to deposit into the Fund's account amounts received from the Transfer Agent of the Fund for shares of the Fund issued by the Fund and sold by its distributor. The Custodian will provide timely notification to the Fund of any receipt by the Sub-Custodian from the Transfer Agent of payments for shares of the Fund. 3.6 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund and the Custodian, the Custodian shall cause one or more Sub-Custodians, upon the receipt of Proper Instructions, to make federal funds available to the Fund as of specified times agreed upon from time to time by the Fund and the Custodian with respect to amounts received by the Sub-Custodians for the purchase of shares of the Fund. 3.7 COLLECTION OF INCOME. The Custodian shall cause one or more Sub-Custodians to collect on a timely basis all income and other payments with respect to registered securities held hereunder, including securities held in a Securities System, to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer securities if, on the date of payment by the issuer, such securities are held by the Sub-Custodian or agent thereof and shall credit such income, as collected, to the Fund's account. Without limiting the generality of the foregoing, the Custodian shall cause the Sub-Custodian to detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held under the applicable Sub-Custodian Agreement. Arranging for the collection of income due the Fund on securities loaned pursuant to the provisions of Section 3.2.10 shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Sub- Custodian of the income to which the Fund is properly entitled. 3.8 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall cause one or more Sub-Custodians to pay out monies of the Fund in the following cases only: 3.8.1 Upon the purchase of securities for the account of the Fund but only (a) against the delivery of such securities to the Sub- Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Sub-Custodian as its agent for this purpose) or any 17f-5 Sub-Custodian or any Foreign Depository registered in the name of the Fund or in the name of a nominee of the Sub-Custodian referred to in Section 3.3 hereof or in proper form for transfer; PROVIDED, HOWEVER, that the Sub-Custodian may cause monies of the Fund to be paid out prior to delivery of such securities if (i) in the Sub-Custodian's judgment, (A) payment prior to delivery is required by the terms of the instrument evidencing the security or (B) payment prior to delivery is the prevailing method of settling securities transactions between institutional investors in the applicable market and (ii) payment prior to delivery is in accordance with generally accepted trade practice and with any applicable governmental regulations and the rules of Securities Systems or other securities depositories and clearing agencies in the applicable market; the Custodian agrees, upon request, to advise the Fund of all pending transactions in which payment will be made prior to the receipt of securities in accordance with the provision to the foregoing sentence; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 3.13 hereof; or (c)(i) in the case of a repurchase agreement entered into between the Fund and the Sub-Custodian, another bank, or a broker-dealer against delivery of the securities either in certificate form or through an entry crediting the Sub- Custodian's account at the Federal Reserve Bank with such securities or (ii) in the case of a repurchase agreement entered into between the Fund and the Sub-Custodian, against delivery of a receipt evidencing purchase by the Fund of Securities owned by the Sub-Custodian along with written evidence of the agreement by the Sub- Custodian to repurchase such securities from the Fund; or (d) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign, which transfer may be effected prior to receipt of a confirmation of the deposit from the applicable bank or a financial intermediary; 3.8.2 In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 3.2 hereof; 3.8.3 For the redemption or repurchase of Shares issued by the Fund as set forth in Section 3.10 hereof; 3.8.4 For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, transfer agent and legal fees, including the Custodian's fee; and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 3.8.5 For the payment of any dividends or other distributions declared to shareholders of the Fund; 3.8.6 For transfer to another Sub-Custodian of the Fund; 3.8.7 For any other proper purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Trustees or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Clerk or an Assistant Clerk, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payments is to be made. 3.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. Except as otherwise provided in this Agreement, in any and every case where payment for purchase of securities for the account of the Fund is made by a Sub-Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund to so pay in advance, the Custodian shall cause the Sub-Custodian to be absolutely liable to the Fund in the event any loss results to the Fund from the payment by the Sub-Custodian in advance of delivery of such securities. 3.10 PAYMENTS FOR REPURCHASE OR REDEMPTIONS OF SHARES OF THE FUND. From such funds as may be available, the Custodian shall, upon receipt Proper Instructions, cause one or more Sub- Custodians to make funds available for payment to a shareholder who has delivered to the Transfer Agent a request for redemption or repurchase of shares of the Fund. In connection with the redemption or repurchase of shares of the Fund, the Custodian is authorized, upon receipt of Proper Instructions, to cause one or more Sub-Custodian, to wire funds to or through a commercial bank designated by the redeeming shareholder. In connection with the redemption or repurchase of Shares of the Fund, the Custodian, upon receipt of Proper Instructions, shall cause one or more Sub- Custodians to honor checks drawn on the Sub-Custodian by a shareholder when presented to the Sub-Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time among the Fund, the Custodian and the Sub- Custodian. 3.11 APPOINTMENT OF AGENTS. The Custodian may permit any Sub-Custodian at any time or times in its discretion to appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Section 3 as the Sub- Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian or any Sub-Custodian of its responsibilities or liabilities hereunder and provided that any such agent shall have been approved by vote of the Trustees of the Fund. The Custodian may also permit any Sub-Custodian to which foreign securities of the Fund have been delivered to direct such securities to be held by 17f-5 Sub-Custodians and to use the facilities of Foreign Depositories, as those terms are defined in the Foreign Sub- Custodian Agreement, in accordance with the terms of the Foreign Sub-Custodian Agreement. The agents which the Fund and the Custodian have approved to date are set forth in Schedule B hereto. Schedule B shall be amended from time to time as agents are changed, added or deleted. The Fund shall be responsible for informing the Custodian, and the Custodian shall be responsible for informing the appropriate Sub-Custodian, sufficiently in advance of a proposed investment which is to be held at a location not listed on Schedule B, in order that there shall be sufficient time for the Sub-Custodian to complete the appropriate contractual and technical arrangements with such agent. Any Sub-Custodian Agreement shall provide that the engagement by the Sub-Custodian of one or more agents shall not relieve the Sub-Custodian of its responsibilities or liabilities thereunder. 3.12 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may permit any Sub-Custodian to deposit and/or maintain securities owned by the Fund in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "Securities System" in accordance with applicable rules and regulations (including Rule 17f-4 of the 1940 Act) and subject to the following provisions: 3.12.1 The Sub-Custodian may, either directly or through one or more agents, keep securities of the Fund in a Securities System provided that such securities are represented in an account ("Account") of the Sub-Custodian in the Securities System which shall not include any assets of the Sub-Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3.12.2 The records of the Sub-Custodian with respect to securities of the Fund which are maintained in a Securities System shall identify by book-entry those securities belonging to the Fund; 3.12.3 The Sub-Custodian shall pay for securities purchased for the account of the Fund upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Sub-Custodian to reflect such payment and transfer for the account of the Fund. The Sub-Custodian shall transfer securities sold for the account of the Fund upon (i) receipt of advice from the Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Sub-Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the Securities System of transfers of securities for the account of the Fund shall identify the Fund, be maintained for the Fund by the Sub-Custodian or such an agent and be provided to the Fund at its request. The Sub-Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Fund on the next business day; 3.12.4 The Sub-Custodian shall provide the Fund with any report obtained by the Sub- Custodian on the Securities System's accounting system, internal accounting controls and procedures for safeguarding securities deposited in the Securities System; 3.12.5 The Sub-Custodian shall utilize only such Securities Systems as are approved by the Board of Trustees of the Fund, and included on a list maintained by the Custodian; 3.12.6 Anything to the contrary in this Agreement notwithstanding, the Sub-Custodian shall be liable to the Fund for any loss or damage to the Fund resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Sub-Custodian or any of its agents or of any of its or their employees or from failure of the Sub-Custodian or any such agent to enforce effectively such rights as it may have against the Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Sub- Custodian with respect to any claim against the Securities System or any other person which the Sub-Custodian may have as a consequence of any such loss or damage if and to the extent that the Fund has not been made whole for any such loss or damage. 3.12A DEPOSITARY RECEIPTS. Only upon receipt of Proper Instructions, the Sub-Custodian shall instruct a 17f-5 Sub- Custodian or an agent of the Sub-Custodian appointed pursuant to the applicable Foreign Sub-Custodian Agreement (an "Agent") to surrender securities to the depositary used by an issuer of American Depositary Receipts or International Depositary Receipts (hereinafter collectively referred to as "ADRs") for such securities against a written receipt therefor adequately describing such securities and written evidence satisfactory to the 17f-5 Sub-Custodian or Agent that the depositary has acknowledged receipt of instructions to issue with respect to such securities ADRs in the name of the Sub-Custodian, or a nominee of the Sub-Custodian, for delivery to the Sub-Custodian. Only upon receipt of Proper Instructions, the Sub-Custodian shall surrender ADRs to the issuer thereof against a written receipt therefor adequately describing the ADRs surrendered and written evidence satisfactory to the Sub-Custodian that the issuer of the ADRs has acknowledged receipt of instructions to cause its depository to deliver the securities underlying such ADRs to a 17f-5 Sub-Custodian or an Agent. 3.12BFOREIGN EXCHANGE TRANSACTIONS AND FUTURES CONTRACTS. Only upon receipt of Proper Instructions, the Sub- Custodian shall enter into foreign exchange contracts or options to purchase and sell foreign currencies for spot and future delivery on behalf and for the account of the Fund or shall enter into futures contracts or options on futures contracts. Such transactions may be undertaken by the Sub-Custodian with such banking institutions, including the Sub-Custodian and 17f-5 Sub- Custodian(s) appointed pursuant to the applicable Foreign Sub- Custodian Agreement, as principals, as approved and authorized by the Fund. Foreign exchange contracts, futures contracts and options, other than those executed with the Sub-Custodian, shall for all purposes of this Agreement be deemed to be portfolio securities of the Fund. 3.12COPTION TRANSACTIONS. Only upon receipt of Proper Instructions, the Sub-Custodian shall enter into option transactions in accordance with the provisions of any agreement among the Fund, the Custodian and/or the Sub-Custodian and a broker-dealer. 3.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall cause one or more Sub-Custodians as may be appropriate to execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to securities of the Fund held by the Sub-Custodian and in connection with transfers of securities. 3.14 PROXIES. The Custodian shall, with respect to the securities held by the Sub-Custodians, cause to be promptly executed by the registered holder of such securities, if the securities are registered other than in the name of the Fund or a nominee of the fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities. 3.15 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. The Custodian shall cause the Sub-Custodians to transmit promptly to the Custodian, and the Custodian shall transmit promptly to the Fund, all written information (including, without limitation, pendency of calls and maturities of securities and expirations of rights in connection therewith) received by the Sub-Custodian from issuers of the securities being held for the account of the Fund. With respect to tender or exchange offers, the Custodian shall cause the Sub-Custodian to transmit promptly to the Fund, all written information received by the Sub-Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian of the action the Fund desires such Sub-Custodian to take, provided, however, neither the Custodian nor the Sub- Custodian shall be liable to the Fund for the failure to take any such action unless such instructions are received by the Custodian at least four business days prior to the date on which the Sub-Custodian is to take such action or, in the case of foreign securities, such longer period as shall have been agreed upon in writing by the Custodian and the Sub-Custodian. 3.16 PROPER INSTRUCTIONS. Proper Instructions as used throughout this Agreement means a writing signed or initialed by one or more person or persons who are authorized by the Trustees of the Fund and the Custodian. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian or Sub-Custodian, as the case may be, reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. All oral instructions shall be confirmed in writing. Proper Instructions also include communications effected directly between electro-mechanical or electronic devices provided that the Trustees have approved such procedures. Notwithstanding the foregoing, no Trustee, officer, employee or agent of the Fund shall be permitted access to any securities or similar investments of the Fund deposited with any Sub-Custodian or any agent of any Sub-Custodian for any reason except in accordance with the provisions of Rule 17f-2 under the 1940 Act. 3.17 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in its discretion, and may permit one or more Sub- Custodians in their discretion, without express authority from the Fund to: 3.17.1 make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement, or in the case of a Sub- Custodian, under the applicable Sub- Custodian Agreement, provided that all such payments shall be accounted for to the Fund; 3.17.2 surrender securities in temporary form for securities in definitive form; 3.17.3 endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 3.17.4 in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund except as otherwise directed by the Trustees of the Fund. 3.18 EVIDENCE OF AUTHORITY. The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. 3.19 INVESTMENT LIMITATIONS. In performing its duties generally, and more particularly in connection with the purchase, sale and exchange of securities made by or for the Fund, the Custodian may assume, unless and until notified in writing to the contrary, that Proper Instructions received by it are not in conflict with or in any way contrary to any provisions of the Fund's Declaration of Trust or By-Laws (or comparable documents) or votes or proceedings of the shareholders or Trustees of the Fund. The Custodian shall in no event be liable to the Fund and shall be indemnified by the Fund for any violation of any investment limitations to which the Fund is subject or other limitations with respect to the Fund's powers to expend funds, encumber securities, borrow or take similar actions affecting its portfolio. 4. PERFORMANCE STANDARDS. The Custodian shall use its best efforts to perform its duties hereunder in accordance with the standards set forth in Schedule C hereto. Schedule C may be amended from time to time as agreed to by the Custodian and the Trustees of the Fund. 5. RECORDS. The Custodian shall create and maintain all records relating to the Custodian's activities and obligations under this Agreement and cause all Sub-Custodians to create and maintain all records relating to the Sub-Custodian's activities and obligations under the appropriate Sub-Custodian Agreement in such manner as will meet the obligations of the Fund under the 1940 Act, with particular attention to Sections 17(f) and 31 thereof and Rules 17f-2, 31a-1 and 31a-2 thereunder, applicable federal and state tax laws, and any other law or administrative rules or procedures which may be applicable to the Fund. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian or during the regular business hours of the Sub-Custodian, as the case may be, be open for inspection by duly authorized officers, employees or agents of the Custodian and Fund and employees and agents of the Securities and Exchange Commission. At the Fund's request, the Custodian shall supply the Fund and cause one or more Sub-Custodians to supply the Custodian with a tabulation of securities owned by the Fund and held under this Agreement. When requested to do so by the Fund and for such compensation as shall be agreed upon, the Custodian shall include and cause one or more Sub-Custodians to include certificate numbers in such tabulations. 6. OPINION AND REPORTS OF FUND'S INDEPENDENT ACCOUNTANTS. The Custodian shall take all reasonable actions, as the Fund may from time to time request, to furnish such information with respect to its activities hereunder as the Fund's independent public accountants may request in connection with the accountant's verification of the Fund's securities and similar investments as required by Rule 17f-2 under the 1940 Act, the preparation of the Fund's registration statement and amendments thereto, the Fund's reports to the Securities and Exchange Commission, and with respect to any other requirements of such Commission. The Custodian shall also direct any Sub-Custodian to take all reasonable actions, as the Fund may from time to time request, to furnish such information with respect to its activities under the applicable Sub-Custodian Agreement as the Fund's independent public accountant may request in connection with the accountant's verification of the Fund's securities and similar investments as required by Rule 17f-2 under the 1940 Act, the preparation of the Fund's registration statement and amendments thereto, the Fund's reports to the Securities and Exchange Commission, and with respect to any other requirements of such Commission. 7. REPORTS OF CUSTODIAN'S AND SUB-CUSTODIANS' INDEPENDENT ACCOUNTANTS. The Custodian shall provide the Fund, at such times as the Fund may reasonably require, with reports by its independent public accountant on its accounting system, internal accounting controls and procedures for safeguarding securities, including securities deposited and/or maintained in Securities Systems, relating to services provided by the Custodian under this Agreement. The Custodian shall also cause one or more of the Sub-Custodians to provide the Fund, at such time as the Fund may reasonably require, with reports by independent public accountants on their accounting systems, internal accounting controls and procedures for safeguarding securities, including securities deposited and/or maintained in Securities Systems, relating to services provided by those Sub-Custodians under their respective Sub-Custody Agreements. Such reports, which shall be of sufficient scope and in sufficient detail as may reasonably be required by the Fund, shall provide reasonable assurance that any material inadequacies would be disclosed by such examinations, and, if there is no such inadequacies, shall so state. 8. COMPENSATION. The Custodian shall be entitled to reasonable compensation for its services and expenses as custodian, as agreed upon from time to time between the Fund and the Custodian. Such expenses shall not include, however, the fees paid by the Custodian to any Sub-Custodian. 9. RESPONSIBILITY OF CUSTODIAN. The Custodian shall exercise reasonable care and diligence in carrying out the provisions of this Agreement and shall not be liable to the Fund for any action taken or omitted by it in good faith without negligence. So long as and to the extent that it is in the exercise of reasonable care, neither the Custodian nor any Sub-Custodian shall be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and, if in writing, reasonably believed by it to be signed by the proper party or parties. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. Notwithstanding the foregoing, the responsibility of the Custodian or a Sub-Custodian with respect to redemptions effected by check shall be in accordance with a separate Agreement entered into between the Custodian and the Fund. It is also understood that the Custodian shall not be liable for any loss resulting from a Sovereign Risk. A "Sovereign Risk" shall mean nationalization, expropriation, devaluation, revaluation, confiscation, seizure, cancellation, destruction or similar action by any governmental authority, de facto or de jure; or enactment, promulgation, imposition or enforcement by any such governmental authority of currency restrictions, exchange controls, taxes, levies or other charges affecting the Fund's property; or acts of war, terrorism, insurrection or revolution; or any other similar act or event beyond the Custodian's control. If the Fund requires the Custodian which in turn may require a Sub-Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian or the Sub-Custodian result in the Custodian or its nominee or a Sub-Custodian or its nominee being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian or the Custodian requiring any Sub-Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. The Fund agrees to indemnify and hold harmless the Custodian and its nominee from and against all taxes, charges, expenses, assessments, claims and liabilities (including counsel fees) incurred or assessed against it or its nominee or any Sub- Custodian or its nominee in connection with the performance of this Agreement, or any Sub-Custodian Agreement except, as to the Custodian, such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, and as to a Sub-Custodian, such as may arise from such Sub- Custodian's or its nominee's own negligent action, negligent failure to act or willful misconduct. The negligent action, negligent failure to act or willful misconduct of the Custodian shall not diminish the Fund's obligation to indemnify the Custodian in the amount, but only in the amount, of any indemnity required to be paid to a Sub-Custodian under its Sub-Custodian Agreement. The Custodian may assign this indemnity from the Fund directly to, and for the benefit of, any Sub-Custodian. The Custodian is authorized, and may authorize any Sub-Custodian, to charge any account of the Fund for such items and such fees. To secure any such authorized charges and any advances of cash or securities made by the Custodian or any Sub-Custodian to or for the benefit of the Fund for any purpose which results in the Fund incurring an overdraft at the end of any business day or for extraordinary or emergency purposes during any business day, the Fund (except a Fund specified in Schedule D to this Agreement) hereby grants to the Custodian a security interest in and pledges to the Custodian securities up to a maximum of 10% of the value of the Fund's net assets for the purpose of securing payment of any such advances and hereby authorizes the Custodian on behalf of the Fund to grant to any Sub-Custodian a security interest in and pledge of securities held for the Fund (including those which may be held in a Securities System) up to a maximum of 10% of the value of the net assets held by such Sub-Custodian. The specific securities subject to such security interest may be designated in writing from time to time by the Fund or its investment adviser. In the absence of any designation of securities subject to such security interest, the Custodian or the Sub-Custodian, as the case may be, may designate securities held by it. Should the Fund fail to repay promptly any authorized charges or advances of cash or securities, the Custodian or the Sub-Custodian shall be entitled to use such available cash and to dispose of pledged securities and property as is necessary to repay any such authorized charges or advances and to exercise its rights as a secured party under the U.C.C. The Fund agrees that a Sub- Custodian shall have the right to proceed directly against the Fund and not solely as subrogee to the Custodian with respect to any indemnity hereunder assigned to a Sub-Custodian, and in that regard, the Fund agrees that it shall not assert against any Sub- Custodian proceeding against it any defense or right of set-off the Fund may have against the Custodian arising out of the negligent action, negligent failure to act or willful misconduct of the Custodian, and hereby waives all rights it may have to object to the right of a Sub-Custodian to maintain an action against it. 10. SUCCESSOR CUSTODIAN. If a successor custodian shall be appointed by the Trustees of the Fund, the Custodian shall, upon termination, cause to be delivered to such successor custodian, duly endorsed and in the form for transfer, all securities, funds and other properties then held by the Sub-Custodians and all instruments held by the Sub-Custodians relative thereto and cause the transfer to an account of the successor custodian all of the Fund's securities held in any Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Trustees of the Fund, cause to be delivered at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote. In the event that no written order designating a successor custodian or certified copy of a vote of the Trustees shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which meets the requirements of the 1940 Act and the rules and regulations thereunder, such securities, funds and other properties. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement. In the event that such securities, funds and other properties remain in the possession of the Custodian or any Sub- Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Trustees to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Sub-Custodians retain possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect. 11. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT. This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; provided either party may at any time immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the other party or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. No provision of this Agreement may be amended or terminated except by a statement in writing signed by the party against which enforcement of the amendment or termination is sought. Upon termination of the Agreement, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian and through the Custodian any Sub-Custodian for its costs, expenses and disbursements. 12. INTERPRETATION. This Agreement constitutes the entire understanding and agreement of the parties hereto with respect to the subject matter hereof. In connection with the operation of this Agreement, the Custodian and the Fund may from time to time agree in writing on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. 13. GOVERNING LAW. This instrument is executed and delivered in The Commonwealth of Massachusetts and shall be governed by and construed according to the internal laws of said Commonwealth, without regard to principles of conflicts of law. 14. NOTICES. Notices and other writings delivered or mailed postage prepaid to the Fund addressed to the Fund attention: John Hughes, or to such other person or address as the Fund may have designated to the Custodian in writing, or to the Custodian at One Post Office Square, Boston, Massachusetts 02109 attention: George Crane, or to such other address as the Custodian may have designated to the Fund in writing, shall be deemed to have been properly delivered or given hereunder to the respective addressee. 15. BINDING OBLIGATION. This Agreement shall be binding on and shall inure to the benefit of the Fund and the Custodian and their respective successors and assigns, provided that neither party hereto may assign this Agreement or any of its rights or obligations hereunder without the prior written consent of the other party. 16. DECLARATION OF TRUST. A copy of the Declaration of Trust of each of the Funds is on file with the Secretary of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Trustees of each of the Funds as Trustees and not individually and that the obligations of this instrument are not binding on any of the Trustees or officers or shareholders individually, but are binding only on the assets and property of each Fund with respect to its obligations hereunder. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf as of the day and year first above written. THE PUTNAM FUNDS LISTED IN SCHEDULE A By ---------------------------- Vice President and Treasurer PUTNAM FIDUCIARY TRUST COMPANY By ---------------------------- President Putnam Investments, Inc. ("Putnam"), the sole owner of the Custodian, agrees that Putnam shall be the primary obligor with respect to compensation due the Sub-Custodians pursuant to the Sub-Custodian Agreements in connection with the Sub-Custodians' performance of their responsibilities thereunder and agrees to take all actions necessary and appropriate to assure that the Sub-Custodians shall be compensated in the amounts and on the schedules agreed to by the Custodian and the Sub-Custodians pursuant to those Agreements. PUTNAM INVESTMENTS, INC. By ------------------------------ EXHIBIT 1 MASTER SUB-CUSTODIAN AGREEMENT AGREEMENT made this day of , 199 , between Putnam Fiduciary Trust Company, a Massachusetts-chartered trust company (the "Custodian"), and , a (the "Sub-Custodian"). WHEREAS, the Sub-Custodian represents to the Custodian that it is eligible to serve as a custodian for a management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and WHEREAS, the Custodian has entered into a Custodian Agreement between it and each of the Putnam Funds listed in Schedule A, each of such Funds acting on its own behalf separately from all the other Funds and not jointly or jointly and severally with any of the other Funds (each of the Funds being hereinafter referred to as the "Fund"), and WHEREAS, the Custodian and the Fund desire to utilize sub- custodians for the purpose of holding cash and securities of the Fund, and WHEREAS, the Custodian wishes to appoint the Sub-Custodian as the Fund's Sub-Custodian, NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. APPOINTMENT OF CUSTODIAN. The Custodian hereby employs and appoints the Sub-Custodian as a Sub-Custodian for the Fund for the term and subject to the provisions of this Agreement. Upon request, the Custodian shall deliver to the Sub-Custodian such proxies, powers of attorney or other instruments as may be reasonably necessary or desirable in connection with the performance by the Sub-Custodian of its obligations under this Agreement on behalf of the Fund. 2. DUTIES OF THE SUB-CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY IT. The Custodian may from time to time deposit securities or cash owned by the Fund with the Sub-Custodian. The Sub-Custodian shall have no responsibility or liability for or on account of securities, funds or other property of the Fund not so delivered to it. The Sub-Custodian shall hold and dispose of the securities hereafter held by or deposited with the Sub-Custodian as follows: 2.1 HOLDING SECURITIES. The Sub-Custodian shall hold and physically segregate for the account of the Fund all non-cash property, including all securities owned by the Funds, other than securities which are maintained pursuant to Section 2.13 in a Securities System. All such securities are to be held or disposed of for, and subject at all times to the instructions of, the Custodian pursuant to the terms of this Agreement. The Sub- Custodian shall maintain adequate records identifying the securities as being held by it as Sub-Custodian of the Fund. 2.2 DELIVERY OF SECURITIES. The Sub-Custodian shall release and deliver securities of the Fund held by it hereunder (or in a Securities System account of the Sub-Custodian) only upon receipt of Proper Instructions (as defined in Section 2.17), which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Fund and receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; 3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.13 hereof; 4) To the depository agent in connection with tender or other similar offers for portfolio securities of the Fund; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Sub-Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Sub-Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.12; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Sub-Custodian; 7) Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that, in any such case, the Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Sub-Custodian's own negligence or willful misconduct; 8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Sub-Custodian; 9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Sub-Custodian; 10) For delivery in connection with any loans of securities made by the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Sub-Custodian, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities; 11) For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Fund, but only against receipt of amounts borrowed; 12) Upon receipt of instructions from the transfer agent for the Fund (the "Transfer Agent"), for delivery to such Transfer Agent or to the shareholders of the Fund in connection with distributions in kind, as may be described from time to time in the Fund's Declaration of Trust and currently effective registration statement, if any, in satisfaction of requests by shareholders for repurchase or redemption; 13) For delivery to another Sub-Custodian of the Fund; and 14) For any other proper purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Trustees or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Clerk or an Assistant Clerk, specifying the securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purposes to be proper corporate purposes, and naming the person or persons to whom delivery of such securities is to be made. 2.3 REGISTRATION OF SECURITIES. Securities of the Fund held by the Sub-Custodian hereunder (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Sub- Custodian, which nominee shall be assigned exclusively to the Fund, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.12. Notwithstanding the foregoing, a Sub- Custodian or agent thereof may hold securities of the Fund in a nominee name which is used for its other clients provided such name is not used by the Sub-Custodian or agent for its own securities and that securities of the Fund are physically segregated at all times from other securities held for other clients using the same nominee name. All securities accepted by the Sub-Custodian under the terms of this Agreement shall be in "street name" or other good delivery form. 2.4 BANK ACCOUNTS. The Sub-Custodian shall open and maintain a separate bank account or accounts in the name of the Fund, subject only to draft or order by the Sub-Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received for the account of the Funds, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act. Funds held by the Sub- Custodian for the Fund shall be deposited by it to its credit as Sub-Custodian of the Fund in the Banking Department of the Sub- Custodian or other banks. Such funds shall be deposited by the Sub-Custodian in its capacity as Sub-Custodian and shall be withdrawable by the Sub-Custodian only in that capacity. The Sub-Custodian shall be liable for losses incurred by the Fund attributable to any failure on the part of the Sub-Custodian to report accurate cash availability information with respect to the Fund's bank accounts maintained by the Sub-Custodian or any of its agents, provided that such liability shall be determined solely on a cost-of-funds basis. 2.5 PAYMENTS FOR SHARES. The Sub-Custodian shall receive from any distributor of the Fund's shares or from the Transfer Agent of the Fund and deposit into the Fund's account such payments as are received for shares of the Fund issued or sold from time to time by the Fund. The Sub-Custodian will provide timely notification to the Custodian, and the Transfer Agent of any receipt by it of payments for shares of the Fund. 2.6 INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Custodian and the Sub-Custodian, the Sub-Custodian shall, upon the receipt of Proper Instructions, 1) invest in such instruments as may be set forth in such instructions on the same day as received all federal funds received after a time agreed upon between the Sub-Custodian and the Custodian; and 2) make federal funds available to the Fund as of specified times agreed upon from time to time by the Custodian and the Sub-Custodian in the amount of checks, when cleared within the Federal Reserve System, received in payment for shares of the Fund which are deposited into the Fund's account or accounts. 2.7 COLLECTION OF INCOME. The Sub-Custodian shall collect on a timely basis all income and other payments with respect to registered securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer securities if, on the date of payment by the issuer, such securities are held hereunder and shall credit such income, as collected, to the Fund's account. Without limiting the generality of the foregoing, the Sub- Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Arranging for the collection of income due the Fund on securities loaned pursuant to the provisions of Section 2.2(10) shall be the responsibility of the Custodian. The Sub- Custodian will have no duty or responsibility in connection therewith, other than to provide the Custodian with such information or data as may be necessary to assist the Custodian in arranging for the timely delivery to the Sub-Custodian of the income to which the Fund is properly entitled. 2.8 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Sub-Custodian shall cause monies of a Fund to be paid out in the following cases only: 1) Upon the purchase of securities for the account of the Fund but only (a) against the delivery of such securities to the Sub-Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act, as amended, to act as a custodian and has been designated by the Sub-Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.13 hereof; or (c) in the case of repurchase agreements entered into between the Fund and the Sub-Custodian, or another bank, (i) against delivery of the securities either in certificate form or through an entry crediting the Sub- Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Fund of securities owned by the Sub-Custodian along with written evidence of the agreement by the Sub-Custodian to repurchase such securities from the Fund; 2) In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 2.2 hereof; 3) For the redemption or repurchase of shares issued by the Fund as set forth in Section 2.10 hereof; 4) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, custodian and Sub-Custodian, transfer agent and legal fees, including the Custodian's fee; and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 5) For the payment of any dividends declared pursuant to the governing documents of the Fund; 6) For transfer to another Sub-Custodian of the Fund; and 7) For any other proper purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Trustees or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Clerk or an Assistant Clerk, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made. 2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In any and every case where payment for purchase of securities for the account of a Fund is made by the Sub-Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Custodian to so pay in advance, the Sub-Custodian shall be absolutely liable to the Fund and the Custodian in the event any loss results to the Fund or the Custodian from the failure of the Sub-Custodian to make such payment against delivery of such securities, except that in the case of repurchase agreements entered into by the Fund with a bank which is a member of the Federal Reserve System, the Sub-Custodian may transfer funds to the account of such bank prior to the receipt of written evidence that the securities subject to such a repurchase agreement have been transferred by book-entry into a segregated non-proprietary account of the Sub-Custodian maintained with any Federal Reserve Bank or of the safe-keeping receipt, provided that such securities have in fact been so transferred by book-entry. 2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND. From such funds as may be available for the purpose but subject to the limitations of the Declaration of Trust and By-Laws and any applicable votes of the Trustees of the Fund pursuant thereto, the Sub-Custodian shall, upon receipt of instructions from the Custodian, make funds available for payment to shareholders of the Fund who have delivered to the Transfer Agent a request for redemption or repurchase of their shares. In connection with the redemption or repurchase of shares of the Fund, the Sub-Custodian, upon receipt of Proper Instructions, is authorized to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of shares of the Fund, the Sub- Custodian, upon receipt of Proper Instructions, shall honor checks drawn on the Sub-Custodian by a shareholder, when presented to the Sub-Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time among the Fund, the Custodian and the Sub-Custodian. 2.11 VARIANCES. The Sub-Custodian may accept securities or cash delivered in settlement of trades notwithstanding variances between the amount of securities or cash so delivered and the amount specified in the instructions furnished to it by the Custodian, provided that the variance in any particular transaction does not exceed (i) $25 in the case of transactions of $1,000,000 or less, and (ii) $50 in the case of transactions exceeding $1,000,000. The Sub-Custodian shall maintain a record of any such variances and notify the Custodian of such variances in periodic transaction reports submitted to the Custodian. The Sub-Custodian will not advise any party with whom the Fund effects securities transactions of the existence of these variance provisions without the consent of the Fund and the Custodian. 2.12 APPOINTMENT OF AGENTS. Without limiting its own responsibility for its obligations assumed hereunder, the Sub- Custodian may at any time and from time to time engage, at its own cost and expense, as an agent to act for the Fund on the Sub- Custodian's behalf with respect to any such obligations any bank or trust company which meets the requirements of the 1940 Act, and the rules and regulations thereunder, to perform services delegated to the Sub-Custodian hereunder, provided that the Fund shall have approved in writing any such bank or trust company and the Sub-Custodian shall give prompt written notice to the Custodian and the Fund of any such engagement. All agents of the Sub-Custodian shall be subject to the instructions of the Sub- Custodian and not the Custodian. The Sub-Custodian may, at any time in its discretion, and shall at the Custodian's direction, remove any bank or trust company which has been appointed as an agent, and shall in either case promptly notify the Custodian and the Fund in writing of the completion of any such action. The agents which the Fund has approved to date are set forth in Schedule B hereto. Schedule B shall be amended from time to time as approved agents are changed, added or deleted. The Custodian shall be responsible for informing the Sub-Custodian sufficiently in advance of a proposed investment which is to be held at a location not listed on Schedule B, in order that there shall be sufficient time for the Fund to give the approval required by the preceding paragraph and for the Sub-Custodian to complete the appropriate contractual and technical arrangements with such agent. The engagement by the Sub-Custodian of one or more agents to carry out such of the provisions of this Section 2 shall not relieve the Sub-Custodian of its responsibilities or liabilities hereunder. 2.13 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Sub-Custodian may deposit and/or maintain securities owned by the Fund in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury (collectively referred to herein as "Securities System") in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations (including Rule 17f-4 of the 1940 Act), and subject to the following provisions: 1) The Sub-Custodian may keep securities of the Fund in a Securities System provided that such securities are represented in an account ("Account") of the Sub-Custodian in the Securities System which shall not include any assets other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Sub-Custodian with respect to securities of the Fund which are maintained in a Securities System shall identify by book-entry those securities belonging to the Fund; 3) The Sub-Custodian shall pay for securities purchased for the account of the Fund upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Sub-Custodian to reflect such payment and transfer for the account of the Fund. The Sub-Custodian shall transfer securities sold for the account of the Fund upon (a) receipt of advice from the Securities System that payment for such securities has been transferred to the Account, and (b) the making of an entry on the records of the Sub-Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the Securities System of transfers of securities for the account of the Fund shall identify the Fund, be maintained for the Fund by the Sub-Custodian and be provided to the Fund or the Custodian at the Custodian's request. The Sub- Custodian shall furnish the Custodian confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Custodian copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Fund on the next business day; 4) The Sub-Custodian shall provide the Custodian with any report obtained by the Sub-Custodian on the Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the Securities System; 5) The Sub-Custodian shall have received the initial or annual certificate, as the case may be, required by Section 2.10 hereof; 6) Anything to the contrary in this Agreement notwithstanding, the Sub-Custodian shall be liable to the Fund and the Custodian for any loss or damage to the Fund or the Custodian resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Sub-Custodian or any of its agents or of any of its or their employees or from failure of the Sub-Custodian or any such agent to enforce effectively such rights as it may have against the Securities System; at the election of the Custodian, it shall be entitled to be subrogated to the rights of the Sub-Custodian with respect to any claim against the Securities System or any other person which the Sub-Custodian may have as a consequence of any such loss or damage if and to the extent that the Fund and the Custodian have not been made whole for any such loss or damage. 2.14 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Sub- Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to securities held by it hereunder and in connection with transfers of securities. 2.15 PROXIES. The Sub-Custodian shall, with respect to the securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of a Fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Custodian such proxies, all proxy soliciting materials and all notices relating to such securities. 2.16 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. The Sub-Custodian shall transmit promptly to the Custodian all written information (including, without limitation, pendency of calls and maturities of securities and expirations of rights in connection therewith) received by the Sub-Custodian from issuers of the securities being held for the account of the Fund. With respect to tender or exchange offers, the Sub- Custodian shall transmit promptly to the Custodian all written information received by the Sub-Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transactions, the Custodian shall notify the Sub-Custodian of the action the Fund desires the Sub- Custodian to take; provided, however, that the Sub-Custodian shall not be liable to the Fund or the Custodian for the failure to take any such action unless such instructions are received by the Sub-Custodian at least two business days prior to the date on which the Sub-Custodian is to take such action. 2.17 PROPER INSTRUCTIONS. Proper Instructions as used throughout this Agreement means a writing signed or initialed by one or more persons who are authorized by the Trustees of the Fund and by vote of the Board of Directors of the Custodian. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Sub- Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Custodian shall cause all oral instructions to be confirmed in writing. Upon receipt of a certificate of the Clerk or an Assistant Clerk as to the authorization by the Trustees of the Funds accompanied by a detailed description of procedures approved by the Trustees, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices, provided that the Trustees, the Custodian and the Sub-Custodian are satisfied that such procedures afford adequate safeguards for the Fund's assets. Notwithstanding the foregoing, no Trustee, officer, employee or agent of the Fund shall be permitted access to any securities or similar investments of the Fund deposited with the Sub-Custodian or any agent for any reason except in accordance with the provisions of Rule 17f-2 under the 1940 Act. 2.18 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Sub-Custodian may in its discretion, without express authority from the Custodian: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement, provided that all such payments shall be accounted for to the Fund and the Custodian; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund held by the Sub-Custodian hereunder except as otherwise directed by the Custodian or the Trustees of the Fund. 2.19 EVIDENCE OF AUTHORITY. The Sub-Custodian shall be protected in acting upon any instruction, notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to have been properly executed by or on behalf of the Fund or the Custodian as custodian of the Fund. The Sub-Custodian may receive and accept a certified copy of a vote of the Trustees of the Fund or the Board of Directors of the Custodian, as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Trustees pursuant to the Declaration of Trust and By-Laws and the Board of Directors of the Custodian, as the case may be as described in such vote, and such vote may be considered as in full force and effect until receipt by the Sub-Custodian of written notice to the contrary. 3. PERFORMANCE STANDARDS; PROTECTION OF THE FUND. The Sub-Custodian shall use its best efforts to perform its duties hereunder in accordance with the standards set forth in Schedule C hereto. Schedule C may be amended from time to time as agreed to by the Custodian and the Trustees of the Fund. 4. RECORDS. The Sub-Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Trustees of the Fund to keep the books of account of the Funds or, if directed in writing to do so by the Custodian, shall itself keep such books of account. The Sub-Custodian shall create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of the Custodian under its Custodian Agreement with the Fund under the 1940 Act, with particular attention to Sections 17(f) and 31 thereof and Rules 17f-2, 31a-1 and 31a-2 thereunder, applicable federal and state tax laws, and any other law or administrative rules or procedures which may be applicable to the Fund or the Custodian. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Sub-Custodian be open for inspection by duly authorized officers, employees or agents of the Custodian and the Fund and employees and agents of the Securities and Exchange Commission. The Sub-Custodian shall, at the Custodian's request, supply the Custodian with a tabulation of securities owned by the Fund and held under this Agreement and shall, when requested to do so by the Custodian and for such compensation as shall be agreed upon between the Custodian and Sub-Custodian, include certificate numbers in such tabulations. 5. OPINION AND REPORTS OF THE FUND'S INDEPENDENT ACCOUNTANTS. The Sub-Custodian shall take all reasonable actions, as the Custodian may from time to time request, to obtain from year to year favorable opinions from the Fund's independent public accountants with respect to its activities hereunder in connection with the preparation of the Fund's registration statements and amendments thereto, the Fund's reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 6. REPORTS OF SUB-CUSTODIAN'S INDEPENDENT ACCOUNTANTS. The Sub-Custodian shall provide the Custodian, at such times as the Custodian may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Sub-Custodian under this Agreement; such reports, which shall be of sufficient scope and in sufficient detail as may reasonably be required by the Custodian, shall provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, shall so state. 7. COMPENSATION. The Sub-Custodian shall be entitled to reasonable compensation for its services and expenses as Sub- Custodian, as agreed upon from time to time between the Custodian and the Sub-Custodian. 8. RESPONSIBILITY OF SUB-CUSTODIAN. The Sub-Custodian shall exercise reasonable care and diligence in carrying out the provisions of this Agreement and shall not be liable to the Fund or the Custodian for any action taken or omitted by it in good faith without negligence. So long as and to the extent that it is in the exercise of reasonable care, the Sub-Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. Notwithstanding the foregoing, the responsibility of the Sub- Custodian with respect to redemptions effected by check shall be in accordance with a separate agreement entered into between the Custodian and the Sub-Custodian. The Sub-Custodian shall protect the Fund and the Custodian from direct losses to the Fund resulting from any act or failure to act of the Sub-Custodian in violation of its duties hereunder or of law and shall maintain customary errors and omissions and fidelity insurance policies in an amount not less than $25 million to cover losses to the Fund resulting from any such act or failure to act. If the Custodian requires the Sub-Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Sub- Custodian, result in the Sub-Custodian's being liable for the payment of money or incurring liability of some other form, the Custodian, as a prerequisite to requiring the Sub-Custodian to take such action, shall provide indemnity to the Sub-Custodian in an amount and form satisfactory to it. The Custodian agrees to indemnify and hold harmless the Sub- Custodian from and against all taxes, charges, expenses, assessments, claims and liabilities (including counsel fees) incurred or assessed against it or its nominee in connection with the performance of this Agreement, except such as may arise from its own negligent action, negligent failure to act or willful misconduct. To secure any such authorized charges and any advances of cash or securities made by the Sub-Custodian to or for the benefit of the Fund for any purpose which results in the Fund's incurring an overdraft at the end of any business day or for extraordinary or emergency purposes during any business day, the Custodian on behalf of the Fund, unless prohibited from doing so by one or more of the Fund's fundamental investment restrictions, hereby represents that it has obtained from the Fund authorization to apply available cash in any account maintained by the Sub-Custodian on behalf of the Fund and a security interest in and pledge to it of securities held for the Fund by the Sub-Custodian, in an amount not to exceed the amount not prohibited by such restrictions, for the purposes of securing payment of any such advances, and that the Fund has agreed, from time to time, to designate in writing, or to cause its investment adviser to designate in writing, the specific securities subject to such security interest and pledge. The Custodian hereby assigns the benefits of such security interest and pledge to the Sub-Custodian, and agrees that, should the Fund or the Custodian fail to repay promptly any advances of cash or securities, the Sub-Custodian shall be entitled to use such available cash and to dispose of such pledged securities as is necessary to repay any such advances. 9. SUCCESSOR SUB-CUSTODIAN. If a successor Sub-Custodian shall be appointed by the Custodian, the Sub-Custodian shall, upon termination, cause to be delivered to such successor Sub- Custodian, duly endorsed and in the form for transfer, all securities then held by it, shall cause the transfer to an account of the successor Sub-Custodian all of the Fund's securities held in a Securities System and shall cause to be delivered to such successor Sub-Custodian all funds and other property held by it or any of its agents. If no such successor Sub-Custodian shall be appointed, the Sub-Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Trustees of the Fund, cause to be delivered at the office of the Sub-Custodian and transfer such securities, funds and other properties in accordance with such vote. In the event that no written order designating a successor Sub-Custodian or certified copy of a vote of the Trustees shall have been delivered to the Sub-Custodian on or before the date when such termination shall become effective, then the Sub- Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Sub-Custodian and its agents and all instruments held by the Sub-Custodian and its agents relative thereto and all other property held by it and its agents under this Agreement and to cause to be transferred to an account of such successor Sub-Custodian all of the Fund's securities held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Sub-Custodian under this Agreement. In the event that securities, funds and other properties remain in the possession of the Sub-Custodian after the date of termination hereof owing to failure of the Custodian to obtain the certified copy of vote referred to or of the Trustees to appoint a successor Sub-Custodian, the Sub-Custodian shall be entitled to fair compensation for its services during such period as the Sub-Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and obligations of the Sub-Custodian shall remain in full force and effect. Upon termination, the Sub-Custodian shall, upon receipt of a certified copy of a vote of the Trustees of the Fund, cause to be delivered to any other Sub-Custodian designated in such vote such assets, securities and other property of the Fund as are designated in such vote, or pursuant to Proper Instructions, cause such assets, securities and other property of the Fund as are designated by the Custodian to be delivered to one or more of the sub-custodians designated on Schedule D hereto, as from time to time amended. 10. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT. This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid, to the other party, such termination to take effect not sooner than thirty (30) days after the date of mailing; provided, however, that the Sub-Custodian shall not act under Section 2.13 hereof in the absence of receipt of an initial certificate of the Clerk or an Assistant Clerk that the Trustees of the Fund have approved the initial use of a particular Securities System and the receipt of an annual certificate of the Clerk or an Assistant Clerk that the Trustees have reviewed the use by the Fund of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940; and provided, further, however, that the Custodian shall not amend or terminate this Agreement in contravention of any applicable federal or state regulations or any provision of the Declarations of Trust or By-Laws of the Fund; and provided, further, that the Custodian may at any time, by action of its Board of Directors, or the Trustees of the Fund, as the case may be, immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Sub-Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of this Agreement, the Custodian shall pay to the Sub-Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Sub- Custodian for its reimbursable costs, expenses and disbursements. 11. AMENDMENT AND INTERPRETATION. This Agreement constitutes the entire understanding and agreement of the parties hereto with respect to the subject matter hereof. No provision of this Agreement may be amended or terminated except by a statement in writing signed by the party against which enforcement of the amendment or termination is sought. In connection with the operation of this Agreement, the Sub- Custodian and the Custodian may from time to time agree in writing on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. 12. GOVERNING LAW. This Agreement is executed and delivered in The Commonwealth of Massachusetts and shall be governed by and construed according to the laws of said Commonwealth. 13. NOTICES. Notices and other writings delivered or mailed postage prepaid to the Custodian addressed to the Custodian attention: , or to such other person or address as the Custodian may have designated to the Sub-Custodian in writing, or to the Sub-Custodian at , or to such other address as the Sub-Custodian may have designated to the Custodian in writing, shall be deemed to have been properly delivered or given hereunder to the respective addressee. 14. BINDING OBLIGATION. This Agreement shall be binding on and shall inure to the benefit of the Custodian and the Sub- Custodian and their respective successors and assigns, provided that neither party hereto may assign this Agreement or any of its rights or obligations hereunder without the prior written consent of the other party. 15. PRIOR AGREEMENTS. This Agreement supersedes and terminates, as of the date hereof, all prior contracts between the Fund or the Custodian and the Sub-Custodian relating to the custody of the Fund's assets. 16. DECLARATION OF TRUST. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that the obligations of or arising out of this instrument are not binding upon any of the Trustees or beneficiaries individually but binding only upon the assets and property of the Funds. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the day of , 199 . PUTNAM FIDUCIARY TRUST COMPANY By --------------------------- (SUB-CUSTODIAN) By --------------------------- EXHIBIT 1(A) MASTER FOREIGN SUB-CUSTODIAN AGREEMENT AGREEMENT made this day of , 199 , between Putnam Fiduciary Trust Company, a Massachusetts-chartered trust company (the "Custodian"), and , (the "Sub-Custodian"). WHEREAS, the Sub-Custodian represents to the Custodian that it is eligible to serve as a custodian for a management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and WHEREAS, the Custodian has entered into a Custodian Agreement between it and each of the Putnam Funds listed in Schedule A to this Agreement, each of such Funds acting on its own behalf separately from all the other Funds and not jointly or jointly and severally with any of the other Funds (each of the Funds being hereinafter referred to as the "Fund"), and WHEREAS, the Custodian and the Fund desire to utilize sub-custodians for the purpose of holding cash and securities of the Fund, and WHEREAS, the Custodian wishes to appoint the Sub-Custodian as the Fund's Sub-Custodian, NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. APPOINTMENT OF SUB-CUSTODIAN. The Custodian hereby employs and appoints the Sub-Custodian as a sub-custodian for safekeeping of securities and other assets of the Fund for the term and subject to the provisions of this Agreement. Upon request, the Custodian shall deliver to the Sub-Custodian such proxies, powers of attorney or other instruments as may be reasonably necessary or desirable in connection with the performance by the Sub-Custodian of its obligations under this Agreement on behalf of the Fund. 2. DUTIES OF THE SUB-CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY IT. The Custodian may from time to time deposit or direct the deposit of securities or cash owned by the Fund with the Sub-Custodian. The Sub-Custodian shall have no responsibility or liability for or on account of securities, funds or other property of the Fund not so delivered to it. Except for securities and funds held by 17f-5 Sub-Custodians (as defined in Section 2.11(b)) the Sub-Custodian shall hold and dispose of the securities or cash hereafter held by or deposited with the Sub-Custodian as follows: 2.1. HOLDING SECURITIES. The Sub-Custodian shall hold and, by book-entry or otherwise, identify as belonging to the Fund all non-cash property which has been delivered to the Sub-Custodian. All such securities are to be held or disposed of for, and subject at all times to the instructions of, the Custodian pursuant to the terms of this Agreement. The Sub-Custodian shall maintain adequate records identifying the securities as being held by it as sub-custodian of the Fund. 2.2. DELIVERY OF SECURITIES. The Sub-Custodian shall release and deliver securities of the Fund held by it hereunder (or in a Securities System account of the Sub-Custodian) only upon receipt of Proper Instructions (as defined in Section 2.19), which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Fund and receipt of payment therefor, provided, however, that the Sub-Custodian may release and deliver securities prior to the receipt of payment therefor if (i) in the Sub-Custodian's judgment, (A) release and delivery prior to payment is required by the terms of the instrument evidencing the security or (B) release and delivery prior to payment is the prevailing method of settling securities transactions between institutional investors in the applicable market and (ii) release and delivery prior to payment is in accordance with generally accepted trade practice and with any applicable governmental regulations and the rules of Securities Systems or other securities depositories and clearing agencies in the applicable market. The Sub-Custodian agrees, upon request, to advise the Custodian of all pending transactions in which release and delivery will be made prior to the receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; 3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.12 hereof; 4) To the depository agent in connection with tender or other similar offers for such securities; provided that, in any such case, the cash or other consideration is thereafter to be delivered to the Sub-Custodian; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is thereafter to be delivered to the Sub-Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Sub-Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.11 or any other name permitted pursuant to Section 2.3; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are thereafter to be delivered to the Sub-Custodian; 7) Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that, in any such case, the Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Sub-Custodian's own negligence or willful misconduct; 8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, thereafter are to be delivered to the Sub-Custodian; 9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the now securities and cash, if any, are thereafter to be delivered to the Sub-Custodian; 10) For delivery in connection with any loans of securities made by the Fund, but only against receipt of collateral the adequacy and timing of receipt of which shall be as agreed upon from time to time in writing by the Custodian and the Sub-Custodian, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities; 11) For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Fund, but only against receipt of amounts borrowed; 12) Upon receipt of instructions from the transfer agent for the Fund (the "Transfer Agent"), for delivery to such Transfer Agent or to the shareholders of the Fund in connection with distributions in kind, in satisfaction of requests by shareholders for repurchase or redemption; 13) For delivery to the Custodian or another sub-custodian of the Fund; and 14) For any other proper purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Trustees or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Clerk or an Assistant Clerk, specifying the securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purposes to be proper corporate purposes, and naming the person or persons to whom delivery of such securities is to be made. 2.3. REGISTRATION OF SECURITIES. Securities of the Fund held by the Sub-Custodian hereunder (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Sub-Custodian or any 17f-5 Sub-Custodian or Foreign Depository (as each of those terms is defined in Section 2.11(b)), which nominee shall be assigned exclusively to the Fund, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.11(a). Notwithstanding the foregoing, the Sub-Custodian or agent thereof or any 17f-5 Sub-Custodian or Foreign Depository may hold securities of the Fund in a nominee name which is used for its other clients provided that such name is not used by the Sub-Custodian, agent, 17f-5 Sub-Custodian or Foreign Depository for its own securities and that securities of the Fund are, by book-entry or otherwise, at all times identified as belonging to the Fund and distinguished from other securities held for other clients using the same nominee name. In addition, and notwithstanding the foregoing, the Sub-Custodian or agent thereof or 17f-5 Sub-Custodian or Foreign Depository may hold securities of the Fund in its own name if such registration is the prevailing method in the applicable market by which custodians register securities of institutional clients and provided that securities of the Fund are, by book-entry or otherwise, at all times identified as belonging to the Fund and distinguished from other securities held for other clients or for the Sub-Custodian or agent thereof or 17f-5 Sub-Custodian or Foreign Depository. All securities accepted by the Sub-Custodian under the terms of this Agreement shall be in good delivery form. 2.4. BANK ACCOUNTS. The Sub-Custodian shall open and maintain a separate bank account or accounts in the name of the Fund or of the Custodian for the benefit of the Fund, subject only to draft or order by the Sub-Custodian acting pursuant to the terms of this Agreement or by the Custodian acting pursuant to the Custodian Agreement, and shall hold in such account or accounts, subject to the provisions hereof, to the Sub-Custodian's credit as sub-custodian of the Fund or the Custodian's credit as custodian for the Fund, cash received for the account of the Fund other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act or cash held as deposits with 17f-5 Sub-Custodians in accordance with the following paragraph. The responsibilities of the Sub-Custodian for cash, including foreign currency, of the Fund accepted on the Sub-Custodian's books as a deposit shall be that of a U.S. bank for a similar deposit. The Sub-Custodian may open a bank account on the books of a 17f-5 Sub-Custodian in the name of the Fund or of the Sub- Custodian as a sub-custodian for the Fund, and may deposit cash, including foreign currency, of the Fund in such account, and such funds shall be withdrawable only pursuant to draft or order of the Sub-Custodian. The records for such account will be maintained by the Sub-Custodian but such account shall not constitute a deposit liability of the Sub-Custodian. The responsibilities of the Sub- Custodian for deposits maintained in such account shall be the same as and no greater than the Sub-Custodian's responsibility in respect of other portfolio securities of the Fund. The Sub-Custodian shall be liable for actual losses incurred by the Fund attributable to any failure on the part of the Sub- Custodian to report accurate cash availability information with respect to the bank accounts referred to in this Section 2.4. 2.5. PAYMENTS FOR SHARES. The Sub-Custodian shall maintain custody of amounts received from the Transfer Agent of the Fund for shares of the Fund issued by the Fund and sold by its distributor and deposit such amounts into the Fund's account. The Sub-Custodian will provide timely notification to the Custodian and the Transfer Agent of any receipt by it of payments for shares of the Fund. 2.6. AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Custodian and the Sub-Custodian, the Sub-Custodian shall, upon the receipt of Proper Instructions, make federal funds available to the Custodian for the account of the Fund as of specified times agreed upon from time to time by the Custodian and the Sub-Custodian with respect to amounts received by the Sub-Custodian for the purchase of shares of the Fund. 2.7. COLLECTION OF INCOME. The Sub-Custodian shall collect on a timely basis all income and other payments with respect to registered securities held hereunder, including securities held in a Securities System, to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer securities if, on the date of payment by the issuer, such securities are held hereunder and shall credit such income, as collected, to the Fund's account. Without limiting the generality of the foregoing, the Sub-Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Arranging for the collection of income due the Fund on securities loaned pursuant to the provisions of Section 2.2(10) shall be the responsibility of the Custodian. The Sub-Custodian will have no duty or responsibility in connection therewith, other than to provide the Custodian with such information or data as may be necessary to assist the Custodian in arranging for the timely delivery to the Sub-Custodian of the income to which the Fund is properly entitled. 2.8. PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Sub-Custodian shall cause monies of the Fund to be paid out in the following cases only: 1) Upon the purchase of securities for the account of the Fund but only (a) against the delivery of such securities to the Sub-Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act, as amended, to act as a custodian and has been designated by the Sub-Custodian as its agent for this purpose) or any 17f-5 Sub-Custodian or any Foreign Depository (as each of those terms is defined in Section 2.11(b)) registered in the name of the Fund or in the name of a nominee referred to in Section 2.3 hereof or in proper form for transfer, provided, however, that the Sub-Custodian may cause monies of the Fund to be paid out prior to delivery of such securities if (i) in the Sub-Custodian's judgment, (A) payment prior to delivery is required by the terms of the instrument evidencing the security or (B) payment prior to delivery is the prevailing method of settling securities transactions between institutional investors in the applicable market and (ii) payment prior to delivery is in accordance with generally accepted trade practice and with any applicable governmental regulations and the rules of Securities Systems or other securities depositories and clearing agencies in the applicable market. The Sub-Custodian agrees, upon request, to advise the Custodian of all pending transactions in which payment will be made prior to the receipt of securities in accordance with the proviso to the foregoing sentence; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.12 hereof; or (c) (i) in the case of a repurchase agreement entered into between the Fund and the Sub-Custodian, another bank or a broker-dealer, against delivery of the securities either in certificate form or through an entry crediting the Sub-Custodian's or its agent's non-proprietary account at any Federal Reserve Bank with such securities or (ii) in the case of a repurchase agreement entered into between the Fund and the Sub-Custodian, against delivery of a receipt evidencing purchase by the Fund of securities owned by the Sub-Custodian along with written evidence of the agreement by the Sub-Custodian to repurchase such securities from the Fund; or (d) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign, which transfer may be effected prior to receipt of a confirmation of the deposit from the applicable bank or a financial intermediary; 2) In connection with conversion, exchange or surrender or tender or exercise of securities owned by the Fund as set forth in Section 2.2 hereof; 3) For the redemption or repurchase of shares issued by the Fund as set forth in Section 2.10 hereof; 4) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, custodian and sub-custodian, transfer agent and legal fees, including the Custodian's fee; and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 5) For the payment of any dividends or other distributions declared to shareholders of the Fund; 6) For transfer to the Custodian or another sub-custodian of the Fund; and 7) For any other proper purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Trustees or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Clerk or Assistant Clerk, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made. 2.9. LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. Except as otherwise provided in this Agreement, in any and every case where payment for purchase of securities for the account of the Fund is made by the Sub-Custodian in advance of receipt of the securities purchased in the absence of Proper Instructions from the Custodian to so pay in advance, the Sub-Custodian shall be absolutely liable to the Fund and the Custodian in the event any loss results to the Fund or the Custodian from the payment by the Sub-Custodian in advance of delivery of such securities. 2.10. PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND. From such funds as may be available, the Sub-custodian shall, upon receipt of Proper Instructions, make funds available for payment to a shareholder of the Fund who has delivered to the Transfer Agent a request for redemption or repurchase of shares of the Fund. In connection with the redemption or repurchase of shares of the Fund, the Sub-Custodian, upon receipt of Proper Instructions, is authorized to wire funds to or through a commercial bank designated by the redeeming shareholder. In connection with the redemption or repurchase of shares of the Fund, the Sub-Custodian, upon receipt of Proper Instructions, shall honor checks drawn on the Sub-Custodian by a shareholder, when presented to the Sub-Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time among the Fund, the Custodian and the Sub-Custodian. 2.11. APPOINTMENT OF AGENTS AND SUB-CUSTODIANS PURSUANT TO RULE 17F-5. (a) Agents. Without limiting its own responsibility for its obligations assumed hereunder, the Sub-Custodian may at any time and from time to time engage, at its own cost and expense, as an agent to act for the Fund on the Sub-Custodian's behalf with respect to any such obligations any bank or trust company which meets the requirements of the 1940 Act, and the rules and regulations thereunder, to perform services delegated to the Sub-Custodian hereunder, provided that the Fund and the Custodian shall have approved in writing any such bank or trust company. All agents of the Sub-Custodian shall be subject to the instructions of the Sub-Custodian and not the Custodian. The Sub- Custodian may, at any time in its discretion, and shall at the Custodian's direction, remove any bank or trust company which has been appointed as an agent, and shall in either case promptly notify the Custodian and the Fund in writing of the completion of any such action. The agents which the Fund has approved to date are set forth in Schedule B hereto. Schedule B shall be amended from time to time as approved agents are changed, added or deleted. The Custodian shall be responsible for informing the Sub-Custodian sufficiently in advance of a proposed investment which is to be held at a location not listed on Schedule B, in order that there shall be sufficient time for the Fund to give the approval required by the preceding paragraph and for the Sub-Custodian to complete the appropriate contractual and technical arrangements with such agent. The engagement by the Sub-Custodian of one or more agents shall not relieve the Sub-Custodian of its responsibilities or liabilities hereunder. (b) 17f-5 Sub-Custodians. Securities, funds and other property of the Fund may be held by sub-custodians appointed pursuant to the provisions of this Section 2.11 (each, a "17f-5 Sub-Custodian"). The Sub-Custodian may, at any time and from time to time, appoint any bank or trust company (that meets the requirements of a custodian or a foreign custodian under the Investment Company Act of 1940 and the rules and regulations thereunder, including without limitation Rule 17f-5 thereunder, or that has received an order of the Securities and Exchange Commission ("SEC") exempting it from any of such requirements that it does not meet) to act as a 17f-5 Sub-Custodian for the Fund, provided that the Fund shall have approved in writing (1) any such bank or trust company and the sub-custodian agreement to be entered into between such bank or trust company and the Sub- Custodian, and (2) the 17f-5 Sub-Custodian's offices or branches at which the 17f-5 Sub-Custodian is authorized to hold securities, cash and other property of the Fund. Upon such approval by the Fund, the Sub-Custodian is authorized on behalf of the Fund to notify each 17f-5 Sub-Custodian of its appointment as such. The Sub-Custodian may, at any time in its discretion, remove any bank or trust company that has been appointed as a 17f-5 Sub-Custodian. Those 17f-5 Sub-Custodians and their offices or branches which the Fund has approved to date are set forth on Schedule C hereto. Such Schedule C shall be amended from time to time as 17f-5 Sub-Custodians, branches or offices are changed, added or deleted. The Custodian shall be responsible for informing the Sub-Custodian sufficiently in advance of a proposed investment which is to be held at a location not listed on Schedule C, in order that there shall be sufficient time for the Fund to give the approval required by the preceding paragraph and for the Sub- Custodian to put the appropriate arrangements in place with such 17f-5 Sub-Custodian pursuant to such sub-custodian agreement. With respect to the securities and funds held by a 17f-5 Sub- Custodian, either directly or indirectly, including demand and interest bearing deposits, currencies or other deposits and foreign exchange contracts, the Sub-Custodian shall be liable to the Custodian and the Fund if and only to the extent that such 17f-5 Sub-Custodian is liable to the Sub-Custodian and the Sub- Custodian recovers under the applicable sub-custodian agreement, provided, however, that the foregoing limitation shall not apply if such 17f-5 Sub-Custodian's liability to the Sub-Custodian is limited because the applicable sub-custodian agreement does not contain provisions substantially similar to the provisions of Section 2 (but not including Section 2.12) of this Agreement. The Sub-Custodian shall also be liable to the Custodian and the Fund for its own negligence in transmitting any instructions received by it from the Fund or the Custodian and for its own negligence in connection with the delivery of any securities or funds held by it to any such 17f-5 Sub-Custodian. The Custodian or the Fund may authorize the Sub-Custodian or one or more of the 17f-5 Sub-Custodians to use the facilities of one or more foreign securities depositories or clearing agencies (each, a "Foreign Depository") that is permitted to be used by registered investment companies by a Rule or Rules of the SEC or that has received an order of the SEC exempting it from any of such requirements that it does not meet. The records of the Sub- Custodian or a 17f-5 Sub-Custodian employing a Foreign Depository or clearing agency shall identify those securities belonging to the Fund which are maintained in such a Foreign Depository. The engagement by the Sub-Custodian of one or more Foreign Depositories shall not relieve the Sub-Custodian of its responsibilities or liabilities hereunder. The Foreign Depositories which the Fund has approved to date are set forth in Schedule C hereto. Schedule C shall be amended from time to time as approved Foreign Depositories are changed, added or deleted. The Custodian shall be responsible for informing the Sub-Custodian sufficiently in advance of a proposed investment which is to be held at a location not listed on Schedule C, in order that there shall be sufficient time for the Fund to give the approval required by the preceding paragraph and for the Sub-Custodian to complete the appropriate contractual and technical arrangements with such Foreign Depository. In the event that any 17f-5 Sub-Custodian appointed pursuant to the provisions of this Section 2.11 fails to perform any of its obligations under the terms and conditions of the applicable sub- custodian agreement, the Sub-Custodian shall use its best efforts to cause such 17f-5 Sub-Custodian to perform such obligations. In the event that the Sub-Custodian is unable to cause such 17f-5 Sub-Custodian to perform fully its obligations thereunder, the Sub-Custodian shall forthwith upon the Custodian's request terminate such 17f-5 Sub-Custodian as a sub-custodian for the Fund and, if necessary or desirable, appoint another 17f-5 Sub- Custodian in accordance with the provisions of this Section 2.11. At the election of the Custodian, it shall have the right to enforce and shall be subrogated to the Sub-Custodian's rights against any such 17f-5 Sub-Custodian for loss or damage caused the Fund by such 17f-5 Sub-Custodian. At the written request of the Fund, the Sub-Custodian will terminate as a sub-custodian for the Fund any 17f-5 Sub-Custodian appointed pursuant to the provisions of this Section 2.11 in accordance with the termination provisions under the applicable sub-custodian agreement. The Sub-Custodian will not amend any sub-custodian agreement or agree to change or permit any changes thereunder except upon the prior written approval of the Fund. In the event the Sub-Custodian makes any payment to a 17f-5 Sub-Custodian under the indemnification provisions of any sub- custodian agreement, no more than thirty days after written notice to the Custodian of the Sub-Custodian's having made such payment, the Custodian will reimburse the Sub-Custodian the amount of such payment except in respect of any negligence or misconduct of the Sub-Custodian. 2.12. DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Sub-Custodian may deposit and/or maintain securities owned by the Fund in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury or by a federal agency (collectively referred to herein as "Securities System") in accordance with applicable rules and regulations (including Rule 17f-4 of the 1940 Act), and subject to the following provisions: 1) The Sub-Custodian may, either directly or through one or more agents, keep securities of the Fund in a Securities System provided that such securities are represented in an account ("Account") of the Sub-Custodian or such an agent in the Securities System which shall not include any assets other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Sub-Custodian with respect to securities of the Fund which are maintained in a Securities System shall identify by book-entry those securities belonging to the Fund; 3) The Sub-Custodian shall pay for securities purchased for the account of the Fund upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Sub-Custodian to reflect such payment and transfer for the account of the Fund. The Sub-Custodian shall transfer securities sold for the account of the Fund upon (i) receipt of advice from the Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Sub-Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the Securities System of transfers of securities for the account of the Fund shall identify the Fund, be maintained for the Fund by the Sub-Custodian or such an agent and be provided to the Fund or the Custodian at the Custodian's request. The Sub-Custodian shall furnish the Custodian confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Custodian copies of daily transaction statements reflecting each day's transactions in the Securities System for the account of the Fund on the next business day; 4) The Sub-Custodian shall provide the Custodian with any report obtained by the Sub-Custodian on the Securities System's accounting system, internal accounting controls and procedures for safeguarding securities deposited in the Securities System; 5) The Sub-Custodian shall utilize only such Securities Systems as are set forth in a list provided by the Custodian of Securities Systems approved for use by the Board of Trustees of the Fund, which list will be amended from time to time by the Custodian as may be necessary to reflect any subsequent action taken by the Trustees of the Fund; 6) Anything to the contrary in this Agreement notwithstanding, the Sub-Custodian shall be liable to the Fund and the Custodian for any loss or damage to the Fund or the Custodian resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Sub-Custodian or any of its agents or of any of its or their employees or from failure of the Sub-Custodian or any such agent or employee to enforce effectively such rights as it may have against the Securities System. At the election of the Custodian, it shall be entitled to be subrogated to the rights of the Sub-Custodian with respect to any claim against the Securities System or any other person which the Sub-Custodian may have as a consequence of any such loss or damage if and to the extent that the Fund and the Custodian have not been made whole for any such loss or damage. 2.13. DEPOSITARY RECEIPTS. Only upon receipt of Proper Instructions, the Sub-Custodian shall instruct a 17f-5 Sub- Custodian appointed pursuant to Section 2.11(b) hereof or an agent of the Sub-Custodian appointed pursuant to Section 2.11(a) hereof (an "Agent") to surrender securities to the depositary used by an issuer of American Depositary Receipts or International Depositary Receipts (hereinafter collectively referred to as "ADRs") for such securities against a written receipt therefor adequately describing such securities and written evidence satisfactory to the 17f-5 Sub-Custodian or Agent that the depositary has acknowledged receipt of instructions to issue with respect to such securities ADRs in the name of the Sub-Custodian, or a nominee of the Sub-Custodian, for delivery to the Sub-Custodian in Boston, Massachusetts, or at such other place as the Sub-Custodian may from time to time designate. Only upon receipt of Proper Instructions, the Sub-Custodian shall surrender ADRs to the issuer thereof against a written receipt therefor adequately describing the ADRs surrendered and written evidence satisfactory to the Sub-Custodian that the issuer of the ADRs has acknowledged receipt of instructions to cause its depository to deliver the securities underlying such ADRs to a 17f-5 Sub-Custodian or an Agent. 2.14. FOREIGN EXCHANGE TRANSACTIONS AND FUTURES CONTRACTS. Only upon receipt of Proper Instructions, the Sub- Custodian shall enter into foreign exchange contracts or options to purchase and sell foreign currencies for spot and future delivery on behalf and for the account of the Fund or shall enter into futures contracts or options on futures contracts. Such transactions may be undertaken by the Sub-Custodian with such banking institutions, including the Sub-Custodian and 17f-5 Sub- Custodian(s) appointed pursuant to Section 2.11(b), as principals, as approved and authorized by the Fund. In connection with such transaction, the Sub-Custodian is authorized to make free outgoing payments of cash in the form of U.S. Dollars or foreign currency without receiving confirmation of a foreign exchange contract, futures contract or option thereon or confirmation that the countervalue currency completing the foreign exchange contract or futures contract has been delivered or received or that the option has been delivered or received. Foreign exchange contracts, futures contracts and options, other than those executed with the Sub-Custodian as principal, shall for all purposes of this Agreement be deemed to be portfolio securities of the Fund. 2.15. OPTION TRANSACTIONS. Only upon receipt of Proper Instructions, the Sub-Custodian shall enter into option transactions in accordance with the provisions of any agreement among the Fund, the Custodian, and/or the Sub-Custodian and a broker-dealer. 2.16. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Sub-Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to securities held by it hereunder and in connection with transfers of securities. 2.17. PROXIES. The Sub-Custodian shall, with respect to the securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered other than in the name of the Fund, all proxies that are received by the Sub-Custodian, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Custodian such proxies, all proxy soliciting materials and all notices relating to such securities. 2.18. COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. The Sub-Custodian shall transmit promptly to the Custodian all written information (including, without limitation, pendency of calls and maturities of securities and expirations of rights in connection therewith) received by the Sub-Custodian from issuers of the securities being held for the account of the Fund. With respect to tender or exchange offers, the Sub-Custodian shall transmit promptly to the Custodian all written information received by the Sub-Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transactions, the Custodian shall notify the Sub-Custodian of the action the Fund desires the Sub-Custodian to take; provided, however, that the Sub-Custodian shall not be liable to the Fund or the Custodian for the failure to take any such action unless Proper Instructions are received by the Sub-Custodian at least two business days prior to the date on which the Sub-Custodian is to take such action, or in the case of foreign securities, such longer periods as shall have been agreed upon in writing by the Custodian and the Sub-Custodian, which may be in the form of written operating procedures or standards. 2.19. PROPER INSTRUCTIONS. Proper Instructions as used throughout this Agreement means a writing signed or initialed by one or more persons who are authorized by the Trustees of the Fund and by the Custodian. Each such writing shall set forth the specific transaction or type of transaction involved. Oral instructions will be considered Proper Instructions if the Sub-Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Custodian shall cause all oral instructions to be confirmed in writing. Proper Instructions shall also include communications effected directly between the Custodian and Sub-Custodian by electro-mechanical or electronic devices, provided that the Custodian and the Sub-Custodian have approved such procedures. Notwithstanding the foregoing, no Trustee, officer, employee or agent of the Fund shall be permitted access to any securities or similar investments of the Fund deposited with the Sub-Custodian or any agent for any reason except in accordance with the provisions of Rule 17f-2 under the 1940 Act. 2.20. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Sub-Custodian may in its discretion, without express authority from the Custodian: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement, provided that all such payments shall be accounted for to the Custodian; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund held by the Sub-Custodian hereunder except as otherwise directed by the Custodian. 2.21. EVIDENCE OF AUTHORITY. The Sub-Custodian shall be protected in acting upon any instruction, notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to have been properly executed by or on behalf of the Fund or the Custodian as custodian of the Fund. 2.22. PERFORMANCE STANDARDS. The Sub-Custodian shall use its best efforts to perform its duties hereunder in accordance with such standards as are agreed upon from time to time by the Custodian and the Sub-Custodian. 3. RECORDS. The Sub-Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Trustees of the Fund to keep the books of account of the Fund or, if directed in writing to do so by the Custodian, shall itself keep such books of account. The Sub-Custodian shall create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of the Fund under the 1940 Act, with particular attention to Sections 17(f) and 31 thereof and Rules 17f-2, 31a-1 and 31a-2 thereunder; the Sub-Custodian shall also create and maintain such records as are required by applicable federal and state tax laws, and any other law or administrative rules or procedures which may be applicable to the Fund or the Custodian, such laws, rules or procedures to be specified by the Custodian from time to time. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Sub-Custodian be open for inspection by duly authorized officers, employees or agents of the Custodian and the Fund and employees and agents of the Securities and Exchange Commission. The Sub-Custodian shall, at the Custodian's request, supply the Custodian with a tabulation of securities owned by the Fund and held under this Agreement and shall, when requested to do so by the Custodian and for such compensation as shall be agreed upon between the Custodian and Sub-Custodian, include certificate numbers in such tabulations. 4. Opinion and Reports of the Fund's Independent Accountant. The Sub-Custodian shall take all reasonable actions, as the Custodian may from time to time request, to furnish such information with respect to its activities hereunder as the Fund's independent public accountant may request in connection with the accountant's verification of the Fund's securities and similar investments as required by Rule 17f-2 under the 1940 Act, the preparation of the Fund's registration statement and amendments thereto, the Fund's reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 5. Reports of Sub-Custodian's Independent Accountant. The Sub-Custodian shall provide the Custodian, at such times as the Custodian may reasonably require, with reports by an independent public accountant on the accounting system, internal accounting controls and procedures for safeguarding securities, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Sub-Custodian under this Agreement; such reports, which shall be of sufficient scope and in sufficient detail as may reasonably be required by the Custodian, shall provide reasonable assurance that any material inadequacies would be disclosed by such examination, and if there are no such inadequacies, shall so state. 6. Compensation. The Sub-Custodian shall be entitled to reasonable compensation for its services and expenses as sub-custodian, as agreed upon from time to time between the Custodian and the Sub-Custodian. 7. Responsibility of Sub-Custodian. The Sub-Custodian shall exercise reasonable care and diligence in carrying out the provisions of this Agreement and shall not be liable to the Fund or the Custodian for any action taken or omitted by it in good faith without negligence or willful misconduct. So long as and to the extent that it is in the exercise of reasonable care, the Sub-Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and, if in writing, reasonably believed to be signed by the proper party or parties. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters and shall be without liability for any action reasonably taken or omitted pursuant to such advice. Notwithstanding the foregoing, the responsibility of the Sub-Custodian with respect to redemptions effected by check shall be in accordance with a separate agreement entered into between the Custodian and the Sub-Custodian. It is also understood that the Sub-Custodian shall not be liable for any loss resulting from a Sovereign Risk. A "Sovereign Risk" shall mean nationalization, expropriation, devaluation, revaluation, confiscation, seizure, cancellation, destruction or similar action by any governmental authority, de facto or de jure; or enactment, promulgation, imposition or enforcement by any such governmental authority of currency restrictions, exchange controls, taxes, levies or other charges affecting the Fund's property; or acts of war, terrorism, insurrection or revolution; or any other similar act or event beyond the Sub-Custodian's control. The Sub-Custodian shall protect the Fund and the Custodian from losses to the Fund resulting from any act or failure to act of the Sub-Custodian in violation of its duties hereunder or of any law applicable to the Sub-Custodian's duties hereunder. If the Custodian requires the Sub-Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Sub-Custodian, result in the Sub-Custodian's being liable for the payment of money or incurring liability of some other form, the Custodian, as a prerequisite to requiring the Sub-Custodian to take such action, shall provide indemnity to the Sub-Custodian in an amount and form satisfactory to the Sub-Custodian. The Custodian agrees to indemnify and hold harmless the Sub-Custodian from and against all taxes, charges, expenses, assessments, claims and liabilities (including counsel fees) (collectively, "Authorized Charges") incurred or assessed against it or its nominee in connection with the performance of this Agreement, except such as may arise from its own negligent action, negligent failure to act or willful misconduct. The Sub-Custodian is authorized to charge any account of the Fund for such items and such fees. To secure any such Authorized Charges and any advances of cash or securities made by the Sub-Custodian to or for the benefit of the Fund for any purpose which results in the Fund's incurring an overdraft at the end of any business day or for extraordinary or emergency purposes during any business day, the Custodian on behalf of the Fund hereby represents that it has obtained from the Fund authorization to apply available cash in any account maintained by the Sub-Custodian on behalf of the Fund and a security interest in and pledge to the Sub-Custodian of securities of the Fund held by the Sub-Custodian (including those which may be held in a Securities System) up to a maximum of 10% of the value of the net assets held by the Sub-Custodian for the purposes of securing payment of any Authorized Charges and any advances of cash or securities, and that the Fund has agreed, from time to time, to designate in writing, or to cause its investment adviser to, or permit the Custodian to, designate in writing, the securities subject to such security interest and pledge with such specificity and detail as the Sub-Custodian may reasonably request (and in the absence of such designation to permit the Sub- Custodian so to designate securities). The Custodian hereby grants on behalf of the Fund a security interest and pledge to the Sub-Custodian, as aforesaid, in securities and available cash, as security for any Authorized Charges and any advances of cash or securities and agrees that, should the Fund or the Custodian fail to repay promptly any Authorized Charges and any advances of cash or securities, the Sub-Custodian shall be entitled to use such available cash and to dispose of such pledged securities as is necessary to repay any such Authorized Charges or any advances of cash or securities and to exercise the rights of a secured party under the Uniform Commercial Code. The Custodian agrees not to amend the third paragraph of Section 9 of the Custodian Agreement unless it provides the Sub- Custodian with at least thirty (30) days' prior written notice of the substance of any proposed amendments, provided that the foregoing shall not be construed to in any way to provide that the Sub-Custodian's consent shall be required to make such an amendment effective or that the Sub-Custodian's failure to give such consent shall in any way affect its obligations under this Agreement. 8. SUCCESSOR SUB-CUSTODIAN. If a successor sub-custodian shall be appointed by the Custodian, the Sub-Custodian shall, upon termination and upon receipt of Proper Instructions, cause to be delivered to such successor sub-custodian, duly endorsed and in the form for transfer, all securities, funds and other property of the Fund then held by it and all instruments held by the Sub-Custodian related thereto and cause the transfer to an account of the successor sub-custodian all of the Fund's securities held in any Securities Systems. If no such successor sub-custodian shall be appointed, the Sub-Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Trustees of the Fund, cause to be transferred such securities, funds and other property in accordance with such vote. In the event that no written order designating a successor sub-custodian or certified copy of a vote of the Trustees shall have been delivered to the Sub-Custodian on or before the date when such termination shall become effective, then the Sub- Custodian shall have the right to deliver to a bank or trust company, which meets the requirements of the 1940 Act and the rules and regulations thereunder, all securities, funds and other properties of the Fund. Thereafter, such bank or trust company shall be the successor of the Sub-Custodian under this Agreement. In the event that securities, funds and other property remain in the possession of the Sub-Custodian after the date of termination hereof owing to failure of the Custodian to obtain a certified copy of the Trustees appointing a successor sub- custodian, the Sub-Custodian shall be entitled to fair compensation for its services during such period as the Sub- Custodian retains possession of such securities, funds and other property and the provisions of this Agreement relating to the duties and obligations of the Sub-Custodian shall remain in full force and affect. 9. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT. This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid, to the other party, such termination to take effect not sooner than thirty (30) days after the date of mailing; provided, that either party may at any time immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the other party or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. No provision of this Agreement may be amended or terminated except by a statement in writing signed by the party against which enforcement of the amendment or termination is sought. Upon termination of this Agreement, the Custodian shall pay to the Sub-Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Sub-Custodian for its reimbursable costs, expenses and disbursements. The provisions of Section 7, including, until any Authorized Charges and any advances of cash or securities referred to therein are repaid, all liens and security interests created pursuant thereto, and all rights to indemnification, shall survive any termination of this Agreement. 10. INTERPRETATION. This Agreement constitutes the entire understanding and agreement of the parties hereto with respect to the subject matter hereof. In connection with the operation of this Agreement, the Sub-Custodian and the Custodian may from time to time agree in writing on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. 11. GOVERNING LAW. This Agreement is executed and delivered in The Commonwealth of Massachusetts and shall be governed by and construed according to the internal laws of said Commonwealth, without regard to principles of conflicts of law. 12. NOTICES. Notices and other writings delivered or mailed postage prepaid to the Custodian addressed to the Custodian attention: George H. Crane, Senior Vice President, The Putnam Companies, 99 High Street, Boston, MA 02109 or to such other person or address as the Custodian may have designated to the Sub- Custodian in writing, or to the Sub-Custodian attention: or to such other address as the SubCustodian may have designated to the Custodian in writing, shall be deemed to have been properly delivered or given hereunder to the respective addressee. 13. BINDING OBLIGATION. This Agreement shall be binding on and shall inure to the benefit of the Custodian and the Sub- Custodian and their respective successors and assigns, provided that neither party hereto may assign this Agreement or any of its rights or obligations hereunder without the prior written consent of the other party. 14. PRIOR AGREEMENTS. This Agreement supersedes and terminates, as of the date hereof, all prior contracts between the Fund or the Custodian and the Sub-Custodian relating to the custody of the Fund's assets. 15. DECLARATION OF TRUST. A copy of the Declaration of Trust of the Fund is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that the obligations of or arising out of this instrument are not binding upon any of the Trustees or beneficiaries individually but binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the day of , 199 . PUTNAM FIDUCIARY TRUST COMPANY By-------------------------------- Name: Title: (Sub-Custodian) By--------------------------------- Name: Title: The Sub-Custodian and Putnam Investments, Inc. ("Putnam"), the sole owner of the Custodian, agree that Putnam shall be the primary obligor with respect to compensation due the Sub-Custodian pursuant to Section 6 of this Agreement in connection with the Sub-Custodian's performance of its responsibilities hereunder. The Custodian and Putnam agree to take all actions necessary and appropriate to assure that the Sub-Custodian shall be compensated in the amounts and on the schedule agreed to by the Custodian and the Sub-Custodian pursuant to Section 6. PUTNAM INVESTMENTS, INC. By:------------------------------- Name: Title: PUTNAM FIDUCIARY TRUST COMPANY By:-------------------------------- Name: Title: (Sub-Custodian) By:---------------------------------- Name: Title: S:\shared\boiler\newfunds\pre-eff\NF-27d.rev EX-99.B16 9 SCHEDULES OF COMPUTATION SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Massachusetts Tax Exempt Income Fund II -- Class A Shares Fiscal period ending: May 31, 1994 Inception date (if less than 10 years of performance): October 23, 1989 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1000 n/a $1000 ERV = Ending Redeemable Value $ 970 n/a $1407 T = Average Annual Total Return -2.97% n/a +7.68%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $1,328,575 Expenses $ 194,251 Reimbursement $ 0 Average shares 26,933,037 NAV $9.05 Sales Charge 4.75% POP $9.50 Yield at POP 5.38% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 5.38% - ------ = 10.12% 1-46.8 Class B Shares Inception date (if less than 10 years of performance): July 15, 1993 TOTAL RETURN Formula -- Cumulative Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment n/a n/a $1000 ERV = Ending Redeemable Value n/a n/a $942 T = Cumulative Total Return n/a n/a -5.81%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $119,840 Expenses $ 29,751 Reimbursement $ 0 Average shares 2,430,867 NAV $9.05 Maximum Contingent Deferred Sales Charge 5.00% Yield at NAV 4.96% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.96% - ------ = 9.33% 1-46.8% EX-99.16 10 SCHEDULES OF COMPUTATION SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Michigan Tax Exempt Income Fund II -- Class A Shares Fiscal period ending: May 31, 1994 Inception date (if less than 10 years of performance): October 23, 1989 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1000 n/a $1000 ERV = Ending Redeemable Value $ 972 n/a $1344 T = Average Annual Total Return -2.78% n/a +6.62%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $703,635 Expenses $100,112 Reimbursement $ 0 Average shares 14,406,117 NAV $8.90 Sales Charge 4.75% POP $9.34 Yield at POP 5.44% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 5.44% - ------ = 9.44% 1-42.3% Class B Shares Inception date (if less than 10 years of performance): July 15, 1993 TOTAL RETURN Formula -- Cumulative Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment n/a n/a $1000 ERV = Ending Redeemable Value n/a n/a $946 T = Cumulative Total Return n/a n/a -5.42%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $53,764 Expenses $13,099 Reimbursement $ 0 Average shares 1,101,658 NAV $8.90 Maximum Contingent Deferred Sales Charge 5.00% Yield at NAV 5.03% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 5.03% - ------ = 8.73% 1-42.3% EX-99.16 11 SCHEDULES OF COMPUTATION SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Minnesota Tax Exempt Income Fund II -- Class A Shares Fiscal period ending: May 31, 1994 Inception date (if less than 10 years of performance): October 23, 1989 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1000 n/a $1000 ERV = Ending Redeemable Value $ 977 n/a $1318 T = Average Annual Total Return -2.28% n/a +6.18%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $501,534 Expenses $ 80,644 Reimbursement $ 0 Average shares 10,854,841 NAV $8.79 Sales Charge 4.75% POP $9.23 Yield at POP 5.10% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 5.10% - ------ = 9.23% 1-44.7% Class B Shares Inception date (if less than 10 years of performance): July 15, 1993 TOTAL RETURN Formula -- Cumulative Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment n/a n/a $1000 ERV = Ending Redeemable Value n/a n/a $949 T = Cumulative Total Return n/a n/a -5.09%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $43,949 Expenses $11,815 Reimbursement $ 0 Average shares 953,710 NAV $8.77 Maximum Contingent Deferred Sales Charge 5.00% Yield at NAV 4.65% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.65% - ------ = 8.41% 1-44.7% EX-99.16 12 SCHEDULES OF COMPUTATION SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: Putnam Ohio Tax Exempt Income Fund II -- Class A Shares Fiscal period ending: May 31, 1994 Inception date (if less than 10 years of performance): October 23, 1989 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1000 n/a $1000 ERV = Ending Redeemable Value $ 971 n/a $1339 T = Average Annual Total Return -2.95% n/a +6.53%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $954,354 Expenses $161,050 Reimbursement $ 0 Average shares 22,014,325 NAV $8.80 Sales Charge 4.75% POP $9.24 Yield at POP 4.73% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.73% - ------ = 8.47% 1-44.1% Class B Shares Inception date (if less than 10 years of performance): July 15, 1993 TOTAL RETURN Formula -- Cumulative Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment n/a n/a $1000 ERV = Ending Redeemable Value n/a n/a $945 T = Cumulative Total Return n/a n/a -5.48%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $84,475 Expenses $24,081 Reimbursement $ 0 Average shares 1,949,302 NAV $8.79 Maximum Contingent Deferred Sales Charge 5.00% Yield at NAV 4.27% TAX-EXEMPT EQUIVALENT YIELD Formula: 30 day yield --------------- = TAX EQUIVALENT YIELD 1-(Highest Individual Tax Rate) 4.27% - ------ = 7.64% 1-44.1% EX-27.CLASSA 13 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II ANNUAL REPORT(CLASS A) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000792288 PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II YEAR MAY-31-1994 MAY-31-1994 $260,408,520 $260,620,345 $13,212,671 $270,740 $33,061 $274,136,817 $396,101 $0 $6,204,652 $6,600,753 $0 $267,590,185 27,006,382 22,583,106 $0 ($118,519) $0 ($147,427) $211,825 $267,536,064 $0 $17,128,279 $0 $2,546,667 $14,581,612 $1,623,609 ($13,149,699) $3,055,522 $0 ($13,985,915) ($3,941,191) ($62,493) 6,728,726 3,455,423 1,149,973 $51,925,484 $0 $2,850,212 $67,554 $0 $1,549,215 $0 $2,546,667 $245,903,174 $9.55 $0.55 ($0.35) ($0.55) ($0.15) $0 $9.05 1 $0 $0
EX-27.CLASSA 14 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II ANNUAL REPORT(CLASS A) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000794611 PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II YEAR MAY-31-1994 MAY-31-1994 $135,955,164 $138,197,378 $2,922,900 $447,542 $2,281 $141,570,101 $1,625,847 $0 $772,383 $2,398,230 $0 $137,717,523 14,487,549 12,155,581 $0 ($52,244) $0 ($735,622) $2,242,214 $139,171,871 $0 $8,573,754 $0 $1,319,446 $7,254,308 $300,897 ($5,751,612) $1,803,593 $0 ($6,991,204) ($340,991) ($729,509) 3,156,753 1,345,853 521,068 $26,097,848 $0 $556,512 ($96,468) $0 $782,934 $0 $1,319,446 $125,791,728 $9.30 $0.52 ($0.32) ($0.52) ($0.03) (0.05) $8.90 1 $0 $0
EX-27.CLASSA 15 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PUTNAM MINNESOTA TAX INCOME FUND II ANNUAL REPORT(CLASS A) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000794612 PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II YEAR MAY-31-1994 MAY-31-1994 $103,227,573 $103,815,506 $3,724,422 $30,720 $3,360 $107,574,008 $2,616,846 $0 $496,785 $3,113,631 $0 $104,177,574 10,871,939 9,562,273 $0 ($64,452) ($309,428) $0 $656,683 $104,460,377 $0 $6,504,301 $0 $1,031,777 $5,472,524 $177,351 ($3,593,920) $2,055,955 $0 ($5,279,232) $0 $0 2,011,440 1,095,167 393,393 $17,849,612 $0 $212,613 ($76,001) $0 $589,840 $0 $1,031,777 $94,922,798 $9.06 $0.51 ($0.27) ($0.51) $0 $0 $8.79 1 $0 $0
EX-27.CLASSA 16 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PUTNAM OHIO TAX EXEMPT INCOME FUND II ANNUAL REPORT(CLASS A) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000794616 PUTNAM OHIO TAX EXEMPT INCOME FUND II YEAR MAY-31-1994 MAY-31-1994 $206,285,443 $208,307,448 $5,456,323 $393,677 $5,446 $214,162,894 $517,808 $0 $1,556,673 $2,074,481 $0 $210,271,212 22,067,955 19,213,935 $0 ($115,422) $0 ($89,382) $2,022,005 $212,088,413 $0 $13,398,569 $0 $2,039,907 $11,358,662 $2,087,769 ($10,780,015) $2,666,416 $0 ($10,890,642) ($2,534,385) $0 3,670,439 1,764,710 948,291 $34,209,619 $0 $1,153,472 ($169,743) $0 $1,206,826 $0 $2,039,907 $192,581,353 $9.26 $0.53 ($0.35) ($0.52) ($0.12) $0 $8.80 1 0 0
EX-27.CLASSB 17 FINANCIAL DATA SCHEDULE
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II ANNUAL REPORT(CLASS B) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000792288 PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II YEAR MAY-31-1994 MAY-31-1994 $260,408,520 $260,620,345 $13,212,671 $270,740 $33,061 $274,136,817 $396,101 $0 $6,204,652 $6,600,753 $0 $267,590,185 2,542,905 0 $0 ($118,519) $0 ($147,427) $211,825 $267,536,064 $0 $17,128,279 $0 $2,546,667 $14,581,612 $1,623,609 ($13,149,699) $3,055,522 $0 ($13,985,915) ($229,597) ($6,844) 2,685,178 196,505 54,232 $51,925,484 $0 $2,850,212 $67,554 $0 $1,549,215 $0 $2,546,667 $13,789,855 $9.71 $0.41 ($0.51) ($0.41) ($0.15) $0 $9.05 2 $0 $0
EX-27.CLASSB 18 FINANCIAL DATA SCHEDULE
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II ANNUAL REPORT (CLASS B) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000794611 PUTNAM MICHIGAN TAX EXEMPT INCOME FUND II YEAR MAY-31-1994 MAY-31-1994 $135,955,164 $138,197,378 $2,922,900 $447,542 $2,281 $141,570,101 $1,625,847 $0 $772,383 $2,398,230 $0 $137,717,523 1,152,226 0 $0 ($52,244) $0 ($735,622) $2,242,214 $139,171,871 $0 $8,573,754 $0 $1,319,446 $7,254,308 $300,897 ($5,751,612) $1,803,593 $0 ($6,991,204) ($340,991) ($729,509) 1,214,204 80,978 19,000 $26,097,848 $0 $556,512 ($96,468) $0 $782,934 $0 $1,319,446 $5,250,477 $9.43 $0.41 ($0.46) ($0.40) $0 ($0.08) $8.90 2 $0 $0
EX-27.CLASSB 19 FINANCIAL DATA SCHEDULE
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PUTNAM MINNESOTA TAX INCOME FUND II ANNUAL REPORT(CLASS B) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000794612 PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II YEAR MAY-31-1994 MAY-31-1994 $103,227,573 $103,815,506 $3,724,422 $30,720 $3,360 $107,574,008 $2,616,846 $0 $496,785 $3,113,631 $0 $104,177,574 1,011,320 0 $0 ($64,452) ($309,428) $0 $656,683 $104,460,377 $0 $6,504,301 $0 $1,031,777 $5,472,524 $177,351 ($3,593,920) $2,055,955 $0 ($161,707) $0 $0 1,042,351 41,211 10,180 $17,849,612 $0 $212,613 ($76,001) $0 $589,840 $0 $1,031,777 $3,789,015 $9.18 $0.39 ($0.41) $0.00 ($0.39) $0 $8.77 2 $0 $0
EX-27.CLASSB 20 FINANCIAL DATA SCHEDULE
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PUTNAM OHIO TAX EXEMPT INCOME FUND II ANNUAL REPORT (CLASS B) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000794616 PUTNAM OHIO TAX EXEMPT INCOME FUND II YEAR MAY-31-1994 MAY-31-1994 $206,285,443 $208,307,448 $5,456,323 $393,677 $5,446 $214,162,894 $517,808 $0 $1,556,673 $2,074,481 $0 $210,271,212 2,042,303 $0 $0 $115,422 $0 ($89,382) $2,022,005 $212,088,413 $0 $13,398,569 $0 $2,039,907 $11,358,662 $2,087,769 ($10,780,015) $2,666,416 $0 ($10,890,642) ($107,263) $0 2,105,600 98,765 35,468 $34,209,619 $1,153,472 $1,153,472 ($169,743) $0 $1,206,826 $0 $2,039,907 $9,609,983 $9.37 $0.40 ($0.46) ($0.40) ($0.12) $0 $8.79 2 0 0
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