-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fs6kCccLva9Ong9k8ykTtfVOonRRqP/jnz075B8LDl2y3Sqppaulte7TkjmJ7Utc gyv6ZFZd67r1gwfvzXMddw== 0000869392-96-000007.txt : 19960506 0000869392-96-000007.hdr.sgml : 19960506 ACCESSION NUMBER: 0000869392-96-000007 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960503 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM ARIZONA TAX EXEMPT INCOME FUND CENTRAL INDEX KEY: 0000869392 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046665534 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-37992 FILM NUMBER: 96555888 BUSINESS ADDRESS: STREET 1: PUTNAM INVESTMENTS INC STREET 2: ONE POST OFFICE SQUARE MAIL STOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 8002251585 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND II CENTRAL INDEX KEY: 0000792288 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046626127 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-05416 FILM NUMBER: 96555889 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 / CENTRAL INDEX KEY: 0000794611 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046626130 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-08923 FILM NUMBER: 96555890 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: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046626128 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-08916 FILM NUMBER: 96555891 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 PENNSYLVANIA TAX EXEMPT INCOME FUND CENTRAL INDEX KEY: 0000794615 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 043057637 STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-28321 FILM NUMBER: 96555892 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 MAIL ADDRESS: STREET 1: ONE POST OFFICE SQU CITY: BOSTON STATE: MA ZIP: 02109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM OHIO TAX EXEMPT INCOME FUND II CENTRAL INDEX KEY: 0000794616 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046626129 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-08924 FILM NUMBER: 96555893 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND CENTRAL INDEX KEY: 0000857463 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 043073948 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-32550 FILM NUMBER: 96555894 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQUARE CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM FLORIDA TAX EXEMPT INCOME FUND CENTRAL INDEX KEY: 0000864488 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 043091965 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-35677 FILM NUMBER: 96555895 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQUARE STREET 2: MAILSTOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 8002551581 497 1 REVISED PROSPECTUS PROSPECTUS OCTOBER 1, 1995 , AS REVISED MAY 1, 1996 PUTNAM ARIZONA TAX EXEMPT INCOME FUND (THE "ARIZONA FUND") PUTNAM FLORIDA TAX EXEMPT INCOME FUND (THE "FLORIDA FUND") PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND (THE "MASSACHUSETTS FUND") PUTNAM MICHIGAN TAX EXEMPT INCOME FUND (THE "MICHIGAN FUND") PUTNAM MINNESOTA TAX EXEMPT INCOME FUND (THE "MINNESOTA FUND") PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND (THE "NEW JERSEY FUND") PUTNAM OHIO TAX EXEMPT INCOME FUND (THE "OHIO FUND") PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND (THE "PENNSYLVANIA FUND") CLASS A, B AND M SHARES INVESTMENT STRATEGY: TAX-ADVANTAGED This prospectus explains concisely what you should know before investing in 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, 1995 statement of additional information ("SAI"), as amended from time to time. For a free copy of the SAI or other information, call Putnam Investor Services at 1-800-225-1581. The SAI has been filed with the Securities and Exchange Commission and is incorporated into this prospectus by reference. Each fund invests primarily in a portfolio of tax-exempt securities (as defined on page 29) , which may include securities of issuers other than the relevant state and its political subdivisions. 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 AMOUNT INVESTED. BOSTON*LONDON*TOKYO ABOUT THE FUNDS EXPENSES SUMMARY PAGE NUMBER This section describes the sales charges, management fees, and annual operating expenses that apply to a fund's various classes of shares. Use it to help you estimate the impact of transaction costs on your investment over time. FINANCIAL HIGHLIGHTS PAGE NUMBER Study this table to see, among other things, how a fund performed each year for the past 10 years or since it began investment operations if it has been in operation for less than 10 years. OBJECTIVES PAGE NUMBER Read this section to make sure a fund's objectives are consistent with your own. HOW THE FUNDS PURSUE THEIR OBJECTIVES PAGE NUMBER This section explains in detail how a fund seeks its investment objectives. RISK FACTORS. All investments entail some risk. Read this section to make sure you understand certain risks that may be involved when investing in a fund. HOW PERFORMANCE IS SHOWN PAGE NUMBER This section describes and defines the measures used to assess a fund's performance. All data are based on a fund's past investment results and do not predict future performance. HOW THE FUNDS ARE MANAGED PAGE NUMBER Consult this section for information about a fund's management, allocation of a fund's expenses, and how purchases and sales of securities are made for a fund. ORGANIZATION AND HISTORY PAGE NUMBER In this section, you will learn when a fund was introduced, how it is organized, how it may offer shares, and who its Trustees are. ABOUT YOUR INVESTMENT ALTERNATIVE SALES ARRANGEMENTS PAGE NUMBER Read this section for descriptions of the classes of shares this prospectus offers and for points you should consider when making your choice. HOW TO BUY SHARES PAGE NUMBER This section describes the ways you may purchase shares and tells you the minimum amounts required to open various types of accounts. It explains how sales charges are determined and how you may become eligible for reduced sales charges on each class of shares. DISTRIBUTION PLANS PAGE NUMBER This section tells you what distribution fees are charged against each class of shares. HOW TO SELL SHARES PAGE NUMBER In this section you can learn how to sell shares of a fund, either directly to the fund or through an investment dealer. HOW TO EXCHANGE SHARES PAGE NUMBER Find out in this section how you may exchange shares of a fund for shares of other Putnam funds. The section also explains how exchanges can be made without sales charges and the conditions under which sales charges may be required. HOW A FUND VALUES ITS SHARES PAGE NUMBER This section explains how a fund determines the value of its shares. HOW A FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION PAGE NUMBER This section describes the various options you have in choosing how to receive dividends from a fund. It also discusses the federal tax status of the payments and counsels shareholders to seek specific advice about their own situation. ABOUT PUTNAM INVESTMENTS, INC. PAGE NUMBER Read this section to learn more about the companies that provide the marketing, investment management, and shareholder account services to Putnam funds and their shareholders. APPENDIX Securities ratings PAGE NUMBER ABOUT THE FUNDS EXPENSES SUMMARY Expenses are one of several factors to consider when investing. The following table summarizes your maximum transaction costs and expenses incurred in its most recent fiscal year. The examples show the cumulative expenses attributable to a hypothetical $1,000 investment over specified periods. CLASS A CLASS B CLASS M SHARES SHARES SHARES SHAREHOLDER TRANSACTION EXPENSES Maximum sales charge imposed on purchases (as a percentage of offering price) 4.75% NONE* 3.25%* Deferred sales charge 5.0% in the first (as a percentage year, declining of the lower of to 1.0% in the original purchase sixth year, and price or redemption eliminated proceeds) NONE** thereafter NONE ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets) Total fund Management 12b-1 Other operating fees fees expenses expenses - ---------- ----- ------------------- Arizona fund class A 0.60% 0.20% 0.13% 0.93% class B 0.60% 0.85% 0.13% 1.58% class M 0.60% 0.50% 0.13% 1.23% Florida fund class A 0.60% 0.20% 0.11% 0.91% class B 0.60% 0.85% 0.10% 1.55% class M 0.60% 0.50% 0.11% 1.21% Massachusetts fund class A 0.60% 0.20% 0.09% 0.89% class B 0.60% 0.85% 0.08% 1.53% class M 0.60% 0.50% 0.09% 1.19% Michigan fund class A 0.60% 0.20% 0.15% 0.95% class B 0.60% 0.85% 0.14% 1.59% class M 0.60% 0.50% 0.15% 1.25% Minnesota fund class A 0.60% 0.20% 0.19% 0.99% class B 0.60% 0.85% 0.18% 1.63% class M 0.60% 0.50% 0.19% 1.29% New Jersey fund class A 0.60% 0.20% 0.15% 0.95% class B 0.60% 0.85% 0.14% 1.59% class M 0.60% 0.50% 0.15% 1.25% Ohio fund class A 0.60% 0.20% 0.13% 0.93% class B 0.60% 0.85% 0.13% 1.58% class M 0.60% 0.50% 0.13% 1.23% Pennsylvania fund class A 0.60% 0.20% 0.04% 0.84% class B 0.60% 0.85% 0.04% 1.49% class M 0.60% 0.50% 0.04% 1.14% The tables are provided to help you understand the expenses of investing in each fund and your share of the operating expenses each fund incurs. Expense information shown in the table for the Arizona, Florida, New Jersey and Pennsylvania funds has been annualized based on the expenses for each fund's most recent fiscal period. For the Arizona fund, actual management fees for class A and class B shares were 0.45%, actual 12b-1 fees were 0.15% and 0.64%, respectively, actual "Other expenses " were 0.10%, and actual total operating expenses were 0.70% and 1.19%, respectively. For the Florida fund, actual management fees for class A and class B shares were 0.55%, actual 12b-1 fees were 0.18% and 0.78% , respectively, actual "Other expenses" were 0.10% and 0.09% , respectively, and actual total operating expenses were 0.83% and 1.42% , respectively. For the New Jersey fund actual management fees for class A and class B shares were 0.55%, actual 12b-1 fees were 0.18% and 0.78%, respectively, actual "Other expenses" were 0.14% and 0.13%, respectively, and actual total operating expenses were 0.88% and 1.46%, respectively. For the Pennsylvania fund, actual management fees for class A and class B shares were 0.15%, actual 12b-1 fees were 0.05% and 0.22%, respectively, actual "Other expenses" were 0.01% and actual total operating expenses were 0.21% and 0.38%, respectively. The 12b-1 fees for class A, B and M shares for each fund reflect amounts currently payable under each distribution plan. For each fund's class M shares, management fees and "Other expenses" are based on the corresponding expenses for class A shares. EXAMPLES Your investment of $1,000 would incur the following expenses, assuming 5% annual return and, except as indicated, redemption at the end of each period: 1 year 3 years 5 years 10 years ARIZONA FUND CLASS A $57 $76 $97 $156 CLASS B $66 $80 $106 $170*** CLASS B (NO REDEMPTION)$16 $50 $86 $170*** CLASS M $45 $70 $98 $177 FLORIDA FUND CLASS A $56 $75 $95 $154 CLASS B $66 $79 $104 $167*** CLASS B (NO REDEMPTION)$16 $49 $84 $167*** CLASS M $44 $70 $97 $174 MASSACHUSETTS FUND CLASS A $56 $75 $94 $152 CLASS B $66 $78 $103 $165*** CLASS B (NO REDEMPTION)$16 $48 $83 $165*** CLASS M $44 $69 $96 $172 MICHIGAN FUND CLASS A $57 $76 $98 $159 CLASS B $66 $80 $107 $172*** CLASS B (NO REDEMPTION)$16 $50 $87 $172*** CLASS M $45 $71 $99 $179 MINNESOTA FUND CLASS A $57 $76 $100 $163 CLASS B $67 $81 $109 $176*** CLASS B (NO REDEMPTION)$17 $51 $89 $176*** CLASS M $45 $72 $101 $183 NEW JERSEY FUND CLASS A $57 $76 $98 $159 CLASS B $66 $80 $107 $172*** CLASS B (NO REDEMPTION)$16 $50 $87 $172*** CLASS M $45 $71 $99 $179 OHIO FUND CLASS A $57 $76 $97 $156 CLASS B $66 $80 $106 $170*** CLASS B (NO REDEMPTION)$16 $50 $86 $170*** CLASS M $45 $70 $98 $177 PENNSYLVANIA FUND CLASS A $56 $73 $92 $146 CLASS B $65 $77 $101 $160*** CLASS B (NO REDEMPTION)$15 $47 $81 $160*** CLASS M $44 $68 $93 $167 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 varies. * The higher 12b-1 fees borne by class B and class M shares may cause long-term shareholders to pay more than the economic equivalent of the maximum permitted front-end sales charge on class A shares. ** 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 . 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 "Alternative sales arrangements." FINANCIAL HIGHLIGHTS The following tables present per share financial information for the funds. No class M shares were outstanding during these periods for the Arizona and Pennsylvania funds. 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 1995 fiscal year are incorporated by reference into this prospectus. Each fund's annual report, which contains additional unaudited performance information, is available without charge upon request. Financial highlights* (For a share outstanding throughout the period) OBJECTIVES EACH FUND SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX AND, PERSONAL INCOME TAX (IF ANY) OF ITS RESPECTIVE STATE AS PUTNAM INVESTMENT MANAGEMENT, INC., THE FUNDS' INVESTMENT MANAGER ("PUTNAM MANAGEMENT"), BELIEVES IS CONSISTENT WITH PRESERVATION OF CAPITAL. None of the funds are intended to be a complete investment program, and there is no assurance that any fund will achieve its objective. HOW THE FUNDS PURSUE THEIR OBJECTIVES BASIC INVESTMENT STRATEGY EACH FUND SEEKS ITS OBJECTIVE BY FOLLOWING THE FUNDAMENTAL INVESTMENT POLICY OF INVESTING AT LEAST 80% OF ITS NET ASSETS IN TAX-EXEMPT SECURITIES (WHICH ARE DESCRIBED BELOW), EXCEPT WHEN INVESTING FOR DEFENSIVE PURPOSES DURING TIMES OF ADVERSE MARKET CONDITIONS. Under normal market conditions, the Florida fund will invest at least 65% of its net assets in tax-exempt securities issued by the State of Florida, its political subdivisions and their agencies and instrumentalities and in other tax-exempt securities which are exempt from the Florida intangibles tax. The Florida fund generally will seek to select investments which will enable its shares to be exempt from this tax, except when pursuing the alternative investment strategies described below. Such investments at times may have lower yields than other tax-exempt securities available for investment by the Florida fund. This investment strategy could also result in higher portfolio turnover and related transaction costs. See "How a fund makes distributions to shareholders ; tax information --Florida taxes." Under current law, to the extent distributions by a fund are derived from interest that is exempt from federal income tax and personal or gross income tax in the relevant state (other than any applicable federal or state alternative minimum tax or any state minimum corporate income tax). Such distributions will also be exempt from such taxes, provided a fund satisfies certain requirements described below . See "How a fund makes distributions to its shareholders; tax information . " Florida does not impose an individual income tax but imposes certain additional requirements on the composition of the Florida fund for shares of that fund to be exempt from the Florida intangibles tax. 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 money market instruments or in cash. Subject to Trustee approval, each fund's investments in tax-exempt securities and taxable obligations 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) or Standard & Poor's ("S&P") (AAA, AA, A, BBB or BB), or unrated securities that Putnam Management determines are of comparable quality. If such Trustee approval is not obtained, this prospectus will be revised. No funds will purchase a security rated both Ba by Moody's and BB by S&P at the time of purchase, or, if unrated, determined by Putnam Management to be of comparable quality if, as a result, more than 25% of the fund's total assets would be of that quality. The rating services' descriptions of the five highest grades of debt securities are included in the appendix to this prospectus. Securities rated Ba or BB (and unrated securities of comparable quality) are considered to have speculative elements, with large uncertainties or major exposures to adverse conditions. Investors should carefully consider their ability to assume the risks of owning shares of a mutual fund which may invest in securities in the lower rating categories. Putnam Management expects that each fund will generally invest in tax-exempt securities of longer maturities (10 years or more), but each fund may invest in tax-exempt securities having a broad range of maturities. Under the Pennsylvania fund's investment policies, Putnam Management will not trade the fund's securities for the purpose of seeking profits. It is a fundamental policy of the fund that its portfolio securities may be varied only (i) to eliminate unsafe investments and investments not consistent with the preservation of the fund's capital or the tax status of the fund's investments; (ii) to honor redemption orders and meet anticipated redemption requirements and negate gains from discount purchases; (iii) to reinvest the earnings from securities in like securities; or (iv) to defray normal administrative expenses. For purposes of this fundamental policy, the fund may vary its portfolio securities if (i) there has been an adverse change in a security's credit rating or in that of its issuer or in Putnam Management's credit analysis of the security or its issuer; (ii) there has been, in the opinion of Putnam Management, a deterioration or anticipated deterioration in general economic or market conditions affecting issuers of tax-exempt securities, or a change or anticipated change in interest rates; (iii) adverse changes or anticipated changes in market conditions or economic or other factors temporarily affecting the issuers of one or more portfolio securities make necessary or desirable the sale of such security or securities in anticipation of the fund's repurchase of the same or comparable securities at a later date; or (iv) Putnam Management engages in the alternative investment practices described below. In addition, for purposes of this fundamental policy, the fund may purchase or sell financial futures contracts and related options on securities and securities indices for hedging purposes. As a result of these limitations, the fund may have less flexibility than other mutual funds in responding to market or interest rate changes and to new investment opportunities. ALTERNATIVE MINIMUM TAX INTEREST INCOME FROM CERTAIN TYPES OF TAX-EXEMPT SECURITIES MAY BE SUBJECT TO FEDERAL ALTERNATIVE MINIMUM TAX. In determining compliance with the 80% test described above, it is a fundamental policy of each fund to exclude from the definition of tax-exempt securities any securities the interest from which may be subject to the federal alternative minimum tax for individuals. An investment in a fund may subject corporate shareholders to the federal alternative minimum tax , because a portion of tax-exempt income is generally included in the alternative minimum taxable income of corporations. ALTERNATIVE INVESTMENT STRATEGIES At times Putnam Management may judge that conditions in the markets for 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 without limit 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; 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 these alternative strategies. TAX-EXEMPT SECURITIES THE TERM "TAX -EXEMPT SECURITIES , " WHEN USED WITH RESPECT TO A PARTICULAR FUND, INCLUDES OBLIGATIONS OF A STATE AND ITS POLITICAL SUBDIVISIONS AND THEIR AGENCIES, INSTRUMENTALITIES OR OTHER GOVERNMENTAL UNITS, THE INTEREST ON WHICH, IN THE OPINION OF BOND COUNSEL, IS EXEMPT FROM FEDERAL INCOME TAX AND (EXCEPT FOR FLORIDA, WHICH HAS NO PERSONAL INCOME TAX) PERSONAL OR GROSS INCOME TAX OF THE RELEVANT STATE. 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, or to fund short-term cash requirements. They 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. Short-term tax-exempt securities may be issued as interim financing in anticipation of tax collections, revenue receipts or bond sales to finance various public purposes. Tax-exempt securities also include obligations issued by certain other governmental entities, such as U.S. territories, if these debt obligations generate interest income that is exempt from federal income tax and (except for Florida , which has no personal income tax) the personal or gross income tax of the relevant state. THE TWO PRINCIPAL CLASSIFICATIONS OF 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, whose credit quality is tied to the private user of the facilities. A fund may also invest in securities representing interests in tax-exempt securities, known as "inverse floating obligations" or "residual interest bonds." These obligations pay interest rates that vary inversely with 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. These securities have the effect of providing a degree of investment leverage. They will generally respond to changes in market interest rates more rapidly than fixed-rate long-term securities (typically twice as fast). 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. RISK FACTORS THE VALUES OF TAX-EXEMPT SECURITIES FLUCTUATE IN RESPONSE TO CHANGES IN INTEREST RATES. A decrease in interest rates will generally result in an increase in the value of a fund's assets. Conversely, during periods of rising interest rates, the value of a fund's assets will generally decline. The magnitude of these fluctuations generally is greater for securities with longer maturities. However, the yields on such securities are also generally higher. In addition, the values of fixed-income securities are 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 a fixed-income security and changes 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 income derived from these securities, but will affect a fund's net asset value. A fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Putnam Management will monitor the investment to determine whether continued investment in the security will assist in meeting a fund's investment objective. EACH FUND MAY INVEST IN BOTH HIGHER-RATED AND LOWER-RATED TAX- EXEMPT SECURITIES. LOWER-RATED SECURITIES ARE SECURITIES RATED BELOW BAA BY MOODY'S OR BBB BY S&P, AND ARE COMMONLY KNOWN AS "JUNK BONDS." 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. The tables below show the percentages of fund assets invested during fiscal 1995 in securities assigned to various rating categories by S&P , or , if unrated by S&P, assigned to comparable rating categories by Moody's and in unrated securities determined by Putnam Management to be of comparable quality:
ARIZONA FUND FLORIDA FUND MASSACHUSETTS FUND MICHIGAN FUND ------------------------- -------------------------- ------------------------ ------------------------ 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 PERCENTAGE QUALITY, AS AS PERCENTAGE QUALITY, AS AS PERCENTAGE QUALITY, AS AS PERCENTAGE QUALITY, AS OF NET PERCENTAGE OF OF NET PERCENTAGE OF OF FUND PERCENTAGE OF OF NET PERCENTAGE OF RATINGS ASSETS NET ASSETS ASSETS NET ASSETS ASSETS FUND ASSETS ASSETS NET ASSETS - ------------------------------------------------------------------------------------------------------------------------ "AAA" 40.83% - 62.93% - 41.37% 0.32% 48.48% - "AA" 16.14 - 10.05 - 4.76 0.22 9.38 - "A" 16.83 0.41% 7.54 0.58% 16.02 0.61 7.77 2.93% "BBB" 13.62 5.34 13.75 0.52 13.84 4.42 19.67 3.59 "BB" 1.86 4.82 - 2.96 1.23 15.94 0.64 6.32 "B" - 0.15 0.05 1.62 - 1.27 1.22 - ------ ------ ------ ------ ------- ------ ------ ----- 89.28% 10.72% 94.32% 5.68% 77.22% 22.78% 87.16% 12.84% - ------------------------------------------------------------------------------------------------------------------------
MINNESOTA FUND NEW JERSEY FUND OHIO FUND PENNSYLVANIA FUND ------------------------- -------------------------- ------------------------ ------------------------ 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 PERCENTAGE QUALITY, AS AS PERCENTAGE QUALITY, AS AS PERCENTAGE QUALITY, AS AS PERCENTAGE QUALITY, AS OF FUND PERCENTAGE OF OF FUND PERCENTAGE OF OF FUND PERCENTAGE OF OF FUND PERCENTAGE OF RATINGS ASSETS FUND ASSETS ASSETS FUND ASSETS ASSETS FUND ASSETS ASSETS FUND ASSETS - ------------------------------------------------------------------------------------------------------------------------ "AAA" 34.80% - 43.83% - 57.43% 0.56% 56.46% 0.33% "AA" 21.75 - 15.61 0.05% 7.78 0.22 7.10 - "A" 25.18 - 13.61 1.32 7.16 - 11.03 - "BBB" 10.86 2.50% 7.80 2.32 13.28 6.63 15.17 3.61 "BB" - 4.91 0.38 15.08 1.21 5.42 1.85 3.91 "B" - - - - - 0.31 0.30 0.24 ------ ------ ------ ------ ------- ------ ------ ------ 92.59% 7.41% 81.23% 18.77% 86.86% 13.14% 91.91% 8.09% - ------------------------------------------------------------------------------------------------------------------------ /TABLE Putnam Management seeks to minimize the risks of investing in lower-rated securities through careful investment analysis. However, the amount of information available 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. When a 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 ability than would be the case if the fund were investing in 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 that may invest in securities in certain of the lower rating categories. 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 all or a major portion. 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 these securities when Putnam Management believes it advisable to do so or may be able to sell the securities only at prices lower than if they were more widely held. Under these 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 of these securities, a fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on the securities. This could 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. The ability of a holder of a tax-exempt security to enforce the terms of that security in a bankruptcy proceeding may be more limited than would be the case with respect to privately-issued securities. 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, that 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 that 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 tax-exempt securities is generally less liquid than that for taxable fixed-income securities, particularly for securities in the lower rating categories. Thus it may be more difficult from time to time to value or buy and sell certain securities. FOR ADDITIONAL INFORMATION CONCERNING THE RISKS ASSOCIATED WITH INVESTING IN SECURITIES IN THE LOWER RATING CATEGORIES, SEE THE SAI. SINCE THE FUNDS INVEST PRIMARILY IN TAX-EXEMPT SECURITIES, THE VALUE OF EACH FUND'S SHARES MAY BE ESPECIALLY AFFECTED BY FACTORS PERTAINING TO THE ECONOMY OF THE RELEVANT STATE AND OTHER FACTORS AFFECTING THE ABILITY OF ISSUERS OF 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 tax-exempt securities may be affected from time to time by economic, political and demographic conditions within or outside of 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 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. The facility's economic status, in turn, could be affected by economic, political and demographic conditions affecting the particular state. Any reduction in the actual or perceived ability of an issuer of tax-exempt securities to meet its obligations would be likely to have an adverse effect on the market value and marketability of its obligations. A reduction in the rating of the issuer's outstanding securities would be included among these factors. Doubts surrounding such an issuer's ability to meet its obligations could adversely affect the values of other tax-exempt securities as well. DIVERSIFICATION AND CONCENTRATION POLICIES Under the Investment Company Act of 1940 and the Internal Revenue Code of 1986, each of the Massachusetts, Michigan, Minnesota Ohio and Pennsylvania funds may generally invest up to 25% of its total assets in the securities of any one issuer, and each of the Arizona, Florida and New Jersey funds, may generally invest up to 25% of its total assets in the securities of each of any two issuers. Otherwise, each of the funds may not invest more than 5% of its assets in the securities of any one issuer. Because of these limitations and the relatively small number of issuers of tax-exempt securities available to each fund, each fund is more likely to invest a higher percentage of its assets in the securities of a single issuer than an investment company that invests in a broad range of tax-exempt securities. This practice involves an increased risk of loss to a fund if an issuer were unable to make interest or principal payments or if the market value of these securities were to decline. NO FUND WILL INVEST MORE THAN 25% OF ITS TOTAL ASSETS IN ANY ONE INDUSTRY. Governmental issuers of tax-exempt securities are not considered part of any "industry." However, for this purpose (and for diversification purposes discussed above) tax-exempt securities backed only by the assets and revenues of nongovernmental users may be deemed to be issued by such nongovernmental users. Thus, the 25% limitation would apply to these obligations. It is possible that a fund may invest more than 25% of its assets in a broader segment of the market for 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 these obligations could be supported by the credit of governmental issuers or by the credit of nongovernmental issuers engaged in a number of industries, economic, business, political and other developments generally affecting the revenues of their issuers may have a general adverse effect on all tax-exempt securities in a market segment. (Examples would include proposed legislation or pending court decisions affecting the financing of such projects and market factors affecting the demand for their services or products.) Each fund reserves the right to invest more than 25% of its assets in industrial development bonds and private activity securities. INVESTMENTS IN PREMIUM SECURITIES During a period of declining interest rates, many of each fund's portfolio investments will likely bear coupon rates that are higher than current market rates, regardless of whether these securities were originally purchased at a premium. These 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 these "premium" securities tend to approach the principal amount as the securities 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 these periods would initially receive higher monthly distributions (derived from the higher coupon rates payable on that fund's investments) than might be available from alternative investments bearing current market interest rates. But the investor 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." PORTFOLIO TURNOVER The length of time a fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by a fund is known as "portfolio turnover." As a result of a fund's investment policies, under certain market conditions a fund's portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover generally involves some expense to a fund, including brokerage commissions or dealer markups and other transaction costs on the sale of securities and reinvestment in other securities. These transactions may result in realization of taxable capital gains. Portfolio turnover rates for the life of each fund are shown in the section "Financial highlights." FINANCIAL FUTURES AND OPTIONS EACH FUND MAY PURCHASE AND SELL FINANCIAL FUTURES CONTRACTS FOR HEDGING PURPOSES. Futures contracts on the 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 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 tax-exempt securities that such fund owns or expects to purchase. Each fund may also purchase and sell put and call options on index futures or on the indexes directly, in addition to or as an alternative to purchasing and selling index futures. For hedging purposes, each fund may also purchase and sell futures contracts and related options on U.S. Treasury securities, including U.S. Treasury bills, notes and bonds ("U.S. government securities") and options directly on U.S. government securities. U.S. government securities futures and options would be used for purposes similar to index futures and options. In addition, to the extent consistent with its investment restrictions, each fund may purchase put and call options on, or warrants to purchase tax-exempt securities, either directly or through custodial arrangements in which the funds and other investors own an interest in one or more options on tax-exempt 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 from the possibility of imperfect correlations between movements in the prices of financial futures and related options and movements in the prices of the underlying bond index or U.S. government securities or of the tax-exempt securities that 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 the potential inability to close out futures or options positions. 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 the use of futures and options transactions. A MORE DETAILED EXPLANATION OF FINANCIAL FUTURES AND OPTIONS TRANSACTIONS AND THE RISKS ASSOCIATED WITH THEM IS INCLUDED IN THE SAI. OTHER INVESTMENT PRACTICES EACH FUND MAY ALSO ENGAGE IN THE FOLLOWING INVESTMENT PRACTICES, EACH OF WHICH MAY RESULT IN TAXABLE INCOME OR CAPITAL GAINS AND INVOLVES CERTAIN SPECIAL RISKS. THE SAI 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 involves 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. DERIVATIVES Certain of the instruments in which a fund will invest, such as futures contracts , options and inverse floating obligations, are considered to be "derivatives." Derivatives are financial instruments whose value depends upon, or is derived from, the value of an underlying asset, such as a security or an index. Further information about these instruments and the risks involved in their use is included elsewhere in this prospectus and in the SAI. 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) (For the Massachusetts, Michigan, Minnesota, Ohio funds with respect to 100% of the total assets, for the Pennsylvania fund with respect to 75% of total assets and for Arizona, Florida and New Jersey funds with respect to 50% of total assets) 5% of total assets in the securities of any one issuer (other than obligations of the U.S. government or its agencies or instrumentalities, and , for the Massachusetts, Michigan, Minnesota and Ohio funds, tax-exempt securities);* (b) 5% of its net assets 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 (except obligations of the U.S. government, or its agencies or instrumentalities and obligations backed by the faith, credit and taxing power of any person authorized to issue tax-exempt securities); (c) 25% of total assets in any one industry (other than tax-exempt securities backed by the governmental issuers and obligations of the U.S. government, its agencies or instrumentalities);* and (d) 15% of its net assets in securities that are not readily marketable, securities restricted as to resale (excluding securities determined by the Trustees (or the person designated by them 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 investment policies. See the SAI for the full text of these policies and the funds' other fundamental investment policies. Except for investment policies designated as fundamental in this prospectus or the SAI, and the policy that under normal market conditions at least 80% of each fund's net assets will be invested in 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 SAI are not fundamental investment 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 THAT FUND. "Yield" for each class of shares is calculated by dividing the annualized net investment income per share during a recent 30-day period by the maximum public offering price per share of the class on the last day of that period. For purposes of calculating yield, 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 net investment income as determined for tax purposes, which may not reflect amortization in the same manner. See "How the funds pursue their objectives -- Investments in premium securities." Yield is based on the price of the shares, including the maximum initial sales charge in the case of class A and class M shares, but does not reflect 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 each 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 class's tax-exempt yield. "Total return" for the one-, five- and ten-year periods (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 a fund invested at the maximum public offering price (in the case of class A and class M 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 the sales charge were used. ALL DATA ARE BASED ON PAST INVESTMENT RESULTS AND DO 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 which class of shares the investor purchases. 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 with 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 that of various indexes. See the SAI. 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. Each fund pays Putnam Management a quarterly fee for these services based on that fund's average net assets. See "Expenses summary" and the SAI. The following officers of Putnam Management , have had primary responsibility for the day-to-day management of the indicated funds' portfolios since the year stated below: Business experience Year (at least 5 years) ------- ----------------- Howard K. Manning Employed as an investment Senior Vice President professional by Putnam Management Arizona fund 1995 since 1986. Michigan fund 1993 Minnesota fund 1993 Richard P. Wyke Employed as an investment Senior Vice President professional by Putnam Management Florida fund 1990 since 1987. Massachusetts 1996 Pennsylvania fund 1990 Leslie J. Burke Employed as an investment Vice President professional by Putnam New Jersey fund 1995 Management since 1992. Prior to 1992, Ms. Burke was a Research Associate and Municipal Bond Trader at Fidelity Management and Research Company. James M. Prusko Employed as an investment Assistant Vice President professional by Putnam Ohio fund 1995 Management since 1992. Prior to 1992, Mr. Prusko was a Sales and Trading Associate at Salomon Brothers. 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. Putnam Arizona Tax Exempt Income Fund was organized on November 9, 1990. Putnam Florida Tax Exempt Income Fund was organized on June 27, 1990. Putnam Massachusetts Tax Exempt Income Fund, which prior to October 1, 1995 was known as Putnam Massachusetts Tax Exempt Income Fund II was organized on March 7, 1986. Each of Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund and Putnam Ohio Tax Exempt Income Fund, which prior to October 1, 1995 were known as Putnam Michigan Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio Tax Exempt Income Fund II , respectively, were organized on September 2, 1986. Putnam New Jersey Tax-Exempt Income Fund was organized on November 17, 1989. Putnam Pennsylvania Tax Exempt Income Fund was organized on April 20, 1989. 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 of the Massachusetts, Michigan, Minnesota, Ohio and Pennsylvania funds is an open-end, diversified management investment company and each of the Arizona, Florida and New Jersey funds is an open-end, non-diversified management investment company . Each fund has an unlimited number of authorized shares of beneficial interest. Shares of each fund may be divided without shareholder approval into two or more series of shares representing separate investment portfolios. Any such series of shares may be 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 three classes. Only the funds' class A, B and M shares are offered by this prospectus. Each fund may also offer other classes of shares with different sales charges and expenses. Because of these different sales charges and expenses, the investment performance of the classes will vary. For more information, including your eligibility to purchase any other class of shares, contact your investment dealer or Putnam Mutual Funds (at 1-800-225-1581). Each share has one vote, with fractional shares voting proportionally. Shares of each class will vote together as a single class except when otherwise 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. 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, Massachusetts Institute of Technology; JAMESON ADKINS BAXTER, President, Baxter Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American Management Corp.; JOHN A. HILL, Chairman and Managing Director, First Reserve Corporation; ELIZABETH T. KENNAN, President Emeritus and Professor, 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 and Director of Acquisitions , Cabot Partners Limited Partnership; DONALD S. PERKINS,* Director of various corporations, including Cummins Engine Company, Inc., Lucent Technologies, Inc., Springs Industries, Inc. and Time Warner Inc.; GEORGE PUTNAM, III,* President, New Generation Research, Inc.; ELI SHAPIRO, Alfred P. Sloan Professor of Management, Emeritus, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; A.J.C. SMITH,* Chairman, Chief Executive Officer , Marsh & McLennan Companies, Inc.; and W. NICHOLAS THORNDIKE, Director of various corporations and charitable organizations, including Data General Corporation, Bradley Real Estate, Inc. and Providence Journal Co. Also, Trustee of Massachusetts General Hospital and Eastern Utilities Associates. The funds' Trustees are also Trustees of the other Putnam funds. Those marked with an asterisk (*) are or may be deemed to be "interested persons" of the funds, Putnam Management or Putnam Mutual Funds. ABOUT YOUR INVESTMENT ALTERNATIVE SALES ARRANGEMENTS This prospectus offers investors three classes of shares that bear sales charges in different forms and amounts and that 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 certatin sales at net asset value that are subject to a contingent deferred sales charge ("CDSC") . Certain purchases of class A shares qualify for reduced sales charges. Class A shares bear a lower 12b-1 fee than class B and class M shares. See "How to buy shares -- Class A shares" and "Distribution plans." CLASS B SHARES. Class B shares are sold without an initial sales charge, but are subject to a CDSC if redeemed within a specified period after purchase. Class B shares also bear a higher 12b-1 fee than class A and class M shares. Class B shares automatically convert into class A shares, based on relative net asset value, approximately eight years after purchase. For more information about the conversion of class B shares, see the SAI. This discussion will include information about how shares acquired through reinvestment of distributions are treated for conversion purposes. The discussion will also note certain circumstances under which a conversion may not occur. 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. Until conversion, class B shares will have a higher expense ratio and pay lower dividends than class A and class M shares because of the higher 12b-1 fee. See "How to buy shares -- Class B shares" and "Distribution plans." CLASS M SHARES. An investor who purchases class M shares pays a sales charge at the time of purchase that is lower than the sales charge applicable to class A shares. Certain purchases of class M shares qualify for reduced sales charges. Class M shares bear a 12b-1 fee that is lower than class B shares but higher than class A shares. Class M shares are not subject to any CDSC and do not convert into any other class of shares. See "How to buy shares -- Class M shares" and "Distribution plans." WHICH ARRANGEMENT IS BEST 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 or class M 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. 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 write a check for the amount you wish to invest, payable to the fund. Return the completed form and check 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 $25 or more per month through automatic deductions from your bank checking or savings account. Application forms are available from your investment dealer or through Putnam Investor Services. Shares are sold at the public offering price based on the net asset value next determined after Putnam Investor Services receives your order. In most cases, in order to receive that day's public offering price, Putnam Investor Services must receive your order before the close of regular trading on the New York Stock Exchange. If you buy shares through your investment dealer, the dealer must receive your order before the close of regular trading on the New York Stock Exchange to receive that day's public offering price. CLASS A SHARES The public offering price of class A shares is the net asset value plus a sales charge that varies depending on the size of your purchase. The relevant fund receives the net asset value. The sales charge is allocated between your investment dealer and Putnam Mutual Funds as shown in the following table, except when Putnam Mutual Funds, in its discretion, allocates the entire amount to your investment dealer. SALES CHARGE AMOUNT OF AS A PERCENTAGE OF : SALES CHARGE ------------------- REALLOWED TO NET DEALERS AS A AMOUNT OF TRANSACTION AMOUNT OFFERING PERCENTAGE OF AT OFFERING PRICE ($) INVESTED PRICE OFFERING PRICE - ----------------------------------------------------------------- Under 25,000 4.99% 4.75%4.50% 25,000 but under 100,000 4.71 4.50 4.25 100,000 but under 250,000 3.90 3.75 3.50 250,000 but under 500,000 3.09 3.00 2.75 500,000 but under 1,000,000 2.04 2.00 1.85 There is no initial sales charge on purchases of class A shares of $1 million or more. However, a CDSC of 1.00% or 0.50%, respectively, will be imposed if you redeem these 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. Shares purchased by certain investors investing $1 million or more who have made arrangements with Putnam Mutual Funds and whose dealer of record waived the commission as described below are not subject to the CDSC. In determining whether a CDSC is payable, a fund will first redeem shares not subject to any charge. Putnam Mutual Funds receives the entire amount of any CDSC you pay. See the SAI for more information about the CDSC. 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. Each subsequent one-year measuring period for these purposes will begin 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 $47 million and 0.25% thereafter. CLASS B SHARES Class B shares are sold without an initial sales charge, although a CDSC will be imposed if you redeem shares within a specified period after purchase, as shown in the table below. The following types of shares may be redeemed without charge at any time: (i) shares acquired by reinvestment of distributions and (ii) shares otherwise exempt from the CDSC, as described in "How to buy shares --General" below. For other shares, the amount of the charge is determined as a percentage of the lesser of the current market value or the cost of the shares being redeemed. YEAR 1 2 3 4 5 6 7+ - ------------------------------------------------------------- CHARGE 5% 4% 3% 3% 2% 1% 0% In determining whether a CDSC is payable on any redemption, a fund will first redeem shares not subject to any charge, and then shares held longest during the CDSC period. For this purpose, the amount of any increase in a share's value above its initial purchase price is not regarded as a share exempt from the CDSC. Thus, when a share that has appreciated in value is redeemed during the CDSC period, a CDSC is assessed only on its initial purchase price. For information on how sales charges are calculated if you exchange your shares, see "How to exchange shares." Putnam Mutual Funds receives the entire amount of any CDSC you pay. CLASS M SHARES The public offering price of class M shares is the net asset value plus a sales charge that varies depending on the size of your purchase. The relevant fund receives the net asset value. The sales charge is allocated between your investment dealer and Putnam Mutual Funds as shown in the following table, except when Putnam Mutual Funds, at its discretion, allocates the entire amount to your investment dealer. SALES CHARGE AMOUNT OF AS A PERCENTAGE OF: SALES CHARGE ------------------- REALLOWED TO NET DEALERS AS A AMOUNT OF TRANSACTION AMOUNT OFFERING PERCENTAGE OF AT OFFERING PRICE ($) INVESTED PRICE OFFERING PRICE - ----------------------------------------------------------------- Under 50,000 3.36% 3.25% 3.00% 50,000 but under 100,000 2.30 2.25 2.00 100,000 but under 250,000 1.52 1.50 1.25 250,000 but under 500,000 1.01 1.00 1.00 500,000 and above NONE NONE NONE GENERAL YOU MAY BE ELIGIBLE TO BUY CLASS A SHARES AND CLASS M 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 SAI. In addition, sales charges will not apply to class M shares purchased with redemption proceeds received within the prior 90 days from non-Putnam mutual funds on which the investor paid a front-end or contingent deferred sales charge. Each fund may sell class A, class B and class M shares at net asset value without an initial sales charge or a CDSC to a 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, 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, each fund may sell shares at net asset value without an initial sales charge or a CDSC in connection with the acquisition by that fund of assets of an investment company or personal holding company . The CDSC will be waived on redemptions of shares arising out of the death or post- purchase disability of a shareholder or settlor of a living trust account, and on redemptions 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. The SAI contains additional information about purchasing a fund's shares at reduced sales charges. Shareholders of other Putnam funds may be entitled to exchange their shares for, or reinvest distributions from their funds in, shares of the funds 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 will from time to time, at its expense, provide additional promotional incentives or payments to dealers that sell shares of the Putnam funds. These incentives or payments may include payments for travel expenses, including lodging, incurred in connection with trips taken by invited registered representatives and their guests to locations within and outside the United States for meetings or seminars of a business nature. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares. Certain dealers may not sell all classes of shares. DISTRIBUTION PLANS CLASS A DISTRIBUTION PLAN. The class A plans provide for payments by each fund to Putnam Mutual Funds at the annual rate of up to 0.35% of average net assets attributable to class A shares. The Trustees currently limit payments under each class A plan to the annual rate of 0.20% of such assets. Putnam Mutual Funds makes quarterly payments to qualifying dealers (including, for this purpose, certain financial institutions) to compensate them for services provided in connection with sales of class A shares and the maintenance of shareholder accounts. The payments are based on the average net asset value of class A shares 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, known as "NAV shares," by shareholders investing $1 million or more. NAV shares are not subject to the one-year exclusion provision in cases where certain shareholders who invested $1 million or more have made arrangements with Putnam Mutual Funds and the dealer of record waived the sales commission. Putnam Mutual Funds makes quarterly payments at the annual rate of 0.15% of such average net asset value for class A shares outstanding as of March 5, 1993 for the Arizona fund, July 8, 1993 for the Florida and Pennsylvania funds, March 9, 1992 for the Michigan, Minnesota and Ohio funds, May 11, 1992 for the Massachusetts fund and December 31, 1992 for the New Jersey fund, and 0.20% of such average net asset value for shares acquired after such dates (including class A shares acquired through reinvestment of distributions.) CLASS B AND CLASS M DISTRIBUTION PLANS. The class B and class M plans provide for payments by each fund to Putnam Mutual Funds at the annual rate of up to 1.00% of average net assets attributable to class B shares and class M shares, as the case may be. The Trustees currently limit payments under the class B and class M plans to the annual rates of 0.85% and 0.50% of such assets, respectively. 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 or on sales to investors exempt from the CDSC. The amount paid to dealers at the time of the sale of class M shares is set forth above under "How to buy shares -- Class M shares. "In addition, to further compensate dealers (including qualifying financial institutions) for services provided in connection with sales of class B shares and class M shares and the maintenance of shareholder accounts, Putnam Mutual Funds makes quarterly payments to qualifying dealers. The payments are based on the average net asset value of class B shares and class M shares attributable to shareholders for whom the dealers are designated as the dealer of record ,except for the first year's service fees for class B shares, which are prepaid as described above. Putnam Mutual Funds makes the payments at an annual rate of 0.20% of such average net asset value of class B shares and class M shares, as the case may be. Putnam Mutual Funds also pays to dealers, as additional compensation with respect to the sale of class M shares, 0.20% of such average net asset value of class M shares. For class M shares, the total annual payment to dealers equals 0.40% of such average net asset value. GENERAL. Payments under the plans are intended to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of fund shares, including the payments to dealers mentioned above. Putnam Mutual Funds may suspend or modify such payments to dealers. The payments are also subject to the continuation of the 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 SAI 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 this event, 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 shares that 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 you 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. Not all Putnam funds offer all classes of shares. 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. The CDSC will be computed 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. The form is available from 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 that 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 SAI to find out more about the exchange privilege. HOW A FUND VALUE ITS SHARES A 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 are valued 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 a 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 valued at market value. Short-term investments that will mature in 60 days or less are valued 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 A FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; 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 each fund. Distributions paid by a fund with respect to class A shares will generally be greater than those paid with respect to class B and class M shares because expenses attributable to class B and class M shares will generally be higher. You begin earning distributions on the business day after 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: - - Reinvest all distributions in additional shares of your fund without a sales charge; - - 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 - - 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 distributions are 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 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. Fund distributions designated by a fund 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. Each fund may at times purchase tax-exempt securities at a discount from the price at which they were originally issued, especially during periods of rising interest rates. For federal income tax purposes, some or all of the market discount will be included in each fund's ordinary income and will be taxable to you as such when it is distributed to you. 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 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 Putnam Investor Services will notify you of the amount and tax status of distributions paid to you for the preceding year. STATE TAXES GENERAL. Except as described below, to the extent not tax-exempt under the state income tax regime to which you are subject, 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). ARIZONA. It is the published position of the Arizona Department of Revenue that distributions by a regulated investment company are exempt from Arizona state income tax to the extent such dividends are derived from interest on obligations the interest on which is exempt from Arizona state income tax. As long as the Arizona fund qualifies as a regulated investment company, to the extent distributions by the Arizona fund are derived from interest income with respect to U.S. Treasury securities or, as described below, tax-exempt securities as defined above under "How the funds pursue their objectives--Tax-exempt securities". Such distributions will be exempt from Arizona state income tax. In addition, it is the published position of the Arizona Department of Revenue that distributions by a regulated investment company derived from certain other governmental obligations as to which federal law specifically precludes state taxation of interest received by a direct investor in such obligations are exempt from Arizona state income tax. Some tax-exempt securities of Arizona issuers have a direct income tax exemption under Arizona law, independent of federal tax treatment. However, in most cases, interest with respect to tax-exempt securities of Arizona issuers is exempt from Arizona state income tax only so long as that interest is excluded from gross income for federal income tax purposes. Therefore, if interest with respect to tax-exempt securities of Arizona issuers held by the Arizona fund ceases to be exempt from federal income tax (or is retroactively determined to be taxable under federal law), then, unless that obligation has an independent statutory tax exemption under Arizona law, distributions by the Arizona fund derived from interest on that obligation will cease to be exempt from state income taxes (and, if interest on the obligation is determined to be taxable under federal law retroactive to any date, those distributions may be considered not to have been exempt from state income taxes from that date). For Arizona income tax purposes, dividends by the Arizona fund, other than dividends exempt from Arizona state income tax, will be taxable as ordinary income, whether paid in cash or reinvested in additional shares. Under current Arizona income tax law, distributions of net capital gains earned by the Arizona fund are not exempt from taxation and are taxed at ordinary income tax rates. FLORIDA. Florida does not currently impose an income tax on individuals. Thus individual shareholders of the fund will not be subject to any Florida state income tax on distributions received from the Florida fund. However, certain distributions will be taxable to corporate shareholders which are subject to Florida corporate income tax. Florida currently imposes an "intangibles tax" at the annual rate of 0.2% on certain securities and other intangible assets owned by Florida residents. Certain types of tax-exempt securities of Florida issuers, U.S. government securities and tax-exempt securities issued by certain U.S. territories and possessions are exempt from this intangibles tax. The Florida fund has received a ruling from Florida authorities that, if on December 31 of any year the Florida fund's portfolio consists solely of such exempt assets, the Florida fund's shares will be exempt from the Florida intangibles tax payable for the following year. In order to take advantage of the exemption from the intangibles tax in any year, the Florida fund must sell any non-exempt assets held in its portfolio and reinvest the proceeds in exempt assets prior to December 31. Transaction costs involved in restructuring the portfolio in this fashion would likely reduce the Florida fund's investment return and might exceed any increased investment return the Florida fund achieved by investing in non-exempt assets during the year. MASSACHUSETTS. Distributions received from the Massachusetts fund are exempt from Massachusetts personal income tax to the extent that they are derived from interest on tax-exempt securities and are designated as such. The Massachusetts 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 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 the Michigan fund are exempt from Michigan personal income tax and Michigan intangibles tax to the extent they are derived from interest on 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 SAI. For Michigan personal income tax, intangibles tax and single business tax purposes, fund distributions attributable to any source other than interest on tax-exempt securities will be fully taxable. Fund distributions may be subject to the uniform city income tax imposed by certain Michigan cities. MINNESOTA. In 1995 Minnesota enacted a statement of intent that interest on obligations of Minnesota and its political subdivisions and Indian tribes be included in net income of individuals, estates and trusts for Minnesota income tax purposes if it is judicially determined that Minnesota's exemption of such interest and taxation of interest on obligations of other states and their political subdivisions and Indian tribes unlawfully discriminates against interstate commerce . This provision applies to taxable years that begin during or after the calendar year in which any such determination becomes final . Putnam Management is not aware of any decision in which a federal court has held that a state's exemption of interest on its own bonds or those of its political subdivisions or Indian tribes and taxation of interest on the bonds of other states or their political subdivisions or Indian tribes unlawfully discriminates against interstate commerce or otherwise contravenes the United States Constitution. However, there can be no assurance that interest on the Minnesota bonds held by the Minnesota fund would not become taxable under this Minnesota statutory provision. Shareholders of the Minnesota fund 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 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 excludable 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. NEW JERSEY. The New Jersey fund intends to qualify as a "qualified investment fund" under the New Jersey Gross Income Tax law except when investing for defensive purposes under certain circumstances. As long as the New Jersey fund is a qualified investment fund and to the extent its distributions are derived from interest or net gains on tax-exempt securities, such distributions will be exempt from New Jersey tax, but will be reflected in the net income tax base for purposes of computing the corporate business tax. The exemption from the New Jersey Gross Income Tax will also extend to interest or net gains on obligations of the United States, its territories and certain of its agencies and instrumentalities which pay interest free from state or local taxation under any laws of New Jersey or under the Constitution or laws of the United States. Gains resulting from the redemption or sale of shares of the New Jersey fund will also be exempt from New Jersey Gross Income Tax. In order to be a qualified investment fund, the New Jersey fund must, as of the end of each fiscal quarter, invest at least 80% of the aggregate principal amount of its investments (excluding financial options, futures, forward contracts, or other similar financial instruments related to interest-bearing obligations, obligations issued at a discount or bond indexes related thereto to the extent such instruments are authorized under the regulated investment company rules under the Internal Revenue Code, and cash and cash items, which cash items shall include receivables) in the exempt obligations referred to above and have no investments other than interest bearing or discounted obligations, cash or cash items (including receivables) and financial options, futures, forward contracts or certain other similar instruments related to interest-bearing or discounted obligations or bond indexes related thereto. If the New Jersey fund fails to be a qualified investment fund, as a result of employing alternative investment strategies or otherwise, none of its distributions for the entire taxable year will qualify for tax-exempt status under New Jersey law. For New Jersey Gross Income Tax purposes, distributions by the fund derived from income or net gains on investments other than tax-exempt securities and obligations of the United States, its territories and certain of its agencies and instrumentalities will be taxable as ordinary income, whether paid in cash or reinvested in additional shares. OHIO. Distributions received from the Ohio fund with respect to shares are exempt from Ohio personal income tax and school district and municipal income taxes in Ohio to the extent they are properly attributable to interest on obligations issued by the State of Ohio, political subdivisions, thereof , or agencies or instrumentalities thereof, ("Ohio Obligations") provided that the Ohio 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 consists of 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 Ohio fund are excluded from the net income base of the Ohio corporation franchise tax to the extent that they (a) are properly attributable to interest on Ohio Obligations , or (b) represent exempt-interest dividends for federal income tax purposes. The Ohio fund's shares will be included in a shareholder's tax base for purposes of computing the Ohio franchise tax on the net worth basis. Distributions of capital gain with respect to shares of the Ohio fund will be exempt from Ohio personal income tax and school district income taxes and municipal income taxes in Ohio 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 properly attributable to profit made on the sale, exchange or other disposition by the Ohio fund of Ohio Obligations . Distributions with respect to shares properly attributable to interest on obligations of the United States or of any authority, commission, or instrumentality of the United States or obligations of Puerto Rico, the Virgin Islands, or Guam or their authorities or instrumentalities will be exempt from Ohio personal income tax and school district and municipal income taxes in Ohio, and are excluded from the net income base of the Ohio corporation franchise tax. PENNSYLVANIA. Distributions paid by the Pennsylvania fund will not be subject to the Pennsylvania personal income tax or to the Philadelphia School District investment net income tax to the extent that the distributions are attributable to interest received by the Pennsylvania fund from its investments in tax- exempt securities and obligations of the United States, its territories and certain of its agencies and instrumentalities. Distributions by the Pennsylvania fund to a Pennsylvania resident that are attributable to other sources may be subject to the Pennsylvania personal income tax and (for residents of Philadelphia) to the Philadelphia School District investment net income tax whether paid in cash or reinvested in additional shares. Distributions paid by the Pennsylvania fund which are excludable as exempt income for federal tax purposes are not subject to the Pennsylvania corporate net income tax. For a more detailed description of Pennsylvania corporate income tax , see the SAI. Individual shareholders of the Pennsylvania fund who are subject to the personal property taxes levied by certain Pennsylvania counties, cities and school districts will be exempt from such tax on their shares of the Pennsylvania fund to the extent that the Pennsylvania fund's portfolio consists of tax- exempt securities and obligations of the United States, its territories and certain of its agencies and instrumentalities. Corporations are not subject to Pennsylvania personal property taxes. GENERAL The foregoing is a summary of certain federal and state income tax consequences of investing in the funds. You should consult your tax adviser to determine the precise effect of an investment in a fund on your particular tax situation (including possible liability for federal 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 SECURITY RATINGS The ratings services' descriptions are as follows: 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 edged." 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 risk appear somewhat larger than in the 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: 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' has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The `BB' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied `BBB-' rating. 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. COMMERCIAL PAPER A-1 -- This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 -- Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated`A-1'. PUTNAM ARIZONA TAX EXEMPT INCOME FUND PUTNAM FLORIDA TAX EXEMPT INCOME FUND PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND PUTNAM MICHIGAN TAX EXEMPT INCOME FUND PUTNAM MINNESOTA TAX EXEMPT INCOME FUND PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND PUTNAM OHIO TAX EXEMPT INCOME FUND PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND 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 Arizona, Michigan, New Jersey and Ohio funds Coopers & Lybrand L.L.P. One Post Office Square Boston, MA 02109 Florida, Massachusetts , Minnesota and Pennsylvania funds Price Waterhouse LLP 160 Federal Street Boston, MA 02110 PUTNAMINVESTMENTS One Post Office Square Boston, Massachusetts 02109 Toll-free 1-800-225-1581 -----END PRIVACY-ENHANCED MESSAGE-----